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We are
Glanbia
Annual report 2014
Glanbia plc is a leading
performance nutrition and
ingredients group. We employ
over 5,800 people in 34
countries and our products
are sold or distributed in over
130 countries. We have leading
market positions in performance
nutrition, cheese, dairy
ingredients, specialty non-dairy
ingredients and vitamin and
mineral premixes. Our shares
are listed on the Irish and
London Stock Exchanges
(symbol: GLB).
Find out More at
glanbia.com
Additional information
More content in the strategic report
More content in governance
More content in financial statements
More content on our website
Forward-Looking Statements
The Company has made forward-looking
statements in this Annual Report that are based
on management’s beliefs and assumptions and
on information currently available to management.
Forward-looking statements include, but are not
limited to, information concerning the Company’s
possible or assumed future results of operations,
business strategies, financing plans, competitive
position, potential growth opportunities, potential
operating performance improvements, the effects
of competition and the effects of future legislation
or regulations. Forward-looking statements include
all statements that are not historical facts and can be
identified by the use of forward-looking terminology
such as the words “believe,” “expect,” “plan,”
“intend,” “project,” “anticipate,” “estimate,” “predict,”
“potential,” “continue,” “may,” “should” or the negative
of these terms or similar expressions. Forward-
looking statements involve risks, uncertainties and
assumptions. Actual results may differ materially from
those expressed in these forward-looking statements.
You should not place undue reliance on any forward-
looking statements. The risk factors included at
pages 50 to 57 of this Annual Report could cause
the Company’s results to differ materially from those
expressed in forward-looking statements. There may
be other risks and uncertainties that the Company
is unable to predict at this time or that the Company
currently does not expect to have a material adverse
effect on its business. These forward-looking
statements are made as of the date of this Annual
Report. The Company expressly disclaims any
obligation to update these forward-looking
statements other than as required by law.
The forward-looking statements in this Annual Report
do not constitute reports or statements published
in compliance with any of Regulations 4 to 9 and 26
of the Transparency (Directive 2004/109/EC)
Regulations 2007.
As an Irish incorporated company, the Strategic report
does not constitute a Strategic Report for the purposes
of the UK Companies Act 2006 (Strategic Report and
Directors’ Report) Regulations 2013 and the Large and
Medium-sized Companies and Groups (Accounts and
Reports) (Amendment) Regulations 2013, and the
Remuneration Committee Report does not constitute a
Remuneration report for the purposes of the UK Large
and Medium-sized Companies and Groups (Accounts
and Reports) (Amendment) Regulations.
On the cover
Ricardo Barbara
Latin America Regional Director,
Global Performance Nutrition
Crystal bell
Weigh Station Quality Operator,
Global Performance Nutrition
JOSEPH CHIANG
Head of Procurement,
Global Ingredients
Customised Solutions
Robert shortall
Plant Manager,
Glanbia Ingredients Ireland
Patrick o’riordan
Chief Science & Technology
Officer, Glanbia plc
Yvonne kerrigan
Operations Manager,
Dairy Ireland
Consumer Products
See page 44 for more about our people
Directors’ report
Strategic report
Performance highlights and outlook
Key performance indicators
Group Chairman’s statement
We are Glanbia
Our markets
Our business
Where we operate
Our business model
What makes us different
Our strategy
Group Managing Director’s review
Group Finance Director’s review
Operations review
Our people
Risk management
Governance
Chairman’s introduction to governance
Governance overview
Board of Directors and senior management
Audit Committee report
Nomination and Governance Committee report
Remuneration Committee report
Statement of compliance
Other statutory information
Statement of Directors’ responsibilities
Financial statements
Independent Auditors’ report
Group financial statements
Company financial statements
Notes to the financial statements
Shareholders’ information
Contacts
1
2
4
8
12
16
20
24
28
30
34
38
44
50
58
61
64
69
75
80
100
110
114
116
121
126
129
190
193
Performance highlights and outlook
DOUBLE DIGIT GROWTH
We achieved a fifth consecutive year of
double digit growth in 2014 with a 10.1%
increase in adjusted earnings per share,
constant currency. Along with strong
profit and cash flow growth, we also
announced our fifth consecutive year
of dividend increase, up 10%.
The outlook is positive and we are guiding
9% to 11% growth in adjusted earnings
per share, constant currency, for 2015.
ADJUSTED EARNINGS
PER SHARE
KPI
61.16c
+10.3% +10.1%
Change
Constant currency change
REVENUE
KPI
Total Group1
EBITA2
KPI
Total Group1
EBITA MARGIN
KPI
Total Group1
Change
Constant currency change
€2.5bn +6.6% +6.4%
€3.5bn
+7.3%
+6.9%
€208.6m +11.1% +11.1%
€245.0m
+8.1%
+7.9%
8.2% +30bps +30bps
7.0%
+10bps
+10bps
Operating
cash flow
KPI
€206.2m +48.3%
See pages 34 to 43 for further information about our performance
1. Total Group includes Glanbia’s share of Joint Ventures & Associates
2. Earnings before interest, taxation and amortisation excluding exceptional items
www.glanbia.com
1
Strategic report
Key performance indicators
Measuring our performance
We monitor our performance by measuring key performance indicators (KPIs) that we
believe are important to our longer-term success. Performance against some of these KPIs
is linked to the remuneration arrangements of our Executive Directors and senior executives.
total group revenue
Total Group EBITA
€3.5bn
€245m
total group
EBITA MARGIN
7.0%
ADJUSTED EARNINGS
PER SHARE1,2,3
61.16c
3.5
3.3
3.0
2.8
245
227
215
182
7.1
6.9
7.0
6.6
61.16
55.46
51.34
40.34
11
12
13
14
11
12
13
14
11
12
13
14
11
12
13
14
Definition
Revenue of the wholly
owned businesses and
the Group’s share of Joint
Ventures & Associates.
Strategic relevance
While movements in
commodity dairy markets can
influence revenue movements
in a specific year, Total Group
revenue growth, when viewed
over a period of time, is an
indicator of how Glanbia is
succeeding in developing the
Group through its ongoing
investment and acquisition
programme.
Performance
In 2014, Total Group revenue
was €3.5 billion, a 6.9%
increase on the previous
year, constant currency.
Definition
Earnings before interest,
taxation and amortisation
(EBITA), excluding exceptional
items, of the wholly owned
businesses plus Glanbia’s
share of EBITA of its Joint
Ventures & Associates.
Strategic relevance
EBITA measures the
profitability of the Group.
The exclusion of intangible
asset amortisation aids
comparability between
segments which have grown
organically and those that
have grown by acquisition.
Performance
Total Group EBITA was
€245 million, up 7.9% over
2013, constant currency.
Definition
Total Group EBITA as
a percentage of Total
Group revenue.
Strategic relevance
Glanbia has four business
segments with a range of
EBITA margins. Long-term
improvement in EBITA
margin demonstrates
how the Group’s strategy
to focus on high growth,
higher margin products
and segments is being
successfully implemented.
Performance
Total Group EBITA margin
in 2014 was 7.0%, reflecting
an 8.2% margin in the wholly
owned businesses, up 30
basis points (bps) on 2013
and 3.7% in Joint Ventures
& Associates, down 60bps
on 2013.
See page 80 for more about remuneration
1. Performance condition of Glanbia’s Long Term Incentive Plan
2. Performance condition of Glanbia’s Annual Incentive Plan for 2014
3. Performance condition of Glanbia’s Annual Incentive Plan from 2015
2
Glanbia plc 2014 Annual Report and Accounts
Definition
Adjusted earnings per share
(EPS) is calculated as the net
profit attributable to the equity
holders of Glanbia plc, before
exceptional items and
intangible asset amortisation
(net of related tax), divided by
the weighted average number
of ordinary shares in issue
during the year.
Strategic relevance
Adjusted EPS is an important
measure of return on equity
as it represents the underlying
profit of the Group per equity
share in issue.
Performance
Adjusted EPS was 61.16
cents, up 10.3% on 2013.
This equates to an increase
of 10.1%, constant currency,
in line with market
expectations and is the fifth
consecutive year of double
digit EPS growth. The
compound annual growth
rate in adjusted EPS from
2011 to 2014 was 14.9%.
Operating
Cash flow3
€206m
NET DEBT: ADJUSTED
EBITDA2
RETURN ON
CAPITAL EMPLOYED1
Total shareholder
return1
1.97times
13.4%
16.9%
206
2.12
1.97
1.72
1.66
14.1
14.2
13.4
12.8
139
123
112
400
300
200
100
11
12
13
14
11
12
13
14
11
12
13
14
11
12
13
14
Definition
Earnings before interest,
taxation, depreciation and
amortisation (EBITDA) of the
wholly owned businesses less
business sustaining capital
expenditure plus / minus
working capital movements
and excluding exceptional
cash flows. EBITDA
represents pre-exceptional
EBITA of the wholly owned
businesses plus depreciation.
Strategic relevance
Operating cash flow measures
the cash generated from
operations before interest
and tax payments and before
strategic capital expenditure.
It is a measure of the ability of
the Group to convert profits to
cash, which is then available
for strategic investments and
dividend payments.
Performance
Operating cash flow for 2014
was €206.2 million, up €67.2
million on 2013. The increase
resulted primarily from
improvements in working
capital performance.
Definition
Net debt to adjusted EBITDA
is calculated as net debt at
the end of the year divided
by adjusted EBITDA. Adjusted
EBITDA is calculated as
EBITDA for the wholly owned
businesses plus dividends
received from Joint Ventures
& Associates, and in the event
of an acquisition in the year,
includes pro-forma EBITDA
as though the acquisition date
had been at the beginning of
the year.
Strategic relevance
Net debt to adjusted EBITDA
measures the relationship
between net debt and the
Group’s cash flow and is a
measure of the ability of the
Group to repay its debt.
Net debt / adjusted EBITDA
is a financial covenant of
the Group.
Performance
The Group achieved a
year end net debt to adjusted
EBITDA leverage ratio of
1.97 times (2013: 1.66 times)
compared to the Group’s
financial covenant of
3.5 times.
Definition
Return on capital employed
(ROCE) is Group earnings
before interest and
amortisation (net of tax) plus
Glanbia’s share of results of
Joint Ventures & Associates
after interest and tax, divided
by capital employed. Capital
employed is calculated as the
sum of the Group’s total
assets less current liabilities,
excluding all borrowings, cash
and deferred tax balances
plus cumulative intangible
asset amortisation.
Strategic relevance
ROCE is a measure of the
return the Group achieves
on its investment in organic
capital expenditure projects,
acquisitions and other
strategic investments.
Performance
ROCE for 2014 was 13.4%
compared to 14.2% in 2013.
The decrease reflects the
spend of €222 million on
acquisitions and strategic
capital expenditure during
2014, where returns will
build over time.
Glanbia
STOXX Europe 600 F&B Index
Definition
Total Shareholder Return
(TSR) represents the change
in the capital value of Glanbia
plc’s shares plus dividends
reinvested. The change in
capital value is the difference
between the closing share
price and the opening share
price for the period, expressed
as a percentage of the
opening value.
Strategic relevance
TSR reflects the value delivered
to shareholders arising from
the ownership of Glanbia’s
shares plus dividends
reinvested. Relative TSR,
compared to a specific peer
group or market index, is an
important measure of how
successful the Group has
been in terms of shareholder
value creation, in comparison
with its peers for the same
time period.
Performance
Glanbia’s TSR in 2014 was
16.9% (2013: 35.4%). Four
year TSR out performed the
STOXX Europe 600 Food and
Beverage Index by 197%.
www.glanbia.com
3
Strategic report
Group Chairman’s statement
STRONG RESULTS AND
A POSITIVE OUTLOOK
“Our 2014 results were strong with
continued double digit earnings growth.
The outlook for 2015 is positive and
the ambitious strategic targets we set
ourselves to 2018 remain on track.”
Liam Herlihy
Group Chairman
Dear Shareholder
In my final letter as Group Chairman, I am delighted to report
another year of significant progress for Glanbia plc. Despite
some challenges in the external operating environment,
Total Group revenue, including Joint Ventures & Associates,
grew 7.3% to €3.5 billion (6.9% constant currency). Total
Group EBITA increased 8.1% to €245.0 million (7.9% constant
currency). Growth in adjusted earnings per share was 10.1%,
constant currency. This is the fifth consecutive year of double
digit earnings growth, which is an excellent achievement
by any standard.
Gaining global momentum
Glanbia’s global business continued to expand in 2014. The
Group now has a footprint in 34 countries, adding new countries
through acquisitions and establishing further in-country offices.
This gives us excellent reach into major developed and
emerging markets, and the ability to foster and sustain strong
relationships with our customers and consumers. Our two
global growth platforms – Global Performance Nutrition and
Global Ingredients – accounted for 91% of wholly owned EBITA
and 77% of Total Group EBITA.
Delivering shareholder value
Total Shareholder Return (TSR) is a key performance indicator
(KPI) for Glanbia as it reflects our key strategic objective of
maximising returns to shareholders. Executive and senior
management performance is also linked to TSR, aligning
shareholder interests with the Glanbia long-term incentive
plan. The share price rose 15.9% to end the year at €12.81.
TSR for 2014 was 16.9%, following returns of 35.4% in 2013
and 80.6% in 2012. This three-year performance reflects the
benefits of the Group’s growth strategy and focus on our
global growth platforms.
Board changes
Key to board success, I believe, is ensuring that we have
the right mix of Non-Executive Directors with a variety
of experience and skills to constructively challenge and
support the Executive team. In 2014, we welcomed Patrick
Coveney and Dan O’Connor as new Non-Executive Directors.
Brendan Hayes re-joined the Board as a Non-Executive
Director, nominated by Glanbia Co-operative Society Limited.
A number of Directors retired during the year and I would like
to thank Jerry Liston, Non-Executive Director and John
Callaghan, Senior Independent Director for their excellent
contribution and commitment to Glanbia over the course
of their tenure. I am pleased that Paul Haran has now taken
on the role of Senior Independent Director.
4
Glanbia plc 2014 Annual Report and Accounts
GOVERNANCE HIGHLIGHTS IN 2014
• Appointment of two new independent Non-Executive
Directors on the recommendation of the Nomination
and Governance Committee, which conducted a
thorough evaluation for these appointments including
engaging external advisors to assist the process;
• Appointment of a new Senior Independent Director;
• Board visits conducted to US Cheese, Ingredient
Technologies and Global Performance Nutrition;
• Attendance of the Group Chairman and new Senior
Independent Director at the Global Performance
Nutrition Capital Markets Day in the USA;
• Three year remuneration policy review (2015 to 2017),
review recommendations subject to shareholder
approval at the AGM; and
• Decision to appoint new auditors to the Group,
effective for the 2016 audit, with the tender process
to be completed by June 2015.
See page 58 for more about governance
Progressive dividend
The Board is recommending a final dividend of 6.57 cents
per share bringing the total dividend for 2014 to 11.0 cents per
share, representing an increase of 10%. The Annual General
Meeting (AGM) will be held on Tuesday, 12 May 2015 in the
Lyrath Estate Hotel, Old Dublin Road, Kilkenny, Ireland. Subject
to approval at the AGM, dividends will be paid on 15 May 2015
to shareholders on the register of members as of 7 April 2015.
Irish withholding tax will be deducted at the standard rate
where appropriate.
Great people
At the end of 2014 Glanbia employed over 5,800 people
worldwide, an increase of 12% during the year. While two
new acquisitions in Global Performance Nutrition accounted
for much of the increase, we have also added Group capability
in innovation, talent management and reputation. I would like
to thank all our people for their continued hard work and
commitment. They have maintained, throughout the year, a
great operational performance and a strong health and safety
track record. This enabled the Group to deliver high quality
products and ingredients to our customers and consumers
worldwide, driving our strong performance in 2014.
Positive 2015 outlook
At Glanbia, we have a unique portfolio in both the business-to-
business (B2B) and business-to-consumer (B2C) arenas that
creates distinctive competitive advantage. We are continuing
to invest behind the business in developing our organisation
and capabilities as well as infrastructure and facilities. The
outlook for 2015 is positive and our full year 2015 guidance
is 9% to 11% growth in adjusted earnings per share, constant
currency. In addition, the ambitious strategic targets we set
ourselves to 2018 remain on track.
Farewell and thank you
I am retiring from Glanbia at the 2015 AGM. In my time on
the Board and as Chairman, the Group has been transformed
from an Irish dairy business to a global player in performance
nutrition and ingredients. While our strategy has certainly been
core to our success, it is our people who are at the heart of the
business. Glanbia has also been fortunate in having strong and
visionary executive leadership and is today ably led by Siobhán
Talbot. My Board colleagues too have always been a strong
support, while offering at times good and necessary challenge.
For all of this, I would like to say a personal thanks to everyone
and wish the Group continued success into the future.
Liam Herlihy
Group Chairman
www.glanbia.com
5
Strategic report
6
Our markets
WE ARE
PART OF A
CHANGING
WORLD
Ricardo Barbara, Latin America Regional Director,
Global Performance Nutrition, Brazil
“ We have a global approach to growing
our performance nutrition business with
an in-market commercial presence in
23 countries. I am based in Brazil with
responsibility for the Latin American
region, which represents an exciting growth
opportunity for us. Within my region, Brazil
is a good example of how we select and
develop international markets.
Brazil is the seventh largest economy in the
world, with a growing middle class. It has a
large population of over 200 million people,
with more than 50% of those under 35 years
old. It has the second highest gym membership
after the USA and a strong cultural
appreciation of beauty. It is also a large
and growing performance nutrition market.
While there are always challenges in
doing business in new regions, my role
as an international business builder is to
support the advancement of Glanbia’s
Global Performance Nutrition brands to
become the category leader in my region.
This helps to deliver further growth and
success in our international markets for
Global Performance Nutrition.”
7
Our MARKETs
The pace of change in food and nutrition is accelerating. Our portfolio of performance
nutrition and ingredients is addressing the growth opportunities that are being driven
by key consumer trends and the impact these are having on our industry.
GLOBAL PERFORMANCE NUTRITION
Glanbia has the largest global performance nutrition brand
portfolio and a presence in 23 countries. We have five iconic
brands and market over 80 products covering protein,
pre-workout energy, muscle gainers and builders, and general
health. The global performance nutrition market, at retail selling
price, is approximately $10.1 billion1 with the USA accounting
for 63%, and other international markets accounting for 37%.
We estimate our global market share in terms of branded
revenue is in the region of 12%. All regions continue to exhibit
good growth, sustaining the positive momentum of recent
years. There are stronger growth rates in the less mature
markets, where per capita consumption of sports nutrition
products continues to grow off a low base. Globally, powders
are the single biggest sports nutrition format and are our core
format offering. We are also continuing to broaden our range
into Ready-to-Drink (RTD) beverages, bars and supplements.
Energy is one of the fastest growing categories while protein
is a gateway product into performance nutrition usage. Protein
is the largest category with statistically four out of ten people
striving to include more protein in their diets.2
See pages 38 and 39 for more information
GLOBAL INGREDIENTS
Nutrition is at the core of our Global Ingredients business,
whether it’s in the form of 640lb blocks of natural cheese,
our specialised value-added protein systems or micronutrient
premixes. Nutrition has never been more relevant to the
global market than it is today. The one-size-fits-all approach to
nutrition that existed in the past is gone. Today lifestyle, culture,
age, gender and location will all have an influence and nutrition
is increasingly becoming tailored to the individual. This has
resulted in significant changes in how consumers meet their
nutritional requirements which has led to a proliferation of
product formats and driven significant innovation across
the food sector. As a large global provider of ingredient
solutions, this provides huge opportunity for Global Ingredients.
Our protein systems have transformed the bar and beverage
categories over several years facilitating increased levels
of protein, cleaner labels and greater product functionality.
Our aim is ensure that we continue to leverage both our dairy
and non-dairy capabilities to meet the ever evolving demands
of our customers and end consumers across the globe.
See pages 40 and 41 for more information
1. 2014 Euromonitor retail selling prices
2. NPD Group
8
Market megaTREND
Consumer TREND
MARKET IMPACT
OUR OPPORTUNITIES
HEALTH & WELLBEING
• An ageing population in major western economies with
a growing agenda of individual preventive health care,
through personal ownership of health and wellness.
This is in response to the growing cost of medical care
and concerns over public health care systems; and
• A growing focus on active and healthy lifestyles with a
greater consumer awareness and understanding of the
link between diet, exercise and health, across genders
and generations.
EASY, CONVENIENT & SIMPLE
• Urbanisation and westernisation of diets, shifting
consumption away from traditional mealtimes to
new convenient formats for busy lifestyles.
Food sustainability & security
• A desire for natural, sustainable ingredients with
clear and understandable information about what
a food product contains, to address legitimate
consumer concerns around product and ingredient
safety and origin.
CHANGING GLOBAL DEMOGRAPHICS
• Global population growth and an expanding global
economy which is driving the need for affordable
nutrition; and
• Global growth in the middle class with a greater
disposable income seeking convenience, choice
and access to premium products.
SMART & CONNECTED CONSUMERS
•
Increased frequency of exercise in modern lifestyles
and consumption of protein and energy supplements
as consumers seek ways to improve their health
and longevity.
IMPROVED LIFESTYLE
• Advances in nutrition science and food technology
which are improving the nutrition density and quality
of foods; and
•
Innovation in the area of food nutrition and healthier
ingredients in processed foods.
Increasing demand for
Using nutrition to improve
Market leaders
supplements and
natural prevention.
underlying health and
physical performance and
reduce the requirement for
medical intervention.
Glanbia is the global leader
in performance nutrition with
three global and two market
leading regional brands.
Increasing use of
snack-based meal
replacements.
Driving a broader range of
Ready-to-Go
food and beverage formats
We have a growing range
for convenient and
of great tasting RTD and
on-the-go consumption.
Ready-To-Eat (RTE) products
for active lifestyles.
Customers and
consumer demand
for greater ingredient
authenticity and
traceability.
Moving to clean labelling
for maximum transparency
and providing assurance to
address multiple concerns
as to the source, quality
and treatment of food
and ingredients.
Sustainable quality
We maintain industry leading
standards in quality and
safety throughout our
operations and focus
on good sustainability and
environmental stewardship.
Growth of multiple
nutritional segments.
Addressing consumer
needs according to
Increasing demand
Our products are consumed
different life-stage, gender
by a wide-ranging demographic
and performance demands,
across multiple geographies.
health issues, regional diets
and regulatory frameworks.
Increasing knowledge
Tailoring nutrition to enhance
Savvy consumers
of the benefits of
combining exercise
and diet.
the results to be gained
from exercising, be it for
intensive gym enthusiasts
or casual athletes.
Glanbia is a leader in sports
nutrition education to create
informed consumers and
brand advocates about the
benefits of our products.
Demand for higher
nutrient density in
mainstream diet.
Including more nutritious
Ingredients and systems
ingredients and new
solutions
formats in processed food
Our products tap into the
and beverages for healthier
demands of those who are
consumption.
seeking improved health
and lifestyle benefits through
what they eat and drink.
Market megaTREND
HEALTH & WELLBEING
• An ageing population in major western economies with
a growing agenda of individual preventive health care,
through personal ownership of health and wellness.
This is in response to the growing cost of medical care
and concerns over public health care systems; and
• A growing focus on active and healthy lifestyles with a
greater consumer awareness and understanding of the
link between diet, exercise and health, across genders
and generations.
EASY, CONVENIENT & SIMPLE
• Urbanisation and westernisation of diets, shifting
consumption away from traditional mealtimes to
new convenient formats for busy lifestyles.
Food sustainability & security
• A desire for natural, sustainable ingredients with
clear and understandable information about what
a food product contains, to address legitimate
consumer concerns around product and ingredient
safety and origin.
CHANGING GLOBAL DEMOGRAPHICS
• Global population growth and an expanding global
economy which is driving the need for affordable
nutrition; and
• Global growth in the middle class with a greater
disposable income seeking convenience, choice
and access to premium products.
SMART & CONNECTED CONSUMERS
•
Increased frequency of exercise in modern lifestyles
and consumption of protein and energy supplements
as consumers seek ways to improve their health
and longevity.
IMPROVED LIFESTYLE
• Advances in nutrition science and food technology
which are improving the nutrition density and quality
of foods; and
•
Innovation in the area of food nutrition and healthier
ingredients in processed foods.
Consumer TREND
MARKET IMPACT
OUR OPPORTUNITIES
Increasing demand for
supplements and
natural prevention.
Using nutrition to improve
underlying health and
physical performance and
reduce the requirement for
medical intervention.
Market leaders
Glanbia is the global leader
in performance nutrition with
three global and two market
leading regional brands.
Increasing use of
snack-based meal
replacements.
Driving a broader range of
food and beverage formats
for convenient and
on-the-go consumption.
Ready-to-Go
We have a growing range
of great tasting RTD and
Ready-To-Eat (RTE) products
for active lifestyles.
Customers and
consumer demand
for greater ingredient
authenticity and
traceability.
Growth of multiple
nutritional segments.
Moving to clean labelling
for maximum transparency
and providing assurance to
address multiple concerns
as to the source, quality
and treatment of food
and ingredients.
Sustainable quality
We maintain industry leading
standards in quality and
safety throughout our
operations and focus
on good sustainability and
environmental stewardship.
Addressing consumer
needs according to
different life-stage, gender
and performance demands,
health issues, regional diets
and regulatory frameworks.
Increasing demand
Our products are consumed
by a wide-ranging demographic
across multiple geographies.
Increasing knowledge
of the benefits of
combining exercise
and diet.
Tailoring nutrition to enhance
the results to be gained
from exercising, be it for
intensive gym enthusiasts
or casual athletes.
Savvy consumers
Glanbia is a leader in sports
nutrition education to create
informed consumers and
brand advocates about the
benefits of our products.
Demand for higher
nutrient density in
mainstream diet.
Including more nutritious
ingredients and new
formats in processed food
and beverages for healthier
consumption.
Ingredients and systems
solutions
Our products tap into the
demands of those who are
seeking improved health
and lifestyle benefits through
what they eat and drink.
9
Strategic report
10
Our business
WE ARE
A MARKET
LEADER
CRYSTAL BELL, WEIGH STATION QUALITY OPERATOR,
GLOBAL PERFORMANCE NUTRITION, ILLINOIS, USA
“ I work in the new 948 Global Performance
Nutrition (GPN) plant in Aurora, Illinois. My
job is to calibrate and weigh all the ingredients
for the product we are producing at that time
on the manufacturing line. 948 is a state-of-
the-art, large scale manufacturing facility in
terms of efficiency but more importantly in
terms of hygiene and safety.
948 covers 600,000 square feet and when
it is completed we will be able to produce
up to 50 million pounds of performance
nutrition powders each year. GPN has made
a big investment in manufacturing and quality
to guarantee the integrity of our products, so
our consumers get the product quality and
specification we promise and they deserve.
This is a fast-paced workplace and I am lucky
to get the opportunity to work across several
areas of the plant. GPN products enable
people to achieve wellbeing and athletic
success. Equally Glanbia encourages its
employees to achieve their goals and
succeed in their careers. I am very proud
to work here.”
11
Our business
We have a strategic portfolio of businesses. We have two global growth platforms in Global
Performance Nutrition and Global Ingredients. We have a strong heritage in Dairy Ireland
and have key strategic long-term partnerships in our Joint Ventures & Associates.
GLOBAL
PERFORMANCE
NUTRITION
Leading global provider
of branded performance
nutrition products
GLOBAL
INGREDIENTS
Leading manufacturer of
American-style cheddar cheese
Leading global provider of dairy and
non-dairy nutritional solutions
Leading global provider of
micro-nutrient premixes
DAIRY
IRELAND
#2 selling grocery brand
in Ireland
#1 Irish supplier of
farm inputs
JOINT
VENTURES
& ASSOCIATES
#1 Irish dairy processor
#1 mozzarella producer in Europe
Leading manufacturer
of American-style
cheddar cheese
12
12
GLOBAL PERFORMANCE NUTRITION
B2C global growth platform
Global Performance Nutrition is a leading business-to-
consumer (B2C) branded performance nutrition business.
Our brand portfolio is comprised of Optimum Nutrition,
BSN, Isopure, ABB and Nutramino, each with its own brand
essence and consumer appeal. We produce the full range
of performance nutrition products and we are the market
leader in innovation and new product development.
REVENUE
EBITA
€746.2m €89.2m
EBITA MARGIN
12.0%
EMPLOYEES
1,442
See page 38 for more about Global
Performance Nutrition
GLOBAL INGREDIENTS
B2B global growth platform
Global Ingredients is comprised of three related business
-to-business (B2B) operations. US Cheese is a large scale
manufacturer and marketer of American-style cheddar
cheese. Ingredient Technologies formulates and markets
a range of dairy and non-dairy based nutritional ingredients.
Customised Solutions blends vitamins, minerals and other
nutrients to exact specifications for a range of food and
beverage customers.
REVENUE
€1.2bn
EBITA MARGIN
8.5%
EBITA
€100.4m
EMPLOYEES
1,632
See page 40 for more about Global Ingredients
Dairy Ireland
Value-adding growth opportunities
Dairy Ireland is comprised of two businesses. Consumer
Products is a leading supplier of branded consumer
products to the Irish market, including standard and fortified
milks, cheese, butter and cream. Agribusiness supplies
inputs to the Irish agri sector and is the leading purchaser
and processor of grain in Ireland, and the leading
manufacturer of branded animal feed.
Revenue
€616.7m
EBITA
€19.0m
EBITA margin
3.1%
Employees
1,183
See page 42 for more about Dairy Ireland
JOINT VENTURES & ASSOCIATES
Enables growth in Global Ingredients
Our Joint Ventures & Associates comprise Southwest
Cheese, a large scale manufacturer of cheese and whey,
based in the USA; Glanbia Ingredients Ireland, a leading
European dairy processor; Glanbia Cheese, a leading
European mozzarella producer; and Nutricima, a Nigeria
based branded consumer dairy products business. Our Joint
Venture & Associate model offers the opportunity through
dairy partnerships to support growth in Global Ingredients.
1. Glanbia’s share
REVENUE1
EBITA1
€984.0m €36.4m
EBITA MARGIN
3.7%
EMPLOYEES
1,558
See page 43 for more about Joint
Ventures & Associates
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Strategic report
14
WHERE We OPERATE
WE ARE A
GLOBAL
BUSINESS
JOSEPH CHIANG, HEAD OF PROCUREMENT,
GLOBAL INGREDIENTS CUSTOMISED SOLUTIONS, CHINA
“ We are the number two global provider
of high quality premix solutions and our
customers are local and multinational
manufacturers in the food, beverage and
infant formula industries. Premixes are a dry
or liquid custom blend of a wide array of
nutritional ingredients and provide a food
product with additional nutritional value.
I manage the procurement function for
Customised Solutions in China. With
manufacturing plants in China, Germany
and the USA, an effective procurement
function is critical to the success of our
business and provides the opportunity to
differentiate ourselves from our competitors.
Procurement plays an important role in
building key strategic relationships to ensure
a stable and consistent supply of the best
quality, competitively priced raw materials.
In my role, I have the opportunity to build
and foster supplier relationships that will
enable Glanbia to have a long-term
sustainable supply.”
15
Where we operate
We added two new countries to our global footprint in 2014, enhancing our
ability to serve our customers and consumers and bringing our in-market
presence in key international markets to 34 countries worldwide.
Global Performance
Nutrition
Aurora, Illinois, USA
Global Performance Nutrition
has manufacturing operations
in Aurora, Illinois, which
produce a range of high quality
performance nutrition powders.
Canada
USA
Mexico
Global ingredients
Idaho, USA
US Cheese and Ingredient Technologies
have four production plants and two
innovation services centres, located in
the highly productive Idaho agricultural
heartland. They are also responsible for
distribution of the output of Southwest
Cheese, a key strategic Joint Venture.
68
sales & technical
locations in
Brazil
Uruguay
€3.5bn
52%
34
countries
total group revenue by destination
(€m)
12%
USA
Ireland
Rest of Europe
Other
Total
1,824
15%
746
524
428
3,522
21%
16
Joint ventures & Associates
Glanbia Ingredients Ireland
Belview, Kilkenny, Ireland
Glanbia Ingredients Ireland will commission its
new world-class dairy processing plant in the
first quarter of 2015. Belview will process up
to 19 million litres of milk per week, producing
high-quality skim, whole and enriched milk
powders and infant formula ingredients.
Ireland
Sweden
Norway
Russia
UK/Europe
Turkey
Jordan
UAE
India
Nigeria
South Africa
Key
Global Performance Nutrition
Global Ingredients
Dairy Ireland
Joint Ventures & Associates
Production
Sales & technical
Innovation centre
Group Headquarters
South Korea
China
Japan
Thailand
Malaysia
Vietnam
Singapore
Philippines
Indonesia
Australia
Global ingredients
Suzhou, China
The Customised Solutions plant in China
has achieved strong production growth
in recent years and now exports quality
premixes to over nine different countries
in the region. It is part of a network of
four plants serving global customers.
New Zealand
17
Strategic report
18
Our business model
WE ARE A
LONG-TERM
PARTNER
ROBERT SHORTALL, PLANT MANAGER,
GLANBIA INGREDIENTS IRELAND, BELVIEW, CO Kilkenny, IRELAND
“ Glanbia Ingredients Ireland (GII) is Ireland’s
largest dairy processor and is 60:40 owned
by Glanbia Co-operative Society Limited
and Glanbia plc respectively. I am the
Plant Manager at the new GII Belview
dairy processing facility, which will open
officially in March 2015. Belview is the
first investment of its kind in Ireland in
over 80 years and is an important driver
and enabler of milk expansion in the 2015
post-quota era in Europe.
Belview will process in the region of 19 million
litres of milk per week into a range of
nutritional ingredients including specialised
milk powders for infant formula and enriched
milk powders for markets in Africa, Asia and
Central America. My role as Plant Manager is
to deliver plant performance in terms of
throughput, quality and safety to ensure a
sustainable outlet for the anticipated 65%
increase in milk volumes by 2020. GII has two
other large scale processing plants in Ireland.
Glanbia has a strong track record in
successful long-term partnerships and the
relationship with GII is one of the cornerstones
of its Joint Ventures & Associates business
segment. We have complementary strengths
and roles, which helps GII to create and
sustain competitive advantage. Our success
as long-term partners is built on our shared
ambition for success.”
19
Our business model
We create greater value from our pool of raw materials through collaborative
long-term partnerships, customer focused innovation and investment in consumer
facing brands in high growth markets; driving our portfolio towards added value,
and more complex and higher margin products.
OUR VALUE CHAIN
BASE INGREDIENTS
Leadership in global cheese
and dairy ingredients
Global Ingredients and key strategic Joint Ventures
& Associates process large milk pools in Ireland, the
UK and the USA. This gives us unique raw material
supply chain sustainability and traceability, which is
a key differentiator for leading global customers and
their consumers. Our processing capability provides
us with captive large scale whey volumes, a critical
raw material for higher value specialty ingredients and
in particular performance nutrition bars and powders
for consumer brands.
PRODUCTS
• Cheese
• Whey Protein Concentrate (34%)
• Lactose
• Milk powders, casein, butter
SPECIALTY INGREDIENTS
Strong innovation capabilities
in nutritional ingredients
We are at the forefront of the development of
whey as an important protein ingredient in food
and nutrition. Today, Glanbia is the leading global
manufacturer, marketer and user of whey protein
fractions and isolates. We have complemented
our dairy ingredient expertise with a portfolio
of non-dairy and other specialty ingredients,
which gives us greater market reach and
customer relevance.
PRODUCTS
• Whey Protein Isolate
• Whey Protein Concentrate (80%)
• Milk Protein Isolate
• Milk Protein Concentrate
• Dairy calcium and lactoferrin
• Specialty milled grains
OUR VALUE CHAIN IN ACTION 2014
EXPANSION OF NUTRITIONAL DAIRY POWDERS
We have large scale and sustainable leadership in cheese
and dairy ingredients. Since 1984 a quota system has
restricted milk production in Ireland and elsewhere in the
European Union. On 1 April 2015 this quota system is being
abolished and Irish milk production is expected to rise by
65% by 2020. In anticipation of this and in line with the
ambitions of our farmer suppliers, a key business relationship
for the Group, GII is currently commissioning a €150 million
greenfield dairy processing facility. The new facility will have
the capacity to produce more than 100,000 tonnes of
nutritional dairy powders per year for export to global
markets, making it one of the largest and most technologically
advanced plants of its kind in Europe. We have also
approved a further investment of €35 million to produce
added value ingredients for the infant formula market.
EXPANSION OF WHEY PROTEIN
and LACTOFERRIN CAPACITY
Glanbia is one of the largest producers of whey-derived
lactoferrin worldwide. Demand for lactoferrin continues to
grow as an increased appreciation of lactoferrin’s clinically-
based nutritional benefits means it is now incorporated into
an ever broader range of foods, clinical nutrition, capsules
and tablets. With this in mind and in keeping with Glanbia’s
long-term strategic capital investment plan, Global
Ingredients has commenced an $85 million expansion
plan at its Idaho facilities focusing mainly on the increased
production of higher end whey and lactoferrin. The facilities
will be fully commissioned by the end of 2015.
See page 43 for more about GII
See page 40 for more about Global Ingredients
20
SOLUTIONS AND SYSTEMS
Turn-key nutritional
and functional innovation
We combine a range of own and bought-in ingredients
to form ingredient systems which can provide both
nutritional and functional benefits to food. We also
have the capacity to innovate and develop full turn-key
ingredient solutions for our customers, independently
or in collaboration, in key market segments including
performance nutrition, beverages, breakfast cereals,
infant formula and supplements. These are all higher
growth market segments, which are being driven by
changing global consumer trends and demographics.
PRODUCTS
• Dairy-based protein systems
• Vitamin and mineral premix solutions
• Specialty grain systems
• Aseptic beverages
CONSUMER BRANDS
Focus on higher margin
and higher growth markets
Our global and regional brands are part of our leading
performance nutrition brand family. These include
products in protein, energy, performance and recovery
together with general health supplements; available
in multiple formats and channels in the USA and other
international markets. We also have some of the leading
Irish consumer food and agribusiness brands. While
Global Performance Nutrition is our leading brand
portfolio, our selective investment in growth opportunities
in Dairy Ireland demonstrates that there is potential for
moving up the value chain across the Group.
PRODUCTS
• Global: Optimum Nutrition, BSN and Isopure
• Regional: ABB and Nutramino
• Local: Avonmore and Gain
BUILDING CAPABILITY IN ANCIENT GRAINS
Our new grain facility in the USA produces MeadowPure®
flaxseed ingredients as well as a portfolio of chia, quinoa
and other ancient grains. Our plant is unrivalled in its
processing capabilities and is underpinned by our unique
patented sourcing, cleaning and milling process known as
MeadowPure®. This, combined with our experience in the
development of protein and other ingredient applications for
the food sector, has allowed us to build a market leading
position in the development of grain-based ingredient
solutions for a range of food categories including beverages,
bars and bakery. We recently opened an oat mill facility in
Ireland to provide premium quality Irish oats. Our Irish oats
are exported to the USA and mainland Europe under the
Ingredient Technologies OatPure™ (gluten-free) brand. We
are the only grain processor in the world that has complete
end-to-end control of its gluten-free supply chain.
INVESTING IN BRAND POWER
We constantly seek to enhance our brand portfolio
through acquisitions, investment, brand renovation and
extension and new product development. In 2014, we
acquired Nutramino and Isopure, leading performance
nutrition businesses. We invested in new facilities in
performance nutrition in the USA and we commissioned
a new Ultra Heat Treated (UHT) facility in Ireland to
export our leading Irish milk brand. We developed new
global performance nutrition products as well as local
products such as protein milk in Ireland. We renovated
existing brand offerings such as the global launch of
the N.O.-XPLODE™ supplement, which represents the
beginning of a new era for the pre-workout category
in performance nutrition.
See page 42 for more about Dairy Ireland
See page 38 for more about GPN
21
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Strategic report
22
What makes us different
WE ARE
Market-LED AND
technology
driven
PATRICK O’RIORDAN, CHIEF SCIENCE & TECHNOLOGY OFFICER,
GLANBIA PLC, IRELAND
“ Macro trends continue to shape the global
market environment for food and nutrition.
Consumer attitudes and behaviours towards
food, nutrition and wellbeing are continuously
evolving, emphasising the need for
actionable insights and the continuous
application of proven science and
technology. This requires a strategic
approach to innovation that’s collaborative,
entrepreneurial, agile and continuous.
Indeed, our market-led and technology-
driven approach to innovation has enabled
Glanbia to deliver an exciting array of
ingredients, products and technology
solutions in 2014. In Ingredient Technologies,
we further expanded our protein systems
portfolio including a range of high protein
Greek yogurt smoothies. In US Cheese,
our Innovation Centre in Idaho has allowed
us to further strengthen our relationship
and collaborative engagement with our key
customers and has led to a number of new
product launches during the year.
In Global Performance Nutrition, renovation
and innovation drives brand equity and
continues to shape the sector by opening
up new consumer benefit and growth
opportunities. Examples include the strategic
innovation of Optimum Nutrition (ON) Gold
Standard Pre-Workout, addressing consumer
needs for optimal energy, focus and
endurance; and convenient RTD formats for
products. In Ireland, we also successfully
developed UHT milk for export markets.”
23
What makes us different
We believe that the interface between science, technology and commercial innovation is exciting,
dynamic and continuously evolving. It provides us with great opportunities to deliver and scale
added value to our cheese, ingredient and branded product portfolios.
Market insight and foresight
Glanbia has a unique range of activities which span business-
to-business (B2B) cheese and ingredients and business-to-
consumer (B2C) performance nutrition brands. This gives us
the ability to harness expansive market insight and foresight
in developing our global growth platforms. It also enables
us to create strong strategic and operational alignment to our
customers’ strategy. And it helps us uncover emerging cheese,
ingredient and branded product opportunities at the interface
of macro trends in food, nutrition and wellbeing.
Desirability, feasibility and viability
A systematic approach to identifying true market need,
ensuring excellent execution and the ability to sell at an
attractive price, provides a strong strategic framework
through which we evaluate our innovation investment
decisions. This assists us in improving the overall likelihood
of innovation success and drives return on investment in the
area. Validated market desirability, technical or execution
feasibility and financial viability are central to the success
of any innovation we undertake.
Co-create and co-develop innovation
The deepest form of collaboration is to work directly with
our customers to co-create and co-develop ingredient or
product solutions. This fosters a new type of relationship built
on trust, transparency and partnership. Increasingly, we are
adopting a more ‘user-centred’ approach to innovation, a key
aspect of which is early and rapid product prototyping. Making
sure a prototype gets in front of customers or end users at a
very early stage in development means it can be iterated and
improved throughout development. In some cases a pilot can
be launched in advance of a full new product rollout. This can
provide competitive differentiation and improve the chances
of commercial success. In 2013, we opened a new Cheese
Innovation Centre in Twin Falls, Idaho and enhanced this
capability with the acquisition and development of a more
agile cheese manufacturing facility in Blackfoot, Idaho.
This has facilitated co-creation and co-development with
our customers through a user-centred approach to cheese
product development. In 2014 this included our ‘Gamut of
Gouda’ platform of innovative Gouda style cheese varieties
including smoked, classic European, and aged Gouda.
In our B2B activities this sharpens our focus on key market
sectors and the cheese products and ingredients required
to meet the portfolio needs and aspirations of our customers.
In our B2C segment this enables us to streamline innovation
activity leveraging our in-depth science, technology and
application know-how in convenient formats and key channels.
Innovation proficiency
As a leading supplier of cheese and added-value nutritional
ingredients, innovation has been at the core of our development
for more than three decades. Ongoing shifts in the food,
nutrition and wellbeing arenas have created a unique opportunity
for a continuous innovation growth system that is market-led
and technology-driven. A continuous system links innovation
to our organic growth strategy through innovation portfolio
planning and the delivery of multi-generation innovation pipelines.
Innovation portfolio planning
Innovation portfolio planning helps us to make clear strategic
choices about innovation initiatives and how these address
the growth aspirations of our business over the short, medium
and longer term.
Three kinds of strategic innovation initiatives shape our
innovation portfolio planning:
1. Strategic renovations such as N.O.-XPLODETM and
incremental innovations such as Avonmore Protein
Milk help protect and improve the performance
of our core businesses;
2. Opportunities to shape or reshape existing or adjacent
sectors with initiatives to safeguard relevance and build
new platforms of growth, such as ON Protein Energy
or our Optisol 3000 range of functional ingredients; and
3. Creation of new strategic investment options that have
the potential to become stepping stones to future growth.
24
ON Gold Standard Pre-Workout: Our ‘user-centred’ approach to product innovation
The ‘pre-workout’ category continues to evolve. Consumers’
interest in a clean, more basic pre-workout offering continues
to expand and fuel market growth. Recognising this
opportunity, we leveraged a meaningful, user-centred
approach to innovation that better addresses consumer wants
and needs, drives stronger consumer loyalty to the ON Gold
Standard franchise, and delivers a differentiated offering that
grows the category.
Desirability
Viability
Feasibility
Desirability
Core user
Feasibility
Technical
Viability
Business
Best in class nutrition, performance,
ingredient and taste expertise
were combined to deliver a unique
formula to meet and exceed our
target users’ expectations.
Furthermore, premium packaging
that builds on Gold Standard’s
distinctive brand assets drives
stand-out and findability on shelf
(and online), while reinforcing
product quality.
The value proposition of ON
Gold Standard Pre-Workout is
grounded in consumer need for
superior quality and trust. Our
‘user-centred’ approach allowed
us to combine actionable insights
with industry-leading supply chain
and commercial expertise to deliver
a superior proposition that will
meet the needs of our consumers,
while driving incremental revenue
and margin.
User-centred innovation starts
with unmet and emerging consumer
needs. ON’s new Gold Standard
Pre-Workout was born from the
insight that many performance
nutrition users shy away from the
pre-workout category. Our
pre-workout product was designed
with Team ON athletes and users
in mind to address the need for a
clean label pre-workout product
that delivers optimal energy, focus,
endurance and taste at the best
value. Key design elements of the
brand drive differentiation and
stand-out both on shelf and online,
while also reinforcing ON Gold
Standard brand equity.
25
Strategic report 26
Our strategy
We are one
team Focused
on growth
SIOBHÁN TALBOT, GROUP MANAGING DIRECTOR,
GLANBIA PLC, IRELAND
“ There are over 5,800 people working in
Glanbia and this year we are recognising the
importance of our employees from around
the Group, who represent the diversity and
breadth of skills we have in the business.
A core part of my leadership is about
building a team of highly engaged people
and making Glanbia a great place to build
a career. In 2014, we launched a new
employee engagement initiative called
‘Our Glanbia’.
At its heart, ‘Our Glanbia’ is about developing
a real connection with employees and between
employees throughout Glanbia. On a broader
basis it is about creating a renewed focus on
both engagement and employee development
across the Group. I have been with Glanbia
for over 20 years and it has been like working
in a number of different companies, such has
been the change in the organisation.
We are now in another phase of developing
Glanbia, with a focus on building a truly
global business with sustained growth and
ambitious strategic objectives to meet. It is
the talent of our people and their focus on
executing our strategy that will deliver on
our promise of global momentum.”
27
Our strategy
Our vision is to be the leading global performance nutrition and ingredients group
and our strategic objective is to maximise total returns to shareholders, while also
maintaining a strong position on key sustainability issues.
2014 TO 2018 STRATEGIC TARGETS
We have defined a clear set of strategic
priorities and targets in order to achieve
our 2018 ambitions. To support this,
we need to ensure that we continue to
develop world-class strategic capabilities
and assets to harness Glanbia’s global
growth potential.
Our 2014 to 2018 strategic targets are:
• To maintain organic growth each year
of 8% to 10%, constant currency; and
• To achieve a return on capital
employed in excess of 12%, post
tax, by year three of an investment.
We have the potential to deliver higher
levels of growth with acquisitions and
partnerships that add further scale
to our current portfolio.
KEY PERFORMANCE INDICATORS
We monitor our long-term progress by
measuring growth or improvement in
eight key performance indicators (KPI).
These KPIs have been identified by the
Board as the most relevant to delivering
the Group’s strategy and objectives.
See page 2 for more about KPIs
SUSTAINABILITY
We seek to maintain a strong position
on key sustainability issues in our sector
including food safety and quality, the
environment, regulatory compliance
and nutritional innovation.
See pages 41 to 43 for more
about sustainability
Priority
ONE
SUSTAIN CURRENT AND
DRIVE FURTHER MARKET
LEADERSHIP IN OUR B2B
AND B2C GROWTH
PLATFORMS
STRATEGIC
OBJECTIVE
To maximise total
returns to
shareholders
Priority
FOUR
DEVELOP TALENT,
CULTURE AND
VALUES IN
LINE WITH
OUR GROWING
GLOBAL SCALE
Priority
TWO
ACQUIRE OR PARTNER
WITH COMPLEMENTARY
BUSINESSES TO GROW
OUR CURRENT
PORTFOLIO
Priority
THREE
DELIVER OUR
STRATEGIC CAPITAL
INVESTMENT
PROGRAMME
Find out more online at
glanbia.com/about-us/strategy
28
2014 ACHIEVEMENTS
2015 FOCUS AREAS
STRATEGIC capabilities
• Consolidated our position
as the leading Global
Performance Nutrition
business with double digit
revenue growth; and
• Maintained our leadership
positions in American-style
cheddar cheese and
whey-based nutritional
solutions in Global
Ingredients.
• Deliver branded revenue
growth ahead of the market
in Global Performance
Nutrition; and
• Develop growth opportunities
with a goal of revenue growth
and margin expansion in
Global Ingredients.
• Acquired Isopure, a US
• Continue to develop an
based provider of premium
branded performance
nutrition products, for €121
million in September; and
• Acquired Nutramino, a leading
Scandinavian performance
nutrition business, in January
for a consideration of
€21 million plus €7 million
additional earnout.
acquisition pipeline to grow
our portfolio across the
performance nutrition and
ingredients sector; and
• Continue to pursue
long-term partnership
opportunities in the area of
large scale milk processing
to grow our Global
Ingredients business.
• Strategic capital expenditure
programme of €73 million:
– US production
expansion in Global
Performance Nutrition;
– Investment in Whey Protein
Isolate and lactoferrin
capacity expansion in
Global Ingredients; and
– New UHT milk facility
in Consumer Products
in Ireland.
• Launched the ‘Our Glanbia’
programme to enhance
employee engagement
across the Group;
• Completed a Group-wide
‘Our Glanbia’ week; and
• Created strong goodwill
and energy throughout
Glanbia around greater
employee engagement.
• Strategic capital expenditure
of approximately €90 million;
• Commission the Idaho-based
dairy expansion in Global
Ingredients;
• Complete further phase
of investment in Global
Performance Nutrition
production facilities; and
• Commission new dairy
facility in Ireland.
• Complete our global employee
engagement survey;
• Launch Group-wide
global intranet;
• Develop the ‘Our Glanbia’
programme at a local and
global level; and
• Reform ‘Purpose, Vision and
Values’ at overall Group level.
GLOBAL talent management
As a global business, excellence in human
resources and talent management is key
to the Group’s future success and this
is a particular area of focus to 2018.
PORTFOLIO MANAGEMENT
Glanbia has a strong track record of
efficient capital allocation and portfolio
management. Our ability to use a variety
of structures including joint ventures is
critical to sustainable long-term growth
both organically and by acquisition.
BRAND POWER
Global Performance Nutrition is the foremost
global performance nutrition brand portfolio
with an unrivalled product offering and key
channel and category leadership. As an
ingredient supplier in the B2B arena, the
Glanbia brand stands for quality, integrity,
innovation and sustainability.
MARKET LEADERSHIP
Glanbia is a market leader in performance
nutrition, cheese, dairy ingredients, specialty
non-dairy ingredients and vitamin and mineral
premixes. The Group is focused on maximising
its current strategic positions and driving to
leadership positions in other markets.
OPERATIONAL EXCELLENCE
Operational excellence enables us to
manufacture products that meet customer
and consumer food safety and high-quality
standards. It also enables us to run large scale,
efficient facilities with full regulatory compliance
and good environmental stewardship.
SCIENCE-BACKED INNOVATION
Innovation contributes to our customers’
growth and our own growth. We focus on
market-led and technology-driven innovation,
to move up the ingredients value chain
and deliver well researched patented or
branded products.
STRONG CUSTOMER RELATIONSHIPS
Customer and consumer insights are key to
maintaining and growing strong and enduring
relationships. In B2B, we seek to grow the
potential of these relationships further and
in B2C our objective is to continue to grow
global branded revenue.
29
Strategic report
Group Managing Director’s review
WELL POSITIONED TO DELIVER
OUR STRATEGY
“We made good progress in our strategic
priorities in 2014, building on our track record
of delivery. This puts us in a strong position
for further growth in 2015 and beyond.”
Siobhán Talbot
Group Managing Director
2014 STRATEGIC HIGHLIGHTS
• Delivery of 2014 adjusted earnings per share and
return on capital employed targets;
• Successful execution and integration of the Isopure
and Nutramino acquisitions in our performance
nutrition brand portfolio;
• Approval and commencement of significant
organic capital investment programme within Global
Ingredients, which will add value to our existing whey
stream in the USA;
• Delivery of the Total Group capital investment
programme, on time and on budget, which includes
a significant Associate investment in new dairy
processing facilities in Ireland;
• Strong innovation execution with an exciting array
of ingredients, products and technology solutions
developed; and
• Launch of major employee engagement initiatives.
See page 28 for more about our strategy
See pages 38 to 49 for more about our operations
and our people
HOW DID GLANBIA PERFORM IN 2014?
We had a good year overall. We made strong progress
in delivering our strategic priorities and this enabled us
to achieve our earnings per share (EPS) and return on
capital employed targets. Adjusted EPS was up 10.1%,
constant currency, just ahead of our target range
of 8% to 10%. Return on capital employed was 13.4%,
well ahead of our target of achieving in excess of 12%.
These are the strategic financial targets we set ourselves
and outlined last year as part of our five year strategic
ambitions to drive global growth in our business. As the
Group Chairman has outlined, in 2014 we achieved good
revenue and EBITA growth. Total Group EBITA margin
grew 10 basis points to 7.0%, with a stronger performance
in our wholly-owned businesses where EBITA margin
grew 30 basis points to 8.2%.
WHAT WAS THE MAIN DRIVER OF RESULTS?
Global Performance Nutrition (GPN) was the key driver
of results for the Group. GPN had a strong performance
and revenue in this business segment grew 13.5%,
constant currency. EBITA margin expanded 120 basis
points delivering a 26.0% increase in EBITA, constant
currency. There was some market elasticity in response
to price increases implemented in the second quarter of
2014. However our sustained investment in our brands
allied with the strength of our global approach delivered
branded revenue growth, which is a core strategic
priority for this business, of 11.1% (excluding acquisitions)
for the full year. We were also pleased with the margin
progression in GPN, reflecting in part the major
investment we have made in manufacturing facilities
which is now beginning to deliver cost efficiencies.
30
Glanbia plc 2014 Annual Report and Accounts
Thank you to Liam Herlihy
In October 2014, Liam Herlihy, our Group Chairman,
announced his intention to retire at the AGM in May
2015. Liam joined the Board of Glanbia in 1997, became
a Vice-Chairman four years later and was appointed
Group Chairman in 2008.
During his tenure Glanbia plc has been transformed
and Liam’s depth of experience and knowledge of
the Group has provided strong and focused Board
leadership. Key international highlights include the
development of the Global Performance Nutrition
business and the major growth in the Group’s global
platforms, which now represent over 77% of Total Group
EBITA. In Ireland, Liam was pivotal in the formation of
Glanbia Ingredients Ireland in 2012, unlocking significant
value for all stakeholders and enabling the expansion
of dairy processing.
Liam has made an enormous contribution to Glanbia
overall and on behalf of myself and the Board I would
like to thank him sincerely and to wish him and his family
the very best for the future.
ARE THERE ANY OTHER MAJOR PROJECTS
ON THE HORIZON?
We have a significant annual strategic capital investment
programme, which amounted to over €230 million in
the last three years, and we have a further €90 million
planned in 2015. The main focus of this investment is the
second phase of the new manufacturing facilities in GPN
bringing the total cost to $75 million and the completion
and commissioning of the $85 million capacity expansion
in Global Ingredients.
We are also very pleased with the progress of the new
dairy facility in the Glanbia Ingredients Ireland business,
which is our 40:60 partnership with Glanbia Co-operative
Society Limited. Located in Belview, Co Kilkenny, this
€150 million plant will be officially opened in March 2015,
on time and on budget. With a milk quota regime in
existence in the EU since 1984, the post quota era from
April 2015 represents a significant strategic opportunity
for the Irish dairy industry. As a measure of our confidence,
we announced a further investment of €35 million to
further enhance the new site and to produce added
value ingredients for the infant formula market.
HOW DID GLOBAL Ingredients PERFORM?
Along with GPN, Global Ingredients is a global growth
platform for the Group. This business segment had a
satisfactory performance for the year, although results
were marginally behind 2013. While revenue in Global
Ingredients grew 9.3%, constant currency, EBITA
declined 1.4%, constant currency, and EBITA margin
dropped 100 basis points to 8.5%. It was a difficult
operating environment during the year and this resulted
in lower volumes and higher milk input costs in our
US Cheese and Ingredient Technologies businesses.
The teams responded well to these challenges and
our ongoing focus on adding value to our portfolio
and ruthless attention to costs minimised the negative
consequences of the challenging external conditions.
Customised Solutions, which is the third business unit
in Global Ingredients, delivered a good performance
in the year with revenue and margin growth.
DID DAIRY IRELAND RECOVER AS EXPECTED?
Yes, I am pleased to say that as planned, Dairy Ireland
delivered an improved performance in 2014, compared
with a weak 2013. Despite a difficult market environment
for a number of years, we have continued to invest in
this business segment to ensure the long-term viability
of Consumer Products and Agribusiness. This strategy
delivered in 2014 as the improved performance was
mainly as a result of benefits achieved from cost and
reorganisation initiatives introduced in recent years.
EBITA increased 25.8% with an 80 basis point increase
in EBITA margin, despite a 5.4% decline in revenue.
WHAT ABOUT STRATEGIC JOINT VENTURES
IN 2014?
Joint Ventures & Associates’ performance declined due
largely to a deterioration in dairy markets in the second
half of the year which impacted EBITA and EBITA margin,
down 7.6% and 60 basis points respectively, constant
currency. The business models that we operate with our
Joint Venture & Associate partners continue to operate
well and we remain ambitious for the future development
of these businesses.
WHAT STRATEGIC PROGRESS DID YOU
MAKE IN 2014?
Glanbia’s total investment in capital expenditure was
€116 million in 2014 of which €73 million was strategic
investment, reflecting our ongoing focus on the organic
growth potential of the business. The key projects
undertaken in 2014 include the commissioning of a new
production facility in Global Performance Nutrition in the
USA, significant investment in high end whey processing
also in the USA in Global Ingredients and completion of
a plant in Dairy Ireland to produce long-life milk for export
markets. We also completed two exciting acquisitions
during the year for a total cost of €149 million. Nutramino
Holding ApS (“Nutramino”) is a leading Scandinavian
sports nutrition business with operations in Denmark,
Sweden and Norway, and The Isopure Company, LLC
(“Isopure”) is a US based provider of premium branded
sports nutrition products. These are great brand
additions to our Global Performance Nutrition brand
family and we now have five iconic brands – three global
in ON, BSN and Isopure and two regional in Nutramino
and ABB.
www.glanbia.com
31
Strategic report
Group Managing Director’s review continued
HOW ARE MARKET CONTEXT AND TRENDS
SHAPING YOUR BUSINESS?
As a global business we constantly monitor currency
and commodity movements. Like many businesses
today relative currency movements, particularly the US
dollar, are of particular note. While a stronger US dollar
is positive from the context of our reported results, we
are conscious of the potential impact that a stronger US
dollar can have on the purchasing power of consumers
for our performance nutrition products in certain
international markets. In addition, while in recent years
we have increasingly de-risked our overall performance
from movements in global dairy markets, we remain
very aware of the potential impact of relative prices in
dairy commodities and the management of the margin
dynamics across our businesses. These shorter-term
management issues are more than offset by the
longer-term positive market trends in food and nutrition,
which underpin the growth potential of our two global
growth platforms and our strategic priorities as a business.
WHY IS INNOVATION IMPORTANT IN
THE SECTOR?
Innovation is a key growth agenda in the food industry.
The ultimate challenge and opportunity for Glanbia is
to ensure that our innovation is market insight-led and
technology driven. Consumer trends continuously evolve
and it is crucial that as an organisation we remain
responsive to the needs of our customers and ultimately
our consumers. We also believe there is a real opportunity
to enhance the partnerships we have with key customers
to identify how we can jointly best address and respond
to consumer trends. In 2014, we delivered a number
of key product innovations and renovations and we are
aiming to take the innovation agenda in Glanbia to the
next level as part of our 2014 to 2018 strategic plan.
WHERE ARE YOUR GROWTH OPPORTUNITIES?
The growth profile of Glanbia will continue to be a blend
of organic growth through innovation and strategic capital
investment and growth through the execution of
‘step-out’ development opportunities. These ‘step-out’
opportunities will either be significant expansions of our
geographic footprint or strategic acquisitions or alliances
that add to our portfolio.
We have an active acquisition and development pipeline
and our main focus is to enhance our brand portfolio
in Global Performance Nutrition and the capabilities
and assets of Global Ingredients. We also remain open
to and will continue to evaluate strategic partnerships or
alliances. We currently have debt capacity of approximately
€250 million and we could seek to increase this by
way of additional equity for the right strategic growth
opportunity, something we believe would receive good
support from our Board and shareholders.
WHAT IS THE OUTLOOK LIKE FOR 2015?
In terms of our operations, we believe that the prospects
are positive for Global Performance Nutrition for 2015.
While we are trailing very strong prior year revenue growth
for the first half, we aim to continue to deliver growth in
branded revenue ahead of the market for the full year
in 2015. We are targeting an improved performance
for Global Ingredients in 2015 as some of the external
dynamics that shaped its performance in 2014 have
improved. We expect continued earnings progression
in Dairy Ireland with a focus on margin management
and cost containment. Joint Ventures & Associates are
expected to deliver a performance broadly in line with
2014 as dairy market conditions stabilise.
total group revenue
total group ebita
total group ebita
15%
28%
18%
€3.5bn
21%
33%
8%
15%
8%
€245m
€245m
41%
Global Performance Nutrition
41%
Global Ingredients
36%
36%
total group employees
27%
25%
5,815
20%
28%
Global Performance Nutrition
Global Performance Nutrition
Dairy Ireland
Global Performance Nutrition
Global Ingredients
Dairy Ireland
Global Ingredients
Joint Ventures & Associates
Global Ingredients
Dairy Ireland
Dairy Ireland
Joint Ventures & Associates
Joint Ventures & Associates
Joint Ventures & Associates
32
Glanbia plc 2014 Annual Report and Accounts
WHAT ARE THE LONGER-TERM PROSPECTS
FOR THE BUSINESS?
Last year we stated a five year ambition to 2018 to deliver
organic growth in adjusted earnings per share of between
8% and 10%, constant currency, with an overall return on
capital employed target in excess of 12%. We delivered
well against these targets in 2014 and we are restating
our ambition to continue this annual rate of growth and
return on capital employed for the next four years to
2018. Overall, I believe our broad portfolio and global
footprint means Glanbia is well placed to take advantage
of the growth opportunities presented by the macro
trends that continue to shape the global market
environment for food and nutrition.
WHAT ARE YOUR PERSONAL PRIORITIES
FOR GLANBIA?
Last year, which was my first year as Group Managing
Director, I said that one of my personal goals was to
put a renewed focus and energy around employee
engagement and development during my tenure.
In the second quarter, I and some of the Executive
team did a Group-wide roadshow. This was to meet as
many employees as possible, to get their perspective on
Glanbia and to generate commitment for our ambitious
growth plans. This created some wonderful goodwill
and momentum around greater employee engagement,
which we have called ‘Our Glanbia’.
Sustained employee engagement is a long-term
commitment for the business. We also have some
critical initiatives underway. These include a ‘Purpose,
Vision and Values’ project, a Group-wide employee
survey and the phased launch of a Group-wide intranet.
Over 5,800 people work in Glanbia in 34 countries.
I would like to thank them all, new recruits and old hands,
for their work in 2014. It has meant that Glanbia delivered
another strong set of results and positions us very well
for further growth and delivery of our strategic objectives
for the years ahead. Our people and their contribution
and commitment drive our success as a business.
Siobhán Talbot
Group Managing Director
‘OUR Glanbia’
‘Our Glanbia’ is the name of the Group’s new employee
engagement initiative launched in 2014, the objective
of which is to give employees a real opportunity to
engage locally with their business unit and with the
wider global business.
See page 44 for more about our people
www.glanbia.com
33
Strategic report
Group Finance Director’s review
STRONG Profit AND CASH
FLOW GROWTH
Glanbia had a good financial performance in 2014. Our results
were strong with increases in revenue, EBITA and EBITA margin,
continuing the positive growth trend of recent years. This
performance enabled us to achieve our core strategic financial
targets with 10.1% growth in adjusted EPS, constant currency,
and 13.4% return on capital employed. We also performed
well in the other KPIs used to measure the longer-term financial
health of the business. Along with our good financial results
we announced a 10% increase in our dividend.
INCOME STATEMENT
Wholly owned revenue increased 6.4% (6.6% reported)
to €2.5 billion (2013: €2.4 billion). EBITA grew by 11.1%
(11.1% reported) to €208.6 million (2013: €187.7 million).
EBITA margin increased by 30 basis points to 8.2%.
Net financing costs decreased by €2.7 million to €20.3 million
(2013: €23.0 million), the interest reduction arising from the
repayment of €39 million cumulative redeemable preference
shares during the year and capitalisation of interest related
to our capital expenditure programme. The Group’s average
interest rate for the period was 4.4% (2013: 5.1%). Glanbia
operates a policy of fixing a significant amount of its interest
exposure, with 70% of projected 2015 debt currently
contracted at fixed rates for 2015.
The 2014 pre-exceptional tax charge increased by €3.6 million
to €28.3 million (2013: €24.7 million). This represents an effective
rate, excluding Joint Ventures & Associates, of 17.0%
(2013: 17.2%).
The Group’s share of results of Joint Ventures & Associates
decreased by €2.8 million to €23.7 million (2013: €26.5 million).
Share of results of Joint Ventures & Associates is an after tax
and interest amount.
We had a somewhat varied performance across our business
segments. The main contributor to Group results was Global
Performance Nutrition, which delivered a very good set of results
with strong increases in EBITA and EBITA margin. Global
Ingredients and Joint Ventures & Associates were impacted
by external market dynamics during the year. Dairy Ireland
improved as expected from a low point in 2013, mainly as a
result of business reorganisation and cost efficiency measures.
“In 2014, we delivered strong profit and
cash flow growth and continued to
drive future growth through acquisitions
and strategic capital expenditure.”
Mark Garvey
Group Finance Director
2014 Financial Highlights
• Revenue growth from wholly owned segments
of 6.4%, constant currency;
• EBITA margin of 8.2% for wholly owned segments;
• Adjusted EPS growth of 10.1%, constant currency,
just ahead of market guidance;
• Return on capital employed of 13.4%, compared
to 14.2% in 2013;
• Operating cash flow of €206 million, up from
€139 million in 2013;
• €222 million spent on acquisitions and strategic
capital expenditure;
• Year-end net debt of €510 million and net debt
to adjusted EBITDA just under two times; and
• Total shareholder return of 16.9%, outperforming
relevant stock market indices.
34
Glanbia plc 2014 Annual Report and Accounts
2014 results summary pre exceptional
€m
Revenue
EBITDA
Depreciation
EBITA
EBITA margin
- Amortisation of intangible assets
- Net finance costs
- Share of results of Joint Ventures & Associates
- Income tax
Profit for the year
2014
2,538.3
240.6
(32.0)
208.6
8.2%
(22.5)
(20.3)
23.7
(28.3)
161.2
Segmental analysis
€m
Global Performance Nutrition
Global Ingredients
Dairy Ireland
Total wholly-owned businesses
Joint Ventures & Associates1
Total Group
Revenue
746.2
1,175.4
616.7
2,538.3
984.0
3,522.3
2014
EBITA
89.2
100.4
19.0
208.6
36.4
245.0
EBITA margin
12.0%
8.5%
3.1%
8.2%
3.7%
7.0%
2013
2,382.1
214.6
(26.9)
187.7
7.9%
(21.0)
(23.0)
26.5
(24.7)
145.5
Revenue
655.3
1,074.6
652.2
2,382.1
900.5
3,282.6
Change
+6.6%
Constant
currency
change
+6.4%
+11.1%
+11.1%
2013
EBITA
70.6
102.0
15.1
187.7
39.0
226.7
EBITA margin
10.8%
9.5%
2.3%
7.9%
4.3%
6.9%
2014
Joint Ventures & Associates – Reconciliation of EBITA
to share of results
€m
EBITA of Joint Ventures
& Associates1
Amortisation
Finance costs
Income tax
Share of results as reported
in the Income Statement
36.4
(0.4)
(5.3)
(7.0)
23.7
39.0
(0.3)
(4.2)
(8.0)
26.5
2013
ADJUSTED EARNINGS PER SHARE
Total adjusted earnings per share grew 10.1% (10.3% reported),
driven by growth in EBITA. Adjusted earnings per share is
believed to be more reflective of the Group’s underlying
performance than basic earnings per share and is calculated
based on the net profit attributable to equity holders of the
parent before exceptional items and amortisation of intangible
assets, net of related tax.
1. Glanbia’s share
Investor Relations
During 2014 we continued to build upon our engagement
with investors. Our research coverage has grown to nine
institutions, up from seven in 2013. For the first time we
were invited to the Consumer Analysts Group of Europe
conference in London. We also attended other leading
investment bank conferences and roadshows in the
USA and Europe. We presented bi-annual updates
to the Council and Regional Committees of Glanbia
Co-operative Society Limited, our largest shareholder,
and we also presented at over ten capital markets
conferences and met with over 250 market participants.
In addition, we hosted a successful Capital Markets Day
in Aurora, Illinois focused on our Global Performance
Nutrition business which was attended by representatives
from over 25 institutions. We took the opportunity to
showcase our new state-of-the-art facility. In addition
investors had the opportunity to hear from our Global
Performance Nutrition senior management team
covering sales, marketing, operations and consumer
insights. In 2015 our dedicated Investor Relations team
will continue to work on building awareness of Glanbia
with additional focus on the US investor community.
www.glanbia.com
35
Strategic report
Group Finance Director’s review continued
Exceptional items
€m
Rationalisation costs1
Transaction related costs2
Revision to Group pension
schemes
Exceptional (charge)/credit
pre-tax
Taxation credit/(charge)
Total exceptional
(charge)/credit
2014
(6.4)
(9.6)
–
(16.0)
1.9
(14.1)
2013
(8.0)
–
13.8
5.8
(0.3)
5.5
2014 exceptional items resulted in an exceptional charge of
€14.1 million for the year, compared to a €5.5 million credit
in 2013. Details of the 2014 exceptional items are as follows:
1. Rationalisation costs amounting to €6.4 million were
incurred in Dairy Ireland during the year as both Consumer
Products and Agribusiness continued their rationalisation
programmes. The costs primarily relate to redundancy
and a related writedown of tangible assets of €3.2 million.
We expect to complete these programmes in 2015 with
a cost of approximately €12 million for the year.
2. Transaction related costs comprise:
(i) €3.1 million related to acquisition activities that did not
come to fruition. The primary costs incurred were legal,
taxation, due diligence, other consultancy and loan
facility fees.
(ii) The Group acquired Nutramino Holding ApS
on 17 January 2014 (see note 36 to the financial
statements). The fair value of the contingent consideration
at that date was €4.8 million based on management’s
forecast EBITDA for the business. Following a better than
anticipated performance since acquisition, an additional
earnout of €6.5 million is payable. In accordance with
IFRS 3 – Business Combinations, any subsequent increase
in contingent consideration to that estimated at the
acquisition date must be charged to the Income Statement.
The pre-tax cash cost of exceptional items in 2014 was
€16.4 million (€3.0 million in 2013).
DIVIDEND PER SHARE
The Board is recommending a final dividend of 6.57 cents
per share (2013: final dividend 5.97 cents per share). This
represents an increase of 10% in the year and brings the total
dividend for the year to 11.0 cents per share (2013: 10.0 cents
per share).
CASH AND WORKING CAPITAL
During 2014 we increased our focus on working capital and
initiated programmes to improve management of inventory
as well as payables and receivables. On inventory we have
implemented improved sales and operations planning
processes Group-wide. We plan to review the results of this
programme regularly and look for continuing improvements.
In addition, we performed a best practice benchmark review
of our payables and receivables practices and have identified
a number of improvement opportunities which we will begin
implementing in 2015.
At the end of 2014 our working capital was €252 million, in
line with the prior year, constant currency, and compares to
significant increases in the prior two years. While we expect
that working capital may increase as the Group continues
to grow, our goal is to have working capital grow at a slower
pace than revenues.
Overall free cash flow was €153 million in 2014, a strong increase
from €88 million in 2013 and €65 million in 2012. Operating cash
flow increased from €139 million in 2013 to €206 million.
Summary cash flow
€m
EBITDA pre exceptional
Working capital movement1
Business sustaining capital
expenditure
Operating cash flow
Net interest and tax paid
Dividends from Joint Ventures
Other outflows
Free cash flow
Strategic capital expenditure
Acquisitions/disposals
Equity dividends
Exceptional costs paid1
Loans repaid by Joint Ventures
Cash flow pre currency
exchange/fair value
adjustments
Currency exchange/fair value
adjustments
Movement in net debt
in the year
Net debt at the beginning
of the year
Net debt at the end of the year
2014
240.6
8.2
(42.6)
206.2
(57.1)
12.6
(9.1)
152.6
(72.9)
(137.4)
(30.8)
(16.4)
–
(104.9)
(31.1)
(136.0)
(374.4)
(510.4)
2013
214.6
(39.9)
(35.7)
139.0
(55.8)
10.9
(6.5)
87.6
(76.5)
8.5
(27.9)
(3.0)
7.2
(4.1)
6.3
2.2
(376.6)
(374.4)
1. Exceptional costs paid includes €10.8 million relating to movements in
provisions for exceptional items, which are included in the change in net
working capital in note 35 to the Financial Statements.
INVESTING FOR GROWTH
In 2014, we continued our programme of organic and external
investments to drive growth, investing €222 million on
acquisitions and strategic capital expenditure programmes.
We completed two acquisitions in the Global Performance
Nutrition segment during the year – Nutramino in Scandinavia
for €21 million plus €7 million additional earnout and Isopure
in the USA for €121 million. Both will add further geographic
reach and additional consumers to the segment and are
strong additions to our portfolio of brands.
We announced the expansion of high end whey processing
and lactoferrin capacity by Global Ingredients in Idaho, which
we expect to complete in late 2015. In addition, we opened our
new manufacturing facility for Global Performance Nutrition in
Chicago. Strategic capital expenditure amounted to €73 million
in 2014. We are guiding total capital investment of between
€120 million and €130 million in 2015.
36
Glanbia plc 2014 Annual Report and Accounts
Financing capability
We have considerable financing capacity available to continue
to invest in growth opportunities in 2015. We currently have
additional debt capacity of approximately €250 million and we
would have the ability to raise additional funds through the use
of equity should the need arise, something we believe would
be supported by our Board and shareholders.
Financing key performance indicators
Net debt: adjusted EBITDA1
Adjusted EBIT1: net finance cost
2014
1.97 times
8.9 times
2013
1.66 times
7.8 times
PRINCIPAL RISKS AND UNCERTAINTIES AFFECTING
THE GROUP’S PERFORMANCE IN 2015
The performance of the Group is influenced by global
economic growth and consumer confidence in the markets in
which it operates. In 2015 the principal risks and uncertainties
affecting the Group’s performance are:
• The competitive landscape for Global Performance
Nutrition, recognising the impact of a stronger dollar
on the purchasing power of consumers in certain
international markets;
• The overall impact on margins of movements in dairy
pricing, particularly in whey markets; and
1. The definition of adjusted EBITDA and adjusted earnings before interest
and taxation (EBIT) are as per our financing agreements and include
dividends from Joint Ventures & Associates.
• The potential impact of geopolitical unrest and macro-
economic uncertainty on our international growth strategy.
GROUP FINANCING
The Group’s financial position continues to be strong. Net debt
at the end of 2014 was €510 million. This is an increase from
€374 million in 2013 and can be primarily attributed to funding
the two acquisitions completed during the year as well as the
impact of a stronger dollar at year end on translation of our US
dollar debt. Net debt to adjusted EBITDA was just under two
times and interest cover was 8.9 times, both metrics remaining
well within our financing covenants. During the year we
refinanced and increased our committed bank facilities which
will result in lower financing costs. As at year end we had bank
facilities of €713 million which will mature in January 2020 and
private placement debt of $325 million which will mature in
June 2021. During the year cumulative redeemable preference
shares of €39 million were repaid.
RETURN ON CAPITAL EMPLOYED
The return on capital employed has decreased by 80 basis
points to 13.4% from 14.2% in 2013 due to acquisitions and
strategic capital expenditure in 2014, as returns from these
investments will build over time. The Group operates to an
internal hurdle rate of 12% post tax, by year three, and
monitors investment decisions against this metric.
PENSION
The Group’s net pension liability under IAS 19 (revised)
‘Employee Benefits’, before deferred tax, increased in 2014 by
€36.8 million to €114.8 million (2013: €78 million). This increase
primarily relates to the decrease in the discount rate used in
valuing the net pension obligation, from 3.6% at the end of
2013 to 2.1% at end of 2014 for the Irish schemes, reflecting
the fall in AA corporate bond yields during the year.
DELIVERING RETURNS TO SHAREHOLDERS
The past year was another strong year for shareholder returns.
Total shareholder return for the year was 16.9%, following 35.4%
in 2013. The Glanbia share price at the end of the financial year
was €12.81 compared to €11.05 at the 2013 year end. The
share price outperformed the STOXX Europe 600 Food and
Beverage Index by 3.2% in 2014.
The Board has the ultimate responsibility for risk management,
and the principal risks and uncertainties are outlined in more
detail in pages 50 to 57 of this report.
FINANCIAL STRATEGY
Our financial strategy is very much aligned with the Group’s
overall strategy of ensuring we deliver on our key financial goals
of organic adjusted EPS growth, constant currency, of 8% to
10% per annum while maintaining a minimum return on capital
employed of 12%.
Specific financial goals to enable our strategy include:
• Assessing both external and organic investment
opportunities against a minimum benchmark of 12%
return post tax by year three;
• Focusing the organisation on cash conversion through
improved working capital management and moderate
business sustaining capital expenditure;
• Leveraging the Group’s activities to enable improved
cost structures utilising shared services, procurement,
Information Technology, and a continuous improvement
mindset; and
• Maintaining overall debt levels below a target net debt
to adjusted EBITDA ratio of 3.0.
Mark Garvey
Group Finance Director
See page 28 for more about our strategy
See page 38 for more about our operations
See page 50 for more about risk management
www.glanbia.com
37
Strategic report
Operations review*
Global Performance Nutrition
Global Performance Nutrition (GPN) is the number 1 global
performance nutrition brand family, with three global brands –
Optimum Nutrition, BSN and Isopure – and two regional brands
– Nutramino and ABB. GPN produces the full range of
performance nutrition products including protein, pre-workout,
muscle gainers and general health. Products are sold through
a variety of channels including specialty retail, the internet and
gyms in a variety of formats including powders, bars and
Ready-to-Drink beverages. GPN has a global footprint with
an in-market presence in 23 countries.
Revenue
€746.2m
2013: €655.3m
EBITA
€89.2m
2013: €70.6m
€m
Revenue
EBITA
EBITA margin
Reported
2014
746.2
89.2
12.0%
2013
655.3
70.6
10.8%
Change
+13.9%
+26.3%
+120bps
Constant
currency
change
+13.5%
+26.0%
+120bps
“We delivered a strong performance in
2014, with very good branded revenue
growth, market leading innovation, ongoing
focus on specialty and internet channels
and further international expansion.”
Hugh McGuire
Chief Executive Officer,
Global Performance Nutrition
2014 PERFORMANCE
Global Performance Nutrition delivered a strong performance
in 2014. Revenues increased 13.5% to €746.2 million reflecting
volume growth of 7.4%, impact of acquisitions of 5.0% and
net pricing of 1.1%. EBITA increased 26.0% in the period
and EBITA margins increased 120 basis points to 12.0%.
The improvement in margins reflected operating leverage
and improved manufacturing efficiencies associated with
the new production facility in the USA, partially offset by
continued investment in expanding the business.
Branded revenue growth, excluding the impact of acquisitions,
was 11.1% in 2014. Second half revenue growth was lower than
the first half, due to some demand elasticity experienced in the
third quarter following the implementation of price increases.
In 2014, branded revenue grew across all key geographies
with our international business outside the USA continuing
to perform strongly. With a direct presence in 23 markets
worldwide our focus is now on strengthening our position in
those markets and we will continue to invest to achieve this.
ONGOING INVESTMENT
The acquisition of Nutramino and Isopure during the year
further consolidated our position as the global leader in
performance nutrition. Both acquisitions complement and
extend our existing market leading brand portfolio, bringing
our total number of performance nutrition consumer brands
to five, including three global and two regional brands.
Nutramino provides access to the Scandinavian market and
offers the potential to distribute its Ready-To-Drink (RTD) and
bar offering to other European markets.
* Commentary is on a constant currency basis throughout the
operations review
38
Glanbia plc 2014 Annual Report and Accounts
Global performance nutrition mission
Our mission is to inspire people everywhere to achieve their performance goals.
We will achieve this by becoming their trusted partner through education, advocacy,
quality and authenticity.
See page 8 for more about our markets
Isopure focuses on powders and RTDs and increases our
relevance to lifestyle consumers in the USA as well as having
future international growth potential. Both businesses are
performing in line with expectations and the integration
process for each business is progressing well.
The first phase of our new state-of-the-art manufacturing
plant in Illinois, USA was successfully commissioned in
May 2014. The second phase, bringing the total cost to
approximately $75 million, will be commissioned in 2015
and will provide the additional capacity required to support
our growth targets for the next three to four years.
DIGITALLY CONNECTED
Our goal is to create brand advocates who build brand
advocates. This extends our connection with existing consumers
and our reach to new consumers for our products; building
lifetime and lifestyle relationships. We live in a digital world and
our consumers expect to be digitally connected. Our growing
social media presence is both an ongoing, two-way conversation
and a means for consumers to connect and build communities
around sport and performance nutrition.
We also use the science of listening to enhance our engagement
with our consumers and to provide competitive insight for
brand innovation and product renovation. The final way we
connect with our consumers is through our Ecommerce
business. We have invested in geographic expansion of our
online shop presence and we have US and other international
Ecommerce sites, primarily in Optimum Nutrition and BSN.
In 2014, we significantly grew our digital footprint and our digital
ecosystem is one of, if not, the strongest in the sports nutrition
sector. Our YouTube total views grew almost 16 million to
approximately 45 million views during the year. We have more
than doubled our Facebook ‘likes’ to 2.6 million and our Twitter
and Instagram profiles continue to grow. Digital is a powerful
tool for our business and it has immense potential for how
we engage with our consumers, today and into the future.
LEAD WITH INNOVATION
In 2014, we continued to innovate and renovate our portfolio
based on consumer and category insights. There were a
number of exciting developments including the expansion
of ON’s flagship Gold Standard brand into a new category
with the launch of Gold Standard Pre-Workout; creating new
protein occasions with the launch of ON Protein Energy; and
the launch of the next generation of BSN’s N.O.-XPLODETM
pre-workout supplement, which represented our first
synchronised global product launch.
2015 OUTLOOK
The outlook for GPN in 2015 is positive. The strength of our
brand portfolio and our proactive approach with regard to
innovation and marketing initiatives will enable us to remain
in a strong position. The performance nutrition market remains
competitive and the strengthening of the US dollar has the
potential to impact demand in some international markets.
We expect some continued operational leverage upside
through 2015 although this will be partially offset by our
ongoing investment in expanding the business. We continue
to target growth in branded revenue ahead of the market,
while we note that given the strong performance during the
first half of 2014, this growth will be weighted towards the
second half of the year.
LEADERS IN EDUCATION
GPN prides itself on being able
to educate its staff and customers
through its Sports Nutrition School
(SNS). In 2014, the SNS hosted
events in nine different countries
with over 5,000 participants.
Key events included:
• Visits to five major cities in India,
reaching over 800 key influencers;
• The first ever formal sports nutrition education
programme conducted in Beijing and Shanghai
in China; and
• Four days of intensive training in Manila in the
Philippines for leading customers in retail, gyms
and online.
We define sports nutrition as the study (science) and
practice (application) of nutrition and diet (supplements)
as it relates to athletic performance (fitness). We
recognise through the SNS programme that different
sports require different approaches and, in particular,
that the correct diet is the first source of nutrition for
athletes with sports nutrition providing supplements
to help individuals or teams achieve performance
goals and fitness levels.
SNS events typically cover topics such as ‘nutrition 101’,
our brands, best practice training techniques, sports
psychology and motivation, understanding product
labelling and learning about our product offering, as
well as live training sessions and guest athlete speakers.
www.glanbia.com
39
Strategic report
Operations review continued
Global Ingredients
Global Ingredients comprises US Cheese, Ingredient Technologies
and Customised Solutions. While these business units are distinct,
all benefit from the ever increasing focus on health and nutrition
and share relationships with common global customers and
end-markets. Global Ingredients has a direct presence in 21
countries worldwide. In addition to US based manufacturing
facilities, both US Cheese and Ingredient Technologies have
numerous international sales & technical offices supporting
strong export platforms. Customised Solutions has manufacturing
facilities in the USA, Europe and Asia and sales teams in 17
countries worldwide.
Revenue
€1,175.4m
2013: €1,074.6m
EBITA
€100.4m
2013: €102.0m
€m
Revenue
EBITA
EBITA margin
Reported
2014
1,175.4
100.4
8.5%
2013
1,074.6
102.0
9.5%
Change
+9.4%
-1.6%
-100bps
Constant
currency
change
+9.3%
-1.4%
-100bps
“We achieved a satisfactory performance
in the context of challenging dairy markets
which impacted milk procurement and
whey pricing dynamics. We made further
progress with our innovation agenda and
commenced an exciting $85 million
organic investment programme.”
Brian Phelan
Chief Executive Officer,
Global Ingredients
2014 PERFORMANCE
Global Ingredients delivered a satisfactory performance in 2014
in the context of challenging dairy markets which impacted milk
procurement and whey pricing dynamics. Revenues increased
9.3% to €1,175.4 million reflecting market related price increases
of 10.9% which were partially offset by a volume decline of
1.6%. EBITA decreased 1.4% arising from a decline in margins
in our US Cheese and Ingredient Technologies business units.
US Cheese
US Cheese performance for 2014 was satisfactory. Revenue
growth was strong as the impact of higher average market
pricing more than offset a decline in volumes related to
challenging milk procurement conditions experienced earlier
in the year.
The milk supply environment improved from quarter two
onwards in 2014 with plants broadly operating at full capacity
in the fourth quarter. Price changes and the impact of efficiency
measures taken across the business partially offset higher
input costs, resulting in margins for the period that were
somewhat behind the prior year.
Our plants had a strong operational performance in 2014.
Good progress was made during the year at our Cheese
Innovation Centre in Idaho, enabling us to strengthen our
innovation agenda with our key customers. In addition,
our organic cheese initiative launched in 2014 is gaining
momentum and represents an exciting opportunity for
all participants in the supply chain.
40
Glanbia plc 2014 Annual Report and Accounts
Ingredient Technologies
Ingredient Technologies had a challenging performance in
2014 as positive revenue growth was more than offset by a
decline in margins. This margin decline was driven primarily
by the relative price of base whey (which drives input costs)
to high end whey selling prices.
Ingredient Technologies continues to focus on market-led
collaborative innovation and our pipeline remains strong.
Our $85 million high end whey and lactoferrin capacity
expansion projects in Idaho, USA are progressing well and
are expected to be fully commissioned by the end of 2015.
The projects involve installation of the technology to convert
our existing whey protein concentrate 34 (WPC34) stream
into value added whey powders. As well as increasing whey
protein isolate capacity, it will also allow us to expand our
higher margin whey-based ingredient systems offering,
which focuses on attractive end markets such as sports
nutrition, supplements, nutritional bars and beverages.
The investment programme also incorporates increasing
our lactoferrin capacity. Lactoferrin is a high value specialty
milk protein used in a range of growth sectors including
infant formula, supplements and nutritional beverages.
Both the expansion and the commercial opportunities that
they will provide are underpinned by our long track record
for manufacturing excellence and dairy ingredient innovation.
It is also fully aligned with our strategy of maximising the
value of our whey pool and deriving an ever increasing
portion of revenues from value-added ingredient systems.
Customised Solutions
Customised Solutions delivered a strong performance in 2014
reflecting a combination of positive revenue growth and higher
margins. While the market remained competitive in 2014, we
increased our sales with key existing customers and continued
to further develop our relationships with new customers. We
will continue to invest in our global operational and commercial
footprint to increase our position with our customers.
2015 OUTLOOK
We are expecting an improved performance for Global
Ingredients in 2015. Our strategy of maximising the value
of our ingredient pool in dairy will continue to deliver results.
The high end whey and lactoferrin expansion projects will
begin to contribute in the second half of 2015 with the full
impact coming through in 2016. Milk procurement conditions
and whey price dynamics have improved to date in 2015 and
the underlying demand profile across each of our businesses
remains solid. We expect further progress in the development
of our non-dairy ingredients portfolio in 2015.
SUSTAINABILITY
The Group’s Glanbia Performance System (GPS) is a fully
integrated work system that incorporates industry best
practices that drive operational excellence. We have
rolled out GPS to each of our operational facilities and
it provides the framework to drive down costs, reduce
energy usage, and eliminate waste, among other critical
sustainability criteria.
In 2014, two projects at our Twin Falls, Idaho cheese
plant helped deliver an energy reduction of 6% and
19% respectively. In Richview Idaho, we realised a 9.5%
reduction in overall natural gas usage from more efficient
use of our boilers.
Southwest Cheese in Clovis, New Mexico, also committed
to the Energy Star Challenge in 2010 to reduce energy
usage by 10% in five years. As of the last quarter of 2014
Southwest Cheese has reduced British Thermal Units
per pound of milk processed by a full 16%.
Market-led innovation
There are significant changes in how
consumers meet their nutritional
requirements. This has led to a proliferation
of product formats and driven significant
innovation across the food sector.
As a large global provider of ingredient
solutions, this provides significant
opportunity for Global Ingredients.
See page 8 for more about our markets
www.glanbia.com
41
Strategic report
Operations review continued
Dairy Ireland
Dairy Ireland comprises two business units.
Consumer Products is a leading supplier to
the food retail sector and Agribusiness has
a network of over 50 retail stores focused
on the Irish agri sector.
€m
Revenue
EBITA
EBITA margin
2014
616.7
19.0
3.1%
Reported
Constant
currency
change
-5.4%
+25.8% +25.8%
+80bps
2013
652.2
15.1
2.3% +80bps
Change
-5.4%
2014 PERFORMANCE
Dairy Ireland delivered an improved performance in 2014
driven primarily by Consumer Products. Revenues declined
5.4% reflecting a 2.2% decline in volumes and a 3.2% impact
from lower pricing. An 80 basis points increase in EBITA
margins more than offset the decline in revenues and EBITA
increased 25.8% as a result.
Consumer Products
Consumer Products delivered a positive performance in
the period. While revenues were ahead of the prior year,
performance was driven primarily by higher margins. The key
component of the increase in margins was the impact of the
efficiency initiatives undertaken in recent years, the impact
of which will continue into 2015. While global dairy prices
have been in decline since mid-2014, the average milk cost
for 2014 was broadly unchanged versus the prior year. The
market environment remains challenging both from a retailer
and consumer perspective. In this context, we remain focused
on the optimisation of our brand portfolio in domestic and
international markets as well as operating efficiencies.
Agribusiness
Agribusiness’ performance in the period was satisfactory
in an environment where overall market demand diminished
materially year-on-year. Animal feed sales were impacted by
the very mild weather conditions which prevailed for much
of 2014 and revenues were behind the prior year as a result.
Cost savings associated with the restructuring programme
implemented in 2014 helped to offset the impact of lower
revenues. During the year we opened our food grade oats
mill in Ireland to produce a range of high end products and
ingredients, including gluten free oats, for international markets.
2015 OUTLOOK
The outlook for Dairy Ireland is broadly positive. We expect
both Consumer Products and Agribusiness to see a further
reduction in their cost base in 2015 from the ongoing efficiency
measures being taken across the businesses.
Sustainability
Consumer Products
Consumer Products continues to maintain a successful
ISO 14001 Environmental Management System. This is
a multi-site independently audited accreditation. We are
also the first dairy company in Europe to use only milk
cartons which have been produced from sustainable
forests independently verified by the Forest Stewardship
Council. The introduction of resource surveys for raw
materials, packaging formats and packaging materials
leads to continuous evaluation of these materials with a
view to improving their overall impact on the environment.
This has led to the weight of some product packaging
formats being reduced by 7%. The introduction of
intelligent fuel management systems and route optimisation
programmes into our supply chain has cut carbon
emissions and has reduced engine running time by over
6,500 hours. We are currently recycling 65% of all waste
and in conjunction with our suppliers we are developing
reuse and recycle initiatives, which will enable a further
5% improvement in recycling rates.
Agribusiness
Agribusiness has a number of sustainability initiatives
across its activities, with a focus on efficiency throughout
its fully traceable and quality assured supply chain.
This includes operating two accredited UFAS mills close
to grain growing areas, operating a ‘Lean’ production
programme and using by-products from oat milling
for use in feed production. Plant replacements are
also being switched to more energy efficient models
to continue to reduce energy consumption. Innovative
feed ingredients are being used to limit bovine methane
production and improve feed efficiency. A key part
of the Agribusiness overall sustainability programme is
promoting the use of agricultural farming methods that
have the lowest possible impact on the environment and
are animal friendly.
42
Glanbia plc 2014 Annual Report and Accounts
Joint Ventures & Associates
Glanbia has a strong capability and
track record with regard to the successful
operation of strategic joint ventures and
we view the joint venture model as a
potential option for future growth.
Reported
€m
Revenue1
EBITA1
EBITA margin
2014
984.0
36.4
3.7%
2013
900.5
39.0
4.3%
Change
+9.3%
-6.7%
-60bps
Constant
currency
change
+8.3%
-7.6%
-60bps
2014 PERFORMANCE
After a good performance in the first half of 2014, the Joint
Ventures & Associates segment was impacted by the decline
in global dairy market prices in the second half of the year.
Revenues increased 8.3% driven by a 2.4% increase in
volumes, 5.0% impact from higher pricing, primarily at
Southwest Cheese, and 0.9% impact from a small acquisition
in GII. Despite the increase in revenues, EBITA declined 7.6%
reflecting a 60 basis points reduction in margins.
Glanbia Ingredients Ireland (GII)
GII delivered a satisfactory performance in 2014, whilst facing
a difficult market backdrop. Revenues were slightly ahead
of the prior year as higher volumes and the impact of a small
acquisition in 2014 offset a decline in pricing. Milk input costs
were reduced during the year in response to market conditions,
however the pace and magnitude of the decline in dairy
commodity prices led to a decline in margins.
The investment of €150 million in the milk processing plant
at Belview, Co. Kilkenny, Ireland was completed on time and
on budget. The official opening will take place in March 2015
prior to the removal of EU milk quotas in April 2015. Reflecting
confidence in the future of the Irish dairy sector, GII recently
announced an additional €35 million capital expenditure
investment to further upgrade the Belview site to produce
value added ingredients for the infant formula sector.
Southwest Cheese (SWC)
Revenues for SWC in 2014 were strong as a result of higher
year-on-year cheese market prices in the USA, an excellent
operating performance and record volumes of cheese
produced. There was an overall decline in year-on-year margins
caused primarily by an unfavourable timing effect associated
with the sharp decline in cheese market prices in the last two
months of the year.
Glanbia Cheese
Glanbia Cheese delivered a positive performance in the
year underpinned by growing demand trends across the
European mozzarella market. Revenues increased moderately
as volume growth more than offset the decline in prices. While
mozzarella prices were lower on average in the year, milk input
prices adjusted accordingly and margins increased versus the
prior year.
Nutricima
Nutricima delivered an improved performance in the period
reflecting a combination of revenue growth and improved
margins. The increase in revenues was driven by price and
volume growth. However, the market and political conditions
in Nigeria remain very challenging.
2015 OUTLOOK
Joint Ventures & Associates are expected to deliver a
performance broadly in line with 2014 as dairy market
conditions stabilise.
GII Sustainability
GII exports to over 50 countries worldwide and a key
element of our strategy for engaging with global customers
is to become the industry reference point for best
practice in dairy sustainability. Highlights of GII’s
sustainability initiatives include:
• Being a founding member of Origin Green, which is
the sustainability development programme by Bord
Bia (the Irish Food Board), a nationwide programme
aimed at establishing Ireland as a world leader in
sustainable food and beverage production;
• The launch of the Open Source® Sustainability
Programme, which provides a blueprint for high
quality, sustainable milk production, and making the
most of what gives Ireland a competitive advantage
in sustainable dairy farming and processing;
• Being the first dairy processing company to be
awarded the Carbon Trust triple certification in
recognition of best practice and real achievements
in reduction in carbon emissions, water and waste;
• Becoming members of the Roundtable for
Sustainable Palm Oil, the Sustainable Agriculture
Initiative and the Dairy Sustainability Framework; and
• Being awarded first prize, along with our customer
Diageo, in the B2B category at the Ethical
Corporations’ Responsible Business awards.
1. Glanbia’s share of results of Joint Ventures & Associates
www.glanbia.com
43
Strategic report
Our people
A NEW PERSPECTIVE ON OUR
TALENT STRATEGY
From left:
Ben Smith, Commercial Manager, Ecommerce GPN
Europe, Middle East and Africa; Michael Patten, Group
Human Resources & Corporate Affairs Director;
Niamh O’Sullivan, Digital Media Associate.
We have fundamentally reshaped our organisation in recent
years and as a result we are focusing our resources and capital
allocation on two global growth platforms, bringing further
momentum to our ambitions. This is driving a new perspective
on our talent strategy and employee engagement.
Our goal is to create a shared, cohesive Group-wide culture
with a high performing workforce of engaged employees. Our
opportunity is to build stronger connections across the Group
worldwide, growing our talent, finding better ways of working,
driving more collaboration and successfully executing our
growth strategy, in a very dynamic operating environment.
This goal has shaped key initiatives undertaken in 2014,
particularly in the area of employee engagement, and has
informed our 2015 people priorities. In addition, our Group
Human Resources (HR) leadership team, which is drawn
from all business units, has commenced a global HR strategy
process to ensure that the HR function is fit for purpose to
achieve this goal.
See page 48 for our 2015 people priorities
“We are focused on building a highly
engaged employee population, growing
our leadership and talent base, and
through our people, unlocking enhanced
performance. We want to ensure that
Glanbia is a great company to work for.”
Michael Patten
Group Human Resources &
Corporate Affairs Director
44
Glanbia plc 2014 Annual Report and Accounts
2015 HUMAN RESOURCES PRIORITIES
• A full review of the HR operating model to ensure
the function is meeting our strategic talent goals,
is effective and fit for purpose;
• A review of the HR information systems to ensure
that the technologies and processes necessary
to support our people agenda are best practice;
• Full HR engagement with the reassessment of the
Group’s ‘Purpose, Vision and Values’; and
• A full organisation and people review to inform
the leadership development and talent acquisition
strategies for 2016.
total group employees
27%
25%
5,815
20%
28%
Global Performance
Nutrition
Global Ingredients
Dairy Ireland
Joint Ventures
& Associates
GLOBAL HR AGENDA
To date, Glanbia has operated an effective and successful
HR programme delivering talent recruitment, development
planning, performance management and succession as well
as critical measurement and leadership tracking of key HR
metrics. In late 2014, the Glanbia global HR team commenced
an initiative called ‘understanding our current and future
priorities in 2015 and beyond’. This is with a view to developing
the global HR agenda as an enabler of the Group’s strategy as
well as understanding and prioritising the key people themes
that will have the highest business and HR impact for Glanbia.
The critical areas for review include engagement, talent
management, HR operational excellence and the use and
application of technology in the global HR operating model.
The scope of the project is also addressing external and
internal drivers of HR, regional and industry-specific factors
for consideration and the HR implications of Glanbia’s strategic
priorities up to 2018.
GROWING GLOBAL EMPLOYEE BASE
In 2014, total Group employees, including Joint Ventures &
Associates, increased by 613 people to 5,815 people based
in 34 countries.
Global Performance Nutrition (GPN) employee numbers
increased by 501 people in 2014. Strong business growth
created employment opportunities in our new state-of-the-art
manufacturing plant in Aurora, Illinois, USA. GPN also acquired
Nutramino and Isopure, leading sports nutrition companies
based in Denmark and the USA respectively. Both businesses
are performing well and the integration process for employees
is on track. Global Ingredients, which encompasses US
Cheese, Ingredient Technologies and Customised Solutions,
increased its workforce by 74 people.
In Dairy Ireland, Consumer Products and Agribusiness have
continued to reorganise elements of their activities aimed
at optimising future growth prospects in the context of the
challenging business environment.
BUILDING OUR ORGANISATIONal CAPABILITIES
As the Group continues to grow, the depth, quality and
readiness of our talent is a key factor for future success.
Glanbia has a proud tradition of growing its talent and most
of the senior leadership have spent a large part of their careers
within the Group. Throughout the year, we continued to build
our organisational capabilities through a number of core activities.
Enhanced recruitment processes
We harnessed the growing power of social media to raise our
profile with the millennial generation and attract young talent
to the business. We focused considerable attention in 2014
on emerging talent recruitment to secure and develop the
long-term potential of top talent for the business.
Glanbia graduate programme
During the year 47 graduates joined Glanbia through the
graduate programme, with opportunities to develop their
careers in the areas of finance, business management,
engineering, IT, sales, marketing and supply chain. Many
are given the opportunity of global work placements and
assignments. We also continued to invest in role specific
training and development for graduates, including professional
qualifications, project management certification and leadership
skills. We maintain a commitment to continuous on-the-job
coaching and mentoring for all graduates, maximising the
benefits of this programme. In 2014, 85% of graduates from
the prior programme in 2012 achieved fulltime roles with the
Group. We expect a further 65 graduates to join in 2015,
all taking up the challenge of our new ‘Pure Ambition’
graduate programme.
Find out more online at
glanbia.com/careers/graduate-programme/
www.glanbia.com
45
Strategic report
Our people continued
Employee training and education
Glanbia offers ongoing training and education opportunities for
employees. GPN partnered with Alchemy to provide employees
with web-based training. Alchemy has over 70 courses
focusing on the food industry and also creates customised
courses that are GPN-specific. Global Ingredients (GI) also
offers a number of training courses including a management
training course, a future leader programme specifically
designed for plant employees and a leadership development
programme designed for team leaders. Over 950 GI employees
attended a range of leadership and personal development
courses in 2014, all aimed at enhancing personal, team and
leadership effectiveness and inspiring innovative thinking and
work practices. In Dairy Ireland, Agribusiness run an internal
leadership development programme called ‘Accelerate’.
25 newly appointed leaders participated in the programme
in 2014. Consumer Products also continues to invest in
training and up-skilling. A range of courses are provided for
senior managers ranging from behavioural and leadership
development to finance and resilience training, plus some
function-specific bespoke courses.
Management development
The Glanbia management development programme is held
annually for high potential managers in the Group. The Group
also hosts an annual global management conference for the
top 100 senior leaders from around the world. In 2014 the
focus of the conference was on the Group’s growth strategy
and the key actions essential to deliver the identified
opportunities, in addition to the ‘Our Glanbia’ employee
engagement programme.
Performance management
Performance and reward management processes are key
tools to support continued high performance. Glanbia has
strong, proven systems in place. We will continue to enhance
these systems and processes to deliver the best possible
engagement between managers and their teams around
performance and development and to ensure that reward
is optimally aligned with performance outcomes.
HEALTH & SAFETY AND EMPLOYEE WELLBEING
We aim to provide our employees with a safe and healthy
environment in which to work. All Glanbia business units
maintained an excellent Health & Safety (H&S) performance
during the year and highlights for 2014 were:
• GII’s Ballyragget plant received OHSAS 18001 certification,
which sets out the requirements for occupational health
and safety management best practice. In the second half
of the year, GII launched the ‘Zero Harm’ on farm initiative
to complement the ‘Zero Harm’ programme in its facilities;
• GPN continued with the implementation of several new
H&S programmes to ensure a safe and healthy workplace
for employees, contractors and visitors at all GPN sites.
GPN’s safety performance in 2014 achieved a 15% decrease
in recordable injuries/illnesses. GPN sites have also made
significant strides in reducing overall risk through
implementation of opportunities identified in the annual
Glanbia Risk Management System audit. As a result, three
of the four GPN manufacturing sites achieved the highest
rating possible; and
• Global Ingredients Recordable Injury Rate (RIR) continues
to consistently reduce year-on-year and is now at 2.8. The
Lost Time Injury rate has also fallen to the lowest level ever
at 0.1 in 2014. The most significant improvement was in the
Blackfoot Idaho Cheese plant, purchased in March 2013 by
Glanbia. At that time, the RIR was five times above industry
average. Employees embraced the Group’s new behaviour
based safety programme and now the RIR has fallen below
the industry average and Blackfoot is quickly establishing
itself as a leader in employee health and safety within
the Group.
Wellbeing
Glanbia provides a range of initiatives to help maintain a
healthy working life. A number of the business units operate
gym and wellness programmes and many of the businesses
conduct monthly wellness activities around diet, exercise and
mental health. Annual health checks and health screenings
are also available.
Yvonne kerrigan,
operations manager,
dairy Ireland
consumer products
“ Consumer Products produces some of the most popular
Irish dairy and chilled foods. Our products are consumed in
92% of Irish homes, with Avonmore being Ireland’s number
one milk and cream brand. At the beginning of April 2014,
we began processing UHT milk at our new plant in Co.
Monaghan, Ireland. As operations manager, my role
embraces all the activities required to create and deliver
premium products to our export customers in Asia, the
Middle East and Europe. My role includes site and process
design, talent selection and training, and the development of
systems and procedures. I also engage with our Innovation
Centre in Kilkenny to proactively create new products in
UHT form for our emerging markets.”
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Glanbia plc 2014 Annual Report and Accounts
LAUNCH OF ‘OUR GLANBIA’
We started our journey of renewing our focus on employee
engagement and development in 2014 with the launch of
‘Our Glanbia’, which is an integrated Group-wide programme
of employee initiatives, events and communication. Its purpose
is to give all employees a real understanding of the total Glanbia
organisation, locally and globally. This helps our employees to
gain a better understanding of how their role contributes to the
successful delivery of business unit and Group strategy.
It is also contributing to wider knowledge of the Glanbia
business, breaking down silos and fostering a stronger
connection with employees and between employees throughout
Glanbia. Whether an employee is in Suzhou or Sioux Falls, the
objective is that our people get to know our strategy, our
strengths, our ambition, our markets, our customers, our activities
and our growth opportunities. Highlights of the year included
a global employee roadshow by the Group Managing Director
and senior executives; a new Group-wide website focused on
building employee awareness of the total organisation; and a
Group-wide ‘Our Glanbia’ week to sustain momentum in
employee engagement.
GLOBAL EMPLOYEE SURVEY
We recognise that ‘Our Glanbia’ is just the first step on our
Group journey to great employee engagement and that we need
to fully understand how well we are performing as an employer,
as leaders and as a company to work for. We also recognise
the importance of culture and engagement to delivering
consistent performance and creating competitive advantage.
Glanbia has over 5,800 employees in 34 countries. We
operate in emerging and developed economies with significant
differences in business and market landscapes. We have a
diverse portfolio spanning B2C and B2B activities, from leading
global brands to large scale processing facilities. Our operating
model combines a high degree of local autonomy with Group
co-ordination in areas such as strategy, finance, procurement,
reputation and IT.
HUMAN RESOURCES VISION
“ Glanbia Human Resources is
committed to unlocking the full potential
of our people and Glanbia through
our values and leadership, relentlessly
pursuing excellence and inspiring our
people everywhere.”
This diversity of geography and business segments drives
some organisational complexity and we want to gain the fullest
insight possible of our employees’ views to inform our plans for
talent management and employee engagement.
In February 2015, we undertook our first global employee
survey, known as ‘Your Voice’. This was locally administered
by an independent third party provider to ensure employee
confidentiality and encourage strong participation. Employees
had the opportunity to take the survey online or in paper format
and four languages were offered to accommodate the diversity
of our global workforce. As this was our first survey it was
wide-ranging in nature, covering employee engagement
metrics as well as leadership, culture and values and our
employee value proposition.
In the second quarter we will analyse and segment the results
to identify the areas where we are strong and the opportunities
for improvement. The results and action plans will roll-out
across the organisation and we will report in more detail next
year on the outcomes and progress in 2015. In particular, the
survey gives us the capability to set the bar for employee
engagement throughout Glanbia and to deploy an employee
engagement best practice training module for managers.
EMPLOYEE
SURVEY
Lao Campos, Cheese Plant Operator, Global Ingredients US Cheese
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Strategic report
Our people continued
DEFINING OUR EMPLOYER BRAND REPUTATION
To complement the global employee survey, we are
undertaking a wider Glanbia reputation benchmarking survey
amongst key stakeholder groups such as customers, investors,
suppliers, key opinion formers and media. While this is a
multi-purpose exercise, in conjunction with the employee
survey it will help inform our key reputation drivers as an
employer and how our employer brand is aligned externally
and internally.
We want to be a company that is a great place to work and
to drive our talent recruitment and retention strategy through
a strong, earned reputation. A specific outcome is a renewed
Group ‘Purpose, Vision, and Values’ development project,
which we expect to roll-out in 2015.
CORPORATE GIVING AND EMPLOYEE VOLUNTEERING
Glanbia has a long tradition of involvement with our local
communities in areas which seek to make a tangible difference
where we operate. These range from corporate sponsorship
and donations to employee fundraising and volunteering.
One of Glanbia’s most significant partnerships was the Group’s
relationship with Barretstown, which is a camp that provides
respite care for seriously ill children and their families. Glanbia
adopted Barretstown as its Irish charity partner in 2008. Since
then €1.6 million has been raised in a three-way programme
including employee fundraising, Consumer Products
sponsorship and corporate donations.
Employee ‘champions’ and ‘ambassadors’ have volunteered
to raise internal awareness of this relationship and help support
fundraising. These volunteers led by example, organising and
taking part in numerous fundraising events and encouraging
colleagues to participate in fitness and fun with a social purpose.
Glanbia’s sponsorship has meant that Barretstown is reaching
and helping even more families’ with the camp capacity
increasing by 75% since 2008. The partnership concluded
in 2014.
As a lasting legacy to this partnership, Glanbia donated
a unique sensory garden to Barretstown. The ‘sowing the
seeds of magic’ garden will be enjoyed by children who
attend Barretstown for many years to come. We are currently
reviewing our Corporate Social Responsibility partnerships.
Find out more online at glanbia.com/our-
responsibilities/communities
2015 PEOPLE PRIORITIES
• Deliver employee engagement survey and
action planning;
• Develop and roll-out ‘Purpose, Vision and Values’
programme;
• Build and deploy Phase I of a Group-wide intranet,
including a mobile platform;
• Enhance our internal and leadership communications
programme; and
• Create and roll-out an employee engagement best
practice training module for managers.
NEW GLOBAL INTRANET
A further initiative we are undertaking in 2015 is to
build and deploy the first phase of a global intranet,
including mobile ‘on-the-go’ access. This will replace
the ‘Our Glanbia’ website, which was launched in 2014
as part of the ‘Our Glanbia’ programme. This website
has been very well received internally and is receiving
over 100,000 visits per month with Group news and
employee engagement activities being the most popular.
The new Group intranet will form part of the reshaping
of the HR information systems infrastructure, by
developing a single Group-wide platform for employee
services, internal communications, sharing knowledge,
facilitating collaboration and communities and improving
work processes.
‘Our Glanbia’ website
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Glanbia plc 2014 Annual Report and Accounts
JYOTI SHARMA, GLANBIA PERFORMANCE SYSTEM LEADER,
US CHEESE, GLOBAL INGREDIENTS, IDAHO, USA
“ I am a Glanbia Performance System (GPS)
team leader in Glanbia’s US Cheese business.
We are one of the leading producers in the
USA, processing 3.8 billion litres of milk
per annum into 410,000 tonnes of cheese.
GPS is an internally developed work system
that is based on Lean Manufacturing and
Total Productive Maintenance principles.
This means we place a strong emphasis on
empowering and involving all employees in
improving productivity, safety and quality
in a sustainable way.
This is to ensure that all the US Cheese
plants and our employees have the tools
and knowledge to improve and sustain a zero
loss and harm work culture, which drives out
injuries and safeguards our products and
high quality specifications. This creates
competitive advantage for our business and
empowers our employees in the work they do
each day for the business and our customers.
GPS creates a shared responsibility to
improve the performance of our business
and add more value for our customers.
Over the longer term, this will position us
well to address the growth opportunities
that are emerging in the world of nutrition
and ingredients.”
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Strategic report
Risk management
DRIVING A ROBUST RISK
Management CULTURE
“Our aim is to anticipate and address
changes to the Group’s business and risk
environment that may impact the delivery
of our strategic objectives. We do this by
ensuring that a robust risk management
culture exists throughout the organisation.”
Paul Haran
Senior Independent Director
The Board has ultimate responsibility for determining the nature
and extent of the significant risks it is willing to take in achieving
its strategic objectives, and for ensuring that risks are managed
effectively across the Group. Risk management is a regular
agenda item at Board and Audit Committee meetings and
the Board considers the impact of the Group’s principal risks
in detail during the annual Group strategy process. This is
designed to ensure that the Board understands the key risks
within the business and the methods by which these risks
are managed.
2014 risk management highlights
Throughout 2014, the Group focused on responding to a
dynamic operating environment and managing risk in several
key areas.
Supplier risk
We successfully addressed the US milk procurement
challenges encountered in early 2014 by Global Ingredients
through a combination of measures. These included
sustainable cost reductions, pricing changes and achieving
greater security of supply with two year milk supply contracts
now in place with the vast majority of our local suppliers.
We expect our Idaho plants to operate at full capacity in 2015
and will keep our milk procurement policies under review in
order to maintain supply security.
Building team engagement
In 2014 we launched the ‘Our Glanbia’ programme to ensure
that the business retains and attracts talented and motivated
employees as they are the life blood of the Group. We have
already experienced enhanced employee engagement across
the Group. This was driven by the global employee roadshow
undertaken by the Group Managing Director and senior
executives and an ongoing global and local programme
of activities.
Delivery of capital investment programme
The Group continued to invest significantly behind its two
growth platforms with:
• Global Performance Nutrition commissioning the first
phase of a new $75 million investment in a state-of-
the-art manufacturing facility in Aurora, Illinois; and
• Global Ingredients further developing the strategy of
maximising the value of our ingredient pool through the
$85 million high end whey and lactoferrin programme
announced during 2014 at our Idaho facilities. The project
is on schedule for full commissioning by the end of 2015.
These investments will strengthen our production capabilities
and facilitate our goal of being a leader in the development of
market insight-led and technology driven solutions and systems.
We also continue to invest in our Dairy Ireland and Joint
Ventures & Associates segments, in particular:
• The completion of the greenfield Glanbia Ingredients Ireland
milk processing facility;
• The development of the Agribusiness food grade oats
milling facility; and
• The commissioning of Consumer Products new long-life
milk and cream plant.
These developments will not only better serve existing
customers but offer our Ireland based businesses extra
capacity for further growth in international markets.
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Glanbia plc 2014 Annual Report and Accounts
Our risk management framework
While the Board has ultimate responsibility for the Group’s
systems of risk management and internal control, there are
defined roles within the process for the Group Operating
Executive, the Audit Committee, Internal Audit and the
Group Senior Leadership Team.
The diagram below outlines the key stakeholder risk
management responsibilities within our risk management
framework. It is designed to ensure that there is input across
all levels of the business to the management of risk; this
allows us to remain responsive to the ever changing
environment in which we operate.
Develops the Group’s
vision and strategic
priorities
Defines the organisational
Code of Conduct
and culture
Sets risk appetite
and tolerance
The board
Monitors the nature and
extent of the Group’s
principal risk exposures
versus the defined
risk appetite
Top-down
Oversight,
identification,
assessment
and mitigation
of risk at
Group level
Group Operating Executive
Audit Committee
Internal Audit
Forms organisational structure
Responsible for maintaining
effective risk management
policies and programmes
Monitors performance, risk
exposure, mitigation and internal
controls
Supports the Group Senior
Leadership Team
Reviews the design and
implementation of the Group’s
risk management and internal
control systems
Supports the Board in
monitoring risk exposure versus
risk appetite
Supports the Audit Committee
in reviewing the effectiveness of
the Group risk management and
internal control processes
Monitors actions taken
by management
Reports regularly to the
Audit Committee
Group senior leadership team
Risk ownership
Risk awareness
Risk monitoring
Risk reporting
Identifies, measures and
assigns risk management
roles and responsibilities
at operational level
Ensures risk management
processes and internal
control systems are
embedded within each
business unit
Monitors business
performance and uses
risk management to
support decision making
Encourages open
communication on risk
matters and reports
to the Group Operating
Executive, Audit
Committee and Board
Bottom-up
Oversight,
identification,
assessment
and mitigation
of risk at
business unit
level and across
key Group
functional areas
See page 61 for more information about our governance framework
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Strategic report
Risk management continued
Our risk management process
Our risk management process aims to support the delivery of
the Group’s strategy by managing the risk of failing to achieve
business objectives.
• A summary of the key movements in the identified risks;
• Management action plans and owners to help manage
the key residual risk exposures; and
• An overview of the broader organisational and
By focusing our risk management system on the early
identification of key risks, it enables us to conduct a detailed
consideration of the existing level of mitigation and the
management actions required to either reduce or remove
the risk.
Where the reduction or removal of the risk is not possible, the
Group formulates a management action plan to respond to the
risk should the risk materialise. Our risk management process
is as follows:
Group Senior Leadership Team
On a quarterly basis, each business unit management team
and functional lead are requested to perform a detailed risk
review exercise and to update the Group risk register. The
register ensures consistency of approach in reporting of risks
and requires management to:
• Identify and classify each risk as financial, operational,
strategic or regulatory;
• Assess the inherent risk impact and likelihood, and the
speed at which the impact of the risk could materialise;
• Identify mitigation measures;
• Allocate an owner who has responsibility for the timely
implementation of the agreed action plan; and
• Report on implementation of strategies to address residual
risk exposures.
Glanbia has a continuous risk assessment process comprising
five key stages.
Risk Assessment Process
t
r
ep o
R
A
l
l
o
c
a
t
e
Identif
y
A
s
s
e
s
s
Mit i g a t
e
Consolidation and review of the Group key risk summary
Internal Audit prepares a Group summary report based on the
quarterly information submitted by management. The Group
Operating Executive review the report on a quarterly basis
while the Audit Committee and the Board perform a bi-annual
review, with an interim update from management if significant
issues arise. The report includes:
• An analysis of the key Group risks in terms of impact
(assessed over the following 12 months within defined
monetary terms), likelihood of occurrence (assessed based
on defined probabilities of occurrence) and velocity (the
speed at which the impact of the risk could materialise);
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Glanbia plc 2014 Annual Report and Accounts
business risks.
Management and Board review
The focus of the Board is on ensuring that the Group residual
risk position is within their risk appetite. The Group Operating
Executive and the Audit Committee, supported by Internal
Audit, are entrusted with ensuring that appropriate measures
are in place to validate the strength of internal controls and
risk mitigation.
Ongoing monitoring
The quality and consistency of risk reporting is supported
through a number of other monitoring and reporting
processes including:
• Annual Group strategy process and Board presentations;
• Bi-annual control self-assessment and management
representation letter processes;
• Monthly Chief Executive business review reports of the key
financial and operational performance levels within each
business unit; and
• Monthly detailed finance reviews.
Senior management are also required, when presenting a
business update to the Board or Audit Committee, to provide
detailed presentations on their individual business unit key
risks, the mitigating controls and the residual risk exposures.
The Audit Committee continues to operate a programme of
evaluating key areas of risk through a series of presentations
from management and Group functional leads on matters
such as food safety and quality, operational site risk
management and IT.
Principal risks and uncertainties
Key risks are identified based on the likelihood of occurrence
and potential impact on the Group using the processes
outlined. The Board has carefully considered the nature and
extent of the significant risks it is willing to take in achieving
the Group’s strategic objectives and delivering a satisfactory
return for shareholders.
The performance of the Group is influenced by global
economic growth and consumer confidence in the markets in
which it operates. In 2015 the principal risks and uncertainties
affecting the Group’s performance are:
• The competitive landscape for Global Performance Nutrition,
recognising the impact of a stronger dollar on the purchasing
power of consumers in certain international markets;
• The overall impact on margins of movements in dairy
pricing, particularly in whey markets; and
• The potential impact of geopolitical unrest and macro-
economic uncertainty on our international growth strategy.
The Group’s approach to financial risks, including currency
risk, interest rate risk, liquidity risk, price risk and credit risk is
to centrally manage these risks against comprehensive policy
guidelines, details of which are outlined in note 3.1 ‘Financial
risk factors’ on pages 137 and 138 of this report. The Board
regularly reviews these policies.
Risk profile
The Group’s principal risks are summarised in the risk profile
table below according to the strategic objective to which they
relate, together with an overview of the risk trend during 2014.
There may be other risks and uncertainties that are not yet
considered material or not yet known to us and this list will
change if these risks assume greater importance in the future.
Likewise some of the current risks will drop off the key
risks schedule as mitigating management action plans are
implemented or changes in the operating environment occur.
The nature of each principal risk is described in detail on
pages 54 to 57.
Priority one
Sustain current and
drive further market
leadership in our
B2B and B2C
growth platforms
• Economic and
industry risk
• Strategy risk
• Customer
concentration risk
• Market risk
• Supplier risk
• Product safety and
compliance risk
GROUP
STRATEGIC
priorities
Risk
trend
Increasing
Stable
Decreasing
Priority two
Acquire or partner
with complementary
businesses to grow
our current portfolio
Priority three
Deliver our strategic
capital investment
programme
Priority four
Develop talent,
culture and values in
line with our growing
global scale
• Acquisition risk
• Investment risk
• Site compliance
risk and
environment,
H&S regulation risk
• Talent management
risk
• Liquidity risk
• Infrastructure
capacity risk
See pages 28 and 29 for
more information about
our strategic priorities
See pages 54 to 57 for more
information about our principal
risks and uncertainties
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Strategic report
Risk management continued
Principal risks and uncertainties
Strategic Priority ONE:
Sustain current and drive further market leadership in our B2B and B2C growth platforms
Risk
Description
Impact
Mitigation
Economic and
industry risk
Strategy risk
Customer
concentration
risk
Our performance is
strongly influenced
by global economic
growth and consumer
confidence in the
markets in which
we operate.
Deterioration in economic
growth or consumer
confidence, significant
currency movements,
political instability or civil
disturbances may impact
business unit performance
and the achievement of
organic growth targets.
We may adopt an
incorrect business
strategy in relation to
market opportunities
or fail to obtain
accurate and
relevant competitive
intelligence before
entering particular
international markets.
Sudden or extreme changes
in local conditions or in
regulatory requirements
may result in negative
impact to financial
performance, possible
restrictions on future
growth opportunities
or potential impairments.
The Group benefits
from close commercial
relationships with a
number of key
customers.
The loss of one or more
of these customers, or a
significant deterioration in
commercial terms, could
have a material impact on
Group profitability.
Market risk
Increasing competition
across certain channels
through high
promotional activity
and competitor
product innovations
provides an ongoing
challenge.
Potential adverse effect
on the Group’s financial
performance if we fail to
adapt successfully where
and when required to
meet market challenges.
See page 24 for more information about what makes us different
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Glanbia plc 2014 Annual Report and Accounts
• Our strategy is aimed at the continued extension
of our geographic spread, focusing on key
customer relationships and investment in new
product development which will help to shelter
the Group from short-term economic fluctuations.
• The Group Operating Executive and the Board
regularly assess key market trends and implications
for Group performance and strategy objectives.
Corrective actions are identified and implemented
as required.
• As an established international business,
the Group already operates in many countries
with differing, and in some cases potentially
fast-changing, competitive, economic, social and
political conditions. Detailed market knowledge
is assembled using a team of internal and external
experts and potential risk exposures are assessed
in advance of establishing operations.
• The Group has developed strong relationships
with major customers by focusing on superior
customer service, product innovation, quality
assurance and cost competitiveness.
• The Board regularly reviews its exposure to
individual customers and considers the impact
of potential acquisitions where relevant.
• Credit exposure is actively reviewed and
managed including the use of credit insurance
where possible. The Group’s credit risk
management policy and controls were reviewed
and approved by the Audit Committee in 2014.
• Continued channel and international expansion
by leveraging the strength of our brands limits
the impact of prolonged aggressive competitor
challenges in specific areas.
• Our strategy of embedding in-market sales
teams allows us the opportunity to drive
increased penetration of our products.
• We protect our market positions through the
active monitoring of the major macro trends
which could impact our businesses.
• Research and development expenditure is
focused on value-added and customer-specific
solutions in sectors where Glanbia has significant
technical and market knowledge.
• A new role of Chief Science & Technology Officer
was created in 2014 to strengthen the focus on
developing our innovation pipeline and quality
systems, which will allow us to further deepen
our key customer relationships and enhance
our market leadership position.
Strategic Priority ONE continued:
Sustain current and drive further market leadership in our B2B and B2C growth platforms
Risk
Description
Impact
Mitigation
Supplier risk
Product safety
and compliance
risk
Risk of not achieving
an appropriate
balance between
sustainable milk
supply and cost.
Milk availability
can fluctuate from
quarter-to-quarter
and year-to-year
with resulting
impacts on plant
production levels.
The relative whey
pricing dynamic
between base and
high end whey can
also have a significant
impact when our
ability to pass
pricing volatility
back to suppliers
is constrained by
competitive pressures.
A breakdown in
control processes may
result in contamination
of products and/or raw
materials resulting in a
breach of existing food
safety legislation and
potential customer
or employee illness.
Adverse impact on earnings. • Market pricing is continually evolving and
the market environment can change quickly.
As a result, our milk procurement strategy
teams are working to ensure the business
remains competitive in its supplier offerings,
which is in the interests of our milk suppliers,
customers and Glanbia.
• The vast majority of our existing Idaho suppliers
have signed two year supply agreements with
Glanbia including our revised milk price formula.
• Management will continue to ensure that the focus
is not solely on pricing but also on the non-pricing
value added initiatives that can be used to ensure
continued milk supply.
Potential impacts
include reputational
damage, regulatory
penalties or restrictions,
product recall costs,
compensation
payments, lost revenues
and reduced growth
potential. The sudden
introduction of more
stringent regulations
such as additional
labelling requirements
may also cause
operational difficulties.
The Group conforms to food safety and quality
regulations and aims to employ best practice across
all its production facilities to maintain the highest
standards by focusing on:
• Employing suitably qualified and experienced staff;
• Operating a supplier certification programme
whereby suppliers, their processes, facilities
and products are audited for conformance
to Group standards;
• Monitoring overall food safety through the Glanbia
Quality System (GQS), which is used to assist
management responsible for food safety. Results
of GQS testing are presented to and considered
by the Audit Committee on a regular basis; and
• Ensuring that product liability insurance
is maintained.
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Strategic report
Risk management continued
Strategic Priority two:
Acquire or partner with complementary businesses to grow our current portfolio
Risk
Description
Impact
Mitigation
Acquisition risk The anticipated
benefits of such
investments may
not be achieved if
the Group is unable
to identify suitable
targets, conduct
full and proper
due diligence,
raise the required
funds, complete
the transaction or
properly integrate
the operations
of the acquired
businesses.
Below expected performance
of the acquired business and
the diversion of management
attention to integration efforts
could result in significant
value destruction, impacting
the Group’s profitability and
growth objectives.
• The Group has acquisition integration and
partnership processes in place to monitor
the integration and performance of acquired
businesses and to implement corrective
actions as required.
• Board approval of the business case and funding
requirements for all acquisitions and significant
partnership arrangements is obtained.
• Acquired entity management teams are typically
strengthened by the transfer of experienced
Glanbia managers, which assists in increasing
the efficiency of integration efforts.
Liquidity risk
Lack of liquidity to sustain
and grow the Group which
in an extreme circumstance
may impact on the Group’s
ability to continue as a
going concern.
The ongoing
monitoring and
management
of Group debt
facilities is key
to underpinning
the liquidity
requirements
of the Group.
See page 37 for more information about Group financing
• The Group has strong ongoing relationships
with debt providers. New financing arrangements
are typically negotiated at least 12 months prior
to expiration.
• During 2014 we refinanced and increased our
committed bank facilities.
• Group Treasury is responsible for ensuring tight
management of debt and interest rate exposures,
with significant headroom maintained against
current covenants.
• The Board routinely reviews and approves Group
financing options.
Strategic Priority three:
Deliver our strategic capital investment programme
Risk
Description
Impact
Mitigation
Investment risk
The risk of the
Board making a
sub-optimal capital
allocation decision.
Lost opportunities to maximise
shareholder value.
Infrastructure
capacity risk
Failure to deliver on
planned facilities
expansion.
Inability to service new and
existing customer requirements
and potential operational
efficiency impacts.
• The Group manages capital by operating within
defined return on capital employed metrics and
debt ratios.
• All significant investment and divestment decisions
are considered and approved by the Board in a
portfolio context to ensure that Group resources
are directed to business segments and projects
which will maximise overall Group performance.
• All key development projects are well planned
in advance of execution by dedicated and
experienced teams with regular Group reporting
requirements to ensure projects are delivered
on time and on budget.
• All business units have business continuity plans
in place in the event of unexpected issues arising.
Our key sites undergo regular simulation testing to
ensure the operating effectiveness of our business
continuity plans.
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Glanbia plc 2014 Annual Report and Accounts
Strategic Priority three continued:
Deliver our strategic capital investment programme
Risk
Description
Impact
Mitigation
Potential impacts include H&S
risks, reputational damage,
regulatory penalties and an
inability to service customer
requirements.
Site compliance
risk and
environment,
H&S regulation
risk
The risk of
non-compliance
with regulations
pertaining to
building and fire
codes and/or
zoning restrictions
resulting in a loss
of capacity at
a major site
or a breach of
environment or
H&S regulations.
The Group limits the risk of a major event impacting
capital investment programmes, existing operations
or the environment by:
• Monitoring overall safety and loss prevention
performance through the Glanbia Risk
Management System (GRMS). This system
assists operational management responsible
for site risk. An independent third party conducts
the GRMS reviews, the results of which are
presented to and considered by the Audit
Committee on an annual basis;
• Continual investment in energy efficiency
advancements, carbon reduction and emission
management programmes to ensure compliance
with environmental regulations;
• Ensuring all business operations have business
continuity plans in place including identification of
alternative production locations where relevant; and
• Maintaining a comprehensive insurance
programme for all significant insurable risks
and major catastrophes.
Strategic Priority four:
Develop talent, culture and values in line with our growing global scale
Risk
Description
Impact
Mitigation
Growth targets may be at risk
by failing to attract, retain and
manage key personnel.
Talent
management
risk
The Group is
dependent upon
the quality, ability
and commitment
of key personnel
in order to sustain,
develop and grow
the business in line
with our key
objectives.
See page 44 for more information about our people
See page 80 for more information about remuneration
• The Group has put in place strong recruitment
processes, effective HR policies and procedures,
long-term incentives, robust succession
management planning and a range of talent
management initiatives including the Group
Management Development Programme.
• The completion of the Remuneration Committee’s
three year remuneration policy review which is
designed to assist the Group in meeting our
strategic ambitions by attracting, retaining and
motivating talent.
• The ‘Our Glanbia’ programme was launched
in 2014 to drive enhanced employee engagement,
together with a programme of global and
local activities.
• Our graduate recruitment programme is
focused on recruiting talented, motivated, young
professionals capable of developing into future
business leaders.
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Strategic report
Chairman’s introduction to governance
Focused on Maintaining
good governance
“The Board provides constructive challenge
to the Group Operating Executive to create
accountability for results and drive performance.
Shareholder value is generated through the
decisions that are taken and the strategy
we pursue.”
Liam Herlihy
Group Chairman
Dear shareholders,
Maintaining and promoting high standards of corporate
governance is central to my role as Group Chairman.
I firmly believe that good corporate governance is essential
to support the delivery of our strategic priorities. It is also a
vital element of an effective board, whose primary role is to
promote the long-term success of the Group. This protects
the interests of shareholders and wider stakeholders in the
Group, such as our employees and local communities.
Your Board is committed to promoting good corporate
governance and understands that a valuable and challenging
board is essential to providing leadership to the Group
Operating Executive. By setting goals and targets, developing
strategy and establishing policies and processes, the Board
enables the Group to achieve its current growth ambitions,
with a view to maintaining the strong performance of
recent years.
COMPLIANCE WITH THE CODES
Glanbia is subject to the UK Corporate Governance Code
(2012) and the Irish Corporate Governance Annex (2010),
collectively known as the Codes. I am happy to confirm that
the Group has complied with the detailed provisions of the
Codes throughout 2014, with the exception of the composition
of the Board of Directors. The Board and I are happy that
the alternative to following this provision is justified in our
particular circumstances in keeping with good governance.
A detailed description of how we have applied the principles
of the Codes is set out in the Statement of Compliance on
pages 100 to 109.
BOARD EVALUATION
The Board continually strives to improve its effectiveness
and recognises that the performance evaluation process
represents an annual opportunity to enhance overall board
effectiveness. In 2013, we conducted an externally facilitated
board evaluation. This resulted in recommendations for
improving the Board’s effectiveness and these were
progressed during this year. In 2014, the Board agreed that
an internal board performance evaluation would be the most
effective, in light of the ongoing work in relation to the 2013
externally-facilitated evaluation.
The key findings of the 2014 board evaluation were:
• The Board continues to be high functioning with a
collaborative and professional atmosphere.
• The most recently appointed members of the Board
have added positively to the Board balance and mix
of skills and have embedded well.
• An acknowledgement that it has been a busy year
for both:
– the Nomination and Governance Committee
with the appointment of two new Non-Executive
Directors; and
– the Remuneration Committee with the completion
of the triennial review of remuneration and preparation
for consideration of the remuneration policy at the
2015 Annual General Meeting (AGM).
58
Glanbia plc 2014 Annual Report and Accounts
BOARD CHANGES
During the year, the composition of the Board continued
to evolve. On 13 May 2014, Jerry Liston retired as a
Non-Executive Director of the Company and Chairman
of the Remuneration Committee. On the same date,
Donard Gaynor assumed the role of Chairman of the
Remuneration Committee. On 30 May 2014, Patrick
Coveney was appointed as a Non-Executive Director.
Also on 30 May 2014, Brendan Hayes was re-appointed as
a Non-Executive Director on behalf of Glanbia Co-operative
Society Limited (the ‘Society’). On 30 September 2014,
John Callaghan announced his intention to retire as a
Non-Executive Director, Senior Independent Director and
Chairman of the Audit Committee. He retired from the Board
and these roles on 1 December 2014. On the same date,
Dan O’Connor was appointed as a Non-Executive Director
and assumed the role of Audit Committee Chairman. Paul
Haran is the new Senior Independent Director.
RE-ELECTION OF DIRECTORS
In accordance with the UK Corporate Governance Code
(2012), all of the Directors are subject to annual re-election
by shareholders. Accordingly, each of the Directors will seek
re-election at the AGM to be held on 12 May 2015 with the
exception of myself, David Farrell and Patrick Gleeson, as
we intend to retire at the conclusion of the AGM.
Additionally in 2015, Patrick Coveney, Donard Gaynor,
Paul Haran and Dan O’Connor will seek re-election at the
AGM by separate resolution of the independent shareholders
(i.e. all of the shareholders save the Society and its subsidiary
companies). All Directors have indicated that they will
abstain from voting on these separate resolutions.
RELATIONSHIP AGREEMENT
On 10 November 2014, Glanbia plc and the Society entered
into a Relationship Agreement in accordance with the Listing
Rules applicable to premium listed companies in the UK.
The Relationship Agreement reiterates the commitment
of both parties to reduce the size of the Board (as agreed
in 2012). The Relationship Agreement also provides that
the Society and Glanbia shall do everything necessary to
ensure that the independence provisions referred to in the
Listing Rules are satisfied at all times during the term of the
Relationship Agreement.
REMUNERATION AND REPORTING
Our approach to remuneration has served the Group and
our shareholders well over many years. It has enabled us to
motivate and retain high calibre and talented management,
and served to align the interests of Executive Directors and
senior management with those of our shareholders.
Our sustained focus on paying for performance with a
high ratio of variable pay to fixed pay and the consistency
with which we have applied our remuneration policy has
delivered excellent business results and shareholder
returns. The Executive Directors have their performance
individually reviewed by the Remuneration Committee
against KPIs which are set annually. The incentives payable
to the Executive Directors under Glanbia’s Annual Incentive
Plan and its 2008 Long Term Incentive Plan are linked
directly to the results of these reviews.
Key actions and progress in 2014
2013 Board evaluation
recommendations
Board refreshment
and renewal
Progress
Excellent progress was made in 2014, including:
• The appointment of two new Non-Executive Directors;
• The appointment of a new Senior Independent Director;
• The appointment of a new Audit Committee Chairman;
• The appointment of a new Remuneration Committee Chairman; and
• A review of Committee composition and resultant changes to the Audit Committee.
The reduction in the number of Society nominated members is well signalled and
is due to commence in 2016.
Reduction in the number
of Society nominated
Board members
www.glanbia.com
59
Governance
Chairman’s introduction to governance continued
During 2014, the Remuneration Committee carried
out a detailed review of the remuneration structures
in place in Glanbia. The key findings from the review
were the need for:
• Greater emphasis on Europe/USA as a market reference
for remuneration given the global nature of the Group;
• Greater linkage of Executive Director remuneration to
Company performance, particularly business segment
metrics, where relevant;
•
Increased weighting on long term incentives, with market
benchmarking showing a significant shortfall, particularly
when compared to the European and US markets; and
• Greater alignment with shareholders/share value
growth – with significant amounts linked to shares,
increased shareholding requirements and increased
LTIP participation below Executive Director level (both
in terms of number of participants and quantum).
RISK MANAGEMENT
Your Board continues to place particular emphasis on
monitoring risk and on a structured approach to the
management of risk in the Group. The Board retains ultimate
responsibility for defining the level of risk appropriate to
Glanbia, while the Audit Committee has been delegated
responsibility for reviewing the design and implementation
of the Group’s management and internal control systems.
The Risk Management report is contained on pages
50 to 57.
EXTERNAL AUDITORS
The regulatory regime relating to mandatory audit tendering
has significantly changed in Ireland and Europe and the
Audit Committee has closely monitored these developments.
The Audit Committee is very satisfied with the quality of
audit services provided by PricewaterhouseCoopers (PwC).
As PwC have been the external Auditor of the Group since
the merger of Avonmore Foods plc and Waterford Foods plc
in 1997, the Audit Committee has recommended that the
Group conduct an audit tender in 2015. The Audit Committee
will oversee the tender of the external audit, with a view to
appointing a new auditor for the 2016 audit.
More information
Strategic report on pages 1 to 57
Board evaluation pages 58 and 59
Board of Directors and senior management
pages 64 to 68
Audit Committee report on pages 69 to 74
ENGAGEMENT WITH SHAREHOLDERS
During the year, we have continued our work in
promoting greater and more effective engagement with
our shareholders. We have a dedicated Investor Relations
team. Our Group Managing Director, Group Finance Director
and Executive Directors have presented at over ten capital
market conferences and held over 250 meetings globally in
2014 with various market participants. We have an active
engagement programme, we report to the market on a
quarterly basis, we publish our results on our website and
we make webcasts on our results freely available. Paul
Haran, our Senior Independent Director and I, have met
with institutional investors and analysts and attended a
Global Performance Nutrition Investor Day on 19 November
2014 in Aurora, Illinois, USA. Attendees got an in-depth
understanding of Global Performance Nutrition with
presentations from members of the senior management
team. Donard Gaynor, the Chairman of the Remuneration
Committee, also consulted with institutional shareholders
on executive remuneration, particularly on the proposed
remuneration policy being put to shareholders for
consideration at the 2015 AGM.
FAREWELL
As announced on 28 October 2014, I will be retiring as
Group Chairman at the conclusion of the AGM on 12 May
2015. The new Group Chairman will be nominated by the
Society and appointed by the Board in due course. I leave
in the certain knowledge that Glanbia is in great shape
for the future, with a strong Board, Executive and senior
management team and great people working across the
organisation. Under this leadership, shareholders and other
stakeholders can be confident that effective governance
and good performance will continue to be a high priority.
Liam Herlihy
Group Chairman
Nomination and Governance Committee report
on pages 75 to 79
Remuneration Committee report pages 80 to 99
Statement of compliance pages 100 to 109
60
Glanbia plc 2014 Annual Report and Accounts
Governance overview
Board leadership
and effectiveness
OUR GOVERNANCE FRAMEWORK
The role of our Board of Directors includes setting the
strategic direction of the Group, providing strong leadership
and challenge to the Group Operating Executive and reporting
to the shareholders on its stewardship of the Group. The Board
has a clear governance framework with defined responsibilities
and accountabilities.
These are designed to safeguard long-term shareholder
value, through strategic execution and business performance
delivery. Our governance framework supports integrated
decision making and risk management. Our internal control
and risk management arrangements are described on pages
51 and 52 of this report.
Board of Directors
Group Managing
Director
Audit
Committee
Nomination and
Governance
Committee
Remuneration
Committee
Group Operating
Executive
Group Management
Committee
Group Senior
Leadership Team
Board committees
Audit Committee
Key activities: Review of Financial Statements and external
Auditors’ independence, internal controls, risk management
systems and the effectiveness of internal audit.
Nomination and Governance Committee
Key activities: Recommendations on appointments to the
Board, including Group Chairman/Vice-Chairmen, succession
planning, review of the independence and time commitment of
Non-Executive Directors and keeping under review corporate
governance developments to ensure Group governance
practices are in line with best practice.
Remuneration Committee
Key activities: Review of Executive Directors’ salaries and
benefits, approval of Annual Incentive targets, Long Term
Incentive Plan share awards and review of Non-Executive
Directors’ fees.
Group management
Group Operating Executive
This group is comprised of the Executive Directors, the Group
Secretary and the Group Human Resources & Corporate
Affairs Director. Key activities: Monitoring performance and
making strategic recommendations to the Board. This forum
is also the Group Risk Committee.
Group Management Committee
This group brings together the Group Operating Executive,
Business Unit Chief Executives, the Group Corporate
Development Director and the Chief Science & Technology
Officer and has responsibility for the delivery of Glanbia’s
annual business plan and strategic priorities.
Group Senior Leadership Team
This team includes the Group Operating Executive, the Group
Management Committee and senior business and functional
leaders, to create alignment and drive delivery of Glanbia’s
business plan and strategy.
www.glanbia.com
61
Governance
Governance overview continued
THE BOARD
The Board held nine scheduled meetings in 2014 with Board
member meeting attendance as follows:
2014 Board meeting attendance
Member
L Herlihy
Mn Keane
H Corbally
S Talbot
J Callaghan1
W Carroll
P Coveney
J Doheny
D Farrell
M Garvey
D Gaynor
P Gleeson
V Gorman
P Haran
B Hayes2
J Liston3
Ml Keane4
H McGuire
M Merrick
J Murphy
P Murphy
D O’Connor
B Phelan
E Power5
Appointed
11 September 1997
24 May 2006
9 June 1999
1 July 2009
13 January 1998
26 May 2011
30 May 2014
29 May 2012
26 May 2011
12 November 2013
12 March 2013
24 May 2006
27 June 2013
9 June 2005
30 May 2014
10 June 2002
29 June 2010
1 June 2013
9 June 2005
29 June 2010
26 May 2011
1 December 2014
1 January 2013
26 May 2011
1. Retired 1 December 2014
Number of full
years on the
Board
17
8
15
5
16
3
Less than 1
2
3
1
1
8
1
9
3
11
6
1
9
4
3
Less than 1
2
12
2014 meeting
attendance
9/9
9/9
9/9
9/9
8/8
9/9
4/6
9/9
9/9
9/9
9/9
9/9
9/9
9/9
6/6
3/3
9/9
9/9
9/9
9/9
9/9
1/1
9/9
9/9
2. Appointed 30 May 2014 having previously served three full years
on the Board
3. Retired 13 May 2014
4. Appointed to the Board in 2010 having previously served two full years
on the Board
5. Appointed to the Board in 2011 having previously served nine full years
on the Board
See pages 64 to 67 for more information on
Board members
Division of responsibilities
The Group Chairman
Liam Herlihy’s responsibility as Group Chairman is the efficient
and effective working of the Board. His role is to lead and
manage the business of the Board, promoting the highest
standards of corporate governance and ensuring accurate,
timely and clear information for the Board. He facilitates active
engagement and challenge by the Board to the Group
Operating Executive and conducts the annual board evaluation,
both internal and external as appropriate. The Group Chairman
has a strong working relationship with the Group Managing
Director, Siobhán Talbot, and acts as a confidential sounding
board. Liam Herlihy is also Chairman of the Nomination and
Governance Committee.
The Senior Independent Director
Paul Haran is the Board’s Senior Independent Director and his
primary role is to support the Group Chairman on all governance
related matters. In addition, he specifically conducts the annual
appraisal of the Group Chairman’s performance, acts as an
intermediary for other Directors and ensures that the views
of the Non-Executive Directors are heard. He is available to
shareholders should they wish to raise any matter directly.
The Group Managing Director
Siobhán Talbot, Group Managing Director, is responsible for
all aspects of the operation and management of the Group.
She leads the corporate strategic decision making process and
develops the Group strategy for Board approval. She ensures
that Group policies and procedures are followed and that the
business complies with relevant legislation and regulation.
The Group Secretary
Michael Horan, Group Secretary, assists the Group Chairman
in promoting the highest standards of corporate governance.
He supports the Group Chairman in ensuring Directors receive
timely and clear information so that the Directors are properly
equipped for robust debate and informed decision making.
He is a central source of guidance and advice on policy,
procedure, governance and ethics and acts as a sounding
board for the Directors. He co-ordinates, when necessary,
access to independent professional advice for Directors. He
ensures compliance with all legal and regulatory requirements.
In addition, he has responsibility for providing a high quality
service on all shareholder related matters.
Composition of the BOARD
Non-Executive
Chairman nominated by
Glanbia Co-operative
Society Limited
Non-Executive
Directors nominated by
Glanbia Co-operative
Society Limited
Non-Executive
Directors
Executive Directors
62
Glanbia plc 2014 Annual Report and Accounts
INDEPENDENCE
The Board and Nomination and Governance Committee believe
that all Non-Executive Directors demonstrate the essential
characteristics of independence and bring independent challenge
and deliberations to the Board; however while the Company
continues to regard the Directors appointed by Glanbia
Co-operative Society Limited (the ‘Society’) (the ‘Society
Nominee Directors’) as meeting the criteria for independence
specified in the UK Corporate Governance Code (2012), the
Society Nominee Directors are not being designated as
independent Directors for the purpose only of Listing Rule
9.2.2A of the United Kingdom Listing Authority (UKLA). This
is to ensure consistency with the agreement reached at the
Extraordinary General Meeting (EGM) held on 20 November
2012 with regard to the composition and size of the Board and
allow for the planned reduction of the Society’s representation
on the Board as described in the circular which was sent by
the Company to shareholders on 2 November 2012 and is set
out on page 79 of the Annual Report and is available to view
at www.glanbia.com (Society representation on the Board).
In compliance with Listing Rule 9.2.2A of the UKLA, the
Company has entered into a written legally binding agreement
with the Society, the only controlling shareholder, which is
intended to ensure that the Society complies with the
independence provisions set out in Listing Rule 6.1.4D of
the UKLA (the ‘Independence Provisions’). This Relationship
Agreement also provides that the governance arrangements
referred to above will apply with respect to the composition
and size of the Board.
During 2014, the Company has complied with the Independence
Provisions in the Relationship Agreement and, in so far as the
Company is aware, the Society has also complied with the
Independence Provisions. The Company is proposing a
resolution as its forthcoming AGM to amend its Articles of
Association to allow the election and re-election of independent
Directors for the purpose of Listing Rule 9.2.2A of the UKLA to
be conducted in accordance with the new election provisions
for such Directors in the UKLA Listing Rules.
KEY MATTERS RESERVED FOR THE BOARD
The following are the key matters reserved for the Board:
• Group strategy and business plans, including responsibility
for the overall leadership of the Group;
• Approval of the Group’s strategic plan, oversight of the
Group’s operations and review of performance in the light
of the Group’s strategy, objectives, business plans and
budgets, and ensuring that any necessary corrective
action is taken;
• Acquisitions, disposals and other transactions outside
delegated limits;
• Financial reporting and controls, including approval of the
half year results, interim management statements and full
year results, approval of the Annual Report and Financial
Statements, approval of any significant changes in
accounting policies or practices, and ensuring maintenance
of appropriate internal control and risk management systems;
• Capital expenditure, including the annual approval of the
capital expenditure budgets and any material changes
to them in line with the Group-wide policy on capital
expenditure;
• Dividend policy, including the annual review of the
dividend policy and declaration of the interim dividend
and recommendation of the final dividend;
• Appointment of Directors;
• Shareholder documentation, including approval of
resolutions and corresponding documentation to be put to
shareholders and approval of all press releases concerning
matters decided by the Board; and
• Key business policies, including approval of the
remuneration and treasury policies.
Directors’ tenure on board
Allocation of board time
Less than
three years
Between three
and six years
Between six and
nine years
Over nine years
Strategy
Operational and
financial performance
Corporate
development
Investor relations
Other
www.glanbia.com
63
Governance
Board of Directors and senior management
Group Chairman and Vice-Chairmen
From left:
Liam Herlihy Group Chairman
Henry Corbally Vice-Chairman
Henry Corbally (aged 60), Vice-Chairman, was appointed
to the Board on 9 June 1999 and has served 15 full years
on the Board. He was nominated for appointment by
Glanbia Co-operative Society Limited. Henry farms at
Kilmainhamwood, Kells, Co. Meath and holds a certificate of
merit in Corporate Governance from University College Cork.
He is a former Vice-Chairman of the National Dairy Council.
Member: Audit Committee / Remuneration Committee
Liam Herlihy (aged 63), Group Chairman, was appointed to
the Board on 11 September 1997 and has served 17 full years
on the Board. He was nominated for appointment by Glanbia
Co-operative Society Limited. Liam farms at Headborough,
Knockanore, Tallow, Co. Waterford and has completed the
Institute of Directors Development Programme (2006) and
holds a certificate of merit in Corporate Governance from
University College Dublin. He is a former Director of both The
Irish Dairy Board Co-operative Limited and Irish Co-operative
Organisation Society Limited.
Chair: Nomination and Governance Committee
Member: Audit Committee / Remuneration Committee
Martin Keane Vice-Chairman
Martin Keane (aged 59), Vice-Chairman, was appointed to
the Board on 24 May 2006 and has served eight full years
on the Board. He was nominated for appointment by Glanbia
Co-operative Society Limited. Martin farms at Errill, Portlaoise,
Co. Laois and has completed the ICOS Co-operative Leadership
Programme. Martin is President of Irish Co-operative
Organisation Society Limited and a Director of The Irish
Dairy Board Co-operative Limited.
Member: Audit Committee / Remuneration Committee
Board composition
The Glanbia Board is comprised of 22 members. 14 members are Non-Executive Directors
nominated by Glanbia Co-operative Society Limited, including the Chairman and two
Vice-Chairmen. There are four other Non-Executive Directors and four Executive Directors.
64
Glanbia plc 2014 Annual Report and Accounts
Non-Executive Directors
From left:
Dan O’Connor Non-Executive Director
Donard Gaynor Non-Executive Director
Dan O’Connor (aged 55) was appointed to the Board on
1 December 2014 and has served less than one full year on
the Board. Dan is a Non-Executive Director of CRH plc and
is also its Senior Independent Director. Dan is also a Director
of International Personal Finance plc. He is a former President
and Chief Executive Officer of GE Consumer Finance Europe
and a former Senior Vice-President of GE. He was Executive
Chairman of Allied Irish Banks plc from November 2009 until
October 2010. A fellow of the Institute of Chartered Accountants
in Ireland, Dan graduated from University College Dublin with a
Bachelor of Commerce and Diploma in Professional Accounting.
Chair: Audit Committee Member: Nomination and
Governance Committee / Remuneration Committee
Patrick Coveney Non-Executive Director
Patrick Coveney, (aged 44) was appointed to the Board on
30 May 2014 and has served less than one full year on the
Board. He is Chief Executive Officer (CEO) of Greencore
Group plc, the leading convenience foods manufacturer.
Prior to becoming CEO of Greencore, Patrick served as the
Group’s Chief Financial Officer for over two years. Before he
joined Greencore, Patrick was Managing Partner of McKinsey
& Company in Ireland. He holds an M. Phil and D. Phil from
New College Oxford University, where he was a Rhodes
Scholar. He also holds a Bachelor of Commerce degree
(First Class) from University College Cork, where he was
overall graduate of the year in 1992. Patrick served as
President of the Dublin Chamber of Commerce in 2012,
having been a Council member since 2003. He currently
sits on the Commercial Board of Munster Rugby.
Member: Audit Committee
Donard Gaynor (aged 58) was appointed to the Board on
12 March 2013 and has served one full year on the Board.
Donard retired in March 2012 as Senior Vice President of
Strategy and Corporate Development of Beam, Inc., the
premium spirits company previously listed on the New York
Stock Exchange, based in Chicago, Illinois. A Fellow of the
Institute of Chartered Accountants in Ireland, he joined Beam
in 2003 as Senior Vice President and Managing Director –
International. Prior to this he served in a variety of senior
executive leadership roles with The Seagram Spirits & Wine
Group in New York and was also Audit Client Services Partner
with the New York office of PricewaterhouseCoopers.
Chair: Remuneration Committee Member: Nomination
and Governance Committee / Audit Committee
Paul Haran Senior Independent Director
Paul Haran (aged 57) was appointed to the Board on
9 June 2005 and has served nine full years on the Board.
He is a Director of a number of companies including the Mater
Private Hospital and Insurance Ireland. He also chairs Edward
Dillon & Co. He is a former Director of Bank of Ireland, the
Road Safety Authority, the Institute of Public Administration
and the Qualifications Authority of Ireland. He retired at the end
of 2004 as Secretary General of the Department of Enterprise,
Trade and Employment after a public sector career of almost
30 years. Paul was appointed to the Ministerial Advisory
Council for Public Sector Reform for Northern Ireland during
2014. He graduated from Trinity College Dublin with a B.Sc.
in Computer Science and also has an M.Sc. in Public Sector
Analysis and an Honorary Doctorate of Law, all from Trinity
College Dublin.
Member: Audit Committee / Nomination and Governance
Committee / Remuneration Committee
www.glanbia.com
65
Governance
Board of Directors and senior management continued
Non-Executive Directors
Directors nominated by Glanbia Co-operative Society Limited
1
5
9
2
6
3
7
10
11
4
8
Avonmore Foods plc and Waterford Foods plc merged in 1997
to form Glanbia plc. At the same time, their respective major
shareholders also merged to form Glanbia Co-operative Society
Limited (the ‘Society’). The Society still retains a major shareholding
in Glanbia plc and nominates from its Board of Directors, which
is elected on a three year basis, up to 14 Non-Executive Directors
for appointment to the Board of Glanbia plc.
1 William Carroll
William Carroll (aged 49) was appointed to the Board on
26 May 2011 and has served three full years on the Board.
2 Jer Doheny
Jer Doheny (aged 60) was appointed to the Board on
29 May 2012 and has served two full years on the Board.
Jer has completed the University College Cork Diploma
in Corporate Direction.
3 David Farrell
David Farrell (aged 65) was appointed to the Board on
26 May 2011 and has served three full years on the Board.
4 Patrick Gleeson
Patrick Gleeson (aged 53) was appointed to the Board on
24 May 2006 and has served eight full years on the Board.
He was a member of the Audit Committee between July 2011
and February 2015. He has completed the University College
Dublin Diploma in Corporate Governance.
5 Vincent Gorman
Vincent Gorman (aged 58) was appointed to the Board on
27 June 2013 and has served one full year on the Board.
6 Brendan Hayes
Brendan Hayes (aged 54) was re-appointed to the Board
on 30 May 2014 and has served less than one full year on the
Board in the current term. He previously served three full years
on the Board. He has completed the University College Cork
Diploma in Corporate Direction.
This number will reduce to eight Non-Executive Directors in
2018, more details of which are set out in the Nomination and
Governance Committee report. All of the Directors nominated
for appointment by the Society are full-time farmers who have
significant experience of the dairy and agricultural industry.
7 Michael Keane
Michael Keane (aged 62) was re-appointed to the Board on
29 June 2010 and has served four full years on the Board in the
current term. He previously served two full years on the Board.
8 Matthew Merrick
Matthew Merrick (aged 63) was appointed to the Board
on 9 June 2005 and has served nine full years on the Board.
He was a member of the Audit Committee between July 2011
and February 2015. He has completed the University College
Dublin Diploma in Corporate Governance.
9 John Murphy
John Murphy (aged 52) was appointed to the Board on
29 June 2010 and has served four full years on the Board.
He also sits on the National Dairy Council Board. He has
completed the University College Cork Diploma in
Corporate Direction.
10 Patrick Murphy
Patrick Murphy (aged 56) was appointed to the Board on
26 May 2011 and has served three full years on the Board.
11 Eamon Power
Eamon Power (aged 60) was re-appointed to the Board on
26 May 2011 and has served three full years on the Board in
the current term. He previously served nine full years on the
Board. He has completed the University College Cork Diploma
in Corporate Direction.
66
Glanbia plc 2014 Annual Report and Accounts
Group operating Executive
From left:
Hugh McGuire CEO Global Performance Nutrition
Siobhán Talbot Group Managing Director
Hugh McGuire (aged 44) was appointed to the Board on
1 June 2013 as an Executive Director with responsibility
for Global Performance Nutrition. Hugh joined the Group in
2003 and has been Chief Executive Officer (CEO) of Global
Performance Nutrition since 2008. Prior to that he held a number
of senior management roles in the Group. He previously worked
for McKinsey & Company as a consultant across a range
of industry sectors. Prior to this he worked in the consumer
products industry with Nestlé and Leaf. Hugh graduated
from University College Dublin with an M.Sc. in Food Science.
He has a Diploma in Finance from the Association of Chartered
Certified Accountants.
Brian Phelan CEO Global Ingredients
Brian Phelan (aged 48) was appointed as Chief Executive Officer
Global Ingredients on 1 June 2013. He was appointed to the
Board on 1 January 2013 as Group Development and Global
Cheese Director. Brian was previously Group Human Resources
& Operations Development Director. He is the Chairman of
Southwest Cheese Company, LLC. Since joining the Group
in 1993 he has held a number of senior management positions.
Prior to this he worked with KPMG. He graduated from University
College Cork with a Bachelor of Commerce and is a fellow of
the Institute of Chartered Accountants in Ireland.
Siobhán Talbot (aged 51) was appointed as Group Managing
Director on 12 November 2013, having been appointed Group
Managing Director Designate on 1 June 2013. She was
previously Group Finance Director and her role encompassed
responsibility for Group strategic planning. She has been
a member of the Group Executive Committee since 2000
and the Board since 2009 and has held a number of senior
positions since she joined the Group in 1992. Prior to joining
the Group, she worked with PricewaterhouseCoopers in
Dublin, Ireland and Sydney, Australia. A fellow of the Institute
of Chartered Accountants in Ireland, Siobhán graduated from
University College Dublin with a Bachelor of Commerce and
Diploma in Professional Accounting.
Michael Horan Group Secretary
Michael Horan (aged 50) was appointed as Group Secretary
on 9 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 Limited in Saudi Arabia and BDO Simpson Xavier.
A fellow of the Institute of Chartered Accountants in Ireland,
Michael graduated from the National University of Ireland,
Galway with a Bachelor of Commerce.
Mark Garvey Group Finance Director
Mark Garvey (aged 50) was appointed as Group Finance
Director on 12 November 2013. Prior to joining Glanbia he
held the position of Executive Vice President & Chief Financial
Officer until 2012 with Sara Lee Corporation, a leading global
food and beverage company. Mark also held a number of
senior finance roles in the Sara Lee Corporation in the USA
and Europe and prior to that he worked with Arthur Andersen
in Ireland and the USA. A fellow of the Institute of Chartered
Accountants in Ireland and the American Institute of Certified
Public Accountants, Mark graduated from University College
Dublin with a Bachelor of Commerce and Diploma in
Professional Accounting and has an Executive MBA
from Northwestern University, Illinois.
Michael Patten Group Human Resources
& Corporate Affairs Director
Michael Patten (aged 52), is Group Human Resources and
Corporate Affairs Director and has responsibility for Group
human resources, strategic leadership of the Group’s global
reputation, public affairs and sustainability agenda. Prior to
joining Glanbia, Michael was Global Public Affairs Director with
Diageo plc. He previously served with Glanbia plc as Director
of Communications. Michael holds a BA in Communication
Studies from Dublin City University and is an Honorary Life
Fellow of the Public Relations Institute of Ireland.
www.glanbia.com
67
Governance
Board of Directors and senior management continued
Group management committee
Back Row (left to right)
Patrick O’Riordan Chief Science & Technology Officer
Jerry O’Dea CEO and President Ingredient Technologies
Patrick O’Riordan (B.Sc., Ph.D.) (aged 40), is Chief Science
& Technology Officer responsible for co-ordinating the
commercial innovation agenda of the Group. Prior to joining
Glanbia, Patrick was Innovation & Insights Director for Lion
Dairy & Drinks Pty Ltd in Australia. He previously worked with
Anheuser-Busch Inbev (ABI) where he was ultimately Head
of Global Innovation based in New York. Patrick also worked
with the CSIRO, Australia’s national science and technology
research agency.
Paul Vernon CEO Glanbia Cheese Limited
Paul Vernon (aged 54) was appointed to the Group Management
Committee in December 2013 and is Chief Executive of the
Glanbia Cheese Joint Venture since its inception in 2000. Prior
to joining the Group in 1995 he worked for a dairy co-operative
based in Northern Ireland and began his career with HP Foods,
a leading FMCG company based in Great Britain.
Jim Bergin CEO Glanbia Ingredients Ireland Limited
Jim Bergin (B.Comm., M.Sc. Management Practice) (aged 52)
is Chief Executive of Glanbia Ingredients Ireland Limited, an
associate of the Group. He was appointed to this role in 2012
(having previously been CEO of Dairy Ingredients Ireland). He
has worked for the Glanbia plc Group between 1984 and 2012
and has held a number of senior positions during that time.
Colin Gordon CEO Consumer Products
Colin Gordon (BBS, MBS, FMII) (aged 53) has been Chief
Executive of Consumer Products since his appointment
to the Group in 2006. He previously worked with C&C Group
plc where he held a number of senior positions, including
Managing Director of C&C (Ireland) Limited. Colin is currently
a member of the Consumer Foods Board of Bord Bia and
a Director of the Marketing Institute of Ireland.
Jerry O’Dea (B. Sc. Dy., MBA) (age 55), is President and
Chief Executive of 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 Ingredient Technologies in 2008.
Front Row (left to right)
Tom Tench Group Corporate Development Director
Tom Tench (aged 44), is the Group Corporate Development
Director. Tom joined the Group in 2004 with responsibility for
strategy and development for Glanbia’s US Cheese and Global
Nutritionals businesses. Prior to joining Glanbia, Tom worked in
the investment banking and investment management industry.
Tom also served for ten years as an officer in the US military.
Raimund Hoenes CEO Customised Solutions
Raimund Hoenes (Ph.D., M.Sc.) (aged 48), is Chief Executive
of Customised Solutions. He joined the Group in 2008 and
was appointed Chief Executive of Customised Solutions in
2009. He previously worked in a variety of senior roles in the
ingredients sector in several countries.
Colm Eustace CEO Agribusiness
Colm Eustace (B.Ag. Sc., C. Dip. AF., MBA) (aged 53) has
been Chief Executive of Agribusiness since 2006. He joined
the Group in 1985 and has held a number of senior positions
since 1997 within Agribusiness.
68
Glanbia plc 2014 Annual Report and Accounts
Audit Committee report
Protecting and enhancing
shareholder value
“The Audit Committee believes that effective
governance of risk within the Board’s defined
risk appetite is a critical aspect of protecting
and enhancing shareholder value.”
Dan O’Connor
Audit Committee Chairman
Dear shareholder,
I am very pleased to present the Audit Committee report
for 2014, my first as the Glanbia Audit Committee Chairman
following the retirement of John Callaghan in December 2014.
During the year, the Audit Committee devoted significant time
to fulfilling its key oversight responsibilities including:
• Monitoring the integrity of the Group’s financial reporting;
• Assessing the effectiveness of the internal and external
audit processes; and
• Reviewing the design and implementation of the Group’s
systems of risk management and internal control.
This involved engaging regularly with management, Internal
Audit and the external Auditors to ensure the information the
Committee receives is timely and accurate, thereby enabling
the Committee to discharge its duties effectively.
The Committee has performed a detailed review of both
the financial and non-financial information contained in
the Group’s Annual Report. It is satisfied that the report
presents a fair, balanced and understandable assessment
of the Group’s position and prospects. It also provides
the information necessary for shareholders to assess
the Group’s strategy, business model and performance.
We have endeavoured to ensure that the key messages
are clearly called out throughout the document and that
consistency exists between the front and back sections
of the report. To assist in the process of supporting the
fair, balanced and understandable statement I requested
the Group Head of Internal Audit to prepare a report for
the Committee setting out the key considerations in
arriving at the statement.
The Committee is aware of the changing nature of the
Board’s responsibility for monitoring risk management
and internal control systems on an on-going basis and
for conducting a robust assessment of the principal
risks, including those relating to solvency and liquidity.
We believe that our determination over the past number
of years to embed a robust risk identification and
assessment process across the Group positions us well
to ensure conformance with the enhanced requirements.
The Committee will continue to keep our systems of risk
management and internal control under regular review
and will maintain our programme of receiving presentations
directly from Group senior management to ensure that the
principal risks and challenges faced by the business are
fully understood and managed appropriately.
While the Committee is satisfied that the current external
Auditors are both independent and objective, it has been
agreed with the Board that the Group audit will be put
out to tender for the year commencing 3 January 2016.
This follows the finalisation of the EU audit sector reforms
and a detailed review of their impact on Glanbia, together
with an examination of market practice in Ireland and the
UK. I will oversee this tender process on behalf of the
Committee to ensure it is conducted in a fair and
objective manner. The Committee has agreed the
scope, assessment criteria and timing of the request
for proposal (RFP) process. Ultimately the Committee,
following participant presentations, will make the final
recommendation to the Board.
On behalf of the Audit Committee
Dan O’Connor
Audit Committee Chairman
www.glanbia.com
69
Governance
Audit Committee report continued
Governance
The Audit Committee was in place throughout 2014.
MEMBERSHIP
Allocation of time
Non-Executive
Chairman
Non-Executive
Directors nominated
by Glanbia
Co-operative
Society Limited
Non-Executive
Directors
Financial and
corporate governance
updates
External Auditors
Risk management
and internal control
systems
Internal Audit
Other
As of 24 February 2015, the Committee comprises seven
Non-Executive Directors, of whom three members constitute
a quorum. Each of these Directors is considered by the Board
to be independent in judgement and character (see page 78 of
the Nomination and Governance Committee report). The Group
Secretary acts as secretary to the Committee. Membership
of the Committee is reviewed annually by the Chairman of the
Committee and the Group Chairman who recommend new
appointments to the Nomination and Governance Committee
for consideration and onward recommendation to the Board.
A number of changes have occurred to the membership of the
Committee in 2014 and to date in 2015, as referenced in the
Chairman’s introduction to governance and as outlined in the
2014 Audit Committee meeting attendance table below.
The terms of reference of the Audit Committee, which outline
the key roles and responsibilities of the Committee, can be
found on the Group’s website: www.glanbia.com, or can be
obtained from the Group Secretary. Set out opposite is an
analysis of the Committee’s current membership and primary
activities during 2014.
2014 Committee meeting attendance
There were four scheduled meetings of the Audit Committee
during the year ended 3 January 2015. Attendance by the
Non-Executive Directors at these meetings is outlined in the
table below. Meetings are typically attended by the Group
Managing Director, the Group Finance Director, the Group
Financial Controller, the Group Head of Internal Audit and
the external Auditors. Other relevant people from the Group’s
businesses are requested to attend certain meetings in order
to provide a deeper insight into key developments and areas
of particular risk focus.
Audit Committee as of 24 February 2015
Member
D O’Connor (B.Comm, FCA)
P Coveney (B.Comm, M.Phil, D.Phil)
D Gaynor (FCA)
P Haran (B.Sc., M.Sc.)
L Herlihy
Mn Keane
H Corbally
Appointed
1 December 2014
30 September 2014
24 February 2015
9 June 2005
8 June 2001
29 June 2010
7 July 2005
2014 Audit Committee meeting attendance
Member
J Callaghan (FCA, FIB)
D O’Connor (B.Comm, FCA)
L Herlihy
Mn Keane
H Corbally
P Coveney (B.Comm, M.Phil, D.Phil)
P Gleeson
P Haran (B.Sc., M.Sc.)
J Liston (B.A., MBA)
M Merrick
Resigned
1 December 2014
Appointed
13 January 1998
1 December 2014
8 June 2001
29 June 2010
7 July 2005
30 September 2014
26 July 2011
9 June 2005
10 June 2002
26 July 2011
24 February 2015
13 May 2014
24 February 2015
Number of full years on
the Committee
16
Less than 1
13
4
9
Less than 1
3
9
11
3
2014 meeting
attendance
3/4
0/0
4/4
4/4
4/4
1/1
4/4
4/4
1/1
4/4
See pages 64 and 65 for more information on current Audit Committee members
70
Glanbia plc 2014 Annual Report and Accounts
Key matters considered
by the Committee in 2014
At our meetings during 2014 and to date in 2015, the
Committee considered, amongst other matters, the following:
Financial reporting
• Reviewed the Group’s half-year results and 2014 Annual
Report by considering and challenging (where appropriate)
the Group’s accounting policies and key judgement areas;
• Reviewed a report from the Group Head of Internal Audit
on the key considerations supporting our fair, balanced
and understandable statement;
• Considered any potential indicators of impairment
to goodwill and other intangible assets and the
appropriateness of the going concern basis in
preparing the 2014 Financial Statements;
• Considered the extent of rebate and deduction claims
across the Group where the amounts payable or receivable
can vary depending on the arrangements made with
individual customers or suppliers and the volume of trade.
This included understanding the basis behind any significant
year end provisions to ensure they were adequate and
appropriate;
• Reviewed reports from management and the external
Auditors on accounting, financial reporting, treasury and
taxation issues;
• Reviewed the accounting disclosures and asset/liability
valuations relating to the acquisitions of Nutramino Holding
ApS and The Isopure Company, LLC;
• Reviewed the status of the various legal claims and disputes
the Group is party to including management’s calculations
and assumptions utilised in determining whether the
provisions held are adequate and appropriate;
• Reviewed the Group’s policy of highlighting significant
items within the Group’s results as exceptional items
where warranted by virtue of their scale and nature;
• Received a report on the effectiveness of the Group’s
financial reporting controls and systems of risk management
and internal control from the Internal Auditors;
• Considered the Directors’ Responsibility Statement and
the principal risks and uncertainties of the Group within
the 2014 Annual Report and the half-year results;
• Considered the impact to the Group of recent corporate
governance updates, IFRS reporting developments and
regulator commentary;
• Considered our obligations with regard to the new viability
statement required for accounting periods beginning
1 October 2014; and
• Recommended the approval of the Group’s half-year results
and 2014 Annual Report to the Board.
Risk management and internal control systems
• Received Group key risk summary presentations tracking
residual risk exposures and assessed management action
plans to ensure the Board’s risk appetite and tolerance
levels were not exceeded;
• Considered the current risk management process and
deemed it effective in relation to identifying, assessing
and monitoring Group risks;
• Received a presentation on the Glanbia Risk Management
System, an external independent measurement of Group-
wide operational and risk management procedures; and
• Approved the revised Group Credit Control policy including
the Group authorisation matrices for approving uninsured
credit limits, authorising credit notes and for assigning
customer risk categories.
Internal Audit
• Held a private review meeting with the Group Head
of Internal Audit;
• Received presentations covering team development,
progress against the audit plan, improvements implemented
to address control weaknesses identified, risk management
practices and whistleblowing procedures;
• Considered and approved the Internal Audit work plan; and
• Considered the effectiveness of the Internal Audit function,
adequacy of resources, experience and expertise and
deemed all to be satisfactory.
Whistleblowing and fraud
• Considered the Group’s arrangements for its employees to
raise concerns, in confidence, about possible wrong doings
in financial reporting and other matters;
• Considered the Group’s procedures for fraud prevention
and detection to ensure that these arrangements allow for
the proportionate and independent investigation of such
matters and appropriate follow up action; and
• Deemed the current procedures to be adequate.
External Auditors
• Held a private review meeting with the audit partner;
• Reviewed the report from the Auditors regarding their
findings in respect of the half-year review and the 2014
audit and a summary of internal control observations,
including observations in respect of IT controls;
• Assessed the effectiveness of the Auditors;
• Reviewed the proposed audit fee, the level of non-audit
services provided and the Auditors’ independence;
• Considered the appropriateness of the re-appointment
of the Auditors. This included a review of external audit
tendering requirements, best practice guidance and
market practices in Ireland and the UK; and
• Considered the external audit plan and review of corporate
reporting updates.
Review of Audit Committee performance
• Considered the Committee’s performance, which was
deemed effective; and
• Considered members’ independence and recent
and relevant financial expertise, all of which were
deemed appropriate.
www.glanbia.com
71
Governance
Audit Committee report continued
2014 Significant financial reporting
judgements and disclosures
The Audit Committee reviewed the effectiveness of the process
undertaken by the Directors to evaluate going concern, including
the analysis supporting the going concern statement and
disclosures in the Financial Statements. The Committee was
satisfied that a robust assessment has been made, further
detail in respect of which is given within the Statement of
Compliance with the UK Corporate Governance Code (2012)
and the Irish Corporate Governance Annex on page 104.
The Audit Committee assessed whether suitable accounting
policies have been adopted and whether management has
made appropriate estimates and judgements in the preparation
of the 2014 Financial Statements. As part of this exercise
the Committee reviewed accounting papers prepared by
management which provide the supporting detail for the
key areas of financial judgement.
The primary areas of financial reporting judgement and
disclosure which were considered by the Committee in
relation to the 2014 Financial Statements and how these
were addressed are outlined below:
2014 Significant financial reporting judgements and disclosures
How the Audit Committee addressed these matters
Impairment
review of
goodwill and
intangibles
• The Committee recognises that goodwill and intangible asset impairment reviews involve a range of
judgemental decisions largely related to the assumptions used to assess the value in use of the assets
being tested. These assumptions typically include long term business and macro economic projections,
cash flow forecasts and associated discount rates;
• Detailed reports to support the recoverable value of the balances included in note 15 to the Financial
Statements were received from management and considered by the Committee. This included examining
the methodology applied including ensuring the discount rates used are within an acceptable range;
• The Committee considered input received from both the Internal and external Auditors;
• The Committee constructively challenged assumptions used to support short and long term projections,
with consideration of different scenarios and key assumptions used within the respective reviews; and
• Following these discussions, the Committee is satisfied that the impairment review approach, disclosures
in note 15, key assumptions and conclusions are appropriate.
Acquisition
accounting
• The Committee reviewed external professional advice obtained to support the accounting treatment
adopted; and
• The Committee discussed with management and the external Auditors the accounting treatment
for newly acquired businesses and was satisfied that the treatment in 2014 was appropriate.
Further details of the business combinations undertaken in 2014 are included in note 36 to the
financial statements.
Pension
disclosures and
key assumptions
• The Group operates a number of post employment defined benefit retirement schemes. The pension
costs and liability calculations in respect of the defined benefit retirement schemes are calculated and
determined by independent actuaries;
• The Committee recognises the inherent uncertainties surrounding the financial assumptions adopted
in defined benefit retirement scheme valuations, particularly in relation to discount rate, price inflation
and mortality assumptions;
• The Committee assessed the estimated impacts on plan valuations resulting from changes to the key
actuarial assumptions;
• The Committee discussed the appropriateness of the assumptions used with the external Auditors,
who had indicated in their audit plan that this was an area of elevated audit risk;
• The Committee considered the work of the external Auditor in assessing the reasonableness of the
actuarial assumptions used; and
• Following discussion with management and the external Auditors, the Committee is satisfied that the
accounting and disclosures in respect of the defined benefit retirement schemes are appropriate.
Further details on the pension schemes are given in note 28 to the Financial Statements.
Tax provisions
• The Committee review focused on the key judgements in relation to the calculation of the year end tax
provisions and the respective tax charge;
• The Committee received an analysis of movements in the tax provisions and obtained an update from
management on the outcome of any tax authority reviews conducted during the financial period;
• The Committee reviewed external professional advice obtained to support the year end provisions;
• The Committee discussed the basis and appropriateness of the provisions with the external Auditors; and
• Following these enquiries, the Committee is satisfied that the key assumptions governing the calculation
of tax provisions within the Financial Statements are appropriate.
72
Glanbia plc 2014 Annual Report and Accounts
External Auditors’ review
During the year, the Committee agreed the approach and
scope of the annual audit work to be undertaken by the external
Auditors, which included planned levels of materiality, key risks
to the accounts including fraud risks, confirmation of Auditors’
independence, the proposed audit fee, the Group’s processes
for disclosing information to the Auditors and the approval of
the terms of engagement for the audit. The Committee also
discussed recent corporate governance updates, IFRS
reporting developments and regulator commentary. The
Committee ensured that the external Auditors had direct
access to the Chairman of the Committee and the Group
Chairman. It is standard practice for the external Auditors to
meet privately with the Audit Committee on at least an annual
basis without any members of management or the Executive
Directors being present. This meeting was held following the
2013 audit process and again in February 2015 following the
completion of the 2014 audit.
Independence of our external Auditors
In order to ensure the independence and objectivity of the
external Auditors, the Committee maintains and regularly
reviews the Group’s Auditors’ Relationship and Independence
Policy. This policy provides clear definitions of services that
PricewaterhouseCoopers cannot provide, such as financial
information systems design and implementation, internal audit
services or legal services. The policy recognises that certain
work of a non-audit nature may be best undertaken by the
external Auditors. PricewaterhouseCoopers may only provide
non-audit services provided that any individual service to be
undertaken by the external Auditors, to a value in excess of the
established threshold, does not impair their independence and
is approved in advance by the Chairman of the Committee.
The Committee also considers the performance of the external
Auditors, including audit partner rotation requirements, each
year and assesses their independence on an on-going basis.
In line with regulatory requirements for listed companies, the
external Auditors are required to rotate the audit partner
responsible for the Group audit every five years. The current
audit engagement partner was appointed as lead engagement
partner for the Group in 2013. The Committee believes that
rotation ensures a fresh review without sacrificing industry
knowledge.
As part of the independence review process, the external
Auditors are requested to formally confirm their independence
in writing to the Committee. This confirmation process also
provides examples of safeguards that may, either individually
or in combination, reduce any independence threat to an
acceptable level.
While their appropriateness depends on the specific
circumstances involved in the provision of the service
they will always include:
• Ensuring that the external Auditors do not make any
management decisions; and
• Ensuring the individuals involved in providing the non-audit
service are not members of the audit engagement team.
Non-audit services
The Committee performs regular reviews of the schedule
of non-audit services authorised and the level of fees paid.
Fees paid to PricewaterhouseCoopers for audit related
and non-audit related services are analysed in note 6 to
the Financial Statements and a trend analysis is provided
in the table below.
The primary non-audit related services provided by the
Auditors during the year were in respect of due diligence and
taxation work for potential acquisitions and a broad range of
Group tax consulting advice. PricewaterhouseCoopers were
considered to be best placed to provide these services and
the Committee reviewed the steps taken to ensure that these
non-audit services would not impair their independence.
Percentage of statutory audit and other
assurance services versus tax advisory
and other non-audit services
34%
43%
56%
66%
57%
44%
2014
2013
2012
0%
50%
100%
Statutory audit and other
assurance services
Tax advisory and other
non-audit services
In the 2013 Annual Report we reported that the Committee,
while satisfied with the independence and objectivity of the
current external Auditors, was conscious that the level of
non-audit fees has grown in recent years, primarily as a result
of due diligence work for potential acquisitions and tax advisory
fees. Despite the Committee taking some corrective measures
no substantial improvement in the audit to non-audit fee ratio
occurred in 2014. This was primarily because of due diligence
and taxation costs associated with acquisition activities which
had commenced prior to the Audit Committee committing to
substantially reduce the provision of any new due diligence
services by PricewaterhouseCoopers. The Committee has
ensured that any subsequent material due diligence services
were not provided by PricewaterhouseCoopers and will continue
to monitor the type and level of services provided to prevent
any perceived or actual impact to the Auditors’ independence.
www.glanbia.com
73
Governance
In January 2015 a request for information (RFI) was issued to
five of the largest audit firms. The RFI was designed to cover
their capability to conduct the audit and other specialist services
provided by accounting firms to the Group. In February 2015,
the Committee decided, based on the responses received,
that three firms would be invited to participate in the detailed
RFP with the participants limited to those providers that, in the
Committee’s opinion, were best placed to audit an expanding
global group.
The Committee also approved the RFP documents including
scope, assessment criteria and timing together with the type
and extent of information to be made available to tenderers
through information packs, meetings and presentations. It is
intended that the RFP documents will be issued to the shortlist
of invited firms in March 2015 with the entire process to be
completed by the end of June 2015. Key site visits will be held
for participants including site management presentations. The
Committee believes that this time investment should promote
strong bidder engagement and allow effective participant
presentations to the Audit Committee in June 2015.
Audit Committee report continued
Audit appointment and tendering
PricewaterhouseCoopers have been the Group’s Auditors
since the merger of Avonmore Foods plc and Waterford
Foods plc in September 1997 (17 years). Section 160(2) of
the Companies Act, 1963 provides that the auditor of an Irish
company shall be automatically re-appointed at a company’s
annual general meeting unless the auditor has given notice in
writing of his unwillingness to be re-appointed or a resolution
has been passed at that meeting appointing someone else
or providing expressly that the incumbent auditor shall not be
re-appointed. In this respect, Irish company law differs from the
requirements that apply in other jurisdictions, for example the
UK, where auditors of a public company must be re-appointed
annually by shareholders at the annual general meeting. The
Auditors, PricewaterhouseCoopers, have indicated that they
are willing to continue in office. Accordingly, the Directors have
not proposed a resolution to re-appoint PricewaterhouseCoopers
as such a resolution can have no effect in Ireland.
Following the finalisation of EU audit reform legislation in 2014
the Committee fulfilled its commitment to conduct a detailed
review of the provisions of the legislation and their impact on
the Group, along with the audit tendering recommendations
contained in the 2012 edition of the UK Corporate Governance
Code, the Financial Reporting Council (FRC) Guidance for
Audit Committees and market practice in Ireland and the UK.
At the completion of our review the Committee recommended
to the Board that the external audit should be put out to tender,
a process not previously undertaken by the Group, for the year
commencing 3 January 2016. It was also recommended that
the incumbent auditor, PricewaterhouseCoopers, would not
be invited to tender given the recent EU audit reform legislation
which limits audit tenure.
The Committee considers it essential that a major international
Group, such as Glanbia, ensures that the tendering of the
external audit is well planned to enable the Group to comply
with regulatory and best practice requirements as well as
ensuring an effective and efficient on-going external audit
service. The Committee has agreed that the Audit Committee
Chairman will oversee the process, with operational matters
being delegated to the audit tender project managers, the
Group Financial Controller and Group Head of Internal Audit
under the guidance of the Group Finance Director.
74
Glanbia plc 2014 Annual Report and Accounts
Nomination and Governance Committee report
Enabling the board to manage
an expanding business
“The Committee reviews the composition
and balance of the Board and Group
Operating Executive on a regular basis to
ensure that Glanbia has the right structure,
skills and diversity of experience in place for
the effective management of the Group’s
expanding business.”
Liam Herlihy
Nomination and Governance Committee Chairman
Dear shareholder,
I am pleased to present to you the Nomination and
Governance Committee report for 2014.
This year has seen further significant changes to the
Board, with the retirement of both Jerry Liston and John
Callaghan. Jerry and John have served on our Board with
distinction for 11 and 16 years respectively. Both Jerry and
John brought considerable experience and expertise to
their roles and made a significant contribution to the
development of the Group.
The retirement of Jerry and John from the Board has given
us the opportunity to appoint new Non-Executive Directors.
Amrop Strategis, who specialise in the recruitment of high
calibre non-executive directors, was engaged to assist in
this process, which resulted in us securing the appointment
of two new Non-Executive Directors, Patrick Coveney and
Dan O’Connor, to succeed Jerry and John on their
retirement from the Board. In conjunction with these
appointments, we reviewed our Committee composition
and made a number of changes including the appointment
of Paul Haran as Senior Independent Director. Brendan
Hayes also returned to the Board. Brendan was nominated
by Glanbia Co-operative Society Limited (the ‘Society’).
We have also extended the scope of the terms of reference
of the Committee to include corporate governance and the
Committee has been renamed the Nomination and
Governance Committee.
The following pages provide more details on the roles
and responsibilities of the Nomination and Governance
Committee and our highlights and achievements during
2014. I am available at any time to discuss any concerns
that any shareholder may wish to raise.
On behalf of the Nomination and Governance Committee
Liam Herlihy
Nomination and Governance Committee Chairman
www.glanbia.com
75
Governance
Nomination and Governance Committee report continued
Our 2014 Highlights
• Considered the effect on the composition and
balance of the Board arising from the retirement
of Jerry Liston and identified the requirement for
an independent candidate with the appropriate
experience of building operations of scale on an
international basis, resulting in the appointment
of Patrick Coveney as a Non-Executive Director;
• Considered the effect on the composition and
balance of the Board arising from the retirement
of John Callaghan and identified the requirement
for an independent candidate with recent relevant
accounting experience, resulting in the appointment
of Dan O’Connor as a Non-Executive Director;
• Considered the nomination by the Society of
Brendan Hayes as Non-Executive Director;
• Considered and recommended changes to Board
Committee composition following the new Non-
Executive Director appointments and retirement
of existing Non-Executive Directors; and
• Recommended the appointment of Paul Haran
as Senior Independent Director to replace John
Callaghan on his retirement from the Board.
2014 Committee meeting attendance
Number of full
years on the
Committee
6
13
12 December 2014 Less than 1
9
11
12 December 2014 Less than 1
Member
L Herlihy
J Callaghan1
D Gaynor
P Haran
J Liston2
D O’Connor
Appointed
05 June 2008
08 June 2001
09 June 2005
10 June 2002
2014 Meeting
attendance
7/7
7/7
0/0
7/7
3/3
0/0
1. Retired 1 December 2014
2. Retired 13 May 2014
See pages 64 and 65 for more information on current
Nomination and Governance Committee members
Governance
The Committee was in place throughout 2014. Liam Herlihy,
the Group Chairman, has been Chairman of the Committee
since 2008.
The Committee comprises four Non-Executive Directors,
of whom two members constitute a quorum. 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 meetings of the
Committee as required and such meetings will be chaired by
the Senior Independent Director, Paul Haran.
Key responsibilities
• Making recommendations to the Board on the
appointment and re-appointment of Directors.
• Planning for the orderly succession of new Directors
to the Board.
• Keeping 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 respectively.
• Keeping the extent of Directors’ other interests under
review to ensure that the effectiveness of the Board
is not compromised.
• Keeping under review corporate governance developments
with the aim of ensuring that the Group’s governance policies
and practices continue to be in line with best practice.
• Ensuring that the principles and provisions set out in the
UK Corporate Governance Code and the Irish Corporate
Governance Annex (and any other governance code that
applies to the Company) are observed where appropriate.
• Reviewing the disclosures and statements made in the
corporate governance report to shareholders.
The full terms of reference of the Nomination and
Governance Committee can be found on the Group’s
website: www.glanbia.com or can be obtained from
the Group Secretary.
membership
Allocation of committee time
Non-Executive
Chairman nominated
by Glanbia
Co-operative
Society Limited
Non-Executive
Directors
Board and
Committee
composition
Succession planning
Board effectiveness
Other
76
Glanbia plc 2014 Annual Report and Accounts
Activities during 2014
The principal activities undertaken by the Committee in 2014
are as follows.
Appointment of new Non-Executive Directors
During 2014, the Committee continued to focus on the search
for new Non-Executive Directors as the phased refreshment
of the Board progressed. When recruiting Non-Executive
Directors, the Committee evaluates the particular skills,
knowledge, independence, experience and diversity that
would benefit and balance the Board most appropriately
for each appointment.
Amrop Strategis was engaged to ensure that the widest
possible pool of candidates was available from which to select.
They are signatories to the Voluntary Code of Conduct for
Executive Search Firms and other than assisting the Group
with certain other senior executive searches do not have any
other connection with the Group. Career profiles for potential
Non-Executive appointees were considered by the Committee
and candidates were shortlisted for consideration on merit
and against objective criteria, after assessing their relevant
qualifications and time commitments.
After consideration, the Committee was pleased to
recommend to the Board the appointment of Patrick Coveney
and Dan O’Connor as Non-Executive Directors. Patrick Coveney
was appointed to the Board on 30 May 2014 and Dan O’Connor
was appointed to the Board on 1 December 2014. The Board
considered that these appointments achieved the aim of
appointing a Non-Executive Director with significant
experience of building operations of scale on an international
basis and a Non-Executive Director with recent relevant
accounting experience.
The Committee also recommended the re-appointment of
Brendan Hayes as a Non-Executive Director. The Committee
noted his nomination by the Society and the experience and
suitability of Brendan and recommended his appointment to
the Board of the Company. This was subsequently approved
by the Board on 30 May 2014. The Committee did not use an
external search consultancy or open advertising for the
appointment of Brendan as it was not deemed necessary.
Liam Herlihy has indicated that he will step down as Group
Chairman following the conclusion of the 2015 Annual General
Meeting (AGM). The Society has indicated that David Farrell
and Patrick Gleeson will both retire as Directors of the Society
from the conclusion of the Society’s AGM and accordingly
David and Patrick will not be seeking re-election at the
2015 AGM of the Company and will retire as Non-Executive
Directors immediately following the conclusion of the AGM.
Relationship Agreement with the Society
In compliance with Listing Rule 9.2.2A of the United Kingdom
Listing Authority (UKLA), the Company has entered into a written
legally binding agreement with the Society which is intended
to ensure that the Society complies with the independence
provisions set out in Listing Rule 6.1.4D of the UKLA. This
Relationship Agreement also provides that the governance
arrangements set out on page 79 will apply with respect to
the composition and size of the Board. These provisions mirror
exactly the Board governance arrangements described in the
circular which was sent by the Company to shareholders on
2 November 2012 and approved at the Extraordinary General
Meeting (EGM) held on 20 November 2012.
While the Company continues to regard the Directors nominated
by the Society (the ‘Society Nominee Directors’) as meeting
the criteria for independence specified in the UK Corporate
Governance Code (see page 78), the Society Nominee
Directors are not being designated as independent Directors
for the purpose only of Listing Rule 9.2.2A of the UKLA. This is
to ensure consistency with the agreement reached in 2012 with
regard to the composition and size of the Board and allow for
the planned reduction of the Society’s representation on the
Board as agreed and set out on page 79. The re-election of the
Society Nominee Directors shall not therefore require separate
approval by independent shareholders.
Board and committee changes
The Board’s proactive approach to the refreshment of the
Board of the Company has resulted in orderly changes in
the composition of the Board and its Committees on the
recommendation of the Committee which are set out below.
Jerry Liston did not stand for re-election at the AGM in May
2014 after 11 years of service and John Callaghan retired
on 1 December 2014 as a Non-Executive Director, Audit
Committee Chairman and Senior Independent Director
after 16 years service.
Paul Haran succeeded John Callaghan as Senior Independent
Director on 1 December 2014, and the Board has confirmed
that he continues to demonstrate the characteristics of
independence in carrying out his role on the Board (see page 78).
Donard Gaynor succeeded Jerry Liston as Chairman of the
Remuneration Committee on 13 May 2014 and Dan O’Connor
succeeded John Callaghan as Chairman of the Audit
Committee on 1 December 2014.
www.glanbia.com
77
Governance
Nomination and Governance Committee report continued
Patrick Coveney was appointed to the Audit Committee with
effect from 30 September 2014. Dan O’Connor was appointed
to the Remuneration Committee with effect from 1 December
2014. Donard Gaynor and Dan O’Connor were appointed to
the Nomination and Governance Committee with effect from
12 December 2014.
Additionally, at a meeting of the Committee held on 13 January
2015, consistent with the changes referred to above the
Committee recommended that the Board revise the composition
of the Audit Committee so that its membership comprised only
independent Non-Executive Directors, the Group Chairman
and Vice-Chairmen, bringing its membership in line with the
recommendations of the UK Corporate Governance Code.
Matthew Merrick and Patrick Gleeson therefore both resigned
from the Audit Committee on 24 February 2015 and Donard
Gaynor was appointed.
Policy for appointment of new independent
Non-Executive Directors
The Board is conscious of the importance of planned succession
of independent Non-Executive Directors. The Company has
adopted a formal policy with respect to the appointment of
new independent Non-Executive Directors (other than those
appointed by Glanbia Co-operative Society Limited). Our policy
is that any new independent Non-Executive Directors will be
appointed for an initial three year term, subject to re-appointment
by shareholders at each Annual General Meeting and should
expect to serve no more than three successive three year
terms i.e. a maximum of nine years.
All new independent Non-Executive Directors, and any
re-appointments, will be subject to a rigorous review by the
Committee after the initial three year period and annually
after six years. The changes referred to above are part of the
orderly programme of retirement and appointment to bring the
composition of new independent Non-Executive Directors in
line with this policy.
Regular matters
A number of regular matters were considered by the Committee
in accordance with its terms of reference, details of which are
set out below:
Review of Non-Executive Directors’ independence in
accordance with the guidance in the UK Corporate
Governance Code (2012) and the Irish Corporate
Governance Annex (the ‘Codes’)
The Board evaluation and review process considered the
independence of each of the Non-Executive Directors,
taking into account their integrity, their objectivity and
their contribution to the Board and its Committees.
The Board is of the view that the following behaviours are
essential for a Non-Executive Director to be considered
independent:
• provides an objective, robust and consistent challenge to
the assumptions, beliefs and views of senior management
and the other Directors;
• questions intelligently, debates constructively and
challenges rigorously and dispassionately;
• acts at all times in the best interests of the Company
and its shareholders; and
• has a detailed and extensive knowledge of the Company and
the Group’s business and of the market as a whole which
provides a solid background in which they can consider the
Company and the Group’s strategy objectively and help the
Executive Directors develop proposals on strategy.
The Board and Committee believe that all Non-Executive
Directors demonstrated the essential characteristics of
independence and brought independent challenge and
deliberations to the Board.
The Committee’s review took into consideration the fact that
Paul Haran has served on the Board for more than nine years
(five and a half years of which coincide with the Group Managing
Director’s tenure, the longest co-terminous period with a current
Executive Director) and that 14 of the Non-Executive Directors
are nominated by the Society, both of which the Codes state
could be relevant to the determination of a Non-Executive
Director’s independence. However, the Codes also make
it clear that a director may be considered independent
notwithstanding the presence of one or more of these factors.
This reflects the Board’s view that independence is determined
by the Director’s character as set out above. The Committee
concluded that both Paul Haran and the Society Nominee
Directors continue to demonstrate the essential characteristics
of independence and brought independent challenge and
deliberations to the Board through their character and objectivity;
however notwithstanding this, the Society Nominee Directors
are not being designated as independent directors for the
purpose only of Listing Rule 9.2.2A of the UKLA. Mr Haran was
considered to be independent. This conclusion was presented
to and agreed by the Board.
The Board agreed that Paul Haran should remain on the
Board for the foreseeable future in order to maintain a degree
of certainty and smooth handover of Board and Committee
experience and knowledge and help to integrate the recently
appointed independent Non-Executive Directors and new
Group Chairman following the AGM. This decision was
subject to a rigorous review in line with the new policy on
the appointment of independent Non-Executive Directors.
Re-election of Directors
The Committee continues to be of the view that, in line with
best practice, all Directors should be re-elected to the Board
at the Company’s AGM. All Directors were re-elected at the
2014 AGM, with the exception of Jerry Liston, who was not
put forward for re-election as he had indicated his intention
to retire at the commencement of the AGM.
All Directors are seeking re-election at the 2015 AGM, with
the exception of Liam Herlihy, David Farrell and Patrick Gleeson
who have indicated their intention to retire at the conclusion
of the AGM. The Committee is satisfied that the backgrounds,
skills, experience and knowledge of the Company and the
Group of the continuing Directors collectively enables the Board
and its Committees to discharge their respective duties and
responsibilities effectively. This was supported by the formal
performance evaluation of the Board, the outcome and
recommendations of which are set out on page 58.
78
Glanbia plc 2014 Annual Report and Accounts
Glanbia Co-operative Society
Limited – Right to nominate 14
of the Company’s Directors
The Society currently owns 41.2% of the issued share
capital of the Company. During 2012, the Society and the
Board agreed the following changes, which will impact
the composition and size of the Board in the coming years:
•
•
•
for the years 2014 to 2015 (inclusive) the number of
Society Nominee Directors on the Board will continue
to be up to 14 members;
for 2016 and 2017, the number of Society Nominee
Directors on the Board will reduce to ten members;
for 2018 and subsequent years the number of
Society Nominee Directors on the Board will
reduce to eight members;
• the Group Chairman of the Company will be a Society
Nominee until 2020; and
• up to eight of the Directors on the Board will be
composed of Executive Directors and Non-Executive
Directors who are independent of the Society.
In addition, if the number of Non-Society Nominees on
the Board changes, the number of Society Nominees on
the Board will change on a pro rata basis. Further if the
Society’s shareholding in the Company falls below 40%
of the issued share capital, discussions will take place
regarding a further reduction in the size of the Society’s
representation on the Board.
Additionally in 2015, each of Patrick Coveney, Donard
Gaynor, Paul Haran and Dan O’Connor will seek re-election
at the AGM by separate resolution of the independent
shareholders (i.e. all of the shareholders save the Society
and its subsidiary companies).
We believe that sufficient biographical and other information on
those Directors seeking re-election is provided in this Annual
Report to enable shareholders to make an informed decision.
Review of the time required from a
Non-Executive Director
The Committee assessed the time dedicated to the Company
and the Group by each Non-Executive Director. This review
also considered the extent of the Non-Executive 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 Group
Chairman and each of the Non-Executive Directors commit
sufficient time to the fulfilment of their duties as Group
Chairman and Directors of the Company respectively.
The Group Chairman farms at Headborough, Knockanore,
Tallow, Co. Waterford, but the Committee and the Board
consider that this does not interfere with the discharge
of his duties to the Group.
Succession
The Committee has continued its work on planning for Board
and oversight of Senior Executive succession. The Committee
continues to actively consider succession and has an
appropriate dialogue with the Board and the Chairman
in this regard.
Review of Nomination and Governance 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 that it has met
its terms of reference.
Diversity
The Committee at the current time has not agreed to set a
specific female board member quota. Appointments to the
Board, having regard to the right of the Society to nominate
up to 14 of the 22 Directors, and throughout the Group will
continue to be based on the diversity of contribution and
required competencies, irrespective of gender, age, nationality
or other personal characteristics.
www.glanbia.com
79
Governance
Remuneration Committee report
Setting new remuneration
policy for continued
performance delivery
“The remuneration strategy is to ensure that
Glanbia has in place a policy and structure
that meets Glanbia’s strategic business
ambitions and also attracts, retains and
motivates key talent to deliver long term
sustainable shareholder value.”
Donard Gaynor
Remuneration Committee Chairman
Dear Shareholder,
I am very pleased to present the Remuneration Committee
report for 2014, my first as the Glanbia Remuneration
Committee Chairman following the retirement of Jerry
Liston at the 2014 Annual General Meeting (AGM).
Strategy and performance
The Group has delivered another strong performance in
2014, building on the momentum of recent years. This is the
fifth successive year of double digit increases in adjusted
earnings per share (EPS) on a constant currency basis
which, at 10.1%, was at the upper end of market guidance.
2014 Performance outcomes
The variable elements of our Executive Directors’
remuneration, which consists of an Annual Incentive and
a Long Term Incentive Plan (LTIP), are designed to reward
Directors for performance. The Annual Incentive is based
on a combination of personal objectives, year-on-year
growth in annual adjusted EPS on a constant currency
basis and a strong closing debt/adjusted EBITDA ratio.
As a result, the Executive Directors were awarded an
Annual Incentive of up to 87.5% of Base Salary of which
75% will be paid in cash with the balance of up to 12.5%
deferred into shares deliverable in two years, subject
to a claw back condition.
Share awards in 2012 under the 2008 Long Term Incentive
Plan (2008 LTIP) in respect of performance in the three year
period to 3 January 2015 are based on growth in annual
adjusted EPS on a reported basis, the Group’s relative total
shareholder return (TSR) measured against a peer group
of 12 other international food and nutritional companies and
return on capital employed (ROCE). Glanbia’s performance
against the outlined conditions has been independently verified
by external advisers on behalf of the Remuneration Committee.
The outcome for annual adjusted EPS on a reported basis
is set out on page 92 and shows that actual performance
(14.88%) exceeded maximum expected performance under
the 2008 LTIP (10.38%) over the performance period
2012-2014.
Over the last three years TSR performance has delivered
an increase of 188.44%, placing Glanbia in the top quartile
of its peer group. The ROCE achieved was 13.9% which
exceeded maximum expected performance of 13.5% over
the three year performance period. As a result share awards
granted to Executive Directors in 2012, under the 2008
LTIP will vest in full no earlier than 30 August 2015, being
the three year anniversary of their grant. This is the third
consecutive year for which share awards will vest in full.
Arising from amendments approved by shareholders at the
2012 AGM the final vesting of the 2012 share awards will be
subject to a post vesting holding period of one year.
The tables on pages 90 and 91 set out a summary of the
remuneration earned by Executive Directors in respect of
performance for 2014 and those share awards which will
vest with Executive Directors in respect of performance
in the three year period to 3 January 2015.
80
Glanbia plc 2014 Annual Report and Accounts
Executive Remuneration Policy and
Design Review 2015-2017
Executive remuneration policy and design is reviewed
by the Remuneration Committee on a three year basis.
It was last reviewed in 2011, changes were implemented
at the beginning of 2012 (with shareholder support of 97%)
and that policy ran to the end of 2014.
During the course of 2014, the Remuneration Committee
carried out a further review, with changes proposed to
be implemented during 2015 (with related shareholder
resolutions to be put forward at the 2015 AGM) and the
new policy and design expected to run to the end of 2017.
In terms of the overall context of the review, it is considered
that Glanbia has evolved significantly from the Company
that was reviewed in 2011. The Group has achieved strong
growth and has a stated ambition for this growth to continue
for the next number of years. With the restructuring of the
Group in 2012 and the establishment of the two key global
growth platforms within a portfolio of four business
segments, the strategic focus and direction of the Group
is clear and has driven an increase in share price since the
restructuring of 58.1%. In addition the shareholder base has
altered in the period with the largest shareholder, Glanbia
Co-operative Society Limited (the ‘Society’) having reduced
its shareholding from 54.3% to 41.2%. An ongoing focus on
business segments, as well as the overall Group is extremely
important in driving performance underpinned by a valued
and effective management team.
In light of this, the key question underpinning the 2014 review
was: “What does Glanbia need in terms of a remuneration
policy and structure to meet its strategic business ambitions
and attract, retain and motivate key talent?”
In terms of the key findings of the policy review, it is
considered that there should be:
•
Increasing emphasis on the global nature of the Group
as a market reference for remuneration;
• Greater linkage of Executive Director remuneration to
Company performance, particularly business segment
metrics, where relevant;
•
Increased weighting on long term incentives, with market
benchmarking reflecting trends towards Europe and USA
markets; and
• Greater alignment with shareholders/share value
growth – with significant amounts linked to shares,
increased shareholding requirements and increased
LTIP participation below executive director level (both
in terms of number of participants and quantum).
Details of these changes are explained further on pages
83 to 88.
Non-Executive Director
Remuneration Policy
As part of the overall policy review the Board is planning
modest increases in 2015 to the base fee paid to Non-
Executive Directors, as well as the premium paid to
Committee chairmen and the Senior Independent Director.
Disclosure
We believe that the proposed remuneration policy and
structure, which has been unanimously approved by
the Remuneration Committee and the Board, supports
shareholder value creation, is aligned to our key strategic
imperatives and through this report is transparent. This
remuneration report is designed to be clear and concise,
to meet regulatory requirements and, above all, to provide
you with information to demonstrate the alignment of
remuneration with Company performance.
Glanbia is mindful that it is an Irish incorporated Company
with a primary listing on the Irish Stock Exchange and
a secondary listing on the London Stock Exchange.
Our approach is that the remuneration report should
reference best disclosure practice in both Ireland and
the UK. Best practice and regulatory requirements in the
area of remuneration in the UK have been evolving over
recent years.
In 2013, significant new legislative requirements were
brought into force in the UK in relation to executive
remuneration by the Large and Medium-sized Companies
and Groups (Accounts and Reports) (Amendment)
Regulations (the “2013 UK Regulations”). While as an
Irish incorporated company, Glanbia is not subject to
those UK regulatory requirements, the Group has sought
to apply the new requirements on a voluntary basis to the
extent possible under Irish law.
Shareholder engagement
The Remuneration Committee acknowledge and listen to
the views of the Company’s shareholders and have taken
account of their opinions in formulating the remuneration
principles, the remuneration policy and this remuneration
report. Indeed, the Remuneration Committee has engaged
extensively with its larger institutional shareholders and
voting guidance services in relation to the proposed policy
changes. During this consultation all shareholders, including
the Society, were supportive with no material issues raised.
A number of small changes to the remuneration policy were
adopted arising from the consultation process.
Voting
An advisory non-binding resolution to approve the
remuneration policy for the period 2015-2017 and an
advisory non-binding resolution to approve this Remuneration
Committee report will be put to the AGM on 12 May 2015
together with an ordinary resolution to approve amendments
to the 2008 LTIP. I thank you for your continued support.
I would also like to take this opportunity to thank the members
of the Remuneration Committee for their commitment
during what proved to be a very busy and productive year.
Donard Gaynor
Remuneration Committee Chairman
www.glanbia.com
81
Governance
Remuneration Committee report continued
Key responsibilities of the Remuneration
Committee
• Determine and agree with the Board the framework or
broad policy for remuneration of the Non-Executive
Directors, the Executive Directors and other senior
executives as required.
• Determine, within the agreed policy, individual total
compensation packages for the Non-Executive Directors,
the Executive Directors and other senior executives as
required.
• Recommend to the Board any employee share-based
incentive schemes and any performance conditions
to be used for such schemes.
• Consider and approve Executive Directors’ and other senior
executives’ total compensation arrangements annually.
The full terms of reference of the Remuneration Committee
can be found on the Group’s website: www.glanbia.com
or can be obtained from the Group Secretary.
Governance
The Remuneration Committee was in place throughout 2014.
Donard Gaynor has been Chairman of the Remuneration
Committee since the 2014 AGM. The Remuneration Committee
comprises six Non-Executive Directors, of whom three
members constitute a quorum.
The Group Managing Director and the Group Human
Resources Director attend Committee meetings by invitation
only. They absent themselves when their remuneration is
discussed and no Director is involved in considering his/her
own remuneration. The Group Secretary acts as secretary
to the Remuneration Committee. The position of Group
Human Resources Director was vacant for most of the year
with a new appointment made on 11 December 2014. The
Group Managing Director assumed responsibility during the
time the position was vacant.
Our 2014 highlights
• Completion of the executive remuneration policy and
design review. The steps taken by the Remuneration
Committee in relation to the remuneration policy and
design review included the following:
- Considered the key business needs and forward
looking strategic plan; and
- Determined an appropriate population of
comparative companies in the food industry in
Europe and the USA, and reviewed their practice
and quantum of reward versus Glanbia practice.
• Reviewed pay principles including:
-
-
-
-
the balance of fixed and short/long term elements
of pay;
the current market practice structure of pay and
reward (Ireland, Europe and USA);
the current market practice of the design of
variable pay plans (Ireland, Europe and USA);
the current trends and best governance practice
(Ireland, Europe and USA);
- modelling the remuneration outcomes and the
associated costs; and
- consulting with shareholders and governance
agencies.
• Reviewed the outcomes of Company performance
and personal targets under the 2013 Annual Incentive
scheme for the Group Operating Executive and the
business unit CEOs and approved the payment of
such Annual Incentives including the level of deferral.
• Reviewed and approved the vesting level for share
awards granted in 2011 under the 2008 LTIP.
• Reviewed and approved all share awards made under
the 2008 LTIP during 2014 taking into account the
total value of share awards under the 2008 LTIP.
• Reviewed the UK disclosure requirements and the
Company’s voluntary implementation of many of the
requirements in these regulations.
membership
Allocation of time
Non-Executive
Chairman
Non-Executive
Directors nominated
by Glanbia
Co-operative
Society Limited
Non-Executive
Directors
Framework and policy
Total compensation
package
Annual incentive
Long Term
Incentive Plan
Other
82
Glanbia plc 2014 Annual Report and Accounts
2014 Remuneration Committee meeting
attendance
Member
D Gaynor
J Liston1
L Herlihy
Mn Keane
H Corbally
J Callaghan2
P Haran
D O’Connor
Appointed
13 May 2014
10 June 2002
8 June 2001
29 June 2010
26 July 2011
13 January 1998
9 June 2005
1 December 2014
1. Retired 13 May 2014
2. Retired 1 December 2014
Number of full
years on the
Committee
Less than 1
11
13
4
3
16
9
Less than 1
2014 Meeting
attendance
5/5
2/2
7/7
7/7
6/7
6/6
7/7
1/1
See pages 64 and 65 for more information on current
Remuneration Committee members
Advice and assistance to the Remuneration Committee
The Remuneration Committee receives independent external
advice from Towers Watson, remuneration consultants, in
respect of remuneration policy, pay positioning and best
practice. Towers Watson is a member of the Remuneration
Consultants Group (RCG) and adheres to the RCG Voluntary
Code of Conduct in relation to executive remuneration
consulting (which was originally published in 2009 and is
reviewed biennially). The Remuneration Committee is satisfied
that the advice provided on executive remuneration is objective
and independent and that no conflict of interest arises as a
result of other services. Towers Watson fees for advising the
Remuneration Committee during the year were €139,000.
Legal advice to the Remuneration Committee is provided
by Arthur Cox, who also provides other legal services to the
Group. The Remuneration Committee also receives assistance
and advice on remuneration policy, when required, from Group
Human Resources.
SECTION A: DIRECTORS’ REMUNERATION POLICY REPORT
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 by growing and
developing the business. Performance related elements of
remuneration are designed to form an appropriate portion
of the overall remuneration package of Executive Directors
and link remuneration to Group performance and individual
performance, while aligning the interests of Executive
Directors with those of shareholders.
Our remuneration strategy and policies focus on using
remuneration to drive the implementation of a successful
corporate strategy, within our risk management framework.
This strategy aims to deliver superior earnings growth and TSR
for our shareholders over the long term by attracting, retaining
and motivating high quality and committed people who are
critical to sustaining the future development of the Group.
We seek to:
• Create a consistent global approach to remuneration
by applying our strategy and policy, as far as possible,
to all senior executives;
• Provide a competitive benefits package; and
• Provide an appropriate balance between fixed and
variable remuneration, the payment of which is linked
to the achievement of demanding Group and individual
performance measures.
The Group KPIs, which are detailed on pages 2 and 3,
underpin the selection of performance criteria used within
the incentive arrangements.
We have summarised the individual elements of the
remuneration packages offered to our Executive Directors
on pages 86 and 87.
remuneration consultants, and is proposed to be implemented
with effect from January 2015. The Remuneration Committee
will continue to consider changes in regulation and market
best practice as required and we intend to review again our
remuneration policy and practices in 2017.
Details of the proposed changes are contained on the following
pages, but summarised as follows:
• Re-positioning the remuneration policy to recognise the
global nature of the organisation with European/USA market
geography seen as appropriate.
• Short Term Incentive (STI) performance metrics to be
separately measured at both Company level and individual
level. The Company performance metrics to be Group
adjusted EPS on a constant currency basis (as before),
Group operating cash flow (as defined) and business
segment performance (where relevant). Individual performance
metrics to be set annually by the Group Managing Director.
No increase in quantum (as a percentage of Base Salary)
is proposed.
• The weighting of the LTIP performance metrics have been
altered as follows:
- The performance metrics altered to both reduce the
relative influence of TSR (for all participants) and, where
relevant and appropriate, to increase the relevance of
business segment performance;
-
Increase in the current LTIP participation levels across
the senior leadership of the Group;
- Realignment of the threshold vesting levels of the LTIP
performance measures;
- The LTIP post vesting holding period lengthened from
one year to two years; and
-
Introduction of malus and claw back provisions
for the LTIP.
Executive Remuneration Policy and Design
Review – summary of changes
Executive remuneration policy and design is reviewed by the
Remuneration Committee on a three year basis and accordingly
was reviewed in 2014, with the advice of Towers Watson,
•
Increased shareholding requirement for all members
of the Group Operating Executive.
• Modest increase to the base fee paid to Non-Executive
Directors, as well as the premiums paid to Committee
chairmen and the Senior Independent Director.
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Remuneration Committee report continued
Executive Remuneration Policy and Design Review – details of proposed changes
As outlined in the Remuneration Committee Chairman’s report, the Remuneration Committee has engaged with its larger
institutional shareholders and voting guidance services in relation to the proposed policy changes. During this consultation
all shareholders, including the Society, were supportive with no material issues raised. A number of small changes to the
remuneration policy were adopted arising from the consultation process.
Following the proposed changes, the Remuneration Committee believes that the level of remuneration for the Executive Directors
is appropriately positioned relative to European and USA markets, being at or slightly below median levels.
Element
Base Salary
Annual Incentive
Policy Changes for 2015 – 2017
Design Changes for 2015 – 2017
Definition of market for pay by reference
to European and USA companies of
similar size and complexity.
Definition of market for Annual Incentive
levels determined by reference to European
and USA companies of similar size and
complexity, median to upper quartile levels.
Greater linkage to KPIs.
No change in levels proposed but a flexible policy going
forward, with reference to different market perspectives.
In considering the market position of each individual,
the Remuneration Committee/management to continue
to consider the value an individual brings at his/her
particular level to the organisation as a whole.
No change in levels proposed.
Range of Annual Incentive potential to remain at 0%
to 150% of Base Salary.
Key Group financial metrics to be Group adjusted
EPS on a constant currency basis (as before), Group
operating cash flow and individual performance objectives.
Calibration details are considered to be commercially
sensitive, but will include significant stretch and targets
will be based on a mix of market expectations and
budgeted expectations.
For the Group Managing Director and Finance Director,
the weighting is proposed to be: Group adjusted EPS on
a constant currency basis (56%), Group operating cash
flow (24%) and individual performance objectives (20%).
Recognising Group/divisional responsibility. Financial performance metrics tailored to business
Ensure strategic and individual goals
are capable of being rewarded outside
of financial delivery.
Shareholding
Guidelines
Ensure a greater alignment with
shareholders’ interests through
own shareholding.
segment, where relevant.
For business segment Executive Directors, the
proposed weightings are: Group adjusted EPS on
a constant currency basis (40%), Group operating
cash flow (20%), business segment EBITA (20%)
and personal objectives (20%).
Individual performance objectives are separate from
financial performance.
For the Group Managing Director the share ownership
recommended level is 250% of Base Salary (from 200%)
to be built up and maintained over a maximum of five
years. For other Executive Directors the share ownership
recommended level is 150% of Base Salary (from 100%)
to be built up and maintained over a maximum period
of five years.
A quality of earnings review/underpin will continue to be exercised at the discretion of the Remuneration Committee.
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Element
Policy Changes for 2015 – 2017
Design Changes for 2015 – 2017
Long Term Incentive
Definition of market for LTIP levels
by reference to European and USA
companies of similar size and complexity.
Focus on greater alignment with
shareholders, long term retention and
reward for performance recognising
different market dynamics and
contribution/alignment of the senior
leadership team to share value delivery.
Greater linkage to KPIs, with reduced
influence of relative TSR.
Greater focus on line of sight business
metrics to drive and recognise
performance of the Group.
Maximum award face value to increase from 150%
to 250% of Base Salary.
Proposed award levels for 2015: 250% for Group
Managing Director (from 150%) and 200% for other
Executive Directors (from 150%).
Key Group financial metrics to be Group adjusted EPS
on a reported basis, Group ROCE and relative TSR.
For the Group Managing Director and the Group
Finance Director, the weighting is proposed to be:
Group adjusted EPS on a reported basis (50%),
Group ROCE (30%) and relative TSR (20%).
Relative TSR comparator, for all LTIP participating
groups to be changed to the STOXX Europe 600 Food
and Beverage index (which is considered more relevant).
Financial performance metrics tailored to business
segment, where relevant.
For business segment Executive Directors, the weighting
is proposed to be: Group adjusted EPS on a reported
basis (40%), Group ROCE (15%), relative TSR (15%),
business segment EBITA (20%) and business segment
ROCE (10%).
Post vesting holding period, malus and
claw back.
Post vesting holding period of two years (from one year)
for all future awards.
Introduction of malus and claw back provisions, in line
with best practice, to be applicable for all future awards.
Calibration of performance metrics.
Vesting calibration is proposed to be as follows:
Group adjusted EPS on a reported basis – threshold
vesting at 6% CAGR (reported) over three years,
maximum vesting at 12% CAGR (reported).
Group ROCE – threshold vesting at 12% (average over
three years), maximum vesting at 14%.
Relative TSR – threshold vesting at median of the index
performance and maximum vesting for upper quartile
of the index.
Straight line pro rata vesting between threshold and
maximum for each of the performance conditions.
The threshold level, for all performance metrics has
been realigned to 25%. Previous levels were 50%
(EPS), 30% (TSR) and 0% (ROCE).
Calibration details for business segment EBITA
and business segment ROCE are considered to
be commercially sensitive, but will include significant
stretch and targets will be based on a mix of market
expectations and budgeted expectations.
Quality of earnings review/underpin will continue to be
exercised at the discretion of the Remuneration Committee.
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Remuneration Committee report continued
Key elements of remuneration for Executive Directors (to reflect proposed changes)
Element
Description
Objective
Details (including maximum value)
Base Salary
Annual fixed
pay.
Provide competitive base
pay which reflects market
value of role, job size,
responsibility and individual
skills and experience.
Set by reference to the relevant market median of Europe and
USA based on an external independent evaluation of the role
against appropriate peer companies.
Reviewed annually by the Remuneration Committee.
Any reviews, unless reflecting a change in role, usually take
effect from the commencement of the relevant financial year.
Pension
Benefit
Retirement
benefits.
Other
Benefits
Annual
Incentive
Car benefit
or equivalent,
suitable
medical
insurance,
re-location
expenses
(if applicable)
and overseas
allowance
where
appropriate.
Annual payment
only earned if
agreed target
performance is
achieved.
Provide competitive,
affordable and sustainable
retirement benefits.
Provide competitive benefits
which recognise market
value of role, job size and
responsibility.
Incentivise Executive
Directors to achieve
specific performance
goals which are linked
to the Group’s business
plans and personal
performance objectives
during a one year period.
Ensure greater linkage
of remuneration to
performance.
Ensure greater linkage
to long term sustainability
and alignment to Group
risk management policy.
Alignment with
shareholders/share
value growth.
Range of Annual Incentive potential of 0% to 150%
of Base Salary.
Based on growth in annual Group adjusted EPS on a
constant currency basis, Group operating cash flow,
business segment EBITA (where appropriate) and
individual performance objectives, all as determined
by the Remuneration Committee annually.
Performance targets are set by the Remuneration
Committee each year.
Deferral of the proportion of the Annual Incentive earned in
excess of 75% of Base Salary which, once the appropriate
taxation and social security deductions have been made,
will be invested in shares in the Company and delivered to
the Executive Directors two years following this investment.
Deferred incentives may be subject to malus and claw back
(for a period of two years following this investment) to the
extent deemed appropriate by the Remuneration Committee
in line with best practice.
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Element
Description
Objective
Details (including maximum value)
Long Term
Incentive
Plan
LTIP under
which shares
are granted
in the form of
a provisional
allocation of
shares for
which no
exercise price
is payable.
The 2008 LTIP aligns
the interests of Executive
Directors and shareholders
through a long term share
based incentive linked to
share ownership and
holding requirements.
In addition, as part of
the overall total direct
compensation package
it ensures that a greater
proportion is based on
long term sustainable
results and linkage to key
long term performance
indicators.
Ensure a greater alignment
with shareholders’ interests.
Shareholding
requirement
Minimum
share
ownership
requirements
to be built
up over a five
year period.
Long Term Incentive individual annual award level of a maximum
of 250% of Base Salary. The award is determined by reference
to three performance metrics for the Group Managing Director
and Group Finance Director:
• 50% based on Group adjusted EPS on a reported basis;
• 30% based on Group ROCE; and
• 20% based on Relative TSR against the STOXX Europe 600
Food and Beverage index.
In all cases, 25% vests at threshold performance and
100% vests at maximum with straight line vesting in between
these levels.
For business segment Executive Directors, the weighting of the
award is proposed to be: Group adjusted EPS on a reported
basis (40%), Group ROCE (15%), Relative TSR (15%), business
segment EBITA (20%) and business segment ROCE (10%).
Performance is measured over a three year period.
Share awards will vest early in the event of a takeover, merger,
scheme of arrangement or other similar event involving a change
of control of the Company, subject to the pro-rating of the share
awards, to reflect the reduced period of time between the
commencement of the performance period and the early vesting,
although the Remuneration Committee can decide not to pro-rate
a share award if it regards it as inappropriate to do so in the
particular circumstances.
A share award shall not vest unless the Remuneration
Committee is satisfied that the Group’s underlying financial
performance has shown a sustained improvement in the period
since the date of grant. The extent of vesting shall be determined
by the Group adjusted EPS on a reported basis, ROCE and TSR
performance conditions as appropriate, and in addition where
relevant, business segment EBITA and ROCE.
Executive Directors are required to hold shares received
pursuant to the vesting of LTIP awards for a minimum period
of two years post vesting.
The Remuneration Committee has the discretion to change the
performance criteria (including the measures, their weighting and
calibration) where deemed appropriate. Any changes to these
performance conditions will be disclosed in the Remuneration
Committee report which will be subject to a general shareholder
non-binding advisory vote.
Future LTIP awards may be subject to claw back (for a period
of two years following vesting) to the extent deemed appropriate
by the Remuneration Committee in line with best practice.
The Group Managing Director is required to build and maintain
a shareholding of 250% of Base Salary over a maximum of five
years. Other Executive Directors are required to build up and
maintain a shareholding of 150% of Base Salary over a
maximum of five years.
Executives are expected to build a shareholding through
the vesting of shares under the Group’s 2008 LTIP.
Existing shareholdings and shares acquired in the market are
also taken into account, and although share ownership guidelines
are not contractually binding, the Remuneration Committee
retains the discretion to withhold future grants under the 2008
LTIP if Executive Directors do not comply with the guidelines.
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Remuneration Committee report continued
Key elements of remuneration beyond executive directors
The above framework is used for the Group’s Executive Directors. Glanbia’s remuneration principles and policy are also
applied, as far as possible, across the Group below this level, taking account of seniority and local market practice.
Many of the features outlined above will therefore continue to apply across the Group, but some principal differences
are as follows.
Element
Objective
Details
Annual
Incentive
Focus on business
responsibilities for individuals
and ensure an appropriate
deferral percentage based
on position and role.
Long Term
Incentive
Ability to offer increased level
of share awards in markets
where there are high levels
of long term incentives.
Ensure line of sight to business
unit metrics.
The Annual Incentive potential will be based on appropriate and specific
business unit measures, as determined by the Remuneration Committee.
Deferral of the proportion of the Annual Incentive earned in excess of 50%
of Base Salary which, once the appropriate taxation and social security
deductions have been made, will be invested in shares in the Company
and delivered two years following this investment.
Material increases in maximum award potential to further align and create
an ownership culture, better aligned with market expectations.
In addition to key Group financial metrics, the Long Term Incentive level
will also be focused on appropriate and specific business unit measures,
as determined by the Remuneration Committee.
In order to retain or recruit exceptional key employees, there is the ability
to offer restricted stock, time based only, for key employees (particularly
on recruitment).
All future awards under the LTIP may be subject to malus and claw back
to the extent deemed appropriate by the Remuneration Committee in line
with best practice.
Shareholding
guidelines
Ensure a greater alignment with
shareholders’ interests through
own shareholding.
For business unit CEOs, the share ownership recommended level is
75% of Base Salary to be built up over a maximum period of five years.
Key elements of remuneration for Non-Executive Directors
The remuneration policy for the Group Chairman and Non-Executive Directors is summarised below:
Element
Fees
Description
Objective
Details
Annual fixed pay.
Recognise market
value of role, job size,
responsibility and
reflects individual
skills and experience.
Set by reference to the relevant market median based on an
external independent evaluation of comparator companies
of a similar scale and complexity.
Reflects a base fee for the role of Non-Executive Director
and additional fees reflecting responsibilities for membership
of a sub-committee of the Board.
Reviewed from time to time by the Remuneration Committee
and the Board. Any reviews usually take effect from 1 January
in the relevant year.
Such expenses may include travel in the course of the role
for the Group.
2015 €
105,000
52,500
80,000
80,000
80,000
70,000
35,000
2014 €
100,000
47,500
72,500
75,000
75,000
67,500
30,000
Benefits and
Expenses
No additional
benefits are provided
other than direct
expenses relating
to the role.
Reimburse role based
expenses incurred
during performance of
the duties of the role.
Non-Executive Director fees
Role
Chairman
Vice-Chairmen
Senior Independent Director
Audit Committee Chairman
Remuneration Committee Chairman
Non-Executive Director
Society nominated Non-Executive Director
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Glanbia plc 2014 Annual Report and Accounts
The Non-Executive Directors do not have service contracts,
but 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 AGM of the Company.
The Non-Executive Directors do not have periods of notice and
the Group has no obligation to pay compensation when their
appointment terminates. They are subject to annual re-election
at the AGM of the Company.
Recruitment policy
When recruiting new Executive Directors, the Group’s policy
is to pay what is necessary to attract individuals with the skills
and experience appropriate to the role to be filled, taking into
account remuneration across the Group, including other senior
executives, and that offered by other international food and
nutritional companies and other companies of similar size and
complexity. New Executive Directors will generally be appointed
on remuneration packages with the same structure and pay
elements as described in the table on pages 86 and 87. Each
element of remuneration to be included in the package offered
to a new Executive Director would be considered.
On appointment to the Board for either an external or
internal candidate:
• Base Salary levels will be set in consideration of the new
recruit’s existing salary, location, skills and experience and
expected contribution to the new role, the current salaries
of other Executive Directors in the Group and current market
levels for the role;
• Pension will be considered in light of the retirement
arrangements which are in place for the other Executive
Directors with a contribution level considered by the
Remuneration Committee to be appropriate in light of the
new recruit’s package as a whole, market practice at the
time and internal equities;
• Other benefits will be considered in light of the provisions
in place for the other Executive Directors;
• For Annual Incentive, the Group will consider whether it is
appropriate for the new recruit to participate in the same
Annual Incentive plan applicable to the current Executive
Directors. If this is considered appropriate, the same
financial measures, weighting, payout scale and target
and maximum bonus opportunity (as a percentage of
Base Salary) which apply to the existing Directors will
generally apply to the new recruit;
• The award of long term incentives will depend on the timing
of the appointment and where this fits into the typical annual
grant cycles; and
• The maximum level of variable remuneration which may
be granted to a new recruit is 400% (i.e. 150% maximum
Annual Incentive plus 250% maximum LTIP) excluding any
buyout awards that might arise.
For an external appointment, although there are no plans
to offer additional cash and/or share based payments on
recruitment, the Remuneration Committee reserves the right
to do so when it considers this to be in the best interests of
the Group, the Company and its shareholders. Such payments
may take into account remuneration relinquished when leaving
the former employer and would reflect the nature, time horizons
and performance requirements attached to that remuneration.
The Remuneration Committee may grant share awards on
hiring an external candidate to buyout awards which will be
forfeited on leaving the previous employer.
The Remuneration Committee’s approach to this is to carry
out a detailed review of the awards which the individual will
lose and calculate the estimated value of them. In doing so,
the Remuneration Committee will consider the vesting period,
the award exercise period if applicable, whether the awards
are cash or share based, performance related or not, the
Company’s recent performance and payout levels and
any other factors the Remuneration Committee considers
appropriate. If a buyout award is to be made, the structure
and level will be carefully designed and will generally reflect
and replicate the previous awards as accurately as possible.
The award will be made subject to appropriate claw back
provisions in the event that the individual resigns or is
terminated within a certain time frame.
For an internal appointment, any variable pay element awarded
in respect of the prior role may be allowed to pay out according
to its terms, adjusted as relevant to take into account the
appointment. In addition, any outgoing remuneration obligations
existing prior to appointment (which are inconsistent with the
policy as disclosed herein) may continue, provided they are
disclosed to the Remuneration Committee. Although there are
no plans to offer additional cash and/or share based payments
on an internal promotion, the Remuneration Committee
reserves the right to do so when it considers this to be in the
best interests of the Group, the Company and its shareholders.
Exit payment policy
The letters of appointment for Executive Directors do not
provide for any compensation for loss of office beyond
payments in lieu of notice, and therefore, except as may
otherwise be required by Irish law, the maximum amount
payable upon termination is limited to 12 months payment.
The Remuneration Committee retains the discretion to make
additional payments to Directors upon termination.
In the event an Executive Director leaves for reasons of
death, injury, disability, redundancy, retirement or any other
exceptional circumstance or by agreement with the Group,
which the Remuneration Committee in its absolute discretion
permits, any outstanding share awards will be pro-rated for
time and performance and will vest at the end of the period.
In addition, in the event of a takeover, merger, scheme of
arrangement or other similar event involving a change of
control of the Company or a demerger of a substantial part
of the Group or a special dividend which has the effect of
materially changing the Group’s business or other similar
event that affects the Company’s shares to a material extent
share awards will vest early, subject to the pro-rating of the
share awards to reflect the reduced period of time between
the commencement of the performance period and the early
vesting, although the Remuneration Committee can decide
not to pro-rate an award if it regards it as inappropriate
to do so in the particular circumstances.
In all other circumstances, outstanding share awards will lapse.
There have been no payments made during the year in relation
to compensation for loss of office by an Executive Director.
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Remuneration Committee report continued
Details of Executive Directors’ service
contracts
The Executive Directors are employed under contracts
of employment with Glanbia plc (or one of its subsidiary
companies). No Executive Director has a service contract with
a notice period in excess of 12 months or with provisions for
pre-determined compensation on termination which exceed
12 months’ salary and benefits-in-kind and accordingly there
are no service contracts which are required to be made
available for inspection.
Policy on external Board appointments
The long-standing policy of allowing Executive Directors to hold
external non-executive directorships with the prior approval of
the Remuneration Committee will continue. The Remuneration
Committee considers that external directorships provide the
Group’s Executive Directors with valuable experience that is
of benefit to Glanbia. The Remuneration 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. Other than
Siobhán Talbot’s appointment to the IBEC Board, for which
she does not receive any fee, the Executive Directors have
no external directorships and no other fees earned.
Consideration of employment conditions
elsewhere in the Company
The Remuneration Committee considers all employees across
the Group when establishing and implementing policy for
Executive Directors. All senior and high performing individuals
within the organisation are invited to participate in both annual
and long term incentive arrangements, similar to the Executive
Directors to ensure reward strategy is calibrated to provide
substantive reward only on achievement of superior performance.
The Remuneration Committee does not consult directly with
employees when formulating Executive Director pay policy.
However, it does take into account information provided by
the Human Resources function and the independent external
advice from Towers Watson, remuneration consultants.
SECTION B: DIRECTORS’ REMUNERATION IMPLEMENTATION REPORT
This section of the report explains how Glanbia’s remuneration policy has been implemented during the financial year.
The remuneration for 2014 for each of the Executive Directors is set out in the table below:
Fixed
Variable
Total
Salary
€’000
Pension
Contribution
€’000
Other Benefits
€’000
Annual Incentive
(paid in cash)1
€’000
Annual Incentive
(deferred into
shares)2
€’000
2014 Total3
€’000
2013 Total3
€’000
750
400
400
390
–
–
199
64
60
114
–
–
20
19
116
17
–
–
563
300
300
293
–
–
94
50
50
26
–
–
1,626
833
926
840
–
–
1,029
129
584
876
1,207
95
Executive Directors
S Talbot4
M Garvey5
H McGuire6
B Phelan
J Moloney7
K Toland8
1. This reflects the proportion of the Annual Incentive payable to Executive Directors in respect of performance for the year 2014 (which amount to 75%
of Base Salary), which will be paid through salary in 2015.
2. This reflects the proportion of the Annual Incentive which, once the appropriate taxation and social security deductions have been made, will be invested
in shares in the Company and delivered to the Executive Directors two years following this investment (2017).
3. Remuneration disclosed refers to each Director’s period of appointment on the Board in 2013 and 2014.
4. Appointed as Group Managing Director on 12 November 2013.
5. Appointed to the Board on 12 November 2013.
6. Appointed to the Board on 01 June 2013. Other benefits include an overseas allowance of €98,964 (2013 (part): €54,389).
7. Retired on 12 November 2013.
8. Resigned on 5 January 2013.
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Glanbia plc 2014 Annual Report and Accounts
2008 LTIP
It is expected that share awards granted to Executive Directors,
under the 2008 LTIP in 2012, will vest in 2015 as follows:
Base Salary
Base Salaries for the Executive Directors are determined
by the Remuneration Committee as set out on page 86.
Executive Directors
S Talbot
H McGuire
B Phelan
J Moloney1
1. Retired 12 November 2013
Number of
share awards
The following table sets out the closing 2014 Base Salary
for each of the Executive Directors.
90,500
46,500
46,500
64,126
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
Base Salary €
750,000
400,000
400,000
390,000
Comparison of overall performance and pay
The chart below shows the value over the last three financial
years of €100 invested in Glanbia plc compared with that
of €100 invested in the STOXX Europe 600 Food and
Beverage index. A hypothetical €100 investment in Glanbia
plc on 1 January 2012 would have generated a total return
(inclusive of original investment) of €285.88 compared with
a total return of €154.70 if invested in the STOXX Europe
600 Food and Beverage index. The Committee believes that,
due to the size/industry of the Group, this index is the most
appropriate index against which to compare the historic TSR
of the Group.
Total Shareholder Return
300
250
200
150
100
2011
2012
2013
2014
Glanbia
STOXX Europe 600 Food and Beverage index
At the time when Siobhán Talbot was appointed as Group
Managing Director in November 2013 (having been appointed
as Group Managing Director designate in June 2013), it was
agreed that her initial base pay level would be reviewed in the
period following her appointment, including by reference to
appropriate peers. During 2014, the Remuneration Committee
therefore considered managing director base pay levels against
a number of peers (across Ireland, the UK and USA), which
demonstrated that Siobhán’s Base Salary was significantly
below relevant levels reviewed. In light of this review, and her
development in the role, Siobhán’s annual Base Salary was
increased to €750,000 with effect from 1 January 2014. No
change to the Base Salaries of Executive Directors for 2015
is proposed.
Pension
Siobhán Talbot is a deferred member of a Glanbia defined
benefit pension scheme. In light of the cap on pension benefits
introduced in the Irish Finance Act 2006, and subsequently
amended in December 2010, the Remuneration Committee
reviewed the pension arrangements for Executive Directors
and agreed, with effect from 1 January 2012, to offer the
option to Siobhán Talbot to receive a taxable payment of 25%
of salary in lieu of pension benefits. Following a further review
in 2014 this rate was increased to 26.5% of Base Salary.
Brian Phelan is an active member of the Group’s defined
benefit plan which is based on an accrual rate of 1/60th
of pensionable salary.
There is provision for Siobhán Talbot and Brian Phelan
to retire at 60 years of age.
Hugh McGuire and Mark Garvey participate in a defined
contribution retirement plan, to which contributions are made
at an agreed rate.
Other benefits
Employment related benefits include the use of company
cars, medical/life assurance, relocation costs and overseas
allowance, where appropriate.
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Governance
Remuneration Committee report continued
Annual Incentive
The Group operates a performance related incentive scheme
for Executive Directors and other senior executives as set
out on page 86. The Committee believes that this method
of assessment is transparent, rigorous and balanced, and
provides an appropriate and objective assessment of
annual performance.
For the annual period to 3 January 2015, each Executive
Director could earn up to 150% of Base Salary for maximum
performance measured against growth in adjusted EPS on
a constant currency basis (120%) and delivery of targeted
closing debt/adjusted EBITDA ratios (30%, provided a
minimum adjusted EPS threshold is achieved).
In addition, each Executive Director had individual performance
targets which must also be met to obtain the maximum incentive
level. The personal objectives are specific and measurable and
are determined at the commencement of the financial year.
These comprise each individual’s contribution to the Group
Operating Executive, delivery against projects and initiatives
within the scope of his/her role, and his/her contribution to the
overall performance of the Group. Personal performance of the
Executive Directors has been reviewed and the outcomes
reflected in the Annual Incentive earned in the year.
The performance of the Group during the year included
adjusted EPS growth on a constant currency basis of 10.1%
and a strong closing debt/adjusted EBITDA ratio. In light of
the above performance, the Committee concluded that up
to 87.5% of Base Salary is payable to each Executive Director
as set out on page 90.
Long Term Incentive Plan
The principal Long Term Incentive Plan for Executive Directors
is the 2008 LTIP, which has received shareholder approval.
This Long Term Incentive Plan was amended in 2012 with
shareholder approval. It is the Committee’s view that the
combination of the Annual Incentive Plan and the 2008 LTIP
provide an appropriate balance between short term reward
and long term share based reward in accordance with
recommended best practice.
Long Term Incentives (share awards with performance
periods ending in the year)
Long Term Incentive share awards granted in August 2012
had a three year performance period ending on 3 January
2015 with one third of the award subject to satisfaction of an
adjusted EPS growth target, one third subject to a relative
TSR performance target and one third subject to a ROCE
performance target.
EPS performance condition
100% of the EPS element is capable of vesting as determined
by the rate of growth in reported EPS as compared to the
Consumer Price Index (CPI) over the three year performance
period. Adjusted EPS is calculated as the profit attributable to
the equity holders of the Group before exceptional items and
intangible asset amortisation (net of related tax), divided by the
weighted average number of ordinary shares in issue during
the year.
The rationale for the EPS performance condition is that
investors consider adjusted EPS to be a key indicator of
long term financial performance and value creation of a public
limited company. The Committee exercised its discretion
under Rule 5.2 of the 2008 LTIP rules and applied the
continuing basis of accounting when assessing the EPS
performance condition.
This adjustment to the performance condition was made
to effectively treat Glanbia Ingredients Ireland Limited as an
Associate in the accounts for 2011 (it became an Associate
in 2012). The Committee considers this like for like basis of
calculation to be more appropriate and consistent with a
modest impact on the vesting outcome of the 2012 awards.
As a result, in the three year period ended 3 January 2015,
the Group delivered growth in reported adjusted EPS on a
continuing basis of 14.88% Compound Annual Growth Rate
(CAGR). This will result in 100% of the EPS element vesting to
each Executive Director. The vesting conditions are as follows:
EPS element vesting
Threshold performance
(Three year adjusted EPS growth equal
to CPI plus 5% compounded (5.38%))
Maximum performance
(Three year adjusted EPS growth equal
to CPI plus 10% compounded (10.38%))
Actual performance (Three year adjusted
EPS growth equal to 14.88%)
50%
100%
100%
The table below shows the Group’s reported adjusted EPS
over the performance period for continuing operations.
2011
2014
40.34c
61.16c
TSR performance condition
100% of the TSR element is capable of vesting as determined
by the Group’s TSR ranking relative to an agreed comparator
group of 12 other international food and nutritional companies.
TSR represents the change in the capital value of a listed/
quoted company over a period, plus dividends reinvested,
expressed as a plus or minus percentage of the opening value.
TOTAL SHAREHOLDER RETURN
300
240
180
120
60
Jan 2012
Jan 2015
Glanbia
Peer group (median)
92
Glanbia plc 2014 Annual Report and Accounts
The rationale for using a TSR performance condition 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 share awards only vest
if there has been a clear improvement in the Group’s relative
performance over the relevant period.
The graph on page 92 shows that, under the terms of the
2008 LTIP, at 3 January 2015, a hypothetical €100 invested in
Glanbia plc on 1 January 2012 would have generated a total
return (inclusive of original investment) of €288.44 compared
with a total return of €188.79 if invested in the median
performer from the peer group. This will result in 100% of the
relative TSR element vesting to each Executive Director. The
methodology on which TSR is calculated for LTIP purposes
differs from the TSR calculation on page 91 due mainly to the
use of a 30 day average base and final share price in the LTIP
calculation. The vesting conditions are presented below.
TSR element vesting
Threshold performance
(Ranked halfway)
Maximum performance
(Ranked in top quartile)
Actual performance
(Ranked in top quartile)
30%
100%
100%
ROCE performance condition
100% of ROCE element is capable of vesting, as determined
by ROCE as set out below. ROCE is calculated as Group
earnings before interest and amortisation net of tax plus
Glanbia’s share of results of Joint Ventures & Associates
after interest and tax divided by capital employed. Capital
employed is calculated as the sum of the Group’s total assets
less current liabilities, excluding all borrowings, cash and
deferred tax balances plus cumulative intangible asset
amortisation. The rationale for using ROCE is that it highlights
the returns generated from capital invested in the business and
will show how the Group adds to shareholder value over the
long term.
ROCE element vesting
Threshold performance
(Three year simple ROCE average
equal to 12.5%)
Maximum performance
(Three year simple ROCE average
equal to 13.5%)
Actual performance
(Three year simple ROCE average
equal to 13.9%)
0%
100%
100%
In light of the performance against the EPS growth target,
relative TSR and ROCE targets, the Committee confirmed that
100% of the total 2012 LTIP share award is capable of vesting
to each Executive Director.
Long Term Incentives (share awards made in the
financial year)
Long term incentive share awards were made to the Executive
Directors in July 2014 and will vest in July 2017, subject to the
achievement of TSR, EPS and ROCE performance conditions.
The performance period will end on 31 December 2016. The
vesting conditions are summarised below.
Performance targets for outstanding share awards
The performance targets for all outstanding 2008 LTIP share awards are set out in the following tables:
Adjusted EPS growth
2012-2014
(33% of award)
Vesting Level
0%
Three year adjusted
EPS growth less than
CPI plus 5% compounded
50%*
Three year adjusted
EPS growth equal to
CPI plus 5% compounded
100%*
Three year adjusted EPS
growth equal to or greater than
CPI plus 10% compounded
* Straight line vesting between adjusted EPS growth equal to CPI plus 5% compounded and adjusted EPS growth equal to or greater than CPI
plus 10% compounded.
TSR Ranking in the comparator group
Vesting Level
0%
2012-2014 (33% of award) Ranked below the top half
30%*
Ranked half way
100%*
Ranked in the top quartile
* Straight line vesting where ranked between half way and the top quartile.
Return on Capital Employed
2012 (33% of award)
2013 (33% of award)
2014 (33% of award)
Vesting Level
0%
Less than 12.5%
Less than 13.5%
Less than 13.0%
0%*
12.5%
13.5%
13.0%
* Straight line vesting between threshold performance and maximum performance.
100%*
13.5%
14.5%
14.0%
www.glanbia.com
93
Governance
Remuneration Committee report continued
Directors’ shareholdings
As at 3 January 2015, the Executive Directors’ share ownership against the guidelines was as follows:
Shares held as at 3 January 2015
% of Base Salary based
on market value as at
3 January 2015
Compliance with
shareholding guidance
Executive Directors
S Talbot
H McGuire
B Phelan
M Garvey*
194,431
123,118
115,013
849
332%
394%
378%
3%
250%
150%
150%
–
* Mark Garvey joined the Group on 12 November 2013 and has a maximum of five years to build up his shareholding in the Company to 150% of his
Base Salary.
Dilution
Share awards granted under the 2008 LTIP and the
Annual Deferred Incentive are satisfied through the funding
of employee benefit trusts which acquire shares in the
market. The employee benefit trusts held 715,558 shares
at 3 January 2015.
The exercise of share options under the 2002 LTIP (which
expired in 2012) is satisfied by the allotment of newly issued
shares. At 3 January 2015 the total number of shares which
could be allotted under this scheme was 210,000 shares
which represent significantly less than one percent of the
issued share capital of the Company.
The Group Chairman and Non-Executive
Directors
Liam Herlihy was appointed Group Chairman on 28 May 2008.
His appointment is subject to annual re-appointment by the
shareholders at the AGM of the Company. His appointment
as Group Chairman will automatically terminate if he ceases
to be a Director of the Company or a Director of Glanbia
Co-operative Society Limited.
The Group Chairman’s fee is set by the Remuneration
Committee and for 2015 is €105,000 per annum (2014: €100,000).
This fee reflects the level of commitment and responsibility of
the role and is set by reference to the relevant market median
based on an external independent evaluation conducted by
Towers Watson, remuneration consultants.
Implementation of policy in 2014
Base Salary is reviewed on an annual basis. The Base Salaries
of Executive Directors for 2015 remain unchanged from 2014
and are set out on page 91.
Following on from the remuneration policy review carried out
in 2014 the Remuneration Committee has determined that the
Annual Incentive opportunity for Executive Directors and senior
executives in 2015 will be contingent on meeting targets relating
to EPS, Group operating cash flow and individual performance
objectives, with financial performance metrics tailored to business
segment where relevant. The Committee intends that the
financial targets will include significant stretch and will be based
on a mix of market expectations and budgeted expectations.
The Committee will review the performance measures for
share awards under the 2008 LTIP, to be granted in 2016
and beyond, to ensure they remain appropriately stretching
in light of the Group’s expectations of performance and those
of external analysts.
Review of Committee performance
The Board and Committee assessed its performance,
covering its 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.
Information subject to audit
The information in Tables A to G is covered by the Independent
Auditors’ report on page 116. The tables give details of the
Directors’ remuneration and interests in shares in Glanbia plc
and Glanbia Co-operative Society Limited held by Directors
and the Group Secretary and their connected persons
as at 3 January 2015. There have been no changes in the
interests listed in Tables B to G between 4 January 2015 and
24 February 2015. The market price of the ordinary shares as
at 3 January 2015 was €12.805 and the range during the year
was €13.06 to €10.48. The average price for the year was €11.34.
Results 2014—Resolution to receive and consider 2013 Remuneration Committee Report
For
194,618,425
%
97.23%
Against
5,543,778
* Votes withheld are not votes in law.
Total excluding
withheld
2.77% 200,162,203
%
%
100%
Withheld*
109,885
Total including
withheld
0.05% 200,272,088
%
94
Glanbia plc 2014 Annual Report and Accounts
Table A: 2014 Directors’ Remuneration
The salary, fees and other benefits pursuant to the remuneration package of each Director during the year were:
Date of appointment/
resignation, if
applicable
Salary
€’000
Fees
€’000
Executive Directors
S Talbot4
M Garvey
H McGuire5
B Phelan
J Moloney
K Toland
2014
2013
App. 12 Nov 13
App. 01 Jun 13
Ret. 12 Nov 13
Res. 05 Jan 13
Ret. 01 Dec 14
App. 30 May 14
Non-Executive Directors
L Herlihy
H Corbally
Mn Keane
J Callaghan
W Carroll
P Coveney
J Doheny
D Farrell
D Gaynor
P Gleeson
V Gorman
P Haran
B Hayes
Ml Keane
J Liston
M Merrick
J Murphy
P Murphy
W Murphy
D O’Connor
E Power
R Prendergast
2014
2013
Re-app. 30 May 14
Ret. 13 May 14
Ret. 01 Jun 13
App. 01 Dec 14
Res. 05 Jun 13
750
400
400
390
–
–
1,940
1,686
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total 2014
Total 2013
1,940
1,686
–
–
–
–
–
–
–
–
100
48
48
73
30
40
30
30
72
30
30
68
18
30
27
30
30
30
–
6
30
–
800
812
800
812
Annual
Incentive
paid
in cash1
€’000
Annual
Incentive
deferred
into shares2
€’000
563
300
300
293
–
–
1,456
1,193
94
50
50
26
–
–
220
525
Pension
contribution
€’000
Other
benefits
€’000
2014
Total3
€’000
2013
Total3
€’000
199
64
60
114
–
–
437
386
1,626
833
926
840
–
–
4,225
20
19
116
17
–
–
172
130
1,029
129
584
876
1,207
95
3,920
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
48
48
73
30
40
30
30
72
30
30
68
18
30
27
30
30
30
–
6
30
–
800
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
100
48
48
80
30
–
30
30
54
30
15
68
13
30
75
30
30
30
28
–
30
13
812
1,456
1,193
220
525
437
386
172
130
5,025
4,732
1. This reflects the portion of the Annual Incentive earned by Executive Directors in respect of performance for the year 2014 (which amounts to 75%
of Base Salary) which will be paid through salary in 2015.
2. This reflects the portion of the Annual Incentive which, once the appropriate taxation and social security deductions have been made, will be invested
in shares in the Company and delivered to Executive Directors two years following this investment (2017).
3. Remuneration disclosed refers to each Director’s period of appointment on the Board in 2013 and 2014.
4. Appointed as Group Managing Director on 12 November 2013.
5. Other benefits include an overseas allowance of €98,964 (2013 (part): €54,389).
See page 91 for details of Directors’ awards expected to vest in respect of performance to 3 January 2015
www.glanbia.com
95
Governance
Remuneration Committee report continued
The pension benefits of each of the Executive Directors during the year were as follows:
S Talbot1
B Phelan
2014
2013
Transfer value of
increase in
accrued pension
€’000
–
87
87
57
Annual pension
accrued in 2014
in excess of
inflation €’000
–
8
8
7
Total annual
accrued pension
at 3 January
2015 €’000
158
103
261
750
1. Siobhán Talbot is a deferred member of the Glanbia defined benefit pension scheme. As a result of the cap on pension benefits introduced in the
Finance Act 2006, and subsequently amended in December 2010, the Remuneration Committee reviewed the pension arrangements for Executive
Directors and agreed to offer the option to receive a taxable payment of 26.5% of salary in lieu of future service pension benefit, with effect from
5 January 2014 (2013: 25%).
Table B: Directors’ and Secretary’s interests in Glanbia Co-operative Society Limited
Directors
L Herlihy
H Corbally
Mn Keane
S Talbot1
W Carroll
J Doheny
D Farrell
V Gorman
B Hayes2
Ml Keane
M Merrick
J Murphy
P Murphy
B Phelan1
E Power
Secretary
M Horan
1. Executive Director
2. Re-appointed 30 May 2014
* Or date of appointment if later
As at 3 January 2015
As at 5 January 2014*
“A” Ordinary
shares of €1.00
“C” shares
of €0.01
“A” Ordinary
shares of €1.00
“C” shares
of €0.01
79,686
6,095
7,612
–
18,987
6,366
5,863
6,066
16,040
21,606
5,970
16,122
14,766
–
23,812
12,045,240
–
3,600,000
3,600,000
–
–
–
–
–
–
–
–
5,200,000
10,540,800
5,600,000
79,686
5,153
7,612
–
17,102
6,366
4,921
3,066
11,327
19,721
5,499
14,237
11,939
–
23,812
10,686,889
363,583
3,118,390
3,000,000
–
341,122
112,000
–
2,000,000
3,000,000
–
–
12,143,890
16,284,000
16,284,935
–
677,679
–
574,000
96
Glanbia plc 2014 Annual Report and Accounts
Table C: Directors’ and Secretary’s interests in ordinary shares in Glanbia plc
Directors
L Herlihy
H Corbally
Mn Keane
S Talbot1
W Carroll
P Coveney2
J Doheny
D Farrell
M Garvey1
D Gaynor
P Gleeson
V Gorman
P Haran
B Hayes3
Ml Keane
H McGuire1
M Merrick
J Murphy
P Murphy
D O’Connor4
B Phelan1
E Power
Secretary
M Horan
1. Executive Director
2. Appointed 30 May 2014
3. Re-appointed 30 May 2014
4. Appointed 1 December 2014
* Or date of appointment if later
As at
3 January 2015
As at
5 January 2014*
Ordinary
shares
Ordinary
shares
131,113
12,536
22,849
194,431
8,435
3,900
14,737
2,927
849
10,000
10,171
2,727
7,462
26,246
30,770
123,118
6,312
11,022
27,582
7,680
115,013
49,296
131,113
12,536
22,849
141,587
8,435
–
14,737
2,927
–
5,000
23,171
2,727
7,462
26,246
30,770
89,425
6,312
11,022
27,582
–
85,519
49,296
51,191
43,079
Note: The ordinary shares held in trust for the Directors and Secretary disclosed in Table G on page 99 are included in the total
number of ordinary shares held by the Directors and Secretary above.
Table D: Summary of Directors’ and Secretary’s interests in Glanbia plc 2002 LTIP and 2008 LTIP
Directors
M Garvey
H McGuire
B Phelan
S Talbot
Secretary
M Horan
As at 3 January 2015
As at 5 January 2014
2008 LTIP
Share awards
2002 LTIP
Share awards
2008 LTIP
Share awards
2002 LTIP
Share awards
53,250
126,650
147,250
227,150
–
–
750
700
–
123,400
145,250
243,650
101,400
–
123,400
–
–
750
700
–
www.glanbia.com
97
Governance
Remuneration Committee report continued
Table E: Directors’ and Secretary’s interests in 2008 LTIP
Date of grant
05 Jan 14
Granted
during
the year
Vested during
the year
Market price
at date
of award €
Earliest date
for vesting
03 Jan 15
Expiry date
Notes
Directors
M Garvey
Total:
H McGuire
Total:
B Phelan
Total:
S Talbot
Total:
Secretary
M Horan
Total:
02 Jul 14
–
–
53,250
53,250
–
–
53,250
53,250
11.51
02 Jul 17
02 Jul 18
28 Mar 11
30 Aug 12
23 Apr 13
02 Jul 14
28 Mar 11
30 Aug 12
23 Apr 13
02 Jul 14
28 Mar 11
30 Aug 12
23 Apr 13
02 Jul 14
28 Mar 11
30 Aug 12
23 Apr 13
02 Jul 14
50,000
46,500
26,900
–
123,400
50,000
46,500
48,750
–
145,250
96,500
90,500
56,650
–
243,650
50,000
46,500
26,900
–
123,400
–
–
–
53,250
53,250
–
–
–
52,000
52,000
–
–
–
80,000
80,000
–
–
–
28,000
28,000
50,000
–
–
–
50,000
50,000
–
–
–
50,000
96,500
–
–
–
96,500
–
46,500
26,900
53,250
126,650
–
46,500
48,750
52,000
147,250
–
90,500
56,650
80,000
227,150
4.35
6.26
10.11
11.51
28 Mar 14
30 Aug 15
23 Apr 16
02 Jul 17
02 Jul 14
30 Aug 16
23 Apr 17
02 Jul 18
4.35
6.26
10.11
11.51
28 Mar 14
30 Aug 15
23 Apr 16
02 Jul 17
02 Jul 14
30 Aug 16
23 Apr 17
02 Jul 18
4.35
6.26
10.11
11.51
28 Mar 14
30 Aug 15
23 Apr 16
02 Jul 17
02 Jul 14
30 Aug 16
23 Apr 17
02 Jul 18
50,000
–
–
–
50,000
–
46,500
26,900
28,000
101,400
4.35
6.26
10.11
11.51
28 Mar 14
30 Aug 15
23 Apr 16
02 Jul 17
02 Jul 14
30 Aug 16
23 Apr 17
02 Jul 18
3
1
2
3
3
1
2
3
3
1
2
3
3
1
2
3
3
1. Awards granted on 28 March 2011 were subject to performance conditions measured over the three financial years ended 4 January 2014.
The outcome of these performance conditions was such that 100% of the awards vested. The vesting date was 2 July 2014.
2. Awards granted on 30 August 2012 were subject to performance conditions measured over the three financial years ended 3 January 2015.
The outcome of these performance conditions is such that 100% of these awards are expected to vest during 2015.
3. The performance periods in respect of the 2008 LTIP awards made in 2013 and 2014 are the three financial years ending 2015 and 2016 respectively.
The performance conditions attached to the awards are detailed in the section entitled ‘Performance targets for outstanding share awards’ on page 93.
98
Glanbia plc 2014 Annual Report and Accounts
TABLE F: Directors’ and Secretary’s INTERESTS in 2002 LTIP
S Talbot
S Talbot retained 7,000 of the shares allotted to her on 8 January 2013 under the 2002 LTIP until 8 January 2015 and is therefore
eligible for a share award of 10% of these shares (700).
B Phelan
B Phelan retained 7,500 of the shares allotted to him on 8 January 2013 under the 2002 LTIP until 8 January 2015 and is therefore
eligible for a share award of 10% of these shares (750).
Table G: Directors’ and Secretary’s Annual Deferred Incentive
Value of Annual
Incentive to be
converted into
shares €1
Date of
conversion/
acquisition of
shares
Acquisition price
per share at date
of conversion
Number of
shares acquired
Shares subject
to restriction2,3
Date restriction
removed
Directors
M Garvey
2013 Annual Deferred Incentive
H McGuire
2012 Annual Deferred Incentive
2013 Annual Deferred Incentive
B Phelan
2012 Annual Deferred Incentive
2013 Annual Deferred Incentive
S Talbot
2012 Annual Deferred Incentive
2013 Annual Deferred Incentive
Secretary
M Horan
2012 Annual Deferred Incentive
2013 Annual Deferred Incentive
€18,000
02 Jul 14
€11.57
1,586
849
02 Jul 16
€36,000
€118,000
23 Apr 13
02 Jul 14
€10.11
€11.57
3,582
10,165
2,389
5,738
23 Apr 15
02 Jul 16
€176,000
€120,000
29 May 13
02 Jul 14
€10.70
€11.57
16,472
10,355
8,744
5,547
29 May 15
02 Jul 16
€279,000
€143,000
29 May 13
02 Jul 14
€10.70
€11.57
26,097
12,367
13,852
6,625
29 May 15
02 Jul 16
€153,000
€68,000
23 Apr 13
02 Jul 14
€10.11
€11.57
15,134
5,908
8,176
3,165
23 Apr 15
02 Jul 16
1. Numbers are rounded to the nearest thousand.
2. The total number of shares subject to restriction are included in the total number of ordinary shares disclosed in Table C on page 97.
3. Directors are permitted to sell sufficient shares to satisfy any tax or social security deductions arising on the acquisition of the shares. The balance
of the shares are restricted from sale for two years and are held on trust for them by the trustee of the Glanbia plc Section 128D Employee Benefit Trust.
www.glanbia.com
99
Governance
Statement of compliance with UK Corporate Governance Code (2012)
and the Irish Corporate Governance Annex
As required by the European Communities (Directive 2006/46/EC)
Regulations 2009 (as amended) this Statement of Compliance
explains how the Board has applied the principles set down in
the UK Corporate Governance Code (2012) (which is referred to
in the Listing Rules, applicable to Irish and UK listed companies
and which is publicly available on the Financial Reporting
Council’s website: www.frc.org.uk/corporate/ukcgcode.cfm)
(the ‘UK Code’) and the Irish Corporate Governance Annex
published in December 2010 by the Irish Stock Exchange
and which is publicly available on the Irish Stock Exchange
website: www.ise.ie/Products-Services/Sponsors-and-Advisors/
Irish-Corporate-Governance-Annex.pdf?v=16112014 (the ‘ISE
Annex’) (collectively the ‘Codes’).
The Board accepts that the Codes represent an authoritative
statement of best practice and as such it has reviewed its
practices relative to them. The Board also acknowledges
that frequently it is the case 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
standards of integrity and business conduct expected. Our
Code of Conduct is not intended to be a substitute for our
responsibility and accountability to exercise good judgement
and obtain guidance on proper business conduct. Glanbia
employees are encouraged and expected to seek additional
guidance and support from others when in doubt.
The Group has complied with the detailed provisions of the
Codes throughout 2014, with the exception of provision B.1
of the UK Corporate Governance Code, Composition of the
Board. We have explained in detail our reasons on page
102 which set out our alternative practice to achieve good
governance. The Codes are not a rigid set of rules and they
recognise that an alternative to following a provision may be
justified in particular circumstances where good governance
is still achieved.
We have addressed each Code principle in the tables below.
COMPLIANCE WITH UK CORPORATE GOVERNANCE CODE (2012)
Code of Best Practice – Principles
Group Statement of Compliance
A
Directors
A.1 The role of the board
Every company should
be headed by an effective
board which is collectively
responsible for the long term
success of the company.
Our Board consists of the Group Chairman (Liam Herlihy), two Vice-Chairmen (Martin
Keane and Henry Corbally); 15 other Non-Executive Directors (including Paul Haran,
the Senior Independent Director) and four Executive Directors (Siobhán Talbot, the Group
Managing Director, Mark Garvey, the Group Finance Director, Brian Phelan, Chief Executive
Officer of Global Ingredients and Hugh McGuire, Chief Executive Officer of Global
Performance Nutrition). 14 of the Non-Executive Directors are currently nominated
by our major shareholder, Glanbia Co-operative Society Limited (the ‘Society’).
Our Group’s governance structure is based on the leadership principles in the Codes
and is set out on page 61.
The Board and its Committees monitor the application of values, standards and processes.
The core activities of the Board and its Committees are documented and planned on an
annual basis and include an agreed annual calendar of the main business to be considered
at each Board meeting. This forms the basic structure within which the Board operates.
The Directors’ responsibilities are outlined on pages 62 to 63. The Board meets regularly
on a formal basis plus additional ad hoc meetings as necessary.
The Board held eight scheduled meetings in 2014 (11: 2013) and one two day planning
and strategy session.
The attendance of each Director at the scheduled Board meetings and the two day
planning and strategy session are shown on page 62.
The Audit, Nomination and Governance and Remuneration Committee membership
and attendances are shown in their respective reports.
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A.2 Division of responsibilities
There should be a clear
division of responsibilities
at the head of the company
between the running of the
board and the executive
responsibility for the running
of the company’s business.
No one individual should
have unfettered powers
of decision.
A.3 The chairman
The chairman is responsible
for leadership of the board
and ensuring its effectiveness
on all aspects of its role.
A.4 Non-executive directors
As part of their role
as members of a
unitary board,
non-executive
directors should
constructively
challenge and help
develop proposals
on strategy.
Responsibility is clearly split between the Group Chairman and the Group
Managing Director.
The Group Chairman is responsible for the efficient and effective working of the Board.
While the Board is ultimately responsible for the success of the Group, given the size
and complexity of its operations the day to day operations of the Group are managed
on a delegated basis by the Group Managing Director and the senior executives working
with her.
The Board appoints the Group Managing Director and monitors her performance
in leading the Group. The Group Managing Director is responsible for all aspects of the
operation and management of the Group and its business. Specifically, she is responsible
for developing (for the Board’s approval) appropriate values and standards to guide all
activities undertaken by the Group and also for making recommendations on appropriate
delegation of responsibilities.
A detailed explanation of their respective responsibilities is set out on page 62.
The Group Chairman sets the Board’s agenda and ensures that adequate time is available
for the discussion of all agenda items.
The Group Chairman promotes a culture of openness and debate. He also ensures
constructive relations between the Executive Directors and the Non-Executive Directors.
The Group Chairman ensures effective communication with shareholders. Further
information may be found on pages 58 to 60.
A detailed explanation of the Group Chairman’s responsibilities is set out on page 62.
The Non-Executive Directors scrutinise the performance of management, monitor the
reporting of performance and assist in the development of strategy.
The two day planning and strategy meeting has been developed to ensure that the
Non-Executive Directors can participate in the development of proposals on strategy
and includes a full consideration of the key risks and opportunities facing the Group.
The Senior Independent Director supports the Group Chairman on all governance issues
and is available to shareholders if they have concerns that contact through the normal
channels has failed to resolve.
The Group Chairman holds meetings with the Non-Executive Directors without the
Executive Directors present where considered appropriate.
The Senior Independent Director meets with the Non-Executive Directors without the
Group Chairman being present on such occasions as he considers appropriate.
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Statement of compliance with UK Corporate Governance Code (2012)
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B
Effectiveness
B.1 The composition
of the board
The board and
its committees should
have the appropriate
balance of skills,
experience,
independence and
knowledge of the
company to enable
them to discharge their
respective duties and
responsibilities effectively.
The Board is pleased to take this opportunity to explain its reasons for its structure and,
in doing so, how it meets the requirements of the Codes to comply or explain. The Board
also wishes to explain why it is justified in the circumstances and how good governance
is still achieved.
Avonmore Foods plc and Waterford Foods plc merged in 1997 to form Glanbia plc.
At the same time, their respective major shareholders also merged to form the ‘Society’.
The Society still retains a major shareholding in the Company and nominates from its
Board of Directors, which is elected on a three year basis, up to 14 Non-Executive Directors
for appointment to the Board of the Company. This will reduce to eight Non-Executive
Directors in 2018, more details of which are set out on page 79 of the Nomination and
Governance Committee report.
All the Non-Executive Directors are considered by the Board to demonstrate the essential
characteristics of independence and bring independent challenge and deliberations to the
Board through their character, objectivity and integrity. Further information may be found
on page 78 of the Nomination and Governance Committee report.
The practical conduct of Board meetings is such that, even though there are currently
14 Non-Executive Directors appointed by the Society, the views of all the Non-Executive
Directors are given due weight and a collective approach to decision making is adopted.
The Group has an excellent track record in delivering sustained growth in shareholder
value. In the latest three year period, total shareholder return has increased by 185.88%
and the share price has risen from €4.63 (at the end of 2011) to €12.81 at financial year
end 2014, all underpinned by the Group’s good governance practices over many years.
B.2 Appointments to the board
There should be a formal,
rigorous and transparent
procedure for the
appointment of new
directors to the board.
The Nomination and Governance Committee comprises four Non-Executive Directors, of
whom two members constitute a quorum, and is responsible for making recommendations
to the Board on the appointment and re-appointment of Directors and planning for the
orderly succession of new Directors to the Board. A detailed explanation of the Nomination
and Governance Committee and its work is set out in the Nomination and Governance
Committee report.
Succession planning is used by the Board to deliver two key responsibilities: firstly to
ensure that the Group is managed by executives with the necessary skills, experience
and knowledge; and secondly to ensure that the Board itself has the right balance of
individuals to be able to discharge its responsibilities effectively. The Nomination and
Governance Committee has specific responsibilities in this area but the Board as a
whole is also involved in overseeing the development of management resources with
the aim of ensuring the Group has the individuals with the right skills to meet the needs
of an increasingly complex and global business.
All Non-Executive Directors are advised of the likely time commitments at appointment and
are asked to seek approval from the Nomination and Governance Committee if they wish
to take on additional external appointments. The ability of individual Directors to allocate
sufficient time to the discharge of their responsibilities is considered as part of the Board’s
annual evaluation process overseen by the Group Chairman. Any issues concerning the
Group Chairman’s time commitment are dealt with by the Nomination and Governance
Committee, chaired for this purpose by the Senior Independent Director.
The terms of appointment of Non-Executive Directors are available for inspection at the
registered office of the Company.
B.3 Commitment
All directors should
be able to allocate
sufficient time to the
company to discharge
their responsibilities
effectively.
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B
Effectiveness
B.4 Development
All directors should
receive induction on
joining the board and
should regularly update
and refresh their skills
and knowledge.
B.5 Information and support
The board should be
supplied in a timely manner
with information in a form
and of a quality appropriate
to enable it to discharge
its duties.
The Company puts full, formal and tailored induction programmes in place for all its
new Directors. While Directors’ backgrounds and experience are taken into account, the
induction is aimed to be a broad introduction to the Group’s businesses and its areas of
significant risk. Key elements are meeting the Executive Directors and senior and middle
management and visiting the Group’s major sites in order to be briefed on Group strategy
and on individual businesses.
As part of their induction programme during the year, Patrick Coveney and Dan O’Connor
both visited several of the Group’s sites and met relevant senior management.
The Group Chairman regularly encourages the Non-Executive Directors to update
their skills, knowledge and ongoing familiarity with the Group in order to competently
carry out their responsibilities. This is achieved by regular presentations at Board
meetings from senior management on matters of significance. Examples during the
year included: presentations from the Global Performance Nutrition and US Cheese
senior management and a presentation on research and development from the Chief
Science and Technology Officer.
In addition to the induction programme that all Directors undertake on joining the
Board, an ongoing programme of Director development and Group awareness has been
developed. For example, as part of the annual programme of Board meetings, Directors
will typically visit some of the Group’s principal operations to meet employees and gain an
understanding of the Group’s products and services. In June 2014 the Board visited Global
Performance Nutrition in Aurora, Illinois and in September 2014 the Board visited the
US Cheese plants in Idaho and the Ingredient Technologies grain facility in Sioux Falls,
South Dakota.
The Directors are also regularly provided with updates on the Group’s business as well as
updates on corporate governance and legislative/regulatory issues. Updates are by way of
written briefings from the Group Secretary, presentations from management and external
advisors. During the year under review, updates focused on the changing corporate
landscape which included the UK Companies Act 2006 (Strategic Report and Directors’
Report) Regulations 2013 and the FRC’s 2012 UK Corporate Governance Code, particularly
the balanced and understandable requirements and the reforms to Directors’ remuneration
reporting and the new listing rules applicable to premium listed companies in the UK.
As part of their annual performance evaluation, Directors are given the opportunity to
discuss their own training and development needs.
A comprehensive Board procedures manual is maintained which includes formal
procedures for the working of the Board and its committees, delegated authorities, the
timely provision of appropriate information and the duties and responsibilities of directors,
including standards of conduct and compliance.
The Group Chairman, with the assistance of the Group Managing Director and Group
Secretary, is responsible for ensuring that Directors are supplied with information in a timely
manner and that it is in a form and of an appropriate quality that enables them to discharge
their duties. In the normal course of business, such information is provided by the Group
Managing Director in a regular report to the Board that includes information on operational
matters, strategic developments, financial performance relative to the business plan,
business development, corporate responsibility and investor relations.
At each scheduled Board meeting, the Executive Directors provide operational and
financial updates. Depending on the nature of the proposal to be considered, other senior
executives are invited to make presentations or participate in Board discussions to ensure
that Board decisions are supported by a full analysis of each proposal.
All Directors have access to the advice and services of the Group Secretary, who is
responsible for advising the Board on all governance matters. The Directors also have
access to independent professional advice, if required, at the expense of the Group
and this is co-ordinated through the Group Secretary.
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Statement of compliance with UK Corporate Governance Code (2012)
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B.6 Evaluation
The board should
undertake a formal and
rigorous annual evaluation
of its own performance and
that of its committees and
individual directors.
B.7 Re-election
All directors should be
submitted for re-election
at regular intervals, subject
to continued satisfactory
performance.
The Board conducts an annual review of its effectiveness and that of each Board
Committee and Board member. The evaluation of the performance of the Board is to
be externally facilitated every three years. A detailed description of the outcome of the
2014 Board internal evaluation is given in the Group Chairman’s introduction to corporate
governance on page 58 and a description of the process is set out on page 109
(Compliance with Irish Corporate Governance Annex). This was not externally facilitated
in 2014 as a full external evaluation was undertaken in 2013.
All Directors are ordinarily subject to re-election at every Annual General Meeting (AGM).
All Directors were re-elected at the 2014 AGM, with the exception of Jerry Liston, who
was not put forward for re-election as he had indicated his intention to retire at the
commencement of the AGM.
The Board has recommended that all Directors (with the exception of Liam Herlihy,
David Farrell and Patrick Gleeson as they have indicated their intention to retire following
the conclusion of the AGM) should be put forward for re-election at the 2015 AGM. Each
Director seeking re-election continues to be effective and demonstrates commitment
to his/her roles.
C
Accountability
C.1 Financial and business
reporting
The board should
present a balanced
and understandable
assessment of the
company’s position
and prospects.
Through this Annual Report and, as required, through other periodic financial updates,
the Board is committed to providing shareholders and other stakeholders with a clear
assessment of the Company and the Group’s position and prospects.
A statement of the Directors’ responsibilities for preparing the financial statements for
the Company and the Group is set out on page 114. A statement by the external Auditors
about their reporting responsibilities is set out on page 116.
Going Concern
The Directors continue to report in the annual and half-yearly financial statements that
the business is a going concern.
The Group’s business activities, together with the factors likely to affect its future
development, performance and position are set out in the Group Managing Director’s
review on pages 30 to 33.
The financial position of the Company and the Group, its cash flows, liquidity position and
borrowing facilities are outlined in the Group Finance Director’s review on pages 34 to 37.
In addition, note 3 to the financial statements includes the Company and the Group’s
objectives, policies and processes for managing its capital; its financial risk management
objectives; details of its financial instruments and hedging activities; and its exposures
to credit risk and liquidity risk. The Company and the Group have considerable financial
resources and a large number of customers and suppliers across different geographic
areas and industries. As a consequence, the Directors believe that the Company and the
Group are well placed to manage its business risks successfully. The Directors have a
reasonable expectation that the Company, and the Group as a whole, have adequate
resources to continue in operational existence for the foreseeable future. For this reason,
they continue to adopt the going concern basis in preparing the financial statements.
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C.2 Risk management and
internal control
The board is responsible
for determining the nature
and extent of the significant
risks it is willing to take
in achieving its strategic
objectives. The board
should maintain sound
risk management and
internal control systems.
The Board has applied principle C.2 of the UK Corporate Governance Code by establishing
a continuous process for identifying, evaluating and managing the significant risks the
Group faces to ensure that the Group’s strategic objectives are achieved. The arrangements
established by the Board for the application of risk are outlined in the Risk Management
report on pages 50 to 57.
The Audit Committee assists the Board in discharging its review responsibilities in
accordance with the requirements of the revised Turnbull Guidance on Internal Control,
published by the FRC, which the Board has fully adopted, and the Codes. In order to assist
the Audit Committee and the Board in their review, the Group has developed a Control Self
Assessment programme. This is subject to regular review. Having undertaken such reviews,
the Audit Committee reports to the Board on its findings so that the Board can take a view
on this matter.
The Board has reviewed the effectiveness of the current systems of risk management and
internal control specifically for the purpose of this statement and is satisfied that these
systems have been operating throughout 2014 and to the date of this report.
The Group also maintains a risk register, which contains the key risks faced by the Group,
including their likelihood and impact, as well as the controls and procedures implemented
to mitigate these risks. The content of the register is determined through regular
discussions with senior management and is reviewed by the Audit Committee.
While the Board is responsible for the Group’s system of internal control and for the
ongoing review of its effectiveness, such a system is designed to manage, rather than
eliminate, the risk of failure to achieve business objectives. It can only provide reasonable
and not absolute assurance against material misstatement or loss.
The Board has delegated to the Audit Committee oversight of the management of the
relationship with the Group’s external Auditors, further details of which can be found
in the Audit Committee report on pages 69 to 74.
Proper Books of Account
The Directors, through the use of appropriate procedures and systems, have also
ensured that measures are in place to secure compliance with the Company and the
Group’s obligation to keep proper books of account. These books of account are kept
at the registered office of the Company.
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Statement of compliance with UK Corporate Governance Code (2012)
and the Irish Corporate Governance Annex continued
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Code of Best Practice – Principles
Group Statement of Compliance
C.2 Risk management and
internal control
The board is responsible
for determining the nature
and extent of the significant
risks it is willing to take
in achieving its strategic
objectives. The board
should maintain sound risk
management and internal
control systems.
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.
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 or 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 the Group Secretary and
the Group Finance Director as Compliance Officers, from one of whom approval must
be obtained, in advance, for any share dealings by persons to whom the rules apply.
Directors’ dealings must also be approved by the Group Chairman.
The interests of the Directors and Secretary and their spouses and minor children in the
share capital of the Company, the holding Society and subsidiary companies and societies
are set out in the Remuneration Committee report on pages 96 to 99.
Main features of Internal control and risk management systems in preparing consolidated
financial statements and financial reporting:
• Board approval of the annual business and strategic plans following Group and business
unit strategy plan reviews;
• Monitoring of performance against the annual plan through monthly Board reports
detailing actual versus budgeted results, analysis of material variances, review of key
performance indicators and re-forecasting where required;
• Monthly reporting by all business units and review by Group Finance;
• Well resourced Finance function to facilitate segregation of duties;
• Audit Committee review of the integrity of the annual report and half-yearly report.
Any resulting recommendations are included in the Audit Committee Chairman’s
Board report;
• Board review and approval of the Group consolidated half-yearly accounts, consolidated
annual accounts, interim management statements and any formal announcements;
• The use of a Group Finance management manual that clearly sets out Group accounting
policies and financial control procedures;
• Centralised Taxation and Treasury functions;
• Board approved Treasury risk management policies, designed to ensure that
Group foreign exchange and interest rate exposures are managed within defined
parameters; and
• Appropriate IT security environment.
C.3 Audit Committee
and auditors
A detailed explanation is given in the Risk Management report on pages 50 to 57 and
the Audit Committee report on pages 69 to 74.
The board should establish
formal and transparent
arrangements for considering
how they should apply the
corporate reporting and risk
management and internal
control principles and for
maintaining an appropriate
relationship with the
company’s auditor.
The Audit Committee comprised eight Non-Executive Directors as at 3 January 2015
of whom three members constitute a quorum. In February 2015, the Nomination and
Governance Committee recommended that the composition of the Audit, Remuneration
and Nomination and Governance Committees be comprised only of Independent
Non-Executive Directors, the Group Chairman and the Vice-Chairmen. Accordingly,
the Audit Committee Membership was reduced to seven, with Donard Gaynor replacing
Matthew Merrick and Patrick Gleeson.
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D
Remuneration
D.1 The level and components
of remuneration
Levels of remuneration
should be sufficient to attract,
retain and motivate directors
of the quality required to run
the company successfully,
but a company should
avoid paying more than is
necessary for this purpose.
A significant proportion
of executive directors’
remuneration should be
structured so as to link
rewards to corporate and
individual performance.
D.2 Procedure
There should be a formal
and transparent procedure
for developing policy on
executive remuneration and
for fixing the remuneration
packages of individual
directors.
No director should be
involved in deciding his
or her own remuneration.
E
Relations with
shareholders
E.1 Dialogue with shareholders
There should be a dialogue
with shareholders based on
the mutual understanding
of objectives.
The board as a whole
has responsibility for
ensuring that a satisfactory
dialogue with shareholders
takes place.
E.2 Constructive use
of the AGM
The board should use the
AGM to communicate with
investors and to encourage
their participation.
Our remuneration strategy and policies focus on using remuneration to facilitate the
implementation of a successful corporate strategy, within our risk management framework.
This strategy aims to deliver superior earnings growth and total shareholder return for our
shareholders over the long term by attracting, retaining and motivating high quality and
committed people who are critical to sustain the future development of the Group.
A detailed explanation is given in the Remuneration Committee report on pages 80 to 99.
Remuneration packages for individual Executive Directors are set by the Remuneration
Committee after receiving appropriate information from independent sources and Group
Human Resources. The Remuneration Committee comprises six Non-Executive Directors,
of whom three members constitute a quorum. The Group Managing Director and the Group
Human Resources and Corporate Affairs Director attend Committee meetings by invitation
only. They absent themselves when their remuneration is discussed and no Director is
involved in considering his/her own remuneration. The position of Group Human Resources
Director was vacant for most of the year with a new appointment made on 11 December
2014. The Group Managing Director assumed responsibility during the period the position
was vacant.
The Group has a well developed Investor Relations programme managed by the Group
Finance Director. This includes regular contact with major shareholders including the
Society to keep them informed of progress on Group performance. A description
of our Investor Relations activity during 2014 is set out on page 35.
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 Codes, details of proxy
voting by shareholders, including votes withheld, are made available on request and are
placed on the Group’s website following the meeting.
To ensure shareholders have time to consider the Annual Report and Financial Statements
and lodge their proxy votes, notice of the AGM and related documents are issued more
than 20 working days prior to the meeting. The Company offers all shareholders the choice
of submitting proxy votes either electronically or in paper format. It also offers them the
option to abstain.
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Statement of compliance with UK Corporate Governance Code (2012)
and the Irish Corporate Governance Annex continued
Compliance with Irish Corporate Governance Annex
Code of Best Practice – Principles
Group Statement of Compliance
1
Composition of the board
A detailed explanation of the rationale for the current Board size and structure is set out in
B.1 on page 102. Anticipated changes (from 2016 to 2018) to the Board size and structure
are set out on page 79 of the Nomination and Governance Committee report.
Our Directors come from a diversity of backgrounds, ranging from public service,
accountancy and banking to industry (dairy, construction, fast moving consumer goods
and production). A detailed description of the skills, expertise and experience that each
of the Directors brings to the Board is set out on pages 64 to 67. The date of appointment
of each Director and the length of service of each Director as a Director is given on page
62 and, where applicable, the length of service of each Director on a Board Committee
is also given in the respective Committee reports.
We involve all Directors in formulating our strategic business plan (which is the route map
which guides us to meet our objectives and provides a vital framework within which the
Group operates) and in all key decision making.
The Group Chairman ensures that the skills, expertise and experience of the Board are
harnessed to best effect in addressing significant issues facing the Group by ensuring:
(i) that Directors are properly informed on all matters;
(ii) that discussions foster constructive challenge and debate; and
(iii) that adequate time is provided for discussions so that the view of each Director is
presented and considered.
Directors’ roles and responsibilities are clarified from the outset and continually updated to
reflect the evolving business and changing dynamics. We encourage training and personal
development, and as part of the annual evaluation process, the Group Chairman discusses
individual training and development requirements for each Director. Additionally, the Senior
Independent Director is available to all fellow Non-Executive Directors, either individually or
collectively, to discuss any matters of concern in a forum that does not include Executive
Directors or the management of the Company.
2
Board appointments
A detailed explanation is given in the Nomination and Governance Committee report
on pages 75 to 79.
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3
Board evaluation
4
5
6
Board re-election
Audit committee
Remuneration
We have established a formal process for the annual evaluation of the performance of the
Board, its principal Committees and individual Directors. The evaluation of the Board is to
be externally facilitated every three years. Given that an external evaluation was undertaken
in 2013, during 2014 our Board and/or its Committees conducted an internal evaluation of
its own performance, its principal Committees and individual Directors, the results of which
are set out on page 58.
The objective of the annual Board evaluation is to provide assurance to our shareholders
and other stakeholders that we are committed to the highest standards of governance
and probity, and to gain insight into Board effectiveness to help the Board perform as
well as possible and help the Board understand how well it is operating in key areas.
These include: Board performance and strategic oversight, risk management and
internal control, Board Committees, succession planning and talent management,
Board processes, culture and relationships, diversity, individual performance including
Chairman and CEO performance and priorities to enhance Board performance.
As part of the evaluation process, questionnaires are drawn up to provide the framework for
the evaluation process. In order to ensure the robustness of the process, the questionnaires
are designed to be forward looking and to lead to insights for improvement. The questions
are open-ended to encourage dialogue about the workings of the Board. Additionally, each
member of the Board or appropriate Committee is invited to comment on the performance
of peer Directors (if necessary), the collective Board and/or the appropriate Committee.
Once completed the questionnaires are collated and reviewed by the Group Chairman,
who then meets with each Director individually to discuss the performance of the Board
or the appropriate committee and individual Directors. These interviews are designed
to be informal and encourage active participation.
Following the interviews the Group Chairman meets the Group Secretary to analyse the
findings and prepare a report to the Board identifying the recommendations for the Board
to consider.
The performance of the Group Chairman is included in this process. The Group Chairman’s
evaluation is managed by the Senior Independent Director. As part of the Group Chairman’s
evaluation, the Non-Executive Directors meet separately under the chairmanship of the
Senior Independent Director.
The Board is confident following the completion of the evaluation that all of its members
have the requisite knowledge, ability and experience to perform the functions required
of a director of an internationally listed company and continue to demonstrate a high
level of commitment to their roles.
A detailed explanation is given in the Nomination and Governance Committee report
on pages 75 to 79.
A detailed explanation is given in the Audit Committee report on pages 69 to 74 and the
Risk Management report on pages 50 to 57.
A detailed explanation is given in the Remuneration report and throughout this
Annual Report.
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Governance
Other statutory information
Principal activities
Glanbia plc is a global performance nutrition and ingredients
group, headquartered in Ireland, with operations in 34
countries worldwide.
Further detail can be found in: ‘Where we operate’ on
pages 16 and 17.
The Group’s strategy, business model and development
activity are summarised in ‘Our business’ on pages 12 and 13,
‘Our business model’ on pages 20 and 21 and ‘Our strategy’
on pages 28 and 29.
As set out in the Consolidated Income Statement on page
121, the Group reported a profit before tax and exceptional
items for the year of €189.5 million. Comprehensive reviews
of the financial and operating performance of the Group
during 2014 are set out in the ‘Group Finance Director’s
review’ on pages 34 to 37 and in the ‘Operations review’
on pages 38 to 43. Key performance indicators are set
out in ‘Key performance indicators’ on pages 2 and 3.
The treasury policy and objectives of the Group are set out
in detail in note 3 to the Consolidated Financial Statements.
Process for appointment/retirement
of directors
In addition to the Companies Acts, the Articles of Association
of the Company contain provisions regarding the appointment
and retirement of Directors. At each Annual General Meeting
(AGM) the Articles of Association provide that each Director
who has been in office at the conclusion of each of the three
preceding AGMs and who has not been appointed or re-
appointed at either of the two most recently held of those three
meetings shall retire from office; however in accordance with
the UK Corporate Governance Code (2012), all Directors will
retire at the 2015 AGM and, being eligible, offer themselves
for re-appointment with the exception of Liam Herlihy, David
Farrell and Patrick Gleeson who are retiring from the Board
on that date.
The Company is proposing a resolution at its forthcoming AGM
to amend its Articles of Association to allow the election and
re-election of independent directors for the purpose only of
Listing Rule 9.2.2A of the United Kingdom Listing Authority
(UKLA) to be conducted in accordance with the new election
provisions for such Directors in the UKLA Listing Rules.
No person other than a Director retiring by rotation shall be
appointed a Director at any general meeting unless he is
recommended by the Directors or, not less than seven nor
more than 42 days before the date appointed for the meeting,
notice executed by a member qualified to vote at the meeting
has been given to the Company of the intention to propose
that person for appointment. If a Director is also a Director
of Glanbia Co-operative Society Limited (the ‘Society’), the
Articles of Association provide that his appointment as a
Director shall terminate automatically in the event of his
ceasing to be a Director of the Society.
The Articles of Association also contain provisions
regarding the automatic retirement of a Director in
certain other limited circumstances.
Annual General Meeting
The Company’s AGM will be held on 12 May 2015. Full details
of the AGM, together with explanations of the resolutions to
be proposed, are contained in the Notice of Meeting available
on the Group’s website: www.glanbia.com and, if requested,
posted with this Annual Report.
Powers of the Directors
The Directors are responsible for the management of the
business of the Company and the Group and may exercise all
powers of the Company subject to applicable legislation and
regulation and the Articles of Association. At the 2014 AGM,
the Directors were given the power to issue new shares up to
a nominal amount of €3,260,380. This power will expire on the
earlier of the conclusion of the 2015 AGM or 12 August 2015.
Accordingly, a resolution will be proposed at the 2015 AGM
to renew the Company’s authority to issue further new shares.
At the 2014 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 €886,937. This authority too will expire on
the earlier of the conclusion of the 2015 AGM or 12 August
2015. A resolution will be proposed at the 2015 AGM to
renew this authority.
Dividends
An interim dividend of 4.43 cent per share was paid on
10 October 2014 to shareholders on the register at the close
of business on 29 August 2014. The Directors propose a
final dividend of 6.57 cent per share. Subject to shareholder
approval, the final dividend will be paid on 15 May 2015 to
shareholders on the share register on 7 April 2015.
Following approval by shareholders at the AGM in 2010, 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’s dividend will default to a sterling
payment. All other shareholder’s dividends will default to
a euro payment.
Political donations
The Electoral Act, 1997 as amended requires companies
to disclose all political donations over €200 in aggregate
made during the financial year. The Directors, on enquiry,
have satisfied themselves that no payment or other donations
in excess of this amount have been made by the Group.
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Glanbia plc 2014 Annual Report and Accounts
Issued share capital
At 3 January 2015 the authorised share capital of the
Company was 350,000,000 ordinary shares of €0.06 each and
the issued share capital was 295,875,684 (2013: 295,645,684)
ordinary shares of €0.06 each, of which 41.2% was held by the
Society. All the Company’s shares are fully paid up and quoted
on the Irish and London Stock Exchanges. During the year
230,000 ordinary shares of €0.06 each were allotted, upon
the exercise of outstanding share options under the 2002 LTIP.
Details of the Company’s share capital and shares under
option or award at 3 January 2015 are given in notes 23
and 22, respectively, 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 shareholder 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 a return of capital on a winding up,
holders of ordinary shares are entitled to participate.
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 share(s) where
the holder of the share(s) 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 3 January
2015, 715,558 ordinary shares were held in employee benefit
trusts for the purpose of the Group’s employee share schemes.
The employee benefit trusts have waived dividends due to
them in respect of unallocated shares save a nominal amount.
The Trustees of the employee trusts do not seek to exercise
voting rights on shares held in the employee trusts 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
Shareholder(s) have the right to ask questions related to items
on the agenda of a general meeting and to receive answers,
subject to certain qualifications. Shareholder(s) holding 3% of
the issued share capital of the Company, representing at least
3% of its total voting rights, 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 2015 AGM available on
the Group website: www.glanbia.com and, if requested, posted
with this Annual 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 Group’s
website after the meeting.
Memorandum and Articles of Association
The Company’s Memorandum and Articles of Association
set out the objects and powers of the Company. The Articles
of Association detail the rights attaching to the shares; the
method by which the Company’s shares may be purchased or
re-issued; the provisions which apply to the holding of shares
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 Group’s website:
www.glanbia.com.
Unless expressly specified to the contrary in the Articles of
Association of the Company, the Company’s Memorandum
and Articles of Association may be amended by special
resolution of the Company’s shareholders.
Change of control provisions
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 Company 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 were 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 employee share 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 of a change of control.
The Board is satisfied that no change of control provisions
has occurred in respect of these agreements.
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Governance
Other statutory information continued
Substantial interests
The Company has been advised of the following notifiable interests in its ordinary share capital:
Shareholder
Glanbia Co-operative Society Limited
The Capital Group Companies, Inc.
Contracts of Significance for the purpose
of LR 9.8.4 R, United Kingdom Listing Authority
The Company has entered into a Shareholders’ Agreement
dated 25 November 2012 with the Society in respect of Glanbia
Ingredients Ireland Limited (GII).
The key terms of the Shareholders’ Agreement are as follows:
the board of directors of GII will comprise 14 directors
appointed by the Society, six directors appointed by the
Company (the ‘PLC Appointees’) and up to two executive
directors. The PLC Appointees will be appointed from the
Executive Directors of the Company, the independent (of the
Society) Non-Executive Directors of the Company and such
other persons as may be approved by the Nomination and
Governance Committee of the Board of the Company. Each
of the PLC Appointees will have 1.5 votes at any meeting of the
board of directors of GII. All of the other directors on the board
of directors of GII will have one vote each. The prior written
consent of the Company and the Society will be required for
certain matters relating to GII, including agreeing the annual
budget and the three year rolling business plan, changes to
the business being carried on by GII, issuing shares in GII,
making material investments, acquisitions and disposals or
incurring material new debt. Any proposed transfer of shares
in GII must be offered first to the other shareholder. If the
Society proposes to dispose of its shares in GII so that the
Society ceases to own a majority of the issued shares in GII,
the Company (as a condition to completion of any such sale
by the Society) will be entitled to sell its shares to the buyer in
the same proportion and on the same terms as the proposed
disposal by the Society (to include any non-cash consideration
and non-compete covenants (limited to two years and only the
business and geographical scope of GII’s business at the
time of sale) agreed by the Society, if applicable). Future
capital contributions will be considered by shareholders
on a case by case basis (without any binding commitment).
The shareholders are required to agree a business plan for
GII which provides, inter alia, for the delivery of a minimum
retained profit in the business equivalent to 1 cent per litre
of milk processed, post the expansion investment period.
In addition, post the expansion investment period in a year
of low dairy pricing, GII can reduce the profit retained in the
business to 0.5 cent per litre in any one financial year of a
four year cycle commencing with the 2017 financial year.
No of ordinary
shares as
at 3/01/2015
121,919,315
21,043,293
% of issued
share Capital as
at 3/01/2015
No of ordinary
shares as
at 24/02/2015
41.2% 121,919,315
7.12% 21,043,293
% of issued
share Capital as
at 24/02/2015
41.2%
7.12%
Under the Shareholders’ Agreement the Society has a call
option (the ‘Call Option’) exercisable over the six year period
post completion to acquire the Company’s remaining 40%
interest in GII. Should the Society exercise this option, the
Company would no longer be a shareholder of GII. The Call
Option will be exercisable for a four month period following
the end of each financial year or as otherwise may be agreed.
The Company cannot sell its shares in GII so long as the Call
Option remains exercisable without the prior consent of the
Society. The price payable by the Society on completion of
the Call Option shall be an amount equal to 40% of the higher
of: (i) the audited book value of the net assets (subject to
adjustment in respect of any pension deficit of GII as described
below and adjusted upwards for an amount, if any, by which
the assets of GII have been written down by reference to the
discount of €20 million against the book value of the net assets
of Dairy Ingredients Ireland at completion) of GII as at the end
of the financial year prior to the date of exercise of the Call
Option; or (ii) 5.5x 12 months audited earnings before interest,
tax, depreciation and amortisation (EBITDA) of GII (calculated
as the average of the last three financial years prior to the
exercise of the Call Option).
The equity consideration under this formula will be on a
debt-free, cash-free basis. A cap has been placed on the total
consideration which may be payable in respect of a disposal of
GII (i.e. being the initial 60% sale to the Society and the further
sale of the remaining 40% on the exercise of the Call Option by
the Society). The IAS 19 pension deficit of GII for the purposes
of calculating the equity value pursuant to the Call Option
will be calculated by valuing the scheme liabilities using the
average of the yields to calculate such liabilities on each of
the last four reporting dates (June, December) ending on the
financial year ended immediately prior to the exercise of the
Call Option. If, following the exercise of the Call Option by the
Society, GII continues to be a participating employer in the
Glanbia pension scheme, the Society will guarantee to the
Company the due performance of its obligations under
the scheme.
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Glanbia plc 2014 Annual Report and Accounts
If the Company ceases to have any shareholding in GII,
the Shareholders’ Agreement provides that the following
will happen:
• the proposed licence arrangements for use by GII of
the Avonmore and Premier trademarks will terminate;
• GII will change its name to a new name which does not
include the name ‘Glanbia’ and the Company will pay to
GII 50% of the vouched reasonable costs of rebranding up
to a maximum liability for the Company of €500,000; and
• unless the Society effects a change of its name to one
which does not include the name ‘Glanbia’ within a
prescribed period from the date on which the Company
ceases to have any shareholding in GII, the Society will bear
the reasonable and vouched costs of the Company and its
subsidiaries rebranding to a name which does not include
the name ‘Glanbia’.
Corporate social responsibility
Glanbia is focused on corporate social responsibility
in three areas – our employees, the environment and
our local communities.
More particular details of which are summarised in
‘Our People’ on pages 44 to 48 and throughout the
‘Operations Review’ on pages 38 to 43.
Subsidiary and associated undertakings
A list of the principal subsidiary and associated undertakings
is included in note 39 to the financial statements.
Accountability and audit
Financial reporting
Directors’ responsibilities for preparing the Financial
Statements for the Company and the Group are detailed
on page 114.
The Independent Auditors’ Report details the respective
responsibilities of Directors and external Auditors.
External Auditors
The external Auditors, PricewaterhouseCoopers, have
expressed their willingness to continue in office in accordance
with Section 160(2) of the Companies Act, 1963.
Information required to be disclosed by LR 9.8.4 R, United Kingdom Listing Authority
For the purposes of LR 9.8.4C R, the information required to be disclosed by LR 9.8.4 R can be found in the following locations:
Section
Topic
Interest capitalised
Location
Financial Statements, note 10
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Publication of unaudited financial information
Not applicable
Details of long-term incentive schemes
Remuneration Committee report
Waiver of emoluments by a director
Waiver of future emoluments by a director
Non pre-emptive issues of equity for cash
Item (7) in relation to major subsidiary undertakings
Parent participation in a placing by a listed subsidiary
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Contracts of significance
Other Statutory Information
Provision of services by a controlling shareholder
Not applicable
Shareholder waivers of dividends
Shareholder waivers of future dividends
Other Statutory Information
Other Statutory Information
Agreement with controlling shareholders
Page 63
All the information cross-referenced above is hereby incorporated by reference into this Directors’ Report.
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113
Governance
Statement of Directors’ Responsibilities
The Directors are responsible for preparing the Annual Report
and the Financial Statements in accordance with applicable
law and regulations. Irish company law requires the Directors
to prepare Financial Statements for each financial year. Under
that law the Directors have prepared the Financial Statements
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union. The Financial
Statements are required by law to give a true and fair view of
the state of affairs of the Company and the Group and of the
profit or loss of the Group.
In preparing these Financial Statements the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• 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 corporate governance 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.
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 2013 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 certain corporate and financial information included on the
Group’s website. Legislation in Ireland concerning the
preparation and dissemination of Financial Statements
may differ from legislation in other jurisdictions.
Each of the current Directors, whose names and functions are
listed on pages 64 to 67 confirms that he/she consider that the
Annual Report and Financial Statements, taken as a whole is
fair, balanced and understandable and provides the information
necessary for shareholders to assess the Company’s and the
Group’s performance, business model and strategy. Each of
the current Directors also 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.
Pages 1 to 114 are deemed to be the Directors’ Report which encompasses
Strategy (pages 1 to 57) and Governance (pages 58 to 114)
Directors’ Report
On behalf of the Board
Liam Herlihy
Directors
24 February 2015
Siobhán Talbot
Mark Garvey
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Glanbia plc 2014 Annual Report and Accounts
Financial statements
Independent Auditors’ Report
to the members of Glanbia plc
Group income statement
Group statement of comprehensive income
Group statement of changes in equity
Group balance sheet
Group statement of cash flows
Company balance sheet
Company statement of changes in equity
Company statement of comprehensive
income and statement of cash flows
Notes to the financial statements
Shareholders’ information
Contacts
116
121
122
123
124
125
126
127
128
129
190
193
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Independent Auditors’ report to the members of Glanbia plc
Independent Auditors’ report to the members of Glanbia plc
Report on the Financial
Statements
OUR OPINION
In our opinion:
the Group Financial Statements give a true and fair view, in
accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union, of the state of
the Group's affairs as at 03 January 2015 and of its profit
and cash flows for the year then ended;
the 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 2013, of the state of the
Company's affairs as at 03 January 2015 and of its cash
flows for the year then ended; and
the Group and Company Financial Statements have been
prepared in accordance with the requirements of the
Companies Acts 1963 to 2013 and, as regards the Group
Financial Statements, Article 4 of the IAS Regulation.
WHAT WE HAVE AUDITED
Glanbia plc's Financial Statements comprise:
the Group income statement and statement of
comprehensive income for the year ended 03 January 2015;
the Group and Company statements of changes in equity for
the year ended 03 January 2015;
the Group and Company balance sheets as at 03 January
2015;
the Group statements of cash flows for the year ended
03 January 2015;
the Company statement of comprehensive income and
statement of cash flows for the year ended 03 January 2015;
and
the notes to the Financial Statements, which include a
summary of significant accounting policies and other
explanatory information.
Certain required disclosures have been presented elsewhere in
the Annual Report, rather than in the notes to the Financial
Statements. These are cross-referenced from the Financial
Statements and are identified as audited.
The financial reporting framework that has been applied in the
preparation of the Financial Statements is Irish law and IFRSs as
adopted by the European Union and, as regards the Company,
as applied in accordance with the provisions of the Companies
Acts 1963 to 2013.
OUR AUDIT APPROACH – OVERVIEW
Materiality
Overall Group materiality: €9.2 million (2013: €8 million) which
represents approximately 5% of profit before tax and
exceptional items.
Audit scope
We conducted audit work in 17 reporting units. We paid
particular attention to these reporting units due to their size
or risk characteristics.
Taken together, the reporting units and functions where we
performed our audit work accounted for 85% of Group
revenues and 87% of Group profit before tax and exceptional
items.
Area of focus
Goodwill and indefinite life intangible assets impairment
assessment
Business combinations
Provision for income taxes
Risk of fraud in revenue recognition
Pension liabilities
The scope of our audit and our areas of focus
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) (ISAs (UK & Ireland)).
We designed our audit by determining materiality and assessing
the risks of material misstatement in the Financial Statements.
In particular, we looked at where the Directors made subjective
judgements, for example in respect of significant accounting
estimates that involved making assumptions and considering
future events that are inherently uncertain. As in all of our audits,
we also addressed the risk of management override of internal
controls, including evaluating whether there was evidence of
bias by the Directors that may represent a risk of material
misstatement due to fraud.
The risks of material misstatement that had the greatest effect
on our audit, including the allocation of our resources and effort,
are identified as "areas of focus" below together with an
explanation of how we tailored our audit to address these
specific areas. This is not a complete list of all risks identified
by our audit.
Area of focus
Goodwill and indefinite life intangible assets impairment
assessment
Refer to note 15.
The Group has goodwill and indefinite life intangible assets of
€362 million at 03 January 2015 (see note 15).
There are eight individual Cash Generating Units (CGUs). The
most significant goodwill and indefinite life intangible assets
relates to the Group's Global Performance Nutrition business
(€253 million) and the Group's Customised Solutions business
(€80 million).
We focused on this area given the scale of the assets and
because the determination of whether an impairment charge
for goodwill or indefinite life intangible assets was necessary
involves significant judgement in estimating the future results
of the business.
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Glanbia plc 2014 Annual Report and Accounts
How our audit addressed the area of focus
Our audit procedures included interrogating the Group's
impairment model, and evaluating the methodology followed
and key assumptions used.
We evaluated management's future cash flow forecasts, and the
process by which they were drawn up, including comparing
them to the latest Board approved budgets, and testing the
underlying calculations.
We challenged the Directors estimation of growth in future
profitability by considering sales growth used in the cash flow
forecasts in light of:
current sales demand; and
independent projections of the expected growth of key
markets, in particular the Performance Nutrition market in the
US and globally.
We also considered the Group's historic growth rates and its
achievement record of past strategic objectives.
We considered and challenged the discount rates used by
recalculating the cost of capital adjusted to reflect risks
associated with each CGU using observable inputs from
independent sources. We also benchmarked the discount rates
used against the published cost of capital for comparable
organisations.
We also performed our own sensitivity analysis on the impact of
changes in key assumptions.
Area of focus
Business combinations
Refer to note 36.
The Group acquired The Isopure Company, LLC (Isopure)
during the year for consideration of €107 million.
The Group acquired Nutramino Holding ApS (Nutramino) during
the year for consideration of €21 million.
For both acquisitions, the Group was required to determine the
fair values of all acquired assets and liabilities and to identify and
value intangible assets, including goodwill arising on acquisition.
The consideration arising on the acquisition of Nutramino
included a portion which is contingent on future earnings. The
fair value of contingent consideration is required to be calculated
at the acquisition date and was estimated at €4.8 million. Due to
a better than anticipated performance the estimate increased to
€11.3 million at the year end. As set out in note 7, the increase
in this estimate of €6.5 million was charged to the income
statement in accordance with IFRS 3 and is included in
exceptional items.
We focused on this area as significant judgement is exercised in;
The identification and valuation of acquired intangible
assets including:
Isopure brand
€57.2m
Isopure customer relationships
Nutramino brand
Nutramino customer relationships
€26.6m
€9.9m
€5.2m
The estimate of the contingent consideration at the
acquisition and year end date.
How our audit addressed the area of focus
We obtained and considered the reports prepared by
management’s independent valuation specialists.
For both acquisitions we considered the process applied to
identify intangible assets and performed procedures to assess
the reasonableness of the assumptions applied in valuing such
assets.
In particular we consulted with our in-house valuation specialists
regarding the relief from royalty rate which was used to devise
the brand valuations.
We compared the customer attrition rates used in the valuation
of customer relationships with those which have been observed
to date by the Group in other acquisitions in the Performance
Nutrition sector since 2008. We compared the projected gross
margins to those historically achieved by the acquired
businesses.
We performed sensitivity analysis around the key drivers of the
valuation models including the relief from royalty rate, the
customer attrition rate, the sales growth rate and the discount
rate applied to the cash flow forecasts.
We also assessed the reasonableness of fair values of other
assets and liabilities acquired in the business combinations.
In the case of Nutramino, when assessing the fair value of the
contingent consideration at the acquisition date and at the year
end, we obtained the most up to date management budgets
and forecasts used to estimate the likely earn out. We
challenged the assumptions used by management and
considered the budgeted earnings in the light of historic results.
Area of focus
Provision for income taxes
As described in the critical accounting estimates and
judgements section in note 4, the Group is subject to income
tax in numerous jurisdictions and judgement is required in
determining the worldwide provision for current and deferred
taxes as there are many transactions during the ordinary
course of business for which the ultimate tax determination is
uncertain. This area required our focus as there is a level of
estimation and judgement in calculating such liabilities.
How our audit addressed the area of focus
We obtained an understanding of the critical accounting
judgements made in the estimation of these liabilities through
discussions with management and the Group's in-house tax
specialists.
We challenged judgements used and estimates made by
management to determine the provision for uncertain tax
positions. This included holding discussions with PwC
international and Irish taxation specialists to assist us in
evaluating the assumptions and methodologies used by the
Group in calculating tax liabilities.
We read the relevant correspondence between the Group and
relevant tax authorities.
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117
financial statements
Independent Auditors’ report to the members of Glanbia plc continued
Independent Auditors’ report to the members of Glanbia plc continued
Area of focus
Risk of fraud in revenue recognition
ISAs (UK & Ireland) presume there is a risk of fraud in revenue
recognition because of the pressure management may feel
to achieve the planned results.
How our audit addressed the area of focus
As the foundation of the evidence we obtained regarding the
revenue recognised during the year, we evaluated the relevant
IT systems and tested the internal controls over the
completeness, accuracy and timing of revenue recognised in
the Financial Statements. We also tested certain journal entries
posted to revenue accounts to identify unusual or irregular
items.
We tested a sample of credit notes recorded during the year
and after the year end to ensure appropriate revenue
recognition. We traced a sample of sales recorded during the
year to delivery documentation and cash remittance.
We read extracts of relevant customer agreements and tested
the amounts recorded for rebate agreements in Global
Performance Nutrition, Customised Solutions and Consumer
Products by independently recalculating rebate amounts based
on the underlying customer agreements and the observable
sales data of the entity.
Area of focus
Pension liabilities
Refer to note 28.
The deficits on the Group's defined benefit pension schemes
included on the balance sheet is determined based on a
number of key estimates, a significant assumption being the
discount rate at year end. The discount rate has been adversely
impacted in the current year by the continuing decline in global
bond yields. Assumptions regarding mortality rates and inflation
are also important. We focus on these assumptions because a
modest change in such assumptions can result in a material
change in the value of the overall deficit.
How our audit addressed the area of focus
We considered and challenged the reasonableness of the
actuarial assumptions used by management regarding discount
rates, salary increases, inflation and mortality rates, by holding
dialogue with our in-house actuaries and comparing the
assumptions to in-house benchmark data.
We evaluated whether the Directors' judgements and
assumptions had been made on a basis consistent with
prior years.
We also focused on the valuations of pension plan liabilities and
the pension assets as follows:
we obtained third party confirmations on ownership and
valuation of pension assets; and
we independently tested changes in membership census
data by reference to pension scheme records.
HOW WE TAILORED THE AUDIT SCOPE
We tailored the scope of our audit to ensure that we performed
enough work to be able to give an opinion on the Financial
Statements as a whole, taking into account the geographic
structure of the Group, the accounting processes and controls
and the industry in which the Group operates.
The Group is structured along four business segments: Global
Performance Nutrition, Global Ingredients, Dairy Ireland and
Joint Ventures & Associates. The Group Financial Statements
are a consolidation of 34 reporting units, comprising the
Group's operating businesses and centralised functions.
In establishing the overall approach to the Group audit, we
determined the type of work that needed to be performed at
the reporting units by us, as the Group engagement team,
or component auditors within PwC ROI and from other PwC
network firms operating under our instruction. Where the work
was performed by component auditors, we determined the level
of involvement we needed to have in the audit work at those
reporting units to be able to conclude whether sufficient
appropriate audit evidence had been obtained as a basis for
our opinion on the Group Financial Statements as a whole.
Our Group audit scope focused on 17 Glanbia reporting units.
Ten subsidiaries and joint ventures were subject to an audit
of their full financial information due to their size or risk
characteristics. This included the primary central reporting unit,
which controls central Group functions. Glanbia Ingredients
Ireland Limited, a material associate, which, while not controlled
by the Group, was also subject to an audit of their full financial
information.
These operations which were subject to a full scope audit
accounted for approximately 85% of Group turnover and 87%
of Group profit before tax and exceptional items. Taken
collectively these reporting units represent the principal business
units of the Group.
Specific audit procedures on certain balances and transactions
were performed at six of the remaining reporting units. This,
together with additional procedures over central functions and
areas of significant judgement including taxation, goodwill,
treasury and post-retirement benefits performed at the Group
level, gave us the evidence we needed for our opinion on the
Group Financial Statements as a whole.
The Group audit team follows a programme of planned site
visits that is designed so that senior team members visit the full
scope audit reporting units regularly on a rotational basis. In
addition to these visits, meetings are held with each full scope
reporting unit's component auditors at least once a year and
post audit conference calls are held.
118
106
Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
Materiality
The scope of our audit is influenced by our application of
materiality. We set certain quantitative thresholds for materiality.
These, together with qualitative considerations, helped us to
determine the scope of our audit and the nature, timing and
extent of our audit procedures and to evaluate the effect of
misstatements, both individually and on the Financial
Statements as a whole.
Based on our professional judgement, we determined materiality
for the Financial Statements as a whole as follows:
Overall Group
materiality
How we
determined it
Rationale for
benchmark
applied
€9.2 million (2013: €8 million)
5% of profit before tax and exceptional
items
We applied this benchmark because in our
view this is the metric against which the
performance of the Group is most
commonly measured and it results in using
a materiality level that is appropriately
normalised from year to year.
We agreed with the Audit Committee that we would report
to them misstatements identified during our audit above
€0.5 million (2013: €0.4 million) as well as misstatements
below that amount that, in our view, warranted reporting for
qualitative reasons.
Going concern
Under the Listing Rules of the Irish Stock Exchange we are
required to review the Directors’ statement, set out on page
104, in relation to going concern. We have nothing to report
having performed our review.
As noted in the Directors’ statement, the Directors have
concluded that it is appropriate to prepare the Group and
Company Financial Statements using the going concern
basis of accounting. The going concern basis presumes that
the Group and Company have adequate resources to remain
in operation, and that the directors intend them to do so,
for at least one year from the date the Financial Statements
were signed. As part of our audit we have concluded that
the Directors’ use of the going concern basis is appropriate.
However, because not all future events or conditions can
be predicted, these statements are not a guarantee as to
the Group’s and the Company’s ability to continue as a going
concern.
Other required reporting
CONSISTENCY OF OTHER INFORMATION
Companies Acts 1963 to 2013 opinions
In our opinion:
the information given in the Directors' Report is consistent
with the Financial Statements and the description in the
Corporate Governance Statement 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.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland) we are required to report to you if,
in our opinion:
We have no
exceptions to
report arising
from this
responsibility.
We have no
exceptions to
report arising
from this
responsibility.
information in the Annual Report is:
materially inconsistent with the
information in the audited Financial
Statements; or
apparently materially incorrect based
on, or materially inconsistent with, our
knowledge of the Group and Company
acquired in the course of performing
our audit; or
is otherwise misleading.
the statement given by the Directors on
page 114, in accordance with provision
C.1.1 of the UK Corporate Governance
Code (the Code), that they consider the
Annual Report taken as a whole to be fair,
balanced and understandable and provides
the information necessary for members to
assess the Group's performance, business
model and strategy is materially inconsistent
with our knowledge of the Group acquired
in the course of performing our audit.
the section of the Annual Report on page
72, as required by provision C.3.8 of the
Code, describing the work of the Audit
Committee does not appropriately
address matters communicated by
us to the Audit Committee.
We have no
exceptions to
report arising
from this
responsibility.
www.glanbia.com
107
www.glanbia.com
119
financial statements
Independent Auditors’ report to the members of Glanbia plc continued
WHAT AN AUDIT OF FINANCIAL STATEMENTS
INVOLVES
An audit involves obtaining evidence about the amounts and
disclosures in the Financial Statements sufficient to give
reasonable assurance that the Financial Statements are free
from material misstatement, whether caused by fraud or error.
This includes an assessment of:
whether the accounting policies are appropriate to the
Group's and Company's circumstances and have been
consistently applied and adequately disclosed;
the reasonableness of significant accounting estimates made
by the Directors; and
the overall presentation of the Financial Statements.
We primarily focus our work in these areas by assessing the
Directors' judgements against available evidence, forming our
own judgements, and evaluating the disclosures in the Financial
Statements.
We test and examine information, using sampling and other
auditing techniques, to the extent we consider necessary to
provide a reasonable basis for us to draw conclusions. We
obtain audit evidence through testing the effectiveness of
controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information
in the Annual Report to identify material inconsistencies with
the audited Financial Statements and to identify any information
that is apparently materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us in the course
of performing the audit. If we become aware of any apparent
material misstatements or inconsistencies we consider the
implications for our report.
Martin Freyne
for and on behalf of PricewaterhouseCoopers
Chartered Accountants and Statutory Audit Firm
Ballycar House
Newtown
Waterford
Date: 24 February 2015
DIRECTORS' REMUNERATION
Under the Companies Acts 1963 to 2013 we are required to
report to you if, in our opinion, the disclosure of Directors'
remuneration and transactions specified by law have not been
made, and under the Listing Rules of the Irish Stock Exchange
we are required to review the six specified elements of
disclosures in the report to shareholders by the Board on
Directors' remuneration. We have no exceptions to report
arising from these responsibilities.
CORPORATE GOVERNANCE STATEMENT
Under the Listing Rules of the Irish Stock Exchange we are
required to review the part of the Corporate Governance
Statement relating to the Company's compliance with nine
provisions of the UK Corporate Governance Code and the two
provisions of the Irish Corporate Governance Annex specified for
our review. We have nothing to report having performed our
review.
OTHER MATTERS ON WHICH WE ARE REQUIRED TO
REPORT BY THE COMPANIES ACTS 1963 TO 2013
We have obtained all the information and explanations
which we consider necessary for the purposes of our audit.
In our opinion proper books of account have been kept by
the Company.
The Company balance sheet is in agreement with the
books of account.
The net assets of the Company, as stated in the Company
balance sheet, are more than half of the amount of its called-up
share capital and, in our opinion, on that basis there did not
exist at 03 January 2015 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.
Responsibilities for the financial
statements and the audit
OUR RESPONSIBILITIES AND THOSE OF THE
DIRECTORS
As explained more fully in the Directors' Responsibilities
Statement set out on page 114, the Directors are responsible
for the preparation of the Group and Company Financial
Statements giving a true and fair view.
Our responsibility is to audit and express an opinion on the
Group and Company Financial Statements in accordance with
applicable law and ISAs (UK & Ireland). Those standards require
us to comply with the Auditing Practices Board's Ethical
Standards for Auditors.
This report, including the opinions, has been prepared for and
only for the Company's members as a body in accordance
with Section 193 of the Companies Act, 1990 and for no other
purpose. We do not, in giving these opinions, 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.
120
108
Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
Group income statement
Group income statement
for the financial year ended 03 January 2015
for the financial year ended 03 January 2015
Pre-
exceptional
2014
€’000
Exceptional
2014
€’000
(note 7)
Notes
Total
2014
€’000
Pre-
exceptional
2013
€’000
Exceptional
2013
€’000
(note 7)
Total
2013
€’000
Revenue
5
2,538,368
–
2,538,368 2,382,133
– 2,382,133
Earnings before interest, tax and
amortisation (EBITA)
Intangible asset amortisation
Operating profit
Finance income
Finance costs
Share of results of Joint Ventures & Associates
Profit before taxation
Income taxes
Profit for the year
Attributable to:
Equity holders of the Parent
Non-controlling interests
6
10
10
11
25
208,634
(22,512)
(15,949)
–
192,685
(22,512)
187,665
(21,011)
5,804
193,469
–
(21,011)
186,122
(15,949)
170,173
166,654
5,804
172,458
1,725
(22,050)
23,729
–
–
–
1,725
(22,050)
23,729
2,168
(25,110)
26,488
–
–
–
2,168
(25,110)
26,488
189,526
(28,252)
(15,949)
1,870
173,577
(26,382)
170,200
5,804
176,004
(24,692)
(316)
(25,008)
161,274
(14,079)
147,195
145,508
5,488
150,996
Earnings per share attributable to the equity holders of the Parent
Basic earnings per share (cents)
Diluted earnings per share (cents)
12
12
On behalf of the Board
L Herlihy
Directors
S Talbot
M Garvey
146,313
882
147,195
49.60
49.32
150,330
666
150,996
51.01
50.66
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109
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121
financial statements
Group statement of comprehensive income
Group statement of comprehensive income
for the financial year ended 03 January 2015
for the financial year ended 03 January 2015
Profit for the year
Other comprehensive income/(expense)
Items that are not reclassified subsequently to the Group income statement:
Remeasurements – defined benefit schemes
Deferred tax credit/(charge) on remeasurements
Share of remeasurements – Joint Ventures & Associates
Deferred tax credit on remeasurements – Joint Ventures & Associates
Items that may be reclassified subsequently to the Group income statement:
Currency translation differences
Net investment hedge
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
Notes
2014
€’000
147,195
2013
€’000
150,996
28
27
24
24
22
22
22
22
27
(42,369)
4,868
(8,900)
1,120
97,805
(9,544)
1,457
507
(140)
(1,546)
(166)
(1,149)
220
(24,592)
2,472
1,425
898
(541)
Other comprehensive income/(expense) for the year, net of tax
44,804
(22,979)
Total comprehensive income for the year
191,999
128,017
Total comprehensive income attributable to:
Equity holders of the Parent
Non-controlling interests
191,117
882
127,351
666
25
Total comprehensive income for the year
191,999
128,017
122
110
Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
Group statement of changes in equity
Group statement of changes in equity
for the financial year ended 03 January 2015
for the financial year ended 03 January 2015
Attributable to equity holders of the Parent
Share capital
and share
premium
€’000
(note 23)
Other
reserves
€’000
(note 22)
Retained
earnings
€’000
(note 24)
Total
€’000
Non-
controlling
interests
€’000
(note 25)
Total
€’000
Balance at 29 December 2012
102,095
145,289
289,997
537,381
7,275
544,656
Profit for the year
Other comprehensive income/(expense)
Remeasurements – defined benefit schemes
Deferred tax on remeasurements
Share of remeasurements – Joint Ventures & Associates
Fair value movements
Deferred tax on fair value movement
Currency translation differences
Net investment hedge
Total comprehensive (expense)/income for the year
Dividends paid during the year
Cost of share based payments
Transfer on exercise, vesting or expiry
of share based payments
Shares issued
Premium on shares issued
Purchase of own shares
Balance at 04 January 2014
Profit for the year
Other comprehensive income/(expense)
Remeasurements – defined benefit schemes
Deferred tax on remeasurements
Share of remeasurements – Joint Ventures & Associates
Fair value movements
Deferred tax on fair value movements
Currency translation differences
Net investment hedge
Total comprehensive income for the year
Dividends paid during the year
Cost of share based payments
Transfer on exercise, vesting or expiry
of share based payments
Deferred tax on share based payments
Sale of shares held by subsidiary
Shares issued
Premium on shares issued
Purchase of own shares
–
–
–
–
–
–
–
–
–
–
–
–
150,330
150,330
666
150,996
–
–
–
2,323
(541)
(24,592)
2,472
(20,338)
(1,546)
(166)
(929)
–
–
–
–
147,689
(1,546)
(166)
(929)
2,323
(541)
(24,592)
2,472
127,351
–
–
–
–
–
–
–
666
(1,546)
(166)
(929)
2,323
(541)
(24,592)
2,472
128,017
–
4,568
(27,929)
–
(27,929)
4,568
(307)
–
(28,236)
4,568
–
41
1,861
–
103,997
4,468
–
–
(7,387)
126,600
(4,468)
–
–
–
405,289
–
41
1,861
(7,387)
635,886
–
–
–
–
7,634
–
41
1,861
(7,387)
643,520
–
146,313
146,313
882
147,195
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,964
(140)
97,805
(9,544)
90,085
(42,369)
4,868
(7,780)
–
–
–
–
101,032
(42,369)
4,868
(7,780)
1,964
(140)
97,805
(9,544)
191,117
–
5,516
(30,751)
–
(30,751)
5,516
–
–
–
14
717
–
4,361
–
–
–
–
(7,981)
(4,361)
272
2,092
–
–
–
–
272
2,092
14
717
(7,981)
–
–
–
–
–
–
–
882
(620)
–
–
–
–
–
–
–
(42,369)
4,868
(7,780)
1,964
(140)
97,805
(9,544)
191,999
(31,371)
5,516
–
272
2,092
14
717
(7,981)
Balance at 03 January 2015
104,728
218,581
473,573
796,882
7,896
804,778
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111
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123
financial statements
Group balance sheet
Group balance sheet
as at 03 January 2015
as at 03 January 2015
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
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
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
Directors
S Talbot
M Garvey
124
112
Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
Notes
14
15
16
17
19
27
18 (a)
20
19
32
21
23
22
24
25
26
27
28
29
30
31
26
32
29
2014
€’000
2013
€’000
490,180
662,169
81,365
69,945
9,863
28,503
10,621
1,352,646
373,972
454,486
80,492
62,894
9,376
22,464
9,498
1,013,182
336,802
305,027
1,279
110,370
753,478
314,481
257,216
1,750
106,259
679,706
2,106,124
1,692,888
104,728
218,581
473,573
796,882
7,896
804,778
103,997
126,600
405,289
635,886
7,634
643,520
620,317
128,002
114,808
18,569
2,214
883,910
441,641
95,584
78,035
18,492
2,471
636,223
390,350
3,115
416
574
22,981
417,436
1,301,346
344,642
1,415
39,062
1,725
26,301
413,145
1,049,368
2,106,124
1,692,888
Group statement of cash flows
Group statement of cash flows
for the financial year ended 03 January 2015
for the financial year ended 03 January 2015
Cash flows from operating activities
Cash generated from operating activities
Interest received
Interest paid
Tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Acquisition of subsidiaries - purchase consideration
Acquisition of subsidiaries - liabilities settled at completion
Acquisition of subsidiaries - cash and cash equivalents acquired
Insurance proceeds
Purchase of property, plant and equipment
Purchase of intangible assets
Dividends received from Joint Ventures
Loans repaid by Joint Ventures & Associates
Decrease in available for sale financial assets
Proceeds from property, plant and equipment
Net cash (outflow) from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Sale of shares held by subsidiary
Purchase of own shares
Increase/(decrease) in borrowings
Redemption of preference shares
Finance lease payments
Dividends paid to Company shareholders
Dividends paid to non-controlling interests
Net cash inflow/(outflow) from financing activities
Net (decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
Reconciliation of net cash flow to movement in net debt
Net (decrease) in cash and cash equivalents
Cash movements from debt financing
Acquisition of subsidiaries - debt acquired
Fair value movement of currency swaps
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
Notes
35
36
36
36
17
23
24
22
13
25
21
36
2014
€’000
2013
€’000
230,716
1,683
(24,358)
(34,393)
173,648
(125,812)
(16,138)
2,768
1,035
(101,953)
(13,532)
12,648
–
334
63
(240,587)
731
2,092
(7,981)
138,242
(39,062)
(313)
(30,751)
(620)
62,338
(4,601)
106,259
8,712
110,370
2014
€’000
(4,601)
(98,867)
(1,401)
(104,869)
(453)
(30,597)
(135,919)
(374,444)
(510,363)
169,296
2,253
(26,409)
(31,600)
113,540
–
–
–
7,670
(94,897)
(17,346)
10,937
7,178
1,752
780
(83,926)
1,902
–
(7,387)
(138,496)
(24,425)
–
(27,929)
(307)
(196,642)
(167,028)
275,572
(2,285)
106,259
2013
€’000
(167,028)
162,921
–
(4,107)
674
5,549
2,116
(376,560)
(374,444)
26
21
(620,733)
110,370
(510,363)
(480,703)
106,259
(374,444)
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113
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125
financial statements
Company balance sheet
Company balance sheet
as at 03 January 2015
as at 03 January 2015
ASSETS
Non-current assets
Investments in associates
Investments in subsidiaries
Available for sale financial assets
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
Non-current liabilities
Deferred tax liabilities
Current liabilities
Trade and other payables
Bank overdraft
Total liabilities
Total equity and liabilities
Notes
16
18 (b)
18 (a)
19
21
23
24
27
31
26
2014
€’000
2013
€’000
22,876
609,530
4,488
636,894
22,876
609,440
514
632,830
147
8,590
8,737
209
–
209
645,631
633,039
459,996
54,875
8,282
523,153
459,265
65,170
4,350
528,785
403
403
–
–
122,075
–
122,075
122,478
102,021
2,233
104,254
104,254
645,631
633,039
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 the Company amounts
to €24.8 million (2013: loss €10.2 million).
On behalf of the Board
L Herlihy
Directors
S Talbot
M Garvey
126
114
Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
Company statement of changes in equity
Company statement of changes in equity
for the financial year ended 03 January 2015
for the financial year ended 03 January 2015
Other reserves
Share
capital and
share
premium
€’000
(note 23)
Retained
earnings
€’000
(note 24)
Capital
reserve
€’000
(note 22 a)
Own
shares
€’000
(note 22 f)
Share
based
payment
reserve
€’000
(note 22 g)
Available
for sale
financial
asset
reserve
€’000
(note 18)
Balance at 29 December 2012
457,363
107,795
4,227
(8,221)
6,695
Loss for the year
Dividends paid during the year
Cost of share based payments
Transfer on exercise, vesting or expiry
of share based payments
Shares issued
Premium on shares issued
Purchase of own shares
–
–
–
–
41
1,861
–
(10,228)
(27,929)
–
(4,468)
–
–
–
–
–
–
–
–
–
–
Balance at 04 January 2014
459,265
65,170
4,227
Profit for the year
Other comprehensive income/(expense)
Fair value movements
Deferred tax on fair value movements
Total comprehensive income for the year
Dividends paid during the year
Cost of share based payments
Transfer on exercise, vesting or expiry
of share based payments
Shares issued
Premium on shares issued
Purchase of own shares
–
–
–
–
–
–
–
14
717
–
24,817
–
–
24,817
(30,751)
–
(4,361)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
7,417
–
–
(7,387)
(8,191)
–
–
–
–
–
–
8,207
–
–
(7,981)
–
–
4,568
(2,949)
–
–
–
8,314
–
–
–
–
–
5,516
(3,846)
–
–
–
–
–
–
–
–
–
–
–
–
–
3,039
(1,003)
2,036
–
–
–
–
–
–
Total
€’000
567,859
(10,228)
(27,929)
4,568
–
41
1,861
(7,387)
528,785
24,817
3,039
(1,003)
26,853
(30,751)
5,516
–
14
717
(7,981)
Balance at 03 January 2015
459,996
54,875
4,227
(7,965)
9,984
2,036
523,153
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financial statements
Company statement of comprehensive income and statement of cash flows
Company statement of comprehensive income and statement of cash flows
for the financial year ended 03 January 2015
for the financial year ended 03 January 2015
Company statement of comprehensive income
Profit/(loss) for the year after tax
Other comprehensive income/(expense) for the year
Revaluation of available for sale financial assets
Deferred tax on revaluation of available for sale financial assets
Other comprehensive income for the year, net of tax
Total comprehensive income/(expense) for the year
Company statement of cash flows
Cash flows from operating activities
Cash generated from operating activities
Net cash inflow from operating activities
Cash flows from investing activities
Purchase of other Group companies
Disposal of other Group companies
Purchase of investments
Net cash (outflow)/inflow from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Dividends paid to Company shareholders
Purchase of own shares
Net cash (outflow) from financing activities
Net increase in cash and cash equivalents
(Bank overdraft) at the beginning of the year
Cash and cash equivalents/(bank overdraft) at the end of the year
Notes
24
18
27
Notes
35
18
23
13
22
2014
€’000
24,817
2013
€’000
(10,228)
3,039
(1,003)
2,036
26,853
–
–
–
(10,228)
2014
€’000
2013
€’000
49,849
49,849
33,370
33,370
(117)
27
(935)
(1,025)
731
(30,751)
(7,981)
(38,001)
10,823
(2,233)
8,590
(2,085)
3,165
(513)
567
1,902
(27,929)
(7,387)
(33,414)
523
(2,756)
(2,233)
128
116
Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
Notes to the financial statements
Notes to the financial statements
for the financial year ended 03 January 2015
for the financial year ended 03 January 2015
1. GENERAL INFORMATION
Glanbia plc (the Company) and its subsidiaries (together the
Group) is a leading global performance nutrition and ingredients
Group with its main operations in Europe, USA, Middle East,
Africa, Asia Pacific and Latin America.
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). The Society
can nominate up to 14 members of the board of Directors of
Glanbia plc for 2015 and currently holds, together with its
subsidiaries, 41.2% of the issued share capital of the Company
and is the ultimate parent of the Group.
The Company’s 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 24 February 2015.
2. SUMMARY OF SIGNIFICANT ACCOUNTING
POLICES
New accounting standards and IFRIC interpretations adopted
by the Group during the year ended 03 January 2015 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 2013 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 the
52-week period ending on 03 January 2015, comparatives
are for the 53-week period ended 04 January 2014. The
balance sheets for 2014 and 2013 have been drawn up as
at 03 January 2015 and 04 January 2014 respectively.
Going concern
After making enquiries the Directors have a reasonable
expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. The Group
therefore continues to adopt the going concern basis in
preparing its consolidated Financial Statements.
(b) Consolidation
The Group Financial Statements incorporate:
(i) The Financial Statements of the Company and entities
controlled by it (its subsidiaries). Subsidiaries are all entities
(including structured entities) over which the Group has
control. The Group controls an entity when the Group is
exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect
those returns through its power over the entity. 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 sum
of 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. 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.
Discontinued operations and non-current assets held for
sale are defined as follows: a component of an entity that
either has been disposed of, abandoned, or is classified
as held for sale and:
represents a separate major line of business or
geographical area of operation; or
is part of a single coordinated plan to dispose of a
separate major line of business or geographical area
of operation; or
is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs upon
disposal, abandonment, or when the operations meet the
criteria to be classified as held for sale.
Non-current assets and disposal groups classified as held
for sale are measured at the lower of the carrying value
and the fair value less costs to sell. Non-current assets
and disposal groups are classified as held for sale if their
carrying amounts will be recovered through a sale
transaction rather than continued use. This condition is
regarded as satisfied only when the sale is highly probable
and the asset or disposal group is available for immediate
sale in its present condition. Management must be
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
committed to the sale, which should be expected to qualify
for recognition as a completed sale within one year of the
date of classification. Property, plant and equipment and
intangible assets, once classified as held for sale are not
depreciated or amortised.
When the Group ceases to have control, any retained
interest in the entity is re-measured to its fair value at the
date when control is lost, with the change in carrying
amount recognised in profit or loss. The fair value is the
initial carrying amount for the purposes of subsequently
accounting for the retained interest as an associate, joint
venture or financial asset. In addition, any movements
previously recognised in other comprehensive income in
respect of that entity are accounted for as if the Group had
directly disposed of the related assets or liabilities. This may
mean that amounts previously recognised in other
comprehensive income are reclassified to profit or loss.
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)
Investments in subsidiaries are accounted for at cost
less impairment. Cost is adjusted to reflect changes in
consideration arising from contingent consideration
amendments. Cost also includes directly attributable
costs of investment.
(iii) The Group applies IFRS 11 to all joint arrangements.
Under IFRS 11 investments in joint arrangements are
classified as either joint operations or joint ventures
depending on the contractual rights and obligations of
each investor. Glanbia plc has assessed the nature of
its joint arrangements and determined them to be joint
ventures. Joint ventures are accounted for using the
equity method.
(iv) The Group’s share of the results and net assets of
associated companies and joint ventures is included
based on the equity method of accounting. An
associate is an entity over which the Group has
significant influence, but not control, through
participation in the financial and operating policy
decisions of the investee. A joint venture is an entity
subject to joint control by the Group and other parties.
Under the equity method of accounting, the Group’s
share of the post-acquisition profits and losses of
associates and joint ventures is recognised in the
income statement and its share of post acquisition
movements in reserves is recognised directly in other
comprehensive income. The cumulative post
acquisition movements are adjusted against the cost
of the investment. Unrealised gains on transactions
between the Group and its associates and joint
ventures are eliminated to the extent of the Group’s
interest in the associate or joint venture. Unrealised
losses are also eliminated unless the transaction
provides evidence of an impairment of the asset
transferred. When the Group’s share of losses in an
associate or joint venture equals or exceeds its interest
in the associate or joint venture, the Group does not
recognise further losses, unless the Group has
incurred obligations or made payments on behalf
of the associate or joint venture.
(c) Segment reporting
In accordance with the requirements of IFRS 8 – Operating
Segments, 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 Group Operating
Executive Committee.
(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 the 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.
(iii) Group companies
The income statement and balance sheet of Group
companies that have a functional currency different from
the presentation currency are translated into the
presentation currency as follows:
assets and liabilities at each reporting date are
translated at the closing rate at the reporting date of
the balance sheet; and
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.
130
118
Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
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 (04 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 its 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 the
carrying amount and are included in the income statement.
Repairs and maintenance expenditure is charged to the income
statement during the financial period in which it is 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, associate
or joint venture at the date of acquisition.
Goodwill on acquisitions of subsidiaries is included in
intangible assets.
Goodwill associated with the acquisition of associates
or joint ventures is included within the investment in
associates or joint ventures.
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 six 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 set out in note 15. 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 five
and ten years.
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
(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 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 financial assets 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 and associates 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 dependent 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 compared with 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. When a receivable is uncollectable, it is written off
against the provision account for receivables.
Subsequent recoveries of amounts previously written off are
credited to the income statement. Where risks associated
with receivables are transferred out of the Group under debt
purchase agreements, such receivables are recognised in
the balance sheet 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 three months or less
and bank overdrafts. In the balance sheet, bank overdrafts
(if applicable) are included in borrowings in current liabilities.
132
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Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
Income taxes
(l)
The tax expense for the period comprises current and deferred
tax. Tax is recognised in the income statement except to the
extent that it relates to items recognised in other comprehensive
income or directly in equity, in which case the tax is also
recognised in other comprehensive income or directly in equity
respectively.
(i) Current ta x
Current tax is calculated on the basis of tax laws enacted or
substantially enacted at the Group balance sheet date in
countries where the Group operates and generates taxable
income, taking into account adjustments relating to prior
years. Management periodically evaluates positions taken
in tax returns with respect to situations in which applicable
tax legislation is subject to interpretation and establishes
provision, where appropriate, on the basis of amounts
expected to be paid to the tax authorities.
(ii) Deferred tax
Deferred tax is provided in full, using the liability method,
on temporary differences arising on the reporting date
between the tax bases of assets and liabilities and their
carrying amounts in the Financial Statements. However,
deferred 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. Deferred tax is determined using tax rates and laws
enacted or substantively enacted by the reporting date.
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 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 by the Group and it is probable
that the temporary difference will not reverse in the
foreseeable future.
(m) Employee benefits
(i) Pension obligations
Group companies operate various pension schemes.
The schemes are generally funded through payments to
insurance companies or trustee-administered funds,
determined by periodic actuarial calculations. The Group
has both defined benefit and defined contribution plans.
A defined contribution plan is a pension plan under which
the Group pays fixed contributions into a separate entity.
The Group has no legal or constructive obligations to pay
further contributions if the fund does not hold sufficient
assets to pay all employees the benefits relating to
employee service in the current and prior periods. The
contributions are recognised as employee benefit expense
when they are due.
A defined benefit plan is a pension plan that is not a defined
contribution plan. Defined benefit plans define an amount of
pension benefit that an employee will receive on retirement,
usually dependent on one or more factors such as age,
years of service and compensation.
The liability recognised in the balance sheet in respect of
defined benefit pension plans is the present value of the
defined benefit obligation at the reporting date less the fair
value of the plan assets. 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 obligation.
Actuarial gains and losses are charged or credited to
equity in other comprehensive income in the period in
which they arise.
A curtailment arises when the Group is demonstrably
committed to make a significant reduction in the number
of employees or employee entitlements covered by a plan.
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. Past-service costs,
negative or positive, are recognised immediately in the
income statement. 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.
(ii) Share based payments
The Group operates a number of equity settled share
based compensation plans which include executive share
option and share award schemes.
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 binomial model.
Non-market vesting conditions are included in assumptions
about the number of options that are expected to vest.
The total expense is recognised over the vesting period,
which is the period over which all of the specified vesting
conditions are to be satisfied. At each reporting date, the
Group revises its estimates of the number of options that
are expected to vest based on the non-market vesting
conditions. It recognises the impact of the revision to
original estimates, if any, in the income statement, with a
corresponding adjustment to equity. When the options are
exercised, the Company issues new shares or uses own
shares depending on the options exercised. 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.
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
(iii) Awards under the 2008 Long Term Incentive Plan (LTIP)
The fair value of shares awarded under the 2008 LTIP 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.
(iv) Awards under the Annual Incentive Deferred Into Shares
Scheme (AIDIS)
The fair value of shares awarded is determined in line with
the Group’s Annual Incentive Scheme rules. The expense is
recognised immediately in the income statement with a
corresponding entry to equity.
(n) Government grants
Grants from government authorities 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 the income statement 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,
when 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. Rebates and discounts are provided for based on
agreements or contracts with customers, agreed promotional
arrangements and accumulated experience. The timing of
recognition of services revenue equals the timing of when the
services are rendered. Interest income is recognised using the
effective interest method. Dividends are recognised when the
right to receive payment is established. Revenue from the sale
of property is recognised when there is an unconditional and
irrevocable contract for sale.
(p) Impairment of assets
(i)
Financial assets
The Group assesses at each 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.
Impairment losses recognised in the income statement on
equity instruments are not reversed through the income
statement. Impairment testing of trade receivables is
described in (j) above.
(ii) Non-financial assets
Assets that have an indefinite useful life are not subject to
amortisation and are tested annually for impairment. Assets
which have a finite useful life are subject to amortisation
and reviewed for impairment when events or changes in
circumstance indicate that the carrying value may not be
recoverable. Goodwill is reviewed at least annually for
impairment. An impairment loss is recognised to the extent
that the carrying value of the assets exceeds 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
Ordinary shares purchased under the terms of the 2008 LTIP
schemes and the AIDIS 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, interest
rates and commodity prices. The Group uses foreign currency,
interest rate and commodity derivative financial instruments to
hedge these exposures.
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 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
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a recognised asset or liability or a highly probable forecast
transaction (cash flow hedge).
instruments that do not qualify for hedge accounting are
recognised in the income statement.
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 every
six months, 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
hedging reserve are shown in note 22. The full fair value of a
hedging derivative is classified as a non-current asset or liability
if the remaining maturity of the hedged item is more than 12
months, and as a current asset or liability if the remaining
maturity of the hedged item is less than 12 months.
(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 is 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 foreign exchange
contracts is recognised in the income statement within
revenue. However, when the forecast transaction that is
hedged results in the recognition of a non-financial asset
(for example, inventory) or a non-financial liability, the gains
and losses previously deferred in equity are transferred from
equity and included in the initial measurement of the cost of
the asset or liability.
When a hedging instrument expires or is sold, or when a
hedge no longer meets the criteria for hedge accounting,
any cumulative gain or loss existing in equity at that time
remains in equity and is recognised when the forecast
transaction is ultimately recognised in the income
statement. When a forecast transaction is no longer
expected to occur, the cumulative gain or loss that
was reported in equity is immediately transferred to
the income statement.
(iii) Derivatives that do not qualify for hedge accounting
Certain derivative instruments do not qualify for hedge
accounting. Changes in the fair value of any derivative
(iv) Financial guarantee contracts
Financial guarantee contracts are issued to banking
institutions by the Company 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 balance sheet. Guarantees
provided by the Company 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 Company, divided by the weighted average
number of ordinary shares in issue during the period.
Adjusted earnings per share is calculated on the net profit
attributable to the owners of the Company, before 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.
Financial assets and liabilities are offset and the net amount
reported in the balance sheet when there is a legally enforceable
right to offset the recognised amounts and there is an intention
to settle on a net basis or realise the asset and settle the liability
simultaneously. The legally enforceable right must not be
contingent on future events and must be enforceable in the
normal course of business and in the event of default,
insolvency or bankruptcy of the company or the counterpart.
(w) Provisions
Provisions are recognised when the Group has a constructive or
legal obligation as a result of past events, when it is more likely
than not that an outflow of resources will be required to settle
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
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 at the earlier of the following dates (a) when the Group
can no longer withdraw the offer of those benefits and (b) when
the entity recognises costs for a restructuring that is within the
scope of IAS 37 and involves the payment of termination
benefits.
(y) Income Statement format
(i) Exceptional Items
The Group has adopted an income statement format
that 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.
(ii) Earnings before interest, tax and amortisation (EBITA)
The Group believes that EBITA is a relevant performance
measure and has therefore disclosed this amount in the
Group income statement. EBITA is stated before
considering the share of results of Joint Ventures &
Associates.
(z) New accounting standards and IFRIC interpretations
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 03 January 2015 and have been adopted by
the Group:
IFRS 10, ‘Consolidated financial statements’.
IFRS 11, ‘Joint arrangements’.
IFRS 12, ‘Disclosure of interests in other entities’.
Amendments to IFRS 10,11,12 on transition guidance.
IAS 27 (revised 2011) ‘Separate financial statements’.
IAS 28 (revised 2011) ‘Associates and joint ventures’.
Amendments to IFRS 10, IFRS 12 and IAS 27 on
consolidation for investment entities.
Amendments to IAS 32 on Financial instruments asset and
liability offsetting.
Amendments to IAS 36 ‘Impairment of assets’ on
recoverable amount disclosures.
Amendments to IAS 39 ‘Financial instruments: Recognition
and measurement’, on novation of derivatives and hedge
accounting.
IFRIC 21 ‘Levies’.
None of the above have had a significant impact on the
results or the financial position of the Group during the
year ended 03 January 2015.
The following standards, amendments and interpretations have
been published. The Group will apply the relevant standards
from their effective dates and is currently assessing their impact
on the Group’s Financial Statements. The standards are
mandatory for future accounting periods but are not yet
effective and have not been early adopted by the Group.
Amendment to IAS 19 ‘Employee benefits’ regarding defined
benefit plans (effective for periods beginning on or after
01 July 2014).
This amendment applies to contributions from employees
or third parties to defined benefit plans. The objective of the
amendment is to simplify the accounting for contributions that
are independent of the number of years of employee service,
for example, employee contributions that are calculated
according to a fixed percentage of salary.
Amendments to IFRS 11, ‘Joint arrangements’ on acquisition
of an interest in a joint operation (effective on or after
01 January 2016).
These amendments add new guidance on how to account for
the acquisition of an interest in a joint operation that constitutes
a business. The amendments specify the appropriate
accounting treatment for such acquisitions.
Amendments to IAS 27, ‘Separate financial statements’ on
the equity method (effective on or after 01 January 2016).
These amendments allow entities to use the equity method for
investments in subsidiaries, Joint Ventures & Associates in their
separate financial statements.
Amendments to IFRS 10, ‘Consolidated financial statements’
and IAS 28, ‘Investments in associates and joint ventures’
(effective on or after 01 January 2016).
These amendments address an inconsistency between the
requirements in IFRS 10 and those in IAS 28 in dealing with
the sale or contribution of assets between an investor and its
associates or joint venture. The main consequence of the
amendment is that a full gain or loss is recognised when a
transaction involves a business (whether it is housed in a
subsidiary or not). A partial gain or loss is recognised when a
transaction involves assets that do not constitute a business,
even if these assets are housed in a subsidiary.
IFRS 15 ‘Revenue from contracts with customers’ (effective
on or after 01 January 2017).
IFRS 15, ‘Revenue from contracts with customers’ is a
converged standard from the IASB and FASB on revenue
recognition. The standard will improve the financial reporting of
revenue and improve comparability of the top line in financial
statements globally.
IFRS 9 ‘Financial instruments’ (effective on or after
01 January 2018).
This standard replaces the guidance in IAS 39. It includes
requirements on the classification and measurement of financial
assets and liabilities; it also includes an expected credit losses
model that replaces the current incurred loss impairment model.
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Amendments to IFRS 9, ‘Financial instruments’, regarding
general hedge accounting (effective on or after
01 January 2018).
These amendments to IFRS 9, ‘Financial instruments’, bring into
effect a substantial overhaul of hedge accounting that will allow
entities to better reflect their risk management activities in the
financial statements.
3. FINANCIAL RISK MANAGEMENT
3.1 Financial risk factors
The conduct of its ordinary business operations necessitates the
Group holding and issuing financial instruments and derivative
financial instruments. The main risks arising from issuing,
holding and managing these financial instruments typically
include currency risk, interest rate risk, price risk, liquidity risk,
cash flow risk and credit risk. The Group’s 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. The Group finances its
operations by a mixture of retained profits, medium-term
committed borrowings and short-term uncommitted
borrowings. The Group borrows in the major global debt
markets in a range of currencies at both fixed and floating rates
of interest, using derivatives where appropriate to generate the
desired effective currency profile and interest rate basis. Risk
management, other than credit risk 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
cooperation with the Group’s business 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 with the euro as the
functional currency of Glanbia plc, it has significant geographic
investment and operating exposures outside the eurozone,
primarily in the USA. As a result currency movements,
particularly movements in the US dollar/euro exchange rate, can
significantly affect the Group’s euro balance sheet and income
statement. The Group actively seeks to manage these currency
exposures by financing currency assets with equivalent currency
borrowings, leaving the residual net assets unhedged and
accordingly exposed to foreign currency translation risk. The
Group also has transactional currency exposures that arise from
sales or purchases by an operating unit in currencies other than
the unit’s operating functional currency. Management has set up
a policy to require Group companies to manage their foreign
exchange risk against their functional currency. Group
companies are required to hedge foreign exchange risk
exposure through Group Treasury. Group Treasury monitors
and manages these currency exposures on a continuous basis,
using approved hedging strategies, (including net investment
hedges) and appropriate currency derivative instruments.
At 03 January 2015 and 04 January 2014, 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 03 January 2015 would have resulted in a
currency translation gain/loss of approximately €36.7 million
(2013: €31.9 million), which would be recognised directly
in other comprehensive income.
(b) Interest rate risk
The Group’s objective in relation to interest rate management is
to minimise the impact of interest rate volatility on interest costs
in order to protect reported profitability. This is achieved by
determining a long-term strategy against a number of policy
guidelines, which focus on (a) the amount of floating rate
indebtedness anticipated over such a period and (b) the
consequent sensitivity of interest costs to interest rate
movements on this indebtedness and the resultant impact on
reported profitability. The Group borrows at both fixed and
floating rates of interest and can use interest rate swaps to
manage the Group’s resulting 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,
with further minimum guidelines over succeeding 24 and 36
month periods.
The Group, on a continuous basis, monitors the level of fixed
rate cover dependent on prevailing fixed market rates, projected
debt and market informed interest rate outlook.
Based on noted Group policies, the impact of a 1% movement
in market interest rates would have resulted in a €1.5 million
gain/loss during 2014 (2013: €1.6 million gain/loss).
Occasionally, 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 Group balance sheet as available for sale
financial assets. Certain securities are carried at cost and
therefore 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 equity.
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 indices across the eurozone countries would
not have any material impact on Group operating profit.
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
To manage its exposure to certain commodity markets the
Group enters into commodity future contracts.
For further details regarding the Group’s price risk see note 32.
(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 the 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 €982.3 million (2013: €744.0 million)
of which €362.0 million (2013: €263.4 million) was undrawn.
The weighted average maturity of these facilities is 5.4 years
(2013: 4.9 years).
For further details regarding the Group’s borrowing facilities see
note 26.
(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. In the international movement and
placement of funds and execution of financial transactions, the
Group’s policies require exposure to independently rated parties
with long term credit ratings of at least A3 (Moody’s) or A-
(Standard & Poor’s). In the movement and placement of funds
and execution of financial transactions in Ireland, the Group is
exposed to independently rated parties with long term credit
ratings of at least Ba2 (Moody’s) or BB (Standard & Poor’s).
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.
For further details regarding the Group’s credit risk see note 19.
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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.
Financial liabilities
At 03 January 2015
Borrowings
Future finance costs
Derivative financial instruments
Trade and other payables
Deferred acquisition payment
Less future finance costs
Financial liabilities
At 04 January 2014
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
More than
5 years
€’000
Total
€’000
416
23,179
574
390,350
6,504
421,023
(23,179)
397,844
419
23,179
–
–
–
23,598
(23,179)
419
502
69,479
–
–
–
69,981
(69,479)
502
619,396
21,131
–
–
–
640,527
(21,131)
619,396
620,733
136,968
574
390,350
6,504
1,155,129
(136,968)
1,018,161
Less than
1 year
€’000
Between
1 and 2 years
€’000
Between
2 and 5 years
€’000
More than
5 years
€’000
39,062
25,042
1,725
344,642
410,471
(25,042)
385,429
–
23,481
–
–
23,481
(23,481)
–
203,266
238,375
59,835
31,665
–
–
263,101
(59,835)
–
–
270,040
(31,665)
203,266
238,375
Total
€’000
480,703
140,023
1,725
344,642
967,093
(140,023)
827,070
The Company has cash at bank of €8.6 million at year end (2013: borrowings €2.2 million). The contractual undiscounted cash
flows equal the balance at 03 January 2015 and 04 January 2014.
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 03 January 2015
Foreign exchange contracts – cash flow hedges
Inflow
Outflow
Foreign exchange contracts
At 04 January 2014
Foreign exchange contracts – cash flow hedges
Inflow
Outflow
Less than
1 year
€’000
Between
1 and 2 years
€’000
Between
2 and 5 years
€’000
More than
5 years
€’000
295
(40)
255
–
–
–
–
–
–
–
–
–
Less than
1 year
€’000
Between
1 and 2 years
€’000
Between
2 and 5 years
€’000
More than
5 years
€’000
19
(24)
(5)
–
–
–
–
–
–
–
–
–
Total
€’000
295
(40)
255
Total
€’000
19
(24)
(5)
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
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 balance sheet and net debt which
amounted to €1,315.1 million (2013: €1,017.9 million).
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 03 January 2015, the Group’s
debt/adjusted EBITDA ratio was 1.97 times (2013: 1.66 times),
which is deemed by management to be prudent and in line with
industry norms. Adjusted EBITDA for the purpose of financing
ratios is as per the Group’s financing agreements and includes
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 03 January 2015. 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 foreign exchange contracts is
determined using quoted forward exchange rates at
03 January 2015.
The carrying value less impairment provision of trade receivables
and payables is 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 13 – Fair Value Measurements, the
Group has disclosed the fair value of instruments by the
following fair value measurement hierarchy:
quoted prices (unadjusted) in active markets for identical
assets and liabilities (level 1);
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); and
inputs for the asset or liability that are not based on
observable market data (that is, unobservable inputs)
(level 3).
The following table presents the Group’s assets and liabilities, which are measured at fair value at 03 January 2015 and
04 January 2014:
At 03 January 2015
Assets
Derivatives used for hedging
Available for sale financial assets – equity securities
Total assets
Liabilities
Derivatives used for hedging
Deferred acquisition payments
Total liabilities
At 04 January 2014
Assets
Derivatives used for hedging
Available for sale financial assets – equity securities
Total assets
Liabilities
Derivatives used for hedging
Total liabilities
Notes
Level 1
€’000
Level 2
€’000
Level 3
€’000
32
18
32
29
Notes
32
18
32
–
272
272
–
–
–
Level 1
€’000
–
307
307
1,279
3,281
4,560
(574)
–
(574)
Level 2
€’000
1,750
1,789
3,539
–
–
(1,725)
(1,725)
–
–
–
–
(6,504)
(6,504)
Level 3
€’000
–
–
–
–
–
Total
€’000
1,279
3,553
4,832
(574)
(6,504)
(7,078)
Total
€’000
1,750
2,096
3,846
(1,725)
(1,725)
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Valuation techniques used to derive level 2 fair values
Level 2 derivatives comprise foreign exchange contracts and
commodity futures. These foreign exchange contracts and
commodity futures have been fair valued using forward rates
that are quoted in active markets. The effects of discounting are
generally insignificant for level 2 derivatives.
Group’s valuation process
The Group’s finance department includes a team that performs
the valuations of financial assets and liabilities required for
financial reporting purposes, including level 3 fair values.
The Group did not hold any level 3 financial assets at
03 January 2015 or 04 January 2014. Level 3 financial
liabilities are outlined in note 36. The valuation team reports
directly to the Group Finance Director who in turn reports to
the Audit Committee. Discussions of valuation processes and
results are held between the Group Finance Director and the
Audit Committee.
Changes in level 2 and level 3 fair values are analysed at each
reporting date. As part of this discussion, the valuation team
presents a report that explains the reasons for fair value
movements.
3.4 Offsetting financial assets and financial liabilities
(a) Financial assets
The following financial assets are subject to offsetting, enforceable master netting arrangements and similar agreements:
At 03 January 2015
Derivative financial assets
Cash and cash equivalents
At 04 January 2014
Derivative financial assets
Cash and cash equivalents
Gross amounts
of recognised
financial assets
€’000
26,081
362,813
388,894
Gross amounts
of recognised
financial assets
€’000
24,082
370,226
394,308
Gross amounts
of recognised
financial liabilities
set off in the
balance sheet
€’000
(25,641)
(252,443)
(278,084)
Gross amounts
of recognised
financial liabilities
set off in the
balance sheet
€’000
(24,082)
(263,967)
(288,049)
Net amounts of
financial assets
presented in the
balance sheet
€’000
440
110,370
110,810
Net amounts of
financial assets
presented in the
balance sheet
€’000
–
106,259
106,259
(b) Financial liabilities
The following financial liabilities are subject to offsetting, enforceable master netting arrangements and similar agreements:
At 03 January 2015
Derivative financial liabilities
Bank overdrafts and borrowings
At 04 January 2014
Derivative financial liabilities
Bank overdrafts and borrowings
Gross amounts
of recognised
financial liabilities
€’000
(25,641)
(873,176)
(898,817)
Gross amounts
of recognised
financial liabilities
€’000
(24,095)
(744,670)
(768,765)
Gross amounts
of recognised
financial assets
set off in the
balance sheet
€’000
25,641
252,443
278,084
Gross amounts
of recognised
financial assets
set off in the
balance sheet
€'000
24,082
263,967
288,049
Net amounts of
financial liabilities
presented in the
balance sheet
€’000
–
(620,733)
(620,733)
Net amounts of
financial liabilities
presented in the
balance sheet
€’000
(13)
(480,703)
(480,716)
For the financial assets and liabilities subject to enforceable master netting arrangements or similar arrangements, each agreement
between the Group and the counterparty allows that they will have the option to settle all such amounts on a net basis in the event
of default of the other party.
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
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 Dairy Ireland, Global Ingredients and
Global Performance Nutrition, including goodwill arising on
acquisition were tested for impairment using projected cash
flows over a five year period and a terminal value for a further
sixteen year period assuming zero growth. 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.
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.
Additional information in relation to impairment reviews is
disclosed in note 15.
(b) Income taxes
The Group is subject to income tax in numerous jurisdictions.
Significant judgement is required in determining the worldwide
provision for income taxes. There are many transactions during
the ordinary course of business for which the ultimate tax
determination is uncertain and the applicable tax legislation is
open to differing interpretations. The Group takes external
professional advice to help minimise this risk. The Group
recognises liabilities for anticipated tax authority review issues
based on estimates of whether additional taxes will be due,
having regard to all information available on the tax matter. The
Group engages with local tax experts to support the judgements
made where there is significant uncertainty about the position
taken. In determining any liability for amounts expected to be
paid to tax authorities, the Group has regard to the tax status of
the entities involved, the external professional advice received,
the status of negotiations and correspondence with the relevant
tax authorities, past practices of the tax authorities and any
precedents in the relevant jurisdiction. Where the final outcome
of these tax 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 may 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.
The decision to recognise deferred tax assets (or not) also
requires judgement as it involves an assessment of future
recoverability of those assets.
(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 €393.3 million (2013: €346.5 million) and
plan liabilities of €508.1 million (2013: €424.5 million) giving a net
pension deficit of €114.8 million (2013: €78.0 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 03 January
2015, an increase in the discount rates applied of 0.25% across
the various defined benefit plans, would have the impact of
decreasing the pension deficit for the Group by €23.4 million
(2013: €19.3 million).
Additional information in relation to post employment benefits is
disclosed in note 28.
(d) Business combinations
Business combinations are accounted for using the acquisition
method which requires that the assets and liabilities assumed
are recorded at their respective fair values at the date of
acquisition. The application of this method requires certain
estimates and assumptions particularly concerning the
determination of the fair values of the acquired assets and
liabilities assumed at the date of acquisition. For intangible
assets acquired, the Group bases valuations on expected future
cash flows. This method employs a discounted cash flow
analysis using the present value of the estimated after-tax cash
flows expected to be generated from the purchased intangible
asset using risk adjusted discount rates, revenue forecasts,
estimated customer attrition and royalty savings as appropriate.
The period of expected cash flows is based on the expected
useful life of the intangible asset acquired.
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5. SEGMENT INFORMATION
In accordance with IFRS 8 – Operating Segments, the Group
has four segments as follows: Global Performance Nutrition,
Global Ingredients, Dairy Ireland, and Joint Ventures &
Associates. 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.
nutrition products; Global Ingredients earns its revenue from the
manufacture and sale of cheese, dairy and non dairy nutritional
ingredients and vitamin and mineral premixes; Dairy Ireland
earns its revenue from the manufacture and sale of a range of
consumer products and farm inputs and Joint Ventures &
Associates revenue arises from the manufacture and sale of
cheese, dairy ingredients and dairy consumer products.
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, tax, amortisation and
exceptional items.
Each segment derives its revenues as follows: Global
Performance Nutrition earns its revenue from performance
Amounts stated below for Joint Ventures & Associates
represents the Group's share.
5.1 The segment results for the year ended 03 January 2015 are as follows:
Total gross segment revenue
Inter-segment revenue
Global
Performance
Nutrition
€’000
746,381
(154)
(a)
Global
Ingredients
€’000
1,210,376
(34,979)
Dairy
Ireland
€’000
616,744
–
JVs &
Associates
€’000
984,016
–
Group
including JVs
& Associates
€’000
3,557,517
(35,133)
Segment external revenue
746,227
1,175,397
616,744
984,016
3,522,384
Segment earnings before interest, tax,
amortisation and exceptional items (EBITA)
(b)
89,188
100,426
19,020
36,427
245,061
Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of €21.2 million
and related party sales between Global Ingredients and Joint Ventures & Associates of €18.2 million. Inter-segment transfers
or transactions are entered into under the normal commercial terms and conditions that would also be available to unrelated
third parties.
5.1 (a): Total gross segment revenue is reconciled to reported external revenue as follows:
Total gross segment revenue
Inter-segment revenue
Joint Ventures & Associates revenue
Reported external revenue
2014
€’000
3,557,517
(35,133)
(984,016)
2,538,368
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
5.1 (b): Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before
tax and profit after tax as follows:
Segment earnings before interest, tax, amortisation and exceptional items
Amortisation
Exceptional items
Joint Ventures & Associates interest, tax and amortisation
Finance income
Finance costs
Reported profit before tax
Income taxes
Reported profit after tax
2014
€’000
245,061
(22,512)
(15,949)
(12,698)
1,725
(22,050)
173,577
(26,382)
147,195
Finance income, finance costs and income taxes are not allocated to segments, as this type of activity is driven by 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 03 January 2015 are as follows:
Depreciation of property, plant and equipment
Amortisation of intangibles
Capital grants released to the income statement
Exceptional items before tax
Global
Performance
Nutrition
€’000
5,609
12,727
(15)
9,570
Global
Ingredients
€’000
18,359
7,416
(53)
–
Dairy
Ireland
€’000
8,262
2,369
(196)
6,379
JVs &
Associates
€’000
14,394
394
(1,142)
–
Group
including JVs
& Associates
€’000
46,624
22,906
(1,406)
15,949
The segment assets and liabilities at 03 January 2015 and segment capital expenditure and acquisitions for the year then
ended are as follows:
Segment assets
Segment liabilities
Global
Performance
Nutrition
€’000
801,572
(c)
Global
Ingredients
€’000
709,810
Dairy
Ireland
€’000
293,186
JVs &
Associates
€’000
161,173
Group
including JVs
& Associates
€’000
1,965,741
(d)
160,139
230,678
197,583
–
588,400
Segment capital expenditure and acquisitions
(e)
186,700
64,439
29,367
56,469
336,975
5.1 (c): Segment assets are reconciled to reported assets as follows:
Segment assets
Unallocated assets
Reported assets
Unallocated assets primarily include tax, cash and cash equivalents, available for sale financial assets and derivatives.
2014
€’000
1,965,741
140,383
2,106,124
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5.1 (d): Segment liabilities are reconciled to reported liabilities as follows:
Segment liabilities
Unallocated liabilities
Reported liabilities
2014
€’000
588,400
712,946
1,301,346
Unallocated liabilities primarily include items such as tax, 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
2014
€’000
336,975
(56,469)
3,119
283,625
5.2 The segment results for the year ended 04 January 2014 are as follows:
Total gross segment revenue
Inter-segment revenue
Global
Performance
Nutrition
€’000
655,289
–
(a)
Global
Ingredients
€’000
1,118,526
(43,874)
Dairy
Ireland
€’000
652,192
–
JVs &
Associates
€’000
900,466
–
Group
including JVs
& Associates
€’000
3,326,473
(43,874)
Segment external revenue
655,289
1,074,652
652,192
900,466
3,282,599
Segment earnings before interest, tax,
amortisation and exceptional items
(b)
70,545
101,982
15,138
39,026
226,691
Included in external revenue are related party sales between Dairy Ireland and Joint Ventures & Associates of €11.0 million, and
related party sales between Global Ingredients and Joint Ventures & Associates of €15.8 million. Inter-segment transfers or
transactions are entered into under normal commercial terms and conditions that would also be available to unrelated third parties.
5.2 (a): Total gross segment revenue is reconciled to reported external revenue as follows:
Total gross segment revenue
Inter-segment revenue
Joint Ventures & Associates revenue
Reported external revenue
2013
€’000
3,326,473
(43,874)
(900,466)
2,382,133
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
5.2 (b): Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before
tax and profit after tax as follows:
Segment earnings before interest, tax, amortisation and exceptional items
Amortisation
Exceptional items
Joint Ventures & Associates interest, tax and amortisation
Finance income
Finance costs
Reported profit before tax
Income taxes
Reported profit after tax
2013
€’000
226,691
(21,011)
5,804
(12,538)
2,168
(25,110)
176,004
(25,008)
150,996
Finance income, finance costs and income taxes are not allocated to segments, as this type of activity is driven by 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 04 January 2014 are as follows:
Depreciation of property, plant and equipment
Amortisation of intangibles
Capital grants released to the income statement
Exceptional items before tax
Global
Performance
Nutrition
€’000
2,832
10,545
(15)
–
Global
Ingredients
€’000
16,036
7,459
(53)
–
Dairy Ireland
€’000
8,335
3,007
(151)
(5,804)
JVs &
Associates
€’000
12,963
254
(951)
–
Group
including JVs
& Associates
€’000
40,166
21,265
(1,170)
(5,804)
The segment assets and liabilities at 04 January 2014 and segment capital expenditure and acquisitions for the year then
ended are as follows:
Segment assets
Segment liabilities
Global
Performance
Nutrition
€’000
Global
Ingredients
€’000
Dairy
Ireland
€’000
JVs &
Associates
€’000
Group
including JVs
& Associates
€’000
(c)
539,849
600,543
273,305
152,762
1,566,459
(d)
104,231
222,620
166,059
–
492,910
Segment capital expenditure and acquisitions
(e)
43,060
50,984
20,836
34,117
148,997
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Glanbia plc 2014 Annual Report and Accounts
5.2 (c): Segment assets are reconciled to reported assets as follows:
Segment assets
Unallocated assets
Reported assets
Unallocated assets primarily include tax, 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
2013
€’000
1,566,459
126,429
1,692,888
2013
€’000
492,910
556,458
1,049,368
Unallocated liabilities primarily include items such as tax, 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
2013
€’000
148,997
(34,117)
2,413
117,293
5.3 Entity wide disclosures
Revenue from external customers in the Global Performance Nutrition, Global Ingredients, Dairy Ireland and Joint Ventures &
Associates segments is outlined in 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:
USA
Ireland
UK
Rest of Europe
Other
2014
€’000
1,823,565
745,524
212,774
312,492
428,029
2013
€’000
1,630,524
784,985
196,321
243,939
426,830
3,522,384
3,282,599
Revenue of approximately €350.3 million (2013: €297.4 million) is derived from a single external customer.
The total of non-current assets, other than derivative financial instruments and deferred tax assets, located in Ireland is €767.5
million (2013: €701.5 million) and located in other countries, mainly the USA, is €556.7 million (2013: €289.2 million).
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147
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
6. OPERATING EXPENSES
Revenue
Less costs:
Raw materials and consumables used
Depreciation of property, plant and equipment
Amortisation of government grants received
Employee benefit expense
Auditor’s remuneration*
– Statutory audit of Group companies
– Other assurance services
– Tax advisory services
– Other non-audit services
Research and development costs
Net foreign exchange gain/(loss)
Other expenses
Notes
2014
€’000
2,538,368
2013
€’000
2,382,133
(1,773,010)
(1,676,122)
14
30
8
(32,230)
264
(27,203)
219
(256,023)
(230,512)
(774)
(672)
(2,174)
(644)
(7,830)
816
(728)
(903)
(1,728)
(450)
(7,722)
(792)
(257,457)
(248,527)
Earnings before interest, tax and amortisation (EBITA)
Intangible asset amortisation
208,634
(22,512)
187,665
(21,011)
15
Operating profit before exceptional items
186,122
166,654
* Auditor’s remuneration for the Company in respect of its statutory audit amounted to €35,000 (2013: €35,000).
7.
EXCEPTIONAL ITEMS
Rationalisation costs
Transaction related costs
Irish defined benefit pension schemes
Total exceptional (charge)/credit before tax
Exceptional tax credit/(charge)
Total exceptional (charge)/credit
Notes
(a)
(b)
(c)
11
2014
€’000
(6,379)
(9,570)
–
(15,949)
1,870
2013
€’000
(8,029)
–
13,833
5,804
(316)
(14,079)
5,488
(a) Rationalisation costs primarily relate to the ongoing redundancy programmes in the Dairy Ireland segment and a related write
down of tangible assets of €3.2 million (see note 14).
(b) The Group acquired Nutramino Holding ApS on 17 January 2014 (see note 36). The fair value of the contingent consideration
at that date was €4.8 million based on management’s forecast EBITDA for the business. Following a better than anticipated
performance since acquisition, an additional earn out of €6.5 million is payable. In accordance with IFRS 3 – Business
Combinations, any subsequent increase in contingent consideration to that estimated at the acquisition date must be charged
to the income statement.
The balance of transaction related costs, €3.1 million, relates to acquisition activities that did not come to fruition. The primary
costs incurred were legal, taxation, due diligence, other consultancy and loan facility fees.
(c) The Group undertook a review of pension arrangements during 2009 and 2010 across its main Irish defined benefit pension
schemes. In 2013, revisions to the Group’s pension arrangements for two smaller Irish defined benefit schemes were completed
giving rise to an exceptional gain in the year, in accordance with IAS 19, of €13.8 million. This gain relates to negative past
service cost, settlement and curtailment of €8.9 million, €4.0 million and €0.9 million respectively. The curtailment gains and
negative past service costs arose following the removal of guaranteed increases to pensions in payment for all members and the
provision of benefits for members in employment on a career average basis from a final salary basis.
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8. EMPLOYEE BENEFIT EXPENSE
Wages and salaries
Social security costs
Cost of share based payments
Pension costs – defined contribution schemes
Pension costs – defined benefit schemes
Exceptional items
Notes
22
28
28
2014
€’000
215,158
22,312
5,516
4,811
8,226
256,023
1,678
2013
€'000
191,336
21,575
4,568
4,232
8,801
230,512
(7,807)
257,701
222,705
The average number of employees, excluding the Group’s Joint Ventures & Associates, in 2014 was 4,257 (2013: 3,750) and
is analysed into the following categories:
Global Performance Nutrition
Global Ingredients
Dairy Ireland
2014
1,442
1,632
1,183
2013
941
1,558
1,251
4,257
3,750
9. DIRECTORS’ REMUNERATION
The Directors’ remuneration information is shown on pages 80 to 99 in the Corporate Governance section of this report.
10. FINANCE INCOME AND COSTS
Finance income
Interest income
Total finance income
Finance costs
Bank borrowing costs on loans repayable in greater than five years
Unwinding of discounts
Finance lease costs
Finance cost of private debt placement
Finance cost of preference shares
Total finance costs
Net finance costs
Notes
2014
€'000
2013
€’000
29
1,725
2,168
1,725
2,168
(6,812)
(9,327)
(165)
(70)
(13,442)
(1,561)
(118)
–
(12,989)
(2,676)
(22,050)
(25,110)
(20,325)
(22,942)
Net finance costs do not include borrowing costs of €2.0 million attributable to the acquisition, construction or production of a
qualifying asset, which have been capitalised, as disclosed in note 14.
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149
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
11. INCOME TAXES
Current tax
Irish current tax
Adjustments in respect of prior years
Irish current tax for the year
Foreign current tax
Adjustments in respect of prior years
Foreign current tax for the year
Total current tax
Deferred tax
Deferred tax – current year
Adjustments in respect of prior years
Total deferred tax
Pre exceptional tax charge
Exceptional tax (credit)/charge
Current tax
Deferred tax
Total tax charge for the year
(a) Notes on exceptional tax (credit)/charge:
Notes
2014
€'000
2013
€’000
14,124
787
14,911
16,332
1,925
18,257
10,800
858
11,658
13,403
(2,238)
11,165
33,168
22,823
(3,681)
(1,235)
356
1,513
27
(4,916)
1,869
28,252
24,692
(a)
(a)
(1,469)
(401)
(907)
1,223
26,382
25,008
(i) The rationalisation costs in the Dairy Ireland segment resulted in an exceptional current tax credit of €0.4 million
(2013: €0.9 million) and an exceptional deferred tax credit of €0.4 million (2013: nil).
(ii) The Group incurred transaction costs in 2014 relating to acquisition activities that did not come to fruition, which resulted
in an exceptional current tax credit of €1.1 million.
(iii) In 2013, the revisions to the Group’s Irish pension arrangements resulted in an exceptional deferred tax charge of
€1.2 million.
The exceptional net tax (credit)/charge in 2014 and 2013 have been disclosed separately above as they relate to costs and income
which have been presented as exceptional.
The tax on the Group’s profit before tax differs from the theoretical amount that would arise applying the corporation tax
rate in Ireland, as follows:
Profit before tax
Income tax calculated at Irish rate of 12.5% (2013: 12.5%)
Earnings at higher Irish rates
Difference due to overseas tax rates
Adjustment to tax charge in respect of previous periods
Tax on post tax profits of Joint Ventures & Associates included in profit before tax
Other reconciling differences
Total tax charge
2014
€'000
173,577
21,697
2
7,305
1,477
(2,966)
(1,133)
2013
€'000
176,004
22,000
29
9,017
133
(3,299)
(2,872)
26,382
25,008
Details of deferred tax charged or credited directly to other comprehensive income during the year are outlined in note 27.
Factors that may affect future tax charges and other disclosure requirements
The total tax charge in future periods will be affected by any changes to the applicable tax rates in force in jurisdictions in which the
Group operates and other relevant changes in tax legislation, including amendments impacting on the excess of tax depreciation
over accounting depreciation. The total tax charge of the Group may also be influenced by the effects of acquisitions and disposals.
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12. EARNINGS PER SHARE
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)
2014
146,313
2013
150,330
Weighted average number of ordinary shares in issue
295,011,089
294,712,649
Basic earnings per share (cents per share)
49.60
51.01
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume conversion
of all potential dilutive ordinary shares. Share options are potential dilutive ordinary shares. In respect of share options and share
awards, 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 Parent’s shares) based on the monetary value of the subscription rights attached to
outstanding share options. The number of shares calculated above is compared with the number of shares that would have been
issued assuming the exercise of all share options.
Weighted average number of ordinary shares in issue
Adjustments for share options and share awards
Adjusted weighted average number of ordinary shares
2014
295,011,089
1,645,431
296,656,520
2013
294,712,649
2,041,339
296,753,988
Diluted earnings per share (cents per share)
49.32
50.66
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)
Amortisation of Joint Ventures & Associates 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)
2014
€'000
146,313
19,698
345
14,079
180,435
2013
€'000
150,330
18,385
222
(5,488)
163,449
61.16
55.46
60.82
55.08
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
13. DIVIDENDS
The dividends paid in 2014 and 2013 were €30.8 million (10.4 cents per share) and €27.9 million (9.46 cents per share) respectively.
On 10 October 2014 an interim dividend of 4.43 cents per share on the ordinary shares amounting to €13.1 million was paid to
shareholders on the register of members at 29 August 2014. The Directors have recommended the payment of a final dividend of
6.57 cents per share on the ordinary shares which amounts to €19.4 million. Subject to shareholders approval, this dividend will be
paid on 15 May 2015 to shareholders on the register of members at 07 April 2015, the record date. These Financial Statements do
not reflect this final dividend.
14. PROPERTY, PLANT AND EQUIPMENT
Land and
buildings
€'000
Plant and
equipment
€'000
Motor
vehicles
€'000
Notes
Year ended 04 January 2014
Opening net book amount
Exchange differences
Additions
Disposals
Reclassification
Impairments
Depreciation charge
Closing net book amount
At 04 January 2014
Cost
Accumulated depreciation
Net book amount
Year ended 03 January 2015
Opening net book amount
Exchange differences
Acquisitions
Additions
Disposals
Reclassification
Impairments
Depreciation charge
6
36
15
7
6
136,324
(2,685)
27,771
(646)
(354)
–
(4,797)
172,897
(4,125)
71,705
(620)
354
(108)
(22,119)
275
(30)
471
(54)
–
–
(287)
Total
€'000
309,496
(6,840)
99,947
(1,320)
–
(108)
(27,203)
155,613
217,984
375
373,972
210,258
(54,645)
528,272
(310,288)
18,732
(18,357)
757,262
(383,290)
155,613
217,984
375
373,972
155,613
13,052
–
39,846
(503)
–
(1,184)
(6,126)
217,984
25,033
2,281
70,979
(346)
503
(2,032)
(25,774)
375
125
206
502
(24)
–
–
(330)
373,972
38,210
2,487
111,327
(873)
503
(3,216)
(32,230)
Closing net book amount
200,698
288,628
854
490,180
At 03 January 2015
Cost
Accumulated depreciation
Net book amount
265,793
(65,095)
641,234
(352,606)
19,658
(18,804)
926,685
(436,505)
200,698
288,628
854
490,180
Depreciation expense of €32.2 million was charged to the income statement during the year (2013: €27.2 million). An impairment
of €3.2 million also arose (see note 7). The impairments arise from the rationalisation activities and the challenging retail environment
in Dairy Ireland.
Included in the cost of additions for 2014 is an amount of €56.6 million (2013: €41.1 million) incurred in respect of assets
under construction.
During the year, the Group has capitalised borrowing costs amounting to €2.0 million (2013: nil) on qualifying assets.
Operating lease rentals amounting to €19.0 million (2013: €18.2 million) are charged to the income statement.
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15. INTANGIBLE ASSETS
Year ended 04 January 2014
Opening net book amount
Exchange differences
Additions
Reclassification
Write-off of intangibles
Amortisation
Goodwill
€'000
note (b)
189,112
(5,511)
–
(1,332)
(511)
–
Other
intangibles
€'000
note (a)
262,268
(8,000)
–
1,332
(24)
(14,671)
Notes
6
Software
costs
€'000
Development
costs
€'000
Total
€'000
12,247
(338)
11,543
–
–
(4,280)
9,389
(405)
5,803
–
(76)
(2,060)
473,016
(14,254)
17,346
–
(611)
(21,011)
Closing net book amount
181,758
240,905
19,172
12,651
454,486
At 04 January 2014
Cost
Accumulated amortisation
181,758
–
303,791
(62,886)
62,232
(43,060)
26,706
(14,055)
574,487
(120,001)
Net book amount
181,758
240,905
19,172
12,651
454,486
Year ended 03 January 2015
Opening net book amount
Exchange differences
Acquisitions
Additions
Reclassification
Write-off of intangibles
Amortisation
181,758
23,771
57,460
–
–
–
–
240,905
33,517
98,820
–
42
–
(15,058)
19,172
1,516
–
5,716
(545)
–
(4,568)
12,651
2,156
–
7,815
–
(73)
(2,886)
454,486
60,960
156,280
13,531
(503)
(73)
(22,512)
36
14
6
Closing net book amount
262,989
358,226
21,291
19,663
662,169
At 03 January 2015
Cost
Accumulated amortisation
262,989
–
445,247
(87,021)
70,120
(48,829)
38,622
(18,959)
816,978
(154,809)
Net book amount
262,989
358,226
21,291
19,663
662,169
Amortisation expense of €22.5 million (2013: €21.0 million) has been charged to the income statement during the year. The average
remaining amortisation period for software costs is 8 years (2013: 8 years) and development costs is 4 years (2013: 6 years).
Approximately €2.6 million of software additions during the year (2013: €4.2 million) were internally generated with the remaining
balance acquired from external parties. Development costs of €0.1 million (2013: €0.1 million) were written off during the year due
to uncertainty that these projects will reach commercialisation.
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
Note 15 (a): Other intangibles
Year ended 04 January 2014
Opening net book amount
Exchange differences
Reclassification
Write-off of intangibles
Amortisation
Closing net book amount
At 04 January 2014
Cost
Accumulated amortisation
Net book amount
Year ended 03 January 2015
Opening net book amount
Exchange differences
Acquisitions
Reclassification
Amortisation
Closing net book amount
At 03 January 2015
Cost
Accumulated amortisation
Net book amount
Brands/
know-how
€'000
Customer
relationships
€'000
Other
€'000
Total other
intangibles
€'000
Notes
160,576
(4,430)
2,083
–
(3,633)
97,989
(3,503)
(1,554)
–
(10,390)
3,703
(67)
262,268
(8,000)
803
(24)
(648)
1,332
(24)
(14,671)
154,596
82,542
3,767
240,905
166,972
130,857
(12,376)
(48,315)
5,962
(2,195)
303,791
(62,886)
154,596
82,542
3,767
240,905
36
154,596
21,066
67,090
42
(3,968)
82,542
12,304
31,730
–
(11,027)
3,767
147
–
–
(63)
240,905
33,517
98,820
42
(15,058)
238,826
115,549
3,851
358,226
256,312
(17,486)
182,185
(66,636)
6,750
(2,899)
445,247
(87,021)
238,826
115,549
3,851
358,226
Included in the total cost of brands/know-how are intangible assets of €99.0 million (2013: €87.5 million) which have 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 lives 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. There are no material internally generated brand-related intangibles included above.
The remaining average amortisation period for Global Performance Nutrition brands/know-how is 38 years (2013: 37 years) and for
the remaining brands/know-how is 12 years (2013: 13 years).
Included in customer relationships are individual significant intangible assets of €49.6 million (2013: €49.8 million) with a remaining
amortisation period of 7 years (2013: 8 years). The remaining customer relationships are amortised over an average period of 12
years (2013: 9 years). The remaining average amortisation period for other intangibles is 8 years (2013: 9 years). No intangible
assets were acquired by way of government grant during the financial year (2013: nil).
Note 15 (b): Impairment tests for goodwill and indefinite life intangibles
Goodwill is allocated to the Group’s cash generating units (CGUs) that are expected to benefit from business acquisitions,
rather than where the asset is owned. The CGUs represent the lowest level within the Group at which the associated goodwill
is monitored for internal management purposes and are not larger than the operating segments determined in accordance with
IFRS 8 – Operating Segments. For the purposes of goodwill a total of 8 CGUs have been identified and these are allocated
between the Group’s main segments as follows: Global Performance Nutrition 3, Global Ingredients 4 and Dairy Ireland 1.
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A summary of goodwill by CGU is as follows:
Global Performance Nutrition
Isopure
Nutramino
Global Performance Nutrition segment
Global Ingredients - Customised Solutions
Global Ingredients - other CGUs
Dairy Ireland
A summary of indefinite life intangibles by CGU is as follows:
Global Performance Nutrition
Global Performance Nutrition
IIIImpairment testing methodology and results
Goodwill
2014
€’000
93,859
52,687
7,303
153,849
79,621
19,849
9,670
Exchange
differences
€’000
9,634
2,513
17
12,164
9,291
2,316
–
Acquisition
€’000
–
50,174
7,286
57,460
–
–
–
Goodwill
2013
€’000
84,225
–
–
84,225
70,330
17,533
9,670
262,989
23,771
57,460
181,758
Indefinite life
intangibles
2014
€’000
Exchange
differences
€’000
Acquisition
€’000
Indefinite life
intangibles
2013
€’000
99,049
11,558
–
87,491
Goodwill and indefinite life intangibles are subject to impairment testing on an annual basis or more frequently if there are indications
they might be impaired. The recoverable amount of goodwill and indefinite life intangibles allocated to a CGU is determined based
on a value in use computation, which has been selected due to the impracticality of obtaining fair value less costs to sell
measurements for each reporting period.
The cash flow projections are based on a four year strategic plan formally approved by the Group Operating Executive Committee
and the Board of Directors and specifically exclude the impact of future development activity. While the Group expects cash flow
growth between year five and twenty a terminal value was derived for this further sixteen year period assuming zero growth.
No significant impairments arose in either 2014 or 2013. The present value of future cashflows is calculated using pre tax discount
rates which is the Group’s weighted average cost of capital adjusted to reflect risks associated with the CGU and are set out in the
table below:
Global Performance Nutrition
Global Ingredients
Dairy Ireland
Key sources of estimation uncertainty
Discount
rates
2014
8.1%
Discount
rates
2013
7.5%
7.9%-8.1% 7.4%-7.5%
7.4%
7.9%
The key assumptions employed in arriving at the estimates of value in use factored into impairment testing are inherently subjective.
Key assumptions include management’s estimates of future profitability and discount rates. Other assumptions include the duration
of the discounted cash flow model, replacement capital expenditure requirements and working capital investment. These
assumptions take account of managements past experience, the Group’s financial position, history of earnings, cash flow
generation and the nature of the industry in which it operates. 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 assumptions used are consistent with the Group’s adjusted EPS growth target.
Sensitivity analysis
Sensitivity analysis has been performed across the CGUs. These CGUs had aggregate goodwill and indefinite life intangibles of
€362.0 million at the date of testing. If the estimated future profitability was 10% lower than management’s estimates, there would
be no requirement on the Group to recognise any impairment against goodwill or indefinite life intangibles. If the estimated cash flow
forecasts used in the value in use estimates were 10% lower than management’s estimates, again there would be no requirement
on the Group to recognise any impairment against goodwill or indefinite life intangibles. If the estimated cost of capital used in
determining the pre-tax discount rate had been 1% higher than management's estimates there would be no requirement on the
Group to recognise any impairment.
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
16. INVESTMENTS IN ASSOCIATES
At the beginning of the year
Share of profit after tax
Transfer to investments in joint ventures
Other comprehensive income
At the end of the year
2014
Company
€'000
22,876
–
–
–
22,876
2014
Group
€'000
80,492
11,219
(3,119)
(7,227)
81,365
2013
Company
€'000
22,876
–
–
–
22,876
2013
Group
€'000
67,586
13,760
–
(854)
80,492
The associates listed below have share capital consisting solely of ordinary shares, which is held directly by the Group.
Nature of investment in associates 2014 and 2013
Name of entity
Glanbia Ingredients Ireland Limited
Co-operative Animal Health Limited
South Eastern Cattle Breeding Society Limited
South East Port Services Limited
Place of business/
country of incorporation
Kilkenny, Ireland
Tullow, Co. Carlow, Ireland
Thurles, Co. Tipperary, Ireland
Kilkenny, Ireland
% of ownership
interest
40%
50%
57%
49%
Nature of the
relationship
Note 1
Note 2
Note 2
Measurement
method
Equity
Equity
Equity
Equity
Note 1: Glanbia Ingredients Ireland Limited is the leading Irish dairy processor. Its products, the large majority of which are
exported, include milk powders, butter, cheese, whey protein, milk protein and casein.
Note 2: 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 associates as the Group has
significant influence over the entities, but not control, due to their co-operative structure.
Note 3: The Group’s shareholding in Malting Company of Ireland Limited increased from 33.33% to 50%, it is now recognised
as a joint venture (see note 17).
There are no contingent liabilities relating to the Group’s interest in associates.
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Summarised financial information for associates
Set out below is the summarised financial information for the Group's associates, which are accounted for using the equity method.
The information below reflects the amounts presented in the Financial Statements of the associates (and not Glanbia plc's share of
those amounts) adjusted for differences in accounting policies between the Group and the associates.
2014
Associate balance sheet (100%):
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Glanbia
Ingredients
Ireland Ltd
€'000
305,480
266,390
(240,676)
(155,940)
Other
€'000
Total
€'000
20,486
22,138
(11,698)
(9,328)
325,966
288,528
(252,374)
(165,268)
175,254
21,598
196,852
Group’s interest in associate/carrying value
70,102
11,263
81,365
Associate income statement (100%):
Revenue
Profit before tax
Profit after tax
Other comprehensive (expense)/income
2013
Associate balance sheet (100%):
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
894,386
30,525
26,472
(18,080)
Glanbia
Ingredients
Ireland Ltd
€'000
184,803
238,838
(129,105)
(127,570)
42,157
1,477
1,250
9
936,543
32,002
27,722
(18,071)
Other
€'000
Total
€'000
29,842
27,078
(17,599)
(12,834)
214,645
265,916
(146,704)
(140,404)
166,966
26,487
193,453
Group’s interest in associate/carrying value
66,786
13,706
80,492
Associate income statement (100%):
Revenue
Profit before tax
Profit after tax
Other comprehensive (expense)
Further details in relation to principal associates are outlined in note 39.
878,034
36,203
31,695
(1,100)
51,710
2,577
2,258
(740)
929,744
38,780
33,953
(1,840)
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157
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
17. INVESTMENTS IN JOINT VENTURES
At the beginning of the year
Share of profit after tax
Disposals
Transfer from investments in associates
Other comprehensive income
Income tax movement
Dividend received
Exchange differences
At the end of the year
2014
€'000
62,894
12,510
(4,089)
3,119
405
5,032
(12,648)
2,722
2013
€'000
58,482
12,728
–
–
433
3,930
(10,937)
(1,742)
69,945
62,894
The joint ventures listed below have share capital consisting solely of ordinary shares, which are held directly by the Group.
Nature of investment in joint ventures 2014 and 2013
Name of entity
Southwest Cheese Company, LLC
Glanbia Cheese Limited
Milk Ventures (UK) Limited
Malting Company of Ireland Limited
Place of business/country of
incorporation
Clovis, New Mexico, USA
Magheralin and Llangefni, UK
Stockport, England
Togher, Cork, Ireland
% of
ownership
interest
50%
51%
50%
50%
Nature of the
relationship
Note 1
Note 2
Note 3
Note 4
Measurement
method
Equity
Equity
Equity
Equity
Note 1: Southwest Cheese Company, LLC is a large scale manufacturer of cheese and whey and has facilitated the expansion of
Glanbia's cheese and whey production capacity.
Note 2: Glanbia Cheese Limited is a leading European mozzarella producer. Its customers include most of the leading pizza and
pasta chains, food service operators, industrial food manufacturers, wholesalers and retailers across Europe and internationally. The
Group holds 51% of the share capital of Glanbia Cheese Limited but this entity is considered to be a joint venture as the group does
not have control of the company, as it controls only 50% of the voting rights and is entitled to appoint only 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.
Note 3: Milk Ventures (UK) Limited is the parent company of Nutricima Limited, a company incorporated in Nigeria and the
manufacturer and supplier of branded consumer dairy products for the Nigerian market.
Note 4: Malting Company of Ireland Limited provides Irish malted barley products to the brewing and distilling industry.
Commitments and contingent liabilities in respect of joint ventures
The Group has the following commitments relating to its joint ventures:
Proportionate share of capital commitments
There are no contingent liabilities relating to the Group's interest in its joint ventures.
2014
€'000
2013
€'000
2,000
607
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Glanbia plc 2014 Annual Report and Accounts
Summarised financial information for joint ventures
Set out below is the summarised financial information for the Group's joint ventures, which are accounted for using the equity
method.
The information below reflects the amounts presented in the financial statements of the joint ventures (and not Glanbia plc's share
of those amounts) adjusted for differences in accounting policies between the Group and the joint ventures.
2014
Joint venture balance sheet (100%):
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Non-current liabilities
Financial liabilities
Other non-current liabilities
Current liabilities
Bank overdrafts and loans
Other current liabilities
Southwest
Cheese
Company,
LLC
€'000
Glanbia
Cheese
Limited
€'000
Milk Ventures
(UK)
Limited
€'000
Other
€'000
Total
€'000
201,225
31,242
32,812
10,390
275,669
–
93,106
93,106
13,914
36,464
50,378
(134,358)
–
(134,358)
(9,851)
(98,614)
(108,465)
–
(7,238)
(7,238)
–
(28,842)
(28,842)
2,094
35,736
37,830
(16,923)
–
(16,923)
(3,028)
(15,557)
(18,585)
12
6,460
6,472
(2,036)
(2,285)
(4,321)
(182)
(5,561)
(5,743)
16,020
171,766
187,786
(153,317)
(9,523)
(162,840)
(13,061)
(148,574)
(161,635)
Net assets
51,508
45,540
35,134
6,798
138,980
Group’s interest in joint venture/carrying value
25,754
23,225
17,567
3,399
69,945
Joint venture income statement (100%):
Revenue
Depreciation
Interest (expense)
Profit/(loss) before tax
Tax
Profit/(loss) after tax
Other comprehensive income
Dividend received by Group
Exchange differences arising on consolidation
802,145
(9,502)
(5,131)
20,373
(8,149)
12,224
360
(9,419)
2,360
300,954
(3,769)
(105)
13,626
(3,295)
10,331
442
(3,229)
1,307
89,835
(1,933)
(929)
1,458
1,005
2,463
–
–
(945)
10,807
(434)
(57)
(188)
(17)
(205)
–
–
–
1,203,741
(15,638)
(6,222)
35,269
(10,456)
24,813
802
(12,648)
2,722
www.glanbia.com
147
www.glanbia.com
159
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
2013
Joint venture balance sheet (100%):
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Non-current liabilities
Financial liabilities
Other non-current liabilities
Current liabilities
Bank overdrafts and loans
Other current liabilities
Southwest
Cheese
Company,
LLC
€'000
Glanbia
Cheese
Limited
€'000
Milk Ventures
(UK)
Limited
€'000
Other
€'000
Total
€'000
183,622
26,608
33,182
13,690
257,102
–
88,092
88,092
7,640
44,231
51,871
(119,718)
–
(119,718)
–
(3,871)
(3,871)
(5,940)
(103,076)
(109,016)
–
(36,076)
(36,076)
1,157
31,938
33,095
(15,762)
–
(15,762)
(2,220)
(13,735)
(15,955)
–
7,722
7,722
–
(7,844)
(7,844)
8,797
171,983
180,780
(135,480)
(11,715)
(147,195)
–
(4,623)
(4,623)
(8,160)
(157,510)
(165,670)
Net assets
42,980
38,532
34,560
8,945
125,017
Group’s interest in joint venture/carrying value
21,490
19,651
17,280
4,473
62,894
Joint venture income statement (100%):
Revenue
Depreciation
Interest (expense)
Profit before tax
Tax
Profit after tax
Other comprehensive income/(expense)
Dividend received by Group
Exchange differences arising on consolidation
679,421
(9,184)
(5,690)
24,798
(9,896)
14,902
1,634
(9,410)
(567)
280,800
(3,469)
(27)
12,137
(2,064)
10,073
(973)
(1,527)
(179)
82,464
(1,946)
(960)
386
(94)
292
224
–
(996)
–
–
–
(12)
–
(12)
–
–
–
1,042,685
(14,599)
(6,677)
37,309
(12,054)
25,255
885
(10,937)
(1,742)
160
148
Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
18. INVESTMENTS
(a) Available for sale financial assets
At the beginning of the year
Disposals/redemption
Fair value movements
Additions
Amounts written off
2014
Company
€'000
514
–
3,039
935
–
2014
Group
€'000
9,498
(1,269)
1,457
935
–
2013
Company
€'000
1
–
–
513
–
2013
Group
€'000
9,144
(1,071)
1,425
–
–
At the end of the year
4,488
10,621
514
9,498
Available for sale financial assets include the following:
Listed securities
Equity securities – eurozone countries
Unlisted securities
One51 plc
The Irish Dairy Board Co-operative Limited
Other available for sale financial assets
2014
Company
€'000
2014
Group
€'000
2013
Company
€'000
2013
Group
€'000
272
272
69
307
3,281
–
935
3,281
5,513
1,555
445
–
–
1,789
6,725
677
4,488
10,621
514
9,498
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 financial assets 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 €7.1 million (2013: €7.4 million) are included at cost. 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.
(b) Investments in subsidiaries
At the beginning of the year
Disposals
Additions
Amounts written off
At the end of the year
2014
Company
€'000
609,440
(27)
117
–
2013
Company
€'000
611,660
(35,166)
34,284
(1,338)
609,530
609,440
www.glanbia.com
149
www.glanbia.com
161
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
19. TRADE AND OTHER RECEIVABLES
Trade receivables
Less provision for impairment of receivables
Trade receivables – net
Prepayments
Receivables from Joint Ventures & Associates
Receivables from other related parties
Loans to Joint Ventures & Associates
Value added tax
Other receivables
Total
Less non-current trade receivables:
Loans to Joint Ventures & Associates
Non-current
Current
Notes
37
37
37
37
2014
Company
€'000
–
–
–
–
36
–
–
–
111
2014
Group
€'000
280,756
(8,600)
272,156
19,363
5,496
776
9,863
955
6,281
2013
Company
€'000
–
–
–
–
–
–
–
–
209
2013
Group
€'000
248,721
(11,155)
237,566
10,718
921
806
9,376
2,053
5,152
147
314,890
209
266,592
–
–
(9,863)
(9,863)
–
–
(9,376)
(9,376)
147
305,027
209
257,216
The carrying value of receivables is a reasonable approximation of fair value. The net movement in the provision for impairment of
receivables has been included within the income statement.
As disclosed 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, by holding charges over assets and by active credit management. Management do not expect any significant
loss from receivables that have not been provided for at year end.
The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies:
Euro
US dollar
Sterling
Other
2014
Company
€'000
147
–
–
–
2014
Group
€'000
98,063
188,669
20,391
7,767
2013
Company
€'000
209
–
–
–
2013
Group
€'000
95,881
152,259
17,105
1,347
147
314,890
209
266,592
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
162
150
Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
2014
€'000
11,155
1,849
(3,269)
(1,135)
2013
€'000
10,434
2,091
(743)
(627)
8,600
11,155
As of 03 January 2015, trade receivables of €8.6 million (2013: €11.2 million) were impaired and accordingly a provision is provided
as set out on page 162. Trade receivable balances are generally considered for an impairment review when falling due outside trade
terms and are normally partially or wholly provided for depending on the assessment of likely recoverability of the balance. Set out
below is an aged analysis of trade receivables which remain outstanding outside of trade terms which the Group has provided for.
The breakdown of impaired trade receivables is as follows:
Past due and impaired:
Up to 3 months
3 to 6 months
Over 6 months
2014
€'000
2013
€'000
1,504
2,061
5,035
2,163
1,748
7,244
8,600
11,155
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.
At 03 January 2015, trade receivables of €51.1 million (2013: €51.8 million) were past due but not impaired, as they are considered
recoverable, as follows:
Past due not impaired:
Up to 3 months
3 to 6 months
Over 6 months
20. INVENTORIES
Raw materials
Finished goods
Consumables
2014
€'000
2013
€'000
40,435
9,138
1,512
38,642
11,619
1,565
51,085
51,826
2014
€'000
112,602
198,546
25,654
2013
€'000
107,639
186,667
20,175
336,802
314,481
Included above are inventories carried at net realisable value amounting to €11.6 million (2013: €9.5 million). The amount written off
in respect of these inventories was €3.9 million (2013: €4.0 million).
21. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short term bank deposits
2014
Company
€'000
8,590
–
2014
Group
€'000
102,160
8,210
2013
Company
€'000
–
–
2013
Group
€'000
86,259
20,000
8,590
110,370
–
106,259
The fair value of cash and cash equivalents is 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.
www.glanbia.com
151
www.glanbia.com
163
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
22. OTHER RESERVES
Merger
reserve
€'000
Currency
reserve
€'000
Hedging
reserve
€'000
Available
for sale
financial
asset
reserve
€'000
Share
based
payment
reserve
€'000
Own
shares
€'000
Total
€'000
(note b)
(note c)
(note d)
(note e)
(note f)
(note g)
Capital
reserve
€'000
(note a)
Balance at 29 December 2012
2,825 113,148
32,655
(2,254)
441
(8,221)
6,695 145,289
Currency translation differences
Net investment hedge
Revaluation of interest rate swaps – gain in year
Foreign exchange contracts – loss in year
Transfers to income statement:
Foreign exchange contracts – loss in year
Forward commodity contracts – loss in year
Revaluation of forward commodity contracts
– gain in year
Revaluation of available for sale financial assets
– gain in year
Deferred tax on fair value movements
Cost of share based payments
Transfer on exercise, vesting or expiry
of share based payments
Purchase of own shares
Balance at 04 January 2014
Currency translation differences
Net investment hedge
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
Revaluation of forward commodity contracts
– loss in year
Revaluation of available for sale financial assets
– gain in year
Deferred tax on fair value movements
Cost of share based payments
Transfer on exercise, vesting or expiry
of share based payments
Purchase of own shares
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(24,592)
2,472
–
–
–
–
–
–
–
–
–
–
–
776
(273)
155
162
78
–
–
–
–
–
–
–
–
1,425
(71)
(470)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4,568
(24,592)
2,472
776
(273)
155
162
78
1,425
(541)
4,568
7,417
(2,949)
4,468
–
–
2,825 113,148
–
10,535
–
(1,427)
–
1,396
(7,387)
(8,191)
–
(7,387)
8,314 126,600
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
97,805
(9,544)
–
–
–
–
–
–
–
–
–
–
–
–
(107)
1,122
271
(79)
(700)
–
–
–
–
–
–
–
–
1,457
175
(315)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,207
5,516
(3,846)
97,805
(9,544)
(107)
1,122
271
(79)
(700)
1,457
(140)
5,516
4,361
(7,981)
–
(7,981)
Balance at 03 January 2015
2,825 113,148
98,796
(745)
2,538
(7,965)
9,984 218,581
164
152
Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
Note 22 (a): Capital reserve
The capital reserve comprises of 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.
At the beginning and the end of the year
Note 22 (b): Merger reserve
2014
Company
€'000
4,227
2014
Group
€'000
2,825
2013
Company
€'000
4,227
2013
Group
€'000
2,825
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 adjustment1
Share premium and other reserves relating to nominal value of shares in Waterford Foods plc
At the beginning and the end of the year
2014
€'000
2013
€'000
355,271
(327,085)
84,962
355,271
(327,085)
84,962
113,148
113,148
1. The merger adjustment represents the difference between the nominal value of the issued share capital of Waterford Foods plc (now named
Waterford Foods Limited) and the fair value of the shares issued by Avonmore Foods plc (now named Glanbia plc) in 1997.
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.
See note 32 for further details. In addition, 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 asset 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 715,558 (2013: 864,898) ordinary shares in Glanbia plc which are held by two trusts.
An Employee Share Trust was established in May 2002 to operate initially in connection with the Company's Saving Related Share
Option Scheme ('Sharesave Scheme') and subsequently for the vesting of shares under the 2008 LTIP. The trustee of the Employee
Share Trust is Computershare Trustees (Jersey) Limited, a Jersey based trustee services company. The dividend rights in respect of
these shares has been waived, save 0.001 pence per share.
An Employee Share Scheme Trust was established in April 2013 to operate in connection with the Company's Annual Incentive
Deferred into Shares Scheme. The trustee of the Employee Share Scheme Trust is Glanbia Management Services Limited. The
dividend rights in respect of shares which have not vested have been waived.
The shares included in the Employee Share Trust and the Employee Share Scheme Trust at 03 January 2015 cost €8.0 million
(2013: €8.2 million) and had a market value of €9.2 million (2013: €9.6 million). Shares purchased for the 2008 LTIP scheme and
Company’s Annual Incentive Deferred into Shares Scheme are deemed to be own shares in accordance with IAS 32 – Financial
Instruments: Disclosure and Presentation.
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153
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165
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
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, the 2008
LTIP and the Annual Incentive Deferred into Shares Schemes, net of transfers on vesting or expiry of share based payments.
At the beginning of the year
Transfer on exercise, vesting or expiry of share based payments
Cost of share based payments
2014
Company
€'000
8,314
(3,846)
5,516
2014
Group
€'000
8,314
(3,846)
5,516
2013
Company
€'000
6,695
(2,949)
4,568
2013
Group
€'000
6,695
(2,949)
4,568
At the end of the year
9,984
9,984
8,314
8,314
2002 Long Term Incentive Plan (the 2002 LTIP)
Movement in the 2002 LTIP for the year ended 03 January 2015 and 04 January 2014 is as follows:
At the beginning of the year
Exercised
2014
Average
exercise
price in
€ per share
3.60
(3.18)
2014
Number
of options
440,000
(230,000)
2013
Average
exercise
price in
€ per share
3.08
(2.76)
2013
Number
of options
1,130,000
(690,000)
At the end of the year
4.06
210,000
3.60
440,000
Expiry date in
2014
2019
2021
2021
2021
2021
2021
2021
Exercise
price
€
2.73
2.29
3.68
3.95
4.38
4.30
4.70
4.63
2014
Number
of options
–
35,000
20,000
–
90,000
–
45,000
20,000
2013
Number
of options
140,000
50,000
20,000
20,000
90,000
55,000
45,000
20,000
210,000
440,000
Total options of 210,000 (2013: 440,000) ordinary shares were outstanding at 03 January 2015 under the 2002 Long Term
Incentive Plan (the 2002 LTIP), at prices ranging between €2.29 and €4.70. In accordance with the terms of the 2002 LTIP, certain
executives to whom options were granted in 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 1,450 (2013: 1,450) ordinary shares.
The cost of the 2002 LTIP charged in the Group income statement was €0.1 million (2013: €0.2 million).
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 Binomial Model. Options over 210,000 (2013: 440,000) ordinary shares
were exercisable at 03 January 2015 at a weighted average price of €4.06 (2013: €2.71). The weighted average share price at the date
of exercise for share options exercised was €11.47 (2013: €8.80). The weighted average life for share options outstanding is six years.
166
154
Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
2008 Long Term Incentive Plan (the 2008 LTIP)
This is a long-term share incentive plan, which was introduced in 2008 following the approval by the shareholders, under which
share awards are granted to executive directors and certain senior managers in the form of a provisional allocation of shares for
which no exercise price is payable.
Following a review of executive remuneration policy and design in 2011, the following amendments to the 2008 LTIP were
recommended to and approved by the shareholders at the 2012 Annual General Meeting:
Long Term Incentive individual annual award level of a maximum 150% of Base Salary and in exceptional cases and in relation
to specific local needs (USA), a maximum of 200% of Base Salary (previous maximum 115%) determined by reference to relative
Total Shareholder Return (TSR), Earnings Per Share (EPS) and Return on Capital Employed (ROCE), with each of these
performance conditions representing one-third of maximum vesting level, unless otherwise determined by the Remuneration
Committee.
Requirement to hold shares received pursuant to the vesting of LTIP awards for a minimum period of one year post-vesting
(previously no requirement to hold).
For Business Unit CEOs, the Long Term Incentive level will be determined by reference to relative TSR, EPS and an appropriate
Business Unit measure, with each of these performance conditions representing one-third of maximum vesting level, unless
otherwise determined by the Remuneration Committee.
Awards outstanding under the 2008 LTIP as at 03 January 2015 amounted to 2,073,126 (2013: 2,251,601) and are scheduled
for release in August 2015, April, August and October 2016, July and November 2017 to the extent that there is sustained
improvement in the underlying financial performance over a three year period as determined by the Remuneration Committee.
The extent of vesting for the awards shall be determined by growth in the Company’s EPS, the Company’s TSR performance
and the Company’s ROCE, with each of EPS, TSR and ROCE representing one third of the maximum vesting level.
The TSR element is assessed against a group of leading peer companies, the EPS element is measured against pre-set targeted
adjusted EPS growth criteria for the Group and the ROCE is measured against pre-set targets as set out in the Remuneration
Committee Report on pages 90 to 93.
Shares awarded under the Group’s LTIP schemes are equity settled share based payments as defined in IFRS 2 – Share Based
Payments. IFRS 2 requires that a recognised valuation methodology be employed to determine the fair value of shares awarded
and stipulates that this methodology should be consistent with methodologies used for pricing of financial instruments. The expense
of €5.1 million (2013: €3.5 million) 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.
Movement in the 2008 LTIP for the year ended 03 January 2015 and 04 January 2014 is as follows:
At the beginning of the year
Granted
Vested
Lapsed
At the end of the year
Expiry date in
2014
2015
2016
2017
2018
At the end of the year
2014
Number of
Awards
2,251,601
841,000
(758,863)
2013
Number of
Awards
2,714,000
824,100
(1,010,851)
(260,612)
(275,648)
2,073,126
2,251,601
2014
Number of
Awards
2013
Number of
Awards
–
–
604,926
639,200
829,000
50,000
719,401
717,600
764,600
–
2,073,126
2,251,601
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155
www.glanbia.com
167
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
The total expense in the Group income statement is analysed as follows:
Granted in 2011
2008 Long Term Incentive Plan
Granted in 2012
2008 Long Term Incentive Plan
Granted in 2013
2008 Long Term Incentive Plan
Granted in 2014
Share price at
date
of award
€
Period
to earliest
vesting
Date
Number
of shares
4.35
–
776,500
Expense in
Group income
statement
2014
€'000
Expense in
Group income
statement
2013
€'000
–
747
Fair
value
€
3.59
6.26
1 year
855,500
5.44
1,019
811
10.11
2 years
824,100
8.63
1,715
1,903
2008 Long Term Incentive Plan
11.51
3 years
841,000
9.38
2,392
–
Shares awarded under the 2008 LTIP are equity settled share-based payments as defined in IFRS 2 – Share Based Payments.
On 02 July 2014, 50,000 of the share awards granted in 2010 vested, and 708,863 of the share awards granted in 2011 vested.
The balance of 67,637 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
Granted
in 2014
0.1%
26.1%
0.94%
Granted
in 2013
0.2%
29.9%
1.17%
Granted
in 2012
0.2%
33.1%
1.6%
Granted
in 2011
2%
45%
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 award.
Annual Incentive Deferred into Shares Scheme
This scheme is an annual performance related incentive scheme for Executive Directors and other senior management. The cost
of the Annual Incentive Deferred into Shares Scheme is €0.3 million in 2014 (2013: €0.9 million). The incentive will be invested in
shares in the Company and delivered to the Executive Directors and senior management two years following this investment.
23. SHARE CAPITAL AND SHARE PREMIUM
Company
At 04 January 2014
Shares issued
At 03 January 2015
Group
At 04 January 2014
Shares issued
At 03 January 2015
Number of
shares
(thousands)
295,646
230
Ordinary
shares
€'000
17,738
14
Share
premium
€'000
441,527
717
Total
€'000
459,265
731
295,876
17,752
442,244
459,996
Number of
shares
(thousands)
295,646
230
Ordinary
shares
€'000
17,738
14
Share
premium
€'000
86,259
717
Total
€'000
103,997
731
295,876
17,752
86,976
104,728
The total authorised number of ordinary shares is 350 million shares (2013: 306 million shares) with a par value of €0.06 per share
(2013: €0.06 per share). All issued shares are fully paid.
168
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Glanbia plc 2014 Annual Report and Accounts
24. RETAINED EARNINGS
Balance at 29 December 2012
(Loss)/profit for the year
Other comprehensive income/(expense)
Remeasurements – defined benefit schemes
Deferred tax on remeasurements
Share of remeasurements – Joint Ventures & Associates
Total comprehensive (expense)/income for the year
Dividends paid during the year
Transfer on exercise, vesting or expiry of share based payments
Balance at 04 January 2014
Profit for the year
Other comprehensive income/(expense)
Remeasurements – defined benefit schemes
Deferred tax on remeasurements
Share of remeasurements – Joint Ventures & Associates
Total comprehensive income for the year
Dividends paid during the year
Transfer on exercise, vesting or expiry of share based payments
Deferred tax credit on share based payments
Sale of shares held by subsidiary
Balance at 03 January 2015
25. NON-CONTROLLING INTERESTS
At the beginning of the year
Share of profit for the year
Dividends paid to minority
At the end of the year
Notes
Company
€'000
107,795
Group
€'000
289,997
28
27
22
28
27
22
(10,228)
150,330
–
–
–
(10,228)
(1,546)
(166)
(929)
147,689
(27,929)
(4,468)
(27,929)
(4,468)
65,170
405,289
24,817
146,313
–
–
–
24,817
(30,751)
(4,361)
–
–
(42,369)
4,868
(7,780)
101,032
(30,751)
(4,361)
272
2,092
54,875
473,573
2014
€'000
7,634
882
(620)
2013
€'000
7,275
666
(307)
7,896
7,634
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
26. BORROWINGS
Current
Bank overdraft and borrowings
Cumulative redeemable preference shares
Finance lease liabilities
Non-current
Bank borrowings
Private debt placement
Finance lease liabilities
Total borrowings
2014
Company
€'000
2014
Group
€'000
2013
Company
€'000
2013
Group
€'000
–
–
–
–
–
–
–
–
–
–
–
416
416
2,233
–
–
2,233
349,530
269,866
921
620,317
–
–
–
–
–
39,062
–
39,062
203,266
238,375
–
441,641
620,733
2,233
480,703
Borrowings are secured by cross-guarantees from other Group companies.
On 31 July 2014, all 30.764 million of the remaining cumulative redeemable preference shares were redeemed at the issue price.
The maturity of non-current borrowings is as follows:
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
2014
€'000
419
502
619,396
2013
€'000
–
203,266
238,375
620,317
441,641
The exposure of the Group’s total borrowings to interest rate changes, taking account of contractual repricing dates, at the
reporting date is as follows:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
2014
€'000
349,946
419
502
269,866
2013
€'000
242,328
–
–
238,375
620,733
480,703
The effective interest rates at the reporting date are as follows:
Overdrafts
Borrowings
EUR
USD
2014
1.20%
1.83%
2013
1.95%
2.87%
2014
–
4.04%
2013
–
5.29%
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Glanbia plc 2014 Annual Report and Accounts
The carrying amounts and fair values of non-current borrowings are as follows:
Non-current borrowings
Carrying
amount
2014
€'000
620,317
Carrying
amount
2013
€'000
441,641
Fair
value
2014
€'000
645,781
Fair
value
2013
€'000
456,064
The carrying value of current borrowings approximates to their fair value.
The carrying amounts of the Group’s total borrowings are denominated in the following currencies:
Euro
US dollar
The Group has the following undrawn borrowing facilities:
Uncommitted facilities expiring within 1 year
Committed facilities expiring beyond 1 year
All of the undrawn borrowing facilities are floating rate facilities.
Finance lease liabilities – minimum lease payments:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
Future finance charges on lease payments
Present value of finance lease liabilities
The present value of finance lease liabilities is as follows:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
2014
€'000
207,215
413,518
2013
€'000
234,585
246,118
620,733
480,703
2014
€'000
70,482
362,040
2013
€'000
63,020
263,394
432,522
326,414
2014
€'000
472
452
517
1,441
(104)
1,337
2014
€'000
416
419
502
1,337
2013
€'000
–
–
–
–
–
–
2013
€'000
–
–
–
–
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171
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
27. DEFERRED TAXES
The following amounts are shown in the Group balance sheet:
Deferred tax assets
Deferred tax liabilities
Net deferred tax liability
The gross movement on the deferred tax account is as follows:
2014
Company
€'000
–
2014
Group
€'000
(28,503)
2013
Company
€'000
–
403
128,002
403
99,499
–
–
At the beginning of the year
Income statement – pre exceptional (credit)/charge
Income statement – exceptional (credit)/charge
Deferred tax charge to other comprehensive income
Deferred tax (credit)/charge relating to defined benefit
remeasurement
Deferred tax on acquisition of subsidiaries and intellectual
property
Deferrred tax credited directly to equity
Exchange differences
Notes
11
11
22
24
36
24
2014
Company
€'000*
–
(600)
–
1,003
–
–
–
–
2014
Group
€'000
73,120
(4,916)
(401)
140
(4,868)
27,741
(272)
8,955
At the end of the year
403
99,499
* The Company movement in deferred tax relates to a fair value gain and other movements.
The movement in deferred tax assets and liabilities during the year is as follows:
Deferred tax assets
At 29 December 2012
Charged/(credited) to income statement
Charged to other comprehensive income
Exchange differences
At 04 January 2014
Charged/(credited) to income statement
(Credited) to other comprehensive income
(Credited) directly to equity
Acquisitions of subsidiaries and intellectual
property
Exchange differences
Notes
24
24
24
Retirement
benefit
obligations
€'000
(8,396)
Other
employee
obligations
€'000
(3,670)
1,621
166
2
(6,607)
439
(4,868)
–
–
(7)
(4,785)
–
245
(8,210)
(170)
–
(272)
(301)
(999)
Tax
losses
€'000
(612)
(24)
–
11
(625)
(56)
–
–
–
(26)
2013
Company
€'000
–
–
–
–
–
–
–
–
–
Other
€'000
(7,285)
55
–
208
(7,022)
1,153
–
–
(204)
(728)
2013
Group
€'000
(22,464)
95,584
73,120
2013
Group
€'000
71,094
1,869
1,223
541
166
–
–
(1,773)
73,120
Total
€'000
(19,963)
(3,133)
166
466
(22,464)
1,366
(4,868)
(272)
(505)
(1,760)
At 03 January 2015
(11,043)
(9,952)
(707)
(6,801)
(28,503)
172
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Glanbia plc 2014 Annual Report and Accounts
Deferred tax liabilities
At 29 December 2012
Charged/(credited) to income statement
Charged to other comprehensive income
Exchange differences
At 04 January 2014
Charged/(credited) to income statement
Charged to other comprehensive income
Acquisition of subsidiaries and intellectual
property
Exchange differences
Notes
22
22
Accelerated
tax
depreciation
€'000
35,757
15,512
–
(1,408)
49,861
5,675
–
93
6,349
Fair value
gain/
loss
€'000
163
–
541
–
704
–
140
IP and
deferred
development
costs
€'000
25,991
(1,073)
–
(797)
24,121
Other
€'000
29,146
(8,214)
–
(34)
20,898
Total
€'000
91,057
6,225
541
(2,239)
95,584
(91)
–
(12,267)
–
(6,683)
140
–
–
28,146
4,380
7
(14)
28,246
10,715
At 03 January 2015
61,978
844
56,556
8,624
128,002
A deferred tax asset has been recognised on the basis that the realisation of the related tax benefit through future taxable profits is
probable. This includes deferred tax assets which 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 unrecognised tax losses of €123.4 million (2013: €116.3 million) to carry forward against future taxable profits,
of which €51.1 million (2013: €48.0 million) are unrecognised capital losses. These unrecognised losses can be carried forward
indefinitely. Deferred tax liabilities of €13.6 million (2013: €10.5 million) have not been recognised for the withholding tax and other
taxes that would be payable on the unremitted earnings of certain subsidiaries. There is no current intention to remit such earnings.
The deferred income tax charged/(credited) to other comprehensive income during the year is as follows:
Available for sale financial asset reserve
Hedging reserve
Exchange differences
Defined benefit remeasurements
Notes
22
22
24
2014
€'000
315
(175)
8,955
(4,868)
2013
€'000
470
71
(1,773)
166
4,227
(1,066)
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financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
28. RETIREMENT BENEFIT OBLIGATIONS
The Group operates a number of defined benefit and defined contribution schemes in Ireland and the UK under broadly similar
regulatory frameworks, which provide retirement and death benefits for its employees. The bulk of the defined benefit pension
schemes are career average pension plans, which provide benefits to members in the form of a guaranteed level of pension payable
for life. The level of benefits provided depends on members’ length of service and their average salary over their period of
employment. The plans face broadly similar risks as described below. The schemes are funded through separate trustee controlled
funds. Plan assets held in trusts are governed by local regulations and practice in each country, as is the nature of the relationship
between the Group and the trustees (or equivalent) and their composition.
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 01 July 2011
and 01 January 2014. The contributions paid to the schemes in 2014 are in accordance with the contribution rates recommended
in the actuarial valuation reports or in subsequent actuarial advice.
Present value of funded obligations
Fair value of plan assets
Liability in the Group balance sheet
The amounts recognised in the Group income statement are as follows:
Defined benefit pension schemes
Service costs – current
Service costs – past
Net interest cost
Total (expense) pre curtailment gains and negative past service costs
Negative past service costs, gains and losses on settlements
Total (expense)/gain
Defined contribution pension schemes
2014
€'000
(508,098)
393,290
2013
€'000
(424,519)
346,484
(114,808)
(78,035)
Notes
2014
€'000
2013
€'000
(5,522)
–
(2,704)
(8,226)
–
(5,128)
(256)
(3,417)
(8,801)
13,833
(8,226)
5,032
(4,811)
(4,232)
8
7
8
The Group undertook a review of pension arrangements during 2009 and 2010 across its main Irish defined benefit pension
schemes. In 2013 revisions to the Group’s pension arrangements for two smaller Irish defined benefit schemes were completed
giving rise to the negative past service costs, curtailments and settlements recognised in the Group income statement.
The movement in the liability recognised in the Group balance sheet over the year is as follows:
At the beginning of the year
Exchange differences
Service costs and net interest costs
Negative past service costs, gains and losses on settlements
Remeasurements – defined benefit schemes
Contributions paid by employer
At the end of the year
Notes
8
7
24
2014
€'000
(78,035)
(1,423)
(8,226)
–
(42,369)
15,245
2013
€'000
(98,133)
436
(8,801)
13,833
(1,546)
16,176
(114,808)
(78,035)
174
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Glanbia plc 2014 Annual Report and Accounts
The movement in obligations during the year is as follows:
At the beginning of the year
Exchange differences
Current service costs
Past service costs and gains and losses on settlement
Interest costs
Remeasurements:
– Experience gain
– Gain/(loss) from changes in demographic assumptions
– (Loss) from changes in financial assumptions
Contributions by plan participants
Past service costs
Payments from plans:
Benefit payments
At the end of the year
The movement in the fair value of plan assets during the year is as follows:
At the beginning of the year
Exchange differences
Interest income
Remeasurements:
– Return on plan assets excluding amounts included in interest income
Contributions by plan participants
Contributions paid by employer
Payments from plans:
– Benefit payments
– Settlements
At the end of the year
The principal actuarial assumptions used are as follows:
2014
€'000
(424,519)
(5,933)
(5,522)
–
(15,705)
3,765
8,463
(89,990)
(1,867)
–
2013
€'000
(430,736)
1,434
(5,128)
26,496
(16,193)
3,662
(633)
(15,714)
(1,959)
(256)
23,210
14,508
(508,098)
(424,519)
2014
€'000
346,484
4,510
13,001
2013
€'000
332,603
(998)
12,776
35,393
1,867
15,245
11,139
1,959
16,176
(23,210)
–
(14,508)
(12,663)
393,290
346,484
Discount rate
Inflation rate
Future salary increases
Future pension increases1
2014
IRL
2.10%
2014
UK
3.60%
1.20%–1.50% 1.95%–2.95%
2.50%
3.70%
0.00% 2.05%–2.80%
2013
IRL
3.60%
2013
UK
4.40%
2.00% 2.35%–3.35%
3.00%
4.10%
0.0% 2.40%–3.05%
1. The future pension increases on the Irish pension schemes have been calculated on a weighted average basis.
Cumulative remeasurements:
Remeasurements for the year
Cumulative remeasurements
2014
€'000
42,369
302,866
2013
€'000
1,546
260,497
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163
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175
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
Plan assets are comprised as follows:
2014
2013
Equities:
– Consumer
– Energy
– Financials
– Healthcare
– Industrials
– Information Technology
– Materials
– Telecommunication services
– Utilities
– Other
Corporate bonds:
– Investment grade
– Non investment grade
– Cash
Government bonds and gilts
Property:
– UK
– Ireland
– Europe
Cash
Investment funds
Other
Quoted
€’000
Unquoted
€’000
Total
€’000
24,340
7,617
24,741
10,621
12,227
11,677
7,365
3,714
3,019
–
–
–
–
–
–
–
–
–
–
1,479
24,340
7,617
24,741
10,621
12,227
11,677
7,365
3,714
3,019
1,479
22,669
7,615
88
130,891
4,096
1,972
–
–
26,765
9,587
88
130,891
761
2,246
6,473
2,472
38,976
391
–
–
2,924
–
63,991
925
761
2,246
9,397
2,472
102,967
1,316
Quoted
€’000
Unquoted
€’000
Total
€’000
23,332
8,799
21,559
8,846
13,272
9,398
7,277
3,856
2,827
–
24,832
2,569
2,399
107,929
–
–
–
–
–
–
–
–
–
1,225
23,332
8,799
21,559
8,846
13,272
9,398
7,277
3,856
2,827
1,225
–
–
–
–
24,832
2,569
2,399
107,929
–
–
–
4,815
–
663
717
3,025
9,244
–
89,050
850
717
3,025
9,244
4,815
89,050
1,513
%
6
2
6
3
3
3
2
1
1
0
7
2
0
33
0
1
2
1
26
1
%
6
3
6
3
4
3
2
1
1
1
7
1
1
30
0
1
3
1
25
1
317,903
75,387
393,290
100
242,373
104,111
346,484
100
Expected contributions to post-employment benefit plans for 2015 are €15.4 million. The weighted average duration of the defined
benefit obligation is 19 years.
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
2014
Irish mortality
rates
22.8
2014
UK mortality
rates
22.7
25.2
25.2
2013
Irish mortality
rates
24.5
27.3
2013
UK mortality
rates
22.6
25.2
The mortality assumptions imply the following life expectancies in years of an active member, aged 65, retiring now:
Male
Female
2014
Irish mortality
rates
20.2
2014
UK mortality
rates
21.4
2013
Irish mortality
rates
21.0
2013
UK mortality
rates
21.3
23.0
23.7
23.8
23.7
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Glanbia plc 2014 Annual Report and Accounts
Five year summary
Fair value of plan assets
Present value of funded obligations
2014
€'000
393,290
(508,098)
2013
€'000
346,484
(424,519)
2012
€'000
332,603
(430,736)
2011
€'000
400,022
(448,447)
2010
€'000
389,351
(437,911)
Deficit
(114,808)
(78,035)
(98,133)
(48,425)
(48,560)
Experience adjustments on plan liabilities
3,765
3,662
(591)
2,248
8,442
Experience adjustments on plan assets
35,393
11,139
21,542
(16,732)
7,929
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 pension schemes, the estimated impact on the plan
liabilities resulting from changes to key actuarial assumptions, all other assumptions remaining constant.
2014
Assumption
Discount rate
Price inflation
Mortality
2013
Assumption
Discount rate
Price inflation
Mortality
Change in assumption
Increase/decrease 0.25%
Increase/decrease 0.25%
Increase/decrease by one year
Impact on plan liabilities
Decrease/increase by €23.6 million
Increase/decrease by €9.7 million
Increase/decrease by €15.3 million
Change in assumption
Increase/decrease 0.25%
Increase/decrease 0.25%
Increase/decrease by one year
Impact on plan liabilities
Decrease/increase by €19.4 million
Increase/decrease by €11.3 million
Increase/decrease by €10.0 million
Through its defined benefit pension plans the Group is exposed to a number of risks, the most significant of which are detailed
below:
Investment risk
The pension plans hold investment in asset classes such as equities, which have volatile market values and while these assets are
expected to provide higher returns than other asset classes over the long-term, the short-term volatility could cause an increase in
the deficit at any particular point in time.
Interest rate risk
The pension plans liabilities are assessed using market yields on high quality corporate bonds to discount the liabilities. As the
pension plans hold other assets such as equities the value of the assets and liabilities may not move in the same way.
Inflation risk
A significant proportion of the benefits under the plans are linked to inflation. Although the plans’ assets are expected to provide
a good hedge against inflation over the long term, movements over the short-term could lead to further deficits emerging.
Mortality risk
In the event that members live longer than assumed a further deficit will emerge in the Schemes.
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165
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177
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
29. PROVISIONS FOR OTHER LIABILITIES AND CHARGES
At 04 January 2014
13,320
18,126
Restructuring
€'000
note (a)
UK
pension
€'000
note (b)
Legal
claims
€'000
note (c)
6,046
Property &
lease
commitments
€'000
note (d)
1,554
Provided for in the year
Utilised in the year
Exchange differences
Unwinding of discounts
Reclassification
3,163
(13,372)
–
–
(361)
–
(898)
1,148
130
–
928
(500)
470
–
220
–
(380)
10
35
–
Operational
€'000
note (e)
5,747
7,940
(1,173)
103
–
(706)
Total
€'000
44,793
12,031
(16,323)
1,731
165
(847)
At 03 January 2015
2,750
18,506
7,164
1,219
11,911
41,550
Non-current
Current
–
2,750
17,583
923
–
7,164
986
233
–
11,911
18,569
22,981
2,750
18,506
7,164
1,219
11,911
41,550
(a) The restructuring provision relates to the rationalisation programme that the Group is currently undertaking. The provision,
which relates mainly to termination payments is expected to be fully utilised during 2015. The amount provided in the year is
recognised in the income statement as an exceptional item.
(b) The UK pension provision relates to administration and certain costs associated with pension schemes attached to businesses
disposed of in prior years. This provision is expected to be fully utilised over the next 29 years.
(c) The legal claims provision relates to legal claims brought against the Group. The amounts provided for in the year are
recognised in the income statement. The balance at 03 January 2015 is expected to be utilised during 2015. In the opinion
of the Directors, after taking appropriate legal advice, the outcome of these legal claims is not expected to give rise to any
significant loss beyond the amounts provided for at 03 January 2015.
(d) The property and lease commitments provision relates to onerous leases in respect of two properties where the Group has
present and future obligations to make lease payments. It is expected that €0.2 million will be utilised during 2015 and the
balance will be fully utilised over the next 3 years.
(e) The operational provision represents deferred payments in respect of recent acquisitions and other provisions related to
operations. It is expected that €11.9 million of this provision will be utilised during 2015. Approximately €6.5 million of the
amount provided in the year is recognised in the income statement as an exceptional item (see note 7). Due to the nature
of these items, there is some uncertainty around the amount and timing of payments.
178
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Glanbia plc 2014 Annual Report and Accounts
30. CAPITAL GRANTS
At the beginning of the year
Credited to income statement
Additions
Exchange differences
At the end of the year
31. TRADE AND OTHER PAYABLES
Trade payables
Amounts due to Joint Ventures & Associates
Amounts due to other related parties
Amounts due to other Group companies
Social security costs
Accrued expenses
Other payables
Notes
6
2014
€'000
2,471
(264)
–
7
2013
€'000
2,636
(219)
57
(3)
2,214
2,471
Notes
37
37
37
2014
Company
€'000
36
–
–
112,279
–
9,760
–
2014
Group
€'000
187,201
68,254
41
–
3,732
131,122
–
2013
Company
€'000
–
–
–
96,499
–
5,522
2013
Group
€'000
177,519
52,014
50
–
3,363
110,387
–
1,309
122,075
390,350
102,021
344,642
The carrying value of payables is a reasonable approximation of fair value.
32. DERIVATIVE FINANCIAL INSTRUMENTS
Non-hedging instruments
Foreign exchange contracts – cash flow hedges
Commodity futures – cash flow hedges
Commodity futures – fair value hedges
Total
Non-current
Current
2014
Assets
€'000
440
295
–
544
1,279
–
1,279
2014
Liabilities
€'000
–
(40)
(534)
–
(574)
–
(574)
2013
Assets
€'000
–
19
86
2013
Liabilities
€'000
(13)
(24)
(43)
1,645
(1,645)
1,750
(1,725)
–
–
1,750
(1,725)
www.glanbia.com
167
www.glanbia.com
179
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
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 03 January 2015 and the Directors
are of the opinion that no losses will arise thereon. These
subsidiaries avail of the exemption from filing 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 amount of the potential
liability under the UK pension guarantee is reducing annually by
the contributions paid into these schemes. The Company treats
the guarantee contracts 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 €2.6 million (2013: €2.0 million)
are outstanding at 03 January 2015, 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.
Non-hedging instruments
Non-hedging instruments refers to a translation difference
on a GBP/EUR currency swap with a notional amount of
GBP 20.0 million (2013: GBP 20.0 million).
Interest rate swaps
Gains and losses recognised in the hedging reserve in other
comprehensive income on interest rate swaps represent our
share of the movement on swaps entered into by joint ventures.
All movements are recognised against the carrying value of the
investment in the joint venture until repayment of the related
bank borrowings.
Foreign exchange contracts
The notional principal amounts of the outstanding foreign
exchange contracts at 03 January 2015 were €16.7 million
(2013: €17.7 million).
Gains and losses recognised in the hedging reserve in other
comprehensive income on foreign exchange contracts at
03 January 2015 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, cheese, gas and oil) futures, qualifying as cash flow
hedges and fair value hedges at 03 January 2015 were
€2.1 million and €44.9 million respectively (2013: €1.4 million
and €22.2 million). Gains and losses recognised in the hedging
reserve in other comprehensive income on these futures at
03 January 2015 will be released to the income statement
at various dates within one year from the reporting date.
Net investment hedge
A portion of the Group’s US dollar denominated borrowings
amounting to USD 98.5 million (2013: USD 98.5 million) is
designated as a hedge of the net investment in the Group’s
US dollar net assets. The fair value of the borrowing was
€81.7 million (2013: €72.2 million). The foreign exchange loss
of €9.5 million (2013: gain of €2.5 million) arising on translation
of the borrowing into euro at 03 January 2015 is recognised in
other comprehensive income.
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 and has determined that their value is not significant. No
adjustment has been made to the Glanbia plc company balance
sheet to reflect the fair value of the financial guarantee contracts
issued in its name.
Call option
Glanbia Co-operative Society Limited has a call option to
acquire Glanbia plc’s 40% interest in Glanbia Ingredients Ireland
Limited under an agreed valuation methodology for a six year
period from November 2012. The Group is satisfied that there is
no more than a nominal value attached to this call option.
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Glanbia plc 2014 Annual Report and Accounts
34. COMMITMENTS
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised in the Financial Statements is as follows:
Property, plant and equipment
2014
€'000
46,900
2013
€'000
50,864
Operating lease commitments – where the Group is the lessee
The Group leases various assets. Generally, operating leases are short-term with no purchase option. 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
2014
€'000
17,457
55,312
66,609
2013
€'000
12,197
40,025
46,594
139,378
98,816
35. CASH GENERATED FROM OPERATIONS
Profit/(loss) before taxation
Write-off of intangibles
Exceptional loss/(gain)
Share of results of Joint Ventures & Associates
Depreciation
Amortisation
Cost of share based payments
Difference between pension charge and cash contributions
(Profit)/loss on disposal of property, plant and equipment
Finance income
Finance expense
Other Group companies – amounts written off
Non-cash movement on investments
Amortisation of government grants received
Cash generated/(absorbed) before changes in working
capital
Change in net working capital:
– Decrease/(increase) in inventory
– Decrease/(increase) in short term receivables
– Increase in short term liabilities
– (Decrease) in provisions
Notes
2014
Company
€'000
24,217
2014
Group
€'000
173,577
2013
Company
€'000
(10,228)
2013
Group
€'000
176,004
–
–
–
–
–
5,516
–
–
–
–
–
–
–
73
10,290
(23,729)
32,230
22,512
5,516
(7,019)
(226)
(1,725)
22,050
–
–
(264)
–
–
–
–
–
4,568
–
–
–
–
1,338
(199)
–
76
(5,804)
(26,488)
27,203
21,011
4,568
(7,375)
206
(2,168)
25,110
–
–
(219)
29,733
233,285
(4,521)
212,124
14
15
22
10
10
18
30
–
62
20,054
–
15,740
(16,264)
9,321
(11,366)
–
(40,516)
422
37,469
–
2,620
3,340
(8,272)
Cash generated from operating activities
49,849
230,716
33,370
169,296
www.glanbia.com
169
www.glanbia.com
181
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
36. BUSINESS COMBINATIONS
The acquisitions completed by the Group during the year were as follows:
On 17 January 2014, the Group acquired 100% of Nutramino Holding ApS (Nutramino). Nutramino is a leading Scandinavian
sports nutrition business with operations in Denmark, Sweden and Norway.
On 14 October 2014, the Group acquired 100% of The Isopure Company, LLC (Isopure). Isopure is a US based provider of
premium branded sports nutrition products.
The reason for both acquisitions was to complement the portfolio of the Group’s Global Performance Nutrition business and to
further consolidate the Group’s market leading position. Goodwill acquired in respect of both acquisitions is attributable to the
profitability and development opportunities associated with the extension of the Group’s portfolio by complementing and enhancing
existing performance nutrition capabilities.
Acquisition related costs charged to the Group income statement during the year ended 03 January 2015 amounted to €1.1 million
(2013: €0.5 million).
No contingent liabilities arose as part of the acquisitions.
Summary of Nutramino acquisition
Details of net assets acquired and goodwill arising from the acquisition are as follows:
Purchase consideration – cash paid
Contingent consideration – cash paid
Total consideration
Less: fair value of assets acquired
Goodwill
The fair value of assets and liabilities arising from the acquisition are as follows:
Property, plant and equipment
Intangible assets – brands
Intangible assets – customer relationships
Inventories
Trade and other receivables
Trade and other payables
Deferred income tax liabilities
Net borrowings
Fair value of assets acquired
€'000
16,364
4,771
21,135
(13,849)
7,286
€'000
2,200
9,918
5,160
994
2,573
(2,287)
(3,308)
(1,401)
13,849
The contingent consideration arrangement requires the Group to pay the former owners of Nutramino an earn out if the 2014 actual
adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) exceeds the actual 2013 adjusted EBITDA by a
minimum agreed amount. The fair value of the Group’s estimated contingent consideration at acquisition was €4.8 million. As a
result of a better than anticipated performance this is now estimated to be €11.3 million and the additional earn out payable of
€6.5 million has been charged to the income statement (see note 7). The fair value estimate is a level 3 fair value measurement
and is calculated based on the adjusted EBITDA achieved during 2014 as outlined in the latest available financial information
of Nutramino.
The contingent consideration is due to be paid before 17 March 2015 and as a result, the contingent consideration recognised
was not discounted as the effect of discounting was not materially different than the gross amount.
The fair value of trade and other receivables at the acquisition date amounted to €2.6 million. The gross contractual amount
for trade receivables due is €2.4 million, an amount of €0.1 million is provided for as an allowance for doubtful debts.
182
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Glanbia plc 2014 Annual Report and Accounts
Summary of Isopure acquisition
Details of net assets acquired and goodwill arising from the acquisition are as follows:
Purchase consideration – cash paid
Other consideration
Total consideration
Less: fair value of assets acquired
Goodwill
The fair value of assets and liabilities arising from the acquisition are as follows:
Property, plant and equipment
Intangible assets – brands
Intangible assets – customer relationships
Inventories
Trade and other receivables
Trade and other payables
Deferred income tax liabilities
Liabilities settled at completion
Cash and cash equivalents
Fair value of assets acquired
€’000
104,677
1,836
106,513
(56,339)
50,174
€'000
287
57,172
26,570
6,987
6,306
(3,180)
(24,433)
(16,138)
2,768
56,339
The fair value of trade and other receivables at the acquisition date amounted to €6.3 million. There was no allowance for doubtful
debts. The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis in respect
of the Isopure business combination given the timing of closure of this transaction. Any amendments to these fair values within the
12 month timeframe from the date of acquisition will be disclosed in the 2015 Annual Report as stipulated by IFRS 3.
Combined impact of acquisitions
The revenue and profit (net of transaction costs) of the Group including the impact of acquisitions completed during the financial
year was as follows:
Revenue
Profit before taxation and exceptional items
2014
Acquisitions
€’000
32,604
965
Group
excluding
acquisitions
€’000
2,505,764
188,561
Consolidated
Group
including
acquisitions
€'000
2,538,368
189,526
The revenue and profit (net of transaction costs) of the Group for the financial year determined in accordance with IFRS 3 as
though the acquisition date for all business combinations had been at the beginning of the year would be as follows:
Revenue
Profit before taxation and exceptional items
2014
Acquisitions
€’000
75,997
2,631
Group
excluding
acquisitions
€’000
2,505,764
Pro Forma
Consolidated
Group
€'000
2,581,761
188,561
191,192
www.glanbia.com
171
www.glanbia.com
183
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
37. RELATED PARTY TRANSACTIONS
The Group is controlled by Glanbia Co-operative Society Limited, which holds 41.2% 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
– Key management1
Sales of services:
– Glanbia Co-operative Society Limited
– Associates
– Joint ventures
2014
Company
€'000
2014
Group
€'000
2013
Company
€'000
–
–
–
–
–
–
–
14,734
2,020
16,754
511
6,708
18,000
25,219
–
–
–
–
–
–
–
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 management1
Purchases of services:
– Glanbia Co-operative Society Limited
– Associates
– Joint ventures
– Subsidiaries
2014
Company
€'000
2014
Group
€'000
2013
Company
€'000
–
–
–
–
–
–
–
4,277
66,749
5,795
456
73,000
290
2,025
–
–
–
–
–
–
–
–
–
3,210
2013
Group
€'000
5,859
2,799
8,658
502
4,686
16,240
21,428
2013
Group
€'000
51,172
6,260
409
57,841
290
2,566
61
–
Purchases from related parties were carried out under normal commercial terms and conditions.
1. Purchases, sales and related year-end balances involving key management refer to trading balances with Directors who are engaged in farming activities.
No loans were made to key management during the year (2013: nil).
4,277
2,315
3,210
2,917
184
172
Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
(c) Year-end balances
Receivables from related parties:
– Glanbia Co-operative Society Limited
– Associates
– Joint ventures
– Key management¹
Payables to related parties:
– Associates
– Joint ventures
– Key management¹
– Subsidiaries
2014
Company
€'000
2014
Group
€'000
2013
Company
€'000
–
36
–
–
192
2,938
2,558
584
36
6,272
–
–
–
112,279
19,059
49,195
41
–
–
–
–
–
–
–
–
–
96,499
2013
Group
€'000
102
482
439
704
1,727
8,422
43,592
50
–
112,279
68,295
96,499
52,064
The receivables from related parties arise mainly from sale transactions and are due two months after the date of sale. The
receivables are unsecured in nature and only bear interest when receivables are due more than three months after the date of sale.
The payables to related parties arise mainly from purchase transactions and are payable one month after the date of purchase.
The payables bear no interest.
(d) Key management compensation2
Salaries and other short-term employee benefits
Post-employment benefits
Share based payments
Non-Executive Directors fees
2014
Company
€'000
–
–
–
800
2014
Group
€'000
4,094
508
1,928
800
2013
Company
€'000
–
–
–
812
2013
Group
€'000
3,381
444
1,701
812
800
7,330
812
6,338
1. Purchases, sales and related year-end balances involving key management refer to trading balances with Directors who are engaged in farming activities.
No loans were made to key management during the year (2013: nil).
2. Key management compensation includes Directors (Executive and Non-Executive) and members of the Group Operating Executive Committee, including the
Group Secretary.
www.glanbia.com
173
www.glanbia.com
185
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
(e) Loans to joint ventures & associates
Loans receivable
At the beginning of the year
Foreign exchange difference on opening balance
Loans advanced during the year
Loan payments received
At the end of the year
Interest on loans receivable
At the beginning of the year
Foreign exchange difference on opening balance
Interest charged
Interest received
At the end of the year
Total loan and interest receivable at the end of the year
2014
Company
€'000
–
–
–
–
–
–
–
–
–
–
–
2014
Group
€'000
9,376
487
–
–
9,863
122
8
216
(85)
261
10,124
2013
Company
€'000
–
–
–
–
–
–
–
–
–
–
–
2013
Group
€'000
16,735
(181)
350
(7,528)
9,376
125
(5)
572
(570)
122
9,498
The GBP 6.25 million loan to Milk Ventures (UK) Limited is due as GBP 4.8 million on 30 April 2015 and GBP 1.45 million on
02 October 2015. It is expected that these loans will roll over on the repayment dates. There is also a loan of €1.5 million to
South East Port Services Limited, which is due as €0.75 million repayable on 31 October 2015 and 30 October 2016,
subject to cash flows. A loan of €0.36 million to the Malting Company of Ireland Limited is repayable in 2043.
38. EVENTS AFTER THE REPORTING PERIOD
There were no significant events outside the ordinary course of business that affected the Group since 03 January 2015.
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Glanbia plc 2014 Annual Report and Accounts
39. PRINCIPAL SUBSIDIARY AND ASSOCIATED UNDERTAKINGS
(a) Subsidiaries
Incorporated and operating in
Principal place of business
Principal activities
Group interest %
Ireland
Glanbia Foods Ireland Limited
Kilkenny and Citywest,
Dublin 24
Consumer food products and general
trading
Glanbia Consumer Foods Limited
Kilkenny
Chilled consumer foods
Glanbia Nutritionals (Ireland) Limited
Kilkenny
Glanbia Nutritionals (Europe) Limited
Kilkenny
Nutritional products
Nutritional products
Glanbia Nutritionals (Research) Limited Kilkenny
Research and development
Glanbia Feeds Limited
Enniscorthy, Co. Wexford and
Portlaoise, Co. Laois
Manufacture of animal feed products
Glanbia Estates Limited
Glanbia Property Rentals Limited
Kilkenny
Kilkenny
Property and land dealing
Property rental company
D. Walsh & Sons Limited
Palmerstown, Co. Kilkenny
Grain and fertilisers
Grassland Fertilisers (Kilkenny) Limited Palmerstown, Co. Kilkenny
Fertilisers
Glanbia Management Services Limited Kilkenny
Glanbia Investip Limited
Glanbia Support Services Limited
Avonmore Proteins Limited
Glanbia Financial Services
Glassonby
Glanbia Finance Limited
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Glanbia Nutritionals (Blending) Limited
Kilkenny
ON Optimum Nutrition Limited
Kilkenny
Avonmore Skim Milk Products Limited Kilkenny
Waterford Foods Limited
Glanbia Holdings (Ireland) Limited
Alanfield Society Limited
Glanbia Property Holding Limited
Kilkenny
Kilkenny
Kilkenny
Kilkenny
United States
Glanbia, Inc.
Glanbia (Delaware), Inc.
Delaware
Delaware
Glanbia Business Services, Inc.
Aurora, Illinois
Management services
Management of receivables
Business services
Financing
Financing
Financing
Financing
Financing
Financing
Financing
Holding company
Holding company
Holding company
Holding company
Holding company
Holding company
Business services
Glanbia Foods, Inc.
Twin Falls, Idaho
Milk products
Glanbia Performance Nutrition, Inc
Illinois, South Carolina, Florida
Performance nutrition products
The Isopure Company, LLC
New York
The Isopure Company Trading LLC
New York
Isopure Plus LLC
New York
Performance nutrition products
Performance nutrition products
Performance nutrition products
Glanbia Nutritionals (NA), Inc.
Carlsbad, California
Nutrient delivery systems
Glanbia Nutritionals, Inc.
Madison, Wisconsin
Nutritional products and distribution
Aseptic Solutions USA Ventures, LLC
Corona, California
Beverage manufacturer & co packer
Glanbia Ingredients, Inc.
Madison, Wisconsin
Dairy products distribution
100
100
100
100
100
100
100
100
60
73
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
www.glanbia.com
175
www.glanbia.com
187
financial statements
Notes to the financial statements
for the financial year ended 03 January 2015 continued
Incorporated and operating in
Principal place of business
Principal activities
Group interest %
Britain and Northern Ireland
Glanbia (UK) Limited
Victoria Square, Birmingham
Holding company
Waterford Foods International Limited
Victoria Square, Birmingham
Holding company
Glanbia Holdings Limited
Victoria Square, Birmingham
Holding company
Glanbia Investments (UK) Limited
Victoria Square, Birmingham
Holding company
Glanbia Milk Limited
Victoria Square, Birmingham
Management services
Glanbia Performance Nutrition (UK) Limited Middlesbrough, England
Performance nutrition products
Glanbia Foods (NI) Limited
Glanbia Feedstuffs Limited
Portadown, Co. Armagh
Consumer food products
Victoria Square, Birmingham
Supply of animal feeds
Germany
Glanbia Nutritionals Deutschland GmbH
Glanbia Performance Nutrition GmbH
Netherlands
Glanbia Foods B.V.
Asia
Glanbia Nutritionals (Suzhou) Company
Limited
GN Life Science (Shanghai) Co. Limited
Shanghai, China
Glanbia Nutritionals Singapore Pte Limited Singapore
Denmark
Nutramino Holding ApS
Nutramino Int. ApS
Luxembourg
Glanbia Luxinvest S.A
Glanbia Luxfin S.A
Copenhagen
Copenhagen
Luxembourg
Luxembourg
Glanbia Luxembourg S.A
Australia
Glanbia Performance Nutrition Pty Limited Sydney
Luxembourg
Orsingen-Nenzingen
Berlin
Nutrient delivery systems
Performance nutrition products
Schiphol Boulevard 231
Holding company
Suzhou, China
Nutrient delivery systems
Nutrient ingredients
Customer service office
Holding company
Performance nutrition products
Financing
Financing
Financing
Performance nutrition products
Belgium
The Isopure Company Belgium Sprl
Aubel
Performance nutrition products
Brazil
Glanbia Marketing de Produtos de
Nutricao e Performance do Brasil Ltda
Canada
Glanbia Nutritionals (Canada) Inc.
Winnipeg
Glanbia Performance Nutrition Canada Inc. Winnipeg
Sao Paulo
France
Glanbia Performance Nutrition France SAS Paris
India
Glanbia Performance Nutrition (India)
Private Limited
Glanbia India Private Limited
Mexico
Glanbia, S.A. de C.V
Delhi
Mexico
Bangalore
Performance nutrition products
Nutritional products
Performance nutrition products
Performance nutrition products
Performance nutrition products
Nutrient ingredients
Nutrient Ingredients
Norway
Nutramino NO AS
Oslo
Performance nutrition products
188
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Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Incorporated and operating in
Principal place of business
Principal activities
Group interest %
Portugal
Glanbia Nutritionals (Portugal) – Sociedade
Unipessoal, Lda
Russian Federation
LLC Glanbia
South Africa
Glanbia (Pty) Limited
Sweden
Nutramino AB
Uruguay
Sintra
Performance nutrition products
Moscow
Nutrient Ingredients
Ekurhuleni
Nutrient Ingredients
Stockholm
Performance nutrition products
Glanbia (Uruguay Exports) SA
Canelones
Customer service office
100
100
100
100
100
(b) Associates and joint ventures
Incorporated and operating in
Ireland
Date to
which results
are included
Principal place of business
Principal activities
Group interest %
Co-operative Animal Health Limited*
31–Dec–13
Tullow, Co. Carlow
South Eastern Cattle Breeding Society
Limited*
31–Dec–13
Thurles, Co. Tipperary
Malting Company of Ireland Limited**
30–Sept–14
Togher, Cork
South East Port Services Limited*
03–Jan–15
Belview, Kilkenny
South East Port Investments Limited****
03–Jan–15
Glanbia Ingredients Ireland Limited*
MacCormac Products Limited***
Wexford Creamery Limited***
United States
Southwest Cheese Company, LLC**
Britain and Northern Ireland
03–Jan–15
03–Jan–15
03–Jan–15
Kilkenny
Kilkenny
Kilkenny
Kilkenny
Agri chemicals
Cattle breeding
Malting
Port services
Port services
Milk products
Milk products
Milk products
03–Jan–15
Clovis, New Mexico
Milk products
Glanbia Cheese Limited**
03–Jan–15
Magheralin and Llangefni
Cheese products
Milk Ventures (UK) Limited**
30–Nov–14
Stockport, England
Holding Company
Nigeria
Nutricima Limited**
30–Nov–14
Lagos
Evaporated and
powdered milk
Pursuant to Section 16 of the Companies Act, 1986 a full list of subsidiaries, joint ventures 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
*** Consolidated as part of Glanbia Ingredients Ireland Limited
**** Consolidated as part of South East Port Services Limited
50
57
50
49
49
40
40
40
50
51
50
50
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189
financial statements
Shareholders’ information
Stock exchange listings
The Company’s shares are listed on the main market of the Irish
Stock Exchange as well as having a premium listing on the main
market of the London Stock Exchange.
Managing your shareholding
Computershare Investor Services (Ireland) Limited
(Computershare) maintains the Company’s register of members.
Should a shareholder have any queries in respect of their
shareholding, they should contact Computershare directly
using the contact details provided below:
Computershare Investor Services (Ireland) Limited, Heron
House, Corrig Road, Sandyford Industrial Estate, Dublin 18,
Ireland.
Contact details:
Telephone number 01 247 5349 (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 financial year end
Market capitalisation
Share price movements during the year:
– high
– low
2014
2013
€
€
12.81
11.05
3,790m 3,267m
13.06
10.48
11.41
8.09
The current share price of Glanbia plc ordinary shares can be
accessed at: http://www.glanbia.com/prices-delayed
Shareholder analysis
Shareholders analysis
41%
14%
2%
5%
12%
26%
Glanbia Co-operative Society Limited
Retail
North America
European Union
Ireland
United Kingdom
Share capital
The authorised share capital of the Company at 03 January
2015 was 350,000,000 ordinary shares at €0.06 each. The
issued share capital at 03 January 2015 was 295,875,684
ordinary shares of €0.06 each.
Substantial shareholdings
The table below details the significant holding (3% or more) in
the Company’s ordinary share capital that has been disclosed
to the Company at 03 January 2015 and 24 February 2015 in
accordance with the requirements of Rule 7 of the Transparency
Rules issued by the Central Bank under Section 22 of the
Investment Funds, Companies and Miscellaneous Provisions
Act, 2006.
Shareholder
Glanbia
Co-operative Society
Limited
Capital Group
Companies, Inc
No. of ordinary shares
as at
03 January 2015
% of issued share
capital as at
03 January 2015
121,919,315
21,043,293
41.2
7.12
Shareholder
Glanbia
Co-operative
Society Limited
Capital Group of
Companies, Inc
No. of ordinary shares
as at
24 February 2015
% of issued share
capital as at
24 February 2015
121,919,315
21,043,293
41.2
7.12
Employee share schemes
The Company operates a number of employee share schemes.
At 03 January 2015 715,558 ordinary shares were held in
employee benefit trusts for the purpose of the Group’s
employee share schemes. While 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 4.43 cents per share was paid in respect
of ordinary shares on 10 October 2014.
Subject to shareholders’ approval, a final dividend 6.57 cents
per share will be paid in respect of ordinary shares on 15 May
2015 to shareholders on the register of members on 07 April
2015. 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, the payment will be in
GBP. All other payments will be in euro.
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Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
Dividend Withholding Tax (DWT) is deductible from dividends
paid by an Irish resident company, unless the shareholder
is entitled to an exemption and has submitted a properly
completed exemption form to the Company's Registrar,
Computershare. 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 protect the security of dividend
payments to shareholders and reduce costs, the Company
proposes to continue 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. Bank account details supplied to the Company
and its Registrar will be used only for dividend distribution and
the information will not be used for any other purpose or
supplied to any third party.
www.glanbia.com
Shareholders may visit: www.glanbia.com/shareholder-centre
for up-to-date investor information. Electronic copies 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 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.
Financial calendar
Announcement of final results for 2014
Ex-dividend date
25 February 2015
02 April 2015
Record date for dividend
Date for receipt of proxy forms
Record date for AGM
AGM
Dividend payment date
07 April 2015
10 May 2015
10 May 2015
12 May 2015
15 May 2015
AGM
The AGM will be held on 12 May 2015. The notice of meeting,
together with details of the business to be conducted at the
meeting is available on: www.glanbia.com/agm.
The voting results for the 2015 AGM, including proxy votes and
votes withheld will be available on our website shortly after the
meeting at the following address: www.glanbia.com/agm.
Conditions for participating in a meeting
Every shareholder, irrespective of how many Glanbia plc shares
they hold, has the right to attend, speak, ask questions and vote
at the AGM. Completion of a 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 2015 AGM the record date is 5:00 pm on 10 May 2015
(or in the case of an adjournment 5:00 pm, on the day prior to
the day before the time fixed for the adjourned meeting).
Appointment of proxy
Where a shareholder is unable to attend the AGM in person,
a proxy (or proxies) may be appointed to attend, speak, ask
questions and vote on their behalf. For this purpose a form of
proxy is posted to all shareholders. Copies of these documents
may be requested by telephoning the Company’s Registrar on
01 247 5349 (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, Ireland.
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 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:
by attending the AGM in person;
by appointing the Chairman or another person as a proxy
to vote on their behalf; or
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.
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financial statements
Shareholders’ information continued
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 2015 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 or info@glanbia.ie no later than 01 April
2015 (i.e. 42 days before the AGM).
An item cannot be included on the AGM agenda unless it is
accompanied by the written explanation and received at one
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 2015 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 01
April 2015 (i.e. 42 days before the AGM) by post to the Group
Secretary at Glanbia plc, Glanbia House, Kilkenny, Ireland or by
email to ir@glanbia.ie or info@glanbia.ie. A resolution cannot be
included on the 2015 AGM agenda unless it is received at one
of these addresses by this deadline. Furthermore, shareholders
are reminded that there are provisions in company law which
impose other conditions on the right of shareholders to propose
resolutions at the general meeting of a company.
How to ask a question before or at the meeting
The AGM is an opportunity for shareholders to put a question to
the Chairman during the question and answer session. Before
the 2015 AGM, a shareholder may also submit a question in
writing by sending a letter and evidence of shareholding at least
four business days before the 2015 AGM (i.e. 07 May 2015) to
the Group Secretary, Glanbia plc, Glanbia House, Kilkenny,
Ireland or by email to ir@glanbia.ie or info@glanbia.ie.
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 the interim dividends 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.
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Glanbia plc 2014 Annual Report and Accounts
Glanbia plc 2014 Annual Report and Accounts
Contacts
Group Secretary and Registered Office
Michael Horan,
Glanbia plc,
Glanbia House,
Kilkenny,
Ireland.
Stockbrokers
Davy Stockbrokers,
49 Dawson Street,
Dublin 2,
Ireland.
(Joint Broker)
Jefferies Hoare Govett,
Vintners Place,
68 Upper Thames Street,
London EC4V 3BJ,
United Kingdom.
(Joint Broker)
Auditor
PricewaterhouseCoopers,
Ballycar House,
Newtown,
Waterford,
Ireland.
Solictors
Arthur Cox,
Earlsfort Centre,
Earlsfort Terrace,
Dublin 2,
Ireland.
Pinsent Masons,
3 Colmore Circus,
Birmingham B4 6BH,
United Kingdom.
Principal Bankers
Allied Irish Banks, plc
The Governor and Company of the Bank of Ireland
BNP Paribas S.A.
Barclays Bank Ireland plc
Citibank N.A.
Danske Bank A/S
HSBC Bank plc
Rabobank International
Ulster Bank Ireland Limited
Registrar
Computershare Investor Services (Ireland) Limited,
Heron House,
Corrig Road,
Sandyford Industrial Estate,
Dublin 18,
Ireland.
This report is printed on mixed source paper which is
FSC® certified (the standards for well-managed forests,
considering environmental, social and economic issues).
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Glanbia plc
Glanbia House
Kilkenny
Ireland
Tel: +353 56 777 2200
Fax: +353 56 777 2222
www.glanbia.com
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