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DELIVERING
BETTER NUTRITION
FOR EVERY STEP
OF LIFE’S JOURNEY
Glanbia plc
Annual Report and Accounts 2015
HIGHLIGHTS OF 2015
Another year
of DOUBLE DIGIT
GROWTH
We are pleased to report a sixth consecutive year
of double digit growth. We achieved a reported
growth of 29.4% in adjusted earnings per share
(10.6% increase constant currency). We also achieved
a 29.9% increase in EBITA (10.5% constant currency)
with margin expansion of 160bps (130bps constant
currency) and strong operating cashflow of €281.4
million. We are increasing our dividend by 10% to
12.1 cent per share. The outlook is positive and
we are guiding 8% to 10% growth in adjusted
earnings per share, constant currency, for 2016.
ADJUSTED EARNINGS PER SHARE
79.14c
REVENUE
€2.8bn
EBITA
€271.0m
EBITA MARGIN
9.8%
OPERATING CASHFLOW
€281.4m
For definitions and more information on constant currency and
other performance measures see the glossary on pages 170 to 172.
Reported
change
Constant
currency change
+29.4% +10.6%
+9.3% -3.6%
+29.9% +10.5%
+160bps +130bps
+36.5% +16.6%
WWW.GLANBIA.COM
Forward-Looking Statements
Glanbia plc (‘the Group’) 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 Group’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,’ ‘develop,’
‘ensure,’ ‘arrive,’ ‘achieve,’ ‘anticipate,’ ‘maintain,’
‘grow,’ ‘aim,’ ‘deliver,’ ‘sustain,’ ‘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 35 to 38
of this Annual Report could cause the Group’s
results to differ materially from those expressed in
forward-looking statements. There may be other
risks and uncertainties that the Group is unable
to predict at this time or that the Group 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 Group 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 Group, 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.
a global
nutrition
GROup
OUR PURPOSE:
Delivering better nutrition for
every step of life’s journey.
OUR VISION:
To be one of the world’s top
performing nutrition companies
trusted to enrich lives every day.
glAnbia
at a GlAnce
Glanbia plc is a global nutrition group, dedicated to delivering
better nutrition for every step of life’s journey. We employ over
6,000 people across 32 countries and our products are sold or
distributed in over 130 countries. Our major production facilities
are located in Ireland, the US, the UK, Germany and China.
We have four segments; Glanbia Performance Nutrition, Global
Ingredients, Dairy Ireland and Joint Ventures & Associates.
Our shares are listed on the Irish and London Stock Exchanges
(symbol: GLB).
GLANBIA PERFORMANCE
NUTRITION
GLOBAL
INGREDIENTS
Glanbia Performance Nutrition (GPN) is the number one global
performance nutrition brand portfolio comprising of Optimum
Nutrition, BSN, Isopure, thinkThin, Nutramino, ABB and trusource,
each with its own brand essence. Our mission is to inspire
consumers everywhere to achieve their performance and healthy
lifestyle goals. We produce the full range of performance nutrition
products with broad consumer appeal, and we are the market
leader in innovation and new product development.
WHERE YOU WILL FIND OUR PRODUCTS
Whether it’s a protein smoothie in the morning, a pre-workout
energy drink, a post-workout protein shake to repair and build
muscle, or an on-the-go protein bar, professional athletes and
everyday fitness enthusiasts all over the world rely on GPN
products for their nutritional needs.
Global Ingredients has a portfolio focused on both dairy and
non-dairy nutritional ingredients. We deliver nutritional and
functional ingredient solutions, and precision premixes for
use in the nutrition-enhanced mainstream food and beverage
markets, infant and clinical nutrition and functional nutrition
markets. We are also a large-scale manufacturer and marketer
of American-style cheddar cheese.
WHERE YOU WILL FIND OUR PRODUCTS
Our specialised value-added protein systems and solutions and
precision premixes are found in everyday products such as Ready-To-
Drink (RTD) beverages, protein-enriched bars and snacks, bakery and
dairy products, health and wellness supplements and sports nutrition.
Our American-style cheddar cheese is predominately used in the retail
and food service channels.
32
countries
6,015
employees
DAIRY
IRELAND
JOINT VENTURES
& ASSOCIATES
Dairy Ireland is comprised of two businesses. Consumer Products
is the leading supplier of branded consumer dairy products to
the Irish market. It also produces long-life products for export.
Agribusiness supplies inputs to the Irish agriculture sector and
is the leading purchaser and processor of grain and the leading
manufacturer of branded animal feed in Ireland.
We have three strategic Joint Ventures & Associates: Glanbia
Ingredients Ireland, Glanbia Cheese in the UK and Southwest
Cheese in the US. These are strategically important partnerships,
not only in their own right, but also in terms of the synergies and
growth opportunities they bring to the wholly owned Group.
WHERE YOU WILL FIND OUR PRODUCTS
Our consumer product portfolio extends across a range of dairy
products, including standard and fortified milks, cheese, butter
and cream, and a range of chilled soups. We also produce long-life
liquid milk and cream for export to markets such as China, Europe
and the Middle East. Agribusiness has a network of over 50 retail
stores focused on the Irish agriculture sector.
WHERE YOU WILL FIND OUR PRODUCTS
Glanbia Ingredients Ireland (GII) is a supplier of dairy ingredients
to key global customers including the infant formula, clinical
nutrition and food and beverage sectors. Glanbia Cheese is the
#1 mozzarella producer in Europe. Cheese and dairy products
produced by Southwest Cheese are all commercialised by
Global Ingredients.
MAKING LIFE
HEALTHY
HEALTH AND WELLBEING
Today’s consumers are increasingly aware of the importance
of nutrition in improving their overall health and wellbeing.
We are searching for better, healthier and smarter nutritional
ingredients and solutions that fit our lifestyles. A desire for improved
health and physical wellness is driving the demand for functional
and nutritional foods and beverages that are high in fibre and
protein or fortified with dairy and non-dairy ingredients.
HOW ARE WE ADDRESSING THIS TREND?
Our range of ingredients, solutions and premixes in
Global Ingredients and Joint Ventures & Associates plus our
branded consumer products in Glanbia Performance Nutrition
and Dairy Ireland tap into the demands of health conscious
consumers. We are at the forefront of the development of whey
as an important protein ingredient in food and nutrition.
Read more about our operations on pages 18 to 23.
88%
OF CONSUMERS
GLOBALLY ARE WILLING
TO PAY MORE FOR
HEALTHIER FOODS
Source: Nielsen’s 2015 Global
Health & Wellness Survey
MAKING LIFE
ACTIVE
ACTIVE LIFESTYLES
Fitness is no longer an occasional activity: it’s now a lifestyle
choice. A growing focus on active lifestyles, and a greater
understanding of the link between diet, exercise and health is
driving strong demand for sports nutrition products in convenient
formats. Active lifestyles are lived at various levels of intensity.
HOW ARE WE ADDRESSING THIS TREND?
Our sports nutrition products target all fitness levels; from the
casual user to the high performance athlete. Our products appeal
to the heightened desire for tailor-made nutritional solutions that
support an active lifestyle. As a supplier of high quality ingredients,
Global Ingredients enables our customers to deliver nutritional and
functional products to their consumers. In our Glanbia Performance
Nutrition business, our brands are market leading and inspire our
consumers to achieve their fitness goals.
Read more about our operations on pages 18 to 23.
Millennials:
THE MOST PHYSICALLY
ACTIVE GENERATION –
MOVING FITNESS
FROM A TREND TO
A TIPPING POINT
Source: Generation Next Millennials –
Bank of America Merrill Lynch May 2015
MAKING LIFE
SIMPLE
EASY, CONVENIENT
AND ON-THE-GO
Busy lifestyles are driving consumers away from traditional meals
towards quick convenient foods and eating out. Convenient foods,
drinks and snacks with clean nutritional profiles are the most
sought after meal replacement products.
HOW ARE WE ADDRESSING THIS TREND?
In Global Ingredients we produce a large portfolio of nutrition
enriched food and beverage systems and functional ingredients
for use in the bakery, beverage, snack bar, dairy and foodservice
markets. Our capabilities range from producing ‘straight’
ingredients to bespoke blends. Additionally, our product offerings,
across Glanbia Performance Nutrition and Consumer Products
continue to evolve into increasingly convenient formats through
product and packaging innovation.
Read more about our operations on pages 18 to 23.
51%
OF CONSUMERS
SNACK AT LEAST
THREE TIMES A DAY
Source: Insights now – 2014 Meal
Replacement Study: 5 Mega-Trends
MAKING LIFE
SAFE
CLEAN LABELLING
Consumers are becoming more aware and interested in what is
in their food. They have a growing desire for natural, sustainable
ingredients with clear and understandable information about
what a food product contains. They are demanding greater
ingredient authenticity and transparency in the foods that they
purchase and there is a growing trend towards minimally
processed, clean label food and beverage products.
HOW ARE WE ADDRESSING THIS TREND?
We address the demand for product and ingredient safety and
origin by producing clean label, natural ingredients. Our Isopure
brand delivers protein with little or no fat or carbohydrates.
Glanbia Agribusiness operates an Oatsecure closed-loop
supply chain process, which produces functional and
nutritional oats (‘Oatpure’) that are guaranteed gluten-free.
In Ireland we operate a milk quality assurance
programme – Open Source Dairy.
Read more about our sustainability programme on pages 28 to 30.
85%
OF CONSUMERS
SEEK CLEAN LABELS
WHEN THEY ARE
PURCHASING FOOD
Source: Mintel 2015
Food and Drink Trends
MAKING LIFE
BETTER
Key topics
in 2015
STRATEGY
Our vision is to be one of the world’s top performing nutrition
companies trusted to enrich lives every day. Our strategic
objective is to maximise total returns to shareholders.
Read more about our strategic priorities and targets.
READ MORE ON PAGES 6 TO 13
PERFORMANCE
We have leading market positions in performance nutrition,
cheese, dairy ingredients and nutritional systems and
precision premixes.
Read our commentary on the Group’s operating performance.
READ MORE ON PAGES 14 TO 23
PEOPLE
Our diverse and talented employees are key to our success.
Find out what the Group is doing to create a great workplace
where people feel engaged and inspired to do their best work.
READ MORE ON PAGES 24 TO 27
STRATEGIC REPORT
Group Chairman’s statement
Business model
Strategy
Key performance indicators
Group Managing Director’s review
Group Finance Director’s review
Operations review
Our people
Sustainability review
Risk management
02
04
06
08
10
14
18
24
28
32
DIRECTORS’ REPORT
Group Chairman’s introduction to governance 40
Governance overview
Board of Directors and senior management
Audit Committee report
Nomination and Governance
Committee report
Remuneration Committee report
UK Corporate Governance Code
and ISE Annex
Other statutory information
Statement of Directors’ responsibilities
FINANCIAL STATEMENTS
Independent Auditors’ report
Group financial statements
Company financial statements
Notes to the financial statements
OTHER INFORMATION
Glossary of KPIs and non-IFRS
performance measures
Shareholder information
Contacts
43
48
55
61
66
84
86
90
93
98
103
106
170
173
176
Glanbia plc
Annual Report and Accounts 2015
01
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GROUP CHAIRMAN’S STATEMENT
Global
Growth
“It is a testament to the strength of our
business model and the commitment of
our employees that we achieved a sixth
consecutive year of double digit growth
in earnings in 2015.”
HENRY CORBALLY
Group Chairman
HIGHLIGHTS OF 2015
l Strong performance and delivery
of shareholder value;
l Investment in people development
and talent management;
l Renewed purpose, vision and values
for the Group;
l Agreed further planned reduction
in Board composition; and
l Positive outlook for 2016.
02
Glanbia plc
Annual Report and Accounts 2015
STRATEGIC REPORT SHAREHOLDER ANALYSIS
Institutional
North America
UK
Rest of World
Other
Retail
Glanbia Co-op Society
12.6%
14.8%
8.9%
27.2%
36.5%
DEAR SHAREHOLDER,
It is a genuine privilege to have been appointed
Group Chairman of Glanbia plc.
We live in an age where consumer attitudes to
nutrition and food are changing rapidly. Busy
lifestyles and a growing focus on health and
wellbeing are driving demand for convenient,
nutritionally-enriched foods that provide health
benefits beyond just basic nutrition. Our vision
to be one of the world’s top performing nutrition
companies, trusted to enrich lives every
day, commits us to growing our business by
addressing these health and nutrition trends.
STRONG PERFORMANCE
It is my particular pleasure, in my first year as
Group Chairman, to report another strong set
of results for Glanbia plc.
Group revenue grew from €2.5 billion to
€2.8 billion. Group EBITA increased 29.9%
to €271.0 million (10.5% constant currency).
Growth in adjusted earnings per share was
29.4% (10.6% constant currency). This is the
sixth consecutive year of double digit earnings
growth (constant currency) which is an excellent
achievement by any standard.
It has been a year of further progress –
strategically, operationally and financially,
despite challenging dairy markets. There is,
however, no room for complacency and we
continue to develop our two global growth
platforms – Glanbia Performance Nutrition
(GPN) and Global Ingredients (GI) – which
together accounted for 89.4% of wholly
owned 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. Our executive and
senior management incentive programmes
are also linked to TSR, aligning the Glanbia
long-term incentive plan with shareholder
interests. The share price rose 32.3% to end
the year at €16.95. TSR for 2015 was 33.2%,
following returns of 16.9% in 2014 and 35.4% in
2013. This three-year performance reflects the
benefits of the Group’s growth strategy and the
focus on our global growth platforms.
GOVERNANCE AND BOARD CHANGES
A strong governance structure is one of the
principal features that underpins the continued
expansion of our business. Critical to the
success of the business is ensuring we maintain
a breadth and balance of skills to suit both the
existing business and support future growth.
I would like to take this opportunity to pay tribute
to my predecessor Liam Herlihy, who retired
as Group Chairman and a director in June.
Liam’s depth of experience and knowledge of
the Group provided strong and focused Board
leadership. I would like to thank him and wish
him and his family the very best for the future.
Three Non-Executive Directors nominated
by Glanbia Co-operative Society Limited
(‘the Society’); David Farrell, Patrick Gleeson
and Bill Carroll, also retired from the Board
during the year. I thank them for their excellent
contribution and commitment over the
course of their tenure.
Following my appointment as Group Chairman,
Patrick Murphy was appointed Group Vice-
Chairman. Patsy Ahern, Jim Gilsenan, Patrick
Hogan and Tom Grant were also appointed
to the Board as nominees of the Society.
During the year, the Society members approved
the sale of four million Glanbia plc shares – the
equivalent of 1.35% of the plc – and the spin-
out of a further 10 million shares or 3.38% of the
plc to over 15,500 individual Society members.
This has reduced the Society’s stake in Glanbia
plc from 41.2% to 36.5% and the Society’s
board retains the discretion to reduce its
holding to 33% in the future.
representation on the Board of Glanbia plc
will reduce from the previously agreed eight
members to seven members in 2020.
PROGRESSIVE DIVIDEND
The Board is recommending a final dividend of
7.22 cent per share bringing the total dividend
for 2015 to 12.1 cent per share, representing an
increase of 10%. The Annual General Meeting
(AGM) will be held on 27 April 2016 in the Lyrath
Estate Hotel, Old Dublin Road, Kilkenny, Ireland.
Subject to approval at the AGM, dividends will
be paid on 29 April 2016 to shareholders on the
register of members as of 18 March 2016. Irish
withholding tax will be deducted at the standard
rate where appropriate.
OUR PEOPLE
Glanbia’s continued success owes a great deal
to the outstanding efforts of a very talented
global workforce.
At the end of 2015 Glanbia employed over
6,000 people worldwide, an increase of 3.4%
during the year. Through their efforts, the Group
has continued to grow and serve the needs of
our valued customers and consumers.
POSITIVE 2016 OUTLOOK
In closing, I would like to thank the Board, the
Glanbia management team and all our employees
for their continuing hard work and commitment.
Our significant scale and broad geographical
exposure, as well as our strong understanding of
the industry and how it is evolving, ensures we
are well-positioned for future growth.
The outlook for 2016 is positive and our
full year guidance is 8% to 10% growth in
adjusted earnings per share, constant currency.
In addition, the ambitious strategic targets we
set ourselves to 2018 remain on track.
As a consequence of this further reduction in
the Society’s holding in the plc, the Society’s
HENRY CORBALLY
Group Chairman
Glanbia plc
Annual Report and Accounts 2015
03
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT BUSINESS MODEL
creating
value through
nutrition
OUR VISION
TO BE ONE OF THE WORLD’S TOP
PERFORMING NUTRITION COMPANIES,
TRUSTED TO ENRICH LIVES EVERYDAY
WHAT WE DO AND HOW WE ADD VALUE
CLEAN INGREDIENTS, EXPERTISE
AND CAPABILITIES
HOW WE DO IT BETTER
OUTSTANDING PEOPLE,
PROCESSES AND SYSTEMS
We take pure and clean ingredients including milk,
whey and grains, and using our expertise and
capabilities produce high-quality nutritional
ingredients and branded consumer products
for our customers and consumers worldwide.
Our deep sector knowledge, our collaborative
approach and our innovative thinking enables us to:
• Develop and commercialise specialty nutritional and
functional ingredients;
• Be the world leading performance nutrition company; and
• Identify trends and collaborate closely with customers and
consumers to co-create and co-develop product solutions
that meet consumer needs.
Our capabilities are wide ranging and include the
deployment of our global talent to deliver best in
class portfolio management, brand management,
operational excellence, science-backed innovation
and strong customer relationships supported by
a well invested asset infrastructure.
We create sustainable value for all our stakeholders:
our shareholders, our suppliers, our employees,
our customers and our communities.
OUR VALUE CHAIN
BASE INGREDIENTS
Global Ingredients and our key strategic Joint Ventures &
Associates process circa six billion litres of milk in Ireland, the
UK and the US. This gives us a unique raw material supply
chain, sustainable and traceable, which is a key differentiator for
our customers and their consumers. Our processing capability
provides us with captive large scale whey volumes: a critical
raw material for higher value specialty ingredients, nutritional
and functional systems and performance nutrition products.
SPECIALTY INGREDIENTS
We are at the forefront in developing whey as a key protein
ingredient in food and nutrition. Today, Glanbia is the leading
global manufacturer, marketer and user of whey protein
fractions and isolates. We complement our dairy ingredient
expertise with a portfolio of non-dairy and other specialty
ingredients, such as grains and vegetable proteins, which
gives us greater market reach and customer relevance.
04
Glanbia plc
Annual Report and Accounts 2015
O
U
R
P
E
O
P
L
E
S
R
E
H A REHOLD
R S
O U
STRATEGIC REPORT
O U R COMMUNITY
OUR
FOCUS
NUTRITION
OUR
MARKETS
NUTRITIONAL MEGATRENDS
+ CONSUMER NEEDS
OUR
INPUTS
RAW INGREDIENTS + EXPERTISE
& CAPABILITIES
O
U
R
P
E
O
P
L
E
OUR
OUTPUTS
HIGH QUALITY NUTRITIONAL AND
FUNCTIONAL INGREDIENTS + BRANDED
CONSUMER PRODUCTS
S
R
E
H A REHOLD
R S
O U
NUTRITIONAL INGREDIENT SOLUTIONS AND SYSTEMS
We combine a range of own and bought-in ingredients to
create ingredient systems which can provide both nutritional
and functional benefits to food. We also have the capability to
innovate and develop full turn-key nutritional ingredient solutions
for our customers, independently or collaboratively. We supply
to key market segments including performance nutrition,
mainstream food and beverage markets and the clinical and
infant nutrition industry. These are all higher growth market
segments, which are being driven by changing global consumer
trends and demographics.
CONSUMER BRANDS
Our leading performance nutrition brand family comprises
protein, energy, performance and recovery products and
general health supplements, which are available in multiple
formats and channels in the US and other markets around
the world. We also have some of the leading Irish consumer
food and agribusiness brands. While Glanbia Performance
Nutrition has our leading brand portfolio, our range of consumer
products in Dairy Ireland demonstrates that there is potential
for moving up the value chain across the Group.
Glanbia plc
Annual Report and Accounts 2015
05
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT
OUR STRATEGY
Maintaining
a strong posITion
STRATEGIC OBJECTIVE
TO MAXIMISE
TOTAL RETURNS TO
SHAREHOLDERS
PRIORITY
MAINTAIN AND GROW OUR
GLOBAL LEADERSHIP IN
PERFORMANCE NUTRITION
2016 TO 2018
STRATEGIC TARGETS
We have defined a clear set of strategic
priorities and targets in order to achieve
our 2018 ambitions.
Our 2016 to 2018 strategic targets are:
• To maintain annual growth in adjusted
earnings per share of 8% to 10%,
constant currency; and
• To maintain a return on capital employed
of over 12%.
KEY PERFORMANCE INDICATORS
We monitor our long-term progress by
measuring growth or improvement in seven
key performance indicators (KPIs). These
KPIs have been identified by the Board as
the most relevant to delivering the Group’s
strategy and objectives. See pages 8 to 9
for more on our KPIs.
SUSTAINABILITY
We seek to maintain a strong position
on key sustainability issues in our sector
including the environment, regulatory
compliance, supply chain and food
safety. See pages 28 to 31 for more
about sustainability.
PRIORITY
SUSTAIN CURRENT AND DRIVE
FURTHER MARKET LEADERSHIP
IN NUTRITIONAL AND
FUNCTIONAL INGREDIENTS
PRIORITY
GROW THROUGH ORGANIC
INVESTMENT PROGRAMME AND
ACQUISITION/PARTNER WITH
COMPLEMENTARY BUSINESSES
PRIORITY
DEVELOP TALENT, CULTURE
AND VALUES IN LINE WITH
OUR GROWING GLOBAL SCALE
06
Glanbia plc
Annual Report and Accounts 2015
STRATEGIC REPORT 2015 PROGRESS
• Further consolidated our position as a leading performance
2016 TARGETS
• Deliver branded revenue growth ahead of the market, addressing
nutrition brand family with the acquisition, in December 2015,
of thinkThin – a US based provider of protein-enriched bars
and snacks;
specific challenges in certain international markets;
• Accelerate consumer-insight led innovation across new formats
and channels; and
• Achieved channel expansion through branded revenue
• Leverage thinkThin’s platform for healthy snacks and bars
growth especially in the US; and
throughout the rest of Glanbia Performance Nutrition (GPN).
• Successfully integrated Isopure, a provider of performance
nutrition products, acquired in 2014.
2015 PROGRESS
• Maintained our leadership positions in American-style
cheddar cheese and whey-based nutritional solutions
in Global Ingredients (GI);
• Delivered strong growth in nutritional and functional dairy
solutions, particularly in the nutrition bar sector; and
• Commenced the organisational redesign of Gl.
2016 TARGETS
• Deliver earnings growth through further progression in value
added ingredients;
• Drive innovation in our functional ingredients across key growth
sectors; and
• Complete organisational redesign and leverage commercial and
strategic capabilities to deliver our customers’ requirements.
2015 PROGRESS
• Completed strategic capital expenditure programme of
€86.2 million including the investment in high-end whey
production facility in Idaho, US and Performance Nutrition
packing capability expansion in Chicago, US;
• Acquired thinkThin for €202 million in December; and
• Commissioned new €235 million dairy facilities in our associate
Glanbia Ingredients Ireland (GII) to facilitate an increase in milk
throughput, following the abolition of EU quotas in 2015.
2016 TARGETS
• Successfully complete capital expenditure programme
of €115 million to €125 million;
• Continue to develop an acquisition pipeline to grow our portfolio
across the performance nutrition and ingredients sectors; and
• Finalise agreements for the 25% capacity expansion investment
in our cheese and whey facility in Southwest Cheese, Clovis,
New Mexico, US.
2015 PROGRESS
• Completed first global employee engagement survey and
commenced initiatives to address issues raised;
2016 TARGETS
• Embed values and behaviours across the Group;
• Develop leadership talent programme to secure pipeline of our
• Renewed the Group’s purpose, vision and values and identified
next generation of leaders; and
core behaviours to deliver same; and
• Renew focus on career development and succession planning.
• Completed comprehensive organisation and people talent
review of top leaders.
Glanbia plc
Annual Report and Accounts 2015
07
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC 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.
Definitions of Key Performance Indicators are contained in the glossary
on pages 170 to 172.
REVENUE
(€bn)
€2.8bn
EBITA 1
(€m)
€271.0m
EBITA MARGIN
(%)
9.8%
3.0
2.5
2.0
1.5
1.0
0.5
0
300
250
200
150
100
50
0
10
8
6
4
2
0
2.8
2.5
2.4
2.2
1.9
2011
2012
2013
2014
2015
271.0
208.6
187.7
175.8
141.3
2011
2012
2013
2014
2015
9.8
8.0
7.9
8.2
7.3
2011
2012
2013
2014
2015
STRATEGIC RELEVANCE
While movements in commodity
dairy markets can influence revenue
movements in a specific year,
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 2015, revenue was €2.8 billion,
up 9.3% reported, a decline of
3.6% constant currency on 2014.
Constant currency revenue growth
in Glanbia Performance Nutrition
and Dairy Ireland was offset by a
decline in Global Ingredients as
a result of lower global dairy
market prices.
STRATEGIC RELEVANCE
EBITA is a measure of the trading
profitability of the Group, excluding
intangible asset amortisation.
The exclusion of intangible asset
amortisation aids comparability
between our segments that have
grown organically and those that
have grown by acquisition.
PERFORMANCE
EBITA was €271.0 million in
2015 up 29.9% reported and up
10.5% constant currency on 2014.
Strong performances in Glanbia
Performance Nutrition and Dairy
Ireland were offset by a constant
currency decline in EBITA in Global
Ingredients caused by challenging
global dairy markets in 2015.
STRATEGIC RELEVANCE
The Group has a portfolio of
businesses with a range of EBITA
margins. Long-term improvement
in EBITA margin demonstrates
how the Group’s strategy to focus
on higher growth, higher margin
products and segments is being
successfully implemented.
PERFORMANCE
EBITA margin in 2015 was 9.8%,
up 160 basis points reported,
up 130 basis points constant
currency, on 2014. EBITA margin
increased in all segments, with
particularly strong increase in
Glanbia Performance Nutrition, due
to improved product mix, operating
leverage and input cost reductions.
1. Performance condition of Glanbia’s Annual Incentive Scheme.
2. Performance condition of Glanbia’s Long Term Incentive Plan.
08
Glanbia plc
Annual Report and Accounts 2015
STRATEGIC REPORT 79.14
61.16
55.46
51.34
40.34
2011
2012
2013
2014
2015
281.4
206.2
139.0
123.0
112.3
2011
2012
2013
2014
2015
14.1
14.2
13.9
13.4
12.8
2011
2012
2013
2014
2015
ADJUSTED
EARNINGS
PER SHARE 1,2
(€ cent)
79.14c
OPERATING
CASHFLOW 1
(€m)
€281.4m
RETURN
ON CAPITAL
EMPLOYED 2
(%)
13.9%
TOTAL
SHAREHOLDER
RETURN 2
Glanbia
100
80
60
40
20
0
300
250
200
150
100
50
0
15
12
9
6
3
0
600
500
400
300
200
100
STOXX Europe 600 F&B Index
0
2010
2011
2012
2013
2014
2015
STRATEGIC RELEVANCE
Adjusted earnings per share
(EPS) is an important measure of
the profitability of the Group as it
represents the underlying profit
of the Group per equity share in
issue. The Group has set a target
of achieving annual growth in
adjusted EPS of 8%-10%,
constant currency, to 2018.
PERFORMANCE
Adjusted EPS was 79.14 cent,
up 29.4% reported, 10.6%
constant currency on 2014. This
is in line with market expectations
and is the sixth consecutive year
of double digit constant currency
EPS growth. The compound
annual growth rate in constant
currency adjusted EPS from
2011 to 2015 was 18.3%.
STRATEGIC RELEVANCE
Operating cashflow 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
trading profits to cash, which is then
available for strategic investments
and dividend payments.
PERFORMANCE
Operating cashflow was €281.4
million, up €75.2 million on 2014,
a 16.6% increase, constant
currency. Increased earnings
and continued management of
working capital were the main
contributors to this increase.
STRATEGIC RELEVANCE
Return on Capital Employed
(ROCE) measures the efficiency of
the Group’s organic and acquisition
investment programmes as well
as the utilisation of its assets. The
strategic target is to maintain
a minimum ROCE of 12%.
PERFORMANCE
ROCE for 2015 was 13.9%
compared to 13.4% in 2014.
This increase is primarily driven
by the growth in reported EBITA
including the impact of currency,
somewhat offset by the dilutive
effect of recent acquisitions.
PERFORMANCE
Glanbia’s TSR in 2015 was
33.2% (2014: 16.9%). Five year
TSR of 387% out-performed the
STOXX Europe 600 Food and
Beverage (F&B) Index by 283%.
STRATEGIC RELEVANCE
Total Shareholder Return (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, compared with its
peers for the same time period.
Note: Following reassessment of its KPIs during 2015, the Group no longer views Net debt : adjusted EBITDA
as a KPI and has replaced Total Group Revenue and Total Group EBITA with the equivalent wholly-owned measures.
Glanbia plc
Annual Report and Accounts 2015
09
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GROUP MANAGING DIRECTOR’S REVIEW
Delivering
a strong
performance
“2015 was a very good year at Glanbia.
We achieved strong earnings and cash
growth and delivered on our capital
investment and acquisition programmes.”
SIOBHÁN TALBOT
Group Managing Director
2015 STRATEGIC HIGHLIGHTS
l Delivery of 2015 financial growth targets;
l Successful execution of the thinkThin
acquisition in our Performance Nutrition
brand portfolio;
l Completion of significant organic investment
programme within Global Ingredients (GI)
and commencement of the reorganisation
of GI into one global organisation;
l Delivery of the Group capital investment
programme of €123.6 million, plus
commissioning of the €235 million investment
in dairy processing facilities in Ireland by our
associate Glanbia Ingredients Ireland (GII);
l Strong innovation execution with an exciting
array of new product developments across
both our ingredient and branded portfolios;
l Renewed Group purpose, vision and values;
and
l Launched major employee engagement and
talent development initiatives.
10
Glanbia plc
Annual Report and Accounts 2015
STRATEGIC REPORT NUMBER OF EMPLOYEES
6,015
Glanbia Performance Nutrition 1,598
1,781
Global Ingredients
1,251
Dairy Ireland
1,385
Joint Ventures & Associates
Q: HOW DID GLANBIA PERFORM IN 2015?
A: We had a strong year overall and are pleased
that we sustained our growth momentum into
2015. We made good progress against our
strategic priorities and this enabled us to
achieve a reported growth in adjusted earnings
per share of 29.4%. From a management
perspective we focus on the performance of
the business excluding the impact of currency
translation and on a constant currency basis
delivered 10.6% adjusted earnings per share
growth. This was our sixth consecutive year of
double digit constant currency growth. We also
achieved a return on capital employed of 13.9%,
thereby delivering on our two key strategic
performance metrics.
As in any business of our scale, there were
lots of opportunities and challenges during
the course of the year. It is a real testament
to the resilience of the Glanbia model and the
natural portfolio hedges within the Group, that
we sustained our growth despite challenging
conditions in global dairy markets. We have a
strong portfolio of nutritional ingredients and
branded products and we believe that our deep
sector knowledge provides us with a unique
opportunity to capitalise on key growth trends in
the nutrition industry. We are ambitious and will
continue to invest to sustain this momentum.
Q: WHAT WERE THE MAIN GROWTH
DRIVERS?
A: Our performance was underpinned by
another year of strong growth in Glanbia
Performance Nutrition (GPN) with EBITA up
28.3%, constant currency and margins at 14.7%
up 250 basis points, constant currency. GPN
maintained the strong pace observed in recent
years. We saw renewed branded revenue
momentum in our core market in the US and
while there were undoubtedly currency related
challenges in certain other geographies, the
strength of our product portfolio resulted in
good growth in overall branded revenue and
a strong improvement in margins in the year.
Our recently acquired Isopure brand performed
well in 2015. We also completed the acquisition
of the US based snack bar business – thinkThin
– a brand that very much complements our
existing GPN portfolio.
In addition, we saw a recovery of margins in
Dairy Ireland by 140 basis points to 4.5%. Our
decision in recent years to sustain investment
levels both in our leading brands and in the
infrastructure of the business delivered returns
and we saw revenue growth and margin
recovery in that segment of the business.
Q: WHAT ARE YOUR THOUGHTS ON THE
CHALLENGES IN GLOBAL INGREDIENTS?
A: Global Ingredients (GI) experienced a
challenging market environment in 2015 as a
consequence of difficult US and global dairy
markets. This resulted in an 11.6% EBITA
decline, constant currency, while margins
at 8.8% were up 20 basis points constant
currency. While we have a robust pricing model
in our dairy operations, which gives us a strong
element of margin protection, the pace and
scale of US and global dairy market pricing
declines resulted in margin pressures in the
dairy side of our GI business. However, the
team had a number of significant successes
in 2015. We continue to invest in our strategy
of adding value to our whey streams and
completed the high-end whey investment in
our Idaho plant during the year. This investment
has further enabled the development, with our
customers, of our nutritional and functional dairy
solutions. We had particular success in 2015
in the bar sector in the US and equally, on the
non-dairy side, our Customised Solutions
business and our emerging platforms such
as grains and vegetable proteins are all
developing well with good revenue growth.
Q: TELL ME ABOUT THE ORGANISATION
REDESIGN OF GLOBAL INGREDIENTS
(GI)?
A: The organisational redesign of GI has been
an exciting project in 2015 which will continue
into 2016. Essentially this programme will result
in the reorganisation of the business into one
global GI organisation from the existing three
current business units: US Cheese, Ingredient
Technologies and Customised Solutions.
This allows us to leverage our current strengths
to seamlessly deliver the full suite of Glanbia’s
product, service and innovation capability to
our customers. In practical terms we will have
a redesigned commercial organisation, focused
on driving our cheese and nutritional ingredient
portfolio, aligned with clear product strategies
and supported by centres of excellence across
areas such as product supply, innovation and
strategy. These exciting changes will enable us
to be an innovative agile insight-led organisation,
very much aligned to customer requirements
and consumer trends.
Q: WHAT ABOUT STRATEGIC JOINT
VENTURES & ASSOCIATES IN 2015?
A: Our strategic Joint Ventures & Associates
progressed well in 2015. The JV model is
one which we are very comfortable with,
we see it as very complementary to our Global
Ingredients business. Clearly, as our Joint
Ventures & Associates are predominantly large
scale dairy businesses, market conditions were
challenging but overall the businesses delivered
extremely well against their strategic plans.
Glanbia Cheese had a solid year with continued
volume growth with key customers.
The commissioning of the Belview facility in
Glanbia Ingredients Ireland (GII) was a milestone
for the Group and our Irish suppliers. Following
the abolition of EU milk quotas in May 2015,
the collective ambition of the business and our
Irish suppliers was demonstrated by a 18.1%
increase in milk supplied by GII suppliers in
the year.
We also continue to have a very strong
partnership with Milk Member, LP in Southwest
Cheese and were pleased to announce plans
for a 25% expansion of our cheese and whey
facility in Clovis, New Mexico by 2018.
Glanbia plc
Annual Report and Accounts 2015
11
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GROUP MANAGING DIRECTOR’S REVIEW CONTINUED
“WE DELIVERED ON OUR PERFORMANCE METRICS,
WITH ADJUSTED EARNINGS PER SHARE GROWTH
OF 10.6% CONSTANT CURRENCY, OUR SIXTH
CONSECUTIVE YEAR OF DOUBLE DIGIT GROWTH,
AND RETURN ON CAPITAL EMPLOYED OF 13.9%.”
SIOBHÁN TALBOT
Group Managing Director
base. For years, the category was a niche
offshoot of supplements, catering largely to
elite athletes and bodybuilders.
However, with the recent rising profile of protein
as a healthy ingredient and the ever increasing
focus on nutrition, health and wellbeing, the
category has begun to attract more mainstream
fitness consumers.
As an ingredients provider, our nutritional
ingredient solutions help us exploit emerging
cheese and ingredient opportunities. For
example, our protein systems have transformed
the bar and beverage categories over several
years by facilitating increased levels of protein,
cleaner labels and greater product functionality.
In 2015, we further expanded our protein
systems portfolio to include a range of non-
dairy protein such as pea protein.
For more information on key macro trends
find out more in our booklet.
a Global
nutrition
Group
OUR PURPOSE:
Delivering better nutrition for
every step of life’s journey.
OUR VISION:
To be one of the world’s top
performing nutrition companies
trusted to enrich lives every day.
During the year we sold our interest in the
Nigerian-based Nutricima joint venture to our
partner PZ Cussons plc, but retain a strong
commercial relationship with this business as
a route to market in West Africa for ingredients
from our GII business.
Q: HOW IS GLANBIA’S STRATEGY
PROGRESSING?
A: We made excellent progress on our strategic
ambitions in 2015.
We retained our market leadership position
in nutritional and functional ingredients with
particularly strong growth in the nutritional bar
sector. Our non-dairy protein business such
as grain and vegetable proteins also continued
to gain traction.
One of our main strategic priorities is to grow
our business through organic investment
and acquisition/alliance with complementary
businesses.
Our acquisition of the US snack bar business
thinkThin and the launch of trusource will enable
us to expand our consumer and channel reach.
We launched trusource in Q4 2015 and this is
our first entry into the US mass retail channel,
aimed at lifestyle consumers.
In 2015, our total investment in capital
expenditure was €123.6 million, of which €86.2
million was strategic investment, reflecting our
ongoing focus on the organic growth potential
of the business. The key projects undertaken
in 2015 include the significant investment in Gl
high end whey production facility in Idaho, US
and the further expansion of our Performance
Nutrition packing capability in Chicago, US.
Last year was also a year of significant progress
in terms of unlocking the potential of our people
and global talent development in Glanbia. We
placed particular focus on a comprehensive
review of our top talent and succession to
ensure a healthy pipeline of future leaders
and to identify their development needs.
12
Glanbia plc
Annual Report and Accounts 2015
We also refreshed the Group’s purpose,
vision and values and developed a set of core
behaviours that will underpin how our teams
live these values.
At the heart of our strategy is our purpose of
delivering better nutrition for every step of life’s
journey and ultimately we will measure our
success through the delivery of our vision: to
be one of the world’s top performing nutrition
companies, trusted to enrich lives every day.
Q: WHEN YOU TALK ABOUT BEING
DRIVEN BY KEY NUTRITIONAL
CONSUMER TRENDS, WHAT DOES
THAT MEAN?
A: Consumer attitudes towards food, nutrition
and wellbeing are continuously evolving. The
challenge and opportunity for Glanbia is to
respond to the ever-changing needs of our
customers and ultimately our consumers. This
requires a strategic approach to innovation,
investments and acquisitions and it also
requires agile and collaborative relationships
with our key customers and consumers.
Through innovation and in particular our strong
partnerships with key customers we identify
how we can best address and respond to
consumer trends and stay at the forefront of the
food and nutrition industry. Therefore our unique
portfolio of performance nutrition brands and
nutritional ingredients are right at the heart of
emerging growth opportunities.
Our product range spans from cheese, functional
ingredients and nutritional solutions to consumer
branded products.
Our GPN brands inspire our consumers to
achieve optimal energy, focus and endurance,
in easy and convenient formats such as powder,
Ready-To-Drink (RTD) beverages, bars and
supplements.
Over the last number of years, one of the
biggest shifts seen in the performance nutrition
sector is the rapid expansion of its demographic
STRATEGIC REPORT OUR GLANBIA
UNITED BY OUR PURPOSE,
VISION AND VALUES
In 2015, we refreshed the Group’s purpose, vision
and values to better reflect our global scale, diverse
customer and consumer base and growth strategy.
Q: WHAT IS THE OUTLOOK FOR 2016?
A: Our outlook for 2016 is to sustain our growth
and we are guiding growth in adjusted earnings
per share of 8% to 10%, constant currency.
The growth profile of Glanbia will continue to be
a blend of organic growth through innovation
and strategic capital investment and acquisition.
We have an active development pipeline and will
look for opportunities to invest in complementary
technologies, ingredients and brands that extend
our customer and consumer reach.
In terms of our individual segments, we are
ambitious to continue the momentum in our
two key global platforms and believe that the
prospects are positive for Glanbia Performance
Nutrition and Global Ingredients for 2016.
Dairy Ireland and Joint Ventures & Associates
are expected to be broadly in line with 2015
performance.
While there are challenges in the global
economic and dairy market landscape, we
believe that our market leading positions and
strong execution skills will sustain our growth
momentum in 2016.
SIOBHÁN TALBOT
Group Managing Director
OUR PURPOSE: DELIVERING BETTER
NUTRITION FOR EVERY STEP OF
LIFE’S JOURNEY.
OUR VISION: TO BE ONE OF THE
WORLD’S TOP PERFORMING
NUTRITION COMPANIES TRUSTED
TO ENRICH LIVES EVERY DAY.
OUR VALUES: Our values describe the
behaviours that are important to us in
Glanbia. They provide us with a framework
for how we do business, guiding the way
we work with each other, our customers,
stakeholders and within our communities.
As a business, it is the trust we build with
all our stakeholders that is most important
to us.
First, we are the Customers’ Champion.
It is this value that means our customers
and consumers don’t just choose us once,
but rely on us delivering for them time
and again.
Our commitment to quality, consistency,
safety and more, demonstrates that only
the highest standards of Performance
Matters to us. We’re not just delivering
better nutrition, but delivering it better
every day.
It’s this drive to constantly improve on our
performance that has led us to innovate
and collaborate to Find a Better Way to
do things throughout our history. It has
fuelled acquisitions, partnerships, new
product launches and smarter ways of
working. It’s essentially a mindset: it’s in
our DNA.
Naturally these values mean that we
expect a lot of our people, every day. But
we’ve plenty to offer in return. Nurturing
individuals for their talent is a part of this,
but so is encouraging every opportunity
to work together across Glanbia. Winning
is great, but Winning Together is far
more rewarding.
Showing Respect underpins everything
we do – caring for our people and our
planet is at our core and is embedded in
the fabric of Glanbia. It builds a better future
for everyone and is vital for our success.
Glanbia plc
Annual Report and Accounts 2015
13
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GROUP FINANCE DIRECTOR’S REVIEW
strong
CASHFLOW
AND MARGIN
EXPANSION
MARK GARVEY
Group Finance Director
FULL YEAR 2015 RESULTS HIGHLIGHTS
l Adjusted earnings per share 79.14 cent, up
10.6% constant currency (up 29.4% reported);
l EBITA in the wholly owned business
€271.0 million, up 10.5%, constant currency
(up 29.9% reported);
l EBITA margins in the wholly owned business
9.8%, up 130 basis points, constant currency
(up 160 basis points reported);
l Strong result from Glanbia Performance
Nutrition with EBITA of €135.6 million,
a 28.3% increase, constant currency
(up 52.0% reported);
l Global Ingredients delivered a resilient
result in difficult dairy markets with EBITA
of €106.6 million, an 11.6 % decrease,
constant currency (up 6.2% reported);
l Dairy Ireland EBITA of €28.8 million as
margins recovered to 4.5%;
l Joint Ventures & Associates performed
in line with expectations;
l Operating cashflow improved by
€75.2 million to €281.4 million; and
l Recommended full year dividend
of 12.1 cent per share, an increase of 10%.
14
Glanbia plc
Annual Report and Accounts 2015
STRATEGIC REPORT “OUR STRONG OPERATING CASHFLOW AND
GOOD MARGIN EXPANSION ILLUSTRATES
THE STRENGTH OF OUR GLOBAL BUSINESS
AS WE CONTINUE TO BUILD ON OUR TRACK
RECORD OF DELIVERING DOUBLE DIGIT
EARNINGS GROWTH.”
MARK GARVEY
Group Finance Director
STRONG PERFORMANCE
We are pleased to report another year of double digit growth in earnings
per share (EPS), constant currency, along with a strong wholly owned
EBITA margin of 9.8%. In addition our working capital initiatives across the
Group are facilitating improved cash conversion and we reported strong
double digit growth in operating cashflow, constant currency. These
results enabled us to continue to meet our core strategic financial targets
as we achieved constant currency EPS growth of 10.6% and a return
on capital employed of 13.9%. Along with our strong financial results,
we are also pleased to increase our dividend by 10% to 12.1 cent per
share returning over €35 million to our shareholders.
INCOME STATEMENT
In 2015, wholly owned revenue declined 3.6%, constant currency
(9.3% reported increase) to €2.8 billion (2014: €2.5 billion). EBITA
grew by 10.5% constant currency (29.9% reported) to €271.0 million
(2014: €208.6 million). EBITA margin increased by 130 basis points
constant currency (160 basis points reported) to 9.8%.
Net financing costs increased by €0.8 million to €21.1 million
(2014: €20.3 million). This was driven by the adverse impact of foreign
exchange on translation of US dollar denominated interest and increased
debt due to the net impact of acquisitions, offset somewhat by the
repayment of €39 million cumulative redeemable preference shares in
2014. The Group’s average interest rate in 2015 was 4.0% (2014: 4.4%).
Glanbia operates a policy of fixing a significant amount of its interest
exposure, with 70% of projected 2016 debt currently contracted at
fixed rates.
The 2015 pre-exceptional tax charge increased by €9.0 million to
€37.3 million (2014: €28.3 million). This represents an effective tax rate,
excluding Joint Ventures & Associates, of 17.1% (2014: 17.0%). The Group
anticipates an effective tax rate in 2016 of between 17% and 18%.
The Group’s share of results of Joint Ventures & Associates increased by
€2.6 million to €26.3 million (2014: €23.7 million). Share of results of Joint
Ventures & Associates is an after tax and interest amount.
2015 INCOME STATEMENT (PRE-EXCEPTIONAL)
€m
Revenue
EBITA
EBITA margin
– Amortisation of intangible assets
– Net finance costs
– Share of results of Joint Ventures & Associates
– Income tax
Profit for the year (pre-exceptional)
Constant
Currency
Change
-3.6%
+10.5%
+130bps
2015
2,774.3
271.0
9.8%
(31.1)
(21.1)
26.3
(37.3)
207.8
2014
Change
+9.3%
+29.9%
+160bps
2,538.3
208.6
8.2%
(22.5)
(20.3)
23.7
(28.3)
161.2
SEGMENTAL ANALYSIS
€m
Glanbia Performance Nutrition
Global Ingredients
Dairy Ireland
Total wholly-owned businesses
Joint Ventures & Associates
Total Group
Revenue
923.1
1,218.0
633.2
2,774.3
893.1
3,667.4
2015
2014
EBITA
135.6
106.6
28.8
271.0
39.7
310.7
EBITA %
14.7%
8.8%
4.5%
9.8%
4.4%
8.5%
Revenue
746.2
1,175.4
616.7
2,538.3
984.0
3,522.3
EBITA
89.2
100.4
19.0
208.6
36.4
245.0
EBITA %
12.0%
8.5%
3.1%
8.2%
3.7%
7.0%
For definitions and more information on constant currency and other performance measures see the glossary on pages 170 to 172.
Glanbia plc
Annual Report and Accounts 2015
15
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GROUP FINANCE DIRECTOR’S REVIEW CONTINUED
ADJUSTED EARNINGS PER SHARE
2015
2014
Change
Constant
Currency
Change
Adjusted earnings
per share
79.14c
61.16c
+29.4%
+10.6%
DIVIDEND PER SHARE
The Board is recommending a final dividend of 7.22 cent per share
(2014: final dividend 6.57 cent per share). This represents an increase
of 10% in the year and brings the total dividend for the year to 12.10 cent
per share (2014: 11.00 cent per share) and a return of over €35 million
to shareholders.
Total adjusted earnings per share grew 10.6% constant currency (29.4%
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.
EXCEPTIONAL ITEMS
€m
1. Organisational redesign costs
2. Acquisition integration costs
3. Rationalisation costs
4. Group pension scheme costs
5. Disposal of interest in Joint Venture
Transaction related costs
Exceptional charge pre-tax
Taxation credit
Total exceptional charge
2015
(7.0)
(2.9)
(7.8)
(5.0)
(3.6)
–
(26.3)
2.5
(23.8)
2014
–
–
(6.4)
–
–
(9.6)
(16.0)
1.9
(14.1)
CASHFLOW
€m
EBITDA pre-exceptional
Movement in working capital (pre-exceptional)
Business sustaining capital expenditure
Operating cashflow
Net interest and tax paid
Dividends from Joint Ventures & Associates
Other outflows
Free cashflow
Strategic capital expenditure
Acquisitions
Disposals
Equity dividends
Exceptional costs paid
Cashflow pre-exchange
translation adjustments
Exchange translation adjustments
Net debt movement
The total cash outflow during the year in respect of exceptional charges
was €15.1 million (2014: €16.4 million) of which €7.1 million (2014: €10.8
million) was in respect of prior year exceptional charges. Details of the
exceptional items are as follows:
Net debt at the beginning of the year
Net cash acquired on acquisition
of subsidiary
2015
2014
313.9
4.9
(37.4)
281.4
(33.6)
14.9
(6.7)
256.0
(86.2)
(196.8)
29.0
(33.9)
(15.1)
240.6
8.2
(42.6)
206.2
(57.1)
12.6
(9.1)
152.6
(72.9)
(142.0)
3.2
(30.8)
(16.4)
(47.0)
(33.8)
(106.3)
(31.1)
(80.8)
(137.4)
(510.4)
(374.4)
7.0
1.4
1. Organisational redesign costs relate to the project to create one
integrated Global Ingredients (GI) organisation as described in the
Operations Review. This project will continue for 12 months at a
total cost of approximately €15 million to €20 million.
2. Acquisition integration costs comprise costs incurred by Glanbia
Performance Nutrition relating to restructuring and the redesign
of route to market capabilities in acquired businesses.
3. Rationalisation costs primarily relate to the completion of the
restructuring programme in the Dairy Ireland segment. There was
no related write down of tangible assets in 2015 (2014: €3.2 million).
4. The Group undertook a review of its pension arrangements in 2015
and agreed with the pension trustees to wind up three of its smaller
Irish defined benefit pension schemes. This transaction resulted in
an exceptional charge in the year of €5.0 million. This charge relates
to net losses on settlement of €4.3 million, in accordance with IAS19,
and professional fees of €0.7 million in relation to the transaction.
This settlement reduced the gross retirement benefit obligations
by €60.2 million.
5. On 01 April 2015 the Group disposed of its investment in Milk Ventures
(UK) Limited, which is the parent company of Nutricima Limited, a Joint
Venture business involved in the supply and distribution of evaporated
and powdered milk, based in Nigeria. The disposal of the Group’s
interest resulted in a loss of €3.6 million.
Net debt at the end of the year
(584.2)
(510.4)
Overall free cashflow was €256.0 million in 2015, a strong increase on
€152.6 million in 2014. Operating cashflow increased from €206.2 million
to €281.4 million, representing an increase of 16.6% when the impact of
currency is excluded.
Corporation tax payments in 2015 were €24.4 million lower than the
previous year, primarily due to the availability of accelerated capital
allowances on capital expenditure in the US.
OPERATING WORKING CAPITAL
€m
Inventories
Trade and other receivables
Trade and other payables
Net operating working capital
2015
2014
344.4
350.0
(442.7)
251.7
336.8
305.0
(390.4)
251.4
During 2015 Glanbia continued to focus on working capital management
and has implemented a number of initiatives focusing on payables,
receivables and inventory. Total operating working capital at the end of
2015 was €251.7 million, an increase of €0.3 million compared to the
previous year. Excluding the impact of currency movements, acquisitions
and other non-operational movements, this represents a decrease in year
on year operating working capital of €8.9 million.
16
Glanbia plc
Annual Report and Accounts 2015
STRATEGIC REPORT INVESTING FOR GROWTH
In 2015 Glanbia continued its programme of organic and external
investments to drive growth, investing €283.0 million in acquisitions
and strategic capital expenditure programmes.
In December 2015, the Group acquired thinkThin, a leading range of
protein-enriched bars and snacks targeted at lifestyle consumers in
the US, for a total acquisition cost of €202.4 million, including liabilities
assumed/settled on completion, of which €195.2 million was paid
immediately and the balance is payable in 2016. The organic investment
programme continued with a €123.6 million investment in capital
expenditure during 2015. This included €86.2 million of strategic
capital expenditure, primarily the completion of a high-end whey
production facility by Global Ingredients in Idaho and the construction
of additional packing capability in the Glanbia Performance Nutrition
plant in Chicago. Total capital expenditure investment is expected
to be between €115 million and €125 million in 2016.
DELIVERING RETURNS TO SHAREHOLDERS
The past year was another strong year for shareholder returns. Total
shareholder return for the year was 33.2% following 16.9% in 2014 and
35.4% in 2013. The Glanbia share price at the end of the financial year
was €16.95 compared to €12.81 at the 2014 year end. The share price
outperformed the STOXX Europe 600 Food & Beverage Index by 12.1%
in 2015.
PRINCIPAL RISKS AND UNCERTAINTIES
The performance of the Group is influenced by global economic
conditions and consumer confidence in the markets in which it operates.
In 2016 the principal risks and uncertainties affecting the Group’s
performance continue to be:
• The competitive landscape for Glanbia Performance Nutrition,
recognising the impact of a stronger US dollar on the purchasing
power of consumers in certain non-US markets;
• The overall impact on margins of movements in dairy market pricing;
GROUP FINANCING
and
Financing key performance indicators
2015
2014
Net debt : adjusted EBITDA
Adjusted EBIT : net finance cost
1.75 times 1.97 times
8.9 times
10.8 times
The Group’s financial position continues to be strong. Net debt at the
end of 2015 was €584.2 million. This is an increase from €510.4 million in
2014 and can be primarily attributed to funding the thinkThin acquisition
completed during the year as well as the impact of a stronger dollar at
year end on translation of US dollar debt. Net debt to adjusted EBITDA
was 1.75 times and interest cover was 10.8 times, both metrics remaining
well within financing covenants. At year end 2015 Glanbia had available
bank facilities of €721 million which will mature in January 2020 and
private placement debt of $325 million which will mature in June 2021.
Glanbia’s capital structure has considerable capacity to finance future
investments.
RETURN ON CAPITAL EMPLOYED
Return on Capital Employed
13.9%
13.4%
+50bps
2015
2014
Change
The return on capital employed in 2015 increased by 50 basis points to
13.9% (2014: 13.4%). This was driven primarily by the growth in reported
EBITA, including the impact of currency, somewhat offset by the dilutive
effect of recent acquisitions. The Group has a strategic target to maintain
a minimum return on capital employed of 12%.
PENSION
The Group’s net pension liability under IAS 19 (revised) ‘Employee
Benefits’, before deferred tax, decreased in 2015 by €27.5 million to
€87.3 million (2014: €114.8 million). A significant driver of this decrease
was the increase in the discount rate used in valuing the net pension
obligation, from 2.1% at the end of 2014 to 2.25% at end of 2015,
reflecting the rise in AA Corporate Bond yields during the year.
The Group settled the liabilities of three Irish defined benefit pension
schemes in 2015, resulting in an exceptional charge of €5.0 million.
This settlement reduced the gross retirement benefit obligations by
€60.2 million.
• The potential impact of geopolitical unrest and macro-economic
uncertainty on our international growth strategy.
The Board has the ultimate responsibility for risk management and the
principal risks and uncertainties are outlined in detail on pages 32 to 38.
FINANCIAL STRATEGY
Glanbia’s financial strategy is very much aligned with its overall strategy of
ensuring the Group delivers on our key financial goals to 2018 of adjusted
EPS growth on a constant currency basis of 8% to 10% while maintaining
a minimum return on capital employed of 12%.
Specific financial goals to enable this strategy include:
• Assessing both external and organic investment opportunities against
a minimum benchmark of 12% return after 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, IT, and a continuous
improvement mindset; and
• Maintaining the capital structure of the Group within an implicit
investment grade credit profile.
INVESTOR RELATIONS
The Group Managing Director, Group Finance Director, Executive
Directors and Head of Investor Relations presented at 13 investor
conferences globally and conducted over 400 meetings with the investor
community in 2015. Glanbia’s dedicated investor relations team engages
with investors on a daily basis, outside of closed periods, and travels to
various financial centres around the world to meet with shareholders and
potential shareholders alike. Glanbia is now covered by equity analysts
from 10 leading stockbroking firms who regularly publish detailed
independent research reports on Glanbia for their clients. Glanbia will
hold a capital markets day in London on Wednesday 18 May 2016
focusing on the Glanbia Performance Nutrition business.
ANNUAL GENERAL MEETING (AGM)
Glanbia plc’s AGM will be held on Wednesday, 27 April 2016, in the
Lyrath Estate Hotel, Old Dublin Road, Kilkenny, Ireland.
MARK GARVEY
Group Finance Director
Glanbia plc
Annual Report and Accounts 2015
17
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT OPERATIONS REVIEW
GLANBIA PERFORMANCE NUTRITION
Another strong
perforMance
Glanbia Performance Nutrition is the global leader
in the performance nutrition industry. Our portfolio
is comprised of seven brands – Optimum Nutrition,
BSN, Isopure, thinkThin, Nutramino, ABB and trusource.
Each has its own brand essence and consumer appeal.
Our brands participate across a range of formats such
as powders, drinks and bars and are sold in a variety
of channels such as internet, specialty and mass retail.
Innovation sits at the heart of our business and we
continuously develop new products in line with our
consumers’ preferences.
GLANBIA PERFORMANCE NUTRITION
€m
Revenue
EBITA
EBITA margin
Reported
2014
746.2
89.2
12.0%
2015
923.1
135.6
14.7%
Change
+23.7%
+52.0%
+270bps
Constant
Currency
Change
+6.7%
+28.3%
+250bps
* Commentary is on a constant currency basis throughout the Operations Review.
18
Glanbia plc
Annual Report and Accounts 2015
HUGH MCGUIRE
CEO Glanbia Performance Nutrition
2015 PERFORMANCE*
Glanbia Performance Nutrition (GPN) delivered
a strong performance in 2015. Revenues
increased 6.7% to €923.1 million reflecting
volume growth of 1.5%, the impact of
acquisitions of 7.8% and a net pricing decline
of 2.6%. EBITA increased 28.3% in the period
and EBITA margins increased 250 basis points
to 14.7%. The improvement in margins was
driven by operating leverage, improved branded
product mix and raw material price deflation.
Branded revenue growth, excluding the impact
of acquisitions, was 5.6% in 2015. This was
led by the US market where branded revenue
growth was ahead of market growth rates.
Growth was broad based as GPN experienced
growth in branded sell-through in specialty,
internet and club channels. In non-US
markets performance was mixed as growth in
certain regions was offset by country specific
challenges, particularly in Brazil and Russia
as a result of a strong US dollar, geopolitical
and macro-economic events. Contract sales
declined in 2015 and for the year represented
less than 15% of 2015 GPN revenues (22% of
2014 GPN revenues).
ONGOING INVESTMENT
Isopure, which was acquired in Q4 2014,
was successfully integrated and performed
well in 2015.
The acquisition in December 2015 of thinkThin,
a leading lifestyle nutrition brand of protein-
enriched bars and snacks, has strengthened
GPN’s position in the rapidly expanding
nutrition bar segment which is currently valued
at $2.8 billion in US retail channels. thinkThin
is distributed primarily in food, natural and
mass retail channels in the US and provides a
platform for GPN to enter the “better for you”
snack products category as well as augment
the GPN brand portfolio in its existing channels.
Net sales for thinkThin in the twelve months to
the end of December 2015 were $87 million.
STRATEGIC REPORT “ALL OUR BRANDS SHARE FIVE FUNDAMENTAL
ATTRIBUTES: AUTHENTIC, PREMIUM, SCIENCE-
BASED, HIGHEST QUALITY AND EFFECTIVE.
THAT’S WHAT MAKES US THE LEADING
PERFORMANCE NUTRITION BRAND FAMILY.”
HUGH MCGUIRE
CEO Glanbia Performance Nutrition
MAKING LIFE ACTIVE
ISOPURE
We successfully integrated our
recent acquisition of Isopure during
the year. Isopure is a provider
of premium branded sports
nutrition products.
INNOVATION
Innovation sits at the heart of
the GPN strategy. We respond to
consumer trends by continuously
investing in the research and
development of new products.
The Isopure brand has a strong heritage
and shares many common attributes
with our other GPN brands ON and
BSN – credibility, trust, quality and strong
consumer loyalty. The business focuses
on powders and ready-to-drink (RTD)
formats, primarily through the specialty,
internet and direct distribution channels.
As a premium brand, Isopure is an
excellent addition to our portfolio of
market leading performance nutrition
brands and provides an opportunity
to leverage our infrastructure and
capabilities to drive future growth.
Our brand portfolio provides us with
a unique platform to expand into new
formats, categories and channels to
meet our consumer needs.
During the year some of our key
successful launches included Optimum
Nutrition Gold Standard Pre-Workout,
Amino Energy Café Series, Isopure
Aminos, Nutramino Lean Protein Bar
range and trusource. trusource was
launched in Q4 2015 and is our first entry
in to the US mass retail channel, aimed
at lifestyle consumers. An investment
programme to support the brand will
continue through 2016 as the brand
is at the early stages of launch.
OUTLOOK FOR 2016
Glanbia Performance Nutrition is expected to
continue driving branded revenue growth from
increased channel penetration and innovation.
CAPITAL MARKETS DAY 2016
Glanbia will hold a capital markets day on
Wednesday, 18 May 2016 in London. The day
will focus on Glanbia Performance Nutrition
and provide an opportunity to get a detailed
perspective on this segment.
BRAND ADVOCATES AND SOCIAL MEDIA
One of the core ways GPN sustains growth is
continually building a community of passionate
advocates who view our brands as their trusted
partners for goal achievement, backed by our
leadership in education and inspiration. In 2015,
we engaged our advocates globally through
a range of activation and experiences. We
developed comprehensive videos, collaborating
with athletes and retail partners, which were
viewed over 46 million times. We grew our
social media following across our brands
to over 4 million and launched new mobile
friendly websites for the ON, BSN and Isopure
brands. We elevated the profile of our athlete
base, including the signing of UFC Champion
Conor McGregor (pictured below) to BSN.
We held 85 Sports Nutrition Schools and GPN
Webinars across the globe to train our teams,
retail partners and athletes on how to apply
our brands to their performance nutritional
goals. Together with our advocates, we
comprise one of the largest global communities
for performance nutrition that fuels our
consumers and GPN’s growth ambitions.
Glanbia plc
Annual Report and Accounts 2015
19
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT OPERATIONS REVIEW CONTINUED
GLOBAL INGREDIENTS
posITioning
FOR GROWTH
Global Ingredients is our ingredients platform with
a portfolio focused on both dairy and non-dairy
nutritional ingredients. We deliver nutritional functional
solutions for use in the mainstream food and beverage
industry, as well as the infant and clinical nutrition
sector. We are also a large scale manufacturer and
marketer of American-style cheddar cheese.
€m
Revenue
EBITA
EBITA margin
Reported
2014
1,175.4
100.4
8.5%
2015
1,218.0
106.6
8.8%
Change
+3.6%
+6.2%
+30bps
Constant
Currency
Change
-12.8%
-11.6%
+20bps
* Commentary is on a constant currency basis throughout the Operations Review.
20
Glanbia plc
Annual Report and Accounts 2015
BRIAN PHELAN
CEO Global Ingredients
2015 PERFORMANCE*
Global Ingredients (GI) had a reduced
performance in 2015 as a result of difficult
dairy markets which impacted US Cheese and
Ingredient Technologies. Revenues decreased
12.8% to €1,218.0 million reflecting market
related price decreases of 17.8% which were
partially offset by a volume increase of 5.0%.
As a result EBITA decreased 11.6% to
€106.6 million.
US CHEESE
US Cheese revenues decreased in 2015 due
to market related pricing declines. On average,
cheese pricing in the US was down 25% year
on year. Volumes improved in 2015 as our
cheese plants operated at close to full capacity
throughout the year. Although the US Cheese
business model has a robust mechanism to
manage dairy price volatility it did not provide
full protection from dairy markets due to the
scale of price declines year on year which
resulted in a decreased financial performance.
INGREDIENT TECHNOLOGIES
The market environment for Ingredient
Technologies was challenging in 2015 due
to deteriorating dairy markets throughout the
year. This impacted overall pricing with market
prices down substantially across the portfolio.
Volumes also declined and this led to a
reduction in financial performance year on year.
Production capacity to increase the volume of
high-end whey ingredients produced in Idaho
was commissioned successfully in Q4 2015.
This will improve the product mix of whey based
ingredients produced by GI. Good progress was
made on the development of the value added
ingredients based business. Functional systems
in particular had a strong performance in 2015,
reflecting GI’s capability to help customers
reliably incorporate dairy protein into everyday
nutrition products.
STRATEGIC REPORT “WE ARE RE-SHAPING OUR INGREDIENTS
BUSINESS TO BE A MORE AGILE, INTEGRATED
ORGANISATION FOCUSED ON CUSTOMER-
CENTRIC, INSIGHT-LED INNOVATION.”
BRIAN PHELAN
CEO Global Ingredients
CUSTOMISED SOLUTIONS
Customised Solutions delivered a good
performance in 2015 due to volume growth with
pricing marginally down. Sales of high-quality
micro-nutrient premixes continued to grow
during the year reflecting growth in customer
end markets.
GLOBAL INGREDIENTS
REORGANISATION
The project to create one integrated GI
organisation is progressing to plan. Over the
next 12 months the business structure will
be fully reorganised into a single commercial
team focused on GI’s nutritional ingredient
portfolio. This will be supported by centres
of excellence across areas such as product
supply, innovation and strategy. These changes
will enable GI to be a more agile, integrated
and consumer-insight-driven organisation
delivering to customers the full suite of Glanbia’s
capability. The total cost of this project will be
approximately €15 million to €20 million.
OUTLOOK FOR 2016
Gl is expected to grow earnings in 2016, as a
result of improved product mix following capital
investment in 2015 and continued development
of higher-value nutritional systems business
with customers. The outlook is impacted by
expectations of future global dairy markets
and Glanbia is expecting dairy markets to
remain challenging in 2016.
MAKING LIFE HEALTHY
CHEESE
Glanbia has a long tradition of
excellence in cheese making.
Innovation and quality are at the heart
of our cheese products. Last year, we
created a new ‘Reduced Fat Cheddar’.
This cheese was featured in our ‘2015
Spring Health and Wellness’ marketing
campaign and is a higher protein
alternative for consumers who are looking
for natural ways to get more protein into
their diets. We also created a vitamin D
fortified cheddar which provides added
nutritional value. In addition, we expanded
our pepper cheese category to include
new offerings for Gouda and Havarti style
cheese which have improved slicing and
functional capabilities.
BAR SOLUTIONS
GI has developed a wide range
of ingredient solutions which are
uniquely formulated to deliver a range
of texture and shelf life-enhancing
properties to nutrition bars.
• BarFlex® is our whey protein based
bar solution.
• BarGain® is our whey and vegetable
protein based systems.
• BarPro® is our milk protein
based solution.
Our OptiSol™ 2000 ingredient solution
improves the nutrition profile of our bars
without the loss of texture, flavour, or
eating experience. Its unique binding
system reduces sugar by up to 50 per
cent. OptiSol™ 2000 is suitable for several
applications including chewy granola
bars, baked bars and cereal clusters.
We have a range of ingredients that
match the nutritional and functional
characteristics that our customers require.
Glanbia plc
Annual Report and Accounts 2015
21
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT OPERATIONS REVIEW CONTINUED
DAIRY IRELAND
MArgin
RECovery
MAKING LIFE
SIMPLE
Mooju is Ireland’s leading brand
in the Flavoured Milk category
with a 60% market share. Its
great taste as well as its high
protein content has seen it
championed by young
consumers.
Mooju is a youth brand, with all
activation taking place through
social media. A dedicated and
lively following has built up online
for the product.
Dairy Ireland is comprised of two businesses. Consumer
Products is a supplier of branded consumer dairy products to
the Irish market and also produces longlife dairy products for
export. Agribusiness supplies inputs to the Irish agriculture
sector and is the leading purchaser and processor of grain in
Ireland, which includes high quality food grade oats. It is also
the leading manufacturer of branded animal feed and has a
network of over 50 retail stores focusing on the agri-sector.
€m
Revenue
EBITA
EBITA margin
2015 PERFORMANCE
Dairy Ireland delivered a good performance in
2015 driven primarily by Consumer Products.
Revenues increased 2.7% reflecting a 1.8%
increase in volumes and a 0.5% decline in
pricing. Bolt on acquisitions in Consumer
Products contributed 1.4%. EBITA margins
recovered by 140 basis points to 4.5%.
CONSUMER PRODUCTS
Consumer Products delivered a good
performance in 2015. The investment in
operational efficiencies, mix improvement
and some reduction in input costs enabled
a recovery in margins.
Revenue growth was driven by increases in
value added milk and cream sales plus bolt on
acquisitions. We will continue to innovate and
invest in our brand portfolio both domestically
and internationally.
2015
633.2
28.8
4.5%
Reported
2014
616.7
19.0
3.1%
Change
+2.7%
+51.6%
+140bps
AGRIBUSINESS
Agribusiness’ performance in 2015 was
broadly in line with prior year. Returns from
fertiliser and feed sales declined as a result
of reduced demand for fertiliser and reduced
margins in feed.
This was offset by an increase in sales of food
grade oats as customer demand for this high
quality consumer product continues to expand.
OUTLOOK FOR 2016
Dairy Ireland performance in 2016 is expected
to be broadly in line with 2015. The outlook is
dependent on a stable consumer environment
and demand for animal feed and fertiliser in
Ireland which is impacted by climatic conditions
and farm income.
22
Glanbia plc
Annual Report and Accounts 2015
STRATEGIC REPORT OPERATIONS REVIEW CONTINUED
JOINT VENTURES & ASSOCIATES
AmbITious
for future
development
We have three strategic Joint Ventures & Associates:
Glanbia Ingredients Ireland, Southwest Cheese in the US
and Glanbia Cheese in the UK. Glanbia plc has a strong track
record with regard to the successful operation of strategic
joint ventures.
€m
Revenue1
EBITA1
EBITA margin
Reported
2014
984.0
36.4
3.7%
2015
893.1
39.7
4.4%
Change
-9.2%
+9.1%
+70bps
Constant
Currency
Change
-17.3%
0.0%
+70bps
* Commentary is on a constant currency basis throughout the Operations Review.
1. Glanbia’s share of Joint Ventures & Associates results.
2015 PERFORMANCE *
Revenues from Glanbia’s share of Joint
Ventures & Associates decreased 17.3% in
2015. The main drivers of this were the decline
in global dairy market prices during the year
which led to a price reduction of 19.7% and the
disposal of the Group’s interest in Nutricima
which resulted in a 2.5% decrease. This was
offset by a volume increase of 4.9% largely
driven by increased throughput in Glanbia
Ingredients Ireland following the abolition
of EU milk quotas in April 2015. EBITA of
€39.7 million was similar to prior year with
margins improving by 70 basis points.
GLANBIA INGREDIENTS IRELAND (GII)
GII performance in 2015 was slightly ahead
on the prior year. A challenging dairy market
environment reduced margins in the business
and this was offset by higher volumes and cost
reduction. GII milk suppliers responded to the
abolition of EU milk quotas with an increase
in production in 2015 by 18.1% versus the
prior year.
During the year GII completed the construction
of a new dairy nutrition plant in Belview,
Co. Kilkenny, Ireland to produce a range of
value added ingredients. This plant processed
over 300 million litres of milk in 2015 and has
additional available capacity to support the
growth ambitions of the business and its supply
base. GII recently announced plans for the
expansion of cheddar cheese capacity at its plant
in Wexford, Ireland at a cost of €35 million. This
facility is expected to be commissioned in 2017.
SOUTHWEST CHEESE (SWC)
Performance in SWC was broadly in line with
prior year. Raw material price reductions and
improved ingredient yields offset a significant
reduction in price as a result of US cheese
market price declines. Cheese volumes were
flat as the plant continued to operate at close
to full capacity throughout the year.
In Q3 2015 Glanbia announced it was in
advanced discussions with its SWC joint
venture partner to expand cheese and whey
production capacity by 25% at its plant in Clovis
New Mexico, US. It is expected that the total
project cost of approximately $140 million will
be independently financed by SWC. The project
is expected to be commissioned by 2018.
GLANBIA CHEESE
Glanbia Cheese performance declined
marginally year on year due to a significant
reduction in European mozzarella pricing.
While production volumes increased as a result
of good underlying demand in the sector this
was not enough to offset the decline in pricing.
NUTRICIMA
In Q2 2015, the Group disposed of its
investment in Nutricima to PZ Cussons plc
for cash consideration of £21 million (€28.5
million). The impact of this disposal on 2015
Group earnings was immaterial. As part of the
transaction GlI has entered into a long term
agreement with Nutricima for the sale of dairy
ingredients thereby maintaining a route to
market in West Africa.
OUTLOOK FOR 2016
Joint Ventures & Associates are expected to
be marginally down versus 2015 performance.
The outlook is impacted by dairy markets which
Glanbia is expecting to remain challenging
in 2016.
Glanbia plc
Annual Report and Accounts 2015
23
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT OUR PEOPLE
our People:
a year of
signIFicant
progress
2015 HUMAN RESOURCES HIGHLIGHTS
l Completed a comprehensive global employee survey
and addressed issues raised;
l Renewed Group purpose, vision and values and
identified core behaviours to deliver same;
l Completed a comprehensive succession and people
talent review of our senior leadership population;
l Completed a full review of the HR operating model
to ensure it is meeting our strategic talent goals;
l Completed review of HR information systems to ensure
that the technologies and processes necessary to
support our people agenda are best practice; and
l Developed a comprehensive Code of Conduct to
support our commitment to ethical business,
underpinned by a new employee ‘Speak-Up’ resource.
GLOBAL HR AGENDA
2015 was a year of significant progress in
creating the best possible conditions to unlock
the potential of our people and of Glanbia.
Our employee engagement work focused
on seeking the views of our people about
our Group; what we do well and where we
can improve.
We recognise that organisations with a distinct
purpose, clear vision and strong values deliver
sustained superior returns through more
committed, engaged and focused employees.
The Board and Group’s Executive Leadership
agreed on a core purpose and vision for the
organisation, and the values and behaviours
required to fulfil our potential.
While the results were very positive overall,
this has led to some key initiatives across
the organisation to improve the employee
experience and services and to recognise
and celebrate our achievements. Further
progress was also made in improving employee
communications and to improve our outreach
to potential new hires to increase our talent
pipeline at all levels of the organisation.
In addition, particular focus was placed on a
comprehensive review of our top talent and
succession to ensure a healthy pipeline of future
leaders and to identify their development needs.
Our aim as a HR function is to strategically
partner with the businesses to align our people,
performance and culture with our growth
agenda. To this end a review was undertaken
24
Glanbia plc
Annual Report and Accounts 2015
MICHAEL PATTEN
Group HR & Corporate Affairs Director
of the HR operating model to identify the
optimum configuration of capabilities and
service delivery across talent acquisition,
development and retention, performance
and reward, HR strategy, administration and
systems to meet the needs of our growing
global organisation.
Work will progress in 2016 to address a number
of the opportunities identified in the review.
GROWING GLOBAL EMPLOYEE BASE
In 2015, total Group employees, including
Joint Ventures & Associates, increased by 199
people to 6,015 people based in 32 countries.
Glanbia Performance Nutrition (GPN) employee
numbers rose by 157 to 1,598 in 2015. Global
Ingredients (GI) increased its workforce by
149 people to 1,781 employees. Dairy Ireland
increased employee numbers by 67 to 1,251
people. Our Joint Ventures & Associates had
1,385 employees in 2015.
STRATEGIC REPORT EMPLOYEE ENGAGEMENT SURVEY
We are confident that the results give a clear and true reflection of how our people feel about Glanbia.
81%
EMPLOYEES PARTICIPATED IN THE
SURVEY.
93%
OF EMPLOYEES QUESTIONED ARE
WILLING TO WORK BEYOND WHAT
IS NORMALLY EXPECTED TO HELP
GLANBIA SUCCEED.
86%
OF EMPLOYEES SURVEYED ARE
PROUD TO WORK IN GLANBIA.
RENEWED PURPOSE,
VISION AND VALUES
During the year, we undertook a comprehensive
programme of work, informed by extensive
internal and external stakeholder research
which led us to a renewed purpose, vision
and values. These unite our people and guide
the actions, decisions and behaviours of
every employee.
OUR PURPOSE: is dedicated to ‘delivering
better nutrition for every step of life’s journey’.
OUR VISION: ‘to be one of the world’s top
performing nutrition companies, trusted to
enrich lives every day’ describes what we
aspire to become and to achieve.
OUR VALUES: The Customers’ Champion,
Performance Matters, Find a Better Way,
Winning Together and Showing Respect
represent our desired culture and set the
foundation for the way we work with our
business partners, within our communities
and with each other.
We have also defined the behaviours and
leadership standards that underpin our
refreshed values. These set the benchmarks
for how we behave and ultimately succeed
both personally in Glanbia and as a Group.
Our focus in 2016 is to embed our values
and behaviours across every level of our
organisation and to ensure our strategy and
energies are focused in service of our purpose
and vision. In the longer term, we’ll measure
and reward our people, not just on commercial
results, but on how they live these behaviours
every day.
EMPLOYEE ENGAGEMENT SURVEY
In February 2015 we undertook our first global
employee survey, ‘Your Voice’. Every employee
in the Group, across 32 countries and in
four languages, was given the opportunity
to participate.
OUR PURPOSE
Delivering better nutrition for every step of life’s journey
OUR VISION
To be one of the world’s top performing nutrition companies trusted
to enrich lives every day
OUR VALUES
OUR BEHAVIOURS
THE CUSTOMERS’
CHAMPION
Customer advocate and
Company ambassador
PERFORMANCE
MATTERS
Committed to quality,
safety and performance
FIND A BETTER WAY
Curious, innovative and
eager to learn
WINNING TOGETHER
Developing ourselves and
collaborating with others
SHOWING RESPECT
Role model and valuing
the ideas of others
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25
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT OUR PEOPLE CONTINUED
“OUR DIVERSE AND TALENTED EMPLOYEES
ARE KEY TO OUR SUCCESS. RETAINING AND
DEVELOPING THEIR ENTHUSIASM AND ENERGY
IS CENTRAL TO THE GROUP’S STRATEGY FOR
GROWTH AND DEVELOPMENT.”
MICHAEL PATTEN
Group HR & Corporate Affairs Director
We achieved an outstanding participation rate
of 81% with an engagement score of 82%.
In particular, the survey gave us new insights
to enhance employee engagement throughout
Glanbia.
The results highlighted that our people are
very proud to work for Glanbia and would
recommend us as a great place to work but
it also identified the areas where we need
to improve. We have engaged with all of our
employees to share the findings and have
implemented key actions at Group, business
unit and site level in response to these findings.
DEVELOPING THE FULL POTENTIAL
OF OUR LEADERS
We have a talented and dedicated workforce
who demonstrate commitment and passion
for our business on a daily basis. In return
we continue to invest in our people to help
them perform and grow, as well as share
in our success.
In 2015 a comprehensive review of our senior
leadership community was undertaken to
evaluate talent, bench strength and succession
cover, and to identify actions to develop our
people and performance. The outcome of
our Organisational People Review (OPR) is
driving our Group talent strategy in 2016.
We also continue to invest in building our
leadership capabilities at all levels across
the Group. Last year the core focus was on
equipping our managers with the insights and
skills to effectively lead teams and to prepare
our emerging senior managers for increased
people management responsibilities and
career development.
The Glanbia 2015 General Management
Development Programme which is delivered,
in conjunction with the Irish Management
Institute, prepares a new generation of leaders
for enhanced responsibilities across the Group.
In addition we have launched a global module-
based management development programme
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Glanbia plc
Annual Report and Accounts 2015
in 2016. It is anticipated that over 500 managers
will go through the ‘Leading the Glanbia Way’
programme.
Individually, our business units also offer
significant training opportunities. For example;
220 leaders participated in Glanbia Performance
Nutrition’s (GPN) two-day ‘Peak Performance’
leadership development programme. Also during
2015 GPN launched a global customised sales
training programme. To date 60 participants
have attended four sessions held in the US
and Australia.
Global Ingredients (GI) and Southwest Cheese
continue to invest heavily in training and up-
skilling. Fifty-seven leadership workshops were
held during the year, training 675 leaders in
total. All the courses were aimed at enhancing
personal, team and leadership effectiveness and
inspiring innovative thinking and work practices.
A significant level of training and development
was also undertaken in Glanbia Agribusiness.
In total 218 employees took part in a broad
spectrum of training and development courses
including business leadership courses and
sales programmes.
In Consumer Products over 100 employees
across the business unit undertook training
and development courses.
In Glanbia Ingredients Ireland (GII) over 300
staff took part in training courses last year.
PURE AMBITION GRADUATE PROGRAMME
The Pure Ambition Graduate Programme
plays a vital role in developing future leaders
for Glanbia globally. In 2015, we welcomed 58
graduates onto our programme and expect a
further 65 graduates to join the Group in 2016.
We also continue to strengthen and broaden
our collaboration with third-level universities and
colleges through internship programmes and
other areas of mutual support and learning.
CODE OF
CONDUCT
AND SPEAK-UP
Our new ‘Code of Conduct’
sets out our business principles
and what we expect from
employees to ensure they
protect themselves as well
as the Group’s reputation
and assets.
Each employee has a responsibility
to adhere to our ‘Code of Conduct’
and uphold our values, to ensure we
operate in a safe and ethical way.
We also launched a ‘Speak-Up’
service, a completely independent
and confidential reporting service,
which affords our employees the
opportunity to report any genuine
concern about a breach of our
ethical standards. The service is
operated by Safecall and is available
to all employees, at all times.
STRATEGIC REPORT 96%
OF OUR PEOPLE SURVEYED WOULD
RECOMMEND GLANBIA’S PRODUCTS
OR SERVICES TO A FAMILY MEMBER
OR FRIEND.
2016 HUMAN RESOURCES PRIORITIES
l Embed values and behaviours across all levels of the
Group to support superior performance delivery,
engagement and retention;
l Progress senior leadership development based
on findings of 2015 Organisational People Review (OPR);
l Progress implementation of HR Operating Model strategy;
l Drive greater linkages between career pathways,
performance and reward management; and
l Grow Glanbia culture of dynamic entrepreneurialism
underpinned by effective processes and a highly
engaged and collaborative workforce.
Graduates have the opportunity to develop their
careers in the areas of accounting and finance,
IT, engineering, food science, marketing, HR,
purchasing and supply chain management.
Through our newly launched Pure Ambition
Academy, graduates have the opportunity to
make a real impact from day one. We offer role
specific training and development, including
professional qualifications, project management
certification and leadership skill development.
Many are given the opportunity of global work
placements and assignments. We maintain a
commitment to continuous on-the-job coaching
and mentoring, maximising the benefits of this
programme.
Learn more: www.glanbia.com/graduates
LAUNCH OF GLOBAL INTRANET
The new ‘Our Glanbia’ global intranet forms
the cornerstone of a suite of tools designed
to help Glanbia employees share information,
find colleagues, recognise success and
work together more easily across our global
organisation. It ensures our people get to
know one another, our strategy, our strengths,
our ambition, our markets, our customers,
and our growth opportunities.
HEALTH AND SAFETY
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. At our key facilities we recorded
a 40% reduction in Recordable Injury Rates
(RIR) in 2015. Additionally our Glanbia Risk
Management System (GRMS) levels have
improved across the majority of our key
facilities. New health and safety policies
were also adopted in 2015 such as:
• GPN sites focused heavily on next level
implementation of Intelex (EHS Data
Management System) and Alchemy
(Learning Management System) to
streamline EHS program management
and improve employee training and
engagement. Results have been extremely
positive with a decrease in Total Recordable
Injury Rate (TRIR) of 36% from 2014.
• Employee Health and Wellness Programme
development was a key focus area for GPN
in 2015. An Early Intervention Program (EIP)
was piloted at two GPN manufacturing sites.
Since the commencement of the programme
there has been a 72% reduction in reported
injuries related to sprains/strains.
• A new ‘Safety in Numbers’ KPI tracker for all
managers was introduced in GII Ballyragget,
Kilkenny, Ireland; and
• Our new GII Belview, Ireland plant received
the certification to OHSAS18001 in the first
year of operation. This achievement assures
us that our Health & Safety Management
system meets international industry specific
standards for these systems.
Glanbia plc
Annual Report and Accounts 2015
27
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT SUSTAINABILITY REVIEW
CAring for
OUR WORLd
A COMMITMENT TO ACT RESPONSIBLY
Our vision is to be one of the world’s top
performing nutrition companies, trusted to enrich
lives every day. We see sustainability in a social and
environmental context as the opportunity to make a
difference while at the same time strengthening our
business for the longer-term. This is the beginning
of a broadening sustainability journey for Glanbia.
Our aim is to facilitate the ambition of
our businesses through the development
of a consistent, credible and verifiable
sustainability programme.
In order to fulfil our purpose we have set ourselves key focus areas:
We believe the energy and raw materials that we consume impacts
on our environment; therefore protecting Our Environment is a
core tenet of our sustainability framework.
Quality starts at the source. As a global nutrition company,
we are committed to the strictest standards of quality control.
Supply Chain management therefore, is a key link in
our framework.
Glanbia has a long tradition of involvement with our local
communities and seeks to make a tangible difference in the
areas where we operate. These range from sponsorship and
donations to employee fundraising and volunteering.
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Annual Report and Accounts 2015
OUR ENVIRONMENT
Nature provides the foundations for our Group;
nurturing and taking care of it ensures our
success. We aim to operate our business with
a strong regard for environmental sustainability.
In 2015 we adopted a Group-wide environmental
approach to drive a consistent, target-led
approach across the organisation.
We are working to understand our environmental
impacts as a Group and how we can reduce
waste, increase resource efficiency and improve
our environmental performance throughout the
entire product lifecycle. These programmes
make good business sense, as well as ensuring
we are good stewards of our natural resources.
GLANBIA PERFORMANCE SYSTEM
Sustainability is a vital cornerstone of the
Group’s Glanbia Performance System (GPS).
This production management and improvement
system drives operational excellence and
provides a framework for engaging our people
in achieving our sustainability related goals of
reducing energy and resources, eliminating
waste, improving both worker safety and
product safety, and assuring quality. Since
its launch in 2010, the implementation of
GPS has generated significant savings and
improvements in safety, sustainability and
employee engagement.
STRATEGIC REPORT “OVER THE PAST DECADE MANY PARTS OF THE GROUP HAVE
INCREASINGLY EMBEDDED SUSTAINABILITY THINKING AND
POSITIVE ACTION INTO THEIR ACTIVITIES. OUR FOCUS NOW
IS TO BUILD ON THIS AMBITION FOR THE DELIVERY OF A
SUSTAINABLE BUSINESS MODEL.”
SIOBHÁN TALBOT
Group Managing Director
4,800
GLANBIA IS ROLLING OUT THE
SUSTAINABLE DAIRY ASSURANCE
SCHEME (SDAS) TO ALL ITS 4,800
IRISH MILK SUPPLIERS.
10%
US CHEESE REDUCED ITS CARBON
FOOTPRINT BY 10% AT THE IDAHO
FACILITIES IN 2015.
STRONG PERFORMANCE IN 2015
Our businesses continued to progress environmental
projects in 2015.
• In 2015, Glanbia Performance Nutrition
(GPN) completed eight GPS energy
efficiency projects across three sites and
has committed to tracking energy efficiency
gains using 2015 base year data.
• Against the backdrop of a 4% increase in
milk processing the Dairy Ireland businesses
achieved a slight reduction in water and
energy usage and decreased waste to
landfill by 28%.
• In 2015 ISO14001 certification was
successfully maintained across the
Consumer Product sites and our new
plant in Co. Monaghan successfully joined
the Origin Green programme.
• GlI is achieving its Zero Waste to landfill
targets and in 2015 recycled more than 600
tonnes of materials. It also won the Origin
Green Sustainability award, the Green Food
& Beverage award and collaborated with
FBD on the Champions for Change initiative
which is an on-farm health and safety
initiative to move towards our goal of
Zero Harm on-farm.
• On average US Cheese reduced its carbon
footprint by 10% (relative to 2014) at the
Idaho facilities.
• Our GPN US Office relocated to a LEED
(Leadership in Environmental and Energy
Design) certified building in Downers Grove,
Illinois. The building is Energy Star rated by
the United States Environmental Protection
Agency (EPA), and is in the top 25% of the
most energy efficient buildings tracked
through this system and received the
EPA’s Energy Star Award.
• US Cheese continued in 2015 to focus
on energy and water saving programmes
through plant improvements and engineering
projects.
• Through various water reduction methods,
including visual alarms and more efficient
cleaning processes, in 2015 US Cheese
increased its polished water recovery – water
that remains after nutrients are extracted
from milk – to reuse for cleaning and other
processes. The use of wastewater and
polished water at the land application
facilities produced 93,256 tonnes of
alfalfa, corn, sorghum and grains in
Richfield and Gooding.
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Annual Report and Accounts 2015
29
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT SUSTAINABILITY REVIEW CONTINUED
our Supply
Chain
US CHEESE
SUSTAINABILITY
REPORT
US Cheese – part of the Global
Ingredients segment – published
its second sustainability report
in 2015.
The report, which is in line with
the Global Reporting Initiative
4 standard, highlights the significant
progress made in 2015.
2015 REPORT HIGHLIGHTS
• Reduction in electricity and
natural gas consumption.
• Reduction in carbon footprint.
• Increase in truck fleet fuel
efficiency.
• Major reductions in Lost-Time
and Total Recordable injuries.
• 100% FARM animal welfare
program certification.
• Continued unblemished record
of zero air emissions violations.
• Important new innovations
in response to the needs of
our customers and the wider
marketplace, leveraging our
whey innovation centre and
new cheese innovation centre.
Our goal is to sustainably source the raw materials we use in
our products. We follow the principles for ethical business set
out in the Glanbia Code of Conduct and operate to the highest
food quality standards.
OATSECURE
Gl and Glanbia Agribusiness made significant
progress with OatSecure in 2015. The OatSecure
closed loop supply chain process, which has
gained NSF certification, was instrumental in
OatPure Gluten Free Oats being adopted by
key accounts. This rigorously validated process
offers an exceptionally high level of protection,
and operates to the highest international food
safety standards. This development is also an
endorsement of the premium quality oats grown
by the Glanbia grain growers.
US FARM PROGRAMME
In our US Cheese business, Glanbia is focused
on sustainable supply chains through its adoption
of the National Milk Producers Federation FARM
programme, (Farmers Assuring Responsible
Management) which governs on-farm animal
welfare. This programme is third party verified.
Understanding the importance of this issue and
to recognise Glanbia’s commitment to animal
welfare, we adopted the programme in Spring
2013 and began the process to ensure all of our
dairy farms were FARM certified. One hundred
percent of the milk supplied to Glanbia by Idaho
and Southwest Cheese farmers was FARM
certified in 2015. The FARM programme also
enabled us to add transparency, accountability,
and responsibility to animal welfare certification.
OPEN SOURCE
Our dairy and feed products are sourced
from local farmers who are committed to the
highest standards of animal health and crop
husbandry – thus ensuring that they produce
the highest quality products possible, tailored
to meet our specific compositional and quality
standards. In Ireland we operate a milk quality
assurance programme, which ensures our
milk is of the highest quality and is produced
responsibly. Open Source is a programme
operated by Glanbia Ingredients Ireland (GII)
and is the industry reference point for best
practice in dairy sustainability. The Open
Source® Sustainability Programme, provides
a blueprint for high quality, sustainable milk
production, linking the farmer to the end
customer. It is independently audited by Bord
Bia (the Irish Food Board) who also certifies the
milk supplier’s dairy holding in line with current
EU and national legislation and customer
requirements.
ORIGIN GREEN
Glanbia is a founding member of Origin
Green – Bord Bia’s sustainability development
programme. This is operated on a voluntary
basis and follows many of the Open Source’s
principles. This programme demonstrates the
commitment of Irish food companies to operate
in the most sustainable manner possible. We
are also a founding partner of the Origin Green
Ambassador Programme, which promotes the
benefits of direct sourcing from Ireland to key
global customers.
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Annual Report and Accounts 2015
STRATEGIC REPORT our
Society and
CommunITies
Purpose Led
OUR PEOPLE SUPPORTED A NUMBER
OF NUTRITIONAL PROJECTS IN OUR
COMMUNITIES IN 2015.
Valuing our communities is at our core. We recognise
our biggest societal contribution is the delivery of better
nutrition, but also by contributing to stable employment
and economic prosperity in our local communities.
FRIENDS AGAINST HUNGER
Employees in Customised Solutions in
Springfield, US, participated in the Friends
against Hunger annual ‘Meals a Million’
charity event during the year. Friends Against
Hunger is a non-profit organisation focused
on feeding people who are hungry in the US
and around the world.
FEED MY STARVING CHILDREN
A group of employees from GPN volunteered
to package food for the charitable organisation
‘Feed My Starving Children’ (FMSC). FMSC is a
non-profit organisation that packages and ships
meals to children in need around the world.
US CHEESE RAISES FUNDS
FOR FIVE MAJOR CHARITIES
In its 22nd year, the annual ‘Glanbia US Cheese
Charity Golf Challenge’ in Idaho raised $160,000
in support of selected charities and organisations
in the Magic Valley area of Idaho. Since the
event’s inception, Glanbia in Idaho has raised
more than $1.7 million for selected charities.
GREAT PINK RUN
Over 5,000 people, including Glanbia
employees, descended on the Phoenix Park
in Dublin during the summer of 2015 as part of
the Great Pink Run, sponsored by Avonmore
Slimline Milk. The event raised much needed
funds for Breast Cancer Ireland, a charity
established to support breast cancer
research, education and awareness.
GLANBIA 300 CYCLE CHALLENGE
Glanbia Ingredients Ireland continued to
support local cancer care and other community
endeavours in the South East of Ireland in 2015.
Employees raised over €28,000 through the
second GII 300k charity cycle.
HURLING SPONSORSHIP
In Ireland Glanbia has a long association with
the GAA – the Gaelic Athletic Association and
we sponsor the Kilkenny and Wexford hurling
teams. The sponsorship is an ideal fit for a
nutrition company like Glanbia and particularly
for our consumer brand Avonmore milk.
There is a strong link between the GAA
and Glanbia through its employees,
suppliers and customers.
SCHOOLS’ BUSINESS
Glanbia is active in the educational sector
and participates in a Schools’ Business
Partnership – an education inclusion
programme that partners schools with
business. In recent years we partnered with
Duiske College, Co. Kilkenny – which involves
Glanbia Agribusiness management and
employees volunteering time and expertise to
students for personal and career development.
Glanbia plc
Annual Report and Accounts 2015
31
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT RISK MANAGEMENT
EffecTive risk
management
Embedding an effective risk management
culture across the Group.
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.
The Board’s aim is to anticipate and address
changes to the Group’s business and risk
environment that may impact the delivery
of the Group’s strategic objectives. This is
achieved by working to ensure that a robust
risk management culture exists throughout
the organisation.
While risk management is a regular agenda
item at Board meetings, it also conducts a
detailed consideration of the impact of the
Group’s principal risks during the annual Group
strategy process. This is designed to ensure
that the Board understands both the key risks
within the business and newly emerging risks
together with the methods by which these risks
are managed.
Following the UK Corporate Governance Code
2014 updates, the Board, with the assistance of
the Audit Committee, reviewed its approach to
risk management and assessed the potential for
gaps in its oversight processes. As a result of this
review the Audit Committee will be increasing its
level of oversight of certain principal risks through
its programme of evaluating key areas of risk
by direct presentations from management and
Group functional leads. The Board is satisfied
that its risk management and internal control
processes are robust but, as with all practices,
continuous improvement and a fresh challenge
is required to remain effective.
The Board also considered its obligations in
relation to providing both the annual Going
Concern Statement and the new Viability
Statement. Its review and conclusions in this
regard are outlined in the following table.
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Annual Report and Accounts 2015
GOING CONCERN AND
VIABILITY STATEMENT
The following statements detail the Directors’
assessment of the Group’s viability and
ability to continue as a going concern.
GOING CONCERN
Glanbia’s business activities, together
with the main factors likely to affect its
future development and performance,
are described in the strategic report on
pages 2 to 38.
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.
In reaching this conclusion the Directors
have had due regard for;
• Available cash resources, cash generated
from operations, committed bank facilities
and their maturities which taken together
provide confidence that Glanbia will be
able to meet its obligations as they fall
due. Further information on our bank
facilities is provided in Note 26 to the
Financial Statements.
• Glanbia’s financial risk management
policies which are described in the financial
statements, the nature of our business
activities and the factors likely to impact our
operating performance and future growth.
VIABILITY STATEMENT
In accordance with provision C.2.2 of the
UK Corporate Governance Code 2014, the
Directors have assessed the viability of the
Group and its ability to meet its liabilities as
they fall due over the medium term, taking
into account the Group’s current financial
position and the potential impact arising from
the principal risks and uncertainties detailed
on pages 35 to 38. The financial position of
the Group, its cashflows, liquidity position
and borrowing facilities are outlined in the
Group Finance Director’s review on pages
14 to 17.
The Group has developed a rigorous
planning process, which comprises a
strategic plan, a consolidated financial
forecast for the current year and financial
projections for future years. The plan is
reviewed each year by the Board as part of
its strategy review, with routine monitoring
regarding the achievement of strategic
objectives taking place at each Board
meeting. Assumptions are built at both
Group and divisional levels and are subject
to detailed examination, challenge and
sensitivity analysis by management and
the Directors.
The plan assumes that there will be no
significant deterioration in economic growth,
consumer confidence or other key drivers
of revenue, profit and cashflow. The Group
assumes it will be able to renegotiate
banking facilities in advance of expiry date.
Whilst the Directors have no reason to
believe the Group will not be viable over a
longer period, a period of three years has
been chosen for the purpose of this viability
statement, in line with the Group’s three year
strategic plan to 2018.
The Directors’ assessment of the Group’s
viability has been made with reference to the
principal risks and uncertainties facing the
Group and how these are managed within
the Board’s risk appetite; together with a
robust assessment of the aforementioned
financial projections during the two day
strategy and budget review session in
December 2015. Having considered these
elements, the Directors have a reasonable
expectation that the Group will be able to
continue in operation and meet its liabilities
as they fall due over the three year period
of the assessment.
STRATEGIC REPORT 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, Group Internal Audit
and the Group Senior Leadership Team.
Our Risk management framework diagram
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.
TOP-DOWN
Oversight, identification, assessment
and mitigation of risk at Group level
THE BOARD
Develops the Group’s
vision and strategic
priorities
Defines the organisational
Code of Conduct
and culture
Sets risk appetite
and tolerance
Monitors the nature
and extent of the
Group’s principal
risk exposures
versus the defined
risk appetite
GROUP OPERATING
EXECUTIVE
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
AUDIT
COMMITTEE
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
GROUP INTERNAL
AUDIT
Supports the Audit Committee
in reviewing the effectiveness of
the Group risk management and
internal control systems
Monitors actions taken
by management
Reports regularly to the
Audit Committee
GROUP SENIOR LEADERSHIP TEAM
Risk ownership
Identifies, measures and
assigns risk management
roles and responsibilities
at operational level
Risk awareness
Ensures risk management
processes and internal
control systems are
embedded within each
business unit
Risk monitoring
Monitors business
performance and uses
risk management to
support decision making
Risk reporting
Encourages open
communication on risk
matters and reports
to the Group Operating
Executive, Audit
Committee and the Board
BOTTOM-UP
Oversight, identification, assessment and mitigation
of risk at business unit level and across key Group functional areas
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Annual Report and Accounts 2015
33
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC 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.
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.
The Board and management use the same
process to assess and manage risks within
our material Joint Ventures and Associates
as it does for the remainder of the Group.
This includes being:
• Subject to a detailed annual strategy
and budget review where key risks are
considered and;
• Fully assessed through our Group-wide risk
register, operational site risk and food safety
and quality processes. We also hold Board
positions in all such entities where key site
risk matters are fully considered.
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
Each business unit management team and
functional lead is required to maintain a risk
register on an on-going basis. The register
ensures consistency of approach in reporting
of risks and requires management to:
CONSOLIDATION AND REVIEW
OF THE GROUP KEY RISK SUMMARY
Internal Audit prepares regular Group risk
summary reports based on information
submitted by management throughout
the year. These reports include:
• 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);
• 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 business risks.
The Group Operating Executive reviews this
report regularly during the year. The Audit
Committee on behalf of the Board perform
a bi-annual review, with interim updates from
management also presented if significant
issues arise.
MANAGEMENT AND BOARD REVIEW
The Board regularly monitors the risk
management and internal control systems. The
focus of the Board during such reviews 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.
• 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;
• Generate a management action plan
if required;
ON-GOING 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;
• Allocate an owner who has responsibility
• Bi-annual control self-assessment and
for the timely implementation of the agreed
action plan; and
management representation letter processes;
• Monthly Chief Executive Officer business
• Report on implementation of strategies to
address residual risk exposures.
reviews of the key financial and operational
performance within each business unit; and
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, tax
compliance and IT.
PRINCIPAL RISKS AND UNCERTAINTIES
The Directors have carried out a robust
assessment of the principal risks facing the
Group, including those that may threaten our
business model, future performance, solvency
or liquidity.
Key risks are identified based on the likelihood of
occurrence and potential impact on the Group
using the processes outlined. The performance
of the Group is influenced by global economic
conditions and consumer confidence in the
markets in which it operates. In 2016 the
principal risks and uncertainties affecting
the Group’s performance continue to be:
• The competitive landscape for Glanbia
Performance Nutrition, recognising the
impact of a stronger US dollar on the
purchasing power of consumers in
certain non-US markets;
• The overall impact on margins of movements
in dairy market pricing; 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
and cashflow risk, price risk and
credit risk is to centrally manage these risks
against comprehensive policy guidelines,
details of which are outlined in Note 25
‘Financial risk management’ on pages
143 to 145 of this report. The Board
regularly reviews these policies.
The Group’s use of financial instruments is
described in Note 32 ‘Derivative Financial
Instruments’ on pages 156 and 157.
• 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.
Glanbia has a continuous risk assessment
process comprising five key stages.
RISK ASSESSMENT PROCESS
T
R
O
R E P
A
L
L
O
C
A
T
E
IDE
N
T
I
F
Y
S
S
E
S
S
A
MITIGA T E
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Glanbia plc
Annual Report and Accounts 2015
STRATEGIC REPORT
RISK PROFILE
The Group’s principal risks and uncertainties
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 2015. 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. During 2015, both Liquidity
risk and Infrastructure capacity risk have
been removed from the Group principal risk
summary. This is due to:
• The Group debt and interest rate exposures
being managed with significant headroom
against current bank covenants; and
• Existing and planned Group banking facilities
providing adequate capacity to service
existing and anticipated new customer
requirements in line with our growth plans.
IT and Cyber security risks have been
added as a new principal risk in 2015 due to
the general trend of increasing frequency of
coordinated attacks. The Group is responding
by strengthening controls and monitoring
activities in this area.
The nature of each principal risk is described
in detail on pages 35 to 38.
GROUP
STRATEGIC
PRIORITIES
RISK TREND
INCREASING
STABLE
Maintain and grow our
global leadership in
performance nutrition and
nutritional and functional
ingredients
Grow through organic
investment programme
and acquisition/partner
with complementary
businesses
Develop talent, culture
and values in line with our
growing global scale
Other Risks
Economic, industry and
political risk
Strategy risk
Market risk
Customer
concentration risk
Supplier risk
Acquisition risk
Talent management
risk
IT and cyber
security risks
Site compliance
risk and environment,
health & safety
regulation risk
Product safety and
compliance risk
PRINCIPAL RISKS AND UNCERTAINTIES
STRATEGIC PRIORITY: MAINTAIN AND GROW OUR GLOBAL LEADERSHIP
IN PERFORMANCE NUTRITION AND NUTRITIONAL AND FUNCTIONAL INGREDIENTS
ECONOMIC, INDUSTRY AND POLITICAL RISK
Risk trend
Increasing
Description
Our performance is influenced
by global economic conditions,
consumer confidence and the stability
of the markets in which we operate.
Potential impact
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.
Changes in local or international
tax rules or new challenges by tax
authorities may expose the Group
to additional tax liabilities or impact
the carrying value of our deferred
tax assets.
Mitigation
• 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 strategic
objectives. Corrective actions
are identified and implemented
as required.
• We constructively engage with tax
authorities on a range of taxation
issues and where required, we
engage advisors and legal counsel
to clarify tax legislation, to help
ensure we achieve compliance
with tax law across the jurisdictions
in which we operate.
Changes during 2015
There continues to be trading
headwinds in certain markets as
geopolitical events and macro-
economic uncertainty impact on
our international growth strategy.
The strong US dollar has impacted
the purchasing power of consumers
in certain international markets,
increasing the competitive landscape
for Glanbia Performance Nutrition. This
has required continued investment in
promotional activity to maintain and
develop market positions.
There has been increased focus
on international tax legislation and
compliance, arising from the OECD’s
emerging recommendations on Base
Erosion and Profit Shifting (BEPS).
Impacts, although limited from a
Group perspective, of a potential
British exit from the European Union
will be maintained under review.
Glanbia plc
Annual Report and Accounts 2015
35
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT RISK MANAGEMENT CONTINUED
STRATEGY RISK
Risk trend
Stable
MARKET RISK
Risk trend
Stable
Description
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.
Potential impact
Sudden or extreme changes in
local conditions or in regulatory
requirements may result in a negative
impact to financial performance,
possible restrictions on future growth
opportunities or potential impairments.
Description
Increasing competition across
certain channels through high
promotional activity and competitor
product innovations provides an
on-going challenge.
Potential impact
Potential adverse effect on the Group’s
financial performance if we fail to
adapt successfully where and when
required to meet market challenges.
CUSTOMER CONCENTRATION RISK
Risk trend
Stable
Description
The Group benefits from close
commercial relationships with
a number of key customers.
Potential impact
The loss of one or more of these
customers, or a significant deterioration
in commercial terms, could have a
material impact on Group profitability.
Mitigation
• 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.
Changes during 2015
Global Ingredients commenced
a process to reshape the current
operating model in order to support
our growth ambitions and to best
position us for future opportunities.
Glanbia Performance Nutrition has
also enhanced its organisational
structure and continues to evolve
its strategy by expanding into
new channels.
Mitigation
• We limit the impact of prolonged
competitor challenges in specific
areas through continued channel
and international expansion and
by targeted acquisitions.
• We protect our market positions by
actively monitoring the major trends
impacting our businesses.
• Research and development
expenditure is focused on value-
added and customer-specific
solutions in sectors where we
have significant technical and
market knowledge.
Changes during 2015
The performance nutrition landscape
continues to be fast moving and
competitive, with changes in
consumer channel preferences
and aggressive promotional activity
among competitors.
Where required we continue to invest
in promotional activity to develop our
market position with new product
launches during 2015 such as
Optimum Nutrition Gold Standard
Pre-workout performing well.
Mitigation
• The Group has developed strong
relationships with major customers
by focusing on superior customer
service, product innovation,
quality assurance and cost
competitiveness.
Changes during 2015
We continued to respond to customer
demands through the development
of a branded and ingredient product
portfolio to serve the growing demand
for nutritional products in formats
suitable for healthy and active lifestyles.
• 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.
36
Glanbia plc
Annual Report and Accounts 2015
STRATEGIC REPORT SUPPLIER RISK
Risk trend
Stable
Description
The principal Group ingredient supply
risk relates to the 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.
Potential impact
Adverse impact on earnings.
Mitigation
• 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, our customers
and Glanbia.
• 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.
Changes during 2015
Global Ingredients has significantly
enhanced its Idaho whey processing
facilities and has continued to engage
proactively with the patron supplier
base on milk procurement policy
and milk price to underpin long
term sustainable supply.
STRATEGIC PRIORITY: GROW THROUGH ORGANIC INVESTMENT PROGRAMME
AND ACQUISITION/PARTNER WITH COMPLEMENTARY BUSINESSES
ACQUISITION RISK
Risk trend
Stable
Description
The anticipated benefits of acquisitions
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.
Potential impact
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.
Mitigation
• The Group has acquisition integration
and partnership processes in place to
monitor the performance of acquired
businesses and to implement
corrective actions as required.
• Board approval of the business case
and funding requirements for all
significant investments is obtained.
• Post acquisition completion reviews
are conducted to extract learnings
from previous acquisitions.
• Acquired entity management
teams are typically strengthened
by the transfer of experienced
Glanbia managers, which assists
in increasing the efficiency of
integration efforts.
Changes during 2015
In 2015 the Group acquired thinkThin,
increasing our presence in the nutrient
bar market. thinkThin provides a strong
platform for the Group to enter the
snack products category as well as to
augment the GPN brand portfolio in its
existing channels.
The integration of our 2014
acquisitions, Nutramino and Isopure,
has progressed well and along with
thinkThin they complement and extend
our market leading brand portfolios.
STRATEGIC PRIORITY: DEVELOP TALENT, CULTURE AND VALUES IN LINE WITH OUR GROWING GLOBAL SCALE
TALENT MANAGEMENT RISK
Risk trend
Stable
Description
The Group is dependent upon
our global talent to deliver best in
class portfolio management, brand
management, operational excellence,
science-based innovation and strong
customer relationships.
Potential impact
A failure to retain, attract and/or
develop key talent will impact on
our ability to create sustainable
value for all our stakeholders.
Mitigation
• The Group has implemented strong
recruitment processes, effective
HR policies and procedures, long-
term incentives, robust succession
management planning and a range
of talent management initiatives
including a focused graduate
recruitment programme and a
Group management development
programme.
Changes during 2015
In 2015 we completed an employee
engagement survey and implemented
actions across the Group to address
improvement opportunities identified.
We re-developed and communicated
our Group purpose, vision and
value statements and identified core
behaviours to deliver same across
the Group.
We conducted a comprehensive
talent review of the extended
leadership team.
Glanbia plc
Annual Report and Accounts 2015
37
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT
RISK MANAGEMENT CONTINUED
OTHER RISKS
IT AND CYBER SECURITY RISKS
Risk trend
Increasing
Description
The Group is dependent on robust IT
systems and infrastructure for most
of our principal business processes.
Potential impact
A successful cyber-attack on
our IT infrastructure may result in
significant disruption to our operating
performance; with the potential loss of
sensitive financial and/or commercial
information. Such an attack could
result in serious damage to our
reputation together with the
risk of financial penalties and
consequential customer loss.
Mitigation
• The Group maintains a global
system for the control and reporting
of access to our critical IT systems.
This is supported by on-going testing
of access controls, which include
data leakage/loss risk assessments.
• We have policies in place regarding
the protection of both business and
personal information, as well as the
use of IT systems and applications
by our employees.
• We have systems in place (including
on-going audit activities) to monitor
compliance with relevant privacy
laws and regulations.
Changes during 2015
In general the frequency of
coordinated cyber-attacks has
increased during 2015. The Group
has responded by strengthening
controls and monitoring activities
in this area.
SITE COMPLIANCE RISK AND ENVIRONMENT, HEALTH & SAFETY REGULATION RISK
Risk trend
Stable
Description
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 Health & Safety regulations.
Potential impact
Potential impacts include Health &
Safety risks, reputational damage,
regulatory penalties and an inability
to service customer requirements.
Mitigation
• The Group monitors overall safety and
loss prevention performance through
the Glanbia Risk Management
System (GRMS). This assists
operational management responsible
for site risk. An independent third
party conducts the GRMS reviews,
with the results presented to and
considered by the Audit Committee
on an annual basis.
• The Group continues to invest in
energy efficiency advancements,
carbon reduction and emission
management programmes
to ensure compliance with
environmental regulations.
Changes during 2015
A Group insurance tender was
conducted to ensure that a
comprehensive and cost effective
programme is in place for all
significant insurable risks and
major catastrophes.
An enhanced emphasis was
placed on ensuring all key business
operations have updated business
continuity plans in place with detailed
simulation exercises conducted on
a number of our key operating sites.
PRODUCT SAFETY AND COMPLIANCE RISK
Risk trend
Stable
Description
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
consumer or employee illness.
Mitigation
The Group conforms to all relevant
food safety and quality regulations
and aims to employ best practice
across all its production facilities
to maintain the highest standards
by focusing on:
Changes during 2015
During 2015 we appointed a new
Group Head of Quality & Food Safety
to underpin and further develop the
best practice adopted across the
Group regarding food safety and
quality regulations.
Potential impact
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.
• 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.
38
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Annual Report and Accounts 2015
STRATEGIC REPORT Directors´ report
Group Chairman’s introduction to governance
Governance overview
Board of Directors and senior management
Audit Committee report
Nomination and Governance
Committee report
Remuneration Committee report
UK Corporate Governance Code and ISE Annex
Other statutory information
Statement of Directors’ responsibilities
40
43
48
55
61
66
84
86
90
Glanbia plc
Annual Report and Accounts 2015
39
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GROUP CHAIRMAN’S INTRODUCTION TO GOVERNANCE
FOCUSED ON ROBUST
GOVERNANCE AND
EMBEDDING OUR
PURPOSE, VISION
AND VALUES
We believe that a high standard of corporate
governance supports long-term value
creation and is a key element of our
business success.
HENRY CORBALLY
Group Chairman
DEAR SHAREHOLDER,
I am delighted to present my first corporate governance statement
as your Group Chairman following my appointment in June 2015.
The promotion and maintenance of high standards of corporate
governance is a core element of our Board. I am committed to continuing
the work of my predecessor, Liam Herlihy, in ensuring a well-governed
and effective Board to support the delivery of our strategic priorities.
Our Board strives to continually improve the success of the Group
on behalf of our shareholders. We are committed to promoting good
corporate governance. We understand that a supportive yet challenging
Board is essential to providing strong leadership to the Group Operating
Executive. This protects the interests of shareholders and wider
stakeholders of the Group.
During 2015, the Group adopted new purpose, vision and values
statements with the full endorsement of the Board. These covered five
pillars: ‘the customers’ champion’, ‘performance matters’, ‘find a better
way’, ‘winning together’ and ‘showing respect’. Collectively these pillars
will provide the compass for our journey ahead in achieving our ambitious
growth targets. Siobhán Talbot, the Group Managing Director, ensures
that this approach is effectively implemented across the whole Group and
that all our employees are aware of, and live by, our purpose, vision and
values, and uphold the highest standards of corporate governance.
COMPLIANCE WITH THE CODES
The Group is subject to the UK Corporate Governance Code (2014) 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 2015, with the exception
of the composition of the Board of Directors. In keeping with good
governance, the Board and I are happy that the alternative to following
this provision is justified in our particular circumstances. A detailed
description of how we have applied the principles of the Codes is set out
in the following pages, an index to which is contained on pages 84 to 85.
BOARD EVALUATION
In my role as Group Chairman, I am responsible for ensuring
effectiveness in all aspects of the Board’s role. This includes promoting
effective relationships and open communication between Directors
and encouraging active engagement by all members. I am pleased to
report that the positive outcome of the Board and Committee evaluation
process reflects this effectiveness.
Based on the outcome of the 2015 review, it was concluded that the
Board continues to work very effectively as a cohesive body with a good
balance of support and challenge. The Board rated its performance
as robust and effective in the areas of governance and compliance,
shareholder accountability and relationships, induction and succession
planning. It was also our view that, overall, the principal Committees
continued to function efficiently and effectively. Each of the Directors
was considered to be making a valuable contribution and with proper
commitment, including of time, to their respective roles.
In accordance with our three-year cycle of Board performance
evaluations an external consultant will be engaged to facilitate the
external evaluation of the effectiveness of the Board during the course
of 2016. The external evaluation will supplement our existing internal
Board performance evaluation processes, details of which are set out on
page 47. The last externally facilitated Board evaluation was carried out
in 2013 which resulted in recommendations for improving the Board’s
effectiveness and these were progressed during 2014 and 2015.
40
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT BOARD CHANGES
2015 was another year of change for the Board. At the conclusion of the Annual General Meeting (AGM) on 12 May 2015, Liam Herlihy retired as Group
Chairman, Chairman of the Nomination and Governance Committee and as a Non-Executive Director. David Farrell, Patrick Gleeson and William
Carroll also retired as Non-Executive Directors during 2015.
On 12 June 2015, I was appointed Group Chairman and Chairman of the Nomination and Governance Committee. Patrick Murphy was appointed Vice-
Chairman to replace me. Also on the same date, three new Non-Executive Directors, Patsy Ahern, Jim Gilsenan and Patrick Hogan were appointed on
behalf of Glanbia Co-operative Society Limited (the ‘Society’).
On 15 December 2015, Tom Grant was appointed as a Non-Executive Director on behalf of the Society.
RE-ELECTION OF DIRECTORS
In accordance with the UK Corporate Governance Code (2014), 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 27 April 2016. Additionally, 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.
SUCCESSION PLANNING
During the year, the Nomination and Governance Committee and the Board continued to focus on strengthening the pipeline of executive talent in the
Group. They are committed to building on existing programmes while introducing new initiatives to broaden and develop the strong talent which exists
across the Group.
A comprehensive talent review was presented to the Board by the Group Human Resources & Corporate Affairs Director mapping the strength of our
talent base for senior leadership and outlining successional candidates across senior roles within the Group. Recommendations from this review will
be progressed in 2016.
Development programmes are a key part of our talent management and the Glanbia Management Development Program has been in place for a
number of years and continues to identify and partner key senior talent across the Group, broadening their skillsets and experience to prepare them
for future opportunities.
RELATIONSHIP AGREEMENT
On 10 November 2014, the Company 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. The Relationship
Agreement was amended in 2015 to reflect the agreement between the Company and the Society to further reduce the Society’s representation on
the Board, details of which are set out on page 64. The Society’s shareholding in the Company was reduced from 41.2% to 36.5% during the year.
REMUNERATION AND REPORTING
The attraction, retention and motivation of a valued and highly effective management team are key to achieving our ambition for continued sustainable
growth.
The Remuneration Committee carried out an extensive review of the Group’s remuneration policy and design during 2014 with the advice of Towers
Watson (now named Willis Towers Watson), remuneration consultants, who provided independent external advice in respect of remuneration policy,
pay positioning and best practice.
At the 2015 AGM the shareholders were invited to receive and consider the revised Remuneration policy report, the Remuneration Committee report
and the amendments to the 2008 Long Term Incentive Plan (LTIP). These resolutions were passed by an overwhelming majority, full results of which
are set out on page 79.
Our revised remuneration strategy ensures that the Group has a policy and structure in place to drive and support our strategic business ambitions
and attract, retain and motivate key talent to deliver long term sustainable shareholder value.
RISK MANAGEMENT
Your Board continues to place emphasis on monitoring risk with a structured approach to the management of risk in the Group. While the Board has
ultimate accountability for defining the level of risk appropriate to Glanbia, the responsibility for reviewing the design and implementation of the Group’s
management and internal control systems to mitigate the risks has been delegated to the Audit Committee who played a key role in 2015 in ensuring
the appropriate governance and challenge around risk and assurance is embedded throughout the Group. Our approach to risk is set out in the Risk
Management report on pages 32 to 38.
EXTERNAL AUDITORS
As indicated last year, in light of the requirements of the UK Corporate Governance Code and other recent changes to the EU regulatory framework,
the Audit Committee undertook a competitive tender for the external audit. PricewaterhouseCoopers (PwC) have been the external Auditors of
the Group since the merger of Avonmore Foods plc and Waterford Foods plc in 1997. PwC did not participate in the tender process. This process
involved: presentations to the Audit Committee by three tendering firms, addressing the key business risks and their proposed audit approach;
individual meetings of the tendering firms with key members of the divisional and functional management teams, executive management and members
of the Audit Committee; the presentation of written tender documents; and a final presentation to a selection committee chaired by the Chairman of
the Audit Committee and comprising Executive and Non-Executive Directors, the Group Secretary, the Group Head of Internal Audit and the Group
Financial Controller. The result of this tender process was that, on the recommendation of the Audit Committee, the Board has agreed to appoint
Deloitte, Chartered Accountants as external Auditors for the 2016 financial year, in place of PwC. The appointment will be put to the shareholders
as a non-binding resolution for their consideration at the AGM.
Glanbia plc
Annual Report and Accounts 2015
41
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GROUP CHAIRMAN’S INTRODUCTION TO GOVERNANCE CONTINUED
ENGAGEMENT WITH SHAREHOLDERS
The Company has a very active and extensive investor relations programme. We report our performance to the market on a quarterly basis. In
addition, we keep the investors section of our website, www.glanbia.com/investors, up-to-date with all published results and presentations with a
playback facility of most recent results conference calls freely available. The Group Managing Director, Group Finance Director, Executive Directors
and Head of Investor Relations presented at 13 investor conferences globally and conducted over 400 meetings with the investor community in 2015.
Our dedicated investor relations team engages with investors on a daily basis outside of closed periods and travels to various financial centres around
the world to meet with shareholders and potential shareholders. We are now covered by equity analysts from 10 leading stockbroking firms and they
publish detailed independent research reports on the Company for their clients.
Additionally, whenever possible, all Directors attend the AGM and shareholders are invited to ask questions during the meeting and have an
opportunity to meet with all the Directors following the conclusion of the meeting.
ANNUAL GENERAL MEETING
I welcome questions or comments from shareholders either via our website, www.glanbia.com, or in person at the AGM which will be held at the
Lyrath Estate Hotel, Kilkenny on 27 April 2016.
In the following pages, we explain in greater detail our approach to governance and how the Board and its Committees have fulfilled their governance
responsibilities during the year to ensure that robust governance practices are embedded across the Group.
HENRY CORBALLY
Group Chairman
MORE INFORMATION
Strategic report on pages 2 to 23.
Board of Directors and senior management pages 48 to 54.
Board evaluation pages 40 and 47.
Audit Committee report on pages 55 to 60.
Nomination and Governance Committee report on pages 61 to 65.
Remuneration Committee report pages 66 to 83.
UK Corporate Governance Code and ISE Annex pages 84 and 85.
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Annual Report and Accounts 2015
DIRECTORS’ REPORT 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. Our Governance Framework ensures that policies and procedures set at Board level are effectively communicated
across the whole business.
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
in pages 32 to 38 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, the Group Human Resources & Corporate Affairs Director and the Group
Corporate Development 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 and the Business Unit Chief Executives and has responsibility for the delivery of the Group’s
annual business plan and strategic priorities. The Chief Executive Officers of the Joint Ventures attend meetings by invitation.
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 the Group’s business plan and strategy.
Glanbia plc
Annual Report and Accounts 2015
43
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GOVERNANCE OVERVIEW CONTINUED
BOARD LEADERSHIP AND EFFECTIVENESS CONTINUED
LEADERSHIP
BOARD STRUCTURE
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 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 seven
Non-Executive Directors in 2020, more details of which are set out on page 64 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).
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. 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.
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 33.2% and the share price has risen from €8.24 (at the end of 2012) to €16.95 at financial year end 2015, all underpinned by the
Group’s high standard of corporate governance practices over many years.
BOARD RESPONSIBILITIES
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.
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. Read biography on page 52.
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. Read
biography on page 49.
DIVISION OF RESPONSIBILITIES
THE GROUP CHAIRMAN
Henry Corbally’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. Henry Corbally is also Chairman of
the Nomination and Governance Committee.
Read biography on page 48.
44
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT BOARD ATTENDANCE
The Board had six scheduled meetings in 2015 with Board member meeting attendance as follows:
2015 Board meeting attendance
Director
H Corbally
Mn Keane
P Murphy
S Talbot
P Ahern
W Carroll 1
P Coveney
J Doheny
D Farrell 2
M Garvey
D Gaynor
J Gilsenan 3
P Gleeson 2
V Gorman
T Grant 4
P Haran
B Hayes 5
L Herlihy 2
P Hogan
Ml Keane 6
H McGuire
M Merrick
J Murphy
D O’Connor
B Phelan
E Power 7
Appointed
Number of full years
on the Board
2015 Meeting
attendance
9 June 1999
24 May 2006
26 May 2011
1 July 2009
12 June 2015
26 May 2011
30 May 2014
29 May 2012
26 May 2011
12 November 2013
12 March 2013
12 June 2015
24 May 2006
27 June 2013
15 December 2015
9 June 2005
30 May 2014
11 September 1997
12 June 2015
29 June 2010
1 June 2013
9 June 2005
29 June 2010
1 December 2014
1 January 2013
26 May 2011
16
9
4
6
Less than 1
4
1
3
3
2
2
11
9
2
Less than 1
10
4
18
Less than 1
7
2
10
5
1
3
13
6/6
6/6
6/6
6/6
3/3
4/5
6/6
6/6
3/3
6/6
6/6
3/3
3/3
6/6
1/1
6/6
6/6
3/3
3/3
6/6
6/6
6/6
6/6
6/6
6/6
6/6
1. Retired 6 November 2015.
2. Retired 12 May 2015.
3. J Gilsenan was appointed on 12 June 2015 having previously served 11 full years on the Board.
4. Appointed 15 December 2015.
5. B Hayes was appointed to the Board in 2014 having previously served three full years on the Board.
6. Ml Keane was appointed to the Board in 2010 having previously served two full years on the Board.
7. E Power was appointed to the Board in 2011 having previously served nine full years on the Board.
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.
He coordinates, 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.
Read biography on page 52.
EXECUTIVE DIRECTORS
The Executive Directors are collectively
responsible for the day-to-day running of the
business and developing the Group’s strategy
and budget for Board approval. They monitor
the financial and operational performance of
the Group and review the Group risk register;
allocating resources across the Group within
parameters agreed by the Board. The Executive
Directors are also responsible for developing
leadership and future talent programmes and
securing strong succession planning for the
Group. Read biographies on pages 52 and 53.
NON-EXECUTIVE DIRECTORS
The Non-Executive Directors promote the
highest standards of integrity, probity and
corporate governance throughout the Group,
particularly at Board level. They constructively
challenge and develop proposals on strategy
scrutinising the performance of management
in meeting agreed goals and objectives, and
monitor the reporting of performance. They
review the integrity of financial information,
and ensure that financial controls and
systems of risk management are robust and
defensible. They also determine the three year
remuneration policy for Executive Directors
and have a prime role in appointing and,
where necessary, removing Executive
Directors, and in succession planning.
Read biographies on page 48 to 51.
Glanbia plc
Annual Report and Accounts 2015
45
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GOVERNANCE OVERVIEW CONTINUED
BOARD LEADERSHIP AND EFFECTIVENESS CONTINUED
EFFECTIVENESS
INDUCTION AND BOARD DEVELOPMENT
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.
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 all four business segments, Glanbia Performance Nutrition, Global Ingredients,
Dairy Ireland and Joint Ventures and Associates.
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 October 2015 the Board visited Glanbia
Performance Nutrition in Downers Grove, Chicago.
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 Companies Act 2014 (enacted 1 June 2015), the FRC’s
2014 UK Corporate Governance Code, particularly the fair, balanced and understandable requirements and the reforms to Directors’ remuneration
reporting, viability statements 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.
INFORMATION FOR THE BOARD
The Group Chairman, with the assistance of the Group Managing Director and the 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 coordinated through the
Group Secretary.
COMPOSITION OF THE BOARD
ALLOCATION OF TIME
Strategy
Operational and financial performance
Corporate development
Investor relations
Other
Non-Executive Chairman
nominated by Glanbia
Co-operative Society Limited
Non-Executive Directors
nominated by Glanbia
Co-operative Society Limited
Other Non-Executive Directors
Executive Directors
46
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT BOARD EVALUATION
The Group has established a formal process for the annual evaluation of the performance of the Board, its principal Committees and individual Directors.
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 Group Chairman and Group Managing Director 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.
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 (2014), 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 64 of the Annual Report and is available to view at www.glanbia.com (Society representation on the Board). During 2015, the Company
and the Society agreed to further reduce the number of Society Nominee Directors from 2020 (from eight to seven).
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 2015, 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 Articles of Association 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 election provisions for such Directors in the UKLA Listing Rules.
GLANBIA – DIRECTORS’ TENURE ON THE BOARD
Less than 3 years
Between 3 and 6 years
Between 6 and 9 years
Over 9 years
Glanbia plc
Annual Report and Accounts 2015
47
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT BOARD OF DIRECTORS AND SENIOR MANAGEMENT
GROUP CHAIRMAN AND VICE-CHAIRMEN
HENRY CORBALLY
Group Chairman
MARTIN KEANE
Vice-Chairman
PATRICK MURPHY
Vice-Chairman
Henry Corbally (aged 61), was
appointed Group Chairman on
12 June 2015. Henry was appointed
to the Board on 9 June 1999 and has
served 16 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.
Martin Keane (aged 60), was appointed
Vice-Chairman on 29 June 2010. Martin
was appointed to the Board on 24 May
2006 and has served nine 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 Ornua Co-operative Limited.
Patrick Murphy (aged 57) was appointed
Vice-Chairman on 12 June 2015. Patrick
was appointed to the Board on 26 May
2011 and has served four full years
on the Board. He was nominated for
appointment by Glanbia Co-operative
Society Limited. Patrick farms at
Smithstown, Maddoxtown, Co. Kilkenny.
Patrick is a Director of Farmer Business
Developments plc.
MEMBER: Audit Committee/
Remuneration Committee
CHAIR: Nomination and
Governance Committee
MEMBER: Audit Committee/
Remuneration Committee
MEMBER: Audit Committee/
Remuneration Committee
48
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT BOARD OF DIRECTORS AND SENIOR MANAGEMENT
NON-EXECUTIVE DIRECTORS
PATRICK COVENEY
Non-Executive Director
DAN O’CONNOR
Non-Executive Director
PAUL HARAN
Senior Independent Director
DONARD GAYNOR
Non-Executive Director
Patrick Coveney, (aged 45) was
appointed to the Board on 30 May
2014 and has served 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.
MEMBER: Audit Committee
Dan O’Connor (aged 56) was appointed
to the Board on 1 December 2014 and
has served one full year on the Board.
Dan is a former Non-Executive Director
of CRH plc. 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
Paul Haran (aged 58) was appointed
to the Board on 9 June 2005 and has
served 10 full years on the Board. He
is a Director of a number of companies
including the Mater Private Hospital,
Drury Porter Novelli and Insurance
Ireland. He also chairs Edward Dillon
& Co. Previously he was Secretary
General of the Department of Enterprise
and Employment, Principal of the UCD
College of Business and Law and a
Director of Bank of Ireland, the Road
Safety Authority, the Institute of Public
Administration and chaired the
Qualifications Authority of Ireland. Paul
is a member of the Ministerial Advisory
Council for Public Sector Reform for
Northern Ireland. He graduated from
Trinity College Dublin with a B.Sc.
in Computer Science and an M.Sc.
in Public Sector Analysis. He was
awarded Honorary Doctorates from
both Trinity College Dublin and UCD.
MEMBER: Audit Committee/
Nomination and Governance
Committee/Remuneration Committee
Donard Gaynor (aged 59) was
appointed to the Board on 12 March
2013 and has served two full years
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
Glanbia plc
Annual Report and Accounts 2015
49
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT BOARD OF DIRECTORS AND SENIOR MANAGEMENT
NON-EXECUTIVE DIRECTORS NOMINATED BY GLANBIA CO-OPERATIVE SOCIETY LIMITED
PATSY AHERN
Patsy Ahern (aged 58) was appointed to the Board
on 12 June 2015 and has served less than one full
year on the Board.
JER DOHENY
Jer Doheny (aged 61) was appointed to the Board on
29 May 2012 and has served three full years on the
Board. Jer has completed the University College Cork
Diploma in Corporate Direction.
JIM GILSENAN
Jim Gilsenan (aged 56) was re-appointed to the Board
on 12 June 2015 and has served less than one full year
on the Board in the current term. He previously served
11 full years on the Board. Jim has completed the
University College Cork Diploma in Corporate Direction.
VINCENT GORMAN
Vincent Gorman (aged 59) was appointed to the
Board on 27 June 2013 and has served two full
years on the Board.
TOM GRANT
Tom Grant (aged 61) was appointed to the Board on
15 December 2015 and has served less than one
full year on the Board.
BRENDAN HAYES
Brendan Hayes (aged 55) was re-appointed to the
Board on 30 May 2014 and has served 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.
50
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT PATRICK HOGAN
Patrick Hogan (aged 64) was appointed to the Board
on 12 June 2015 and has served less than one full
year on the Board.
MICHAEL KEANE
Michael Keane (aged 63) was re-appointed to the
Board on 29 June 2010 and has served five full years
on the Board in the current term. He previously served
two full years on the Board.
MATTHEW MERRICK
Matthew Merrick (aged 64) was appointed to the Board
on 9 June 2005 and has served 10 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.
JOHN MURPHY
John Murphy (aged 53) was appointed to the Board
on 29 June 2010 and has served five full years on
the Board. He is Vice-Chairman of the National Dairy
Council. He has completed the University College
Cork Diploma in Corporate Direction.
EAMON POWER
Eamon Power (aged 61) was re-appointed to the Board
on 26 May 2011 and has served four 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.
Glanbia plc
Annual Report and Accounts 2015
51
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT BOARD OF DIRECTORS AND SENIOR MANAGEMENT
GROUP OPERATING EXECUTIVE
SIOBHÁN TALBOT
Group Managing Director
and Executive Director
MARK GARVEY
Group Finance Director
and Executive Director
MICHAEL HORAN
Group Secretary
Michael Horan (aged 51) 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 (aged 51) 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.
Siobhán Talbot (aged 52) 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. She is also a
Director of the Irish Business
Employers Confederation (IBEC).
Prior to joining Glanbia, 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.
52
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT
HUGH MCGUIRE
CEO Glanbia Performance
Nutrition and Executive
Director
Hugh McGuire (aged 45) was appointed
to the Board on 1 June 2013 as an
Executive Director with responsibility
for Glanbia Performance Nutrition.
Hugh joined the Group in 2003 and has
been Chief Executive Officer (CEO) of
Glanbia 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
and Executive Director
MICHAEL PATTEN
Group Human Resources &
Corporate Affairs Director
TOM TENCH
Group Corporate
Development Director
Brian Phelan (aged 49) 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 Glanbia Cheese
Limited. 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.
Michael Patten (aged 53), is Group
Human Resources & 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.
Tom Tench (aged 45), 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.
Glanbia plc
Annual Report and Accounts 2015
53
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT BOARD OF DIRECTORS AND SENIOR MANAGEMENT
GROUP MANAGEMENT COMMITTEE
COLIN GORDON
CEO Consumer Products
COLM EUSTACE
CEO Agribusiness
RAIMUND HOENES
CEO Customised Solutions
Colin Gordon (BBS, MBS, FMII) (aged 54) 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.
Colm Eustace (B.Ag. Sc., C. Dip. AF., MBA) (aged 54)
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.
Raimund Hoenes (Ph.D., M.Sc.) (aged 49), 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.
JERRY O’DEA
CEO and President Ingredient
Technologies
Jerry O’Dea (B. Sc. Dy., MBA) (aged 56), 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.
JIM BERGIN
CEO Glanbia Ingredients Ireland Limited
PAUL VERNON
CEO Glanbia Cheese Limited
Jim Bergin (B.Comm., M.Sc. Management Practice)
(aged 53) 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. Jim is also a Director of Ornua
Co-operative Limited.
Paul Vernon (aged 55) 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.
54
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT AUDIT COMMITTEE REPORT
SAFEGUARDING
SHAREHOLDER VALUE
Effective risk management and internal
control systems help protect our people,
business and reputation.
DAN O’CONNOR
Audit Committee Chairman
DEAR SHAREHOLDER,
As Chairman of the Committee, I am pleased to present the report of
the Committee for the year ended 2 January 2016. During the year, the
Audit Committee devoted significant time to fulfilling its key oversight
responsibilities including:
• Reviewing the design and implementation of the Group’s systems
of risk management and internal control;
• Monitoring the integrity of the Group’s financial reporting;
• Assessing the effectiveness of the internal and external audit
processes; and
• Overseeing the external audit tender process.
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 in line with the revised UK Corporate Governance Code
and the new guidance on risk management and internal control.
The Committee has been delegated responsibility by the Board for the
on-going monitoring of the effectiveness of the Group’s systems of risk
management and internal control and for conducting a robust assessment
of the principal risks, including those that would threaten the Group’s
business model, future performance, solvency and liquidity. Our focus over
the past number of years has been to embed a robust risk identification and
assessment process across the Group. This has enabled the Board to fully
consider these risks as part of our three year Group strategy review process.
As a result we are well positioned to confirm that both the Committee and
the Board consider it appropriate to adopt the going concern basis of
accounting with no material uncertainties as to our ability to continue to
do so. The work performed in this regard is set out on page 32.
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, the Group Head of Internal Audit prepares a
report for the Committee setting out the key considerations in arriving at
the statement including the documented processes for the preparation
of the 2015 Annual Report and Accounts.
As highlighted in last year’s Audit Committee report, the Committee
engaged in a formal tender process for the external audit of the Group’s
Financial Statements in respect of the year commencing 3 January 2016.
This followed the finalisation of the EU audit sector reforms and a detailed
review of their impact on Glanbia. I oversaw the tender process on behalf
of the Committee and ensured it was conducted in a fair and objective
manner. Following the conclusion of this process, the Board has agreed
to appoint Deloitte as our new Group Auditors. Full details of the tender
process are set out on page 60. The 2015 Group audit will be the last
external audit conducted by PricewaterhouseCoopers (PwC) who have
been our Group Auditors for the past 18 years. I would like to record
my thanks to all the partners and staff of PwC for their many years of
excellent service to Glanbia.
On behalf of the Audit Committee
DAN O’CONNOR
Audit Committee Chairman
Glanbia plc
Annual Report and Accounts 2015
55
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT AUDIT COMMITTEE REPORT CONTINUED
GOVERNANCE
The Audit Committee was in place throughout 2015.
As of 23 February 2016, 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 64 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. The record of members attendance for meetings held in 2015 is outlined in the 2015 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. Outlined below is an analysis of the Committee’s current membership, 2015 meeting
attendance and primary activities during 2015.
AUDIT COMMITTEE AS OF 23 FEBRUARY 2016
Member
D O’Connor (B.Comm, FCA)
P Coveney (B.Comm, M.Phil, D.Phil)
D Gaynor (FCA)
P Haran (B.Sc., M.Sc.)
H Corbally
Mn Keane
P Murphy
Appointed
1 December 2014
30 September 2014
24 February 2015
9 June 2005
7 July 2005
29 June 2010
12 June 2015
2015 AUDIT COMMITTEE MEETING ATTENDANCE
There were six scheduled meetings of the Audit Committee during the year ended 2 January 2016. 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.
Member
Appointed
Retired/Resigned
Number of full years
on the Committee
2015 meeting
attendance
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.)
D Gaynor (FCA)
M Merrick
P Murphy
1 December 2014
8 June 2001
29 June 2010
7 July 2005
30 September 2014
26 July 2011
9 June 2005
24 February 2015
26 July 2011
12 June 2015
12 May 2015
24 February 2015
24 February 2015
1
13
5
10
1
3
10
Less than 1
3
Less than 1
6/6
2/2
6/6
6/6
6/6
1/2
6/6
4/4
2/2
4/4
See pages 48 and 49 for more information on current Audit Committee members.
MEMBERSHIP
ALLOCATION OF TIME
Non-Executive Chairman
Non-Executive Directors
nominated by Glanbia
Co-operative
Society Limited
Other Non-Executive
Directors
Financial and corporate
governance updates
External Auditors
Risk management and
internal control systems
Internal audit
Other
56
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT
KEY MATTERS CONSIDERED BY THE COMMITTEE IN 2015
At our meetings during 2015 and to date in 2016, the Committee considered, amongst other matters, the following:
FINANCIAL REPORTING
• Reviewed the Group’s half-year results, 2015 full-year Financial Statements and 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 2015 Financial Statements;
• Reviewed reports from management and the external Auditors on accounting, financial reporting, treasury and taxation issues;
• Reviewed the Group’s policy of highlighting significant items within the Group’s results as exceptional items. The Committee reviewed the items
classified as exceptional in 2015 and following a review of supporting calculations, documentation and assumptions deemed the classification and
disclosures in the financial statements to be appropriate. Detailed disclosures are included in Note 6 to the Financial Statements;
• Reviewed the accounting disclosures and asset/liability valuations relating to the acquisition of thinkThin;
• 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;
• Received a report on the effectiveness of the Group’s financial reporting controls and systems of risk management and internal control from the
Group Head of Internal Audit;
• Received a presentation from the Group Head of Tax on tax matters including legislative and other developments, team structure and controls;
• Considered the Directors’ Responsibility Statement and the principal risks and uncertainties of the Group within the 2015 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 the Group’s obligations with regard to the new viability statement;
• Recommended the approval of the Group’s half-year results, 2015 full-year Financial Statements and Annual Report to the Board; and
• The Committee considered and were satisfied with the events after the reporting period note in the Financial Statements (Note 39).
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;
• Received a presentation from the Group Head of Quality and Food Safety on our controls in this area;
• Received a presentation on IT risks from the Group Head of IT which considered key risk areas such as cybersecurity, data privacy and the
non-availability of mission critical systems; and
• See pages 32 to 38 for more information on our approach to risk management.
INTERNAL AUDIT
• Held a private review meeting with the Group Head of Internal Audit;
• Received presentations covering team development, external resource benchmarking reports, 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, which included the Group’s new Safecall Speak-up service;
• Considered the revised Group Code of Conduct and approved all updates noted;
• 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 2015 audit and a summary of internal control observations, including
observations in respect of IT controls;
• Assessed the effectiveness of the Auditors, the audit fee, the level of non-audit services provided and the Auditors’ independence;
• Considered the external audit plan and review of corporate reporting updates;
• Conducted an external audit tender process described in detail on page 60; and
• Considered the adequacy of the transition plan for the agreed change in external Auditors in 2016.
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.
Glanbia plc
Annual Report and Accounts 2015
57
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT AUDIT COMMITTEE REPORT CONTINUED
2015 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 and the Board consider it appropriate to adopt the going
concern basis of accounting with no material uncertainties as to the Group’s ability to continue to do so. The Group will be able to continue in operation
and meet its liabilities taking into account its current position and principal risks. The Committee also reviewed the Directors’ Viability Statement which
covers the next three financial years (2016-2018). This statement is supported by the work conducted by the Board during its two day strategy and
budget review session in December 2015 and the Board’s on-going review of monthly and year-to-date business performance versus budget and
forecast. Further detail is given within the Risk Management section of the Strategic report on page 32.
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 2015 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 2015 Financial
Statements and how these were addressed are outlined below:
2015 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, cashflow forecasts and associated discount rates;
• Detailed reports to support the recoverable value of the balances included in Note 14 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 appropriate;
• 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 14,
key assumptions and conclusions are appropriate.
Acquisition
accounting
• The Committee reviewed external professional advice obtained in relation to the key assumptions used to assess asset
valuations, long term business and macro-economic projections and 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 2015 was appropriate.
Further details of the business combinations undertaken in 2015 are included in Note 37 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;
• 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 increased focus on international legislation and compliance; and
• The Committee discussed the basis and appropriateness of the provisions with the external Auditors.
Following these enquiries, the Committee is satisfied that the key assumptions governing the calculation of tax provisions
within the Financial Statements are appropriate.
Revenue
recognition
• The Committee considered the extent of rebate and deduction claims across the Group where the amounts payable can
vary depending on the arrangements made with individual customers and the volume of trade.
• This included understanding the basis behind any significant year-end provisions to ensure they were adequate
and appropriate.
Following these discussions, the Committee is satisfied that the basis behind the year-end rebate provisions within the
Financial Statements is appropriate.
58
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT REVIEW OF EXTERNAL AUDITORS
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
in February 2016 following the completion of the 2015 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, which has been updated to reflect the EU audit reform legislation requirements, provides clear
definitions of services that the external Auditors 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 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, is approved in advance by the Chairman of the Committee and does not exceed the thresholds defined by EU legislation.
The Committee also considers the performance of the external Auditors each year, including audit partner rotation requirements, 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 partner was appointed as lead engagement partner for the Group in 2013.
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 PwC for audit related
and non-audit related services are analysed in Note 5 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 taxation work for potential acquisitions and a broad
range of Group tax consulting advice. PwC 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
2015
2014
2013
34%
42%
43%
58%
66%
57%
0%
20%
40%
60%
80%
100%
Statutory audit and other
assurance services
Tax advisory and other
non-audit services
While the Committee is satisfied with the independence and objectivity of the current external Auditors, it anticipates that the level of non-audit fees will
reduce significantly in 2016 following the Board’s decision to appoint Deloitte as our new Group Auditors for the financial year commencing 3 January
2016. This is primarily as a result of the Committees’ decision to restrict the external Auditors’ involvement in due diligence and taxation consulting
services in line with recent EU legislative changes. The Committee will continue to monitor the type and level of services provided to prevent any
perceived or actual impact on the Auditors’ independence.
Glanbia plc
Annual Report and Accounts 2015
59
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT AUDIT COMMITTEE REPORT CONTINUED
REVIEW OF EXTERNAL AUDITORS CONTINUED
AUDITOR TENDERING AND APPOINTMENT
The Audit Committee oversees the relationship with the external Auditors and is responsible for considering and making recommendations to the
Board in relation to the appointment, re-appointment or removal of the Company’s external Auditors. PwC have been the Group’s Auditors since
the merger of Avonmore Foods plc and Waterford Foods plc in September 1997 (18 years).
As noted in last year’s Audit Committee report, the Committee, following a detailed review of EU audit reform legislation, the audit tendering
recommendations contained in the UK Corporate Governance Code, the Financial Reporting Council (FRC) guidance for Audit Committees and market
practice in Ireland and the UK, recommended to the Board that the external audit for the year commencing 3 January 2016 should be put out to tender,
a process not previously undertaken by the Group. It was also recommended that the incumbent auditor, PwC, would not be invited to tender given
the EU audit reform legislation which limits audit tenure. As such, the current Auditors, PwC, will resign as Auditors of the Company prior to the Annual
General Meeting (‘AGM’) on 27 April 2016.
The Committee agreed that the Audit Committee Chairman would 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. 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 request for proposal (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 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. The RFP documents were issued to the shortlist of invited firms
in March 2015 and key site visits were held for participants, in Ireland and the USA, including detailed site management presentations. The Committee
believes that this time investment promoted strong bidder engagement and resulted in effective participant presentations to the Audit Committee
in June 2015. These presentations were also attended by the Group Managing Director, Group Finance Director, Group Secretary, Group Financial
Controller and Group Head of Internal Audit.
Following these final presentations and discussions, the Committee recommended to the Board that Deloitte be appointed as the external Auditors.
The Board accepted this recommendation and appointed Deloitte as the external Auditors for the year commencing 3 January 2016 with effect from
the conclusion of the AGM on 27 April 2016. The appointment will be put to shareholders as a non-binding resolution for their approval at the AGM.
PwC have confirmed that there are no matters in connection with their proposed resignation as Auditors which need to be brought to the attention
of shareholders.
60
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT NOMINATION AND GOVERNANCE COMMITTEE REPORT
EMPOWERING THE
BOARD TO MEET THE
GROUP’S STRATEGIC
OBJECTIVES
The Committee ensures the Board
comprises individuals with the necessary
skill, knowledge and experience to ensure
the effective management of the
Group’s expanding business and
delivery of its strategic objectives.
HENRY CORBALLY
Nomination and Governance
Committee Chairman
DEAR SHAREHOLDER,
Having succeeded Liam Herlihy as Chairman of the Nomination and
Governance Committee following his retirement, I am pleased to present
to you the Nomination and Governance Committee report for 2015
outlining the work performed by the Committee during the year.
2015 was another year of significant change for the Board following the
retirement of Liam Herlihy as Group Chairman in May 2015. Liam served
on the Board for nearly 18 years; he joined the Board in 1997 and was
appointed Vice-Chairman in 2001 and Group Chairman in 2008. Liam
made an enormous contribution to Glanbia, his depth of experience
and knowledge of the Group provided strong and focused leadership
during a hugely important period of transformation and it is an honour
to succeed him.
Patrick Murphy was appointed Vice-Chairman in succession to me.
Other significant changes to the Board during 2015 were the retirement
of William Carroll, David Farrell and Patrick Gleeson as Non-Executive
Directors. Both William and David had served on the Board for four years
and Patrick had served on the Board for nine years.
Four new Non-Executive Directors: Patsy Ahern, Jim Gilsenan, Tom
Grant and Patrick Hogan were appointed to the Board following their
nomination by Glanbia Co-operative Society Limited (‘the Society’).
The following pages provide more details on the roles and responsibilities
of the Nomination and Governance Committee and our highlights and
achievements during 2015. I am available at any time to discuss any
matters that any shareholder may wish to raise.
On behalf of the Nomination and Governance Committee.
HENRY CORBALLY
Nomination and Governance Committee Chairman
Glanbia plc
Annual Report and Accounts 2015
61
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOMINATION AND GOVERNANCE COMMITTEE REPORT CONTINUED
OUR 2015 HIGHLIGHTS
• Considered and recommended the appointment of Henry Corbally as Group Chairman.
• Considered and recommended the appointment of Patrick Murphy as Vice-Chairman.
• Considered the nomination by the Society of Patsy Ahern, Jim Gilsenan, Tom Grant and Patrick Hogan as Non-Executive Directors.
• Recommended the revision of the Memorandum and Articles of Association for the re-election of directors to reflect the changes required under the
United Kingdom Listing Authority (UKLA) Listing Rules.
• Oversaw governance aspects of the Board and its Committees.
• Succession Planning.
• Amendment to the Relationship Agreement with Glanbia Co-operative Society Limited.
GOVERNANCE
The Committee was in place throughout 2015. Henry Corbally the new Group Chairman replaced Liam Herlihy as Chairman of the Committee on
12 June 2015.
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.
2015 COMMITTEE MEETING ATTENDANCE
Member
H Corbally
D Gaynor
P Haran
D O’Connor
L Herlihy 1
1. Retired 12 May 2015.
Appointed
Number of full years
on the Committee
2015 Meeting
attendance
12 June 2015
12 December 2014
9 June 2005
12 December 2014
Less than 1
1
10
1
5 June 2008
6
0/0
2/2
2/2
2/2
1/1
See pages 48 and 49 for more information on current Nomination and Governance Committee members.
COMPOSITION OF THE BOARD
ALLOCATION OF TIME
Non-Executive Chairman
nominated by Glanbia
Co-operative Society Limited
Non-Executive Directors
Board and Committee composition
Succession planning
Board effectiveness
Other
62
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT ACTIVITIES DURING 2015
The principal activities undertaken by the Committee in 2015 are as follows:
APPOINTMENT OF NEW GROUP CHAIRMAN
Liam Herlihy retired as Group Chairman on 12 May 2015 following the conclusion of 2015 Annual General Meeting (AGM) and was succeeded by
Henry Corbally (former Vice-Chairman) who was appointed as new Group Chairman on 12 June 2015 on the recommendation of the Committee.
Mr Corbally was considered independent on his appointment.
APPOINTMENT OF NEW VICE-CHAIRMAN
Following the appointment of Henry Corbally as new Group Chairman, the Committee recommended the appointment of Patrick Murphy as new
Vice-Chairman to replace Henry Corbally.
APPOINTMENT OF NEW NON-EXECUTIVE DIRECTORS
The Committee recommended the re-appointment of Jim Gilsenan and also the appointment of Patsy Ahern, Tom Grant and Patrick Hogan
as Non-Executive Directors. The Committee noted their nomination by the Society and their experience and suitability and recommended their
appointment to the Board. Patsy, Jim and Patrick were approved by the Board on 12 June 2015. Tom was approved by the Board on 15 December
2015. The Committee did not use an external search consultancy or open advertising for these appointments or the appointment of the Group
Chairman, as it was not deemed necessary.
AMENDMENT TO THE MEMORANDUM AND ARTICLES OF ASSOCIATION
The Committee recommended the adoption of a new Article 84(c) in response to the new United Kingdom Listing Authority (‘UKLA’) Listing Rule 9.2.2A
which requires the Company to have a constitution that allows the election and re-election of independent Directors to be conducted in accordance with
the new election provisions for independent Non-Executive Directors in the UKLA Listing Rules. These changes were approved at the AGM in 2015.
The new UKLA Listing Rules require a dual voting process on the election or re-election of independent directors at general meetings for listed
companies which have a controlling shareholder. The dual approval process requires such appointments to be approved by independent shareholders
(those shareholders other than the controlling shareholder and its concert parties) as well as by shareholders as a whole. This is on the basis that
independent directors act as an important source of challenge and control and the Listing Authority therefore sees it as essential that minority
shareholders have a proper say in their election.
RELATIONSHIP AGREEMENT WITH THE SOCIETY
In compliance with UKLA Listing Rule 9.2.2A, 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 64 will apply with respect to the composition and size of the Board. These provisions reflect 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.
This Relationship Agreement was amended in 2015 to reflect the agreement between the Company and the Society to further reduce the Society’s
representation on the Board, details of which are set on page 64. This was agreed as part of the Society’s agreement to reduce its shareholding to
36.5% of the Company.
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 64), 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 and amended in 2015 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 64.
The re-election of the Society Nominee Directors shall not therefore require separate approval by independent shareholders.
COMMITTEE CHANGES
Changes in the composition of the Committees on the recommendation of the Committee are set out below.
Henry Corbally was appointed Chairman of the Nomination and Governance Committee on 12 June 2015. Additionally, at a meeting of the Committee
held on 13 January 2015, 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.
Glanbia plc
Annual Report and Accounts 2015
63
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOMINATION AND GOVERNANCE COMMITTEE REPORT CONTINUED
GLANBIA CO-OPERATIVE SOCIETY LIMITED – RIGHT TO NOMINATE 14 OF THE COMPANY’S DIRECTORS
The Society currently owns 36.5% of the issued share capital of the Company. During 2012 (and amended in 2015), 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 would 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 2019 the number of Society Nominee Directors on the Board will reduce to eight;
• From 2020 the number of Society Nominee Directors on the Board will reduce to seven;
• 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 33% of the issued share capital, discussions will take
place regarding a further reduction in the size of the Society’s representation on the Board.
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 IRISH CORPORATE
GOVERNANCE ANNEX AND THE UK CORPORATE GOVERNANCE CODE (2014) (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 ten years (six 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 transition
of Board and Committee experience and knowledge and help to integrate the recently appointed independent Non-Executive Directors and new Group
Chairman following the 2015 AGM. This decision was subject to a rigorous review in line with the Company’s policy on the appointment of independent
Non-Executive Directors adopted in 2014.
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 2015 AGM, with the exception of Liam Herlihy, David Farrell and Patrick Gleeson who were not put forward for
re-election as they had indicated their intention to retire at the conclusion of the AGM.
All Directors are seeking re-election at the 2016 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 40.
Additionally in 2016 (as 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.
64
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT 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 Kilmainhamwood, Kells, Co. Meath, but the Committee
and the Board consider that this does not interfere with the discharge of his duties to the Group.
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.
SUCCESSION
Succession planning and talent development provided much focus during the year. The Committee and the Board remain committed to broadening
and developing the strong talent which exists across the Group. This is also referenced on page 41.
DIVERSITY
The Committee at the current time has not 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 (which will reduce to 10 later in 2016), 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.
Glanbia plc
Annual Report and Accounts 2015
65
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT REMUNERATION COMMITTEE REPORT
ENABLING GROWTH
AMBITIONS THROUGH
INDIVIDUAL AND
COLLECTIVE
PERFORMANCE
“The remuneration strategy is designed
to ensure that the Group has in place
a policy and structure that meets the
Group’s strategic business ambitions
and attracts, retains and motivates key
talent to deliver long term sustainable
shareholder value.”
DONARD GAYNOR
Remuneration Committee Chairman
66
Glanbia plc
Annual Report and Accounts 2015
DEAR SHAREHOLDER,
On behalf of the Remuneration Committee, I am pleased to present the
Remuneration Committee report for the year ended 2 January 2016.
The Group’s remuneration policy is reviewed every three years, the
last review was in 2014 with changes effective 2015 through to 2017.
Following the Remuneration Committee and the Board’s unanimous
approval, an advisory non-binding resolution to approve the remuneration
policy for the period 2015-2017 and an advisory non-binding resolution to
approve the 2014 Remuneration Committee report was put to the Annual
General Meeting (AGM) on 12 May 2015 together with an ordinary resolution
to approve amendments to the 2008 Long Term Incentive Plan (‘LTIP’).
I am pleased to report that all three resolutions received the overwhelming
support of shareholders at the AGM in May 2015. No changes are being
proposed to the current remuneration policy, which is outlined on pages
69 to 73.
REMUNERATION POLICY AND PRINCIPLES
The Group’s current remuneration policy reflects the strong growth
achieved and the stated ambition for this growth to continue into the
future, supported by our business strategies. This growth is dependent
on us continuing to drive for sustainable performance through each
business segment, as well as the overall Group.
The attraction, retention and motivation of a valued and highly effective
management team are key to achieving this growth ambition.
This is reflected in the principles which underpin the current
remuneration policy:
• Global context – strong emphasis on the global nature of the Group
and therefore global market references for remuneration;
• Strong alignment with business performance – clear linkage of
Executive Director remuneration to Group performance, particularly
business segment metrics, where relevant;
• Rewarding sustained performance – higher weighting on long
term incentives, with market benchmarking reflecting trends towards
Europe and US markets; and
• Greater alignment with shareholders/share value growth –
delivery of remuneration through shares, increased shareholding
requirements, extended LTIP holding period, malus and claw back
provisions together with increased LTIP participation below Executive
Director level (both in terms of number of participants and quantum).
BUSINESS PERFORMANCE AND REWARD OUTCOMES FOR 2015
The Executive Directors participate in two variable remuneration plans, an
Annual Incentive and a LTIP, both designed to reward Executive Directors
for performance, based on both business and personal objectives.
1) The Annual Incentive for 2015 is based on a combination of personal
objectives, year-on-year growth in annual adjusted Earnings Per Share
(EPS) on a constant currency basis, EBITA (Earnings Before Interest,
Tax and Amortisation) performance and Operating Cash Flow (OCF).
OCF was introduced through the 2014 remuneration review and
implemented for 2015.
2) The 2013 share awards under the 2008 Long Term Incentive Plan
(2008 LTIP) in respect of performance in the three year period to
2 January 2016 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).
The Group’s outcome against the outlined performance conditions
has been independently verified by external advisers on behalf
of the Remuneration Committee.
DIRECTORS’ REPORT Whilst the external conditions have been challenging for 2015, the Group again delivered another strong performance. Growth in adjusted EPS on
a constant currency basis for 2015 was 10.6%, aligning with the full year guidance of 9% to 11%. On a reported basis adjusted EPS grew by 29.4%
in the year. ROCE was 13.9% for 2015.
Against stretching performance conditions, the share awards granted to Executive Directors in 2013, under the 2008 LTIP, will vest at a rate of 74.98%
no earlier than 23 April 2016, the three year anniversary of their grant. The final vesting of the 2013 share awards will be subject to a post vesting
holding period of one year in line with the amendments approved by shareholders at the 2012 AGM.
Details of both the 2015 Annual Incentive and 2013 share awards for Executive Directors are included on pages 75 and 77.
Aligned with our remuneration policy, the performance targets for our incentive schemes reflect stretch business metrics and targets which will enable
us to achieve our stated ambition for continued growth. Business performance has been strong and will deliver incentive awards under the 2015 Annual
Incentive scheme and the share awards granted in 2013 under the 2008 LTIP. Whilst these incentive awards are not at the maximum opportunity level
they fairly and transparently recognise business performance against our stretch targets. Through the construct of the Annual Incentive scheme there
continues to be an opportunity to differentiate personal performance, relative to peers. The out-turn of the 2015 Annual Incentive scheme and the 2008
LTIP demonstrate how stretching targets focus, drive and recognise individual and collective performance.
NON-EXECUTIVE DIRECTOR REMUNERATION
The fees paid to Non-Executive Directors were adjusted as part of the overall remuneration policy review carried out in 2014 and no further
amendments are planned for 2016.
RELEVANT REMUNERATION
The Committee complies with all relevant reporting and legislative requirements as required for an Irish incorporated company with a primary listing on
the Irish Stock Exchange. Additionally the Committee monitors and incorporates, as appropriate, best practice developments for remuneration policies.
Best disclosure practice is reflected in the remuneration report through compliance with Irish regulations. Whilst the Company is not subject to UK
regulatory requirements, the Company has a secondary listing on the London Stock Exchange and as such we integrate, on a voluntary basis to the
extent possible under Irish law, best practice approaches from the UK.
The views of the Company’s shareholders are very important to us. The Remuneration Committee continues to acknowledge and actively listen to
the views of the shareholders when determining the remuneration policy and making remuneration decisions. Additionally, the Committee welcomes
independent and expert advice in developing and implementing remuneration policy and decisions.
VOTING
An advisory non-binding resolution to approve the Remuneration Committee report will be put to the AGM in April 2016 (excluding the part containing
the Directors’ remuneration policy 2015-2017 which was overwhelmingly approved at the 2015 AGM).
The Committee continues to be committed to ensuring the Group’s remuneration policy is aligned to our shareholders’ best interests, is compliant with
relevant legislation and enables the Group to attract, retain and motivate a highly effective management team to meet the Group’s objectives.
DONARD GAYNOR
Remuneration Committee Chairman
Glanbia plc
Annual Report and Accounts 2015
67
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT REMUNERATION COMMITTEE REPORT CONTINUED
THE REMUNERATION COMMITTEE
REMUNERATION COMMITTEE ACTIVITY 2015
OUR 2015 HIGHLIGHTS
• Implementation of the executive remuneration policy and design as approved at the 2015 AGM.
• Implemented revised long term performance metric weightings for the Group Managing Director and Group Finance Director of EPS (50%)
relative to ROCE (30%) and TSR (20%).
• Implemented revised long term performance metrics to incorporate business segment EBITA and business segment ROCE where appropriate.
• Implemented revised Annual Incentive scheme, with stand-alone reward for business and personal performance.
• Reviewed the outcomes of Group performance and personal targets under the 2014 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 into shares.
• Reviewed and approved the vesting level for share awards granted in 2012 under the 2008 LTIP.
• Reviewed and approved all share awards made under the 2008 LTIP during 2015, 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.
• Reviewed Irish Defined Benefit Pension Schemes resulting in the de-risking and winding up of a number of the smaller schemes.
ROLE & KEY RESPONSIBILITIES OF THE REMUNERATION COMMITTEE
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.
COMPOSITION OF THE REMUNERATION COMMITTEE
The Remuneration Committee was in place throughout 2015. 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 & 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 Group Secretary
acts as secretary to the Remuneration Committee.
REMUNERATION COMMITTEE MEETINGS
2015 REMUNERATION COMMITTEE MEETING ATTENDANCE
Member
D Gaynor
P Haran
Mn Keane
H Corbally
D O’Connor
P Murphy
L Herlihy 1
1. Retired 12 May 2015.
Appointed
13-May-14
09-Jun-05
29-Jun-10
26-Jul-11
01-Dec-14
12-Jun-15
08-Jun-01
Number of full years
on the Committee
2015 Meeting
attendance
1
10
5
4
1
Less than 1
13
5/5
5/5
5/5
5/5
4/5
2/2
2/2
REMUNERATION COMMITTEE MEMBERSHIP
REMUNERATION COMMITTEE ALLOCATION OF TIME
Non-Executive Chairman
Non-Executive Directors
Non-Executive Directors
nominated by Glanbia
Co-Operative
Society Limited
Framework and Policy
Annual Incentive Plan
Long Term Incentive Plan
Pension
Total Compensation Package
Other
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Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT REMUNERATION COMMITTEE ADVISORS
The Remuneration Committee aims to ensure that decisions on executive remuneration are objective and independent. Towers Watson (now named Willis
Towers Watson following a merger in early 2016), remuneration consultants, have been engaged by the Remuneration Committee to provide independent
external advice in respect of remuneration policy, pay positioning and best practice. Willis 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). Willis Towers Watson fees for advising the Remuneration Committee during the year were €122,000.
The Remuneration Committee is satisfied that the advice provided raises no conflict of interest as a result of other services from Willis Towers Watson.
Arthur Cox are engaged to provide legal advice to the Remuneration Committee. Arthur Cox 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, POLICY & PURPOSE
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 Total Shareholder Return 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 appropriate to reflect unique geographic
circumstances, 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 stretching Group
and individual performance measures.
The Group KPIs, which are detailed on pages 8 and 9, 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 the following pages.
KEY ELEMENTS OF REMUNERATION FOR EXECUTIVE DIRECTORS
The following table details the remuneration policy for the Group’s Executive Directors as approved by Shareholders at the 2015 AGM and is applicable
for the three year period, 2015 to 2017 inclusive.
Description
Objective
Description and maximum value
Performance measures
Base Salary (fixed)
Annual fixed pay
Provide competitive base pay
which reflects market value of
role, job size, responsibility and
individual skills and experience.
Short Term Performance Related Incentive (variable)
Annual Incentive payment
only earned if agreed
target performance
is achieved
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.
Individual performance, with
targets and assessment
determined annually.
Based on growth in annual Group
adjusted EPS on a constant
currency basis, Group operating
cashflow, business segment
EBITA (where appropriate)
and individual performance
objectives, all as determined by
the Remuneration Committee
annually.
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.
The Annual Incentive scheme rewards
achievement of specific short term
annual performance metrics.
Group Executive Directors can earn 75%
of Base Salary at target performance and
up to 150% for maximum performance.
The proportion of the Annual Incentive
earned in excess of 75% of Base Salary
is deferred, once the appropriate taxation
and social security deductions have been
made, 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.
Glanbia plc
Annual Report and Accounts 2015
69
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT REMUNERATION COMMITTEE REPORT CONTINUED
SECTION A: DIRECTORS’ REMUNERATION POLICY REPORT CONTINUED
KEY ELEMENTS OF REMUNERATION FOR EXECUTIVE DIRECTORS CONTINUED
Description
Objective
Description and maximum value
Performance measures
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.
For business segment Executive
Directors, the weighting of the
award is:
• 40% based on Group adjusted
EPS on a reported basis;
• 15% based on Group ROCE;
• 15% based on Relative TSR
against the STOXX Europe 600
Food and Beverage index;
• 20% based on business
segment EBITA and;
• 10% based on business
segment ROCE.
Performance is measured over
a three year period.
The Remuneration Committee
has discretion to amend the
financial performance targets
over the performance period to
take account of acquisitions and
disposals where appropriate.
Straight line pro rata vesting
between threshold and maximum
for each of the performance
conditions.
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.
Long Term Performance Related Incentive (variable)
Long Term Incentive Plan
under which shares are
granted in the form of
a provisional allocation
of shares for which no
exercise price is payable
To align the interests of Executive
Directors and shareholders
through a long term share
based incentive linked to
share ownership and holding
requirements.
Long Term Incentive individual annual
award level of a maximum of 250% of
Base Salary. Set dependent on the level of
job responsibilities and with reference to
companies of similar size and complexity
in Europe and USA.
To focus on greater alignment
with shareholders, long term
retention and reward for
sustainable performance.
In all cases, 25% vests at threshold
performance and 100% vests at
maximum with straight line vesting
in between these levels.
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’s 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 will be 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 report will be subject to a general
shareholder non-binding advisory vote.
LTIP awards granted from 2015 are
subject to claw back and malus (for a
period of two years following vesting) to
the extent deemed appropriate by the
Remuneration Committee in line with
best practice.
Determined as a % of Base Salary.
Pension (fixed)
Retirement Benefits
Provide competitive,
affordable and sustainable
retirement benefits.
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Annual Report and Accounts 2015
DIRECTORS’ REPORT Description
Objective
Description and maximum value
Performance measures
Other Benefits (fixed)
Car benefit or equivalent,
suitable medical
insurance, re-location
expenses (if applicable)
and overseas allowance
where appropriate
Provide competitive benefits
which recognise market value of
role, job size and responsibility.
Determined in consideration of the level of
responsibilities and local market practice.
Shareholding Requirement
Minimum share ownership
requirements to be built
up over a five year period
Ensure a greater alignment with
shareholders’ interests.
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.
Executive Directors 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.
The content of the table above is consistent with the policy approved by shareholders and is inclusive of formatting and language refinements to give
better clarity.
ELEMENTS OF REMUNERATION BEYOND EXECUTIVE DIRECTORS
The Group’s remuneration principles and policy as outlined in the preceding tables are used for the Group’s Executive Directors. Below this level
across the Group the same principles and policy are also applied, as far as possible, 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.
The Annual Incentive potential is 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.
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.
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 is
focused on appropriate and specific business unit measures, as determined
by the Remuneration Committee.
Shareholding
Guidelines
Ensure a greater alignment with
shareholders’ interests through
own shareholding.
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).
LTIP share awards granted from 2015 may be subject to malus and claw
back provisions to the extent deemed appropriate by the Remuneration
Committee in line with best practice.
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.
Glanbia plc
Annual Report and Accounts 2015
71
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT REMUNERATION COMMITTEE REPORT CONTINUED
SECTION A: DIRECTORS’ REMUNERATION POLICY REPORT CONTINUED
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
Annual fixed pay.
Objective
Details
Recognise market value of role,
job size, responsibility and reflects
individual skills and experience.
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
Group Chairman
Vice-Chairmen
Senior Independent Director
Audit Committee Chairman
Remuneration Committee Chairman
Non-Executive Director
Society nominated Non-Executive Director
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 chairmanship 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.
2016
€
2015
€
105,000
52,500
80,000
80,000
80,000
70,000
35,000
105,000
52,500
80,000
80,000
80,000
70,000
35,000
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 69 to 71. 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, 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
incentive opportunity (as a percentage of Base Salary) which apply to the existing Executive 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 exceptional senior external appointments, the Remuneration Committee reserves the right to offer additional cash and/or share based
payments on recruitment, when it considers this to be in the best interests of the Group 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 also grant share awards on hiring an external candidate to buyout awards which will be forfeited
on leaving the previous employer.
72
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT 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 former employer’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. During 2015 this discretion was exercised for some senior appointments. These
instances were exceptional and managed by the Group Human Resources & Corporate Affairs Director with the guidance of Willis Towers Watson,
the Remuneration Committee advisors.
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 and its shareholders.
EXIT PAY 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 Executive 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 Group’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.
DETAILS OF EXECUTIVE DIRECTORS’ SERVICE CONTRACTS
The Executive Directors are employed under contracts of employment with the Company (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 GROUP
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 Group Human Resources function and the independent external advice from Willis Towers Watson,
remuneration consultants.
Glanbia plc
Annual Report and Accounts 2015
73
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT REMUNERATION COMMITTEE REPORT CONTINUED
SECTION B: DIRECTORS’ REMUNERATION IMPLEMENTATION REPORT
This section of the report explains how the Group’s remuneration policy was implemented during 2015. This is aligned with the Group’s strategy to
deliver superior earnings growth for our shareholders.
COMPARISON OF OVERALL PERFORMANCE AND PAY
The graph below illustrates 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. Total return from the hypothetical €100 invested in Glanbia shares over the three years is €210.92 (inclusive of
original investment) versus the Index of €153.46.
TOTAL SHAREHOLDER RETURN
250
220
190
160
130
100
2012
2013
2014
2015
Glanbia
STOXX 600 Food and Beverage Index
EXECUTIVE DIRECTOR REMUNERATION 2015
The remuneration for 2015 for each of the Executive Directors is set out in the table below.
Remuneration element
Executive Directors
S Talbot
M Garvey
H McGuire 3
B Phelan
Fixed
Variable
Total
Base
Salary
€’000
Pension
Contribution
€’000
Other
Benefits
€’000
Annual
incentive
(paid in cash)1
€’000
Annual
incentive
(deferred into
shares)2
€’000
750
400
479
390
199
64
72
103
26
21
135
15
563
300
359
293
351
199
254
90
2015
Total
€’000
1,889
984
1,299
891
2014
Total
€’000
1,626
833
926
840
1. This reflects the proportion of the Annual Incentive payable to Executive Directors in respect of performance for the year 2015 (which amount to 75% of Base Salary), which will be paid through
salary in 2016.
2. This reflects the proportion of the Annual Incentive (over 75% of Base Salary) which once the appropriate taxation and social security deductions have been made will be invested in shares in the
Company in 2016 and delivered to Executive Directors two years following this investment (2018).
3. The base salary is paid in US dollars and remains unchanged from year to year, whilst currency movement impacts the euro reported number.
Details of Directors’ long term awards expected to vest in respect of performance to 2 January 2016 are set out on page 77.
Further explanatory notes relating to each remuneration element follow.
BASE SALARY (FIXED)
Base salaries for the Executive Directors are determined by the Remuneration Committee, 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.
The following table sets out the closing 2015 Base Salary for each of the Executive Directors.
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
* For clarity the base salary is being disclosed in US dollars as it is the underlying currency of payment.
Base salaries for Executive Directors will increase in the range of 2-3% with effect from 1 April 2016.
74
Glanbia plc
Annual Report and Accounts 2015
Base Salary
€750,000
€400,000
$530,800*
€390,000
DIRECTORS’ REPORT PENSION (FIXED)
Brian Phelan 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 4 January 2015, to offer the option to Brian Phelan to receive a taxable payment of 26.5% of Base Salary in lieu of pension
benefits. Siobhán Talbot is a deferred member of a Glanbia defined benefit pension scheme effective 1 January 2012. 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 (FIXED)
This includes employment related benefits such as the use of company cars, medical/life assurance, relocation costs and overseas allowance, where
appropriate. All benefits are subject to normal deductions per the relevant regulations.
ANNUAL INCENTIVE (VARIABLE)
The Group’s Executive Directors participate in a performance related Annual Incentive scheme, which aims to reward achievement of specific short
term performance metrics determined by the Remuneration Committee annually and reviewed periodically during the year. Other senior executives
below the Group’s Executive Directors also participate in this scheme, albeit at different participation levels. The performance metrics consider
collective business performance and individual performance. The Committee believes that this method of performance measurement and assessment
is objective, transparent, rigorous and balanced, and provides an appropriate means to evaluate annual performance. It also ensures that all senior
management in the Group are aligned to the same annual goals in the best interest of the Group and the shareholders.
For the annual period to 2 January 2016, 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, Operating Cashflow on a constant currency basis, individual performance objectives and where
relevant Business Segment EBITA for Executive Directors with Business Unit responsibility. The mix of weightings for all objectives reflected 30% for
personal objectives at maximum performance and 120% for business objectives (EPS, Operating Cashflow and Business Segment EBITA where
relevant) at maximum performance.
Both personal and business objectives are specific and measurable, determined and communicated at the start of the financial year. The mix and
weighting of objectives recognises each individual’s contribution to the Group. Achievement against personal performance objectives is reviewed
continuously during the financial year with the full year outcomes reflected in the Annual Incentive earned.
The table below summarises the achieved performance in 2015 in respect of the primary measures used in the determination of annual incentive,
together with an indication of actual performance relative to target.
Performance Assessment in 2015
Adjusted EPS Growth 1
Group Operating Cashflow (€m) 2
Actual
Performance
Below
Target
Target
10.6%
281.4
Above
Target
ü
Maximum
ü
1. Adjusted EPS growth is measured on a constant currency basis to reflect the underlying performance of the Group. For 2015 the Executive Directors targeted constant currency adjusted EPS
growth of 9.5% with a maximum incentive achieved at 12%. The 2015 outcome is 10.6% growth in adjusted EPS adjusted to 10.5% for incentive purposes when the impacts of acquisitions and
divestitures made during the year are excluded. Note that on a reported basis adjusted EPS increased by 29.4%.
2. Operating Cash Flow (OCF) is defined as EBITDA plus or minus the movement in Working Capital less Business Sustaining Capital Expenditure. Similar to Adjusted EPS, OCF is measured
on a constant currency basis. For 2015 the Executive Directors targeted constant currency OCF of €250.8 million with a maximum incentive achieved at €273.2 million. The 2015 outcome
was €281.4 million adjusted to €283.2 million when the impacts of acquisitions and divestitures made during the year are excluded.
The table outlines the 2015 Annual Incentive design for each Executive Director and respective weightings. It also details the full year 2015 actual
incentive outcome as a percentage of salary.
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
Annual Incentive Weighting
Adjusted
EPS
Group
Operating
Cashflow
Personal
Objectives
Business
Segment
EBITA
56%
56%
40%
40%
24%
24%
20%
20%
20%
20%
20%
20%
–
–
20%
20%
Total
100%
100%
100%
100%
Annual
Incentive
Opportunity
0% – 150%
0% – 150%
0% – 150%
0% – 150%
2015
Actual
Incentive
Outcome as a
% of Salary
121.8%
124.8%
128.1%
98.1%
LONG TERM INCENTIVE PLAN
The Group operates a 2008 LTIP for Executive Directors. The 2008 LTIP was approved by shareholders and was subsequently amended in 2012 with
shareholder approval to include a post vesting holding period of one year. The 2008 LTIP was further amended in 2015 with shareholder approval to
extend the post vesting holding period to two years as well as the addition of clawback and malus provisions.
The Remuneration Committee approves the terms, conditions and allocation of awards under the 2008 LTIP to Executive Directors and senior
management. Based on the best practice reviews, the Committee believe that the combination of the short term Annual Incentive Plan and the 2008
LTIP provide an appropriate balance to incentivise and reward performance which supports shareholder value creation and aligns to the key strategic
imperatives of long term sustainable performance.
LONG TERM INCENTIVES (SHARE AWARDS WITH PERFORMANCE PERIODS ENDING IN THE YEAR)
Long Term Incentive share awards granted in April 2013 had a three year performance period ending on 2 January 2016 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.
Glanbia plc
Annual Report and Accounts 2015
75
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT REMUNERATION COMMITTEE REPORT CONTINUED
SECTION B: DIRECTORS’ REMUNERATION IMPLEMENTATION REPORT CONTINUED
LONG TERM INCENTIVE PLAN CONTINUED
EPS PERFORMANCE CONDITION
One third of the award vests according to the Group’s rate of growth in reported adjusted 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.
Investors consider adjusted EPS to be a key indicator of long term financial performance and value creation of a public limited company. Therefore
adjusted EPS is a key metric to incentivise long term sustainable business performance.
The vesting conditions are as follows:
Threshold performance
(Three year adjusted EPS growth equal to CPI plus 5% compounded (5.03%))
Maximum performance
(Three year adjusted EPS growth equal to CPI plus 10% compounded (10.03%))
Actual performance
(Three year adjusted EPS growth equal to 15.76%)
The table below shows the Group’s reported adjusted EPS over the performance period for continuing operations.
2012 as restated to reflect IAS19 (revised)
2015
EPS element vesting
50%
100%
100%
51.34c
79.14c
TSR PERFORMANCE CONDITION
One third of the award vests according to 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.
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. Therefore TSR
is a key metric to incentivise long term sustainable business performance.
The graph below shows that, under the terms of the 2008 LTIP, at 2 January 2016, a hypothetical €100 invested in Glanbia plc on 30 December
2012 would have generated a total return (inclusive of original investment) of €221.26 compared with a total return of €191.98 if invested in the median
performer from the peer group. This will result in 77% 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 74 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.
Threshold performance (Ranked halfway)
Maximum performance (Ranked in top quartile)
Actual performance (Ranked between median and top quartile)
Total Shareholder Return
TSR element vesting
30%
100%
77%
250
200
150
100
Dec 12
Glanbia
Peer Group (Median)
76
Glanbia plc
Annual Report and Accounts 2015
Jan 16
DIRECTORS’ REPORT ROCE PERFORMANCE CONDITION
One third of the award vests according to the Group’s ROCE over the three year performance period. 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.
ROCE is an important metric as 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. Therefore ROCE is a key metric to incentivise long term sustainable performance. The Committee exercised its
discretion under Rule 5.2 of the 2008 LTIP rules to amend the 2013 ROCE performance condition threshold to take account of the impact of strategic
acquisitions and disposals during 2014 and 2015. The Committee considered it reasonable to revise the threshold vesting level only, to 13.2% from
13.5%. The Committee believes this to be a fairer measure of performance whilst continuing to maintain the Group’s commitment to deliver a minimum
ROCE performance of 12%.
Threshold performance (Three year simple ROCE average equal to 13.2% (as amended))
Maximum performance (Three year simple ROCE average equal to 14.5%)
Actual performance (Three year simple ROCE average equal to 13.82%)
ROCE element vesting
0%
100%
47.95%
In light of the performance against the EPS growth target, relative TSR and adjusted ROCE targets, the Committee confirmed that 74.98% of the total
2013 LTIP share award is capable of vesting to each Executive Director.
2008 LTIP
It is expected that share awards granted to Executive Directors, under the 2008 LTIP in 2013 for the three year performance period 2013-2015, will vest
in 2016 as follows:
Executive Directors
S Talbot
H McGuire
B Phelan
Number of
Share Awards
Estimated
Market Value1
42,479
20,172
36,555
€725,966
€344,739
€624,725
1. This reflects the value of long term incentive awards expected to vest in 2016 with a three-year performance period ended in 2015. These have been estimated using the average official closing
price over the last quarter of 2015 of €17.09.
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
2013 Awards
2014 Awards
33% of award for all participants
2015 Awards
50% of award for Group Managing
Director and Group Finance Director.
40% of award for business segment
Executive Directors
Vesting Level
0%
Vesting Level
50% (Threshold)*
Vesting Level
100% (Maximum)*
Three year adjusted EPS
growth less than CPI plus
5% compounded
Three year adjusted EPS
growth equal to CPI plus
5% compounded
Three year adjusted
EPS growth equal to or
greater than CPI plus 10%
compounded
Vesting Level
0%
Vesting Level
25% (Threshold)*
Vesting Level
100% (Maximum)*
Three year adjusted EPS
growth less than 6% CAGR
Three year adjusted EPS
growth equal to 6% CAGR
Three year adjusted EPS
growth equal to or greater
than 12% CAGR
TSR RANKING IN THE COMPARATOR GROUP
Vesting Level
0%
Vesting Level
30% (Threshold)*
Vesting Level
100% (Maximum)*
2013 Awards
2014 Awards
2015 Awards
33% of award for all participants
Ranked below the top half
Ranked half way
Ranked in the top quartile
Peer group of 12 other international food
and nutritional companies
20% of award for Group Managing
Director and Group Finance Director.
15% of award for business segment
Executive Directors
Peer group is the STOXX Europe 600
Food and Beverage index
Vesting Level
0%
Vesting Level
25% (Threshold)*
Vesting Level
100% (Maximum)*
Ranked below the top half
Ranked half way
Ranked in the top quartile
Glanbia plc
Annual Report and Accounts 2015
77
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT REMUNERATION COMMITTEE REPORT CONTINUED
SECTION B: DIRECTORS’ REMUNERATION IMPLEMENTATION REPORT CONTINUED
PERFORMANCE TARGETS FOR OUTSTANDING SHARE AWARDS CONTINUED
RETURN ON CAPITAL EMPLOYED
Vesting Level
0%
Vesting Level
0% (Threshold)*
2013 Awards
33% of award for all participants
Less than 13.5%1
Equal to 13.5%
2014 Awards
33% of award for all participants
Less than 13.0%
Equal to 13.0%
Vesting Level
0%
Vesting Level
25% (Threshold)*
Less than 12.0%
Equal to 12.0%
Vesting Level
100% (Maximum)*
Equal to or greater
than 14.5%
Equal to or greater
than 14%
Vesting Level
100% (Maximum)*
Equal to or greater
than 14%
2015 Awards
30% of award for Group Managing
Director and Group Finance Director.
15% of award for business segment
Executive Directors
BUSINESS SEGMENT RETURN
ON CAPITAL EMPLOYED**
2015 Awards
10% of award for business segment
Executive Directors based on Average
Business Segment ROCE
BUSINESS SEGMENT EBITA**
2015 Awards
20% of award for business segment
Executive Directors
Vesting Level
0%
Below target
Vesting Level
25% (Threshold)*
At target
Vesting Level
100% (Maximum)*
At Maximum
Vesting Level
0%
Vesting Level
25% (Threshold)*
Vesting Level
100% (Maximum)*
Growth over Base EBITA
is less than 6% per annum
compounded
Growth over Base EBITA
is equal to 6% per annum
compounded
Growth over Base EBITA is
equal to or greater than 12%
per annum compounded
Straight line vesting between threshold performance and maximum performance.
*
** Commercially sensitive information.
1. Revised to 13.2% to take account of strategic acquisitions and disposals during 2014 and 2015.
LONG TERM INCENTIVES (SHARE AWARDS MADE IN THE FINANCIAL YEAR)
Long term incentive share awards were made to the Executive Directors on 18 May 2015 and will vest no earlier than 18 May 2018, subject to the
achievement of TSR, EPS and ROCE performance conditions. For business segment Executive Directors, their long term incentive weightings also
include business segment EBITA and business segment ROCE as outlined in the table ‘Key Elements of Remuneration for Executive Directors’ on
page 69.
These awards were made in line with the remuneration policy agreed at the AGM in May 2015. Performance is measured over a three year period. The
performance period will end on 30 December 2017. The shares are subject to a two year holding period from date of vesting.
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
Share Award
Granted May 2015
Market Value
€1
Share Award as a
% of Base Salary
109,450
46,700
46,700
45,500
1,875,152
800,088
800,088
779,529
250%
200%
166%
200%
1. These have been valued at the mean between the highest and lowest sale prices of a Glanbia plc share on 15 May 2015 (€17.1325) the dealing day immediately preceding the date of grant.
DIRECTORS’ SHAREHOLDINGS
As at 2 January 2016, the Executive Directors’ share ownership against the guidelines was as follows:
Executive Directors
S Talbot
M Garvey*
H McGuire
B Phelan
Shares held as at
2 January 2016
% of Base Salary
based on Market
Value as at
2 January 2016
Compliance with
Shareholding
Guidance
223,150
2,444
125,602
130,342
504%
10%
445%
566%
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.
78
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT
DILUTION
The Company offers Executive Directors and employees the opportunity to participate in share based schemes as part of the Group’s remuneration
policy.
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 859,933 shares at 2 January 2016.
The exercise of share options under the 2002 LTIP (which expired in 2012) is satisfied by the allotment of newly issued shares. At 2 January 2016 the
total number of shares which could be allotted under this scheme was 55,000 shares which represent significantly less than one percent of the issued
share capital of the Company.
THE GROUP CHAIRMAN AND NON-EXECUTIVE DIRECTORS
Henry Corbally was appointed Group Chairman on 12 June 2015. 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 2016 is €105,000 per annum (2015: €105,000). 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 Willis Towers Watson, remuneration consultants.
IMPLEMENTATION OF POLICY IN 2016
Base Salary is reviewed on an annual basis. Base salaries for Executive Directors will increase in the range of 2-3% with effect from 1 April 2016.
The Base Salaries of Executive Directors as of the date of this report are set out on page 74. Annual Incentive opportunity for Executive Directors
and senior executives in 2016 will continue to align with the remuneration policy review carried out in 2014 by the Remuneration Committee. Annual
Incentive 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. Annual incentive opportunity will also remain unchanged in 2016.
2016 LTIP awards will continue to operate in line with the remuneration policy as outlined on page 70. Proportional weighting will apply to Group
adjusted EPS, Group ROCE and Relative TSR against the STOXX Europe 600 Food and Beverage index, extended to include business segment
EBITA and business segment ROCE for business segment Executive Directors. The Committee intends that the performance measures and targets
will continue to include significant stretch to reflect the Group’s and external expectations of performance.
All pension and other benefits will remain unchanged.
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 H is covered by the Independent Auditors’ report on pages 93 to 97. The tables give details of the Directors’ remuneration
and interests in shares in Glanbia plc held by Directors and the Group Secretary and their connected persons as at 2 January 2016. There have been no
changes in the interests listed in Tables B to G between 3 January 2016 and 23 February 2016.
The market price of the ordinary shares as at 02 January 2016 was €16.95 and the range during the year was €12.36 to €19.55. The average price for
the year was €16.92.
RESULTS 2015—RESOLUTION TO RECEIVE AND CONSIDER 2014 REMUNERATION COMMITTEE REPORT
For
%
Against
%
Total excluding
withheld
%
193,564,861
97.69%
4,569,311
2.31%
198,134,172
100%
Withheld*
587,513
%
0.30%
Total including
withheld
198,721,685
* Votes withheld are not votes in law.
RESULTS 2015—RESOLUTION TO RECEIVE AND CONSIDER REMUNERATION POLICY REPORT (2015-2017)
For
%
Against
%
Total excluding
withheld
%
Withheld*
%
Total including
withheld
191,062,482
97.59%
4,715,762
2.41%
195,778,244
100%
2,943,441
1.48%
198,721,685
RESULTS 2015—RESOLUTION TO AUTHORISE THE AMENDMENT OF THE 2008 LONG TERM INCENTIVE PLAN
For
%
Against
%
Total excluding
withheld
%
Withheld*
%
Total including
withheld
191,306,153
97.58%
4,737,693
2.42%
196,043,846
100%
2,677,839
1.35%
198,721,685
Glanbia plc
Annual Report and Accounts 2015
79
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT REMUNERATION COMMITTEE REPORT CONTINUED
SECTION B: DIRECTORS’ REMUNERATION IMPLEMENTATION REPORT CONTINUED
TABLE A: 2015 DIRECTORS REMUNERATION
The salary, fees and other benefits pursuant to the remuneration package of each Director during the year were:
Date of appointment/
retirement, if applicable
Executive Directors
S Talbot
M Garvey
H McGuire 3,4
B Phelan
2015
2014
Non-Executive Directors
H Corbally
Mn Keane
P Murphy
P Ahern
J Callaghan
W Carroll
P Coveney
J Doheny
D Farrell
D Gaynor
J Gilsenan
P Gleeson
V Gorman
T Grant
P Haran
B Hayes
L Herlihy
P Hogan
Ml Keane
J Liston
M Merrick
J Murphy
D O’Connor
E Power
App. 12 June 2015
Ret. 1 Dec 2014
Ret. 6 Nov 2015
App. 30 May 2014
Ret. 12 May 2015
Reapp. 12 June 2015
Ret. 12 May 2015
App. 15 Dec 2015
Reapp. 30 May 2014
Ret. 12 May 2015
App. 12 June 2015
Ret. 13 May 2014
App. 1 Dec 2014
2015
2014
Total 2015
Total 2014
Base
Salary
€’000
750
400
479
390
2,019
1,940
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,019
1,940
Annual
Incentive
paid in cash 1
€’000
Fees
€’000
Annual
Incentive
deferred into
shares 2
€’000
Pension
Contribution
€’000
Other
Benefits
€’000
2015
Total
€’000
2014
Total
€’000
–
–
–
–
–
–
81
53
45
19
–
30
70
35
13
80
19
13
35
2
80
35
38
19
35
–
35
35
80
35
887
800
887
800
563
300
359
293
1,515
1,456
351
199
254
90
894
220
199
64
72
103
438
437
1,889
984
1,299
891
5,063
26
21
135
15
197
172
1,626
833
926
840
4,225
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,515
1,456
894
220
438
437
197
172
81
53
45
19
–
30
70
35
13
80
19
13
35
2
80
35
38
19
35
–
35
35
80
35
887
5,950
48
48
30
–
73
30
40
30
30
72
–
30
30
–
68
18
100
–
30
27
30
30
6
30
800
5,025
1. This reflects the portion of the Annual Incentive earned by Executive Directors in respect of performance for the year 2015 (which amounts to 75% of base salary) which will be paid through
salary in 2016.
2. This reflects the portion of the Annual Incentive (over 75% of Base Salary) which once the appropriate taxation and social security deductions have been made will be invested
in shares in the Company in 2016 and delivered to Executive Directors two years following investment (2018).
3. Other benefits includes an overseas allowance of €92,866.
4. The Base Salary is paid in US dollars and remains unchanged from year to year, whilst currency movement impacts the euro reported number.
Details of Directors’ long term awards expected to vest in respect of performance to 2 January 2016 are set out on page 77.
80
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT The pension benefits of each of the Executive Directors during the year were as follows:
S Talbot
B Phelan
2015
2014
Transfer value
of increase in
accrued pension
Annual pension
accrued in 2015 in
excess of inflation
Total annual
accrued pension
at 2 January 2016
€’000
€’000
–
–
–
87
–
–
–
8
€’000
158
103
261
261
Siobhán Talbot and Brian Phelan are deferred members of the Glanbia defined benefit pension scheme, effective 1 January 2012 and 4 January 2015
respectively. As a result 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 to offer the option to receive a taxable payment in
lieu of future service pension benefit.
TABLE B: DIRECTORS’ AND SECRETARY’S INTERESTS IN GLANBIA PLC
Directors
H Corbally
Mn Keane
P Murphy
S Talbot 1
P Ahern 2
P Coveney
J Doheny
M Garvey 1
D Gaynor
J Gilsenan 2
V Gorman
T Grant 3
P Haran
B Hayes
P Hogan 2
Ml Keane
H McGuire 1
M Merrick
J Murphy
D O’Connor
B Phelan 1
E Power
Secretary
M Horan
As at
2 January 2016
As at
4 January 2015*
Ordinary Shares
Ordinary Shares
13,991
24,664
31,105
223,150
7,720
3,900
16,257
2,444
10,000
5,373
4,173
6,236
7,462
30,074
7,658
35,927
125,602
7,736
8,000
7,680
130,342
55,322
12,536
22,849
27,582
194,431
3,726
3,900
14,737
849
10,000
4,549
2,727
6,236
7,462
26,246
7,020
30,770
123,118
6,312
11,022
7,680
115,013
49,639
55,524
51,191
1. Executive Director.
2. Appointed 12 June 2015.
3. Appointed 15 December 2015.
* Or date of appointment if later.
Note: The ordinary shares held in trust for the Directors and Secretary disclosed in Table C below are included in the total number of ordinary shares held by the Directors and Secretary above.
TABLE C: DIRECTORS’ AND SECRETARY’S INTERESTS IN ORDINARY SHARES IN GLANBIA PLC SUBJECT TO RESTRICTION ON SALE
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
Secretary
M Horan
2008 LTIP 2
2013 Annual
Deferred Incentive 3
2014 Annual
Deferred Incentive 4
45,728
–
24,536
23,495
6,625
849
5,738
5,547
2,991
1,595
2,484
834
Total 1
55,344
2,444
32,758
29,876
23,495
3,165
838
27,498
1. The above ordinary shares are held on trust for the Directors and Secretary by the Glanbia plc Section 128D Employee Benefit Trust and are included in the total number of ordinary shares held
by the Directors and Secretary disclosed in Table B.
2. Subject to restriction on sale until 1 September 2016.
3. Subject to restriction on sale until 2 July 2016.
4. Subject to restriction on sale until 27 March 2017.
Glanbia plc
Annual Report and Accounts 2015
81
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT REMUNERATION COMMITTEE REPORT CONTINUED
SECTION B: DIRECTORS’ REMUNERATION IMPLEMENTATION REPORT CONTINUED
TABLE D: SUMMARY OF DIRECTORS’ AND SECRETARY’S INTERESTS IN GLANBIA PLC 2002 LTIP AND 2008 LTIP
Directors
S Talbot
M Garvey
H McGuire
B Phelan
Secretary
M Horan
As at 2 January 2016
As at 4 January 2015
2008 LTIP
2002 LTIP
Share awards
Share awards
2008 LTIP
Share awards
2002 LTIP
Share awards
246,100
99,950
126,850
146,250
700
–
–
750
227,150
53,250
126,650
147,250
76,350
–
101,400
700
–
–
750
–
TABLE E: DIRECTORS’ AND SECRETARY’S INTERESTS IN 2008 LTIP
Date of grant
4 January
2015
Granted
during
the year
Vested
during
the year
2 January
2016
Market price
at date
of award
€
Earliest date
for vesting
Expiry date
Notes
Directors
S Talbot
Total:
M Garvey
Total:
H McGuire
Total:
B Phelan
Total:
Secretary
M Horan
Total:
30 Aug 12
23 Apr 13
2 Jul 14
18 May 15
90,500
56,650
80,000
–
227,150
–
–
–
109,450
109,450
90,500
–
–
–
90,500
–
56,650
80,000
109,450
246,100
6.26 30 Aug 15 30 Aug 16
23 Apr 17
10.11
23 Apr 16
2 Jul 18
11.51
2 Jul 17
17.525 18 May 18 18 May 19
1,2,3
4
5
5
2 Jul 14
18 May 15
53,250
–
53,250
–
46,700
46,700
–
–
–
53,250
46,700
99,950
11.51
2 Jul 18
2 Jul 17
17.525 18 May 18 18 May 19
5
5
30 Aug 12
23 Apr 13
2 Jul 14
18 May 15
46,500
26,900
53,250
–
126,650
–
–
–
46,700
46,700
46,500
–
–
–
46,500
–
26,900
53,250
46,700
126,850
6.26 30 Aug 15 30 Aug 16
23 Apr 17
10.11
23 Apr 16
2 Jul 18
11.51
2 Jul 17
17.525 18 May 18 18 May 19
30 Aug 12
23 Apr 13
2 Jul 14
18 May 15
46,500
48,750
52,000
–
147,250
–
–
–
45,500
45,500
46,500
–
–
–
46,500
–
48,750
52,000
45,500
146,250
6.26 30 Aug 15 30 Aug 16
23 Apr 17
10.11
23 Apr 16
2 Jul 18
11.51
2 Jul 17
17.525 18 May 18 18 May 19
30 Aug 12
23 Apr 13
2 Jul 14
18 May 15
46,500
26,900
28,000
–
101,400
–
–
–
21,450
21,450
46,500
–
–
–
46,500
–
26,900
28,000
21,450
76,350
6.26 30 Aug 15 30 Aug 16
23 Apr 17
10.11
23 Apr 16
2 Jul 18
11.51
2 Jul 17
17.525 18 May 18 18 May 19
1,2,3
4
5
5
1,2,3
4
5
5
1,2,3
4
5
5
1. 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 was
such that 100% of the awards vested. The vesting date was 1 September 2015.
2. Directors were 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 one
year and are held on trust for them by the trustee of the Glanbia plc Section 128D Employee Benefit Trust.
3. The total number of shares subject to restriction are included in the total number of ordinary shares disclosed in Tables B and C on page 81.
4. Awards granted on 23 April 2013 were subject to performance conditions measured over the three financial years ended 2 January 2016. The outcome of these performance conditions is such
that 74.98% of these awards are expected to vest during 2016, and will be restricted from sale for one year and held on trust for them by the trustee of the Glanbia plc Section 128D Employee
Benefit Trust.
5. The performance periods in respect of the 2008 LTIP awards made in 2014 and 2015 are the three financial years ending 2016 and 2017 respectively. The performance conditions attached to
the awards are detailed in the section entitled ‘Performance Targets for Outstanding Share Awards’ on pages 77 and 78.
82
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT
TABLE F: DIRECTORS’ AND SECRETARY’S INTEREST IN 2002 LTIP
Siobhán Talbot retained 7,000 of the shares allotted to her on 8 January 2013 under the 2002 Long Term Incentive Plan until 8 January 2015 and is
therefore eligible for a share award of 10% of these shares (700).
Brian Phelan retained 7,500 of the shares allotted to him on 8 January 2013 under the 2002 Long Term Incentive Plan 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
Directors
Siobhán Talbot
2013 Annual Deferred Incentive
2014 Annual Deferred Incentive
Mark Garvey
2013 Annual Deferred Incentive
2014 Annual Deferred Incentive
Hugh McGuire
2013 Annual Deferred Incentive
2014 Annual Deferred Incentive
Brian Phelan
2013 Annual Deferred Incentive
2014 Annual Deferred Incentive
Secretary
Michael Horan
2013 Annual Deferred Incentive
2014 Annual Deferred Incentive
Value of Annual
Incentive converted
into shares
€1
Date of conversion/
acquisition
of shares
Acquisition price
per share at date
of conversion
€
Number of
shares acquired
143,000
94,000
2 Jul 14
27 Mar 15
18,000
50,000
2 Jul 14
27 Mar 15
118,000
62,000
2 Jul 14
27 Mar 15
120,000
26,000
2 Jul 14
27 Mar 15
68,000
26,000
2 Jul 14
27 Mar 15
11.57
16.79
11.57
16.79
11.57
16.79
11.57
16.79
11.57
16.79
12,367
5,584
1,586
2,978
10,165
3,665
10,355
1,557
5,908
1,565
1. Numbers are rounded to the nearest thousand.
2. Directors were 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.
3. The total number of shares subject to restriction are included in the total number of ordinary shares disclosed in Tables B and C on page 81.
TABLE H: VALUE OF AWARDS EXPECTED TO VEST IN 2016 AND AWARDS VESTED IN 2015
Executive Directors
S Talbot
H McGuire
B Phelan
Number of Share
Awards expected
to vest in 2016
Estimated
Market Value
€1
Number of Share
Awards vested
in 2015
42,479
20,172
36,555
725,966
344,739
624,725
90,500
46,500
46,500
Market Value
€2
1,610,448
827,468
827,468
1. This reflects the value of long term incentive awards expected to vest in 2016 with a three-year performance period ended in 2015. The market values have been estimated using the average
closing price over the last quarter of 2015 of €17.09 per share.
2. This reflects the value of long term incentive awards vested in 2015 with a three-year performance period ended in 2014. These have been valued at the market value of the shares on the date
of vesting €17.795 per share (official opening price).
Glanbia plc
Annual Report and Accounts 2015
83
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT
UK CORPORATE GOVERNANCE CODE AND THE IRISH CORPORATE GOVERNANCE ANNEX
(‘THE CODES’) INDEX TO DETAILED PROVISIONS
The Group has complied with the detailed provisions of the Codes throughout 2015, with the exception of provision B.1 of the UK Corporate Governance
Code, Composition of the Board. The rationale for this departure is explained on pages 44 and 64. 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.
The Codes are 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’).
HOW THE COMPANY HAS APPLIED THE PRINCIPLES OF IRISH CORPORATE GOVERNANCE ANNEX
BOARD COMPOSITION
Rationale for the current Board size and structure
Board biographies and tenure
Skills, expertise and experience of the Board
Explanation for divergence from Provision B.1.2 of the UK Corporate Governance Code
Nomination by Glanbia Co-operative Society Limited
BOARD APPOINTMENTS
Process for the identification, selection and recommendation of Directors
BOARD EVALUATION
Leadership
Nomination and Governance
Committee report
Page 44
Page 64
Board attendance
Board of Directors
Board of Directors
Leadership
Nomination and Governance
Committee report
Nomination and Governance
Committee report
Page 45
Pages 48 to 53
Pages 48 to 53
Page 44
Page 64
Page 64
Nomination and Governance
Committee report
Pages 61 to 65
Objective, scope and methodology and steps taken to ensure approach is robust
and objective
Effectiveness
Page 47
BOARD RE-ELECTION
General Policy for renewal
Independence
AUDIT COMMITTEE
Nomination and Governance
Committee report
Pages 61 to 65
Independence
Pages 47 and 64
Work Carried out by the Audit Committee
Work done by Audit Committee relating to oversight of risk management
Audit Committee report
Risk Management report
Pages 55 to 60
Pages 32 to 38
REMUNERATION COMMITTEE
Remuneration policy
Remuneration Committee report
Pages 66 to 83
Skills, expertise and experience of the Remuneration Committee Members
Board of Directors
Pages 48 and 49
Components of Remuneration
Recovery of Variable Compensation
Vesting Periods for Shares
Remuneration Committee report
Pages 69 to 73
Remuneration Committee report
Pages 69 and 70
Remuneration Committee report
Page 70
84
Glanbia plc
Annual Report and Accounts 2015
DIRECTORS’ REPORT HOW THE COMPANY HAS APPLIED THE PRINCIPLES OF THE UK CORPORATE GOVERNANCE CODE (2014)
A: LEADERSHIP
An effective Board collectively responsible for the long-term success of the Company
A clear division of responsibilities at the head of the Company between the running
of the Board and the Executive. No one individual should have unfettered powers
of decision
The Group Chairman is responsible for leadership of the Board and ensuring its
effectiveness on all aspects of its role
As a member of a unitary Board, Non-Executive Directors should constructively
challenge and help develop proposals on strategy
B: EFFECTIVENESS
Board of Directors
Leadership
Pages 48 to 53
Page 44
Division of responsibilities
Pages 44 and 45
Division of responsibilities
Pages 44 and 45
Leadership
Pages 44 and 45
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
Board of Directors
Independence
Nomination and Governance
Committee report
There should be a formal, rigorous and transparent procedure for the appointment
of new Directors to the Board
Nomination and Governance
Committee report
Pages 48 to 53
Page 47
Page 64
Pages 61 to 65
All Directors should be able to allocate sufficient time to the Company to discharge
their responsibilities effectively
Board attendance table
Effectiveness
Page 45
Pages 46 and 47
All Directors should receive induction on joining the Board and should regularly update
and refresh their skills and knowledge
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 Board should undertake a formal and rigorous annual evaluation of its own
performance and that of its committees and individual Directors
All Directors should be submitted for re-election at regular intervals, subject to
continued satisfactory performance
Effectiveness
Effectiveness
Effectiveness
Effectiveness
Nomination and Governance
Committee report
Page 46
Page 46
Page 47
Page 47
Page 64
C: ACCOUNTABILITY
The Board should present a fair, balanced and understandable assessment of the
Company’s position and prospects
Strategic report
Going concern and viability
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
Risk management
Pages 2 to 23
Page 32
Pages 32 to 38
The Board should establish formal and transparent arrangements for considering
how they should apply the corporate reporting, risk management and internal control
principles, and for maintaining an appropriate relationship with the Company’s Auditors
D: REMUNERATION
Executive Directors’ remuneration should be designed to promote the long-term
success of the Company. Performance-related elements should be transparent,
stretching and rigorously applied
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
There should be a dialogue with shareholders based on the mutual understanding
of objectives. The Board as a whole is responsible for ensuring that a satisfactory
dialogue with shareholders takes place
The Board should use General Meetings to communicate with investors and to
encourage their participation
Audit Committee report
Pages 55 to 60
Remuneration Committee report
Pages 66 to 83
Remuneration Committee report
Pages 66 to 83
Engagement with shareholders
Page 42
Engagement with shareholders
Page 42
Glanbia plc
Annual Report and Accounts 2015
85
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT OTHER STATUTORY INFORMATION
PRINCIPAL ACTIVITIES, STRATEGY AND BUSINESS MODEL
Glanbia plc is a global nutrition group, headquartered in Ireland, with operations in 32 countries worldwide.
The Group’s business model and strategy are summarised in the Strategic report on pages 4 to 7.
The Group Chairman’s statement on pages 2 and 3, the Group Managing Director’s review on pages 10 to 13, the Operations review on pages 18 to
23 and the Group Finance Director’s review on pages 14 to 17 contain a review of the development and performance of the Group’s business during
the year, of the state of affairs of the business at 2 January 2016, of recent events and of likely future developments. Information in respect of events
since the year end is included in these sections and in Note 39 on page 164.
As set out in the Consolidated Income Statement on page 98, the Group reported a profit before tax and exceptional items for the year of €245.0 million.
Comprehensive reviews of the financial and operating performance of the Group during 2015 are set out in the Group Finance Director’s review on pages
14 to 17 and in the Operations review on pages 18 to 23. Key performance indicators are set out in Key performance indicators on pages 8 and 9. The
treasury policy and objectives of the Group are set out in detail in Note 25 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 (2014), all Directors will retire at the 2016 AGM and, being
eligible, offer themselves for re-appointment. The Articles of Association also allows the election and re-election of independent Directors to be
conducted in accordance with the new election provisions for independent Non-Executive Directors in the United Kingdom Listing Authority
(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 27 April 2016. Full details of the AGM, together with explanations of the resolutions to be proposed, are contained
in the Notice of the Annual General Meeting.
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 2015 AGM, the Directors were given the power to issue new shares up to a
nominal amount of €3,239,059. This power will expire on the earlier of the conclusion of the 2016 AGM or 11 August 2016. Accordingly, a resolution will
be proposed at the 2016 AGM to renew the Company’s authority to issue further new shares.
At the 2015 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 €888,047. This authority too will expire on the earlier of the conclusion of the 2016 AGM or
11 August 2016. A resolution will be proposed at the 2016 AGM to renew this authority.
DIVIDENDS
An interim dividend of 4.88 cent per share was paid on 16 October 2015 (an aggregate of €14.5 million) to shareholders on the register at the close of
business on 4 September 2015. The Directors propose a final dividend of 7.22 cent per share. Subject to shareholder approval, the final dividend will
be paid on 29 April 2016 to shareholders on the share register on 18 March 2016.
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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DIRECTORS’ REPORT ISSUED SHARE CAPITAL
At 2 January 2016 the authorised share capital of the Company was 350,000,000 ordinary shares of €0.06 each and the issued share capital was
296,030,684 (2014: 295,875,684) ordinary shares of €0.06 each, of which 36.5% 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 155,000 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 2 January 2016 are given in Notes 22 and 21, 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 21 to the Financial Statements at 2 January 2016, 859,933 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 2016 AGM.
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 Venture
with Leprino Foods Company. 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 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 this agreement.
Glanbia plc
Annual Report and Accounts 2015
87
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT OTHER STATUTORY INFORMATION CONTINUED
INTERNAL CONTROLS
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, the UK Corporate Governance Code and Irish Stock Exchange Annex. 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 2015 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 55 to 60.
FEATURES OF INTERNAL CONTROL 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.
ADEQUATE ACCOUNTING RECORDS
The Directors are responsible for keeping adequate accounting records that are sufficient to correctly record and explain the transactions of the
Company or enable, at any time, the assets, liabilities, financial position and profit or loss of the Company to be determined with reasonable accuracy,
enable the Directors to ensure that the Financial Statements comply with the Companies Act 2014, and as regards the Group Financial Statements,
Article 4 of the IAS Regulation and enable those Financial Statements to be audited.
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 adequate accounting records. These accounting records are kept at the registered office of the Company.
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.
Standard Life Investments Limited
No of ordinary
shares as at
2/01/2016
% of issued share
Capital as at
2/01/2016
No of ordinary
shares as at
23/02/2016
% of issued share
Capital as at
23/02/2016
108,014,900
20,550,941
8,941,987
36.5% 108,014,900
20,550,941
8,941,987
6.9421%
3.021%
36.5%
6.9421%
3.021%
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).
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DIRECTORS’ REPORT 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.
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.
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’.
SUBSIDIARY AND ASSOCIATED UNDERTAKINGS
A list of the principal subsidiary and associated undertakings and their activities is included in Note 40 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 90.
The Independent Auditors’ report details the respective responsibilities of Directors and external Auditors.
EXTERNAL AUDITORS
The Board has agreed to appoint Deloitte, Chartered Accountants, as Auditors for the year commencing 3 January 2016 in place of
PricewaterhouseCoopers who have indicated their willingness to resign later this year. PricewaterhouseCoopers has confirmed that there are not any
matters in connection with their proposed resignation as Auditors which need to be brought to the attention of shareholders.
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
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Interest capitalised
Publication of unaudited financial information
Details of long-term incentive schemes
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
Contracts of significance
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Agreement with controlling shareholders
Location
Financial Statements, Notes 9 and 13
Not applicable
Remuneration Committee report
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Other Statutory Information
Not applicable
Other Statutory Information
Other Statutory Information
Page 63
All the information cross-referenced above is hereby incorporated by reference into this Directors’ report.
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Annual Report and Accounts 2015
89
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT 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. Under Irish law the Directors
shall not approve the financial statements unless they are satisfied that they give a true and fair view of the assets, liabilities and financial position as
at the end of the financial year and of the profit or loss for the financial year.
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 ensure the Financial Statements contain the
information required by the Companies Act 2014; and
• prepare the Financial Statements on a 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 adequate accounting records that are sufficient to:
• correctly record and explain the transactions of the Company;
• enable, at any time, the assets, liabilities, financial position and profit or loss of the Company to be determined with reasonable accuracy; and
• enable the Directors to ensure that the Financial Statements comply with the Companies Act 2014, and as regards the Group Financial Statements
article 4 of the IAS Regulation and enable those Financial Statements to be audited.
The Directors 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 48 to 53 confirms that he/she considers 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.
Strategy (pages 2 to 23) and Directors’ report (pages 40 to 89) are deemed to be the Directors’ report.
DIRECTORS’ REPORT
On behalf of the Board
HENRY CORBALLY
Directors
23 February 2016
SIOBHÁN TALBOT
MARK GARVEY
90
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Annual Report and Accounts 2015
DIRECTORS’ REPORT Financial
statements
Independent Auditors’ report
Group income statement
Group statement of comprehensive income
Group balance sheet
Group statement of changes in equity
Group statement of cashflows
Company balance sheet
Company statement of changes in equity
Company statement of comprehensive
income and statement of cashflows
Notes to the financial statements
93
98
99
100
101
102
103
104
105
106
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91
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT FINANCIAL STATEMENTS
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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:
• Glanbia plc's Group Financial Statements and Company Financial
Statements (the “Financial Statements") give a true and fair view of the
Group's and the Company's assets, liabilities and financial position as
at 02 January 2016 and of the Group's profit and the Group's and the
Company's cash flows for the year then ended;
the Group Financial Statements have been properly prepared in
accordance with International Financial Reporting Standards (IFRSs)
as adopted by the European Union;
the Company Financial Statements have been properly prepared in
accordance with IFRSs as adopted by the European Union as applied
in accordance with the provisions of the Companies Act 2014; and
the Financial Statements have been properly prepared in accordance
with the requirements of the Companies Act 2014 and, as regards the
Group Financial Statements, Article 4 of the IAS Regulation.
•
•
WHAT WE HAVE AUDITED
The Financial Statements, included within the Annual Report, comprise:
•
the Group and Company balance sheets as at 02 January 2016;
•
the Group income statement and statement of comprehensive income
for the year then ended;
the Group statement of cash flows for the year then ended;
the Company statement of comprehensive income and statement of
cash flows for the year then ended;
the Group and Company statements of changes in equity for the year
then ended; 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.
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 represented 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" in the table below. We have also set out how we tailored our
audit to address these specific areas in order to provide an opinion on the
Financial Statements as a whole. This is not a complete list of all risks
identified by our audit.
Area of focus
Refer to note 14.
The Group has goodwill and indefinite life intangible assets of €486.8 million
at 02 January 2016 (see note 14).
There are 7 individual Cash Generating Units (CGUs). The most significant
goodwill and indefinite life intangible assets relates to the Group's Glanbia
Performance Nutrition business (€368.9 million) and the Group's
Customised Solutions business (€85.2 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.
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 Financial Statements, as
applied in accordance with the provisions of the Companies Act 2014.
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.
OUR AUDIT APPROACH
Materiality
Overall Group materiality: €12 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.
An audit on the full financial information of 12 units and specified
procedures on selected account balances of a further 5 units were
performed.
• Taken together, the reporting units and functions where an audit on
the full financial information was performed accounted for 82% of Group
revenues and 84% 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
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 on the impairment assessment, for example the
discount rate and the rate of sales and margin growth assumed by
management.
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FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GLANBIA PLC CONTINUED
Area of focus
Refer to note 37.
The Group acquired PHTT Acquisition, LLC (thinkThin) during the year for
consideration of €193.3 million.
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.
We focused on this area as significant judgement is exercised in:
the identification and valuation of acquired intangible assets including:
•
•
thinkThin brand €78.6 million
thinkThin customer relationships €71.3 million
How our audit addressed the area of focus
We obtained and considered the reports prepared by management's
independent valuation specialists.
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
also compared the projected sales growth and gross margins to those
historically achieved by the acquired businesses.
We focused on this area as a degree of judgement is involved
• due to the fact that the percentage rebate may vary depending on the
achievement of targets and
• certain allowances may still be open to negotiation at the year end.
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 Glanbia 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 entities. We considered
rebate calculations in the context of sales in the year to date and the
historical achievement of similar targets. We considered promotional
agreements spanning the year end in light of settlement discounts claimed
post year end and the outcome of similar arrangements in previous years.
We selected rebate payments made after the year end to ensure they were
accrued in the Financial Statements where appropriate.
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.
Area of focus
Refer to note 28.
The deficits on the Group's defined benefit pension schemes included on
the balance sheet are determined based on a number of key estimates, a
significant assumption being the discount rate at year end. Assumptions
regarding mortality rates and inflation are also important. We focused on
the assumptions used in the calculation of the pension liabilities because
a modest change in such assumptions can result in a material change in
the amount 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 tested the calculation of the settlement loss arising on the wind-up
(see note 28) and read
of certain
correspondence with the Trustees and regulators.
Irish Pension Schemes
We also assessed the reasonableness of the fair values of other assets
and liabilities acquired in the business combinations.
Area of focus
As described in the critical accounting estimates and judgements section
in note 3, 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.
Area of focus
As described in the accounting policies in note 2 revenue is recognised
net of rebates and discounts which are calculated based on agreements
or contracts with customers, agreed promotional arrangements and
accumulated experience.
94
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GLANBIA PLC CONTINUED
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: Glanbia
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.
11 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, although not
controlled by the Group, was also subject to an audit of their full financial
information. These operations accounted for approximately 82% of Group
turnover and 84% 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 5 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.
The scope of our audit was 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 on the individual
Financial Statement line items and disclosures and in evaluating 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
Component
materiality
€12 million (2014: €9.2 million).
5% of profit before tax and exceptional items.
We applied this benchmark because in our view this is
a metric against which the performance of the Group is
commonly measured and it results in using a materiality
level that is appropriately normalised from year to year.
For each component in our audit scope, we allocated a
materiality that is less than our overall Group materiality.
The range of materiality allocated across components
was €1 million to €11.5 million. Certain components were
audited to a local statutory audit materiality that was also
less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them
misstatements identified during our audit above €0.5 million (2014: €0.5
million) as well as misstatements below that amount that, in our view,
warranted reporting for qualitative reasons.
Under the Listing Rules we are required to review the Directors' statement,
set out on page 32, in relation to going concern. We have nothing to report
having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we have
anything material to add or to draw attention to in relation to the Directors'
statement about whether they considered it appropriate to adopt the going
concern basis in preparing the Financial Statements. We have nothing
material to add or to draw attention to.
As noted in the Directors' statement, the Directors have concluded that it
is appropriate to adopt the going concern basis in preparing the Financial
Statements. The going concern basis presumes that the Group and
Company has 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 Company's ability
to continue as a going concern.
Glanbia plc
Annual Report and Accounts 2015
95
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GLANBIA PLC CONTINUED
Under the Listing Rules we are required to review the Directors' statement
that they have carried out a robust assessment of the principal risks facing
the Group and the Directors' statement in relation to the longer-term
viability of the Group. Our review was substantially less in scope than an
audit and only consisted of making inquiries and considering the Directors'
process supporting their statements; checking that the statements are in
alignment with the relevant provisions of the Code; and considering
whether the statements are consistent with the knowledge acquired by us
in the course of performing our audit. We have nothing to report having
performed our review.
DIRECTORS' REMUNERATION
Under the Companies Act 2014, we are required to report to you if, in our
opinion, the disclosure of Directors' remuneration and transactions
specified by sections 305 to 312 of that Act have not been made, and
under the Listing Rules of the Irish Stock Exchange we are required to
review the 6 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
•
In our opinion, based on the work undertaken in the course of our audit
of the Financial Statements:
•
•
the description of the main features of the internal control and risk
management systems in relation to the financial reporting process;
and
the information required by Section 1373(2)(d) of the Companies
Act 2014;
included in the Corporate Governance Statement, is consistent with
the Financial Statements and has been prepared in accordance with
section 1373(2) of the Companies Act 2014.
• Based on our knowledge and understanding of the Company and its
environment obtained in the course of our audit of the Financial
Statements, we have not identified material misstatements in the
description of the main features of the internal control and risk
management systems in relation to the financial reporting process and
the information required by section 1373(2)(d) of the Companies Act
2014 included in the Corporate Governance Statement.
In our opinion, based on the work undertaken during the course of our
audit of the Financial Statements, the information required by section
1373(2)(a),(b),(e) and (f) is contained in the Corporate Governance
Statement.
•
• Under the Listing Rules we are required to review the part of the
Corporate Governance Statement relating to the Company's
compliance with 10 provisions of the UK Corporate Governance Code
and the 2 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 ACT 2014
• We have obtained all the information and explanations which we
•
consider necessary for the purposes of our audit.
In our opinion the accounting records of the Company were sufficient
to permit the Company Financial Statements to be readily and properly
audited.
• The Company balance sheet is in agreement with the accounting
records.
OTHER REQUIRED REPORTING
CONSISTENCY OF OTHER INFORMATION
In our opinion the information given in the Directors' Report is consistent
with the Financial Statements.
ISAs (UK & IRELAND) REPORTING
Under ISAs (UK & Ireland) we are required to report to you if, in our opinion:
•
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 otherwise
misleading.
the statement given by the Directors on page 90,
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 and Company's position and performance,
business model and strategy
is materially
inconsistent with our knowledge of the Group and
Company acquired in the course of performing our
audit.
the section of the Annual Report on page 58, 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.
We have no
exceptions to
report.
We have no
exceptions to
report.
THE DIRECTORS' ASSESSMENT OF THE PROSPECTS OF THE
GROUP AND OF THE PRINCIPAL RISKS THAT WOULD THREATEN
THE SOLVENCY OR LIQUIDITY OF THE GROUP
Under ISAs (UK & Ireland) we are required to report to you if we have
anything material to add or to draw attention to in relation to:
We have
nothing material
to add or to
draw attention
to.
We have
nothing material
to add or to
draw attention
to.
We have
nothing material
to add or to
draw attention
to.
•
•
•
the Directors' confirmation on page 34 of the Annual
Report, in accordance with provision C.2.1 of the
Code, that they have carried out a robust
assessment of the principal risks facing the Group,
including those that would threaten its business
model, future performance, solvency or liquidity.
the disclosures in the Annual Report that describe
those risks and explain how they are being
managed or mitigated.
they consider
the Directors' explanation on page 32 of the Annual
Report, in accordance with provision C.2.2 of the
Code, as to how they have assessed the prospects
of the Group, over what period they have done so
and why
to be
appropriate, and their statement as to whether they
have a reasonable expectation that the Group will
be able to continue in operation and meet its
liabilities as they fall due over the period of their
assessment, including any related disclosures
drawing attention to any necessary qualifications or
assumptions.
that period
96
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF GLANBIA PLC CONTINUED
RESPONSIBILITIES FOR THE FINANCIAL
STATEMENTS AND THE AUDIT
OUR RESPONSIBILITIES AND THOSE OF THE DIRECTORS
As explained more fully in the Statement of Directors' Responsibilities set
out on page 90, the Directors are responsible for the preparation of the
Financial Statements and for being satisfied that they give a true and fair
view.
Our responsibility is to audit and express an opinion on the Financial
Statements in accordance with Irish 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 391 of the
Companies Act 2014 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.
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 the
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
Waterford
23 February 2016
Glanbia plc
Annual Report and Accounts 2015
97
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GROUP INCOME STATEMENT
GROUP INCOME STATEMENT
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Revenue
4
2,774,326
–
2,774,326
2,538,368
–
2,538,368
Pre-
exceptional
2015
€’000
Exceptional
2015
€’000
(note 6)
Notes
Total
2015
€’000
Pre-
exceptional
2014
€’000
Exceptional
2014
€’000
(note 6)
Total
2014
€’000
271,003
(31,125)
(26,342)
–
244,661
(31,125)
208,634
(22,512)
(15,949)
–
192,685
(22,512)
239,878
(26,342)
213,536
186,122
(15,949)
170,173
1,706
(22,816)
26,270
–
–
–
1,706
(22,816)
26,270
1,725
(22,050)
23,729
–
–
–
1,725
(22,050)
23,729
245,038
(37,322)
(26,342)
2,543
218,696
(34,779)
189,526
(28,252)
(15,949)
1,870
173,577
(26,382)
207,716
(23,799)
183,917
161,274
(14,079)
147,195
183,271
646
183,917
62.08
61.87
146,313
882
147,195
49.60
49.32
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
5
9
9
10
24
Earnings per share attributable to the equity holders of the Parent
Basic earnings per share (cent)
Diluted earnings per share (cent)
11
11
98
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS GROUP STATEMENT OF COMPREHENSIVE INCOME
GROUP STATEMENT OF COMPREHENSIVE INCOME
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Profit for the year
Other comprehensive income
Items that are not reclassified subsequently to the Group income statement:
Remeasurements – defined benefit schemes
Deferred tax (charge)/credit on remeasurements
Share of remeasurements – Joint Ventures & Associates
Deferred tax (charge)/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
Recycle of currency reserve to the Group income statement on disposal of Investment in Joint
Venture
Deferred tax on cash flow hedges and revaluation of available for sale financial assets
Other comprehensive income for the year, net of tax
Notes
2015
€’000
2014
€’000
183,917
147,195
28
27
23
23
21
21
21
21
21
27
20,856
(2,334)
4,254
(612)
91,102
(8,684)
1,273
145
5,037
(480)
110,557
(42,369)
4,868
(8,900)
1,120
97,805
(9,544)
1,457
507
–
(140)
44,804
Total comprehensive income for the year
294,474
191,999
Total comprehensive income attributable to:
Equity holders of the Parent
Non-controlling interests
293,828
191,117
24
646
882
Total comprehensive income for the year
294,474
191,999
Glanbia plc
Annual Report and Accounts 2015
99
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GROUP BALANCE SHEET
GROUP BALANCE SHEET
AS AT 02 JANUARY 2016
AS AT 02 JANUARY 2016
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
Derivative financial instruments
Deferred tax liabilities
Retirement benefit obligations
Provisions
Capital grants
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings
Derivative financial instruments
Provisions
Capital grants
Total liabilities
Total equity and liabilities
On behalf of the Board
H CORBALLY S TALBOT M GARVEY
Directors
100
Glanbia plc
Annual Report and Accounts 2015
Notes
2015
€’000
2014
€’000
13
14
15
16
18
27
17 (a)
586,190
951,527
97,897
60,585
1,850
36,474
10,754
490,180
662,169
81,365
69,945
9,863
28,503
10,621
19
18
32
20
22
21
23
24
26
32
27
28
29
30
31
26
32
29
30
1,745,277
1,352,646
344,353
350,020
414
210,889
905,676
336,802
305,027
1,279
110,370
753,478
2,650,953
2,106,124
105,370
306,425
642,763
1,054,558
8,515
1,063,073
104,728
218,581
473,573
796,882
7,896
804,778
752,963
620,317
47
201,646
87,288
18,984
2,787
–
128,002
114,808
18,569
2,214
1,063,715
883,910
442,713
18,969
42,169
902
19,128
284
390,350
3,115
416
574
22,981
–
524,165
417,436
1,587,880
1,301,346
2,650,953
2,106,124
FINANCIAL STATEMENTS GROUP STATEMENT OF CHANGES IN EQUITY
GROUP STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Balance at 04 January 2014
103,997
126,600
405,289
635,886
7,634
643,520
Attributable to equity holders of the Parent
Share capital and
share premium
€’000
(note 22)
Other
reserves
€’000
(note 21)
Retained
earnings
€’000
(note 23)
Total
€’000
Non-controlling
interests
€’000
(note 24)
Total
€’000
Profit for the year
Other comprehensive income/(expense)
Remeasurements – defined benefit schemes
Deferred tax on remeasurements
Share of remeasurements – Joint Ventures & Associates (net of
deferred tax)
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
Balance at 03 January 2015
Profit for the year
Other comprehensive income/(expense)
Remeasurements – defined benefit schemes
Deferred tax on remeasurements
Share of remeasurements – Joint Ventures & Associates (net of
deferred tax)
Fair value movements
Deferred tax on fair value movements
Currency translation differences
Recycle of currency reserve to the Group income statement on
disposal of Investment in Joint Venture
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
Shares issued
Premium on shares issued
Purchase of own shares
Additions during the year
–
–
–
–
–
–
–
–
–
–
–
–
–
–
14
717
–
–
–
–
–
1,964
(140)
97,805
(9,544)
90,085
146,313
146,313
882
147,195
(42,369)
(42,369)
4,868
4,868
(7,780)
–
–
–
–
(7,780)
1,964
(140)
97,805
(9,544)
–
–
–
–
–
–
–
(42,369)
4,868
(7,780)
1,964
(140)
97,805
(9,544)
101,032
191,117
882
191,999
–
(30,751)
(30,751)
(620)
(31,371)
5,516
4,361
–
–
–
–
(7,981)
–
(4,361)
272
2,092
–
–
–
5,516
–
272
2,092
14
717
(7,981)
–
–
–
–
–
–
–
5,516
–
272
2,092
14
717
(7,981)
104,728
218,581
473,573
796,882
7,896
804,778
–
–
–
–
–
–
–
–
–
–
–
–
–
–
9
633
–
–
–
–
–
–
1,418
(480)
91,102
5,037
(8,684)
88,393
183,271
183,271
646
183,917
20,856
(2,334)
3,642
–
–
–
–
–
20,856
(2,334)
3,642
1,418
(480)
91,102
5,037
(8,684)
–
–
–
–
–
–
–
–
20,856
(2,334)
3,642
1,418
(480)
91,102
5,037
(8,684)
205,435
293,828
646
294,474
–
(33,895)
(33,895)
(427)
(34,322)
8,724
4,078
–
–
–
(13,351)
–
–
(4,078)
1,728
–
–
–
–
8,724
–
1,728
9
633
(13,351)
–
–
–
–
–
–
–
400
8,724
–
1,728
9
633
(13,351)
400
Balance at 02 January 2016
105,370
306,425
642,763
1,054,558
8,515
1,063,073
Glanbia plc
Annual Report and Accounts 2015
101
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GROUP STATEMENT OF CASHFLOWS
GROUP STATEMENT OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
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
Disposal of Investment in Joint Venture
Capital grants received
Insurance proceeds
Purchase of property, plant and equipment
Purchase of intangible assets
Interest paid in relation to property, plant and equipment
Dividends received from Joint Ventures & Associates
Net redemption and additions 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 in borrowings
Redemption of preference shares
Finance lease payments
Dividends paid to Company shareholders
Dividends paid to non-controlling interests
Net cash inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at the end of the year
Reconciliation of net cash flow to movement in net debt
Net increase/(decrease) in cash and cash equivalents
Cash movements from debt financing
Acquisition of subsidiaries - debt acquired
Exchange translation adjustment on 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
102
Glanbia plc
Annual Report and Accounts 2015
Notes
35
37
37
37
30
15/16
17 (a)
22
23
21
12
24
20
2015
€’000
2014
€’000
307,865
1,773
(22,939)
(9,987)
276,712
230,716
1,683
(22,361)
(34,393)
175,645
(195,579)
(125,812)
(1,296)
6,991
28,516
1,132
–
(16,138)
2,768
–
–
1,035
(103,792)
(101,953)
(19,798)
(2,403)
14,924
1,140
428
(13,532)
(1,997)
12,648
334
63
(269,737)
(242,584)
642
–
(13,351)
91,577
–
(468)
(33,895)
(427)
44,078
51,053
110,370
7,702
169,125
2015
€’000
51,053
(91,109)
–
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)
(40,056)
(104,869)
1,108
(34,932)
(73,880)
(510,363)
(584,243)
(453)
(30,597)
(135,919)
(374,444)
(510,363)
26
20
(753,368)
169,125
(584,243)
(620,733)
110,370
(510,363)
FINANCIAL STATEMENTS COMPANY BALANCE SHEET
COMPANY BALANCE SHEET
AS AT 02 JANUARY 2016
AS AT 02 JANUARY 2016
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
Borrowings
Trade and other payables
Total liabilities
Total equity and liabilities
Notes
15
17 (b)
17 (a)
18
20
22
23
27
26
31
2015
€’000
2014
€’000
22,876
609,530
5,827
638,233
213
15,303
15,516
22,876
609,530
4,488
636,894
147
8,590
8,737
653,749
645,631
460,638
147,489
8,586
616,713
459,996
54,875
8,282
523,153
1,045
1,045
372
35,619
35,991
37,036
403
403
–
122,075
122,075
122,478
653,749
645,631
As permitted by section 304 of the Companies Act, 2014, 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 €130.6 million (2014: €24.8 million).
On behalf of the Board
H CORBALLY S TALBOT M GARVEY
Directors
Glanbia plc
Annual Report and Accounts 2015
103
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT COMPANY STATEMENT OF CHANGES IN EQUITY
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Balance at 04 January 2014
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
Balance at 03 January 2015
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
Other reserves
Capital
reserve
€’000
(note 21 (a))
Own shares
€’000
(note 21 (f))
Share based
payment
reserve
€’000
(note 21 (g))
Available for
sale financial
asset reserve
€’000
(note 17)
4,227
(8,191)
8,314
Share capital
and share
premium
€’000
(note 22)
459,265
–
–
–
–
–
–
–
14
717
–
Retained
earnings
€’000
(note 23)
65,170
24,817
–
–
24,817
(30,751)
–
(4,361)
–
–
–
459,996
54,875
4,227
–
–
–
–
–
–
–
9
633
–
130,587
–
–
130,587
(33,895)
–
(4,078)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,516
8,207
(3,846)
–
–
(7,981)
(7,965)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,724
8,078
(4,000)
–
–
(13,351)
–
–
–
Total
€’000
528,785
24,817
3,039
(1,003)
26,853
(30,751)
5,516
–
14
717
(7,981)
–
–
3,039
(1,003)
2,036
–
–
–
–
–
–
–
130,587
1,273
(420)
1,273
(420)
853
131,440
–
–
–
–
–
–
(33,895)
8,724
–
9
633
(13,351)
9,984
2,036
523,153
Balance at 02 January 2016
460,638
147,489
4,227
(13,238)
14,708
2,889
616,713
104
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS COMPANY STATEMENT OF COMPREHENSIVE INCOME AND STATEMENT OF CASHFLOWS
COMPANY STATEMENT OF COMPREHENSIVE INCOME AND STATEMENT
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
OF CASH FLOWS
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Company statement of comprehensive income
Profit for the year after tax
Other comprehensive income
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 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 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
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Notes
23
17
27
Notes
35
17
22
12
21
20
2015
€’000
130,587
1,273
(420)
853
2014
€’000
24,817
3,039
(1,003)
2,036
131,440
26,853
2015
€’000
53,011
53,011
–
–
(66)
(66)
642
(33,895)
(13,351)
(46,604)
6,341
8,590
14,931
2014
€’000
49,849
49,849
(117)
27
(935)
(1,025)
731
(30,751)
(7,981)
(38,001)
10,823
(2,233)
8,590
Glanbia plc
Annual Report and Accounts 2015
105
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS
NOTES TO THE FINANCIAL STATEMENTS
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
1. GENERAL INFORMATION
Glanbia plc (the “Company”) and its subsidiaries (together the “Group”) is
a leading global nutrition group with its main operations in Europe, USA,
Middle East, 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. Glanbia Co-operative Society Limited (the “Society”), together with
its subsidiaries, holds 36.5% of the issued share capital of the Company.
The Board of Directors for the year ended 02 January 2016 is comprised
of 22 members, of which up to 14 are nominated by the Society. The
number of members the Society may nominate to the Board will reduce
to 10 members in 2016. In accordance with IFRS 10 ‘Consolidated
Financial Statements’, the Society controls the Group and is the ultimate
parent of the Group.
The Company’s shares are quoted on the Irish and London Stock
Exchanges.
The consolidated Financial Statements have been approved for issue by
the Board of Directors on 23 February 2016.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICES
New accounting standards and International Financial Reporting
Interpretations Committee (IFRIC) interpretations adopted by the Group
during the year ended 02 January 2016 are dealt with in section (aa) below.
The adoption of these standards and interpretations had no significant
impact on the results or financial position of the Group during the year.
The other principal accounting policies adopted in the preparation of the
Financial Statements are set out below.
These policies have been consistently applied to all years presented, by
the Company, its subsidiaries and Joint Ventures & Associates unless
otherwise stated.
(a) Basis of preparation
The consolidated Financial Statements have been prepared in accordance
with EU adopted International Financial Reporting Standards (IFRS), IFRIC
interpretations and those parts of the Companies Act 2014, applicable to
companies reporting under IFRS.
Both the Company and consolidated Financial Statements have also been
prepared in accordance with IFRS as adopted by the European Union (EU)
which comprise standards and interpretations approved by the
International Accounting Standards Board (IASB). The consolidated
Financial Statements comply with Article 4 of the EU IAS Regulation. IFRS
adopted by the EU differs in certain respects from IFRS issued by the IASB.
References to IFRS hereafter refer to IFRS adopted by the EU.
The Company Financial Statements are prepared using accounting policies
consistent with the accounting policies applied by the Group to the
consolidated Financial Statements.
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, derivative financial instruments, share-based
payments and retirement benefit obligations. The carrying values of
recognised assets and liabilities that are hedged are adjusted to record
changes in the fair values attributable to the risks that are being hedged.
The preparation of the consolidated 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
consolidated 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 ended
02 January 2016. Comparatives are for the 52-week period ended 03
106
Glanbia plc
Annual Report and Accounts 2015
January 2015. The balance sheets for 2015 and 2014 have been drawn
up as at 02 January 2016 and 03 January 2015 respectively.
Going concern
After making enquiries the Directors consider it appropriate to adopt the
going concern basis of accounting in preparing the consolidated Financial
Statements.
(b) Basis of Consolidation
(i) Subsidiaries
The consolidated Financial Statements incorporate the Financial
Statements of the Company and entities controlled by it (its
subsidiaries). Subsidiaries are 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.
Inter-company transactions, balances and unrealised gains and
losses, unless they provide an indicator of impairment, between
Group companies are eliminated.
(ii) Joint Ventures
The Group applies IFRS 11 ‘Joint Arrangements’ 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. The Group has
assessed the nature of its joint arrangements and determined them
to be joint ventures. Investments in Joint Ventures are accounted for
using the equity method of accounting.
(iii) Associates
Associates are entities over which the Group has significant influence
but not control, generally accompanying a shareholding of between
20% and 50% of the voting rights. Significant influence is the power
to participate in the financial and operating policy decisions of the
investee but is not control or joint control over those policies.
Investments in Associates are accounted for using the equity method
of accounting.
(iv) Equity method of accounting - Joint Ventures & Associates’
Under the equity method of accounting, investments in Joint Ventures
& Associates are initially recognised at cost.
The Group’s share of Joint Ventures & Associates’ post acquisition
profits or losses after tax are recognised in the “Share of results of
Joint Ventures & Associates” in the Group income statement.
The Group’s share of Joint Ventures & Associates’ post acquisition
movement in reserves is recognised in other comprehensive income.
The cumulative post-acquisition movements are adjusted against the
carrying amount of the investment less any impairment in value.
Where indicators of impairment arise, the carrying amount of the Joint
Venture or Associate is tested for impairment by comparing its
recoverable amount against its carrying value.
Unrealised gains arising from transactions with Joint Ventures &
Associates are eliminated to the extent of the Group’s interest in the
entity. Unrealised losses are similarly eliminated to the extent that they
do not provide evidence of impairment.
When the Group’s share of losses in a Joint Venture or Associate
equals or exceeds its interest in the Joint Venture or Associate the
Group does not recognise further losses unless the Group has
incurred obligations or made payments on behalf of the Joint Venture
or Associate.
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
When the Group ceases to have joint control or significant influence,
any retained interest in the entity is re-measured to its fair value at the
date when joint control or significant influence is lost with the change
in carrying amount recognised in the income statement. The Group
also reclassifies any movements previously recognised in other
comprehensive income to the income statement.
(v) Business combinations
The Group uses the acquisition method of accounting to account for
business combinations.
The acquisition date is deemed to be the date the Group gained
control of the entity.
The cost of the acquisition is measured at the aggregate of the fair
value of the consideration given.
Any contingent consideration to be transferred by the acquirer will be
recognised at fair value at the acquisition date. Subsequent changes
to the fair value of the contingent consideration will be recognised in
accordance with IAS 39 ‘Financial Instruments: Recognition and
Measurement’ in the income statement.
Identifiable assets acquired and liabilities and contingent liabilities
assumed in a business combination are measured initially at their fair
values at the acquisition date.
The fair value of the assets and liabilities are based on valuations using
assumptions deemed by management to be appropriate. Professional
valuers are engaged when it is deemed appropriate to do so.
Upon acquisition, the Group assesses the financial assets and
liabilities assumed for appropriate classification and designation in
accordance with the contractual terms, economic circumstances and
pertinent conditions as at the acquisition date.
Acquisition-related costs are expensed as incurred in the income
statement.
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.
Goodwill is initially measured at cost being the excess of the
aggregate of the consideration transferred and the amount of any
non-controlling interest in the net identifiable assets acquired and
liabilities assumed. 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.
If the initial accounting for a business combination is incomplete by
the end of the reporting period in which the combination occurs, the
Group reports provisional amounts for the items for which the
valuation of the fair value of assets and liabilities acquired is still in
progress. Those provisional amounts are adjusted during the
measurement period of one year from the date control is achieved
facts and
when additional
circumstances which would have affected the amounts recognised
as of that date.
is obtained about
information
(vi) Discontinued operations and non-current assets held for sale
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 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.
(vii) Non-controlling interests
Non-controlling interests represent the portion of the equity of a
subsidiary not attributable either directly or indirectly to the Company
and are presented separately in the income statement and within
equity in the balance sheet, distinguished from shareholders’ equity
attributable to owners of the Company.
(c) Foreign currency translation
(i)
Functional and presentation currency
Items included in the Financial Statements of each of the Group’s
subsidiaries, Joint Ventures & Associates 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 currency 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 or net
investment 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 net
investment hedges.
Net investment hedges are 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
Glanbia plc
Annual Report and Accounts 2015
107
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
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 reclassified to
the income statement unless the entity is disposed of.
(iii) Subsidiaries, Joint Ventures & Associates
The income statement and balance sheet of subsidiaries, Joint
Ventures & Associates 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 and statement of
comprehensive income are translated at average exchange rates
for the year. Average exchange rates are only permissible if they
approximate actual. The average exchange rates are a reasonable
approximation of the cumulative effect of the rates on transaction
dates.
• all resulting exchange differences are recognised in other
comprehensive income.
Resulting exchange differences are taken to a separate currency
reserve within equity. When a foreign entity is disposed outside the
Group, such exchange differences are recognised in the income
statement as part of the gain or loss on disposal.
The principal exchange rates used for the translation of results and
balance sheets into euro are as follows:
euro 1=
US dollar
Pound Sterling
Danish Kroner
Average
Year end
2015
2014
2015
2014
1.1092
1.3271
1.0887
1.2043
0.7259
0.8058
0.7340
0.7800
7.4589
7.4547
7.4626
7.4434
In accordance with IFRS 1 ‘First time Adoption of International
Financial Reporting Standards’, cumulative currency translation
differences arising prior to the transition date to IFRS (04 January
2004) have been set to zero for the purpose of ascertaining the gain
or loss on disposal of a foreign operation.
(iv) Business combinations
Goodwill and fair value adjustments arising on the acquisition of a
foreign entity are expressed as functional currency assets and
liabilities of the foreign entity and are recorded at the exchange rate
at the date of the transaction and subsequently retranslated at the
applicable closing rates.
(d) Property, plant and equipment
(i) Cost
Property, plant and equipment is stated at cost or deemed cost less
accumulated depreciation and impairment losses.
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.
Subsequent costs, for example the costs of major renovation, are
included in the asset’s carrying amount or recognised as a separate
asset, as appropriate, only when it is probable that future economic
benefits associated with the item will flow to the Group and the cost
of the item can be measured reliably.
The carrying amount of any component accounted for as a separate
asset is de-recognised when replaced.
All other repairs and maintenance are charged to the income
statement during the reporting period in which they are incurred.
Gains and losses on disposals are determined by comparing
proceeds with the carrying amount and are included in the income
statement.
Borrowing costs directly attributable to the construction of property,
plant and equipment are capitalised as part of the cost of the assets.
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.
(ii) Depreciation
Depreciation is calculated on the straight-line method to write off the
cost (less residual value) 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
Land is not depreciated. 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.
(iii)
Impairment
In accordance with IAS 36 ‘Impairment of Assets’, the carrying
amounts of items of property, plant and equipment are reviewed at
each balance sheet date to determine whether there is any indication
of impairment. An impairment loss is recognised whenever the
carrying amount of an asset exceeds its recoverable amount.
Impairment losses are recognised in the income statement. Following
the recognition of an impairment loss, the depreciation charge
applicable to the asset is adjusted prospectively in order to
systematically allocate the revised carrying amount, net of any residual
value over the remaining useful life.
(e) Intangible assets
(i) Goodwill
Goodwill is initially recognised at cost being the excess of the cost of
an acquisition over the fair value of the Group’s share of the net
identifiable assets, liabilities and contingent liabilities of the acquired
subsidiary, Joint Venture or Associate at the date of acquisition.
Goodwill on acquisitions of subsidiaries is included in intangible
assets.
Goodwill associated with the acquisition of Joint Ventures &
Associates is included within the investment in Joint Ventures &
Associates under the equity method of accounting.
Following initial recognition goodwill is carried at cost less
accumulated impairment losses, if applicable. Goodwill impairments
are not reversed.
Goodwill is not amortised but is subject to impairment testing on an
annual basis and at any time during the year if an indicator of
impairment is considered to exist; the annual goodwill impairment
tests are undertaken at a consistent time in each annual period.
Goodwill is allocated to cash generating units for the purpose of
impairment testing. The allocation is made to those cash generating
units or group of cash generating units that are expected to benefit
from the business combination in which the goodwill arose.
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The units or groups of units are identified at the lowest level at which
goodwill is monitored for internal management purposes.
Gains and losses on the disposal of an entity include the carrying
amount of goodwill relating to the entity sold.
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.
(ii) Research and development costs
Research expenditure is recognised as an expense in the income
statement 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, customer relationships and other intangibles
Brands, customer relationships and other intangibles acquired as part
of a business combination are stated at their fair value at the date
control is achieved.
Indefinite life brands are carried at cost less accumulated impairment
losses, if applicable. Indefinite life brands are not amortised on an
annual basis but are tested annually for impairment. Indefinite life
intangible assets are those for which there is no foreseeable limit to
their expected useful life. The classification of the brands as indefinite
is assessed annually.
Definite life brands, customer relationships and other intangibles are
amortised using the straight-line method over their useful life, which
is set out in note 14. The useful life used to amortise definite life
brands, customer relationships and other intangibles relates to the
future performance of the assets acquired and management’s
judgement of the period over which the economic benefit will be
derived from the assets.
The carrying values of definite life brands, customer relationships and
other intangibles are reviewed for indicators of impairment at each
reporting date and are subject to impairment testing when events or
circumstances indicate that the carrying values may not be
recoverable.
(iv) Computer software
Computer software is stated at cost less accumulated amortisation
and impairment losses.
Costs incurred on the acquisition of computer software are
capitalised, as are costs directly associated with developing computer
software programmes for internal use, if they meet the recognition
criteria of IAS 38 ‘Intangible Assets’.
Computer software costs recognised as assets are amortised using
the straight-line method over their estimated useful lives, which is
normally between 5 and 10 years.
(v)
Impairment of intangible assets
All intangible assets are reviewed for impairment annually or more
frequently if indicators of impairment exist.
For the purposes of assessing impairment, assets are grouped at the
lowest level for which there are separately identifiable cash flows (cash
generating units).
An impairment loss is recognised in the income statement for the
amount by which the carrying value of the cash generating unit (CGU)
exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less
costs to sell and its value in use. Value in use is determined as the
discounted future cash flows of the CGU.
(f) 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 classified as 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 disposed 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
(level 1 within the fair value hierarchy).
If the market for a financial asset is not active the Group establishes fair
value using valuation techniques (level 2 within the fair value hierarchy).
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.
Dividends on available for sale financial assets are recognised in the income
statement.
Impairment
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, 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.
Available for sale financial assets - Company
Investments in subsidiaries and associates held by the Company are
carried at cost.
(g) Inventories
Inventories are stated at the lower of cost or net realisable value.
Cost includes all expenditure incurred in the normal course of business in
bringing the products to their present location and condition.
Cost is determined by the first-in, first-out (FIFO) method or by weighted
average cost. 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).
Costs of inventories include the transfer from equity of any gains/losses
on qualifying cash flow hedges which relate to purchases of raw materials.
Net realisable value is the estimated selling price in the ordinary course of
business, less the estimated costs of completion and selling expenses.
Provision is made, where necessary, for aged, slow moving, obsolete and
defective inventories.
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(h) 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.
(k) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand, deposits held on call
with banks and other short-term highly liquid investments with original
maturities of three months or less.
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.
Impairment
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.
Objective evidence includes 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.
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.
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. The Group has not
entered into any debt purchase arrangement.
(i) Trade and other payables
Trade and other payables are recognised initially at their fair value and
subsequently measured at amortised cost which approximates to fair value
given the short dated nature of these liabilities.
These amounts represent liabilities for goods and services provided to the
Group prior to the end of the financial year which are unpaid.
The amounts are unsecured and are usually paid within 30 days of
recognition. Trade and other payables are presented as current liabilities
unless payment is not due within 12 months after the reporting period.
(j) Provisions
Provisions are recognised on the balance sheet when the Group has a
constructive or legal obligation as a result of past events, it is probable
that an outflow of resources will be required to settle the obligation and
the amount can be reliably estimated. Provisions are not recognised for
future operating losses. Provisions are measured using management’s
best estimate of the present value of the expenditure required to settle the
present obligation at the end of the reporting period. The discount rate
used to determine the present value is a pre-tax rate that reflects current
market assessments of the time value of money and the risks specific to
the liability. The increase in provision due to passage of time is recognised
as an interest expense.
Provisions arising on business combinations are only recognised to the
extent that they have qualified for recognition in the Financial Statements
of the acquiree prior to acquisition.
A contingent liability is not recognised but is disclosed where the existence
of the obligation will only be confirmed by future events or where it is not
probable that an outflow of resources will be required to settle the
obligation or where the amount of the obligation cannot be measured with
reasonable reliability. Contingent assets are not recognised but are
disclosed where an inflow of economic benefits is probable.
For the purposes of the Group statement of cash flows, cash and cash
equivalents consists of cash and cash equivalents as defined above net
of bank overdrafts.
(l) Borrowings
Borrowings are recognised initially at fair value. Borrowings are
subsequently stated at amortised cost; any difference between the
proceeds and the redemption value is recognised in the income statement
over the period of the borrowings using the effective interest method.
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.
(m) Employee benefits
(i) Pension obligations
The 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.
Defined contribution pension
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 obligation 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 an employee benefit expense in
the income statement when they are due.
Defined benefit pension obligation
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.
The fair value of plan assets is based on market price information and
in the case of published securities, it is the published bid price.
losses arising
Remeasurement gains and
from experience
adjustments and changes in actuarial assumptions are recognised in
the period in which they occur, directly in other comprehensive
income. They are included in retained earnings in the statement of
changes in equity and in the balance sheet. Remeasurements are not
reclassified to the income statement in subsequent periods.
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A curtailment arises when the Group significantly reduces the number
of employees or employee entitlements covered by a plan. A past
service cost may be either positive (when benefits are introduced or
changed so that the present value of the defined benefit obligation
increases) or negative (when benefits are withdrawn or changed so
that the present value of the defined benefit obligation decreases).
A settlement occurs when an entity enters into a transaction that
eliminates all further legal or constructive obligation for part or all of
the benefits provided under a defined benefit plan (other than a
payment of benefits to, or on behalf of, employees in accordance with
the terms of the plan and included in the actuarial assumptions).
The gain or loss on a settlement is the difference between:
(a)
the present value of the defined benefit obligation being settled,
as determined on the date of settlement; and
the settlement price, including any plan assets transferred and
any payments made directly by the entity in connection with
the settlement.
(b)
The deferred tax impact of pension scheme obligations is disclosed
separately within deferred tax assets.
(ii) Share based payments
(n) 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 any foreign currency contracts or any commodities
contract is estimated by discounting the difference between the
contractual forward price and the current forward price, using the market
interest rate at the measurement date, for a time period equal to the
residual maturity of the contract.
The fair value of any interest rate swap is estimated by discounting future
cash flows under the swap, using the market interest rates, at the
measurement date, for time periods equal to the residual maturity of the
contracted cash flows.
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 operates a number of equity settled share based
compensation plans which include share option and share award
schemes which are open to Executive Directors and certain senior
managers.
The Group designates certain derivatives as either: (1) hedges of the fair
value of recognised assets or liabilities or a firm commitment (fair value
hedge); (2) hedges of a particular risk associated with a recognised asset
or liability or a highly probable forecast transaction (cash flow hedge).
The charge to the income statement in respect of share-based
payments is based on the fair value of the equity instruments granted.
The charge is spread over the period from the start of the performance
period to the date of vesting of the instrument. This is the period over
which all of the specified vesting conditions are to be satisfied.
Options under the 2002 Long Term Incentive Plan
The fair value of the instruments awarded is calculated using the
binomial model.
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.
Awards under the 2008 Long Term Incentive Plan
The fair value of the awards is calculated using a Monte Carlo
simulation technique. The awards contain inter alia a Total
Shareholder Return (TSR) based (and hence market based) vesting
condition and, accordingly, the fair value assigned to the related equity
instruments on initial application of IFRS 2 ‘Share-based Payment’ is
adjusted so as to reflect the anticipated likelihood at the grant date
of achieving the market-based vesting condition.
Non-market vesting conditions are included in assumptions about
the number of awards that are expected to vest. At each reporting
date, the Group revises its estimates of the number of awards 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.
The non-market based charge to the income statement is only
reversed where awards do not vest because non-market performance
conditions have not been met or where, subject to the rules of the
scheme, an employee in receipt of share awards relinquishes service
before the end of the vesting period.
Awards under the Annual Incentive Deferred Into Shares Scheme
The fair value of shares awarded is determined in line with the Group’s
Annual Incentive Scheme rules and equates with the cash value of
the portion of the annual incentive that will be settled by way of shares.
The expense is recognised immediately in the income statement with
a corresponding entry to equity.
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 hedging
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 cash flow hedging reserve in
equity are shown in note 21. 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 (e.g. 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.
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(p) 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.
Revenue grants 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 current and 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.
(q) Share capital
(i) Equity
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.
(ii) Own shares
Where the Employee Share Trust and/or the Employee Share Scheme
Trust (on behalf of the Company) purchases the Company’s equity
share capital, under the 2008 LTIP Scheme and the Annual Incentive
Deferred into Shares Scheme, the consideration paid is deducted
from total equity and classified as own shares until they are re-issued.
Where such shares are re-issued, they are re-issued on a first in, first
out basis and the amount re-issued is transferred from own shares
to retained earnings.
(r) Revenue recognition
Revenue
the consideration
received/receivable for the sale of goods to external customers net of value
added tax, rebates and discounts.
is measured at
fair value of
the
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. This
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. Rebates and discounts are recorded in the same period as
the original revenue.
Interest income is accrued on a time basis, by reference to the principal
outstanding and at the effective interest rate applicable.
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.
The timing of recognition of service revenue equals the timing of when the
services were rendered.
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
Changes in the fair value of any derivative instruments that do not
qualify for hedge accounting are recognised in the income statement.
(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.
(o) Income taxes
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 tax
Current tax is calculated on the basis of tax laws enacted or
substantively 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 provisions, where appropriate, on the
basis of amounts expected to be paid to the tax authorities.
(ii) Deferred tax
Deferred tax is determined using tax rates and laws enacted or
substantively enacted by the reporting date. Deferred tax is provided
on a non-discounted basis, using the balance sheet liability method,
providing for temporary differences 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
liabilities are not recognised to the extent they arise from the initial
recognition of goodwill not having full tax basis.
Deferred tax is provided on temporary differences arising on
investments in subsidiaries, Joint Ventures & Associates 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.
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.
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(s) Segment reporting
In identifying the Group's operating segments, management assessed the
following by business unit:
Other finance costs are expensed in the income statement in the period
in which they are incurred.
•
•
•
•
the nature of the products,
the nature of the production processes,
the type or class of customer; and
the methods used to distribute the products.
The Group has four segments:
Glanbia Performance Nutrition
Glanbia Performance Nutrition earns its revenue from performance nutrition
products. Its products are sold through a variety of channels including
speciality retail, the internet and gyms in a variety of formats, including
powders, bars and ready-to-drink beverages.
Global Ingredients
Global Ingredients comprises US Cheese, Ingredient Technologies and
Customised Solutions and sells cheese, dairy and non-dairy nutritional
ingredients. All are targeted on the increased market focus on health and
nutrition and share relationships with common global customers and end
markets.
Dairy Ireland
Dairy Ireland comprises two Irish 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.
Joint Ventures & Associates
Joint Ventures & Associates comprise the Group's strategic Joint Ventures
& Associates and are considered by management as strategically
important, not just in their own right but also in terms of the synergies and
growth opportunities they bring to the wholly owned Group.
These segments align with the Group's internal financial reporting system
and the way in which the Chief Operating Decision Maker (Glanbia
Operating Executive) assesses performance and allocates the Group's
resources.
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 tax position of the Group.
Unallocated assets and liabilities primarily include tax, cash and cash
equivalents, available for sale financial assets, borrowings and derivatives.
Intersegment revenue is determined on an arms-length basis. Where a
material dependency or concentration on an individual customer would
warrant disclosure, this is disclosed in the operating segments note under
IFRS 8 ‘Operating Segments’.
(t) Dividends
Dividends on Ordinary Shares to the Company’s shareholders are
recognised as a liability of the Company when approved by the Company’s
shareholders.
Proposed dividends that are approved after the balance sheet date are
not recognised as a liability but are disclosed in the dividends note.
(u) Finance costs
Finance costs comprise interest payable on borrowings calculated using
the effective interest rate method, net losses on hedging instruments that
are recognised in the income statement, facility fees and the unwinding of
discounts on provisions. The interest expense component of finance lease
payments is recognised in the income statement using the effective interest
rate method.
General and specific finance costs that are directly attributable to the
acquisition, construction or production of a qualifying asset are capitalised
during the period of time that is required to complete and prepare the asset
for its intended use or sale. Qualifying assets are assets that necessarily
take a substantial period of time to get ready for their intended use or sale.
(v) Finance income
Finance income is recognised in the income statement as it accrues using
the effective interest rate method and includes net gains on hedging
instruments that are recognised in the income statement.
(w) 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 excluding own shares.
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) divided by the weighted average number
of Ordinary Shares in issue during the period.
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.
(x) Leases
(i) Finance leases
Leases of assets where the Group has substantially all the risks and
rewards of ownership are classified as finance leases. All other leases
are operating leases.
A determination is also made as to whether the substance of an
arrangement could equate to 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 cost.
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.
The corresponding rental obligation, net of finance charges is included
in borrowings and split between current and non-current, as
appropriate.
(ii) Operating leases
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.
(y) 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 ‘Provisions, Contingent Liabilities and Contingent Assets’ and
involves the payment of termination benefits.
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Amendments to IAS 27 ‘Consolidated and 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 - not yet endorsed).
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 Ventures. 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.
Amendment to IAS 1 ‘Presentation of Financial Statements’ on
the disclosure initiative (effective on or after 01 January 2016 -
not yet endorsed).
These amendments are as part of the IASB initiative to improve
presentation and disclosure in financial report, effective for annual periods
beginning on or after 1 January 2016, subject to EU endorsement.
IFRS 15 ‘Revenue from Contracts with Customers’ (effective on
or after 01 January 2018 - not yet endorsed).
IFRS 15, 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 - not yet endorsed).
This standard replaces the guidance in IAS 39 ‘Financial Instruments:
Recognition and Measurement’. 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.
Amendments to IAS 12 'Income Taxes' on the recognition of
deferred tax assets for unrealised losses (effective on or after 01
January 2017 - not yet endorsed).
These amendments clarify the recognition of deferred tax assets for
unrealised losses on debt instruments.
Amendments to IAS 7 'Statement of Cash Flows' under its
disclosure initiative (effective on or after 01 January 2017 - not
yet endorsed).
These amendments are intended to improve the information provided to
users of Financial Statements about an entity's financing activities.
IFRS 16 'Leases' (effective on or after 01 January 2019 - not yet
endorsed).
IFRS 16 supersedes IAS 17 'Leases'. The new standard provides a single
lessee accounting model, requiring lessees to recognise assets and
liabilities for all leases unless the lease term is 12 months or less or the
underlying asset has a low value. Lessors continue to classify leases as
operating or finance, with IFRS 16's approach to lessor accounting
substantially unchanged from IAS 17.
(z) 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, adjustments
to contingent consideration, material acquisition integration costs,
restructuring costs, profit or loss on disposal or termination of
operations, material acquisition costs, litigation settlements, legislative
changes, gains or losses on defined benefit pension scheme
restructuring 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.
(aa) 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 02 January 2016
and have been adopted by the Group:
• Amendments to IFRS 1 ‘First-time Adoption of International Financial
Reporting Standards’;
• Amendments to IFRS 2 ‘Share-based Payment’;
• Amendments to IFRS 3 ‘Business Combinations’;
• Amendments to IFRS 8 ‘Operating Segments’;
• Amendments to IFRS 13 ‘Fair Value Measurement’;
• Amendments to IAS 16 ‘Property, Plant & Equipment’ and IAS 38
‘Intangible Assets’;
• Amendments to IAS 24 ‘Related Party Disclosures’;
• Amendments to IAS 40 ‘Investment Property’;
• Amendment to IAS 19 ‘Employee Benefits’; and
•
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 02 January 2016.
The following standards, amendments and interpretations have been
published. The Group will apply the relevant standards from their effective
dates and at this point the Group does not believe that they will have a
material 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.
Amendments to IFRS 11 ‘Joint Arrangements’ on acquisition of
an interest in a joint operation (effective on or after 01 January
2016).
This amendment adds 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 16 ‘Property, Plant and Equipment’ and IAS
38, ‘Intangible Assets’, on depreciation and amortisation
(effective on or after 01 January 2016).
These amendments clarify that the use of revenue-based methods to
calculate the depreciation of an asset is not appropriate because revenue
generated by an activity that includes the use of an asset generally reflects
factors other than the consumption of the economic benefits embodied
in the asset. The IASB has also clarified that revenue is generally presumed
to be an inappropriate basis for measuring the consumption of the
economic benefits embodied in an intangible asset.
114
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FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
(c) Retirement benefit obligations
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 €352.8 million (2014: €393.3 million) and
plan liabilities of €440.1 million (2014: €508.1 million) giving a net pension
deficit of €87.3 million (2014: €114.8 million) for the Group. The size of the
obligation and cost of the benefits are sensitive to actuarial assumptions.
These include demographic assumptions covering mortality and longevity,
and economic assumptions covering price inflation, benefit and salary
increases together with the discount rate used. The Group has reviewed
the impact of a change in the discount rate used and concluded that based
on the pension deficit at 02 January 2016, 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 €19.4
million (2014: €23.6 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.
3. 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 (e). 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 Glanbia
Performance Nutrition, including goodwill arising on acquisition were tested
for impairment using projected cash flows over a three year period and a
terminal value for a further seventeen 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
14.
(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. It 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, a probability weighted
expected value, 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.
Glanbia plc
Annual Report and Accounts 2015
115
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
4. SEGMENT INFORMATION
In accordance with IFRS 8 ‘Operating Segments’, the Group has four
segments as follows: Glanbia 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 which acts as the Chief Operating Decision
Maker for the Group.
Each segment derives its revenues as follows: Glanbia Performance
Nutrition earns its revenue from performance 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 and
dairy ingredients.
Each segment is reviewed in its totality by the Chief Operating Decision
Maker. The Glanbia Operating Executive assesses the trading performance
of operating segments based on a measure of earnings before interest,
tax, amortisation and exceptional items.
Amounts stated below for Joint Ventures & Associates represents the
Group's share.
4.1 The segment results for the year ended 02 January 2016 are as follows:
Total gross segment revenue
Inter-segment revenue
Glanbia
Performance
Nutrition
€’000
Global
Ingredients
€’000
Dairy
Ireland
€’000
JVs &
Associates
€’000
Group including
JVs &
Associates
€’000
(a)
924,165
1,272,795
633,787
893,089
3,723,836
(1,050)
(54,814)
(557)
–
(56,421)
Total Group Revenue
923,115
1,217,981
633,230
893,089
3,667,415
Total Group earnings before interest, tax,
amortisation and exceptional items (EBITA)
(b)
135,610
106,642
28,751
39,690
310,693
Included in external revenue are related party sales between Global Ingredients and Joint Ventures & Associates of €15.3 million and related party sales
between Dairy Ireland and Joint Ventures & Associates of €17.0 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.
4.1 (a) Segment revenue is reconciled to reported external revenue as follows:
Total gross segment revenue
Inter-segment revenue
Joint Ventures & Associates revenue
Reported external revenue
2015
€’000
3,723,836
(56,421)
(893,089)
2,774,326
4.1 (b) Total Group earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax and
profit after tax as follows:
Total Group earnings before interest, tax, amortisation and exceptional items (EBITA)
Amortisation
Exceptional items
Joint Ventures & Associates interest, tax and amortisation
Finance income
Finance costs
Reported profit before tax
Income taxes
Reported profit after tax
Notes
14
6
9
9
10
2015
€’000
310,693
(31,125)
(26,342)
(13,420)
1,706
(22,816)
218,696
(34,779)
183,917
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.
116
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FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Other segment items included in the income statement for the year ended 02 January 2016 are as follows:
Depreciation of property, plant and equipment
Amortisation of intangibles
Capital grants released to the income statement
Glanbia
Performance
Nutrition
€’000
10,352
19,471
(17)
Global
Ingredients
€’000
23,777
9,209
(38)
Dairy
Ireland
€’000
9,008
2,445
(227)
JVs &
Associates
€’000
Group including
JVs &
Associates
€’000
14,863
476
(1,212)
58,000
31,601
(1,494)
The segment assets and liabilities at 02 January 2016 and segment capital expenditure and acquisitions for the year then ended are
as follows:
Segment assets
Segment liabilities
Capital expenditure - additions
Capital expenditure - business combinations
Glanbia
Performance
Nutrition
€’000
1,150,637
257,148
34,437
235,359
(c)
(d)
(e)
(e)
Global
Ingredients
€’000
794,155
237,853
64,399
–
Dairy
Ireland
€’000
302,000
181,146
13,484
1,109
JVs &
Associates
€’000
Group including
JVs &
Associates
€’000
160,332
2,407,124
–
35,522
–
676,147
147,842
236,468
4.1 (c) Segment assets are reconciled to reported assets as follows:
Segment assets
Unallocated assets
Reported assets
Unallocated assets primarily include taxation, cash and cash equivalents, available for sale financial assets and derivatives.
4.1 (d) Segment liabilities are reconciled to reported liabilities as follows:
Segment liabilities
Unallocated liabilities
Reported liabilities
2015
€’000
2,407,124
243,829
2,650,953
2015
€’000
676,147
911,733
1,587,880
Unallocated liabilities primarily include items such as taxation, borrowings and derivatives.
4.1 (e) Segment capital expenditure and acquisitions are reconciled to reported capital expenditure and acquisitions as follows:
Capital expenditure - additions
Capital expenditure - business combinations
Joint Ventures & Associates capital expenditure
Unallocated capital expenditure
Reported capital expenditure and acquisitions
2015
€’000
147,842
236,468
(35,522)
8,086
356,874
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Annual Report and Accounts 2015
117
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
4.2 The segment results for the year ended 03 January 2015 are as follows:
Total gross segment revenue
Inter-segment revenue
Glanbia
Performance
Nutrition
€’000
Global
Ingredients
€’000
Dairy
Ireland
€’000
JVs &
Associates
€’000
Group including
JVs &
Associates
€’000
(a)
746,381
1,210,376
616,744
984,016
3,557,517
(154)
(34,979)
–
–
(35,133)
Total Group Revenue
746,227
1,175,397
616,744
984,016
3,522,384
Total Group 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 normal
commercial terms and conditions that would also be available to unrelated third parties.
4.2 (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
2014
€’000
3,557,517
(35,133)
(984,016)
2,538,368
4.2 (b) Total Group earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax and
profit after tax as follows:
Total Group earnings before interest, tax, amortisation and exceptional items (EBITA)
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
Glanbia
Performance
Nutrition
€’000
5,609
12,727
(15)
Global
Ingredients
€’000
18,359
7,416
(53)
Dairy
Ireland
€’000
8,262
2,369
(196)
JVs &
Associates
€’000
Group including
JVs &
Associates
€’000
14,394
394
(1,142)
46,624
22,906
(1,406)
118
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Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
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
Capital expenditure - additions
Capital expenditure - business combinations
Glanbia
Performance
Nutrition
€’000
801,572
160,139
27,933
158,767
(c)
(d)
(e)
(e)
Global
Ingredients
€’000
709,810
230,678
64,439
–
Dairy
Ireland
€’000
293,186
197,583
29,367
–
JVs &
Associates
€’000
Group including
JVs &
Associates
€’000
161,173
1,965,741
–
56,469
–
588,400
178,208
158,767
4.2 (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.
4.2 (d) Segment liabilities are reconciled to reported liabilities as follows:
Segment liabilities
Unallocated liabilities
Reported liabilities
2014
€’000
1,965,741
140,383
2,106,124
2014
€’000
588,400
712,946
1,301,346
Unallocated liabilities primarily include items such as tax, borrowings and derivatives.
4.2 (e) Segment capital expenditure and acquisitions are reconciled to reported capital expenditure and acquisitions as follows:
Capital expenditure - additions
Capital expenditure - business combinations
Joint Ventures & Associates capital expenditure
Unallocated capital expenditure
Reported capital expenditure and acquisitions
2014
€’000
178,208
158,767
(56,469)
3,119
283,625
4.3 Entity wide disclosures
Revenue from external customers in the Glanbia Performance Nutrition, Global Ingredients, Dairy Ireland and Joint Ventures & Associates segments is
outlined in section 4.1 (a) and 4.2 (a) 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
2015
€’000
2014
€’000
2,008,164
1,823,565
746,215
227,268
291,194
394,574
745,524
212,774
312,492
428,029
3,667,415
3,522,384
Revenue of approximately €291.4 million (2014: €350.3 million) is derived from a single external customer within the Global Ingredients segment.
The total of non-current assets, other than the financial instruments and deferred tax assets, located in Ireland is €828.3 million (2014: €767.5 million)
and located in other countries, mainly the USA, is €880.5 million (2014: €556.7 million).
Glanbia plc
Annual Report and Accounts 2015
119
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
5. OPERATING EXPENSES
Revenue
Less costs:
Raw materials and consumables used
Depreciation of property, plant and equipment
Amortisation of capital 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
Other expenses
Earnings before interest, tax, amortisation and exceptional items (EBITA)
Intangible asset amortisation
Notes
4.1
2015
€’000
2014
€’000
2,774,326
2,538,368
(1,782,647)
(1,773,010)
(43,137)
(32,230)
282
264
(329,894)
(256,023)
13
30
7
(823)
(583)
(1,930)
(10)
(6,646)
790
(774)
(672)
(2,174)
(644)
(7,830)
816
(338,725)
(257,457)
271,003
(31,125)
208,634
(22,512)
14
Operating profit before exceptional items
239,878
186,122
* Auditor’s remuneration for the Company in respect of its statutory audit amounted to €35,000 (2014: €35,000).
6. EXCEPTIONAL ITEMS
Organisation redesign costs
Acquisition integration costs
Rationalisation costs
Irish defined benefit pension schemes
Disposal of Joint Venture
Transaction related costs
Total exceptional charge before tax
Exceptional tax credit
Total exceptional charge
The nature of the total exceptional charge before tax is as follows:
Employee benefit expense
Defined benefit pension scheme settlement loss
Other operating costs
Total exceptional charge before tax
Notes
(a)
(b)
(c)
(d)
(e)
( f )
Notes
28
2015
€’000
(6,945)
(2,919)
(7,841)
(5,006)
(3,631)
–
(26,342)
2,543
2014
€’000
–
–
(6,379)
–
–
(9,570)
(15,949)
1,870
(23,799)
(14,079)
2015
€’000
(7,416)
(4,306)
(14,620)
(26,342)
2014
€’000
(1,678)
–
(14,271)
(15,949)
The total cash outflow during the year in respect of exceptional charges was €15.1 million (2014: €16.4 million) of which €7.1 million (2014: €10.8
million) was in respect of prior year exceptional charges.
(a) The project to create one integrated Global Ingredients (GI) organisation is progressing to plan. Over the next 12 months the business structure
will be fundamentally reorganised into a single commercial team focused on GI’s nutritional ingredient portfolio. This will be supported by centres
of excellence across areas such as product supply, innovation and strategy. These changes will enable GI to be a more agile integrated consumer
insight driven organisation delivering to customers the full suite of Glanbia’s capability. Costs of €6.9 million include consultancy of €4.9 million,
employee benefit expense of €0.6 million and other costs of €1.4 million. The total cost of this project will be approximately €15 million to €20
million.
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FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
(b) Acquisition integration costs of €2.9 million comprise costs incurred by Glanbia Performance Nutrition relating to restructuring and the redesign
of route to market capabilities in acquired businesses. Costs of €2.9 million include consultancy of €1.6 million, employee benefit expense of €0.8
million and other costs of €0.5 million.
(c) Rationalisation costs primarily relate to the completion of the restructuring programme in the Dairy Ireland segment. Costs of €7.8 million include
employee benefit expense of €5.9 million and other costs of €1.9 million. There were no related impairments of tangible assets in 2015 (2014:
€3.2 million).
(d) The Group undertook a review of its pension arrangements in 2015 and agreed with the pension trustees to wind up three of its smaller Irish
defined benefit pension schemes. This transaction resulted in an exceptional charge in the year of €5.0 million. This charge relates to gains and
losses on settlement of €4.3 million, in accordance with IAS 19 ‘Employee Benefits’, and professional fees of €0.7 million in relation to the transaction.
This settlement reduced the gross retirement benefit obligation by €60.2 million.
(e) On 01 April 2015, the Group disposed of its investment in Milk Ventures (UK) Limited which is the parent company of Nutricima Limited, a non-core
Joint Venture business involved in the supply and distribution of evaporated and powered milk, based in Nigeria. PZ Cussons plc, Glanbia’s partner
in the Joint Venture Nutricima, acquired Glanbia’s 50% stake for cash consideration of £21 million (€28.5 million). In line with IFRS 5 ‘Non Current
Assets Held for Sale and Discontinued Operations’, the disposal of the Group’s interest resulted in a non-cash loss of €3.6 million. This comprised
a profit on disposal of €1.4 million (cash consideration of €28.5 million less carrying value €27.1 million including loan to Joint Venture) offset by
the recycle of €5.0 million cumulative foreign currency translation losses previously recognised in equity. Milk Ventures (UK) Limited was previously
included in the Joint Ventures & Associates segment.
(f ) Transaction related costs in 2014 comprised of costs relating to acquisition activities that did not come to fruition and additional contingent
consideration relating to the acquisition of Nutramino Holding ApS, in excess of its fair value at date of acquisition.
EMPLOYEE BENEFIT EXPENSE
7.
The aggregate payroll costs of employees (including Executive Directors) in the Group were:
Wages and salaries
Social security costs
Pension costs – defined contribution schemes
Pension costs – defined benefit schemes
Other compensation costs:
Cost of share based payments
Company car allowance
Private health insurance
Exceptional items
Notes
28
28
21
5
6
2015
€’000
266,197
24,196
7,817
8,512
8,724
1,383
13,065
329,894
11,722
2014
€'000
205,486
22,312
4,811
8,226
5,516
1,045
8,627
256,023
1,678
341,616
257,701
Capitalised labour costs of €12.0 million (2014: €8.9 million) are included within the aggregate payroll costs above. See note 13 and note 14.
The average number of employees, excluding the Group’s Joint Ventures & Associates, in 2015 was 4,630 (2014: 4,257) and is analysed
into the following categories:
Glanbia Performance Nutrition
Global Ingredients
Dairy Ireland
The aggregate payroll costs of employees in the Company is nil (2014: nil).
8. DIRECTORS’ REMUNERATION
The Directors’ remuneration information is shown on pages 66 to 83 in the Remuneration Committee report.
2015
1,598
1,781
1,251
2014
1,442
1,632
1,183
4,630
4,257
Glanbia plc
Annual Report and Accounts 2015
121
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
9.
FINANCE INCOME AND COSTS
Finance income
Interest income
Total finance income
Finance costs
Bank borrowing costs
Facility fees
Unwinding of discounts
Finance lease costs
Finance cost of private debt placement
Finance cost of preference shares
Total finance costs
Net finance costs
Notes
2015
€'000
2014
€’000
29
1,706
1,725
1,706
1,725
(4,109)
(2,761)
(142)
(127)
(15,677)
–
(4,767)
(2,045)
(165)
(70)
(13,442)
(1,561)
(22,816)
(22,050)
(21,110)
(20,325)
Net finance costs do not include borrowing costs of €2.4 million (2014: €2.0 million) attributable to the acquisition, construction or production of a
qualifying asset, which have been capitalised, as disclosed in note 13. Interest is capitalised at the Group’s average interest rate for the period of 4.0%
(2014: 4.4%).
122
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FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
10. 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
Current tax
Deferred tax
Total tax charge for the year
Notes
2015
€'000
16,388
489
16,877
14,282
(5,488)
8,794
2014
€’000
14,124
787
14,911
16,332
1,925
18,257
25,671
33,168
5,898
5,753
(3,681)
(1,235)
27
11,651
(4,916)
37,322
28,252
(2,302)
(241)
(1,469)
(401)
34,779
26,382
Notes on exceptional tax credit:
(a) The Group incurred exceptional costs in the Global Ingredients and
Glanbia Performance Nutrition segments during 2015 relating to
restructuring projects aimed at redesigning the businesses to meet
future market needs. These costs resulted in an exceptional current
tax credit of €1.29 million (2014: nil).
(b) The rationalisation costs in the Dairy Ireland segment resulted in an
exceptional current tax credit of €0.95 million (2014: €0.40 million)
and an exceptional deferred tax credit of €0.03 million (2014: €0.40
million).
In 2015, there was an exceptional current tax credit of €0.06 million
(2014: nil) and exceptional deferred tax credit of €0.21 million (2014:
nil) relating to revisions to the Group’s Irish pension arrangements.
(c)
(d) During 2015, the Group disposed of its investment in Milk Ventures
(UK) Limited which is the parent company of Nutricima Limited, a
non-core Joint Venture business involved in the supply and
distribution of evaporated and powdered milk, based in Nigeria. While
this transaction gave rise to an exceptional loss of €3.6 million in the
Financial Statements, there is no current tax or deferred tax impact
arising.
In 2014, the Group incurred transaction costs relating to acquisition
activities that did not come to fruition, which resulted in an exceptional
current tax credit of €1.1 million.
(e)
The exceptional net tax credit in 2015 and 2014 has been disclosed
separately above as it relates 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% (2014: 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
2015
€'000
218,696
27,337
24
10,632
754
(3,284)
(684)
2014
€'000
173,577
21,697
2
7,305
1,477
(2,966)
(1,133)
34,779
26,382
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
corporate development activity.
Glanbia plc
Annual Report and Accounts 2015
123
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
11. 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 21 (f)).
2015
2014
Profit attributable to equity holders of the Parent (€’000)
Weighted average number of Ordinary Shares in issue
Basic earnings per share (cent)
183,271
146,313
295,196,003
295,011,089
62.08
49.60
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 and share awards are the Company’s only 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 market price (determined as the average
annual market price of the Company’s shares) and the fair value (determined as the fair value at the date of grant) attached to outstanding share options
and awards. 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 and awards.
Weighted average number of Ordinary Shares in issue
Adjustments for share awards
Adjustments for share options
Adjusted weighted average number of Ordinary Shares
Diluted earnings per share (cent)
2015
2014
295,196,003
295,011,089
1,002,678
1,510,550
42,617
134,881
296,241,298
296,656,520
61.87
49.32
Adjusted
Adjusted earnings per share is calculated on the net profit attributable to equity holders of the Parent, before exceptional items (net of related tax) 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 and reflects the metrics used by the Group to measure profitability and financial 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)
Exceptional items (net of related tax)
Adjusted net income
Adjusted earnings per share (cent)
Diluted adjusted earnings per share (cent)
12. DIVIDENDS
Dividends paid per Ordinary Share are as follows:
Final dividend for the year ended 03 January 2015 of 6.57 cent per share paid on 15 May 2015
2015
€'000
183,271
26,126
417
23,799
233,613
2014
€'000
146,313
19,698
345
14,079
180,435
79.14
61.16
78.86
60.82
2015
€’000
19,449
2014
€’000
–
Final dividend for the year ended 04 January 2014 of 5.97 cent per share paid on 16 May 2014
–
17,650
Interim dividend for the year ended 02 January 2016 of 4.88 cent per share paid on 16 October 2015
Interim dividend for the year ended 03 January 2015 of 4.43 cent per share paid on 10 October 2014
14,446
–
33,895
–
13,101
30,751
The Directors have recommended the payment of a final dividend of 7.22 cent per share on the Ordinary Shares which amounts to €21.4 million.
Subject to shareholder approval, this dividend will be paid on 29 April 2016 to shareholders on the register of members at 18 March 2016, the record
date. These Financial Statements do not reflect this final dividend. There are no income tax consequences for the Company in respect of dividends
proposed prior to issuance of the Financial Statements.
124
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Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
13. PROPERTY, PLANT AND EQUIPMENT
Notes
Land and
buildings
€'000
Plant and
equipment
€'000
Motor
vehicles
€'000
Year ended 03 January 2015
Opening carrying amount
Exchange differences
Acquisitions
Additions
Disposals
Reclassification
Impairments
Depreciation charge
Closing carrying amount
At 03 January 2015
Cost
Accumulated depreciation
Carrying amount
Year ended 02 January 2016
Opening carrying amount
Exchange differences
Acquisitions
Additions
Disposals
Reclassification
Depreciation charge
Closing carrying amount
At 02 January 2016
Cost
Accumulated depreciation
Carrying amount
14
6 (c)
5
37
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)
Total
€'000
373,972
38,210
2,487
111,327
(873)
503
(3,216)
(32,230)
200,698
288,628
854
490,180
265,793
(65,095)
641,234
(352,606)
19,658
(18,804)
926,685
(436,505)
200,698
288,628
854
490,180
200,698
14,541
38
36,462
(13)
887
288,628
23,723
765
63,637
(582)
(887)
854
139
2
477
(42)
–
490,180
38,403
805
100,576
(637)
–
5
(8,625)
(34,005)
(507)
(43,137)
243,988
341,279
923
586,190
321,232
(77,244)
743,907
(402,628)
20,413
1,085,552
(19,490)
(499,362)
243,988
341,279
923
586,190
Depreciation expense of €43.1 million was charged to the income statement during the year (2014: €32.2 million). There were no impairments during
the year (2014: €3.2 million).
Included in the closing cost at 02 January 2016 is an amount of €73.9 million (2014: €62.2 million) incurred in respect of assets under construction.
Included in the cost of additions for 2015 is €2.1 million (2014: €1.4 million) incurred in respect of staff costs capitalised into assets.
During the year, the Group has capitalised borrowing costs amounting to €2.4 million (2014: €2.0 million) on qualifying assets. See note 9.
Operating lease rentals amounting to €23.8 million (2014: €19.0 million) are charged to the income statement.
Assets held under finance leases:
The net carrying amount and the depreciation charge during the year in respect of assets held under finance leases and accordingly capitalised in
property, plant and equipment is as follows:
Leasehold equipment
Cost
Accumulated depreciation
Carrying amount
Depreciation charge
2015
€'000
6,281
(5,083)
1,198
312
2014
€'000
6,218
(4,767)
1,451
317
Glanbia plc
Annual Report and Accounts 2015
125
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
14. INTANGIBLE ASSETS
Year ended 03 January 2015
Opening carrying amount
Exchange differences
Acquisitions
Additions
Reclassification
Write-off of intangibles
Amortisation
Closing carrying amount
At 03 January 2015
Cost
Accumulated amortisation
Carrying amount
Year ended 02 January 2016
Opening carrying amount
Exchange differences
Acquisitions
Additions
Disposals
Reclassification
Amortisation
Goodwill
€'000
note (b)
Other
intangibles
€'000
note (a)
Notes
Software
costs
€'000
Development
costs
€'000
Total
€'000
454,486
60,960
156,280
13,531
(503)
(73)
181,758
240,905
23,771
57,460
33,517
98,820
–
–
–
–
–
42
–
19,172
1,516
–
5,716
(545)
–
12,651
2,156
–
7,815
–
(73)
(15,058)
(4,568)
(2,886)
(22,512)
262,989
358,226
21,291
19,663
662,169
262,989
–
445,247
(87,021)
70,120
(48,829)
38,622
(18,959)
816,978
(154,809)
262,989
358,226
21,291
19,663
662,169
262,989
25,340
85,790
–
–
(23)
–
358,226
36,069
149,867
335
–
23
21,291
1,414
6
8,124
(31)
82
19,663
2,198
–
11,371
–
(82)
662,169
65,021
235,663
19,830
(31)
–
(20,810)
(5,428)
(4,887)
(31,125)
13
5
37
5
Closing carrying amount
374,096
523,710
25,458
28,263
951,527
At 02 January 2016
Cost
Accumulated amortisation
374,096
643,481
–
(119,771)
76,265
(50,807)
53,843
1,147,685
(25,580)
(196,158)
Carrying amount
374,096
523,710
25,458
28,263
951,527
Amortisation expense of €31.1 million (2014: €22.5 million) has been charged to operating expenses during the year. The average remaining amortisation
period for software costs is 7 years (2014: 8 years) and development costs is 5 years (2014: 4 years).
Approximately €6.0 million of software additions during the year (2014: €2.6 million) were internally generated which included €4.4 million (2014: €3.6
million) of staff costs capitalised. Approximately €10.2 million of development cost additions during the year (2014: €7.0 million) were internally generated
which included €5.5 million (2014: €3.9 million) of staff costs capitalised.
No development costs were written off in 2015 due to uncertainty that these projects would not reach commercialisation (2014: €0.1 million).
126
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Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
14 (a) Other intangibles
Year ended 03 January 2015
Opening carrying amount
Exchange differences
Acquisitions
Reclassification
Amortisation
Closing carrying amount
At 03 January 2015
Cost
Accumulated amortisation
Carrying amount
Year ended 02 January 2016
Opening carrying amount
Exchange differences
Acquisitions
Additions
Reclassification
Amortisation
Closing carrying amount
At 02 January 2016
Cost
Accumulated amortisation
Carrying amount
Individually material intangible assets with definite useful lives
Brands
Glanbia Performance Nutrition - BSN
Glanbia Performance Nutrition - Isopure
Glanbia Performance Nutrition - thinkThin
Customer Relationships
Glanbia Performance Nutrition - Optimum Nutrition
Glanbia Performance Nutrition - BSN
Glanbia Performance Nutrition - Isopure
Glanbia Performance Nutrition - thinkThin
Notes
Brands
€'000
Customer
relationships
€'000
154,596
21,066
67,090
42
82,542
12,304
31,730
–
Other
€'000
3,767
147
–
–
Total other
intangibles
€'000
240,905
33,517
98,820
42
(3,968)
(11,027)
(63)
(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
37
238,826
115,549
3,851
24,017
78,589
–
1,129
(5,651)
11,924
71,278
–
1,505
(15,025)
128
–
335
(2,611)
(134)
358,226
36,069
149,867
335
23
(20,810)
336,910
185,231
1,569
523,710
365,244
(28,334)
275,530
(90,299)
2,707
(1,138)
643,481
(119,771)
336,910
185,231
1,569
523,710
Average
remaining
amortisation
position
2015
Yrs
35
39
40
7
10
12
13
Carrying
amount
2015
€’000
51,289
64,390
78,862
45,365
29,319
27,957
71,406
Carrying
amount
2014
€’000
47,688
59,710
–
47,330
29,395
27,433
–
Glanbia plc
Annual Report and Accounts 2015
127
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Indefinite life intangible assets
Brands
Carrying
amount
2015
€’000
Useful life
2015
Yrs
Carrying
amount
2014
€’000
Glanbia Performance Nutrition - Optimum Nutrition
112,703
Indefinite
99,049
In arriving at the conclusion that certain brands 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 being capitalised is that there are no material legal, regulatory, contractual
or other factors that limit their useful lives. 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.
14 (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 the business acquisition, 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’.
A summary of goodwill by CGU is as follows:
Glanbia Performance Nutrition
thinkThin
Glanbia Performance Nutrition segment
Global Ingredients - Customised Solutions
Global Ingredients - Other CGUs
Global Ingredients segment
Dairy Ireland
Goodwill
2015
€’000
171,030
85,126
256,156
85,184
21,987
107,171
10,769
Indefinite life
intangibles
2015
€’000
112,703
–
112,703
–
–
–
–
374,096
112,703
Number of
CGUs
2015
1
1
2
2
2
4
1
7
Goodwill
2014
€’000
153,849
–
Indefinite life
intangibles
2014
€’000
99,049
–
153,849
99,049
79,621
19,849
99,470
9,670
–
–
–
–
262,989
99,049
Number
of CGUs
2014
3
–
3
2
2
4
1
8
The Isopure and Nutramino businesses acquired in 2014 have been integrated into the Glanbia Performance Nutrition business and are included within
the Glanbia Performance Nutrition CGU in 2015.
Impairment testing methodology and results
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 three year strategic plan formally
approved by the Group Operating Executive and the Board of Directors
and specifically exclude the impact of future development activity. While
the Group expects cash flow growth between years four and twenty, a
terminal value was derived for this further seventeen year period assuming
zero growth. No impairments arose in either 2015 or 2014. The present
value of future cash flows is calculated using pre-tax discount rates which
are the Group’s weighted average cost of capital adjusted to reflect risks
associated with the CGU and are set out in the table below:
Glanbia Performance Nutrition
Global Ingredients - Customised Solutions
Global Ingredients - Other CGUs
Dairy Ireland
Key sources of estimation uncertainty
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 management’s 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.
128
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Annual Report and Accounts 2015
Discount rates
2015
Discount rates
2014
6.8%
8.1%
6.0%-6.5% 7.9%-8.1%
8.0%
7.5%
8.1%
7.9%
Sensitivity analysis
Sensitivity analysis has been performed across the CGUs. 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.
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
15. INVESTMENTS IN ASSOCIATES
At the beginning of the year
Share of profit after tax
Transfer to Investments in Joint Ventures
Other comprehensive income/(expense)
Dividend received
Notes
16
2015
Company
€'000
22,876
–
–
–
–
2015
Group
€'000
81,365
12,450
–
4,474
(392)
2014
Company
€'000
22,876
–
–
–
–
2014
Group
€'000
80,492
11,219
(3,119)
(7,227)
–
At the end of the year
22,876
97,897
22,876
81,365
The Associates listed below have share capital, consisting of Ordinary Shares and Preference Shares, which are held by the Group.
Nature of Investment in Associates
Name of entity
Glanbia Ingredients Ireland Limited
Co-operative Animal Health Limited
Place of business/
country of incorporation
Kilkenny, Ireland
Tullow, Co Carlow, Ireland
South Eastern Cattle Breeding Society Limited
Thurles, Co Tipperary, Ireland
South East Port Services Limited
Kilkenny, Ireland
% of ownership
interest
Nature of the
relationship
Measurement
method
40%
50%
61%
49%
Note 1
Note 2
Note 2
Equity
Equity
Equity
Equity
Note 1: Glanbia Ingredients Ireland Limited is the largest dairy processor in Ireland. Its products, the large majority of which are exported, include milk
powders, butter, cheese, whey protein, milk protein and casein. Its customers include many of the large global food and infant formula manufacturers
as well as more regionally focused food companies across Europe, Middle East, Africa and Asia.
Note 2: In accordance with the Group’s accounting policy, Co-operative Animal Health Limited and South Eastern Cattle Breeding Society Limited are
included in the Group result as Associates using the equity method of accounting. The Group, despite holding 50% or more of the Ordinary Share
capital of these entities, has significant influence and not control over the entities, due to the nature of its voting rights.
There are no contingent liabilities relating to the Group’s interest in Associates.
Glanbia plc
Annual Report and Accounts 2015
129
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
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 the Group’s share of those amounts)
adjusted for differences in accounting policies between the Group and the Associates.
2015
Associate balance sheet (100%):
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
Glanbia
Ingredients
Ireland Ltd
€'000
346,837
257,356
(279,719)
(108,861)
Other
€'000
Total
€'000
27,952
16,879
(11,443)
(11,078)
374,789
274,235
(291,162)
(119,939)
215,613
22,310
237,923
Group’s interest in Associate/carrying value
86,245
11,652
97,897
Associate income statement (100%):
Revenue
Profit before tax
Profit after tax
Other comprehensive income/(expense)
Total comprehensive income
2014
Associate balance sheet (100%):
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net assets
866,997
40,174
907,171
32,440
28,856
11,499
40,355
Glanbia
Ingredients
Ireland Ltd
€'000
305,480
266,390
(240,676)
(155,940)
1,953
1,773
(251)
1,522
34,393
30,629
11,248
41,877
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
Total comprehensive income
Further details in relation to principal Associates are outlined in note 40.
894,386
30,525
26,472
(18,080)
8,392
42,157
1,477
1,250
9
1,259
936,543
32,002
27,722
(18,071)
9,651
130
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
16. INVESTMENTS IN JOINT VENTURES
The Joint Ventures listed below have share capital consisting solely of Ordinary Shares, which are held directly by the Group.
2015
€'000
69,945
13,820
(18,263)
(391)
(662)
6,155
(14,532)
4,513
2014
€'000
62,894
12,510
(4,089)
3,119
405
5,032
(12,648)
2,722
60,585
69,945
At the beginning of the year
Share of profit after tax
Disposals
Transfer (to Investments in Subsidiaries)/from Investments in Associates
Other comprehensive (expense)/income
Income tax movement
Dividend received
Exchange differences
At the end of the year
Nature of investment in Joint Ventures
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, Co Cork, Ireland
% of ownership
interest
Nature of the
relationship
Measurement
method
50%
51%*
50%*
50%
Note 1
Note 2
Note 3
Note 4
Equity
Equity
Equity
Equity
* Percentage of ownership interest is in line with the Group’s control of voting rights in the entity at year end, with the exception of Glanbia Cheese Limited (see note 2 below) and Milk Ventures
(UK) Limited (see note 3 below).
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 two plants (Magheralin and Llangefni)
are strategically located in productive agricultural heartlands which helps to ensure a secure and consistent supply of high quality milk. 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.
Note 3: Milk Ventures (UK) Limited was the parent company of Nutricima Limited, a company based in Nigeria, involved in the supply and distribution
of evaporated and powdered milk. The Group disposed of its share in Milk Ventures (UK) Limited to its Joint Venture partner, PZ Cussons plc on 01
April 2015, as the business no longer aligned with the Group’s strategic priorities. As part of the sale agreement, Glanbia Ingredients Ireland Limited
entered into a long-term agreement with PZ Cussons (International) Limited for the supply of dairy ingredients.
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.
2015
€'000
2014
€'000
4,831
2,000
Glanbia plc
Annual Report and Accounts 2015
131
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
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 the Group’s share of those amounts)
adjusted for differences in accounting policies between the Group and the Joint Ventures.
2015
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
220,890
40,764
–
75,891
75,891
(123,135)
–
(123,135)
(11,127)
(99,836)
(110,963)
12,195
38,003
50,198
–
(7,409)
(7,409)
–
(31,859)
(31,859)
Malting
Company
of Ireland
Limited
€'000
Total
€'000
7,397
269,051
–
6,177
6,177
(1,656)
(370)
(2,026)
(1,079)
(4,709)
(5,788)
12,195
120,071
132,266
(124,791)
(7,779)
(132,570)
(12,206)
(136,404)
(148,610)
5,760
120,137
2,880
60,585
–
–
–
–
–
–
–
–
–
–
–
–
Net assets
62,683
51,694
Group’s interest in Joint Venture/carrying value
31,341
26,364
Joint Venture income statement (100%):
Revenue
Depreciation
Interest expense
Profit/(loss) before tax
Tax
Profit/(loss) after tax
Other comprehensive income/(expense)
Total comprehensive income/(expense)
Joint Venture other movements:
Dividend received by Group
Exchange differences arising on consolidation
752,687
(11,417)
(5,871)
25,263
(10,105)
15,158
889
16,047
(11,269)
2,678
259,730
22,544
11,569
1,046,530
(4,339)
(238)
14,370
(2,476)
11,894
(2,170)
9,724
(3,263)
1,442
–
(193)
803
(197)
606
–
606
–
393
(439)
(75)
(313)
58
(255)
–
(255)
–
–
(16,195)
(6,377)
40,123
(12,720)
27,403
(1,281)
26,122
(14,532)
4,513
132
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
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
(134,358)
–
(134,358)
(9,851)
(98,614)
(108,465)
13,914
36,464
50,378
2,094
35,736
37,830
–
(16,923)
(7,238)
(7,238)
–
(28,842)
(28,842)
–
(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
Total comprehensive income/(expense)
Joint Ventures other movements:
Dividend received by Group
Exchange differences arising on consolidation
Further details in relation to principal Joint Ventures are outlined in note 40.
802,145
300,954
(9,502)
(5,131)
20,373
(8,149)
12,224
360
12,584
(9,419)
2,360
(3,769)
(105)
13,626
(3,295)
10,331
442
10,773
(3,229)
1,307
89,835
(1,933)
(929)
1,458
1,005
2,463
–
2,463
–
(945)
10,807
1,203,741
(434)
(57)
(188)
(17)
(205)
–
(205)
–
–
(15,638)
(6,222)
35,269
(10,456)
24,813
802
25,615
(12,648)
2,722
Glanbia plc
Annual Report and Accounts 2015
133
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
17. INVESTMENTS
(a) Available for sale financial assets
At the beginning of the year
Disposals/redemption
Fair value adjustment
Additions
At the end of the year
Available for sale financial assets at the reporting date include the following:
2015
Company
€'000
4,488
–
1,273
66
2015
Group
€'000
10,621
(1,506)
1,273
366
2014
Company
€'000
514
–
3,039
935
2014
Group
€'000
9,498
(1,269)
1,457
935
5,827
10,754
4,488
10,621
Listed securities
Equity securities – eurozone countries
Unlisted securities
One51 plc
Ornua Co-operative Limited
The BDO Development Capital Fund
Other available for sale financial assets
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. These fair values are within
level 1 of the fair value hierarchy (note 25.3).
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. The unlisted investment in the BDO Development Capital Fund is
fair valued by reference to the latest quarterly report to the limited partners.
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. These fair values are within level
2 of the fair value hierarchy (note 25.3).
(b) Investments in subsidiaries
At the beginning of the year
Disposals
Additions
At the end of the year
Notes
25.3
25.3
25.3
2015
Company
€'000
2015
Group
€'000
2014
Company
€'000
2014
Group
€'000
161
161
272
272
4,772
–
894
–
4,772
4,041
894
886
3,281
–
935
–
3,281
5,513
935
620
5,827
10,754
4,488
10,621
Available for sale financial assets with a carrying value of €4.9 million (2014:
€6.1 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.
2015
Company
€'000
609,530
–
–
2014
Company
€'000
609,440
(27)
117
609,530
609,530
134
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
18. TRADE AND OTHER RECEIVABLES
Trade receivables
Less allowance 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
Non-current - Loans to Joint Ventures & Associates
Current
2015
Company
€'000
Notes
38
38
38
–
–
–
–
101
112
–
–
–
213
–
213
213
2015
Group
€'000
315,798
(8,969)
306,829
24,079
4,419
237
1,850
2,500
11,956
351,870
1,850
350,020
351,870
2014
Company
€'000
–
–
–
–
36
–
–
–
111
147
–
147
147
2014
Group
€'000
280,756
(8,600)
272,156
19,363
5,496
776
9,863
955
6,281
314,890
9,863
305,027
314,890
See note 36 for analysis of the movement in trade and other receivables. 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 4.3, 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 has not been
provided for at year end.
The carrying amounts of the Group’s trade and other receivables at the reporting date are denominated in the following currencies:
Euro
US dollar
Pound Sterling
Other
Provision for impairment of receivables:
At the beginning of the year
Translation adjustment
Allowance for receivables impairment
Receivables written off during the year as uncollectible
Unused amounts reversed
At the end of the year
2015
Company
€'000
213
–
–
–
2015
Group
€'000
111,919
218,300
12,485
9,166
2014
Company
€'000
147
–
–
–
2014
Group
€'000
98,063
188,669
20,391
7,767
213
351,870
147
314,890
2015
€'000
8,600
91
1,201
(548)
(375)
2014
€'000
11,155
159
1,690
(3,269)
(1,135)
8,969
8,600
Glanbia plc
Annual Report and Accounts 2015
135
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Movement on the Group’s provision for impairment of trade receivables is as follows:
As of 02 January 2016, trade receivables of €9.0 million (2014: €8.6 million) were impaired and accordingly an allowance is provided as set out on the
previous page. 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
2015
€'000
1,324
3,009
4,636
2014
€'000
1,504
2,061
5,035
8,969
8,600
The maximum exposure to credit risk at the reporting date is the carrying value of each class of receivable mentioned above.
At 02 January 2016, trade receivables of €54.7 million (2014: €51.1 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
19. INVENTORIES
Raw materials
Finished goods
Consumables
2015
€'000
41,624
10,338
2,746
2014
€'000
40,435
9,138
1,512
54,708
51,085
2015
€'000
113,759
198,615
31,979
2014
€'000
112,602
198,546
25,654
344,353
336,802
See note 36 for analysis of the movement in inventories. Included above are inventories carried at net realisable value amounting to €18.0 million (2014:
€11.6 million). The amount written off as an expense to the income statement in respect of these inventories was €4.6 million (2014: €3.9 million).
20. CASH AND CASH EQUIVALENTS
Cash at bank and in hand
Short term bank deposits
2015
Company
€'000
15,303
–
2015
Group
€'000
202,021
8,868
2014
Company
€'000
8,590
–
2014
Group
€'000
102,160
8,210
15,303
210,889
8,590
110,370
Cash and cash equivalents include the following for the purposes of the Company and Group statement of cash flows:
Cash at bank and in hand
Short term bank deposits
Bank overdrafts
2015
Company
€'000
15,303
–
(372)
2015
Group
€'000
202,021
8,868
(41,764)
2014
Company
€'000
8,590
–
–
2014
Group
€'000
102,160
8,210
–
Notes
26
14,931
169,125
8,590
110,370
The fair values of cash and cash equivalents are not materially different to their book values.
136
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
21. OTHER RESERVES
Balance at 04 January 2014
2,825
113,148
10,535
(1,427)
1,396
(8,191)
8,314
126,600
Capital
reserve
€'000
note (a)
Merger
reserve
€'000
note (b)
Currency
reserve
€'000
note (c)
Hedging
reserve
€'000
note (d)
Available
for sale
financial
asset
reserve
€'000
note (e)
Own shares
€'000
note (f)
Share
based
payment
reserve
€'000
note (g)
Total
€'000
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
Balance at 03 January 2015
Currency translation differences
Recycle of currency reserve to the Group income
statement on disposal of Investment in Joint Venture
Net investment hedge
Revaluation of interest rate swaps – gain in year
Foreign exchange contracts – loss in year
Transfers to income statement:
Foreign exchange contracts – gain in year
Forward commodity contracts – loss 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
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
97,805
(9,544)
–
–
–
–
–
–
–
–
–
–
–
–
(107)
1,122
271
(79)
(700)
–
175
–
–
–
–
–
–
–
–
–
–
1,457
(315)
–
–
–
2,825
113,148
98,796
(745)
2,538
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
91,102
5,037
(8,684)
–
–
–
–
–
–
–
–
–
–
–
–
–
248
(294)
(149)
701
(361)
–
(60)
–
–
–
–
–
–
–
–
–
–
–
1,273
(420)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
5,516
97,805
(9,544)
(107)
1,122
271
(79)
(700)
1,457
(140)
5,516
8,207
(3,846)
4,361
(7,981)
(7,965)
–
(7,981)
9,984
218,581
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8,724
91,102
5,037
(8,684)
248
(294)
(149)
701
(361)
1,273
(480)
8,724
8,078
(4,000)
4,078
(13,351)
–
(13,351)
Balance at 02 January 2016
2,825
113,148
186,251
(660)
3,391
(13,238)
14,708
306,425
Glanbia plc
Annual Report and Accounts 2015
137
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
21 (a) Capital reserve
The capital reserve comprises of a capital redemption reserve and a capital reserve which arose due to the renominalisation of the Company's share
capital on conversion to the euro.
At the beginning and the end of the year
21 (b) Merger reserve
2015
Company
€'000
4,227
2015
Group
€'000
2,825
2014
Company
€'000
4,227
2014
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 adjustment*
Share premium and other reserves relating to nominal value of shares in Waterford Foods Limited
At the beginning and end of the year
2015
€'000
2014
€'000
355,271
(327,085)
84,962
355,271
(327,085)
84,962
113,148
113,148
* The merger adjustment represents the difference between the nominal value of the issued share capital of Waterford Foods plc (now named Waterford Foods Limited) and the fair value of the
shares issued by Avonmore Foods plc (now named Glanbia plc) in 1997.
21 (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 that differs 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.
21 (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.
21 (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.
21 (f) Own shares
The own shares reserve reflects the purchase and issue of Ordinary Shares in Glanbia plc.
At the beginning of the year
Purchased
Allocated
At the end of the year
2015
Number of
Shares
715,558
770,475
2014
Number of
shares
864,898
696,185
(626,100)
(845,525)
859,933
715,558
The amount included as own shares relates to 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 Long Term Incentive Plan (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 02 January 2016 cost €13.2 million (2014: €8.0 million)
and had a market value of €14.6 million (2014: €9.2 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’.
138
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
21 (g) Share based payment reserve
The share based payment reserve reflects charges relating to granting of both shares and options under the 2002 Long Term Incentive Plan (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
2015
Company
€'000
9,984
(4,000)
8,724
2015
Group
€'000
9,984
(4,000)
8,724
2014
Company
€'000
8,314
(3,846)
5,516
2014
Group
€'000
8,314
(3,846)
5,516
At the end of the year
14,708
14,708
9,984
9,984
2002 Long Term Incentive Plan
Movement in the 2002 LTIP for the year ended 02 January 2016 and 03 January 2015 is as follows:
At the beginning of the year
Exercised
At the end of the year
Expiry date
2019
2021
2021
2021
2021
2015
Average
Exercise
price in
€ per share
4.06
(4.14)
Notes
22
2015
Number
of options
210,000
(155,000)
2014
Average
Exercise
price in
€ per share
3.60
(3.18)
2014
Number
of options
440,000
(230,000)
3.81
55,000
4.06
210,000
Exercise
price
€
2.29
3.68
4.38
4.70
4.63
2015
Number
of options
15,000
–
40,000
–
–
2014
Number
of options
35,000
20,000
90,000
45,000
20,000
55,000
210,000
Total options of 55,000 (2014: 210,000) Ordinary Shares were outstanding at 02 January 2016 under the 2002 LTIP at prices of €2.29 and €4.38. 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 (2014: 1,450) Ordinary
Shares. The cost of the 2002 LTIP charged in the Group income statement was nil (2014: €0.1 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 pre-
determined performance criterion for the Group has been achieved. The performance criterion is that there has been an increase in the adjusted earnings
per share (EPS) of the Group of at least the Consumer Price Index plus 5% over a three year period.
When the options are exercised, the Company issues new shares. The fair value of the awards exercised is reclassified from the share based payment
reserve to retained earnings.
The fair value of share options has been calculated using the Binomial Model. Options over 55,000 (2014: 210,000) Ordinary Shares were exercisable
at 02 January 2016 at a weighted average price of €3.81 (2014: €4.06). The weighted average share price at the date of exercise for share options
exercised was €16.92 (2014: €11.47). The weighted average life for share options outstanding is five years.
Glanbia plc
Annual Report and Accounts 2015
139
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
2008 Long Term Incentive Plan
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 2014, the following amendments to the 2008 LTIP were recommended to, and
approved by, the shareholders at the 2015 Annual General Meeting and implemented with effect from January 2015:
• Long Term Incentive individual annual award level of a maximum 250% (previous maximum 150%) of Base Salary. In all cases, 25% vests at threshold
performance and 100% vests at maximum with straight line vesting in between those levels.
• The award is determined by reference to three performance metrics for the Group Managing Director and the Group Finance Director:
• 50% based on Group adjusted EPS on a reported basis;
• 30% based on Group Return on Capital Employed (ROCE); and
• 20% based on relative Total Shareholder Return (TSR) against the STOXX Europe 600 Food and Beverage index.
• For business segment Executive Directors, the award is determined by reference to the following performance metrics:
• 40% based on Group adjusted EPS on a reported basis;
• 15% based on Group ROCE;
• 15% based on relative TSR against the STOXX Europe 600 Food and Beverage index;
• 20% based on business segment EBITA; and
• 10% based on business segment ROCE.
Awards outstanding under the 2008 LTIP as at 02 January 2016 amounted to 2,060,605 (2014: 2,073,126) and are scheduled to vest in April, August
and October 2016, July and November 2017 and May, June, August and September 2018, 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 awards granted
before 2015 shall be determined by growth in EPS, TSR performance and ROCE, with each of EPS, TSR and ROCE representing one third of the
maximum vesting level. The extent of vesting for awards granted from 2015 onwards shall be determined based on the performance category of each
individual and consists of a combination of the performance metrics outlined above and in certain circumstances a personal objective.
In relation to awards granted up to and including 2014 there is a requirement to hold shares received pursuant to the vesting of LTIP awards for a
minimum period of one year post-vesting. From 2015 onwards this requirement has been increased to two years.
Shares awarded under the Group’s LTIP schemes are equity settled share based payments as defined in IFRS 2 ‘Share-based Payment’. 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 €7.3 million (2014: €5.1 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.
When the awards are exercised the Company re-issues shares from own shares, the fair value of the awards exercised is reclassified from the share
based payment reserve to retained earnings.
Movement in the 2008 LTIP for the year ended 02 January 2016 and 03 January 2015 is as follows:
2015
Number of
Awards
2014
Number of
Awards
2,073,126
2,251,601
844,490
(596,451)
(260,560)
841,000
(758,863)
(260,612)
2,060,605
2,073,126
2015
Number of
Awards
2014
Number of
Awards
–
470,015
766,500
824,090
604,926
639,200
829,000
–
2,060,605
2,073,126
At the beginning of the year
Granted
Vested
Lapsed
At the end of the year
Expiry date in
2016
2017
2018
2019
At the end of the year
140
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
The total expense in the Group income statement is analysed as follows:
Granted in 2012
2008 Long Term Incentive Plan
Granted in 2013
2008 Long Term Incentive Plan
Granted in 2014
2008 Long Term Incentive Plan
Granted in 2015
2008 Long Term Incentive Plan
Share price at
date
of award
€
Period to
earliest vesting
Date
Number
of shares
6.26
–
855,500
10.11
1 year
824,100
11.51
2 years
841,000
Expense in
Group income
statement
2015
€'000
Expense in
Group income
statement
2014
€'000
–
1,019
732
1,715
2,159
2,392
Fair
value
€
5.44
8.63
9.38
17.525
3 years
844,490
15.79
4,320
–
On 26 June 2015 and 01 September 2015, 11,800 and 584,651, respectively, of the share awards granted in 2012 vested. The balance of 259,049
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 2015
0.04%
22.0%
0.81%
Granted
in 2014
0.10%
26.1%
0.94%
Granted
in 2013
0.20%
29.9%
1.17%
Granted
in 2012
0.20%
33.1%
1.60%
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 fair value of the Annual
Incentive Deferred into Shares Scheme was calculated as €1.4 million in 2015 (2014: €0.3 million) and equates to the cash value of the portion of the
annual incentive that will be settled by way of shares. The incentive will be invested in shares in the Company and delivered to the Executive Directors
and senior management two years following this investment. Please refer to the Remuneration Committee report on pages 66 to 83 for further information.
22. SHARE CAPITAL AND SHARE PREMIUM
Company
At 03 January 2015
Shares issued
At 02 January 2016
Group
At 03 January 2015
Shares issued
At 02 January 2016
Number of
shares
(thousands)
295,876
155
Ordinary
Shares
€'000
17,752
9
Share
premium
€'000
442,244
633
Total
€'000
459,996
642
296,031
17,761
442,877
460,638
Number of
shares
(thousands)
295,876
155
Ordinary
Shares
€'000
17,752
9
Share
premium
€'000
86,976
633
Total
€'000
104,728
642
296,031
17,761
87,609
105,370
The total authorised number of Ordinary Shares is 350 million shares (2014: 350 million shares) with a par value of €0.06 per share (2014: €0.06 per
share). All issued shares are fully paid.
During the year ended 02 January 2016 155,000 (2014: 230,000) of the 2002 Long Term Incentive Plan shares were exercised with exercise proceeds
of €0.6 million (2014: €0.7 million). The related weighted average exercise price was €4.14 (2014: €3.18) per share.
The rights and obligations of the Ordinary Shares and the restrictions on the transfer of shares and voting rights are provided on page 87.
Details of share options and awards granted under the Long Term and Annual Incentive Schemes are provided in note 21 and also in the Remuneration
Committee report on page 66 to 83.
Glanbia plc
Annual Report and Accounts 2015
141
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
23. RETAINED EARNINGS
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
Profit for the year
Other comprehensive income/(expense)
Remeasurements – defined benefit schemes
Deferred tax on remeasurements
Share of remeasurements – Joint Ventures & Associates (net of deferred tax)
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
Balance at 02 January 2016
24. NON-CONTROLLING INTERESTS
At the beginning of the year
Share of profit for the year
Dividends paid
Additions during the year
At the end of the year
142
Glanbia plc
Annual Report and Accounts 2015
Notes
Company
€'000
65,170
Group
€'000
405,289
28
27
21
28
27
21
24,817
146,313
–
–
–
(42,369)
4,868
(7,780)
24,817
101,032
(30,751)
(4,361)
–
–
(30,751)
(4,361)
272
2,092
54,875
473,573
130,587
183,271
–
–
–
20,856
(2,334)
3,642
130,587
205,435
(33,895)
(4,078)
–
(33,895)
(4,078)
1,728
147,489
642,763
2015
€'000
7,896
646
(427)
400
2014
€'000
7,634
882
(620)
–
8,515
7,896
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
25. FINANCIAL RISK MANAGEMENT
25.1 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 €1,647.3 million (2014: €1,315.1 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 02 January 2016, the Group’s debt/adjusted EBITDA
ratio was 1.75 times (2014: 1.97 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.
25.2 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
co-operation with the Group’s business units. The Board of Directors
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.
There has been no significant change during the financial year or since the
end of the year to the types of financial risks faced by the Group or the
Group’s approach to the management of those risks.
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 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.
Sensitivity analysis
At 02 January 2016 and 03 January 2015,
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. A weakening
/strengthening of the euro against the US dollar by 5% as at 02 January
2016 would have resulted in a currency translation gain/loss of
approximately €59.0 million (2014: €36.7 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.
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.
Sensitivity analysis
Based on noted Group policies, the impact of a 1% movement in market
interest rates would have resulted in a €1.8 million gain/loss during 2015
(2014: €1.5 million gain/loss).
(c) Price risk
The Group’s objective is to minimise the price risk the Group is exposed
to 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.
Sensitivity analysis
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.
Glanbia plc
Annual Report and Accounts 2015
143
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
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 ensure that the Group does not encounter
difficulties in meeting obligations associated with financial liabilities that are
settled by delivering cash or another financial asset.
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 €1,019.0 million (2014: €982.3 million)
of which €265.6 million (2014: €362.0 million) was undrawn. The weighted
average maturity of these facilities is 4.4 years (2014: 5.4 years).
When appropriate, surplus funds in the Group are transferred to Group
Treasury through different methods including the repayment of borrowings,
deposits and dividends. These are then lent to Group companies or
contributed as equity to fund Group operations, used to repay external
debt or invested externally. The Group does not use off-balance sheet
special purpose entities as a source of liquidity or for other financing
purposes. The Group uses cash flow forecasts to constantly monitor the
funding requirements of the Group. Compliance with the Group’s debt
covenants is monitored continually based on the management accounts.
All covenants have been complied with and based on current forecasts it
is expected that all covenants will continue to be complied with for the
foreseeable future. There is no significant concentration of liquidity risk.
Further analysis of the Group’s debt covenants is included in the Group
Finance Director’s Review on pages 14 to 17.
For further details regarding the Group’s borrowing facilities see note 26.
The table below analyses the Group’s financial liabilities, all non-derivative financial liabilities and net and gross settled derivative financial instruments
for which the contractual maturities are essential for an understanding of the timing of the cash flows, 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 02 January 2016
Non-derivative financial liabilities
Borrowings (excluding finance lease liabilities)
Finance lease liabilities
Future finance costs
Trade and other payables
Less future finance costs
Derivative financial liabilities
Other derivative financial liabilities
Foreign exchange contracts - gross cash (outflow)
Foreign exchange contracts - gross cash inflow
Financial liabilities
At 03 January 2015
Non-derivative financial liabilities
Borrowings (excluding finance lease liabilities)
Finance lease liabilities
Future finance costs
Trade and other payables
Deferred acquisition payment
Less future finance costs
Derivative financial liabilities
Other derivative financial instruments
Foreign exchange contracts - gross cash (outflow)
Foreign exchange contracts - gross cash inflow
144
Glanbia plc
Annual Report and Accounts 2015
Less than
1 year
€’000
Between
1 and 2 years
€’000
Between
2 and 5 years
€’000
More than
5 years
€’000
Total
€’000
(41,764)
(474)
(23,395)
(438,328)
(503,961)
23,395
(480,566)
(877)
(25)
35
(867)
–
(453,978)
(298,521)
(794,263)
(366)
(136)
–
(23,359)
(62,710)
(7,254)
–
–
–
(976)
(116,718)
(438,328)
(23,725)
(516,824)
(305,775)
(1,350,285)
23,359
(366)
62,710
7,254
116,718
(454,114)
(298,521)
(1,233,567)
(47)
–
–
(47)
–
–
–
–
–
–
–
–
Less than
1 year
€’000
Between
1 and 2 years
€’000
Between
2 and 5 years
€’000
More than
5 years
€’000
(924)
(25)
35
(914)
Total
€’000
–
(472)
(23,123)
(386,618)
(6,504)
(416,717)
23,123
(393,594)
(534)
(40)
295
(279)
–
(452)
(23,146)
–
–
(23,598)
23,146
(452)
–
–
–
–
–
(619,396)
(619,396)
(517)
(69,479)
–
(21,131)
–
–
–
–
(1,441)
(136,879)
(386,618)
(6,504)
(69,996)
69,479
(640,527)
(1,150,838)
21,131
136,879
(517)
(619,396)
(1,013,959)
–
–
–
–
–
–
–
–
(534)
(40)
295
(279)
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
The Company had cash at bank of €15.3 million at 02 January 2016 (2014:
€8.6 million). The contractual undiscounted cash flows equal the balance
at 02 January 2016 and 03 January 2015.
(e) Credit risk
The Group’s objective is to minimise credit risk. Credit risk is managed on
a Group basis. Credit risk arises from cash and cash equivalents, deposits
with banks and financial institutions, derivative financial instruments 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 risk of counterparty
default is managed by the Group’s policies requiring 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’s policies
require exposure 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 and process in relation to trade
receivables involves periodically assessing the financial reliability of
customers, taking into account their financial position, past experience and
other factors. As disclosed in note 4.3 the Group has one significant
external customer. The Group is satisfied that they have satisfactory credit
control procedures in place in respect of that customer.
The utilisation of credit limits is regularly monitored and where appropriate,
credit risk is covered by credit insurance and by holding appropriate
security or liens.
The Group does not expect any significant counterparty to fail to meet its
obligations. The maximum exposure to credit risk is represented by the
carrying amount of each asset.
For further details regarding the Group’s credit risk see note 18.
25.3 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 02 January
2016. 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 02 January 2016.
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.
Fair value of financial assets and liabilities carried at fair value
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 02 January 2016 and 03 January 2015:
Assets
Derivatives used for hedging
Available for sale financial assets – equity securities
Available for sale financial assets – equity securities
Total assets
Liabilities
Derivatives used for hedging
Deferred acquisition payments
Total liabilities
Notes
Fair value
hierarchy
32
17
17
32
Level 2
Level 1
Level 2
Level 2
Level 3
2015
€’000
414
161
5,666
6,241
(949)
–
(949)
2014
€’000
1,279
272
4,216
5,767
(574)
(6,504)
(7,078)
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 02 January 2016
or 03 January 2015. The level 3 financial liability held at 03 January 2015
was settled during the year. 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.
Fair value of financial assets and liabilities carried at amortised
cost
With the exception of borrowings (see note 26) it is considered that the
carrying amounts of financial assets and financial liabilities recognised at
amortised cost in the Financial Statements approximate their fair value.
Glanbia plc
Annual Report and Accounts 2015
145
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
25.4 Offsetting financial assets and financial liabilities
The Group enters into derivative transactions under International Swaps
and Derivatives Association (ISDA) master netting arrangements. The
ISDA agreements do not meet the criteria for offsetting in the Group
balance sheet. This is because the Group does not have any current
legally enforceable right to offset recognised amounts, because the right
to offset is enforceable only on the occurrence of future events such as
a default on bank loans or other credit events. No collateral is paid or
received.
The Group is required to maintain cash on deposit in respect of certain
borrowings. Upon maturity the Group and the lender intend to net settle.
As a result, the Group’s borrowings have been presented net of the cash
on deposit as the requirements for offsetting have been met.
The following tables set out the carrying amounts of recognised financial instruments that are subject to the above agreements. The Group has no
recognised financial instruments that are not included in the following tables.
25.4 (a) Financial assets
At 02 January 2016
Derivative financial assets
Cash and cash equivalents
At 03 January 2015
Derivative financial assets
Cash and cash equivalents
25.4 (b) Financial liabilities
At 02 January 2016
Derivative financial liabilities
Bank overdrafts and borrowings
At 03 January 2015
Derivative financial liabilities
Bank overdrafts and borrowings
Gross amounts
of recognised
financial assets
€’000
414
425,705
426,119
Gross amounts
of recognised
financial liabilities
set off in the
balance sheet
€’000
Net amounts of
financial assets
presented in the
balance sheet
€’000
–
(214,816)
(214,816)
414
210,889
211,303
Gross amounts
of recognised
financial assets
€’000
1,279
362,813
364,092
Gross amounts
of recognised
financial liabilities
set off in the
balance sheet
€’000
–
(252,443)
(252,443)
Net amounts of
financial assets
presented in the
balance sheet
€’000
1,279
110,370
111,649
Gross amounts
of recognised
financial liabilities
€’000
(949)
(1,009,948)
(1,010,897)
Gross amounts
of recognised
financial assets
set off in the
balance sheet
€’000
Net amounts of
financial liabilities
presented in the
balance sheet
€’000
–
214,816
214,816
(949)
(795,132)
(796,081)
Gross amounts
of recognised
financial liabilities
€’000
(574)
(873,176)
(873,750)
Gross amounts
of recognised
financial assets
set off in the
balance sheet
€'000
–
252,443
252,443
Net amounts of
financial liabilities
presented in the
balance sheet
€’000
(574)
(620,733)
(621,307)
The prior year financial assets and financial liabilities offset disclosure has been restated to exclude the notional gross value of the cross currency swap
which had previously been disclosed for information purposes only and is not required under IFRS.
146
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
26. BORROWINGS
Non-current
Bank borrowings
Private debt placement
Finance lease liabilities*
Current
Bank overdraft and borrowings
Finance lease liabilities*
Total borrowings
* Secured on specific plant and equipment.
2015
Company
€'000
2015
Group
€'000
2014
Company
€'000
Notes
–
–
–
–
372
–
372
453,978
298,521
464
752,963
41,764
405
42,169
372
795,132
20
–
–
–
–
–
–
–
–
2014
Group
€'000
349,530
269,866
921
620,317
–
416
416
620,733
Borrowings are secured by cross-guarantees from Glanbia plc and certain principal subsidiaries. The Group has complied with the financial covenants
of its borrowing facilities during 2015 and 2014. See Group Finance Director’s review on page 14.
Borrowings include the following for the purposes of the Company and Group statement of cash flows at the reporting date:
Borrowings
Bank overdraft included as part of cash and cash equivalents
Notes
20
2015
Company
€'000
372
(372)
–
2015
Group
€'000
795,132
(41,764)
753,368
The maturity of non-current borrowings at the reporting date is as follows:
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
2014
Company
€'000
–
–
–
2015
€'000
333
454,109
298,521
2014
Group
€'000
620,733
–
620,733
2014
€'000
419
502
619,396
752,963
620,317
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
Details of the Group’s exposure to risks arising from current and non-current borrowings are set out in note 25.
2015
€'000
2014
€'000
496,147
349,946
333
131
419
502
298,521
269,866
795,132
620,733
Glanbia plc
Annual Report and Accounts 2015
147
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
The effective interest rates at the reporting date are as follows:
Overdrafts
Borrowings
EUR
GBP
USD
2015
0.95%
1.31%
2014
1.20%
1.83%
2015
1.10%
–
2014
–
–
2015
–
3.78%
2014
–
4.04%
The carrying amounts and fair values of non-current borrowings at the reporting date are as follows:
Non-current borrowings
Fair value
hierarchy
Level 2
Carrying
amount
2015
€'000
752,963
Carrying
amount
2014
€'000
Fair
value
2015
€'000
Fair
value
2014
€'000
620,317
776,931
645,781
The fair values of non-current borrowings are based on discounted cash flows using current borrowing rates. 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 at the reporting date:
Euro
Pound Sterling
US dollar
The Group has the following undrawn borrowing facilities at the reporting date:
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 at the reporting date:
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 at the reporting date is as follows:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
148
Glanbia plc
Annual Report and Accounts 2015
2015
€'000
234,220
20,387
540,525
2014
€'000
207,215
–
413,518
795,132
620,733
2015
€'000
80,701
265,652
2014
€'000
70,482
362,040
346,353
432,522
2015
€'000
474
366
136
976
(107)
2014
€'000
472
452
517
1,441
(104)
869
1,337
2015
€'000
405
333
131
869
2014
€'000
416
419
502
1,337
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
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:
At the beginning of the year
Income statement – pre-exceptional charge/(credit)
Income statement – exceptional credit
Deferred tax charge on fair value movements
Deferred tax charge/(credit) relating to defined benefit
remeasurement
Deferred tax on acquisition of subsidiaries
Deferred tax credited on share based payments
Exchange differences
At the end of the year
2015
Company
€'000
–
1,045
2015
Group
€'000
(36,474)
201,646
1,045
165,172
2015
Company
€'000
Notes
10
10
21
23
37
23
403
222
–
420
–
–
–
–
2015
Group
€'000
99,499
11,651
(241)
480
2,334
42,807
(1,728)
10,370
2014
Company
€'000
–
403
403
2014
Company
€'000
–
(600)
–
1,003
–
–
–
–
2014
Group
€'000
(28,503)
128,002
99,499
2014
Group
€'000
73,120
(4,916)
(401)
140
(4,868)
27,741
(272)
8,955
1,045
165,172
403
99,499
The movement in deferred tax assets and liabilities during the year is as follows:
Deferred tax assets
At 04 January 2014
Charged/(credited) to income statement
(Credited) to other comprehensive income
(Credited) directly to equity
Acquisitions of subsidiaries
Exchange differences
At 03 January 2015
Charged/(credited) to income statement
Charged to other comprehensive income
(Credited) directly to equity
Acquisitions of subsidiaries and intellectual property
Exchange differences
At 02 January 2016
Notes
Retirement
benefit
obligations
€'000
(6,607)
Other employee
obligations
€'000
(8,210)
439
(4,868)
–
–
(7)
(170)
–
(272)
(301)
(999)
(11,043)
(9,952)
Tax
losses
€'000
(625)
Other
€'000
(7,022)
(56)
1,153
–
–
–
(26)
(707)
–
–
(204)
(728)
(6,801)
2,136
2,334
–
(648)
(976)
(6,452)
–
(1,728)
–
(4)
2,264
(1,070)
–
–
(2,527)
9
–
–
(655)
(654)
23
23
23
23
Total
€'000
(22,464)
1,366
(4,868)
(272)
(505)
(1,760)
(28,503)
(3,122)
2,334
(1,728)
(3,830)
(1,625)
(8,197)
(18,136)
(961)
(9,180)
(36,474)
Glanbia plc
Annual Report and Accounts 2015
149
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Deferred tax liabilities
At 04 January 2014
Charged/(credited) to income statement
Charged to other comprehensive income
Acquisition of subsidiaries
Exchange differences
At 03 January 2015
Charged/(credited) to income statement
Charged to other comprehensive income
Acquisition of subsidiaries
Exchange differences
Accelerated tax
depreciation
€'000
Notes
Fair value
gain
€'000
21
21
49,861
5,675
–
93
6,349
61,978
11,970
–
58
6,133
704
–
140
–
–
844
–
480
–
–
IP and
deferred
development
costs
€'000
24,121
(91)
–
28,146
4,380
56,556
(2,317)
–
46,440
5,809
Other
€'000
20,898
(12,267)
–
7
(14)
8,624
4,879
–
139
53
Total
€'000
95,584
(6,683)
140
28,246
10,715
128,002
14,532
480
46,637
11,995
At 02 January 2016
80,139
1,324
106,488
13,695
201,646
A deferred tax asset of €36.5 million (2014: €28.5 million) 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 €124.1 million (2014: €123.4 million) to carry forward against future taxable profits, of which €54.3 million
(2014: €51.1 million) are unrecognised capital losses. These unrecognised losses can be carried forward indefinitely. Deferred tax liabilities of €15.4
million (2014: €13.6 million) have not been recognised for withholding tax and other taxes that would be payable on unremitted earnings of €305.4
million (2014: €272.1 million) in certain subsidiaries. There is no current intention to remit such earnings.
The deferred income tax charged to other comprehensive income during the year is as follows:
Available for sale financial asset reserve
Hedging reserve
Exchange differences
Defined benefit remeasurements
Notes
21
21
23
2015
€'000
420
60
10,370
2,334
2014
€'000
315
(175)
8,955
(4,868)
13,184
4,227
150
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
28. RETIREMENT BENEFIT OBLIGATIONS
The Group operates a number of defined benefit schemes in Ireland and
the UK under their respective regulatory frameworks and minimum
funding requirements. These schemes provide retirement and death
benefits for the Group’s employees. The majority 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 defined benefit schemes in Ireland
and the UK are administered by Boards of Trustees. These Boards are
responsible for the management and governance of the plans including
compliance with all relevant laws and regulations.
The contributions paid to the defined benefit schemes are in accordance
with the schedule of contributions agreed between the Group and the
trustees of the relevant schemes. The contributions are partly funded by
the employees, where they are required to contribute a fixed percentage
of pensionable salary, and partly by the Group. The contributions paid to
the schemes in 2015 are also in accordance with the contribution rates
recommended in the actuarial valuation reports or in subsequent actuarial
advice. The latest actuarial valuation reports for these schemes, which are
not available for public inspection, are dated between 01 October 2012
and 01 January 2015.
The Group also has a number of defined contribution schemes in place.
Present value of funded obligations
Fair value of plan assets
Liability in the Group balance sheet
The net liability disclosed above relates to funded plans.
The amounts recognised in the Group income statement are as follows:
Defined benefit pension schemes
Current service cost
Net interest cost
Total expense pre-settlement
Settlement loss
Total expense
2015
€'000
(440,077)
352,789
2014
€'000
(508,098)
393,290
(87,288)
(114,808)
Notes
7
6 (d)
2015
€'000
(5,887)
(2,625)
(8,512)
(4,306)
2014
€'000
(5,522)
(2,704)
(8,226)
–
(12,818)
(8,226)
Defined contribution pension schemes
7
(7,817)
(4,811)
The Group undertook a review of pension arrangements in 2015 and agreed with the pension trustees to wind up three of its smaller Irish defined
benefit pension schemes. This transaction resulted in a settlement loss of €4.3 million. The Group has also committed to making estimated cash
contributions to the schemes of €6.5 million as part of the transaction which are accrued within contributions paid/payable by employer as at 02 January
2016.
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 cost and net interest cost
Loss on settlement
Remeasurements - defined benefit schemes
Contributions paid/payable by employer
At the end of the year
Notes
7
6 (d)
23
2015
€'000
2014
€'000
(114,808)
(78,035)
(1,557)
(8,512)
(4,306)
20,856
21,039
(1,423)
(8,226)
–
(42,369)
15,245
(87,288)
(114,808)
Glanbia plc
Annual Report and Accounts 2015
151
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
The movement in obligations during the year is as follows:
At the beginning of the year
Exchange differences
Current service costs
Settlement
Interest costs
Remeasurements:
– Experience gain
– (Loss)/gain from changes in demographic assumptions
– Gain/(loss) from changes in financial assumptions
Contributions by plan participants
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
Settlement
Remeasurements:
- Return on plan assets excluding amounts included in interest income
Contributions by plan participants
Contributions paid/payable by employer
Payments from plans:
- Benefit payments
At the end of the year
The principal actuarial assumptions used are as follows:
2015
€'000
2014
€'000
(508,098)
(424,519)
(6,815)
(5,887)
60,229
(5,933)
(5,522)
–
(11,945)
(15,705)
7,045
(1,153)
11,076
(1,477)
3,765
8,463
(89,990)
(1,867)
16,948
23,210
(440,077)
(508,098)
2015
€'000
2014
€'000
393,290
346,484
5,258
9,320
(64,535)
3,888
1,477
21,039
4,510
13,001
–
35,393
1,867
15,245
(16,948)
(23,210)
352,789
393,290
Discount rate
Inflation rate
Future salary increases
Future pension increases
2015
IRL
2.25%
2015
UK
3.70%
2014
IRL
2.10%
2014
UK
3.60%
1.30%–1.40%
2.0%–3.0%
1.20%–1.50%
1.95%–2.95%
2.40%
0.00%
3.75%
2.10%–2.80%
2.50%
0.00%
3.70%
2.05%–2.80%
152
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Plan assets are comprised as follows:
2015
2014
Quoted
€’000
Unquoted
€’000
Total
€’000
%
Quoted
€’000
Unquoted
€’000
Total
€’000
Equities:
- Consumer
- Energy
- Financials
- Healthcare
- Industrials
- Information Technology
- Materials
- Telecommunication services
- Utilities
- Other
Corporate bonds:
- Investment grade
- Non-investment grade
- Cash
17,408
4,245
17,487
8,785
8,869
9,836
3,209
2,480
1,946
–
–
–
–
–
–
–
–
–
8
1,406
24,629
3,229
–
6,755
77
–
17,408
4,245
17,487
8,785
8,869
9,836
3,209
2,480
1,946
1,414
31,384
3,306
–
5
1
5
2
3
3
1
1
1
–
9
1
–
Government bonds and gilts
61,778
12,869
74,647
21
130,891
Property:
- UK
- Ireland
- Europe
Cash
Investment funds
Other
–
1,611
–
1,931
2,555
1,665
796
2,822
6,566
796
4,433
6,566
13,791
15,722
115,807
118,362
20,229
21,894
–
1
2
4
34
6
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
761
2,246
6,473
2,472
4,096
1,972
–
–
–
–
2,924
–
24,340
7,617
24,741
10,621
12,227
11,677
7,365
3,714
3,019
1,479
26,765
9,587
88
130,891
761
2,246
9,397
2,472
38,976
63,991
102,967
391
925
1,316
%
6
2
6
3
3
3
2
1
1
–
7
2
–
33
–
1
2
1
26
1
171,671
181,118
352,789
100
317,903
75,387
393,290
100
Expected contributions to post-employment defined benefit plans for 2016 are €13.7 million. The weighted average duration of the defined benefit
obligation is 18 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:
2014
Irish mortality
rates
2015
Irish mortality
rates
2015
UK mortality
rates
Male
Female
22.9
25.3
22.3
24.9
22.8
25.2
The mortality assumptions imply the following life expectancies in years of an active member, aged 65, retiring now:
2014
UK mortality
rates
22.7
25.2
Male
Female
2015
Irish mortality
rates
2015
UK mortality
rates
2014
Irish mortality
rates
2014
UK mortality
rates
20.4
23.1
21.0
23.3
20.2
23.0
21.4
23.7
Glanbia plc
Annual Report and Accounts 2015
153
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Sensitivity analysis for principal assumptions used to measure
scheme liabilities
Through its defined benefit pension plans the Group is exposed to a
number of risks, the most significant of which are detailed below:
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. The impact on the plan liabilities has been calculated using the
projected unit credit method, which is the same as that applied in
calculating the defined benefit obligation recognised on the Group balance
sheet. There have been no changes from the previous year in the methods
and assumptions used in preparing the sensitivity analysis.
2015
Assumption Change in assumption
Impact on plan liabilities
Discount rate
Price inflation
Mortality
Increase/decrease
0.25%
Increase/decrease
0.25%
Decrease/increase by
€19.4 million
Increase/decrease by €8.8
million
Increase/decrease by
one year
Increase/decrease by
€13.5 million
Future salary increases*
Future pension increases**
Investment risk
The pension plans hold investments 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 plan’s 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.
2014
Assumption Change in assumption
Impact on plan liabilities
Discount rate
Price inflation
Mortality
Increase/decrease
0.25%
Increase/decrease
0.25%
Decrease/increase by
€23.6 million
Increase/decrease by €9.7
million
Increase/decrease by
one year
Increase/decrease by
€15.3 million
Future salary increases*
Future pension increases**
*
**
The majority of the defined benefit schemes are career average plans.
As a result, future salary increases will not have a material impact on
the plan liabilities.
There are no future pension increases agreed in the material defined
benefit pension schemes.
154
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
29. PROVISIONS
At 03 January 2015
Provided for in the year
Utilised in the year
Exchange differences
Unwinding of discounts
Reclassification
Restructuring
€'000
note (a)
2,750
4,720
(1,778)
–
–
–
UK
pension
€'000
note (b)
18,506
–
(913)
1,168
137
–
Legal
claims
€'000
note (c)
7,164
2,190
(2,676)
430
–
(180)
At 02 January 2016
5,692
18,898
6,928
Non-current
Current
–
5,692
18,120
778
–
6,928
5,692
18,898
6,928
Lease
commitments
€'000
note (d)
1,219
Operational
€'000
note (e)
11,911
Total
€'000
41,550
6,910
(11,988)
1,678
142
(180)
–
(6,381)
72
–
–
5,602
38,112
–
5,602
18,984
19,128
5,602
38,112
–
(240)
8
5
–
992
864
128
992
(a) The restructuring provision relates to the rationalisation programme in Dairy Ireland that the Group concluded this year. The provision, which relates
mainly to termination payments, is expected to be fully utilised during 2016. 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 28 years. See further detail in note 33.
(c) The legal claims provision represents legal claims brought against the Group. The balance at 02 January 2016 is expected to be utilised during
2016. 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 02 January 2016.
(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 €0.1 million will be utilised during the next year and the balance will be fully utilised in 2017.
(e) The operational provision represents provisions relating to certain insurance claims, property remediation works and product returns. Due to the
nature of these items, there is some uncertainty around the amount and timing of payments.
Glanbia plc
Annual Report and Accounts 2015
155
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
30. CAPITAL GRANTS
At the beginning of the year
Amortisation of grants received
Additions
Exchange differences
At the end of the year
Non-current
Current
Notes
5
2015
€'000
2,214
(282)
1,132
7
2014
€'000
2,471
(264)
–
7
3,071
2,214
2,787
284
2,214
–
3,071
2,214
The entities receiving the grants are principal subsidiaries as outlined in note 40 and have no going concern issues, therefore, there are no material
contingencies attaching to any grants received.
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
Notes
38
38
38
2015
Company
€'000
35
–
–
26,819
–
8,765
2015
Group
€'000
216,247
53,280
42
–
4,385
168,759
2014
Company
€'000
36
–
–
112,279
–
9,760
2014
Group
€'000
187,201
68,254
41
–
3,732
131,122
35,619
442,713
122,075
390,350
See note 36 for analysis of the movement in trade and other payables. The carrying value of payables is a reasonable approximation of fair value due
to their short term nature.
Notes
2015
Assets
€'000
2015
Liabilities
€'000
25.3
–
35
–
379
414
–
414
414
(666)
(25)
(258)
–
(949)
(47)
(902)
2014
Assets
€'000
440
295
–
544
1,279
–
1,279
2014
Liabilities
€'000
–
(40)
(534)
–
(574)
–
(574)
(574)
(949)
1,279
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 - Commodity futures - cash flow hedges
Current portion
156
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Non-hedging instruments
Non-hedging instruments refer to a translation difference on a GBP/EUR
currency swap with a notional amount of GBP 31.0 million (2014: GBP
20.0 million). The translation loss included in the Group income statement
is €1.1 million (2014 €0.5 million gain).
losses recognised
Interest rate swaps
in other
Gains and
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 Joint Ventures
until repayment of the related bank borrowings.
in the hedging reserve
Foreign exchange contracts
The notional principal amounts of the outstanding foreign exchange
contracts at 02 January 2016 were €12.5 million (2014: €16.7 million).
losses recognised
in other
Gains and
comprehensive income on foreign exchange contracts at 02 January 2016
will be released to the income statement at various dates within one year
from the reporting date. The gain released to the Group income statement
in respect of these contracts during 2015 was €0.3 million.
in the hedging reserve
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 02 January 2016 were €2.0 million and €43.5 million respectively
(2014: €2.1 million and €44.9 million).
losses recognised
Gains and
in other
comprehensive income on these futures at 02 January 2016 will be
released to the income statement at various dates within two years from
the reporting date. The loss released to the Group income statement in
respect of these futures during 2015 was €0.5 million.
in the hedging reserve
Net investment hedge
A portion of the Group's US dollar denominated borrowings amounting to
US dollar 98.5 million (2014: US dollar 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 €90.5 million (2014: €81.7 million). The foreign
exchange loss of €8.7 million (2014: €9.5 million loss) arising on translation
of the borrowing into euro at 02 January 2016 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 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, based on professional advice received, that there is no
more than a nominal value attached to this call option.
33. CONTINGENT LIABILITIES
Company
The Company has guaranteed the liabilities of:
• D Walsh & Sons Limited
• Eilish Oils Limited
• Grassland Fertilizers (Kilkenny) Limited
•
•
Inactive Company 100 Limited
Inactive Company 101 Limited
• Rathcoffey Fertilizers Limited
and all the Company’s Irish registered wholly-owned subsidiaries with the
exception of:
• Glanbia Pension Trustees Limited
• Cold Chain Food Distributors Limited
• Glanbia Pension Trustees (No. 2) Limited
• Virginia Milk Products Pension Trustees Limited
in respect of any losses or liabilities (as defined in section 357 (i) (b) of the
Companies Act 2014) for the year ended 02 January 2016 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 357 of the Companies Act 2014.
Within the scope of benefiting of the exemption related to the filing of the
annual accounts for the financial year ended on 31 December 2015 of the
three Luxembourg subsidiaries (see note 40), the Company has guaranteed
the liabilities of these subsidiaries in respect of any losses or liabilities (as
provided by Article 70 (c) of the Luxembourg Law of 19 December 2002
on the register of commerce and companies and the accounting and
annual accounts of undertakings) for the financial year ended on 31
December 2015. These subsidiaries avail of the exemption from filing of
their Financial Statements, as permitted by Article 70 of the Luxembourg
Law of 19 December 2002 on the register of commerce and companies
and the accounting and annual accounts of undertakings.
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 €3.6 million (2014: €2.6 million) are
outstanding at 02 January 2016. 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.
Glanbia plc
Annual Report and Accounts 2015
157
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
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
2015
€'000
12,845
2014
€'000
46,900
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 at the reporting date:
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
35. CASH GENERATED FROM OPERATIONS
Profit before taxation
Write-off of intangibles
Non-cash element of exceptional charge
Share of results of Joint Ventures & Associates
Depreciation
Amortisation
Cost of share based payments
Difference between pension charge and cash contributions
Loss/(profit) on disposal of property, plant and equipment
Finance income
Finance expense
Amortisation of government grants received
Cash generated before changes in working capital
Change in net working capital:
– Decrease in inventory
– (Increase)/decrease in short term receivables
– (Decrease)/increase in short term liabilities
– (Decrease) in provisions
2015
€'000
18,944
59,742
64,187
2014
€'000
17,457
55,312
66,609
142,873
139,378
2015
Group
€'000
218,696
–
18,299
(26,270)
43,137
31,125
8,724
(6,027)
209
(1,706)
22,816
(282)
2014
Company
€'000
24,217
–
–
–
–
–
5,516
–
–
–
–
–
2014
Group
€'000
173,577
73
10,290
(23,729)
32,230
22,512
5,516
(7,019)
(226)
(1,725)
22,050
(264)
139,533
308,721
29,733
233,285
–
(63)
(86,459)
–
20,287
(12,187)
846
(9,802)
–
62
20,054
–
15,740
(16,264)
9,321
(11,366)
Notes
2015
Company
€'000
130,809
–
–
–
–
–
8,724
–
–
–
–
–
13
14
21
9
9
30
36
36
36
36
Cash generated from operating activities
53,011
307,865
49,849
230,716
158
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
36. MOVEMENT IN WORKING CAPITAL
2014
At 04 January 2014
Exchange differences
Arising on acquisition
Other consideration arising on acquisition
Exceptional items, interest accruals, capital creditors
and other non-operating items
(Decrease)/increase in working capital
At 03 January 2015
2015
At 03 January 2015
Exchange differences
Arising on acquisition
Arising on disposal
Liabilities assumed at completion
Refund of consideration due from vendor - thinkThin
Exceptional items, interest accruals, capital creditors
and other non-operating items
(Decrease)/increase in working capital
At 02 January 2016
Notes
Inventories
€'000
Short term
receivables
€'000
314,481
257,216
30,080
7,981
22,668
8,879
–
–
–
–
35
(15,740)
336,802
16,264
305,027
Notes
Inventories
€'000
Short term
receivables
€'000
336,802
305,027
37
37
37
35
24,642
3,196
–
–
–
–
(20,287)
344,353
20,932
10,741
(233)
–
1,433
(67)
12,187
350,020
Short term
liabilities
€'000
(344,642)
(26,082)
(5,467)
(1,836)
(3,002)
(9,321)
(390,350)
Short term
liabilities
€'000
(390,350)
(24,671)
(10,500)
–
(8,647)
–
(7,699)
(846)
Provisions
€'000
(44,793)
(1,148)
–
–
(6,975)
11,366
(41,550)
Provisions
€'000
(41,550)
(1,678)
–
–
–
–
(4,686)
9,802
Total
€'000
182,262
25,518
11,393
(1,836)
(9,977)
2,569
209,929
Total
€'000
209,929
19,225
3,437
(233)
(8,647)
1,433
(12,452)
856
(442,713)
(38,112)
213,548
Glanbia plc
Annual Report and Accounts 2015
159
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
37. BUSINESS COMBINATIONS
The acquisitions completed by the Group during the year were as follows:
• On 28 June 2015, the Group acquired 100% of Cold Chain Food
Distributors Limited (Cold Chain). Cold Chain’s principal activity is the
sale and distribution of dairy products in Ireland. The acquisition will
allow the Group to broaden its product range for customers in the
growing food service channel and its customer base. Goodwill is
attributable to the profitability and development opportunities
associated with the extension of the Group’s portfolio by
complementing and enhancing existing sales and distribution
channels. Goodwill is not deductible for tax purposes.
• On 10 December 2015, the Group acquired 100% of PHTT
Acquisition, LLC (thinkThin). thinkThin is a US based provider of
premium lifestyle nutrition products. The reason for the acquisition
was to complement the portfolio of the Group’s Glanbia Performance
Nutrition business and to further consolidate the Group’s market
leading position. Goodwill 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. The goodwill reflects
the
expectation that the business will continue to generate new customers
and new products over time, the acquired workforce (which is not an
identifiable asset for financial reporting purposes) and synergies.
Goodwill of €12.5 million is deductible for tax purposes.
Acquisition related costs charged to the Group income statement,
included within other expenses (note 5), during the year ended 02 January
2016 amounted to €0.8 million (2014: €1.1 million).
No contingent liabilities arose as part of the acquisitions.
Summary of acquisitions
Details of the net assets acquired and goodwill arising from the acquisitions during the year ended 02 January 2016 are as follows:
Purchase consideration
Add/(less): fair value of liabilities acquired/(assets acquired)
Goodwill
Cold Chain
€’000
872
227
thinkThin
€’000
193,274
Total
€’000
194,146
(108,583)
(108,356)
1,099
84,691
85,790
The fair value of assets and liabilities arising from the acquisitions during the year ended 02 January 2016 are as follows:
Property, plant and equipment
Intangible assets - brands
Intangible assets - customer relationships
Intangible assets - software
Inventories
Trade and other receivables
Trade and other payables
Deferred tax asset/(liabilities)
Liabilities assumed at completion
Liabilities settled at completion
Cash and cash equivalents
Cold Chain
€'000
thinkThin
€'000
10
–
–
–
108
1,374
(1,217)
22
–
(802)
278
795
78,589
71,278
6
3,088
9,367
(9,283)
(42,829)
(8,647)
(494)
6,713
Total
Fair Value
€'000
805
78,589
71,278
6
3,196
10,741
(10,500)
(42,807)
(8,647)
(1,296)
6,991
Fair value of (liabilities)/assets acquired
(227)
108,583
108,356
The total purchase consideration is as follows:
Purchase consideration - cash paid
Refund of consideration due from vendor
Purchase consideration
Cold Chain
€’000
872
–
872
thinkThin
€’000
194,707
(1,433)
193,274
Total
€’000
195,579
(1,433)
194,146
The fair value of Cold Chain’s trade and other receivables at the
acquisition date amounted to €1.4 million. The gross contractual amount
for trade receivables due is €1.5 million, an amount of €0.1 million is
provided for as an allowance for doubtful debts.
The fair value of thinkThin’s trade and other receivables at the acquisition
date amounted to €9.4 million. The gross contractual amount for trade
receivables due is €6.3 million, an amount €0.2 million is provided for as
an 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 thinkThin 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 2016
Annual Report as stipulated by IFRS 3 ‘Business Combinations’.
For the acquisitions completed in 2014 there were no material revisions of
the provisional fair value adjustments since the initial values were
established.
160
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
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 ended 02 January
2016 were as follows:
Revenue
Profit before taxation and exceptional items
2015
Acquisitions
€’000
Group
excluding
acquisitions
€’000
Consolidated
Group including
acquisitions
€'000
9,892
373
2,764,434
2,774,326
244,665
245,038
The revenue and profit (including transaction costs) of the Group for the financial year ended 02 January 2016 determined in accordance with IFRS 3
as though the acquisition date for all business combinations effected during the year had been at the beginning of the year would be as follows:
Revenue
(Loss)/profit before taxation and exceptional items
2015
Acquisitions
€’000
Group
excluding
acquisitions
€’000
Pro Forma
Consolidated
Group
€'000
86,606
(4,748)
2,764,434
2,851,040
244,665
239,917
Glanbia plc
Annual Report and Accounts 2015
161
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
38. RELATED PARTY TRANSACTIONS
The Group is controlled by Glanbia Co-operative Society Limited, which
holds 36.5% of the issued share capital of the Company and is the
ultimate parent of the Group. During 2015, dividends of €13.3 million
(2014: €12.7 million) were paid to Glanbia Co-operative Society Limited
and its wholly owned subsidiaries based on their shareholding in Glanbia
plc.
Subsidiaries, Joint Ventures & Associates
The Group Financial Statements include the Financial Statements of the
Company, its subsidiaries and its percentage shareholding of results from
38 (a) Sales of goods and services
Joint Ventures & Associates. A listing of the principal subsidiary and
associated undertakings is provided in note 40.
Sales to and purchases from, together with outstanding payables and
receivables to and from subsidiaries, are eliminated in the preparation of
the Group Financial Statements
IFRS 10
‘Consolidated Financial Statements’. Borrowings are secured by cross-
guarantees from Glanbia plc and certain principal subsidiaries.
in accordance with
The following transactions were carried out with related parties:
Sales of goods:
– Associates
– Joint Ventures
– Key management*
Sales of services:
– Glanbia Co-operative Society Limited
– Associates
– Joint Ventures
Sales to related parties were carried out under normal commercial terms and conditions.
38 (b) Purchases of goods and services
Purchases of goods:
– Associates
– Joint Ventures
– Key management*
Purchases of services:
– Glanbia Co-operative Society Limited
– Associates
– Joint Ventures
– Subsidiaries
2015
Company
€'000
–
–
–
–
–
–
–
–
2015
Company
€'000
–
–
–
–
–
–
–
6,803
2015
Group
€'000
6,886
2,971
2,029
11,886
1,331
6,679
15,770
23,780
2015
Group
€'000
70,394
5,681
369
76,444
290
6,427
24
–
2014
Company
€'000
–
–
–
–
–
–
–
–
2014
Company
€'000
–
–
–
–
–
–
–
4,277
2014
Group
€'000
14,734
–
2,020
16,754
511
6,708
18,000
25,219
2014
Group
€'000
66,749
5,795
456
73,000
290
6,444
–
–
* Purchases, sales and related year end balances involving key management refer to trading balances with Directors who are engaged in farming activities.
Purchases from related parties were carried out under normal commercial terms and conditions.
6,803
6,741
4,277
6,734
162
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
38 (c) Contributions to retirement benefit plans
Information in relation to the Group’s contributions to retirement benefit plans is disclosed in note 28.
38 (d) Year end balances
Receivables from related parties:
– Glanbia Co-operative Society Limited
– Associates
– Joint Ventures
– Key management*
Payables to related parties:
– Associates
– Joint Ventures
– Key management*
– Subsidiaries
2015
Company
€'000
112
101
–
–
213
–
–
–
26,819
2015
Group
€'000
102
2,456
1,963
135
4,656
15,763
37,517
42
–
2014
Company
€'000
–
36
–
–
36
–
–
–
112,279
2014
Group
€'000
192
2,938
2,558
584
6,272
19,059
49,195
41
–
26,819
53,322
112,279
68,295
* Purchases, sales and related year end balances involving key management refer to trading balances with Directors who are engaged in farming activities.
The outstanding balances included in receivables and payables at the balance sheet date in respect of transactions with related parties are unsecured,
interest free and settlement arises in cash.
38 (e) Key management compensation
The Board of Directors and Glanbia Operating Executive are deemed to be key management personnel as they are responsible for planning, directing
and controlling the activities of the Group. Key management compensation includes Directors (Executive and Non-Executive) and members of the
Glanbia Operating Executive, including the Group Secretary. Dividends totalling €0.1 million (2014: €0.1 million) were received by key management
personnel during the year, based on their personal shareholdings in Glanbia plc.
In addition to their salaries and short term benefits, the Group contributes to post retirement benefit plans on behalf of key management personnel and
these personnel also participate in the Group’s Long Term Incentive Plan (LTIP). See notes 21 and 28. No loans were made to key management during
the year (2014: nil).
Salaries and other short-term employee benefits
Post-employment benefits
Share based payments
Non-Executive Directors fees
2015
Company
€'000
–
–
–
887
887
2015
Group
€'000
5,179
568
4,343
887
10,977
2014
Company
€'000
–
–
–
800
800
2014
Group
€'000
4,094
508
1,928
800
7,330
Glanbia plc
Annual Report and Accounts 2015
163
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
38 (f) Loans to Joint Ventures & Associates
Loans receivable
At the beginning of the year
Foreign exchange difference on opening balance
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
2015
Company
€'000
–
–
–
–
–
–
–
–
–
–
2015
Group
€'000
9,863
462
(8,475)
1,850
261
11
89
(308)
53
1,903
2014
Company
€'000
–
–
–
–
–
–
–
–
–
–
2014
Group
€'000
9,376
487
–
9,863
122
8
216
(85)
261
10,124
The GBP £6.25 million loan to Milk Ventures (UK) Limited was repaid on 1 April 2015, following the disposal of the Group’s investment in Milk Ventures
(UK) Limited, which was the parent company of Nutricima Limited. See notes 6 and 16. A loan of €1.5 million, to South East Port Services Limited, is
due as €0.75 million repayable on 31 October 2017 and 31 October 2018, subject to cash flows. A loan of €0.35 million to the Malting Company of
Ireland Limited is repayable in 2043.
39. EVENTS AFTER THE REPORTING PERIOD
See note 12 for the final dividend, recommended by the Directors, to be paid on 29 April 2016.
164
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
40. PRINCIPAL SUBSIDIARY AND ASSOCIATED UNDERTAKINGS
The information outlined below relates only to the principal undertakings in the Group. The Group has availed of the exemption under section 316 of
the Companies Act 2014. The information required under section 314 of the Companies Act 2014, including a full listing of subsidiaries and Joint
Ventures & Associated undertakings, will be annexed to the Company’s Annual Return to be filed in the Companies Registration Office in Ireland.
40 (a) Subsidiaries
Group
interest %
2015
Group
interest %
2014
Incorporated and operating in
Registered office
Principal activity
Ireland
Alanfield Society Limited
Glanbia House, Kilkenny, Co Kilkenny
Holding society
Avonmore Proteins Limited
Glanbia House, Kilkenny, Co Kilkenny
Financing
Avonmore Skim Milk Products Limited Glanbia House, Kilkenny, Co Kilkenny
Holding company
Cold Chain Food Distributors Limited
Glanbia House, Kilkenny, Co Kilkenny
Sale and distribution of dairy foods
D. Walsh & Sons Limited
Palmerstown, Co Kilkenny
Grain and fertilisers
Glanbia Cheesip Limited 1
Glanbia House, Kilkenny, Co Kilkenny
Research and development
Glanbia Consumer Foods Limited
Glanbia House, Kilkenny, Co Kilkenny
Consumer foods
Glanbia Estates Limited
Glanbia Feeds Limited
Glanbia Finance Limited
Glanbia House, Kilkenny, Co Kilkenny
Property and land dealing
Glanbia House, Kilkenny, Co Kilkenny
Manufacture of animal feed
Glanbia House, Kilkenny, Co Kilkenny
Glanbia Financial Services
Glanbia House, Kilkenny, Co Kilkenny
Glanbia Foods Ireland Limited
Glanbia House, Kilkenny, Co Kilkenny
Financing
Financing
Consumer foods, agri trading and
business services
Glanbia Investipr Limited
Glanbia House, Kilkenny, Co Kilkenny
Management of receivables
Glanbia Holdings (Ireland) Limited
Glanbia House, Kilkenny, Co Kilkenny
Holding company
Glanbia Management Services Limited Glanbia House, Kilkenny, Co Kilkenny
Management services
Glanbia Nutritionals (Blending) Limited Glanbia House, Kilkenny, Co Kilkenny
Financing
Glanbia Nutritionals (Europe) Limited
Glanbia House, Kilkenny, Co Kilkenny
Nutritional ingredients
Glanbia Nutritionals (Ireland) Limited
Glanbia House, Kilkenny, Co Kilkenny
Performance nutrition and ingredients
Glanbia Nutritionals (Research) Limited Glanbia House, Kilkenny, Co Kilkenny
Research and development
Glanbia Property Holding Limited
Glanbia House, Kilkenny, Co Kilkenny
Holding company
Glanbia Property Rentals Limited
Glanbia House, Kilkenny, Co Kilkenny
Property rental company
Glanbia Support Services Limited
Glanbia House, Kilkenny, Co Kilkenny
Business services
Glassonby
Glanbia House, Kilkenny, Co Kilkenny
Grassland Fertilizers (Kilkenny) Limited Palmerstown, Co Kilkenny
ON Optimum Nutrition Limited
Glanbia House, Kilkenny, Co Kilkenny
Financing
Fertilisers
Financing
Waterford Foods Limited
Glanbia House, Kilkenny, Co Kilkenny
Holding company
United States
100
100
100
100
60
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
73
100
100
Aseptic Solutions USA Ventures, LLC 1209 Orange Street, Wilmington,
Beverage manufacturer & co packer
100
Glanbia (Delaware), Inc.
Glanbia, Inc.
Glanbia Business Services, Inc.
New Castle County, DE 19801
1209 Orange Street, Wilmington,
New Castle County, DE 19801
2711 Centerville Road Suite 400,
Wilmington, New Castle County,
DE 19808
1209 Orange Street, Wilmington,
New Castle County, DE 19801
Holding company
Holding company
Business services
Glanbia Foods, Inc.
121 4th Avenue S., Twin Falls ID 83301
Cheese and nutritional ingredients
Glanbia Nutritionals (NA), Inc.
Glanbia Nutritionals, Inc.
Glanbia Performance Nutrition, Inc.
PHTT Acquisition, Inc.
1209 Orange Street, Wilmington,
New Castle County, DE 19801
1209 Orange Street, Wilmington,
New Castle County, DE 19801
11380 Prosperity Farms Rd #221E,
Palm Beach, Gardens FL 33410
3411 Silverside Road,
Rodney Building 104,
Wilmington, New Castle County, DE 19810
Nutritional ingredients
Nutritional ingredients
Performance nutrition
Holding company
100
100
100
100
100
100
100
100
100
100
100
–
60
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
73
100
100
100
100
100
100
100
100
100
100
–
Glanbia plc
Annual Report and Accounts 2015
165
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Incorporated and operating in
Registered office
Principal activity
United States
thinkThin, LLC
The Isopure Company, LLC
Britain and Northern Ireland
2711 Centerville Road Suite 400,
Wilmington, New Castle County, DE 19808
Performance nutrition
1209 Orange Street, Wilmington,
New Castle County, DE 19801
Performance nutrition
Glanbia Feedstuffs Limited
One Victoria Square, Birmingham, B1 1BD
Animal feed distribution
Glanbia Foods (NI) Limited
202 City Business Park, Dunmurry,
BT17 9HY
Consumer food distribution
Glanbia Holdings Limited
One Victoria Square, Birmingham, B1 1BD
Financing
Glanbia Investments (UK) Limited
One Victoria Square, Birmingham, B1 1BD
Holding company
Glanbia Milk Limited
One Victoria Square, Birmingham, B1 1BD
Management services
Glanbia Performance Nutrition (UK)
Limited
One Victoria Square, Birmingham, B1 1BD
Performance nutrition
Glanbia (UK) Limited
One Victoria Square, Birmingham, B1 1BD
Holding company
Waterford Foods International Limited One Victoria Square, Birmingham, B1 1BD
Holding company
Germany
Glanbia Nutritionals Deutschland
GmbH
Gewerbestrasse 3, 78359 Orsingen -
Nenzingen
Nutritional delivery systems
Glanbia Performance Nutrition GmbH Köpenicker Strasse 10, 10997, Berlin
Performance nutrition products
Asia
Group
interest %
2015
Group
interest %
2014
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
Glanbia Nutritionals Singapore Pte
Limited
70 Bendemeer Road, 06-01, 339940,
Singapore
Customer service office
100
100
Glanbia Nutritionals (Suzhou)
Co. Limited
GN Life Science (Shanghai)
Co. Limited
Australia
No. 128 Fangzong Street SIP, Suzhou,
Jiangsu Province, PRC 215025, China
Room 432, No.473 Fute Xiyi Road,
Waigaoqiao Free Trade Zone, Shanghai,
China
Nutrient delivery systems
100
100
Nutritional ingredients
100
100
Glanbia Performance Nutrition Pty
Limited
Level 10, 68 Pitt Street,
Sydney NSW 2000
Performance nutrition
100
100
Brazil
Glanbia Marketing de Produtos de
Nutricao e Performance do
Brasil Ltda
Canada
Glanbia Nutritionals (Canada) Inc.
Glanbia Performance Nutrition Canada
Inc.
Denmark
Nutramino Holding ApS
Nutramino Int. ApS
France
Glanbia Performance Nutrition France
SAS
Alameda Gabriel Monteiro da Silva,
No. 2892, Jardim America,
na Cidade de Sao Paulo, São Paulo
c/o Thompson Dorfman Sweatman LLP,
201 Portage Avenue, Suite 2200,
Winnipeg MB R3B 3L3
c/o Thompson Dorfman Sweatman LLP,
201 Portage Avenue, Suite 2200,
Winnipeg MB R3B 3L3
Frederikssundsvej 62 B 1, 2400
København NV
Frederikssundsvej 62 B 1, 2400
København NV
Performance nutrition
100
100
Nutritional products
100
100
Performance nutrition
100
100
Holding company
Performance nutrition
100
100
100
100
8, Avenue Hoche, 75008, Paris
Performance nutrition
100
100
166
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS Group
interest %
2015
Group
interest %
2014
100
100
100
100
100
100
100
100
100
100
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
Incorporated and operating in
Registered office
Principal activity
India
Glanbia India Private Limited 2
Glanbia Performance Nutrition (India)
Private Limited
Luxembourg
43/61, “Srinidhi”, Surveyor’s Street,
Basavangudi, Bangalore 560004
234, 3rd Floor, Shivani CGHS Ltd.,
Plot No. 18, Sector 12, Dwarka,
New Delhi, West Delhi, Delhi-DL, 110078
Nutritional ingredients
Performance nutrition
Glanbia Luxembourg SA 3
5, Rue Guillaume Kroll, L-1882
Glanbia Luxfin SA 3
Glanbia Luxinvest SA 3
Netherlands
Glanbia Foods B.V.3
Mexico
Glanbia, S.A. de CV
Norway
Nutramino NO AS
Portugal
Glanbia Nutritionals (Portugal) -
Sociedade Unipessoal, Lda.
Russian Federation
LLC Glanbia
South Africa
Glanbia (Pty) Limited
Sweden
Nutramino AB
Turkey
Financing
Financing
Financing
5, Rue Guillaume Kroll, L-1882
5, Rue Guillaume Kroll, L-1882
Schiphol Boulevard 231,
1118 BH Schiphol
Av. Prolongación Paseo de la Reforma
No. 115-1006, Col. Paseo de las Lomas,
C.P. 01330
Holding company
100
100
Nutritional ingredients
100
100
Fillpstad brygge 1, 0252, Oslo
Performance nutrition
100
100
Regus Quinta da Fonte,
Edifico D. Pedro I, Rua dos Malhões,
2770-071, Paço de Arcos, Oeiras
Office 1934, 10 Testovskaya Street,
123317, Moscow
Stand 893, 7 Forbes Street, Midstream
Estate - Windsor Gate, Brakfontein Road,
Ekurhuleni
Performance nutrition
100
100
Nutritional ingredients
100
100
Nutritional ingredients
100
100
Frederikssundsvej 62b, DK-2400
København NV, Denmark
Performance nutrition
100
100
Glanbia Besin Ürünleri Pazarlama ve
Ticaret Limited Sirketi
Kocatepe Mah., Lamartin Cad. No:5,
Ofis Lamartine Kat:6, Taksim, Beyoglu,
Istanbul, 34437
Performance nutrition
100
–
Uruguay
Glanbia (Uruguay Exports) SA
Copacabana Street, Block 26 - S 12,
Médanos de Solymar City, Canelones
Customer service office
100
100
1 Glanbia Cheesip Limited has a branch at 7A, rue Robert Stümper, L-2557, Luxembourg, with a statutory year end fixed at 31 December each year in order to comply with statutory
requirements.
2 The statutory year end of this subsidiary is 31 March 2016, which coincides with the tax year in India.
3 The statutory year end of these subsidaries is fixed at 31 December each year in order to comply with statutory requirements.
The Group has no significant restrictions in relation to the Group’s ability to access or use the assets and settle the liabilities of its principal subsidaries.
Glanbia plc
Annual Report and Accounts 2015
167
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT NOTES TO THE FINANCIAL STATEMENTS CONTINUED
FOR THE FINANCIAL YEAR ENDED 02 JANUARY 2016
40 (b) Joint Ventures & Associates
Incorporated and operating in
Ireland
Date to
which results
are included
Registered Office
Principal activities
Group
interest %
2015
Group
interest %
2014
Co-operative Animal Health Limited1
31–Dec–2014
Tullow, Co Carlow
Glanbia Ingredients Ireland Limited1
02-Jan-2016
Malting Company of Ireland Limited2
30–Oct–2015
Ballyconra, Ballyragget,
Co Kilkenny
The Maltings, South Link,
Togher, Co Cork
Agri chemicals
Milk products
Malting
South Eastern Cattle Breeding Society
Limited1
31–Dec–20143
Dovea,Thurles, Co Tipperary
Cattle breeding
South East Port Services Limited 1
02-Jan-2016
Palmerstown, Co Kilkenny
Port services
United States
Southwest Cheese Company, LLC 2
02-Jan-2016
Britain and Northern Ireland
Glanbia Cheese Limited 2
02-Jan-2016
Milk Ventures (UK) Limited 2
31-Mar-2015
(note 6)
1209 Orange Street, Wilmington
New Castle County, DE 19801
Milk products
4 Royal Mews, Gadbrook Park,
Rudheath, Northwich,
Cheshire, CW9 7VD
Manchester Business Park,
3500 Aviator Way, Manchester,
M22 5TG
Cheese products
51
Holding company
50
40
50
61
49
50
–
–
50
40
50
57
49
50
51
50
50
Nigeria
Nutricima Limited2
31-Mar-2015
(note 6)
45/47 Town Planning Way, Ilupeju,
Lagos
Evaporated and
powdered milk
1 Associate
2
3
Joint Venture
This Associate’s results do not have a material impact on the Group’s result and are therefore accounted for one year in arrears.
The Group’s investments in Joint Ventures & Associates are subject to certain restrictions however these are not material.
168
Glanbia plc
Annual Report and Accounts 2015
FINANCIAL STATEMENTS Other
information
Glossary of KPIs and non-IFRS
performance measures
Shareholder Information
Contacts
170
173
176
Glanbia plc
Annual Report and Accounts 2015
169
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GLOSSARY
GLOSSARY
KEY PERFORMANCE INDICATORS AND NON-IFRS PERFORMANCE MEASURES
KEY PERFORMANCE INDICATORS AND NON-IFRS PERFORMANCE MEASURES
NOT COVERED BY INDEPENDENT AUDITORS’ REPORT
Non-IFRS performance measures
The Group reports certain performance measures that are not defined under IFRS but which represent additional measures used by the Board of
Directors and the Glanbia Operating Executive in assessing performance and for reporting both internally and to shareholders and other external users.
The Group believes that the presentation of these non-IFRS performance measures provides useful supplemental information which, when viewed in
conjunction with our IFRS financial information, provides readers with a more meaningful understanding of the underlying financial and operating
performance of the Group.
None of these non-IFRS performance measures should be considered as an alternative to financial measures drawn up in accordance with IFRS.
The principal non-IFRS performance measures used by the Group are defined below with a reconciliation of these measures to IFRS measures where
applicable.
Constant currency
While the Group reports its results in euro, it generates a significant proportion of its earnings in currencies other than euro, in particular US dollar.
Constant currency reporting is used by the Group to eliminate the translational effect of foreign exchange on the Group's results. To arrive at the
constant currency year-on-year change, the results for the prior year are retranslated using the average exchange rates for the current year and
compared to the current year reported numbers.
The principal average exchange rates used to translate results for 2015 and 2014 were as follows:
euro 1 =
US dollar
Pound Sterling
Danish Kroner
2015
1.1092
0.7259
7.4589
2014
1.3271
0.8058
7.4547
Total Group
The Group has a number of strategically important Joint Ventures & Associates which when combined with the Group’s wholly owned businesses give
an important indication of the scale and reach of the Group’s operations. Total Group is used to describe certain financial metrics such as Revenue
and EBITA when they include both the wholly owned businesses and the Group's share of Joint Ventures & Associates.
Revenue
Revenue comprises sales of goods and services of the wholly owned businesses to external customers net of value added tax, rebates and discounts.
Revenue is one of the Group’s Key Performance Indicators (see pages 8 to 9).
Total Group Revenue
Total Group Revenue comprises the revenue of the wholly owned businesses and the Group's share of the revenue of its Joint Ventures & Associates.
2014
€'000
Notes to the Financial Statements
2015
€'000
Revenue per the Group income statement
Group’s share of revenue of Joint Ventures & Associates
4.1 / 4.2
Total Group Revenue
2,774,326
2,538,368
893,089
984,016
3,667,415
3,522,384
EBITA
EBITA is defined as earnings before interest, tax and amortisation excluding exceptional items.
EBITA is one of the Group's Key Performance Indicators (see pages 8 to 9). Business Segment EBITA growth on a constant currency basis is one of
the performance conditions in Glanbia's Annual Incentive Plan for Executive Directors with Business Unit responsibility. See Remuneration Committee
report on pages 66 to 83 for more information.
Total Group EBITA
Total Group EBITA comprises EBITA of the wholly owned businesses and the Group's share of its Joint Ventures & Associates EBITA.
2015
€'000
Notes to the Financial Statements
EBITA per the Group income statement
Group's share of EBITA of Joint Ventures & Associates
Total Group EBITA
4.1 / 4.2
271,003
39,690
310,693
2014
€'000
208,634
36,427
245,061
»
Reconciliation of the Group's share of Joint Ventures & Associates EBITA to the share of results of Joint Ventures & Associates per the Group
income statement is as follows:
EBITA of Joint Ventures & Associates
Amortisation
Finance costs
Income tax
Share of results of Joint Ventures & Associates per the Group income statement
170
Glanbia plc
Annual Report and Accounts 2015
2015
€'000
39,690
(476)
(5,037)
(7,907)
26,270
2014
€'000
36,427
(394)
(5,310)
(6,994)
23,729
OTHER INFORMATION EBITA margin
EBITA margin is defined as EBITA as a percentage of the revenue of the wholly owned businesses.
EBITA per the Group income statement
Revenue per the Group income statement
EBITA margin
2015
€'000
2014
€'000
271,003
208,634
2,774,326
2,538,368
9.8%
8.2%
Total Group EBITA margin
Total Group EBITA margin is defined as Total Group EBITA as a percentage of Total Group Revenue.
Total Group EBITA
Total Group Revenue
Total Group EBITA margin
Notes to the Financial Statements
4.1 / 4.2
4.1 / 4.2
2015
€'000
2014
€'000
310,693
245,061
3,667,415
3,522,384
8.5%
7.0%
Adjusted Earnings per share (EPS)
Adjusted EPS is defined 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. The Group believes that Adjusted EPS is a
better measure of underlying performance than Basic EPS as it excludes exceptional items that are not related to on-going operational performance
and intangible asset amortisation, which allows better comparability of segments and companies that grow by acquisition to those that grow organically.
Adjusted EPS is one of the Group's Key Performance Indicators (see pages 8 to 9). Adjusted EPS growth on a constant currency basis is one of the
performance conditions in Glanbia's Annual Incentive Plan. Adjusted EPS growth on a reported basis is one of the performance conditions in Glanbia's
Long-term Incentive Plan. See Remuneration Committee report on pages 66 to 83 for more information.
Notes to the Financial Statements
Profit attributable to equity holders of the Parent
Amortisation of intangible assets (net of related tax)
Amortisation of Joint Venture & Associates intangible assets (net of related tax)
Exceptional items (net of related tax)
Adjusted net income
Weighted average number of Ordinary Shares in issue
Adjusted earnings per share (cent per share)
11
11
11
11
2015
€'000
183,271
26,126
417
23,799
233,613
2014
€'000
146,313
19,698
345
14,079
180,435
295,196,003
295,011,089
79.14
61.16
Financing Key Performance Indicators
Net debt : 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 (as defined under operating cash flow) 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.
Adjusted EBIT : net finance cost is calculated as Earnings before interest and tax plus dividends received from Joint Ventures and Associates divided
by net finance cost. Net finance cost comprises finance costs less finance income per the Group income statement plus capitalised borrowing costs.
Operating cash flow
Operating cash flow is defined as earnings before interest, taxation, depreciation and amortisation (EBITDA) of the wholly owned businesses net of
business sustaining capital expenditure and working capital movements, excluding exceptional cash flows. EBITDA represents pre-exceptional EBITA
of the wholly owned businesses plus depreciation, net of grant amortisation.
Operating cash flow is one of the Group's Key Performance Indicators (see pages 8 to 9). Operating cash flow on a constant currency basis is one
of the performance conditions in Glanbia's Annual Incentive Plan. See Remuneration Committee report on pages 66 to 83 for more information.
Glanbia plc
Annual Report and Accounts 2015
171
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT GLOSSARY CONTINUED
GLOSSARY CONTINUED
KEY PERFORMANCE INDICATORS AND NON-IFRS PERFORMANCE MEASURES
KEY PERFORMANCE INDICATORS AND NON-IFRS PERFORMANCE MEASURES
Reconciliation of Operating cash flow to the Group statement of cash flows in the Financial Statements:
Notes to the Financial Statements
35
35
35
35
6
35
Cash generated from operating activities
Add back exceptional costs paid in the year
Less non operating working capital movements in the year
Less business sustaining capital expenditure
Cost of share options
Difference between pension charge and cash contributions
Loss on disposal of property, plant and equipment
Operating cash flow
Pre-tax exceptional charge for year
Non-cash element of exceptional charge
Current year exceptional costs paid in the year
Prior year exceptional costs paid in the year*
Total exceptional costs paid in the year
Business sustaining capital expenditure
Strategic capital expenditure
Total capital expenditure
»
»
»
Purchase of property, plant and equipment
Purchase of intangible assets
Total capital expenditure per the Group statement of cash flows
* Within decrease in provisions of €9.8 million (2014: €11.4 million) in note 35.
2015
€'000
307,865
15,090
(1,295)
2014
€'000
230,716
16,438
–
(37,391)
(42,600)
(8,724)
6,027
(209)
(5,516)
7,019
226
281,363
206,283
26,342
(18,299)
8,043
7,047
15,090
15,949
(10,290)
5,659
10,779
16,438
37,391
86,199
42,600
72,885
123,590
115,485
103,792
19,798
123,590
101,953
13,532
115,485
Business sustaining capital expenditure
The Group defines business sustaining capital expenditure as the
expenditure required to maintain/replace existing assets with a high
proportion of expired useful life. This expenditure does not attract new
customers or create the capacity for a bigger business. It enables the
Group to keep running at current throughput rates but also keep pace
with regulatory and environmental changes as well as complying with
new requirements from existing customers.
Strategic capital expenditure
The Group defines strategic capital expenditure as the expenditure
required to facilitate growth and generate additional returns for the Group.
This is generally expansionary expenditure beyond what is necessary to
maintain the Group’s current competitive position.
Operating working capital
Operating working capital is defined as inventories plus trade and other
receivables less trade and other payables. The year on year movement
on operating working capital, excluding the impact of currency translation,
acquisitions, disposals and other non operating items (note 36) is a
measure of the success of the Group's working capital management
programme.
Free cash flow
Free cash flow is calculated as the net cash flow in the year before the
following items: strategic capital expenditure, acquisition spend, proceeds
received on disposals, equity dividends paid, exceptional costs paid and
currency translation movements.
Return on capital employed (ROCE)
ROCE is defined as the Group's earnings before interest, tax and
amortisation (net of related tax) plus the Group's share of the results of
Joint Ventures & Associates after interest and tax divided by capital
employed. Capital employed comprises the sum of the Group's total
assets plus cumulative intangible asset amortisation less current liabilities
but excluding all borrowings, cash and deferred tax balances. It is
calculated by taking the average of the relevant opening and closing
balance sheet amounts.
In years where the Group makes significant acquisitions or disposals, the
ROCE calculation is adjusted appropriately, to ensure the acquisition or
disposal are equally time apportioned in the numerator and the
denominator.
ROCE is one of the Group's Key Performance Indicators (see pages 8 to
9). ROCE is one of the performance conditions in Glanbia's Long-term
Incentive Plan. See Remuneration Committee report on pages 66 to 83
for more information.
Total Shareholder Return (TSR)
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.
TSR is one of the Group's Key Performance Indicators (see pages 8 to
9). TSR is one of the performance conditions in Glanbia's Long-term
Incentive Plan. See Remuneration Committee report on pages 66 to 83
for more information.
172
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Annual Report and Accounts 2015
OTHER INFORMATION SHAREHOLDER INFORMATION
SHAREHOLDER 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.
Share capital
The authorised share capital of the Company at 02 January 2016 was
350,000,000 Ordinary Shares at €0.06 each. The issued share capital at
02 January 2016 was 296,030,684 Ordinary Shares of €0.06 each.
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.
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 02 January 2016 and 23 February 2016 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.
Contact details:
Telephone number
Within Ireland:
Outside Ireland:
01 247 5349
+353 1 247 5349
or by logging on to: www.investorcentre.com/ie/contactus
Shareholder
Glanbia Co-operative
Society Limited
Capital Group
Companies, Inc
Standard Life
Investments Limited
Share price data
Share price as at financial year end
2015
€
16.95
2014
€
12.81
Market capitalisation as at financial year end
5,018m
3,790m
Shareholder
Share price movements during the year:
– high
– low
19.55
12.37
13.06
10.48
The current share price of Glanbia plc Ordinary Shares can be accessed
at: http://www.glanbia.com/prices-delayed
Glanbia Co-operative
Society Limited
Capital Group of
Companies, Inc
Standard Life
Investments Limited
No. of Ordinary
Shares as at
02 January 2016
% of issued share
capital as at
02 January 2016
108,014,900
20,550,941
8,941,987
36.50
6.94
3.02
No. of Ordinary
Shares as at
23 February 2016
% of issued share
capital as at
23 February 2016
108,014,900
20,550,941
8,941,987
36.50
6.94
3.02
Shareholder analysis
Employee share schemes
The Company operates a number of employee share schemes. At 02
January 2016 859,933 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 4.88 cent per share was paid in respect of Ordinary
Shares on 16 October 2015.
Subject to shareholders’ approval, a final dividend of 7.22 cent per share
will be paid in respect of Ordinary Shares on 29 April 2016 to shareholders
on the register of members on 18 March 2016. 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.
Glanbia plc
Annual Report and Accounts 2015
173
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT SHAREHOLDER INFORMATION CONTINUED
SHAREHOLDER INFORMATION CONTINUED
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 improve the security of dividend payments to
shareholders and reduce costs, the Company proposes to pay future
dividend payments on its Ordinary Shares only by credit transfer into a
nominated bank or building society account.
Shareholders will continue to receive tax vouchers in respect of dividend
payments. The Company takes data security issues very seriously. 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.
AGM
The AGM will be held on 27 April 2016. 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 2016 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 2016
AGM the record date is 5:00 pm on 25 April 2016 (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), +353 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.
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.
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.
Financial calendar
Announcement of final results for 2015
24 February 2016
Ex-dividend date
Record date for dividend
Date for receipt of proxy forms
Record date for AGM
AGM
Dividend payment date
17 March 2016
18 March 2016
25 April 2016
25 April 2016
27 April 2016
29 April 2016
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.
174
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Annual Report and Accounts 2015
OTHER INFORMATION 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 2016 AGM agenda together with
a written explanation why the item is to be included on the agenda and
evidence of the shareholding must be received by the Group Secretary at
Glanbia plc, Glanbia House, Kilkenny, Ireland or by email to ir@glanbia.ie
/info@glanbia.ie no later than 17 March 2016 (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 either of these addresses by
this deadline.
Tabling draft resolutions
A shareholder, or a group of shareholders acting together, who hold at
least 3% of the issued share capital of the Company, has the right to table
a draft resolution for inclusion on the agenda of the 2016 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 no later than 17 March 2016 (i.e. 42
days before the AGM) by post to the Group Secretary at Glanbia plc,
Glanbia House, Kilkenny,
ir@glanbia.ie
/info@glanbia.ie. A resolution cannot be included on the 2016 AGM agenda
unless it is received at either of these addresses by this deadline.
Furthermore, shareholders are reminded that there are provisions in
company law which impose other conditions on the right of shareholders
to propose resolutions at the general meeting of a company.
Ireland or by email
to
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 2016 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 2016
AGM (i.e. 22 April 2016) to the Group Secretary, Glanbia plc, Glanbia
House, Kilkenny, Ireland or by email to ir@glanbia.ie /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.
Glanbia plc
Annual Report and Accounts 2015
175
FINANCIAL STATEMENTSOTHER INFORMATIONDIRECTORS’ REPORTSTRATEGIC REPORT 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.
SOLICITORS
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.
176
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Annual Report and Accounts 2015
OTHER INFORMATION G
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Glanbia plc
Glanbia House
Kilkenny
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Tel: +353 56 777 2200
Email: ir@glanbia.com
www.glanbia.com