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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 7
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 7
Our performance and outlook
An excellent performance in 2007 delivered double digit earnings
growth, a sustainable margin position and a diversified earnings base.
We are confident of another good performance this year and Glanbia
is on target to achieve further double digit earnings growth in 2008.
Revenue
€2.2 billion
2006 €1.9 billion
Operating profit (pre exceptional)
€115.8 million
2006 €85.6 million
up 19%
up 35%
Operating margin (pre exceptional)
5.2%
2006 4.6%
up 60 basis points
Profit before tax (pre exceptional)
€99.5 million
2006 €74.4 million
Adjusted earnings per share
28.2 cent
2006 22.6 cent
Dividend per share
6.08 cent
2006 5.79 cent
up 34%
up 25%
up 5%
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Our business
Glanbia is organised into three divisions and has operations in Ireland, Europe, USA, Canada and China with
key international joint ventures in the UK, USA and Nigeria. In 2007, including the Group’s share of Joint
Ventures & Associates, Ireland accounted for 31% of revenue and 26% of pre exceptional operating profit, while
International markets accounted for 69% of revenue and 74% of pre exceptional operating profit.
Total Group (including Joint Ventures & Associates)
4,900
employees
5,500
milk suppliers
4.12 billion
litres of milk processed
400,000 tonnes
of cheese produced
260,000 tonnes of food
ingredients manufactured
Consumer
Foods
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Agribusiness
& Property
Revenue*
Operating profit*
20%
15%
Business
Leading brands and
market positions.
11%
11%
Key linkage to farmer
supply base.
Business Review Page 14
Food Ingredients
& Nutritionals
55%
70%
Food Ingredients
Ireland
Largest dairy processor
in Ireland.
Food Ingredients
USA
Largest dairy processor in
Idaho, USA.
Nutritionals
Global leader in
science based
innovation.
Business Review Page 16
Joint Ventures
& Associates
14%
4%
Three major international
joint ventures in cheese
and consumer products.
Business Review Page 22
*Share of Group including Joint Ventures & Associates
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2007 Revenue
2007 Operating profit
(pre exceptional)
31%
26%
69%
74%
Ireland
International
(including Joint Ventures & Associates)
Locations
Ten locations in Ireland.
Description
This business is one of the largest
suppliers to the Irish grocery
sector.
Products
Branded milk, fresh dairy
products, natural cheeses and
fresh soups.
Market positions
No.1 Fresh milk
No.1 Fresh cream
No.1 Fruit yogurts
No.1 Fromage frais
No.1 Fresh soups
Brands
Avonmore, Yoplait,
Petits Filous, Nash’s, CMP,
Snowcream, Premier,
Kilmeaden.
Agribusiness: 61 retail locations
nationwide and two feed mills.
Agribusiness is the Group’s key
linkage with its large farmer
supply base.
Feed, fertilisers, farm
inputs and the CountryLife
retail range.
Gain Feeds, IFI fertilisers,
CountryLife, Mastercrop,
Mastervet.
Property is focused on
maximising the value of the
Group’s property portfolio.
Two manufacturing facilities
located in Ireland.
This business processes one-third
of the total milk pool in Ireland
processing 1.4 billion litres of milk
per annum in to cheese and food
ingredients.
Cheese, butters, acid and rennet
casein, milk proteins, whey
products and formulated milk.
No.1 Irish dairy processor
No.1 Irish cheese processor
No.1 European producer of casein
Three processing plants in
Idaho, which is the third largest
and one of the fastest growing
milk states in the USA.
This business is a leading
manufacturer of cheese and
whey-based food ingredients
processing 1.9 billion litres of milk
per annum.
American style cheddar cheese
and whey products.
No.1 American style cheddar
No.2 Whey protein
No.3 Lactose
Global operations include
Ireland, UK, Germany, USA,
Canada and China.
This business focuses on
providing science based
nutritional solutions in areas such
as sports & performance, weight
management, health & wellness
and infant nutrition.
Whey protein isolates and other
whey protein powders, protein
peptides and bioactives, milk
protein isolates and concentrates,
lactose, milk calcium, lactoferrin,
vitamin & mineral premixes, flax
seeds and lignans.
Leading supplier of customised
nutrients.
Leading global supplier of
advanced technology whey
proteins and fractions.
No.1 Whey/dairy based ingredients
No.5 Globally in B2B nutritional
Provon, Trucal®, Thermax,
Avonlac, Prolibra, Bioferrin,
Salibra, Barflex, Barpro,
CFM™, Olivactive®,
Meadowpure™.
UK, USA and Nigeria.
The Group currently has three
key international joint ventures:
Glanbia Cheese in the UK;
Southwest Cheese in the USA;
and Nutricima in Nigeria.
Pizza cheese for the UK
and European markets.
Cheese and whey products in
the USA.
Consumer products in Nigeria.
solutions
No.1 North American producer
of flax oil derivatives
No.1 Pizza cheese supplier
in Europe
No. 1 American style cheddar
in USA
No. 3 Consumer packaged dairy
powders in Nigeria
NuNu, Coast, Powerfist,
Olympic.
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Chairman’s statement
“ The Group had an excellent
year in 2007, delivering
benefits to all stakeholders.
Operating profit pre
exceptional rose 35% to
€115.8 million and adjusted
earnings per share were
up 25% to 28.2 cent. These
results reflect the benefits
of the strategic investment
programmes implemented
over recent years and the
Group’s spread of businesses,
against a backdrop of positive
global dairy markets.”
An excellent year
International operations gained
momentum in 2007 and were the driver
of this year’s results. Our international
presence comprises Food Ingredients
& Nutritionals, which delivered a strong
performance with good organic growth,
improvements in operational efficiency
and sustainable margin expansion.
Revenue from Food Ingredients &
Nutritionals increased 30% to
€1.4 billion (2006: €1.1 billion).
Operating profit was up 93% to
€85.2 million (2006: €44.2 million) while
margins grew by 200 basis points to
6.1%. The operating profit and margin
growth was due to a good performance
from Food Ingredients USA, an increased
contribution from Nutritionals and a
recovery of margins in Food Ingredients
Ireland to their historic levels.
The Group operates in Ireland through
our Consumer Foods and Agribusiness &
Property divisions.
Revenue from Irish operations grew 3.6%
to €803.4 million (2006: €775.5 million).
Operating profit declined 26% to
€30.6 million (2006: €41.4 million) and
operating margins dropped 150 basis
points to 3.8%. Performance was
impacted by the timing of recovery of
higher milk costs for Consumer Foods
Ireland.
During the year Glanbia took the
decision to exit its pigmeat business in
Ireland and a Management Buy Out was
announced on 3 March 2008.
4
A growing global footprint
The successful execution of Glanbia’s
growth strategy has transformed the
Group in recent years and created a
good spread of Irish and international
business in key food markets and sectors.
In growing the businesses, Glanbia has
invested €293 million in acquisition and
development capital expenditure in the
last four years up to the end of 2007, with
the main focus being on developing
international operations.
During the same period the Group’s
portfolio of businesses has been
reshaped with disposals releasing
€200 million for strategic investments.
An ongoing development programme
will expand operations in Ireland, Nigeria
and the USA further in 2008.
Three major international joint ventures
are part of our strategic international
expansion - Southwest Cheese in the
USA, Glanbia Cheese in the UK and
Nutricima in Nigeria. These businesses
were operationally excellent in 2007 and
delivered strong top line growth of 41%.
However, Glanbia’s share of profit after
tax and interest declined €1.8 million
to just under €1 million, directly as a
consequence of the performance of
Glanbia Cheese, which suffered as a
result of the time lag in recovering the
dramatic increase in milk cost during
the year.
A detailed review of the Group’s
operational performance is explained on
pages 12 to 23 of this report.
Dividends
The Board is recommending a final
dividend of 3.58 cent per share, compared
with a 3.41 cent per share final dividend
in 2006. This brings the total dividend
for the year to 6.08 cent per share (2006:
5.79 cent per share), representing a 5%
increase. Subject to shareholders approval,
dividends will be paid on Tuesday, 20 May
2008 to shareholders on the register of
members as at Friday, 25 April 2008. Irish
dividend withholding tax will be deducted
at the standard rate where appropriate.
Board changes
At the conclusion of the Annual
General Meeting on 14 May, I will retire
as Chairman and from the Board. I
would like to convey my appreciation
to my fellow Board members, to our
shareholders, to the management and
to the staff of Glanbia for their support
and commitment during my tenure.
I consider myself fortunate in having had
the opportunity to chair Glanbia at a
time which has been both exciting and
challenging for the Group and for the
farming sector.
On 31 May 2007 Nicholas Dunphy
replaced Michael Keane, who retired after
two years on the Board and on behalf
of the Board I would like to welcome
Nicholas and to thank Michael for his
contribution and commitment during the
time he served as a member of the Board.
Effective Corporate Governance
A detailed statement setting out Glanbia’s
key governance principles and practices
is provided on pages 37 to 45. The
Board and management are committed
to achieving the highest standards of
corporate governance and being ethical
in the conduct of the business, and are
satisfied that appropriate systems of
internal control are in place throughout the
Group.
A decade of progress
In 2007, the Group reached a significant
milestone - the tenth anniversary of the
formation of Glanbia plc, which resulted
from the merger of two Irish companies,
Waterford Foods plc and Avonmore
Foods plc in September 1997. Since then
Glanbia has grown into a vibrant cheese
and nutritional ingredients business. In the
process the Group has overcome many
challenges, grasped new opportunities,
taken risks and succeeded more often than
not. Today, Glanbia employs 4,900 people.
It is the enthusiasm and commitment of the
management and staff, past and present,
that has transformed and grown Glanbia.
On behalf of the Board I would like to
thank John Moloney and all our employees
for their contribution and dedication and
congratulate them on an excellent 2007
and the prospect of sustained high growth
into the future.
Michael Walsh
Chairman
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 7
A ten year transformation
1997-2007
97
Avonmore Foods and Waterford Foods
merge to form Avonmore Waterford
Group (AWG).
99
AWG is renamed and rebranded
Glanbia plc, a name that has its roots in
the Irish language.
00
Glanbia enters its first international
joint venture with Leprino Foods to
form Glanbia Cheese, which is the
no.1 mozzarella cheese supplier in
Europe today.
01
John Moloney is appointed Group
Managing Director of Glanbia plc.
02
Exit from UK food service and consumer
foods businesses.
Establishment of Group Nutritionals
business.
03
Glanbia agrees Nigerian joint venture with
PZ Cussons plc - Nutricima.
04
Building commenced at Southwest Cheese,
a Glanbia joint venture with the Great
Southwest Milk Agency in New Mexico, USA.
Glanbia acquires Kortus Foods, Germany
- its first European nutritionals business.
05
Opening of Group Innovation
Centre, Kilkenny.
06
Official opening of Southwest
Cheese, USA.
Purchase of Seltzer Companies, Inc., USA.
07
Expansion of Nutritionals business with
the completion of a new premix plant
in China and the acquisition of Pizzey’s
Milling in Canada.
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Group Managing Director’s review
“ The successful execution of
Glanbia’s growth strategy
transformed the Group in
recent years and positions us
well to enhance our future
performance. We are well
on our way to achieving our
vision, which is to be a world
leader in cheese and nutritional
ingredients, delivering superior
customer solutions.
Our overall objective is to
increase shareholder value
through sustained double digit
earnings growth.”
2007 performance highlights
It was a good year. Food Ingredients
& Nutritionals, the primary focus of
investment in recent years, delivered a
strong performance. Food Ingredients
Ireland restored margins to historic levels,
while also delivering significant benefits
to suppliers. Food Ingredients USA had
a strong year with positive USA cheese
markets, and solid underlying demand.
Milk growth in our key regions of Idaho for
Food Ingredients USA and New Mexico/
West Texas for our Southwest Cheese
joint venture, was amongst the highest in
the USA.
which is the key active ingredient in
weight loss product “Celebrity Slim”
in the Australian market; and Glovon,
a natural antimicrobial capable of
acting as a parabens replacement in the
cosmetics sector.
Our largest division Food
Ingredients & Nutritionals
delivered good volumes,
improvements in operating
efficiency and solid growth
in margins.
The Nutritionals business achieved good
organic growth and had commercial
success with important new product
development (NPD) projects such as
CFM Nitro, which is a sports nutrition
product used to build up blood supply
to muscles. Other successful products
included: Provon Revive, a performance
and recovery product launched as an
internet-oriented offering; Prolibra,
Nutritionals also benefited from a full year
contribution from Seltzer Companies, Inc.
which was acquired in September 2006.
Seltzer is a leading provider of customised
vitamin and mineral premixes to the USA
food and beverage markets.
6
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 7
In September 2007 Nutritionals acquired
Pizzey’s Milling, a leading industry supplier
of flax seed solutions, which will extend
our offering into non-dairy Omega-3 and
lignan products. The build phase of a new
premix plant, in Suzhou, near Shanghai,
China was completed in December and
this facility is now progressing through the
commissioning phase.
Consumer Foods Ireland made
good progress with a number of new
innovations and renovations to its product
portfolio including Avonmore Supermilk
and the introduction of new Avonmore
milk shakes and low fat flavoured milk
products. Other successful launches
included Yoplait Mixed Seeds, Yoplait
Superfruits and Yoplait Smootheze.
Despite this success the business
struggled to recover raw material price
increases in the market place because of
the magnitude and speed of the changes
in milk cost. Towards the latter end of the
year price increases were implemented
in key customer groups and margin and
performance recovery is a key focus for
the business in 2008.
Buoyant sector development
Glanbia’s strong 2007 performance was
against a backdrop of positive world
dairy markets. Global dairy demand is
exceeding supply and is likely to continue
to do so for the foreseeable future. Good
progress by developing economies with
emerging middle classes underpins
growth in consumption of dairy products.
Government support for dairy products
in countries such as China is also positive
and a number of countries, including
Russia and Vietnam, have lowered tariffs
to support domestic supply and
thus trade.
Food stocks, a historical feature of the
sector, particularly in Europe, are at
historic lows. This, together with strong
demand, led to sharp price increases
in dairy commodities during the year.
Substitute or competing ingredients like
vegetable oil and soya have also risen
sharply in tandem. A further constraint on
supply has been an increase in alternative
land use for bio fuel production. These
developments created a positive
backdrop for our operations and future
development.
Core model for Food Ingredients & Nutritionals
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A major focus on efficiency
The Group has significant manufacturing
operations, such as our scale western
USA dairy facilities in Idaho and New
Mexico. These maintain a major focus
on yields, quality parameters and
throughput measures, which support
and drive efficiency gains. The relentless
pursuit of efficiencies is a key component
of managing Glanbia. In a competitive
and challenging industry, costs and
productivity are high on the agenda
and we have a number of programmes
around the Group that focus on further
automation of process and plant.
One such programme is the 2007 energy
management initiative undertaken in
Food Ingredients Ireland. This project
was a resounding success and Food
Ingredients Ireland became the first Irish
owned company to be awarded the IS393
Standard for Energy Management.
Developing Glanbia
Our vision is to be a world leader in
cheese and nutritional ingredients.
Glanbia’s core business model in Food
Ingredients & Nutritionals is predicated
on having access to a series of large dairy
milk pools, which are then processed into
a range of cheese and dairy products.
Derived from these scale processing
operations is a large valuable whey stream
which, with the application of innovation
and the acquisition of complementary
ingredients and technologies, creates
a further product range of high margin
nutritional ingredients, focused on high
growth markets.
Our portfolio of nutritional ingredients
will not be exclusively dairy but will have
complementary non dairy components
which will enable us to deliver full
solutions to customers. Science and
innovation will be important factors for
success both in terms of developing new
ingredients products but also in driving
applications for customers.
The characteristics of this portfolio of
businesses are a diversified earnings
base, a sustainable margin profile,
positive cash generation and favourable
market dynamics. At the centre is scale
manufacturing operations with a major
focus on efficiency, cost competitiveness
and productivity.
These businesses are run with
strong commercial and operational
competencies, creating a solid foundation
for future growth, as Glanbia continues
to move towards a higher percentage
of Group revenue and profitability from
higher margin, higher growth
nutritional ingredients.
Internationalisation will also continue
to be a driver of the business.
In developed economies our focus will
be on advanced nutritional solutions for
health and wellness and general nutrition.
In developing regions such as in Nigeria
we are building a range of products
which can deliver mass market nutrition.
Complementary acquisitions will be
important across a number of core sectors
together with the delivery of strong,
profitable and sustainable organic growth.
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Group Managing Director’s review (continued)
This, together with strong Irish
operations, is positive for the Group’s
outlook and I look forward to reporting
another good performance against our
key financial and strategic targets in 2008.
Looking further ahead
Last year we set out three strategic
imperatives for the Group. Number one
was to deliver growth and performance in
the period 2007 to 2009 and we are well
on track to achieve this.
Number two was to extend growth
and performance beyond 2009 with
further acquisitions, expansion of
international operations and focusing
on cost reduction, competitiveness and
productivity. Here again we are on track
and remain focused on delivery of a
significant investment or acquisition in
the nutritionals area.
Finally our number three goal was to
improve our financial flexibility and
maintain progress in financial ratios. In
2007 the financial capacity of Glanbia has
significantly improved and we intend to
maintain this momentum into 2008.
John Moloney
Group Managing Director
Good risk management
While risk is inherent in any business, the
identification and management of risk is
critical to the achievement of our financial
and strategic goals. Glanbia has good
processes in place to manage the myriad
of risks facing a business with large scale,
geographically diverse operations.
One of the principal risks the Group
faces, I believe, is the potential for a
significant global economic downturn
which could curtail demand for dairy
products. This is an area of exposure
for many sectors, but being in the food
sector and our spread of businesses
affords us some protection.
On page 30 of this report we have set
out the key risks the Board has identified
and the steps we take as a Group to
mitigate them.
Measuring our progress
Last year we set out confident financial
targets and a strategic roadmap for
the period 2007 to 2009. The Group’s
strategic objectives are clear:
• Achieve and sustain double digit
earnings growth
• Improve and maintain higher operating
margins
• Diversify the Group’s earnings base to
reduce volatility
• Allocate capital to a mix of higher
growth opportunities.
In 2007 we performed very well against
our financial targets. Our development
spend was, however, lower than our
target, despite ongoing efforts by
Glanbia’s development teams. The
Group continuously assesses a pipeline
of potential transactions and investment
opportunities. The timing of transactions
is of course unpredictable.
Nevertheless acquisitions, particularly
in the Nutritionals area remain a priority
for the Group and we are focused on
delivering another successful one, such as
the Seltzer Companies, Inc. acquisition,
which was completed in late 2006.
Apart from the targets we set out
last year, we also measure organic
revenue growth and return on capital
employed. Revenue growth, adjusted for
acquisitions, disposals and the impact
of foreign translation effects was 19.1%
in 2007, compared with 1% in 2006 and
all segments of the business had good
organic growth for the year. Return
on capital employed is an important
metric as we seek to measure the
success of our key strategic objectives
of allocating capital to a mix of higher
growth opportunities. Return on capital
employed grew from 14.7% in 2006 to
18.8% in 2007.
Overall our growth strategy
is delivering and we are
well placed to continue this
momentum into 2008.
Driving future growth
Over the past number of years Glanbia
has been transformed through a
number of phases including significant
reorganisation and rationalisation of the
business, particularly of underperforming
or non core activities, as well as building
a solid foundation to support the
business as it gains momentum in its
current growth phase. These foundations
include being:
• The largest milk processor in Ireland
• The largest cheddar cheese producer
in the USA
• A major global whey processor/supplier
of whey ingredients and derivatives.
2008 Outlook
We are confident of another good
performance this year and Glanbia
is on target to deliver further double
digit earnings growth in 2008. More
importantly we continue to successfully
build a strategic international presence in
cheese and nutritional ingredients.
8
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 7
2007-2009 Financial targets
2007 progress
Adjusted earnings
per share growth
10-14%
Operating margin
(pre Joint Ventures & Associates)
5%+
Free cash flow
(pre exceptional)
+25%
5.2%
€45 million+
€56.3 million
Potential development
spend 2007
€150 million
EBIT from
international operations
>50%
EBIT interest cover
€57.5 million
74%
5-6 times
6.7 times
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Our global footprint
Glanbia has a strong position in key food markets and sectors around the world and an ongoing
investment programme will expand operations in Ireland, China, Nigeria, and the USA further in 2008.
The Group operates in the Irish market through the Consumer Foods and the Agribusiness & Property
businesses. International markets are serviced by the Food Ingredients & Nutritionals division and
international joint ventures.
Internationalisation will continue to be a driver of the business and a key element of our growth strategy
going forward. In developed economies we focus on health and wellness and general nutrition. In
developing economies we are building a range of products, which can deliver mass market nutrition.
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Supported by Innovation
During the year Glanbia invested in several intervention studies helping the Group
develop scientifically sound nutritional solutions to match specific needs and add value
to various whey fractions.
Studies focused around key development areas for future product offerings including
weight loss, protein utilisation, and the use of novel anti-microbial offerings in beverage
and cosmetic preservation.
These studies have been completed by independent professional organisations and
academic institutions and leverage the expert capabilities of the Glanbia Scientific
Advisory Committee members who both challenge and inform the design of these
programmes.
10
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 7
A world of
cheese and nutritional
ingredients
In addressing specific consumer needs around health, the innovation team at the Glanbia
Innovation Centres in the USA and Ireland, assisted by teams in the business units, led to a
number of commercial developments in 2007.
These included new consumer products under the Yoplait brand - Mixed Seeds, Superfruits
and a new smoothie range called Smootheze. New nutritional ingredient brands launched
include: Solmiko advanced milk proteins; sports and performance oriented CFM Nitro and
Provon Revive, in addition to the extension of body composition applications for Prolibra.
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Consumer Foods
No.1
Glanbia has no.1 market
positions in all varieties of fresh
milk and cream, family yogurt,
kids fromage frais, drinking yogurt
and fresh soup.
Three year revenue analysis (€’000)
493,582
511,022
510,782
2005
2006
2007
Consumer Foods Ireland
Consumer Foods Ireland is one of the
largest suppliers into the Irish grocery
sector with seven brands in the Top 100
brands – more than any other Irish food
company. The division operates across a
wide range of packaged grocery sectors
including all varieties of fresh milk and
cream, juice, water, yogurt, fromage frais,
natural cheese, spreads, butter, fresh
soups, fresh sandwiches and smoothies.
Consumer Foods Ireland employs 820
people at 10 locations throughout Ireland
and processes 300 million litres of
milk annually.
2007 Performance
Consumer Foods Ireland had a challenging
year in a competitive and concentrated
market place. Increasing promotional
costs coupled with the dramatic rise of raw
material milk costs put significant pressure
on margins and impacted the nutritional
beverages business, in particular, in the
second half.
Growth in the nutritional beverages
category continues to be driven by
demand for more value added products,
where the Avonmore brand has the leading
market position. Despite the increased
margin pressure due to high input costs,
considerable progress was made with the
launch of new products including a family
pack of Avonmore Supermilk and the
introduction of new Avonmore milk shakes
and low fat flavoured milk products.
Demand for natural cheese drove the
growth in total cheese consumption
but at the expense of processed
cheeses. Formats that provide additional
convenience are achieving most of
this growth where Consumer Foods
successfully launched a number of more
convenient choices and healthier options.
Fresh soup demand continues to increase
with the Avonmore range growing their
overall market share.
12
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 7
Revenue
* Excluding pigmeat
+7%
Operating profit
pre exceptional
-27%
Colin Gordon, CEO Consumer Foods Ireland
Consumer Foods Summary
2007
€510.8m
Revenue
Operating profit pre exceptional €17.8m
3.5%
Operating margin
2006
€511.0m
€24.5m
4.8%
This division includes Consumer Foods Ireland which incorporates nutritional
beverages, fresh dairy products and cheeses, soups and spreads and Glanbia Meats,
the Group’s pigmeat operations.
Revenue in this division was broadly flat at €510.8 million (2006: €511.0 million)
with growth in Consumer Foods Ireland offset by a decline in Glanbia Meats
revenue. Operating profit pre exceptional items decreased 27% or €6.7 million to
€17.8 million (2006: €24.5 million) and the operating margin decreased 130 basis
points to 3.5%. The decline in the operating profit and margin was driven primarily
by a timing lag in the recovery of a dramatic rise in raw material costs within
Consumer Foods Ireland.
Health and convenience continue to be
core drivers of demand in the Irish retail
food sector. Research conducted by
both the Irish Food Board and Glanbia
Consumer Foods, shows Irish consumers
have high regard for health and nutrition
as the most important factor affecting
their food purchase decisions. Against
this background, Consumer Foods Ireland
continued to invest in product innovation
and launched a number of other new
products into the Irish market place in 2007
- including Yoplait Mixed Seeds, Yoplait
Superfruits and Yoplait Smootheze.
Strategy
Overall, the strategy of the business is
to grow market share by building the
relevance of core brands, increasing
customer partnerships and sustaining
growth through innovation. A number of
initiatives have been undertaken during
the year to maintain and grow Glanbia’s
leading market positions.
These include continuing innovation, trade
marketing developments, a reshaping
of the business in Northern Ireland,
establishing a new Convenience Division
“Fresh Direct”, together with increasing
the businesses profile and reputation
among key customers.
Cost competitiveness is critically important
and the business continues to invest to
deliver cost efficiencies at its production
and supply chain sites.
2008 Outlook
Nutritious, fresh and natural continue to
be the key drivers of demand for food and
beverage products among Irish consumers.
Continued investment to support our
brands, a drive to restore margins through
price recovery and disciplined cost
management will underpin a better result
from this business in 2008.
Pigmeat
The performance of Glanbia Meats was
neutral in 2007 when compared with 2006.
Glanbia announced the sale of the pigmeat
business on 3 March 2008 and the exit
created a net exceptional charge of
€20.4 million.
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Every day Irish consumers
take home almost 2 million
Glanbia consumer food
products.
Agribusiness & Property
Market
Leader
In recent years Agribusiness has
reorganised its branch structure
and now operates from 61 retail
locations – of which 12 are
CountryLife stores.
Three year revenue analysis (€’000)
229,142
264,492
292,581
2005
2006
2007
Strategy
The strategy for the business is to grow
market share in core sectors by focusing
on the development of distinctive
propositions for target customers in retail
and farm segments. The reshaping of the
business will continue to ensure Glanbia
has the most cost effective, efficient value
chain for each core offering.
The retailing strategy under the
CountryLife banner is to capture the
convenience needs of a growing rural
population with a focused offering in
horticulture, pet care and equestrian,
whilst also catering for the needs of
the core farmer customer base with an
extended farm hardware offering.
Agribusiness
Agribusiness is engaged primarily in feed
milling, grain processing and marketing,
and the retailing of a range of farm inputs,
to the Group’s farmer supply base. Its
portfolio also includes CountryLife, which
is a broader retail offering. Agribusiness is
market leader in animal feeds, fertilisers,
seed grain, chemicals and veterinary
product sales. The business employs 510
people and operates in 16 counties in
Ireland.
2007 Performance
Agribusiness had a satisfactory
performance in a competitive trading
environment and results were broadly in
line with 2006. This business unit performed
well in its core feed and fertiliser markets
and continued to rationalise and reinvest
to ensure a cost effective and efficient
supply chain. The Agribusiness retail
strategy, under the CountryLife format, is
making good progress with 12 branches
redeveloped to date.
14
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 7
Colm Eustace, CEO Glanbia Agribusiness
Ger Mullally, CEO Glanbia Estates
Agribusiness & Property Summary
Revenue
+11%
Operating profit
pre exceptional
-24%
Revenue
Operating profit
Operating margin
2007
€292.6m
€12.8m
2006
€264.5m
€16.9m
4.4%
6.4%
This division includes Agribusiness which is the key link to the Group’s Irish
farmer supply base; and Property, which is tasked with maximising the value
of the Group’s property portfolio.
Revenue in this division was up 11% to €292.6 million (2006: €264.5 million)
driven by volume growth and pricing in Agribusiness. Operating profit
was down 24% by €4.1 million to €12.8 million (2006: €16.9 million) as a
stable performance in Agribusiness was offset by a reduction in profit from
Property due to the timing of property disposals during the year.
Outlook
2007 was a reasonable year for farmers,
notwithstanding the challenges in the
beef and pigmeat sectors. There is
undoubtedly a sense of optimism amongst
farmers about the long term future of food
production in Ireland.
Over the longer term the number of
commercial farmers will continue to
reduce and Glanbia Agribusiness is
positioning itself to be able to service
the changing needs of this farmer base
whilst recognising the potential created
by growing rural population. There
is a positive outlook for key farming
sectors, including dairy and cereals,
which underpins an expected satisfactory
performance in 2008.
Property
The remit of the Property business, which
trades as Glanbia Estates, is to review and
maximise the value of Glanbia’s portfolio
of properties, with a particular focus
on a number of properties which have
development or alternative use potential.
2007 Performance
The timing and pacing of property
transactions is difficult to manage with
a degree of precision. During 2007 the
number of property disposals completed
was lower than 2006, mainly due to timing
issues and as a result the operating profit
of the property business was lower than
in 2007. Good progress was made in
progressing the next phase of potential
property transactions.
Strategy
The property business is focused on the
implementation of the most appropriate
strategy on a site by site basis and
includes a mix of potential options
including disposals.
2008 Outlook
With a significant number of its properties
commercial in nature, Glanbia is well
placed to benefit from the resilience of
this part of the market. As a result, the
Property business expects to continue
to contribute positively to Group
profitability and cash flow, with a pipeline
of transactions which are forecast to be
completed at a steady pace over the
medium term.
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Food Ingredients & Nutritionals
No. 1 cheese
International operations gained momentum
in 2007 with strong revenue, profit and margin
increases. These businesses delivered good
organic growth and sustainable margin
expansion, against a backdrop of favourable
market conditions.
Food Ingredients Ireland
This business is the largest dairy
ingredients business in Ireland,
assembling a milk pool of 1.4 billion litres
from the Group’s 4,500 Irish milk suppliers
and processing it into butter, cheese, milk
proteins and whey derivatives. It markets
over 200,000 tonnes of dairy products and
ingredients on a business-to-business
basis to customers in over 40 countries
and most of its total output is sold to
international markets. In addition to milk
supplies from Glanbia’s farmer members,
a network of suppliers of cream, raw
whey and skimmed milk is an important
element of the strategic development of
the business.
Food Ingredients Ireland employs
550 people at two locations, Ballyragget,
County Kilkenny and Virginia,
County Cavan.
2007 Performance
2007 was a positive year for both
producers and processors in the Irish
dairy industry. Favourable market
conditions including increased global
dairy demand drove prices to high
levels during the year. This situation
provided an opportunity for the European
Commission to reduce all export refunds
to zero and the absence of a balancing
mechanism between the EU and world
markets, which had been in place for
many years, gave rise to significant
volatility and high prices. Energy costs, a
significant element of cost discipline in a
large manufacturing business, were lower
relative to 2006 for the peak processing
season. These market conditions enabled
the business to restore margins to historic
levels and deliver significant benefits to
milk suppliers.
16
Rafael Jozelic and Alexander Simic on the cheese
packing line in our Twin Falls facility, Idaho.
Three year revenue analysis (€’000)
1,107,288
1,077,913
1,403,204
2005
2006
2007
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 7
Kevin Toland, CEO & President
Glanbia USA & Nutritionals
Jim Bergin,
CEO Food Ingredients Ireland
Revenue
+30%
Jeff Williams, President Glanbia
Foods Inc.
Jerry O’Dea, CEO Glanbia
Nutritionals - Ingredient
Technologies
Hugh McGuire, CEO Glanbia
Nutritionals - Customised
Solutions
Wayne Seltzer, President Seltzer
Companies, Inc.
Operating profit
pre exceptional
Food Ingredients and Nutritionals Summary
+93%
Revenue
Operating profit
Operating margin
2007
€1.4bn
€85.2m
6.1%
2006
€1.1bn
€44.2m
4.1%
Revenue increased 30% to €1.4 billion (2006: €1.1 billion) primarily due to
volume growth and higher global dairy markets in 2007. Operating profit
was up 93% to €85.2 million (2006: €44.2 million) while margins grew
strongly, by 200 basis points, to 6.1%. The operating profit and margin
growth was due to a good performance from Food Ingredients USA, an
increased contribution from the higher margin Nutritionals business and a
recovery of margins in Food Ingredients Ireland to their historic levels.
Strategy
The strategy for this business continues to
be to maximise returns from raw material
inputs, through a focus on providing a
growing and innovative offering of dairy
ingredient solutions to its expanding
customer base. Food Ingredients
Ireland is also increasing resources in
its innovation function with the support
of Enterprise Ireland. This function also
develops a pipeline of new products for
Nutricima in Nigeria.
Food Ingredients Ireland’s supply
strategy includes growing the business
in line with milk expansion from its
supplier base, continuing to identify
sensible consolidation opportunities in
the industry, strengthening the product
mix in the context of a changing market
environment and continuously pursuing
efficiencies to offset increasing costs.
The past year has seen the installation of a
new Milk Protein Concentrate facility with
proprietary technology to produce high
specification protein ingredients for the
nutritional and fresh dairy product sectors.
This plant will be in full production in the
first quarter of 2008. The cheese facility
is undergoing a significant investment
programme which will increase capacity
by 30% and utilise new technology
targeted to produce niche cheese variants
for emerging and developing markets.
Both projects have been supported by
The Department of Agriculture, Fisheries
& Food and Enterprise Ireland.
The pursuit of efficiencies is a key
component of managing this business
and an ongoing cost reduction
programme is based on further
automation of processes and plants.
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Food Ingredients & Nutritionals (continued)
During 2007 a particular
emphasis was placed on
energy management and
as a result Food Ingredients
Ireland became the first Irish
dairy company to be awarded
the IS393 Standard for
Energy Management.
2008 Outlook
The current long term outlook for dairy
markets is positive based on demand
growth outstripping supply growth.
The impact of bio fuels, grain prices,
energy prices, climate change and
changes in the global economy are
major factors impacting the operating
environment. Energy and climate change
issues serve to underpin Ireland’s position
as a relatively low cost producer of high
quality dairy products. Irish milk suppliers
and processors will take on the challenge
of developing their production capability
and expanding their enterprises to
underpin the growth of a world class
industry.
Pat Bergin pictured with the first two blocks of cheese
produced in the newly expanded cheese facility in
Ballyragget, Ireland.
18
Food Ingredients Ireland is well set for
the challenges of short term volatility
in markets. Investment in its business
processes and product mix positions the
business to sustain performance in 2008.
Food Ingredients USA
Combined with its joint venture
Southwest Cheese, the Group is the
largest producer of American style
cheddar cheese in the USA with close to
a 17% market share. Glanbia USA is also
one of the world’s leading producers of
whey-based nutritional ingredients.
Food Ingredients USA is located in one
of the fastest growing milk regions in
the country - Idaho. Both Idaho and
New Mexico, which is the location of the
Southwest Cheese joint venture, are in
the top 10 states for milk production in
the USA. The Idaho facilities employ 600
people.
In total the Idaho and Southwest Cheese
facilities processed nearly 2.8 billion
litres of milk in 2007 and sold over
318,000 tonnes of cheese, achieving a
record US$1 billion revenue from cheese
for the first time. Cheese is sold on a
business-to-business basis to some of
the largest cheese suppliers of natural
and processed cheese, in both branded
and private label formats, to the retail,
food service and food ingredient sectors.
Glanbia operations in the USA also
produced nearly 57,000 tonnes of dairy-
based nutritional ingredients in 2007.
2007 Performance
In 2007, strong cheese markets in the
USA and global whey markets, together
with production expansion drove good
revenue growth in Food Ingredients USA.
Demand for American style cheddar
cheese increased during the year and
production output was expanded to meet
this growing market demand. As the
number one supplier of American style
cheddar cheese, this business continues
to increase its relevance to customers
with new product development initiatives
and in 2007 commenced the production
of organic cheddar cheese to serve a fast
growing segment of the market.
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 7
Overall, the Food Ingredients USA
business performed very well and
delivered a strong set of results, in a
favourable market environment.
Strategy
Glanbia’s USA cheese strategy is to be
the most relevant supplier of American
style cheddar cheese to key industrial
customers and to retain and grow its
number one position. This business
also plans to diversify into value-added
products, such as organic cheddar
cheese.
A new and growing demand for American
style cheddar cheese internationally has
opened up further export opportunities
for the business.
Foods Ingredients USA has strong
and long-standing relationships with
leading suppliers who, in turn, have well-
established relationships with industry
leaders in retail, food service and food
ingredient sectors of the cheese business.
Product excellence is a
core value proposition and
Glanbia cheese is a perennial
multiple medal winner at
World and USA Cheese
Championships.
2008 Outlook
The outlook for milk production in Idaho,
as well as New Mexico, is excellent for
2008. Domestic demand for American
style cheddar cheese is greater than the
current supply and, commercially viable
export opportunities are increasing. The
weaker US Dollar has been a factor in
driving this export demand. Export sales
will enhance customer relationships, as
Food Ingredients USA seeks to meet the
needs of its customers in other countries.
A good performance is expected from
this business in 2008.
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Food Ingredients & Nutritionals (continued)
% growth in sports
nutrition market
Glanbia Nutritionals
produces a wide range of
speciality whey proteins,
customised premix solutions
and other nutritional
ingredients for use by
infant formula, food and
beverage companies in
ready-to-drink and powdered
beverages, nutritional bars,
dairy products, snacks and
confectionery applications.
Nutritionals
The Nutritionals business unit is a leading
supplier of advanced technology whey
proteins and fractions. In recent years it
has expanded its portfolio to include a
global capability in customised nutrient,
vitamin and mineral premixes through
its acquisition of Seltzer Companies, Inc.
in the USA and Kortus Food Ingredients
in Europe. Glanbia Nutritionals services
the health and wellness, functional
foods, sports nutrition, infant and clinical
nutrition sectors with a range of patented,
branded solutions.
This business unit is building a worldwide
reputation for customised products,
innovative processing technologies and
excellent customer service. The business
continues to evolve with 350 employees
at locations in USA: (Wisconsin, Idaho,
Illinois and California); Canada; Europe
(Ireland, Germany, UK, Belgium); South
America (Brazil, Uruguay, Argentina)
and Asia Pacific (Shanghai, Suzhou,
Singapore, Malaysia).
2007 Performance
Revenues, profits and margins grew
in the Nutritionals business in 2007
driven by strong global whey markets,
good organic growth and the first full
year contribution from the 2006 Seltzer
acquisition.
The Group’s Nutritionals business
continued to grow and perform
well, driven by the successful
commercialisation of several new
ingredient solutions, the strong demand
for whey protein worldwide and the
increased demand for premix solutions.
In addition, the global nutritional market
exhibited positive growth in key sectors
of weight management, sports nutrition
and infant nutrition.
Glanbia Nutritionals is continuously
developing new technologies and
processes to improve its portfolio of
nutritional solutions.
20
% growth in sports
nutrition market
Innovation
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 7
Through our network spanning
Asia, Europe, the USA and
Canada, our well resourced
Innovation Centres in Ireland
and the USA, and through
partnerships with academic
institutions, the Glanbia
Nutritionals Innovation team
delivers expert science-based
nutritional solutions to meet
customer demands.
These innovative nutritional solutions include a variety of specialty
whey protein and fractions, milk proteins, dairy calcium, minerals,
vitamins, flax, and other nutritional ingredients.
Our brands include Provon® WPI, Avonlac™ WPC, Thermax® whey
proteins, Prolibra® weight management solution, Meadowpure™,
CFM® WPI, Bioferrin® lactoferrin, Salibra® bioactive whey fraction,
Trucal® dairy calcium, Provon Revive® a sports protein recovery
solution, Olivactive® an olive based antioxidant, Barflex®, BarMax™,
BarGain™ and BarPro™ bar solutions as well as CVH and ActiNOS™
peptides.
During 2007 additional investments were
made in the business including:
• In September, Glanbia acquired
Pizzey’s Milling, the industry’s leading
supplier of flax seed solutions, thereby
expanding its nutritional portfolio
beyond milk-based solutions into
Omega-3 and lignan products
• In December, a new premix facility was
completed in China
• During the year sales offices were
opened in Singapore, Malaysia and
Indonesia. The South East Asia market
offers strong growth prospects in
addition to China and this market
presence supports the Group’s planned
expansion in the region.
Strategy
The vision of Glanbia Nutritionals is
to become one of the most relevant
players in the delivery of science-based
nutritional ingredients and solutions to
the global nutrition industry. This will be
achieved through acquisition and joint
venture, capacity expansion and through
continued investment in research and
development, in both dairy and non dairy
sectors. Innovation is key to the future
development of this business and is
supported by Group Innovation, which is
centred in Ireland. The strategic objective is
to deliver new and innovative products and
solutions that will afford Glanbia a point of
difference in the market place and deliver
value to customers. Successful delivery of
strong customer partnerships is based on a
clear focus on finding innovative solutions
to customer needs.
2008 Outlook
Key global consumer trends in health
and wellness create a very positive
background for the Nutritionals business.
Very strong dairy markets prevailed
throughout 2007 and while prices are
expected to retreat from their 2007 peaks,
the expectation is that prices will remain
above historical averages in the medium
term. Glanbia’s growth in the vitamin and
premix market was strengthened further
in 2007 with the building of a new state of
the art manufacturing facility in Suzhou,
China. Overall strong organic growth is
forecast for the Nutritionals business unit
in 2008.
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The global nutritional
market exhibited strong
growth in 2007 and is a
market with an estimated
value of US$228 billion per
annum.
The ability to isolate and
market key anti-obesity dairy
components - supported by
cellular, animal and human
dietary intervention studies
- presents a strong growth
opportunity for Glanbia.
Joint Ventures & Associates
Key locations
UK, USA and Nigeria.
Description
Southwest Cheese, New Mexico,
is one of the largest natural
cheese and high protein whey
processing plants in the world.
Glanbia Cheese is the no. 1
producer of mozzarella cheese
for the European market.
Nutricima manufactures and
markets branded dairy based
consumer products for the
Nigerian market.
The Group has a number of smaller
Agribusiness and Food Ingredients Joint
Ventures & Associates.
Joint Ventures & Associates
Glanbia’s share of revenue was up 41%
to €372.1 million in 2007 as key joint
ventures delivered strong top line growth
and good operational performances.
However, Glanbia’s share of profit after
tax and interest declined €1.8 million to
€1.0 million, directly as a consequence
of the performance of Glanbia Cheese,
which suffered as a result of a time lag
in recovering increased milk cost in the
market place.
USA: Southwest Cheese
Southwest Cheese, located in Clovis,
New Mexico, is one of the largest
natural cheese and high protein whey
processing plants in the world. It is a
50:50 joint venture between Glanbia and
the Greater Southwest Agency.
The milk is supplied by members
of the Greater Southwest Agency,
- Dairy Farmers of America, Select Milk
Producers Inc., Lone Star Milk Producers
and Zia Milk Producers.
With a background in large scale dairy
operations, Glanbia was responsible for
the plant design and construction of the
facility, which was commissioned in 2006.
Glanbia sells the cheese and whey
produced on a commission basis. The
business employs 240 people.
2007 Performance
The Southwest Cheese facilities ramped
up towards full capacity in 2007 and
strong revenue growth was achieved
as the business performed very well.
Margins, however, were reduced as
buoyant dairy markets drove raw material
input costs to a level which was not
recovered in the market place during
the year.
Overall, Southwest Cheese achieved
key operational metrics in 2007 and
produced 123,000 tonnes of American
style cheddar cheese, equivalent to 7%
of the USA market.
International joint ventures
are a key element of the
Group’s growth strategy
and represent an excellent
opportunity for leveraging
Glanbia’s core capabilities in
cheese, scale processing and
developing new markets.
In 2007, Southwest Cheese also
produced 8,000 metric tonnes of high
protein whey powder for domestic and
international nutritional markets. The
large scale, automated facility allows
Southwest Cheese to produce a high
quality product in high volume.
22
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 7
Glanbia’s share of revenue
+41%
2008 Outlook
2007 represented a milestone in terms of
the evolution of the business. Southwest
Cheese has built a strong team capable
of delivering world class performance in
an ever changing market place, with a
clear focus on quality, consistency and
efficiency. The facility is now operating at
capacity, delivering premium products to
a growing market.
The impact of higher milk prices on the
broad dairy spectrum is being managed
and the business is in a good position
to capitalise on its scale and efficiency.
Based on current market conditions,
Southwest Cheese is expected to deliver
improved results in 2008.
UK: Glanbia Cheese
Glanbia has a 50% interest in Glanbia
Cheese which is a joint venture with
Leprino Foods, USA. Glanbia Cheese
produces chilled and individually
quick frozen mozzarella cheese for the
European market in a variety of formats.
The company is the largest mozzarella
producer in Europe.
The business employs 350 people
at three sites, which includes two
cheese processing facilities and an
administrative centre.
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2007 Performance
This business had a difficult 2007.
Performance was impacted by escalating
milk prices and reduced milk availability,
and the time lag in achieving the
necessary price increases in the market
place.
During the year Glanbia Cheese
successfully strengthened its position
as Europe’s leading supplier. The
business also continued to invest in new
technology and during 2007 completed
the installation of a new string cheese
plant to meet the growing demand.
2008 Outlook
The Glanbia Cheese strategy is to
maintain and build on its position as the
leading supplier of mozzarella cheese in
Europe. This will be achieved by quality
product, quality people and quality
service. Cheese price increases were
secured as 2007 progressed and a better
result is forecast for this business in 2008.
Nigeria: Nutricima
Nutricima is a 50:50 joint venture with
PZ Cussons and supplies reconstituted
evaporated milk, milk powder and
energy powder to the local Nigerian
market. This is a large and growing
market which has a population of
140 million. The milk market is valued
at US$550 million and the overall food
processing market is growing at a rate of
14% per annum.
Increased oil prices and a relatively stable
political environment has underpinned
strong economic growth. This is giving
rise to increased wealth and an emerging
middle class, which supports good
demand for dairy products.
Nutricima employs 260 people at its
evaporated milk manufacturing plant and
a powder packing facility. In December
2006 the partners announced plans to
double the capacity of the evaporated
milk facility and to develop a second
facility to produce a further range of
ready to drink beverages to meet the
increasing requirements of this fast
growing, dynamic consumer market.
Glanbia is investing €16 million in these
projects.
2007 Performance
Despite strong competition, Nutricima
grew its market share and delivered
strong top line growth in 2007. While the
business performed satisfactorily, results
were impacted by significant raw material
price increases together with the need
to invest heavily in building its brand.
The business continues to innovate,
bringing new products to consumers.
New product development is strongly
supported by the Group Innovation
Centre, based in Kilkenny.
2008 Outlook
Nutricima is expected to make good
progress in 2008. The construction of a
second factory has commenced, with
completion forecast by the end of 2008.
A number of new product launches are
also planned including yogurt powder,
new Powerfist formats and flavoured
condensed milk.
23
Corporate social responsibility
As Glanbia grows and develops as a leading international Group in cheese and nutritional ingredients,
so also does our commitment to conducting our business in a way that is economically, socially and
environmentally sustainable.
During 2007 we made further progress in our corporate citizenship objectives under the four pillars
of Community, Environment, Workplace and Marketplace.
Environment
Better management of our energy
resources and usage is not only an
important contribution to protecting the
environment and to the challenge of
dealing with climate change, but it makes
good business sense as well.
Glanbia Food Ingredients Ireland is IPPC
licensed and ISO14001 Environmental
Management System accredited. During
2007 Glanbia Ingredients Ireland also
became the first Irish owned company to
receive the IS 393 Energy Management
System certification.To complement
this accreditation staff were trained
with respect to energy and waste
management and by comparison to 2006
figures waste to landfill was reduced by a
further 13% in 2007.
Progress in Ireland was echoed in the USA
where the Idaho Food Ingredients business
made further strides on energy efficiency,
waste water treatment and on recycling.
Initiatives include the Idaho water re use
projects which saved 600,000 gallons of
water per day and our recycling projects
which removed 30,693 kgs of cardboard,
1,340 kgs of aluminium, and 3,608 pallets
from landfill in 2007. In the USA we are
reducing energy consumption with the
use of bio gas for boiler fuel in Gooding.
In 2007, we have implemented important
environmental and energy management
steps that we intend to build on.
• Our Southwest Cheese joint venture in
New Mexico recycles 4.5 million litres
of water daily recovered from the milk
processing operations.
David Doran, CEO, CMRF at Our Lady’s Hospital Crumlin showing Brian Phelan, Glanbia Human Resources & Operational
Development Director the murals provided by Glanbia employees.
In the USA, we continued our strong
support for local communities in Idaho
- through a three year programme of
support for the Boys’ and Girls’ Club.
Food Ingredients USA funded a new
nutrition centre at the Twin Falls centre
and also supported another nutrition
centre at the Buhl Club, so bringing to
an end the project with the Club, which
involved employees and their families as
well as customers in a range of support
activities. Elsewhere our Nutritionals team
in Suzhou near Shanghai were pleased
to host the Irish Volunteers when the
Special Olympics were held in China last
October.
• Over the past three years the Group
has made a significant difference
through fundraising and practical
support for Our Lady’s Hospital for Sick
Children in Ireland and the Boys’ and
Girls’ Club in Idaho, USA.
Community
Glanbia continues to foster company and
employee involvement and support for
the local communities where we operate.
In Ireland we continue our strong
association with Junior Achievement
Ireland through ongoing employee
volunteering whereby the Group allows
people time out to mentor primary and
secondary school students, particularly
on business subjects. We also continue
to encourage the promotion of fitness
and health through our ongoing and long
standing corporate relationship with the
GAA (The Gaelic Athletic Association)
through sponsorships of the Kilkenny and
Waterford senior hurling teams.
We have just come to the end of a very
worthwhile three year programme in
support of Our Lady’s Hospital for Sick
Children Crumlin, in Dublin. In 2007
Glanbia invested in providing six new
state of the art anaesthetic machines.
Through our employees involvement the
hospital was able to commission murals
on the walls of the hospital’s Radiography
Department. Thus, a traditionally gloomy
and somewhat daunting section of the
hospital has been enlivened and the
reaction of children and their parents has
been very positive.
24
Workplace
Glanbia employs 4,900 people. We
are determined to attract and retain
high performing people and work with
individuals to realise their potential,
which is critical to our growth and
success.
In 2007 training was provided at all levels
- technical development for operational
personnel, professional development for
finance, sales, marketing and innovation,
and management development targeted
at the appropriate levels of management
experience. In all 504 employees received
a total of 863 days of development
training.
Importantly we have robust health
and safety policies and practices in
place throughout all businesses.
Our key indicators have shown
continuous improvement since we were
formed in 1997, with continuous Health
& Safety training for employees around
the globe. During 2007, 1,054 employees
received a total of 5,960 days of health
and safety training. We have policies in
place to deal with diversity, ethics, equal
opportunities, disability, harassment and
bullying.
In 2007, we delivered a strong
programme to enhance the quality of
internal communications with the re-
launch of the Group intranet site. 76%
of all employees had face-to-face team
briefings and we continued to invest
in ongoing performance development
programmes.
• Since Glanbia plc was formed in 1997,
the frequency and cost of workplace
accidents has continuously improved
- down from 348 in 2002 to 190 in 2006.
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 7
Community
Workplace
For the past two years we have been working
some magic with the Boys’ and Girls’ Club, Idaho.
The Club offers disadvantaged kids a caring, safe
and fun place to learn and develop.
Amanda Montano, Southwest Cheese, USA
employee, New Mexico who works as a cheese
operator in the company. Health and safety at
work is an important part of our business and we
have policies and practices in place to protect our
employees.
Environment
Marketplace
This year, Glanbia achieved an energy ‘first’
- when we were accredited to the IS 393 Energy
Management System. The Food Ingredients Ireland
team are featured here with Brian Motherway,
Sustainable Energy Ireland and John Ryan,
Certification Europe.
We are what we eat. That’s why increasingly
consumers want to know more about the
ingredients in the food products they eat.
92% of Glanbia products display information
about the ‘Big 8’ key nutrients.
Marketplace
With Irish household brands, including
Avonmore, Premier, Yoplait, Kilmeaden,
Snowcream and CMP, Glanbia‘s
consumer foods brands have been at
the heart of Irish life for decades. These
brands have a proud legacy and a
reputation founded on trust and loyalty
- values which are at the core of our
vision and brand values and to which
the business is fully committed through
responsible brand management.
Glanbia processes and markets almost
two million consumer packs in Ireland
each day. From farm to plate we take our
responsibility to consumers seriously with
initiatives such as the annual Glanbia Milk
Quality Awards and the annual Glanbia
Grain Quality Awards to recognise the
critical role played by milk suppliers
and grain growers in food safety and
quality. Glanbia is also accredited by the
British Retail Consortium global standard
and our consumer foods facilities
are all accredited to the ISO14001
Environmental standard.
Glanbia engages with our consumers in a
variety of ways - we listen through focus
groups and independent research and we
are committed to providing consumers
with all the information they need to
make informed choices about healthy
eating. We already provide information
on key nutrients on more than 92% of our
products and are currently developing a
system to include GDA (Guideline Dietary
Amount) information on all packaging.
• We check on consumer satisfaction
with our products continuously. In
Ireland in 2007 we spoke directly to
more than 6,700 consumers to make
sure they were satisfied with our
products and advertising.
• Food Ingredients USA and Southwest
Cheese won gold again for their
cheese at the 2007 World Cheese
Championship.
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Finance review
“ Good organic growth,
disciplined cost and margin
management saw the Group
deliver a 34% increase in pre
exceptional profit before tax
and a 68% increase in free
cash flow.”
Joint Ventures & Associates
The Group’s share of results of joint
ventures and associates, post interest
and taxation amounted to €1.0 million
compared with €2.8 million in 2006,
despite strong top line growth of 41%.
This result reflects margin pressures in
the businesses due to a time lag in the
recovery of significant increases in dairy
raw material prices across the world,
particularly in Glanbia Cheese, the UK
mozzarella joint venture with Leprino
Foods. The Group’s share of operating
profit of joint ventures & associates
(pre interest and tax) grew by €0.5 million
to €5.9 million.
Profit before tax
Profit before tax pre exceptional increased
34% from €74.4 million in 2006 to €99.5
million in 2007.
Summary
The successful delivery of Glanbia’s
growth strategy has enhanced the Group’s
earnings and cash flow and is reflected
in an excellent set of results this year. In
2007, revenue increased 19% to
€2,206.6 million (2006: €1,853.4 million),
driven by a 30% increase in revenue
in the Food Ingredients & Nutritionals
division, where a combination of price and
volume growth and a full year contribution
from Seltzer Companies, Inc. acquired
in September 2006, drove a strong
performance.
Operating profit pre exceptional grew
35% (€30.2 million) to €115.8 million
(2006: €85.6 million). Operating margin
pre exceptional increased 60 basis points
to 5.2% (2006: 4.6%).
Net financing costs
Financing costs pre exceptional increased
€3.3 million to €17.3 million (2006: €14.0
million) due primarily to higher interest
rates. Interest cover was 6.7 times in 2007,
an increase from 6.1 times in 2006.
26
Summary income statement
Revenue(1)
Operating profit pre exceptional
Operating margin pre exceptional
Net financing costs
Share of results of joint ventures and associates(1)
Profit before tax pre exceptional
Taxation pre exceptional
Profit after tax pre exceptional
Exceptional items(2)
Earnings per share
Adjusted earnings per share(3)
Dividend per share in respect of the year
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 7
2007
2006
Change
€2,206.6m €1,853.4m
€115.8m
€85.6m
Up 19%
Up 35%
5.2%
4.6%
Up 60bps
(€17.3m)
(€14.0m)
Up €3.3m
€1.0m
€99.5m
€2.8m Down €1.8m
€74.4m
Up 34%
(€16.4m)
(€8.0m)
Up €8.4m
€83.1m
(€22.8m)
€66.4m
(€0.1m)
Up 25%
See note
20.4c
28.2c
6.08c
22.5c
Down 9%
22.6c
5.79c
Up 25%
Up 5%
1. Revenue including Glanbia’s share of the revenue of Joint Ventures & Associates was €2.6 billion in 2007, up 22% on 2006. Share of results of Joint Ventures & Associates is an
after interest and tax amount.
2. On 3 March 2008 Glanbia announced the sale of Glanbia Meats in a Management Buy Out. This disposal is consistent with the Group’s strategy of focussing on key growth
areas of cheese and nutritional ingredients. The exit from Glanbia Meats resulted in a net exceptional charge in the year of €20.4 million. Restructuring costs relating to Yoplait production
facilities in Consumer Foods Ireland were €2.4 million during the year.
3. Before exceptional items
Revenue
+19%
Glanbia’s international
activities continued to grow
successfully and international
margins, including Joint
Ventures & Associates,
increased 140 basis points.
Profit before tax pre exceptional
+34%
Taxation
The pre exceptional tax charge for
2007 increased €8.4 million to €16.4
million (2006: €8.0 million), reflecting the
increased level of international profits
which attract higher tax rates, in the
Group. The tax effect of the exceptional
charges in 2007 resulted in an exceptional
tax credit of €0.6 million. The exceptional
tax credit in 2006 arose on the recognition
of a deferred tax asset relating to tax
losses in former UK operations.
Exceptional items
The net exceptional charge for the year
amounted to €22.8 million compared with
€0.1 million in 2006. Exceptionals before
tax amounted to €23.5 million in 2007 and
€12.5 million in 2006. 2007 exceptional
items include €20.4 million relating to the
Group’s exit from the Pigmeat operations
and €2.4 million restructuring costs in
the Irish Consumer Foods business. In
2006 the exceptionals before tax amount
of €12.5 million included €3.3 million
restructuring costs relating to the 2006
closure of the Pigmeat canning operations
and €9.2 million relating to the disposal
of the Group’s remaining 25% interest and
related loan note in The Cheese Company
Holdings Limited.
The Group completed a strategic review
of its Pigmeat operations in 2007 and
as a result decided to exit this sector.
This involved a settlement with the
Group’s insurers in relation to a fire at
a pigmeat processing facility in Ireland
in August 2007 and the sale of the
Pigmeat facilities to a Management
Buy Out team, led by Jim Hanley, Chief
Executive of Glanbia Meats on 3 March
2008. This transaction gave rise to a net
€20.4 million exceptional that includes a
provision of €23.0 million and €2.6 million
profit on the disposal of the canning
operations site. The decision to exit the
business released €35.0 million of cash
for the Group, which will be reinvested in
strategic higher growth projects.
Earnings and dividends
Earnings per share declined 9% to
20.4 cent (2006: 22.5 cent) due to the
exceptional items. Adjusted earnings per
share increased 25% to 28.2 cent (2006:
22.6 cent). The Board is recommending
a final dividend of 3.58 cent per share,
compared with a 3.41 cent per share
final dividend in 2006. This brings a
total dividend for the year to 6.08 cent
per share (2006: 5.79 cent per share),
representing a 5% increase. Subject to
shareholder approval, dividends will
be paid on Tuesday, 20 May 2008 to
shareholders on the register of members
as at Friday, 25 April 2008.
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Finance review (continued)
2007 divisional results including Joint Ventures & Associates
Ireland
Revenue
€m
510.8
292.6
803.4
Revenue
€m
1,403.2
372.1
1,775.3
2007
Operating
profit*
€m
17.8
12.8
30.6
2007
Operating
profit*
€m
85.2
5.9
91.1
Operating
margin
%
3.5
4.4
3.8
Operating
margin
%
6.1
1.6
5.1
Revenue
€m
511.0
264.5
775.5
Revenue
€m
1,077.9
262.9
1,340.8
2006
Operating
profit*
€m
24.5
16.9
41.4
2006
Operating
profit*
€m
44.2
5.4
49.6
Operating
margin
%
4.8
6.4
5.3
Operating
margin
%
4.1
2.1
3.7
• €19.7 million expenditure on acquisitions,
net of disposals including deferred
consideration on prior year acquisitions
• €39.8 million expenditure on strategic
development capital projects, including
further investment in international joint
ventures
• €17.3 million on equity dividends
Glanbia has an active development
programme and has two acquisition
teams - one in Europe and one in the
USA - who continually analyse a range
of potential projects. Our principal focus
is on nutritional acquisitions, which add
value through complementary ingredients
or technologies, in this high growth and
higher margin sector.
Net debt
Net debt at the end of the year
was €220.2 million compared with
€224.5 million in 2006, a reduction of
€4.3 million. The movement in net debt
reflects the reinvestment of the cash
generated by the Group in its growth
strategy. The Group targets acquisition
and investment opportunities that are
value enhancing and the Group’s policy is
to fund these transactions from cash flow
or borrowings. The Group sets EBITDA
(Debt to Earnings before Interest, Taxation,
Depreciation and Amortisation) targets
that allow flexibility to accommodate
acquisition and development
opportunities. These targets recognise that
the Group’s net debt is subject to seasonal
fluctuation above year end debt levels.
2007 divisional results
The Group’s Irish operations include
Consumer Foods and Agribusiness &
Property. International activities include
Food Ingredients & Nutritionals and key
joint ventures. Food Ingredients Ireland
is included in international activities as
its products are sold to international
customers.
The 2007 dairy environment had differing
implications across the business portfolio.
While revenue was up 3.6% in the Irish
operations, margins were reduced,
primarily due to the timing of recovery in
the market place of higher milk costs in
Consumer Foods Ireland. Overall revenue
in international operations grew strongly
by 32%, due mainly to higher pricing.
Operating margins in the Food Ingredients
and Nutritionals business expanded due
to strong markets, good organic growth,
the first full year contribution from the 2006
Seltzer acquisition in the USA and Food
Ingredients Ireland margins returning to
historical levels.
While there was good volume and revenue
growth in the joint ventures & associates,
operating margins declined as margin
expansion in Southwest Cheese was offset
by a margin reduction in Glanbia Cheese,
the UK mozzarella joint venture.
Balance sheet and cash flow
Strong free cash flow was generated in
the year, increasing by €22.7 million to
€56.3 million (2006: €33.6 million). Free
cashflow was, after business sustaining
capital investment of €20.8 million (2006:
€18.9 million). This cash combined
with proceeds from asset disposals and
insurance proceeds of €20.5 million was
invested as follows during the year:
Consumer Foods
Agribusiness & Property
TOTAL
International
Food Ingredients & Nutritionals
Joint Ventures & Associates
TOTAL
*Pre exceptional
The Group’s debt levels
at the end of the year
were similar to 2006 and
2005 levels, despite the
increased size of the
Group and acquisition and
development expenditure
of €144 million over the two
year period.
28
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 7
Free cash flow
Free cash flow
+ €22.7m
EBITDA pre exceptional
Working capital movement
Net interest and taxation paid
Business sustaining capital investment
Free cash flow
Net finance costs ratios
Net debt: EBITDA (times)
EBITDA: Net finance cost (times)
2007
1.5
8.6
2006
2.0
8.1
2007
€m
149.2
(52.1)
(20.0)
(20.8)
56.3
2005
2.1
8.2
2006
€m
114.3
(36.6)
(25.2)
(18.9)
33.6
2004
2.3
7.0
Financial risk management
The conduct of Glanbia’s ordinary business
operations necessitates the holding
and issuing of financial instruments and
derivative financial instruments by the
Group. The main risks arising from issuing,
holding and managing these financial
instruments typically include liquidity risk,
interest rate risk and currency risk. The
Group approach is to centrally manage
these risks against comprehensive policy
guidelines. The Board agrees and regularly
reviews these guidelines. More detailed
information on financial risk is contained in
note 3.1 ‘Financial risk factors’ in the notes
to the financial statements.
Share price and market capitalisation
Glanbia’s share price performed strongly
during 2007. The closing share price at the
year end was €4.59 and the share price
high/low during the year was €5.08 and
€3.12 respectively. This compares with a
year end closing share price of €2.96 in
2006 and a share price high of €3.13 and
low of €1.93 during the year.
Glanbia’s market capitalisation at the year
end was €1.346 billion compared with
€0.868 billion at year end 2006.
Investor relations
Glanbia operates an active domestic
and international Investor Relations and
Financial Media Relations Programme each
year. In 2007 management met with over
170 existing and potential investors
In 2007, the Group has
continued to improve its
debt to EBITDA ratio and
sustained a strong interest to
EBITDA cover ratio.
and visited 15 cities in 12 countries. The
Group has a 45% free float, which is well
balanced between institutional and retail
investor ownership and between domestic
and international institutional ownership.
Conclusion
Glanbia has successfully improved all key
financial performance indicators during
2007. We are also on track to deliver our
three year strategic financial targets.
The hallmark of the 2007 results is the
improvement in the financial strength of
the Group and the enhancement of our
financial capacity to continue to deliver on
our growth strategy.
Geoff Meagher
Deputy Group Managing Director/Group
Finance Director
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Risk and risk management
The management of risk is key to the achievement of Glanbia’s strategic and financial objectives. The Board
is ultimately responsible for the Group’s risk management system which is designed to manage, rather than
eliminate the risk of failure to achieve business objectives. There is an ongoing process in place for identifying,
assessing, managing, monitoring and reporting on the significant risks faced by individual group companies
and by the Group as a whole. This process has been in place for the year under review up to and including the
date of approval of the 2007 Annual Report and Accounts. We have identified the key areas of risk and these,
together with the steps we take to mitigate them, are shown below.
Risk
Global economic
downturn
Impact
Mitigation
A global economic downturn could curtail
demand.
• Balanced spread of business, with an emphasis
on developed economies.
• Continue to diversify earnings base to reduce
volatility in financial results.
Food
safety
Glanbia must maintain the highest standards of
food safety.
• Our processing sites operate world class
quality and food safety systems.
• These systems are regularly reviewed to ensure
they remain effective and follow best practice.
• Full compliance with all regulatory
requirements.
Legislation
and regulation
Group operations in processing, distribution,
packaging and labelling of food are governed
by extensive legislation, regulation, codes of
practice and guidance.
• The Group conforms to international and
local food safety, quality and environmental
regulations.
Competition
Significant product innovations, technical
advances or the intensification of price
competition could adversely affect the Group.
Environment
The Group continues to be committed to
sustainable growth in harmony with the
environment and the communities in which it
operates.
• The Group invests in research and
development and ensures that the introduction
of new products and improved production
processes positions the Group well in its
chosen markets.
• The Group also continually works to streamline
its cost base to ensure it remains competitive.
• The inclusion of environmentally friendly
objectives and risk management as part of the
overall business strategy.
• The maintenance of relationships with local
communities and authorities, regulatory
agencies and interest groups to create better
understanding and co-operation.
• The recycling and the re-using of raw materials and
the reducing of discharges to land, air or water.
Growth through
acquisition
There is a risk to the business if the Group is
unable to continue to grow as outlined in its
business plan due to an inability to source
and complete complementary acquisitions
and integrate the operations of the acquired
businesses.
• The Group’s management team has significant
experience in the areas of both pre acquisition
due diligence and post acquisition integration.
• Where appropriate, external resources are
engaged to assist with acquisitions and
investments.
30
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Risk
Health
and safety
Energy
costs
Loss of
a major site
Impact
Mitigation
Ensuring the safety, health and welfare of
employees, visitors to Glanbia operations,
surrounding communities and the public .
• Full compliance with relevant safety, health and
welfare legislation.
• Processes have been put in place to ensure
that workplace conditions, practices and
procedures are maintained to the highest
possible level of safety.
Large scale processing is an energy intensive
operation.
• Energy efficiency programmes throughout the
Group.
• In order to minimise the impact on energy
costs of price volatility, the Group will, where
necessary, enter into fixed price arrangements
to cover certain future energy requirements.
The Group operates from many key sites the loss
or significant destruction of any one of which
would present significant operational difficulties.
• The Group’s operations have business
continuity and communication plans in place to
manage the impact of such an event.
• The Group also has insurance programmes
designed to mitigate the financial
consequences.
Recruitment
and retention
The ongoing success of the Group is dependent
on attracting and retaining high quality senior
management and staff.
• The Group mitigates any risk associated
with loss of key personnel through robust
succession planning, strong recruitment
processes, long term management incentives
and retention initiatives.
Supply
chain
The Group’s ability to fulfil the demand for its
products is dependent on an efficient supply
chain.
• The Group mitigates this risk by maintaining
a broad supplier base and the Group is
committed to ensuring that suppliers continue
to choose the Group as the partner of choice.
Financial
risk
The conduct of 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, details of which are outlined in note
3.1 Financial Risk Factors in the notes to the
financial statements.
• The Board agrees and regularly reviews these
guidelines.
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Board of Directors
Chairman
Michael Walsh (aged 65) 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.
Group Managing Director
John Moloney B.Agr.Sc., MBA, (aged 53) is Group Managing Director since 2001 having been appointed to the Board in 1997.
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 was appointed Deputy Group Managing Director in 2000 and assumed the responsibilities of
Chief Operating Officer in 2001. Prior to joining the Group John Moloney 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
the Irish Business and Employers Confederation.
Executive Directors
Geoffrey Meagher CPA, (aged 58) joined the Board as Group Finance Director in 1993 and was appointed Deputy Group
Managing Director in 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 Toland FCMA, (aged 42) was appointed to the Board in 2003. He 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 in 1999, he held a number of senior management positions with Coca-Cola Bottlers in Russia and with
Grand Metropolitan plc in Ireland and Central Europe.
Non-executive Directors
Liam Herlihy 1,2 (aged 56)
is Vice-Chairman of Glanbia plc. He was
appointed to the Board in 1997. He is a
Director of Irish Co-operative Organisation
Society Limited and farms at Headborough,
Knockanore, Tallow, Co. Waterford.
John Callaghan FCA, FIB, (aged 65)
was appointed to the Board in 1998. He is a
Director of 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.
Henry Corbally 2 (aged 53)
was appointed to the Board in 1999. He is
Vice-Chairman of the National Dairy Council
and a Director of Kilmainhamwood Community
Employment Scheme Limited. He farms at
Kilmainhamwood, Kells, Co. Meath.
32
Victor Quinlan 2 B.Agr.Sc., (aged 62)
is Vice-Chairman of Glanbia plc. He was first
appointed to the Board in 1996. He is
Chairman of Irish Co-op Society Limited and
a Director of Malting Company of Ireland
Limited. He farms at Baptistgrange, Lisronagh,
Clonmel, Co. Tipperary.
Nicholas Dunphy (aged 47)
was appointed to the Board in May 2007.
He farms at Grawn, Kilmacthomas,
Co. Waterford.
John Fitzgerald 2 (aged 52)
was appointed to the Board in 2004. He farms
at Ross, Kilmeaden, Co. Waterford.
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 7
Jerry Liston B.A., MBA, (aged 67)
was appointed to the Board in 2002. He is
Chairman of the Irish Aviation Authority. He was
formerly Chief Executive of United Drug plc and
past Executive Chairman of the Michael Smurfit
Graduate School of Business.
Matthew Merrick (aged 56)
was appointed to the Board in 2005. He is the
Chairman of the County Offaly Enterprise Board
and a board member of IFAC Accountants.
He farms at Shean, Edenderry, Co. Offaly.
William Murphy B. Comm, (aged 62)
retired as Deputy Group Managing Director
of Glanbia plc in 2005. He was appointed to the
Board in 1989. He is a Director of IAWS plc and
a number of unlisted companies.
Michael Parsons (aged 58)
was appointed to the Board in 1999. He 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 Power 2 (aged 53)
was appointed to the Board in 1999 and
represents the Group on the Tus Forum and
the Progressive Genetic Advisory Committee.
He is a Master Farmer and farms at Corse,
Fethard-on-Sea, Co. Wexford.
1 Completed the Institute of Directors Development Programme (2006)
and holds a certificate of merit in Corporate Governance from the
Institute of Directors Centre for Corporate Governance at UCD.
2 Completed the ICOS Diploma in Corporate Direction
Edward Fitzpatrick 2 (aged 60)
was appointed to the Board in 1999. He is
a Director of South Eastern Cattle Breeding
Society Limited and Castlegannon Show
Limited. He farms at Knockmoylan,
Mullinavat, Co. Kilkenny.
James Gilsenan 2 (aged 48)
was appointed to the Board in 1999.
He farms at Drogheda Road, Collon, Co. Louth.
Patrick Gleeson (aged 46)
was appointed to the Board in 2006. He is a
Committee Member of Centenary Thurles
Co-operative Society Limited and farms at
Loughmore, Templemore, Co. Tipperary.
Paul Haran (aged 50)
was appointed to the Board in 2005. He serves
on the Court of Directors of the Bank of Ireland,
chairs the Board of the UCD Michael Smurfit
Graduate School of Business and holds a
number of other directorships.
Christopher Hill 2 B.Agr.Sc., (aged 49)
was appointed to the Board in 2000.
He is a Director of Wicklow Rural Partnership
Limited and a member of the Wicklow County
Development Board. He farms at Johnstown
House, Arklow, Co. Wicklow.
Martin Keane (aged 52)
was appointed to the Board in 2006. He is a
Director of Donaghmore Famine Work House
and Agricultural Museum Co-operative Society
Limited and farms at Errill, Portlaoise, Co. Laois.
Board Committees
Audit
Committee
J Callaghan - Chairman,
H Corbally,
J Fitzgerald, P Haran,
L Herlihy, J Liston,
E Power, V Quinlan.
Remuneration
Committee
J Liston - Chairman,
J Callaghan, P Haran,
L Herlihy, V Quinlan,
M Walsh.
Nomination
Committee
M Walsh - Chairman,
J Callaghan,
P Haran, J Liston.
Secretary
Michael Horan B. Comm, FCA,
Glanbia House, Kilkenny, Ireland.
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Business review
The Group had an excellent year in 2007. Operating profit pre
exceptional rose 35% to €115.8 million and adjusted earnings
per share were up 25% to 28.2 cent. These results reflect the
benefits of strategic investment programmes implemented
over recent years and the Group’s spread of businesses, against
a backdrop of positive global dairy markets. The driver was
the strong performance of the Group's largest division, Food
Ingredients and Nutritionals. This division delivered with good
volumes, improvements in operational efficiency and solid
growth in margins.
Comprehensive reviews of the development and financial and
operating performance of the Group during 2007 are set out in
the Managing Director’s review on pages 6 to 8, the separate
operations reviews for each of the divisions on pages 12 to 23
and the finance review on pages 26 to 29 including key financial
performance indicators on pages 26 to 29. The treasury policy
and objectives of the Group are set out in note 3.1 to the
financial statements.
Outlook
The Group’s vision is to be a world leader in international
cheese and nutritional ingredients. Realisation of this vision
is through a clear growth strategy, which has transformed the
Group in recent years and created a good spread of Irish and
international businesses in key markets and sectors.
Since 2004, the Group has invested significantly to support its
growth strategy with €293 million invested in acquisition and
development capital expenditure. During the same period
the Group’s portfolio of businesses has been reshaped with
disposals releasing €200 million for investment into higher
growth areas. The main focus has been on growing international
operations, with over 90% of the investment allocated to this
segment in 2006 and 2007.
The Group’s growth strategy is delivering. The Group is
confident of another good performance this year and the
Group is on target for double digit growth in 2008. More
importantly the Group continues to successfully develop a
strategic international presence in cheese and nutritional
ingredients. This, together with strong Irish operations,
is positive for sustained high growth into the future.
Report of the Directors
for the year ended 29 December 2007
Introduction
The Directors are pleased to present their report to
shareholders together with the audited financial statements
for the year ended 29 December 2007.
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; and maximising the value of the Company
and its subsidiaries (“the Group”) property assets.
Results and dividends
Revenue increased 19% to €2,206.6 million (2006: €1,853.4
million). This revenue increase was driven by a 30% increase
in revenue in the Food Ingredients and Nutritionals division,
where a combination of price and volume growth and a full
year contribution from Seltzer Companies, Inc., a leading US
nutritional solutions company acquired in September 2006,
drove a strong performance. Operating profit pre exceptional
grew 35% (€30.2 million) to €115.8 million (2006: €85.6 million).
Operating margin pre exceptional increased 60 basis points to
5.2% (2006: 4.6%). Basic earnings per share amounted to 20.4
cent compared with 22.5 cent in 2006, a decrease of 9%, while
adjusted earnings per share amounted to 28.2 cent compared
with 22.6 cent in 2006, an increase of 25%.
Net debt at the year end amounted to €220.2 million (2006:
€224.5 million). In 2007 free cash flow increased €22.7 million
to €56.3 million (2006: €33.6 million). EBITDA grew by €34.9
million to €149.2 million. The Group had capital and strategic
acquisition investment of €57.5 million in the year, over 90%
of which was spend on expanding international operations.
Working capital increased by €52.1 million during the year due
to higher global dairy markets and the increased size of the
Group overall.
An interim dividend of 2.5 cent per share on the ordinary
shares amounting to €7.3 million was paid to shareholders on 3
October 2007. The Directors have recommended the payment
of a final dividend of 3.58 cent per share on the ordinary shares
which amounts to €10.5 million. Subject to shareholders
approval this dividend will be paid on Tuesday, 20 May 2008 to
shareholders on the register of members as at Friday, 25 April,
2008, the record date.
Some key performance indicators are set out in the finance
review on pages 26 to 29. The financial statements for the year
ended 29 December 2007 are set out in detail on pages 45 to
106.
34
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 7
As at 29 December 2007, Options outstanding under the
Company’s 1988 Share Option Scheme and the 2002 Long Term
Incentive Plan (“LTIP”) amounted to 2,792,000 ordinary shares
(30 December 2006: 2,734,000) made up as follows:
Board of Directors
Mr Michael Keane retired on 31 May 2007 and Mr Nicholas
Dunphy was appointed to the Board on the same day. In
accordance with the Articles of Association of the Company,
Mr Dunphy will retire at the 2008 Annual General Meeting and,
being eligible, offers himself for re-appointment.
In accordance with the Articles of Association of the Company,
Messrs John Fitzgerald, Geoffrey Meagher and Victor Quinlan
retire from the Board by rotation and, being eligible, offer
themselves for re-appointment.
2002 LTIP and
Share option
scheme
No of Ordinary
Shares
Price Range
Dates
exercisable
2,792,000
€1.55 - €4.25
2008 – 2017
GBP£2.90
2008
In accordance with the provisions of the 2006 Combined
Code on Corporate Governance of the Irish and London Stock
Exchanges, Messrs Michael Walsh, Liam Herlihy, John Callaghan
and William Murphy, being Directors who have each served
a period in excess of nine years on the Board will retire at the
Annual General Meeting and, being eligible, offer themselves
for re-appointment.
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.
Employees
The Group’s 4,900 employees are the key to building
sustainable growth through delivery of the strategy. The Group
provides opportunity, development and reward to those who
enjoy working in a challenging delivery focussed environment
and is proud to be an employer of choice at its worldwide
locations.
As at 29 December 2007 Share Awards had been granted under
the Company’s 2002 LTIP over 134,600 ordinary shares (30
December 2006: 146,900).
As at 29 December 2007 Share Awards had been granted under
the Company’s 2007 LTIP over 183,500 ordinary shares (30
December 2006: Nil).
Share Trust
As detailed in note 27 to the financial statements at 29
December 2007, 234,190 ordinary shares were held in an
employee benefit trust for the purpose of the Group’s
employee share schemes. Whilst any shares in the Company are
held by the Trustees the Trustees shall refrain from exercising
any voting rights which may attach to the shares save that
if the beneficial interest in any share has been vested in
any beneficiary the Trustees shall seek and comply with any
direction from such beneficiary as to the exercise of voting
rights attaching to such share.
Substantial Interests
As at 4 March 2008, the Company has been advised of the
following notifiable interests in its ordinary share capital:
Books of account
The measures taken by the Directors to secure compliance
with the Company’s obligations to keep proper books of
account are the use of appropriate systems and procedures and
employment of competent persons. The books of account are
kept at Glanbia House, Kilkenny, Ireland.
Shareholder
Glanbia Co-operative
Society Limited
Bank of Ireland
Nominees Limited*
No of Ordinary
Shares
% of issued
share capital
160,277,308
54.7%
17,134,736
5.8%
* Bank of Ireland Nominees Limited and its affiliates state that
these shares are not beneficially owned by them.
Share capital and options
The authorised share capital of the Company is 306,000,000
ordinary shares of €0.06 each. The issued share capital as at
29 December 2007 was 293,346,684 ordinary shares of €0.06
each, of which 54.7% was held by Glanbia Co-operative Society
Limited (“the Society”), an Irish industrial and provident society.
The rights attaching to the ordinary shares of €0.06 each
are set out in the Memorandum and Articles of Association
of the Company, a copy of which may be obtained from the
Company’s website www.glanbia.com. All shares rank pari passu
and the principal rights are the right to vote, the right to receive
a dividend and the right to capital on a winding up or a return
of capital.
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Report of the Directors
for the year ended 29 December 2007
Authority to purchase own shares/authority to allot
relevant securities
At the Annual General Meeting in 2007 the Company was
authorised by shareholders to purchase up to 10 per cent of
the aggregate nominal value of the issued share capital of
the Company as at the close of business on 16 May, 2007.
The Company did not make use of this authority during
2007. As detailed in note 27 to the financial statements at
29 December 2007, 234,190 ordinary shares were held in
an employee benefit trust for the purpose of the Group’s
employee share schemes. During the year, the Glanbia
Employees’ Share Trust purchased 21,687 shares.
The authority for the Company to purchase its own shares expires
at the conclusion of the Annual General Meeting in 2008 and a
resolution to renew it will be proposed at that meeting.
As explained in the circular accompanying these financial
statements, 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 (given at the Annual General Meeting in 2007), in the
manner set out therein.
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 43 to the financial statements.
Appointment and replacement of Directors
The Company is a subsidiary of Glanbia Co-operative Society
Limited (“the Society”), an Irish industrial and provident society,
which owns 54.7% of the share capital of the Company. The
Society nominates from its Board of Directors, which is elected
on a three-year basis, fourteen of the eighteen non-executive
Directors for appointment to the Board of the Company.
Principal risks and uncertainties and financial
risk management
Under Irish company law (Statutory Instrument 116.2005-
European Communities (International Financial Reporting
Standards and Miscellaneous Amendments) Regulations 2005),
the Group is required to give a description of the principal risks
and uncertainties which it faces. These appear on pages 30-31
of the risk and risk management report.
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 forecasted
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 note 3.1 to
the financial statements.
Corporate governance
The Directors of the Company are committed to maintaining the
highest standards of corporate governance and a statement of
how the Company applies the main and supporting principles of
the 2006 Combined Code on Corporate Governance of the Irish
and London Stock Exchanges (“the Combined Code”) appears
on pages 37 to 45.
36
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 the 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, other products and the enhancement
of proprietary technologies and processes.
Through its research and development facilities in Kilkenny and
Idaho, USA, the Group’s business has developed and launched
advanced, differentiated and branded ingredients and
consumer products targeted at a range of nutritional benefits
such as weight management and immune enhancement.
Subsidiary and associated undertakings
A list of the principal subsidiary and associated undertakings is
included in note 44 to the financial statements.
Political donations
The Electoral Act, 1997 requires companies to disclose all
political donations over €5,079 in aggregate made during
the financial year. The Directors, on enquiry, have satisfied
themselves that no such donations in excess of this amount
have been made by the Company.
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 2008 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.
On behalf of the Board
M Walsh
Chairman
J Moloney
Group Managing Director
Glanbia House
Kilkenny
4 March 2008
Directors’ statement of corporate governance
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 7
Glanbia plc (the “Company”) has primary listings on the Irish
and London Stock Exchanges.
1. The Directors' report on corporate governance
The Directors are committed to maintaining the highest
standards of corporate governance which they see as
fundamental to discharging their stewardship responsibilities.
The Board strives to provide the right leadership, strategic
oversight and control environment to produce and sustain
the delivery of value to all of the Company's shareholders.
The Board applies integrity, principles of good governance
and accountability throughout its activities and each
Director brings independence of character and judgement
to the role. All of the members of the Board are individually
and collectively aware of their responsibilities to the
Company's stakeholders.
The principal governance rules applying to Irish companies
listed on the Irish and London Stock Exchanges are currently
contained in the Combined Code on Corporate Governance
adopted by the Financial Reporting Council in June 2006
(“the Combined Code”).
This report describes the Board's approach to corporate
governance and explains how it applies the Combined Code.
2. The Board of Directors (“the Board”)
2.1 The composition of the Board
The Board consists of the Chairman (Mr Michael Walsh);
seventeen other non-executive directors (including Mr John
Callaghan, the Senior Independent Director) and three
executive directors (Mr John Moloney, the Group Managing
Director, Mr Geoffrey Meagher, the Deputy Group Managing
Director and Group Finance Director and Mr Kevin Toland,
the CEO and President Glanbia USA and Nutritionals).
2.2 Directors’ Independence
The Board assesses and reviews the independence of each
of the Directors at least annually having regard to the
potential relevance and materiality of a Director’s interests.
Following this assessment, the Board has determined
that throughout the reporting period, Mr John Callaghan,
Mr Paul Haran and Mr Jerry Liston were independent. In
particular, the Board reviewed the position of Mr Callaghan
in the context of the guidance in the Combined Code and
determined that, notwithstanding his 10 years on the Board,
he remains independent. In the same manner as the other
non-executive Directors, he discharges his duties in a proper
and consistently independent manner and constructively
and appropriately challenges the executive Directors and
the Board.
Fourteen of the remaining fifteen non-executive Directors are
nominated by the Board of the Society for appointment to
the Board of the Company. Additionally, Mr William Murphy
who retired as Deputy Group Managing Director in 2005
remains on the Board as a non-executive Director. The Board
recognises that these Directors do not meet the criteria for
independence as specified in the Combined Code. The
Board, however, considers that they are independent in
character and judgment.
All of the non-executive Directors bring an independent
perspective to their advisory and monitoring roles.
2.3 The Role and Operation of the Board
2.3.1 Board meetings and attendance
There were 11 scheduled meetings of the Board during
2007. Details of Directors’ attendance at those meetings
are set out in the table on the next page:
The Company is a subsidiary of Glanbia Co-operative Society
Limited (“the Society”), an Irish industrial and provident
society, which owns 54.7% of the share capital of the
Company. Many of the members of the Society supply milk
and trade with Irish subsidiaries of the Company.
2.3.2 Operation of the Board
The Board is responsible for the leadership, direction
and control of the Company and its subsidiary
companies and is accountable to shareholders for
financial performance.
The Society nominates from its Board of Directors, which
is elected on a three-year basis, fourteen of the eighteen
non-executive Directors (including the Chairman) for
appointment to the Board of the Company. Mr Michael
Keane stepped down from the Board on 31 May 2007
following his retirement from the Society. The Society
nominated Mr Nicholas Dunphy to replace Mr Keane and
Mr Dunphy joined the Board as a non-executive director with
effect from 31 May 2007.
Biographies of each of the Directors are set out on pages 32
and 33.
The Board considers that the Directors bring to the
Company and its subsidiaries (“the Group”) the range of
skills, knowledge and experience, including international
experience, necessary to lead the Group.
2.3.3 Matters reserved for the Board
There is a schedule of matters which is dealt with
exclusively by the Board. These include approval of
annual and strategic business plans, capital expenditure,
any change in Group strategy and any acquisition or
disposal of Group assets, the recommendation and
approval of any dividends and Group treasury and risk
management policies.
2.3.4 The roles of executive and non-executive directors
The executive Directors are responsible for proposing
strategy and for making and implementing operational
decisions. Non-executive Directors complement the
skills and experience of the executive Directors, bring
an independent judgement, and contribute to the
formulation of strategy, policy and decision-making
through their knowledge and experience of other
businesses and sectors.
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37
Directors’ statement of corporate governance (continued)
M Walsh
L Herlihy
V Quinlan
J Moloney
J Callaghan
H Corbally
N Dunphy*
E Fitzpatrick
J Fitzgerald
J Gilsenan
P Gleeson
P Haran
C Hill
M Keane
Ml Keane**
J Liston
G Meagher
M Merrick
W Murphy
M Parsons
E Power
K Toland
Board
B
11
11
11
10
11
11
7
11
11
10
11
11
11
11
4
11
11
11
11
11
11
8
A
11
11
11
11
11
11
7
11
11
11
11
11
11
11
4
11
11
11
11
11
11
11
Audit Nomination Remuneration
Committee
Committee
Committee
B
A
B
A
A
7
7
1
1
5
7
6
7
5
5
5
5
B
1
1
7
1
1
1
1
7
7
5
5
7
5
5
5
5
5
5
5
5
5
4
5
5
Column A indicates the number of meetings held during the period the Director was a member of the Board and /or Committee.
Column B indicates the number of meetings attended during the period the Director was a member of the Board and /or the Committee.
* Appointed 31 May 2007 ** Retired 31 May 2007
Eight of the Directors nominated to the Board by the
Society have completed the ICOS Diploma in Corporate
Direction.
2.3.6 Outside appointments
Non-executive Directors may serve on a number of
outside Boards, provided they continue to demonstrate
the requisite commitment to discharge effectively their
duties to the Company. The Nomination Committee
keeps the extent of Directors' other interests under
review to ensure that the effectiveness of the Board
is not compromised. The Board is satisfied that the
Chairman and each of the non-executive Directors
commit sufficient time to the fulfilment of their duties
as Chairman and Directors of the Company respectively.
The Board believes, in principle, in the benefit of
executive Directors and members of the executive
committee accepting non-executive directorships of
other companies in order to widen their experience and
knowledge for the benefit of the Company. Accordingly,
executive Directors are permitted to accept external
non-executive Board appointments, subject to the
agreement of the Board, and are allowed to retain
any fees received from that appointment. The Group
Managing Director, Mr John Moloney, is a Director of
the Irish Dairy Board Co-operative Limited for which he
received fees of €12,000 which he retained.
2.3.5 Information and training
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 further information required is available to all
Directors on request.
Directors are provided with a comprehensive information
pack on joining the Company and advised of their
legal and other duties and obligations as a director of
a listed company. In addition, all new Directors receive
induction on their appointment covering such matters
as the operation and activities of the Company and the
Group, the role of the Board and the Group’s corporate
governance procedures. As part of this programme,
major shareholders are offered an opportunity to meet
new non-executive Directors.
Directors are also briefed, where appropriate, on
changes to legislation, regulation or market practices,
as well as receiving briefings from business groups
throughout the year. During the year, Directors
received regular presentations on different aspects
of the Company’s business and training on, amongst
other things, changes to the Combined Code on
Corporate Governance, developments in relation to
implementation of the Transparency Directive and the
Takeover Directive.
All Directors have access to independent professional
advice at the Group’s expense where they judge it
necessary to discharge their responsibilities as Directors.
Committees are provided with sufficient resources to
undertake their duties.
38
2.3.7 Chairman, Vice-Chairmen, Group Managing
Director, Senior Independent Director and Group
Secretary
Separation of Role of Chairman and Group Managing
Director
The role of the Chairman, which is non-executive, is
separate (and always has been separate) from the
role of the Group Managing Director. The division of
responsibilities between the Chairman and Group
Managing Director have been clearly established, set
out in writing and agreed by the Board.
Chairman
Mr Michael Walsh has been Chairman of the Board
since June 2005. 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.
The Chairman is available to consult with shareholders
throughout the year. The Board is kept informed of the
views of shareholders through regular updates from
the Chairman, the Group Secretary and the executive
Directors, as well as through the inclusion in the Board
papers of relevant reports and commentaries of, and
exchanges with, shareholders and investor bodies.
While Mr Walsh holds a number of other directorships
(see details on page 32) and farms at Coolroe,
Graiguenamanagh, Co. Kilkenny, the Board considers
that these do not interfere with the discharge of his
duties to the Group.
Vice-Chairmen
The Company has two Vice-Chairmen, Mr Liam Herlihy
and Mr Victor Quinlan.
Group Managing Director
The day to day management of the Group has been
delegated to the Group Managing Director, Mr John
Moloney, whose appointment to that position was
effective from July 2001. His responsibilities include the
formulation of strategy and related plans and, subject to
Board approval, their execution. He is also responsible
for ensuring an effective organisation structure, for
the appointment and direction of the senior executive
management and for the operational management of all
the Group’s businesses.
Senior Independent Director
Mr John 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, has failed to
resolve. Mr Callaghan is also available to fellow non-
executive Directors, either individually or collectively, to
discuss any matters of concern in a forum that does not
include executive Directors or the management of the
Company.
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 7
In the year under review, the Chairman hosted a meeting
of the non-executive Directors, without the executive
Directors present. The Senior Independent Director,
Mr John Callaghan has, in addition, held a meeting
of non-executive Directors without the presence
of the Chairman at which, among other things, the
performance of the Chairman was discussed.
Group Secretary
Mr Michael Horan is the Group Secretary. 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 and that
applicable rules and regulations are followed. Both the
appointment and removal of the Secretary is a matter for
the Board.
2.3.8 Board, Committee and Director performance
evaluation
A formal evaluation of the performance and
effectiveness of the Board and of the Audit,
Remuneration and Nomination Committees is carried
out each year, led by the Chairman.
In completing the annual performance evaluation, the
Chairman met with each Director individually to discuss
the 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 summarising the outcome of the performance
evaluation process and recommending a number of
actions.
For the year under review, the Chairman has assessed
that all Directors continue to make an effective
contribution to the Board.
The Chairman confirms that each of Mr John Callaghan,
Mr Nicholas Dunphy, Mr John Fitzgerald, Mr Liam
Herlihy, Mr Geoffrey Meagher, Mr William Murphy and
Mr Victor Quinlan, standing for re-appointment at this
year's Annual General Meeting, continue to perform
effectively and to demonstrate commitment to their
roles. Mr John Callaghan, as Senior Independent
Director, confirms that Mr Michael Walsh, also
standing for re-appointment at this year's Annual
General Meeting, continues to perform effectively and
demonstrates commitment to his role.
39
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Directors’ statement of corporate governance (continued)
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 are set out on pages 102.
2.3.12 Board succession planning
The Board plans for its own succession with the
assistance of the Nomination Committee. In so doing,
the Board considers the knowledge and experience
necessary to allow it to meet the strategic vision for the
Company and the Group.
2.4 The Board’s committees and the executive committee
The Board has established a committee structure to assist
it in the discharge of its responsibilities. The committees
and their membership are detailed on pages 32 to 34. 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 to each of these committees.
Nomination Committee
Fourteen non-executive Directors are nominated by
the Board of 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 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 three-year term which may be renewed and are also
subject to early removal under the Articles.
The Nomination Committee did not use external search
consultants or open advertising in the appointment of
the new non-executive Director, Mr Nicholas Dunphy,
as he was nominated by the Board of the Society for
appointment to the Board. The Nomination Committee
uses industry and professional contacts to identify
suitable candidates for the appointment of independent
Directors other than those appointed by the Society.
The Nomination Committee also considers and
recommends the appointment of the Chairman of
the Company and the Vice-Chairmen. It is the custom
and practice that the Chairman and Vice-Chairmen of the
Society are also Chairman and Vice-Chairmen of
the Company.
The Nomination Committee considered the nomination
for the re-appointment of the non-executive Directors,
Mr Callaghan, Mr Herlihy, Mr Murphy, Mr Quinlan and
Mr Walsh respectively, with particular rigour, as they have
served as Directors for nine years or more (with each of
Mr Callaghan and Mr Walsh excusing themselves from
the consideration of their own nomination for
re-appointment), and were satisfied that their
re-appointment as Directors for a further term was
warranted having regard to their continuing contribution
and valuable experience on the Board, which in
the Board's view enhanced their effectiveness and
commitment to their roles.
The Board also evaluated the performance of the
Audit, Nomination and Remuneration Committees and
has assessed that they continue to make an effective
contribution to the Board.
2.3.9 Retirement of Directors
New Directors are subject to election at the first annual
general meeting following their appointment, and
Directors are subject to retirement and re-appointment
by shareholders every three years. The re-appointment
of non-executive Directors is not automatic. The Board
has determined that non-executive Directors who have
served for nine years or more will be asked to stand
for re-appointment annually provided that the Board
remains satisfied both with the Director's performance
and that nine or more years' continuous service does not
compromise the Director's continuing independence.
2.3.10 Terms of appointment
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.
2.3.11 Share ownership and dealing
In order to maintain investor confidence in the stock
markets, quoted companies have an obligation to
ensure that their Directors and employees, and anyone
closely associated or connected to them, do not place
themselves in positions where investors might suspect
them of abusing inside information. For this reason,
the Company issued revised rules, in early 2006,
covering share dealings by Directors and employees
who regularly, or even occasionally, have access to inside
information.
The main principle underlying the rules is that no
one should trade in shares of the Company while in
possession of inside information about the Company.
Likewise, no one should deal in the shares of the
Company, if it would give rise to a suspicion that they are
abusing inside information. As a safeguard against any
actual or potential abuse of these rules, the Company
has appointed as Compliance Officers, the Group
Secretary and the Deputy Group Finance Director from
whom approval must be obtained, in advance, for any
share dealings by persons to whom the rules apply.
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 7
The Chairman of the Company chairs meetings of the
Nomination Committee except when it is dealing with
the appointment of a successor to the Chairmanship.
Mr John Callaghan is Chairman of the Audit Committee
and he reports to the Board after each meeting of the
Committee.
The Chairman of the Nomination Committee 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, and to the
shareholders for their approval in general meeting,
in relation to the appointment, re-appointment and
removal of the external auditors and to approve
the remuneration and terms of engagement of the
external auditors;
• to review and monitor the external auditors’
independence 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 auditors 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; and
• to review the arrangements by which staff of the
Company may, in confidence, raise concerns about
possible improprieties in matters of financial reporting
or other matters.
In discharging its responsibilities the Audit Committee
met five 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 and Members 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.
Remuneration Committee
The Remuneration Committee determines, on behalf of the
Board, the Group’s framework 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 ordinary 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. Jerry Liston is Chairman of the Remuneration Committee
and formally reports to the Board after each meeting of the
Committee.
US Advisory Board
The US Advisory Board was established to assist the Board
in developing a greater awareness of activities and market
trends in the relevant USA industry sectors. Mr Thomas
Corcoran, Glanbia Group Chairman from 2000 to 2005 is
Chairman of the US Advisory Board. The membership of
the Advisory Board currently comprises Mr John Callaghan,
Senior Independent Director, Mr Kevin Toland, Executive
Director, Mr Liam Herlihy, Mr Victor Quinlan, Vice-Chairmen,
and Messrs Joe McCullough, Peter Rogers and Ms Susan
Davis, USA based members.* The Group Chairman and
Group Managing Director also attend meetings of the US
Advisory Board.
* Mr McCullough recently retired as Chief Executive Officer
of CRH Americas Products and Distribution. He joined
CRH in 1979 and has held a number of senior management
positions with that company.
Mr Rogers, retired, was previously President of Nabisco
Foods Americas and held a variety of other senior positions
in food companies.
Ms Davis is Chairperson of Susan Davis International,
a Washington D.C. based public affairs agency.
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Directors’ statement of corporate governance (continued)
3. Remuneration Policy
Remuneration policy is based on attracting, retaining and
motivating executives to ensure that they perform in the best
interests of the Group 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 2002
Long Term Incentive Plan (“the 2002 LTIP”) and participation
in a defined benefit pension scheme. Executive Directors
also participated 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 for their attendance at
Board meetings.
Performance-Related Annual Bonus
The Group operates a performance-related bonus scheme
for executive Directors, senior executives and other
management. Payments under the scheme for executive
Directors depend on the achievement of pre-determined
goals for Group performance and an assessment of
individual performance against agreed objectives.
Long Term Incentive Plans
The 2002 LTIP
In 2002 shareholders approved the introduction of the
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 anniversaries 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.
Pension Benefits
Pension benefits for executive Directors are calculated on
basic salary only. Benefits, which are agreed on appointment,
are designed to provide a percentage of basic salary at
retirement for full service.
42
Directors’ Emoluments and Attributable Pension Benefits
Details of Directors’ emoluments and attributable pension
benefits are set out in note 9 and details of share options are
included in note 43 to the financial statements.
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 exceed one year’s salary
and benefits-in-kind.
Review of Compensation Arrangements
During 2007, the Remuneration Committee, with the assistance
of external advisers, Mercer Limited, who are not otherwise
connected with the Company, undertook a thorough review of
the Group’s compensation arrangements for executive Directors
and senior managers. The review took account of the global
nature of the Group’s business, the success of the Group and
the need to have competitive compensation packages which
will attract and retain international managers of the highest
calibre and changes in the accounting treatment of long-term
incentive schemes and developments in market practice in
relation to these schemes.
Arising from this review, the Remuneration Committee
concluded that the Group should introduce a new Long Term
Incentive Plan. Accordingly, the 2007 Long Term Incentive
Plan (“the 2007 LTIP”) was approved in August 2007 for
selected Senior Managers (other than Directors), details of
which are provided below. Since then, the Remuneration
Committee concluded that the executive Directors should be
eligible to participate in a similar new Long Term Incentive
Plan. Accordingly, the proposed 2008 Long Term Incentive
Plan (“the 2008 LTIP”) will be put to shareholders for approval
at the forthcoming Annual General Meeting. Executive
Directors will be eligible to participate in the 2008 LTIP if
approved. Further details of the proposed 2008 LTIP are set
out in the Circular containing the Notice of the 2008 Annual
General Meeting.
The 2007 LTIP
The 2007 LTIP has been designed so that any rewards will be
dependent on the growth in the Company’s EPS (i.e earnings
per share) and the Company’s TSR (i.e. total shareholder return)
performance (the “EPS condition” and the “TSR Performance
Condition”, respectively). The vesting of 50% of the shares
which are the subject of an award will be subject to the EPS
condition and the remaining 50% shall be subject to the TSR
Performance condition. EPS is the adjusted consolidated
earnings or profit made by the Company divided by the
number of shares outstanding (as shown in the annual report).
TSR represents the change in capital value of a listed/quoted
company over a period, plus dividends, expressed as a plus or
minus percentage of the opening value.
Under the EPS condition, there must be an increase in the
adjusted consolidated earnings per share of the Company
of at least the increase in the Consumer Price Index plus 5%
compounded over a three year period. The benefit which
a participant can receive under the 2007 LTIP will depend
on the annualised percentage increase in the Company’s
EPS over the performance period. There will be three
pre-defined levels of EPS performance, which will govern
the percentage level of vesting that may occur under an
award. The 2007 LTIP will provide that at the lowest level,
no part of an award may vest unless the Company’s EPS
performance over the performance period achieves at
least the annualised percentage increase in the Consumer
Price Index plus 5% compounded over the performance
period. Where the Company’s EPS performance over the
performance period equals the annualised percentage
increase in the Consumer Price Index plus 5% compounded
over the performance period, then 25% of the award shall
vest. Where the Company’s EPS performance over the
performance period equals or is greater than the annualised
percentage increase in the Consumer Price Index plus 10%
compounded over the performance period, then 50% of the
award shall vest. Where the Company’s EPS performance
over the performance period is between the thresholds of
the annualised percentage increase in the Consumer Price
Index plus 5% and the annualised percentage increase in the
Consumer Price Index plus 10% compounded, then a pro
rata vesting on a straight line basis shall apply.
Under the TSR Performance Condition, the Company’s TSR
performance will be compared against the TSR performance
of a peer group of food companies. The benefit which a
participant can receive under the 2007 LTIP will depend
on how well the Company’s TSR performance compares
against this peer group over the performance period. There
will be three pre-defined levels of TSR performance, which
will govern the percentage level of vesting that may occur
under an award. The 2007 LTIP provides that at the lowest
level, no part of an award may vest unless the Company’s
TSR performance over the performance period achieves at
least the median TSR performance of the peer group of food
companies. Where the Company’s TSR performance equals
the median TSR performance of the peer group, then 15% of
the award shall vest. Where the Company’s TSR performance
is equal to or above the top 25% of TSR performance of the
peer group, then 50% of the award shall vest. Where the
Company’s TSR performance is between the median and top
25% of TSR performance of the peer group, then a pro rata
vesting on a straight line basis shall apply.
The first awards under the 2007 LTIP were made in August
2007 immediately following the publication of the interim
results for 2007. These did not include any awards to the
Directors. Details of the award to the Group Secretary are
provided in note 43.
Share Options
Options outstanding under the Company’s 1988 Share
Option Scheme and the 2002 LTIP as at 29 December 2007
amounted to 2,792,000 ordinary shares (30 December 2006:
2,734,000) made up as follows:
2002 LTIP and
Share option scheme
No of Ordinary
Price Range
Dates
Shares
2,792,000
€1.55 - €4.25
GBP£2.90
exercisable
2008 – 2017
2008
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 7
Share Awards
As at 29 December 2007 Share Awards had been granted
under the Company’s 2002 LTIP over 134,600 ordinary shares
(30 December 2006: 146,900).
As at 29 December 2007 Share Awards had been granted
under the Company’s 2007 LTIP over 183,500 ordinary shares
(30 December 2006: Nil).
Share Trust
As detailed in note 27 to the financial statements at
29 December 2007, 234,190 ordinary shares were held in
an employee benefit trust for the purpose of the Group’s
employee share schemes.
4. Internal Control
The Turnbull Guidance sets out best practice on internal
control for Irish and UK listed companies to assist them in
assessing the application of the Combined Code's principles
and compliance with the Combined Code's provisions with
regard to internal control.
The Group's systems of internal control are designed and
operated to support the identification, evaluation and
management of risks affecting the Group and the business
environment in which it operates. 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.
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.
Key features of the systems of internal control are:
• 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;
• a Group financial management manual that clearly sets out
the accounting policies and financial control procedures to
be followed by business units;
• a treasury risk management policy approved by the Board
which ensures that foreign exchange and interest rate
exposures of the Group are managed within defined
parameters;
43
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Directors’ statement of corporate governance (continued)
• 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.
these results to investors and analysts. The Chairman discusses
governance and strategy with major shareholders. Non-
executive Directors are offered an opportunity to attend
meetings with major shareholders. The Senior Independent
Director has also attended meetings with major 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.
The Board has reviewed the effectiveness of the current
system of internal control specifically for the purpose of this
statement.
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 Directors, through the use of appropriate procedures
and systems, have also 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.
5. Relations with Auditors
PricewaterhouseCoopers have been appointed as auditors of
the Company.
The Company has in place a formal policy on auditor
independence and non-audit services, with which the
external auditors are required to comply, to ensure that the
independence of the auditors is not impaired by the nature
of non-audit work. This policy provides that the Group shall
not retain its independent auditors to provide services
other than audit and audit-related services other than in
exceptional circumstances.
The following services are prohibited unless approved under
the terms of the Policy:
• bookkeeping or other administrative services related to the
Group’s accounting records or financial statements;
• financial information systems design and implementation;
• internal audit services;
• management functions, executive searches for the Group
Managing Director or Group Finance Director and legal
services.
6. Relations with Shareholders
During the year the Company has continued to promote
dialogue with its major 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
7. Annual General Meeting
The Notice of the 2007 Annual General Meeting was
despatched to shareholders not less than 20 business days
before the meeting. Separate resolutions were proposed at
the meeting on each substantially separate issue, including
a resolution to receive and consider the 2006 financial
statements and the reports of the Directors and auditors
thereon. The level of proxy votes for and against and
withheld was announced after each resolution had been
passed on a show of hands.
It is Group policy for all Directors to attend the annual
general meeting. In normal circumstances, the Chairmen
of the Audit, Nomination and Remuneration Committees
attend the annual general meeting and are available to
answer relevant questions
8. Corporate Social Responsibility
As the Group grows and develops as a leading international
cheese and nutritional ingredients Group, so also does our
commitment to conducting our business in a way that is
economically, socially and environmentally sustainable.
During 2007 we made further progress in our corporate
citizenship objectives under the four pillars of Community,
Environment, Workplace and Marketplace, more particular
details of which are summarised in our corporate social
responsibility statement on pages 24 to 25.
9. Accountability and Audit
Financial reporting
Directors’ responsibilities for preparing the financial
statements for the Company and the Group are detailed on
page 45. The external 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.
10.Compliance
The Board believes that, except in relation to the
composition of the Board, as explained above, the Company
has complied throughout the financial period with the
principles and provisions of the Combined Code.
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 7
Financial statements
contents
Statement of Directors’ responsibilities
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law
and regulations.
Independent auditors’ report: to the members of Glanbia plc 46
Consolidated income statement
48
Consolidated statement of recognised income and expense 49
Company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors
have prepared the group and parent company financial
statements in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union. The
financial statements are required by law to 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 judgements and estimates that are reasonable and
prudent.
• State that the financial statements comply with IFRSs as
adopted by the European Union.
• Prepare the financial statements on the going concern
basis, unless it is inappropriate to presume that the Group
will continue in business, in which case there should be
supporting assumptions or qualifications as necessary.
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 the Group and to
enable them to ensure that the financial statements comply with
the Companies Acts 1963 to 2006 and, as regards the group
financial statements, 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 web site. Legislation in the Republic of Ireland
concerning the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
On behalf of the Board
M Walsh
Chairman
J Moloney
Group Managing Director
Glanbia House
Kilkenny
4 March 2008
Consolidated balance sheet
Consolidated cash flow statement
Company balance sheet
Company statement of recognised income and expense
and cash flow statement
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 Segment information
6 Operating profit
7 Exceptional items
8 Employee benefit expense
9 Directors’ remuneration
10 Finance income and costs
11 Income taxes
12 Earnings per share
13 Dividends
14 Property, plant and equipment – Group
15 Intangible assets
16 Investments in associates
17 Investments in joint ventures
18 Investments
19 Trade and other receivables
20 Inventories
21 Cash and cash equivalents
22 Assets and liabilities classified as held for sale and
included in disposal groups
23 Reconciliation of changes in equity
24 Share capital and share premium
25 Other reserves
26 Retained earnings
27 Own shares (Company and Group)
28 Capital reserves
29 Merger reserve – Group
30 Minority interests
31 Borrowings
32 Deferred income taxes
33 Retirement benefit obligations
34 Provisions for other liabilities and charges
35 Capital grants
36 Trade and other payables
37 Derivative financial instruments
38 Contingent liabilities
39 Commitments
40 Cash generated from operations
41 Business combinations
42 Related party transactions
43 Directors’ and Secretary’s interests
44 Principal subsidiary and associated undertakings
50
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52
53
54
54
63
66
67
70
71
71
72
73
73
74
75
76
77
78
79
80
81
82
82
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83
84
87
88
88
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89
89
89
91
93
96
96
96
97
98
98
99
99
100
102
105
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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
29 December 2007, 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.
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 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 2006. We also report to you whether the financial statements have been properly prepared in accordance
with Irish statute comprising the Companies Acts, 1963 to 2006 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 2007 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.
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.
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.
46
Independent auditors’ report: to the members of Glanbia plc
(continued)
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 7
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 29 December 2007 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 2006, of the state of the Parent Company’s affairs as
at 29 December 2007 and cash flows for the year then ended;
the financial statements have been properly prepared in accordance with the Companies Acts, 1963 to 2006 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 29 December 2007 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
4 March 2008
47
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Consolidated income statement
for the year ended 29 December 2007
Revenue
Cost of sales
Gross profit
Distribution expenses
Administration expenses
Operating profit
Finance income
Finance costs
Share of results of joint
ventures and associates
Profit before taxation
Income taxes
Pre-
Pre-
exceptional
Exceptional
Total
exceptional
Exceptional
Notes
2007
€’000
2007
€’000
2007
€’000
2006
€’000
2006
€’000
Total
2006
€’000
5 2,206,567
(1,882,648)
- 2,206,567
(1,882,648)
-
1,853,427
(1,596,547)
323,919
-
323,919
256,880
-
-
-
1,853,427
(1,596,547)
256,880
7
6
10
10
(114,180)
(93,905)
-
(23,463)
(114,180)
(117,368)
(105,724)
(65,589)
-
(12,455)
(105,724)
(78,044)
115,834
(23,463)
92,371
85,567
(12,455)
73,112
4,813
(22,095)
992
-
-
-
4,813
(22,095)
4,883
(18,918)
992
2,842
-
-
-
99,544
(16,458)
(23,463)
617
76,081
(15,841)
74,374
(7,970)
(12,455)
12,321
11
4,883
(18,918)
2,842
61,919
4,351
Profit for the year
83,086
(22,846)
60,240
66,404
(134)
66,270
Attributable to:
Equity holders of the Parent
Minority interests
Basic earnings per share (cent)
Diluted earnings per share (cent)
12
12
59,833
407
60,240
20.42
20.34
65,934
336
66,270
22.51
22.47
On behalf of the Board
M Walsh
Directors
J Moloney
G Meagher
48
Consolidated statement of recognised
income and expense for the year ended 29 December 2007
Actuarial (loss)/gain - defined benefit schemes
Deferred tax on actuarial loss/gain
Share of actuarial gain - joint ventures
Currency translation differences
Fair value adjustments (net of tax)
- Group
- Joint venture
Net (expense)/income recognised directly in equity
Profit for the year
Total recognised income for the year
Attributable to:
Equity holders of the Parent
Minority interest
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 7
Notes
2007
€’000
33
32
23
23
23
23
(4,539)
1,102
230
(14,878)
10,733
(2,155)
(9,507)
60,240
2006
€’000
36,852
(3,923)
230
(9,401)
2,367
367
26,492
66,270
50,733
92,762
50,326
407
92,426
336
50,733
92,762
On behalf of the Board
M Walsh
Directors
J Moloney
G Meagher
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Consolidated balance sheet
as at 29 December 2007
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Investments in associates
Investments in joint ventures
Trade and other receivables
Deferred tax assets
Available for sale financial assets
Derivative financial instruments
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Assets in disposal group held for sale
Total assets
EQUITY
Issued capital and reserves attributable to equity holders of the Parent
Share capital and share premium
Other reserves
Retained earnings
Minority interests
Total equity
LIABILITIES
Non-current liabilities
Borrowings
Derivative financial instruments
Deferred tax liabilities
Retirement benefit obligations
Provisions for other liabilities and charges
Capital grants
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Derivative financial instruments
Provisions for other liabilities and charges
Liabilities in disposal group held for sale
Total liabilities
Total equity and liabilities
On behalf of the Board
M Walsh
Directors
J Moloney
G Meagher
50
14
15
16
17
19
32
18
37
20
19
37
21
22
Notes
2007
€’000
298,771
137,565
10,729
50,370
13,929
21,672
30,089
763
2006
€’000
335,152
138,724
10,933
58,668
4,929
23,923
12,527
2,095
563,888
586,951
225,057
202,234
4,990
159,819
592,100
20,304
145,158
164,611
6,776
259,311
575,856
-
612,404
575,856
1,176,292
1,162,807
24
25
26
30
31
37
32
33
34
35
36
31
37
34
98,450
107,909
21,176
227,535
7,040
98,304
113,696
(18,116)
193,884
6,635
234,575
200,519
379,028
3,736
37,587
114,248
13,660
3,535
444,570
3,406
38,611
124,888
20,361
10,660
551,794
642,496
336,663
9,182
966
3,187
22,278
257,893
1,942
39,235
3,688
17,034
372,276
319,792
22
17,647
-
389,923
319,792
941,717
962,288
1,176,292
1,162,807
Consolidated cash flow statement
for the year ended 29 December 2007
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 available for sale investments
Insurance proceeds received - exit from Pigmeat
Repayment of loan note
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
(Decrease)/increase in borrowings
Finance lease principal payments
Dividends paid to Company’s shareholders
Loans advanced to joint ventures
Capital grants received
Net cash (used in)/from financing activities
Net (decrease)/increase 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
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 7
Notes
40
2007
€’000
85,015
3,015
(17,613)
(5,401)
2006
€’000
61,023
1,000
(19,967)
(6,274)
65,016
35,782
(17,742)
(51,662)
(2,000)
-
12,937
-
13,419
(67,823)
(38,085)
(3,406)
22,185
-
52,822
8,665
(45,048)
(25,642)
24
13
167
-
(84,056)
(954)
(17,334)
(9,001)
1,399
190
122
169,851
(1,077)
(16,472)
(4,929)
123
(109,779)
147,808
(89,811)
157,948
259,311
(9,681)
104,405
(3,042)
Cash and cash equivalents at the end of the year
21
159,819
259,311
Reconciliation of net cash flow to movement in net debt
Net (decrease)/increase in cash and cash equivalents
Cash inflow/(outflow) from debt financing
Fair value of interest rate swaps qualifying as fair value hedges
Exchange translation adjustment on net debt
Movement in net debt in the year
Net debt at beginning of year
Net debt at end of year
Net debt comprises:
Borrowings (note 31)
Cash and cash equivalents (note 21)
On behalf of the Board
M Walsh
Directors
J Moloney
G Meagher
2007
€’000
2006
€’000
(89,811)
85,889
157,948
(168,774)
(3,922)
(764)
9,005
(10,826)
3,978
6,506
4,319
(224,494)
(342)
(224,152)
(220,175)
(224,494)
2007
€’000
2006
€’000
(379,994)
159,819
(483,805)
259,311
(220,175)
(224,494)
51
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Company balance sheet
as at 29 December 2007
ASSETS
Non-current assets
Investments in associates
Investments in subsidiaries
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 and share premium
Retained earnings
Capital reserve
Total equity
LIABILITIES
Current liabilities
Borrowings
Trade and other payables
Total liabilities
Total equity and liabilities
Notes
2007
€’000
2006
€’000
16
18
1,395
455,303
1,395
510,412
456,698
511,807
19
21
24,023
-
24,023
1,881
4,376
6,257
480,721
518,064
24
26
28
453,718
18,354
5,187
453,572
47,924
4,674
477,259
506,170
31
36
1,928
1,534
-
11,894
3,462
11,894
480,721
518,064
On behalf of the Board
M Walsh
Directors
J Moloney
G Meagher
52
Company statement of recognised income and
expense and cash flow statement for the year ended 29 December 2007
Company statement of recognised income and expense
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 7
(Loss)/profit for the year
Total recognised (expense)/income for the year
Company cash flow statement
Cash flows from operating activities
Cash generated from operations
Interest received
Net cash from operating activities
Cash flows from investing activities
Dividends received
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Sharesave Scheme - receipt from Trustees
Shares purchased
Redemption of shares
Decrease in borrowings
Dividends paid to Company’s shareholders
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
2007
€’000
2006
€’000
(12,236)
16,959
(12,236)
16,959
Notes
2007
€’000
40
(23,600)
1,255
2006
€’000
(4,981)
2,125
(22,345)
(2,856)
8,000
10,508
8,000
10,508
24
24
13
167
-
(95)
25,303
-
(17,334)
190
122
-
-
(3,397)
(16,472)
8,041
(19,557)
(6,304)
(11,905)
4,376
16,281
(1,928)
4,376
As permitted by Section 148(8) of the Companies Act, 1963 and section 7(1A) of the Companies Amendment Act, 1986 the Parent
Company is availing of the exemption from presenting its separate income statement in these financial statements and from filing it
with the Registrar of Companies. The loss for the year dealt with in the financial statements of Glanbia plc, amounts to (€12,236,000)
(2006: profit €16,959,000).
On behalf of the Board
M Walsh
Directors
J Moloney
G Meagher
53
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Notes to the financial statements
for the year ended 29 December 2007
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, Canada, China, 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 Group is controlled by Glanbia Co-operative Society Limited (“the Society”), which holds 54.66%
of the issued share capital of the Company and is the ultimate parent of the Group.
The Company shares are quoted on the Irish and London Stock Exchanges.
These consolidated financial statements have been approved for issue by the Board of Directors on 4 March 2008.
2. Summary of significant accounting polices
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 consolidated financial statements have been prepared in accordance with EU endorsed International Financial Reporting
Standards (IFRSs), IFRIC interpretations and these parts of the Companies Acts, 1963 to 2006 applicable to companies reporting
under IFRS. The consolidated financial statements have been prepared under the historical cost convention as modified by use
of fair values for available for sale financial assets and derivative financial instruments. A summary of the more important Group
accounting policies is set out below.
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.
Amounts are stated in euro thousands (€’000) unless otherwise stated.
These financial statements are prepared for a 52 week period ending on 29 December 2007, comparatives are for the 52 week
period ended 30 December 2006. The balance sheets for 2007 and 2006 have been drawn up as at 29 December 2007 and 30
December 2006 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 achieve d where the Company has the power to govern the financial and operating policies of an entity 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 incurred or assumed
at the date of acquisition plus costs directly attributable to the acquisition. The excess of the cost of acquisition over the
fair value of the Group’s share of the identifiable net assets 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.
(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 directly in equity. 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.
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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 7
(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.
A geographic segment is a distinguishable component of the Group that is engaged in providing products or services within a
particular economic environment that are subject to risks and returns that are different to those of other geographic segments.
(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. Foreign exchange gains and losses resulting from the settlement of such transactions are recognised in the income
statement, except when deferred in equity as qualifying cash flow hedges. 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 held at fair value through profit or loss 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 currency 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. In accordance with IFRS 1, the cumulative
translation differences on foreign subsidiaries was set to zero on IFRS transition date (4 January 2004).
(e) Property, plant and equipment
Property, plant and equipment is stated at cost or deemed cost less subsequent depreciation less any impairment loss. Historic
cost includes expenditure that is directly attributable to the acquisition of the items. Cost may also include transfers from equity
of any gains/losses on qualifying cash flow hedges of foreign currency purchases of properties, plant and equipment.
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 on the straight-line method to write off the cost of each asset over their estimated useful life as 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.
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.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
Property, plant and equipment is tested for impairment when indicators arise. 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 identifiable
assets of the acquired subsidiary or associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included
in intangible assets. Goodwill associated with the acquisition of associates is included within the investment in associates.
Goodwill is carried at cost less accumulated impairment losses, if applicable. Goodwill is tested for impairment on an annual
basis. Goodwill impairments are not reversed.
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.
Goodwill is allocated to cash generating units for the purpose of impairment testing. The allocation is made to those cash
generating units or groups of cash generating units that are expected to benefit from the business combination in which the
goodwill arose.
(ii) Research and 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 using the straight-line method over their estimated useful lives, which is normally 6 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
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
Available for sale financial assets are non-derivatives that are either designated in this category or not classified in any of the
other categories. They are included in non-current assets unless management intends to dispose of the investment within
12 months of the balance sheet date. They are initially recognised at fair value plus transaction costs and are subsequently
adjusted to 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.
Investments in subsidiaries held by the Company are carried at cost.
Impairment losses recognised in the income statement on equity instruments are not reversed through the income statement.
(h) Leases
Leases of assets where the Group has substantially all the risks and rewards of ownership are classified as finance leases.
A determination is also made as to whether the substance of an arrangement could equate to a finance lease, considering
whether fulfilment of the arrangement is dependant upon the use of a specific asset and the arrangement contains the right to
use an asset. If the specified criteria are met, the arrangement is classified as a finance lease. Finance leases are capitalised at
the inception of the lease at the lower of the fair value of the leased asset or the present value of the minimum lease payments.
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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 borrowings, 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.
(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 estimated costs of completion and the costs of selling expenses. Costs of inventories include the transfer
from equity of any gains/losses on qualifying cash flow hedges purchases of raw materials.
(j) Trade and other receivables
Trade receivables are recognised initially at fair value and subsequently measured at amortised cost using the effective
interest method less provision for impairment. 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.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and
default or delinquency in payments are considered indicators that the trade receivable is impaired. The amount of the provision
is the difference between the asset’s carrying value and the estimated future cash flows. The carrying amount of the asset
is reduced through the use of a provision account and the amount of the loss is recognised in the income statement within
distribution costs. When a trade receivable is uncollectible, it is written off against the provision account for trade receivables.
Subsequent recoveries of amounts previously written off are credited against distribution costs in the income statement.
Loan receivables are initially recognised at fair value and subsequently measured at amortised cost using the effective interest
method, less provision for impairment. 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 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.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
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.
The fair value of plan assets are measured at their bid value.
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 the income statement, 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
The Group operates a number of equity settled share based compensation plans which 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. In accordance with the transition arrangements set out in IFRS 2 (Share Based Payments), this standard has been applied in
respect of share options granted after 7 November 2002 which had not vested by transition date (4 January 2004).
Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each
balance sheet date, the Group revises its estimates of the number of options that are expected to vest. It recognises the
impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. The
proceeds received net of any directly attributable transaction costs are credited to share capital (nominal value) and share
premium when the options are exercised.
(iii) Awards under the Long Term Incentive Performance Plan (“The 2007 LTIP”) share plan
The fair value of shares awarded under the LTIP 2007 share plan is determined using a Monte Carlo simulation technique.
The performance share plan contains inter-alia a TSR-based (and hence market-based) vesting condition, and accordingly,
the fair value assigned to the related equity instruments on initial application of IFRS 2 is adjusted so as to reflect the
anticipated likelihood as at the grant date of achieving the market-based vesting condition.
(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. The Group recognises revenue when the amount of revenue can be reliably measured, it is probable that future
economic benefit will flow to the entity and when specific criteria have been met for each of the Group’s activities. Revenue
from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the
buyer, in the ordinary course of the Group’s business which generally arises on delivery, or in accordance with specific terms
and conditions agreed with customers. Service income is recognised on a straight-line basis over the life of the arrangement
to which it relates. The timing of recognition of services revenue equals the timing of when the services are rendered. Interest
income is recognised using the effective interest method. 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) above.
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(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. Goodwill is reviewed at least annually for impairment.
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
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in
equity as a deduction from the proceeds.
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. Ordinary shares purchased under the terms of the 2007 LTIP are accounted for as own shares and recorded as a
deduction 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.
The Group accounts for financial instruments under IAS 32 (Financial Instruments: 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 at balance sheet date.
The fair value of forward foreign currency contracts is estimated by discounting the difference between the contractual forward price
and the current forward price for the residual maturity of the contract using a risk-free interest rate (based on government bonds).
The fair value of interest rate swaps is based on discounting estimated future cash flows based on the terms and maturity of
each contract and using market interest rates for a similar instrument at the measurement date.
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 on-going 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.
The fair values of various derivative instruments used for hedging purposes are disclosed in note 37. Movements on the fair
value reserve are shown in note 25. The full fair value of a hedging derivative is classified as a non-current asset or liability if the
remaining maturity of the hedged item is more than 12 months, and as a current asset or liability, if the remaining maturity of the
hedged item is less than 12 months. Trading derivatives are classified as a current asset or liability.
(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 hedged
item for which the effective interest method is used is amortised to profit or loss over the period to maturity.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
(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 recycled 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 recycled 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.
(iv) Financial guarantee contracts
Financial guarantee contracts are issued to banking institutions by the entity Glanbia plc on behalf of certain of its
subsidiaries. These subsidiaries engage in ongoing financing arrangements with these banking institutions. Under the terms
of amended IAS 39 (Financial Instruments: Recognition and Measurement) financial guarantee contracts are required to be
recognised at fair value at inception and subsequently measured as a provision under IAS 37 on the Glanbia plc company
balance sheet.
(t) Earnings per share
Earnings per share represents the profit in cent attributable to share holders of the Company, divided by the weighted average
number of ordinary 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 significant 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 a finance cost. 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. Provisions
are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax rate that
reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in provision
due to passage of time is recognised as interest expense.
(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.
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 7
(z) Business combinations
The purchase method of accounting is employed in accounting for the acquisition of subsidiaries by the Group.
The cost of a business combination is measured as the aggregate of the fair values at the date of exchange of assets given,
liabilities incurred or assumed and equity instruments issued in exchange for control together with any directly attributable
costs. To the extent that settlement of all or any part of a business combination is deferred, the fair value of the deferred
component is determined through discounting the amounts payable to their present value at the date of exchange. The
discount component is unwound as an interest charge in the income statement over the life of the obligation.
Where a business combination agreement provides for an adjustment to the cost of the combination contingent on future
events, the amount of the adjustment is included in the cost at the acquisition date if the adjustment can be reliably measured.
Contingent consideration is included in the acquisition balance sheet on a discounted basis.
The assets, liabilities and contingent liabilities of a subsidiary are measured at their fair values at the date of acquisition. When
the initial accounting for a business combination is determined provisionally, any adjustments to the provisional values allocated
to the identifiable assets, liabilities and contingent liabilities are made within 12 months of the acquisition date.
Intangible assets acquired as part of a business combination are capitalised separately from goodwill if the intangible asset
meets the definition of an asset and the fair value can be reliably measured on initial recognition.
In accordance with IFRS 1, business combinations that took place before the transition date (4 January 2004) have not been
restated. All goodwill written off to reserves or amortised prior to the transition date remains written off.
(aa) New accounting standards and IFRIC interpretations
Certain new accounting standards and IFRIC interpretations are mandatory for accounting periods beginning on or after 31
December 2006. The Group’s assessment of the impact of these new standards and interpretations is set out below;
Standards early adopted by the Group
(i) IFRS 7, ‘Financial instruments: Disclosures’, and the complementary amendment to IAS 1 ‘Presentation of financial
statements – Capital disclosures’, were early adopted in 2007
IFRS 7 introduces new disclosures relating to financial instruments. This standard does not have any impact on the
classification and valuation of the Group’s financial instruments.
Standards, amendments and interpretations effective in 2007 but not relevant to the Group’s operations
The following standards, amendments and interpretations are mandatory for the Group for accounting periods beginning on or
after 31 December 2006 but are not relevant to the Group’s operations:
-
-
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IFRIC 7, Applying the restatement approach under IAS 29, Financial reporting in hyper-inflationary economies
IFRIC 8, Scope of IFRS 2
IFRIC 9, Reassessment of embedded derivatives
IFRIC 10, Interim financial reporting and impairment
Standards and interpretations to existing standards that are not yet effective and have not been early adopted by the Group
The following standards, amendments to and interpretations to existing standards have been published and are mandatory for
future accounting periods and have not been early adopted:
(ii) IFRS 3 (Revised), ‘Business combinations’, (effective for annual periods beginning on or after 1 July 2009)
The standard continues to apply the acquisition method to business combinations, with some significant changes. These
changes include a requirement that all payments to purchase a business are to be recorded at fair value at the acquisition
date, with some contingent payments subsequently re-measured through income. Goodwill may be calculated based
on the parent’s share of net assets or it may include goodwill related to minority interest. All transaction costs will be
expensed. The Group will apply this revised standard from the effective date and is currently assessing the impact on the
Group’s financial statements.
(iii) IFRS 8 – Operating segments
This standard is effective for accounting periods beginning on or after 1 January 2009. IFRS 8 sets out the requirements
for disclosure of financial and descriptive information about an entity’s operating segments and also about the entity’s
products and services, the geographical areas in which it operates, and its major customers. The IFRS replaces IAS 14
Segment Reporting. The Group will apply IFRS 8 from 1 January 2009 and is currently considering the impact of this
standard on its disclosures.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
(iv) IFRIC 11 ‘IFRS 2 – Group and treasury share transactions’, (effective for financial periods beginning on or after 1 March 2007)
IFRIC 11 provides guidance on whether share-based transactions involving own shares or involving Group entities (for
example, options over a parent’s shares) should be accounted for as equity-settled or cash-settled share-based payment
transactions in the stand-alone accounts of the Parent and Group companies. The Group will apply IFRIC 11 to financial
periods beginning on or after 1 March 2007 and is currently assessing the impact on the Group’s financial statements.
(v) IFRIC 12 ‘Service concession arrangements’ (effective for financial periods beginning on or after 1 January 2008)
IFRIC 12 applies to contractual arrangements whereby a private sector operator participates in the development, financing,
operation and maintenance of infrastructure for public sector services. As the Group is not a service concession operator
IFRIC 12 is not relevant to the Group’s activities.
(vi) IFRIC 13 ‘Customer loyalty programmes’ (effective for financial periods beginning on or after 1 July 2008)
IFRIC 13 clarifies that where goods or services are sold together with a customer loyalty incentive (for example, loyalty points
or free products), the arrangement is a multiple-element arrangement and the consideration receivable from the customer
is allocated between the components of the arrangement using fair values. The Group will apply IFRIC 13 to financial
periods beginning on or after 1 July 2008, however it is not expected to have any material impact on the Group’s financial
statements.
(vii) IFRIC 14 ‘IAS 19 – The limit on a defined benefit asset, minimum funding requirements and their interaction’ ( effective for
financial periods beginning on or after 1 January 2008)
IFRIC 14 provides guidance on assessing the limit in IAS 19 on the amount of the surplus that can be recognised as an
asset. It also explains how the pension asset or liability may be affected by a statutory or contractual minimum funding
requirement. The Group will apply IFRIC 14 from the effective date and is currently assessing the impact on the Group’s
financial statements.
(viii) IAS 1 (Amendment), ‘Presentation of financial statements’, (effective for financial periods beginning on or after 1 January 2009)
The main aim of the amended version of IAS 1 is to aggregate information in the financial statements on the basis of shared
characteristics. Consequently changes in equity (net assets) of an entity arising from transactions with owners in their capacity as
owners will be disclosed separately from other changes in equity. IAS 1 (Amendment) will be implemented for financial periods
beginning on or after 1 January 2009 and the Group is currently assessing the impact on the Group’s financial statements.
(ix) IAS 23 (Amendment), ‘Borrowing costs’, (effective for financial periods beginning on or after 1 January 2009)
The amendment requires an entity to capitalise borrowing costs directly attributable to the acquisition, construction or
production of a qualifying asset (one that takes a substantial period of time to get ready for use or sale) as part of the cost
of that asset. The option of immediately expensing those borrowing costs will be removed. The Group will apply IAS 23
(Amendment) for financial periods beginning on or after 1 January 2009, however it is not expected to have any material impact
on the Group’s financial statements.
(x) IAS 27 (Revised), ‘Consolidated and separate financial statements’, (effective for annual periods beginning on or after 1 July 2009)
IAS 27 (revised) requires the effect of all transactions with non-controlling interests to be recorded in equity if there is no
change in control. They will no longer result in goodwill or gains and losses. The standard also specifies the accounting
when control is lost. Any remaining interest in the entity is re-measured to fair value and a gain or loss is recognised in
profit or loss. The Group will apply this revised standard from the effective date and is currently assessing the impact on the
Group’s financial statements.
(xi) IAS 32 and IAS 1 (Amendment) ‘Puttable financial instruments and obligations arising on liquidation’, (effective for annual
periods beginning on or after 1 January 2009)
The amendments require some puttable financial instruments and some financial instruments that impose on the entity
and obligation to deliver to another party a pro-rata share of net assets of the entity only on liquidation to be classified as
equity. The Group will apply the amendments from the effective date and is currently assessing the impact on the Group’s
financial statements.
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 7
3. Financial risk management
3.1 Financial risk factors
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.
The Group does not engage in holding or issuing speculative financial instruments or derivatives thereof. The Group finances
its operations by a mixture of retained profits, preference shares, 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.
Risk management is carried out by a central treasury department (Group treasury) under policies approved by the Board of
Directors. Group treasury identifies, evaluates and hedges financial risks in close co-operation with the Group’s operating units.
The Board provides written principles for overall risk management, as well as written policies covering specific areas, such
as foreign exchange risk, interest rate risk, credit risk, use of derivative financial instruments and non-derivative financial
instruments, and investment of excess liquidity.
Market risk
(a) Currency risk
Although the Group is based in Ireland, it has significant investment in overseas operations primarily in the USA. As a result
movements in US dollar/euro exchange rates can significantly affect the Group’s euro balance sheet and income statement.
The Group seeks to match, to a certain extent, the currency of its borrowings, with that of its assets. 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. Management has set up a policy to require Group companies to manage their foreign exchange
risk against their functional currency. The Group companies must manage their exposure on both recognised and expected
foreign exchange exposures on a nominal basis. The Group companies are required to hedge their entire foreign exchange risk
exposure with Group treasury.
Group treasury reviews exposure reports on a regular basis. To manage their foreign exchange risk arising from future
commercial transactions and recognised assets and liabilities, entities in the Group use forward contracts, transacted with
Group treasury. Foreign exchange risk arises when future commercial transactions or recognised assets or liabilities are
denominated in a currency that is not the entity’s functional currency.
The Group treasury’s risk management practice is to hedge up to 100% of anticipated cash flows (mainly export sales and
purchase of inventory) in each major foreign currency for the following financial year. The Group does not take out cover unless
the prospective sale is highly probable.
For segment reporting purposes, each subsidiary designates contracts with Group treasury as fair value hedges or cash flow
hedges, as appropriate. External foreign exchange contracts are designated at Group level as hedges of foreign exchange risk
on specific assets, liabilities or future transactions.
The Group has certain investments in foreign operations, whose net assets are exposed to foreign currency translation risk.
Currency exposure arising from the net assets of the Group’s foreign operations is managed primarily through borrowings
denominated in the relevant foreign currencies.
At 29 December 2007 and 30 December 2006, if the euro had weakened/strengthened by 5% against the US dollar with all other
variables held constant, post-tax profit for the year would not have been materially impacted as a result of foreign exchange
gains/losses on translation of US dollar denominated non hedged trade receivables, financial assets at fair value through profit
or loss or debt securities classified as available for sale. Group profit is more sensitive to movement in currency/US dollar
exchange rates in 2007 than 2006 because of the increased amount of US dollar denominated trade receivables and increased
amount of reported US dollar profits.
A weakening/strengthening of the euro against the US dollar by 5% as at 29 December 2007 would have resulted in a currency
translation gain/loss respectively of approximately €7.5 million, which would be recognised directly in equity.
At 29 December 2007 and 30 December 2006, if the currency had weakened/strengthened by 5% against the UK pound with
all other variables held constant, post-tax profit for the year would not have been materially impacted as a result of foreign
exchange gains/losses on translation of UK pound-denominated non hedged trade receivables, financial assets at fair value
through profit or loss or debt securities classified as available for sale.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
A weakening/strengthening of the euro against the UK pound by 5% as at 29 December 2007 would have resulted in a currency
translation gain/loss respectively of approximately €1.55 million, which would be recognised directly in equity.
(b) 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.
Borrowings issued at floating rates expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the
Group to fair value interest rate risk. Group policy is to maintain no more than one third of its projected debt exposure on a
floating rate basis over any succeeding 12 month period.
The Group, on a continuous basis, maintains a level of fixed rate cover dependent on prevailing fixed market rates, projected
debt and market informed interest rate outlook.
Based on the Group’s unhedged variable rate debt in all currencies at 29 December 2007, a 1% increase in prevailing market
interest rates would have resulted in a €0.704 million loss movement (2006: €1.062 million loss).
The Group manages its cash flow interest rate risk by using floating to fixed interest rate swaps. Such interest rate swaps have
the economic effect of converting borrowings from floating rates to fixed rates. Under the interest rate swaps, the Group agrees
with other parties to exchange at specified intervals, the difference between fixed contract rates and floating rate interest
amounts calculated by reference to the agreed notional amounts.
Occasionally the Group enters into fixed to floating interest rate swaps to hedge the fair value interest rate risk arising where it
has borrowed at fixed rates and is hedged in excess of policy targets.
(c) 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. To manage its exposure to certain commodity markets the Group enters
commodity future contracts. Such commodity futures are subject to fair value changes which are recognised in the income
statement. To manage its price risk arising from investments in equity securities, the Group does not maintain a significant
balance with any one entity.
Diversification of the portfolio must be done in accordance with the limits set by the Group. The impact of a 5% increase or
decrease in equity indexes across the eurozone countries would not have any significant impact on Group operating profit.
(d) 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 term facilities of €633.9 million of which €260.9 million was
undrawn. The weighted average period to maturity of these facilities was 4.8 years.
The table below analyses the Group’s financial liabilities which will be settled on a net basis into relevant maturity groupings
based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the table
are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of
discounting is not significant.
At 29 December 2007
Borrowings
Derivative financial instruments
Trade and other payables
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Less than 1
Between 1
Between 2
year
€’000
and 2 years
€’000
and 5 years
€’000
966
3,187
336,663
904
1,633
-
316,047
2,538
-
Over 5
years
€’000
65,643
-
-
340,816
2,537
318,585
65,643
At 30 December 2006
Borrowings
Derivative financial instruments
Trade and other payables
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 7
Less than 1
Between 1
Between 2
year
€’000
and 2 years
€’000
and 5 years
€’000
39,235
3,688
257,893
1,133
903
-
258,749
2,480
-
Over 5
years
€’000
188,930
472
-
300,816
2,036
261,229
189,402
The table below analyses the Group’s derivative financial instruments which will be settled on a gross basis into relevant maturity
groupings based on the remaining period at the balance sheet to the contractual maturity date. The amounts disclosed in the
table are the contractual undiscounted cash flows. Balances due within 12 months equal their carrying balances as the impact of
discounting is not significant.
At 29 December 2007
Less than 1
Between 1
Between 2
year
€’000
and 2 years
€’000
and 5 years
€’000
Over 5
years
€’000
Forward foreign exchange contracts - cash flow hedges
Inflow
2,872
-
-
-
At 30 December 2006
Less than 1
Between 1
Between 2
year
€’000
and 2 years
€’000
and 5 years
€’000
Over 5
years
€’000
Forward foreign exchange contracts - cash flow hedges
Inflow
1,832
-
-
-
(e) Credit risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments and
deposits with banks and financial institutions, as well as credit exposures to customers, including outstanding receivables and
committed transactions. For banks and financial institutions, only independently rated parties with a minimum credit rating of
‘A’ are accepted.
3.2 Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern in order to
provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the
cost of capital.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return
capital to shareholders, issue new shares or sell assets to increase or reduce debt.
The Group monitors debt capital on the basis of interest cover and debt to EBITDA ratios. At 29 December 2007, the Group’s
debt/EDBITDA ratio was 1.5 (2006: 2.0 times), which is deemed by management to be prudent and in line with industry norms.
3.3 Fair value estimation
The fair value of financial instruments traded in active markets (such as trading and available for sale securities) is based on
quoted market prices at the balance sheet date. The quoted market price used for financial assets held by the Group is the
current bid price.
The fair value of financial instruments that are not traded in an active market (for example, over-the counter derivatives) is
determined by using valuation techniques. The Group uses a variety of methods and makes assumptions that are based on
market conditions existing at each balance sheet date. Quoted market prices or dealer quotes for similar instruments are
used for long-term debt. Other techniques, such as estimated discounted cash flows, are used to determine fair value for the
remaining financial instruments. The fair value of interest rate swaps is calculated as the present value of the estimated future
cash flows. The fair value of forward foreign exchange contracts is determined using quoted forward exchange rates at the
balance sheet date.
The carrying value less impairment provision of trade receivables and payables are assumed to approximate their fair values due to
the short-term nature of trade receivables. The fair value of financial liabilities for disclosure purposes is estimated by discounting
the future contractual cash flows at the current market interest rate that is available to the Group for similar financial instruments.
65
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Notes to the financial statements (continued)
for the year ended 29 December 2007
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 Seltzer assets, including goodwill of €54.6 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. A rate of zero percent has been used to estimate cash flow growth between 5 and 10 years.
Based on a reduction in projected EBITDA of 10% or an increase in the discount factor used from a 9% to 10%, the Group is
satisfied that no impairment is required on goodwill across its remaining cash generating units.
(b) 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. Were the actual final outcome of these matters to differ by 10% from management’s estimates, the
Group would need to revise its tax liabilities by approximately €1 million.
Deferred tax assets are recognised to the extent that it is probable that future taxable profit will be available against which the
unused tax losses and unused tax credits can be utilised. The Group estimates the most probable amount of future taxable
profits, using assumptions consistent with those employed in impairment calculations, and taking into consideration applicable
tax legislation in the relevant jurisdiction. These calculations require the use of estimates. An increase in the Group’s effective
tax rate by 1% would reduce profit after tax by €0.99 million.
(c) Post-employment benefits
The Group operates a number of post employment defined benefit plans. The rates of contributions payable, the pension cost
and the Group’s total obligation in respect of defined benefit plans is calculated and determined by independent qualified
actuaries and updated at least annually. The Group also has plan assets totalling €382.5 million giving a net pension liability of
€114.2 million for the Group. The size of the obligation and cost of the benefits are sensitive to actuarial assumptions. These
include demographic assumptions covering mortality and longevity, and economic assumptions covering price inflation, benefit
and salary increases together with the discount rate used. The Group has reviewed the impact of a change in the discount rate
used and concluded that based on the pension deficit at 29 December 2007, an increase in the discount rates applied of 10
basis points across the various defined benefit plans, would have the impact of decreasing the pension deficit for the Group by
€8.9 million.
(d) Establishing lives for depreciation of property, plant and equipment and intangible assets
Long-lived assets comprising primarily property, plant and equipment and intangible assets, represent a significant portion
of total assets. The annual depreciation and amortisation charge depends primarily on the estimated lives of each type of
asset and, in certain circumstances, estimates of fair values and residual values. The Directors regularly review these useful
lives and change them as necessary to reflect current thinking on remaining lives in light of technological change, pattern of
consumption, the physical condition and expected economic utilisation of the asset. Changes in the useful lives can have a
significant impact on the depreciation and amortisation charge for the period. Details of the useful lives are included in the
accounting policy 2(e) and 2(f). The impact of any change could vary significantly depending on the individual changes in assets
and the classes of assets impacted. The Group has reviewed the impact of a change in useful lives on land and buildings and
a 1 year reduction in useful lives would have a €0.3 million reduction impact on operating profit. The Group has also reviewed
the impact of a change in useful lives in plant and equipment and a one year reduction in useful lives would have a €3.1 million
reduction impact on operating profit.
(e) Fair value of derivatives and other financial instruments
The fair value of financial instruments that are not traded in an active market (for example, over-the-counter derivatives) is
determined by using valuation techniques. The Group uses its judgement to select a variety of methods and make assumptions
that are mainly based on market conditions existing at each balance sheet date. The Group has used discounted cash flow
analysis for various available for sale financial assets that are not traded in active markets. The carrying amount of available for
sale financial assets would not be materially different were the discounted rate used in the discounted cash flow analysis to
differ by 10% from management’s estimates.
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 7
5. Segment information
Primary reporting format – business segments
At 29 December 2007 the Group is organised into three main business segments:
- Consumer Foods
- Food Ingredients and Nutritionals
- Agribusiness and Property
The segment results for the year ended 30 December 2006 are as follows:
2006
Total gross segment revenue
Inter-segment revenue
Revenue
Food
Ingredients Agribusiness
Consumer
and
and
Foods Nutritionals
€’000
€’000
Property Unallocated
€’000
€’000
Group
€’000
511,077
(55)
1,186,890
(108,977)
264,492
-
511,022 1,077,913
264,492
-
-
-
1,962,459
(109,032)
1,853,427
Operating profit pre exceptional items
Exceptional items
24,525
(3,277)
44,166
-
16,876
-
-
(9,178)
85,567
(12,455)
21,248
44,166
16,876
(9,178)
73,112
Finance income and costs
Share of results of joint ventures and associates
Profit before tax
Tax
Profit for the year
The segment results for the year ended 29 December 2007 are as follows:
(14,035)
2,842
61,919
4,351
66,270
2007
Total gross segment revenue
Inter-segment revenue
Revenue
Operating profit pre exceptional items
Exceptional items
Finance income and costs
Share of results of joint ventures and associates
Profit before tax
Tax
Profit for the year
Food
Ingredients Agribusiness
Consumer
and
and
Foods Nutritionals
€’000
€’000
Property Unallocated
€’000
€’000
Group
€’000
510,821
(39)
1,529,310
(126,106)
293,034
(453)
510,782 1,403,204
292,581
17,834
(23,463)
85,194
-
12,806
-
(5,629)
85,194
12,806
-
-
-
-
-
-
2,333,165
(126,598)
2,206,567
115,834
(23,463)
92,371
(17,282)
992
76,081
(15,841)
60,240
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be
available to unrelated third parties.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
Other segment items included in the income statement for the year ended 30 December 2006 are as follows:
2006
Food
Ingredients Agribusiness
Consumer
and
and
Foods Nutritionals
€’000
€’000
Property Unallocated
€’000
€’000
Group
€’000
Depreciation
Amortisation of intangibles
Capital grants released to income statement
Restructuring costs - exceptional items
7,989
2,567
(1,127)
(3,277)
15,000
1,607
(12)
-
2,426
278
(41)
-
-
-
-
(9,178)
25,415
4,452
(1,180)
(12,455)
Other segment items included in the income statement for the year ended 29 December 2007 are as follows:
2007
Food
Ingredients Agribusiness
Consumer
and
and
Foods Nutritionals
€’000
€’000
Property Unallocated
€’000
€’000
Group
€’000
Depreciation
Amortisation of intangibles
Capital grants released to income statement
Restructuring costs - exceptional items
7,378
2,287
(637)
(23,463)
17,418
3,740
(67)
-
2,450
789
(32)
-
-
-
-
-
27,246
6,816
(736)
(23,463)
The segment assets and liabilities at 30 December 2006 and capital expenditure for the year then ended are as follows:
2006
Food
Ingredients Agribusiness
Consumer
and
and
Foods Nutritionals
€’000
€’000
Property Unallocated
€’000
€’000
Group
€’000
Assets
Associates and joint ventures
149,129
-
488,926
-
140,632
-
314,519
69,601
1,093,206
69,601
Total assets
Liabilities
149,129
488,926
140,632
384,120
1,162,807
(77,232)
(161,113)
(35,000)
(688,943)
(962,288)
Group capital expenditure and acquisitions
6,275
102,817
11,252
(71)
120,273
The segment assets and liabilities at 29 December 2007 and capital expenditure for the year then ended are as follows:
2007
Assets
Associates and joint ventures
Total assets
Liabilities
Food
Ingredients Agribusiness
Consumer
and
and
Foods Nutritionals
€’000
€’000
Property Unallocated
€’000
€’000
Group
€’000
90,795
-
651,291
-
142,139
-
230,968
61,099
1,115,193
61,099
90,795
651,291
142,139
292,067
1,176,292
(62,092)
(257,977)
(51,120)
(570,528)
(941,717)
Group capital expenditure and acquisitions
3,980
59,542
5,584
878
69,984
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 7
Segment assets consist primarily of property, plant and equipment, intangible assets, inventories, derivatives designated
as hedges of future transactions and receivables. Unallocated amounts include deferred taxation, cash, investments and
derivatives held for trading or designated as hedges of borrowings.
Segment liabilities comprise operating liabilities. Unallocated amounts include 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.
Revenue
Ireland
Rest of Europe
USA/other
Total assets
Ireland
Rest of Europe
USA/other
Investment in associates and joint ventures
Unallocated assets
2007
€’000
803,363
251,176
1,152,028
2006
€’000
775,514
214,942
862,971
2,206,567
1,853,427
2007
€’000
597,067
12,058
275,099
2006
€’000
471,259
30,382
277,046
884,224
778,687
61,099
230,969
69,601
314,519
Total assets
1,176,292
1,162,807
Total assets are allocated based on where the assets are located.
Capital expenditure
Ireland
Rest of Europe
USA/other
2007
€’000
33,591
1,287
35,106
2006
€’000
31,720
799
87,754
69,984
120,273
Capital expenditure, including acquisitions is allocated based on where the assets are located.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
6. Operating profit
The following items have been included in arriving at operating profit:
Depreciation of property, plant and equipment (note 14)
- Owned assets
- Leased assets under finance leases
Profit on disposal of property, plant and equipment
2007
€’000
24,994
2,252
2006
€’000
23,730
1,685
(3,002)
(7,531)
Repairs and maintenance expenditure on property, plant and equipment
28,459
25,264
Exit from Pigmeat
Amortisation of intangible assets (note 15)
- Software costs
- Other intangible assets
Increase in inventories
20,756
-
3,824
2,992
92,053
3,370
1,082
908
Raw materials and consumables used
1,637,623
1,355,389
Trade receivables - impairment charge for bad and doubtful debts
Amortisation of government grants received (note 35)
Operating lease rentals payable
- Plant and machinery
- Other
Employee benefit expense (note 8)
Auditors’ remuneration
Research and development costs
Net foreign exchange gains
Disposal of loan note - The Cheese Company Holdings Limited
Other
Total operating expenses
297
696
(736)
(4,322)
4,561
4,556
3,317
4,715
196,977
184,434
627
599
7,509
6,275
(611)
(2,008)
-
9,178
91,065
173,534
2,114,196
1,780,315
70
7. Exceptional items
Exit from Pigmeat
Restructuring cost
The Cheese Company Holdings Limited
Exceptional tax credit (note 11)
Net exceptional item
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 7
Notes
(a)
(b)
2007
€’000
(20,756)
(2,707)
-
2006
€’000
-
(3,277)
(9,178)
(23,463)
(12,455)
617
12,321
(22,846)
(134)
(a) Exit from Pigmeat – included in the exceptional charge relating to the Group’s exit from Pigmeat are the following: insurance
proceeds received in excess of the carrying value of the assets plus a provision for the loss on disposal to the Management
Buy Out (MBO) team, net charge (pre tax) €23.8 million. A gain on the disposal of property relating to the former processing
site at Ruskey of €3.1 million was also realised during the year.
(b) Restructuring of Consumer Foods operations. Costs include redundancy and asset impairment charges.
8. Employee benefit expense
Wages and salaries
Termination costs
Social security costs
Share option and Sharesave Scheme costs
Shares awarded under LTIP 2007
Pension costs - defined contribution plans (note 33)
Pension costs - defined benefit plans (note 33)
Exceptional item - curtailment gain (note 33)
Exceptional item - termination costs (note 7(b))
2007
€’000
169,554
2,877
17,673
377
210
1,024
4,981
2006
€’000
152,358
1,469
17,093
290
-
1,026
6,435
196,696
178,671
(1,843)
2,124
-
5,763
196,977
184,434
The average number of employees in 2007 was 3,993 (2006: 3,926) and is analysed into the following categories:
Consumer Foods
Food Ingredients and Nutritionals
Agribusiness and Property
2007
2006
1,822
1,476
695
3,993
1,894
1,349
683
3,926
71
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Notes to the financial statements (continued)
for the year ended 29 December 2007
9. Directors’ remuneration
The salary, fees and other benefits for each of the Directors during the year were:
Executive
J Moloney
G Meagher
K Toland
2007
2006
Non-executive
M Walsh
L Herlihy
V Quinlan
J Callaghan
H Corbally
N Dunphy (note(a))
J Fitzgerald
E Fitzpatrick
J Gilsenan
P Gleeson (note (b))
P Haran
C Hill
Ml Keane (note (c))
M Keane (note (b))
J Liston
M Merrick
J Miller (note (d))
W Murphy
M Parsons
E Power
G Stanley (note (d))
2007
2006
Total 2007
Total 2006
Performance
Pension
Salary
€’000
Fees
€’000
bonus
€’000
contribution
€’000
Other
benefits
€’000
439
291
302
1,032
988
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
85
41
41
63
19
12
19
19
19
19
59
19
8
19
63
19
-
59
19
19
-
621
573
581
347
463
1,391
761
140
97
105
342
290
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
34
21
6
61
62
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,032
621
1,391
988
573
761
342
290
61
62
2007
Total
€’000
1,194
756
876
2,826
85
41
41
63
19
12
19
19
19
19
59
19
8
19
63
19
-
59
19
19
-
621
3,447
2006
Total
€’000
927
569
605
2,101
80
38
38
57
17
-
17
17
17
11
57
17
17
11
57
17
7
57
17
17
7
573
2,674
(a) Mr N Dunphy was appointed as a Director on 31 May 2007.
(b) Mr P Gleeson and Mr M Keane were appointed as Directors on 24 May 2006.
(c) Mr Ml Keane resigned as a Director on 31 May 2007.
(d) Mr J Miller & Mr G Stanley resigned as Directors on 24 May 2006
Details of Directors’ share options are set out in note 43 to the financial statements.
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.
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 7
The pension benefits of each of the executive Directors during the year were as follows:
Transfer value
of increase in
accrued pension
€’ 000
Annual pension
accrued in 2007
in excess of inflation
€’ 000
Total annual
accrued pension at
29 December 2007
€’ 000
-
359
149
508
624
-
16
14
30
40
J Moloney
G Meagher
K Toland
2007
2006
10. Finance income and costs
(a) Finance income
Interest income
(b) Finance costs
Interest expense
- Bank borrowings repayable within five years
Interest cost on deferred consideration
-
- Finance lease costs
-
-
- Fair value adjustment of borrowings attributable to interest rate risk
Interest rate swaps, transfer from equity
Interest rate swaps, fair value hedges
Finance cost of preference shares
Total finance costs
11. Income taxes
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 32)
Pre exceptional tax charge
Exceptional tax credit
268
216
79
563
513
2006
€’000
4,883
2006
€’000
(16,265)
-
(380)
1,169
(4,242)
4,242
(15,476)
(3,442)
2007
€’000
4,813
2007
€’000
(19,084)
(450)
(272)
1,401
676
(676)
(18,405)
(3,690)
(22,095)
(18,918)
2007
€’000
7,284
(100)
7,184
6,338
327
6,665
13,849
2,609
2006
€’000
3,080
238
3,318
1,035
(46)
989
4,307
3,663
16,458
(617)
7,970
(12,321)
15,841
(4,351)
73
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Notes to the financial statements (continued)
for the year ended 29 December 2007
(i)
The pre exceptional deferred tax charge for 2007 includes €0.787 million for the reduction in the value of the Group’s UK
deferred tax asset (see (iv) below) due to the decrease in the UK corporation tax rate from 30% to 28%, with effect from 1
April 2008.
(ii) Exit from meat processing: the sale during 2007 of the former processing site at Ruskey resulted in an exceptional current
tax charge of €0.481 million. Tax on the insurance settlement agreed following the destruction by fire in August 2007 of
processing assets at the Edenderry plant, and the tax effects of the Group’s decision to dispose of the Pigmeat business
to its management team, resulted in an exceptional corporation tax charge of €1.734 million and a deferred tax credit of
€2.554 million.
(iii) Also, in 2007, the restructuring provision in the Consumer Foods division resulted in an exceptional corporation tax credit of
€0.240 million and a deferred tax credit of €0.038 million.
(iv) In the prior year a deferred tax asset of €12.1 million arising from the expected use in future years of UK tax losses, which
previously had not been recognised due to uncertainty as to recoverability, was recognised in the 2006 financial statements.
Also, in 2006, a restructuring provision in the Pigmeat division resulted in a corporation tax credit of €0.699 million and a
deferred tax charge of €0.489 million.
The tax credits in 2007 and 2006, by virtue of nature and size, have been separately disclosed as an exceptional credit 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
Tax calculated at Irish rate of 12.5% (2006: 12.5%)
Earnings at reduced and higher Irish rates
Difference due to overseas tax rates
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
Tax charge
2007
€’000
2006
€’000
76,081
61,919
9,510
(1,176)
7,359
-
57
(124)
215
7,740
(448)
2,489
(11,508)
(58)
(355)
(2,211)
15,841
(4,351)
Details of deferred tax charged or credited directly to equity during the year are outlined in note 32.
12. Earnings per share
Basic
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 own
shares (note 27).
Profit attributable to equity holders of the Company
2007
€’000
59,833
2006
€’000
65,934
Weighted average number of ordinary shares in issue
293,012,540
292,958,667
Basic earnings per share (cent per share)
20.42
22.51
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 7
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 as above 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
2007
€’000
293,012,540
1,110,557
2006
€’000
292,958,667
480,072
Adjusted weighted average number of ordinary shares
294,123,097
293,438,739
Diluted earnings per share (cent per share)
20.34
22.47
At year end, options over 491,000 ordinary shares could potentially dilute basic earnings per share in the future but are anti-
dilutive during the year ended 29 December 2007.
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)
2007
€’000
59,833
22,846
82,679
28.22
28.11
2006
€’000
65,934
134
66,068
22.55
22.52
13. Dividends
The dividends paid in 2007 and 2006 were €17.3 million (5.91 cent per share) and €16.5 million (5.62 cent per share) respectively.
On 3 October 2007 an interim dividend of 2.50 cent per share on the ordinary shares amounting to €7.33 million was paid to
shareholders on the register of members as at 14 September 2007. The Directors have recommended the payment of a final
dividend of 3.58 cent per share on the ordinary shares which amounts to €10.5 million. Subject to shareholders approval this
dividend will be paid on Tuesday, 20 May 2008 to shareholders on the register of members as at Friday, 25 April 2008, the record
date. These financial statements do not reflect this final dividend payable.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
14. Property, plant and equipment – Group
Year ended 30 December 2006
Opening net book amount
Exchange differences
Acquisition of subsidiaries
Additions
Disposals
Reclassification
Depreciation charge
Closing net book amount
At 30 December 2006
Cost
Accumulated depreciation
Land and
Plant and
Motor
buildings
€’000
equipment
€’000
vehicles
€’000
Total
€’000
141,634
(3,102)
419
6,337
(1,543)
-
(4,745)
197,789
(7,489)
859
24,544
(225)
(29)
(20,074)
1,080
(11)
-
376
(101)
29
(596)
340,503
(10,602)
1,278
31,257
(1,869)
-
(25,415)
139,000
195,375
777
335,152
202,932
(63,932)
537,849
(342,474)
18,123
(17,346)
758,904
(423,752)
Net book amount
139,000
195,375
777
335,152
Year ended 29 December 2007
Opening net book amount
Exchange differences
Acquisition of subsidiaries (note 41)
Additions
Disposals
Reclassification
Transfer to disposal group held for sale
Depreciation charge
Closing net book amount
At 29 December 2007
Cost
Accumulated depreciation
139,000
(3,382)
1,849
9,117
(9,426)
-
(20,649)
(4,922)
195,375
(7,218)
1,455
41,816
(6,801)
266
(16,681)
(21,747)
777
(34)
278
392
(117)
-
-
(577)
335,152
(10,634)
3,582
51,325
(16,344)
266
(37,330)
(27,246)
111,587
186,465
719
298,771
167,604
(56,017)
523,626
(337,161)
18,463
(17,744)
709,693
(410,922)
Net book amount
111,587
186,465
719
298,771
Depreciation expense of €27,245,814 (2006: €25,415,366) has been charged to cost of sales €24,483,735 (2006: €22,647,360),
to distribution costs €1,101,849 (2006: €2,053,075) and to administration expenses €1,660,230 (2006: €714,931).
Leased assets, comprising plant and equipment, included in the table above, where the Group is a lessee under a finance lease,
comprise as follows:
Cost - capitalised finance leases
Accumulated depreciation
Net book amount
2007
€’000
43,976
(27,250)
2006
€’000
43,976
(24,998)
16,726
18,978
Operating lease rentals amounting to €9,116,980 (2006: €8,031,578) are included in the income statement.
Included in the cost of plant and equipment is an amount of €24,780,022 (2006: €4,652,730) incurred in respect of assets under
construction. Insurance proceeds received or receivable as compensation for property, plant and equipment that was damaged
or impaired amounted to €21.7 million.
Borrowing costs incurred on significant capital projects are capitalised. The amount capitalised, using the Group’s incremental
cost of borrowing, amounted to nil in 2007 (2006: €517,000).
Capitalised borrowing costs will be depreciated to the income statement and will be deducted in determining taxable profit
over the life of the underlying asset.
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 7
15. Intangible assets
Year ended 30 December 2006
Opening net book amount
Exchange differences
Additions
Acquisition of subsidiaries
Amortisation
Other
Development
Goodwill
€’000
intangibles
€’000
Software
€’000
24,592
(1,780)
172
62,148
-
10,168
(254)
300
16,589
(868)
21,378
(355)
6,459
-
(3,370)
costs
€’000
1,825
(135)
2,069
-
(214)
Total
€’000
57,963
(2,524)
9,000
78,737
(4,452)
Closing net book amount
85,132
25,935
24,112
3,545
138,724
At 30 December 2006
Cost
Accumulated amortisation
85,132
-
27,367
(1,432)
41,099
(16,987)
3,759
(214)
157,357
(18,633)
Net book amount
85,132
25,935
24,112
3,545
138,724
Year ended 29 December 2007
Opening net book amount
Exchange differences
Additions/adjustments re acquisitions
Acquisition of subsidiaries (note 41)
Reclassification
Amortisation
85,132
(6,761)
171
6,125
-
-
25,935
(1,820)
91
5,545
-
(2,363)
24,112
(287)
1,341
-
(266)
(3,824)
3,545
(286)
1,804
-
-
(629)
138,724
(9,154)
3,407
11,670
(266)
(6,816)
Closing net book amount
84,667
27,388
21,076
4,434
137,565
At 29 December 2007
Cost
Accumulated amortisation
84,667
-
31,183
(3,795)
41,887
(20,811)
5,277
(843)
163,014
(25,449)
Net book amount
84,667
27,388
21,076
4,434
137,565
Goodwill is summarised by segment as follows:
At 30 December 2006
Ireland
Rest of Europe
USA/other
At 29 December 2007
Ireland
Rest of Europe
USA/other
Food
Ingredients Agribusiness
Consumer
and
Foods Nutritionals
€’000
€’000
and
Property
€’000
5,650
-
-
540
16,852
61,399
5,650
78,791
5,462
-
-
540
16,367
61,607
691
-
-
691
691
-
-
Total
€’000
6,881
16,852
61,399
85,132
6,693
16,367
61,607
5,462
78,514
691
84,667
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77
Notes to the financial statements (continued)
for the year ended 29 December 2007
The recoverable amount of a cash generating unit 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 which are not in excess of forecast inflation. A rate of zero percent has
been used to estimate cash flow growth between five and ten years. Key assumptions include management’s estimates of future
profitability, capital expenditure requirements and working capital investment. Capital expenditure requirements are based on the
Group’s strategic plans and broadly assume that historic investment patterns will be maintained. Working capital requirements are
forecast to increase in line with activity. Discount rates used reflect specific risks relating to the relevant segments.
The value in use calculations are prepared using pre tax discount rates, which range from 7.5% to 10%, and incorporate terminal
values. In forecasting terminal values, a multiple of seven times EBITDA is generally assumed.
16. Investments in associates
At the beginning of the year
Share of profit after tax
Exchange differences
Additions
Disposals
At the end of the year
2007
Company
€’000
2007
Group
€’000
2006
Company
€’000
1,395
-
-
-
-
10,933
158
(157)
-
(205)
1,395
-
-
-
-
2006
Group
€’000
11,090
66
(142)
367
(448)
1,395
10,729
1,395
10,933
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:
2006
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
2007
Co-operative Animal Health Limited
South Eastern Cattle Breeding Society Limited*
Malting Company of Ireland Limited
South East Port Services Limited
Westgate Biological Limited
Assets
€’000
Liabilities
€’000
Revenues
€’000
8,064
1,842
4,966
3,930
209
27
6,047
460
2,583
1,867
76
288
14,718
1,647
3,391
1,388
-
-
19,038
11,321
21,144
Assets
€’000
Liabilities
€’000
Revenues
€’000
7,968
1,851
4,793
7,417
103
5,916
878
2,102
5,175
112
15,098
1,735
3,773
1,451
-
22,132
14,183
22,057
Interest
held
%
50
57
33.33
49
41.8
Interest
held
%
50
57
33.3
49
41.8
Profit/
(loss)
€’000
155
(8)
6
82
(169)
-
66
Profit/
(loss)
€’000
(271)
102
310
165
(148)
158
* In accordance with Group accounting policy, South Eastern Cattle Breeding Society Limited is included in the Group result
based on the equity method of accounting, as the Group has significant influence over the entity but not control, due to its
co-op structure.
Further details in relation to principal associates are outlined in note 44.
78
17. Investments in joint ventures
At the beginning of the year
Share of profit after tax
Other reserve movements
Deferred tax provision
Write-down of investment
Exchange differences
Additions
At the end of the year
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 7
2007
€’000
58,668
834
(1,925)
(3,312)
(380)
(5,671)
2,156
2006
€’000
59,832
2,776
568
-
-
(4,514)
6
50,370
58,668
The following amounts represent the Group’s share of the assets and liabilities, 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
Proportionate interest in joint venture’s commitments
A listing and description of interests in significant joint ventures is outlined in note 44.
18. Investments
2007
€’000
2006
€’000
100,418
63,819
113,644
50,965
164,237
164,609
53,356
60,511
61,848
44,093
113,867
105,941
50,370
58,668
350,055
(349,221)
241,727
(238,951)
834
2,776
15,700
14,600
At the beginning of the year
Exchange differences
Disposals/redemption
Fair value adjustment
Amounts written-off
Additions
At the end of the year
Available
Investments
for sale
Investments
Available
for sale
in subsidiaries
investments in subsidiaries
investments
2007
Company
€’000
510,412
-
(27,251)
-
(27,858)
-
2007
Group
€’000
2006
Company
€’000
12,527
-
(37)
17,512
-
87
510,469
-
(57)
-
-
-
2006
Group
€’000
29,511
376
(17,811)
102
-
349
455,303
30,089
510,412
12,527
There were no disposals or impairment provisions on available for sale investments in 2007 or 2006.
79
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Notes to the financial statements (continued)
for the year ended 29 December 2007
Investments include the following:
Listed securities
- Equity securities – eurozone countries
Unlisted securities
- One51 plc
- Irish Dairy Board
- Glanbia Enterprise Fund Limited
- Moorepark Technology
Available
Investments
for sale
Investments
Available
for sale
in subsidiaries
investments in subsidiaries
investments
2007
Company
€’000
2007
Group
€’000
2006
Company
€’000
2006
Group
€’000
1
526
1
864
-
-
1,290
-
18,431
9,644
1,290
198
-
-
1,290
-
613
9,558
1,290
202
-
- Other Group companies
454,012
-
509,121
455,303
30,089
510,412
12,527
The unlisted equity shares in One51 plc are currently traded on an informal ‘grey’ market. These shares are fair valued by
reference to published bid prices.
Available for sale financial assets are fair valued annually at year end. 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.
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. All available for sale financial assets are
euro denominated.
19. 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 (note 42)
Amounts due from subsidiary companies
Valued added tax
Other receivables
2007
Company
€’000
2007
Group
€’000
2006
Company
€’000
2006
Group
€’000
-
-
157,415
(7,834)
-
-
142,336
(10,439)
-
39
-
-
23,984
-
-
149,581
29,189
6,757
13,929
-
9,848
6,859
-
1,881
-
-
-
-
-
131,897
16,025
3,301
4,929
-
4,725
8,663
24,023
216,163
1,881
169,540
Less non-current portion: loans to related parties
-
(13,929)
-
(4,929)
24,023
202,234
1,881
164,611
In 2007, 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 €27.6 million (2006: €24.5 million). The Group has continued to
recognise an asset of €515,000 (2006: €557,000), representing the extent of its continuing involvement, and an associated
liability of a similar amount.
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 7
The carrying value of receivables are a reasonable approximation of fair value. 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.
The Group’s objective is to minimise credit risk by carrying out credit checks where appropriate by the use of credit insurance
in certain situations, and by active credit management. Management does not expect any significant losses of receivables that
have not been provided for.
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Euro
US dollar
GBP sterling
Other
2007
Company
€’000
24,023
-
-
-
2007
Group
€’000
2006
Company
€’000
106,173
96,497
13,332
161
1,881
-
-
-
2006
Group
€’000
81,497
74,370
10,056
3,617
24,023
216,163
1,881
169,540
Movements on the Group provision for impairment of trade receivables are as follows:
At the beginning of the year
Provision for receivables impairment
Receivables written off during the year as uncollectable
Unused amounts reversed
At the end of the year
2007
€’000
10,439
859
(1,909)
(1,555)
2006
€’000
11,716
1,821
(1,766)
(1,332)
7,834
10,439
As of 29 December 2007, trade receivables of €9.1 million (2006: €11.4 million) were impaired. The amount of the provision was
€7.8 million (2006: €10.4 million).
Up to 3 months
3 to 6 months
Over 6 months
2007
€’000
1,094
60
7,992
2006
€’000
1,056
438
9,923
9,146
11,417
As of 29 December 2007, trade receivables of €23.7 million (2006: €30.6 million) were past due but not impaired.
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.
The Group does not hold any collateral as security.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
20. Inventories
Raw materials
Finished goods
Consumables
2007
€’000
18,071
195,342
11,644
2006
€’000
18,852
111,045
15,261
225,057
145,158
Included in the above are inventories carried at fair value less costs to sell amounting to €3.1 million (2006: €32.7 million).
The amounts written off in respect of these inventories were €1.4 million.
21. Cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
2007
Company
€’000
2007
Group
€’000
2006
Company
€’000
2006
Group
€’000
-
-
-
62,478
97,341
4,376
-
63,596
195,715
159,819
4,376
259,311
The fair value of cash and cash equivalents are not materially different to the book values.
22. Assets and liabilities classified as held for sale and included in disposal groups
Disposal group
Inventory
Trade and other receivables
Total assets included in disposal group
Disposal group
Trade and other payables
Liabilities included in disposal group
2007
€’000
9,224
11,080
20,304
17,647
17,647
2006
€’000
-
-
-
-
-
A strategic review of Pigmeat operations was conducted during the year, following which a decision was made to exit these
operations. On 19 December 2007 the Group signed non-binding heads of agreement and, following further negotiation, an
agreement was signed on 3 March 2008 to sell the Pigmeat operations to the Management Buy Out (“MBO”) team. Assets and
liabilities included in disposal groups are stated at lower of cost and fair value less costs to sell.
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 7
23. Reconciliation of changes in equity
Notes
Share
capital
€’000
(note 24)
Other
Retained
Minority
reserves
€’000
(note 25)
earnings
€’000
(note 26)
interest
€’000
(note 30)
Total
€’000
Restated balance at 31 December 2005
97,964
120,192
(100,737)
6,299
123,718
Actuarial gain - defined benefit schemes
Deferred tax on pension gain
Share of actuarial gain - joint ventures
Currency translation differences
Fair value adjustment
Net income recognised directly in equity
Profit for the year
Total recognised income for 2006
Shares issued
Premium on shares issued
Cost of share options
Sharesave Scheme - options exercised
Sharesave Scheme - discount on options
Dividends paid in 2006
Balance at 30 December 2006
Actuarial loss - defined benefit schemes
Deferred tax on pension loss
Share of actuarial gain - joint ventures
Currency translation differences
Fair value adjustments
Net expense recognised directly in equity
Profit for the year
Total recognised income for 2007
Change in minority interest in subsidiaries
Shares issued
Premium on shares issued
Cost of share options
Discount on options
Shares purchased
Dividends paid in 2007
33
32
25
25
24
24
28
24
28
33
32
25
25
30
24
24
28
28
27
-
-
-
-
-
-
-
-
7
183
-
122
28
-
340
-
-
-
(9,401)
2,734
(6,667)
-
36,852
(3,923)
230
-
-
33,159
65,934
(6,667)
99,093
-
-
199
-
(28)
-
-
-
-
-
-
(16,472)
171
(16,472)
-
-
-
-
-
-
336
336
-
-
-
-
-
-
-
36,852
(3,923)
230
(9,401)
2,734
26,492
66,270
92,762
7
183
199
122
-
(16,472)
(15,961)
98,304
113,696
(18,116)
6,635
200,519
-
-
-
-
-
-
-
-
-
6
161
-
74
(95)
-
146
-
-
-
(14,878)
8,578
(6,300)
-
(4,539)
1,102
230
-
-
(3,207)
59,833
(6,300)
56,626
-
-
-
587
(74)
-
-
-
-
-
-
-
-
(17,334)
-
-
-
-
-
-
407
407
(2)
-
-
-
-
-
-
(4,539)
1,102
230
(14,878)
8,578
(9,507)
60,240
50,733
(2)
6
161
587
-
(95)
(17,334)
513
(17,334)
(2)
(16,677)
Balance at 29 December 2007
98,450
107,909
21,176
7,040
234,575
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Notes to the financial statements (continued)
for the year ended 29 December 2007
24. Share capital and share premium
Company
At 31 December 2005
Sharesave Scheme - options exercised
Sharesave Scheme - discount on options
Issue of shares - option scheme
At 30 December 2006
Discount on options
Shares purchased
Issue of shares - option scheme
Share
Number of
Ordinary
premium
shares
(thousands)
shares
€’000
Company
€’000
293,116
-
-
123
17,587
-
-
7
436,183
-
-
183
293,239
-
17,594
-
436,366
-
108
6
161
Own
shares
€’000
(538)
122
28
-
(388)
74
(95)
-
Total
Company
€’000
453,232
122
28
190
453,572
74
(95)
167
At 29 December 2007
293,347
17,600
436,527
(409)
453,718
Group
At 31 December 2005
Sharesave Scheme - options exercised
Sharesave Scheme - discount on options
Issue of shares - option scheme
At 30 December 2006
Discount on options
Shares purchased
Issue of shares - option scheme
Share
Number of
Ordinary
premium
shares
(thousands)
shares
€’000
Group
€’000
293,116
-
-
123
293,239
-
-
108
17,587
-
-
7
17,594
-
-
6
80,915
-
-
183
81,098
-
-
161
Own
shares
€’000
(538)
122
28
-
(388)
74
(95)
-
Total
Group
€’000
97,964
122
28
190
98,304
74
(95)
167
At 29 December 2007
293,347
17,600
81,259
(409)
98,450
The total authorised number of ordinary shares is 306 million shares (2006: 306 million shares) with a par value of €0.06 per share
(2006: €0.06 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
price in € Number of
options
per share
2.39 2,734,000
166,000
4.03
(108,000)
1.55
-
-
2007
2006
2006
2007
Average
exercise
Average
exercise
price in €
per share
2.41
2.87
1.55
3.23
Number of
options
3,007,000
50,000
(123,000)
(200,000)
At the end of the year
2.52 2,792,000
2.39
2,734,000
84
Expiry date in
�
2008
2008
2012
2013
2014
2014
2016
2017
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 7
Exercise
price
€
2007
Number
2006
Number
Stg£2.90
4.25
1.55
1.90
2.73
2.47
2.87
4.03
10,000
315,000
961,000
160,000
1,030,000
100,000
50,000
166,000
10,000
315,000
1,069,000
160,000
1,030,000
100,000
50,000
-
2,792,000
2,734,000
Total options over 2,467,000 (2006: 2,409,000) ordinary shares were outstanding at 29 December 2007 under the 2002 Long
Term Incentive Plan (“LTIP”), at prices ranging between €1.55 and €4.03. Furthermore, in accordance with the terms of the LTIP,
certain executives to whom options were granted in 2002 and 2004 are eligible to receive share awards related to the number
of ordinary shares which they hold on the second anniversary of the exercise of the option, to a maximum of 134,600
(2006: 146,900) 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 27 to the financial statements, the Employee Share Trust held 234,190 (2006: 262,503) ordinary
shares at 29 December 2007. The dividend rights in respect of these shares have been waived, save 0.001 pence per share.
Options over 325,000 ordinary shares, which were granted in 1998, under the Avonmore Foods plc 1988 Share Option Scheme
remain outstanding at a price of €4.25 or Stg£2.90.
Under the 2002 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.
Long Term Incentive Plan 2007 (“The 2007 LTIP”)
In August 2007, arising from the review of the Group’s compensation arrangements for executive Directors and senior
managers, the Directors approved the introduction of a 2007 LTIP for selected senior managers (other than directors) in order to
further align the interests of such senior managers with those of shareholders. Awards outstanding under the Company’s 2007
LTIP as at 29 December 2007 amounted to 183,500 ordinary shares (2006: nil).
The 2007 LTIP is tied 50% to achievement of targeted EPS growth and 50% to Total Shareholder Return (TSR).
The TSR element is assessed against a group of leading peer companies and the EPS element is measured against pre-set
targeted adjusted EPS growth criteria for the Group. The maximum award under the 2007 LTIP is 115% of base salary per annum
in the form of conditional shares and the vesting period is three years.
Shares awarded under the Group’s 2007 LTIP are equity settled share based payments as defined in IFRS 2 Share Based
Payments. The IFRS requires that a recognised valuation methodology be employed to determine the fair value of shares
awarded and stipulates that this methodology should be consistent with methodologies used for pricing of financial
instruments. The expense of €209,840 reported in the Group income statement has been arrived at through applying a Monte
Carlo simulation technique to model the combination of market and non-market based performance conditions of the plan.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
Impact on Group income statement
The total expense is analysed as follows: -
Granted in 2007
Share price
Period
Number
at date
to earliest
of award
€
release date
of
shares
Fair value
€
2007 Long Term Incentive Plan
4.03
3 years
183,500
3.85
Shares awarded under the 2007 LTIP are nil based payments. The 2007 awards will expire in 2011.
Expense in Group
income statement
2007
€’000
€210
2006
€’000
-
The fair value of the shares awarded were determined using a Monte Carlo simulation technique taking account of peer group
total share return volatilities and correlations together with the following assumptions:
Risk free interest rate
Expected volatility
Dividend yield
2007
4%
25%
2%
2006
-
-
-
Expected volatility was determined by calculating the historical volatility of the Company’s share price over a period equivalent
to the expected life of the option.
Impact on Group balance sheet
The Glanbia Employees’ Share Trust (“The Trust”) was retained during the year to manage the 2007 Long Term Incentive Plan.
The Trust purchased 21,687 shares on 7 December 2007 at a cost of €95,472. As at 29 December 2007, the Trust held 234,190
ordinary shares.
These shares were accounted for as own shares in the Group balance sheet.
The fair value of share options has been calculated using the Trinomial Model. Options over 2,576,000 (2006: 1,394,000) ordinary
shares were exercisable at 29 December 2007 at a weighted average price of €2.42 (2006: €2.18).
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 7
25. Other reserves
Capital and
mergers
reserves
€’000
Currency
Fair value
reserve
€’000
reserves
€’000
Total
€’000
Restated balance at 31 December 2005
116,250
1,798
2,144
120,192
Translation differences on foreign currency net investments
Revaluation of interest rate swaps - gain in year
Foreign exchange contracts - gain in year
Transfers to income statement
- Foreign exchange contracts - gain in year
- Forward commodity contracts - loss in year
- Interest rate swaps - gain in year
Revaluation of forward commodity contracts - gain in year
Revaluation of available for sale investments - gain in year
Deferred tax on fair value adjustments
Cost of share options
Discount on own shares vested
-
-
-
-
-
-
-
-
-
199
(28)
(9,401)
-
-
-
-
-
-
-
-
-
-
-
2,378
1,840
(540)
227
(1,169)
591
102
(695)
-
-
(9,401)
2,378
1,840
(540)
227
(1,169)
591
102
(695)
199
(28)
Balance at 30 December 2006
116,421
(7,603)
4,878
113,696
Translation differences on foreign currency net investments
Revaluation of interest rate swaps - loss in year
Foreign exchange contracts - gain in year
Transfers to income statement
- Foreign exchange contracts - gain in year
- Forward commodity contracts - gain in year
- Interest rate swaps - gain in year
Revaluation of forward commodity contracts - gain in year
Revaluation of available for sale investments - gain in year
Deferred tax on fair value adjustments
Cost of share options
Discount on own shares vested
-
-
-
-
-
-
-
-
-
587
(74)
(14,878)
-
-
-
-
-
-
-
-
-
-
-
(3,714)
2,237
(2,445)
(594)
(1,401)
11
17,512
(3,028)
-
-
(14,878)
(3,714)
2,237
(2,445)
(594)
(1,401)
11
17,512
(3,028)
587
(74)
Balance at 29 December 2007
116,934
(22,481)
13,456
107,909
Capital and merger reserves
Capital and merger reserves reflect (i) Sharesave Scheme through which charges relating to granting of both shares and options
are recorded, (ii) shares awarded under the 2007 LTIP scheme accounted for as own shares, (iii) the net share premium, that is
the excess of fair value over nominal value of ordinary shares issued, in connection with the merger of Avonmore Foods plc and
Waterford Foods plc.
Currency reserve
Currency reserve reflects the foreign exchange gains and losses that form part of the net investment in foreign operations.
Where Group companies have a functional currency different from the presentation currency, their assets and liabilities are
translated at closing rate at the balance sheet date, income and expenses in the income statement are translated at the
average rate for the year, resulting exchange differences are taken to the currency reserve within equity.
Fair value reserve
Fair value reserve reflects the effective portion of changes in the fair value of derivatives that are designated and qualify as
cash flow hedges. Amounts accumulated in the fair value reserve are recycled to the income statement in the periods when
the hedged item affects profit or loss. Unrealised gains and losses arising from changes in the fair value of available for sale
investments are recognised in the fair value reserve. When such investments are sold or impaired, the accumulated fair value
adjustments are recycled to the income statement.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
26. Retained earnings
Company
retained
earnings
€’000
Group
retained
earnings
€’000
Group
goodwill
write-off
€’000
Group
Total
€’000
Restated balance at 31 December 2005
47,437
(7,776)
(92,961)
(100,737)
Actuarial gain - defined benefit schemes
Deferred tax on pension gain
Share of actuarial gain - joint venture
Net income recognised directly in equity
Profit for the year
Total recognised income for 2006
Dividends paid in 2006
-
-
-
-
16,959
36,852
(3,923)
230
33,159
65,934
16,959
99,093
(16,472)
(16,472)
-
-
-
-
-
-
-
36,852
(3,923)
230
33,159
65,934
99,093
(16,472)
Balance at 31 December 2006
47,924
74,845
(92,961)
(18,116)
Actuarial loss - defined benefit schemes
Deferred tax on pension loss
Share of actuarial gain - joint venture
Net expense recognised directly in equity
(Loss)/profit for the year
Total recognised income for 2007
Dividends paid in 2007
-
-
-
-
(12,236)
(4,539)
1,102
230
(3,207)
59,833
(12,236)
56,626
(17,334)
(17,334)
-
-
-
-
-
-
-
(4,539)
1,102
230
(3,207)
59,833
56,626
(17,334)
Balance at 29 December 2007
18,354
114,137
(92,961)
21,176
27. Own shares (Company and Group)
At the beginning of the year
Options exercised - Sharesave Scheme
Discount on options
Shares purchased
At the end of the year
2007
€’000
(388)
-
74
(95)
(409)
2006
€’000
(538)
122
28
-
(388)
The amount included above as own shares relates to 234,190 (2006: 262,503) 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 Halifax EES Trustees International Limited; a Jersey
based trustee services company.
The shares included in the Employee Trust at 29 December 2007 cost €409,339 and had a market value of €1,074,932 at 29
December 2007. The transfer from capital reserve represents the excess of the purchase price over the option price in respect of
50,000 ordinary shares (2006: 101,982 ordinary shares) on which options vested during the year.
Shares purchased represents shares purchased under the 2007 LTIP scheme and are deemed to be own shares in accordance
with IAS 32.
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 €12 and €320 (GBP£10 and GBP£250 in the UK) each month for a three
year period in a Revenue approved Save as You Earn (“SAYE”) contract.
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 7
2007
Company
€’000
2007
Group
€’000
2006
Company
€’000
4,674
(74)
587
3,273
(74)
587
4,503
(28)
199
5,187
3,786
4,674
2006
Group
€’000
3,102
(28)
199
3,273
28. Capital reserves
At the beginning of the year
Sharesave Scheme - discount on options
Cost of share options and share awards
At the end of the year
29. Merger reserve – Group
Share premium – representing excess of fair value over nominal value of ordinary shares
issued in connection with the merger of Avonmore Foods plc and Waterford Foods plc
Merger adjustment
Share premium and other reserves relating to nominal value of shares in Waterford Foods plc
2007
€’000
2006
€’000
355,271
(327,085)
84,962
113,148
355,271
(327,085)
84,962
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).
30. Minority interests
At the beginning of the year
Share of profit for the year
Reduction in minority interest in subsidiaries
Increase in minority interest in subsidiaries
At the end of the year
31. Borrowings
Current
Bank overdrafts
Cumulative redeemable preference shares
Finance lease liabilities
Non-current
Bank borrowings
Cumulative redeemable preference shares
Finance lease liabilities
Total borrowings
2007
€’000
6,635
407
(2)
-
7,040
2007
Company
€’000
2007
Group
€’000
2006
Company
€’000
1,928
-
-
1,928
-
-
966
966
-
-
-
-
309,548
63,487
5,993
379,028
1,928
379,994
-
-
-
-
-
-
-
-
-
2006
€’000
6,299
336
(1)
1
6,635
2006
Group
€’000
-
38,184
1,051
39,235
437,708
-
6,862
444,570
483,805
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.
89
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Notes to the financial statements (continued)
for the year ended 29 December 2007
The maturity of non-current borrowings is as follows:
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
2007
€’000
904
312,481
65,643
2006
€’000
1,133
254,507
188,930
379,028
444,570
The exposure of the Group’s total borrowings to interest rate changes having consideration for the contractual repricing dates
at the balance sheet date are as follows:
6 months or less
Between 6 to 12 months
Between 2 and 5 years
Over 5 years
2007
€’000
119,645
-
190,000
70,349
2006
€’000
247,924
38,184
-
197,697
379,994
483,805
The effective interest rates at the balance sheet date, were as follows:
EUR
GBP
USD
CAD
2007
2006
2007
2006
2007
2006
2007
2006
Bank overdrafts
Bank borrowings
5.47%
4.46%
4.29%
4.41%
6.10%
6.81%
5.60%
5.89%
9.25%
4.97%
10.25%
5.95%
7.25%
5.50%
n/a
n/a
The carrying amounts and fair values of non-current borrowings are as follows:
Non-current borrowings
379,028
444,570
372,772
441,310
The carrying amounts of the Group’s total borrowings are denominated in the following currencies:
Net carrying
2007
€’000
amount
2006
€’000
Estimated
fair values
2006
€’000
2007
€’000
2007
€’000
278,204
6,958
87,145
7,687
2006
€’000
271,362
81,614
130,829
-
379,994
483,805
Euro
GBP sterling
US dollar
Canadian dollars
90
The Group has the following undrawn borrowing facilities:
Floating rate:
- Expiring within one year
- Expiring beyond one year
Finance lease liabilities minimum lease payments:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
Future finance charges on finance leases
Present value of finance lease liabilities
The present value of finance lease liabilities is as follows:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
32. Deferred income taxes
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 7
2007
€’000
2006
€’000
16,785
244,122
17,501
120,770
260,907
138,271
2007
€’000
1,240
1,143
3,430
2,286
2006
€’000
1,360
1,143
3,430
3,429
8,099
(1,140)
9,362
(1,449)
6,959
7,913
2007
€’000
966
904
2,933
2,156
6,959
2006
€’000
1,051
869
2,821
3,172
7,913
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
Net deferred tax liability
The gross movement on the deferred income tax account is as follows:
At the beginning of the year
Income statement - pre exceptional charge (note 11)
Income statement - exceptional credit
Acquisition of subsidiary and purchase of intellectual property
Deferred tax charged to the fair value reserve (note 25)
Deferred tax (credit)/charge relating to the actuarial gain/(loss) in the year
Exchange differences
At the end of the year
2007
€’000
2006
€’000
(21,672)
(23,923)
37,587
38,611
15,915
14,688
2007
€’000
2006
€’000
14,688
2,609
(2,592)
462
3,028
(1,102)
(1,178)
18,602
3,663
(11,622)
1,330
695
3,923
(1,903)
15,915
14,688
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Notes to the financial statements (continued)
for the year ended 29 December 2007
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
Accelerated
Deferred
tax
Fair value development
depreciation
€’000
gains
€’000
costs
€’000
At 31 December 2005
Charged/(credited) to income statement
Charged against equity (note 25)
Acquisition of subsidiaries and intellectual property
Exchange differences
At 30 December 2006
(Credited)/charged to income statement
Charged against equity (note 25)
Acquisition of subsidiaries and intellectual property
Exchange differences
29,742
5,000
-
-
(1,881)
32,861
(4,230)
-
-
(1,978)
210
-
695
-
-
905
-
3,028
-
-
Other
€’000
4,291
(1,303)
-
1,330
151
Total
€’000
34,471
3,873
695
1,330
(1,758)
228
176
-
-
(28)
376
4,469
38,611
209
-
-
(53)
1,695
-
462
(157)
(2,326)
3,028
462
(2,188)
At 29 December 2007
26,653
3,933
532
6,469
37,587
Deferred tax assets
At 31 December 2005
Charged/(credited) to income statement
Charged against equity
Exchange differences
At 30 December 2006
Charged to income statement
Charged against equity
Exchange differences
At 29 December 2007
Retirement
Impairment
obligations
€’000
of assets
€’000
Tax
losses
€’000
Other
€’000
Total
€’000
(15,869)
279
3,923
-
(11,667)
1,570
(1,102)
-
(11,199)
-
-
-
-
-
-
-
-
-
-
(12,111)
-
(145)
(12,256)
773
-
1,010
(10,473)
-
-
-
-
-
-
-
-
-
(15,869)
(11,832)
3,923
(145)
(23,923)
2,343
(1,102)
1,010
(21,672)
The deferred tax charged/(credited) to equity during the year is as follows:
Fair value reserve in equity
- Available for sale investments
- Hedging reserve
Impact of increase in retirement benefit obligations
2007
€’000
3,503
(475)
(1,102)
1,926
2006
€’000
20
675
3,923
4,618
The decrease in the retirement benefit obligation has given rise to a reduction in the related deferred tax asset. A deferred tax
asset has been recognised on the basis that the realisation of the related tax benefit through future taxable profits is probable.
Deferred tax assets are recognised for tax losses 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 €20.7 million (2006: €25.9 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.
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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 7
33. 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 30
June 2003 and 1 January 2006. The contributions paid to the scheme in 2007 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:
Service cost - current
Service cost - past
Interest cost
Expected return on plan assets
Curtailment
Exceptional item - curtailment gain (note 7(a))
Defined contribution
The actual return on plan assets was a loss of €9.3 million (2006: €31.7 million gain).
2007
€’000
2006
€’000
(496,769)
382,521
(501,473)
376,585
(114,248)
(124,888)
2007
€’000
2006
€’000
(9,315)
-
(18,885)
23,219
-
(4,981)
1,843
(10,176)
(375)
(17,266)
20,100
1,282
(6,435)
-
(3,138)
(6,435)
(1,024)
(1,026)
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Notes to the financial statements (continued)
for the year ended 29 December 2007
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
Total expense
Actuarial (loss)/gain - 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
Current service cost
Past service cost
Interest cost
Actuarial gains/(losses) - shown in equity
- Experience losses
- Change in assumptions
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 (losses)/gains shown in equity
Contributions by plan participants
Contributions by employer
Curtailments
Benefits paid
At the end of the year
The principal actuarial assumptions used were as follows:
2007
€’000
2006
€’000
(124,888)
2,161
1,230
(3,138)
(4,539)
14,926
(165,016)
(825)
(614)
(6,435)
36,852
11,150
(114,248)
(124,888)
2007
€’000
2006
€’000
(501,473)
7,910
(18,787)
(9,315)
-
(18,885)
(7,160)
35,165
(4,147)
1,843
18,080
(503,845)
(2,180)
(4,967)
(10,176)
(375)
(17,266)
(12,651)
37,928
(4,382)
3,670
12,771
(496,769)
(501,473)
2007
€’000
2006
€’000
376,585
(5,751)
20,017
23,219
(32,542)
4,147
14,926
-
(18,080)
338,829
1,355
4,353
20,100
11,575
4,382
11,150
(2,388)
(12,771)
382,521
376,585
2007
2006
IRL
UK
IRL
UK
5.5%
6.0%
4.7%
5.3%-5.4%
8.5%
5.0%
5.5%
4.0%
8.1%
4.5%-5.3%
5.9%-7.0%
4.2%
2.5%-3.5% 2.25%-3.25%
8.5%
4.7%
7.0%
3.5%
7.5%-8.0%
4.5%-4.62%
4.0%-7.0%
3.75%
2.25%-3.5% 2.25%-3.25%
Discount rate
Expected return on plan assets
- Equities
- Bonds
- Other
Future salary increases
Future pension increases
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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 7
2007
€’000
2006
€’000
Actuarial losses/(gains) recognised in the statement of recognised income and expense
4,539
(36,852)
Cumulative actuarial losses recognised in the statement of recognised income and expense
55,745
51,206
Plan assets are comprised as follows:
Equity
Bonds
Other
2007
€’000
212,063
95,357
75,101
2006
€’000
244,240
92,125
40,220
%
55
25
20
%
65
24
11
382,521
100
376,585
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 27 December 2008 will be broadly in line with
2007 contributions.
Mortality Rates
Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and
experience in each territory. The mortality assumptions imply the following life expectancies in years of an active member on
retiring at age 65:
Male
Female
At the end of the year
Present value of defined benefit obligations
Fair value of plan assets
Deficit
Irish mortality
UK mortality
rates
18.9
21.9
rates
20.8
23.9
2007
€’000
2006
€’000
2005
€’000
2004
€’000
(496,769)
382,521
(501,473)
376,585
(503,845)
338,829
(412,052)
285,376
(114,248)
(124,888)
(165,016)
(126,676)
Experience adjustments on plan liabilities
(7,160)
(12,651)
(2,037)
(6,341)
Experience adjustments on plan assets
(32,542)
11,575
28,383
5,911
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Notes to the financial statements (continued)
for the year ended 29 December 2007
34. Provisions for other liabilities and charges
At 30 December 2006
Charged to the consolidated income statement
- Additional provisions
Net amounts (credited)/charged to provisions
Exchange differences
At 29 December 2007
Non-current
Current
Restructuring
€’000
UK pension
€’000
Other
€’000
Total
€’000
7,110
5,336
24,948
37,395
4,427
(5,253)
-
-
(1,026)
(465)
-
1,035
(174)
4,427
(5,244)
(640)
6,284
3,845
25,809
35,938
-
6,284
3,845
-
9,815
15,994
13,660
22,278
6,284
3,845
25,809
35,938
(a) The restructuring provision relates primarily to exit from Pigmeat operations and rationalisation within Consumer Foods
operations. This provision is expected to be fully utilised during the first half of 2008.
(b) The UK pension provision relates to administration and certain costs associated with pension schemes relating to businesses
disposed of in prior years. This provision is expected to be fully utilised within three years.
(c) Included in ‘Other’ above are provisions in respect of property lease commitments, deferred consideration in respect of
recent acquisitions, insurance and certain legal claims pending against the Group. It is expected that €16.0 million of this
provision will be utilised in 2008, with the balance being utilised over a further five year period.
35. Capital grants
At 30 December 2006
Receivable for year
In acquired subsidiaries
Currency translation adjustment
Transfer to disposal group held for sale
Released to income statement
At 29 December 2007
36. Trade and other payables
Trade payables
Amounts due to associates and joint ventures
Amounts due to other related parties (note 42)
Amounts due to subsidiary companies
PAYE and PRSI
Accrued expenses
Other payables
2007
€’000
10,660
1,399
45
(19)
(7,814)
(736)
2006
€’000
14,855
123
-
4
-
(4,322)
3,535
10,660
2007
Company
€’000
2007
Group
€’000
2006
Company
€’000
-
-
-
-
-
1,534
-
111,785
32,868
930
-
4,016
185,133
1,931
20
-
-
10,474
-
1,400
-
2006
Group
€’000
96,612
18,669
17
-
3,824
137,419
1,352
1,534
336,663
11,894
257,893
The carrying value of payables are a reasonable approximation of fair value.
96
37. Derivative financial instruments
Interest rate swaps - cash flow hedges
Interest rate swaps - fair value hedges
Forward foreign exchange contracts - cash flow hedges
Other cash flow hedges
Other fair value hedges
Total
Less non-current portion
- Interest rate swaps - cash flow hedges
- Interest rate swaps - fair value hedges
Current portion
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 7
2007
Assets
€‘000
82
1,172
2,980
9
1,510
2007
Liabilities
€‘000
(528)
(4,738)
(108)
(39)
(1,510)
2006
Assets
€‘000
3,593
-
1,843
636
2,799
5,753
(6,923)
8,871
43
720
763
(259)
(3,477)
2,095
-
(3,736)
2,095
4,990
(3,187)
6,776
2006
Liabilities
€‘000
-
(4,242)
(11)
(42)
(2,799)
(7,094)
-
(3,406)
(3,406)
(3,688)
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 29 December 2007 are €71.8 million (2006:
€58.0 million).
Gains and losses recognised in the fair value reserve in equity on forward foreign exchange contracts as of 29 December 2007
will be released to the income statement at various dates within one year from the balance sheet date.
Interest rate swaps
The notional principal amounts of the outstanding interest rate swap contracts, qualifying as cashflow hedges, at 29 December
2007 were €96.4 million (2006: €248.7 million).
The notional principal amounts of the outstanding interest rate swap contracts, qualifying as fair value hedges, at 29 December
2007 were €265.1 million (2006: €272.5 million).
At 29 December 2007, the fixed interest rates vary from 3.7900% to 4.3722% (2006: 3.2375% to 4.3300%) and the main floating
rates are set in advance by reference to inter-bank interest rates (4.3% EURIBOR, 4.82875% $LIBOR).
Gains and losses recognised in the hedging reserve in equity on interest rate swap contracts as of 29 December 2007 will be
continuously released to the income statement until repayment of the bank borrowings.
Commodity futures
The notional principal amounts of the outstanding commodity futures, qualifying as cash flow hedges and fair value hedges
at 29 December 2007 were €1.2 million and €7.6 million (2006: €5.9 million and €48.7 million) respectively. Gains and losses
recognised in the fair value reserve on these futures as at 29 December 2007 will be released to the income statement at various
dates within one year from the balance sheet date.
Financial guarantee contracts
In accordance with Group accounting policy, management has reviewed the fair values associated with financial guarantee
contracts, as defined within IAS 39 (Financial Instruments: Recognition and Measurement) issued in the name of Glanbia plc (the
Company) and has determined that their value is not significant. No adjustment has been made to the Glanbia plc company
balance sheet to reflect fair value of the financial guarantee contracts issued in its name.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
38. 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 29 December 2007 and the Directors are of
the opinion that no losses will arise thereon. 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
Bank guarantees, amounting to €7,495,000 (2006: €13,794,000) are outstanding as at 29 December 2007, mainly in respect of
payment of EU subsidies. The Group does not expect any material loss to arise from these guarantees.
39. 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 €107.0 million (2006: €76.6 million).
2007
€’000
2006
€’000
19,856
11,787
Operating lease commitments - where the Group is the lessee
The Group leases various assets. 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
2007
€’000
5,947
14,606
5,868
2006
€’000
4,717
11,418
7,401
26,421
23,536
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40. Cash generated from operations
2007
Company
€’000
2007
Group
€’000
2006
Company
€’000
2006
Group
€’000
Profit/(loss) before tax
(12,236)
76,081
16,959
61,919
Development costs capitalised
Non-cash exceptional - exit from Pigmeat
Non-cash - redemption of shares
Exceptional loss on The Cheese Company Holdings Limited
Share of results of associates and joint ventures
Depreciation
Amortisation
Cost of share options
Gain on disposal of investments
Pension - credit
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
-
27,858
1,948
-
-
-
-
587
-
-
-
-
(1,255)
-
(8,000)
-
(1,804)
13,706
-
-
(992)
27,246
6,816
587
-
(1,026)
-
(3,002)
(4,813)
22,095
-
(736)
-
-
-
-
-
-
-
199
-
57
-
(2,125)
-
(10,508)
-
(2,069)
-
-
9,178
(2,842)
25,415
4,452
199
(1,541)
(323)
-
(7,531)
(4,883)
18,918
-
(4,322)
Net profit before changes in working capital
8,902
134,158
4,582
96,570
Change in net working capital
- Increase in inventory
- Increase in short term receivables
- (Decrease)/increase in short term liabilities
- Increase/(decrease) in provisions
-
(22,142)
(10,360)
-
(82,093)
(36,615)
68,704
861
-
(947)
(8,616)
-
(2,684)
(20,208)
(11,332)
(1,323)
Cash generated from operations
(23,600)
85,015
(4,981)
61,023
41. Business combinations
On 10 September 2007 Glanbia plc acquired a Canadian based nutritional business, Pizzey’s Milling. Glanbia Nutritionals
(Canada), Inc. (Pizzey’s Milling), produces and markets nutritional ingredients predominantly derived from flax seed, a primary
source of plant based Omega-3 fatty acids. The acquired business contributed revenues of €2.95 million and operating profit of
€0.05 million to the Group for the period from 10 September 2007.
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 acquisition
Total purchase consideration
Fair value of assets acquired
Goodwill (note 15)
€’000
8,561
7,528
506
16,595
(10,470)
6,125
The goodwill is attributable to the profitability and workforce of the acquired businesses and the benefits associated with the
extension of Glanbia’s scale and specific capabilities to the acquired businesses, synergies and other benefits.
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Notes to the financial statements (continued)
for the year ended 29 December 2007
The assets and liabilities arising from the acquisition are as follows:
Property, plant and equipment (note 14)
Other intangible assets (note 15)
Inventories
Receivables
Payables
Net assets acquired
Purchase consideration
Contingent consideration
Cash outflow on acquisition
Fair
value
€’000
3,582
5,545
587
943
(187)
10,470
Acquiree’s
carrying
amount
€’000
4,477
313
587
943
(187)
6,133
16,595
(7,528)
9,067
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 12 months of the acquisition date.
In the year ended 30 December 2006, the Group acquired the business of Seltzer Companies, Inc., a leading US nutritionals
solutions company with strong expertise in the development of customised formulations and the distribution of speciality
ingredients for the nutritional supplement, food and pharmaceutical markets.
42. Related party transactions
The Group is controlled by Glanbia Co-operative Society Limited (“the Society”), which holds 54.66% 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:
(a) Sales of goods and services
Sales of goods:
- Associates
- Joint ventures
- Key management
Sales of services:
- The Society
- Joint ventures
- Subsidiaries
2007
Company
€’000
2007
Group
€’000
2006
Company
€’000
-
-
-
-
3,871
82,543
578
86,992
-
-
-
-
-
-
11,684
187
4,671
-
-
-
6,416
11,684
4,858
6,416
2006
Group
€’000
3,644
57,549
574
61,767
1,325
5,399
-
6,724
Sales to related parties were carried out on normal commercial terms and conditions.
100
(b) Purchases of goods and services
Purchases of goods:
- Associates
- Joint ventures
- Key management
Purchases of services:
- Joint ventures
- Key management
- Subsidiaries
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 7
2007
Company
€’000
2007
Group
€’000
2006
Company
€’000
-
-
-
-
12,628
14,221
2,169
29,018
-
-
-
-
2006
Group
€’000
10,760
17,326
1,800
29,886
-
-
1,702
374,593
4
-
-
-
1,729
222,781
4
-
1,702
374,597
1,729
222,785
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
(d) Year-end balances arising from sales/purchases of goods/services
Receivables from related parties:
- Associates
- Joint ventures
- Key management
- Subsidiaries
Payables to related parties:
- The Society
- Associates
- Joint ventures
- Key management
- Subsidiaries
2007
Company
€’000
-
-
-
2007
Group
€’000
4,123
582
4,705
2006
Company
€’000
-
-
-
2007
Company
€’000
2007
Group
€’000
2006
Company
€’000
-
-
-
23,984
42
6,715
88
-
23,984
6,845
-
-
-
-
-
930
1,749
31,119
5
-
-
-
-
-
10,474
-
-
-
-
-
-
2006
Group
€’000
2,966
487
3,453
2006
Group
€’000
237
3,064
14
-
3,315
17
1,068
17,601
-
-
33,798
10,474
18,686
101
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Notes to the financial statements (continued)
for the year ended 29 December 2007
(e) Loans to joint ventures
Loan to Southwest Cheese Company, LLC
Loan to Milk Ventures (UK) Ltd
2007
Company
€’000
-
-
2007
Group
€’000
6,971
6,958
2006
Company
€’000
-
-
2006
Group
€’000
4,929
-
On 19 December 2007 the Company signed non-binding heads of agreement with a Management Buy Out team led by
Mr. Jim Hanley, Director and Chief Executive of Glanbia Fresh Pork Limited, to acquire the entire Pigmeat business.
The transaction was completed on 3 March 2008 for a total consideration of €35.0 million, inclusive of insurance proceeds
for the destroyed assets at Edenderry, Co. Offaly.
43. 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:
Ordinary shares of €0.06
29/12/2007
31/12/2006
**
33,708
91,804
21,347
104,593
35,000
7,495
10,390
24,171
50,501
5,842
31,923
7,462
30,029
20,000
15,000
212,327
2,600
230,827
26,344
37,893
23,243
23,708
81,804
21,347
94,593
35,000
3,495
10,390
24,171
50,501
2,842
21,423
7,462
30,029
20,000
15,000
212,327
1,600
230,827
26,344
37,893
23,243
4,593
4,593
(a) Glanbia plc
Beneficial
Directors
M Walsh
L Herlihy
V Quinlan
J Moloney
J Callaghan
H Corbally
N Dunphy
J Fitzgerald
E Fitzpatrick
J Gilsenan
P Gleeson
P Haran
C Hill
M Keane
J Liston
G Meagher
M Merrick
W Murphy
M Parsons
E Power
K Toland
Secretary
M Horan
*
§
*
*
* Executive Director.
** Or at date of appointment if later.
§ Appointed on 31 May 2007.
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 7
(b) Glanbia plc
Directors’ and Secretary’s options
Details of movements on outstanding options over the Company’s ordinary share capital are set out below. Outstanding options
are exercisable on dates between 2007 and 2017.
Options - Ordinary shares of €0.06
Movements
31/12/2006
during year
29/12/2007
Beneficial
Directors
J Moloney
G Meagher
1988 Share Option Scheme
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
1988 Share Option Scheme
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
K Toland
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
Options:
[a] Exercisable by Directors at any time up to May 2008.
[b] Exercisable by Directors at any time up to 2012.
[c] Exercisable by Directors at any time up to 2014.
[d] Exercisable by Directors between 2010 and 2017.
150,000
290,000
150,000
-
75,000
205,000
75,000
-
164,000
100,000
-
-
-
-
70,000
-
-
-
48,000
-
-
48,000
Exercise
price
€
4.25
[a]
1.55 [b]
[c]
4.03 [d]
2.725
4.25
[a]
1.55 [b]
[c]
4.03 [d]
2.725
150,000
290,000
150,000
70,000
75,000
205,000
75,000
48,000
164,000
100,000
48,000
2.725
1.55 [b]
[c]
4.03 [d]
There were no other changes in the interests of the Directors and Secretary between 29 December 2007 and 22 February 2008.
G Meagher, J Moloney and K 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.
G 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.
J Moloney as a 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 29 December 2007 was €4.59 and the range during the year was €3.12 to €5.08.
The average price for the year was €3.94. The 1988 Share Option Scheme expired on 31 August 1998.
103
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Notes to the financial statements (continued)
for the year ended 29 December 2007
(c) Directors’ and Secretary’s awards under the 2007 Long Term Incentive Plan
Secretary
M Horan
Initial
allocation of Market price
Number at shares during
in euro on Performance
Earliest date Number at
31/12/2006
2007
award date
€
period
of release 29/12/2007
-
11,000
4.03
31/12/06
-02/01/10 March 2010
11,000
Awards under the 2007 Long Term Incentive Plan (“the 2007 LTIP”):
This is a long-term share incentive plan under which share awards are granted in the form of a provisional allocation of shares
for which no exercise price is payable. The shares are scheduled for release in March 2010 to the extent that the relative
Earnings Per Share (EPS) and Total Shareholder Return (TSR) conditions are achieved. The structure of the 2007 LTIP is set out on
pages 42 to 43.
(d) Glanbia Co-operative Society Limited
‘A’ Ordinary shares
of €1
Convertible
loan stock units
of €0.01269738
‘C’ shares
of €0.01
‘F’ shares
of €0.01
29/12/2007
31/12/2006
29/12/2007
31/12/2006
29/12/2007
31/12/2006
29/12/2007
31/12/2006
**
**
**
**
Beneficial
Directors
M Walsh
L Herlihy
V Quinlan
J Moloney *
H Corbally
N Dunphy
J Fitzgerald
E Fitzpatrick
J Gilsenan
C Hill
M Keane
G Meagher *
M Merrick
W Murphy
M Parsons
E Power
Secretary
M Horan
14,374
89,398
9,585
-
5,675
11,633
25,563
24,034
2,844
20,480
6,117
-
1,824
-
7,810
26,300
14,374
89,398
9,585
-
5,675
11,633
25,563
24,034
2,844
20,480
6,117
-
1,824
-
7,810
26,300
154,158
1,209,101
-
-
237,665
134,947
397,025
263,957
231,647
-
170,314
-
297,069
-
248,122
258,601
198,691
1,600,438
-
-
320,305
176,482
526,823
340,786
289,947
-
224,023
-
395,495
-
304,961
340,976
2,318,428
1,983,609
37,837,394 33,452,288
1,509,000
7,452,304
168,706
234,418
-
7,213,532
7,157,402
4,340,461
84,564
8,500,000
200,000
3,095,071
1,980,360
6,785,305
2,330,185
7,952,304
505,681
260,518
-
8,609,862
7,157,402
4,840,461
84,564
6,500,000
387,464
1,904,610
1,980,360
10,592,198
1,000
1,226
392
-
226
310
376
560
89
283
353
-
173
-
658
493
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,000,000
1,000,000
-
-
* Executive Director.
** Or at date of appointment if later.
There have been no changes in the above interests between 29 December 2007 and 22 February 2008.
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 7
44. Principal subsidiary and associated undertakings
(a) Subsidiaries
Incorporated and operating in
Principal place of business
Principal activities
Ireland
Glanbia Foods Society Limited
Ballyragget, Co. Kilkenny and
Citywest, Dublin 24
Inch, Co. Wexford and Kilkenny
Glanbia Consumer Foods Limited
Glanbia Ingredients (Ballyragget) Limited Ballyragget, Co. Kilkenny
Virginia, Co. Cavan
Glanbia Ingredients (Virginia) Limited
Kilkenny
Glanbia Nutritionals (Ireland) Limited
Kilkenny
Glanbia Nutritionals (Europe) Limited
Glanbia Nutritionals (Research) Limited Kilkenny
Glanbia Nutritionals (Blending) Limited Kilkenny
Glanbia Feeds Limited
Glanbia Fresh Pork Limited
Glanbia Farms Limited
Glanbia Estates Limited
Avonmore Proteins Limited
Glanbia Financial Services
Glanbia Investments (Ireland) Limited
Glassonby
Waterford Foods plc
Enniscorthy, Co. Wexford and
Portlaoise, Co. Laois
Edenderry, Co. Offaly
Cavan and Mayo
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Grassland Fertilizers (Kilkenny) Limited Palmerstown, Co. Kilkenny
Palmerstown, Co. Kilkenny
D. Walsh & Sons 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
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
Nutritional products
Nutritional products
Research and development
Nutritional products
Manufacture of animal feed products
Pork and bacon products
Pig rearing
Property and land dealing
Financing
Financing
Holding company
Investment holding
Holding company
Fertilizers
Grain and fertilizers
Supply of animal feeds
Holding company
Holding company
Investment holding
Sports nutrition products
Consumer food products
United States
Glanbia Inc.
Glanbia Foods, Inc.
Glanbia Nutritionals, Inc.
Seltzer Companies Inc.
Canada
Delaware
Twin Falls, Idaho
Monroe, Wisconsin
San Diego, California
Holding company
Milk products
Nutritional distribution
Nutrient delivery systems
Glanbia Nutritionals (Canada), Inc.
Angusville, Manitoba
Nutrient delivery systems
Germany
Glanbia Nutritionals Deutschland GmbH Orsingen-Nensingen, Germany
Nutrient delivery systems
Netherlands
Glanbia Foods BV
Mexico
Moergestel, Netherlands
Holding company
Group
interest
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
73
60
100
100
100
100
100
100
100
100
100
100
100
100
100
Zymalact Mexico S.A. de C.V.
Lerma
Dairy blending and processed cheese
100
Uruguay
Glanbia (Uruguay Exports) S.A.
Uruguay
Nutritional distribution
China
Glanbia Nutritionals (Suzhou) Limited
Suzhou, China
Nutrient delivery systems
100
100
105
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Notes to the financial statements (continued)
for the year ended 29 December 2007
(b) Associates and joint ventures
Incorporated in
Ireland
Dates to which
results included
Principal place of business Principal activities
Co-operative Animal Health Limited *
31 December 2006
Tullow, Co. Carlow
Agri chemicals
South Eastern Cattle Breeders
Society Limited *
31 December 2006
Thurles, Co. Tipperary Cattle breeding
Group
interest
%
50
57
Malting Company of Ireland Limited *
31 October 2007
Togher, Cork
Malting
33.33
South East Port Services Limited *
29 December 2007
Kilkenny
Port services
Nashs Mineral Waters
(Marketing) Limited **
29 December 2007
Newcastle West,
Co. Limerick
Mineral waters
and soft drinks
Corman Miloko Ireland Limited **
31 December 2007
Carrick-on- Suir,
Co. Tipperary
Dairy spreads
Britain and Northern Ireland
Glanbia Cheese Limited **
29 December 2007
Milk Ventures (UK) Limited **
30 November 2007
Magheralin
and Llangefni
Stockport
Cheese products
Holding company
Nigeria
Nutricima Limited **
30 November 2007
Nigeria
Evaporated and
powdered milk
United States
Southwest Cheese Company, LLC **
29 December 2007
Clovis, New Mexico
Milk products
Mexico
Conabia de Mexico S.A. de C.V. **
29 December 2007
Mexico City
Dairy ingredients
49
50
45
50
50
50
50
50
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.
* Associate
** Joint venture
106
Senior management
Glanbia Executive Committee
The Glanbia Executive Committee chaired by John Moloney,
Group Managing Director oversees the development
and execution of the Group’s strategy. It also has overall
responsibility for achieving business results.
John Moloney - See page 32
Geoff Meagher - See page 32
Kevin Toland - See page 32
Siobhan Talbot (B.Comm, FCA) age 44, was appointed Deputy
Group Finance Director of Glanbia plc in June 2005. She was
formerly Group Secretary and also held a number of senior
finance positions, including Group Operations Controller, since
she joined the Group in 1992. Prior to joining the Group she
worked with Price Waterhouse Coopers in Dublin and Sydney,
Australia.
Brian Phelan (B. Comm, FCA) age 41, is Group Human
Resources & Operations Development Director of Glanbia
plc. Brian was appointed to his Human Resources role in 2004
and his role was expanded in May 2007 to include Operations
Development. Prior to this he was Chief Financial Officer of
the Consumer Foods Division. He also worked in Glanbia
Ingredients in Ireland and the USA. Prior to joining the Group in
1994 he worked with KPMG.
Jim Bergin (B. Comm, MSc Mngt Practice) age 45, is Chief
Executive of Glanbia Ingredients Ireland. He joined the Group in
1984 and has held a number of senior positions including Group
IT Manager and subsequently Group Business Process Director.
He joined the Ingredients Business as Operations Manager in
May 2003 and was appointed Chief Executive in March 2005.
Colin Gordon (BBS, MBS, FMII) age 46, is Chief Executive of
Glanbia Consumer Foods Ireland. He joined the Group in
March 2006. He previously worked in C&C Group plc, the drinks
and snack food company where he held a number of senior
positions including, Managing Director of C&C (Ireland) Ltd.
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 7
CEO’s Ireland
Consumer Foods
Colin Gordon
Agribusiness:
Colm Eustace (B. Agr Sc. MBA) age 47, is CEO for Glanbia
Agribusiness since November 2005. He joined Agribusiness in
1986 where he has held a number of senior positions.
Property:
Ger Mullally (B.Agr Sc. MBA) age 50, is Chief Executive of
Glanbia Estates. He was appointed to this role in November
2005 after six years as Chief Executive of Agribusiness. He
joined the Group in 1980 where he has held a number of senior
positions within Agribusiness.
CEO’s International
Global Food Ingredients and Nutritionals
Jim Bergin - CEO Food Ingredients Ireland
Kevin Toland - CEO and President of Glanbia USA/Global
Nutritionals (with responsibility for all USA activities).
Food Ingredients USA:
Jeff Williams (BSC Sc. Marketing, MBA) age 50, is President of
Glanbia Foods, Inc., a position he has held since January 2005.
He joined the Group in 1990 during which time he has held
a number of senior positions. Prior to this he was involved in
Commercial and Investment Banking. He is a member of the
International Dairy Foods Association Board, National Cheese
Institute Board and the Leadership Idaho Agriculture Board
of Trustees.
Global Nutritionals:
Hugh McGuire (M.Sc, Dip Finance) age 37, is CEO of Glanbia
Nutritionals - Customised Solutions. He joined the Group in
2003 from McKinsey & Co. where he worked as a Consultant
across a range of industry sectors. Prior to this he worked in the
consumer goods industry with Nestle and Leaf.
Jerry O’Dea (BSC Food Sc., MBA) age 48, is CEO of Glanbia
Nutritionals - Ingredient Technologies since February 2008.
Prior to this he was President of Glanbia Nutritionals, Inc.,since
2002. He joined the Group in 1981 and has held a number of
senior positions including Vice President, General Manager of
Glanbia Ingredients USA. He is a member of the Nominations
committee of the United States Dairy Export Council (USDEC)
and the board of the American Dairy Products Institute (ADPI).
Wayne Seltzer age 65, is President of Seltzer Companies Inc.,
which he founded in 1981. He is a graduate of the University
of California, Los Angeles and has been with the Group
since Glanbia acquired Seltzer in September 2006. Prior to
establishing Seltzer Companies he held a senior position at
Gillies International.
Note:
In March 2008 Glanbia sold Glanbia Meats to a Management
Buy Out team, led by Jim Hanley, former CEO of the business.
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107
Shareholders Information
Dividend payments
An interim dividend of 2.50 cent was paid in respect of Ordinary Shares on 3 October 2007.
A final dividend of 3.58 cent, if approved, will be paid in respect of Ordinary Shares on 20 May 2008.
Dividend Withholding Tax (DWT) must be deducted from dividends paid by an Irish resident company, unless a shareholder is
entitled to an exemption and has submitted a properly completed exemption form to the Company’s Registrars, Computershare
Investor Services (Ireland) Limited. DWT applies to dividends paid by way of cash and is deducted at the standard rate of Income
Tax (currently 20%). Non-resident shareholders and certain Irish companies, trusts, pension schemes, investment undertakings and
charities may be entitled to claim exemption from DWT and are thereby required to send the relevant form to Computershare
Investor Services (Ireland) Limited. Further copies of this form may be obtained from the Company’s Registrars.
Shareholders who wish to have their dividend paid direct to a bank account, by electronic funds transfer, should contact the
Company’s Registrars to obtain a mandate form. Tax vouchers will be sent to the shareholder’s registered address under this
arrangement.
Share Price Data
Share price as at 29th December
Market capitalisation
Share price movements during the year: - high
- low
Shareholdings as at 29th December 2007
Ownership of Ordinary Shares
Geographic location
Ireland
United Kingdom
United States
Europe
Other
Holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
Over 100,000
Stock Exchange listings
Glanbia plc has primary listings on the Irish and London Stock Exchanges.
Financial calendar
Announcement of final results for 2007
Ex-dividend date
Record date for dividend
Annual General Meeting
Dividend payment date
Announcement of interim results for 2008
108
2007
€
4.59
1.346 bn
5.08
3.12
Number of
Shares held
241,465,277
51,604,054
147,311
92,688
37,354
2006
€
2.96
868 m
3.13
1.93
% of
total
82.32
17.59
0.05
0.03
0.01
293,346,684
100.00
Number of
Number of
Shareholders
12,194
9,491
1,775
928
87
Shares held
5,145,054
22,166,057
12,576,015
20,516,419
232,943,139
% of
total
1.75
7.56
4.29
6.99
79.41
24,475
293,346,684
100.00
5 March 2008
23 April 2008
25 April 2008
14 May 2008
20 May 2008
27 August 2008
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 7
Registrar and Transfer Office
Computershare Investor Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland.
Auditors
PricewaterhouseCoopers, Ballycar House, Newtown, Waterford, Ireland.
Principal Bankers
ABN AMRO Bank N.V., Allied Irish Banks, p.l.c., the Governor & Company of the Bank of Ireland, BNP Paribas S.A., Barclays Bank
Ireland PLC, Citibank Group plc, IIB Bank plc, Danske Bank A/S trading as National Irish Bank, 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, UK.
Stockbroker
Davy Stockbrokers, 49 Dawson Street, Dublin 2, Ireland. (Corporate Broker)
Oriel Securities Limited, 125 Wood Street, London EC2V 7AN. (London Broker)
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.
Electronic Communication
For Shareholders who wish to avail of the convenience of electronic communication, you may register your e-mail address by
accessing our Registrar’s website at www.computershare.com/register/ie, selecting Glanbia plc from the drop down menu
“Company Selection” and clicking on ”submit”. You will need your Shareholder Reference Number (SRN) which is located on your
share certificate or dividend counterfoil. This will allow shareholders to receive communications (interim/annual reports, etc) as soon
as they are published and should benefit the environment and reduce the Company’s costs. We also have a system to allow you to
submit your proxy via the internet and via the CREST system. Please see proxy form for details of how to operate such systems.
Website
The Group’s website, www.glanbia.com, provides in full the text of the Annual and Interim Reports, trading statements and copies
of presentations to analysts and investors. News releases are made available, in the Investor Relations section of the website,
immediately after release to the Stock Exchanges.
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109
Index
Agribusiness & Property
Assets and liabilities classified as held for sale
Balance sheet – company
Balance sheet - consolidated
Board of Directors
Borrowings
Business combinations
Capital grants
Capital reserves
Cash and cash equivalents
Cash flow statement - company
Cash flow statement - consolidated
Cash generated from operations
Chairman’s statement
Commitments
Consumer Foods
Contingent liabilities
Corporate social responsibility
Critical accounting estimates and assumptions
Deferred income taxes
Derivative financial instruments
Directors’ and Secretary’s interests
Directors’ Biographies
Directors’ remuneration
Directors’ statement of corporate governance
Dividends
Earnings per share
Employee benefit expense
Exceptional items
Executive Committee
Finance income and costs
Financial risk management
Financial statements contents
Finance review
Food Ingredients & Nutritionals
Global footprint
General information
14
82
52
50
32
89
99
96
89
82
53
51
99
4
98
12
98
24
66
91
97
102
32
72
37
75
74
71
71
107
73
63
45
26
16
10
54
Income taxes
Income statement – consolidated
Independent auditors’ report
Intangible assets
Inventories
Investments
Investments in associates
Investments in joint ventures
Joint Ventures & Associates
Managing Director’s review
Merger reserve – Group
Minority interests
Notes to the financial statements
Operating profit
Other reserves
Our business
Our performance
Own shares (Company and Group)
Principal subsidiary and associated undertakings
Property, plant and equipment – Group
Provision for other liabilities and charges
Reconciliation of changes in equity
Related party transactions
Retained earnings
Retirement benefit obligations
Risk and risk management
Report of the Directors
Segment information
Share capital and share premium
Shareholders information
Statement of recognised income
and expense – company
Statement of recognised income
and expense – consolidated
Summary of significant accounting policies
Trade and other receivables
Trade and other payables
73
48
46
77
82
79
78
79
22
6
89
89
54
70
87
2
1
88
105
76
96
83
100
88
93
30
34
67
84
108
53
49
54
80
96
110