A world of dairy
foods and nutritional
ingredients
Annual Report 2005
C O N T E N T S
Page
2
4
5
6
8
Glanbia Market Positions and Global Locations
Divisions and core activities
Financial highlights
Chairman’s Review
Group Managing Director’s Review
12
Operations Review
Agribusiness and Property
16
22
28
30
34
36
Consumer Foods
Food Ingredients
Nutritionals
International Joint Ventures
Corporate Social Responsibility
Finance Review
38
Directors and Advisors
41
Report of the Directors
49
Financial Statements
Glanbia market positions
US A
NO.1 US Barrel Cheese Supplier
A
NO.1 Whey Protein Isolate Supplier
NO.3 American Cheddar Cheese Supplier
IDAHO
CHICAGO
Glanbia’s strategy is to build international relevance in cheese,
NEW MEXICO
MEXICO
G l o b a l
Leading supplier of advanced
technology whey proteins and fractions
and global locations
I r e l a n d
NO.1 Dairy Processor
NO.1 Liquid Milk and Cream Brands
NO.1 Cheese Processor
NO.1 Pigmeat Processor
IR ELAND
UK
GERMANY
dairy-based nutritional ingredients and selected consumer foods.
E u r o p e
NO.1 Pizza Cheese Supplier
C H I N A
NO.1 Supplier of Key Customised
Nutrient Premixes
NIGERIA
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G L A N B I A P L C A N N U A L R E P O R T 2 0 0 4
Glanbia plc, the international dairy foods and nutritional ingredients Group
Glanbia plc has operations in Ireland, Europe and the USA, with International joint ventures in the UK,
USA and Nigeria. The Group is organised into three operating divisions of Agribusiness & Property,
Consumer Foods and Food Ingredients, which includes the evolving Nutritionals business.
Agribusiness
& Property
Consumer Foods
Food Ingredients
12.52% of Group Turnover
13.26% of Group Operating Profit
26.97% of Group Turnover
33.68% of Group Operating Profit
60.51% of Group Turnover
53.06% of Group Operating Profit
12.52%
13.26%
26.97%
33.68%
60.51%
53.06%
Agribusiness is the primary
interface whereby Glanbia trades
with its 5,700 Irish farmer suppliers.
The business is engaged primarily
in feed milling and the marketing
of a range of farm inputs, including
fertilisers, feed and grain. The
Property business has responsibility
for the maximisation of the Group's
property portfolio.
Glanbia Consumer Foods
incorporates liquid milk, chilled
foods and pigmeat. Glanbia is the
leading supplier of branded and
value-added liquid milk, mineral
water, fresh dairy, cheeses, soups
and spreads in the Irish retail
market. Glanbia Meats is the
leading Irish fresh pork and
bacon processor selling to Irish
and International markets.
This division has operations
of scale in Ireland and the USA
and is engaged in the production
of cheese, butter, casein, dairy
spreads and whey protein
ingredients. The division also
includes the Group’s evolving
Nutritionals business which has
a growing customer base in
Europe, the USA and China.
Financial highlights
5
G R O U P M A N A G I N G D I R E C T O R ' S R E V I E W
%
2
2
* The figures for the years 2001 to 2003 are as previously stated under Irish GAAP
except for profit before exceptional items and tax which is stated after deduction
of non-equity minority interest in each year. Profit before exceptional items and
tax for 2004 is as restated in accordance with IFRS and adjusted for non-equity
minority interest. Net debt in each year includes non-equity minority interest.
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G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
1 Chairman’s Review
Michael Walsh, Chairman
Joint ventures in New Mexico and Nigeria,
which are central to the strategic development
of the Group, are progressing well, reaching
key milestones in plant commissioning and
customer performance
7
C H A I R M A N ’ S R E V I E W
Glanbia delivered a satisfactory performance overall in
2005. A difficult environment in Ireland impacted the
Group’s overall profitability and margins, as Irish operations
continue to be affected by a combination of ongoing EU
reform, inflationary pressures and a competitive market
environment. International operations performed well.
USA Food Ingredients delivered a solid result, together
with strong organic growth in the evolving Nutritionals
business. Joint ventures in New Mexico and Nigeria,
which are central to the strategic development of the
Group, are progressing well, reaching key milestones in
plant commissioning and customer performance.
Glanbia delivered a satisfactory perfor-
mance in 2005. A difficult environment in
Ireland impacted overall profitability and
margins, however international operations
performed well
Results A detailed commentary on the results for the
year is included in the Finance Review (pages 36 and 37).
The highlights of the results are as follows:
• Revenue increased by 4% to 21,830.0 million
• Operating profit pre-exceptional was down 7% to
280.6 million
• Profit before tax pre-exceptional, on a comparable basis,
was similar to 2004 at 268.7 million
• Profit after tax on a comparable basis increased
marginally to 261.1 million
• Operating margin pre-exceptional was 4.4% (2004: 4.9%)
• Share of profits of joint ventures and associates, post
interest and tax, recovered from a loss of 21.5 million to
a profit of 2932,000
• Net exceptional gains for the year amounted to 2521,000
• Adjusted earnings per share was up 1% to 20.86 cent
• Net debt at the year end on a comparable basis
was down 17% to 2215.7 million
• Capital and development expenditure was 271.6 million
Dividends The Board is recommending a 5% increase in
the final dividend to 3.24 cent per share, compared with a
3.09 cent per share final dividend in 2004. This brings the
total dividend for the year to 5.51 cent per share (2004:
5.25 cent per share). Dividends will be paid on Monday
22 May, 2006 to shareholders on the register as at Friday
21 April, 2006. Irish dividend withholding tax will be
deducted at the standard rate where appropriate.
Glanbia’s strategic goal is to build a strong
and sustainable business. This requires a
careful balance of economic, environmental
and social policies
Our Nigerian milk powder brand Nunu being traded in Lagos
Corporate Social Responsibility Glanbia’s strategic goal
is to build a strong and 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. On pages 34 and 35 you
will find more details of Glanbia’s activities in this area.
Board and Management Changes In June 2005, I had
the honour of being elected Chairman of the Board,
replacing Tom Corcoran who chaired the Group through
a challenging period of reorganisation since 2000. Victor
Quinlan was elected Vice-Chairman, succeeding myself,
and the Board also appointed three new non-executive
Directors, Paul Haran, the former Secretary General of the
Department of Enterprise, Trade and Employment and
Matthew Merrick and Michael Keane both dairy farmers
and Directors of Glanbia Co-operative Society Limited.
The former Deputy Group Managing Director, Billy Murphy
retired during 2005 and was elected to the Board as
a non-executive Director. During the year Thomas
Heffernan retired as a Director having served five years.
On behalf of the Board I would like to welcome all the
new members and to thank both Tom Corcoran and
Thomas Heffernan for their commitment and contribution
to the Board and to wish them well in their retirement.
In June 2005, Glanbia lost a great friend and colleague
with the premature passing of Pat Brophy, Chief Executive
of our Consumer Foods Ireland business. On behalf of the
Board and management of Glanbia I extend my sincere
sympathy to Pat’s wife Muriel and his family.
People are the bedrock of Glanbia and with our skilled
and focused management team, led by Group Managing
Director, John Moloney, I look forward to further progress
from the Group in 2006. I would like to thank my coll-
eagues on the Board, the Group Managing Director,
management and staff for their continued commitment
to Glanbia.
Michael Walsh
Chairman
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G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
2
Group Managing Director’s Review
John Moloney, Group Managing Director
The 2005 results reflect a year of solid
business execution and further progress
internationally, which will be the platform
for growth and development in the future
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G R O U P M A N A G I N G D I R E C T O R ' S R E V I E W
Trading Environment The global dairy trading
environment was relatively strong in 2005, with firm
market prices for casein, cheese and whey, in the first half.
Growing markets in Asia and in oil producing nations
coupled with reductions in output from Australia
underpinned market demand.
The Irish Ingredients business was impacted by the
implementation of Mid Term Review (MTR) of the EU
Common Agriculture Policy (CAP). Product prices were
reduced in the second year of MTR and the market prices
for casein, which had somewhat offset the affects of MTR,
weakened in the second half. This movement towards
lower product prices, together with energy cost inflation,
represented a significant challenge to the Irish Ingredients
business. Poor global grain markets and changing farm
purchasing patterns impacted on our Agribusiness during
2005. The Irish liquid milk and chilled foods marketplace
also continued to be competitive with challenging retail
markets and continued growth in liquid milk imports and
the own brand category.
To counteract these challenges in the Irish market,
the Group undertook a series of rationalisation initiatives
in Consumer Foods, Food Ingredients and Agribusiness
during 2005 to improve efficiencies and competitiveness.
Market conditions for the international business were
positive overall in 2005. In the USA dietary trends, in
particular, the switch to increased protein consumption,
underpinned market demand. The growth in American-
style cheese, in the natural category, continued to grow
primarily driven by food service and retail demand for
sliced and shredded cheese applications. Milk production
grew 12% in the State of Idaho, where the Group has
major production facilities. American-style cheese
production continues its western migration following
the milk supply growth trend that has developed over
the past 15 years. In addition the global nutritional
market exhibited strong growth.
Investments
In 2005 the Group spent C72.6 million on its
ongoing capital and development programme
focused on strategic development initiatives
and organic expansion. The Group’s 50:50
investment in the Southwest Cheese joint
venture in the USA is progressing to plan
as is Nutricima, in Nigeria
During the year we continued a capital expenditure
programme in the Irish Food Ingredients business with
the installation of advanced butter fractionation technology
and a new butter oil facility at Ballyragget, Ireland. This is
The Southwest Cheese plant in New Mexico
part of a new joint venture with Corman SA, part of the
Bongrain Group, which is the largest butterfat processor
in the world.
In February 2005 the Group concluded an agreement
with Dairygold Co-operative Society Limited to take on
the CMP regional liquid milk, cream and juice brand for
a consideration of 210.8m. During the year CMP was
integrated into our Consumer Foods business and is
performing in line with expectations.
Strategic Vision Overall the strategic development of
the Group is progressing well. Our strategy is to build
international relevance in cheese, nutritional ingredients
and selected consumer foods, balancing our strong market
positions in Ireland with an increasing presence in overseas
markets. The joint ventures in Nigeria and the USA are
central to this strategic development, as is the continuing
development of our Nutritionals business. This is being
achieved through a focus on international scale, food
technologies and growth markets.
Relevance is key to the success of our strategy. Glanbia’s
strength is in ensuring that we are relevant to customers
within the sectors in which we operate.
International Cheese Glanbia’s competitive advantage
lies in the scale and efficiency of our milk processing
businesses, the depth of our partnerships with blue chip
customers as well as our strategic locations providing
strong market access. Our international cheese strategy
is to expand this business-to-business model through
ongoing innovation, strategic joint ventures, acquisition
and a relentless focus on operational efficiency.
International Nutrition Glanbia is evolving its global
nutritional business in the USA, Europe and in 2005
established an Asia headquarters in Shanghai as well as
a new network of sales offices in Latin America. A strong
innovation agenda reflecting the ongoing consumer
interest in health and wellness is the key driver for this
business, which is being supported by increased R&D and
innovation spend, with particular emphasis on licensing,
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G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Group Managing Director’s Review
production. Overall this development is progressing well
and initial customer feedback has been very positive.
Innovation Agenda Innovation is central to Glanbia’s
nutritional strategy. Our ability to innovate and design
customer relevant health-based functional food ingredients
and consumer foods with a nutritional emphasis is critical in
today’s market place. Our nutritional development is being
supported by two innovation centres – in Ireland and the
USA – with a complement of 65 professionals and
scientists.
The new Group Innovation Centre in Kilkenny was
officially opened by the Minister for Enterprise, Trade
and Employment, Mr Michéal Martin TD, in June 2005.
The focus of this Innovation Centre is on the European
consumer foods and nutritional markets and complements
our existing USA innovation centre in Idaho, which has
special expertise in whey protein extraction technologies.
In its first year of operation the Group Innovation Centre
was responsible for the successful commercialisation of
a number of new products including an advanced weight
management protein beverage mix ‘Prolibra’, a cereal
based, cholesterol reducing product ‘Oatvantage’ and a
new health and wellbeing product range, ‘Yoplait Essence’.
During 2005 we also established the Scientific Advisory
Committee, Chaired by Professor Gerald Fitzgerald of
UCC to provide regular collaboration between Glanbia
and the international research community.
Since year end Glanbia launched ‘Yoplait
Essence’, a new development in the area of
food nutrition technology, which is a significant
initiative of the Glanbia Group Innovation
Centre based in Ireland
Glanbia People In June 2005 Michael Walsh was app-
ointed Chairman of the Board and on behalf of manage-
ment and staff, I would like to convey our apprec iation
to Michael for his astute stewardship to date and to wish
him continued success in this position. The Group also
announced a number of senior management changes
during the year. Geoffrey J Meagher, Group Finance
Director succeeded William G Murphy, who retired in
Investment programme
Glanbia is committed to
an on-going investment
pro gramme to underpin
its development strategy
on technology and on intellectual property management.
Our acquisitions focus is on adding complimentary tech-
nologies, products and expertise to grow our overall
capability to meet customer and consumer needs.
International Joint Ventures Glanbia’s international
Joint Ventures producing cheese, whey and milk products
are central to our strategic vision. Glanbia Cheese, in
the UK, Southwest Cheese, in the USA and Nutricima in
Nigeria all provide the Group with scale, market access
and growth opportunities.
UK: Glanbia Cheese, the joint venture with Leprino Foods,
produces mozzarella cheese for the European market. It
reported an improved performance in 2005 arising from
increased demand and the benefits of investment.
Nigeria: Nutricima is a US$25 million joint venture with
PZ Cussons plc. During 2005 the packing facility for
fat filled milk powder, which is sourced in Ireland and
sold on the Nigerian market in consumer formats, and
the manufacturing plant for condensed milk were also
completed. Overall progress to date in Nigeria has
exceeded expectations.
USA: Commissioning of the Southwest Cheese facility
began in October 2005 and is the first phase in an
18 month scale up process towards full production.
Southwest Cheese is a US$190 million cheese and whey
products facility in New Mexico. This joint venture, with
principal partners, Dairy Farmers of America and Select
Milk Producers Inc., will make Glanbia the number one
producer of American cheese, when it reaches full
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G R O U P M A N A G I N G D I R E C T O R ' S R E V I E W
Outlook While there are ongoing challenges in Irish
operations and unpredictability in energy prices, we
expect key cost and product development initiatives in
these businesses, together with ongoing international
development to underpin the 2006 results.
The growing internationalisation and scale of the business,
which is now well on track, is critical to future growth and
development. Growing momentum within the business
maintains Glanbia’s steady progress towards double digit
growth in 2007.
John Moloney
Group Managing Director
June, as Deputy Group Managing Director. Siobhán Talbot,
Group Secretary was appointed Deputy Group Finance
Director and Michael Horan, Group Financial Controller,
took on the position of Group Secretary. Jim Bergin was
appointed Chief Executive of Food Ingredients Ireland.
Ger Mullally, was appointed Chief Executive of our prop-
erty business, Glanbia Estates and Colm Eustace was
appointed Chief Executive of Glanbia Agribusiness.
As the Chairman reported, during the year we suffered the
tragic loss, following a brief illness, of one of the heroes of
the organisation, Pat Brophy. Pat who was Chief Executive
of our Irish Consumer Foods business is sadly missed by
his friends and colleagues.
The skill and commitment of our people is Glanbia’s
great est asset and will underpin the Group's success into
the future. I would like to thank all our stakeholders –
shareholders, customers, consumers, our employees and
the Board for the strong partnership that is essential in
driving the business forward.
Since year end Glanbia announced the
appointment of Colin Gordon as Chief
Executive of the Irish Consumer Foods
business. Colin joined Glanbia from C&C
Group plc, the drinks and snack food
company, where he was Managing
Director of C& C (Ireland) Ltd
Y
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Glanbia is well positioned through our business to business and retail
strategies and ongoing cost efficiency programmes
Our inputs
Feed milling, grain drying,
fertilisers, malting and
port services
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G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
3
Operations Review
Glanbia plc has operations in Ireland, Europe and the USA, with international joint
ventures in the UK, USA and Nigeria. The Group is organised into three operating
divisions of Agribusiness and Property, Consumer Foods and Food Ingredients,
which includes the evolving Nutritionals business.
Agribusiness & Property
Revenue – up 1%
(2000)
229,142
2005
2004
229,142
227,368
Operating profit – down 10%
( pre-exceptional) (2000)
Operating margin – down 50 bps
( pre-exceptional)
10,684
2005
2004
10,684
11,911
4.7%
2005
2004
4.7%
5.2%
The Agribusiness and Property division has
two business units, Agribusiness, the key
linkage with the Group’s 5,700 Irish farmer
supply base and Glanbia Property which has
responsibility for the maximisation of value
from the Group’s property portfolio
A GR I B U S IN ESS
Results 2005 was a difficult year arising from poor
global grain markets and the changing patterns of farm
purchasing. These conditions led to a decline in perform-
ance and operating margin. Revenue was up 1% to
2229.1 million (2004: 2227.4 million). Operating profit
was down 10% to 210.7 million (2004: 211.9 million) and
the operating margin was down 50 basis points to 4.7%
(2004: 5.2%). Rationalisation costs of 21.2 million were
incurred during the year as part of a wider Group
programme to improve competitive ness in the Irish
businesses.
Agribusiness is the primary interface whereby Glanbia
trades with its farmer suppliers. The business is engaged
primarily in feed milling, grain processing
and marketing, and the retailing of a range of farm
inputs, including fertilisers, feed and grain, as well as
a broader ‘CountryLife’ product offering. Agribusiness
also has interests through subsidiaries and associates
in fertiliser production, veterinary wholesaling, malting
and port services. These include Grassland Fertilisers
Kilkenny, South East Port Services, Co-operative Animal
Health and The Malting Company of Ireland. The bus-
iness has 39 grain intake locations, 14 of which are
engaged in drying grain for customers and in addition
it has two feed mills.The business employs 400 people
and operates in 16 counties in Ireland.
In recent years Agribusiness has reorganised its
traditional retail branch structure and now operates
from 61 locations. Following the closure of 12 branches
in 2004, Agribusiness closed a further nine branches
in 2005 as part of ongoing cost reduction and
efficiency initiatives.
Environment In 2005 Irish grain market prices were
depressed due to the recovery in EU harvest yields.
The environment for farming is for ongoing change
during Mid Term Review (MTR) which impacts Agri-
business. 2005 was the second year of the decoupling
of EU area aid payments from farm production which
resulted in decreased input usage.
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A G R I B U S I N E S S & P R O P E R T Y
Brands With a strong portfolio of leading brands,
Glanbia Agribusiness is market leader in animal feeds,
fertilisers, seed grain, chemicals and veterinary product
sales. Among the brands in the range are : Gain Feeds,
IFI, Mastercrop and Mastervet. The new ‘CountryLife’
retail brand is a further addition to this portfolio.
Outlook In Ireland, the environment for farming is for
ongoing change during MTR which impacts Agribusiness.
The challenge continues to be to effectively manage the
business during this period of change.
Through our business to business and retail strategies
and ongoing cost efficiency programmes, Glanbia
Agribusiness is well positioned.
GLA NBIA PRO PERT Y
Recognising the potential value of the Group’s property
portfolio, in 2005 Glanbia established a dedicated
business unit to maximise this value. This business
has assumed responsibility for the operations of
Glanbia Estates.
Glanbia Agribusiness also commenced a
C6m investment in a new retailing initiative
under the ‘CountryLife’ brand which was
introduced to three branches in 2005. The
retailing strategy is to capture the convenience
needs of a growing rural population for pet
Colm Eustace
CEO Glanbia
Agribusiness
food, gardening, hardware and outdoor
clothing through the CountryLife concept
Investment During the year the business commenced
a 27 million programme of investment in new technology
and business systems in support of its retail strategy.
Glanbia Agribusiness also commenced a 26 million
investment in a new retailing initiative under the
‘CountryLife’ brand in 2005. The retailing strategy is
to capture the convenience needs of a growing rural
population for pet food, gardening, hardware and out-
door clothing through the CountryLife concept. In
deciding to focus on certain locations, difficult decisions
had to be made in respect of some branches. The
branches are part of the heritage of the Group and have
made a strong contribution locally, hence the decision
to close branches was taken with regret. Glanbia is com-
mitted to ensuring that the needs of customers are well
served despite local branch closures. Agribusiness also
completed a new 12,500 tonne grain store at Clonroche
Feed Mill in Co. Wexford during 2005.
The needs of full time farmers are such that
Agribusiness is focused on moving key inputs
from factory to farm at minimum cost and
to selling these inputs at competitive, up
front prices
Strategy The overall growth strategy for the business
is to grow market share in feed and fertiliser organically
and by acquisition. Central to this strategy is the consoli-
dation of Glanbia’s retail offering to focus on the chang-
ing needs of customers. The needs of full time farmers
are such that Agribusiness is focused on moving key
inputs from factory to farm at minimum cost and to
selling these inputs at competitive, up front prices. To
be relevant to the part-time farmer and also non farmers
living in rural Ireland, we are building on our existing,
strategic branch locations with a wider range of retail
products under the new ‘CountryLife’ concept. Con-
current with these developments is the continuation of
cost efficiency programmes which are essential to the
underlying competitiveness of the business.
Ger Mullally
CEO Glanbia
Property
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The benefits of rationalisation, product innovation, marketing and
investment underpin the outlook going forward
Our brands
Our Portfolio
Avonmore, Yoplait, Nash’s,
CMP, Snowcream, Premier,
Kilmeaden
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G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
4 Consumer Foods
Consumer Foods Ireland is the leading supplier
of branded and value added liquid milk, fresh dairy
products, natural cheese and fresh soups in the
Irish retail market.
Revenue – up 9%
(2000)
493,582
2005
2004
493,582
451,124
Operating profit – down 3%
( pre-exceptional) (2000)
Operating margin – down 70 bps
( pre-exceptional)
27,139
2005
2004
27,139
27,906
5.5%
2005
2004
5.5%
6.2%
Irish grocery trade and has number one brand positions
in milk, cream, fruit yogurt, kids fromage frais, drinking
yogurt, fresh soup and natural cheddar cheese. Its
brand portfolio includes: Avonmore; Premier; Yoplait;
Kilmeaden, Snowcream and Petits Filous.
Consumer Foods Ireland employs over 800 people at 11
locations throughout Ireland and processes 260 million
litres of milk annually. For every ten litres of milk bought
by Irish consumers, five of them have been produced
and supplied by Glanbia Consumer Foods.
The Consumer Foods Division incorporates liquid milk,
chilled foods and pig meat.
Results A good improvement in performance from the
pig meat business was offset by competitive markets
in the liquid milk and chilled foods segments and the
effects of rationalisation initiatives undertaken in these
businesses during the year. Revenue for the division was
up 9% to 2493.6 million (2004: 2451.1 million), mainly
due to stronger pig meat markets. Operating profit was
down 3% to 227.1 million (2004: 227.9 million), leading
to a 70 basis points reduction in the operating margin
to 5.5% for this division overall (2004: 6.2%).
Rationalisation during the year, in liquid milk and chilled
foods, focused on improving the competitiveness and
productivity of these businesses. The total exceptional
cost incurred amounted to 211.9 million. This relates to
25.7 million for the rationalisation plan at the Inch Yoplait
facility, 23.3 million for the rationalisation of the Cork
distribution business and 22.2 million for the reorgan-
isation of the Dublin distribution operation. Other costs
relate to sales and administration redundancies.
CONSUMER FOODS IRELAND
Our Consumer Foods Ireland business is the leading
supplier of branded and value-added liquid milk, fresh
dairy products, natural cheeses and fresh soups in the
Irish retail market. It is the number one supplier to the
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C O N S U M E R F O O D S
Environment Competitor promotional activity in defence
of market share increased in 2005 with the number of
products bought on promotion increasing significantly in
the Fresh Dairy market. In most categories the share of
retailer own brands increased in 2005 and own label milk
imports from Northern Ireland continued to increase.
Colin Gordon
CEO
Consumer Foods
Ireland
Consumer demand for fresh dairy products increased
with new launches in the functional health area driving
double digit growth. In liquid milk an increasing number
of consumers are switching from standard milks to more
fortified varieties where Avonmore has leading share
positions. In cheese, natural grated and sliced products
are driving market growth.
Market research conducted by Glanbia
during the year confirmed the growth in
consumer interest around the role of diet and
health, with consumers looking for additional
food solutions to meet their nutritional and
health needs
This trend, combined with the aging population in
Ireland (within ten years almost half the population will
be aged 40 or over) creates implications for food and
nutritional innovation. Addressing the needs of this
ageing population was a major factor in Glanbia’s dec-
ision to invest in the development of a new range of
nutrient enriched yogurt drinks offering specific health
benefits to different age cohorts.
Liquid milk This business performed satisfactorily in a
challenging environment, with increasing cost pressures,
rising imports from Northern Ireland and the continuing
growth of own brand milk in 2005. In February 2005
Glanbia concluded an agreement with Dairygold
Co-operative Society Limited to take on the CMP
liquid milk, cream and juice brands for a consideration
of 210.8 million. This business has been successfully
integrated into Glanbia and extends the Group’s
overall market reach.
Glanbia Consumer Foods Ireland maintained its number
one and number two positions for the Avonmore and
Premier Milk brands. Growth in the market continues
to be driven by demand for more value added products.
The Avonmore Flavoured milk range, launched in late
2004, continued to grow in 2005 providing a more
nutritious beverage choice for consumers. The business
strategy of focusing on more valued added products is
proving effective and will continue with the launch of
additional milk flavours and the development of more
functional offerings.
Chilled foods This business, which incorporates the
Group’s branded yogurt, cheese, spreads, soup and
sauce products, had a challenging year arising from the
competitive trading environment.
During the year the business realigned the cost base
at the Inch yogurt facility which has resulted in a more
flexible and cost competitive environment with a total
focus on market requirements.
Marketing investment was made in promoting key brands
and new products to improve market share. Kilmeaden
cheese “the fillet of cheese” defended its leading market
share position in the natural block cheese segment and
extended its offering into other premium segments of the
market. The increased marketing focus behind Avonmore
Fresh Soup helped to drive overall market growth and
build share in the Fresh Soup market. In 2005, Consumer
Foods maintained its leading market share position in
Diet, Kids and Drinking yogurt segments with its Yoplait,
WeightWatchers and Petits Filous brands. The focus
will be to grow market share through launches into the
high growth functional health segment.
Strategy Our vision 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. This will be achieved through brand
relevance with key customers, continuous innovation
and organic growth.
Innovation Innovation is central to Consumer Foods
Ireland’s growth strategy. Our innovation agenda is based
on the continued development of consumer foods with
a nutritional emphasis. Consumers are demanding new
products, new tastes, a focus on health and well being
and convenience – and all without compromising
Avonmore milk
The Avonmore flavoured
milk range, launched in
late 2004, continued to
grow in 2005
on quality or cost. All our research and development is
based on a close study of consumer lifestyle changes
and the need for efficient nutrition and ensures that
innovations are commercially relevant.
“Nutritious, fresh and natural” continue to be the key
drivers of demand for food and beverages among Irish
consumers. These attributes are found in all of the
Consumer Foods product portfolio and are particularly
synonymous with the Avonmore, Yoplait and Kilmeaden
brands. Developments under the Avonmore brand in
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G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Consumer Foods
2005 include additional flavours in the Avonmore
flavoured milks range and the extension of Avonmore
into snacking with the launch of Avonmore breaded
snacks. We also added new juice varieties, Avonmore
Cranberry and Multivitamin. The Kilmeaden brand was
re-launched during the year, supported by new products
such as Kilmeaden White Slices, Kilmeaden Fully Mature
Red and new Vintage varieties.
Yoplait Essence
In February 2006 we
launched ‘Yoplait Essence’,
which condenses essential
nutrients into shot sized
yogurt based drinks to
offer health benefits
Ongoing investment in our brands is key to growing
our relevance with consumers and to building on our
strong customer partnerships. Investments such as
Yoplait Essence, which is a major innovation for 2006,
will help to drive Yoplait’s share of the Fresh Dairy
Products market.
New initiatives will also be announced under the
Kilmeaden and Avonmore brands to extend their rele-
vance in 2006. These innovations combined with our
investment in the brands places the business in a
strong position to achieve its growth targets in 2006.
PIG M EAT
Glanbia’s pig meat business, which trades as Glanbia
Meats, is involved in primary processing of pork for sale
into the wholesale, retail foodservice and food process-
ing sectors on domestic and export markets. Export
markets include: Germany, France, the Netherlands, the
USA and Japan. During 2005 the business significantly
increased exports to Asia and has carved out a solid
position in high value export markets such as Japan
and the USA.
Under the Yoplait brand we introduced the new ‘Yoplait
0% Chunky fruit’ and ‘0% Smooth’ ranges to deliver more
taste and appetite appeal for consumers in the diet seg-
ment. We also launched ‘Yoplait Everykid’, a specially
formulated probiotic yogurt drink.
Glanbia is the number one supplier of pork
in Ireland servicing all the leading value
added processors
Outlook Although markets remain competitive, the
benefits of rationalisation, product innovation and
marketing underpin an improving outlook for the
liquid milk and chilled foods businesses.
The business operates from four facilities, and employs
a total of 975 people in these operations in the Republic
of Ireland. The main products are fresh and frozen pork
and bacon principally in boneless format ready to use
either for retail packing or further processing into value
added products for the retail and foodservice sectors.
A range of canned meats and canned ready meals are
also produced.
Environment Business performance improved overall
in 2005 as a result of increased capacity arising from the
completion of investments at two core facilities and the
benefit of increased supply. The global market for pork
is expanding at a rate of circa 1% per annum on the
back of population growth and economic development
in many areas of the world – particularly the USA, Asia,
Russia and Eastern Europe. Given the global nature of
this market the focus for Glanbia is on being competitive
at all stages along the value chain, from production
through primary and value added processing.
In Ireland pig production has been declining by 2–3%
per annum over the past number of years although this
has been compensated to some degree by increases in
average carcase weight. The impact of the EU Nitrates
directive is a cause for concern to producers and is
currently being assessed.
21
C O N S U M E R F O O D S
John Madden
CEO
Glanbia Meats
A relentless focus on efficiency and quality at our
modern slaughtering facilities, which operate at
high levels of utilisation matching best in class in
terms of quality, yields and processing cost, is
also a key driver of this business
Strategy The business strategy is to be the supplier
of choice to our customers, based on the three pillars
of quality, efficiency and flexibility. Glanbia Meats com-
petes on the provision of a flexible, quality offering to
the broad range to the markets served. Local tastes and
prefer ences vary significantly from one market to the
next and this drives demand for specific products in
these markets. A relentless focus on efficiency and quality
at our modern slaughtering facilities, which operate at
high levels of utilisation matching best in class in terms
of quality, yields and processing cost, is also a key
driver of this business.
Investment The final phase of expansion at our Roscrea
and Edenderry facilities was completed at the end of
2004, with plant capacities now at a level equal to that
which preceded the fire at the Roosky plant in 2002.
Outlook The outlook for 2006 is for pig meat markets
to remain reasonably stable. This allied to the benefits
of the investment made in 2004, as well as the business’
stong position in the Irish market and its growing
international reputation, means it is well positioned
for 2006.
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NO.1 USA Barrel Cheese
• Four facilities in Idaho
• Processes 1.6 billion litres – one third of all Idaho milk
• Processes 167,000 tonnes of cheese and 56,000 tonnes of other ingredients
• Gooding facility is the largest producer of barrel cheese in the world
24
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
5
Food Ingredients
The Food Ingredients division has operations in Ireland and the
USA and is engaged in the production of cheeses, butter, casein,
dairy spreads and whey protein ingredients. This division also
includes the Group’s evolving Nutritionals business which has
a growing customer base in the USA, Europe and Asia.
Revenue – up 3%
(2000)
1,107,288
2005
2004
1,107,288
1,075,153
Operating profit – down 8%
(pre-exceptional) (2000)
Operating margin – down 40 bps
(pre-exceptional)
42,746
2005
2004
42,746
46,440
3.9%
2005
2004
3.9%
4.3%
Results The USA operations and Nutritionals delivered
a solid performance in 2005, growing profitability and
margins. The impact of reduced EU market supports on the
Irish portion of the business crystallised in the second half,
leading to a significant deterioration in profitability. Overall
revenue increased by 3% to 21.11 billion (2004: 21.08
billion). Operating profit was down 8% to 242.7 million
(2004: 246.4 million) and the operating margin declined
40 basis points to 3.9% (2004: 4.3%). This was a direct
consequence of the decline in the performance of the
Irish Food Ingredients business in the latter half of 2005.
IR EL AN D
Glanbia Ingredients Ireland markets over 240,000 tonnes
of dairy ingredients on a business-to-business basis to
customers in over 40 countries. It is the largest dairy
ingredients business in Ireland, assembling a milk pool
of 1.3 billion litres and processing it into butters, casein,
cheeses, milk powders and cream mixes.
Glanbia processes one third of the milk pool on the island
of Ireland which is processed at two sites in Ballyragget,
Co. Kilkenny and Virginia, Co. Cavan. The Ballyragget site
is the largest integrated dairy facility in Europe processing
20% of the Irish milk pool. A range of whey products
are also manufactured and marketed from Ballyragget
where 40% of the Irish whey pool is processed. Glanbia
Ingredients is the largest cheddar cheese manufacturer
in Ireland, 95% of which is for export markets. Glanbia
processes almost 60,000 tonnes of butter and
butter oil per year. It markets its butter both directly
to international customers and through the Irish
Dairy Board.
Glanbia is the largest manufacturer of casein, producing
both acid and rennet casein for European and US
markets. The three largest infant formula manufacturers
in the world have production facilities in Ireland and
Glanbia Ingredients is the largest supplier of lactose,
in addition to other whey proteins, to these businesses.
Ireland market positions
No 1 Dairy processor
No 1 Cheese
No 1 Casein – Ireland
and Europe
25
F O O D I N G R E D I E N T S
Jim Bergin
CEO Glanbia
Ingredients Ireland
The Virginia, County Cavan facility is the pre-eminent
supplier of cream mix for the manufacture of Baileys
Cream Liqueur.
Environment 2005 was the second year of the imple-
mentation of the Mid Term Review (MTR) of the Common
Agriculture Policy which will result in significant change in
dairy markets. In 2004 and early 2005 markets remained
reasonably stable, however, these changes began to
impact performance in the second half. While revenue
was marginally up for the year, pricing and inflationary
cost pressures, mainly energy, led to a sharp downturn
in profitability and margins.
Glanbia has a clear strategy of developing
industry alliances and co-operation to
ach ieve mutual efficiencies, through
initiatives such as joint ventures and
contract manufacturing
Glanbia Ingredients Ireland is following a strategic pro-
gramme to offset these pressures. The relentless pursuit
of efficiencies resulted in a reduction of 10% in the
workforce in 2005. In addition a continued focus on
improved plant performance, conversion efficiencies
and quality development continued to deliver
increased returns during the year.
Glanbia has a clear strategy of developing industry
alliances and co-operation to achieve mutual efficiencies.
During the year Glanbia agreed a contract manufac-
turing arrangement on cheese whereby we consolidated
cheddar production between our Ballyragget facility
and the Mitchelstown site of Dairygold Co-operative
Society Limited. We also announced the decision to
cease what was seasonal cheddar cheese production
at Kilmeaden, County Waterford. The cost of this
restructuring was 22.6 million.
In addressing the particular problems for butterfats
posed by the reduction of EU refunds and the lowering
of intervention supports, Glanbia sought to secure
enhanced technology and sustainable routes to market
for the Irish butterfat pool. In November Glanbia reached
agreement with Corman SA – a Belgian company and
world leader in butterfat technology, part of the French
Bongrain Group – to create a new joint venture company
to manufacture and market dairy spreads and butterfat
products. The new company, known as Corman Miloko
Ireland Limited, will manufacture a range of spreadable
butters for the home and higher value EU commercial
markets. The installation of advanced butter fractionation
technology and a new butter oil facility at the Ballyragget
site during 2005 will enable the production of butter
fractions for customised solutions in the bakery and
confectionery industries.
Glanbia Foods Inc plant at Twin Falls, Idaho
The business continues to focus on the effective manage-
ment of the impact of MTR through a combination of
efficiencies, cost control and balanced pricing and
product mix.
Strategy The strategic focus of the business is threefold:
to continue to maximise efficiencies and scale through
co-operation opportunities that will further consolidate
the Irish and European dairy industry, to pursue a growth
agenda through international market access and the
ongoing delivery of an innovative and flexible customer
service to our blue chip customers.
The business has been refocused around the strength-
ening of a global supply chain and the pursuit of further
co-operation in the Irish and European dairy industries.
The commercial organisation is being further developed to
provide customers with innovative customised solutions off
a broader base of manufacture, outsourcing and blending.
Innovation Glanbia Food Ingredients Ireland has a
comprehensive programme of strategic and applied
research, backed up by world class laboratory and pilot
process plant facilities at the new Glanbia Innovation
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Food Ingredients
Centre in Kilkenny. The Innovation Centre has provided
a further impetus to our ongoing innovation programme
which we implement in partnership with our leading
customers. Research is focused on the quality, safety
and efficacy of our dairy food ingredients and enables
Glanbia to progress from pre to full commercial
exploitation with industry clients or partners.
Jeff Williams
The outlook for 2006 is for another challenging
President
Glanbia Foods Inc.
year with a significant development agenda
to mitigate the affects of MTR and an adverse
energy cost environment
Outlook Food Ingredients Ireland is a large user of
energy and therefore any significant and sustained
upward shift in pricing would be a cause for concern
for 2006. The overall management and consumption
of energy is a key objective for the business.
The outlook for 2006 is for another challenging year
with a significant development agenda to mitigate the
affects of MTR and an adverse energy environment.
US A
Glanbia’s USA Food Ingredients businesses, (Glanbia
Foods Inc.), is the largest producer of cheddar barrel
cheese in the USA and is one of the top global producers
of American-style cheddar cheese and whey-based food
ingredients. With headquarters and operations in the
State of Idaho, the business processes approximately
one third of all milk produced in Idaho – which is the
fourth largest milk producing state in the USA. Idaho
was the fastest growing milk producing state in the
USA in 2005, with milk production growth of 12%.
Customers are business to business, blue chip companies
in the food service, food processing and retail sectors.
Glanbia Foods Inc. processes 1.6 billion litres of milk a
year 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 where
it employs 540 people.
American-style Cheddar Cheese Overall, Glanbia
Foods Inc. has a 9.1% share of American-style cheddar
cheese production in the USA. Product is sold to leading
food service manufacturers for food service, retail and
ingredient applications under leading USA cheese
USA market positions
No. 1 barrel cheese
No. 2 whey protein isolate
No. 3 lactose
No. 3 American-style
cheese
labels. Block cheddar is sold for shredding and slicing
applications in food service and retail markets. The block
cheese facility in Twin Falls produces all varieties of
American cheese – cheddar, mozzarella, Monterey Jack,
Colby, Colby Jack and Pepper Jack, Glanbia has won
several USA and World Cheese Championships for the
fine quality American-style cheese produced at the Twin
Falls facility.
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
Barrel Cheese The cheese facility at Gooding 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 nutritional food formulations by other
food manufacturers.
Due to the ongoing demand for our barrel cheese,
Glanbia is planning a further expansion in 2006,
following on from a 30% expansion to the Gooding
barrel plant completed in 2004.
Whey In addition to cheese, Glanbia Foods Inc.
manufactures whey protein concentrate and refined
edible grade lactose at the Gooding facility and these
27
F O O D I N G R E D I E N T S
value-added whey-based nutritional products are market-
ed by the Nutritionals business.
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.
Demand continues to grow and we predict
a 2% increase in the demand for American
style natural cheddar, and an even stronger
demand for speciality varieties, over the next
number of years
Environment In 2005 market prices for cheese were
lower than 2004, although market demand and sub-
sequent volume growth was strong and contributed to
margin growth. Retail and food service categories are
driving the growth as consumers want variety, flavour,
functionality and convenience. Retail, food service and
ingredient market consolidation will continue which will
add increased complexity and competition, leading
customers to seek evolving services and relationships.
The growth in American-style cheddar cheese was in
the natural category (e.g. blocks) in 2005 and is primarily
driven by food service and retail demand for sliced and
shredded cheese applications. American-style cheese
production continues its western migration, following
the milk supply growth trend that has developed over
the past 15 years due to economies of scale with sev eral
dairy operations milking more than 5,000 cows.
Strategy The business strategy is to continue to develop
a tailored strategic approach to delivering solutions to
our customers, with the emphasis on being the most
relevant business-to-business supplier of American style
cheese. This will be achieved through the ongoing pro-
vision of a wider portfolio of cheese offerings, joint new
product development and innovation as well as supply
chain coordination. The continuation of our competitive
cost positioning is fundamental to delivering this
strategy.
Investment / Innovation During the year Glanbia Foods
Inc invested in a calcium expansion, increasing pro duc-
tion of the branded calcium `Trucal’. A programme of
investment in new technology and business systems was
completed in 2005. Additional investment in cheese
innovation is also committed in 2006.
Glanbia Foods Inc. utilises cutting edge production
technology and the resources of the Glanbia R&D
Innovation Centre in Twin Falls to produce what
are among the finest quality cheese and nutritional
ingredients in the world.
Researchers at the Innovation Centres in Idaho and
Kilkenny work with Glanbia Foods to achieve product
solutions for customers as well as a range of research
designed to move the industry forward, from calcium
absorption to studies linking dairy product intake to
decreased obesity levels.
Outlook The outlook for 2006 is positive. Following on
from a 12% growth in milk production in 2005 growth
in Idaho milk production of 8-10% is projected in 2006.
Glanbia’s customers are expressing a strong demand for
cheese, some of which will be supplied by Southwest
Cheese, the joint venture in Clovis, New Mexico.
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Food Ingredients
Kevin Toland
CEO & President
Glanbia USA &
Nutritionals
GL AN B I A N U TRI T I ON AL S
Glanbia Nutritionals is a leading provider of science-
based nutritional food solutions that address the growing
demand for products with health benefits in addition to
their nutritional value. Drawing on Glanbia’s international
resources – including state-of-the-art production and
R&D – the business produces a wide range of specialty
whey proteins and other nutritional ingredients for use
in ready-to-drink and powdered beverages, nutritional
bars, dairy products, snacks, confectionary applications
and more.
Glanbia’s solutions are used by a broad and growing
range of nutrition-based industries including functional
foods, sports nutrition, infant nutrition, clinical nutrition,
weight management, health and wellness products and
nutritional supplements. Its product range includes:
whey protein isolates and other whey powders; lactose;
calcium; lactoferrin; vitamins and minerals; bars and
beverages. These ingredients are the basis for a range
of brands such as: Provon; Prolibra; Salibra; Trucal; Tri-
Fix; Barflex; BarPro; Barmax; Oatvantage and Glovon.
Through these brands the company is building a world-
wide reputation for customised products, innovative
processing technologies and outstanding customer
services.
As an evolving business, Glanbia Nutritionals employs
over 100 people at global locations in: Ireland (Kilkenny),
the USA (Wisconsin, Idaho and Illinois), Germany, the
United Kingdom, Brazil, Uruguay, Argentina and China.
The business continued to make steady
progress in 2005 supported by additional
capacity in specialised calcium products at
the Group’s Idaho facility and the integration
of Kortus Foods Ingredients Services GmbH,
the German based nutrient delivery systems
business
Environment The business continued to make steady
progress in 2005 supported by additional capacity in
specialised whey protein isolate products at the Group’s
Idaho facility and the integration of Kortus Foods
Ingredients Services GmbH, the German based nutrient
delivery systems business. During the year Kortus, which
specialises in the production, research and development
of customised nutrient systems for customers in the
infant nutrition, dietetics and functional foods markets,
performed well with sales growth of over 30%.
The global nutritional market exhibited strong growth
in 2005.
Substantial investment was made in 2005 in
building a strong team with a blend of skills
in science-based research and development
and marketing, to drive the business forward
Strategy The Glanbia Nutritionals strategy is to be a key
global provider of nutritional ingredients and nutritional
solutions. This will be achieved through acquisition and
joint ventures, capacity expansion, investment in research
and development in both the dairy and non dairy sectors.
Innovation in the development of a strong pipeline of
new products that will afford Glanbia a point of diff-
erence in the market and deliver added value to our
customers, is central to this strategy.
Developments / Investments Substantial investment was
made in 2005 in building a strong team with a blend of
skills in science-based research and development and
marketing, to drive the business forward.
Other investments were made to strengthen the bus-
iness, including the expansion of the new Glanbia
Innovation Centre in Ireland and the purchase of a small
manufacturer of bars, beverages and powders in the UK.
This business adds an additional solutions capability
to Glanbia Nutritionals giving it a strategic presence
in a key market.
In October 2005 Glanbia expanded the Group
Innovation Centre in Kilkenny, with further research and
development facilities – comprising additional laboratory
space for technologically sophisticated biochemical and
microbiological analysis and clinical trial support. The
total number of research scientists and commercialisation
staff at the Innovation Centre is now over 50.
29
F O O D I N G R E D I E N T S
A number of other investments and
developments undertaken in 2005, such
as the commissioning of additional large
scale whey capacity at Southwest Cheese in
Clovis, New Mexico and of additional calcium
capacity in Idaho, as well as the opening
of a representative office in Shanghai and
in Argentina, further strengthens Glanbia’s
position as a leading player in the global
nutritionals market
Innovation The development work in the Group’s
Innovation Centres in Ireland and the USA, carried
out in partnership with customers, led to a number of
commercial developments in 2005. We continue to
develop products and solutions that match a market
need, or a customer requirement, working closely with
universities and other research agencies.
During the year Glanbia Nutritionals developed and
acquired advanced, differentiated and branded ingre-
dients targeted at a range of nutritional require ments
such as weight management; immune enhancement;
heart health; cancer prevention; endurance and
performance.
Among the range of developments progressed during
the year was ‘Oatvantage(tm)’ an oat based product
for which Glanbia acquired the exclusive European
distribution rights.
Outlook With a strong team and increased innovation
resources, overall the outlook for 2006 is positive with
anticipated growth from capacity expansion, new
product development and acquisitions.
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NO.1 Whey protein isolate
• US$190 million investment
• Cheese and whey facility
• 340,000 sq.ft. building
• 120 suppliers – 1.1 billion litres of milk
• 18 month scale-up process
• Full production mid –2007, making Glanbia the number
one producer of American-style cheddar in the USA
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6 International Joint Ventures
Glanbia’s strategy is to build international relevance in cheese,
nutritional ingredients and selected consumer foods, balancing our
strong market positions in Ireland with an increasing presence in
overseas markets. The Group has a number of significant international
Joint Ventures producing cheese, whey and milk products which are
central to this strategic development.
an improved performance in 2005 arising from increased
demand and the benefits of investment. The strength
of the Glanbia Cheese market position, quality product
and unique technology places this business in a good
position.
NIGE RIA : NU TR IC IMA
In 2003 Glanbia entered 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. Glanbia has responsibility for the opera-
tion 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.
During 2005 the packing facility for fat filled milk
powder, which is sourced in Ireland and sold on the
local market in consumer formats under the Nunu brand
and the manufacturing plant for condensed milk, were
commissioned and overall progress to date in Nigeria
has exceeded expectations.
During 2005 commissioning of the packing
facility for fat filled milk powder, which is
sourced in Ireland and sold on the local
market in consumer formats under the Nunu
brand, was commenced
UK : GL AN B I A CH EES E
Glanbia has a 51% interest in Glanbia Cheese, a joint
venture with Leprino Foods Company, Europe’s leading
producer of mozzarella cheese for the pizza sector. The
business employs approximately 360 people between
its two manufacturing operations 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 indus-
trial 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.
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
proprietory mozzarella production technology, quality
and flexibility. These value offerings enable the business
to offer a significantly differentiated product, process
and economic offering to the marketplace. As a leading
supplier of innovative products, the business reported
33
I N T E R N AT I O N A L J O I N T V E N T U R E S
US A: S OU THWES T C H EES E
Commissioning of the Southwest Cheese facility began
in October 2005 and is the first phase in an 18 month
scale up process towards full production. Southwest
Cheese is a US$190 million cheese and whey products
facility in New Mexico. This joint venture, with Dairy
Farmers of America and Select Milk Producers Inc., will
make Glanbia the number one producer of American
cheese when it reaches full production. Once fully oper-
ational, Southwest Cheese will be one of the largest
cheese processors in the world and will have the capacity
to process in excess of one billion litres of milk per
annum and 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.
From a greenfield situation in 2004, Glanbia
expects Southwest Cheese to achieve full
capacity in 2007
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.
Overall this development is progressing well and initial
customer feedback has been very positive.
O TH ERS : M EXI CO
Glanbia established a marketing joint venture based in
Mexico with Conaprole of Uruguay in 2003. This joint
venture company, Conabia, markets dairy ingredients into
Central and South American markets and enjoyed growth
in sales in 2005.
Glanbia also purchased 100% of Zymalact; a small
blending plant in Mexico during 2005 and this business
provides a base for producing customised blends for
customers in Central America.
40lb Cheese line at our Southwest Cheese plant New Mexico
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7 Corporate Social Responsibility
Our Corporate Social Responsibility programme relies on
a careful balance of economic, environmental and social
policies while we aim to fulfil our strategic goals of building
a sustainable business and long term growth.
Community Support for local services, endeavours and
sporting activities in the communities in which we operate
is central to our philosophy.
The sponsorships represent a positive synergy
between our mission to promote healthy
food products and the GAA’s outstanding
community values, health and exercise focus
and appeal to young people
In 2005, we renewed our long-standing sponsorships of
Kilkenny and Waterford hurling at every level from minor
to senior with the Avonmore milk brand and new Yoplait
Essence brand respectively. The sponsorships represent a
positive synergy between our mission to promote healthy
food products and the GAA’s outstanding community
values, health and exercise focus and appeal to young
people.
2005 also saw the second year of a two-year commitment
by our Irish and USA employees to two causes selected by
them – Our Lady’s Hospital for Sick Children in Crumlin,
Dublin and the Boys & Girls Club in Magic Valley, Idaho.
The dedication and commitment shown by our employees
to both causes has been outstanding and their willingness
to give up their free time in today’s busy life schedules
demonstrates a social awareness and desire for community
involvement.
In Ireland, that comittment saw over 240,000 raised
by employees in a campaign that started at the Irish
Ploughing Championships and included diverse activities
such as sponsored cycling trips in Hungary and promotions
at the Ideal Homes Exhibition. These funds, when com-
bined with the Group’s financial contribution, were used
for such vital facilities as Ireland’s first Transitional Care
Unit at Crumlin Hospital.
Our Irish employees also continued their association
with ‘Junior Achievement Ireland’, a voluntary school
organisation which encourages student interest in the
world of work and commerce.
In the USA, our employees worked tirelessly in support
of The Boys & Girls Club in Magic Valley, working closely
with the Club in organising events and creating awareness
of the Club and the Glanbia involvement. One of the high-
lights of the fund-raising campaign was a highly success ful
‘Great Glanbia Grilled Cheese Sandwich Event’ which
contributed significantly to a fund that helped, among
other things, to build a new kitchen for the Club.
Environment Protection and preservation of the
environment and natural resources lies at the heart of our
objective to manage our business in an environmentally
responsible manner.
We continue to be committed to sustainable growth in
harmony with the environment and the communities in
which we operate, which is achieved by attention to such
elements as:
• including environmental goals and risk management
as part of the overall business strategy;
• maintaining relationships with local communities and
authorities, regulatory agencies and interest groups
to create better understanding and co-operation;
• recycling and re-using raw materials and reducing
35
C O R P O R AT E S O C I A L R E S P O N S I B I L I T Y
discharges to land, air or water;
• maintaining an Environmental Management System at all
our manufacturing plants.
An example of this approach was the creation of a
wastewater treatment facility at our Gooding Cheese and
Whey Manufacturing plant in the USA which was fully
operational by late 2005.
Marketplace Communication with consumers and cust-
omers to understand their views and needs has always
been a critical factor in our organisation. Research is
continuously conducted into consumer attitudes and
perceptions of our products and a consumer feedback
programme generates significant information on such
areas as product safety, packaging, labelling, promotions
and advertising.
Our advertising adheres to the relevant legislation and to
the Codes of Best Practice demanded by the Advertising
Association of Ireland and the Broadcasting Commission
of Ireland.
A central thrust of our communication strategy is to
encourage awareness of the need for a balanced diet and
nutrition to a healthy lifestyle. As part of this approach,
we are highly pro-active in communicating ingredients’
information on our product labelling.
The core values of ‘Pride In What We Do’,
‘People Matter’, ‘Find a Better Way’ and
‘Be The Best’ are very much part of our ethos
which has evolved with the organisation since
its origins in the Irish co-operative movement
Sharon McDonnell, Glanbia Meats presenting the
employee fundraising cheque to Eamonn Coghlan,
Director of Fundraising and Development
at Our Lady’s Hospital, Crumlin, Dublin
Children at The Boys & Girls Club, Magic Valley, Idaho
Workplace By offering good working conditions,
providing personal development opportunities and
rewarding employees’ on-going commitment to the
Group’s success, we consistently achieve our objective
of being considered an employer of choice at our
various locations.
We strive to attract and develop the best people and
operate a number of development programmes for all
levels within the organisation, in conjunction with various
training courses that meet specific individual needs.
We also promote a Group Graduate programme that aims
to attract outstanding graduates from diverse disciplines
to further enhance our management structure and our
future leadership.
36
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
8
Finance Review
Geoff Meagher, Group Finance Director
Results The 2005 results are prepared under International
Financial Reporting Standards (IFRS) and all comparisons
are based on a restatement of 2004 financial information.
A detailed IFRS restatement document is available on
the Group’s website at www.glanbia.com.
Revenue grew by 4% in 2005 to 21.83 billion primarily
driven by growth in the Consumer Foods and Nutritionals
businesses. A difficult environment in Ireland impacted
operating profit and margins with pre exceptional oper-
ating profit down 7% to 280.6 million. This was offset by a
21% reduction in pre exceptional net financing cost and an
improved performance in the Group’s associates and joint
ventures, which resulted in a pre exceptional profit before
taxation of 268.7 million which, on a comparable basis,
was similar to the 2004 level.
Details of divisional operating profit are given in the
Operations Review on pages 12 to 29.
The Group’s pre exceptional net financing cost (on a com-
parable basis including interest on non equity minority
interest) decreased 23.3 million to 212.8 million from
216.1 million in 2004. Financing cover (Group operating
profit, pre exceptional, to net financing cost) improved to
6.3 times (compared to 5.4 times in 2004). EBITDA finance
cover was 8.4 times (compared to 6.9 times in 2004) and
the ratio of year end net debt to EBITDA was 2 times
(compared to 2.3 times in 2004).
Net exceptional gains for the year amounted to 2521,000
compared with a 21.3 million gain in 2004. These include
211 million profit on the sale of quoted investments, a
23.9 million foreign exchange credit arising from the imple-
mentation of IFRS and a 26.9 million tax credit. These
gains were offset by restructuring charges to improve
competitiveness in Ireland of 215.7 million (Agribusiness
and Property 21.2 million, Consumer Foods 211.9 million
and Food Ingredients 22.6 million), the cancellation cost
of 25.3 million for the prepayment of US$100 million
preferred securities and 20.3 million relating to prior
disposals.
The Group’s share of results of joint ventures and
associates, post interest and tax, amounted to a profit of
2932,000 in 2005, compared with a loss of 21.5 million
in 2004. This result reflects the improved performance in
Glanbia Cheese, the Group’s UK joint venture with Leprino
Foods.
Taxation for the year amounted to 2657,000, compared
with 28.4 million in 2004. This is as a consequence of an
exceptional of 26.9 million, primarily due to a tax credit
relating to a prior disposal of assets in the USA. The
pre-exceptional taxation charge was 27.6 million which
represents an effective tax rate of 11%. 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 Earnings per share
amounted to 21.04 cent compared with 21.03 cent in
2004. Adjusted earnings per share was up 1% to 20.86
cent (2004: 20.59 cent).
The total dividend per share for the year is 5.51 cent, an
increase of 5.0% on the 2004 dividend.
Cash generation Summary cash flows for 2005 and 2004
are set out on page 37.
Total cash generated from operations amounted to
2162.9 million including 272.9 million reduction in working
capital (including a reduction in seasonal investment in
this area). Capital and development expenditure in the
year amounted to 272.6 million. The Group has invested
significantly in recent years in its international operations
both in the USA facilities in Idaho and the joint ventures
in New Mexico and Nigeria.
The US$100 million preferred securities were prepaid in
June 2005 as part of a refinancing of the Group. The
Group has renewed financing facilities of over 2400 million
In Consumer Foods Ireland, investment was
to July 2010 with core banking relationships.
made in organic growth with the launch of
Group net debt on a comparable basis reduced by 245.3
flavoured milks and new soup and sauce
million to 2215.7 million (2004; 2261.0 million).
products under the Avonmore brand.
Balance sheet Equity shareholders’ funds increased to
2123.7 million at the end of 2005 from 2119.9 million in
2004. In accordance with IFRS the Group’s balance sheet
includes a retirement benefit obligation of 2165.0 million
(2149.1 million of net of deferred tax asset). The increase
in the obligation of 238.3 million arises primarily due to
2,922
(15,612)
215
(14,814)
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.
37
F I N A N C E R E V I E W
Currency risk Although the Group is based in Ireland, it
has significant investment in overseas operations in the UK
and the US. As a result, movements in the US dollar/euro
and sterling/euro exchange rates can significantly affect
the Group’s euro balance sheet and income statement.
The Group seeks to match, to a reasonable extent, the
currency of its borrowings with that of its assets, inclusive
of goodwill. The Group also has transactional currency
exposures that arise from sales or purchases by an oper-
ating 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.
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 antici-
pated 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
bank term facilities of 2439.9 million of which 2158.3
million was undrawn. The weighted average period to
maturity of these facilities was 4.5 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 fluctuations.
Summary The Group made solid progress in 2005 with
strong debt reduction and improvements in key financial
ratios.
Geoff Meagher
Group Finance Director
Summary cash flows
2005
4’000
2004
4’000
Cash generated from operations
162,905
83,447
Net interest paid
Tax paid
(22,507)
(3,777)
(10,866)
(4,955)
Cash flows from investing activities
Acquisitions and investments
Capital expenditure
Disposals
Cash flows from financing activities
Share capital issued
Dividends paid
Net increase in borrowings
net of cash
Borrowings net of cash at the
beginning of the year
(26,366)
(46,207)
18,665
(65,368)
(60,946)
84,686
70,023
11,399
(260,950)
(269,556)
Effects of exchange rate changes
(24,725)
(2,793)
Borrowings net of cash at
the end of the year
(215,652)
(260,950)
a reduction in the discount rate applied to the actuarial
calculations.
Financial Instruments and Derivative Financial
Instruments The conduct of its ordinary business oper-
ations necessitates the holding and issuing of financial
instruments and derivative financial instruments by the
Group. The main risks arising from issuing, holding and
managing these financial instruments typically include
liquidity risk, interest rate risk and currency risk. The
Group approach is to centrally manage these risks against
comprehensive policy guidelines. The Board agrees and
regularly reviews these guidelines which are summarised
below. With the exception of an amendment to permit
the holding of instruments deemed to be speculative
under IAS 39, these policies have remained unchanged
during the past financial year.
The Group does not engage in holding or issuing
speculative financial instruments or derivatives thereof,
other than as outlined above. The Group finances its
operations by a mixture of retained profits, preference
shares, medium and short term committed bank
borrowings and uncommitted 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 appropriate
to generate the desired effective currency profile
and interest rate basis.
38
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Directors and Advisors
Jerry Liston
Matt Merrick
Eric Stanley
Micheal Keane
Kevin Toland
Chris Hill
Ned Fitpatrick
Henry Corbally
Victor Quinlan
Billy Murphy
Jim Gilsenan
John Fitzgerald
Eamon Power
John Miller
Geoff Meagher
Michael Parsons
Paul Haran
John Callaghan
John Moloney
Michael Walsh
Liam Herlihy
Non-executive Directors
Michael J Walsh (aged 63) is Chairman of Glanbia plc.
He was appointed to the Board in 1989, was appointed
Vice-Chairman of the Company in 1996 and was appointed
Chairman of the Company in 2005. He is also Chairman of
Glanbia Co-operative Society Limited and is a Director of 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.
Liam Herlihy (aged 54) 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
Chairman of Co-operative Animal Health Limited. He is a
Director of a number of other Irish companies/societies.
He completed the ICOS Diploma in Corporate Direction
in 2002. He farms at Headborough, Tallow, Co. Waterford.
John V Quinlan, B.Agr.Sc., (aged 60) is Vice-Chairman of
Glanbia plc. He was first appointed to the Board in 1996,
re-appointed in 2001 and appointed Vice-Chairman of the
Company in June 2005. He is a Director of a number of
Irish companies including Irish Sugar Limited and Malting
Company of Ireland Limited. He completed the ICOS
Diploma in Corporate Direction in 2004. He farms at
Baptistgrange, Lisronagh, Clonmel, Co. Tipperary.
John E Callaghan, FCA, FIB, (aged 63) 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.
Paul M Haran, MSc, BSc, (aged 48) was appointed to
the Board in June 2005. He also serves on the Court of
39
D I R E C T O R S A N D A D V I S O R S
Directors of the Bank of Ireland and on the Board of the
Mater Private Hospital. He was recently appointed as
Principal of the UCD College of Business and Law and
chairs the Board of the UCD Michael Smurfit Graduate
School of Business. He was appointed by the Minister for
Justice and Law Reform to chair the Working Group on
Legal Costs. He retired in 2004 as Secretary General of the
Department of Enterprise, Trade and Employment at the
end of his seven-year term of office.
Jerry V Liston, B.A., MBA, (aged 65) was appointed to
the Board in 2002. He is a Director of the Michael Smurfit
Graduate School of Business, University College Dublin
and holds directorships in various other companies includ-
ing BWG Group and Balcas Limited. He was formerly Chief
Executive of United Drug plc, a past Chairman of the Irish
Management Institute and past Executive Chairman of the
Michael Smurfit Graduate School of Business.
William G Murphy, B. Comm, (aged 60) retired as Deputy
Group Managing Director of Glanbia plc in June 2005
but continues on the Board. 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. He is a Director of a number of Irish and
UK companies including IAWS Group plc.
The following non-executive Directors are farmers and all
are Directors of Glanbia Co-operative Society Limited:
Henry V Corbally (aged 51) completed the ICOS 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 50). He farms at Ross, Kilmeaden,
Co. Waterford. He has completed an ICOS course in co-
operative training.
Edward P Fitzpatrick (aged 58) is a Director of both South
Eastern Cattle Breeding Society Limited and Castlegannon
Show Limited. He completed the ICOS Diploma in
Corporate Direction in 2003. He farms at Knockmoylan,
Mullinavat, Co. Kilkenny.
James A Gilsenan (aged 46) completed the ICOS Diploma
in Corporate Direction in 2003. He farms at Drogheda
Road, Collon, Co. Louth.
Christopher L Hill B.Agr.Sc., (aged 47) is a Director of
Wicklow Rural Partnership Limited and a member of the
Wicklow County Development Board. He completed the
ICOS Diploma in Corporate Direction in 2002. He farms
at Johnstown House, Arklow, Co. Wicklow.
Michael Keane (aged 53) was appointed to the Board in
June 2005. He farms at Foxhall, Ballinamona, Ardmore,
Youghal, Co. Waterford.
Matthew Merrick (aged 54) was appointed to the Board
in 2005. He is the Vice-Chairman of the County Offaly
Enterprise Board and a Board member of IFAC
Accountants. He farms at Shean, Edenderry, Co. Offaly.
John J Miller (aged 65) is Chairman of the Glen Barrow
Farm Producers Group and a Director of Laois Leader Rural
Development Company Limited. He is also active in Spink
Community Council. He farms at Boleybeg, Abbeyleix,
Co. Laois.
Michael Parsons (aged 56) is Chairman of Kilkenny
Co-operative Livestock Market Limited and a Director
of Kilkenny, Carlow and District Farm Relief Services
Society Limited. He farms at Outrath, Kilkenny.
Eamon M Power (aged 51) completed the ICOS Diploma
in Corporate Direction in 2004 and is a Master Farmer.
He also represents the Group on the Tus Forum and the
Progressive Genetic Advisory Committee. He farms at
Corse, Fethard-on-Sea, Co. Wexford.
George E Stanley (aged 61) is a Committee Member of
the Centenary-Thurles Co-operative Society Limited. He
farms at Shinrone, Birr, Co. Offaly.
Executive Directors
John J Moloney, B.Agr.Sc., MBA (aged 51) is Group
Managing Director since 2001. He was appointed to the
Board in 1997. He was appointed Deputy Group Managing
Director in 2000 and assumed the responsibilities of
Chief Operating Officer in 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 a Council Member
of both the Irish Business and Employers Confederation
and the Irish Management Institute.
Geoffrey J Meagher, CPA, (aged 56) joined the Board
as Group Finance Director in 1993 and is also Deputy
Group Managing Director since June 2005. He joined the
Group in 1975 and held a number of positions including
that of Group Financial Controller. Prior to that he trained
and worked with PricewaterhouseCoopers, Chartered
Accountants.
Kevin E Toland, FCMA, (aged 40) was appointed to the
Board in 2003. He joined the Group in 1999 and is CEO
and President of Glanbia USA and Nutritionals, having
previously held the positions of Group Development
Director and Chief Executive of the Consumer Foods
Division. Prior to joining Glanbia, he held a number of
senior management positions with Coca-Cola Bottlers in
Russia and with Diageo plc in Ireland and Central Europe.
40
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Directors & Advisors
Directors offering themselves for re-appointment
The following Directors are retiring by rotation in
accordance with the Articles of Association of the
Company and, being eligible, offer themselves for
re-appointment:
Michael Horan
Group Secretary
Henry V Corbally (aged 51)
Edward P Fitzpatrick (aged 58)
James A Gilsenan (aged 46)
Liam Herlihy (aged 54)
Jerry V Liston (aged 65)
Eamon M Power (aged 51)
Kevin E Toland (aged 40)
Michael J Walsh (aged 63)
Shareholder Enquiries All shareholders’ enquiries should
be addressed to the Registrar, Computershare Investor
Services (Ireland) Limited, Heron House, Corrig Road,
Sandyford Industrial Estate, Dublin 18. The Registrar can
be contacted on telephone number 01 2475349 (within
Ireland), 00353 1 247 5349 (outside Ireland), or by e-mail
to webqueries@computershare.ie
Shareholders may check their accounts on the Company’s
Share Register by accessing the Company’s website at
www.glanbia.com, clicking on “Investors” and “Shareholder
Information”. Shareholders may check their shareholdings,
recent dividend payment details and can also download
forms required to notify the Registrar
of changes in their details.
Paul M Haran, Matthew Merrick and Michael Keane
were appointed to the Board during the year and retire
in accordance with the Articles of Association and, being
eligible, offers themselves for re-election.
All are farmers and are Directors of Glanbia
Co-Operative Society Limited with the exception
of Paul M Haran, Jerry V Liston and Kevin E Toland.
Board Committees
Audit Committee JE Callaghan-Chairman, HV Corbally,
JG Fitzgerald, PM Haran, L Herlihy, JV Liston, EM Power,
JV Quinlan.
Remuneration Committee JV Liston-Chairman, JE
Callaghan, PM Haran, L Herlihy, JV Quinlan, MJ Walsh.
Nomination Committee MJ Walsh-Chairman, JE
Callaghan, PM Haran, JV Liston.
Secretary and Registered Office Michael Horan
B. Comm, FCA, Glanbia House, Kilkenny, Ireland.
Registrar and Transfer Office Computershare Investor
Services (Ireland) Limited, Heron House, Corrig Road,
Sandyford Industrial Estate, Dublin 18, Ireland.
Telephone: +353 1 216 3100; Facsimile: +353 1 216 3151.
Auditors PricewaterhouseCoopers, Ballycar House,
Newtown, Waterford, Ireland.
Principal Bankers ABN AMRO Bank N.V., Allied Irish
Banks, p.l.c., Bank of Ireland, BNP Paribas S.A., Barclays
Bank Ireland PLC, Citibank, N.A., IIB Bank Limited, National
Irish Bank Limited, Rabobank Ireland plc, Ulster Bank
Ireland Limited.
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.
41
R E P O R T O F T H E D I R E C T O R S
Report of the Directors
Introduction
The Directors are pleased to present their report to share-
holders together with the audited financial statements for
the year ended 31 December 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 and 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. The Group’s strategy
is to build international relevance in cheese, nutritional
ingredients and selected consumer foods, balancing
its strong market positions in Ireland with an increasing
presence in overseas markets. The Joint Ventures in Nigeria
and the USA are central to this strategic development, as is
the continuing development of its Nutritionals business.
Review of Business
The highlights of the results for the year were as follows:
• Revenue increased by 4% to 21,830.0 million
• Operating profit pre exceptional was down 7%
to 280.6 million
• Profit before tax pre exceptional, including share
of joint ventures and associates, was similar to 2004
at 268.7 million
• Profit after tax pre exceptional increased marginally
to 261.1 million
• Operating margin pre exceptional declined 50 basis
points to 4.4% (2004: 4.9%)
• Share of results of joint ventures and associates, post
interest and tax, went from a loss to a profit of 2932,000
• Net exceptionals for the year amounted to 2521,000
• Adjusted earnings per share was up 1% to 20.86 cent
• Net debt at the year end was down 17% to
2215.7 million
• Capital and development expenditure was 271.6 million
The Group Managing Director’s Review on pages 8 to 11
outlines the trading environment and strategic vision of
the Group. The Operations Review on pages 12 to 29
includes analysis, by operational division, of the 2005
results, trading environment and current business outlook
of each business segment. The Finance Review outlines
the financial results for 2005 including commentary on
the financial ratios and Group balance sheet.
Share Capital
The authorised share capital of the Company is
306,000,000 ordinary shares of 20.06 each. The issued
share capital as at 31 December 2005 was 293,115,684
and is currently 293,238,684 ordinary shares of 20.06 each.
Dividends
On 5 October 2005 an interim dividend of 2.27c per
share on the ordinary shares amounting to 26.6 million
was paid to shareholders on the register of members as
at 9 September 2005. The Directors have recommended
the payment of a final dividend of 3.24c per share on the
ordinary shares which amounts to 29.5 million. Subject
to shareholders approval this dividend will be paid on
Monday, 22 May 2006 to shareholders on the register
of members as at Friday, 21 April 2006, the record date.
Employees
The Group’s 3,800 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.
Research and Development
The Group is committed to an ongoing and extensive
innovation programme to support a customer-led business
and marketing approach. There is growing consumer
awareness of the link between health and diet and
Glanbia as a food group is committed to achieving the
highest standards of best practice in relation to science
based innovation. It is directed towards the development
of technically superior dairy-based food ingredient
and nutritional products, cheese, high value consumer
food products, and the enhancement of proprietary
technologies and processes.
The Group opened a new innovation centre in Ireland
in 2004 and in conjunction with the Idaho Centre of
Excellence in the U.S.A. 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.
Substantial Interests
As at 17 February 2006, Glanbia Co-operative Society
Limited held 54.7% of the Company’s issued ordinary
shares. The Company has been advised that as at 17
February 2006, Bank of Ireland Securities Services Limited
had a notifiable interest in 7% 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, subsidiary companies and the holding society
are disclosed in note 44 to the financial statements.
Corporate Governance
The Directors of the Company are committed to
maintaining the highest standards of corporate governance
and, in particular, have regard to the principles set out in
the Combined Code on Corporate Governance published
in July 2003.
42
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Report of the Directors
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 principles and
provisions of the Combined Code on Corporate
Governance.
Directors
The Board The Board is responsible for the leadership and
control of the Company.
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 54.7% 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 three executive Directors and four
additional non-executive Directors. Biographies of each
of the Directors are set out on pages 38 and 39.
The Board considers that the Directors bring to the
organisation the range of skills, common knowledge and
experience, including international experience, necessary
to lead the Company.
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 financial statements and
reports and full Board papers are sent to each Director in
sufficient time before Board meetings. Any required further
information 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 MJ Walsh. Mr Walsh was appointed as Chairman on
9 June 2005 following the retirement of Mr TP Corcoran.
The Chairman is responsible for the efficient and effective
working of the Board. He ensures that Board agendas
cover the key strategic issues confronting the Group and
that Directors receive accurate, timely, clear and relevant
information. While Mr Walsh holds a number of other
directorships (see details on page 38) and farms at
Coolroe, Graiguenamanagh, Co. Kilkenny, the Board
considers that these do not interfere with the discharge
of his duties to the Company. The Company has two Vice
Chairmen, Mr L Herlihy and Mr JV Quinlan. Mr Quinlan was
appointed Vice-Chairman on 9 June 2005.
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 JE
Callaghan, Mr P Haran and Mr JV Liston to be independent
non-executive Directors. As noted earlier, fourteen of the
remaining non-executive Directors are nominated by the
Board of Glanbia Co-operative Society Limited for
appointment to the Board of the Company. Additionally,
Mr WG Murphy retired as Deputy Group Managing
Director in September 2005 but remains on the Board
as a non-executive Director. The Board considers that the
fourteen Directors referred to above and Mr WG Murphy
are independent of character and judgement, however,
the Board recognises that these Directors do not meet
the criteria for independence as specified in the
Combined Code.
Mr Callaghan is the senior independent Director. As
senior independent Director, Mr 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
shareholders are offered an opportunity to meet new
non-executive Directors.
All Directors have access to independent 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.
During the year, all Directors were advised in relation to
the implications of new regulations contained in the Market
Abuse (Directive 2003/6/EC) Regulations 2005.
Seven of the Directors nominated to the Board by Glanbia
Co-operative Society Limited have completed the ICOS
Diploma in Corporate Direction.
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 approval 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 led
by the Chairman.
In completing the performance evaluation, the Chairman
met with each Director individually to discuss the
43
R E P O R T O F T H E D I R E C T O R S
performance 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 summ-
arising the outcome of the performance evaluation process
and recommending a number of actions.
of the Company and, being eligible, offer themselves for
re-appointment. Biographical details of Directors offering
themselves for re-appointment are set out on pages 38 and
39. 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.
The performance of the Chairman was considered at a
meeting of the Directors which was chaired by Mr JE
Callaghan, the Senior Independent Director.
The Audit Committee, Nomination 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 40 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 Nomination, Audit
and Remuneration Committees is comprised exclusively of
non-executive Directors. The Group Secretary acts as
secretary of each of these committees.
Nomination Committee As noted earlier, fourteen
non-executive Directors are nominated by the Board
of Glanbia Co-operative Society Limited (“the Society”)
for appointment to the Board of the Company. For the
remaining non-executive and executive Directors, the
Nomination Committee of the Company leads the process
for Board appointments. The Chairman of the Group chairs
meetings of the Nomination 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 the Society is subject to and co-terminus
with their appointment 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 HV Corbally, EP Fitzpatrick, JA Gilsenan,
L Herlihy, JV Liston, EM Power, KE Toland and MJ Walsh
retire from the Board by rotation and, being eligible, offer
themselves for re-appointment. Messrs P Haran, M Keane
and M Merrick who were appointed as Directors on 9 June
2005 retire in accordance with the Articles of Association
The Nomination Committee did not use an external search
consultancy or open advertising in the appointment of
the new non-executive Directors. Messrs M Keane and M
Merrick were appointed by the Board of the Society for
appointment to the Board. The Nomination Committee
used industry and professional contacts to identify suitable
candidates for the appointment of an independent director
and following this process, Mr P Haran was recommended
to and appointed to the Board.
The Nomination Committee also considered and
recommended the appointment of Mr MJ Walsh as
Chairman of the Company, the appointment of Mr JV
Quinlan as Vice-Chairman and the continuation of Mr L
Herlihy as Vice-Chairman. It is the custom and practice
that the Chairman and Vice-Chairmen of the Society are
also Chairman and Vice-Chairmen of the Company.
On an ongoing basis, the Nomination 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 MJ Walsh is Chairman of the
Nomination 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 a separate board risk
committee composed of independent directors, or 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;
44
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Report of the Directors
• to review and monitor the external auditor’s inde-
pendence 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 improvement
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; and
• to monitor and review the effectiveness of the Group’s
controls in relation to the Group’s compliance under
the new Market Abuse (Directive 2003/6/EC)
Regulations 2005.
In discharging its responsibilities the Audit Committee met
six 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 received 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 reviewed the policy of the Company in
relation to the provision of non-audit services by the
external auditors.
Mr JE 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
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
determined 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. Mr JV Liston is Chairman of the Remuneration
Committee and formally reports to the Board after each
meeting of the Committee.
Remuneration
Remuneration Policy Remuneration policy is based on
attracting, retaining and motivating executives to ensure
that they perform in the best interests of the Company
and its shareholders. Performance related elements
of remuneration 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
participate in the share option scheme of the Company
which expired in August 1998.
Basic Salaries and Benefits The basic salaries of executive
Directors are reviewed annually 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 Group employees in order to
further align the interests of key Group personnel with
those of shareholders. Under the 2002 LTIP options cannot
be exercised before the expiration of three years from the
date of grant and can only be exercised if a predetermined
performance criterion for the Company has been achieved.
The performance criterion is that there has been an increase
in the adjusted earnings per share of the Company of at
least the increase in the Consumer Price Index plus 5%
compounded 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 will
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.
45
R E P O R T O F T H E D I R E C T O R S
Employee Savings – Related Share Options Scheme
In 2002 the shareholders approved the introduction of
an employee Savings-Related Share Option (“Sharesave”)
Scheme. In 2002 options were granted over 2,988,622
ordinary shares under the Sharesave Scheme. During
the year, 1,370,464 ordinary shares were transferred to
employees of the Company who exercised their options
under the Scheme. Options over 109,913 ordinary shares
remained unexercised at 31 December 2005.
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 10 and details of Directors’
shareholdings and share options are included in note 44
to the financial statements.
Other Directorships Mr WG Murphy, the former Deputy
Group Managing Director of the Company, is a Director
of IAWS Group plc, for which he received fees of 246,250
which he retained. The Group Managing Director, Mr JJ
Moloney, is a Director of the Irish Dairy Board 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
outstanding under the Company’s 1988 Share Option
Scheme, the LTIP and the Sharesave Scheme as at 31
December 2005 amounted to 3,116,913 ordinary shares
(1 January 2005: 5,122,070) made up as shown in the
table below.
As detailed in note 28 to the financial statements at 31
December 2005 364,485 ordinary shares were held in an
employee benefit trust for the purpose of the Sharesave
Scheme (“the Employees’ Share Trust”).
1 Guidance for Directors, Internal Control: Guidance for Directors
on the Combined Code (the “Turnbull guidance”) published in
September 1999.
Accountability and Audit
Financial Reporting Directors’ responsibilities for preparing
the financial statements for the Company and the Group
are detailed on page 48 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.
International Financial Reporting Standards It has
become mandatory for all EU listed companies to report
their consolidated financial statements under International
Financial Reporting Standards ”(IFRS)“ for accounting
periods commencing on or after 1 January 2005. This
applies to the Group for these financial statements. A full
restatement of the 2004 financial statements was published
with the interim results in July 2005 and is available on the
Group’s website at www.glanbia.com.
Internal Control The Directors are required by the
Combined Code to maintain a sound system of internal
control to safeguard shareholders’ investment and the
Group’s assets.
The Board confirms that there are ongoing procedures for
identifying, evaluating and managing significant risks faced
by the Group. These, or their equivalent, have been in
place for the year covered in this Annual Report and
Financial Statements and up to the date of its approval and
are themselves regularly reviewed by the Board and accord
with the Turnbull guidance which the Board has fully
adopted. The Board has also reviewed the effectiveness
of the current system of internal control specifically for
the purposes of this statement.
While acknowledging its responsibility for the system
of internal control, the Board is aware that such a system
is designed to manage rather than eliminate the risk of
failure to achieve business objectives, and can only provide
reasonable and not absolute assurance against material
misstatement or loss.
The risk appetite of the Group is set by the Board.
The strategy for managing risk is formulated by the Group
Executive Committee, a management committee chaired
by the Group Managing Director 1, and recommended to
the Board.
Share option scheme
and 2002 LTIP
Sharesave Scheme
Total
No of Ordinary Shares
Price Range
3,007,000
21.55 – 24.25
GBP£2.90
Dates
Exercisable
2006 - 2014
2006 - 2008
109,913
21.20 – GBP£0.764
January to March 2006
3,116,913
46
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Report of the Directors
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, review of
key performance indicators and regular re-forecasting;
• clearly defined guidelines for capital expenditure,
including detailed budgeting, appraisal and post-
investment review;
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; and
• 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.
Column A indicates the number of meetings held during the
period the Director was a member of the Board and / or
• a Group Financial Management Manual that clearly
Committee. Column B indicates the number of meetings attended
sets out the accounting policies and financial control
procedures to be followed by Business Units;
• a Treasury Risk Management policy approved by the
during the period the Director was a member of the Board and /
or the Committee.
Board which ensures that foreign exchange and interest
* Retired 9 June 2005 **Appointed 9 June 2005
Attendance at Board and Board Committee Meetings during the year ended 31 December 2005
Board
Audit
Committee
Nomination
Committee
Remuneration
Committee
MJ Walsh
L Herlihy
JV Quinlan
JJ Moloney
JE Callaghan
HV Corbally
T P Corcoran*
JG Fitzgerald
EP Fitzpatrick
JA Gilsenan
P Haran**
T Heffernan*
CL Hill
M Keane**
JV Liston
GJ Meagher
M Merrick**
JJ Miller
WG Murphy
M Parsons
EM Power
GE Stanley
KE Toland
A
14
14
14
14
14
14
7
14
14
14
7
7
14
7
14
14
7
14
14
14
14
14
14
B
14
14
14
13
13
14
7
14
14
13
7
6
12
7
11
14
7
14
13
14
14
14
6
A
3
6
3
6
3
3
3
6
3
6
3
B
3
6
3
6
3
2
2
6
3
4
3
A
1
7
5
1
7
B
1
7
5
1
6
A
3
3
1
3
1
1
3
B
3
3
1
3
1
1
3
47
R E P O R T O F T H E D I R E C T O R S
Financial Risk Management
A comprehensive analysis on the financial risk management
objectives and policies of the Company and the Group
including the policy for hedging each major type of fore-
casted transaction for which hedge accounting is used, and
the exposure of the Company and the Group to price risk,
credit risk, liquidity risk and cash flow risk is contained in
notes 3, 32 and 38 to the financial statements.
Relations with Shareholders Dialogue with Institutional
Shareholders. The Company has dialogue with institutional
shareholders during the year and immediately following the
announcement of the half-year and full-year results; the
Company presents these results to investors and analysts.
The 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 meet-
ings with major shareholders. The Company responds to
enquiries from all shareholders and welcomes their
attendance at the Annual General Meeting.
The Group’s website, www.glanbia.com, provides the full
text of the Annual and Interim Reports and presentations to
analysts and investors through the Investors Section. Stock
Exchange announcements are also made available in the
Investors Section of the website, after release to the Stock
Exchange.
Annual General Meeting The Notice of the 2005 Annual
General Meeting was despatched to shareholders not less
than 20 working days before the meeting. Separate reso-
lutions were proposed at the meeting on each substan tially
separate issue, including a resolution to receive and con-
sider the 2004 financial statements and the reports of the
Directors and Auditors thereon. The Chairmen of the
Audit Committee, the Nomination 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 under-
takings is included in note 45 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 2006 Annual General Meeting with details of the
special business to be considered at the meeting is set out in
a separate circular which is enclosed with this Annual Report.
Disapplication of Pre-Emption Rights, Purchase of
Company Shares and Treasury Shares
Under the second item of special business, shareholders
are being asked to renew the authority to disapply the
strict statutory pre-emption provisions in the event of
a rights issue or in any other issue up to an aggregate
amount of 2765,678.96 in nominal value of ordinary
shares, representing 4.4% 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 15 August 2007 or the date of
the Annual General Meeting of the Company in 2007.
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 16 May 2006.
Under the third item of special business, shareholders are
being asked to extend this authority until the earlier of the
close of business on 15 August 2007 or the date of the
Annual General Meeting of the Company in 2007. 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 fourth item
of special business to pass a resolution authorising the
Company to reissue such shares purchased by it and not
cancelled as treasury shares. Such purchases would be
made only at price levels which it considered to be in the
best interests of the shareholders generally, after taking
into account the Company’s overall financial position.
Furthermore the authority being sought from shareholders
will provide that the minimum price which may be paid for
such shares shall not be less than the nominal value of the
shares and the maximum price will be 105% of the then
market price of such shares.
Alteration of Articles of Association Under the fifth
item of special business, shareholders are being asked
to amend the Articles of Association of the Company to
permit the use of electronic communications. None of the
changes proposed will force either the Company or an
individual shareholder to send or receive documents or
notices by electronic mail. They merely permit this to occur
where appropriate and where both the Company and the
relevant shareholder agrees. Shareholders will be notified
with full information when the Company proposes to allow
electronic communications. A copy of the draft proposed
new Articles of Association containing all of the amend-
ments required to permit the use of electronic comm-
unications is available for inspection at the registered
office of the Company and on the Company’s website
at www.glanbia.com.
Authority to allot shares Under the first item of special
business, shareholders are being asked to renew the
Directors’ authority to allot relevant securities, within the
meaning of Section 20 of the Companies (Amendment) Act,
1983, up to an aggregate nominal amount of 2765,678.96.
On behalf of the Board
Michael J Walsh Chairman
John J Moloney Group Managing Director
28 February 2006
48
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Report of the Directors
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Annual
Report and the financial statements in accordance with
International Financial Reporting Standards (“IFRS”) and
IFRIC interpretations endorsed by the European Union
and with those parts of the Companies Act, 1963 to 2005
applicable to companies reporting under IFRS and Article
4 of the IAS Regulation.
Irish company law requires the Directors to prepare
financial statements for each financial year which 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 these financial statements, the
Directors are required to:
• select suitable accounting policies and then apply
them consistently;
• make judgments and estimates that are reasonable
and prudent;
• state that the financial statements comply with IFRS; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group will continue in business.
The Directors confirm that they have complied with the
above requirements in preparing the financial statements.
The Directors are responsible for keeping proper books of
account that disclose with reasonable accuracy at any time
the financial position of the Company and enable them
to ensure that the financial statements are prepared in
accordance with IFRS and IFRIC interpretations endorsed
by the European Union and with those parts of the
Companies Act, 1963 to 2005 applicable to companies
reporting under IFRS and Article 4 of the IAS Regulation.
They are also responsible for safeguarding the assets
of the Company and the Group and hence for taking
reasonable steps for the prevention and detection
of fraud and other irregularities.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company’s website. Legislation in the Republic
of Ireland governing the preparation and dissemination
of financial statements may differ from legislation
in other jurisdictions.
Financial Statements – contents
Page
50
Independent auditors’ report: to the members of Glanbia plc
5 1
Consolidated income statement
52
Consolidated statement of recognised income and expense
53
Consolidated balance sheet
54
Consolidated cash flow statement
55
Company balance sheet
56
Company statement of recognised income and expense and cash flow statement
57
57
63
64
65
68
7 1
72
73
74
75
76
77
78
79
80
8 1
82
83
84
85
86
87
Notes to the financial statements
1 General information
2 Summary of significant accounting policies
3 Financial risk management
4 Critical accounting estimates and assumptions
5 Effects of IFRS implementation
6 Segment information
7 Operating profit
8 Exceptional items
9 Employee benefit expense
10 Directors’ remuneration
11 Finance income and costs
12 Taxation
13 Discontinued operations
14 Earnings per share
15 Dividends
16 Property, plant and equipment
17 Intangible assets
18 Investments in associates
19 Investments in joint ventures
20 Investments
21 Trade and other receivables
22 Inventories
23 Cash and cash equivalents
24 Reconciliation of changes in equity
25 Share capital
26 Other reserves
27 Retained earnings
28 Own shares
88
29 Capital reserves
30 Merger reserve
31 Minority interests
32 Borrowings
90
92
93
94
33 Deferred income taxes
34 Retirement benefit obligations
35 Provisions for other liabilities and charges
36 Capital grants
37 Trade and other payables
38 Derivative financial instruments
95
39 Contingent liabilities
40 Commitments
96
41 Cash generated from operations
42 Business combinations
43 Related party transactions
44 Directors’ and Secretary’s interests
45 Principal subsidiary and associated undertakings
97
99
102
50
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Independent auditors’ report: to the members of Glanbia plc
We have audited the Group and Parent Company financial
statements (the “financial statements”) of Glanbia plc for the
year ended 31 December 2005, which comprise the consolidated
income statement, the consolidated and Parent Company
balance sheets, the consolidated and Parent Company cash flow
statements, the consolidated and Parent Company statement of
recognised income and expense and the related notes. These
financial statements have been prepared under the accounting
policies set out therein.
We read the other information contained in the Annual Report
and consider whether it is consistent with the audited financial
statements. The other information comprises only the Directors’
Report, the Chairman’s Statement, the Group Managing
Director’s Report, the Operating Review and the Financial Review.
We consider the implications for our report if we become aware
of any apparent misstatements or material inconsistencies with
the financial statements. Our responsibilities do not extend to
any other information.
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 International Financial Reporting Standards (IFRSs) as
adopted by the European Union, are set out in the Statement
of Directors’ Responsibilities.
Our responsibility is to audit the financial statements in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland). 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 Group financial
statements give a true and fair view, in accordance with IFRSs
as adopted by the European Union. We report to you our
opinion as to whether the Parent financial statements give a
true and fair view, in accordance with IFRSs as adopted by the
European Union, as applied in accordance with the provisions
of the Companies Acts 1963 to 2005. We also report to you
whether the financial statements have been properly prepared
in accordance with Irish statute comprising the Companies
Acts, 1963 to 2005 and Article 4 of the IAS Regulation. We state
whether we have obtained all the information and explanations
we consider necessary for the purposes of our audit, and
whether the financial statements are 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 of the Company; 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, any information
specified by law or the Listing Rules of the Irish Stock Exchange
regarding Directors’ remuneration and Directors’ transactions is
not disclosed and, where practicable, include such information
in our report.
We review whether the Corporate Governance Statement which
is included in the Directors’ Report, reflects the Company’s
compliance with the nine provisions of the 2003 FRC Combined
Code specified for our review by the Listing Rules of the Irish
Stock Exchange, 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 form an opinion on the
effectiveness of the Group’s corporate governance procedures
or its risk and control procedures.
Basis of audit opinion We conducted our audit in accordance
with International Standards on Auditing (UK and Ireland)
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 judgments made
by the Directors in the preparation of the financial statements,
and of whether the accounting policies are appropriate to the
Group’s and Company’s circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all the
information and explanations which we considered necessary
in order to provide us with sufficient evidence to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or other irregularity
or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the
financial statements.
Opinion In our opinion:
•
the Group financial statements give a true and fair view,
in accordance with IFRSs as adopted by the European Union,
of the state of the Group’s affairs as at 31 December 2005
and of its profit and of its cash flows for the year then ended;
the Parent Company financial statements give a true and fair
view, in accordance with IFRSs as adopted by the European
Union, as applied in accordance with the provisions of the
Companies Acts 1963 to 2005, of the state of the Parent
Company’s affairs as at 31 December 2005 and cash flows
for the year then ended;
the financial statements have been properly prepared in
accordance with the Companies Acts, 1963 to 2005 and
Article 4 of the IAS Regulation.
•
•
We have obtained all the information and explanations which
we consider necessary for the purposes of our audit. In our
opinion proper books of account have been kept by the
Company. The Company balance sheet is in agreement with
the books of account.
In our opinion the information given in the Directors’ Report
is consistent with the financial statements.
The net assets of the Company, as stated in the Company
balance sheet are more than half of the amount of its called-up
share capital and, in our opinion, on that basis there did not
exist at 31 December 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
28 February 2006
Consolidated income statement
for the year ended 31 December 2005
51
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
E x c e p t i o n a l
2 0 0 5
3’000
To t a l
2 0 0 5
3’000
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
P r e -
e x c e p t i o n a l
2 0 0 5
3’000
1,830,012
(1,590,049)
239,963
(94,743)
(64,651)
-
-
-
1,830,012
(1,590,049)
1,753,645
(1,529,413)
239,963
224,232
-
(1,110)
(94,743)
(65,761)
(77,857)
(60,118)
80,569
(1,110)
79,459
86,257
4,209
(16,995)
-
(5,304)
4,209
(22,299)
3,033
(8,756)
932
-
932
(1,523)
(6,414)
6,935
62,301
(657)
79,011
(8,386)
61,644
70,625
68,715
(7,592)
61,123
-
61,123
521
-
521
To t a l
2 0 0 4
3’000
1,753,645
(1,529,413)
224,232
(77,857)
(57,223)
89,152
3,033
(8,756)
(1,523)
81,906
(8,386)
73,520
-
-
-
-
2,895
2,895
-
-
-
2,895
-
2,895
-
-
(1,601)
(1,601)
61,644
70,625
1,294
71,919
61,327
-
317
61,644
21.04
-
21.04
20.96
-
20.96
61,119
10,387
413
71,919
21.58
(0.55)
21.03
21.47
(0.55)
20.92
Revenue
Cost of sales
Gross profit
Distribution expenses
Administration expenses
Operating profit
Finance income
Finance costs (note)
Share of results of joint ventures
and associates
Profit before taxation (note)
Income taxes
Profit after taxation (note)
Loss for the year from
discontinued operations
Profit for the year (note)
Attributable to:
Equity holders of the Parent
Non-equity minority interest
Equity minority interest
Basic earnings per share (cent)
— Continuing operations
— Discontinued operations
Diluted earnings per share (cent)
— Continuing operations
— Discontinued operations
Notes
6
8
7
11
11
12
13
14
14
Note:
The prior year comparative figures have been restated in line with the Group’s transition to IFRS on 4 January 2004, with the exception of IAS
32 and IAS 39, which were implemented from 2 January 2005. Accordingly, interest on preferred securities and preference shares is shown in
the income statement as part of finance cost for 2005 and as non-equity minority interest for 2004. When adjusted for this item, the profit after
taxation, pre-exceptional items for 2005 was 361.1 million compared to 360.2 million for 2004.
On behalf of the Board
MJ Walsh JJ Moloney GJ Meagher
Directors
52
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Consolidated statement of recognised income and expense
for the year ended 31 December 2005
Actuarial loss — defined benefit schemes
Deferred tax on pension loss
Currency translation differences
Fair value adjustments
Net expense recognised directly in equity
Profit for the year
Notes
34
33
24
24
2 0 0 5
3’000
(42,303)
4,054
(3,042)
(3,465)
(44,756)
61,644
2 0 0 4
3’000
(45,755)
5,059
(5,257)
-
(45,953)
71,919
Total recognised income for the year
16,888
25,966
Attributable to:
Equity holders of the Parent
Non-equity minority interest
Equity minority interest
On behalf of the Board
MJ Walsh JJ Moloney GJ Meagher
Directors
16,571
-
317
21,254
4,299
413
16,888
25,966
53
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Consolidated balance sheet
as at 31 December 2005
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associates
Investments in joint ventures
Available for sale investments
Other investments
Trade and other receivables
Derivative financial instruments
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents (note)
Total assets
EQUITY
Issued capital and reserves attributable to equity holders of the Parent
Share capital
Other reserves
Retained earnings
Equity minority interest
Non-equity minority interest (note)
LIABILITIES
Non-current liabilities
Borrowings (note)
Deferred tax liabilities
Retirement benefit obligations
Provisions for other liabilities and charges
Capital grants
Current liabilities
Borrowings (note)
Provisions for other liabilities and charges
Trade and other payables
Current tax liabilities
Derivative financial instruments
Total liabilities
Total equity and liabilities
Notes
2 0 0 5
3’000
2 0 0 4
3’000
16
17
18
19
20
20
21
38
33
22
21
38
23
25
26
27
31
31
24
32
33
34
35
36
32
35
37
38
332,003
57,963
11,090
59,832
29,511
-
56,874
1,825
15,869
564,967
144,250
143,610
1,125
104,405
393,390
302,057
36,698
10,918
48,281
-
28,672
51,942
-
12,299
490,867
133,419
172,622
-
51,625
357,666
958,357
848,533
97,964
117,059
(97,604)
117,419
6,299
-
123,718
319,727
34,471
165,016
6,072
14,855
540,141
330
8,433
278,583
4,605
2,547
294,498
834,639
95,208
116,414
(97,797)
113,825
6,085
110,384
230,294
198,682
30,375
126,676
5,348
15,276
376,357
3,509
1,291
228,901
8,181
-
241,882
618,239
958,357
848,533
Note:
The prior year comparative figures have been restated in line with the Group’s transition to IFRS on 4 January 2004, with the
exception of IAS 32 and IAS 39, which were implemented from 2 January 2005. This impacts the presentation of net borrowings
which when adjusted for this item, were 3215.7 million at 31 December 2005 and 3260.9 million at 1 January 2005.
On behalf of the Board
MJ Walsh JJ Moloney GJ Meagher
Directors
54
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Consolidated cash flow statement
for the year ended 31 December 2005
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Tax paid
Net cash from operating activities
Cash flows from investing activities
Acquisition of subsidiary, net of cash acquired
Purchase of property, plant and equipment
Purchase of available for sale investments
Disposal of subsidiary, net of cash disposed
Disposal of available for sale investments
Proceeds from sale of property, plant and equipment
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Sharesave Scheme — receipt from Trustee
Repayment of borrowings
Finance lease principal payments
Dividends paid to Company’s shareholders
Repayment of minority interest
Capital grants received
Dividends paid to minority interests
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Notes
41
25
15
31
2 0 0 5
3’000
2 0 0 4
3’000
162,905
670
(23,177)
(3,777)
83,447
573
(11,439)
(4,955)
136,621
67,626
(19,366)
(46,979)
(5,214)
(147)
14,394
4,418
(10,157)
(60,946)
(55,211)
83,277
-
1,409
(52,894)
(41,628)
731
2,191
(20,242)
(519)
(15,612)
(7)
772
-
215
-
(8,513)
(612)
(14,814)
-
-
(9,674)
(32,686)
(33,398)
51,041
(7,400)
51,625
1,739
59,775
(750)
Cash and cash equivalents at the end of the year
23
104,405
51,625
On behalf of the Board
MJ Walsh JJ Moloney GJ Meagher
Directors
55
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Company balance sheet
as at 31 December 2005
ASSETS
Non-current assets
Investments in associates
Other investments
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY
Issued capital and reserves attributable to equity holders of the Company
Share capital
Retained earnings
Capital reserve
LIABILITIES
Non-current liabilities
Borrowings
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
On behalf of the Board
MJ Walsh JJ Moloney GJ Meagher
Directors
Notes
2 0 0 5
3’000
2 0 0 4
3’000
18
20
21
23
25
27
29
32
37
1,395
510,469
511,864
934
16,281
17,215
1,395
512,174
513,569
1,481
1,507
2,988
529,079
516,557
453,232
47,437
4,503
505,172
450,476
39,085
4,624
494,185
3,397
3,397
20,510
18,975
23,907
22,372
529,079
516,557
56
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Company statement of recognised income and expense
and cash flow statement
for the year ended 31 December 2005
Company statement of recognised income and expense
Profit for the year
Total recognised income for the year
Company cash flow statement
Cash flows from/(funds absorbed by) operating activities
Cash generated from operations
Interest received
Interest paid
2 0 0 5
3’000
2 0 0 4
3’000
23,964
28,470
23,964
28,470
2 0 0 5
3’000
8,281
2,053
-
2 0 0 4
3’000
(8,858)
-
(98)
Notes
41
Net cash from/(used in) operating activities
10,334
(8,956)
Cash flows from investing activities
Disposal of available for sale investments
Dividends received
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Sharesave Scheme — receipt from Trustee
Dividends paid to Company’s shareholders
Net cash used in financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
916
16,214
5,401
19,528
17,130
24,929
25
15
731
2,191
(15,612)
215
-
(14,814)
(12,690)
(14,599)
14,774
1,507
1,374
133
1,507
Cash and cash equivalents at the end of the year
23
16,281
As permitted by Section 148(8) of the Companies Act 1963, a separate income statement for the Parent Company, Glanbia plc, has
not been included in these financial statements. The profit for the year dealt with in the financial statements of Glanbia plc, amounts to
223,964,000 (2004: 228,470,000).
On behalf of the Board
MJ Walsh JJ Moloney GJ Meagher
Directors
57
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
Notes to the financial statements
for the year ended 31 December 2005
1 General information
Glanbia plc (“the Company”) and its subsidiaries (together “the Group”) is an international dairy, consumer foods and nutritional
products group with operations in Ireland, Europe, the USA and Nigeria. Business units are structured around developing the Group’s
strategic focus on the consumer foods, food ingredients and nutritionals markets.
The Company is a public limited company incorporated and domiciled in Ireland. The address of its registered office is
Glanbia House, Kilkenny, Ireland.
The Company’s shares are quoted on the Dublin and London Stock Exchanges.
These consolidated financial statements have been approved for issue by the Board of Directors on 28 February 2006.
2 Summary of significant accounting policies
The principal accounting policies adopted in the preparation of these financial statements are set out below. These policies have
been consistently applied to all years presented, unless otherwise stated.
(a) Basis of preparation
These financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) and IFRIC
interpretations endorsed by the European Union and those parts of the Companies Acts, 1963 to 2005 applicable to companies
reporting under IFRS. The financial statements have been prepared under the historical cost convention as modified by the
revaluation of land and buildings, available for sale investments, and financial assets and liabilities held for trading. A summary of
the more important Group accounting policies is set out below, together with an explanation of where changes have been made
to previous policies on the adoption of new accounting standards in the year.
The Group’s date of transition to IFRS is 4 January 2004. The comparative figures have been restated to reflect IFRS, except where
otherwise required or permitted by IFRS 1, First Time Adoption of International Financial Reporting Standards.
In line with the provisions of IFRS 1, the Group has adopted IAS 32 (Financial Instruments: Disclosure and Presentation) and IAS 39
(Financial Instruments: Recognition and Measurement) from 2 January 2005. The comparative figures are reported under the previous
accounting standards. The Group has opted for early adoption of the amendment to IAS 19 (Employee Benefits) allowing recognition
in the statement of recognised income and expense, of actuarial gains and losses in full in the period in which they occur. The Group
has also opted for early adoption of IFRS 5 (Non-Current Assets held for Sale and Discontinued Operations) and has applied this
standard from transition date.
The preparation of the financial statements in conformity with IFRS requires the use of estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions,
actual results ultimately may differ from these estimates.
These financial statements are prepared for a 52 week period ending on 31 December 2005, comparatives are for the 52 week period
ended 1 January 2005. The balance sheets for 2005 and 2004 have been drawn up as at 31 December 2005 and 1 January 2005
respectively.
(b) Consolidation
The Group financial statements incorporate:
(i) The financial statements of Glanbia plc (the Company) and enterprises controlled by the Company (its subsidiaries). Control is
achieved where the Company has the power to govern the financial and operating policies of an investee enterprise so as to
obtain benefits from its activities.
Subsidiaries are consolidated from the date on which control is transferred to the Group and are no longer consolidated
from the date that control ceases. The purchase method of accounting is used to account for the acquisition of subsidiaries.
The cost of an acquisition is measured as the fair value of the assets given up, shares issued or liabilities undertaken at the date
of acquisition plus costs directly attributable to the acquisition. The excess of the cost of acquisition less the fair value of the net
assets of the subsidiary acquired is recorded as goodwill. If the cost of acquisition is less than the fair value of the Group’s share
of the identifiable net assets acquired, the difference is recognised directly in the income statement. Inter-company transactions,
balances and unrealised gains on transactions between Group companies are eliminated. Where necessary, the accounting
policies for subsidiaries have been changed to ensure consistency with the policies adopted by the Group.
58
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
2 Summary of significant accounting policies (continued)
(b) Consolidation (continued)
(ii) The Group’s share of the results and net assets of associated companies and joint ventures are included based on the equity
method of accounting. An associate is an enterprise over which the Group has significant influence, but not control, through
participation in the financial and operating policy decisions of the investee. A joint venture is an entity subject to joint control
by the Group and other parties. Under the equity method of accounting, the Group’s share of the post-acquisition profits and
losses of associates and joint ventures is recognised in the income statement and its share of post acquisition movements in
reserves is recognised in reserves. The cumulative post acquisition movements are adjusted against the cost of the investment.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the
Group’s interest in the associate or joint venture. Unrealised losses are also eliminated unless the transaction provides evidence
of an impairment of the asset transferred. When the Group’s share of losses in an associate or joint venture equals or exceeds its
interest in the associate or joint venture, the Group does not recognise further losses, unless the Group has incurred obligations
or made payments on behalf of the associate or joint venture.
(c) Segment reporting
The Group reports segment information by class of business and by geographical area. A business segment is a group of assets and
operations engaged in providing products or services that are subject to risks and returns that are different to those of other business
segments. The Group’s primary reporting segment, for which more detailed disclosures are required, is by class of business.
(d) Foreign currency translation
(i) Functional and presentation currency
Items included in the financial statements of each of the Group’s entities are measured using the currency of the primary
economic environment in which the entity operates (the “functional currency”). The consolidated financial statements are
presented in euro, which is the Company’s functional and presentation currency.
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the
transactions. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at
the balance sheet date. Currency translation differences on monetary assets and liabilities are taken to the income statement,
except when deferred in equity as qualifying cash flow hedges.
Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss.
Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through the income
statement are recognised in the income statement as part of the fair value gain or loss. Translation differences on non-monetary
financial assets such as equities classified as available for sale are included in the fair value reserve in equity.
(iii) Group companies
The income statement and balance sheet of Group companies that have a functional currency different from the presentation
currency are translated into the presentation currency as follows:
• assets and liabilities at each balance sheet date are translated at the closing rate at the date of the balance sheet
• income and expenses in the income statement are translated at average exchange rates for the year.
Resulting exchange differences are taken to a separate translation reserve within equity. When a foreign entity is sold,
such exchange differences are recognised in the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as local currency assets
and liabilities of the foreign entity and are translated at the balance sheet rate.
Certain inter-company loans had been treated under Irish GAAP as part of the net investment in the foreign entity and foreign
exchange gains or losses arising on these loans had been recognised directly in reserves. On transition to IFRS, loans between
fellow subsidiaries did not qualify as part of the net investment and therefore gains or losses on these loans are required to be
recognised in the income statement.
(e) Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost less subsequent depreciation less any impairment loss.
Certain items of property, plant and equipment that had been revalued prior to the date of transition to IFRS (4 January 2004) are
measured on the basis of deemed cost, being the revalued amount depreciated to date of transition. Items of property, plant and
equipment that were fair valued at date of transition are also measured at deemed cost, being the fair value at date of transition.
Depreciation is calculated using the straight line method to write-off the cost of each asset over their estimated useful life at the
following rates:
Land
Buildings
Plant and equipment
Motor vehicles
%
Nil
2.5 – 5
5 – 33
20 – 25
The assets’ useful lives are reviewed, and adjusted if appropriate, at each balance sheet date.
59
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
2 Summary of significant accounting policies (continued)
(e) Property, plant and equipment (continued)
Assets held under finance leases are depreciated over their expected useful lives on the same basis as owned assets or,
where shorter, the term of the relevant lease.
Interest incurred on payments on account of assets under construction is included in the cost of those assets. Where the carrying
amount of an asset is greater than its estimated recoverable amount, it is written down immediately to its recoverable amount.
Gains and losses on disposals are determined by comparing proceeds with carrying amount and are included in operating profit.
Repairs and maintenance are charged to the income statement during the financial period in which they are incurred. The cost of
major renovations is included in the carrying amount of the asset when it is probable that future economic benefits in excess of
the originally assessed standard of performance of the existing asset will flow to the Group. Major renovations are depreciated over
the remaining useful life of the related asset.
(f) Intangible assets
(i) Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the net assets of the
acquired subsidiary or associate at the date of acquisition. Goodwill on acquisitions of subsidiaries and associates is included
in intangible assets.
Goodwill is carried at cost less accumulated impairment losses, if applicable. Goodwill is tested for impairment on an annual basis.
In accordance with IFRS 1, goodwill written off to reserves prior to date of transition to IFRS remains written off. In respect
of goodwill capitalised and amortised at transition date, its carrying value at date of transition to IFRS remains unchanged.
(ii) Development costs
Research expenditure is recognised as an expense as incurred. Costs incurred on development projects (relating to the design
and testing of new or improved products) are recognised as intangible assets when it is probable that the project will be a
success, considering its commercial and technological feasibility, and costs can be measured reliably. Development costs are
amortised over their estimated useful lives, which is normally 5 to 8 years.
(iii)
Intellectual property
Expenditure to acquire intellectual property is capitalised and amortised using the straight line method over its useful life,
which is normally between 15 and 20 years.
(iv) Computer software
Costs incurred on the acquisition of computer software are capitalised, as are costs directly associated with developing or
maintaining computer software programmes, if they meet the recognition criteria of IAS 38. Computer software costs recognised
as assets are written off over their estimated useful lives, which is normally between 5 and 10 years.
(g) Financial assets
For 2004:
Financial fixed assets are shown at cost less provision for impairment. Income from financial fixed assets is recognised in the profit
and loss account in the year in which it is receivable.
From 2005:
The Group classifies all its investments as available for sale financial assets and they are initially recognised at fair value and are
valued at fair value at each balance sheet date. Unrealised gains and losses arising from changes in the fair value of investments
classified as available for sale are recognised in equity. When such investments are sold or impaired, the accumulated fair value
adjustments are included in the income statement as gains or losses from investments.
The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active the Group
establishes fair value using valuation techniques. Where the range of reasonable fair values is significant and the probability of
various estimates cannot be reasonably assessed, the Group measures the investment at cost.
(h) Leases
Leases of property, plant and equipment where the Group has substantially all the risks and rewards of ownership are classified as
finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased property or the
present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to
achieve a constant rate on the finance balance outstanding. The corresponding rental obligation, net of finance charges, is included
in other payables, split between current and non-current as appropriate. The interest element of the finance cost is charged to the
income statement over the lease period. The property, plant and equipment acquired under finance leases is depreciated over the
shorter of the useful life of the asset or the lease term.
Leases where a significant portion of the risks and rewards of ownership are retained by the lessor are classified as operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to the income statement on a
straight line basis over the period of the lease.
60
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
2 Summary of significant accounting policies (continued)
(i) Inventories
Inventories are stated at the lower of cost or net realisable value. Cost is determined by the first-in, first-out (“FIFO”) method.
The cost of finished goods and work in progress comprises raw materials, direct labour, other direct costs and related production
overheads (based on normal capacity). Net realisable value is the estimated selling price in the ordinary course of business,
less the costs of selling.
(j) Trade and other receivables
Trade receivables are carried at original invoice amount less provision for impairment of these receivables. A provision for impairment
of trade receivables is established when there is objective evidence that the Group will not be able to collect all amounts due
according to the original terms of the receivables.
Loan receivables are carried at the original principal amount advanced, plus compounded interest. These are classified as non-current
assets, except for those maturing within 12 months of the balance sheet date.
(k) Cash and cash equivalents
Cash and cash equivalents are carried in the balance sheet at cost. For the purposes of the cash flow statement, cash and
cash equivalents comprise cash on hand, deposits held at call with banks, other short-term highly liquid investments with original
maturities of 3 months or less and bank overdrafts. In the balance sheet, bank overdrafts, if applicable, are included in borrowings
in current liabilities.
(l) Income taxes
Current tax represents the expected tax payable or recoverable on the taxable profit for the period, taking into account adjustments
relating to prior years.
Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets
and liabilities and their carrying amounts in the financial statements. Tax rates enacted or substantively enacted by the balance sheet
date are used to determine deferred income tax.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the
temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries, associates and joint ventures,
except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference
will not reverse in the foreseeable future. Deferred income tax is not accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that at the time of the transaction affects neither accounting nor taxable
profit or loss.
(m)Employee benefits
(i) Pension obligations
Group companies operate various pension schemes. The schemes are generally funded through payments to insurance
companies or trustee administered funds, determined by periodic actuarial calculations. The Group has both defined benefit
and defined contribution plans.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the defined
benefit obligation at the balance sheet date less the fair value of the plan assets, together with adjustments for unrecognised
past service costs. The defined benefit obligation is calculated annually by independent actuaries using the projected unit credit
method. The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows
using interest rates of high quality corporate bonds that are denominated in the currency in which the benefits will be paid,
and that have terms to maturity approximating to the terms of the related pension liability.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited
to equity in the statement of recognised income and expense in the period in which they arise.
Past service costs are recognised immediately in income, unless the changes to the pension plan are conditional on the
employees remaining in service for a specified period of time (the vesting period). In this case, the past service costs are
amortised on a straight line basis over the vesting period.
Payments to defined contribution schemes are charged as an expense when they fall due.
(ii) Share-based payments
Share-based payments include executive share option schemes, employee sharesave schemes and share awards.
The charge to the income statement in respect of share-based payments is based on the fair value of the equity instruments
granted and is spread over the vesting period of the instrument. The fair value of the instruments is calculated using the
Trinomial model.
61
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
2 Summary of significant accounting policies (continued)
(n) Government grants
Grants from the government are recognised at their fair value where there is a reasonable assurance that the grant will be received
and the Group will comply with all attached conditions. Government grants relating to costs are deferred and recognised in the
income statement over the period necessary to match them with the costs they are intended to compensate. Government grants
relating to the purchase of property, plant and equipment are included in non-current liabilities and are credited to the income
statement on a straight line basis over the expected lives of the related assets.
(o) Revenue recognition
Revenue comprises the fair value of the sale of goods and services to external customers net of value added tax, rebates and
discounts. Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred
to the buyer, which generally arises on delivery, or in accordance with specific terms and conditions agreed with customers. Revenue
from the rendering of services is recognised in the period in which the services are rendered. Interest income is recognised on a time
proportion basis, taking account of the principal outstanding and the effective rate over the period to expected maturity, when it is
determined that such income will accrue to the Group. Dividends are recognised when the right to receive payment is established.
Revenue from the sale of property is recognised when there is an unconditional and irrevocable contract for sale.
(p) Impairment of assets
(i)
Financial assets
The Group assesses at each balance sheet date whether there is objective evidence that a financial asset or a group of financial
assets is impaired. In the case of equity securities classified as available for sale, a significant or prolonged decline in the
fair value of the security below its cost is considered an indicator that the securities are impaired. If any such evidence exists for
available for sale financial assets, the cumulative loss — measured as the difference between the acquisition cost and the current
fair value, less any impairment loss on that financial asset previously recognised in the profit or loss — is removed from equity
and recognised in the income statement. Impairment losses recognised in the income statement on equity instruments are not
reversed through the income statement. Impairment testing of trade receivables is described in (j).
(ii) Non-financial assets
Assets which have a finite useful life are subject to amortisation and reviewed for impairment when events or changes in
circumstance indicate that the carrying value may not be recoverable. An impairment loss is recognised to the extent that the
carrying value of the assets exceeds its recoverable amount. The recoverable amount is the higher of the assets fair value less
costs to sell and its value in use. For the purposes of assessing impairment, assets are grouped at the lowest levels for which
there are separately identifiable cash flows (cash generating units).
(q) Share capital
(i) Preferred securities and preference shares
For 2004:
Preferred securities and preference shares, with fixed dividend entitlements and fixed redemption dates, are accounted for
as non-equity minority instruments within shareholders’ funds.
From 2005:
Such preferred securities and preference shares are classified as liabilities.
(ii) Own shares
The cost of own shares, held by an Employee Share Trust in connection with the Company’s Sharesave Scheme, is deducted
from equity.
(r) Dividends
Dividends to the Company’s shareholders are recognised as a liability of the Company when approved by the Company’s shareholders.
(s) Derivative financial instruments
The activities of the Group expose it primarily to the financial risks of changes in foreign currency exchange rates and interest rates.
The Group uses derivative financial instruments such as foreign exchange contracts and options, interest rate swap contracts and
forward rate agreements to hedge these exposures.
For 2004:
Derivative financial instruments used as hedging instruments are matched with their underlying hedged 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 the 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.
If the matched underlying asset or liability prematurely ceases to exist, or is no longer considered likely to exist prior to the maturity
date of any associated financial instrument held as a hedge, the hedging instrument is terminated and any profit or loss arising is
recognised in the profit and loss account at that time. Instruments, which cease to be recognised as hedges, are marked to market.
62
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
2 Summary of significant accounting policies (continued)
(s) Derivative financial instruments (continued)
From 2005:
The Group accounts for financial instruments under IAS 32 (Financial Instruments: Disclosure and Presentation) and IAS 39 (Financial
Instruments: Recognition and Measurement). Derivatives are initially recognised at fair value on the date a derivative contract is entered
into and are subsequently remeasured at their fair value. The method of recognising the resulting gain or loss depends on whether
the derivative is designated as a hedging instrument, and if so, the nature of the item being hedged. The Group designates certain
derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedge); (2) hedges
of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge).
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well
as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its assessment,
both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions are highly
effective in offsetting changes in fair values or cash flows of hedged items.
(i)
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income
statement, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk.
If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedge item
for which the effective interest method is used is amortised to profit or loss over the period to maturity.
(ii) Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges are
recognised in equity. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Amounts accumulated in equity are recycled in the income statement in the periods when the hedged item affects profit or loss
(for instance when the forecast sale that is hedged takes place). The gain or loss relating to the effective portion of interest rate
swaps hedging variable rate borrowings is recognised in the income statement within ‘finance costs’. The gain or loss relating to
the effective portion of forward foreign exchange contracts hedging export sales is recognised in the income statement within
revenue. However, when the forecast transaction that is hedged results in the recognition of a non-financial asset (for example,
inventory) or a non-financial liability, the gains and losses previously deferred in equity are transferred from equity and included
in the initial measurement of the cost of the asset or liability.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any
cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is
ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative
gain or loss that was reported in equity is immediately transferred to the income statement.
(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instruments
that do not qualify for hedge accounting are recognised immediately in the income statement.
(t) Earnings per share
Earnings per share represents the profit in cent attributable to equity holders of the Company, 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. Diluted earnings per share is calculated by adjusting
the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares.
(u) Borrowing costs
Borrowing costs incurred for assets under construction are capitalised during the period of time that is required to complete
and prepare the asset for its intended use. Other borrowing costs are expensed.
(v) Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised
cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement
over the period of the borrowings using the effective interest method. Preference shares, which are mandatorily redeemable
on a specific date, are classified as liabilities. The dividends on these preference shares are recognised in the income statement
as interest expense.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least
12 months after the balance sheet date.
(w) Provisions
Provisions are recognised when the Group has a constructive or legal obligation as a result of past events; it is more likely than not
that an outflow of resources will be required to settle the obligation; and the amount has been reliably estimated.
63
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
2 Summary of significant accounting policies (continued)
(x) Termination benefits
Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever
an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is
demonstrably committed to either; terminating the employment of current employees according to a detailed formal plan without
possibility of withdrawal; or providing termination benefits as a result of an offer made to encourage voluntary redundancy.
(y) Exceptional items
The Group has adopted an income statement format, which seeks to highlight significant items within the Group results for
the year. Such items may include restructuring, impairment of assets, profit or loss on disposal or termination of operations,
litigation settlements and profit or loss on disposal of investments. Judgement is used by the Group in assessing the particular
items, which by virtue of their scale and nature, should be disclosed in the income statement and notes as exceptional items.
(z) New accounting standards and IFRIC interpretations
Certain new accounting standards and IFRIC interpretations are mandatory for accounting periods beginning on or after
1 January 2006. The Group’s assessment of the impact of these new standards and interpretations is set out below;
(i)
IAS 21 (Amendment) — Net Investment in a Foreign Operation
The Group will adopt this amendment for annual periods beginning 1 January 2006. The adoption of this amendment will
require that all foreign exchange gains and losses on inter-company loans that form part of the net investment in a foreign
operation, including loans between fellow subsidiaries, will be recognised directly in reserves on consolidation.
(ii)
IAS 39 (Amendment) — Cash Flow Hedge Accounting of Forecast Intragroup Transactions
This amendment will not have a significant impact on the Group’s operations. The Group will apply this amendment from
1 January 2006.
(iii)
IAS 39 (Amendment) — The Fair Value Option
This amendment will not have a significant impact on the Group’s operations. The Group will apply this amendment for annual
periods beginning 1 January 2006.
IAS 39 and IFRS 4 (Amendment) — Financial Guarantee Contracts
(iv)
Management considered this amendment to IAS 39 and concluded that it is not relevant to the Group.
(v)
IFRS 1 (Amendment) — First-time Adoption of International Financial Reporting Standards and
IFRS 6 (Amendment) — Exploration for and Evaluation of Mineral Resources
These amendments are not relevant to the Group’s operations.
(vi)
IFRS 6 — Exploration for and Evaluation of Mineral Resources
IFRS 6 is not relevant to the Group’s operations.
(vii) IFRS 7 — Financial Instruments: Disclosures, and a complementary amendment to IAS 1,
Presentation of Financial Statements — Capital Disclosures
The Group assessed the impact of IFRS 7 and the amendment to IAS 1 and concluded that the main additional disclosures will
be the sensitivity analysis to market risk and the capital disclosures required by the amendment to IAS 1. The Group will apply
IFRS 7 and the amendment to IAS 1 for annual periods beginning 1 January 2007.
(viii) IFRIC 4 — Determining whether an Arrangement contains a Lease
IFRIC 4 requires the determination of whether an arrangement is or contains a lease to be based on the substance of the
arrangement. It requires an assessment of whether: (a) fulfilment of the arrangement is dependent on the use of a specific asset
or assets (the asset); and (b) the arrangement conveys a right to use the asset. Management is currently assessing the impact of
IFRIC 4 on the Group’s operations.
(ix)
IFRIC 5 — Rights to Interests arising from Decommissioning, Restoration and Environmental Rehabilitation Funds
IFRIC 5 is not relevant to the Group’s operations.
(x)
IFRIC 6 — Liabilities arising from Participating in a Specific Market — Waste Electrical and Electronic Equipment
IFRIC 6 is not relevant to the Group’s operations.
3 Financial risk management
The conduct of its ordinary business operations necessitates the holding and issuing of financial instruments and derivative financial
instruments by the Group. The main risks arising from issuing, holding and managing these financial instruments typically include
liquidity risk, interest rate risk and currency risk. The Group approach is to centrally manage these risks against comprehensive policy
guidelines, which are summarised below. With the exception of an amendment to permit the holding of instruments deemed to be
speculative under IAS 39, these policies have remained unchanged during the past financial year.
64
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
3 Financial risk management (continued)
The Group does not engage in holding or issuing speculative financial instruments or derivatives thereof, other than as outlined
above. The Group finances its operations by a mixture of retained profits, preference shares, medium and short-term committed bank
borrowings and uncommitted 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 appropriate to generate the desired effective currency profile and interest
rate basis.
Currency risk
Although the Group is based in Ireland, it has significant investment in overseas operations in the USA and the UK. As a result,
movements in US dollar/euro and sterling/euro exchange rates can significantly affect the Group’s euro balance sheet and income
statement. The Group seeks to match, to a reasonable extent, the currency of its borrowings with that of its assets, inclusive of
goodwill. 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 and cash flow 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 bank term facilities of 2439.9 million of which 2158.3 million was undrawn. The weighted
average period to maturity of these facilities was 4.5 years.
Finance and interest rate risk
The Group’s objective in relation to interest rate management is to minimise the impact of interest rate volatility on interest costs in
order to protect reported profitability. This is achieved by determining a long-term strategy against a number of policy guidelines,
which focus on (a) the amount of floating rate indebtedness anticipated over such a period and (b) the consequent sensitivity of
interest costs to interest rate movements on this indebtedness and the resultant impact on reported profitability. The Group borrows
at both fixed and floating rates of interest and uses interest rate swaps to manage the Group’s exposure to interest rate fluctuations.
Price risk
The Group is exposed to equity securities price risk because of investments held by the Group and classified on the consolidated
balance sheet as available for sale.
Credit risk
The Group has no significant concentrations of credit risk. It has policies in place to ensure that credit sales of products are made
to customers with an appropriate credit history. Derivative counterparties and cash transactions are limited to high credit quality
financial institutions.
4 Critical accounting estimates and assumptions
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including expectations
of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom
equal the related actual results. The estimates and assumptions that could have a significant risk of causing a material adjustment
to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Impairment reviews of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in note
2(f). The recoverable amounts of cash generating units have been determined based on value in use calculations. These calculations
require the use of estimates.
The assets of Kortus Food Ingredients Services GmbH, including goodwill arising on acquisition of 210.9 million, were tested for
impairment using projected cash flows over a 10 year period. A reduction in projected EBITDA of 10% or an increase in the discount
factor used from 9% to 10% would not result in an impairment of the assets.
(b) Fair value reviews of available for sale investments
The Group has used discounted cash flow analysis for fair value reviews of various available for sale investments.
This Group’s investment in 25% of the share capital of The Cheese Company Holdings Limited is stated in the balance sheet at
214.5 million. The cash flows, which have been prepared on a conservative basis, support this valuation. A reduction in projected
EBITDA of 10% or an increase in the discount factor used from 9% to 10% would not result in an impairment of the assets.
65
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
4 Critical accounting estimates and assumptions (continued)
(c) Income taxes
The Group is subject to income tax in numerous jurisdictions. Significant judgement is required in determining the worldwide
provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain
during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of
whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially
recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.
Notwithstanding the above, the Group believes that it has adequate tax provisions to cover all risks across all jurisdictions.
5 Effects of IFRS implementation
Glanbia plc reported under Irish GAAP in its previously published financial statements for the year ended 1 January 2005.
The analysis below shows a reconciliation of net assets and profit as reported under Irish GAAP as at 1 January 2005 to the
revised net assets and profit under IFRS as reported in these financial statements. In addition, there is a reconciliation of net
assets under Irish GAAP to IFRS at the transition date for this Company, being 4 January 2004.
The information in this note is a summary of the impact of the adoption of IFRS on the Group’s financial statements. The Group
published a comprehensive restatement document on 31 August 2005.
As stated earlier, IFRS 1 and certain other IFRSs contain a number of optional exemptions that can be availed of by companies
on transition to IFRS. Glanbia, in common with the majority of listed companies, has elected to avail of the following options:
(i) Business combinations that took place before transition date have not been restated and therefore all goodwill written off to
reserves or amortised prior to date of transition remains written off and will not be taken into account either for subsequent
impairment reviews or on disposal of the subsidiary.
(ii) Fair value, or a previous revaluation to fair value adjusted for subsequent depreciation, may be used as deemed cost for any
item of property, plant and equipment at the date of transition. The Group has opted to regard the fixed asset valuations of 31
December 1988 and 31 December 1992 as deemed cost and the related asset values therefore remain unadjusted on transition
to IFRS. Certain assets in the Foods Ingredients and Agribusiness and Property divisions have been fair valued at date of transition.
(iii) The Group has elected to set the cumulative translation differences on foreign subsidiaries to zero at date of transition.
(iv) The actuarial losses on the Group’s defined benefit schemes have been recognised in full in the balance sheet at the date
of transition, and adjusted against reserves.
(v) Given the delay encountered in securing EU approval, the effective date of the revised versions of IAS 32 and IAS 39 is
1 January 2005 and therefore the Group is adopting these standards only in respect of the 2005 figures. Irish GAAP will
apply to the 2004 reported figures.
(vi) In accordance with the transitional arrangements set out in IFRS 2 Share-based Payment, this standard has been applied
in respect of share options granted after 7 November 2002, which had not vested by transition date.
(vii) The Group has elected to recognise its interest in joint ventures using the equity method of accounting.
(viii) The Group has opted for early adoption of IFRS 5 Non-current Assets Held for Sale and Discontinued Operations
and had applied this standard from transition date.
66
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
5 Effects of IFRS implementation (continued)
A s a t 4 J a n u a r y 2 0 0 4
A s a t 1 J a n u a r y 2 0 0 5
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associates
Investments in joint ventures
Available for sale investments
Trade and other receivables
Deferred tax assets
Current assets
Inventories
Trade and other receivables
Cash and cash equivalents
Assets classified as held for sale
Total assets
EQUITY
Share capital
Other reserves
Retained earnings
— Profits retained/(losses absorbed)
— Currency translation
— Goodwill write-off
Equity minority interest
Non-equity minority interest
LIABILITIES
Non-current liabilities
Borrowings
Deferred tax liabilities
Retirement benefit obligations
Provisions
Capital grants
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Liabilities directly associated with
assets classified as held for sale
Notes
(a)
(a)/(b)
(c)
(c)
(c)
(d)
(g)
(a)
(a)
(a)
(a)
(e)
(f)
(g)
(d)
(d)
(h)
(a)
P r e v i o u s l y
r e p o r t e d
3’000
I F R S
t r a n s i t i o n
e f f e c t
3’000
363,641
2,466
9,607
12,944
13,035
14,082
-
415,775
202,736
200,054
59,775
462,565
-
462,565
(83,263)
19,206
775
(1,122)
(810)
(14,083)
7,594
(71,703)
(73,269)
(32,679)
(22,106)
(128,054)
200,725
72,671
I F R S
b a l a n c e
s h e e t
3’000
280,378
21,672
10,382
11,822
12,225
(1)
7,594
344,072
129,467
167,375
37,669
334,511
200,725
535,236
P r e v i o u s l y
r e p o r t e d
3’000
I F R S
t r a n s i t i o n
e f f e c t
3’000
I F R S
b a l a n c e
s h e e t
3’000
321,780
16,652
9,908
49,827
29,869
58,170
-
486,206
133,419
172,622
51,625
357,666
-
357,666
(19,723)
20,046
1,010
(1,546)
(1,197)
(6,228)
12,299
4,661
-
-
-
-
-
-
302,057
36,698
10,918
48,281
28,672
51,942
12,299
490,867
133,419
172,622
51,625
357,666
-
357,666
878,340
968
879,308
843,872
4,661
848,533
94,321
116,379
26,244
(26,970)
(33,362)
176,612
5,671
115,759
298,042
170,351
27,559
-
13,331
16,611
227,852
300,949
8,276
43,221
352,446
-
352,446
-
9
(36,689)
26,970
(60,387)
(70,097)
-
-
(70,097)
-
673
86,563
(7,951)
-
79,285
(29,176)
-
-
(29,176)
20,956
(8,220)
94,321
116,388
(10,445)
-
(93,749)
106,515
5,671
115,759
227,945
170,351
28,232
86,563
5,380
16,611
307,137
271,773
8,276
43,221
323,270
20,956
344,226
95,208
116,286
70,286
(27,028)
(33,351)
221,401
6,085
110,384
337,870
198,682
29,493
-
11,680
15,276
255,131
239,181
8,181
3,509
250,871
-
250,871
-
128
(75,122)
27,028
(59,610)
(107,576)
-
-
(107,576)
-
882
126,676
(6,332)
-
121,226
(8,989)
-
-
(8,989)
-
(8,989)
95,208
116,414
(4,836)
-
(92,961)
113,825
6,085
110,384
230,294
198,682
30,375
126,676
5,348
15,276
376,357
230,192
8,181
3,509
241,882
-
241,882
Total liabilities
580,298
71,065
651,363
506,002
112,237
618,239
Total equity and liabilities
878,340
968
879,308
843,872
4,661
848,533
67
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
5 Effects of IFRS implementation (continued)
The effects of implementing IFRS on the previously reported profit for year ended 1 January 2005 are as follows:
Profit after taxation for the year as previously reported
Goodwill no longer amortised
Share of results of investment reclassified as an associate
Adjustment to pension charge
Impact of retirement benefit obligations recognised in joint venture
Tax impact of adjusted pension charge
Deferred tax credit
Currency losses on repayment of certain inter-company loans
Currency losses on change of functional currency of certain Group companies
Cost of share options
Profit after taxation for the year under IFRS
Notes
(b)
(c)
(d)
(g)
(g)
(i)
(j)
(k)
3’000
70,110
238
(152)
2,833
12
(281)
33
(749)
(49)
(76)
71,919
(a) Under IFRS 5, non-current assets held for sale and the assets of disposal groups must be presented separately from other assets in
the balance sheet. Likewise, liabilities of a disposal group must be presented separately from other liabilities in the balance sheet.
Arising from the sale by the Group of a 75% interest in its UK hard cheese business in April 2004, related assets and liabilities have
been respectively reclassified as either non-current assets held for sale or liabilities associated with assets held for sale. Further to this,
software development costs, amounting to 219,206,000 at 4 January 2004 and 219,808,000 at 1 January 2005, previously capitalised
under Irish GAAP as plant and equipment have been reclassified as intangible assets.
(b) Under IFRS 3, goodwill is no longer amortised but measured at cost less impairment losses. Under previous GAAP, goodwill was
amortised on a straight line basis over its useful economic life (not exceeding 20 years). The effect of the change is an increase
in equity at 1 January 2005 of 2238,000 and an increase in profit before tax for 2004 of 2238,000. There is no impact on equity
at 4 January 2004, as goodwill amortised prior to date of transition remains written off, under IFRS 1.
(c) Following a review of all its investments, the Group has concluded that its holding in Westgate Biological Limited, which had been
accounted for at cost within other investments, should be reclassified as an associate. In addition the results of certain associates and
joint ventures have been adjusted to take account of the implementation of IFRS within their own accounts. The recognition of a share
of the results of the reclassified investment resulted in reductions in equity of 235,000 at 4 January 2004 and 2187,000 at 1 January
2005 while the impact of retirement benefit obligations recognised in joint ventures resulted in equity reductions of 21,122,000
at 4 January 2004 and 21,546,000 at 1 January 2005.
(d) Included in non-current receivables at 4 January 2004 and 1 January 2005 were SSAP 24 pension assets of 25,426,000 and
26,228,000 respectively. Non-current receivables at 4 January 2004 also include assets of the UK hard cheese business amounting
to 28,657,000 that have been reclassified as assets held for sale. Included in current receivables at 4 January 2004 was a pension
asset of 2128,000. These assets were reversed on implementation of IAS 19. Included in non-current provisions and other liabilities
as at 4 January 2004 and 1 January 2005 were pension provisions amounting to 27,951,000 and 26,332,000 respectively. These were
reversed on implementation of IAS 19. Under IAS 19, the retirement benefit obligations at 4 January 2004 and 1 January 2005 were
286,563,000 and 2126,676,000. The impact of these changes is a decrease in equity at 4 January 2004 of 284,166,000 and
at 1 January 2005 of 2126,572,000. There is an increase in profit before tax for 2004 of 22,833,000.
(e) Under previous GAAP, currency translation differences on foreign currency net investments were written off against revenue reserves.
The Group has opted to set the cumulative translation differences to zero as at 4 January 2004. Under IAS 21, such translation
differences are written off to a separate currency translation reserve. Translation losses of 258,000, which arose in 2004, have been
written-off against this new reserve. On implementation of IAS 19, an additional translation gain of 280,000 arises and this is also
applied to the currency reserve resulting in a net credit of 243,000 to the reserve. These translation differences will therefore remain
written off against revenue reserves and will no longer be separately disclosed.
(f) Goodwill on acquisitions up to 1992 was debited to revaluation reserve until such time as the revaluation reserve was completely
written down. The Group has opted to use previous revaluations in arriving at the deemed cost of property, plant and equipment
and as required by IFRS 1, the balance on the revaluation reserve was reinstated by transferring goodwill previously written off
to revaluation reserve to the goodwill reserve and crediting revenue reserves.
(g) Deferred tax assets amounting to 27,594,000 and 212,299,000 as at 4 January 2004 and 1 January 2005 respectively, arise
as a result of the implementation of IAS 19. The impact on the tax charge for 2004 was an increase of 2281,000 due to the lower
pension charge for the year and an adjustment of 233,000 relating to asset revaluations.
(h) Under IAS 10, final dividends declared after year end are not considered liabilities of the Group. The impact of the write-back of the
2003 and 2004 final dividends on trade and other payables was 28,535,000 at 4 January 2004 and 28,989,000 at 1 January 2005.
Trade and other payables at 4 January 2004 also include liabilities of the UK hard cheese business amounting to 220,641,000 that
have been reclassified as liabilities directly associated with assets held for sale.
68
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
5 Effects of IFRS implementation (continued)
(i) Certain inter-company loans had been treated under Irish GAAP as part of the net investment in the foreign entity and foreign
exchange gains or losses arising on these loans had been recognised directly in reserves. On transition, loans between fellow
subsidiaries do not qualify under IFRS as part of the net investment and therefore gains or losses on these loans must be
recognised in the income statement.
(j) IAS 21 provides specific guidance on how the functional currency (i.e. the currency that an entity should use to record its transactions)
of a company should be determined and the functional currencies of a small number of Group companies have altered as a result of
the application of this guidance.
(k) Under Irish GAAP, the charge to the profit and loss account was based on the difference between the market value of the shares at
the date of grant and the exercise price. Under IFRS 2, the charge to the income statement in respect of share-based payments is
based on the fair value of the options granted and is spread over the vesting period of the instrument.
Implementation of IAS 32 and IAS 39
The Group has availed of the exemption under IFRS 1 to implement IAS 32 and IAS 39 only in respect of the 2005 figures and not
the comparative period. The adjustments required for differences between Irish GAAP and IAS 32 and IAS 39 are determined and
recognised at 2 January 2005. The effects on equity of adopting these standards at 2 January 2005 is as follows:
Fair value uplift of available for sale investments (note 20)
Fair value uplift of derivatives (note 38)
Fair value of derivatives in joint ventures (note 19)
Provision for interest rate swaps not qualifying as hedges (note 38)
Deferred tax effects of the above adjustments (note 33)
Reduction in equity
3’000
1,165
2,554
(72)
(5,609)
(630)
(2,592)
In line with the provisions of these standards, non-equity minority interest was reclassified as borrowings on 2 January 2005.
6 Segment information
Primary reporting format — business segments
At 31 December 2005 the Group is organised into three main business segments:
• Consumer Foods
• Food Ingredients
• Agribusiness and Property
The segment results for the year ended 1 January 2005 are as follows:
2004
C o n s u m e r
F o o d s
3’000
F o o d
I n g r e d i e n t s
3’000
A g r i -
b u s i n e s s
a n d P r o p e r t y
3’000
U n a l l o c a t e d
3’000
G r o u p
3’000
Total gross segment revenue
Inter-segment revenue
458,103
(6,979)
1,195,646
(120,493)
236,492
(9,124)
Revenue
451,124
1,075,153
227,368
Operating profit pre-exceptional items
Exceptional items
27,906
2,594
46,440
-
11,911
1,099
Finance income and costs
Share of losses of joint ventures and associates
(1,671)
(152)
300
30,500
46,440
13,010
Profit before tax
Tax
Profit for year from continuing operations
Discontinued operations
(1,601)
-
-
Profit for the year
-
-
-
-
(798)
(798)
-
-
1,890,241
(136,596)
1,753,645
86,257
2,895
89,152
(5,723)
(1,523)
81,906
(8,386)
73,520
(1,601)
71,919
69
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
6 Segment information (continued)
The segment results for the year ended 31 December 2005 are as follows:
2005
C o n s u m e r
F o o d s
3’000
F o o d
I n g r e d i e n t s
3’000
A g r i -
b u s i n e s s
a n d P r o p e r t y
3’000
Total gross segment revenue
Inter-segment revenue
493,667
(85)
1,215,559
(108,271)
239,826
(10,684)
Revenue
493,582
1,107,288
229,142
U n a l l o c a t e d
3’000
G r o u p
3’000
-
-
-
1,949,052
(119,040)
1,830,012
Operating profit pre-exceptional items
Exceptional items
27,139
(11,860)
42,746
(2,649)
10,684
(1,160)
-
14,559
80,569
(1,110)
15,279
40,097
9,524
14,559
79,459
Finance income and costs
Share of profits of joint ventures and associates
551
(116)
497
-
Profit before tax
Tax
Profit for the year
(18,090)
932
62,301
(657)
61,644
With effect from 2005, all property trading and development activities across the Group are organised as part of an expanded
Agribusiness and Property segment.
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be
available to unrelated third parties.
Other segment items included in the income statement for the year ended 1 January 2005 are as follows:
2004
Depreciation
Amortisation
C o n s u m e r
F o o d s
3’000
F o o d
I n g r e d i e n t s
3’000
A g r i -
b u s i n e s s
a n d P r o p e r t y
3’000
U n a l l o c a t e d
3’000
7,103
1,525
14,190
633
3,267
67
470
333
Other segment items included in the income statement for the year ended 31 December 2005 are as follows:
2005
Depreciation
Amortisation
C o n s u m e r
F o o d s
3’000
F o o d
I n g r e d i e n t s
3’000
A g r i -
b u s i n e s s
a n d P r o p e r t y
3’000
U n a l l o c a t e d
3’000
6,870
1,976
13,367
821
2,859
112
422
404
G r o u p
3’000
25,030
2,558
G r o u p
3’000
23,518
3,313
70
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
6 Segment information (continued)
The segment assets and liabilities at 1 January 2005 and capital expenditure for the year then ended are as follows:
2004
Assets
Associates and joint ventures
Total assets
Liabilities
C o n s u m e r
F o o d s
3’000
171,084
10,130
F o o d
I n g r e d i e n t s
3’000
A g r i -
b u s i n e s s
a n d P r o p e r t y
3’000
U n a l l o c a t e d
3’000
407,954
38,151
146,372
10,918
63,924
-
G r o u p
3’000
789,334
59,199
181,214
446,105
157,290
63,924
848,533
(116,145)
(193,707)
(67,640)
(240,747)
(618,239)
Group capital expenditure
12,486
38,478
3,909
2,266
57,139
The segment assets and liabilities at 31 December 2005 and capital expenditure for the year then ended are as follows:
2005
Assets
Associates and joint ventures
Total assets
Liabilities
C o n s u m e r
F o o d s
3’000
175,389
10,925
F o o d
I n g r e d i e n t s
3’000
A g r i -
b u s i n e s s
a n d P r o p e r t y
3’000
U n a l l o c a t e d
3’000
469,463
48,907
122,309
11,090
120,274
-
G r o u p
3’000
887,435
70,922
186,314
518,370
133,399
120,274
958,357
(131,503)
(271,859)
(72,144)
(359,133)
(834,639)
Group capital expenditure
12,096
30,006
8,439
495
51,036
Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, derivatives designated as hedges
of future transactions and receivables. They exclude deferred taxation, investments and derivatives held for trading or designated as
hedges of borrowings.
Segment liabilities comprise operating liabilities. They exclude items such as taxation, corporate borrowings and related
hedging derivatives.
Secondary reporting format — geographical segments
The Group’s three main business segments operate in three main geographical areas, even though they are managed
on a worldwide basis.
Sales
Ireland
Rest of Europe
USA /other
Sales are allocated based on the country in which the customer is located.
2 0 0 5
3’000
735,034
226,545
868,433
2 0 0 4
3’000
730,636
202,740
820,269
1,830,012
1,753,645
71
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
6 Segment information (continued)
Total assets
Ireland
Rest of Europe
USA /other
Associates and joint ventures
Unallocated assets
Total assets
Total assets are allocated based on where the assets are located.
Capital expenditure
Ireland
Rest of Europe
USA /other
Capital expenditure is allocated based on where the assets are located.
7 Operating profit
The following items have been included in arriving at operating profit:
Depreciation of property, plant and equipment (note 16)
— Owned assets
— Leased assets under finance leases
2 0 0 5
3’000
537,167
11,673
218,321
2 0 0 4
3’000
536,104
22,427
166,879
767,161
725,410
70,922
120,274
59,199
63,924
958,357
848,533
2 0 0 5
3’000
35,922
685
14,429
2 0 0 4
3’000
27,331
1,241
28,567
51,036
57,139
2 0 0 5
3’000
21,878
1,640
2 0 0 4
3’000
21,299
3,731
Profit on disposal of property, plant and equipment
(2,509)
(920)
Repairs and maintenance expenditure on property, plant and equipment
25,891
27,712
Amortisation of intangible assets (note 17)
— Software costs
— Other intangible assets
2,784
529
2,523
35
Increase/(decrease) in inventories of finished goods and work in progress
10,831
(69,317)
Raw materials and consumables used
1,356,020
1,369,921
Trade receivables — (decrease)/increase in impairment charge for bad and doubtful debts
(270)
130
Amortisation of government grants received (note 36)
(1,424)
(1,228)
Operating lease rentals payable
— Plant and machinery
— Other
Auditors’ remuneration
Research and development costs
Net foreign exchange losses
Gain on interest rate swaps not qualifying as hedges
2,798
5,767
549
5,991
196
(2,098)
2,826
5,399
513
4,331
634
-
72
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
8 Exceptional items
Foreign currency translation
(Loss)/profit on sale or termination of operations
Restructuring cost
Profit on sale of quoted investments
Notes
(a)
(b)
(c)
(d)
2 0 0 5
3’000
3,931
(331)
(15,669)
10,959
2 0 0 4
3’000
(798)
3,693
-
-
(1,110)
2,895
(a) The foreign currency translation gain arises on the repayment of loans between fellow subsidiaries. Under IFRS, for 2005, loans
between fellow subsidiaries do not qualify as part of the net investment and therefore any gains or losses on these loans are
recognised in the income statement.
(b) This represents the revision of losses arising in prior years on disposals, restructuring and termination of operations.
(c) The restructuring cost relates to costs of rationalisation programmes carried out mainly in the Consumer Foods and Food Ingredients
divisions in Ireland.
(d) During the year, the Group benefited from the exchange of shares held in Irish Agricultural Wholesale Society Limited for shares
in IAWS Group plc. The profit arises from the subsequent sale of these shares.
9 Employee benefit expense
Wages and salaries
Termination payments
Social security costs
Share option and Sharesave Scheme costs
Pension costs — defined contribution plans (note 34)
Pension costs — defined benefit plans (note 34)
2 0 0 5
3’000
143,623
12,331
14,364
259
738
5,789
2 0 0 4
3’000
141,879
1,502
15,283
109
534
5,103
177,104
164,410
The average number of employees in 2005 was 3,837 (2004: 3,831) and is analysed into the following categories:
Consumer Foods
Food Ingredients
Agribusiness and Property
2 0 0 5
1,879
1,299
659
3,837
2 0 0 4
2,095
1,073
663
3,831
73
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
10 Directors’ remuneration
The salary, fees and other benefits for each of the Directors during the year were:
S a l a r y
3’000
F e e s
3’000
P e r f o r -
m a n c e
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
3’000
O t h e r
p a y m e n t s
3’000
P e n s i o n
c o n t r i -
b u t i o n
3’000
O t h e r
b e n e f i t
3’000
Executive
JJ Moloney
GJ Meagher
WG Murphy (note (f))
KE Toland
2005
2004
Non-executive
MJ Walsh (note (a))
L Herlihy
JV Quinlan (note (b))
JE Callaghan
TP Corcoran (note (c))
HV Corbally
J Fitzgerald
EP Fitzpatrick
JA Gilsenan
P Haran (note (d))
TP Heffernan (note (e))
CL Hill
M Keane (note (d))
JV Liston
M Merrick (note (d))
JJ Miller
M Parsons
EM Power
GE Stanley
F Quigley (note (g))
2005
2004
Total 2005
Total 2004
399
251
146
257
1,053
1,098
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,053
1,098
-
-
14
-
14
-
57
36
29
52
32
16
16
16
16
31
8
16
10
52
10
16
16
16
16
-
461
419
475
419
115
75
-
123
313
629
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
313
629
2 0 0 5
To t a l
3’000
642
420
196
462
1,720
57
36
29
52
32
16
16
16
16
31
8
16
10
52
10
16
16
16
16
-
2 0 0 4
To t a l
3’000
748
489
488
594
2,319
35
35
16
50
73
16
8
16
16
-
16
16
-
50
-
16
16
16
16
8
461
2,181
419
2,738
13
18
9
10
50
60
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
137
88
115
76
27
72
290
307
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
137
88
290
307
50
60
(a)
Mr MJ Walsh was appointed Chairman on 9 June 2005.
(b)
Mr JV Quinlan was appointed Vice Chairman on 9 June 2005.
(c)
Mr TP Corcoran resigned both as Chairman and Director on 9 June 2005.
(d)
Messrs P Haran, M Keane and M Merrick were appointed as Directors on 9 June 2005.
(e)
Mr TP Heffernan resigned as a Director on 9 June 2005.
(f)
Mr WG Murphy retired as an executive Director on 9 September 2005 and remains on the Board as a non-executive Director.
(g)
Mr F Quigley resigned as Director on 10 June 2004.
(h)
No fees are payable to executive Directors.
(i)
Details of Directors’ share options are set out in note 44 to the financial statements.
(j)
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.
74
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
10 Directors’ remuneration (continued)
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 5
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
3 1 D e c e m b e r 2 0 0 5
3’000
17
272
295
64
648
852
3
13
11
8
35
52
229
178
197
45
649
440
JJ Moloney
GJ Meagher
WG Murphy
KE Toland
2005
2004
11 Finance income and costs
(a) Finance income
Interest income (i)
(b) Finance costs — pre-exceptional
Interest expense
— Bank borrowings repayable within five years
— Bank borrowings repayable after five years
— Senior notes
— Finance lease
Finance cost of preferred securities and preference shares
Total finance costs — pre-exceptional (ii)
Finance costs — exceptional
Cancellation of preferred securities (iii)
Total finance costs (ii)
2 0 0 5
3’000
2 0 0 4
3’000
4,209
3,033
2 0 0 5
3’000
(10,291)
-
-
(109)
* 2 0 0 4
3’000
(3,970)
(3,779)
(917)
(90)
(10,400)
(8,756)
(6,595)
(10,387)
(16,995)
(19,143)
(5,304)
-
(22,299)
(19,143)
*
The Group has availed of the option under IFRS 1 to implement IAS 32 and IAS 39 only in respect of the 2005 figures and not
the comparative period. The figures for 2004 above include the finance cost of preferred securities and preference shares for
comparability purposes only.
(i)
Interest income consists mainly of interest on a Stg£35 million subordinated secured loan note granted by The Cheese Company
Holdings Limited in 2004, representing part proceeds on the sale by the Group of a 75% interest in its UK hard cheese business.
(ii) The comparative figures for the year ended 1 January 2005 have been restated in accordance with IFRS, with the exception of
IAS 32 and IAS 39, which were implemented from 2 January 2005. As a result, interest on preferred securities and preference
shares is shown as an interest charge in the year ended 31 December 2005, and as non-equity minority interest in the 2004
comparative numbers. On a comparable basis the net financing costs, pre-exceptional item, for 2005 was 212.8 million
compared to 216.1 million for 2004.
(iii) On 15 June 2005 the Group prepaid the US$100 million 7.99% cumulative guaranteed preferred securities, giving rise to a cost
of 25.3 million, which has been disclosed as an exceptional item.
12 Taxation
Irish corporation tax
Adjustments in respect of prior years
Current tax on income for the year
Foreign tax
Adjustments in respect of prior years
Current tax on income for the year
Total current tax
Deferred tax (note 33)
Pre-exceptional tax charge
Exceptional tax credit
75
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
2 0 0 5
3’000
2,460
(1,285)
1,175
594
(1,056)
(462)
713
6,879
7,592
(6,935)
657
2 0 0 4
3’000
5,409
(859)
4,550
444
(134)
310
4,860
3,526
8,386
-
8,386
A taxation benefit arising from the disposal of certain US operations in prior years, which previously had not been recognised in the
financial statements, has now been finalised. This has given rise to a gain, which by virtue of its scale and nature, has been separately
disclosed as an exceptional item in the financial statements.
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the corporation tax rate in Ireland,
as follows:
Profit before tax (pre-exceptional items)
Tax calculated at Irish rate of 12.5% (2004: 12.5%)
Earnings at reduced and higher Irish rates
Difference in effective tax rates on overseas earnings
Utilisation of previously unrecognised tax losses
Adjustment to tax charge in respect of previous periods
Tax on profits of joint ventures and associates shown in profit before tax
Expenses not deductible for tax purposes and other differences
2 0 0 5
3’000
2 0 0 4
3’000
68,715
79,011
8,589
(759)
3,072
(3,781)
(59)
(116)
646
9,876
(937)
(451)
(7)
(1,363)
(190)
1,458
Pre-exceptional tax charge
7,592
8,386
Details of deferred tax charged or credited directly to equity during the year are outlined in note 33.
76
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
13 Discontinued operations
On 23 February 2004, the Group publicly announced its intention to sell a 75% interest in its UK hard cheese business
(Glanbia Foods Limited). The sales, results, cash flows and net assets of this business were as follows:
Sales
Operating costs
Loss on disposal
Loss from operations
Finance cost
Loss before tax
Tax
Loss for the year from discontinued operations
Cash flows of discontinued operations up to date of disposal:
Operating cash flows
Investing cash flows
Total cash flows
The loss on disposal recognised in the year was determined as follows:
Net assets sold
Costs of disposal
Write-back of goodwill
Proceeds from sale
Loss on disposal
Provision for loss on disposal in prior year
Loss on disposal recognised in the year
The net cash inflow on sale is determined as follows:
Proceeds from sale, net of disposal costs
Less secured loan note received as part proceeds
Net cash inflow on sale
14 Earnings per share
Basic
2 0 0 5
3’000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2 0 0 4
3’000
92,400
(91,481)
(2,520)
(1,601)
-
(1,601)
-
(1,601)
(19,010)
(224)
(19,234)
(153,520)
(13,149)
(30,517)
145,520
(51,666)
49,146
(2,520)
132,371
(49,094)
83,277
Basic earnings per share is calculated by dividing the net profit attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group and held as treasury
shares (note 28).
Profit attributable to equity holders of the Company
2 0 0 5
3’000
2 0 0 4
3’000
61,327
61,119
Weighted average number of ordinary shares in issue
291,469,902
290,617,359
Basic earnings per share (cent per share)
21.04
21.03
The basic earnings per share, excluding the results of discontinued operations, for the year 2004 is 21.58 cent per share.
77
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
14 Earnings per share (continued)
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares. Share options are dilutive potential ordinary shares. In respect of share options,
a calculation is done to determine the number of shares that could have been acquired at fair value (determined as the average
annual market share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding
share options. The number of shares calculated is compared with the number of shares that would have been issued assuming the
exercise of the share options.
Weighted average number of ordinary shares in issue
Adjustments for share options
2 0 0 5
2 0 0 4
291,469,902
1,134,139
290,617,359
1,532,995
Adjusted weighted average number of ordinary shares
292,604,041
292,150,354
Diluted earnings per share (cent per share)
20.96
20.92
The diluted earnings per share, excluding the results of discontinued operations, for the year 2004 is 21.47 cent per share.
At year end options over 1,505,000 ordinary shares could potentially dilute basic earnings per share in the future but are anti-dilutive
during the year ended 31 December 2005.
Adjusted
Profit attributable to equity holders of the Company
Exceptional items
Adjusted earnings per share (cent per share)
Diluted adjusted earnings per share (cent per share)
2 0 0 5
3’000
61,327
(521)
2 0 0 4
3’000
61,119
(1,294)
60,806
59,825
20.86
20.78
20.59
20.48
15 Dividends
The dividends paid in 2005 and 2004 were 215.6 million (5.36 cent per share) and 214.8 million (5.10 cent per share) respectively.
An interim dividend in respect of the year ended 31 December 2005 of 2.27 cent per share was paid during the year. A final dividend
of 3.24 cent per share, amounting to a total dividend in respect of 2005 of 216.1 million (5.51 cent per share), is to be proposed at
the Annual General Meeting on 16 May 2006. These financial statements do not reflect this final dividend payable.
78
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
16 Property, plant and equipment
At 4 January 2004
Cost
Accumulated depreciation
Net book amount
Year ended 1 January 2005
Opening net book amount
Exchange differences
Additions
Disposals
Reclassification
Depreciation charge
Closing net book amount
At 1 January 2005
Cost
Accumulated depreciation
Net book amount
Year ended 31 December 2005
Opening net book amount
Exchange differences
Acquisition of subsidiaries (note 42)
Additions
Disposals
Reclassification
Depreciation charge
Closing net book amount
At 31 December 2005
Cost
Accumulated depreciation
Net book amount
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
M o t o r
v e h i c l e s
3’000
To t a l
3’000
176,838
(53,460)
459,426
(303,751)
17,805
(16,480)
654,069
(373,691)
123,378
155,675
1,325
280,378
123,378
(1,537)
9,289
(77)
-
(6,726)
155,675
(5,252)
44,259
(637)
1,063
(17,873)
1,325
(6)
421
249
(1,063)
(431)
280,378
(6,795)
53,969
(465)
-
(25,030)
124,327
177,235
495
302,057
184,019
(59,692)
495,186
(317,951)
17,359
(16,864)
696,564
(394,507)
124,327
177,235
495
302,057
124,327
3,644
1,637
11,573
(3,210)
(1,054)
(3,783)
177,235
9,247
1,146
31,334
(3,035)
1,054
(19,192)
495
16
32
1,159
(79)
-
(543)
302,057
12,907
2,815
44,066
(6,324)
-
(23,518)
133,134
197,789
1,080
332,003
194,766
(61,632)
527,039
(329,250)
18,204
(17,124)
740,009
(408,006)
133,134
197,789
1,080
332,003
The total depreciation expense of 223,517,839 (2004: 225,030,355) has been charged as follows: 221,230,641 (2004: 223,478,484) to cost of sales,
21,915,298 (2004: 2753,164) to distribution costs and 2371,900 (2004: 2798,707) to administration expenses.
As required by IAS 16, a review of the useful lives of the Group’s property, plant and equipment was carried out during the year. This resulted in the
revision of the remaining useful lives of certain buildings with an overall reduction in the depreciation charge of 22,146,000, as compared with the
previous useful lives.
79
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
16 Property, plant and equipment (continued)
Leased assets, comprising plant and equipment, included in the table on page 78, where the Group is a lessee under a finance lease, comprise
as follows:
Cost — capitalised finance leases
Accumulated depreciation
Net book amount
2 0 0 5
3’000
34,898
(22,180)
2 0 0 4
3’000
35,370
(22,540)
12,718
12,830
Operating lease rentals amounting to 28,564,871 (2004: 28,224,632) are included in the income statement.
Included in the cost of plant and equipment is an amount of 214,881,934 (2004: 215,823,108) incurred in respect of assets under construction.
Borrowing costs incurred on significant capital projects are capitalised. The amount capitalised, using the Group’s incremental cost of borrowing,
amounted to 2623,000 in 2005 (2004: 2nil).
17 Intangible assets
At 4 January 2004
Cost
Accumulated amortisation and impairment
Net book amount
Year ended 1 January 2005
Opening net book amount
Exchange differences
Additions
Acquisition of subsidiaries
Amortisation
G o o d w i l l
3’000
O t h e r
i n t a n g i b l e s
3’000
S o f t w a r e
3’000
D e v e l o p m e n t
c o s t s
3’000
2,466
-
2,466
2,466
(60)
-
10,157
-
-
-
-
-
-
-
4,362
(35)
27,422
(8,216)
19,206
19,206
(45)
3,170
-
(2,523)
Closing net book amount
12,563
4,327
19,808
At 1 January 2005
Cost
Accumulated amortisation and impairment
12,563
-
4,362
(35)
30,547
(10,739)
Net book amount
12,563
4,327
19,808
Year ended 31 December 2005
Opening net book amount
Exchange differences
Additions
Disposals
Acquisition of subsidiaries (note 42)
Reclassification
Amortisation/impairment charge
12,563
33
493
-
8,968
1,035
-
4,327
-
-
-
8,905
(1,035)
(529)
19,808
210
4,652
(508)
-
-
(2,784)
-
-
1,825
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
To t a l
3’000
29,888
(8,216)
21,672
21,672
(105)
3,170
14,519
(2,558)
36,698
47,472
(10,774)
36,698
36,698
243
6,970
(508)
17,873
-
(3,313)
Closing net book amount
23,092
11,668
21,378
1,825
57,963
At 31 December 2005
Cost
Accumulated amortisation and impairment
23,092
-
12,232
(564)
34,995
(13,617)
1,825
-
72,144
(14,181)
Net book amount
23,092
11,668
21,378
1,825
57,963
Other intangibles include intellectual property (primarily unpatented know-how) and brands recognised at the time of acquisition of subsidiary
undertakings. The amounts included above on acquisition of subsidiaries are provisional valuations of the intangible assets relating to Pro-Fibe
and CMP.
80
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
17 Intangible assets (continued)
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to country of operation and business segment.
A segment level summary of the goodwill allocation is presented below:
At 1 January 2005
Ireland
Rest of Europe
USA /other
At 31 December 2005
Ireland
Rest of Europe
USA /other
C o n s u m e r
F o o d s
3’000
F o o d
I n g r e d i e n t s
3’000
A g r i -
b u s i n e s s
a n d P r o p e r t y
3’000
774
-
-
774
4,135
-
-
540
9,789
789
11,118
540
16,580
1,146
4,135
18,266
671
-
-
671
691
-
-
691
To t a l
3’000
1,985
9,789
789
12,563
5,366
16,580
1,146
23,092
The recoverable amount of a CGU is determined based on value in use calculations. These calculations use cash flow projections based on financial
budgets approved by management covering a three year period. Cash flows beyond the three year period are extrapolated using estimated growth
rates consistent with forecasts included in industry reports. Gross margin assumptions are based on past performance and management’s expectations
for market development. Discount rates used reflect specific risks relating to the relevant segments.
The value in use calculations are prepared using discount rates, which range from 7.5% to 10%.
18 Investments in associates
At the beginning of the year
Share of profit after tax
Exchange differences
Additions
Disposals
Deferred tax liability
At the end of the year
2 0 0 5
C o m p a n y
3’000
1,395
-
-
-
-
-
2 0 0 5
G r o u p
3’000
10,918
341
182
-
(190)
(161)
2 0 0 4
C o m p a n y
3’000
1,395
-
-
-
-
-
2 0 0 4
G r o u p
3’000
10,382
149
-
387
-
-
1,395
11,090
1,395
10,918
The Group’s share of the results of principal associates, all of which are unlisted, and its share of the assets (including goodwill) and liabilities are
as follows:
2004
Co-operative Animal Health Limited
South Eastern Cattle Breeding Society Limited
Malting Company of Ireland Limited
South East Port Services Limited
Westgate Biological Limited
Other
A s s e t s
3’000
7,677
1,758
5,494
4,111
244
425
L i a b i l i t i e s
3’000
R e v e n u e s
3’000
4,972
353
3,260
2,275
46
273
13,205
1,651
2,769
1,220
-
1,166
19,709
11,179
20,011
I n t e r e s t
h e l d
%
50
57
33.33
49
28
P r o f i t /
( l o s s )
3’000
141
(136)
26
228
(152)
42
149
81
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
18 Investments in associates (continued)
2005
Co-operative Animal Health Limited
South Eastern Cattle Breeding Society Limited
Malting Company of Ireland Limited
South East Port Services Limited
Westgate Biological Limited
Other
A s s e t s
3’000
8,578
1,839
4,939
4,004
80
475
L i a b i l i t i e s
3’000
R e v e n u e s
3’000
5,718
449
2,562
1,989
38
288
14,664
1,642
3,458
1,223
-
1,210
19,915
11,044
22,197
Further details in relation to principal associates are outlined in note 45.
19 Investments in joint ventures
At the beginning of the year
Implementation of IAS 32 and IAS 39
Share of profit/(loss) after tax
Actuarial loss on defined benefit pension scheme
Exchange differences
Additions
At the end of the year
The following amounts represent the Group’s share of the assets and liabilities, and revenue and results in joint ventures:
Assets
Non-current assets
Current assets
Liabilities
Long-term liabilities
Current liabilities
Net assets
Revenue
Expenses
Profit after income tax
P r o f i t /
( l o s s )
3’000
155
(15)
143
179
(156)
35
341
2 0 0 5
3’000
48,281
(72)
591
-
6,573
4,459
I n t e r e s t
h e l d
%
50
57
33.33
49
28
2 0 0 4
3’000
11,822
-
(1,672)
(436)
(366)
38,933
59,832
48,281
2 0 0 5
3’000
118,802
33,355
2 0 0 4
3’000
61,477
25,155
152,157
86,632
61,948
30,377
22,599
15,752
92,325
38,351
59,832
48,281
90,187
(89,596)
75,016
(76,688)
591
(1,672)
Proportionate interest in joint venture’s commitments
510
138
A listing and description of interests in significant joint ventures is outlined in note 45.
82
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
20 Investments
Balance at 1 January 2005
Implementation of IAS 32 and IAS 39
O t h e r
i n v e s t m e n t s
A v a i l a b l e
f o r s a l e
i n v e s t m e n t s
O t h e r i n v e s t m e n t s
2 0 0 5
C o m p a n y
3’000
512,174
-
2 0 0 5
G r o u p
3’000
28,672
1,165
2 0 0 4
C o m p a n y
3’000
515,253
-
2 0 0 4
G r o u p
3’000
12,224
-
Restated balance at 2 January 2005
512,174
29,837
515,253
12,224
Exchange differences
Acquisition of subsidiaries (note 42)
Disposals/redemption
Additions
-
-
(1,705)
-
460
14
(3,977)
3,177
-
-
(3,079)
-
-
-
(442)
16,890
Balance at 31 December 2005
510,469
29,511
512,174
28,672
Non-current
Current
510,469
-
29,511
-
512,174
-
28,672
-
510,469
29,511
512,174
28,672
The Group has availed of the option under IFRS to implement IAS 32 and IAS 39 only in respect of the 2005 figures and not the comparative period.
Therefore, the 2004 figures above are stated at cost less provision for impairment, rather than at fair value.
Investments include the following:
Listed securities
— Equity securities — eurozone countries
Unlisted securities
— The Cheese Company Holdings Limited
— Irish Dairy Board
— Glanbia Enterprise Fund Limited
— Moorepark Technology Limited
— Other Group companies
Loan to joint venture
Other
O t h e r
i n v e s t m e n t s
2 0 0 5
C o m p a n y
3’000
A v a i l a b l e
f o r s a l e
i n v e s t m e n t s
O t h e r i n v e s t m e n t s
2 0 0 5
G r o u p
3’000
2 0 0 4
C o m p a n y
3’000
2 0 0 4
G r o u p
3’000
1
762
19
80
-
-
1,290
-
509,178
-
-
14,481
9,215
1,290
245
-
2,905
613
-
-
1,290
-
510,865
-
-
11,009
9,555
1,290
289
-
5,658
791
510,469
29,511
512,174
28,672
Available for sale investments are fair valued annually at the close of business on 31 December. For investments traded in active markets, fair value is
determined by reference to Stock Exchange quoted bid prices. For other investments, fair value is estimated by reference to the current market value
of similar instruments or by reference to cash flows discounted using a rate based on the market interest rate and the risk premium specific to the
unlisted securities.
The Group has availed of the option under IFRS 1 to implement IAS 32 and IAS 39 only in respect of the 2005 figures and not the comparative period.
Therefore, values stated above in respect of 2004 continue to represent the cost of the particular investments.
Available for sale investments are classified as non-current assets, unless they are expected to be realised within 12 months of the balance sheet date
or unless they will need to be sold to raise operating capital.
The Group’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 the Group does not have significant influence over its operations.
21 Trade and other receivables
Trade receivables
Less provision for impairment of receivables
Trade receivables — net
Prepayments
Receivable from associates and joint ventures
Loans to related parties
Valued added tax
Other receivables
Less non-current portion: loans to related parties
83
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
2 0 0 5
C o m p a n y
3’000
-
-
-
934
-
-
-
-
934
-
934
2 0 0 5
G r o u p
3’000
120,560
(11,716)
108,844
15,378
1,529
56,874
5,670
12,189
200,484
(56,874)
2 0 0 4
C o m p a n y
3’000
-
-
-
1,481
-
-
-
-
1,481
-
2 0 0 4
G r o u p
3’000
152,610
(12,143)
140,467
15,179
716
51,942
5,623
10,637
224,564
(51,942)
143,610
1,481
172,622
The Stg£35 million 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.
Under a Debt Purchase Agreement with a financial institution, the Group has transferred credit risk and retained late payment risk on certain trade
receivables, amounting to 225 million. The Group has continued to recognise an asset of 2549,000, representing the extent of its continuing
involvement, and an associated liability of a similar amount.
The fair values of receivables are not materially different to the book values. The net movement in the provision for impairment of receivables has been
included in distribution expenses in the income statement.
There is no concentration of credit risk with respect to trade receivables, as the Group has a large number of customers, internationally dispersed.
22 Inventories
Raw materials
Finished goods
Expense
2 0 0 5
3’000
21,404
107,512
15,334
2 0 0 4
3’000
11,140
110,525
11,754
144,250
133,419
Included in the above are inventories carried at fair value less costs to sell amounting to 234.2 million (2004: 220.2 million).
23 Cash and cash equivalents
2 0 0 5
C o m p a n y
3’000
2 0 0 5
G r o u p
3’000
2 0 0 4
C o m p a n y
3’000
2 0 0 4
G r o u p
3’000
Cash at bank and in hand
16,281
104,405
1,507
51,625
84
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
24 Reconciliation of changes in equity
Notes
S h a r e
c a p i t a l
3’000
(note 25)
O t h e r
r e s e r v e s
3’000
(note 26)
R e t a i n e d
e a r n i n g s
3’000
(note 27)
M i n o r i t y
i n t e r e s t
3’000
(note 31)
To t a l
3’000
Restated balance at 4 January 2004
94,321
116,388
(104,194)
121,430
227,945
Actuarial loss — defined benefit schemes
Deferred tax on pension loss
Currency translation differences
Net income/(expense) recognised directly in equity
Profit for the year
Total recognised income for 2004
Increase in minority interest in subsidiaries
Shares issued
Premium on shares issued
Cost of share options
Sharesave Scheme — discount cost
Sharesave Scheme — options exercised
Sharesave Scheme — discount on options
Dividend paid to non-equity minority interest
Dividends paid in 2004
Balance at 1 January 2005
Implementation of IAS 32 and IAS 39
— Financial derivatives and available
for sale investments
Reclassification as borrowings
Restated balance at 2 January 2005
Actuarial loss — defined benefit schemes
Deferred tax on pension loss
Currency translation differences
Fair value adjustments
Net expense recognised directly in equity
Profit for the year
Recognised income post IAS 32/39
Total recognised income for 2005
Change in minority interest in subsidiaries
Shares issued
Premium on shares issued
Cost of share options
Sharesave Scheme — discount cost
Sharesave Scheme — options exercised
Sharesave Scheme — discount on options
Dividends paid in 2005
34
33
25
25
29
29
25
29
5
31
34
33
26
25
25
29
29
25
29
-
-
-
-
-
-
-
8
207
-
-
546
126
-
-
887
-
-
43
43
-
43
-
-
-
76
33
-
(126)
-
-
(17)
(45,755)
5,059
788
(39,908)
61,119
21,211
-
-
-
-
-
-
-
-
(14,814)
(14,814)
-
-
(6,088)
(6,088)
10,800
4,712
1
-
-
-
-
-
-
(9,674)
-
(9,673)
(45,755)
5,059
(5,257)
(45,953)
71,919
25,966
1
8
207
76
33
546
-
(9,674)
(14,814)
(23,617)
95,208
116,414
(97,797)
116,469
230,294
-
-
3,017
-
(5,609)
-
-
(110,384)
(2,592)
(110,384)
95,208
119,431
(103,406)
6,085
117,318
-
-
-
-
-
-
-
-
-
28
703
-
-
1,645
380
-
2,756
-
-
(1,378)
(873)
(2,251)
-
(2,251)
766
-
-
-
161
98
-
(380)
-
(121)
(42,303)
4,054
(1,664)
-
(39,913)
61,327
21,414
15,805
-
-
-
-
-
-
-
(15,612)
(15,612)
-
-
-
-
-
317
317
317
(103)
-
-
-
-
-
-
-
(103)
(42,303)
4,054
(3,042)
(873)
(42,164)
61,644
19,480
16,888
(103)
28
703
161
98
1,645
-
(15,612)
(13,080)
Balance at 31 December 2005
97,964
117,059
(97,604)
6,299
123,718
85
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
25 Share capital
Company
At 4 January 2004
Sharesave Scheme — options exercised
Sharesave Scheme — discount on options
Issue of shares — option scheme
At 1 January 2005
Sharesave Scheme — options exercised
Sharesave Scheme — discount on options
Issue of shares — option scheme
N u m b e r o f
s h a r e s
(thousands)
O r d i n a r y
s h a r e s
3’000
292,514
-
-
130
292,644
-
-
472
17,551
-
-
8
17,559
-
-
28
S h a r e
p r e m i u m
C o m p a n y
3’000
435,273
-
-
207
435,480
-
-
703
O w n s h a r e s
3’000
(3,235)
546
126
-
(2,563)
1,645
380
-
To t a l
C o m p a n y
3’000
449,589
546
126
215
450,476
1,645
380
731
At 31 December 2005
293,116
17,587
436,183
(538)
453,232
Group
At 4 January 2004
Sharesave Scheme — options exercised
Sharesave Scheme — discount on options
Issue of shares — option scheme
At 1 January 2005
Sharesave Scheme — options exercised
Sharesave Scheme — discount on options
Issue of shares — option scheme
N u m b e r o f
S h a r e s
(thousands)
O r d i n a r y
S h a r e s
3’000
292,514
-
-
130
292,644
-
-
472
17,551
-
-
8
17,559
-
-
28
S h a r e
P r e m i u m
G r o u p
3’000
80,005
-
-
207
80,212
-
-
703
O w n S h a r e s
3’000
(3,235)
546
126
-
(2,563)
1,645
380
-
To t a l
G r o u p
3’000
94,321
546
126
215
95,208
1,645
380
731
At 31 December 2005
293,116
17,587
80,915
(538)
97,964
The total authorised number of ordinary shares is 306 million shares (2004: 306 million shares) with a par value of 20.06 per share
(2004: 20.06 per share). All issued shares are fully paid.
Share options
Share options are granted to Directors and to employees. Movements in the number of share options outstanding are as follows:
At the beginning of the year
Granted
Exercised
Lapsed
2 0 0 5
2 0 0 4
A v e r a g e
e x e r c i s e
p r i c e i n 3
p e r s h a r e
2.34
-
1.55
3.78
A v e r a g e
e x e r c i s e
p r i c e i n 3
p e r s h a r e
2.10
2.70
1.66
1.86
N u m b e r o f
o p t i o n s
3,608,500
-
(471,500)
(130,000)
N u m b e r o f
o p t i o n s
2,949,500
1,295,000
(130,000)
(506,000)
At the end of the year
2.41
3,007,000
2.34
3,608,500
Sharesave Scheme (note 28)
Total at the end of the year
1.20
109,913
1.20
1,513,570
3,116,913
5,122,070
86
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
25 Share capital (continued)
Expiry date in
2006
2008
2008
2012
2013
2014
2014
E x e r c i s e
p r i c e
1.20
Stg£2.90
4.25
1.55
1.90
2.73
2.47
2 0 0 5
N u m b e r o f
o p t i o n s
109,913
10,000
390,000
1,192,000
160,000
1,105,000
150,000
2 0 0 4
N u m b e r o f
o p t i o n s
1,513,570
10,000
480,000
1,663,500
160,000
1,145,000
150,000
3,116,913
5,122,070
Total options over 2,607,000 ordinary shares were outstanding at 31 December 2005 under the 2002 Long Term Incentive Plan (“LTIP”), at prices
ranging between 21.55 and 22.73. 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, up to a maximum of 191,300 ordinary shares.
In May 2002, the Company established an Employee Share Trust to operate in connection with the Company’s Sharesave Scheme. As detailed in
note 28 to the financial statements, the Employee Share Trust held 364,485 ordinary shares at 31 December 2005. In accordance with the terms of
the Company’s 2002 Sharesave Scheme, options over 109,913 ordinary shares which were granted in 2002, remain outstanding on 31 December 2005
and are exercisable, under normal circumstances, in 2006. The dividend rights in respect of these shares have been waived.
Options over 400,000 ordinary shares, which were granted in 1998, under the Avonmore Foods plc 1988 Share Option Scheme remain outstanding
at a price of 24.25 or Stg£2.90.
Under the LTIP and the 1988 Share Option Scheme, options cannot be exercised before the expiration of three years from the date of grant and can
only be exercised if a predetermined performance criterion for the Group has been achieved. The performance criterion is that there has been an
increase in the adjusted earnings per share of the Group of at least the Consumer Price Index plus 5% over a three year period.
The fair value of share options had been calculated using the Trinomial Model. Options over 1,701,913 ordinary shares were exercisable
at 31 December 2005.
26 Other reserves
Restated balance at 4 January 2004
Translation differences on foreign currency net investments
Cost of share options
Discount on own shares vested
Sharesave Scheme — discount cost
Balance at 1 January 2005
Implementation of IAS 32 and IAS 39
Restated balance at 2 January 2005
Translation differences on foreign currency net investments
Gains on interest rate swaps
Foreign exchange contracts — loss in year
Transfers to income statement
— Foreign exchange contracts
— Available for sale investments
Revaluation of forward commodity contracts
Deferred tax on fair value adjustments
Cost of share options
Discount on own shares vested
Sharesave Scheme — discount cost
C a p i t a l a n d
m e r g e r s
r e s e r v e s
3’000
116,388
-
76
(126)
33
116,371
-
116,371
-
-
-
-
-
-
-
161
(380)
98
Notes
29
29
29
5
29
29
29
C u r r e n c y
r e s e r v e
3’000
F a i r v a l u e
r e s e r v e s
3’000
To t a l
3’000
116,388
43
76
(126)
33
116,414
-
-
-
-
-
-
3,017
3,017
3,017
119,431
-
2,467
(1,466)
(1,631)
(410)
(253)
420
-
-
-
(1,378)
2,467
(1,466)
(1,631)
(410)
(253)
420
161
(380)
98
-
43
-
-
-
43
-
43
(1,378)
-
-
-
-
-
-
-
-
-
Balance at 31 December 2005
116,250
(1,335)
2,144
117,059
87
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
27 Retained earnings
C o m p a n y
r e t a i n e d
e a r n i n g s
3’000
G r o u p
r e t a i n e d
e a r n i n g s
3’000
G r o u p
g o o d w i l l
w r i t e - o f f
3’000
G r o u p
To t a l
3’000
Restated balance at 4 January 2004
25,429
(10,445)
(93,749)
(104,194)
Actuarial loss — defined benefit schemes
Deferred tax on pension loss
Currency translation differences
Net (expense)/income recognised directly in equity
Profit for the year
Recognised income for 2004
Dividends paid in 2004
Balance at 1 January 2005
-
-
-
-
28,470
(45,755)
5,059
-
(40,696)
61,119
28,470
20,423
(14,814)
(14,814)
-
-
788
788
-
788
-
(45,755)
5,059
788
(39,908)
61,119
21,211
(14,814)
39,085
(4,836)
(92,961)
(97,797)
Implementation of IAS 32 and IAS 39 (note 5)
-
(5,609)
-
(5,609)
Restated balance at 2 January 2005
39,085
(10,445)
(92,961)
(103,406)
Actuarial loss — defined benefit schemes
Deferred tax on pension loss
Currency translation differences
Net expense recognised directly in equity
Profit for the year
Recognised income/(expense) post IAS 32/39
-
-
-
-
23,964
23,964
(42,303)
4,054
-
(38,249)
61,327
23,078
-
-
(1,664)
(1,664)
-
(1,664)
(42,303)
4,054
(1,664)
(39,913)
61,327
21,414
Total recognised income/(expense) for 2005
23,964
17,469
(1,664)
15,805
Dividends paid in 2005
(15,612)
(15,612)
-
(15,612)
Balance at 31 December 2005
47,437
(2,979)
(94,625)
(97,604)
28 Own shares
At the beginning of the year
Sharesave Scheme — options exercised
Sharesave Scheme — discount on options
At the end of the year
2 0 0 5
3’000
(2,563)
1,645
380
2 0 0 4
3’000
(3,235)
546
126
(538)
(2,563)
The amount included above as own shares relates to 364,485 (2004: 1,734,949) 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 2538,344 and had a market value of 2874,764 at 31 December 2005. The transfer from capital
reserve represents the excess of the purchase price over the option price in respect of 1,370,464 ordinary shares (2004: 455,049 ordinary shares)
on which options vested during the year.
The purpose of the Sharesave Scheme, which was open to Irish and UK employees, was 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 (Stg£10 and Stg£250 in the UK) each month for a three year period in a Revenue approved Save as You Earn
(“SAYE”) contract.
88
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
29 Capital reserves
At the beginning of the year
Sharesave Scheme — discount on options
Sharesave Scheme — discount cost
Cost of share options
2 0 0 5
C o m p a n y
3’000
4,624
(380)
98
161
2 0 0 5
G r o u p
3’000
3,223
(380)
98
161
2 0 0 4
C o m p a n y
3’000
4,641
(126)
33
76
2 0 0 4
G r o u p
3’000
3,240
(126)
33
76
At the end of the year
4,503
3,102
4,624
3,223
30 Merger reserve
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
Share premium and other reserves relating to nominal value of shares in Waterford Foods plc
2 0 0 5
3’000
2 0 0 4
3’000
355,271
(327,085)
84,962
355,271
(327,085)
84,962
113,148
113,148
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 (now named Glanbia plc).
31 Minority interests
At the beginning of the year
Reclassified as borrowings
Share of profit for the year
Currency translation adjustment
Dividend paid
Reduction in minority interest in subsidiaries
Increase in minority interest in subsidiaries
At the end of the year
2 0 0 5
E q u i t y
3’000
6,085
-
317
-
-
(104)
1
6,299
2 0 0 5
N o n - e q u i t y
3’000
110,384
(110,384)
-
-
-
-
-
2 0 0 4
E q u i t y
3’000
5,671
-
413
-
-
-
1
2 0 0 4
N o n - e q u i t y
3’000
115,759
-
10,387
(6,088)
(9,674)
-
-
-
6,085
110,384
The Group has availed of the option under IFRS 1 to implement IAS 32 and IAS 39 only in respect of the 2005 figures and not the comparative period.
On 2 January 2005, the non-equity minority interests were reclassified as borrowings.
Non-equity minority interest in 2004 included US$100 million 7.99% cumulative guaranteed preferred securities which were prepaid on 15 June 2005.
It also included 238.2 million 8.50% cumulative redeemable preference shares.
32 Borrowings
Current
Bank overdrafts
Finance lease liabilities
Non-current
Bank borrowings
Cumulative redeemable preference shares
Finance lease liabilities
2 0 0 5
C o m p a n y
3’000
-
-
-
3,397
-
-
3,397
2 0 0 5
G r o u p
3’000
-
330
330
281,581
37,986
160
319,727
2 0 0 4
C o m p a n y
3’000
-
-
-
3,397
-
-
3,397
2 0 0 4
G r o u p
3’000
2,958
551
3,509
198,224
-
458
198,682
Total borrowings
3,397
320,057
3,397
202,191
89
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
32 Borrowings (continued)
Bank borrowings are secured by cross-guarantees from Group companies. Lease liabilities are effectively secured as the rights to the leased asset
revert to the lessor in the event of default.
The 8.50% cumulative redeemable preference shares were classified as non-equity minority interest in the prior year.
The maturity of non-current borrowings is as follows:
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
2 0 0 5
3’000
38,146
281,581
-
2 0 0 4
3’000
102,127
160
96,395
319,727
198,682
The exposure of the Group’s total borrowings to interest rate changes having consideration for the interest rate swaps in place and the contractual
repricing dates at the balance sheet date are as follows:
6 months or less
6 to 12 months
1 to 5 years
2 0 0 5
3’000
163,598
-
156,459
2 0 0 4
3’000
161,923
7,073
33,195
320,057
202,191
The effective interest rates at the balance sheet date, having consideration for the interest rate swaps in place, were as follows:
Bank overdrafts
Bank borrowings
E U R
2 0 0 5
3.06%
5.23%
2 0 0 4
2.96%
* 4.85%
G B P
2 0 0 5
5.10%
5.21%
2 0 0 4
5.50%
6.27%
U S D
2 0 0 5
9.25%
4.69%
2 0 0 4
7.25%
* 6.39%
*
The rates for 2004 have been restated for comparative purposes and include the effect of the 238.2 million 8.50% cumulative redeemable
preference shares (EUR), and the US$100 million 7.99% cumulative guaranteed preferred securities (USD), which for 2004 are classified in
the balance sheet as non-equity minority interest.
The carrying amounts and fair values of non-current borrowings are as follows:
N e t
c a r r y i n g
a m o u n t
2 0 0 5
3’000
E s t i m a t e d
f a i r v a l u e s
2 0 0 5
3’000
2 0 0 4
3’000
2 0 0 4
3’000
Non-current borrowings
319,727
198,682
322,783
198,682
The carrying amounts of the Group’s total borrowings are denominated in the following currencies:
Euro
GBP Sterling
US Dollar
2 0 0 5
3’000
95,793
74,074
150,190
2 0 0 4
3’000
76,593
80,294
45,304
320,057
202,191
90
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
32 Borrowings (continued)
The Group has the following undrawn borrowing facilities:
Floating rate:
— Expiring within one year
— Expiring beyond one year
Finance lease liabilities minimum lease payments:
Not later than 1 year
Later than 1 year and not later than 5 years
Future finance charges on finance leases
Present value of finance lease liabilities
The present value of finance lease liabilities is as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
2 0 0 5
3’000
2 0 0 4
3’000
17,856
158,327
17,782
171,977
176,183
189,759
343
164
507
(17)
490
330
160
490
593
476
1,069
(60)
1,009
551
458
1,009
33 Deferred income taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current tax liabilities
and when the deferred income taxes relate to the same fiscal authority. The following amounts, determined after appropriate offsetting, are shown
in the consolidated balance sheet:
Deferred tax assets
Deferred tax liabilities
The gross movement on the deferred income tax account is as follows:
At the beginning of the year
Implementation of IAS 32 and IAS 39
Income statement — pre-exceptional charge (note 12)
Income statement — exceptional credit
Transfer to associate
Acquisition of subsidiary and purchase of intellectual property
Transfer arising on discontinued operations
Deferred tax charged to the fair value reserve (note 26)
Deferred tax credit relating to the actuarial loss in the year
Exchange differences
At the end of the year
2 0 0 5
3’000
2 0 0 4
3’000
(15,869)
(12,299)
34,471
30,375
18,602
18,076
2 0 0 5
3’000
18,076
630
6,879
(6,421)
(161)
1,791
-
(420)
(4,054)
2,282
2 0 0 4
3’000
20,638
-
3,526
-
-
-
315
-
(5,059)
(1,344)
18,602
18,076
91
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
33 Deferred income taxes (continued)
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within the same
tax jurisdiction, is as follows:
Deferred tax liabilities
At 4 January 2004
Charged/(credited) to income statement
Transfer arising on discontinued operations
Exchange differences
At 1 January 2005
Implementation of IAS 32 and IAS 39
Charged/(credited) to income statement
Credited to equity (note 26)
Transfer to associate
Acquisition of subsidiaries and intellectual property
Exchange differences
At 31 December 2005
A c c e l e r a t e d
t a x
d e p r e c i a t i o n
3’000
F a i r v a l u e
g a i n s
3’000
D e f e r r e d
d e v e l o p m e n t
c o s t s
3’000
20,967
3,278
315
(1,122)
23,438
-
4,144
-
-
104
2,056
29,742
-
-
-
-
-
630
-
(420)
-
-
-
210
-
-
-
-
-
-
228
-
-
-
-
228
O t h e r
3’000
7,265
(106)
-
(222)
To t a l
3’000
28,232
3,172
315
(1,344)
6,937
30,375
-
(4,398)
-
(161)
1,687
226
630
(26)
(420)
(161)
1,791
2,282
4,291
34,471
Deferred tax assets
At 4 January 2004
Charged to income statement
Credited to equity
At 1 January 2005
Charged to income statement
Credited to equity
At 31 December 2005
The deferred tax credited to equity during the year is as follows:
Fair value reserves in shareholders equity
— Available for sale investments
— Hedging reserve
Impact of increase in retirement benefit obligations
R e t i r e m e n t
o b l i g a t i o n s
3’000
I m p a i r m e n t
o f a s s e t s
3’000
Ta x l o s s e s
3’000
O t h e r
3’000
(7,594)
354
(5,059)
(12,299)
484
(4,054)
(15,869)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2 0 0 5
3’000
(82)
(338)
(4,054)
To t a l
3’000
(7,594)
354
(5,059)
(12,299)
484
(4,054)
(15,869)
2 0 0 4
3’000
-
-
(5,059)
The increase in retirement benefit obligations has given rise to the recognition of a deferred tax asset on the basis that the realisation of the
related tax benefit through future taxable profits is probable.
Deferred tax assets are recognised for tax loss carry forwards to the extent that realisation of the related tax benefit through the future taxable profits
is probable. The Group has unrecognised tax losses of 267.2 million (2004: 255.8 million) to carry forward against future taxable income.
Deferred tax liabilities have not been recognised for withholding tax and other taxes that would be payable on the unremitted earnings of certain
subsidiaries, associates and joint ventures.
(4,474)
(5,059)
92
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
34 Retirement benefit obligations
Pension benefits
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 July 2002 and 5 April 2005. The contributions
paid to the scheme in 2005 are in accordance with the contribution rates recommended in the actuarial valuation reports.
The amounts recognised in the balance sheet are determined as follows:
Present value of funded obligations
Fair value of plan assets
Liability in the balance sheet
The pension plan assets do not include the Company’s ordinary shares.
The amounts recognised in the income statement are as follows:
Current service cost
Interest cost
Expected return on plan assets
Curtailment
Total, included in staff costs (note 9)
The actual return on plan assets was 249.6 million (2004: 225.2 million).
The movement in the liability recognised in the balance sheet over the year is as follows:
At the beginning of the year
Exchange differences
Movements relating to disposed operations
Liability assumed on acquisition of CMP
Total expense — as shown above
Actuarial losses — shown in equity
Contributions paid
At the end of the year
The movement in obligations over the year is as follows:
At the beginning of the year
Exchange differences
Movements relating to disposed operations
Liability assumed on acquisition of CMP
Current service cost
Interest cost
Actuarial losses — shown in equity
Contributions by plan participants
Curtailments
Benefits paid
At the end of the year
The movement in the fair value of plan assets over the year is as follows:
At the beginning of the year
Exchange differences
Movements relating to disposed operations
Expected return on plan assets
Actuarial gains — shown in equity
Contributions by plan participants
Contributions by employer
Curtailments
Benefits paid
At the end of the year
2 0 0 5
3’000
2 0 0 4
3’000
(502,499)
337,483
(411,847)
285,171
(165,016)
(126,676)
(8,440)
(15,718)
16,908
723
(6,468)
(14,780)
15,611
-
(6,527)
(5,637)
(126,676)
(751)
(607)
(350)
(6,527)
(42,303)
12,198
(86,563)
54
(607)
-
(5,637)
(45,755)
11,832
(165,016)
(126,676)
(412,052)
(2,085)
(4,589)
(350)
(7,702)
(15,718)
(70,686)
(4,578)
2,929
10,986
(342,984)
151
(4,151)
-
(5,934)
(14,780)
(51,317)
(4,152)
-
11,115
(503,845)
(412,052)
285,376
1,334
3,982
16,908
28,383
4,578
11,460
(2,206)
(10,986)
256,421
(97)
3,544
15,611
6,040
4,152
10,820
-
(11,115)
388,829
285,376
93
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
34 Retirement benefit obligations (continued)
The principal actuarial assumptions used were as follows:
Discount rate
Expected return on plan assets
Future salary increases
Future pension increases
2 0 0 5
I R L
U K
2 0 0 4
I R L
U K
4.3%
4.8% – 8.5%
3.5%
2.25% – 3.5%
4.9% – 5.0%
4.1% – 8.0%
3.55%
2.0% – 3.25%
4.8%
4.8% – 8.5%
3.5%
2.25% – 3.5%
5.5%
4.0% – 8.5%
3.5%
1.85% – 3.25%
Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience
in each territory.
2 0 0 5
3’000
2 0 0 4
3’000
Actuarial losses recognised in the statement of recognised income and expense
42,303
45,755
Cumulative actuarial losses recognised in the statement of recognised income and expense
88,058
45,755
Plan assets are comprised as follows:
Equity
Bonds
Other
2 0 0 5
3’000
222,943
89,660
24,880
337,483
%
66
27
7
2 0 0 4
3’000
173,525
83,746
27,900
%
61
29
10
100
285,171
100
The expected return on plan assets was determined by considering the expected returns available on the assets underlying the current investment
policy. Expected yields on fixed interest investments are based on gross redemption yields as at the balance sheet date. Expected returns on equity
and property reflect long-term real rates of return experienced in the respective markets.
Expected contributions to post-employment benefit plans for the year ending 31 December 2006 are broadly in line with 2005 contributions.
35 Provisions for other liabilities and charges
At 1 January 2005
Charged to the consolidated income statement
— Additional provisions
— Unused amounts reversed
Net amounts charged/(credited) to provision
Exchange differences
R e s t r u c t u r i n g
3’000
U K P e n s i o n
3’000
O t h e r
3’000
To t a l
3’000
1,291
5,000
348
6,639
15,669
-
(8,527)
-
-
-
401
134
-
(64)
200
53
15,669
(64)
(7,926)
187
At 31 December 2005
8,433
5,535
537
14,505
Non-current
Current
-
8,433
5,535
-
537
-
6,072
8,433
8,433
5,535
537
14,505
(a) The restructuring provision relates to amounts payable in respect of programmes commenced and committed to during 2005 in the Consumer Foods,
Food Ingredients and Agribusiness and Property divisions. These amounts are expected to be paid during 2006.
(b) The UK pension provision relates to administration and related costs associated with schemes within businesses disposed of in prior years.
94
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
36 Capital grants
At the beginning of the year
Receivable for year
In disposed subsidiaries
In acquired subsidiaries
Currency translation adjustment
Released to income statement
At the end of the year
37 Trade and other payables
Trade payables
Amounts due to associates and joint ventures
Amounts due to other related parties (note 43)
Amounts due to subsidiary companies
PAYE and PRSI
Accrued expenses
Other payables
The fair value of payables are not materially different to the book values.
38 Derivative financial instruments
Interest rate swaps not qualifying as hedges
Interest rate swaps — cash flow hedges
Interest rate swaps — fair value hedges
Forward foreign exchange contracts — cash flow hedges
Forward foreign exchange contracts — fair value hedges
Other cash flow hedges
Other fair value hedges
Total
Less non-current portion
Interest rate swaps — cash flow hedges
2 0 0 5
3’000
15,276
772
-
231
-
(1,424)
2 0 0 4
3’000
16,611
3
(115)
-
5
(1,228)
14,855
15,276
2 0 0 5
C o m p a n y
3’000
20
-
551
18,512
-
1,427
-
2 0 0 5
G r o u p
3’000
118,874
10,823
6,271
-
3,677
134,526
4,412
2 0 0 4
C o m p a n y
3’000
10
-
504
18,220
-
241
-
2 0 0 4
G r o u p
3’000
115,822
1,497
1,828
-
3,004
105,397
1,353
20,510
278,583
18,975
228,901
2 0 0 5
A s s e t s
3’000
2 0 0 5
L i a b i l i t i e s
3’000
* 2 0 0 4
A s s e t s
3’000
* 2 0 0 4
L i a b i l i t i e s
3’000
-
2,752
-
92
-
44
62
(630)
-
-
(1,558)
-
(297)
(62)
-
285
-
2,342
-
-
576
(5,609)
-
-
(73)
-
-
(576)
2,950
(2,547)
3,203
(6,258)
1,825
-
188
-
Current portion
1,125
(2,547)
3,015
(6,258)
*
The Group has availed of the option under IFRS 1 to implement IAS 32 and IAS 39 only in respect of the 2005 figures and not the comparative
period. Therefore, the 2004 figures stated above represent the estimated fair value of derivative financial instruments at 1 January 2005 and are
not reflected in the Group balance sheet as at that date.
Other cash flow hedges and other fair value hedges represent commodity futures.
Forward foreign exchange contracts
The notional principal amounts of the outstanding foreign exchange contracts at 31 December 2005 are 275.1 million (2004: 238.2 million).
Gains and losses recognised in the hedging reserve in equity on forward foreign exchange contracts as of 31 December 2005 will be released
to the income statement at various dates within one year from the balance sheet date.
95
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
38 Derivative financial instruments (continued)
Interest rate swaps
The notional principal amounts of the outstanding interest rate swap contracts, qualifying as hedges, at 31 December 2005 were 2118.3 million
(2004: 225.7 million).
At 31 December 2005, the fixed interest rates vary from 3.2375% to 4.3300% (2004: 3.2375% to 3.2475%) and the main floating rates are set
in advance by reference to inter-bank interest rates (2LIBOR, £LIBOR, $LIBOR).
Gains and losses recognised in the hedging reserve in equity on interest rate swap contracts as of 31 December 2005 will be continuously released
to the income statement until repayment of the bank borrowings.
39 Contingent liabilities
Company
The Company has guaranteed the liabilities of certain subsidiaries in Ireland in respect of any losses or liabilities (as defined in Section 5 (c) of the
Companies (Amendment) Act 1986) for the year ended 31 December 2005 and the Directors are of the opinion that no losses will arise therefrom.
These subsidiaries avail of the exemption from the filing of audited financial statements, as permitted by Section 17 of the Companies (Amendment)
Act, 1986.
Group
(i) Bank guarantees, amounting to 215,252,000 (2004: 217,304,000) are outstanding as at 31 December 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 Venture 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.
(iii) Under the terms of a sale and purchase agreement concluded with Milk Link Limited dated 21 February 2004, the Group retains a 25% interest
in its UK hard cheese business through The Cheese Company Holdings Limited (“TCCH”). A subsidiary of TCCH, The Cheese Company Limited
(“TCC”) has become the subject of an investigation by the Office of Fair Trading (“OFT”) in the UK under Chapter 1 of the Competition Act 1998
into whether TCC agreed and/or concerted with other undertakings on prices in the supply of cheese and other products at the wholesale/retail
level during periods between July 2002 and December 2003. We understand TCC are assisting the OFT in their investigation and will address any
concerns they may have.
40 Commitments
Capital commitments
Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements is as follows:
Property, plant and equipment
Capital commitments not contracted for amounted to 255.6 million (2004: 237.2 million).
2 0 0 5
3’000
2 0 0 4
3’000
23,258
25,908
Operating lease commitments — where the Group is the lessee
The Group leases items such as properties and various types of equipment including cars, trucks and forklifts. Generally operating leases are on a
short-term basis with no purchase options. The future aggregate minimum lease payments under non-cancellable operating leases are as follows:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
2 0 0 5
3’000
6,595
14,204
7,258
2 0 0 4
3’000
7,986
17,097
13,462
28,057
38,545
96
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
41 Cash generated from operations
2 0 0 5
C o m p a n y
3’000
2 0 0 5
G r o u p
3’000
2 0 0 4
C o m p a n y
3’000
2 0 0 4
G r o u p
3’000
Profit for the year
21,879
61,644
28,470
71,919
Non-cash restructuring costs
Loss on disposal/termination of operations
Share of results of associates and joint ventures
Income taxes
Depreciation
Amortisation
Cost of share options
Exchange losses
Exchange gains — exceptional
Gain on disposal of investments
Loss on write-off of investments
Gain on disposal of property, plant and equipment
Interest income
Interest expense
Dividends received
Amortisation of government grants received
Net profit before changes in working capital
Change in net working capital
— Increase in inventory
— Decrease/(increase) in short-term receivables
— Increase/(decrease) in short-term liabilities
— Increase in provisions
-
-
-
-
-
98
161
-
-
(898)
1,687
-
(2,053)
-
(16,214)
-
2,172
-
(932)
657
23,518
3,313
161
196
(3,931)
(10,959)
-
(2,509)
(4,209)
22,299
-
(1,424)
-
-
-
-
-
33
76
-
-
(2,321)
-
-
-
98
(19,528)
-
-
156
1,523
8,386
25,030
2,558
76
634
-
-
-
(1,849)
(3,033)
8,756
-
(1,228)
4,660
89,996
6,828
112,928
-
1
3,620
-
(5,501)
35,419
35,849
7,142
-
17
(15,703)
-
(10,498)
(1,807)
(17,176)
-
Cash generated from/(funds absorbed by) operations
8,281
162,905
(8,858)
83,447
42 Business combinations
(a) CMP Dairy
On 2 February 2005, the Group announced an agreement with Dairygold Co-operative Society Limited to operate the CMP liquid milk, cream and
juice brands for a total consideration of 210,784,000. The agreement took effect on 11 April 2005. The acquired business contributed revenues of
214,920,000 for the period from 11 April to 31 December 2005. The CMP business has been incorporated into the Group’s broader Consumer Foods
business maximising available synergies and on that basis it is impracticable to disclose separately, the operating profit of this business since the date
of acquisition.
(b) Pro-Fibe Nutrition
On 19 August 2005, the Group acquired 100% of the share capital of Pro-Fibe Nutrition Limited, a UK company specialising in customised solutions
for the sports nutrition market for a consideration of Stg£4,129,000. The acquired business contributed revenues of 21,257,695 and operating profit
of 253,387 to the Group for the period from 20 August to 31 December 2005, and its assets and liabilities at 31 December 2005 were respectively
22,985,927 and 22,204,460. The results for the period from 2 January 2005 to the date of acquisition are not available due to non-coterminous
accounting periods.
(c) Zymalact
In March 2005, the Group acquired 51% of the share capital of Zymalact Mexico S.A. de C.V., a small family owned dairy blending and processed
cheese manufacturing company. The shareholding was increased to 100% in September 2005. The total consideration was US$400,000.
Details of net assets acquired and goodwill arising from the above business combinations are as follows:
Purchase consideration:
— Cash paid
— Contingent consideration
— Direct costs relating to the acquisitions
Total purchase consideration
Fair value of assets acquired
Goodwill (note 17)
The goodwill is attributable to the profitability of the acquired businesses and the benefits associated with the extension of Glanbia’s scale
and specific capabilities to the acquired businesses.
3’000
14,046
3,156
1,021
18,223
(9,255)
8,968
97
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
42 Business combinations (continued)
The assets and liabilities arising from the acquisition are as follows:
Cash and cash equivalents
Property, plant and equipment (note 16)
Intellectual property and brands (note 17)
Available for sale investments (note 20)
Inventories
Receivables
Payables
Borrowings
Net deferred tax liabilities (note 33)
Retirement benefit obligations (note 34)
Capital grants (note 36)
Net assets acquired
Purchase consideration settled in cash
Contingent consideration
Repayment of borrowings in acquirees
Cash outflow on acquisitions
A c q u i r e e ’s
c a r r y i n g
a m o u n t
3’000
11
2,815
-
14
1,288
1,223
(1,258)
(1,786)
(63)
-
(231)
F a i r v a l u e
3’000
11
2,815
8,905
14
1,288
1,223
(1,258)
(1,786)
(1,376)
(350)
(231)
9,255
2,013
18,223
(3,156)
1,732
16,799
The contingent consideration is dependant on the achievement of a targeted earnings figure.
The fair values assigned to the identifiable assets and liabilities have been determined provisionally. Any adjustments to these provisional valuations
will be recognised within twelve months of the acquisition dates.
In the year ended 1 January 2005, the Group acquired Kortus Food Ingredients Services GmbH, a German-based nutrient delivery systems business.
43 Related party transactions
The Group is controlled by Glanbia Co-operative Society Limited (“the Society”), which holds 54.68% of the issued share capital of the Company
and is the ultimate parent of the Group.
The following transactions were carried out with related parties:
2 0 0 5
C o m p a n y
3’000
2 0 0 5
G r o u p
3’000
2 0 0 4
C o m p a n y
3’000
2 0 0 4
G r o u p
3’000
(a) Sales of goods and services
Sales of goods:
— Associates
— Joint ventures
— Key management
Sales of services:
— The Society
— Joint ventures
— Subsidiaries
Sales to related parties were carried out on normal commercial terms and conditions.
-
-
-
3,496
21,931
527
-
-
-
4,504
25,137
693
-
25,954
-
30,334
-
-
7,377
1,849
902
-
-
-
7,420
1,807
417
-
7,377
2,751
7,420
2,224
98
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
43 Related party transactions (continued)
(b) Purchases of goods and services
Purchases of goods:
— Associates
— Joint ventures
— Key management
Purchases of services:
— The Society
— Subsidiaries
2 0 0 5
C o m p a n y
3’000
-
-
-
2 0 0 5
G r o u p
3’000
10,628
18,313
1,762
2 0 0 4
C o m p a n y
3’000
-
-
-
2 0 0 4
G r o u p
3’000
8,504
7,728
1,753
-
30,703
-
17,985
254
1,539
1,793
254
-
254
254
2,124
2,378
254
-
254
Purchases from related parties were carried out on normal commercial terms and conditions.
(c) Key management compensation
Salaries and other short-term employee benefits
Post-employment benefits
Other long-term benefits
Share-based payments
(d) Year end balances arising from sales/purchases of goods/services
Receivables from related parties:
— Associates
— Joint ventures
— Key management
Payables to related parties:
— The Society
— Associates
— Joint ventures
— Key management
— Subsidiaries
(e) Other related party balances
2 0 0 5
C o m p a n y
3’000
-
-
-
-
2 0 0 5
G r o u p
3’000
1,891
290
-
-
2 0 0 4
C o m p a n y
3’000
-
-
-
-
-
2,181
-
2 0 0 5
C o m p a n y
3’000
-
-
-
2 0 0 5
G r o u p
3’000
217
1,312
67
2 0 0 4
C o m p a n y
3’000
-
-
-
-
1,596
-
2 0 0 4
G r o u p
3’000
2,206
307
137
88
2,738
2 0 0 4
G r o u p
3’000
84
632
58
774
551
-
-
-
18,512
6,271
1,233
9,590
11
-
504
-
-
-
18,220
1,828
1,206
290
4
-
19,063
17,105
18,724
3,328
2 0 0 5
C o m p a n y
3’000
2 0 0 5
G r o u p
3’000
2 0 0 4
C o m p a n y
3’000
2 0 0 4
G r o u p
3’000
Loan to The Cheese Company Holdings Limited
-
56,874
-
51,942
Loan to Glanbia Cheese Limited
-
2,905
-
5,658
99
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
44 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
MJ Walsh
L Herlihy
JV Quinlan
JJ Moloney
JE Callaghan
HV Corbally
JG Fitzgerald
EP Fitzpatrick
JA Gilsenan
P Haran
CL Hill
M Keane
JV Liston
GJ Meagher
JJ Miller
WG Murphy
M Parsons
EM Power
GE Stanley
KE Toland
Secretary
M Horan
*
§
§
*
*
§
* Executive Director.
** Or at date of appointment if later.
§ Appointed on 9 June 2005.
O r d i n a r y s h a r e s o f 30 . 0 6
3 1 / 1 2 / 2 0 0 5
0 2 / 0 1 / 2 0 0 5
* *
23,708
81,804
21,347
84,593
35,000
1,495
24,171
50,501
2,842
7,462
31,966
22,104
5,000
212,327
61,136
230,827
26,344
37,893
28,724
23,243
23,708
81,804
21,347
70,000
35,000
1,495
24,171
50,501
2,842
7,462
31,966
22,104
-
212,327
61,136
230,827
26,344
37,893
28,724
18,650
4,593
-
100
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
44 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.
Beneficial
Directors
JJ Moloney
GJ Meagher
1988 Share Option Scheme
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
Sharesave Scheme
1988 Share Option Scheme
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
WG Murphy
1988 Share Option Scheme
2002 Long Term Incentive Plan
KE Toland
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
Sharesave Scheme
Secretary
O p t i o n s — o r d i n a r y s h a r e s o f 30 . 0 6
E x e r c i s e d
d u r i n g y e a r
3 1 / 1 2 / 2 0 0 5
-
-
-
(4,593)
-
-
-
-
(225,500)
150,000
290,000
150,000
-
75,000
205,000
75,000
75,000
-
-
-
(4,593)
164,000
100,000
-
0 2 / 0 1 / 2 0 0 5
* *
150,000
290,000
150,000
4,593
75,000
205,000
75,000
75,000
225,500
164,000
100,000
4,593
E x e r c i s e
p r i c e
3
4.25 (a)
1.55 (b)
2.73 (c)
1.20 (d)
4.25 (a)
1.55 (b)
2.73 (c)
4.25 (a)
1.55 (b)
1.55 (b)
2.73 (c)
1.20 (d)
M Horan
Sharesave Scheme
4,593
(4,593)
-
1.20 (d)
** Or at date of appointment if later.
Options:
(a) Exercisable by Directors at any time up to May 2008.
(b) Exercisable by Directors and Secretary at any time up to 2012.
(c) Exercisable by Directors and Secretary between 2007 and 2014.
(d) Exercisable by Directors and Secretary, under normal circumstances, at any time up to March 2006.
There were no other changes in the interests of the Directors and Secretary between 31 December 2005 and 17 February 2006.
GJ Meagher, JJ Moloney and KE Toland as participants of the 2002 Long Term Incentive Plan as noted at (b) above, are eligible
for a share award of 10% of the ordinary shares they continue to hold following the second anniversary of the exercise of the option.
GJ Meagher as a participant of the 2002 Long Term Incentive Plan as noted at (c) above, is eligible for a share award of 10%
of the ordinary shares he continues to hold following the second anniversary of the exercise of the option.
JJ Moloney as participant of the 2002 Long Term Incentive Plan as noted at (c) 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.
The market price of the ordinary shares as at 31 December 2005 was 22.40 and the range during the year was 22.30 to 23.25.
The average price for the year was 22.71. The 1988 Share Option Scheme expired on 31 August 1998.
101
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
‘ A’ O r d i n a r y s h a r e s o f 31
C o n v e r t i b l e R e d e e m a b l e
‘ B ’ s h a r e s o f 30 . 0 1
3 1 / 1 2 / 2 0 0 5
0 2 / 0 1 / 2 0 0 5
* *
3 1 / 1 2 / 2 0 0 5
0 2 / 0 1 / 2 0 0 5
* *
13,774
87,916
9,090
4,265
22,457
23,044
2,365
18,396
18,381
1,504
22,771
6,820
25,082
632
13,293
87,192
8,975
4,156
22,230
22,701
2,302
15,273
18,245
1,454
22,491
6,563
24,801
632
-
-
-
-
-
-
-
-
-
-
-
-
-
-
481
724
115
109
227
343
63
123
136
50
280
257
281
-
44 Directors’ and Secretary’s interests (continued)
(b) Glanbia Co-operative Society Limited
Beneficial
Directors
MJ Walsh
L Herlihy
JV Quinlan
HV Corbally
JG Fitzgerald
EP Fitzpatrick
JA Gilsenan
CL Hill
M Keane
M Merrick
JJ Miller
M Parsons
EM Power
GE Stanley
** Or at date of appointment if later.
There have been no changes in the above interests between 31 December 2005 and 17 February 2006.
Beneficial
Directors
MJ Walsh
L Herlihy
JV Quinlan
JJ Moloney
HV Corbally
JG Fitzgerald
EP Fitzpatrick
JA Gilsenan
CL Hill
M Keane
GJ Meagher
M Merrick
JJ Miller
WG Murphy
M Parsons
EM Power
*
*
C o n v e r t i b l e l o a n s t o c k u n i t s
o f 30 . 0 1 2 6 9 7 3 8
‘ C ’ s h a r e s o f 30 . 0 1
3 1 / 1 2 / 2 0 0 5
0 2 / 0 1 / 2 0 0 5
* *
3 1 / 1 2 / 2 0 0 5
0 2 / 0 1 / 2 0 0 5
* *
242,589
1,866,068
-
-
374,467
637,924
416,134
335,196
-
539,623
-
469,002
477,627
-
344,734
416,623
190,075
1,455,858
-
-
294,956
504,173
330,717
251,757
-
478,050
-
402,980
379,348
-
252,039
330,172
1,100,000
16,626,637
1,067,686
4,634,869
63,498
-
6,497,492
3,714,146
3,426,974
253,948
8,880,921
-
6,309,314
2,904,610
1,269,738
4,945,207
1,100,000
16,626,637
1,067,686
4,634,869
63,498
-
6,497,492
3,714,146
3,426,974
253,948
8,880,921
-
6,309,314
2,904,610
1,269,738
4,945,207
* Executive Director.
** Or at date of appointment if later.
There have been no changes in the above interests between 31 December 2005 and 17 February 2006.
102
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes to the financial statements (continued)
for the year ended 31 December 2005
45 Principal subsidiary and associated undertakings
(a) Subsidiaries
I n c o r p o r a t e d a n d o p e r a t i n g i n
P r i n c i p a l p l a c e o f b u s i n e s s
P r i n c i p a l a c t i v i t i e s
Ireland
Glanbia Foods Society Limited
Glanbia Consumer Foods Limited
Glanbia Ingredients (Ballyragget) Limited
Glanbia Ingredients (Virginia) Limited
Glanbia Fresh Pork Limited
Glanbia Farms Limited
Glanbia Feeds Limited
Glanbia Estates Limited
Avonmore Proteins Limited
Glanbia Financial Services
Glanbia Investments (Ireland) Limited
Glassonby
Waterford Foods plc
D. Walsh & Sons Limited
Grassland Fertilizers (Kilkenny) Limited
Britain and Northern Ireland
Glanbia Feedstuffs Limited
Glanbia (UK) Limited
Glanbia Holdings Limited
Glanbia Investments (UK) Limited
Glanbia Nutritionals (UK) Limited
Glanbia Foods (NI) Limited
United States
Glanbia Foods Inc.
Glanbia Inc.
Ballyragget, Co. Kilkenny and Citywest,
Dublin 24
Inch, Co. Wexford and Kilkenny
Ballyragget, Co. Kilkenny
Virginia, Co. Cavan
Edenderry, Co. Offaly
Cavan and Mayo
Enniscorthy, Co. Wexford and Portlaoise,
Co. Laois
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Palmerstown, Co. Kilkenny
Palmerstown, Co. Kilkenny
Tamworth, Staffordshire
Tamworth, Staffordshire
Tamworth, Staffordshire
Tamworth, Staffordshire
Middlesborough
Portadown, Co. Armagh
Dairying, liquid milk, consumer food
products and general trading
Fresh dairy products and soups
Milk products
Milk products
Pork and bacon products
Pig rearing
Manufacture of animal feed products
Property and land dealing
Financing
Financing
Holding company
Investment holding
Holding company
Grain and fertilizers
Fertilizers
Supply of animal feeds
Holding company
Holding company
Investment holding
Sports nutrition products
Consumer food products
Twin Falls, Idaho
Delaware
Milk products
Holding company
Germany
Kortus Food Ingredients Services GmbH
Orsingen-Nensingen
Nutrient delivery systems
Netherlands
Glanbia Foods BV
Mexico
Moergestel
Holding company
G r o u p
i n t e r e s t
%
100
100
100
100
100
100
100
100
100
100
100
100
100
60
73.34
100
100
100
100
100
100
100
100
100
100
Zymalact Mexico S.A. de C.V.
Lerma
Dairy blending and processed cheese
100
103
N O T E S T O T H E F I N A N C I A L S TAT E M E N T S
45 Principal subsidiary and associated undertakings (continued)
(b) Associates and joint ventures
I n c o r p o r a t e d i n
D a t e t o w h i c h
r e s u l t s i n c l u d e d
P r i n c i p a l p l a c e
o f b u s i n e s s
P r i n c i p a l a c t i v i t i e s
Ireland
Co-operative Animal Health Limited
South Eastern Cattle Breeders
Society Limited
Malting Company of Ireland Limited
South East Port Services Limited
Nashs Mineral Waters
(Marketing) Limited
Corman Miloko Ireland Limited
Britain and Northern Ireland
Glanbia Cheese Limited
Milk Ventures (UK) Limited
United States
31 December 2004
Tullow, Co. Carlow
Agri-chemicals
31 December 2004
31 October 2005
31 December 2005
Thurles, Co. Tipperary
Togher, Co. Cork
Kilkenny
Cattle breeding
Malting
Port services
31 December 2005
31 December 2005
Newcastle West, Co. Limerick
Carrick-on-Suir, Co. Tipperary
Mineral waters and soft drinks
Butter products
31 December 2005
30 November 2005
Magheralin and Llangefni
Nigeria
Cheese products
Evaporated and powdered milk
Southwest Cheese Company, LLC
31 December 2005
Clovis, New Mexico
Milk products
Mexico
Conabia de Mexico S.A. de C.V.
31 December 2005
Mexico City
Dairy ingredients
Pursuant to Section 16 of the Companies Act, 1986 a full list of subsidiaries, joint venture and associated undertakings will be annexed to
the Company’s Annual Return to be filed in the Companies Registration Office in Ireland.
G r o u p
i n t e r e s t
%
50
57
33.33
49
50
45
51
50
50
50
104
G L A N B I A P L C A N N U A L R E P O R T 2 0 0 5
Notes
Designed and produced by Design Factory
Annual Report
2005
Glanbia plc
Glanbia House,
Kilkenny, Ireland
Tel. +353 56 777 2200
Fax. +353 56 777 2222
www.glanbia.com