A world of dairy
foods and nutritional
ingredients
Annual Report 2004
Our vision…
is to build international relevance
in cheese, nutritional ingredients
and selected consumer foods
Through a focus on leading brands
and technologies, international scale
and growth markets.
Annual Report 2004
Divisions and core activities
Glanbia plc is an international dairy, consumer
foods and nutritional products company.
Glanbia plc has three operational divisions:
Agribusiness, Consumer Foods and Food
Ingredients. Growth strategy is focused
on enhancing the Group’s core businesses
and developing a strategic focus on
Consumer Foods, Food Ingredients and
Nutritionals markets.
Agribusiness
The key linkage between Glanbia and its Irish raw mate-
rials supply base of 5,300 farmer suppliers. This business is
engaged primarily in feed milling and the marketing of a
range of farm inputs, including fertilisers, feed and grain
through a retail branch network.
Consumer Foods
Includes liquid milk, chilled foods and pork processing
as well as the UK mozzarella cheese joint venture. In
Ireland, Glanbia is the leading supplier of branded and
value-added liquid milk, fresh dairy, cheeses, soups and
spreads in the retail market. Glanbia Meats is the leading
Irish fresh pork and bacon processor selling to Irish and
international markets.
Food Ingredients
Comprising the USA and Irish dairy ingredients operations
and the Group's developing Nutritionals business. Glanbia
processes a range of milk, cheese and whey protein ingre-
dients at facilities in Ireland and the USA for sale on inter-
national markets. Glanbia Nutritionals supplies the global
nutrition industry with a range of solutions designed to
address specific health and wellness benefits.
In Summary
Group Turnover
12.32
29.44
58.24
%
Group Operating Profit
(Pre-exceptional)
14.30
52.90
%
32.80
Agribusiness
Consumer Foods
Food Ingredients
2
GLANBIA PLC ANNUAL REPORT 2004
Financial highlights
2004 represents a progressive,
improved performance, with stronger
EPS and operating margin and an
improved debt position.
Profit before exceptional
items and tax (Euro million)
77.1
77.7
71.8
66.6
C C C C
2001
2002
2003
2004
Operating margin
(Pre-exceptional)
Adjusted earnings
per share (Euro cent)
4.5
4.6
3.9
3.6
19.3
20.1
17.4
15.9
% % % %
c c c c
2001
2002
2003
2004
2001
2002
2003
2004
Year end net debt/EBITDA
(times)
1.6
1.2
1.2
1.3
Finance cover
(times)
5.2
3.5
2.8
2.3
2001
2002
2003
2004
2001
2002
2003
2004
GLANBIA PLC ANNUAL REPORT 2004
3
BRAND PORTFOLIO
Consumer Brands
In the highly competitive Irish milk market,
Avonmore is the number one milk brand.
Given its milk heritage Avonmore is seen by
Irish consumers as natural, fresh and
nutritious. These attributes extend into the
other products under the Avonmore name
making it Ireland's biggest selling grocery
brand.
Ireland's leading yogurt brand for over 30
years, Yoplait has established a unique posi-
tion with Irish consumers for quality, taste
and trust. Known for its consistently high
quality and refreshing flavours, it is also per-
ceived as being particularly good value for
money in a highly competitive market.
Yoplait Everybody is a probiotic yogurt drink
that provides 18% of the recommended
daily allowance of essential vitamins and
minerals, specially selected to enhance nat-
ural energy and resistance. Number two in
the Irish market, it was the first Irish product
to contain the LGG probiotic culture.
One of the first milk brands to come on to
the Irish market when it was launched over
53 years ago, Snowcream has successfully
maintained a loyal following and, despite
increased competition, has continued to
retain its position as the regional favourite
in the South-East of the country.
Premier Milk has a long association with the
Dublin market and continues to maintain its
position as the preferred choice for genera-
tions in the capital. As a result, Premier is a
significant player in the total market.
Available in a number of variations and
renowned as 'the fillet of cheese', Kilmeaden
is the most distinctive of Glanbia's variety of
cheeses. It has established a nationwide rep-
utation for its superior quality against other
notable brands. Kilmeaden scores heavily
with consumers on taste, trust, choice and
value for money.
Nutritionals Brands
Using the most technically advanced mem-
brane processes, cross flow micro-filtration,
Provon is a premium whey protein isolate
that has exceptional nutritional attributes.
Containing significantly high levels of bio-
logically active peptides and branded chain
amino acids, it delivers 90% protein for the
sports nutrition, clinical nutrition and health
and wellness categories.
Developed for weight management appli-
cations, Prolibra is a whey protein milk
mineral complex. It has shown in a clinical
study to improve overall body composition
through the loss of fat and maintenance of
lean muscle mass. The all natural ingredient
contains active peptides, proteins and is
an excellent source of calcium and other
milk minerals.
Used as an ingredient in functional foods,
TruCal is a naturally derived dairy ingredient.
It contains a balanced mineral profile includ-
ing appropriate ratios of calcium, phospho-
rous, magnesium, potassium, zinc, copper,
iron and selenium which are needed to pro-
mote and maintain optimal bone health.
A natural, biologically active milk protein
that is isolated from fresh sweet whey with
a unique processing technology, Bioferrin
is an iron-binding lactoferrin which has
antimicrobial properties and enhances
immune system modulation. It is used in
infant formulas, nutritional foods and sup-
plements, sports nutrition supplements
and pharmaceutical applications.
Salibra is bioactive whey protein concentrate.
It is targeted at enhancing health and wellbeing
through nourishment and regeneration of the
intestinal system. Containing high levels of
immunoglobulins and lactoferrin, its bioactive
components destroy pathogens and viral toxins
but promote survival of probiotic bacteria and
help in cell regeneration, tissue repair and
immune modulation.
4
GLANBIA PLC ANNUAL REPORT 2004
GLOBAL MARKET POSITIONS
LOCATIONS
USA
NO.1 US Barrel Cheese
NO.1 Whey Protein Isolate
NO.3 Lactose
NO.4 American Cheddar Cheese
IRELAND
NO.1 Dairy Processor
NO.1 Pigmeat Processor
NO.1 Liquid Milk and Cream Brands
NO.1 Cheese and Butter Processor
EU RO PE
NO.1 Pizza Cheese Supplier
NO.1 Supplier of Customised Nutrient Premixes
GL OBAL
Leading global supplier of advanced
technology whey proteins and fractions
USA
Food Ingredients
Twin Falls, Gooding
& Richfield, Idaho
Clovis, New Mexico
Nutritionals
Chicago
Monroe, Wisconsin
Centre of Excellence,
Twin Falls, Idaho
IRELAND
Headquarters &
Group Innovation Centre
Kilkenny
Food Ingredients
Ballyragget, Co. Kilkenny
Virginia, Co. Cavan
Kilmeaden, Co. Waterford
Carrick-on-Suir,
Co. Tipperary
Consumer Foods
Dublin
Inch, Co. Wexford
Ballitore, Co. Kildare
Drogheda, Co. Louth
Waterford
Kilkenny
Roscrea, Co. Tipperary
Edenderry, Co. Offaly
Clara, Co. Offaly
Roosky, Co. Roscommon
Nutritionals Europe
Kilkenny
UK
Consumer Foods
Magheralin, Co. Armagh
Llangefni, Wales
Northwich, Cheshire
GERM ANY
Nutritionals
Orsingen-Nenzingen
AF RICA
Food Ingredients
Lagos, Nigeria
CENTRAL
AM ER ICA
Food Ingredients
Mexico City
GLANBIA PLC ANNUAL REPORT 2004
5
Chairman’s Statement
1
The results reflect the completion of our major
restructuring and our strong strategic focus
on high growth areas
These results reflect the continued transformation of
Glanbia into a clearly focused consumer products, food
ingredients and nutritionals Group. I am pleased to report
on a satisfactory result and overall improved performance
for 2004, notwithstanding the difficulties in the pigmeat
sector and the background context of the EU dairy
sector reforms.
2004 was a transition year for the Group and the results
reflect the completion of our major re-structuring and our
strong strategic focus on high growth areas.
Results Turnover for continuing operations increased by
10% to 21,828.7 million (2003: 21,659.2 million). Total
Group turnover declined 10% to 21,846.0 million (2003:
22,041.1 million) as a result of the planned re-structuring
of the Group's UK operations. The Group's share of the
turnover of joint ventures increased 9.2% to 275.0 million
(2003: 268.7 million).
Operating profit before exceptional items from continuing
operations declined 5.6% to 283.5 million (2003: 288.5
million), mainly as a result of the poor performance of the
fresh pork business, which was impacted by difficulties in
the Irish pigmeat sector during the year. Profit before tax
increased to 278.9 million as against a loss before tax in
2003 of 214.9 million. The pre-tax loss in 2003 reflects the
292.0 million exceptional charges in that year, as a conse-
quence of the planned Group re-structuring, compared
with a gain in 2004 of 21.2 million, principally on
the sale of assets.
Adjusted earnings per share amounted to 20.10c, up
4.4% (2003: 19.26c), while earnings per share amounted to
20.41c compared with a loss per share of 12.01c in 2003.
Net debt decreased 23.2 million to 2150.6 million
(2003: 2153.8 million), notwithstanding 2126.3 million in
capital expenditure and development initiatives in 2004.
The overall improvement in the Group's debt reflects the
proceeds of the disposal of Glanbia Foods Ltd (the UK
hard cheese operation) and solid cash flow from
operations.
The net interest charge declined to 26.0 million (2003:
215.0 million). This includes an interest credit of 22.5
million in respect of a Stg£35.0 million loan note from The
Cheese Company Holdings Limited. The interest charge
declined due to a changing mix of debt and a more favour-
able interest rate environment. The Group has a non-equity
minority interest charge of 210.4 million relating to pre-
ferred securities (2003: 211.0 million). The total financing
charge for the Group declined 29.6 million to 216.4 million
(2003: 226.0 million). Financing cover was 5.2 times in
2004, compared with 3.5 times in 2003.
Dividends The Board is recommending a final dividend
of 3.09c per share, compared with a 2.94c per share final
dividend in 2003. This brings the total dividend for the year
to 5.25c per share (2003: 5.0c per share), representing a
5% increase. Subject to shareholder approval the final
dividend will be paid on Monday 23rd May 2005 to
shareholders on the register as at Friday 22nd April 2005,
6
GLANBIA PLC ANNUAL REPORT 2004
Below: New product developments in Yoplait include a tailored
healthy proposition specifically formulated for children
During the year Glanbia invested
--
C68.3 million
on development projects
Chairmanship On a personal note, I am due to retire from
the Board in June and this, therefore, is my last Annual
Report as Chairman. It has been an honour to serve
Glanbia as Chairman for the last five years and as a
Director of the Group for 17 years. During recent times,
the Board and management have made difficult and far-
reaching decisions to re-orientate the Group in a new
direction. This year, we began to realise the benefit of the
steady implementation of the Group's development
strategy and going forward the Group is well positioned
for growth. I would like to thank the shareholders, my
colleagues on the Board, the Group Managing Director,
management and staff for their unswerving commitment
to Glanbia.
Tom Corcoran
Chairman
the record date. Irish dividend withholding tax will be
deducted at the standard rate where appropriate.
Development During the year Glanbia invested 268.3
million on development projects. Significant progress was
made in the construction of two new dairy processing
facilities in New Mexico and in Nigeria. Also during the
year, Glanbia opened the new Group Innovation Centre
and announced the first strategic acquisition in the
Nutritionals business.
Corporate Governance During the year, the Board
reviewed in detail the principles and provisions of the
revised Combined Code on Corporate Governance. As
a consequence of this review, the Board implemented a
revised corporate governance framework incorporating
amended terms of reference of a number of Board
Committees, specifically the Remuneration, Audit and
Nominations Committees.
Management Change Group Deputy Managing Director,
Billy Murphy, will be retiring from Glanbia in 2005. On
behalf of the Group, I would like to pay tribute to Billy
for the substantial contribution he has made to the growth
and development of Glanbia. With his vast experience and
strong customer relationships, Billy was instrumental in
developing and expanding our Agribusiness, Food
Ingredients and Meats businesses in particular. Billy will
remain on as a Non-Executive Director for a subsequent
two-year period.
GLANBIA PLC ANNUAL REPORT 2004
7
2
Group Managing
Director's Review
Our competitive advantage lies in the scale and
diversity of our milk processing businesses, strong
consumer brands, international partnerships and
nutritional ingredients expertise
Overall, the Group performed satisfactorily in 2004,
delivering results in line with expectations, notwithstanding
the challenging trading environment in Ireland, particularly
the difficult pigmeat sector. We are pleased with the
progress made on the development and implementation
of the Group's strategy and the completion of the Group
re-structuring programme.
Financial Highlights The success of the Glanbia strategy
is demonstrated in an overall improvement in performance,
with increased turnover from continuing operations, an
improved operating margin, stronger earnings per share
and an improved debt position.
Trading Environment Market conditions within the global
dairy industry were strong overall in 2004. The European
market benefited considerably from higher exports to third
countries. Year-on-year, annual average milk powder and
cheese prices in Europe rose slightly on 2003. This was
contrary to industry expectations following the imple-
mentation of the Mid Term Review (MTR) of the Common
Agriculture Policy (CAP), which took place in July and was
expected to lead to price falls over the second half of the
year. The generally positive trading environment in Europe
underpinned a stable product and raw material pricing
structure for Glanbia during the year. However, this
situation is not expected to persist and a re-balancing of
the pricing structure in the sector is expected in the shorter
term. USA cheese production grew at one of its fastest
rates in 2004, with a year-on-year increase of 2.9% which
was a record high. Dietary trends, in particular the switch to
increased protein consumption, contributed to this growth
rate. Increased milk output in the State of Idaho, where the
Group has major production facilities, was ahead of the
rest of the USA for the year. This volume growth, combined
with the benefits of our investment programme in the
Idaho facilities, contributed to the strong performance
overall from Glanbia's USA business.
Investments In 2004, as part of the overall capital expen-
diture programme, the Group spent 268.3 million on a
number of development initiatives aligned with the
Group's growth strategy. This includes strategic investment
in two significant joint venture initiatives in New Mexico
and Nigeria, as well as organic expansion in our Food
Ingredients and Consumer Foods businesses.
The Group has a 50:50 investment in the US$190 million
cheese and whey production facility in New Mexico, the
Southwest Cheese joint venture with Dairy Farmers of
America Inc. and Select Milk Producers Inc. We also
have a 50:50 joint venture with PZ Cussons plc to build
a new US$25 million facility in Nigeria to further process
powdered milk, sourced primarily from Ireland, for the
Nigerian market. Both of these projects will begin
commissioning in 2005.
A capital expenditure programme in the USA saw the
expansion of our Idaho facilities where we commissioned
three new plant extensions during the year. These capacity
8
GLANBIA PLC ANNUAL REPORT 2004
Below: Glanbia’s Ballyragget site is Europe’s largest integrated dairy facility
People are crucial to the success of Glanbia
Our 4000 employees
are the key to building sustainable growth
expansions were designed to meet the increased demand
for cheddar cheese, primarily from the food service and
retail sectors as well as increased demand for whey-based
ingredients, reflecting the growing nutritional marketplace.
In Consumer Foods Ireland, investment was made in
organic growth with the launch of flavoured milks and
new soup and sauce products under the Avonmore brand.
On-going brand investment is central to the growth of our
business. Well-supported brands that benefit from inno-
vation and effective marketing retain consumer loyalty and
attract new followers in what is an intensely competitive
retail market place. Consumer Foods Ireland also made
a small strategic joint venture in 2004 with the announce-
ment of a 50:50 joint venture agreement with Nashs
Mineral Waters for a cash consideration of 21.3 million.
Acquisitions During the year, the Group made its first
acquisition in the nutritionals area with the purchase of
German-based nutrient delivery systems business Kortus
Food Ingredients Services (“Kortus”) for 214.5 million.
Kortus specialises in the production, research and devel-
opment of customised nutrient systems for customers in
the Infant Formula, Clinical Nutrition and Dietetics markets.
This business gives Glanbia a platform for growth in those
sectors as well as access to a strong sales presence in
Germany and Austria.
Glanbia is committed to an on-going investment pro-
gramme to underpin its development strategy. This will
be focused around developing and acquiring world-class
nutritional solutions capabilities as well as continuing to
drive scale positions in cheese on an international basis.
Strategic Vision Our vision is to build international
relevance in cheese, nutritional ingredients and selected
consumer foods and the Group's development strategy
is centred on these high growth areas.
Glanbia's competitive advantage lies in the scale and
efficiency of the Irish and USA milk processing businesses,
the strength of our Irish consumer brands, the depth of our
partnerships with our blue chip food customers worldwide
and our expertise in nutritional ingredients. The continued
expansion of the strategic areas of operation will be
achieved by a programme of product and process inno-
vation, acquisitions, strategic joint ventures and on-going
investment for organic growth and operational efficiency.
Specific medium term targets are centred around:
• Developing and acquiring “world-class” nutritional
solutions capabilities
• Accelerating product and process innovation to meet
changing customer and consumer demands for specific
formulations, functionality, taste or convenience
GLANBIA PLC ANNUAL REPORT 2004
9
Group Managing Director’s Review
• Driving our scale position by further expanding our
cheese facilities and our customer offer on an
international basis
• Continuing to build a global dairy ingredients business
by maximising new market opportunities in emerging
markets
• Consolidating our market leading positions and brand
portfolio through increased marketing and innovation
times and the fact that 10% of adults snack instead of
having a main meal. There is also a growing market for
convenient, on-the-move products and foods aimed at low-
carb diets. Trends like this provide the fuel for innovation.
Keeping up with these and other trends ensures that
innovations are commercially relevant. During 2004, the
Group made further progress in advancing its innovation
agenda with the opening of the Group Innovation Centre
in Ireland. This complements the existing Centre in Idaho,
as well our R&D facilities in other Group businesses.
• Managing the impact of EU dairy sector reforms
• Focusing on continuous improvement in operational
efficiency (including continued sensible co-operation
within the Irish milk processing industry)
Innovation Agenda Glanbia's innovation agenda is based
on the continued development of health-based functional
food ingredients and consumer foods with a nutritional
emphasis, through the constant application of science-
based innovation. All Glanbia's research is based on a
close study of consumer lifestyle changes and consumer
food choices. Efficient nutrition is a key driver of our
new product development and the Group continuously
tracks health and wellness developments, particularly the
obesity concerns, in order to provide the most effective
nutritional solution to our customers.
Other lifestyle drivers are the growth of one and two
person households, shorter average meal preparation
Board and Management changes Our Group Chairman,
Tom Corcoran, is due to retire from the Board in June. Tom
has served as a Director of the Group since 1988 and as
Chairman for the last five years. On behalf of management
and staff, I would like to record our deep appreciation of
the leadership, deep commitment and support provided
by Tom. He chaired Glanbia through challenging times and
steered the Group to where we are now, clearly en route
with our development strategy.
The Chairman has already paid tribute to my colleague,
Group Deputy Managing Director, Billy Murphy, and I
would like to reinforce this sentiment and to wish Billy
every good wish for the future. Billy's contribution to
Glanbia has been substantial, not just in terms of his
experience but his vision and values, and we will retain
the benefit of his experience for the period he remains
on as a Non-Executive Director.
10
GLANBIA PLC ANNUAL REPORT 2004
Group Managing Director’s Review
Glanbia People Glanbia is about people. Our 4,000
employees are the key to building sustainable growth and
the Glanbia values of 'Be the Best', 'People Matter', 'Find
a Better Way' and 'Pride in What We Do' are part of the
everyday way of working in the organisation. I am fortunate
to have a strong management and employee team as well
as a strong Board. With loyal stakeholders, robust customer
partnerships and consumer support, we have a strong
dynamic driving the business forward.
Since year-end, the Group reached agreement with
Dairygold Co-Operative Society Limited that Glanbia will
operate the regional CMP liquid milk, cream and juice
brand. Also since year-end, Glanbia reached a separate
agreement with Dairygold Co-Operative to enter into a
contract manufacturing arrangement for elements of our
respective milk processing activities. The agreements with
Dairygold demonstrate our continuing internal drive for
production and cost efficiencies in response to the effects
of MTR on the market landscape.
Developing and acquiring a world class nutritional
solutions capability as well as continuing to drive
scale positions in cheese on an international basis
Outlook For 2005, our focus will be on the completion
of the major strategic dairy processing investments in New
Mexico and Nigeria, development initiatives that build
scale and diversity and drive cost efficiencies that enhance
performance. The trading outlook across the Group has
some challenges, particularly in the context of managing
the impact of EU dairy sector reform. However, with our
strong market positions and evolving Nutritionals business,
the Group is well positioned for growth.
John Moloney
Group Managing Director
GLANBIA PLC ANNUAL REPORT 2004
11
Through the constant application of
science-based innovation and the
researching of consumer lifestyle changes
and food choices, Glanbia has continually
developed health-based functional food
ingredients and consumer foods with a
nutritional emphasis.
This has enabled the launch of
a positive synergistic effect
advanced, differentiated and
on weight management diets,
branded ingredients and foods
immune enhancement and
with nutritional benefits that have
physical performance.
A world
of innovation
3
3
Operations
Review
Our vision is to build international
relevance in cheese, nutritional ingredients
and selected consumer foods
Glanbia plc has three operational divisions:
Agribusiness, Consumer Foods and Food
Ingredients. Growth strategy is focused
on enhancing the Group’s core businesses
and developing a strategic focus on
Consumer Foods, Food Ingredients and
Nutritionals markets.
The Division has 39 grain intake locations, 14 of which are
engaged in drying green grain for customers. In addition,
Glanbia has two compound feed mills and two coarse
feed plants. Glanbia Agribusiness also operates a number
of ventures in association with other companies. These
include Grassland Fertilisers (Kilkenny), South-East Port
Services, Co-Operative Animal Health, D. Walsh & Sons
and the Malting Company of Ireland.
Results As anticipated, 2004 was a challenging year for
the Agribusiness division and overall turnover declined by
3.0% to 2227.4 million (2003: 2234.5 million). Operating
profit declined 15.1% to 212.1 million (2003: 214.2
Agribusiness
Agribusiness The Agribusiness Division is the key linkage
between Glanbia and its Irish farmer suppliers. It is engaged
primarily in feed milling and the marketing of a range of
farm inputs, including fertilisers, feed and grain through a
retail branch network. The Division also has interests in
fertiliser production, veterinary wholesaling, malting and
port services.
With a workforce of more than 400, Agribusiness operates
in 16 counties with a broad geographical reach in the
South-East of Ireland. It has a strong customer interface
through a network of 70 retail branches.
Agribusiness
Overall Turnover
Agribusiness
Operating Profit
234.5
227.4
C--
million
C--
million
14.2
C--
million
12.1
C--
million
2003
2004
2003
2004
14
GLANBIA PLC ANNUAL REPORT 2004
Outlook 2005 is the first year following full decoupling
of EU agricultural supports from farm production. It is
anticipated that this will result in a further reduction in
farm input requirements and in overall market volumes.
However, in the 2004 Glanbia survey of dairy suppliers in
respect of the impact of MTR, the majority of suppliers
predicted that milk volumes would not decrease in the
Glanbia Agribusiness trading area.
The division will continue to focus on a programme
of investment and rationalisation in order to achieve
necessary cost efficiencies going forward.
With its evolving structure and more efficient cost base,
Glanbia Agribusiness is well positioned to provide a full
product offering to continue to meet changing customer
needs.
million), reflecting the combined effects of poor grain
markets and the influence of changing demand patterns
and pricing in an evolving farming sector. Operating
margin reduced to 5.3% (2003: 6.1%). During 2004, the
division continued its efficiency and cost management
programme and the number of retail branch outlets was
reduced by 12 to 70 branches.
Trading Environment The influence of world trade
policies on agricultural support had a significant effect
on all facets of the industry in 2004; specifically the imple-
mentation of the MTR, and the introduction of direct
payments resulting in payments no longer being linked
to output. This trading environment resulted, in some
cases, in reduced inputs and production.
Strategy Despite a challenging trade environment,
Glanbia Agribusiness is committed to building on its
inherent strengths to grow its market share.
The Agribusiness strategy is to maximise efficiency
and grow market share by:
- growing the core product range organically and
by acquisition
- being the most cost efficient supplier
- providing competitive products to customers
-
re-shaping the retail offer to a more diverse rural
population
Brands With a portfolio of national brands, such as Gain
Feeds, IFI and MasterCrop, Glanbia Agribusiness has
market leading positions in animal feeds, fertiliser, seed
grain, chemicals and grain markets.
In the animal feed markets, the Gain Feeds ruminant
and horse feed brand is the market leader and is widely
recognised for quality and value in both the Irish and
European markets. With the Gain Feeds brand, Glanbia
applies its internationally recognised nutrition expertise
to animal feed across the full spectrum of livestock.
GLANBIA PLC ANNUAL REPORT 2004
15
Consumer Foods
Focusing on nutritious,
fresh and natural
The business strategy is for strong organic and acquisitional
growth, with a concentration on nutritional beverages, fresh dairy
products, cheese, soups and spreads
The Consumer Foods Division of Glanbia plc includes
Consumer Foods Ireland (liquid milk and chilled foods
businesses), Glanbia Meats and the UK joint venture with
Leprino Foods, Glanbia Cheese.
CONSUMER FOODS IRELAND
In Ireland, Glanbia is the leading supplier of branded
and value-added liquid milk, fresh dairy products, natural
cheeses and fresh soups in the retail market.
Results Overall, 2004 was a challenging year for the
Consumer Foods Division. Turnover at 2543.5 million
(2003: 2900.4 million) was down, reflecting the completion
of the planned UK re-structuring programme. Operating
The business, spread over 10 locations, employs almost
900 people and has leading category positions in branded
and fortified milks, potted and drinking yogurts, natural
block and value-added cheese, fresh soups and sauces.
Consumer Foods
Overall Turnover
Consumer Foods
Operating Profit
900.4
C--
million
543.5
C--
million
44.8
C--
million
27.8
C--
million
2003
2004
2003
2004
profit declined to 227.8 million (2003: 244.8 million),
reflecting the impact of the UK re-structuring programme
and a sharp decline in the performance of Glanbia Meats.
Operating margin improved to 5.1% (2003: 5.0%).
16
GLANBIA PLC ANNUAL REPORT 2004
It operates under three category functions - Nutritional
Beverages, Fresh Dairy Products and Cheese, Soup and
Spreads.
Nutritional Beverages In 2004, the Avonmore and
Premier milk brands consolidated their No. 1 & No. 2
positions respectively in a flat market which had increasing
milk imports from Northern Ireland. The business strategy
of focusing on value-added milk offerings resulted in the
successful launch of a chocolate and strawberry milk range,
a nutritious alternative to carbonated drinks for older
children, targeted at mothers. The performance of the
Avonmore functional milks such as the pro-biotic milk
continued to grow in 2004.
During the year, Consumer Foods entered into a joint ven-
ture with Nashs Mineral Waters (Marketing) Limited for the
sales and marketing of the Nash’s range of water-based
beverages. This joint venture complements Consumer
Food's existing milk and juice portfolios to provide a
complete beverage range to customers and consumers.
Fresh Dairy Products 2004 was a demanding year in the
very competitive Fresh Dairy Products market, compound-
ed by the entrance of additional competitor brands and a
slowing of the market growth rate. Yoplait Petit Filous and
YOP consolidated their strong positions as the leading
children's fromage frais and drinking yogurt brands.
Cheese, Soups and Spreads Kilmeaden, “the fillet of
cheese”, and Avonmore Fresh Soup defended their
leading positions as nutritious, convenient offerings for the
busy Irish consumer. Avonmore extended its fresh soup
portfolio with the launch of a “Connoisseur” range of more
adventurous and premium recipes to appeal to the chang-
ing tastes and preferences of Irish consumers. Avonmore
also launched a “Kidz” fresh soup range to mothers as a
fun, nutritious and convenient meal to suit children‘s tastes.
Results Against the background of a competitive grocery
trade and food retail market in Ireland, the liquid milk and
chilled foods businesses performed reasonably well,
although both turnover and profitability reduced in 2004.
During 2004, a substantial investment was made to
integrate the supply chain processes of liquid milk and
chilled foods and while there is further work planned in
this area, this new structure is beginning to yield benefits.
Environment The trading environment continued to
be competitive in the multiple and convenience trade
channels, particularly in the context of price and promo-
tional activity in the fresh dairy products and cheese
categories.
Strategy The vision of Consumer Foods Ireland is to be
Ireland's premier supplier of chilled foods and nutritious
beverages to the retail and food service sectors and the
supplier of choice to key customers.
The business strategy is for strong organic and, where
appropriate, acquisitional growth with an operational con-
centration in nutritional beverages, fresh dairy products
and cheese, soup and spreads.
Brands and Innovation Consumer Foods Ireland contin-
ued to consolidate its position in 2004 with Ireland's
leading dairy food and beverage brands - comprising
Avonmore, Premier, Yoplait, Petit Filous and Kilmeaden.
Glanbia's milk, fruit yogurt, fromage frais, drinking
yogurt, fresh soup, fresh creamed rice and natural block
cheddar brands hold leading market positions.
The Division's innovation agenda is consumer and
customer-led with a focus on nutritious, fresh and natural
– the key drivers of growth for food and beverages
among consumers. These attributes are found in all of
the Consumer Foods product portfolio and are partic-
ularly synonymous with the Avonmore, Yoplait and
Kilmeaden brands.
Below: Avonmore flavoured milks were successfully launched in 2004
The growing awareness among Irish consumers of the link
between food and health has resulted in an increasing
demand for more functional food solutions. Growing public
concerns with regard to obesity, heart health and diabetes
are causing consumers to seek out food propositions that
provide specific health benefits to help them manage their
increasingly sedentary lifestyles.
Milk as a perfect source of protein and dairy products
being ideal carriers of nutritional and functional ingre-
dients, provide strong platforms for both the Avonmore
and Yoplait brands to offer additional health benefits to
the Irish consumer.
Innovation in the three portfolios focuses on the
introduction of new products that provide nutrition and
health benefits, across treat, re-fuel and snacking usage
occasions. In addition, offerings such as the 0% fat Yoplait
range are designed for consumers as part of a nutritious
weight management solution.
Research and development is also focused on the demand
for more easy to prepare, easy to eat or drink, nutritious
food propositions. This trend arises from reduced food
preparation time and increased snacking behaviour. Irish
consumers are increasingly reluctant to accept products
that offer this convenience at the expense of nutrition.
Avonmore Super Milk, in its easy to use, on-the-go bottle,
is an example of a packaging innovation solution for
snacking consumers.
GLANBIA PLC ANNUAL REPORT 2004
17
Pat Brophy
Chief Executive
Consumer Foods
Ireland
Consumer Foods
Outlook The growing
demands for more
“efficient nutrition”
strongly position the
Consumer Foods portfolio
to capitalise on this trend
going forward. On-going
innovation, combined with
Consumer Food's leading
brands, places the business
in a strong position to continue the development and
extension of its portfolio for taste, nutrition and health in a
variety of convenient formats for the demanding consumer.
Since year-end, in line with its growth strategy, Consumer
Foods Ireland reached agreement with Dairygold Co-
Operative that Glanbia will operate the regional CMP
liquid milk, cream and juice brands.
GLANBIA MEATS
Glanbia Meats is the largest Irish pork processor with a
50% share of pig slaughtering in the Republic of Ireland.
A total of 920 people are employed at two slaughtering
plants at Roscrea and Edenderry and two further
processing plants at Roosky and Clara.
The business serves domestic and international markets,
including the UK, Germany, the Far East, Russia and the
United States. Principal products are boneless pork and
bacon cuts in fresh and frozen format. Customers include
all the leading Irish food retailers, major international food
processors and distributors into the food service market.
A range of cooked products in canned and other formats
is also produced for the Irish and UK markets.
Results Profitability in Glanbia Meats declined sharply
in 2004 due to a weak pork market and very competitive
market supply dynamics. The pigmeat industry is cyclical
and this has been compounded in recent years by over-
capacity relative to the available supply of pigs. During
2004, the industry consolidated with a reduction in the
number of processors and, as anticipated, trading
conditions improved late in the year with some margin
recovery and growing international demand.
Strategy The business strategy is built upon the three
pillars of quality, efficiency and flexibility. The sector is
increasingly dominated at an international level by super-
large processing companies that cross national boundaries
to increase their scale and reach. Glanbia Meats competes,
therefore, on the basis of its “small scale advantages” and
has successfully developed a number of key customer
relationships built upon these three strategy pillars. A key
success factor is Glanbia Meats' ability to provide this
flexible, quality offering in the broad range of national
markets served. Local tastes and preferences vary signif-
icantly from one market to the next and this drives demand
for specific products in these markets.
Outlook General market conditions are expected to
improve in 2005 as a result of the anticipated reduction
in pig supply across most of the major pig producing
countries in Europe and increasing demand amongst the
10 CEEC countries, as well as Japan, Russia and China.
Against this more favourable background, the business
expects to capitalise upon its strong positions in the home
market and to continue to build market share
internationally.
Overall, the outlook for 2005 is for a continuing improve-
ment in performance within Glanbia Meats as efficiencies
and returns improve due to the completion of the invest-
ment programme that started in 2003. With modern plant
and efficient operations, Glanbia Meats is well positioned
to benefit from this stronger industry and operating
environment in 2005.
GLANBIA CHEESE
Glanbia Cheese, where Glanbia has a 51% interest in
a joint venture with Leprino Foods, is Europe's leading
producer of mozzarella for the pizza sector. The business
employs 363 people between its two manufacturing oper-
ations based in Llangefni, North Wales and Magheralin,
Northern Ireland, and an administration office based in
Northwich, Cheshire. The business services both the food
service and industrial pizza manufacturers. It lists the major
pizza providers in both sectors among its customer base,
and with the majority of the key pizza providers it has a
sole or lead supply position. Glanbia Cheese supplies a
range of mozzarella products including block, ribbon,
and string mozzarella.
Results While the overall market for mozzarella cheese
grew, trading conditions remained highly competitive as
dairy processors re-position their product portfolios in the
wake of the implementation of MTR in EU dairy markets.
As a leading supplier of innovative products, volumes at
Glanbia Cheese grew - however, profits were depressed
by the poor pricing environment.
Environment The sector remains competitive with a
number of manufacturers striving to fill additional capacity
that has come on-stream in recent years.
Strategy The Glanbia Cheese strategy is to maintain
and build on its position as the leading supplier of pizza
cheese in Europe through on-going innovation based on
the Leprino technology, quality and functionality. These
value offerings enable the business to offer a significantly
differentiated product, process and economic offering to
the marketplace.
18
GLANBIA PLC ANNUAL REPORT 2004
Consumer Foods
Below: Glanbia Cheese is Europe‘s leading producer of mozzarella for
the pizza sector
Outlook The business has invested heavily in transferring
the Leprino technology to its manufacturing locations.
Customer reaction and uptake of this new technology has
been extremely positive, and the business is confident that
the technical and economic benefits that the technology
brings will enable the business to further strengthen its
position in the marketplace.
This market environment is expected to improve somewhat
in 2005. The strength of the Glanbia Cheese market posi-
tion, quality product and unique technology places this
business in a good position to benefit as these
developments unfold.
GLANBIA PLC ANNUAL REPORT 2004
19
Food Ingredients
Addressing health
& wellness issues
We have a deep understanding of specific customer requirements
and the expertise to supply the most appropriate ingredients to
meet those expectations
Billy Murphy
Deputy Group
Managing Director
The Food Ingredients
Division of Glanbia has a
number of clearly defined
but closely related busi-
nesses. These include
Glanbia Foods Inc. in the
USA, Food Ingredients
Ireland, a number of
joint ventures in various
countries and the
Group's developing Nutritionals business.
At facilities in Ireland, the USA and Nigeria, Glanbia
processes a range of milk, cheese, whey protein
Food Ingredients
Overall Turnover
Food Ingredients
Operating Profit
906.2
C--
million
1,075.2
C--
million
44.8
33.8
C--C--
million
million
2003
2004
2003
2004
20
GLANBIA PLC ANNUAL REPORT 2004
ingredients, formulated milk powders (including infant
formulas), casein, skim milk powder and lactose for sale
on international markets. Glanbia Nutritionals supplies the
global nutrition industry with a range of solutions designed
to address specific health and wellness benefits.
Results The Division delivered a good result in 2004,
driven by a strong contribution from the Group's USA
cheese operations and a satisfactory result from the Irish
business. Turnover increased 18.6% to 21,075.2 million
(2003: 2906.2 million). Operating profit grew 32.6% to
244.8 million (2003: 233.8 million) and operating margin
grew 44 basis points to 4.2% (2003: 3.7%).
FOOD INGREDIENTS USA
Located in the State of Idaho, the Glanbia Food
Ingredients USA business, (Glanbia Foods Inc.), has access
to a high quality, high volume supply of milk. It is the
largest producer of barrel cheese in the world and is one
of the top producers of American-type cheddar cheese
and whey-based food ingredients. Customers are
companies in the food service, food processing and
retail sectors.
Glanbia Foods Inc. processes 1.6 billion litres of milk a year
(one third of the Idaho milk supply), and produces 167,000
tonnes of cheese and 56,000 tonnes of other ingredients
between its four processing plants located at Gooding,
Richfield and Twin Falls. Glanbia Foods Inc. employs
approximately 500 people in Idaho.
Below: An expansion at the Gooding cheese facility in the USA
resulted in a 25% production increase in 2004
The cheese facility at Gooding is the largest producer of
barrel cheese in the world. This one plant produces more
cheese than the equivalent of Ireland’s national output and
has gone through five expansions since Glanbia acquired it
in 1990. The Gooding whey plant, which is located beside
the cheese plant, manufactures whey protein concentrate,
lactose, lactoferrin and bioferrin which are used in nutri-
tional food formulations by other food manufacturers.
The Gooding facility is one of the largest single site
operations of its type in the USA.
The Twin Falls cheese facility produces 50,000 tonnes
of all varieties of American cheese per annum (cheddar,
mozzarella, Monterey Jack, Colby, Colby Jack, and Pepper
Jack). Cheese from this source is sold under the leading
USA cheese labels and is widely used by leading pizza
and frozen snack manufacturers.
The whey plant at Richfield processes all the whey from
the Twin Falls facility and is one of the largest dedicated
whey processing facilities in the USA. It was one of the
first facilities in the country to fractionate whey into whey
protein concentrate and lactose. Glanbia pioneered the
development of cross-flow micro-filtration to enable the
production of the highest quality whey protein isolate
currently available on the market. Approximately half the
products from the Richfield whey plant are exported to
Asia and South America.
Results Solid volume growth, good demand for whey,
improved market pricing for cheese and increased capacity
at the Idaho facilities resulted in a strong performance
overall from Glanbia Foods Inc. in 2004.
As part of an on-going programme of investment - 218.6
million in 2004 - an increase in capacity at the Idaho facil-
ities for cheese and whey products was completed during
the year. A further phase of investment to add new plant
for the production of protein isolates, which is a core
product in the Nutritionals business, was also commenced
in 2004 and has recently been commissioned.
Trading Environment USA cheese production in 2004
grew at one of the fastest rates for some time, with a year-
on-year increase of 2.9% to hit a new record. The buoyant
economy as well as dietary trends, especially the switch to
increased protein consumption, helped stimulate demand
for high-quality cheese products.
GLANBIA PLC ANNUAL REPORT 2004
21
Food Ingredients
Strategy The business vision is to become the most
relevant supplier of American cheese to industrial
customers in the USA while achieving maximum value from
the whey stream generated by the cheese operations.
This is being achieved through the adoption of the low
cost, large scale western milk production and processing
model. This strategy of efficient asset utilisation through
least cost production is coupled with long-term customer
relationships.
Outlook The outlook for 2005 is positive, with milk pro-
duction in Idaho expected to be strong and with solid
market demand indications.
FOOD INGREDIENTS IRELAND
Glanbia's Irish Food Ingredients business is Ireland's
largest milk processor with 30% of the country's manufac-
turing milk pool, or 1.3 billion litres, being processed. The
business operates on a global scale with 95% of outputs
exported to key markets across Europe, North America
and Africa.
Food Ingredients Ireland is one of the leading global
suppliers of dairy-based ingredients to international food,
pharmaceutical and beverage manufacturers. It has four
processing centres in Ireland: Ballyragget, County Kilkenny;
Virginia, County Cavan; Kilmeaden, County Waterford and
Carrick-on-Suir, County Tipperary and employs
approximately 600 people.
The main manufacturing site at Ballyragget is Europe's
largest integrated dairy facility and ranks among the
world's top dairy ingredient sites, both in terms of scale
and in the level of technology and innovation employed.
In Ballyragget, milk is split into its various components
and products are manufactured to meet the specific
requirements of its varied customers.
Glanbia's food ingredient product range includes: acid
casein; rennet casein; cheddar cheese; butter; butter oil;
lactose, cream and milk powders. Glanbia is one of the
largest suppliers of fortified milk products in the world and
is the largest manufacturer of casein in Ireland, with key
market positions in Europe and North America. It is also
the leading supplier of lactose into the infant formula
industry in Ireland.
Glanbia is one of Ireland's largest butter manufacturers and
is also Ireland's largest manufacturer of cheddar cheese,
which is manufactured in Ballyragget and Kilmeaden. The
business is also a key supplier of cream for the Baileys Irish
Cream Liqueur brand, which in addition to fat-filled milk
powders, is produced at the Virginia facility. Dairy spreads
are produced at the Carrick-on-Suir facility.
Results Food Ingredients Ireland had a satisfactory year
against a backdrop of solid market demand. This arose
both from a growing demand in developing countries and
22
GLANBIA PLC ANNUAL REPORT 2004
also as a result of the growing realisation that dairy
products provide safe nutrition. The combined benefits of
rationalisation, an enhanced product mix from innovation
and increased capacity utilisation contributed to the per-
formance of the business. Market demand was better than
anticipated in 2004 and this underpinned a stable product
and raw material pricing structure during the year.
Strategy The business strategy is to pursue a relentless
drive for internal efficiencies, coupled with strategic
alliances, to increase utilisation of facilities, lower the cost
of finished product and establish new routes to market.
The focus on on-going innovation and strong customer
partnerships further leverages the advantages of scale
and high quality milk from grass-based production.
Since year-end, further progress was made in the area of
strategic alliance with the announcement that the business
has agreed, in principle, a contract manufacturing arrange-
ment with Dairygold Co-Operative Society Limited. Under
this agreement, Glanbia will manufacture Dairygold's
butter and Dairygold will manufacture a range of dairy
products for Glanbia, thereby maximising capacity
utilisation in the respective facilities.
Innovation and Brands Glanbia Food Ingredients has a
deep understanding of its specific customer requirements
and has the expertise to supply the most appropriate
ingredients to meet clients' expectations. An on-going
innovation programme, in partnership with customers,
has been successful in developing functional capabilities
for specific applications.
While the focus is on ingredients, Glanbia has also invested
in business-to-business branding and is, for example, a
leading supplier of milk and whey protein with two brands,
Snopro and Avonlac.
Outlook As a large manufacturing operation, the focus
for Food Ingredients Ireland in 2005 is to continue to
examine opportunities to minimise the impact of infla-
tionary cost increases. The recently announced agreement
in principle with Dairygold Co-Operative is a logical
development in this regard.
Arising from the implementation of MTR, a re-balancing
of the pricing structure in the sector is expected in the
shorter term due to downward pressure on commodity
product returns, coupled with the reduction in EU
institutional supports.
Against this background the business is well placed in the
market to fully exploit new trading opportunities and an
increased demand for efficient nutrition.
Food Ingredients
GLOBAL JOINT VENTURES
New Mexico In 2004, Glanbia began the construction of
a US$190 million cheese and whey manufacturing plant at
Clovis, New Mexico in a joint venture with Dairy Farmers of
America Inc. (DFA) and Select Milk Producers Inc. (Select).
Called “Southwest Cheese Company LLC”, the business is
50% owned by Glanbia and will begin commissioning at
the end of 2005.
Once operational in 2006, Southwest Cheese will be one
of the largest cheese processors in the world. It will have
the capacity to process in excess of one billion litres of milk
per annum and will produce over 110,000 tonnes of
cheese. The associated whey plant will be able to produce
7,500 tonnes of high quality value-added whey proteins
per annum.
Glanbia's partners, DFA and Select, will provide the
milk for the new plant and Glanbia has responsibility for
operating the plant and for sales and marketing of the
products through existing structures.
Uruguay A marketing joint venture with Conaprole of
Uruguay was established in 2003 and is based in Mexico.
It markets dairy ingredients into Central and South
American markets.
Nigeria In 2003, Glanbia entered into a 50:50 joint venture
with PZ Cussons plc to build a US$25 million facility in
Nigeria to supply evaporated milk and milk powder to the
local Nigerian market. Due for commissioning in 2005, this
business will handle 35,000 tonnes of milk products per
annum.
Glanbia has responsibility for the operation of the plant
and sourcing of raw materials. PZ Cussons is responsible
for the marketing and distribution of the products through
its existing Nigerian subsidiary.
GLANBIA PLC ANNUAL REPORT 2004
23
6
Nutritionals
Growing demand for
food products with
health benefits
With our growing portfolio of ingredient brands, we are building
a worldwide reputation for customised products, innovative
processing technologies and outstanding customer service
Kevin Toland
Group
Development
Director
Glanbia's expertise and
leading global position in
the fractionation and
utilisation of whey proteins
is the strategic rationale
for this evolving business.
Glanbia Nutritionals sup-
plies the global nutrition
industry with a range of
solutions designed to
provide specific health and wellness benefits.
As an evolving business, Glanbia Nutritionals employs
over 50 people at global locations in Ireland (Kilkenny),
the USA (Monroe, Twin Falls and Chicago), Germany
(Orsingen-Nenzingen), Brazil, Uruguay and China.
Glanbia Nutritionals is a key provider of nutritional
ingredients that address the growing demand for food
products with health benefits over and above nutritional
value. Its end market is a growing range of nutrition-based
industries, including Performance Nutrition, Sports
Nutrition, Sports Bars, Nutritional Beverages, near Pharma,
Supplements, Medical, Clinical Nutrition, and Infant
Nutrition.
The Glanbia Nutritionals product range includes: whey
protein isolates, lactose, calcium, lactoferrin, vitamins and
minerals. These ingredients are the basis for a range of
brands such as Provon®, Prolibra™, Salibra™, Trucal®,
Tri-Fx™, BarFlex™, BarPro™ and BarMax. Through these
brands the company is building a worldwide reputation for
24
GLANBIA PLC ANNUAL REPORT 2004
customised products, innovative processing technologies
and outstanding customer service. The market reach of the
business includes: the USA, Japan, Germany, Canada,
Mexico, China, Korea, Thailand, Australia, Brazil, Argentina,
Uruguay, Ireland, the UK, France, Spain, Holland, Austria,
Hungary and Switzerland.
Results Glanbia Nutritionals made progress in 2004,
achieving good sales growth, supported by the additional
capacity in specialised whey protein isolate products in
Idaho.
During the year, Glanbia Nutritionals developed and
launched advanced, differentiated and branded ingredi-
ents, targeted at a range of nutritional requirements such
as weight management, immune enhancement and per-
formance. These products were developed at the Group's
Innovation Centre in Ireland and at the Idaho Centre of
Excellence in the USA in partnership with customers, and
have all been positively received by the market.
Trading Environment The Global Nutrition market and,
in particular the whey sector exhibited strong growth in
2004. In particular the core areas of dairy derived ingredi-
ents have benefited from continuing scientific research that
underpins the health benefits of dairy as well as its role in
weight loss and in targeting various health areas (such as
bone health). This has been underpinned in early 2005 by
the updated USA dietary guidelines that have recom-
mended a 50% increase in dairy consumption in the
daily diet.
Strategy The Group strategy is to become a key global
provider of nutritional ingredients and nutritional solutions,
through a range of initiatives in capacity expansion,
research and development, acquisition and joint ventures
in both dairy and non-dairy sectors.
During 2004, the business made its first acquisition with
the purchase for 214.5 million of the German-based Kortus
Food Ingredients Services (“Kortus”) which specialises in
the production, research and development of customised
nutrient systems for customers in the Infant Nutrition,
Dietetics and Functional Food markets. This development
extends the Glanbia solution capability and product range,
and strengthens access to key sectors of infant and clinical
nutrition as well as improving the Glanbia scale, presence
and relevance particularly in the German, Austrian and
Central European market places.
Developments/Investments In addition to the Kortus
acquisition, a number of investments were made in 2004
to further strengthen the business, including increased
resourcing of the Nutritionals development programme.
The commissioning of additional capacity for specialised
whey protein isolate products in Idaho, as well as addi-
tional capacity in New Mexico coming on line at the end
of 2005, will guarantee an increased volume of raw
material supply to the Nutritionals business going forward.
In response to strong sales growth in the Pacific Rim and
Oceania, the business has established a direct presence in
these markets, through offices in South America and Asia,
further positioning the business for growth.
Brands/Innovation During the year, Glanbia Nutritionals
had continued success in the development and launch
of advanced, differentiated, branded ingredients such as
Barflex™ (focused on the bar market), Prolibra™ (focused
on weight management), Salibra™ (immunity) and Tri-Fx™
(Performance Nutrition sector).
The business is committed to the continued expansion
of innovation through increased resourcing at the Idaho
Centre of Excellence and the world class Group Innovation
Centre in Kilkenny.
Outlook Overall, the outlook for 2005 is positive with
anticipated sales growth coming from organic growth
through capacity expansion and by acquisition.
Glanbia Nutritionals will continue to drive growth with a
strong innovation agenda, together with focused sales
based on a thorough understanding of customer needs.
Based on continuing consumer demand and additional
resourcing within the business, there is a potential for
further growth in new geographies and sectors.
GLANBIA PLC ANNUAL REPORT 2004
25
Glanbia marketeers realise that
the cornerstone of strategic
success is understanding and
meeting customer needs with
bespoke solutions.
Well-supported national and
loyalty of existing customers
international brands that benefit
and attracting new ones in
from innovation and effective
an intensely competitive
marketing have contributed
marketplace.
significantly in retaining the
A world
of marketing
solutions
Geoff Meagher
Group Finance
Director
4 Finance Review
Results Growth in
operating profit before tax
and exceptional items of
1.0% to 277.7 million, an
increase in operating
margin to 4.6% together
with a further reduction in
debt and strengthening of
the Group's balance sheet
are key highlights of the
2004 results. Operating profit before exceptional items
from continuing operations declined 5.6% to 283.5 million,
mainly as a result of the poor performance of the Fresh
Pork business, which was impacted by difficulties in the
pigmeat sector during the year. Group turnover declined
9.6% reflecting the impact of restructuring of operations in
the UK. Details of divisional operating profit are given on
pages 8 to 25.
The Group's finance charge (including non-equity minority
interest) decreased to 216.4 million from 226.0 million in
2003. The finance charge is net of interest receivable of
22.5 million in respect of the Stg£35.0 million loan note
from The Cheese Company Holdings Limited. Financing
cover (Group operating profit, pre exceptional items, to
Group net interest and non-equity minority interest)
improved to 5.2 times (compared to 3.5 times in 2003)
while EBITDA finance cover was 6.9 times and the ratio of
year end net debt to EBITDA was 1.3 times. Substantial
improvement in financial ratios has been made in the last
number of years. A net exceptional credit for the year of
21.2 million arises principally on the sale of assets.
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 23.0 million in the depreciation charge, as
compared with the original useful lives.
The disclosure requirements of FRS 17 – 'Retirement
Benefits' are in note 35 to the financial statements. The
adoption of FRS 17 has had no impact on the results of
2004 or the prior year. The disclosures required under FRS
17 show a net pension deficit of 2117.4 million as at the
balance sheet date. The increase in the net deficit during
2004 was driven mainly by the decline in corporate bond
yields. As part of the sale of a 75% interest in the UK hard
cheese business in April 2004, the assets and obligations
of the Glanbia Foods pension scheme transferred with
Glanbia Foods Limited. During the year the Group
implemented funding proposals to address the pension
actuarial valuation deficits over a ten year period.
Taxation The tax charge for the year was 28.8 million –
this represents an effective tax rate of 12.3% 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 20.10c compared to 19.26c in 2003 –
growth of 4.4%. The total dividend per share for the year
is 5.25c, an increase of 5.0% on the 2003 dividend.
Cash generation Summary cash flows for 2004 and 2003
are set out on page 29. Net cash generated amounted to
23.2 million resulting in a reduction in year end net
borrowings to 2150.6 million.
Capital expenditure and financial investment for the year
amounted to 2114.8 million. The Group had net inflows of
273.1 million from disposals and acquisitions. The Group
has applied 2477 million in capital investment in the last
seven years, including major expansions of the USA facil-
ities in Idaho and the food ingredients plant in Ballyragget.
The continued weakening of the US dollar against the euro
during 2004 resulted in a decrease of 21.5 million in non-
euro borrowings, shown as currency translation impact in
the cash flow statement.
Non-equity minority interests Non-equity minority
interests of 2110.4 million (2003: 2115.8 million) comprise
$100.0 million preferred securities and 238.2 million pref-
erence shares. The decrease of 25.4 million in non-equity
minority interest between 2003 and 2004 is due to the
further weakening of the US dollar against the euro during
2004. Dividends paid to non-equity minority interests plus
amortisation of issue costs during 2004 amounted to
210.4 million.
Balance sheet Equity shareholders' funds increased to
2221.4 million at the end of 2004 from 2176.6 million in
2003, reflecting the fact that no exceptional restructuring
charges arose during the year. Capital employed amounted
to 2337.9 million at the end of 2004 compared to 2298.0
million in 2003, reflecting the earnings retained in the year
coupled with the reduction in non-equity minority interests
arising from the weakening of the US dollar against the
euro in 2004. Net debt to capital employed was 44.6%
compared to 51.6% in 2003, 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 neces-
sitates 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 cen-
trally 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 specula-
tive 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
28
GLANBIA PLC ANNUAL REPORT 2004
Summary Cash Flows
Net cash inflow from operating activities
Returns on investments & servicing of finance
Interest paid
Dividends paid to minority interest
Taxation
2 0 0 4
3'000
2 0 0 3
3'000
83,444
94,507
(10,866)
(9,674)
(16,548)
(11,758)
(4,955)
(9,816)
Capital expenditure and financial investment
(114,745)
(41,517)
Acquisitions and disposals
73,120
6,176
Share capital issued
215
-
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
(14,813)
1,726
1,505
3,231
(153,797)
(150,566)
(14,080)
6,964
15,547
22,511
(176,308)
(153,797)
bank borrowings. 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 appro-
priate 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
USA and the UK. As a result, the Group's euro balance
sheet can be significantly affected by movements in US
dollar/euro and sterling/euro exchange rates. The Group
seeks to match, 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 2391.0
million of which 2189.8 million was undrawn. The weighted
average period to maturity of these facilities was 2.9 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 deter-
mining 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 fluctu-
ations.The numerical disclosures required under FRS 13 –
‘Derivatives andd other financial instruments’ disclosures’
in relation to the above risks are set out in note 39 to the
financial statements.
International Financial Reporting Standards It will
become mandatory for all EU listed companies to report
their consolidated financial statements under International
Financial Reporting Standards (IFRS) from 2005 onwards.
This will apply to the Group for its June 2005 Interim
Results and the Group has established a programme
to ensure full compliance with IFRS. The main impact on
the Group's financial statements is expected to be the
implementation of IAS 19 'Employers Benefits' and the
recognition on the Balance Sheet of pension fund deficits.
Summary The Group continued to make good progress
during 2004 in improving underlying operating perform-
ance and key financial ratios, whilst at the same time
completing its UK restructuring programme.
Geoff Meagher
Group Finance Director
GLANBIA PLC ANNUAL REPORT 2004
29
5
Corporate Social
Responsibility
A proud history of
social and community
involvement
Our objective is to manage our business in an environmentally
responsible manner and we are committed to sustainable growth
in harmony with the environment
Glanbia's strategic goals are about building long term
growth and a sustainable business. This requires a careful
balance of economic, environmental and social policies,
which is at the heart of the Group's Corporate and Social
Responsibility programme.
This ethos has evolved with the organisation, with its
origins in the Irish co-operative movement and is best
summed up by our core values of 'Be the Best', 'People
Matter', 'Find a Better Way' and 'Pride in What We Do'.
Community In 2003, Glanbia was a major sponsor of the
Special Olympics World Games in Ireland and employees
and customers responded enthusiastically to this spectac-
ular community initiative. Building on this experience,
Glanbia employees selected Our Lady's Hospital for Sick
Children in Crumlin, Dublin, and the Boys and Girls Club
in Magic Valley, Idaho as their partnership organisations
for a two-year period. Glanbia is now working with both
organisations on a full awareness programme involving the
company, employees and customers. Glanbia employees
are also actively involved with a voluntary school organ-
isation, 'Junior Achievement Ireland', which encourages
student interest in the world of work and commerce. This
involves Glanbia employees volunteering classroom visits
to share their experiences with students.
In recognition of the positive social and health impacts
of sport, particularly on young people, Glanbia gives
substantial support to amateur sports such as the Gaelic
Athletic Association in Ireland and to the essential services
in the communities where it operates in Ireland, the UK
and the USA.
Environment Glanbia is committed to sustainable growth
in harmony with the environment and the communities in
which we operate. Therefore, our objective is to manage
our business in an environmentally responsible manner,
which includes the protection and preservation of the
environment and precious natural resources.
Our strategy to meet these objectives includes:
- Environmental goals and risk management in our
strategic business plans
- The consistent reduction of discharges to land, air
and water, while recycling and reusing raw materials
- Building relationships with regulatory agencies,
communities, interest groups, and local authorities to
foster mutual understanding, co-operation and
collaboration
- An Environmental Management System (EMS) consistent
with the requirements of ISO 14001 at all our manu-
facturing facilities. Glanbia's principal European
processing plants are now accredited to ISO 14001
Marketplace The importance of clear and open commu-
nication with consumers, customers, business partners
and suppliers is a central value in Glanbia. Listening to
consumers and understanding their views and needs is a
priority for the Group. Glanbia has developed a consumer
feedback programme focusing on all elements of packag-
ing and labelling, product safety, as well as advertising
and promotions. Glanbia Consumer Foods also conducts
continuous research into consumer attitudes and percep-
tions of its products. The business adheres to legislation
regarding all types of advertising media and best codes
30
GLANBIA PLC ANNUAL REPORT 2004
The Boys and Girls Club, Magic Valley, Idaho
of practice of the Advertising Association of Ireland and
Broadcasting Commission of Ireland.
Brian Phelan
Human Resources Director
The company leads the way in the communication of easy
to understand ingredients information to help drive awar-
eness between diet, health and well-being. Through all its
marketplace initiatives, Glanbia endeavours to promote
awareness of the importance of a balanced diet and
nutrition to a healthy lifestyle.
Workplace Glanbia is proud to be regarded as an
employer of choice at its various global locations. The
continued commitment of all employees is critical to the
success of Glanbia. Glanbia endeavours to attract, retain
and develop the best people by providing a challenging
and rewarding personal development path. Glanbia oper-
ates four distinct Group development programmes target-
ed at all levels of the organisation. These programmes
are in conjunction with on-going training to meet specific
individual training needs.
In addition, Glanbia has a Group Graduate programme to
attract the highest calibre graduates from across all the
relevant disciplines and to create leadership of the future.
Children from Our Lady’s Hospital, Dublin
GLANBIA PLC ANNUAL REPORT 2004
31
John Moloney Group Managing Director Tom Corcoran Chairman
Billy Murphy Deputy Group Managing Director
Directors and Advisors
Non-Executive Directors
Thomas P Corcoran (aged 65) 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. In
2004, he was appointed to the Consumer Board of
An Bord Bia. In 2005 he was appointed as Chairman of the
National Cattle Breeding Centre. He has completed the
Institute of Directors 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 53) 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/UCC Diploma in Corporate Direction
in 2002. He farms at Headborough, Knockanore, Tallow,
Co. Waterford.
Michael J Walsh (aged 62) 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 and a number of other Irish societies including Irish
Co-operative Organisation Society Limited and The Irish
Dairy Board Co-operative Limited. He farms at Coolroe,
Graiguenamanagh, Co. Kilkenny.
John E Callaghan, FCA, FIB (aged 62) was appointed to
the Board in 1998. He is a Director of a number of Irish
companies including Rabobank Ireland plc and Vivas
Insurance Limited. He was formerly Managing Partner of
KPMG (Ireland), Chief Executive of Fyffes plc and Chairman
of First Active plc.
Jerry V Liston, B.A., MBA, (aged 64) 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 50) completed the ICOS/UCC
Diploma in Corporate Direction in 2002. He is also a
Director of Kilmainhamwood Community Employment
Scheme Limited. He farms at Kilmainhamwood, Kells,
Co. Meath.
John G Fitzgerald (aged 49). He farms at Ross, Kilmeaden,
Co. Waterford.
Edward P Fitzpatrick (aged 57) is a Director of South
Eastern Cattle Breeding Society Limited and of
Castlegannon Show Limited. He completed the ICOS/UCC
Diploma in Corporate Direction in 2003. He farms at
Knockmoylan, Mullinavat, Co. Kilkenny.
James A Gilsenan (aged 45) completed the ICOS/UCC
Diploma in Corporate Direction in 2003. He farms at
Drogheda Road, Collon, Co. Louth.
Thomas P Heffernan (aged 49) is a Director of South
Eastern Cattle Breeding Society Limited and completed
the ICOS/UCC Diploma in Corporate Direction in 2003.
He farms at Kearney Bay, Glenmore, Co. Kilkenny.
32
GLANBIA PLC ANNUAL REPORT 2004
Michael Walsh
Liam Herlihy
Victor Quinlan
Chris Hill
Henry Corbally
John Fitzgerald
Eric Stanley
Ned Fitzpatrick
John Miller
Michael Parsons
John Callaghan
Jerry Liston
Geoff Meagher
Jim Gilsenan
Eamon Power
Tom Heffernan
Kevin Toland
Christopher L Hill, B.Agr.Sc., (aged 46) is a Director of
Wicklow Rural Partnership Limited and a member of the
Wicklow County Development Board. He completed the
ICOS/UCC Diploma in Corporate Direction in 2002. He
farms at Johnstown House, Arklow, Co. Wicklow.
John J Miller (aged 64) is a Director of Laois Leader
Rural Development Company Limited and active in Spink
Community Council. He farms at Boleybeg, Abbeyleix,
Co. Laois.
Michael Parsons (aged 55) is Chairman of Kilkenny Co-
operative Livestock Market Limited and a Director of both
Noreside Farm Relief (Enterprises) Society Limited and
Kilkenny, Carlow and District Farm Relief Services Society
Limited. He farms at Outrath, Kilkenny.
Eamon M Power (aged 50) completed the ICOS/UCC
Diploma in Corporate Direction in 2004 and is a Master
Farmer. He farms at Corse, Fethard-on-Sea, Co. Wexford.
John V Quinlan, B.Agr.Sc., (aged 59) is a Director of a
number of Irish companies including Irish Sugar Limited
and Malting Company of Ireland Limited. He completed
the ICOS/UCC Diploma in Corporate Direction in 2004. He
farms at Baptistgrange, Lisronagh, Clonmel, Co. Tipperary.
George E Stanley (aged 60) ) is a Committee Member of
the Centenary Co-operative Society Limited. He farms at
Shinrone, Birr, Co. Offaly.
Executive Directors
John J Moloney, B.Agr.Sc., MBA, (aged 50) 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
and Repak Limited and a Council Member of both the Irish
Business and Employers Confederation and the Irish
Management Institute.
William G Murphy, B. Comm, (aged 59) is Deputy Group
Managing Director since June 2001. He joined the Group
in 1977 and has held a number of senior management
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 was formerly a Director of
Irish Agricultural Wholesale Society Limited.
Geoffrey J Meagher, CPA, (aged 55) 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. He is
also a Director of both St. Canice's Parish Homes for the
Elderly Association Limited and Kilkenny Carers Support
Services Limited.
Kevin E Toland, FCMA, (aged 39) was appointed to the
Board in 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.
GLANBIA PLC ANNUAL REPORT 2004
33
Directors offering themselves for re-appointment
The following Directors are retiring by rotation in accor-
dance with the Articles of Association of the Company and,
being eligible, offer themselves for re-appointment:
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.
Thomas P Corcoran (aged 65), Geoffrey J Meagher (aged
55), John J Miller (aged 64), John V Quinlan (aged 59) and
George E Stanley (aged 60).
Solicitors Arthur Cox, Earlsfort Centre, Earlsfort Terrace,
Dublin 2, Ireland. Pinsent Masons, 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 access-
ing 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.
Management Changes Since year end Glanbia
announced that Geoffrey J Meagher, Group Finance
Director, will succeed William G Murphy as Deputy Group
Managing Director. Siobhan Talbot, Group Secretary, will
take on the role of Deputy Group Finance Director and
Michael Horan, Group Financial Controller, will take on the
position of Group Secretary. These changes will take effect
from June 2005
John G Fitzgerald was appointed to the Board during
the year and retires in accordance with the Articles of
Association and, being eligible, offers himself for re-
election.
All are farmers with the exception of Geoffrey J Meagher.
All are Directors of Glanbia Co-operative Society Limited
with the exception of Geoffrey J Meagher.
Board Committees
Audit Committee JE Callaghan-Chairman, L Herlihy,
JV Liston, JJ Miller, EM Power, GE Stanley, MJ Walsh.
Remuneration Committee JV Liston-Chairman, TP
Corcoran, JE Callaghan, L Herlihy, MJ Walsh.
Nomination Committee TP Corcoran-Chairman, JE
Callaghan, JV Liston.
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.
Siobhán Talbot
Group Secretary
34
GLANBIA PLC ANNUAL REPORT 2004
Report of the Directors
for the year ended 1 January 2005
Introduction The Directors are pleased to present their
report to shareholders together with the audited financial
statements for the year ended January 1st 2005.
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, Germany 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 The Chairman's Statement, Group
Managing Director's Review, Operations Review and the
Finance 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 45.
Share Capital The authorised share capital of the
Company is 306,000,000 ordinary shares of 20.06 each.
The issued share capital is 292,644,184 ordinary shares of
20.06 each.
Dividends On October 6th 2004, an interim dividend
of 2.16c per share on the ordinary shares, amounting to
26.3m, was paid to shareholders on the register of
members as at September 10th 2004. The Directors have
recommended the payment of a final dividend of 3.09c
per share on the ordinary shares which amounts to 2 9.0m.
Subject to shareholders' approval, this dividend will be
paid on Monday, 23rd May 2005, to shareholders on the
register of members as at Friday 22nd April 2005, the
record date.
Future Developments Our plans for the future develop-
ment of the Group are outlined in the Chairman's
Statement; Group Managing Director's Review, Operations
Review and the Finance Review.
Research and Development The Group is committed
to an on-going 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 propri-
etary technologies and processes. The Group opened a
new Innovation Centre in Ireland in 2004 and,
in conjunction with the Idaho Centre of Excellence in the
USA, Glanbia's nutritional business has developed and
launched advanced, differentiated and branded ingredients
targeted at a range of nutritional requirements such as
weight management and immune enhancement.
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.
Substantial Interests As at February 18th 2005, Glanbia
Co-Operative Society Limited held 54.8% of the Company's
issued ordinary shares. The Company has been advised that
as at February 18th 2005, Bank of Ireland Securities
Services Limited had a notifiable interest in 8.3% of the
Company's issued ordinary shares.
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, sub-
sidiary companies and the holding society are disclosed in
note 37 to the financial statements.
Corporate Governance A revised Combined Code1 on
Corporate Governance, applicable for reporting years
beginning on or after November 1st 2003 has been
appended to the Listing Rules of the Irish and London
Stock Exchange to replace the 1998 Code. The Board has
reviewed the principles and provisions of the New
Combined Code and as a consequence of this review, the
Board has implemented a revised corporate governance
framework for the Company incorporating amended terms
of reference for a number of Board committees. The Board
adopted this revised corporate governance framework on
September 9th 2004. 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 1998 Combined Code and has since
September 9th 2004, complied with the principles and
provisions of the new Combined Code.
Directors
The Board The Company is a subsidiary of Glanbia Co-
Operative Society Limited (“the Society”). The Society
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. The Society,
an Irish industrial and provident society, owns 54.8% of the
share capital of the Company and many of its members
supply milk and trade with Irish subsidiaries of the
Company. The remaining Directors comprise four executive
Directors and two additional non-executive Directors.
Biographies of each of the Directors are set out on pages
32 and 33.
GLANBIA PLC ANNUAL REPORT 2004
35
The Board agrees a schedule of regular meetings to
be held in each financial year and also meets on other
occasions as necessary. The Board has a formal schedule of
matters reserved to it for decision such as the approval of
annual and strategic business plans, capital expenditure,
any change in Group strategy and any acquisition or
disposal of Group assets, the approval of any dividends
and Group treasury and risk management policies.
All Directors have been advised of their fiduciary duties
and of their obligation to bring an independent judgement
to bear on the issues of strategy, performance, resources,
including key appointments and standards of conduct. All
Directors receive monthly Group management financial
statements and reports and full Board papers are sent to
each Director in sufficient time before Board meetings and
any further information required is available to all Directors
on request.
The roles of the Chairman and Group Managing Director
are and always have been separate. The division of respon-
sibilities between the Chairman and Group Managing
Director have been clearly established, set out in writing
and agreed by the Board. The Chairman of the Company
is Mr T.P. Corcoran. The Company has two Vice-Chairmen,
Mr M. Walsh and Mr L. Herlihy. Mr T.P. Corcoran is retiring
from the Board in June 2005 at which time his successor
will be appointed.
Independence The Board has reviewed the independence
of the non-executive Directors under the guidelines spec-
ified in the Combined Code. The Board considers Mr. J.E.
Callaghan and Mr. J.V. Liston to be independent non-
executive Directors. As noted earlier, the remaining four-
teen non-executive Directors are nominated by the Board
of Glanbia Co-Operative Society Limited for appointment
to the Board of the Company. While the Board considers
that these Directors are independent of character and
judgement, it recognises that these Directors do not
meet the criteria for independence as specified in the
Combined Code.
Mr. J.E. Callaghan is the senior independent Director. As
senior independent Director, Mr. J.E. Callaghan is available
to shareholders if they have concerns which contact
through the normal channels have failed to resolve.
Information on professional development All new
Directors receive a full, formal and tailored induction on
joining the Board. As part of this programme, major share-
holders are offered an opportunity to meet new non-
executive Directors. All Directors have access to independ-
ent professional advice at the Company's expense where
they judge it necessary to discharge their responsibilities
as Directors. Committees are provided with sufficient
resources to undertake their duties.
The Chairman has completed the Institute of Directors'
Director Development Programme and holds a certificate
of merit in corporate governance from the Institute of
Directors' Centre for Corporate Governance at University
College Dublin. Eight of the Directors nominated to the
Board by Glanbia Co-Operative Society Limited have
completed the ICOS/UCC Diploma in Corporate Direction.
During the year, all Directors participated in a one-day
training programme on corporate governance which was
developed with the assistance of external advisors to the
Company.
All Directors have access to the advice and service of
the Group Secretary who is responsible to the Board for
ensuring that Board procedures are complied with. Both
the appointment and removal of the Group Secretary is
a matter for the Board.
Performance Evaluation During the year, a performance
evaluation has been conducted of the Board, its
Committees and individual Directors which was lead by
the Chairman. The performance evaluation of the Chairman
was led by the senior independent Director and the non-
executive Directors, taking into account the views of the
executive Directors.
In completing the performance evaluation, the Chairman
met with each Director individually to discuss the perform-
ance of the Board and individual Directors. In advance of
the meetings, the Chairman circulated a comprehensive
questionnaire to Directors for their consideration and
encouraged the Directors to raise any other issues on
Board matters during the meetings. Based on the verbal
and written feedback from the Directors, the Chairman
then prepared a report for the Board summarising the
outcome of the performance evaluation process and
recommending a number of actions.
The performance of the Chairman was considered at a
meeting of the Directors which was chaired by Mr. J.E.
Callaghan, the senior independent director.
The Audit Committee, Nominations Committee and
Remuneration Committee evaluated their performance at
specific meetings held for that purpose.
Board Committees The Board has established a
committee structure to assist it in the discharge of its
responsibilities. The committees and their membership are
detailed on page 34 of this report. All committees of the
Board have written terms of reference dealing with their
role and authority delegated by the Board and are
available on the Group's website at www.glanbia.com.
Membership of the Nominations, Audit and Remuneration
Committees is comprised exclusively of non-executive
Directors. The Group Secretary acts as secretary of
each of these committees.
Nominations Committee As noted earlier, fourteen non-
executive Directors are nominated by the Board of Glanbia
Co-Operative Society Limited for appointment to the Board
of the Company. For the remaining non-executive and
36
GLANBIA PLC ANNUAL REPORT 2004
Report of the Directors
for the year ended 1 January 2005
executive Directors, the Nominations Committee of the
Company leads the process for Board appointments. The
Chairman of the Group chairs meetings of the Nominations
Committee except when it is dealing with the appointment
of a successor to the Chairmanship.
The appointment to the Board of non-executive Directors
nominated by Glanbia Co-Operative Society Limited (“the
Society”) is subject to and coterminous with their appoint-
ment 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 3-year term which may be
renewed and are also subject to early removal under
the Articles.
All Directors are subject to election by shareholders at the
first annual general meeting after their appointment and
to re-election thereafter at intervals of no more than three
years. In accordance with the Articles of Association of the
Company, Messrs T.P. Corcoran, G.J. Meagher, J.J. Miller,
J.V. Quinlan and G.E. Stanley retire from the Board by
rotation and, being eligible, offer themselves for re-
appointment. Mr J.G. Fitzgerald, who was appointed a
Director on June 10th 2004, retires in accordance with the
Articles of Association of the Company and, being eligible,
offers himself for re-appointment. Biographical details of
Directors offering themselves for re-appointment are set
out on pages 32 and 33. None of the Directors proposed
for re-appointment has a service contract with the
Company. The Chairman wishes to confirm that following
the completion of the performance evaluation process,
all Directors proposed for re-election continue to be
effective and these Directors continue to demonstrate
commitment to their roles.
As detailed in its terms of reference during the period, the
Nominations Committee evaluated the balance of skills,
knowledge and experience on the Board and, in the light
of this evaluation, prepared a description of the role and
capabilities required for the appointment of an additional
non-executive Director. The Nominations Committee is not
using an external search consultancy or open advertising in
the appointment of the non-executive Director as it is using
industry and professional contacts to identify suitable
candidates.
The Nominations Committee also reviewed the structure,
size and composition of the Board during the period.
On an on-going basis, the Nominations Committee gives
consideration to succession planning for Directors and
other senior executives.
The terms and conditions of appointment of non-executive
Directors are available for inspection at the Company's
registered office during normal business hours and at the
Annual General Meeting of the Company. The Group
Chairman, Mr. T.P. Corcoran, is Chairman of the
Nominations Committee and he reports to the Board
after each meeting of the Committee.
Audit Committee The main role and responsibilities of the
Audit Committee are set out in written terms of reference
which are available on the Group's website at
www.glanbia.com and include:
•
•
•
•
•
•
•
To monitor the integrity of the financial statements of
the Company, and any formal announcements relating
to the Company's financial performance, reviewing
significant financial reporting judgements contained in
them;
To review the Company's internal financial controls
and, unless expressly addressed by the Board itself,
to review the Company's internal control and risk
management systems;
To monitor and review the effectiveness of the
Company's internal audit function;
To make recommendations to the Board, for it to put to
the shareholders for their approval in general meeting,
in relation to the appointment, re-appointment and
removal of the external auditor and to approve the
remuneration and terms of engagement of the external
auditor;
To review and monitor the external auditor's independ-
ence and objectivity and the effectiveness of the audit
process, taking into consideration relevant Irish
professional and regulatory requirements;
To develop and implement policy on the engagement
of the external auditor to supply non-audit services,
taking into account relevant ethical guidance regarding
the provision of non-audit services by the external audit
firm; and to report to the Board, identifying any matters
in respect of which it considers that action or improve-
ment is needed and making recommendations as to
the steps to be taken;
To review the arrangements by which staff of the
Company may, in confidence, raise concerns about
possible improprieties in matters of financial reporting
or other matters.
In discharging its responsibilities, the Audit Committee met
four times during the period. It reviewed the interim and
final results for the Group prior to their submission to the
Board for approval. It approved the internal audit plan and
reviewed progress against this plan at intervals during the
year. The Chairman of the Audit Committee receives an
executive summary of all audit reports issued by the
internal audit department and maintains dialogue with
the Group internal auditor on a regular basis. The Audit
Committee reviewed the independence of the external
auditors and formally adopted a policy in relation to the
provision of non-audit services by the external auditors.
Mr J.E. Callaghan is Chairman of the Audit Committee
and he reports to the Board after each meeting of the
Committee.
Remuneration Committee The Remuneration Committee
determines, on behalf of the Board, the Company's frame-
work of executive remuneration and the specific packages
and conditions of employment for each of the executive
GLANBIA PLC ANNUAL REPORT 2004
37
Directors and certain senior executives, as decided by
the Board. The Committee consults the Group Managing
Director regarding remuneration proposals and obtains
internal and external professional advice as deemed
appropriate. The Remuneration Committee operates the
Company's Share Option and Long Term Incentive
Schemes.
The remuneration of the non-executive Directors is deter-
mined by the Remuneration Committee within the total
amount approved by the Company's shareholders in
general meeting from time to time.
The terms of reference of the Remuneration Committee,
including its role and the authority delegated to it by the
Board, are available on the Group's website at
www.glanbia.com.
On December 9th 2004, Mr. J.V. Liston was appointed
Chairman of the Remuneration Committee, a position
which was held by the Group Chairman prior to that date.
The Chairman of the Committee formally reports to the
Board after each meeting of the committee.
Remuneration
Remuneration Policy Remuneration Policy is designed to
attract, retain and motivate executives to ensure that they
perform in the best interests of the Company and its
shareholders. Performance-related elements of remu-
neration form a significant proportion of the total
remuneration package of executive Directors. The
Remuneration Committee obtains external advice on
remuneration in comparable companies as necessary
and has given full consideration 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
Long Term Incentive Plan (“LTIP”) and participation in a
defined benefit pension scheme. Executive Directors also
have options under the 1988 share option scheme of the
Company which expired in August 1998.
Basic Salaries and Benefits The basic salaries of executive
Directors are reviewed annually having 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 achieve-
ment of pre-determined goals for Group performance and
an assessment of individual performance against agreed
objectives.
Long Term Incentive Plan In 2002 the shareholders
approved the introduction of a Long Term Incentive Plan
(“2002 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 pre-
determined 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 over 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. 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.
Benefits under the 2002 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 of 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 or
2004 under the Sharesave Scheme.
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
37 to the financial statements.
Other Directorships Mr. W.G. Murphy, the Deputy Group
Managing Director of the Company, is a director of IAWS
Group plc, for which he received fees of 240,000, which he
retained. The Group Managing Director, Mr. J.J. Moloney, is
a director of the Irish Dairy Board Co-Operative Limited for
which he received fees of 212,000, which he retained.
Share Options As noted above, in 2002 the shareholders
approved the introduction of a Long Term Incentive
Plan (“2002 LTIP”) and Savings-Related Share Option
(“Sharesave”) Scheme in order to further align the interests
of Group personnel with those of shareholders. Options
38
GLANBIA PLC ANNUAL REPORT 2004
Report of the Directors
for the year ended 1 January 2005
outstanding under the Company's 1988 Share Option
Scheme, the 2002 LTIP and the Sharesave Scheme as at
January 1st 2005 amounted to 5,122,070 ordinary shares
(January 3rd 2004: 5,392,473) made up as follows:
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.
N o o f o r d i n a r y
s h a r e s
P r i c e
R a n g e
D a t e s
E x e rc i s a b l e
Share option scheme
and 2002 LTIP
3,608,500
Sharesave Scheme
1,513,570
Total
5,122,070
21.55- 24.25
GBP£2.90
21.20/GBP£0.764
2005 - 2014
2005 - 2008
2005 - 2006
As detailed in note 25 to the financial statements,
1,734,949 ordinary shares have been purchased to date for
the purpose of the Sharesave Scheme and are held in an
employee benefit trust (“the Employees' Share Trust”)
pending exercise of the options.
Accountability and Audit
Financial Reporting Directors' responsibilities for
preparing the financial statements for the Company and
the Group are detailed on page 42 of this report. The
Independent Auditors' report details the respective
responsibilities of Directors and Auditors.
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 to maintain a
sound system of internal control to safeguard shareholders'
investment and the Group's assets.
The Board confirms that there are on-going 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 guidance2 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.
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 Chairman of the Audit Committee reports
to the Board after each meeting of the Committee.
The Group's control systems include:
• a Code of Conduct 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.
GLANBIA PLC ANNUAL REPORT 2004
39
Attendance at Board and Board Committees during the year ended 1 January 2005
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
A
4
2
2
4
B
4
2
2
4
A
6
6
6
6
B
6
5
5
6
4
2
6
5
TP Corcoran
L Herlihy
MJ Walsh
JJ Moloney
JE Callaghan
HV Corbally
JG Fitzgerald **
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
A
17
17
17
17
17
17
10
17
17
17
17
17
17
17
17
17
17
7
17
17
17
B
15
16
16
14
14
15
9
14
15
13
14
10
16
15
15
15
16
5
15
15
10
A
3
4
4
4
4
4
4
4
B
3
4
4
4
2
4
3
4
Column A indicates the number of meetings held during
the period the Director was a member of the Board and/or
Committee.
Column B indicates the number of meetings attended
during the period the Director was a member of the Board
and/or Committee.
* Retired 10 June 2004
** Appointed 10 June 2004
Relations with Shareholders
Dialogue with Institutional Shareholders The Company
had 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 Chairman discusses
governance and strategy with major shareholders. Non-
executive Directors are offered an opportunity to attend
meetings with major shareholders. The Senior Independent
Director has also attended meetings with major share-
holders. The Company responds to enquiries from all
shareholders and welcomes their attendance at the
Annual General Meeting.
Annual General Meeting The Notice of the 2004 Annual
General Meeting was dispatched 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 2003 financial statements and
the reports of the Directors and Auditors thereon. The
Chairmen of the Audit Committee and the Remuneration
Committee were present. The level of proxy votes for and
against was announced after each resolution had been
passed on a show of hands.
Subsidiary and Associated Undertakings A list of the
principal subsidiary and associated undertakings is included
in note 38 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 2005 Annual General Meeting, with details of
the special business to be considered at the meeting, is set
40
GLANBIA PLC ANNUAL REPORT 2004
Report of the Directors
for the year ended 1 January 2005
out in a separate circular which is enclosed with this
Annual Report.
Dis-application of Pre-Emption Rights, Purchase of
Company Shares and Treasury Shares
Under the first item of special business, shareholders are
being asked to renew the authority to dis-apply the strict
statutory pre-emption provisions in the event of a rights
issue or in any other issue up to an aggregate amount of
2801,348.96 in nominal value of ordinary shares, repre-
senting 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 August
16th 2006 or the date of the Annual General Meeting of
the Company in 2006.
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 May 17th
2005. Under the second item of special business, share-
holders are being asked to extend this authority until the
earlier of the close of business on August 16th 2006 or the
date of the Annual General Meeting of the Company in
2006. 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.
Shareholders are also being asked under the third 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 considers 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
John J Moloney
Chairman
Group Managing Director
Glanbia House
Kilkenny
1 March 2005
1
In July 2003 a new code on Corporate Governance was
published which supercedes and replaces the Combined
Code issued by the Hempel Committee on Corporate
Governance in June 1998.
2 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 accept-
ed in Ireland and comply with Irish statute comprising the
Companies Acts, 1963 to 2003, 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 rea-
sonable 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 2004
41
Report of the Directors
for the year ended 1 January 2005
Financial Statements - contents
Page
44
Independent Auditors' Report
45
47
48
49
50
51
53
53
54
55
56
59
60
61
62
63
64
65
66
67
68
69
70
71
74
75
79
80
83
84
Consolidated Profit and Loss Account
Consolidated Balance Sheet
Company Balance Sheet
Consolidated Cash Flow Statement
Notes to the Consolidated Cash Flow Statement
Accounting Policies
Notes to the Financial Statements
1
Segmental analysis
2
3
4
5
6
7
Employees and remuneration
Exceptional items
Loss on sale of operation
Provision for loss on sale of operation
Profit on sale of fixed assets
Profit/(loss) on termination of operations
8 Group interest
9
Profit/(loss) before taxation
10 Taxation
11 Profit/(loss) for financial year attributable to Glanbia plc
12 Dividends
13 Earnings per share
14 Tangible assets - Group
15 Intangible assets - Group
16 Financial assets
17 Other investments
18 Stocks - Group
19 Debtors
20 Creditors - Amounts falling due within one year
21 Other creditors
22 Creditors - Amounts falling due after more than one year
23 Deferred taxation - Group
24 Capital grants - Group
25 Called up equity share capital
26 Share premium account
27 Merger reserve - Group
28 Revenue reserves
29 Own shares (Company and Group)
30 Capital reserve
31 Minority interests
32 Capital commitments
33 Operating lease commitments
34 Contingent liabilities
35 Pension schemes
36 Related party transactions
37 Directors' and Secretary's interests
38 Details of the Company's interest in its principal subsidiary and associated undertakings
39 Borrowings and financial instruments
40 Approval of the financial statements
Five year Financial Summary
Independent Auditors' Report: To the members of Glanbia plc
We have audited the financial statements, which comprise
the Group profit and loss account, the Group balance
sheet, the Company balance sheet, the Group cash flow
statement, the Group statement of total recognised gains
and losses and the related notes. These financial
statements 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 51 to 52.
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 41 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 2003, 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 Finance Director’s Review and the
Corporate Governance statement.
We review whether the Corporate Governance statement
on pages 35 to 40 reflects the Company's compliance with
the nine provisions of the Combined Code (issued 2003)
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 accor-
dance 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 ade-
quacy 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 1 January 2005 and of the profit and
cash flows of the Group for the year then ended and have
been properly prepared in accordance with the
Companies Acts, 1963 to 2003, and the European
Communities (Companies: Group Accounts) Regulations,
1992. We have obtained all the information and explana-
tions 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 agree-
ment with the books of account.
In our opinion, the information given in the Directors'
Report on pages 35 to 41 is consistent with the financial
statements. The net assets of the Company, as stated in
the Company balance sheet on page 48, are more than
half the amount of its called-up share capital and, in our
opinion, on that basis there did not exist at 1 January
2005 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
1 March 2005
44
GLANBIA PLC ANNUAL REPORT 2004
Consolidated Profit and Loss Account
for the year ended 1 January 2005
Notes
Turnover
Continuing operations
Discontinued operations
Less share of turnover of joint ventures
P r e -
e x c e p t i o n a l
2 0 0 4
3'000
1,828,661
92,400
(75,016)
Group turnover
1
1,846,045
(1,612,927)
233,118
(82,171)
(66,525)
83,503
919
84,422
201
84,623
-
-
-
-
(5,964)
(917)
77,742
(8,805)
68,937
Cost of sales
Gross profit
Distribution costs
Administrative expenses
Operating profit
Continuing operations
Discontinued operations
Group operating profit
Share of operating profit of joint ventures
and associates
Operating profit including joint ventures
and associates
Loss on sale of operation
Provision for loss on sale of operation
Profit on sale of fixed assets
Profit/(loss) on termination of operations
Group interest
Share of interest of joint ventures
and associates
3
4
5
6
7
8
Profit/(loss) before taxation
Taxation
Profit/(loss) after taxation
Equity minority interest
Non-equity minority interest
Profit/(loss) for the year
Dividends
Profit retained/(loss absorbed)
for the year
Earnings per share
Fully diluted earnings per share
Adjusted earnings per share
9
10
11
12
13
13
13
On behalf of the Board
TP Corcoran JJ Moloney GJ Meagher
Directors
E x c e p t i o n a l
2 0 0 4
3'000
To t a l
2 0 0 4
3'000
P r e -
e x c e p t i o n a l
2 0 0 3
3'000
E x c e p t i o n a l
2 0 0 3
3'000
To t a l
2 0 0 3
3'000
-
-
-
-
-
-
-
400
400
-
400
-
1,828,661
92,400
(75,016)
1,659,153
450,607
(68,687)
1,846,045
2,041,073
(1,612,927)
(1,773,537)
-
-
-
-
-
233,118
(82,171)
(66,125)
267,536
(94,697)
(80,970)
-
-
(16,451)
1,659,153
450,607
(68,687)
2,041,073
(1,773,537)
267,536
(94,697)
(97,421)
83,903
919
88,472
3,397
(16,451)
-
72,021
3,397
84,822
91,869
(16,451)
75,418
201
916
-
916
400
(2,601)
-
929
2,445
-
85,023
(2,601)
-
929
2,445
(5,964)
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)
-
(917)
(627)
-
(627)
1,173
-
1,173
78,915
(8,805)
77,135
(10,272)
(92,020)
1,546
(14,885)
(8,726)
70,110
66,863
(90,474)
(23,611)
(413)
(10,387)
59,310
(15,268)
44,042
20.41c
20.30c
20.10c
(251)
(11,005)
(34,867)
(14,515)
(49,382)
(12.01c)
(12.01c)
19.26c
GLANBIA PLC ANNUAL REPORT 2004
45
Consolidated Profit and Loss Account (continued)
for the year ended 1 January 2005
Note of historical cost profits and losses
Profit/(loss) before taxation
Difference between historical cost depreciation
charge and actual depreciation charge
Historical cost profit/(loss) before taxation
Historical cost profit retained/(loss absorbed) for the year
Statement of total recognised gains and losses
Profit/(loss) for the year
Currency translation difference on
foreign currency net investments
Total recognised gains/(losses) for the year
Reconciliation of movements in shareholders' funds
Profit/(loss) for the year
Dividends
Other recognised (losses)/gains
Goodwill on disposal
Currency translation adjustment on goodwill reserves
Share capital issued
Own shares
Net change in shareholders' funds
Opening shareholders' funds - as originally reported
Prior year adjustment (note 29 and note 30)
Opening shareholders' funds - as restated
Closing shareholders' funds
On behalf of the Board
TP Corcoran JJ Moloney GJ Meagher
Directors
2 0 0 4
3'000
2 0 0 3
3'000
78,915
(14,885)
3,706
4,125
82,621
(10,760)
47,748
(45,257)
2 0 0 4
3'000
2 0 0 3
3'000
59,310
(34,867)
(58)
5,520
59,252
(29,347)
2 0 0 4
3'000
2 0 0 3
(as restated)
3'000
59,310
(15,268)
44,042
(58)
-
11
215
579
(34,867)
(14,515)
(49,382)
5,520
41,688
318
-
339
44,789
(1,517)
179,441
(2,829)
176,612
181,297
(3,168)
178,129
221,401
176,612
46
GLANBIA PLC ANNUAL REPORT 2004
Consolidated Balance Sheet
as at 1 January 2005
Assets employed
Fixed assets
Tangible assets
Intangible assets
Financial assets
Investments in joint ventures:
Share of gross assets
Share of gross liabilities
Investments in associates
Other investments
Current assets
Stocks
Debtors
Cash and bank balances
Notes
2 0 0 4
3'000
2 0 0 3
(as restated)
3'000
14
15
16
16
17
18
19
321,780
16,652
363,641
2,466
86,632
(36,805)
49,827
9,908
29,869
40,542
(27,598)
12,944
9,607
13,035
89,604
35,586
428,036
401,693
133,419
230,792
51,625
415,836
202,736
214,136
59,775
476,647
Creditors - Amounts falling due within one year
20
250,871
352,446
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
Own shares
Capital reserve
Equity shareholders' funds
Equity minority interests
Non-equity minority interests
On behalf of the Board
TP Corcoran JJ Moloney GJ Meagher
Directors
164,965
124,201
593,001
525,894
210,362
183,682
29,493
15,276
27,559
16,611
337,870
298,042
17,559
80,212
113,148
9,907
(2,563)
3,138
221,401
6,085
110,384
17,551
80,005
113,148
(34,088)
(3,235)
3,231
176,612
5,671
115,759
337,870
298,042
22
23
24
25
26
27
28
29
30
31
31
GLANBIA PLC ANNUAL REPORT 2004
47
Company Balance Sheet
as at 1 January 2005
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
Own shares
Capital reserve
On behalf of the Board
TP Corcoran JJ Moloney GJ Meagher
Directors
Notes
2 0 0 4
3'000
2 0 0 3
(as restated)
3'000
16
19
20
513,569
516,648
1,481
1,507
2,988
27,964
952
133
1,085
43,212
(24,976)
(42,127)
488,593
474,521
22
3,397
3,397
485,196
471,124
25
26
28
29
30
17,559
435,480
30,181
(2,563)
4,539
17,551
435,273
16,903
(3,235)
4,632
485,196
471,124
48
GLANBIA PLC ANNUAL REPORT 2004
Notes
(a)
Consolidated Cash Flow Statement
for the year ended 1 January 2005
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 of investments
Acquisitions and disposals
Purchase of subsidiary undertakings
Disposal of subsidiary undertakings
Termination of operation
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
Share capital issued
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 3 January 2004
Net debt at 1 January 2005
(b)
2 0 0 4
3'000
573
(11,349)
(90)
-
(9,674)
(60,946)
1,409
(55,211)
(10,157)
76,781
6,496
-
(8,513)
(613)
-
215
3
2 0 0 4
3'000
83,444
(20,540)
(4,955)
(114,748)
73,120
(14,813)
1,508
(8,908)
(7,400)
(7,400)
9,126
1,726
1,505
3,231
(153,797)
(150,566)
2 0 0 3
3'000
277
(16,676)
(149)
(1,463)
(10,295)
(41,741)
2,629
(2,410)
-
795
(1,851)
7,332
(34,478)
(987)
(100)
-
5
2 0 0 3
3'000
94,507
(28,306)
(9,816)
(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 2004
49
Notes to the Consolidated Cash Flow Statement
for the year ended 1 January 2005
(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) in stocks
(Increase) in debtors
(Decrease)/increase in creditors
Goodwill amortisation
(b) Analysis of net debt
Net cash
Cash at bank and in hand
Debt
Debt
Finance leases
Net debt
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
2 0 0 4
3'000
2 0 0 3
3'000
84,422
-
(920)
29,320
(1,228)
(10,498)
(1,807)
(16,118)
273
91,869
(338)
(415)
38,125
(1,443)
(35,004)
(2,333)
3,749
297
83,444
94,507
A t
3 J a n u a r y
2 0 0 4
3'000
C a s h f l o w
3'000
E x ch a n g e
M o v e m e n t
3'000
A t
1 J a n u a r y
2 0 0 5
3'000
59,775
(7,400)
(750)
51,625
(211,950)
(1,622)
(213,572)
(153,797)
59,775
(42,523)
(698)
(924)
(169,427)
(153,797)
8,513
613
9,126
1,726
2,255
-
(201,182)
(1,009)
2,255
(202,191)
1,505
(150,566)
51,625
(2,958)
(551)
(458)
(198,224)
(150,566)
50
GLANBIA PLC ANNUAL REPORT 2004
Accounting Policies
The significant accounting policies adopted by the
Group are as follows:
(a) Basis of preparation
activity. Net realisable value represents the estimated
selling price less costs to completion and appropriate
selling and distribution costs.
The financial statements have been prepared in
accordance with accounting standards generally
accepted in Ireland and Irish statute comprising the
Companies Acts, 1963 to 2003. 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 1 January 2005, comparatives are for
the 52 week period ended 3 January 2004. The balance
sheets for 2004 and 2003 have been drawn up as at 1
January 2005 and 3 January 2004 respectively. Results
to 1 January 2005 are referred to as 2004 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.
(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.
(iv) Interest incurred on payments on account of major
fixed tangible assets under construction is included
in the cost of these assets.
(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.
(c) Turnover
(h) Financial fixed assets
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 attrib-
utable 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 cal-
culating 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 and 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
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 trans-
ferred 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
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.
GLANBIA PLC ANNUAL REPORT 2004
51
Accounting Policies (continued)
(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 compu-
tations 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 com-
mitment 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 instru-
ments 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) the retranslation of the net investment in foreign
subsidiaries; and
(b) 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.
(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 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 prema-
turely 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.
52
GLANBIA PLC ANNUAL REPORT 2004
(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 expect-
ed 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 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 1 January
2005 are shown in note 35.
(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.
(r) Own shares
In December 2003 the Urgent Issues Task Force issued
Abstract 38 "Accounting for ESOP Trusts" and
consequential amendments to Abstract 17 "Employee
Share Schemes". As a result, the cost of awards made
under the share schemes is calculated with reference to
the intrinsic value of the award whereas previously the
charge was also determined in relation to the cost of
the shares that would satisfy the awards.
In addition, the cost of own shares held is now
deducted from shareholders' funds. The Group has
adopted these abstracts in these financial statements.
This represents a change in accounting policy and the
2003 comparative figures have been restated
accordingly (note 29 and note 30).
Notes to the Financial Statements
1 January 2005
1 Segmental analysis
(a) Analysis by class of business
Turnover
Consumer Foods
Food Ingredients
Agribusiness
Total turnover for Food Ingredients was 21,195.645m (2003: 21,079.120m) of which
2120.492m (2003: 2172.910m) represented inter-segment sales and 21,075.153m
(2003: 2906.210m) 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 ventures
and associates
Consumer Foods
Food Ingredients
Agribusiness
Net assets
Consumer Foods
Food Ingredients
Agribusiness
Unallocated liabilities
Total net assets
2 0 0 4
3'000
543,524
1,075,153
227,368
2 0 0 3
3'000
900,411
906,210
234,452
1,846,045
2,041,073
2 0 0 4
3'000
27,755
44,770
12,098
2 0 0 3
3'000
44,773
33,765
14,247
84,623
92,785
2 0 0 4
3'000
2 0 0 3
(as restated)
3'000
112,122
281,263
95,051
488,436
(150,566)
193,227
186,176
72,436
451,839
(153,797)
337,870
298,042
GLANBIA PLC ANNUAL REPORT 2004
53
Notes to the Financial Statements (continued)
1 January 2005
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 ventures
and associates
Ireland
Rest of Europe
USA/other
Net assets
Ireland
Rest of Europe
USA/other
Unallocated liabilities
Total net assets
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 3,831
(2003: 5,052) and is analysed into the following categories:
Number of persons employed
Consumer Foods
Food Ingredients
Agribusiness
54
GLANBIA PLC ANNUAL REPORT 2004
2 0 0 4
3'000
731,733
292,855
821,457
2 0 0 3
3'000
793,753
653,747
593,573
1,846,045
2,041,073
2 0 0 4
3'000
2 0 0 3
3'000
1,217,049
102,219
526,777
1,132,431
459,028
449,614
1,846,045
2,041,073
2 0 0 4
3'000
60,702
1,901
22,020
2 0 0 3
3'000
74,178
3,894
14,713
84,623
92,785
2 0 0 4
3'000
2 0 0 3
(as restated)
3'000
407,742
(21,021)
101,715
294,884
100,566
56,389
488,436
451,839
(150,566)
(153,797)
337,870
298,042
2 0 0 4
2,095
1,073
663
3,831
2 0 0 3
3,371
969
712
5,052
2 Employees and remuneration (continued)
The staff costs are comprised of:
Wages and salaries
Social welfare costs
Pension costs
3 Exceptional items
Redundancy credit/(cost) arising from fire at Roosky plant (note 6)
Restructuring credit/(cost) associated with EU Commission's Mid Term
Review of Common Agricultural Policy
2 0 0 4
3'000
141,879
15,283
9,322
2 0 0 3
3'000
170,224
17,774
8,796
166,484
196,794
2 0 0 4
3'000
230
170
400
2 0 0 3
3'000
(9,505)
(6,946)
(16,451)
The credit in 2004 arises from the release of redundancy provisions no longer required.
4 Loss on sale of operation
The loss arises primarily from the sale by the Group of a 75% interest in its UK hard cheese business in April 2004
(note 5). The Group also incurred additional costs relating to prior period disposals.
Loss on disposal of asset
(2,520)
(81)
(2,601)
U K H a r d
C h e e s e
3'000
O t h e r
3'000
To t a l
3'000
The loss on sale in 2003 arose mainly from the Group's sale of its UK Fresh Meats operation at West Bromwich. The
Group also disposed of a pig farm during 2003 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.
5 Provision for loss on sale of operation
The 2003 provision arose from the sale by the Group in April 2004 of a 75% interest in its UK hard cheese business.
Loss on disposal of asset after year end
Write-back of goodwill on asset disposed after year end
2 0 0 4
3'000
-
-
-
2 0 0 3
3'000
(18,629)
(30,517)
(49,146)
GLANBIA PLC ANNUAL REPORT 2004
55
Notes to the Financial Statements (continued)
1 January 2005
6 Profit on sale of fixed assets
The 2004 profit arises from the sale of a site in the Consumer Foods business.
Profit on disposal of tangible assets
2 0 0 4
3'000
2 0 0 3
3'000
929
11,594
The profit in 2003 arose 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.
7 Profit/(loss) on termination of operations
The gain arises from the sale by the Group of its UK Fresh Meats and UK Consumer Meats plants at Drongan,
Gainsborough and Milton Keynes during 2004, following the sale of its UK Fresh Meats business in 2003 and the
closure of its UK Consumer Meats business in 2002.
Profit/(loss) arising on termination of operations
Goodwill written off on termination
2 0 0 4
3'000
2,445
-
2,445
2 0 0 3
3'000
(8,578)
(1,249)
(9,827)
The loss in 2003 relates to the closure of the Group's UK Fresh Meats operation at Drongan and Gainsborough, and an
adjustment to the loss arising from the closure of the Group's UK Consumer Meats operation in June 2002.
8 Group interest
Loans and overdrafts:
Repayable within five years
Repayable after 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
56
GLANBIA PLC ANNUAL REPORT 2004
2 0 0 4
3'000
(4,211)
(3,779)
(917)
(90)
3,033
2 0 0 3
3'000
(7,362)
-
(7,735)
(149)
223
(5,964)
(15,023)
2 0 0 4
3'000
2 0 0 3
3'000
29,320
38,125
513
4,331
2,826
3,271
564
4,695
4,348
3,756
(1,228)
(1,443)
9 Profit/(loss) before taxation (continued)
(b) Operating costs
Operating costs relate to continuing and discontinued operations as set out below:
Cost of sales
Distribution costs
Administrative expenses
2 0 0 4
C o n t i n u i n g
3'000
1,529,413
77,857
62,472
2 0 0 4
Discontinued
3'000
2 0 0 4
To t a l
3'000
83,514
4,314
3,653
1,612,927
82,171
66,125
2 0 0 3
C o n t i n u i n g
3'000
1,361,452
76,350
80,643
2 0 0 3
Discontinued
3'000
2 0 0 3
To t a l
3'000
412,085
18,347
16,778
1,773,537
94,697
97,421
The discontinued operations represent the Group's disposal of 75% of its interest in the UK hard cheese busines on 7 April 2004, and
the sale of its UK Fresh Meats business in 2003. Comparative amounts have been restated accordingly.
(c) Directors' remuneration
The salary, fees and other benefits for each of the Directors during the year were:
S a l a r y a n d
f e e s
3'000
Performance
b o n u s
3'000
L o n g t e r m
i n c e n t i v e
p l a n
( n o t e ( a ) )
3'000
O t h e r
p ay m e n t s
( n o t e ( b ) )
3'000
Pe n s i o n
contribution
3'000
O t h e r
b e n e f i t s
3'000
Executive Directors
JJ Moloney
WG Murphy (note (b))
GJ Meagher (note (b))
KE Toland (note (a))
2004
2003
Non-Executive Directors
TP Corcoran
MJ Walsh
L Herlihy
JE Callaghan
JV Liston
HV Corbally
J Fitzgerald (note (c))
EP Fitzpatrick
JA Gilsenan
TP Heffernan
CL Hill
JJ Miller
M Parsons
EM Power
F Quigley (note (d))
V Quinlan
GE Stanley
2004
2003
399
230
230
239
1,098
981
73
35
35
50
50
16
8
16
16
16
16
16
16
16
8
16
16
419
353
221
135
134
139
629
632
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
137
137
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
44
44
-
88
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
115
65
63
64
307
266
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
13
14
18
15
60
67
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2004 Total remuneration
1,517
2003 Total remuneration
1,334
629
632
137
-
88
-
307
266
60
67
2 0 0 4
To t a l
3'000
748
488
489
594
2,319
73
35
35
50
50
16
8
16
16
16
16
16
16
16
8
16
16
419
2,738
2 0 0 3
To t a l
3'000
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
GLANBIA PLC ANNUAL REPORT 2004
57
Notes to the Financial Statements (continued)
1 January 2005
9 Profit/(loss) before taxation (continued)
(c) Directors' remuneration (continued)
(a) The Glanbia Executive Long Term Incentive Plan was introduced in 2000 as part of an overall plan to align the interests
of senior management with shareholders. Mr KE Toland was granted units in accordance with the rules of the scheme in
2000. The performance criteria of the scheme were met and the units were exercised by Mr KE Toland in March 2004.
(b) In 2004 holders of options granted in 1994 under the Avonmore share option scheme were given the option to receive
the value of the option in cash in lieu of exercising the options. Mr WG Murphy and Mr GJ Meagher both elected to
receive a cash payment in lieu of exercising the options, which then lapsed.
(c) Mr J Fitzgerald was appointed as a Director on 10 June 2004.
(d) Mr F Quigley resigned as a Director on 10 June 2004.
(e) No fees are payable to executive Directors.
(f) Details of Directors' share options are set out in note 37 to the financial statements.
(g) 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
2004
2003
Tr a n s f e r v a l u e o f
i n c r e a s e i n a c c r u e d
p e n s i o n
3'000
A n n u a l p e n s i o n
a c c r u e d i n 2 0 0 4
i n e x c e s s o f i n f l a t i o n
3'000
To t a l a n n u a l
a c c r u e d p e n s i o n
a t 1 J a n u a r y 2 0 0 5
3'000
439
152
220
41
852
668
33
7
12
6
58
52
195
152
136
36
519
440
58
GLANBIA PLC ANNUAL REPORT 2004
10 Taxation
P r e -
e x c e p t i o n a l
2 0 0 4
3'000
E x c e p t i o n a l
2 0 0 4
3'000
To t a l
2 0 0 4
3'000
P r e -
e x c e p t i o n a l
2 0 0 3
3'000
E x c e p t i o n a l
2 0 0 3
3'000
To t a l
2 0 0 3
3'000
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 ventures
Share of tax of associates
Total current tax
Deferred tax
Group
Joint venture
Total deferred tax
Total tax charge
5,409
(859)
4,550
444
(134)
310
-
66
4,926
3,278
601
3,879
8,805
-
-
-
-
-
-
-
-
-
-
-
-
-
5,409
(859)
4,031
(457)
4,550
3,574
444
(134)
310
-
66
345
(453)
(108)
-
136
4,926
3,602
-
-
-
-
-
-
-
-
-
3,278
601
3,879
7,112
(442)
(1,546)
-
6,670
(1,546)
8,805
10,272
(1,546)
4,031
(457)
3,574
345
(453)
(108)
-
136
3,602
5,566
(442)
5,124
8,726
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 and exceptional items
Profit on ordinary activities multiplied by standard rate of Irish corporation tax of 12.5%
Effects of:
Earnings at reduced and passive Irish rates
Difference between capital allowances and depreciation
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 ventures
2 0 0 4
3'000
2 0 0 3
3'000
77,742
77,135
9,718
9,642
(937)
(3,303)
184
(7)
(451)
(993)
715
4,926
4,860
66
4,926
(819)
1,187
(1,339)
(2,849)
(1,887)
(910)
577
3,602
3,466
136
3,602
GLANBIA PLC ANNUAL REPORT 2004
59
Notes to the Financial Statements (continued)
1 January 2005
11 Profit/(loss) for financial year attributable to Glanbia plc
As permitted by Section 3(2) of the Companies (Amendment) Act, 1986, a separate profit and loss account for the
holding company, Glanbia plc, has not been included in these financial statements. The profit for the financial year
dealt with in the financial statements of Glanbia plc, amounts to 228.546m (2003: 223.226m).
12 Dividends
2 0 0 4
cent per share
2 0 0 4
3'000
2 0 0 3
cent per share
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
2.16
-
2.16
3.09
-
3.09
5.25
6,321
(42)
6,279
9,043
(54)
8,989
15,268
2.06
-
2.06
2.94
-
2.94
5.00
2 0 0 3
3'000
6,026
(46)
5,980
8,600
(65)
8,535
14,515
13 Earnings per share
Profit/(loss) after taxation and minority interest
2 0 0 4
3'000
2 0 0 3
3'000
59,310
(34,867)
Weighted average number of ordinary shares in issue
290,617,359
290,303,425
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
(Gain)/loss on termination of operations
Adjusted earnings per share
Fully diluted earnings per share
20.41c
(12.01c)
0.10c
(0.14c)
0.89c
-
(0.32c)
(0.84c)
0.10c
5.13c
9.71c
16.93c
(3.99c)
3.39c
20.10c
19.26c
20.30c
(12.01c)
In the opinion of the Directors, adjusted earnings per share is a more appropriate indicator of underlying performance.
The number of shares used in the calculation of the fully diluted earnings per share is 292,150,354.
60
GLANBIA PLC ANNUAL REPORT 2004
14 Tangible assets - Group
L a n d a n d
b u i l d i n g s
3'000
P l a n t a n d
e q u i p m e n t
3'000
Cost or valuation
As at 3 January 2004
Currency translation adjustment
Additions
Disposals
Reclassification
206,935
(2,541)
10,578
(34,538)
-
559,583
(8,947)
47,637
(69,813)
775
M o t o r
v e h i cl e s
3'000
17,805
(25)
421
(67)
(775)
To t a l
3'000
784,323
(11,513)
58,636
(104,418)
-
As at 1 January 2005
180,434
529,235
17,359
727,028
Depreciation
As at 3 January 2004
Charged to profit and loss account
Currency translation adjustment
On disposals
Reclassification
As at 1 January 2005
Net book value
As at 1 January 2005
As at 3 January 2004
62,644
6,903
(540)
(9,316)
-
341,558
21,986
(3,661)
(30,902)
(288)
16,480
431
(19)
(316)
288
420,682
29,320
(4,220)
(40,534)
-
59,691
328,693
16,864
405,248
120,743
200,542
495
321,780
144,291
218,025
1,325
363,641
(a) Included in the net book values of plant and equipment are assets acquired under lease agreements with a net book
value of 212,830,000 (2003: 216,560,000). The depreciation charged in respect of these leased assets and included in
the total depreciation charge above was 23,731,000 (2003: 23,734,000).
(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 22,956,000, as compared with the original useful lives.
GLANBIA PLC ANNUAL REPORT 2004
61
Notes to the Financial Statements (continued)
1 January 2005
15 Intangible assets - Group
At 3 January 2004
Goodwill on disposal
Additions
Currency translation adjustment
Amortised to profit and loss account
At 1 January 2005
2 0 0 4
3'000
2,466
-
14,519
(60)
(273)
2 0 0 3
3'000
4,420
(1,348)
-
(309)
(297)
16,652
2,466
The cumulative goodwill amortised at 1 January 2005 was 21,662,000 (2003: 21,389,000).
The additions to intangible assets arise on the acquisition of Kortus Food Ingredients Services GmbH and
the business of Wicklow Corn Company Limited in 2004. The figure of 214.519m is analysed as follows:
Consideration
Book value of assets acquired
Acquisition costs
Split as:
Goodwill
Intellectual property
Consideration includes deferred amounts of 24,000,000, of which 22,000,000 is dependent on the
achievement of a targeted earnings figure.
3'000
15,509
(1,812)
822
14,519
10,157
4,362
14,519
To t a l
3'000
16 Financial assets
Company
At 3 January 2004
Disposals
At 1 January 2005
Group
At 3 January 2004
Additions
Share of retained (loss)/profit
Disposals/redemption
Amounts written off
Currency translation adjustment
S u b s i d i a r i e s
3'000
A s s o c i a t e s
3'000
O t h e r
i n v e s t m e n t s
( n o t e 1 7 )
(as restated)
3'000
513,544
(2,679)
510,865
1,395
-
1,395
1,709
(400)
516,648
(3,079)
1,309
513,569
Joint ventures
3'000
A s s o c i a t e s
3'000
O t h e r
i n v e s t m e n t s
( n o t e 1 7 )
(as restated)
3'000
12,944
38,933
(1,684)
-
-
(366)
9,607
-
301
-
-
-
13,035
17,338
-
(400)
(42)
(62)
To t a l
3'000
35,586
56,271
(1,383)
(400)
(42)
(428)
At 1 January 2005
49,827
9,908
29,869
89,604
Included in the figure of 238.933m above is an amount of 2155,000 in respect of goodwill arising on the
acquisition of a 50% shareholding in Nashs Mineral Waters (Marketing) Limited during the year.
62
GLANBIA PLC ANNUAL REPORT 2004
17 Other investments
Irish Dairy Board
Moorepark Technology
Quoted investments
The Cheese Company Holdings Limited
Loan to joint venture
Glanbia Enterprise Fund Limited
Other
Market value
Quoted investments
2 0 0 4
C o m p a n y
3'000
-
-
19
-
-
1,290
-
2 0 0 4
G r o u p
3'000
9,555
289
80
11,009
5,658
1,290
1,988
2 0 0 3
C o m p a n y
(as restated)
3'000
2 0 0 3
G r o u p
(as restated)
3'000
-
-
19
-
-
1,690
-
9,425
331
80
-
-
1,690
1,509
1,309
29,869
1,709
13,035
568
1,245
413
930
The company's 25% interest in The Cheese Company Holdings Limited has not been treated as an associated
undertaking as the company is controlled by its majority shareholders and, in the opinion of the Directors, the Group
does not, at present, exercise significant influence over its operations. In the opinion of the Directors, the value of the
unquoted investments is not less than as shown above.
18 Stocks - Group
Raw materials and other stocks
Finished goods and goods for resale
Expense
2 0 0 4
3'000
11,140
110,525
11,754
2 0 0 3
3'000
11,375
174,751
16,610
133,419
202,736
The replacement cost of stocks is not materially different from the above amounts.
19 Debtors
Amounts falling due within one year
Trade debtors
Amounts owed by joint ventures
Amounts owed by associated companies
Value added tax
Other debtors
Prepayments and accrued income
Amounts falling due after one year
Pension prepayment/surplus
Loan note (note 39 (c))
2 0 0 4
C o m p a n y
3'000
2 0 0 4
G r o u p
3'000
2 0 0 3
C o m p a n y
3'000
-
-
-
-
-
1,481
140,467
632
84
5,623
7,441
18,375
-
-
6,228
51,942
-
-
-
-
-
952
-
-
2 0 0 3
G r o u p
3'000
148,349
9,043
128
5,119
17,119
20,296
14,082
-
1,481
230,792
952
214,136
GLANBIA PLC ANNUAL REPORT 2004
63
Notes to the Financial Statements (continued)
1 January 2005
20 Creditors - Amounts falling due within one year
Trade creditors
Amounts due to joint ventures
Amounts due to associated companies
Other creditors (note 21)
Accruals and deferred income
Borrowings (note 39)
Bills of exchange
Dividend payable (note 12)
Amounts due to subsidiary companies
Amounts due to/(from) parent - Glanbia
Co-operative Society Limited
2 0 0 4
C o m p a n y
3'000
10
-
-
-
241
-
-
8,989
18,220
2 0 0 4
G r o u p
3'000
115,822
290
1,207
18,076
99,797
3,509
-
10,342
-
2 0 0 3
C o m p a n y
3'000
113
-
-
-
1,505
-
-
8,535
33,090
2 0 0 3
G r o u p
3'000
141,517
-
1,406
21,161
111,370
43,221
20,189
9,887
-
504
1,828
(31)
3,695
27,964
250,871
43,212
352,446
21 Other creditors
Corporation tax
PAYE and PRSI
Other creditors
2 0 0 4
C o m p a n y
3'000
-
-
-
-
2 0 0 4
G r o u p
3'000
8,181
3,004
6,891
18,076
2 0 0 3
C o m p a n y
3'000
-
-
-
-
22 Creditors - Amounts falling due after more
than one year
2 0 0 4
C o m p a n y
3'000
2 0 0 4
G r o u p
3'000
2 0 0 3
C o m p a n y
3'000
2 0 0 3
G r o u p
3'000
8,276
3,532
9,353
21,161
2 0 0 3
G r o u p
3'000
Borrowings
Other creditors
3,397
-
198,682
11,680
3,397
-
170,351
13,331
3,397
210,362
3,397
183,682
The maturity profile of the Group's borrowings is analysed in note 39.
64
GLANBIA PLC ANNUAL REPORT 2004
23 Deferred taxation - Group
Liability at 3 January 2004
Translation difference
Receipt from joint venture
Profit and loss account
Liability at 1 January 2005
2 0 0 4
3'000
27,559
(1,344)
-
3,278
2 0 0 3
3'000
23,723
(2,728)
998
5,566
29,493
27,559
The receipt from joint venture in 2003 was the settlement in respect of a deferred tax asset in Glanbia Cheese Limited.
The deferred tax balance of 229.493m represents the net liability arising from the following:
Capital allowances
Other timing differences
24 Capital grants - Group
At 3 January 2004
Receivable for year
In disposed subsidiaries
Currency translation adjustment
Released to profit and loss account
At 1 January 2005
A m o u n t
p r o v i d e d
3'000
23,709
5,784
29,493
2 0 0 3
3'000
18,505
5
(418)
(38)
(1,443)
2 0 0 4
3'000
16,611
3
(115)
5
(1,228)
15,276
16,611
GLANBIA PLC ANNUAL REPORT 2004
65
Notes to the Financial Statements (continued)
1 January 2005
25 Called up equity share capital
(a) Authorised:
2 0 0 4
3'000
2 0 0 3
3'000
306,000,000 ordinary shares of 20.06 each
18,360
18,360
(b) Issued:
In issue 292,644,184 (2003: 292,514,184) ordinary shares of 20.06 each
17,559
17,551
Options over 100,000 ordinary shares were excercised during the year at 21.56, while options over 30,000 ordinary shares were
excercised at 21.97.
In accordance with the terms of the 2002 Long Term Incentive Plan ("LTIP"), options over 1,295,000 ordinary shares were granted
during the year and are exercisable between 2007 and 2014. Total options over 3,118,500 ordinary shares were outstanding at 1
January 2005 under the LTIP, at prices ranging between 21.55 and 22.725. Furthermore, in accordance with the terms of the LTIP,
certain executives to whom options were granted in 2002 and 2004 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 191,300 ordinary shares.
In accordance with the terms of the Company's 2002 Sharesave Scheme, options over 1,513,570 ordinary shares which were granted
in 2002, remain outstanding on 1 January 2005 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 29 to the financial statements, 1,734,949 ordinary shares were held by the Employee Share Trust at 1 January
2005. The dividend rights in respect of these shares have been waived.
Options over 490,000 ordinary shares, which were granted in 1998, under the Avonmore Foods plc 1988 Share Option Scheme remain
outstanding at a price of 24.25.
Total options over 5,122,070 ordinary shares were outstanding at 1 January 2005 at prices ranging between 21.20 and 24.25 and
GBP£0.764 and GBP£2.90, exercisable in periods up to 2014.
26 Share premium account
At 3 January 2004
Shares issued at a premium during the year
At 1 January 2005
C o m p a n y
3'000
435,273
207
G r o u p
3'000
80,005
207
435,480
80,212
66
GLANBIA PLC ANNUAL REPORT 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
2 0 0 4
3'000
2 0 0 3
3'000
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
C o m p a n y
3'000
S u b s i d i a r i e s
3'000
Joint
ventures and
associates
3'000
To t a l p r o f i t
a n d l o s s
r e s e r v e s
3'000
C u r r e n cy
t r a n s l a t i o n
r e s e r v e
3'000
G o o d w i l l
r e s e r v e
3'000
To t a l
r ev e n u e
r e s e r v e s
3'000
At 3 January 2004
16,903
2,503
6,838
26,244
(26,970)
(33,362)
(34,088)
Currency translation difference on
foreign currency net investments
-
-
-
-
(58)
11
(47)
Profit retained/(loss absorbed)
for year
13,278
32,147
(1,383)
44,042
-
-
44,042
At 1 January 2005
30,181
34,650
5,455
70,286
(27,028)
(33,351)
9,907
GLANBIA PLC ANNUAL REPORT 2004
67
Notes to the Financial Statements (continued)
1 January 2005
29 Own shares (Company and Group)
At 3 January 2004 - as reported
Prior year adjustment
At 3 January - as restated
Shares vested
Capital reserve
At 1 January 2005
2 0 0 4
3'000
-
(3,235)
(3,235)
546
126
2 0 0 3
3'000
-
(3,282)
(3,282)
38
9
(2,563)
(3,235)
The amount included above as own shares relates to 1,734,949 (2003: 2,189,998) ordinary shares in Glanbia plc held by
an Employee Share Trust which was established in May 2002 to operate in connection with the company's Saving
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 Trust cost 22,562,520 and had a market value of 24,857,857 at 1 January 2005.
The transfer from capital reserve represents the excess of the purchase price over the option price in respect of 455,049
ordinary shares (2003: 32,002 ordinary shares) on which options vested during the year.
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 212 and 2320 (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.
Prior year adjustment following the adoption of UITF 17 and UITF 38
UITF 38 was issued in December 2003 and requires shares held in Employee Share Trusts to be treated as a deduction
in shareholders' funds rather than as fixed asset investments. As a result, net assets have reduced by 22,829,000 at 3
January 2004 (4 January 2003: 23,168,000) and this has been reflected as a prior year adjustment.
In addition to the publication of UITF 38, UITF 17 was revised. The amendment to UITF 17 requires that the
measurement of the Sharesave Scheme charge should, as a minimum, be based on the intrinsic value of the award at
the date of grant and not (as previously) based on the carrying value of such shares held by an Employee Share Trust.
This represents a change in accounting policy, as the market price at date of granting the award was similar to the
purchase price of the shares, no adjustment to the profit and loss account in prior years is required.
68
GLANBIA PLC ANNUAL REPORT 2004
30 Capital reserve
At 3 January 2004 - as reported
Prior year adjustment (note 29)
At 3 January 2004 - as restated
Own shares - discount (note 29)
Own shares - amortisation
31 Minority interests
At 3 January 2004
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
At 1 January 2005
C o m p a n y
3'000
2 0 0 4
4,226
406
4,632
(126)
33
G r o u p
3'000
2 0 0 4
2,825
406
3,231
(126)
33
C o m p a n y
3'000
2 0 0 3
4,226
114
4,340
(9)
301
G r o u p
3'000
2 0 0 3
2,825
114
2,939
(9)
301
4,539
3,138
4,632
3,231
E q u i t y
2 0 0 4
3'000
5,671
413
-
-
-
1
-
6,085
E q u i t y
2 0 0 3
3'000
6,983
251
-
(1,464)
-
1
(100)
N o n - e q u i t y
2 0 0 4
3'000
N o n - e q u i t y
2 0 0 3
3'000
115,759
10,387
(6,088)
-
(9,674)
-
-
132,156
11,005
(17,107)
-
(10,295)
-
-
5,671
110,384
115,759
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 238.2m 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 although, 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 2004
69
Notes to the Financial Statements (continued)
1 January 2005
32 Capital commitments
Capital expenditure approved:
Contracted for
Not yet contracted for
33 Operating lease commitments
Commitments under operating leases, payable in 2005, expire as follows:
Within one year
Two to five years
After five years
2 0 0 4
C o m p a n y
3'000
-
-
-
2 0 0 4
G r o u p
3'000
25,908
37,241
63,149
2 0 0 3
C o m p a n y
3'000
-
-
-
C o m p a n y
3'000
-
-
-
-
2 0 0 3
G r o u p
3'000
14,547
86,050
100,597
G r o u p
3'000
959
4,399
24
5,382
34 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 1 January 2005 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 Avonmore Delaware L.P., and the Directors are of the opinion that no losses will
arise therefrom.
Group
(i) Bank guarantees, amounting to 217.304m (2003: 218.117m) are outstanding as at 1 January 2005, mainly in respect of payment
of EU subsidies.
(ii) The Group together with the other shareholders in Southwest Cheese Company LLC ("the Joint Venture") is a party to a Sponsor
Support Agreement, as part of the financing of the Joint Venture. Under the agreement, each sponsor severally agrees to provide
support to the Joint Ventures either by equity contributions or by way of loan;
• to enable the Joint Venture to achieve the Project Construction Completion date; and
• to indemnify the Joint Venture for any amounts necessary to discharge Mechanics Liens.
70
GLANBIA PLC ANNUAL REPORT 2004
35 Pension schemes
(a) The Group operates a number of defined benefit and defined contribution 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 defined benefit 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 1 January 2002 and 31
March 2004. The contributions paid to the schemes in 2004 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 2252m.
The most recent actuarial valuations show that the defined benefit 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 81% of these accrued liabilities at the relevant actuarial valuation dates. The Group has submitted
proposals to the relevant regulatory bodies in relation to the funding of the schemes. The pension cost charged to the profit and loss
account for 2004 amounted to 28,788,000 (2003: 28,091,000).
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.
The Group operates defined contribution schemes in Ireland and the USA for the Group's employees. The Group has previously
operated defined contribution schemes in the United Kingdom for the meat businesses which were disposed in 2003. The pension cost
charged to the profit and loss account for defined contribution schemes in 2004 amounted to 2534,000 (2003: 2705,000).
(b) FRS 17 Retirement benefits
The transitional arrangements of FRS 17 require disclosure of the assets and liabilities as at 1 January 2005 and 3 January 2004
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:
2 0 0 4
2 0 0 3
2 0 0 2
2 0 0 1
%
I r i s h S ch e m e s
%
%
%
2 0 0 4
%
2 0 0 3
2 0 0 2
2 0 0 1
U K S ch e m e s
%
%
%
Inflation rate increase
Discount rate
Salary rate increase
Pension payment increase
2.25
4.8
3.5
2.25 - 3.5
2.25
5.5
3.5
2.25 - 3.5
2.5
5.75
3.5
2.5 - 3.5
2.5
6.0
3.5
2.5 - 3.5
2.75
5.5
3.5
1.85 - 3.25
2.6
5.6
3.1
1.85 - 3.25
2.25 - 2.5
5.75
3.25 - 3.5
1.75 - 3.25
2.5
6.0
3.5
2.5 - 3.0
Scheme assets
The expected long term rate of return on the assets of the schemes were as follows:
Equities
Bonds
Other
2 0 0 4
%
2 0 0 3
%
8.5
4.57 - 5.5
7.0
8.5
4.44 - 5.0
7.5
2 0 0 2
%
8.5
5.75
7.5
2 0 0 1
%
8.5
6.0
7.5
GLANBIA PLC ANNUAL REPORT 2004
71
Notes to the Financial Statements (continued)
1 January 2005
35 Pension schemes (continued)
Scheme assets (continued)
The assets of the Group schemes were as follows:
Equities
Bonds
Other
Total assets
Actuarial liabilities
(Deficit)/surplus
Related deferred tax asset/(liability)
2 0 0 4
3'000
178,696
84,373
28,448
2 0 0 3
3'000
235,110
78,778
25,965
2 0 0 2
3'000
206,775
79,248
28,020
2 0 0 1
3'000
273,947
86,263
23,702
291,517
(421,223)
339,853
(440,260)
314,043
(392,148)
383,912
(367,993)
(129,706)
12,299
(100,407)
7,594
(78,105)
4,876
15,919
(2,198)
Net pension (liability)/asset
(117,407)
(92,813)
(73,229)
13,721
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 are as follows:
Analysis of the amount that would have been charged to the operating profit in 2004, 2003 and 2002 under FRS 17
Current service cost
Past service cost
Disposals
2 0 0 4
3'000
6,284
-
-
2 0 0 3
3'000
10,086
295
-
2 0 0 2
3'000
9,760
117
(861)
6,284
10,381
9,016
Analysis of amount that would have been credited to other finance income in 2004, 2003 and 2002 under FRS 17
Expected return on pension scheme assets
Interest on past service scheme liabilities
Net credit to finance income
2 0 0 4
3'000
19,621
(19,380)
2 0 0 3
3'000
23,326
(21,864)
2 0 0 2
3'000
29,400
(21,566)
241
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
2 0 0 4
3'000
5,911
(6,341)
(45,701)
2 0 0 3
3'000
16,120
(3,835)
(35,088)
2 0 0 2
3'000
(86,424)
510
(12,527)
Actuarial loss that would have been recognised in statement of total recognised
gains and losses
(46,131)
(22,803)
(98,441)
72
GLANBIA PLC ANNUAL REPORT 2004
35 Pension schemes (continued)
Movement in (deficit)/surplus during the year
(Deficit)/surplus in schemes at beginning of year
Disposal of Glanbia Foods Limited (note a)
Translation of opening balances
Current service cost
Past service cost
Other disposals
Cash contributions
Finance income
Experience loss
2 0 0 4
3'000
(100,407)
11,640
53
(6,284)
-
-
11,182
241
(46,131)
2 0 0 3
3'000
(78,105)
-
3,043
(10,086)
(295)
-
6,377
1,462
(22,803)
2 0 0 2
3'000
15,919
-
-
(9,760)
(117)
861
5,599
7,834
(98,441)
Deficit at end of year
(129,706)
(100,407)
(78,105)
History of experience gains and losses
2 0 0 4
2 0 0 3
2 0 0 2
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
2.0%
4.7%
(27.5%)
(1.5%)
(0.9%)
0.1%
Total loss on STRGL as a percentage of schemes actuarial liabilities
(11.0%)
(5.2%)
(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
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
2 0 0 4
3'000
337,870
(117,407)
(6,228)
6,334
2 0 0 3
3'000
298,042
(92,813)
(14,082)
14,171
2 0 0 2
3'000
320,436
(73,229)
(25,340)
8,843
220,569
205,318
230,710
2 0 0 4
3'000
70,286
(117,407)
(6,228)
6,334
2 0 0 3
3'000
26,244
(92,813)
(14,082)
14,171
2 0 0 2
3'000
75,626
(73,229)
(25,340)
8,843
2 0 0 1
3'000
118,806
13,721
(27,306)
10,758
Profit and loss account reserve on FRS 17 basis
(47,015)
(66,480)
(14,100)
115,979
Comprising:
Profit and loss account reserve on FRS 17 basis
excluding pension (deficit)/asset
Pension (deficit)/asset
70,392
(117,407)
26,333
(92,813)
59,129
(73,229)
102,258
13,721
(47,015)
(66,480)
(14,100)
115,979
(a) On 7 April 2004 the Group sold 100% of Glanbia Foods Limited to Milk Link Limited, and created a new entity, The Cheese Company
Holdings Limited, in which the Group has a 25% interest. As part of this transaction, the assets and obligations of the Glanbia Foods
pension scheme transferred with Glanbia Foods Limited.
GLANBIA PLC ANNUAL REPORT 2004
73
Notes to the Financial Statements (continued)
1 January 2005
36 Related party transactions
(a) Transactions with principal shareholder
Glanbia Co-operative Society Limited ("the Society") holds 54.77% 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 21.807m for the year
(2003: 21.539m). 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 2004
and 2003.
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 2253,948 (2003: 2253,948).
The balance due from the Company and its subsidiaries to the Society at 1 January 2005 is 21.828m (2003: 23.695m).
(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 1 January 2005, trading
balances due from Directors amounted to 254,366 (2003: 275,382). Details of 2004 trading are summarised below:
Total amounts traded
Highest level of trading with an individual Director
P u rch a s e s f r o m D i r e c t o r s
S a l e s t o D i r e c t o r s
2 0 0 4
3'000
2 0 0 3
3'000
1,753
1,557
557
569
2 0 0 4
3'000
693
174
2 0 0 3
3'000
729
244
(c) Transactions with affiliated companies
The Company and its subsidiaries transacted purchases and sales with associated companies, including joint ventures as listed in
note 37. At 1 January 2005, net balances due to associated companies amounted to 2780,389 (2003 – due from: 27,765,202) and
purchases from associated companies amounted to 216,232,137 (2003: 213,966,660) for the year. Sales to associated companies
amounted to 229,641,324 (2003: 282,361,399). The loan advanced to a joint venture amounted to 25,658,509 (2003: nil) at the year
end.
74
GLANBIA PLC ANNUAL REPORT 2004
37 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
JG Fitzgerald
EP Fitzpatrick
JA Gilsenan
TP Heffernan
CL Hill
JV Liston
GJ Meagher
JJ Miller
WG Murphy
M Parsons
EM Power
JV Quinlan
GE Stanley
KE Toland
*
*
*
Secretary
S Talbot
Executive Director
*
** Or at date of appointment if later
$ Appointed on 10 June 2004
Ordinary shares
of 20.06
0 1 / 0 1 / 0 5
0 3 / 0 1 / 0 4
**
Number of units
81,520
81,804
23,708
70,000
35,000
1,495
24,171
50,501
2,842
27,644
31,966
-
212,327
61,136
230,827
26,344
37,893
21,347
28,724
18,650
81,520
81,804
23,708
60,000
35,000
1,495
24,171
38,501
2,842
27,644
31,966
-
212,327
61,136
230,827
26,344
37,893
21,347
28,724
13,650
9,100
9,100
GLANBIA PLC ANNUAL REPORT 2004
75
Notes to the Financial Statements (continued)
1 January 2005
37 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 2005 and 2014.
Options - Ordinary shares of 20.06
Number of units
03/01/04
Granted/Lapsed during year
01/01/05
Beneficial Directors
JJ Moloney
1988 Share Option Scheme
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
Sharesave Scheme
GJ Meagher 1988 Share Option Scheme
1988 Share Option Scheme
2002 Long Term Incentive Plan
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
2002 Long Term Incentive Plan
Sharesave Scheme
Secretary
S Talbot
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
Sharesave Scheme
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
-
(50,000)
-
-
75,000
(50,000)
-
-
-
100,000
-
-
75,000
-
150,000
290,000
150,000
4,593
-
75,000
205,000
75,000
-
75,000
225,500
164,000
100,000
4,593
164,000
75,000
4,593
E x e rc i s e
p r i c e
3
4.25 (b)
1.55 (c)
2.725 (d)
1.20 (e)
1.97 (a)
4.25 (b)
1.55 (c)
2.725 (d)
1.97 (a)
4.25 (b)
1.55 (c)
1.55 (c)
2.725 (d)
1.20 (e)
1.55 (c)
2.725 (d)
1.20 (e)
Options:
(a) The remuneration committee gave the holders of these options, which were issued in 1994, the choice to receive
cash in lieu of exercising the options. Messrs. Meagher and Murphy chose the cash alternative and as a result,
the options held lapsed.
(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 between 2007 and 2014.
(e) 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 1 January 2005 and
18 February 2005.
JJ Moloney, GJ Meagher, KE Toland and S Talbot, as participants of the 2002 Long Term Incentive Plan, as noted at
(c) above, 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.
76
GLANBIA PLC ANNUAL REPORT 2004
37 Directors' and Secretary's interests (continued)
(a) Glanbia plc (continued)
GJ Meagher and S Talbot, as participants of the 2002 Long Term Incentive Plan, as noted at (d) above, 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.
JJ Moloney, as a participant of the 2002 Long Term Incentive Plan, as noted at (d) above, is eligible for a share award of
6.6% of the ordinary shares he continues to hold following the second anniversary of the exercise of the option.
Participants in the Sharesave Scheme are deemed to be interested in 1,734,949 ordinary shares beneficially owned by
the Glanbia Employees' Share Trust as at 1 January 2005 (1,731,290 ordinary shares as at 18 February 2005).
The market price of the ordinary shares as at 1 January 2005 was 22.80 and the range during the year was 22.15 to
22.85. The 1988 Share Option Scheme expired on 31 August 1998.
(b) Glanbia Co-operative Society Limited
Beneficial Directors
TP Corcoran
L Herlihy
MJ Walsh
HV Corbally
JG Fitzgerald
EP Fitzpatrick
JA Gilsenan
TP Heffernan
CL Hill
JJ Miller
M Parsons
EM Power
JV Quinlan
GE Stanley
”A“ Ordinary shares
of 21
Convertible redeemable
"B" shares of 20.01
01/01/05
03/01/04
**
01/01/05
03/01/04
**
Number of units
Number of units
65,929
87,192
13,293
4,156
22,230
22,701
2,302
25,274
15,273
22,491
6,563
24,801
8,975
632
65,761
86,515
12,793
4,058
22,230
22,401
2,259
25,100
15,051
22,150
6,349
24,570
8,850
599
139
724
481
109
227
343
63
173
123
280
257
281
115
-
307
1,401
981
207
227
643
106
347
345
621
471
512
240
33
There have been no changes in the above interests between 1 January 2005 and 18 February 2005.
** Or at date of appointment if later.
GLANBIA PLC ANNUAL REPORT 2004
77
Notes to the Financial Statements (continued)
1 January 2005
37 Directors' and Secretary's interests (continued)
(b) Glanbia Co-operative Society Limited (continued)
*
Beneficial Directors
TP Corcoran
L Herlihy
MJ Walsh
JJ Moloney
HV Corbally
JG Fitzgerald
EP Fitzpatrick
JA Gilsenan
TP Heffernan
CL Hill
GJ Meagher
JJ Miller
WG Murphy
M Parsons
EM Power
JV Quinlan
KE Toland
*
*
*
Secretary
S Talbot
Convertible loan stock units
20.01269738
”C“ shares
of 20.01
01/01/05
03/01/04
**
01/01/05
03/01/04
**
Number of units
Number of units
297,279
1,455,858
190,075
-
294,956
504,173
330,717
251,757
282,558
-
-
379,348
-
252,039
330,172
-
-
220,400
1,062,568
140,392
-
217,781
423,196
243,713
167,020
197,755
-
-
289,109
-
155,883
240,306
-
-
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
1,067,686
-
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
1,067,686
-
-
-
7,182,246
7,182,246
There have been no changes in the above interests between 1 January 2005 and 18 February 2005 with the exception
of convertible loan stock units issued to Directors who are milk suppliers in accordance with the conditions of the 2005
Revolving Share Plan of the Society.
Executive Director
*
** Or at date of appointment if later
78
GLANBIA PLC ANNUAL REPORT 2004
38 Details of the Company's interest in its principal subsidiary and associated undertakings are as follows:
(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 Holdings Limited
Glanbia Investments (UK) Limited
Glanbia Inc.
Glanbia Foods Inc.
Glanbia Foods B.V.
Kortus Food Ingredients Services GmbH
(b) Associated undertakings/joint ventures
P r i n c i p a l
a c t i v i t i e s
G r o u p
i n t e r e s t
%
A d d r e s s o f
r e g i s t e r e d
o f f i c e
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
Fertilizers
Holding Company
Holding Company
Supply of Animal Feeds
Consumer Foods Products
Holding Company
Investment Holding
Holding Company
Milk Products
Holding Company
Nutrient Delivery Systems
60
100
100
100
100
100
100
100
100
100
100
100
100
73.34
100
100
100
100
100
100
100
100
100
100
(1)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(2)
(3)
(2)
(4)
(4)
(5)
(4)
(4)
(6)
(7)
(8)
(9)
D a t e t o w h i ch
r e s u l t s i n cl u d e d
P r i n c i p a l
a c t i v i t i e s
G r o u p
i n t e r e s t
%
A d d r e s s o f
r e g i s t e r e d
o f f i c e
Glanbia Cheese Limited
Co-operative Animal Health Limited
South Eastern Cattle Breeding Society Limited
Malting Company of Ireland Limited
South East Port Services Limited
Nashs Mineral Waters (Marketing) Limited
South West Cheese Company LLC
Milk Ventures (UK) Limited
1 January 2005
31 December 2003
31 December 2003
31 October 2004
1 January 2005
31 December 2004
31 December 2004
31 December 2004
Cheese Products
Agro Chemicals
Cattle Breeding
Malting
Port Services
Marketing
Milk Products
Evaporated and
Powdered Milk
51
50
57
33.33
49
50
50
50
(4)
(10)
(11)
(12)
(3)
(13)
(14)
(15)
20 Patrick Street, Kilkenny, Ireland.
Palmerstown, Kilkenny, Ireland.
Second Floor, 2 Albert Road, Tamworth, Staffordshire, B79 7JN, England.
Suite 780, Wilmington Trust Centre, 1100 North Market Street, Wilmington, Delaware, USA.
1373 Fillmore Street, Twin Falls, Idaho, 83301 USA.
Krijtenbogtstraat 2A, 5066 BJ, Moergestel, The Netherlands.
Address of registered office of subsidiary and associated undertakings are as follows:
(1)
(2) Glanbia House, Kilkenny, Ireland.
(3)
(4)
(5) Unit 4, Carn Industrial Estate, Portadown, Co. Armagh, BT63 5RH, Northern Ireland.
(6)
(7)
(8)
(9) Gewerbestraße 3, 78539 Orsingen-Nenzingen, Germany.
(10) Tullow, Co. Carlow, Ireland.
(11) Dovea, Thurles, Co. Tipperary, Ireland.
(12) South Link, Togher, Co. Cork, Ireland.
(13) Unit 4, Sheehan's Road, Newcastlewest, Co. Limerick, Ireland.
(14) 1141 Curry County Road, Clovis, New Mexico, 88101 USA.
(15) PZ Cussons House, Bird Hall Lane, Stockport, Cheshire SK3 0XN, England.
Associated companies are
treated as such where the Group
has significant but not dominant
influence over operating and
financial policies.
GLANBIA PLC ANNUAL REPORT 2004
79
Notes to the Financial Statements (continued)
1 January 2005
39 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 Finance
Review on pages 28 to 29.
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 1 January 2005 were as follows:
Fi n a n c e
l e a s e s
3'000
N e t
b o r r o w i n g s
3'000
551
298
160
-
3,509
102,127
160
96,395
N o n - e q u i t y
m i n o r i t y
i n t e r e s t
3'000
-
72,593
37,791
-
1,009
-
202,191
(51,625)
110,384
-
To t a l
3'000
3,509
174,720
37,951
96,395
312,575
(51,625)
D e b t
3'000
2,958
101,829
-
96,395
201,182
(51,625)
149,557
1,009
150,566
110,384
260,950
152,175
1,622
153,797
115,759
269,556
In less than one year or on demand
Between one and two years
Between two and five years
In more than five years
Less cash balances
At 1 January 2005
At 3 January 2004
(b) Borrowing facilities
The group has various borrowing facilities available to it. The undrawn committed facilities available at 1 January 2005 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
2 0 0 4
3'000
17,782
148,372
-
23,605
2 0 0 3
3'000
21,473
-
146,159
120,000
189,759
287,632
80
GLANBIA PLC ANNUAL REPORT 2004
39 Borrowings and financial instruments (continued)
(c) Interest rate risk profile of financial liabilities and financial assets
Financial liabilites
Euro
Sterling
US dollar
Finance leases
Total
Financial assets
2 0 0 4
F l o a t i n g r a t e
f i n a n c i a l
l i a b i l i t i e s
3'000
75,584
9,563
19,640
2 0 0 4
Fi x e d r a t e
f i n a n c i a l
l i a b i l i t i e s
3'000
37,791
70,731
98,257
2 0 0 4
To t a l
3'000
113,375
80,294
117,897
2 0 0 3
F l o a t i n g r a t e
f i n a n c i a l
l i a b i l i t i e s
3'000
38,337
(36,853)
19,112
2 0 0 3
Fi x e d r a t e
f i n a n c i a l
l i a b i l i t i e s
3'000
37,594
191,354
78,165
2 0 0 3
To t a l
3'000
75,931
154,501
97,277
104,787
206,779
311,566
20,596
307,113
327,709
1,009
312,575
1,622
329,331
At 1 January 2005 the Group's financial assets consist of cash balances of 251.625m as disclosed above, other investments of
229.869m (2003: 213.035m) (note 17) and a Stg£35m subordinated secured loan note (note 19).
The other investments have been excluded from the interest rate risk and currency profiles as they have no maturity date and would
thus distort the weighted average period and currency exposure information.
The Stg£35m subordinated secured loan note, was granted by The Cheese Company Holdings Limited in 2004, representing part
proceeds arising on the sale by the Group of its 75% interest in its UK hard cheese business. The loan note yields interest at 1.75%
above LIBOR. The principle amount and compounded interest is repayable over 40 quarterly instalments from 1 April 2008 to
1 January 2018.
(d) Fixed rate financial liabilities
Euro
Sterling
US dollar
Weighted average
interest rate
Weighted average
period for which rate
is fixed
2 0 0 4
%
8.50
5.19
6.75
6.53
2 0 0 3
%
8.50
6.69
7.99
7.25
2 0 0 4
years
2.58
0.37
2.15
1.62
2 0 0 3
years
3.58
1.26
2.87
1.96
Fixed rate financial liabilities include US$100m (maturing November 2006) and 238.2m (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.
GLANBIA PLC ANNUAL REPORT 2004
81
Notes to the Financial Statements (continued)
1 January 2005
39 Borrowings and financial instruments (continued)
(e) Currency exposures
As explained on pages 28 to 29 of the Finance Review, the Group's currency exposures arising from its overseas investments (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 1 January 2005, 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.
(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 1 January 2005.
Financial assets
Cash balance
Secured loan note
Other investments - quoted
Other investments - unquoted
Other investments - loan to joint venture
Net carrying amount
Estimated fair value
2 0 0 4
3'000
51,625
51,942
80
24,131
5,658
2 0 0 3
3'000
59,775
-
80
12,955
-
2 0 0 4
3'000
51,625
51,942
1,245
24,131
5,658
2 0 0 3
3'000
59,775
-
930
12,955
-
133,436
72,810
134,601
73,660
Due to the seasonal aspect of the business, cash balances at year-end are typically higher than throughout the year. The carrying value
of the Secured Loan note and the loan to a joint venture approximated fair value due to the loans yielding interest at rates similar to
current interest rates. The fair values of quoted investments were estimated based on quoted market prices for those investments.
In the opinion of the Directors, the carrying value of unquoted investments approximated fair value.
Financial liabilities
Non-equity shares
Long term fixed rate borrowings
Floating rate borrowings
Finance leases
Net carrying amount
Estimated fair value
2 0 0 4
3'000
111,509
-
201,182
1,009
2 0 0 3
3'000
116,940
92,133
119,817
1,622
2 0 0 4
3'000
120,949
-
201,182
1,009
2 0 0 3
3'000
126,527
96,012
119,817
1,622
313,700
330,512
323,140
343,978
The carrying value of non-equity shares is gross of unamortised issue costs. The fair value of non-equity shares has been calculated by
discounting expected future cashflows at prevailing year-end interest rates.
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
Net carrying amount
Estimated fair value
2 0 0 4
3'000
-
-
-
2 0 0 3
3'000
1,599
-
1,599
2 0 0 4
3'000
5,325
(3,176)
2 0 0 3
3'000
4,314
(3,506)
2,149
808
Market rates have been used to determine the fair value of all swaps and forward foreign currency contracts.
82
GLANBIA PLC ANNUAL REPORT 2004
39 Borrowings and financial instruments (continued)
(g) Hedges
The Group's policy is to hedge the following exposures:
• Interest rate risk - using interest rate swaps, currency swaps and interest rate options.
• Structural and transactional currency exposures and currency exposures on future committed sales - using currency swaps, 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 3 January 2004
Arising in previous year and recognised in 2004
Arising in previous year and not recognised in 2004
Arising in 2004 and not recognised in 2004
On hedges at 1 January 2005
Of which:
Expected to be recognised in 2005
Expected to be recognised in 2006 or later
Deferred gains and losses:
On hedges at 3 January 2004
Arising in previous year and recognised in 2004
Arising in previous year and not recognised in 2004
Arising in 2004 and not recognised in 2004
On hedges at 1 January 2005
Of which:
Expected to be recognised in 2005
Expected to be recognised in 2006 or later
40 Approval of the financial statements
The directors approved the financial statements on 1 March 2005.
G a i n s
3'000
3,506
(3,506)
-
3,460
3,460
3,272
188
-
-
-
-
-
-
-
L o s s e s
3'000
(2,715)
-
(2,715)
(2,894)
N e t
3'000
791
(3,506)
(2,715)
566
(5,609)
(2,149)
(79)
(5,530)
(1,546)
524
(1,022)
-
3,193
(5,342)
(1,546)
524
(1,022)
-
(1,022)
(1,022)
(521)
(501)
(521)
(501)
GLANBIA PLC ANNUAL REPORT 2004
83
Five year Financial Summary
Profit and loss accounts
2 0 0 4
2 0 0 3
2 0 0 2
2 0 0 1
2 0 0 0
3 million
(as restated)
3 million
3 million
3 million
3 million
Turnover
1,846.0
2,041.1
2,316.7
2,625.4
2,401.7
84.8
(6.9)
0.2
(2.6)
–
–
0.9
2.5
78.9
(8.8)
(10.8)
59.3
(15.3)
44.0
4.6
4.3
20.41
20.30
20.10
44.6
1.7
1.1
75.4
(15.7)
0.9
(28.2)
(49.1)
–
11.6
(9.8)
(14.9)
(8.7)
(11.3)
(34.9)
(14.5)
(49.4)
4.5
(0.7)
(12.01)
(12.01)
19.26
51.6
1.4
0.8
88.6
(19.7)
2.9
(25.6)
–
–
13.8
(68.1)
(8.1)
(7.9)
(13.3)
(29.3)
(13.8)
(43.1)
3.9
(0.3)
(10.06)
(10.06)
17.44
55.0
1.6
1.0
91.7
(26.6)
1.6
(2.1)
–
–
(3.5)
–
61.1
(7.4)
(13.6)
40.1
(13.2)
26.9
3.6
2.3
13.71
13.71
15.85
75.2
1.5
0.9
81.8
(28.9)
0.8
23.1
–
(2.8)
5.5
–
79.5
(5.5)
(14.5)
59.5
(12.6)
46.9
3.4
3.3
20.35
20.35
11.55
** 101.5
1.4
1.0
Operating profit
Interest (net)
Share of operating profit of joint
venture and associates
Loss on sale of operations
Provision for loss on sale of operation
Reorganisation and merger costs
Profit/(loss) on sale of fixed assets
Profit/(loss) on termination of operations
Profit/(loss) before taxation
Taxation
Minority interests
Profit/(loss)
Dividends
Profit retained/(loss absorbed)
Key financial ratios
Operating profit before exceptional items/turnover *** %
%
Profit/(loss) before tax/turnover
c
Earnings per share
c
Fully diluted earnings per share
c
Adjusted earnings per share
Borrowings/capital employed
%
times
Current assets/current liabilities
times
Quick assets*/current liabilities
*
**
***
Current assets less stocks
Excluding capital grants
Excluding share of turnover of joint ventures
84
GLANBIA PLC ANNUAL REPORT 2004
ANNUAL
REPORT
2OO4
Glanbia plc
Glanbia House
Kilkenny, Ireland
Tel. +353 56 777 2200
Fax. +353 56 777 2222
www.glanbia.com