l
G
a
n
b
a
p
l
c
i
2
0
0
9
A
n
n
u
a
l
R
e
p
o
r
t
Glanbia plc, Glanbia House,
Kilkenny, Ireland.
Tel +353 56 777 2200
Fax +353 56 777 2222
www.glanbia.com
Glanbia plc
2009 Annual Report
Cautionary statement
The 2009 Annual Report contains forward-looking
statements. These statements have been made
by the Directors in good faith, based on the
information available to them up to the time of
their approval of this report. Due to the inherent
uncertainties, including both economic and
business risk factors, underlying such forward-
looking information, actual results may differ
materially from those expressed or implied by
these forward-looking statements. The Directors
undertake no obligation to update any forward-
looking statements contained in this report,
whether as a result of new information, future
events, or otherwise.
Get more online
www.glanbia.com
Glanbia plc 2009 Annual Report Contents
1
Overview of Glanbia
Introduction
Financial results
Glanbia at a glance
Directors’ report: Business review
Chairman’s statement
Group Managing Director’s review
International growth strategy
Operations review
US Cheese & Global Nutritionals
Dairy Ireland
Joint Ventures & Associates
Finance review
Risk management
Our responsibilities
Our people
Directors’ report: Corporate governance
Board of Directors
Statement on corporate governance
Statement on Directors’ remuneration
Other statutory information
Statement of Directors’ responsibilities
Financial statements
Independent auditors’ report to the members of Glanbia plc
Group income statement
Group statement of comprehensive income
Group statement of changes in equity
Group statement of financial position
Group statement of cash flows
Company statement of financial position
Company statement of changes in equity
Company statement of comprehensive income
and statement of cash flows
Notes to the financial statements
Other information
Shareholders’ information
Five year trends
Index
2
3
4
6
8
10
14
16
18
22
28
30
31
34
36
46
54
55
60
62
63
64
65
66
67
68
69
70
124
127
128
2
Glanbia plc 2009 Annual Report Overview of Glanbia
Glanbia plc is an international nutritional
ingredients and cheese group, headquartered
in Ireland. The Group’s Global Nutritionals head
office and main innovation centre are also located
in Ireland. Glanbia has over 4,300 employees
in fifteen countries, including Joint Ventures
& Associates. The Group has three business
segments – US Cheese & Global Nutritionals,
Dairy Ireland and Other Business. Glanbia also
has three principal international joint ventures –
Southwest Cheese in the USA, Glanbia Cheese
in the UK and Nutricima in Nigeria – as well as
a number of smaller Irish-based joint ventures
and associates. Glanbia is listed on the Irish and
London Stock Exchanges (Symbol: GLB).
Events after the reporting period
On 10 March 2010, the Group announced
that Glanbia Co-operative Society Limited, its
54.6% shareholder, had expressed an interest
in acquiring Glanbia’s Dairy Ireland operations
(incorporating Dairy Ingredients, Consumer
Products and Agribusiness), Glanbia’s Irish
property business, Group Business Services and
related Irish joint ventures and associates.
Glanbia plc 2009 Annual Report Overview of Glanbia
3
Financial results
The global economic recession led to extreme volatility in global
dairy markets in the first half of the year and this had a significant
impact on Glanbia’s revenue, profitability and earnings. The decline
in our financial results was contained with a strong performance by
Global Nutritionals, a resilient performance by US Cheese and the
benefits of strategic cost reductions.
Revenue (€ billion)
2.2
2.2
1.8
18.0%
Revenue declined
by 18.0% primarily
as a result of a sharp
decline in revenue in
Dairy Ireland. Revenue
including Glanbia’s
share of Joint Ventures
& Associates was €2.1
billion (2008: €2.6 billion).
Operating margin pre exceptional (%)
6.0
6.1
5.2
10 basis points
Operating margin pre
exceptional increased
10 basis points reflecting
a strong performance
by Global Nutritionals.
Operating margin pre
exceptional including
share of Joint Ventures &
Associates increased 20 basis
points to 6.0% (2008: 5.8%).
2007
2008
2009
2007
2008
2009
Operating profit pre exceptional (€ million)
Adjusted earnings per share (cents)
134.1
115.8
111.2
2007
2008
2009
17.1%
Operating profit pre
exceptional declined
17.1% driven mainly
by a significant loss in
Irish Dairy Ingredients.
Operating profit pre
exceptional including
share of Joint Ventures
& Associates declined
14.9% to €128.6 million
(2008: €151.1 million).
35.9
30.3
30.7
14.4%
Adjusted earnings per
share (EPS) is calculated
on net profit attributable
to the owners of the Parent
pre exceptional items and
amortisation of intangible
assets (net of tax). Adjusted
EPS declined by 14.4% to
30.68 cents per share, driven
by the decline in operating
profit in Dairy Ireland.
2007
2008
2009
Profit before tax pre exceptional (€ million)
Dividend per share (cents)
120.3
99.5
97.4
2007
2008
2009
19.0%
Profit before tax pre
exceptional including
Joint Ventures &
Associates declined
19.0% to €97.4 million
(2008: €120.3 million)
reflecting the effect that
volatility in global dairy
markets had on the
Group’s performance
during 2009.
6.1
6.5
6.8
5.0%
The Board is recommending
a final dividend of 3.95
cents per share (2008:
final dividend 3.76 cents
per share), an increase
of 5.0%. This brings the
total dividend for the year
to 6.84 cents per share
(2008: 6.51 cents per
share), representing a total
increase of 5.0% for the year.
2007
2008
2009
4
Glanbia plc 2009 Annual Report Overview of Glanbia
Glanbia at a glance
In 2009, Glanbia continued to
serve domestic and international
customers with innovative,
science-based nutritional
ingredients, cheese and dairy
products. A new customer lead
research facility was opened in
the USA in 2009, to complement
the activities of the Group’s main
innovation centre based in Ireland.
Key
Customer service office
Group headquarters
Innovation centre
Manufacturing site
US regional head office
US Cheese & Global Nutritionals
Locations
Australia Glanbia Nutritionals has a customer service office in Sydney.
Belgium Glanbia Nutritionals has a customer service office in Brussels.
Brazil Glanbia Nutritionals has a customer service office in Curitiba.
Canada Glanbia Nutritionals (Canada), North America’s
largest processor of speciality-flaxseed ingredients, is based
in Angusville, Manitoba.
China Glanbia Nutritionals has a premix manufacturing facility in
Suzhou. Glanbia also has a customer service office in Shanghai.
Germany Glanbia Nutritionals Deutschland produces customised
micro-nutrient premixes at its facility in Orsingen-Nenzingen.
Indonesia Glanbia Nutritionals has a customer service office in Jakarta.
UK Glanbia Performance Nutrition, located in Middlesborough,
manufactures high protein bars, beverages and ready to mix
ingredients for the sports performance market.
Uruguay Glanbia Nutritionals has a customer service office
in Montevideo.
USA
California Glanbia Nutritionals (NA), (formerly Seltzer),
located in Carlsbad, manufactures micronutrient premixes and
sells nutritional ingredients.
Florida Optimum Nutrition manufactures a complete range
of tablet/capsule nutritional supplements at its Sunrise facility.
Idaho Glanbia Foods 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.
Ireland Global Nutritionals headquarters and the Group’s main
innovation centre are located in Kilkenny.
Illinois Glanbia’s US regional head office is situated in Evanston.
Optimum Nutrition has two manufacturing facilities in Aurora.
Malaysia Glanbia Nutritionals has a customer service office
in Kuala Lumpur.
Missouri Glanbia Nutritionals (NA) has opened a new
manufacturing facility in Springfield.
Mexico Glanbia Nutritionals has a customer service office and
blending operation in Mexico.
South Carolina Optimum Nutrition manufactures a complete
range of nutritional beverage products at its Walterboro facility.
Singapore Glanbia Nutritionals has a customer service office
in Singapore.
Wisconsin Glanbia Nutritionals Ingredient Technologies is situated
in Madison, and has a customer service office in Monroe.
Glanbia plc 2009 Annual Report Overview of Glanbia
Glanbia plc 2009 Annual Report Overview of Glanbia
5
Dairy Ireland
Locations
Joint Ventures & Associates
Locations
Ireland Irish operations include Dairy Ingredients Ireland, Consumer
Products and Agribusiness. Dairy Ingredients Ireland has two
manufacturing facilities producing cheese and a range of food
ingredients. Consumer Products has ten locations producing
a range of branded milk, fresh dairy products, natural cheeses,
butters, spreads and fresh soups. Agribusiness has 53 locations and
is the Group’s key linkage with its farmer supply base.
USA 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.
Nigeria Nutricima, located near Lagos, supplies reconstituted
evaporated milk, milk powder and UHT flavoured milk products to
the Nigerian market. It is a 50:50 joint venture with PZ Cussons plc.
UK Glanbia Cheese has processing facilities in Northern Ireland
and Wales manufacturing mozzarella cheese. It is a 51:49 joint
venture with Leprino Foods Company, USA.
2009 key figures for total Group including Joint Ventures & Associates
5.3 billion
litres of milk processed
440,000
tonnes of cheese produced
223,000
tonnes of dairy-based food ingredients
manufactured
4,349
employees
15
countries
2
innovation centres
6
Glanbia plc 2009 Annual Report Directors’ report: Business review
Chairman’s statement
In 2009, the Group delivered a
solid financial performance in
very challenging circumstances.
We achieved a 10 basis points
improvement in operating margin
pre exceptional, reflecting an
increased contribution by higher
margin businesses.
Liam Herlihy
Chairman
Market commentary
2009 results summary
2009 was a very difficult year. Demand for dairy products weakened
as a result of the global economic recession. Economic uncertainty
and credit availability significantly reduced consumer confidence.
As a result, global dairy prices declined sharply through the first half
of the year remaining at extremely low levels until the last quarter of
2009 when market conditions improved.
It was a year of negative returns for Irish dairy processors and
farmer suppliers, mainly as a result of the scale and pace of market
changes in the first half of the year. The reduction in farm incomes,
together with difficulty in accessing finance, had a significant
impact on farmer spending power.
A deep consumer recession in Ireland drove an exceptionally
competitive food retailing environment. This led to a change in
shopping profiles, to which suppliers and retailers are responding.
In 2009, nutritional markets had a resilient year despite the
global economic recession. Demand was particularly robust in
Performance Nutrition, a key sector for Glanbia Global Nutritionals.
However, the US dairy market mirrored global trends and US
cheese prices fell sharply in January and remained low and volatile
until the latter part of the year.
Against this background the Group delivered a solid financial
performance although the sharp decline in global dairy markets
in the first half of the year in particular, had a significant impact on
Glanbia’s revenue, profitability and earnings.
Earnings per share
Basic earnings per share (EPS) increased 43.7% to 38.46 cents
per share (2008: 26.76 cents per share) as the impact of the net
exceptional credit in 2009 of €34.9 million offset the effect of
the decline in profit pre exceptional for the year relative to 2008.
Adjusted EPS declined by 14.4% to 30.68 cents per share (2008:
35.86 cents per share), driven by the decline in operating profit
in Dairy Ireland.
Full details of the Group’s performance are contained in the Group
Managing Director’s review on pages 8 to 9, operations review
on pages 14 to 19 and the finance review on pages 22 and 27, of
this report.
Operating profit pre
exceptional including
Joint Ventures & Associates
(€ million)
90.0
24.0
US Cheese
& Global
Nutritionals
Dairy
Ireland
(2.8)
Other
Business
Total
128.6
17.4
Joint
Ventures &
Associates
Glanbia plc 2009 Annual Report Directors’ report: Business review
7
Dividends
Management and staff
The Board is recommending a final dividend of 3.95 cents per share
(2008: final dividend 3.76 cents per share), an increase of 5.0%.
This brings the total dividend for the year to 6.84 cents per share
(2008: 6.51 cents per share), representing a total increase of 5.0%
for the year. Subject to shareholder approval, dividends will be
paid on Wednesday 2 June 2010 to shareholders on the register
of members on Friday 7 May 2010. Irish withholding tax will be
deducted at the standard rate, where appropriate.
In 2009, across Glanbia there was a need to adapt to the external
environment and the unprecedented change in circumstances.
Management and staff throughout the Group undertook to do
whatever was necessary to ensure that the business was sustained
in the best possible position through this difficult period. Their
effort, dedication, commitment and willingness to adapt has been
exceptional and the Board’s thanks and appreciation goes to all the
Glanbia team.
The Annual General Meeting (AGM) will be held on Tuesday 25
May 2010.
Strategic review
The Group has an annual strategic review process to support
the achievement of our strategic objectives. The Board annually
approves changes to the strategic framework and agrees a three
year financial plan. Each business segment produces its own
business plan outlining specific strategies and considerations
and sets performance targets for the following three years. These
business plans are then overlaid with the strategic objectives for the
overall Group to produce a final three year strategic plan. This plan
is initially formulated and approved by the Executive Committee
and ultimately approved by the Board. Progress on implementation
is reviewed regularly throughout the year by the Group Managing
Director and the Group Finance Director. This review process
ensures regular monitoring and reporting of performance against
strategy, with regular updating for the Board. The Group’s
Managing Director’s review outlines the Group’s growth strategy
on pages 10 to 13.
Risk management and governance
During 2009, the Audit Committee in conjunction with members of
the executive management team, including the Group Managing
Director and Group Finance Director, undertook a detailed
assessment of strategic risks within our operating environment. As
part of this review process, each area of the business was required
to review its principal areas of risk and uncertainty and present to
either the Audit Committee or the Board on the steps taken to
mitigate such risks. Detailed information on risk management is
contained on page 28 and 29.
Proposed disposal of Irish Dairy and
Agribusiness operations
On 10 March 2010, Glanbia plc announced that Glanbia Co-
operative Society Limited (“the Society”), its 54.6% shareholder,
had expressed an interest in acquiring Glanbia’s Dairy Ireland and
related operations, primarily incorporating Dairy Ingredients,
Consumer Products and Agribusiness. Any such transaction would
be likely to involve a significant reduction in the Society’s ownership
in the Group and would require the approval of both the Society’s
members and Glanbia plc shareholders. While discussions are
progressing well, there is no guarantee that they will result in
a transaction being concluded. The strategic rationale for this
transaction is outlined in the Group Managing Director’s review on
page 8 and 9 of this report.
2010 outlook
US Cheese is expected to benefit from a better pricing environment.
Global Nutritionals will continue to develop its product range and
geographical reach. Overall, US Cheese & Global Nutritionals is
expected to deliver good underlying growth although margins are
likely to reduce somewhat due to a significant investment by Global
Nutritionals in developing its resources and business.
Dairy Ireland is expected to deliver a marked improvement this
year mainly as a result of a recovery in Irish Dairy Ingredients and a
continuation of the sustainable cost reduction programme.
Joint Ventures & Associates is expected to deliver a reasonable
result, underpinned by a good year from Southwest Cheese.
Whilst the outlook remains challenging, we are seeing some
positive signs in our operating environment, which coupled with
the ongoing strategic cost reduction programme should underpin
our performance in 2010.
Liam Herlihy
Chairman
The new Avonmore ‘Easy Pour
Jug’ format has been the most
successful innovation in milk
packaging for many years and has
been a key driver of growth for the
leading Irish milk brand.
8
Glanbia plc 2009 Annual Report Directors’ report: Business review
Group Managing Director’s review
It was an unprecedented year
in 2009 and while the outlook
remains challenging we are
seeing some positive signs in our
operating environment which
should underpin our performance
in 2010.
John Moloney
Group Managing Director
Almost the perfect storm
2009 delivered almost the perfect storm in the global dairy industry.
The reform of the Common Agricultural Policy in Europe was
completed in 2008. While this drove a major increase in global dairy
prices for the next 12 months, a correction was well underway in the
second half of 2008 when the global economic and banking crisis
crystallised. The combination of these two events led to, amongst
other effects, a dramatic reduction in dairy commodity prices and a
decrease in dairy product returns.
In response to this unprecedented operating environment, we
implemented strategic cost reduction programmes throughout the
Group and focused on running our business very efficiently. By the
middle of the year, the rate of decline had moderated and some
recovery in global dairy markets commenced in the final quarter
of 2009. However, it was the scale of the reduction and the level of
volatility in pricing that gave rise to a very difficult year overall and a
major loss in Irish Dairy Ingredients. This had a significant impact on
the Group’s financial results for the year.
Global Nutritionals was largely insulated from the turmoil in the
global economy and delivered a strong performance for the full
year. Glanbia’s growth strategy has focused in recent years on
building a portfolio of nutritional businesses to reduce earnings
exposure to commodity dairy markets and achieve a sustainable
higher margin for the Group. The containment of the decline in
Group results and the positive outcome for this business unit in
2009 demonstrate the success of this strategy.
2009 overview
While we were clearly not able to fully mitigate the effect of the
operating environment in 2009, the resilient performance by our
US Cheese businesses and a strong set of results from Global
Nutritionals underpinned a robust performance by the Group.
Highlights for the year include:
• results in line with market expectations;
•
significant sustainable cost reductions;
Elsewhere, despite stable US demand, US cheese prices
reached historic lows and the Group’s wholly-owned US Cheese
business and Southwest Cheese, our largest joint venture, were
impacted. The full effect of which was somewhat offset by the risk
management mechanisms utilised in these businesses.
• €45.8 million invested in strategic capital projects;
•
operating and EBITDA margins increased, up 10 basis points to
6.1% and 80 basis points to 8.3% respectively;
• dividend per share for the full year increased by 5.0%;
Revenue
(€ million)
2008
2009
Operating profit pre exceptional
(€ million)
2,602.5
2,127.9
2008
2009
151.1
128.6
US Cheese & Global Nutritionals
Dairy Ireland
Other Business
Joint Ventures & Associates
Glanbia plc 2009 Annual Report Directors’ report: Business review
9
•
completion of a strategic review of the Group’s pension
arrangement which is a significant factor in reducing the Group’s
pension liability by €79.0 million; and
•
40% expansion in Southwest Cheese is on track to begin
processing in the first quarter of 2010.
A review of the financial performance of the Group is in the finance
review starting on page 22 of this report.
2009 segmental analysis
Dairy Ireland is the largest business segment by revenue
representing 48.3% of total revenue, including Joint Ventures &
Associates. Its operating profit contribution declined to 18.7% of
total operating profit pre exceptional reflecting a difficult year. In
2009, US Cheese & Global Nutritionals represented 37.2% of total
revenue and 70.0% of total operating profit pre exceptional. The
Other Business segment is less than 0.5% of total revenue and was
loss making in 2009. Joint Ventures & Associates represent 14.0% of
total revenue and 13.5% of total operating profit pre exceptional.
Share of results of Joint Ventures & Associates are reported as
an after interest and tax amount in the income statement. The
operations review commences on page 14 of this report.
Unlocking potential
The Chairman’s statement referred to an expression of interest by
Glanbia Co-operative Society Limited (“the Society”), the Group’s
majority shareholder, in acquiring the Group’s Irish Dairy and
Agribusinesses and related activities. While these discussions are
very constructive and progressing well, there is no guarantee at this
juncture of a successful conclusion. The transaction would be likely
to involve a significant reduction in the Society’s 54.6% ownership
in the Group. The approval of both the Society’s members and
Glanbia plc shareholders would also be required.
The discussions are underpinned by a clear strategic rationale
and represent a unique opportunity to transform Glanbia. For
the Society and its members the significant changes in global
dairy markets creates the right time now to consider a potential
transaction. It would offer the prospect of full ownership and
control of the Irish businesses most relevant to its members and it
would align stewardship of key strategic assets more closely with
member interests. For Glanbia, it would, inter alia, increase the
Group’s focus on its international businesses, significantly improve
financial flexibility and enhance the development of our successful
international growth strategy.
Dairy Ireland strategy
Dairy Ireland represents the majority of the assets that the Society
is potentially interested in acquiring. This business incorporates
Irish Dairy Ingredients, Consumer Products and Agribusiness. Irish
Dairy Ingredients is a large scale, well invested business. A major
rationalisation programme, which is ongoing in 2010, is achieving a
level of cost competitiveness that can and will ensure a sustainable
business in this changed global dairy environment. Consumer
Products is also competitively well positioned to continue to develop
its product portfolio and maintain a strong share of the Irish retail milk
market. Its portfolio stretches across milk and fresh dairy products,
consumer cheeses, soups and sauces. Agribusiness is very much
focused on developing a business that fits the evolving agricultural
landscape and farmer needs. For further information go to the Dairy
Ireland operations review on page16 and 17 of this report.
International growth strategy
Glanbia has a well established growth strategy and has built a strong
track record in developing its international businesses. This growth
strategy is explained in detail on pages 10 and 13 of this report.
Corporate responsibility
Building trust with our stakeholders and acting with integrity at
all times is critical to our success, our reputation and our long-
term sustainability. Key issues managed within our corporate
responsibility strategy include business conduct and accountability,
fairness and respect for employees, health and safety, sustainability,
environmental impact and community involvement. Details of our
performance in this area are in the our responsibilities review on
page 30 to 33 of this report.
Looking ahead
This is a unique period in the Group’s development that
represents a transformational opportunity. We need to find the
best strategic way forward for the Group, so that Glanbia continues
to develop successful and profitable businesses that contribute
meaningfully for all stakeholders. The opportunity at hand is to
recognise the structural change that has occurred in our operating
environment and to grasp the strategic prospect of unlocking the
Group’s potential.
John Moloney
Group Managing Director
Optimum Nutrition, acquired in
August 2008, delivered a positive
full first year with Glanbia, achieving
strong volume growth underpinned
by ongoing product innovation and
market development in the USA
and internationally.
1010
The Group’s international
growth strategy is well
established and is based on
interconnected businesses
incorporating nutritional
ingredients and cheese
1111
Glanbia has successfully grown its international businesses – nutritional
ingredients and cheese – in recent years and further strategic
opportunities exist to develop and grow further in our chosen areas
of focus. These growth opportunities are underpinned by ongoing
consolidation in fragmented markets, strong structural market growth
drivers, favourable consumer trends, and the ability to expand,
Performance Nutrition in particular, on a global basis.
We have focused scale businesses and well developed science-based
innovation capability as a result of significant investment in people and
facilities. We have established leading market positions in international
growth markets, supported by strong routes to market that include
in-country representation through local sales offices and strong agent
and distributor relationships.
Performance Nutrition
Customised Premix Solutions
Global
Nutritionals
Ingredient Technologies
US
Cheese
Large captive whey pool
e
t
a
r
n
o
i
t
a
v
o
n
n
i
g
n
i
s
a
e
r
c
n
I
s
e
t
a
r
h
t
w
o
r
g
t
e
k
r
a
m
g
n
o
r
t
S
Natural business alignment
i
s
n
g
r
a
m
l
i
r
e
h
g
h
e
b
a
n
a
t
s
u
S
i
1212
Nutritional
Ingredients
Glanbia produces 64,000 tonnes of whey-based
nutritional ingredients and value-added
whey products from a large captive whey pool,
which is derived from the Group’s cheese
processing operations.
The Global Nutritionals business unit has
developed three platforms for growth that utilise
this large whey pool. Through the application of
increasing rates of innovation, a focus on growth
markets and expansion into complementary
non-dairy nutritional solutions, Global Nutritionals
is building a scalable business with sustainable
higher margins.
Performance Nutrition is a business-to-consumer
manufacturer, formulator and marketer of products
for performance, sport and the health and wellness
sectors. This business is founded on the Group’s
2008 acquisition of Optimum Nutrition in the USA
and has the opportunity to develop as a global
brand in performance nutrition.
Customised Premix Solutions is a business-to-
business supplier of a broad range of micro-
nutrients, particularly vitamins and minerals and is
a leading supplier to the infant formula and sports
beverage sectors in Europe and the USA.
Ingredient Technologies is a business-to-business
whey-based ingredient applications developer that
offers enhanced nutritional solutions for the sports
bar, beverage and clinical foods sectors.
Nutritional Ingredients structural growth drivers
Aging profile of
western economies,
higher disposal
incomes and a shift in
attitudes to prevention
rather than cure
Demographics
Leading food and
drink companies and
nutrition specialists
are developing new
products in response
to market demand
Industry
and sector
demand
Normalisation
of nutritional products
in areas of fitness,
weight management,
body-consciousness,
self-care and
active aging
Consumer
awareness
Focus on fitness
and wellbeing
Healthcare
concerns
The information age
is increasing
understanding of
the link between
diet and fitness,
health and wellness
Rising health care
costs and lack of
comprehensive social
welfare and
healthcare systems in
many countries
1313
US
Cheese
Glanbia has built up world-class capability in
cheese processing in the USA with a wholly-owned
business in Idaho and a major joint venture in New
Mexico; both low cost milk regions. US Cheese is a
business-to-business, large scale, low cost, quality
producer that is designed to operate 24/7, 365
days of the year at 100% of its rated capacity.
It sells cheese to companies who cut and package
for the retail sector and to businesses who make
a range of special ingredient-type cheeses, which
are ultimately converted into processed cheese
slices for the food service sector.
In 2009 US Cheese and Southwest Cheese
produced 340,000 tonnes of American-style
cheddar cheese, creating a market leading share
in terms of total US cheddar cheese output. These
businesses deliver customer value by making
‘gold medal’ quality dairy products at competitive
price points. Glanbia recently won 12 medals in
the World Cheese championships; a business and
industry leading performance.
US Cheese and Global Nutritionals operations review
is on page 14 and 15 of this report.
US Cheese structural growth drivers
Core US market
growing due to
population growth,
increasing use of
cheese as a core
ingredient in both out
of home and at home
cooking
Increased
domestic
consumption
Increased,
sustained demand
for cheese in
emerging markets
Growing global
demand and
internationalisation
Opportunity
to grow
manufacturing
share
Ongoing
rationalisation of
production capacity
from smaller older
plants to scale,
modern facilities
14
Glanbia plc 2009 Annual Report Directors’ report: Business review
Operations review: US Cheese & Global Nutritionals
A strong performance in Global Nutritionals including the full year
effect of the Optimum Nutrition acquisition more than offset the impact
of lower US cheese prices.
Kevin Toland
Raimund Hoenes
Hugh McGuire
Jerry O’Dea
Jeff Williams
Senior Management
Kevin Toland
CEO & President, Glanbia USA & Global Nutritionals
Raimund C. Hoenes
CEO, Glanbia Nutritionals Customised Premix Solutions
Hugh McGuire
CEO & President, Performance Nutrition
Jerry O’ Dea
CEO & President, Glanbia Nutritionals Ingredient Technologies
Jeff Williams
CEO & President, Glanbia Foods Inc
While overall revenue was down 6.1%, US Cheese & Global
Nutritionals operating profit pre exceptional increased 7.4% or
€6.2 million during the year to €90.0 million (2008: €83.8 million).
Operating margin pre exceptional increased to 11.4% (2008: 9.9%)
as a strong performance in Global Nutritionals, driven by solid
organic growth, new product introductions and the full year effect
of Optimum Nutrition acquisition, more than offset the impact of
lower US cheese prices. EBITDA pre exceptional increased €13.3
million to €110.0 million (2008: €96.7 million) with EBITDA margin
pre exceptional increased 240 basis points in the year to 13.9%
(2008: 11.5%).
US Cheese
Glanbia’s wholly-owned US Cheese business, combined with
the output from the Group’s Southwest Cheese joint venture,
is a leading producer of American-style cheddar cheese with a
significant market share. This business operates modern, large scale,
efficient plants in two leading milk producing regions in the USA.
Commentary on Southwest Cheese is on page 19 of this report.
The Group’s wholly-owned US Cheese business is located in Idaho
and operates two cheese processing plants in Gooding and Twin
Falls and two whey processing plants in Gooding and Richfield.
The US Cheese business employs over 610 people and processes
over one-third of the milk produced in Idaho, which is the third
largest milk producing state in the USA. In 2009, the plants in Idaho
processed 1.9 billion litres of milk into 198,000 tonnes of cheese
and 46,000 tonnes of whey-based ingredients.
The cheese plants, aided by a good milk supply, ran at capacity
throughout 2009 sustaining their position as a low cost, extremely
efficient production facilities. A major reconstruction of the
lactose plant in Gooding was ramped up to full production in 2009
producing product to world-class standards for use in infant formula.
Glanbia together with Southwest Cheese recently won 12 medals in
the World Cheese Championships; a business and industry leading
performance.
2009 key figures
€792.4 million revenue
€90.0 million operating profit pre exceptional
37% of total revenue
70% of total operating profit pre exceptional
1,358 employees
11.4% operating margin pre exceptional
Glanbia plc 2009 Annual Report Directors’ report: Business review 15
The US Cheese business delivered a solid result in the context of
market circumstances and compared with a very strong 2008 pricing
environment. The US cheese market is a US$6 billion market, at
the wholesale level, that grows approximately 2% per annum due
to increased US consumption and overall population growth. In
2009, US cheese volumes and milk supply were stable with demand
from the retail sector driven by increased promotional activity.
Foodservice demand remained reasonably robust through the
year as consumers traded to value by moving to the quick service
restaurant sector. US Cheese also continued to develop export
markets with product exported to Latin America and Asia in 2009.
However, cheese prices declined steeply in January 2009 and
remained low until the latter part of the year. Average 2009 US block
cheddar prices on the Chicago Mercantile Exchange (CME) were
30% lower than 2008 levels. While reduced prices impacted revenue
and profits, operating margin was sustained as a result of the
pricing mechanisms of this business unit. These pricing mechanisms
include the pricing of both raw material inputs and cheese outputs
on a formula basis linked to publicly quoted market prices.
Global Nutritionals
The Global Nutritionals business is a leading supplier of advanced
technology whey proteins and fractions, flax and customised micro-
nutrients, vitamin and mineral premixes. It comprises three distinct
businesses – Ingredient Technologies (business-to-business
nutritional ingredients development and marketing); Customised
Premix Solutions (business-to-business premix solutions provider)
and Performance Nutrition (business-to-consumer manufacturer
and marketer of products for performance nutrition and health
and wellness). The Global Nutritionals business is headquartered
in Ireland and has global operations employing approximately
750 people.
Global Nutritionals had a strong year demonstrating resilience
against the global economic recession. The focus for Global
Nutritionals during the year continued to be volume growth,
further development of science-based nutritional solutions
and the continued expansion of Optimum Nutrition which was
acquired in August 2008. In 2009, all of Glanbia’s core nutritional
sectors continued to grow, outperforming market growth rates.
Glanbia Nutritionals is now a scale business with market leadership
positions. In 2009, operating profit and operating margin showed
good improvement.
Optimum Nutrition delivered an excellent full first year with
the Group. Post acquisition integration has been successfully
completed and the 2009 performance was driven by strong
underlying volume growth, increased innovation together with
continuing market and product development both in the USA
and internationally.
Customised Premix Solutions delivered a solid performance with
strong positions sustained during the year with core customers. A
new premix plant in Missouri was commissioned during the year
and is now fully operational. The Group’s premix plant in Suzhou,
near Shanghai, China, which was fully commissioned in late-2008,
continued to grow volumes.
Ingredient Technologies had a good year and continued to
grow volumes and develop its added-value solutions business.
Continued investment in research and development is being made
in clinical, functional and emerging applications.
2010 outlook
US Cheese is expected to benefit from a better pricing environment.
Global Nutritionals will continue to develop its product range and
geographical reach. Overall, US Cheese & Global Nutritionals is
expected to deliver good underlying growth although margins are
likely to reduce somewhat due to a significant investment by Global
Nutritionals in developing its resources and business.
Performance Nutrition
continues to build its
international business and
sells products in over 100
countries around the world.
16
Glanbia plc 2009 Annual Report Directors’ report: Business review
Operations review: Dairy Ireland
Dairy Ireland had a very challenging year. Global dairy markets
created a very difficult operating environment and gave rise to
a major loss in Irish Dairy Ingredients for the full year.
Jim Bergin
Colm Eustace
Colin Gordon
Senior Management
Jim Bergin
CEO, Glanbia Dairy Ingredients
Colm Eustace
CEO, Glanbia Agribusiness
Colin Gordon
CEO, Glanbia Consumer Products
Dairy Ireland is comprised of three business units. Dairy Ingredients
is the largest dairy processor in Ireland, assembling a milk pool of 1.4
billion litres annually and processing this into dairy products and
ingredients for sale on a business-to-business basis to customers in
50 countries. Consumer Products is one of the largest branded food
suppliers in the Irish grocery sector and has seven brands in the Top
100. Agribusiness is primarily engaged in feed milling, grain processing
and marketing and retails a range of farm inputs to the Group’s large
Irish farmer supplier base. Its operations also include ‘CountryLife’,
which is a broader retail offering for rural based communities.
2009 performance
Dairy Ireland had a very challenging year. Revenue declined 23.3%
to €1,028.8 million (2008: €1,340.6 million). Operating profit pre
exceptional was down 51.7% to €24.0 million (2008: €49.7 million) and
operating margin pre exceptional was 140 basis points lower at 2.3%
(2008: 3.7%). While the most significant impact was the loss in Irish
Dairy Ingredients, Consumer Products experienced a very competitive
market place and Agribusiness suffered as a consequence of reduced
farm spending. EBITDA pre exceptional decreased €24.7 million to
€45.2 million (2008: €69.9 million) with EBITDA margin pre exceptional
decreasing 80 basis points to 4.4% (2008: 5.2%).
Dairy Ingredients
Dairy Ingredients is the biggest business of its type in the country.
It employs approximately 470 people at two large-scale processing
facilities including one of the largest integrated dairy sites in
Europe, which processes 40% of the Irish milk pool and 25% of
the Irish whey pool. This business unit is a leading 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, a form of milk protein, and of cheddar cheese. Dairy
Ingredients 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.
Dairy Ingredients performance was severely impacted as raw
material costs did not fully reflect the fall in product prices on global
markets. Significant losses were incurred in the first half of the year
with the rate of loss reduced as expected in the second half due to
some recovery in markets and the impact of strategic cost reductions.
2009 key figures
€1,028.8 million revenue
€24.0 million operating profit pre exceptional
48% of total revenue
19% of total operating profit pre exceptional
1,711 employees
2.3% operating margin pre exceptional
Glanbia plc 2009 Annual Report Directors’ report: Business review 17
During 2009, this business unit rationalised its production facilities
and reduced the number of employees by 9%. This was facilitated
by work practice changes and increased investment in automation
and achieved significant cost savings. However, as it quickly
became evident early in 2009 that the cost base at all levels of the
industry could not be maintained, a further comprehensive review
of Dairy Ingredients was completed mid-year with the objective
to shape the business towards a sustainable position even in weak
markets. As a result, an agreed strategic cost reduction programme
is ongoing in 2010.
Notwithstanding the difficulties of 2009, Irish Dairy Ingredients
continued to develop its product portfolio through diversification
of its cheese product mix, entering new cheese markets and
developing milk protein isolates for performance beverages and
clinical nutrition sectors. In addition, the whey processing facility
was commissioned during the year to ensure this business achieves
the highest quality food and infant formula standards.
Consumer Products
Consumer Products has market leading positions 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. It employs approximately 720 people at 10
locations and processed 275 million litres of milk in 2009. Consumer
Products supplies over 6,000 customers with 2.5 million consumer
packs per day.
Consumer Products delivered a reasonable performance in a
very competitive market place. The recession in Ireland led to a
strong consumer focus on price and weaker sterling increased
sterling-based competition. Consumer Products responded to
this trading environment by reducing wholesale pricing, improving
store-by-store sales force coverage, sustainable cost reduction
initiatives and improving operational efficiency. In addition, major
cost saving initiatives were undertaken including a 20% reduction
in its workforce, reorganisation of production, administration and
central support facilities and the introduction of a range of new
technologies to improve operational efficiency. This programme is
ongoing in 2010.
While volumes for the year declined broadly in line with the
overall market decline of 7%, the rate of decline was significantly
reduced by the fourth quarter through reshaping and increasing
promotional plans and successfully launching new pack formats.
New two litre milk formats were particularly successful in
supporting volumes of branded milk products. Notable other
successes during the year included winning new contracts in the
foodservice sector and re-negotiating the Yoplait franchise for the
Island of Ireland extending the term out to 2024.
Agribusiness
Agribusiness mills animal feed, processes and markets grain and
retails a range of farm inputs to the Group’s large farmer supply base.
It is the market leader in feed, fertiliser, seed grain, farm chemicals
and veterinary products. It also includes CountryLife, which is a
broader retail offering. The business employs over 510 people and
currently operates at 53 locations. Four branches are set for closure
in 2010, reducing the number of outlets to 49.
In 2009, reduced farm incomes led to a weaker sales performance
from Agribusiness. As a result, revenue, operating profit and
operating margin for this business unit were down on 2008. In
response to market conditions and changing customer demands
Agribusiness reshaped its sales organisation and developed a
key account focus with dedicated individual sales staff for key
commercial farm accounts.
2010 outlook
Dairy Ireland is expected to deliver a marked improvement this
year mainly as a result of a recovery in Irish Dairy Ingredients and
a continuation of the agreed strategic cost reduction programme.
Events after reporting period
In March 2010, Glanbia plc announced that Glanbia Co-operative
Society Limited, its 54.6% shareholder, has expressed an interest in
acquiring Glanbia’s Dairy Ireland operations. Further information
is contained in the Chairman’s statement on page 7 and the Group
Managing Director’s review on page 9, including a summary of
Dairy Ireland’s strategy.
Kilmeaden cheese grew
its market share of natural
block cheddar in 2009, to
reaffirm its position as the
nations favourite.
18
Glanbia plc 2009 Annual Report Directors’ report: Business review
Operations review: Joint Ventures & Associates
Glanbia’s share of the operating profit pre exceptional in the Joint
Ventures & Associates at €17.4 million was marginally increased on
2008 levels.
Mel Glentzes
Frank Stephenson
Paul Vernon
Senior Management
Mel Glentzes
CEO, Nutricima
Frank Stephenson
CEO & President, Southwest Cheese
Paul Vernon
CEO, Glanbia Cheese
Glanbia has three principal 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 and associates.
Glanbia’s share of revenue from Joint Ventures & Associates
declined 19.6% to €297.6 million (2008: €370.3 million) mainly
as a result of lower prices in US cheese markets and European
mozzarella markets. Lower US cheese prices impacted Southwest
Cheese. Weaker pricing for mozzarella cheese reduced revenue
in Glanbia Cheese. Revenue at Nutricima in Nigeria was broadly
flat year-on-year as double digit volume growth was offset by the
impact of a depreciating Nigerian Naira:Euro exchange rate.
Glanbia’s share of the operating profit pre exceptional in the Joint
Ventures & Associates at €17.4 million was marginally increased
on 2008 levels. Operating profit pre exceptional in Southwest
Cheese declined marginally in the year, which represented a robust
performance in the context of an extremely low cheese price
environment in the USA thoughout most of 2009. Operating profit
in Glanbia Cheese in the UK also declined marginally due to weaker
pricing for mozzarella cheese in its markets.
Operating margin pre exceptional in Joint Ventures & Associates
grew 120 basis points to 5.8% (2008: 4.6%). Glanbia’s share of the
EBITDA of Joint Ventures & Associates increased €0.7 million to
€23.8 million (2008: €23.1 million) with EBITDA margins increasing
180 basis points to 8.0%. Southwest Cheese delivered a good
performance including an increase in operating margin, albeit
profit after tax was marginally lower when compared to a strong
2008. Glanbia Cheese in the UK experienced a decline in profit
after tax although margins remained stable. Nutricima recorded a
profit in 2009 representing an improved performance relative to the
loss incurred in 2008. Glanbia’s share of profits - post interest and
tax – was €10.2 million (2008: €7.3 million).
2009 key figures
€297.6 million revenue
€17.4 million operating profit pre exceptional
14% of total revenue
13.5% of operating profit pre exceptional
931 employees
5.8% operating margin pre exceptional
Share of results of Joint Ventures & Associates is reported as an after interest and tax amount in the Group income statement.
Glanbia plc 2009 Annual Report Directors’ report: Business review 19
Southwest Cheese
Glanbia Cheese
The largest business in the Group’s Joint Ventures & Associates
segment is Southwest Cheese in the USA. In 2009, Southwest
Cheese accounted for over 50% of the Group’s share of revenue
of Joint Ventures & Associates and over 80% of Glanbia’s share of
operating profit pre exceptional. All the output from Southwest
Cheese is marketed by Glanbia in conjunction with the output
from the Group’s wholly-owned US cheese and whey businesses.
Combined, these businesses produced 340,000 tonnes of cheese in
2009, making Glanbia a leading supplier of American-style cheddar
cheese in the US market today.
Southwest Cheese is located in Clovis, New Mexico, a major milk
producing region in the USA. This business, a 50:50 joint venture
between Glanbia and The Greater Southwest Agency, employs
approximately 280 people. It is one of the largest natural cheese
and high-protein whey processing plants in the world and is in its
fourth year of operation. In 2009, Southwest Cheese produced
140,000 tonnes of American-style cheddar cheese and other
American-style varieties of cheese and 9,000 tonnes of high
protein whey.
Southwest Cheese delivered a consistently strong operating
performance in 2009 and achieved stretch goals in terms of
product throughput and quality. An expansion of the facility is
currently underway which will increase output by 40% and is due
to start processing milk by the end of the first quarter in 2010.
This US$85 million project is currently on time and on budget
and will consolidate Southwest Cheese’s position as the largest
American-style cheddar cheese and whey facility in the world,
processing 3.4 million litres of milk per day. The successful
commissioning of this new facility is a critical milestone this year.
Southwest Cheese won three medals (one gold, one silver and
one bronze) at the 2010 World Cheese Championships.
Glanbia has a 51% interest in Glanbia Cheese, which is a joint
venture with Leprino Foods Company, USA. This business unit
produces mozzarella cheese for the European pizza market in
shredded, ribbon and string formats and is one of Europe’s leading
suppliers of mozzarella cheese to the foodservice and retail pizza
sector. Glanbia Cheese employs approximately 340 people at three
locations, including two cheese processing facilities, one in Wales
and one in Northern Ireland.
Nutricima
Nutricima is a 50:50 joint venture with PZ Cussons plc and is
based in Nigeria. Nutricima is developing a portfolio of branded
consumer products to serve all market segments including liquid,
condensed and powdered milk-based products in the Nigerian
market. Nigeria is a large and developing market with an estimated
population of 150 million and a local oil industry. Undoubtedly the
scale of the global economic downturn has impacted the pace
of development of countries in Africa and created significant
economic turmoil, but despite this, the business has performed
satisfactorily in 2009. Nutricima employs approximately 315 people
at its evaporated milk manufacturing and powder packing facility
and its newly commissioned Ready-To-Drink factory near the
capital, Lagos.
2010 outlook
Joint Ventures & Associates are expected to deliver a reasonable
result, underpinned by a good year from Southwest Cheese.
Nutricima’s Ready-To-Drink
facility was successfully
commissioned in May 2009. This
investment will position it to
service this fast growing segment
of the Nigerian market.
2020
Established, scale
businesses with market
leading positions
2121
Focusing on cost
competitiveness
and operational
excellence
22
Glanbia plc 2009 Annual Report Directors’ report: Business review
Finance review
Throughout the year we focused
on embedding strategic
cost reductions and running
our operations as effectively
and efficiently as possible.
We contained the decline
in our financial results with a
strong performance by Global
Nutritionals, a resilient performance
by US Cheese and the benefits of
strategic cost reductions.
Siobhán Talbot
Group Finance Director
2009 highlights
The Group’s operating margin pre exceptional grew by 10 basis
points to 6.1% (2008: 6.0%), reflecting an increased contribution
by higher margin businesses. Our earnings before interest,
tax, depreciation and amortisation (EBITDA) margin grew 80
basis points to 8.3%. We spent €45.8 million on strategic capital
expenditure during the year ensuring that the business is sustained
in the best possible position, despite an unprecedented year.
While adjusted EPS was in line with market expectations, it
declined 14.4% to 30.68 cents per share (2008: 35.86 cents per
share). Dividend per share increased 5.0% to 6.84 cents per share
(2008: 6.51 cents per share).
A strategic review of the Group’s pension arrangements was
completed during 2009, giving rise to a net reduction in the Group’s
pension liabilities and an exceptional net gain of €79.0 million in
2009. Further details are included on page 27 of this review.
Throughout 2009 we focused on embedding strategic cost
reductions and running our operations as effectively and efficiently
as possible. This cost competitiveness focus will continue into 2010.
Operating margin
pre exceptional
including Joint Ventures
& Associates
5.8%
6.0%
20 basis points
2008
2009
Financial summary
Revenue
Operating profit pre exceptional
Net financing costs
Profit before tax pre exceptional
Taxation pre exceptional
Profit after tax pre exceptional
Net exceptional items (post tax)
Group
€1,830.3m
€111.2m
(€24.0m)
€87.2m
(€19.1m)
€68.1m
€34.9m
Glanbia plc 2009 Annual Report Directors’ report: Business review 23
2009
Joint
Ventures &
Associates
2008
Joint
Ventures &
Associates
Total
Group
Year-on-year
change
Total
(€27.5m)
€297.6m €2,127.9m €2,232.2m
€134.1m
(€21.1m)
€113.0m
(€21.5m)
€91.5m
(€18.5m)
€17.4m €128.6m
(€3.5m)
€13.9m €101.1m
(€3.7m)
€10.2m
–
(€22.8m)
€78.3m
€34.9m
(€25.0m)
€370.3m €2,602.5m
€17.0m €151.1m
(€3.9m)
€13.1m €126.1m
(€5.8m)
€7.3m
(€0.9m)
(€27.3m)
€98.8m
(€19.4m)
(18.2%)
(14.9%)
10.0%
(19.8%)
(16.5%)
(20.7%)
Operating margin pre exceptional
EBITDA pre exceptional
EBITDA margin pre exceptional
6.1%
€152.5m
8.3%
5.8%
6.0%
€23.8m €176.3m
8.0%
8.3%
6.0%
€167.6m
7.5%
4.6%
5.8%
€23.1m €190.7m
7.3%
6.2%
Basic earnings per share (cents)
Adjusted net income
Adjusted earnings per share (cents)
€/US$ - average
€/US$ - closing rate
€/US$ - opening rate
38.46c
€89.9m
30.68c
1.3948
1.4406
1.3888
26.76c
€105.1m
35.86c
43.7%
(14.4%)
(14.4%)
1.4704
1.3888
1.4711
Revenue
Profitability and margins
Total revenue including share of Joint Ventures & Associates,
declined 18.2% to €2,127.9 million (2008: €2,602.5 million). Revenue
in US Cheese & Global Nutritionals was down €51.8 million to
€792.4 million. This reflects the impact of significantly lower US
cheese markets, which were not fully offset by strong revenue
growth in Global Nutritionals including the full year effect of the
acquisition of Optimum Nutrition. Revenue in Dairy Ireland declined
€311.8 million to €1,028.8 million (2008: €1,340.6 million). Weak
global dairy markets reduced revenue directly in Dairy Ingredients
and indirectly in Agribusiness while extremely challenging Irish
consumer market conditions impacted Consumer Products.
Revenue in Joint Ventures & Associates was down €72.7 million to
€297.6 million (2008: €370.3 million) primarily due to a decline in
revenue in Southwest Cheese driven by lower US cheese prices.
Operating profit pre exceptional including share of Joint Ventures
& Associates declined 14.9% to €128.6 million (2008: €151.1 million),
driven primarily by a loss in Dairy Ingredients. Operating margin
pre exceptional including share of Joint Ventures & Associates
increased 20 basis points to 6.0% (2008: 5.8%). US Cheese & Global
Nutritionals delivered a significant increase in operating margin
pre exceptional, primarily due to a strong performance by Global
Nutritionals including the full year effect of the acquisition of
Optimum Nutrition. Joint Ventures & Associates also delivered a
robust performance. EBITDA including share of Joint Ventures &
Associates declined 7.6% to €176.3 million (2008: €190.7 million).
EBITDA margin including share of Joint Ventures & Associates
increased 100 basis points to 8.3% (2008: 7.3%).
EBITDA margin
pre exceptional
including Joint Ventures
& Associates
8.3%
100 basis points
7.3%
2008
2009
24
Glanbia plc 2009 Annual Report Directors’ report: Business review
Segmental analysis including Joint Ventures & Associates
Revenue
€'m
Operating
profit*
€'m
2009
Operating
margin* EBITDA*
€'m
EBITDA
margin*
Revenue
€'m
Operating
profit*
€'m
2008
Operating
margin*
EBITDA
margin*
EBITDA*
€'m
US Cheese &
Global Nutritionals
792.4
Dairy Ireland
1,028.8
Other business
9.1
Group as reported** 1,830.3
Joint Ventures
& Associates
297.6
90.0
24.0
(2.8)
11.4%
110.0 13.9%
844.2
2.3%
45.2
4.4% 1,340.6
(30.8%)
(2.7)
(29.7%)
47.4
83.8
49.7
0.6
9.9%
3.7%
1.3%
96.7
11.5%
69.9
1.0
5.2%
2.1%
111.2
6.1%
152.5
8.3% 2,232.2
134.1
6.0%
167.6
7.5%
17.4
5.8%
23.8
8.0%
370.3
17.0
4.6%
23.1
6.2%
Total
2,127.9
128.6
6.0%
176.3
8.3% 2,602.5
151.1
5.8%
190.7
7.3%
* Pre exceptional
** Reported results exclude Joint Ventures & Associates.
US Cheese & Global Nutritionals
While overall revenue was down 6.1% to €792.4 million
(2008: €844.2 million), operating profit pre exceptional increased
7.4% or €6.2 million to €90.0 million (2008: €83.8 million) and
operating margins pre exceptional increased to 11.4% (2008: 9.9%).
This reflects a strong performance in Global Nutritionals driven by
solid organic growth, new product introductions and the full year
effect of the acquisition of Optimum Nutrition, which more than
offset the impact of lower US cheese prices during the year.
EBITDA pre exceptional increased €13.3 million to €110.0 million
(2008: €96.7 million) with EBITDA margin pre exceptional increasing
240 basis points in the year to 13.9% (2008: 11.5%).
Dairy Ireland
Dairy Ireland had a very challenging year. Revenue declined 23.3%
to €1,028.8 million (2008: €1,340.6 million). Operating profit pre
exceptional was down 51.7% to €24.0 million (2008: €49.7 million)
and operating margin pre exceptional was 140 basis points lower
at 2.3% (2008: 3.7%). While the most significant impact was the
major loss in Dairy Ingredients, Consumer Products experienced
a very competitive market place and Agribusiness suffered as a
consequence of reduced farm spending. EBITDA pre exceptional
decreased €24.7 million to €45.2 million (2008: €69.9 million) with
EBITDA margin pre exceptional decreasing 80 basis points to 4.4%
(2008: 5.2%).
Other Business
In 2009, the Group’s Other business segment included a small dairy
ingredients related operation in Mexico and Glanbia’s property
unit. In March 2008, Glanbia disposed of its Irish pigmeat business.
A combination of the effects of global dairy markets and few
property transactions resulted in a €2.8 million loss for the full year.
Joint Ventures & Associates
Glanbia’s share of revenue from Joint Ventures & Associates
declined 19.6% to €297.6 million (2008: €370.3 million). Lower US
cheese prices impacted Southwest Cheese. Weaker pricing for
mozzarella cheese reduced revenue in Glanbia Cheese. Revenue
at Nutricima was broadly flat year-on-year as double digit volume
growth was offset by the impact of a depreciating Nigerian
Naira:Euro exchange rate.
Glanbia’s share of the operating profit pre exceptional in Joint
Ventures & Associates at €17.4 million represented a minor
increase on 2008 levels. Operating profit pre exceptional in
Southwest Cheese declined marginally in the year, which was a
robust performance in the context of an extremely low cheese
price environment in the USA thoughout 2009. Operating profit
in Glanbia Cheese also declined marginally during the year due
to weaker pricing for mozzarella cheese in its markets. Overall,
Nutricima recorded a profit in 2009 reflecting an improved
performance relative to the loss incurred in 2008.
Glanbia’s share of operating margin pre exceptional in Joint
Ventures & Associates increased 120 basis points to 5.8%
(2008: 4.6%). EBITDA of Joint Ventures & Associates increased
€0.7 million to €23.8 million (2008: €23.1 million) with EBITDA
margins increasing 180 basis points to 8.0%.
Segmental analysis US Cheese & Global Nutritionals
Revenue
(€ million)
Operating profit pre exceptional
(€ million)
EBITDA pre exceptional
(€ million)
844.2
792.4
6.1%
83.8
90.0
7.4%
96.7
110.0
2008
2009
2008
2009
2008
2009
240
margin
basis
points
Glanbia plc 2009 Annual Report Directors’ report: Business review 25
Net financing costs
Adjusted earnings per share
Financing costs increased 13.7% by €2.9 million to €24.0 million
(2008: €21.1 million) due mainly to increased debt levels as a result
of the acquisition of Optimum Nutrition in August 2008. EBIT to
net financing cost interest cover was 4.6 times in 2009 compared to
6.4 times in 2008. EBITDA to net financing cost interest cover was
6.4 times compared to 7.9 times in the prior year.
Adjusted EPS is calculated on the net profit attributable to the
owners of the Parent pre exceptional items and amortisation of
intangible assets (net of tax). Adjusted earnings per share declined
by 14.4% to 30.68 cents per share (2008: 35.86 cents per share),
driven by the decline in operating profit in Dairy Ireland.
Taxation
The 2009 pre exceptional tax charge decreased by €2.4 million
to €19.1 million (2008: €21.5 million) reflecting the reduction in
Group operating profit pre exceptional. The Group’s effective tax
rate, excluding Joint Ventures & Associates increased to 21.9%
(2008: 19.1%).
Exceptional items
In 2009 there was an overall net exceptional credit of €34.9 million
(2008 net exceptional charge: €19.4 million). This net exceptional
credit was €45.7 million pre tax (2008 net exceptional charge:
€20.3 million pre tax). 2009 net exceptional items include:
•
•
•
a provision of €15.1 million, mainly relating to redundancies.
Glanbia is implementing a further significant cost reduction
programme in 2010 in Dairy Ireland as part of ongoing
improvements focused on achieving sustainable cost
competitiveness.
a strategic review of the Group’s pension arrangements which
was completed in 2009. The revisions to the overall Group
pension arrangements gave rise to a net reduction in pension
liabilities and an exceptional gain of €79.0 million in 2009. More
detailed information on Glanbia’s pension liability is on page 27
of this finance review; and
a review of the internal corporate structures of the Group was
also completed during the year. This gave rise to an exceptional
non-cash foreign exchange loss of €18.2 million on the
repayment of certain sterling inter-group loans in 2009. This
loss, which was previously recognised in the Group’s currency
reserve, is now recycled to the Group’s income statement.
Basic earnings per share
Basic earnings per share (EPS) increased 43.7% to 38.46 cents
per share (2008: 26.76 cents per share) as the impact of the net
exceptional gain in 2009 of €34.9 million, set out above, offset the
effect of the decline in profit pre exceptional for the year relative
to 2008.
Calculation of adjusted earnings per share
Reconciliation of profit attributable to owners of the Parent to
adjusted net income used to calculate adjusted earnings per share
2009
€'m
112.7
12.1
(34.9)
89.9
2008
€'m
78.4
7.3
19.4
105.1
292,985,630
293,018,610
30.68
35.86
Profit attributable to owners
of the Parent
Amortisation of intangible assets
(net of tax)
Net exceptional items
Adjusted net income
Weighted average number
of ordinary shares in issue
Adjusted earnings per share
(cents per share)
Dividends
The Board is recommending a final dividend of 3.95 cents per share
(2008: final dividend 3.76 cents per share), an increase of 5.0%. This
brings the total dividend in respect of the year to 6.84 cents per
share (2008: 6.51 cents per share), representing a total increase of
5.0% for the year. Subject to shareholder approval, dividends will be
paid on 2 June 2010 to shareholders on the register of members at
7 May 2010. Irish withholding tax will be deducted at the standard
rate, where appropriate.
Cash flow
Net debt decreased by €9.5 million in the year to €442.6 million
(2008: €452.1 million). The Group generated free cash flow of
€52.0 million in the year (2008: €72.4 million). Free cash flow is
after charging business sustaining capital expenditure and before
acquisition costs, strategic capital expenditure and the payment
of equity dividends. Free cash flow reduced in 2009 relative to
2008 due to the reduction in EBITDA driven by the decline in
performance in the Dairy Ireland segment.
Segmental analysis Dairy Ireland
Revenue
(€ million)
Operating profit pre exceptional
(€ million)
1,340.6
1,028.8
23.3%
49.7
51.7%
24.0
EBITDA pre exceptional
(€ million)
69.9
45.2
2008
2009
2008
2009
2008
2009
80
margin
basis
points
26
Glanbia plc 2009 Annual Report Directors’ report: Business review
Summary cash flow
EBITDA pre exceptional
Working capital movement
Net interest and tax paid
Business sustaining capital investment
Other ( including additional pension contributions)
Free cash flow
Acquisitions
Disposals
Dividends from Joint Ventures
Strategic capital expenditure
Equity dividends
Currency exchange/fair value adjustments
Net decrease/(increase) in debt during the year
Net debt at the beginning of the year
Net debt at the end of the year
2009
€'m
2008
€'m
Change
€'m
152.5
(32.9)
(30.7)
(20.1)
(16.8)
52.0
(1.3)
2.0
17.9
(45.8)
(19.5)
4.2
9.5
(452.1)
(442.6)
167.6
(1.0)
(49.7)
(23.6)
(20.9)
72.4
(229.4)
22.3
0.5
(63.9)
(18.5)
(15.3)
(231.9)
(220.2)
(452.1)
(15.1)
(31.9)
19.0
3.5
4.1
(20.4)
228.1
(20.3)
17.4
18.1
(1.0)
19.5
241.4
(231.9)
9.5
Dividends of €17.9 million were received in 2009 (2008: nil) from
Southwest Cheese. Total strategic capital expenditure for 2009
including loans to joint ventures, which were driven by capital
investment amounted to €45.8 million (2008: €63.9 million). The
key strategic investments in 2009 included the completion of the
upgrade of the cheese and whey facilities in Irish Dairy Ingredients,
investment in the whey facilities in the USA and the investment
in the expansion of Southwest Cheese. The Group has made
significant investment in acquisitions and strategic organic growth
projects in recent years underpinning the growth strategy.
Financing
The Group has total committed debt facilities of €729.1 million
incorporating bank facilities of €665.6 million and €63.5 million
cumulative redeemable preference shares. Additional bank
facilities of €100.0 million were secured during the year. Bank
facilities are held with nine banks under bilateral arrangements with
common documentation and terms. €255.6 million of the facilities
are renewable in July 2012 and €410.0 million in July 2013. The
cumulative redeemable preference shares mature in July 2014.
The Group’s average interest rate for 2009 was 4.3% compared
to 5.1% for 2008. Glanbia operates a policy of fixing a significant
amount of its interest exposure with approximately 70% contracted
at fixed rates for 2010.
Glanbia manages its bank debt position within a number of
financial covenants and Group Treasury ensures full compliance
with all financial covenants on an ongoing basis. For financial
prudence Glanbia sets internal net debt to EBITDA targets to
recognise that the Group’s debt is subject to seasonal fluctuation
and as a result average debt can be up to 25% above year end debt
levels. The Group’s key financial covenants are:
•
•
•
that consolidated net bank borrowings shall not exceed 3 times
EBITDA on the last day in any financial year;
that consolidated net bank borrowings shall not exceed 4 times
EBITDA on any other day of the financial year; and
that consolidated operating profit shall not be less than 3.5
times consolidated net borrowing costs in any financial year.
Segmental analysis Joint Ventures & Associates
Revenue
(€ million)
Operating profit pre exceptional
(€ million)
Profit after interest and tax
(€ million)
370.3
297.6
19.6%
17.0
17.4
2.4%
7.3
10.2
39.7%
2008
2009
2008
2009
2008
2009
Glanbia plc 2009 Annual Report Directors’ report: Business review 27
Key financial covenants
Covenant 2009 2008 2007
Net debt1: EBITDA (times)
EBIT : Net finance cost (times)
3.4
3.5
2.9
4.6
2.7
6.4
1.5
6.7
1
Including €63.5 million cumulative redeemable preference shares
Pensions
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. At 2 January 2010 the
Group’s net pension liability under IAS 19, before deferred tax, was
€85.8 million (2008: €164.4 million). The Group’s provisions for other
liabilities and charges also includes a provision of €20.1 million
(2008: €1.3 million) in relation to administration and certain other
costs associated with pension schemes in the UK relating to
businesses disposed of in prior years.
Movement in the liability for retirement benefit obligations
during the year
At the beginning of the year
Exchange differences
Movements relating to disposed
operations
Total expense pre curtailment gains
and negative past service costs
Curtailment gains and negative past
service costs
Actuarial loss – defined benefit schemes
Contributions paid by employer
2009
€'m
(164.4)
(1.8)
(1.3)
(12.8)
100.1
(31.2)
25.6
2008
€'m
(114.2)
6.0
(0.5)
(7.9)
0.4
(68.2)
20.0
At the end of the year
(85.8)
(164.4)
The fair value of the assets of the pension schemes at 2 January
2010 was €349.2 million (2008: €301.5 million) and the value of the
scheme liabilities was €435.0 million (2008: €465.9 million).
The funding of the pension schemes is decided by the Group
in conjunction with the Trustees of the schemes and the advice
of external actuaries. Recognising the scale of the pension
liability, a strategic review of the Group’s pension arrangements
was completed during 2009 following which the Group revised
benefits under the Irish defined benefit schemes giving rise to an
exceptional gain, in accordance with IAS 19, in the year of €100.1
million relating to curtailment gains and negative past service costs
of €14.1 million and €86.0 million respectively. The curtailment
gains and negative past service costs arise following the removal of
guaranteed increases to pensions in payment for all members and
the provision of benefits for members in employment on a career
average basis from a final salary basis. The Group has completed
its consultation process with all members of the main schemes.
The Group has a number of pension schemes in the UK relating to
businesses disposed of in prior years. In 2009 a provision for future
regulatory and administration costs of €21.1 million relating to
these schemes has been recognised.
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
does not trade in financial instruments. The Group’s treasury
policies and guidelines are designed to mitigate the impact of
fluctuations in interest rates and exchange rates and to manage
the Group’s financial risks. The Board agrees and regularly reviews
these policies and 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 management
section on pages 28 to 29 in this report.
Events after the reporting period
On 10 March 2010, Glanbia announced that it is in discussions
regarding the potential disposal of Irish Dairy and Agribusinesses
to Glanbia Co-operative Society Limited, the Group’s majority
shareholder. The successful completion of this transaction would
increase the Group’s focus on international nutritional ingredients
and cheese, significantly improve financial flexibility and enhance
development of its successful growth strategy. Further information
is in the Group Managing Director’s review on pages 8 to 13 of
this report.
Siobhán Talbot
Group Finance Director
Maturity profile of committed debt facilities
2014
2013
2012
2012
€63.5 million preference shares
€65.6 million US Dollar facilities
€190.0 million Euro facilities
Total debt facilities
€729.1 million
€410.0 million Euro facilities
28
Glanbia plc 2009 Annual Report Directors’ report: Business review
Risk management
This section of the report sets out a review of the evolution of risk
identification and management undertaken during the year together
with a description of the main risk factors facing the Group.
Evolution of risk identification and management
Principal risks and uncertainties
The Board is ultimately responsible for risk management which
includes the Group’s risk governance structure and maintaining
an appropriate internal control framework. The Audit Committee
Terms of Reference includes responsibility for reviewing the
effectiveness of the Group internal control and risk management
systems. This incorporates reporting to the Board on the
effectiveness, efficiency and sustainability of the internal control
system environment. A structured and consistent approach to
identifying, assessing and responding to risk in relation to the
Group’s strategic and business objectives is fundamental to
continued growth and is a key element of creating and preserving
shareholder value. Management’s responsibility is to manage risk
on behalf of the Board.
Under Irish Company law (Regulation 37 of the European
Communities (Companies Group Accounts) Regulations 1992,
as amended), the Group is required to give a description of the
principal risks and uncertainties which it faces. 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 2009 Annual Report.
The principal strategic, financial, operational and regulatory risks
identified are set out below in the following sections.
Strategic risks
•
In early 2009 the Audit Committee, in conjunction with members of
the executive management team, including the Group Managing
Director and Group Finance Director, reviewed the population of
risks the business is exposed to and identified and evaluated the
key areas of risk for Glanbia. Once identified a programme of key
Group business and strategic risk reports were developed requiring
the responsible individuals within the Group to present either to
the Audit Committee or directly to the Board on the steps taken
to manage such risks having due regard to the balance of risk, cost
and opportunity. Risk reports typically included:
•
the structure of the functional or business unit organisation;
•
the functional role and responsibilities for key risk management;
an evaluation assessing the likelihood, impact and velocity of
potential negative events occurring within the relevant function
which may effect the Group’s financial, operational or regulatory
control objectives;
•
management’s response to the identified risks (i.e. risk
acceptance, reduction, avoidance or elimination);
details of how the control activities encompassed in the Group’s
policies and procedures are utilised effectively and efficiently to
manage risk;
the information and communication systems used to ensure
management decision-making is properly supported; and
the controls in place to allow consistent monitoring of business
performance.
Group risk management presentations have included functional
reviews; product safety and quality; business continuity risk;
strategic and business risk assessment; human resource, succession
planning and health and safety risks; business services and IT system
risk; financial control and related controls; and treasury, liquidity
and tax management.
The Audit Committee, following careful consideration, reported to
the Board expressing their level of satisfaction with the processes
and procedures in place to manage key Group business and
strategic risks and how these are being implemented throughout
the Group.
•
•
•
•
•
The performance of the Group is influenced by economic growth,
global dairy and US cheese markets, consumer confidence and
changes in commodity prices. Declining general economic
conditions and dairy market volatility negatively impacted 2009
results and the pace and sustainability of an improvement in
markets, which commenced in late 2009, may continue to impact
Glanbia’s business. A deterioration or delay in economic recovery
or acute volatility in dairy pricing represents a material risk to
the operating performance and financial position of the Group.
To help mitigate this, the Group has employed, particularly in
the USA, a number of risk management tools to limit volatility.
In addition, the Group has a portfolio of businesses and this
approach, with a growing emphasis on international operations,
mitigated some of the worst effects of the unprecedented
trading environment experienced in 2009.
Competitor product innovations technical advances and the
intensification or consolidation of competition could adversely
affect the Group. To combat competitive threats the Group
has re-positioned the business with a focus on high growth,
profitable market segments where the Group has market
leadership positions, strong brands, excellent customer
relationships and a solid platform for international growth.
Glanbia also invests in research and development through
its Irish and USA innovation centres as well as associations with
a number of third level institution research programmes.
•
•
Glanbia has a significant number of key customers across its
portfolio of businesses and consequently there is a risk that
business performance could be negatively impacted by the
loss of one or more of these customers. The Group believes
that it currently enjoys good relationships with major customers
and continues to manage and develop these relationships by
focusing on superior customer service, product innovation,
quality assurance and cost competitiveness.
Although demand for food products is expected to remain
broadly stable, consumer purchasing patterns tend to change
over time and especially when the economy is weak. The
success of the Group depends on its ability to react to changing
trends with appropriate innovation.
Glanbia plc 2009 Annual Report Directors’ report: Business review 29
•
•
Failure to attract and retain qualified personnel could negatively
impact the execution of Glanbia’s strategy. Glanbia strives to
attract and retain the right quality of management and staff
required to support its growth and customer relationship
management requirements. Detailed management
succession plans, strong recruitment processes, management
development programmes, long-term incentives and retention
initiatives have all been implemented and are routinely
monitored to manage the risk.
•
•
Risks inherent in the acquisition or disposal of businesses and
brands may have an adverse impact on the Group’s business
or financial results. The risks are partially mitigated by careful
planning, significant pre acquisition due diligence and post
acquisition integration experience built up by the Group’s
senior management team.
Financial risks
•
•
Lack of financial capacity could affect the Group’s ability to
conduct its business, maintain capital investment programmes,
pursue acquisitions, and make dividend payments and
service debt commitments. The Group manages its bank debt
position within a number of financial covenants that are closely
monitored by Group Treasury. Strong banking relationships
are maintained through regular meetings and updates.
Close monitoring and management of cash flows and regular
forecasting mitigates the risk exposure.
The conduct of ordinary business operations necessitates the
holding and issuing of financial instruments and derivative
financial instruments by the Group. The main risks arising from
issuing, holding and managing these financial instruments
typically includes liquidity risk, interest rate risk and currency
risk. The Group does not trade in financial instruments.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’ on page 77 of this
report. The Board agrees and regularly reviews these policies.
Operational risks
•
The loss or significant destruction of a key site could present
operational and financial difficulties for Glanbia. All operations
within the Group 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 in line with safety, health and welfare legislation
through its risk management system to assist operational
management responsible for the day-to-day management of
business risk. In addition, an insurance cover programme is in
place for all significant insurable risks and major catastrophes to
mitigate the potential financial consequences.
In order to fulfil the demand for its products Glanbia needs to
ensure an efficient supply chain is in place which complies with
the highest health and safety standards. The Group mitigates
supply chain risk by maintaining a broad supplier base and 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.
There are a number of factors affecting the price of milk and it
can be subject to potentially significant price fluctuations. The
Group has a varying degree of control over these prices and
may be unable to pass on increases to its customers in whole or
part or without a period of delay. This can adversely affect the
Group’s operating profits and cash flow. If the supply of milk
from suppliers were constrained for any reason, the Group may
not be able to obtain sufficient supplies, or supplies of a suitable
quality, from other sources, which could have an adverse impact
on its financial performance.
Regulatory risks
•
•
•
Robust processes are in place to ensure the Group maintains
the highest standards of food safety across all processing,
packaging, labelling and distribution operations in the
interest of the health and well being of its consumers and
sustaining its strong reputation as a leading international
nutritional ingredients and cheese group. Glanbia conforms to
international and local food safety, quality and environmental
regulations and employs best practice to maintain the highest
standards and to develop a competitive advantage from the
consistent supply of high quality products.
While the Group could be at risk from product contamination
and consequent liability, either through its products and/or raw
materials, Glanbia employs best practice food safety and quality
standards in its operations and supply chain management to
mitigate this risk.
The Group is subject to strict and developing environmental
laws and regulations which could result in an increase in the
cost of achieving compliance and that may impact the Group’s
operational or financial performance. Glanbia currently believes
that the Group is abreast of evolving environmental standards
and operates energy efficiency, carbon reduction, recycling
and emission programmes as a means of reducing costs in
a sustainable fashion and gaining a long term competitive
advantage in the market place.
30
Glanbia plc 2009 Annual Report Overview of Glanbia
Our responsibilities
As Glanbia, our corporate social responsibility focus is on the
environment, health and safety, people and corporate giving.
Our goal is to develop a sustainable business and to contribute
to our local communities.
The environment
Health and safety
Glanbia has a global footprint with operations in fifteen countries.
At a minimum the Group seeks to comply with all legislative
and regulatory requirements. In addition, we are committed to
continuous improvement at all of our locations and environmental
initiatives across the Group include:
•
•
•
Membership of the Energy Star Programme by our businesses
in the USA. This is a national call to action to improve energy
efficiency of America’s commercial and industrial sectors by 10%
or more;
As well as energy usage reduction, US operations are also
progressing water usage reduction and waste volume and
strength reduction programmes;
There is a carbon reduction programme in Ireland and
dedicated Carbon Footprint and Sustainability Manager,
who works to complement a fulltime engineer focusing on
energy efficiencies in the very energy intensive Irish dairy
processing facilities;
•
The Irish businesses also have ISO14001 accreditation for
environmental management systems and IS393 accreditation
for energy management; and
•
The Group undertakes an active recycling programme covering
paper, cardboard, plastic, timber, stainless and mild steel.
Glanbia delivered a good environmental performance in 2009.
There were no environmental incidents across the Group and good
progress continued to be made with key environmental initiatives.
Overall in 2009 the Group delivered a good Health & Safety
(H&S) performance. Significant progress was made with the
consolidation of H&S risk into risk management processes and
procedures. Sustained compliance is achieved through a rigorous
risk management process and a continuous high level of awareness
of H&S issues by the management teams and staff. Keeping people
safe is our main priority and we expect further progress in 2010 with
the role out of a number of H&S risk management initiatives.
Corporate giving and employee volunteering
Glanbia plc and its Consumer Products business unit has a major
three year sponsorship agreement with Barretstown, which is a
therapeutic recreation camp for children with cancer and other
serious illnesses. The Group has committed €75,000 per annum
and Glanbia employees raised an addition €60,000 in 2009 through
a wide range of fundraising and volunteer activities. Consumer
Products through its Avonmore Brand seeks to raise awareness
of Barretstown and creates the opportunity for consumers to
engage and support the charity. All funds go towards developing
additional facilities at the camp, in particular this year to build
cottage accommodation for sick children and the 2009 arts and
craft programme, which helps the children focus on something
other than their illness.
The Group’s US operations have partnerned with Shriners
Hospital for Children for a two-year period and have donated over
US$70,000. Shriners have decided to use Glanbia’s donation to
upgrade facilities for parents. Shriners Hospitals is a network of 22
paediatric hospitals in the USA, Canada and Mexico. The hospitals
provide specialised care for children under the age of 18 with
orthopaedic conditions, burns, spinal cord injuries and cleft lip and
palate issues. All services are provided free of charge.
Glanbia’s US Cheese business unit hosted their 16th Annual Charity
Challenge Golf Tournament again this year and raised US$105,000
for local charities. The tournament started in 1994 as a way to raise
money to support Magic Valley charities and since then has raised
almost US$1 million dollars which has been given to 40 local non-
profit organisations.
Glanbia plc 2009 Annual Report Overview of Glanbia 31
Our people
In 2009, the role of Human Resources (HR)
was central to the implementation of the
key initiatives designed to safeguard the
business from the uncertainty it faced,
enhance competitiveness and create a solid
platform for future growth.
Brian Phelan
Group Human
Resources &
Operations Director
A €16 million rationalisation and change programme was
undertaken, mainly in Irish operations resulting in 210 people
leaving the Group during the year. A pay freeze was implemented
across the majority of the organisation. A global recruitment ban
was put in place, with the exception of key strategic appointments
that were necessary to sustain or future proof the business.
Strategic review of pensions
In addition, there was a strategic review of the Group’s pension
arrangements. This was necessary as a consequence of a
significantly increased pension funding deficit experienced by the
schemes. The proposals agreed will lead to important changes in
Glanbia’s defined benefit schemes designed to help sustain the
future of these schemes. Full financial details relating to the pension
arrangements are in the finance review on page 27.
Open employee communication
Throughout the year there were detailed employee communication
initiatives to ensure open, honest and productive dialogue, which
supported all major change management initiatives during 2009.
People strategy
There was also a continued focus on Glanbia’s people strategy,
which has two core elements – sustained succession management
and ensuring an effective HR organisation and systems. Sustained
succession management identifies people who have the potential
to develop to the next level of leadership and skill and focuses on
ensuring that Glanbia is developing the right people to deliver
its business plans and strategic objectives. It is supported by very
clear processes and systems that have been developed over recent
years. In 2009, there was a reorganisation of the Global Nutritionals
business and the ability to put the right management in place
to support this new structure is a reflection of the success of the
Group’s sustained succession management approach.
Project Perform
Project Perform – a new SAP-based HR system – was rolled out
during 2009, commencing with ‘go live’ in March. This system is
designed to automate the Group’s well developed succession
management processes. Phase 1 provides a platform for HR
processes for global salaried employees and also enables payroll
for Irish based salaried employees. The system allows individuals
to have access to a secure HR portal to transact employee-related
activities and is an interactive platform for recording the outcome
of performance management and related development activities
with their manager throughout each year. The system also allows
managers to have ‘real time’ access to essential HR information for
their department and to conduct performance management with
the support of a unified, secure and efficient IT platform.
32
32 Glanbia plc 2009 Annual Report Overview of Glanbia
Our people continued
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.
SAP HR Team
Máire Foley, Louise Kent and Tony
Wiseman, key members of the IT team that
supported the design and delivery of the
SAP IT platform to support Glanbia’s Human
Resources processes. Tony, technical lead
for the project reflects on the team’s journey;
Liam Langton
“I have been in the Ballitore Milk plant for
11 years and during that time have seen
many changes to the production and
marketing of Avonmore milk and cream
products. In 2009, we launched the unique
Avonmore 2 Litre ‘easy pour’ Milk Jug
which has been very well received by our
consumers for its convenience and fresh
image. For me and my colleagues it was a
busy and interesting experience getting
familiar with the new packing machines
and ensuring we continue to produce a
consistently high quality product that is
valued by our consumers”
“This project reflects the value Glanbia
places on people management throughout
the Company’s global community.
Following on the development of Glanbia’s
Strategic HR processes over a number of
years, the time was right to build a system
that would enable managers to optimise
their team’s performance through good HR
practice. We worked closely with the HR
teams to customise the system to Glanbia’s
experience. The challenge was to deliver
a comprehensive and secure system to
enable employees and HR specialists to
automate in ‘real time’ the routine ‘People’
processes and, especially, to facilitate
Glanbia’s performance and development
agenda. For our team, this was the first
simultaneous global rollout of a SAP
project in Glanbia and required intensive
interaction, not only with the global HR
teams, but with all employees”
Glanbia plc 2009 Annual Report Overview of Glanbia 33
33
Denis O’Donoghue
“I joined the Glanbia Graduate programme
in September 2008 after completing a
B.Sc in Accounting in UCC, Ireland. Since
then I have been challenged with different
assignments in Group Finance, Dairy
Ingredients Ireland and, most recently,
working for the Finance team in the
Nutricima JV, based in Lagos, Nigeria.
I am learning all the time particulary on
the commercial side of the business
from experienced people such as Lampe
Omoyele, Marketing Director, Nutricima
(pictured above) while also studying for my
professional Accounting exams. It’s great to
see how the total business works, especially
in an interesting integrated business like
Nutricima where we manufacture, distribute
and sell branded consumer milk products
to the Nigerian market. I am already looking
forward to my next assignment in US
Cheese, our cheese and whey business in
Idaho, USA”
Serena Lopez
“I joined Southwest Cheese in Clovis, NM
just a year ago. This is an amazing plant that
has already added 40% more capacity just 4
years into its short life. I am responsible for
operating the RO system which cleans the
process water and allows it to be recovered
for reuse in the plant, thereby ensuring
energy saving and good environmental
practice. During my time at SWC, I have
enjoyed my work as part of a proud and
committed member of the whey team and
have also taken the opportunity to learn
new skills through participation in technical
and safety training.”
Sharon Rokosh
During my four years with Glanbia, I have
developed my business skills and worked
in the very exciting ‘Weight Management’
sector for Glanbia Nutritionals. Our Brand,
Prolibra®, has become a key part of the
formulations of some of the best known
Global Nutrition companies. I am proud to
have been part of a team that has leveraged
our technical and clinical research for
commercial success. I have also had the
opportunity to utilise and build on my
Business education at Purdue University and
have participated in Glanbia’s Management
Development Programme. During the
programme, I had the opportunity to
develop my leadership and strategic
thinking capability and to share learning
experiences and gain exposure to other
business issues with many of my colleagues
from the USA, Ireland and the UK”
34
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance
Board of Directors
The Board of Directors of Glanbia, which stands
at the apex of Glanbia’s governance structure, is
committed to achieving the highest standards
of corporate governance and being ethical in
the conduct of all aspects of the business 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 and ensure
maximum transparency and good communication
between the Group and its shareholders.
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
J Fitzgerald
V Quinlan
Nomination
Committee
L Herlihy, Chairman
J Callaghan
P Haran
J Liston
Michael Horan
B. Comm, FCA
Group Secretary
Liam Herlihy
Chairman
John Moloney
Group Managing Director
Siobhán Talbot
Group Finance Director
Chairman
Kevin Toland
CEO & President of Glanbia
USA & Global Nutritionals
Liam Herlihy1 (aged 58) is Chairman of Glanbia plc. He was
appointed to the Board in 1997, Vice-Chairman in 2001 and
Chairman in May 2008. He is also Chairman of Glanbia Co-
operative Society Limited and a Director of Irish Co-operative
Organisation Society Limited. He completed the Institute of
Directors Development Programme (2006) and holds a certificate of
merit in Corporate Governance at UCD. He farms at Headborough,
Knockanore, Tallow, Co. Waterford.
Executive Directors
John Moloney B.Agr.Sc., MBA, (aged 55) 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 Officer 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.
Siobhán Talbot (B.Comm, FCA) (aged 46), joined the Board as
Group Finance Director on 1 July 2009. She was appointed Deputy
Group Finance Director of Glanbia plc in June 2005 and held the
position of Group Finance Director Designate since March 2009.
She was formerly Group Secretary and also held a number of
senior finance positions, since she joined the Group in 1992. Prior
to joining the Group she worked with PriceWaterhouseCoopers in
Dublin and Sydney, Australia.
Kevin Toland FCMA, (aged 44) was appointed to the Board in
2003. He is CEO & President of Glanbia USA & 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.
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance 35
John Fitzgerald
Victor Quinlan
John Callaghan
Henry Corbally
Nicholas Dunphy
Edward Fitzpatrick
James Gannon
James Gilsenan
Patrick Gleeson
Paul Haran
Christopher Hill
Martin Keane
Jerry Liston
Matthew Merrick
William Murphy
Anthony O’Connor
Robert Prendergast
Non-executive Directors
John Fitzgerald (aged 54) is vice-Chairman of Glanbia plc. He
was first appointed to the Board in 1997 and was appointed
vice-Chairman of the Company in May 2008. He farms at Ross,
Kilmeaden, Co. Waterford.
Paul Haran (aged 52) was appointed to the Board in 2005. He
serves on the Court of Directors of the Bank of Ireland, chairs the
Board of the UCD Michael Smurfit Graduate School of Business
and holds a number of other directorships.
Victor Quinlan1 B.Agr.Sc., (aged 64) is vice-Chairman of Glanbia
plc. He was first appointed to the Board in 1996 and was appointed
vice-Chairman of the Company 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.
John Callaghan FCA, FIB, (aged 67) 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.
Henry Corbally1 (aged 55) was appointed to the Board in 1999.
He is vice-Chairman of the National Dairy Council. He farms at
Kilmainhamwood, Kells, Co. Meath.
Nicholas Dunphy, (aged 49) was appointed to the Board in 2007.
He farms at Grawn, Kilmacthomas, Co. Waterford.
Edward Fitzpatrick1 (aged 61) was appointed to the Board in 1999.
He is a Director of South Eastern Cattle Breeding Society Limited
and Castlegannon Show Limited. He farms at Knockmoylan,
Mullinavat, Co. Kilkenny.
James Gannon (aged 59) was appointed to the Board in 2009. He
farms at Oldtown, Ballyragget, Co. Kilkenny.
James Gilsenan1 (aged 50) was appointed to the Board in 1999. He
farms at Drogheda Road, Collon, Co. Louth.
Patrick Gleeson (aged 48) 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 51) 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.
Martin Keane (aged 54) 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.
Jerry Liston B.A., MBA, (aged 69) was appointed to the Board in
2002. He is Chairman of the Irish Aviation Authority. He was formerly
Chief Executive of United Drug plc and past Executive Chairman of
the Michael Smurfit Graduate School of Business.
Matthew Merrick (aged 58) was appointed to the Board in 2005.
He is Chairman of the County Offaly Enterprise Board and a
board member of IFAC Accountants. He farms at Shean, Edenderry,
Co. Offaly.
William Murphy B. Comm, (aged 64) 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.
Anthony O’Connor (aged 58) was appointed to the Board in May
2008. He farms at Ballymacsimon, Kilmuckridge, Gorey,
Co. Wexford.
Robert Prendergast (aged 48) was appointed to the Board in May
2008. He farms at Jeanville, Goresbridge, Co. Kilkenny.
1 Completed the University College Cork Diploma in Corporate Direction
36
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance
Statement on corporate governance
•
•
•
capital expenditure, including the approval of the annual
operating and capital expenditure budgets and any material
changes to them and the implementation of a Group
wide policy on capital expenditure which defines limits
on expenditure;
dividend policy, including the annual review of the Company’s
dividend policy and declaration of the interim dividend and
recommendation of the final dividend;
shareholder documentation, including approval of resolutions
and corresponding documentation to be put forward to
shareholders at a general meeting, approval of all circulars,
prospectuses and listing particulars and approval of all press
releases concerning matters decided by the Board; and
•
key business policies, including approval of the remuneration,
treasury and risk management policies.
All Directors are equally accountable to the shareholders for the
proper stewardship of the affairs and the success of the Company.
By using their judgement, experience and independence, the
non-executive Directors play a valuable role by critically reviewing
and, where appropriate, challenging strategies proposed by
management to further develop the Group’s business, effectively
use resources and standards of conduct. This ensures the Board
acts in the best long-term interests of the shareholders, while
taking account of the wider community of interests represented by
employees, customers and suppliers.
During the year matters considered by the Board included the
evolving strategic direction of the business, review of Group
funding arrangements and the potential effect of the recession
including mitigating recessionary pressures.
Additionally, senior managers from across the business presented
to the Board on key strategic issues. During the year the Board
also considered and approved annual and medium-term plans and
operating results.
By reviewing the Group’s operating performance at each Board
meeting Directors are kept informed of its progress. Between
Board meetings, Directors are supplied with monthly performance
reports, including detailed commentary and analysis. To ensure
Directors are fully informed on all Committee matters they receive
reports and minutes from the Chairmen of the Board Committees.
The Board held ten scheduled Board meetings. Details of
Directors’ attendance at those meetings are set out in the table
on the next page.
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. In this regard, the Board
supports the principles of corporate governance contained in the
Combined Code on corporate governance issued by the Financial
Reporting Council (the “Combined Code”), which is referred to in
the Listing Rules, applicable to Irish and UK listed companies and
is publicly available on the Financial Reporting Council’s website
www.frc.org.uk/corporate/combined code.cfm.
This Statement on corporate governance together with the
Statement on Directors’ remuneration and Risk management
report on pages 46 to 53 and 28 to 29 respectively are intended
to explain how the Company has applied the principles of the
Combined Code and provide an insight into how the Board and
management run the business for the benefit of shareholders. The
Chairman’s statement and the Group Managing Director’s review
seek to present a balanced assessment of the Company’s position
and prospects.
Compliance with Combined Code
It is the Board’s view that except in relation to the composition
of the Board, the Company has been compliant throughout the
accounting period with the provisions of the Combined Code.
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.
Key matters reserved to the Board include:
•
•
•
Group strategy and business plans, including responsibility for
the overall management of the Group, approval of the Group’s
long-term objectives and commercial strategy, oversight of the
Group’s operations and review of performance in the light of the
Group’s strategy, objectives, business plans and budgets and
ensuring that any necessary corrective action is taken;
acquisitions, disposals and other transactions outside
delegated limits. The Group has in place an Investment
Committee which considers all major acquisitions, disposals
and other transactions prior to presenting to the Board for
consideration;
financial reporting and controls, including approval of the
half-yearly report, interim management statements and any
preliminary announcement of the final results, approval of
the annual report and accounts, including this Statement
on corporate governance and Statement on Directors’
remuneration, approval of any significant changes in accounting
policies or practices, ensuring maintenance of a reliable system
of internal control and risk management including: receiving
reports on, and reviewing the effectiveness of, the Group’s risk
and control processes to support its strategy and objectives,
undertaking an annual assessment of these processes and
approving an appropriate statement for inclusion in this
Annual report;
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance 37
Board
Audit Committee
Nomination Committee
Remuneration Committee
A
4
4
4
4
4
4
4
B
4
4
4
4
4
4
4
A
1
1
1
1
B
1
1
1
1
A
5
5
5
5
5
5
B
5
5
5
5
5
5
L Herlihy
J Fitzgerald
V Quinlan
J Moloney
J Callaghan
H Corbally
N Dunphy
E Fitzpatrick
J Gannon**
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
S Talbot****
K Toland
A
10
10
10
10
10
10
10
10
7
10
10
10
10
10
10
5
10
10
10
3
10
5
10
B
10
10
10
10
10
10
10
10
7
10
10
10
9
10
10
5
10
10
10
3
10
5
8
Column A indicates the number of meetings held during the period the
Director was a member of the Board and/or Committee
Column B indicates the number of meetings attended during the period the
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, Ms S Talbot, the Group
Finance Director and Mr K Toland, the CEO and President Glanbia
USA and 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 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.
Director was a member of the Board and/or Committee
*
Retired 27 May 2009
*** Retired 30 June 2009
**
****
Appointed 27 May 2009
Appointed 1 July 2009
The Board considers that the executive and non-executive
Directors together have the range of skills, knowledge and
experience, including international experience, necessary to
enable them to effectively govern the business. The non-executive
Directors contribute operational experience and understanding of
the sectors in which the Group operates. The executive Directors
bring additional perspectives to the Board’s work through an
understanding of the Group’s businesses.
Biographies of each of the Directors are set out on pages 34 and 35.
Changes to the composition of the Board during the year
Mr G Meagher retired as a Director of the Company on 30 June
2009 following his retirement as Deputy Group Managing Director
and Group Finance Director. Mr M Parsons also stepped down as
a Director of the Company on 27 May 2009 following his retirement
as a Director of the Society. The Society nominated Mr J Gannon to
replace Mr M Parsons and he joined the Board as a non-executive
Director with effect from 27 May 2009. In addition, Ms S Talbot was
appointed Director and Group Finance Director on 1 July 2009.
38
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance
Organisation of the Board and Group Secretary
Division of responsibilities
The roles of the Chairman and Group Managing Director are
split, with clear written guidance to support the division of responsibility.
Group Chairman
Mr L Herlihy was appointed Chairman on 28 May 2008. The
Chairman is responsible for the efficient and effective working of
the Board. He ensures that Board agendas cover the key strategic
issues confronting the Group and that Directors receive accurate,
timely, clear and relevant information.
The Chairman is available to consult with shareholders throughout
the year. The Board is kept informed of the views of shareholders
through regular updates from the Chairman, the Group Secretary
and the executive Directors, as well as through the inclusion in
the Board papers of relevant reports and commentaries of, and
exchanges with, shareholders and investor bodies.
While the Chairman holds a number of other directorships
including Irish Co-operative Organisation Society Limited 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
Mr J Moloney, as Group Managing Director, is responsible for
all aspects of the operation and management of the Group and
its business. His role includes developing, for Board approval,
an appropriate business strategy and ensuring that the agreed
strategy is implemented in a timely and effective manner. 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.
Non-executive Directors
The non-executive Directors on the Board currently consists
of the Chairman and seventeen other non-executive Directors.
Mr J Callaghan is the Senior Independent Director.
In addition to their attendance at Board and, as appropriate,
Committee meetings, the non-executive Directors also met
formally on two occasions during 2009 without executive
management present. At one of these meetings the non-executive
Directors examined and reviewed the performance of the executive
management while the remaining meeting was held without
the presence of the Chairman at which, among other things, the
performance of the Chairman was discussed.
Senior Independent Director
The Senior Independent Director is Mr J Callaghan. In this role
Mr J Callaghan is available to shareholders if they have concerns
which contact, through the normal channels, has failed to resolve.
Mr J 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.
Group Secretary
The Group Secretary, Mr M Horan, through the Chairman, is
responsible for advising the Board on governance matters and for
ensuring good information flows within the Board. All Directors
have access to the advice and services of the Group Secretary, as
well as access to external advice, if required, at the expense of the
Group. No such external advice was sought by any Director during
the year.
Independence
The Board assesses and reviews the independence of each of the
Directors annually, or at any other time where the circumstances of
a director change such as to warrant reconsideration, having regard
to the potential relevance and materiality of a director’s interests.
Following the 2009 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 Messrs Callaghan and Liston in the context of
the guidance in the Combined Code and determined that,
notwithstanding their twelve years and seven years on the Board
respectively, they remain independent. In the same manner as
the other non-executive Directors, they discharge their duties in a
proper and consistently independent manner and constructively
and appropriately challenge 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 and 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.
Information and professional development
The Board is supplied with information in a form and quality to
enable it to take informed decisions and to discharge its duties.
All Directors are encouraged to make further enquiries as they
consider appropriate of the executive Directors or management.
Directors are provided with detailed briefings on the Group’s
businesses, the markets in which they operate and the overall
economic and competitive environment. Other areas addressed
include legal issues and responsibilities of Directors, the Group’s
governance arrangements and its Investor Relations programme.
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.
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance 39
Non-executive Directors are encouraged to visit the Group’s major
facilities to enable them to gain a greater understanding of the
Group’s activities. In addition, at least one board meeting each
year is held at an ‘off-site’ location which incorporates a visit to
one of the Group’s principal businesses or developments. During
the year, the Board made visits to the Group’s businesses located
in Orsingen-Nenzingen in Germany and Virginia in Co. Cavan.
The Board also visited a number of other international food and
ingredients companies operating in Europe and the Agricultural
Commission of the European Parliament in Brussels where it
received updates on European Union (“EU”) policy changes in
relation to the agricultural sector in the EU.
Six of the Directors nominated to the Board by the Society have
completed the ICOS Diploma in Corporate Direction. Two
further Directors commenced the diploma in 2009 and three
further Directors commenced the Smurfit Director Development
Programme. In addition, members of the Audit Committee
received a number of technical updates from the Group’s auditors.
Board performance evaluation
The effectiveness of the Board is vital to the success of the
Group and the Company undertakes a rigorous evaluation each
year in order to assess how well the Board, its Committees,
the Directors and the Chairman are performing. The aim is to
improve the effectiveness of the Board and its Committees and
the Group’s performance. The process is led by the Chairman
and supported by the Group Secretary. An external review of the
Board’s effectiveness and the effectiveness of its Committees
was undertaken in 2008/2009 by an independent consultancy
firm. The evaluation considered the effectiveness of the Board
and its committees under the following categories: Board
structure and responsibilities, Board process and procedures,
Board culture and relationships, Board composition and
competencies, Board content and Board performance. As part
of the evaluation, interviews were conducted with each Board
member. All Directors also completed a questionnaire evaluating
the Board and Committees’ processes, their effectiveness and
where improvements may be considered. A report was prepared
based on the interviews with the Directors and the questionnaire
circulated and the overall results of the evaluation were presented
to and reviewed by the Board.
The performance of the Chairman is also included in the above
process and takes into account the views of both the executive and
non-executive Directors. The Chairman’s evaluation is managed
by the Senior Independent Director who provides feedback to the
Chairman. As part of the Chairman’s evaluation the non-executive
Directors meet separately under the chairmanship of the Senior
Independent Director.
The Board evaluation process assesses the executive Directors in
their capacities as directors of the Company. They are evaluated
in respect of their executive duties through a separate process
whereby the Chairman and the non-executive Directors assess
the Group Managing Director and the Group Managing Director
assesses the executive Directors.
Following this comprehensive review, the Directors have concluded
that the Board and its Committees operate effectively and agreed a
number of key changes which are being implemented. Additionally,
the Chairman has concluded that each Director (including all
Directors standing for re-election) contributes effectively and
demonstrates full commitment to his/her duties. Mr J Callaghan,
as Senior Independent Director, confirms that Mr L Herlihy, also
standing for re-appointment at this year’s Annual General Meeting
(“AGM”), continues to perform effectively and demonstrates
commitment to his role.
Appointment and retirement of Directors
The Nomination Committee of the Company leads the process
for Board appointments other than the fourteen non-executive
Directors nominated by the Board of the Society for appointment
to the Board of the Company. New Directors are subject to
election at the first AGM following their appointment, and
Directors are subject to retirement and re-appointment by
shareholders every three years. The re-appointment of non-
executive Directors is not automatic. The Board has determined
that non-executive Directors who have served for nine years
or more will be asked to stand for re-appointment annually
provided that the Board remains satisfied both with the Director’s
performance and that nine or more years’ continuous service does
not compromise the Director’s continuing independence.
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 AGM
of the Company.
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 2008, 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 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 in the
Statement on Directors’ remuneration on pages 46 to 53.
40
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance
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. During the year
Ms S Talbot replaced Mr G Meagher as Group Finance Director
following Mr Meagher’s retirement. Ms S Talbot was previously
Deputy Finance Director. This process was assisted by the
Nomination Committee.
External appointments
The Board supports executive Directors and members of the
Executive Committee taking up non-executive directorships as
part of their continuing development which will ultimately benefit
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 is a
Director of The Irish Dairy Board Co-operative Limited and DCC plc
for which he received fees of €12,000 and €61,000 respectively.
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.
Board Committees
The Board has in place a committee structure to assist it in the
discharge of its responsibilities. The Committees of the Board
are the Audit Committee, the Nomination Committee, the
Remuneration Committee and the Finance Sub-Board. Each of
the Committees has terms of reference under which authority is
delegated by the Board. The terms of reference may be found at
www.glanbia.com
The Group Secretary provides secretariat support for each of
the Committees.
Nomination Committee
The Nomination Committee is chaired by Mr L Herlihy and its other
members are Mr J Callaghan, Mr P Haran and Mr J Liston, all of
whom are non-executive Directors.
The Nomination Committee of the Company leads the process
for Board appointments other than the fourteen non-executive
Directors nominated by the Board of the Society for appointment
to the Board of the Company. The Nomination Committee also
considers appointments to senior executive positions. The
Nomination Committee met once during the year. Information
on meeting attendance by Nomination Committee members is
included in the table on page 37.
The Nomination Committee’s main responsibilities are to:
•
identify and nominate for the approval of the Board, candidates
to fill board vacancies as and when they arise;
•
•
•
•
•
before making an appointment, evaluate the balance of skills,
knowledge and experience on the Board and, in the light of this
evaluation, prepare a description of the role and capabilities
required for a particular appointment;
review annually the time required from a non-executive Director.
The performance evaluation procedures will be used to assess
whether a non-executive Director is spending enough time to
fulfil their duties;
give full consideration to succession planning in the course of
its work, taking into account the challenges and opportunities
facing the company and what skills and expertise are therefore
needed on the Board in the future;
regularly review the structure, size and composition (including
the skills, knowledge and experience) of the Board and make
recommendations to the Board with regard to any changes; and
keep under review the leadership needs of the organisation,
both executive and non-executive, with a view to ensuring the
continued ability of the organisation to compete effectively in
the marketplace.
Key activities during the year
•
Recommendation on the appointment of new Finance Director
The Board accepted the Nomination Committee’s
recommendations that Ms S Talbot join the Board following
the retirement of Mr G Meagher. Ms S Talbot was previously
Deputy Finance Director.
•
•
•
Review of Directors’ independence
The nomination for the re-appointment of the non-executive
Directors, Mr J Callaghan, Mr H Corbally, Mr J Fitzgerald,
Mr E Fitzpatrick, Mr J Gilsenan, Mr L Herlihy, Mr C Hill, Mr W
Murphy and Mr V Quinlan respectively, was reviewed with
particular rigour, as they have served as Directors for nine years
or more (with each of Mr J Callaghan and Mr L Herlihy excusing
themselves from the consideration of their own nomination for
re-appointment). The Nomination Committee was 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 Nomination
Committee and the Board’s view enhanced their effectiveness
and commitment to their roles.
Review of the time required from a non-executive Director
The Nomination Committee and 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.
Review of Committee performance
The Nomination Committee assessed its performance. As a result
of that assessment, the Nomination Committee is satisfied that it
is functioning effectively and it has met its terms of reference.
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance 41
The Nomination Committee did not use an external search
consultancy or open advertising in the appointment of the new
non-executive Director, Mr J Gannon, as he was nominated by the
Board of the Society for appointment to the Board.
Remuneration Committee
The Remuneration Committee is chaired by Mr J Liston and its
other members are Mr L Herlihy, Mr V Quinlan, Mr J Callaghan, Mr J
Fitzgerald and Mr P Haran, all of whom are non-executive Directors.
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 Remuneration Committee operates the Company’s share
option and Long Term Incentive Schemes. The remuneration of
the non-executive Directors is determined by the Remuneration
Committee within the total amount approved by the Company’s
shareholders.
The Remuneration Committee met five times during the year.
Information on meeting attendance by Remuneration Committee
members is included in the table on page 37.
The Remuneration Committee’s key objectives are to:
•
align senior executives’ remuneration with the interests of
shareholders and other stakeholders, including customers
and employees;
•
promote the achievement of both the Company’s annual
plans and its strategic objectives by providing a remuneration
package that contains appropriately motivating targets; and
•
establish a competitive remuneration package to attract, retain
and motivate high quality leaders.
Full details of the Remuneration Committee’s members, attendance,
objectives, responsibilities and key activities during the year are set
out in the Statement on Directors’ remuneration on pages 46 to 53.
Audit Committee
The Audit Committee is chaired by Mr J Callaghan and its other
members are Mr L Herlihy, Mr V Quinlan, Mr H Corbally, Mr J
Fitzgerald, Mr P Haran and Mr J Liston, all of whom are non-
executive Directors.
The Audit Committee met four times during the year. Information
on meeting attendance by Audit Committee members is included
in the table on page 37.
The main role and responsibilities of the Audit Committee 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.
Key activities during the year
•
Review of the integrity of the financial statements
The Audit Committee assisted the Board in assuring the
integrity of the financial statements of the Group and any formal
announcements by evaluating and making recommendations
to the Board on the appropriateness of accounting policies and
practices, areas of judgement, compliance with accounting
standards and the results of external and internal audits prior to
their submission to the Board for approval.
•
Review of the Group’s internal control and risk management
systems
The Board is ultimately responsible for risk management
which includes the Group’s risk governance structure and
maintaining an appropriate internal control framework. The
Audit Committee terms of reference includes responsibility for
reviewing the effectiveness of the Group’s internal control and
risk management systems. During 2009 the Audit Committee in
conjunction with members of the executive management team
reviewed the population of risks the business is exposed to and
identified and evaluated the key areas of risk for the Group.
Management presentations included detailed reviews of the
key Group risks identified and of the systems for managing
these risks. Further details of these reviews are outlined in the
Risk management report on pages 28 to 29.
42
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance
•
•
Review of auditors Independence
The Audit Committee manages the relationship with the
external auditors on behalf of the Board. In doing so it provided
recommendations in relation to the re-appointment of the
existing auditors and reviewed and approved their terms of
engagement. It also assessed the performance of the auditors
and their level of independence and objectivity in carrying
out their duties in line with the Group auditor relationship and
Independence policy.
Review of the effectiveness of the Internal Audit function
The Audit Committee reviewed and approved the annual
Internal Audit Plan (the “Plan”) and ensured that the function
was adequately staffed to perform its duties. The Audit
Committee reviewed progress against the Plan and received
an executive summary of all audit reports issued by the internal
audit department.
•
Review of Audit Committee Performance
The Audit Committee assessed its performance and as a result
of that assessment the Audit Committee is satisfied that it is
functioning effectively in line with its terms of reference.
Relations with auditors
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; and
•
legal services.
Details of the Auditor’s remuneration is set out in note 6 – operating
expenses. The audit engagement partner rotates every five years.
Finance Sub-Board
The Finance Sub-Board is chaired by Mr L Herlihy and its other
members are Mr V Quinlan, Mr J Fitzgerald, Mr J Callaghan, Mr E
Fitzpatrick, Mr P Haran, M J Liston, Mr J Moloney and Ms S Talbot.
The Finance Sub-Board met once during the year.
The Finance Sub-Board’s key objective is to consider and, where
appropriate, make recommendations to the Board in respect of any
change in Group strategy or any acquisition or divestment above a
certain level.
Activities during the year
• Recommendation on pension strategy for Irish pension schemes.
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, 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; Messrs
J Fitzgerald and V Quinlan, Vice-Chairmen; Mr M Walsh, Glanbia
Chairman from 2005 to 2008; and Messrs J McCullough, P Rogers,
W Seltzer and Ms S Davis, USA based members*. Mr J Moloney,
Group Managing Director, also attends meetings of the US
Advisory Board.
*
*
*
*
Mr J McCullough, retired, 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, retired, 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.
Internal control
The Board has overall responsibility for the group’s system of
internal control, for reviewing its effectiveness and for confirming
that a process exists for the identification, evaluation and
management of risk in order to ensure that the Group’s strategic
objectives are achieved. This process has been in place for the
year covered in this Annual report and financial statements and
up to the date of its approval. 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 regularly reviewed by the Board and accord with the
Turnbull Guidance which the Board has fully adopted.
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance 43
While acknowledging its responsibility for the system of internal
control, the Board is aware that such a system is designed to
manage rather than eliminate the risk of failure to achieve business
objectives, and can only provide reasonable and not absolute
assurance against material misstatement or loss.
The Group’s key systems of internal control and risk management
can be summarised as follows;
•
•
•
•
•
•
a code of conduct that defines a set of agreed standards and
guidelines for corporate behaviour;
clearly defined organisation structures and lines of authority
including appropriate terms of reference for Board Committees;
a Group-wide risk assessment process which is maintained by
business unit management reporting to the Group Executive
and Board as required;
the Audit Committee, a formally constituted committee of
the Board comprising non-executive Directors only. It meets
with internal and external auditors to satisfy itself that control
procedures are in place and are being followed;
a Group Internal Audit function which monitors financial,
operational and regulatory controls and reports to the Audit
Committee and management. The annual audit plan is
approved by the Audit Committee;
a control self assessment programme has been implemented
which assesses internal control and fraud prevention processes;
and
•
Financial reporting process internal control and risk
management systems which include the following main features:
- Board approval of the annual budget plan following Group
and business unit strategy plan reviews;
- monitoring of performance against the annual budget
through monthly board reports detailing actual versus
budgeted results, analysis of material variances, review of key
performance indicators and re-forecasting where required;
- Audit Committee review of the integrity of the half-year
accounts and annual financial statements, interim
management statements and any formal announcements.
Any resulting recommendations are included in the Audit
Committee Chairman’s Board report;
- Board review and approval of the group half-year accounts,
annual accounts, interim management statements and any
formal announcements;
- the establishment of clearly defined guidelines for capital
expenditure, including detailed budgeting, appraisal and
post-investment reviews;
- the use of a Group finance management manual that clearly
sets out Group accounting policies and financial control
procedures; and
- Board approved treasury risk management policies, designed
to ensure that Group foreign exchange and interest rate
exposures are managed within defined parameters.
The Board has reviewed the effectiveness of the current systems
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. Further details of these reviews
are outlined in the Risk management report on pages 28 to 29.
The Chairman of the Audit Committee reports to the Board after
each meeting of the Audit Committee. In addition to the Audit
Committee reporting the Board has also taken assurance through
the work of the various other Board Committees. The Board is
satisfied that the Group internal controls systems are properly
reviewed and effective.
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.
Memorandum and Articles of Association
The Company’s Memorandum and Articles of Association set
out the objects and powers of the Company. The Articles detail
the rights attaching to each share class; the method by which the
Company’s shares can be purchased or re-issued; the provisions
which apply to the holding of and voting at general meetings; and
the rules relating to the Directors, including their appointment,
retirement, re-election, duties and powers. A copy of the
Memorandum and Articles of Association can be obtained from
the Company’s website, www.glanbia.com.
Share capital
At 2 January 2010 the authorised share capital of the Company
was 306,000,000 ordinary shares of €0.06 each and the issued share
capital was 293,555,684 ordinary shares of €0.06 each, of which
54.6% was held by the Society. All the Company’s shares are fully
paid up and quoted on the Irish and London Stock Exchanges.
No shares were allotted during the year. Details of the Company’s
share capital and shares under option or award at 2 January 2010
are given in note 23 to the financial statements.
Rights and obligations of ordinary shares
On a show of hands at a general meeting every holder of ordinary
shares present in person or by proxy and entitled to vote shall have
one vote. On a poll, every member present in person or by proxy,
shall have one vote for every ordinary share held. In accordance
with the provisions of the Articles of Association, holders of
ordinary shares are entitled to a dividend where declared or paid
out of profits available for such purposes. On return of capital on a
winding up, holders of ordinary shares are entitled to participate in
such a return.
44
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance
Amendments to the Company’s Articles of Association will
be proposed at the forthcoming AGM to take account of the
provisions of The Shareholders’ Rights (Directive 2007/36/EC)
Regulations 2009 and to permit future dividends to be made
only by credit transfer into a nominated bank or building society
account. The amendments to take account of the Shareholders’
Rights (Directive 2007/36/EC) Regualtions 2009 will include
measures relating to the votes of proxies and multiple corporate
representatives at general meetings of the Company. Further
information can be found in the circular to shareholders
accompanying the notice of the AGM.
Rights under the Shareholders’ Rights (Directive 2007/36/EC)
Regulations 2009
Members have the right to ask questions related to items on the
agenda of a general meeting and to receive answers, subject to
certain qualifications.
Members (s) holding 3% of the issued share capital of the company,
representing at least 3% of its total voting rights, will have the right
to put items on the agenda and to table draft resolutions at AGMs.
The request must be received by the company at least 42 days
before the relevant meeting.
Further details of shareholders rights under the Shareholders’
Rights (Directive 2007/36/EC) Regulations 2009 are contained
in the notice of the 2010 AGM available on the Group website
www.glanbia.com and posted with this Report.
Exercise of rights of shares in employee share schemes
As detailed in note 23 to the financial statements at 2 January 2010,
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.
Restrictions on transfer of shares
With the exception of restrictions on transfer of shares under the
Company’s share schemes while the shares are subject to the
schemes, there are no restrictions on the voting rights attaching to
the Company’s ordinary shares or the transfer of securities in the
Company.
No person holds securities in the Company carrying special rights
with regard to control of the Company. The Company is not aware
of any agreements between holders of securities that may result in
restrictions in the transfer of securities or voting rights.
Unless expressly specified to the contrary in the Articles of Association
of the Company, the Company’s Articles of Association may be
amended by special resolution of the Company’s shareholders.
Authority to purchase own shares
At the Company’s AGM held on 13 May 2009, shareholders
renewed the Company’s authorities to make market purchases
of up to 10% of the aggregate nominal value of the issued share
capital of the Company at close of business on that date. These
authorities were not used during the year and, at the forthcoming
AGM, shareholders will be asked to renew them for another year.
Details are contained in the notice of AGM. As detailed in note
23 to the financial statements at 2 January 2010, 570,054 ordinary
shares were held in an employee benefit trust for the purpose of
the Group’s employee share schemes.
Substantial interests
At 9 March, 2010, the Company has been advised of the following
notifiable interests in its ordinary share capital:
Shareholder
No. of
ordinary shares
% of issued share
capital
Glanbia Co-operative
Society Limited
160,277,308
54.6%
Communication with shareholders
The Company places considerable importance on communication
with shareholders and engages with them on a wide range of
issues. The Group has an ongoing programme of dialogue and
meetings between the executive Directors and institutional
investors, fund managers and analysts. At these meetings a
wide range of relevant issues including strategy, performance,
management and governance are discussed within the constraints
of information already made public.
The Group Finance Director facilitates communication with
institutional investors. The Directors consider it important to
understand the views of shareholders and, in particular, any issues
which concern them. The Board receives reports on matters that
have been raised with management at the regular meetings
held with the large investors. During the year the Chairman held
a meeting with the major institutional investors and attended
investor meetings with management. In addition, the Senior
Independent Director is available to meet with major shareholders
to discuss any areas of concern that cannot be resolved through
normal channels of investor communication and arrangements can
be made to meet with the Senior Independent Director through the
Group Secretary. Similarly, arrangements can be made for major
shareholders to meet with newly appointed directors. In addition,
the Board consults with shareholders in connection with specific
issues where it considers appropriate.
The Board is equally interested in the concerns of private
shareholders and, on its behalf the Group Secretary oversees
communication with these investors. All material information
reported to the regulatory news services is simultaneously
published on the Company’s website affording all shareholders
full access to Company announcements.
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance 45
The Company has taken full advantage of the provisions within the
Transparency (Directive 2004/109/EC) Regulations 2007 allowing
communications to be made electronically to shareholders where
they have not requested hard copy documentation. As a result
the Company’s website has become the primary method of
communication for the majority of its shareholders.
•
•
give approval to call an Extraordinary General Meeting on
14 days notice; and
amend the Articles of Association so as to update the Articles
of Association in order to make them consistent with the
Shareholders’ Rights (Directive 2007/36/EC) Regulations 2009
and permit future dividends to be made only by credit transfer
into a nominated bank or building society account.
To ensure shareholders have time to consider the annual report and
accounts and notice of the AGM and lodge their proxy votes they
were mailed more than 20 working days prior to the meeting. The
Group offers all shareholders the choice of submitting proxy votes
either electronically or in paper format. It also offers them the ability
to abstain.
The Company’s AGM, which is held in Ireland, provides a valuable
opportunity for the Board to communicate with private investors. At
the meeting, the Company complies with the Combined Code as it
relates to voting, the separation of resolutions and the attendance
of Committee chairmen. Whenever possible, all Directors attend
the AGM and shareholders are invited to ask questions during
the meeting and have an opportunity to meet with the Directors
following the conclusion of the formal part of the meeting. In line
with the Combined Code, details of proxy voting by shareholders,
including votes withheld, are made available on request and are
placed on the Company’s website following the meeting.
The Company’s annual report and accounts and annual review,
together with the Company’s half-yearly reports, interim
management statements and other public announcements are
designed to present a balanced and understandable view of
the Group’s activities and prospects and are available on the
Company’s website. The Chairman’s statement, Group Managing
Director’s review, and Business review provide an assessment of
the Group’s affairs and they will be supported by a presentation to
be made at the AGM.
Change of control provisions
The Company has certain banking facilities which may require
repayment in the event that a change in control occurs with respect
to the Company. There are also a number of agreements that take
effect, alter or terminate upon a change of control of the Company,
such as commercial contracts and joint venture agreements. In
addition, the Company’s long term incentive plans contain change
of control provisions which can allow for the acceleration of the
exercisability of share options and the vesting of share awards in the
event that a change of control occurs with respect to the Company.
Corporate responsibility
As the Group grows and develops as a leading international
cheese and nutritional ingredients Group, so also does the
Group’s commitment to conducting its business in a way that is
economically, socially and environmentally sustainable.
During 2009 the Group made further progress in its corporate
citizenship objectives, more particular details of which are
summarised in Our responsibilities section of this report on
pages 30 to 33.
Accountability and audit
Full details of the AGM to be held on Tuesday 25 May 2010,
together with explanations of the resolutions to be proposed, are
contained in the notice of the AGM available on the Group’s website
www.glanbia.com and posted with this Report. In addition to the
ordinary business of an AGM, shareholders are being asked to:
Financial reporting
Directors’ responsibilities for preparing the financial statements
for the Company and the Group are detailed on page 55. The
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.
•
•
renew the Directors’ authority to allot relevant securities, within
the meaning of section 20 of the Companies (Amendment)
Act, 1983, up to an aggregate nominal amount of equal to the
authorised but unissued share capital of the Company of the
date of the AGM;
renew the authority to disapply the strict statutory pre-emption
provisions in the event of a rights issue or in any other issue up
to an aggregate amount of €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;
•
extend the authority to purchase up to 10% of its own shares
until the earlier of the close of business on 24 August 2011 or the
date of the AGM of the Company in 2011;
•
pass a resolution authorising the Company to reissue such
shares purchased by it and not cancelled as treasury shares;
46
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance
Statement on Directors’ remuneration
•
•
•
•
•
•
•
•
determine each year whether share awards will be made, and if
so, the overall amount of such share awards, the individual share
awards to executive Directors and other senior executives and
the performance targets to be achieved;
determine the policy for, and scope of, pension arrangements
for each executive Director and other senior executives;
ensure that contractual terms on termination, and any payments
made are fair to the individual, and the Company, that failure is
not rewarded and that the duty to mitigate loss is fully recognised;
within the terms of the agreed policy and in consultation with
the Group Chairman and/or the Group Managing Director
as appropriate, determine the total individual remuneration
package of each executive Director and other senior executives
including bonuses, incentive payments and share options or
other share awards;
review and note annually the remuneration trends across the
Company or Group;
oversee any major changes in employee benefits structures
throughout the Company or Group;
ensure that all provisions regarding disclosure of remuneration
including pensions, as set out in the Combined Code on
Corporate Governance issued by the Financial Reporting
Council (the “Combined Code”), are fulfilled; and
be exclusively responsible for establishing the selection criteria,
selecting, appointing and setting the terms of reference for
any remuneration consultants who advise the Remuneration
Committee; and for obtaining reliable, up-to-date information
about remuneration in other companies as appropriate.
Remuneration Committee membership
The Remuneration Committee is chaired by J Liston and its
members are L Herlihy, V Quinlan, J Callaghan, J Fitzgerald
and P Haran, all of whom are non-executive Directors.
The Remuneration Committee met on five occasions in 2009
and the meeting attendance record is set out in the Statement
on corporate governance.
Remuneration Committee meetings are generally attended by
Mr J Moloney, the Group Managing Director and Mr B Phelan,
the Group Human Resources Director (other than when their own
remuneration is being discussed). The Group Secretary acts as
secretary to the Remuneration Committee.
This report sets out the remuneration policy for the Company’s
Directors, describes its implementation and discloses the
amounts earned in 2009.
This report covers the following:
•
the Remuneration Committee’s objectives, membership and
main activities in 2009;
• a review of the Company’s remuneration policy and practice;
•
summary of basic salary benefits, performance related bonus,
share-based incentive schemes and pension benefits;
• service contracts;
• external board appointments;
• remuneration policy for non-executive Directors; and
•
tables summarising the 2009 position on: Directors’
remuneration and Directors’ and Secretary’s interests in shares.
Remuneration Committee objectives
The Remuneration Committee is a committee of the Board. Its
terms of reference are available from the Group Secretary and can
be found on the Company’s website www.glanbia.com.
The Remuneration Committee’s key objectives are to:
•
align senior executives’ remuneration with the interests of
shareholders and other stakeholders, including customers
and employees;
•
promote the achievement of both the Company’s annual
plans and its strategic objectives by providing a remuneration
package that contains appropriately motivating targets; and
•
establish a competitive remuneration package to attract,
retain and motivate high quality leaders.
The Remuneration Committee’s main responsibilities are to:
determine and agree with the Board the framework or broad
•
policy for the remuneration of the Group Managing Director, the
Group Chairman, the executive Directors, the Group Secretary
and such other members of the executive management as it is
designated to consider;
•
•
•
ensure that members of the executive management of
the Company are provided with appropriate incentives to
encourage enhanced performance and are, in a fair and
responsible manner, rewarded for their individual contributions
to the success of the Company;
review the ongoing appropriateness and relevance of the
remuneration policy;
approve the design of, and determine targets for, any
performance-related pay schemes operated by the Company and
approve the total annual payments made under such schemes;
•
review the design of all share incentive plans for approval by the
Board and shareholders;
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance 47
The Remuneration Committee appointed Mercer to advise them
on a review of senior executive remuneration which culminated
in the introduction of the 2007 and 2008 Long Term Incentive
Plans (the “LTIPs”). The Group Secretary and the Group Human
Resources Director advised the Remuneration Committee in
relation to the operation of the Company’s share plans.
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.
In line with the Combined Code requirements, the Board undertook
a review of the effectiveness of the Remuneration Committee
during the year. The 2009 review concluded that the Remuneration
Committee had fulfilled its role and responsibilities appropriately.
Remuneration Committee activities during 2009
The Remuneration Committee considers matters relating to
the operation of the remuneration policy and emerging market
practices. In 2009 the Remuneration Committee discussed,
amongst others, the issues set out below:
• approval of Group Managing Director’s service contract;
•
•
•
annual review of executive Directors’ basic salaries and benefits
in kind ;
annual consideration and approval of executive Directors’
bonus target for 2009;
a review and approval of LTIP grants to the executive Directors’
and approval of the performance conditions for the 2009 grants;
• a performance test of existing options;
• senior management salary review for the Group; and
•
strategic review of the ongoing funding of the Group’s defined
benefit pension scheme.
During the year, the Group Managing Director and all other Directors
and senior management reporting directly to the Group Managing
Director volunteered to take a reduction in their basic salaries.
Remuneration policy and practice
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 Remuneration Committee consults the Group Managing
Director regarding remuneration proposals and obtains internal
and external professional advice as deemed appropriate. The
Remuneration Committee operates the Company’s share option
and Long Term Incentive Schemes.
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.
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.
Share-based incentive schemes
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 EPS 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.
The 2008 LTIP
The 2008 LTIP has been designed so that any rewards will be
dependent on a sustained improvement in the underlying financial
performance of the Group in the period since the date of the grant
of the relevant awards. Where there is sustained improvement in
the underlying financial performance, the extent of vesting shall be
determined by 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
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
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.
48
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance
EPS Condition
Under the EPS Condition, there must be an increase in the adjusted
consolidated EPS 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 are three pre-defined levels of EPS 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 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.
TSR Performance Condition
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 are 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 25% of TSR performance of the peer group, then a pro rata
vesting on a straight line basis shall apply.
The 2007 LTIP
The 2007 LTIP corresponds with the 2008 LTIP except that Directors
were excluded from participating and the extent of vesting is
determined only by reference to growth in the Company’s EPS and
the Company’s TSR. The 2008 LTIP has since replaced the 2007 LTIP.
Pension benefits
Pension benefits for executive Directors are calculated on basic
salary only. Benefits are designed to provide a percentage of basic
salary at retirement for full service.
Service contracts
No Director has a service contract with a notice period in excess of
one year or with provisions for pre-determined compensation on
termination which exceed one year’s salary and benefits-in-kind.
External Board 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 broaden 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 J Moloney, is a Director of The Irish Dairy
Board Co-operative Limited and DCC plc for which he received fees
of €12,000 and €61,000, respectively, which he retained.
Non-executive Directors
The remuneration policy for non-executive Directors is to pay the
market rate to secure persons of a suitable calibre for a group
of this size. The remuneration of the non-executive Directors is
determined by the Remuneration Committee within the total
amount approved by the Company’s shareholders in general
meeting from time to time. The responsibility of the role and
international nature of the Group are fully considered when setting
the fee levels. The Chairman of each Remuneration Committee
receives an additional fee. The non-executive Directors’ fees are
non-pensionable and non-executive Directors are not eligible to
participate in any incentive plans. The non-executive Directors do
not have service contracts with the Company, but are appointed
to the Board under letters of appointment for an initial three-year
period. They are subject to retirement and re-appointment by
shareholders at the first Annual General Meeting following their
appointment and every three years thereafter.
Directors’ remuneration
Details of Directors’ salary, fees and other benefits are set out
in Table 1 on page 49 opposite.
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance 49
Table 1
The salary, fees and other benefits pursuant to the remuneration package of each Director during the year were:
Executive Directors
J Moloney
G Meagher (note a)
K Toland
S Talbot (note b)
2009
2008
Non - Executive Directors
L Herlihy (note c)
J Fitzgerald (note d)
V Quinlan
J Callaghan
H Corbally
N Dunphy
E Fitzpatrick
J Gannon (note e)
J Gilsenan
P Gleeson
P Haran
C Hill
M Keane
J Liston
M Merrick
W Murphy
A O’Connor (note f)
M Parsons (note i)
E Power (note g)
R Prendergast (note f)
M Walsh (note h)
2009
2008
Total 2009
Total 2008
Salary
€’000
457
146
342
125
1,070
1,141
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,070
1,141
Performance
bonus
€’000
Pension
contribution
€’000
Fees
€’000
Other
benefits
€’000
–
–
–
–
–
–
79
38
38
64
18
18
18
11
18
18
56
18
18
64
18
56
18
8
–
18
–
594
656
594
656
–
–
–
–
–
1,058
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,058
94
42
73
30
239
384
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
36
11
57
9
113
65
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
239
384
113
65
2009
Total
€’000
587
199
472
164
1,422
79
38
38
64
18
18
18
11
18
18
56
18
18
64
18
56
18
8
–
18
–
594
2,016
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
656
3,304
a Mr G Meagher retired as an executive Director on 30 June 2009.
b Ms S Talbot was appointed as an executive Director on 1 July 2009.
c Mr L Herlihy was appointed Chairman on 28 May 2008.
d Mr J Fitzgerald was appointed vice Chairman on 28 May 2008.
e Mr J Gannon was appointed as a Director on 27 May 2009.
f Messrs A O’Connor and R Prendergast were appointed Directors on 28 May 2008.
g Mr E Power resigned as a Director on 28 May 2008.
h Mr M Walsh resigned both as Chairman and Director on 28 May 2008.
i Mr M Parsons resigned as a Director on 27 May 2009.
50
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance
Details of Directors’ and Secretary’s options and awards under the
Company’s share schemes are set out in Table 2 of this Report.
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 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 2009
in excess of
inflation
€’ 000
Total annual
accrued
pension at
2 Jan 2010
€’ 000
J Moloney
G Meagher
K Toland
S Talbot
2009
2008
88
55
56
20
219
1,140
11
4
10
3
28
63
327
237
109
111
784
582
As detailed in note 7 a strategic review of the Group’s pension
arrangements was completed during 2009 which resulted in a
reduction of €6,308,000 in the transfer value of the accrued benefits
of executive directors, including Mr G Meagher who retired during
the year.
Directors’ and Secretary’s interests in shares
Details of the interests of the Directors and Secretary and their
spouses and minor children in the share capital of the holding
Company, parent society and subsidiary companies/societies,
are set out in Table 2:
Table 2
Directors’ and Secretary’s shares in Glanbia plc
Ordinary shares of €0.06
2 Jan 2010
4 Jan 2009
**
*
§
Beneficial
Directors
L Herlihy
J Fitzgerald
V Quinlan
J Moloney
J Callaghan
H Corbally
N Dunphy
E Fitzpatrick
J Gannon
J Gilsenan
P Gleeson
P Haran
C Hill
M Keane
J Liston
M Merrick
W Murphy
A O’Connor
R Prendergast
S Talbot
K Toland
§§ *
*
Secretary
M Horan
* Executive Director.
** Or at date of appointment if later.
§ Appointed on 27 May 2009.
§§ Appointed on 1 July 2009.
91,804
24,171
31,347
104,593
35,000
7,495
10,390
50,501
12,552
5,842
24,923
7,462
30,029
20,000
15,000
3,600
91,804
24,171
31,347
104,593
35,000
7,495
10,390
50,501
12,552
5,842
31,923
7,462
30,029
20,000
15,000
3,600
230,827
230,827
15,743
4,007
17,693
23,243
15,743
4,007
17,693
23,243
4,593
4,593
There have been no changes in the above interests between
2 January 2010 and 9 March 2010.
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance 51
Directors’ and Secretary’s options in Glanbia plc
Details of movements on outstanding options over the Company’s ordinary share capital are set out below. Outstanding options are
exercisable on dates between 2010 and 2017.
4 Jan 2009
**
Options - Ordinary shares of €0.06
Movements
during year
2 Jan 2010
Exercise price
€
Beneficial
Directors
J Moloney
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
S Talbot
2002 Long Term Incentive Plan
K Toland
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
2002 Long Term Incentive Plan
** Or at date of appointment if later.
Options:
(a) Exercisable by Directors at any time up to 2012
(b) Exercisable by Directors at any time up to 2014
(c) Exercisable by Directors between 2010 and 2017
290,000
150,000
70,000
75,000
164,000
100,000
48,000
–
–
–
–
–
–
–
290,000
150,000
70,000
1.55
2.725
4.03
(a)
(b)
(c)
75,000
2.725
(b)
164,000
100,000
48,000
1.55
2.725
4.03
(a)
(b)
(c)
There have been no changes in the above interests between 2 January 2010 and 9 March 2010.
Mr J Moloney and Mr K Toland as participants of the 2002 Long Term Incentive Plan as noted at (a) 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.
Ms S Talbot is eligible for a share award of 10% of 4,000 of the ordinary shares allotted to her on 28 August 2008 pursuant to an option
granted to her under the 2002 Long Term Incentive Plan if she continues to hold these shares until the second anniversary of that date.
Mr J Moloney as participant of the 2002 Long Term Incentive Plan as noted at (b) 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.
Ms S Talbot as participant of the 2002 Long Term Incentive Plan as noted at (b) above, is eligible for a share award of 10% of the ordinary
shares she continues to hold following the second anniversary of the exercise of the option.
The market price of the ordinary shares as at 2 January 2010 was €2.89 and the range during the year was €1.84 to €3.00. The average price
for the year was €2.53.
52
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance
Directors’ and Secretary’s awards under Long Term Incentive Plans (LTIPs) of Glanbia plc
Number at
4 Jan 2009
**
Movements
during year
Market Price in
euro on award date
€
Performance Period
Earliest Date
of Release
Number at
2 Jan 2010
Directors
J Moloney
2008 LTIP
142,000
–
4.45 30 Dec 2007 – 1 Jan 2011
March 2011
S Talbot
K Toland
Secretary
M Horan
2008 LTIP
2007 LTIP
2008 LTIP
2008 LTIP
2008 LTIP
2008 LTIP
2007 LTIP
2008 LTIP
2008 LTIP
** Or at date of appointment if later.
–
142,000
2.72 4 Jan 2009 – 31 Dec 2011 March 2012
24,000
45,000
–
96,000
–
11,000
24,000
–
–
–
56,000
–
96,000
–
–
24,000
4.03 31 Dec 2006 – 2 Jan 2010
March 2010
4.45 30 Dec 2007 – 1 Jan 2011
March 2011
2.72 4 Jan 2009 – 31 Dec 2011 March 2012
4.45 30 Dec 2007 – 1 Jan 2011
March 2011
2.72 4 Jan 2009 – 31 Dec 2011 March 2012
4.03 31 Dec 2006 – 2 Jan 2010
March 2010
4.45 30 Dec 2007 – 1 Jan 2011
March 2011
2.72 4 Jan 2009 – 31 Dec 2011 March 2012
142,000
142,000
24,000
45,000
56,000
96,000
96,000
11,000
24,000
24,000
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 and March 2012 to the extent that there is sustained
improvement in the underlying financial performance. The extent of vesting shall be determined by growth in the Company’s EPS
(earnings per share) and the Company’s TSR (total shareholder return) performance.
Awards under the 2007 Long Term Incentive Plan (“the 2007 LTIP”):
The 2007 LTIP corresponds with the 2008 LTIP except that Directors were excluded from participating and the extent of vesting is
determined only by reference to growth in the Company’s EPS and the Company’s TSR. The shares are scheduled for release in March
2010. The 2008 LTIP has since replaced the 2007 LTIP.
The structures of the 2007 LTIP and the 2008 LTIP are set out in note 23.
There have been no changes in the above interests between 2 January 2010 and 9 March 2010.
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance 53
Directors’ and Secretary’s shares in Glanbia Co-operative Society Limited
‘A’ Ordinary of €1.00 each
Convertible loan stock
units of €0.01269738
‘C’ shares of €0.01
‘F’ shares of €0.01
2 Jan 2010
4 Jan 2009
**
2 Jan 2010
4 Jan 2009
**
2 Jan 2010
4 Jan 2009
**
2 Jan 2010
4 Jan 2009
**
Beneficial
Directors
L Herlihy
J Fitzgerald
V Quinlan
J Moloney
*
H Corbally
N Dunphy
E Fitzpatrick
J Gannon
J Gilsenan
C Hill
M Keane
M Merrick
W Murphy
A O’Connor
R Prendergast
S Talbot
*
Secretary
M Horan
90,397
25,900
12,245
–
5,814
11,822
24,329
10,759
3,917
20,597
6,360
6,074
–
19,785
6,620
–
–
89,398
25,563
12,085
–
5,675
11,633
24,034
10,475
2,844
20,480
6,117
1,824
–
19,449
6,455
–
–
410,210
133,751
803,500
258,267
48,176,819
47,527,630
–
3,576,185
4,952,304
1,040,133
422,240
–
2,826,185
4,952,304
912,739
341,850
10,036,078
10,036,078
142,905
5,157,402
5,990,461
84,564
387,464
292,712
5,157,402
5,990,461
84,564
387,464
–
–
156,687
92,245
172,417
83,584
168,175
–
113,156
206,540
–
1,714,149
1,714,149
221,932
97,055
–
–
–
–
–
–
9,145,071
9,145,071
1,000,000
1,000,000
–
–
79,510
43,544
85,412
83,584
83,439
–
56,298
92,334
–
104,550
48,671
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,226
376
392
–
226
310
560
366
89
283
353
173
–
430
19
–
–
Executive Director.
*
** Or at date of appointment if later.
There have been no changes in the above interests between 2 January 2010 and 9 March 2010.
54 Glanbia plc 2009 Annual Report Directors’ report: Corporate governance
Other statutory information
Principal activities
Books of account
Glanbia plc is an international nutritional ingredients and cheese
company. 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; and maximising
the value of the Company and its subsidiaries (“the Group”)
property assets.
The Directors are responsible for ensuring that proper books and
accounting records, as outlined in section 202 of the Companies
Act, 1990, are kept by the Company. 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.
Dividends
Research and development
The Directors have declared dividends as follows:
Interim paid, 2.89 cent per share (2008: 2.75 cent per share)
Proposed final, 3.95 cent per share (2008: 3.76 cent per share)
The final dividend, if approved, will be paid on 2 June 2010 to
our shareholders on the Register of Members at the close of
business on 7 May 2010. The associated ex dividend date will
be 5 May 2010. An interim dividend was paid on 30 September
2009 to shareholders on the register at the close of business
on 11 September 2009.
Retirement of Directors
In accordance with the Articles of Association of the Company, Mr
J Gannon and Ms S Talbot will retire at the 2010 Annual General
Meeting and, being eligible, offer themselves for re-appointment.
In accordance with the Articles of Association of the Company,
Messrs J Callaghan, P Gleeson, C Hill, M Keane, J Moloney and W
Murphy retire from the Board by rotation and, being eligible, offer
themselves for re-appointment.
In accordance with the provisions of the Combined Code on
Corporate Governance issued by the Financial Reporting Council,
Messrs H Corbally, J Fitzgerald, E Fitzpatrick, J Gilsenan, L Herlihy
and V Quinlan, being Directors who have each served a period in
excess of nine years on the Board will retire at the Annual General
Meeting and, being eligible, offer themselves for re-appointment.
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. The Senior
Independent Director, confirms that the Chairman, also standing
for re-appointment at this year’s Annual General Meeting,
continues to perform effectively and demonstrates commitment
to his role.
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.
The Group is committed to an ongoing and extensive innovation
programme to support a consumer-led business and marketing
approach. 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 ingredients, nutritional products, cheese, high
value consumer food products, using 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 bringing a range of nutritional benefits that enhance
physiological well being and development.
Subsidiary and associated undertakings
A list of the principal subsidiary and associated undertakings is
included in note 39 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.
During the year, political donations were made as follows:
Fianna Fáil European Referendum Lisbon 2009: €5,000
Ireland for Europe Campaign: €6,000
Auditors
The auditors, PricewaterhouseCoopers, have expressed their
willingness to continue in office in accordance with section 160(2)
of the Companies Act, 1963.
Glanbia plc 2009 Annual Report Directors’ report: Corporate governance 55
Statement of Directors’ responsibilities
The Directors are responsible for preparing the annual report
and the financial statements in accordance with applicable law
and regulations.
Irish company law requires the Directors to prepare financial
statements for each financial year. Under that law the Directors have
prepared the financial statements in accordance with International
Financial Reporting Standards (IFRSs) as adopted by the European
Union. The financial statements are required by law to give a true
and fair view of the state of affairs of the Company and the Group
and of the profit or loss of the Group.
In preparing these financial statements the Directors are required to:
select suitable accounting policies and then apply them
consistently;
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 2009 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 corporate and financial information included on the Company’s
website. Legislation in the Republic of Ireland concerning the
preparation and dissemination of financial statements may differ
from legislation in other jurisdictions.
make judgements and estimates that are reasonable and
prudent;
Directors’ statement pursuant to the Transparency (Directive
2004/109/EC) Regulations 2007
Each of the Directors, whose names and functions are listed
on pages 34 to 35 confirms that to the best of each person’s
knowledge and belief:
•
•
the financial statements prepared in accordance with IFRSs
as adopted by the EU 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; and
the Directors’ report contained in the annual report includes a
fair review of the development and performance of the business
and the position of the Company and Group, together with a
description of the principal risks and uncertainties that they face.
•
•
•
•
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 applicable law and the Listing
Rules issued by the Irish Stock Exchange to prepare a directors’
report and reports relating to Directors’ remuneration and
corporate governance in accordance with the Transparency
(Directive 2004/109/EC) Regulations 2007 and the Directors
are required to include a management report containing a fair
review of the business and a description of the principal risks and
uncertainties facing the Group.
Directors’ Report
On behalf of the Board
L Herlihy
J Moloney
Directors
S Talbot
9 March 2010
56
56
Glanbia plc 2009 Annual Report Directors’ report: Business review
Developing
sustainable higher
margin businesses
57
Glanbia plc 2009 Annual Report Directors’ report: Business review 57
Science-based
innovation and
new product
development
58
58
Glanbia plc 2009 Annual Report Directors’ report: Business review
Financial
statements
Glanbia plc 2009 Annual Report Financial statements
59
Independent auditors’ report to the members of Glanbia plc
Group income statement
Group statement of comprehensive income
Group statement of changes in equity
Group statement of financial position
Group statement of cash flows
Company statement of financial position
Company statement of changes in equity
Company statement of comprehensive income and statement of cash flows
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
15. Intangible assets
16. Investments in associates
17. Investments in joint ventures
18. Available for sale financial assets
19. Trade and other receivables
20. Inventories
21. Cash and cash equivalents
22. Reconciliation of changes in equity
23. Share capital and share premium
24. Retained earnings
25. Minority interests
26. Borrowings
27. Deferred income taxes
28. Retirement benefit obligations
29. Provisions for other liabilities and charges
30. Capital grants
31. Trade and other payables
32. Derivative financial instruments
33. Contingent liabilities
34. Commitments
35. Cash generated from operations
36. Business combinations
37. Related party transactions
38. Events after the reporting period
39. Principal subsidiary and associated undertakings
60
62
63
64
65
66
67
68
69
70
70
77
81
82
87
88
89
89
89
90
91
92
92
93
95
97
98
99
101
101
102
104
107
107
108
110
112
115
115
116
116
117
117
118
118
119
120
121
60 Glanbia plc 2009 Annual Report 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 2 January 2010, which comprise the Group income
statement, the Group and Parent Company statement of financial
position, the Group and Parent Company statement of changes in
equity, the Group and Parent Company statement of cash flows,
the Group and Parent Company statement of comprehensive
income and the related notes. These financial statements have
been prepared under the accounting policies set out therein.
We review whether the Directors’ statement of corporate
governance, which is included in the Directors' report, reflects the
Company's compliance with the nine provisions of the June 2008
Combined Code specified for our review by the Listing Rules of
the Irish Stock Exchange, and report if it does not. We are not
required to consider whether the Board’s statements on internal
controls 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.
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 2009. We also report to you
whether the financial statements have been properly prepared
in accordance with Irish statute comprising the Companies Acts,
1963 to 2009 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 statement of financial position is in agreement with
the books of account. We also report to you our opinion as to:
(cid:159) whether the Company has kept proper books of account;
(cid:159) whether the Directors’ report is consistent with the financial
statements; and
(cid:159) whether at the reporting 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 statement of financial position 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 read the other information contained in the Annual Report
and consider whether it is consistent with the audited financial
statements. The other information comprises only the Directors'
report: business review and the Directors’ report: corporate
governance. 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.
Opinion
In our opinion:
(cid:159)
(cid:159)
(cid:159)
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 2 January 2010 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 2009 of the state of the Parent
Company’s affairs as at 2 January 2010 and cash flows for the
year then ended;
the financial statements have been properly prepared in
accordance with the Companies Acts, 1963 to 2009 and Article
4 of the IAS Regulation.
Glanbia plc 2009 Annual Report Financial statements
61
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 statement of financial position 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
statement of financial position 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 2 January 2010 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
9 March 2010
62 Glanbia plc 2009 Annual Report Financial statements
Group income statement
for the year ended 2 January 2010
Pre-
exceptional
2009
€’000
Notes
Exceptional
2009
€’000
(note 7)
Total
2009
€’000
Pre-
exceptional
2008
€'000
Exceptional
2008
€'000
(note 7)
Total
2008
€'000
Revenue
Cost of sales
Gross profit
5
1,830,327
–
1,830,327
2,232,161
–
2,232,161
(1,507,119)
(5,084)
(1,512,203)
(1,890,549)
(10,113)
(1,900,662)
323,208
(5,084)
318,124
341,612
(10,113)
331,499
Distribution expenses
Administration expenses
Other gains and losses
(116,115)
(95,927)
–
(1,486)
(8,485)
60,730
(117,601)
(104,412)
60,730
(121,373)
(86,185)
–
(3,251)
(5,939)
–
(124,624)
(92,124)
–
Operating profit
111,166
45,675
156,841
134,054
(19,303)
114,751
Finance income
Finance costs
Share of results of Joint Ventures
& Associates
Profit before taxation
Income taxes
10
10
11
5,542
(29,576)
10,225
97,357
(19,103)
–
–
–
5,542
(29,576)
5,590
(26,695)
–
–
5,590
(26,695)
10,225
7,306
(947)
6,359
45,675
(10,770)
143,032
120,255
(20,250)
100,005
(29,873)
(21,528)
892
(20,636)
Profit for the year
78,254
34,905
113,159
98,727
(19,358)
79,369
Attributable to:
Owners of the Parent
Minority interests
Basic earnings per share (cents)
Diluted earnings per share (cents)
12
12
112,676
483
113,159
38.46
38.35
78,399
970
79,369
26.76
26.63
On behalf of the Board
L Herlihy J Moloney S Talbot
Directors
Glanbia plc 2009 Annual Report Financial statements
63
Group statement of comprehensive income
for the year ended 2 January 2010
Profit for the year
113,159
79,369
Notes
2009
€'000
2008
€'000
Other comprehensive income/(expense)
Actuarial loss – defined benefit schemes
Deferred tax credit on actuarial loss
Share of actuarial loss – Joint Ventures & Associates
Currency translation differences
Fair value movements on available for sale financial assets
Fair value movements on cash flow hedges
Deferred tax on fair value movements
Other comprehensive expense for the year, net of tax
Total comprehensive income for the year
Total comprehensive income attributable to:
Owners of the Parent
Minority interests
28
27
22
22
22
22
22
(31,215)
2,684
(1,364)
6,258
(3,367)
5,114
(503)
(68,246)
7,084
(204)
17,251
(3,597)
(20,297)
964
(22,393)
(67,045)
90,766
12,324
25
90,283
483
11,354
970
90,766
12,324
64 Glanbia plc 2009 Annual Report Financial statements
Group statement of changes in equity
for the year ended 2 January 2010
Attributable to owners of the Parent
Share capital
and share
premium
€'000
Notes
Other
reserves
€'000
Retained
earnings
€'000
Total
€'000
Minority
interests
€'000
Total
€'000
Balance at 29 December 2007
98,450
107,909
21,176
227,535
7,040
234,575
Profit for the year
Other comprehensive income/(expense)
Actuarial loss – defined benefit schemes
Deferred tax on actuarial loss
Share of actuarial loss – Joint Ventures & Associates
Fair value movements
Deferred tax on fair value movements
Currency translation differences
Total comprehensive (expense)/income for the year
Dividends paid during the year
Cost of share options
Discount on options
Shares issued
Premium on shares issued
Shares purchased
–
–
–
–
–
–
–
–
–
–
175
13
347
(1,665)
–
–
–
–
(23,894)
964
17,251
78,399
78,399
970
79,369
(68,246)
(68,246)
7,084
(204)
–
–
–
7,084
(204)
(23,894)
964
17,251
–
–
–
–
–
–
(68,246)
7,084
(204)
(23,894)
964
17,251
(5,679)
17,033
11,354
970
12,324
–
(18,502)
(18,502)
827
(175)
–
–
–
–
–
–
–
–
827
–
13
347
(1,665)
–
–
–
–
–
–
(18,502)
827
–
13
347
(1,665)
22
22
22
22
22
22
13
22
22
23
23
23
Balance at 3 January 2009
97,320
102,882
19,707
219,909
8,010
227,919
Profit for the year
Other comprehensive income/(expense)
Actuarial loss – defined benefit schemes
Deferred tax on actuarial loss
Share of actuarial loss – Joint Ventures & Associates
Fair value movements
Deferred tax on fair value movements
Exceptional non-cash foreign exchange loss
Currency translation differences
Total comprehensive income for the year
Dividends paid during the year
Cost of share options
22
22
22
22
22
7, 22
22
13
22
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,747
(503)
18,280
(12,022)
112,676
112,676
483
113,159
(31,215)
(31,215)
2,684
(1,364)
–
–
–
–
2,684
(1,364)
1,747
(503)
18,280
(12,022)
–
–
–
–
–
–
(31,215)
2,684
(1,364)
1,747
(503)
18,280
(12,022)
7,502
82,781
90,283
483
90,766
–
(19,484)
(19,484)
(2,000)
(21,484)
187
–
187
–
187
Balance at 2 January 2010
97,320
110,571
83,004
290,895
6,493
297,388
Goodwill previously written off amounting to €93.0 million (2008: €93.0 million) is included in opening and closing retained earnings.
Group statement of financial position
as at 2 January 2010
Glanbia plc 2009 Annual Report Financial statements
65
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
Total assets
EQUITY
Issued capital and reserves attributable to owners 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
Total liabilities
Total equity and liabilities
On behalf of the Board
L Herlihy J Moloney S Talbot
Directors
Notes
2009
€'000
2008
€'000
14
15
16
17
19
27
18
32
20
19
32
21
23
22
24
25
26
32
27
28
29
30
31
26
32
29
363,152
342,112
10,041
58,276
33,718
12,022
20,397
2,718
361,131
359,212
11,597
64,895
12,767
25,380
24,112
2,754
842,436
861,848
201,577
191,594
7,501
152,789
267,422
182,749
10,378
132,572
553,461
593,121
1,395,897
1,454,969
97,320
110,571
83,004
97,320
102,882
19,707
290,895
219,909
6,493
8,010
297,388
227,919
594,462
5,631
66,337
85,765
20,133
18,582
569,374
9,248
59,056
164,410
4,899
12,694
790,910
819,681
265,912
2,816
945
10,615
27,311
351,452
332
15,281
16,815
23,489
307,599
407,369
1,098,509
1,227,050
1,395,897
1,454,969
66 Glanbia plc 2009 Annual Report Financial statements
Group statement of cash flows
for the year ended 2 January 2010
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
Dividends received from joint ventures
Loans advanced to joint ventures
Disposal of available for sale financial assets
Proceeds from sale of property, plant and equipment
Disposal proceeds received - exit from Pigmeat
Insurance proceeds received - exit from Pigmeat
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Purchase of treasury shares
Increase in borrowings
Finance lease principal payments
Dividends paid to Company shareholders
Dividends paid to minority interests
Capital grants received
Net cash from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Notes
35
17
23
23
13
25
2009
€'000
2008
€'000
104,710
5,352
(30,484)
(5,533)
146,946
7,149
(30,768)
(26,096)
74,045
97,231
(521)
(762)
(51,187)
17,924
(21,508)
433
1,609
–
–
(217,942)
(11,427)
(84,507)
451
(12,602)
2,513
7,629
3,308
8,820
(54,012)
(303,757)
–
–
16,642
(908)
(19,484)
(2,000)
6,793
360
(1,665)
188,090
(934)
(18,502)
–
9,655
1,043
177,004
21,076
(29,522)
132,572
(859)
159,819
2,275
Cash and cash equivalents at the end of the year
21
152,789
132,572
Reconciliation of net cash flow to movement in net debt
Net increase/(decrease) in cash and cash equivalents
Cash movements 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 the beginning of the year
Net debt at the end of the year
Net debt comprises:
Borrowings
Cash and cash equivalents
2009
€'000
21,076
(15,734)
2008
€'000
(29,522)
(187,156)
5,342
(216,678)
597
3,526
(5,544)
(9,686)
9,465
(452,083)
(231,908)
(220,175)
(442,618)
(452,083)
26
21
(595,407)
152,789
(584,655)
132,572
(442,618)
(452,083)
Company statement of financial position
as at 2 January 2010
Glanbia plc 2009 Annual Report Financial statements
67
ASSETS
Non-current assets
Investments in associates
Available for sale financial assets
Investments in subsidiaries
Current assets
Trade and other receivables
Total assets
EQUITY
Issued capital and reserves attributable to owners of the Company
Share capital and share premium
Retained earnings
Capital reserve
Total equity
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Total liabilities
Total equity and liabilities
Notes
2009
€'000
2008
€'000
16
18
18
1,395
740
1,395
1,290
452,814
459,481
454,949
462,166
19
76,327
48,340
531,276
510,506
23
24
22
31
26
452,588
59,913
6,444
452,588
36,056
5,839
518,945
494,483
2,781
9,550
2,283
13,740
12,331
16,023
531,276
510,506
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 €43,341,000
(2008: €36,204,000).
On behalf of the Board
L Herlihy J Moloney S Talbot
Directors
68 Glanbia plc 2009 Annual Report Financial statements
Company statement of changes in equity
for the year ended 2 January 2010
Share capital
and share
premium
€'000
Notes
Retained
earnings
€'000
Capital
reserve
€'000
Total
€'000
Balance at 29 December 2007
453,718
18,354
5,187
477,259
Profit for the year
Dividends paid during the year
Cost of share options
Discount on options
Shares issued
Premium on shares issued
Shares purchased
Balance at 3 January 2009
Profit for the year
Dividends paid during the year
Cost of share options
Transfer from trade and other payables – share options
–
–
–
175
13
347
(1,665)
36,204
(18,502)
–
–
–
–
–
–
–
827
(175)
–
–
–
36,204
(18,502)
827
–
13
347
(1,665)
452,588
36,056
5,839
494,483
–
–
–
–
43,341
(19,484)
–
–
–
–
167
438
43,341
(19,484)
167
438
13
22
22
23
23
23
13
22
22
Balance at 2 January 2010
452,588
59,913
6,444
518,945
Glanbia plc 2009 Annual Report Financial statements
69
Company statement of comprehensive income and statement
of cash flows
for the year ended 2 January 2010
Company statement of comprehensive income
Notes
2009
€'000
2008
€'000
Profit for the year
24
43,341
36,204
Total comprehensive income for the year
43,341
36,204
Company statement of cash flows
Cash flows from operating activities
Cash generated from operations
Net cash from operating activities
Cash flows from investing activities
Disposal of available for sale financial assets
Proceeds received – exit from Pigmeat
Net cash from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Purchase of treasury shares
Dividends paid to Company shareholders
Net cash used in financing activities
Net increase/(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
2009
€'000
2008
€'000
35
23,124
4,687
23,124
4,687
550
–
550
23
23
13
–
–
(19,484)
–
3,308
3,308
360
(1,665)
(18,502)
(19,484)
(19,807)
4,190
(11,812)
(13,740)
(1,928)
(9,550)
(13,740)
70 Glanbia plc 2009 Annual Report Financial statements
Notes to the financial statements
for the year ended 2 January 2010
1. General information
Glanbia plc (“the Company”) and its subsidiaries (together
“the Group”) is an international nutritional ingredients and cheese
group with operations in Ireland, Europe, the USA, Canada, China
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 9 March 2010.
2. Summary of significant accounting polices
New accounting standards and IFRIC interpretations adopted by
the Group during the year ended 2 January 2010 are dealt with in
section (aa) below. The adoption of these standards and
interpretations had no significant impact on the results or financial
position of the Group during the year. However, the adoption of
IFRS 8 – Operating Segments and IAS 1 – Presentation of
Financial Statements has resulted in a change in the Group’s
disclosure requirements.
IFRS 8 replaces IAS 14 – Segment Reporting. The new standard
requires a ‘management approach’, under which the segment
information is presented on the same basis as that used for
internal reporting purposes. In addition, the segments are
reported in a manner consistent with information provided to
the Chief Operating Decision Maker. On adoption of IFRS 8, the
number of reportable segments presented by the Group has
increased. The basis of segment reporting has changed from
Ireland and International to US Cheese and Global Nutritionals,
Dairy Ireland, Joint Ventures & Associates and Other. As a result,
the Group has re-presented its segmental analysis for the
comparative 2008 financial information.
The other 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 2009 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.
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 52 week period
ending on 2 January 2010, comparatives are for the 53 week
period ended 3 January 2009. The statements of financial
position for 2009 and 2008 have been drawn up as at 2 January
2010 and 3 January 2009 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 other comprehensive income. The
cumulative post acquisition movements are adjusted against
the cost of the investment. Unrealised gains on transactions
between the Group and its associates and joint ventures are
eliminated to the extent of the Group’s interest in the
associate or joint venture. Unrealised losses are also
eliminated unless the transaction provides evidence of an
impairment of the asset transferred. When the Group’s share
of losses in an associate or joint venture equals or exceeds
its interest in the associate or joint venture, the Group does
not recognise further losses, unless the Group has incurred
obligations or made payments on behalf of the associate or
joint venture.
(c) Segment reporting
In accordance with the requirements of IFRS 8 – Segment
Reporting, operating segments are reported in a manner
consistent with the internal reporting provided to the Chief
Operating Decision Maker. The Chief Operating Decision Maker
responsible for allocating resources and assessing performance
of the operating segments has been identified as the Glanbia
Executive Committee who make strategic decisions.
Glanbia plc 2009 Annual Report Financial statements
71
Segment assets consist primarily of property, plant and equipment,
intangible assets, inventories, derivatives designated as hedges of
future transactions and receivables. Unallocated amounts primarily
include taxation, cash and cash equivalents, available for sale
financial assets and derivatives.
liabilities of the foreign entity and are translated at the
statement of financial position rate. In accordance with IFRS
1, the cumulative translation differences on foreign
subsidiaries was set to zero on IFRS transition date (4
January 2004).
Segment liabilities comprise operating liabilities. Unallocated
amounts primarily include taxation, borrowings and 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 reporting date. Currency
translation differences on monetary assets and liabilities are
taken to the income statement, except when deferred in
equity in the currency translation reserve as (i) qualifying cash
flow hedges or (ii) exchange gains or losses on long term
intra-group loans and on foreign currency borrowings used
to finance or provide a hedge against Group equity
investments in non-euro denominated operations to the
extent that they are neither planned nor expected to be
repaid in the foreseeable future or are expected to provide
an effective hedge of the net investment. When long term
intra-group loans are repaid the related cumulative currency
translation recognised in the currency reserve is recycled
through the income statement.
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 statement of financial position 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 reporting date are translated at
the closing rate at the reporting date of the statement of
financial position.
– 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
The Group uses the direct method of consolidation for
revaluation of the net investments in foreign operations
where the financial statements of the foreign operation are
translated directly into the functional currency of the
ultimate parent.
(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 at the
following rates:
Land
Buildings
Plant and equipment
Motor vehicles
%
Nil
2.5 – 5
4 – 33
20 – 25
The assets residual values and useful lives are reviewed, and
adjusted if appropriate, at each reporting 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.
Intangible assets
(f)
(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
72 Glanbia plc 2009 Annual Report Financial statements
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) Brands/know-how, customer relationships and other
intangibles
Expenditure to acquire brands/know-how, customer
relationships and other intangibles 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 financial assets
Available for sale financial assets are non-derivatives that are
either designated in this category or not classified in any of the
other categories. They are included in non-current assets unless
management intends to dispose of the investment within 12
months of the reporting date. They are initially recognised at fair
value plus transaction costs and are subsequently adjusted to fair
value at each reporting date. Unrealised gains and losses arising
from changes in the fair value of investments classified as available
for sale are recognised in other comprehensive income. When
such investments are sold or impaired, the accumulated fair value
adjustments are included in the income statement as gains or
losses from investments.
The fair values of quoted investments are based on current bid
prices. If the market for a financial asset is not active the Group
establishes fair value using valuation techniques. Where the range
of reasonable fair values is significant and the probability of
various estimates cannot be reasonably assessed, the Group
measures the investment at cost.
Investments in subsidiaries held by the Company are carried
at cost.
Impairment losses recognised in the income statement on equity
instruments are not reversed through the income statement.
(h) Leases
Leases of assets where the Group has substantially all the risks
and rewards of ownership are classified as finance leases. A
determination is also made as to whether the substance of an
arrangement could equate to a finance lease, considering
whether fulfilment of the arrangement is dependant upon the use
of a specific asset and the arrangement contains the right to use
an asset. If the specified criteria are met, the arrangement is
classified as a finance lease. Finance leases are capitalised at the
inception of the lease at the lower of the fair value of the leased
asset or the present value of the minimum lease payments. 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 and 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.
Inventories
(i)
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. If
collectability appears unlikely according to the original terms of
the receivable the Group will determine the appropriate
provision based on the available evidence at that time.
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 statement of financial position to the extent
of the Group’s continued involvement and retained risk.
Glanbia plc 2009 Annual Report Financial statements
73
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 reporting date.
(k) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held
on call with banks, other short-term highly liquid investments with
original maturities of 3 months or less and bank overdrafts. In the
statement of financial position, bank overdrafts, if applicable, are
included in borrowings in current liabilities.
Income taxes
(l)
Current tax represents the expected tax payable or recoverable
on the taxable profit for the year, 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
reporting date are used to determine deferred income tax.
Deferred tax assets are recognised to the extent that it is
probable that future taxable profit will be available against which
the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising
on investments in subsidiaries, associates and joint ventures,
except where the timing of the reversal of the temporary
difference can be controlled and it is probable that the temporary
difference will not reverse in the foreseeable future. Deferred
income tax is not accounted for if it arises from initial recognition
of an asset or liability in a transaction other than a business
combination that at the time of the transaction affects neither
accounting nor taxable profit or loss.
(m) Employee benefits
Pension obligations
(i)
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 statement of financial position
in respect of defined benefit pension plans is the present
value of the defined benefit obligation at the reporting 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 other comprehensive income. Past-service costs, negative
or positive, 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 past service
cost, negative or positive, arises following a change in the
present value of the defined benefit obligation for employee
service in prior periods, resulting in the current period from
the introduction of, or changes to, post employment benefits.
A settlement arises where the Group is relieved of
responsibility for a pension obligation and eliminates
significant risk relating to 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. Curtailment and settlement
gains and 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 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 the date of transition to IFRS (4 January 2004).
Non-market vesting conditions are included in assumptions
about the number of options that are expected to vest. At
each reporting 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
other comprehensive income. 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.
In accordance with IFRS 2 (Amendment), vesting conditions
are service conditions and performance conditions only. Any
other features do not impact the number of awards
expected to vest or valuation there of subsequent to grant
date. In addition, all cancellations, whether by entity or other
parties, receive the same accounting treatment.
(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 is adjusted so as to reflect the
74 Glanbia plc 2009 Annual Report Financial statements
anticipated likelihood 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. Research and development taxation credits
are recognised at their fair value in operating profit where there is
reasonable assurance that the credit will be received.
(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.
(p)
(i)
Impairment of assets
Financial assets
The Group assesses at each reporting 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 is 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 exceed their 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
(Amendment), ‘Financial Instruments: Presentation’, IAS 39
(Amendment), ‘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 the reporting 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 the European Central Bank interest rate.
The fair value of interest rate swaps is based on discounting
estimated future cash flows based on the terms and maturity
of each contract and using market interest rates for a similar
instrument at the measurement date.
The fair value of commodity contracts is estimated by
discounting the difference between the contracted futures price
and the current forward price for the residual maturity of the
contracts using the European Central Bank and US Federal
Reserve interest rates.
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.
Glanbia plc 2009 Annual Report Financial statements
75
The fair values of various derivative instruments used for hedging
purposes are disclosed in note 32. Movements on the fair value
reserve are shown in note 22. 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 other comprehensive income. 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 other
comprehensive income 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 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 statement of financial position.
Guarantees provided by Glanbia plc, the entity, over the
payment of employer contributions in respect of the UK
defined benefit pension schemes are treated as insurance
contracts.
(t) Earnings per share
Earnings per share represents the profit in cents attributable to
shareholders 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 on the net profit
attributable to the owners of the Parent, pre exceptional items
and 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
In accordance with IAS 23 (Revised), ‘Borrowing Costs’, borrowing
costs directly attributable to the acquisition, construction or
production of a qualifying asset are capitalised. Other borrowing
costs are expensed.
(v) Borrowings
Borrowings are recognised initially at fair value, net of transaction
costs incurred. Borrowings are subsequently stated at amortised
cost; any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the income
statement over the period of the borrowings using the effective
interest method.
Preference shares, which are mandatorily redeemable on a
specific date, are classified as liabilities. The dividends on these
preference shares are recognised in the income statement as a
finance cost. Borrowings are classified as current liabilities unless
the Group has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting 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
76 Glanbia plc 2009 Annual Report Financial statements
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. 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 statement of financial
position 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 to IFRS (4 January 2004) have not been
restated. All goodwill written off to reserves or amortised prior to
the transition date remains written off.
(aa) New accounting standards and IFRIC interpretations
The Group’s assessment of the impact of these new standards and
interpretations is set out below;
The following standards and interpretations, issued by the IASB and
the International Financial Reporting Interpretations Committee
(‘IFRIC’), are effective for the Group for the first time in the year
ended 2 January 2010 and have been adopted by the Group:
(cid:159)
(cid:159)
(cid:159)
(cid:159)
(cid:159)
(cid:159)
(cid:159)
(cid:159)
IFRS 2 (Amendment), ‘Share Based Payment’
IFRS 8, ‘Operating Segments’
IAS 1 (Revised), ‘Presentation of Financial Statements’
IAS 23 (Revised), ‘Borrowing Costs’
IAS 32 (Amendment), ‘Financial Instruments: Presentation’
IAS 39 (Amendment), ‘Financial Instruments: Recognition and
Measurement’
IFRIC 16, ‘Hedges of a Net Investment in a Foreign Operation’
IAS 39 and IFRS 7 (Amendments), ‘Reclassification of Financial
Assets’
Except for IFRS 8, ‘Operating Segments’ adoption of the
standards and interpretations above had no significant impact on
the results or financial position of the Group during the year
ended 2 January 2010. Refer to (c) - segment reporting above and
note 5 - segment information for a detailed analysis of the impact
of IFRS 8 adoption.
Standards, amendments and interpretations effective in
2009, reviewed by the Group and determined not applicable
by the Group for the year ended 2 January 2010:
The following standards, amendments and interpretations are
mandatory for the Group for accounting periods beginning on
or after 4 January 2009 but are not relevant to the Group’s
current operations:
(cid:159)
(cid:159)
(cid:159)
(cid:159)
(cid:159)
IFRIC 9 and IAS 39 (Amendments), ‘Embedded Derivatives’.
IFRIC 13, ‘Customer Loyalty Programmes’
IFRIC 15, ‘Agreements for Construction of Real Estates.’
IFRS 1 (Amendment), ‘First time adoption of IFRS’ and IAS 27
‘Consolidated and Separate Financial Statements’.
IAS 1 (Amendment), ‘Presentation of Financial Statements’ –
‘Puttable Financial Instruments and Obligations arising on
Liquidation’.
The following standards, amendments and interpretations are
mandatory for the Group for accounting periods beginning on or
after 1 July 2009 but are not relevant to the Group’s operations:
(cid:159)
(cid:159)
IFRIC 17, ‘Distributions of Non–cash Assets to Owners.
IFRIC 18, ‘Transfers of Assets from Customers’.
The following standards, amendments and interpretations are
mandatory for the Group for accounting periods beginning on or
after the date indicated below but are not relevant to the
Group’s operations:
(cid:159) Amendments to IFRS 1 – ‘Additional Exemptions for First –
time Adopters’ (1 January 2010)
(cid:159) Amendments to IAS 32 – Classification of Rights Issues (1
February 2010)
The following standards, amendments and interpretations to
existing standards have been published. They are mandatory
for future accounting periods but are not yet effective and
have not been early adopted by the Group:
Improvements to IFRSs, (effective for financial periods beginning
on various dates and for companies using IFRS for the year
ended 31 December 2010).
The IASB has issued the 'Improvements to IFRS 2009' standard
which amends ten standards, basis of conclusions and guidance,
and two interpretations based on the exposure drafts issued in
October 2007 and August 2008. The improvements include
changes in presentation, recognition and measurement plus
terminology and editorial changes. The improvements are
subject to EU endorsement. The Group has reviewed the
improvements to IFRS’ and will apply the revisions to applicable
standards from the effective date and is currently assessing their
impact on the Group’s financial statements.
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. This
revised version retains the substance of the original standard but
with a changed structure. The revised IFRS 1 is not applicable to
the group as it has already adopted IFRS, however it would be
applicable to other entities should they transition to IFRS in the
Glanbia plc 2009 Annual Report Financial statements
77
future, subject to EU endorsement. The Group will apply this
revised standard if applicable from the effective date and is
currently assessing the impact on the Group’s financial statements.
IFRS 2 (Amendment), ‘Group Cash-settled share-based payment
transactions’, (effective for financial periods beginning on or after
1 January 2010).
The amendment is still subject to EU endorsement. The
amendment clarifies the scope and the accounting for group cash-
settled share-based payment transactions in the separate financial
statements of the entity receiving the goods or services when that
entity has no obligation to settle the share-based payment
transactions. The amendment also incorporates the guidance
contained in IFRIC 8 and IFRIC 11. As a result IFRIC 8 and IFRIC 11
have been withdrawn. 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 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.
Amendment to IAS 24 – Related Party Disclosures (effective
for financial periods beginning on or after 1 January 2011).
This amendment is subject to EU endorsement. The amendment
simplifies the definition of a related party and provides a partial
exemption from the disclosure requirements for government-
related entities. The Group will apply this revised standard 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 financial periods beginning on
or after 1 July 2009.
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.
IAS 39 (Amendment) – Eligible Hedged Items, ‘Financial
Instruments: Recognition and Measurement’ (effective for annual
periods beginning on or after 1 July 2009).
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
this revised standard 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-term committed bank borrowings and short-term
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 liquidity risk, 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 and has extensive
euro operations, it has significant investment in overseas
undertakings, primarily in the USA. As a result movements in US
dollar/euro exchange rates can significantly affect the Group’s
euro statement of financial position 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
operating unit’s 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, recognised assets and liabilities and
profits earned in foreign currency entities, the Group use forward
contracts or currency options, 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 or purchase
is highly probable.
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 in listed and unlisted securities
and classified on the consolidated statement of financial position
as available for sale. Certain securities are carried at cost and
therefore are not exposed to price risk.
To manage its price risk arising from investments in listed 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.
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.
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 €729.1 million (2008: €661.5 million)
of which €138.8 million (2008: €82.9 million) was undrawn. The
weighted average maturity of these facilities was 3.2 years (2008:
4.2 years).
78 Glanbia plc 2009 Annual Report Financial statements
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 2 January 2010 and 3 January 2009, 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 2 January 2010 would have resulted in a currency
translation gain/loss of approximately €16.1 million (2008: €8.5
million), which would be recognised directly in other
comprehensive income.
At 2 January 2010 and 3 January 2009, if the euro 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 2 January 2010 would have resulted in a currency
translation gain/loss of approximately €7.0 million (2008: €3.0
million), which would be recognised directly in other
comprehensive income.
Interest rate risk
(b)
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 2009, a 1% increase in prevailing market
interest rates would have resulted in a €1.3 million loss (2008: €1.8
million loss), with no impact on other comprehensive income.
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 these 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.
Glanbia plc 2009 Annual Report Financial statements
79
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 reporting date to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows. Balances due within one year equal their carrying balances as the impact of discounting is not significant.
Financial liabilities
At 2 January 2010
Borrowings
Future finance costs
Derivative financial instruments
Trade and other payables*
Less future finance costs
At 3 January 2009
Borrowings
Future finance costs
Derivative financial instruments
Trade and other payables*
Less future finance costs
Less than
1 year
€'000
Between 1
and 2 years
€'000
Between 2
and 5 years
€'000
Over 5
years
€'000
945
29,375
10,615
146,486
982
29,376
3,297
–
589,237
35,094
2,544
–
187,421
(29,375)
33,655
(29,376)
626,875
(35,094)
158,046
4,279
591,781
–
–
–
–
–
–
–
Less than
1 year
€'000
Between 1
and 2 years
€'000
Between 2
and 5 years
€'000
Over 5 years
€'000
15,281
26,500
16,815
158,911
926
25,132
5,171
–
501,325
57,510
4,417
–
64,624
2,559
76
–
Total
€'000
591,164
93,845
16,456
146,486
847,951
(93,845)
754,106
Total
€'000
582,156
111,701
26,479
158,911
217,507
(26,500)
31,229
(25,132)
563,252
(57,510)
67,259
(2,559)
879,247
(111,701)
191,007
6,097
505,742
64,700
767,546
* Excludes accrued expenses and social security costs.
The Company has an overdraft of €9,550,000 at year ended 2 January 2010 (2008: €13,740,000). 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 reporting date to the contractual maturity date. The amounts disclosed in the table
are the contractual undiscounted cash flows. Balances due within one year equal their carrying balances as the impact of discounting is
not significant.
Foreign exchange contracts
At 2 January 2010
Foreign exchange contracts – cash flow hedges
Less than
1 year
€'000
Between 1
and 2 years
€'000
Between 2
and 5 years
€'000
Over 5
years
€'000
Total
€'000
Outflow
(956)
–
–
–
(956)
Less than
1 year
€'000
Between 1
and 2 years
€'000
Between 2
and 5 years
€'000
Over 5
years
€'000
Total
€'000
At 3 January 2009
Foreign exchange contracts – cash flow hedges
Outflow
(59)
–
–
–
(59)
80 Glanbia plc 2009 Annual Report Financial statements
Credit risk
Credit risk is managed on a Group basis. Credit risk arises from
cash and cash equivalents, derivative financial instruments and
deposits with banks and financial institutions, as well as credit
exposures to customers, including outstanding receivables and
committed transactions. For banks and financial institutions, only
independently rated parties with a minimum credit rating of 'A'
are accepted. The minimum credit rating applicable to a
counterparty used for derivative financial instruments is A+.
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 and by holding appropriate security or liens.
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.
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. Total capital is calculated based on
equity as shown in the statement of financial position and
net debt.
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 2 January 2010, the Group’s debt/
EBITDA ratio was 2.9 times (2008: 2.7 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 reporting 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 reporting 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 reporting 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 and trade payables.
The fair value of financial liabilities for disclosure purposes is
estimated by discounting the future contractual cash flows at
current market interest rates that are available to the Group for
similar financial instruments.
Effective from 4 January 2009, the Group adopted the
amendment to IFRS 7 for financial instruments that are measured
in the statement of financial position at fair value. This requires
disclosure of fair value instruments by level of the following fair
value measurement hierarchy:
(cid:159) quoted prices (unadjusted) in active markets for identical
assets and liabilities (level 1)
(cid:159)
(cid:159)
inputs, other than quoted prices included in level 1, that are
observable for the asset and liability, either directly (that is, as
prices) or indirectly (that is, derived from prices) (level 2)
inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs) (level 3)
The following table presents the Group’s assets and liabilities
that are measured at fair value at 2 January 2010:
Level 1
€'000
Level 2
€'000
Level 3
€'000
Total
€'000
Assets
Financial assets at fair
value through the
income statement
Derivatives used for
hedging
Available for sale
financial assets
– equity securities
–
10,219
–
10,219
155
8,352
–
8,507
Total assets
155 18,571
– 18,726
Liabilities
Financial liabilities at
fair value through the
income statement
Derivatives used for
hedging
–
(16,246)
–
(16,246)
Total liabilities
– (16,246)
– (16,246)
Glanbia plc 2009 Annual Report Financial statements
81
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.
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 2 January 2010,
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 €5.2 million.
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.
Impairment reviews of goodwill and indefinite life intangibles
(a)
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 Glanbia Nutritionals (NA), Inc. (formerly Seltzer
Companies, Inc.), Optimum Nutrition, Inc. and Glanbia
Nutritionals Deutschland GmbH, including goodwill arising on
acquisition of €227.3 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.
Income taxes
(b)
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 €1.4 million (2008: €1.0 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 €1.3 million (2008: €1.1 million).
(c) Post-employment benefits
The Group operates a number of post employment defined
benefit plans. The rates of contributions payable, the pension cost
and the Group’s total obligation in respect of defined benefit
plans is calculated and determined by independent qualified
actuaries and updated at least annually. The Group has plan
assets totalling €349.2 million giving a net pension liability of €85.8
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
The curtailment gains and negative past service costs have been
calculated by management using certain estimates and
judgements, primary among these being the inflation rate,
investment strategy approach and discount rate assumed, the
final determination of which may be different as actual results
become certain. The curtailment gains and negative past service
costs are also based on management’s assumption regarding
how benefit reductions will be achieved. The benefit reductions
can be achieved in a number of different ways and therefore the
final figures may ultimately vary from those estimated.
(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 policies 2 (e) and 2 (f) above. 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 one year reduction in useful lives would have a
€2.1 million reduction impact on operating profit. The Group has
also reviewed the impact of a change in useful lives in plant and
equipment and a one year reduction in useful lives would have a
€0.2 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
reporting 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.
(f) 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. The
amount recognised as a provision is the best estimate of the
amount required to settle the present obligation at the reporting
date, taking account of the risks and uncertainties surrounding
the obligation.
82 Glanbia plc 2009 Annual Report Financial statements
5. Segment information
On adoption of IFRS 8, the Group has changed the basis of segmental reporting from Ireland and International to US Cheese & Global
Nutritionals, Dairy Ireland, Joint Ventures & Associates and Other. These segments align with the Group’s internal financial reporting
system and the way in which the Chief Operating Decision Maker assesses performance and allocates the Group’s resources. A
segment manager is responsible for each segment and is directly accountable for the performance of that segment to the Glanbia
Executive Committee which acts as the Chief Operating Decision Maker for the Group.
Each segment derives their revenues as follows: US Cheese & Global Nutritionals earns its revenue from the sale of cheese, whey
protein and other nutritional ingredients; Dairy Ireland incorporates the manufacture and sale of a range of dairy products and the sale
of feed, fertiliser and other farm inputs; Joint Ventures & Associates revenue mainly includes the sale of cheese, whey proteins and
dairy consumer products. Each segment is reviewed in its totality by the Chief Operating Decision Maker. The Other segment refers to
all other businesses which comprise the Property business unit, a small dairy operation in Mexico and the Pigmeat business which was
disposed of in March 2008.
The Glanbia Executive Committee assesses the trading performance of operating segments based on a measure of earnings before
interest and tax. This measure excludes exceptional items.
Comparatives for the year ended 3 January 2009 have been restated to reflect the revised segment analysis as shown at section 5.2
below.
US Cheese &
Global
Nutritionals
€'000
Dairy Ireland
€'000
JV's &
Associates
€'000
Total gross segment revenue
(a)
Inter-segment revenue
795,974
(3,581)
1,037,473
297,587
(8,707)
–
Group
including JV's
& Associates
€'000
2,140,202
(12,288)
Other
€'000
9,168
–
Segment external revenue
792,393
1,028,766
297,587
9,168
2,127,914
Segment earnings before interest, tax and
exceptional items
(b)
Exceptional items – segment rationalisation costs
89,982
(219)
24,004
(13,738)
17,453
–
(2,820)
(84)
128,619
(14,041)
Segment earnings before interest and tax
89,763
10,266
17,453
(2,904)
114,578
Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of €58.1 million and related
party sales between US Cheese & Global Nutritionals and Joint Ventures & Associates of €2.2 million.
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be
available to unrelated third parties.
5.1 (a): Segment revenue is reconciled to reported external revenue as follows:
Segment revenue
Inter-segment revenue
Joint Ventures & Associates revenue
Reported external revenue
2009
€'000
2,140,202
(12,288)
(297,587)
1,830,327
Glanbia plc 2009 Annual Report Financial statements
83
5.1 (b): Segment earnings before interest, tax and exceptional items are reconciled to reported profit before tax and profit
after tax as follows:
Segment earnings before interest and tax
Exceptional items – segment rationalisation costs
Exceptional items – unallocated
Joint Ventures & Associates interest and tax
Finance income
Finance costs
Reported profit before tax
Income taxes
Reported profit after tax
2009
€'000
128,619
(14,041)
59,716
(7,228)
5,542
(29,576)
143,032
(29,873)
113,159
Finance income, finance costs and income taxes are not allocated to segments as this type of activity is driven by the central treasury
and taxation functions, which manage the cash and taxation position of the Group.
Other segment items included in the income statement for the year ended 2 January 2010 are as follows:
US Cheese &
Global
Nutritionals
€'000
Dairy Ireland
€'000
JV's &
Associates
€'000
Depreciation of property, plant and equipment
Amortisation of intangibles
Capital grants released to the income statement
Exceptional items – segment rationalisation costs
Exceptional items – unallocated
9,692
10,364
(11)
(219)
–
18,964
3,494
(1,226)
(13,738)
–
6,691
6
(396)
–
–
Group
including JV's
& Associates
€'000
35,426
13,864
(1,633)
(14,041)
59,716
Other
€'000
79
–
–
(84)
–
The segment assets and liabilities at 2 January 2010 and segment capital expenditure & acquisitions for the year then ended
are as follows:
US Cheese &
Global
Nutritionals
€'000
Dairy Ireland
€'000
JV's &
Associates
€'000
Group
including JV's
& Associates
€'000
Other
€'000
Segment assets
Segment liabilities
Segment capital expenditure and acquisitions
(c)
(d)
(e)
630,530
445,854
102,035
23,809
1,202,228
164,351
235,174
–
1,202
400,727
24,704
21,907
29,993
3,435
80,039
5.1 (c): Segment assets are reconciled to reported assets as follows:
Segment assets
Unallocated assets
Reported assets
Unallocated assets primarily include taxation, cash and cash equivalents, available for sale financial assets and derivatives.
2009
€'000
1,202,228
193,669
1,395,897
84 Glanbia plc 2009 Annual Report Financial statements
5.1 (d): Segment liabilities are reconciled to reported liabilities as follows:
Segment liabilities
Unallocated liabilities
Reported liabilities
2009
€'000
400,727
697,782
1,098,509
Unallocated liabilities primarily include items such as taxation, borrowings and derivatives.
5.1 (e): Segment capital expenditure and acquisitions are reconciled to reported capital expenditure and acquisitions as
follows:
Segment capital expenditure and acquisitions
Joint Ventures & Associates capital expenditure
Unallocated capital expenditure
Reported capital expenditure and acquisitions
2009
€'000
80,039
(29,993)
426
50,472
5.2 The restated segment results for the year ended 3 January 2009 are as follows:
US Cheese &
Global
Nutritionals
€'000
Dairy Ireland
€'000
JV's &
Associates
€'000
Group
including JV's
& Associates
€'000
Other
€'000
Total gross segment revenue
(a)
Inter-segment revenue
847,888
(3,672)
1,357,027
(16,473)
370,315
47,391
–
–
2,622,621
(20,145)
Segment external revenue
844,216
1,340,554
370,315
47,391
2,602,476
Segment earnings before interest,
tax and exceptional items
(b)
83,839
49,660
17,039
Exceptional item
–
(15,971)
(947)
555
(3,332)
151,093
(20,250)
Segment earnings before interest and tax
83,839
33,689
16,092
(2,777)
130,843
Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of €69.3 million and related
party sales between US Cheese & Global Nutritionals and Joint Ventures & Associates of €2.9 million.
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be
available to unrelated third parties.
Glanbia plc 2009 Annual Report Financial statements
85
5.2 (a): Segment revenue is reconciled to reported external revenue as follows:
Segment revenue
Inter-segment revenue
Joint ventures & associates revenue
Reported external revenue
2008
€'000
2,622,621
(20,145)
(370,315)
2,232,161
5.2 (b): Segment earnings before interest, tax and exceptional items are reconciled to reported profit before tax and profit
after tax as follows:
Segment earnings before interest and tax
Exceptional items
Joint Ventures & Associates interest and tax
Finance income
Finance costs
Reported profit before tax
Income taxes
Reported profit after tax
2008
€'000
151,093
(20,250)
(9,733)
5,590
(26,695)
100,005
(20,636)
79,369
Finance income, finance costs and income taxes are not allocated to segments as this type of activity is driven by the central treasury
and taxation functions, which manage the cash and taxation position of the Group.
Other segment items included in the income statement for the year ended 3 January 2009 are as follows:
US Cheese &
Global
Nutritionals
€'000
Dairy Ireland
€'000
JV's &
Associates
€'000
Depreciation of property, plant and equipment
Amortisation of intangibles
Capital grants released to the income statement
Exceptional items
7,935
4,902
(10)
–
17,394
3,455
(590)
(15,971)
6,634
140
(695)
(947)
Group
including JV's
& Associates
€'000
32,423
8,497
(1,295)
(20,250)
Other
€'000
460
–
–
(3,332)
The segment assets and liabilities at 3 January 2009 and segment capital expenditure & acquisitions for the year then ended
are as follows:
US Cheese &
Global
Nutritionals
€'000
Dairy Ireland
€'000
JV's &
Associates
€'000
Group
including JV's
& Associates
€'000
Other
€'000
Segment assets
Segment liabilities
(c)
(d)
617,242
536,846
89,259
32,675
1,276,022
173,357
378,080
–
12,196
563,633
Segment capital expenditure and acquisitions (e)
252,600
45,218
4,326
3,955
306,099
86 Glanbia plc 2009 Annual Report Financial statements
5.2 (c): Segment assets are reconciled to reported assets as follows:
Segment assets
Unallocated assets
Reported assets
Unallocated assets primarily include taxation, cash and cash equivalents, available for sale financial assets and derivatives.
5.2 (d): Segment liabilities are reconciled to reported liabilities as follows:
Segment liabilities
Unallocated liabilities
Reported liabilities
2008
€'000
1,276,022
178,947
1,454,969
2008
€'000
563,633
663,417
1,227,050
Unallocated liabilities primarily include items such as taxation, borrowings and derivatives.
5.2 (e): Segment capital expenditure and acquisitions are reconciled to reported capital expenditure and acquisitions
as follows:
Segment capital expenditure and acquisitions
Joint Ventures & Associates capital expenditure
Unallocated capital expenditure
Reported capital expenditure and acquisitions
2008
€'000
306,099
(4,326)
2,841
304,614
5.3 Entity wide disclosures
Revenue from external customers for each group of similar product in the US Cheese & Global Nutritionals, Dairy Ireland, Joint
Ventures & Associates and Other segments are outlined at section 5.1 and 5.2 above.
Geographical information
Revenue by geographical destination is reviewed by the Chief Operating Decision Maker. The breakdown of revenue by geographical
destination is as follows:
Ireland
UK
Rest of Europe
USA
Other
2009
€'000
703,217
116,194
244,294
583,718
182,904
2008
€'000
1,055,597
69,981
112,450
859,234
134,899
1,830,327
2,232,161
Revenue of approximately €231.1 million (2008: €320.2 million) is derived from a single external customer.
The total of non-current assets, other than financial instruments and deferred tax assets, located in Ireland is €289.1 million and located
in other countries, mainly the USA is €538.6 million.
Glanbia plc 2009 Annual Report Financial statements
87
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
2009
€'000
27,221
1,514
(716)
2008
€'000
24,149
1,640
(5,319)
Repairs and maintenance expenditure on property, plant and equipment
26,903
25,698
Exceptional items (pre tax)
– Exit from Pigmeat
– Rationalisation costs
– Non-cash foreign exchange loss
– UK defined benefit schemes
– Irish defined benefit schemes
–
15,055
18,280
21,088
(100,098)
3,332
15,971
–
–
Net foreign exchange gains (excluding exceptional items)
(2,543)
(4,019)
Amortisation of intangible assets (note 15)
– Software costs
– Other intangible assets
(Decrease)/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 30)
Operating lease rentals (note 14)
– Plant and machinery
– Other
Employee benefit expense – pre exceptional (note 8)
Auditors' remuneration
Research and development costs
Other expenses
Total operating expenses
Reconciliation of total operating expenses to income statement
Cost of sales
Distribution expenses
Administration expenses
Other gains and losses
Total operating expenses
4,163
9,695
3,685
4,672
(65,845)
42,365
1,364,843
1,619,992
26,753
51,735
5,172
(1,237)
6,606
3,923
39,714
54,110
1,384
(600)
4,775
5,582
175,231
185,401
546
7,686
639
6,880
77,511
87,359
1,673,486
2,117,410
2009
€'000
2008
€'000
1,512,203
1,900,662
117,601
104,412
(60,730)
124,624
92,124
–
1,673,486
2,117,410
88 Glanbia plc 2009 Annual Report Financial statements
7. Exceptional items
Rationalisation costs
Non-cash foreign exchange loss
Defined benefit schemes
– Irish defined benefit schemes
– UK defined benefit schemes
Exit from Pigmeat
Joint venture – deferred tax charge
Total exceptional credit/(charge) before tax
Exceptional tax (charge)/credit (note 11)
Net exceptional credit/(charge)
Notes
(a)
(b)
(c)
(d)
2009
€'000
(15,055)
(18,280)
100,098
(21,088)
–
–
2008
€'000
(15,971)
–
–
–
(3,332)
(947)
45,675
(20,250)
(10,770)
892
34,905
(19,358)
(a) An exceptional charge of €15.1 million was incurred during the year, primarily relating to redundancy costs due to the on-going
rationalisation programmes in the Dairy Ireland segment.
(b) During the year, a review of the internal corporate structures of the Group was completed. This gave rise to an exceptional non-
cash charge of €18.3 million on the repayment of certain sterling inter-group loans. This loss, which was previously recognised in
the Group’s currency reserve is now recycled to the Group’s income statement.
(c) A strategic review of the Group’s pension arrangements was completed during 2009, following which the Group revised benefits
under the Irish defined benefit schemes giving rise to an exceptional gain, in accordance with IAS 19, in the year of €100.1 million
relating to curtailment gains and negative past service costs of €14.1 million and €86.0 million respectively. The curtailment gains
and negative past service costs arise following the removal of guaranteed increases to pensions in payment for all members and
the provision of benefits for members in employment on a career average basis from a final salary basis. The Group has completed
its consultation process with all members of the main schemes.
(d) The Group’s UK defined benefit schemes exceptional charge of €21.1 million relates to the scheme’s administration and certain
other costs associated with businesses disposed of in prior years. As outlined in note 33 – contingent liabilities, the Company has
guaranteed the payment of a proportion of employer contributions in respect of these UK pension schemes.
8. Employee benefit expense
Wages and salaries
Termination costs
Social security costs
Cost of share options
Pension costs – defined contribution plans (note 28)
Pension costs – defined benefit plans (note 28)
Exceptional item – negative past service costs
Exceptional item – rationalisation costs (note 7 (a))
Glanbia plc 2009 Annual Report Financial statements
89
2009
€'000
144,518
–
15,613
187
2,146
12,767
2008
€'000
157,510
708
17,036
515
1,719
7,913
175,231
185,401
(60,400)
15,055
(376)
15,068
129,886
200,093
The average number of employees, excluding the Group's Joint Ventures & Associates in 2009 was 3,418 (2008: 3,400) and is analysed
into the following categories:
US Cheese & Global Nutritionals
Dairy Ireland
Other
2009
1,471
1,852
95
2008
1,194
2,136
70
3,418
3,400
The average number of employees in US Cheese & Global Nutritionals increased due to the acquisition of Optimum Nutrition in August
2008 and the average number of employees in Dairy Ireland decreased due to the on-going rationalisation programme in this segment.
9. Directors’ remuneration
The audited Directors’ remuneration information is shown on pages 49 to 53 of the statement on Directors’ remuneration.
10. Finance income and costs
Finance income
Interest income
Interest income on deferred consideration
Total finance income
Finance costs
Bank borrowings repayable within five years
Interest cost on deferred consideration
Finance lease costs
Interest rate swaps, transfer from equity
Interest rate swaps, fair value hedges
Fair value adjustment to borrowings attributable to interest rate risk
Finance cost of preference shares
Total finance costs
Net finance costs
2009
€'000
4,662
880
2008
€'000
5,164
426
5,542
5,590
(16,756)
(21,471)
(67)
(241)
(8,163)
1,524
(1,524)
(4,349)
(22)
(360)
(477)
(1,295)
1,295
(4,365)
(29,576)
(26,695)
(24,034)
(21,105)
Net finance costs exclude borrowing costs attributable to the acquisition, construction or production of a qualifying asset which has
been capitalised, as disclosed in note 14.
90 Glanbia plc 2009 Annual Report Financial statements
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 27)
Pre exceptional tax charge
Exceptional tax charge/(credit)
Current
Deferred
Total tax charge
Notes
2009
€'000
3,044
(1,623)
2008
€'000
8,961
(99)
1,421
8,862
4,727
215
11,857
(607)
4,942
11,250
6,363
20,112
12,740
1,416
19,103
21,528
(a)
(b)
(1,742)
12,512
(1,073)
181
29,873
20,636
(a) The restructuring provision charged in 2009 resulted in an exceptional current tax credit of €1.7 million.
(b) The curtailment gains and negative past service costs recognised in the defined benefit pension schemes during the year resulted
in an exceptional deferred tax charge of €12.5 million.
The net tax charges and credits in 2009 and 2008, by virtue of their nature and size, have been separately disclosed as exceptional
charges and credits in the financial statements.
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the corporation tax rate in Ireland,
as follows:
Profit before tax
Tax calculated at Irish rate of 12.5% (2008: 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 & Associates shown in profit before tax
Expenses not deductible for tax purposes and other differences
Total tax charge
2009
€'000
2008
€'000
143,032
100,005
17,879
(2,067)
13,001
(1,071)
(1,278)
3,409
12,501
(2,732)
9,396
(54)
(913)
2,438
29,873
20,636
Details of tax charged or credited directly to other comprehensive income during the year are outlined in note 27.
Glanbia plc 2009 Annual Report Financial statements
91
12. Earnings per share
Basic
Basic earnings per share is calculated by dividing the net profit attributable to the owners of the Parent 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 23 (a)).
Profit attributable to owners of the Parent
2009
€'000
2008
€'000
112,676
78,399
Weighted average number of ordinary shares in issue
292,985,630
293,018,610
Basic earnings per share (cents per share)
38.46
26.76
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 performed 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
2009
€'000
2008
€'000
292,985,630
293,018,610
830,517
1,356,809
Adjusted weighted average number of ordinary shares
293,816,147
294,375,419
Diluted earnings per share (cents per share)
38.35
26.63
Adjusted
Adjusted earnings per share is calculated on the net profit attributable to owners of the Parent, before net exceptional items and
intangible asset amortisation (net of related tax). Adjusted earnings per share is considered to be more reflective of the Group’s overall
underlying performance.
Profit attributable to owners of the Parent
Amortisation of intangible assets (net of related tax)
Net exceptional items
Adjusted net income
Adjusted earnings per share (cents per share)
Diluted adjusted earnings per share (cents per share)
2009
€'000
112,676
12,126
(34,905)
2008
€'000
78,399
7,312
19,358
89,897
105,069
30.68
35.86
30.60
35.69
92 Glanbia plc 2009 Annual Report Financial statements
13. Dividends
The dividends paid in 2009 and 2008 were €19.5 million (6.65 cents per share) and €18.5 million (6.33 cents per share) respectively. On
30 September 2009 an interim dividend of 2.89 cents per share on the ordinary shares amounting to €8.5 million was paid to
shareholders on the register of members as at 11 September 2009. The Directors have recommended the payment of a final dividend
of 3.95 cents per share on the ordinary shares which amounts to €11.6 million. Subject to shareholders approval this dividend will be
paid on 26 May 2010 to shareholders on the register of members at 30 April 2010, the record date. These financial statements do not
reflect this final dividend.
14. Property, plant and equipment
Year ended 3 January 2009
Opening net book amount
Exchange differences
Acquisition of subsidiaries (note 36)
Additions
Disposals
Reclassification
Depreciation charge
Land and
buildings
€'000
Plant and
equipment
€'000
Motor
vehicles
€'000
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)
Total
€'000
298,771
6,405
3,389
81,426
(2,838)
(233)
(25,789)
Closing net book amount
132,995
227,623
513
361,131
At 3 January 2009
Cost
Accumulated depreciation
Net book amount
Year ended 2 January 2010
Opening net book amount
Exchange differences
Additions
Disposals
Reclassification
Depreciation charge
193,578
(60,583)
585,482
(357,859)
18,782
(18,269)
797,842
(436,711)
132,995
227,623
513
361,131
132,995
(1,396)
14,779
(7,476)
(2,218)
(4,678)
227,623
(2,971)
28,857
(1,216)
2,143
(23,650)
513
3
262
(11)
–
(407)
361,131
(4,364)
43,898
(8,703)
(75)
(28,735)
Closing net book amount
132,006
230,786
360
363,152
At 2 January 2010
Cost
Accumulated depreciation
Net book amount
197,267
(65,261)
612,295
(381,509)
19,036
(18,676)
828,598
(465,446)
132,006
230,786
360
363,152
Depreciation expense of €28.7 million (2008: €25.8 million) has been charged as follows: cost of sales €25.1 million (2008: €23.0 million),
distribution expenses €1.2 million (2008: €1.2 million) and administration expenses €2.4 million (2008: €1.6 million).
Included in the cost of plant and equipment is an amount of €8.9 million (2008: €18.0 million) incurred in respect of assets under
construction.
Borrowing costs incurred directly attributable to the acquisition, construction or production of a qualifying asset are capitalised.
The amount capitalised, using the Group’s incremental cost of borrowing amounted to €0.3 million (2008: €0.6 million). Capitalised
borrowing costs will be depreciated through 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.
Glanbia plc 2009 Annual Report Financial statements
93
Leased assets, comprising plant and equipment where the Group is a lessee under a finance lease, are as follows:
Cost – capitalised finance leases
Accumulated depreciation
Net book amount
Operating lease rentals amounting to €10.5 million (2008: €10.4 million) are included in the income statement.
2009
€'000
41,673
(29,344)
2008
€'000
41,673
(27,830)
12,329
13,843
15. Intangible assets
Year ended 3 January 2009
Opening net book amount
Exchange differences
Acquisition of subsidiaries
Additions
Reclassification
Write-off of intangibles
Reduction in contingent consideration
Amortisation
Goodwill
€'000
note (b)
Other
intangibles
€'000
note (a)
Software
costs
€'000
Development
costs
€'000
88,023
5,515
58,065
77
–
–
(6,096)
–
24,032
10,336
154,028
–
–
(282)
–
(3,817)
21,076
157
–
4,376
233
–
–
4,434
342
–
3,253
–
–
–
(3,685)
(855)
Total
€'000
137,565
16,350
212,093
7,706
233
(282)
(6,096)
(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
Year ended 2 January 2010
Opening net book amount
Exchange differences
Additions
Reclassification
Amortisation
145,584
(3,756)
224
–
–
184,297
(5,832)
58
–
(7,750)
22,157
(101)
3,653
75
(4,163)
7,174
(202)
2,639
–
(1,945)
359,212
(9,891)
6,574
75
(13,858)
Closing net book amount
142,052
170,773
21,621
7,666
342,112
At 2 January 2010
Cost
Accumulated amortisation
142,052
–
186,135
(15,362)
50,280
(28,659)
11,309
(3,643)
389,776
(47,664)
Net book amount
142,052
170,773
21,621
7,666
342,112
Amortisation expense of €13.9 million (2008: €8.4 million) has been charged to administration expenses during the year.
The remaining amortisation period for software costs is 5 years and development costs is 4 years.
94 Glanbia plc 2009 Annual Report Financial statements
Note 15 (a): Other intangibles
Year ended 3 January 2009
Opening net book amount
Exchange differences
Acquisition of subsidiaries
Write-off of intangibles
Amortisation
Brands/
know-how
€'000
Customer
relationships
€'000
9,407
5,681
82,855
–
(749)
11,368
5,119
71,173
–
(2,908)
Other
€'000
3,257
(464)
–
(282)
(160)
Total other
intangibles
€'000
24,032
10,336
154,028
(282)
(3,817)
Closing net book amount
97,194
84,752
2,351
184,297
At 3 January 2009
Cost
Accumulated amortisation
Net book amount
Year ended 2 January 2010
Opening net book amount
Exchange differences
Additions
Amortisation
99,616
(2,422)
89,441
(4,689)
2,852
(501)
191,909
(7,612)
97,194
84,752
2,351
184,297
97,194
(3,287)
–
(687)
84,752
(2,774)
–
(6,866)
2,351
229
58
(197)
184,297
(5,832)
58
(7,750)
Closing net book amount
93,220
75,112
2,441
170,773
At 2 January 2010
Cost
Accumulated amortisation
Net book amount
96,329
(3,109)
86,667
(11,555)
3,139
(698)
186,135
(15,362)
93,220
75,112
2,441
170,773
Included in intangibles is a carrying value of €85.2 million (2008: €88.4 million) relating primarily to brands/know-how with indefinite
useful lives. In arriving at the conclusion that certain 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 these brands/know-how
being capitalised is that there are no material legal, regulatory, contractual or other factors that limit the useful life of these intangibles.
In addition, the likelihood that market based factors could truncate a brand’s life is relatively remote because of the size, diversification
and market share of the brands in question. The remaining amortisation period for the balance of brands/know-how is 12 years and for
other intangibles is 12 years.
Included in customer relationships are individual significant intangible assets of €66.1 million with a remaining amortisation period of
12.5 years. The remaining customer relationships are amortised over a period of 11 years.
Glanbia plc 2009 Annual Report Financial statements
95
Note 15 (b): Impairment tests for goodwill and indefinite life intangibles
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
Glanbia Nutritionals (NA), Inc. (formerly Seltzer Companies, Inc.)
Optimum Nutrition, Inc.
2009
€'000
11,297
55,838
59,918
2008
€'000
11,297
57,921
61,915
127,053
131,133
Multiple units without individual significant amounts of goodwill
14,999
14,451
142,052
145,584
Indefinite life intangibles amounting to €85.2 million (2008: €88.4 million) are in the Optimum Nutrition, Inc. cash generating unit within
“brands/know-how”. The recoverable amount of goodwill and indefinite life intangibles 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, replacement capital
expenditure requirements and working capital investment. Capital expenditure requirements and profitability 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.
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 incorporates terminal values. The above rate is consistent for each cash generating unit. In forecasting terminal values, a multiple
of five to ten times EBITDA is generally used.
16. Investments in associates
At the beginning of the year
Share of profit after tax
Losses recognised directly through the statement of comprehensive
income
Additions
Write-down of investment
Exchange differences
Funding repaid
At the end of the year
2009
Company
€'000
1,395
–
–
–
–
–
–
2009
Group
€'000
11,597
586
(1,038)
117
(1,078)
(143)
–
2008
Company
€'000
2008
Group
€'000
1,395
10,729
–
–
–
–
–
–
458
–
610
–
–
(200)
1,395
10,041
1,395
11,597
96 Glanbia plc 2009 Annual Report Financial statements
The Group’s share of the results of associates, all of which are unlisted, and it’s share of the assets (including goodwill) and liabilities are
as follows:
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
2009
Co-operative Animal Health Limited*
South Eastern Cattle Breeding Society Limited*
Malting Company of Ireland Limited
South East Port Services Limited
Westgate Biological Limited
Greenfield Dairy Partners Limited
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
163
130
156
195
(186)
458
50.00
57.00
33.33
49.00
49.99
Assets
€'000
Liabilities
€'000
Revenues
€'000
Profit/
(loss)
€'000
Interest
held
%
8,832
5,205
5,268
7,327
154
117
6,614
2,121
2,316
5,657
197
–
16,660
1,946
3,723
1,473
–
–
26,903
16,905
23,802
276
180
102
201
(173)
–
586
50.00
57.00
33.33
49.00
49.99
33.33
*
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 39.
Glanbia plc 2009 Annual Report Financial statements
97
17. Investments in joint ventures
At the beginning of the year
Share of profit after tax
Gains/(losses) recognised directly through the statement of comprehensive income
Deferred tax movement
Exchange differences
Dividends received
Funding advanced
Write-down of investment
At the end of the year
2009
€'000
64,895
9,639
1,457
3,445
(3,236)
(17,924)
–
–
2008
€'000
57,328
5,901
(2,961)
(2,420)
(224)
(451)
8,057
(335)
58,276
64,895
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
Share of profit after tax
Proportionate interest in joint ventures’ commitments
2009
€'000
2008
€'000
120,033
60,143
101,573
69,598
180,176
171,171
69,686
52,214
63,361
42,915
121,900
106,276
58,276
64,895
2009
€'000
2008
€'000
273,785
(264,146)
346,000
(340,099)
9,639
5,901
8,939
31,812
A listing and description of interests in significant joint ventures is outlined in note 39.
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.
98 Glanbia plc 2009 Annual Report Financial statements
18. Available for sale financial assets
At the beginning of the year
Disposals/redemption
Fair value movement recognised directly through
the statement of other comprehensive income
Additions
Available
for sale
financial assets
2009
Group
€'000
24,112
(550)
(3,367)
202
Investments
2009
Company
€'000
460,771
(7,217)
–
–
Available
for sale
financial assets
2008
Group
€'000
30,089
(2,913)
(3,597)
533
Investments
2008
Company
€'000
455,303
–
–
5,468
At the end of the year
453,554
20,397
460,771
24,112
There were no impairment provisions on available for sale financial assets or investments in 2009 or 2008.
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 financial assets
Available
for sale
financial assets
2009
Group
€'000
155
8,352
10,193
740
198
–
759
Investments
2009
Company
€'000
1
–
–
740
–
452,813
–
Available
for sale
financial assets
2008
Group
€'000
182
11,692
9,986
1,290
198
–
Investments
2008
Company
€'000
1
–
–
1,290
–
459,480
–
764
453,554
20,397
460,771
24,112
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 financial assets with a carrying value of €11.9 million (2008: €12.2 million) are included at cost. Fair value information
has not been disclosed as it cannot be measured reliably. These available for sale financial assets comprise the following – Irish Dairy
Board, Glanbia Enterprise Fund Limited, Moorepark Technology and other investments. The fair value of these shares cannot be
reliably measured as they are not actively traded and there is not a readily available market for such instruments.
Available for sale financial assets are classified as non-current assets, unless they are expected to be realised within 12 months of the
reporting 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
Receivables from Joint Ventures & Associates (note 37)
Loans to joint ventures (note 37)
Amounts due from subsidiary companies
Value added tax
Other receivables
Glanbia plc 2009 Annual Report Financial statements
99
2009
Company
€'000
–
–
–
30
–
–
2009
Group
€'000
164,855
(12,035)
152,820
14,569
2,357
33,718
2008
Company
€'000
–
–
–
31
–
–
76,297
–
48,309
–
–
5,113
16,735
–
–
2008
Group
€'000
152,005
(8,091)
143,914
21,562
2,430
12,767
–
6,841
8,002
76,327
225,312
48,340
195,516
Less non-current portion: loans to joint ventures (note 37)
–
(33,718)
–
(12,767)
76,327
191,594
48,340
182,749
In 2009, 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 €34.0 million (2008: €37.0 million). The Group has continued to recognise an asset of
€0.4 million (2008: €0.7 million), representing the extent of its continuing involvement, and an associated liability of a similar amount.
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.
As shown in note 5.3, the Group has one significant external customer. Management are satisfied that they have satisfactory credit
control procedures in place in respect of this customer. There is no concentration of risk in respect of other trade receivables.
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.
100 Glanbia plc 2009 Annual Report Financial statements
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Euro
US dollar
GBP sterling
Other
2009
Company
€'000
76,327
–
–
–
2009
Group
€'000
88,412
95,888
3,325
3,969
2008
Company
€'000
48,340
–
–
–
2008
Group
€'000
81,658
89,208
4,167
7,716
76,327
191,594
48,340
182,749
Movement on the Group’s provision for impairment of trade receivables is as follows:
At the beginning of the year
Provision for receivables impairment
Receivables written off during the year as uncollectible
Unused amounts reversed
At the end of the year
2009
€'000
8,091
4,696
(356)
(396)
2008
€'000
7,834
1,797
(1,194)
(346)
12,035
8,091
As of 2 January 2010, trade receivables of €20.5 million (2008: €8.2 million) were impaired. Trade receivable balances are generally
considered for an impairment review when falling due outside trade terms and are normally partially or wholly provided for. The
amount of the provision was €12.0 million (2008: €8.1 million).
The breakdown of impaired trade receivables is as follows:
Past due:
Up to 3 months
3 to 6 months
Over 6 months
2009
€'000
2,987
4,533
13,008
2008
€'000
2,739
613
4,880
20,528
8,232
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above. The
Group holds charges on property and other assets of certain trade debtors, valued at €8.0 million.
As of 2 January 2010, trade receivables of €31.3 million (2008: €29.6 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
2009
€'000
25,494
4,267
1,572
2008
€'000
17,518
10,122
1,997
31,333
29,637
20. Inventories
Raw materials
Finished goods
Consumables
Glanbia plc 2009 Annual Report Financial statements
101
2009
€'000
29,573
159,480
12,524
2008
€'000
40,009
216,259
11,154
201,577
267,422
Included in the above are inventories carried at net realisable value amounting to €26.1 million (2008: €115.3 million). The amounts
written off in respect of these inventories was €4.1 million (2008: €18.8 million).
21. Cash and cash equivalents
Cash at bank and in hand
Short term bank deposits
The fair value of cash and cash equivalents are not materially different to their book values.
2009
€'000
38,831
113,958
2008
€'000
22,998
109,574
152,789
132,572
102 Glanbia plc 2009 Annual Report Financial statements
22. Reconciliation of changes in equity
Other reserves
Share capital
and share
premium
€'000
(note 23)
Capital and
merger
reserves
€'000
(notes a & b)
Currency
reserve
€'000
(note c)
Fair value
reserve
€'000
(note d)
Retained
earnings
€'000
(note 24)
Minority
interests
€'000
(note 25)
Total
€'000
Balance at 29 December 2007
98,450
116,934
(22,481)
13,456
21,176
7,040 234,575
Currency translation differences
Actuarial loss – defined benefit schemes
Deferred tax on actuarial loss
Share of actuarial loss – Joint Ventures & Associates
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 financial assets – loss in
year
Deferred tax on fair value movements
Profit for the year
Shares issued
Premium on shares issued
Shares purchased
Cost of share options
Discount on options
Dividends paid during the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
13
347
(1,665)
–
175
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
827
(175)
–
17,251
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(16,508)
(484)
(342)
(11)
477
(2,910)
(519)
(3,597)
964
–
–
–
–
–
–
–
–
(68,246)
7,084
(204)
–
–
–
–
–
–
–
–
–
78,399
–
–
–
–
–
(18,502)
–
–
–
–
–
–
–
–
–
–
–
–
–
970
–
–
–
–
–
–
17,251
(68,246)
7,084
(204)
(16,508)
(484)
(342)
(11)
477
(2,910)
(519)
(3,597)
964
79,369
13
347
(1,665)
827
–
(18,502)
Balance at 3 January 2009
97,320
117,586
(5,230)
(9,474)
19,707
8,010 227,919
Currency translation differences
Exceptional foreign exchange loss
Actuarial loss – defined benefit schemes
Deferred tax on actuarial loss
Share of actuarial loss – Joint Ventures & Associates
Revaluation of interest rate swaps – loss in year
Foreign exchange contracts – loss in year
Transfers to income statement
– Foreign exchange contracts – loss in year
– Forward commodity contracts – loss in year
– Interest rate swaps – loss in year
Revaluation of forward commodity contracts – gain in year
Revaluation of available for sale financial assets – loss in
year
Deferred tax on fair value movements
Profit for the year
Cost of share options
Transfer between reserves
Dividends paid during the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
187
648
–
(12,022)
18,280
–
–
–
–
–
–
–
–
–
–
–
–
–
(648)
–
–
–
–
–
–
(3,690)
(983)
903
716
8,163
5
(3,367)
(503)
–
–
–
–
–
–
(31,215)
2,684
(1,364)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
112,676
–
–
(19,484)
–
483
–
–
(2,000)
(12,022)
18,280
(31,215)
2,684
(1,364)
(3,690)
(983)
903
716
8,163
5
(3,367)
(503)
113,159
187
–
(21,484)
Balance at 2 January 2010
97,320
118,421
380
(8,230)
83,004
6,493 297,388
Glanbia plc 2009 Annual Report Financial statements
103
Note 22 (a): Capital reserve
The capital reserve reflects charges relating to granting of both shares and options under the 2002 LTIP, 2007 LTIP and 2008 LTIP
schemes.
At the beginning of the year
Sharesave Scheme – discount on options
Transfer from trade and other payables – share options
Transfer between reserves
Cost of share options
At the end of the year
2009
Company
€'000
2009
Group
€'000
2008
Company
€'000
5,839
4,438
–
438
–
167
–
–
648
187
5,187
(175)
–
–
827
2008
Group
€'000
3,786
(175)
–
–
827
6,444
5,273
5,839
4,438
Note 22 (b): Merger reserve
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).
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
2009
€'000
2008
€'000
355,271
355,271
(327,085)
84,962
(327,085)
84,962
113,148
113,148
Note 22 (c): Currency reserve
The 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 the
closing rate at the reporting 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.
Note 22 (d): Fair value reserve
The 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 income or expense. Unrealised gains and losses arising from changes in the fair value of available for sale financial assets are
recognised in the fair value reserve. When such available for sale financial assets are sold or impaired, the accumulated fair value
adjustments are recycled to the income statement.
104 Glanbia plc 2009 Annual Report Financial statements
23. Share capital and share premium
Company
At 29 December 2007
Discount on options
Shares purchased
Issue of shares – option scheme
Number of
shares
(thousands)
Ordinary
shares
€'000
Company
Share premium
€'000
293,347
17,600
436,527
–
–
209
–
–
13
–
–
347
Own
shares
€'000
note (a)
(409)
175
(1,665)
–
Company
Total
€'000
453,718
175
(1,665)
360
At 3 January 2009 and 2 January 2010
293,556
17,613
436,874
(1,899)
452,588
Group
At 29 December 2007
Discount on options
Shares purchased
Issue of shares – option scheme
Number of
shares
(thousands)
Ordinary
shares
€'000
Group
Share premium
€'000
293,347
17,600
81,259
–
–
209
–
–
13
–
–
347
Own
shares
€'000
Note (a)
(409)
175
(1,665)
–
Group
Total
€'000
98,450
175
(1,665)
360
At 3 January 2009 and 2 January 2010
293,556
17,613
81,606
(1,899)
97,320
The total authorised number of ordinary shares is 306 million shares (2008: 306 million shares) with a par value of €0.06 per share (2008:
€0.06 per share). All issued shares are fully paid.
Note 23 (a): Own shares
The amount included above as own shares relates to 570,054 (2008: 570,054) 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 Share Trust at 2 January 2010 cost €1.9 million and had a market value of €1.6 million at 2 January
2010. The dividend rights in respect of these shares have been waived, save 0.001 pence per share.
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: Presentation.
Note 23 (b): 2002 Long Term Incentive Plan (‘the 2002 LTIP’)
Share options are granted to Directors and to employees. Movements in the number of share options outstanding are as follows:
At the beginning of the year
Granted
Exercised
Lapsed
2009
Average
exercise price
in € per share
2009
Number
of
options
2008
Average
exercise price
in € per share
2.35
2.29
–
–
2,258,000
50,000
–
–
2.52
–
1.72
4.25
2008
Number
of
options
2,792,000
–
(209,000)
(325,000)
At the end of the year
2.35
2,308,000
2.35
2,258,000
Expiry date in
2012
2013
2014
2014
2016
2017
2019
Glanbia plc 2009 Annual Report Financial statements
105
Exercise price
€
1.55
1.90
2.47
2.73
2.87
4.03
2.29
2009
number
782,000
160,000
100,000
2008
number
782,000
160,000
100,000
1,000,000
1,000,000
50,000
166,000
50,000
50,000
166,000
–
2,308,000
2,258,000
Total options over 2,308,000 (2008: 2,258,000) ordinary shares were outstanding at 2 January 2010 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 (2008: 118,600) ordinary
shares. The cost of the 2002 LTIP charged in the Group income statement is €84,208.
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 Group has been achieved. The performance criterion is that there has been an
increase in the adjusted earnings per share of the Group of at least the Consumer Price Index plus 5% over a three year period.
The fair value of share options has been calculated using the Trinomial Model. Options over 2,092,000 (2008: 2,042,000) ordinary shares
were exercisable at 2 January 2010 at a weighted average price of €2.21 (2008: €2.20).
The weighted average life for share options outstanding is four years.
Note 23 (c): 2007 Long Term Incentive Plan (‘the 2007 LTIP’) and 2008 Long Term Incentive Plan (‘the 2008 LTIP’)
Arising from a review of the Group’s compensation arrangements for senior managers and executive Directors, the Directors approved
the introduction of the 2007 LTIP for selected senior managers and the shareholders approved the introduction of the 2008 LTIP for
selected senior managers and executive Directors. Awards outstanding under the 2007 LTIP and the 2008 LTIP as at 2 January 2010
amounted to 169,500 ordinary shares (2008: 169,500) and 1,201,000 ordinary shares (2008: 583,000) respectively.
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 2007 LTIP scheme is 115% of base salary per annum in the
form of conditional shares and the vesting period is three years. With regard to the 2008 LTIP, an award shall not vest unless the
Remuneration Committee is satisfied that the Company’s underlying financial performance has shown a sustained improvement in the
period since the date of grant.
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 €103,044 (2008 LTIP: €40,062, 2007 LTIP: €62,982) 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
of award
€
Period to
earliest
release date
Number
of shares
Fair value
€
Expense in
Group income
statement
2009
€'000
Expense in
Group income
statement
2008
€'000
2007 Long Term Incentive Plan
4.03
1 year
169,500
3.85
63
210
106 Glanbia plc 2009 Annual Report Financial statements
Shares awarded under the 2007 LTIP are nil based payments. The 2007 awards will expire in 2011.
The fair value of the shares awarded was 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:
Share price
at date
of award
€
Period to
earliest
release date
Number
of shares
Fair value
€
Expense in
Group income
statement
2009
€'000
Expense in
Group income
statement
2008
€'000
Granted in 2008
2008 Long Term Incentive Plan
4.45
2 years
583,000
4.32
(153)
678
Granted in 2009
2008 Long Term Incentive Plan
2.72
3 years
618,000
2.57
193
–
Shares awarded under the 2008 LTIP are nil based payments. The 2008 and 2009 awards will expire in 2012 and 2013 respectively.
The number of options granted in 2008, expected to vest has decreased, resulting in a credit to the income statement during the year.
The fair value of the shares awarded was 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
Granted in
2009
Granted in
2008
2%
35%
2%
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.
24. Retained earnings
Glanbia plc 2009 Annual Report Financial statements
107
Company
retained
earnings
€'000
Group
retained
earnings
€'000
Group
goodwill
write-off
€'000
Group
Total
€'000
Balance at 29 December 2007
18,354
114,137
(92,961)
21,176
Actuarial loss – defined benefit schemes
Deferred tax on actuarial loss
Share of actuarial loss – Joint Ventures & Associates
Net expense recognised directly in other comprehensive income
Profit for the year
–
–
–
–
36,204
(68,246)
7,084
(204)
(61,366)
78,399
Total comprehensive income for the year
36,204
17,033
Dividends paid during the year
(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
Actuarial loss – defined benefit schemes
Deferred tax on actuarial loss
Share of actuarial loss – Joint Ventures & Associates
Net expense recognised directly in other comprehensive income
Profit for the year
–
–
–
–
43,341
(31,215)
2,684
(1,364)
(29,895)
112,676
Total comprehensive income for the year
43,341
82,781
Dividends paid during the year
(19,484)
(19,484)
–
–
–
–
–
–
–
(31,215)
2,684
(1,364)
(29,895)
112,676
82,781
(19,484)
Balance at 2 January 2010
59,913
175,965
(92,961)
83,004
25. Minority interests
At the beginning of the year
Share of profit for the year
Dividends paid to minority interests during the year
At the end of the year
2009
€'000
8,010
483
(2,000)
2008
€'000
7,040
970
–
6,493
8,010
108 Glanbia plc 2009 Annual Report Financial statements
26. Borrowings
Current
Bank overdrafts/borrowings
Finance lease liabilities
Non-current
Bank borrowings
Cumulative redeemable preference shares
Finance lease liabilities
2009
Company
€'000
9,550
–
2009
Group
€'000
–
945
2008
Company
€'000
13,740
–
2008
Group
€'000
14,401
880
9,550
945
13,740
15,281
–
–
–
–
526,803
63,487
4,172
594,462
–
–
–
–
500,742
63,487
5,145
569,374
Total borrowings
9,550
595,407
13,740
584,655
Bank borrowings are secured by cross-guarantees from Group companies. Lease liabilities are effectively secured as the rights to the
leased asset revert to the lessor in the event of default.
The maturity of non-current borrowings is as follows:
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
2009
€'000
982
593,480
–
2008
€'000
926
503,824
64,624
594,462
569,374
The exposure of the Group’s total borrowings to interest rate changes having consideration for the contractual repricing dates
at the reporting date are as follows:
6 months or less
Between 2 and 5 years
Over 5 years
2009
€'000
336,803
258,604
–
2008
€'000
325,143
190,000
69,512
595,407
584,655
The effective interest rates at the reporting date, were as follows:
EUR
GBP
USD
CAD
2009
2008
2009
2008
2009
2008
2009
2008
Bank overdrafts
Bank borrowings
1.18% 3.55% 1.10% 2.60% 5.25% 5.25% 3.25% 4.50%
3.40% 4.34% 1.16% 3.76% 1.04% 2.57% 1.26% 3.32%
Glanbia plc 2009 Annual Report Financial statements
109
The carrying amounts and fair values of non-current borrowings are as follows:
Carrying
amount
2009
€'000
Carrying
amount
2008
€'000
Fair
values
2009
€'000
Fair
values
2008
€'000
Non-current borrowings
594,462
569,374
589,283
571,306
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
The Group has the following undrawn borrowing facilities:
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
2009
€'000
458,168
–
126,605
10,634
2008
€'000
287,143
22,348
265,159
10,005
595,407
584,655
2009
€'000
16,286
138,795
2008
€'000
31,803
67,302
155,081
99,105
2009
€'000
1,149
1,149
3,447
–
5,745
(628)
2008
€'000
1,197
1,197
3,588
1,197
7,179
(1,154)
Present value of finance lease liabilities
5,117
6,025
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
2009
€'000
945
982
3,190
–
2008
€'000
880
926
3,082
1,137
5,117
6,025
110 Glanbia plc 2009 Annual Report Financial statements
27. Deferred income taxes
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets against current
tax liabilities and when the deferred income taxes relate to the same fiscal authority. The following amounts, determined after
appropriate offsetting, are shown in the consolidated statement of financial position:
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
Acquisition of subsidiary and purchase of intellectual property
Deferred tax charge/(credit) to the fair value reserve (note 22)
Deferred tax credit relating to the actuarial loss in the year (note 22)
Exchange differences
At the end of the year
2009
€'000
2008
€'000
(12,022)
(25,380)
66,337
59,056
54,315
33,676
2009
€'000
33,676
12,740
12,512
–
503
(2,684)
(2,432)
2008
€'000
15,915
1,416
181
20,631
(964)
(7,084)
3,581
54,315
33,676
Glanbia plc 2009 Annual Report Financial statements
111
The movement in deferred tax assets and liabilities during the year, without taking into consideration the offsetting of balances within
the same tax jurisdiction, is as follows:
Deferred tax liabilities
At 29 December 2007
(Credited)/charged to income statement
Credited to other comprehensive income (note 22)
Acquisition of subsidiaries and intellectual property
Exchange differences
At 3 January 2009
Charged/(credited) to income statement
Charged to other comprehensive income (note 22)
Exchange differences
At 2 January 2010
Deferred tax assets
At 29 December 2007
Charged/(credited) to income statement
Credited to other comprehensive income (note 22)
Exchange differences
At 3 January 2009
Charged to income statement
Credited to other comprehensive income (note 22)
Exchange differences
At 2 January 2010
Accelerated
tax
depreciation
€'000
Fair value
gains
€'000
Deferred
development
costs
€'000
26,653
(1,798)
–
–
831
3,933
–
(964)
–
–
532
309
–
–
45
Other
€'000
6,469
2,147
–
20,631
268
Total
€'000
37,587
658
(964)
20,631
1,144
25,686
2,969
886
29,515
59,056
9,271
–
(787)
–
503
–
130
–
(20)
(861)
–
(955)
8,540
503
(1,762)
34,170
3,472
996
27,699
66,337
Retirement
obligations
€'000
Tax
losses
€'000
Total
€'000
(11,199)
(10,473)
(21,672)
1,196
(7,084)
–
(257)
–
2,437
939
(7,084)
2,437
(17,087)
(8,293)
(25,380)
13,684
(2,684)
–
3,028
–
(670)
16,712
(2,684)
(670)
(6,087)
(5,935)
(12,022)
2009
€'000
(427)
930
(2,684)
2008
€'000
(752)
(212)
(7,084)
(2,181)
(8,048)
The deferred tax credited to other comprehensive income during the year is as follows:
Fair value reserve in equity
– Available for sale financial assets
– Hedging reserve
Impact of increase in retirement benefit obligations due to actuarial loss
The decrease in the retirement benefit obligation has given rise to a decrease 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 future
taxable profits is probable. The Group has unrecognised tax losses of €14.8 million (2008: €11.1 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.
112 Glanbia plc 2009 Annual Report Financial statements
28. Retirement benefit obligations
Pension benefits
The Group operates a number of defined benefit and defined contribution schemes which provide retirement and death benefits for
the majority of employees. The schemes are funded through separate Trustee controlled funds.
The contributions paid to the defined benefit schemes are in accordance with the advice of professionally qualified actuaries. The latest
actuarial valuation reports for these schemes, which are not available for public inspection, are dated between 1 October 2006 and 1
January 2009. The contributions paid to the scheme in 2009 are in accordance with the contribution rates recommended in the actuarial
valuation reports.
The amounts recognised in the statement of financial position are determined as follows:
Present value of funded obligations
Fair value of plan assets
Liability in the Group statement of financial position
The amounts recognised in the Group income statement are as follows:
Service costs – current
Interest costs
Expected return on plan assets
Total expense pre curtailment
Exceptional item – curtailment gains and negative past service cost (note 7 and note 8)
Total gain/(loss)
Defined contribution
2009
€'000
2008
€'000
(435,010)
349,245
(465,909)
301,499
(85,765)
(164,410)
2009
€'000
(5,515)
(23,635)
16,383
(12,767)
100,098
2008
€'000
(7,594)
(23,147)
22,828
(7,913)
376
87,331
(7,537)
(2,146)
(1,719)
The actual return on plan assets was a profit of €28.7 million (2008: €81.4 million loss).
The movement in the liability recognised in the Group statement of financial position over the year is as follows:
At the beginning of the year
Exchange differences
Movements relating to disposed operations
Total expense pre curtailment gains and negative past service costs
Curtailment gains and negative past service costs
Actuarial loss - defined benefit schemes
Contributions paid by employer
At the end of the year
2009
€'000
2008
€'000
(164,410)
(114,248)
(1,821)
(1,280)
(12,767)
100,098
(31,215)
25,630
6,101
(500)
(7,913)
376
(68,246)
20,020
(85,765)
(164,410)
Glanbia plc 2009 Annual Report Financial statements
113
The movement in obligations during the year is as follows:
At the beginning of the year
Exchange differences
Movements relating to disposed operations
Current service costs
Interest costs
Actuarial gains/(losses)
– Experience gains/(losses)
– Change in assumptions
Contributions by plan participants
Curtailment gains and negative past service costs
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 gain/(loss)
Contributions by plan participants
Contributions by employer
Benefits paid
At the end of the year
The principal actuarial assumptions used were as follows:
2009
€'000
2008
€'000
(465,909)
(496,769)
(4,800)
(4,131)
(5,515)
(23,635)
5,366
(48,895)
(3,796)
100,098
16,207
17,833
(4,208)
(7,594)
(23,147)
(3,175)
39,158
(4,163)
376
15,780
(435,010)
(465,909)
2009
€'000
301,499
2,979
2,851
16,383
12,314
3,796
25,630
(16,207)
2008
€'000
382,521
(11,732)
3,708
22,828
(104,229)
4,163
20,020
(15,780)
349,245
301,499
Discount rate
Expected return on plan assets
– Equities
– Corporate bonds
– Government bonds and gilts
– Cash
– Property
– Other assets
Inflation rate
Future salary increases
Future pension increases
Cumulative actuarial losses:
Actuarial loss for the year
Cumulative actuarial losses
2009
IRL
2009
UK
2008
IRL
2008
UK
5.65%
5.80%
5.90%
6.60%
7.75%
5.80%
4.45%
2.50%
6.50%
7.75%
2.25%
2.25%–3.25%
8.25%
5.80%
4.50%
4.10%
8.00%
n/a
3.45%
4.20%
8.25%
4.25%
4.25%
3.25%
7.25%
7.25%
2.50%
3.50%
0%–3.50%
3.25% 1.50%–3.50%
8.70%
6.70%
3.90%
3.50%
7.80%
7.80%
3.10%
3.85%
3.00%
2009
€'000
2008
€'000
31,215
68,246
155,206
123,991
114 Glanbia plc 2009 Annual Report Financial statements
Plan assets are comprised as follows:
Equity
Corporate bonds
Government bonds and gilts
Property
Cash
2009
€'000
177,273
34,522
86,426
20,638
30,386
2009
%
50
10
25
6
9
2008
€'000
125,893
11,112
84,195
40,392
39,907
2008
%
42
4
28
13
13
349,245
100
301,499
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 at the reporting date. Expected
returns on equity and property reflect long-term real rates of return experienced in the respective markets.
Following a detailed review of the Group’s schedule of contributions during the year, contributions to post-employment benefit plans
are expected to be €20.0 million in 2010.
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
2009
Irish
mortality
rates
2009
UK
mortality
rates
2008
Irish
mortality
rates
2008
UK
mortality
rates
21.5
24.2
24.8
27.4
20.0
22.9
24.0
26.8
The mortality assumptions imply the following life expectancies in years of an active member, aged 65, retiring now:
Male
Female
2009
Irish
mortality
rates
2009
UK
mortality
rates
2008
Irish
mortality
rates
2008
UK
mortality
rates
19.2
21.9
23.0
25.8
18.9
21.8
22.9
25.8
Five year summary
At the end of the year
Fair value of plan assets
Present value of funded obligations
2009
€'000
2008
€'000
2007
€'000
2006
€'000
2005
€'000
349,245
(435,010)
301,499
(465,909)
382,521
(496,769)
376,585
(501,473)
338,829
(503,845)
Deficit
(85,765)
(164,410)
(114,248)
(124,888)
(165,016)
Experience adjustments on plan liabilities
5,366
(3,175)
(7,160)
(12,651)
(2,037)
Experience adjustments on plan assets
12,314
(104,229)
(32,542)
11,575
28,383
Glanbia plc 2009 Annual Report Financial statements
115
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.
2009
Assumption
Discount rate
Price inflation
Mortality
2008
Assumption
Discount rate
Price inflation
Mortality
Change in assumption
Impact on Irish plan liabilities
Impact on UK plan liabilities
Increase/decrease 0.25%
Increase/decrease by 3.8%
Decrease/increase by 4.7%
Increase/decrease 0.25%
Increase/decrease by 1.4%
Decrease/increase by 3.1%
Increase/decrease by one year
Increase/decrease by 3.8%
Decrease/increase by 2.1%
Change in assumption
Impact on Irish plan liabilities
Impact on UK plan liabilities
Increase/decrease 0.25%
Increase/decrease by 4.3%
Decrease/increase by 4.7%
Increase/decrease 0.25%
Increase/decrease by 2.4%
Decrease/increase by 3.0%
Increase/decrease by one year
Increase/decrease by 3.7%
Decrease/increase by 2.1%
29. Provisions for other liabilities and charges
At 3 January 2009
Provided in the year (note 7)
Utilised in the year
Exchange differences
Unwinding of discounts
At 2 January 2010
Non-current
Current
Restructuring
€'000
UK pension
€'000
note (a)
note (b)
Other
€'000
note (c)
Total
€'000
19,437
1,334
7,617
28,388
15,055
(14,136)
–
–
21,088
(2,501)
165
–
1,435
(1,480)
242
(812)
37,578
(18,117)
407
(812)
20,356
20,086
7,002
47,444
–
20,356
17,309
2,777
2,824
4,178
20,133
27,311
20,356
20,086
7,002
47,444
(a) The restructuring provision relates primarily to the rationalisation programme Glanbia is currently undertaking. The provision
which relates mainly to redundancy is expected to be fully utilised during 2010.
(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 over the next 34 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 €4.2 million of this provision will be
utilised during 2010, with the balance being utilised over a further five year period. Due to the nature of these items, there is some
uncertainty around the amount and timing of payments.
30. Capital grants
At 3 January 2009
Receivable for the year
Exchange differences
Released to income statement
At 2 January 2010
2009
€'000
12,694
7,114
11
(1,237)
2008
€'000
3,535
9,802
(43)
(600)
18,582
12,694
116 Glanbia plc 2009 Annual Report Financial statements
31. Trade and other payables
Trade payables
Amounts due to Joint Ventures & Associates (note 37)
Amounts due to other related parties (note 37)
Social security costs
Accrued expenses
Other payables
2009
Company
€'000
14
–
–
–
2,767
–
2009
Group
€'000
113,161
31,095
360
3,153
116,273
1,870
2008
Company
€'000
–
–
–
–
2,283
–
2008
Group
€'000
116,132
39,723
1,148
3,576
188,965
1,908
2,781
265,912
2,283
351,452
The carrying value of payables is a reasonable approximation of fair value.
32. Derivative financial instruments
Interest rate swaps – cash flow hedges
Interest rate swaps – fair value hedges
Forward foreign exchange contracts – cash flow hedges
Commodity futures – cash flow hedges
Commodity futures – fair value hedges
2009
Assets
€'000
–
5,848
2,085
1,933
353
2009
Liabilities
€'000
(11,057)
(1,606)
(3,041)
(189)
(353)
2008
Assets
€'000
–
4,156
2,400
236
6,340
2008
Liabilities
€'000
(14,957)
(1,657)
(2,459)
(650)
(6,340)
Total
10,219
(16,246)
13,132
(26,063)
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
–
2,718
–
(5,631)
–
–
–
2,501
253
(8,388)
(607)
(253)
2,718
(5,631)
2,754
(9,248)
7,501
(10,615)
10,378
(16,815)
Interest rate swaps
The notional principal amounts of the outstanding interest rate swap contracts, qualifying as cash flow hedges at 2 January 2010 were
€236.2 million (2008: €317.6 million).
The notional principal amounts of the outstanding interest rate swap contracts, qualifying as fair value hedges at 2 January 2010 were
€265.1 million (2008: €265.1 million).
At 2 January 2010, the fixed interest rates vary from 3.665% to 4.94% (2008: 3.665% to 4.94%) and the main floating rates are set in
advance by reference to inter-bank interest rates (1.153% EURIBOR, 0.45575% $LIBOR).
Gains and losses recognised in the fair value reserve in equity on interest rate swap contracts at 2 January 2010 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 2 January 2010 are €225.9 million (2008: €78.3 million).
Gains and losses recognised in the fair value reserve in equity on foreign exchange contracts at 2 January 2010 will be released to the
income statement at various dates within one year from the reporting date.
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 2 January 2010 were €6.4 million and €36.8 million respectively (2008: €5.6 million and €28.8 million). Gains and
losses recognised in the fair value reserve in other comprehensive income on these futures as at 2 January 2010 will be released to the
income statement at various dates within one year from the reporting date.
Glanbia plc 2009 Annual Report Financial statements
117
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 statement of
financial position to reflect fair value of the financial guarantee contracts issued in its name.
33. 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 2 January 2010 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.
The Group recognises a defined benefit liability and incurs administration and certain other costs in relation to it’s UK pension schemes
for businesses disposed of in prior years, as outlined in note 28 and note 29. In addition, the Company has guaranteed the payment of
a proportion of employer contributions in respect of these UK pension schemes. The Company considers these guarantees to be
insurance contracts and accounts for them as such. The Company treats the guarantee contract as a contingent liability until such time
as it becomes probable that the Company will be required to make a payment under the guarantee.
Group
Bank guarantees amounting to €10.5 million (2008: €4.5 million) are outstanding as at 2 January 2010, mainly in respect of payment of
EU subsidies. The Group does not expect any material loss to arise from these guarantees.
34. Commitments
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised in the financial statements is as follows:
Property, plant and equipment
Capital commitments not contracted for at the reporting date amounted to €44.4 million (2008: €40.8 million).
2009
€'000
2008
€'000
2,260
20,050
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
2009
€'000
6,750
18,232
12,951
2008
€'000
7,736
20,255
5,390
37,933
33,381
118 Glanbia plc 2009 Annual Report Financial statements
35. Cash generated from operations
2009
Company
€'000
2009
Group
€'000
2008
Company
€'000
2008
Group
€'000
Profit before taxation
43,341
143,032
36,204
100,005
Development costs capitalised
Impairment charge
Non-cash exceptional (gain)/loss (note 7)
Share of results of Joint Ventures & Associates
Depreciation
Amortisation
Cost of share options
Difference between pension charge and cash contributions
Gain on disposal of property, plant and equipment
Profit on disposal of investments
Interest income
Interest expense
Amortisation of government grants received
–
–
–
–
–
–
167
–
–
(12,891)
–
–
–
(2,639)
1,078
(45,675)
(10,225)
28,735
13,858
187
(12,863)
(716)
–
(5,542)
29,576
(1,237)
–
–
–
–
–
–
–
–
–
–
–
–
–
(3,252)
620
16,914
(6,359)
25,789
8,357
827
(12,483)
(5,319)
–
(5,590)
26,695
(600)
Cash generated from operations before changes in working capital
30,617
137,569
36,204
145,604
Change in net working capital:
– Decrease/(increase) in inventory
– (Increase)/decrease in short term receivables
– Increase/(decrease) in short term liabilities
– (Decrease)/increase in provisions
–
(7,991)
498
–
71,568
(10,504)
(78,077)
(15,846)
–
(32,266)
749
–
(20,888)
27,088
(1,481)
(3,377)
Cash generated from operations
23,124
104,710
4,687
146,946
36. Business combinations
In August 2008, Glanbia plc acquired the US based sports nutritional business, Optimum Nutrition, Inc. (Optimum). Optimum
manufactures, markets and retails whey based, premium nutritional ingredients for the US and global sports nutrition markets.
A final adjustment to consideration payable on the Optimum acquisition was made during the year, resulting in an adjustment to
goodwill of €0.2 million.
Glanbia plc 2009 Annual Report Financial statements
119
37. 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
2009
Company
€'000
2009
Group
€'000
2008
Company
€'000
–
–
–
–
–
–
–
11,241
5,497
52,613
659
58,769
880
18
4,722
–
–
–
–
–
–
–
–
17,651
2008
Group
€'000
5,875
69,484
829
76,188
212
22
6,429
–
11,241
5,620
17,651
6,663
Sales to related parties were carried out under normal commercial terms and conditions.
(b) Purchases of goods and services
Purchases of goods:
– Associates
– Joint ventures
– Key management*
Purchases of services:
– The Society
– Associates
– Joint ventures
– Subsidiaries
2009
Company
€'000
2009
Group
€'000
2008
Company
€'000
–
–
–
–
–
–
–
1,996
10,431
3,339
1,737
15,507
290
1,660
307,282
–
–
–
–
–
–
–
–
2,139
2008
Group
€'000
10,468
5,467
2,646
18,581
–
2,470
424,680
–
1,996
309,232
2,139
427,150
Purchases from related parties were carried out under normal commercial terms and conditions.
(c) Key management compensation1
Salaries and other short-term employee benefits
Post-employment benefits
Share based payments
2009
Company
€'000
–
–
–
–
2009
Group
€'000
2,041
376
114
2,531
2008
Company
€'000
–
–
–
–
2008
Group
€'000
3,817
624
645
5,086
1 Key management includes the Board of Directors and the Glanbia Executive Committee.
120 Glanbia plc 2009 Annual Report Financial statements
(d) Year-end balances arising from sales/purchases of goods/services
Receivables from related parties:
– The Society
– 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
2009
Company
€'000
2009
Group
€'000
2008
Company
€'000
–
–
–
–
79,346
502
509
1,848
134
–
–
–
–
–
51,617
2008
Group
€'000
–
447
1,983
146
–
79,346
2,993
51,617
2,576
–
–
–
–
–
2009
Company
€'000
–
–
–
360
2,822
28,273
–
31,455
2009
Group
€'000
28,313
5,405
33,718
–
–
–
–
–
2008
Company
€'000
–
–
–
1,148
1,338
38,385
3
40,874
2008
Group
€'000
7,768
4,999
12,767
*
Purchases, sales and related year-end balances to key management refer to trading balances with Directors who are engaged
in farming activities.
During 2009, Glanbia plc approved an €8.0 million interest free loan facility for milk suppliers based on the April, May and June
manufacturing milk supply. This fund was available on a voluntary basis and must be repaid over the following year. Approximately
€3.4 million of the facility was advanced to milk suppliers and is included in other receivables at year end.
38. Events after the reporting period
On 10 March 2010, Glanbia plc announced that Glanbia Co-operative Society Limited ("the Society"), its 54.6% shareholder, has
expressed an interest in acquiring Glanbia's Dairy Ireland operations (incorporating Dairy Ingredients, Consumer Products and
Agribusiness), Glanbia's Irish property business, Group Business Services and related Irish Joint Ventures & Associates. Any such
transaction would be likely to involve a significant reduction in the Society's ownership in the Group and would require the approval of
both the Society's members and Glanbia plc shareholders. While discussions are progressing well, there is no guarantee that they will
result in a transaction being concluded.
Glanbia plc 2009 Annual Report Financial statements
121
39. Principal subsidiary and associated undertakings
(a) Subsidiaries
Incorporated and operating in
Principal place of business
Principal activities
Group Interest %
Ireland
Glanbia Foods Society Limited
Ballyragget, Co. Kilkenny and
Citywest, Dublin 24
Dairying, liquid milk, consumer food
products and general trading
Glanbia Consumer Foods Limited
Inch, Co. Wexford and Kilkenny
Fresh dairy products and soups
Glanbia Ingredients (Ballyragget)
Limited
Ballyragget, Co. Kilkenny
Milk products
Glanbia Ingredients (Virginia) Limited Virginia, Co. Cavan
Milk products
Glanbia Nutritionals (Ireland) Limited Kilkenny
Glanbia Nutritionals (Blending)
Limited
Kilkenny
ON Optimum Nutrition Limited
Kilkenny
Glanbia Nutritionals (Europe) Limited Kilkenny
Nutritional products
Nutritional products
Nutritional products
Nutritional products
Glanbia Nutritionals (Research)
Limited
Glanbia Feeds Limited
Kilkenny
Research and development
Enniscorthy, Co. Wexford and
Portlaoise, Co. Laois
Manufacture of animal feed products
Glanbia Estates Limited
Avonmore Proteins Limited
Glanbia Financial Services
Kilkenny
Kilkenny
Kilkenny
Glanbia Investments (Ireland) Limited Kilkenny
Glassonby
Waterford Foods plc
Kilkenny
Kilkenny
Property and land dealing
Financing
Financing
Investment company
Holding company
Holding company
Grassland Fertilizers (Kilkenny) Limited Palmerstown, Co. Kilkenny
Fertilizers
D. Walsh & Sons Limited
Palmerstown, Co. Kilkenny
Grain and fertilizers
Eilish Oils Limited
Newtown Mount Kennedy,
Co. Wicklow
Biofuels
Britain and Northern Ireland
Glanbia (UK) Limited
Tamworth, Staffordshire
Holding company
Glanbia Holdings Limited
Tamworth, Staffordshire
Holding company
Glanbia Investments (UK) Limited
Tamworth, Staffordshire
Holding company
Glanbia Nutritionals (UK) Limited
Middlesborough
Sports nutrition products
Glanbia Foods (NI) Limited
Portadown, Co. Armagh
Consumer food products
Glanbia Feedstuffs Limited
Tamworth, Staffordshire
Supply of animal feeds
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
73.00
60.00
80.00
100.00
100.00
100.00
100.00
100.00
100.00
122 Glanbia plc 2009 Annual Report Financial statements
Incorporated and operating in
Principal place of business
Principal activities
Group Interest %
United States
Glanbia, Inc.
Delaware
Holding company
Glanbia Foods, Inc.
Twin Falls, Idaho
Milk products
Optimum Nutrition, Inc.
Illinois, South Carolina, Florida
Sports nutrition products
Glanbia Nutritionals (NA), Inc.
San Diego, California
Nutrient delivery systems
Glanbia Nutritionals, Inc.
Monroe, Wisconsin
Nutritional distribution
100.00
100.00
100.00
100.00
100.00
Canada
Glanbia Nutritionals (Canada), Inc.
Angusville, Manitoba
Nutrient delivery systems
100.00
Germany
Glanbia Nutritionals Deutschland GmbH Orsingen-Nensingen, Germany Nutrient delivery systems
100.00
Netherlands
Glanbia Foods B.V.
Moergestel, Netherlands
Holding company
100.00
Mexico
Zymalact Mexico S.A. de C.V.
Lerma, Mexico City
Dairy blending and processed cheese
100.00
Uruguay
Glanbia (Uruguay Exports) S.A.
Uruguay
Nutritional distribution
100.00
China
Glanbia Nutritionals (Suzhou) Company
Limited
Suzhou, China
Nutrient delivery systems
100.00
Glanbia plc 2009 Annual Report Financial statements
123
(b) Associates and joint ventures
Incorporated in
Ireland
Date to which
results included
Principal place of business
Principal activities
Group interest %
Co-operative Animal Health Limited * 31–Dec–08
Tullow, Co. Carlow
Agri chemicals
South Eastern Cattle Breeders
Society Limited *
31–Dec–08
Thurles, Co. Tipperary
Cattle breeding
Malting Company of Ireland Limited * 31–Oct–09
Togher, Cork
South East Port Services Limited *
02–Jan–10
Kilkenny
Greenfield Dairy Partners Limited *
31–Dec–09
Dunbell, Co. Kilkenny
Malting
Port services
Dairy production
and development
Corman Miloko Ireland Limited **
02–Jan–10
Carrick-on-Suir, Co. Tipperary
Dairy spreads
Britain and Northern Ireland
Glanbia Cheese Limited **
02–Jan–10
Magheralin and Llangefni
Cheese products
Milk Ventures (UK) Limited **
30–Nov–09
Stockport, England
Holding company
Nigeria
Nutricima Limited *
30–Nov–09
Nigeria
Evaporated and
powdered milk
50.00
57.00
33.33
49.00
33.33
45.00
51.00
50.00
50.00
United States
Southwest Cheese Company, LLC **
02–Jan–10
Clovis, New Mexico
Milk products
50.00
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
124 Glanbia plc 2009 Annual Report Other information
Shareholders’ information
Stock exchange listings
The Company’s shares are listed on the main market of the Irish
Stock Exchange as well as having a premium listing on the main
market of the London Stock Exchange.
Managing your shareholding
Computershare Investor Services (Ireland) Limited
(“Computershare”) maintains the Company’s register of
members. Should a shareholder have any queries in respect
of their shareholding, they should contact Computershare
directly using the contact details provided below:
Computershare Investor Services (Ireland) Limited, Heron House,
Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland.
Contact details: telephone number 01 2475349 (within Ireland),
00353 1 247 5349 (outside Ireland), or by logging on to
www.investorcentre.com/ie/contactus.
Share price data
Share price as at 2 January 2010
Market capitalisation
Share price movements during the year:
– high
– low
2009
2008
€
2.89
848m
3.00
1.84
€
2.07
608m
5.31
1.80
The current share price of Glanbia plc ordinary shares can be
accessed at http://www.glanbia.ie/prices-delayed
Geographic analysis of shareholdings as at 2 January 2010
Ireland
United Kingdom
United States
Other
Number of
shares held
250,977,645
41,941,624
173,606
462,809
293,555,684
Holdings
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
Over – 100,000
Number of
shareholders
Number of
shares held
12,278
5,179,134
9,342
1,698
888
98
21,787,619
12,075,230
19,358,337
235,155,364
24,304 293,555,684
% of total
85.49
14.29
0.06
0.16
100
% of total
1.76
7.42
4.11
6.59
80.12
100
Share capital
The authorised share capital of the Company at 2 January 2010
was 306,000,000 ordinary shares at €0.06 each. The issued share
capital at 2 January 2010 was 293,555,684 ordinary shares of
€0.06 each.
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 at 9 March 2010 in accordance with the requirements of
Rule 7.1 of the Transparency Rules issued by the Financial
Regulator under section 22 of the Investment Funds, Companies
and Miscellaneous Provisions Act, 2006.
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 2 January 2010, 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 shares.
Dividend payments direct to your bank account
An interim dividend of 2.89 cents per share was paid in respect
of ordinary shares on 30 September 2009.
Subject to shareholders approval, a final dividend of 3.95
cents per share will be paid in respect of ordinary shares on
2 June 2010 to shareholders on the register of members on
7 May 2010.
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 Registrars,
Computershare. DWT applies to dividends paid by way of cash
and is deducted at the standard rate of income tax (currently
20%). Non-resident shareholders and certain Irish companies,
trusts, pension schemes, investment undertakings and charities
may be entitled to claim exemption from DWT and are thereby
required to send the relevant form to Computershare. Copies of
this form may be obtained from Computershare.
In order to continue to improve the security of dividend payments
to shareholders and reduce costs, the Company proposes,
subject to an amendment of the Company's Articles of
Association, that after payment of the final dividend in May 2011,
it will pay future dividend payments on its ordinary shares only by
credit transfer into a nominated bank or building society account.
Glanbia plc 2009 Annual Report Other information
125
Shareholders will continue to receive tax vouchers in respect of
dividend payments. The Company takes data security issues very
seriously. Required bank account details supplied to the Company
and its Registrars will be used only for dividend distribution and
the information will not be used for any purpose or supplied to
any third party.
Conditions for participating in a meeting
Every shareholder, irrespective of how many Glanbia shares they
hold has the right to attend, speak, ask questions and vote at the
AGM. Completion of proxy form will not affect a shareholder’s
right to attend, speak, ask questions and/or vote at the meeting
in person.
Shareholders will continue to receive tax vouchers in respect of
dividend payments.
www.glanbia.com
Shareholders may visit www.glanbia.ie/shareholder-centre for up-
to-date investor information. An electronic copy of current and
past annual and half-yearly reports can be downloaded from the
website. Current and historic share prices, news, updates and
presentations may also be obtained. Shareholders may also
register to receive future shareholder communications
electronically.
Electronic communications
The changes brought about by the Transparency (Directive
2004/109/EC) Regulations 2007 recognises the growing
importance of electronic communications. The Group therefore
provides documentation and communications to all shareholders
via our website unless a shareholder has specifically elected to
receive a hard copy.
Using electronic communications enables fast receipt of
documents, helps the environment by significantly reducing the
amount of paper used to communicate with shareholders and
reduces associated printing, mailing and distribution costs.
Shareholders can also vote online for the next Annual General
Meeting (“AGM”). This is a quick and easy option, using the proxy
voting service provided by Computershare. Shareholders may use
this facility by visiting www.computershare.com/ie/voting/glanbia.
Announcement of final results for 2009
10 March 2010
Ex-dividend date
Record date for dividend
Date for receipt of proxy forms
Record date for AGM
AGM
Dividend payment date
Financial calendar
AGM
The AGM will be held on 25 May 2010.
5 May 2010
7 May 2010
23 May 2010
23 May 2010
25 May 2010
2 June 2010
The Notice of Meeting, together with details of the business to be
conducted at the Meeting is available on www.glanbia.ie/agm
The voting results for the 2010 AGM, including proxy votes and
votes withheld will be available on our website shortly after the
meeting at the following address: www.glanbia.ie/agm
The quorum for a general meeting of the Company is constituted
by three persons entitled to vote upon the business of the
meeting, each being a shareholder or a proxy or corporate
representative for a shareholder.
The right to participate in the AGM is subject to the registration of
the shares prior to the date of the meeting (the record date). For
the 2010 AGM the record date is 5:00 pm on 23 May 2010 (or in
the case of an adjournment 5:00 pm, on the day prior to the day
before the time fixed for the adjourned meeting).
Appointment of proxy
Where a shareholder is unable to attend the AGM in person,
a proxy (or proxies) may be appointed to attend, speak, ask
questions and vote on their behalf. For this purpose a form of
proxy is posted to all shareholders. Copies of these documents
may be requested by telephoning the Company’s Registrars on
01 2475349 (within Ireland), 00353 1 247 5349 (outside Ireland),
or by logging on to www.investorcentre.com/ie/contactus or
by writing to the Group Secretary at Glanbia plc, Glanbia
House, Kilkenny.
Alternatively, a shareholder may appoint a proxy electronically,
by visiting the website of the Company’s Registrars at
www.computershare.com/ie/voting/glanbia. Shareholders will
need their shareholder identification number and PIN number,
which can be found on the top of the form of proxy.
CREST members who wish to appoint a proxy or proxies through
the CREST electronic proxy appointment service may do so for the
Meeting and any adjournment(s) thereof by using the procedures
described in the CREST manual.
How to exercise shareholders rights
Shareholders have several ways to exercise their right to vote:
(cid:159) by attending the AGM in person;
(cid:159) by appointing the Chairman or another person as a proxy to
vote on their behalf; or
(cid:159) by appointing a proxy via the CREST system.
The passing of resolutions at a meeting of the Company, other
than special resolutions, requires a simple majority. To be passed,
a special resolution requires at least 75% of the votes cast to be in
favour of the resolution.
Tabling agenda items
A shareholder, or a group of shareholders acting together, who
hold at least 3% of the issued share capital of the Company, has the
right to put an item on the agenda of the AGM. In order to exercise
this right, written details of the item to be included on the 2010
AGM agenda together with a written explanation why the item is to
be included on the agenda and evidence of the shareholding must
be received by the Group Secretary at Glanbia plc, Glanbia House,
Kilkenny, Ireland or by email to ir@glanbia.ie /info@glanbia.ie no
later than 14 April 2010 (i.e. 42 days before the AGM meeting).
An item cannot be included on the AGM agenda unless it is
accompanied by the written explanation and received at either of
these addresses by this deadline.
126 Glanbia plc 2009 Annual Report Other information
Tabling draft resolutions
A shareholder, or a group of shareholders acting together, who
hold at least 3% of the issued share capital of the Company, has
the right to table a draft resolution for inclusion on the agenda of
the 2010 AGM subject to any contrary provision in company law
In order to exercise this right, the text of the draft resolution
and evidence of shareholding must be received by no later than
14 April 2010 (i.e. 42 days before the AGM meeting) by post to
the Company Secretary at Glanbia plc, Glanbia House, Kilkenny,
Ireland or by email to ir@glanbia.ie /info@glanbia.ie. A resolution
cannot be included on the 2010 AGM agenda unless it is received
at either of these addresses by this deadline. Furthermore,
shareholders are reminded that there are provisions in company
law which impose other conditions on the right of shareholders to
propose resolutions at the general meeting of a company.
How to ask a question before or at the meeting
The AGM is an opportunity for shareholders to put a question to
the Chairman during the question and answer session. Before the
2010 AGM, a shareholder may also submit a question in writing by
sending a letter, and evidence of your shareholding at least four
business days before the 2010 AGM (i.e. 19 May 2010) to the
Group Secretary, Glanbia plc, Glanbia House, Kilkenny, Ireland or
by email to ir@glanbia.ie /info@glanbia.ie.
Additional shareholder information
Dividend rights
The Company may, by ordinary resolution declare dividends in
accordance with the respective rights of shareholders, 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.
Distribution on winding up
If the Company shall be wound up and the assets available for
distribution among shareholders 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 shareholders 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. Further if,
in a winding up, the assets available for distribution among
shareholders 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 shareholders 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.
Advisors:
Auditors
PricewaterhouseCoopers, Ballycar House, Newtown,
Waterford, Ireland.
Principal bankers
ABN AMRO Bank N.V., Allied Irish Banks, plc., 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.
Solicitors
Arthur Cox, Earlsfort Centre, Earlsfort Terrace, Dublin 2, Ireland.
Pinsent Masons, 3 Colmore Circus, Birmingham B4 6BH, UK.
Stockbrokers
Davy Stockbrokers, 49 Dawson Street, Dublin 2, Ireland (joint
broker).
RBS Hoare Govett Limited, 250 Bishopsgate, London EC2M 4AA
(joint broker).
Five year trends
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
Net exceptional items (post tax)
Basic earnings per share
Adjusted earnings per share
Dividend per share in respect of the full year
Glanbia plc 2009 Annual Report Other information
127
2009
2008
2007
2006
2005
€1,830.3m
€2,232.2m
€2,206.6m
€1,853.4m
€1,830.0m
€111.2m
6.1%
(€24.0m)
€10.2m
€97.4m
(€19.1m)
€78.3m
€34.9m
38.46c
30.68c
6.84c
€134.1m
6.0%
(€21.1m)
€7.3m
€120.3m
(€21.5m)
€98.8m
(€19.4m)
26.76c
35.86c
6.51c
€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
* Share of results in Joint Ventures & Associates is an after interest and tax amount.
Adjusted earnings per share
2009
2008
2007
2006
2005
Profit attributable to owners of the Parent
Amortisation of intangible assets (net of related tax)
Net exceptional items
112,676
12,126
(34,905)
78,399
7,312
19,358
59,833
5,964
22,846
65,964
3,896
134
57,396
2,899
3,410
Adjusted net income
89,897
105,069
88,643
69,994
63,705
Weighted average number of ordinary shares in issues 292,985,630
293,018,610
293,012,540
292,958,667
291,469,902
Adjusted earnings per share (cents per share)
30.68
35.86
30.25
23.89
21.86
128 Glanbia plc 2009 Annual Report Other information
Index
A
At a glance
Available for sale financial assets
B
Board of Directors
Borrowings
Business combinations
C
Capital grants
Cash and cash equivalents
Cash generated from operations
Chairman’s statement
Commitments
Company statement of changes in equity
Company statement of comprehensive income
Company statement of cash flows
Company statement of financial position
Contents
Contingent liabilities
Critical accounting estimates and judgements
D
Deferred income taxes
Derivative financial instruments
Directors’ remuneration
Dividends
E
Earnings per share
Employee benefit expense
Exceptional items
Events after the reporting date
F
Finance income and costs
Financial results
Finance review
Financial risk management
Financial statements
Five year trends
G
General information
Group income statement
Group Managing Director’s review
Group statement of cash flows
Group statement of changes in equity
Group statement of comprehensive income
Group statement of financial position
4
98
34
108
118
115
101
118
6
117
68
69
69
67
1
117
81
110
116
89
92
91
89
88
120
89
3
22
77
58
127
70
62
8
66
64
63
65
I
Income taxes
Independent auditors’ report
Intangible assets
International growth strategy
Introduction
Inventories
Investments in associates
Investments in joint ventures
M
Minority interests
N
Notes to the financial statements
O
Operating expenses
Operations review – Dairy Ireland
Operations review – Joint Ventures & Associates
Operations review – US Cheese & Global Nutritionals
Other statutory information
Our people
Our responsibilities
P
Principal subsidiary and associated undertakings
Property, plant and equipment
Provisions for other liabilities and charges
R
Reconciliation of changes in equity
Related party transactions
Retained earnings
Retirement benefit obligations
Risk management
S
Segment information
Share capital and share premium
Shareholders’ information
Statement on corporate governance
Statement on Directors’ remuneration
Statement of Directors’ responsibilities
Summary of significant accounting policies
T
Trade and other receivables
Trade and other payables
90
60
93
10
2
101
95
97
107
70
87
16
18
14
54
31
30
121
92
115
102
119
107
112
28
82
104
124
36
46
55
70
99
116
l
G
a
n
b
a
p
l
c
i
2
0
0
9
A
n
n
u
a
l
R
e
p
o
r
t
Glanbia plc, Glanbia House,
Kilkenny, Ireland.
Tel +353 56 777 2200
Fax +353 56 777 2222
www.glanbia.com
Glanbia plc
2009 Annual Report