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Focused on
Nutrition
Investing for Growth
Glanbia plc | Annual Report and Financial Statements 2017
Glanbia plc is a global nutrition group,
dedicated to delivering better nutrition
for every step of life’s journey.
Our vision is to be one of the top performing nutrition companies,
trusted to enrich lives every day.
Highlights of 2017
Eighth year of double-digit
earnings growth
Creation of Glanbia Ireland
and acquisitions of Amazing
Grass and Body & Fit
Strong top line revenue
growth at +9.2%
(constant currency)
Contents
P7
FOCUSED ON
ACQUISITIONS
P26
FOCUSED ON
INNOVATION
P20
FOCUSED ON
BUILDING
BRANDS
Glanbia plc | Annual Report and Financial Statements 2017
1
Highlights of 2017
Pro-forma adjusted Earnings Per Share
Revenue from continuing operations
EBITA
87.11c
+8.3%1
+10.2%2
EBITA margin
11.9%
-30bps1
-30bps2
1. Reported
2. Constant currency
€2.4bn
+7.0%1
+9.2%2
Net debt
€367.7m
€283.2m
+3.6%1
+5.8%2
Dividend payout ratio
25.3%
Reduction of €69.8 million
versus prior year
of pro-forma adjusted EPS
+65% in total dividend
For definitions and more information on constant
currency and other performance measures see the
glossary on pages 212 to 222.
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.
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.
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 48 to 51 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.
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.
Strategic Report
Highlights of 2017
Group Chairman’s Statement
Group Managing Director’s Review
Business Model
Our Strategy
Key Performance Indicators
Operations Review
Group Finance Director’s Review
Our People, Our World, Our Communities
Risk Management
Principal Risks and Uncertainties
1
6
8
12
14
18
20
30
36
44
48
Directors’ Report
Corporate Governance Report
Board of Directors and Senior Management
Audit Committee Report
Financial Statements
Independent Auditors’ Report
Group Financial Statements
Company Financial Statements
54
64
70
Nomination and Governance Committee Report 76
Notes to the Financial Statements
Remuneration Committee Report
Other Statutory Information
Directors’ Responsibility Statement
80
106
111
Other Information
Glossary of KPIs and Non-IFRS
Performance Measures
Shareholder Information
Contacts
114
123
129
132
212
223
229
2
Glanbia plc | Annual Report and Financial Statements 2017
Glanbia at a Glance
Glanbia participates in the world of nutrition through an innovative business model.
Glanbia Performance Nutrition and Glanbia Nutritionals are high-margin segments
focused on branded performance nutrition and lifestyle consumer products, and
nutritional ingredients. These wholly-owned businesses are complemented by three
key strategic Joint Ventures focused on primary dairy processing. Our shares are
listed on the Irish and London Stock Exchanges (symbol:GLB).
Glanbia Performance Nutrition
Glanbia Performance Nutrition is the global leader in
the performance nutrition business. It has a portfolio of
eight brands ranging in appeal from consumers looking for
performance nutrition to those seeking on-the-go snacks
and beverages to support a healthy lifestyle.
Glanbia Nutritionals
Glanbia Nutritionals is a global provider of innovative
nutritional and functional solutions. Through its extensive
portfolio of ingredients and capabilities, it provides
a wide range of science-led solutions to its global
customers. It is also the #1 producer and marketer
of American-style cheddar cheese.
Read more on page 20
Read more on page 24
Glanbia Ireland
Glanbia Ireland is the largest Irish-based
integrated dairy, agri-food and nutrition
business. Established in July 2017,
Glanbia Ireland is a 40:60 joint venture
between Glanbia plc and Glanbia
Co-operative Society Limited.
Strategic Joint Ventures
Glanbia Cheese
Glanbia Cheese is the largest
mozzarella producer in Europe
and is a 51:49 joint venture between
Glanbia plc and Leprino Foods
Company, a US company.
Read more on page 28 and 29
Southwest Cheese
Southwest Cheese, based in the US, is a
50:50 cheese and whey manufacturing
joint venture, between Glanbia plc and
the Greater Southwest Agency.
Core capabilities
Market-led,
technology
driven innovation
The focus of the Group’s
innovation agenda is customer
led, science-backed innovation
that produces better solutions,
better products and better
outcomes for our customers
and consumers.
Talent
development
We know that the development
of our people is key to our
future success. We achieve
this through an integrated
approach to talent management
and career development.
Glanbia plc | Annual Report and Financial Statements 2017
3
Glanbia employs 6,600 people across 32 locations and our products are sold in over
130 countries world-wide. Our major production facilities are located in Ireland, the US,
the UK, Germany and China. Our relentless focus on the needs of our customers’ and
consumers’ places us at the heart of major global market trends in food and nutrition.
Products
sold in over
130
countries World’s
#1
Global performance
nutrition brand portfolio
€2.4bn
Revenue
4Global R&D
Innovation
centres
Global
Footprint:
Presence in
32
countries
* Includes JV’s.
Relationship
focused
We work as a proactive
and long-term business
partner with our customers:
delivering nutritional solutions
based on market foresight and
contributing to better business
for our customers.
6,600*
Employees globally
27
production facilities
including Joint
Ventures
#1Global whey
protein, nutritional
solutions
6.7bn*
Litres of milk processed
Operational
excellence
We are dedicated to achieving
high-quality products to meet
customer food safety and
quality standards and we
are focused on regulatory
compliance and good
environmental stewardship.
Disciplined capital
management
We have a strong track
record of efficient capital
allocation and portfolio
management. We deploy a
variety of structures including
joint ventures which have
been, and remain, critical to
sustainable long-term growth.
4
Glanbia plc | Annual Report and Financial Statements 2017
Strategic
Report
Strategic Report
Group Chairman’s Statement
Group Managing Director’s Review
Business Model
Our Strategy
Key Performance Indicators
Operations Review
Group Finance Director’s Review
Our People, Our World, Our Communities
Risk Management
Principal Risks and Uncertainties
6
8
12
14
18
20
30
36
44
48
Glanbia plc | Annual Report and Financial Statements 2017
5
FOCUSED
ON NUTRITION
A GROWING
MARKET
80%
OVER 80% OF SPORTS
NUTRITION COMES FROM
PROTEIN-BASED PRODUCTS.
THE HIGH-PROTEIN DIET TREND
PROMOTING HEALTH AND FITNESS
WILL ENSURE SPORTS PROTEIN
PRODUCTS WILL CONTINUE TO
LEAD THE INDUSTRY.
Source: International Euromonitor
Read more on pages 20 to 30
64%
OF ASIAN
CONSUMERS
BELIEVE THAT
SUPERFOODS
PROVIDE A
NATURAL WAY TO
PREVENT ILLNESS.
Source: Nielsen
6
Glanbia plc | Annual Report and Financial Statements 2017
Group Chairman’s Statement
FOCUSED ON
NUTRITION
Highlights of 2017
Good 2017 earnings growth;
Strategic evolution of the Group portfolio
with the creation of Glanbia Ireland and
acquisitions of Amazing Grass and Body
& Fit; and
Increase of total dividend payout ratio
to 25.3%.
Dear shareholder,
2017 has been a busy and successful year for Glanbia, with all divisions of
the Group delivering growth. Group revenue from continuing operations
was €2.4 billion, wholly-owned EBITA increased 3.6% to €283.2 million
(5.8% constant currency) and growth in pro-forma adjusted Earnings Per
Share was 8.3% (10.2% growth constant currency).
Strategic roadmap
We strive to meet the fast-changing expectations of our customers and
consumers by pursuing a growth and investment agenda in line with
our strategic roadmap. In 2017 we evolved the Group portfolio further
through the strategic acquisitions of Amazing Grass and Body & Fit
and further advanced discussions to form a new Joint Venture in
the US to build a large-scale cheese and whey facility. In addition,
we are particularly pleased with the creation of Glanbia Ireland –
a Joint Venture that now encompasses all of Glanbia’s primary dairy
and agribusiness activities in Ireland. These actions support our vision
of becoming one of the world’s top performing nutrition companies
trusted to enrich lives every day.
Progressive dividend policy
Our strategy of capital optimisation, strategic investment and driving
operational performance continues to create sustainable long-term
value for our shareholders. Glanbia is committed to a progressive
dividend policy and following a review of the Group’s dividend policy,
the Board decided to increase the dividend payout ratio to between
25% and 35%. The payout ratio is the percentage of annual pro-forma
adjusted Earnings Per Share paid in dividends. To bring the policy in
line with 2017 earnings the Board has approved the payment of a final
dividend of 16.09 cent per share bringing total annual dividend to 22.0
cent per share. This represents an increase of over 65% in the 2017
dividend payment versus prior year.
The Annual General Meeting (AGM) will be held on 25 April 2018 in
the Lyrath Estate Hotel, Old Dublin Road, Kilkenny, Ireland. Subject
to approval at the AGM, dividends will be paid on 27 April 2018 to
shareholders on the register of members as of 16 March 2018. Irish
withholding tax will be deducted at the standard rate where appropriate.
Governance and Board changes
We had a number of changes to the Board in 2017. We welcomed
Tom Grant, Brendan Hayes and Eamon Power to the Board. John
Murphy was also appointed as one of two Vice-Chairs of Glanbia plc
in place of Patrick Murphy who remains as a Non-Executive Director.
In addition, Jim Gilsenan, Matthew Merrick and Jer Doheny retired
as Non-Executive Directors. On 20 February 2018, Michael Keane
informed the Board that he will retire at the Company’s AGM in
April 2018. His replacement will be appointed by 30 June 2018.
I would like to take this opportunity to thank them for their contribution
and commitment over the last number of years. Good corporate
governance underpinned by an open and strong culture remains
fundamental to our success and ability to generate long-term
sustainable growth.
“We take the Board’s role in establishing
the culture and values of the organisation
very seriously and see it as a key attribute
to our success.”
Henry Corbally
Group Chairman
Glanbia plc | Annual Report and Financial Statements 2017
7
$5bn
The plant food category in the US is estimated to be worth
$5bn. In 2017 Glanbia acquired Amazing Grass which offers
a wide range of plant-based protein products.
Source: US Plant-based food association
As in prior years we continued in 2017 to consult with our key
shareholders and I would like to acknowledge their significant support.
Following this consultation, the Board has increased certain disclosures
in relation to the remuneration of our Executive Directors. The Board
also undertook an internal evaluation on the overall effectiveness
of the Board and the Committees, following which it was agreed
to reconstitute the membership of the Nomination and Governance,
Remuneration, and Audit Committees to comprise only Independent
Non-Executive Directors.
For more details please see the Nomination and Governance Report
on pages 76 to 79 and the Remuneration Report on pages 80 to 105.
Glanbia Ireland
On 2 July 2017, the Company’s largest shareholder Glanbia Co-
operative Society Limited (the ‘Society’) acquired 60% of the Dairy
Ireland business and related assets (Dairy Ireland). Glanbia plc retained
a 40% interest and as a result of the transaction Dairy Ireland was
integrated with Glanbia Ingredients Ireland and the combined new
Joint Venture was renamed Glanbia Ireland DAC. Post the transaction
the Society’s shareholding in Glanbia plc reduced to 31.5%. Consistent
with Board governance changes agreed by shareholders in 2012, the
Society’s representation on the plc Board was scheduled to reduce to
eight nominees by 2018 and seven by 2020. Arising from the creation
of Glanbia Ireland, the number of Society’s nominees will reduce to six
nominees by 2022.
Our people
Our values define how we operate. We have a diverse, engaged and
energetic group of employees, and on behalf of the Board, I would
like to offer all our employees my gratitude for their hard work and
dedication that delivered another successful year for the Group in 2017.
Conclusion
Being Focused on Nutrition means continuing to invest in our people,
our assets, our capabilities and our product offerings based on sound
strategic rationale. To further unlock the Group’s growth potential we
plan to further step-up investment and strengthen our capabilities to
support the growing market for our brands and ingredients and thereby
create sustainable long-term value for all our shareholders.
Henry Corbally
Group Chairman
Glanbia’s Core ValuesOur core values guide how we act, make decisions and interact with all our stakeholders.THE CUSTOMERS’ CHAMPIONPERFORMANCE MATTERSFIND A BETTER WAYWINNING TOGETHERSHOWING RESPECTStrategic acquisitionsGlanbia has an active acquisition and development pipeline focused on enhancing our portfolios across Glanbia Performance Nutrition and Glanbia Nutritionals. In Q1 2017 in line with our growth strategy, Glanbia acquired Amazing Grass and Body & Fit. Amazing Grass has a portfolio of organic and non-GMO plant-based nutrition brands. Amazing Grass participates in the fast growing plant-based nutrition, ‘Greens’ and ‘Super food’ categories in North America. Body & Fit provides GPN with a presence in the European Direct-To-Consumer (DTC) online channel. Both acquisitions are a strong strategic fit, extending the reach of GPN brands to new consumers and channels. 8
Glanbia plc | Annual Report and Financial Statements 2017
Group Managing Director’s Review
INVESTING
FOR GROWTH
Highlights of 2017
Eighth year of double-digit earnings
growth;
Good top line volume growth across
all business segments;
Successfully added Amazing Grass and
Body & Fit to our Glanbia Performance
Nutrition portfolio;
Reshaped the Group portfolio in Ireland
through the creation of the Glanbia
Ireland Joint Venture; and
Supported more than 1,000 executives,
managers and team leaders participation
in our ‘Leading the Glanbia Way’
development programme.
How did Glanbia perform in 2017?
We are pleased that our growth momentum continued in 2017
delivering an eighth year of double-digit earnings growth. 2017 also
marked a further evolution of our strategic journey with a reshaping of
the organisation in Ireland and the exciting acquisitions to the portfolio
in Europe and North America. As a Group with great people, strong
financial capability and strong ambition to continue to deliver better
nutrition to our customers and consumers, we are well placed for
future growth.
Where do you see Glanbia currently
in its strategic journey?
Over recent years we have restructured and reshaped the organisation
into a global nutritional business which is well positioned to benefit
from the consumer megatrends around health and wellbeing. We are
now an organisation with leading nutritional market positions, market
leading performance nutrition brands, global reach and a strong
balance sheet. We continue to focus on growth and have set out a
refreshed three-year strategy that reaffirms ‘better nutrition’ at our
core. Our refreshed strategy focuses on our three strategic pillars:
protecting and growing our core; selectively build and scale beyond
the core; and embed enablers across the business. We have translated
these strategic pillars into strategic priorities, leveraging our current
strengths with a deliberate emphasis on investment to drive top line
volume momentum in Glanbia Performance Nutrition (GPN) and
Glanbia Nutritionals (GN) augmented by selective M&A.
We aim to win in our markets by having an in depth understanding
of evolving consumer trends, by setting the industry bar for innovation
and by solving key consumer nutrition needs across our ingredient and
branded portfolios.
Further details of our strategy are on pages 14 to 17 of this report.
What were the main drivers of growth in 2017?
Growth was seen across the entire Glanbia portfolio in 2017. The
fundamental drivers of growth were good volume growth across our
consumer branded platforms and key nutritional ingredient solutions,
and volume and margin expansion in our Joint Ventures. Innovation
was an overarching theme, driving volume growth in GPN and in the
Nutritional Solutions component of GN in 2017. In GPN a strategic
decision taken in prior years to invest in extending the geographic
reach of our branded portfolio delivered strongly for the organisation
with strong growth in geographies such as EMEA, Asia and Oceania.
In Nutritional Solutions we continued to deepen our customer
relationships and expand our product offerings in both dairy and
non-dairy nutrition products. Our Joint Ventures achieved strong
growth in 2017 supported by relatively strong dairy markets. We
continue to develop both our existing and new customer propositions.
What are the current trends for Performance Nutrition?
GPN had another good year in 2017. For GPN, the overall story was one
of driving top line volume growth through innovation. Overall branded
revenue grew 15.2% for the year. Like-for-like branded revenue growth
was 6.3% with like-for-like volume growth of 8.0%. Having invested in
recent years to build the position of our brands and in-market capability
outside North America, we were particularly pleased with the strong
revenue growth in 2017 across key geographies such as EMEA, Asia
and Oceania.
Glanbia plc | Annual Report and Financial Statements 2017
9
“Our future growth journey will leverage
our current strengths with a deliberate
emphasis on investment to drive top line
volume momentum in the two key growth
pillars of Glanbia Performance Nutrition
and Glanbia Nutritionals augmented by
selective M&A.”
Siobhán Talbot
Group Managing Director
The market dynamics in North America were undoubtedly more
challenging as we are not completely insulated from the disruption
being experienced by some of our retail partners, particularly in the
specialty channel. We are responding very robustly to these challenges
to support our growth agenda. With the support of our retail partners
and consumers, our focus on innovation and extending our reach to
new formats, channels and consumers, we will drive continued growth
momentum in the GPN business.
Can you tell me about the acquisitions
of Amazing Grass and Body & Fit?
We evaluated a number of opportunities in the plant-based proteins
and super foods category and in the Direct-to-Consumer (DTC) space.
We are very excited about the acquisitions of Amazing Grass and Body
& Fit as they are a strong fit with our growth strategy. Amazing Grass is
a strong brand in the high-growth, on-trend food category of organic
green superfoods. It is a growing brand which complements our overall
portfolio, helping us to broaden our appeal to the health-conscious
lifestyle consumer seeking plant-based nutrition. Similar to thinkThin,
Amazing Grass is available across all channels in the US and we will be
investing behind it for future growth.
Body & Fit is more of a step-out acquisition for us and it brings a
whole new digital capability to the GPN organisation. Consumers of
performance nutrition have embraced the online channel in a number
of our markets and Body & Fit is a strong brand in that space in its
heartland of Benelux. Body & Fit is very complementary to our portfolio
and we intend to invest behind it going forward. By building our people
and system capabilities and using the brand experience, we can
leverage the platform to increase reach and deepen consumer
engagement across our entire brand portfolio.
How did Glanbia Nutritionals perform in 2017?
Overall GN had a good year driven by strong momentum in the
Nutritional Solutions component of the business. Cheese performance
was somewhat challenged by the dynamics in the US market, notably
around some supply and demand imbalances in particular cheese
formats. Our strong customer relationships helped mitigate the impact
of these challenges.
The Nutritional Solutions component continued to perform well, with
increased pricing and volumes and we had growth in both our dairy
and non-dairy based nutrition systems. A number of our customers
are expanding globally and we are very pleased to partner with them
on this journey. Our focus is on innovation and being a partner of
choice for our customers.
10
Glanbia plc | Annual Report and Financial Statements 2017
Group Managing Director’s Review continued
Glanbia opened a new R&D innovation centre in 2017.
Can you describe the Group’s approach to innovation?
We approach innovation through a number of lenses and our
innovation has always been collaborative, entrepreneurial and agile.
We opened a new GPN R&D Innovation Centre in Chicago in early
2017. The Chicago innovation centre brings our total number of global
R&D innovation centres to four, greatly enhancing our ability to develop,
commercialise, and scale-up new products with speed and effectiveness.
In 2017 we prioritised our focus on innovation and we were particularly
pleased with our developments in the Ready-to-Eat (RTE) platform. The
launch of Cake Bites under the Optimum Nutrition and thinkThin brands
exceeded expectations against the planned metrics. We also continued
to innovate around price points and formats to meet consumer demand
for a high quality product at an affordable price point. We will focus on
driving innovation both in the North American market and regionally
across key geographies.
In GN our product and innovation team have a long history of collaboration
with customers to develop innovative cheese and ingredient solutions.
Our customers rely on our R&D teams to provide a sophisticated portfolio
of ingredients that match the current market trends and meet consumer
demand for nutrition, taste, texture and flavour. GN’s innovation continues
to provide an advantage for our customers since many of the technologies
and ingredients used are unique to Glanbia. For example, in 2017 we built
upon our current offerings by developing intellectual property around clean
label cheese, increasing shelf-life stability of nutritional ingredients and new
innovations around protein delivery in nutritional bars.
Not only do we provide one of the best global ingredient portfolios, we
also show our customers how to use ingredients in developing innovative
food products. Our customers visit our Glanbia Nutritionals research
centres for rapid prototyping. The ability to go from concept to prototype
in a few days is considered a significant benefit in accelerating the
product development cycle and responding to market trends and
opportunities. We specialise in innovative products for use in healthy
snacks such as nutritional bars, Ready-To-Mix (RTM), Ready-To-Drink
(RTD), flavours, smoothies, protein cookies, bakery items, pre-mix
formulations and other formats.
It has been a significant year for the Joint Ventures.
How did they perform?
Our Joint Ventures are at the forefront of global dairy markets and
therefore performance improves when global dairy markets are
relatively stronger, as they were in 2017. This improved performance
was broad based across the Joint Ventures. Glanbia Cheese has a
very strong commercial position in mozzarella cheese in Europe and
continued to grow its relevance in that space. Southwest Cheese
is closely aligned to our US Cheese and whey strategy in GN and
the business continued to develop strongly with the 25% capacity
expansion, on schedule and on budget, for delivery in 2018. As we
have announced previously, our discussions in relation to a further
Joint Venture in Michigan are progressing well. We continue to plan
with our partners for this new cheese and whey facility to be
commissioned in 2020.
“ The execution of our strategy has
resulted in a stronger and more
focused portfolio and footprint,
which we will invest behind to deliver
long-term sustainable growth.”
TSR
Adjusted EPS (reported)
Adjusted EPS (constant currency)
Leading with purpose‘Leading the Glanbia Way’ is our global leadership development programme, which was created in response to feedback from our employee engagement survey. Built upon our purpose, vision and values, the programme focuses on leadership, impact, performance management, personal effectiveness, change management and supporting customer excellence. It aims to equip managers across the organisation with leadership skills and insights and to offer a tangible commitment to the personal development of Glanbia’s people. An executive programme in tandem is aimed at the Group’s leadership. More than 1,000 executives, managers and team leaders globally have participated in the programme in 2017, which runs over five distinct modules. Participants are also encouraged to run values exploration workshops within their teams to take the learnings from the programme back into the workplace. Feedback on the programme has been excellent so far. Coming together in cross-functional groupings allows participants to gather practical learnings from right across the organisation, fosters collaboration and sparks valuable conversations on the nature of leadership, performance management, personal impact and managing change. By fostering talent in a structured way across Glanbia, our people are empowered to lead with confidence and to deliver on our vision of being a top performing global nutrition group.Meadhbh Broderick, HR Associate and Dave Colgan, Transport Manager participate in a ‘Leading the Glanbia Way’ session in Dublin, Ireland. Glanbia plc | Annual Report and Financial Statements 2017
11
In 2018 the focus will be on volume-driven revenue growth. To achieve
this Glanbia will invest in further building the consumer brand franchise in
GPN, the solutions capability in GN and across the Group will continue
to support innovation, talent development and systems infrastructure
recognising the need for new skills and capabilities in an increasingly
digital age.
For 2018 Glanbia is targeting mid-to-high single digit like-for-like
volume growth in both the branded portfolio in GPN and the Nutritional
Solutions component of GN. Overall margins in both GPN and GN
are expected to be broadly in line with 2017 levels. Joint Ventures
are expected to deliver a reduced profit in 2018 versus prior year as a
result of more challenging dairy markets. On a pro-forma basis Glanbia
expects adjusted Earnings Per Share of the continuing Group to grow
between 5% to 8%, constant currency in 2018. Growth is expected to
be delivered in the second half of 2018 as comparative dairy dynamics
and planned investments will adversely affect performance in the first
half of 2018.
Siobhán Talbot
Group Managing Director
And of course, Glanbia Ireland is a new Joint Venture for the
organisation and we are very excited about its future opportunities.
We believe that Glanbia Ireland which is a combination of Dairy Ireland
and Glanbia Ingredients Ireland is strategically well placed to execute
growth that will benefit of all stakeholders.
The overall shape of the organisation positions us very well for 2018.
A significant element of our primary dairy activity is now conducted
with very good partners in the Joint Venture operations. Our model of
wholly-owned businesses across the ingredient solutions and branded
performance nutrition space complemented by strong Joint Ventures
in primary dairy processing is a model that we believe will continue to
deliver for our shareholders.
Glanbia’s values are very important to you.
How effective are they in driving strategy?
We are a values-led organisation. Our purpose, vision, and values provide
focus and direction for the organisation, and guide us every day in our
business interactions. They have informed our refreshed strategy and
underpinned our performance.
Our people and their contribution and commitment drive our success as
a business. We take great pride in the depth of their commitment. 6,600
people, across 32 countries work in Glanbia and I would like to thank them
all for their contribution in 2017. Their dedication delivered another strong
year for Glanbia and ensures that we are well positioned for the future.
What are the priorities for 2018 and beyond?
The execution of our strategy to-date has resulted in a stronger and
more focused product portfolio and geographic footprint, which we
will invest behind to deliver long-term sustainable growth. In 2017
Glanbia refreshed its strategy; reaffirming better nutrition at its core
and restating the ambition to drive long-term sustainable growth.
Glanbia generates a significant portion of its earnings in US Dollar
and reports in Euro. We set our targets and monitor our annual and
strategic performance on the basis of local currencies. We therefore
guide the market on the basis of constant currency recognising that
the reported result will vary dependent largely on the translation rate
between the US Dollar and the Euro.
40
30
20
10
0
-10
11.9%
8.0%
10.1%
10.3%
29.4%
10.6%
11.2%
10.8%
10.2%
8.3%
2013
2014
2015
2016
2017
TSR
Adjusted EPS (reported)
Adjusted EPS (constant currency)
12
Glanbia plc | Annual Report and Financial Statements 2017
Business Model
We have built a resilient business
model that enables the business
to prosper and grow.
We leverage our strategic assets
and distinctive capabilities to
create world-leading performance
and lifestyle nutrition brands and
innovative nutritional and functional
ingredients. We benefit from the
diversity of our end-users, broad
product range and our wide
geographic spread. We strive to
create sustainable value for all our
stakeholders: our shareholders,
our employees, our consumers,
our customers and the communities
where we operate.
Our vision is to be one of the world’s
top performing nutrition companies,
trusted to enrich lives every day.
IIRC Capitals
This key provides a mapping to
the ‘capitals’ of the International
Integrated Reporting Councils
(IIRC) framework.
F Financial
H Human
M Manufactured
I Intellectual
S Social
N Natural
You can find out more at:
www.theiirc.org
Related information
Our strategy
The main elements of our strategy
are outlined on pages 14-17.
Our principal risks
Our approach to risk management
and our principal risks are described
on pages 47-51.
Governance
How we govern the group
is described from pages 57-63.
Develop
We apply our deep sector knowledge,
collaborative approach and innovative
thinking to turn raw ingredients into
branded consumer products and high-
quality functional ingredients and products
for our customers and consumers
worldwide. Our innovative mindset and
strong relationships foster a culture of
co-creation for mutual benefit.
How we do it
Business-to-Consumer (B2C)
Innovation sits at the heart of our business as
we continuously develop new performance and lifestyle
nutrition products. Our brands include a range of formats
such as powders, drinks, capsules, tablets and bars.
We manufacture substantially all of our own brands.
Business-to-Business (B2B)
Our Nutritional Solutions business is a leading marketer
of advanced-technology whey protein, specialist
vitamin and mineral blends, plant-based ingredients
and functional beverages. We are the leading
manufacturer and marketer of American-style
cheddar cheese in the US.
Direct-to-Consumer (D2C)
The acquisition of Body & Fit will enable us to build
a platform for our online capability and develop powerful
e-commerce and digital tools to support our
performance nutrition brands.
Inputs
Disciplined capital management F
We display a strong track record of efficient
capital allocation and portfolio management.
We deploy a variety of structures including
Joint Ventures which have been, and remain,
critical to sustainable long-term growth.
Talent development H
People lie at the heart of the business. With
6,600 employees, we aim to attract, retain
and develop high-quality employees through
an integrated approach to talent management
and career development.
Operational excellence M
We have a proven ability, demonstrated over
decades, of running large-scale manufacturing
facilities. We have 27 production facilities
including our joint ventures.
Innovation I
With four R&D innovation centres world-wide,
we focus on customer-led, science-backed
innovation that produces better solutions,
better products and better outcomes for
our customers and consumers.
Relationship focused S
We work as a proactive and long-term
business partner with our customers:
delivering nutritional solutions based on
market foresight and contributing to better
business for our customers.
Natural resources N
We source clean, traceable ingredients.
We are dedicated to achieving high-quality
products to meet customer food safety
and quality standards. We are focused
on regulatory compliance and good
environmental stewardship.
THE CUSTOMERS’
CHAMPION
PERFORMANCE
MATTERS
Glanbia plc | Annual Report and Financial Statements 2017
13
Deliver
Grow
We source clean ingredients, such as milk
and grains, from the primary producers.
In addition we source inputs from other
food manufacturers across the globe.
This requires an in-depth understanding
of our raw ingredients markets and the
development of long-term, mutually
beneficial relationships with producers
to secure supply.
We are the global leader in the
performance nutrition industry with a
portfolio of eight leading consumer
brands. As a nutritional solutions provider
in the B2B arena, we commercialise
specialty nutritional and functional
ingredients and precision premixes
to meet our customer needs.
How we do it
Solid supply chains
Through worldwide facilities that meet the most stringent
standards and our supplier partnerships around the
globe, we ensure flexibility, responsiveness and solid
sustainable supply chains.
Innovation
Supported by our four state-of-the-art R&D innovation
centres, we create greater value from our pool of raw
materials through collaborative long-term partnerships,
customer focused innovation and investment in
consumer-facing products and brands in high-growth
markets. This enables us to drive our portfolio towards
added value, and more complex and higher margin
brands and ingredients.
How we do it
B2C
Each of our performance nutrition brands has its own
consumer appeal. We are in the top three performance
nutrition brands in over 20 countries.
B2B
Our portfolio of both nutritional ingredients and cheese
gives us strong market reach and customer relevance.
We work hand-in-hand with our customers to develop
products that exceed their expectations.
D2C
Our new digital platform will enhance engagement with
our consumers at multiple touch points throughout their
purchasing decision journey. Through our brands we will
continue to strive to connect with consumers through
creative excellence and new digital layers of services.
Outputs
Communities
We partner with a number of
charities and encourage our
people to engage in volunteer
work. Our operations also create
opportunities for local businesses.
Committed people
We attract and retain talented
employees through management
training and development
programmes.
Loyal customers and
consumers
We deliver high quality brands
and nutritional ingredients for
our customers and consumers
which enable them to achieve
their performance goals.
Engaged shareholders
We have a progressive dividend
policy and have in 2017 increased
the total dividend payment by over
65% when compared with the
previous year.
Environmental
awareness
As a global nutrition company
we are conscious of the impact of
our organisation on the broader
community. In 2017 we completed
a ‘Carbon Trust’ review of our
sustainability strategy.
Underpinned by our values
FIND A BETTER
WAY
WINNING
TOGETHER
SHOWING
RESPECT
14
Glanbia plc | Annual Report and Financial Statements 2017
Our Strategy
SHAPING A
PLATFORM FOR
STRATEGIC GROWTH
Our purpose:
Our vision:
Aligned to our purpose and vision, our three
strategic pillars set the broad roadway for our
future growth agenda. We have further refined
these pillars into strategic priorities and identified
enablers as we drive forward to harness Glanbia’s
global growth potential.
Related information
Read more about our Business Model on page 12
Read more about our Strategy in Action – GPN thinkThin
case study on page 22
Read more about our Strategy in Action – GN Innovation
in Healthy Snacking on page 26
Read more about our Principal Risks on pages 47-51
Global Macro Trend
Evolving consumer whose
expectations are focused on
health, nutritional requirements,
immediacy and transparency.
Strategic Enablers
We are a growth company
and will win in the market
place by using our strengths
as strategic enablers.
Consumer needs-
driven ingredient
and brand innovator
Every ingredient needed
to fuel better nutrition.
Glanbia plc | Annual Report and Financial Statements 2017
15
To deliver better nutrition for every step of life’s journey
To be one of world’s top performing nutrition companies
trusted to enrich lives every day
Health and
wellness
On-the-go
food and
beverages
Digitally
connected
Clean
labelling
Have a differentiated understanding of evolving consumer trends
Leverage Glanbia’s insight and scale in consumer performance nutrition and value-added ingredients
to develop products which delight our consumers and customers
Build technical know-how on a secure supply base
Rigorous cost management to fuel and fund growth
Attract, develop, and retain the best talent to address the identified growth opportunities
Strategic pillars
Protect and grow
the core
Selectively build and
scale beyond the core
Embed enablers
across the business
Growth will be an intentional journey
Concentrate our focus in growing markets
where we have market leading capability
and right to win
Invest in innovation, digital capability and
selective M&A or partnerships
to drive growth
Invest further in insights, technology,
and innovation to create and capture
growth opportunities
Build scale internationally
Engage the consumer online
Invest in capability to capture
market opportunities
Capture efficient growth by leveraging
shared assets where feasible
Invest in our ability to have a personal
link to our consumers
Maintain and grow our
global leadership in
performance nutrition
Sustain current, and drive
further ingredient market
leadership in nutritional
ingredients
Grow through organic
investment programme and
acquisition/partner with
complementary businesses
Develop talent, culture
and values in line with
our growing global scale
Strategic priorities
16
Glanbia plc | Annual Report and Financial Statements 2017
Our Strategy continued
CREATING SUSTAINABLE
LONG-TERM VALUE
STRATEGIC PILLARS
Protect
and grow
the core
Strategic priority
Maintain and grow
our global leadership in
performance nutrition
Selectively
build and
scale beyond
the core
Strategic priority
Sustain current and drive
further ingredient market
leadership in nutritional
ingredients
Strategic priority
Grow through organic
investment programme and
acquisition/partner with
complementary businesses
Embed
enablers
across the
business
Strategic priority
Develop talent, culture
and values in line with
our growing global scale
2017 progress
– GPN EBITA growth 7.0% (constant currency);
– GPN branded revenue growth 15.2%, like-for-
like revenue growth 6.3% like-for-like volume
growth 8.0% (all constant currency);
– Strong growth in key international geographies;
– Acquired Amazing Grass and Body & Fit brands
extending GPN’s consumer and channel reach;
and
– Commissioned GPN R&D innovation centre to
enhance our product offering and capabilities
and drive further growth.
2017 progress
– GN EBITA growth 4.1% (constant currency);
– GN volume growth in Nutritional Solutions 7.2%;
– Deepened our relationships with key customers
as a partner of choice for a comprehensive
range of dairy and plant-based solutions across
a broad range of categories; and
– Informed by market, customer and consumer
insight, continued to innovate in the solutions
space to exceed the expectations of our
customers.
2017 progress
– Created Glanbia Ireland as a new 40:60 Joint
Venture with Glanbia Co-operative Society
Limited integrating all of the primary dairy
and agri-business of Glanbia in Ireland;
– Acquired Amazing Grass and Body & Fit
brands to complement the GPN performance
and lifestyle portfolio;
– Progressed plans to build a large-scale cheese
and whey plant in the State of Michigan, US
through a new Joint Venture with GN; and
– Completed capital spend of €72.5 million.
2017 progress
– Continued to embed employee focused
purpose, vision and values across all levels of
the Group, with an employee centric approach;
– Commenced a HR transformation programme
focusing on talent acquisition; and
– Deepened linkages between career pathways,
values performance and reward across the
Group.
Looking forward
Key risks
Link to remuneration
– Drive branded volume and revenue
– A deterioration in economic growth or
– Linked to short and long-term incentive
growth in key geographies;
consumer confidence;
plans for GPN Executive Director and
– Commercialise innovation across
– High competitor promotional activity
management team.
consumer usage occasions, brands,
resulting in additional margin pressure;
formats, channels and geographies;
– Channel shifts by consumers; and
– Deepen consumer franchise: and
– Develop DTC platform capabilities.
– Potential pace of change in consumer
behaviour relative to business capability.
– Operating Cash Flow
Key metrics:
– EBITA growth
– Return on Capital Employed
– Branded like-for-like revenue growth
– Innovation rate
– Talent development
Looking forward
Key risks
Link to remuneration
– Drive innovation agenda across all
– A failure to adapt to new market
– Linked to short and long-term incentive
platforms;
challenges or innovate at a faster pace
plans for GN Executive Director and
– Further develop and support customer
than our competitors;
management team.
growth globally; and
– The loss or significant deterioration in
– Continue to explore opportunities to grow
commercial terms with one of our key
value-added cheese and nutritional
solutions through organic growth
customers; and
– Competitor activity.
acquisition and joint venture investments.
Key metrics:
– EBITA growth
– Operating Cash Flow
– Return on Capital Employed
– Volume growth in Nutritional Solutions
– Talent development
Looking forward
Key risks
Link to remuneration
– Commission and commercialise the
– The Group may fail to identify suitable
– Linked to short and long-term incentive
25% capacity expansion of Southwest
acquisition targets or conduct effective
plans for all Executive Directors and
Cheese in New Mexico, US;
due diligence;
members of the Group Operating
– Finalise Joint Venture plans to build a
– Management’s attention may be diverted
Executive.
large-scale cheese and whey plant in
to acquisition integration efforts with a
Michigan, US; and
resulting impact on organic growth
Key metrics:
– Continue to evaluate strategic M&A and
objectives; and
– Group adjusted Earnings Per Share
alliances across all activities of the Group.
– Joint Venture expansion agreements may
growth
be more difficult to complete or implement
– Group Return on Capital Employed
than anticipated.
– Group Operating Cash Flow
– Total Shareholder Return
Looking forward
Key risks
Link to remuneration
– Accelerate focus on talent, succession
– Competitive dynamics potentially
– Linked to short-term incentive plan for all
and leadership development across
impacting ability to recruit key new
Executive Directors and members of the
the organisation;
talent in areas such as DTC; and
Group Operating Executive.
– Invest in hiring new skills and capability
– Any failure to invest in developing or
to underpin growth ambitions; and
– Continued focus on embedding our
values across the Group.
retaining our people will impact the
delivery of our strategic objectives.
Key objectives:
– Leadership and talent development plans
– Succession plans for key roles
– Recruitment and retention plans
Glanbia plc | Annual Report and Financial Statements 2017
17
STRATEGIC PILLARS
Strategic priority
Maintain and grow
our global leadership in
performance nutrition
Strategic priority
Sustain current and drive
further ingredient market
leadership in nutritional
ingredients
Strategic priority
2017 progress
Grow through organic
investment programme and
acquisition/partner with
complementary businesses
Strategic priority
Develop talent, culture
and values in line with
our growing global scale
2017 progress
– GPN EBITA growth 7.0% (constant currency);
– GPN branded revenue growth 15.2%, like-for-
like revenue growth 6.3% like-for-like volume
growth 8.0% (all constant currency);
– Strong growth in key international geographies;
– Acquired Amazing Grass and Body & Fit brands
extending GPN’s consumer and channel reach;
and
– Commissioned GPN R&D innovation centre to
enhance our product offering and capabilities
and drive further growth.
2017 progress
– GN EBITA growth 4.1% (constant currency);
– GN volume growth in Nutritional Solutions 7.2%;
– Deepened our relationships with key customers
as a partner of choice for a comprehensive
range of dairy and plant-based solutions across
a broad range of categories; and
– Informed by market, customer and consumer
insight, continued to innovate in the solutions
space to exceed the expectations of our
customers.
– Created Glanbia Ireland as a new 40:60 Joint
Venture with Glanbia Co-operative Society
Limited integrating all of the primary dairy
and agri-business of Glanbia in Ireland;
– Acquired Amazing Grass and Body & Fit
brands to complement the GPN performance
and lifestyle portfolio;
– Progressed plans to build a large-scale cheese
and whey plant in the State of Michigan, US
through a new Joint Venture with GN; and
– Completed capital spend of €72.5 million.
2017 progress
– Continued to embed employee focused
purpose, vision and values across all levels of
the Group, with an employee centric approach;
– Commenced a HR transformation programme
focusing on talent acquisition; and
– Deepened linkages between career pathways,
values performance and reward across the
Group.
Looking forward
– Drive branded volume and revenue
Key risks
– A deterioration in economic growth or
growth in key geographies;
consumer confidence;
– Commercialise innovation across
– High competitor promotional activity
consumer usage occasions, brands,
formats, channels and geographies;
– Deepen consumer franchise: and
– Develop DTC platform capabilities.
resulting in additional margin pressure;
– Channel shifts by consumers; and
– Potential pace of change in consumer
behaviour relative to business capability.
Looking forward
– Drive innovation agenda across all
Key risks
– A failure to adapt to new market
platforms;
– Further develop and support customer
growth globally; and
– Continue to explore opportunities to grow
value-added cheese and nutritional
solutions through organic growth
acquisition and joint venture investments.
challenges or innovate at a faster pace
than our competitors;
– The loss or significant deterioration in
commercial terms with one of our key
customers; and
– Competitor activity.
Link to remuneration
– Linked to short and long-term incentive
plans for GPN Executive Director and
management team.
Key metrics:
– EBITA growth
– Operating Cash Flow
– Return on Capital Employed
– Branded like-for-like revenue growth
– Innovation rate
– Talent development
Link to remuneration
– Linked to short and long-term incentive
plans for GN Executive Director and
management team.
Key metrics:
– EBITA growth
– Operating Cash Flow
– Return on Capital Employed
– Volume growth in Nutritional Solutions
– Talent development
Looking forward
– Commission and commercialise the
Key risks
– The Group may fail to identify suitable
25% capacity expansion of Southwest
Cheese in New Mexico, US;
acquisition targets or conduct effective
due diligence;
– Finalise Joint Venture plans to build a
large-scale cheese and whey plant in
Michigan, US; and
– Continue to evaluate strategic M&A and
alliances across all activities of the Group.
– Management’s attention may be diverted
to acquisition integration efforts with a
resulting impact on organic growth
objectives; and
– Joint Venture expansion agreements may
be more difficult to complete or implement
than anticipated.
Link to remuneration
– Linked to short and long-term incentive
plans for all Executive Directors and
members of the Group Operating
Executive.
Key metrics:
– Group adjusted Earnings Per Share
growth
– Group Return on Capital Employed
– Group Operating Cash Flow
– Total Shareholder Return
Looking forward
– Accelerate focus on talent, succession
and leadership development across
the organisation;
– Invest in hiring new skills and capability
to underpin growth ambitions; and
– Continued focus on embedding our
values across the Group.
Key risks
– Competitive dynamics potentially
impacting ability to recruit key new
talent in areas such as DTC; and
– Any failure to invest in developing or
retaining our people will impact the
delivery of our strategic objectives.
Link to remuneration
– Linked to short-term incentive plan for all
Executive Directors and members of the
Group Operating Executive.
Key objectives:
– Leadership and talent development plans
– Succession plans for key roles
– Recruitment and retention plans
18
Glanbia plc | Annual Report and Financial Statements 2017
Key Performance Indicators
FOCUSED ON RESULTS
The Group has a range of key performance indicators (KPIs) which are used to monitor Group performance, operations and measure progress
against the key strategic objectives. The KPIs set out below are also a key element of the remuneration arrangements of our Executive Directors
and senior executives. In 2017 two new KPIs were added: Dividend payout ratio and Environmental Health and Safety. In addition to the primary
KPIs identified below, the Group and Business Units have a range of KPIs which assist in monitoring our performance with customers, supplier
performance, environmental targets and employee engagement. Further details on a number of these KPIs are set out on pages 36 to 43.
Definitions of KPIs are contained in the glossary on pages 212 to 222.
REVENUE FROM CONTINUING
OPERATIONS
€2.4bn (2016: €2.2bn)
Strategic relevance
Revenue growth is a key indicator of how
Glanbia is succeeding in developing the
Group through its ongoing investment
and acquisitions programme.
2.4
2.2
2.8
2.5
2.4
In addition to the overall revenue for the
Group there are a number of key components
of Group revenue which are actively monitored
to provide greater insight into markets,
opportunities and performance of the
Business Units.
2017
2016
2015
2014
2013
EBITA1,2
€283.2m (2016: €273.3m)
2017
2016
2015
2014
2013
EBITA MARGIN
283.2
273.3
208.6
187.7
175.8
11.9% (2016: 12.2%)
2017
2016
2015
2014
11.9
12.2
9.8
8.2
Strategic relevance
EBITA from continuing operations pre-
exceptional items is a measure of the trading
profitability of the wholly-owned businesses
within 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.
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.
PRO-FORMA ADJUSTED EARNINGS
2013
PER SHARE 1,2
7.9
87.11c (2016: 80.40c)
2017
2016
2015
2014
2013
87.11
80.40
79.14
61.16
55.46
Strategic relevance
Pro-forma 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.
Following the disposal of the Dairy Ireland
segment in the year the Group adopted
a pro-forma EPS calculation to ensure a
like-for-like comparison of the continuing
operations, accounting for Dairy Ireland as
part of the Glanbia Ireland Joint Venture in
current and prior year comparatives.
Performance
In 2017, revenue from continuing operations
was €2.4 billion (2016: €2.2 billion), up 7.0%
reported, and 9.2% constant currency on
2016. Revenue growth on prior year was
driven by volume increases of 5.3% driven by
Nutritionals Solutions within GN and branded
revenue growth within GPN, price benefit of
0.2% primarily driven by higher dairy markets
and 3.7% benefit from acquisitions of Amazing
Grass and Body & Fit within the GPN segment.
Performance
EBITA was €283.2 million in 2017, up 3.6%
reported and up 5.8% constant currency
on 2016.
Performance
EBITA margin in 2017, was 11.9%, down
30 basis points on 2016. 2017 saw a slight
contraction in EBITA margins which was
driven primarily by a rise in input costs.
Performance
Pro-forma adjusted EPS was 87.11 cent,
up 8.3% reported, 10.2% constant currency
on 2016.
Glanbia plc | Annual Report and Financial Statements 2017
19
OPERATING CASH FLOW 1
€148.0m (2016: €354.5m)
2017
2016
2015
2014
2013
148.0
206.2
139
354.5
281.4
RETURN ON CAPITAL EMPLOYED 2
13.4% (2016: 13.9%*)
2017
2016
2015
2014
2013
13.4
13.9
13.9
13.4
14.2
Strategic relevance
Operating Cash Flow (OCF) 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.
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.
Performance
OCF was €148.0 million in 2017 which
represents a decrease of €206.5 million on
2016. The adverse performance compared to
last year is primarily driven by negative working
capital movements of €170.8 million in the year.
Negative working capital movements are
largely due to negative receivables movements
of €149.9 million, of which €73.4 million relates
to Dairy Ireland in the first half of the year.
Performance
The ROCE in 2017 decreased by 50 basis
points to 13.4% (2016: 13.9%). This was
primarily due to the growth in reported
EBITA, which was more than offset by the
near-term dilutive effect of recent acquisitions
and investment in working capital.
* Prior year number restated to account for impact of
deferred tax. Prior year reported number was 12.9%.
TOTAL SHAREHOLDER RETURN 2
-4.8% one year
(+18.9% three years)
300
200
Glanbia
STOXX
100
Dec 12
Dec 17
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
over the same time period.
Performance
Glanbia’s TSR in 2017 was a negative 4.8%.
TSR over the three-year period of 2015 to 2017
was 18.9% and five-year TSR was 88.2%.
Glanbia’s share price at the end of the financial
year was €14.90 (2016: €15.78). The STOXX
Europe 600 Food and Beverage Index, which
is a key benchmark for remuneration purposes,
increased by 10.4% in 2017.
DIVIDEND PAYOUT RATIO
25.3% (2016: 16.6%)
65% increase in
total dividends
Strategic relevance
Dividend payout ratio reflects shareholder
return via dividends as a percentage of
pro-forma adjusted EPS in the period. The
revised dividend policy aims for a dividend
payout ratio of between 25% and 35%
of pro-forma adjusted EPS.
Performance
Based on a final dividend of 16.09c per share,
total dividends for the year amount to 22.0 cent
per share which equates to a 25.3% dividend
payout ratio of pro-forma adjusted EPS. This
represents a 65% increase in total dividend
versus 2016 and a return of €65.1 million to
shareholders from 2017 earnings.
ENVIRONMENTAL HEALTH
AND SAFETY
Objective
Maintain the highest possible global safety
standards using sites with no Lost Time
Case (LTC) as the key benchmark.
Strategic relevance
The health and safety of our employees is
inherent in our Glanbia values and is reflected
in our organisational goal of ‘Zero Harm’.
LTC frequency rate is an established global
measure of safety performance and Glanbia
has a goal of zero LTC.
See pages 44-51 for more information
on Environmental Health and Safety.
GLANBIA RISK MANAGEMENT
SYSTEM (GRMS)
Objective
Generate heightened operational risk
awareness to help protect the safety
of our people, the wider community
and the environment.
See pages 44-51 for more information
on Risk Management.
Strategic relevance
Risk management is a key focus point for
the Group. GRMS is the operational risk
management system in place across the
Group. It covers a number of key risk areas
with assessment and ranking levels based
on international risk management standards.
The annual on-site assessments are
conducted by an independent third party to
help drive a continuous improvement culture
across our sites with each individual site
awarded a Level 1 to Level 5 overall score.
Performance
In 2017, 50% of our global sites achieved our
target of zero LTC reported. 30% of our sites
celebrated two or more continuous years
without a recorded LTC. An analysis of the
specific drivers behind LTCs reported was
performed, leading to the development
and the implementation of a number of
improvement measures.
Performance
All locations maintained or improved their
individual site rating from the prior year. In
addition, recommendations were developed by
the independent assessor to address the key
improvement opportunities and management
progress against these recommendations will
be centrally monitored.
1. Performance condition of Glanbia’s Annual Incentive Scheme.
2. Performance condition of Glanbia’s Long Term Incentive Plan.
20
Glanbia plc | Annual Report and Financial Statements 2017
Operations Review
Glanbia Performance Nutrition
INVESTING IN A WORLD LEADING
BRANDED PORTFOLIO
€169.7
million
EBITA
FOCUSED
ON NUTRITION
INVESTING IN
OUR BRANDS
€1.1 billion
Revenue
Glanbia Performance Nutrition is the global leader in
the performance nutrition industry. The brand portfolio
is comprised of Optimum Nutrition (ON), BSN, ABB,
Isopure, Nutramino, thinkThin, Amazing Grass and
Body & Fit and each brand has its own brand essence.
Our mission is to inspire people everywhere to achieve
their performance and healthy lifestyle goals. We produce
the full range of performance nutrition products with broad
consumer appeal; from hardcore fitness enthusiasts to
those seeking a healthier lifestyle. We are the market
leader in innovation and new product development.
Glanbia plc | Annual Report and Financial Statements 2017
21
Hugh McGuire
CEO Glanbia
Performance
Nutrition
REVENUE
€1.1 billion
+13.7% constant currency
Glanbia Performance Nutrition
€m
Revenue
EBITA
EBITA margin
Re-
presented
FY 2016*
Constant
Currency
Change
Change
+11.3% +13.7%
1,007.5
+7.0%
+4.8%
162.0
-100bps
16.1% -100bps
FY 2017
1,121.1
169.7
15.1%
* EBITA for GPN and GN for 2016 have been adjusted down by €0.5m reflecting ongoing
corporate costs previously allocated to the Dairy Ireland segment but which will be allocated
to GPN and GN going forward. This is to ensure a like-for-like comparison and reflective of
the allocations received in 2017 and going forward.
All commentary is on a constant currency basis.
Business Performance
Glanbia Performance Nutrition (GPN) delivered a good performance in
2017 with an overall increase in revenue of 13.7%. Volume increased by
7.1% as a result of good branded growth. The acquisitions of Amazing
Grass and Body & Fit drove revenue growth of 8.1% and there was a
net price decline of 1.5% due to investment in brand development and
innovation launches. Like-for-like branded revenue growth versus prior
year was 6.3% and like-for-like branded volume growth was 8%. GPN
EBITA in 2017 was €169.7 million which was a 7.0% increase on the prior
year with EBITA margin of 15.1%, down 100 basis points largely due to
the net impact of higher year-on-year input costs and increased brand
investment. Branded revenue growth was driven by the continued
expansion of the online, food, drug, mass and club channels in North
America and strong in-market execution and share gains in EMEA and
LAPAC. As expected momentum improved in the North American market
in quarter four 2017, driven by improved seasonal uplift relative to the
prior year. Innovation was also a key element of branded growth with
the recent launches of ON Cake Bites and thinkThin plant-based bars
both performing well. As a result of recent investments in geographic
development, innovation and acquisition, GPN has navigated a channel
shift that has occurred in the category and has in place a portfolio of
brands and product formats to serve performance and lifestyle consumer
occasions across all channels on a global basis.
OUR BRANDS
Glanbia Performance Nutrition’s portfolio is comprised
of eight brands – Optimum Nutrition (ON), BSN, Isopure,
Nutramino, ABB, thinkThin, Amazing Grass and Body & Fit.
Our products are sold in over 100 countries and we are in the
top three performance nutrition brands in over 20 countries.
22
Glanbia plc | Annual Report and Financial Statements 2017
Operations Review continued
Glanbia Performance Nutrition
Global Market Trends
Our markets continue to evolve as today’s busy consumers want to stay
fit and healthy. Underlying this in many markets across the globe, is a
growing focus on active lifestyles as consumers become more educated
about the benefits of a health and fitness lifestyle and governments play
an increasingly active role in encouraging and sponsoring healthy living
initiatives among their populations, especially in emerging markets. To
fuel the demands of their on-the-go lifestyle, consumers are also looking
for functional foods and beverages that are high in protein, sustainable,
good-tasting and in an easy-to-use format. The shift from traditional
three-meals a day lifestyle continues apace, with snacking and
convenience playing a critical role in everyday routines. There is also
greater awareness of the benefits of good nutrition across ages and
genders. As people live longer they are looking to understand specific
nutritional and fitness plans to support their lifestyles whatever their age.
Finally, digital consumerism has heightened expectations for
individualised nutrition and fitness plans. The demand for digital
engagement offers significant opportunities in the performance
nutrition market.
Our Consumers
Driven by these macro trends we are seeing three broad groups of
consumers who are active in the performance and lifestyle nutrition
category. The expectations of these consumers are holistic, multi-
dimensional and intertwined. The first group is the core sports-nutrition
consumer, whose main motivation is building muscle mass. They are
likely to visit the gym more than five times per week. This group is highly
influential in providing advice for those less knowledgeable in performance
nutrition. The second group are active lifestyle consumers, for whom
exercise is an important lifestyle choice that they take part in three or four
times per week. This group is most interested in improving their sports
performance and building lean muscle. The third group are more relaxed
‘keep-fitters’, a large cohort which is growing in numbers, they are aspiring
to a healthier lifestyle especially through nutrition and new on-the-go
convenient formats like bars and drinks.
Channel Mix
GPN has expanded rapidly in the past decade through innovation
and acquisitions. This has resulted in a diversified channel mix
oriented around the full spectrum of performance-orientated to
lifestyle consumers. In 2017 total revenues for GPN were €1,121 million.
Of this 30% reached our consumers via distributors. We work closely
with distributors as key partners in many countries including where
the category is less mature or the route-to-market is complex. As a
consequence GPN’s products are distributed to and sold in over 100
countries and we have a direct presence in 22 countries worldwide.
Online was one of GPN’s fastest growing channels in 2017 and is a key
driver of category growth. The online channel represented 26% of GPN
2017 revenues. We have invested in developing our digital marketing
capability and also acquired Body & Fit, a Direct-to-Consumer (DTC)
brand, in 2017. This further augments GPN’s presence online. Food,
Drug, Mass and Club retailers (FDMC) represented 16% of GPN’s 2017
revenues. This has become an important channel for the Nutramino,
thinkThin and Amazing Grass brands. GPN products in this channel
are typically in ready-to-consume formats such as bars, snacks and
drinks. FDMC is also predominantly where lifestyle consumers
purchase GPN brands.
Finally the Specialty channel accounted for 28% of GPN’s 2017
revenues. Specialty retail remains a key channel for performance-
oriented consumers and in many cases consumers rely on store
expertise to assist in product selection. As a result Specialty is an
important channel for innovation where new products are typically
trialled by consumers.
Strategy In Action
94% OF
AMERICAN
CONSUMERS
SNACK ONCE
A DAY
Source: Mintel
thinkThin Innovating in the nutrition and food space means having to constantly evaluate ingredient and food sources. With growing numbers of flexitarians and consumers actively incorporating plant-based foods in their meal, the US plant foods industry is now estimated to be worth $5bn. In 2017, thinkThin, a leader in creating nutritious, protein rich foods, launched a range of plant-based protein products spanning from high protein bars to protein powders. thinkThin’s unique understanding of the best taste combinations of plant-based sources means we deliver category leading nutritionals and the indulgent flavours consumers expect and enjoy. In 2017 thinkThin launched:• a plant-based Sea Salt Almond Chocolate High Protein Bar; and• a plant-based Chocolate Mint High Protein Bar.In addition to delivering on both elevated flavour and nutritional profiles, each of the company’s new plant-based high protein bars and protein and probiotic powder mixes are also crafted with no soy ingredients, are GMO-free, gluten free and vegan-friendly. Glanbia plc | Annual Report and Financial Statements 2017
23
Regional Distribution
A core part of GPNs strategy is to grow its business beyond North
America. Significant progress has been made on this strategy and in
2017 38% of total revenues were outside North America. Key countries
where GPN experienced strong growth included the UK, Australia, India,
Brazil, China and France. Through innovation and digital development
we plan to further harness the strong growth potential outside North
America. We will continue to develop new products which are regionally
relevant while utilising the brand equity and heritage of the GPN portfolio.
In 2017 GPN acquired the Body & Fit brand in Europe, an exciting
addition to the portfolio and we also continue to work with other global
online platforms to participate in the fast growing online channel.
Education – Fit India and Fit Malaysia
As Governments increasingly regulate foods and beverages regarded
as unhealthy, they are creating a favourable environment for nutrition that is
focused on health and wellbeing. GPN has partnered with the Indian and
Malaysian governments offering Fit India and Fit Malaysia initiatives
which are designed to help consumers in both countries understand the
benefits of a healthy lifestyle. Through the Optimum Nutrition brand, GPN
provides detailed classroom education programmes to retailers and
consumers which are then supported by in-market sampling, education and
workout programmes that come alive through a mobile vehicle tour.
Focused on Growth
GPN remains focused on growth and in 2018 we will be investing in
our brands, innovation, systems and organisational infrastructure to
maintain our momentum.
Hugh McGuire
CEO Glanbia Performance Nutrition
GPN 2017 Revenue
GPN by Channel
Online retailers (26%)
Distributors (30%)
Specialty (28%)
FDMC (16%)
GPN by region
North America (62%)
Rest of World (38%)
26%
THE ONLINE
CHANNEL
PERCENTAGE OF
GPN’S REVENUES
IN 2017
BODY & FITThe acquisition of Body & Fit in March 2017 brings a new capability to GPN by expanding our offering with powerful digital connectivity and capabilities. Today’s consumers are using a variety of platforms to monitor, maintain and improve their health and wellbeing. Consumer connectivity and demand for better assortment, value and engagement through an omnichannel experience are some of the drivers behind this acquisition. Body & Fit already has a strong presence in the Benelux region and building on this position, we aim to establish a truly global platform for consumer engagement, education and GPN branded products. ON Cake BitesIn 2017 Optimum Nutrition Cake Bites disrupted the sports nutrition Ready-to-Eat (RTE) category with our unique combination of indulgent taste, macronutrient profile and snackable format. These cake bites are packed with 20 grams of protein, limited sugar, minimal fat and unique format per serving of three cakes. Targeted at calorie counting athletes or an anytime snack for active adults interested in new and delicious ways to get protein. Cake Bites are now available in six different flavours and in 2018 will expand beyond the US market. 24
Glanbia plc | Annual Report and Financial Statements 2017
Operations Review continued
Glanbia Nutritionals
STRONG GROWTH IN GLOBAL
NUTRITIONAL SOLUTIONS
€1.3 billion
Revenue
About Glanbia Nutritionals
Glanbia Nutritionals is a global provider of innovative
nutritional and functional solutions. Through its extensive
portfolio of ingredients and capabilities, it provides a
wide range of science-led solutions to global customers.
It is also a large-scale cheese manufacturer and marketer.
Nutritional Solutions
Nutritional Solutions is a provider of customised nutrient
premixes, advanced-technology dairy and plant protein
solutions, functional beverages and flavours.
Cheese
GN is the #1 producer and marketer of American-style
cheddar cheese in the US.
FOCUSED
ON NUTRITION
VOLUME
GROWTH
JUST ADD
GLANBIA.
€113.5
million
EBITA
Glanbia plc | Annual Report and Financial Statements 2017
25
Brian Phelan
CEO Glanbia
Nutritionals
REVENUE
€1.3 billion
+5.4% constant currency
Glanbia Nutritionals
€m Revenue
Nutritional Solutions
US Cheese
Re-
presented
FY 2016*
Constant
Currency
Change
Change
488.3
735.9
+8.9% +10.9%
+1.8%
-0.2%
FY 2017
531.9
734.1
Total GN
1,266.0
1,224.2
+3.4%
+5.4%
GN EBITA
GN EBITA margin
113.5
9.0%
+2.0%
111.3
9.1% -10bps
+4.1%
-10bps
* EBITA for GPN and GN for 2016 have been adjusted down by €0.5m reflecting ongoing
corporate costs previously allocated to the Dairy Ireland segment but which will be allocated
to GPN and GN going forward. This is to ensure a like-for-like comparison and reflective of
the allocations received in 2017 and going forward.
All commentary is on a constant currency basis.
Business Performance
Glanbia Nutritionals (GN) is comprised of two divisions Nutritional
Solutions and US Cheese. GN delivered a good performance in 2017.
Revenues increased versus the prior year by 5.4% to €1.3 billion driven
by volume growth of 3.9% and pricing growth of 1.5%. Both volume and
pricing growth was largely driven by Nutritional Solutions. GN’s EBITA
in 2017 was €113.5 million, a 4.1% improvement versus prior year,
as a strong Nutritional Solutions performance was somewhat offset by
challenging US Cheese dynamics. Overall EBITA margins at 9.0% are
down 10 bps compared to prior year on a constant currency basis.
Nutritional Solutions
Nutritional Solutions at 42% of total GN revenues, is a provider of
customised nutrient premixes, advanced-technology dairy and plant
protein solutions, functional beverages and flavours. Nutritional
Solutions has a diverse product portfolio and supports its customers
on both a global and regional basis, supplying solutions that improve
product functionality and nutritional profile.
UNIQUE INSIGHTS AND PARTNERSHIPS
We provide unique insights and partnerships in exploring
the optimal application of, not only a variety of dairy and plant
proteins available, but also other ingredients in our portfolio
such as premixes and flavours.
26
Glanbia plc | Annual Report and Financial Statements 2017
Operations Review continued
Glanbia Nutritionals
Nutritional Solutions (continued)
We delivered a good performance in 2017 with revenue of €531.9
million, an increase of 10.9% on the prior year. Volume growth of 7.2%
was broadly based across customers, geographies and categories,
driven by the ever-increasing trend of consumers seeking nutritional
products with added protein, convenience and functionality. Pricing
was also positive with growth of 3.7% mainly reflecting relatively
stronger dairy markets in 2017 versus the prior year.
In 2017, 61% of the revenue in Nutritional Solutions was from non-dairy
products such as vitamin & mineral blends, functional beverages,
plant-based solutions and flavours. The remaining 39% of revenue
was from dairy solutions including advanced-technology whey and
specialist dairy ingredients.
US Cheese
US Cheese is a leading producer of American-style cheddar cheese
in the US supplying leading retail brand owners and other leading food
service organisations. US Cheese delivered a satisfactory performance
in 2017 with revenue of €734.1 million, an increase of 1.8% versus
2016. This was driven by volume growth of 1.7% and price increase
of 0.1%. Volume growth was achieved through an increase in milk
processed and improved yields year-on-year. Pricing was broadly flat
as a result of reduced prices in the cheese barrel format offsetting
improved prices for the cheese block format.
Strategy In Action
Glanbia Nutritionals Revenue 2017
Revenue from US Cheese and Nutritional Solutions
Nutritional Solutions (42%)
US Cheese (58%)
Nutritional Solutions – Dairy and Non-Dairy revenues
Dairy (39%)
Non-Dairy (61%)
Nutritional Solutions – End Categories
Sports nutrition
Supplements
Mainstream Food & Beverage
Clinical Nutrition
Infant Nutrition
Driving innovation in healthy snacking With production facilities in Europe, Asia and North America, GN has built a diverse business with state-of-the-art technologies servicing a range of end markets. In 2017 we launched a number of exciting new innovations that set us apart in the marketplace. In the popular healthy snacking category, we have developed ingredientsolutions to address a variety of snack bar challenges. We have functional proteins that can address bars that might be too sticky, too brittle or lose shape. We have proteins that address shelf-life, can be used with less sugar, and we have developed optimised blends of dairy and plant-based proteins. We take a holistic view of how functional ingredients can best perform in the core, coatings and layers of bars. With access to an extensive portfolio of ingredients from dairy and non-dairy sources, we ensure the maximum nutritional value without a compromise to taste, texture or format.Similarly, in the growing beverage category, GN has developed ingredient solutions to cater for the growing number of consumers interested in convenient healthy beverages. For example, GN’s drink concept, High Protein and Bone Health Chocolate Ready- to-Mix (RTM) beverage, contains Prolibra®. This allows consumers to benefit from a convenient and unique combination of protein and vitamins in one drink. Muscle Mocha is another example of a prototype RTM hot coffee beverage containing natural caffeine, as well as protein from ProTherma™, the heat stable hydrolysed whey protein and Micelle XL®, a slow release milk protein. Together, these ingredients provide convenient sources of energy and protein. Caption: Nhu My, Flavour Technician, Jody Emmel, Senior Flavour Chemist Manager, Liliane El Debs, Flavour Chemist in Training, work on developing new flavours for applications in Corona, CA, USA. Global Market Trends
Today’s busy consumers want to be in control of their health and are
increasingly seeking products with clean, healthy ingredients and
added functional benefits. Consumers are also looking for on-the-go
snacks that are tailored to individual needs and fit a busy but healthy
lifestyle. Furthermore, the Millennial generation and Generation Z are
increasingly connected and demanding personalised nutrition, while an
ever-increasing lifespan coupled with globally low birth rates also
combine to form an ageing population with changing nutritional needs.
These global macro trends have resulted in significant changes in how
consumers meet their nutritional requirements and in turn has led to a
proliferation of products and formats across the food and beverage
sector. Nutrition is at the core of our business. As a large-scale global
provider of ingredient and functional solutions and one of the biggest
cheese manufacturers in the world, GN is perfectly positioned to
benefit from these global trends. GN innovation and capabilities in the
fast-growing Ready-to-Eat (RTE), Ready-to-Mix (RTM) and Ready-to-
Drink (RTD) categories is ideally positioned to benefit from the
consumer demand for convenience in consumption.
Our protein solutions have transformed the bar and beverage categories
over several years. Our aim is to ensure that GN continues to leverage
both its dairy and plant-based protein capabilities to meet the ever
evolving demands of customers and consumers across the globe.
Glanbia plc | Annual Report and Financial Statements 2017
27
Glanbia Nutritionals Categories
From newborns, to professional bodybuilders to grandparents GN
serves a wide range of consumers and categories. Functional food
and beverages is in the broadest sense our key category. GN has the
unique capability to support beverage makers through every step of
the production process and has made considerable progress in recent
years in producing advanced-technology protein and grain systems for
healthy snacks and beverages. The life stage nutrition which includes
infant formula and clinical nutrition customers has been an area of
focus for many years and we continue to leverage our strong tradition
in the sports nutrition category and are the partner of choice for a
number of key customers in this category.
Award Winning Innovation
The International Food and Technology Association recognised GN
with a 2017 Innovation Award for their BevEdge™ technology that is
utilised in Ready-to-Mix (RTM) and Ready-to-Drink (RTD) applications
for easier processing and a cleaner label.
Just add Glanbia.
At GN we combine our deep understanding of consumers, category
trends and end-to-end product development to help our customers
consistently bring winning products to market. Whatever is needed
to make our customers product more nutritious and successful,
from smarter, more functional ingredients to custom formulations,
we can help. Just add Glanbia.
For further details on our categories and ingredients visit:
www.glanbianutritionals.com
Brian Phelan
CEO Glanbia Nutritionals
Setting the standard for cheese production worldwideUS Cheese At Glanbia we think of the US cheese business through the lens of our customers. We produce a natural product in a range of formats: 40lb blocks, 640lbs blocks and 500lb barrels. We deliver these solutions to our customers through an innovative partnership model consisting of our wholly-owned business in Idaho and our Southwest Cheese (SwC) Joint Venture in Clovis, New Mexico. Glanbia is recognised globally as an excellent technical, operational and commercial partner with best-in-class practices and key relationships with customers.We are a partner in innovation, proactively analysing trends and developing new formulations. Built in 2013, our GN Cheese R&D Innovation Centre brings new cheese concepts to life quickly and efficiently. By focusing on the customers’ needs we deliver new global cheese styles, unique flavours and innovative inclusions.Building on the success of our SwC Joint Venture, Glanbia was the natural partner of choice when the dairy farmers in Michigan began exploring capacity expansion in the State. The Michigan Joint Venture will be a 50:50 partnership between a milk supply group and Glanbia. We expect the new cheese and whey facility to be commissioned in 2020. 28
Glanbia plc | Annual Report and Financial Statements 2017
Operations Review continued
Strategic Joint Ventures
A YEAR OF
TRANSFORMATION
Joint Ventures (JVs) (Glanbia Share)
Reported
€m
FY 2017
FY 2016
Change
1,093.4
63.4
5.8%
820.8
42.9
5.2%
+33.2%
+47.8%
+60bps
Constant
Currency
Change
+35.7%
+50.2%
+60bps
Revenue
EBITA
EBITA margin
Share of JVs’ Profit
after tax pre-
exceptional items
42.8
26.0
+64.6%
+67.0%
Glanbia Ireland locations
Lough Egish
UHT Dairy Plant
GI Virginia
Milk Processing Plant
Drogheda
Liquid Milk Plant
Portlaoise
Oat Mill
& Feed Mill
GI Ballyragget
Milk Processing
Plant
Kilkenny
Soup Plant
Ballitore
Liquid Milk Plant
Carrick-on-Suir
Corman Miloko
(45% Associate)
Clonroche Feed Mill
GI Wexford
Milk Processing Plant
GI Belview
Milk Processing Plant
Joint Venture Business Performance
Glanbia’s Joint Ventures (JVs) consist of investments in Glanbia
Ireland (previously Glanbia Ingredients Ireland – see details below),
Glanbia Cheese and Southwest Cheese. JVs delivered a strong
performance in 2017 as Glanbia’s share of results in JVs pre-
exceptionals increased by €16.8 million to €42.8 million. This
increase was driven primarily by strong dairy markets and in
particular a strong performance from Glanbia Cheese. Glanbia’s
share of JVs’ revenues 1 increased by 35.7% versus the prior year.
This was driven by a price increase of 17.1%, as a result of the
positive dairy market environment during 2017, and volume growth
of 4.3% versus prior year driven by the Glanbia Ireland and Glanbia
Cheese JVs. The Dairy Ireland transaction grew JVs’ revenue
by 14.3% in 2017. Glanbia’s share of JVs’ EBITA in 2017 was
€63.4 million, an increase of 50.2% year-on-year. This was primarily
as a result of volume growth and relatively strong year on year
dairy markets.
Full details on the performance of all Joint Ventures, and details
of share of assets and liabilities are set out in note 18 to the
financial statements.
Glanbia Ireland
The Glanbia Ireland (GI) JV was created on 2 July 2017. Following
the acquisition of 60% of Dairy Ireland and related assets (Dairy
Ireland) from Glanbia plc by Glanbia Co-operative Society Limited
(the ‘Society’) the businesses of Glanbia Ingredients Ireland and
Dairy Ireland were combined to create GI. This JV is owned 60%
by the Society and 40% by Glanbia plc. The process to complete
the integration of GI is on track and is expected to be completed
by the end of 2018. GI delivered a good performance in 2017 with
milk volumes increasing by 9% to a total milk pool of 2.6 billion
litres. GI has a strategy in place to support the significant growth
plans of the Irish dairy supply base and has plans for strategic
investment of €250-€300 million between 2018 and 2020 to
increase processing capacity and capability to produce value-
added ingredients. This investment will largely be funded by debt
facilities sourced directly by GI. GI is the largest milk processor in
Ireland producing a range of value-added dairy ingredients and
consumer products. In addition GI is a large-scale seller of animal
feed and fertiliser as well as having a chain of agricultural retail
outlets in Ireland. It owns leading consumer and agri brands such
as Avonmore, GAIN Feeds, Kilmeaden Cheese, Premier Milk,
mymilkman.ie and Wexford Cheese. This new JV has significant
strengths and capabilities building on a strong sustainable supply
chain in Ireland that enables it to bring high-quality Irish output to
a global market.
1. Share of JVs revenue is calculated as the share of revenue attributed
to Glanbia based on Glanbia’s percentage ownership in the JV.
See glossary for further details.
Glanbia plc | Annual Report and Financial Statements 2017
29
Operations Review continued
Strategic Joint Ventures
CAPACITY EXPANSION AND
STRONG BUSINESS PERFORMANCE
Southwest Cheese (SwC)
SwC is a large-scale producer of American-style cheddar cheese
and whey ingredients in the US with a production facility located in the
State of New Mexico, US. SwC is 50% owned by Glanbia plc and 50%
owned by US based dairy co-operative organisations. SwC delivered
a reduced performance in 2017 versus prior year due to the impact of
certain US dairy market dynamics on milk costs. The project to expand
production capacity at SwC by 25% is on track with commissioning
expected to be completed in the third quarter of 2018.
SwC works closely with Glanbia Nutritionals as the operating partner
of the plant and as a route to market for all of its cheese and dairy
ingredients production. GN is the #1 American-style cheddar cheese
manufacturer and marketer in the US and the leader in advanced-
technology whey proteins. During 2017 GN marketed a total of 422,000
metric tonnes of cheese and 25,500 metric tonnes of whey proteins,
as high-end whey products, systems and solutions.
Glanbia’s innovative partnership model with SwC underpins GN’s
leadership positions in American-style cheddar cheese and advanced-
technology whey operations and continues to support its growth
ambitions in these categories. We meet the needs of our customers
through a co-ordinated approach across our wholly-owned facilities
in Idaho and our Joint Venture operations.
Within the joint venture structure through a shared control model, GN
provides the operational, technical and commercial expertise while its
partner producer organisations provide a long-term secure milk supply.
As previously announced, Glanbia is in advanced discussions on a
proposed new JV in Michigan, USA to construct a new large-scale
cheese and whey plant which is expected to be commissioned in
2020. This proposed facility would produce 140,000 metric tonnes of
cheese and 9,300 metric tonnes of advanced-technology whey protein
at full capacity. The total project cost will be $400-$450 million with the
majority of the costs expected to be financed through debt facilities
within the Joint Venture.
Glanbia Cheese
Glanbia Cheese is a large-scale Mozzarella producer which provides
custom cheese solutions to companies in over 20 countries around the
world. With corporate headquarters in Northwich, Cheshire, England,
Glanbia Cheese also has two state-of-the-art mozzarella manufacturing
facilities: one in Llangefni, North West Wales and one in Magheralin,
Northern Ireland. The locations provide access to a solid supply base
to source high quality milk which is used to make mozzarella cheese
for pizza and other food products. Glanbia Cheese is a joint venture
51% owned by Glanbia plc and 49% owned by a global specialist
mozzarella producer, Leprino Foods Company, a US company.
Glanbia Cheese delivered an excellent performance in 2017 with strong
revenue and profit growth. The improvement in performance over the
prior year was driven by improved pricing, in relatively stronger dairy
markets, and sales volume increases.
Creating one of the world’s largest cheese plantsGlanbia established its first cheese and whey JV in 2005 when it formed a joint venture with the Greater Southwest Agency, made up of a number of national and local milk co-operatives in New Mexico, US. The SwC JV, which began processing six million lbs of milk per day in 2006 has gone from strength to strength and following further expansion in 2010, processes 11 million lbs of milk per day. A new expansion phase set to be commissioned in Q2 2018 will increase the size of the facility by 25%, processing in excess of 14 million lbs of milk per day, thereby making it one of the largest cheese plants in the world. Post commissioning of the new expansion SwC will produce 250,000 tonnes of cheese and 16,000 tonnes of whey ingredients. The SwC JV is widely recognised in the industry as an innovative model of a successful collaboration between dairy farmers and a world-class processor. 30
Glanbia plc | Annual Report and Financial Statements 2017
Group Finance Director’s Review
STRONG YEAR
OF RESULTS
“A good performance from GPN and GN
and a strong performance from our
strategic Joint Ventures delivered our
eighth year of double-digit growth.”
Mark Garvey
Group Finance Director
Full year 2017 results highlights
10.2% growth, on a constant currency basis, in pro-forma adjusted
Earnings Per Share at 87.11 cent (up 8.3% reported);
Disposal of 60% of the Dairy Ireland segment and related assets completed
on 2 July 2017 creating a new Joint Venture called Glanbia Ireland;
Implementing a revised dividend policy and recommending a final full
year dividend of 16.09 cent per share which represents an increase in
total dividends of 65% on prior year and a dividend payout ratio of
25.3% on 2017 pro-forma adjusted Earnings Per Share. A total return
of €65.1 million to our shareholders from 2017 earnings;
Acquisitions of Amazing Grass and Body & Fit within our GPN segment
for a combined cost of €168.2 million;
Wholly-owned Group revenues from continuing operations of €2.4 billion
(2016: €2.2 billion) up 7.0% on prior year (9.2% constant currency);
Wholly-owned EBITA from continuing operations before exceptional
items of €283.2 million (2016:€273.3 million) up 3.6% on prior year
(5.8% constant currency);
Reported profit after tax of €329.4 million up €117.3 million on prior year
driven primarily by strong underlying results and the profit arising on
the disposal of 60% of the Dairy Ireland segment and related assets;
Basic Earnings Per Share from continuing operations 80.40 cent,
up 26.4% (28.8% constant currency); and
€69.8 million reduction in net debt and significant capacity to support
future investments.
Glanbia plc | Annual Report and Financial Statements 2017
31
Strong performance
In what was a significant year for the Group with the disposal of
60% of the Dairy Ireland segment and related assets (Dairy Ireland),
we are pleased to report basic Earnings Per Share (EPS) from continuing
operations of 80.40 cent and pro-forma adjusted EPS of 87.11 cent, the
latter representing an increase of 10.2% on a constant currency basis.
We achieved good growth in both our Glanbia Performance Nutrition
(GPN) and Glanbia Nutritionals (GN) segments with EBITA growth of
7.0% and 4.1% respectively on a constant currency basis. GPN delivered
good organic growth with like-for-like branded revenues increasing
6.3%. In addition GPN completed two acquisitions with Amazing Grass,
an expansion into the plant-based nutrition category in North America
and Body & Fit, an EMEA Direct-to-Consumer (DTC) brand. GN also had
a good year with strong sales volume and profit growth delivered by the
Nutritional Solutions business.
pleased to increase our final dividend to 16.09 cent per share bringing the
total 2017 dividend to 22.0 cent per share, representing a return of €65.1
million to our shareholders from 2017 earnings and an annual dividend
payout ratio of 25.3% of pro-forma adjusted Earnings Per Share.
Disposal of 60% of Dairy Ireland and creation
of Glanbia Ireland
The disposal of 60% of Dairy Ireland was completed on 2 July 2017.
As a consequence, the results of Dairy Ireland have been classified
as a discontinued operation up to the date of disposal with prior year
comparatives also adjusted accordingly. Total net cash proceeds from
the transaction amounted to €208.8 million of which €112.0 million
represents the disposal of the 60% equity stake in Dairy Ireland and
the balance of the cash proceeds relate to the value of working capital
in Dairy Ireland at the transaction date.
Our share of results of Equity accounted investees pre-exceptionals
grew by 64.6% on a reported basis to €42.8 million (27.2% on a
pro-forma basis) as a result of strong dairy markets, particularly in the
first half of the year. The pro-forma number assumes Dairy Ireland as a
40% joint venture in both 2017 and 2016.
These results enabled us to meet our core strategic financial targets as we
achieved pro-forma adjusted EPS growth of 10.2% on a constant currency
basis and a Return on Capital Employed of 13.4%. Along with our strong
financial results, following a review of our dividend policy, we are also
The operations of Dairy Ireland were integrated with Glanbia Ingredients
Ireland DAC, creating a new joint venture called Glanbia Ireland DAC
(Glanbia Ireland). Glanbia Ireland is classified as a joint venture with
60% owned by Glanbia Co-operative Society Limited (Society) and
40% owned by Glanbia plc. The profit arising on the disposal of 60% of
Dairy Ireland, and the related costs incurred in respect of the transaction,
have been presented as exceptional items in the period as discussed
further below.
See page 35 for further details on the Dairy Ireland transaction.
2017 Group Income Statement
€m
Revenue
Earnings before interest, tax and amortisation
(EBITA)
EBITA margin
Intangible asset amortisation
Operating profit
Finance income
Finance costs
Share of results of equity accounted investees
Profit before taxation
Income taxes
Profit for the year – continuing operations
Profit/(loss) – discontinued operations
Profit for the year – Group
2017
20161
Pre-exceptional
Exceptional
Total
Pre-exceptional
Exceptional
Total
2,387.1
–
2,387.1
2,231.7
–
2,231.7
283.2
11.9%
(43.1)
240.1
3.0
(26.0)
42.8
259.9
(38.3)
221.6
9.8
231.4
(5.5)
(19.4)
(24.9)
–
(14.0)
8.7
(30.2)
45.8
15.6
82.4
98.0
277.7
11.6%
(62.5)
215.2
3.0
(40.0)
51.5
229.7
7.5
273.3
12.2%
(37.4)
235.9
2.4
(25.2)
26.0
239.1
(39.3)
(14.4)
–
(14.4)
–
–
–
(14.4)
2.3
258.9
11.6%
(37.4)
221.5
2.4
(25.2)
26.0
224.7
(37.0)
237.2
199.8
(12.1)
187.7
92.2
329.4
27.1
226.9
(2.7)
(14.8)
24.4
212.1
Revenue and EBITA are key financial metrics used to monitor the performance of the Group and segments. Details of current and prior year
performance are set out below:
Segmental analysis
€m
Glanbia Performance Nutrition
Glanbia Nutritionals
Total wholly-owned businesses
Revenue
1,121.1
1,266.0
2,387.1
2017
EBITA
169.7
113.5
283.2
EBITA %
15.1%
9.0%
11.9%
Revenue
1,007.5
1,224.2
2,231.7
20161
EBITA2
162.0
111.3
273.3
EBITA %
16.1%
9.1%
12.2%
For definitions and more information on constant currency and other performance measures see the glossary on pages 212 to 222.
1. As represented to reflect impact of discontinued operations.
2.
Prior year EBITA for GPN and GN have each been adjusted down by €0.5 million respectively as a result of reallocations of ongoing central overhead costs following the disposal of 60% of
Dairy Ireland to ensure a like-for-like comparison.
32
Glanbia plc | Annual Report and Financial Statements 2017
Group Finance Director’s Review continued
Income statement
Revenue
Wholly-owned revenue from continuing operations increased by
7.0% (9.2% constant currency) in 2017 to €2.4 billion. Sales volumes
accounted for 5.3% of the increase primarily driven by branded
revenue growth within GPN and Nutritional Solutions within GN. Pricing
benefit accounted for 0.2% of the growth in the year driven primarily by
higher dairy markets offset partially by brand investment and innovation
support within GPN. Acquisitions, which include the results of Amazing
Grass and Body & Fit, accounted for a 3.7% increase in revenue.
Profit
Profit for the year from continuing activities amounted to €237.2
million which represents an increase of €49.5 million on prior year.
This increase is driven by profit growth in GPN and GN, an increase
in the share of Joint Venture profits and one off net exceptional gains
versus prior year. Wholly-owned EBITA from continuing activities before
exceptional items grew by 5.8% constant currency (up 3.6% reported)
to €283.2 million (2016: €273.3 million). Increased EBITA was reported
from each wholly-owned segment as a result of branded sales growth
in GPN and good performance from Nutritional Solutions within GN.
Overall wholly-owned EBITA margins have increased from 10.7%
reported in prior year to 11.9% as a result of the Dairy Ireland
transaction. On a like-for-like comparison, wholly-owned EBITA
margins from continuing activities decreased by 30 basis points
to 11.9% driven primarily by higher input costs.
Net finance costs
Net financing costs pre-exceptional items increased by €0.2 million to
€23.0 million (2016: €22.8 million) primarily driven by the higher costs
in the first half of the year as a result of the acquisitions of Amazing
Grass and Body & Fit, which were completed in the first quarter
of 2017. On 15 December 2017 post a review of Group financing
structures, the Group repaid $169 million of outstanding private
placement debt of $325 million, due in June 2021 and consequently
paid additional interest of €14 million reflecting make-whole interest
due to holders of this private placement debt. Overall net finance
costs in 2017 include this additional interest cost as an exceptional
item. The early repayment of the private placement debt appropriately
re-structured the Group’s debt facilities following the disposal of 60%
of Dairy Ireland and accordingly will beneficially impact finance costs
over financial periods to June 2021. The Group’s average interest rate
in 2017 was 6.3% (3.9% excluding the additional interest on private
placement debt) (2016: 3.8%). Glanbia operates a policy of fixing a
significant amount of its interest exposure, with 85% of projected
2018 debt currently contracted at fixed rates.
Equity accounted investees (Joint Ventures)
The Group’s share of equity accounted investees profits increased
by €16.8 million to €42.8 million (2016: €26.0 million) in the year
driven by sales volume growth and strong dairy markets. The share
of equity accounted investees profits includes the impact of 40% of
Dairy Ireland from 2 July following the disposal of 60% of Dairy Ireland
to the Society. The results of Dairy Ireland up to the date of disposal
have been included within discontinued operations. The share of
results of equity accounted investees is after tax and interest.
Income taxes
The 2017 pre-exceptional tax charge decreased by €1.0 million to
€38.3 million (2016: €39.3 million). This represents an effective tax
rate, excluding Joint Ventures & Associates, of 17.6% (2016: 18.4%).
The overall tax charge for the year includes an exceptional item of
€38.7 million relating to a deferred tax credit arising from a change
in US corporate tax rate from 35% to 21% under the Tax Cuts and
Jobs Act which was signed into US law on 22 December 2017.
The reduction in the US corporate tax rate is expected to drive a
reduction in the Group’s effective tax rate, however there are certain
provisions within the legislation to be evaluated further during 2018 to
confirm this. As a result, we expect that the Group effective tax rate in
2018 will be between 16.0% and 17.5%.
Earnings Per Share
2017
2016
Change
Constant
Currency
Change
Basic (continuing
activities)
Adjusted pro-forma
80.40c
87.11c
63.59c
80.40c
26.4%
8.3%
28.8%
10.2%
Basic EPS from continuing activities grew by 28.8% constant currency
(26.4% reported) in the year driven by strong results in the year.
Pro-forma adjusted EPS grew 10.2% constant currency (8.3% reported).
Pro-forma adjusted EPS has been presented as it is more reflective of
the revised structure of the Group following the disposal of 60% of Dairy
Ireland. Pro-forma adjusted EPS assumes the Dairy Ireland disposal was
completed at the beginning of the 2016 financial year and is calculated
based on the net profit attributable to equity holders of the parent from
continuing activities plus 40% of the share of profits after tax for Dairy
Ireland, before exceptional items and amortisation of intangible assets
(excluding software amortisation net of tax), net of related tax.
Exceptional items
€m
Rationalisation costs (note 1)
Debt restructuring costs (note 2)
Intangible asset amortisation (note 3)
Organisation redesign costs (note 4)
Acquisition integration costs (note 5)
Share of result of Joint Venture – deferred tax
2017
(5.4)
(14.1)
(19.4)
–
–
2016
–
–
–
(11.3)
(3.1)
credit due to US tax reform (note 6)
8.7
–
Exceptional loss before tax – continuing
operations
Deferred tax credit due to US tax reform (note 6)
Tax credit on exceptional items – continuing
operations
Exceptional profit/(loss) after tax –
continuing operations
(30.2)
38.7
(14.4)
–
7.1
2.3
15.6
(12.1)
Dairy Ireland – profit on disposal net of
transaction costs (note 7)
Rationalisation costs (note 1)
Exceptional profit/(loss) before tax –
discontinued operations
Exceptional tax (charge)/credit – discontinued
operations
Exceptional profit/(loss) after tax –
discontinued operations
Total exceptional profit/(loss) after tax
83.3
–
83.3
(0.9)
82.4
98.0
–
(3.0)
(3.0)
0.3
(2.7)
(14.8)
The total net cash inflow during the year in respect of exceptional
items was €177.5 million (2016: outflow of €19.4 million) of which
outflow of €9.9 million (2016: €9.1 million) was in respect of prior
year exceptional charges.
Glanbia plc | Annual Report and Financial Statements 2017
33
Details of the exceptional items are as follows:
1. Rationalisation costs in the current year relate to redundancies
arising from the elimination of certain positions following a Group-
wide organisational review. This review is ongoing to ensure that
the structure is appropriate to support the future growth of the
Group post the disposal of 60% of Dairy Ireland. Discontinued
costs in 2016 primarily relate to the redundancy and rationalisation
programme in the Dairy Ireland segment.
2. Debt restructuring costs: Following the disposal of 60% of Dairy
Ireland a review of existing debt facilities was undertaken to ensure
they were appropriate to meet the needs of the new Group structure.
As a result the Group repaid $169 million of the $325 million private
placement debt resulting in €14.1 million of one off interest costs and
fees reflecting make-whole interest due to holders of this private
placement debt arising on early settlement.
3. Intangible asset amortisation: Following a review of the useful life
of capitalised development costs in respect of newly developed
products across the Group, it was decided to reduce the estimate of
the useful life from 6 to 3 years to reflect the dynamic environment for
new product launches in their early development stage. The once-off
additional amortisation from this change in estimate amounted to
€19.4 million.
4. Organisation redesign costs in 2016 relate to GN’s programme
to fundamentally reorganise the business and leverage future
market opportunities.
key drivers of the outflow in the year was the acquisitions of Amazing
Grass and Body & Fit for a combined cost of €168.2 million and capital
expenditure of €72.5 million being partially offset by net proceeds from
the disposal of 60% of Dairy Ireland. Total capital expenditure in the year
relates to tangible and intangible asset investments across GN and GPN.
This is discussed further in the investing for growth section below. Total
net proceeds from the Dairy Ireland transaction amounted to €208.8
million which represents cash proceeds of €112 million and the balance
relating to settlement of working capital balances at the completion date.
Financing activities
Net cash outflow from financing activities amounted to €120.1 million
which represents a decrease of €83.2 million. The outflow in the current
year is driven by repayment of part of the US private placement debt
and dividends to shareholders.
Cash flow KPIs
Key cash flow KPIs of the Group and Business Units are Operating
Cash Flow (OCF) and Free Cash Flow (FCF). OCF represents EBITDA
of the wholly-owned businesses net of business sustaining capital
expenditure and working capital movements, excluding exceptional
cash flows. FCF is calculated as the net cash flow in the year before
the following items: strategic capital expenditure, acquisition spend,
proceeds received on disposal, loans to joint ventures, equity
dividends, exceptional costs paid and foreign exchange movements.
These metrics are used to monitor cash conversion performance of
the Group and Business Units and identify available cash for strategic
spend. OCF is a key element of executive and senior management
remuneration. OCF and FCF results for the Group are outlined below:
5. Acquisition integration costs in 2016 relate to the costs of integration,
restructuring and redesign of route-to-market capabilities within
acquired businesses in GPN.
6. The overall tax charge for the year includes an exceptional deferred
tax credit of €38.7 million arising from a reduction in the US federal
corporate tax rate from 35% to 21% under the Tax Cuts and Jobs
Act signed into law on 22 December 2017. The impact from the
reduced tax rate on the Group’s share of results from the Southwest
Cheese Joint Venture amounted to €8.7 million.
7. On 2 July 2017 the Group completed the disposal of 60% of Dairy
Ireland to Glanbia Co-operative Society Limited. The profit arising
on disposal amounted to €83.3 million which was net of transaction
related costs of €13 million. These costs include impairment of
tangible fixed assets, professional fees, EGM meeting costs,
employee benefit expenses and other related costs.
Cash flow
The commentary below relates to the Group Statement of Cash Flows
as set out on page 128 of the financial statements.
Operating activities
Net cash inflow from operating activities in the year amounted to
€91.1 million which was a decrease of €231.7 million compared to prior
year. The key drivers of the decrease in operational cash inflow on prior
year are negative working capital movements of €180.7 million and the
additional interest on private placement debt of €14 million, as previously
discussed within net finance costs. Negative working capital movements
are driven primarily by €76.5 million of negative receivable movements
from the continuing business, due to increased business activity and
negative working capital movements from Dairy Ireland in the first half
of 2017, amounting to €47.5 million. Working capital will continue to be
a key focus of the Group in the coming year.
Investing activities
Net cash outflow from investing activities in the year amounted to €14
million which was a decrease of €90 million compared to prior year. The
€m
EBITDA pre-exceptional
Movement in working capital
(pre-exceptional)
Business sustaining capital
expenditure
Operating cash flow
Net interest and tax paid
Dividends from Joint Ventures
Other outflows
Free cash flow
Strategic capital expenditure
Equity dividends
Acquisitions
Disposals
Exceptional items paid
Loans to Associates
Cash flow pre-exchange
translation/other adjustments
Exchange translation/other adjustments
Net debt movement
Net debt at beginning of the year
Net debt acquired on acquisition
New finance leases
Closing net debt
* Pro-forma excludes Dairy Ireland cash flows.
Pro-forma*
2017
328.2
2017
342.6
2016
355.0
(123.3)
(170.8)
31.9
(19.9)
185.0
(58.4)
15.8
(5.5)
136.9
(23.8)
148.0
(57.9)
15.8
(5.5)
100.4
(48.7)
(41.0)
(168.2)
208.8
(31.4)
–
19.9
49.9
69.8
(437.5)
(367.7)
(32.4)
354.5
(52.9)
13.8
(4.4)
311.0
(57.1)
(37.2)
(14.6)
0.3
(19.4)
(12.8)
170.2
(20.9)
149.3
(584.2)
(0.8)
(1.8)
(437.5)
On a pro-forma basis (excluding Dairy Ireland cash flows) OCF was
€185.0 million which includes an adverse working capital movement
of €123.3 million. The adverse working capital movement was largely
driven by negative receivables movement of €76.5 million due to
increased sales activity in the latter part of the year. The pro-forma
OCF of €185.0 million represents a cash conversion on EBITDA of
56.4% compared to a prior year pro-forma cash conversion of 101.5%.
The OCF conversion target for 2018 is 80%.
34
Glanbia plc | Annual Report and Financial Statements 2017
Group Finance Director’s Review continued
Despite the reduced OCF in the year, overall net debt was reduced
in the year by €69.8 million driven by an overall net positive cash flow
of €19.9 million and a positive foreign exchange movement of €49.9
million. This is discussed further below.
Return on Capital Employed (ROCE)
Return on Capital Employed
13.4%
13.9%
(50) bps
2017
2016*
Change
Group net debt
* Restated for the impact of deferred tax (prior year reported was 12.9%).
Financing key performance indicators
2017
2016
Net debt
€367.7m
€437.5m
Net debt: adjusted EBITDA
Adjusted EBIT: net finance cost
1.07 times
7.0 times
1.19 times
11.5 times
The Group’s financial position continues to be strong. Net debt at the end
of 2017 was €367.7 million. This is a decrease of €69.8 million from the
prior year net debt of €437.5 million and can be primarily attributed to the
proceeds received from the disposal of 60% of Dairy Ireland and positive
foreign exchange gains offset partially by the cost from the investment in
working capital and the Amazing Grass and Body & Fit acquisitions. Net
debt to adjusted EBITDA was 1.07 times and interest cover was 7.0 times,
both metrics remaining well within financing covenants. The reduction in
the interest cover was driven by the exceptional €14 million interest cost
in the year following the early repayment of part of the private placement
debt. Excluding this once-off cost the cover would be 11.2 times. At year
end 2017 Glanbia had available facilities of €844 million. Glanbia’s capital
structure has considerable capacity to finance future investments.
Dividend per share
Glanbia is committed to a progressive dividend policy. Following
a detailed review of the Group dividend payout ratio, the Board
is recommending increasing the annual dividend payout ratio to
between 25% and 35% of pro-forma adjusted EPS. As a result of this
change the recommended final dividend will be 16.09 cent per share
(2016: final dividend 7.94 cent per share) and brings the total dividend
for the year to 22.0 cent per share (2016: 13.31 cent per share). This
represents a 65% increase in the total dividend payment versus prior
year and represents a return of €65.1 million to shareholders from 2017
earnings. Going forward the Board intends to maintain the dividend
payout ratio between 25% and 35%.
Investing for growth
In 2017 capital expenditure amounted to €72.5 million which includes
€23.8 million of sustaining capital expenditure and €48.7 million of
strategic capital expenditure, which was focused on GPN and GN.
The majority of the capital spend during the year related to enhancing
our innovation assets, system enhancements to improve reporting
capabilities and improved process alignment and controls across the
Glanbia group and completion of the GPN R&D Innovation Centre in
Chicago, US.
In the first quarter of 2017 the Group acquired Amazing Grass and
Body & Fit for a combined cost of €168.2 million. Amazing Grass and
Body & Fit are two key platforms for GPN in the strategically important
plant-nutrition category and the Direct-to-Consumer (DTC) online
channel respectively. The combined revenues of these two businesses
in 2017 was €79.6 million. The DTC channel, initially through Body & Fit,
is a key strategic objective for Glanbia and in addition to the investment
made in 2017 we expect that this investment will continue in 2018
to drive top line growth. Work has also continued in respect of the
proposed Joint Venture in Michigan. The new facility is expected to be
commissioned in 2020. Acquisitions will continue to be an important
part of the growth strategy of Glanbia, and as outlined above, the
Group has capacity to make acquisitions should an opportunity arise
that is in line within the strategic and financial objectives of the Group.
Following a review and peer benchmark of the ROCE metric,
the methodology used to calculate ROCE was amended in 2017
to include the impact of net deferred taxes within capital employed.
On a like-for-like comparison using the restated ROCE of 13.9%,
ROCE decreased in 2017 by 50 basis points to 13.4%. This was driven
primarily by the growth in reported EBITA, being more than offset by
the near-term dilutive effect of recent acquisitions. The Group has a
strategic target to maintain a minimum ROCE of 12%.
Foreign exchange
Glanbia generates over 80% of its earnings in US Dollar and
has significant assets and liabilities denominated in US Dollar.
As a result, and as Glanbia has a Euro reporting currency, there can
be a significant impact to reported numbers arising from currency
movements year-on-year and on translation of US Dollar non-monetary
assets and liabilities in the preparation of the Consolidated Financial
Statements. Within the income statement commentary has been
provided on a constant currency basis to provide a better reflection
of the underlying operating results in the year as this removes the
translational currency impact. To arrive at the constant currency
change, the average foreign exchange rate for the current period
is applied to the relevant reported result from the same period
in the prior year.
At the balance sheet date, due to the weakening of the US Dollar
compared to prior year, there was a significant translation loss arising
on the translation of US assets and liabilities into Euro. The gain or loss
on translation of non-monetary assets and liabilities from US Dollar to
Euro is presented within other comprehensive income and amounted
to a charge of €149.8 million in the year. The retranslation of US Dollar
denominated debt resulted in a gain of €49.9 million within the cash flow
statement. Year-end and average rates were as follows:
Average
Year end
2017
2016
2017
2016
1 Euro converted into
US Dollar
1.1295
1.1068
1.1993
1.0541
Pension
The Group’s net pension liability under IAS 19 (revised) ‘Employee
Benefits’, before deferred tax, decreased in 2017 by €68.5 million
to €41.9 million (2016: €110.4 million). The decrease was driven by
the transfer to Glanbia Ireland of €44.2 million relating to the liability
attributed to Dairy Ireland pension members following the completion
of the disposal of 60% of Dairy Ireland.
Shareholder returns
Total Shareholder Return (TSR) for the year was a negative 4.8%.
Despite the decline in 2017, over a three and five-year period the TSR
has performed strongly. TSR over the three-year period 2015 to 2017
was 18.9% and five-year TSR to 2017 was 88.2%. Glanbia’s share
price at the end of the financial year was €14.90 compared to €15.78
at the 2016 year end. The STOXX Europe 600 Food & Beverage Index,
which is a key benchmark for the Group, increased by 10.4% in 2017.
Financial strategy
Glanbia’s financial strategy is very much aligned with its overall strategy
of ensuring the Group delivers on our key financial goals. 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 end of
year three;
• Focusing the organisation on cash conversion through improved
working capital management and disciplined business sustaining
capital expenditure;
• Leveraging the Group’s activities to enable improved cost structures
utilising shared services, procurement, IT, and a continuous
improvement mind-set;
• Maintaining the capital structure of the Group within an implicit
investment-grade credit profile; and
• Dividend policy.
Investor relations
Glanbia continued its active investor relations initiatives in 2017.
During the year, representatives from Glanbia presented at 18 investor
conferences globally and held over 300 meetings with institutional
investors. Glanbia is focused on ensuring that a broad geographic base
of institutional investors is reached via our investor relations programme.
To do this Glanbia senior management increased the level of investor
meetings in the US and for the first time completed two investor
roadshows in Asia covering five financial centers in the region. Finally,
during 2017 Glanbia met with its largest institutional shareholders as
well as key independent proxy advisors to get perspectives on the
Group’s Remuneration Policy. This was led by the Chairman of the
Remuneration Committee with all stakeholders viewing this as a
proactive approach by the Company in gathering external feedback
on the Remuneration Policy. As part of our ongoing communication
with investors Glanbia will hold a Capital Market’s Day in Chicago on
Wednesday, 23 May 2018.
Annual General Meeting (AGM)
Glanbia plc’s AGM will be held on Wednesday, 25 April 2018, in the
Lyrath Estate Hotel, Old Dublin Road, Kilkenny, Ireland.
Mark Garvey
Group Finance Director
** Pro-forma adjusted EPS in respect of the 2018 outlook assumes 40% of the results
of Dairy Ireland as part of Glanbia Ireland Joint Venture for full year 2017 and 2018.
Glanbia plc | Annual Report and Financial Statements 2017
35
Accounting for the Dairy Ireland transaction
Dairy Ireland is comprised of two Business Units, Glanbia
Consumer Foods Ireland and Glanbia Agribusiness. On 2 July
2017 the disposal of 60% of Dairy Ireland was completed.
In consideration for the Society acquiring the 60% interest,
Glanbia plc received net cash proceeds of €208.8 million, of
which, €112 million represents the disposal of the 60% equity
stake in Dairy Ireland, and the balance relates to an amount
equal to 100% of the working capital in Dairy Ireland based
on the final completion accounts.
Costs incurred in relation to this transaction include impairment
of tangible assets of €8.1 million, consultancy costs of €3.6 million,
extraordinary general meetings costs of €0.6 million, employee benefit
expense of €0.5 million and other operating costs of €0.2 million.
The relevant accounting standards require that in a transaction of
this nature, where Glanbia plc no longer has control of the entity,
that Glanbia plc Financial Statements record the transaction as
a 100% disposal of Dairy Ireland in consideration for the cash
payments outlined above and a 40% investment in Dairy Ireland.
The profit arising on the disposal of 60% of Dairy Ireland and the
related costs outlined above have been included within the 2017
exceptional items. See note 6 on page 152 of the Financial
Statements for more details.
In accordance with IFRS 5 ‘Non-current Assets Held for Sale and
Discontinued Operations’, the Dairy Ireland activities up until the
date of disposal (2 July 2017) have been disclosed as discontinued
operations in the Group Income Statement and Group Statement
of Comprehensive Income and the comparative information has
been re-presented to show the discontinued operations separately
from continuing operations. From 2 July 2017, Dairy Ireland has
been treated as a joint venture of the Group (now part of Glanbia
Ireland) and 40% of the results from that date have been included
in share of results of equity accounted investees. In addition as
required by IFRS 5, the historical allocation of central corporate
costs to Dairy Ireland have been revised to exclude costs that will
continue to be incurred by the Group, with the result that the 2016
EBITA of Glanbia Performance Nutrition and Glanbia Nutritionals
segments have been each reduced by €0.5 million (costs
previously allocated to Dairy Ireland).
Pro-forma adjustments
To better reflect the structure of the Group going forward,
the financial commentary in this Annual Report and Financial
Statements is based where indicated, on pro-forma results.
Pro-forma results are prepared on the basis that Dairy Ireland
has been part of Glanbia Ireland since the beginning of the 2016
period with 40% of the results incorporated within Share of results
of Equity accounted investees. Key pro-forma metrics referred to
within the financial statements are set out in the table below:
2017
2016
Reported
Pro-forma
Reported
Pro-forma
89.17
87.11
86.02
80.40
Adjusted Earnings
Per Share*
Profit from continuing
activities
237.2
225.5
187.7
210.7
Share of Joint
Venture profits
* From continuing activities.
42.8
46.7
26.0
36.7
For definitions and further detail see the glossary on pages 212 to 222.
36
Glanbia plc | Annual Report and Financial Statements 2017
Our People, Our World, Our Communities
SHAPING A
SUSTAINABLE FUTURE
FOCUSED
ON DELIVERING
BETTER
NUTRITION
6,600*
people
Purpose-led, performance driven
In 2017, we continued to work on building our culture
of shared values and behaviours across the Group.
Our culture underpins our focus on embedding
sustainability and corporate responsibility in our strategy,
creating shared value for all our stakeholders.
* Includes JV’s.
32
COUNTRIES
Glanbia plc | Annual Report and Financial Statements 2017
37
Michael Patten
Group Human
Resources &
Corporate Affairs
Director
2017 People Highlights
Focused on embedding our purpose, vision
and values including the integration of our
values into performance management
processes;
More than 1,000 executives, managers and
team leaders participated in our ‘Leading
the Glanbia Way’ development programme
in 2017;
Accelerated the rollout of our Organisation
and Talent Strategy;
Rolled out phase 1 of our HR systems
renewal programme, focusing initially on
the launch of a new global talent acquisition
platform;
Focused on accelerating wider talent
agenda and people development while
leveraging our Organisation and People
Review; and
Completed a three-year Remuneration
Policy review.
“ Our people bring our values to life
and enable us to fulfil our purpose of
delivering better nutrition for every step
of life’s journey. Their talent, commitment
and pride in Glanbia are fundamental to
our long-term success.”
Markos Joannides, Treasury Manager and Kathleen
Jelew, HR Associate in Glanbia House, Kilkenny, Ireland.
Michael Patten
Group Human Resources & Corporate Affairs Director
38
Glanbia plc | Annual Report and Financial Statements 2017
Our People
Performing with purpose – our global HR agenda
2017 was a year in which we made further solid, tangible progress
towards achieving our vision of becoming a top performing global
nutrition company.
During the year we accelerated the rollout of our Organisation
and Talent Strategy (OTS) under four key pillars: Talent, Leadership,
Organisational Effectiveness and Culture & Engagement. Our OTS is
delivered through our new HR operating model. The goal of the HR
operating model is to build on existing strengths to develop a world
class HR function, providing strategic business partnering, appropriate
expertise, efficient and cost effective service delivery and a seamless
employee experience.
We continued to focus on embedding our purpose, vision and values
across the Group. In order to support and reinforce the connection
between values and behaviours for employees, 2017 saw the
integration of values based behaviours into Performance Development
Plans (PDP) for employees. The overall PDP process and enabling
systems and toolkits were reviewed and simplified to become fit for
purpose and aligned with employees’ and managers’ needs. These
changes, which have been very well received, represent a positive
move from a process driven activity towards a more active and ongoing
dialogue with performance and talent development at its core.
The process of renewing our HR systems commenced in earnest
with the launch of ‘MyCareer’, a new talent acquisition platform and
an exciting new stage in the rollout of our OTS. Work in 2018 will
continue to build on these areas whilst also implementing further
actions from our 2016 ‘Your Voice’ Employee Pulse Survey.
Global employee base
In 2017 total Group employees, including Joint Ventures & Associates,
increased by 388 people to 6,600 people based in 32 countries. Glanbia
Performance Nutrition (GPN) employee numbers rose by 249 to 2,027 in
2017, including the addition of 202 new employees from Amazing Grass
and Body & Fit, who joined the Group in early 2017. Glanbia Nutritionals
(GN) increased its workforce by 73 people to 1,948 employees.
Following the establishment of Glanbia Ireland, 1,931 employees
transferred from Dairy Ireland and Glanbia Ingredients Ireland, to
the newly established Joint Venture, Glanbia Ireland. Our Joint
Ventures & Associates had a total of 2,625 employees in 2017.
Talent agenda
Glanbia’s talent agenda is focused on acquiring, developing and
retaining critical talent. In 2017 the Group launched ‘MyCareer’,
an exciting new, best-in-class, talent acquisition solution from SAP
SuccessFactors. ‘MyCareer’ is designed to support Glanbia’s future
success by acquiring, retaining and developing the right people,
in the right place, at the right time.
The new platform will enhance how we recruit and will deliver a
significantly enhanced candidate experience. It provides a global, fully
integrated system for collaboration and rapid decision-making around all
aspects of recruitment including: a single careers website for all of Glanbia,
a recruitment management system for all recruitment activities and a
comprehensive onboarding experience for new hires. A comprehensive
new external careers website is available at www.Glanbia.com/careers
Fostering purpose-led leadership
We are focused on building strong leaders at all levels in the business
through common purpose, identification and the development of key
talent and inspiring excellence and innovation. In 2017, a number of key
initiatives focused on developing a culture of purpose-led leadership
across the Group.
Leading the Glanbia Way – manager programme
Our Leadership Development Programme (LDP) ‘Leading the Glanbia
Way’ continued its rollout across the Group in 2017. Built upon our
purpose, vision and values, the programme focuses on leadership,
impact, performance management, personal effectiveness, change
management and supporting customer excellence. It aims to equip
our people managers with a best practice set of leadership skills
and insights and to offer a tangible commitment to the personal
development of Glanbia’s people while contributing to our leadership
capability across the organisation. Over the course of 2017, more than
1,000 executives, managers and team leaders globally participated in
the programme which runs over five distinct modules. A number of
senior leaders across the business also completed the Executive
component of the programme.
Advanced Leadership and Senior Leadership
Development Programmes
As an additional element of our wider talent agenda, two new
leadership development programmes were devised in 2017, to be
rolled out in 2018. The Advanced Leadership Development Programme
and the Senior Leadership Development Programme focus on the
further development of our leadership teams across the Group.
Our Values
THE CUSTOMERS’
CHAMPION
PERFORMANCE
MATTERS
FIND A
BETTER WAY
WINNING
TOGETHER
SHOWING
RESPECT
Customer advocate
and Company
ambassador
Committed to quality,
safety and
performance
Our Behaviours
Curious, innovative
and eager to learn
Developing ourselves
and collaborating
with others
Role model for
integrity and valuing
the ideas and
contribution of others
Glanbia plc | Annual Report and Financial Statements 2017
39
Recognition Case Study
Glanbia Nutritionals
Carlsbad
When employee survey results identified recognition as a
development area for the Carlsbad site, a cross-functional
committee was formed to deliver a solution. The result was a
peer-to-peer recognition programme called Glanbia Gratitude.
The committee created recognition cards that employees can
present to each other for the special achievements they make
in support of our company values. Completed cards are
displayed onsite on a dedicated ‘Recognition Wall’. Site
leadership also committed to spending more time engaging
with and recognising employees. The programme inspired
other sites within GN to also accelerate recognition as a
powerful tool to inspire our people and create an atmosphere
of positivity and engagement. In addition, Carlsbad also
recorded a significant improvement in its site safety record
during this time.
Michael Patten, Group Director of HR and Corporate Affairs and Noreen
Hobayan, Director of Regulatory Affairs visit the Glanbia Nutritionals
‘Recognition Wall’ in Carlsbad, CA.
Business Unit learning and development initiatives
In addition to the Group development programmes, there are significant
learning and development initiatives undertaken within each of our
Business Units.
Glanbia Nutritionals undertook several key learning and development
initiatives in 2017, including a significant refresh of the graduate and
intern talent development programmes, developmental 360 degree
assessment for all senior leaders, a full rollout of online harassment
prevention training and the implementation of a new document control
and training tracking system in the Idaho sites. A further specific
initiative in 2017 was the comprehensive rollout of the ‘Leading the
Glanbia Way’ programme across all GN sites.
In Glanbia Performance Nutrition, 2017 saw the graduation of the first
participants in the GPN LDP, an in-depth nine month development
opportunity for selected mid-level leaders to gain insights into their
leadership style and learn new skills to effectively lead people and teams.
Approximately 100 manufacturing leads and supervisors also attended
several training modules which provided participants a foundation for
building skills required to be an effective supervisor. In addition to this
training, GPN developed an Individual Development Planning (IDP) tool to
enable employees to identify their development opportunities and plan
their careers.
Pure Ambition Graduate Programme
Glanbia’s Pure Ambition Graduate Programme plays a key role in
selecting and developing talent and leaders at all levels for Glanbia
globally. Graduates have the opportunity to develop their careers
across a wide range of disciplines and in 2017 we welcomed 58
new graduates onto our programme. The Pure Ambition Graduate
Programme has been recognised at the 2016 and 2017 ‘GradIreland
Awards’, winning the Gold Award for Best Training and Development
Programme in the Business/Management category. Learn more at
www.glanbia.com/graduates.
Employee engagement
The 2017 ‘Our Glanbia’ roadshow saw our Group Managing Director
Siobhán Talbot and members of the Executive visit 18 sites across the
US, Ireland and Asia, conducting 24 townhall meetings and interacting
directly with more than 2,200 employees across the Group.
EU Non-Financial Reporting Directive
The EU Non-Financial Reporting Directive (2014/95) requires large companies to report a wide range of non-financial information in their
annual reports. Under the directive companies are required to set out their policy position and performance in relation to environmental,
social and employee matters, respect for human rights, and anti-corruption and anti-bribery matters. In 2017 Glanbia undertook a complete
and comprehensive review and refreshed its current approach to non-financial reporting and performance measurement against the provisions
set out in the directive. Our Board Diversity Policy is explained on page 59. Many of our polices can be viewed on www.glanbia.com.
Group considerations in respect of new non-financial reporting regulations
‘Matters’
Environmental
Policy
2018 Focus areas
Yes
1. Progress against KPIs of water, waste, energy
2. Develop carbon foot printing with Carbon Trust
3. Embed Corporate Responsibility Council (CRC) and quarterly reporting
4. Evolve Carbon Disclosure Project disclosure
Social and Employee
Yes
1. Recognition awards
2. Employee engagement survey
3. Employee engagement executive roadshow
4. Training and development
5. Rollout of values champions
H&S and Food Safety/QLT
Yes
1. Embed CRC and quarterly reporting
2. Establish HSLT, program, process, and priorities, and Group-wide reporting of KPI’s
3. Address two high risk areas in development and launch of new global Glanbia standards
Anti-Bribery & Corruption
Yes
1. Effective communication of our recently updated Anti-Bribery & Corruption Policy
2. Conduct fraud risk assessments across Business Units to highlight potential risk focus areas
Diversity Report
Yes
1. Review evolving legalisation and potential Group impact
40
Glanbia plc | Annual Report and Financial Statements 2017
Our World
Focused on sustainable value
2017 Key Achievements
Progress on Key Performance
Indicators against targets;
Completed Carbon Trust review
of our sustainability strategy;
Completed Group-wide reporting
to Carbon Disclosure Project;
Established Group Corporate
Responsibility Council; and
Received the 2017 US Outstanding
Dairy Processing and Manufacturing
Sustainability award.
Governance
Our sustainability strategy is to advance our purpose, vision and values
through a phased programme that delivers economic, environmental
and social value. In living our commitment to sustainability we drive
continuous improvement as ‘One Glanbia’ under the areas of
environment, food safety and quality, health and safety and community
support. Corporate responsibility is governed by the Group Operating
Executive. In Q2 2017, with the ambition of strengthening our internal
governance, we convened the Glanbia Corporate Responsibility
Council (CRC) comprising of representatives from all Group operations.
The CRC brings leadership visibility to progress strategic priorities and
programme direction, and sign-off half yearly on the broad agenda of
sustainability reporting. Leadership teams on Sustainability, H&S and
Food Safety & Quality, drive the agenda, develop the content, and
provide a forum for sharing best practice and experience delivering
resource efficiency. These global networks are co-ordinated by the
Group Director of Sustainability and the Group Director of Quality
and Food Safety. The sustainability, health and safety, and quality
leadership team programs will be reviewed bi-annually by the CRC.
Sustainability
In 2017 Glanbia sought to embed the common Group wide approach
to sustainability which we reported for the first time in 2016. We aligned
the Sustainability Leadership team with the newly established Health
and Safety Leadership Team. The Global Reporting Initiative (GRI) G4
guidelines continue to determine our focus on key material aspects,
boundaries and measures. The collection, analysis and oversight
of group wide data across all our operations enables us to meet
international reporting standards and demonstrate continuous
improvement. Our phased sustainability strategy follows the measure,
target and action approach. In 2017 we continued to measure our
environmental impacts as a group across water, energy, waste as
well as progress on International Standard (ISO) certification.
Health and Safety
Our Health and Safety Leadership Team (HSLT) creates and embeds
Group-wide standards and reporting requirements to safeguard
the health and safety of our employees, our customers and our
communities, as is inherent in our ‘Showing Respect’ value.
In pursuing our ambition of ‘Zero Harm’, we have set a five-year mission
to eliminate accidents recorded as Lost Time Cases (LTC) globally and
to reduce all Total Recordable Incident Rates (TRIR) to 1.5 incidences/
200,000 hours worked, representing a 30% reduction on the 2017
reported TRIR across Glanbia. Action plans are in place, working locally
and globally, to tackle the most frequent and significant risks to employee
Health and Safety (H&S) to achieve the LTC and TRIR targets.
A Glanbia Health and Safety (H&S) dashboard will be deployed in
2018 to measure our progress and track performance against industry
relevant standards and will be aligned with the current sustainability
reporting. Furthermore, we will implement revisions to our Glanbia Risk
Management System (GRMS) tool and process in 2018 and implement
wider internal auditing to ensure H&S risks are identified, prioritised,
and effectively mitigated.
Food safety and quality
Glanbia has strengthened its commitment to becoming a recognised
global leader in food safety and quality through our Quality Leadership
Team (QLT). This team drives the agenda on food safety and quality
excellence, by leveraging best practice and implementing global
standards in priority topics for food safety risk management. In
addition, the QLT has established governance, benchmarking and
measurement processes to ensure that Glanbia is tracking to global
standards, surfacing the top business risks, and ensuring proficiency
to meet or exceed Glanbia Quality System (GQS) requirements.
An external food safety expert annually reviews and benchmarks
Glanbia’s programme based on industry best practices. Key metrics
for this programme include: compliance to global food safety
certifications (actual vs. target), implementation of our GQS standards
(site proficiency vs. target) and critical case review and ‘lessons
learned’ (actual vs. target).
Jina Kepler, Laboratory Technician and Emily Stout, R&D Scientist in our Cheese R&D
Innovation Center in Twin Falls, Idaho where our award winning cheese solutions are
developed to the highest quality.
Glanbia plc | Annual Report and Financial Statements 2017
41
Progress on our journey in 2017
In our 2016 Annual Report, we presented our ambition on energy, water use,
waste reduction and the adoption of ISO 14001 as a common standard. In
2017, we demonstrated solid progress across these targets and, through the
CRC, have established a similar target-led focus for Health and Safety.
• Our five-year target is to reduce water usage by 8%. In 2017, we
recorded a 20% reduction over the baseline of 2015. The target,
now having been exceeded ahead of schedule, will be revisited
in 2018.
• GPN has targeted 100% zero landfill across all its sites by 2018.
In 2017, clear progress was made with 93% of all GPN waste
material diverted from landfill.
• Our sustainability programmes are being aligned to relevant
international standards (ISO 14001 and OHSAS 18001/ISO 45001).
In 2017, eight Glanbia sites were confirmed certified accredited to
ISO 14001 and two sites are certified to OHSAS 18001/ISO 45001.
• Our 2017 data shows that 50% (25 sites) of our reporting sites have
one or more years of no LTC. 14 sites have two or more continuous
years of no LTC, establishing the baseline for continuous
improvement.
• We established the baseline for TRIR at 2.2 incidences/200,000
hours worked. Our target is to reduce this by 30% in five years.
Programmes
Our vision
Baseline
Our targets
0.61 kwh/kg
Continuous improvement
2017 progress
0.56 kwh/kg
(-7.6%)
To ensure responsible stewardship of
the environment and reduce emissions
at all our facilities and corporate offices
To improve water efficiency in our
facilities and focus on the re-use of
our ‘polished’ or ‘cow’ water
Our ultimate aim is to reduce all waste
being generated across the Group. In
the medium-term our ambition is to
divert waste away from landfill
Energy
Water
Waste
Environmental
Management
Systems
H&S
4.88 lts/kg
Reduce water use by 8%
by 2020
3.93 lts/kg
(-19.84%)
Waste to landfill
0.01kg/kg
Zero landfill where feasible
GPN 93% of waste
diverted from landfill
To grow without compromising
resources for future generations
Eight sites accredited
Adopt ISO 14001 as a common
standard across facilities
Eight sites confirmed
accredited
Our aim is to safeguard the health and
safety of our employees, our customers,
and our community
Two sites accredited
25 sites have one or
more years of no LTC
TRIR 2.2/200,000 hrs
Adopt OHSAS 18001/ISO
450001 or equivalent in a
Glanbia EHS Management
System. Eliminate LTA by 2022.
Reduce by 30% by 2022
Baselines established
Case Study
GPN – The journey
to zero landfill
Glanbia Performance Nutrition (GPN) made a commitment to
achieve Zero Landfill at all GPN manufacturing and warehouses
by 2018. We have worked to identify robust recycling routes
for key materials such as Intermediate Bulk Containers, metal,
cardboard and plastic. Educating our workforce is a key element
of the programme. All sites have completed comprehensive
waste surveys and established reduction plans to ensure the
2018 goal is met. The GPN Middlesbrough UK manufacturing
site has set the bar for all GPN sites by achieving Zero Landfill
status in 2015.
GPN zero landfill: Team
members in Walterboro,
SC engaged in the drive
towards ‘Zero Landfill’
across GPN.
Case Study
Glanbia Nutritionals
wins 2017 Outstanding
Dairy Processing
and Manufacturing
Sustainability award
In June 2017, Glanbia Nutritionals (GN) was awarded
the prestigious 2017 Outstanding Dairy Processing and
Manufacturing Sustainability award by the Innovation Centre for
US Dairy. This award recognises dairy farms, businesses and
partnerships whose practices improve the wellbeing of people,
animals and the planet. Judges evaluated nominations based
on their economic, environmental and community impact and
the independent judging panel, including experts working with
and throughout the dairy community, also considered learning,
innovation, scalability and replicability. For Glanbia, the award
highlighted several years of work within GN to benchmark,
measure and align sustainability goals among our cheese and
whey plants in the US.
42
Glanbia plc | Annual Report and Financial Statements 2017
Our World continued
Peer review and reporting
In 2017 we engaged the Carbon Trust to review our approach to-date
to sustainability in order to inform and guide our 2025 strategy.
“ As the world takes action on climate change and we are
seeing significant progress from many industrial sectors,
the impact of dairy is coming under increasing scrutiny.
In this context, Glanbia recognises the importance of
becoming ever more efficient and taking every available
opportunity to reduce emissions.”
Tom Cumberlege, Associate Director, Carbon Trust
Key findings
The Carbon Trust reported the following recommendations:
• Develop reporting in line with international standards;
•
Implement a robust footprint measurement of environmental
impacts;
• The long-term objective should include science-based target
setting;
• Focus on development of programmes to work with suppliers; and
• Engage on multi-stakeholder programmes to tackle important
pre-competitive issues.
The Carbon Trust’s findings were presented to the Group Operating
Executive in August 2017.
International climate change reporting
Based on the key recommendation of the Carbon Trust, in 2017 we
submitted our first Group-wide response to the Carbon Disclosure
Project (CDP) climate change questionnaire. Our engagement with
CDP allows us benchmark our performance and to measure and
manage our environmental impacts. In 2017 we were assessed
on our supply chain submission. As a first Group-wide submission,
our CDP score is ranked above the CDP respondent industry average.
It is our intention to evolve our reporting in 2018 as part of our drive
for continuous improvement and best practice.
DISCLOSURE INSIGHT ACTION
CDP 2017 climate change and water scores
Glanbia plc score
CDP Food and Beverage
Industry average
Supply chain
Water
Supplier
engagement
rating
C-
D
C
D
B
C
Sustainable sourcing
At Glanbia, we continue to focus on sustainably sourcing our
ingredients. Our Group supplier qualifications protocols are used
to advance this goal. Given the materiality of milk to our business,
a significant focus has been made in building partnerships that drive
sustainable progress on farms. Our farm relations teams work with
producers for the betterment of the environment and their productivity.
In addition, Glanbia plays a key role in national and international groups
focused on sustainable improvement including Bord Bia, Global Dairy
Platform, the Sustainable Agriculture Initiative, the Innovation Center
for US Dairy, Dairy Sustainability Framework and the programmes
associated with those organisations. Our supply chain protocols are
reinforced by best-in-class food safety and quality control as enforced
by the QLT.
2017 Sustainable sourcing highlights
• 94% of our Irish milk suppliers are now certified to Origin Green,
an increase from 85% in 2016.
• Glanbia takes every precaution to ensure antibiotics do not enter
the food chain. Every load of milk either collected or delivered to
Glanbia is tested for antibiotic residues before unloading. Loads that
contain residues are rejected and discarded safely. Furthermore,
monetary fines placed on the milk supplier identified as the source
act as economic deterrents to ensure responsible use.
• Glanbia Nutritionals also introduced ‘Navigating Natural’ to clarify
and simplify frequently used terminology in the US dairy sector.
It explains production systems, antibiotic use on farms, feeding
regimes, as well as natural cheese.
• As part of our Navigating Natural approach we made the decision to
remove recombinant Bovine Somatotrophin (rBST) from our supply
chain in the US and have committed to achieving this in 2018.
In Idaho, our certified evaluators work with our producers to drive
continuous improvement on the implementation of the Farmers
Acting In a Responsible Manner (FARM) animal welfare programme.
•
• Supported the rollout of the FARM Environment Stewardship
module geared at addressing on-farm sustainability.
• Supported the efforts of the Idaho Dairymen’s Association in
building a farm worker safety training module.
• Launch in Ireland of Truly Grass Fed™, a range of certified grass fed
dairy ingredients from cows fed 95% grass and on pasture for up to
300 days a year. The programme is underpinned by independent
scientific research and third party verification (including Non-GMO
Project Verified™).
Glanbia plc | Annual Report and Financial Statements 2017
43
Our communities
2017 Highlights
Inspired by our purpose, we continued to
rollout health and wellness programmes
for employees across the Group;
Health and wellness is the theme for all
community partnerships; and
More than one million euro total
contribution to community and charitable
causes.
Throughout the year, Glanbia continued to focus on rolling out
standardised health and wellness programmes for all employees.
These included:
• Onsite health and wellness facilities available to employees;
• Health and wellness education delivered through GPN Scientific
Affairs and Education team and GPN’s Sports Nutrition School’s
global education programme;
• Glanbia Nutritionals held its Annual Wellness Week in Twin
Falls, Idaho as part of wider programmes of activity to mark National
Nutrition Month in the US and National Workplace Wellbeing Day
(NWWD) in Ireland; and
• Employee Assistance Programme (Ireland and US) – a confidential
counselling service available to employees providing professional
support and information on a wide range of topics.
GPN Sports Nutrition School
In 2017 over 15,000 customers, consumers and employees attended
GPN’s Sports Nutrition School across more than 150 global education
sessions. The school is an industry leading programme designed
to educate participants on the benefits of combining exercise, good
nutrition and supplementation. 2017 was an evolutionary year for GPN
global education with the introduction of an advanced level 200 Sports
Nutrition School commencing in North America and the launch of
regional education franchising with new GPN educators in countries
reaching across South and Central America, Europe, Asia and Australia,
all actively extending the reach of GPN education into new markets.
Breast Cancer Ireland partnership
Glanbia continued its association with Breast Cancer Ireland (BCI) in
2017, sponsoring the annual Great Pink Run which was extended to a
second event in Kilkenny. Around 300 Glanbia employees participated
in the events. In October 2017, more than 100 Glanbia employees took
on the Two Peaks Challenge for BCI, climbing Mount Brandon and
Carrauntoohil, raising an additional €55,000. Glanbia Agribusiness
also supported BCI with its #PinkBales campaign which included the
sale of a special limited edition pink silage wrap through Glanbia
Agribusiness branches.
Breast cancer awareness initiatives also took place in Glanbia
Performance Nutrition Chicago to raise funds for a local charity,
the Lynn Sage Cancer Research Foundation.
Warming up for the Great Pink Run in aid of Breast Cancer Ireland in Kilkenny.
Glanbia 300 Cycle
This year BCI, as well as local charities involved in mental health, were
the main beneficiaries of the annual Glanbia 300 Cycle. The 32 cyclists
completed a 300km round trip cycle to Galway, raising €32,400 for the
chosen charities.
GN charity golf
Glanbia Nutritionals Annual Charity Golf Challenge raised $175,000 for
a number of local charity causes in the Twin Falls, Idaho community.
GPN ‘Fill the Backpacks’ initiative
Glanbia Performance Nutrition partnered with the Humanitarian
Service Project, ‘Fill the Backpacks’ to lend a helping hand to children
in need in Illinois. Glanbia donations made it possible to provide over
3,000 children with school supplies for the 2017-2018 school year.
Community based sponsorships
Glanbia continues to maintain its long-standing association with a number
of sporting and cultural initiatives in the regions in which we operate.
In Ireland, Glanbia’s support for the Kilkenny, Waterford and Wexford
GAA teams continues to resonate strongly with local communities. Our
support for local cultural initiatives continues through our commitment to
the world famous Kilkenny Arts Festival as well as food festivals Savour
Kilkenny and the Waterford Food Festival.
Colleagues in Twin Falls take part in the Annual ‘Glanbia Ryder Cup’ golf tournament,
a special tradition pitting teams from Europe and the US against one another.
44
Glanbia plc | Annual Report and Financial Statements 2017
Risk Management
BUILDING RISK
RESILIENCE
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,
the Board 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
existing within the business and newly emerging risks together with
the methods by which these risks are managed. Overall, the Board
is satisfied that its risk management and internal control processes
are robust however, as with all practices, continuous improvement
and a fresh challenge are required to remain effective. The Board
also considered its obligations in relation to providing both the annual
Going Concern and Long-term Viability Statements. Its review and
conclusions in this regard are outlined below.
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 1 to 51.
After making enquiries the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for a period of at least 12 months from the date of
approval of the Financial Statements. The Group therefore
continues to adopt the going concern basis in preparing its
Financial Statements.
In reaching this conclusion the Directors have had due regard to:
• Available cash resources, cash generation 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 its bank
facilities is provided in note 26 to the Financial Statements; and
• Glanbia’s financial risk management policies which are described
in the Financial Statements, the nature of its business activities
and the factors likely to impact our operating performance and
future growth.
Long-term Viability Statement
Assessment of Prospects
In accordance with the UK Corporate Governance Code (2016)
(‘the Code’), the Directors have assessed the prospects of the
Group taking into account its current position and principal risks.
The Directors have assessed the viability of the Group and its
ability to meet its liabilities as they fall due, taking into account the
Group’s current financial position and the potential impact arising
from the principal risks and uncertainties detailed on pages 47
to 51. The financial position of the Group, its cash flows, liquidity
position and borrowing facilities are outlined in the Group Finance
Director’s Review on pages 30 to 35.
Assessment of Viability
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 consolidated
financial forecast for the current year and financial projections for
future years during the most recent two day strategy and budget
review session in December 2017.
The Board reviewed the process and assessment of the Group’s
prospects made by management, including:
•
the development of a rigorous planning process, outputs of which
comprises of a strategic plan, a consolidated financial forecast for
the current year and financial projections for future years;
• a comprehensive review of the strategic plan as part of their
annual strategy review, with regular monitoring regarding the
achievement of strategic objectives taking place at each Board
meeting. Assumptions are built at both Group and Business Unit
levels and are subject to detailed examination, challenge and
sensitivity analysis by management and the Directors; and
• considering the strategic plan for sensitivity arising from a number
of specific scenarios occurring including, the risk of a significant
deterioration in economic growth, consumer confidence or other
key drivers of revenue, profit and cash flow particularly due to the
economic, industry, political and tax risk factors outlined on pages
48 and 49. The Group considers it will be able to renegotiate
banking facilities in advance of expiry dates.
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. This time period has been chosen for the purpose of
this viability statement, in line with the Group’s three-year strategic
plan to 2020. The Group has sufficient distributable reserves to pay
dividends for a number of years which has been fully considered
as part of the Board’s recent policy considerations. The Board
assesses the Group’s key financial metrics, liquidity position
and projected cash flows before declaring interim and proposing
final dividends.
Glanbia plc | Annual Report and Financial Statements 2017
45
Our risk management framework
Our risk management framework outlines the key stakeholder risk management responsibilities. It is designed to ensure that there is
input across all levels of the business to the management of risk. A combination of a top-down and bottom-up approach allows us to
identify and 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
purpose, vision,
values and strategic
direction
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
Develops and implements the Groups
strategic pillars and priorities.
Determines the Group operating model
and organisational structure.
Monitors performance, risk exposure,
mitigation and internal controls.
Supports and develops the Group Senior
Leadership team and overall talent
development agenda.
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.
Makes recommendations and 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
46
Glanbia plc | Annual Report and Financial Statements 2017
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. 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. All of our principal risks and
uncertainties have been linked to our strategic priorities for ease of reference.
The Board and management use the same process to assess and manage risks within our material Joint Ventures & Associates as it does for
the wholly-owned areas 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 risk matters are fully considered.
Group Senior Leadership Team
Each segment management team and functional lead is required to
maintain a risk register on an ongoing basis. New or emerging risks
are added to the risk register as they are identified. The register
ensures consistency of approach in reporting of risks and requires
management to:
•
Identify and classify each risk as financial, operational, strategic
or regulatory;
• Assess the inherent risk impact, likelihood and the velocity at
which the impact of the risk could materialise;
Identify mitigation measures;
•
• Generate a management action plan if required to address
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 to help manage the key residual risk
exposures; and
the residual risk;
• An overview of the broader organisational and business risks.
• Allocate an owner who has responsibility for the timely
implementation of the agreed action plan; and
• Monitor the implementation of strategies to address risk
exposures.
The Group Operating Executive reviews this report regularly during
the year. The Audit Committee and the Board perform a bi-annual
review, with interim updates from management on significant issues.
Board oversight
The Board regularly monitors the risk management and internal
control systems. The focus of the Board during such reviews is
to ensure 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.
The Audit Committee further developed its level of oversight of
certain principal risks in 2017 through receiving presentations
from management and Group functional leads. Presentations
were received from the following function leads:
• Group Head of Glanbia Business Services and IT;
• Group Head of Food Quality and Safety;
• Group Finance Director; and
• Group Secretary and Group Head of Health and Safety.
Ongoing monitoring
The quality and consistency of risk reporting is supported through
a number of other monitoring and reporting processes including:
• Annual Group strategy process and Board presentations;
• Bi-annual control self-assessment and management
representation letter processes;
• Regular business reviews of key financial and operational
performance;
• Monthly detailed finance reviews;
• Risk focused Internal Audit plan; and
• The externally assessed Glanbia Risk Management System
(GRMS) reviews.
Senior management is also required, when presenting a business
update to the Board or Audit Committee, to outline their key risks
and planned management actions.
Glanbia plc | Annual Report and Financial Statements 2017
47
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 process outlined on page 46. Risks are reported on a residual risk basis and represent a snapshot of the Group’s current principal risk profile.
This is not an exhaustive list of all of the risks faced by the Group, 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 management actions are implemented or changes in the operating environment occur. In 2017 we combined
Strategy risk with Economic, Industry and Political risk due to their overlap but no new principal risks were identified. The current risk profile is
summarised in the diagram below:
Strategic and
Commercial
Financial
Operational and
Regulatory
Economic, Industry
and Political risk
Market risk
Customer Concentration risk
Acquisition risk
Tax risk
Supplier risk
Talent Management risk
IT, Data Protection and
Cyber Security risks
Site Compliance risk and
Environmental, Health and
Safety regulation risk
Product Safety and
Compliance risk
In 2018 the principal risks and uncertainties affecting the Group’s performance are:
• Economic, Industry and Political risk – Macroeconomic and global trade uncertainty continues to increase, partly as a result of the geo-
political climate and the continued uncertainty in relation to Brexit (the United Kingdom (UK) electorate vote to leave the European Union).
From a Group perspective this has increased raw material pricing and currency volatility which together with other economic measures will
require continued focus to limit the impact to our strategic growth objectives;
• Market risk – The overall impact on margins of movements in dairy pricing;
• Tax risk – While the impacts of the recent US tax reform legislation will continue to be considered in detail by the Group, it is possible that
further legislative change in other jurisdictions may follow which will require careful monitoring by our in-house tax team and external advisors
to assess any potential impacts to our tax strategy and investment decisions; and
• Customer Concentration – While from a strategic perspective the Group aims to build strong customer relationships with major customers, it
can expose us to credit exposure and other balance sheet risks. The Board and management will be focused on utilising available mitigation
to limit such exposures while recognising that they cannot be fully eliminated.
The Group’s approach to financial risks, including currency risk, interest rate risk, liquidity and cash flow risk, price risk and credit risk is to centrally
manage these risks against comprehensive policy guidelines, details of which are outlined in note 31 ‘Derivative financial instruments and financial
risk management’. The Board regularly reviews these policies. The Group’s use of financial instruments is also described in note 31.
48
Glanbia plc | Annual Report and Financial Statements 2017
Principal Risks and Uncertainties
Link to Strategic Priorities
Grow performance nutrition
Sustain and drive nutritional solutions
Organic and acquisitional growth
Develop talent, culture and values
Risk
Link
Potential Impact
Mitigation
Risk Trend
Developments in 2017
2018 Focus Areas
Strategic and Commercial risks
Economic, Industry
and Political risk
Our performance is influenced by
global economic conditions, consumer
confidence and the stability of the
markets in which we operate. Failing
to recognise or obtain accurate and
relevant competitive and environmental
intelligence may result in the adoption
of incorrect business strategies.
Market risk
Increasing competition across certain
channels through high promotional
activity, competitor product innovation
and channel shifts provides an ongoing
challenge.
Customer
Concentration risk
The Group benefits from close
commercial relationships with
a number of key customers.
Acquisition risk
The anticipated benefits of acquisitions
may not be achieved if the Group
fails to conduct full and proper due
diligence, raise the required funds,
complete the transaction or properly
integrate the operations of the
acquired businesses.
Financial risk
Tax risk
The Group’s tax strategy may be
impacted by legislative changes
to local or international tax rules.
Deterioration in economic growth or
consumer confidence, significant currency
movements, political instability or civil
disturbances may impact performance
and the achievement of growth targets.
The Board regularly assesses key market trends and
the implications for Group performance and strategic
objectives. Corrective actions are identified and
implemented as required.
Our strategy is aimed at the continued expansion 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.
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.
Potential adverse effect on the Group’s
financial performance if we fail to adapt
successfully where and when required
to meet market challenges.
We limit the impact of prolonged competitor
challenges through continued channel and
international expansion including a broadening
of the portfolio through targeted acquisitions.
We protect our market positions by actively monitoring
the major trends impacting our businesses.
We invest in research and development expenditure
focused on value-added and customer-specific
solutions and invest in promotional activities where
required.
The loss of one or more of these
customers, or a significant deterioration in
commercial terms, could have a material
impact on Group profitability.
The Group has developed strong relationships with
major customers by focusing on superior customer
service, product innovation, quality assurance and
cost competitiveness.
Below expected performance of the
acquired business and the diversion of
management attention to integration
efforts could result in significant value
destruction, impacting the Group’s
profitability and growth objectives.
The Group may be exposed to additional
tax liabilities.
The Board regularly reviews its exposure to individual
customers and considers the impact of acquisitions
where relevant.
Credit exposure is actively reviewed and managed
including the use of credit insurance where possible.
The Group has acquisition integration processes
in place to monitor the performance of acquired
businesses and to implement corrective actions.
The Board approves business case and funding
requirements for all significant investments.
Mandatory post-acquisition completion reviews are
conducted, with regular Audit Committee updates.
Acquired entity management teams are typically
strengthened by the transfer of experienced Glanbia
managers, which assists in increasing the efficiency
of integration efforts.
The Group employs a team of tax professionals to
support the Group in ensuring compliance with
legislative requirements globally.
We constructively engage with tax authorities where
appropriate and we engage advisors to clarify tax
legislation to ensure we achieve compliance with
relevant tax law across the jurisdictions in which
we operate.
Macroeconomic and global trade uncertainty continues to increase,
From a Group perspective the evolving economic landscape has
partly as a result of the geo-political climate and the continued
increased raw material and currency volatility which will require
uncertainty in relation to Brexit. A Brexit Committee was formed
continued focus to limit the impact to our strategic growth objectives.
to assess risks and develop action plans in this area.
We invest in developing in-house capabilities to assess trends in key
Across the organisation we continue to expand our portfolio into new
market areas ensuring accurate and relevant data is available to the
areas of operation and new geographies to balance macroeconomic
Board and management teams to support key decision making.
risk.
The performance nutrition landscape continues to be fast moving
We continually focus on developing consumer insights and trends
and competitive, with changes in consumer channel preferences
in all areas of the business and matching these to our innovation
and aggressive promotional activity. The market dynamics in North
capabilities will be integral to our growth ambitions.
We focus on serving our customers and consumers across
multiple geographies.
We pursue targeted acquisitions to further expand our product,
customer and channel reach.
America were particularly challenging in the specialty channel in 2017
but overall GPN continued to drive organic branded volume growth
both in North America and key geographies across EMEA and
LAPAC underpinned by a focus on innovation.
The acquisitions of Amazing Grass and Body & Fit are a strong
strategic fit and have allowed GPN to extend its reach to new
customers and channels.
In GN we continued to innovate and be the partner of choice for
nutritional and functional solutions in cheese and whey. This focus
differentiates our capabilities from the competitive set.
The restructuring of the GN segment during 2016 and 2017 enabled
Our innovation pipeline in GN and GPN is led by consumer insights.
us to further grow as an innovative agile insight-led organisation,
aligned to customer requirements and consumer trends.
We continually assess the potential impact of channel shifts by
consumers and the financial strength of our customer base.
Closely monitor our customer credit exposures and balance sheet
risks and utilise available mitigation to limit the risks where possible.
Management continually monitors the marketplace to identify
Acquisition decisions are focused on the achievement of our strategic
potential acquisitions which fit with our Group portfolios.
priorities.
Successfully added Amazing Grass and Body & Fit into our
We will further develop and execute the investment plans to optimise
GPN brand portfolio.
the growth potential of Amazing Grass and Body & Fit.
The Group Finance Director presented to the Audit Committee on the
Support the development of the strategic plan for Glanbia Ireland.
output of post-acquisition completion reviews conducted in 2017.
In 2017 we reshaped the Group portfolio by the disposal of 60% of
Dairy Ireland to Glanbia Co-operative Society establishing a strong
Joint Venture of Glanbia’s Irish businesses ‘Glanbia Ireland’ with a
robust business model.
US tax reform legislation was enacted on 22 December 2017.
Monitoring potential further developments in international tax
There remains some uncertainties on certain provisions within the
legislation.
Ensuring compliance with the new legislative requirements.
legislation that will be worked through over the coming months.
Continued focus to address the Base Erosion and Profit Shifting
project (including Country by Country Reporting) requirements.
Glanbia plc | Annual Report and Financial Statements 2017
49
Risk
Link
Potential Impact
Mitigation
Risk Trend
Developments in 2017
2018 Focus Areas
Deterioration in economic growth or
The Board regularly assesses key market trends and
consumer confidence, significant currency
the implications for Group performance and strategic
movements, political instability or civil
objectives. Corrective actions are identified and
disturbances may impact performance
implemented as required.
and the achievement of growth targets.
Macroeconomic and global trade uncertainty continues to increase,
partly as a result of the geo-political climate and the continued
uncertainty in relation to Brexit. A Brexit Committee was formed
to assess risks and develop action plans in this area.
Across the organisation we continue to expand our portfolio into new
areas of operation and new geographies to balance macroeconomic
risk.
From a Group perspective the evolving economic landscape has
increased raw material and currency volatility which will require
continued focus to limit the impact to our strategic growth objectives.
We invest in developing in-house capabilities to assess trends in key
market areas ensuring accurate and relevant data is available to the
Board and management teams to support key decision making.
Risk Trend
Increasing
Stable
Decreasing
The performance nutrition landscape continues to be fast moving
and competitive, with changes in consumer channel preferences
and aggressive promotional activity. The market dynamics in North
America were particularly challenging in the specialty channel in 2017
but overall GPN continued to drive organic branded volume growth
both in North America and key geographies across EMEA and
LAPAC underpinned by a focus on innovation.
The acquisitions of Amazing Grass and Body & Fit are a strong
strategic fit and have allowed GPN to extend its reach to new
customers and channels.
In GN we continued to innovate and be the partner of choice for
nutritional and functional solutions in cheese and whey. This focus
differentiates our capabilities from the competitive set.
We continually focus on developing consumer insights and trends
in all areas of the business and matching these to our innovation
capabilities will be integral to our growth ambitions.
We focus on serving our customers and consumers across
multiple geographies.
We pursue targeted acquisitions to further expand our product,
customer and channel reach.
The restructuring of the GN segment during 2016 and 2017 enabled
us to further grow as an innovative agile insight-led organisation,
aligned to customer requirements and consumer trends.
Our innovation pipeline in GN and GPN is led by consumer insights.
Closely monitor our customer credit exposures and balance sheet
risks and utilise available mitigation to limit the risks where possible.
We continually assess the potential impact of channel shifts by
consumers and the financial strength of our customer base.
Management continually monitors the marketplace to identify
potential acquisitions which fit with our Group portfolios.
Acquisition decisions are focused on the achievement of our strategic
priorities.
Successfully added Amazing Grass and Body & Fit into our
GPN brand portfolio.
We will further develop and execute the investment plans to optimise
the growth potential of Amazing Grass and Body & Fit.
The Group Finance Director presented to the Audit Committee on the
output of post-acquisition completion reviews conducted in 2017.
In 2017 we reshaped the Group portfolio by the disposal of 60% of
Dairy Ireland to Glanbia Co-operative Society establishing a strong
Joint Venture of Glanbia’s Irish businesses ‘Glanbia Ireland’ with a
robust business model.
Support the development of the strategic plan for Glanbia Ireland.
US tax reform legislation was enacted on 22 December 2017.
There remains some uncertainties on certain provisions within the
legislation that will be worked through over the coming months.
Continued focus to address the Base Erosion and Profit Shifting
project (including Country by Country Reporting) requirements.
Monitoring potential further developments in international tax
legislation.
Ensuring compliance with the new legislative requirements.
Strategic and Commercial risks
Economic, Industry
and Political risk
Our performance is influenced by
global economic conditions, consumer
confidence and the stability of the
markets in which we operate. Failing
to recognise or obtain accurate and
relevant competitive and environmental
intelligence may result in the adoption
of incorrect business strategies.
Market risk
Increasing competition across certain
channels through high promotional
activity, competitor product innovation
and channel shifts provides an ongoing
challenge.
Customer
Concentration risk
The Group benefits from close
commercial relationships with
a number of key customers.
Acquisition risk
The anticipated benefits of acquisitions
may not be achieved if the Group
fails to conduct full and proper due
diligence, raise the required funds,
complete the transaction or properly
integrate the operations of the
acquired businesses.
Financial risk
Tax risk
The Group’s tax strategy may be
impacted by legislative changes
to local or international tax rules.
Our strategy is aimed at the continued expansion 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.
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.
We protect our market positions by actively monitoring
the major trends impacting our businesses.
We invest in research and development expenditure
focused on value-added and customer-specific
solutions and invest in promotional activities where
required.
Potential adverse effect on the Group’s
We limit the impact of prolonged competitor
financial performance if we fail to adapt
challenges through continued channel and
successfully where and when required
international expansion including a broadening
to meet market challenges.
of the portfolio through targeted acquisitions.
The loss of one or more of these
The Group has developed strong relationships with
customers, or a significant deterioration in
major customers by focusing on superior customer
commercial terms, could have a material
service, product innovation, quality assurance and
impact on Group profitability.
cost competitiveness.
Below expected performance of the
The Group has acquisition integration processes
acquired business and the diversion of
in place to monitor the performance of acquired
management attention to integration
efforts could result in significant value
destruction, impacting the Group’s
profitability and growth objectives.
The Board regularly reviews its exposure to individual
customers and considers the impact of acquisitions
where relevant.
Credit exposure is actively reviewed and managed
including the use of credit insurance where possible.
businesses and to implement corrective actions.
The Board approves business case and funding
requirements for all significant investments.
Mandatory post-acquisition completion reviews are
conducted, with regular Audit Committee updates.
Acquired entity management teams are typically
strengthened by the transfer of experienced Glanbia
managers, which assists in increasing the efficiency
of integration efforts.
The Group may be exposed to additional
The Group employs a team of tax professionals to
tax liabilities.
support the Group in ensuring compliance with
legislative requirements globally.
We constructively engage with tax authorities where
appropriate and we engage advisors to clarify tax
legislation to ensure we achieve compliance with
relevant tax law across the jurisdictions in which
we operate.
50
Glanbia plc | Annual Report and Financial Statements 2017
Principal Risks and Uncertainties continued
Link to Strategic Priorities
Grow performance nutrition
Sustain and drive nutritional solutions
Organic and acquisitional growth
Develop talent, culture and values
Risk
Link
Potential Impact
Mitigation
Risk Trend
Developments in 2017
2018 Focus Areas
Operational and Regulatory risks
Supplier risk
The principal Group ingredient supply
risk relates to the risk of not achieving
an appropriate balance between
sustainable milk supply and cost. Milk
availability and pricing can vary from
quarter-to-quarter and year-to-year
with resulting impacts on plant
production levels and input costs.
Talent Management risk
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.
IT, Data Protection and
Cyber Security risks
The Group is dependent on robust IT
systems and infrastructure for most
of our principal business processes.
Site Compliance risk and
Environmental, Health and
Safety regulation risk
The risk of non-compliance with
regulations pertaining to building and
fire codes and/or zoning restrictions
resulting in a loss of capacity or
closure at a major site or a breach
of environment or Health and
Safety regulations.
Product Safety and
Compliance risk
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.
Structurally in many areas of our business
our models for the purchase of milk are
significantly aligned with our end product
pricing. However, that protection is not
absolute. In particular, the relative 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.
Market pricing is continually evolving and the market
environment can change quickly. As a result, our
milk procurement strategy teams work to ensure the
business remains competitive in its supplier offerings
ensuring the sustainability of our supply base.
We work to ensure that the focus is not solely on
pricing but also on non-pricing value-added initiatives.
We have developed a number of risk management
tools across our business to protect from dairy
market volatility.
A failure to retain, attract and/or develop
key talent will impact on our ability to
create sustainable value for all our
stakeholders.
A successful cyber-attack on our IT
infrastructure may result in significant
disruption to our operating performance.
There is also a risk of reputational damage
due to the potential loss of sensitive
financial, personal and commercial
information.
The Group has implemented strong recruitment
processes, effective HR policies and procedures,
short and long-term incentives, robust succession
management planning and a range of talent
management initiatives including a focused graduate
recruitment programme and a range of Group
management development programmes.
The Group maintains a global system for the control
and reporting of access to our critical IT systems. This
is supported by ongoing 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 ongoing audit
activities) to monitor compliance with relevant privacy
laws and regulations.
Health and Safety risks, reputational
damage, regulatory penalties and an
inability to service customer requirements
due to capacity restrictions or plant
closure.
The Group monitors overall safety and loss prevention
performance through the independently assessed
Glanbia Risk Management System (GRMS). The
results are 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.
Reputational damage, regulatory penalties
or restrictions, product recall costs,
compensation payments, lost revenues
and reduced growth potential. The sudden
introduction of more stringent regulations
such as additional labelling requirements
may also cause operational difficulties.
The Quality Leadership Team (QLT) drives the agenda
on Quality and Food Safety excellence by:
• Leveraging best practice and implementing
global standards in priority topics; and
• Employing suitably qualified and experienced
staff.
The Group also ensures appropriate product liability
insurance is maintained.
GN has continued to engage proactively with the patron supplier
Ongoing engagement with our supply base in Ireland and the US
base on milk procurement policy and milk price to underpin long-term
to ensure sustainability of supply at a level of pricing that is both
sustainable supply.
commercial and competitive.
With the creation of Glanbia Ireland the partners have established a
robust business model to manage this risk by establishing an annual
minimum level of profitability in the business.
Agreed updated Remuneration Policy with clear links to our
Continue to embed our purpose, vision and values across all levels
strategic objectives.
of the Group.
Continued to implement appropriate responses to our employee
Accelerated focus on talent, succession and leadership development.
Further develop the HR operating model across the Group.
engagement Pulse Survey.
global talent.
Introduced a new talent acquisition system to attract and retain
The risk of coordinated cyber-attacks increased in 2017 with
Continue to review our data protection obligations in advance of
a number of major organisations falling victim to such attacks.
the regulatory environment changing in 2018 particularly in relation
The regulatory environment supporting data protection continues
to be a focus area.
Dedicated Group IT Security team in place to limit IT risks.
Detailed Internal Audit IT audit programme to identify operational
IT weaknesses.
to the EU General Data Protection Regulation (GDPR) requirements.
Continued investment in IT platforms to support a reshaped GN
Enhancing our integration of IT systems post acquisitions and Group
Enhancement of IT platform within Body & Fit to support the online
organisation.
monitoring controls.
DTC growth strategy.
Launch of the Glanbia Corporate Responsibility Council to streamline
Monitoring evolving regulatory requirements.
reporting across sustainability, food safety and quality, environmental,
Enhancement of our Health and Safety training programmes and
health and safety and community support.
Clear Group vision established of Zero Harm.
Group level governance.
Development of environmental, health and safety dashboard to
measure progress and track performance against industry standards.
Five-year roadmap established to eliminate lost time accidents globally.
The QLT has established governance, benchmarking and KPI
The QLT is focused on ensuring that the team is fully trained and
measurement processes to ensure the Group is tracking to global
informed on new regulatory requirements particularly in some of the
standards and best practice.
emerging markets the Group has targeted for growth.
The Group Head of Quality and Food Safety has implemented a
lessons learned tool to push key learnings across critical quality
and food safety cases.
Glanbia plc | Annual Report and Financial Statements 2017
51
Risk
Link
Potential Impact
Mitigation
Risk Trend
Developments in 2017
2018 Focus Areas
Risk Trend
Increasing
Stable
Decreasing
Operational and Regulatory risks
Supplier risk
The principal Group ingredient supply
risk relates to the risk of not achieving
an appropriate balance between
sustainable milk supply and cost. Milk
availability and pricing can vary from
quarter-to-quarter and year-to-year
with resulting impacts on plant
production levels and input costs.
Talent Management risk
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.
IT, Data Protection and
Cyber Security risks
The Group is dependent on robust IT
systems and infrastructure for most
of our principal business processes.
Site Compliance risk and
Environmental, Health and
Safety regulation risk
The risk of non-compliance with
regulations pertaining to building and
fire codes and/or zoning restrictions
resulting in a loss of capacity or
closure at a major site or a breach
of environment or Health and
Safety regulations.
Product Safety and
Compliance risk
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.
Structurally in many areas of our business
Market pricing is continually evolving and the market
our models for the purchase of milk are
environment can change quickly. As a result, our
significantly aligned with our end product
milk procurement strategy teams work to ensure the
pricing. However, that protection is not
business remains competitive in its supplier offerings
absolute. In particular, the relative pricing
ensuring the sustainability of our supply base.
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.
We work to ensure that the focus is not solely on
pricing but also on non-pricing value-added initiatives.
We have developed a number of risk management
tools across our business to protect from dairy
market volatility.
A failure to retain, attract and/or develop
The Group has implemented strong recruitment
key talent will impact on our ability to
processes, effective HR policies and procedures,
create sustainable value for all our
short and long-term incentives, robust succession
stakeholders.
management planning and a range of talent
management initiatives including a focused graduate
recruitment programme and a range of Group
management development programmes.
A successful cyber-attack on our IT
The Group maintains a global system for the control
infrastructure may result in significant
and reporting of access to our critical IT systems. This
disruption to our operating performance.
is supported by ongoing testing of access controls,
There is also a risk of reputational damage
which include data leakage/loss risk assessments.
due to the potential loss of sensitive
financial, personal and commercial
information.
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 ongoing audit
activities) to monitor compliance with relevant privacy
laws and regulations.
Health and Safety risks, reputational
damage, regulatory penalties and an
The Group monitors overall safety and loss prevention
performance through the independently assessed
inability to service customer requirements
Glanbia Risk Management System (GRMS). The
due to capacity restrictions or plant
results are presented to and considered by the Audit
closure.
Committee on an annual basis.
The Group continues to invest in energy efficiency
advancements, carbon reduction and emission
management programmes.
Reputational damage, regulatory penalties
The Quality Leadership Team (QLT) drives the agenda
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.
on Quality and Food Safety excellence by:
• Leveraging best practice and implementing
global standards in priority topics; and
• Employing suitably qualified and experienced
staff.
The Group also ensures appropriate product liability
insurance is maintained.
GN has continued to engage proactively with the patron supplier
base on milk procurement policy and milk price to underpin long-term
sustainable supply.
Ongoing engagement with our supply base in Ireland and the US
to ensure sustainability of supply at a level of pricing that is both
commercial and competitive.
With the creation of Glanbia Ireland the partners have established a
robust business model to manage this risk by establishing an annual
minimum level of profitability in the business.
Agreed updated Remuneration Policy with clear links to our
strategic objectives.
Continue to embed our purpose, vision and values across all levels
of the Group.
Continued to implement appropriate responses to our employee
engagement Pulse Survey.
Introduced a new talent acquisition system to attract and retain
global talent.
Accelerated focus on talent, succession and leadership development.
Further develop the HR operating model across the Group.
The risk of coordinated cyber-attacks increased in 2017 with
a number of major organisations falling victim to such attacks.
The regulatory environment supporting data protection continues
to be a focus area.
Dedicated Group IT Security team in place to limit IT risks.
Detailed Internal Audit IT audit programme to identify operational
IT weaknesses.
Continue to review our data protection obligations in advance of
the regulatory environment changing in 2018 particularly in relation
to the EU General Data Protection Regulation (GDPR) requirements.
Continued investment in IT platforms to support a reshaped GN
organisation.
Enhancing our integration of IT systems post acquisitions and Group
monitoring controls.
Enhancement of IT platform within Body & Fit to support the online
DTC growth strategy.
Launch of the Glanbia Corporate Responsibility Council to streamline
reporting across sustainability, food safety and quality, environmental,
health and safety and community support.
Clear Group vision established of Zero Harm.
Monitoring evolving regulatory requirements.
Enhancement of our Health and Safety training programmes and
Group level governance.
Development of environmental, health and safety dashboard to
measure progress and track performance against industry standards.
Five-year roadmap established to eliminate lost time accidents globally.
The QLT has established governance, benchmarking and KPI
measurement processes to ensure the Group is tracking to global
standards and best practice.
The QLT is focused on ensuring that the team is fully trained and
informed on new regulatory requirements particularly in some of the
emerging markets the Group has targeted for growth.
The Group Head of Quality and Food Safety has implemented a
lessons learned tool to push key learnings across critical quality
and food safety cases.
52
Glanbia plc | Annual Report and Financial Statements 2017
GLOBAL
FUNCTIONAL
DRINKS
MARKET
WORTH
$277.7BN
BY 2020.
Source: Technavio
market research
$440bn
GLOBAL REVENUES
FOR FUNCTIONAL
FOOD PROJECTED
TO INCREASE FROM
$300BN IN 2017 TO
OVER $440BN IN 2022.
Source: Statistica
94%
eat on
the go
94% OF AMERICAN CONSUMERS REACH FOR A SNACK
AT LEAST ONCE A DAY. THESE CONSUMERS WANT THEIR
SNACKS TO BE CONVENIENT FOR THEIR BUSY LIVES
AND CONTRIBUTE TO THEIR DAILY NUTRITION NEEDS
Source: NBJ
Read more on pages 20-29
Glanbia plc | Annual Report and Financial Statements 2017
53
Directors’ Report
Corporate Governance Report
Board of Directors and
Senior Management
Audit Committee Report
Nomination and Governance
Committee Report
Remuneration Committee Report
Other Statutory Information
Directors’ Responsibility Statement
54
64
70
76
80
106
111
Directors’
Report
54
Glanbia plc | Annual Report and Financial Statements 2017
COMMITTED TO STRONG
GOVERNANCE AND ETHICAL
STANDARDS ALIGNED WITH
OUR CORE VALUES OF
EXCELLENCE AND INTEGRITY
“ One of my key responsibilities as Group
Chairman is to ensure that high standards
of corporate governance exist at all levels
of Glanbia plc. Good governance is integral
to ensuring that we remain a successful
and viable company achieving our strategic
objectives and continuing to deliver
sustainable value creation for shareholders.”
Dear shareholder,
On behalf of the Board, I am pleased to present the Corporate Governance
Report for the year ended 30 December 2017 which highlights the Board’s
continued commitment to maintaining excellent corporate governance and
the highest ethical standards in everything we do.
The Board recognises that our success is dependent on cultivating
a working environment in which the highest standards of corporate
governance and behaviour are established, demonstrated and
maintained in all our activities.
Board and Committee composition
There were a number of changes to the composition of the Board
and its Committees during the year which are discussed in detail
in the Nomination and Governance Report on page 76.
Board evaluation and Board effectiveness
The annual Board evaluation process is an important element in ensuring
the effective and efficient operation of the Board. Following a comprehensive
external evaluation in 2016, the Board undertook an internal evaluation in
2017. This evaluation focused on the overall effectiveness of the Board and
its Committees, and the progress the Board has made in addressing the
outcomes of the 2016 evaluation.
Key areas of focus for 2018 remain as follows:
• Continued evolution of risk reporting; and
• Continued emphasis on medium-term succession planning.
Further details on the Board evaluation are set out on page 60.
This transaction required the highest level of corporate governance
oversight and conduct to ensure that the interests of all stakeholders
were taken into account in the decision making process. Both parties
retained independent advisers for the duration of the transaction.
Remuneration and reporting
Executive Remuneration Policy and design is reviewed by the
Remuneration Committee on a three-year basis and 2017 signified
the end of the current three-year period. Following a comprehensive
tendering process during the year, the Group retained Willis Towers
Watson Remuneration Advisers to provide an independent external
review of our Remuneration Policy for the period 2018-2020. The
2018-2020 Remuneration Policy (details of which are set out on pages
85 to 90 of the Remuneration Committee Report), which is largely
unchanged to the 2015-2017 Remuneration Policy, will be presented
to shareholders for consideration at the 2018 Annual General Meeting
(AGM).
Compliance with the Codes
The Group is subject to the Irish Corporate Governance Annex (2010)
and the UK Corporate Governance Code (2016), collectively known as
(the ‘Codes’). A fundamental part of the way the Board conducts its
business is embedding the main principles of the Codes and embracing
best practice across all parts of our organisation. Details of where the
Codes can be accessed are included on page 63. I am happy to confirm
that the Group has complied with C.3.1 (Composition of the Audit
Committee) of the UK Corporate Governance Code (2016)since 9 August
2017 and the other detailed provisions of the Codes throughout 2017,
with the exception of B.1 (Composition of the Board of Directors) of
the UK Corporate Governance Code (2016). On 9 August 2017, the
Group Chairman and Vice-Chairmen retired as Committee members,
strengthening the independence of the Audit Committee. Between 2012
and 2017, the Society and the Board agreed on a number of changes
impacting the composition and size of the Board over the period
2016-2022 which will reduce the number of Directors nominated by the
Society from the current level of 10 (previously 14) to six (details of which
is set out in the Nomination and Governance Committee Report on page
78). The Board will continue to work closely with the representatives of
the Society to further the interests of the Group. The Board is satisfied
that the composition and size of the Board (which has received
shareholder approval) 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 including the Audit, Nomination
and Governance and Remuneration Committee Reports.
Creation of Glanbia Ireland
As I outlined in my statement on page 7, one of the most significant
developments for the Group during 2017 was the disposal by the Group to
Glanbia Co-operative Society Limited (the ‘Society’) of 60% of its interest
in the Group’s Dairy Ireland business. Glanbia plc retained a 40% interest
and as a result Dairy Ireland was integrated with Glanbia Ingredients
Ireland, and the combined business has been renamed Glanbia Ireland.
Re-election of Directors
In accordance with the UK Corporate Governance Code (2016),
all of the Directors are subject to annual re-election by shareholders.
Accordingly, each of the Directors will seek re-election at the 2018
AGM with the exception of Michael Keane who has indicated his
intention to retire at the conclusion of the 2018 AGM. Additionally,
Glanbia plc | Annual Report and Financial Statements 2017
55
Patrick Coveney, Donard Gaynor, Paul Haran and Dan O’Connor
will each seek re-election at the 2018 AGM by separate resolution
of the independent shareholders (i.e. all of the shareholders save
the Society and its subsidiary companies and related parties).
All Directors have indicated that they will abstain from voting on
these separate resolutions.
Looking ahead
Details of the major areas of the Board’s stewardship and governance
actions during 2017 are given in the Corporate Governance and
Committee Reports which follow. The Board welcomes open,
meaningful discussion with all of our shareholders and I look forward
to meeting shareholders at our 2018 AGM, which will be held on
25 April 2018 at 11.00 am in the Lyrath Estate Hotel, Old Dublin Road,
Kilkenny, Ireland. Input from our shareholders is valued by Glanbia and
I welcome questions or comments from shareholders either via our
website www.glanbia.com, or in person at the AGM.
Finally, I would like to thank my colleagues on the Board for their
continued support, commitment, challenge and passion for our business.
Henry Corbally
Group Chairman
See pages 1 to 52 for more information on the Strategic Report.
See pages 56 to 68 for more information on Board of Directors
and Senior Management.
See page 56 for more information on Board activity.
See pages 70 to 75 for more information on the Audit Committee
Report.
See pages 76 to 79 for more information on the Nomination and
Governance Committee Report.
See pages 80 to 105 for more information on the Remuneration
Committee Report.
56
Glanbia plc | Annual Report and Financial Statements 2017
Corporate Governance Report
Board Highlights
LIVING OUR VALUES THROUGH OUR ACTIVITIES
The Customers’ Champion: Re-design of the
business performance management structure
to support the newly reshaped and rebranded
Glanbia Nutritionals and provide an enhanced
customer experience
Performance Matters: Commissioned an
externally facilitated Group-wide strategic review
Find a Better Way: Opened a new state-of-
the-art Glanbia Performance Nutrition R&D
Innovation Centre in Downers Grove, Illinois, US
Winning Together: Approved the integration
of Dairy Ireland with Glanbia Ingredients Ireland
creating the strategic Joint Venture Glanbia
Ireland
Showing Respect: Adopted a new health and
wellness theme for all our community initiatives
THE CUSTOMERS’
CHAMPION
PERFORMANCE
MATTERS
FIND A
BETTER WAY
WINNING
TOGETHER
SHOWING
RESPECT
Strategy and corporate
development
– Conducted a detailed strategic review of the themes
and key drivers of each of the Group’s business
segments for the 2018 strategic plan;
– Approved the three-year strategic plan (2018-2020);
and
– Received regular updates on Group corporate
development opportunities from the Group
Corporate Development Director. This included
regular reviews of the merger and acquisition
strategy/pipeline.
Operational and
financial performance
– Received regular reports from the Group
Managing Director;
– Received regular updates from the Group Finance
Director and other Executive Directors on business
performance, business priorities and operations of
the Group;
– Approved the Group’s Annual Report, half-yearly
report and interim management statements;
– Recommended the 2016 final dividend and
approved the 2017 interim dividend; and
– Approved the Group budget for the 2018
financial year.
Risk
– Conducted an annual review of the material financial
and non-financial risks facing the Group;
– Considered the Group’s principal risks and
uncertainties and how they are managed within
our risk appetite when assessing the Group’s longer
term viability;
– Debated risk appetite and the refreshment of the risk
appetite statements against the Group Risk Register;
– Received reports from the Group Committee
Chairmen and core Group Risk Functional owners;
and
– Conducted a review of the Group’s material
compliance arrangements and structures for the
purpose of the Compliance Statement.
Investor relations
– Presented at 18 investor conferences globally
and regularly engaged with key shareholders;
– Management updated the market regularly on
performance via the AGM, full and half-yearly
results and interim management statements;
– Published a circular and held an Extraordinary
General Meeting in relation to the creation of the
Glanbia Ireland Joint Venture;
– Consulted with larger institutional shareholders
and key independent proxy advisers in relation
to the Group’s Executive Remuneration Policy
and the reconstitution of the Committees; and
– Consulted regularly with the representative
structure of our largest shareholder.
Governance
– Undertook an internal Board evaluation;
– Confirmed Directors’ independence;
– Appointed a new Chairman of the Nomination
and Governance Committee;
– Reconstituted the membership of the Audit,
Nomination and Governance and Remuneration
Committees to comprise only Independent (of the
Society) Non-Executive Directors;
– Amended and restated the Relationship Agreement
with the Society to reduce the Society’s
representation on the Board to six by 2022;
– Received reports from the Committee Chairmen; and
– Reviewed updates on corporate regulatory matters.
People
– Undertook a Remuneration Policy review;
– Reviewed progress of values and behaviours
–
implementation across the Group;
Implemented actions arising from the employee
engagement Pulse Survey results;
– Received updates on and considered senior
succession planning and talent management;
– Renewed focus on career planning, launch of
‘MyCareer’, an end to end new recruitment Global
talent acquisition platform;
– Reviewed and approved the HR strategy focusing
on leadership, talent, culture and operational
effectiveness; and
– Oversaw Group-wide performance and reward
processes and target setting.
Glanbia plc | Annual Report and Financial Statements 2017
57
Our governance framework
Our 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 on pages 44 to 51 and 73.
BOARD OF DIRECTORS
GROUP MANAGING
DIRECTOR
AUDIT
COMMITTEE
NOMINATION AND
GOVERNANCE COMMITTEE
REMUNERATION
COMMITTEE
GROUP OPERATING
EXECUTIVE
GROUP SENIOR
LEADERSHIP TEAM
Board Committees
Audit Committee
Key activities: Review of Annual Report and Financial Statements and statutory Auditors’ independence and fees, internal controls, risk management
systems, post-acquisition reviews and the effectiveness of the Group Internal Audit and Finance functions.
Nomination and Governance Committee
Key activities: Making recommendations on appointments to the Board (including the Group Chairman and Vice-Chairmen), Senior Management
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 share awards, review
of Non-Executive Directors’ fees and compliance with the relevant codes.
Group management
Group Operating Executive
This group is comprised of the four Executive Directors, the Group Secretary, the Group Human Resources & Corporate Affairs Director, the Group
Corporate Development Director and the CEO of Glanbia Ireland. Key activities: Monitoring performance and making strategic recommendations to
the Board. This forum is also the Group Risk Committee.
Group Senior Leadership Team
This team includes the Group Operating Executive and the Group’s senior business and functional leaders. Key activities: To create alignment and
drive delivery of the Group’s business plans.
58
Glanbia plc | Annual Report and Financial Statements 2017
Corporate Governance Report continued
Leadership
Board structure
The Board comprises 18 Directors: Four Executive Directors and 14 Non-Executive Directors (of whom 10 are nominated by the Society).
Avonmore Foods plc and Waterford Foods plc merged in 1997 to form Glanbia plc. At the same time, their respective major shareholders also
merged to form the Society. The Society retains a major shareholding in the Company and nominates from its Board of Directors up to 10
(previously 14) Non-Executive Directors for appointment to the Board of the Company. This will reduce to six Non-Executive Directors in 2022,
more details of which are set out on page 78 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 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 that:
(i) Directors are properly informed on all matters;
(ii) agendas are aligned to the Group’s strategic objectives;
(iii) discussions foster constructive challenge and debate; and
(iv) adequate time is provided for discussions so that the view of each Director is presented and considered.
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.
Details of our strategic priorities are set out on pages 16 and 17.
Board responsibilities
The following are the key matters reserved for the Board:
• Approval of the Group’s strategic plan, oversight of the Group’s operations and review of performance in light of the Group’s strategy,
objectives, business plans and budgets, and ensuring that any necessary corrective action is taken;
• Ultimate oversight of risk, including determining the Group’s risk profile and risk appetite;
• Culture and succession planning;
• 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;
• Ensuring the Annual Report and Financial Statements present a fair, balanced and understandable assessment of the Group’s position and prospects;
• Assessment of the Group’s viability and ability to continue as a going concern;
• 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 the 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.
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 is provided to the Board. He
facilitates active engagement and challenge by
the Board to the Group Operating Executive
and conducts the annual Board evaluation.
The Group Chairman has a strong working
relationship with the Group Managing Director,
Siobhán Talbot. Read biography on page 64.
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 67.
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 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 also
Chairman of the Nomination and Governance
Committee. He is available to shareholders
should they wish to raise any matter directly.
Read biography on page 65.
Glanbia plc | Annual Report and Financial Statements 2017
59
Appointments to the Board, policy, diversity and succession planning
During the year, the Board adopted a Board Diversity Policy which recognises the benefits of diversity. Having regard to the right of the Society
to nominate 10 of the 18 Directors, the Nomination and Governance Committee keeps the Board’s balance of skills, knowledge, experience and
the tenure of Directors under constant review. In this regard, the Company has not set any specific quota. In respect of succession planning and
maintaining the skill set of the Board, there is an established procedure for the appointment of new Directors and Senior Executives. The Committee
identifies the set of skills and experience required. Individuals are then selected on the basis of required competencies, irrespective of gender, age,
nationality or other personal characteristics. External search agencies are engaged to assist where appropriate. The Company also has a formal
policy with respect to the appointment of new Independent Non-Executive Directors (other than those nominated by the Society). The policy provides
that any new Independent Non-Executive Directors will be appointed for an initial three-year term, subject to re-appointment by shareholders at each
AGM and should expect to serve no more than three successive three-year terms i.e. a maximum of nine years. All new Independent Non-Executive
Directors, and any re-appointments, will be subject to a rigorous review by the Committee after the initial three-year term and annually after six years.
Board attendance
The Board had seven meetings in 2017 with Board member meeting attendance as follows:
2017 Board meeting attendance
Director
H Corbally
Mn Keane
J Murphy
S Talbot
P Ahern
P Coveney
J Doheny1
M Garvey2
D Gaynor
J Gilsenan3
V Gorman
T Grant4
P Haran
B Hayes5
Ml Keane6
H McGuire
M Merrick3
P Murphy
D O’Connor
B Phelan
E Power7
Number of full years
Appointed
on the Board
2017 meeting
attendance
9-Jun-99
24-May-06
29-Jun-10
1-Jul-09
12-Jun-15
30-May-14
29-May-12
12-Nov-13
12-Mar-13
12-Jun-15
27-Jun-13
2 Jun-17
9-Jun-05
2 Jun-17
29-Jun-10
1-Jun-13
9-Jun-05
26-May-11
1-Dec-14
1-Jan-13
2-Jun-17
18
11
7
8
2
3
5
4
4
13
4
1
12
5
9
4
11
6
3
5
14
7/7
7/7
7/7
7/7
7/7
7/7
2/2
6/7
7/7
2/2
7/7
4/4
7/7
4/4
7/7
7/7
2/2
7/7
7/7
7/7
4/4
1. J Doheny retired on 2 June 2017.
2. M Garvey was unable to attend one of the scheduled Board meetings due to a family bereavement.
3. J Gilsenan and M Merrick retired on 26 April 2017.
4. T Grant was re-appointed to the Board on 2 June 2017 having previously served five months on the Board.
5. B Hayes was re-appointed to the Board on 2 June 2017 having previously served four full years on the Board.
6. Ml Keane was re-appointed to the Board on 29 June 2010 having previously served two full years on the Board.
7. E Power was re-appointed to the Board on 2 June 2017 having previously served 13 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 co-ordinates, when necessary,
access to independent professional advice
for Directors. He ensures compliance with all
legal and regulatory requirements. In addition,
he has responsibility for providing a high
quality service on all shareholder-related
matters. Read biography on page 68.
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 page 67.
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, if necessary, removing Executive
Directors, and in succession planning.
Read biographies on pages 64 to 66.
60
Glanbia plc | Annual Report and Financial Statements 2017
Corporate Governance Report 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 Management as well as 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, expertise and knowledge of 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 Senior Management of our wholly owned business segments: Glanbia
Performance Nutrition, Glanbia Nutritionals and from our Joint Venture partners. The Board also received presentations from the Group Corporate
Development Director and the Group Human Resources & Corporate Affairs Director.
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. These visits provide Directors
with an in-depth understanding of the business and how it works and helps the Directors to set the tone for how business is conducted.
The Directors are also regularly provided with updates on the Group’s business as well as updates on corporate governance, legislative and regulatory
issues. Updates are by way of written briefings and presentations from the Group Secretary, management and external advisers. During the year
under review, updates included a presentation from the Group Secretary on the current whistleblowing arrangements in place, an investor relations
update presentation from the Group Finance Director and further updates on the Companies Act 2014 (enacted 1 June 2015).
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. This is co-ordinated through the
Group Secretary.
Board evaluation
The annual Board evaluation process is an important element in ensuring the effective and efficient operation of the Board. The Group has
established a formal process for the annual evaluation of the performance of the Board and its principal Committees. This includes a triennial
external evaluation. During 2016, we commissioned an independently facilitated Board evaluation which was undertaken by Leaders’ Mores,
who had no connections with the Group. The 2016 external Board evaluation report highlighted some improvement opportunities for the Board to
consider, including the introduction of some refinements to the annual strategic planning process and ensuring an enhanced focus on succession
planning and risk reporting.
The 2017 internal evaluation focused on the progress made in these three areas, the outcome of which was shared at the December Board
meeting. The Board noted that there had been good progress against the agreed areas of focus as set out below:
• Strategy: The strategy-setting process has been enhanced through the establishment of a Strategy Review Committee (see page 78) in order to
harness the experience of individual Directors to facilitate deeper discussion and focus on selected items of a strategic nature where appropriate;
• Succession and talent development: The Nomination and Governance Committee increased its focus on succession planning for the broader
executive team and enhanced development plans to identify short-to-medium-term successors. This included opportunities for the Senior Leaders
to meet the Non-Executive Directors, as part of Board visits to the business and other presentations to, and interactions with, the Board; and
• Risk reporting: This was further enhanced in 2017 by establishing a revised risk framework within which risk appetite has context and can
be operationalised through both quantitative and qualitative statements where appropriate.
As part of the Board evaluation process, detailed discussions were undertaken with the new Directors (which included the completion by them of
detailed questionnaires) and individual discussions with other Directors led by the Group Chairman. The discussions were informal and encouraged
active participation. Each Committee evaluated their own performance, further details of which are available in their respective reports that follow in
this report.
Following the discussions, the Group Chairman met with the Group Secretary to analyse the findings and prepare the report to the Board on the
outcome of the evaluation and to identify the areas for renewed focus for 2018 for the Board to consider.
The performance of the Group Chairman was included in this process. The Group Chairman’s evaluation was managed by the Senior
Independent Director. As part of the Group Chairman’s evaluation, the Non-Executive Directors met separately under the Chairmanship
of the Senior Independent Director.
Glanbia plc | Annual Report and Financial Statements 2017
61
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. A detailed description of how independence was determined
is set out in the Nomination and Governance Committee Report on page 79. However, 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 (2016), the Society Nominee Directors are not being designated as Independent Directors for the purpose only of Listing Rule 6.2.2 A of the
Irish Stock Exchange (ISE)/Listing Rule 9.2.2 AD of the United Kingdom Listing Authority (UKLA). This is to ensure consistency with the agreement
reached at the Extraordinary General Meeting held on the 22 May 2017 updating the previously agreed position with regard to the composition and
size of the Board and allowing 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 28 April 2017 and is set out on page 78 of this Annual Report and is available to view at www.glanbia.com
(Society representation on the Board).
In compliance with Listing Rule 6.2.2 A of the ISE/Listing Rule 9.2.2 AD of the UKLA, the Company has entered into a written legally binding
agreement (the ‘Relationship Agreement’) with the Society, the only controlling shareholder, which is intended to ensure that the Society complies
with the independence provisions/undertakings set out in Listing Rule 3.3.7 A of the ISE and 6.5.4 R 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 2017, the Company has complied with the Independence Provisions in the Relationship Agreement and, in so far as the Company is
aware, the Society has also complied with the Independence Provisions. The Company’s Constitution allows the election and re-election of
Independent Directors for the purpose of Listing Rule 6.2.2 A of the ISE/Listing Rule 9.2.2 AD of the UKLA, to be conducted in accordance
with the election provisions for such Directors in the ISE/UKLA Listing Rules.
Composition of the Board
Directors’ tenure on the Board
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
Less than 3 years
Between 3 and 6 years
Between 6 and 9 years
Over 9 years
62
Glanbia plc | Annual Report and Financial Statements 2017
Corporate Governance Report continued
Accountability
Risk management and internal control
Effective risk management underpins our operating, financial and governance activities. The Board continues to place particular emphasis on
monitoring risk and regularly monitors the risk management framework to ensure risks are being appropriately mitigated and new risks identified.
While the Board has ultimate responsibility for determining the Group’s risk profile and risk appetite, the Board has delegated responsibility for
reviewing the design and implementation of the Group’s management and internal control systems to the Audit Committee. These systems are
designed to manage, rather than eliminate, the risk of failure to achieve business objectives and provide reasonable, but not absolute, assurance
against material misstatement or loss. During the year, the Board considered the Group key risk reports and received updates from the Audit
Committee Chairman on the programme of risk presentations from key risk managers across the Group. The Board also received presentations
from core Group Risk Functional owners. This work provided a deeper insight into how key risk exposures are managed and better informs the
Board in its evaluation of progress against strategic objectives of the business.
The Board and management are satisfied that appropriate risk management and internal control systems are in place throughout the Group. The
Risk Management section is contained on pages 44 to 51.
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 1 to 51.
After making enquiries, the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence
for a period of at least 12 months from the date of approval of the Annual Report and Financial Statements. The Group therefore continues to
adopt the going concern basis in preparing its Annual Report and Financial Statements. The full Going Concern Statement is contained on page
44.
Long-term Viability Statement
In accordance with the UK Corporate Governance Code (2016), the Directors have assessed the viability of the Group and its ability to meet its
liabilities as they fall due, taking into account the Group’s current financial position and the potential impact arising from the principal risks and
uncertainties detailed on pages 44 to 51.
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. The full Viability Statement is contained on page 44.
Fair, balanced and understandable
The Directors have concluded that the Annual Report and Financial Statements present a fair, balanced and understandable assessment of
the Group’s position and prospects. This assessment was completed by the Audit Committee as outlined in their report on pages 72 and 73.
Remuneration
Our aim is to ensure that our remuneration policies and practices remain competitive within our industry to attract, retain and motivate high quality
and committed people who are critical to the future development and growth of the Group, further details can be obtained on pages 80 to 105.
Relations with shareholders
Glanbia continued its active investor relations initiatives in 2017. During the year, representatives from Glanbia presented at 18 investor
conferences globally and held over 300 meetings with institutional investors. Glanbia also engages regularly with the representative structure
of the largest shareholder, the Society. Glanbia is focused on ensuring that a broad geographic base of institutional investors is reached via
our investor relations programme. To achieve this, Glanbia Senior Management increased the level of investor meetings in the US West Coast,
and for the first time completed two investor roadshows in Asia covering five financial centres in the region. We update the market regularly on
our performance via our AGM, our full and half-year results as well as our interim management statements. Additionally in 2017, Glanbia published
a circular and held an Extraordinary General Meeting (EGM) for independent shareholders to vote on the Dairy Ireland integration. Shareholders
were invited to ask questions during the meeting and had an opportunity to meet with the Directors following the conclusion of the meeting.
Finally during 2017, Glanbia met with its largest institutional shareholders as well as key independent proxy advisers to consult on the Group’s
Executive Remuneration Policy. This was led by the Chairman of the Remuneration Committee with all stakeholders viewing this as a proactive
approach by the Company at gathering external feedback on the Remuneration Policy.
Glanbia plc | Annual Report and Financial Statements 2017
63
Compliance Statements
Corporate Governance Statement
The Group is subject to the Irish Corporate Governance Annex (2010) and the UK Corporate Governance Code (2016) (the ‘Codes’). The Group
has complied with C.3.1 (Composition of the Audit Committee) of the UK Corporate Governance Code (2016) since 9 August 2017 (on which date
the Group Chairman and Vice-Chairmen retired as Audit Committee members) and the other detailed provisions of the Codes throughout 2017
with the exception of B.1 (Composition of the Board) of the UK Corporate Governance Code (2016). The rationale for this departure is explained
on page 54. 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 Irish Corporate Governance Annex published in December 2010 by the Irish Stock Exchange is publicly available on the Irish Stock Exchange
website: www.ise.ie/Products-Services/Sponsors-and-Advisors/Irish-Corporate-Governance-Annex.pdf (the ‘ISE Annex’). The UK Corporate
Governance Code is publicly available on www.frc.org.uk/directors/corporate-governance-and-stewardship/uk-corporate-governance-code.
Our approach to corporate governance and how we apply the principles of the Codes is set out in this Corporate Governance Report, the Board
of Directors and Senior Management section and the Risk Management section (all of which are deemed to be incorporated in this Corporate
Governance Statement). The Reports from the Chairmen of the Audit, Nomination and Governance and Remuneration Committees highlight the
key areas of focus for, and the background to the principal decisions taken by, those Committees, which form an integral part of our governance
structure. A fair, balanced and understandable assessment of the Group’s position and prospects is set out in the Strategic Report on pages 1 to
51. Other Statutory Information contains certain other information required to be incorporated into this Corporate Governance Statement. All of
these statements are deemed to be incorporated in this Corporate Governance Statement.
ISE Annex
Board Composition
Board Appointments
Board Evaluation
Board Re-election
Audit Committee
Remuneration
Pages 57 to 67
Pages 59 and 76 to 79
Page 54 and 60
Page 79
Pages 70 to 75
Pages 80 to 105
UK Corporate Governance Code
Leadership
Effectiveness
Accountability
Remuneration
Relations with shareholders
Section 1373 Companies Act 2014
Applicable codes
Departures from the codes
Risk management and Internal control
Page 63
Page 54 and 63
Pages 44 to 51 and 73
Takeover regulations
Shareholder information
Board and Committees
Pages 57 to 58
Pages 60 to 61
Page 62
Pages 80 to 105
Page 62
Pages 106 to 110
Pages 106 to 110
Pages 57 to 105
Directors’ Compliance Statement
It is the policy of the Company to comply with its relevant obligations (as defined in the Companies Act 2014). The Directors have drawn up a
compliance policy statement as defined in section 225(3)(a) of the Companies Act 2014. Arrangements and structures have been put in place that
are, in the Directors’ opinion, designed to secure a material compliance with the Company’s relevant obligations. These arrangements and structures
were reviewed by the Company during the financial year. As required by section 225(2) of the Companies Act 2014, the Directors acknowledge that
they are responsible for the Company’s compliance with the relevant obligations. In discharging their responsibilities under section 225, the Directors
relied on the advice of third parties whom the Directors believe have the requisite knowledge and experience to advise the Company on compliance
with its relevant obligations.
64
Glanbia plc | Annual Report and Financial Statements 2017
Board of Directors and Senior Management
Group Chairman, Vice-Chairmen, Non-Executive Directors
Henry Corbally
Group Chairman and
Martin Keane
Vice-Chairman and
John Murphy
Vice-Chairman and
Non-Executive Director
Non-Executive Director
Non-Executive Director
Age: 63
Age: 62
Age: 55
Experience
Henry Corbally was appointed Group
Chairman on 12 June 2015. Henry 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 was appointed
Vice-Chairman on 29 June 2010. Martin
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.
John Murphy was appointed as
Vice-Chairman on 2 June 2017.
John was nominated for appointment
by Glanbia Co-operative Society
Limited. John farms at Ballinacoola,
Craanford, Gorey, Co. Wexford.
John is Vice-Chairman of the National
Dairy Council and has completed the
University College Cork Diploma in
Corporate Direction.
Term of office
Date of Appointment: 9 June 1999
Date of Appointment: 24 May 2006
Date of Appointment: 29 June 2010
Tenure: 18 full years
Tenure: 11 full years
Tenure: Seven full years
Board of Directors and Senior Management
Senior Independent Director, Non-Executive Directors
Glanbia plc | Annual Report and Financial Statements 2017
65
Paul Haran
Senior Independent Director
and Non-Executive Director
Age: 60
Patrick Coveney
Non-Executive Director
Donard Gaynor
Non-Executive Director
Dan O’Connor
Non-Executive Director
Age: 47
Age: 61
Age: 58
Experience
Paul Haran is a Director of a number
of companies including the Mater
Private Hospital and Insurance Ireland.
He also chairs Edward Dillon & Co.
Previously he was Secretary General
of the Department of Enterprise
and Employment, Principal of the
University College Dublin 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.
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 University College Dublin.
Term of office
Patrick Coveney 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. Patrick is also Non-Executive
Chairman of Core Media Group. 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.
Donard Gaynor retired in December
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
Chartered Accountants Ireland and the
American Institute of Certified Public
Accountants, he joined Beam Inc. 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. In November
2016 Donard was appointed Chairman
of Hazelwood Demesne Limited ‘The
Lough Gill Distillery’ Company.
Dan O’Connor is currently Chairman
of Activate Capital Limited and
International Personal Finance plc. He is
a former Non-Executive Director of CRH
plc. Dan is a former President and CEO
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 Chartered
Accountants Ireland, Dan graduated
from University College Dublin with a
Bachelor of Commerce and Diploma
in Professional Accounting.
Date of Appointment: 9 June 2005
Date of Appointment: 30 May 2014
Date of Appointment: 12 March 2013
Date of Appointment: 1 December 2014
Tenure: 12 full years
Tenure: Three full years
Tenure: Four full years
Tenure: Three full years
Committee Membership
Nomination and Governance
Committee (Chair)
Audit Committee/Nomination and
Governance Committee (Member)
Audit Committee/Remuneration
Committee (Member)
Remuneration Committee (Chair)
Audit Committee (Chair)
Audit Committee/Nomination and
Governance Committee (Member)
Nomination and Governance/
Remuneration Committee (Member)
66
Glanbia plc | Annual Report and Financial Statements 2017
Board of Directors and Senior Management
Non-Executive Directors nominated by Glanbia Co-operative Society Limited
All of the Directors
nominated by Glanbia
Co-operative Society
Limited are full time
farmers who have
significant experience
of the dairy and
agricultural industry.
Patsy Ahern
Age: 60
Vincent Gorman
Age: 61
Tom Grant
Age: 63
Experience
Patsy Ahern was appointed to the
Board on 12 June 2015 and has
served two full years on the Board.
Vincent Gorman was appointed to
the Board on 27 June 2013 and has
served four full years on the Board.
Tom Grant was re-appointed to the
Board on 2 June 2017. He has served
one full year on the Board over each
of his terms.
Brendan Hayes
Age: 57
Michael Keane
Age: 65
Patrick Murphy
Age: 59
Eamon Power
Age: 63
Experience
Brendan Hayes was re-appointed to
the Board on 2 June 2017. He has
served five full years on the Board over
each of his terms. He has completed
the University College Cork Diploma
in Corporate Direction.
Michael Keane was re-appointed to
the Board on 29 June 2010 and has
served nine full years on the Board
over each of his terms.
Patrick Murphy was appointed to
the Board on 26 May 2011 and has
served six full years on the Board.
Patrick is a Director of Farmer
Business Developments plc.
Eamon Power was re-appointed to the
Board on 2 June 2017. He has served
14 full years on the Board over each
of his terms. He has completed the
University College Cork Diploma in
Corporate Direction.
Board of Directors and Senior Management
Group Operating Executive
Glanbia plc | Annual Report and Financial Statements 2017
67
Siobhán Talbot
Group Managing Director
and Executive Director
Mark Garvey
Group Finance Director
and Executive Director
Age: 54
Age: 53
Hugh McGuire
CEO Glanbia Performance
Nutrition and Executive
Director
Age: 47
Brian Phelan
CEO Glanbia Nutritionals
and Executive Director
Age: 51
Experience
Siobhán Talbot was appointed 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 Operating
Executive 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 and Sydney. A fellow of
Chartered Accountants Ireland,
Siobhán graduated from University
College Dublin with a Bachelor
of Commerce and Diploma in
Professional Accounting.
Term of Office
Mark Garvey was appointed as Group
Finance Director on 12 November
2013. Prior to joining Glanbia he
held the position of Executive Vice
President and 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 US and Europe
and prior to that he worked with
Arthur Andersen in Ireland and the
US. A fellow of Chartered Accountants
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.
Hugh McGuire 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 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 Ireland.
Brian Phelan was appointed as CEO of
Glanbia Nutritionals 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 Chartered Accountants Ireland.
Date of Appointment: 1 July 2009
Date of Appointment: 12 November 2013
Date of Appointment: 1 June 2013
Date of Appointment: 1 January 2013
Tenure: Eight full years
Tenure: Four full years
Tenure: Four full years
Tenure: Five full years
68
Glanbia plc | Annual Report and Financial Statements 2017
Senior Management
Group Operating Executive
Jim Bergin
CEO Glanbia Ireland
Age: 55
Michael Horan
Group Secretary
Age: 53
Michael Patten
Group Human Resources &
Corporate Affairs Director
Tom Tench
Group Corporate
Development Director
Age: 55
Age: 47
Experience
Jim Bergin (B.Comm., M.Sc.
Management Practice) is CEO of
Glanbia Ireland, a Joint Venture of the
Group. He was appointed to this role
in 2012 having previously been CEO of
Dairy Ingredients Ireland. He worked
for the Group between 1984 and 2012
and held a number of senior positions
during that time. Jim is also a Director
of Ornua Co-operative Limited.
Michael Horan was appointed as
Group Secretary on 9 June 2005,
having previously held the position of
Group Financial Controller since June
2002. He joined the 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 Chartered
Accountants Ireland, Michael graduated
from the National University of Ireland,
Galway with a Bachelor of Commerce.
Michael Patten 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
the Group, Michael was Global Public
Affairs Director with Diageo plc. He
previously served with the Group 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 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 the Group,
Tom worked in the investment banking
and investment management industry.
Tom also served for 10 years as an
officer in the US military.
Glanbia plc | Annual Report and Financial Statements 2017
69
Corporate Governance Report
Committee Highlights
LIVING OUR VALUES THROUGH OUR ACTIVITIES
The Customers’ Champion – Review and
refreshment of the Annual Report.
Performance Matters – Review of the
Executive Remuneration Policy.
Find a Better Way – Enhanced risk reporting.
Winning Together – Successful completion
of the statutory audit transition process.
Showing Respect – Adoption of a Board
Diversity Policy.
THE CUSTOMERS’
CHAMPION
PERFORMANCE
MATTERS
FIND A
BETTER WAY
WINNING
TOGETHER
SHOWING
RESPECT
Audit Committee
– Review of the effectiveness of the statutory
audit process;
– Strengthened risk management oversight;
– Approval of updated Anti-bribery and Corruption
Policy;
Nomination and
Governance Committee
– Appointment of a new Chairman of the
Nomination and Governance Committee;
– Reconstitution of the membership of the
Committees;
– Reduction in the Society’s representation
– Recommendation of the Going Concern and
Viability Statements for approval to the Board; and
– Reconstitution of the membership of the Audit
on the Board;
Internal Board evaluation; and
–
– Succession planning.
Committee.
Remuneration Committee
– Review of Executive Remuneration Policy;
– Shareholder consultation regarding Remuneration
Policy review;
– Review of Non-Executive Director fees; and
– Reconstitution of the membership of the
Remuneration Committee.
70
Glanbia plc | Annual Report and Financial Statements 2017
Audit Committee Report
ENSURING EFFECTIVE
GOVERNANCE AND
FINANCIAL REPORTING
“The Board and the Audit Committee are
committed to the continuous strengthening
of the Group’s systems of risk management,
internal control and financial reporting.”
Dan O’Connor
Audit Committee Chairman
2017 Committee members and meeting attendance
Key responsibilities
Monitor the integrity of the Group’s Financial Statements;
Review the appropriateness of accounting policies and significant
financial reporting issues or judgements;
Advise the Board in relation to its responsibilities in regard to
monitoring of the Group’s systems of risk management and internal
control;
Member
D O’Connor
P Haran
P Coveney
D Gaynor
H Corbally1
Mn Keane1
J Murphy1, 2
P Murphy2
Appointed
1-Dec-14
9-Jun-05
30-Sep-14
24-Feb-15
7-Jul-05
29-Jun-10
2-Jun-17
12-Jun-15
Number of full years
on the Committee
2017 meeting
attendance
Assist the Board in its responsibilities with regard to the assessment
of the going concern and viability statements;
3
12
3
2
11
6
0
1
6/6
6/6
6/6
6/6
4/4
4/4
2/2
2/2
Provide input on whether the Annual Report and Financial Statements,
taken as a whole, is fair, balanced and understandable;
Oversee the relationship with the statutory Auditors, including
approving the terms of engagement and assessing the effectiveness
of the process;
Ensure that the Group’s Auditors’ Relationship and Independence
Policy is enforced including conducting an audit tender at least every
10 years;
Review the operation and effectiveness of the Internal Audit function;
1. H Corbally, Mn Keane and J Murphy retired on 9 August 2017.
2. P Murphy retired from the Committee on 2 June 2017 with J Murphy being appointed
on the same date.
See page 65 for more information on current
Audit Committee members.
Assess the Group’s procedures for fraud prevention and detection; and
Review the Group’s arrangements for its employees to raise concerns,
in confidence, about possible wrongdoing in financial reporting and
other matters.
Terms of reference
The full terms of reference of the Audit Committee can be found on the
Group’s website: www.glanbia.com or can be obtained from the Group
Secretary.
Composition of the Committee
Allocation of time
Non-Executive Chairman
Non-Executive Directors
Financial and corporate
governance updates
Statutory Auditors
Risk management and internal
control systems
Internal Audit
Other
Glanbia plc | Annual Report and Financial Statements 2017
71
Dear shareholder,
As Chairman of the Audit Committee, I am pleased to present the Audit Committee Report for the year ended 30 December 2017.
This report sets out the Audit Committee’s primary activities during the year, as well as the Committee’s priorities for the year ending
29 December 2018. The Committee continues to devote significant time to fulfilling its key oversight responsibilities which involved engaging
regularly with management, Internal Audit and the statutory Auditor to ensure the Committee receives timely and accurate information.
The Committee is responsible for monitoring the integrity of the Group’s Financial Statements which involves conducting a detailed review of both
the financial and non-financial information contained in the Group’s Annual Report and Financial Statements. In 2017, this included the Committee
considering the additional reporting requirements of the EU Non-Financial Disclosure Directive. The Committee also assists the Board in determining
that the Annual Report and Financial Statements, when taken as a whole, is fair, balanced and understandable and provides the information necessary
for shareholders to assess the Group’s strategy, business model and performance. Included in this report, on page 74, is a summary of the 2017
significant financial judgements and disclosures and the steps taken by the Committee to address these matters, including the disposal of the Group’s
controlling interest in Dairy Ireland. To assist in the process of supporting the fair, balanced and understandable statement, management prepared a
report for the Committee setting out the key considerations in arriving at the statement including the documented processes for the preparation of the
Annual Report and Financial Statements. The work done in this regard is set out on page 72.
The Committee is responsible for assisting the Board by taking delegated responsibility for the ongoing 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. The Committee strengthened this oversight in 2017
by formalising its approach to developing risk appetite statements. The Committee will build on this further in 2018 to ensure effective risk
management processes are implemented across the Group. This enables 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 pages 62 and 73.
The Audit Committee considered the requirements of the Irish Companies Act 2014 in relation to the Directors’ Compliance Statement and is
satisfied that appropriate steps have been undertaken to ensure that Glanbia is fully compliant with these requirements.
Following the completion of Deloitte’s first annual audit of the Group, the Committee conducted a detailed review of the key areas of the audit
process and the role that management has contributed to ensure an effective process. Group Internal Audit supported the Committee in this
review which concluded that the external audit process was conducted to a high standard in accordance with requirements. The improvement
opportunities identified were implemented in 2017 and the Committee is satisfied that the auditor transition process was effective. Our engagement
with the statutory Auditor and with the Group Internal Audit function is detailed on pages 75 and 73, respectively, of this report.
Our priorities for 2018 will include building risk resilience by further strengthening controls across core areas such as, IT security, food safety and
quality, health and safety, financial reporting, tax and business continuity strategies. Ensuring effective risk management and internal control
systems in such areas will help protect our people, business and reputation.
On behalf of the Audit Committee
Dan O’Connor
Audit Committee Chairman
72
Glanbia plc | Annual Report and Financial Statements 2017
Audit Committee Report continued
Governance
The Committee was in place throughout 2017. The Audit Committee comprises four Independent Non-Executive Directors, Dan O’Connor
(Chairman), Paul Haran (Senior Independent Director), Patrick Coveney and Donard Gaynor, of whom three members constitute a quorum. 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. On 9 August 2017, following a review of the membership of the Audit, Remuneration and Nomination and Governance Committees of
the Board, the Group Chairman (Henry Corbally) and Group Vice-Chairmen (Martin Keane and John Murphy) retired as Committee members in line
with best practice. Patrick Murphy also retired as a member of the Committee on 2 June 2017.
The Board is satisfied that Dan O’Connor, Patrick Coveney and Donard Gaynor have recent and relevant financial experience, as set out in the
UK Corporate Governance Code (2016). The Board is also satisfied that the Audit Committee, as a whole, have competence relevant to the sector
in which the Group operates including a wide range of skills, expertise and experience arising from the senior positions they hold or held in other
organisations. The Chairman of the Audit Committee reports to the Board as necessary on the activities of the Committee and attends the AGM
to answer questions on the report on the Committee’s activities and matters within the scope of the Committee’s responsibilities.
Meetings
The Committee met six times during the year ended 30 December 2017 and there was full attendance by all members of the Committee. The
Group Managing Director, Group Finance Director, Group Secretary, Group Head of Internal Audit, Group Financial Controller and representatives
of the statutory Auditors are typically invited to attend all meetings of the Committee with additional members of the Group Senior Leadership
Team invited to attend as deemed necessary.
Audit Committee key activities
Financial reporting and significant financial judgements
At our meetings during 2017 and to date in 2018, the Committee reviewed both the Group’s half-year results, Interim Management Statement
(IMS) updates and the 2017 full-year Annual Report and Financial Statements by considering and challenging (where appropriate) the Group’s
accounting policies and key judgement areas. The Committee reviewed reports from the Group Finance team on accounting, financial reporting,
treasury and taxation issues in making these assessments which were discussed with the statutory Auditor, Deloitte.
The Committee paid particular attention to matters it deemed to be important by virtue of their impact on the Group’s results and particularly
those items which involved a higher level of estimation or judgement. The table on page 74 sets out the 2017 significant financial statement
reporting judgements and disclosures and how the Audit Committee addressed these matters. The Committee also reviewed the Group’s policy
of highlighting significant items within the Group’s results as exceptional items including the items classified as exceptional in 2017 and deemed
the classification and disclosures in Note 6 to the Financial Statements to be appropriate. The Committee reviewed the status of the various legal
claims and disputes the Group is party to, including management’s calculations and assumptions, and concluded that the provisions held are
adequate and appropriate. The Committee considered the Directors’ Responsibility Statement and the principal risks and uncertainties of the
Group within the 2017 Annual Report and Financial Statements and the half-year results and received a presentation from the Group Finance
Director on key financial risk exposures. The Committee were satisfied with the adequacy of the disclosures in the Financial Statements.
Fair, balanced and understandable
The UK Corporate Governance Code (2016) requires the Board to present a fair, balanced and understandable assessment of the Company’s
position and prospects and specifically that the Annual Report and Financial Statements when taken as a whole is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group’s strategy, business model and performance. The
Committee is responsible for assisting the Board in considering whether the 2017 Annual Report and Financial Statements met these requirements.
In doing so the Committee reviewed a report from the Group Head of Internal Audit on the key considerations supporting our fair, balanced and
understandable statement including a detailed overview of the established process for the planning, preparation and review of the 2017 Annual
Report and Financial Statements. In particular the Committee considered the effectiveness of the following features of internal control and financial
reporting outlined by the Group Head of Internal Audit in preparing the Financial Statements:
• Well-resourced Finance function to facilitate segregation of duties;
• 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 reforecasting where required;
• Monthly reporting by all Business Units and review by Group Finance;
• The Group Finance Director ensures that a reporting timetable for the development of the Annual Report and Financial Statements has been
established and communicated to key stakeholders on a timely basis with a dedicated project manager in place to drive adherence to deadlines,
reporting standards and consistency;
• The Group Finance team prepare the draft Annual Report and Financial Statements which are subject to detailed review by senior members
of the Group Finance team, the Group Finance Director and the Group Operating Executive;
• The Audit Committee review the Annual Report and Financial Statements including review and approval of any significant changes in
accounting policies or practices and a detailed consideration of the significant financial judgements and disclosures;
• The Group Finance Director and Controller prepare a paper which highlights these key issues to the Audit Committee along with a draft
of the Annual Report and Financial Statements;
• These documents are provided to the Audit Committee well in advance of the formal approval meeting to allow the Committee sufficient time
to input into the process and challenge management on any areas where they feel the report may not be fair, balanced and understandable;
• The Audit Committee review is focused on ensuring that the key messages are clearly called out throughout the document and that
consistency exists between the front and back sections of the report; and
• The Board review and approval of the Annual Report and Financial Statements including approval of any significant changes in accounting
policies or practices and key judgment areas as highlighted by the Audit Committee Chairman. The Board review ensures that the overall
message and tone is appropriate and that a clear framework for identifying key themes has been established and implemented.
Glanbia plc | Annual Report and Financial Statements 2017
73
• The Board makes the final determination that the Annual Report and Financial Statements, when taken as a whole, is fair, balanced and
understandable and provides the information necessary for shareholders to assess the Group’s strategy, business model and performance.
The Committee also considered the formal process undertaken by the Auditor and the regular updates the Committee receives from Deloitte.
Regulators and our financial reporting
The Committee is committed to improving the effectiveness and precision of the Group’s reporting and management are encouraged to consider,
and adopt where appropriate, initiatives by regulatory bodies such as the Financial Reporting Council (FRC) Lab projects, and guidance issued by
the Irish Auditing and Accounting Supervisory Authority (IAASA). During the year the Group received correspondence from IAASA in respect of
the Annual Report and Financial Statements for the year ended 31 December 2016. IAASA acknowledged the co-operation received from the
Directors and management in responding to the queries raised and the Committee is strongly of the view that this external review process serves
to enhance the consistent application of financial reporting standards and the transparency of Financial Statement disclosures.
Risk management and internal control systems
The Committee is responsible for assisting the Board by taking delegated responsibility for the ongoing monitoring of the effectiveness of the
Group’s systems of risk management and internal control. The Risk Management Report on pages 44 to 47 sets out the detailed steps in this
regard. The Group maintains a risk register, which contains the key risks faced by the Group, including their likelihood, impact and velocity as well
as the controls and procedures implemented to mitigate these risks. The Committee receive regular Group key risk summary reports, prepared
by the Internal Audit team, tracking residual risk exposures which allows the Committee to assess the appropriateness of management’s action
plans to ensure the Board’s risk appetite is not exceeded.
In 2017, the Committee continued its practice of evaluating key areas of risk such as, IT security, food safety and quality, health and safety, financial
reporting, tax, and business continuity strategies by receiving direct presentations from management and Group functional heads. One of our main
priorities for 2018 is to build risk resilience by further strengthening controls across these core areas. For example the Group Head of IT will present
on progress made on major IT projects, managing cyber-security risks, preparations for the introduction of the new EU General Data Protection
Regulation (GDPR), and progress in addressing improvement opportunities identified during the Internal Audit IT reviews. The Committee also
received a number of presentations from the Group Finance Director on tax risks, tax provisions, the impact of the recent US tax reform legislation
and potential further legislative changes. Ensuring effective risk management in these core areas, within the Board’s risk appetite, will help protect
and enhance shareholder value.
The Audit Committee considered the current risk management process during the year and deemed it effective in relation to identifying, assessing
and monitoring Group risks. The Committee strengthened this oversight in 2017 by formalising its approach to developing risk appetite statements.
In 2018, the Committee will build on this strategy through direct management presentations. These direct reviews are important to the role of the
Committee as they allow us to meet the business leaders responsible for these areas of risk and provide a robust challenge to their activities.
The Board has also 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 2017 and to the date of this report.
Going Concern and Viability Statements
The Audit Committee reviewed the Going Concern and Viability Statements prior to recommending them for approval by the Board. These
statements are included in the Risk Management Report on page 44. This review included assessing 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 Committee also reviewed the Directors’ Viability Statement which covers the next three financial
years (2018-2020). This statement is supported by the work conducted in the two day strategy and budget review session in December 2017, the
Board’s strategy discussions at the October Board meeting and the Board’s ongoing review of monthly and year-to-date business performance
versus budget and forecast. Further detail is given within the Viability Statement on page 44.
Internal Audit
The Committee approves the annual work programme of the Internal Audit function and regularly receives presentations covering team development,
progress against the audit plan, the status of management action plans to address control weaknesses identified, best practice risk management and
whistleblowing procedures. The Committee is satisfied that the Internal Audit team is adequately resourced with a strong mix of skills and expertise
capable of conducting effective internal audits, IT audits and special investigations. The team is utilising a market leading audit management system
and appropriate data analytics tools to further improve the effectiveness of the Internal Audit processes across the organisation. The Committee hold
private review meetings with the Group Head of Internal Audit as required.
Whistleblowing and fraud
During 2017 the Committee 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 a review of the Group’s Safecall Speak-up service and the Group Code of
Conduct. The Committee also 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. The Committee noted the organisational
benefits of using our shared services facilities to enhance fraud prevention controls, improve data analytic capabilities and drive consistency in
our internal control processes. The Committee also reviewed and approved our updated Anti-bribery and Corruption Policy and concluded that
the Group’s whistleblowing and fraud prevention procedures are adequate.
Review of Audit Committee performance
The Committee’s performance and its members independence, recent and relevant financial experience were assessed and deemed appropriate.
74
Glanbia plc | Annual Report and Financial Statements 2017
Audit Committee Report continued
2017 significant financial reporting judgements and disclosures
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 2017 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 2017 Financial
Statements and how these were addressed are outlined in the following table.
Key financial judgement
and disclosures
Impairment review of
goodwill and intangibles
Disposal of 60% of Dairy
Ireland and related
assets to a related party
and subsequent creation
of Glanbia Ireland joint
venture
How the Audit Committee addressed these matters
• 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 macroeconomic projections, cash flow forecasts and associated discount rates;
• Management provided the Committee with detailed reports to support the recoverable value of the balances
included in Note 17 to the Financial Statements. The Committee examined the methodology applied including
ensuring the discount rates used were appropriate; and
• 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.
Following these discussions, the Committee is satisfied that the impairment review approach, disclosed in
Note 17, key assumptions made and conclusions reached are appropriate.
• A significant exercise was conducted to extract the discontinued operations from Group operations during
the year. This included the correct identification of all assets and liabilities, including the liabilities associated
with the defined benefit pension schemes, relating to the discontinued operations. The Committee is
satisfied that as this was largely related to the Dairy Ireland segment, the required information was clearly
identifiable and a significant level of judgement or estimates was not required to complete this exercise; and
• The Committee reviewed a paper, prepared by management, outlining the presentation changes in the
Financial Statements to ensure the disclosures made are in line with Group accounting policy, IFRS 5
and IAS 24 related party transactions disclosure requirements.
Following these discussions, the Committee is satisfied that the transaction has been correctly accounted for,
that the assumptions used by management in calculating the gain on disposal are reasonable and that the fair
value of the 40% investment in Glanbia Ireland and the classification of Glanbia Ireland as a Joint Venture in the
current year are appropriate.
Acquisition Accounting
and Valuation of
intangibles on
acquisition
• The Group acquired two businesses in 2017, Amazing Grass for a consideration of €124.5m and B&F
Vastgoed B.V. for €43.7m. Both acquisitions included intangible assets and goodwill. Intangible assets
included customer relationships and brands;
• The Committee recognises that valuing these intangible assets is a subjective process requiring a level of
estimation and judgement around areas such as cash flow projections and discounts rates; and
• The Group Finance Director outlined the advice received from the Group’s external valuation experts to the
Committee, with regard to the purchase price allocations and key assumptions utilised in the acquisition model.
Revenue recognition
Following this review the Committee is satisfied that the accounting treatment applied for the acquisition under
IFRS 3, the purchase price allocations performed by management and the assumptions utilised are reasonable.
• The Committee considered the extent of rebate, discount, deduction and allowance claims across the
Group where the amounts payable can vary depending on the arrangements made with individual
customers and the volume of trade; and
• This review included understanding the basis behind any significant year-end provisions to ensure they were
adequate and appropriate.
Following these discussions and a review of a number of Internal Audit reports focused on our controls over
the Group’s rebate, discount, deduction and allowance claim processes across the Group, the Committee is
satisfied that the basis behind the year-end rebate provisions within the Financial Statements are appropriate.
Tax provisions
• The Committee received a number of presentations from the Group Finance Director on various tax matters
including legislative changes, tax structures and controls;
• The Committee considered in detail the impact of the changes, particularly the US tax reform legislation
enacted on 22 December 2017 on the Group, the potential for further legislative changes and the associated
increasing compliance requirements;
• The Committee received an analysis of movements in the year-end tax provisions and obtained an update
from management on the outcome of any tax authority reviews conducted during the financial period; and
• The Committee reviewed the key judgements in relation to the calculation of the tax provisions, the external
professional advice obtained to support the provisions and the Financial Statement disclosure requirements.
Following these enquiries, the Committee is satisfied that the key assumptions governing the calculation of tax
provisions and their disclosure within the Financial Statements are appropriate.
Glanbia plc | Annual Report and Financial Statements 2017
75
Review of statutory Auditors
The Committee oversees the relationship with the statutory Auditor, including approving the external Auditor’s fee proposals and ensuring that the
statutory audit contract is put out to tender at least every 10 years. Deloitte were appointed as the Group’s statutory Auditors in 2016 following a
formal tender process.
At the Committee’s October 2017 meeting it reviewed the approach and scope of the annual audit work to be undertaken by the statutory Auditors,
which included planned levels of materiality, key risks to the accounts including fraud risks, 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, such as the revised FRC guidance, the EU Non-Financial Disclosure Directive, regulator commentary and correspondence
and the preparations for the implementation of IFRS 9, IFRS 15 and IFRS 16 together with other planned IFRS reporting developments. The
Committee also received updates from the Auditors at its meetings in December 2017 and February 2018.
The Committee ensured that the statutory Auditors had direct access to the Chairman of the Committee and the Group Chairman. It is standard
practice for the statutory 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 2018 following the completion of the 2017 audit to review the findings
from the audit of the Group Financial Statements. Management’s progress on control improvement opportunities identified by Deloitte will be
maintained under review by the Committee during 2018.
Independence of the statutory Auditors
In order to ensure the independence and objectivity of the statutory Auditors, the Committee maintains and regularly reviews the Group’s Auditors’
Relationship and Independence Policy. The policy provides clear definitions of services that the statutory Auditors cannot provide, such as financial
information systems design and implementation, Internal Audit services or legal services. For services that may be undertaken by the statutory
Auditors appropriate approval thresholds are in place to ensure the provision of these services do not impair the Auditors’ independence.
The Committee also considers the performance of the statutory Auditors each year, including Audit Partner rotation requirements, and assesses their
independence on an ongoing basis. In line with regulatory requirements for listed companies, the statutory Auditors are required to rotate the Audit
Partner responsible for the Group audit every five years. The current audit engagement partner was appointed as lead engagement partner for the
Group in 2016 which was the first year of audit for Deloitte as statutory Auditors following the 2016 audit tender. The Committee is supportive of such
rotation requirements as it helps ensure a fresh review without sacrificing industry knowledge.
As part of the independence review process, the statutory 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 statutory Auditors do not play any part in the management or decision-making of Glanbia; and
the individuals involved in providing the non-audit service are not members of the audit engagement team.
Non-audit services
Our revised Audit Relationship and Independence Policy includes a clearly defined pre-approval process for audit and other services, including
a requirement for the business to submit a formal template setting out the details of the services requested, the likely fee level, the rationale
for requiring the work to be carried out by Deloitte rather than another service provider and a confirmation that the service requested is not
a prohibited service. The policy requires each request to be reviewed and where appropriate challenged by the Group Financial Controller,
Group Finance Director, Group Secretary and Audit Committee Chairman (subject to a defined monetary threshold). The provision of all non-audit
services which are not prohibited and approved in line with our policy must be ratified by the Audit Committee at the following meeting of the
Committee, who also ensure that the total fees for non-audit services will not exceed the defined thresholds. Fees paid to Deloitte for audit related
and non-audit related services are analysed in Note 5 to the Financial Statements. The Committee will continue to monitor the type and level of
services provided to prevent any perceived or actual impact on the Auditors’ independence.
Effectiveness
As outlined in the prior year Annual Report and Financial Statements following the completion of Deloitte’s first annual audit of the Group, the
Committee conducted a detailed review of the key areas of the audit process as well as the role that management has contributed to an effective
process. The purpose of this exercise was to:
• ensure that year one audit learning’s were captured;
• confirm that the quality of management’s papers is maintained at a consistently high standard;
• ensure the audit process is fully respected; and
• progress the overall efficiency and effectiveness of the statutory audit process in future years.
Internal Audit supported the Audit Committee in this process through developing a tailored assessment framework utilising appropriate guidance
material including the 2015 FRC ‘Audit Quality Practice Aid for Audit Committees’ and reported back to the Committee at its June 2017 meeting. The
questionnaire was shared with a broad range of relevant stakeholders both at Group and Business Unit level with a focus on the following key topics:
•
Independence and objectivity;
• Skills, character and knowledge;
• Communications; and
• Quality control – Quality of services and sufficiency of resources provided by the auditor.
Constructive feedback was obtained both through the survey itself and through follow-up discussions where required with the respondents.
The observations were shared with the statutory Auditors to ensure learning’s have been openly discussed and the Committee is satisfied that
the audit process was further enhanced in 2017 through the implementation, by both the management team and Auditors, of many of the
observations noted. The review concluded that the external audit process was conducted to a high standard. This partly reflected the significant
up-front investment made by Deloitte and the management teams in the audit planning process including onsite visits to all our key operating
locations and a significant level of senior management interaction.
The Committee remains satisfied with the effectiveness of the statutory Auditors based on the improvements implemented following the year one
statutory audit process review, the quality of the presentations received, management commentary on the robustness of the challenge provided,
their technical insight and their demonstration of a clear understanding of the Group’s business and its key risks.
76
Glanbia plc | Annual Report and Financial Statements 2017
Nomination and Governance Committee Report
FOCUSING ON LEADERSHIP
AND ENSURING THE BOARD
HAS THE REQUISITE SKILLS
AND EXPERIENCE TO MEET
THE GROUP’S STRATEGIC
OBJECTIVES
“The Committee ensures the Board and Group
Operating Executive comprises of individuals
with the appropriate skills, knowledge, and
diversity of experience to ensure the effective
management of the Group’s businesses and
delivery of its strategic objectives.”
Paul Haran
Nomination and Governance Committee Chairman
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 and
of Senior Management;
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;
2017 Committee members and meeting attendance
Recommending to the Board the membership and chairmanship
of the Audit and Remuneration Committees respectively;
Member
P Haran
H Corbally1
P Coveney
D Gaynor
D O’Connor
Appointed
9-Jun-05
12-Jun-15
23-Feb-16
12-Dec-14
12-Dec-14
Number of full years
on the Committee
2017 meeting
attendance
12
2
1
3
3
6/6
3/3
6/6
6/6
6/6
1.
H Corbally retired from the Committee on 9 August 2017.
See page 65 for more information on current
Nomination and Governance Committee members.
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 Irish
Corporate Governance Annex and the UK Corporate Governance
Code (and any other governance code that applies to the Company)
are observed where appropriate; and
Reviewing the disclosures and statements made in the Directors’
Report to the shareholders.
Terms of reference
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.
Composition of the Committee
Allocation of time
Non-Executive Chairman
Non-Executive Directors
Governance
Board and Committee composition
Succession planning
Board effectiveness
Nomination and Governance Committee Report continued
Glanbia plc | Annual Report and Financial Statements 2017
77
Our 2017 highlights
• Appointed Paul Haran as Chairman of the Nomination and
Governance Committee;
• Reconstituted the membership of the Audit, Nomination and
Governance and Remuneration Committees to comprise only
Independent (of the Society) Non-Executive Directors;
• Agreed to reduce the Society’s representation on the Board
to six by 2022;
• Considered the composition and balance of the Board;
• Progressed Senior Management succession planning;
• Considered the outcome of the evaluation of the Board when
discussing the effectiveness of the Non-Executive Directors seeking
re-election at the 2018 AGM; and
• Oversaw governance aspects of the Board and its Committees.
Governance
The Committee was in place throughout 2017 and Paul Haran, Senior
Independent Director is Chairman of the Committee. The Committee
comprises four Independent Non-Executive Directors, of whom two
members constitute a quorum. The Group Secretary acts as secretary
to the Committee.
Dear shareholder,
Having succeeded Henry Corbally as Chairman of the Nomination and
Governance Committee, I am pleased to present to you the Nomination
and Governance Committee Report for the year ended 30 December
2017 which outlines the work performed by the Committee during the
year.
2017 was another year of significant change for the Board and its
Committees.
At the conclusion of the 2017 Annual General Meeting (AGM) on 26 April
2017, Jim Gilsenan and Matthew Merrick retired as Non-Executive
Directors. On 2 June 2017, Jeremiah Doheny retired from the Board as a
Non-Executive Director, having served on the Board for five years. On
the same day, three new Non-Executive Directors, Tom Grant, Brendan
Hayes and Eamon Power were nominated by Glanbia Co-operative
Society Limited (the ‘Society’) to join the Board of the Company in line
with the amended and restated Relationship Agreement dated 2 July
2017 between the Company and the Society. Also on the same day,
John Murphy was appointed as one of two Vice-Chairmen in place of
Patrick Murphy who remains on the Board as a Non-Executive Director.
As part of the integration of Dairy Ireland into Glanbia Ireland, the Board
looked at the composition of the Board and agreed, with shareholder
approval, a further planned reduction in the Society’s representation
on the Board, details of which are set out on page 78.
Reflecting on feedback from shareholders, the Board agreed that the
Group Chairman and Group Vice-Chairmen would retire as Committee
members, where appropriate, ensuring that the membership of the
Audit, Nomination and Governance and Remuneration Committees
comprise only Independent (of the Society) Non-Executive Directors.
These changes took effect on 9 August 2017. Paul Haran was also
appointed Chairman of the Nomination and Governance Committee
on 9 August 2017 in place of Henry Corbally. These changes were
raised with Institutional shareholders and the Society as part of the
consultation relating to the Remuneration Policy review.
Recognising the ability of the Society to nominate up to 10 of our 14
Non-Executive Directors, the succession of Non-Executive Directors
remained a key focus for the Committee during 2017. Succession
planning and talent management formed a significant proportion of
the work undertaken by the Committee in 2017. In 2018 the number
of Directors nominated by the Society (the ‘Society Nominee Directors’)
on the Board will reduce from 10 to eight.
The following pages provide further details on the roles and responsibilities
of the Committee and our highlights and achievements during 2017. 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
Paul Haran
Nomination and Governance Committee Chairman
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Glanbia plc | Annual Report and Financial Statements 2017
Nomination and Governance Committee Report continued
Glanbia Co-operative Society Limited – right to nominate 10 of the Company’s Non-Executive Directors
The current composition and size of the Board reflects the historical shareholding and relationship of the Company with the Society and
is documented in the amended and restated Relationship Agreement dated 2 July 2017.
The Society currently owns 31.5% of the issued share capital of the Company. Between 2012 and 2017, the Society and the Board agreed
the following changes, which will impact the composition and size of the Board in the coming years:
•
In 2018 the number of Society Nominee Directors will reduce from 10 to eight, which number of Society Nominee Directors will also
apply in 2019;
In 2020 the number of Society Nominee Directors will reduce from eight to seven, which number of Society Nominee Directors will also
apply in 2021; and
In 2022 the number of Society Nominee Directors will reduce from seven to six, which number of Society Nominee Directors will also
apply each subsequent year thereafter.
•
•
It is the intention that the Society would continue to nominate a Society Nominee as Chairman of the Board until no later than 30 June 2020.
Up to eight of the Directors on the Board will be made up of Executives and Independent (of the Society) Non-Executive Directors. The parties
will co-operate to ensure (as far as practicable) that the Independent Non-Executive Directors will be appointed on the recommendation of the
Nomination and Governance Committee. If the number of non-Society Nominee Directors on the Board changes, the number of Society
Nominee Directors set out above will change pro rata.
Where a reduction is required to take effect in the number of Society Nominee Directors in respect of a particular year it shall take effect on
the earlier of the conclusion of the first board meeting of the Society immediately following the AGM of the Society which takes place in that
year or 30 June (or such earlier date as the Society shall agree with Glanbia plc) in that year. Further, if the Society’s shareholding in the
Company falls below 28% of the issued share capital, discussions will take place regarding a further reduction in the size of the Society’s
representation on the Board.
Nomination and Governance Committee key activities
The principal activities undertaken by the Committee in 2017 were as follows:
Board changes
There were a number changes to the composition of the Board during the year which are discussed on page 77. The Nomination and Governance
Committee did not use either an external search consultancy or open advertising for these appointments as the Directors were nominated by the
Society. A description of our Diversity Policy with respect to the appointment of Directors is contained on page 59.
Committee changes and governance
On 9 August 2017, the Group Chairman and Vice-Chairmen retired as Committee members ensuring that the membership of the Audit, Nomination
and Governance and Remuneration Committees comprise only Independent (of the Society) Non-Executive Directors.
Strategy Review Committee
The Nomination and Governance Committee continues to work with the Board to enhance the corporate governance processes. As part of our
commitment to continuous improvement the Board established a Strategy Review Committee in 2017.
The Strategy Review Committee was formed to harness the experience of individual directors to facilitate deeper dives and focus on selected
items of a strategic nature where appropriate.
The Strategy Review Committee is comprised of the Group Chairman and two Vice-Chairmen, four Independent (of the Society) Non-Executive
Directors, the Group Managing Director, the Group Finance Director, the Group Head of Corporate Development and other Executive Directors
and senior business leaders as needed. The Senior Independent Director is the Chairman of the Strategy Review Committee and reports to the
Board after each meeting.
Disclosure Committee
The Disclosure Committee remains in place and continues to oversee the timely and accurate disclosure of all information required to be so
disclosed by the Group to meet the legal and regulatory obligations required by its Stock Exchange listings and continues to assist in the design,
implementation and periodic evaluation of disclosure controls and procedures.
Succession Planning
In addition to leading the process for Board appointments and making recommendations to the Board in relation to new appointments, the Committee
also contributes towards the development of the Board and the Senior Leadership team taking into account the Group’s strategy and the opportunities
and challenges facing the Group.
Following a comprehensive executive succession and talent management update received from the Group Managing Director and Group Human
Resources and Corporate Affairs Director, the Committee continued to keep the robustness of succession planning arrangements for the Group
Operating Executive and Senior Leadership team under review.
Glanbia’s culture, articulated through our purpose, vision and values, is a major factor in our ongoing development. Continuing to embed a
positive culture across the Group will ensure the delivery of long term success for our stakeholders. The Nomination and Governance Committee
has a key role to play in this process by ensuring that our succession planning and appointment process identifies candidates who are exemplars
of our purpose, vision and values. The Committee promotes these values in all our Directors and Senior Leaders through induction and training
programmes, and through the annual performance evaluation process.
Glanbia plc | Annual Report and Financial Statements 2017
79
Relationship Agreement
The Company and the Society have entered into a Relationship Agreement in accordance with the Irish Stock Exchange Listing Rules and the
Listing Rules applicable to premium listed companies in the UK. The Relationship Agreement reiterated the commitment of both parties to reduce
the size of the Board. The Relationship Agreement (originally signed in 2014) was amended and restated in 2015 and again in 2017 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 78.
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 (2016) (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
with which they can consider the strategy of the Company and the Group 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 reviews took into consideration the fact that Paul Haran has served on the Board for more than 12 years (eight and a half years of which
coincide with the Group Managing Director’s tenure, the longest coterminous period with a current Executive Director) and that 10 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 6.2.2 A of the ISE/
Listing Rule 9.2.2 AD of the UKLA. Paul Haran was considered to be independent. This conclusion was presented to and agreed by the Board.
The Board concluded that Paul Haran should remain on the Board as he continues to make a vital contribution to the Board through his input into
Board decisions and his leadership of the Nomination and Governance Committee. This decision was again subject to a rigorous review in line
with the Company’s policy on the appointment of Independent (of the Society) Non-Executive Directors adopted in 2014. The above views were
supported by both the external Board evaluation in 2016 and the internal Board evaluation in 2017.
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 who sought re-election at the 2017 AGM were re-elected.
All Directors are seeking re-election at the 2018 AGM with the exception of Michael Keane who has indicated his intention to retire at the
conclusion of the 2018 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 external performance evaluation of the Board conducted in 2016 and the internal evaluation conducted in 2017.
Additionally in 2018 (as in 2017), Patrick Coveney, Donard Gaynor, Paul Haran and Dan O’Connor will each seek re-election at the 2018 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 and the circular accompanying
the Notice of the 2018 AGM to be published to enable shareholders to make an informed decision.
Review of the time required from a Non-Executive Director
The Committee assessed the time dedicated to the Company and the Group by each Non-Executive Director. This review also considered the
extent of the Non-Executive Directors’ other interests to ensure that the effectiveness of the Board is not compromised by such interests. The
Board and Committee are satisfied that the Group Chairman and each of the Non-Executive Directors commit sufficient time to the fulfilment of
their duties. 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 Committee assessed its performance covering its terms of reference, composition, procedures, contribution and effectiveness. As a result of
that assessment, the Board and Committee are satisfied that the Committee is functioning effectively and continues to meet its terms of reference.
80
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report
DELIVERING SUPERIOR
EARNINGS GROWTH AND
SUSTAINABLE VALUE
CREATION FOR OUR
SHAREHOLDERS
“Our remuneration policy focuses on
incentivising the successful implementation of
our corporate strategy, consistent with our risk
management framework. This policy aims to
support and reward the delivery of sustainable,
superior earnings growth, return on capital and
total shareholder return for our shareholders
over the long-term. It does so by attracting,
retaining and motivating high-quality and
committed people who are critical to the future
development and growth of the Group.”
Donard Gaynor
Remuneration Committee Chairman
2017 Committee members and meeting attendance
Key responsibilities of the Committee
Determine and agree with the Board the framework and broad policy
for remuneration of the Executive Directors, Non-Executive Directors
and other Senior Executives as required.
Oversee remuneration design and target setting to ensure
comprehensive linkages between performance and reward and
incentivise delivery of Group strategy.
Determine, within the agreed policy, individual total compensation
packages for the Executive Directors, Non-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.
Member
D Gaynor
H Corbally1
P Haran
Mn Keane1
D O’Connor
J Murphy1,2
P Murphy2
Appointed
13-May-14
26-Jul-11
9-Jun-05
29-Jun-10
1-Dec-14
2-Jun-17
12-Jun-15
Number of full years
on the Committee
2017 meeting
attendance
Determine the achievement of performance conditions for vesting
of Annual and Long Term Incentive Plans.
3
6
12
6
3
0
1
6/6
3/3
6/6
3/3
6/6
0/0
3/3
1. H Corbally, Mn Keane and J Murphy retired from the Committee on 9 August 2017.
2. P Murphy retired from the Committee on 2 June 2017 with J Murphy being appointed
on the same date.
See page 65 for more information on current Remuneration
Committee members.
Terms of reference
The full terms of the 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 Committee
Non-Executive Chairman
Non-Executive Directors
Allocation of time
Framework and Policy
Annual Incentive Plan
Long Term Incentive Plan
Total Compensation Package
Other
Glanbia plc | Annual Report and Financial Statements 2017
81
Dear shareholder,
On behalf of the Remuneration Committee, I am pleased to present the Remuneration Committee Report for year ended 30 December 2017.
Business performance 2017
The Group delivered its eighth year of double-digit earnings growth, with pro-forma adjusted Earnings Per Share (EPS) from continuing operations
up 10.2% constant currency for the year. On a reported basis pro-forma adjusted EPS was up 8.3%, reflecting a weakening of the US Dollar versus
the Euro during the year. Return on Capital Employed (ROCE) was 13.4% for 2017. The Balance Sheet was also further strengthened. Net debt
was reduced by €69.8 million and the net debt to Earnings before Interest, Tax, Depreciation and Amortisation (EBITDA) ratio is now 1.07 times.
Pro-forma operating cash flow was €185.0 million for the year.
Strategically, 2017 was a pivotal year for the Group with the disposal in July 2017 of 60% of Dairy Ireland to Glanbia Co-operative Society Limited
(the ‘Society’), in turn creating a new Joint Venture business – Glanbia Ireland, which now encompasses Glanbia Ingredients Ireland, Consumer
Foods Ireland and Agribusiness – which is 40% owned by Glanbia plc. The Group is now focused on its two main growth platforms: Glanbia
Nutritionals and Glanbia Performance Nutrition, and a clear strategy is in place to further develop the Group as an international nutrition player.
In the three-year performance period of the 2015 share award, 2015 to 2017, performance delivery was evaluated as if the Dairy Ireland segment
has continued as part of the Group (as 30 of the 36 month performance period had elapsed at date of disposal). This saw adjusted EPS compound
annual growth rate (CAGR) on a reported basis grow by 13.54%, exceeding the maximum target of 12% growth, and average ROCE of 13.10%
for the period. During 2017 the Remuneration Committee completed a Remuneration Policy review to ensure that delivery of an ambitious Group
strategy is appropriately incentivised while maintaining focus on strong financial discipline. Details of that review and implications for the 2018-2020
Remuneration Policy are set out below.
Remuneration in respect of 2017
Annual Incentive
The proposed 2017 Annual Incentive reflects the satisfactory business performance during the year and the Remuneration Committee considers
that the 2017 Annual Incentive fairly recognises the performance of the Executive Directors. The 2017 Annual Incentive is based on a combination
of business (80% weighting) and personal (20% weighting) objectives. See page 93 and 94 for 2017 performance conditions.
2008 Long Term Incentive Plan (LTIP)
Similarly, the Committee believes the percentage levels of the 2015 share award to vest will reflect a sustained delivery over the three-year
performance period, 2015 to 2017 inclusive. Under the 2008 Long Term Incentive Plan (2008 LTIP) the 2015 share award is the first share award
which incorporates business segment as well as Group performance conditions for relevant Executive Directors. See page 95 to 97 for 2017 Group
and business segment performance conditions.
Under the 2008 LTIP, the 2015 share award granted to Executive Directors will vest no earlier than 18 May 2018, the third anniversary of their grant.
The final vesting of the 2015 share award will be subject to a post vesting holding period of two years and will be subject to malus and clawback
provisions during the holding period to the extent deemed appropriate by the Remuneration Committee in line with the rule amendments approved
by shareholders at the 2015 Annual General Meeting (AGM). The Remuneration Committee considers that the 2015 share award expected to vest
fairly recognises the performance of the Executive Directors over the three-year period.
Details of both the 2017 Annual Incentive and 2015 share award for Executive Directors are included on pages 93 to 97.
Remuneration Policy
The Group’s Remuneration Policy promotes performance, while sustaining the underlying strong financial health of the business. Emphasising the
global nature of the Group, the Remuneration Policy aims to ensure sound decision making for growth and success, with clear linkage of Executive
Director remuneration to Group performance, benefiting all its stakeholders.
As I highlighted in last year’s Remuneration Committee Report, the Group’s current 2015-2017 Remuneration Policy was last reviewed in 2014.
As part of the three-year cycle, a review of the Remuneration Policy was conducted in 2017 and a new policy will be put to shareholders for
consideration, in respect of the 2018-2020 period, at the 2018 AGM. As part of this Remuneration Policy review, the Remuneration Committee
reviewed the existing policy and the application of the short and long term incentive plans to Senior Executives below the Board. This review
was discussed by the Committee and supported, as appropriate, by its outside advisers and Board during 2017 to ensure that the policy and
remuneration programmes continue to appropriately reward business performance and maintain the underlying strong financial health of the
business. Full details of 2018-2020 Remuneration Policy are on pages 85 to 90.
Outcome of the Remuneration Policy review
Overall the Committee found that the 2015-2017 Remuneration Policy remains appropriate in respect of base salary, benefits, annual incentive
and LTIP (i.e. quantum and structure) at Executive Director levels and therefore should be retained with no major changes in the policy framework.
As part of the review process, a key input of the review process was the feedback and engagement from key shareholders, representing 51.2%
of the total shareholding, as well as key proxy advisers. Our proposal is to continue the existing remuneration framework in the 2018-2020
Remuneration Policy, whilst implementing an increased weighting and focus on ROCE in the long term incentive plan, was well received during
the consultation process. During the engagement process we received some suggestions to provide enhanced disclosure around personal
objectives in the Remuneration Committee Report which the Committee has incorporated into our 2017 Report. Some shareholders also raised
the practice of adjusting ROCE and EPS to neutralise the effect of acquisitions and disposals which were not planned for at the time of the grant
of share awards and therefore not in the original targets. Having considered that feedback, it is the intention of the Board that in implementing
future LTIP share awards, any calibration of performance targets set at the outset of the three-year performance period will not be amended
under normal circumstances for a subsequent acquisition or disposal.
82
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report continued
In addition, since the integration of the Dairy Ireland businesses to the Glanbia Ireland Joint Venture, which completed in July 2017, the Group’s
revenues, EBITA and adjusted EPS are now, in all cases, over 80% US Dollar generated, albeit the Group reports in Euro. The Annual Incentive is
already evaluated on a constant currency basis. In this context, to ensure the LTIP more accurately reflects underlying earnings performance by
Executive Directors and senior management, the Remuneration Committee is considering whether the LTIP EPS performance condition should
be evaluated on a constant currency basis rather than on a reported basis. This would remove a distortionary effect of currency volatility and
more directly link reward to actual performance. The Committee is consulting shareholders and will make a final decision on this issue, as an
implementation matter, in the coming weeks and will disclose the outcome in the 2018 AGM Circular.
The Committee is satisfied based on the business strategy, the policy review findings and feedback from our key shareholders, that the proposed
2018-2020 Remuneration Policy is appropriate both for the market context within which the Group operates and allows the Group to continue to
attract, retain and motivate a highly effective management team who contribute significantly towards achieving the Group’s growth ambition.
Remuneration in respect of 2018
Executive Director base salary and benefits (2017-2018)
As part of the Remuneration Policy review process, the Remuneration Committee undertook a detailed benchmarking exercise of total pay
for the Executive Directors. The review clearly showed that for a number of our executive roles, given the growth of the Group, as well as their
performance and significantly increased scope of the roles and responsibilities, the Group had fallen below the mid-level of the market and for
the Group Managing Director in some cases below the market lower quartile. In the context of this market data, the expansion of the roles, high
performance of the team and criticality of the executive team for continued business growth the Remuneration Committee recommended that
base salaries be increased over 2017 and 2018 to reflect a fairer compensation for these roles. The recommendations increased the base salaries
of the Group Managing Director, Group Finance Director and CEO Glanbia Nutritionals by 6% to €811,000, €477,000 and €421,700 respectively,
effective 1 January 2017. The base salary of the CEO Glanbia Performance Nutrition was reviewed during 2016 in the context of his relocation to
Ireland, resulting in a base salary of €500,000 effective 1 January 2017.
Further, the Committee has also confirmed 6% base salary increases for the Group Managing Director, Group Finance Director and CEO Glanbia
Nutritionals and a 2.5% increase for the CEO Glanbia Performance Nutrition, all effective 1 January 2018. Together with the actions taken in 2017, this
brings the base salaries of our Executive Directors to a level that the Committee deem appropriate for the scope of the roles and responsibilities and
is reasonably competitive versus the market. Other salaries across the Group will also increase to varying degrees in response to role adjustments,
however average salaries will adjust for inflation by 2.5%-3.5% during 2018 depending on geographic location.
Non-Executive Director remuneration 2018
Non-Executive Director fees had not been changed since 2014. The fees are reviewed in conjunction with the triennial Remuneration Policy review
having regard to the Company’s size, structure and complexity; fees paid to Non-Executive Directors of a range of companies in the principal
markets where we operate; and the steps taken by the Company to improve overall governance in light of structural changes and the contribution
of Non-Executive Directors to such efforts. As a result, fees were increased by €15,000 for Independent Non-Executive Directors and by €7,500
for the Society Nominated Non-Executive Directors. These proposed changes are effective from 1 January 2018. The current fees paid to
Non-Executive Directors for 2017 and proposed for 2018 are outlined on page 89.
2018 Long Term Incentive Plan
In line with best practice, the Glanbia 2008 Long Term Incentive Plan has a ten year life and will expire on 4 March 2018. A new long term incentive
plan containing rules mostly similar to the 2008 plan will be put to shareholders for approval at the 2018 AGM.
We have taken the opportunity in presenting the new LTIP to review the existing plan rules and have updated the new rules where necessary to
reflect current market practice and guidance and to enhance its retention impact below Board level. The rules are essentially the same as the
existing 2008 LTIP rules which were updated regularly over its ten year cycle. The long term incentive is a critical part of the total remuneration
framework in that it enables us to deliver shares awarded under the plan to the Executives who have earned those rewards. It also aligns the
senior team below the Board with the interests of shareholders, focusing senior management on long-term value delivery. It is also a critical
retention part of our total remuneration package. A summary of the rules of the new 2018 LTIP will be set out in detail in the Circular
accompanying the Notice of the 2018 AGM.
Voting
At our AGM on 25 April 2018 we will be asking shareholders to vote on three resolutions relating to remuneration:
• Directors’ Remuneration Report 2017 – this non-binding resolution is a voluntary advisory vote for our shareholders to confirm their support
for the implementation of the Remuneration Policy – in particular section B of this report, ‘Directors Remuneration Implementation Report’;
• Remuneration Policy for 2018-2020 – this non-binding resolution is a voluntary advisory vote for our shareholders to confirm their support to
the Remuneration Policy proposed for 2018-2020 – section A of this report; and
• 2018 LTIP – (binding vote) – this is a binding resolution on the establishment by the Company of a new 2018 Long Term Incentive Plan.
I would like again to thank the shareholders and other stakeholders who took part in the consultation process on our Remuneration Policy and
we encourage all our shareholders to support the resolutions at the forthcoming AGM.
Donard Gaynor
Remuneration Committee Chairman
Glanbia plc | Annual Report and Financial Statements 2017
83
Governance of the Remuneration Committee during 2017
Governance
The Remuneration Committee comprises three Non-Executive Directors, of whom three members constitute a quorum.
Remuneration Best Practices
The Remuneration Committee complies with all relevant reporting and legislative requirements applicable to an Irish incorporated company with
a primary listing on the Irish Stock Exchange. With a secondary listing on the London Stock Exchange, the Remuneration Committee has also
resolved on a voluntary basis to align, to the extent possible under Irish law, the Company’s Remuneration Policy with UK remuneration best
practices. Additionally, the Remuneration Committee is giving increasing regard to remuneration practices in the major overseas countries in
which the Group operates which are relevant in attracting, retaining and motivating senior talent in relevant markets, particularly below Board.
The Remuneration Committee receives independent external advice on executive remuneration from Willis Towers Watson who were first
appointed as Remuneration Advisers in 2011 and were re-appointed following a competitive selection process in 2016. Willis Towers Watson
provide advice to the Remuneration Committee which enables robust and sound decision making. Willis Towers Watson fees for advising the
Remuneration Committee during 2017 were €468,556. Willis Towers Watson received additional fees in 2017 for the provision of pension related
and other services.
The Remuneration Committee continues to actively listen and incorporate, as far as possible, the views of the shareholders when determining
the Remuneration Policy and making remuneration decisions. This was an important part of the Remuneration Policy review during 2017 and the
feedback from shareholders was presented to the Remuneration Committee with many changes to the Remuneration Report disclosures made
as a result of such feedback. Additionally the Remuneration Committee, through the advice of the independent Remuneration Advisers, monitors
and incorporates, as appropriate, best practice developments for remuneration policies.
Remuneration Committee Governance
The three Society Nominated Non-Executive Directors retired from the Remuneration Committee in August 2017. Consequently, the
Remuneration Committee which was previously comprised of six Non-Executive Directors, is now comprised of three Independent (of the
Society) Non-Executive Directors.
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 Key Activities
• 2016 Annual Incentive scheme – reviewed the outcomes of Group and personal performance conditions 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. Considered
Group Operating Executive performance in the context of overall Group performance and market environment.
• 2014 share award – reviewed and approved the vesting level for share awards granted in 2014 under the 2008 LTIP.
• 2017 Annual Incentive scheme – reviewed and approved the Group and personal performance conditions and targets for the Group Operating
Executive and the Business Unit CEOs.
• 2017 share award – reviewed and approved the performance conditions, targets and total value of share awards granted in 2017 under the
2008 LTIP Scheme.
• Personal Objectives – reviewed progress against personal objectives for Executive Directors and Senior Executives on an ongoing basis
throughout the year.
• Remuneration Policy for 2018-2020 – conducted a review of the Remuneration Policy including a comprehensive consultation process with
key shareholders. Recommended the 2018-2020 policy for adoption by the Board.
• 2017 Remuneration Report – reflected the feedback from shareholders on improving Remuneration Report clarity and transparency which
was received through the Remuneration Policy consultation process.
84
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report continued
Governance of the Remuneration Committee during 2017 continued
2017 Executive remuneration at Glanbia
Fixed
Pay
Base
Salary
Retirement
Benefits
Other
Benefits
Variable Pay
Annual Incentive
Long Term Incentive
Group
Performance
Personal
Objectives
Business
Segment
Performance
Group
Performance
Business
Segment
Performance
Group Adjusted
EPS
Group OCF
See page 94
Business
Segment
EBITA
Group
Adjusted EPS
Group ROCE
Relative TSR
Business
Segment
ROCE
Business
Segment
EBITA
Annual Incentive in excess of 75%
of base salary net of tax deferred
for two years
Vested share award net of tax
deferred for two years
Shareholder guidelines
Malus and Clawback
Where appropriateWhere appropriate Glanbia plc | Annual Report and Financial Statements 2017
85
Section A: Directors’ Remuneration Policy 2018-2020
The 2018-2020 Remuneration Policy will apply to the four current Executive Directors and is subject to non-binding approval as a voluntary
advisory vote at the Group’s AGM in April 2018. No material changes are proposed in the 2018-2020 Remuneration Policy. The previous
2015-2017 Remuneration Policy received 97.6% shareholder approval at the 2015 AGM.
Remuneration strategy, policy and purpose
The Group’s 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 over the long-term. 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 Policy focuses on incentivising the successful implementation of our corporate strategy, consistent with our risk management
framework. This strategy aims to deliver sustainable, superior earnings growth, solid financial stewardship and total shareholder return (TSR)
performance for our shareholders over the long-term through the strong performance of high-quality and committed leadership who are critical
to the future development of the Group.
We seek to:
• Create a consistent global approach to remuneration for all senior executives, by applying our strategy and policy as appropriate having regard
to the markets where we compete for superior talent;
• 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 Key Performance Indicators (KPIs), which are detailed on pages 18 and 19, underpin the selection of performance criteria used within
the incentive arrangements. We have provided specifics in summary form on the individual elements of the remuneration packages for Executive
Directors including personal objectives on the following pages.
Individual elements of the remuneration for Executive Directors
The Remuneration Committee has proposed, and the Board has agreed, that there are no significant changes to the policy that has operated
from 2015-2017 for the three years commencing 2018.
The following table details the proposed 2018-2020 Remuneration Policy for the Executive Directors. The Remuneration Policy is subject to
shareholder non-binding approval at the April 2018 AGM.
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.
Set by reference to the relevant market
median of Europe and US 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.
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 and/or
share value growth.
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
and 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 are subject to malus and
clawback (for a period of two years following
this investment) to the extent determined by
the Remuneration Committee as outlined in
Note 1 on page 87.
Individual performance, with targets and
assessment determined annually.
Based on growth in annual Group adjusted
EPS on a constant currency basis, Group
Operating Cash flow, business segment
EBITA (where appropriate) and individual
performance objectives.
All performance metrics and calibration of
targets are determined by the Remuneration
Committee annually.
86
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report continued
Section A: Directors’ Remuneration Policy 2018-2020 continued
Description
Objective
Description and maximum value
Performance measures
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.
To focus on greater
alignment with
shareholders, long-term
retention and reward for
sustainable performance.
Long Term Incentive individual annual share
award level of a maximum of 250% of base
salary. The level of share award is dependent
on the level of job responsibilities and with
reference to companies of similar size and
complexity in Europe and US.
For all performance metrics, 25% vests at
threshold performance and 100% vests at
maximum with straight line vesting in between
these levels.
The extent of vesting shall be dependent
on the level of achievement of the relevant
performance conditions which may include
the Group’s adjusted EPS, Group ROCE
and relative TSR performance conditions as
appropriate, and in addition where relevant,
business segment EBITA and ROCE. The
Remuneration Committee has the discretion
to change the performance criteria (including
the measures, their weighting and calibration)
where deemed appropriate. Any changes
to these performance conditions will be
disclosed in the Remuneration Committee
Report which will be subject to a general
shareholder non-binding advisory vote.
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.
LTIP share awards granted from 2015 will be
subject to malus and clawback (for a two-year
holding period following vesting), to the extent
determined by the Remuneration Committee
as outlined in Note 1 on page 87.
Executive Directors will be required to hold
shares received pursuant to the vesting of
LTIP share awards for a minimum period
of two years post vesting.
For the Group Managing Director, the award
level will be a maximum of 250%. For all other
Executive Directors, the award level will be a
maximum of 200%.
The Remuneration Committee annually reviews
and determines the financial metrics. In 2017,
the Committee increased the weighting for
ROCE and reduced the weighting for EPS.
It is intended that these will be the weighting
metrics to be applied for the 2018 share
awards. The 2018 share award is to be
determined by reference to three performance
metrics for the Group Managing Director and
Group Finance Director:
• 40% based on Group adjusted EPS;
• 40% 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 2018 share award is to be:
• 30% based on Group adjusted EPS;
• 25% 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.
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 and budget expectations.
Quality of earnings review/underpin will
continue to be exercised at the discretion
of the Remuneration Committee.
Pension (fixed)
Retirement Benefit.
Provide competitive,
affordable and sustainable
retirement benefits.
Determined as a percentage of base salary.
Glanbia plc | Annual Report and Financial Statements 2017
87
Description
Objective
Description and maximum value
Performance measures
Other Benefits (fixed)
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.
Car or equivalent
payment, benefit
in lieu of personal
future service
pension benefit,
suitable medical
insurance, tax
equalisation
payments, relocation
expenses/payments
(if applicable) and
overseas allowance
where appropriate.
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 schemes.
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 2018 LTIP if Executive
Directors do not comply with the guidelines.
Note 1: Malus and clawback – The Committee may, at any time within two years of an LTIP share award or Annual Deferred Incentive vesting,
determine that malus and clawback shall apply if the Committee determines that there was a material misstatement of the financial statements
of the Company upon which the performance targets were assessed or an erroneous calculation was made in assessing the extent to which
performance targets were met. Additionally, the Committee can determine at any time within two years of an LTIP share award or Annual Deferred
Incentive vesting that malus and clawback will apply if an award holder is found guilty, or pleads guilty, to a crime which causes reputational
damage; or an award holder is guilty of serious misconduct or gross negligence which causes loss or reputational damage.
88
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report continued
Section A: Directors’ Remuneration Policy 2018-2020 continued
Elements of remuneration across the Group
The Group’s remuneration principles and policy underpin remuneration practice across the Group. Below the level of the Executive Directors,
similar principles, and policy framework as outlined in the preceding pages, cascade as far as possible, taking account of seniority and local
market practice.
Following the Remuneration Policy review in 2017, and given the geographic diversity of our markets and need for talent it was determined that in
order to retain and recruit exceptional key employees, the LTIP would need to be refined for participants other than Executive Directors through
the following measures:
•
Introduction of a formal restricted stock programme through re-allocating part of the annual LTIP share award (i.e. not increasing the overall
annual quantum). Restricted stock is based on service and individual performance over the performance period. This proportion of restricted
stock is not available to any Executive Directors. Given the international breadth of the business, the share award of restricted stock aligns with
local market practice and is appropriate to allow the Group to attract and retain talent.
• Re-balance of Group and business unit metrics.
• Closer consideration of job responsibilities when granting LTIP share awards.
Description
Objective
Details
Annual Incentive
Long Term 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.
For designated senior executives, 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.
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.
In addition to key Group financial metrics and TSR, the Long Term Incentive level is
focused on appropriate and specific Business Unit measures, as determined by the
Remuneration Committee, with a greater emphasis on business unit conditions.
Formal restricted stock program, conditional on service and individual performance
over the performance period.
LTIP share awards granted from 2015 onwards are subject to malus and clawback
provisions during the holding period to the extent determined by the Remuneration
Committee as outlined in Note 1 on page 87. The holding period for participants
below the Group Operating Executive is one year.
Elements of remuneration for Non-Executive Directors
The remuneration for the Group Chairman and Non-Executive Directors was considered during the Remuneration Policy review in 2017. The findings
and conclusion from the review were that, to reflect the demands of the Board and Committee roles undertaken by the different members of the
Board, the fee for each of the four Independent (of the Society) Non-Executive Directors would be increased by €15,000 effective from 1 January
2018. The fee for the Society Nominated Non-Executive Directors would be increased by €7,500 effective from 1 January 2018.
The Remuneration Policy for the Group Chairman and Non-Executive Directors is summarised below:
Element
Fees
Description
Annual fees.
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.
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 fee for the role
of Non-Executive Director and additional fees reflecting
responsibilities for chairmanship of a 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.
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
Glanbia plc | Annual Report and Financial Statements 2017
89
2018
€
112,500
60,000
95,000
95,000
95,000
85,000
42,500
2017
€
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
in accordance with their letters of appointment. 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 85 to 87. Each element of remuneration to
be included in the package offered to a new Executive Director would be considered.
On appointment to the Board for either an external or internal candidate:
• Base salary – base salary levels will be set in consideration of the 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;
• Variable Pay – 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 share award) excluding any buyout share awards that might arise.
– Annual Incentive – the Remuneration Committee 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; and
– Long Term Incentives – the award of long-term incentives will depend on the timing of the appointment and where this fits into the typical
annual grant cycles;
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 buy out awards
which will be forfeited on leaving the previous employer.
The Remuneration Committee’s approach to this matter 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 pay out levels and any
other factors the Remuneration Committee considers appropriate. If a buyout share 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
clawback provisions in the event that the individual resigns or is terminated within a certain time frame.
For an internal appointment, any variable pay element awarded in respect of the prior role may be allowed to pay out according to its terms,
adjusted as relevant to take into account the appointment. In addition, any ongoing 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.
90
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report continued
Section A: Directors’ Remuneration Policy 2018-2020 continued
Exit pay policy
Employment contracts 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 amount payable upon termination is limited to a maximum of 12 months
remuneration.
In the event an Executive Director leaves for reasons of injury, disability, redundancy or retirement by agreement with the Group, which the
Remuneration Committee in its absolute discretion permits, any outstanding share awards issued under the 2018 LTIP will be pro-rated for time
and performance and will vest at the end of the period subject to compliance with any separation agreement or protective covenants in force at
that time. In the event of death or other exceptional circumstances, the Remuneration Committee has absolute discretion to allow all or part of
outstanding share awards to vest.
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, or which has the effect of materially changing the Group’s business, or an
Executive Director’s employment with the Group terminates by reason of a transfer of his/her employment to an entity outside the Group or other
similar event that affects the Group’s shares to a material extent, share awards under the 2018 LTIP will vest early, subject to normal restrictions on
sale and 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. The Remuneration Committee can decide not to apply restrictions on sale or pro-rate a share award if it regards it as inappropriate to
do so in the particular circumstances.
TSR
300
200
Section B: Directors’ Remuneration Implementation Report
This section of the report explains how the Group’s Remuneration Policy was implemented during 2017.
Comparison of overall performance and pay
The graph below illustrates the value over the last five years of €100 invested in Glanbia plc compares with that of €100 invested in the STOXX
Europe 600 Food and Beverage Index. The return from the hypothetical €100 invested in Glanbia shares over the five years is €188.22. (inclusive
of the original investment) versus the Index of €169.23.
Glanbia
STOXX
In all other circumstances, outstanding share awards under the 2018 LTIP will lapse.
100
Dec 12
Dec 17
Any outstanding share awards under the 2008 LTIP will vest in accordance with the 2015-2017 Remuneration Policy details of which are
contained on page 77 of Glanbia’s 2016 Annual Report and Accounts.
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 currently 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. During the year ended 30 December 2017, other
than Siobhán Talbot’s position on 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. 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, incentives are calibrated to provide appropriate rewards only on the achievement of superior performance. In addition, senior
executives below Board level may be eligible to participate in restricted stock awards as part of the annual LTIP grant, as a retention measure.
The Remuneration Committee does not consult directly with employees when formulating Executive Director pay policy. However, it does solicit
and take into account information provided by the Group Human Resources function and the independent external advice from Willis Towers
Watson, Remuneration Advisers.
Hugh McGuire’s post tax income.
through salary in 2018.
Glanbia
STOXX Europe 600 Food and Beverage Index
Executive Directors’ remuneration 2017
Executive Directors
Full Year 2017
S Talbot
M Garvey
H McGuire
B Phelan
Fixed
Variable
Annual Incentive
Pension
Annual Incentive
(deferred into
Base salary
Contribution1
Other Benefits2
(paid in cash)3
€’000
€’000
€’000
€’000
shares)4
€’000
811
477
500
422
119
-
-
-
267
29
6262
141
608
358
375
316
263
154
119
92
1. Mark Garvey participates in the Glanbia defined contribution plan with a contribution in 2017 of €119,250.
2. Other benefits includes taxable payments made to Siobhán Talbot of €214,915 (26.5% of base salary) and €111,750 (26.5% of base salary) to Brian Phelan in lieu of personal future service
pension benefit. Both Siobhán Talbot and Brian Phelan are deferred members of the Glanbia defined benefit scheme. Hugh McGuire received a taxable non-pensionable allowance of
€125,000 (25% of base salary) in lieu of a pension contribution to the Group defined contribution pension plan following his relocation to Ireland. Other benefits also include car, healthcare,
permanent health insurance and life assurance benefits. In the case of Hugh McGuire €456,000 relates to tax equalisation and relocation payments incurred in connection with his
relocation to Ireland. On 5 July 2017 Hugh McGuire’s 2014 share award of 53,250 shares vested at 81.06% resulting in a vested share award of 43,168 shares. During the vest period, 2014
to 2017 inclusive, Hugh McGuire worked mainly in the US as well as in Ireland, therefore in line with the applicable tax regulations in the two jurisdictions the share awards were subject to
US tax on a time apportioned basis in addition to Irish tax and social security on vesting for the entire three-year period. The impact of the Irish and US tax treatment meant a double tax
for Hugh McGuire in respect of certain taxes which were not creditable against each other, accordingly the Remuneration Committee agreed to make an equalisation payment to him of
€48,189 for the elements which could not be offset against each other. Hugh paid tax at the higher of the US and Irish tax rates. Additionally towards the end of 2016 and into 2017, Hugh
incurred certain non-tax exempt relocation costs which were reimbursed by the Company amounting to €407,734 in 2017. As this was a reimbursement, it did not result in any increase in
3. This reflects the proportion of the Annual Incentive payable to Executive Directors in respect of performance for the year 2017 (which amount to 75% of base salary), which will be paid
4. This reflects the proportion of the gross 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 2018 and delivered to Executive Directors two years following this investment (2020).
Glanbia plc | Annual Report and Financial Statements 2017
91
Section B: Directors’ Remuneration Implementation Report
This section of the report explains how the Group’s Remuneration Policy was implemented during 2017.
Comparison of overall performance and pay
The graph below illustrates the value over the last five years of €100 invested in Glanbia plc compares with that of €100 invested in the STOXX
Europe 600 Food and Beverage Index. The return from the hypothetical €100 invested in Glanbia shares over the five years is €188.22. (inclusive
of the original investment) versus the Index of €169.23.
TSR
300
200
Glanbia
STOXX
100
Dec 12
Dec 17
Glanbia
STOXX Europe 600 Food and Beverage Index
Executive Directors’ remuneration 2017
Full Year 2017
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
Fixed
Pension
Contribution1
€’000
Variable
Other Benefits2
€’000
Annual Incentive
(paid in cash)3
€’000
Annual Incentive
(deferred into
shares)4
€’000
-
119
-
-
267
29
6262
141
608
358
375
316
263
154
119
92
Base salary
€’000
811
477
500
422
1. Mark Garvey participates in the Glanbia defined contribution plan with a contribution in 2017 of €119,250.
2. Other benefits includes taxable payments made to Siobhán Talbot of €214,915 (26.5% of base salary) and €111,750 (26.5% of base salary) to Brian Phelan in lieu of personal future service
pension benefit. Both Siobhán Talbot and Brian Phelan are deferred members of the Glanbia defined benefit scheme. Hugh McGuire received a taxable non-pensionable allowance of
€125,000 (25% of base salary) in lieu of a pension contribution to the Group defined contribution pension plan following his relocation to Ireland. Other benefits also include car, healthcare,
permanent health insurance and life assurance benefits. In the case of Hugh McGuire €456,000 relates to tax equalisation and relocation payments incurred in connection with his
relocation to Ireland. On 5 July 2017 Hugh McGuire’s 2014 share award of 53,250 shares vested at 81.06% resulting in a vested share award of 43,168 shares. During the vest period, 2014
to 2017 inclusive, Hugh McGuire worked mainly in the US as well as in Ireland, therefore in line with the applicable tax regulations in the two jurisdictions the share awards were subject to
US tax on a time apportioned basis in addition to Irish tax and social security on vesting for the entire three-year period. The impact of the Irish and US tax treatment meant a double tax
for Hugh McGuire in respect of certain taxes which were not creditable against each other, accordingly the Remuneration Committee agreed to make an equalisation payment to him of
€48,189 for the elements which could not be offset against each other. Hugh paid tax at the higher of the US and Irish tax rates. Additionally towards the end of 2016 and into 2017, Hugh
incurred certain non-tax exempt relocation costs which were reimbursed by the Company amounting to €407,734 in 2017. As this was a reimbursement, it did not result in any increase in
Hugh McGuire’s post tax income.
3. This reflects the proportion of the Annual Incentive payable to Executive Directors in respect of performance for the year 2017 (which amount to 75% of base salary), which will be paid
through salary in 2018.
4. This reflects the proportion of the gross 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 2018 and delivered to Executive Directors two years following this investment (2020).
92
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report continued
Section B: Directors’ Remuneration Implementation Report continued
Executive Directors’ remuneration 2016
Full Year 2016
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
Fixed
Pension
Contribution
€’000
Variable
Other Benefits
€’000
Annual Incentive
(paid in cash)
€’000
Annual Incentive
(deferred into
shares)
€’000
–
99
74
–
229
21
353
121
574
338
370
298
465
278
285
165
Base salary
€’000
761
438
494
396
Details of Directors’ 2008 LTIP share awards granted in 2015 expected to vest in respect of performance to 30 December 2017 are set out on
page 97. Further explanatory notes relating to each remuneration element follow.
Base salary (fixed) 2017
The Remuneration Committee evaluated the base salary and total level of compensation of the Executive Directors in the context of the scope
and accountabilities of each role and compared it to external market benchmark data for European and US equivalent positions to understand
the range and scope of pay for comparators. The pay positioning was reviewed against market data from at least four different peer groups based
on geography, listing, business competitors and size, to understand the total potential pay market and assess the fairness of levels of pay at the
Executive Director level against similar roles and competitors. For a number of our executive roles given the performance and scope we had fallen
behind the mid-level of the market and for the Group Managing Director in some cases below the lower quartile. In the context of this market data,
the growth of the business, the expansion of the roles, high performance of the team and criticality of the executive team for continued business
growth, the Remuneration Committee resolved to increase the base salaries over 2017 and 2018 to reflect a fairer positioning of these roles.
The Group Managing Director, Group Finance Director and CEO Glanbia Nutritionals increased by 6% to €811,000, €477,000 and €421,700
respectively, effective 1 January 2017. The base salary of CEO Glanbia Performance Nutrition was reviewed during 2016 in the context of his
relocation to Ireland, resulting in a base salary of €500,000 effective 1 January 2017. The base salary increase for the broader employee
population for 2017 was between 1.75% to 3%.
Base salaries for the Executive Directors are determined by the Remuneration Committee, set by reference to the relevant market median of
Europe and US based on an external independent evaluation of the role against appropriate peer companies. The following table sets out the
closing 2017 base salary for each of the Executive Directors.
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
Closing 2017
Base salary
€811,000
€477,000
€500,000
€421,700
Base salary (fixed) 2018
As a consequence of the Remuneration Policy review undertaken by the Committee, as outlined above, the balance of the recommended
adjustment occurred on 1 January 2108 to bring relevant Executive Director salaries up to our targeted remuneration level, which are appropriate
for the roles and are reasonably market competitive. Base salaries of the Group Managing Director, Group Finance Director and CEO Glanbia
Nutritionals were increased by 6% to €859,660, €505,620 and €447,000 respectively. The base salary of CEO Glanbia Performance Nutrition
increased by 2.5% to €512,500. All increases are effective 1 January 2018.
Pension (fixed) 2017
Mark Garvey participates in a defined contribution retirement plan, to which contributions are made at an agreed rate of 25% since 1 January 2017.
Glanbia plc | Annual Report and Financial Statements 2017
93
Other benefits (fixed) 2017
This includes employment related benefits such as the use of company car or equivalent, payment in lieu of personal future service pension
benefit, medical/life assurance, tax equalisation payments and relocation or other business related allowances where appropriate. All benefits
are subject to normal deductions per the relevant regulations.
Siobhán Talbot and Brian Phelan are no longer accruing personal pension benefits from the Glanbia defined benefit pension schemes, 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 and in December 2013, the Remuneration Committee reviewed the pension arrangements for Executive Directors and
agreed to offer the option to receive a taxable payment (26.5% of base salary), in lieu of the personal future service pension benefit. As agreed by the
Remuneration Committee, Hugh McGuire received a taxable non-pensionable allowance of 25% of base salary in lieu of a pension contribution to the
Glanbia defined contribution retirement plan following his relocation to Ireland.
Annual incentive (variable) 2017
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.
The table outlines the 2017 Annual Incentive design for each Executive Director and respective weightings. It also details the full year 2017 actual
incentive outcome as a percentage of salary.
Annual Incentive Weighting
Executive Directors
Adjusted EPS
Group OCF
Personal
Objectives
Business
segment EBITA
S Talbot
M Garvey
H McGuire
B Phelan
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%
2017 Actual
Incentive Outcome
as a % of Salary
107.4%
107.4%
98.9%
96.7%
For the annual period to 30 December 2017, 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 Cash flow (OCF) 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 15% of base salary for personal objectives and 60% of base salary for business objectives (EPS, OCF and business segment
EBITA where relevant) at target performance, 30% of base salary for personal objectives and 120% of base salary for business objectives 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. Personal objectives are aligned with the
Group strategy reflecting personal contribution to the achievement of both medium and long-term strategic objectives all relating to: organisational
effectiveness, the execution of the strategy growth plan, driving innovation capability and embedding the organisation purpose, vision and values.
Progress was made on all fronts and is reflected in the personal objectives achievement included in the 2017 Annual Incentive outcomes.
Key Business Objectives 2017
The table below summarises the achieved performance in 2017 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 2017
Adjusted EPS Growth1
Group OCF (€m)2
Actual
Performance
10.2%
148.0
Below Target
Target
Above Target
Maximum
1. Adjusted EPS growth is measured on a constant currency basis to reflect the underlying performance of the Group. For 2017 the Executive Directors targeted constant currency adjusted
EPS growth of 7% with a maximum incentive achieved at 11%. The 2017 outcome is 10.2% growth in adjusted EPS.
2. 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 2017 the Executive Directors targeted constant currency OCF of €300 million with a maximum incentive achieved at €324.6 million. The 2017 outcome was €148.0 million
adjusted to €185.0 million when the impact of acquisitions and divestiture during the year are excluded.
Key Personal Objectives 2017
Personal objectives are aligned with the Group strategy reflecting personal contribution to organisational effectiveness, the execution of the
strategic growth plan, driving innovation capability and embedding the organisation purpose, vision and values. The Group Managing Director
set the personal performance objectives for each of the other Executive Directors, with the Group Managing Director’s personal objectives set by
the Chairman in conjunction with the Remuneration Committee. All personal objectives are then agreed with the Remuneration Committee who
monitored their progress throughout the year.
94
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report continued
Section B: Directors’ Remuneration Implementation Report continued
Group Managing Director, Siobhán Talbot
2017 personal objectives at maximum: 30%
2017 full year performance: 28%
Organisation Effectiveness
• Drive, with business segment CEOs, global footprint, commercial channels and product portfolios.
• Embed, with the Group Operating Executive, the purpose, vision and values system across the organisation.
Strategic Growth Plan
• Continue to evolve the growth strategy through internal opportunities and merger and acquisition activity.
• Continue to work with the Group Operating Executive to build a high performing team ensuring capability
development and succession plans are in place for key roles across the Group.
• Lead the creation of a new Joint Venture Glanbia Ireland encompassing the three Irish based businesses.
Driving Innovation Capability
• Continue to progress and evolve innovation strategy to align such strategy with revenue ambitions.
Group Finance Director, Mark Garvey
2017 personal objectives at maximum: 30%
2017 full year performance: 28%
Organisation Effectiveness
• Sustain focus on cash and working capital management.
• Focus on cost optimisation across the Group.
• Reporting to the Audit Committee, ensure compliance and risk mitigation.
• Enable the creation of a new Joint Venture Glanbia Ireland encompassing the three Irish-based businesses.
Strategic Growth Plan
• Support Group Operating Executive in exploring, and delivering on, acquisition/development opportunities.
CEO Glanbia Performance Nutrition, Hugh McGuire
2017 personal objectives at maximum: 30%
2017 full year performance: 30%
Organisation Effectiveness
• Focus on cost management and efficiency.
• Evolve business operating model continuing to develop the required high performing team, skills and
capabilities.
Strategic Growth Plan
• Grow branded portfolio.
• Maintain and grow commercial strategy for North America driven by customer/consumer insights.
• Develop and grow portfolio in key international markets driven by customer/consumer insights.
• Develop digital commercialisation strategy.
Driving Innovation Capability
• Continue to progress and evolve innovation strategy to align such strategy with revenue ambitions.
CEO Glanbia Nutritionals, Brian Phelan
2017 personal objectives at maximum: 30%
2017 full year performance: 25%
Organisation Effectiveness
• Focus on cost management and operational efficiency across all platforms.
• Continue with implementation of revised business operating model focusing on developing the required high
performing team, skills and capabilities.
Strategic Growth Plan
• Drive growth in key value adding portfolios.
• Maintain and develop key customers relationships expanding on global activity.
• Develop strategic partnerships in key areas including Joint Venture activities.
Driving Innovation Capability
• Determine opportunities, internal and external, to build innovation capability.
Glanbia plc | Annual Report and Financial Statements 2017
95
2008 LTIP (share awards with performance periods ending in the year)
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 malus and clawback provisions.
The Remuneration Committee approves the terms, conditions and allocation of share 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.
2008 LTIP (share awards over the performance period 2015 to 2017)
The 2008 LTIP share awards granted on 18 May 2015 had a three-year performance period which ended on 30 December 2017. Under the 2008 LTIP
the 2015 share award is the first share award which incorporates business segment performance conditions as well as Group performance conditions.
Both the Group and business segment performance conditions for the 2015 share awards are measured in respect of performance in the three-year
period to 30 December 2017 and independently verified by external advisers on behalf of the Remuneration Committee.
The Remuneration Committee has agreed that, in implementing the policy for 2015-2017, in the event of a material acquisition or disposal
which was unforeseen at the time of setting LTIP metrics, the calibration of the performance conditions for the Group and Business Unit may
be adjusted by the Committee for the impact of the acquisition or disposal during the performance period. The principle for such review is that
the impact of any transaction on the LTIP should not influence decision making to the detriment of the long-term strategy of the business; that
the true underlying performance of the business is factored into any LTIP performance achievement; and that there is a balanced perception of
appropriate reward levels and value creation by LTIP participants and shareholders over the long-term. However, as the disposal of 60% of Dairy
Ireland occurred in July 2017, with 30 of the 36 months of the performance period elapsed, the Remuneration Committee resolved that the 2015
share award would be evaluated as if 100% of Dairy Ireland remained part of the Group for the full performance period.
For the Group Managing Director and Group Finance Director the performance conditions were: growth in annual adjusted EPS on a reported
basis, Group ROCE and the Group’s relative TSR measured against a peer group of STOXX Europe 600 Food & Beverage Index. The CEO Glanbia
Nutritionals and CEO Glanbia Performance Nutrition are also incentivised through these Group performance conditions as well as business segment
ROCE and business segment EBITA. The table below outlines the relative weighting of the 2015 share award performance conditions for each of the
Executive Directors.
2008 Long Term Incentive Plan
2015 share award
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
Adjusted EPS
Growth
Group ROCE
TSR Ranking In
The Comparator
Group
Business segment
EBITA
Business segment
ROCE
50%
50%
40%
40%
30%
30%
15%
15%
20%
20%
15%
15%
–
–
20%
20%
–
–
10%
10%
During the performance period the Group has made a number of acquisitions and disposals to develop Glanbia’s business portfolio. The
Remuneration Committee has reflected on the changes to the business structure and their impact on the incentive targets set during the period,
to ensure the target continues to reflect a fair incentive to perform as well as sustain the overall value and health of the underlying business.
Relative TSR reflects the relative health of the business. The Remuneration Committee considered this metric and determined that no adjustment
was required. The Remuneration Committee also reviewed EPS and ROCE in detail for this performance cycle and made an adjustment to the
ROCE metric range as stated on page 96. No adjustment was made for EPS as the metric target had been exceeded and the vesting percentage
would not be altered by any adjustment. In all cases no adjustment has been made for the Dairy Ireland transaction.
1. EPS performance condition
The Group’s CAGR of reported adjusted EPS over the three-year performance period was a key LTIP metric for each Executive Director’s 2015
share award, representing 50% weighting for the Group Managing Director and Group Finance Director and a 40% weighting for business segment
Directors. 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.
Group EPS vesting conditions
Threshold performance (Three-year adjusted EPS growth equal to 6% CAGR)
Maximum performance (Three-year adjusted EPS growth equal to or greater than 12% CAGR)
Actual performance (Three-year adjusted EPS growth equal to 13.54% CAGR)
The table below shows the Group’s reported adjusted EPS over the performance period from continuing operations.
2014
2017
EPS element
vesting
25%
100%
100%
61.16c
89.17c
96
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report continued
Section B: Directors’ Remuneration Implementation Report continued
2. Group ROCE performance condition
Group ROCE over the three-year performance period represented a 30% weighting for the Group Managing Director and Group Finance Director and
a 15% weighting for business segment Directors for the 2015 share award. ROCE is calculated as Group earnings before interest and amortisation (net
of related 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 plus cumulative intangible asset amortisation less current liabilities less deferred tax liability, excluding
all financial liabilities, retirement benefit assets and cash. Following a review and peer benchmark of the ROCE metric, the metric was amended in 2017
to include the impact of net deferred taxes within capital employed. The ROCE for all three years of the 2015 share award was calculated using the
method applicable to the 2015 and 2016 Group ROCE metric. As a result there was no adjustment to capital employed for net deferred tax balances.
The Committee amended the 2015 ROCE performance condition threshold and maximum by (-0.61%) maintaining the performance metric range
to take account of the impacts of strategic acquisitions and disposals during 2015, 2016, 2017 in line with the implementation approach agreed
by the Committee for the 2015-2017 period.
Group ROCE vesting conditions
Threshold performance (Three-year simple ROCE average equal to 11.39%)
Maximum performance (Three-year simple ROCE average equal to 13.39%)
Actual performance (Three-year simple ROCE average 13.10%)
ROCE element
vesting
25%
100%
89.3%
3. TSR performance condition
The Group’s TSR ranking relative to an agreed peer group of STOXX Europe 600 Food & Beverage Index 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 as well
as ensuring 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 methodology on which TSR is calculated for LTIP purposes differs from the TSR calculation on page 91 due mainly to the use of a 30 day
average base and final share price in the LTIP calculation.
Group TSR vesting conditions
Threshold performance (Ranked at the median)
Maximum performance (Ranked in the top quartile)
Actual performance (Ranked below median)
TSR element
vesting
25%
100%
0%
4. Business segment Return On Capital Employed
Business segment Executive Directors have a 10% weighting associated with business segment ROCE over the three-year performance period
for the 2015 share award. ROCE is calculated as business segment earnings before interest and amortisation (net of related tax) plus the share
of results of Joint Ventures & Associates after interest and tax divided by Capital Employed.
Capital employed is calculated as the sum of the business segment’s total assets less current liabilities, excluding all borrowings, cash and
deferred tax balances plus cumulative intangible asset amortisation.
Glanbia Performance Nutrition ROCE vesting conditions
Threshold performance (Three-year simple ROCE average equal to the defined target %*)
Maximum performance (Three-year simple ROCE average equal to the defined maximum %*)
Actual performance
* Commercially sensitive information.
ROCE element
vesting
25%
100%
100%
The Committee amended the 2015 Glanbia Performance Nutrition business segment ROCE performance condition threshold and maximum
maintaining the performance metric range to take account of the impacts of strategic acquisitions and disposals during 2015, 2016, 2017 as set
out above.
Glanbia Nutritionals ROCE vesting conditions
Threshold performance (Three-year simple ROCE average equal to the defined target %*)
Maximum performance (Three-year simple ROCE average equal to the defined maximum %*)
Actual performance
* Commercially sensitive information.
ROCE element
vesting
25%
100%
0%
Glanbia plc | Annual Report and Financial Statements 2017
97
5. Business segment EBITA
Business segment EBITA is calculated as business segment compounded growth over Base EBITA for the three-year performance period. This
metric attracts a 20% weighting for business segment Executive Directors.
Glanbia Performance Nutrition EBITA vesting conditions
Threshold performance (Growth over Base EBITA average equal to the defined target %)
Maximum performance (Growth over Base EBITA average equal to the defined maximum %)
Actual performance (Growth over Base EBITA)
EBITA element
vesting
25%
100%
60.3%
The Committee reduced the Glanbia Performance Nutrition EBITA performance outcome to take account of the impact of strategic acquisitions
during 2015, 2016 and 2017 as per the approach set out earlier.
Glanbia Nutritionals EBITA vesting conditions
Threshold performance (Growth over Base EBITA equal to the defined target %)
Maximum performance (Growth over Base EBITA average equal to the defined maximum %)
Actual performance (Growth over Base EBITA)
EBITA element
vesting
25%
100%
0%
2008 LTIP – 2015 share award vesting
It is expected that share awards granted to Executive Directors in 2015, under the 2008 LTIP scheme, for the three-year performance period
2015-2017, will vest in May 2018 as follows:
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
Full share award
109,450
46,700
46,700
45,500
Percentage
outcome %
Number of shares
awarded expected
to vest in 2018
Estimated market
value1
76.8
76.8
75.5
53.4
84,047
35,861
35,239
24,295
€1,252,300
€534,329
€525,061
€361,996
1. This reflects the value of 2008 LTIP share awards expected to vest in 2018 with a three-year performance period ended in 2017. The market values have been estimated using the official
closing price of a Glanbia plc share on 29 December 2017 (being the last day of trading of the Irish Stock Exchange in 2017) of €14.90.
98
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report continued
Section B: Directors’ Remuneration Implementation Report continued
Performance targets for outstanding share awards
The performance targets for all outstanding 2008 share awards are set out in the following tables:
Adjusted EPS Growth
2016 Share awards
2017 Share awards
50% of share award for Group
Managing Director and Group
Finance Director.
40% of share award for business
segment Executive Directors.
40% of share award for Group
Managing Director and Group
Finance Director.
30% of share award for business
segment Executive Directors.
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.
Three-year adjusted EPS
growth less than 5% CAGR.
Three-year adjusted EPS
growth equal to 5% CAGR.
Three-year adjusted EPS
growth equal to or greater
than 12% CAGR.
TSR Ranking in the Comparator Group
Vesting Level 0%
Vesting Level 25% (Threshold)*
Vesting Level 100% (Maximum)*
2016 Share awards
2017 Share awards
20% of share award for Group
Managing Director and Group
Finance Director.
15% of share award for business
segment Executive Directors.
Ranked below the median.
Peer group is the STOXX
Europe 600 Food and
Beverage Index.
Ranked at the median. Peer
group is the STOXX Europe
600 Food and Beverage
Index.
Ranked in the top quartile.
Peer group is the STOXX
Europe 600 Food and
Beverage Index.
Group Return on Capital Employed
Vesting Level 0%
Vesting Level 25% (Threshold)*
Vesting Level 100% (Maximum)*
2016 Share awards
2017 Share awards
30% of share award for Group
Managing Director and Group
Finance Director.
15% of share award for business
segment Executive Directors.
40% of share award for Group
Managing Director and Group
Finance Director.
25% of share award for business
segment Executive Directors.
Business segment Return on Capital Employed**
2016 Share awards
2017 Share awards
10% of share award for business
segment Executive Directors
based on Average Business
Segment ROCE.
Less than 12.0%.
Equal to 12.0%.
Equal to or greater than 14%.
Less than 12.0%.
Equal to 12.0%.
Equal to or greater than 14%.
Vesting Level 0%
Below target.
Vesting Level 25% (Threshold)*
Vesting Level 100% (Maximum)*
At target.
At Maximum.
Business segment EBITA**
Vesting Level 0%
Vesting Level 25% (Threshold)*
Vesting Level 100% (Maximum)*
2016 Share awards
2017 Share awards
20% of share award for business
segment Executive Directors.
Growth over Base EBITA is less
than the defined % per annum
compounded.
Growth over Base EBITA is
equal to the defined % per
annum compounded.
Growth over Base EBITA
is equal to or greater than
the defined % per annum
compounded.
* Straight line vesting between threshold performance and maximum performance.
** Commercially sensitive information.
Glanbia plc | Annual Report and Financial Statements 2017
99
2008 LTIP (share awards made in the financial year 2017)
2008 LTIP share awards were made to the Executive Directors on 23 February 2017 and will vest no earlier than 23 February 2020, 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 ‘Individual elements of the remuneration for Executive
Directors’ on page 85.
These share 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 4 January 2020. 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 awards
granted February
2017
Market
value
€1
Share award as a
% of base salary at
30/12/2017
112,451
52,911
55,463
46,777
2,027,492
953,985
999,998
843,389
250%
200%
200%
200%
1. These have been valued at the mean between the highest and lowest sale prices of a Glanbia plc share on 22 February 2017 (€18.03) the dealing day immediately preceding the date of grant.
Directors’ shareholdings
As at 30 December 2017 the Executive Directors’ share ownership against the guidelines was as follows:
Executive Directors
S Talbot
M Garvey 1
H McGuire
B Phelan
Shares held as at
30 December 2017
% of base salary
based on market
value as at
30 December 2017
255,175
38,429
100,606
153,059
469%
120%
300%
541%
Shareholding
guidance
250%
150%
150%
150%
1. Mark Garvey joined the Group on 12 November 2013 and has until 12 November 2018 to build up his shareholding in the Company to 150% of his base salary.
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 1,127,066 shares at 30 December 2017.
The exercise of share options under the 2002 LTIP (which expired in 2012) is satisfied by the allotment of newly issued shares. At 30 December
2017 the total number of shares which could be allotted under this scheme was 40,000 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 2017 was €105,000 per annum (2016: €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 Advisers.
Implementation of policy in 2018
The base salaries of Executive Directors as of the date of this report are set out on page 92. As outlined on pages 82 and 92 following a review by
the Remuneration Committee the base salaries of the Group Managing Director, Group Finance Director and CEO Glanbia Nutritionals increased
by 6% effective 1 January 2018, to reflect the growth of the Group scope of responsibilities and to retain reasonable competitiveness with the
market. The base salary of CEO Glanbia Performance Nutrition increased by 2.5% effective 1 January 2018 in line with other employees.
Annual Incentive opportunity for Executive Directors and Senior Executives in 2018 will remain unchanged following the Remuneration Policy
review in 2017. 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 budget expectations.
100
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report continued
Section B: Directors’ Remuneration Implementation Report continued
Implementation of policy in 2018 continued
2018 share awards will continue to operate in line with the Remuneration Policy as outlined on pages 85 to 90, reflecting increased weighting on
Group and business segment ROCE as appropriate. 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 Committee reviewed its performance covering its terms of reference, composition, procedures, contribution and effectiveness. As a result of
that assessment, the Board and Committee is satisfied that it is functioning effectively and it has met its terms of reference.
Directors’ remuneration and interests in shares in Glanbia plc
Tables A to G give details of the Directors remuneration and interests in shares, etc. 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 30 December 2017. There have
been no changes in the interests listed in Tables B to G between 30 December 2017 and 20 February 2018.
The market price of the ordinary shares as at 30 December 2017 was €14.90 and the range during the year was €19.21 to €14.46. The average
price for the year was €16.91.
Results 2016 – Resolution to receive and consider the Remuneration Committee report for the year ended 31 December 2016 excluding the
part containing the Directors Remuneration Policy
For
%
Against
Total excluding
withheld
%
%
Withheld
Total including
withheld
%
%
188,674,128
97.43%
4,986,103
2.57% 193,660,231
100.00%
4,740,659
2.39% 198,400,890
100.00%
Glanbia plc | Annual Report and Financial Statements 2017
101
Table A: 2017 Directors Remuneration
The salary, fees and other benefits pursuant to the remuneration package of each Director during the year were:
Date of appointment/resignation, if applicable
Salary
€’000
Fees
€’000
Pension
contribution1
€’000
Other
benefits2
€’000
Annual
Incentive
paid in
cash3
€’000
Annual
Incentive
deferred
into shares4
€’000
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
2017
2016
Non-Executive Directors
H Corbally
Mn Keane
J Murphy
P Ahern
P Coveney
J Doheny
D Gaynor
J Gilsenan
V Gorman
T Grant
P Haran
B Hayes
P Hogan
Ml Keane
M Merrick
P Murphy
D O’Connor
E Power
2017
2016
Total 2017
Total 2016
Ret. 2 June 2017
Ret. 26 April 2017
Ret. 9 May 2016 and Reapp 2 June 2017
Ret. 9 May 2016 and Reapp 2 June 2017
Ret. 9 May 2016
Ret. 26 April 2017
Ret. 9 May 2016 and Reapp 2 June 2017
811
477
500
422
2,210
2,089
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2,210
2,089
–
–
–
–
–
–
105
53
45
35
70
15
80
11
35
20
80
20
–
35
11
42
80
20
757
814
757
814
–
119
–
–
119
480
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
267
29
6262
141
608
358
375
316
263
154
119
92
1,063
417
1,657
1,580
628
1,193
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2017
Total
€’000
2016
Total
€’000
1,949
1,137
1,620
971
5,677
2,029
1,174
1,576
980
5,759
105
53
45
35
70
15
80
11
35
20
80
20
–
35
11
42
80
20
757
105
53
35
35
70
35
80
35
35
12
80
12
12
35
35
53
80
12
814
119
480
1,063
417
1,657
1,580
628
6,434
1,193
6,573
1. Mark Garvey participates in the Glanbia defined contribution plan with a contribution in 2017 of €119,250.
2. Other benefits includes taxable payments made to Siobhán Talbot of €214,915 (26.5% of base salary) and €111,750 (26.5% of base salary) to Brian Phelan in lieu of personal future service
pension benefit. Both Siobhán Talbot and Brian Phelan are deferred members of the Glanbia defined benefit scheme. Hugh McGuire received a taxable non-pensionable allowance of
€125,000 (25% of base salary) in lieu of a pension contribution to the Group defined contribution pension plan following his relocation to Ireland. Other benefits also include car, healthcare,
permanent health insurance and life assurance benefits. In the case of Hugh McGuire €456,000 relates to tax equalisation and relocation payments incurred in connection with his
relocation to Ireland. On 5 July 2017 Hugh McGuire’s 2014 LTIP share award of 53,250 shares vested at 81.06% resulting in a vested share award of 43,168 shares. During the vest period,
2014 to 2017 inclusive, Hugh McGuire worked mainly in the US as well as in Ireland, therefore in line with the applicable tax regulations in the two jurisdictions the share awards were
subject to US tax on a time apportioned basis in addition to Irish tax and social security on vesting for the entire three-year period. The impact of the Irish and US tax treatment meant a
double tax for Hugh McGuire in respect of certain taxes which were not creditable against each other, accordingly the Remuneration Committee agreed to make an equalisation payment
to him of €48,189 for the elements which could not be offset against each other. Hugh paid tax at the higher of the US and Irish tax rates. Additionally towards the end of 2016 and into
2017, Hugh incurred certain non-tax exempt relocation costs which were reimbursed by the Company amounting to €407,734 in 2017. As this was a reimbursement, it did not result in any
increase in Hugh McGuire’s post tax income.
3. This reflects the proportion of the Annual Incentive payable to Executive Directors in respect of performance for the year 2017 (which amount to 75% of base salary), which will be paid
through salary in 2018.
4. This reflects the proportion of the gross Annual Incentive (over 75% of base salary) which is deferred and, 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 the investment.
Details of Directors’ long-term share awards expected to vest in respect of performance to 30 December 2017 are set out on page 105.
102
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report continued
Section B: Directors’ Remuneration Implementation Report continued
The pension benefits of each of the Executive Directors during the year were as follows:
S Talbot
B Phelan
2017
2016
Transfer value of
increase in
accrued pension
€’000
Annual pension
accrued in 2017 in
excess of inflation
€’000
Total annual
accrued pension
at 30 December
2017 €’000
–
–
–
–
–
–
–
–
159
103
262
261
Siobhán Talbot and Brian Phelan are no longer accruing personal pension benefits from the Glanbia defined benefit pension schemes, 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 and in December 2013, the Remuneration Committee reviewed the pension arrangements for Executive Directors
and agreed to offer the option to receive taxable payment (26.5% of base salary), in lieu of the personal future service pension benefit.
The cost of death in service and dependant’s pensions in not included in the figures quoted above.
Table B: Directors’ and Secretary’s interests in ordinary shares in Glanbia plc
Directors
H Corbally
Mn Keane
J Murphy
S Talbot1
P Ahern
P Coveney
M Garvey1
D Gaynor
V Gorman
T Grant2
P Haran
B Hayes2
Ml Keane
H McGuire1
P Murphy
D O’Connor
B Phelan1
E Power2
Secretary
M Horan
1. Executive Director.
2. Appointed 2 June 2017.
* or at date of appointment if later.
As at
30 December 2017
Ordinary Shares
As at
1 January 2017
Ordinary Shares *
14,855
25,742
7,283
255,175
10,091
3,900
38,429
10,000
5,033
7,251
7,462
32,346
38,990
100,606
33,198
7,680
153,059
58,693
13,991
24,664
8,000
233,567
7,720
3,900
8,356
10,000
4,173
6,236
7,462
30,074
35,927
110,945
31,105
7,680
141,845
55,322
27,162
57,878
Note: The ordinary shares held in trust for the Directors and Secretary disclosed in Table C on page 103 are included in the total number of ordinary shares held by the Directors and Secretary above.
Glanbia plc | Annual Report and Financial Statements 2017
103
Table C: Directors’ and Secretary’s interests in ordinary shares in Glanbia plc subject to restriction
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
Secretary
M Horan
2008 LTIP2
2015 Annual
Deferred Incentive3
2016 Annual
Deferred Incentive4
32,769
21,812
20,390
21,300
10,417
5,912
7,436
2,674
13,839
8,261
10,928
4,914
Total1
57,025
35,985
38,754
28,888
11,469
2,354
4,284
18,107
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 5 July 2018.
3. Subject to restriction on sale until 29 March 2018.
4. Subject to restriction on sale until 28 March 2019.
Table D: Summary of Directors’ and Secretary’s interests in Glanbia plc 2008 LTIP
Directors
S Talbot
M Garvey
H McGuire
B Phelan
Secretary
M Horan
As at
30 December 2017
2008 LTIP
share awards
As at
1 January 2017
2008 LTIP
share awards
325,691
143,891
156,203
135,457
293,240
144,230
153,990
140,680
65,512
69,810
104
Glanbia plc | Annual Report and Financial Statements 2017
Remuneration Committee Report continued
Section B: Directors’ Remuneration Implementation Report continued
Table E: Directors’ and Secretary’s interests in 2008 LTIP
Date
of Grant
01-Jan-17
Granted
during
the year
Vested
during
the year
Lapsed
during
the year
30-Dec-17
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:
Notes
02-Jul-14
18-May-15
25-Feb-16
23-Feb-17
02-Jul-14
18-May-15
25-Feb-16
23-Feb-17
02-Jul-14
18-May-15
25-Feb-16
23-Feb-17
02-Jul-14
18-May-15
25-Feb-16
23-Feb-17
02-Jul-14
18-May-15
25-Feb-16
23-Feb-17
80,000
109,450
103,790
–
293,240
53,250
46,700
44,280
–
144,230
53,250
46,700
54,040
–
153,990
52,000
45,500
43,180
–
140,680
28,000
21,450
20,360
–
69,810
–
–
–
112,451
112,451
–
–
–
52,911
52,911
–
–
–
55,463
55,463
–
–
–
46,777
46,777
–
–
–
23,702
23,702
64,853
–
–
–
64,853
43,168
–
–
–
43,168
43,168
–
–
–
43,168
42,155
–
–
–
42,155
22,699
–
–
–
22,699
15,147
–
–
–
15,147
10,082
–
–
–
10,082
10,082
–
–
–
10,082
9,845
–
–
–
9,845
5,301
–
–
–
5,301
–
109,450
103,790
112,451
325,691
–
46,700
44,280
52,911
143,891
–
46,700
54,040
55,463
156,203
–
45,500
43,180
46,777
135,457
–
21,450
20,360
23,702
65,512
02-Jul-17
11.51
05-Jul-17
17.53 18-May-18 18-May-19
18.47 25-Feb-19 25-Feb-20
18.05 23-Feb-20 23-Feb-21
02-Jul-17
05-Jul-17
11.51
17.53 18-May-18 18-May-19
18.47 25-Feb-19 25-Feb-20
18.05 23-Feb-20 23-Feb-21
02-Jul-17
11.51
05-Jul-17
17.53 18-May-18 18-May-19
18.47 25-Feb-19 25-Feb-20
18.05 23-Feb-20 23-Feb-21
02-Jul-17
11.51
05-Jul-17
17.53 18-May-18 18-May-19
18.47 25-Feb-19 25-Feb-20
18.05 23-Feb-20 23-Feb-21
02-Jul-17
11.51
05-Jul-17
17.53 18-May-18 18-May-19
18.47 25-Feb-19 25-Feb-20
18.05 23-Feb-20 23-Feb-21
1,2,3
4
5
5
1,2,3
4
5
5
1,2,3
4
5
5
1,2,3
4
5
5
1,2,3
4
5
5
1. Share awards granted on 2 July 2014 were subject to performance conditions measured over the three financial years ended 31 December 2016. The outcome of these performance
conditions was such that 81.06% of the share awards vested. The vesting date was 5 July 2017.
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 is 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 is included in the total number of ordinary shares disclosed in Table B on page 102.
4. Share awards granted on 18 May 2015 were subject to performance conditions measured over the three financial years ended 30 December 2017. The outcome of these performance
conditions and the number of share awards expected to vest during 2018 are set out on pages 95 to 97. The vested share award, net of relevant tax, will be restricted from sale for two
years and will be 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 share awards made in 2016 and 2017 are the three financial years ending 2018 and 2019 respectively. The performance conditions
attached to the share awards are detailed in the section entitled ‘Performance Targets for Outstanding Share Awards’ on page 98.
Table F: Directors’ and Secretary’s Annual Deferred Incentive
Directors
S Talbot
2015 Annual Deferred Incentive
2016 Annual Deferred Incentive
M Garvey
2015 Annual Deferred Incentive
2016 Annual Deferred Incentive
H McGuire
2015 Annual Deferred Incentive
2016 Annual Deferred Incentive
B Phelan
2015 Annual Deferred Incentive
2016 Annual Deferred Incentive
Secretary
M Horan
2015 Annual Deferred Incentive
2016 Annual Deferred Incentive
Glanbia plc | Annual Report and Financial Statements 2017
105
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
€351,000
€465,000
29-Mar-16
28-Mar-17
€199,000
€278,000
29-Mar-16
28-Mar-17
€253,000
€290,000
29-Mar-16
28-Mar-17
€90,000
€165,000
29-Mar-16
28-Mar-17
€18.05
€18.00
€18.05
€18.00
€18.05
€18.00
€18.05
€18.00
19,446
25,834
11,037
15,422
14,011
16,120
4,992
9,173
€79,000
€144,000
29-Mar-16
28-Mar-17
€18.05
€18.00
4,396
7,998
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 is 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 is included in the total number of ordinary shares disclosed in Table B on page 102.
Table G: Value of 2008 LTIP share awards expected to vest in 2018 and LTIP share awards vested in 2017
Executive Directors
S Talbot
M Garvey
H McGuire
B Phelan
Number of shares
awarded expected
to vest in 2018
Estimated
market value
€1
Number of
shares vested
in 2017
84,047
35,861
35,239
24,295
1,252,300
534,329
525,061
361,996
64,853
43,168
43,168
42,155
Market value
€2
1,115,472
742,490
742,490
725,066
1. This reflects the value of long term incentive share awards expected to vest in 2018 with a three-year performance period ended in 2017. The market values have been estimated using the
official closing price of a Glanbia plc share on 29 December 2017 (being the last day of trading of the Irish Stock Exchange in 2017) of €14.90.
2. This reflects the value of long term incentive share awards vested in 2017 with a three-year performance period ended in 2016. These have been valued at the market value of the shares
on the date of vesting €17.20 per share (official opening price).
106
Glanbia plc | Annual Report and Financial Statements 2017
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 12 to 17.
The Group Chairman’s statement on pages 6 and 7, the Group Managing Director’s review on pages 8 to 11, the Operations review on pages 20
to 29 and the Group Finance Director’s review on pages 30 to 35 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 30 December 2017, 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 38 to the Financial Statements.
As set out in the Group Income Statement on page 123, the Group reported a profit for the period of €329.4 million. Comprehensive reviews of
the financial and operating performance of the Group during 2017 are set out in the Group Finance Director’s review on pages 30 to 35 and in
the Operations review on pages 20 to 29. Key Performance Indicators are set out on pages 18 and 19. The treasury policy and the financial risk
management objectives of the Group are set out in detail in Note 31 to the Financial Statements. Our approach to our people and sustainability
is discussed on pages 36 to 39.
Process for appointment/retirement of Directors
In addition to the Companies Acts, the Constitution of the Company contains provisions regarding the appointment and retirement of Directors.
At each Annual General Meeting (AGM) the Constitution provides 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 (2016), all Directors, with the exception of Michael Keane who has
indicated his intention to retire at the conclusion of the 2018 AGM, will retire at the 2018 AGM and, being eligible, offer themselves for re-appointment.
The Constitution also allows the election and re-election of Independent Directors to be conducted in accordance with the election provisions for
Independent Non-Executive Directors in the Irish Stock Exchange (ISE) Listing Rules and 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 Constitution provides that his or her appointment as a Director shall terminate automatically in the
event of his or her ceasing to be a Director of the Society.
The Constitution also contains provisions regarding the automatic retirement of a Director in certain other limited circumstances.
Annual General Meeting
The Company’s 2018 AGM will be held on 25 April 2018. Full details of the 2018 AGM, together with explanations of the resolutions to be
proposed, will be contained in the Notice of the 2018 AGM. The record date for the 2018 AGM is 5pm on 23 April 2018.
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 Constitution. At the 2017 AGM, the Directors were given the power to issue new shares up
to a nominal amount of €3,237,258.96. This power will expire on the earlier of the close of business on the date of the 2018 AGM or 25 July 2018.
Accordingly, a resolution will be proposed at the 2018 AGM to renew the Company’s authority to issue new shares.
At the 2017 AGM, the Directors were also given the power to:
(i) dis-apply the strict statutory pre-emption provisions in the event of a rights issue or other pre-emptive issue or in any other issue up to an
aggregate amount equal to 5% of the nominal value of the Company’s issued share capital. This 5% limit includes any treasury shares
re-issued by the Company while this authority remains operable; and
(ii) dis-apply the strict statutory pre-emption provisions for an additional 5% for specific transactions. The resolution gave the Directors an
additional power to allot shares on a non-pre-emptive basis and for cash up to a further 5% of the issued share capital in connection with an
acquisition or a specified capital investment which is announced contemporaneously with the issue, or which has taken place in the preceding
six month period and is disclosed in the announcement of the issue. The 5% limit includes any treasury shares reissued by the Company while
this authority remains operable.
These powers will expire on the date of the 2018 AGM or 25 July 2018, whichever is earlier. Accordingly, resolutions will be proposed at the 2018
AGM to renew these authorities.
Compliance with Pre-emption Guidelines
It is the Directors’ intention to follow the provisions of the Pre-emption Principles regarding cumulative usage of authorities within a rolling
three-year period. These principles provide that companies should consult shareholders prior to issuing, other than to existing shareholders,
shares for cash representing in excess of 7.5% of the Company’s issued share capital in any rolling three-year period.
Research and development
The Group is fully committed to ongoing technological innovation in all sectors of its business, providing integrated customer-focused product
development by leveraging our global technology capabilities and expertise. Expenditure on research and development amounted to € 9.0 million
in 2017 (2016: €7.7 million) as disclosed in Note 5 to the Financial Statements.
Glanbia plc | Annual Report and Financial Statements 2017
107
Dividends
An interim dividend of 5.91 cent per share was paid on 6 October 2017 (an aggregate of €17.5 million) to shareholders on the share register at the
close of business on 25 August 2017. The Directors propose a final dividend of 16.09 cent per share. Subject to shareholder approval, the final
dividend will be paid on 27 April 2018 to shareholders on the share register on 16 March 2018.
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 a 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.
Issued share capital
At 30 December 2017 the authorised share capital of the Company was 350,000,000 ordinary shares of €0.06 each and the issued share capital
was 296,045,684 (2016: 296,040,684) ordinary shares of €0.06 each, of which 31.5% 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 5,000 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 share award at 30 December 2017 are given in Notes 23 and 24, 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
Constitution, 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/votes
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 (except as outlined below) or the transfer of securities in the
Company.
Article 2 of the Constitution provides that any ordinary shares acquired by any person who is/was an employee of the Group or any associate or
joint venture (provided he is neither a Director of the Company nor a Director of the Society) shall be non-voting shares if such acquisition would,
if not for this restriction on voting rights, cause such person to be deemed to have acquired indirect control of the Company or to have to make an
offer under Rule 9 of the Irish Takeover Panel Act 1997, Takeover Rules 2013.
Under the Constitution 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 24 to the Financial Statements at 30 December 2017, 1,127,066 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 will be
contained in the Notice of the 2018 AGM.
108
Glanbia plc | Annual Report and Financial Statements 2017
Other Statutory Information continued
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 is published
on the Group’s website after the meeting.
Constitution
The Company’s Constitution details the rights attaching to the shares; the method by which the Company may purchase or reissue its shares, 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 Constitution can be obtained from the Group’s website:
www.glanbia.com.
Unless expressly specified to the contrary in the Constitution of the Company, the Company’s Constitution 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
Glanbia Cheese 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.
The Board is satisfied that no change of control provisions has occurred in respect of these agreements.
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.
Substantial interests
The Company has been advised of the following notifiable interests in its ordinary share capital:
Shareholder
No of ordinary
shares as at
30/12/2017
% of issued share
capital as at
30/12/2017
No of ordinary
shares as at
20/02/2018
% of issued share
capital as at
20/02/2018
Glanbia Co-operative Society Limited
The Capital Group Companies, Inc./Capital Research and Mgt. Company*
Standard Life Investments (Holdings) Limited**
Mawer Investment Management Limited
Standard Life Aberdeen plc affiliated investment management entities***
93,276,241
19,562,747
10,488,025
8,900,549
8,895,151
31.5%
6.6%
3.5%
3.0%
3.0%
93,276,241
19,562,747
10,488,025
12,004,534
8,895,151
31.5%
6.6%
3.5%
4.1%
3.0%
*
The Capital Group Companies, Inc. (CGC) is the parent company of Capital Research and Management Company (CRMC). CRMC is a US based investment management company that
manages the American Funds family of mutual funds. CRMC manages equity assets for various investment companies through three divisions, Capital Research Global Investors, Capital
International Investors and Capital World Investors. CRMC in turn is the parent company of Capital Group International, Inc. (CGII), which in turn is the parent company of five investment
management companies (‘CGII management companies’): Capital Guardian Trust Company, Capital International, Inc., Capital International Limited, Capital International Sàrl and Capital
International K.K. The CGII management companies primarily serve as investment managers to institutional clients.
Neither CGC nor any of its affiliates own shares in the Company for their own account. Rather, the shares reported are owned by accounts under the discretionary investment management
of one or more of the investment management companies described above. The Growth Fund of America (GFA) is a mutual fund registered in the US under the Investment Company Act of
1940. GFA is the legal owner of 13,668,044 shares (4.617% of the outstanding shares). GFA has granted proxy voting authority to its investment adviser CRMC.
** An interest of 3.22% held by Standard Life Investments Limited is included in the holding of Standard Life Investments (Holdings) Limited.
*** An interest of 2.63% held by Standard Life Investments Limited is included in the holding of Aggregate of Standard Life Aberdeen plc affiliated investment management entities.
Contracts of significance for the purpose of LR 6.8.1, ISE Listing Rules/LR 9.8.4 R, UKLA Listing Rules
In connection with the expansion of the strategic Joint Venture Glanbia Ireland (GI) the following agreements were entered into by Glanbia plc and
the Society:
• Shareholders’ Agreement dated 2 July 2017 (replacing the shareholders’ agreement dated 25 November 2012);
• Share Subscription and Redemption Agreement the principal terms and conditions of which were included in the circular sent to shareholders
on 28 April 2017 in respect of the Extraordinary General Meeting held on 22 May 2017 and is available to view on www.glanbia.com.
• Amended and Restated Relationship Agreement as also described in the circular sent to shareholders on 28 April 2017.
The key terms of the Shareholders’ Agreement dated 2 July 2017 are as set out below.
The board of directors of GI
The board of directors of GI will comprise 14 directors appointed by the Society, six directors appointed by Glanbia plc (the ‘PLC Appointees’)
and up to three executive directors. The PLC Appointees are appointed from the Directors of Glanbia plc, the Independent (of the Society)
Non-Executive Directors of Glanbia plc and such other persons as may be approved by the Nomination and Governance Committee of the
Board of Glanbia plc. Each of the PLC Appointees has 1.5 votes at any meeting of the board of directors of GI. All of the other directors of GI
have one vote each. The chairman of the board of GI shall not be entitled to a casting vote. The chairman of GI shall be appointed by the Society
so long as it holds more than 50% of the entire issued share capital of GI.
Glanbia plc | Annual Report and Financial Statements 2017
109
Consent of Glanbia plc and the Society
The prior written consent of Glanbia plc and the Society will be required for certain matters relating to GI, including:
• changes to the business being carried on by GI;
• agreeing the annual budget and the three-year rolling business plan;
• Value Added Projects (as defined below) approval and changes to the related dividend policy;
• altering the distribution policy or any material decision which is likely to result in GI failing to meet its minimum profitability level specified in the
business plan;
incurring any capital expenditure in excess of that provided for in the budget;
•
• acquisitions and disposals with a consideration in excess of €4 million;
• entering into any contract or transaction except in the ordinary course of the business of GI and on an arm’s length basis with a value in
•
excess of €2 million; and
incurring any new debt facilities in excess of €4 million which is not included in the business plan or which does not arise in the ordinary
course of trading.
Future capital contributions
Future capital contributions will be considered by the shareholders of GI on a case by case basis (without any binding commitment).
Profit and distribution policies
Profit retention
A new minimum profit policy for the enlarged business that sets an expectation for the profitability of GI by reference to a minimum profit after
tax equivalent to not less than 3.2% of net revenue of the combined businesses of GI (the ‘Minimum Net Profit’). Net revenue for this purpose will
be adjusted for revenue arising from Value Added Projects (as defined below) in respect of which there is to be a separate profit retention policy
(see below).
In any year where the Minimum Net Profit will be exceeded, the first €5 million of incremental net profit in excess of the Minimum Net Profit will be
set aside as a Volatility Fund in the business to support milk suppliers, grain suppliers, suppliers of other farm outputs and customers purchasing
agricultural inputs, to be paid out at the discretion of the GI board (the terms of distribution of each Volatility Fund and the time limit on payout will be
determined by the board of GI before the close of the audit of the financial statements for GI for the year in which the Volatility Fund was created).
The new minimum profit policy replaces the existing profit policy in operation at GI. The new minimum profit policy was effective from the beginning
of the 2018 financial year.
Value Added Projects – target profit policy
A separate target profit policy will apply to Value Added Projects. Projects undertaken as Value Added Projects shall be subject to a target profit
after tax which shall be agreed by the board of GI on a project-by-project basis for each financial year based upon the investment business case
of each such Value Added Project. For such projects, 30% of the profit after tax for each Value Added Project shall be retained by GI and 70%
shall be distributed to GI’s shareholders pro rata.
Dividend policy
Subject to compliance with its applicable banking covenants and the availability of sufficient distributable reserves, GI will operate an annual
dividend payout comprised of the aggregate of 70% of the profit after tax attributable to Value Added Projects as described above, and 50%
of profit after tax attributable to the remaining business activities.
Call Option
Under the Shareholders’ Agreement dated 2 July 2017, the Society will continue to have a call option (the ‘Call Option’) to acquire Glanbia plc’s
40% interest in GI. This Call Option will be exercisable for a one year period commencing on completion of a change of control event in relation to
Glanbia plc. A reduction of the Society’s representation on the Glanbia plc Board or its shareholding in Glanbia plc below 30% shall not constitute
a change of control for the purposes of the commencement of the Call Option (unless there is an associated acquisition by an unaffiliated third
party of a controlling interest in Glanbia plc). The price payable by the Society on completion of the Call Option shall be an amount equal to 40%
of the fair value of GI as between a willing buyer and willing seller (and no discount in respect of Glanbia plc being a minority shareholder in GI
will apply). The fair value of GI shall be agreed by Glanbia plc and the Society or, in the absence of agreement, the fair value shall be the midpoint
between the valuations as determined for the fair value by two suitably qualified independent valuers.
If following the exercise of the Call Option by the Society, GI and/or Glanbia Foods Ireland Limited continues to be a participating employer in the
Glanbia defined benefit pension schemes and Glanbia plc continues to be the principal employer, the Society will guarantee to Glanbia plc the
due performance of the obligations of these companies under the schemes for so long as each individual company remains as a participating
employer.
For a period of three years from completion, Glanbia plc shall not, directly or indirectly, without the Society’s prior written consent, transfer or
dispose of any interest in GI, or enter into any agreement, arrangement or understanding (whether legally binding or not) or do or omit to do any
act as a result of which any third party may acquire such interest. This restriction shall not apply to transfers by Glanbia plc to subsidiaries of
Glanbia plc provided that the transferee does not cease to be a subsidiary of Glanbia plc.
110
Glanbia plc | Annual Report and Financial Statements 2017
Other Statutory Information continued
Contracts of significance for the purpose of LR 6.8.1, ISE Listing Rules/LR 9.8.4 R, UKLA Listing Rules continued
Effect of termination of the Joint Venture
If Glanbia plc ceases to have any shareholding in GI:
• GI and, if applicable, each of its subsidiaries will change its name to a new name which does not include the name ‘Glanbia’ and Glanbia
•
will pay to GI 50% of the vouched reasonable costs of such rebranding up to a maximum liability for Glanbia plc of €1,500,000 (i.e. 50% of
€3 million); and
the Society will propose (and recommend to its members for approval) a resolution at the next annual general meeting of the Society following
the date on which Glanbia plc ceases to have any shareholding in GI to change its corporate name to a name which does not include the
name ‘Glanbia’. The Society will not be required to convene a general meeting of members solely to consider a proposed change of name.
The Society will not use the ‘Glanbia’ name for any trading or business purpose.
The shareholders’ agreement entered into by Glanbia plc, the Society and GI on 25 November 2012, details of which are contained in our 2016
Annual Report and Accounts, was terminated on 2 July 2017.
Information required to be disclosed by LR 6.8.1, ISE Listing Rules/LR 9.8.4 R, UKLA Listing Rules
For the purposes of LR 6.8.1/LR 9.8.4 R, the information required to be disclosed by LR 6.8.1/LR 9.8.4 R can be found in the following locations:
Section
Topic
Location
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Interest capitalised and related tax relief
Financial Statements, Note 12
Publication of unaudited financial information
Small related party transactions
Not applicable
Not applicable
Details of long-term incentive schemes
Remuneration Committee report
Waiver of emoluments by a director
Waiver of future emoluments by a director
Non-pre-emptive issues of equity for cash
Item (7) in relation to major subsidiary undertakings
Parent participation in a placing by a listed subsidiary
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Contracts of significance
Other Statutory Information
Provision of services by a controlling shareholder
Not applicable
Shareholder waivers of dividends
Shareholder waivers of future dividends
Other Statutory Information
Other Statutory Information
Agreement with controlling shareholders and independence
provisions/undertakings
Page 61
All the information cross-referenced above is hereby incorporated by reference into this Directors’ Report.
Subsidiary and associated undertakings
A list of the principal subsidiary and associated undertakings and their activities is included in Note 39 to the Financial Statements.
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’s and the Group’s obligation to keep adequate accounting records. These accounting records are kept at the registered office of
the Company.
Accountability and audit
Directors’ responsibilities for preparing the Financial Statements for the Company and the Group are detailed on page 111.
The Independent Auditors’ report details the respective responsibilities of Directors and statutory Auditors.
Statutory Auditors
The statutory Auditors, Deloitte, have expressed their willingness to continue in office in accordance with Section 383(2) of the Companies Act 2014.
Disclosure of information to statutory Auditors
In accordance with the provisions of section 330 of the Companies Act 2014, each of the persons who are Directors of the Company at the date
of approval of this report confirms that:
• So far as the Director is aware, there is no relevant audit information (as defined in the Companies Act 2014) of which the statutory Auditor is
unaware; and
• The Director has taken all the steps that he/she ought to have taken as a Director to make himself/herself aware of any relevant audit
information (as defined) and to ensure that the statutory Auditor is aware of such information.
Glanbia plc | Annual Report and Financial Statements 2017
111
Directors’ Responsibility Statement
The Directors are responsible for preparing the Annual Report and the Group and Company 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
are required to prepare the Group Financial Statements in accordance with International Financial Reporting Standards (IFRS) as adopted by
the European Union and Article 4 of the IAS Regulation and elected to prepare the Company Financial Statements in accordance with IFRS as
adopted by the European Union, as applied in accordance with the provisions of the Companies Act 2014. Under Irish law the Directors shall not
approve the Group and Company Financial Statements unless they are satisfied that they give a true and fair view of the assets, liabilities and
financial position, of the Group and Company respectively, as at the end of the financial year and of the profit or loss of the Group for the financial
year and otherwise comply with the Companies Act 2014.
In preparing these Group and Company 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 IFRS as adopted by the European Union and ensure the Financial Statements contain the
information required by the Companies Act 2014 and as regards the Company Financial Statements as applied in accordance with the
provision of the Companies Act 2014; and
• prepare the Financial Statements on a going concern basis, unless it is inappropriate to presume that the Group and the Company will
continue in business.
The Directors are also required by the Transparency Directive (Directive 2004/109/EC) Regulations 2007, the Transparency Rules of the Central
Bank of Ireland, the Companies Act 2014 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, amongst
other things, a fair review of the development and performance of the Group’s business and of its position 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;
• enable the Directors to ensure that the Group and Company Financial Statements and the Directors Report comply with the Companies Act
2014, and as regards the Group Financial Statements Article 4 of the IAS Regulation; and
• enable the Group and Company 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 (www.glanbia.com). Legislation in Ireland concerning the preparation and dissemination of
Financial Statements may differ from legislation in other jurisdictions.
Each of the Directors, whose names and functions are listed on pages 64 to 67 (‘Current Directors’) 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 position, performance, business model and strategy of the Company and the undertakings included in the consolidation taken as
whole. Each of the Current Directors also confirms that to the best of each person’s knowledge and belief:
•
the Group Financial Statements prepared in accordance with IFRS as adopted by the European Union and the Company Financial Statements
prepared in accordance with IFRS as adopted by the European Union and as applied in accordance with the provision of the Companies Act
2014 give a true and fair view of the assets, liabilities and financial position and profit or loss of the Company and the undertakings included in
the consolidation taken as a whole; 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 the undertakings included in the consolidation taken as whole, together with a description of the principal risks
and uncertainties that they face.
•
The Directors’ Report for the purpose of the Transparency Directive (Directive 2004/109/EC) Regulations 2007, the Transparency Rules of the
Central Bank of Ireland, the Companies Act 2014 and the Listing Rules issued by the Irish Stock Exchange consists of pages 1 to 111.
Directors’ Report
On behalf of the Board
Henry Corbally
Directors
20 February 2018
Siobhán Talbot
Mark Garvey
112
Glanbia plc | Annual Report and Financial Statements 2017
Financial
Statements
Financial Statements
Independent Auditors’ Report
Group Financial Statements
Company Financial Statements
Notes to the Financial Statements
Glossary of KPIs and Non-IFRS
Performance Measures
Shareholder Information
Contacts
114
123
129
132
212
223
229
Glanbia plc | Annual Report and Financial Statements 2017
113
91% OF
CONSUMERS WANT
PROTEIN WITH
RECOGNISABLE
INGREDIENTS
Source: McKinsey
Research
93%
OF U.S. HOUSEHOLDS HAVE
PURCHASED A CLEAN LABEL
PRODUCT
THE MOST HEALTH
FOCUSED HOUSEHOLDS
ARE ALSO THE MOST
LIKELY TO BE ENGAGING
WITH ONLINE GROCERY
SHOPPING.
Nielsen 2017
Source: Nielsen
Read more on pages 20-29
114
Glanbia plc | Annual Report and Financial Statements 2017
Independent Auditors’ Report to the Members of Glanbia plc
Opinion on financial statements of Glanbia plc
In our opinion, the Group and Company financial statements:
• give a true and fair view of the assets, liabilities and financial position of the Group and the Company as at 30 December 2017 and of the
Group’s profit for the financial year then ended; and
• have been properly prepared in accordance with the relevant financial reporting frameworks and in particular, with the requirements of the
Companies Act 2014 and, as regards the Group financial statements, Article 4 of the IAS Regulation.
The financial statements we have audited comprise:
The Group financial statements:
the Group income statement;
•
the Group statement of comprehensive income;
•
the Group balance sheet;
•
the Group statement of changes in equity;
•
the Group statement of cash flows; and
•
the related notes 1 to 39, including a summary of significant accounting policies as set out in note 2.
•
The Company financial statements:
the Company balance sheet;
•
the Company statement of changes in equity;
•
the Company statement of comprehensive income; and statement of cash flows;
•
the related notes 1 to 39, including a summary of significant accounting policies as set out in note 2.
•
The relevant financial reporting framework that has been applied in the preparation of the Group financial statements is the Companies Act 2014,
International Financial Reporting Standards (IFRS) as adopted by the European Union (IFRSs as adopted by the EU) and IFRSs as issued by the
International Accounting Standards Board (IASB) (“relevant financial reporting framework”).
The relevant financial reporting framework that has been applied in the preparation of the Company financial statements is the Companies Act 2014
and IFRSs as adopted by the EU as applied in accordance with the provisions of the Companies Act 2014 (“relevant financial reporting framework”).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (Ireland) (ISAs (Ireland)) and applicable law. Our responsibilities
under those standards are described below in the “Auditor’s responsibilities for the audit of the financial statements” section of our report.
We are independent of the Group and the Company in accordance with the ethical requirements that are relevant to our audit of the financial
statements in Ireland, including the Ethical Standard issued by the Irish Auditing and Accounting Supervisory Authority, as applied to public
interest entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Glanbia plc | Annual Report and Financial Statements 2017
115
Summary of our audit approach
Key audit matters
The key audit matters that we identified in the current year were:
Event Driven:
• Acquisition accounting & valuation of intangible assets on acquisitions;
• Disposal of controlling interest in Dairy Ireland to a related party & subsequent reorganisation of investment
in Glanbia Ireland;
Recurring:
• Risk of potential impairment to the carrying value of goodwill & intangible assets;
• Appropriateness of taxation provisions; and
• Revenue recognition.
Materiality
Scoping
The materiality that we used in the current year was €13.8m which was determined on the basis of profit before tax and
exceptional items.
We determined the scope of our Group audit by obtaining an understanding of the Group and its environment, including
Group-wide internal financial controls, and assessing the risks of material misstatement at the Group level. Based on that
assessment, we focused our Group audit scope primarily on the audit work in 43 components. 13 of these were subject
to a full audit, whilst the remaining 30 were subject to specified audit procedures where the extent of our testing was
based on our assessment of the associated risks of material misstatement and of the materiality of the Group’s
operations in those components.
Significant changes
in our approach
Key audit matters:
We have included two new key audit matters in the current year arising from changes in Glanbia’s business relating to the
disposal of Dairy Ireland and the acquisition of subsidiaries Amazing Grass and Body and Fit by Glanbia Performance
Nutrition.
We have removed Retirement Benefit Obligations from being a key audit matter as it is no longer considered significant
due to the reduction in retirement benefit liabilities held by Glanbia plc following the disposal of the controlling interest in
Dairy Ireland.
Materiality & Scoping:
Our materiality and scoping were affected in the current year due to the disposal of the Dairy Ireland segment. Materiality
has reduced due to the changes in the Group’s business resulting in a number of additional international components
being included in our audit scope.
Conclusions relating to principle risks, going concern and viability statement
We have nothing to report in respect of the following information in the annual report, in relation to which ISAs (Ireland) require us to report to you
whether we have anything material to add or draw attention to:
•
•
the disclosures on pages 47 to 51 to the annual report that describe those risks and explain how they are being managed or mitigated;
the Directors’ confirmation in the annual report on page 47 that they have carried out a robust assessment of the principal risks facing the
Group and the Company, including those that would threaten its business model, future performance, solvency or liquidity;
the Directors’ statement on page 132 in the financial statements about whether the Directors consider it appropriate to adopt the going
concern basis of accounting in preparing the financial statements and the Directors’ identification of any material uncertainties to the Group’s
and the Company’s ability to continue to do so over a period of at least twelve months from the date of approval of the financial statements;
•
• whether the Directors’ statement relating to going concern required under the Listing Rules in accordance with Listing Rule 6.8.3(3) is
•
materially inconsistent with our knowledge obtained in the audit; or
the Directors’ explanation on page 62 in the annual report as to how they have assessed the prospects of the Group and Company, over what
period they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group and Company 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.
Key Audit Matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the
current financial year and include the most significant assessed risks of material misstatement we identified (whether or not due to fraud), including
those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit, and directing the efforts of the engagement
team. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we
do not provide a separate opinion on these matters.
116
Glanbia plc | Annual Report and Financial Statements 2017
Independent Auditors’ Report to the Members of Glanbia plc continued
Disposal of controlling interest in Dairy Ireland to a related party & subsequent reorganisation of investment in Glanbia Ireland
Key audit
matter description
On 2 July 2017, the Group completed the disposal of 60% of its shareholding in Dairy Ireland and related assets to
Glanbia Co-operative Society Limited, its ultimate parent. This transaction resulted in the creation of a new joint venture,
together with Glanbia Ingredients Ireland DAC, called Glanbia Ireland.
On completion the Group received €112m consideration in respect of its 60% equity stake and a 40% interest in the
resulting Glanbia Ireland joint venture. These transactions were accounted for as a single transaction under IFRS 10
Consolidated Financial Statements.
The trade of the Dairy Ireland business up to 1 July 2017 is disclosed as discontinued operations in line with IFRS 5
Non-current Assets Held for Sale and Discontinued Operations. Since 2 July 2017 the 40% investment in Glanbia Ireland
is treated as a joint venture of the Group.
We identified the following risks arising from this transaction:
(a) The accounting for the disposal and acquisition element of the transaction is not in accordance with IFRS 3 Business
Combinations;
(b) Disclosures in relation to the discontinued operations are not presented in accordance with IFRS 5 and IAS 24 Related
Party Transactions.
Refer also to page 74 (Audit Committee Report), pages 132, 133 and 134 (basis of preparation, basis of consolidation,
and discontinued operations and non-current assets held for sale accounting policies) and notes 6, 10 and 18 to the
financial statements.
We gained an understanding of the transaction and reviewed the legal agreements supporting the transaction.
We evaluated the design and determined the implementation of the controls which the Directors have in place regarding
the disposal and reorganisation process.
We have assessed if the treatment of the transaction is in compliance with IFRS 5 and IFRS 3 including assessing the
point in time at which the disposal group was classified as held for sale and whether the discontinued operations profit
after tax was correctly included in the financial statements.
We agreed that the assets and liabilities being transferred were in line with the legal agreements. Where judgement was
made by the Directors in splitting the assets and liabilities between the disposal and continuing groups we tested the
assumptions for reasonableness.
We have evaluated the completeness and accuracy of the disclosures made in accordance with IFRS 5 and IAS 24.
We have challenged the assumptions used by the Directors in calculating the profit from discontinued operations and
also in calculating the profit on disposal recognised.
We have tested the fair value of the 40% investment in Glanbia Ireland and the classification of Glanbia Ireland as a joint
venture in the current year.
We have no observations that impact on our audit in respect of the amounts and disclosures related to the transaction.
How the scope
of our audit
responded
to the key
audit matter
Key
observations
Glanbia plc | Annual Report and Financial Statements 2017
117
Acquisition accounting and valuation of intangible assets on acquisitions
Key audit
matter description
The Group acquired 100% of the equity of Grass Advantage LLC (Amazing Grass) on 6 January 2017 for consideration
of $132m and 100% of the equity of B&F Vastgoed B.V. (Body & Fit) on 31 March 2017 for consideration of €43.7m.
Both acquisitions include intangible assets and goodwill. Intangible assets recognised by the Group include customer
relationships or lists, and intellectual property and brand names. Valuing these intangible assets is a subjective process
requiring a high level of estimation and judgement by the Directors. Both acquisitions required the Group to allocate the
excess of purchase price over the fair value of the net assets acquired, firstly to intangible assets and the residual to
goodwill. The treatment as goodwill or intangible assets has a significant impact on the subsequent amortisation or
impairment policy applied. Therefore there is a risk that the allocation between intangible assets and goodwill is incorrect.
Refer also to page 74 (Audit Committee Report), page 133 (business combinations accounting policy), note 3 (Critical
accounting estimates and judgements) and notes 17 and 36 to the financial statements.
How the scope
of our audit
responded
to the key
audit matter
We evaluated the design and determined the implementation of key controls in place in relation to the valuation process.
We, in conjunction with our valuation specialists, reviewed the purchase price allocation and challenged the key
assumptions utilised in the acquisition model to value the split between goodwill and other intangible assets. We assessed
whether all assets had been appropriately identified and evaluated if appropriate methodologies were used in the valuation
of the assets. We also tested the accounting treatment of acquisitions for compliance with IFRS 3.
Based on our procedures completed we assessed if the purchase price allocations performed by the Directors
are reasonable.
We also evaluated the completeness and accuracy of the disclosures.
Key
observations
We have no observations that impact on our audit in respect of the amounts and disclosures related to acquisition
accounting and valuation of intangible assets on acquisitions.
Taxation Provisions
Key audit
matter description
The Group operates across numerous multinational jurisdictions, the most significant of which are Ireland and the USA.
The Directors apply significant judgement in assessing current and deferred tax risks and exposures in relation to the
interpretation of local and international tax laws, rates and treaties relating to worldwide provisions for uncertain tax positions.
In addition, on 22 December 2017, the US signed into law the Tax Cuts and Jobs Act (“The US Tax Act”). This enactment
introduces significant changes to the US tax code including a reduction of the US corporate income tax rate from 35%
to 21%. The US Tax Act is an extensive legislative change which requires interpretation and judgement, most notably in
relation to deferred tax, the impact on US state taxes, and uncertain tax positions.
There is a risk that tax authorities could have different interpretations to those of the Directors resulting in potential
misstatement of tax provisions.
How the scope
of our audit
responded
to the key
audit matter
Refer also to page 74 (Audit Committee Report), Page 141 (Income taxes accounting policy), note 3 (Critical accounting
estimates and judgements) and notes 13 and 27 to the financial statements.
To obtain evidence over the appropriateness of the Directors’ assumptions in determining provisions for uncertain tax
positions, we obtained an understanding of the Group’s tax strategy, tax operating models and the Directors’ assessment
of related tax risks and exposures across the Group.
We engaged our Irish and Deloitte International tax specialists as part of our audit team, including US tax specialists to
analyse and challenge the appropriateness of the assumptions made by the Directors in determining adjustments to
current and deferred tax provisions, including provisions for uncertain tax positions as a result of the US Tax Act.
We challenged and evaluated Directors’ assumptions and estimates, including external advice obtained, in respect of tax
risks and related provisions.
We focussed particularly on the Directors’ judgements made in relation to transfer pricing risks and interpretations of
relevant tax laws, and the Directors’ assessment of likely outcomes for uncertain tax positions in key jurisdictions where
the Group has significant trading operations.
We inspected relevant correspondence between the Group and relevant tax authorities.
We evaluated the completeness and accuracy of current and deferred tax disclosures for compliance with the relevant
accounting standards, including the treatment of tax credits arising as a result of the US Tax Act, as an exceptional item
in the Group income statement.
Key
observations
We have no observations that impact on our audit in respect of the amounts and disclosures related to the taxation
provisions.
118
Glanbia plc | Annual Report and Financial Statements 2017
Independent Auditors’ Report to the Members of Glanbia plc continued
Risk of potential impairment to the carrying value of goodwill & intangible assets
Key audit
matter description
The Group’s goodwill and intangible assets of €960m, which is held across twelve individual Cash Generating Units
(CGUs), represents approximately 39% of the Group’s total assets at year end. The Performance Nutrition business
accounts for 88% of total goodwill and intangible assets as it has been the fastest growing and most acquisitive division
of the Group over recent years.
There is a risk that incorrect inputs or inappropriate assumptions could be included in the Group’s impairment
assessment model leading to an impairment charge that has not been included in the Group’s financial statements.
When a review for impairment is carried out, the recoverable amount of each CGU is compared to its carrying value.
The recoverable amount is determined based on value in use calculations which rely on Director’s assumptions and
estimates of future trading performance.
The key assumptions utilised by the Directors in the impairment reviews are discount rates and growth rates.
How the scope
of our audit
responded
to the key
audit matter
Refer also to page 74 (Audit Committee Report), pages 136 and 137 (Intangible assets accounting policy), note 3
(Critical accounting estimates and judgements) and note 17 to the financial statements.
We evaluated the methodology applied by the Directors in preparing the value in use calculations and the judgements
applied in determining the CGUs. In addition, we evaluated the design and determined the implementation of controls
in respect of the impairment review process and the budgeting process upon which the Group’s discounted cash flow
model is based.
We performed a retrospective review of assumptions used in prior year value in use calculations and compared these
to actual outturn.
We challenged the underlying key assumptions within the Group’s impairment model by developing an independent
view of the Group discount rate where we benchmarked the rates used by the Directors against market data and
comparable organisations.
We challenged cash flow projections by comparing them to historic rates and Group strategic plans. We challenged
the Group’s forecasts with reference to recent performance and trend analysis including historic growth rates.
We assessed the reasonableness of related assumptions used in determining terminal values.
We evaluated the completeness and accuracy of the disclosures in relation to goodwill and intangible assets for
compliance with the relevant accounting standards.
Key
observations
We have no observations that impact on our audit in respect of the amounts and disclosures related to carrying value
of goodwill and intangible assets.
Glanbia plc | Annual Report and Financial Statements 2017
119
Revenue Recognition
Key audit
matter description
How the scope
of our audit
responded
to the key
audit matter
Key
observations
The Group sells products to customers under a variety of contractual terms. Revenue is recognised net of discounts,
rebates and other promotional arrangements where they apply to sales contracts. Significant judgement is required to
determine the level of accruals required to settle these arrangements with customers post year end, which impacts the
amount of revenue recognised in the period.
There is a risk that year end accruals relating to selling arrangements, and therefore revenue could be misstated
either intentionally to achieve performance targets, or as a result of error. Due to the level of different contractual terms
with customers across the Group there is a risk that different revenue cut-off arrangements are not captured and
recorded correctly.
Refer also to page 74 (Audit Committee Report), and page 142 (Revenue recognition accounting policy).
We obtained an understanding of the various selling contracts and arrangements in place with customers across all
divisions of the Group, and of the internal controls and IT systems in place over the revenue processes to determine if
revenue was appropriately recognised to reflect the terms of contracts with customers and to ensure that the appropriate
cut-off procedures are applied and revenue at year end is not misstated.
We evaluated the design and determined the implementation of controls in respect of revenue recognition.
We tested year end accruals for settlement of rebates and other selling arrangements and assessed whether there was
any evidence of management bias in key judgements made by management. We also tested year end cut-off procedures
and reviewed goods in transit at the year end date to ensure transactions were recorded in the correct period.
We tested manual journal entries posted to revenue for any unusual items. We tested higher risk transactions including
consignment sales and agency arrangements and assessed if these transactions were appropriately accounted for in
accordance with the relevant accounting standards.
In addition, we tested post year end credit notes and rebate payments to identify any invalid sales transactions recorded
in the period.
We have no observations that impact on our audit in respect of the amounts and disclosures related to revenue recognised.
Our audit procedures relating to these matters were designed in the context of our audit of the financial statements as a whole, and not to
express an opinion on individual accounts or disclosures. Our opinion on the financial statements is not modified with respect to any of the risks
described above, and we do not express an opinion on these individual matters.
120
Glanbia plc | Annual Report and Financial Statements 2017
Independent Auditors’ Report to the Members of Glanbia plc continued
Our application of materiality
We define materiality as the magnitude of misstatement that makes it probable that the economic decisions of a reasonably knowledgeable
person, relying on the financial statements, would be changed or influenced. We use materiality both in planning the scope of our audit work and
in evaluating the results of our work.
We determined materiality for the Group to be €13.8m, which is approximately 5% of profit before tax and exceptional items, and 1% of consolidated
shareholders’ equity. We have considered the profit before tax and exceptionals to be the appropriate benchmark for determining materiality because
it is the most important measure for users of the Group’s financial statements. We have considered quantitative and qualitative factors such as
understanding the entity and its environment, history of misstatements, complexity of the Group and reliability of the control environment.
PBT
Materiality
PBT €260m
Materiality €13.8m
Audit Committee reporting
threshold €0.688m
We agreed with the Audit Committee that we would report to them all audit differences in excess of €0.688m as well as differences below this
threshold that, in our view, warranted reporting on qualitative grounds. We also report to the Audit Committee on disclosure matters that we
identified when assessing the overall presentation of the financial statements.
An overview of the scope of our audit
We determined the scope of our Group audit by obtaining an understanding of the Group and its environment, including Group-wide controls,
and assessing the risks of material misstatement at the Group level. Based on that assessment, we focused our Group audit scope primarily on
the audit work in 43 components. 13 of these were subject to a full audit, whilst the remaining 30 were subject to specified audit procedures
where the extent of our testing was based on our assessment of the associated risks of material misstatement and of the materiality of the
Group’s operations in those components.
These components were selected based on coverage achieved and to provide an appropriate basis for undertaking audit work to address the
risks of material misstatement identified above. Our audit work at the 43 components was executed at levels of materiality applicable to each
individual unit which were lower than Group materiality and ranged from €0.75m to €9.6m.
At the Group level, we also tested the consolidation process and carried out analytical procedures to confirm our conclusion that there were no
significant risks of material misstatement of the aggregated financial information of the remaining components not subject to a full audit.
The levels of coverage of key financial aspects of the Group by type of audit procedures are as set out below:
Net Assets % Tested
Full audit
Specified Audit Balances
Analytical Procedures
External Revenue % Tested
Full audit
Specified Audit Balances
Analytical Procedures
Net Assets
52%
37%
11%
Revenue
77%
13%
10%
The Group audit team attended planning meetings at a number of significant component locations, including Ireland and the USA, during the year
and participated in audit meetings with other significant components and a number of non significant components.
In addition to our planning meetings, we sent detailed instructions to our component audit teams, included them in our team briefings, discussed
their risk assessment, attended closing meetings, and reviewed their audit working papers.
Other information
The Directors are responsible for the other information. The other information comprises the information included in the annual report, other than
the financial statements and our auditor’s report thereon. Our opinion on the financial statements does not cover the other information and, except
to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon.
Glanbia plc | Annual Report and Financial Statements 2017
121
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider whether the
other information is materially inconsistent with the financial statements or our knowledge obtained in the audit or otherwise appears to be materially
misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material
misstatement in the financial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude
that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
In this context, we also have nothing to report with regard to our responsibility to specifically address the following items in the other information
and to report as uncorrected material misstatements of the other information where we conclude that those items meet the following conditions:
• Fair, balanced and understandable – the statement given by the Directors that they consider 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 Group’s and the
Company’s performance, business model and strategy, is materially inconsistent with our knowledge obtained in the audit; or
• Audit committee reporting – the section describing the work of the audit committee does not appropriately address matters communicated
by us to the audit committee; or
• Directors’ statement of compliance with the UK Corporate Governance Code and the Irish Corporate Governance Annex – the parts of the
Directors’ statement required under the Listing Rules relating to the company’s compliance with the UK Corporate Governance Code and the
Irish Corporate Governance Annex containing provisions specified for review by the auditor in accordance with Listing Rule 6.8.3(7) and Listing
Rule 6.8.3(9) do not properly disclose a departure from a relevant provision of the UK Corporate Governance Code or the Irish Corporate
Governance Annex.
Responsibilities of directors
As explained more fully in the Directors’ Responsibilities Statement, the Directors are responsible for the preparation of the financial statements
and for being satisfied that they give a true and fair view and otherwise comply with the Companies Act 2014, and for such internal control as the
Directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud
or error.
In preparing the financial statements, the Directors are responsible for assessing the Group and the Company’s ability to continue as a going
concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the Directors either
intend to liquidate the Group and the Company or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether
due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements can
arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs (Ireland), we exercise professional judgment and maintain professional scepticism throughout the
audit. We also:
•
Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit
procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk
of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery,
intentional omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances,
but not for the purpose of expressing an opinion on the effectiveness of the Group and the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by
the Directors.
• Conclude on the appropriateness of the Directors’ use of the going concern basis of accounting and, based on the audit evidence obtained,
whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Group and the company’s ability to
continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the
related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the
audit evidence obtained up to the date of the auditor’s report. However, future events or conditions may cause the entity (or where relevant,
the Group) to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial
statements represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the business activities within the Group to express an
opinion on the Group financial statements. The group auditor is responsible for the direction, supervision and performance of the group audit.
The group auditor remains solely responsible for the audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant
audit findings, including any significant deficiencies in internal control that the auditor identifies during the audit.
This report is made solely to the company’s members, as a body, in accordance with Section 391 of the Companies Act 2014. Our audit work
has been undertaken so that we might state to the company’s members those matters we are required to state to them in an auditor’s report and
for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the company and the
company’s members as a body, for our audit work, for this report, or for the opinions we have formed.
122
Glanbia plc | Annual Report and Financial Statements 2017
Independent Auditors’ Report to the Members of Glanbia plc continued
Report on other legal and regulatory requirements
Opinion on other matters prescribed by the Companies Act 2014
Based solely on the work undertaken in the course of the audit, we report that:
• We have obtained all the information and explanations which we consider necessary for the purposes of our audit;
•
• The Company balance sheet is in agreement with the accounting records; and
•
In our opinion the accounting records of the Company were sufficient to permit the financial statements to be readily and properly audited;
In our opinion the information given in the Directors’ Report is consistent with the financial statements and the Directors’ Report has been
prepared in accordance with the Companies Act 2014.
Corporate Governance Statement
We report, in relation to information given in the Corporate Governance Statement on pages 54 to 63 that, in our opinion the information given in
the Corporate Governance Statement pursuant to subsections 2(c) and (d) of section 1373 Companies Act 2014 is consistent with the company’s
statutory financial statements in respect of the financial year concerned and such information has been prepared in accordance with section 1373
of the Companies Act 2014.
Based on our knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified any
material misstatements in this information.
In our opinion, based on the work undertaken during the course of the audit, the information required pursuant to section 1373(2)(a),(b),(e) and (f)
of the Companies Act 2014 is contained in the Corporate Governance Statement.
Matters on which we are required to report by exception
Based on the knowledge and understanding of the Group and Company and its environment obtained in the course of the audit, we have not
identified material misstatements in the Directors’ Report.
We have nothing to report in respect of the provisions in the Companies Act 2014 which require us to report to you if, in our opinion, the
disclosures of directors’ remuneration and transactions specified by law are not made.
The Listing Rules of the Irish Stock Exchange require us to review six specified elements of disclosures in the report to shareholders by the Board
of Directors’ remuneration committee. We have nothing to report in this regard.
Other matters which we are required to address
We were appointed by Glanbia plc on 27 April 2016 to audit the financial statements for the financial year ended 31 December 2016 and subsequent
financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is two years, covering the
years ending 31 December 2016 and 30 December 2017.
The non-audit services prohibited by IAASA’s Ethical Standard were not provided and we remained independent of the company in conducting
the audit.
Our audit opinion is consistent with the additional report to the audit committee we are required to provide in accordance with ISA (Ireland) 260.
Kevin Sheehan
For and on behalf of Deloitte
Chartered Accountants and Statutory Audit Firm
Dublin
20 February 2018
Glanbia plc | Annual Report and Financial Statements 2017
123
Group Income Statement
for the financial year ended 30 December 2017
Continuing operations
Revenue
Earnings before interest, tax and amortisation (EBITA)
Intangible asset amortisation
Operating profit
Finance income
Finance costs
Share of results of Equity accounted investees
Profit before taxation
Income taxes
Profit from continuing operations
Discontinued operations
Profit from discontinued operations
Pre-
exceptional
€’m
Notes
2017
Exceptional
€’m
(note 6)
Total
€’m
Pre-
exceptional
€’m
Re-presented*
2016
Exceptional
€’m
(note 6)
Total
€’m
5
2,387.1
–
2,387.1
2,231.7
–
2,231.7
5
17
5
12
12
18
13
283.2
(43.1)
(5.5)
(19.4)
277.7
(62.5)
273.3
(37.4)
(14.4)
–
258.9
(37.4)
240.1
(24.9)
215.2
235.9
(14.4)
221.5
3.0
(26.0)
42.8
259.9
(38.3)
–
(14.0)
8.7
(30.2)
45.8
3.0
(40.0)
51.5
229.7
7.5
2.4
(25.2)
26.0
–
–
–
2.4
(25.2)
26.0
239.1
(39.3)
(14.4)
2.3
224.7
(37.0)
221.6
15.6
237.2
199.8
(12.1)
187.7
10
9.8
82.4
92.2
27.1
(2.7)
24.4
Profit for the year
231.4
98.0
329.4
226.9
(14.8)
212.1
Attributable to:
Equity holders of the Company – Continuing operations
Equity holders of the Company – Discontinued operations
Non-controlling interests – Discontinued operations
25
237.2
92.2
–
329.4
Earnings Per Share from continuing and discontinued operations attributable to the equity holders of the Company
Basic Earnings Per Share (cent)
Continuing operations
14
Discontinued operations
Diluted Earnings Per Share (cent)
Continuing operations
Discontinued operations
14
14
14
* As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
80.40
31.25
111.65
80.19
31.17
111.36
187.7
24.1
0.3
212.1
63.59
8.17
71.76
63.38
8.14
71.52
124
Glanbia plc | Annual Report and Financial Statements 2017
Group Statement of Comprehensive Income
for the financial year ended 30 December 2017
Profit for the year
Other comprehensive income/(expense)
Items that will not be reclassified subsequently to the Group income statement:
Remeasurements – defined benefit schemes
– Continuing operations
– Discontinued operations
Deferred tax on remeasurements
– Continuing operations
– Discontinued operations
Share of remeasurements – defined benefit plans – Equity accounted investees – net of
deferred tax
– Continuing operations
– Discontinued operations
Items that may be reclassified subsequently to the Group income statement:
Currency translation differences
– Continuing operations
– Discontinued operations
Reclassification of foreign currency differences on disposal of Dairy Ireland
Net investment hedge
Revaluation of available for sale financial assets
Deferred tax on revaluation of available for sale financial assets
Net fair value movements on cash flow hedges
Deferred tax on cash flow hedges
Net fair value movements on cash flow hedges – Equity accounted investees
Deferred tax on cash flow hedges – Equity accounted investees
Other comprehensive expense for the year, net of tax
Notes
9
9
27
27
18
18
24
24
10/24
24
24
24
2017
€’m
329.4
Re-presented*
2016
€’m
212.1
7.1
12.0
(0.3)
(1.5)
(0.6)
1.9
(149.8)
–
(0.2)
11.3
1.6
(0.7)
(0.6)
–
2.9
(0.1)
(117.0)
(22.8)
(9.0)
0.7
1.1
(6.0)
–
27.4
(0.3)
–
(2.9)
(1.3)
0.4
0.8
(0.2)
2.3
(1.3)
(11.1)
Total comprehensive income for the year
212.4
201.0
Total comprehensive income attributable to:
Equity holders of the Company – Continuing operations
Equity holders of the Company – Discontinued operations
Non-controlling interests – Discontinued operations
108.0
104.5
(0.1)
184.8
15.9
0.3
25
Total comprehensive income for the year
212.4
201.0
* As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
Glanbia plc | Annual Report and Financial Statements 2017
125
30 December
2017
€’m
31 December
2016
€’m
Notes
16
17
18
19(a)
20
27
9
442.2
959.8
266.9
11.1
–
1.6
1.7
628.2
966.2
166.3
9.9
14.7
1.8
2.6
21
20
31
22
23
24
25
26
27
9
28
29
30
30
26
31
28
29
1,683.3
1,789.7
11.3
321.6
302.4
2.2
162.2
799.7
5.3
366.5
327.1
1.2
218.9
919.0
2,483.0
2,708.7
105.4
190.0
1,086.3
1,381.7
–
1,381.7
105.4
331.6
779.0
1,216.0
11.1
1,227.1
499.6
125.6
43.6
24.0
0.1
10.1
703.0
307.9
52.0
30.3
0.3
7.8
–
398.3
624.2
158.2
113.0
15.6
3.0
11.6
925.6
448.7
54.1
32.2
1.2
19.5
0.3
556.0
1,101.3
1,481.6
2,483.0
2,708.7
Group Balance Sheet
as at 30 December 2017
ASSETS
Non-current assets
Property, plant and equipment
Intangible assets
Equity accounted investees
Available for sale financial assets
Trade and other receivables
Deferred tax assets
Retirement benefit assets
Current assets
Current tax 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 Company
Share capital and share premium
Other reserves
Retained earnings
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Financial liabilities
Deferred tax liabilities
Retirement benefit obligations
Provisions
Capital grants
Other payables
Current liabilities
Trade and other payables
Current tax liabilities
Financial liabilities
Derivative financial instruments
Provisions
Capital grants
Total liabilities
Total equity and liabilities
On behalf of the Board
H Corbally
Directors
S Talbot
M Garvey
126
Glanbia plc | Annual Report and Financial Statements 2017
Group Statement of Changes in Equity
for the financial year ended 30 December 2017
Attributable to equity holders of the Company
Share
capital and
share
premium
€’m
(note 23)
Other
reserves
€’m
(note 24)
Retained
earnings
€’m
Total
€’m
Non-
controlling
interests
€’m
(note 25)
Total
€’m
Balance at 31 December 2016
105.4
331.6
779.0
1,216.0
11.1
1,227.1
Profit for the year
Other comprehensive income/(expense)
Remeasurements – defined benefit plans
Deferred tax on remeasurements – defined benefit plans
Share of remeasurements – defined benefit plans – Equity accounted
investees – net of deferred tax
Currency translation differences
Reclassification of foreign currency differences on disposal of
Dairy Ireland
Net investment hedge
Fair value movements
Deferred tax on fair value movements
Total comprehensive (expense)/income for the year
Transactions with equity holders of the Company
Contributions and distributions
Dividends
Sale of shares held by a subsidiary
Cost of share-based payments
Transfer on exercise, vesting or expiry of share-based payments
Deferred tax on share-based payments
Purchase of own shares
Total contributions and distributions
Changes in ownership interests
Disposal of non-controlling interest
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(149.8)
(0.2)
11.3
3.9
(0.8)
329.4
329.4
–
329.4
19.2
(1.8)
1.3
–
–
–
–
–
19.2
(1.8)
1.3
(149.8)
(0.2)
11.3
3.9
(0.8)
(0.1)
–
–
–
–
–
–
–
19.1
(1.8)
1.3
(149.8)
(0.2)
11.3
3.9
(0.8)
(135.6)
348.1
212.5
(0.1)
212.4
–
–
7.8
2.4
–
(16.2)
(6.0)
(40.9)
2.4
–
(2.4)
0.1
–
(40.8)
(40.9)
2.4
7.8
–
0.1
(16.2)
(46.8)
–
–
–
–
–
–
–
(40.9)
2.4
7.8
–
0.1
(16.2)
(46.8)
–
–
–
(11.0)
(11.0)
Balance at 30 December 2017
105.4
190.0
1,086.3
1,381.7
–
1,381.7
Glanbia plc | Annual Report and Financial Statements 2017
127
Group Statement of Changes in Equity continued
for the financial year ended 30 December 2017
Attributable to equity holders of the Company
Balance at 2 January 2016
Profit for the year
Other comprehensive income/(expense)
Remeasurements – defined benefit plans
Deferred tax on remeasurements – defined benefit plans
Share of remeasurements – defined benefit plans – Equity accounted
investees – net of deferred tax
Currency translation differences
Net investment hedge
Fair value movements
Deferred tax on fair value movements
Total comprehensive income for the year
Transactions with equity holders of the Company
Contributions and distributions
Dividends
Cost of share-based payments
Transfer on exercise, vesting or expiry of share-based payments
Deferred tax on share-based payments
Purchase of own shares
Total contributions and distributions
Changes in ownership interests
Non-controlling interests arising on gain in control
Share
capital and
share
premium
€’m
(note 23)
105.4
Other
reserves
€’m
(note 24)
306.4
Retained
earnings
€’m
Total
€’m
Non-
controlling
interests
€’m
(note 25)
Total
€’m
642.8
1,054.6
8.5
1,063.1
211.8
211.8
0.3
212.1
(31.8)
1.8
(6.0)
–
–
–
–
(31.8)
1.8
(6.0)
27.1
(2.9)
1.8
(1.1)
–
–
–
–
–
–
–
(31.8)
1.8
(6.0)
27.1
(2.9)
1.8
(1.1)
175.8
200.7
0.3
201.0
(36.8)
–
(3.0)
0.2
–
(39.6)
(36.8)
7.7
–
0.2
(10.4)
(39.3)
(0.9)
–
–
–
–
(0.9)
(37.7)
7.7
–
0.2
(10.4)
(40.2)
–
–
–
–
27.1
(2.9)
1.8
(1.1)
24.9
–
7.7
3.0
–
(10.4)
0.3
–
–
–
3.2
3.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Balance at 31 December 2016
105.4
331.6
779.0
1,216.0
11.1
1,227.1
128
Glanbia plc | Annual Report and Financial Statements 2017
Group Statement of Cash Flows
for the financial year ended 30 December 2017
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
Capital grants received
Purchase of property, plant and equipment
Purchase of intangible assets
Interest paid in relation to property, plant and equipment
Dividends received from Equity accounted investees
Loans advanced to Equity accounted investees
Net redemption, disposal and additions in available for sale financial assets
Disposal of undertaking and investment in Equity accounted investee (net of cash disposed)
Proceeds from property, plant and equipment
Sale of shares held by a subsidiary
Net cash outflow from investing activities
Cash flows from financing activities
Purchase of own shares
Decrease in borrowings
Finance lease payments
Dividends paid to Company shareholders
Dividends paid to non-controlling interests
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Effects of exchange rate changes on cash and cash equivalents
Notes
34
36
36
36
29
12
18
37
19(a)
10
24
26
26
15
25
2017
€’m
162.2
3.1
(39.5)
(34.7)
91.1
(162.2)
(7.6)
1.6
–
(38.0)
(34.5)
(0.8)
15.8
–
0.4
208.8
0.1
2.4
(14.0)
(16.2)
(60.7)
(2.2)
(41.0)
–
(120.1)
(43.0)
187.3
(12.2)
Cash and cash equivalents at the end of the year
22
132.1
Reconciliation of net cash flow to movement in net debt
Net (decrease)/increase in cash and cash equivalents
Cash movements from debt financing
New finance leases
Debt acquired on acquisition
Exchange translation adjustment on net debt
Movement in net debt in the year
Net debt at the beginning of the year
2017
€’m
(43.0)
62.9
–
–
19.9
49.9
69.8
(437.5)
26
2016
€’m
374.2
2.4
(24.8)
(29.0)
322.8
(15.7)
–
1.1
0.6
(65.4)
(24.1)
(1.5)
13.8
(12.8)
(0.4)
–
0.4
–
(104.0)
(10.4)
(154.5)
(0.3)
(37.2)
(0.9)
(203.3)
15.5
169.1
2.7
187.3
2016
€’m
15.5
154.8
(1.8)
(0.8)
167.7
(21.0)
146.7
(584.2)
Net debt at the end of the year
26
(367.7)
(437.5)
Company Balance Sheet
as at 30 December 2017
ASSETS
Non-current assets
Equity accounted investees
Investment in subsidiaries
Available for sale financial assets
Deferred tax 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
Other reserves
Retained earnings
Total equity
LIABILITIES
Non-current liabilities
Deferred tax liabilities
Current liabilities
Provisions
Trade and other payables
Total liabilities
Total equity and liabilities
Glanbia plc | Annual Report and Financial Statements 2017
129
Notes
18
19(b)
19(a)
27
20
22
23
27
30
30 December
2017
€’m
31 December
2016
€’m
95.4
467.4
10.8
0.3
573.9
318.2
6.0
324.2
22.1
605.9
6.2
0.6
634.8
355.4
11.3
366.7
898.1
1,001.5
460.7
3.4
212.1
676.2
1.7
1.7
0.6
219.6
220.2
221.9
460.7
8.0
148.2
616.9
1.0
1.0
–
383.6
383.6
384.6
898.1
1,001.5
As permitted by section 304 of the Companies Act 2014, the 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 €107.2 million (2016: €40.5 million).
On behalf of the Board
H Corbally
Directors
S Talbot
M Garvey
130
Glanbia plc | Annual Report and Financial Statements 2017
Company Statement of Changes in Equity
for the financial year ended 30 December 2017
Other reserves
Share
capital
and share
premium
€’m
(note 23)
Capital
reserve
€’m
(note 24 (a))
Own
shares
€’m
(note 24 (f))
Share-
based
payment
reserve
€’m
(note 11)
Available
for sale
financial
asset
reserve
€’m
(note 19)
Retained
earnings
€’m
Total
€’m
Balance at 31 December 2016
460.7
4.2
(15.2)
17.0
2.0
148.2
616.9
Profit for the year
Other comprehensive income/(expense)
Fair value movements
Deferred tax on fair value movements
Total comprehensive income for the year
Transactions with equity holders of the Company
Contributions and distributions
Dividends
Cost of share-based payments
Transfer on exercise, vesting or expiry of share-based
payments
Purchase of own shares
Total contributions and distributions
Balance at 30 December 2017
Balance at 2 January 2016
Profit for the year
Other comprehensive income/(expense)
Fair value movements
Deferred tax on fair value movements
Total comprehensive income/(expense) for the year
Transactions with equity holders of the Company
Contributions and distributions
Dividends
Cost of share-based payments
Transfer on exercise, vesting or expiry of share-based
payments
Purchase of own shares
Total contributions and distributions
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12.3
(16.2)
(3.9)
–
–
–
–
–
7.8
(9.9)
–
(2.1)
460.7
460.7
4.2
4.2
(19.1)
14.9
(13.2)
14.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
8.4
(10.4)
(2.0)
–
–
–
–
–
7.7
(5.4)
–
2.3
–
107.2
107.2
2.1
(0.7)
1.4
–
–
2.1
(0.7)
107.2
108.6
–
–
–
–
–
3.4
2.9
–
(1.3)
0.4
(0.9)
–
–
–
–
–
(40.9)
–
(2.4)
–
(43.3)
(40.9)
7.8
–
(16.2)
(49.3)
212.1
676.2
147.5
616.8
40.5
40.5
–
–
40.5
(36.8)
–
(3.0)
–
(39.8)
(1.3)
0.4
39.6
(36.8)
7.7
–
(10.4)
(39.5)
Balance at 31 December 2016
460.7
4.2
(15.2)
17.0
2.0
148.2
616.9
Company Statement of Comprehensive Income and Statement of Cash Flows
for the financial year ended 30 December 2017
Glanbia plc | Annual Report and Financial Statements 2017
131
Company statement of comprehensive income
Profit for the year after tax
Other comprehensive income/(expense)
Revaluation of available for sale financial assets
Deferred tax on revaluation of available for sale financial assets
Other comprehensive income/(expense) 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
Dividend income received from Group companies
External dividend income received
Net cash inflow/(outflow) from operating activities
Cash flows from investing activities
Disposal of investment in subsidiary
Net redemption, disposal and additions of available for sale financial assets
Net cash (outflow)/inflow from investing activities
Cash flows from financing activities
Dividends paid to Company shareholders
Purchase of own shares
Dividend income received from other Group companies
Dividend income received from related party
Net cash inflow/(outflow) from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the year
Notes
19(a)
27
Notes
34
19(a)
15
24
22
2017
€’m
107.2
2.1
(0.7)
1.4
108.6
2017
€’m
71.8
(51.0)
–
20.8
(49.3)
(2.5)
(51.8)
(41.0)
(16.2)
51.0
31.9
25.7
(5.3)
11.3
6.0
2016
€’m
40.5
(1.3)
0.4
(0.9)
39.6
2016
€’m
42.2
(43.0)
–
(0.8)
3.4
(1.7)
1.7
(37.2)
(10.4)
43.0
–
(4.6)
(3.7)
15.0
11.3
132
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements
for the financial year ended 30 December 2017
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, US,
Middle East, Asia Pacific and Latin America. See note 4.
The Company is a public limited company incorporated and domiciled in Ireland, the number under which it is registered is 129933. The address
of its registered office is Glanbia House, Kilkenny, Ireland. Glanbia Co-operative Society Limited, (the ‘Society’), together with its subsidiaries,
holds 31.5% of the issued share capital of the Company. The Board of Directors for the year ended 30 December 2017 is comprised of 18
members, of which up to 10 are nominated by the Society. 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 Company and consolidated Financial Statements were approved and authorised for issue by the Board of Directors on 20 February 2018.
2. Summary of significant accounting policies
New accounting standards and International Financial Reporting Interpretations Committee (IFRIC) interpretations adopted by the Group and
Company during the year ended 30 December 2017 are dealt with in section (ab) below. The adoption of these standards and interpretations had
no significant impact on the results or financial position of the Group and Company during the year.
The 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 Equity accounted investees 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.
IFRS as adopted by the European Union (EU) 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, as applied in accordance with the Companies Act 2014.
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. See note 3.
Amounts are stated in euro millions (€’m) unless otherwise stated. These Financial Statements are prepared for the 52-week period ended
30 December 2017. Comparatives are for the 52-week period ended 31 December 2016. The balance sheets for 2017 and 2016 have been drawn
up as at 30 December 2017 and 31 December 2016 respectively.
Re-presentation
Certain comparative amounts in the balance sheet have been reclassified or re-presented, to achieve a more appropriate presentation. This
includes the reclassification of lease incentives, the presentation of Interests in Associates and Interests in Joint Ventures as Equity accounted
investees (note 18) and the offset of certain receivables and payables in the Company. Following the disposal of 60% of Dairy Ireland and related
assets, and in accordance with the requirements of IFRS 5 ‘Non-current assets held for sale and discontinued operations’ and note (b) (vi) below,
the results of Dairy Ireland to the date of disposal have been presented within profit from discontinued operations in the Group income statement
with the prior year comparatives re-presented accordingly.
Going concern
After making enquiries the Directors consider it appropriate to adopt the going concern basis of accounting in preparing the consolidated
Financial Statements. Further details can be found in the Going Concern statement on page 44.
Glanbia plc | Annual Report and Financial Statements 2017
133
(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 not the ability to control or jointly control 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, interests 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 Equity
accounted investees’ 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.
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 except for deferred tax assets or liabilities and assets or liabilities related to employee benefit arrangements
which are recognised and measured in accordance with IAS 12 ‘Income Taxes’ and IAS 19 ‘Employee Benefits’ respectively.
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.
134
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
2. Summary of significant accounting policies continued
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 when additional
information is obtained about facts and circumstances which would have affected the amounts recognised as of that date.
(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 an operation is classified as a discontinued operation, the comparative statement of profit or loss and other comprehensive income is
re-presented as if the operation had been discontinued from the start of the comparative year.
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 Equity accounted investee 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.
In determining the amount to be presented as discontinued operations, all intercompany items are eliminated on consolidation. These items
are eliminated against continuing operations when an arrangement will not continue and are eliminated against discontinued operations
where an arrangement will continue.
(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.
Glanbia plc | Annual Report and Financial Statements 2017
135
(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 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;
– 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; and
– 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
Australian dollar
(iv) Business combinations
Average
Year-end
2017
1.1295
0.8764
1.4734
2016
1.1068
0.8194
1.4884
2017
1.1993
0.8872
1.5346
2016
1.0541
0.8562
1.4596
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 less accumulated depreciation and impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the assets.
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.
136
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
2. Summary of significant accounting policies continued
(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
Land is not depreciated.
%
Nil
2.5 – 5
4 – 33
20 – 25
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 acquisition of subsidiaries is included within intangible assets.
Goodwill associated with the acquisition of Joint Ventures & Associates is included within the interest 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 (CGU) for the purpose of impairment testing. The allocation is made to those CGUs or group
of CGUs that are expected to benefit from the business combination in which the goodwill arose.
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. During the year the estimated useful life
was changed from six years to three years.
Glanbia plc | Annual Report and Financial Statements 2017
137
(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 as follows:
Brands
Customer relationships
Other intangibles
Yrs
10 – 40
5 – 15
2 – 15
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 five 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
(CGUs).
An impairment loss is recognised in the income statement for the amount by which the carrying value of the 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, (unquoted), the Group establishes fair value using valuation techniques. Where the range of reasonable fair values is significant and
the probability of various estimates cannot be reasonably assessed, the Group measures the investment at cost.
Dividends on available for sale financial assets are recognised in the income statement.
138
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
2. Summary of significant accounting policies continued
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.
(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.
(h) Trade and loan receivables
Trade and loan receivables are recognised initially 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
An allowance 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 allowance based on
the available evidence at that time.
The amount of the allowance 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 an allowance account and the amount of the loss is recognised in the income statement. When a receivable
is uncollectable it is written off against an allowance 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 30-60 days of recognition depending on the terms negotiated with suppliers. Trade and
other payables are presented as current liabilities unless payment is not due within 12 months after the reporting period.
(j) Provisions, contingent assets, contingent liabilities
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.
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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.
(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.
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) Financial liabilities
Financial liabilities are recognised initially at fair value. Financial liabilities 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 financial liabilities using the effective
interest method.
Financial liabilities 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 operates various pension plans. The plans are funded through payments to trustee-administered funds. 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 quoted securities in active markets it is the published
bid price.
Remeasurement gains and losses arising 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.
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).
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Notes to the Financial Statements continued
for the financial year ended 30 December 2017
2. Summary of significant accounting policies continued
The gain or loss on a settlement is the difference between:
(a)
(b)
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.
The deferred tax impact of pension plan obligations is disclosed separately within deferred tax assets.
(ii) Share-based payments
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 charge to the income statement in respect of share-based payments is based on the fair value of the equity instruments granted and is
spread over the performance period.
Options under the 2002 Long-term incentive plan
The fair value of the instruments awarded were calculated using the binomial model.
The proceeds received are credited to share capital (nominal value) and share premium when the options are exercised.
The market vesting condition is Total Shareholder Return (TSR) and the awards contain both market and non-market vesting conditions.
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 both market and non-market vesting
conditions. The market vesting condition is Total Shareholder Return (TSR) and, accordingly, the fair value assigned to the related equity
instruments is adjusted so as to reflect the anticipated likelihood at the grant date of achieving the market-based vesting condition. There are
no revisions to the fair value at subsequent reporting dates for changes in TSR estimates.
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 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 leaves 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.
(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 recorded at fair value and subsequently remeasured at their fair value at the reporting date. Other than for ‘regular way’
contracts for which settlement date accounting is applied, derivative contracts are recognised on the date the contract is entered into.
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 designates certain derivatives as either: (1) hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value
hedge); or (2) hedges of a particular risk associated with a recognised asset or liability or a highly probable forecast transaction (cash flow hedge).
The Group documents at the inception of the transaction the relationship between hedging instruments and hedged items, as well as its risk
management objective and strategy for undertaking various 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 effective in offsetting changes in fair values
or cash flows of hedged items.
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The fair values of various derivative instruments used for hedging purposes are disclosed in note 31. Movements on the cash flow hedging
reserve in equity are shown in note 24. 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.
(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.
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 Group and 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 plans are
treated as insurance contracts (note 31).
(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.
Management uses in-house tax experts, professional firms and previous experience when assessing tax risks and the tax uncertainties have
been measured using a probability weighted expected value approach. We recognise interest and penalties related to tax uncertainties
within administration expenses in the income statement and within provisions on the balance sheet. Further detail on estimates and
judgements are set out in note 3.
Current tax assets and liabilities are offset only if certain criteria are met.
(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.
The carrying amount of a deferred tax asset or liability may change for reasons other than a change in the temporary difference itself. Such
changes might arise as a result of a change in tax rates or laws, a reassessment of the recoverability of a deferred tax asset or a change in
the expected manner of recovery of an asset or the expected manner of a settlement of a liability. The impact of these changes is recognised
in the income statement or in other comprehensive income depending on where the original deferred tax balance was recognised.
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Notes to the Financial Statements continued
for the financial year ended 30 December 2017
2. Summary of significant accounting policies continued
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.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities
and when they relate to income taxes levied by the same tax authority and the Group intends to settle its current tax assets and liabilities on
a net basis.
(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 Long-term incentive plan 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 is measured at the fair value of the consideration received/receivable for the sale of goods to external customers net of value added tax,
rebates and discounts.
The Group recognises revenue when the amount of revenue can be reliably measured, when it is probable that future economic benefit will flow
to the entity and when specific criteria have been met for each of the Group’s activities.
Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer. 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 recognised using the effective interest rate method.
Dividends are recognised when the right to receive payment is established.
Revenue from the sale of property is recognised when there is an unconditional and irrevocable contract for sale.
If the Group acts in the capacity of an agent rather than as the principal in a transaction, then the revenue recognised is the net amount of
commission made by the Group. Management considers the following factors to determine whether the Group acts as an agent or principal: (a)
whether the Group takes title to or is exposed to inventory risk related to the goods, or has no significant responsibility in respect of the goods
sold; (b) although the Group collects the revenue from the final customer, all credit risk is borne by the supplier of the goods; and (c) the ability
of the Group to vary the selling prices set by the supplier by more than a small percentage.
The timing of recognition of service revenue equals the timing of when the services were rendered.
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(s) Segment reporting
In identifying the Group’s operating segments, management considered the following factors:
• how financial information is reported to the Chief Operating Decision Maker (CODM)
• existence of managers responsible for the components
•
•
•
•
•
the nature of the component business activities
the nature of products and services
the nature of the production processes
the type or class of customer
the methods used to distribute the products.
The Group has identified three segments based on a revised review completed in the year following the disposal of 60% of the Dairy Ireland
segment and related assets. These are as follows:
Glanbia Performance Nutrition
Glanbia Performance Nutrition earns its revenue from performance nutrition products. Its products are sold through a variety of channels
including specialty retail, the internet, FDMC (food, drug, mass and club), and gyms in a variety of formats, including powders, ready-to-eat
(bars and snacking foods) and ready-to-drink beverages.
Glanbia Nutritionals
Glanbia Nutritionals manufactures and sells cheese, dairy and non-dairy nutritional ingredients and vitamin and mineral premixes targeting the
increased market focus on health and nutrition.
Glanbia Ireland
The Glanbia Ireland Joint Venture was created on 2 July 2017 following the disposal of 60% of Dairy Ireland and related assets to Glanbia
Co-operative Society Limited. Glanbia Ireland is the largest milk processor in Ireland producing a range of value added dairy ingredients and
consumer products. Glanbia Ireland is also a large scale seller of animal feed and fertilizer as well as having a chain of agricultural retail outlets
in Ireland.
Other segments
Other non-reportable segments include Equity accounted investees which do not meet the segment criteria, individually or on an aggregate
basis, as outlined in IFRS 8 ‘Operating Segments’.
These segments align with the Group’s internal 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, financial liabilities and derivatives. Inter-segment 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.
Other finance costs are expensed in the income statement in the period in which they are incurred.
(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.
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Notes to the Financial Statements continued
for the financial year ended 30 December 2017
2. Summary of significant accounting policies continued
(w) Earnings Per Share
Earnings Per Share represents the profit 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 excluding software amortisation (net of related tax) divided by the weighted average number of ordinary shares in issue during
the period excluding own shares.
Pro-forma Adjusted Earnings Per Share from continuing operations has been provided as it represents the revised and on-going structure of the
Group following the disposal of 60% of the Dairy Ireland segment and related assets. Pro-forma Adjusted Earnings Per Share is calculated based
on the net profit attributable to equity holders of the parent from continuing activities plus 40% of the share of profits of Dairy Ireland and related
assets, before exceptional items and amortisation of intangible assets (excluding software amortisation), net of related tax. Prior year
comparatives are also adjusted accordingly.
Both Adjusted and Pro-forma Adjusted Earnings Per Share are non-IFRS metrics. Full details on the calculation and reconciliation to IFRS
reported numbers are included in the Glossary on pages 212 to 222.
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 financial liabilities 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.
(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, including material adjustments arising from the re-assessment of asset lives, 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 plan 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 Equity accounted investees.
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(aa) Financial assets – Company
Investments in subsidiaries and associates held by the Company are carried at cost.
(ab) New accounting standards and IFRIC interpretations
The following standards and interpretations, issued by the IASB and IFRIC are effective for the Group for the first time in the year ended
30 December 2017 and have been adopted by the Group:
• Amendments to IAS 12 ‘Income Taxes’ on the recognition of deferred tax assets for unrealised losses
• Amendments to IAS 7 ‘Statement of Cash Flows’ under its disclosure initiative
• Annual Improvements to IFRS 2014-2016 Cycle – Amendments to IFRS 12
None of the above, have had a significant impact on the results or the financial position of the Group during the year ended 30 December 2017.
The following standards, amendments and interpretations have been published. The Group will apply the relevant standards from their effective
dates. The standards are mandatory for future accounting periods but are not yet effective for the Group and have not been early adopted by
the Group.
IFRS 9 ‘Financial Instruments’ (EU effective date: on or after 1 January 2018)
This standard will be effective for and will be adopted by the Group for the 2019 financial year beginning 30 December 2018.
The Group’s evaluation of the effect of adoption of IFRS 9 is on-going and the Group’s initial findings are detailed as follows:
The Group’s review has indicated that, on transition to the new standard, equity securities previously accounted for in accordance with IAS 39 as
available for sale financial assets will be elected on initial recognition at fair value through other comprehensive income. On adoption of IFRS 9 any
gains or losses arising on de-recognition of such assets will remain in equity and will not be recycled to the income statement. No other impact
relating to the changes in classification have been identified that are likely to have a material effect on the Group’s results.
IFRS 9 introduces a forward-looking expected credit losses model, rather than the current incurred loss model, when assessing impairment of
financial assets in the scope of IFRS 9. The standard provides a simplified approach as a practical expedient. The Group will adopt this approach
on transition and it is not expected that any significant adjustments will be made to results already reported on transition.
No impact to the Group’s results has been identified from the Group’s assessment of the requirements of the hedge accounting section of IFRS 9.
IFRS 15 ‘Revenue from Contracts with Customers’ (EU effective date: on or after 1 January 2018)
This standard will be effective for and will be adopted by the Group for the 2019 financial year beginning 30 December 2018.
The Group’s evaluation of the effect of adoption of IFRS 15 is on-going and the Group’s initial findings are detailed as follows:
The Group’s assessment of the existing contracts with customers under the principal versus agent relationship may result in the Group
transitioning from an agent to a principal relationship in the case of certain contracts. This assessment is on-going and any material impact,
if there is any, will be quantified in the 2018 half year results. Any changes would result in a gross up of the revenue and costs of sales in lieu
of the commission currently recognised for certain customers, with no expected impact to profit.
With the exception of the matter set out above, the Group has not identified any other material issues arising on the transition to the new standard.
IFRS 16 ‘Leases’ (IASB effective date: on or after 1 January 2019)
This standard will be effective for and will be adopted by the Group for the 2020 financial year beginning 6 January 2020.
The Group’s evaluation of the effect of adoption of IFRS 16 is on-going and the Group’s initial findings are detailed as follows:
The Group expects to adopt the modified retrospective approach to transition permitted by the standard in which the cumulative effect of initially
applying the standard is recognised in opening retained earnings at the date of initial application.
The Group expects that the adoption of IFRS 16 will have a material impact on the financial statements, significantly increasing the Group’s
recognised assets and liabilities. The Group has approximately 540 operating leases for a range of assets principally relating to property,
equipment and vehicles. The fair values of these leases are currently being evaluated. As a result of the transition to IFRS 16, the fair value of
these leases representing the present value of the lease payments over the expected lease contract period will be recognised as a Right of Use
Asset with a corresponding value recognised as a lease liability. Information on the Group’s leases currently classified as operating leases is
provided in note 33.
Amendments to IFRS 2 ‘Classification and Measurement of Share-based payment Transactions’ (IASB effective date: on or after 1 January
2018 – not yet endorsed)
These amendments clarify that only market and non-vesting conditions are taken into account in the measurement of the fair value of the liability
in a cash-settled share-based payment transaction. Vesting conditions (other than market conditions) are considered when estimating the
number of awards expected to vest.
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Notes to the Financial Statements continued
for the financial year ended 30 December 2017
2. Summary of significant accounting policies continued
Annual Improvements to IFRSs 2014-2016 Cycle (IASB effective date: on or after 1 January 2018)
A number of small amendments to IAS 28 ‘Investments in Associates and Joint Ventures’.
Amendments to IAS 40 ‘Transfers of Investment Property’ (IASB effective date: on or after 1 January 2018 – not yet endorsed)
This amendment provides guidance on transfers to, or from, investment properties.
Amendments to IAS 28 ‘Long-term Interests in Associates and Joint Ventures’ (IASB effective date: on or after 1 January 2019 – not yet
endorsed)
The amendments clarify that an entity applies IFRS 9 ‘Financial Instruments’ to long-term interests in an Associate or Joint Venture that form part
of the net investment in the Associate or Joint Venture but to which the equity method is not applied.
Amendments to IFRS 9 ‘Financial Instruments’ (IASB effective date: on or after 1 January 2019)
The amendments address concerns about how IFRS 9 ‘Financial Instruments’ classifies particular pre-payable financial assets. In addition, the
IASB has clarified an aspect of the accounting for financial liabilities following a modification.
Amendments to IAS 19 ‘Employee Benefits’ (IASB effective date: on or after 1 January 2019 – not yet endorsed)
The amendments clarify the effect of a plan amendment curtailment or settlement on the requirements regarding the asset ceiling. It also clarifies
that if a plan amendment, curtailment or settlement occur, that it is mandatory that the current service cost and the net investment for the period
after the re-measurement are determined using the assumptions used for the re-measurement.
IFRIC Interpretation 22 ‘Foreign Currency Translation and Advance Consideration’ (IASB effective date: on or after 1 January 2018 – not
yet endorsed)
IFRIC 22 clarifies the accounting for transactions that include the receipt or payment of advance consideration in a foreign currency.
Annual Improvements to IFRSs 2015-2017 Cycle (IASB effective date: on or after 1 January 2019 – not yet endorsed)
A number of small amendments to IFRS 3 ‘Business Combinations’, IFRS 11 ‘Joint Arrangements’, IAS12 ‘Income Taxes’ and IAS 23
‘Borrowing Costs’.
IFRIC 23 ‘Uncertainty over Income Tax treatments’ – (IASB effective date 1 January 2019 – not yet endorsed)
The interpretation sets out how to determine taxable profit (tax loss), tax bases, unused tax losses, unused tax credits and tax rates when there is
uncertainty over income tax treatments under IAS 12 Income taxes.
IFRS 17 ‘Insurance Contracts’ (IASB effective date on or after 1 January 2021 – not yet endorsed)
This standard replaces the guidance in IFRS 4 ‘Insurance Contracts’. It requires insurance liabilities to be measured at a current fulfilment value
and provides a more uniform measurement and presentation approach for all insurance contracts. These requirements are designed to achieve
the goal of a consistent, principle based accounting for insurance contracts.
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. Revisions to estimates are recognised prospectively. Significant judgements and estimates made in the preparation of these
Financial Statements are set out below. With the exception of retirement benefit obligations, which are subject to market conditions, it is not
expected that there will be a material adjustment to the carrying value of the asset and liabilities of the other areas outlined below.
Judgements
Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the
consolidated Financial Statements is included in the following notes:
• Note 2(r) – commission revenue: whether the Group acts as an agent in the transaction rather than as a principal;
• Note 17 – amortisation of intangible assets: estimation of useful life of development assets;
• Note 6 – exceptional items: assessing particular items which by virtue of their scale and nature should be disclosed in the income statement
and noted as exceptional items;
• Note 18 – interests in Joint Ventures: whether the Group has joint control over an investee;
• Note 26 – financial liabilities: whether an arrangement contains a lease; and
• Note 2(x) – lease classification.
Glanbia plc | Annual Report and Financial Statements 2017
147
Estimates
(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 CGUs have been determined based on value in use calculations. These calculations require the use of estimates.
The intangible assets of Glanbia Nutritionals, Glanbia Performance Nutrition and within the investment in Glanbia Ireland, including goodwill
arising on acquisition is tested for impairment using projected cash flows over a three year period. In cases where management have strategic
plans beyond three years these numbers are also used in the projections. A terminal value assuming 2% growth into perpetuity is also applied. A
reduction in projected EBITDA of 10% or a terminal value assuming zero growth 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 17.
(b) Income taxes
The Group is subject to income tax in numerous jurisdictions. Significant estimation 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 reviews 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, assessments
of 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.
On 22 December 2017, the Tax Cuts and Jobs Act was signed into law in the United States which reduced the federal corporation tax rate from
35% to 21%. The impact of the reduction in the US tax rate has been factored into the calculation of the 2017 US tax liabilities, particularly
impacting deferred tax (note 6 and note 27). As all provisions and interpretations of the new legislation have not yet been clarified, certain
assumptions have been made in the calculation of income taxes. It is not expected that there will be a material adjustment, within the next
financial year, to the carrying amounts of tax assets and liabilities as at 30 December 2017 as a result of the assumptions made.
(c) Retirement benefit obligations
The Group operates a number of defined benefit pension plans both in Ireland and the UK. 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 Irish plans have plan assets totalling €103.3 million (2016: €285.3 million) and plan liabilities of €122.7 million (2016: €364.5
million) giving a net pension deficit of €19.4 million (2016: €79.2 million). The UK plans have plan assets totalling €82.4 million (2016: €81.5 million)
and plan liabilities of €104.9 million (2016: €112.7 million) giving a net pension deficit of €22.5 million (2016: €31.2 million).
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 including price inflation, benefit and salary increases together with the discount rate used.
As a result of the UK referendum on EU membership, and the on-going Brexit negotiations, the Group’s UK defined benefit pension plan
assumptions are subject to increased volatility and risk. The Group disclose the UK defined benefit pension plan details separate from the Irish
plans to identify the impact of a change in UK assumptions on the Group’s defined benefit pension plans.
The Group has reviewed the impact of a change in the discount rate used and concluded that based on the pension deficit at 30 December 2017,
an increase/decrease in the discount rate applied of 0.25% would have the impact of decreasing/increasing the Irish pension plan deficit by
approximately €5.3 million to €5.6 million (2016: €16 million to €16.8 million) and the UK pension plan deficit by approximately €4.2 million to €4.5
million (2016: €4.8 million to €5.1 million). Additional information in relation to retirement benefit obligations is disclosed in note 9.
(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.
148
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
3. Critical accounting estimates and judgements continued
(e) Provisions
The amounts recognised as a provision are management’s best estimate of the expenditure required to settle present obligations at the balance
sheet date. The outcome depends on future events which are by their nature uncertain. In assessing the likely outcome, management bases its
assessment on historical experience and other factors that are believed to be reasonable in the circumstances. Provisions are disclosed in
note 28.
4. Segment information
On 2 July 2017 the Group completed the disposal of Dairy Ireland and related assets. The Group has treated these operations as discontinued
operations in accordance with IFRS 5 ‘Non-current assets held for sale and discontinued operations’ and details of the disposal are included
in note 10. Following this change the structure of the internal reporting to the Chief Operating Decision Maker was reviewed as required by
IFRS 8 ‘Operating segments’. As a result, the Group has revised its operating segments, and, comparative segment amounts for 2016 have
been restated.
The Group, including its Joint Venture Glanbia Ireland, now reports across the following segments: Glanbia Performance Nutrition, Glanbia
Nutritionals and Glanbia Ireland. 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. 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 (EBITA).
Each segment derives its revenue as follows; Glanbia Performance Nutrition earns its revenue from the manufacture and sale of performance
nutrition products, Glanbia Nutritionals earns its revenue from the manufacture and sale of cheese, dairy and non-dairy nutritional ingredients,
and Glanbia Ireland earns its revenue from the manufacture and sale of cheese and dairy ingredients, and the manufacture and sale of a range
of consumer products and farm inputs. Glanbia Ireland is an Equity accounted investee and the amounts stated represent the Group’s share (note
18). All other segments and unallocated include both the results of other Equity accounted investees who manufacture and sell cheese and dairy
ingredients and unallocated corporate costs. These investees did not meet the quantitative thresholds for reportable segments in 2017 or 2016.
Amounts stated for Equity accounted investees represents the Group’s share.
The segment results for continuing operations are as follows:
2017
Total gross segment revenue
Inter-segment revenue
Revenue
Glanbia
Performance
Nutrition
€’m
1,121.1
–
1,121.1
Glanbia
Nutritionals
€’m
1,304.7
(38.7)
1,266.0
Total Group earnings before interest, tax,
amortisation and exceptional items (EBITA)
169.7
113.5
Glanbia
Ireland
€’m
–
–
–
–
Total
reportable
segments
€’m
2,425.8
(38.7)
2,387.1
283.2
All other
segments and
unallocated
€’m
–
–
–
–
Total
Group
€’m
2,425.8
(38.7)
2,387.1
283.2
Shares of results of Equity accounted
investees (pre-exceptional)
–
–
16.4
16.4
26.4
42.8
2016 (Re-presented)**
Total gross segment revenue
Inter-segment revenue
Revenue
Glanbia
Performance
Nutrition
€’m
1,007.5
–
1,007.5
Glanbia
Nutritionals
€’m
1,250.4
(26.2)
1,224.2
Total Group earnings before interest, tax,
amortisation and exceptional items (EBITA)
162.0
111.3
Glanbia
Ireland
€’m
–
–
–
–
Total
reportable
segments
€’m
2,257.9
(26.2)
2,231.7
273.3
All other
segments and
unallocated
€’m
–
–
–
–
Total
Group
€’m
2,257.9
(26.2)
2,231.7
273.3
Share of results of Equity accounted
investees (pre-exceptional)
** Re-presented to reflect the realignment of operating segments.
–
–
13.3
13.3
12.7
26.0
Included in external revenue are related party sales between Glanbia Nutritionals and Joint Ventures of €14.1 million (2016: €13.5 million).
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to
unrelated third parties.
Glanbia plc | Annual Report and Financial Statements 2017
149
Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax and profit after
tax for continuing operations as follows:
Earnings before interest, tax, amortisation and exceptional items – Continuing operations
Amortisation – pre-exceptional
Exceptional items
Share of results of Equity accounted investees
Finance income
Finance costs
Reported profit before taxation – Continuing operations
Income taxes
Notes
17
6
12
12
13
2017
€’m
283.2
(43.1)
(30.2)
42.8
3.0
(26.0)
229.7
7.5
2016
€’m
273.3
(37.4)
(14.4)
26.0
2.4
(25.2)
224.7
(37.0)
Reported profit for the year – Continuing operations
237.2
187.7
Other segment information (pre-exceptional) for continuing operations are as follows:
2017
Depreciation and impairment of PPE
Amortisation and impairment of
intangibles
Capital expenditure – additions
Capital expenditure – business
combinations
2016 (Re-presented)**
Depreciation and impairment of PPE
Amortisation and impairment of
intangibles
Capital expenditure – additions
Capital expenditure – business
combinations
Notes
16
17
Notes
16
17
Glanbia
Performance
Nutrition
€’m
14.8
33.2
32.8
166.9
Glanbia
Performance
Nutrition
€’m
13.9
28.1
24.7
3.0
The segment assets and liabilities are as follows:
2017
Segment assets
Segment liabilities
2016 (Re-presented)**
Segment assets
Segment liabilities
Glanbia
Performance
Nutrition
€’m
1,331.5
232.2
Glanbia
Performance
Nutrition
€’m
1,157.2
264.6
Glanbia
Nutritionals
€’m
Glanbia
Ireland
€’m
Total reportable
segments
€’m
All other
segments and
unallocated
€’m
30.3
9.9
29.4
–
–
–
–
–
45.1
43.1
62.2
166.9
2.7
–
10.5
–
Glanbia
Nutritionals
€’m
Glanbia
Ireland
€’m
Total reportable
segments
€’m
All other
segments and
unallocated
€’m
27.8
9.8
40.1
–
Glanbia
Nutritionals
€’m
759.7
181.0
Glanbia
Nutritionals
€’m
772.6
212.4
–
–
–
–
41.7
37.9
64.8
3.0
–
–
7.7
–
Glanbia
Ireland
(note 18)
€’m
187.1
–
Glanbia
Ireland
(note 18)
€’m
95.6
–
Total reportable
segments
All other
segments and
unallocated
€’m
2,278.3
413.2
€’m
204.7
688.1
Total reportable
segments
All other
segments and
unallocated
€’m
2,025.4
477.0
€’m
683.3
1,004.6
Total
Group
€’m
47.8
43.1
72.7
166.9
Total
Group
€’m
41.7
37.9
72.5
3.0
Total
Group
€’m
2,483.0
1,101.3
Total
Group
€’m
2,708.7
1,481.6
** Re-presented to reflect the realignment of operating segments.
Unallocated assets and liabilities comprise primarily taxation, cash and cash equivalents, borrowings, available for sale financial assets,
derivatives, retirement benefit obligations and the carrying value of remaining Equity accounted investees.
150
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
4. Segment information continued
Geographical information
The following represents a geographical analysis of the segment information in accordance with IFRS 8, which requires disclosure of information
about the country of domicile (Republic of Ireland) and countries with material revenue and non-current assets. The analysis of revenue
represents revenue from continuing operations.
US
Ireland
UK
Australia
Rest of Europe
Other
Total
2017
€’m
1,723.8
23.4
72.1
53.2
217.1
297.5
2,387.1
Re-presented*
2016
€’m
1,731.7
22.3
62.8
31.3
154.0
229.6
2,231.7
* As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
Revenue of approximately €312.5 million (2016: €332.5 million) is derived from a single external customer within the Glanbia Nutritionals segment.
The total of non-current assets, other than financial instruments and deferred tax assets, located in Ireland is €821.3 million (2016: €857.4 million)
and located in other countries, mainly the US, is €849.3 million (2016: €920.6 million).
5. Operating profit – Continuing operations
Pre-
exceptional
Notes
€’m
2017
Exceptional
(note 6)
€’m
Revenue
Cost of goods sold
Gross profit
Selling and distribution expenses
Administration expenses
Earnings before interest tax and
amortisation (EBITA)
Intangible asset amortisation
2,387.1
(1,742.4)
644.7
(212.3)
(149.2)
283.2
(43.1)
17
–
–
–
–
(5.5)
(5.5)
(19.4)
Total
€’m
2,387.1
(1,742.4)
644.7
(212.3)
(154.7)
Pre-
exceptional
€’m
2,231.7
(1,596.6)
635.1
(198.2)
(163.6)
277.7
(62.5)
273.3
(37.4)
Re-presented*
2016
Exceptional
(note 6)
€’m
–
(1.0)
(1.0)
–
(13.4)
(14.4)
–
Total
€’m
2,231.7
(1,597.6)
634.1
(198.2)
(177.0)
258.9
(37.4)
Operating profit
240.1
(24.9)
215.2
235.9
(14.4)
221.5
Operating profit – Continuing operations
is stated after (charging)/crediting:
Notes
€’m
Pre-
exceptional
Raw materials and consumables used
Depreciation of property, plant and
equipment
Impairment of property, plant and
equipment
Amortisation of intangible assets
Impairment of intangible assets
Amortisation of capital grants received
Employee benefit expense
Auditor’s remuneration
Research and development costs
Net foreign exchange gain
(Loss)/profit on disposal of property,
plant and equipment
Operating lease expense
21
16
16
17
17
29
7
34
(1,468.2)
(45.1)
(2.7)
(43.1)
–
0.1
(309.8)
(1.2)
(9.0)
0.4
(0.9)
(20.1)
2017
Exceptional
(note 6)
€’m
Total
€’m
Pre-
exceptional
€’m
Re-presented*
2016
Exceptional
(note 6)
€’m
Total
€’m
–
–
–
(19.4)
–
–
(3.9)
–
–
–
–
–
(1,468.2)
(1,337.4)
(1.0)
(1,338.4)
(45.1)
(41.2)
(2.7)
(62.5)
–
0.1
(313.7)
(1.2)
(9.0)
0.4
(0.9)
(20.1)
(0.5)
(37.4)
(0.5)
0.2
(284.1)
(1.8)
(7.7)
0.9
0.3
(17.7)
–
–
–
(0.6)
–
(7.1)
–
–
–
–
–
(41.2)
(0.5)
(37.4)
(1.1)
0.2
(291.2)
(1.8)
(7.7)
0.9
0.3
(17.7)
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
Glanbia plc | Annual Report and Financial Statements 2017
151
The following tables disclose the fees paid or payable to Deloitte Ireland, the Group and Company auditor, and to other statutory audit firms in the
Deloitte network.
Current auditor
Statutory auditor
– Statutory audit of Group companies**
– Other assurance services
– Tax advisory services
– Other non-audit services
Current auditor
Other statutory auditor network firms
– Statutory audit of Group companies
– Other assurance services
– Tax advisory services
– Other non-audit services
2017
€’m
0.5
–
–
–
0.5
2017
€’m
0.7
–
–
–
0.7
2016
€’m
0.4
–
0.1
0.1
0.6
2016
€’m
0.6
–
–
–
0.6
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
** The audit fee for the Company is €35,700 (2016: €35,000) and is payable to Deloitte Ireland, the statutory auditor.
In addition to the above, Deloitte and its member firms received fees of €0.2 million (2016: €0.2 million) in respect of the audit of the Group’s
Equity accounted investees.
6. Exceptional items
Intangible asset amortisation
Rationalisation costs
Debt restructuring
Organisation redesign costs
Acquisition integration costs
Profit on disposal of 60% of Dairy
Ireland
Total exceptional operating
(loss)/profit
Finance costs
Share of results of Equity accounted
investees – deferred tax credit due
to US tax reform
Total exceptional (loss)/profit
before tax
Deferred tax credit due to US tax
reform
Tax credit/(charge) on exceptional
items
Total exceptional profit/(loss) for
the year
Continuing
operations
€’m
2017
Discontinued
operations
€’m
Notes
(a)/17
(b)
(c)
(f)
(g)
(e)
(c)/12
(19.4)
(5.4)
(0.1)
–
–
–
(24.9)
(14.0)
(d)/18
8.7
4
(30.2)
(d)/27
13
38.7
7.1
–
–
–
–
–
83.3
83.3
–
–
83.3
–
(0.9)
Re-presented*
2016
Discontinued
operations
€’m
Continuing
operations
€’m
–
–
–
(11.3)
(3.1)
–
(14.4)
–
–
(14.4)
–
2.3
–
(3.0)
–
–
–
–
(3.0)
–
–
(3.0)
–
0.3
Total
€’m
(19.4)
(5.4)
(0.1)
–
–
83.3
58.4
(14.0)
8.7
53.1
38.7
6.2
Total
€’m
–
(3.0)
–
(11.3)
(3.1)
–
(17.4)
–
–
(17.4)
–
2.6
15.6
82.4
98.0
(12.1)
(2.7)
(14.8)
152
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
6. Exceptional items continued
The nature of the total exceptional operating (loss)/profit is as follows:
Amortisation of development costs
Employee benefit expense
Professional fees
Other operating costs
Profit on disposal of Dairy Ireland
Impairment of tangible asset
Extraordinary general meeting costs
Total exceptional operating
(loss)/profit
Continuing
operations
€’m
2017
Discontinued
operations
€’m
(19.4)
(3.9)
(1.2)
(0.4)
–
–
–
–
(0.5)
(3.6)
(0.2)
96.3
(8.1)
(0.6)
Notes
(a)
7
10
16
Re-presented*
2016
Discontinued
operations
€’m
Continuing
operations
€’m
–
(7.1)
(3.6)
(3.7)
–
–
–
–
(3.0)
–
–
–
–
–
Total
€’m
(19.4)
(4.4)
(4.8)
(0.6)
96.3
(8.1)
(0.6)
Total
€’m
–
(10.1)
(3.6)
(3.7)
–
–
–
(24.9)
83.3
58.4
(14.4)
(3.0)
(17.4)
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
The net cash inflow during the year in respect of exceptional charges was €177.5 million (2016: net cash outflow €19.4 million) of which a cash
outflow of €9.9 million (2016: cash outflow of €9.1 million) was in respect of prior year exceptional charges.
(a) Intangible asset amortisation: Following a review of the useful life of capitalised development costs in respect of newly developed products
across the Group, it was decided to reduce the estimate of the useful life from 6 to 3 years to reflect the dynamic environment for new product
launches in their early development stage. The once-off additional amortisation from this change in estimate amounted to €19.4 million.
(b) Rationalisation costs in the current year relate mainly to redundancies arising from the elimination of certain positions following a Group-wide
organisational review. This review is on-going to ensure that the structure is appropriate to support the future growth of the Group following
the disposal of 60% of the Dairy Ireland segment and related assets (Dairy Ireland). Costs of €5.4 million include employee benefit expense of
€3.9 million, professional fees of €1.1 million and other costs of €0.4 million. Rationalisation costs in 2016 primarily relate to the redundancy
and rationalisation programme in the Dairy Ireland segment, now presented as discontinued operations (note 10). In 2016 costs of €3.0 million
related to redundancy.
(c) Debt restructuring costs: Following the disposal of 60% of Dairy Ireland a review of existing debt facilities was undertaken to ensure they were
appropriate for the revised Group structure. As a result the Group repaid $169.0 million of the $325.0 million private placement debt resulting
in €14.0 million of once-off interest costs reflecting make-whole interest due to note holders arising on early settlement and €0.1 million of
professional fees.
(d) On 22 December 2017 the Tax Cuts and Jobs Act was signed into law in the United States which reduced the federal corporate tax rate from
35% to 21%. As a result of the reduced federal corporate tax rate the Group recognised a deferred tax credit of €38.7 million within wholly
owned subsidiaries and a deferred tax credit of €8.7 million within Equity accounted investees (note 18).
(e) On 2 July 2017 the Group completed the disposal of 60% of Dairy Ireland to Glanbia Co-operative Society Limited. The profit arising on
disposal amounted to €83.3 million which was net of related costs of €13.0 million. These costs include impairment of tangible fixed assets of
€8.1 million, professional fees of €3.6 million, Extraordinary General Meeting costs of €0.6 million, employee benefit expense of €0.5 million
and other related costs of €0.2 million.
(f) Organisation redesign costs relate to the Glanbia Nutritionals programme, announced in 2015, to fundamentally reorganise the business and
leverage future market opportunities. This was largely completed in 2016. In 2016 costs of €11.3 million include consultancy of €2.9 million,
employee benefit expense of €5.0 million, of which redundancy was €1.4 million, travel and expenses of €1.7 million, impairment of
development costs and product line of €1.6 million and other costs of €0.1 million. There were no material organisation redesign related costs
in 2017.
(g) Acquisition integration costs comprise costs relating to the integration, restructuring and redesign of route to market capabilities within
acquired businesses in the Glanbia Performance Nutrition segment. This was completed in 2016. 2016 costs of €3.1 million include
consultancy of €0.7 million, employee benefit expense comprising redundancy of €2.1 million and other costs of €0.3 million. There were no
material acquisition related costs in 2017.
Please refer to the Glossary on page 218 for further information on exceptional items (non-IFRS information).
Glanbia plc | Annual Report and Financial Statements 2017
153
7. Employee benefit expense – Continuing operations
The aggregate payroll costs of employees (including Executive Directors) in the Group were:
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Pension costs – defined benefit plans
Other compensation costs:
Cost of share-based payments
Company car allowance
Private health insurance
Exceptional items
Notes
9
9
11
5
5/6
5
2017
€’m
250.3
22.0
9.7
2.8
7.5
1.4
16.1
309.8
3.9
Re-presented*
2016
€’m
230.3
19.5
9.2
2.8
7.1
1.3
13.9
284.1
7.1
313.7
291.2
Exceptional items includes redundancy of €3.9 million (2016: €3.5 million) and wages and salaries of €nil (2016: €3.6 million). Capitalised labour
costs of €21.2 million (2016: €12.3 million) are included within the aggregate payroll costs above. See note 16 and note 17.
The average number of employees in continuing operations, excluding the Group’s Equity accounted investees, is analysed into the
following categories:
Glanbia Performance Nutrition
Glanbia Nutritionals
2017
2,027
1,948
Re-presented*
2016
1,778
1,875
3,975
3,653
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
The aggregate payroll cost of employees in the Company is €nil (2016: €nil).
8. Directors’ remuneration
The Directors’ remuneration information is shown on tables A to G on pages 101 to 105 in the Remuneration Committee report.
9. Retirement benefit obligations
The Group operates defined benefit and defined contribution pension plans.
Defined contribution plans
The Group has a number of defined contribution pension plans in operation.
The following amounts have been recognised in the Group income statement in relation to the defined contribution pension
plan expense:
Defined contribution pension plan expense
Continuing
operations
(note 7)
€’m
9.7
2017
Discontinued
operations
(note 10)
€’m
0.4
Total
€’m
10.1
Continuing
operations
(note 7)
€’m
9.2
Re-presented*
2016
Discontinued
operations
(note 10)
€’m
0.6
Total
€’m
9.8
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
154
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
9. Retirement benefit obligations continued
Defined benefit pension plans
The Group operates two defined benefit pension plans in the Republic of Ireland and two defined benefit pension plans in the United Kingdom (UK).
The defined benefit pension plans in Ireland and the UK are administered by Boards of Trustees through separate trustee controlled funds. These
Boards are responsible for the management and governance of the plans including compliance with all relevant laws and regulations. Each of the
Group’s plans operates under their respective regulatory frameworks and minimum funding requirements. All of the plans are closed to new
entrants and the UK plans comprise solely pensioners and deferred pensioners.
The defined benefit pension plans provide retirement and death benefits for the Group’s employees. The majority of the defined benefit pension
plans 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 contributions paid to the defined benefit pension plans are in accordance with the schedule of contributions agreed between the Group and
the Trustees of the relevant plans as recommended in the actuarial valuation reports or in subsequent actuarial advice. 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
latest actuarial valuation reports for these plans, which are not available for public inspection, are dated between 1 January 2015 and 5 April 2017.
Principal risks in the defined benefit pension plans
Through its defined benefit pension plans the Group is exposed to a number of risks, the most significant of which are detailed below:
(a) Investment risk
The pension plans hold investments in asset classes such as equities, which have volatile market values. 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. When assets return less than the discount rate, this will lead to an increase in the net defined benefit obligation. The Trustees
conduct investment reviews to take advice on asset allocation, taking into account asset valuations, liability durations, funding measurements
and an achievement of an appropriate return on assets.
(b) Interest rate risk
The pension 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. A change in the defined benefit obligation as a result
of changes in the discount rate leads to volatility in the Group balance sheet, Group income statement and Group statement of comprehensive
income. It also impacts the funding requirements for the plans.
(c) Inflation risk
A significant proportion of the benefits under the plans are linked to inflation, be it consumer price inflation or retail price inflation, which in most
cases are subject to a cap on annual increases. Although there are caps in force on inflation increases and the plans’ assets are expected to
provide a good hedge against inflation over the long-term, higher inflation will lead to higher liabilities.
(d) Longevity risk
The present value of the defined benefit obligation is calculated by reference to the best estimate of the life expectancy of plan participants both
during and after their employment. An increase in the life expectancy of the plan participants will increase the defined benefit obligation.
Principal assumptions used in the defined benefit pension plans
The principal assumptions used for the purposes of the actuarial valuations were as follows:
2017
ROI
2017
UK
2016
ROI
2016
UK
Discount rate
Inflation rate
Future salary increases*
Future pension increases
2.35%
1.80%
2.50%
1.50%-1.60% 2.15%-3.15% 1.40%-1.50% 2.20%-3.20%
2.50%
0.00%
0.00% 2.25%-2.95%
2.60%
0.00%
0.00% 2.25%-2.95%
1.80%
*
The ROI defined benefit pension plans are on a career average structure therefore this assumption does not have a material impact. The UK defined benefit pension plans comprise solely
pensioners and deferred pensioners.
Mortality rates
Male – reaching 65 years of age in 20 years’ time
Female – reaching 65 years of age in 20 years’ time
Male – currently aged 65 years old
Female – currently aged 65 years old
2017
ROI mortality
rates
Years
2017
UK mortality
rates
Years
2016
ROI mortality
rates
Years
2016
UK mortality
rates
Years
23.0
25.4
20.6
23.2
22.7
25.0
21.2
23.5
23.0
25.4
20.6
23.2
23.1
25.7
21.4
23.8
Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience in each territory.
Glanbia plc | Annual Report and Financial Statements 2017
155
Recognition in the Group income statement and in the Group statement of comprehensive income
The following amounts have been recognised in the Group income statement and Group statement of comprehensive income in relation to
defined benefit pension plans:
Recognition in the Group income statement:
Current service cost
Net interest cost
Total expense recognised in the Group
income statement in employee benefit
expense
Continuing
operations
€’m
(1.7)
(1.1)
2017
Discontinued
operations
(note 10)
€’m
(2.0)
(0.5)
Total
€’m
(3.7)
(1.6)
Continuing
operations
€’m
(2.0)
(0.8)
2016
Discontinued
operations
(note 10)
€’m
(3.3)
(1.2)
Total
€’m
(5.3)
(2.0)
(2.8)
(2.5)
(5.3)
(2.8)
(4.5)
(7.3)
Recognition in the Group statement of comprehensive income:
Return of plan assets in excess of interest
income
Actuarial gain arising from experience
adjustments
Actuarial gain/(loss) arising from changes in
demographic assumptions
Actuarial gain/(loss) arising from changes in
financial assumptions
Total income/(expense) recognised in the
Group statement of comprehensive income
Recognition in the Group balance sheet:
Present value of funded obligations
Fair value of plan assets
Net defined benefit pension plan liability
Continuing
operations
€’m
2017
Discontinued
operations
€’m
(2.3)
(0.9)
–
–
12.9
2.9
1.3
5.2
7.1
Continuing
operations
€’m
2016
Discontinued
operations
€’m
11.8
0.9
(1.6)
5.9
2.6
–
Total
€’m
17.7
3.5
(1.6)
(33.9)
(17.5)
(51.4)
Total
€’m
(3.2)
2.9
1.3
18.1
12.0
19.1
(22.8)
(9.0)
(31.8)
2017
€’m
(227.6)
185.7
2016
€’m
(477.2)
366.8
(41.9)
(110.4)
Reconciliation of net defined benefit pension plan liability to the amounts recognised in the Group balance sheet:
Non-current assets
Surplus on defined benefit pension plan
Non-current liabilities
Deficit on defined benefit pension plan
Net defined benefit pension plan liability
The net liability disclosed above relates to funded plans.
2017
€’m
1.7
2016
€’m
2.6
(43.6)
(113.0)
(41.9)
(110.4)
156
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
9. Retirement benefit obligations continued
The movement in the net retirement benefit liability recognised in the Group balance sheet is as follows:
At the beginning of the year
Exchange differences
Service cost and net interest cost
Remeasurements – defined benefit plans
Contributions paid/payable by employer
Disposal of discontinued operations
Notes
10
2017
€’m
(110.4)
1.0
(5.3)
19.1
9.5
44.2
2016
€’m
(87.3)
2.7
(7.2)
(31.8)
13.2
–
At the end of the year
(41.9)
(110.4)
The movement in obligations during the year is as follows:
At the beginning of the year
Exchange differences
Current service costs
Interest costs
Remeasurements:
– Experience gain
– Gain/(loss) from changes in demographic assumptions
– Gain/(loss) from changes in financial assumptions
Contributions by plan participants
Payments from plans:
– Benefit payments
Disposal of discontinued operations
ROI
€’m
(364.5)
–
(3.7)
(4.2)
0.1
–
20.3
(0.9)
6.8
223.4
2017
UK
€’m
(112.7)
3.8
–
(2.8)
2.8
1.3
(2.2)
–
4.9
–
Notes
10
Total
€’m
(477.2)
3.8
(3.7)
(7.0)
2.9
1.3
18.1
(0.9)
11.7
223.4
ROI
€’m
(334.0)
–
(5.3)
(7.4)
3.5
–
(30.7)
(1.4)
10.8
–
2016
UK
€’m
(106.1)
15.1
–
(3.4)
–
(1.6)
(20.7)
–
4.0
–
Total
€’m
(440.1)
15.1
(5.3)
(10.8)
3.5
(1.6)
(51.4)
(1.4)
14.8
–
At the end of the year
(122.7)
(104.9)
(227.6)
(364.5)
(112.7)
(477.2)
The movement in the fair value of plan assets during the year is as follows:
At the beginning of the year
Exchange differences
Interest income
Remeasurements:
– Return on plan assets excluding amounts included in interest
(expense)/income
Contributions by plan participants
Contributions paid/payable by employer
Payments from plans:
– Benefit payments
Disposal of discontinued operations
Notes
ROI
€’m
285.3
–
3.4
(5.8)
0.9
5.5
(6.8)
(179.2)
10
2017
UK
€’m
81.5
(2.8)
2.0
2.6
–
4.0
(4.9)
–
Total
€’m
366.8
(2.8)
5.4
(3.2)
0.9
9.5
(11.7)
(179.2)
ROI
€’m
267.3
–
6.1
12.1
1.4
9.2
(10.8)
–
2016
UK
€’m
85.5
(12.4)
2.8
5.6
–
4.0
(4.0)
–
Total
€’m
352.8
(12.4)
8.9
17.7
1.4
13.2
(14.8)
–
At the end of the year
103.3
82.4
185.7
285.3
81.5
366.8
Glanbia plc | Annual Report and Financial Statements 2017
157
The fair value of plan assets at the end of the reporting period are as follows:
Equities:
– Consumer
– Energy
– Financials
– Healthcare
– Industrials
– Information technology
– Materials
– Telecommunication services
– Utilities
– Other
Corporate bonds:
– Investment grade
– Non-investment grade
Government bonds and gilts
Property:
– UK
– Ireland
– Europe
Cash
Investment funds
Other
2017
Quoted
€’m
Unquoted
€’m
Total
€’m
6.3
2.0
6.2
3.0
3.3
4.3
1.6
0.8
0.7
2.0
11.5
1.7
36.2
–
0.6
–
6.2
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
1.8
–
81.8
15.5
6.3
2.0
6.2
3.0
3.3
4.3
1.6
0.8
0.7
2.0
11.5
1.7
36.2
–
0.7
1.8
6.2
81.8
15.6
2016
Quoted
€’m
Unquoted
€’m
13.9
6.1
18.0
8.9
9.0
11.0
4.0
2.9
2.7
6.9
27.9
3.5
70.7
–
1.4
–
1.2
–
0.4
–
–
–
–
–
–
–
–
–
1.0
6.7
0.9
11.5
3.1
1.1
6.3
9.1
119.6
19.0
Total
€’m
13.9
6.1
18.0
8.9
9.0
11.0
4.0
2.9
2.7
7.9
34.6
4.4
82.2
3.1
2.5
6.3
10.3
119.6
19.4
%
4
1
4
2
2
2
1
–
–
1
6
1
19
–
–
1
4
44
8
%
4
2
5
2
2
3
1
1
1
2
9
1
22
1
1
2
3
33
5
86.5
99.2
185.7
100
188.5
178.3
366.8
100
The plan assets at the end of the reporting period do not include any equities held in the Group, nor does the Group use or occupy any of the
plan assets.
Sensitivity analysis for principal assumptions used to measure plan liabilities
There are inherent uncertainties surrounding the financial assumptions adopted in calculating the actuarial valuation of the Group’s defined
benefit pension plans. The following table analyses, for the Group’s pension plans, the estimated impact on the plan liabilities resulting from
changes to key actuarial assumptions, with all other assumptions remaining constant.
The sensitivity analysis may not be representative of the actual change in the defined benefit obligation as it is unlikely that the change in the
assumptions would occur in isolation of one another as some of the assumptions may be correlated. 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.
2017
Assumption
Discount rate
Price inflation
Longevity
Future salary increases*
Future pension increases**
2016
Assumption
Discount rate
Price inflation
Longevity
Future salary increases*
Future pension increases**
Change in assumption
0.25% movement
0.25% movement
1 year movement
ROI plans
UK plans
Increase
€’m
Decrease
€’m
Increase
€’m
Decrease
€’m
(5.3)
1.8
3.6
5.6
(1.9)
(3.5)
(4.2)
3.3
4.2
4.5
(3.4)
(4.5)
Change in assumption
0.25% movement
0.25% movement
1 year movement
ROI plans
UK plans
Increase
€’m
(16.0)
5.5
10.7
Decrease
€’m
16.8
(5.4)
(10.4)
Increase
€’m
Decrease
€’m
(4.8)
3.5
4.3
5.1
(3.4)
(4.3)
*
The majority of the defined benefit plans 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 plans.
158
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
9. Retirement benefit obligations continued
Expected contributions to the defined benefit pension plans for the coming year
Weighted average duration of the defined benefit plans
ROI plans
€’m
2.2
ROI plans
Years
18
UK plans
€’m
3.9
UK plans
Years
16
10. Discontinued operations
On 2 July 2017, the Group disposed of 60% of its shareholding in Dairy Ireland and related assets to Glanbia Co-operative Society Limited (the
Society), its ultimate parent, creating a new joint venture, together with Glanbia Ingredients Ireland DAC, called Glanbia Ireland. Dairy Ireland is
comprised of two business units, Glanbia Consumer Foods Ireland and Glanbia Agribusiness.
The disposal was approved by Society members at a Special General Meeting (SGM) on 18 May 2017 and by Group shareholders at an
Extraordinary General Meeting (EGM) on 22 May 2017.
In consideration for the Society acquiring the 60% interest, Glanbia plc received €112.0 million and an amount of €96.8 million which equalled
100% of the net working capital in Dairy Ireland at completion.
The transaction is accounted for as a 100% disposal of Dairy Ireland in consideration for the cash payments outlined above and a 40%
investment in Glanbia Ireland. Since 2 July 2017 the 40% investment in Glanbia Ireland is treated as a Joint Venture of the Group (note 18).
Results of discontinued operations
The following table details the results of discontinued operations included within the Group income statement:
Revenue
Cost of goods sold
Gross profit
Selling and distribution expenses
Administration expenses
Earnings before interest tax and amortisation (EBITA)
Intangible asset amortisation
Operating profit
Finance costs
Share of results of Equity accounted investees
Exceptional items
(Loss)/profit from operating activities before tax
Income tax credit/(charge) on discontinued operations
(Loss)/profit from operating activities for the year, net of tax
Profit on disposal of discontinued operations
Income tax on profit on disposal of discontinued operations
Profit from discontinued operations for the year, net of tax
Exceptional items from discontinued operations for the year, net of tax
Profit from discontinued operations for the year, net of tax, attributable to:
Equity holders of the Company
Non-controlling interests
Notes
17
18
25
2017
€’m
358.4
(284.9)
73.5
(42.3)
(20.6)
10.6
(0.7)
9.9
(0.1)
0.3
(13.0)
(2.9)
2.2
(0.7)
96.3
(3.4)
92.2
82.4
92.2
–
92.2
2016
€’m
616.8
(469.6)
147.2
(83.4)
(32.1)
31.7
(2.3)
29.4
–
1.6
(3.0)
28.0
(3.6)
24.4
–
–
24.4
(2.7)
24.1
0.3
24.4
Glanbia plc | Annual Report and Financial Statements 2017
159
The operating profit for discontinued operations pre-exceptional is stated after (charging)/crediting:
Raw materials and consumables used
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Amortisation of intangible assets
Amortisation of capital grants
Employee benefit expense
Research and development costs
Net foreign exchange loss
Operating lease expense
The aggregate payroll cost of employees in discontinued operations was:
Wages and salaries
Social security costs
Pension costs – defined contribution plans
Pension costs – defined benefit plans
Other compensation costs:
Cost of share-based payments
Company car allowance
Private health insurance
Exceptional items
The average number of employees in discontinued operations in 2017 was 1,070 (2016: 1,142).
The net cash flows of the Group’s discontinued operations are as follows:
Operating net cash (outflow)/inflow
Investing net cash inflow/(outflow)
Financing cash outflow
Cash generated during the year
Notes
21
16
16
17
29
16
Notes
9
9
11
6
2017
€’m
(252.1)
(4.0)
(8.1)
(0.7)
0.2
(32.3)
(0.1)
–
(3.1)
2017
€’m
26.1
2.9
0.4
2.5
0.3
0.1
–
32.3
0.5
32.8
2017
€’m
(32.1)
149.4
(1.4)
2016
€’m
(407.9)
(9.2)
–
(2.3)
0.2
(78.3)
(1.1)
(0.1)
(6.4)
2016
€’m
65.1
7.1
0.6
4.5
0.6
0.3
0.1
78.3
3.0
81.3
2016
€’m
22.6
(11.4)
(0.9)
115.9
10.3
160
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
10. Discontinued operations continued
The following table details the effect of the disposal on the financial position of the Group:
Property, plant and equipment
Intangible assets
Investments in Equity accounted investees
Available for sale financial assets
Retirement benefit asset
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Accruals and sundry creditors
Financial liabilities
Retirement benefit obligations
Other amounts due to Glanbia plc entities
Qualifying working capital amounts with Glanbia plc entities
Net assets and liabilities
Attributable to owners of the Company
Attributable to non-controlling interest
The following table details the profit on disposal of discontinued operations before tax:
Consideration received, satisfied in cash
Fair value of investment in Glanbia Ireland
Reclassification of foreign currency differences on disposal of Dairy Ireland
Net assets and liabilities attributable to owners of the Company
Profit on disposal of discontinued operations before tax
Notes
16
17
18
9
35
35
(a)
(a)
9
25
Notes
18
24
The following table details the proceeds, net of cash and cash equivalents, as recognised in the Group statement of cash flows:
Consideration received, satisfied in cash
Working capital – received at completion
Cash and cash equivalents disposed of
Financial liabilities disposed of
Notes
(a)
2017
€’m
113.2
16.5
12.3
0.4
0.4
42.1
171.8
168.6
(243.8)
(23.0)
(3.5)
(44.6)
(107.7)
(1.1)
101.6
90.6
11.0
101.6
2017
€’m
112.0
74.7
186.7
0.2
(90.6)
96.3
2017
€’m
112.0
107.7
(14.4)
3.5
208.8
(a) Included in cash and cash equivalents and trade and other payables is an amount of €154.2 million. This amount relates to the redemption
of ordinary shares in Glanbia Foods Ireland Limited by Glanbia plc which occurred on the date of the transaction, 2 July 2017.
Glanbia plc | Annual Report and Financial Statements 2017
161
11. Share-based payment expense
The Group operates the following equity settled share-based payment arrangements as defined in IFRS 2 ‘Share-based Payment’. The
arrangements include both share option and share award schemes open to both Executive Directors and certain senior management.
• 2002 Long-term incentive plan (the 2002 LTIP)
• 2008 Long-term incentive plan (the 2008 LTIP)
• The annual incentive deferred into shares scheme (the AIDIS Scheme)
Further details of the plans are available in the Remuneration Committee report on pages 80 to 105.
The share-based payment reserve reflects charges relating to granting of both share options and awards under the 2002 LTIP, the 2008 LTIP and
the AIDIS Scheme, net of transfers on vesting or expiry of share-based payments.
The movement in the share-based payment reserve recognised in the Group and Company balance sheet is as follows:
At the beginning of the year
Transfer on exercise, vesting or expiry of share-based payments
Cost of share-based payments
At the end of the year
Notes
24
24
24
24
The total cost recognised in the Group income statement is analysed as follows:
The 2008 LTIP
The AIDIS Scheme
Continuing
operations
(note 7)
€’m
6.8
0.7
7.5
2017
Discontinued
operations
(note 10)
€’m
0.3
–
0.3
Group
Company
2017
€’m
17.0
(9.9)
7.8
14.9
Total
€’m
7.1
0.7
7.8
2016
€’m
14.7
(5.4)
7.7
17.0
2017
€’m
17.0
(9.9)
7.8
14.9
Re-presented*
2016
Discontinued
operations
(note 10)
€’m
0.6
–
0.6
Continuing
operations
(note 7)
€’m
5.2
1.9
7.1
2016
€’m
14.7
(5.4)
7.7
17.0
Total
€’m
5.8
1.9
7.7
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
2002 Long-term incentive plan
This plan closed to further grants in 2012, the last share options were granted in 2011.
Under the 2002 LTIP, options could not be exercised before the expiration of three-years from the date of grant and could only be exercised if a
pre-determined performance criterion for the Group had been achieved. The performance criterion required 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 and the fair value of the awards exercised is reclassified from the share-based
payment reserve to retained earnings.
In accordance with the terms of the 2002 LTIP, certain executives to whom options were granted in 2004 were eligible to receive share awards
related to the number of ordinary shares which they held on the second anniversary of the exercise of the option up to a maximum of 1,450
ordinary shares. There are no share awards outstanding as at the end of the year (2016: nil).
Movement in the number of options outstanding under 2002 LTIP is as follows:
At the beginning of the year
Exercised during the year
At the end of the year
2017
Weighted
average
exercise
price per
share
€
4.15
(2.29)
2017
Number
of options
45,000
(5,000)
2016
Weighted
average
exercise
price per
share
€
3.81
(2.29)
Notes
23
2016
Number
of options
55,000
(10,000)
4.38
40,000
4.15
45,000
162
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
11. Share-based payment expense continued
Expiry dates of share options outstanding and exercisable at 30 December 2017 and 31 December 2016 are as follows:
Expiry date
2019
2021
Exercise
price
€
2.29
4.38
2017
Number
of options
–
40,000
2016
Number
of options
5,000
40,000
40,000
45,000
Total options of 40,000 (2016: 45,000) ordinary shares were outstanding at 30 December 2017 under the 2002 LTIP at a price of €4.38. The cost
of the 2002 LTIP charged in the Group income statement was €nil (2016: €nil). The fair value of the share options was calculated using the
Binomial Model.
Options over 40,000 (2016: 45,000) ordinary shares were exercisable at 30 December 2017. The share price at the date of exercise for share
options exercised was €18.47 (2016: €18.39). The weighted average life for share options outstanding is four years.
2008 Long-term incentive plan
This is a long-term share incentive plan, which was introduced in 2008 following 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.
Awards outstanding under the 2008 LTIP as at 30 December 2017 amounted to 2,203,668 (2016: 2,294,783). These are scheduled to vest in
periods up to April 2020, to the extent that there is sustained improvement in the underlying financial performance over a three-year period and
that the service condition is fulfilled as determined by the Remuneration Committee. The maximum annual award level is 250% (for awards
granted before 2016 the maximum was 250%) of Base Salary. Vesting is determined on a straight line basis between threshold and maximum.
Further details are included within the Remuneration Committee report.
The extent of vesting for awards granted before 2015 is determined by growth in EPS, Total Shareholder Return performance (TSR) and Return
on Capital Employed (ROCE), with each of EPS, TSR and ROCE conditions representing one third of the maximum vesting level. A service
condition also applies. There is a requirement to hold shares received pursuant to the vesting of LTIP awards for a minimum period of one year
post-vesting.
The extent of vesting for an award granted from 2015 onwards is determined based on the performance category of each individual and consists
of a combination of the following performance metrics, a service condition and in certain circumstances a personal objective.
The award is determined by reference to three performance metrics for the Group Managing Director and the Group Finance Director:
Performance measure
2015 & 2016 Awards
2017 Awards
Group
adjusted
EPS
50%
40%
Relative TSR
against the
STOXX Europe
600 Food
& Beverage index
20%
20%
Group
ROCE
30%
40%
For business segment Executive Directors, the award is determined by reference to the following performance metrics:
Performance measure
2015 & 2016 Awards
2017 Awards
Business
Segment
EBITA
20%
20%
Business
Segment
ROCE
10%
10%
Group
adjusted
EPS
40%
30%
Relative TSR
against the
STOXX Europe
600 Food
& Beverage index
15%
15%
Group
ROCE
15%
25%
From 2015 onwards the required period to hold shares received post vesting of LTIP award has increased to two years for members of the Group
Operating Executive.
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 €7.1 million (2016: €5.8 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.
Glanbia plc | Annual Report and Financial Statements 2017
163
The assumptions used in the valuation were as follows:
Risk-free interest rate
Expected volatility
Dividend yield
Granted
in 2017
(0.63%)
25.00%
0.79%
Granted
in 2016
(0.50%)
22.30%
0.66%
Granted
in 2015
0.04%
22.00%
0.81%
Granted
in 2014
0.10%
26.10%
0.94%
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.
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 and the service condition. A share award may lapse if a participant ceases to be employed within the Group before the date of vest.
When the awards are exercised the Company re-issues shares from own shares and the fair value of the awards exercised is reclassified from the
share-based payment reserve to retained earnings.
Movement in the number of awards in the 2008 LTIP for the year ended 30 December 2017 and 31 December 2016 is as follows:
At the beginning of the year
Granted
Vested
Lapsed
At the end of the year
Expiry dates of share awards outstanding at 30 December 2017 and 31 December 2016:
Expiry date in
2017
2018
2019
2020
2021
At the end of the year
2017
Number of
awards
2,294,783
874,641
(644,620)
(321,136)
2016
Number of
awards
2,060,605
851,305
(457,852)
(159,275)
2,203,668
2,294,783
2017
Number of
Awards
–
–
673,337
706,990
823,341
2016
Number of
Awards
4,000
710,103
751,865
828,815
–
2,203,668
2,294,783
The total expense recognised in the Group income statement is analysed as follows:
Share price
at date
of award
€
Year of
earliest
vesting
date
Number
of shares
Fair value
– TSR
component
€
Fair value –
non-market
performance
components
€
Total
weighted
average
fair value
€
Expense in
Group
income
statement
2017
€’m
Expense in
Group
income
statement
2016
€’m
Granted in 2014
2008 Long-term Incentive Plan
Granted in 2015
2008 Long-term Incentive Plan
Granted in 2016
2008 Long-term Incentive Plan
Granted in 2017
2008 Long-term Incentive Plan
11.51
2017
841,000
5.75
11.19
9.38
17.53
2018
844,490
13.16
17.10
16.55
18.47
2019
851,305
11.19
18.11
17.15
18.05
2020
874,641
9.00
17.62
16.57
Total expense recognised in Group income statement
–
1.9
2.2
3.0
7.1
2.4
2.5
0.9
–
5.8
On 23 March 2017, 26 June 2017, 29 June 2017, 2 July 2017, 5 July 2017, 27 October 2017 and 10 November 2017, 10,074, 4,864, 131,348,
464,633, 16,143, 5,031 and 9,526 respectively, of the share awards granted in 2014 vested and 199,381 lapsed. On 5 July 2017 3,001 of the
share awards granted in 2013 were vested.
164
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
11. Share-based payment expense continued
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 €0.7 million in 2017 (2016: €1.9 million) and equates to the cash value of the
portion of the annual incentive that will be settled by way of shares. The number of shares received is determined by the share price on the date
of allocation. 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 80 to 105 for further information.
12. Finance income and costs – Continuing operations
Finance income
Interest income
Total finance income
Finance costs
Bank borrowing costs
Facility fees including cost amortisation
Unwinding of discounts
Finance lease costs
Net interest expense on currency swaps
Finance cost of private debt placement
Total finance costs
Net finance costs
Notes
28
Pre-
exceptional
€’m
3.0
3.0
(7.3)
(2.6)
(0.1)
(0.1)
(1.2)
(14.7)
2017
Exceptional
(note 6)
€’m
–
–
–
(0.1)
–
–
–
(13.9)
Total
Pre-
exceptional
€’m
3.0
3.0
(7.3)
(2.7)
(0.1)
(0.1)
(1.2)
(28.6)
€’m
2.4
2.4
(6.1)
(2.7)
(0.3)
–
(0.1)
(16.0)
(26.0)
(14.0)
(40.0)
(25.2)
(23.0)
(14.0)
(37.0)
(22.8)
Re-presented*
2016
Exceptional
(note 6)
€’m
–
–
–
–
–
–
–
–
–
–
Total
€’m
2.4
2.4
(6.1)
(2.7)
(0.3)
–
(0.1)
(16.0)
(25.2)
(22.8)
* As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
Net finance costs do not include bank borrowing costs of €0.8 million (2016: €1.3 million) attributable to the acquisition, construction or production of a
qualifying asset, which have been capitalised, as disclosed in note 16. Interest is capitalised at the Group’s average interest rate (excluding exceptional
items) for the period of 3.9% (2016: 3.8%). Where relevant, tax deduction for capitalised interest was taken in accordance with Sec 81(3), TCA 1997.
Interest income includes interest on loans to related parties of €0.7 million (2016: €0.7 million) (note 37).
13. 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
Continuing
operations
€’m
Notes
2017
Discontinued
operations
€’m
Re-presented*
2016
Discontinued
operations
€’m
Continuing
operations
€’m
Total
€’m
(13.2)
0.6
(12.6)
(12.4)
3.2
(9.2)
(0.9)
0.1
(0.8)
–
–
–
(11.8)
0.3
(11.5)
(37.3)
(1.3)
(38.6)
(0.8)
(21.8)
(50.1)
(0.6)
0.2
(0.4)
(1.2)
27.6
0.5
28.1
6.3
12.2
0.9
13.1
(37.0)
Total
€’m
(14.5)
0.3
(14.2)
(37.4)
(1.3)
(38.7)
(52.9)
11.4
0.9
12.3
(40.6)
(2.7)
–
(2.7)
(0.1)
–
(0.1)
(2.8)
(0.8)
–
(0.8)
(3.6)
(12.3)
0.5
(11.8)
(12.4)
3.2
(9.2)
(21.0)
28.2
0.3
28.5
7.5
Total deferred tax
Tax credit/(charge)
27
34
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
Glanbia plc | Annual Report and Financial Statements 2017
165
The tax credit on exceptional items and the exceptional deferred tax credit included in the above amounts is as follows:
Continuing
operations
€’m
Notes
2017
Discontinued
operations
€’m
Current tax credit/(charge) on
exceptional items
Deferred tax credit/(charge) on
exceptional items
Deferred tax credit due to US tax reform
27
4.8
2.3
38.7
(0.7)
(0.2)
–
Re-presented*
2016
Discontinued
operations
€’m
Continuing
operations
€’m
2.1
0.2
–
0.3
–
–
Total
€’m
4.1
2.1
38.7
Total
€’m
2.4
0.2
–
Total tax credit/(charge) on
exceptional items and exceptional
deferred tax credit for the year
6
45.8
(0.9)
44.9
2.3
0.3
2.6
The net tax credit on exceptional items in 2017 and 2016 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 for continuing operations differs from the theoretical amount that would arise applying the
corporation tax rate in Ireland, as follows:
Profit before tax – Continuing operations
Income tax calculated at Irish rate of 12.5% (2016: 12.5%)
Earnings at higher Irish rates
Difference due to overseas tax rates
Reduction in US tax rate
Adjustment to tax charge in respect of previous periods
Tax on share of results of Equity accounted investees included in profit before tax
Other reconciling differences
Total tax credit/(charge) – Continuing operations
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
2017
€’m
229.7
(28.7)
(2.5)
(6.7)
38.7
4.0
5.4
(2.7)
7.5
Re-presented*
2016
€’m
224.7
(28.1)
–
(13.2)
–
(0.1)
3.5
0.9
(37.0)
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 and clarification on certain application matters in relation to the recently enacted Tax Cuts and Jobs Act in the US. The total tax
charge of the Group may also be influenced by the effects of corporate development activity and the resolution of uncertain tax positions where
the final outcome of those matters is different than the amounts recorded using the probability weighted expected value approach.
14. Earnings Per Share
Basic
Basic Earnings Per Share is calculated by dividing the net profit attributable to the equity holders of the Company by the weighted average
number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Group and held as own shares (note 24).
The weighted average number of ordinary shares in issue used in the calculation of basic earnings per share is 295,010,462 (2016: 295,130,809).
2017
Re-presented*
2016
Continuing
operations
Discontinued
operations
Total
Continuing
operations
Discontinued
operations
Profit after tax attributable to equity holders of
the Company (€’m)
237.2
92.2
329.4
187.7
Basic Earnings Per Share (cent)
80.40
31.25
111.65
63.59
24.1
8.17
Total
211.8
71.76
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.
166
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
14. Earnings Per Share continued
The share awards, which are performance based, are treated as contingently issuable shares, because their issue is contingent upon satisfaction
of specified performance conditions, as well as the passage of time. Contingently issuable shares are included in the calculation of diluted
Earnings Per Share to the extent that conditions governing exercisability have been satisfied, as if the end of the reporting period were the end
of the vesting period.
Weighted average number of ordinary shares in issue
Shares deemed to be issued for no consideration in respect of:
Share awards
Share options
2017
Re-presented*
2016
295,010,462
295,130,809
759,074
29,639
955,421
33,896
Weighted average number of shares used in the calculation of Diluted Earnings Per Share
295,799,175
296,120,126
2017
Re-presented*
2016
Continuing
operations
Discontinued
operations
Total
Continuing
operations
Discontinued
operations
Total
Diluted Earnings Per Share (cent)
80.19
31.17
111.36
63.38
8.14
71.52
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
Adjusted Earnings Per Share (Non-IFRS information)
Adjusted Earnings Per Share is a non-IFRS performance measure and is calculated on the profit after tax attributable to equity holders of the
Company, before net exceptional items and intangible asset amortisation (excluding software 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. Refer to Glossary of KPIs and non-IFRS performance measures.
Pro-forma Adjusted Earnings Per Share (Non-IFRS information)
Pro-forma Adjusted Earnings Per Share is a non-IFRS performance measure. Pro-forma calculation of Adjusted Earnings Per Share from
continuing operations has been provided as it represents the revised and on-going structure of the Group following the disposal of 60% of
Dairy Ireland and related assets. Pro-forma Adjusted Earnings Per Share assumes the Dairy Ireland disposal was completed at the beginning
of financial year 2016 and is calculated based on the profit attributable to equity holders of the Company from continuing operations plus the
Group’s share (40%) of the profits after tax for Dairy Ireland and related assets before exceptional items and amortisation of intangible assets
(excluding software amortisation) net of related tax. Refer to Glossary of KPIs and non-IFRS performance measures.
15. Dividends
Dividends recommended per ordinary share are as follows:
Final dividend recommended for the year ended 30 December 2017
Final dividend recommended for the year ended 31 December 2016
Interim dividend for the year ended 30 December 2017
Interim dividend for the year ended 31 December 2016
2017
€’Cent
16.09
5.91
2016
€’Cent
7.94
5.37
22.0
13.31
On 6 October 2017 an interim dividend for the year ended 30 December 2017 of 5.91 cent per share (total €17.5 million) was paid. On 7 October
2016 an interim dividend for the year ended 31 December 2016 of 5.37 cent per share (total €15.9 million) was paid.
On 28 April 2017 a final dividend for the year ended 31 December 2016 of 7.94 cent per share (total €23.5 million) was paid. On 29 April 2016 a
final dividend for the year ended 2 January 2016 of 7.22 cent per share (total €21.3 million) was paid.
Cash payments in relation to dividends of €41.0 million (2016: €37.2 million) in the year does not equate to the amount deducted from equity due
to timing of waived dividends (note 24 (f)).
The Directors have recommended the payment of a final dividend of 16.09 cent per share on the ordinary shares which amounts to €47.6 million.
Subject to shareholder approval, this dividend will be paid on 27 April 2018 to shareholders on the register of members at 16 March 2018, the
record date. These Financial Statements do not reflect this final dividend. There is no income tax consequences for the Company in respect of
dividends proposed prior to issuance of the Financial Statements.
Glanbia plc | Annual Report and Financial Statements 2017
167
16. Property, plant and equipment
Year ended 30 December 2017
Opening carrying amount
Exchange differences
Acquisitions
Additions
Disposal of assets
Disposal of discontinued operations
Impairments
Depreciation charge
Notes
36
10
Land and
buildings
€’m
Plant and
equipment
€’m
Motor
vehicles
€’m
270.9
(21.1)
5.6
5.1
(5.7)
(54.2)
(8.8)
(9.7)
355.5
(33.1)
1.9
35.6
(0.9)
(58.7)
(2.0)
(39.0)
Closing carrying amount
182.1
259.3
At 30 December 2017
Cost
Accumulated depreciation and impairment
Carrying amount
Year ended 31 December 2016
Opening carrying amount
Exchange differences
Acquisitions
Additions
Disposal of assets
Impairments
Depreciation charge
242.0
(59.9)
495.4
(236.1)
182.1
259.3
244.0
5.4
6.9
25.5
(0.3)
(0.5)
(10.1)
341.3
6.0
0.6
48.7
(1.4)
–
(39.7)
Closing carrying amount
270.9
355.5
Total
€’m
628.2
(54.3)
7.5
41.1
(7.2)
(113.2)
(10.8)
(49.1)
442.2
740.1
(297.9)
442.2
586.2
12.0
8.1
74.7
(1.9)
(0.5)
(50.4)
628.2
1.8
(0.1)
–
0.4
(0.6)
(0.3)
–
(0.4)
0.8
2.7
(1.9)
0.8
0.9
0.6
0.6
0.5
(0.2)
–
(0.6)
1.8
At 31 December 2016
Cost
Accumulated depreciation and impairment
356.9
(86.0)
694.5
(339.0)
11.1
(9.3)
1,062.5
(434.3)
Carrying amount
270.9
355.5
1.8
628.2
The amounts charged to the Group income statement during the year are as follows:
Depreciation
Impairment
Capitalised borrowing costs on qualifying assets
Operating lease rentals
Continuing
operations
(note 5/12)
€’m
45.1
2.7
0.8
20.1
2017
Discontinued
operations
(note 10)
€’m
4.0
8.1
–
3.1
Re-presented*
2016
Discontinued
operations
(note 10)
€’m
9.2
–
0.2
6.4
Continuing
operations
(note 5/12)
€’m
41.2
0.5
1.3
17.7
Total
€’m
49.1
10.8
0.8
23.2
Total
€’m
50.4
0.5
1.5
24.1
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
Included in the closing cost at 30 December 2017 is an amount of €11.9 million (2016: €24.3 million) incurred in respect of assets under
construction. Included in the cost of additions for 2017 is €0.6 million (2016: €1.8 million) incurred in respect of staff costs capitalised into assets.
168
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
16. Property, plant and equipment continued
Assets held under finance leases:
The net carrying amount in respect of assets held under finance leases and accordingly capitalised in property, plant and equipment is
as follows:
Carrying amount at the beginning of the year
Additions
Disposals of discontinued operations
Depreciation charge
Carrying amount at the end of the year
At the end of the year
Cost
Accumulated depreciation
Carrying amount
17. Intangible assets
Year ended 30 December 2017
Opening carrying amount
Exchange differences
Acquisitions
Additions
Disposal of discontinued operations
Amortisation
2017
€’m
2.7
–
(2.2)
(0.4)
0.1
1.4
(1.3)
0.1
Notes
Goodwill
€’m
Brands
and other
intangibles
€’m
Software
costs
€’m
Development
costs
€’m
36
10
386.9
(48.0)
68.1
–
(10.8)
–
513.2
(67.1)
91.3
0.8
(4.1)
(30.2)
32.6
(2.3)
–
20.2
(1.6)
(5.5)
33.5
(3.2)
–
13.5
–
(27.5)
2016
€’m
1.2
1.8
–
(0.3)
2.7
6.0
(3.3)
2.7
Total
€’m
966.2
(120.6)
159.4
34.5
(16.5)
(63.2)
Closing carrying amount
396.2
503.9
43.4
16.3
959.8
At 30 December 2017
Cost
Accumulated amortisation and impairment
396.2
–
659.4
(155.5)
76.4
(33.0)
70.9
(54.6)
1,202.9
(243.1)
Carrying amount
396.2
503.9
43.4
16.3
959.8
Year ended 31 December 2016
Opening carrying amount
Exchange differences
Acquisitions
Additions
Disposals
Impairment
Amortisation
374.1
11.5
1.3
–
–
–
–
523.7
15.4
1.5
0.1
–
–
(27.5)
Closing carrying amount
386.9
513.2
25.5
0.6
–
12.2
(0.1)
–
(5.6)
32.6
28.3
1.1
–
11.8
–
(1.1)
(6.6)
951.6
28.6
2.8
24.1
(0.1)
(1.1)
(39.7)
33.5
966.2
At 31 December 2016
Cost
Accumulated amortisation and impairment
386.9
–
665.4
(152.2)
89.5
(56.9)
66.2
(32.7)
1,208.0
(241.8)
Carrying amount
386.9
513.2
32.6
33.5
966.2
Glanbia plc | Annual Report and Financial Statements 2017
169
The amounts charged to the Group income statement during the year are as follows:
Amortisation – pre-exceptional
Amortisation – exceptional
Impairment of development costs –
pre-exceptional
Impairment of development costs – exceptional
Continuing
operations
(note 5)
€’m
43.1
19.4
–
–
2017
Discontinued
operations
(note 10)
€’m
0.7
–
–
–
Re-presented*
2016
Discontinued
operations
(note 10)
€’m
2.3
–
–
–
Continuing
operations
(note 5)
€’m
37.4
–
0.5
0.6
Total
€’m
43.8
19.4
–
–
Total
€’m
39.7
–
0.5
0.6
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
Impairment of development costs of €1.1 million was recognised in 2016. €0.6 million was charged to exceptional items relating to the Glanbia
Nutritionals segment. This impairment was driven by a change in product portfolio focus following the re-organisation of the business structure.
€0.5 million was charged to administration expenses relating to the Glanbia Performance Nutrition segment. This impairment was due to
uncertainty that these products would reach commercialisation.
The average remaining amortisation period for software costs is 4.6 years (2016: 7 years) and development costs is 3 years (2016: 4 years).
Approximately €13.6 million of software additions during the year (2016: €6.8 million) were internally generated which included €12.3 million (2016:
€6.0 million) of staff costs capitalised. Approximately €13.2 million of development cost additions during the year (2016: €10.6 million) were
internally generated which included €8.3 million (2016: €4.5 million) of staff costs capitalised.
During the year the estimated useful life of development assets was reduced from 6 years to 3 years. This change was made following a review of
the useful life of capitalised development costs in respect of newly developed products across the Group to reflect the dynamic environment for
new product launches in their early development stage. The additional amortisation in the year due to the change in estimated useful life
amounted to €19.4 million and is included in exceptional items (note 6).
The amortisation that will be charged in the Group income statement in 2018 is estimated at €12.2 million.
Customer
relationships
€’m
Other
€’m
Total brands and
other intangibles
€’m
Brands and other intangibles
Year ended 30 December 2017
Opening carrying amount
Exchange differences
Acquisitions
Additions
Disposal of discontinued operations
Amortisation
Notes
36
Brands
€’m
339.7
(43.5)
50.8
–
(3.8)
(8.0)
172.1
(23.6)
39.9
–
(0.3)
(21.7)
Closing carrying amount
335.2
166.4
At 30 December 2017
Cost
Accumulated amortisation and impairment
Carrying amount
Year ended 31 December 2016
Opening carrying amount
Exchange differences
Acquisitions
Additions
Amortisation
Closing carrying amount
At 31 December 2016
Cost
Accumulated amortisation and impairment
Carrying amount
370.1
(34.9)
285.0
(118.6)
335.2
166.4
336.9
10.2
–
–
(7.4)
185.2
5.2
1.5
–
(19.8)
339.7
172.1
376.5
(36.8)
286.0
(113.9)
339.7
172.1
1.4
–
0.6
0.8
–
(0.5)
2.3
4.3
(2.0)
2.3
1.6
–
–
0.1
(0.3)
1.4
2.9
(1.5)
1.4
513.2
(67.1)
91.3
0.8
(4.1)
(30.2)
503.9
659.4
(155.5)
503.9
523.7
15.4
1.5
0.1
(27.5)
513.2
665.4
(152.2)
513.2
170
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
17. Intangible assets continued
Individually material intangible assets with definite useful lives:
Brands
Glanbia Performance Nutrition – BSN
Glanbia Performance Nutrition – Isopure
Glanbia Performance Nutrition – thinkThin
Glanbia Performance Nutrition – Amazing Grass
Glanbia Performance Nutrition – Body & Fit
Customer Relationships
Glanbia Performance Nutrition – Optimum Nutrition
Glanbia Performance Nutrition – BSN
Glanbia Performance Nutrition – Isopure
Glanbia Performance Nutrition – thinkThin
Glanbia Performance Nutrition – Amazing Grass
Average
remaining
amortisation
period
2017
Years
Carrying
amount
2017
€’m
43.9
55.4
68.0
33.3
11.9
28.5
20.8
21.0
54.4
32.0
33
37
38
39
39
5
8
10
11
14
Average
remaining
amortisation
period
2016
Years
34
38
39
–
–
6
9
11
12
–
Carrying
amount
2016
€’m
51.5
64.8
79.4
–
–
39.6
27.0
26.4
67.8
–
Management reviewed the amortisation period and amortisation method for the intangible assets with definite useful lives at the reporting date.
Management noted no difference in the expected useful life of the brands and customer relationship assets from the original estimates and noted
no change in the expected pattern of consumption of the future economic benefits of the assets.
Individually material indefinite life intangible assets
Brands
Glanbia Performance Nutrition – Optimum Nutrition
Carrying
amount
2017
€’m
Useful life
2017
Years
Carrying
amount
2016
€’m
Useful life
2016
Years
102.3
Indefinite
116.4
Indefinite
As at the reporting date management reviewed the events and circumstances supporting the indefinite useful life assessment. The brand is long
established, continues to have a strong market presence with high customer recognition and there are no material legal, contractual or other
factors that limit its useful life. In addition, the likelihood that market based factors could truncate the brand’s life is relatively remote because of
the size, diversification and market share of the brand in question. It was determined that this asset will continue to contribute indefinitely to the
cash flows of the Group.
Impairment tests for goodwill and indefinite life intangibles
Goodwill acquired in business combinations 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 the carrying value of goodwill and indefinite life intangibles together with the number of CGUs is analysed between the
operating segments in the Group as follows:
Glanbia Performance Nutrition
Glanbia Nutritionals
2017
Indefinite life
intangibles
€’m
102.3
–
Goodwill
€’m
297.9
98.3
396.2
102.3
Number
of CGUs
8
4
12
Re-presented**
2016
Indefinite life
intangibles
€’m
116.4
–
Goodwill
€’m
265.8
110.3
376.1
116.4
Number
of CGUs
6
4
10
** Re-presented to reflect the realignment of operating segments
The Group revised its operating segments in the current year and the comparative amounts for 2016 have been re-presented (note 4).
Glanbia plc | Annual Report and Financial Statements 2017
171
In accordance with IAS 36 ‘Impairment of Assets’, the CGUs to which significant amounts of goodwill and indefinite life intangibles
have been allocated and the discount rates used are as follows:
Glanbia Performance Nutrition – thinkThin
Glanbia Performance Nutrition – Optimum Nutrition
Glanbia Performance Nutrition – Isopure
Glanbia Performance Nutrition – Amazing Grass
Glanbia Performance Nutrition – Body & Fit
Glanbia Nutritionals – Customised Solutions
Other CGUs without individually significant goodwill
2017
Indefinite life
intangibles
€’m
Discount
rate
Goodwill
€’m
7.08%
–
7.76%
102.3
7.08%
–
7.08%
–
7.47%
–
–
7.08%
– 6.18%-8.65%
88.3
82.9
60.2
–
–
76.3
79.2
2016
Indefinite life
intangibles
€’m
–
116.4
–
–
–
–
–
Discount
rate
7.5%
7.9%
7.6%
–
–
7.5%
6.4%-9.2%
Goodwill
€’m
77.6
72.9
52.9
35.4
28.0
67.1
62.3
396.2
102.3
386.9
116.4
Impairment testing methodology, inputs, assumptions and results:
Goodwill and indefinite life intangibles are subject to impairment testing on an annual basis or more frequently if there are indications that 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.
The cash flow projections are based on the 2018 budget formally approved by, and the strategic plan for 2019 and 2020 as presented to, the
Board of Directors. In cases where management have strategic plans beyond 2020 these numbers are also used in the projections. In preparing
the 2018 budget and strategic plan, management considered the Group’s history of earnings, past experience and cash flow generation.
Management also considered external sources of information pertaining to estimated growth of the relevant market, customer and consumer
behaviours, competitor activity and developing trends in the industry in which the CGU operates in. Business sustaining capital expenditure and
working capital requirements are estimated by assigning values to the investment required to support the estimated future profitability taking into
account historic investment patterns and past experience. The cash flow projections exclude the impact of future development and
acquisition activity.
A terminal value assuming 2% growth into perpetuity was used. This growth rate does not exceed the long-term average growth rate for the
industries in which each CGU operates. The application of the terminal value has taken account of the Group’s strong financial position, its
established history of earnings growth and cash flow generation and its proven ability to integrate value enhancing acquisitions.
The present value of future cash flows is calculated using pre-tax discount rates which are the Group’s weighted average cost of capital,
calculated using the Capital Asset Pricing Model adjusted for the Group’s specific beta coefficient together with a country risk premium, adjusted
to reflect risks associated with the CGU.
No impairments arose in either 2017 or 2016.
Sensitivity analysis
The following sensitivities have been performed across the CGUs:
• estimated future profitability 10% lower than managements estimates;
•
• pre-tax discount rate 1% higher than managements estimates.
terminal value assuming zero growth; and
Applying these assumptions would not have required the Group to recognise any impairment against goodwill or indefinite life intangibles.
Management believe that any reasonably possible change in the key assumptions on which the recoverable amount is based would not cause
the aggregate carrying amount to exceed the aggregate recoverable amount of the CGU.
172
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
18. Equity accounted investees
At 31 December 2016 the Group disclosed its investment in Equity accounted investees in two notes to the financial statements, Interests in Joint
Ventures and Interests in Associates. On 2 July 2017 the Group disposed of 60% of its shareholding in Dairy Ireland and related assets to Glanbia
Co-operative Society Limited (the Society), its ultimate parent. The related assets included the Groups shareholding in certain Joint Ventures and
Associates (note (c)). The nature of the transaction resulted in Glanbia Ireland DAC (formerly known as Glanbia Ingredients Ireland DAC) being
recognised as an Associate up to 2 July 2017 and as a Joint Venture from 3 July 2017. The Group has no Interests in Associates as at
30 December 2017. For the purposes of presentation the Group has included the disclosures for both Interests in Joint Ventures and Interests
in Associates within this note, Equity accounted investees.
The Groups nature of interests in Equity accounted investees at the end of the reporting period is as follows:
Interest in Joint Venture
Interest in Associate
At the end of the year
Group
Company
2017
€’m
266.9
–
2016
€’m
68.1
98.2
266.9
166.3
2017
€’m
95.4
–
95.4
2016
€’m
–
22.1
22.1
The Group holds an interest in the following entities:
Name of entity
Southwest Cheese Company, LLC
Glanbia Cheese Limited
Glanbia Ireland DAC (formerly known
as Glanbia Ingredients Ireland DAC)*
Place of business/
country of incorporation
Clovis, New Mexico, US
Magheralin and Llangefni, UK
Kilkenny, Ireland
Malting Company of Ireland Limited
South East Port Services Limited
Co-Operative Animal Health Limited*
Togher, Co Cork, Ireland
Kilkenny, Ireland
Tullow, Co Carlow, Ireland
Notes
(a)
(b)
(c)
(c)
(c)
(c)
2017
% of
ownership
interest
2016
% of
ownership
interest Primary activity
50%
51%
40%
–
–
–
50% Cheese and nutritional ingredients
51% Cheese products
40% Milk products, consumer goods and agri
trading
50% Malting
49% Port services
50% Agri chemicals
*
The Groups interests in Glanbia Ireland DAC (formerly known as Glanbia Ingredients Ireland DAC) and Co-Operative Animal Health Limited were recognised as an Interest in Associate as
at 31 December 2016. As at 31 December 2016 the Groups interests in all other entities were recognised as an Interest in Joint Ventures. As at 30 December 2017 the Group has no
Interests in Associates (note (c)).
The entities listed above have share capital, consisting solely of ordinary shares, membership interests or membership units and
preference shares.
(a) Southwest Cheese Company, LLC (SWC) is a large scale manufacturer of premium quality block cheese and whey protein ingredients for
consumer foods and beverage markets internationally. The Group acts as an agent on behalf of SWC and earns commission on the sale
of whey protein products and cheese.
(b) 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 heartland 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 has equal representation on the Board of Directors, along with its Joint Venture partner Leprino Foods
Company who directs the relevant activities of the business. The Group controls only 50% of the voting rights and is entitled to appoint only
50% of the total number of Directors to the Board.
(c) The Group disposed of its shareholding in Malting Company of Ireland Limited (Joint Venture), South East Port Services Limited (Joint Venture)
and Co-Operative Animal Health Limited (Associate) as part of the Dairy Ireland transaction (note 10). Malting Company of Ireland Limited
provides Irish malted barley products to the brewing and distilling industry, South East Port Services Limited is engaged in the provision of
storage, stevedoring and shipping agency services and Co-Operative Animal Health Limited provides nutrition and veterinary solutions to the
agricultural sector in Ireland. In the prior year, Glanbia Ingredients Ireland DAC was an Associate of the Group. The transaction created a new
Joint Venture together with Glanbia Ingredients Ireland DAC called Glanbia Ireland (note 10). Glanbia Ireland is the largest dairy and Agribusiness in
Ireland. It owns leading consumer and Agri brands such as Avonmore, GAIN Feeds, Kilmeaden cheese, Premier Milk, mymilkman.ie and
Wexford cheese. The Group holds 40% of the ordinary share capital of Glanbia Ireland DAC. However this entity is considered to be a Joint
Venture of the Group as the business plan, which directs the relevant activities of the business, requires the unanimous approval of both the
Group and the Society (60% shareholding). Both parties also have rights to a share of the net assets of the arrangement.
Glanbia plc | Annual Report and Financial Statements 2017
173
The movement in the Equity accounted investees recognised in the Group balance sheet is as follows:
Group
Company
At the beginning of the year
Share of profit after tax (post exceptional)
Remeasurements – defined benefit plan – net of deferred tax
Fair value movement on cash flow hedges – net of deferred tax
Dividend received
Income tax movement
Exchange differences
Transfer to investment in subsidiary
Fair value of investment in Glanbia Ireland DAC**
Disposal of discontinued operations
Notes
34
37
19(b)
10
10
2017
€’m
166.3
51.8
1.3
2.8
(15.8)
4.3
(6.2)
–
74.7
(12.3)
2016
€’m
158.5
27.6
(6.0)
1.0
(13.8)
6.9
(2.3)
(5.6)
–
–
At the end of the year
266.9
166.3
** The fair value of the investment in Glanbia Ireland DAC includes net assets of €35.1 million, intangible assets of €27.7 million and goodwill of €11.9 million.
Recognition in the Group income statement and in the Group statement of comprehensive income
2017
€’m
22.1
–
–
–
–
–
–
–
74.7
(1.4)
95.4
2016
€’m
22.9
–
–
–
–
–
–
(0.8)
–
–
22.1
The following amounts have been recognised in the Group income statement and in the Group statement of comprehensive income in relation to
results from Equity accounted investees:
Recognition in the Group income statement:
Share of profit after tax (post exceptional)
Continuing
operations
€’m
51.5
2017
Discontinued
operations
(note 10)
€’m
0.3
Recognition in the Group statement of comprehensive income:
Remeasurements – defined benefit plans – net
of deferred tax
Fair value movement on cash flow hedges – net
of deferred tax
Continuing
operations
€’m
2017
Discontinued
operations
€’m
(0.6)
2.8
1.9
–
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
Re-presented*
2016
Discontinued
operations
(note 10)
€’m
1.6
Continuing
operations
€’m
26.0
Re-presented*
2016
Discontinued
operations
€’m
–
–
Continuing
operations
€’m
(6.0)
1.0
Total
€’m
51.8
Total
€’m
1.3
2.8
Total
€’m
27.6
Total
€’m
(6.0)
1.0
174
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
18. Equity accounted investees continued
Summarised financial information for Equity accounted investees
Set out below is the summarised financial information for the Group’s Equity accounted investees (EAI), which are accounted for using the equity
method. The information below reflects the amounts presented in the Financial Statements of the Equity accounted investees reconciled to
carrying value of the Group’s interest in Equity accounted investees.
2017
Equity accounted investees (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
Net assets (100%)
Net assets attributable to equity holders of the Company
Reconciliation of the carrying value of the Group’s interest in Equity
accounted investees:
Group’s equity interest
Group’s share of net assets
Adjustment in respect of unrealised profit on sales to the Group
Fair value adjustments on investment in Glanbia Ireland DAC
Dividend income receivable
Carrying value of Group’s interest in Equity accounted investees
Equity accounted investees income statement (100%):
Revenue
Depreciation
Interest expense
Profit before tax
Tax
Exceptional tax credit
Profit after tax
Other comprehensive income
Total comprehensive income
Profit after tax attributable to equity holders of the Company
Total comprehensive income attributable to equity holders of the Company
Reconciliation to the Group’s share of total comprehensive income:
Group’s equity interest
Group’s share of total comprehensive income
Adjustment in respect of unrealised profit on sales to the Group
Amortisation of intangible assets recognised on the fair value adjustments
Dividends receivable by the Group
Group’s share of total comprehensive income
Equity accounted investees other movements:
Dividends received by Group
Exchange differences arising on consolidation
Income tax movement
Investment in Joint Venture
Glanbia
Ireland DAC
Joint
Venture
(note c)
€’m
Notes
Glanbia
Cheese
Limited
Joint
Venture
Southwest
Cheese
Company,
LLC
Joint
Venture
€’m
€’m
591.1
41.8
308.6
46.5
487.8
534.3
(220.5)
(128.7)
(349.2)
–
(390.1)
(390.1)
386.1
375.1
40%
150.0
(1.7)
38.8
–
187.1
1,407.1
(22.8)
(11.1)
50.3
(6.6)
–
43.7
1.5
45.2
43.2
44.7
40%
17.7
(0.1)
(0.8)
–
16.8
–
–
–
74.7
6
27.2
47.7
74.9
–
(12.3)
(12.3)
–
(40.4)
(40.4)
64.0
64.0
51%
32.6
–
–
2.2
34.8
316.7
(5.0)
–
40.2
(8.0)
–
32.2
2.1
34.3
32.2
34.3
51%
17.5
–
–
2.2
19.7
(4.7)
(0.8)
–
–
–
91.6
91.6
(215.6)
–
(215.6)
(9.9)
(84.8)
(94.7)
89.9
89.9
50%
45.0
–
–
–
45.0
738.0
(12.0)
(5.3)
25.8
(10.3)
17.4
32.9
1.5
34.4
32.9
34.4
50%
17.2
–
–
–
17.2
(11.1)
(5.4)
4.3
–
Dairy Ireland
EAI
(note c)
€’m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
59.8
0.5
(0.2)
0.9
(0.1)
–
0.8
3.7
4.5
0.8
4.5
–
2.2
–
–
–
2.2
–
–
–
–
Total
€’m
941.5
73.7
627.1
700.8
(436.1)
(141.0)
(577.1)
(9.9)
(515.3)
(525.2)
540.0
529.0
–
227.6
(1.7)
38.8
2.2
266.9
2,521.6
(39.3)
(16.6)
117.2
(25.0)
17.4
109.6
8.8
118.4
109.1
117.9
–
54.6
(0.1)
(0.8)
2.2
55.9
(15.8)
(6.2)
4.3
74.7
Glanbia plc | Annual Report and Financial Statements 2017
175
Glanbia
Ingredients
Ireland DAC
Associate
(note c)
€’m
Glanbia
Cheese
Limited
Joint
Venture
Southwest
Cheese
Company,
LLC
Joint
Venture
€’m
€’m
Dairy Ireland
EAI
(note c)
€’m
Total
€’m
375.1
41.6
288.3
28.0
733.0
7.3
259.2
266.5
(195.9)
(88.3)
(284.2)
(14.7)
(99.8)
(114.5)
36.8
11.1
47.9
–
(16.1)
(16.1)
–
(36.1)
(36.1)
–
102.8
102.8
(157.6)
–
(157.6)
(12.0)
(141.5)
(153.5)
1.2
19.2
20.4
(1.8)
(8.4)
(10.2)
(3.1)
(14.7)
(17.8)
45.3
392.3
437.6
(355.3)
(112.8)
(468.1)
(29.8)
(292.1)
(321.9)
2016
Equity accounted investees (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
Net assets (100%)
242.9
37.3
80.0
20.4
380.6
Reconciliation of the carrying value of the Group’s interest in Equity accounted
investees:
Group’s equity interest
Group’s share of net assets
Adjustment in respect of unrealised profit on sales to the Group
Dividend income receivable
40%
97.2
(1.6)
–
51%
19.0
–
1.6
50%
40.0
–
–
–
10.1
–
–
–
166.3
(1.6)
1.6
Carrying value of Group’s interest in Equity accounted investees
95.6
20.6
40.0
10.1
166.3
Equity accounted investees income statement (100%):
Revenue
Depreciation
Interest (expense)/income
Profit before tax
Tax
Profit after tax
Other comprehensive (expense)/income
833.5
(16.0)
(9.6)
37.8
(5.2)
32.6
(10.0)
230.5
(4.3)
0.1
4.2
(0.9)
3.3
(6.3)
739.7
(12.0)
(5.2)
31.3
(12.5)
18.8
4.4
55.4
(0.9)
(0.3)
2.7
(0.3)
2.4
0.1
1,859.1
(33.2)
(15.0)
76.0
(18.9)
57.1
(11.8)
Total comprehensive income/(expense) attributable to equity holders of the
Company
22.6
(3.0)
23.2
2.5
45.3
Reconciliation to the Group’s share of total comprehensive income:
Group’s equity interest
Group’s share of total comprehensive income/(expense)
Adjustment in respect of unrealised profit on sales to the Group
Group adjustment due to change in voting rights
Dividends receivable by the Group
40%
9.0
0.3
–
–
51%
(1.5)
–
–
1.6
50%
11.6
–
–
–
Group’s share of total comprehensive income
9.3
0.1
11.6
Equity accounted investees other movements:
Dividends received by Group
Exchange differences arising on consolidation
Income tax movement
Transfers to investment in subsidiary
–
–
–
–
(2.1)
(3.6)
–
–
(11.3)
1.3
6.9
–
–
1.3
–
0.3
–
1.6
(0.4)
–
–
(5.6)
–
20.4
0.3
0.3
1.6
22.6
(13.8)
(2.3)
6.9
(5.6)
Commitments and contingent liabilities in respect of Equity accounted investees
There are no contingent liabilities or commitments relating to the Group’s interest in its Equity accounted investees.
176
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
19. 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:
Listed securities
Equity securities – eurozone countries
Unlisted securities
IPL Plastics plc (formerly One51 plc)
Ornua Co-Operative Limited
The BDO Development Capital Fund
Other available for sale financial assets
Notes
31.2
31.2
31.2
31.2
Level
1
2
2
2
Group
Company
2017
€’m
9.9
(2.4)
1.6
2.0
2016
€’m
10.8
(1.3)
(1.3)
1.7
2017
€’m
6.2
(2.0)
2.1
4.5
11.1
9.9
10.8
Group
2017
€’m
0.2
6.0
1.9
2.7
0.3
11.1
2016
€’m
0.2
4.0
3.0
2.0
0.7
9.9
Company
2017
€’m
0.2
6.0
1.9
2.7
–
10.8
2016
€’m
5.8
–
(1.3)
1.7
6.2
2016
€’m
0.2
4.0
–
2.0
–
6.2
Available for sale financial assets with a carrying value of €0.3 million (2016: €0.7 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.
The additions during the year primarily related to the increase in the Company’s investment in the BDO Development Capital Fund.
(b) Investments in subsidiaries
At the beginning of the year
Disposals
Impairment
Transfer from Interest in Associate
At the end of the year
Notes
18
2017
Company
€’m
605.9
(138.5)
–
–
2016
Company
€’m
609.5
(3.4)
(1.0)
0.8
467.4
605.9
The Company’s principal subsidiaries and Equity accounted investees are disclosed in note 39. On 2 July 2017 the Company disposed of its
investments in subsidiary undertakings within the Dairy Ireland segment to Glanbia Co-operative Society Limited, its ultimate parent (note 10). In
2016 the Company disposed of an investment in a subsidiary undertaking to another Group company and the Company recorded an impairment
charge which related predominantly to subsidiary undertakings that are no longer trading. On 22 December 2016 control was gained over South
Eastern Cattle Breeding Society Limited which was previously recognised as an Associate (note 18).
Glanbia plc | Annual Report and Financial Statements 2017
177
20. Trade and other receivables
Trade receivables
Less allowance for impairment of receivables
Trade receivables – net
Prepayments
Receivables from Equity accounted investees
Receivables from other related parties
Loans to Equity accounted investees
Value added tax
Other receivables
Amounts due from other Group companies
Notes
31.2
31.2/37
37
31.2/37
Group
Company
2017
€’m
256.5
(4.0)
252.5
15.3
14.4
1.1
13.1
0.5
5.5
–
2016
€’m
297.4
(9.1)
288.3
18.8
7.2
0.4
14.7
2.5
9.9
–
2017
€’m
–
–
–
–
0.1
0.7
–
–
–
317.4
2016
€’m
–
–
–
0.2
0.1
–
–
–
–
355.1
Total
302.4
341.8
318.2
355.4
Non-current – loans to Equity accounted investees
Current
–
302.4
14.7
327.1
–
318.2
–
355.4
302.4
341.8
318.2
355.4
See note 35 for analysis of the movement in trade and other receivables. Information in relation to the Group’s credit risk and fair value estimation
process is included in note 31.
The carrying amounts of the Group’s trade and other receivables at the reporting date by currency are as follows:
Euro
US dollar
Pound sterling
Australian dollar
Other
Group
Company
2017
€’m
48.9
221.3
19.9
3.3
9.0
2016
€’m
133.3
182.0
11.9
4.3
10.3
2017
€’m
318.2
–
–
–
–
2016
€’m
355.4
–
–
–
–
302.4
341.8
318.2
355.4
At 30 December 2017, Group trade receivables of €27.0 million (2016: €63.5 million) were past due:
Past due:
Less than 30 days
1 to 3 months
4 to 6 months
Over 6 months
Less allowance for impairment of receivables
2017
€’m
16.7
4.8
1.2
4.3
27.0
(4.0)
23.0
2016
€’m
20.5
19.4
14.2
9.4
63.5
(9.1)
54.4
Where the Group expects that those balances that are past due are not collectible in full the Group establishes an allowance for impairment that
represents the difference between the carrying value of the trade and other receivable and the estimated future cash flows, see note 2(h). At
30 December 2017 the allowance for impairment of trade receivables was €4.0 million (2016: €9.1 million).
178
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
20. Trade and other receivables continued
The movement in the allowance for impairment of Group trade receivables is as follows:
At the beginning of the year
Exchange differences
Allowance for impairment recognised in the year
Receivables written off during the year as uncollectible
Unused amounts reversed
Disposal of discontinued operations
At the end of the year
The net movement in the allowance for impairment of receivables has been included within the Group income statement.
21. Inventories
Raw materials
Work in progress
Finished goods
Consumables
2017
€’m
9.1
(0.2)
2.3
(0.2)
(1.9)
(5.1)
4.0
2017
€’m
99.2
8.4
182.0
32.0
2016
€’m
8.9
–
1.9
(0.3)
(1.4)
–
9.1
2016
€’m
114.8
16.6
199.3
35.8
321.6
366.5
Included above are inventories carried at net realisable value amounting to €18.6 million (2016: €35.9 million).
Recognition in the Group income statement:
Continuing
operations
(note 5)
€’m
2017
Discontinued
operations
(note 10)
€’m
Total
€’m
Continuing
operations
(note 5)
€’m
Re-presented*
2016
Discontinued
operations
(note 10)
€’m
Total
€’m
Cost of inventories recognised as an expense in
Cost of Goods Sold
1,468.2
252.1
1,720.3
1,338.4
407.9
1,746.3
Net write down of inventory to net realisable
value and reversal of such write downs**
0.5
0.2
0.7
2.5
–
2.5
*
As re-presented to reflect the impact of discontinued operations. See note 10 for further information.
** Previous write downs have been reversed as a result of increased sales prices in certain markets.
22. Cash and cash equivalents
Cash at bank and in hand
Short term bank deposits
Cash and cash equivalents in the Group and Company
balance sheet
Bank overdrafts used for cash management purposes
Cash and cash equivalents in the Group and Company
statement of cash flows
Group
Company
Notes
31.3
26
2017
€’m
153.6
8.6
162.2
(30.1)
2016
€’m
209.7
9.2
218.9
(31.6)
2017
€’m
6.0
–
6.0
–
2016
€’m
11.3
–
11.3
–
132.1
187.3
6.0
11.3
Glanbia plc | Annual Report and Financial Statements 2017
179
23. Share capital and share premium
Group
At 31 December 2016
Shares issued
At 30 December 2017
At 2 January 2016
Shares issued
At 31 December 2016
Company
At 31 December 2016
Shares issued
At 30 December 2017
At 2 January 2016
Shares issued
At 31 December 2016
Number of
shares
(thousands)
296,041
5
296,046
296,031
10
296,041
Number of
shares
(thousands)
296,041
5
296,046
296,031
10
296,041
Ordinary
shares
€’m
Share
premium
€’m
87.6
–
87.6
87.6
–
87.6
Share
premium
€’m
442.9
–
Total
€’m
105.4
–
105.4
105.4
–
105.4
Total
€’m
460.7
–
442.9
460.7
442.9
–
460.7
–
442.9
460.7
17.8
–
17.8
17.8
–
17.8
Ordinary
shares
€’m
17.8
–
17.8
17.8
–
17.8
The total authorised number of ordinary shares is 350 million shares (2016: 350 million shares) with a par value of €0.06 per share (2016: €0.06
per share). All issued shares are fully paid, carry one vote per share and a right to dividends.
During the year ended 30 December 2017 5,000 (2016: 10,000) of the 2002 LTIP shares were exercised with exercise proceeds of €0.011 million
(2016: €0.023 million). The related weighted average exercise price was €2.29 (2016: €2.29) 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 108.
Details of share options and awards granted under the Long-term and Annual Incentive Schemes are provided in note 11 and also in the
Remuneration Committee report on page 80 to 105.
The difference between the Company and Group share premium is due to the merger of Waterford Foods plc now named Waterford Foods DAC
and Avonmore Foods plc now named Glanbia plc in 1997. See note 24(b).
180
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
24. Other reserves
Balance at 31 December 2016
Currency translation differences
Net investment hedge
Reclassification of foreign currency differences
on disposal of Dairy Ireland
Transfers to income statement:
– Foreign exchange contracts – loss in year
Revaluation of forward commodity contracts
– gain in year
Revaluation of Interest rate swaps – gain in year
Revaluation of available for sale financial assets
– gain in year
Deferred tax on fair value movements
Cost of share-based payments
Transfer on exercise, vesting or expiry of
share-based payments
Purchase of own shares
Balance at 30 December 2017
Balance at 2 January 2016
Currency translation differences
Net investment hedge
Revaluation of interest rate swaps – gain in year
Foreign exchange contracts – loss in year
Transfers to income statement:
– Foreign exchange contracts – loss in year
– Forward commodity contracts – loss in year
Revaluation of forward commodity contracts
– loss in year
Revaluation of available for sale financial assets
– loss in year
Deferred tax on fair value movements
Cost of share-based payments
Transfer on exercise, vesting or expiry of
share-based payments
Purchase of own shares
Available for
sale
financial
asset
reserve
€’m
note (e)
Hedging
reserve
€’m
note (d)
Capital
reserve
€’m
note (a)
2.8
–
–
Merger
reserve
€’m
note (b)
113.1
–
–
Currency
reserve
€’m
note (c)
210.4
(149.8)
11.3
(0.2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1.0
–
–
–
0.5
1.3
0.5
–
(0.1)
–
–
–
113.1
71.7
3.2
113.1
–
–
–
–
186.2
27.1
(2.9)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(0.6)
–
–
3.3
(0.5)
0.1
0.4
(0.2)
–
(1.5)
–
–
–
–
–
–
–
–
–
–
–
–
2.8
2.8
–
–
–
–
–
–
–
–
–
–
–
–
Share-
based
payment
reserve
€’m
note (g)
17.0
–
–
–
–
–
–
–
–
7.8
(9.9)
–
Own shares
€’m
note (f)
(15.2)
–
–
–
–
–
–
–
–
–
12.3
(16.2)
Total
€’m
331.6
(149.8)
11.3
(0.2)
0.5
1.3
0.5
1.6
(0.8)
7.8
2.4
(16.2)
(19.1)
14.9
190.0
(13.2)
–
–
–
–
–
–
–
–
–
–
8.4
(10.4)
14.7
–
–
–
–
–
–
–
–
–
7.7
(5.4)
–
306.4
27.1
(2.9)
3.3
(0.5)
0.1
0.4
(0.2)
(1.3)
(1.1)
7.7
3.0
(10.4)
2.5
–
–
–
–
–
–
1.6
(0.7)
–
–
–
3.4
3.4
–
–
–
–
–
–
–
(1.3)
0.4
–
–
–
Balance at 31 December 2016
2.8
113.1
210.4
1.0
2.5
(15.2)
17.0
331.6
(a) Capital reserve
The capital reserve comprises of a capital redemption reserve and a capital reserve which arose on the re-nominalisation of the Company’s share
capital on conversion to the euro.
At the beginning and the end of the year
Group
Company
2017
€’m
2.8
2016
€’m
2.8
2017
€’m
4.2
2016
€’m
4.2
Glanbia plc | Annual Report and Financial Statements 2017
181
(b) Merger reserve
The merger reserve arose on the merger of Waterford Foods plc now named Waterford Foods DAC and Avonmore Foods plc now named Glanbia
plc in 1997. The merger reserve adjustment represents the difference between the nominal value of the issued share capital of Waterford Foods
DAC and the fair value of the shares issued by Glanbia plc.
Share premium representing excess of fair value over nominal value of ordinary shares issued in connection with the
merger of Avonmore Foods plc and Waterford Foods plc
Merger reserve adjustment
Share premium and other reserves relating to nominal value of shares in Waterford Foods plc
At the beginning and end of the year
2017
€’m
2016
€’m
355.3
(327.2)
85.0
355.3
(327.2)
85.0
113.1
113.1
(c) Currency reserve
The currency reserve reflects the foreign exchange gains and losses arising from the translation of the net investment in foreign operations and on
borrowings designated as hedges of the net investment which are taken to equity. The movement in USD foreign exchange rates from 1.0541 as
at 31 December 2016 to 1.1993 as at 30 December 2017 is the primary driver of the movement in the currency reserve in the year. See note 31.1
for further details. When an entity is sold the accumulated foreign currency gains and losses are recycled to the income statement (note 10).
(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. The hedging reserve also reflects the Group’s share of the effective portion of changes in the fair value of derivatives that are entered
into by the Group’s Equity accounted investees (note 31.1).
The movements on the hedging reserve for the years ended 30 December 2017 and 31 December 2016 are as follows:
Balance at 31 December 2016
Foreign exchange contracts gain/(loss) in year
Transfer to income statement
– Foreign exchange contracts – loss/(gain) in year
– Revaluation of interest rate swaps – loss in year
– Forward commodity contracts – loss/(gain) in year
Revaluation of forward commodity contracts – gain in year
Deferred tax on fair value movements
Balance at 30 December 2017
Balance at 2 January 2016
Revaluation of interest rate swaps – gain in year
Foreign exchange contracts (loss)/gain in year
Transfer to income statement
– Foreign exchange contracts – loss in year
– Forward commodity contracts – loss in year
Revaluation of forward commodity contracts – (loss)/gain in year
Deferred tax on fair value movements
Balance at 31 December 2016
Equity
accounted
investees
€’m
0.5
0.1
0.9
0.5
0.1
1.3
(0.1)
Total
hedging
reserve
€’m
1.0
–
0.5
0.5
–
1.3
(0.1)
Group
€’m
0.5
(0.1)
(0.4)
–
(0.1)
–
–
3.3
(0.1)
3.2
(0.5)
3.3
(0.9)
0.1
0.1
(0.3)
(1.3)
(0.1)
–
0.4
–
0.3
0.1
(0.2)
(0.6)
3.3
(0.5)
0.1
0.4
(0.2)
(1.5)
0.5
0.5
1.0
(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.
182
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
24. Other reserves continued
(f) Own shares
The own shares reserve reflects the ordinary shares of Glanbia plc which are held in trust.
The movement in own shares for the year ended 30 December 2017 and 31 December 2016 are as follows:
At the beginning of the year
Purchased
Allocated
2017
Nominal
value
€’m
0.1
0.1
–
Value
€’m
15.2
16.2
(12.3)
Number of
Shares
934,860
938,590
(746,384)
Value
€’m
13.2
10.4
(8.4)
2016
Nominal
value
€’m
0.1
–
–
Number of
Shares
859,933
609,845
(534,918)
At the end of the year
19.1
0.2 1,127,066
15.2
0.1
934,860
The shares held in trust are allocated to employees under the 2008 LTIP plan and the AIDIS scheme.
An Employee Share Trust was established in May 2002 to operate initially in connection with the Company’s Saving Related Share Option
Scheme (Sharesave Scheme) and subsequently for the vesting of shares under the 2008 LTIP. The Trustee of the Employee Share Trust is
Computershare Trustees (Jersey) Limited, a Jersey based trustee services company. The dividend rights in respect of these shares have 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 AIDIS 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.
Shares purchased for the 2008 LTIP scheme and the Company’s AIDIS scheme are deemed to be own shares in accordance with IAS 32
‘Financial Instruments’. The shares included in the Employee Share Trust and the Employee Share Scheme Trust at 30 December 2017 cost €19.1
million (2016: €15.2 million) and had a market value of €16.8 million (2016: €14.8 million). During the year ended 30 December 2017 746,384 (2016:
534,918) shares were allocated of which 644,620 (2016: 457,852) were allocated under the 2008 LTIP and 101,764 (2016: 77,066) were allocated
under the AIDIS scheme. See note 37 for details of own shares acquired during the year from related parties.
(g) Share-based payment reserve
The share-based payment reserve reflects the equity settled share-based payment plans in operation by the Group (note 11).
Other reserves in the Company are detailed in the Company statement of changes in equity on page 130.
25. Non-controlling interests
At the beginning of the year
Share of profit for the year
Dividends to non-controlling interests
Non-controlling interests arising on gain in control
Remeasurement – defined benefit plan
Disposal of non-controlling interest
At the end of the year
Notes
10
2017
€’m
11.1
–
–
–
(0.1)
(11.0)
2016
€’m
8.5
0.3
(0.9)
3.2
–
–
–
11.1
On 2 July 2017, the Group disposed of 60% of its shareholding in Dairy Ireland and related assets to Glanbia Co-operative Society Limited (the
Society), its ultimate parent. As a result of the transaction the Group disposed of the entities in which there was a non-controlling interest.
.
Glanbia plc | Annual Report and Financial Statements 2017
183
Notes
2017
€’m
2016
€’m
31.3
22
31.3
369.4
130.1
0.1
499.6
30.1
0.2
30.3
314.0
308.3
1.9
624.2
31.6
0.6
32.2
529.9
656.4
26. Financial liabilities
Non-current
Bank borrowings
Private debt placement
Finance lease liabilities*
Current
Bank overdrafts
Finance lease liabilities*
Total financial liabilities
* Secured on specific plant and equipment.
Bank borrowings
The Group’s bank borrowings are primarily denominated in euro, US dollar and Australian dollar and are borrowed at floating interest rates.
Interest is set at commercial rates based on a margin over EURIBOR, US dollar LIBOR and Australian dollar LIBOR for periods of up to six
months. At 30 December 2017, the Group had undrawn uncommitted bank overdraft facilities of €10.6 million (2016: €10.8 million).
Private debt placement
In August 2011, Private Placement notes of $325.0 million were issued at a fixed rate of 5.4% and mature in June 2021. On 15 December 2017
the Group repaid $169.0 million of the $325.0 million Private Placement notes. The additional interest payable on early repayment amounted to
€14.0 million and has been included as an exceptional item (note 6). At 30 December 2017, the Group had undrawn uncommitted Private
Placement facilities of €83.4 million (2016: €94.9 million).
Debt issue costs
Included within the carrying value of borrowings are deferred debt issue costs of €0.4 million (2016: €1.0 million), all of which will be recognised
in finance costs in the Group income statement using the effective interest rate method over the remaining life of the borrowings.
Guarantees
Financial liabilities 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 2017 and 2016 (note 31.3).
Financial liabilities include the following for the purposes of the Group statement of cash flows at the reporting date:
Total financial liabilities
Bank overdraft included as part of cash and cash equivalents
The maturity profile of financial liabilities and undrawn committed facilities is as follows:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
Undrawn uncommitted facilities expiring within one year are €94.0 million (2016: €105.7 million).
Notes
22
2017
€’m
529.9
(30.1)
2016
€’m
656.4
(31.6)
499.8
624.8
2017
2016
Loans and
borrowings
€’m
Undrawn
committed
facilities
€’m
Loans and
borrowings
€’m
Undrawn
committed
facilities
€’m
30.2
0.2
499.5
–
–
–
344.1
–
32.2
0.3
622.7
1.2
–
–
405.9
–
529.9
344.1
656.4
405.9
184
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
26. Financial liabilities continued
The exposure of the Group’s total financial liabilities 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
2017
€’m
399.6
0.2
130.1
–
2016
€’m
346.2
0.3
308.7
1.2
529.9
656.4
Details of the Group’s exposure to risks arising from current and non-current financial liabilities are set out in note 31.
The terms and conditions of outstanding loans are as follows:
2017
Private debt placement
Committed unsecured bank facility loan
Other committed unsecured bank facility loans
Finance lease liabilities
Bank overdrafts
Total interest bearing liabilities
Currency
USD
EUR
Various
Various
Various
Nominal
interest rate
Year of
maturity
5.40%
0.98%
0.68%-3.25%
6.00%-7.00%
0.69%-2.50%
2021
2021
2020
2018/2019
2018
Carrying
amount
€’m
130.1
140.9
228.5
0.3
30.1
529.9
Various represents financial liabilities denominated in the following currencies – euro, pound sterling, US dollar, Australian dollar, New Zealand
dollar, Danish krone, Swedish krone and Norwegian krone.
2016
Private debt placement
Committed unsecured bank facility loan
Other committed unsecured bank facility loans
Finance lease liabilities
Bank overdrafts
Total interest bearing liabilities
Currency
USD
EUR
Various
Various
Various
Nominal
interest rate
Year of
maturity
5.40%
1.14%
0.82%-3.23%
3.57%-7.00%
0.83%-2.50%
2021
2020
2020
2017/2035
2017
Carrying
amount
€’m
308.3
190.0
124.0
2.5
31.6
656.4
Various represents financial liabilities denominated in the following currencies – euro, pound sterling, US dollar, Australian dollar, New Zealand
dollar, Danish krone, Swedish krone and Norwegian krone.
The carrying amounts of the Group’s total financial liabilities are denominated in the following currencies at 30 December 2017:
Bank overdrafts
Bank borrowings
Private debt placement
Finance lease liabilities
Euro
€’m
24.2
195.2
–
–
US
dollar
€’m
–
163.5
130.1
–
219.4
293.6
Pound
sterling
€’m
Australian
dollar
€’m
5.6
–
–
–
5.6
–
9.8
–
–
9.8
Various
€’m
0.3
0.9
–
0.3
1.5
Total
€’m
30.1
369.4
130.1
0.3
529.9
Various represents financial liabilities denominated in the following currencies – New Zealand dollar, Danish krone, Swedish krone and Norwegian
krone, none of which are individually material.
Glanbia plc | Annual Report and Financial Statements 2017
185
The carrying amounts of the Group’s total financial liabilities are denominated in the following currencies at 31 December 2016:
Bank overdrafts
Bank borrowings
Private debt placement
Finance lease liabilities
Euro
€’m
17.5
211.6
–
1.9
US
dollar
€’m
–
91.4
308.3
–
231.0
399.7
Pound
sterling
€’m
10.3
–
–
–
10.3
Australian
dollar
€’m
–
10.6
–
–
10.6
Various
€’m
3.8
0.4
–
0.6
4.8
Total
€’m
31.6
314.0
308.3
2.5
656.4
Various represents financial liabilities denominated in the following currencies – New Zealand dollar, Danish krone, Swedish krone and Norwegian
krone, none of which are individually material.
Finance lease liabilities – minimum lease payments at the reporting date:
Future minimum
lease payments
Interest
Present value of minimum
lease payment
12 months or less
Between 1 and 2 years
Between 2 and 5 years
Greater than 5 years
2017
€’m
0.3
0.1
–
–
0.4
2016
€’m
0.7
0.3
0.4
1.9
3.3
2017
€’m
(0.1)
–
–
–
(0.1)
For the purposes of the Group statement of cash flows net debt is comprised of the following:
2016
€’m
(0.1)
–
(0.1)
(0.6)
(0.8)
Notes
22
2017
€’m
0.2
0.1
–
–
0.3
2016
€’m
0.6
0.3
0.3
1.3
2.5
2017
€’m
499.8
(132.1)
2016
€’m
624.8
(187.3)
367.7
437.5
Net debt at the end of the year comprises:
Borrowings
Cash and cash equivalents net of bank overdrafts
The movement in net debt is as follows:
2017
At 31 December 2016
Cash flows
Exchange differences
At 30 December 2017
2016
At 2 January 2016
Cash flows
New finance leases
Debt acquired on acquisition
Exchange differences
Cash and
short-term
bank deposits
(note 22)
€’m
(218.9)
44.1
12.6
(162.2)
Cash and
short-term
bank deposits
(note 22)
€’m
(210.9)
(4.8)
–
–
(3.2)
Overdrafts
Finance
leases
Bank
borrowings
Private debt
placement
€’m
314.0
101.3
(45.9)
€’m
308.3
(162.0)
(16.2)
369.4
130.1
367.7
€’m
31.6
(1.1)
(0.4)
30.1
€’m
2.5
(2.2)
–
0.3
€’m
41.8
(10.7)
–
–
0.5
€’m
0.9
(0.3)
1.8
–
0.1
2.5
Overdrafts
Finance
leases
Bank
borrowings
Private debt
placement
€’m
453.9
(154.5)
–
0.8
13.8
€’m
298.5
–
–
–
9.8
Total
€’m
437.5
(19.9)
(49.9)
Total
€’m
584.2
(170.3)
1.8
0.8
21.0
At 31 December 2016
(218.9)
31.6
314.0
308.3
437.5
186
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
27. Deferred taxes
Recognition in the Group balance sheet:
Deferred tax assets/(liabilities) before set off
Set off of deferred tax
Deferred tax
assets
€’m
24.6
(23.0)
2017
Deferred tax
liabilities
€’m
(148.6)
23.0
Net
€’m
(124.0)
–
Deferred
tax assets
€’m
45.7
(43.9)
2016
Deferred tax
liabilities
€’m
(202.1)
43.9
Net
€’m
(156.4)
–
Deferred tax assets/(liabilities) after set off
1.6
(125.6)
(124.0)
1.8
(158.2)
(156.4)
The movement in the net deferred tax liability recognised in the Group balance sheet is as follows:
At the beginning of the year
Income statement (charge)/credit
Reduction in US tax rate credited to the income statement
Deferred tax (charge)/credit on fair value movements
Deferred tax (charge)/credit relating to defined benefit
remeasurement
Deferred tax on acquisition of subsidiaries
Deferred tax on disposal of subsidiaries
Deferred tax credited on share-based payments
Exchange differences
Group
Company
Notes
13
6/13
24
36
2017
€’m
(156.4)
(10.6)
38.7
(0.7)
(1.8)
(8.0)
(2.4)
0.1
17.1
2016
€’m
(165.2)
12.3
–
0.2
1.8
(0.6)
–
0.2
(5.1)
2017
€’m
(0.4)
(0.3)
–
(0.7)
–
–
–
–
–
2016
€’m
(1.0)
0.2
–
0.4
–
–
–
–
–
At the end of the year
(124.0)
(156.4)
(1.4)
(0.4)
The movement in deferred tax assets during the year is as follows:
At 31 December 2016
Credit/(charge) to income statement
Charged to other comprehensive income
Credited to equity
Disposal of discontinued operations
Reduction in US tax rate charged to the income statement
Exchange differences
At 30 December 2017
At 2 January 2016
Credit/(charge) to income statement
Credited to other comprehensive income
Credited to equity
Acquisitions of subsidiaries and intellectual property
Exchange differences
At 31 December 2016
Retirement
benefit
obligations
€’m
Other
employee
obligations
€’m
13.3
0.7
(1.8)
–
(5.5)
(1.3)
(0.5)
4.9
8.2
3.1
1.8
–
–
0.2
13.3
15.9
(3.6)
–
0.1
(0.2)
(3.1)
(1.1)
8.0
18.1
(2.7)
–
0.2
(0.1)
0.4
15.9
Tax
losses
€’m
1.6
(0.5)
–
–
–
–
(0.1)
1.0
1.0
0.7
–
–
–
(0.1)
1.6
Other
€’m
14.9
2.7
–
–
(0.5)
(5.1)
(1.3)
10.7
9.2
4.8
–
–
0.4
0.5
14.9
Total
€’m
45.7
(0.7)
(1.8)
0.1
(6.2)
(9.5)
(3.0)
24.6
36.5
5.9
1.8
0.2
0.3
1.0
45.7
Glanbia plc | Annual Report and Financial Statements 2017
187
The movement in deferred tax liabilities during the year is as follows:
Accelerated tax
depreciation
€’m
Notes
Fair value
gain
€’m
Development
costs and other
intangibles
€’m
At 31 December 2016
(Charge)/credit to income statement
Charged to other comprehensive income
Acquisition of subsidiaries and intellectual properties
Disposal of discontinued operations
Reduction in US tax rate credited to the income
statement
Exchange differences
At 30 December 2017
At 2 January 2016
(Charge)/credit to income statement
Credited to other comprehensive income
Acquisition of subsidiaries and intellectual properties
Exchange differences
At 31 December 2016
24
36
24
(92.7)
(5.7)
–
(0.1)
3.6
28.0
9.0
(57.9)
(80.1)
(9.5)
–
(0.1)
(3.0)
(92.7)
(1.1)
–
(0.7)
–
–
–
–
(1.8)
(1.3)
–
0.2
–
–
(1.1)
(101.0)
8.8
–
(7.9)
0.2
19.7
11.1
Other
€’m
(7.3)
(13.0)
–
–
–
0.5
–
Total
€’m
(202.1)
(9.9)
(0.7)
(8.0)
3.8
48.2
20.1
(69.1)
(19.8)
(148.6)
(106.5)
9.7
–
(1.1)
(3.1)
(13.8)
6.2
–
0.3
–
(201.7)
6.4
0.2
(0.9)
(6.1)
(101.0)
(7.3)
(202.1)
A deferred tax asset has been recognised on the basis that the realisation of the related tax benefit through future taxable profits is probable. This
includes deferred tax assets which are recognised for tax losses carried forward to the extent that realisation of the related tax benefit through
future taxable profits are probable.
At the balance sheet date, the Group has unused tax losses of €95.0 million (2016: €117.0 million) available for offset against future profits. A
deferred tax asset has been recognised in respect of €2.0 million (2016: €4.0 million) of such losses. No deferred tax asset has been recognised
in respect of the remaining €93.0 million (2016: €113.0 million) as it is not considered probable that there will be future taxable profits available.
Included in unrecognised tax losses are losses of €6.2 million (2016: €10.7 million) which will expire within the next 4 years. Other tax losses may
be carried forward indefinitely. Also included in unrecognised tax losses are €46.4 million (2016: €46.7 million) of capital losses.
No deferred tax liability has been recognised on temporary differences of €25.9 million (2016: €17.7 million) relating to the unremitted earnings of
overseas subsidiaries as the Group is able to control the timing of the reversal of these temporary differences and it is probable that they will not
reverse in the foreseeable future. Temporary differences arising in connection with interests in Equity accounted investees are insignificant.
The deferred income tax (charged)/credited to other comprehensive income during the year is as follows:
Available for sale financial asset reserve
Hedging reserve
Remeasurements – defined benefit schemes
Notes
24
24(d)
2017
€’m
(0.7)
–
(1.8)
2016
€’m
0.4
(0.2)
1.8
(2.5)
2.0
Deferred income tax credited to equity:
The deferred income tax credited to equity during the year was €0.1 million (2016: €0.2 million) and relates to tax benefits arising on share-based
payments.
The deferred tax assets and liabilities recognised in the Company balance sheet are as follows:
Deferred tax assets – other
Deferred tax liability – available for sale financial assets
Company
2017
€’m
0.3
(1.7)
2016
€’m
0.6
(1.0)
(1.4)
(0.4)
188
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
28. Provisions
Notes
(a)
12
Group
At 31 December 2016
Reclassification
Net amount provided for in the year
Utilised in the year
Liabilities disposed of in the year
Unused amounts reversed in the
year
Exchange differences
Unwinding of discounts
At 30 December 2017
Non-current
Current
Restructuring
€’m
note (b)
Legal
claims
€’m
note (c)
Property and
lease
commitments
€’m
note (d)
Regulatory and
related
provisions
€’m
note (f)
Operational
€’m
note (e)
5.5
–
5.4
(6.0)
(1.5)
–
(0.2)
–
3.2
–
3.2
3.2
7.5
–
1.9
–
(0.5)
(5.9)
(0.5)
–
2.5
–
2.5
2.5
5.1
–
0.3
–
(1.1)
–
–
(0.1)
4.2
4.2
–
4.2
17.0
(15.6)
0.6
(0.3)
–
–
(0.3)
–
1.4
–
1.4
1.4
–
15.6
4.9
–
–
–
–
–
20.5
19.8
0.7
20.5
Total
€’m
35.1
–
13.1
(6.3)
(3.1)
(5.9)
(1.0)
(0.1)
31.8
24.0
7.8
31.8
(a) Certain reclassifications have taken place in the period to better reflect the nature of the provisions.
(b) The restructuring provision relates mainly to the Group wide review of the operating model that was undertaken during the year to ensure that
the structure and resources of the Group were appropriate. The provision is expected to be fully utilised in 2018. The amount provided for is
recognised as an exceptional item in the Group income statement (note 6).
(c) The legal claims provision represents legal claims brought against the Group. The balance at 30 December 2017 is expected to be utilised in
2018. 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 30 December 2017.
(d) The property and lease commitments provision relates to property remediation works and is based on the estimated cost of re-instating a
property to its original condition. Due to the nature of the remediation works there is some uncertainty around the amount and timing of
payments.
(e) The operational provision represents provisions relating to certain insurance claims, product returns, and other items. Due to the nature of
these items, there is some uncertainty around the amount and timing of payments.
(f) The regulatory and related provision represents provisions relating to the interest and penalties element of uncertain tax positions and the UK
pension provision. Due to the nature of these items, there is some uncertainty around the amount and timing of payments, however there is
not expected to be a material change within the next 12 months.
Company
Recognised on the Company balance sheet is a provision classified as operational of €0.6 million as at 30 December 2017 (€nil as at
31 December 2016).
29. Capital grants
At the beginning of the year
Credited to the Group income statement
Additions
Disposals
At the end of the year
Non-current
Current
2017
€’m
3.3
(0.3)
–
(2.9)
0.1
0.1
–
0.1
2016
€’m
3.1
(0.4)
0.6
–
3.3
3.0
0.3
3.3
The entities receiving the grants are principal subsidiaries (note 39) and have no going concern issues, therefore, there are no material unfulfilled
conditions or other contingencies attaching to any grants received.
Glanbia plc | Annual Report and Financial Statements 2017
189
Recognition in the Group income statement:
`
Capital grants credited to the Group income
statement
30. Trade and other payables
Current
Trade payables
Amounts due to Equity accounted investees
Amounts due to other related parties
Amounts due to other Group companies
Social security costs
Accrued expenses
Non-current
Other payables
Total
Continuing
operations
(note 5)
€’m
2017
Discontinued
operations
(note 10)
€’m
Total
€’m
Continuing
operations
(note 5)
€’m
Re-presented*
2016
Discontinued
operations
(note 10)
€’m
(0.1)
(0.2)
(0.3)
(0.2)
(0.2)
Notes
37
37
37
Group
2017
€’m
173.8
13.3
–
–
2.8
118.0
2016
€’m
266.8
8.5
0.8
–
5.2
167.4
Company
2017
€’m
–
–
–
208.8
–
10.8
Total
€’m
(0.4)
2016
€’m
0.1
–
–
373.7
–
9.8
307.9
448.7
219.6
383.6
10.1
11.6
–
–
318.0
460.3
219.6
383.6
See note 35 for analysis of the movement in trade and other payables. See note 31 for information on the Group’s fair value estimation process.
31. Derivative financial instruments and financial risk management
31.1 Derivative financial instruments
Cross currency swap – fair value through income statement
Foreign exchange contracts – cash flow hedges
Commodity futures – cash flow hedges
Commodity futures – fair value hedges
Total
Non-current
Current
Notes
31.2
31.2
31.2
31.2
31.5
2017
Assets
€’m
2017
Liabilities
€’m
2016
Assets
€’m
2016
Liabilities
€’m
1.7
–
0.1
0.4
2.2
–
2.2
2.2
–
(0.1)
(0.2)
–
(0.3)
–
(0.3)
(0.3)
–
0.5
0.2
0.5
1.2
–
1.2
1.2
(1.1)
(0.1)
–
–
(1.2)
–
(1.2)
(1.2)
Derivatives recognised at fair value through income statement
Included in cross currency swaps is a pound sterling US dollar cross currency swap with a notional amount of GBP £31.0 million and US dollar
$41.5 million and euro US dollar cross currency swaps with notional amounts of €101.7 million and US dollar $120.3 million accounted for at fair
value. The translation gains included in the Group income statement in respect of these swaps is €1.7 million.
The instrument in the prior year refers to a pound sterling US dollar cross currency swap with a notional amount of GBP £31.0 million and US dollar
$39.3 million which was settled during 2017. The translation loss included in the Group income statement in respect of this swap is €0.3 million.
Derivative assets and liabilities designated as cash flow hedges
Foreign exchange contracts
The Group uses foreign exchange contracts to hedge its future cash flow risk from movements in foreign exchange rates, such contracts are
generally designated as cash flow hedges.
The notional principal amounts of the outstanding foreign exchange contracts at 30 December 2017 were €9.3 million (2016: €12.9 million). All
outstanding foreign exchange contracts will mature and be released to the Group income statement within 12 months of the reporting date (2016:
within 12 months of the reporting date).
190
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
31. Derivative financial instruments and financial risk management continued
Commodity futures
The Group uses commodity futures to hedge its future cash flow risk from movement in gas commodity prices. The notional principal amount
of the outstanding futures designated as cash flow hedges is €2.1 million (2016: €1.1 million). All outstanding commodity futures mature and will
be released to the Group income statement within 12 months of the reporting date (2016: within 12 months of the reporting date).
Amounts recognised in the Group income statement and the Group statement of comprehensive income:
(Losses)/gains recognised in other comprehensive income
Foreign exchange contracts
Commodity futures
(Losses)/gains transferred from equity to the Group income statement
Foreign exchange contracts
Commodity futures
Notes
24(d)
24(d)
Notes
24(d)
24(d)
2017
€’m
(0.1)
–
(0.1)
2017
€’m
(0.4)
(0.1)
(0.5)
2016
€’m
0.4
0.1
0.5
2016
€’m
–
0.3
0.3
No ineffectiveness has been recognised in respect of the cash flow hedges in 2017 (2016: nil).
The maturity profile of the cash flows of the derivative financial instruments is included in note 31.4(d).
Derivative assets and liabilities designated as fair value hedges
Commodity futures
The Group enters into fixed price purchase and sale contracts for milk and cheese respectively and uses commodity futures to hedge this exposure.
The notional principal amounts of the outstanding commodity (milk and cheese) futures, designated as fair value hedges at 30 December 2017
was €89.1 million (2016: €61.0 million). All outstanding commodity contracts are short positions at 30 December 2017.
Net investment hedge
A portion of the Group’s US dollar denominated borrowings amounting to US dollar $98.5 million (2016: US dollar $98.5 million) is designated as a
hedge of the net investment in the Group’s US dollar net assets.
Carrying value of net investment hedge
Gain/(loss) recognised in other comprehensive income
There was no ineffectiveness recognised in profit or loss during the year (2016: nil).
Notes
24
2017
€’m
82.1
11.3
2016
€’m
93.4
(2.9)
Derivative financial instruments entered into by Equity accounted investees
The Group’s Equity accounted investees enter into interest rate swaps, commodity futures (gas, oil, butter, whey and skim milk powder) and
foreign exchange contracts. The Group’s share of the movement in the derivative financial instruments designated as cash flow hedges is
recognised in other comprehensive income and against the carrying value of the interest in Equity accounted investees.
The Group has not entered into an interest rate swap, the movement recognised in other comprehensive income on interest rate swaps (note 24)
represents the Group’s share of the movement in the interest rate swaps entered into by Equity accounted investees. All movements are
recognised against the carrying value of the interest in Equity accounted investees until repayment of the related bank borrowings.
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.
Glanbia plc | Annual Report and Financial Statements 2017
191
31.2 Fair value and fair value estimation
The fair value of financial assets and liabilities together with their carrying amounts are as follows:
Fair value
through
income
statement
€’m
Cash flow
hedges
€’m
Financial
assets/
(liabilities)
held at
amortised
cost
€’m
Financial
assets/
(liabilities)
held at fair
value
€’m
At 30 December 2017
Trade receivables – net
Receivables from Equity accounted investees
Receivables from other related parties
Loans to Equity accounted investees
Available for sale financial assets at amortised cost
Available for sale financial assets at fair value
Derivative financial instruments
Cash and cash equivalents
Total financial assets
Trade payables
Amounts due to Equity accounted investees
Amounts due to other related parties
Financial liabilities – non-current
Financial liabilities – current
Derivative financial instruments
Total financial liabilities
At 31 December 2016
Trade receivables – net
Receivables from Equity accounted investees
Receivables from other related parties
Loans to Equity accounted investees
Available for sale financial assets at amortised cost
Available for sale financial assets at fair value
Derivative financial instruments
Cash and cash equivalents
Total financial assets
Trade payables
Amounts due to Equity accounted investees
Amounts due to other related parties
Financial liabilities – non-current
Financial liabilities – current
Derivative financial instruments
Notes
20
20
20
20
19
19
31.1
22
30
30
30
26
26
31.1
Notes
20
20
20
20
19
19
31.1
22
30
30
30
26
26
31.1
–
–
–
–
–
–
0.1
–
0.1
–
–
–
–
–
(0.3)
(0.3)
–
–
–
–
–
–
2.1
–
2.1
–
–
–
–
–
–
–
Fair value
through
income
statement
€’m
Cash flow
hedges
€’m
–
–
–
–
–
–
0.7
–
0.7
–
–
–
–
–
(0.1)
–
–
–
–
–
–
0.5
–
0.5
–
–
–
–
–
(1.1)
Total
carrying
value
€’m
252.5
14.4
1.1
13.1
0.3
10.8
2.2
162.2
252.5
14.4
1.1
13.1
0.3
–
–
162.2
–
–
–
–
–
10.8
–
–
443.6
10.8
456.6
(173.8)
(13.3)
–
(499.6)
(30.3)
–
(717.0)
Financial
assets/
(liabilities)
held at
amortised
cost
€’m
288.3
7.2
0.4
14.7
0.7
–
–
218.9
530.2
(266.8)
(8.5)
(0.8)
(624.2)
(32.2)
–
–
–
–
–
–
–
–
Financial
assets/
(liabilities)
held at fair
value
€’m
–
–
–
–
–
9.2
–
–
9.2
–
–
–
–
–
–
–
(173.8)
(13.3)
–
(499.6)
(30.3)
(0.3)
(717.3)
Total
carrying
value
€’m
288.3
7.2
0.4
14.7
0.7
9.2
1.2
218.9
540.6
(266.8)
(8.5)
(0.8)
(624.2)
(32.2)
(1.2)
(933.7)
1,2 Fair
value
€’m
–
–
–
–
–
10.8
2.2
–
–
–
–
(503.6)
–
(0.3)
1,2 Fair
value
€’m
–
–
–
–
–
9.2
1.2
–
–
–
–
(644.2)
–
(1.2)
Total financial liabilities
(0.1)
(1.1)
(932.5)
The Group deemed that the carrying amounts of financial assets and financial liabilities recognised at amortised cost in the Group Financial
Statements approximate their fair value.
1. The Group has not disclosed the fair values for financial instruments such as short-term trade and other receivables and trade and other
payables because their carrying amounts are a reasonable approximation of fair value.
2. Loans to Equity accounted investees includes a subordinated fixed interest rate loan of €12.8 million advanced to Glanbia Ireland DAC (GI)
formerly known as Glanbia Ingredients Ireland DAC. The interest rate is re-set every 12 months and there has been no change in the credit
status of GI, therefore the carrying amount is deemed to approximate to fair value. The Group expects GI to meet its contractual obligations.
192
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
31. Derivative financial instruments and financial risk management continued
Group’s fair 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 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 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 30 December 2017 and
31 December 2016:
Assets
Cross currency swap – fair value through income statement
Foreign exchange contracts – cash flow hedges
Commodity futures – cash flow hedges
Commodity futures – fair value hedges
Available for sale financial assets – equity securities – listed
Available for sale financial assets – equity securities – IPL Plastics Ltd (formerly known as
One51 plc)
Available for sale financial assets – equity securities – The BDO Development Capital Fund
Available for sale financial assets – Ornua Co-Operative Ltd
Total assets
Liabilities
Cross currency swap – fair value through income statement
Foreign exchange contracts – cash flow hedges
Commodity futures – cash flow hedges
Total liabilities
Notes
Fair value
hierarchy
2017
€’m
(a)
(b)
(c)
(c)
(d)
(e)
(f)
(g)
Level 2
Level 2
Level 2
Level 2
Level 1
Level 2
Level 2
Level 2
1.7
–
0.1
0.4
0.2
6.0
2.7
1.9
2016
€’m
–
0.5
0.2
0.5
0.2
4.0
2.0
3.0
Notes
Fair value
hierarchy
(a)
(b)
(c)
Level 2
Level 2
Level 2
13.0
10.4
2017
€’m
–
(0.1)
(0.2)
2016
€’m
(1.1)
(0.1)
–
(0.3)
(1.2)
(a) Fair value is determined by reference to the current foreign exchange rates at the end of the reporting period.
(b) The fair value is estimated by discounting the difference between the contractual forward exchange rate and the current forward exchange
rate (from observable forward exchange rates at the end of the reporting period). The effect of discounting was insignificant in 2017 and 2016.
(c) The fair value is estimated by discounting the difference between the contractual forward commodity price and the current forward commodity
price (from observable commodity forward prices at the end of the reporting period) and contract forward prices. The effect of discounting
was insignificant in 2017 and 2016.
(d) Fair value is determined by reference to the stock exchange quoted bid prices at the end of the reporting period.
(e) The unlisted equity shares in IPL Plastics Ltd are currently traded on an informal ‘grey’ market. Fair value is determined by reference to these
published prices.
(f) The unlisted investment in the BDO Development Capital Fund is fair valued by reference to the latest quarterly report available to the limited
partners.
(g) The fair value is estimated by discounting the expected future cash flows using current interest rates.
There were no transfers in either direction between Level 1 and Level 2 in 2017 and 2016. The Group did not hold any Level 3 financial assets
or liabilities at 30 December 2017 or 31 December 2016.
Glanbia plc | Annual Report and Financial Statements 2017
193
Fair value of financial assets and liabilities carried at amortised cost
With the exception of those financial liabilities outlined below, it is considered that the carrying amounts of financial assets and financial liabilities
recognised at amortised cost in the Group Financial Statements approximate their fair value.
The following table shows the fair value hierarchy of the financial liabilities not measured at fair value in the Group balance sheet but for which fair
value disclosures are required:
Notes
Fair value
hierarchy
Carrying
amount
2017
€’m
Fair value
2017
€’m
Carrying
amount
2016
€’m
Fair value
2016
€’m
Non-current financial liabilities
(a)
Level 2
499.6
503.6
624.2
644.2
(a) Fair value is estimated by discounting future contractual cash flows using current market interest rates (from observable interest rates at the
end of the reporting period) that are available to the Group for similar financial instruments.
31.3 Capital risk management
The Group’s objective when managing capital is to safeguard the Group’s ability to continue as a going concern while maximising the returns to
shareholders and benefits for other stakeholders and to maintain an optimal capital structure to reduce the overall cost of capital. Total capital is
calculated based on equity as shown in the balance sheet and net debt as follows:
Total equity per the Group balance sheet
Cash and cash equivalents
Non-current financial liabilities
Current financial liabilities
Total capital
Notes
22
26
26
2017
€’m
1,381.7
(162.2)
499.6
30.3
2016
€’m
1,227.1
(218.9)
624.2
32.2
1,749.4
1,664.6
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. Any material adjustments to the capital structure are
approved by the Board of Directors. From time to time, the Group purchases its own shares on the market. These shares are primarily intended to
be used for issuing shares under the Group’s long-term and short-term incentive plans. Buy decisions are made on a specific transaction basis
by the Employee Benefit Trusts. The Group does not have a defined share buy-back plan.
The Group monitors capital using adjusted EBIT: net finance cost and net debt: adjusted EBITDA ratios, as defined within covenants. At
30 December 2017 the Group’s adjusted EBIT: net finance cost was 7.0 times (2016: 11.5 times) which is within the Group’s financing covenants.
The reduction in the interest cover compared to prior year is due to the additional €14.0 million interest paid in respect of the partial repayment of
the Private Placement notes. Excluding this once-off cost the interest cover would be 11.2 times. Adjusted EBIT: net finance cost is calculated as
earnings before interest and tax plus dividends received from Equity accounted investees divided by net finance cost. Net finance cost comprises
finance costs less finance income per the Group income statement plus capitalised borrowing costs.
At 30 December 2017, the Group’s net debt: adjusted EBITDA ratio was 1.07 times (2016: 1.19 times), which is deemed by management to be
prudent and within the Group’s financing covenants. Net debt: adjusted EBITDA is calculated as net debt at the end of the year divided by
adjusted EBITDA. Net debt is calculated as total financial liabilities excluding debt issue costs less cash and cash equivalents. Adjusted EBITDA
is calculated as EBITDA for the wholly owned businesses plus a dividend received from Equity accounted investees, 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.
The Group’s capital position and information on the capital monitoring ratios are included in the monthly report issued to the Board of Directors.
The Group has no externally imposed capital requirements.
No changes were made in the objectives, policies or processes for capital management during 2017.
31.4 Financial risk management
The conduct of its ordinary business operations necessitates the Group holding financial instruments. The Group has exposure to the following
risks arising from financial instruments: currency risk, interest rate risk, price risk, liquidity risk, cash flow risk, and credit risk.
The Group does not enter into any financial instruments that give rise to a speculative position. 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, and credit risk, use of derivative financial
instruments and non-derivative financial instruments and investment of excess liquidity.
194
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
31. Derivative financial instruments and financial risk management continued
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 US. As a result, currency movements, particularly movements in the euro/US dollar
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. Group companies are
required to manage their foreign exchange risk against their functional currency and 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
The following table demonstrates the sensitivity of profit before tax and total equity to movements in the euro/US dollar exchange rate with all
other variables held constant.
5% change in euro/US dollar exchange rate
Impact on profit before tax*
Impact on total equity**
2017
€’m
13.2
70.8
2016
€’m
13.0
55.3
*
The impact on profit before tax is based on changing the euro/US dollar exchange rate used in calculating profit before tax for the period.
** The impact on total equity is calculated by changing the euro/US dollar exchange rate used in measuring the closing balance sheet.
(b) Interest rate risk
The Group’s objective is to minimise the impact of interest rate volatility on interest costs. 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 interest rate 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. The Group has not entered into any interest rate swaps in 2017 or 2016.
The following table analyses the financial liabilities at 30 December 2017 and 31 December 2016 between fixed and variable rates. The Group fix
a portion of the variable rate financial liabilities for 6 month periods in line with Group policies.
Financial liabilities – fixed rate
Financial liabilities – variable rate
Cash and cash equivalents – variable rate
Net debt
Notes
22
2017
€’m
130.1
399.8
(162.2)
2016
€’m
310.8
345.6
(218.9)
367.7
437.5
Glanbia plc | Annual Report and Financial Statements 2017
195
Sensitivity analysis
The Group doesn’t account for any fixed rate financial liabilities at fair value through profit or loss. Therefore a change in interest rates at the
reporting date would not affect profit or loss.
The following table demonstrates the sensitivity of profit before tax and total equity if market interest rates had been 1% higher with all other
variables being constant:
1% increase in market interest rates
Impact on profit before tax
Impact on total equity
2017
€’m
(1.7)
(1.5)
2016
€’m
(2.5)
(2.2)
(c) Price risk
Equity 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. These securities are classified on the Group balance sheet as available for sale financial assets. 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 profit
before tax or total equity.
Commodity price risk
The Group’s objective is to minimise commodity price risk through entering into commodity future contracts and the use of appropriate
hedging strategies.
The Group enters into forward purchase and forward sale agreements in the normal course of business. Certain of these contracts are deemed
to be ‘own use’ in line with IAS 32 ‘Financial Instruments’ as they were entered into in accordance with the Group’s expected purchase, sale or
usage requirements.
Sensitivity analysis
The impact of a 5% increase or decrease in commodity prices (milk, cheese and gas) would not have any material impact on Group profit before
tax or total equity.
(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. At the
year end, the Group had multi-currency committed term facilities of €843.8 million (2016: €1,032.8 million) of which €344.4 million (2016: €405.9
million) was undrawn. The weighted average maturity of these facilities is 2.2 years (2016: 3.5 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, 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 statutory and management accounts and financial projections. All covenants have
been complied with and based on current financial projections 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 30 to 35.
For further details regarding the Group’s borrowing facilities see note 26.
196
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
31. Derivative financial instruments and financial risk management continued
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 30 December 2017
Non-derivative financial liabilities
Financial liabilities (excluding finance lease liabilities)
Finance lease liabilities
Trade and other payables
Less future finance costs
Derivative financial liabilities
Commodity futures – gross cash (outflow)
Commodity futures – gross cash inflow
Cross currency swap – gross cash (outflow)
Cross currency swap – gross cash inflow
Foreign exchange contracts – gross cash (outflow)
Financial liabilities
At 31 December 2016
Non-derivative financial liabilities
Financial liabilities (excluding finance lease liabilities)
Finance lease liabilities
Trade and other payables
Less future finance costs
Derivative financial liabilities
Commodity futures – gross cash inflow
Cross currency swap – gross cash (outflow)
Cross currency swap – gross cash inflow
Foreign exchange contracts – gross cash (outflow)
Foreign exchange contracts – gross cash inflow
Less than
1 year
€’m
Notes
Between
1 and 2
years
€’m
Between
2 and 5
years
€’m
More than
5 years
€’m
26
31.1
31.1
31.1
31.1
31.1
(48.5)
(0.3)
(187.1)
(235.9)
18.6
(18.5)
(0.1)
–
(18.6)
18.4
(510.1)
–
–
(510.1)
10.6
(217.3)
(0.2)
(499.5)
(0.2)
0.1
(134.9)
136.6
(0.1)
1.5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Less than
1 year
€’m
Notes
Between
1 and 2
years
€’m
Between
2 and 5
years
€’m
More than
5 years
€’m
Total
€’m
(577.1)
(0.4)
(187.1)
(764.6)
47.6
(717.0)
(0.2)
0.1
(134.9)
136.6
(0.1)
1.5
Total
€’m
26
31.1
31.1
31.1
31.1
31.1
(57.4)
(0.7)
(276.1)
(334.2)
25.9
(25.8)
(0.3)
–
(26.1)
25.8
(674.4)
(0.4)
–
(674.8)
49.9
–
(1.9)
–
(1.9)
0.7
(757.6)
(3.3)
(276.1)
(1,037.0)
102.3
(308.3)
(0.3)
(624.9)
(1.2)
(934.7)
0.2
(37.3)
36.2
(0.1)
0.5
(0.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
(37.3)
36.2
(0.1)
0.5
(0.5)
The Company had cash at bank of €6.0 million at 30 December 2017 (2016: €11.3 million). The contractual undiscounted cash flows for cash and
cash equivalents equal the carrying value at 30 December 2017 and 31 December 2016.
(e) Credit risk
The Group’s objective is to minimise credit risk which is managed on a Group basis. Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial transaction fails to meet its contractual obligations. 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 accept exposure to independently
rated parties with long-term credit ratings of at least Baa3 (Moody’s) or BBB-(Standard & Poor’s). The Group held cash and cash equivalents of
Glanbia plc | Annual Report and Financial Statements 2017
197
€162.2 million (2016: €218.9 million) and derivative financial assets of €2.2 million (2016: €1.2 million) at 30 December 2017, all balances were held
within financial institutions which complied with Group policy.
The Group advanced an interest bearing loan of €12.8 million to Glanbia Ireland DAC (formerly known as Glanbia Ingredients Irelands DAC) (an
Equity accounted investee of the Group) during the year ended 31 December 2016 for the purposes of funding capital expenditure. The Group
expects Glanbia Ireland DAC to meet its obligations. The loan is classified as a current asset as at 30 December 2017.
The Group’s credit risk management policy requires that, where possible, all debt is insured with an external credit insurance underwriter. No
goods may be dispatched to a customer on credit until the application for credit has been authorised. The Group’s authorisation review includes
external credit agency reports, the trading and financial history and position of the customer, the business case, the country in which the
customer operates and any other available information. The utilisation of credit limits is actively managed and reviewed formally on an annual
basis. Where the extension of credit is not appropriate, payment in advance is required. No goods are dispatched on credit until the credit
controller has authorised the application confirming all necessary procedures have been complied with.
Goods are sold primarily subject to retention of title clauses, so that in the event of non-payment the Group may have a secured claim. Where
required, the Group holds appropriate security or liens in respect of trade and other receivables. The Group does not hold any significant security
or liens at the end of the year.
As disclosed in note 4 the Group has one significant external customer within the Glanbia Nutritionals segment. This customer accounted for
€44.4 million of the trade and other receivables carrying amount (2016: €51.8 million). The Group is satisfied that it has satisfactory credit control
procedures in place in respect of this customer.
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 trade and other receivables see note 20.
31.5 Offsetting financial assets and financial liabilities
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting arrangements. The
Glanbia Advance Payment (GAP) scheme, which offers advance payments to Society member suppliers in periods where grain and milk prices
are weak, commenced in 2016 and was facilitated by the Group through Dairy Ireland on behalf of the Society. At the end of 2016 the Group had
a payable balance outstanding to the Society and a receivable balance from the Society member suppliers. No payable balance outstanding to,
or receivable balance from, was in place at the end of 2017 as a result of the Dairy Ireland transaction. The ISDA agreements and the GAP
agreement 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
or realise the asset and settle the liability simultaneously. 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:
31.5 (a) Financial assets
At 30 December 2017
Derivative financial assets
Cash and cash equivalents
At 31 December 2016
Derivative financial assets
Cash and cash equivalents
Gross amounts
of recognised
financial assets
€’m
Gross amounts
of recognised
financial liabilities
set off in the
balance sheet
€’m
Net amounts
of financial
assets presented
in the balance
sheet
€’m
2.2
266.4
–
(104.2)
2.2
162.2
268.6
(104.2)
164.4
Gross amounts
of recognised
financial assets
€’m
Gross amounts
of recognised
financial liabilities
set off in the
balance sheet
€’m
Net amounts
of financial
assets presented
in the balance
sheet
€’m
1.2
337.5
–
(118.6)
1.2
218.9
338.7
(118.6)
220.1
Notes
31.1
22
Notes
31.1
22
198
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
31. Derivative financial instruments and financial risk management continued
31.5 (b) Financial liabilities
At 30 December 2017
Derivative financial liabilities
Bank overdrafts and borrowings
At 31 December 2016
Derivative financial liabilities
Bank overdrafts and borrowings
Gross amounts
of recognised
financial liabilities
€’m
Gross amounts
of recognised
financial assets
set off in the
balance sheet
€’m
Net amounts of
financial liabilities
presented in the
balance sheet
€’m
(0.3)
(633.8)
–
104.2
(0.3)
(529.6)
(634.1)
104.2
(529.9)
Gross amounts
of recognised
financial liabilities
€’m
Gross amounts
of recognised
financial assets
set off in the
balance sheet
€’m
Net amounts of
financial liabilities
presented in the
balance sheet
€’m
(1.2)
(772.5)
–
118.6
(1.2)
(653.9)
(773.7)
118.6
(655.1)
Notes
31.1
26
Notes
31.1
26
32. Contingent liabilities
Group
Bank guarantees amounting to €6.7 million (2016: €5.4 million) are outstanding at 30 December 2017. 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.
Company
Any Irish registered wholly-owned subsidiary of the Company may avail of the exemption from filing its statutory financial statements for the year
ended 30 December 2017 as permitted by section 357 of the Companies Act 2014 and if an Irish registered wholly-owned subsidiary of the
Company elects to avail of this exemption, there will be in force an irrevocable guarantee from the Company in respect of all commitments
entered into by such wholly-owned subsidiary, including amounts shown as liabilities (within the meaning of section 357 (1) (b) of the Companies
Act 2014) in such wholly-owned subsidiary’s statutory financial statements for the year ended 30 December 2017.
Within the scope of benefitting from the exemption related to the filing of the annual accounts for the financial year ended 30 December 2017
of Glanbia Foods B.V. (note 39), the Company has guaranteed the liabilities ensuing from legal acts performed by this subsidiary from 1 January
2017 in accordance with and to the extent as set out in section 2:403.1(f) of the Dutch Civil Code. Therefore Glanbia Foods B.V. is exempt from
the obligation to publish its Financial Statements and its obligations to file Financial Statements has been fulfilled by means of the publication of
the declaration of consent and the declaration of liability.
Within the scope of benefitting from the exemption related to the filing of the annual accounts for the financial year ended 31 December 2017 of
the three Luxembourg subsidiaries (note 39), 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 undertaking) for the financial year ended on 31 December 2017. 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 9. In addition, the Company has guaranteed the payment of a proportion of employer
contributions in respect of these UK pension plans. 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 plans. 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.
Glanbia plc | Annual Report and Financial Statements 2017
199
33. Commitments
Capital commitments
Capital expenditure contracted for at the reporting date but not recognised in the Group Financial Statements is as follows:
Property, plant and equipment
2017
€’m
3.2
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:
110.0
141.6
Group
Company
Not later than 1 year
Later than 1 year and not later than 5 years
Later than 5 years
34. Cash generated from operations
Profit after taxation
Income taxes
Net write-down of inventories
Impairment of tangible assets
Impairment of intangible assets
Non-cash element of exceptional charge
Share of results of Equity accounted investees
Depreciation
Amortisation
Cost of share-based payments
Difference between pension charge and cash contributions
Loss/(profit) on disposal of property, plant and equipment
Insurance proceeds
Impairment of investments in subsidiaries
Finance income
Finance expense
Amortisation of government grants received
Profit on disposal of discontinued operations
Profit on sale of investments to Joint Ventures
Cash generated before changes in working capital
Change in net working capital:
– (Increase)/decrease in inventory
– (Increase)/decrease in short-term receivables
– (Decrease)/increase in short-term liabilities
– (Decrease)/increase in provisions
Notes
13
21
16
17
18
16
17
11
5
19(b)
12
10/12
29
10
35
35
35
35
2017
€’m
329.4
(6.3)
0.5
10.8
–
3.0
(51.8)
49.1
63.2
7.8
(4.2)
0.9
–
–
(3.0)
40.1
(0.3)
(96.3)
–
342.9
(14.6)
(149.9)
(13.9)
(2.3)
2016
€’m
212.1
40.6
2.5
0.5
0.5
7.1
(27.6)
50.4
39.7
7.7
(6.0)
(0.3)
1.9
–
(2.4)
25.2
(0.4)
–
–
351.5
(23.8)
(4.3)
55.1
(4.3)
Cash generated from operating activities
162.2
374.2
2016
€’m
7.7
2016
€’m
21.6
61.4
58.6
2017
€’m
16.9
49.8
43.3
2017
€’m
107.2
0.3
–
–
–
–
–
–
–
7.8
–
–
–
–
–
–
–
–
(71.6)
43.7
–
37.2
(9.7)
0.6
71.8
2016
€’m
40.5
(0.2)
–
–
–
–
–
–
–
–
–
–
–
1.0
–
–
–
–
–
41.3
–
19.1
(18.2)
–
42.2
200
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
35. Movement in working capital
2017
At 31 December 2016
Exchange differences
Arising on acquisition
Arising on disposal
Exceptional items, interest accruals, capital
creditors and other non-operating items
Increase/(decrease) in working capital
Notes
Inventories
€’m
Trade and other
receivables
€’m
Trade and other
payables
€’m
Provisions
€’m
366.5
(35.5)
18.5
(42.1)
(0.4)
14.6
327.1
(26.8)
7.4
(171.8)
16.6
149.9
(460.3)
32.9
(18.2)
109.6
4.1
13.9
(35.1)
1.0
–
3.0
(3.0)
2.3
36
34
Total
€’m
198.2
(28.4)
7.7
(101.3)
17.3
180.7
At 30 December 2017
321.6
302.4
(318.0)
(31.8)
274.2
36. Business Combinations
Acquisitions in 2017
On 6 January 2017, the Group acquired 100% of the equity of Grass Advantage LLC (Amazing Grass). Amazing Grass offers plant-based organic,
GMO free products to lifestyle consumers in the natural, online, food, drug and mass channels in North America. The brand complements the
product portfolio of Glanbia Performance Nutrition and offers a strong position in the plant-based nutrition market. The goodwill reflects the
expectation that the business will continue to generate new customers and new products over time. Goodwill of €40.1 million is not deductible for
tax purposes.
On 31 March 2017, the Group acquired 100% of the equity of B&F Vastgoed B.V. (Body & Fit). Body & Fit is a leading European direct to consumer
online branded business focused on performance nutrition. This acquisition offers Glanbia Performance Nutrition a direct presence in the rapidly
growing direct to consumer channel and the goodwill attributable to this acquisition is reflective of this. Goodwill of €28.0 million is not deductible
for tax purposes.
On 2 July 2017 the Group disposed of 60% of its shareholding in Dairy Ireland and related assets to Glanbia Co-operative Society Limited (note
10). This transaction is accounted for as a 100% disposal and a 40% investment in Glanbia Ireland. The investment in Glanbia Ireland has been
recognised at fair value in line with IFRS 10 ‘Consolidated Financial Statements’ (note 18).
Details of the net assets acquired and goodwill arising from the acquisition are as follows:
Purchase consideration
Less: Fair value of assets acquired
Goodwill
Purchase consideration – cash paid
Refund due from vendor
Amazing Grass
€’m
Body & Fit
€’m
124.5
(84.4)
43.7
(15.7)
40.1
28.0
Amazing Grass
€’m
Body & Fit
€’m
125.1
(0.6)
44.7
(1.0)
Total
€’m
168.2
(100.1)
68.1
Total
€’m
169.8
(1.6)
Purchase consideration
124.5
43.7
168.2
The fair value of assets and liabilities arising from the acquisition are as follows:
Notes
Amazing Grass
€’m
Body & Fit
€’m
Property, plant and equipment
Intangible assets
Intangible assets – customer relationships
Intangible assets – brands
Inventories
Trade and other receivables
Trade and other payables
Liabilities settled at completion
Cash and cash equivalents
Deferred tax liability
Fair value of assets acquired
16
17
17
17
35
35
35
35
27
0.2
–
38.7
38.7
7.5
6.4
(3.9)
–
1.6
(4.8)
84.4
Total
€’m
7.5
0.6
39.9
50.8
18.5
7.4
(10.6)
(7.6)
1.6
(8.0)
7.3
0.6
1.2
12.1
11.0
1.0
(6.7)
(7.6)
–
(3.2)
15.7
100.1
Glanbia plc | Annual Report and Financial Statements 2017
201
The contingent consideration arrangement in the Body & Fit acquisition requires the Group to pay the former owners of Body & Fit an earn out if
the actual 2017 earnings before interest, tax, depreciation and amortisation (EBITDA) exceeds a minimum agreed amount. The fair value of the
Group’s estimated contingent consideration at acquisition was €nil.
The fair value of Amazing Grass’s trade and other receivables at the acquisition date amounted to €6.4 million. The gross contractual amount for
trade receivables due is €6.6 million.
The fair value of Body & Fit’s trade and other receivables at the acquisition date amounted to €1.0 million which equates to the gross
contractual amount.
The initial assignment of fair values to identifiable net assets acquired has been performed on a provisional basis. Any amendments to these fair
values within the 12 month timeframe from the date of acquisition will be disclosed in the 2018 Annual Report as stipulated by IFRS 3
‘Business Combinations’.
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
30 December 2017 were as follows:
Revenue
Profit before taxation and exceptional items
2017
Acquisitions
€’m
Group
excluding
acquisitions
€’m
Consolidated
group including
acquisitions
€’m
79.6
1.3
2,307.5
258.6
2,387.1
259.9
The revenue and profit (net of transaction costs) of the Group for the financial year ended 30 December 2017 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
Profit before taxation and exceptional items
2017
Acquisitions
€’m
96.9
1.8
Group
excluding
acquisitions
€’m
2,307.5
258.6
Pro-forma
consolidated
group
€’m
2,404.4
260.4
Acquisitions in 2016 – EMI Nutrition Distributors Pty Limited
On 29 February 2016, the Group acquired 100% of the business and operating assets of EMI Nutrition Distributors Pty Limited (EMI). EMI’s
principal activity is the distribution and marketing of performance nutrition products. No amendments were noted in relation to the fair values
assigned at initial recognition.
Acquisitions in 2016 – South Eastern Cattle Breeding Society Limited
On 22 December 2016 the Group gained control of South Eastern Cattle Breeding Society Limited (SECB). The Group’s interest in SECB had
been accounted for under the equity method of accounting as an interest in Associate. On 2 July 2017 the Group disposed of its investment in
SECB as part of the Dairy Ireland transaction (note 10).
37. Related party transactions
Related parties of the Group and Company include Glanbia Co-operative Society Limited (the Group’s ultimate parent), subsidiary undertakings,
Equity accounted investees, post-employment benefits, key management personnel and connected parties. A listing of the principal subsidiary
and associated undertakings is provided in note 39.
Transactions with Glanbia Co-operative Society Limited
Glanbia Co-operative Society Limited (the Society) holds 31.5% of the issued share capital of the Company. The Society controls the composition
of the Board of Directors and is the ultimate parent of the Group. On 2 July 2017 the Group disposed of 60% of its shareholding in Dairy Ireland
and related assets to the Society for €208.8 million (note 10). The transaction created a new joint venture, together with Glanbia Ingredients
Ireland DAC, called Glanbia Ireland. Up until the date of the disposal, 2 July 2017, Glanbia Ingredients Ireland DAC was recognised as an
Associate. As a result of the Dairy Ireland transaction the Society reduced its interest in the issued share capital of the Company by approximately
5%, from 36.5% as at 31 December 2016 to 31.5% as at 31 December 2017. This was effected through a share placement and a spin out to
society members. During 2017, dividends of €14.4 million (2016: €13.6 million) were paid to the Society and its wholly owned subsidiaries based
on their shareholding in Glanbia plc. Dividends of €0.3 million (2016: €nil) were received during the period from the Society by a subsidiary society
of the Group. The Group provides a range of management and administrative services to the Society and is headquartered in a premises owned
by the Society.
202
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
37. Related party transactions continued
Transactions with subsidiaries
Glanbia plc is the parent company of the Group. Transactions in the financial year between the Company and its subsidiaries include dividends
received of €50.4 million (2016: €43.0 million), payment of management services of €4.0 million (2016: €5.5 million) and other transactions entered
into in the normal course of business. The Group operates an annual incentive scheme whereby a portion of the annual incentive will be settled by
way of shares and a long-term incentive plan whereby share awards in the Company are granted to Executive Directors and senior management.
The Company recharges the costs of these plans to its subsidiaries and the balances are settled in cash 2017: €7.8 million, (2016: €7.7 million)
(note 11). Details of balances to/from subsidiaries are provided in the Company balance sheet on page 129, note 20 and note 30.
The Group through Employee Benefit Trusts reacquired Company shares from related parties. The total number acquired during the year was
146,179 ordinary shares at an average price of €16.90 per share.
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 in accordance with IFRS 10 ‘Consolidated Financial Statements’. Financial liabilities are secured by cross-
guarantees from Glanbia plc and certain principal subsidiaries.
Transactions with Equity accounted investees
The Group trades in the normal course of business with its Equity accounted investees. The Group has certain agency agreements in place with
its Equity accounted investees. The commission income receivable is included in sales of services; (note 37(a)) and the year-end balance
receivable is included in note 37(c). The Group provides management and administrative services to its Equity accounted investees, which are
settled in cash. Dividends received by the Group from its Equity accounted investees are as follows:
Southwest Cheese Company, LLC
Glanbia Cheese Limited
South East Port Services Limited
Joint Venture
Joint Venture
Joint Venture
Notes
18
18
18
2017
€’m
11.1
4.7
–
15.8
Dividends receivable from Glanbia Cheese Limited (Joint Venture) of €2.2 million (2016: €1.6 million) were recognised by the Group.
Loans to Equity accounted investees are as follows:
Loans receivable
At the beginning of the year
Disposal
Loans advanced during the year
At the end of the year
Interest on loans receivable
At the beginning of the year
Interest charged
Interest received
At the end of the year
Group
2017
€’m
14.7
(1.9)
–
12.8
–
0.7
(0.4)
0.3
2016
€’m
11.3
2.1
0.4
13.8
2016
€’m
1.9
–
12.8
14.7
0.1
0.7
(0.8)
–
Total loan and interest receivable at the end of the year
13.1
14.7
On 21 January 2016 a subordinated loan of €12.8 million was advanced to Glanbia Ireland DAC (formerly known as Glanbia Ingredients Ireland
DAC), a Joint Venture of the Group. This unsecured loan is repayable on 3 July 2018 and an interest rate of 5% applies, which is re-set every 12
months based on commercial terms. An interest bearing unsecured loan of €1.5 million, to South East Port Services Limited, and an interest free
unsecured loan of €0.4 million to Malting Company of Ireland Limited were disposed of as part of the Dairy Ireland transaction (note 10).
Key management personnel and connected parties
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. In the period to 2 July 2017 the Group traded in the normal course of business, within the
Dairy Ireland segment, with key management personnel and connected parties who are involved in farming activities.
The following transactions were carried out with related parties:
37 (a) Sales of goods and services
Sales of goods:
– Associates
– Joint Ventures
– Key management
Sales of services:
– Glanbia Co-operative Society Limited
– Associates
– Joint Ventures
Sale of property and other assets:
– Glanbia Co-operative Society Limited
Sales to related parties were carried out under normal commercial terms and conditions.
37 (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
Purchases of property and other assets:
– Subsidiaries
Glanbia plc | Annual Report and Financial Statements 2017
203
Group
2017
€’m
4.1
3.7
0.5
8.3
2.9
4.9
28.6
36.4
208.8
208.8
Group
2017
€’m
40.8
27.9
0.2
68.9
0.2
2.1
1.6
–
3.9
–
–
2016
€’m
8.3
3.2
1.0
12.5
2.2
10.5
16.5
29.2
–
–
2016
€’m
73.1
3.5
0.4
77.0
1.0
4.3
2.0
–
7.3
–
–
Company
2017
€’m
2016
€’m
–
–
–
–
–
–
–
–
–
–
Company
2017
€’m
–
–
–
–
–
–
–
4.0
4.0
2.6
2.6
–
–
–
–
–
–
–
–
–
–
2016
€’m
–
–
–
–
–
–
–
5.5
5.5
–
–
Purchases from related parties were carried out under normal commercial terms and conditions.
204
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
37. Related party transactions continued
37 (c) Year end balances
Receivables from related parties:
– Glanbia Co-operative Society Limited
– Associates
– Joint Ventures
– Key management
– Subsidiaries
Payables to related parties:
– Glanbia Co-operative Society Limited
– Associates
– Joint Ventures
– Key management
– Subsidiaries
Group
2017
€’m
1.1
–
14.4
–
–
15.5
–
–
13.3
–
–
13.3
2016
€’m
0.3
4.8
2.4
0.1
–
7.6
0.8
7.8
0.7
–
–
9.3
Company
2017
€’m
0.7
–
0.1
–
317.4
2016
€’m
–
0.1
–
–
355.2
318.2
355.3
–
–
–
–
208.8
–
–
–
–
373.7
208.8
373.7
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. No guarantees have been given or received. All outstanding balances are deemed to be
fully recoverable by the Group.
37 (d) Contributions to retirement benefit plans
Information in relation to the Group’s contributions to retirement benefit plans is disclosed in note 9.
37 (e) Key management compensation
IAS 24 ‘Related Party Disclosures’ requires the disclosure of compensation paid to the Group’s key management.
Key management compensation includes the compensation of the Board of Directors (Executive and Non-Executive) and members of the
Glanbia Operating Executive, including the Group Secretary. Dividends totalling €0.1 million (2016: €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 Annual incentive scheme and Long-term incentive plan (notes 9 and 11). No loans
were made to key management during the year (2016: €nil).
Salaries and other short-term employee benefits
Post-employment benefits
Share-based payments
Non-Executive Directors fees
Group
Company
2017
€’m
6.4
0.9
4.6
0.8
2016
€’m
5.6
0.7
4.7
0.8
12.7
11.8
2017
€’m
–
–
–
0.8
0.8
2016
€’m
–
–
–
0.8
0.8
Retirement benefits of €0.4 million (2016: €0.3 million) were accrued in the year to four members of key management (2016: three) under a post
retirement defined benefit plan. Total retirement benefits accrued to directors under the post retirement defined benefit plan are €5.8 million (2016:
€4.1 million).
The Group through Employee Benefit Trusts reacquired Company shares from key management personnel; the total number reacquired was
186,282 ordinary shares at an average price of €16.91 per share.
Details of the Directors compensation including salary, fees and other benefits, together with their interest in Glanbia plc, the Long-term incentive
plan and the Annual incentive scheme is disclosed in the Remuneration Committee report on pages 80 to 105.
Glanbia plc | Annual Report and Financial Statements 2017
205
The following table sets out details of the amounts outstanding on trading accounts by Directors during the period together with
amounts owed by the Group to Directors at the end of the year.
Current Directors:
H Corbally
Sales to Director
Purchases from Director
MN Keane
Sales to Director
Purchases from Director
P Murphy
Sales to Director
Purchases from Director
P Ahern
Sales to Director
Purchases from Director
V Gorman
Sales to Director
Purchases from Director
MI Keane
Sales to Director
Purchases from Director
J Murphy
Sales to Director
Purchases from Director
D O’Connor
Sales to Director
Purchases from Director
T Grant
Sales to Director
Purchases from Director
E Power
Sales to Director
Purchases from Director
B Hayes
Sales to Director
Purchases from Director
Balance at
31 December
2016/date of
appointment
€’000
Sales/
(purchases)
with Director
during
2017
€’000
(Receipts from)/
payments to
Director during
2017
€’000
Interest
charged
during
2017
€’000
Balance
transferred to
Glanbia Ireland
DAC
€’000
Balance at
30 December
2017
€’000
Maximum
balance
during
2017
€’000
3
(7)
5
–
7
–
3
–
–
(9)
5
–
107
(8)
–
–
9
–
6
–
7
–
31
(36)
51
–
23
–
86
–
43
(44)
15
–
72
(39)
1
–
1
–
–
–
3
–
(27)
36
(40)
–
(31)
–
(75)
–
(43)
45
(17)
–
(113)
40
(1)
–
(5)
–
–
–
–
–
–
–
1
–
1
–
–
–
–
–
–
–
2
–
–
–
–
–
–
–
–
–
(7)
7
(17)
–
–
–
(14)
–
–
8
(3)
–
(68)
7
–
–
(5)
–
(6)
–
(10)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
12
(7)
19
–
14
–
(21)
–
–
(9)
6
–
121
(8)
1
–
6
–
6
–
10
–
Former Directors who were in office during the year:
J Doheny
Sales to Director
Purchases from Director
J Gilsenan
Sales to Director
Purchases from Director
M Merrick
Sales to Director
Purchases from Director
Balance at
31 December
2016/date of
appointment
€’000
Sales/
(purchases)
with Director
during
2017
€’000
(Receipts from)/
payments to
Director
during
2017
€’000
Interest
charged
during
2017
€’000
Balance at
date of
retirement
€’000
Maximum
balance
during
period
€’000
–
–
5
(10)
17
(13)
8
–
12
(30)
45
(26)
–
–
(8)
35
(35)
34
–
–
–
–
–
–
8
–
9
(5)
27
(5)
8
–
9
(9)
27
(8)
206
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
37. Related party transactions continued
Connected persons:
The aggregate of credit sales/purchases, transactions to/with connected persons of Directors in office at 30 December 2017, as defined in
section 220 of the Companies Act 2014, are as follows (aggregate of 8 persons):
Balance at
31 December
2016/date of
appointment
€’000
Sales/
(purchases)
with connected
persons
during 2017
€’000
(Receipts from)/
payments to
connected
persons
during 2017
€’000
Interest
charged
during
2017
€’000
Balance
transferred to
Glanbia Ireland
DAC
€’000
Balance at
30 December
2017
€’000
Sales to connected persons
Purchases from connected
persons
(33)
–
154
–
(102)
–
1
–
(20)
–
–
–
Maximum
balance
during
2017
€’000
52
–
Directors in office during 2016:
Balance at
2 January
2016
€’000
Sales/
(purchases)
with Director
during
2016
€’000
(Receipts from)/
payments to
Director
during 2016
€’000
Interest
charged
during
2016
€’000
Balance at
31 December
2016
€’000
Maximum
balance
during
2016
€’000
H Corbally
Sales to Director
Purchases from Director
MN Keane
Sales to Director
Purchases from Director
P Murphy
Sales to Director
Purchases from Director
P Ahern
Sales to Director
Purchases from Director
J Doheny
Sales to Director
Purchases from Director
J Gilsenan
Sales to Director
Purchases from Director
V Gorman
Sales to Director
Purchases from Director
MI Keane
Sales to Director
Purchases from Director
M Merrick
Sales to Director
Purchases from Director
J Murphy
Sales to Director
Purchases from Director
4
(7)
4
–
–
–
5
–
1
–
4
(9)
–
(10)
3
–
8
(8)
90
(8)
47
(64)
61
–
43
–
94
–
9
–
25
(75)
80
(85)
61
–
108
(72)
172
(74)
(48)
64
(62)
–
(37)
–
(96)
–
(10)
–
(24)
74
(80)
86
(60)
–
(100)
67
(162)
74
–
–
2
–
1
–
–
–
–
–
–
–
–
–
1
–
1
–
7
–
3
(7)
5
–
7
–
3
–
–
–
5
(10)
–
(9)
5
–
17
(13)
107
(8)
15
(7)
23
–
13
–
19
–
5
–
11
(10)
4
(9)
16
–
26
(13)
168
(8)
Glanbia plc | Annual Report and Financial Statements 2017
207
Former Directors who were in office during 2016:
T Grant
Sales to Director
Purchases from Director
B Hayes
Sales to Director
Purchases from Director
E Power
Sales to Director
Purchases from Director
Balance at
2 January
2016
€’000
Sales/
(purchases)
with Director
during 2016
€’000
(Receipts from)/
payments to
Director
during 2016
€’000
Interest
charged
during
2016
€’000
Balance at
date of
retirement
2016
€’000
Maximum
balance
during
period
€’000
5
–
8
–
6
–
19
–
23
–
48
–
(8)
–
(17)
–
(37)
–
1
–
–
–
1
–
17
–
14
–
18
–
17
–
14
–
37
–
Connected persons:
The aggregate of credit sales/purchases, transactions to/with connected persons of Directors in office at 31 December 2016, as defined in
section 220 of the Companies Act 2014, are as follows (aggregate of 8 persons):
Sales to connected persons
Purchases from connected persons
Sales/
(purchases)
with connected
persons
during 2016
€’000
(Receipts from)/
payments to
connected
persons
during 2016
€’000
250
–
(313)
–
Balance at
2 January
2016
€’000
23
–
Interest
charged
during
2016
€’000
5
–
Balance at
31 December
2016
€’000
(35)
–
Maximum
balance
during
2016
€’000
97
–
38. Events after the reporting period
See note 15 for the final dividend, recommended by the Directors, to be paid on 27 April 2018.
There were no significant events, outside the ordinary course of business, which affected the Group since 30 December 2017.
208
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
39. Principal subsidiary and associated undertakings
The information outlined below relates only to the principal undertakings in the Group as at 30 December 2017 and as at 31 December 2016. 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, Joint Ventures & Associate undertakings will be annexed to the Company’s Annual Return to be
filed in the Companies Registration Office in Ireland.
All beneficial interests are in ordinary shares, membership interests or membership units.
(a) Subsidiaries
Incorporated and operating in
Registered office
Principal activity
Ireland
Alanfield Society Limited
Glanbia House, Kilkenny, Co Kilkenny
Avonmore Proteins Designated Activity Company Glanbia House, Kilkenny, Co Kilkenny
Glanbia House, Kilkenny, Co Kilkenny
Avonmore Skim Milk Products Limited
Glanbia Cheesip Limited1
Glanbia House, Kilkenny, Co Kilkenny
Glanbia House, Kilkenny, Co Kilkenny
Glanbia Estates Limited
Glanbia House, Kilkenny, Co Kilkenny
Glanbia Finance Designated Activity Company
Glanbia House, Kilkenny, Co Kilkenny
Glanbia Financial Services Unlimited Company
Glanbia House, Kilkenny, Co Kilkenny
Glanbia Investipr Designated Activity Company
Glanbia House, Kilkenny, Co Kilkenny
Glanbia Holdings (Ireland) Limited
Glanbia House, Kilkenny, Co Kilkenny
Glanbia Management Services Limited
Glanbia House, Kilkenny, Co Kilkenny
Glanbia Nutritionals (Blending) Limited
Glanbia House, Kilkenny, Co Kilkenny
Glanbia Nutritionals (Europe) Limited
Glanbia House, Kilkenny, Co Kilkenny
Glanbia Nutritionals (Ireland) Limited
Glanbia Property Holding Designated
Glanbia House, Kilkenny, Co Kilkenny
Activity Company
Holding society
Financing
Financing
Research and development
Property and land dealing
Financing
Financing
Management of receivables
Holding company
Management services
Financing
Nutritional ingredients
Performance nutrition and
nutritional ingredients
Holding company
Glanbia Property Rentals Designated
Glanbia House, Kilkenny, Co Kilkenny
Property rental company
Activity Company
Glanbia House, Kilkenny, Co Kilkenny
Glanbia Support Services Limited
Glanbia House, Kilkenny, Co Kilkenny
Glassonby Unlimited Company
ON Optimum Nutrition Limited
Glanbia House, Kilkenny, Co Kilkenny
Waterford Foods Designated Activity Company Glanbia House, Kilkenny, Co Kilkenny
Business services
Financing
Financing
Holding company
Beneficial
% interest
2017
Beneficial
% interest
2016
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
United States
Aseptic Solutions USA Ventures, LLC
Glanbia (Delaware), Inc.
Glanbia, Inc.
Glanbia Business Services, Inc.
Glanbia Foods, Inc.
Glanbia (Michigan), Inc.
Glanbia Nutritionals (NA), Inc.
Glanbia Nutritionals, Inc.
3411 Silverside Road Rodney
Building 104, Wilmington,
New Castle County, DE 19810
3411 Silverside Road Rodney
Building 104, Wilmington,
New Castle County, DE 19810
3411 Silverside Road Rodney
Building 104, Wilmington,
New Castle County, DE 19810
3411 Silverside Road Rodney
Building 104, Wilmington,
New Castle County, DE 19810
Corporate Creations Network Inc.,
950 W.Bannock Street 1100,
Boise, ID83702, Ada County
3411 Silverside Road Tatnall
Building 104, Wilmington,
New Castle County, DE 19810
3411 Silverside Road Rodney
Building 104, Wilmington,
New Castle County, DE 19810
3411 Silverside Road Rodney
Building 104, Wilmington,
New Castle County, DE 19810
Nutritional ingredients
Holding company
100
100
Holding company
100
100
Business services
100
100
Cheese and nutritional
ingredients
100
100
Holding company
100
–
Nutritional ingredients
100
100
Nutritional ingredients
100
100
Glanbia plc | Annual Report and Financial Statements 2017
209
Incorporated and operating in
Registered office
Principal activity
United States
Glanbia Performance Nutrition, Inc.
GPN Commercial, LLC (formerly known as
The Isopure Company, LLC)
Grass Advantage, LLC
Britain and Northern Ireland
Glanbia Holdings Limited
Glanbia Investments (UK) Limited
Glanbia Milk Limited
Glanbia Performance Nutrition (UK) Limited
Glanbia Performance Nutrition
(UK Sales Division) Limited
Glanbia (UK) Limited
Waterford Foods International Limited
Australia
Glanbia Performance Nutrition Pty Limited
Brazil
Glanbia Marketing de Produtos de
Nutricao e Performance do
Brasil Ltda
Canada
Glanbia Nutritionals (Canada) Inc.
Glanbia Performance Nutrition Canada Inc.
China
Glanbia Nutritionals (Suzhou) Co. Limited
Glanbia Performance Nutrition Trading
(Shanghai) Co., Ltd.
Glanbia (Shanghai) International Trading Co.
Limited
Denmark
Nutramino Holding ApS
Nutramino Int. ApS
France
Glanbia Performance Nutrition France SAS
Germany
Glanbia Nutritionals Deutschland GmbH
Body & Fit Nutrition GmbH
Glanbia Performance Nutrition GmbH
11380 Prosperity Farms Rd 221E,
Palm Beach Gardens FL 33410
3411 Silverside Road Rodney
Building 104, Wilmington,
New Castle County, DE 19810
2711 Centerville Road, Suite 400,
Wilmington, New Castle County
DE 19808
One Victoria Square,
Birmingham, B1 1BD
One Victoria Square,
Birmingham, B1 1BD
One Victoria Square,
Birmingham, B1 1BD
Unit 3 Romaldkirk Rd,
Middlesbrough, TS2 1XA
One Victoria Square,
Birmingham, B1 1BD
One Victoria Square,
Birmingham, B1 1BD
One Victoria Square,
Birmingham, B1 1BD
Performance nutrition
Performance nutrition
Performance nutrition
Financing
Holding company
Management services
Performance nutrition
Performance nutrition
Holding company
Holding company
Beneficial
% interest
2017
Beneficial
% interest
2016
100
100
100
100
100
100
100
100
100
100
100
100
–
100
100
100
100
–
100
100
Unit 4, 14 Lionel Road Mount
Waverley VIC 3149
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
No. 128 Fangzong Street SIP, Suzhou,
Jiangsu Province, PRC 215025, China
Room 908, World Trade Tower,
Guangdong Road 500,
Huangpu District, Shanghai, 200001
Room 432, No.473 Fute Xiyi Road,
Waigaoqiao Free Trade Zone,
Shanghai, China
Performance nutrition
100
100
Performance nutrition
100
100
Nutritional ingredients
100
100
Performance nutrition
100
100
Nutritional ingredients
Performance nutrition
100
100
100
100
Nutritional ingredients
100
100
Frederikssundsvej 62 B 1,
2400 København NV
Frederikssundsvej 62 B 1,
2400 København NV
Holding company
Performance nutrition
8, Avenue Hoche, 75008, Paris
Performance nutrition
Gewerbestrasse 3, 78359
Orsingen – Nenzingen
Hohenstaufenring 62, 50674, Köln
Köpenicker Strasse 10, 10997, Berlin
Nutritional ingredients
Performance nutrition
Performance nutrition
100
100
100
100
100
100
100
100
100
100
–
100
210
Glanbia plc | Annual Report and Financial Statements 2017
Notes to the Financial Statements continued
for the financial year ended 30 December 2017
39. Principal subsidiary and associated undertakings continued
Incorporated and operating in
Registered office
Principal activity
Beneficial
% interest
2017
Beneficial
% interest
2016
India
Glanbia India Private Limited2
Glanbia Performance Nutrition (India)
Private Limited
Japan
Glanbia Japan K.K
Luxembourg
Glanbia Luxembourg SA3
Glanbia Luxfin SA3
Glanbia Luxinvest SA3
Mexico
Glanbia, S.A. de CV
Netherlands
B&F Vastgoed B.V.
Body & Fit Sportsnutrition B.V.
Glanbia Foods B.V.
New Zealand
Glanbia Performance Nutrition
(New Zealand) Limited
Norway
Nutramino NO AS
Portugal
Glanbia Nutritionals (Portugal) –
Sociedade Unipessoal, Lda.
Russian Federation
LLC Glanbia
Singapore
Glanbia Nutritionals Singapore Pte Limited
Glanbia Performance Nutrition
Singapore Pte Ltd
South Africa
Glanbia (Pty) Limited
Sweden
Nutramino AB
Turkey
Glanbia Besin Ürünleri Pazarlama ve
Ticaret Limited Sirketi
Uruguay
Glanbia (Uruguay Exports) SA
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
100
100
100
100
Level 18 Yebisu Garden Place,
Tower 4-20-3, Ebisu Shibuya-ku, Tokyo
Nutritional ingredients
100
–
5, Rue Guillaume Kroll, L-1882
5, Rue Guillaume Kroll, L-1882
5, Rue Guillaume Kroll, L-1882
Financing
Financing
Financing
Av. Prolongación Paseo de la Reforma
No. 115-1006, Col. Paseo de las Lomas,
C.P. 01330
Nutritional ingredients
Mars 10, 8448CP, Heerenveen
Mars 10, 8448CP, Heerenveen
Atrium Building 8th Floor, Strawinskylaan
3127, 1077 ZX, Amsterdam
Holding company
Performance nutrition
Holding company
100
100
100
100
100
100
100
100
100
100
100
–
–
100
C/-Martelli Mckegg, Level 20, PwC
Tower, 188 Quay Street, Auckland, 1010
Performance nutrition
100
100
Fillpstad brygge 1, 0252, Oslo
Performance nutrition
Performance nutrition
100
100
100
100
Miraflores, Torre de Mansanto,
Rua Afonso Praça, 30-7o e 8o piso,
1495-061 Miraflores
Office 1934, 10 Testovskaya Street,
123317, Moscow
Nutritional ingredients
100
100
70 Bendemeer Road, 06-01, 339940
70 Bendemeer Road, 06-01, 339940
Nutritional ingredients
Performance nutrition
100
100
100
–
Stand 893, 7 Forbes Street, Midstream
Estate – Windsor Gare, Brakfontein
Road, Guateng, South Africa, 2192
Nutritional ingredients
100
100
Ostermalinstorg.1, 4 tr, 114 42,
Stockholm
Performance nutrition
100
100
Kocatepe Mah., Lamartin Cad. No:5,
Ofis Lamartine Kat:6, Taksim, Beyoglu,
Istanbul, 34437
Performance nutrition
100
100
Copacabana Street, Block 26 – S 12,
Médanos de Solymar City, Canelones
Nutritional ingredients
100
100
1. Glanbia Cheesip Limited has a branch at 1 rue Hildegard von Bingen L-1282 Luxembourg, with a statutory year fixed at 31 December each year in order to comply with statutory requirements.
2. The statutory year end of this subsidiary is 31 March 2017, which coincides with the tax year in India.
3. The statutory year end of these subsidiaries 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 the Group.
Glanbia plc | Annual Report and Financial Statements 2017
211
(b) Joint Ventures
Incorporated and operating in
Ireland
Glanbia Ireland Designated
Activity Company (formerly
known as Glanbia Ingredients
Ireland Designated Activity
Company)
Joint Venture/
Associate
Date to which
results are
included
Registered office
Principal activity
Joint Venture 30/12/2017
Glanbia House, Kilkenny,
Co Kilkenny
Milk products,
consumer goods
and agri trading
Beneficial
%interest
2017
Beneficial
% interest
2016
40
40
United States
Southwest Cheese Company, LLC Joint Venture 30/12/2017
Britain and Northern Ireland
Glanbia Cheese Limited
Joint Venture 30/12/2017
1209 Orange Street,
Wilmington New Castle
County, DE 19801
4 Royal Mews, Gadbrook
Park, Rudheath, Northwich,
Cheshire, CW9 7VD
Cheese and
nutritional ingredients
50
50
Cheese products
51
51
The Groups interests in Joint Ventures are subject to certain restrictions however these are not material.
(b)(i) Glanbia Ireland
On 2 July 2017 the Group disposed of 60% of its shareholding in Dairy Ireland and related assets to Glanbia Co-operative Society Limited (the
Society), its ultimate parent. The transaction created a new joint venture, together with Glanbia Ingredients Ireland DAC, called Glanbia Ireland.
Dairy Ireland is comprised of the principal subsidiaries, Joint Ventures & Associates as outlined below.
Principal subsidiaries
Incorporated and operating in
Registered office
Principal activity
Ireland
Cold Chain Food Distributors Limited
D. Walsh & Sons Limited
Eilish Oils Limited
Glanbia Consumer Foods Limited
Glanbia Feeds Limited
Glanbia Foods Ireland Limited
Glanbia House, Kilkenny, Co Kilkenny
Palmerstown, Co Kilkenny
Glanbia House, Kilkenny, Co Kilkenny
Glanbia House, Kilkenny, Co Kilkenny
Glanbia House, Kilkenny, Co Kilkenny
Glanbia House, Kilkenny, Co Kilkenny
Grassland Fertilizers (Kilkenny) Limited
South Eastern Cattle Breeding
Society Limited
Palmerstown, Co Kilkenny
Dovea, Thurles, Co Tipperary
Inactive
Grain and fertilisers
Inactive
Chilled consumer foods
Manufacture of animal feed
Consumer foods, agri trading and
business services
Fertilisers
Cattle breeding
Britain and Northern Ireland
Glanbia Feedstuffs Limited
Glanbia Foods (NI) Limited
Joint Ventures & Associates
Incorporated and operating in
Ireland
Co-Operative Animal Health Limited
Malting Company of Ireland Limited
South East Port Services Limited
One Victoria Square, Birmingham,
B1 1BD
202 City Business Park, Dunmurry,
BT17 9HY
Animal feed distribution
Consumer food distribution
Joint Venture/
Associate
Registered office
Associate
Joint Venture
Joint Venture
Tullow, Co Carlow
The Maltings, South Link, Togher, Co Cork
Palmerstown, Co Kilkenny
Principal activity
Agri chemicals
Malting
Port services
Beneficial
% interest
2016
50
50
49
Beneficial
% interest
2016
100
60
80
100
100
100
73
61
100
100
212
Glanbia plc | Annual Report and Financial Statements 2017
Glossary
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:
G 1. Constant currency
G 2. Total Group
G 3. Revenue
G 4. EBITA
G 5. EBITA margin
G 6. EBITDA
G 7. Adjusted Earnings Per Share
G 8. Pro-forma Adjusted Earnings Per Share
G 9. Financing Key Performance Indicators
G 10. Exceptional Items
G 11. Volume and pricing growth/decline
G 12. Like for like branded revenue growth/decline
G 13. Effective tax rate
G 14. Average Interest Rate
G 15. Capital expenditure – Business sustaining and strategic
G 16. Operating working capital
G 17. Operating cash flow and free cash flow
G 18. Return on capital employed
G 19. Total Shareholder Return
G 20. Dividend pay-out ratio
These principal non-IFRS performance measures are defined below with a reconciliation of these measures to IFRS measures where applicable.
G 1. 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 2017 and 2016 were as follows:
Euro 1 =
US dollar
Pound sterling
Australian dollar
2017
1.1295
0.8764
1.4734
2016
1.1068
0.8194
1.4884
G 2. Total Group
The Group has a number of strategically important Equity accounted investees (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 Equity
accounted investees.
G 3. 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 and is an IFRS performance measure (see pages 18 to 19).
Glanbia plc | Annual Report and Financial Statements 2017
213
G 3.1 Reconciliation of the Group’s constant currency revenue growth:
Glanbia Performance Nutrition revenue
Glanbia Nutritionals revenue
Continuing operations revenue
Reference to the Financial
Statements/Glossary
Note 4
Note 4
Equity accounted investees revenue
G 3.2
Discontinued operations revenue*
Discontinued operations Equity accounted investees revenue
Total Discontinued operations revenue
2016
Reported
€’m
1,007.5
1,224.2
2,231.7
820.8
616.2
28.3
644.5
2016
Retranslated
€’m
986.3
1,200.6
2,186.9
2017
Actual
€’m
Constant
currency growth
€’m
1,121.1
1,266.0
2,387.1
13.7%
5.4%
9.2%
805.8
1,093.4
35.7%
615.8
28.3
644.1
357.9
28.6
386.5
(41.9%)
1.1%
(40.0%)
Total Group revenue
3,697.0
3,636.8
3,867.0
6.3%
*
Excludes inter-segment revenue in 2017 of €0.5m (2016: €0.6m). Gross segment revenue for discontinued operations is presented in note 10.
G 3.2 Group’s share of revenue of Equity accounted investees – continuing operations:
2017
Equity accounted investees revenue (100%)
% of ownership interest
Reference to the Financial
Statements/Glossary
Note 18
Glanbia Ireland
DAC
€’m
1,407.1
40%
Southwest
Cheese
Company, LLC
€’m
Glanbia Cheese
Limited
€’m
738.0
50%
316.7
51%
Total
€’m
2,461.8
Group’s share of revenue of Equity accounted investees
562.9
369.0
161.5
1,093.4
2016
Equity accounted investees revenue (100%)
% of ownership interest
Note 18
833.5
40%
739.7
50%
230.5
51%
1,803.7
Group’s share of revenue of Equity accounted investees
333.4
369.9
117.5
820.8
G 3.3 Reconciliation of Glanbia Nutritionals (GN) constant currency revenue growth:
US Cheese revenue
Nutritional Solutions revenue
Glanbia Nutritionals revenue
Reference to the Financial
Statements/Glossary
G 3.1
2016
Reported
€’m
735.9
488.3
1,224.2
2016
Retranslated
€’m
721.1
479.5
1,200.6
2017
Actual
€’m
734.1
531.9
1,266.0
Constant
currency
growth
€’m
1.8%
10.9%
5.4%
G 4. EBITA
EBITA is defined as earnings before interest, tax and amortisation. EBITA references throughout the annual report are on a pre-exceptional basis
unless otherwise indicated. EBITA is one of the Group’s Key Performance Indicators. 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. Refer to
note 5 to the financial statements for the reconciliation of continuing operations EBITA.
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Glanbia plc | Annual Report and Financial Statements 2017
Glossary
Key Performance Indicators and non-IFRS performance measures continued
G 4. EBITA continued
G 4.1 Reconciliation of the Group’s constant currency EBITA growth:
GPN EBITA
GN EBTA
Continuing operations EBITA
Equity accounted investees revenue
Discontinued operations EBITA
Discontinued operations Equity accounted investees EBITA
Total Discontinued operations EBITA
Reference to the Financial
Statements/Glossary
Note 4
Note 4
G 4.2
Note 10
2016
Reported*
€’m
162.0
111.3
273.3
42.9
31.7
1.8
33.5
2016
Retranslated
€’m
2017
Actual
€’m
Constant currency
growth
€’m
158.6
109.0
267.6
42.2
31.7
1.8
33.5
169.7
113.5
283.2
63.4
10.6
0.5
11.1
7.0%
4.1%
5.8%
50.2%
(66.6%)
(72.2%)
(66.9%)
Total Group EBITA
349.7
343.3
357.7
4.2%
*
EBITA for GPN and GN for 2016 have been adjusted by €0.5m reflecting on going corporate costs previously allocated to the Dairy Ireland segment but which will be allocated to GPN and
GN going forward. This is to ensure a like for like comparison and reflective of the allocations received in 2017 and going forward.
G 4.2 Reconciliation of the Group’s share of Equity accounted investees EBITA to the share of results of Equity accounted investees per the
Group income statement is as follows:
EBITA of Equity accounted investees
Adjustment in respect of unrealised profit on sales to the Group
Amortisation
Finance costs
Income Tax
Share of results of Equity accounted investees
Non-controlling interest
Share of results of Equity accounted investees per the Group income statement
2017
€’m
63.4
(0.2)
(1.7)
(7.1)
(3.1)
0.4
(0.2)
51.5
2016
€’m
42.9
–
(0.6)
(6.5)
(9.8)
–
–
26.0
G 4.3 Total Group Pro-forma EBITA:
Continuing operations
Equity accounted investees
40% share of Discontinued operations
Total Group Pro-forma EBITA
Reference to the Financial
Statements/Glossary
G 4.1
G 4.1
2016
Reported
€’m
273.3
42.9
13.4
329.6
2016
Retranslated
€’m
267.6
42.2
13.4
323.2
2017
Actual
€’m
Constant currency
growth
€’m
283.2
63.4
4.4
351.0
5.8%
50.2%
(67.2%)
8.6%
G 5. EBITA margin
EBITA margin is defined as EBITA as a percentage of revenue. Total Group EBITA margin is defined as Total Group EBITA as a percentage of Total
Group revenue. EBITA margin references throughout the annual report are on a pre-exceptional basis unless otherwise indicated.
G 5.1 2017 EBITA margin
2017 Actual
2017 EBITA
2017 Revenue
EBITA margin
Reference to the Financial
Statements/Glossary
G 4.1
G 3.1
GPN
€’m
169.7
1,121.1
GN
€’m
113.5
1,266.0
Continuing
operations
– wholly owned
€’m
283.2
2,387.1
Continuing
operations
– Equity
accounted
investees
€’m
63.4
1,093.4
Discontinued
operations
€’m
11.1
386.5
Total Group
€’m
357.7
3,867.0
15.1%
9.0%
11.9%
5.8%
2.9%
9.3%
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215
G 5.2 2017 EBITA margin growth on constant currency basis
2016 vs 2017
2016 EBITA-retranslated
2016 Revenue-retranslated
EBITA margin
2017 Actual
Constant currency growth
Reference to the Financial
Statements/Glossary
G 4.1
G 3.1
G 5.1
Continuing
operations
– wholly
owned
€’m
267.6
2,186.9
12.2%
Continuing
operations
– Equity
accounted
investees
€’m
42.2
805.8
5.2%
Discontinued
operations
€’m
33.5
644.1
5.2%
Total Group
€’m
343.3
3,636.8
9.4%
GPN
€’m
158.6
986.3
16.1%
GN
€’m
109.0
1,200.6
9.1%
15.1%
-100 bps
9.0%
-10 bps
11.9%
-30 bps
5.8%
+60 bps
2.9%
-230 bps
9.3%
-10 bps
G 6. EBITDA
EBITDA is defined as earnings before interest, tax, depreciation (net of grant amortisation) and amortisation. EBITDA references throughout the
annual report are on a pre-exceptional basis unless otherwise indicated.
G 6.1 EBITDA – Continuing operations
Earnings before interest, tax and amortisation (pre-exceptional EBITA)
Depreciation
Grant amortisation
Earnings before interest, tax, depreciation and amortisation (pre-exceptional
EBITDA) – continuing operations
G 6.2 EBITDA – Discontinued operations
Reference to the Financial
Statements/Glossary
Group income statement
Note 5
Note 5
Reference to the Financial
Statements/Glossary
Earnings before interest, tax and amortisation (pre-exceptional EBITA)
Depreciation
Grant amortisation
Note 10
Note 10
Note 10
Earnings before interest, tax, depreciation and amortisation (pre-exceptional
EBITDA) – discontinued operations
G 6.3 2017 EBITDA – Continuing and discontinued operations
2017
€’m
283.2
45.1
(0.1)
2016
€’m
273.3
41.2
(0.2)
328.2
314.3
2017
€’m
10.6
4.0
(0.2)
14.4
2016
€’m
31.7
9.2
(0.2)
40.7
Earnings before interest, tax and amortisation (pre-exceptional EBITA)
Depreciation
Grant amortisation
G 6.1/G 6.2
G 6.1/G 6.2
G 6.1/G 6.2
Earnings before interest, tax, depreciation and amortisation (pre-
exceptional EBITDA) – 2017 continuing and discontinued
283.2
45.1
(0.1)
328.2
10.6
4.0
(0.2)
14.4
Reference to the Financial
Statements/Glossary
Continuing
Operations
€’m
Discontinued
Operations
€’m
G 6.4 2016 EBITDA – Continuing and discontinued operations
Earnings before interest, tax and amortisation (pre-exceptional EBITA)
Depreciation
Grant amortisation
G 6.1/G 6.2
G 6.1/G 6.2
G 6.1/G 6.2
Earnings before interest, tax, depreciation and amortisation (pre-
exceptional EBITDA) – 2016 continuing and discontinued
273.3
41.2
(0.2)
314.3
31.7
9.2
(0.2)
40.7
Reference to the Financial
Statements/Glossary
Continuing
Operations
€’m
Discontinued
Operations
€’m
Continuing and
Discontinued
Operations
€’m
293.8
49.1
(0.3)
342.6
Continuing and
Discontinued
Operations
€’m
305.0
50.4
(0.4)
355.0
216
Glanbia plc | Annual Report and Financial Statements 2017
Glossary
Key Performance Indicators and non-IFRS performance measures continued
G 7. 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 (excluding amortisation of software costs), net of related tax, divided by the weighted average number of ordinary shares in issue
during the year. During the current year the calculation of Adjusted Earnings Per Share was amended to exclude the cost of software amortisation
within the earnings calculation. The Group believes that adjusted EPS is a better measure of underlying performance than Basic EPS as it
excludes exceptional items (net of related tax) that are not related to on-going operational performance and intangible asset amortisation, which
allows better comparability of companies that grow by acquisition to those that grow organically.
Adjusted EPS is one of the Group’s Key Performance Indicators. 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.
Continuing and Discontinued operations
Profit attributable to equity holders of the Company
Amortisation and impairment of intangible assets (excluding software
amortisation net of related tax) of €7.5 million (2016: €7.3 million)
Reference to the Financial
Statements/Glossary
Group income statement
Exceptional items (net of related tax)
Note 6
Re-presented *
Constant currency
2016
€’m
208.6
26.7
14.5
2017
€’m
329.4
31.7
(98.0)
Year 2016
€’m
211.8
27.3
14.8
Adjusted net income
263.1
249.8
253.9
Weighted average number of ordinary shares in issue
Note 14
295,010.5
295,130.8
295,130.8
Adjusted Earnings Per Share (cent)
Constant currency growth
89.17
5.3%
84.66
86.02
* As represented to reflect the impact of discontinued operations (note 10) and the exclusion of software amortisation net of related tax.
G 8. Pro-forma Adjusted Earnings Per Share
Pro-forma Adjusted Earnings Per Share is defined as the net profit from continuing operations attributable to the equity holders of Glanbia plc,
before exceptional items and intangible asset amortisation net of related tax (excluding amortisation of software costs) plus the Group’s share
(40%) of the profits after tax of Dairy Ireland and related assets, before exceptional items and intangible asset amortisation net of related tax
(excluding amortisation of software costs).
The Group believes that pro-forma Adjusted Earnings Per Share is more reflective of the revised structure of the Group following the disposal of
60% of Dairy Ireland and related assets.
G 8.1 Reconciliation of prior year Adjusted Earnings Per Share to pro-forma Adjusted Earnings Per Share
Adjusted EPS on a pro-forma basis has been calculated to set out the EPS on the basis that the Dairy Ireland transaction had taken place on
3 January 2016 reflecting the revised structure of the Group following the sale of Dairy Ireland.
Profit attributable to equity holders of the Parent
Amortisation of intangible assets (net of related tax)
Amortisation of Equity accounted investees (net of related
tax)
Notes
Reference to the Financial
Statements/Glossary
Group income statement
Exceptional items (net of related tax)
Group income statement
Constant
Currency
Pro-forma
2016
€’m
208.6
31.1
0.5
14.5
Pro-forma
2016
€’m
211.8
31.6
0.5
14.8
Restated
2016
€’m
211.8
31.6
Reported
2016
€’m
211.8
31.6
0.5
14.8
0.5
14.8
Adjusted net income
254.7
258.7
258.7
258.7
(a)
Software amortisation (net of related tax)
Discontinued operations adjusted net income (100%)
(b)
40% share of discontinued operations adjusted net income (c)
Adjusted net income (pro-forma)
(4.8)
(27.6)
11.1
(4.8)
(27.6)
11.1
(4.8)
–
–
–
–
–
233.4
237.4
253.9
258.7
Weighted average number of ordinary shares in issue
Adjusted Earnings Per Share (cent)
Note 14
295,130.8 295,130.8 295,130.8 295,130.8
87.66
86.02
80.40
79.05
(a) Amortisation in respect of software is no longer being added back when calculating earnings. Adjustment reflects the reduction for the software element of amortisation net of related tax
added back in prior year.
(b) Discontinued activities – removal of 100% of the profit after tax before exceptional items and intangible asset amortisation (excluding amortisation of software costs) net of related tax from
discontinued activities. The ongoing retained element of Dairy Ireland (40%) is added back as part of adjustment (c) below.
(c) Add back of the 40% of Dairy Ireland profit after tax before exceptional items and intangible asset amortisation (excluding amortisation of software costs) net of related tax (reflecting Dairy
Ireland as a Joint Venture from 3 January 2016).
Glanbia plc | Annual Report and Financial Statements 2017
217
G 8.2 Pro-forma Adjusted Earnings Per Share
Adjusted net income
Discontinued operations adjusted net income (100%)
40% of Discontinued operations adjusted net income
Adjusted net income (pro-forma)
Reference to the Financial
Statements/Glossary
G 7
Weighted average number of ordinary shares in issue
Adjusted Earnings Per Share (cent) pro-forma
Constant currency growth
Note 14
Pro-forma
2017
€’m
Constant currency
Pro-forma 2016
€’m
Pro-forma
2016
€’m
253.9
(27.6)
11.1
237.4
249.8
(27.6)
11.1
233.3
295,130.8
79.05
295,130.8
80.40
263.1
(10.1)
4.0
257.0
295,010.5
87.11
10.2%
G 9. Financing Key Performance Indicators
The following are the financing key performance indicators defined as per the Group’s financing agreements.
G 9.1 Net debt: adjusted EBITDA
Net debt: adjusted EBITDA is calculated as net debt at the end of the period divided by adjusted EBITDA. Net debt is calculated as total financial
liabilities less cash and cash equivalents. Adjusted EBITDA is calculated as EBITDA for the wholly owned businesses plus dividends received from
Equity accounted investees, 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 EBITDA is a rolling 12 month measure.
Financial liabilities
Cash and cash equivalents
Reference to the Financial
Statements/Glossary
Note 26
Note 22
2017
€’m
529.9
(162.2)
2016
€’m
656.4
(218.9)
Net debt
Group statement of cash flows/Note 31
367.7
437.5
EBITDA
Dividends received from Equity accounted investees
G 6.1/6.4
Group statement of cash flows
328.2
15.8
355.0
13.8
Adjusted EBITDA
Net debt: adjusted EBITDA
344.0
368.8
1.07
1.19
G 9.2 Adjusted EBIT: Net finance cost
Adjusted EBIT: net finance cost is calculated as earnings before interest and tax plus dividends received from Equity accounted investees divided by
net finance cost. Net finance cost comprises finance costs less finance income per the Group income statement plus capitalised borrowing costs.
Operating profit – pre-exceptional (continuing and discontinued operations)
Dividends received from Equity accounted investees
G 9.2.1
Group statement of cash flows
Reference to the Financial
Statements/Glossary
Adjusted EBIT
Finance costs
Finance income
Capitalised borrowing costs
Net finance costs
Adjusted EBIT: net finance cost
G 9.2.2
Note 12
Note 12
2017
€’m
250.0
15.8
2016
€’m
265.3
13.8
265.8
279.1
40.1
(3.0)
0.8
37.9
7.0
25.2
(2.4)
1.5
24.3
11.5
The Adjusted EBIT: net finance cost calculation includes a once-off finance cost of €14 million recognised as an exceptional item in 2017
(see note 6). Excluding this once off cost the Adjusted EBIT: net finance cost would be 11.2 times.
218
Glanbia plc | Annual Report and Financial Statements 2017
Glossary
Key Performance Indicators and non-IFRS performance measures continued
G 9. Financing Key Performance Indicators continued
G 9.2 Adjusted EBIT: Net finance cost continued
G 9.2.1 Operating profit – pre-exceptional (continuing and discontinued operations)
Continuing operations
Discontinued operations
Reference to the Financial
Statements/Glossary
Group income statement
Note 10
2017
€’m
240.1
9.9
2016
€’m
235.9
29.4
Operating profit – pre-exceptional (continuing and discontinued operations)
250.0
265.3
G 9.2.2 Finance costs (continuing and discontinued operations)
Continuing operations
Discontinued operations
Finance costs (continuing and discontinued operations)
Reference to the Financial
Statements/Glossary
Group income statement
Note 10
2017
€’m
40.0
0.1
40.1
2016
€’m
25.2
–
25.2
G 10. 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 plan 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. Refer to
note 6 of the financial statements for an analysis of exceptional items recognised in 2017 and 2016.
G 11. Volume and pricing increase/(decrease)
Volume increase/(decrease) represents the impact of sales volumes within the revenue movement year on year, excluding volume from
acquisitions, on a constant currency basis.
Pricing increase/(decrease) represents the impact of sales pricing within the revenue movement year on year, excluding acquisitions, on a
constant currency basis.
G 11.1. Reconciliation of volume and pricing increase/(decrease) to constant currency revenue growth
Glanbia Performance Nutrition (GPN)
Glanbia Nutritionals (GN)
Reference to
the Financial
Statements/Glossary
Volume increase/
(decrease)
%
Pricing increase/
(decrease)
%
Acquisitions/
Disposals
%
Revenue increase/
(decrease)
%
G 3.1
G 3.1
7.1%
3.9%
(1.5%)
1.5%
8.1%
0.0%
13.7%
5.4%
2017 growth/(decline) % – continuing operations revenue
G 3.1
5.3%
0.2%
3.7%
9.2%
2017 growth/(decline) % – Equity accounted investees
G 3.1
4.3%
17.1%
14.3%
35.7%
G 11.2. Reconciliation of volume and pricing increase/(decrease) to constant currency revenue growth – Glanbia Nutritionals
US Cheese
Nutritional Solutions
Reference to
the Financial
Statements/Glossary
Volume increase/
(decrease)
%
Pricing increase/
(decrease)
%
Acquisitions/
Disposals
%
Revenue increase/
(decrease)
%
G 3.3
G 3.3
1.7%
7.2%
0.1%
3.7%
0.0%
0.0%
1.8%
10.9%
2017 growth/(decline) % – Glanbia Nutritionals revenue
G 3.3
3.9%
1.5%
0.0%
5.4%
G 12. Like for like branded revenue growth/(decline)
This represents the sales growth/(decline) year on year on branded sales, excluding acquisitions, on a constant currency basis.
Glanbia plc | Annual Report and Financial Statements 2017
219
G 13. Effective tax rate
The effective tax rate is defined as the pre-exceptional income tax charge divided by the profit before tax less share of results of Equity accounted
investees.
Profit before tax
Less share of results of Equity accounted investees
Income tax (pre-exceptional)
Effective tax rate
Reference to the Financial
Statements/Glossary
Group income statement
Group income statement
Group income statement
2017
€’m
259.9
(42.8)
217.1
38.3
Restated
2016
€’m
239.1
(26.0)
213.1
39.3
17.6%
18.4%
G 14. Average interest rate
The average interest rate is defined as the annualised net finance costs (pre-capitalised borrowing costs) divided by the average net debt during
the reporting period.
G 15. Capital expenditure
Business sustaining capital expenditure
Strategic capital expenditure
Total capital expenditure
Reference to the Financial
Statements/Glossary
Capital expenditure reconciled to the Group statement of cash flows:
Purchase of property, plant and equipment
Purchase of intangible assets
Group statement of cash flows
Group statement of cash flows
Total capital expenditure per the Group statement of cash flows
2017
€’m
23.8
48.7
72.5
38.0
34.5
72.5
2016
€’m
32.4
57.1
89.5
65.4
24.1
89.5
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.
G 16. 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 35) is a
measure of the success of the Group’s working capital management programme.
Inventories
Trade and other receivables
Trade and other payables
Net operating working capital
Reference to the Financial
Statements/Glossary
Group balance sheet
Group balance sheet
Note 30
2017
€’m
321.6
302.4
(318.0)
306.0
2016
€’m
366.5
327.1
(460.3)
233.3
220
Glanbia plc | Annual Report and Financial Statements 2017
Glossary
Key Performance Indicators and non-IFRS performance measures continued
G 17. Operating cash flow and free cash flow
Operating cash flow is defined as pre-exceptional EBITDA of the wholly owned businesses net of business sustaining capital expenditure and
working capital movements, excluding exceptional cash flows.
Operating cash flow is one of the Group’s Key Performance Indicators (see pages 18 to 19). Operating cash flow is one of the performance
conditions in Glanbia’s Annual Incentive Plan. See Remuneration Committee report on pages 80 to 105 for more information.
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, loans to Equity accounted investees, equity dividends paid, exceptional costs paid and currency translation movements.
Earnings before interest, tax, depreciation and amortisation
(pre-exceptional EBITDA)
Movement in working capital (pre-exceptional)
Business sustaining capital expenditure
Operating cash flow
Net interest and tax paid
Dividends from Equity accounted investees
Other outflows
Reference to the Financial
Statements/Glossary
G 6.3/6.4
G 17.3
G 15
G 17.4
Group statement of cash flows
G 17.5
2017
€’m
342.6
(170.8)
(23.8)
148.0
(57.9)
15.8
(5.5)
2016
€’m
355.0
31.9
(32.4)
354.5
(52.9)
13.8
(4.4)
Free cash flow
100.4
311.0
G 17.1 Reconciliation of free cash flow and operating cash flow to the Group statement of cash flows in the Financial Statements:
Reference to the Financial
Statements/Glossary
Cash generated from operating activities
Add back exceptional cash flow in the year
Less business sustaining capital expenditure
Non-cash items not adjusted in computing operating cash flow:
Impairment of tangible assets (excluding exceptional items 2017: €8.1m)
Write down of inventories
Insurance proceeds
Impairment of intangible assets
Cost of share options
Difference between pension charge and cash contributions
Profit/(loss) on disposal of property, plant and equipment
Note 34
G 17.2
G 15
Note 34
Note 34
Note 34
Note 34
Note 34
Note 34
Note 34
Operating cash flow
Net interest and tax paid
Dividends from Equity accounted investees
Other outflows
G 17.4
Group statement of cash flows
G 17.5
2017
€’m
162.2
17.3
(23.8)
(2.7)
(0.5)
–
–
(7.8)
4.2
(0.9)
148.0
(57.9)
15.8
(5.5)
2016
€’m
374.2
19.5
(32.4)
(0.5)
(2.5)
(1.9)
(0.5)
(7.7)
6.0
0.3
354.5
(52.9)
13.8
(4.4)
Free cash flow
100.4
311.0
G 17.2 Exceptional cash flow in the year:
Pre-tax exceptional profit/(loss) for year
Intangible asset amortisation
Finance costs
Deferred tax
Profit on disposal of Dairy Ireland
Impairment of tangible asset
Non-cash element of exceptional charge
Current year exceptional items paid in the year
Prior year exceptional items paid in the year
Reference to the Financial
Statements/Glossary
Note 6
Note 6
Note 6
Note 6
Note 6
Note 6
Note 34
Note 6
Exceptional cash inflow/(outflow) in the year – included in operating cash flow
Interest paid
Disposal of undertaking an Investment in Equity accounted investees
Note 6
Group statement of cash flows
Total exceptional cash inflow/(outflow) paid in the year
2017
€’m
53.1
19.4
14.0
(8.7)
(96.3)
8.1
3.0
(7.4)
(9.9)
(17.3)
(14.0)
208.8
177.5
2016
€’m
(17.5)
–
–
–
–
–
7.1
(10.4)
(9.1)
(19.5)
–
–
(19.5)
Glanbia plc | Annual Report and Financial Statements 2017
221
Reference to the Financial
Statements/Glossary
Note 6
Note 35
Reference to the Financial
Statements/Glossary
Group statement of cash flows
Group statement of cash flows
Group statement of cash flows
Group statement of cash flows
G17.2
2017
€’m
(170.8)
(9.9)
(180.7)
2017
€’m
3.1
(39.5)
(34.7)
(0.8)
14.0
2016
€’m
31.9
(9.1)
22.6
2016
€’m
2.4
(24.8)
(29.0)
(1.5)
–
(57.9)
(52.9)
G 17.3 Movement in working capital:
Movement in working capital (pre-exceptional)
Prior year exceptional costs paid in the year
Change in net working capital
G 17.4 Net interest and tax paid:
Interest received
Interest paid
Tax paid
Interest paid in relation to property, plant and equipment
Interest paid – exceptional item
Net interest and tax paid
G 17.5 Other outflows
Cost of share based payments
Difference between pension charge and cash contributions
(Profit)/loss on disposal of property, plant and equipment
Net redemption and additions in available for sale financial assets
Purchase of own shares
Sale of shares held by subsidiary
Impairment of tangible assets (excluding exceptional items 2017: €8.1m)
Write down of inventories
Proceeds from property, plant and equipment
Impairment of intangible assets
Insurance proceeds
Dividends paid to non–controlling interests
Capital grants received
Reference to the Financial
Statements/Glossary
Note 34
Note 34
Note 34
Group statement of cash flows
Group statement of cash flows
Group statement of cash flows
Note 34
Note 34
Group statement of cash flows
Note 34
Note 34
Group statement of cash flows
Group statement of cash flows
2017
€’m
(7.8)
4.2
(0.9)
(0.5)
16.2
(2.4)
(2.7)
(0.5)
(0.1)
–
–
–
–
5.5
G 17.6 Reconciliation of free cash flow and operating cash flow to pro-forma free cash flow and operating cash flow:
Operating cash flow
Adjustments for discontinued operations:
EBITDA – discontinued operations
Working capital – discontinued operations
Business sustaining capital expenditure – discontinued operations
Pro-forma operating cash flow
Net interest and tax paid
Dividends from Equity accounted investees
Other outflows
Pro-forma free cash flow
Reference to the Financial
Statements/Glossary
G 17
G 6.2
Group statement of cash flows
G 17.5
2016
€’m
(7.7)
6.0
0.3
0.5
10.4
–
(0.5)
(2.5)
–
(0.5)
(1.9)
0.9
(0.6)
4.4
2017
€’m
148.0
(14.4)
47.5
3.9
185.0
(58.4)
15.8
(5.5)
(136.9)
222
Glanbia plc | Annual Report and Financial Statements 2017
Glossary
Key Performance Indicators and non-IFRS performance measures continued
G 18. Return on capital employed (ROCE)
ROCE is defined as the Group’s earnings before interest, and amortisation (net of related tax) plus the Group’s share of the results of Equity
accounted investees 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 less deferred tax liabilities excluding all financial liabilities, retirement benefit assets
and cash. 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 18 to 19). ROCE is one of the performance conditions in Glanbia’s Long Term
Incentive Plan. See Remuneration Committee report on pages 80 to 105 for more information.
Operating profit – pre-exceptional
Tax on operating profit
Amortisation and impairment of intangible assets (net of related tax)
Share of results of Equity accounted investees
Adjustment for discontinued operations
Return
Total assets
Current liabilities
Deferred tax liabilities
Less cash and cash equivalents
Less current financial liabilities
Less retirement benefit assets
Plus accumulated amortisation
Capital employed before acquisition adjustment
Adjustment for acquisitions
Capital employed
Average capital employed
Return on capital employed
G 18.1 Adjustment for discounted operations (Dairy Ireland):
Operating profit – discontinued operations
Amortisation net of tax
Tax on EBIT
Share of results of Equity accounted for investees
Total adjustment for discontinued operations
Reference to the Financial
Statements/Glossary
Group income statement
Group income statement
G 18.1
Group balance sheet
Group balance sheet
Group balance sheet
Group balance sheet
Group balance sheet
Group balance sheet
Note 17
G 18.2
Reference to the Financial
Statements/Glossary
Note 10
2017
€’m
240.1
(42.3)
33.7
42.8
9.6
283.9
2,483.0
(398.3)
(125.6)
(162.2)
30.3
(1.7)
243.1
2,068.6
147.2
2,215.8
2,125.6
2016
€’m
265.4
(47.4)
31.6
27.6
–
277.2
2,708.7
(567.6)
(158.2)
(218.9)
32.2
(2.6)
241.8
2,035.4
–
2,035.4
1,994.0
13.4%
13.9%
2017
€’m
9.9
0.6
(1.2)
0.3
9.6
2016
€’m
–
–
–
–
–
G 18.2. Adjustment for acquisitions
This adjustment is required to ensure the capital employed of the acquisitions Amazing Grass and Body & Fit are appropriately time apportioned
in the denominator.
G 19. 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 18 to 19). TSR is one of the performance conditions in Glanbia’s Long Term
Incentive Plan. See Remuneration Committee report on pages 80 to 105 for more information.
G 20. Dividend Pay-out Ratio
Dividend pay-out ratio is defined as the annual dividend per ordinary share divided by the pro-forma Adjusted Earnings Per Share. The dividend
pay-out ratio provides an indication of the value returned to shareholders relative to the Group’s total earnings.
Pro-forma adjusted Earnings Per Share (cent)
Dividend recommended/paid per ordinary share (cent)
Dividend pay-out %
Reference to the Financial
Statements/Glossary
G. 8.2
Note 15
2017
€ cent
87.11
22.00
25.3%
2016
€ cent
80.40
13.31
16.6%
Glanbia plc | Annual Report and Financial Statements 2017
223
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.
Managing your shareholding
Computershare Investor Services (Ireland) Limited (Computershare) maintains the Company’s register of members. Should a shareholder have
any queries in respect of their shareholding, they should contact Computershare directly using the contact details provided below:
Computershare Investor Services (Ireland) Limited, Heron House, Corrig Road, Sandyford Industrial Estate, Dublin 18, Ireland.
Contact details:
Telephone number
Within Ireland
Outside Ireland
01 247 5349
+353 1 247 5349
or by logging on to: www.investorcentre.com/ie/contactus
Share price data
Share price as at financial year end
Market capitalisation
Share price movements during the year:
– high
– low
The current share price of Glanbia plc ordinary shares can be accessed at: http://www.glanbia.com/prices-delayed
Shareholder analysis
Geographic Location*
Institutional
North America
UK
Rest of world
Retail
Glanbia Co–op Society Ltd
Shareholder analysis
North America
UK
Rest of the World
Retail
Glanbia Co-op Society Ltd
2017
€
14.90
4,411m
19.21
14.46
2016
€
15.78
4,671m
18.75
14.00
Number
of shares held
42,368,132
41,390,693
40,866,751
78,143,867
93,276,241
% of
Total
14.3
14.0
13.8
26.4
31.5
Share capital
The authorised share capital of the Company at 30 December 2017 was 350,000,000 ordinary shares at €0.06 each. The issued share capital at
30 December 2017 was 296,045,684 ordinary shares of €0.06 each.
224
Glanbia plc | Annual Report and Financial Statements 2017
Shareholder Information continued
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
30 December 2017 and 20 February 2018 in accordance with the requirements of Rule 7 of the Transparency Rules issued by the Central Bank
under section 22 of the Investment Funds, Companies and Miscellaneous Provisions Act, 2006.
Shareholder
Glanbia Co-operative Society Limited
The Capital Group Companies, Inc/Capital Research and Management Company
Standard Life Investments (Holdings) Limited
Mawer Investment Management Limited
Standard Life Aberdeen plc affiliated investment management entities
Shareholder
Glanbia Co-operative Society Limited
The Capital Group of Companies, Inc/Capital Research and Management Company
Standard Life Investments (Holdings) Limited
Mawer Investment Management Limited
Standard Life Aberdeen plc affiliated investment management entities
No. of ordinary
shares as at
30 December 2017
% of issued share
capital as at
30 December 2017
93,276,241
19,562,747
10,488,025
8,900,549
8,895,151
31.5
6.6
3.5
3.0
3.0
No. of ordinary
shares as at
20 February 2018
% of issued share
capital as at
20 February 2018
93,276,241
19,562,747
10,488,025
12,004,534
8,895,151
31.5
6.6
3.5
4.1
3.0
Employee share schemes
The Company operates a number of employee share schemes. At 30 December 2017 1,127,066 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 5.91 cents per share was paid in respect of ordinary shares on 6 October 2017.
Subject to shareholders’ approval, a final dividend of 16.09 cents per share will be paid in respect of ordinary shares on 27 April 2018 to
shareholders on the register of members on 16 March 2018. 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.
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.
Shareholders may visit: www.glanbia.com/shareholder-centre for up-to-date investor information. Electronic copies of current and past annual
and half-yearly reports can be downloaded from the website. Current and historic share prices, news, updates and presentations may also be
obtained. Shareholders may also register to receive future shareholder communications electronically.
Electronic communications
The Transparency (Directive 2004/109/EC) Regulations 2007 recognises the growing importance of electronic communications. The Group
therefore provides documentation and communications to all shareholders via our website unless a shareholder has specifically elected to receive
a hard copy.
Using electronic communications enables fast receipt of documents, helps the environment by significantly reducing the amount of paper used to
communicate with shareholders and reduces associated printing, mailing and distribution costs.
Shareholders can also vote online for the next Annual General Meeting (“AGM”). This is a quick and easy option, using the proxy voting service
provided by Computershare. Shareholders may use this facility by visiting: www.eproxyappointment.com.
Financial calendar
Announcement of final results for 2017
Ex-dividend date
Record date for dividend
Date for receipt of proxy forms
Record date for AGM
AGM
Dividend payment date
Glanbia plc | Annual Report and Financial Statements 2017
225
21 February 2018
15 March 2018
16 March 2018
23 April 2018
23 April 2018
25 April 2018
27 April 2018
AGM
The AGM will be held on 25 April 2018. The notice of meeting, together with details of the business to be conducted at the meeting will be
available 20 business days before the meeting on: www.glanbia.com/agm
The voting results for the 2018 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 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 2018 AGM
the record date is 5:00 pm on 23 April 2018 (or in the case of an adjournment 5:00 pm, on the day prior to the day before the time fixed for the
adjourned meeting).
Appointment of proxy
Where a shareholder is unable to attend the AGM in person, a proxy (or proxies) may be appointed to attend, speak, ask questions and vote on
their behalf. For this purpose a form of proxy is posted to all shareholders. Copies of these documents may be requested by telephoning the
Company’s Registrar on 01 247 5349 (within Ireland), 00353 1 247 5349 (outside Ireland), or by logging on to www.investorcentre.com/ie/
contactus or by writing to the Group Secretary at Glanbia plc, Glanbia House, Kilkenny, Ireland.
Alternatively, a shareholder may appoint a proxy electronically, by visiting: www.eproxyappointment.com and submitting their proxy details. They
will be asked to enter the Control Number, the Shareholder Reference Number (“SRN”) and PIN and agree to certain terms and conditions. The
Control Number, the SRN and the PIN can be found on the top of the form of proxy.
CREST members who wish to appoint a proxy or proxies through the CREST electronic proxy appointment service may do so for the meeting
and any adjournment(s) thereof by using the procedures described in the CREST manual.
How to exercise shareholders rights
Shareholders have several ways to exercise their right to vote:
• by attending the AGM in person;
• by appointing the Chairman or another person as a proxy to vote on their behalf;
• by visiting www.ieproxyappointment.com and submitting their proxy details; 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.
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 2018 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 15 March 2018 (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.
226
Glanbia plc | Annual Report and Financial Statements 2017
Shareholder Information continued
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 2018 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 15 March 2018 (i.e. 42
days before the AGM) by post to the Group Secretary at Glanbia plc, Glanbia House, Kilkenny, Ireland or by email to ir@glanbia.ie /info@glanbia.
ie. A resolution cannot be included on the 2018 AGM agenda unless it is received at either of these addresses by this deadline. Furthermore,
shareholders are reminded that there are provisions in company law which impose other conditions on the right of shareholders to propose
resolutions at the general meeting of a company.
How to ask a question before or at the meeting
The AGM is an opportunity for shareholders to put a question to the Chairman during the question and answer session. Before the 2018 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 2018
AGM (i.e. 20 April 2018) 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.
Notes
Glanbia plc | Annual Report and Financial Statements 2017
227
228
Glanbia plc | Annual Report and Financial Statements 2017
Notes
Glanbia plc | Annual Report and Financial Statements 2017
229
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.
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
Deloitte,
Deloitte & Touche House,
Earlsfort Terrace,
Dublin 2,
Ireland.
Solicitors
Arthur Cox,
Earlsfort Centre,
Earlsfort Terrace,
Dublin 2,
Ireland.
Pinsent Masons,
3 Colmore Circus,
Birmingham B4 6BH,
United Kingdom.
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Glanbia plc
Glanbia House
Kilkenny
Ireland
Tel: +353 56 777 2200
Email: ir@glanbia.com
www.glanbia.com