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Glanbia plc
Annual Report
20
10
Glanbia plc is an international nutritional
solutions and cheese group, headquartered
in Ireland. Glanbia is listed on the Irish and
London Stock Exchanges (Symbol: GLB). The
Group has four segments; US Cheese & Global
Nutritionals, Dairy Ireland, Joint Ventures
& Associates and Other Business. Including
Joint Ventures & Associates, Glanbia has
over 4,300 employees worldwide and has
manufacturing and processing facilities in
seven countries and sales/technical support
locations in 14 countries.
Get more online
For more information on the Group
please visit our corporate website:
www.glanbia.com
This report is also available online:
www.glanbia.com/annualreport2010
3
Overview
3 How we did in 2010
4 Our performance
5 Key Performance Indicators
6 Our global footprint
9 How we are structured
12
Group performance
Group Managing Director’s review
12 Chairman’s statement
16
20 Our business models
22 Group Finance Director’s review
27 Risk management
31 Our responsibilities
42
Governance
42 Chairman’s introduction to corporate governance
44 Board of Directors and senior management
48 Applying the principles of the Combined Code
54 Other statutory information
57 Committee reports
– Audit Committee report
– Nomination Committee report
– Remuneration Committee report
71 Statement of Director’s responsibilities
Further information
This symbol is used throughout the
report. It is used to cross reference related
information elsewhere within the report.
Pages 3 to 71 make up the Directors’ Report in
accordance with the Companies Acts, 1963 to 2009
10
Our strategy
10 Our strategy
11 Our markets
36
Divisional performance
36 US Cheese & Global Nutritionals
38 Dairy Ireland
40 Joint Ventures & Associates
72
Financial statements
Independent auditors’ report
74
76 Group income statement
77 Group statement of comprehensive income
78 Group statement of changes in equity
79 Group statement of financial position
80 Group statement of cash flows
81 Company statement of financial position
82 Company statement of changes in equity
83 Company statement of comprehensive income and
statement of cash flows
84 Notes to the financial statements
Other information
139 Shareholders’ information
142 Five year trends
143 Index
Glanbia had an
excellent year in 2010.
We achieved strong
revenue and earnings
growth and our 2010
performance reflects the
strength and diversity of
our businesses.
3
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
HOW WE DID IN 2010
OVERVIEW
OUR PERFORMANCE
KEY PERFORMANCE INDICATORS
GLANBIA GLOBAL FOOTPRINT
HOW WE ARE STRUCTURED
How we did in 2010
Our strong performance in 2010 is mainly as a result of a return to profitability in Dairy
Ingredients Ireland after a first time loss in 2009 and a good performance by the Global
Nutritionals business which grew revenue well in excess of market growth rates.
Total Group* revenue
Strong top line revenue
growth was driven by good
volume growth in Global
Nutritionals and the positive
impact of higher US cheese
and global dairy markets
during the year.
21.4%
Adjusted earnings
per share
24.1%
2009
2010
€ billion
2.1
2.6
Adjusted earnings per share
was significantly ahead of 2009
and follows the strong positive
trends in growth in revenue
and EBITA.
2009
2010
30.68
38.07
cents per share
Total Group* EBITA
pre exceptional
21.6%
Dividend per share
A good performance by
Global Nutritionals, a return to
profitability in Dairy Ingredients
Ireland and the benefits of
significant cost rationalisation
in Dairy Ireland underpinned
the increase in EBITA.
2009
2010
€ million
142.4
173.2
The Board is recommending
a final dividend of 4.49 cents
per share. This brings the total
dividend for the year to 7.52
cents per share (2009: 6.84 cents
per share), an increase of 10%.
10%
2009
2010
cents per share
6.84
7.52
Total Group* EBITA
margin pre exceptional
EBITA margin sustained during
2010. This reflects margin
expansion in Dairy Ireland offset
by a margin reduction in US
Cheese & Global Nutritionals.
2009
2010
%
6.7
6.7
Free cash flow
The minimal movement in free
cash flow arose as the higher
EBITDA in 2010 was offset by
year on year investment in
working capital due to strong
volume growth in Global
Nutritionals and higher global
dairy and US cheese markets.
€0.6m
2009
2010
€ million
66.1
65.5
*
Total Group figures include share
of Joint Ventures & Associates
FOCUS DELIVERY MOMENTUM
4
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
HOW WE DID IN 2010
OVERVIEW
OUR PERFORMANCE
KEY PERFORMANCE INDICATORS
OUR GLOBAL FOOTPRINT
HOW WE ARE STRUCTURED
Our performance
The Group achieved a first class operational performance in 2010. Key achievements for the year
include the 40% expansion of Southwest Cheese in the USA and the major planned refurbishment
of the Twin Falls cheese plant in Idaho; both delivered on time and on budget. In addition, strategic
cost management programmes delivered targeted cost savings, process re-engineering and
productivity benefits.
Total Group revenue € billion
Group EBITA pre exceptional € million
US Cheese & Global Nutritionals
40%
Dairy Ireland
44%
Joint Ventures & Associates
16%
Total: €2.6 billion
US Cheese & Global Nutritionals
Dairy Ireland
US Cheese is one of the leading producers
of American-style cheddar cheese for
the US and export markets from its large
scale manufacturing facilities in Idaho.
Global Nutritionals operates from facilities
in the USA, Canada, EU and Asia and
incorporates the Group’s three nutritionals
businesses – Ingredient Technologies,
Customised Premix Solutions and
Performance Nutrition.
Dairy Ireland links the Group’s
relationship with its Irish farmer supplier
base. Agribusiness produces and
supplies inputs to farmers who produce
the key raw material for both Dairy
Ingredients Ireland and Consumer
Products. Dairy Ireland has well invested
facilities serving global and local markets.
US Cheese & Global Nutritionals
60%
Dairy Ireland
28%
Joint Ventures & Associates
12%
Total: €173.2 million
Joint Ventures & Associates
Glanbia 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.
€1 billion revenue
€104.5 million EBITA
10.2% EBITA margin
1,570 employees
€1.1 billion revenue
€47.9 million EBITA
4.2% EBITA margin
1,682 employees
€417 million revenue
€21.6 million EBITA
5.2% EBITA margin
1,002 employees
13 manufacturing/processing locations
8 manufacturing/processing locations
6 manufacturing/processing locations
2010 performance
and 2011 outlook
Business model
36
20
2010 performance
and 2011 outlook
Business model
38
21
2010 performance
40
FOCUS DELIVERY MOMENTUM
5
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
HOW WE DID IN 2010
OVERVIEW
OUR PERFORMANCE
KEY PERFORMANCE INDICATORS
OUR GLOBAL FOOTPRINT
HOW WE ARE STRUCTURED
Key Performance Indicators
We use a large number of performance indicators to measure financial and operational activity
across the Group. These are monitored on a daily, weekly or monthly basis as appropriate. Detailed
management reports for each division are reviewed monthly by the Board. We have six Key
Performance Indicators (KPIs) which we use to measure the financial health of the business over
the longer-term and to monitor progress in achieving our strategic priorities.
Total Group revenue
€ billion
Adjusted earnings per share
cents per share
2006
2007
2008
2009
2010
2.1
2.1
2.6
2.6
2.6
2006
2007
2008
2009
2010
23.89
30.25
35.86
30.68
38.07
Total Group EBITA
€ million
Free cash flow
€ million
95.5
128.6
24.3
2006
2007
50.5
2011 outlook
The Group is well positioned for 2011.
Our current expectation is that the
trading environment will be broadly
positive. Global dairy markets are
expected to remain firm, underpinned
by robust demand, particularly from
Asia, and demand-led growth in key
nutritional sectors. In January 2011
we acquired the Bio-Engineered
Supplements and Nutrition (BSN)
business, a leading US sports nutrition
business which is an excellent strategic
fit with our Performance Nutrition
business. For 2011, given our strong
market positions and
growing portfolio, we
are forecasting 11%
to 13% growth in
adjusted earnings per
share, on a constant
currency basis.
75.8
66.1
65.5
12.5
15.5
15.3
11.2
12.9
2006
2007
2008
2009
2010
159.5
2008
142.5
2009
173.2
2010
Total Group EBITA margin
%
ROCE
%
2006
2007
2008
2009
2010
4.5
5.0
2006
2007
2008
2009
2010
6.1
6.7
6.7
FOCUS DELIVERY MOMENTUM
6
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
HOW WE DID IN 2010
OVERVIEW
OUR PERFORMANCE
KEY PERFORMANCE INDICATORS
OUR GLOBAL FOOTPRINT
HOW WE ARE STRUCTURED
Our global footprint
We have a strong global presence in key food
markets and sectors around the world. The
Group has manufacturing operations in seven
countries, sales and technical support locations
in 14 countries and our products are sold to over
130 countries worldwide.
North America
Leading American-style cheddar cheese
business (including 50:50 joint venture)
Leading US sports nutrition business
Global supplier of whey protein isolates
Global supplier of micronutrient premixes and
solutions
Largest North American processor of speciality
flaxseed ingredients
US innovation centre and customer
collaboration centre
12 manufacturing/processing locations
6 sales and technical support locations
1 innovation and customer collaboration centre
120+ export/distribution markets
1,527 employees
South America
Key export markets and opportunity:
• Performance Nutrition products
• US Cheese products
• Dairy Ingredients from Ireland
• Speciality flaxseed ingredients
1 sales and technical support location
54 employees
Sales/technical support locations
Manufacturing & processing and
sales/technical support locations
Export/product distribution
locations
FOCUS DELIVERY MOMENTUM
7
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
HOW WE DID IN 2010
OVERVIEW
OUR PERFORMANCE
KEY PERFORMANCE INDICATORS
OUR GLOBAL FOOTPRINT
HOW WE ARE STRUCTURED
Ireland
Glanbia plc head office
Global Nutritionals main office
Group innovation centre
Largest dairy processor and cheese producer
Market leadership positions across the Irish
grocery market
Leading feed milling, grain processing and
farm inputs supplier
8 manufacturing/processing locations
3 sales and technical support locations
1 innovation centre
51 Agribusiness branches
50+ export markets
1,870 employees
Asia Pacific
Key export markets and growth opportunity:
• Performance Nutrition products
• US Cheese products
• Dairy Ingredients from Ireland
Premix manufacturing facility in Suzhou, China
1 manufacturing facility
5 sales and technical support locations
36 employees
Europe
Global supplier of micronutrient premixes
and solutions
Leading European pizza cheese manufacturer;
50:50 joint venture
4 manufacturing/processing locations
5 sales and technical support locations
30+ export/distribution markets
481 employees
Africa
Supplier of consumer dairy products; 50:50
joint venture in Nigeria
Export market for Dairy Ingredients Ireland
2 manufacturing/processing locations
1 sales and technical support location
345 employees
FOCUS DELIVERY MOMENTUM
8
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
HOW WE DID IN 2010
OVERVIEW
OUR PERFORMANCE
KEY PERFORMANCE INDICATORS
OUR GLOBAL FOOTPRINT
HOW WE ARE STRUCTURED
5.8 billion
litres of milk processed
9%
477,000
tonnes of cheese produced
8%
US Cheese & Global Nutritionals
US Cheese & Global Nutritionals
Dairy Ireland
Joint Ventures & Associates
Dairy Ireland
Joint Ventures & Associates
262,000
tonnes of dairy-based
ingredients manufactured
17%
US Cheese & Global Nutritionals
Dairy Ireland
Joint Ventures & Associates
Momentum
Global Nutritionals is the fastest
growing business unit in the
Group, driven in particular by
the momentum in Performance
Nutrition. This was established
in 2008 with the acquisition of
Optimum Nutrition in the USA
and today ON is a leading sports
nutrition brand in 20 countries.
Performance Nutrition: 2010
performance and 2011 outlook
37
FOCUS DELIVERY MOMENTUM
9
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
HOW WE DID IN 2010
OVERVIEW
OUR PERFORMANCE
KEY PERFORMANCE INDICATORS
OUR GLOBAL FOOTPRINT
HOW WE ARE STRUCTURED
How we are structured
Joint Ventures &
Associates
Glanbia has three principal
international joint ventures
Divisional performance
and outlook
40
Southwest Cheese
Southwest Cheese
operates one of the largest
natural American-style
cheddar cheese and high-
protein whey processing
facilities in the USA.
Glanbia Cheese
Glanbia Cheese is a
leading supplier of
mozzarella cheese for the
European pizza market.
Nutricima
Nutricima is developing
a portfolio of branded
milk powder-based
products for the
Nigerian market.
US Cheese &
Global Nutritionals
Business model
Divisional performance
and outlook
20
36
US Cheese
US Cheese is a leading
producer of American-
style cheddar cheese.
Ingredient Technologies
Ingredient Technologies
is a business-to-business
nutritional ingredients
solutions development and
marketing business.
Performance
Nutrition
Performance Nutrition is
a business-to-consumer
manufacturer and marketer
of performance nutrition and
health & wellness products.
Customised Premix
Solutions
Customised Premix Solutions
is a business-to-business
premix (vitamins and
minerals) solutions provider.
Dairy
Ireland
Business model
Divisional performance
and outlook
21
38
Dairy Ingredients
Dairy Ingredients is the
largest dairy business
in Ireland, processing
approximately 25% of the
Irish milk pool and 40% of
the Irish whey pool.
Consumer Products
Consumer Products is
one of the largest
branded food suppliers
in the Irish grocery sector.
Agribusiness
Agribusiness produces
and retails a large range
of farm inputs to the
Group’s Irish farmer
supplier base in Ireland.
FOCUS DELIVERY MOMENTUM
10
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
OUR STRATEGY
OUR STRATEGY
OUR MARKETS
Our strategy
In recent years we significantly restructured the Group and re-orientated our business strategy.
Our goals are to diversify earnings, improve operating margin and deliver earnings growth. On
this journey we built strong organisational capability in world-class manufacturing, science-based
innovation in product and solutions development and acquisitions delivery. We also established new
scale businesses with leading market positions in high growth sectors.
Vision
Key
performance
indicators
Strategic
priorities
2011
business
focus
To be the
leading
global
nutritional
solutions and
cheese group
• Revenue
• EBITA
• EBITA margin
• Adjusted earnings
per share
• Free cash flow
• Return on capital
employed
• Align to key
customers and
markets
• First class science-
based innovation
• Effective risk
and capital
management
• Operational
excellence and
strategic cost
management
• Successful
integration of BSN
acquisition
• Achieve organic
growth plans across
each business unit
• Deliver Group
results in line with
market expectations
• Continue to develop
our people and
organisational
capability
• Review of Group
financing facilities
BSN acquisition
On 19 January 2011, we
announced the acquisition of the
Bio-Engineered Supplements
and Nutrition (BSN) business.
For more information:
Chairman's Statement
12
or go online
www.glanbia.com/media
www.bsnonline.net
FOCUS DELIVERY MOMENTUM
11
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
OUR STRATEGY
OUR STRATEGY
OUR MARKETS
Our markets
Global dairy markets were positive for most of 2010. Fundamental to the relative stability in dairy
pricing was continued strong demand in Asia, particularly China and re-emerging demand from
Russia. For 2011, global dairy markets are forecast to remain firm, underpinned by robust demand
particularly from emerging markets and China.
2010 overview
US Cheese & Global Nutritionals
Dairy Ireland
In the first half of 2010 global
milk supply lagged growing
international demand, which was
driven by developing economies.
Supply increased somewhat in
the second half and dairy markets
absorbed the increase in milk
production with relatively limited
price fluctuations. A further
boost to dairy markets (and more
specifically to EU markets) was
the controlled management of
the release of intervention stocks
into the market, at prices closely
aligned to prevailing markets.
During the year dairy farm incomes
across the globe did recover from
the prior year as higher dairy
commodity prices were reflected
at the farm gate.
As the bulk of output of the Irish dairy
industry is exported, the key market
dynamic impacting the performance of
Dairy Ingredients Ireland is the global dairy
market, which also indirectly impacts the
performance of Agribusiness as a supplier
of key farm inputs to Irish farmers. Dairy
Ingredients Ireland benefited from the
improvement in global dairy markets in 2010
despite higher input costs. This performance
is expected to be sustained in 2011, based
on the current positive outlook for global
dairy markets. With improving farm incomes,
demand for Agribusiness farm inputs
was good in 2010 but price competition
was a significant feature of the trading
environment. These trading conditions are
expected to prevail again in 2011.
The trading environment for the Consumer
Products business was impacted by a
combination of local factors in the Irish
retail market and the indirect impact of
global dairy markets on input costs. The
environment for Consumer Products was
very challenging in 2010. Irish consumers
remained very cautious as a consequence
of the difficult economic situation. This was
reflected in their food shopping behaviour,
creating a further market shift towards value
and promotional deals and a channel shift
away from convenience shopping. The
trading environment is expected to remain
challenging in 2011.
In 2010, a combination of market factors
influenced the performance of the US
Cheese business. In the first half, a milk
deficit existed in Idaho leading to tight
supply conditions. While US cheese market
prices recovered to reach historical average
levels, they did not achieve the equivalent
price increases of other dairy products.
Tight supply and competition with other
dairy product classes gave rise to a situation
where payment of milk premiums was
required to secure supply. As the year
progressed, US cheese prices became
volatile with prices trading higher than
expected in the third quarter but declining
steadily in the fourth quarter. A significant
cheese price rally began in early 2011 and
has continued year to date. There are a
number of variables that could impact the
sustainability of this rally but US domestic
demand is solid and export demand is
strong. Milk supply continues to be tight in
Idaho and as a result milk price competition
is expected to be a feature of 2011.
There was strong global demand for whey
in 2010. This growth was underpinned
by structural market changes such as an
increased focus on health & wellness, a
growing understanding of the link between
diet and exercise to weight management
and active ageing, a greater emphasis on
healthier and more nutritious food options
in convenient formats and strong demand
from Asia and developing economies.
Demand was strong across all key
nutritional sectors including performance
and sports nutrition, protein fortification
and new products for mainstream bars
and beverages. Good demand and tight
supply drove whey prices up in 2010 and the
market is expected to continue to be firm
throughout 2011.
FOCUS DELIVERY MOMENTUM
12
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Chairman's statement
Liam Herlihy
Chairman
Results and dividends
Glanbia had an excellent year
in 2010. The key characteristics
underpinning the Group’s strong
performance were a welcome
recovery in global dairy markets
after an unprecedented 2009 and
good demand in key nutritional
markets. Overall we delivered good
growth in revenue and earnings.
Adjusted earnings per share increased
24.1% to 38.07 cents per share
(2009: 30.68 cents per share) driven mainly
by the improved performance of Dairy
Ingredients Ireland and strong organic
revenue growth in Global Nutritionals.
Subject to approval at the Annual General
Meeting (AGM) dividends will be paid
on 20 May 2011 to shareholders on the
register of members as at 8 April 2011. Irish
withholding tax will be deducted at the
standard rate where appropriate.
Glanbia has a 10 year record of steady
dividend increases and the Group
continued its progressive dividend policy in
2010 with a 10% increase in total dividend
for the year, compared with a 5% increase
in 2009.
The Group will hold its AGM on Wednesday,
11 May 2011 in Lyrath Estate Hotel,
Kilkenny. On the same day Glanbia will
issue an Interim Management Statement in
accordance with the reporting requirements
of the EU Transparency Directive.
The Board is recommending a final
dividend of 4.49 cents per share (2009: final
dividend 3.95 cents per share). This brings
the total dividend for the year to 7.52 cents
per share (2009: 6.84 cents per share).
Total Group EBITA analysis
€142.4m
Recovery in pricing for Dairy
Ingredients Ireland
Cost savings in Dairy Ireland
Volume growth in Global Nutritionals
Higher milk costs
Higher operating costs in US Cheese
& Global Nutritionals – investment in
resources (people, services, brand)
Price competition in Consumer
Products
n
o
i
l
l
i
m
€
180
160
140
120
100
80
60
40
20
0
21.6%
€173.2m
2009
2010
FOCUS DELIVERY MOMENTUM
“Whileour2010resultsclearlybenefitedfromamorefavourabletradingenvironmentcomparedwithaverydifficult2009,theyalsoreflectaverystrongoperationalperformanceacrosstheGroup.”
13
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Customer collaboration centre
In 2009, Global Nutritionals opened a customer collaboration
centre in Idaho, USA to support the activities of the Group's main
innovation centre in Ireland. This centre comprises a full-scale
applications laboratory for beverages and bars and a processing
laboratory and separate facilities to run bench-top experiments
such as blending and texture analysis. The centre allows us
to work side-by-side with customers to develop nutritional
solutions and is a great catalyst for exploring and acting on
new product concepts. Collaboration has already contributed
to building joint development plans with key customers,
supporting business growth.
Board changes
There were a number of Board changes
during the year. John Fitzgerald retired as a
non-executive Director and vice-Chairman
of the Board. He was replaced by Brendan
Hayes as a member of the Board. Martin
Keane was elected vice-Chairman of the
Board. Christopher Hill and Nicholas
Dunphy also retired this year as non-
executive Directors and were replaced
by John Murphy and Michael Keane. All
appointments and retirements to the Board
were made on 29 June 2010. I would like
to thank retiring Board members for their
contribution to Glanbia and to welcome
Brendan, Michael and John to the Glanbia
Board and wish them every success.
Proposed disposal of the Irish
Dairy and Agri businesses
Following an approach from Glanbia
Co-operative Society Limited (“the
Society”), the Group’s 54.5% shareholder,
on 20 April 2010, Glanbia announced a
proposal to dispose of its Irish Dairy and
Agri businesses to the Society.
The transaction was conditional in the first
instance upon the approval of the members
of the Society. At a special general meeting
on 10 May 2010 the required approval of
the Society members was not achieved and
therefore the transaction did not proceed.
It is important to stress that neither the
Society nor the Board and management
undertook this process lightly. While
the outcome was a disappointment, it is
gratifying to see that as the transaction was
progressing it was business as usual for the
Group and the proposal was addressed
without impacting business performance
for the year.
Glanbia believes that this project is unlikely
to be re-visited by the Society in the
medium term. The significant improvement
in global dairy markets has shifted the focus
of Society members to dairy expansion
opportunities in a post EU milk quota
environment in 2015.
Full details of the Group’s
performance
Group Managing
Director’s review
Finance Director’s review
Divisional performance
16
22
36
Adjusted earnings per share
Total dividend per share
24.1%
10%
2009
2010
30.68
38.07
2009
2010
cents per share
cents per share
6.84
7.52
FOCUS DELIVERY MOMENTUM
14
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Events since year-end
Acquisition of Bio-Engineered
Supplements and Nutrition (BSN)
On 19 January 2011, Glanbia
announced the acquisition of
the BSN business for a total
consideration of $144 million (€108
million). BSN significantly enhances
and extends Glanbia’s Performance
Nutrition portfolio and continues
to develop Glanbia in line with
its growth strategy. The business
was acquired on a debt free basis
and was funded through Glanbia’s
existing banking facilities. BSN is
a leading developer, provider and
distributor of nutritional products
and builds on the Group’s scale
position in the attractive, high
growth, higher margin, sports
nutrition sector. The integration of
this business is progressing well
and it is expected to be earnings
enhancing in 2011.
Southwest Cheese, USA
Along with acquisition capability, the
development of our Southwest Cheese joint
venture is another strong example of one
of the Group’s core competencies. In 2004,
we formed a 50:50 joint venture partnership
with The Greater Southwest Agency. The
structure of this partnership is that Glanbia
built the plant and is responsible for running
the business and selling the cheese and
whey products manufactured, while our
partner ensures that the facility has a secure
milk supply. In 2005 and 2006 a $200 million
plant was built and commissioned on time
and on budget by the Glanbia team. In
2007 and 2008 production ramped-up to
full capacity. During 2009 and 2010 a 40%
expansion of production capacity, costing
$90 million was approved, built and fully
commissioned by Glanbia; again on time
and on budget. Southwest Cheese is now
one of the largest cheese and high protein
whey processing facilities in the USA;
processing approximately 4.6 million litres of
milk per day and producing approximately
500 tonnes of cheese per day.
FOCUS DELIVERY MOMENTUM
15
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Governance highlights
Committed to good governance
Glanbia’s strong commitment to
high standards of conduct and good
governance is set out in the corporate
governance section of this report. This
year we made a number of enhancements
to increase transparency and improve
shareholder understanding of the Group.
Enhancements include more detail on
our governance and risk framework and
enhanced Committee reports.
Key governance milestones for
2010 include;
• Approval of the 2011-2013 business plan and
objectives; and
• Independent process with good governance
structures in place to review and progress
the proposal by Glanbia Co-operative Society
Limited to acquire the Group’s Irish Dairy and
Agri businesses, and post the conclusion of
this process demonstrating that Glanbia is
a strong organisation, ensuring all parties
are fully committed to driving the business
forward for all stakeholders;
• Detailed review of all US businesses and site
visits to US Cheese in Idaho, Performance
Nutrition in Chicago and the Southwest
Cheese joint venture in New Mexico;
• Continuing to develop Glanbia in line with the
Group’s growth strategy through progression
of a strategic acquisition in Performance
Nutrition finalised in January 2011.
The Board’s 2011 objectives and targets are set
out in the section: Chairman's introduction to
corporate governance.
For more information see
corporate governance
42
US Cheese awards
A selection of our 2010 awards
Outlook
Across the Group, we won a number of
prestigious awards during the year:
• Dairy Ingredients Ireland was recognised
as ‘Innovation Exporter of the Year’ by the
Irish Exporters Association for its successful
commercialisation of the specialist milk protein
product Solmiko;
• Consumer Products was the first Irish business
to be awarded a multi-site award for IS 16001
energy management;
• Glanbia Ingredient Technologies was voted
best overall supplier in the category of whey
by Food Processing magazine readers and
the best overall supplier of whey protein and
hydrolysates by Wellness Food magazine
readers; establishing the business as the
preeminent supplier in this category; and
• Performance Nutrition, through its ON brand,
won four prestigious industry awards for best
protein powder, best supplement, best new
supplement and best brand.
The Group is well positioned for 2011.
Our current expectation is that the
trading environment for 2011 will be
broadly positive. Global dairy markets are
expected to remain firm, underpinned
by robust demand, particularly from Asia,
and demand-led growth in key nutritional
sectors. In January 2011 we acquired BSN,
a leading US sports nutrition business
which is an excellent strategic fit with our
Performance Nutrition business. For 2011,
given our strong market positions and
growing portfolio, we are forecasting 11%
to 13% growth in adjusted earnings per
share, on a constant currency basis.
Liam Herlihy
Chairman
US Cheese, including Southwest
Cheese, won 11 medals at the US
Cheese Championships, including four
gold medals.
Pictured left to right: Dave Perry,
Rudy Jozelic, John Lanigan, Tim Hesby,
Jake Dorman and Oscar Salinas.
Further information
Our responsibilities
32
FOCUS DELIVERY MOMENTUM
16
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Group Managing Director’s review
John Moloney
Group Managing Director
“Wehavestrongbusinesses
bothinIrelandand
internationallyandawell
establishedstrategy.2010
wasanexcellentyearof
growthanddeliveryfor
theGroup.”
Growth and delivery
2010 performance highlights
We delivered a strong set of results in
2010 and it is important to recognise
how Glanbia has evolved over the
last five years. The focus on nutrition,
together with a more informed and
interested consumer in aspects of
health, wellness and diet, is a key
global trend. Since 2006, we have
invested a significant amount in
developing three platforms for growth
in Nutritionals. This has significantly
changed our business profile and
product portfolio. This has delivered
good compound annual growth rates
in revenue and EBITA and has driven
our EBITA margin up 220 basis points
to 6.7% by the end of 2010.
• Our Dairy Ingredients Ireland business,
which is the largest integrated dairy
processor in Europe, returned to
profitability after a first time loss in 2009;
• Our Global Nutritionals business
continued to expand and delivered strong
organic revenue growth, that significantly
outpaced market growth rates;
• We developed our US cheese position with
the 40% production capacity expansion of
our joint venture in New Mexico, making this
plant one of the largest cheese processing
facilities in the USA. This project was
executed on time and on budget;
• Across the Group a first-rate operational
performance was achieved including a
major planned refurbishment of the Twin
Falls plant in Idaho, the first extended
stoppage in over 15 years;
• Our business in Asia grew strongly in 2010 with
exports from US Cheese, Global Nutritionals and
Dairy Ingredients Ireland. This region is a key
focus for future development;
• We continued our focus on strategic cost
management to ensure our Irish businesses are
on a more sustainable cost base;
• We delivered excellent financial results with
significant growth momentum in the business.
In 2010, total Group revenue increased
21.4%, total Group EBITA increased 21.6%
and the Group’s EBITA margin pre exceptional
sustained at 6.7%; and
• Since year-end we strengthened our
Performance Nutrition portfolio in the fast
growing, high margin, sports nutrition sector
through the acquisition of BSN.
Transformational Growth
Total Group EBITA margin %
5% CAGR in total Group revenue from 2006 to 2010
16% CAGR in total Group EBITA from 2006 to 2010
10% CAGR in total Group EBITA margin from 2006 to 2010
€476 million five year acquisition cost and
strategic capital expenditure
%
14
12
10
8
6
4
2
0
FOCUS DELIVERY MOMENTUM
US Cheese &
Global Nutritionals
Total Group
Joint Ventures
& Associates
Dairy Ireland
2006
2007
2008
2009
2010
17
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Innovation
The Group’s main innovation centre, is in Ireland. We have a second innovation
and customer collaboration centre in the USA and both offer key strategic
points of differentiation in areas such as:
• New ingredient development in protein
• Clinical research into muscle physiology,
solutions and mineral premixes;
• Nutrient profiling through scientific
analysis;
• Applications research in nutritional bars,
Ready-to-Drink beverages, Ready-to-
Mix beverages and product prototypes;
bone health, weight management,
immune health and vascular health; and
• Intellectual property where we develop
patented technology to protect
nutritional and functional research
discoveries.
The Glanbia team
The quality of our people continues to
be a core strength for Glanbia and I am
delighted that we have further enhanced
our capabilities in many parts of our
business. In 2010, we invested in operations
and supply chain management, marketing,
research and development, enhanced
technical services for customers and risk
management services to suppliers.
We also instigated a series of changes to
the leadership organisation across the
Group. This included the formation of a
Group Operating Executive which includes
the Office of the Group Managing Director
and executive Directors, with support
from Group Secretariat and Group Human
Resources and Operations Development.
The Group Management Committee brings
together Chief Executive Officers from
the business units as well as the Group
Operating Executive.
The Group Senior Leadership Team includes
the Group’s Operating Executive and
Management Committee and business
unit senior management teams and Group
function heads. This brings together
experienced senior leadership from across
the Group to drive the business forward to
achieve our vision and strategic objectives.
Our 2010 results were excellent. This is due
to the strong performance of management
and all our employees who have been
building the Glanbia business year by year.
In 2010, everyone worked extremely hard
and gave enormous commitment to the
Group. I would like to thank them for their
skill and effort.
Proposed disposal of the Irish
Dairy and Agri businesses
This time last year the Group was reviewing
the proposal of Glanbia Co-operative
Society Limited (“the Society”) to acquire
our Irish Dairy and Agri businesses. This
transaction did not proceed as it did not
receive the required approval of Society
members. This was a disappointing
outcome at the time, however, our
performance this year clearly demonstrates
that Glanbia is a strong organisation with
excellent businesses both in Ireland and
internationally. We have a well established
strategy that continues to deliver growth
and opportunity.
Further information
Governance and risk framework
Our responsibilities
Dairy Ireland
42
32
38
FOCUS DELIVERY MOMENTUM
18
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
US Dairy Sustainability Committee
Glanbia is a member of the US
Dairy Sustainability Committee
set up by the Innovation Centre
for US Dairy. The Committee’s
objective is to show industry
stakeholders and interested
parties progress towards the
goal of ‘reducing greenhouse
gas emissions (GHG) for fluid
milk by 25% by the year 2020’.
More than 500 dairy stakeholders
– including environmental,
academic and scientific experts
are working on 10 projects that
aim to capitalise on opportunities
for efficiency and innovation
across the value chain which will
help to reduce emissions and
build real business value.
FOCUS DELIVERY MOMENTUM
Energy management is one
example which aims to reduce
energy use and GHG emissions
on farms, in processing plants
and in the transport and
distribution of milk and dairy
products. Research is also being
focused on reducing GHG
emissions in areas such as feed
production, packaging and
processing. We are working to
ensure that Glanbia is engaged
with industry effort and this is how
we can have the greatest impact
on helping to reduce the carbon
footprint of dairy products in
the USA.
Further information:
US Cheese &
Global Nutritionals
36
Download the report at
www.usdairy.com/
sustainability
19
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Consumer Products logistics award
Consumer Products supply chain has won
a prestigious environmental award from
the Irish Chartered Institute of Transport
and Logistics. This peer reviewed award
is in recognition of the work conducted
on implementing a best in class transport
routing and scheduling system in the
chilled distribution business. It is a
world class system that takes customer
requirements, adds in any over-riding
delivery constraints and optimises the
transport costs via construction of
logical routes.
This award recognises the positive impact
on carbon emissions that optimal routes
and schedules can play in reducing
carbon footprint. The green agenda
is now part of Consumer Products
corporate and social responsibility policy.
Consumer Products also made the final
nominations in the category of “Supply
Chain Integration” for their work on
network modelling.
Our strategy
Glanbia is organised around two different
business models, one for the US Cheese
& Global Nutritionals division and one for
the Dairy Ireland division. These business
models are strategically aligned to and
strengthened by our key joint ventures in
the USA, the UK and Nigeria. In this report
we have set out our group strategy, our
KPIs, our business models and our business
priorities in 2011.
Maximising our performance and delivering
our strategic objectives requires us to
allocate our resources, people and capital
to business segments where the growth
potential and capability to deliver is
greatest. For Glanbia this means driving the
Global Nutritionals business forward and
this is at the core of our growth strategy. We
have successfully developed our Global
Nutritionals business in the last five years
through organic growth and acquisition.
Our objective this year is to integrate BSN
into our Performance Nutrition business
and drive the ON and BSN brands forward,
particularly internationally. On a proforma
2010 basis, including the acquisition of
BSN, Global Nutritionals now represents
approximately 23% of total Group revenue,
inclusive of Joint Ventures & Associates.
It is a scale business, with well developed
science-based innovation capability and
leading market positions.
FOCUS DELIVERY MOMENTUM
In our US Cheese business, combined with
our Southwest Cheese joint venture, we have
world class capability in cheese processing
and are one of the largest manufacturers
of American-style cheddar cheese in the
USA, processing 3.6 billion litres of milk
and producing 379,000 tonnes of cheese in
2010. Our cheese business gives us access
to a large, high quality whey pool, which
underpins our Ingredient Technologies
business within Global Nutritionals.
In addition, we have substantial businesses
in Ireland, which are operationally excellent
and well invested. We have leading brands
in our Consumer Products and Agribusiness
portfolios. Through disciplined strategic
cost saving programmes in recent years
we have put the Dairy Ireland division on
a more sustainable and competitive cost
base. This is vital as our Dairy Ingredients
Ireland business exports to more than 50
countries world-wide. Within Dairy Ireland
there is considerable work underway
to assess the potential of milk output
expansion which can occur when EU milk
quotas are eliminated in 2015. It is early
days in this process but opportunities do
exist for business growth and development.
Summary
Our strategy is clear and consistent. It is
to deliver attractive and growing returns
to shareholders, excellent solutions and
service to our customers, value adding
routes to market for our milk suppliers
and to provide rewarding careers to our
employees.
We have growth opportunities across our
portfolio, particularly in our US Cheese &
Global Nutritionals division. We have great
people and a range of competencies that
ensure we are well positioned to continue
to grow and develop the Group. We look
forward to the future with confidence.
Further information
Our strategy
Our business models
10
20
John Moloney
Group Managing Director
20
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
US Cheese & Global Nutritionals business model
We have successfully grown our US Cheese & Global Nutritionals businesses and there are further
strategic opportunities to continue to expand in our areas of focus. This is underpinned by strong
structural market drivers, growing global demand for nutritional products and increased consumer
awareness of the link between diet, exercise and health & wellness. All elements of this business have
the ability to develop on a global basis.
Performance
Nutrition
Global
Nutritionals
Customised Premix
Solutions
Ingredient
Technologies
US Cheese
Large captive
whey pool
e
t
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r
n
o
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t
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v
o
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i
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i
s
a
e
r
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s
e
t
a
r
h
t
w
o
r
g
t
e
k
r
a
m
g
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i
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n
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a
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e
h
g
h
e
l
b
a
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a
t
s
u
S
i
Glanbia’s US Cheese & Global Nutritionals
business model incorporates cheese
and nutritional solutions. US Cheese is a
business-to-business, large scale, low cost,
world-class producer that we operate 24/7,
365 days of the year. US Cheese has a strong
relationship with our 50:50 joint venture in
New Mexico, Southwest Cheese.
Derived from cheese processing is a
large captive whey pool which is a key raw
material for Global Nutritionals. Through
the use of innovation, a focus on growth
sectors and markets and expansion in
nutritional solutions, Global Nutritionals is
building a global business.
For divisional performance
36
€1 billion
revenue
FOCUS DELIVERY MOMENTUM
10.8%
EBITA margin pre exceptional
on a constant currency basis
21
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Dairy Ireland business model
Glanbia has three businesses based in Ireland aligned through their relationships with the Group's
Irish farmer supply base. Agribusiness produces and sells a wide range of farm inputs, including
animal feed, to the Group’s farmer suppliers who produced 1.8 billion litres of milk in 2010. This is the
key raw material for Glanbia’s Dairy Ingredients and Consumer Products businesses. 83% of the milk
supplied is processed by Dairy Ingredients primarily for export markets while 17% is processed by
Consumer Products into fresh dairy products and liquid milk for the Irish market.
Dairy
Ingredients
1.5 billion litres
of milk processed
into 214,000
tonnes of cheese
and dairy-
based ingredients
83%
Exports to more
than 50 countries
>5,000 farmer
suppliers
in Ireland
>1.8 billion litres
of milk produced
Consumer
Products
17%
Agribusiness
Production
and sale of
farm inputs
0.3 billion litres
of milk processed
into fresh dairy
products and
liquid milk
2.5 million
consumer packs
per day
For divisional performance
38
Dairy Ireland is a well invested, cost
efficient business with growth potential. In
the local market Consumer Products has
leading market positions in liquid milk and
fresh dairy products. EU market reform is
creating new opportunities for growing
milk supply and Ireland has a natural
grassland advantage that can be exploited.
The abolition of the quota system in April
2015 is the first opportunity to expand
milk output since 1984 and it also creates
other opportunities in broader farming
activities. Expansion is underpinned by
growing global demand for dairy products
supported by demographics and emerging
economies. Fulfilling this demand requires
a presence in international markets and the
Group has established routes-to-market for
dairy ingredients in more than 50 countries
worldwide.
€1.1 billion
revenue
4.2%
EBITA margin pre exceptional
FOCUS DELIVERY MOMENTUM
22
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
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GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Group Finance Director's review
Siobhán Talbot
Group Finance Director
Results as reported
Revenue(1)
EBITA
EBITA margin
Operating profit
Operating margin
Net finance cost
Share of results of Joint Ventures & Associates(1)
Profit before taxation
Income taxes
Profit for the year
Exceptional items
Basic earnings per share
Adjusted earnings per share(2)
Dividend per share in respect of the full year
2010
2009
Change
2010 finance review
€2,166.7m €1,830.3m
+ 18.4%
€151.6m
€125.0m
+ 21.3%
Glanbia delivered a strong performance
in 2010:
7.0%
6.8%
+ 20 bps
• Dairy Ingredients Ireland returned to profitability
€136.5m
€111.2m
+ 22.8%
6.3%
6.1%
+ 20bps
(€22.1m)
(€24.0m)
€10.1m
€124.5m
€10.2m
€97.4m
- €1.9m
- €0.1m
+ 27.8%
after a first time loss in 2009;
• Strategic cost management programmes in Dairy
Ireland delivered targeted annualised savings;
• Organic revenue growth in Global Nutritionals
significantly outpaced market growth rates;
• Revenue increased 18.4%; up 15.6% on a
(€25.5m)
(€19.1m)
+ €6.4m
constant currency basis;
€99.0m
€10.2m
36.86c
38.07c
7.52c
€78.3m
€45.7m
38.46c
30.68c
6.84c
+ 26.4%
-€35.5m
- 4.2%
+ 24.1%
+ 10%
• EBITA increased 21.3%; up 21.4% on a constant
currency basis;
• EBITA margin grew 20 basis pvoints to 7.0%;
up 40 basis points to 7.2% on a constant
currency basis;
• Adjusted earnings per share (Adjusted EPS)
increased by 24.1% to 38.07 cents per share; and
• Dividends increased by 10% to 7.52 cents
per share.
(1)
Revenue including Glanbia’s share of the revenue of Joint Ventures & Associates was €2.6 billion for the
full year, compared with €2.1 billion for 2009. Share of results of Joint Ventures & Associates is an after
interest and tax amount.
(2) Adjusted earnings per share is calculated as the profit for the year attributable to the equity holders of
the Parent before exceptional items and amortisation of intangible assets (net of tax).
Total Group EBITA
includingJoint
Ventures&Associates
FOCUS DELIVERY MOMENTUM
US Cheese & Global Nutritionals 60%
Dairy Ireland 28%
Joint Ventures & Associates 12%
Total
€173.2 million
“Wedeliveredastrongperformancein2010underpinnedbytherecoveryinourDairyIngredientsIrelandbusinessandstrongorganicrevenuegrowthinGlobalNutritionals.” 23
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Segmental revenue, profitability and margins(1) – pre exceptional
Revenue
€m
Operating
profit
€m
2010
Operating
margin EBITA(2)
€m
EBITA
margin
Revenue
€m
2009
Operating
margin
Operating
profit
€m
EBITA
margin
EBITA(2)
€m
US Cheese & Global
Nutritionals
Dairy Ireland
Other Business
1,021.9
1,138.6
6.2
Group as reported(3)
2,166.7
JVs & Associates
416.6
93.8
43.5
(0.8)
136.5
21.6
9.2%
3.8%
104.5
10.2%
792.4
47.9
4.2% 1,028.8
(12.9%)
(0.8)
(12.9%)
9.1
6.3%
5.2%
151.6
7.0% 1,830.3
21.6
5.2%
297.6
90.0
24.0
(2.8)
111.2
17.4
11.4%
100.3
12.7%
2.3%
27.5
2.7%
(30.8%)
(2.8)
(30.8%)
6.1%
5.8%
125.0
17.4
6.8%
5.8%
Total including JVs
& Associates
2,583.3
158.1
6.1%
173.2
6.7% 2,127.9
128.6
6.0%
142.4
6.7%
(1) Pre exceptional items.
(2) Given the nature of Group acquisitions in recent years, EBITA is an accurate reflection of underlying cash generative operating performance.
(3) Reported results exclude Joint Ventures & Associates. Share of results of Joint Ventures & Associates in the income statement is an after interest and tax amount.
Segmental analysis
Group revenue increased 18.4% to €2.2
billion (2009: €1.8 billion). Total Group
revenue, including share of Joint Ventures &
Associates, grew 21.4% to €2.6 billion (2009:
€2.1 billion). The strong growth in revenue
is attributable mainly to the improvements
in global dairy and US cheese markets in
2010 and continued strong organic volume
growth in Global Nutritionals. Revenue in
US Cheese & Global Nutritionals was up
29.0% to €1.0 billion (2009: €792.4 million).
Revenue in Dairy Ireland grew 10.7% to €1.1
billion (2009: €1.0 billion). Revenue in Joint
Ventures & Associates grew 40.0% to €416.6
million (2009: €297.6 million).
Group EBITA increased 21.3% to €151.6
million (2009: €125.0 million). Total
Group EBITA, including Joint Ventures &
Associates, grew 21.6% to €173.2 million
(2009: €142.4 million). This improvement
in performance is driven by the return to
profitability of Dairy Ingredients Ireland with
EBITA for Dairy Ireland improving by 74.2%
to €47.9 million (2009: €27.5 million).
US Cheese & Global Nutritionals delivered
reasonable year-on-year EBITA growth,
underpinned in particular by a good
performance by Global Nutritionals. US
Cheese & Global Nutritionals EBITA grew
4.2% to €104.5 million (2009: €100.3 million).
Group EBITA margin grew 20 basis
points to 7.0% (2009: 6.8%). Total Group
EBITA margin, including Joint Ventures &
Associates, was in line with 2009 at 6.7%.
Dairy Ireland EBITA margin at 4.2% grew
150 basis points (2009: 2.7%), driven by
the strong recovery in Dairy Ingredients
Ireland following a loss in 2009, offset by
margin pressures in Consumer Products. US
Cheese & Global Nutritionals EBITA margin
declined 250 basis points to 10.2% (2009:
12.7%). Lower margins were as a result of
higher input costs, significant brand and
people investment by Global Nutritionals
and volatile market conditions and milk cost
premiums in US Cheese.
Group operating profit, including Joint
Ventures & Associates, increased by 22.9%
to €158.1 million (2009: €128.6 million).
Group operating margin, including Joint
Ventures & Associates, increased 10 basis
points to 6.1% (2009: 6.0%).
Joint Ventures & Associates
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 & Associates. Joint Ventures
& Associates had a reasonable year. Revenue
and operating profit improved primarily as a
result of market price increases in US cheese
and European mozzarella markets. Glanbia
expanded its cheese position in 2010 to
become one of the largest US manufacturers
of American-style cheddar cheese, following
the 40% expansion in production capacity
of Southwest Cheese in New Mexico. This
project was delivered on time and
on budget.
The Group’s share of results of Joint
Ventures & Associates was €10.1 million,
down marginally from €10.2 million in
2009. A table is set out on page 40, which
reconciles Joint Ventures & Associates
operating profit with share of results, as
reported in the income statement.
Further information
Joint Ventures & Associates
40
FOCUS DELIVERY MOMENTUM
24
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Financing KPIs
Net debt decreased by €34.5 million in
the year to €408.1 million (2009: €442.6
million). The reduction in net debt, despite
an adverse foreign exchange movement
of €16.8 million (primarily on USD
denominated debt) was due mainly to an
increase in EBITDA performance.
The Group focused on cash management
in the year, reducing the year end net debt/
adjusted EBITDA to 2.1 times (2009: 2.6
times). This is well within the Group's banking
covenant of 3.3 times.
In 2010, adjusted EBIT to net financing
cost cover improved to 6.7 times (2009: 5.4
times). The Group’s average interest rate
for the full year 2010 was 4.2% (2009:
4.3%). Glanbia operates a policy of fixing a
significant amount of its interest exposure
with approximately 75% of year-end debt
currently contracted at fixed rates for 2011.
Return on capital employed is a post tax
measure of the returns earned by the Group
on capital invested including Joint Ventures
& Associates. This return increased 170
basis points in the year to 12.9% (2009:
11.2%), due to the improved level of
operating performance of the Group.
Group financing facilities
The Group has total committed debt
facilities of €734.2 million incorporating
bank facilities of €670.7 million and €63.5
million cumulative redeemable preference
shares. Credit facilities are held with nine
banks under bilateral arrangements with
common documentation and terms. €160.7
million of the facilities are renewable in
July 2012 and €510.0 million in July 2013.
The €63.5 million cumulative redeemable
preference shares mature in July 2014.
Glanbia will be reviewing overall Group
financing in 2011 as part of the normal
renewal process.
Financing KPIs
EBITDA
Free cash flow
Net debt
Net debt/Adjusted EBITDA(1)
Return on capital employed(2)
2010
2009
€182.8m €152.5m
€65.5m
€66.1m
€408.1m €442.6m
2.1 times
2.6 times
12.9%
11.2%
(1)
Adjusted EBITDA for the purpose of financing ratios reflects Group EBITDA plus dividends from Joint
Ventures & Associates.
(2) Return on capital employed is calculated as EBITA, including share of Joint Ventures & Associates EBITA,
(post tax) over capital employed. Capital employed is defined as non-current assets plus working capital
and includes Glanbia's share of the capital employed of the Joint Ventures & Associates.
Key financial covenants
Key financial covenants
Covenant
2010
2009
2008
Net debt(1) : Adjusted EBITDA(2) (times)
Adjusted EBIT(3) : Net finance costs (times)
3.3
3.5
2.1
6.7
2.6
5.4
2.7
6.4
Including €63.5 million cumulative redeemable preference shares.
(1)
(2) Adjusted EBITDA reflects Group EBITDA plus dividends from Joint Ventures & Associates.
(3) Adjusted EBIT reflects Group EBIT plus dividends from Joint Ventures & Associates.
Net financing costs
Basic earnings per share
Basic earnings per share (EPS) decreased
4.2% to 36.86 cents per share (2009: 38.46
cents per share), as a year-on-year reduction
in net exceptional credit items of €25.2
million was partly offset by an increase in
Group profit after tax of €20.7 million.
Adjusted earnings per share
Adjusted EPS is calculated as the profit for
the year attributable to the equity holders
of the Parent before exceptional items and
amortisation of intangible assets (net of
tax). Adjusted EPS increased 24.1% to 38.07
cents per share (2009: 30.68 cents per share)
driven mainly by the improved performance
of Dairy Ingredients Ireland and a good
performance in Global Nutritionals. A
detailed calculation of adjusted EPS is
shown in note 12 of the financial statements
on page 105.
Financing costs decreased by €1.9 million
to €22.1 million (2009: €24.0 million) mainly
due to lower interest rates in the year.
Taxation
The 2010 tax charge pre exceptional
increased by €6.4 million to €25.5 million
(2009: €19.1 million) reflecting increased
profitability. The Group’s effective tax
rate in 2010, excluding Joint Ventures &
Associates, was 22.3% (2009: 21.9%).
Exceptional items
In 2010, further revisions to the Group’s
pension arrangements for three additional
Irish pension schemes were finalised,
reflecting the planned continuation of the
revision to pension arrangements which
commenced in 2009. This gave rise to a
further net reduction in pension liabilities
and resulted in an exceptional credit of
€10.2 million.
FOCUS DELIVERY MOMENTUM
25
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Summary cash flow
EBITDA pre exceptional
Working capital movement
Net interest and tax paid
Business sustaining capital investment
Other outflows
Free cash flow
Dividends from joint ventures
Loans repaid by/(advanced to) joint ventures
Strategic capital expenditure
Restructuring costs
Equity dividends
Cash flow pre currency exchange/fair value
adjustments
Currency exchange/fair value adjustments
Net decrease in debt during the year
2010
€m
2009
€m
Change
€m
182.8
152.5
+ 30.3
(53.6)
(34.5)
(17.3)
(11.9)
65.5
11.2
23.3
(16.2)
(9.8)
(20.5)
53.5
(19.0)
34.5
(18.8)
(30.7)
(20.1)
(16.8)
66.1
17.9
(21.5)
(23.6)
(14.1)
(19.5)
5.3
4.2
9.5
- 34.8
- 3.8
+ 2.8
+ 4.9
- 0.6
- 6.7
+ 44.8
+ 7.4
+ 4.3
- 1.0
+ 48.2
- 23.2
+ 25.0
+ 9.5
Summary cash flow
Free cash flow decreased year-on-year by
€0.6 million to €65.5 million (2009: €66.1
million). Free cash flow is after charging
working capital movements and business
sustaining capital expenditure, but before
dividends received from Joint Ventures,
loans repaid by/advanced to Joint Ventures,
strategic capital expenditure, restructuring
costs, and equity dividends.
The minimal movement in free cash flow
arose as the higher EBITDA in 2010 was
offset by year on year investment in working
capital due to strong volume growth in
Global Nutritionals and higher global dairy
and US cheese markets.
In 2010, dividends received from joint
ventures were €11.2 million (2009: €17.9
million) and reflect a sustainable level
of cash return to the Group from key
strategic joint ventures. Loans advanced
to Southwest Cheese during 2009 of €21.5
million, to fund the capacity expansion,
were repaid during 2010.
As the Group conserved cash during
2010, strategic capital expenditure reduced
by €7.4 million to €16.2 million (2009:
€23.6 million).
Net debt at the beginning of the year
(442.6)
(452.1)
Net debt at the end of the year
(408.1)
(442.6)
+ 34.5
Movement in the liability for retirement benefit obligations
Pension
2010
€m
2009
€m
(85.8)
(164.4)
(1.0)
–
(7.1)
10.2
13.4
21.7
(1.8)
(1.3)
(12.8)
100.1
(31.2)
25.6
(48.6)
(85.8)
At 1 January 2011 the Group’s net pension
liability under IAS 19 ‘Employee Benefits’,
before deferred tax, decreased by €37.2
million to €48.6 million (2009: €85.8 million).
A strategic review of the Group’s pension
arrangements was completed during 2009
following which the Group revised benefits
under the main Irish defined benefit schemes
giving rise to an exceptional gain and
corresponding reduction in the pension
deficit of €100.1 million. During 2010, revisions
to the Group’s pension scheme arrangements
for three additional Irish pension schemes,
consistent with the revisions made in the
Group’s main pension schemes, have been
finalised. This gave rise to an exceptional gain
in the year of €10.2 million.
The fair value of the assets of the pension
schemes at 1 January 2011 was €389.3
million (2009: €349.2 million) and the value
of the scheme liabilities was €437.9 million
(2009: €435.0 million).
At the beginning of the year
Exchange differences
Disposed operations
Total expense
Curtailment gains and negative past service costs
Actuarial gain/(loss)
Employer contributions
At the end of the year
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26
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Dividends
Investor relations
The Board is recommending a final
dividend of 4.49 cents per share (2009: final
dividend 3.95 cents per share). This brings
the total dividend for the year to 7.52 cents
per share (2009: 6.84 cents per share), an
increase of 10%.
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.
In 2010, Glanbia senior management
participated in over 100 investor meetings
in Ireland, the UK, Europe and North
America. In addition, the Group attended
five capital market conferences and hosted
capital market investor events in Ireland
and the UK, focused on US Cheese &
Global Nutritionals.
Glanbia’s largest shareholder is Glanbia
Co-operative Society Limited, which own
54.5% of the Group. The investor relations
programme for 2010 included a series of
meetings of Glanbia plc senior management
with the Council of the Society.
In 2010, the share price increased 27.4%.
The share price high was €3.68 at year-end
and the share price low during the year
was €2.43. Total Shareholder Return (TSR)
for the year was 30.2%. The share price
outperformed the Irish Stock Exchange
index by 30.4%, the FTSE E300 Index by
20.1%, the S&P 500 Index by 14.6% and the
FTSE E300 Food Producers Index by 7.7%.
Events after the reporting period
On 19 January 2011, Glanbia announced
the acquisition of the Bio-Engineered
Supplements and Nutrition business (BSN)
for a total consideration of $144 million
(€108 million). The business was acquired
on a debt free basis and is expected to be
earnings enhancing in 2011. The acquisition
was funded from Glanbia’s existing
banking facilities.
On 12 January 2011, the Group acquired
the business and assets of Kerry Group plc’s
Limerick based liquid milk business, subject
to regulatory approval.
The Board agrees and regularly reviews
these policies and guidelines. 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 of this report.
Financial statements Note 3.1
Risk management
Further information on
Divisional performance
US Cheese &
Global Nutritionals
Dairy Ireland
Joint Ventures & Associates
40
90
27
36
38
40
Shareholder analysis
December 2010
Glanbia Co-operative Society 54.5%
Retail 22%
UK* 10%
Ireland* 5%
Europe* 5%
North America* 3.5%
* Institutional/other
2011 outlook
The current 2011 outlook for the Group is
good. Including BSN, adjusted earnings
per share growth is expected to be in
the range of 11% to 13% for the year, on
a constant currency basis. Following the
acquisition of BSN, 2011 will be a period of
consolidation as we ensure this business is
integrated well and we continue to drive
organic opportunities across the Group.
We will continue to focus on costs, so that
our operations are on a sustainable and
competitive cost base. We will also be
reviewing the Group's financing facilities
during 2011 as part of the normal facility
renewal cycle. Overall, we look forward to
another year of growth.
Siobhán Talbot
Group Finance Director
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GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Risk management: principal risks and uncertainties
The Board determines the nature and extent of the significant risks it is willing to take in achieving
its strategic objectives. Across the business, there is an ongoing process in place for identifying,
assessing, managing, monitoring and reporting on significant risks faced by the Group. This process
has been in place for the year under review and up to and including the date of approval of the 2010
Annual Report. Risk identification processes take into account the four strategic priorities and five 2011
business focus areas outlined on page 10. A summary of the key risks identified, potential impacts and
mitigating actions are set out below.
Strategic priorities and related risks
1. Align to key customers and markets
Risk description
Potential impact
Mitigation
Reduced profitability and
cash flow.
Certain key customers represent
a significant portion of Group
revenue and operating profits.
The loss of all or part of one
or more of these customers
represents a concentration risk to
the business.
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.
The Group continues to expand its geographic footprint to better serve its key
customers and to provide a platform for future growth.
2. First class science-based innovation
Risk description
Potential impact
Mitigation
Increasing competition,
product innovations, technical
advances and changing market
trends provide a constant
challenge to the future success
of the Group and its ability to
successfully adapt.
Such changes may have material
adverse effects on the Group’s
financial performance.
Glanbia’s main innovation centre is located in Ireland with a further innovation
and customer collaboration centre in the USA as well as associations with a
number of research programmes at third level institutions.
Research and development expenditure is focused on value added and
customer specific solutions in sectors where Glanbia has significant technical
and market knowledge.
3. Effective risk and capital management
Risk description
Potential impact
Mitigation
A failure by the Board to
manage risk or make correct
capital allocation decisions may
impact the Group’s objective of
maximising shareholder return.
Loss of shareholder value.
Inability to achieve strategic
objectives.
The Group has a comprehensive programme for the identification and
management of risk.
The Group manages capital by operating within specific debt ratios as
outlined in the Group Finance Director’s report.
All significant investment and divestment decisions are approved by the
Board based on a range of financial criteria including return on capital
employed. The Board will continue to focus on investments that are in line
with Group strategy and capable of generating acceptable returns.
FOCUS DELIVERY MOMENTUM
28
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
4. Operational excellence and strategic cost management
Risk description
Potential impact
Mitigation
A breach of existing
environmental laws
and regulations or the
introduction of new more
onerous legislation.
A breach of food safety
legislation or the
introduction of more
stringent regulations.
Reputational damage and regulatory
penalties including restrictions on
operations, damages or fines.
The Group is committed to compliance with regulations. We continue to
invest in energy efficiency advancements, carbon reduction and emission
programmes and recycling.
Increased cost of compliance with modified
or new legislation.
Adverse operational consequences.
Reputational damage and regulatory
penalties including restrictions on
operations, damages or fines.
The Group conforms to international and local food safety, quality and
environmental regulations and employs best practice across all its production
facilities to maintain the highest standards.
Product recall costs.
The Group maintains product liability insurance.
Additional labelling requirements.
Key sites have quality accreditations from external parties.
Damage to customer relationships.
Contamination of products
and/or raw materials.
Reputational damage and regulatory.
penalties.
Product recall costs, lost revenues and
reduced growth prospects.
A breach of health and
safety regulations.
Reputational damage and
regulatory penalties.
Loss of capacity at
a major site.
Inability to service customer requirements.
Adverse impact on reputation.
Reduced profitability and cash flow.
One of our major
ingredient suppliers being
unable to fulfill product
demand requirements.
Inability to service new and existing customer
requirements.
Operational efficiencies impacted.
The Group conforms to international and local food safety, quality and
environmental regulations and employs best practice across all its production
facilities to maintain the highest standards.
Key sites have quality accreditations from external parties.
An independent risk consulting firm conducts an annual health and safety
audit for the Group’s main locations the results of which are presented to and
considered by the Audit Committee.
All business operations have business continuity plans in place including
where relevant identification of alternative production locations.
The Group monitors overall safety and loss prevention performance
through the Glanbia risk management system (GRMS) to assist operational
management responsible for the day to day management of business risk.
A comprehensive insurance programme is in place for all significant insurable
risks and major catastrophes.
A broad supplier base is maintained where possible.
Management continuously seeks out and assesses additional sources of supply
for key raw materials.
The Group has invested heavily in supply chain resources and systems.
Regular quality control assessments including supplier site audits are
conducted to ensure the areas of greatest social, political and economic
exposure are identified.
A significant increase in
energy costs impacting
the Group’s large scale
processing operations.
Further
information
Adverse impact on cash flow and earnings.
Energy efficiency programmes are operated across all sites.
When required the Group will enter into fixed price arrangements to cover
certain future energy requirements.
Chairman's introduction
to corporate governance
Our business models
Our strategy
42
20
10
FOCUS DELIVERY MOMENTUM
29
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
2011 Business focus and related risks
1. Successful integration of BSN acquisition
Risk description
Potential impact
Mitigation
Acquisition failure to
deliver in accordance with
business case objectives.
Intended business benefits not
realised impacting profitability
and growth.
Integration efforts may result in
an excessive diversion of
management attention.
Glanbia has significant knowledge of the performance/sports nutrition sector.
There is regular reporting against targets outlined in the acquisition business case.
The Group has significant post acquisition integration experience within the Group
management team.
The acquired entity management team will be strengthened by the transfer of
experienced Glanbia managers.
2. Achieve organic growth plans across each business unit
Risk description
Potential impact
Mitigation
Global economic downturn
leading to declining
consumer confidence.
Negative impact on profitability and
cash flow.
The Group maintains a balanced spread of businesses and continues to diversify
its earnings base in order to reduce volatility in financial performance.
Volatile global dairy
commodity markets.
Inability to deliver higher quality and
less volatile earnings.
Negative impact on earnings and
cash flow.
Changes in the cost
and availability of milk
procurement can be
impacted by a number
of factors including
quality, demand, weather
conditions and
agricultural policies.
The Group continues to streamline its cost base as appropriate to ensure it remains
competitive.
Globally the Group has employed a number of risk management tools to limit
volatility but the Group’s ability to pass back pricing volatility in dairy commodities
to its Irish milk suppliers can be constrained by competitive conditions and the
pricing methods employed.
As the Group maintains a portfolio of businesses there are some natural hedges to
global dairy markets within that portfolio.
Group milk procurement teams constantly monitor the milk procurement
environment to ensure that the Group remains competitive and that plant
utilisation is maximised.
Milk supply agreements have been entered into where possible.
A number of risk management tools are made available to suppliers in the USA
to facilitate them in managing their businesses.
Strong links are sustained with the supplier base in Ireland.
3. Deliver Group results in line with market expectations
Risk description
Potential impact
Mitigation
Deterioration in market
conditions or business unit
performance, impacting on
Group results.
Reduced profitability and cash flow.
Possible impact on the achievement
of Group strategy.
Monthly reviews take place with all business units tracking actual performance
against planned assumptions and determining corrective actions as required.
Regular reviews are undertaken with senior management on the status of business
unit strategic objectives.
Business unit senior management teams and the Board assess key market trends
and implications for Group performance on an ongoing basis.
Foreign currency
and interest rate exposure.
Unexpected variation in net earnings.
Exposures are monitored by the Group Treasurer with oversight by the Group
Finance Director and the Group Managing Director.
Regular liaison with business units on updated currency exposure reports.
FOCUS DELIVERY MOMENTUM
30
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
4. Continue to develop people and organisation capability
Risk description
Potential impact
Mitigation
Recruitment and retention.
The Group is dependent
upon the quality, ability
and commitment of key
personnel in order to
sustain, develop and grow
the business.
The ongoing success of the Group
being put at risk by failing to attract
and retain high quality management
and staff throughout the business.
The Group mitigates risk exposure through sustained succession management,
strong recruitment processes, long term incentives and retention initiatives.
The Group also operates management development programmes to ensure that
there is a continuous pipeline of talent within the Group to support the ongoing
growth and development of the business.
The leadership structure provides a platform for management information to be
relayed and discussed on a timely basis.
5. Review of Group financing facilities
Risk description
Potential impact
Mitigation
Refinancing of Group
debt facilities is key to
underpinning the liquidity
requirements of the Group.
Lack of liquidity to sustain and grow
the Group.
Strong current relationships with debt providers.
Tight management of debt on a daily basis with significant headroom maintained
against current covenants.
New financing arrangements typically negotiated at least twelve months prior
to expiration.
Risk management governance
The Board
Sets risk appetite and tolerance
Assurance/
self assessment
Company culture
Code of Conduct
O
p
F
r
e
a
r
a
m
t
i
e
o
w
n
o
a
r
l
k
Risk management
FOCUS DELIVERY MOMENTUM
Assurance/self assessment
Risk management
• Group Operating
• Review & Identify
Executive reporting
Monthly performance reports
and quarterly risk assessment
Quarterly key risk review by
each business unit CEO and
function head
• Financial reporting
• Evaluate
Ongoing procedures in place
designed to ensure financial
reporting reliability
Risks analysed for impact
and probability to determine
the exposure
• Management
• Respond
representation letter
Bi-annual process to assess the
effectiveness of internal controls
over financial reporting
• Control self assessment
Bi-annual programme to assess
internal control and fraud
prevention processes
• Internal Audit function
Audit plan and output reviewed
by the Audit Committee
Risk owners and action plans
identified to manage key risks
• Report
Risk exposure, risk velocity and
mitigation reviewed by the Group
Risk Committee and the Board
Operational framework
• The Group risk management
structures operate within a
framework of defined organisation
structure, mandated policies and
processes and delegated authority
to key personnel.
31
31
GLANBIA PLC
GLANBIA PLC
ANNUAL REPORT 2010
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Our responsibilities
Over 60 Irish employees
climbed Ireland’s
highest mountain in
September 2010 and
raised almost €23,000
for Barretstown summer
camp for sick children
4. Continue to develop people and organisation capability
Risk description
Potential impact
Mitigation
Recruitment and retention.
The ongoing success of the Group
The Group mitigates risk exposure through sustained succession management,
The Group is dependent
being put at risk by failing to attract
strong recruitment processes, long term incentives and retention initiatives.
upon the quality, ability
and retain high quality management
and commitment of key
and staff throughout the business.
personnel in order to
sustain, develop and grow
the business.
The Group also operates management development programmes to ensure that
there is a continuous pipeline of talent within the Group to support the ongoing
growth and development of the business.
The leadership structure provides a platform for management information to be
relayed and discussed on a timely basis.
5. Review of Group financing facilities
Risk description
Potential impact
Mitigation
Lack of liquidity to sustain and grow
Strong current relationships with debt providers.
Refinancing of Group
debt facilities is key to
underpinning the liquidity
requirements of the Group.
the Group.
Tight management of debt on a daily basis with significant headroom maintained
against current covenants.
to expiration.
New financing arrangements typically negotiated at least twelve months prior
FOCUS DELIVERY MOMENTUM
FOCUS DELIVERY MOMENTUM
32
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Our responsibilities
Our corporate responsibilities include appropriate business conduct and accountability,
fairness and respect for employees, health and safety, respect for the environment and
community involvement. Our goal is to develop a sustainable business and to contribute to
the communities in which we operate.
Our people
We employed an average of 4,313 people,
including Joint Ventures & Associates,
during 2010. While our average number
of employees was very similar to 2009,
there have been some significant changes
by division.
Employee numbers reduced in Dairy
Ireland by 148 people during the year
following a reduction of 210 people in 2009.
This reflects the rationalisation and change
programme we implemented to put our
Irish operations on a more sustainable
and competitive base. This restructuring
saw changes in operations, sales and
administration, supply chain management
and the implementation of significant new
technology and automation. A key task
for Human Resources (HR) throughout
this period has been to ensure that the
restructuring delivered effective change
and productivity gains. In recognition of
the delivery of this programme and to bring
clarity and stability to the pay environment,
a modest pay increase will be implemented
this year for our Irish businesses following a
pay freeze which was in place for 2009
and 2010.
In US Cheese & Global Nutritionals we have
increased employee numbers by almost
7% to an average of 1,570 people. This is to
enhance our capabilities and ensure we are
appropriately resourced to take advantage
of market growth opportunities as we
expand the geographic reach and business
horizons for these business units. We
invested across a broad range of business
areas including operations, business
development, supply chain management,
marketing, research and development.
2010 HR agenda
HR had clear business objectives in
2010. In the first instance it was to ensure
successful delivery of the restructuring of
the Irish businesses. In addition, during
the first half of the year in particular it was
to manage the uncertainty created by the
proposed disposal of the Group’s Irish
Dairy and Agri businesses and to support
the requirement to keep the business
focused on performance delivery in 2010.
Throughout the year, there were many
employee communication initiatives
to ensure that there was open and
transparent dialogue.
A strategic review of the Group’s pension
scheme arrangements was completed
during 2009 following which the Group
revised benefits under the main Irish
defined benefit schemes. During 2010,
revisions to the Group’s pension scheme
arrangements for three additional Irish
pension schemes, consistent with the
revisions made in the Group’s main pension
scheme, have been finalised. These
changes were necessary as a consequence
of significant funding deficits experienced
by these schemes and it is anticipated that
the changes will place the defined benefit
pension schemes on a firmer platform for
the future.
Project Perform
Perform, which is a SAP based HR system,
was rolled out across the Group in 2009.
2010 was a period of consolidation for this
project to ensure that Perform was being
used extensively within the business.
Perform gives HR and business unit
managers everything they need in relation
to employees, salary and benefits, and puts
performance/succession management
processes at their fingertips. It also ensures
that all essential HR processes are uniform
across Glanbia. Feedback on Perform
from business units has been very positive.
The system is providing better quality
information, performance management
and manager/employee engagement.
People strategy
Our HR strategy is consistent and has two
core priorities:
1
Sustained succession management, which
identifies people who have the potential
to develop to the next level and focuses on
making sure that the Group has the right mix
of people, experience and skills to deliver its
business plans and strategic objectives; and
2
Ensuring an effective HR organisation
and systems to support the global scale of
Glanbia’s operations.
During the year we made a series of
changes to the leadership organisation of
Glanbia, strengthening how we manage
our business and the Group’s governance
and risk framework. Externally facilitated
coaching is being provided to members of
the new leadership organisation to improve
their effectiveness and increase their value
and contribution to the organisation.
“ The new HR system has been a
great help to my team and me.
It saves us effort as everything
is recorded electronically, and
I now have all the information I
need at my fingertips, so it is very
empowering. I can now manage
our Performance Development and
Succession Management processes
using the interactive workflow.
My team is up to date on their
development objectives and my
boss is in the loop at all times. The
focus is now around performance
and the delivery of the strategy
rather than chasing paper.”
Jeff Williams,
President & CEO,
US Cheese
FOCUS DELIVERY MOMENTUM
33
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Dairy Ingredients Ireland
Dairy Ingredients Ireland was
acknowledged as a leader in energy
efficiency by the European Committee
of Standardisation at the launch of
Europe’s newest energy management
system, EN 16001. Dairy Ingredients
Ireland is understood to be the first
dairy company in the world to achieve
this standard and this business unit was
fully compliant in 2010.
Dairy Ingredients Ireland also has
ISO 14001 accreditation for
environmental management systems
and the ISO 14001 Environmental
Standard audit conducted during the
year at the Virginia facility resulted in
its best ranking ever with zero non-
conformances. This demonstrates a
strong commitment to environmental
governance and continuous
environmental improvement by Dairy
Ingredients Ireland. One of the biggest
accomplishments for this facility was on
heat recovery processes with energy
savings achieved at both the primary and
secondary stages.
Health and safety
Environmental highlights
Health and safety is at the heart of our
corporate responsibility. Protecting our
employees, contractors and all visitors is
fundamental to our business philosophy.
We are committed to developing and
maintaining a positive health and safety
culture, in which statutory requirements are
viewed as a minimum standard and strong
performance is our goal. In 2010, we ranked
safety across the Group through a detailed
technical survey. We also undertook health
and safety audits at 23 Glanbia sites during
the year. The results of both demonstrate a
continuous improvement across all health
and safety measures throughout the Group.
Health and safety is embedded in risk
management as part of our strategic
priority to achieve operational excellence.
The Glanbia Risk Management System
underpins a systematic approach to
ensuring a safe workplace for all employees.
Strong management teams and committed
senior management have proven to be
critical to the successful implementation of
good safety practice in all locations. In 2010,
we conducted a health and safety forum to
share best practice from around Glanbia to
promote a strong health and safety culture.
Glanbia has major processing operations
and significant consumer facing businesses
in Ireland and the USA. At a minimum we
seek to comply with all regulatory and
legislative requirements and we are also
committed to improving our environmental
performance across the Group each year.
Dairy Ireland
Dairy Ingredients Ireland has two principal
locations, including the largest integrated
dairy processing facility in Europe. This
business unit had a strong environmental
performance in 2010:
• Energy efficiency per tonne of product
produced improved by 4.5%
• Production carbon emissions are down 25%
since 2005;
• A 7.5% reduction was achieved in site waste
and 285 tonnes was diverted from landfill due
to recycling; and
• Chemical use in waste water treatment reduced
by 16%.
FOCUS DELIVERY MOMENTUM
34
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
Pictured left to right:
Tommy Walsh, Jackie Tyrell,
Colin Gordon,CEO, Consumer
Products, TJ Reid and Michael Rice
Consumer Products
Consumer Products energy management
system was successfully accredited to the
EN 16001 standard in 2010. This is the first
multi site accreditation to the EN 16001
standard in Ireland. This management
system complements the environmental
management system ISO 14001 which is in
place since 2003. The energy management
system is fundamental to reducing the
carbon dioxide (CO2) emissions and
simultaneously decreasing fossil fuel
consumption and associated costs.
Consumer Products reduced CO2 emissions
in 2010 by 9%.
Packaging formats and the materials used
in packaging are continuously evaluated
with a view to improving their impact on the
environment. To this end, the liquid milk
production facilities have ceased the use
of phosphorous based detergents and the
weight of some packaging formats has been
reduced by 3%. Working with suppliers,
Consumer Products are using only cartons
which are produced from independently
sustainable forests verified by organisations
such as Forest Stewardship Council.
The business unit is currently recycling 60%
of all its waste and in conjunction with its
suppliers, Consumer Products is developing
reuse and recycle loops which will enable a
further 5% improvement in recycling rates.
US Cheese
Our US Cheese operations had a successful
environmental performance this year
improving water conservation, emissions
and energy usage.
In 2010, our cheese operations in Idaho
had one of the most successful water
conservation years in recent history. This
business unit reduced water usage across all
operations by 12%. Several major projects
related to condensate and polished water
reuse, closed circuit cooling systems,
and efficient utilisation of water during
cleaning and sanitation processes resulted
in over 74 million gallons of water being
conserved. Connected to the successful
water conservation is a continued reduction
in carbon dioxide-equivalent (CO2-e)
emissions as a result of less water being
pumped from natural sources and more
energy efficient operations overall. CO2-e
emissions show a downward trend reflecting
the implementation of numerous energy
efficiency projects undertaken at the Idaho
facilities. Emissions per tonne of product
produced reduced by 7% since 2008. In 2010,
US Cheese also continued to fully utilise its
own renewable biogas energy resource.
Biogas is generated as a result of treating
wastewater at the Gooding facility. In 2010,
over 1 billion cubic feet of biogas was used as
fuel in the Gooding facility boilers.
Sponsorship in the community
In 2010, Glanbia signed a new
three-year sponsorship deal with
Kilkenny senior hurlers to continue
what has become one of the most
successful sponsorships in Irish sport.
Under the Avonmore brand, Glanbia
and Kilkenny hurling have enjoyed
a particularly successful partnership
over the last ten years. During this
period Kilkenny has become one
of the most successful teams of all
time winning seven All Ireland titles
(including four in a row).
Since 2005, under the Avonmore
Supermilk brand, Glanbia is the sole
sponsor of Munster Schools & Youths
Rugby. The sponsorship includes
Munster Schools Senior & Junior
Cups, sponsorship of Munster Schools
Interprovincial Team and the U17 &
U19 Munster Youths Cups as well as
the Munster Youths Interprovincial
team. These competitions cover all
schools in the province along with
all senior and junior clubs. Sport
sponsorships are an ideal fit for
Glanbia in promoting a healthy and
active lifestyle.
FOCUS DELIVERY MOMENTUM
35
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S STATEMENT
GROUP PERFORMANCE
GROUP MANAGING DIRECTOR’S REVIEW
OUR BUSINESS MODELS
GROUP FINANCE DIRECTOR’S REVIEW
RISK MANAGEMENT
OUR RESPONSIBILITIES
“ We are so thankful to Glanbia and all its fantastic
employees who have made a tremendous contribution
to life at Barretstown since this partnership began over
two years ago. Glanbia has proven to be such fantastic
supporters of the camp on so many levels and we look
forward to continuing this relationship in the coming
years. The Glanbia ‘Champions’ and employees all
over Ireland should be so proud and know that they
have made a direct impact on over 2,000 children and
their families who are living and dealing with childhood
cancer. On behalf of the camp, the children and families
I would sincerely like to thank Glanbia and its employees
for their tremendous contribution”.
Dee Ahearn, Chief Executive of Barretstown
Brian Phelan, Group Human Resources & Operations
Development Director, Maria Porter, Glanbia Consumer
Products ‘Champion’, Dee Ahearn, Chief Executive Barretstown
with the Mulvey family, former Barretstown campers at the
presentation by Glanbia staff of €60,000 to the charity.
Southwest Cheese joint venture
In 2010, there was a 40% expansion of
production capacity at Southwest Cheese
and in conjunction with this expansion many
sustainability improvement projects are
being implemented to improve efficiency of
those operations. This is an ongoing process.
In 2010, the amount of water used to
process a pound of milk has reduced by
16% and further gains are expected in 2011
on foot of the new facilities and related
sustainability improvement projects. CO2
emissions declined year on year by 15%
per pound of product processed, reflecting
the positive benefits of the various
environmental initiatives undertaken in
2010. Southwest Cheese achieved biogas
generation and usage of 61 million cubic
feet of biogas in 2010. In 2011, the target is
1 billion cubic feet.
Local community initiatives
Glanbia has a long tradition of working
with local communities through corporate
giving, sponsorship and employee
volunteering. 2010 was another strong year
of support.
brand and employee fundraising. The
association of Barretstown with the
Avonmore brand aligns our corporate
and employee giving with our business
strategy. A corporate donation of €250,000
plus employee fundraising of €60,000 saw
Glanbia donate €310,000 to the charity in
2010. Avonmore’s sponsorship of weather
forecasts on Irish television as part of its
brand strategy is being used to highlight
Glanbia’s association with the charity and
on-pack promotions gives Barretstown
substantial exposure across Ireland on a
daily basis.
During 2010 there was a lot of team spirit and
dedication among employees in support
of Barretstown, who rowed in behind their
business unit ‘Champions’ and volunteered
their personal time and money for the
benefit of the many sick children and families
that attend Barretstown camp. Record
numbers participated in the many events
organised throughout the year in an effort to
achieve the fundraising goal, including:
• Over 420 cyclists who took part in the Tour de
Kilkenny in August; and
• Over 60 Irish employees climbed Ireland’s
highest mountain in September 2010 and
raised almost €23,000.
Ireland
Glanbia’s collaboration with Barretstown
commenced in 2008 and has proven to be
a highly successful three tiered partnership
incorporating the Group, the Avonmore
The money raised by Glanbia is a significant
contribution to the running of Barretstown
and the Group’s contribution helped 220
sick children attend a 10-day summer camp
this year.
FOCUS DELIVERY MOMENTUM
USA
It is a million dollars ago that the US Cheese
team started an annual charity golf event
to raise money for local charities. $20,000
was raised in the first year and over the past
17 years over $1 million has been donated
to more than 50 local non-profit groups in
the Magic Valley in Idaho. With the help of
golfers, sponsors and Glanbia volunteers, a
million dollar event has been created.
$115,000 was raised in 2010.
Following the end of a two year partnership
with Shriner’s Hospitals in the USA, US
Cheese decided to work with community
projects in the town of Gooding, Idaho
where they have a major facility. A
committee was established consisting of
employees and representatives from the
town to explore the community’s needs.
The first project was Christmas decorations
for the streets of Gooding as the old lights
dated back to the 1950’s. The team also
distributed cheese to the teachers, staff
and administrators of local schools, in
recognition of their contribution and the
importance of their work in the community.
This partnership will be developed further
during 2011.
36
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
US CHEESE & GLOBAL NUTRITIONALS
DIVISIONAL PERFORMANCE
DAIRY IRELAND
JOINT VENTURES & ASSOCIATES
US Cheese & Global Nutritionals
Constant Currency
Reported
2010
€971.5m
€93.9m
9.7%
€104.6m
10.8%
€116.8m
2009
€792.4m
€90.0m
11.4%
€100.3m
12.7%
€110.0m
Change
+ 22.6%
+ 4.3%
- 170bps
+ 4.3%
- 190bps
+ 6.2%
2010
€1,021.9m
€93.8m
9.2%
€104.5m
10.2%
€116.7m
Change
+ 29.0%
+ 4.2%
- 220bps
+ 4.2%
- 250bps
+ 6.1%
cheese markets were volatile and difficult,
particularly in the fourth quarter when
markets declined sharply. This was due to
a combination of relatively high US cheese
stocks and softer buyer demand.
The Twin Falls plant refurbishment project
was a significant operational success
for the US Cheese team in 2010. The
project involved upgrading the plants
infrastructure and processing equipment.
The timing of this project coincided with
the commissioning of Southwest Cheese’s
capacity expansion, which enabled US
Cheese to seamlessly continue to meet our
customers’ product requirements.
Strategically, the business is well positioned
to continue to grow. This will be achieved
through increasing added value services
and products for customers, further
improving the industry-leading level
of efficiency and taking advantage of
long term, scale growth opportunities
internationally for US Cheese.
2011 outlook
A strong rally commenced in US cheese
markets in early 2011, as a result of a
perceived overcorrection in the fourth
quarter of 2010. While overall milk supply
is expected to grow modestly in 2011,
we expect other dairy product prices to
outpace cheese prices and as a result the
milk procurement environment will remain
very competitive. US Cheese continuously
monitors the balance of milk cost to milk
availability as part of risk management
and has continued its strategy of reducing
its exposure to US cheese market price
volatility through hedging mechanisms.
Glanbia is forecasting steady domestic
US demand with expanding exports to
international markets in 2011. Overall, an
improved performance is expected for US
Cheese this year.
Global Nutritionals
Global Nutritionals had a good year,
with strong volume and revenue growth
outpacing general market growth rates in
all three business units. There was strong
demand globally for sports nutrition
and protein fortified products for weight
management, active ageing, infant formula
and fortified bar and beverage products.
Ingredient Technologies
Ingredient Technologies had a good year in
2010 as higher and broader demand, both
geographically and by sector, together
with higher global whey prices drove good
revenue, profit growth and higher margins.
Key factors in the 2010 market environment
were increasing demand from the sports
nutrition sector, more mainstream uptake
of whey in bars and beverages, demand in
new sectors such as processed and natural
meats, prepared foods and yoghurts and
growing consumer requirements for clean
labelling and use of natural ingredients.
The trends during 2010 are anticipated to
continue through 2011.
For further information:
www.glanbianutritionals.com
www.glanbiausa.com
www.optimumnutrition.com
www.bsnonline.net
Revenue
Operating profit
Operating margin
EBITA
EBITA margin
EBITDA
Results are stated pre exceptional items
Results overview on a constant
currency basis
In 2010, US Cheese & Global Nutritionals
revenue increased 22.6% to €971.5 million
(2009: €792.4 million). Operating profit pre
exceptional increased 4.3% to €93.9 million
(2009: €90.0 million). Operating margin pre
exceptional decreased 170 basis points to
9.7% (2009: 11.4%). EBITA pre exceptional
increased 4.3% to €104.6 million
(2009: €100.3 million). EBITDA pre
exceptional increased 6.2% to €116.8
million (2009: €110.0 million).
US Cheese
Given the trading environment, US Cheese
performed reasonably well in 2010, however
profits and margins were lower than 2009.
Good revenue growth was achieved mainly
as a result of better cheese market prices,
which improved on the historical lows
reached in 2009. Market demand was solid
and export demand grew strongly from a
relatively low base. Production volumes
were lower in 2010 as a consequence of the
planned major refurbishment of the smaller
of the Idaho cheese plants in the first half. In
addition, following a very difficult farming
environment in 2009, milk production
was tight particularly in the first half. This
placed pricing pressure on securing supply,
necessitating the payment of milk premiums
during the year. Overheads were also higher
as the business invested in supply chain
management, technical services to cheese
customers and risk management services
to milk suppliers. While supply pressures
eased somewhat into the second half,
For details of US Cheese
& Global Nutritionals
management
47
FOCUS DELIVERY MOMENTUM
37
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
US CHEESE AND GLOBAL NUTRITIONALS
DIVISIONAL PERFORMANCE
DAIRY IRELAND
JOINT VENTURES & ASSOCIATES
Internationally, Performance Nutrition
established a clear route-to-market in key
territories and has developed distribution
relationships across the EMEA and Asia
Pacific regions. Another key milestone
was the launch of a transactional website
enabling e-commerce in selected markets.
At the moment this capability is live in
Ireland, the UK and South Korea and we plan
to roll it out to a wider audience over time.
Market growth in the sports nutrition
sector both in the USA and internationally
is estimated to be approximately 7% in
2011and total market size at retail selling
price is in the region of $3 billion in the USA
and $1.5 billion internationally. The powder
sub-sector, where ON is particularly strong,
is estimated to represent 85% of the total
sports nutrition market.
Key priorities in 2011 for Performance
Nutrition are:
• Seamlessly integrate BSN and evaluate
growth opportunities;
• Enhance customer service through best in
class operational efficiency;
• Continue to drive new product
commercialisation;
• Continue to develop key brands in both the
premium protein category and the energy
category; and
• Investment in resources and facilities to drive
business growth momentum.
Customised Premix Solutions
Customised Premix Solutions achieved
good revenue growth in key market
segments and continued to develop
customer specific solutions for core end
markets globally. Revenue, profits and
margins were ahead of 2009. This
business unit achieved very solid
growth across all regions with both
organic growth and new business
development. In the market
environment, there was an increasing
rate of product innovation demand
from customers, beginning a shift away
from the product renovation and cost
saving projects of recent years.
Customised Premix Solutions is
increasingly being recognised by
multinational companies as a global
provider with a broad product offering.
Key priorities for this business unit in 2011
are to continue to deliver exceptional
service to our key customers, increase
geographic coverage and deepen the
customer base.
2011 outlook
Glanbia’s core nutritionals sectors have
strong structural market growth drivers that
are expected to continue to gather pace
in 2011 and beyond. The new customer
collaboration centre in Idaho is contributing
to building joint development plans with
key customers for Global Nutritionals and
supporting business growth objectives.
Expectations are that Global Nutritionals
will perform well overall in 2011.
Highlights for Ingredient Technologies
for the year include:
• Strong innovation and product development with:
• good success in the growing lifestyle/granola
and bar sector;
• numerous launches globally to sports
nutrition customers;
• a range of novel functional whey propositions
for processed food applications; and
• partnering with customers to develop
different protein beverage offerings and
new whey ingredients to facilitate the
development of complex beverage solutions;
• Formulation success by incorporating an
increasing level of non-dairy ingredients into
ingredient solutions to expand the range of
offerings to customers; and
• Restructuring of the regional business to
drive growth in value-added solutions in key
markets.
2011 priorities for this business are to
continue to grow value-added solutions,
leverage Glanbia’s scale and regional
spread, develop complementary ingredient
opportunities, continue to drive international
development and further enhance R&D to
focus on customer partnering.
Performance Nutrition
Performance Nutrition also had a good
year, driven by strong volumes and
innovation. Revenue growth significantly
outpaced market rates but margins
declined due to increased investment in
marketing and management together
with the impact of higher input costs. The
business continued to perform strongly
both in the USA and internationally and key
new product launches for 2010 exceeded
expectations. The ABB brand was
successfully repackaged and relaunched.
A new product in the growing pre-workout
energy category – Amino Energy – was also
successfully launched. The business won a
number of industry awards including four
prestigious supplement awards for best
protein powder, best supplement, best new
supplement and best brand. In addition,
ON brand athletes were voted the top male
and female BodySpace spokes models for
the year. BodySpace is the largest online
fitness forum in the world with over 700,000
active profiles.
FOCUS DELIVERY MOMENTUM
38
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
US CHEESE & GLOBAL NUTRITIONALS
DIVISIONAL PERFORMANCE
DAIRY IRELAND
JOINT VENTURES & ASSOCIATES
Dairy Ireland
Revenue
Operating profit
Operating margin
EBITA
EBITA margin
EBITDA
Results are stated pre exceptional items
2010
2009
€1,138.6m
€1,028.8m
€43.5m
3.8%
€47.9m
4.2%
€66.9m
€24.0m
2.3%
€27.5m
2.7%
€45.2m
Change
+ 10.7%
+ 81.3%
+ 150bps
+ 74.2%
+ 150bps
+ 48.0%
Results overview
Dairy Ingredients Ireland
Dairy Ireland made a good recovery
in 2010, compared with a very difficult
2009. Revenue grew 10.7% to €1.1 billion
(2009: €1.0 billion). Operating profit pre
exceptional increased 81.3% to €43.5
million (2009: €24.0 million) and the
operating margin pre exceptional increased
150 basis points to 3.8% (2009: 2.3%).
EBITA pre exceptional increased 74.2% to
€47.9 million (2009: €27.5 million). EBITDA
pre exceptional increased 48.0% to €66.9
million (2009: €45.2 million).
Love Irish Food
Over 25 of Ireland’s leading food
and drink brands formed a new
independent organisation called Love
Irish Food. This was established to
promote Irish manufactured food and
drink brands to consumers, in a bid to
help enhance the future of Ireland’s
largest indigenous industry which
offers direct and indirect employment
to over 230,000 workers. Consumer
Products is a key supporter of this
initiative, which celebrated its first
anniversary in 2010.
In 2010, market conditions improved
across all global dairy product categories
in line with firm demand and tight supply
conditions. This delivered an improved
performance in Dairy Ingredients Ireland,
despite higher milk costs during the year.
This business recovered from being loss
making for the first time in 2009 but margins
were at the lower end of the historical range.
There was a strong focus on cost
management during the year and targeted
saving initiatives both at gross margin and
overhead level were achieved. A significant
number of people exited the business
resulting in considerable reorganisation of
resources and reshaping of work systems.
A reallocation of management and
technical resources coupled with the first
full year’s operation of a new manufacturing
execution system facilitated by SAP, the
Group’s IT platform, resulted in a step
change in operational performance of the
processing facilities. Cost reduction and
value creation are on-going aims within the
business and the focus on these areas will
continue into 2011.
Dairy Ingredients Ireland was recognised
as ‘Innovation Exporter of the Year’ by The
Irish Exporters Association for its successful
commercialisation of the specialist milk
protein product called Solmiko. Significant
progress was also made in developing the
Middle East as a market for cheese and
fat-filled milk powders through having a
dedicated sales team in the region and
offering customised cheese solutions for
local processing by key customers.
Dairy Ingredients Ireland continues to
examine methods for reducing the effects of
global dairy market price volatility on both
the business and its supplier base. Towards
the end of 2010 a fixed milk price scheme
for a period of three years was discussed
with milk suppliers. The concept was well
received and the business will seek to
develop the scheme further to reflect more
closely current market conditions.
Global dairy markets have risen further to
date in 2011 and are currently expected
to remain firm throughout the year. Dairy
Ingredients Ireland is expected to perform
well in 2011.
For details of Dairy
Ireland management
47
FOCUS DELIVERY MOMENTUM
For further information:
www.glanbia.com
www.avonmoresupermilk.ie
www.glanbiaagribusiness.ie
39
GLANBIA PLC
ANNUAL REPORT 2010
DIVISIONAL PERFORMANCE
US CHEESE & GLOBAL NUTRITIONALS
DAIRY IRELAND
JOINT VENTURES & ASSOCIATES
Consumer Products 2010 awards:
• The Supermilk marketing campaign won
• The milk production facility in Ballitore
a gold medal in ‘advertising effectiveness’
from The Institute of Advertising Practitioners
in Ireland;
was shortlisted as a finalist in the
National Standards Authority of Ireland
Environmental awards;
• A Gold Medal from the Marketing Institute
of Ireland for Avonmore’s Corporate Social
Responsibility (CSR) programme with
Barretstown camp for sick children;
For more on this see
Our responsibilities
31
• Consumer Products became the first Irish
business to be awarded a multi-site award for
IS 16001 energy management; and
• Consumer Products supply chain won a
prestigious environmental award from the
Chartered Institute of Transport and Logistics.
Consumer Products
Market conditions for Consumer Products
remained very challenging in 2010 and
overall revenue, operating profit and
margins were lower than 2009. Consumer
confidence in Ireland declined as the year
progressed and value remains the key
focus in all food categories.
Consumer Products had a mixed year
across its portfolio. The highlights include
market share gains for Avonmore milk and
a good performance in particular by the
value added branded milk products. The
innovations in Avonmore ‘Easy Pour’ jug and
Supermilk continued to underpin branded
milk volumes in 2010, with household
penetration of Avonmore ‘Easy Pour’ jug
increasing by 50% in the year. 2010 also
saw Consumer Products achieve national
distribution for the Avonmore milk range.
Subject to regulatory approval, Consumer
Products has agreed to acquire the Limerick-
based liquid milk business of Kerry Group
plc. This will enable Consumer Products
expand its successful liquid milk business.
The trading environment for fresh dairy
products was difficult in 2010 driven by
intensive price promotion activity. For the
food business overall it was a difficult year
with margin pressure both on pricing and
input costs.Significant cost reductions
were achieved in the operational cost
base driven primarily by headcount
and process re-engineering. Consumer
Products continued to invest in supply chain
management in 2010 and now has the most
advanced route-to-market capability within
the chilled grocery sector in Ireland. While
Consumer Products performance was lower
year-on-year, this business is now on a more
sustainable operating platform given the
prevailing market conditions.
While underlying volume trends have
stabilised for Consumer Products the market
remains fragile and the trading environment
for 2011 is expected to continue to be
difficult. In 2011, Consumer Products plans
to continue to drive cost reductions to
offset input and promotional cost pressures.
Overall performance for 2011 is expected to
be broadly in line with 2010.
Pictured receiving the Marketing Institute of
Ireland award were – L to R – Aidan Power,
EBS Building Society and Robert Jordan,
Marketing Manager, Glanbia Beverages.
Agribusiness
In 2010, the recovery in milk and grain prices
boosted farm incomes. This supported
good volume growth across key categories
of feed and fertiliser in Agribusiness during
the year. Throughout 2010 the business
focused on:
• cost reduction programmes to achieve a more
sustainable and competitive cost base; and
• enhanced customer offering by developing
focused business manager teams with
capability to add value for farmer customers.
In 2010, the business performed broadly
in line with 2009. In 2011, the Group
expects a marginal improvement in
performance through an improved
product mix and continued tight
management of the cost base.
CountryLife Garden Centres
From a standing start three years
ago Agribusiness has developed
a niche garden centre offering in
our CountryLife retail outlets. This
business has strong growth prospects
centered on excellent customer
service supported by horticultural
expertise, strong product quality
and competitive pricing. Just one
year after opening, the CountryLife
Garden Centre in Castlecomer,
Co. Kilkenny, has been awarded the
prestigious Bord Bia `2010 Best DIY/
Garden Centre of the Year Award´
and the `2010 Best New Garden
Centre of the Year Award´ and 4
Star Accreditation.
FOCUS DELIVERY MOMENTUM
40
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
US CHEESE & GLOBAL NUTRITIONALS
DIVISIONAL PERFORMANCE
DAIRY IRELAND
JOINT VENTURES & ASSOCIATES
Joint Ventures & Associates
Revenue(1)
Operating profit
Operating margin
EBITA
EBITA margin
EBITDA
(1) Not included in Group revenue.
Constant Currency
Reported
2010
€401.1m
€20.6m
5.1%
€20.6m
5.1%
€26.7m
2009
€297.6m
€17.4m
5.8%
€17.4m
5.8%
€23.8m
Change
+ 34.8%
+ 18.4%
- 70bps
+ 18.4%
- 70bps
+ 12.2%
2010
€416.6m
€21.6m
5.2%
€21.6m
5.2%
€27.8m
Reconciliation of operating profit to the share of results per the income statement
Operating profit
Finance costs
Income taxes
Share of results of Joint Ventures & Associates
Reported
2010
€m
21.6
(4.7)
(6.8)
10.1
Change
+ 40.0%
+ 24.1%
- 60bps
+ 24.1%
- 60bps
+ 16.8%
2009
€m
17.4
(3.5)
(3.7)
10.2
Analysis on a constant
currency basis
Joint Ventures & Associates had a
reasonable year. Revenue and operating
profit improved as a result of market price
increases in US cheese and European
mozzarella markets. Glanbia’s share of
revenue grew 34.8% to €401.1 million (2009:
€297.6 million). Glanbia’s share of operating
profit increased 18.4% to €20.6 million
(2009: €17.4 million). Operating margins
declined 70 basis points year-on-year to
5.1%, mainly as a result of lower margins in
Southwest Cheese, which was challenged
by the significant decline in cheese markets
in the last quarter of the year. The Group’s
share of profit after interest and tax was
€10.1 million, down marginally from €10.2
million in 2009. The above table reconciles
operating profit with share of results of Joint
Ventures & Associates, as reported in the
income statement.
Glanbia expanded its US cheese position
in 2010 to become one of the largest US
manufacturers of American-style cheddar
cheese, following the 40% expansion of
production capacity of Southwest Cheese in
New Mexico which was completed on time
and on budget in 2010. Southwest Cheese
is the largest of the Group’s joint ventures
and is located in New Mexico, a major milk
producing region in the USA. This business is a
50:50 joint venture with The Greater Southwest
Agency. Overall operating performance was in
line with expectation for 2010.
Glanbia Cheese in the UK, the Group’s
European mozzarella cheese joint venture
with Leprino Foods Company, benefited
from good pizza demand across Europe,
particularly in the home delivery segment
where strong customer relationships and
unique technologies underpinned growth.
This business increased revenue, operating
profit and operating margin in 2010.
Nutricima, based in Nigeria, is a 50:50 joint
venture with PZ Cussons plc. This business is
developing a portfolio of branded dairy-
based consumer products for the Nigerian
market, including liquid, condensed and
powdered milk products. Nigeria is a large
market with an estimated population of
150 million people. It has a significant local
FOCUS DELIVERY MOMENTUM
oil industry and high oil prices support
a positive economic outlook. In 2010,
Nutricima continued to make steady
progress. Revenue growth in the year was
in line with expectations. However, margin
pressure was a feature of the second half,
as increased dairy commodity prices were
not fully recovered in the retail market.
There is a strong pipeline of new product
development for the Ready-to-Drink (RTD)
sector, a key growth market for this business.
In 2011, Joint Ventures & Associates is
expected to deliver some growth relative to
2010 with a good cash return to the Group
through the forecast dividends.
For further information:
www.glanbia.com
www.southwestcheese.com
www.glanbiacheese.co.uk
41
GLANBIA PLC
ANNUAL REPORT 2010
Southwest Cheese is one
of the largest cheese
and high protein whey
processing facilities in
the USA. In 2010, a 40%
expansion of production
capacity, costing
$90 million, was fully
commissioned on time
and on budget.
FOCUS DELIVERY MOMENTUM
42
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Chairman’s introduction to corporate governance
Liam Herlihy
Chairman
Biography
44
We focus on governance in a way
that promotes:
• Transparency, giving our shareholders
the information they need to assess our
performance;
• Effective decision-making, risk management
and control;
• A good balance between executive, senior
management and non-executive Director's
roles and responsibilities;
• Keeping the interests of the shareholders
aligned with how we manage the business; and
• Maintaining a good dialogue with other
stakeholder groups who are associated with
our business such as employees, customers,
suppliers, regulators and the communities
where we operate.
In keeping with the above, this year we
have undertaken a review of our annual
report and made changes in key areas such
as setting out our strategy and business
models in more detail; explaining how we
manage the business and how governance
and risk management is embedded in the
organisation; giving greater detail on the
risks Glanbia faces; and an enhancement in
governance reporting and information.
Board effectiveness
Every three years we conduct an external
evaluation of Board effectiveness and the
last external review was completed in 2009.
In 2010, I undertook a structured internal
review through one-on-one interviews with
each Director. Full details of this process are
set out on page 50 of this report. Overall the
results showed a high level of satisfaction
amongst the Directors regarding Board
processes and decision-making. In my view
this is a very positive outcome in a year of
significant strategic initiatives and very high
levels of engagement by the Board. There
are some recommendations from this review
process, including more frequent reporting
of risk to the Board and more Board
meetings hosted at key Group locations.
Both of these recommendations will be
addressed this year.
Shareholder engagement
There was a high level of investor relations
activity undertaken by senior management
in 2010 and over 100 individual investor
meetings were held. Whenever possible, all
Directors attend the AGM and shareholders
are invited to ask questions during the
meeting and have the opportunity to meet
with the Directors following the conclusion
of the formal part of the meeting.
There were a number of meetings with the
Council of Glanbia Co-operative Society
Limited, including formal presentations to
the Council on results and major strategic
decisions such as the acquisition of Bio-
Engineered Supplements and Nutrition
business (BSN) in January 2011.
Looking ahead to 2011
As set out in corporate governance
highlights on page 15 of my Chairman’s
statement, the Board has a strong
commitment to high standards of
conduct and good governance. Our 2011
governance objectives and targets include:
• Delivery of earnings growth in line with market
expectations;
• Successful integration of the BSN acquisition;
• Ongoing assessment of key risks and
uncertainties;
• Enhance Board relationships with key business
units and personnel through on-site Board
meetings at Irish and US business locations;
• Implement regulatory and governance changes
at an appropriate level for the Group;
• Review and update of the Group remuneration
policy framework.
FOCUS DELIVERY MOMENTUM
"TheBoardandmanagementofGlanbiaarecommittedtoachievingthehigheststandardsofcorporategovernance.WetakegovernanceseriouslyatalllevelsoftheorganisationandarobustgovernancestructureunderpinsthedeliveryoftheGroup’sstrategy.IsetoutbelowwhatgovernancemeanstoGlanbiaandthoseapproachesthatworkforus,inthecontextofourbusinessandculture." 43
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Governance & risk framework
Board of Directors
Non-executive
Chairman
Two non-executive
vice-Chairmen
Senior Independent
Director
Three executive
Directors
Fourteen non-
executive Directors
Group Operating
Executive
Monthly meetings
Purpose is to monitor
performance and make key
strategic recommendations
to the Board. This forum
is also the Group Risk
Committee.
Audit Committee
Key activities include review
of financial statements and
auditor’s independence,
internal control and risk
management systems, and
the effectiveness of the
Internal Audit function.
Remuneration
Committee
Key activities include review of
executive Directors and senior
management salaries and
benefits, approval of annual
bonus targets and long term
incentive plan awards.
Nomination Committee
Key activities include making
recommendations on the
appointment of the Chairman,
vice-Chairmen and new non-
executive Directors, planning
for the orderly succession of
Directors and review of the
independence and time
commitment of non-executive
Directors.
Group Management
Committee
Quarterly meetings
The Group Management
Committee brings together
key business unit CEOs
and the Group Operating
Executive and has
responsibility for delivery of
Glanbia’s annual business
plans and strategy.
Risk management
The Board has ultimate
responsibility for risk, which
includes the Group’s risk
governance structure and
maintaining appropriate
internal controls. The
Audit Committee has
responsibility for reviewing
the effectiveness of the
Group internal control and
risk management systems.
Group Senior
Leadership Team
Bi-annual meetings
This brings together the Group
Operating Executive, Group
Management Committee
members, senior business unit
teams and Group functional
heads. The focus is to drive
shared understanding of
Glanbia's goals and objectives
and the role of each business
unit in delivering the annual
business plan and strategy
and to build on Group-wide
capabilities, initiatives and
collaboration opportunities.
FOCUS DELIVERY MOMENTUM
Find out more
How we are structured
Group Managing Director’s review
Group Finance Director’s review
Risk management
Divisional performance
Board of Directors
and senior management
Audit Committee report
Nomination Committee report
Remuneration Committee report
Go online
www.glanbia.com/report
9
16
22
27
36
44
57
59
61
44
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Board of Directors and senior management
Non-executive Directors
Jerry Liston
John Callaghan
Victor Quinlan
Martin Keane
Liam Herlihy
Jerry Liston Chairman of
Remuneration Committee
Jerry Liston (B.A., MBA) (aged 70) was
appointed to the Board in 2002. He was
formerly Chief Executive of United Drug plc
and past Executive Chairman of the Michael
Smurfit Graduate School of Business.
Chair: Remuneration Committee
Member: Nomination Committee/
Audit Committee
John Callaghan Senior Independent Director
John Callaghan (FCA, FIB) (aged 68)
was appointed to the Board in 1998 and
is the Senior Independent Director. He
is a director of a number of companies
including Topaz Energy Group, 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.
Chair: Audit Committee
Member: Nomination Committee/
Remuneration Committee
FOCUS DELIVERY MOMENTUM
Victor Quinlan1 Vice-Chairman
Liam Herlihy1 Chairman
Victor Quinlan (B.Agr.Sc.) (aged 65) is
vice-Chairman. He was first appointed
to the Board in 1996 and was appointed
vice-Chairman in 2005. He is Chairman of
Irish Co-operative Society Limited and the
Malting Company of Ireland Limited and a
director of D Walsh & Sons Limited and a
number of other Irish companies. He farms
at Baptistgrange, Lisronagh, Clonmel,
Co. Tipperary.
Member: Audit Committee/
Remuneration Committee
Martin Keane Vice-Chairman
Martin Keane (aged 55) is vice-Chairman.
He was appointed to the Board in 2006
and vice-Chairman on 29 June 2010. He is
a director of Co-operative Animal Health
Limited and Donaghmore Famine Work
House and Agricultural Museum Co-
operative Society Limited. He farms at Errill,
Portlaoise, Co. Laois.
Member: Audit Committee/
Remuneration Committee
Liam Herlihy (aged 59) is Chairman. 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
the Irish Dairy Board Co-operative Limited
and 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.
Chair: Nomination Committee
Member: Audit Committee/
Remuneration Committee
1
Completed the University College Cork Diploma
in Corporate Direction
45
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Henry Corbally1 (aged 56) was
appointed to the Board in 1999. He is
vice-Chairman of the National Dairy
Council. He farms at Kilmainhamwood,
Kells, Co. Meath.
Member: Audit Committee
Edward Fitzpatrick1 (aged 62) 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 60) was
appointed to the Board in 2009.
He farms at Oldtown, Ballyragget,
Co. Kilkenny.
James Gilsenan1 (aged 51) was
appointed to the Board in 1999. He
farms at Drogheda Road, Collon,
Co. Louth.
Patrick Gleeson (aged 49) was
appointed to the Board in 2006. He is
a Committee Member of Centenary
Thurles Co-operative Society Limited
and farms at Loughmore, Templemore,
Co. Tipperary.
Paul Haran (aged 53) 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.
Member: Audit Committee /
Remuneration Committee/
Nomination Committee
Brendan Hayes (aged 50) was
appointed to the Board on 29 June
2010. He farms at Ballyquinn, Carrick-
on-Suir, Co. Waterford.
Michael Keane (aged 58) was
appointed to the Board on 29 June
2010. He farms at Foxhall, Ballinamona,
Ardmore, Youghal, Co. Cork. Michael
previously served on the Board from
June 2005 to May 2007.
Matthew Merrick (aged 59) was
appointed to the Board in 2005. He
is Chairman of the County Offaly
Enterprise Board. He farms at Shean,
Edenderry, Co. Offaly.
John Murphy (aged 48) was appointed
to the Board on 29 June 2010. He farms
at Ballinacoola, Craanford, Gorey, Co.
Wexford.
William Murphy (B. Comm) (aged 65)
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’Connor1 (aged 59) was
appointed to the Board in 2008. He
farms at Ballymacsimon, Kilmuckridge,
Gorey, Co. Wexford.
Robert Prendergast1 (aged 49) was
appointed to the Board in 2008. He
farms at Jeanville, Goresbridge,
Co. Kilkenny.
FOCUS DELIVERY MOMENTUM
46
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Group Operating Executive
John Moloney
Brian Phelan
Kevin Toland
Michael Horan
Siobhán Talbot
John Moloney Group Managing Director
and Executive Director
Brian Phelan Group Human Resources &
Operations Development Director
John Moloney (B.Agr.Sc., MBA) (aged 56)
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.
Brian Phelan (B. Comm, FCA) (aged 44),
is Group Human Resources & Operations
Development Director of Glanbia plc. Brian
was appointed to his Human Resources role in
2004 and his role was expanded in May 2007
to include Operations Development and in
July 2009 to include the Group Purchasing
and Group Business Service areas. Prior to this
he was CFO of the Consumer Foods Division.
He also worked in Glanbia Ingredients in
Ireland and the USA. Prior to joining the
Group in 1993 he worked with KPMG.
Kevin Toland CEO and President of Glanbia USA
and Global Nutritionals and Executive Director
Kevin Toland (FCMA) (aged 45) was appointed
to the Board in 2003. He is CEO and President
of Glanbia USA and Nutritionals, having
previously held the positions of Group
Development Director and Chief Executive
of the Consumer Foods Division. Prior to
joining Glanbia in 1999, he held a number of
senior management positions with Coca-Cola
Bottlers in Russia and with Grand Metropolitan
plc in Ireland and Central Europe.
Michael Horan Group Secretary
Michael Horan (B.Comm, FCA) (aged 46),
was appointed Group Secretary of Glanbia
plc in June 2005, having previously held the
position of Group Financial Controller since
June 2002. He joined the Glanbia Group
in 1998 as Financial Controller of the Fresh
Pork business in Ireland. Michael previously
worked with Almarai Company Ltd in Saudi
Arabia and BDO Simpson Xavier.
Siobhán Talbot Group Finance Director and
Executive Director
Siobhán Talbot (B.Comm, FCA) (aged 47),
joined the Board as Group Finance Director
in July 2009. She was appointed Deputy
Group Finance Director of Glanbia plc in
June 2005. She was formerly Group Secretary
and also held a number of senior finance
positions, since she joined the Group in
1992. Prior to joining the Group she worked
with PricewaterhouseCoopers in Dublin and
Sydney, Australia.
FOCUS DELIVERY MOMENTUM
47
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Group Management Committee
Jim Bergin
CEO Dairy Ingredients Ireland
Jim Bergin (B. Comm, M. Sc. Mngt.
Practice) (aged 48), is Chief Executive of
Dairy Ingredients Ireland. He joined the
Group in 1984 and has held a number of
senior positions including Finance Director
Agribusiness and subsequently Group
Business Process Director. He joined
the Ingredients Business as Operations
Manager in May 2003 and was appointed
Chief Executive of Dairy Ingredients Ireland
in March 2005.
Colm Eustace
CEO Agribusiness
Colm Eustace (B. Ag. Sc, C Dip AF, MBA )
(aged 49 ), is Chief Executive of Agribusiness.
He joined the Group in 1985 and has
held a number of senior positions within
Agribusiness (including Commercial
Manager since 1997). He has been Chief
Executive of Agribusiness since October
2005 and is a director of Co-operative Animal
Health Limited.
Colin Gordon
CEO Consumer Products
Colin Gordon (BBS, MBS, FMII) (aged 49), is
Chief Executive of Consumer Foods since
his appointment to the Group in 2006. He
previously worked in C&C Group plc, the
drinks and snack food company where he
held a number of senior positions, including
Managing Director of C&C (Ireland) Ltd.
Colin is currently a member of the Consumer
Foods Board of Bord Bia and Chairman of
the Consumer Foods Council of the Irish
Business and Employers Confederation.
Raimund C. Hoenes
CEO Customised Premix Solutions
Raimund C. Hoenes (Ph.D., M.Sc.)
(aged 44) is Chief Executive of Glanbia
Nutritionals Customised Premix Solutions.
He joined the Group in 2008 and was
appointed Chief Executive of Glanbia
Nutritionals Customised Premix Solutions
in 2009. He previously worked in a variety
of senior roles in the ingredients sector and
held positions in several countries.
Hugh McGuire
CEO Performance Nutrition
Hugh McGuire (M.Sc, Dip Finance)
(aged 40), is Chief Executive of Glanbia
Performance Nutrition. He joined the
Group in 2003 and was appointed as Chief
Executive of Performance Nutrition in 2008.
He previously worked for McKinsey & Co.
as a consultant across a range of industry
sectors. Prior to this he worked in the
consumer products industry with Nestle
and Leaf.
Jerry O’Dea
CEO & President Ingredient Technologies
Jerry O’Dea (B. Sc Dy., MBA) (age 51), is the
President and Chief Executive of Glanbia
Nutritionals Ingredient Technologies. He
joined the Group in 1981 and has held a
number of senior positions including General
Manager of Glanbia Ingredients USA and
President of Glanbia Nutritionals. He was
appointed Chief Executive of Glanbia
Nutritionals Ingredient Technologies in 2008.
Jeff Williams
CEO & President US Cheese
Jeff Williams (BA, MBA) (aged 54), is the
President and Chief Executive of US Cheese
and has management responsibilities for
Glanbia’s joint venture Southwest Cheese.
He joined the Group in 1989 and has held
many positions in the US Cheese business
including Chief Operations Officer and
Executive Vice President. Jeff was appointed
President and Chief Executive of US Cheese
in 2005. Jeff previously worked for six years
in the banking industry.
Find out more
Divisional performance:
US Cheese & Global Nutritionals
Divisional performance:
Dairy Ireland
Divisional performance:
Joint Ventures & Associates
36
38
40
FOCUS DELIVERY MOMENTUM
48
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Applying the principles of the Combined Code on
Corporate Governance and the 2010 UK Corporate
Governance Code
We conduct our business with due regard for applicable laws, regulations and internal policies.
This includes the main and supporting principles in the UK 2008 Combined Code on Corporate
Governance (the “Code”). We also acknowledge that laws, regulations and policies do not provide
guidance on all types of behaviour. As a result, we have a Code of Conduct for everybody in Glanbia.
The Glanbia Code of Conduct is intended as a code of best practice and provides a broad range of
guidance about the expected standards of integrity and business conduct. The Code of Conduct is not
intended to be a substitute for our responsibility and accountability to exercise good judgment and
obtain guidance on proper business conduct. Glanbia employees are encouraged and expected to
seek additional guidance and support from others when in doubt.
Compliance with the Code
Our Board
Board effectiveness
It is our view that except in relation to the
representation of the majority shareholder
on the Board, the Company has been
compliant throughout 2010 with the
provisions set down in Section 1 of the 2008
Combined Code on Corporate Governance
as this applies to all accounting periods
beginning before 29 June 2010.
We have noted the changes made in the
2010 UK Corporate Governance Code
which has replaced the 2008 Combined
Code on Corporate Governance for
accounting periods beginning on or after
29 June 2010 and the recommendations
of the Irish Stock Exchange contained in
the Irish Corporate Governance Annex
(which is publicly available on the Irish Stock
Exchange's website www.ise.ie), which
will not impact the Company until 2011,
and are reviewing our current corporate
governance practices to ensure that the
Company remains compliant and high
standards are maintained.
The Code 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/
ukcgcode.cfm
Our Board consists of the Chairman
(Liam Herlihy), two vice-Chairmen (Martin
Keane and Victor Quinlan); fifteen other
non-executive Directors (including John
Callaghan, the Senior Independent Director)
and three executive Directors (John
Moloney, the Group Managing Director,
Siobhán Talbot, the Group Finance Director
and Kevin Toland, the CEO and President of
Glanbia USA and Global Nutritionals).
The roles of the Chairman and Managing
Director are separate, with clear written
guidance to support the division
of responsibility.
Glanbia Co-operative Society Limited (“the
Society”), an Irish industrial and provident
society, owns 54.5% of the share capital of
the Company. The Society nominates from
its Board of Directors, which is elected on
a three-year basis, fourteen non-executive
Directors for appointment to our Board. All
of the Directors nominated for appointment
by the Society are full time farmers whose
involvement in farming has brought
them into the agricultural co-operative
movement in Ireland. All have significant
expertise in the dairy and agricultural
industry in Ireland and a significant majority
of them have overseen the growth of
Glanbia plc into an international nutritional
solutions and cheese group over the last
number of years.
We consider that, to function effectively, all
members of our Board need appropriate
knowledge of the Group and access to
its operations and staff. 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.
Additionally, presentations and reports
on commercial initiatives, the Group’s
markets, the Group’s competitive position
and general economic indicators are given
periodically to our Board.
We also hold a number of Board meetings
away from the head office, which provide
our Directors with the opportunity to
broaden their understanding of the business
and key markets and to gain invaluable
insights through direct contact with
business managers and the operations.
The September 2010 Board meeting was
held in the US. Our Directors used this
opportunity to meet the management of the
US Performance Nutrition business, the US
Cheese business and the Southwest Cheese
business and inspect these facilities.
FOCUS DELIVERY MOMENTUM
49
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Key matters reserved to the Board
Our Board is responsible for the leadership, direction and control
of the Company and its subsidiary companies and is accountable to
shareholders for financial performance.
• Capital expenditure
including the annual approval of the
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 our
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.
• Key business policies
including approval of the remuneration,
treasury and risk policies.
• Group strategy and business plans
including responsibility for the overall
leadership 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 our 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 Operating Executive considers
all major acquisitions, disposals and other
transactions prior to its consideration by
the Board.
• Financial reporting and controls
including approval of the half-yearly
report, interim management statements
and preliminary announcement of the
final results. Approval of the annual
report and financial statements, including
this corporate governance statement
and Committee reports. Approval of any
significant changes in accounting policies
or practices, ensuring maintenance of a
sound 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.
Following appointment to our Board,
Directors undertake an induction
programme aimed at familiarising
themselves with the Company and the
Group. The programme for Directors
who joined during 2010 included a review
of the following:
• Directors’ duties, corporate governance
and Board procedures. The Company has
a corporate manual which is issued to all
Directors and is regularly updated for new
legislation and procedures;
• Business planning and internal control
processes;
• Strategy and planning;
• Metrics used to monitor business performance;
• Investor relations;
• Corporate responsibility (including ethical
business conduct, and health and safety); and
• Internal Audit.
In addition to the above, as part of the
induction process, the new Directors visited
the Group’s largest processing plant in
Ireland at Ballyragget in order to meet
employees and gain an understanding of
our products and services.
Briefing sessions on legislative and
accounting developments are held for our
Board when appropriate. Our Board has
received updates from the Group Secretary
regarding regulatory changes and new
legislation, including, amongst other
things, the changes adopted in the 2010 UK
Corporate Governance Code, the Irish Stock
Exchange Annex, the new UK Stewardship
Code and the European Communities
(Directive 2006/46/EC) Regulations 2009.
All Directors also have access to the advice
and services of the Group Secretary, who is
also responsible for advising our Board on all
governance matters. The Directors also have
access to external advice, if required, at the
expense of the Group.
FOCUS DELIVERY MOMENTUM
50
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Evaluation of the effectiveness of our Board
Internal control and risk management
d
e
re
g
n a
ctio
A
Implementation
Board
performance
Board
process
Additional
issues
Board culture &
relationships
Overall
performance
Non-executive
Directors
Q
u
e
s
t
i
o
n
n
a
i
r
e
s
R
e
p
ort to B
o
ard
Board
composition
g s
e tin
e
e m
n
e t o o
n
O
Risk assessment
The control
environment
Glanbia
objectives
The Board
Identify &
evaluate risks
& control
objectives
Monitoring
Information &
communication
Control
procedures
to discuss the performance of the Board
and individual Directors. The results
showed a high level of satisfaction amongst
the Directors as to the effectiveness of
our Board, its individual Directors and
Committees. Arising from the review, our
Board has agreed to:
• enhance our risk monitoring policies to include
more regular reporting of the status of risks to
the Audit Committee and our Board
• ensure that more Board meetings are held at
on-site locations to enhance our Directors
opportunities to broaden their understanding
of the business and key markets
The Chairman wishes to confirm that,
following the completion of the performance
evaluation process, the members of the
entire Board who are all being proposed for
re-appointment continue to be effective and
continue to demonstrate commitment to
their roles. The Senior Independent Director,
John Callaghan 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.
Find out more
52
Independence
During the year, the Nomination
Committee reviewed the independence of
the non-executive Directors in accordance
with the guidance in the Code and reported
its recommendations to the Board.
Our Board determined that throughout
the reporting period, John Callaghan, Paul
Haran and Jerry Liston were independent.
We recognised, however, that the remaining
non-executive Directors did not throughout
the entire reporting period meet the criteria
for independence as specified in the Code.
We, however, considered that they are
independent in character and judgement.
All of the non-executive Directors bring an
independent perspective to their advisory
and monitoring roles.
Board and Committee
attendance
The Board held 10 scheduled Board
meetings in 2010 (2009: 10) and as in 2009
also held a two day planning and strategy
session. The attendance of each Director
at the scheduled Board meetings and the
two day planning and strategy session
Evaluation of the effectiveness
of our Board
We have established a formal process for
the annual evaluation of the performance
of the Board, its principal Committees and
individual Directors. Questionnaires are
drawn up, which provide the framework for
the evaluation process. Each member of
the Board and appropriate Committee is
invited to comment on the performance of
the individual, the Board and appropriate
Committee and submits replies to the
questionnaires which are then collated. The
Chairman then meets with each Director
individually to discuss the performance of
the Board and appropriate Committee and
individual Directors and reports his findings
to the Board.
It is the practice that evaluation of the
performance of the Board be externally
facilitated every three years. An external
review was completed in 2009.
During 2010 our Board and/or its
Committees conducted an evaluation of its
own performance, its principal Committees
and individual Directors. In completing
the annual performance evaluation, the
Chairman met each Director individually
FOCUS DELIVERY MOMENTUM
51
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Board Meeting attendance
L Herlihy (Chairman)
Mn Keane (Vice-Chairman)
V Quinlan (Vice-Chairman)
J Moloney
J Callaghan
H Corbally
N Dunphy 1
J Fitzgerald 1
E Fitzpatrick
J Gannon
J Gilsenan
P Gleeson
P Haran
B Hayes 2
C Hill 1
Ml Keane 2
J Liston
M Merrick
J Murphy 2
W Murphy
A O’Connor
R Prendergast
S Talbot
K Toland
1 Retired 29 June 2010
2 Appointed 29 June 2010
11/11
11/11
11/11
11/11
11/11
11/11
5/5
5/5
11/11
11/11
11/11
11/11
11/11
6/6
5/5
6/6
11/11
11/11
6/6
11/11
11/11
11/11
11/11
10/11
Nomination Committee Meeting
attendance
L Herlihy (Chairman)
J Callaghan
P Haran
J Liston
2/3
3/3
3/3
3/3
Remuneration Committee Meeting
attendance
J Liston (Chairman)
J Callaghan
J Fitzgerald 1
P Haran
L Herlihy
Mn Keane 2
V Quinlan
1 Retired 29 June 2010
2 Appointed 29 June 2010
Audit Committee Meeting
attendance
J Callaghan (Chairman)
H Corbally
J Fitzgerald 1
P Haran
L Herlihy
Mn Keane 2
J Liston
V Quinlan
1 Retired 29 June 2010
2 Appointed 29 June 2010
7/7
7/7
3/4
7/7
7/7
3/3
7/7
3/3
3/3
1/2
3/3
3/3
1/1
2/3
3/3
Further information
Directors and senior
management biographies
44
are shown opposite. The Committee
attendance of those Directors who are
members of the principal Board are also
shown opposite.
Committees
Finance Sub-Board
The Finance Sub-Board is chaired by Liam
Herlihy and its other members are Victor
Quinlan, Martin Keane, John Callaghan,
Edward Fitzpatrick, Paul Haran, Jerry Liston,
John Moloney and Siobhán Talbot.
The Finance Sub-Board met twice during
2010. The Finance Sub-Board’s key
objectives are 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.
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 industry sectors in the US.
Liam Herlihy is Chairman of the US Advisory
Board. The membership of the Advisory
Board currently comprises John Callaghan,
Kevin Toland, Martin Keane, Victor
Quinlan, Michael Walsh (Glanbia Group
Chairman from 2005 to 2008); and Joseph
McCullough, Peter Rogers, Wayne Seltzer
and Susan Davis (USA based members).*
John Moloney and Siobhán Talbot also
attend meetings of the US Advisory Board.
*
Joseph McCullough, retired, was previously
Chief Executive Officer of CRH Americas Products
and Distribution. He joined CRH in 1979 and held
a number of senior management positions with
that company.
Peter Rogers, retired, was previously President
of Nabisco Foods Americas and held a variety of
other senior positions in food companies.
Wayne Seltzer recently retired as Chief Executive
Officer of Seltzer Companies, Inc.
Susan Davis is Chairperson of Susan Davis
International, a Washington D.C. based public
affairs agency.
FOCUS DELIVERY MOMENTUM
52
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Our key systems of internal control and risk management are summarised below:
• a Code of Conduct that defines a set of
agreed standards and guidelines for
corporate behaviour;
• a Control Self Assessment programme has
been implemented which assesses internal
control and fraud prevention processes;
• a clearly defined organisation structure and
• Internal control and risk management systems
lines of authority including appropriate terms
of reference for Board committees;
• Group-wide risk assessment process which
is maintained by business unit management
reporting to the Group Operating Executive
and Board;
• 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;
in relation to the process for preparing
consolidated accounts and financial reporting
which includes the following main features:
1
2
Board approval of the annual business
plan following Group and business unit
strategy plan reviews;
Monitoring of performance against the
plan through monthly board reports
detailing actual versus budgeted results,
analysis of material variances, review
of key performance indicators and re-
forecasting where required;
• a Group Internal Audit function, which is
3
regulated by an Internal Audit Charter 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;
Audit Committee review of the
integrity of the half-year and annual
financial statements. Any resulting
recommendations are included in the Audit
Committee Chairman’s Board report;
4
5
6
7
8
Board review and approval of the
Group consolidated half-year accounts,
consolidated 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;
Board approval of acquisitions and
divestments;
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.
Group Secretary
The appointment and removal of the
Group Secretary is a matter for the Board.
All Directors have access to the advice
and services of the Group Secretary, who
is responsible to the Board for ensuring
compliance with Board procedures.
Internal control and risk
management
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. The Board
also has responsibility for determining the
Group’s risk appetite. 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 Code’s principles and
compliance with the Code’s provisions with
regard to internal control. In accordance
with Section 91(6)(b) of the EC (Directive
2006/43) Regulations 2010, responsibility for
monitoring the effectiveness of the Group’s
risk management and internal control
systems has been delegated to the Audit
Committee. The Group’s systems of internal
control are regularly reviewed by the Audit
Committee and the Board and accord with
the Turnbull Guidance which the Board has
fully adopted.
While acknowledging its responsibility for
the system of internal control, we are 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.
Our 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, our Board monitors
the reports of the Audit Committee and
management. Without diminishing its own
responsibilities the Board has delegated
certain acts to the Audit Committee.
These include detailed reviews of key risks
inherent in the business and of the systems
for managing these risks.
The Chairman of the Audit Committee
reports to the Board after each meeting of
the Committee. In addition, the Board has
also taken assurance through the work of
the various other Board Committees. We
are 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.
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 has issued rules covering share
dealings by Directors and employees who
regularly, or even occasionally, have access
to inside information.
FOCUS DELIVERY MOMENTUM
53
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Annual General Meeting (AGM)
The Board views the AGM, which is held in
Kilkenny, as an opportunity to communicate
with investors and sets aside time at
these meetings for shareholders to ask
questions of the Board. At the AGM, the
Group Managing Director provides a brief
summary of the Company’s activities for
the previous year to the shareholders.
At the meeting, the Company complies
with the 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 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.
To ensure shareholders have time to
consider the annual report and accounts
and notice of the AGM and lodge their
proxy votes they are 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.
Annual Report
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, the Group
Finance Director's review and Divisional
performance review provide an assessment
of the Group’s affairs and are supported by
a presentation to be made at the AGM.
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 and the
Group. 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.
Communication with
shareholders
The Company has a well-developed
investor relations programme managed by
the Group Finance Director, which includes
regular meetings with investors and Glanbia
Co-operative Society Limited, its main
shareholder, the annual general meeting
and our corporate website.
The Company is committed to maintaining
and improving dialogue with shareholders in
order to ensure that the objectives of both the
Group and the shareholders are understood.
Institutional shareholders, fund
managers and analysts
A programme of meetings with institutional
shareholders, fund managers and analysts
takes place each year. The Company
also makes presentations to analysts and
investors around the time of the half-year
and full-year results announcements.
In addition, the Board consults with
shareholders in connection with specific
issues where it considers this appropriate.
During the year, in a number of additional
meetings preceding the proposed disposal
of the Irish Dairy and Agribusinesses to
Glanbia Co-operative Society Limited,
various members of the Board met
with institutional shareholders and
representative bodies, reinforcing the
continuation of open dialogue and
discussion of strategy between the Board
and its shareholders.
The Board receives reports on matters
that have been raised with executive
Directors at the regular meetings held
with investors.
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 or any of the
other Directors.
Glanbia Co-operative Society
Limited
A programme of meetings with Glanbia
Co-operative Society Limited takes place
each year. This includes presentations at
the time of the half-year and full-year results
announcement.
Private shareholders
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.
Corporate website
Presentations and webcasts on the
development of the business are available to
all shareholders on the Company’s corporate
website. The Company also uses email alerts
and actively promotes downloading of all
reports enhancing speed and equality of
shareholder communication. The Company
has availed of the provisions within the
Transparency (Directive 2004/109/EC)
Regulations 2007 allowing the website to be
used as the primary means of communication
with shareholders where they have not
requested hard copy documentation.
The shareholder information section on
pages 139 to 141 contains further details
on electronic shareholder communications
together with more general information of
interest to shareholders which is also included
on the Company’s corporate website.
FOCUS DELIVERY MOMENTUM
54
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Other statutory information
Principal activities
Glanbia plc is an international
nutritional solutions and cheese
group, headquartered in Ireland.
Further detail can be found in the
Overview section
3
The Company has set out in this report
a fair review of the business of the
Group during the financial year ended 1
January 2011 including an analysis of the
position of the Group at the end of the
financial year, and a description of the
principal risks and uncertainties facing
the Group (known as a ‘Business review’).
The information that fulfils the Business
review requirements can be found in
the Group and Divisional Performance
sections of this report on pages 12 to 41.
Directors
The current Directors who served
during the 2010 financial year are
listed on pages 44 to 46.
44
Brendan Hayes, Michael Keane and John
Murphy were appointed to the Board on
29 June 2010 following the retirement
of John Fitzgerald, Nicholas Dunphy and
Christopher Hill.
Retirement of Directors
In accordance with the 2010 UK
Corporate Governance Code, all Directors
will retire at the 2011 Annual General
Meeting and, being eligible, offer
themselves for re-appointment.
Annual General Meeting (AGM)
The Company’s AGM will be held on 11
May 2011. Full details of the AGM, together
with explanations of the resolutions to be
proposed, are contained in the Notice
of Meeting available on the Company’s
website www.glanbia.com and posted
with this report. In addition to the routine
ordinary business of an AGM, shareholders
are being asked to:
• authorise the Directors to fix the ordinary
remuneration of the non-executive Directors
from time to time up to an aggregate amount
not exceeding #600,000 in any financial year.
• approve the re-election of all the Directors of
the Board which is now required by the 2010 UK
Corporate Governance Code.
FOCUS DELIVERY MOMENTUM
• 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 equal to the
authorised but unissued share capital of the
Company of the date of the AGM which currently
represents 4.14% of the nominal value of the
Company’s issued share capital.
• 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 equal to the nominal value
of the Company's authorised but unissued
share capital as at 11 May 2011 which is
currently equal to 4.14% of the nominal value
of the Company's issued share capital.
• extend the authority to purchase up to 10% of
its own shares until the earlier of the close of
business on 10 August 2012 or the date of the
AGM of the Company in 2012.
• pass a resolution authorising the Company to
reissue such shares purchased by it and not
cancelled as treasury shares.
• approve a resolution to permit an Extraordinary
General Meeting to be called on 14 days notice.
Powers of the Directors
The Directors are responsible for the
management of the business of the
Company and may exercise all powers
of the Company subject to applicable
legislation and regulation, and the Articles
of Association.
At the 2010 AGM, the Directors were given
the power to issue new shares up to a
nominal amount of €746,658.96. This power
will expire on the earlier of the conclusion
of the 2011 AGM or 24 August 2011.
Accordingly, a resolution will be proposed
at the 2011 AGM to renew the Company’s
authority to issue further new shares. At the
2010 AGM, the Directors were also given
the power to disapply the strict statutory
pre-emption provisions in the event of a
rights issue or in any other issue up to an
aggregate nominal amount of €746,658.96.
This authority too will expire on the earlier of
the conclusion of the 2011 AGM or 24 August
2011, and a resolution will be proposed at the
2011 AGM to renew this additional authority.
At the 2010 AGM, the Directors were given
the power to buy back a maximum number
of 29,355,568 ordinary shares at a minimum
price of €0.06 each. The maximum price was
an amount equal to 105% of the average
of the middle market quotations of the
Company’s ordinary shares as derived from
the Irish Stock Exchange Daily Official List for
the five business days immediately preceding
the day on which such ordinary shares are
contracted to be purchased. This power
will expire at the earlier of the conclusion
of the 2011 AGM or 24 August 2011 and a
resolution will be proposed at the 2011 AGM
to renew this power. A special resolution
will be proposed at the 2011 AGM to renew
the Company’s authority to acquire its own
shares. At the 2010 AGM, shareholders also
authorised the maximum and minimum
prices at which the Company may reissue
off-market such shares as it may purchase.
This authority will expire at the earlier of the
conclusion of the 2011 AGM or 24 August
2011 and a resolution will be proposed at the
2011 AGM to renew this authority.
Dividends
An interim dividend of 3.03 cent per
share was paid on 29 September 2010 to
shareholders on the register at the close of
business on 10 September 2010.
The Directors propose a final dividend of
4.49 cents per share. Subject to shareholder
approval, the final dividend will be paid on
20 May 2011 to shareholders on the register
of members on 8 April 2011.
All dividend payments will be made by
direct credit transfer into a nominated Bank
or Financial institution. If a shareholder has
not provided his/her account details prior to
the payment of the dividend, a shareholder
will be sent the normal tax voucher advising
a shareholder of the amount of his/her
dividend and that the amount is being
held because his/her direct credit transfer
instructions had not been received in time.
A shareholder’s dividends will not accrue
interest while they are held. Payment will
be transferred to a shareholder’s account as
soon as possible on receipt of his/her direct
credit transfer instructions.
Additionally, if a shareholder’s registered
address is in the UK and a shareholder has
not previously provided the Company with
a mandate form for an Irish Euro account,
a shareholder will default to a Sterling
payment. All other shareholders will default
to a Euro payment.
55
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Political donations
The Electoral Act, 1997 requires companies
to disclose all political donations over
€5,079 in aggregate made during the
financial year. The Directors, on enquiry,
have satisfied themselves that no such
donations in excess of this amount have
been made by the Group.
Issued share capital
At 1 January 2011 the authorised share
capital of the Company was 306,000,000
ordinary shares of €0.06 each and the
issued share capital was 293,835,684
(2009: 293,555,684) ordinary shares of
€0.06 each, of which 54.5% was held by
Glanbia Co-operative Society Limited.
All the Company’s shares are fully paid
up and quoted on the Irish and London
Stock Exchanges. During the year 280,000
ordinary shares of €0.06 each were allotted
to Geoff Meagher, former Finance Director,
upon the exercise of his outstanding
share options, for a total consideration of
€522,125 (205,000 shares at €1.55 each and
75,000 shares at €2.725 each). The prices at
which the shares were allotted were fixed on
29 August 2002 and 9 December 2004, the
date of the grant of the options (being the
market price at close of business on the day
preceding the grant of the options).
Details of the Company’s share capital and
shares under option or award at 1 January
2011 are given in note 22 and 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.
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. Under the
articles of association of the Company,
the Directors have the power to impose
restrictions on the exercise of rights
attaching to shares where the holder of
the share fails to disclose the identity of
any person who may have an interest in
those shares.
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.
Exercise of rights of shares in
employee share schemes
As detailed in note 22 to the financial
statements at 1 January 2011, 485,304
ordinary shares were held in an employee
benefit trust for the purpose of the
Company’s employee share schemes.
The Trustees of the employee trust do
not seek to exercise voting rights on shares
held in the employee trust other than on the
direction of the underlying beneficiaries.
No voting rights are exercised in relation
to shares unallocated to individual
beneficiaries.
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 2011 AGM available on the
Company website www.glanbia.com and
posted with this report.
Restrictions on voting deadlines
The notice of any general meeting shall
specify the deadline for exercising voting
rights and appointing a proxy or proxies
to vote in relation to resolutions to be
proposed at the general meeting. The
number of proxy votes for, against or
withheld in respect of each resolution are
published on the Company’s website after
the meeting.
Substantial interests
As at 1 March 2011, 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
54.5%
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.
Unless expressly specified to the contary,
the Company’s Memorandum and Articles
of Association may be amended by a
special resolution at a general meeting of
shareholders.
FOCUS DELIVERY MOMENTUM
56
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Change of control provisions
Research and development
The Group has certain debt facilities
which may require repayment in the event
that a change in control occurs with respect
to the Group.
There are also a number of agreements
that take effect, alter or terminate upon
a change of control of the Group, which
include the Group’s joint ventures with
Leprino Foods Company and PZ Cussons
plc. If a third party were to acquire control
of the Group, Leprino Foods Company
could elect to terminate its joint venture
with the Group and if this were to occur,
the Group could then be required to sell its
shareholding in the joint venture to Leprino
Foods at a price equal to its fair value. In
the same circumstances PZ Cussons plc can
also elect to terminate its Nutricima joint
venture with the Group and if this were to
occur, the Group could then be required
to sell to PZ Cussons plc at a nominal
price certain trade marks which had been
originally transferred from the PZ Cussons
group to the Nutricima business. The
Nutricima joint venture company would
then be wound up.
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.
Corporate social responsibility
As the Group grows and develops as a
leading international nutritional solutions
and cheese Group, so also does the Group’s
commitment to conducting its business
in a way that is economically, socially and
environmentally sustainable. During 2010
the Group made further progress in its
corporate citizenship objectives.
More particular details of
which are summarised in the
Our responsibilities section
31
The Group’s key business objectives
include central ownership of its worldwide
intellectual property (IP) in Ireland, whether
acquired IP or developed organically, to
facilitate central management and control
over IP development and its commercial
exploitation. Accordingly, the Group’s
principal research and development
centre is Global Nutritionals’ Glanbia
Innovation Centre, Kilkenny (the “GIC”)
and it has direct responsibility for overall
Group research and development activity,
including that undertaken at the Group’s
other substantial research and development
centre at Twin Falls, Idaho where it also
operates a Customer Collaboration Centre.
The Group is committed to achieving
the highest standards of best practice in
relation to science-based innovation and
to an ongoing and extensive innovation
programme to support a consumer-led
business and marketing approach. The
programme is directed towards the
development of technically superior
dairy-based food ingredients, nutritional
products, cheese and high value consumer
food products, using proprietary
technologies and processes.
Through its research and development
facilities at the GIC and Idaho, the Group
has developed and launched advanced,
differentiated and branded ingredients
and consumer products, bringing a
range of nutritional benefits that enhance
physiological wellbeing, texture and flavour
enhancements in foods.
In Kilkenny, the R&D activity has focused on
the customer-led areas of sports nutrition,
beverages, protein and energy bars, food
texture and functionality, dietetic products,
weight management, healthy aging, and
medical nutrition. These developments
cut across the Group’s global business
by collaboration with the Customer
Collaboration Centre at Idaho. The GIC
has performed a key role in connecting
the Glanbia Research & Development
Community with Food for Health Ireland
(FHI), a joint development programme
between Enterprise Ireland, Irish dairy
research universities (UCC, UCD, UL) and
organisations (Moorepark), and the Irish
dairy industry. In 2010, the collaboration
with FHI focused on Glanbia-produced milk
and whey products that were screened for
a variety of physiological functions. These
FOCUS DELIVERY MOMENTUM
programme collaborations will continue
through 2011.
The work programme performed at
the Collaboration Centre in Twin Falls,
Idaho for the GIC during 2010 consisted
of developments in sports nutrition and
beverages, protein and energy bars,
food texture and functionality, weight
management, healthy aging, medical
nutrition, and a move into the US health-
food, retail markets under the beveri
brand. These development areas are being
addressed through both whey and flax-
derived ingredients and solutions. The US
Collaboration Centre has become a focal
point for joint research with US customers,
particularly in beverage and bar applications
and, mediated through the GIC, it was also
able to connect to the FHI programme.
Subsidiary and associated
undertakings
A list of the principal subsidiary and
associated undertakings is included in note
40 to the financial statements.
Responsibility Statement
Directors’ responsibilities for preparing
the financial statements for the Company
and the Group are detailed on page 71.
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.
Auditors
The auditors, PricewaterhouseCoopers,
have expressed their willingness to
continue in office in accordance with
Section 160(2) of the Companies Act, 1963.
57
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Audit Committee report
Governance
Relationship with the auditors
The Committee was in place throughout
2010.
John Callaghan is the current chairman
of the Committee. He is a fellow of the
Institute of Chartered Accountants in
Ireland and formerly Managing Partner of
KPMG (Ireland), an international provider of
audit, tax and advisory services in Ireland.
At the invitation of the Committee, the
Group Managing Director, the Group
Finance Director, Group Head of Internal
Audit, the Group Financial Controller and
external auditor regularly attend meetings.
During the year the Group Managing
Director, the Group Finance Director,
Group Head of Internal Audit and external
auditor attended all meetings. The Group
Financial Controller attended two of the
three meetings. The Group Secretary acts
as secretary to the Committee.
The Committee comprises seven non-
executive Directors and three members
constitute a quorum. Membership of the
Committee is reviewed by the Chairman of
the Committee and the Group Chairman
and they recommend new appointments
to the Nomination Committee for onward
recommendation to the Board. Martin
Keane joined the Committee on 29 June
2010 following the retirement of John
Fitzgerald.
The Committee may obtain at the
Company’s expense independent
professional advice on any matters covered
by its terms of reference.
The Committee believes that it is not
appropriate to limit the level of work
undertaken by the auditors by reference to
a set percentage of the audit work fee, as
this does not take into account important
estimates that need to be made concerning
the nature of work undertaken, to help
safeguard the auditors’ independence.
It has in place an approved Auditor
Relationship and Independence Policy
which governs the relationship between the
Company and its auditors and recognises
that certain work of a non-audit nature is
best undertaken by the external auditors.
As part of its responsibilities, the Committee
reviews annually the independence of the
auditors and the amount and nature of non-
audit work they perform. The Committee
has agreed that the external auditors may
provide audit and audit related services
provided that any individual audit related
service to be undertaken by the auditors
in excess of €100,000 does not impair
their independence and is approved by
the Chairman of the Audit Committee in
advance.
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;
The external auditors and Group Head
of Internal Audit have direct access to
the Chairman of the Committee and the
Chairman of the Board.
• executive searches for the Group Managing
Director or Group Finance Director; and
• legal services.
Auditors fees are detailed
in note 6 of the financial
statements.
In 2010, the Committee met
three times and details of
attendance at these meetings
are provided in the Applying
the Principles of the
Combined Code section
101
51
John Callaghan
Audit Committee Chairman and
Senior Independent Director
Biography
44
Members
• John Callaghan
(Chairman)
• Martin Keane
(Vice-Chairman)
• Henry Corbally
• Jerry Liston
• Paul Haran
• Liam Herlihy
(Group Chairman)
• Victor Quinlan
(Vice-Chairman)
Key responsibilities
• Monitor and review the effectiveness of the
Group’s financial reporting process, the
Group’s systems of internal control and risk
management processes.
• Monitor and review the role and
effectiveness of the Internal Audit function,
including the review of the Internal Audit
programme, the review of all Internal Audit
reports and the monitoring and review of
management’s responses to the findings
and recommendations of the Internal
Audit function.
• Monitoring the statutory audit of the
annual and consolidated financial
statements and reviewing significant
financial reporting issues and application
of accounting policies.
• Considering and making recommendations
to the Board on the appointment of the
auditors.
• Keeping the relationship with the auditors
under review, including the terms of their
engagement and fees, their independence
(in particular the provision of non-
audit services), expertise, resources
and qualification, and assessing the
effectiveness of the audit process.
The full terms of reference of the Audit
Committee can be found on the Company’s
website or can be obtained from the Group
Secretary.
FOCUS DELIVERY MOMENTUM
58
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
• approved the Internal Audit programme
for 2010;
• reviewed output from the Internal Audit
programme during the year and considered
progress against the programme; and
• reviewed the effectiveness of the Group’s
Internal Audit function.
External auditors
The Committee:
• agreed the approach and scope of the audit
work to be undertaken by the auditors;
• reviewed the Group’s processes for disclosing
information to the auditors;
• reviewed the effectiveness and independence of
the auditors. Based on the results of this review
the Committee proposed to the Board that it
recommend that the shareholders support the
re-appointment of the auditors at the 2010
Annual General Meeting; and
• agreed the auditors’ fees in respect of the 2011
audit work.
Terms of reference
The Board engaged a leading external
governance expert to review the terms of
reference of the Committee. This review
indicated that the terms of reference
met very high standards of corporate
governance. Some opportunities for minor
incremental improvement were noted
and have now been incorporated into the
terms of reference which are available for
inspection on the Company’s website.
Review of Committee performance
The Board and Committee assessed its
performance, covering terms of reference,
composition, procedures, contribution
and effectiveness. As a result of that
assessment, the Committee is satisfied that
it is functioning effectively and it has met its
terms of reference.
On behalf of the Audit Committee
John Callaghan
Audit Committee Chairman
Activities
The principal activities undertaken by the
Committee in the period under review are
set out below.
Risk management
• The Committee terms of reference include
monitoring of the financial reporting process
and the effectiveness of the Group internal
control, internal audit and risk management
systems.
• In fulfilling this responsibility the Committee
continued its programme of evaluating the
key areas of risk for Glanbia through a series
of risk report presentations on the steps
taken to manage such risks from the relevant
responsible individuals within the Group.
• During 2010 the Committee also approved
the introduction of a quarterly, formal,
documented key risk review process to identify
and analyse the principal risks across each
business unit and Group function.
• This process is aimed at the early identification
of key risks to the Group’s businesses and
the Group’s overall strategy, followed by an
understanding of the nature of those risks, the
probability of them occurring and their likely
impact if they did occur.
• Risk owners and robust action plans are
developed and implemented with the aim of
reducing or removing the likelihood of the risk
occurring or managing the impact if the risk
cannot be avoided. The results of the year end
risk review are outlined in the risk management
section of this report on pages 27 to 30.
• A full and half yearly assessment of the Board’s
performance against regulatory requirements
and best practice guidance was completed
following which the Committee reported to the
Board expressing their level of satisfaction
with the Group’s internal control and risk
management systems.
Internal controls
• The Committee received and considered reports
during the year from the Group’s auditors,
PricewaterhouseCoopers, which included
reports on any key matters arising from the
statutory audit and on any material weaknesses
in internal control in relation to the financial
reporting process. The Committee also received
and considered reports from the Group’s
Internal Audit function on the work undertaken
in reviewing and auditing the control
environment, in order to assess the quality and
effectiveness of the internal control system.
FOCUS DELIVERY MOMENTUM
• A comprehensive Internal Audit programme is
agreed annually and is designed to ensure that
all business units and key Group functions are
audited on a regular basis. Internal Audit reports
are issued to relevant senior management
following the completion of the reviews which set
out agreed Management Action Plans (MAPs) to
address recommended areas of improvement.
Members of the Committee receive an executive
summary of all such Internal Audit reports.
• All MAPs are kept under review by the Internal
Audit team until they are resolved. The Group
Head of Internal Audit provides an update
on the status of the resolution of the MAPs at
regular intervals.
• Internal controls were assessed in detail as
part of the bi-annual Control Self-Assessment
(CSA) process. This assessment is approved by
senior management and reviewed by Internal
Audit for completeness.
• The Committee assessed the effectiveness of
the Group’s internal controls and reviewed the
related disclosures in the Annual Report.
• As part of the Board and the Committee’s
programme to gain a greater awareness
of the Group’s operations, during 2010 the
Board (which also comprised the Committee’s
members) met with senior executives from all
US businesses in the USA and inspected the
facilities of the Performance Nutrition business
in the USA, US Cheese and Southwest Cheese,
one of the Group’s principal joint ventures.
Financial reporting
The Committee monitored the statutory
audit of the annual and consolidated
financial statements and:
• reviewed the financial statements and, as
part of this process, the significant financial
reporting estimates contained within them;
• reviewed the basis for preparing the Group
accounts on a going concern basis, including the
analysis supporting the going concern statement
and disclosures in the financial statements; and
• reviewed the financial statements in the
2009 Annual Report and the 2010 Half-Yearly
Report, and received a report from the auditors
on the statements.
Internal Audit
The Committee:
• approved the Internal Audit Charter which
sets out the framework for the Internal Audit
department, its role and responsibilities, its
authority, the conduct of the function and how it
will operate to accomplish its mission;
59
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Provision A.3.1 of the Code suggests that
the following could be relevant to the
determination of a non-executive Director’s
independence:
• serving more than nine years from the date of
their first election.
• represents a significant shareholder.
• has been an employee of the company or Group
within the last five years.
The Committee concluded that:
• Jerry Liston and John Callaghan, in the same
manner as the other non-executive Directors,
continued to demonstrate the essential
characteristics of independence expected by
the Board and that there are no relationships
or circumstances that are likely to affect,
or could appear to affect, their judgment.
Futhermore, they continue to constructively
and appropriately challenge the executive
Directors and the Board
• throughout the reporting period, John
Callaghan, Paul Haran and Jerry Liston were
independent
• William Murphy demonstrates the essential
characteristics of independence and from
September 2010, the fifth anniversary of his
retirement from the Group, was independent
• the remaining non-executive Directors did not
meet the criteria for independence as specified
in the Code but considered that they were
independent in character and judgement
The Committee reported its conclusions to
the Board for final determination.
In 2010, the Committee
met three times and details
of attendance at these
meetings are provided in the
Applying the Principles of the
Combined Code section
51
Nomination Committee report
Governance
The Committee was in place throughout
2010. Liam Herlihy, the Chairman of
the Group, has been Chairman of the
Committee since 2008.
The Committee comprises four non-
executive directors and two members
constitute a quorum.The Group Managing
Director and vice-Chairmen attend
certain meetings at the invitation of the
Nomination Committee. During the year,
the Group Managing Director attended
one Meeting. The Group Secretary acts as
secretary to the Committee.
When dealing with any matters concerning
his membership of the Board the Group
Chairman will absent himself from the
meeting of the Committee as required
and meetings will accordingly be chaired
by the Senior Independent Director,
John Callaghan.
Liam Herlihy
Nomination Committee
Chairman and Group
Chairman
Biography
44
Members
• Liam Herlihy
• Paul Haran
(Group Chairman)
• John Callaghan
(Senior Independent
Director)
• Jerry Liston
Responsibilities
Activities
The principal activities undertaken by the
Committee in the period under review are
set out below.
Review of Directors’ independence
The Nomination Committee reviewed
the independence of the non-executive
Directors in accordance with the guidance
in the UK 2008 Combined Code on
Corporate Governance.
The Committee’s review took into
consideration the fact that:
• John Callaghan had served on the Board for
thirteen years and Jerry Liston had served on
the Board for eight years.
• Fourteen of the non-executive Directors are
nominated by the Board of the Society, for
appointment to the Board of the Company,
of which each of Henry Corbally, Edward
Fitzpatrick, James Gilsenan, Liam Herlihy and
Victor Quinlan had served as Directors for nine
years or more.
• William Murphy, who retired as Deputy
Group Managing Director in September
2005, remains on the Board as a
non-executive Director.
• Making recommendations to the Board
on the appointment and re-appointment
of the Directors. Glanbia Co-operative
Society Limited (“the Society”), which owns
54.5% of the Company, nominates from its
Board of Directors fourteen of the eighteen
non-executive Directors for appointment
to our Board. The Nomination Committee
recommendations are made with due regard
to these nominations.
• Planning for the orderly succession of new
Directors to the Board.
• Recommending to the Board the appointment
of the Chairman and vice-Chairmen.
• Keep under review the leadership needs
of the Group both executive and non-
executive, with a view to ensuring the
continued ability of the Group to compete
effectively in the market place.
• Recommending to the Board the
membership and chairmanship of the Audit
and Remuneration Committees.
• Keep the extent of Directors’ other interests
under review to ensure that the effectiveness
of the Board is not compromised
The full terms of reference of the Nomination
Committee can be found on the Company’s
website or can be obtained from the
Group Secretary.
FOCUS DELIVERY MOMENTUM
60
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
The Chairman holds a number of other
directorships including the Irish Dairy Board
Co-operative Society Limited and Irish
Co-operative Organisation Society Limited
and farms at Headborough, Knockanore,
Tallow, Co. Waterford, but the Committee
and the Board considers that these do not
interfere with the discharge of his duties to
the Group.
Board committee membership
The Committee is responsible for
recommending appropriate individuals for
membership of the Board’s committees to
ensure that the committees are comprised
of individuals with the necessary skills,
knowledge and experience. During the
year the Committee recommended to the
Board that Martin Keane be appointed to
the Audit and Remuneration Committees
following the retirement of John Fitzgerald.
This was implemented during the year by
the Board.
Review of committee performance
The Board and Committee assessed its
performance, covering terms of reference,
composition, procedures, contribution
and effectiveness. As a result of that
assessment, the Committee is satisfied
that it is functioning effectively and it has
met its terms of reference. Arising from the
review, our Board has agreed to review the
terms of appointment of the non-executive
Directors arising from the changes to the
UK Corporate Governance Code and other
related matters.
The Nomination Committee did not use
an external search consultancy or open
advertising in the appointment of the new
non-executive Directors, Brendan Hayes,
Michael Keane and John Murphy, as they
were nominated by the Board of the Society
for appointment to the Board.
On behalf of the Nomination Committee
Liam Herlihy
Chairman
Appointment of vice-Chairman
The Committee considered the
appointment of Martin Keane as
vice-Chairman of the Company and
recommended his appointment to the
Board. As part of their consideration,
the Committee noted that Martin Keane
had been appointed as vice-Chairman
of Glanbia Co-operative Society Limited
and while there was no obligation on the
Board of the Company to appoint the same
candidate as the Society to the position of
vice-Chairman, the custom and practice to-
date had been that the vice-Chairman of the
Society is also appointed vice-Chairman of
the Company. The Committee considered
the merits of the custom and practice in
this regard and the quality of the candidate
elected by the Society. The Committee
noted the experience of Mr. Keane and
his suitability for the role of vice-Chairman
of the Company and recommended his
appointment to the Board of the Company
which was subsequently approved.
Review of the time required from
a non-executive Director
The Committee assessed the time
dedicated to the Company by each non-
executive Director. Each of the Directors
at the time of appointment agrees to a
minimum time commitment of one to
two days per month (after the induction
phase). This will include attendance at
monthly board meetings, the Annual
General Meeting, two annual board away
days, and at least one site visit per year and
appropriate preparation time ahead of
each meeting. The nature of the Directors
appointments is, however, such that the
Directors are required to be flexible in
terms of their availability. Sometimes
they can be required to work part-time,
and sometimes significant time input is
required depending on the criticality of the
issues and challenges facing the Group.
This review also considers the extent of
the Directors’ other interests to ensure
that the effectiveness of the Board is not
compromised by such interests.
The Board and Committee are 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.
FOCUS DELIVERY MOMENTUM
61
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Remuneration Committee report
The Remuneration report is structured as follows:
a Governance
b Remuneration reporting:
Remuneration strategy and policy
1
2 Chairman’s appointment
3 Non-executive Directors
Tabular information on Directors’ shareholdings, share-based incentives, emoluments and pensions
c
a Governance
The Committee comprises six non-executive
Directors and three members constitute
a quorum. Following John Fitzgerald’s
retirement from the Board on 29 June 2010,
the Board, on the recommendation of the
Nomination Committee, appointed Martin
Keane in his place.
The Group Managing Director and the
Group Human Resources and Operations
Development Director attend Committee
meetings by invitation only. They do not
attend where their remuneration is discussed
and no Director is involved in deciding his
own remuneration. The Group Secretary acts
as secretary to the Committee.
During the year the Committee received
material assistance and advice on
remuneration policy from the Group
Human Resources and Operations
Development Director, Mr. Brian Phelan.
External consultants provide advice to
the Committee on market trends and
competitive positioning of remuneration
packages as required.
Legal advice to the Committee has been
provided by Arthur Cox, who also provided
services to the Company during the
year. The Committee is satisfied that the
services provided to it by Arthur Cox are of
a technical nature and did not create any
conflict of interest. If a conflict of interest
were to arise in the future, the Committee
would appoint separate legal advisors from
those used by the Company.
The Board engaged a leading external
governance expert to review the terms
of reference of the Committee. This
review indicated that the terms of
reference met very high standards of
corporate governance whilst making
recommendations for further incremental
improvement and fine-tuning which have
now been incorporated into the terms of
reference. An updated version of the terms
of reference are available for inspection on
the Company’s website.
In 2010, the Committee met
seven times and details of
attendance at these meetings
are provided in the Applying
the Principles of the
Combined Code section
51
Activities
During the period under review, the
Committee:
• considered and approved executive
Directors and other senior executives bonus
arrangements for 2010.
• assessed and agreed the level of achievement
against bonus objectives for 2009 under the
approved Annual Incentive Plan.
• reviewed and approved the 2010 grant under the
2008 Long Term Incentive Plan (“2008 LTIP”) to
executive Directors and other senior executives.
• considered the outcome of the performance
conditions for the 2007 LTIP share awards
and the real growth in Adjusted Earnings Per
Share1 (“EPS”) and Total Shareholder Return2
(“TSR”) over the three-year performance and
determined the level of shares to be vested.
• initiated an external remuneration consultant
selection process to assist the Committee in
formulating an updated executive remuneration
policy to be put to the Board for approval in 2011.
• undertook a review of executive Directors and
other senior executives base salaries.
• assessed its performance, covering terms
of reference, composition, procedures,
contribution and effectiveness. As a result of
that assessment, the Committee is satisfied
that it is functioning effectively and has met its
terms of reference.
1
2
Adjusted EPS is calculated as the profit for
the year attributable to the equity holders
of the Parent before exceptional items and
amortisation of intangible assets (net of tax).
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.
Jerry Liston
Remuneration Committee
Chairman
Biography
44
• Liam Herlihy
• Martin Keane
• Victor Quinlan
Members
• Jerry Liston
(Chairman)
• John Callaghan
• Paul Haran
Responsibilities
• Determine and agree with the Board
the framework or broad policy for the
remuneration of the Chairman, the Group
Managing Director, executive Directors,
members of the Group Operating Executive,
the Group Management Committee,
the Group Secretary and other senior
executives, as required.
• Within the agreed policy, determining
individual total compensation packages
for the Chairman, the Group Managing
Director, executive Directors, members
of the Group Operating Executive, the
Group Management Committee, the Group
Secretary and other senior executives, as
required.
• Recommending to the Board any employee
share-based incentive schemes and any
performance conditions to be used for
such schemes.
The full terms of reference of the
Remuneration Committee (the “Committee”),
can be found on the Company’s website or
can be obtained from the Group Secretary.
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OTHER STATUTORY INFORMATION
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Elements
Base salary
Purpose
Recognise market value of role and the stage of professional consolidation of the role holder.
Annual incentive plan
Incentivise executives to achieve specific short term business and personal performance goals during a one year
period.
Long term incentive plan Aligns senior executives’ interests with those of shareholders and incentivise them to pursue superior results
over a three year period within the limits of the Group’s risk appetite. The TSR metric measures the relative
return from the Company’s shares against an agreed group of comparator companies, providing alignment with
shareholders interests. The EPS metric is also a key performance measure aligned with shareholders’ interests.
Pension provision
Provide competitive, affordable and sustainable retirement benefits.
Other benefits
Provide a car benefit or equivalent. Provide suitable medical insurance.
b Remuneration reporting
1 Remuneration strategy
and 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 are designed
to form an appropriate portion of the
total remuneration package of executive
Directors. These link remuneration to
individual performance and the Group’s
performance and align the interests
of executive Directors with those of
shareholders.
This framework is applied to the most
senior executives within the Group globally
(Business unit CEOs and their senior teams)
to create a consistent global approach to
reward. The principles of the remuneration
strategy are also applied consistently across
the Group below this level, taking account
of seniority and local market practice.
Executive remuneration policy is generally
reviewed by the Committee on a three year
basis and is planned to be reviewed in 2011,
with the assistance of an external advisor.
The updated policy will be put to the Board
for consideration and approval during 2011
and is to be effective from 2012.
Remuneration policy
The Board determines the remuneration
policy for executive Directors and other
senior executives. Key elements of the
policy are as follows:
The financial targets are derived from the
annual business plan as approved by the
Board and are based on growth in annual
Group EPS or business unit planned
profitability as appropriate.
• setting base salary by reference to the market
median based on an external evaluation of
the role.
• incentivising executive Directors and senior
executives to achieve specific performance goals
which are linked to the Group’s business plans.
Long-term incentive plans (LTIPs)
The Company has operated three LTIPs – the
2002 LTIP (the “2002 Share Option Scheme”),
the 2007 LTIP and the 2008 LTIP. The principal
plan for executives is the 2008 LTIP which has
received shareholder approval.
• incentivising executive Directors and senior
executives to deliver performance exceeding
business plans.
• aligning the interests of executive Directors,
senior executives and shareholders.
• provide an appropriate balance between:
• short-term and long-term reward
• fixed and variable reward
• provide a competitive benefits package
Incentives
The Group’s strategy is set out in the
Strategic Review along with the Group
Strategic Framework. The remuneration
strategy incentivises and rewards executives
to deliver the Group’s strategy through the
combination of short-term and long-term
incentives.
Annual incentive plan
The Group operates a performance-related
bonus scheme for executive Directors and
senior executives. Payments under the
scheme for executive Directors depend
on the achievement of pre-determined
financial targets for the Group or business
unit performance and an assessment of
individual performance against pre-agreed
objectives relevant to their business unit or
area of responsibility.
The combination of the annual incentive
plan and the LTIPs (which are designed
to link reward to the key long term drivers
of the business and to align the interests
of the executive Directors and senior
executives with the long term interests
of the shareholders through a long-term
reward being delivered in shares) provide
a balance between short-term cash reward
and longer-term share-based reward as per
recommended best practice.
LTIP awards under the 2008 LTIP are granted
annually and vesting is dependent on the
achievement of TSR and EPS performance
conditions, full details of which are
contained in the Summary of Long-Term
Incentive Plans on page 63. The TSR and EPS
performance conditions are designed to
ensure that an appropriate proportion of an
executive Directors’ and senior executives’
total incentive package is delivered through
longer-term performance.
To the extent that any performance
condition is not met the relevant part of
the award will lapse.
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COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
How the 2008 LTIP works
50% of award based on TSR growth relative to a pre-determined sectoral
comparator group of companies over the three-year performance period.
2008 LTIP
Award
Sustained improvement
50% of award based on actual EPS growth over the three-year
performance period
2008 LTIP Award
paid in shares
reflecting
performance
achieved
Year 0
Year 1
Year 2
Year 3
Summary of long-term incentive plans
Plan provisions
Performance conditions for grants of
awards to be made under the 2002 Share
Option Scheme (if any) and the 2008 LTIP
are detailed below.
It is not intended that any future awards will
be granted under the 2007 LTIP.
2008 LTIP
2008 LTIP grant awards are generally based
on a percentage of salary and share price at
the date of grant. Key features are as follows:
• the shares are subject to satisfaction of three-
year performance conditions;
• 50% of the 2008 LTIP award is based on a TSR
performance condition and the other 50% is
based on an EPS performance condition; and
• shares under award do not attract dividends
prior to vesting.
How the 2008 LTIP works
An award shall not vest unless the
Committee is satisfied that the Company’s
underlying financial performance has shown
a sustained improvement in the period
since the date of grant. If this condition
is met, the extent of vesting shall be
determined by the EPS condition and the
TSR performance condition set out below.
2008 EPS performance condition
50% of the award is capable of vesting as
determined by the rate of growth in the EPS
over the three-year performance period,
with nil vesting at EPS growth of less than
the Consumer Price Index (CPI) plus 5%, 50%
vesting at EPS growth in excess of CPI plus
5% and 100% vesting at EPS growth in excess
of CPI plus 10%. Where EPS is between CPI
plus 5% and CPI plus 10% then a pro rata
vesting on a straight line basis will apply.
The rationale for the EPS performance
measure is that investors consider EPS to
be a key indicator of long-term financial
performance and value creation of a public
limited company.
• 0% of the TSR amount vested
(0% of the overall award)
• 100% of the EPS element vested
(50% of overall award)
2008 TSR performance condition
50% of the award is capable of vesting
as determined by the Company’s TSR
(share price growth plus dividends)
ranking relative to an agreed comparator
group of 17 other international food and
nutritional companies.
None of the shares vest if the Company’s
TSR performance is below the top 50% of
TSR performance achieved by the sectoral
comparator group (the “Comparator
Group TSR performance”). 30% vests if the
Company’s TSR performance is equal to or
above the top 50% Comparator Group TSR
performance. 100% vests if the Company’s
TSR performance is equal to or above
the top 25% of the Comparator Group
TSR performance. Where the Company’s
TSR performance is between the top
50% and 25% of Comparator Group TSR
performance then a pro rata vesting on a
straight line basis will apply.
The rationale for using a TSR performance
measure is that major investors regard TSR
as an important indication of both earnings
and capital growth relative to other major
companies in the same sector and to ensure
that awards only vest if there has been a
clear improvement in the Company’s relative
performance over the relevant period.
2002 Share Option Scheme
Key features for 2002 Share Option Scheme
options are:
• grant of options over shares are granted based
on a percentage of salary and share price at
the date of grant;
• the shares are subject to satisfaction of rolling
three-year performance conditions;
• the vesting of the options is all based on an EPS
performance condition;
• shares under options will not attract dividends
prior to vesting; and
• 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. The grant of such an
award is at the discretion of the Committee.
2002 EPS performance condition
Whether an option is capable of exercise
is determined by the rate of growth in EPS
over a three-year performance period, with
nil vesting at EPS growth of less than CPI
plus 5% and 100% vesting at CPI plus 5% or
more growth.
Vesting/lapse during the year under the
2007 LTIP
In relation to the 2007 award which was
based on performance in the three year
period to 2 January 2010, the Committee
assessed the performance criteria of the
2007 LTIP and the final award was as follows:
Other information on share plans
Share usage for employee share schemes
The Company currently intends to use
existing shares to satisfy future share
awards under the 2008 LTIP and an
employee benefit trust was set up for
this purpose. At 1 January 2011, 485,304
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OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
How the 2002 share option scheme works
2002 LTIP
Grant of Option
Options exercisable if
there has been growth in
EPS of at least CPI plus 5%
compounded over a three-
year performance period
Options exercisable
Potential Award of
additional shares if
shares acquired are
retained for two or five
years from the date of
exercise
ordinary shares were held by the employee
benefit trust.
The Company currently intends to issue
new shares to satisfy future share options
and awards under the 2002 Share Option
Scheme. The table below sets out the
dilutive effect on the share capital if all
options under the 2002 Share Option
Scheme capable of being exercised and
all awards under the 2002 Share Option
Scheme capable of vesting were issued:
Total issued share capital:
293,835,684
Outstanding share options
under 2002 Share Option
Scheme capable of being
exercised
Outstanding share awards
under 2002 Share Option
Scheme
1,930,000
90,600
Enlarged issued share capital 295,856,284
Information on post-retirement and
other benefits
The Glanbia executive Directors are
members of the Glanbia pension scheme
and the Glanbia executive pension scheme.
As such, they are subject to the same
contribution rates payable by employee
members of the Glanbia pension scheme.
The pension schemes also provide a lump
sum death-in-service benefit and spouse
death in service pension.
Executive directors’ 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.
Policy on external board appointments
The long-standing policy of allowing
executive Directors to hold external non-
Glanbia related non-executive directorships
with the prior approval of the Committee
will continue. The Committee considers
that external directorships provide the
Company’s senior executives with valuable
experience that is of benefit to Glanbia. It
is also considered appropriate for Glanbia
to contribute to the pool of non-executive
expertise available for the benefit of the
wider business community. The Committee
believes that it is reasonable for the
individual executive Director to retain any
fees received from such appointments given
the additional personal responsibility that
this entails. Such fees retained by executive
Directors in 2010 were as follows: John
Moloney: The Irish Dairy Board Co-operative
Limited: €17,500 and DCC plc: €61,000.
2 Chairman’s appointment
Liam Herlihy was appointed Chairman
on 28 May 2008. His appointment is
subject to annual re-appointment by the
shareholders. His appointment as Chairman
will automatically terminate if he ceases to
be a Director of the Company or a Director
of Glanbia Co-operative Society Limited.
His fee, which was set by the Committee
at €79,000 per annum, will be subject to
review in 2011. This fee reflects the level of
commitment and responsibility of the role
and is determined by the Committee.
3 Non-executive directors’
appointment
The non-executive Directors do not have
service contracts but do have letters of
appointment detailing the basis of their
appointment. The terms and conditions of
appointment of non-executive Directors are
available for inspection at the Company’s
registered office during normal business
hours and at the Annual General Meeting
(AGM) of the Company.
The non-executive Directors do not have
periods of notice and the Company has no
obligation to pay compensation when their
appointment terminates. They are subject
to annual re-election at the AGM.
Directors’ fees, which will be subject to
review in 2011, have been set as follows:
Chairman
Vice-Chairman
Senior Independent Director
Remuneration Committee
Chairman
Paul Haran
William Murphy
Director appointed by Glanbia
Co-operative Society Limited
€79,000
€38,000
€63,000
€63,000
€56,000
€56,000
€18,000
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OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Table A: Directors and Secretary’s interests in Glanbia plc
As at 1 January 2011
As at 3 January 2010*
Ordinary
shares
2008 LTIP
awards
2007 LTIP
awards
2002 LTIP
options
2002 LTIP
awards
Ordinary
shares
2008 LTIP
awards
2007 LTIP
awards
2002 LTIP
options
2002 LTIP
awards
Directors
L Herlihy
V Quinlan
Mn Keane
91,804
31,347
20,000
–
–
–
J Moloney
1
104,593
484,000
J Callaghan
H Corbally
E Fitzpatrick
J Gannon
J Gilsenan
P Gleeson
P Haran
B Hayes
Ml Keane
J Liston
M Merrick
J Murphy
W Murphy
A O'Connor
R Prendergast
S Talbot
K Toland
Secretary
M Horan
2
2
2
1
1
35,000
7,495
50,501
12,552
5,842
24,923
7,462
18,920
22,104
15,000
3,600
4,000
230,827
15,743
4,007
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
29,693
221,000
23,243
337,000
10,093
110,000
1 Executive Director
2 Appointed 29 June 2010
* Or at date of appointment if later
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
91,804
31,347
20,000
–
–
–
510,000
38,900
104,593
284,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
35,000
7,495
50,501
12,552
5,842
24,923
7,462
18,920
22,104
15,000
3,600
4,000
230,827
15,743
4,007
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
510,000
38,900
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
75,000
7,900
17,693
101,000
24,000
75,000
7,900
312,000
16,400
23,243
192,000
–
312,000
16,400
–
–
4,593
48,000
11,000
–
–
c Information subject to audit
The information in Tables A,
A(1), B and C are covered
by the Independent
auditors’ report
74
The table above and the tables on pages 66
to 68 give details of the interests in shares
in Glanbia plc and Glanbia Co-operative
Society held by Directors, Secretary
and their connected persons for those
individuals who were Directors and Secretary
of the Company as at 1 January 2011. There
have been no changes in the interests of the
current Directors listed in the table above
between 1 January 2011 and 1 March 2011.
The market price of the ordinary shares as
at 1 January 2011 was €3.68 and the range
during the year was €2.43 to €3.68. The
average price for the year was €3.12.
The Company’s register of Directors’ and
Secretary’s interests (which is open to
inspection) contains full details of Directors’
share interests.
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OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Table A(1): Directors and Secretary’s interests in Glanbia Co-operative Society Limited
As at 1 January 2011
As at 3 January 2010*
"A" Ordinary
Shares of
€1.00
Convertible
Loan Stock of
€0.01269738
"C"
Shares of
€0.01
"A" Ordinary
Shares of
€1.00
Convertible
Loan Stock of
€0.01269738
"C"
Shares of
€0.01
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48,176,819
3,576,185
84,564
4,952,304
1,040,133
10,036,078
142,905
5,157,402
1,500,000
1,875,940
387,464
–
1,714,149
–
–
9,145,071
1,000,000
90,397
12,245
6,360
–
5,814
24,329
10,759
3,917
9,874
20,084
6,074
14,517
–
19,785
6,620
–
–
410,210
48,176,819
–
3,576,185
56,298
–
79,510
85,412
83,584
83,439
–
–
92,334
–
–
104,550
48,671
–
–
84,564
4,952,304
1,040,133
10,036,078
142,905
5,157,402
1,500,000
2,052,647
387,464
283,234
1,714,149
–
–
9,145,071
1,000,000
Directors
L Herlihy
V Quinlan
Mn Keane
J Moloney
H Corbally
E Fitzpatrick
J Gannon
J Gilsenan
B Hayes
Ml Keane
M Merrick
J Murphy
W Murphy
A O'Connor
R Prendergast
S Talbot
Secretary
M Horan
1
2
2
2
1
1 Executive Director
2 Appointed 29 June 2010
* Or at date of appointment if later
91,425
12,387
6,626
–
5,912
24,623
10,974
3,971
9,996
20,157
6,309
14,834
–
20,530
6,683
–
–
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OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Table B: Share Options and LTIP Awards – John Moloney
2002
LTIP
2002EPS
2002EPS
2002EPS
03–Jan–10
290,000
150,000
70,000
510,000
Granted
during
the year
Exercised
during
the year
Lapsed
during
the year
01–Jan–11
–
–
–
–
–
–
–
–
–
–
–
290,000
150,000
70,000
–
510,000
LTIPs
03–Jan–10
Granted
during
the year
Vested
during
the year
Lapsed
during
the year
01–Jan–11
2008TSR
2008EPS
2008TSR
2008EPS
2008TSR
2008EPS
71,000
71,000
71,000
71,000
–
–
–
–
–
–
100,000
100,000
284,000 200,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
71,000
71,000
71,000
71,000
100,000
100,000
484,000
Exercise
price
€
1.55
2.725
4.03
Market
price at
date of
award
€
4.45
4.45
2.72
2.72
2.82
2.82
Date of
exercise
or lapse
Date of
grant
29–Aug–02
9–Dec–04
30–Aug–07
–
–
–
Market
price on
exercise
€
–
–
–
Earliest date
exercisable
from
Expiry date
Note
30–Aug–05 28–Aug–12
10–Dec–07
8–Dec–14
31–Aug–10 29–Aug–17
1, 2
1, 3
1
Date of
award
Date of
vesting
or lapse
28–Aug–08
28–Aug–08
9–Jun–09
9–Jun–09
25–May–10
25–May–10
–
–
–
–
–
–
Market
price at
vesting
€
–
–
–
–
–
–
Earliest date
for vesting
Expiry date
Performance
period
Note
28–Aug–11 28–Aug–12
28–Aug–11 28–Aug–12
9–Jun–13
9–Jun–13
25–May–13 25–May–14
25–May–13 25–May–14
9–Jun–12
9–Jun–12
2008–2010
2008–2010
2009–2011
2009–2011
2010–2012
2010–2012
4
4
4
4
4
4
Note: Performance conditions for the options and awards set out above are detailed below.
1
2
Subject to a performance condition that has been met.
Eligible for a share award of 10% of the ordinary shares he continues to hold
following the second anniversary of the exercise of the option
3
4
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
Subject to a performance condition that is yet to be tested.
Table B: Share Options and LTIP Awards – Siobhán Talbot
2002
LTIP
2002EPS
Granted
during
the year
Exercised
during
the year
Lapsed
during
the year
01–Jan–11
03–Jan–10
75,000
75,000
–
–
–
–
–
–
75,000
75,000
LTIPs
03–Jan–10
Granted
during
the year
Vested
during
the year
Lapsed
during
the year
01–Jan–11
2007TSR
2007EPS
2008TSR
2008EPS
2008TSR
2008EPS
2008TSR
2008EPS
12,000
12,000
22,500
22,500
28,000
28,000
–
–
–
–
–
–
–
–
60,000
60,000
125,000 120,000
–
12,000
–
–
–
–
–
–
12,000
12,000
–
–
–
–
–
–
–
12,000
–
–
22,500
22,500
28,000
28,000
60,000
60,000
221,000
Exercise
price
€
2.725
Market
price at
date of
award
€
4.03
4.03
4.45
4.45
2.72
2.72
2.82
2.82
Date of
grant
Date of
exercise
or lapse
9–Dec–04
–
Market
price on
exercise
€
–
Earliest date
exercisable
from
Expiry date
Note
10–Dec–07
8–Dec–14
1, 2
Date of
award
Date of
vesting
or lapse
30–Aug–07 25–May–10
30–Aug–07 25–May–10
–
28–Aug–08
–
28–Aug–08
–
9–Jun–09
–
9–Jun–09
–
25–May–10
–
25–May–10
Market
price at
vesting
€
–
2.82
–
–
–
–
–
–
Earliest date
for vesting
Expiry date
Performance
period
Note
Mar–10 30–Aug–11
Mar–10 30–Aug–11
28–Aug–11 28–Aug–12
28–Aug–11 28–Aug–12
9–Jun–13
9–Jun–13
25–May–13 25–May–14
25–May–13 25–May–14
9–Jun–12
9–Jun–12
2007–2009
2007–2009
2008–2010
2008–2010
2009–2011
2009–2011
2010–2012
2010–2012
3
1
4
4
4
4
4
4
Ms. S. Talbot is also eligible for a share award of 10% of the 4,000 ordinary shares (400) allotted to her on 28 August 2008.
Note: Performance conditions for the options and awards set out above are detailed below.
1
2
Subject to a performance condition that has been met.
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
3
4
The award lapsed in 2010 having not met the performance condition.
Subject to a performance condition that is yet to be tested.
FOCUS DELIVERY MOMENTUM
68
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Table B: Share Options and LTIP Awards – Kevin Toland
2002
LTIP
2002EPS
2002EPS
2002EPS
03–Jan–10
164,000
100,000
48,000
312,000
Granted
during
the year
Exercised
during
the year
Lapsed
during
the year
01–Jan–11
–
–
–
–
–
–
–
–
–
–
–
–
164,000
100,000
48,000
312,000
Date of
exercise
or lapse
Date of
grant
Exercise
price
€
2.725
1.55 29–Aug–02
9–Dec–04
4.03 30–Aug–07
–
–
–
LTIPs
03–Jan–10
Granted
during
the year
Vested
during
the year
Lapsed
during
the year
01–Jan–11
2008TSR
2008EPS
2008TSR
2008EPS
2008TSR
2008EPS
48,000
48,000
48,000
–
–
–
48,000
–
–
–
72,500
72,500
192,000 145,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
48,000
48,000
48,000
48,000
72,500
72,500
337,000
Market
price at
date of
award
€
Date of
award
Date of
vesting
or lapse
4.45 28–Aug–08
4.45 28–Aug–08
9–Jun–09
2.72
9–Jun–09
2.72
2.82 25–May–10
2.82 25–May–10
–
–
–
–
–
–
Note: Performance conditions for the options and awards set out above are detailed below.
1
2
3
Subject to a performance condition that has been met.
Eligible for a share award of 10% of the ordinary shares he continues to hold
following the second anniversary of the exercise of the option
Subject to a performance condition that is yet to be tested.
Table B: Share Options and LTIP Awards – Michael Horan
Market
price on
exercise
€
–
–
–
Market
price at
vesting
€
–
–
–
Earliest date
exercisable
from
Expiry date
Note
30–Aug–05 28–Aug–12
10–Dec–07
8–Dec–14
31–Aug–10 29–Aug–17
1, 2
1
1
Earliest date
for vesting
Expiry date
Performance
period
Note
28–Aug–11 28–Aug–12
28–Aug–11 28–Aug–12
9–Jun–13
9–Jun–12
–
–
–
9–Jun–12
9–Jun–13
25–May–13 25–May–14
25–May–13 25–May–14
2008–2010
2008–2010
2009–2011
2009–2011
2010–2012
2010–2012
3
3
3
3
3
3
LTIPs
03–Jan–10
Granted
during
the year
Vested
during
the year
Lapsed
during
the year
01–Jan–11
Market
price at
date of
award
€
Date of
award
Date of
vesting
or lapse
Market
price at
vesting
€
Earliest date
for vesting
Expiry date
Performance
period
Note
2007TSR
2007EPS
2008TSR
2008EPS
2008TSR
2008EPS
2008TSR
2008EPS
5,500
5,500
12,000
12,000
12,000
12,000
–
–
59,000
–
–
–
–
–
–
31,000
31,000
62,000
–
5,500
–
–
–
–
–
–
5,500
5,500
–
–
–
–
–
–
–
5,500
–
–
12,000
12,000
12,000
12,000
31,000
31,000
110,000
4.03 30–Aug–07 25–May–10
4.03 30–Aug–07 25–May–10
–
4.45 28–Aug–08
–
4.45 28–Aug–08
–
9–Jun–09
2.72
–
2.72
9–Jun–09
–
2.82 25–May–10
–
2.82 25–May–10
–
2.82
–
–
–
–
–
–
Mar–10 30–Aug–11
Mar–10 30–Aug–11
28–Aug–11 28–Aug–12
28–Aug–11 28–Aug–12
9–Jun–13
9–Jun–13
25–May–13 25–May–14
25–May–13 25–May–14
9–Jun–12
9–Jun–12
2007–2009
2007–2009
2008–2010
2008–2010
2009–2011
2009–2011
2010–2012
2010–2012
2
1
3
3
3
3
3
3
Note: Performance conditions for the options and awards set out above are detailed below.
1
2
3
Subject to a performance condition that has been met.
The award lapsed in 2010 having not met the performance condition.
Subject to a performance condition that is yet to be tested.
FOCUS DELIVERY MOMENTUM
69
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Table C: Directors remuneration
The salary, fees and other benefits pursuant to the remuneration package of each Director during the year were:
Salary
€'000
Fees
€'000
Performance
bonus
€'000
Pension
contribution
€'000
Other
benefits
€'000
Executive Directors
J Moloney
G Meagher (note (a))
K Toland
S Talbot (note (b))
2010
2009
Non – executive Directors
452
–
344
251
1,047
1,070
L Herlihy
Mn Keane (note (c))
V Quinlan
J Callaghan
H Corbally
N Dunphy (note (d))
J Fitzgerald (note (e))
E Fitzpatrick
J Gannon (note (f))
J Gilsenan
P Gleeson
P Haran
B Hayes (note (g))
C Hill (note (d))
Ml Keane (note (g))
J Liston
M Merrick
J Murphy (note (g))
W Murphy
A O'Connor
M Parsons (note (h))
R Prendergast
2010
2009
Total 2010
Total 2009
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,047
1,070
–
–
–
–
–
–
79
28
38
63
18
9
19
18
18
18
18
56
9
9
9
63
18
9
56
18
–
18
591
594
591
594
580
–
430
326
1,336
–
94
–
73
60
227
239
33
–
60
15
108
113
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,336
–
227
239
108
113
2010
Total
€'000
1,159
–
907
652
2,718
2009
Total
€'000
587
199
472
164
1,422
79
28
38
63
18
9
19
18
18
18
18
56
9
9
9
63
18
9
56
18
–
18
79
18
38
64
18
18
38
18
11
18
18
56
–
18
–
64
18
–
56
18
8
18
591
3,309
594
2,016
(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 Mn Keane was appointed vice-Chairman on 29 June 2010.
(d) Messrs N Dunphy and C Hill resigned as Directors on 29 June 2010.
(e) Mr J Fitzgerald resigned as a vice-Chairman and Director on 29 June 2010.
(f) Mr J Gannon was appointed as a Director on 27 May 2009.
(g)
Messrs B Hayes, Ml Keane and J Murphy were appointed Directors on 29
June 2010.
(h) Mr M Parsons resigned as a Director on 27 May 2009.
FOCUS DELIVERY MOMENTUM
70
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Table C: Directors remuneration (continued)
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 2010 in
excess of inflation
€' 000
Total annual
accrued pension
1 January 2011
€' 000
77
51
35
163
219
9
9
6
24
28
338
118
117
573
784
J Moloney
K Toland
S Talbot
2010
2009
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.
All emoluments and compensation paid
to the Directors during the year are shown
above. Where the individual was appointed
during the year the amount shown is for the
period from appointment.
The benefits received by the Irish executive
Directors include, where applicable, the
provision of a car and suitable medical
insurance.
The benefits received by the US-based
executive Director include a cash allowance
for a car, medical examination, dental
benefits and insured life benefits.
On behalf of the Remuneration Committee
Jerry Liston
Remuneration Committee Chairman
FOCUS DELIVERY MOMENTUM
71
GLANBIA PLC
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
Statement of Directors’ responsibilities
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.
Directors’ statement pursuant to the
Transparency (Directive 2004/109/EC)
Regulations 2007
Each of the Directors, executive and non-
executive, whose names and functions are
listed on pages 44 to 46 confirms that to the
best of each person’s knowledge and belief:
• the financial statements prepared in
accordance with IFRS 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.
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;
• Make judgements and estimates that are
reasonable and prudent;
• State that the financial statements comply with
IFRSs as adopted by the European Union; and
• Prepare the financial statements on the going
concern basis, unless it is inappropriate
to presume that the Group will continue
in business, in which case there should be
supporting assumptions or qualifications
as necessary.
The Directors are also required by
applicable law and the Listing Rules issued
by the Irish Stock Exchange to prepare a
Directors’ report and reports relating to
Directors’ remuneration and report on
corporate governance in accordance with
the European Communities (Directive
2006/46/EC) Regulations 2009 (as amended)
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 in accordance with the Transparency
(Directive 2004/109/EC) Regulations 2007.
Directors' Report
On behalf of the Board
L Herlihy J Moloney S Talbot
Directors
1 March 2011
FOCUS DELIVERY MOMENTUM
72
GLANBIA PLC
ANNUAL REPORT 2010
Financial statements
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
FOCUS DELIVERY MOMENTUM
73
73
GLANBIA PLC
GLANBIA PLC
ANNUAL REPORT 2010
ANNUAL REPORT 2010
DIRECTORS' REPORT:
CHAIRMAN’S INTRODUCTION
FINANCIAL STATEMENTS
GOVERNANCE
BOARD OF DIRECTORS & SENIOR MANAGEMENT
APPLYING THE PRINCIPLES OF THE COMBINED CODE
OTHER STATUTORY INFORMATION
COMMITTEE REPORTS
STATEMENT OF DIRECTORS RESPONSIBILITIES
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. Other reserves
23. Share capital and share premium
24. Retained earnings
25. Non-controlling 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. Comparatives
40. Principal subsidiary and associated undertakings
74
76
77
78
79
80
81
82
83
84
84
90
95
96
101
102
103
103
103
104
105
106
106
107
110
111
112
113
115
115
116
120
121
121
122
124
126
129
130
130
130
131
132
132
133
134
135
136
136
FOCUS DELIVERY MOMENTUM
74 GLANBIA PLC
ANNUAL REPORT 2010
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 1 January 2011, which comprise the Group income
statement, the Group and Parent Company statements of financial
position, the Group and Parent Company statements of changes
in equity, the Group and Parent Company statements of cash
flows, the Group and Parent Company statements of
comprehensive income and the related notes. These financial
statements have been prepared under the accounting policies set
out therein.
Respective responsibilities of Directors
and auditors
The Directors’ responsibilities for preparing the Annual Report
and the financial statements, in accordance with applicable Irish
law and International Financial Reporting Standards (IFRSs) as
adopted by the European Union, are set out in the statement
of Directors’ responsibilities.
Our responsibility is to audit the financial statements in
accordance with relevant legal and regulatory requirements and
International Standards on Auditing (UK and Ireland). This report,
including the opinion, has been prepared for and only for the
Parent 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 Parent 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 Parent 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 Parent Company to convene an
extraordinary general meeting of the Parent Company; such a
financial situation may exist if the net assets of the Parent
Company, as stated in the Parent 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 are required by law to report to you our opinion as to whether
the description in the statement on corporate governance of the
main features of the internal control and risk management systems
in relation to the process for preparing the Group financial
statements is consistent with the Group financial statements.
In addition, we review whether the statement on corporate
governance 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.
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 of the following
sections: our strategy, Group performance, divisional performance
and 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 Parent
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 1 January 2011 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 1 January 2011 and cash flows for the
year then ended; and
the financial statements have been properly prepared in
accordance with the Companies Acts, 1963 to 2009 and Article
4 of the IAS Regulation.
75 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
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 Parent Company.
The Parent 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 statement, and the description in the
statements on corporate governance of the main features of the
internal control and risk management systems in relation to the
process for preparing the Group financial statements is consistent
with the Group financial statements
The net assets of the Parent Company, as stated in the Parent
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 1 January 2011 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, Ireland
1 March 2011
76 GLANBIA PLC
ANNUAL REPORT 2010
Group income statement
for the financial year ended 1 January 2011
FINANCIAL STATEMENTS
Pre-
exceptional
2010
€’000
Notes
Exceptional
2010
€’000
(note 7)
Total
2010
€’000
Pre-
exceptional
2009
€'000
Exceptional
2009
€'000
(note 7)
Total
2009
€'000
Revenue
Cost of sales
Gross profit
Distribution expenses
Administration expenses
Other gains and losses
5
2,166,695
(1,784,263)
382,432
(115,896)
(130,029)
–
–
–
–
–
–
10,238
2,166,695
1,830,327
–
1,830,327
(1,784,263)
(1,507,119)
(5,084)
(1,512,203)
382,432
323,208
(5,084)
318,124
(115,896)
(130,029)
10,238
(116,115)
(95,927)
–
(1,486)
(8,485)
60,730
(117,601)
(104,412)
60,730
Operating profit
136,507
10,238
146,745
111,166
45,675
156,841
Finance income
Finance costs
Share of results of Joint Ventures
& Associates
Profit before taxation
Income taxes
10
10
11
3,290
(25,420)
10,103
–
–
–
3,290
(25,420)
5,542
(29,576)
10,103
10,225
–
–
–
5,542
(29,576)
10,225
124,480
(25,527)
10,238
134,718
(558)
(26,085)
97,357
(19,103)
45,675
(10,770)
143,032
(29,873)
Profit for the year
98,953
9,680
108,633
78,254
34,905
113,159
Attributable to:
Equity holders of the Parent
Non-controlling interests
25
Basic earnings per share (cents)
Diluted earnings per share (cents)
12
12
108,047
586
108,633
36.86
36.63
112,676
483
113,159
38.46
38.35
On behalf of the Board
L Herlihy J Moloney S Talbot
Directors
77
GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
Group statement of comprehensive income
for the financial year ended 1 January 2011
Notes
2010
€'000
2009
€'000
Profit for the year
108,633
113,159
Other comprehensive income/(expense)
Actuarial gain/(loss) – defined benefit schemes
Deferred tax (charge)/credit on actuarial gain/loss
Share of actuarial gain/(loss) – Joint Ventures & Associates
Deferred tax (charge)/credit on actuarial gain/loss – Joint Ventures & Associates
Currency translation differences
Revaluation of available for sale financial assets
Fair value movements on cash flow hedges
Deferred tax on cash flow hedges and revaluation of available for sale financial assets
28
27
24
24
22
22
22
27
13,379
(1,250)
2,760
(316)
20,169
(5,381)
3,936
2,267
(31,215)
2,684
(1,730)
366
6,258
(3,367)
5,114
(503)
Other comprehensive income/(expense) for the year, net of tax
35,564
(22,393)
Total comprehensive income for the year
144,197
90,766
Total comprehensive income attributable to:
Equity holders of the Parent
Non-controlling interests
25
143,611
586
90,283
483
144,197
90,766
78 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
Group statement of changes in equity
for the financial year ended 1 January 2011
Attributable to equity holders of the Parent
Share capital
and share
premium
€'000
Other
reserves
€'000
Retained
earnings
€'000
Total
€'000
(note 23)
(note 22)
(note 24)
Non-
controlling
interests
€'000
(note 25)
Total
€'000
Balance at 3 January 2009
99,219
100,983
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 based payments
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
99,219
108,672
83,004
290,895
6,493
297,388
Profit for the year
Other comprehensive income/(expense)
Actuarial gain – defined benefit schemes
Deferred tax on actuarial gain
Share of actuarial gain – Joint Ventures & Associates
Fair value movements
Deferred tax on fair value movements
Currency translation differences
Total comprehensive income for the year
Dividends paid during the year
Cost of share based payments
Transfer on exercise, forfeit or lapse of share based
payments that have vested
Shares issued
Premium on shares issued
–
–
–
–
–
–
–
–
–
–
–
17
505
–
–
–
–
(1,445)
2,267
20,169
108,047
108,047
586
108,633
13,379
(1,250)
2,444
–
–
–
13,379
(1,250)
2,444
(1,445)
2,267
20,169
–
–
–
–
–
–
13,379
(1,250)
2,444
(1,445)
2,267
20,169
20,991
122,620
143,611
586
144,197
–
(20,453)
(20,453)
(187)
(20,640)
2,937
(373)
–
–
–
2,937
373
–
–
–
17
505
–
–
–
–
2,937
–
17
505
Balance at 1 January 2011
99,741
132,227
185,544
417,512
6,892
424,404
Goodwill previously written off amounting to €93.0 million (2009: €93.0 million) is included in opening and closing retained earnings.
79 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
Group statement of financial position
as at 1 January 2011
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 equity holders of the Parent
Share capital and share premium
Other reserves
Retained earnings
Non-controlling 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
2010
€'000
2009
€'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
369,346
356,830
11,757
58,945
23,084
7,388
14,127
1,643
363,152
342,112
10,041
58,276
50,555
12,022
20,397
2,718
843,120
859,273
303,881
246,831
3,912
229,101
201,577
204,326
7,501
152,789
783,725
566,193
1,626,845
1,425,466
99,741
132,227
185,544
99,219
108,672
83,004
417,512
290,895
6,892
6,493
424,404
297,388
636,251
3,315
75,966
48,560
22,392
18,609
594,462
5,631
66,337
85,765
20,133
18,582
805,093
790,910
366,246
2,538
972
6,487
21,105
295,481
2,816
945
10,615
27,311
397,348
337,168
1,202,441
1,128,078
1,626,845
1,425,466
80 GLANBIA PLC
ANNUAL REPORT 2010
Group statement of cash flows
for the financial year ended 1 January 2011
Cash flows from operating activities
Cash generated from operations
Interest received
Interest paid
Tax paid
Net cash inflow 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
Purchase of intangible assets
Dividends received from joint ventures
Loans repaid by/(advanced to) joint ventures
Decrease in available for sale financial assets
Proceeds from sale of property, plant and equipment
Net cash outflow from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Increase in borrowings
Finance lease principal payments
Dividends paid to Company shareholders
Dividends paid to non-controlling interests
Capital grants received
Net cash inflow from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Notes
35
17
23
13
25
FINANCIAL STATEMENTS
2010
€'000
2009
€'000
107,214
3,054
(25,613)
(11,955)
104,710
5,352
(30,484)
(5,533)
72,700
74,045
–
(644)
(31,631)
(4,333)
11,210
23,280
438
1,163
(521)
(762)
(47,463)
(3,724)
17,924
(21,508)
433
1,609
(517)
(54,012)
522
21,823
(926)
(20,453)
(187)
1,432
–
16,642
(908)
(19,484)
(2,000)
6,793
2,211
1,043
74,394
21,076
152,789
1,918
132,572
(859)
Cash and cash equivalents at the end of the year
21
229,101
152,789
Reconciliation of net cash flow to movement in net debt
Net increase in cash and cash equivalents
Cash movements from debt financing
Fair value movement 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
2010
€'000
74,394
(20,897)
2009
€'000
21,076
(15,734)
53,497
5,342
(2,165)
(16,836)
34,496
(442,618)
597
3,526
9,465
(452,083)
(408,122)
(442,618)
26
21
(637,223)
229,101
(595,407)
152,789
(408,122)
(442,618)
81
GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
Company statement of financial position
as at 1 January 2011
ASSETS
Non-current assets
Investments in associates
Available for sale financial assets
Investments in subsidiaries
Current assets
Trade and other receivables
Cash and cash equivalents
Total assets
EQUITY
Issued capital and reserves attributable to equity holders of the Company
Share capital and share premium
Retained earnings
Other reserves
Total equity
LIABILITIES
Current liabilities
Trade and other payables
Borrowings
Total liabilities
Total equity and liabilities
Notes
16
18
18
19
21
23
24
2010
€'000
2,298
265
2009
€'000
1,395
740
599,325
452,814
601,888
454,949
109
8,200
76,327
–
8,309
76,327
610,197
531,276
455,009
40,578
7,340
454,487
59,913
4,545
502,927
518,945
31
26
107,270
–
2,781
9,550
107,270
12,331
610,197
531,276
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 €0.7 million
(2009: €43.3 million).
On behalf of the Board
L Herlihy J Moloney S Talbot
Directors
82 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
Company statement of changes in equity
for the financial year ended 1 January 2011
Other reserves
Share
capital
and share
premium
€'000
(note 23)
Retained
earnings
€'000
Capital
reserve
€'000
Own
shares
€'000
Share
based
payment
reserve
€'000
Total
€'000
(note 24)
(note 22 a)
(note 22 f)
(note 22 g)
Balance at 3 January 2009
454,487
36,056
4,227
(1,899)
1,612 494,483
Profit for the year
Dividends paid during the year
Cost of share based payments
Transfer from trade and other payables – share based payments
–
–
–
–
43,341
(19,484)
–
–
–
–
–
–
–
–
–
–
–
–
167
438
43,341
(19,484)
167
438
Balance at 2 January 2010
454,487
59,913
4,227
(1,899)
2,217 518,945
Profit for the year
Dividends paid during the year
Cost of share based payments
Transfer on exercise, forfeit or lapse of share based
payments that have vested
Transfer of reserves between Group companies
Shares issued
Premium on shares issued
–
–
–
–
–
17
505
745
(20,453)
–
373
–
–
–
–
–
–
–
–
–
–
–
–
–
283
–
–
–
–
–
2,937
(656)
231
–
–
745
(20,453)
2,937
–
231
17
505
Balance at 1 January 2011
455,009
40,578
4,227
(1,616)
4,729 502,927
83 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
Company statement of comprehensive income and statement of cash flows
for the financial year ended 1 January 2011
Company statement of comprehensive income
Notes
2010
€'000
2009
€'000
Profit for the year
24
745
43,341
Total comprehensive income for the year
745
43,341
Company statement of cash flows
Cash flows from operating activities
Cash generated from operations
2010
€'000
2009
€'000
35
33,192
23,124
Net cash inflow from operating activities
33,192
23,124
Cash flows from investing activities
Decrease in available for sale financial assets
Acquisition of other Group companies
Net cash (outflow)/inflow from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Dividends paid to Company shareholders
Capital contribution from other Group companies
Net cash outflow from financing activities
Net increase 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
18
23
13
475
(5,986)
(5,511)
522
(20,453)
10,000
550
–
550
–
(19,484)
–
(9,931)
(19,484)
17,750
4,190
(9,550)
(13,740)
8,200
(9,550)
84 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
Notes to the financial statements
for the financial year ended 1 January 2011
1. General information
Glanbia plc (“the Company”) and its subsidiaries (together
“the Group”) is a global nutritional solutions and cheese Group
with its main operations in Ireland, Europe, the USA, Canada, Asia
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 54.5% 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 1 March 2011.
2. Summary of significant accounting polices
New accounting standards and IFRIC interpretations adopted by
the Group during the year ended 1 January 2011 are dealt with in
section (z) below. The adoption of these standards and
interpretations had no significant impact on the results or financial
position of the Group during the year.
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 1 January 2011, comparatives are for the 52 week
period ended 2 January 2010. The statements of financial position
for 2010 and 2009 have been drawn up as at 1 January 2011 and
2 January 2010 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 Group uses the acquisition method of accounting to
account for business combinations. The consideration
transferred for the acquisition of a subsidiary is the fair values
of the assets transferred, the liabilities incurred and the
equity interests issued by the Group. The consideration
transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement.
Acquisition-related costs are expensed as incurred.
Identifiable assets acquired and liabilities and contingent
liabilities assumed in a business combination are measured
initially at their fair values at the acquisition date. On an
acquisition-by-acquisition basis, the Group recognises any
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. Investments in subsidiaries are
accounted for at cost less impairment. Cost is adjusted to
reflect changes in consideration arising from contingent
consideration amendments. Costs also includes direct
attributable costs of investment. The excess of the
consideration transferred, the amount of any non-controlling
interest in the acquiree and the acquisition-date fair value of
any previous equity interest in the acquiree over the fair
value of the Group's share of the identifiable net assets
acquired is recorded as goodwill. If this is less than the fair
value of the net assets of the subsidiary acquired in the case
of a bargain purchase, 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.
85 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
(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
Operating Executive Committee who make strategic decisions.
(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 Group’s 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 not 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,
outside the Group such exchange differences are recognised in
the income statement as part of the gain or loss on sale.
Goodwill and fair value adjustments arising on the acquisition
of a foreign entity are treated as local currency assets and
liabilities of the foreign entity and are translated at the
exchange rate at the end of the reporting period. In
accordance with IFRS 1, the cumulative translation
differences on foreign subsidiaries was set to zero on IFRS
transition date (4 January 2004).
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 assets. 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 expenditure is 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
within the investment in associates.
86 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
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 - First time adoption of
International Financial Reporting Standards, 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 available for sale financial
asset 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 the available for sale financial assets classified as available for
sale are recognised in other comprehensive income. When such
available for sale assets are sold or impaired, the accumulated fair
value adjustments are included in the income statement as gains
or losses from available for sale financial assets.
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 loan receivables
Trade receivables are recognised initially at fair value and
subsequently measured at amortised cost using the effective
interest method less provision for impairment.
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.
A provision for impairment of 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 trade/loan receivable,
probability that the trade/loan receivable will enter bankruptcy or
financial reorganisation, and default or delinquency in payments
are considered indicators that the 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 receivable is
uncollectible, it is written off against the provision account for
receivables. Subsequent recoveries of amounts previously written
87 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
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.
(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 when the Group is demonstrably
committed to make a significant reduction in the number of
employees covered by a plan or amends the terms of a
defined benefit plan, so that a significant element of future
service by current employees will no longer qualify for
benefits or will qualify for reduced benefits. 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 thereof subsequent to grant
date. In addition, all cancellations, whether by the entity or
other parties, receive similar 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 LTIP 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 anticipated likelihood at the
grant date of achieving the market-based vesting condition.
88 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
(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. 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 income statement 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, 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 at the
measurement date.
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.
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,
89 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
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 the income statement.
(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 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
owners of the parent, 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 borrowings. 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 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.
90 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
(z) 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 1 January 2011 and have been adopted by the Group:
IAS 32 (Amendment) – Classification of Rights Issues (effective for
annual periods beginning on or after 1 February 2010).
The amendment addresses the accounting for rights issues that
are denominated in a currency other than the functional currency
of the issuer. Provided certain conditions are met, such rights
issues are now classified as equity regardless of the currency in
which the exercise price is denominated. Previously such issues
had to be accounted for as derivative liabilities.
(cid:159)
(cid:159)
(cid:159)
IFRS 3, (Revised),’Business Combinations’
IAS 27 (Revised), ‘Consolidated and Separate Financial
Statements’
IAS 39 (Amendment), – Eligible Hedged Items,
’Financial Instruments: Recognition and Measurement’
(cid:159)
Improvements to IFRS’s 2009
As highlighted in note 36 the Group acquired two businesses in
2011 and incurred acquisition related costs of €0.6m in 2010. Apart
from the above, adoption of the standards and interpretations
had no significant impact on the results or financial position of the
Group during the year ended 1 January 2011.
Standards, amendments and interpretations effective in 2010,
reviewed by the Group and determined not applicable by the
Group for the year ended 1 January 2011:
(cid:159)
IFRS 2 ‘Group Cash Settled Share Based Payment
Transactions’.
(cid:159)
(cid:159)
(cid:159)
(cid:159)
(cid:159)
(cid:159)
IFRIC 17, ‘Distributions of Non–cash Assets to Owners’.
IFRIC 18, ‘Transfers of Assets from Customers’.
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’.
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 2011).
The IASB has issued the 'Improvements to IFRS 2010' standard
which amends six standards and one interpretation based on the
exposure draft issued in August 2009. 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 9 ,’Financial Instruments’(effective for financial periods
beginning on or after 1 January 2013).
The new standard is still subject to EU endorsement. IFRS 9 is
the first step in the process to replace IAS39, ‘Financial
Instruments: Recognition and Measurement’. IFRS 9 introduces
new requirements for classifying and measuring financial assets
and is likely to affect the Group’s accounting for its financial
assets. IFRS 9 replaces the multiple classification models in IAS 39
with a single model that has only two classification categories:
amortised cost and fair value. Classification under IFRS 9 is driven
by the Group’s business model for managing financial assets and
the contractual characteristics of the financial assets. IFRS 9
removed the requirement to separate embedded derivatives from
financial asset hosts. IFRS 9 also removes the cost exemption for
unquoted equities.
Amendment to IFRS 7 ‘Disclosures – Transfer of Financial Assets’,
(effective for annual periods beginning on or after 1 July 2011)
The amendment is subject to EU endorsement. The amendment
addressed disclosures required to help users of financial
statements evaluate the risk exposures relating to transfer of
financial assets and the effect of those risks on an entity’s
financial position.
Amendment to IAS 24 – Related Party Disclosures (effective
for financial periods beginning on or after 1 January 2011).
The amendment simplifies the definition of a related party and
provides a partial exemption from the disclosure requirements
for government-related entities.
Amendment to IFRIC 14,’Prepayments of a Minimum Funding
Requirement’, (effective for financial periods beginning on or
after 1 January 2011).
The amendment corrects an unintended consequence of
IFRIC14. Without the amendment entities are not permitted to
recognise as an asset some voluntary prepayments for minimum
funding contributions. This was not intended when IFRIC 14 was
issued and the amendment corrects this.
IFRIC 19,’ Extinguishing Financial Liabilities with Equity
Instruments’, (effective for financial periods beginning on or after
1 July 2010).
The interpretation clarified the accounting by an entity when the
terms of a financial liability are renegotiated and result in the
entity issuing equity instruments to a creditor of the entity to
extinguish all or part of the financial liability (debt for equity
swap). IFRIC 19 requires a gain or a loss to be recognised in profit
or loss, which is measured as the difference between the carrying
amount of the financial liability and the fair value or the equity
instruments issued. If the fair value of the equity instruments
issued cannot be reliably measured, the equity instruments
should be measured to reflect the fair value of the financial
liability extinguised.
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 currency risk, interest rate risk, price risk, liquidity
and cash flow risk and credit 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.
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GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
Risk management, other than credit risk management, is carried out
by a central treasury department (Group Treasury) under policies
approved by the Board of Directors. Group Treasury identifies,
evaluates and hedges financial risks in close co-operation with the
Group’s operating units.
The Board provides written principles for overall risk management,
as well as written policies covering specific areas, such as 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 operations
primarily in the USA. As a result movements in US dollar/euro
exchange rate 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 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.
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 1 January 2011 and 2 January 2010, 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 1 January 2011 would have resulted in a currency translation
gain/loss of approximately €19.7 million (2009: €16.1 million), which
would be recognised directly in other comprehensive income.
At 1 January 2011 and 2 January 2010, 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 1 January 2011 would have resulted in a currency
translation gain/loss of approximately €1.0 million (2009: €1.1
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 2010, a 1% increase in prevailing market
interest rates would have resulted in a €1.8 million loss (2009: €1.3
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.
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 financial assets. 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 futures contracts.
For further details regarding the Group’s price risk see note 32 –
derivative financial instruments.
92 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
(d) Liquidity and cash flow risk
The Group’s objective is to maintain a balance between the
continuity of funding and flexibility through the use of borrowings
with a range of maturities. In order to preserve continuity of
funding, the Group’s policy is that, at a minimum, committed
facilities should be available at all times to meet the full extent
of its anticipated finance requirements, arising in the ordinary
course of business, during the succeeding 12 month period.
This means that at any time the lenders providing facilities in
respect of this finance requirement are required to give at least
12 months notice of their intention to seek repayment of such
facilities. At the year end, the Group had multi-currency
committed term facilities of €734.2 million (2009: €729.1 million)
of which €101.2 million (2009: €138.8 million) was undrawn.
The weighted average maturity of these facilities was 2.2 years
(2009: 3.2 years).
For further details regarding the Group’s borrowing facilities see
note 26 – borrowings.
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 from 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 value balances as the impact of discounting is not
significant.
Financial liabilities
At 1 January 2011
Borrowings
Future finance costs
Derivative financial instruments
Trade and other payables*
Less future finance costs
At 2 January 2010
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
972
25,307
6,487
186,612
205,853
20,107
2,221
–
426,423
10,328
1,155
–
Total
€'000
633,248
55,742
9,863
186,612
219,378
(25,307)
228,181
(20,107)
437,906
(10,328)
885,465
(55,742)
194,071
208,074
427,578
829,723
Less than
1 year
€'000
Between 1
and 2 years
€'000
Between 2
and 5 years
€'000
945
29,375
10,615
176,055
982
29,376
3,297
–
589,237
35,094
2,544
–
Total
€'000
591,164
93,845
16,456
176,055
216,990
(29,375)
33,655
(29,376)
626,875
(35,094)
877,520
(93,845)
187,615
4,279
591,781
783,675
* Excludes accrued expenses and social security costs.
The Company has cash at bank of €8.2 million at year end (2009: €9.6 million overdraft). The contractual undiscounted cash flows equal
the balance as at 1 January 2011.
93 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
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 from the reporting date to the contractual maturity date. The amounts disclosed in the table are the
contractual undiscounted cash flows.
Foreign exchange contracts
At 1 January 2011
Foreign exchange contracts – cash flow hedges
Less than
1 year
€'000
Between 1
and 2 years
€'000
Between 2
and 5 years
€'000
Total
€'000
Outflow
(10)
–
–
(10)
At 2 January 2010
Foreign exchange contracts – cash flow hedges
Outflow
(956)
–
–
(956)
Less than
1 year
€'000
Between 1
and 2 years
€'000
Between 2
and 5 years
€'000
Total
€'000
(e) Credit risk
Credit risk is managed on a Group basis. Credit risk arises from
cash and cash equivalents, derivative financial instruments and
deposits with banks and financial institutions, as well as credit
exposures to customers, including outstanding receivables and
committed transactions. For banks and financial institutions, only
independently rated parties with a minimum credit rating of A-
are accepted or whose obligations are covered by equivalently
rated sovereign guarantee. 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 trade receivable balances.
Where this is done the credit risk is transferred but in some cases
the late payment risk is retained.
For further details regarding the Group’s credit risk see note 19 –
trade and other receivables.
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 1 January 2011, the Group’s
debt/adjusted EBITDA ratio was 2.1 times (2009: 2.6 times), which
is deemed by management to be prudent and in line with
industry norms. Adjusted EBITDA for the purpose of financing
ratios is Group EBITDA plus dividends received from Joint
Ventures & Associates.
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.
In accordance with IFRS 7 – Financial Instruments: Disclosures, the
Group has disclosed the fair value of instruments by 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)
94 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
The following table presents the Group’s assets and liabilities that are measured at fair value at 1 January 2011 and
2 January 2010.
1 January 2011
Assets
Derivatives used for hedging
Available for sale financial assets
– equity securities
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
2 January 2010
Assets
Derivatives used for hedging
Available for sale financial assets
– equity securities
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
Level 1
€'000
Level 2
€'000
Level 3
€'000
Total
€'000
–
5,555
143
143
–
–
2,983
8,538
(9,802)
(9,802)
–
–
–
–
–
5,555
3,126
8,681
(9,802)
(9,802)
Level 1
€'000
Level 2
€'000
Level 3
€'000
Total
€'000
–
10,219
155
155
–
–
8,352
18,571
(16,246)
(16,246)
–
–
–
–
–
10,219
8,507
18,726
(16,246)
(16,246)
95 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
4. Critical accounting estimates and judgements
Estimates and judgements are continually evaluated and are
based on historical experience and other factors, including
expectations of future events that are believed to be reasonable
under the circumstances.
The Group makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and
assumptions that could have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
(a)
Impairment reviews of goodwill and indefinite
life intangibles
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 intangible assets of Glanbia Nutritionals (NA), Inc., Optimum
Nutrition, Inc. and Glanbia Nutritionals Deutschland GmbH,
including goodwill arising on acquisition of €229.1 million (2009:
€212.3 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 by 1% would not
result in an impairment of the assets. A rate of zero percent has
been used to estimate cash flow growth between three and ten
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.
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 also
require the use of estimates.
An increase in the Group’s effective tax rate by 1% would reduce
profit after tax by €1.1 million (2009: €1.3 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 €389.3 million (2009: €349.2 million) and plan
liabilities of €437.9 million (2009: €435.0 million) giving a net
pension deficit of €48.6 million (2009: €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 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 1 January 2011, an increase in the discount
rates applied of 10 basis points across the various defined benefit
plans, would have the impact of decreasing the pension deficit
for the Group by €6.7 million (2009: €5.2 million).
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.
(d) Estimating 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
€0.2 million (2009: €0.2 million) reduction impact on operating
profit. The Group has also reviewed the impact of a change in
useful lives in plant and equipment and a one year reduction in
useful lives would have a €2.2 million (2009: €2.1 million)
reduction impact on operating profit.
The Group has reviewed the impact of a change in the
amortisation period of customer relationships and a one year
reduction in the write off period would result in a €0.7 million
(2009: €0.7 million) reduction in operating profit.
The Group has reviewed the impact on indefinite life intangible
assets by assigning a finite life to these assets and a 20 year
useful life estimate would have a €4.5 million (2009: €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 and actual results may also differ from these estimates.
96 GLANBIA PLC
ANNUAL REPORT 2010
5. Segment information
FINANCIAL STATEMENTS
In accordance with IFRS 8 the Group has four segments as follows: US Cheese & Global Nutritionals, Dairy Ireland, Joint Ventures &
Associates and Other Business. 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 Operating 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 manufacture and sale of
cheese, whey protein and other nutritional solutions; 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 arises due to the manufacture and sale of
cheese, whey proteins and dairy consumer products. The Other Business segment refers to all other businesses which comprise the
Property business unit and a small dairy processing operation in Mexico which was disposed of in September 2010. Each segment is
reviewed in its totality by the Chief Operating Decision Maker.
The Glanbia Operating Executive Committee assesses the trading performance of operating segments based on a measure of
earnings before interest and tax. This measure excludes exceptional items.
US Cheese &
Global
Nutritionals
€'000
Dairy Ireland
€'000
JV's &
Associates
€'000
Other
Business
€'000
Group
including JV's
& Associates
€'000
Total gross segment revenue
(a)
1,024,653
1,154,023
416,564
Inter-segment revenue
(2,752)
(15,473)
–
6,244
–
2,601,484
(18,225)
Segment external revenue
1,021,901
1,138,550
416,564
6,244
2,583,259
Segment earnings before interest, tax and
exceptional items
(b)
93,795
Exceptional items – defined benefit pensions
–
43,543
10,238
21,554
–
(831)
–
158,061
10,238
Segment earnings before interest and tax
93,795
53,781
21,554
(831)
168,299
Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of €69.2 million and related
party sales between US Cheese & Global Nutritionals and Joint Ventures & Associates of €9.4 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
2010
€'000
2,601,484
(18,225)
(416,564)
2,166,695
97 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
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, tax and exceptional items
Exceptional items – defined benefit pension schemes
Joint Ventures & Associates interest and tax
Finance income
Finance costs
Reported profit before tax
Income taxes
Reported profit after tax
2010
€'000
158,061
10,238
(11,451)
3,290
(25,420)
134,718
(26,085)
108,633
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 1 January 2011 are as follows:
US Cheese &
Global
Nutritionals
€'000
Dairy Ireland
€'000
JV's &
Associates
€'000
Other
Business
€'000
Group
including JV's
& Associates
€'000
Depreciation of property, plant and equipment
Amortisation of intangibles
Capital grants released to the income statement
Exceptional items – defined benefit pension schemes
12,514
10,711
(330)
–
19,997
4,400
(1,089)
(10,238)
6,823
6
(526)
–
58
–
–
–
39,392
15,117
(1,945)
(10,238)
The segment assets and liabilities at 1 January 2011 and segment capital expenditure and acquisitions for the year then ended
are as follows:
US Cheese &
Global
Nutritionals
€'000
Dairy Ireland
€'000
JV's &
Associates
€'000
Other
Business
€'000
Group
including JV's
& Associates
€'000
Segment assets
Segment liabilities
Segment capital expenditure and acquisitions
(c)
(d)
(e)
725,960
556,455
87,362
17,041
1,386,818
200,380
288,125
–
1,536
490,041
23,085
13,522
11,901
124
48,632
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.
2010
€'000
1,386,818
240,027
1,626,845
98 GLANBIA PLC
ANNUAL REPORT 2010
5.1 (d): Segment liabilities are reconciled to reported liabilities as follows:
Segment liabilities
Unallocated liabilities
Reported liabilities
FINANCIAL STATEMENTS
2010
€'000
490,041
712,400
1,202,441
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
5.2 The segment results for the year ended 2 January 2010 are as follows:
2010
€'000
48,632
(11,901)
466
37,197
US Cheese &
Global
Nutritionals
€'000
Dairy Ireland
€'000
JV's &
Associates
€'000
Other
Business
€'000
Group
including JV's
& Associates
€'000
Total gross segment revenue
(a)
Inter-segment revenue
795,974
(3,581)
1,037,473
297,587
(8,707)
–
9,168
–
2,140,202
(12,288)
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 item – 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.
99 GLANBIA PLC
ANNUAL REPORT 2010
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
FINANCIAL STATEMENTS
2009
€'000
2,140,202
(12,288)
(297,587)
1,830,327
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, tax and exceptional items
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
Other
Business
€'000
Group
including 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)
–
–
79
–
–
84
–
35,426
13,864
(1,633)
14,041
(59,716)
The segment assets and liabilities at 2 January 2010 and segment capital expenditure and acquisitions for the year then ended
are as follows:
US Cheese &
Global
Nutritionals
€'000
Dairy Ireland
€'000
JV's &
Associates
€'000
Other
Business
€'000
Group
including JV's
& Associates
€'000
Segment assets
Segment liabilities
Segment capital expenditure and acquisitions
(c)
(d)
(e)
630,530
475,423
102,035
23,809
1,231,797
164,351
264,743
–
1,202
430,296
24,704
21,907
29,993
3,435
80,039
100 GLANBIA PLC
ANNUAL REPORT 2010
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
2009
€'000
1,231,797
193,669
1,425,466
2009
€'000
430,296
697,782
1,128,078
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
2009
€'000
80,039
(29,993)
426
50,472
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 Business 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
2010
€'000
725,834
137,874
122,508
901,717
278,762
2009
€'000
703,217
113,569
85,003
718,802
209,736
2,166,695
1,830,327
Revenue of approximately €249.6 million (2009: €231.1 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 €271.5 million
(2009: €305.9 million) and located in other countries, mainly the USA is €562.6 million (2009: €538.6 million).
101 GLANBIA PLC
ANNUAL REPORT 2010
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
Loss/(profit) on disposal of property, plant and equipment
FINANCIAL STATEMENTS
2010
€'000
31,177
1,392
957
2009
€'000
27,221
1,514
(716)
Repairs and maintenance expenditure on property, plant and equipment
27,207
26,903
Exceptional items (pre tax)
– Rationalisation costs
– Non-cash foreign exchange loss
– UK defined benefit pension schemes
– Irish defined benefit pension schemes
Net foreign exchange loss/(gain) (excluding exceptional items)
Amortisation of intangible assets (note 15)
– Software costs
– Other intangible assets
Increase/(decrease) in inventories
Raw materials and consumables used
Energy costs
Sales and marketing costs
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
–
–
–
15,055
18,280
21,088
(10,238)
(100,098)
3,430
(2,543)
4,924
10,187
4,163
9,695
102,304
(65,845)
1,448,569
1,364,843
28,324
56,390
1,357
(1,419)
8,376
3,345
26,753
51,735
5,172
(1,237)
6,606
3,923
Employee benefit expense – pre exceptional (note 8)
190,172
175,231
Auditors' remuneration*
– Statutory audit of Group companies
– Other assurance services
– Tax advisory services
– Other non-audit services
Research and development costs
Other expenses
Total operating expenses
Reconciliation of total operating expenses to the income statement
Cost of sales
Distribution expenses
Administration expenses
Other gains and losses
Total operating expenses
546
834
930
2
546
587
707
4
8,037
7,686
103,147
76,213
2,019,950
1,673,486
2010
€'000
2009
€'000
1,784,263
1,512,203
115,896
130,029
(10,238)
117,601
104,412
(60,730)
2,019,950
1,673,486
*
Auditors remuneration for the Company in respect of their statutory audit amounted to €35,000 (2009: €35,000)
102 GLANBIA PLC
ANNUAL REPORT 2010
7. Exceptional items
Rationalisation costs
Non-cash foreign exchange loss
Defined benefit schemes
– Irish defined benefit pension schemes
– UK defined benefit pension schemes
Total exceptional credit before tax
Exceptional tax charge (note 11)
Net exceptional credit
Notes
(a)
(b)
(c)
(d)
FINANCIAL STATEMENTS
2010
€'000
–
–
10,238
–
2009
€'000
(15,055)
(18,280)
100,098
(21,088)
10,238
45,675
(558)
(10,770)
9,680
34,905
(a) An exceptional charge of €15.1 million was incurred during the prior year, primarily relating to redundancy costs due to the
on-going rationalisation programmes in the Dairy Ireland segment.
(b) During the prior 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 was recycled to the Group’s income statement.
(c) The Group undertook a review of pension arrangements during 2009 which resulted in the recognition of a gain on the main Irish
defined benefit pension schemes of €100.1 million. In 2010, further revisions to the Group’s pension arrangements for three
additional Irish defined benefit schemes, consistent with the revisions made to the Group’s main pension schemes, have been
finalised giving rise to an exceptional gain, in accordance with IAS 19, in the year of €10.2 million. This gain relates to curtailment
gains and negative past service costs of €1.7 million and €10.9 million respectively offset by a change in the estimate of the prior
year curtailment of €2.4 million.
(d) The Group’s UK defined benefit schemes exceptional charge of €21.1 million in the prior year relates to the scheme’s administration
and certain other costs associated with businesses disposed of in prior years.
103 GLANBIA PLC
ANNUAL REPORT 2010
8. Employee benefit expense
Wages and salaries
Termination costs
Social security costs
Cost of share based payments (note 22)
Pension costs – defined contribution schemes (note 28)
Pension costs – defined benefit schemes (note 28)
Exceptional item – curtailment gains and negative past service costs
Exceptional item – rationalisation costs (note 7 a)
FINANCIAL STATEMENTS
2010
€'000
159,434
749
17,234
2,937
2,750
7,068
2009
€'000
144,518
–
15,613
187
2,146
12,767
190,172
175,231
(4,651)
–
(60,400)
15,055
185,521
129,886
The average number of employees, excluding the Group’s Joint Ventures & Associates in 2010 was 3,311 (2009: 3,418) and is analysed
into the following categories:
US Cheese & Global Nutritionals
Dairy Ireland
Other
9. Directors’ remuneration
The Directors’ remuneration information is shown on pages 65 to 70 in the governance section of this report.
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
UK pension provision
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
2010
1,570
1,682
59
2009
1,471
1,852
95
3,311
3,418
2010
€'000
3,008
282
2009
€'000
4,662
880
3,290
5,542
(13,001)
(16,756)
(80)
(121)
(256)
(7,613)
2,733
(2,733)
(4,349)
(67)
–
(241)
(8,163)
1,524
(1,524)
(4,349)
(25,420)
(29,576)
(22,130)
(24,034)
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.
104 GLANBIA PLC
ANNUAL REPORT 2010
11. Income taxes
Current tax
Irish current tax
Adjustments in respect of prior years
Irish current tax on income for the year
Foreign current 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
FINANCIAL STATEMENTS
2010
€'000
11,620
(422)
2009
€'000
3,044
(1,623)
11,198
1,421
2,285
1,050
4,727
215
3,335
4,942
14,533
6,363
10,994
12,740
25,527
19,103
(a)
(b)
–
558
(1,742)
12,512
26,085
29,873
(a) The restructuring provision charged in the prior year resulted in an exceptional current tax credit in 2009 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 €0.6 million (2009: €12.5 million).
The exceptional net tax charges and credits in 2010 and 2009, by virtue of their nature and size, have been separately disclosed above.
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% (2009: 12.5%)
Earnings at reduced Irish rates
Difference due to overseas tax rates
Adjustment to tax charge in respect of previous periods
Tax on profits of Joint Ventures & Associates included in profit before tax
Expenses not deductible for tax purposes and other differences
Total tax charge
2010
€'000
2009
€'000
134,718
143,032
16,840
(902)
6,999
(1,811)
(1,263)
6,222
17,879
(2,067)
13,001
(1,071)
(1,278)
3,409
26,085
29,873
Details of deferred tax charged or credited directly to other comprehensive income during the year are outlined in note 27.
105 GLANBIA PLC
ANNUAL REPORT 2010
12. Earnings per share
FINANCIAL STATEMENTS
Basic
Basic earnings per share is calculated by dividing the net profit attributable to the equity holders 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 22 f).
Profit attributable to equity holders of the Parent (€’000)
2010
2009
108,047
112,676
Weighted average number of ordinary shares in issue
293,105,068 292,985,630
Basic earnings per share (cents per share)
36.86
38.46
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all potential dilutive ordinary shares. Share options are potential dilutive 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
Adjusted weighted average number of ordinary shares
Diluted earnings per share (cents per share)
2010
2009
293,105,068
292,985,630
1,874,570
830,517
294,979,638 293,816,147
36.63
38.35
Adjusted
Adjusted earnings per share is calculated on the net profit attributable to equity holders 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 equity holders 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)
2010
€'000
108,047
13,222
(9,680)
2009
€'000
112,676
12,126
(34,905)
111,589
89,897
38.07
30.68
37.83
30.60
106 GLANBIA PLC
ANNUAL REPORT 2010
13. Dividends
FINANCIAL STATEMENTS
The dividends paid in 2010 and 2009 were €20.5 million (6.98 cents per share) and €19.5 million (6.65 cents per share) respectively. On
29 September 2010 an interim dividend of 3.03 cents per share on the ordinary shares amounting to €8.9 million was paid to
shareholders on the register of members as at 10 September 2010. The Directors have recommended the payment of a final dividend
of 4.49 cents per share on the ordinary shares which amounts to €13.2 million. Subject to shareholders approval this dividend will be
paid on 20 May 2011 to shareholders on the register of members at 8 April 2011, the record date. These financial statements do not
reflect this final dividend.
14. Property, plant and equipment
Year ended 2 January 2010
Opening net book amount
Exchange differences
Additions
Disposals
Reclassification (note 15)
Depreciation charge
Land and
buildings
€'000
Plant and
equipment
€'000
Motor
vehicles
€'000
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)
Total
€'000
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
Year ended 1 January 2011
Opening net book amount
Exchange differences
Additions
Disposals
Reclassification (note 15)
Depreciation charge
197,267
(65,261)
612,295
(381,509)
19,036
(18,676)
828,598
(465,446)
132,006
230,786
360
363,152
132,006
4,105
4,082
(417)
–
(5,158)
230,786
7,103
25,746
(1,648)
(434)
(27,052)
360
66
215
(55)
–
(359)
363,152
11,274
30,043
(2,120)
(434)
(32,569)
Closing net book amount
134,618
234,501
227
369,346
At 1 January 2011
Cost
Accumulated depreciation
Net book amount
205,037
(70,419)
643,062
(408,561)
19,262
(19,035)
867,361
(498,015)
134,618
234,501
227
369,346
Depreciation expense of €32.6 million (2009: €28.7 million) has been charged as follows: cost of sales €28.7 million (2009: €25.1 million),
distribution expenses €1.1 million (2009: €1.2 million) and administration expenses €2.8 million (2009: €2.4 million).
Included in the cost of plant and equipment is an amount of €4.9 million (2009: €8.9 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 nil (2009: €0.3 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.
107 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
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 €11.7 million (2009: €10.5 million) are included in the income statement.
2010
€'000
41,673
(30,736)
2009
€'000
41,673
(29,344)
10,937
12,329
15. Intangible assets
Year ended 2 January 2010
Opening net book amount
Exchange differences
Additions
Reclassification (note 14)
Amortisation
Goodwill
€'000
note (b)
Other
intangibles
€'000
note (a)
Software
costs
€'000
Development
costs
€'000
Total
€'000
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
Year ended 1 January 2011
Opening net book amount
Exchange differences
Additions
Reclassification (note 14)
Write-off of intangibles
Amortisation
142,052
9,885
170,773
12,911
–
–
(215)
–
–
–
–
(7,538)
21,621
269
4,333
434
(200)
(4,924)
7,666
548
2,821
–
(957)
(2,649)
342,112
23,613
7,154
434
(1,372)
(15,111)
Closing net book amount
151,722
176,146
21,533
7,429
356,830
At 1 January 2011
Cost
Accumulated amortisation
151,722
–
199,046
(22,900)
55,116
(33,583)
13,721
(6,292)
419,605
(62,775)
Net book amount
151,722
176,146
21,533
7,429
356,830
Amortisation expense of €15.1 million (2009: €13.9 million) has been charged to administration expenses during the year.
The average remaining amortisation period for software costs is 5 years and development costs is 4 years.
Approximately €3.1 million of software additions during the year were internally generated with the remaining balance acquired from
external parties.
Development costs of €1.0 million were written off during the year due to uncertainty that these projects will reach commercialisation.
108 GLANBIA PLC
ANNUAL REPORT 2010
Note 15 (a): Other intangibles
Year ended 2 January 2010
Opening net book amount
Exchange differences
Additions
Amortisation
FINANCIAL STATEMENTS
Brands/
know-how
€'000
Customer
relationships
€'000
97,194
(3,287)
–
(687)
84,752
(2,774)
–
(6,866)
Other
€'000
2,351
229
58
(197)
Total other
intangibles
€'000
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
Year ended 1 January 2011
Opening net book amount
Exchange differences
Amortisation
96,329
(3,109)
86,667
(11,555)
3,139
(698)
186,135
(15,362)
93,220
75,112
2,441
170,773
93,220
6,361
(644)
75,112
5,158
(6,704)
2,441
1,392
(190)
170,773
12,911
(7,538)
Closing net book amount
98,937
73,566
3,643
176,146
Year ended 1 January 2011
Cost
Accumulated amortisation
102,690
(3,753)
91,825
(18,259)
4,531
(888)
199,046
(22,900)
Net book amount
98,937
73,566
3,643
176,146
Included in intangibles is a carrying value of €89.2 million (2009: €85.2 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 11 years (2009:
12 years) and for other intangibles is 11 years (2009: 12 years).
Included in customer relationships are individual significant intangible assets of €68.2 million (2009: €66.1 million) with a remaining
amortisation period of 11.5 years (2009: 12.5 years). The remaining customer relationships are amortised over a period of 10 years
(2009: 11 years).
No intangible assets were acquired by way of Government grants during the financial years ended 1 January 2011 or 2 January 2010.
109 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
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 principal cash generating units is
as follows:
Glanbia Nutritionals Deutschland GmbH
Glanbia Nutritionals (NA), Inc.
Optimum Nutrition, Inc.
2010
€'000
11,297
60,201
68,411
2009
€'000
11,297
55,838
59,918
139,909
127,053
Multiple units without individual significant amounts of goodwill
11,813
14,999
151,722
142,052
Indefinite life intangibles amounting to €89.2 million (2009: €85.2 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 5.25%, which is the Group's weighted average cost of capital
depending on the cash generating unit, and incorporates terminal values. In forecasting terminal values, a multiple of between five and
ten times EBITDA is generally used.
110 GLANBIA PLC
ANNUAL REPORT 2010
16. Investments in associates
At the beginning of the year
Share of profit after tax
Gain/(loss) recognised directly through the statement of
comprehensive income
Additions
Write-down of investment
Exchange differences
FINANCIAL STATEMENTS
2010
Company
€'000
2010
Group
€'000
2009
Company
€'000
2009
Group
€'000
1,395
10,041
1,395
11,597
–
–
903
–
–
79
1,637
–
–
–
–
–
–
–
–
586
(1,038)
117
(1,078)
(143)
At the end of the year
2,298
11,757
1,395
10,041
The Group’s share of the results of associates, all of which are unlisted, and its share of the assets (including goodwill) and liabilities are
as follows:
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
2010
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
Revenue
€'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
Assets
€'000
Liabilities
€'000
Revenue
€'000
Profit/
(loss)
€'000
Interest
held
%
8,306
5,187
4,632
7,178
116
405
(5,906)
(717)
(1,638)
(5,182)
(299)
(325)
15,732
1,821
1,902
1,595
–
134
25,824
(14,067)
21,184
92
(157)
42
321
(183)
(36)
79
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 40.
111
GLANBIA PLC
ANNUAL REPORT 2010
17. Investments in joint ventures
At the beginning of the year
Share of profit after tax
Additions
Gains recognised directly through the statement of comprehensive income
Deferred tax movement
Dividends received
Exchange differences
At the end of the year
FINANCIAL STATEMENTS
2010
€'000
58,276
10,024
399
1,295
(3,054)
(11,210)
3,215
2009
€'000
64,895
9,639
–
1,457
3,445
(17,924)
(3,236)
58,945
58,276
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
Non-current liabilities
Current liabilities
Net assets
Revenue
Expenses
Share of profit after tax
Proportionate interest in joint ventures’ commitments
2010
€'000
2009
€'000
135,903
59,588
120,033
60,143
195,491
180,176
78,340
58,206
69,686
52,214
136,546
121,900
58,945
58,276
2010
€'000
2009
€'000
395,380
(385,356)
273,785
(264,146)
10,024
9,639
4,930
8,939
A listing and description of interests in significant joint ventures is outlined in note 40.
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, as it only controls 50% of the voting rights and is only entitled to appoint 50% of the total number of directors.
Therefore, the Group does not have the power to govern the financial or operating policies of the entity.
112 GLANBIA PLC
ANNUAL REPORT 2010
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
FINANCIAL STATEMENTS
Available
for sale
financial assets
2010
Group
€'000
Investments
2010
Company
€'000
453,554
(5,229)
–
151,265
20,397
(889)
(5,381)
–
Available
for sale
financial assets
2009
Group
€'000
24,112
(550)
(3,367)
202
Investments
2009
Company
€'000
460,771
(7,217)
–
–
At the end of the year
599,590
14,127
453,554
20,397
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
2010
Group
€'000
Available
for sale
financial assets
2009
Group
€'000
Investments
2009
Company
€'000
Investments
2010
Company
€'000
1
–
–
265
–
599,324
–
143
2,983
9,830
265
198
–
708
1
–
–
740
–
452,813
–
155
8,352
10,193
740
198
–
759
599,590
14,127
453,554
20,397
There were no impairment provisions on available for sale financial assets or investments in 2010 or 2009.
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 €11.0 million (2009: €11.9 million) are included at cost. Fair value information
for these financial assets 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 or there is not a readily available market for such instruments.
The Group has no plans to dispose of these financial assets in the foreseeable future.
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.
113 GLANBIA PLC
ANNUAL REPORT 2010
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
Less non-current trade receivables:
Other receivables
Receivables from Joint Ventures & Associates
Loans to joint ventures (note 37)
FINANCIAL STATEMENTS
2010
Company
€'000
–
–
–
22
–
–
87
–
–
2010
Group
€'000
230,794
(12,802)
217,992
6,344
6,882
13,060
2009
Company
€'000
–
–
–
30
–
–
–
76,297
4,505
21,132
–
–
2009
Group
€'000
194,424
(12,035)
182,389
14,569
2,357
33,718
–
5,113
16,735
109
269,915
76,327
254,881
–
–
–
(6,424)
(3,600)
(13,060)
–
–
–
(16,837)
–
(33,718)
109
246,831
76,327
204,326
In 2010, 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 €32.1 million (2009: €34.0 million). The Group has continued to recognise an asset of
€0.4 million (2009: €0.4 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.
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.
114 GLANBIA PLC
ANNUAL REPORT 2010
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
2010
Company
€'000
109
–
–
–
2010
Group
€'000
126,725
113,506
5,323
1,277
2009
Company
€'000
76,327
–
–
–
2009
Group
€'000
101,144
95,888
3,325
3,969
109
246,831
76,327
204,326
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
2010
€'000
12,035
1,481
(261)
(453)
2009
€'000
8,091
4,696
(356)
(396)
12,802
12,035
As of 1 January 2011, trade receivables of €18.1 million (2009: €20.5 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 €12.8 million (2009: €12.0 million).
The breakdown of impaired trade receivables is as follows:
Past due:
Up to 3 months
3 to 6 months
Over 6 months
2010
€'000
1,652
2,863
13,597
2009
€'000
2,987
4,533
13,008
18,112
20,528
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 €9.6 million (2009: €8.0 million).
As of 1 January 2011, trade receivables of €39.5 million (2009: €31.3 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
2010
€'000
36,100
2,580
838
2009
€'000
25,494
4,267
1,572
39,518
31,333
115 GLANBIA PLC
ANNUAL REPORT 2010
20. Inventories
Raw materials
Finished goods
Consumables
FINANCIAL STATEMENTS
2010
€'000
57,142
230,140
16,599
2009
€'000
29,573
159,480
12,524
303,881
201,577
Included in the above are inventories carried at net realisable value amounting to €8.1 million (2009: €26.1 million). The amount written
off in respect of these inventories was €2.0 million (2009: €4.1 million).
21. Cash and cash equivalents
Cash at bank and in hand
Short term bank deposits
2010
Company
€’000
2010
Group
€'000
2009
Company
€'000
8,200
–
59,554
169,547
8,200
229,101
–
–
–
2009
Group
€'000
38,831
113,958
152,789
The fair value of cash and cash equivalents are not materially different to their book values. The maximum exposure to credit risk at the
reporting date is the carrying value of the cash and cash equivalent balances.
116 GLANBIA PLC
ANNUAL REPORT 2010
22. Other reserves
FINANCIAL STATEMENTS
Capital
reserve
€'000
(note a)
Merger
reserve
€'000
(note b)
Currency
reserve
€'000
(note c)
Hedging
reserve
€'000
(note d)
Available
for sale
financial
assets
reserve
€'000
(note e)
Share
based
payment
reserve
€'000
(note g)
Own
shares
€'000
(note f)
Total
€'000
Balance at 3 January 2009
2,825 113,148
(5,230)
(18,727)
9,253
(1,899)
1,613 100,983
–
–
–
–
Currency translation differences
Exceptional foreign exchange loss
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
–
Cost of share based payments
–
Transfer between reserves
–
–
–
–
–
–
–
–
–
–
–
–
(12,022)
18,280
–
–
–
–
–
–
–
–
–
(648)
–
–
(3,690)
(983)
903
716
8,163
5
–
(988)
–
–
–
–
–
–
–
–
–
–
(3,367)
485
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(12,022)
18,280
(3,690)
(983)
–
–
–
–
–
–
187
648
903
716
8,163
5
(3,367)
(503)
187
–
Balance at 2 January 2010
2,825 113,148
380 (14,601)
6,371
(1,899)
2,448 108,672
–
–
–
Currency translation differences
Revaluation of interest rate swaps – loss in year
Foreign exchange contracts – gain in year
Transfers to income statement
–
– Foreign exchange contracts – loss in year
–
– Forward commodity contracts – gain in year
–
– Interest rate swaps – loss 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
–
Cost of share based payments
Transfer on exercise, forfeit or lapse of share based
payments that have vested (note 24)
–
–
–
–
–
–
–
–
–
–
–
–
20,169
–
–
–
(4,180)
38
743
(202)
7,613
(76)
–
922
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(5,381)
1,345
–
–
–
–
–
–
–
–
–
–
–
–
–
–
20,169
(4,180)
38
–
–
–
–
–
–
2,937
743
(202)
7,613
(76)
(5,381)
2,267
2,937
–
–
283
(656)
(373)
Balance at 1 January 2011
2,825 113,148 20,549
(9,743)
2,335
(1,616)
4,729 132,227
Note 22 (a): Capital reserve
The capital reserve comprises a capital redemption reserve and a capital reserve which arose due to the re-nominalisation of the
Company’s share capital on conversion to the euro.
2010
Company
€'000
2010
Group
€'000
2009
Company
€'000
2009
Group
€'000
At the beginning and the end of the year
4,227
2,825
4,227
2,825
117 GLANBIA PLC
ANNUAL REPORT 2010
Note 22 (b): Merger reserve
Share premium – representing excess of fair value over nominal value of ordinary shares issued in
connection with the merger of Avonmore Foods plc and Waterford Foods plc
Merger adjustment*
Share premium and other reserves relating to nominal value of shares in Waterford Foods plc
FINANCIAL STATEMENTS
2010
€'000
2009
€'000
355,271
355,271
(327,085)
84,962
(327,085)
84,962
113,148
113,148
* The merger adjustment represents the difference between the nominal value of the issued share capital of Waterford Foods plc
and the fair value of the shares issued by Avonmore Foods plc in 1997 (now named Glanbia plc).
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 and
resulting exchange differences are taken to the currency reserve within equity.
Note 22 (d): Hedging reserve
The hedging 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 hedging reserve are recycled to the income statement in the periods when the hedged item
affects income or expense.
Note 22 (e): Available for sale financial assets reserve
Unrealised gains and losses arising from changes in the fair value of available for sale financial assets are recognised in the available for
sale financial asset reserve. When such available for sale financial assets are sold or impaired, the accumulated fair value adjustments
are recycled to the income statement.
Note 22 (f): Own shares
The amount included as own shares relates to 485,304 (2009: 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 1 January 2011 cost €1.6 million (2009: €1.9 million) and had a market value of
€1.8 million at 1 January 2011 (2009: €1.6 million). 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 22 (g): Share based payment reserve
The share based payment reserve reflects charges relating to granting of both shares and options under the 2002 LTIP, 2007 LTIP and
2008 LTIP schemes.
2010
Company
€'000
2010
Group
€'000
2009
Company
€'000
2009
Group
€'000
At the beginning of the year
2,217
2,448
1,612
1,613
Transfer from trade and other payables – share based payments
Transfer between reserves
Transfer of reserves between Group companies
Transfer on exercise, forfeit or lapse of share based payments that
have vested
Cost of share based payments
–
–
231
(656)
2,937
–
–
–
(656)
2,937
438
–
–
–
167
–
648
–
–
187
At the end of the year
4,729
4,729
2,217
2,448
118 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
2002 Long Term Incentive Plan (‘the 2002 LTIP’)
Movement in the 2002 LTIP for the financial year ended 1 January 2011 is as follows:
At the beginning of the year
Granted
Exercised
Lapsed
2010
Average
exercise price
in € per share
2010
Number
of
options
2009
Average
exercise price
in € per share
2.35
–
(1.86)
(4.03)
2,308,000
–
(280,000)
(48,000)
2.35
2.29
–
–
2009
Number
of
options
2,258,000
50,000
–
–
At the end of the year
2.37
1,980,000
2.35
2,308,000
Expiry date in
2012
2013
2014
2014
2016
2017
2019
Exercise price
€
1.55
1.90
2.47
2.73
2.87
4.03
2.29
2010
number
577,000
160,000
100,000
925,000
50,000
118,000
50,000
2009
number
782,000
160,000
100,000
1,000,000
50,000
166,000
50,000
1,980,000
2,308,000
Total options over 1,980,000 (2009: 2,308,000) ordinary shares were outstanding at 1 January 2011 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 90,600 (2009: 118,600) ordinary shares.
The amount of the 2002 LTIP credited to the Group income statement during the year was €15,761 (2009: charge of €84,208 ). A credit
arose due to the lapse of certain share awards.
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 1,930,000 (2009: 2,092,000) ordinary shares
were exercisable at 1 January 2011 at a weighted average price of €2.38 (2009: €2.21).
The weighted average life for share options outstanding is three years.
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 1 January 2011
amounted to nil (2009: 169,500) and 2,283,000 ordinary shares (2009: 1,201,000) respectively.
The performance criteria for 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 was 115% of base salary per annum in
the form of conditional shares and the vesting period was 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.
119 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
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 €2,953,071 (2008 LTIP: €2,823,605, 2007 LTIP: €129,466) 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
Granted in 2007
Share price
at date
of award
€
Period to
earliest
release date
Number
of shares
Fair value
€
Expense in
Group income
statement
2010
€'000
Expense in
Group income
statement
2009
€'000
2007 Long Term Incentive Plan
4.03
–
169,500
3.85
129
63
Shares awarded under the 2007 LTIP are equity settled share-based payments as defined in IFRS 2-Share Based Payment. On 25 May
2010, 50% of the share options above vested and the balance has lapsed.
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
2010
€'000
Expense in
Group income
statement
2009
€'000
Granted in 2008
2008 Long Term Incentive Plan
4.45
1 year
583,000
3.54
1,332
(153)
Granted in 2009
2008 Long Term Incentive Plan
2.72
2 years
618,000
2.22
659
193
Granted in 2010
2008 Long Term Incentive Plan
2.82
3 years
1,082,000
2.31
833
–
Shares awarded under the 2008 LTIP are equity settled share-based payments as defined in IFRS 2-Share Based Payment. The 2008,
2009 and 2010 awards will expire in 2011 (583,000 shares), 2012 (618,000 shares) and 2013 (1,082,000 shares) respectively.
The number of options granted in 2008 and 2009, expected to vest has increased, resulting in an increased charge to the income
statement during the year.
The fair value of the shares awarded were determined using a Monte Carlo simulation technique taking account of peer group total
share return volatilities and correlations together with the following assumptions:
Risk-free interest rate
Expected volatility
Dividend yield
Granted in
2010
Granted in
2009
Granted in
2008
1%
47%
1%
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.
120 GLANBIA PLC
ANNUAL REPORT 2010
23. Share capital and share premium
Company
At 3 January 2009 and 2 January 2010
Shares issued
At 1 January 2011
Group
FINANCIAL STATEMENTS
Number of
shares
(thousands)
Ordinary
shares
€'000
Share premium
€'000
Total
€'000
293,556
280
17,613
17
436,874
454,487
505
522
293,836
17,630
437,379
455,009
Number of
shares
(thousands)
Ordinary
shares
€'000
Share premium
€'000
Total
€'000
At 3 January 2009 and 2 January 2010
Shares issued
At 1 January 2011
293,556
280
17,613
17
81,606
505
99,219
522
293,836
17,630
82,111
99,741
The total authorised number of ordinary shares is 306 million shares (2009: 306 million shares) with a par value of €0.06 per share (2009:
€0.06 per share). All issued shares are fully paid.
121 GLANBIA PLC
ANNUAL REPORT 2010
24. Retained earnings
FINANCIAL STATEMENTS
Company
retained
earnings
€'000
Group
retained
earnings
€'000
Group
goodwill
write-off
€'000
Group
Total
€'000
Balance at 3 January 2009
36,056
112,668
(92,961)
19,707
Profit for the year
43,341
112,676
Other comprehensive income/(expense)
Actuarial loss – defined benefit schemes
Deferred tax on actuarial loss
Share of actuarial loss – Joint Ventures & Associates
–
–
–
(31,215)
2,684
(1,364)
Total comprehensive income for the year
43,341
82,781
Dividends paid during the year
(19,484)
(19,484)
–
–
–
–
–
–
112,676
(31,215)
2,684
(1,364)
82,781
(19,484)
Balance at 2 January 2010
59,913
175,965
(92,961)
83,004
Profit for the year
745
108,047
Other comprehensive income/(expense)
Actuarial gain – defined benefit schemes
Deferred tax on actuarial gain
Share of actuarial gain – Joint Ventures & Associates
–
–
–
13,379
(1,250)
2,444
Total comprehensive income for the year
745
122,620
Dividends paid during the year
(20,453)
(20,453)
Transfer on exercise, forfeit or lapse of share based payments that
have vested (note 22)
373
373
–
–
–
–
–
–
–
108,047
13,379
(1,250)
2,444
122,620
(20,453)
373
Balance at 1 January 2011
40,578
278,505
(92,961)
185,544
25. Non-controlling interests
At the beginning of the year
Share of profit for the year
Dividends paid to non-controlling interests during the year
At the end of the year
2010
€'000
6,493
586
(187)
2009
€'000
8,010
483
(2,000)
6,892
6,493
122 GLANBIA PLC
ANNUAL REPORT 2010
26. Borrowings
Current
Bank overdrafts/borrowings
Finance lease liabilities
Non-current
Bank borrowings
Cumulative redeemable preference shares
Finance lease liabilities
Total borrowings
FINANCIAL STATEMENTS
2010
Company
€'000
–
–
–
–
–
–
–
–
2010
Group
€'000
–
972
2009
Company
€'000
9,550
–
972
9,550
2009
Group
€'000
–
945
945
569,545
63,487
3,219
636,251
–
–
–
–
526,803
63,487
4,172
594,462
637,223
9,550
595,407
Bank borrowings are secured by cross-guarantees from Group companies.
The cumulative redeemable preference shares carry the right to such fixed cumulative annual dividend as was last determined by the
Directors in July 2007. All 50 million of the €1.2697 shares currently carry the right to a fixed cumulative annual dividend 8.6977 cents
per share. In July 2014 all shares still in issue will be redeemed at the issue price.
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
2010
€'000
205,853
430,398
2009
€'000
982
593,480
636,251
594,462
During February 2011, €100 million of a committed bank facility was extended by one year from July 2012 to July 2013.
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
The effective interest rates at the reporting date, were as follows:
Bank overdrafts
Bank borrowings
2010
€'000
379,545
257,678
2009
€'000
336,803
258,604
637,223
595,407
EUR
USD
CAD
2010
2009
2010
2009
2010
2009
1.65% 1.18% 5.25% 5.25% 4.00% 3.25%
3.54% 3.40% 1.15% 1.04% 2.05% 1.26%
123 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
The carrying amounts and fair values of non-current borrowings are as follows:
Carrying
amount
2010
€'000
Carrying
amount
2009
€'000
Fair
values
2010
€'000
Fair
values
2009
€'000
Non-current borrowings
636,251
594,462
632,008
589,283
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
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
Future finance charges on finance leases
2010
€'000
445,620
179,527
12,076
2009
€'000
458,168
126,605
10,634
637,223
595,407
2010
€'000
16,646
101,178
2009
€'000
16,286
138,795
117,824
155,081
2010
€'000
1,181
1,181
2,362
4,724
(533)
2009
€'000
1,149
1,149
3,447
5,745
(628)
Present value of finance lease liabilities
4,191
5,117
The present value of finance lease liabilities is as follows:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
2010
€'000
972
1,021
2,198
2009
€'000
945
982
3,190
4,191
5,117
124 GLANBIA PLC
ANNUAL REPORT 2010
27. Deferred income taxes
FINANCIAL STATEMENTS
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
Deferred tax (credit)/charge to other comprehensive income (note 22)
Deferred tax charge/(credit) on actuarial gain/loss (note 24)
Exchange differences
At the end of the year
2010
€'000
2009
€'000
(7,388)
(12,022)
75,966
66,337
68,578
54,315
2010
€'000
54,315
10,994
558
(2,267)
1,250
3,728
2009
€'000
33,676
12,740
12,512
503
(2,684)
(2,432)
68,578
54,315
The movement in deferred tax liabilities and assets during the year, without taking into consideration the offsetting of balances within
the same tax jurisdiction, is as follows:
Deferred tax liabilities
Accelerated
tax
depreciation
€'000
Fair value
gains
€'000
IP and
deferred
development
costs
€'000
Other
€'000
Total
€'000
At 3 January 2009
25,686
2,969
23,780
6,621
59,056
Charged/(credited) to income statement
Charged to other comprehensive income (note 22)
Exchange differences
At 2 January 2010
9,271
–
(787)
–
503
–
(831)
–
(765)
100
–
(210)
8,540
503
(1,762)
34,170
3,472
22,184
6,511
66,337
Charged/(credited) to income statement
(Credited) to other comprehensive income (note 22)
Exchange differences
At 1 January 2011
2,163
–
1,822
–
(2,267)
–
(1,336)
–
1,657
7,172
–
418
7,999
(2,267)
3,897
38,155
1,205
22,505
14,101
75,966
Deferred tax on intellectual property (IP) of €21.2 million, previously shown in ‘Other’, is now included with deferred development
costs within ‘IP and deferred development costs’.
125 GLANBIA PLC
ANNUAL REPORT 2010
Deferred tax assets
FINANCIAL STATEMENTS
Retirement
obligations
€'000
Tax
losses
€'000
Total
€'000
At 3 January 2009
(17,087)
(8,293)
(25,380)
Charged to income statement
(Credited) to other comprehensive income (note 24)
Exchange differences
At 2 January 2010
Charged to income statement
Charged to other comprehensive income (note 24)
Exchange differences
At 1 January 2011
13,684
(2,684)
–
3,028
–
(670)
16,712
(2,684)
(670)
(6,087)
(5,935)
(12,022)
1,300
1,250
2
2,253
–
(171)
3,553
1,250
(169)
(3,535)
(3,853)
(7,388)
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 carried forward to the extent that realisation of the related tax benefit through future
taxable profits is probable. The Group has tax losses of €72.6 million (2009: €14.8 million) to carry forward against future taxable income
on which a deferred tax asset has not been recognised. 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.
The deferred tax credited to other comprehensive income during the year is as follows:
Available for sale financial assets (note 22)
Hedging reserve (note 22)
Impact of decrease/(increase) in retirement benefit obligations due to actuarial gain/loss (note 24)
2010
€'000
(1,345)
(922)
1,250
2009
€'000
(485)
988
(2,684)
(1,017)
(2,181)
126 GLANBIA PLC
ANNUAL REPORT 2010
28. Retirement benefit obligations
FINANCIAL STATEMENTS
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 January 2008 and 1
January 2010. The contributions paid to the scheme in 2010 are in accordance with the contribution rates recommended in the actuarial
valuation reports.
The discount rate applied to the UK pension schemes changed from Merrill Lynch AA Bonds in 2009 to Towers Watson Global Rate:
Link Model in 2010. This decreased the pension liability at year end by approximately €1.8 million. The inflation rate applied to the UK
pension scheme changed from the Consumer Price Index for both schemes in 2009 to the Consumer Price Index and Retail Price Index
in 2010, depending on the rules of the scheme. This decreased the pension liability at year end by approximately €2.6 million.
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:
Defined benefit pension schemes
– Service costs – current
– Interest costs
– Expected return on plan assets
Total expense pre curtailment gains and negative past service costs
Exceptional item – curtailment gains and negative past service cost (note 7 and note 8)
Total gain
Defined contribution pension schemes
The actual return on plan assets was a profit of €29.8 million (2009: €28.7 million).
2010
€'000
2009
€'000
(437,911)
389,351
(435,010)
349,245
(48,560)
(85,765)
2010
€'000
(4,803)
(24,153)
21,888
(7,068)
10,238
2009
€'000
(5,515)
(23,635)
16,383
(12,767)
100,098
3,170
87,331
(2,750)
(2,146)
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 gain/(loss) on defined benefit schemes
Contributions paid by employer
At the end of the year
2010
€'000
2009
€'000
(85,765)
(164,410)
(972)
(38)
(7,068)
10,238
13,379
21,666
(1,821)
(1,280)
(12,767)
100,098
(31,215)
25,630
(48,560)
(85,765)
127 GLANBIA PLC
ANNUAL REPORT 2010
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
– 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
Contributions by plan participants
Contributions paid by employer
Benefits paid
At the end of the year
The principal actuarial assumptions used were as follows:
FINANCIAL STATEMENTS
2010
€'000
2009
€'000
(435,010)
(2,431)
(38)
(4,803)
(24,153)
8,442
(2,992)
(2,963)
10,238
15,799
(465,909)
(4,800)
(4,131)
(5,515)
(23,635)
5,366
(48,895)
(3,796)
100,098
16,207
(437,911)
(435,010)
2010
€'000
2009
€'000
349,245
1,459
301,499
2,979
–
21,888
7,929
2,963
21,666
(15,799)
2,851
16,383
12,314
3,796
25,630
(16,207)
389,351
349,245
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
2010
IRL
2010
UK
2009
IRL
2009
UK
5.40%
5.45%–5.50%
5.65%
5.80%
7.70%
4.90%
4.40%
2.00%
6.50%
7.70%
2.00%
3.00%
2.75%–3.45%
8.20%
5.45%
4.20%
3.70%
7.70%
n/a
2.75%–3.45%
7.75%
5.80%
4.45%
2.50%
6.50%
7.75%
2.25%
4.20%
3.25%
2.25%–3.25%
0%–3.50%
8.25%
5.80%
4.50%
4.10%
8.00%
n/a
3.45%
4.20%
3.25%
*
The Irish inflation rate and future salary increase assumptions have been decreased for the next three years by 1% to reflect the
current economic conditions in Ireland. The rates set out above are the longer term assumptions.
Cumulative actuarial losses:
Actuarial (gain)/loss for the year
Cumulative actuarial losses
2010
€'000
2009
€'000
(13,379)
31,215
141,827
155,206
128 GLANBIA PLC
ANNUAL REPORT 2010
Plan assets are comprised as follows:
Equities
Corporate bonds
Government bonds and gilts
Property
Cash
FINANCIAL STATEMENTS
2010
€'000
218,484
33,664
90,341
20,456
26,406
2010
%
56
9
23
5
7
2009
€'000
177,273
34,522
86,426
20,638
30,386
2009
%
50
10
25
6
9
389,351
100
349,245
100
The expected return on plan assets was determined by considering the expected returns available on the assets underlying the current
investment policies. Expected yields on fixed interest investments are based on gross redemption yields at the reporting date.
Expected returns on equity and property investments 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 €20.4 million in 2011 (2010: €20.0 million).
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
2010
Irish
mortality
rates
2010
UK
mortality
rates
2009
Irish
mortality
rates
2009
UK
mortality
rates
21.5
24.2
23.9
27.0
21.5
24.2
24.8
27.4
The mortality assumptions imply the following life expectancies in years of an active member, aged 65, retiring now:
Male
Female
Five year summary
At the end of the year
Fair value of plan assets
Present value of funded obligations
2010
Irish
mortality
rates
2010
UK
mortality
rates
2009
Irish
mortality
rates
2009
UK
mortality
rates
19.2
21.9
2009
€'000
21.8
24.9
2008
€'000
19.2
21.9
2007
€'000
23.0
25.8
2006
€'000
2010
€'000
389,351
(437,911)
349,245
(435,010)
301,499
(465,909)
382,521
(496,769)
376,585
(501,473)
Deficit
(48,560)
(85,765)
(164,410)
(114,248)
(124,888)
Experience adjustments on plan liabilities
8,442
5,366
(3,175)
(7,160)
(12,651)
Experience adjustments on plan assets
7,929
12,314
(104,229)
(32,542)
11,575
129 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
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.
2010
Assumption
Discount rate
Price inflation
Mortality
2009
Assumption
Discount rate
Price inflation
Mortality
Change in assumption
Impact on Irish plan liabilities
Impact on UK plan liabilities
Increase/decrease 0.25%
Decrease/increase by 3.7%
Decrease/increase by (4.1%)/4.4%
Increase/decrease 0.25%
Increase/decrease by 1.6%
Increase/decrease by 3.0%/(2.9%)
Increase/decrease by one year
Increase/decrease by 2.2%
Increase/decrease by 3.1%
Change in assumption
Impact on Irish plan liabilities
Impact on UK plan liabilities
Increase/decrease 0.25%
Decrease/increase by 3.8%
Decrease/increase by 4.7%
Increase/decrease 0.25%
Increase/decrease by 1.4%
Increase/decrease by 3.1%
Increase/decrease by one year
Increase/decrease by 3.8%
Increase/decrease by 2.1%
29. Provisions for other liabilities and charges
At 2 January 2010
Provided in the year
Utilised in the year
Exchange differences
Unwinding of discounts
Reclassifications
At 1 January 2011
Non-current
Current
Restructuring
€'000
UK pension
€'000
note (a)
note (b)
Other
€'000
note (c)
Total
€'000
20,356
20,086
7,002
47,444
400
(9,828)
–
–
(457)
–
(1,124)
637
121
–
7,140
(1,645)
381
(29)
457
7,540
(12,597)
1,018
92
–
10,471
19,720
13,306
43,497
–
10,471
18,484
1,236
3,908
9,398
22,392
21,105
10,471
19,720
13,306
43,497
(a) The restructuring provision relates mainly to the rationalisation programme Glanbia is currently undertaking. The provision which
relates mainly to redundancy is expected to be fully utilised during 2011.
(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 33 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 €9.4 million of this provision will be
utilised during 2011, 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.
130 GLANBIA PLC
ANNUAL REPORT 2010
30. Capital grants
At 2 January 2010
Receivable for the year
Exchange differences
Released to income statement
At 1 January 2011
31. Trade and other payables
FINANCIAL STATEMENTS
2010
€'000
18,582
1,440
6
(1,419)
2009
€'000
12,694
7,114
11
(1,237)
18,609
18,582
Trade payables
Amounts due to Joint Ventures & Associates (note 37)
Amounts due to other related parties (note 37)
Amounts due to other Group companies
Social security costs
Accrued expenses
Other payables
The carrying value of payables is a reasonable approximation of fair value.
32. Derivative financial instruments
Non-hedging 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
2010
Company
€'000
66
–
–
104,682
–
2,522
–
2010
Group
€'000
128,645
30,059
235
–
3,262
176,372
27,673
2009
Company
€'000
14
–
–
–
–
2,767
–
2009
Group
€'000
113,002
31,095
510
–
3,153
116,273
31,448
107,270
366,246
2,781
295,481
2010
Assets
€'000
–
–
3,975
590
267
723
2010
Liabilities
€'000
(77)
(8,076)
–
(600)
(326)
(723)
2009
Assets
€'000
–
–
5,848
2,085
1,933
353
2009
Liabilities
€'000
–
(11,057)
(1,606)
(3,041)
(189)
(353)
Total
5,555
(9,802)
10,219
(16,246)
Less non-current portion:
Interest rate swaps – cash flow hedges
Interest rate swaps – fair value hedges
Non-current portion
Current portion
–
1,643
(3,315)
–
–
2,718
(5,631)
–
1,643
(3,315)
2,718
(5,631)
3,912
(6,487)
7,501
(10,615)
131 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
Interest rate swaps
The notional principal amounts of the outstanding interest rate swap contracts, qualifying as cash flow hedges at 1 January 2011 were
€148.5 million (2009: €236.2 million).
The notional principal amounts of the outstanding interest rate swap contracts, qualifying as fair value hedges at 1 January 2011 were
€100.0 million (2009: €265.1 million).
At 1 January 2011, the fixed interest rates vary from 3.79% to 4.94% (2009: 3.665% to 4.94%) and the main floating rates are set in
advance by reference to inter-bank interest rates 1.143% EURIBOR, 0.45631% $LIBOR (2009: 1.153% EURIBOR, 0.45575% $LIBOR).
Gains and losses recognised in the hedging reserve in other comprehensive income on interest rate swap contracts at 1 January 2011
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 1 January 2011 are €51.7 million (2009: €225.9 million).
Gains and losses recognised in the hedging reserve in other comprehensive income on foreign exchange contracts at 1 January 2011
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 1 January 2011 were €4.2 million and €61.4 million respectively (2009: €6.4 million and €36.8 million). Gains and
losses recognised in the hedging reserve in other comprehensive income on these futures as at 1 January 2011 will be released to the
income statement at various dates within one year from the reporting date.
Financial guarantee contracts
In accordance with Group accounting policy, management has reviewed the fair values associated with financial guarantee contracts, as
defined within IAS 39 – Financial Instruments: Recognition and Measurement, issued in the name of Glanbia plc (the Company) and has
determined that their value is not significant. No adjustment has been made to the Glanbia plc company 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 1 January 2011 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 its 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 €7.1 million (2009: €10.5 million) are outstanding as at 1 January 2011, mainly in respect of payment of
EU subsidies. The Group does not expect any material loss to arise from these guarantees. The Group has contingent liabilities in
respect of legal claims arising in the ordinary course of business. It is not anticipated that any material liability will arise from these
contingent liabilities other than those provided for.
132 GLANBIA PLC
ANNUAL REPORT 2010
34. Commitments
FINANCIAL STATEMENTS
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised in the financial statements is as follows:
Property, plant and equipment
2010
€'000
2009
€'000
4,980
2,260
Capital commitments not contracted for at the reporting date amounted to €60.9 million (2009: €44.4 million).
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
35. Cash generated from operations
2010
€'000
7,868
20,171
15,331
2009
€'000
6,750
18,232
12,951
43,370
37,933
2010
Company
€'000
2010
Group
€'000
2009
Company
€'000
2009
Group
€'000
Profit before taxation
745
134,718
43,341
143,032
Development costs capitalised
Impairment charge
Non-cash exceptional (gain) (note 7)
Share of results of Joint Ventures & Associates
Depreciation
Amortisation
Cost of share based payments
Difference between pension charge and cash contributions
Loss/(profit) on disposal of property, plant and equipment
Profit on disposal of investments
Interest income
Interest expense
Amortisation of government grants received
–
–
–
–
–
–
2,937
–
–
–
–
–
–
(2,821)
1,372
(10,238)
(10,103)
32,569
15,111
2,937
(14,598)
957
–
(3,290)
25,420
(1,419)
–
–
–
–
–
–
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)
Cash generated from operations before changes in working capital
3,682
170,615
30,617
137,569
Change in net working capital:
– (Increase)/decrease in inventory
– Decrease/(increase) in short term receivables
– (Decrease)/increase in short term liabilities
– (Decrease) in provisions
–
66,449
(36,693)
(246)
(97,009)
(28,065)
66,048
(4,375)
–
(7,991)
498
–
71,568
(10,504)
(78,077)
(15,846)
Cash generated from operations
33,192
107,214
23,124
104,710
133 GLANBIA PLC
ANNUAL REPORT 2010
36. Business combinations
FINANCIAL STATEMENTS
On 19 January 2011 the Group acquired the business and assets of a leading US based performance nutrition business – Bio-Engineered
Supplements and Nutrition (“BSN”). BSN is a leading developer, provider and distributor of nutritional products designed for health,
physique development and training.
Details of net assets acquired and goodwill arising from the acquisition is as follows:
Purchase consideration – cash paid
Less: Fair value of assets acquired
Goodwill
€'000
107,696
90,271
17,425
The acquisition of BSN significantly enhances the Group’s Performance Nutrition portfolio and delivers further growth opportunities in
this area. The goodwill is attributable to the profitability and development opportunities through combined R&D and the benefits
associated with the extension of Glanbia's scale and specific capabilities to the acquired business.
The fair value of assets and liabilities arising from the acquisition is as follows:
Property, plant and equipment
Other intangible assets
Inventories
Receivables
Payables
Fair value of assets acquired
Fair
value
€'000
1,700
83,614
9,666
7,523
(12,232)
90,271
Acquisition related costs included in administration expenses in the Group’s consolidated income statement for the year ended
1 January 2011 amounted to €0.6 million.
The fair values assigned to identifiable assets and liabilities have been determined provisionally due to the proximity of the acquisition
date to the approval of the Annual Report. Any adjustments to these provisional valuations will be recognised within 12 months of the
acquisition date.
134 GLANBIA PLC
ANNUAL REPORT 2010
37. Related party transactions
FINANCIAL STATEMENTS
The Group is controlled by Glanbia Co-operative Society Limited (‘the Society’), which holds 54.5% 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
2010
Company
€'000
2010
Group
€'000
2009
Company
€'000
–
–
–
–
–
–
–
16,068
2,498
64,077
791
67,366
336
17
11,977
–
–
–
–
–
–
–
–
11,241
2009
Group
€'000
5,497
52,613
659
58,769
395
18
7,503
–
16,068
12,330
11,241
7,916
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
2010
Company
€'000
2010
Group
€'000
2009
Company
€'000
–
–
–
–
–
–
–
2,086
9,721
3,090
2,083
14,894
290
2,174
8
–
–
–
–
–
–
–
–
1,996
2009
Group
€'000
10,431
3,339
1,737
15,507
290
1,660
19
–
2,086
2,472
1,996
1,969
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
2010
Company
€'000
–
–
–
–
2010
Group
€'000
3,671
354
2,004
6,029
2009
Company
€'000
–
–
–
–
2009
Group
€'000
2,041
376
114
2,531
1
Key management compensation includes the Glanbia Operating Executive Committee.
135 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
(d) Year-end balances arising from sales/purchases of goods/services
2010
Company
€'000
2010
Group
€'000
2009
Company
€'000
Receivables from related parties:
– The Society
– Associates
– Joint ventures
– Key management*
– Subsidiaries
Payables to related parties:
– The Society
– Associates
– Joint ventures
– Key management*
– Subsidiaries
(e) Loans to joint ventures
Loan to Southwest Cheese Company, LLC
Loan to Milk Ventures (UK) Limited
682
118
6,764
207
–
–
–
–
–
79,346
7,771
79,346
2,993
–
–
–
–
–
–
–
–
–
–
101,249
31
1,972
28,087
204
–
–
–
–
–
–
–
101,249
30,294
2010
Company
€'000
–
–
–
2010
Group
€'000
7,484
5,576
13,060
2009
Company
€'000
–
–
–
2009
Group
€'000
502
509
1,848
134
–
360
2,822
28,273
150
–
31,605
2009
Group
€'000
28,313
5,405
33,718
*
Purchases, sales and related year-end balances to key management refer to trading balances with Directors who are engaged
in farming activities.
38. Events after the reporting period
On 19 January 2011 the Group announced the acquisition of the business and assets of a leading US based performance nutrition
business – Bio-Engineered Supplements and Nutrition (“BSN”). For further details regarding this acquisition see note 36 – business
combinations.
On 12 January 2011, the Group also acquired the business and assets of Kerry Group plc’s Limerick based liquid milk business subject
to regulatory approval.
136 GLANBIA PLC
ANNUAL REPORT 2010
39. Comparatives
FINANCIAL STATEMENTS
Certain comparatives in the statement of financial position have been restated to reflect the current year classifications as shown below:
Trade and other receivables – non current
Trade and other receivables – current
Trade and other payables – current
Share capital and share premium
Other reserves
Group as
previously
reported
2009
€'000
33,718
191,594
Reclassified
2009
€’000
Group
restated
2009
€’000
16,837
50,555
12,732
204,326
(265,912)
(29,569)
(295,481)
(97,320)
(110,571)
(1,899)
(99,219)
1,899
(108,672)
40. Principal subsidiary and associated undertakings
(a) Subsidiaries
Incorporated and operating in
Principal place of business
Principal activities
Group interest %
Ireland
Glanbia Foods Ireland 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
Glanbia Nutritionals (Research) Limited
Kilkenny
Glanbia Feeds Limited
Glanbia Estates Limited
Avonmore Proteins Limited
Glanbia Financial Services
Enniscorthy, Co. Wexford and
Portlaoise, Co. Laois
Kilkenny
Kilkenny
Kilkenny
Glanbia Investments (Ireland) Limited
Kilkenny
Glassonby
Waterford Foods plc
Kilkenny
Kilkenny
Nutritional products
Nutritional products
Nutritional products
Nutritional products
Research and development
Manufacture of animal feed
products
Property and land dealing
Financing
Financing
Investment company
Holding company
Holding company
Grassland Fertilisers (Kilkenny) Limited
Palmerstown, Co. Kilkenny
Fertilisers
D. Walsh & Sons Limited
Palmerstown, Co. Kilkenny
Grain and fertilisers
Eilish Oils Limited
Newtown Mount Kennedy,
Co. Wicklow
Biofuels
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
137 GLANBIA PLC
ANNUAL REPORT 2010
FINANCIAL STATEMENTS
Incorporated and operating in
Principal place of business
Principal activities
Group Interest %
Britain and Northern Ireland
Glanbia (UK) Limited
Victoria Square, Birmingham
Holding company
Glanbia Holdings Limited
Victoria Square, Birmingham
Holding company
Glanbia Investments (UK) Limited
Victoria Square, Birmingham
Holding company
Glanbia Nutritionals (UK) Limited
Middlesbrough
Sports nutrition products
Glanbia Foods (NI) Limited
Portadown, Co. Armagh
Consumer food products
Glanbia Feedstuffs Limited
Victoria Square, Birmingham
Supply of animal feeds
Optimum Nutrition EMEA Limited
London, England
Sports nutrition products
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.
Carlsbad, California
Nutrient delivery systems
Glanbia Nutritionals, Inc.
Madison, Wisconsin
Nutritional distribution
Canada
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
100.00
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
Asia
Glanbia Nutritionals (Suzhou)
Company Limited
Suzhou, China
Nutrient delivery systems
GN Life Science (Shanghai) Co. Ltd
Shanghai, China
Glanbia Nutritionals Singapore Pte Ltd
Singapore
Nutrient ingredient trading
Customer service office
100.00
100.00
100.00
100.00
138 GLANBIA PLC
ANNUAL REPORT 2010
(b) Associates and joint ventures
Incorporated in
Ireland
FINANCIAL STATEMENTS
Date to which
results included
Principal place of business
Principal activities
Group interest %
Co-operative Animal Health Limited * 31–Dec–09
Tullow, Co. Carlow
Agri chemicals
South Eastern Cattle Breeders
Society Limited *
31–Dec–09
Thurles, Co. Tipperary
Cattle breeding
Malting Company of Ireland Limited * 30–Sept–10
Togher, Cork
South East Port Services Limited *
01–Jan–11
Kilkenny
Greenfield Dairy Partners Limited *
31–Dec–10
Dunbell, Co. Kilkenny
Malting
Port services
Dairy production
and development
Corman Miloko Ireland Limited **
01–Jan–11
Carrick-on-Suir, Co. Tipperary
Dairy spreads
Garristown Properties Limited **
01–Jan–11
Garristown, Co. Dublin
Property development
Britain and Northern Ireland
Glanbia Cheese Limited **
01–Jan–11
Magheralin and Llangefni
Cheese products
Milk Ventures (UK) Limited **
30–Nov–10
Stockport, England
Holding company
Nigeria
Nutricima Limited *
30–Nov–10
Nigeria
United States
Evaporated and
powdered milk
Southwest Cheese Company, LLC **
01–Jan–11
Clovis, New Mexico
Milk products
50.00
57.00
33.33
49.00
33.33
45.00
50.00
51.00
50.00
50.00
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
139 GLANBIA PLC
ANNUAL REPORT 2010
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:
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 1 March 2011 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
No. of
ordinary shares
% of issued
share capital
Computershare Investor Services (Ireland) Limited, Heron House,
Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland.
Glanbia Co-operative
Society Limited
160,277,308
54.5%
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 1 January 2011
Market capitalisation
Share price movements during the year:
– high
– low
2010
€
3.68
1,081m
3.68
2.43
2009
€
2.89
848m
3.00
1.84
The current share price of Glanbia plc ordinary shares can be
accessed at http://www.glanbia.ie/prices-delayed
Share capital
The authorised share capital of the Company at 1 January 2011
was 306,000,000 ordinary shares at €0.06 each. The issued share
capital at 1 January 2011 was 293,835,684 ordinary shares of
€0.06 each.
Employee share schemes
The Company operates a number of employee share schemes.
At 1 January 2011, 485,304 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 3.03 cents per share was paid in respect
of ordinary shares on 29 September 2010.
Subject to shareholders approval, a final dividend of 4.49
cents per share will be paid in respect of ordinary shares on
20 May 2011 to shareholders on the register of members on
8 April 2011. If a shareholder’s registered address is in the UK and
a shareholder has not previously provided the company with a
mandate form for an Irish Euro account, a shareholder will default
to a sterling payment. All other shareholders will default to a Euro
payment.
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, to pay
future dividend payments on its ordinary shares only by credit
transfer into a nominated bank or building society account.
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.
140 GLANBIA PLC
ANNUAL REPORT 2010
OTHER INFORMATION
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.eproxyappointment.com.
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 Registrar 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 www.eproxyappointment.com and submitting their
proxy details. They will be asked to enter the Control Number, the
Shareholder Reference Number (SRN) and PIN and agree to
certain terms and conditions. The Control Number, the
shareholder Reference Number (SRN) and the PIN 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:
Financial calendar
(cid:159) by attending the AGM in person;
Announcement of final results for 2010
02 March 2011
Ex-dividend date
Record date for dividend
Date for receipt of proxy forms
Record date for AGM
AGM
Dividend payment date
06 April 2011
08 April 2011
09 May 2011
09 May 2011
11 May 2011
20 May 2011
AGM
The AGM will be held on 11 May 2011.
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 2011 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
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.
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 2011 AGM the record date is 5:00 pm on 09 May 2011 (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).
(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 2011
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 29 March 2011 (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.
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 2011 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
29 March 2011 (i.e. 42 days before the AGM meeting) by post to
the Group 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 2011 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.
141 GLANBIA PLC
ANNUAL REPORT 2010
OTHER INFORMATION
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
2011 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 2011 AGM (i.e. 5 May 2011) to the Group
Secretary, Glanbia plc, Glanbia House, Kilkenny, Ireland or by
email to ir@glanbia.ie /info@glanbia.ie.
Advisors:
Auditors
PricewaterhouseCoopers, Ballycar House, Newtown,
Waterford, Ireland.
Principal bankers
The Royal Bank of Scotland N.V., Allied Irish Banks, p.l.c., The
Governor & Company of the Bank of Ireland, BNP Paribas S.A.,
Barclays Bank Ireland plc, Citibank Europe plc, KBC Bank Ireland
plc, Danske Bank A/S trading as National Irish Bank, Rabobank
Ireland plc, Ulster Bank Ireland Limited.
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).
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 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.
142 GLANBIA PLC
ANNUAL REPORT 2010
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
OTHER INFORMATION
2010
2009
2008
2007
2006
€2,166.7m
€1,830.3m
€2,232.2m
€2,206.6m
€1,853.4m
€136.5m
6.3%
(€22.1m)
€10.1m
€124.5m
(€25.5m)
€99.0m
€9.7m
36.86c
38.07c
7.52c
€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
2008
€'000
78,399
7,312
19,358
€115.8m
5.2%
(€17.3m)
€1.0m
€99.5m
(€16.4m)
€83.1m
(€22.8m)
20.42c
30.25c
6.08c
2007
€'000
59,833
5,964
22,846
€85.6m
4.6%
(€14.0m)
€2.8m
€74.4m
(€8.0m)
€66.4m
(€0.1m)
22.51c
23.89c
5.79c
2006
€'000
65,964
3,896
134
* Share of results in Joint Ventures & Associates is an after interest and tax amount.
Adjusted earnings per share
Profit attributable to the equity holders of the Parent
Amortisation of intangible assets (net of related tax)
Net exceptional items
2010
€'000
108,047
13,222
(9,680)
2009
€'000
112,676
12,126
(34,905)
Adjusted net income
111,589
89,897
105,069
88,643
69,994
Weighted average number of ordinary shares in issue
293,105,068
292,985,630
293,018,610
293,012,540
292,958,667
Adjusted earnings per share (cents per share)
38.07
30.68
35.86
30.25
23.89
143
GLANBIA PLC
ANNUAL REPORT 2010
Index
A
Applying the principles of the Combined Code
Audit Committee report
Available for sale financial assets
B
Board of Directors and senior management
Borrowings
Business combinations
48
57
112
44
122
133
C
Capital grants
Cash and cash equivalents
Cash generated from operations
Chairman’s introduction to corporate governance
Chairman’s statement
Commitments
Company statement of changes in equity
Company statement of comprehensive income and
statement of cash flows
Company statement of financial position
Comparatives
Contingent liabilities
Critical accounting estimates and judgements
130
115
132
42
12
132
82
83
81
136
131
95
D
Dairy Ireland – business model
Dairy Ireland – divisional performance
Deferred income taxes
Derivative financial instruments
Directors’ remuneration
Dividends
E
Earnings per share
Employee benefit expense
Events after the reporting date
Exceptional items
F
Finance income and costs
Financial risk management
Financial statements contents
Five year trends
G
General information
Group Finance Director’s review
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
H
How we are structured
How we did in 2010
21
38
124
130
103
106
105
103
135
102
103
90
73
142
84
22
76
16
80
78
77
79
9
3
INDEX
I
Income taxes
Independent auditors’ report
Intangible assets
Inventories
Investments in associates
Investments in joint ventures
J
Joint Ventures & Associates
– divisional performance
K
Key Performance Indicators (KPIs)
N
Nomination Committee report
Non-controlling interests
Notes to the financial statements
O
Operating expenses
Other reserves
Other statutory information
Our business models
Our global footprint
Our markets
Our performance
Our responsibilities
Our strategy
P
Principal subsidiary and associated undertakings
Property, plant and equipment
Provisions for other liabilities and charges
R
Related party transactions
Remuneration Committee report
Retained earnings
Retirement benefit obligations
Risk management
S
Segment information
Share capital and share premium
Shareholders’ information
Statement of Directors’ responsibilities
Summary of significant accounting policies
T
Trade and other payables
Trade and other receivables
104
74
107
115
110
111
40
5
59
121
84
101
116
54
20
6
11
4
31
10
136
106
129
134
61
121
126
27
96
120
139
71
84
130
113
U
US Cheese & Global Nutritionals – business model 20
US Cheese & Global Nutritionals
– divisional performance
36
Text paper used: UPM Fine.
UPM focuses on reducing the impact on water,
air, soil and groundwater.
UPM complies with the principles of sustainable
forestry wherever it operates.
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Cautionary statement
The 2010 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.
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Glanbia plc, Glanbia House,
Kilkenny, Ireland.
Tel +353 56 777 2200
Fax +353 56 777 2222
www.glanbia.com