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Overview of Glanbia
Who we are
Glanbia plc is an international cheese and nutritional ingredients group,
headquartered in Ireland. The Group has 4,300 employees in seven countries and
sales offices in a further five. International operations include Food Ingredients &
Nutritionals, while Irish operations incorporate Consumer Foods and Agribusiness &
Property. The Group has three strategic joint ventures, which are based in the UK, USA
and Nigeria. Glanbia is listed on the Irish and London Stock Exchanges (Symbol: GLB).
Overview of Glanbia
Our performance and outlook
Our business
Our global footprint
Our vision and strategy
Chairman’s statement
Directors’ report
Business review
Group Managing Director’s review
Operations review
- International
- Ireland
- Joint Ventures & Associates
Our people
Our responsibilities
Finance review
Risk and risk management
1
2
4
6
8
10
14
20
24
26
29
32
36
Corporate governance
38
Board of Directors
40
Senior management
Report of the Directors
41
Statement of Directors’ responsibilities 44
Directors’ statement of
corporate governance
45
Financial statements
Independent auditor’s report
Consolidated income statement
Consolidated statement of recognised
income and expense
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
Other information
Shareholder information
Five year trends
Index
54
56
57
58
59
60
61
62
117
119
120
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
The Group’s vision is to be a world leader
in cheese and nutritional ingredients, built
on strong positions in key food markets
and sectors around the world.
Glanbia is continuing to maximise organic
growth opportunities and aggressively
manage costs to sustain the business
through the current challenging environment.
In a business that operates from local
to global, Glanbia’s people strategy
provides a common approach and a clear
framework to develop people and deliver
the Group’s growth strategy.
The Board and management of Glanbia
are committed to the highest standards of
corporate governance and ethical conduct
in all aspects of the business.
Glanbia maintains robust financial ratios,
well within its bank debt covenants and
for financial prudence sets more stringent
internal targets, which gives the Group
good financial capacity and flexibility.
In a two year period the performance of
Glanbia has comfortably exceeded the
Group’s strategic growth objectives set out
for the three year period 2007 to 2009.
Glanbia has prioritised debt reduction for
2009, recognising the significant investment
made in recent years and the current
turmoil in global credit markets.
This year over 18,000 shareholders will
receive their Annual Report electronically.
This creates a significant environmental
benefit with a reduction in paper used and
waste paper produced.
Go online for more information at
www.glanbia.com
Overview of Glanbia
Our performance and outlook
Glanbia performed well in 2008, delivering a good set of results, completing a major
strategic acquisition and achieving key financial targets. All businesses performed
to or better than anticipated with the exception of Food Ingredients Ireland which
suffered a sharp decline in profits and margins in 2008. Glanbia is well invested,
financially strong and has a diversified earnings base with good organic growth
opportunities. These should enable the Group to deliver further progress in 2009.
Revenue (€ billion)
Operating margin pre exceptional (%)
2.2bn
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Operating profit pre exceptional (€ million)
134.1m
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Profit before tax pre exceptional (€ million)
Dividend per share (cents)
120.3m
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G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1
Overview of Glanbia
Our business
International operations contributed 71% of 2008 revenue and 65% of operating profit
pre exceptional. Irish operations accounted for 29% of 2008 revenue and 35% of 2008
operating profit pre exceptional. These percentages include the Group’s share of Joint
Ventures & Associates.
International
Overview
International markets are served by Food Ingredients & Nutritionals.
Food Ingredients processes 3.4 billion litres of milk and produces
cheese, butter, casein and protein ingredients at world-class facilities
in Ireland and the USA. The Group’s Nutritionals business produces a
wide range of speciality whey proteins, customised premix solutions
and nutritional ingredients for use by food and beverage companies.
2008 Performance
In 2008, results for the International division were adversely affected
by the performance of Food Ingredients Ireland. The decline in
global dairy commodity prices lowered margins in this business
as reductions in the price paid for milk lagged the decline in global
dairy prices. Elsewhere in the International division, Food Ingredients
USA had a strong performance, generating record revenues and
positive margin expansion. Nutritionals had a good year. Optimum
Nutrition, Inc. (Optimum) acquired in August 2008, made a first time
contribution in line with expectations.
Ireland
Overview
Glanbia operates in the Irish market through Consumer Foods and
Agribusiness & Property. Consumer Foods incorporates nutritional
beverages, fresh dairy products and cheese, and soups and spreads.
Agribusiness is engaged primarily in feed milling, grain processing and
retailing. Property is responsible for the management of all the Group’s
surplus properties in Ireland. In March 2008, the Group announced the
sale of its Pigmeat business in a management buy-out.
2008 Performance
In Ireland, Consumer Foods had a satisfactory year. This compares with
a very challenging 2007 when results were affected by a time lag in
recovering the impact of higher costs in the marketplace. Agribusiness
was ahead of 2007 as a result of a good performance in the feed
and fertiliser segments and a strong focus on cost reduction. Property
performed broadly in line with 2007.
Joint Ventures & Associates
Overview
The Group has three key international joint ventures. Southwest
Cheese is based in New Mexico, USA and is one of the largest
natural cheese and high protein whey processing plants in the world.
Glanbia Cheese is based in the UK and produces pizza cheese for
the UK and European markets. Nutricima is based in Nigeria and
the company manufactures and markets branded dairy-based
consumer products for the Nigerian and African market. Glanbia
also has a number of smaller Agribusiness and Food Ingredients
joint ventures & associates.
2008 Performance
In 2008 there was a significant improvement in the performance
of Glanbia’s Joint Ventures & Associates, most notably Southwest
Cheese, which had an excellent year. Glanbia Cheese achieved
margin growth, despite a challenging market in 2008. However,
Nutricima had a difficult year where, despite volume growth and
increased brand awareness, it was not possible to pass on the full
extent of the significant increases in raw material commodity prices.
As a result Nutricima’s profits and margins were behind 2007.
2
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
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2008 % of Group*
57%
55%
Revenue
€1,489.2m
Operating profit
pre exceptional
€82.5m
Food Ingredients
& Nutritionals
processing locations
18 manufacturing/
1,694 employees
2008 % of Group*
Consumer Foods
Agribusiness & Property
29%
34%
Revenue
€743.0m
Operating profit
pre exceptional
€51.5m
71 locations
1,706 employees
2008 % of Group*
Strategic joint ventures in
the USA, UK and Nigeria
14%
11%
Revenue
€370.3m
Operating profit
pre exceptional
€17.0m
* inclusive of the Group’s share of Joint Ventures & Associates
globally
5 locations
882 employees
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
3
Overview of Glanbia
Our global footprint
Glanbia has a strong position in key food markets and sectors around
the world and an ongoing investment programme continued to expand
operations in Ireland, China, Nigeria and the USA during 2008. In
developed economies the focus is on health, wellness and general
nutrition. In developing economies the Group is building a range of
products which can deliver mass market nutrition.
Market positions
International
No.1
• Irish dairy processor
• Irish cheese producer
• American-style cheddar
cheese in the USA
• Global supplier of whey
protein isolates
No.2
• Globally in sports
nutrition business to
consumer sector
No.3
• Globally in micro-nutrient
• European producer of casein
solutions
• North American producer of
flax seed derivatives
Ireland
No.1
• Fresh milk
• Fresh cream
• Fruit yogurts
• Fromage frais
• Fresh soups
• Brand block cheddar cheese
Joint Ventures & Associates
No.1
• Pizza cheese supplier in Europe
• American-style cheddar cheese in USA
No.3
• Consumer packaged dairy powders in Nigeria
Idaho
Glanbia has two
cheese processing
plants in Gooding
and Twin Falls and
two whey processing
plants in Gooding
and Richfield. The US
Innovation Centre is
located in Twin Falls,
Idaho.
Manitoba
Glanbia Nutritionals (Canada),
North America’s largest
processor of speciality-flaxseed
ingredients, has facilities in
Angusville, Manitoba and
Gurnee, Illinois, USA.
California
Seltzer, located
in Carlsbad, CA,
manufactures micro-
nutrient premixes
and sells nutritional
ingredients. A new
manufacturing facility
has been opened in
Springfield, Missouri.
Mexico
Zymalact
manufactures a
range of processed
cheeses for the
domestic market and
also operates a dairy
ingredients sales office.
Wisconsin
Glanbia Nutritionals-Ingredient
Technologies HQ is situated in
Monroe, Wisconsin.
Illinois
Glanbia’s US headquarters
is situated in Chicago,
Illinois. Optimum operates
from a production facility
in Aurora, Illinois and has
facilities in South Carolina
and Florida manufacturing
nutritional supplements.
New Mexico
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.
Uruguay
Glanbia Nutritionals has a
sales office in Montevideo.
Brazil
Glanbia Nutritionals
has a sales office
in Curitiba.
4
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Total Group including Joint Ventures & Associates
4,300
employees
4,900
milk suppliers
5.3 billion
litres of milk processed
432,000 tonnes
cheese produced
225,000 tonnes
food ingredients manufactured
Ireland
Irish operations include Consumer Foods and
Agribusiness & Property. Consumer Foods has 10
locations producing a range of branded milk, fresh
dairy products, natural cheeses and fresh soups.
Agribusiness has 61 locations and is the Group’s
key linkage with its farmer supply base. Food
Ingredients Ireland has two manufacturing facilities
producing cheese and a range of food ingredients.
Also located in Ireland is the Group’s headquarters
and Innovation Centre.
UK
Glanbia Cheese has processing facilities in Northern Ireland
and Wales manufacturing mozzarella cheese. It is a 50:50
joint venture with Leprino Foods, USA. Glanbia Nutritionals
UK, located in Middlesborough, manufactures high protein
bars, beverages and ready to mix ingredients for the sports
performance market.
Belgium
Glanbia Nutritionals has a
sales office in Brussels.
Germany
Glanbia Nutritionals
Deutschland produces
customised micro-nutrient
premixes for Europe, Middle
East and Africa from a facility
in Orsingen-Nenzingen.
Nigeria
Nutricima, located
near Lagos, supplies
reconstituted evaporated
milk, milk powder and
energy powder to the
Nigerian market and is a
50:50 joint venture with
PZ Cussons plc.
Malaysia
Glanbia Nutritionals
has a sales office in
Kuala Lumpur.
Singapore
Glanbia Nutritionals has a
sales office in Singapore.
Indonesia
Glanbia Nutritionals has a
sales office in Jakarta.
China
Glanbia Nutritionals,
located in Suzhou, has a
premix facility supplying
customers globally.
Glanbia also has a sales
office in Shanghai.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
5
Overview of Glanbia
Our vision and strategy
Our vision is to be a world leader in
cheese and nutritional ingredients.
Our International business model
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Nutritional ingredients
Nutritional ingredients for the health and wellness, sports and lifestyle sectors have strong
growth drivers including favourable demographics, increasing obesity, rising levels of self-care
and a growing understanding of the relationship between diet and exercise.
Whey ingredients
The application of science and innovation together with the acquisition of complementary
ingredients and technologies converts this valuable whey stream into a range of high margin
nutritional ingredients focused on growth markets.
Global cheese and dairy ingredients
Large scale processing and manufacturing facilities are at the heart of Glanbia. These are efficient,
cost competitive and operationally strong with high levels of productivity. Through these facilities
Glanbia processes a large supply of milk, which is then manufactured into a range of cheese and
dairy products. Also derived from these processes is a large and valuable stream of whey proteins.
Innovation
Glanbia has two Innovation Centres based in Ireland
and the USA focusing on developing a range of
science-based food and nutritional ingredients and
solutions in areas such as weight loss, protein bars,
sports nutrition, long-life dairy-based beverages and
ingredients, functional dairy foods, and value-added
consumer food products and packaging formats.
6
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Our strategic objectives
Our competencies
Glanbia’s strategic objectives are focused on developing a more
diversified earnings base, achieving a sustainable operating
margin, generating strong cash flow and delivering continuous
earnings growth.
While growing internationalisation and complementary
acquisitions are significant drivers of growth, 2009 will be a
period of consolidation. This prudent approach reflects the
level of investment by the Group in recent years and the current
global credit and economic environment.
Glanbia has a range of competencies that help in continuing to
grow and develop the business. These are:
•
•
•
•
World-class and proven manufacturing skills in a wide variety
of dairy products and ingredients;
Strong technical and innovation skills, which are an
important part of delivering applications for customers and
driving new formats, products and services;
Excellent relationships and contacts in all key beverage,
dairy food and food ingredients segments; and
Partnering with leading companies and organisations in high
growth markets.
2007-2009 Targets
Adjusted earnings per share growth
Operating margin pre exceptional
(excluding Joint Ventures & Associates)
10-14%
2008 up 18.5%
2007 up 26.6%
5% +
2008 6.0%
2007 5.2%
Free cash flow pre exceptional
Potential development spend per annum
€45m+
2008 €72.4m
2007 €53.1m
€150m
2008 €292.8m
2007 €58.2m
EBIT from International operations
EBIT interest cover
>50%
2008 65%
2007 74%
5-6 times
2008 6.4 times
2007 6.7 times
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
7
Overview of Glanbia
Chairman’s statement
Glanbia achieved a good performance in 2008 despite
deteriorating market conditions, in particular the decline
in the second half of the year of global dairy markets.
Liam Herlihy
In 2008, adjusted
earnings per share grew
18.5%, following a 26.6%
increase in 2007.
in global dairy prices resulted in an
imbalance between market returns and
milk input costs throughout 2008. Margins
in Ireland increased 310 basis points to 6.9%
(2007: 3.8%), benefiting from improvements
in Consumer Foods and Agribusiness and
the exit during the year from the Pigmeat
business. Margins in Joint Ventures &
Associates increased significantly during the
year chiefly as a result of margin correction
in Southwest Cheese.
Full details of the Group’s divisional
performances are contained in the
Group Managing Director’s review,
the operations review and the finance
review, which follow.
Another year of growth
2008 was a good year for the Group
and follows a strong performance in
2007. Profit before tax pre exceptional
increased 20.8% to €120.3 million
(2007: €99.5 million) and adjusted
earnings per share grew 18.5% to 35.86
cents per share (2007: 30.25 cents
per share).
Revenue from the International division
increased 6.1% to €1,489.2 million
(2007: €1,403.2 million), primarily
reflecting good organic growth in
Food Ingredients USA and Nutritionals.
Revenue in the Ireland division declined
7.5% to €743.0 million (2007: €803.4
million). The exit from the Irish Pigmeat
business in March 2008 reduced revenue
by €168.0 million in the year. Revenue
growth was achieved in both Consumer
Foods and Agribusiness. The Group’s
share of revenue from Joint Ventures &
Associates increased 4.9% from €353.0
million to €370.3 million, driven by an
excellent performance from Southwest
Cheese, USA.
The Group’s operating margin pre
exceptional, excluding Joint Ventures
& Associates, increased 80 basis points
to 6.0% in 2008 (2007: 5.2%). Operating
margins for the International division
reduced by 60 basis points to 5.5%
(2007: 6.1%). Margin expansion in Food
Ingredients USA and Nutritionals was
offset by significant margin pressures in
Food Ingredients Ireland, as the decline
8
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Global dairy markets have reached very low levels since the
beginning of the year and in light of the current economic
uncertainty are likely to remain volatile for the rest of the year.
Dividend
The Board is recommending a final dividend
of 3.76 cents per share, compared with a
3.58 cents per share final dividend in 2007.
This brings the total for the year to 6.51
cents per share (2007: 6.08 cents per share)
representing a 7.1% increase. Subject to
shareholder approval, dividends will be paid
on Wednesday 20 May 2009 to shareholders
on the register as at Friday 24 April 2009. Irish
dividend withholding tax will be deducted at
the standard rate where appropriate.
Strong corporate governance
The Board and management are
committed to achieving the highest
standards of corporate governance
and being ethical in the conduct of all
aspects of the business. For the period
under review the Board is fully satisfied
that appropriate systems of internal
control are in place throughout the
Group. A detailed Directors’ statement
of corporate governance is set out on
pages 45 to 52 of this report.
Board changes
Michael Walsh retired from the Board and
the Chairmanship of Glanbia, following the
Group’s Annual General Meeting (AGM)
on 14 May 2008. Michael had served as
a Director since 1989, as Vice-Chairman
since 1996 and as a Chairman since 2005.
His tenure, particularly in the period
since 1996, has been a remarkable and
exciting time for the Group reflecting a
decade of progress and the successful
implementation of Glanbia’s growth
strategy. Michael will remain as a member
of the Group’s US Advisory Board for a
period of three years.
I am delighted with the honour of
being elected Chairman of the Board in
succession to Michael who chaired the
Group with distinction.
In May 2008 a number of changes were
made to the Board. John Fitzgerald, who
has served on the Glanbia Board since
2004 was elected Vice-Chairman. Anthony
O’Connor and Robert Prendergast, both
dairy farmers and Directors of Glanbia Co-
operative Society Limited, were appointed
as Directors. Eamon Power retired as a
Director having served nine years.
In March 2009, the Group announced the
retirement of Geoff Meagher on 30 June
2009 from his executive roles as Deputy
Group Managing Director and Group
Finance Director and from the Board.
Geoff has given exceptional service and
commitment to Glanbia since he joined
what was the Avonmore Group in 1975.
He has been an integral part of the
growth and internationalisation of the
Group and a great pleasure to work with.
Glanbia will be maintaining a consultancy
relationship with Geoff to avail of his
extensive experience.
Siobhan Talbot, who was Deputy Group
Finance Director since 2005, has been
appointed Group Finance Director
Designate with immediate effect and
will succeed Geoff and join the Board
on 1 July 2009. Siobhan, a Chartered
Accountant, has been with the Group
since 1992.
On behalf of the Board I would like
to welcome the new members and
acknowledge with sincere thanks, the
commitment and contribution departing
members made to Glanbia. We wish them
all well in the future.
Management and staff
I would like to personally thank John
Moloney, Group Managing Director and
all our employees for their dedication and
commitment during the year.
Effective risk management
The Group’s management of risk is key
to achieving our strategic, financial
and operational objectives. While risk
is the ultimate responsibility of the
Board, throughout Glanbia there are risk
mitigation and management procedures
and policies in place. The Group’s risk falls
into four principal categories – strategic,
financial, operational and external. In
light of the current environment, there are
short term risks to the delivery of Glanbia’s
strategic objectives. The driver of these
risks is the unprecedented and sustained
nature of the global economic downturn
and as a consequence volatility in global
dairy markets. While there are some
natural hedges in the business such as the
geographic split in earnings, with the USA
likely to respond faster to stimulus, there
are some very significant challenges as we
head into 2009. Risk and risk management
is comprehensively dealt with on pages
36 and 37 of this report.
Conclusion
Detailed views on the outlook for 2009
are set out in the Group Managing
Director’s review and operations reviews
on page 10 to 25.
Trading conditions became progressively
more challenging in the second half of
2008 and into 2009. Global dairy markets
have reached very low levels and in
light of the current global economic
uncertainty are likely to remain volatile
for the rest of this year. However, the
Group is well invested, financially strong
and has a diversified earnings base with
good organic growth opportunities.
These should enable the Group to deliver
further progress in 2009.
Liam Herlihy
Chairman
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
9
Directors’ report: Business review
Group Managing Director’s review
2008 was a year of delivery. Across the business
a strong operational performance underpinned a
good set of results. The Group also completed a major
strategic acquisition and achieved key financial targets.
John Moloney
A year of delivery
Glanbia’s businesses performed well
during 2008. Throughout the Group,
revenues, profits and operating margins
improved with the exception of Food
Ingredients Ireland. For this business unit
the downturn in global dairy commodity
prices affected margins, as reductions in
the price paid for milk lagged the decline
in global dairy prices. Elsewhere in the
International division, Food Ingredients
USA had a strong performance with high
cheese prices, good demand and very
efficient production, generating record
revenues and positive margin expansion.
Nutritionals had a good year driven
by organic volume growth, buoyant
whey markets and a continued good
performance from the premix business.
Optimum, acquired in August 2008,
made a first time contribution in line
with expectations.
In the Ireland division, Consumer Foods
had a satisfactory year. This compares
with a very challenging 2007 when results
were affected by a time lag in recovering
the impact of higher costs in the market
place. Agribusiness results were ahead of
2007 as a result of a good performance
in the feed and fertiliser segments and a
strong focus on cost reduction. Glanbia
has a very conservative approach to its
Property business, which manages the
Group’s surplus property. This business
performed broadly in line with 2007.
A highlight of the year was a significant
improvement in the performance of the
Group’s Joint Ventures & Associates, most
notably Southwest Cheese, which had an
excellent year. Glanbia Cheese achieved
margin growth despite a challenging
market in 2008.
However, Nutricima had a difficult
year, where it was not possible to pass
on the full extent of the significant
increases in raw material commodity
prices. Notwithstanding this, Nutricima
is, I believe, an excellent long-term
strategic investment and is developing a
branded milk product portfolio of liquid,
condensed and powder formats to serve
a growing market.
10
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
€351 million
Acquisition and development capital
expenditure since 2007
Major strategic acquisition
Glanbia has also developed the capability
to successfully acquire and integrate
strategic acquisitions. The latest of which
is Optimum, acquired in August 2008, for
a total consideration of US$323.0 million
(€217.9 million).
Optimum is a leading manufacturer of
nutritional supplements for the sports
nutrition sector, in particular the use of
whey protein as a functional supplement,
where ‘ON’ is a leading brand. Optimum
was a privately owned company with
a successful 22-year history in the
manufacture and supply of premium
nutritional supplements to the US and
global sports nutrition markets. It has
three operating facilities in Illinois, South
Carolina and Florida.
Optimum takes Glanbia’s nutritional
business further up the value chain and
enhances the Group’s route to market
for innovative nutritional applications
and solutions. An opportunity also exists
to grow the business internationally
through Glanbia’s nutritional sales
network, with offices in China,
Singapore and Latin America.
Optimum has performed in line with
expectations since acquisition and sales
have remained resilient. We believe this
is because in sports nutrition, protein is
a key lifestyle component as opposed to
discretionary spending.
Optimum is an excellent strategic fit with
Glanbia’s existing businesses and also fits
well with the Group’s stated growth strategy
and ambition to continue to internationalise
Glanbia, in high growth markets.
Overall, Glanbia’s share of profit after
tax and interest, from Joint Ventures &
Associates, grew to €7.3 million, up from
€1.0 million in 2007.
World-class capability
Food Ingredients USA, together with
Southwest Cheese, is the largest producer
of American-style cheddar cheese in the
USA, with close to 20% market share. In
2008, the Group’s three US cheese plants
produced and sold over 340,000 tonnes
of cheese. Glanbia is one of the world’s
leading manufacturers of whey-based
nutritional ingredients, producing 59,000
tonnes of value-added whey products in
its three whey-based ingredients plants.
In total, over 3 billion litres of milk was
processed in 2008 by businesses that
employ 900 people.
Southwest Cheese is the Group’s joint
venture with The Greater Southwest
Agency. It is based in Clovis, which is
located in the high plains of eastern
New Mexico, USA. Southwest Cheese
is a US$226.0 million cheese and whey
products facility, built on a greenfield
site. From commissioning of the facility in
October 2006 to today, this business has
grown significantly and now generates
revenue in excess of US$600.0 million.
The success of Southwest Cheese in three
years is a strong illustration of Glanbia’s
core capabilities, which include:
• the ability to foster long-term
partnerships with leading companies and
organisations in high growth markets;
• the management skills to deliver major
investment projects, on time and on
budget, from a greenfield site to fully
commissioned large scale facilities;
• world-class manufacturing skills in a
wide variety of dairy products and
ingredients; and
• strong and deep customer
relationships in all key cheese and
food ingredients markets.
A difficult macro environment
Much has and will be written about the
global economic downturn and the
crisis in financial and credit markets.
Commodity prices are also very volatile.
While a reduction in oil prices is a positive
for the energy intensive elements of our
business, the decline in world dairy prices
has an asymmetric – plus and minus
– affect across the Group’s portfolio of
businesses. In Food Ingredients Ireland,
where the bulk of output is exported into
global commodity dairy markets, the
price we pay for milk to farmer suppliers
lags the price for dairy products on world
markets. As a consequence this business
encountered very difficult trading
conditions in 2008 as global dairy markets
experienced a steep decline, from the
historic highs achieved in 2007.
Changing consumer trends
Another facet of the current downturn
is the effect it is having on consumer
confidence and spending patterns.
Consumers have become more value
conscious and Glanbia is addressing this
in two ways.
The first is to manage our branded
product portfolio more strategically,
adding key offerings for the value
conscious consumer or ‘quality at a price’.
Glanbia is also addressing the flight to
value through a strong cost focus.
A significant rationalisation programme,
costing €14.5 million is ongoing across
the Group. This is as a result of an
imperative to remain cost competitive,
particularly in relation to the effect the
global economic downturn is having on
consumer demand. The rationalisation
programme is mainly focused on
Consumer Foods, Agribusiness and Food
Ingredients Ireland and associated costs
relate primarily to redundancy.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 1
Directors’ report: Business review
Group Managing Director’s review (continued)
Rationalisation is not simply to cut costs
but to actively manage our business
consistent with the current reality and in
anticipation of these trends continuing.
Balance sheet capacity and strength
Glanbia is in a good financial position.
After a period of significant acquisition
and development expenditure with
€351.0 million invested in acquisitions
and development capital expenditure in
the past two years, the Group will now
consolidate its operations, particularly as
ample opportunity for growth exists within
the current business.
A prudent and conservative approach to
reduce capital and operating spend is
consistent with the challenging external
environment that is affecting every aspect
of the Group.
In the finance review, on pages 32 to 35,
detailed information is given on the Group’s
debt position and financial covenants.
Our people and responsibilities
Today, Glanbia has a local and global
footprint through its operations, partners
and customer relationships. The Group,
including Joint Ventures & Associates is
a significant employer with 4,300 people
working across the business.
In some instances Glanbia is the
principal employer in an area. Therefore
our presence in a local community and
the values that we set ourselves in how
we engage with our employees, interact
with that local community and run our
business are very important.
On the other hand, aspects of our
business have the potential to impact
major world issues, such as climate
change, through our carbon footprint.
The Group’s Ballyragget facility in Ireland
is the largest integrated dairy processing
plant in Europe and Glanbia’s facility in
Gooding, Idaho, USA is the world’s largest
barrel cheese facility.
As a result of the scale of these and other
operations, we are equally mindful of our
environmental responsibilities and the
need to manage and grow our businesses
in a sustainable way.
In recognition of the importance of
people to the Group we have a dedicated
‘Our people’ section on page 26 to 28
of this report. We also recognise the
growing importance of Corporate Social
Responsibility (CSR) and during 2009 will
be formalising a Group-wide approach to
key elements. The CSR section is on page
29 to 31 of this report.
2007 to 2009 Strategic roadmap
As part of the repositioning and
internationalisation of Glanbia, the Group
set out key financial targets in the 2006
Annual Report. Adjusted earnings per
share growth was targeted at 10% to 14%
per annum. In 2008, adjusted earnings
per share grew 18.5%, following a 26.6%
increase in 2007.
Total development expenditure in 2007
and 2008 amounted to €351.0 million.
Earnings before interest and tax from
International operations now represent
almost two-thirds of total earnings,
reflecting the Group’s significant and
successful presence overseas.
In a two year period the performance of
Glanbia has comfortably exceeded all the
Group’s growth objectives for the three
years 2007 to 2009.
2009 Group outlook
Glanbia performed well in 2008, delivering
a good set of results, completing a major
strategic acquisition and achieving key
financial targets. All businesses performed
to or better than anticipated, with the
exception of Food Ingredients Ireland
which suffered a sharp decline in profits
and margins in 2008.
2009 will be a tough year. Global dairy
markets have weakened considerably
from previous high levels with the
outlook for 2009 deteriorating further
since the beginning of the year. In broad
terms in 2009 we expect that global dairy
markets will remain weak and somewhat
volatile. We would expect that these
markets will bottom out as a result of
some supply contraction in a number
of countries and as a result are likely to
begin to rebalance through the end of
2009 and into early next year with some
price recovery as a consequence.
However, in 2009 Food Ingredients Ireland
will be the most challenged in the context
of Global dairy markets. We expect this
business to breakeven in 2009. Food
Ingredients USA is expected to deliver a
resilient performance, albeit down when
compared with a strong result in 2008.
Reducing farm incomes will have
implications for farm input sales and
as a result for revenue and profits
in Agribusiness. Consumer Foods,
Nutritionals and Joint Ventures &
Associates are expected to deliver
robust performances.
Based on current market conditions,
the Group now expects 2009 earnings
to be in a range of low to mid single
digit growth. Glanbia is continuing to
maximise organic growth opportunities
and aggressively manage costs to
sustain the business through the current
challenging environment.
12
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Recent acquisitions and the Group’s direct investment
in science and technology has put in place a strong
framework for Glanbia’s continued growth in nutritional
ingredients; a high margin, high growth sector.
Southwest Cheese in New Mexico, one of the largest natural cheese and whey processing plants in the world.
Optimum sports nutrition supplements.
Looking ahead
The Group is well positioned. We made
significant investment in recent years
which has enhanced the geographic and
sectoral spread of the business. We have
diversified our earnings base from Ireland
to International.
Within the International division we have
diversified further up the value chain from
cheese to advanced whey and into a range
of nutritional products. This includes a
solid mineral and vitamin formulation
business, which has blue chip customers
and facilities in China, Germany, California
and a new plant being commissioned in
Missouri in the second quarter of 2009.
There is a robust programme of cost saving
measures in place across the Group and we
would expect those to yield considerable
benefits on an annualised basis.
2009 will be a year of consolidation for
Glanbia, prioritising debt reduction,
after having made a major acquisition in
Optimum in 2008.
We have good organic growth
opportunities in the business including
Nutricima, Southwest Cheese, Nutritionals
and Optimum in particular.
I believe that as the general economic
environment improves over the next few
years Glanbia is in a good place to benefit.
John Moloney
Group Managing Director
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 3
Directors’ report: Business review
Operations review International
Food Ingredients USA and global Nutritionals had a
strong performance in 2008, driven by favourable pricing
and good organic volume increases. This underpinned
a satisfactory performance by the International division
for the full year.
In 2008, revenue for the International
division grew 6.1% to €1,489.2 million
(2007: €1,403.2 million). Operating
profit pre exceptional declined 3.2%
to €82.5 million (2007: €85.2 million).
Operating margin pre exceptional
reduced 60 basis points to 5.5%
(2007: 6.1%).
These results reflect the impact of a
deterioration in the performance of Food
Ingredients Ireland, particularly in the
second half of the year, when the decline
in global dairy markets and the resulting
imbalance in milk cost and market pricing
led to a significant reduction in profits and
margins for this business unit.
Nutritionals
The Nutritionals business unit is a
leading supplier of advanced technology
whey proteins and fractions, flax and
customised micro-nutrients, vitamin
and mineral premixes. It comprises
three separate businesses - Ingredient
Technologies (business to business
ingredient developer and distributor);
Customised Solutions (business to
business premix solutions provider)
and Optimum (business to consumer,
manufacturer and marketer of nutritional
supplements) – serving the health and
wellness, functional foods, sports nutrition,
infant and clinical nutrition sectors.
Nutritionals employs 555 people at
locations in the USA (Wisconsin, Idaho,
Illinois, California, Missouri, Florida and
South Carolina); Canada (Manitoba);
Europe (Ireland, UK, Belgium and
Germany) and Asia Pacific (China,
Singapore and Malaysia).
Acquisition of Optimum
A highlight of 2008 was the acquisition
in August of Optimum, a leading
manufacturer of nutritional supplements
for the sports sector, with some of sports
nutrition’s most trusted brands in the USA,
including ‘ON’, ‘Gold Standard 100%
Whey’ and ‘ABB’. The total consideration
was US$323.0 million (€217.9 million).
Optimum has a 22-year track record in
the manufacture and supply of a range
of whey-based, premium nutritional
supplements to the US and global sports
nutrition markets. The company is the
largest US manufacturer of whey-protein-
based, sports nutrition products in powder,
beverage, capsule and bar format.
This is an exciting acquisition for Glanbia
as it gives the Group a leading position
of scale in a fast growing segment of the
nutrition market. It is also a close strategic
fit with existing core areas of nutritional
expertise in whey and sports nutrition
and gives the Group a direct presence in
valuable consumer markets.
14
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Revenue
up 6.1%
Operating profit pre exceptional
down 3.2%
Operating margin pre exceptional
down 60 basis points
€1.49 bn
€82.5m
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A highlight of the year was
the acquisition in August of
Optimum, a leading US sports
nutrition manufacturer.
2008 Performance
The global nutritional market exhibited
strong growth in 2008 with an estimated
value of US$244 billion per annum.
Glanbia has approximately 9% of the US
sports nutrition sector; 18% of the global
premix market; 29% of Global Whey
Protein Isolate (WPI) market; and 8% of
global Whey Protein Concentrate (WPC)
80 market.
All areas in the whey business
experienced growth in 2008 with volume
and pricing in whey protein isolates and
concentrates showing steady growth.
Functionally advanced whey, servicing the
bar and beverage sectors, in particular,
showed significant growth.
Glanbia’s position in the global premix
market was strengthened in 2008 with the
commissioning of a new wholly owned and
operated plant in Suzhou near Shanghai,
China. Investment continued in facilities in
Canada, Germany and the UK to increase
efficiency and capacity at those facilities
and a new US premix plant in Missouri
is expected to be commissioned in the
second quarter 2009.
In 2008, further investment was made
in developing internal science and
technological capabilities in whey
fractionation through research and
development facilities in Ireland and
the USA. This is creating real benefits as
Nutritionals moves into higher value added
solutions and formulations for the food,
beverage and pharmaceutical industries.
Brand strength improved in 2008 with
the addition of the ON and ABB brands.
Other brands include Provon® WPI,
AvonlacTM WPC, Thermax® whey proteins,
Prolibra® weight management solution,
MeadowpureTM, CFM® WPI, Bioferrin®
lactoferrin, Salibra® bioactive whey
fraction, Trucal® dairy calcium, Provon®
Revive a sports protein recovery solution;
Barflex®; BarmaxTM, BarGainTM, and
BarProTM bar solutions.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 5
Directors’ report: Business review
Operations review International (continued)
The vision for Nutritionals
is to become one of the
leading providers of
science-based nutritional
ingredients, solutions and
sports supplements to the
global nutrition industry.
Provon Revive is the ultimate recovery solution and the choice of Irelands elite athletes.
Nutritionals 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.
2009 Outlook
A significant investment in and
commitment to innovation and a full year
contribution from Optimum is expected
to contribute to growth in 2009.
Nutritionals is well positioned for 2009
and has strong brands and capabilities to
continue to develop a business of scale
in both the business to business and
business to consumer areas.
Nutritionals revenues, profits and
margins grew for the year driven by
strong organic volume growth, good
value added whey markets, notably
in the first half, and continued good
performance in premix businesses. 2008
results reflect a first time contribution by
Optimum, in line with expectations.
Strategy
The strategy for this business is based
on building a high margin business, with
positions of scale in both dairy and
non-dairy sectors; in particular:
•
ingredient solutions in core health
areas of sports and performance
nutrition, weight management, health
and wellness; and
•
functional solutions in bars, beverages
and processed foods.
16
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
International markets are served by Food Ingredients
& Nutritionals and these businesses collectively
represented 71% of Group revenue and 65% of Group
operating profit pre exceptional in 2008.
Julie Kolsen checking solids in a refiner tank in the Gooding whey facility.
The Group’s businesses in the
USA have been accepted for
membership to the Energy
Star Programme, a national
call to action to improve the
energy efficiency of America’s
commercial and industrial
sectors by 10% or more.
Glanbia added four additional medals
to its trophy case in 2008 earning two
gold medals and two silver medals in the
World Cheese Championship contest
held in Madison, Wisconsin. A record
breaking eight medals were awarded,
including two gold and four silver, in the
US Cheese Championships in March 2009.
Strategy
The strategy for Food Ingredients USA
is to continue to be the most relevant
supplier of American-style cheddar
cheese to key industrial customers, retain
leading market positions, grow market
share and continue to be an efficient,
high-quality producer of whey-based
ingredients to support Glanbia Nutritionals
growth strategy.
Food Ingredients USA
Food Ingredients USA processed
2.0 billion litres of milk into 205,000
tonnes of cheese and 50,000 tonnes of
whey-based ingredients from facilities
located in Idaho.
Food Ingredients Idaho plants, corporate
head office and state-of-the-art research
and development facility employs 640
people. The business purchases over one-
third of the milk produced in Idaho. Idaho
is the third largest milk producing state
in the USA and is amongst the fastest
growing states for milk production, up by
approximately 7% in 2008.
2008 Performance
High cheese prices enabled Food
Ingredients USA to post record revenues
in 2008, with strong demand and pricing
during the year. Positive market conditions
and continued investment in production
capabilities and efficiencies, underpinned
margin improvement in 2008.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 7
Directors’ report: Business review
Operations review International (continued)
The cheddar cheese block line at our Ballyragget facility.
2009 Outlook
Domestic demand for cheddar cheese is
good. However, having reached historical
highs during 2008, US cheese prices
reduced significantly late in the year. For
2009, despite expected volatility, cheese
prices are forecast to remain above
historical averages, albeit lower than 2008
average prices. Whey prices are lower
year-on-year and only a marginal recovery
is expected during 2009. Therefore
market conditions for Food Ingredients
USA will be more challenging this year
and as a result a lower performance is
expected in 2009, following a strong set
of results in 2008.
18
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Food Ingredients Ireland
Food Ingredients Ireland is the largest
dairy ingredients business in the
country, assembling a milk pool of
1.4 billion litres annually and processing
it into butter, cheese, milk proteins
and whey derivatives. It markets over
190,000 tonnes of dairy products and
ingredients on a business to business
basis to customers in over 40 countries.
Food Ingredients Ireland employs over
440 people at two large processing
facilities in Ballyragget, County Kilkenny
and Virginia, County Cavan. It operates
a joint venture with Corman SA, for the
manufacture of butter fractions and dairy
spreads in Ireland and has a sales and
blending operation in Mexico.
The Ballyragget facility is the largest
integrated dairy site in Europe, processing
20% of the Irish milk pool and 40% of
the Irish whey pool. Food Ingredients
Ireland is the pre-eminent Irish supplier
of lactose and other whey proteins to the
three largest infant formula manufacturers
in the world. It is also Ireland’s largest
manufacturer of casein – another protein
found in milk – and cheddar cheese.
The Virginia facility produces a range of
fat-filled milk powders and fresh creams.
It has exclusive responsibility for cream
and casein procurement and supply to
Baileys Irish Cream Liqueur following the
renewal of a new five-year contract. It is
also the main supplier of milk powder to
Nutricima, the Group’s joint venture with
PZ Cussons plc in Nigeria. In addition
to customers who have strong market
positions in West Africa such as Senegal,
Togo, Mali and Benin.
2008 Performance
2008 was a very challenging year for
Food Ingredients Ireland. Global dairy
markets were volatile and prices reached
historic lows.
As a result of the scale of our processing businesses we are very
mindful of our economic and environmental responsibilities and
the imperative to grow our business in a sustainable way.
Food Ingredients Ireland is the largest manufacturer of cheddar cheese in Ireland.
This decline in global dairy prices,
particularly in the second half of the year,
led to a sharp imbalance in the raw material
input cost and market prices for products.
As a result, while revenues remained
robust, profits and margins were back
significantly when compared with 2007.
The co-operation agreement with
Dairygold, including the contract
manufacture by Dairygold of cheese for
Glanbia and by Glanbia of butter for
Dairygold, operated well during the year.
The joint venture with Corman SA
progressed satisfactorily throughout
2008 with the commissioning of a butter
fractionation facility, which is the only such
facility in Ireland.
In the fourth quarter of 2007 and into the
first quarter of 2008, Food Ingredients
Ireland carried out a complete replacement
of its cheese facility in Ballyragget and
increased capacity by 33%. A further
investment in a Milk Protein Concentrate
(MPC) facility enabled the production of
MPC 80 and Milk Protein Isolate (MPI) which
are targeted at nutritional and fresh dairy
product markets.
Strategy
While recognising that a significant
proportion of Food Ingredients Ireland’s
product base is commodity dairy
products, the strategy for this business
is to provide a growing and innovative
offering of higher margin ingredient
solutions to an expanding customer base.
2009 Outlook
The market outlook for Food Ingredients
Ireland in 2009 is difficult, with global
dairy markets at extremely low levels.
While a realignment of raw material costs
and market pricing is expected, given
current conditions we expect this business
to breakeven this year. We continue to
drive efficiency and cost improvements
in the business through a rationalisation
programme and other initiatives.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 9
Directors’ report: Business review
Operations review Ireland
The Ireland division performed well despite a challenging
market environment. This delivered an increase in operating
profit, together with a significant improvement in operating
margin for the year.
Focused marketing investment
and a new two litre size
delivered double digit volume
growth in Avonmore Supermilk.
2008 Performance
Consumer Foods had a satisfactory
year, although the marketplace became
particularly challenging in the latter half of
2008 with the economic downturn affecting
consumer confidence and shopping
behaviour. Despite this, Consumer Foods
delivered good growth in revenue and
improved its operating profit and margin
position during the year, after a number
of years where higher costs were not fully
recovered in the marketplace.
Beverages
Consumer Foods increased its marketing
investment in its milk portfolio in 2008.
Good progress was achieved in 2008
with double digit volume growth in the
Avonmore Supermilk brand. The launch
of a two litre family pack was a key driver
for this growth coupled with an innovative
advertising and direct marketing activity
targeting health professionals. The
sponsorship of the 2008 World Barista
Championship served to highlight the
superior quality of Avonmore milk in the
food service channel.
In recognising the increased value
conscious consumer, the business
supported a price decrease on its key
selling Avonmore Fresh, Low Fat and
Supermilk brands in late 2008, helping
to maintain a strong market share for its
liquid milk products. This focus on cost
and value are key agenda items in the
marketing strategy going forward.
Consumer Foods had a satisfactory year
and this compares with a very challenging
2007 when results were affected by a time
lag in recovering the impact of higher costs
in the marketplace.
Agribusiness was ahead of 2007 as a result
of a good performance in the feed and
fertiliser segments and a strong focus on
cost reduction. Glanbia’s Property business
performed broadly in line with 2007.
In the Ireland division, although overall
revenue declined 7.5% by €60.4 million
to €743.0 million (2007: €803.4 million),
the exit from the Group’s Pigmeat
business in March 2008 reduced revenue
by €168.0 million in the year. Revenue
growth was achieved in both Consumer
Foods and Agribusiness.
Operating profit pre exceptional increased
68% to €51.5 million (2007: €30.6 million)
and operating margin pre exceptional grew
by 310 basis points to 6.9% (2007: 3.8%).
Consumer Foods
Consumer Foods is the largest branded
food supplier into the Irish grocery sector
with more food brands in The Top 100
than any other supplier.
With household brands such as
‘Avonmore’, ‘Premier’, ‘Yoplait’,
‘Kilmeaden’, ‘Snowcream’, ‘Petits Filous’,
and ‘CMP’ in its portfolio, Consumer
Foods has the No.1 market position in
all sectors of fresh milk and cream, block
cheddar cheese, grated cheddar cheese,
fruit yogurts, kid’s fromage frais, drinking
yogurt, fresh soup and smoothies.
Consumer Foods employs just under 800
people at 10 locations throughout Ireland
and processes almost 300 million litres of
milk annually. The business unit supplies
over 4,000 customers with almost two
million consumer packs each day.
20
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Revenue
Operating profit pre exceptional
down 7.5%
up 68%
Operating margin pre exceptional
up 310 basis points
€743.0m
€51.5m
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A further development in 2008 was the
introduction of other leading beverage
brands into the Consumer Foods
beverage portfolio. Distribution of the
biggest selling smoothie brand ‘Innocent’
and the biggest energy drink challenger
brand ‘Monster’ into the range served to
strengthen the businesses presence in the
nutritional beverage category.
Food
Consumers have moved towards more
mainstream products in pursuit of value
and this has led to increasing demand
for the Yoplait family yogurt range.
Innovation and investment, particularly
in the value-added portfolio, showed
good results in 2008 with sales of Yoplait
Mixed Seeds yogurt growing strongly.
The new ‘100% Natural’ strategy for the
Petits Filous range is proving effective
with increasing consumer loyalty and a
stronger market position.
2008 was Consumer Foods best year
ever for its value-added cream sales.
Extending the Avonmore cream franchise
into special occasions usage delivered
well, with the launch of Avonmore Baileys
Fresh Cream delivering strong sales
during Christmas 2008.
Key offerings for the value
conscious consumer or ‘quality
at a price’ led to increasing
demand in 2008 for the Yoplait
family yogurt range.
Innovation and marketing investment
behind the Kilmeaden brand proved
effective in 2008, strengthening the
brand’s competitive position in the
marketplace. New products and
packaging formats helped to provide
more convenient choices for consumers
and boosted sales.
Avonmore Fresh Soup defended
its leading market position, despite
increased competition in the fresh
soup category. The launch of Chunky
Soup achieved incremental volume as
it extends the Avonmore brand into
more meal-type usage that appeals to a
younger demographic.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
2 1
Directors’ report: Business review
Operations review Ireland (continued)
The Ireland division represented 29% of Group revenue
and 35% of Group operating profit pre exceptional in 2008.
Avonmore Fresh Soup holds the number one position in the Irish fresh soup category.
2009 Outlook
The marketplace will remain competitive
and challenging during this year. Against
this backdrop the emphasis in Consumer
Foods will be on delivering and
promoting enhanced value to customers
and continuing to differentiate its key
brands, while aggressively managing
costs. The outlook for Consumer Foods
is satisfactory for 2009.
Consumer Foods is at the
forefront in promoting the
understanding of nutritional
values in food, with the
introduction of Guideline Daily
Amounts (GDA) labelling across
90% of its product range.
Strategy
Consumer Foods is responding strongly
to the current economic and market
reality, in anticipation that the changing
trends in consumer culture and spending
will continue into 2009 and beyond.
There is a significant ongoing
rationalisation programme costing over
€11.0 million, which will further improve
cost competitiveness and efficiency.
Innovation and value-added products
represent a strong growth opportunity
as demonstrated by the performance
of Supermilk, Bailey’s Cream and soup
packaging formats.
Active management of Consumer Foods
strong brand portfolio, in milk, cream and
selected food categories, and strategically
differentiating key products is enabling
Consumer Foods to maintain good market
share and leadership positions.
22
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
catering for the needs of the core farmer
customer base with an extended farm
hardware offering.
2009 Outlook
2009 will be an extremely challenging
year for farmers across all sectors, with
strong negative headwinds including
a reduction in farm incomes and the
continuing economic downturn. For the
longer-term, Agribusiness is positioning
itself to be able to service the changing
needs of its farmer base whilst
recognising the potential created by a
growing and diverse rural population.
Property
The remit of Property is to review and
maximise the value of Glanbia’s portfolio
of properties, with a particular focus on
surplus property.
2008 Performance
The 2008 performance of Property was
broadly in line with 2007, despite a very
different environment with a dramatic
slowdown in the property market and lack
of available credit.
2009 Outlook
While the market will undoubtedly
continue to be very difficult in 2009,
there are a number of transactions
planned which should support activity
in the coming year. Results for 2009 are
expected to be broadly in line with 2008.
Agribusiness & Property
Agribusiness & Property had a satisfactory
year with improved revenue, operating
profit and margins in 2008.
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 large 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 over 600 people and
operates in 16 counties in Ireland, with a
total of 61 locations.
2008 Performance
Agribusiness had a satisfactory
performance in a competitive trading
environment and results for 2008 were
ahead of 2007. 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 14
branches redeveloped to date.
Strategy
The strategy for Agribusiness 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 and efficient
value chain for each core offering.
The retail strategy under the CountryLife
banner is to capture the convenience
needs of a growing and diverse rural
population. Agribusiness is developing a
focused offering in gardening, pet care
and equestrian products, whilst also
The retail strategy for CountryLife
is to capture the convenience
needs of a growing and diverse
rural population.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
2 3
Directors’ report: Business review
Operations review Joint Ventures & Associates
In 2008, Joint Ventures & Associates performed strongly,
in particular Southwest Cheese in the USA, which is
a world-class cheese and whey-based nutritional
ingredients manufacturer. Overall, Glanbia’s share of
profit after tax and interest pre exceptional increased by
€6.3 million to €7.3 million for the year.
In 2008 there was a significant
improvement in the performance of the
Group’s Joint Ventures & Associates,
most notably Southwest Cheese which
had an excellent year. Glanbia Cheese in
the UK achieved margin growth despite
a challenging market in 2008. However,
Nutricima in Nigeria had a difficult year
as it was not possible to pass on the full
extent of the significant increases in raw
material commodity prices. As a result,
Nutricima’s profits and margins were
behind 2007.
Glanbia’s share of revenue of Joint Ventures
& Associates grew 4.9% to €370.3 million
(2007: €353.0 million). Operating margin
increased 290 basis points to 4.6%
(2007: 1.7%). Glanbia’s share of profit after
tax and interest pre exceptional improved
considerably, increasing to €7.3 million
(2007: €1.0 million).
Southwest Cheese
Southwest Cheese is located in Clovis,
New Mexico, USA, and is one of the
largest natural cheese and high-protein
whey processing plants in the world.
The business is in its third year of
operation and produced 136,000 tonnes
of American-style cheddar cheese
and other American-style varieties of
cheese in 2008, equivalent to 7.5% of
the US market. It is a 50:50 joint venture
between Glanbia and The Greater
Southwest Agency. Glanbia markets all
of the products produced. Southwest
Cheese employs over 270 people.
2008 Performance
2008 was an excellent year for Southwest
Cheese and the business delivered a
strong recovery in results for the year,
compared with 2007. Output increased
as planned to reach full capacity.
Demand was favourable and operational
excellence continued with strong
day-to-day management at the facility.
A highlight of 2008 was achieving a World
Cheese Championship gold medal in the
first year of entering the competition.
A gold medal was also awarded at the
US Cheese Championship in March 2009.
2009 Outlook
The outlook for Southwest Cheese is
good. The people, plant and processes
have proven capabilities with the
markets for American-style cheddar
cheese and high-protein whey product
continuing to grow. Milk production
is robust in the New Mexico and West
Texas regions and this positions the
business for continued growth.
A planned 50% expansion in production
capacity is currently being finalised.
24
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Revenue
up 4.9%
€370.3m
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Profit after interest and tax pre exceptional
up €6.3m
€7.3m
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Glanbia has three principle
International joint ventures -
Southwest Cheese in the USA,
Glanbia Cheese in the UK and
Nutricima in Nigeria - and a
number of smaller Irish based
joint ventures & associates.
Nunu, one of Nutricima’s leading brands of milk-based powder for the developing Nigerian market.
Glanbia Cheese
The Group has a 51% interest in Glanbia
Cheese which is a joint venture with
Leprino Foods, USA. The business
produces mozzarella cheese for the
European pizza market in shredded,
ribbon and string formats and is Europe’s
No.1 supplier of mozzarella cheese to the
foodservice and retail pizza sector. Glanbia
Cheese employs 350 people at three sites,
which includes two cheese processing
facilities in the UK.
2008 Performance
Glanbia Cheese’s performance in 2008
showed a marked improvement over 2007,
as the business fully recovered the milk cost
inflation experienced in the second half
of 2007. However, the external operating
environment disimproved in the second
half of 2008 as a result of the weakness in
the global economy and its detrimental
knock-on effect both on consumer
confidence and demand. Despite the
difficult market conditions Glanbia Cheese
delivered margin growth in 2008.
2009 Outlook
Glanbia Cheese is well positioned to
deal with the significant challenges
anticipated in 2009. A combination of
efficiency benefits and an improved sales
mix underpins volume growth, which is
supported by increased consumption
trends in quick foodservice markets.
Nutricima
Nutricima is a 50:50 joint venture with
PZ Cussons plc in Nigeria. This business
has developed a branded product
portfolio to serve all market segments
including liquid, condensed and
powdered milk-based products. Nigeria
is a large and developing market,
catering for a population estimated at
151 million people, with a fast growing
urban middle class. Local oil production
and a relatively stable political
environment has supported strong GDP
growth. Nutricima employs 260 people
at its evaporated milk manufacturing and
powder packing facility near Lagos.
2008 Performance
2008 was a challenging year as the
business continued to experience the
impact of significant increases in raw
material commodity prices, which could
not be fully passed on in the marketplace.
Good operational progress continued
to be made with the capacity expansion
project for reconstituted evaporated milk
now complete and the factory producing
‘ready-to-drink’ products is on target to
be commissioned in the first half of 2009.
2009 Outlook
Nutricima is expected to make good
progress in 2009, with improvements in
its brand portfolio, market positions and
increased top line growth forecast. Raw
material commodity prices have reduced
significantly and this is expected to
improve margins.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
2 5
Directors’ report: Business review
Our people
In a business that operates from local to global,
Glanbia’s people strategy provides a common approach
and a clear framework to develop people and deliver the
Group’s growth strategy.
Our people strategy has two core
elements – sustained succession
management and effective Human
Resources (HR) organisation and systems.
The emphasis is on maximising the
contribution of people to the overall
business, in an empowering, positive and
safe working environment.
Sustained succession management
This focuses on ensuring that Glanbia
has the right people and skills in place to
deliver its growth and strategic objectives.
Phase I of the sustained succession
management programme focuses
on strong performance and career
management through building and
rolling out a consistent process for
annual performance and development
potential assessment. Detailed action
plans are agreed from these reviews.
High performers, depending on
their roles and experience, have the
opportunity to participate in Glanbia’s
Senior Leadership Programme (SLP) or
the Group Management Development
Programme (GMDP).
Both are customised programmes,
with the SLP focusing on the strategic
challenges facing the Group and its key
operating divisions. The GMDP provides
learning, support and awareness to high
performing managers of what is required
to be successful at the next level. It
focuses on the skills required to become
a business leader and strategic partner
in the business. Both programmes also
crucially provide an invaluable forum
for collaboration and sharing of ideas
among managers across the Group. The
overall goal is for people to become more
effective in their roles and to increase
their contribution to Glanbia.
Phase II concentrates on strengthening
the Group’s development programmes
to include coaching/mentoring, peer
and colleague reviews, individual
stretch objectives and the opportunity
to participate in key projects, which are
independent from day-to-day activities.
Another pillar of sustained succession
management is Glanbia’s Graduate
Programme (GP). This is designed to
hire and develop ‘the managers of the
future’ and is a two-year programme that
offers graduates the chance to work in
three or four business units, in a number
of different countries. In essence, their
career journey starts here and they have
the prospect of refining and honing
their academic skills in key disciplines
such as science, finance, marketing,
and engineering. Such is the success of
this programme that each year Glanbia
receives in excess of 600 applications for
10 places on the GP.
Effective HR organisation and systems
Group HR’s remit is to deal with cross
business unit issues and HR issues that
have group-wide implications. It is also
involved in setting Group HR strategy
policy and in managing the performance
and development programme for
Glanbia’s senior managers.
Other key responsibilities include the
Group’s health and safety forum. Across
Glanbia, there are HR managers in
business units who interact with Group
HR to ensure a unified and consistent
approach to key Group HR policies
and programmes.
A significant part of creating an effective
HR organisation and systems is ‘Project
Perform’ which is ongoing since May
2008. This is being rolled out from
the end of quarter one of 2009, for all
salaried staff. This is a SAP-based HR
system with key workflows embedded
26
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
to deal with all aspects of an employee’s
life-cycle, such as compensation and
benefits, performance management and
development, leave and absenteeism.
The objective is to empower HR and
business unit managers through providing
real time information, measuring key
HR performance indicators and linking
individual performance directly to
Group performance.
Glanbia’s people strategy is
based on a simple proposition.
The Group gives an individual
opportunity, development
and reward for performance.
This is ‘our investment in
you’. In return Glanbia gets
accountability, delivery and
commitment, which is ‘your
investment in us’.
Daragh Maccabee
Vice President & Chief Financial Officer
Food Ingredients USA
In the 10 years since joining Glanbia from the Coca-Cola business in Siberia,
I have held positions as Financial Controller of Consumer Foods and Group
Financial Controller before moving to head up the finance function of
the Group’s US cheese operations based in Idaho. My Glanbia career has
been one of many challenges and rewarding opportunities. My personal
development has been further enhanced during 2008 through participation
in the Glanbia Senior Leadership Programme.
Michelle Naughton
Quality Assurance Team Lead
Southwest Cheese USA
I joined Glanbia on the Graduate Programme in 2004 and after six months
in Ireland, I got the opportunity to move to Idaho. I spent five months there
between the three Glanbia production facilities. Then I had the opportunity
to be part of the start-up at Southwest Cheese in New Mexico which
has been a great learning experience. During the last year I became the
Environmental Manager here and also took part in the Glanbia Management
Development Programme which was a great opportunity to meet with
co-workers from other divisions. I am now the Quality Assurance Team Lead
and appreciate the wealth of opportunities that has been offered to me in
the short time since I started with Glanbia.
Joseph Collum
Marketing Director
Consumer Foods Ireland
Given the dynamic market environment and the challenges and
opportunities that this presents for the Consumer Foods business, the
company places a strong emphasis on performance development. I recently
participated in the Senior Leadership Programme and found the content
and sharing of experiences with fellow senior managers across the Group
to be informative and helpful. I am applying new thinking on growth and
innovation to our business and expect this to improve our ability to compete
in the months and years ahead.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
2 7
Directors’ report: Business review
Our people (continued)
28
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Loren Ward
Director of Research and Development
Nutritionals USA
I joined Glanbia in 1998 after completing a PhD in Nutrition and
Food Science at the University of Minnesota. Glanbia has provided
opportunities for me to develop my professional career and manage
the development of innovative, science-based nutritional solutions for
global applications. In 2006, I enjoyed attending Glanbia’s Management
Development Programme at the Irish Management Institute in Dublin.
Ivy Xiang
Commercial Manager
Nutritionals China
I studied in Massey University in New Zealand for a Masters in Dairy Science
and Technology and later completed an M.Sc Food Science at the Wuxi
Institute in China. I joined Glanbia three years ago and as Commercial Sales
Manager for China I am now responsible for the sale of both dairy ingredients
and vitamin and mineral premix. I am glad to have taken every opportunity
to advance my career at Glanbia and in 2008 I enjoyed particular success
promoting the sales of Glanbia’s Trucal® milk mineral product in China.
Michael O’Leary
Human Resources Manager
Agribusiness Ireland
Having graduated from University of Limerick with an honours degree in
Business Studies, I joined the Glanbia Graduate Programme in November
1997. During my 11 years with the company I have had the opportunity to work
in a variety of HR roles in Group IT, Consumer Foods and Agribusiness. My
development has been supported by participation in the Glanbia Management
Development Programme and my recent role as HR lead of Project Perform.
Our responsibilities
At the heart of Glanbia’s CSR is the Group’s commitment
to the sustainable development of our business and to
making a positive contribution to our local communities.
CSR is increasingly seen as a crucial
element of any business. Consumers
want to shop more in line with their
personal values, as well as getting more
value for money while still purchasing
safe, nutritious and healthy foods.
Sustainability is high on the global
agenda as the world strives not to
exhaust natural resources or cause severe
ecological damage. Companies recognise
that they can make a significant social
contribution, on top of their economic
and environmental impact, by engaging
and working with their local communities.
Governance and risk management
A cornerstone of managing our business
responsibility is a strong commitment by
Glanbia’s Board and management to all
aspects of good corporate governance
and risk management. The Board has
overall responsibility for the stewardship of
the Group including annual and strategic
business plans, capital expenditure
programmes, acquisitions and disposals
together with dividend, treasury and
risk management policies. The Board
comprises 21 members including
a Non-executive Chairman, Senior
Independent Director and three Executive
Directors. Further information on the
Board, Directors’ statement of corporate
governance and information on risk
management are contained in pages
38, 36 and 45 respectively.
The environment
We are committed to continuous
environmental improvement at all of
our operations. The Energy Star
Programme, sponsored by the US
Environmental Protection Agency and the
Department of Energy, is a national call to
action to improve the energy efficiency of
America’s commercial and industrial sectors
by 10% or more. In 2008, our businesses
in the USA were formally accepted for
membership of this programme, which is a
strong statement of intent on their part to
reducing their carbon footprint.
Waste water which is a by-product of milk processing is polished, stored and reused in plant boilers in Gooding.
In Ireland, there is a carbon reduction
programme for Irish processing facilities,
with dedicated resources in place.
Food Ingredients Ireland appointed
a Carbon Footprint and Sustainability
Manager in 2008, to complement a fulltime
engineer focusing on energy efficiencies
in what is a very energy intensive business.
This business is working closely with the
Government through the policy formulation
phase on global warming initiatives in
order to balance the future potential
growth of the industry with the emissions
reduction programme. This is in addition to
ISO14001 accreditation for environmental
management systems and IS393
accreditation for energy management.
Other key environment initiatives include an
active recycling programme with over
12 tonnes of paper recycled during the year,
together with 33 tonnes of cardboard,
7 tonnes of plastic, 51 tonnes of timber and
420 tonnes of stainless and mild steel.
Sustainability
The barrel cheese and whey plant in
Gooding, Idaho, is the world’s largest
barrel cheese facility, with a total
processing capacity of over four million
litres of milk daily, producing 4.5 million
litres of raw whey per day and
149,000 tonnes of cheese annually.
Despite the sheer scale of the Gooding
plant, its manufacturing operations are
almost water-neutral as the operations
team get the most out of precious
water resources. Waste water, which is
a bi-product of processing, is polished
and stored in silos. 1.4 million litres of
this water is used in plant boilers with
other waste water reprocessed in an
anaerobic treatment plant. The gas
generated in this activity is used to heat
water for cleaning at the plant and the
treated water is used to irrigate corn
and alfalfa grown on the 1,200 acres
surrounding the plant.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
2 9
Directors’ report: Business review
Our responsibilities (continued)
Barretstown Camp.
Shriner’s Hospital for Children.
These crops are fed to suppliers cows,
whose milk is then sent to the plant to
start the cycle again. That is the essence
of sustainability and it’s good economics.
panels in both counties. Kilkenny’s
famous black-and-amber jerseys carry
the ‘Avonmore’ logo while in 2008, the
Waterford jerseys sported the ‘Yop’ brand.
Other efficiency measures at Gooding
include enhanced receiving bays which
reduced the number of bays from six to
four while allowing 31,000 litres of milk
to be uploaded in 12 minutes, 24/7. Milk
hauliers are using new, lighter tanker
trucks, delivering better mileage, reduced
energy consumption and lower costs.
Corporate giving and volunteerism
In Ireland Glanbia continued its support
for the GAA which represents strong
community values and actively promotes
health and fitness with the sponsorship
of the Kilkenny and Waterford senior
hurling teams in the provincial and All
Ireland championships as well as the
National Hurling League. Glanbia has
been a long-term sponsor of the senior,
intermediate, under 21 and minor hurling
The Group continues its 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.
As part of our CSR initiatives, we select
a local charity and make a multi-year
commitment to not only fund a need but
provide employee volunteers to serve that
charity. In 2008, Glanbia selected two new
charities to work with.
In Ireland, the Group choose Barretstown.
This is a specially designed camp, providing
a programme of adventure, activities and
fun, which helps children with serious
illness, such as childhood cancer, to regain
their confidence and self-esteem through
We pride ourselves in being
a local company and we
try to be a good corporate
citizen and give back to the
communities where we have
a presence.
therapeutic recreation. This initiative has
a consumer dimension through its direct
association with Consumer Foods and the
Avonmore brand. This is about increasing
awareness for Barretstown to help capture
the benefits of mutual social responsibility,
where consumers are increasingly using
their brand choices to support ethical or
social issues and as a means to get more
involved and participate in these causes.
Apart from the corporate and Consumer
Foods business financial commitments,
eight champions have been appointed
around the Group to raise employee
awareness and support their fundraising
efforts. Collectively, these are targeting a
30
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
In recognition of the importance of CSR to us, Glanbia is
undertaking a review of CSR and EHS (Environment, Health
and Safety) around the Group during 2009, with the aim
of formalising key group-wide policies, and promoting
continuous improvement in all our standards and practices.
Despite the sheer scale
of the Gooding plant, its
manufacturing operations are
almost water-neutral as the
operations team get the most
out of precious water resources.
The combined heat and power plant at Ballyragget.
contribution of approximately €1 million
over a three year period from 2008.
Ultimately for Consumer Foods and Glanbia
the goal is to make a meaningful and
measurable contribution to Barretstown.
Food Ingredients USA and Nutritionals
have partnered with Shriners Hospital for
Children in Salt Lake City, for the period
2008 and 2009. Shriners Hospitals for
Children is a network of 22 paediatric
hospitals in the USA, Canada and Mexico.
They specialise in providing care for
children under 18 with orthopaedic
conditions, burns, spinal injuries and cleft
lip and palate. All services are provided
free of charge. The Glanbia donation,
of US$35,000 in 2008, is being used to
upgrade the parent lounge and laundry
facilities, followed by parent bedrooms.
Similar to Ireland, a group of employee
champions in the USA will promote
and support employee fundraising to
complement corporate giving.
As one of the largest employers in the
Magic Valley region of south-central
Idaho, Glanbia is regarded as one of the
top employers in terms of opportunity,
development and reward. The Group
also has a good reputation as a generous
benefactor having made pledges of over
US$226,000 to various charities and public
institutions in 2008 alone. The highlight of
the year was the Glanbia Charity Challenge
golf tournament, which has been one of
the largest fundraisers in Magic Valley since
its inception in 1994. Set at the bottom of
the Snake River canyon at the beautiful
Blue Lakes Country Club, the Glanbia
Charity Challenge has raised a total of
US$883,000 and benefited 36 local charities
since it began.
Strong health and safety performance
Overall this has been a good year for the
advancement of Health and Safety (H&S)
and legal compliance. Steady progress has
been made in audit scores and in the further
integration of H&S and risk management
processes across all businesses.
Glanbia continues to invest in improving
both the plant infrastructure through
capital investment and the management
of H&S compliance through investment in
H&S personnel and training. During 2008,
993 employees received approx 6,800 days
of H&S training.
Social performance
Glanbia is committed to developing and
nurturing internal talent. This will help
ensure that the Group has the people,
capabilities and skills in place needed
to support the continued growth and
internationalisation of Glanbia. For more
information on our social performance
please refer to the dedicated ‘Our people’
section of this report on pages 26 to 28.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
3 1
Directors’ report: Business review
Finance review
Glanbia delivered a good set of results in 2008 and the
Group’s key annual financial targets set out in our 2007 to
2009 Strategic Roadmap were comfortably achieved or
exceeded. This positions us well for a challenging 2009.
Geoff Meagher
2008 Highlights
• Operating margin pre exceptional
up 80 basis points;
• Profit before tax pre exceptional
up 20.8%;
• Adjusted earnings per share up 18.5%,
following a 26.6% increase in 2007;
• Good cash generation and robust
debt ratios;
• 2008 EBITDA / net financing cost cover
at 7.9 times;
• EBIT to net financing cost cover at
6.4 times; and
• Net debt/EBITDA ratio at 2.7 times.
Summary
Revenue grew 1.0% to €2,232.2 million
(2007: €2,206.6 million). Revenue
growth was positive across almost all
the business, with favourable pricing
32
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
and good organic volume increases,
particularly in Food Ingredients USA
and Nutritionals. Revenue growth was
offset by the sale of the Group’s Pigmeat
business in March 2008 and the effect
of currency translation. Like-for-like
revenue grew 8.9%. Operating profit pre
exceptional increased 15.7% to
€134.1 million (2007: €115.8 million).
Operating margin pre exceptional
increased 80 basis points to 6.0%
(2007: 5.2%). All businesses in the
Group increased margins in 2008 with
the exception of Food Ingredients
Ireland where the decline in global
dairy markets resulted in a significant
imbalance between market returns and
raw material input costs.
Profit before tax pre exceptional grew
20.8% in the year to €120.3 million
(2007: €99.5 million) driven by the first time
contribution of Optimum and good organic
growth in all business segments except
Food Ingredients Ireland. Like-for-like profit
before tax pre exceptional grew 21.4%.
Net financing costs
Financing costs increased €3.8 million
to €21.1 million (2007: €17.3 million)
due mainly to the financing cost
associated with the acquisition of
Optimum. EBIT to net financing cost
cover was 6.4 times in 2008 compared
to 6.7 times in 2007. EBITDA to net
financing cost cover was 7.9 times
compared to 8.6 times in 2007.
Operating margin pre exceptional
Adjusted earnings per share
+80
basis
points
+18.5%
Table 1: Summary income statement
Revenue
Operating profit pre exceptional
Operating margin pre exceptional
Net financing costs
Share of results of Joint Ventures & Associates
Profit before tax pre exceptional
Taxation pre exceptional
Profit after tax pre exceptional
Exceptional items
Earnings per share
Adjusted earnings per share1
Dividend per share in respect of the full year
1: Before exceptional items and amortisation of intangibles (net of related tax)
2008
€2,232.2m
€134.1m
6.0%
(€21.1m)
€7.3m
€120.3m
(€21.5m)
€98.7m
(€19.4m)
26.76c
35.86c
6.51c
2007
€2,206.6m
€115.8m
5.2%
(€17.3m)
€1.0m
€99.5m
(€16.4m)
€83.1m
(€22.8m)
20.42c
30.25c
6.08c
Change
Up 1.0%
Up 15.7%
Up 80 bps
Up €3.8m
Up €6.3m
Up 20.8%
Up €5.1m
Up 18.8%
Down €3.4m
Up 31.0%
Up 18.5%
Up 7.1%
In 2008, the average interest rate for
the Group reduced by approximately
70 basis points to 5.1% primarily due
to lower US dollar rates. The Group
operates a policy of fixing a significant
amount of its interest exposure with
approximately 80% of the Group’s
net debt currently contracted at fixed
interest rates for 2009 and approximately
70% contracted at fixed rates for 2010.
Joint Ventures & Associates
Glanbia’s share of revenue from Joint
Ventures & Associates increased 4.9%
to €370.3 million (2007: €353.0 million)
with strong growth in Southwest Cheese.
Glanbia’s share of profits post interest and
tax grew strongly in 2008 to €7.3 million
(2007: €1.0 million). Both Southwest
Cheese and Glanbia Cheese improved
profitability and margins. Nutricima,
the Group’s Nigerian joint venture,
consolidated its market position in 2008
but it was not possible in a developing
economy to pass on all of the increases in
raw material costs and as a result profits
and margins were below 2007.
Taxation
The 2008 pre exceptional tax charge
increased €5.1 million to €21.5 million
(2007: €16.4 million), reflecting growth in
international profits, which attract higher tax
rates. The effective tax rate for the Group,
excluding Joint Ventures & Associates, was
19.1% in 2008 (2007: 16.7%).
Exceptional items
In 2008, Glanbia initiated a
rationalisation programme costing
€14.5 million. This is as a result of an
imperative to remain cost competitive,
particularly in relation to the effect the
global economic downturn is having on
consumer demand. This programme is
mainly focused on the Consumer Foods,
Agribusiness and Food Ingredients
Ireland businesses and associated costs
relate primarily to redundancy.
An exceptional charge of €3.9 million
was incurred on finalising the Group’s exit
from its Pigmeat business announced in
March 2008. A deferred taxation charge of
€1.0 million arose in Glanbia Cheese due
to a change in UK taxation legislation.
Total exceptional costs for 2008
amounted to €19.4 million
(2007: €22.8 million). Exceptional costs
in 2007 arose due to a provision for the
exit from Pigmeat and restructuring costs
incurred in Consumer Foods.
Earnings per share
Earnings per share increased 31.0% to
26.8 cents (2007: 20.4 cents) due to higher
profits and lower exceptional costs,
relative to 2007. Adjusted earnings per
share increased 18.5% to 35.86 cents
(2007: 30.25 cents).
Dividends
The Board is recommending a final
dividend of 3.76 cents per share
(2007: final dividend 3.58 cents per share),
an increase of 5.0%. This brings the total
dividend for the year to 6.51 cents per share
(2007: 6.08 cents per share), representing a
total increase of 7.1% for the year.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
3 3
Directors’ report: Business review
Finance review (continued)
Glanbia will concentrate on the opportunities for
organic growth that exist within the current business,
as a prudent and conservative approach to reduce
capital and operating spend is consistent with the
challenging external environment.
Table 2: Divisional results pre exceptional
International
Ireland
Total
Joint Ventures & Associates
Revenue
€’m
1,489.2
743.0
2,232.2
370.3
2008
Operating
profit
€’m
82.5
51.5
Operating
margin
%
5.5%
6.9%
Revenue
€’m
1,403.2
803.4
2007
Operating
profit
€’m
85.2
30.6
134.1
17.0
6.0%
4.6%
2,206.6
353.0
115.8
5.9
Group total
2,602.5
151.1
5.8%
2,559.6
121.7
Operating
margin
%
6.1%
3.8%
5.2%
1.7%
4.8%
2008 Divisional results
International activities include Food
Ingredients, in Ireland and the USA,
and the Group’s global Nutritionals
business. Food Ingredients Ireland is
included in international activities as
the majority of its products are sold to
international customers.
The Ireland division includes Consumer
Foods and Agribusiness & Property.
Joint Ventures & Associates includes the
Group’s three key strategic joint ventures,
which are Southwest Cheese, Glanbia
Cheese and Nutricima.
Segmental analysis is contained in
Table 2 above and further more detailed
information on divisional results is in the
operations reviews commencing
on page 14.
Development expenditure
In August 2008 the Group completed
the acquisition of Optimum for a total
consideration of €217.9 million
(US$323.0 million). This was funded from
the Group’s existing bank facilities.
During the year Glanbia continued its
strategic capital investment programme
with €63.4 million expenditure focused
mainly on Food Ingredients and
Nutritionals. In the two-year period since
2007, the Group has invested a total
of €351.0 million on acquisitions and
development capital expenditure.
34
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Cash flow
Net debt increased €231.9 million in the
year to €452.1 million (2007: €220.2 million)
primarily due to the acquisition of Optimum.
• That consolidated net bank borrowings
shall not exceed four times EBITDA on
any other day of the financial year; and
• That consolidated EBIT shall not be
The Group generated good free
cash flow of €72.4 million in 2008,
(2007: €53.1 million). A summary 2008
cash flow is contained in Table 3 on
page 35. Free cash flow is after charging
business sustaining capital expenditure
and before acquisition costs, strategic
capital expenditure and the payment of
equity dividends.
Financing and financial flexibility
The Group has total debt facilities of
€661.5 million - bank facilities of
€598.0 million and €63.5 million
cumulative redeemable preference
shares. Bank facilities are held with nine
banks under bilateral arrangements with
common documentation and terms.
€30.0 million of the facilities are
renewable in December 2009,
€158 million in July 2012 and €410 million
in July 2013. The cumulative redeemable
preference shares mature in July 2014.
Glanbia manages its bank debt position
within a number of financial covenants.
The key covenants are:
• That consolidated net bank borrowings
shall not exceed three times EBITDA
on the last day in any financial year;
less than 3.5 times of consolidated net
borrowing costs in any financial year.
Group Treasury monitors compliance with
all financial covenants and recent trends
in these ratios are outlined in Table 4.
For financial prudence Glanbia sets more
stringent internal net debt to EBITDA
targets to recognise that the Group’s net
debt is subject to seasonal fluctuations
and as a result average debt can be up
to 30% above year-end debt levels.
In light of the above, the Directors of
Glanbia have a reasonable expectation
that the Group has adequate resources
to operate for the foreseeable future.
Therefore they continue to adopt the
going concern basis in the preparation
of this Annual Report.
Balance sheet
The equity of the Group decreased
€6.7 million to €227.9 million at the
end of the year (2007: €234.6 million).
Retained earnings in 2008 decreased
€1.5 million as retained profits of
€78.4 million were offset by adverse
reserve movements due to the increase
in the pension deficit.
Pension deficit
Glanbia operates defined contribution
and defined benefit pension schemes
in Ireland and the UK and defined
contribution schemes in the USA and
other international locations. The deficit
in the Group’s defined benefit pension
schemes increased at the year-end by
€50.2 million to €164.4 million
(2007: €114.2 million). The deficit on the
Irish schemes at year-end amounted to
€142.2 million and €22.2 million related
to UK schemes. This total deficit was
adversely impacted in the year by a
negative return on pension fund assets
and an enhancement in the actuarial
assumptions used in the calculation of
the pension liabilities. A review of the
funding deficit of the Irish schemes is
currently underway as the 10-year funding
proposal submitted to the Irish Pensions
Board is not currently on track due to
low investment returns in 2008. The
Group operates defined benefit pension
schemes in the UK that relate to UK liquid
milk businesses which were disposed of
in 1999. Funding is in place to fund the
deficit of the UK pension schemes over
a 10-year period.
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’s
approach is to centrally manage these
risks against comprehensive policy
guidelines. The Board agrees and
regularly reviews these guidelines and
more detailed information on financial
risk is contained in Note 3.1 ‘Financial
risk factors’ in the notes to the financial
statements and in the risk section on
pages 36 to 37 in this report.
Table 3: Summary cash flow
EBITDA pre exceptional
Working capital movement
Net interest and taxation paid
Additional pension contributions
Business sustaining capital investment
Other
Free cashflow
Acquisitions
Disposals
Strategic capital expenditure
Equity dividends
Currency exchange/fair value adjustments
Net (increase)/decrease in debt during the year
Net debt at beginning of the year
Net debt at end of the year
2008
€’m
167.6
0.5
(49.7)
(14.0)
(23.6)
(8.4)
72.4
(229.4)
22.2
(63.4)
(18.5)
(15.2)
(231.9)
(220.2)
(452.1)
2007
€’m
149.2
(39.1)
(20.0)
(11.0)
(20.8)
(5.2)
53.1
(19.7)
18.4
(38.5)
(17.3)
8.2
4.2
(224.4)
(220.2)
Table 4: Net finance cost ratios
Net debt : EBITDA (times)
EBITDA : Net finance cost (times)
EBIT: Net finance cost (times)
Investor relations
Glanbia operates an active domestic
and international Investor Relations and
Financial Media Relations Programme
each year. Glanbia plc is a subsidiary of
Glanbia Co-operative Society Limited, an
Irish industrial and provident society, which
owns 54.6% of the Company.
The remaining 45.4% free float is well
balanced between institutional and retail
investor ownership and between domestic
and international institutional ownership.
In 2008, management met with over 190
existing and potential investors.
Farewell
This will be my last finance review as I am
retiring from Glanbia on 30 June 2009.
I would like to take this opportunity to
express my thanks to John Moloney
and all the team at Glanbia. It has been
a wonderful privilege to work with a
great group of people and I wish them
continued success in the future.
2008
2.7
7.9
6.4
2007
1.5
8.6
6.7
2006
2.0
8.1
6.1
2005
2.1
8.2
6.2
Conclusion
Glanbia delivered a strong set of results in
2008 and the Group is well positioned for
a challenging 2009. Glanbia has prioritised
debt reduction for 2009, recognising the
significant investment made in recent years
and the current turmoil in global credit
markets. The Group will concentrate on the
opportunities for organic growth that exist
within the current business, as a prudent
and conservative approach to reduce
capital and operating spend is consistent
with the challenging external environment.
Geoff Meagher
Deputy Group Managing Director
Group Finance Director
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
3 5
Directors’ report: Business review
Risk and risk management
The management of risk is central to achieving Glanbia’s strategic and financial
objectives that are set out on page 6 to 7 of this report. The Board of Glanbia is
responsible for the Group’s risk management systems, which are designed to manage
and mitigate the risk of failure to achieve strategic and business objectives.
Strategic risks
Impact
Mitigation
Global economic
downturn and dairy
market volatility
Demand for the Group’s products could
be curtailed, which when coupled with
dairy market volatility represents a very
material risk to the operating performance
and financial stability of the Group.
The Group maintains a balanced spread of businesses and
continues to diversify its earnings base to reduce volatility in
financial performance. In 2008, 71% of Group revenue and
65% of Group operating profit pre exceptional was generated
from the International Division. The Group also continues to
streamline its cost base to ensure it remains competitive. In
2008, Glanbia initiated a rationalisation programme costing
€14.5 million, focused on Consumer Foods, Agribusiness and
Food Ingredients Ireland.
Financing and
liquidity constraints,
associated with
current credit markets
Lack of financial capacity could affect the
Group’s ability to conduct its business
and maintain
investment
programmes, dividend payments and
debt service commitments.
capital
The Group closely monitors and manages its cash flow, with
regular forecasting. Glanbia has in place total debt facilities
of €661.5 million with a weighted average maturity of 4.2
years. The Group manages its bank debt position within a
number of financial covenants that are closely monitored for
compliance by Group Treasury. Strong banking relationships
are maintained through regular meetings and updates.
Inability to leverage
the Group’s significant
recent investment in
acquisitions
There is a risk to the business if the
Group is unable to deliver significant
organic growth from recent acquisitions
and fully integrate the operations of the
acquired businesses.
Recruitment and
retention
The ongoing success of the Group is
dependent on attracting and retaining
high quality management and staff
throughout the business.
Increasing
competition
Significant product innovations, technical
advances or the
intensification of
competition could adversely affect
the Group.
The Group’s management team has significant experience
in the areas of pre acquisition due diligence and post
acquisition integration. Specific information on Nutritionals
growth strategy is outlined on page 16 of this report. For 2009,
Glanbia will concentrate on organic growth opportunities
within the existing business, adopting a conservative
approach to further acquisitive growth in the context of the
challenging external environment.
The Group mitigates any risk associated with loss of key
personnel through sustained succession management,
strong recruitment processes, long-term incentives and
retention initiatives. Glanbia also operates management
development programmes to ensure there is a continuous
pipeline of talent within the Group to support the ongoing
growth and development of the business. Further information
is contained in the Our people section on pages 26 to 28.
The Group invests in research and development and ensures
that the introduction of new products and product formats
and improved production processes positions the Group well
in its chosen markets. Glanbia has Innovation Centres located
in Ireland and the USA as well as associations with a number of
research programmes at third level institutions.
Financial risks
Impact
Mitigation
Financial and
taxation risk
The conduct of ordinary business
the holding
operations necessitates
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’s approach is to centrally manage financial and
taxation 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. Group corporate
taxation planning and compliance is managed centrally.
36
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Across the business, there is an ongoing process in place for identifying, assessing,
managing, monitoring and reporting on the significant risks faced by individual business
units and by the Group as a whole. This process has been in place for the year under
review and up to and including the date of approval of the 2008 Annual Report.
Operational risk
Impact
Mitigation
Food safety
legislation and
regulation
Supply chain
Glanbia must maintain
the highest
standards of food safety in the interest of
the health and well being of its consumers
and sustaining
reputation
as a leading international cheese and
nutritional ingredients group.
its strong
Group operations in processing, distribution, packaging
and labelling of food are governed by extensive legislation,
regulation, codes of practice and guidance. The Group
conforms fully to international and local food safety, quality and
environmental regulations and employs best practice across all
of its production facilities to maintain the highest standards.
The Group’s ability to fulfill the demand for
its products is dependent on an efficient
supply chain. Glanbia also needs to
ensure that its own suppliers comply with
the highest health and safety standards.
The Group mitigates supply chain risk by maintaining a
broad supplier base and the Group is committed to ensuring
that suppliers continue to choose Glanbia as their partner of
choice. All of the Group’s key sites operate quality control
assessments on products supplied to ensure world-class
quality and food safety targets are maintained throughout
the supply chain.
Health and safety
Ensuring the safety, health and welfare of
employees, visitors to Glanbia operations,
surrounding communities and the public.
Environment
is subject to strict and
The Group
developing environmental
laws and
regulations which could result in an increase
in the cost of achieving compliance that
might impact the Group’s operational or
financial performance.
Loss of a major site
The loss or significant destruction of any
one of the Group’s key sites would present
significant operational and financial
difficulties for Glanbia.
Processes and policies have been put in place throughout
the Group to ensure that workplace conditions, practices and
procedures are maintained to high levels of safety in line with
relevant safety, health and welfare legislation. An independent
risk manager carries out an annual risk management audit for
all the Group’s main locations in accordance with the Glanbia
risk management system and this incorporates a separately
reported health and safety audit.
together with a commitment
The inclusion of environmental and sustainability objectives
and risk management as part of the Group’s overall business
to continuous
strategy,
improvement ensures that Glanbia is ahead of evolving
environmental standards. The ‘Our responsibilities’ section
of this report starting on page 29 outlines a number of key
initiatives from around the Group which demonstrate the
Group’s commitment and investment in energy efficiency,
carbon reduction, recycling and emissions programmes.
The Group’s operations have business continuity and
communication plans in place to manage the impact of
the loss of a major site. The Group also monitors overall
safety and loss prevention performance through its risk
management system to assist operational management
responsible for the day-to-day management of business risk.
An insurance cover programme is in place for all significant
insurable risks and major catastrophes to mitigate the
financial consequences.
External risks
Impact
Mitigation
Energy costs
Large scale processing
intensive operation.
is an energy
Energy efficiency programmes are operated across all
sites and the Group was the first dairy processor in the
world to be accredited with the IS393 Energy Management
Standard at its processing site in Ballyragget, Co. Kilkenny.
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.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
3 7
Directors’ report: Corporate governance
Board of Directors
The Directors of Glanbia 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 shareholders.
Chairman
Executive Directors
Liam Herlihy1 (aged 57) is Chairman of Glanbia plc. He was appointed to the Board in 1997, as Vice-Chairman of the Group
in 2001 and Chairman in May 2008. He is also Chairman of Glanbia Co-operative Society Limited and a director of the Irish
Co-operative Organisation Society Limited. He completed the Institute of Directors Development Programme (2006) and holds
a certifi cate of merit in Corporate Governance from University College Dublin. He farms at Headborough, Knockanore, Tallow,
Co. Waterford.
John Moloney B.Agr.Sc., MBA, (aged 54) 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 Food Ingredients
and Agribusiness. He was appointed Deputy Group Managing Director in 2000 and assumed the responsibilities of Chief
Operating Offi cer in 2001. Prior to joining the Group he 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, DCC plc and a Council Member of the Irish
Business and Employers Confederation.
Geoff Meagher CPA, (aged 59) joined the Board as Group Finance Director in 1993 and was appointed Deputy Group
Managing Director in 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. Geoff has resigned
from his executive roles and from the Board with effect from 30 June 2009.
Kevin Toland FCMA, (aged 43) 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.
Secretary
Michael Horan B. Comm, FCA
Board Committees
Audit
Committee
J Callaghan - Chairman,
H Corbally,
J Fitzgerald, P Haran,
L Herlihy, J Liston,
V Quinlan
Remuneration
Committee
J Liston - Chairman,
J Callaghan, P Haran,
L Herlihy, V Quinlan,
J Fitzgerald
Nomination
Committee
L Herlihy - Chairman,
J Callaghan,
P Haran, J Liston
38
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Non-executive Directors
John Fitzgerald1 (aged 53) is Vice-Chairman
of Glanbia plc. He was fi rst appointed to the
Board in 1997 and was appointed Vice-Chairman
in May 2008. He farms at Ross, Kilmeaden,
Co. Waterford.
John Callaghan FCA, FIB, (aged 66) was
appointed to the Board in 1998 and is the
Senior Independent Director. He is a director
of ACC Bank plc and Rabobank Ireland plc.
He was formerly Managing Partner of KPMG
(Ireland), Chief Executive of Fyffes plc and
Chairman of First Active plc.
Nicholas Dunphy, (aged 48) was appointed
to the Board in 2007. He farms at Grawn,
Kilmacthomas, Co. Waterford.
James Gilsenan1 (aged 49) was appointed
to the Board in 1999. He farms at Drogheda
Road, Collon, Co. Louth.
Paul Haran (aged 51) 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 Smurfi t Graduate
School of Business and holds a number of
other directorships.
Martin Keane (aged 53) was appointed
to the Board in 2006. He is a director of
Donaghmore Famine Work House and
Agricultural Museum Co-operative Society
Limited. He farms at Errill, Portlaoise, Co. Laois.
Matthew Merrick (aged 57) was appointed
to the Board in 2005. He is Chairman of the
Offaly County Enterprise Board and a board
member of IFAC Accountants. He farms at
Shean, Edenderry, Co. Offaly.
Anthony O’Connor (aged 57) was
appointed to the Board in May 2008.
He farms at Ballymacsimon, Kilmuckridge,
Gorey, Co. Wexford.
Robert Prendergast (aged 47) was
appointed to the Board in May 2008. He farms
at Jeanville, Goresbridge, Co. Kilkenny.
Victor Quinlan1 B.Agr.Sc., (aged 63) is
Vice-Chairman of Glanbia plc. He was appointed
to the Board in 1996 and as Vice-Chairman in
2005. He is Chairman of Irish Co-operative Society
Limited and a director of Malting Company
of Ireland Limited. He farms at Baptistgrange,
Lisronagh, Clonmel, Co. Tipperary.
Henry Corbally1 (aged 54) 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.
Edward Fitzpatrick1 (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.
Patrick Gleeson (aged 47) 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.
Christopher Hill1 B.Agr.Sc., (aged 50) was
appointed to the Board in 2000. He is a director
of Wicklow Rural Partnership Limited and
Wicklow County Partnership and a member of
the Wicklow County Development Board. He
farms at Johnstown House, Arklow, Co. Wicklow.
Jerry Liston B.A., MBA, (aged 68) 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 Smurfi t
Graduate School of Business.
William Murphy B. Comm, (aged 63) retired
as Deputy Group Managing Director of Glanbia
plc in 2005. He was appointed to the Board
in 1989. He is a director of Aryzta plc and a
number of unlisted companies.
Michael Parsons (aged 59) was appointed to
the Board in 2000. 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.
1 Completed the University College Cork Diploma in Corporate Direction.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
3 9
Directors’ report: Corporate governance
Senior management
John Moloney
*
* Geoff Meagher 1
* Kevin Toland 2
Group Managing Director
Deputy Group Managing Director/Group Finance Director (retiring 30 June 2009)
CEO & President Glanbia USA & Nutritionals
Brian Phelan
Group HR & Operations Development Director
Siobhan Talbot
Group Finance Director Designate
International
Jim Bergin
CEO Glanbia Ingredients Ireland
Raimund Hoenes
COO Glanbia Nutritionals - Customised Solutions
Hugh McGuire
Optimum Nutrition, Inc.
Jerry O’Dea
CEO & President Glanbia Nutritionals - Ingredient Technologies
Jeff Williams
CEO & President Glanbia Foods Inc
Ireland
Colm Eustace
CEO Glanbia Agribusiness
Colin Gordon
CEO Consumer Foods Ireland
Ger Mullally
CEO Glanbia Estates
Joint Ventures & Associates
Mel Glentzes
CEO Nutricima
Frank Stephenson CEO President Southwest Cheese
Paul Vernon
CEO Glanbia Cheese
Member of the Glanbia Executive Committee, chaired by John Moloney which has overall
responsibility for overseeing the development and execution of Group strategy and achieving business results.
* Director of Glanbia plc
1 Responsibility for the Ireland division
2 Responsibility for the International division
40
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Directors’ report: Corporate governance
Report of the Directors
for the year ended 3 January 2009
Introduction
The Directors are pleased to present their report to shareholders
together with the audited financial statements for the year ended
3 January 2009.
Principal activities
Glanbia is an international dairy, consumer foods and nutritional
products group. It is principally engaged in the processing and
marketing of cheese, dairy-based food ingredient and nutritional
products; dairy-based consumer products; manufacture of animal
feedstuffs and trading in agricultural products.
Results and dividends
Revenue grew 1.0% to €2,232.2 million (2007: €2,206.6 million).
Revenue growth was positive across almost all the businesses,
with favourable pricing and good organic volume increases,
particularly in the International division. This positive revenue
growth was offset by a decline in revenue due to the sale of
the Group’s Pigmeat business in March 2008 and the effect of
currency translation. Like-for-like revenue grew 8.9%.
Operating profit pre exceptional increased 15.7% to
€134.1 million (2007: €115.8 million). The International division
was broadly in line with 2008, as a strong performance by Food
Ingredients USA and Nutritionals was offset by a difficult year
for Food Ingredients Ireland. The Ireland division delivered a
satisfactory result from Consumer Foods and Agribusiness &
Property. Joint Ventures & Associates had a good year with a
particularly strong performance from Southwest Cheese.
Operating margin pre exceptional increased 80 basis points to
6.0% (2007: 5.2%). All businesses in the Group increased margins
in 2008, with the exception of Food Ingredients Ireland where the
decline in global dairy markets resulted in a significant imbalance
between market returns and raw material input costs.
Profit before tax pre exceptional grew 20.8% in the year to
€120.3 million (2007: €99.5 million) driven by the first time
contribution of Optimum and good organic growth in all
businesses, except Food Ingredients Ireland. Like-for-like profit
before tax pre exceptional grew 21.4%.
In 2008, the Group initiated a rationalisation programme
costing €14.5 million. This is as a result of an imperative to
remain cost competitive, particularly in relation to the effect
the global economic downturn is having on consumer demand.
This programme is mainly focused in the Consumer Foods,
Agribusiness and Food Ingredients Ireland businesses and
associated costs relate primarily to redundancy. An exceptional
charge of €3.9 million was incurred in the year on finalising
the Group’s exit from its Pigmeat business and an exceptional
deferred taxation charge of €1.0 million arose in Glanbia
Cheese due to a change in UK taxation legislation. Total
exceptional costs for 2008 amounted to €19.4 million
(2007: €22.8 million). Exceptional costs in 2007 arose due to
a provision for the exit from Pigmeat and restructuring costs
incurred in Consumer Foods.
Earnings per share increased 31.0% to 26.76 cents per share
(2007: 20.42 cents per share) due to higher profits and lower
exceptional costs, relative to 2007. Adjusted earnings per
share increased 18.5% to 35.86 cents per share
(2007: 30.25 cents per share).
Net debt increased €231.9 million in the year to €452.1 million
(2007: €220.2 million), mainly as a result of the acquisition of
Optimum. The Group generated good free cash flow of €72.4
million in 2008 (2007: €53.1 million). Free cash flow is after
charging business sustaining capital expenditure and before
acquisition costs, strategic capital expenditure and the payment
of equity dividends. The Group has prioritised debt reduction
for 2009, recognising the significant investment made in recent
years and the current turmoil in global credit markets. Glanbia
will concentrate on the opportunities for organic growth that
exist within the current business, as a prudent and conservative
approach to reduce capital and operating spend that is
consistent with the challenging external environment.
An interim dividend of 2.75 cents per share on the ordinary
shares amounting to €8.1 million was paid to shareholders
on 1 October 2008. The Directors have recommended the
payment of a final dividend of 3.76 cents per share on the
ordinary shares which amounts to €11.0 million. Subject to
shareholders approval this dividend will be paid on 20 May 2009
to shareholders on the register of members as at 24 April 2009,
the record date.
Some key performance indicators are set out in the finance
review on pages 32 to 35. The financial statements for the year
ended 3 January 2009 are set out in detail on pages 53 to 116.
Business review
Glanbia is organised into two main geographic areas, International
and Ireland. The International division activities include Food
Ingredients Ireland and the USA and Nutritionals. Food Ingredients
Ireland is included in international activities as the majority of its
products are sold to international customers. The Ireland division
includes Consumer Foods and Agribusiness & Property. Joint
Ventures & Associates includes the Group’s three key strategic joint
ventures, which are Southwest Cheese in the USA, Glanbia Cheese
in the UK and Nutricima in Nigeria.
For the full year 2008, 71% of Group revenue and 65% of Group
operating profit pre exceptional were generated from the
International division, 29% of Group revenue and 35% of
Group operating profit pre exceptional was generated in the
Ireland division.
Results for the International division were adversely affected by
the performance of Food Ingredients Ireland. The decline in
global dairy commodity prices lowered margins in this business
as reductions in the price paid for milk lagged the decrease in
global dairy prices. Elsewhere in the International division, Food
Ingredients USA had a strong performance with high cheese
prices, good demand and very efficient production, generating
record revenues and positive margin expansion. Nutritionals
had a good year driven by strong organic volume growth,
buoyant value added whey markets and a continued good
performance from the premix business. Optimum made a first
time contribution in line with expectations.
In the Ireland division, Consumer Foods had a satisfactory year.
This compares with a very challenging 2007 when results were
affected by a time lag in recovering the impact of higher costs
in the marketplace. Agribusiness results were ahead of 2007 as a
result of a good performance in the feed and fertiliser segments
and a strong focus on cost reduction. Glanbia’s Property business
performed broadly in line with 2007.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
4 1
Directors’ report: Corporate governance
Report of the Directors (continued)
for the year ended 3 January 2009
Comprehensive reviews of the development, financial and
operating performance of the Group during 2008 are set out in
the Group Managing Director’s review on pages 10 to 13, the
separate operations reviews for each of the divisions on pages
14 to 25 and the finance review on pages 32 to 35. The treasury
policy and objectives of the Group are set out in Note 3.1 to the
financial statements.
Outlook
Glanbia performed well in 2008, delivering a good set of results,
completing a major strategic acquisition and achieving key
financial targets. All businesses, including Joint Ventures &
Associates, performed to or better than anticipated, with the
exception of Food Ingredients Ireland which suffered a sharp
decline in profits and margins in 2008.
2009 will be a tough year. Global dairy markets have weakened
considerably from previous high levels with the outlook for
2009 deteriorating further since the beginning of the year. Food
Ingredients Ireland will be the most challenged in this context
and we expect this business to breakeven this year. Food
Ingredients USA is expected to deliver a resilient performance,
albeit down when compared with a strong result in 2008.
Reducing farm incomes will have implications for farm input
sales and as a result for revenue and profits in Agribusiness.
Consumer Foods, Nutritionals and Joint Ventures & Associates
are expected to deliver robust performances.
Based on current market conditions, the Group now expects
2009 earnings to be in a range of low to mid single digit growth.
Glanbia is continuing to maximise organic growth opportunities
and aggressively manage costs to sustain the business through
the current challenging environment.
Board of Directors
Mr E Power and Mr M Walsh retired on 28 May 2008 and
Mr A O’Connor and Mr R Prendergast were appointed to the
Board on the same day. In accordance with the Articles of
Association of the Company, Mr A O’Connor and
Mr R Prendergast will retire at the 2009 Annual General Meeting
and, being eligible, offer themselves for re-appointment.
In accordance with the Articles of Association of the Company,
Mr H Corbally, Mr E Fitzpatrick, Mr J Gilsenan, Mr P Haran,
Mr L Herlihy, Mr J Liston, Mr M Merrick and Mr K Toland retire
from the Board by rotation and, being eligible, offer themselves
for re-appointment.
In accordance with the provisions of the 2006 Combined Code on
Corporate Governance of the Irish and London Stock Exchanges,
Mr J Callaghan, Mr W Murphy and Mr V Quinlan, being Directors
who have each served a period in excess of nine years on the
Board will retire at the 2009 Annual General Meeting and, being
eligible, offer themselves for re-appointment.
The Chairman of the Company is Mr L Herlihy. Mr Herlihy was
appointed as Chairman on 28 May 2008 following the retirement
of Mr M Walsh. The Company has two Vice-Chairmen,
Mr J Fitzgerald and Mr V Quinlan. Mr Fitzgerald was appointed
Vice-Chairman on 28 May 2008 in succession to Mr Herlihy.
Employees
The Group’s 4,300 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 focused environment and is
proud to be an employer of choice at its worldwide locations.
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.
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 3
January 2009 was 293,555,684 ordinary shares of €0.06 each, of
which 54.6% 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.
Options outstanding under the Company’s 2002 LTIP as at
3 January 2009 amounted to 2,258,000 ordinary shares (29
December 2007: 2,467,000) as set out hereunder. There were no
options outstanding under the Company’s 1988 Share Option
Scheme as at 3 January 2009 (29 December 2007: 325,000).
No of ordinary
Price range
Dates
shares
exercisable
2002 LTIP
2,258,000 €1.55 - €4.25
2009 – 2017
As at 3 January 2009 share awards had been granted under
the Company’s 2002 LTIP over 118,600 ordinary shares
(29 December 2007: 134,600).
As at 3 January 2009 share awards had been granted under
the Company’s 2007 LTIP over 169,500 ordinary shares
(29 December 2007: 183,500).
None of the Directors proposed for re-appointment has a service
contract with the Company.
As at 3 January 2009, share awards had been granted under
the Company’s 2008 LTIP over 583,000 ordinary shares
(29 December 2007: nil).
The Chairman wishes to confirm that, following the completion
of the performance evaluation process, all Directors proposed
for re-appointment continue to be effective and these Directors
continue to demonstrate commitment to their roles.
42
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Share trust
As detailed in Note 27 to the financial statements at 3 January
2009, 570,054 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 3 March 2009, the Company has been advised of the
following notifiable interests in its ordinary share capital:
Shareholder
No of ordinary
% of issued
shares
share capital
Glanbia Co-operative
Society Limited
160,277,308
54.6%
Authority to purchase own shares/Authority to allot relevant
securities
At the annual general meeting in 2008 the Company was
authorised by shareholders to purchase up to 10% of the
aggregate nominal value of the issued share capital of the
Company as at the close of business on 14 May 2008.
The Company allotted 209,000 ordinary shares during 2008.
As detailed in Note 27 to the financial statements at 3 January
2009, 570,054 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
381,510 shares, with 50,000 shares being issued.
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 45 to 52.
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.
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.
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.
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 54.6% of the issued 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 36 to 37
of the risk and risk management report.
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 2009 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.
Authority to allot relevant securities
Under the first item of special business, shareholders are being
asked to renew the Directors’ authority to allot relevant securities,
within the meaning of Section 20 of the Companies (Amendment)
Act, 1983, up to an aggregate nominal value of €746,658.96.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
4 3
Directors’ report: Corporate governance
Report of the Directors (continued)
for the year ended 3 January 2009
Disapplication of pre-emption rights, purchase of Company
shares and treasury shares
Under the second item of special business, shareholders are
being asked to renew the authority to disapply the strict statutory
pre-emption provisions in the event of a rights issue or any other
issue up to an aggregate amount of €746,658.96 in nominal
value of ordinary shares, representing 4.24% of the nominal
value of the Company’s issued ordinary share capital for the time
being. This authority will expire on the earlier of the close of
business on 12 August 2010 or the date of the Annual General
Meeting of the Company in 2010.
At the last annual general meeting of the Company shareholders
passed a resolution to give the Company, or any of its
subsidiaries, the authority to purchase up to 10% of its own
shares. This authority will expire on 13 May 2009. Under the
third item of special business, shareholders are being asked to
extend this authority until the earlier of the close of business on
12 August 2010 or the date of the Annual General Meeting of the
Company in 2010. While the Directors do not have any current
intention to exercise this power, this authority is being sought as
it is common practice for public companies.
Shareholders are also being asked under the fourth item of
special business to pass a resolution authorising the Company
to reissue such shares purchased by it and not cancelled as
treasury shares. Such purchases would be made only at price
levels which it considered to be in the best interests of the
shareholders generally, after taking into account the Company’s
overall financial position. Furthermore the authority being sought
from shareholders will provide that the minimum price which may
be paid for such shares shall not be less than the nominal value
of the shares and the maximum price will be 105% of the then
market price of such shares.
Statement of Directors’ responsibilities
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law
and regulations.
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 assets, liabilities and financial position of the
Company and the Group and of the profit 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; and
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 are also required by the Transparency (Directive
2004/109/EC) Regulations 2007 to include a management report
containing a fair review of the development and performance of
the business, the position of the Company and the Group and a
description of the principal risks and uncertainties facing the Group.
The Directors confirm to the best of each person’s knowledge
and belief 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 website. 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
L Herlihy
Chairman
J Moloney
Group Managing Director
Glanbia House
Kilkenny
3 March 2009
44
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Directors’ statement of corporate governance
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 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 L Herlihy); seventeen
other non-executive Directors (including Mr J Callaghan, the
Senior Independent Director) and three executive Directors
(Mr J Moloney, the Group Managing Director, Mr G Meagher,
the Deputy Group Managing Director and Group Finance
Director and Mr K Toland, the CEO & President Glanbia USA
& Nutritionals).
The Company is a subsidiary of Glanbia Co-operative
Society Limited (‘the Society’), an Irish industrial and
provident society, which owns 54.6% of the issued share
capital of the Company. Many of the members of the Society
supply milk and trade with Irish subsidiaries 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. Mr M Walsh retired as a Director and Chairman
of the Company on 28 May 2008 following his retirement
as a Director and Chairman of the Society. Mr E Power also
stepped down as a Director of the Company on the same
date following his retirement as a Director of the Society. The
Society nominated Mr A O’ Connor and Mr R Prendergast
to replace Mr E Power and Mr M Walsh and they joined the
Board as non-executive Directors with effect from
28 May 2008. In addition, Mr L Herlihy and Mr J Fitzgerald
were appointed Chairman and Vice-Chairman respectively
on 28 May 2008.
Biographies of each of the Directors are set out on pages
38 and 39.
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.
2.2 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 J Callaghan,
Mr P Haran and Mr J Liston were independent. In particular, the
Board reviewed the position of Mr J Callaghan in the context
of the guidance in the Combined Code and determined
that, notwithstanding his 11 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 W 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 judgement.
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
2008. Details of Directors’ attendance at those meetings
are set out in the table on page 46:
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.
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.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
4 5
Directors’ report: Corporate governance
Directors’ statement of corporate governance (continued)
L Herlihy
J Fitzgerald
V Quinlan
J Moloney
J Callaghan
H Corbally
N Dunphy
E Fitzpatrick
J Gilsenan
P Gleeson
P Haran
C Hill
M Keane
J Liston
G Meagher
M Merrick
W Murphy
A O’Connor**
M Parsons
E Power*
R Prendergast**
K Toland
M Walsh*
Board
B
11
11
10
11
11
11
11
11
11
11
11
11
11
10
11
11
11
7
11
4
7
7
4
A
11
11
11
11
11
11
11
11
11
11
11
11
11
11
11
11
11
7
11
4
7
11
4
Audit
Committee
B
A
3
3
3
3
3
3
Nomination
Committee
A
B
Remuneration
Committee
B
4
2
3
A
4
2
4
3
3
3
3
3
3
3
3
2
2
2
2
4
2
2
2
2
4
4
4
3
4
1
1
2
2
Column A indicates the number of meetings held during the period the Director was a member of the Board and /or the Committee.
Column B indicates the number of meetings attended during the period the Director was a member of the Board and /or the Committee.
*Retired 28 May 2008 **Appointed 28 May 2008
2.3.5 Information and training
All Directors receive monthly Group management accounts
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.
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.
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. He has also been recently
appointed a director of the publicly-quoted DCC plc.
46
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
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.
Director 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 M 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 Group Secretary is a matter for the Board.
Chairman
Mr L Herlihy was appointed Chairman of the Board on 28
May 2008. The Chairman is responsible for the efficient
and effective working of the Board. He ensures that the
Board agenda covers 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 L Herlihy holds a number of other directorships
(see details on page 38) and farms at Headborough,
Knockanore, Tallow, Co. Waterford, 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 J Fitzgerald
and Mr V Quinlan.
Group Managing Director
The day to day management of the Group has been
delegated to the Group Managing Director,
Mr J 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 J 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. In the year under review, the Chairman hosted
a meeting of the non-executive Directors, without the
executive Directors present. The Senior Independent
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 was carried out this year, by an
external party.
In completing the annual performance evaluation, each
Director was met individually to discuss the performance
of the Board and individual Directors. In advance of
the meetings, a comprehensive questionnaire was
circulated to Directors for their consideration and the
Directors were encouraged to raise any other issues on
Board matters during the meetings. Based on the verbal
and written feedback from the Directors, a report was
prepared for the Board summarising the outcome of the
performance evaluation process and recommending a
number of actions.
For the year under review, the Chairman concluded that
all Directors continue to make an effective contribution to
the Board.
The Chairman confirms that each of Mr J Callaghan,
Mr H Corbally, Mr E Fitzpatrick, Mr J Gilsenan,
Mr P Haran, Mr J Liston, Mr M Merrick, Mr W Murphy,
Mr A O’Connor, Mr R Prendergast, Mr V Quinlan and
Mr K Toland standing for re-appointment at this year’s
Annual General Meeting, continue to perform effectively
and to demonstrate commitment to their roles.
Mr J Callaghan, as Senior Independent Director, confirms
that Mr L Herlihy, also standing for re-appointment at
this year’s Annual General Meeting, continues to perform
effectively and demonstrates commitment to his role.
The Nomination Committee considered the nomination
for the re-appointment of the non-executive Directors,
Mr J Callaghan, Mr H Corbally, Mr E Fitzpatrick,
Mr J Gilsenan, Mr L Herlihy, Mr W Murphy and
Mr V Quinlan respectively, with particular rigour, as they
have served as Directors for nine years or more, 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.
Mr J Callaghan, Mr P Haran, Mr J Liston and Mr L Herlihy
respectively excused themselves from the consideration
of their own nomination for re-appointment.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
4 7
Directors’ report: Corporate governance
Directors’ statement of corporate governance (continued)
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’ 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 Group Finance Director Designate from whom
approval must be obtained, in advance, for any share
dealings by persons to whom the rules apply.
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 112 to 114.
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
The Board has established a committee structure to assist
it in the discharge of its responsibilities. The Committees
and their membership are detailed on page 38 of this
report. All Committees of the Board have written terms of
reference dealing with their role and authority delegated
by the Board and are available on the Group’s website at
www.glanbia.com. Membership of the Nomination, Audit
and Remuneration Committees is comprised exclusively
of non-executive Directors. The Group Secretary acts as
secretary 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 of the
Company. 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 of Association.
The Nomination Committee did not use an external
search consultancy or open advertising in the
appointment of the new non-executive Directors,
Mr A O’Connor and Mr R Prendergast, as they were
nominated by the Board of the Society for appointment to
the Board of the Company. The Nomination Committee
uses industry and professional contacts to identify
suitable candidates for the appointment of non-executive
Directors other than those appointed by the Society.
The Nomination Committee also considers and
recommends the appointment of the Chairman and Vice-
Chairmen of the Company. 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 Chairman of the Company chairs meetings of the
Nomination Committee except when it is dealing with
the appointment of a successor to the Chairmanship.
The Chairman of the Nomination Committee reports to
the Board after each meeting of the Committee.
48
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
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 Group, and any formal announcements relating to
the Group’s financial performance, reviewing significant
financial reporting judgements contained in them;
• to review the Group’s internal financial controls and,
unless expressly addressed by a separate Board risk
committee composed of non-executive Directors, or by
the Board itself, to review the Group’s internal control
and risk management systems;
• to monitor and review the effectiveness of the Group’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 Group
may, in confidence, raise concerns about possible
improprieties in matters of financial reporting or other
matters.
In discharging its responsibilities the Audit Committee
met three 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 Head of Internal Audit
on a regular basis.
Mr J Callaghan is Chairman of the Audit Committee
and he reports to the Board after each meeting of the
Committee.
Remuneration Committee
The Remuneration Committee determines, on behalf
of the Board, the 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 with 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 J 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 L Herlihy, Group Chairman, is Chairman of the US
Advisory Board. The membership of the Advisory Board
currently comprises Mr J Callaghan, Senior Independent
Director, Mr K Toland, executive Director, Mr J Fitzgerald
and Mr V Quinlan, Vice-Chairmen, Mr M Walsh, Glanbia
Group Chairman from 2005 to 2008 and Mr Joe
McCullough, Mr Peter Rogers, Mr Wayne Seltzer and
Ms Susan Davis, * USA based members. Mr J Moloney,
Group Managing Director, also attends meetings of the
US Advisory Board.
* Mr J McCullough, was previously 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 P Rogers, was previously President of Nabisco
Foods Americas and held a variety of other senior
positions in food companies.
Mr W Seltzer recently retired as Chief Executive Officer
of Seltzer Companies, Inc.
Ms S Davis is Chairperson of Susan Davis International,
a Washington D.C. based public affairs agency.
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’), participation
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
4 9
Directors’ report: Corporate governance
Directors’ statement of corporate governance (continued)
in the 2008 Long Term Incentive Plan (‘the 2008 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.
Review of compensation arrangements
Arising from a review in 2007 carried out by the Remuneration
Committee with the assistance of external advisers, Mercer
Limited, it was concluded that the Group should introduce
a new Long Term Incentive Plan. Accordingly, the 2007 Long
Term Incentive Plan (‘the 2007 LTIP’) was approved by the
Board in May 2007 for selected senior managers only. As
the 2007 LTIP was not approved by shareholders in general
meeting, executive Directors are not entitled to participate.
At the Annual General Meeting held in May 2008, the
introduction of the 2008 LTIP was approved for both
executive Directors and senior managers. Details of both
LTIPs are provided below.
The 2008 LTIP
The 2008 LTIP has been designed so that any rewards will be
dependent on the growth in the Company’s EPS (earnings
per share) and the Company’s TSR (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 2008 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 2008 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 2008 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 2008 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
50
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
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 2008 LTIP were made in August
2008 to executive Directors, senior managers and the Group
Secretary, immediately following the publication of the
interim results for 2008. Details of the awards are provided on
page 94 to 95.
4
The 2007 LTIP
The 2007 LTIP corresponds with the 2008 LTIP with the
exception that Directors were excluded from participating
as it did not receive shareholder approval. Awards under the
2007 LTIP were made in August 2007 and detailed in note 24.
Share options
Options outstanding under the Company’s 2002 LTIP as at
3 January 2009 amounted to 2,258,000 ordinary shares
(29 December 2007: 2,467,000) as set out hereunder.
There were no options outstanding under the Company’s
1988 Share Option Scheme as at 3 January 2009
(29 December 2007: 325,000).
No of ordinary
Price range
Dates
shares
exercisable
2002 LTIP
2,258,000 €1.55 - €4.25
2009 – 2017
Share awards
As at 3 January 2009, share awards had been granted under
the Company’s 2002 LTIP over 118,600 ordinary shares (29
December 2007: 134,600).
As at 3 January 2009, share awards had been granted under
the Company’s 2007 LTIP over 169,500 ordinary shares (29
December 2007: 183,500).
As at 3 January 2009, Share Awards had been granted under
the Company’s 2008 LTIP over 583,000 ordinary shares (29
December 2007: Nil).
Share trust
As detailed in Note 27 to the financial statements at 3
January 2009, 570,054 ordinary shares were held in an
employee benefit trust for the purpose of the Group’s
employee share schemes.
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.
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.
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;
• 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
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
5 1
Directors’ report: Corporate governance
Directors’ statement of corporate governance (continued)
• 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.
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
Relationship and Independence 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;
• Legal services.
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.
7 Annual General Meeting
The Notice of the 2008 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 2007 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. 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 2008 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 29 to 31.
9 Accountability and audit - Our responsibilities
Financial reporting
Directors’ responsibilities for preparing the financial
statements for the Company and the Group are detailed on
page 44. 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.
6 Relations with shareholders
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.
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
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 .
52
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Financial statements contents
Independent auditors’ report: to the members of Glanbia plc
Consolidated income statement
Consolidated statement of recognised income and expense
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 polices
3. Financial risk management
4. Critical accounting estimates and judgements
5. Segment information
6. Operating expenses
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
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G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
5 3
Financial statements
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
3 January 2009, 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 Company
balance sheet is in agreement with the books of account. We also report to you our opinion as to:
- whether the Company has kept proper books of account;
- whether the Directors’ Report is consistent with the financial statements; and
-
whether at the balance sheet date there existed a financial situation which may require the Company to convene an
extraordinary general meeting 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 2006 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 report of the Directors, the Chairman’s Statement, the Group Managing
Director’s review, the operations review, the Directors’ statement of corporate governance and the finance 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.
54
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
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 3 January 2009 and of its profit and 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 3 January 2009 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 3 January 2009 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
3 March 2009
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
5 5
Financial statements
Consolidated income statement
for the year ended 3 January 2009
Notes
Pre-
exceptional
2008
€’000
Exceptional
2008
€’000
Total
2008
€’000
Pre-
exceptional
2007
€’000
Exceptional
2007
€’000
Total
2007
€’000
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
5
2,232,161
(1,890,549)
-
(10,113)
2,232,161
(1,900,662)
2,206,567
(1,882,648)
-
(27,168)
2,206,567
(1,909,816)
341,612
(10,113)
331,499
323,919
(27,168)
296,751
(121,373)
(86,185)
(3,251)
(5,939)
(124,624)
(92,124)
(114,180)
(93,905)
(165)
3,870
(114,345)
(90,035)
6
10
10
11
134,054
(19,303)
114,751
115,834
(23,463)
92,371
5,590
(26,695)
-
-
5,590
(26,695)
4,813
(22,095)
7,306
(947)
6,359
992
-
-
-
120,255
(21,528)
(20,250)
892
100,005
(20,636)
99,544
(16,458)
(23,463)
617
4,813
(22,095)
992
76,081
(15,841)
Profit for the year
98,727
(19,358)
79,369
83,086
(22,846)
60,240
Attributable to:
Equity holders of the Parent
Minority interests
Basic earnings per share (cents)
Diluted earnings per share (cents)
12
12
78,399
970
79,369
26.76
26.63
59,833
407
60,240
20.42
20.34
On behalf of the Board
L Herlihy
Directors
J Moloney G Meagher
56
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Consolidated statement of recognised income and expense
for the year ended 3 January 2009
Actuarial loss - defined benefit schemes
Deferred tax on actuarial loss
Share of actuarial (loss)/gain - joint ventures
Currency translation differences
Fair value adjustments (net of tax)
- Group
- Joint ventures
Net expense recognised directly in equity
Profit for the year
Total recognised income for the year
Attributable to:
Equity holders of the Parent
Minority interest
Notes
33
32
23
23
23
23
2008
€’000
(68,246)
7,084
(204)
17,251
(20,841)
(2,089)
(67,045)
79,369
2007
€’000
(4,539)
1,102
230
(14,878)
10,733
(2,155)
(9,507)
60,240
12,324
50,733
11,354
970
50,326
407
12,324
50,733
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
5 7
Financial statements
Consolidated balance sheet
as at 3 January 2009
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
L Herlihy
Directors
J Moloney G Meagher
58
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Notes
14
15
16
17
19
32
18
37
20
19
37
21
22
24
25
26
30
31
37
32
33
34
35
36
31
37
34
22
2008
€’000
361,131
359,212
11,597
64,895
11,929
25,380
24,112
2,754
2007
€’000
298,771
137,565
10,729
57,328
6,971
21,672
30,089
763
861,010
563,888
267,422
183,587
10,378
132,572
593,959
-
225,057
202,234
4,990
159,819
592,100
20,304
593,959
612,404
1,454,969
1,176,292
97,320
102,882
19,707
219,909
8,010
98,450
107,909
21,176
227,535
7,040
227,919
234,575
569,374
9,248
59,056
164,410
4,899
12,694
379,028
3,736
37,587
114,248
13,660
3,535
819,681
551,794
351,452
332
15,281
16,815
23,489
407,369
-
336,663
9,182
966
3,187
22,278
372,276
17,647
407,369
389,923
1,227,050
941,717
1,454,969
1,176,292
Consolidated cash flow statement
for the year ended 3 January 2009
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
Payment of deferred consideration on acquisition of subsidiaries
Purchase of property, plant and equipment
Loans advanced to joint ventures
Disposal/(purchase) of available for sale investments
Disposal proceeds received - exit from Pigmeat
Insurance proceeds received - exit from Pigmeat
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
Purchase of treasury shares
Increase in borrowings
Decrease in borrowings
Finance lease principal payments
Dividends paid to Company’s shareholders
Capital grants received
Net cash from/(used in) financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Notes
40
41
24
13
2008
€’000
146,946
7,149
(30,768)
(26,096)
2007
€’000
85,110
3,015
(17,613)
(5,401)
97,231
65,111
(217,942)
(11,427)
(84,507)
(12,151)
2,513
3,308
8,820
7,629
-
(17,742)
(51,662)
(9,001)
(2,000)
-
12,937
13,419
(303,757)
(54,049)
360
(1,665)
188,090
-
(934)
(18,502)
9,655
167
(95)
-
(84,056)
(954)
(17,334)
1,399
177,004
(100,873)
(29,522)
(89,811)
159,819
2,275
259,311
(9,681)
Cash and cash equivalents at the end of the year
21
132,572
159,819
Reconciliation of net cash flow to movement in net debt
Net decrease in cash and cash equivalents
Cash (outflow)/inflow 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
Cash and cash equivalents
2008
€’000
(29,522)
(187,156)
(216,678)
(5,544)
(9,686)
2007
€’000
(89,811)
85,889
(3,922)
(764)
9,005
(231,908)
(220,175)
4,319
(224,494)
(452,083)
(220,175)
2008
€’000
2007
€’000
31
21
(584,655)
132,572
(379,994)
159,819
(452,083)
(220,175)
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
5 9
Financial statements
Company balance sheet
as at 3 January 2009
ASSETS
Non-current assets
Investments in associates
Available for sale investments
Investments in subsidiaries
Current assets
Trade and other receivables
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
2008
€’000
2007
€’000
16
18
18
1,395
1,290
459,481
1,395
1,290
454,013
462,166
456,698
19
48,340
24,023
48,340
24,023
510,506
480,721
24
26
28
31
36
452,588
36,056
5,839
453,718
18,354
5,187
494,483
477,259
13,740
2,283
16,023
1,928
1,534
3,462
510,506
480,721
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 profit for the year dealt with in the financial statements of Glanbia plc, amounts to
€36,204,000 (2007: (€12,236,000) loss).
On behalf of the Board
L Herlihy
Directors
J Moloney G Meagher
60
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Company statement of recognised income and expense
and cash flow statement for the year ended 3 January 2009
Company statement of recognised income and expense
Profit/(loss) for the year
Total recognised income/(expense) for the year
Company cash flow statement
Cash flows from operating activities
Cash generated from/(used in) operations
Interest received
Net cash from operating activities
Cash flows from investing activities
Dividends received
Proceeds received - exit from Pigmeat
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Shares purchased
Redemption of shares
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
Notes
2008
€’000
2007
€’000
26
36,204
(12,236)
36,204
(12,236)
40
2008
€’000
4,687
-
2007
€’000
(23,600)
1,255
4,687
(22,345)
-
3,308
3,308
8,000
-
8,000
24
24
13
360
(1,665)
-
(18,502)
167
(95)
25,303
(17,334)
(19,807)
8,041
(11,812)
(6,304)
(1,928)
4,376
(13,740)
(1,928)
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
6 1
Financial statements
Notes to the financial statements
for the year ended 3 January 2009
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.
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 54.6% 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 3 March 2009.
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 adopted International Financial Reporting
Standards (IFRS), IFRIC interpretations and those 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, judgements 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 53 week period ending on 3 January 2009, comparatives are for the 52 week
period ended 29 December 2007. The balance sheets for 2008 and 2007 have been drawn up as at 3 January 2009 and 29
December 2007 respectively.
(b) Consolidation
The Group financial statements incorporate:
(i)
The financial statements of Glanbia plc (the Company) and enterprises controlled by the Company (its subsidiaries). Control
is achieved where the Company has the power to govern the financial and operating policies of an 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.
62
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
(c) Segment reporting
The Group’s reporting segment, for which detailed disclosures are required is by geographical area. 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.
The Group reports segment performance by two geographic areas - Ireland and International.
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.
(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, or for the period
since acquisition, if appropriate.
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 property, 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
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
6 3
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
The assets’ residual values and 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.
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 10 and 20 years. Indefinite life intangible assets are those for which there is no foreseeable
limit to their expected useful life. Indefinite life intangible assets are carried at cost less accumulated impairment losses, if
applicable and are not amortised on an annual basis.
(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 - Intangible Assets. Computer software costs
recognised as assets are written off over their estimated useful lives, which is normally between 5 and 10 years.
(g) Available for sale investments
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.
64
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
(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.
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 which relate to 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.
Where risks associated with receivables are transferred out of the Group under debt purchase agreements, such receivables are
recognised on the balance sheet to the extent of the Group’s continued involvement and retained risk.
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.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
6 5
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
(m) Employee benefits
(i) Pension obligations
Group companies operate various pension schemes. The schemes are generally funded through payments to insurance
companies or trustee-administered funds, determined by periodic actuarial calculations. The Group has both defined
benefit and defined contribution plans.
The liability recognised in the balance sheet in respect of defined benefit pension plans is the present value of the
defined benefit obligation at the balance sheet date less the fair value of the plan assets, together with adjustments for
unrecognised past-service costs. The defined benefit obligation is calculated annually by independent actuaries using
the projected unit credit method. The present value of the defined benefit obligation is determined by discounting the
estimated future cash outflows using interest rates of high-quality corporate bonds that are denominated in the currency in
which the benefits will be paid, and that have terms to maturity approximating to the terms of the related pension liability.
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.
A curtailment arises where an event reduces the expected years of future service of employees or reduces the accrual of
defined benefits for their future service. A settlement arises where the Group is relieved of responsibility for a pension
obligation and eliminates significant risk relating the obligation and the assets used to effect the settlement. Losses arising
on settlement or curtailment not allowed for in the actuarial assumptions are measured at the date on which the Group
becomes demonstrably committed to the transaction. Gains arising on a settlement or curtailment are measured at the date
on which all parties whose consent is required are irrevocably committed to the transaction. Curtailments and settlement
gains on losses are dealt with in the income statement.
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 2007 Long Term Incentive Plan and 2008 Long Term Incentive Plan
The fair value of shares awarded under the 2007 LTIP and 2008 LTIP schemes are determined using a Monte Carlo simulation
technique. The performance share plan contains inter-alia a Total Shareholder Return (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
– Share-based payment 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.
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(o) Revenue recognition
Revenue comprises the fair value of the consideration receivable for 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. Revenue is only recognised when it is possible that the economic benefits associated with the transaction will flow to
the entity.
(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.
(ii) Non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment. 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 and 2008 LTIP schemes 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), IAS 39 (Financial Instruments:
Recognition and Measurement) and IFRS 7 (Financial Instruments Disclosures). 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.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
6 7
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument,
and if so, the nature of the item being hedged. The Group designates certain derivatives as either: (1) hedges of the fair value
of recognised assets or liabilities or a firm commitment (fair value hedge); (2) hedges of a particular risk associated with a
recognised asset or liability or a highly probable forecast transaction (cash flow hedge).
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as
well as its risk management objective and strategy for undertaking various hedge transactions. The Group also documents its
assessment, both at hedge inception and on an ongoing basis, of whether the derivatives that are used in hedging transactions
are highly effective in offsetting changes in fair values or cash flows of hedged items.
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.
(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 interest rates on 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 – Provisions, Contingent
Liabilities and Contingent Assets 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 after tax, pre exceptional,
before intangible asset amortisation (net of related tax). 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.
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(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 an 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, legislative changes and profit or loss on disposal of investments. Judgement is used by the Group in
assessing the particular items, which by virtue of their scale and nature, should be disclosed in the income statement and notes
as exceptional items.
(z) 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 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.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
6 9
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
(aa) New accounting standards and IFRIC interpretations
The Group’s assessment of the impact of these new standards and interpretations is set out below;
Standards, amendments and interpretations effective in 2008, reviewed by the Group and determined not applicable for the
financial year ended 3 January 2009:
The following standards, amendments and interpretations are mandatory for the Group for accounting periods beginning on or
after 30 December 2007 but are not relevant to the Group’s operations:
-
-
-
-
IFRIC 11 ‘IFRS 2 – Group and treasury share transactions’
IFRIC 12 ‘Service concession arrangements’
IFRIC 14 ‘IAS 19 – The limit on defined benefit asset, minimum funding requirements and their interaction’
IAS 39 and IFRS 7 (amendments) – ‘Reclassification of financial assets’
The following standards, amendments and interpretations are mandatory for the Group for accounting periods beginning on or
after 1 July 2008 but are not relevant to the Group’s operations:
-
IFRIC 13 ‘Customer loyalty programmes’
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:
Improvements to IFRSs, (effective for financial periods beginning on or after 1 January 2009).
The improvements to IFRS are still subject to EU endorsement. The IASB has issued the ‘Improvements to IFRSs’ standard
which amends 20 standards, basis of conclusions and guidance based on the exposure draft issued in October 2007. The
improvements include changes in presentation, recognition and measurement plus terminology and editorial changes. The
Group has reviewed the ‘Improvements to IFRSs’ and will apply the revised applicable standards from the effective date and is
currently assessing their impact on the Group’s financial statements.
IFRS 1 (Amendment) ‘First time adoption of IFRS’ and IAS 27 ‘Consolidated and separate financial statements’ (effective for
financial periods beginning on or after 1 January 2009).
The amendments to the two standards are still subject to endorsement by the EU. The amended IFRS 1 allows first-time
adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure
the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements.
The amendment also removes the definition of the cost method from IAS 27 and replaces it with a requirement to present
dividends as income in the separate financial statements of the investor. As the Group is not a first-time adopter of IFRS, IFRS 1
(Amendment) is not relevant to the Group’s activities.
IFRS 1 (Revised), ‘First-time adoption of International Financial Reporting Standards’, (effective for financial periods beginning
on or after 1 July 2009).
The revised standard is still subject to EU endorsement. The current IFRS 1 has been amended many times to accommodate
first time adoption requirements of new and amended IFRSs, resulting in a more complex and less clear standard. This revised
version retains the substance of the original standard but with a changed structure. The Group will apply this revised standard
from the effective date and is currently assessing the impact on the Group’s financial statements.
IFRS 2 (Amendment), ‘Share based payment’ (effective for financial periods beginning on or after 1 January 2009).
The amended standard deals with vesting conditions and cancellations. It clarifies that vesting conditions are service conditions
and performance conditions only. Other features of a share based payment are not vesting conditions. As such these features
would need to be included in the grant date fair value for transactions with employees and others providing similar services,
that is, these features would not impact the number of awards expected to vest or valuation thereof subsequent to grant
date. The amendment also clarifies that all cancellations, whether by the entity or by other parties, should receive the same
accounting treatment. The Group will apply the amendment from the effective date and is currently assessing the impact on the
Group’s financial statements.
IFRS 3 (Revised), ‘Business combinations’, (effective for financial periods beginning on or after 1 July 2009).
The revised standard is still subject to EU endorsement. The revised standard continues to apply the acquisition method to
business combinations, with some significant changes. For example, all payments to purchase a business are to be recorded at
fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the income
statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either
at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net assets. All acquisition-related costs
should 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.
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IFRS 8, ‘Operating segments’ (effective for financial periods beginning on or after 1 January 2009).
IFRS 8 replaces IAS 14 ‘Segment reporting’, and aligns segment reporting with the requirements of the US standard SFAS 131,
‘Disclosures about segments of an enterprise and related information’. 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 new standard requires a ‘management approach’, under
which segment information is presented on the same basis as that used for internal reporting purposes. The Group will apply
IFRS 8 from the effective date and is currently considering the impact of this standard on its disclosures.
IFRIC 15, ‘Agreements for construction of real estates’ (effective from 1 January 2009).
The interpretation is still subject to EU endorsement. The interpretation clarifies whether IAS 18, ‘Revenue’, or IAS 11,
’Construction contracts’ should be applied to particular transactions. It is likely to result in IAS 18 being applied to a wider range
of transactions. As the Group is not involved in construction IFRIC 15 is not relevant to the Groups activities.
IFRIC 16, ‘Hedges of a net investment in a foreign operation’ (effective from 1 October 2008).
The interpretation is still subject to EU endorsement. IFRIC 16 clarifies the accounting treatment in respect of net investment
hedging. This includes the fact that net investment hedging relates to differences in functional currency not presentation
currency, and hedging instruments may be held anywhere in the Group. The requirements of IAS 21, ‘The effects of changes
in foreign exchange rates’, do apply to the hedged item. As the Group does not hedge against net investments in foreign
operations IFRIC 16 is not relevant to the Group’s activities.
IFRIC 17, ‘Distributions of non-cash assets to owners’ (effective from 1 July 2009).
This interpretation applies to transactions in which an entity distributes assets (other than cash) as dividends to its owners acting
in their capacity as owners and how an entity should measure the dividend payable. The IFRIC also clarifies when an entity
should recognise a dividend payable, i.e. when the dividend is appropriately authorised and no longer at the discretion of
the entity. The Group will apply IFRIC 17 from the effective date and is currently assessing the impact on the Group’s financial
statements.
IFRIC 18, ‘Transfers of assets from customers’ (effective for transfers of assets from customers received on or after 1 July 2009)
This interpretation applies to agreements in which an entity receives from a customer an item of property, plant and equipment
(for an amount of cash which must be used to construct or acquire an item of property, plant and equipment) that the entity
must use either to connect the customer to a network or to provide a customer with ongoing access to a supply of goods or
services, or do both. The Group will apply IFRIC 18 from the effective date and is currently assessing the impact on the Group’s
financial statements.
IAS 1 (Amendment), ‘Presentation of financial statements’, (effective for financial periods beginning on or after 1 January 2009).
The revised standard will prohibit the presentation of items of income and expense (that is, ‘non-owner changes in equity’) in
the statement of changes in equity, requiring ‘non-owner changes in equity’ to be presented separately from owner changes
in equity. All non-owner changes in equity will be required to be shown in a performance statement, but entities can choose
whether to present one performance statement (the statement of comprehensive income) or two statements (the income
statement and statement of comprehensive income). Where entities restate or reclassify comparative information, they will be
required to present a restated balance sheet as at the beginning comparative period in addition to the current requirement to
present balance sheets at the end of the current period and comparative period. The Group will apply the amendment from the
effective date and is currently assessing the impact on the Group’s financial statements.
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 the amendment
from the effective date and is currently assessing the impact on the Group’s financial statements.
IAS 27 (Revised), ‘Consolidated and separate financial statements’, (effective for annual periods beginning on or after
1 July 2009).
The revised standard is still subject to endorsement by the EU. The revised standard requires the effects of all transactions with
non-controlling interests to be recorded in equity if there is no change in control and these transactions will no longer result
in goodwill on acquisitions from non-controlling interests or gains and losses on disposals to non-controlling interests. 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.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
7 1
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
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 to the two standards are still subject to endorsement by the EU. The amended standards require entities to
classify puttable financial instruments and instruments, or components of instruments that impose on the entity an obligation
to deliver to another party a pro rata share of the net assets of the entity only on liquidation as equity, provided the financial
instruments have particular features and meet specific conditions. The Group will apply the amendment from the effective date
and is currently assessing the impact on the Group’s financial statements.
IAS 39 (Amendment) – Eligible hedged items, ‘Financial Instruments: Recognition and Measurement’ (effective for annual
periods beginning on or after 1 July 2009).
The amendment to the standard is still subject to endorsement by the EU. This amendment to IAS 39 clarifies how the principles
that determine whether a hedged risk or portions of cash flows is eligible for designation should be applied. The Group will
apply the amendment from the effective date and is currently assessing the impact on the Group’s financial statements.
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, credit 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, other than credit risk, is carried out by a central treasury department (Group Treasury) under policies
approved by the Board of Directors. Credit risk is discussed below. 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 the US dollar/euro exchange rate 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 are required to hedge foreign exchange risk exposure through
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, administered
by 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.
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 to which the Group is exposed for the following financial year. The Group does not
take out cover unless the prospective sale is highly probable.
For 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.
72
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
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 3 January 2009 and 29 December 2007, 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, and cash and cash equivalents.
A weakening/strengthening of the euro against the US dollar by 5% as at 3 January 2009 would have resulted in a currency
translation gain/loss respectively of approximately €8.5 million (2007: €7.5 million), which would be recognised directly in equity.
At 3 January 2009 and 29 December 2007, 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, and cash and cash equivalents.
A weakening/strengthening of the euro against the UK pound by 5% as at 3 January 2009 would have resulted in a currency
translation gain/loss respectively of approximately €3.0 million (2007: €1.6 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 throughout 2008, a 1% increase in prevailing market interest
rates would have resulted in a €1.8 million loss (2007: €0.7 million loss), with no impact on equity.
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 interest rate amounts 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.
(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.
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 €661.5 million of which €82.9 million was
undrawn. The weighted average maturity of these facilities was 4.2 years.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
7 3
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
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 3 January 2009
Borrowings
Derivative financial instruments
Trade and other payables
At 29 December 2007
Borrowings
Derivative financial instruments
Trade and other payables
Less than 1
year
€’000
Between 1
and 2 years
€’000
Between 2
and 5 years
€’000
15,281
16,815
351,452
926
5,171
-
501,325
4,417
-
Over 5
years
€’000
64,624
76
-
Total
€’000
582,156
26,479
351,452
383,548
6,097
505,742
64,700
960,087
Less than 1
year
€’000
Between 1
and 2 years
€’000
Between 2
and 5 years
€’000
Over 5
years
€’000
Total
€’000
966
3,187
336,663
904
1,633
-
316,047
2,538
-
65,643
-
-
383,560
7,358
336,663
340,816
2,537
318,585
65,643
727,581
The Company has an overdraft of €13,740,000 at year ended 3 January 2009. The contractual undiscounted cash flows equal the
year end balance.
The table below analyses the Group’s foreign exchange contracts 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 3 January 2009
Foreign exchange contracts - cash flow hedges
Outflow
At 29 December 2007
Foreign exchange contracts - cash flow hedges
Inflow
Less than 1
year
€’000
Between 1
and 2 years
€’000
Between 2
and 5 years
€’000
Over 5
years
€’000
Total
€’000
(59)
-
-
-
(59)
Less than 1
year
€’000
Between 1
and 2 years
€’000
Between 2
and 5 years
€’000
Over 5
years
€’000
Total
€’000
2,872
-
-
-
2,872
Credit Risk
Credit risk is managed on a Group basis. Credit risk arises from cash and cash equivalents, derivative financial instruments,
available for sale financial investments 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.
The Group’s credit risk management policy in relation to trade receivables involves periodically assessing the financial reliability
of customers, taking into account their financial position, past experience and other factors. The utilisation of credit limits is
regularly monitored and where appropriate, credit risk is covered by credit insurance.
The Group enters into debt purchase agreements with certain financial institutions for part of its debtors’ balances. Where this is
done the credit risk is transferred but the late payment risk is retained.
74
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
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 or buy back shares.
The Group monitors debt capital on the basis of interest cover and debt to EBITDA ratios. At 3 January 2009, the Group’s debt/
EBITDA ratio was 2.7 times (2007: 1.5 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 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.
4. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and assumptions that could have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below.
(a) Impairment reviews of goodwill
The Group tests annually whether goodwill has suffered any impairment, in accordance with the accounting policy stated in
note 2(f). The recoverable amounts of cash generating units have been determined based on value in use calculations. These
calculations require the use of estimates.
The assets of Seltzer Companies, Inc., Optimum Nutrition, Inc. and Glanbia Nutritionals Deutschland GmbH, including goodwill
arising on acquisition of €131.133 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 6.5% to 7.5% would not result in an
impairment of the assets. A rate of zero percent has been used to estimate cash flow growth between 3 and 10 years. Indefinite
life intangible assets are those for which there is no foreseeable limit to their expected useful life. The classification of intangible
assets as indefinite is reviewed annually.
(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 €1.129 million.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
7 5
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
(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 €301.5 million giving a net pension liability of
€164.4 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 3 January 2009, 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
€6.2 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 €0.2 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 1 year reduction in useful lives would have a €2.1 million reduction impact on
operating profit.
The Group has reviewed the impact on indefinite life intangible assets of assigning a finite life to these assets and a 20 year useful
life estimate would have a €4.4 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.
5. Segment information
Primary reporting format – geographic segments
The Group’s internal financial system reports segment performance by two main geographic areas, Ireland and International.
On this basis segment information has been restated to include Consumer Foods and Agribusiness & Property under Ireland and
Food Ingredients and Nutritionals under International. The comparatives for year ended 29 December 2007 have been restated.
The segment results for the year ended 29 December 2007 are as follows:
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
76
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Ireland
€’000
International
€’000
Group
€’000
803,855
(492)
1,529,310
(126,106)
2,333,165
(126,598)
803,363
1,403,204
2,206,567
30,640
(23,463)
85,194
-
115,834
(23,463)
7,177
85,194
92,371
(17,282)
992
76,081
(15,841)
60,240
The segment results for the year ended 3 January 2009 are as follows:
2008
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
Ireland
€’000
International
€’000
Group
€’000
743,061
(85)
1,630,682
(141,497)
2,373,743
(141,582)
742,976
1,489,185
2,232,161
51,530
(15,548)
82,524
(3,755)
134,054
(19,303)
35,982
78,769
114,751
(21,105)
6,359
100,005
(20,636)
79,369
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be
available to unrelated third parties.
Other segment items included in the income statement for the year ended 29 December 2007 are as follows:
2007
Depreciation
Amortisation of intangibles
Capital grants released to income statement
Restructuring costs - exceptional items
Ireland
€’000
International
€’000
9,828
3,076
(669)
(23,463)
17,418
3,740
(67)
-
Other segment items included in the income statement for the year ended 3 January 2009 are as follows:
2008
Depreciation
Amortisation of intangibles
Capital grants released to income statement
Restructuring costs - exceptional items
Ireland
€’000
International
€’000
7,463
2,771
(106)
(15,548)
18,326
5,586
(494)
(3,755)
The segment assets and liabilities at 29 December 2007 and capital expenditure for the year then ended are as follows:
Group
€’000
27,246
6,816
(736)
(23,463)
Group
€’000
25,789
8,357
(600)
(19,303)
2007
Assets
Associates and joint ventures
Total assets
Liabilities
Ireland
€’000
International Unallocated
€’000
€’000
Group
€’000
232,934
-
651,291
-
224,010
68,057
1,108,235
68,057
232,934
651,291
292,067 1,176,292
(113,212)
(257,977)
(570,528)
(941,717)
Group capital expenditure and acquisitions
9,564
59,542
878
69,984
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
7 7
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
The segment assets and liabilities at 3 January 2009 and capital expenditure for the year then ended are as follows:
2008
Assets
Associates and joint ventures
Total assets
Liabilities
Ireland
€’000
International Unallocated
€’000
€’000
Group
€’000
233,713
-
946,569
-
198,195
76,492
1,378,477
76,492
233,713
946,569
274,687 1,454,969
(106,920)
(393,261)
(726,869)
(1,227,050)
Group capital expenditure and acquisitions
24,338
276,125
4,151
304,614
6. Operating expenses
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
Repairs and maintenance expenditure on property, plant and equipment
Exceptional item - exit from Pigmeat
Amortisation of intangible assets (note 15)
- Software costs
- Other intangible assets
Increase in inventories
Raw materials and consumables used
Energy costs
Sales and marketing
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
Other
Total operating expenses
78
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
2008
€’000
2007
€’000
24,149
1,640
24,994
2,252
(5,319)
(3,002)
25,698
28,459
3,332
20,756
3,685
4,672
3,824
2,992
42,365
92,053
1,662,357
1,637,623
39,714
32,031
54,110
45,089
1,384
(600)
297
(736)
4,775
5,582
4,561
4,556
200,093
197,170
639
6,880
627
7,509
(4,019)
(611)
46,273
13,752
2,117,410
2,114,196
7. Exceptional items
Exit from Pigmeat
Rationalisation costs
Joint Venture - deferred tax charge
Exceptional tax credit (note 11)
Net exceptional item
Notes
2008
€’000
(a)
(b)
(c)
(3,332)
(15,971)
(947)
2007
€’000
(20,756)
(2,707)
-
(20,250)
(23,463)
892
617
(19,358)
(22,846)
(a) An exceptional charge of €3.3 million was incurred on the finalisation of the exit from the Pigmeat business announced in
March 2008.
(b) €16.0 million relates to a rationalisation programme, primarily redundancy costs, in Consumer Foods, Agribusiness and
Food Ingredients Ireland.
(c) An exceptional deferred tax charge of €1.0 million (Group share) arises in the Group’s joint venture, Glanbia Cheese.
This relates to a recent UK tax legislation change providing for the withdrawal of industrial buildings allowances.
8. Employee benefit expense
Wages and salaries
Termination costs
Social security costs
Share options and share awards under 2007 LTIP and 2008 LTIP
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))
2008
€’000
157,510
708
17,036
515
1,719
7,913
2007
€’000
169,554
2,877
17,673
587
1,217
4,981
185,401
196,889
(376)
15,068
(1,843)
2,124
200,093
197,170
The average number of employees, excluding the Group’s Joint Ventures & Associates in 2008 was 3,400 (2007: 3,993) and is
analysed into the following categories:
Ireland
International
2008
2007
1,706
1,694
3,400
2,517
1,476
3,993
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
7 9
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
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
2008
2007
Non-executive
L Herlihy (note (a))
J Fitzgerald (note (b))
V Quinlan
J Callaghan
H Corbally
N Dunphy (note (c))
E Fitzpatrick
J Gilsenan
P Gleeson
P Haran
C Hill
Ml Keane (note (e))
M Keane
J Liston
M Merrick
W Murphy
A O’Connor (note (d))
M Parsons
E Power (note (f))
R Prendergast (note (d))
M Walsh (note (g))
2008
2007
Total 2008
Total 2007
Salary
€’000
509
306
326
1,141
1,032
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,141
1,032
Performance
bonus
€’000
Fees
€’000
Pension
contribution
€’000
Other
benefits
€’000
-
-
-
-
-
69
33
42
70
20
20
20
20
20
62
20
-
20
70
20
62
12
20
8
12
36
656
621
656
621
460
284
314
1,058
1,391
162
102
120
384
342
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
36
22
7
65
61
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,058
1,391
384
342
65
61
2008
Total
€’000
1,167
714
767
2,648
69
33
42
70
20
20
20
20
20
62
20
-
20
70
20
62
12
20
8
12
36
2007
Total
€’000
1,194
756
876
2,826
41
19
41
63
19
12
19
19
19
59
19
8
19
63
19
59
-
19
19
-
85
656
3,304
621
3,447
(a) Mr L Herlihy was appointed Chairman on 28 May 2008.
(b) Mr J Fitzgerald was appointed Vice Chairman on 28 May 2008.
(c) Mr N Dunphy was appointed as a Director on 31 May 2007.
(d) Mr A O’Connor and Mr R Prendergast were appointed Directors on 28 May 2008.
(e) Mr Ml Keane resigned as a Director on 31 May 2007.
(f) Mr E Power resigned as a Director on 28 May 2008.
(g) Mr M Walsh resigned both as Chairman and Director on 28 May 2008.
Details of Directors’ share options are set out in note 24 and note 43 to the financial statements.
In 2008 holders of options granted in 1998 under the Avonmore share option scheme were given the option to receive the
value of the option in cash in lieu of exercising the option. Mr J Moloney and Mr G Meagher both elected to receive payment
respectively of €105,000 and €52,500 in lieu of exercising the options, which then lapsed.
80
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
The Remuneration Committee of the Board, which comprises solely of non-executive Directors, determines the Company’s
policy on executive Director remuneration and sets the remuneration package of each of the executive Directors. There are no
contracts of service for executive Directors which are required to be made available for inspection.
The defined benefit 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 2008
in excess of inflation
€’ 000
Total annual
accrued pension at
3 January 2009
€’ 000
776
185
179
1,140
508
38
8
17
63
30
J Moloney
G Meagher
K Toland
2008
2007
10. Finance income and costs
(a) Finance income
Interest income
Interest income on deferred consideration
(b) Finance costs
Interest expense
- Bank borrowings repayable within 5 years
- Interest cost on deferred consideration
- Finance lease costs
- Interest rate swaps, transfer from equity
- Interest rate swaps, fair value hedges
- Fair value adjustment of borrowings attributable to interest rate risk
Finance cost of preference shares
Total finance costs
Net finance costs
283
200
99
582
563
2007
€’000
4,813
-
4,813
2008
€’000
5,164
426
5,590
2008
€’000
2007
€’000
(21,471)
(22)
(360)
(477)
(1,295)
1,295
(22,330)
(4,365)
(19,084)
(450)
(272)
1,401
676
(676)
(18,405)
(3,690)
(26,695)
(22,095)
(21,105)
(17,282)
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
8 1
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
11. Income taxes
Irish corporation tax
Adjustments in respect of prior years
Irish current tax on income for the year
Foreign tax
Adjustments in respect of prior years
Foreign current tax on income for the year
Total current tax
Deferred tax (note 32)
Pre exceptional tax charge
Exceptional tax credit
- Current
- Deferred
2008
€’000
8,961
(99)
8,862
11,857
(607)
11,250
2007
€’000
7,284
(100)
7,184
6,338
327
6,665
20,112
13,849
1,416
2,609
21,528
16,458
(1,073)
181
1,975
(2,592)
20,636
15,841
(i) The restructuring provisions made in 2008 resulted in an exceptional current tax credit of €1.6 million.
(ii) During 2008 adjustments were made in connection with the Group’s 2007 decision to exit meat processing, resulting in an
exceptional current tax charge of €0.5 million and deferred tax charge of €0.1 million.
(iii) Recent UK tax legislation provided for the phased withdrawal of industrial building allowances from April 2008 (with full
abolition from April 2011) resulting in a deferred tax charge of €0.1 million. This change in UK tax legislation also resulted in
an exceptional deferred tax charge in the Group’s UK joint venture, Glanbia Cheese, of which the Group’s share is
€0.9 million.
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% (2007: 12.5%)
Earnings at reduced and higher Irish rates
Difference due to overseas tax rates
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
Details of tax charged or credited directly to equity during the year are outlined in note 32.
2008
€’000
2007
€’000
100,005
76,081
12,501
(2,732)
9,396
(54)
(913)
2,438
9,510
(1,176)
7,359
57
(124)
215
20,636
15,841
82
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
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
2008
€’000
2007
€’000
78,399
59,833
Weighted average number of ordinary shares in issue
293,018,610 293,012,540
Basic earnings per share (cents per share)
26.76
20.42
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
Adjusted weighted average number of ordinary shares
Diluted earnings per share (cents per share)
2008
€’000
2007
€’000
293,018,610
293,012,540
1,356,809
1,110,557
294,375,419
294,123,097
26.63
20.34
Adjusted
Adjusted earnings per share is calculated on the net profit attributable to equity holders of the Company, pre exceptional and
before intangible asset amortisation (net of related tax). Adjusted earnings per share is considered to be more reflective of the
Group’s underlying trading performance. Adjusted EPS as reported in 2007 was stated after amortisation on intangible assets
€5,964,000 (net of related tax).
Profit attributable to equity holders of the Company
Amortisation of intangible assets (net of related tax)
Net exceptional items
Adjusted earnings per share (cents per share)
Diluted adjusted earnings per share (cents per share)
2008
€’000
78,399
7,312
19,358
2007
€’000
59,833
5,964
22,846
105,069
88,643
35.86
35.69
30.25
30.14
13. Dividends
The dividends paid in 2008 and 2007 were €18.5 million (6.33 cents per share) and €17.3 million (5.91 cents per share)
respectively. On 1 October 2008 an interim dividend of 2.75 cents per share on the ordinary shares amounting to €8.1 million
was paid to shareholders on the register of members as at 12 September 2008. The Directors have recommended the payment
of a final dividend of 3.76 cents per share on the ordinary shares which amounts to €11.0 million. Subject to shareholders
approval this dividend will be paid on 20 May 2009 to shareholders on the register of members as at 24 April 2009, the record
date. These financial statements do not reflect this final dividend.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
8 3
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
14. Property, plant and equipment – Group
Year ended 29 December 2007
Opening net book amount
Exchange differences
Acquisition of subsidiaries
Additions
Disposals
Reclassification
Transfer to disposal group held for sale
Depreciation charge
Closing net book amount
At 29 December 2007
Cost
Accumulated depreciation
Net book amount
Year ended 3 January 2009
Opening net book amount
Exchange differences
Acquisition of subsidiaries (note 41)
Additions
Disposals
Reclassification
Depreciation charge
Closing net book amount
At 3 January 2009
Cost
Accumulated depreciation
Net book amount
Land and
buildings
€’000
Plant and
equipment
€’000
Motor
vehicles
€’000
Total
€’000
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)
111,587
186,465
719
298,771
111,587
2,075
1,330
23,753
(1,184)
-
(4,566)
186,465
4,342
2,033
57,374
(1,604)
(289)
(20,698)
719
(12)
26
299
(50)
56
(525)
298,771
6,405
3,389
81,426
(2,838)
(233)
(25,789)
132,995
227,623
513
361,131
193,578
(60,583)
585,482
(357,859)
18,782
(18,269)
797,842
(436,711)
132,995
227,623
513
361,131
Depreciation expense of €25,789,158 (2007: €27,245,814) has been charged as follows: cost of sales €22,989,638 (2007:
€24,483,735), distribution expenses €1,159,010 (2007: €1,101,849) and administration expenses €1,640,510 (2007: €1,660,230).
Leased assets, comprising plant and equipment where the Group is a lessee under a finance lease, comprise as follows:
Cost - capitalised finance leases
Accumulated depreciation
Net book amount
2008
€’000
2007
€’000
41,673
(27,830)
43,976
(27,250)
13,843
16,726
Operating lease rentals amounting to €10,356,958 (2007: €9,116,980) are included in the income statement.
Included in the cost of plant and equipment is an amount of €18,042,531 (2007: €24,780,022) incurred in respect of assets under
construction.
Borrowing costs incurred on significant capital projects are capitalised. The amount capitalised, using the Group’s incremental
cost of borrowing amounted to €589,000 in 2008 (2007: nil).
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.
The Group does not have any assets secured against borrowings.
84
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
15. Intangible assets
Year ended 29 December 2007
Opening net book amount
Exchange differences
Additions
Adjustments re acquisitions
Acquisition of subsidiaries
Reclassification
Amortisation
Previously stated closing net book amount
Final intellectual property valuation adjustment
Other
intangibles
See note (a)
€’000
Goodwill
€’000
Software Development
costs
€’000
costs
€’000
85,132
(6,761)
360
(189)
6,125
-
-
84,667
3,356
25,935
(1,820)
91
-
5,545
-
(2,363)
27,388
(3,356)
24,112
(287)
1,341
-
-
(266)
(3,824)
21,076
-
3,545
(286)
1,804
-
-
-
(629)
4,434
-
Total
€’000
138,724
(9,154)
3,596
(189)
11,670
(266)
(6,816)
137,565
-
Restated closing net book amount
88,023
24,032
21,076
4,434
137,565
At 29 December 2007
Cost
Accumulated amortisation
88,023
-
27,827
(3,795)
41,887
(20,811)
5,277
(843)
163,014
(25,449)
Net book amount
88,023
24,032
21,076
4,434
137,565
Year ended 3 January 2009
Opening net book amount
Exchange differences
Acquisition of subsidiaries (note 41)
Additions
Reclassification
Write-off of goodwill/intangibles
Reduction in contingent consideration (note 41)
Amortisation
88,023
5,515
58,065
77
-
(635)
(5,461)
-
24,032
10,336
154,028
-
-
(282)
-
(3,817)
21,076
157
-
4,376
233
-
-
(3,685)
4,434
342
-
3,253
-
-
-
(855)
137,565
16,350
212,093
7,706
233
(917)
(5,461)
(8,357)
Closing net book amount
145,584
184,297
22,157
7,174
359,212
At 3 January 2009
Cost
Accumulated amortisation
145,584
-
191,909
(7,612)
46,653
(24,496)
8,872
(1,698)
393,018
(33,806)
Net book amount
145,584
184,297
22,157
7,174
359,212
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
8 5
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
Note (a) - other intangibles
At 29 December 2007
Cost
Accumulated amortisation
Previously stated closing net book amount
Final intellectual property valuation adjustment
Brands/
know-how
€’000
Customer
relationships
€’000
Other
€’000
Total other
intangibles
€’000
11,080
(1,673)
9,407
-
13,149
(1,781)
11,368
-
6,954
(341)
6,613
(3,356)
31,183
(3,795)
27,388
(3,356)
Restated closing net book amount
9,407
11,368
3,257
24,032
Year ended 3 January 2009
Opening net book amount
Exchange differences
Acquisition of subsidiaries (note 41)
Write-off of intangibles
Amortisation
Closing net book amount
At 3 January 2009
Cost
Accumulated amortisation
Net book amount
9,407
5,681
82,855
-
(749)
11,368
5,119
71,173
-
(2,908)
3,257
(464)
-
(282)
(160)
24,032
10,336
154,028
(282)
(3,817)
97,194
84,752
2,351
184,297
99,616
(2,422)
89,441
(4,689)
2,852
(501)
191,909
(7,612)
97,194
84,752
2,351
184,297
Included in intangibles is a carrying value of €88.35 million relating primarily to brands/know-how with indefinite useful lives.
In arriving at the conclusion that brands/know-how have indefinite useful lives, it has been determined that these assets will
contribute indefinitely to the cash flows of the Group. The factors that result in the durability of brands/know how capitalised is
that there are no known material legal, regulatory, contractual or other factors that limit the useful life of these intangibles.
Impairment tests for goodwill
Goodwill is allocated to the Group’s cash generating units. A summary of the goodwill allocation by principle cash generating
units is as follows:
Glanbia Nutritionals Deutschland GmbH
Seltzer Companies, Inc.
Optimum Nutrition, Inc.
Multiple units without individual significant amounts of goodwill
2008
€’000
11,297
57,921
61,915
2007
€’000
11,297
54,604
-
131,133
65,901
14,451
18,766
145,584
84,667
The recoverable amount allocated to 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 three and ten years, which is consistent with prior
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 relevant cash generating units.
The value in use calculations are prepared using a pre tax discount rate of 6.5%, which is the Group’s weighted average cost of
capital, and incorporate terminal values. The above rate is consistent for each cash generating unit. The indefinite useful lives
have been included in the Optimum Nutrition, Inc. cash generating unit for the purposes of impairment testing. In forecasting
terminal values, a multiple of five to ten times EBITDA is generally used.
86
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
16. Investments in associates
At the beginning of the year
Share of profit after tax
Exchange differences
Additions
Funding repaid
At the end of the year
2008
Company
€’000
2008
Group
€’000
2007
Company
€’000
1,395
-
-
-
-
10,729
457
-
611
(200)
1,395
11,597
1,395
-
-
-
-
1,395
2007
Group
€’000
10,933
158
(157)
-
(205)
10,729
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:
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
2008
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
Profit/
(loss)
€’000
Interest
held
%
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
(271)
102
310
165
(148)
158
50
57
33.3
49
41.8
Assets
€’000
Liabilities
€’000
Revenues
€’000
Profit/
(loss)
€’000
Interest
held
%
8,463
4,837
5,092
7,582
325
6,219
832
2,245
6,071
197
15,411
1,824
5,288
1,792
-
26,299
15,564
24,315
50
57
33.3
49
49.99
163
130
156
195
(186)
458
* In accordance with Group accounting policy, Co-operative Animal Health Limited and South Eastern Cattle Breeding Society
Limited are included in the Group result based on the equity method of accounting, as the Group has significant influence over
the entities but not control, due to their co-operative structure.
Further details in relation to principal associates are outlined in note 44.
17. Investments in joint ventures
At the beginning of the year
Share of profit after tax - including exceptional tax charge
Other reserve movements
Deferred tax provision
Write-down of investment
Exchange differences
Funding advanced
At the end of the year
2008
€’000
57,328
5,901
(2,961)
(2,420)
(335)
(224)
7,606
2007
€’000
58,668
834
(1,925)
(3,312)
(380)
(5,671)
9,114
64,895
57,328
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
8 7
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
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.
2008
€’000
2007
€’000
101,573
69,598
100,418
63,819
171,171
164,237
63,361
42,915
53,356
60,511
106,276
113,867
64,895
50,370
346,000
(340,099)
330,906
(330,072)
5,901
834
31,812
15,700
The Group holds 51% of the share capital of Glanbia Cheese but this is considered to be a joint venture as the Group does not
have control of the company.
18. Investments
At the beginning of the year
Disposals/redemption
Fair value adjustment
Amounts written off
Additions
At the end of the year
Available
for sale
investments
2008
Group
€’000
Investments
2007
Company
€’000
Available
for sale
investments
2007
Group
€’000
30,089
(3,139)
(3,371)
-
533
510,412
(27,251)
-
(27,858)
-
12,527
(37)
17,512
-
87
Investments
2008
Company
€’000
455,303
-
-
-
5,468
460,771
24,112
455,303
30,089
There was a disposal of shares held in One51 plc during the year, this is outlined in note 42.
There were no impairment provisions on available for sale investments in 2008 or 2007.
88
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Investments include the following:
Listed securities
- Equity securities – eurozone countries
Unlisted securities
- One51 plc
- Irish Dairy Board
- Glanbia Enterprise Fund Limited
- Moorepark Technology
- Other Group companies
Other
Available
for sale
investments
2008
Group
€’000
Investments
2007
Company
€’000
Available
for sale
investments
2007
Group
€’000
Investments
2008
Company
€’000
1
182
1
526
-
-
1,290
-
459,480
11,692
9,986
1,290
198
-
-
-
1,290
-
454,012
17,856
9,644
1,290
198
-
-
764
-
575
460,771
24,112
455,303
30,089
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 at each reporting date. 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
Value added tax
Other receivables
2008
Company
€’000
2008
Group
€’000
2007
Company
€’000
2007
Group
€’000
-
-
152,005
(8,091)
-
-
157,415
(7,834)
-
31
-
-
48,309
-
-
143,914
21,562
2,430
11,929
-
6,841
8,840
-
39
-
-
23,984
-
-
149,581
29,189
6,757
6,971
-
9,848
6,859
48,340
195,516
24,023
209,205
Less non current portion: loans to related parties
-
(11,929)
-
(6,971)
48,340
183,587
24,023
202,234
In 2008, 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 €37.0 million (2007: €27.6 million). The Group has continued to
recognise an asset of €663,000 (2007: €515,000), representing the extent of its continuing involvement, and an associated
liability of a similar amount.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
8 9
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
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
2008
Company
€’000
48,340
-
-
-
2008
Group
€’000
2007
Company
€’000
81,658
96,976
9,166
7,716
24,023
-
-
-
2007
Group
€’000
106,173
96,497
6,374
161
48,340
195,516
24,023
209,205
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
2008
€’000
7,834
1,797
(1,194)
(346)
2007
€’000
10,439
859
(1,909)
(1,555)
8,091
7,834
As of 3 January 2009, trade receivables of €8.2 million (2007: €9.1 million) were impaired. Trade receivable balances are
considered to be impaired in full when falling due outside trade terms and are partially or wholly provided for. The amount of
the provision was €8.1 million (2007: €7.8 million)
The breakdown of impaired trade receivables was as follows:
Past due:
Up to 3 months
3 to 6 months
Over 6 months
2008
€’000
2,739
613
4,880
8,232
2007
€’000
1,094
60
7,992
9,146
As of 3 January 2009, trade receivables of €29.6 million (2007: €23.8 million) were past due but not impaired, as they are
considered recoverable.
Past due not impaired:
Up to 3 months
3 to 6 months
Over 6 months
2008
€’000
17,518
10,122
1,997
2007
€’000
20,558
3,158
81
29,637
23,797
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.
90
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
20. Inventories
Raw materials
Finished goods
Consumables
2008
€’000
40,009
216,259
11,154
2007
€’000
18,071
195,342
11,644
267,422
225,057
Included in the above are inventories carried at fair value less costs to sell amounting to €115.3 million (2007: €3.1 million). The
amounts written off in respect of these inventories was €18.8 million.
21. Cash and cash equivalents
Cash at bank and in hand
Short term bank deposits
2008
Company
€’000
2008
Group
€’000
2007
Company
€’000
-
-
-
22,998
109,574
132,572
-
-
-
2007
Group
€’000
62,478
97,341
159,819
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
Assets
Inventory
Trade and other receivables
Assets included in disposal group
Liabilities
Trade and other payables
Liabilities included in disposal group
2008
€’000
2007
€’000
-
-
-
-
-
9,224
11,080
20,304
17,647
17,647
A strategic review of Pigmeat operations was conducted during 2007, 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.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
9 1
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
23. Reconciliation of changes in equity
Notes
Share
capital
€’000
(note 24)
Other
reserves
€’000
(note 25)
Retained
earnings
€’000
(note 26)
Minority
interest
€’000
(note 30)
Total
€’000
Balance at 30 December 2006
98,304
113,696
(18,116)
6,635
200,519
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 (expense)/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
Balance at 29 December 2007
Actuarial loss - defined benefit schemes
Deferred tax on pension loss
Share of actuarial loss - joint ventures
Currency translation differences
Fair value adjustments
Net expense recognised directly in equity
Profit for the year
Total recognised (expense)/income for 2008
Shares issued
Premium on shares issued
Cost of share options
Discount on options
Shares purchased
Dividends paid in 2008
33
32
25
25
30
24
24
28
28
27
33
32
25
25
24
24
28
28
27
-
-
-
-
-
-
-
-
-
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)
-
-
513
-
-
-
-
-
-
(17,334)
(17,334)
-
-
-
-
-
-
407
407
(2)
-
-
-
-
-
-
(2)
(4,539)
1,102
230
(14,878)
8,578
(9,507)
60,240
50,733
(2)
6
161
587
-
(95)
(17,334)
(16,677)
98,450
107,909
21,176
7,040
234,575
-
-
-
-
-
-
-
-
13
347
-
175
(1,665)
-
(1,130)
-
-
-
17,251
(22,930)
(5,679)
-
(68,246)
7,084
(204)
-
-
(61,366)
78,399
(5,679)
17,033
-
-
827
(175)
-
-
-
-
-
-
-
(18,502)
652
(18,502)
-
-
-
-
-
-
970
970
-
-
-
-
-
-
-
(68,246)
7,084
(204)
17,251
(22,930)
(67,045)
79,369
12,324
13
347
827
-
(1,665)
(18,502)
(18,980)
Balance at 3 January 2009
97,320
102,882
19,707
8,010
227,919
92
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
24. Share capital and share premium
Company
At 30 December 2006
Discount on options
Shares purchased
Issue of shares - option scheme
At 29 December 2007
Discount on options
Shares purchased
Issue of shares - option scheme
Number of
shares
Ordinary
shares
(thousands)
€’000
293,239
-
-
108
293,347
-
-
209
17,594
-
-
6
17,600
-
-
13
Share
premium
Company
€’000
436,366
-
-
161
436,527
-
-
347
Own
shares
Total
Company
€’000
€’000
(388)
74
(95)
-
(409)
175
(1,665)
-
453,572
74
(95)
167
453,718
175
(1,665)
360
At 3 January 2009
293,556
17,613
436,874
(1,899)
452,588
Group
At 30 December 2006
Discount on options
Shares purchased
Issue of shares - option scheme
At 29 December 2007
Discount on options
Shares purchased
Issue of shares - option scheme
Number of
shares
Ordinary
shares
(thousands)
€’000
293,239
-
-
108
293,347
-
-
209
17,594
-
-
6
17,600
-
-
13
Share
premium
Group
€’000
81,098
-
-
161
81,259
-
-
347
Own
shares
Total
Group
€’000
€’000
(388)
74
(95)
-
(409)
175
(1,665)
-
98,304
74
(95)
167
98,450
175
(1,665)
360
At 3 January 2009
293,556
17,613
81,606
(1,899)
97,320
The total authorised number of ordinary shares is 306 million shares (2007: 306 million shares) with a par value of €0.06 per share
(2007: €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:
2008
2008
Average
exercise
price in Number of
2007
2007
Average
exercise
price in Number of
options
€ per share
options € per share
At the beginning of the year
Granted
Exercised
Lapsed
2.52
-
1.72
4.25
2,792,000
-
(209,000)
(325,000)
2.39
4.03
1.55
-
2,734,000
166,000
(108,000)
-
At the end of the year
2.35
2,258,000
2.52
2,792,000
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
9 3
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
Expiry date in
2008
2008
2012
2013
2014
2014
2016
2017
Exercise
price
€
Stg£2.90
4.25
1.55
1.90
2.47
2.73
2.87
4.03
2008
Number
2007
Number
-
-
782,000
160,000
100,000
1,000,000
50,000
166,000
10,000
315,000
961,000
160,000
100,000
1,030,000
50,000
166,000
2,258,000
2,792,000
Total options over 2,258,000 (2007: 2,467,000) ordinary shares were outstanding at 3 January 2009 under the 2002 Long Term
Incentive Plan (the 2002 LTIP), at prices ranging between €1.55 and €4.03. Furthermore, in accordance with the terms of the
2002 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 118,600
(2007: 134,600) 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 570,054 (2007: 238,544) ordinary
shares at 3 January 2009. The dividend rights in respect of these shares have been waived, save 0.001 pence per share.
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.
2007 Long Term Incentive Plan (‘the 2007 LTIP’) and 2008 Long Term Incentive Plan (‘the 2008 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 the 2007 LTIP for selected senior managers 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 3 January 2009
amounted to 169,500 ordinary shares (2007: 183,500).
In August 2008, arising from the review of the Group’s compensation arrangements for executive Directors and senior managers,
the Directors approved the introduction of the 2008 LTIP for selected senior managers in order to further align the interests
of such senior managers with those of shareholders. Awards outstanding under the Company’s 2008 LTIP as at 3 January 2009
amounted to 583,000 ordinary shares (2007: nil).
The LTIP schemes are 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 LTIP schemes 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 LTIP schemes 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 combined expense of €888,398 (2008 LTIP: €677,985, 2007 LTIP: €210,413) charged 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.
The 2007 LTIP
Impact on Group income statement
The total expense is analysed as follows:
Granted in 2007
Share price
at date
Period
to earliest
of award release date
Number
of
shares
€
Fair value
€
Expense in Group
income statement
2008
€’000
2007
€’000
2007 Long Term Incentive Plan
4.03
2 years
169,500
3.85
€210
€210
94
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Shares awarded under the 2007 LTIP are nil based payments. The 2007 awards will expire in 2011.
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
4%
25%
2%
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.
The 2008 LTIP
Impact on Group income statement
The total expense is analysed as follows:
Granted in 2008
Share Price
at date
of award
€
Period
to earliest
release date
Number
of
shares
Fair value
€
Expense in Group
income statement
2008
€’000
2007
€’000
2008 Long Term Incentive Plan
4.45
3 years
583,000
4.32
€678
-
Shares awarded under the 2008 LTIP are nil based payments. The 2008 awards will expire in 2012.
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
4%
29%
1%
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 of the 2007 LTIP and the 2008 LTIP
The Glanbia Employees’ Share Trust (‘the Trust’) was retained during the year to manage the 2007 LTIP and 2008 LTIP. The Trust
purchased the following shares:
Number of shares held by the Trust at 29 December 2007
Number of shares purchased by the Trust
Number of shares issued by the Trust
Number of shares held by the Trust at 3 January 2009
These shares were accounted for as own shares in the Group balance sheet.
Number of
shares
purchased
Cost of
shares
purchased
€
238,544
381,510
(50,000)
415,770
1,658,175
(175,293)
570,054
1,898,652
The fair value of share options has been calculated using the Trinomial Model. Options over 2,042,000 (2007: 2,576,000) ordinary
shares were exercisable at 3 January 2009 at a weighted average price of €2.20 (2007: €2.42).
The weighted average life for share options outstanding is five years.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
9 5
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
25. Other reserves
Capital
and
merger
reserves
€’000
Currency
reserve
€’000
Fair value
reserve
€’000
Total
€’000
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
Translation differences on foreign currency net investments
Revaluation of interest rate swaps - loss in year
Foreign exchange contracts - loss in year
Transfers to income statement
- Foreign exchange contracts - gain in year
- Forward commodity contracts - gain in year
- Interest rate swaps - loss in year
- Sale of quoted investments - gain in year
Revaluation of forward commodity contracts - loss in year
Revaluation of available for sale investments - loss in year
Deferred tax on fair value adjustments
Cost of share options
Discount on options
-
-
-
-
-
-
-
-
-
-
827
(175)
17,251
-
-
-
(16,508)
(484)
17,251
(16,508)
(484)
-
-
-
-
-
-
-
-
-
(342)
(11)
477
(2,910)
(519)
(3,597)
964
-
-
(342)
(11)
477
(2,910)
(519)
(3,597)
964
827
(175)
Balance at 3 January 2009
117,586
(5,230)
(9,474)
102,882
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) cost of share options under the 2007 LTIP and 2008 LTIP schemes 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.
96
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
26. Retained earnings
Company
retained
earnings
€’000
Group
retained
earnings
€’000
Group
goodwill
write-off
€’000
Group
Total
€’000
Balance at 30 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 ventures
Net expense recognised directly in equity
(Loss)/profit for the year
Total recognised (expense)/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
Actuarial loss - defined benefit schemes
Deferred tax on pension loss
Share of actuarial loss - joint ventures
Net expense recognised directly in equity
Profit for the year
Total recognised income for 2008
Dividends paid in 2008
-
-
-
-
36,204
(68,246)
7,084
(204)
(61,366)
78,399
36,204
17,033
(18,502)
(18,502)
-
-
-
-
-
-
-
(68,246)
7,084
(204)
(61,366)
78,399
17,033
(18,502)
Balance at 3 January 2009
36,056
112,668
(92,961)
19,707
27. Own shares (Company and Group)
At the beginning of the year
Discount on options
Shares purchased
At the end of the year
2008
€’000
(409)
175
(1,665)
(1,899)
2007
€’000
(388)
74
(95)
(409)
The amount included above as own shares relates to 570,054 (2007: 238,544) 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 3 January 2009 cost €1,898,652 and had a market value of €1,180,012 at 3 January
2009. The transfer from capital reserve represents the excess of the purchase price over the weighted average price in respect of
50,000 ordinary shares (2007: 50,000 ordinary shares) on which options vested during the year.
Shares purchased under the 2007 LTIP scheme and the 2008 LTIP scheme are deemed to be own shares in accordance with
IAS 32 – Financial Instruments: Disclosure and Presentation.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
9 7
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
28. Capital reserves
At the beginning of the year
Sharesave Scheme - discount on options
Cost of share options and share awards
2008
Company
€’000
5,187
(175)
827
2008
Group
€’000
3,786
(175)
827
2007
Company
€’000
4,674
(74)
587
At the end of the year
5,839
4,438
5,187
2007
Group
€’000
3,273
(74)
587
3,786
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
2008
€’000
2007
€’000
355,271
(327,085)
84,962
355,271
(327,085)
84,962
113,148
113,148
The merger adjustment represents the difference between the nominal value of the issued share capital of Waterford Foods plc
and the fair value of the shares issued by Avonmore Foods plc in 1997 (now named Glanbia plc).
30. Minority interests
At the beginning of the year
Share of profit for the year
Reduction in minority interest in subsidiaries
At the end of the year
31. Borrowings
Current
Bank overdrafts/borrowings
Finance lease liabilities
Non-current
Bank borrowings
Cumulative redeemable preference shares
Finance lease liabilities
2008
€’000
7,040
970
-
8,010
2007
€’000
6,635
407
(2)
7,040
2008
Company
€’000
2008
Group
€’000
2007
Company
€’000
2007
Group
€’000
13,740
-
14,401
880
13,740
15,281
1,928
-
1,928
-
966
966
-
-
-
-
500,742
63,487
5,145
569,374
-
-
-
-
309,548
63,487
5,993
379,028
Total borrowings
13,740
584,655
1,928
379,994
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.
98
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
The maturity of non-current borrowings is as follows:
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
2008
€’000
926
503,824
64,624
2007
€’000
904
312,481
65,643
569,374
379,028
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 2 and 5 years
Over 5 years
2008
€’000
325,143
190,000
69,512
2007
€’000
119,645
190,000
70,349
584,655
379,994
The effective interest rates at the balance sheet date, were as follows:
EUR
GBP
USD
CAD
2008
2007
2008
2007
2008
2007
2008
2007
Bank overdrafts
Bank borrowings
3.55%
4.34%
5.47%
4.46%
2.60%
3.76%
6.10%
6.81%
5.25%
2.57%
9.25%
4.97%
4.50%
3.32%
7.25%
5.50%
The carrying amounts and fair values of non-current borrowings are as follows:
Net carrying
amount
Estimated
fair values
2008
€’000
2007
€’000
2008
€’000
2007
€’000
Non-current borrowings
569,374
379,028
571,306
372,772
The carrying value of current borrowings approximates their fair value.
The carrying amounts of the Group’s total borrowings are denominated in the following currencies:
Euro
GBP sterling
US dollar
Canadian dollar
2008
€’000
287,143
22,348
265,159
10,005
2007
€’000
278,204
6,958
87,145
7,687
584,655
379,994
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
9 9
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
The Group has the following undrawn borrowing facilities:
Floating rate:
- Expiring within 1 year
- Expiring beyond 1 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
2008
€’000
2007
€’000
31,803
67,302
16,785
144,122
99,105
160,907
2008
€’000
1,197
1,197
3,588
1,197
7,179
(1,154)
2007
€’000
1,240
1,143
3,430
2,286
8,099
(1,140)
6,025
6,959
2008
€’000
880
926
3,082
1,137
6,025
2007
€’000
966
904
2,933
2,156
6,959
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 charge/(credit)
Acquisition of subsidiary and purchase of intellectual property
Deferred tax (credit)/charge to the fair value reserve (note 25)
Deferred tax credit relating to the actuarial loss in the year
Exchange differences
At the end of the year
100
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
2008
€’000
2007
€’000
(25,380)
(21,672)
59,056
37,587
33,676
15,915
2008
€’000
15,915
1,416
181
20,631
(964)
(7,084)
3,581
2007
€’000
14,688
2,609
(2,592)
462
3,028
(1,102)
(1,178)
33,676
15,915
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
tax
depreciation
€’000
Deferred
Fair value development
costs
€’000
gains
€’000
Other
€’000
Total
€’000
At 30 December 2006
(Credited)/charged to income statement
Charged against equity (note 25)
Acquisition of subsidiaries and intellectual property
Exchange differences
32,861
(4,230)
-
-
(1,978)
905
-
3,028
-
-
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
(Credited)/charged to income statement
Credited to equity (note 25)
Acquisition of subsidiaries and intellectual property
Exchange differences
(1,798)
-
-
831
-
(964)
-
-
309
-
-
45
2,147
-
20,631
268
658
(964)
20,631
1,144
At 3 January 2009
25,686
2,969
886
29,515
59,056
Deferred tax assets
At 30 December 2006
Charged to income statement
Credited to equity (note 23)
Exchange differences
At 29 December 2007
Charged/(credited) to income statement
Credited to equity (note 23)
Exchange differences
At 3 January 2009
The deferred tax 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
Retirement
obligations
€’000
Tax
losses
€’000
Total
€’000
(11,667)
(12,256)
(23,923)
1,570
(1,102)
-
(11,199)
1,196
(7,084)
-
773
-
1,010
(10,473)
(257)
-
2,437
2,343
(1,102)
1,010
(21,672)
939
(7,084)
2,437
(17,087)
(8,293)
(25,380)
2008
€’000
(752)
(212)
(7,084)
2007
€’000
3,503
(475)
(1,102)
(8,048)
1,926
The increase in the retirement benefit obligation has given rise to an increase 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 €11.1 million (2007: €20.7 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.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 0 1
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
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 5 April
2005 and 1 July 2008. The contributions paid to the scheme in 2008 are in accordance with the contribution rates recommended
in the actuarial valuation reports.
The amounts recognised in the balance sheet are determined as follows:
2008
€’000
2007
€’000
(465,909)
301,499
(496,769)
382,521
(164,410)
(114,248)
2008
€’000
(7,594)
(23,147)
22,828
2007
€’000
(9,315)
(18,885)
23,219
(7,913)
(4,981)
376
1,843
(7,537)
(3,138)
(1,719)
(1,217)
2008
€’000
2007
€’000
(114,248)
6,101
(500)
(7,537)
(68,246)
20,020
(124,888)
2,161
1,230
(3,138)
(4,539)
14,926
(164,410)
(114,248)
Present value of funded obligations
Fair value of plan assets
Liability in the balance sheet
The amounts recognised in the income statement are as follows:
Service cost - current
Interest cost
Expected return on plan assets
Exceptional item - curtailment gain (note 8)
Defined contribution
The actual return on plan assets was a loss of €81.4 million (2007: €9.3 million loss).
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 – shown in equity
Contributions paid
At the end of the year
102
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
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
Interest cost
Actuarial (loss)/gain – shown in equity
- Experience losses
- Change in assumptions
Contributions by plan participants
Curtailment gain
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 loss shown in equity
Contributions by plan participants
Contributions by employer
Benefits paid
At the end of the year
The principal actuarial assumptions used were as follows:
2008
€’000
2007
€’000
(496,769)
17,833
(4,208)
(7,594)
(23,147)
(3,175)
39,158
(4,163)
376
15,780
(501,473)
7,910
(18,787)
(9,315)
(18,885)
(7,160)
35,165
(4,147)
1,843
18,080
(465,909)
(496,769)
2008
€’000
2007
€’000
382,521
(11,732)
3,708
22,828
(104,229)
4,163
20,020
(15,780)
376,585
(5,751)
20,017
23,219
(32,542)
4,147
14,926
(18,080)
301,499
382,521
Discount rate
5.9%
6.6%
5.5%
6.0%
2008
2007
IRL
UK
IRL
UK
Expected return on plan assets
- Equities
- Bonds
- Gilts
- Cash
- Property
- Other assets
Inflation rate
Future salary increases
Future pension increases
8.25%
4.25%
n/a
3.25%
7.25%
7.25%
2.5%
3.5%
1.5%-3.5%
8.7%
6.7%
3.9%
3.5%
7.8%
7.8%
3.1%
3.85%
3.0%
8.7%
5.0%
n/a
4.0%
7.5%
7.5%
2.5%
4.0%
8.1%
5.3%
4.5%
6.0%
7.75%
5.9%-7%
3.4%
4.2%
2.5%-3.5% 2.25%-3.25%
2008
€’000
2007
€’000
Actuarial loss recognised in the statement of recognised income and expense
68,246
4,539
Cumulative actuarial losses recognised in the statement of recognised income and expense
123,991
55,745
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 0 3
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
Plan assets are comprised as follows:
Equity
Bonds
Gilts
Property
Cash
2008
2007
€’000
125,893
90,961
4,346
40,392
39,907
%
42
30
2
13
13
€’000
214,040
84,861
9,230
36,418
37,972
%
56
22
2
10
10
301,499
100
382,521
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.
Contributions to post-employment benefit plans are expected to increase in 2009.
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, 20 years from now:
Male
Female
Irish mortality UK mortality
rates
rates
20
22.9
24
26.8
The mortality assumptions imply the following life expectancies in years of an active member, aged 65, retiring now:
Male
Female
At the end of the year
Irish mortality UK mortality
rates
rates
18.9
21.8
22.9
25.8
2008
€’000
2007
€’000
2006
€’000
2005
€’000
2004
€’000
Fair value of plan assets
Present value of defined benefit obligations
301,499
(465,909)
382,521
(496,769)
376,585
(501,473)
338,829
(503,845)
285,376
(412,052)
Deficit
(164,410)
(114,248)
(124,888)
(165,016)
(126,676)
Experience adjustments on plan liabilities
(3,175)
(7,160)
(12,651)
(2,037)
(6,341)
Experience adjustments on plan assets
(104,229)
(32,542)
11,575
28,383
5,911
104
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Sensitivity analysis for principal assumptions used to measure scheme liabilities
There are inherent uncertainties surrounding the financial assumptions adopted in calculating the actuarial valuation of the
Group’s defined benefit pension schemes. The following table analyses, for the Group’s Irish and UK pension schemes, the
estimated impact on the plan liabilities resulting from changes to key actuarial assumptions, whilst holding all other assumptions
constant.
Assumption
Change in assumption
Impact on Irish plan liabilities
Impact on UK plan liabilities
Discount rate
Price inflation
Mortality
Increase/decrease 0.25%
Increase/decrease 0.25%
Increase/decrease by one year
Increase/decrease by 4.3%
Increase/decrease by 2.4%
Increase/decrease by 3.7%
Decrease/increase by 4.3% to 5.0%
Decrease/increase by 2.5% to 3.4%
Decrease/increase by 2.0% to 2.2%
34. Provisions for other liabilities and charges
At 29 December 2007
Charged to the consolidated income statement
- Additional provisions
Net amounts charged to provision
Exchange differences
At 3 January 2009
Non-current
Current
Restructuring
€’000
UK pension
€’000
Other
€’000
Total
€’000
6,284
3,845
25,809
35,938
16,669
(3,516)
-
-
(1,635)
(876)
2,055
(18,636)
(1,611)
18,724
(23,787)
(2,487)
19,437
1,334
7,617
28,388
-
19,437
1,334
-
3,565
4,052
4,899
23,489
19,437
1,334
7,617
28,388
(a) The restructuring provision relates to the rationalisation programme Glanbia is currently undertaking. The provision which
relates mainly to redundancy is expected to be fully utilised in 2009.
(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 two to 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 €4.0 million of this
provision will be utilised in 2009, with the balance being utilised over a further five year period. Due to the nature of these
items, there is some uncertainly around their amount and the timing of payment.
35. Capital grants
At 29 December 2007
Receivable for year
In acquired subsidiaries
Exchange differences
Transfer to disposal group held for sale
Released to income statement
At 3 January 2009
2008
€’000
3,535
9,802
-
(43)
-
(600)
2007
€’000
10,660
1,399
45
(19)
(7,814)
(736)
12,694
3,535
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 0 5
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
36. Trade and other payables
Trade payables
Amounts due to associates and joint ventures
Amounts due to other related parties (note 42)
PAYE and PRSI
Accrued expenses
Other payables
2008
Company
€’000
2008
Group
€’000
2007
Company
€’000
-
-
-
-
2,283
-
116,132
39,723
1,148
3,576
188,965
1,908
-
-
-
-
1,534
-
2007
Group
€’000
111,785
32,868
930
4,016
185,133
1,931
2,283
351,452
1,534
336,663
The carrying value of payables are a reasonable approximation of fair value.
37. Derivative financial instruments
Interest rate swaps - cash flow hedges
Interest rate swaps - fair value hedges
Foreign exchange contracts - cash flow hedges
Commodity futures - cash flow hedges
Commodity futures - fair value hedges
Total
Less non-current portion
Interest rate swaps - cash flow hedges
Interest rate swaps - fair value hedges
Commodity futures - fair value hedges
Non-current portion
Current portion
2008
Assets
€‘000
-
4,156
2,400
236
6,340
2008
Liabilities
€‘000
(14,957)
(1,657)
(2,459)
(650)
(6,340)
13,132
(26,063)
-
2,501
253
(8,388)
(607)
(253)
2,754
(9,248)
2007
Assets
€‘000
82
1,172
2,980
9
1,510
5,753
43
720
-
763
2007
Liabilities
€‘000
(528)
(4,738)
(108)
(39)
(1,510)
(6,923)
(259)
(3,477)
-
(3,736)
10,378
(16,815)
4,990
(3,187)
Interest rate swaps
The notional principal amounts of the outstanding interest rate swap contracts, qualifying as cash flow hedges at 3 January 2009
were €317.6 million (2007: €96.4 million).
The notional principal amounts of the outstanding interest rate swap contracts, qualifying as fair value hedges at 3 January 2009
were €265.1 million (2007: €265.1 million).
At 3 January 2009, the fixed interest rates vary from 3.665% to 4.94% (2007: 3.79% to 4.3722%) and the main floating rates are set
in advance by reference to inter-bank interest rates (5.151% EURIBOR, 2.3225% $LIBOR).
Gains and losses recognised in the fair value reserve in equity on interest rate swap contracts at 3 January 2009 will be
continuously released to the income statement until repayment of the bank borrowings.
Foreign exchange contracts
The notional principal amounts of the outstanding foreign exchange contracts at 3 January 2009 are €78.3 million
(2007: €71.8 million).
Gains and losses recognised in the fair value reserve in equity on foreign exchange contracts at 3 January 2009 will be released
to the income statement at various dates between one day and one year from the balance sheet date.
106
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Commodity futures
The notional principal amounts of the outstanding commodity (milk, gas, oil and propane) futures, qualifying as cash flow
hedges and fair value hedges at 3 January 2009 were €5.6 million and €28.8 million (2007: €1.2 million and €7.6 million)
respectively. Gains and losses recognised in the fair value reserve on these futures as at 3 January 2009 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, therefore 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.
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 3 January 2009 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 €4,522,000 (2007: €7,495,000) are outstanding as at 3 January 2009, 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 €40.8 million (2007: €107.0 million)
2008
€’000
2007
€’000
20,050
19,856
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
2008
€’000
7,736
20,255
5,390
2007
€’000
5,947
14,606
5,868
33,381
26,421
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 0 7
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
40. Cash generated from operations
2008
Company
€’000
2008
Group
€’000
2007
Company
€’000
2007
Group
€’000
Profit/(loss) before tax
36,204
100,005
(12,236)
76,081
Development costs capitalised
Other movements - impairment charge
Non-cash exceptional - rationalisation/exit from Pigmeat
Non-cash - redemption of shares
Share of results of associates and joint ventures
Depreciation
Amortisation
Cost of share options
Difference between pension charge and cash contributions
Gain on disposal of property, plant and equipment
Interest income
Interest expense
Dividends received
Amortisation of government grants received
Net profit before changes in working capital
Change in net working capital
- (Increase in) inventory
- (Increase)/decrease in short term receivables
- Increase/(decrease) in short term liabilities
- Increase in provisions
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(3,253)
620
943
-
(6,359)
25,789
8,358
827
(13,984)
(5,319)
(5,590)
26,695
-
(600)
-
-
27,858
1,948
-
-
-
-
-
-
(1,255)
-
(8,000)
-
(1,804)
-
13,706
-
(992)
27,246
6,816
587
(10,971)
(3,002)
(4,813)
22,095
-
(736)
36,204
128,132
8,315
124,213
-
(32,266)
749
-
(20,888)
27,088
(1,481)
14,095
-
(21,555)
(10,360)
-
(82,093)
(36,615)
78,744
861
Cash generated from operations
4,687
146,946
(23,600)
85,110
41. Business combinations
On 22 August 2008 Glanbia plc acquired a US based sports nutritional business, Optimum Nutrition, Inc. (Optimum). Optimum
manufactures, markets and retails whey based, premium nutritional ingredients to the US and global sports nutrition markets.
Details of net assets acquired and goodwill arising from the above business combinations are as follows:
Purchase consideration:
- Cash paid
- Direct costs relating to the acquisition
Total purchase consideration
Fair value of assets acquired
Goodwill (note 15)
2008
€’000
216,023
1,919
217,942
(159,877)
58,065
The goodwill is attributable to the profitability and workforce of the acquired business and the benefits associated with the
extension of Glanbia’s scale and specific capabilities to the acquired business, synergies and other benefits.
108
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
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
Deferred tax
Net assets acquired
Purchase consideration
Contingent consideration
Cash outflow on acquisition
Fair
value
€’000
3,389
154,028
18,198
13,097
(9,581)
(19,254)
Acquiree’s
carrying
amount
€’000
3,389
68
18,198
13,097
(9,581)
-
159,877
25,171
217,942
-
217,942
The post acquisition impact of Optimum Nutrition, Inc. completed during the year on Group results for the financial year was as
follows:
Revenue
Profit before taxation
Consolidated
2008
acquisition
€’000
Group excl
acquisition
€’000
Group incl
acquisition
€’000
58,194
2,173,967
2,232,161
9,134
90,871
100,005
The revenue and profit for the financial year determined in accordance with IFRS 3 - Business Combinations as though the
acquisition date for the business combination effected during the year had been the beginning of that year, would be as follows:
Revenue
Profit before taxation
2008
acquisition
€’000
Pro Forma
Group excl consolidated
Group
acquisition
€’000
€’000
157,741
2,173,967
2,331,708
17,799
90,871
108,670
The fair values assigned to the identifiable assets and liabilities have been determined provisionally due to proximity of the
acquisition to year end date. Any adjustments to these provisional valuations will be recognised within 12 months of the
acquisition date.
In the year ended 29 December 2007, the Group acquired the business of 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.
Final valuation adjustments to the provisional intangible asset valuations were carried out during the year resulting in an
adjustment of €3.4 million to intellectual property. In December 2008, the terms of the purchase agreement between Glanbia
plc and the previous owners of Pizzey’s Milling were revised. On determination of the final deferred consideration, goodwill was
revised downwards by €5.5 million. These adjustments were made prospectively in the Group in line with IFRS 3.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 0 9
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
42. Related party transactions
The Group is controlled by Glanbia Co-operative Society Limited (‘the Society’), which holds 54.6% 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
- Associates
- Joint ventures
- Subsidiaries
2008
Company
€’000
2008
Group
€’000
2007
Company
€’000
-
-
-
-
-
-
-
17,651
5,875
69,484
829
76,188
212
22
6,429
-
-
-
-
-
-
-
-
11,684
17,651
6,663
11,684
Sales to related parties were carried out on normal commercial terms and conditions.
(b) Purchases of goods and services
2007
Group
€’000
3,871
82,543
578
86,992
187
20
4,671
-
4,878
2007
Group
€’000
10,675
14,221
2,169
27,065
2008
Company
€’000
2008
Group
€’000
2007
Company
€’000
-
-
-
-
10,468
5,467
2,646
18,581
-
-
-
-
-
-
-
2,139
2,470
424,680
-
-
-
-
-
1,702
1,953
374,593
4
-
2,139
427,150
1,702
376,550
Purchases of goods:
- Associates
- Joint ventures
- Key management*
Purchases of services:
- Associates
- Joint ventures
- Key management*
- Subsidiaries
Purchases from related parties were carried out on normal commercial terms and conditions.
(c) Key management compensation1
Salaries and other short-term employee benefits
Post-employment benefits
Share based payments
2008
Company
€’000
-
-
-
-
2008
Group
€’000
3,817
624
645
5,086
2007
Company
€’000
-
-
-
-
2007
Group
€’000
4,123
582
159
4,864
1 Key management compensation includes Board of Directors and Glanbia Executive Committee.
110
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
(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*
(e) Loans to Joint Ventures
Loan to Southwest Cheese Company, LLC
Loan to Milk Ventures (UK) Limited
2008
Company
€’000
-
-
-
51,617
2008
Group
€’000
447
1,983
139
-
2007
Company
€’000
-
-
-
23,984
51,617
2,569
23,984
-
-
-
-
-
1,148
1,338
38,385
3
40,874
-
-
-
-
-
2008
Company
€’000
-
-
2008
Group
€’000
6,930
4,999
2007
Company
€’000
-
-
2007
Group
€’000
42
6,715
88
-
6,845
930
1,749
31,119
5
33,803
2007
Group
€’000
6,971
-
Glanbia Co-operative Society Limited approved the payment of a milk and grain bonus of €6.7 million to the suppliers of
Glanbia plc for 2008 on 15 January 2009. Glanbia Co-operative Society Limited is the ultimate holding company of Glanbia plc.
The cost of this milk/grain bonus top up will be borne by Glanbia Co-operative Society Limited.
During 2008, the Company disposed of 800,000 shares of its investment in One51 plc for a consideration of €3,139,000 to its
ultimate parent company Glanbia Co-operative Society Limited.
*
Purchases, sales and related year end balances to key management refer to trading balances with Directors who are engaged in
farming activities.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 1 1
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
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:
(a) Glanbia plc
Beneficial
Directors
L Herlihy
J Fitzgerald
V Quinlan
J Moloney
J Callaghan
H Corbally
N Dunphy
E Fitzpatrick
J Gilsenan
P Gleeson
P Haran
C Hill
M Keane
J Liston
G Meagher
M Merrick
W Murphy
*
*
A O’Connor
§
M Parsons
R Prendergast §
*
K Toland
Secretary
M Horan
* Executive Director.
** Or at date of appointment if later.
§ Appointed on 28 May 2008.
(b) Glanbia plc
Directors’ and Secretary’s options
Ordinary shares of €0.06
30/12/2007
03/01/2009
**
91,804
24,171
31,347
104,593
35,000
7,495
10,390
50,501
5,842
31,923
7,462
30,029
20,000
15,000
212,327
3,600
230,827
15,743
38,344
4,007
23,243
91,804
24,171
21,347
104,593
35,000
7,495
10,390
50,501
5,842
31,923
7,462
30,029
20,000
15,000
212,327
2,600
230,827
15,743
26,344
4,007
23,243
4,593
4,593
Details of movements on outstanding options over the Company’s ordinary share capital are set out below. Outstanding options
are exercisable on dates between 2009 and 2017.
112
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
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:
Options - ordinary shares of €0.06
30/12/2007 Movements
during year
03/01/2009
150,000
290,000
150,000
70,000
75,000
205,000
75,000
48,000
164,000
100,000
48,000
(150,000)
-
-
-
(75,000)
-
-
-
-
-
-
-
290,000
150,000
70,000
-
205,000
75,000
48,000
164,000
100,000
48,000
Exercise
price
€
4.25
1.55
2.725
4.03
4.25
1.55
2.725
4.03
1.55
2.725
4.03
[a]
[b]
[c]
[d]
[a]
[b]
[c]
[d]
[b]
[c]
[d]
[a] Options lapsed on 10 May 2008. The Remuneration Committee gave the holders of these options, which were issued in
1998, the choice to receive the value of the option in lieu of exercising the option. Mr J Moloney and Mr G Meagher both
elected to receive a payment respectively of €105,000 and €52,500 in lieu of exercising the options, which then lapsed.
[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.
There were no other changes in the interests of the Directors and Secretary between 3 January 2009 and 20 February 2009.
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 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 3 January 2009 was €2.07 and the range during the year was €1.80 to €5.31. The
average price for the year was €4.13. The 1988 Share Option Scheme expired on 31 August 1998.
(c) Directors’ and Secretary’s awards under the 2008 LTIP and the 2007 LTIP
Initial
allocation
of shares
during
2008
Market
price
in euro
on award
date
€
Number at
30/12/2007
Performance period
Earliest date Number at
03/01/2009
of release
Directors
J Moloney
2008 LTIP
K Toland
2008 LTIP
-
-
142,000
96,000
Secretary
M Horan
2007 LTIP
2008 LTIP
11,000
-
-
24,000
4.45
4.45
4.03
4.45
30/12/07- 01/01/11
March 2011
30/12/07- 01/01/11
March 2011
142,000
96,000
31/12/06 - 02/01/10
March 2010
30/12/07 - 01/01/11
March 2011
11,000
24,000
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 1 3
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
Awards under the 2008 Long Term Incentive Plan (the 2008 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 2011 to the extent that the relative earnings
per share (EPS) and total shareholder return (TSR) conditions are achieved.
Awards under the 2007 Long Term Incentive Plan (the 2007 LTIP)
The 2007 LTIP corresponds with the 2008 LTIP with the exception that Directors were excluded from participating as it did not
receive shareholder approval. The shares are scheduled for release in March 2010.
The structures of the 2007 LTIP and the 2008 LTIP are set out on pages 50 and 51.
(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
03/01/2009
30/12/2007
**
03/01/2009
30/12/2007
**
03/01/2009
30/12/2007
**
03/01/2009
30/12/2007
**
Beneficial
Directors
L Herlihy
J Fitzgerald
V Quinlan
J Moloney
H Corbally
N Dunphy
E Fitzpatrick
J Gilsenan
89,398
25,563
12,085
-
*
5,675
11,633
24,034
2,844
20,480
6,117
-
1,824
-
A O’Connor § 19,449
7,810
6,455
C Hill
M Keane
G Meagher
M Merrick
W Murphy
R Prendergast §
M Parsons
*
89,398
25,563
9,585
-
5,675
11,633
24,034
2,844
20,480
6,117
-
1,824
-
19,449
7,810
6,455
803,500
258,267
-
-
156,687
92,245
172,417
168,175
-
113,156
-
206,540
-
221,932
188,848
97,055
1,209,101
397,025
-
-
237,665
134,947
263,957
231,647
-
170,314
-
297,069
-
324,039
248,122
139,122
47,527,630
-
2,826,185
4,952,304
912,739
341,850
10,036,078
5,157,402
5,990,461
84,564
12,750,000
387,464
1,714,149
-
2,093,255
-
37,837,394
-
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
-
1,226
376
392
-
226
310
560
89
283
353
-
173
-
430
658
19
1,226
376
392
-
226
310
560
89
283
353
-
173
-
430
658
19
Secretary
M Horan
-
-
-
-
1,000,000
1,000,000
-
-
* Executive Director.
** Or at date of appointment if later.
§ Appointed on 28 May 2008.
There have been no changes in the above interests between 3 January 2009 and 20 February 2009.
114
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
44. Principal subsidiary and associated undertakings
(a) Subsidiaries
Incorporated and operating in
Principal place of business
Principal activities
Group interest
%
Ireland
Glanbia Foods Society Limited
Glanbia Consumer Foods Limited
Glanbia Ingredients (Ballyragget) Limited Ballyragget, Co. Kilkenny
Glanbia Ingredients (Virginia) Limited
Glanbia Nutritionals (Ireland) Limited
Glanbia Nutritionals (Blending) Limited
Glanbia Nutritionals (Optimum) Limited
Glanbia Nutritionals (Europe) Limited
Glanbia Nutritionals (Research) Limited
Glanbia Feeds Limited
Ballyragget, Co. Kilkenny and
Citywest, Dublin 24
Inch, Co. Wexford and Kilkenny
Virginia, Co. Cavan
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Enniscorthy, Co. Wexford and
Portlaoise, Co. Laois
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Palmerstown, Co. Kilkenny
Palmerstown, Co. Kilkenny
Newtown Mount Kennedy,
Co. Wicklow
Dairying, liquid milk, consumer
food products and general trading
Fresh dairy products and soups
Milk products
Milk products
Nutritional products
Nutritional products
Nutritional products
Nutritional products
Research and development
Manufacture of animal feed products
Property and land dealing
Financing
Financing
Investment company
Holding company
Holding company
Fertilizers
Grain and fertilizers
Biofuels
Glanbia Estates Limited
Avonmore Proteins Limited
Glanbia Financial Services
Glanbia Investments (Ireland) Limited
Glassonby
Waterford Foods plc
Grassland Fertilizers (Kilkenny) Limited
D. Walsh & Sons Limited
Eilish Oils Limited
Britain and Northern Ireland
Glanbia (UK) Limited
Glanbia Holdings Limited
Glanbia Investments (UK) Limited
Glanbia Nutritionals (UK) Limited
Glanbia Foods (NI) Limited
Glanbia Feedstuffs Limited
United States
Glanbia, Inc.
Glanbia Foods, Inc.
Optimum Nutrition, Inc.
Seltzer Companies, Inc.
Glanbia Nutritionals, Inc.
Canada
Tamworth, Staffordshire
Tamworth, Staffordshire
Tamworth, Staffordshire
Middlesborough
Portadown, Co. Armagh
Tamworth, Staffordshire
Holding company
Holding company
Holding company
Sports nutrition products
Consumer food products
Supply of animal feeds
Delaware
Twin Falls, Idaho
Illinois, South Carolina, Florida
San Diego, California
Monroe, Wisconsin
Holding company
Milk products
Sports nutrition products
Nutrient delivery systems
Nutritional distribution
Glanbia Nutritionals (Canada), Inc.
Angusville, Manitoba
Nutrient delivery systems
Germany
Glanbia Nutritionals Deutschland GmbH Orsingen-Nensingen, Germany
Nutrient delivery systems
Netherlands
Glanbia Foods B.V.
Mexico
Moergestel, Netherlands
Holding company
Zymalact Mexico S.A. de C.V.
Lerma, Mexico City
Dairy blending and processed cheese
100
Uruguay
Glanbia (Uruguay Exports) S.A.
China
Glanbia Nutritionals (Suzhou)
Company Limited
Uruguay
Nutritional distribution
Suzhou, China
Nutrient delivery systems
100
100
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 1 5
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
73
60
80
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Financial statements
Notes to the financial statements (continued)
for the year ended 3 January 2009
(b) Associates and joint ventures
Incorporated in
Ireland
Date to which
results included
Principal place
of business
Principal activities
Co-operative Animal Health Limited *
31 December 2007
Tullow, Co. Carlow
Agri chemicals
South Eastern Cattle Breeders
Society Limited *
31 December 2007
Thurles, Co. Tipperary
Cattle breeding
Group
interest
%
50
57
Malting Company of Ireland Limited *
31 October 2008
Togher, Cork
Malting
33.33
South East Port Services Limited *
3 January 2009
Kilkenny
Nashs Mineral Waters
(Marketing) Limited **
3 January 2009
Corman Miloko Ireland Limited **
3 January 2009
Newcastle West,
Co. Limerick
Carrick-on-Suir,
Co. Tipperary
Port services
Mineral waters
and soft drinks
Dairy spreads
Britain and Northern Ireland
Glanbia Cheese Limited **
3 January 2009
Magheralin and Llangefni Cheese products
Milk Ventures (UK) Limited **
30 November 2008
Stockport, England
Holding company
Nigeria
Nutricima Limited **
United States
30 November 2008
Nigeria
Evaporated and
powdered milk
Southwest Cheese Company, LLC **
3 January 2009
Clovis, New Mexico
Milk products
49
50
45
51
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
116
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Other information
Shareholders information
Dividend payments
An interim dividend of 2.75 cents per share was paid in respect
of ordinary shares on 1 October 2008.
A final dividend of 3.76 cents per share, if approved, will be paid
in respect of ordinary shares on 20 May 2009.
Dividend Withholding Tax (DWT) is deductible from dividends
paid by an Irish resident company, unless the shareholder
is entitled to an exemption and has submitted a properly
completed exemption form to the Company’s Registrar,
Computershare Investor Services (Ireland) Limited (‘the
Registrar‘). DWT applies to dividends paid by way of cash and
is deducted at the standard rate of income tax . 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 the Registrar. Further copies of this form
may be obtained from the Registrar.
Financial calendar
Announcement of final results for 2008
Ex-dividend date
Record date for dividend
Annual General Meeting
Interim management statement
Dividend payment date
Interim management statement
Announcement of interim results for 2009
4 March 2009
22 April 2009
24 April 2009
13 May 2009
13 May 2009
20 May 2009
8 July 2009
26 August 2009
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 Europe plc, KBC Bank Ireland plc,
Danske Bank A/S trading as National Irish Bank, Rabobank
Ireland plc, Ulster Bank Ireland Limited.
Shareholders who wish to have their dividend paid direct to a
bank account, by electronic funds transfer, should contact the
Registrar to obtain a mandate form. Tax vouchers will be sent to
the shareholders’ registered address under this arrangement.
Solicitors
Arthur Cox, Earlsfort Centre, Earlsfort Terrace, Dublin 2, Ireland.
Pinsent Masons, 3 Colmore Circus, Birmingham B4 6BH, UK.
Share price data
2008
€
2007
€
Share price at 3 January 2009
Market capitalisation
Share price movements during the year: - high
- low
2.07
608m
5.31
1.80
4.59
1,346m
5.08
3.12
Geographic analysis of shareholdings at 3 January 2009
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
Number of
Shares held
242,783,280
50,399,046
172,035
157,333
43,990
% of
total
82.70
17.17
0.06
0.05
0.02
293,555,684
100.00
Number of
shareholders
12,214
9,355
1,713
896
95
Number of
shares held
5,148,844
21,842,933
12,166,070
19,502,283
234,895,554
% of
total
1.76
7.44
4.14
6.64
80.02
24,273
293,555,684
100.00
Stock exchange listings
Glanbia plc has primary listings on the Irish and London Stock
Exchanges.
Stockbrokers
Davy Stockbrokers, 49 Dawson Street, Dublin 2, Ireland
(joint broker).
RBS Hoare Govett Limited, 250 Bishopsgate, London EC2M
4AA (joint broker).
Registrar and transfer office
Computershare Investor Services (Ireland) Limited, Heron
House, Corrig Road, Sandyford Industrial Estate, Dublin 18,
Ireland. The Registrar can be contacted on telephone number
01 2475349 (within Ireland), 00353 1 247 5349 (outside Ireland),
or by email to webqueries@computershare.ie.
Shareholder enquiries
All shareholders’ enquiries should be addressed to the Registrar
at the above address, telephone number or email address.
Shareholders may check their accounts on the Company’s
Share Register by accessing the Company’s website at www.
glanbia.com and selecting ‘Investors’ – ’Shareholder centre’.
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
Shareholders who would like to receive shareholder
communications electronically, including half yearly reports, annual
reports and notices of meetings, can register their email address by
accessing the Company’s website at www.glanbia.com, selecting
‘Investors’ – ’Shareholder centre’ – ’E-communications’ and clicking
on the link 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.
Following registration, shareholders will be notified by email when
a half yearly report, annual report or notice of meeting is published
and available for viewing on the Glanbia website.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 1 7
Other information
Shareholders information (continued)
Website
The Group’s website, www.glanbia.com, provides in full the text
of half yearly and annual reports, trading statements, voting
results and copies of presentations to analysts and investors.
News releases are made available, in the Investors’ section of
the website, immediately after release to the Stock Exchanges.
•
Additional shareholder information
Share capital
The authorised share capital of the Company is 306,000,000
ordinary shares of €0.06 each. The issued share capital as at 3
January 2009 was 293,555,684 ordinary shares of €0.06 each.
The rights and obligations attaching to the shares are as follows:
Distribution on winding up - If the Company shall
be wound up and the assets available for distribution
among the members as such shall be insufficient to
repay the whole of the paid up or credited as paid up
share capital, such assets shall be distributed so that,
as nearly as may be, the losses shall be borne by the
members in proportion to the capital paid up or credited
as paid up at the commencement of the winding up
on the shares held by them respectively. And if, in a
winding up, the assets available for distribution among
the members shall be more than sufficient to repay the
whole of the share capital paid up or credited as paid
up at the commencement of the winding up, the excess
shall be distributed among the members in proportion
to the capital at the commencement of the winding up
paid up or credited as paid up on the said shares held by
them respectively.
Substantial shareholdings
The table below details the significant holding (3% or more) in
the Company’s ordinary share capital that has been disclosed
to the Company as at 3 March 2009 in accordance with the
requirements of section 5.1.2 of the UK Listing Authority’s
Disclosure and Transparency Rules.
Shareholder
Glanbia Co-operative
Society Limited
No of ordinary
shares
% of issued
share capital
160,277,308
54.6%
Employee share schemes
The Company operates a number of employee share schemes.
At 3 January 2009, 570,054 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.
•
Voting rights - votes may be given either personally or
by proxy. Subject to any rights or restrictions attached to
the shares, on a show of hands every member present in
person and every proxy shall have one vote, so, however,
that no individual shall have more than one vote, and
on a poll every member present in person or by proxy
shall have one vote for every share carrying voting rights
of which he is the holder. On a poll a member entitled
to more than one vote need not use all his votes or cast
all the votes he uses in the same way. A poll may be
demanded:
(a) by the chairman of the meeting;
(b) by at least three members present (in person or by
proxy) having the right to vote at the meeting;
(c) by any member or members present (in person or
by proxy) representing not less than one tenth of
the total voting rights of all the members having the
right to vote at the meeting; or
(d) by a member or members present (in person or by
proxy) holding shares in the Company conferring the
right to vote at the meeting being shares on which
an aggregate sum has been paid up equal to not less
than one tenth of the total sum paid up on all the
shares conferring that right.
In the case of an equality of votes, whether on a show of
hands or on a poll, the chairman of the meeting at which
the show of hands takes place or at which the poll is
demanded shall be entitled to a casting vote in addition
to any other vote he may have.
•
Dividend rights - the Company may by ordinary
resolution declare dividends in accordance with the
respective rights of the members, but no dividend shall
exceed the amount recommended by the Directors. The
Directors may also declare and pay interim dividends if
it appears to them that they are justified by the profits of
the Company available for distribution.
118
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
Five year trends
Summary income statement
Revenue
Operating profit pre exceptional
Operating margin pre exceptional
Net financing costs
Share of results of joint ventures and associates
Profit before tax pre exceptional
Taxation pre exceptional
Profit after tax pre exceptional
Exceptional items
Basic earnings per share
Adjusted earnings per share*
Dividend per share in respect of the full year
Adjusted earnings per share
2008
2007
2006
2005
**
2004
€2,232.2m
€134.1m
6.0%
(€21.1m)
€7.3m
€120.3m
(€21.5m)
€98.7m
(€19.4m)
26.76c
35.86c
6.51c
€2,206.6m €1,853.4m €1,830.0m €1,753.6m
€86.3m
4.9%
(€16.1m)
(€1.5m)
€68.6m
(€8.4m)
€60.2m
(€1.3m)
21.03c
21.36c
5.25c
€115.8m
5.2%
(€17.3m)
€1.0m
€99.5m
(€16.4m)
€83.1m
(€22.8m)
20.42c
30.25c
6.08c
€85.6m
4.6%
(€14.0m)
€2.8m
€74.4m
(€8.0m)
€66.4m
(€0.1m)
22.51c
23.89c
5.79c
€80.9m
4.4%
(€13.1m)
€0.9m
€68.7m
(€7.6m)
€61.1m
(€3.4m)
19.69c
21.86c
5.51c
2008
€000
2007
€000
2006
€000
2005
€000
2004
€000
Profit attributable to equity holders of the Company
Amortisation on intangible assets (net of related tax)
Exceptional items
78,399
7,312
19,358
59,833
5,964
22,846
65,964
3,896
134
57,396
2,899
3,410
61,119
2,238
(1,294)
Weighted average number of ordinary shares in issues
293,018,610
293,012,540 292,958,667 291,469,902 290,617,359
Adjusted earnings per share (cents per share)
35.86
30.25
23.89
21.86
21.36
105,069
88,643
69,994
63,705
62,063
* Adjusted earnings per share is calculated after tax, pre exceptional items and before intangible asset amortisation (net of tax).
** 2004 figures are presented under IFRS and have been restated.
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
1 1 9
M
Merger reserve – Group
Minority interests
N
Notes to the financial statements
O
Operating expenses
Operations review – international
Operations review – Ireland
Operations review – Joint Ventures & Associates
Other reserves
Our business
Our global footprint
Our people
Our responsibilities
Our performance and outlook
Own shares (Company and Group)
Our vision and strategy
P
Principal subsidiary and associated undertakings
Property, plant and equipment – Group
Provision for other liabilities and charges
R
Reconciliation of changes in equity
Related party transactions
Responsibility statement
Retained earnings
Retirement benefit obligations
Risk and risk management
Report of the Directors
S
Segment information
Senior management team
Share capital and share premium
Shareholders information
Summary of significant accounting policies
T
Trade and other receivables
Trade and other payables
98
98
62
78
14
20
24
96
2
4
26
29
1
97
6
115
84
105
92
110
44
97
102
36
41
76
40
93
117
62
89
106
Other information
Index
A
Assets and liabilities classified as held for sale
B
Board of Directors
Borrowings
Business combinations
C
Capital grants
Capital reserves
Cash and cash equivalents
Consolidated cash flow statement
Cash generated from operations
Chairman’s statement
Commitments
Company balance sheet
Company statement of recognised income
and expense and cash flow statement
Consolidated balance sheet
Consolidated income statement
Consolidated statement of recognised
income and expense
Contingent liabilities
Critical accounting estimates and judgements
D
Deferred income taxes
Derivative financial instruments
Directors’ and Secretary’s interests
Directors’ remuneration
Directors’ statement of corporate governance
Dividends
E
Earnings per share
Employee benefit expense
Exceptional items
F
Finance income and costs
Financial risk management
Financial statements contents
Finance review
G
General information
Group Managing Director’s review
I
Income taxes
Independent auditors’ report
Intangible assets
Inventories
Investments
Investments in associates
Investments in joint ventures
120
G l a n b i a p l c 2 0 0 8 A n n u a l R e p o r t
91
38
98
108
105
98
91
59
108
8
107
60
61
58
56
57
107
75
100
106
112
80
45
83
83
79
79
81
72
53
32
62
10
82
54
85
91
88
87
87