Glanbia plc
Annual Report and Financial Statements 2020
Delivering
Essential
Nutrition
Every Day
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S T R A T E G I C R E P O R T
D I R E C T O R S ’ R E P O R T
F I N A N C I A L S T A T E M E N T S
Financial Highlights
Glanbia at a Glance
Investment Case
Group Chairman’s Statement
Group Managing Director’s Review
Our Strategy
Our People
Our Approach to Stakeholders
Business Model
Key Performance Indicators
Operations Review
Group Finance Director’s Review
Sustainability
Risk Management
Principal Risks and Uncertainties
Corporate Governance Report
Introduction from the Chairman
Board of Directors and Senior Management
Board Highlights 2020
Board Members’ Stakeholder Engagement
Division of Responsibilities
Composition, Succession and Evaluation
62
62
65
70
74
76
78
Audit, Risk, Internal Control and Remuneration 82
Compliance Statements
Audit Committee Report
83
84
Nomination and Governance Committee Report 90
Remuneration Committee Report
Other Statutory Information
Directors’ Responsibility Statement
96
118
124
01
02
04
16
18
21
24
27
28
30
32
42
48
54
58
Independent Auditor’s Report
Group Financial Statements
Notes to the Financial Statements
Company Financial Statements
O T H E R I N F O R M A T I O N
Glossary of KPIs and non-IFRS
Performance Measures
Shareholder Information
Contacts
127
136
141
207
214
222
226
Glanbia is a global nutrition
group dedicated to delivering
better nutrition for every step
of life’s journey. We deliver
essential nutrition every day.
We are committed to finding
better, healthier and more
sustainable nutritional products
that fit the lifestyles and needs
of people around the world.
We are constantly innovating,
developing and reinventing
our brands and ingredients.
What makes us unique:
p04 Our strong culture and values
p06 Ambitious for future growth
p08 Strong brands and market positions
p10 Powerful consumer trends
p12 Innovative business model
p14 Robust balance sheet
1
“The commitment of our people
coupled with the fundamental
strength of our brands and
ingredients enabled us to deliver
a resilient performance through
the challenges of 2020.”
Siobhán Talbot Group Managing Director
Financial Highlights
Revenue
Return on Capital Employed
€3.8bn
(2019: €3.9bn)
-1.4%1/+0.6%2
9.0%
(2019: 10.9%)
-190bps
Sales volumes
GPN Like-for-Like (LFL) branded
Sales volumes
Nutritional Solutions LFL
-10.9%
(2019: -8.9%)
+2.4%
(2019: +7.0%)
Adjusted Earnings Per Share
Basic Earnings Per Share
Profit after tax
Net debt
73.78c
(2019: 88.10c)
-16.3%1/-14.9%2
48.72c
(2019: 61.04c)
-20.2%1/-18.9%2
€143.8m
€493.9m
(2019: €180.2m)
-€36.4m
(2019: €614.3m)
-€120.4m
EBITA (pre-exceptional)
EBITA margin (wholly-owned)
OCF3 cash conversion
€209.6m
(2019: €276.8m)
-24.3%1/-22.6%2
1. Reported currency
2. Constant currency
3. Operating cashflow
5.5%
(2019: 7.1%)
-160bps1,2
122.4%
(2019: 86%)
+3,640bps
For definitions and more information on constant currency balance and other
performance measures see the glossary on pages 214 to 221.
Forward-looking statements
Glanbia plc (the ‘Group’) has made forward-looking statements in this Annual Report that are based on management’s beliefs and assumptions and on information currently available to
management. Forward-looking statements include, but are not limited to, information concerning the Group’s possible or assumed future results of operations, business strategies, financing
plans, competitive position, potential growth opportunities, potential operating performance improvements, the effects of competition and the effects of future legislation or regulations.
Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words ‘believe,’ ‘develop,’ ‘ensure’,
‘arrive,’ ‘achieve,’ ‘anticipate,’ ‘maintain,’ ‘grow,’ ‘aim,’ ‘deliver,’ ‘sustain,’ ‘should’ or the negative of these terms or similar expressions. Forward-looking statements involve risks, uncertainties
and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not place undue reliance on any forward-looking statements.
The risk factors included at pages 58 to 61 of this Annual Report could cause the Group’s results to differ materially from those expressed in forward-looking statements. There may be other
risks and uncertainties that the Group is unable to predict at this time or that the Group currently does not expect to have a material adverse effect on its business. These forward-looking
statements are made as of the date of this Annual Report. The Group expressly disclaims any obligation to update these forward-looking statements other than as required by law. The
forward-looking statements in this Annual Report do not constitute reports or statements published in compliance with any of Regulations 4 to 9 and 26 of the Transparency (Directive
2004/109/EC) Regulations 2007. As an Irish incorporated company, the Strategic report does not constitute a strategic report for the purposes of the UK Companies Act 2006 (Strategic
Report and Directors’ Report) Regulations 2013 and the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013, and the Remuneration
Committee report does not constitute a remuneration report for the purposes of the UK Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 2
Glanbia plc | Annual Report and Financial Statements 2020
Glanbia at a Glance
Who we are:
The Glanbia Group consists of
our performance and lifestyle nutrition
brands, our nutritional solutions
business, and our dairy joint ventures.
Glanbia Performance Nutrition
The Glanbia Performance Nutrition family has a portfolio of
leading brands in sports and lifestyle nutrition. Our mission
is to inspire people everywhere to achieve their performance
and healthy lifestyle goals. Our flagship brands are OPTIMUM
NUTRITION™ and SLIMFAST™ which occupy leadership
positions in sports nutrition and weight control respectively.
Our brand portfolio also includes AMAZING GRASS™, think!™
BODY&FIT™, NUTRAMINO™, BSN™ and ISOPURE™. Our brands
are sold in over 100 countries in shops, stores and online.
Read more on page 32
What we do:
Collectively, we offer expertise
in sports nutrition, nutritional and
functional ingredients and consumer
dairy products. We employ a team of
7,632* people, work with global food
and beverage companies, and sell
our award-winning and market-leading
brands and ingredients in over
100 countries worldwide.
#1
Performance Nutrition
brand globally
Where we are going:
Global reach
Our ambition is to be one of the
world’s top performing nutrition
companies trusted to enrich lives
every day.
We are taking our sports and lifestyle brands to new consumers,
new markets and new channels worldwide. We are looking
beyond our core to new products and new formats for our
consumers. In Glanbia Nutritionals we continue to innovate
our functional and nutritional ingredients business and widen
our capabilities and customer reach.
3
Glanbia Nutritionals
Joint Ventures
Glanbia Nutritionals (GN) is a science-led, innovative producer of both
dairy and non-dairy solutions, including cheese, nutritional and functional
nutrition solutions and flavours. With a decades-long history of nutritional
product leadership, GN’s Nutritional Solutions business partners with
food, beverage and supplement companies to deliver dairy protein, plant,
protein, bioactive, premix, flavour, bakery, functionally optimised nutrients
and edible films for a range of customers, from small start-up brands to
multi-national brands. GN’s US Cheese business is the number one
marketer of American-style cheddar cheese, supplying brand owners
and leading foodservice organisations globally.
We have joint venture partnerships in Glanbia Ireland, Glanbia
Cheese UK, MWC-Southwest Holdings and Glanbia Cheese
EU. These partnerships are strategically important to us and
continue a history of collaboration that stretches back to
Glanbia’s origin as a dairy co-operative. Our joint ventures
work with and complement our wholly-owned businesses.
With their input we are the number one in Irish dairy, European
mozzarella, and American-style cheddar cheese.
Read more on page 36
Read more on page 40
#1
#2
#1
US producer of whey protein isolate
provider of global nutritional
and functional premix solutions
producer and marketer of
American-style cheddar cheese
32
34
Number of countries in which
we have a direct presence
production facilities
across the globe
7,632
employees
worldwide*
* Includes wholly-owned group
and joint venture employees.
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Glanbia plc | Annual Report and Financial Statements 2020
Investment Case 1
Our Strong Culture and Values
Our strong culture and
values set us apart
Glanbia’s purpose and values came
to the fore in 2020. We were deemed
an essential industry during the
Covid-19 pandemic and our 7,632*
people swiftly adapted their day-to-
day working lives and ensured we
kept our operations running safely.
Our collective effort to protect our
people was our top priority
throughout the pandemic.
Thanks to the resilience and commitment of our
people and partners, our supply chains stayed
running, our products and ingredients reached
our customers, made it onto store shelves and
into the homes of millions of people all across the
world every day.
Our people worked tirelessly to deliver for all
our stakeholders, adapting to the situation with
superb flexibility.
Every single person in the Group has been tested
in ways we never imagined, but it is with huge
pride that we can say we have been able to
respond and adapt successfully. The collective
Glanbia spirit has never been stronger and our
people truly lived our values each day in the way
we worked together, alongside our customers and
suppliers to deliver the essential nutrition needed
to sustain people throughout this uniquely
challenging time.
Read more on page 24
* Includes wholly-owned group and joint ventures employees.
Jiby Varghese, Service
Desk Supervisor, Ireland
Jiby works with Glanbia Business
Services team and featured in
our employees communications
campaign ‘We Are All Essential’ to
highlight the importance of health
and safety through the pandemic.
Our people, culture and values continue
to lead us through the challenges of the
Covid-19 pandemic.
5
Pictured: Cynthia Wang
Human Resources Manager, GPN China.
Cynthia featured in our employee
communications campaign ‘We Are All
Essential’ to highlight the importance of
health and safety through the pandemic.
79%
of employees are satisfied
with Glanbia response to the
Covid-19 pandemic.
“In a year like no other,
we focused on our
essential work of
delivering nutrition
in a safe and
sustainable way.”
Michael Patten
Group Human Resources Director
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Glanbia plc | Annual Report and Financial Statements 2020
Investment Case 2
Ambitious for Future Growth
We are resilient and
have ambitious plans
for future growth
Covid-19 led us to adapt our strategy
in 2020 but the Group’s long-term
growth drivers remain fundamentally
unchanged.
Our focus for 2021 is to increase momentum in
Glanbia Performance Nutrition (GPN) and continue
to drive growth in Glanbia Nutritionals (GN).
In 2020, we broadened and accelerated the GPN
transformation programme which will support the
delivery of top line growth and margin momentum
through a focused brand strategy and further
investment in technologies and capabilities.
Nutritional Solutions (NS) has proven ability to
deliver organic growth and is an excellent platform
to add complementary acquisitions. Across both GPN
and GN, our growth strategy remains a blend of
organic growth and pursuing strategic acquisition.
Glanbia US Cheese and our joint ventures are resilient
and deliver attractive returns for all our stakeholders.
But it is our people who are at the heart of our
operations. We will achieve sustainable long-term
success by developing a strong culture where people’s
talent, expertise and innovative mind set are rewarded.
Talent development and retention remains central to
delivery of our strategy. In 2020, Covid-19 transformed
our day-to-day ways of working and we will continue to
build and adapt our smarter ways of working model.
Read more on page 42
7
“The health and wellness
trends which underpin
our strategy have become
more pronounced as a
result of the pandemic.
These healthy lifestyle trends
are embedded across our
branded categories and
ingredient end-markets.”
Siobhán Talbot
Group Managing Director
Revenue
€3.8bn
The Group delivered revenue of
€3.8 billion in 2020, up 0.6% constant
currency, down 1.4% reported.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 8
Glanbia plc | Annual Report and Financial Statements 2020
Investment Case 3
Strong Brands and Market Positions
“Our brands are at the heart
of healthy lifestyles and
aim to transform people’s
health and wellbeing.”
Hugh McGuire
CEO, Glanbia Performance Nutrition
#1
performance nutrition
brand globally.
9
We have strong brands
and market positions
Glanbia understands the value of
great brands and ingredients.
Glanbia Performance Nutrition’s (GPN’s) portfolio
of world-leading performance and lifestyle nutirion
brands satisfies a range of consumer motivations
from sports performance to weight management.
People right across the world from athletes to
remote workers want to eat well and live healthier,
more active lives. Whether you want to build
muscle, reach peak performance, eat more
protein-rich foods, or lose weight, we have
a product to help you achieve your goals.
number one global sports nutrition brand and
sold in over 100 countries. BSN™ and ISOPURE™
complete GPN’s sports performance portfolio.
For active-lifestyle consumers, AMAZING GRASS™
is a plant-based nutrition brand for people who
want to live a healthier life and it enjoys a leading
position in the US greens category. Our think!™
brand provides high quality, high protein, ready-
to-eat bars and snacks.
SLIMFAST™ is well established as a leading
weight management brand in the US and the UK,
with a wide range of product formats.
For more than 30 years, OPTIMUM NUTRITION™
(ON) has supported athletes all over the world in
achieving their sports performance goals, with
OPTIMUM NUTRITION™ Gold Standard Whey the
Our award-winning and trusted performance
and lifestyle nutrition brands inspire our customers
to achieve their performance and healthy
lifestyle goals.
Read more on page 32
All GPN brands are available through
a range of offline and online channels.
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Glanbia plc | Annual Report and Financial Statements 2020
Investment Case 4
Powerful Consumer Trends
SLIMFAST™ KETO reached sales of $100
million in the US in the year. In August
2020, SLIMFAST™ launched a limited
KETO range in the UK which achieved 8%
value market share in leading retailers and
extensive positive consumer feedback
within the first three months.1
The launch of a think!™ KETO bar was
also very well received by US consumers
and within twelve months has become
the top selling think!™ bar across Kroger
retail stores.2
1 Nielsen 4 w/e 31.01.2020.
2 Spins YTD Nov 1 2020.
11
We are driven by powerful
consumer trends
Covid-19 had a clear impact on
consumers’ attitudes, priorities
and behaviours.
In today’s world, consumers are seeking brands
and ingredients that focus on healthy lifestyles,
weight management and boosting immunity.
The sudden change in lifestyle has resulted in
consumers viewing weight management and
metabolic health in a new light with 51% of
global consumers indicating they are concerned
about being less active or gaining weight during
the pandemic.1
Consumers confined to their homes have
turned to online fitness and weight management
communities with a 29%2 increase in the number
of consumers exercising and working-out at home.
Consumers also want their bodies to have the best
defence against illness as possible, resulting in a
rapid rise in demand for immune-boosting food
and drink products.
ingredients and solutions supportive of metabolic
wellness and healthy weight management. Our
portfolio of brands and ingredients play into these
trends, which will support our future ambitions.
The pandemic also led to consumers placing
more emphasis on brands and labels they trust,3
a trend which also favours our established
products and ingredients. Shopping patterns
too have changed with convenient channels such
as eCommerce increasingly the channel of choice
for purchase decisions.
Protein plays a critical role for all these consumers.
Whether they are consuming healthy protein
snacks, sports nutrition shakes or using OPTIMUM
NUTRITION™ Gold Standard Whey protein
powders, a third of consumers still consider whey
protein the “must-have” nutritional product.2
1 Driving Growth in a Covid-19 and Post-Covid-19 World:
What Food & Beverage CPG Brands Need to Know.
2 Glanbia Performance Nutrition consumer research
July/August 2020.
3 Edelman Trust Barometer 2020.
We expect these trends to continue, and increase
the demand for products and functional
Read more on page 21
10.6% CAGR
The weight management
market size is expected to hit
US$295.3 billion by 2027.*
* Allied Market Research. (Weight loss and weight management)
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 12
Glanbia plc | Annual Report and Financial Statements 2020
Investment Case 5
Innovative Business Model
Our business model
is focused on innovation
and partnerships
Research and innovation is at the
heart of our business model and
in 2020 we continued to build on
our expertise and capabilities.
Through our consumer-focused innovation,
long-term partnerships and talented people,
Glanbia Nutritionals (GN) add value to our pool of
raw ingredients and deliver a portfolio of higher-
margin nutritional and functional ingredients.
Our ingredients and solutions are used in a wide
range of market segments such as dairy products,
bakery and confectionary, beverages, infant
nutrition and sports nutrition.
We are constantly innovating interesting new
flavour solutions, new methods of delivering dairy
and plant proteins in products, searching for the
next powerful bioactive, custom designing premix
solutions and helping customers create innovative
products to meet evolving consumer preferences.
GN works in tandem with our customers, sharing
insights and expertise in science and solutions
to create the types of products that today’s
consumers demand.
We share our research data and consumer
insights, create prototypes, and working with our
customers guide the delivery of a product from
concept to production. We proudly solve our
customers’ product challenges with custom
formulations, new formats and innovations and
enable them to outperform their competition.
Read more on page 28
With consumers attuned to health
and fitness, demand is growing for
good, ‘clean’, nutritionally rich foods.
Functional nutrients are finding their
way into everyday foods: in drinks,
desserts, and a new wave of healthy
snacks to eat on-the-go.
13
“Despite the challenges
of Covid-19 our R&D
teams ensured we kept
customer products
and formulations
on track with virtual
engagements and
collaborations.”
Brian Phelan
CEO, Glanbia Nutritionals
US$267bn
Globally fortified/functional food sales
topped $267 billion for the month
of February 2020.
(Euromonitor.)
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 14
Glanbia plc | Annual Report and Financial Statements 2020
Investment Case 6
Robust Balance Sheet
Operating Cash Flow
(OCF) conversion
in 2020
122.4%
OCF was €334.8 million and
represented a strong cash
conversion on EBITDA of
122.4%. Net debt at the end
of the year was €493.9 million,
a decrease of €120.4 million
on the prior year.
15
“We will pursue our strategic
objectives while delivering
strong cash conversion,
enabling us to invest in
growth opportunities.”
Mark Garvey, Group Finance Director
Strong cash flow and
a robust balance sheet
gives us financial strength
We believe that low levels of
financial risk not only provides the
greatest likelihood of generating
value for our shareholders in
the long-term but also leaves
our Group best placed to invest
in the business and react quickly
to both opportunities and adverse
conditions as they arise.
An integral part of the Group’s strategy is the
maintenance of a strong and liquid balance
sheet. Free cash flow is allocated to drive organic
growth in established businesses operating
in markets with development opportunities, and
to acquisitions in existing and new geographic
markets, in line with our development strategy.
Our strong conversion of earnings to cash
also enables the Group sustain a progressive
dividend policy.
At 2 January 2021, Glanbia had net debt of
€493.9 million, a reduction of €120.4 million
versus the prior year, which represented a
net debt to adjusted EBITDA ratio of 1.7 times.
Total committed debt facilities were €1.23 billion
owing to the fact that the Group completed the
financing of debt facilities and has no other
committed facilities due prior to January 2024.
Our strong financial position and considerable
financial firepower gives the Group the flexibility to
continue its development and confidently navigate
the uncertainly created by Covid-19.
Read more on page 42
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Glanbia plc | Annual Report and Financial Statements 2020
Group Chairman’s Statement
“ Our long-term value creation
model is based on the balanced
pursuit of revenue growth
and earnings performance.”
Dear Shareholder
2020 was an extraordinary year to be appointed Chairman of Glanbia
plc as we witnessed the spread of the pandemic in a way that none
of us could have ever predicted. I have always been hugely impressed
by the many qualities of this organisation, but never more so than
in the past 12 months. Under Siobhán Talbot’s leadership, our
people have shown tremendous resilience and fortitude in the most
challenging of times. Everyone, throughout the organisation, has
persevered even as their work routines and everyday lives were heavily
disrupted. On behalf of the Board and myself, I want to recognise and
thank all our people for their dedication, ingenuity and commitment.
At the same time, we send our deepest sympathies and a message
of support to all of those at Glanbia and beyond who have been
personally affected by this unprecedented situation.
The emergence of Covid-19 has demonstrated more than ever how
our consumers and customers rely on us every day for their essential
nutrition. With the rapid spread of the virus, we immediately prioritised
the health and safety of our people as we continued to produce our
brands and ingredients. We quickly introduced a range of additional
measures and processes to minimise the risk of our people contracting
or spreading the virus while carrying out their day-to-day work.
The Board received regular updates from the Executive team on
the pandemic’s impact on the delivery of our products and services;
how the organisation was supporting our people; and the mitigation
of the risks to our business. Throughout this pandemic, we have kept
our operations across the globe running safely, an achievement we
are justifiably proud of.
Financial performance
From a financial perspective, the business portfolio demonstrated
great resilience despite the range of obvious challenges presented.
The Group successfully navigated both the severity of the pandemic
and the uncertainty surrounding Brexit. Of particular note was
the Group’s revenue growth and the delivery of a strong cash
performance. The Group delivered revenue growth to €3.8 billion,
however the severity of Covid-19 in the second quarter of the year
resulted in lower year-on-year earnings. Profit after tax was €143.8
million (2019: €180.2 million) and adjusted Earnings Per Share (EPS)
was 73.78c with Return on Capital Employed (ROCE) at 9.0%.
Our strong operating cash flow conversion continued at 122.4%
(2019: 86%) with net debt at the year-end of €493.9 million (2019:
€614.3 million).
Our portfolio of businesses responded differently to the pandemic.
Glanbia Performance Nutrition (GPN) was most impacted by Covid-19
with international market disruption and challenges in the North
American specialty and distributor channels, with trends improving
as the year progressed. The other elements of our portfolio, most
particularly Glanbia Nutritionals and our strategic joint ventures,
delivered a very good performance in the most challenging of years.
17
Returning value to our shareholders
Financial prudence is of utmost importance in these uncertain times.
Throughout the year, the Board carefully considered and monitored
the potential economic impacts of Covid-19, in particular in relation
to financing. Glanbia has a proven cash generative business model
and we were able to navigate these exceptional times with a strong
balance sheet and significant liquidity headroom. Mindful of the
underlying strength of the Group and the strong financial position,
the Board was pleased to announce a €50 million share buyback
programme during the year. Our finance director, Mark Garvey
provides a detailed overview of the programme on pages 42-47.
As Chairman, it is my intention, where appropriate, to return value
to our shareholders, and to maintain the Company’s dividend policy.
In a further testament to the strength of our business the Board
concluded it is appropriate for Glanbia to deliver a strong dividend for
2020 and has recommended a final dividend of 15.94 cent per share,
subject to shareholder approval at the Annual General Meeting on
6 May 2021. The Group’s total dividend per share for the year will be
26.62c, a payout ratio of 36.1%.
Delivering sustainable growth
Our 2020 successes are also evident in other, less quantifiable but no
less meaningful ways, such as the trusted reputation Glanbia has with
all its stakeholders and our excellent deeply embedded safety culture.
All our safety metrics improved through the year.
As a Board, we exercise our corporate governance responsibilities with
diligence but also with clarity of purpose to help the management team
create value while honouring our responsibilities to our stakeholders and
our communities.
The political and social movement dedicated to fighting racism that
emerged in 2020 shone a light on how our economic, social and
political systems operate. This forced the beginning of a global
conversation on how we all need to change. As a Board we believe
that everyone should have equal opportunities regardless of gender,
religious belief, ethnicity, nationality or sexual orientation. As the
Group’s Workforce Director, a role which as Chairman I am pleased
to retain, I am impressed with the high level of employee engagement
enjoyed within the organisation. A highlight of the ‘Your Voice’
Employee Survey undertaken in early 2020 shows that our people feel
safe in the workplace and are comfortable to be themselves at work.
In 2020 we accelerated our commitment to Diversity and Inclusion
(D&I) with the development of a new Group-wide D&I strategy
as detailed on pages 26 and 94. I firmly believe this D&I strategy
will have a positive impact on all our stakeholders. Furthermore,
we agreed an ambitious 2030 Sustainability Strategy outlining
a prioritised set of actions which will initially focus on reducing
our carbon emissions. These strategies are now reflected in the
incorporation of environmental, social and governance (ESG)
metrics in executive remuneration for 2021.
Board and Committee changes
2020 has been a particularly busy year for Board and Committee
changes. In accordance with the Relationship Agreement dated
2 July 2017 between the Company and Glanbia Co-operative Society
Limited (the ‘Society’) an Independent Non-Executive Director was
to be appointed as Chairman of the Board in 2020, and it was my
honour and privilege to be offered the position. Martin Keane duly
stepped down as Chairman and, on behalf of the Board, I want to
thank Martin for his stewardship of the Group over the past two years
and in particular for his leadership through the current Covid-19
pandemic. The number of Non-Executive Directors nominated by
the Society also reduced from eight to seven, consequently reducing
the overall size of the Board from 16 to 15 Directors. Society Nominee
Directors, Jer Doheny and Eamon Power retired from the Board at
the conclusion of the 2020 AGM and John Murphy was nominated
by the Society to join the Board on 8 October 2020.
Richard Laube, John Daly and Mary Minnick also stepped down from
the Board during the year. We thank them all for their commitment,
wise counsel and insightful contributions during their respective
tenures and I wish them all the best for the future.
As I mentioned earlier, the Board actively promotes D&I in the
workplace and, while we acknowledge the importance of having a
diverse board, we also reiterate our commitment to ensuring that the
best candidates are selected for Board positions. While reinforcing
this commitment, we have made significant progress on gender
diversity with the recent appointments of Jane Lodge and Roisin
Brennan. In addition, Paul Duffy joins the Board effective 1 March
2021. Jane, Roisin’s and Paul’s extensive experience, as outlined
on page 66 and pages 90 to 91, complements and further expands
the broad range of skills on the Board.
While accommodating the aforementioned Board changes we also
reviewed the membership of the Board Committees. On 20 January
2021 Jane Lodge was appointed to the Audit Committee. Jane was
also appointed Chairman of the Remuneration Committee effective
1 March 2021. I succeeded Dan O’Connor as Chairman of the
Nomination and Governance Committee and I will be joined on this
Committee by Roisin Brennan who is also joining the Remuneration
Committee. For more details on the membership of Committees see
page 90.
The Society’s strategic decision to reduce the Society’s
representation on the Board (from seven to three by 2023) in order to
facilitate the appointment of additional Independent Non-Executive
Directors and further strengthen the diversity of the Board is
welcomed. In line with this, the size of the Board will also be reduced,
further details of how this will be effected are contained on page 92.
As a Board we are committed to our dedicated board evaluation
process and in 2020 external consultants conducted an independent
performance evaluation of the Board, its Committees and individual
Directors. Excellent progress has been made against the actions set out
in our external evaluation, details of which are outlined on page 80.
Furthermore, our commitment to the 2018 UK Corporate governance
code and our Non-Financial Reporting Statement can be found on
page 51.
Looking forward
Our strategy is clear and remains aligned to accelerating market
growth opportunities, some of which are emerging as a consequence
of the pandemic. The Board’s expectations for 2021 are positive and
we are optimistic about Glanbia’s growth potential. Our long-term
value creation model is based on the balanced pursuit of revenue
growth and earnings performance. Our cash generative businesses
and a strong balance sheet ensures we are well placed to drive value
for all our stakeholders.
Donard Gaynor
Chairman
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 18
Glanbia plc | Annual Report and Financial Statements 2020
Group Managing Director’s Review
“ I am extremely proud of
Glanbia’s response to the
Covid-19 pandemic and I thank
all of our people across the
Group for their incredible
hard work and dedication.”
Dear Shareholder
The past year was unlike any other I have experienced in my time at
Glanbia or indeed in my career. The Covid-19 pandemic has created
upheaval on a global scale while changing the smallest details of
our everyday lives. 2020 was a year that tested all of our previously
held views: how markets and supply chains operate; about global
economic interdependence; and what it means to truly deliver for
our employees, customers, consumers, partners and communities.
In the face of an unprecedented global crisis, our focus has been,
and must continue to be, on the health and wellbeing of our people.
At the start of the pandemic we set three priorities: protect our
employees; continue supplying food; and maintain a strong
financial position.
Fortunately, our operating model enabled us to respond swiftly
and appropriately to both the local and global challenges presented
by the pandemic. In line with government guidance locally and in
coordination with our suppliers, customers, industry and our supply
chain colleagues, all of our manufacturing sites and work practices
quickly adapted to protect our workforce. This included the
immediate establishment of a Group-wide business continuity team
to deliver key initiatives across the Group, including new working
processes for essential staff, additional safety precautions on
production sites, remote working support, regular engagement
with our people, and a range of employee relations measures to
assist all of our people.
At the outset of the
pandemic, we set
three priorities for
Glanbia which drove
our day-to-day
decision-making:
1.
Protect our
people.
2.
Continue
supplying food.
3.
Maintain our
strong financial
position.
Fundamentally, Glanbia exists to deliver its brands and ingredients
in a responsible and sustainable way. It was of vital importance that
businesses such as ours continued throughout the pandemic to
produce nutritious food safely. This would not have been possible
without the tremendous efforts of all our people, many of whom are
classified by their governments as essential workers. Our people
demonstrated real resilience, agility and strength in navigating the
Covid-19 crisis. I thank them all and our extended community of
supplier and customer partners for their incredible hard work and
dedication throughout this difficult period.
Our Strategy
In February 2020, we set a clear strategy to regain growth
momentum. As we moved through the second quarter of the year,
the pandemic impacted our performance and we took swift action
to adapt to the evolving situation. We maintained focus on both the
tactical and the strategic priorities ensuring that our Group would
emerge strongly from the crisis.
Importantly, our long-term drivers remained unchanged and the onset
of Covid-19 has in fact amplified the market trends that drive our
growth. Now, more than ever, consumers are mindful of their health
and wellbeing; prioritising functional nutrition including immunity
boosters; maintaining a healthy weight; and supplementing with
protein-rich foods to support their performance and healthy lifestyle
goals. This positions Glanbia very well for future growth given our
core focus on health, wellbeing and nutrition. Consumers have
evolved in both their motivations and behaviours. We have seen
increased loyalty towards well established brands, quality being
recognised as a true brand differentiator and convenient channels
such as eCommerce increasingly becoming the channel of choice
for purchase decisions.
We have responded to the amplification of these market trends
across all aspects of our business. In Glanbia Performance Nutrition
(GPN) we accelerated and broadened our ambitious transformation
programme, which is restoring organic growth with an eCommerce
bias and improving margins. In Glanbia Nutritionals (GN), a business
that was particularly resilient through the pandemic, we extended our
offerings in the immunity and functional food space and added flavour
capabilities to our suite of nutritional solutions.
Our clear strategic priority is growth. We will achieve this by regaining
top line growth and margin momentum in GPN and continued
strategic evolution in GN, particularly in Nutritional Solutions. We
remain focused on brand strategy and investment in new ingredient
solutions; enabled by continued investment in our people and our
technology platforms. We remain ambitious for both organic and
acquired growth and our strong liquidity position will facilitate and
fuel this growth.
Detailed financial performance
Our financial performance this year demonstrates more than ever
the Group’s resilience. Despite the obvious challenges, our earnings
were robust and our liquidity position improved. We started the year
well, had a very challenging second quarter when the impact of the
Covid-19 lockdowns was most severe and then sequentially improved
as we moved through the second half with strong margin recovery
in GPN and continued strong performance in GN and in our strategic
joint ventures. Revenue for the year was €3.8 billion and EBITA
margins 5.5% delivering an adjusted Earnings Per Share of 73.78 cent.
Operating cash flow was strong with cash conversion at 122.4%
resulting in net debt reduced by €120.4 million relative to the prior year.
19
Glanbia Performance Nutrition
In 2019 we announced a wide-ranging transformation programme
for GPN and a key focus throughout 2020 was the extension and
execution of this programme which will continue in 2021. The
programme is on track with results achieved to-date ahead of the
business case. GPN revenue for 2020 was €1.1 billion, a 15.0%
constant currency decline on the prior year. On a like-for-like (LFL)
branded basis, revenue declined 10.8% in the year. After a strong first
quarter, the business was significantly impacted in the second quarter
of the year by the Covid-19 lockdowns, particularly in markets outside
the US, which reduced revenue significantly. The business responded
quickly to these market dynamics, reducing costs and altering supply
chain operations as needed. Market conditions improved as we moved
through the second half of the year and the business reacted well to the
gradual reopening of key route-to-market channels. While we continued
to invest behind our brands, strategic pricing decisions implemented
in 2020 resulted in a positive pricing dynamic in the business.
As we moved through 2020, EBITA margin was a key business focus.
Negative operating leverage as a consequence of a declining revenue
significantly reduced margins in the second quarter of 2020, however
margins were rebuilt in the second half to double-digit levels through
a combination of improved operating leverage, improved pricing,
and the realisation of benefits of the transformation programme.
We remain on track to achieve our operating margin ambition in GPN
of between 12% and 13% in 2022.
Our global brands OPTIMUM NUTRITION™ (ON) and SLIMFAST™
both delivered good performances. In our key US market, OPTIMUM
NUTRITION™ and SLIMFAST™ shipments were lower year-on-year by
6% and 9% respectively. However, consumption across both brands
was very resilient, up 4% in both OPTIMUM NUTRITION™ and
SLIMFAST™. Household penetration for SLIMFAST™ also rose and
is at 5% with strong master brand communication across traditional
and digital media which was complemented by the launches of the
SLIMFAST™ app and the dedicated SLIMFAST™ Direct-to-Consumer
(DTC) eCommerce site. OPTIMUM NUTRITION’s™ ‘Better than Before’
campaign also proved successful for the brand and was its first ever
360 degree communications campaign based on deep consumer
insights across multiple media channels which lead to strong
engagement at retail and consumer levels.
“ Now, more than ever, consumers are
mindful of their health and wellbeing:
prioritising functional nutrition including
immunity boosters; maintaining a
healthy weight; and supplementing
with protein-rich foods to support their
performance and healthy lifestyle goals.
This positions Glanbia very well for
future growth given our core focus
on health, wellbeing and nutrition.”
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 20
Glanbia plc | Annual Report and Financial Statements 2020
Group Managing Director’s Review continued
Glanbia Nutritionals
Over the past number of years, in line with our strategy, we have
invested heavily in Glanbia Nutritional’s (GN’s) assets and capabilities
in the growing ingredients sector. This strategy has delivered for
the Group with a 9% constant currency increase in revenue in 2020.
This strong performance was driven in particular by increasing
demand in Nutritional Solutions from growth categories such as
supplements and specialised nutrition as well as retail channels
for food and beverage brands. GN’s US Cheese business delivered
a very good performance in volatile market conditions.
During the third quarter of 2020, we completed the acquisition of
Foodarom, a Canadian flavours business with CAD 34 million annual
revenue for a purchase price of CAD 60 million plus contingent
consideration. Foodarom is highly complementary to GN’s solutions-
based customer approach and focus areas, strengthening Glanbia’s
capability in flavours and nutritional solutions. The knowledge and
experience of the combined R&D teams will strengthen GN’s growing
position in flavours, and enhance its ability to provide optimised
ingredient systems to its customers. For more information on GN’s
performance see page 36.
Joint Ventures
All of our joint ventures (JVs) performed well in 2020, demonstrating
the strength of our models. GN’s US Cheese team continues
to operate all of the dairy processing plants within GN including
MWC-Southwest Holdings in Michigan. This new large-scale JV
plant is on track and commenced commissioning in October 2020.
Commissioning is expected to be completed by the second quarter
of 2021.
The new Glanbia Cheese EU JV plant in Portlaoise, Ireland is on
track with construction largely completed at the end of 2020 and
commissioning expected to be completed by the second quarter
of 2021. This plant will further enhance the Group’s leading position
in the mozzarella cheese category. For more information on the
performance of our JVs, see page 40.
Contributing to a better world
The disruption caused by Covid-19 to markets, trade and supply
chains in the past year made it clear that solving our shared
challenges will require working in broad global coalitions. We continue
to strongly support the U.N. Sustainable Development Goals and
its initiatives and principles for human rights, labour, the environment
and anti-corruption.
Sustainability is an embedded ambition for Glanbia, the very
genesis of our nutrition portfolio was our desire to generate value
from what had been a waste product from dairy processing. From
a very solid base, we will evolve our 2030 sustainability strategy.
As we consider the areas of environmental, social and governance
within a sustainability framework, we will prioritise the environmental
and social pillars. In environmental sustainability we will formalise the
work ongoing in our businesses and go further in committing to more
ambitious targets in key areas such as carbon, water, waste and
packaging. You can read more about our approach to sustainability
throughout this report and on pages 48 to 53.
In social sustainability, we will build on our purpose and values-led
culture to truly embrace diverse perspectives at all levels of our
organisation. In 2020, we elevated the conversation around Diversity
and Inclusion (D&I) and asked ourselves what can we do to make
everyone in Glanbia feel welcomed, valued and heard. We know more
action is needed and we are excited by the journey ahead. We have
enhanced our vision for our people as we foster a culture which
will celebrate individuality, knowing that together we are more.
Before I conclude, I would like to acknowledge the contribution
of our former Chairman Martin Keane, who stepped down in 2020.
During his tenure as Chairman, Martin provided strong and focused
Board leadership. On behalf of the Board, the Senior Management
team, and myself I thank him sincerely for his valued support and
contribution.
Looking forward
We look forward to the future with confidence. The accelerating
health and wellness trends, which underpin our strategy, position
us well for long-term sustainable growth.
At Glanbia we will maintain vigilance as we continue to focus on
the delivery of our strategy. The health and welfare of our people will
remain front of mind and we will continue to work closely with all our
supply chain partners to deliver essential nutrition to our consumers.
Our everyday ways of working remain transformed and we have
learned and adopted new and innovative practices by offering our
people more flexibility in how, where and when they work. It is of
vital importance that all of our people and their families continue
to feel supported during this challenging period.
We currently expect pandemic related restrictions to ease in key
regions during the course of 2021 assuming the widespread rollout
of vaccines are successful in reducing Covid-19 infection rates,
however the duration and impact of the pandemic remains volatile.
In FY 2021 Glanbia expects to deliver adjusted Earnings Per Share
growth of 6% to 12%, constant currency, driven by revenue and
EBITA growth in both GPN and GN. Glanbia’s focus on the GPN
transformation programme will provide an opportunity to build on
the achievements delivered in the second half of 2020 and drive
further margin improvement in FY 2021 over FY 2020.
Siobhán Talbot
Group Managing Director
Our Strategy
21
Evolving our
strategy to reflect
a changed external
environment
Our strategy is fuelled by the accelerating trends around health and
wellness. Our strategy is growth.
Covid-19 has driven demand for food and beverages that promote health
and wellness, weight management, immunity, trust and sustainability.
Glanbia’s portfolio of brands and ingredients sit at the centre of these
large and accelerating trends.
Key market trends
• As the foundation for healthy
• Consumers are loyal to
living has shifted from treatment
to prevention and now
optimisation, consumers
increasingly make food and
beverage choices based on
nutritional benefit, energy,
health and immunity;
• eCommerce has emerged as
the trend of 2020 with penetration
and usage accelerating at pace;
established and trusted brands
in performance nutrition and
weight management;
• Once the preserve of body
builders, the interest in dairy
protein as a nutrition source
has gained mass appeal;
• Plant-based protein appeals to
three growing consumer cohorts:
flexitarian, vegetarian and vegan;
• Strong demand for functional
ingredients that go beyond
nutrient density and provide
specific health and wellness
benefits; and
• Customers want to know much
more about where ingredients
come from and to engage with,
rather than be passive
participants of the food system.
Customers want sustainability
embedded in supply chain.
Our key strengths and unique competitive advantage enable us
to benefit from these accelerating trends
Our strong culture
and values
Ambitious for
future growth
Strong brands
and market position
Sustainable
business model
Robust
balance sheet
Our people are
fundamental to delivering
success for Glanbia and
we are committed to
fostering a diverse and
inclusive culture where our
employees are motivated
to live our Group’s values.
Our growth strategy
continues to be a blend
of organic growth and
strategic acquisition
opportunities.
We operate in attractive
markets, which provide
significant opportunity for
growth for our flagship
consumer brands,
OPTIMUM NUTRITION™
and SLIMFAST™.
We are the
#1 US producer of whey
protein isolate, and the
#2 producer of global
micro-nutrient premixes.
Through our consumer-
focused innovation,
long-term partnerships,
and talented people
we deliver a portfolio
of branded performance
nutrition and lifestyle
brands and of nutritional
and functional
ingredients.
Our business has strong
conversion of earnings
to cash.
With strong financing
metrics, we have
considerable financial
firepower and flexibility
to fund strategic capital
expenditure and
acquisitions.
We have a clearly differentiated strategy for growth underpinned by a
strong environmental, social, and governance focus and clear strategic priorities
Protect and grow our
portfolio of core brands
and ingredients
Purposeful growth
through innovation and
acquisitions
Drive efficiency by
embedding operating
enablers
Read More in Our Strategy on pages 22 and 23
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 22
Glanbia plc | Annual Report and Financial Statements 2020
Our Strategy continued
Strategic priorities
2020 progress
Looking forward
Key Performance Indicators
Key risks
Link to remuneration
Strategic priority #1
Protect and grow
our portfolio of
core brands and
ingredients
Our core brands and ingredients hold
market-leading positions in categories that
are driven by strong underlying health and
wellness trends which have been further
accelerated by the Covid-19 pandemic.
Strategic priority #2
Purposeful growth
through innovation
and acquisitions
The growing global interest in healthy,
active lifestyles means our portfolio of
brands and ingredients have extensive
appeal to a growing number of global
consumers and customers. Our innovative
mindset drives our investment in our
brands and ingredient capabilities.
GPN
• Evolved the transformation project
to deliver sustainable top and bottom
line growth;
• Through focused consumer engagement
OPTIMUM NUTRITION™ increased
its Net Promoter Score to 59 and
SLIMFAST™ increased its household
penetration to 5; and
• Focused the brand development in
growth channels with over 70% of sales
in online and FDMC channels.
GPN
• Complete GPN’s transformation project
driving like-for-like branded revenue
growth and building on the margin
improvements delivered in the
second half of 2020;
• Build OPTIMUM NUTRITION™ brand
and SLIMFAST™ as our global brands
via channel development, innovation
and consumer advocacy; and
• Capture further growth in key
growing channels.
GN and JVs
• Ensured Nutritional Solutions resiliently
played into trending categories driven
by strong demand for functional and
nutritional ingredients which deliver to
consumer needs for improved immunity
and general health; and
• Optimised performance in US Cheese
and JVs as retail food staple demand
increased through the pandemic.
GN and JVs
• Maintain Nutritional Solutions’ strong
growth rate in healthy snacking
and ingredients solutions;
• Continue to build out Nutritional
Solutions’ business through enhanced
capabilities, innovative technologies
and bolt-on acquisitions; and
• Solidify #1 position in US Cheese with full
commissioning of the MWC-Southwest
Holdings JV plant in Michigan.
• Continued to grow with established
online retailers and develop our
Direct-to-Consumer channel;
• Acquired Foodarom, a Canadian
flavours business, to expand NS
into complementary flavours
technologies; and
• Maintain growth and investment in
broad eCommerce channel strategy;
• Selectively invest and grow in key
strategic international markets in both
GPN and GN;
• Consider strategically complementary
acquisitions as opportunities arise;
• Commenced the commissioning of
• Continue to build differentiated,
OCF Conversion
Total Shareholder Return
• A failure to obtain accurate
cash is a performance target
a new dairy JV facility in Michigan, US
(MWC) and a mozzarella JV facility
in Ireland (Glanbia Cheese EU).
compelling capabilities and technologies
that are attractive to NS’ customers; and
• Complete commissioning of the new
dairy JVs in Michigan, US and Ireland.
Adjusted Earnings Per Share
GN Revenue
• Continued disruption or
• Adjusted Earnings Per
-14.9% constant currency
+9.0% constant currency
• An increase in international
Revenue Volume Growth
• Competitor activity across
• Business segment EBITA
73.78c
(2019: 88.10c)
€2.7bn
(2019: €2.5bn)
GPN Revenue
€1.1bn
(2019: €1.4bn)
-15.0% constant currency
-2.0%
(2019: 0.1%)
a significant escalation in
the spread of Covid-19 with
resultant people, supply
chain and market impacts.
trade volatility.
certain channels through
high promotional activity
or unexpected product
innovation.
behaviour or preferences.
• A significant rise in
social unrest.
• The loss of, or significant
deterioration in commercial
terms with, one of our
key customers.
Share is a performance
target in both the annual
and long-term incentive
for Executive Directors
and all members of the
Operating Executive;
forms part of the annual
and long-term incentive
of the CEO of GPN and
CEO of GN; and
growth and GN Nutritional
Solutions volume growth
form part of the annual
incentive for the CEO of GPN
and CEO of GN respectively.
• A rapid change in consumer
• GPN LFL branded revenue
Adjusted Earnings Per Share
ROCE
• A failure to effectively
• Adjusted Earnings Per Share
73.78c
(2019: 88.10c)
9.0%
(2019: 10.9%)
-14.9% constant currency
-190bps
122.4%
(2019: 86%)
+3,640bps
5.0%
(2019: -36.7%)
conduct due diligence,
transaction completion or
business integration which
may prevent anticipated
acquisition benefits from
is a performance target in
both annual incentive and
LTIP for Executive Directors
and all members of the
Operating Executive;
being realised.
• Conversion of earnings to
and relevant market and
competitive intelligence.
• Not innovating ahead of
in the annual incentive for
Executive Directors and the
Operating Executive; and
or in-line with the market
• ROCE and TSR are
or failing to recognise shifts
performance targets in the
in consumer behaviour.
LTIP for Executive Directors
and the Operating Executive.
Strategic priority #3
Continue to embed
operating enablers
• Restructured GPN’s operating model;
• Developed Group-wide 2030
sustainability strategy with clearly
defined targets;
• Continue to refine Group and
•
Business Unit operating models;
Invest in technology to support
our strategic agenda;
• Rolled out a new Group-wide flexible
• Continue ongoing talent development
The Group is supported by vital growth
enablers across talent development,
sustainability and risk management,
all combining to set a consistent
strategic direction.
working model to create an agile working
environment which will remain post
pandemic; and
•
and engagement strategies;
Implement our sustainability
strategy; and
• Enhanced employee culture and
• Embed a transformative and flexible
engagement including the developments
of a Group-wide Diversity and Inclusion
strategy.
working environment.
Employee Engagement Score
Glanbia Risk
72%
Percentage of employees
who said they were happy
working at Glanbia.
Management System
All locations maintained or
rating from the prior year.
improved their individual site
• A failure to match technology
• New Environmental, Social
• A failure to embrace
diversity or invest in
developing our people will
impact employee retention;
• Development of talent is
a personal objective of
Executive Directors and
the Operating Executive;
with needs of new smart
working model; and
• Below expected
performance on
sustainability targets.
and Governance (ESG)
metrics are introduced into
Executive remuneration
for 2021.
Strategic priority #1
GPN
GPN
Protect and grow
our portfolio of
core brands and
ingredients
Our core brands and ingredients hold
market-leading positions in categories that
are driven by strong underlying health and
wellness trends which have been further
accelerated by the Covid-19 pandemic.
• Evolved the transformation project
• Complete GPN’s transformation project
to deliver sustainable top and bottom
driving like-for-like branded revenue
line growth;
growth and building on the margin
• Through focused consumer engagement
improvements delivered in the
OPTIMUM NUTRITION™ increased
its Net Promoter Score to 59 and
SLIMFAST™ increased its household
penetration to 5; and
second half of 2020;
• Build OPTIMUM NUTRITION™ brand
and SLIMFAST™ as our global brands
via channel development, innovation
• Focused the brand development in
and consumer advocacy; and
growth channels with over 70% of sales
• Capture further growth in key
in online and FDMC channels.
growing channels.
GN and JVs
GN and JVs
• Ensured Nutritional Solutions resiliently
• Maintain Nutritional Solutions’ strong
played into trending categories driven
growth rate in healthy snacking
by strong demand for functional and
and ingredients solutions;
nutritional ingredients which deliver to
• Continue to build out Nutritional
consumer needs for improved immunity
Solutions’ business through enhanced
and general health; and
capabilities, innovative technologies
• Optimised performance in US Cheese
and bolt-on acquisitions; and
and JVs as retail food staple demand
• Solidify #1 position in US Cheese with full
increased through the pandemic.
commissioning of the MWC-Southwest
Holdings JV plant in Michigan.
Strategic priority #2
Purposeful growth
through innovation
and acquisitions
The growing global interest in healthy,
active lifestyles means our portfolio of
brands and ingredients have extensive
appeal to a growing number of global
consumers and customers. Our innovative
mindset drives our investment in our
brands and ingredient capabilities.
online retailers and develop our
Direct-to-Consumer channel;
• Acquired Foodarom, a Canadian
flavours business, to expand NS
broad eCommerce channel strategy;
• Selectively invest and grow in key
strategic international markets in both
GPN and GN;
into complementary flavours
• Consider strategically complementary
technologies; and
acquisitions as opportunities arise;
• Commenced the commissioning of
• Continue to build differentiated,
a new dairy JV facility in Michigan, US
compelling capabilities and technologies
(MWC) and a mozzarella JV facility
that are attractive to NS’ customers; and
in Ireland (Glanbia Cheese EU).
• Complete commissioning of the new
dairy JVs in Michigan, US and Ireland.
Strategic priorities
2020 progress
Looking forward
Key Performance Indicators
Key risks
Link to remuneration
23
Adjusted Earnings Per Share
GN Revenue
73.78c
(2019: 88.10c)
€2.7bn
(2019: €2.5bn)
-14.9% constant currency
+9.0% constant currency
GPN Revenue
€1.1bn
(2019: €1.4bn)
-15.0% constant currency
Revenue Volume Growth
-2.0%
(2019: 0.1%)
• Continued disruption or
a significant escalation in
the spread of Covid-19 with
resultant people, supply
chain and market impacts.
• An increase in international
trade volatility.
• Competitor activity across
certain channels through
high promotional activity
or unexpected product
innovation.
• A rapid change in consumer
behaviour or preferences.
• A significant rise in
social unrest.
• The loss of, or significant
deterioration in commercial
terms with, one of our
key customers.
• Adjusted Earnings Per
Share is a performance
target in both the annual
and long-term incentive
for Executive Directors
and all members of the
Operating Executive;
• Business segment EBITA
forms part of the annual
and long-term incentive
of the CEO of GPN and
CEO of GN; and
• GPN LFL branded revenue
growth and GN Nutritional
Solutions volume growth
form part of the annual
incentive for the CEO of GPN
and CEO of GN respectively.
• Continued to grow with established
• Maintain growth and investment in
Adjusted Earnings Per Share
ROCE
• A failure to effectively
73.78c
(2019: 88.10c)
9.0%
(2019: 10.9%)
-14.9% constant currency
-190bps
OCF Conversion
Total Shareholder Return
122.4%
(2019: 86%)
+3,640bps
5.0%
(2019: -36.7%)
conduct due diligence,
transaction completion or
business integration which
may prevent anticipated
acquisition benefits from
being realised.
• A failure to obtain accurate
and relevant market and
competitive intelligence.
• Not innovating ahead of
or in-line with the market
or failing to recognise shifts
in consumer behaviour.
• Adjusted Earnings Per Share
is a performance target in
both annual incentive and
LTIP for Executive Directors
and all members of the
Operating Executive;
• Conversion of earnings to
cash is a performance target
in the annual incentive for
Executive Directors and the
Operating Executive; and
• ROCE and TSR are
performance targets in the
LTIP for Executive Directors
and the Operating Executive.
Strategic priority #3
Continue to embed
operating enablers
• Restructured GPN’s operating model;
• Continue to refine Group and
• Developed Group-wide 2030
Business Unit operating models;
sustainability strategy with clearly
•
Invest in technology to support
defined targets;
our strategic agenda;
• Rolled out a new Group-wide flexible
• Continue ongoing talent development
The Group is supported by vital growth
enablers across talent development,
sustainability and risk management,
all combining to set a consistent
strategic direction.
working model to create an agile working
and engagement strategies;
environment which will remain post
•
Implement our sustainability
pandemic; and
strategy; and
• Enhanced employee culture and
• Embed a transformative and flexible
engagement including the developments
working environment.
of a Group-wide Diversity and Inclusion
strategy.
Employee Engagement Score
72%
Percentage of employees
who said they were happy
working at Glanbia.
Glanbia Risk
Management System
All locations maintained or
improved their individual site
rating from the prior year.
• A failure to embrace
diversity or invest in
developing our people will
impact employee retention;
• A failure to match technology
with needs of new smart
working model; and
• Below expected
performance on
sustainability targets.
• Development of talent is
a personal objective of
Executive Directors and
the Operating Executive;
• New Environmental, Social
and Governance (ESG)
metrics are introduced into
Executive remuneration
for 2021.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 24
Glanbia plc | Annual Report and Financial Statements 2020
Our People
“ Our strong culture, aligned
with the extraordinary
efforts of our people,
steered Glanbia through
the challenges of 2020.”
Michael Patten
Group Human Resources and Corporate Affairs Director
Decisive action in challenging times
Our philosophy of valuing our people informed our approach to
Covid-19 in 2020. It also underpinned our focus on the development
of a Diversity and Inclusion (D&I) strategy. As mentioned by our Group
Chairman and Group Managing Director the health and safety of our
people was our primary concern as the Covid-19 virus spread across
the world. We established a global response team in the initial stages
of the outbreak which took timely and effective action to ensure all our
workers, especially our essential workers, were operating in a safe
manner and in line with government guidelines locally. To this end,
we swiftly introduced a range of additional health and safety
measures and processes to minimise the risk of contracting or
spreading the virus, while our frontline workers across the world
continued to produce essential food and ingredients for our
customers and consumers. No pay cuts or pandemic-related layoffs
were implemented in 2020 and no government support was sought
or received by any part of the Glanbia organisation. To support
employees in North America, additional sick pay measures were
introduced. As the pandemic spread, our focus adapted to living and
working safely with it. We put in place detailed site protection plans,
including temperature checking at point of entry, obligatory mask
wearing, occupational health support and on-site testing as well as
clearly defined policies and training for site leaders, all supported by
frequent communication to employees. Case management tracking
and support became an effective employee support mechanism
and risk mitigation tool. We also focused on employee wellness
more generally, recognising the impact of pandemic-related stress
and anxiety on mental health. In addition, we provided care packs
to our employees on the frontline and recognised their efforts
through Appreciation Awards. We rapidly developed smart working
principles including flexible and remote working policies which
were implemented right across our organisation.
Smart Working
In 2020 we formalised our flexible working models through the
Group-wide launch of our Smart Working initiative. Comprising
flexible and remote working principles, Smart Working aims to
promote both productivity and balance, by being flexible to the
diverse needs of our people, culminating in higher levels of
engagement and productivity.
Talent and Leadership
The Group sustained its focus on talent and leadership development
through Covid-19, successfully transitioning to online learning and
engagement. Our annual Organisation and People Review (OPR) was
completed during the year, supporting the proactive management
of succession and talent planning.
Our Senior Leadership Programme ‘Leading for Growth’ pivoted online
with a focus on navigating disruption. The programme provides insight
into the latest thinking and application in areas such as strategic focus,
agility and sustainable leadership skills, and addressed themes
including international scaling, leadership impact and business building.
Our Advanced Leadership Programme ‘Leading the Future’ won the
‘Best Leadership Development Award’ at the Institute of Training and
Development Awards in 2020. This executive leadership programme
aims to develop future ready leadership capabilities and ignite
transformational change to enable future growth. Planning for the
delivery of our global leadership programmes in 2021 is underway.
Pivoting our learning and development focus online
Glanbia’s success is powered by our people and we know that
our business grows when our people are enabled to develop their
capabilities and skills. In 2020, much of our learning and development
activity was delivered remotely, initially through a Covid-19 Learning
Series which aimed to support our people to navigate disruption
and which covered topics including successful remote working,
communicating effectively in virtual teams and cultivating resilience.
More than 1,400 employees participated in the Covid-19 ‘Learning
Series’ and across the Group we saw an overall 93% increase in
learning and development participation in 2020. A ‘Learning and
Development Hub’ was also rolled out, providing access to a range
of remote learning and development resources.
25
United Nations SDGs most
relevant to Glanbia
Culture and Engagement
In 2020 we deepened our employee listening strategy to continuously
gather insights. Glanbia’s Your Voice employee survey conducted in
early 2020 showed engagement at the industry benchmark level of
72% with a high degree of employee pride in Glanbia’s products and
services. Key areas identified for improvement included greater work
flexibility and career progression. These areas have been a focus in
2020 with the roll out of ‘Smart Working’ flexible work policies across
the organisation.
An employee survey conducted in response to Covid-19 showed
that 79% of employees were satisfied with Glanbia’s response to the
pandemic with differing needs identified between remote workers
(flexibility, communications) and on-site employees (health & safety
protocols, sick leave support). A further pulse survey on Diversity and
Inclusion (D&I) achieved good participation with employee feedback
informing our D&I strategy development.
Key engagement programmes including roadshows and townhalls
quickly pivoted online in 2020 and we extended our wellbeing
programmes to support social, physical and mental wellness.
Our Workforce Director Donard Gaynor participated in a number of
the townhalls. We will continue to evolve our engagement approach
and tools as we establish new ways of working post pandemic.
Pure Ambition Graduate Programme
Glanbia’s Pure Ambition Graduate Programme continues to play
a key role in selecting and developing the next generation of leaders
for Glanbia. Recruitment for the 2021 programme took place virtually.
The programme was recognised as Graduate Employer of the Year
(<40 intake) at Graduate Ireland’s 2020 Recruitment Awards.
Global employee base
In 2020, total Group employees, including joint ventures, came to
7,632 people based in 32 countries. Glanbia Performance Nutrition
(GPN) had 2,038 employees during the year. Glanbia Nutritionals (GN)
employed 2,493 people in 2020 including the addition of 45 from
Foodarom. Our joint ventures had 3,101 employees in 2020.
Jesus Bazan (GPN) and Emily
Stout (GN) were among the
employees featured in our ‘We
Are All Essential’ health and safety
communications campaign.
Health and Safety
Covid-19 shaped much of Glanbia’s Health & Safety (H&S) landscape
in 2020. The H&S Leadership Team continues to be a key part of
the foundation on which our Site Protection Plans were developed,
launched, and sustained. From on-site health checks, to sanitation,
social distancing protocols and standards in contact tracing, our
H&S leaders and teams were a core part of the wider Group effort
to ensure our sites were safeguarded against the spread of the virus.
Despite the unforeseen and expansion of the pandemic, the teams
remained focused and ensured delivery of further H&S improvements
in our key metrics.
In 2020, 47% of reporting locations had zero LTC (Lost Time Cases)
improving on our 2019 performance (2019: 30%). The global Total
Recordable Incident Rate (TRIR) for Glanbia as a Group improved
nearly 15% to 2.00 per 200,000 hours versus 2.35 in 2019. While we
did not reach our 2020 target of 1.80, we are confident that we are
on track to meet our five-year targets with appropriate action plans
in place.
This year’s improvements were driven by strong results most notably
in Glanbia Ireland and Glanbia Performance Nutrition, who showed
incremental improvement by implementing a deeper use of leading
‘near miss’ indicators as a driving force to prevent injuries. For 2021,
our improvement plans will be reviewed bi-annually by our Corporate
Responsibility Council (CRC) and will be part of our culture of
excellence in H&S.
Employee gender split
Employees by age
Men 68%
Women 32%
Gen Z 5%
Millenials 45%
Gen X 36%
Baby Boomers 14%
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Glanbia plc | Annual Report and Financial Statements 2020
Our People continued
Launching our Diversity and Inclusion strategy:
Promoting a diverse and inclusive Glanbia
Glanbia products enrich lives daily. Equally important to Glanbia is
that we enrich the lives of our internal and external stakeholders and
the communities we serve.
In 2020 we placed a renewed focus on Glanbia’s D&I culture through
the development of a D&I strategy.
To ensure that all voices were heard and reflected, we undertook
a deep listening exercise that included focus groups and one-to-one
interviews with diverse and under-represented groups, alongside
a company-wide employee survey. We also completed an external
benchmarking exercise.
Through this broad and inclusive process, we learned that there are
some things we are doing well such as people and culture and some
areas to improve on, for example D&I training and awareness.
Our employees report that ‘the people’ make Glanbia a great place
to work, with respect, camaraderie and teamwork featuring highly
in their experience of working with Glanbia.
In our D&I survey, 70% our employees reported that ‘my workgroup
has a culture in which employees appreciate the differences that
people bring to the workplace’.
While three quarters of respondents said ‘I feel comfortable being
myself at work’ there is evidence that some under-represented
groups may experience the workplace differently and do not always
feel as comfortable expressing themselves. There is also a perception
of inequality in terms of promotion and development opportunities.
The findings have led to the development of a comprehensive D&I
strategy. With Group Executive leadership and Board oversight,
our vision is that ‘At Glanbia we celebrate individuality,
knowing that together we are more’.
We are committed to fostering a truly inclusive culture that rejects
any form of racism and other discrimination, where every one of
our employees believes that they belong and that they have equal
opportunity to thrive.
We are committed to nurturing a diverse workforce reflective
of the customers and consumers we proudly serve and our talent
processes will ensure equitable recruitment, promotion and
development opportunities. Diversity is about valuing difference,
whether that’s people of different ages or genders or races or
backgrounds and the different insights and perspectives different
people bring.
Our ambitious D&I strategy will be realised under four strategic
priorities: Leadership, Talent, Commercial, Inclusion & Collaboration.
Our 2021 priorities will focus on embedding inclusive leadership
behaviours; ensuring that our talent and acquisition processes
are fair and equitable; establishing resource groups; focusing on
facilitating broader employee engagement on the topic; and building
our data capability to track and measure actions.
S t r a t e gic Priorities
Leadership
Talent
Commercial
Inclusion &
Collaboration
D&I infrastructure
and investment
Data Capability & Analytics
Strategic E n a b l e r s
‘Showing Respect’ is one of Glanbia’s core values and we
recognise the opportunity that global cultural events provide to raise
awareness and understanding of different cultures and traditions.
Undaunted by the challenges presented by Covid-19, in 2020 we
found new ways to celebrate global events – demonstrating the
importance we place on respecting each other and valuing diversity.
In June, our activities to mark Pride included a webinar with
Dil Wickremansinghe, an inspiring campaigner for social justice.
Through a variety of educational webinars, virtual engagement
initiatives and personal stories shared by our employees,
other events celebrated included:
International Women’s Day
•
• World Mental Health Day
• Veterans Day
• Diwali
Our Approach to Stakeholders
Our approach to engagement
Glanbia maintains an open and transparent approach to
stakeholder engagement, founded upon building respectful and
constructive relationships with our key stakeholder groups, As a
Group we recognise that the sustainability of our business strategy
is enhanced when it is reflective of stakeholder views and input.
Our key stakeholders, identified below, are those with an interest or
concern in our purpose, strategy, operations and actions and who may
be affected by them. Further details on how the Board Directors’
27
duties are discharged and the oversight of these duties are included
in the Governance section on pages 76 to 77. We have set out
on these pages how the business engages with our stakeholders,
the key interests raised and the outcomes of that engagement.
Our material issues
We have prioritised these as our material issues under the following
sustainability areas of focus:
Ȋ Economic
Ȋ Environmental
Ȋ Social
How the business engages with stakeholders
Stakeholder expectations
Outcomes of engagement
People
We engage with our employees through a range of formal
and informal channels, including meetings, conferences,
appraisals, employee surveys, our intranet, Workforce
Director engagement and focus groups, all of which were
carried out virtually in 2020. Throughout the Covid-19
pandemic, the health, safety and wellbeing of our people
has been paramount.
Ȋ Respecting our people
Ȋ D&I
Ȋ Employee health
79% of employee satisfied with Glanbia response
to Covid-19 (Pulse survey June/July 2020).
Rollout of new flexible working programme.
and safety
Launch of Glanbia’s D&I strategy.
Ȋ Employee engagement
Improvement in key metrics for monitoring
safety including LTC and TRIR metrics.
79% of employees felt Glanbia takes a genuine
interest in employee’s health and wellbeing.
Consumers and customers
Our consumers and customers rely on our brands and
ingredients and therefore our ability to listen, understand
and respond to their feedback is paramount. We
communicate regularly via customer meetings, our DTC
platform, newsletters, blogs and social media. As provider
of essential nutrition, in 2020 we increased our engagement
to reassure our consumers and customers that we would
continue to meet their product and ingredient needs.
Ȋ Product safety and quality
Ȋ Sustainable value chains
Ȋ Animal welfare
Ȋ Packaging
Ȋ Sustainable products
Ȋ Climate change
Launched Glanbia’s sustainability strategy.
Virtual engagements with customers on
business strategy and opportunities.
Refreshed marketing focus in GPN.
Online support and engagement for personal
trainers and coaches during pandemic.
Suppliers
A team of procurement professionals engages regularly
with Glanbia suppliers and supports the business in
delivering a positive, two-way communication process.
We look to secure value-focused, timely and effective
purchases while minimising risk in key areas such as
environment, ethics, quality and supply chain security.
Ȋ Sustainable value chains
Ȋ Farmer sustainability
Ȋ Climate change
Ȋ Fair pricing
Ȋ Energy
Ȋ Waste & water
Launch of sustainability strategy.
Refreshed Glanbia’s global procurement policy.
Commitment from suppliers to our anti-slavery
and human trafficking policy.
Annual review of our Anti-bribery and
Corruption polices.
Shareholders
We have regular dialogue with our investors enabling us
to establish the issues that are most important to them.
Our Chairman and our Senior Independent Director hold
one-to-one investor meetings. The Executive Directors and
Head of Investor Relations meet regularly (via conference
call) with existing and potential investors. We also engage
at conferences and at our AGM.
Ȋ Stakeholder engagement
Ȋ Performance targets
Ȋ Sustainability reporting
Ȋ Corporate Governance
Ȋ Climate change
Ȋ UN SDGs
Attended 10 investor conferences.
Our Chairman and our Senior Independent
Director held one-to-one investor meetings.
Resilient 2020 performance across our key markets.
Launch of sustainability strategy.
Redesigned Glanbia.com website with a revamped
investor section.
Society
Our Group-wide approach to social responsibility is to
support causes aligned to our purpose, values and vision.
The details of our community engagement activities are
given on page 53. Despite Covid-19, the engagement
continued through community liaison activities and fund
raising such as the Great Pink Run which funds cancer
research and took place virtually in 2020.
Ȋ Community engagement
Ȋ Responsible nutrition
Ȋ Climate change
Ȋ Business ethics and
corporate governance
€930,000 raised to support Breast Cancer
Research in a highly successful virtual ‘Great
Pink Run’, which took place virtually in 2020.
GPN’s Sports Nutrition School initiatives.
Donated €1.5 million worth of sports and lifestyle
nutrition products to help support Covid-19
first responders and frontline workers globally.
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Glanbia plc | Annual Report and Financial Statements 2020
Business Model
Driven by
What makes our
model work
How we add value
The value we create
Our purpose
Our markets
Our core capabilities
To deliver better
nutrition for every
step of life’s journey
Our values
The customers’
champion
Performance matters
Showing respect
Find a better way
Winning together
Glanbia’s brands
and ingredients are
positioned at the centre
of a large and growing
market for nutrition and
weight management
products that support
a healthy lifestyle
Our assets and
resources
Capital deployment
Financial control
Quality risk management
Secure supply chain
Sustainable operations
Dedicated employees
Our culture
Hard-working
and adaptable
Passion for delivering
better nutrition
Curious and innovative
Respectful and inclusive
Collaborative
and supportive
Understanding the
views of our
stakeholders
Understanding key
issues through effective
stakeholder engagement
Read more on pages 74-75
Brand power
Our GPN brands occupy leading
positions in the sports and lifestyle
nutrition markets with an unrivalled
product offering and key channel and
category leadership. As an ingredient
supplier in the B2B arena, the
Glanbia brand stands for quality,
integrity, innovation and sustainability.
Portfolio management
Glanbia has a strong track record
of efficient capital allocation and
portfolio management. Our use of
a range of structures including joint
ventures supports financial discipline
and strong returns on capital, critical
to sustainable long-term growth both
organically and by acquisition.
Operational excellence
Operational excellence is part of our
DNA. It enables us to manufacture
products that meet customer and
consumer food safety and high-
quality standards as a trusted
partner to key global customers.
Science-backed innovation
Innovation is critical to our success,
and that of our customers. We
focus on market-led and technology-
driven innovation, to move up the
ingredients value chain and deliver
well researched patented ingredients
and branded products.
Driven by
What makes our
model work
How we add value
The value we create
29
Driven through three strategic priorities
Committed People
Protect our portfolio of core brands
and ingredients
Our core brands and ingredients hold market-leading positions
in categories that are driven by strong underlying health and
wellness trends which have been accelerated by Covid-19.
Read more on pages 22-23
Purposeful growth through innovation
and acquisitions
Our innovative mindset drives our investment in our brands
and ingredients capabilities. There is a considerable runway
of growth across core markets and channels.
Read more on pages 22-23
Continue to embed operating enablers
The Group is supported by vital growth enablers across
talent development, sustainability and risk management,
all combining to set a consistent strategic direction.
Our people are rewarded through
management training and development
programmes aligned with our purpose,
vision and values.
Employee numbers
7,632*
* includes wholly-owned
Group and JV’s
Consumers
OPTIMUM NUTRITION™ enjoys strong
brand loyalty from its users and saw
its Net Promotor Score rise by 5 points
to +59.
OPTIMUM NUTRITION’s
Net Promotor Score (NPS)
+59
Investors
We have a progressive dividend policy
with a targeted dividend payout ratio
of between 25% and 35% of adjusted
Earnings Per Share. We exceeded
this target in 2020 with a payout ratio
of 36.1%.
Communities
Glanbia is proud to have donated
more than €1.5 million worth of sports
and lifestyle nutrition products globally
to help support first responders, frontline
workers and hospitals who were leading
the fight to keep people healthy
throughout the Covid-19 pandemic.
Dividend payout ratio
25%-35%
Charitable donations
€1.5m
Read more on pages 22-23
Suppliers
97% of our Idaho suppliers completed a
Farm Assuring Responsible Management
(FARM)Environmental Stewardship (ES)
programme, a model that calculates
carbon and energy footprint.
Idaho suppliers completing
FARM ES
97%
Environment
In 2015 we set an ambition to reduce
water use intensity by 8% by 2020. We
exceeded this ambition reducing water
use across all manufacturing sites by 17%.
Water usage reduction
over a five year period
-17%
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Glanbia plc | Annual Report and Financial Statements 2020
Key Performance Indicators
Revenue
€3.8bn (2019: €3.9bn)
Strategic relevance
Revenue growth is a key indicator of how the
Group is succeeding in developing through
investment in organic growth and the ongoing
acquisition programme.
€3.8bn
€3.9bn
In addition to overall revenue for the Group
there are a number of key components of Group
revenue (price, volume and acquisition) which
are actively monitored to provide greater insight
into markets.
+0.6% cc
2020
2019
Performance
In 2020, revenue was €3.8 billion (2019:
€3.9 billion), down 1.36% on a reported
basis and up 0.6% constant currency (cc)
on 2019. Like-for-like revenue growth was
1.8% driven by pricing growth of 3.8%.
Sales volumes declined due to Covid-19
challenges in GPN offset by volume growth
in GN.
Revenue volume growth1
-2.0% (2019: +0.1%)
GPN -10.9% (2019: -8.9%)
LFL branded revenue volume growth
NS +2.4% (2019: +7.0%)
LFL revenue volume growth
Strategic relevance
Revenue volume growth is an important metric
for the Group as it represents the underlying
growth in sales to customers excluding any
impact of price. Volume is further broken down
by the Business Units to understand the brand
growth within GPN and the components of
volume growth in Nutritional Solutions within GN.
Performance
Overall volumes decreased 2.0% in the
year. The key volume growth metrics were
a LFL branded volume decline in GPN of
10.9% and volume growth within the NS
and US Cheese businesses of GN of 2.4%
and 5.0% respectively. The decline in GPN
volumes related mainly to the challenging
environment brought about by the Covid-19
pandemic, particularly in Q2.
EBITA2 (pre-exceptional)
€209.6m (2019: €276.8m)
-22.6% cc
2020
2019
€209.6m
€276.8m
Profit after Tax
€143.8m (2019: €180.2m)
2020
2019
€143.8m
€180.2m
Total Shareholder Return3
+5% (2019: -36.7%)
€200
€150
€100
€50
€0
2015
2016
2017
2018
2019
2020
Glanbia
STOXX Europe 600 Food and Beverage Index
Strategic relevance
Earnings Before Interest, Tax and Amortisation
(EBITA), pre-exceptional items, is the key
performance measure of the wholly-owned
segments within the Group. The exclusion
of amortisation aids comparability between
our segments.
EBITA margin is a key metric to ensure that
growth is being driven in a responsible manner
by maintaining margins within an acceptable
range. The strategy for the Group is to focus
on higher growth, higher margin products within
GPN and GN.
Performance
EBITA was €209.6 million in 2020, down
24.3% reported and down 22.6% on a
constant currency basis. GN had an EBITA
decline of 7.4% constant currency with
EBITA margins down 80bps versus 2019.
GPN’s EBITA declined by 36.2% constant
currency versus 2019, while EBITA margins
were down 270bps. The Group started the
year well, had a very challenging second
quarter when the impact of the Covid-19
lockdowns was most severe and then
sequentially improved through the second
half of the year.
Strategic relevance
Profit after tax is the profit attributable to the
equity shareholders of the Company and is a
measure of the profit retained by the Group for
the year, post-tax and post-exceptional items.
Performance
Profit after tax for 2020 was €143.8 million
compared to €180.2 million in 2019,
a decrease of €36.4 million, due to lower
underlying EBITA in the year.
Strategic relevance
Total Shareholder Return (TSR) reflects the value
delivered to shareholders arising from the
ownership of Glanbia’s shares plus dividends
reinvested. 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 was positive 5% in 2020.
The STOXX Europe 600 Food and
Beverage Index (F&B Index), which
is a key benchmark for remuneration
purposes, decreased by 6.5% in the year.
Glanbia’s TSR over the three-year period
of 2018 to 2020 was a negative 25.9%
versus the F&B index of +14.1% and over
the five-year period of 2016 to 2020 was
negative 33.9% versus the F&B Index
of +25.8%. Glanbia’s share price at the
end of the financial year was €10.38
(2019: €10.16).
1 Performance condition of Glanbia’s Annual Incentive Scheme.
2 Both EBITA and OCF are presented on a pre-exceptional basis.
Adjusted Earnings Per Share1,3
73.78c (2019: 88.1c)
-14.9% cc
2020
2019
73.78c
88.1c
Return on Capital Employed3
9.0% (2019: 10.9%)
2020
2019
9.0
10.9
OCF conversion1,2
122.4% (2019: 86%)
+3,640bps
2020
2019
122.4%
86%
Health and safety
Objective
Maintain the highest possible global
safety standards using sites with no
Lost Time Case (LTC) as a key benchmark.
Strategic relevance
Adjusted Earnings Per Share (EPS) is an
important measure of the profitability of the
Group as it represents the underlying profit
per equity share in issue.
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.
Strategic relevance
Operating Cash Flow (OCF) measures the
cash generated from operations before interest
and tax payments and before strategic capital
expenditure. OCF conversion is OCF as a
percentage of EBITDA (earnings before interest,
tax, depreciation and amortisation) and is a
measure of the Group’s ability to convert trading
profits to cash, which is then available for
strategic investments and dividend payments.
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. Glanbia aspires to
zero LTC.
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.
Strategic relevance
GRMS is an auditable framework for the
identification and management of operational
risks across the Group. Assessment and
ranking levels are based on international risk
management standards. On-site assessments
are conducted by an independent third
party to help drive a culture of continuous
improvement across our sites. Each site is
awarded a score on a scale of 1 to 5.
31
Non-financial Metric
Performance
Adjusted EPS was 73.78 cent, down
16.3% on a reported basis, down 14.9%
constant currency basis. Significant
elements of our portfolio were resilient
through the challenges of Covid-19,
particularly GN and our JVs. Covid-19
lockdowns particularly impacted GPN,
however trends improved as the year
progressed.
Performance
ROCE decreased by 190 basis points
to 9%. This was primarily due to lower
profitability in GPN’s operations which
were significantly impacted by the
pandemic. The Group is focused on GPN’s
transformation programme which will
return the segment to profitable growth
in 2021 and consequently improve returns.
Performance
Tight liquidity management in 2020
resulted in OCF conversion of 122.4%
compared to a target conversion of 80%
and conversion in 2019 of 86%.
Performance
In 2020, 47% of reporting locations
had zero LTC, improving on our 2019
performance (2019: 30%). In addition,
the global Total Recordable Incident Rate
(TRIR) for the Group improved nearly 15%
at 2.00/200,000 hours versus 2.35 in 2019.
Although we did not meet our 2020 TRIR
target (1.80) we are confident that we are
on track to meet our five-year targets with
appropriate action plans in place.
Performance
During Covid-19 restrictions in 2020,
the new online GRMS programme
aided the performance of remote self
assessment verifications and audits.
All locations maintained or improved their
individual site rating from the prior year.
Management action plans to address
the key improvement opportunities were
developed by the independent assessor
and agreed with local management.
Progress against these recommendations
is centrally monitored.
Employee engagement
score
72%
Strategic relevance
Employee engagement is a key enabler of
performance. At Glanbia we acknowledge that
people who are positively engaged, motivated
and supported perform to the best of their ability,
find a greater sense of meaning in what they do
and contribute positively to Glanbia’s success.
Performance
Due to the impact of Covid-19 we did not
undertake a full employee engagement
survey during the year. In our pulse survey
in September, 72% of employees said they
are happy working with Glanbia. We will
conduct a Group-wide engagement survey
in H2 2021.
3 Performance condition of Glanbia’s Long-Term Incentive Plan.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 32
Glanbia plc | Annual Report and Financial Statements 2020
Operations Review
Glanbia Performance Nutrition
Delivering on our
transformation programme
and focused on
growth initiatives
Performance
Overview
€’m
FY 2020
FY 2019
Change
Revenue
EBITA
EBITA margin
1,138.0
91.2
8.0%
1,363.8
146.4
10.7%
(16.6%)
(37.7%)
(270bps)
Constant
Currency
Change
(15.0%)
(36.2%)
(270bps)
Commentary on percentage movements is on a constant currency
basis throughout.
Revenue
GPN revenue declined by 15.0% in FY 2020 versus prior year
on constant currency basis. Like-for-like branded sales declined by
10.8%, driven by volume declines of 10.9% offset by a price increase
of 0.1%. After a good start to 2020 where in the first quarter GPN
delivered 6.0% growth in like-for-like branded revenues, the Covid-19
pandemic caused significant disruption globally in the second quarter.
Revenues improved sequentially in the second half of 2020 in
spite of some weakness in Europe in the fourth quarter as restrictions
were reintroduced. Over the full year the key areas negatively
impacted by Covid-19 were International markets which were
curtailed as well as the specialty and distributor channels in North
America. GPN grew in eCommerce channels globally in 2020 as
consumer behaviours and shopping patterns altered through the
evolution of the pandemic. The FDMC channel was down year-on-
year due to strong prior year comparisons and headwinds in the
ready-to-eat category in the North America Lifestyle business which
was impacted by consumer mobility restrictions. Price increase
mainly related to strategic pricing decisions in the North America
Performance Nutrition and International portfolios more than offset
promotional activity in the Direct-to-Consumer (DTC) business.
Hugh McGuire
CEO, Glanbia
Performance Nutrition
Revenue
€1,138.0m
(2019: €1,363.8m)
EBITA (pre-exceptional)
€91.2m
(2019: €146.4m)
EBITA Margin
8.0%
(2019: 10.7%)
EBITA
GPN pre-exceptional EBITA in FY 2020 was €91.2 million, 36.2%
lower than the prior year, with a pre-exceptional EBITA margin
of 8.0%, 270 basis points lower than prior year. EBITA declined
as a result of revenue decline and the negative operating leverage
associated with the significant decline in revenues in the second
quarter in particular. EBITA margins improved significantly to 11.8%
in the second half of 2020 (3.7% H1 2020) as sales volume trends
improved, price increases were implemented and benefits crystallised
from the execution of the GPN transformation project.
GPN transformation programme
and growth strategy
GPN commenced a transformation programme in late 2019 to realign
operating and supply chain structures in support of growth ambitions,
sharpen focus on brands and optimise routes-to-market across
non-US markets to drive greater efficiencies, improve margin and
deliver top line growth with significant progress made during 2020.
The project is delivering against its plans and is on target to deliver
an overall GPN EBITA margin ambition by 2022 of between 12%
and 13%, an increase of 400 to 500 basis points on FY 2020 margin.
The project will continue through 2021 as the onset of the pandemic
led to a further broadening and deepening of its scope. Within the
programme key efficiency projects include: a rationalisation of SKUs
from the portfolio; the exit of contract business in North America;
significant realignment of routes-to-market in regions outside
North America; and a consolidation of supply chain activity.
Growth oriented initiatives include: the prioritisation of the OPTIMUM
NUTRITION™ and SLIMFAST™ brands as category leaders within the
portfolio; targeted price increases which were delivered in H2 2020;
and a reorganisation of talent and teams to align resourcing to
growth opportunities.
33
OPTIMUM NUTRITION™
and SLIMFAST™ reach
consumers through
integrated campaigns
OPTIMUM NUTRITION’s™ PROVEN™ campaign
moved into its second year and has now
reached consumers in over 50 countries.
In May 2020 PROVEN™ was activated to support
a mission to support personal trainers who lost
their jobs due to the closure of gyms. A “30’s”
film, coupled with a number of social and digital
assets were created, as well as online experiential
events that raised money for the personal trainer
community. In August 2020, OPTIMUM NUTRITION™
launched ‘Better Than Before’, a range of content
designed to encourage consumers to continue
or get back into exercise as the second wave
of Covid-19 lockdowns emerged. SLIMFAST™
supported its consumers efforts to manage
their weight during the pandemic. In August, the
‘Back To You’ campaign returned across multiple
channels with a call to action to download the
new SLIMFAST™ Together app. The app provides
weight managers with trackers, meal plans,
recipes, and weight loss advice to help them
stay on the plan longer and achieve their goals.
In the UK, SLIMFAST™ continued to grow share
within the Weight Management category enabled
by a successful post lockdown media campaign
across social media and TV, complementing
the launch of the KETO range and the growing
relevance of weight management in a Covid-19
world. The campaign is fronted by SLIMFAST™
ambassador Kelly Brook.
50
PROVEN™ Campaign
has reached consumers
in over 50 countries
across the world.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 34
Glanbia plc | Annual Report and Financial Statements 2020
Operations Review continued
Glanbia Performance Nutrition continued
GPN is now positioned as a market leader in the growth channels
of eCommerce and FDMC. In FY 2020 GPN derived 70% of its
revenues from these channels which are expected to be a key driver
of future growth given the consumer shopping trends accelerated
by Covid-19. GPN has leading positions within these channels via
the OPTIMUM NUTRITION™ and SLIMFAST™ brands which have
strong positions in their respective categories of performance
nutrition and weight management. These brands delivered
consumption growth in measured channels1 in 2020 and combined
represented 71% of GPN’s branded revenues in FY 2020.
North America Performance Nutrition portfolio
In the North America Performance Nutrition portfolio branded
like-for-like revenues declined by 9.0% in 2020 compared to prior
year. This was driven by volume declines in the specialty and
distributor channels which were heavily impacted by Covid-19
somewhat offset by price increases implemented in the second half
of the year. There was good revenue growth in the period in domestic
eCommerce and FDMC channels which now make up the majority
of sales in this portfolio. The OPTIMUM NUTRITION™ brand has a
leading position within its category in these channels and performed
well in FY 2020 with consumption increasing 4% versus prior year
in measured channels1 in the period.
North America Lifestyle portfolio
In the North America Lifestyle portfolio, like-for-like revenue
decreased by 5.3% in 2020 versus the prior year. This was driven by
headwinds for the think!™ brand as reduced consumer mobility as a
result of Covid-19 resulted in a decline in the ready-to-eat category.
SLIMFAST™ was impacted by strong prior year comparisons in the
second half of the year. SLIMFAST™ continued to outperform the
category and delivered 4% consumption growth in measured
channels1 in FY 2020 with strong growth in eCommerce channels.
think!™ outperformed the category performance in the year and
AMAZING GRASS™, GPN’s plant based nutrition brand, delivered
consumption growth as consumers sought out products providing
natural immunity.
International
In the International portfolio like-for-like revenue decreased by 21.3%
in 2020 versus the prior year. International markets were severely
disrupted by lockdowns as routes-to-market in many countries
were essentially closed in the second quarter and restrictions
were reintroduced in Europe in the fourth quarter. This resulted in
significant negative operating leverage particularly in Q2. During the
third quarter many International markets began to reopen and there
was a corresponding recovery in sales. As part of the transformation
programme, GPN has realigned its footprint internationally to focus
on targeted key growth markets and further utilising eCommerce,
to grow the business.
1. North America measured channels include eCommerce, FDMC (food, drug,
mass, club) and specialty channels. Data compiled from published external sources
and Glanbia estimates.
Revenue by Business Area
North America Performance Nutrition 38%
North America Lifestyle 31%
International 24%
DTC 7%
Direct-to-Consumer
GPN’s DTC business delivered like-for-like growth of 1.9% in FY 2020
versus prior year. The DTC business delivered strong growth in the
second half of 2020 offsetting declines in the first half. Following a
further assessment as part of the transformation project, GPN plans
to further leverage DTC globally to accelerate and augment its
eCommerce channel strategy across the business.
Significant position in growth channels:
Online and FDMC
For a number of years GPN has been on a transformational journey
with respect to its channel orientation in particular growing brand
presence in the eCommerce and FDMC channels. In 2015 GPN
had less than one third of its revenues in these channels. In 2020,
over 70% of GPN’s business was in these channels. These are
growth channels, where brand awareness, trust and loyalty are
very important. GPN is well positioned within these channels,
holding leadership positions and developing strong capability
to further leverage our growth opportunities.
FY2015
FY2020
FDMC 10%
Online 22%
Distributors 32%
Speciality 36%
FDMC 37%
Online 33%
Distributors 16%
Speciality 14%
35
About GPN
We are a global performance
nutrition and lifestyle brand business
Our mission
Inspiring people everywhere to achieve their performance and healthy lifestyle goals.
Our brands
The GPN family has a portfolio of leading brands
in sports and lifestyle nutrition. Our mission is
to inspire people everywhere to achieve their
performance and healthy lifestyle goals. Our
flagship brands are OPTIMUM NUTRITION™ and
SLIMFAST™, which occupy leadership positions
in Sports Nutrition and Weight Management
respectively. The remaining brands include
AMAZING GRASS™, think!™, BODY&FIT™,
NUTRAMINO™, BSN™ and ISOPURE™. Our brands
are sold in over 100 countries in mass retailers,
specialty stores, pharmacies and online.
Our ambition for creating and delivering sustainable growth
In 2020, GPN initiated a business-wide
programme to transform how we execute and
deliver value. Its aim is to significantly drive
efficiencies to fuel top line growth and enhance
margins. This involves hundreds of individual
initiatives targeting both efficiency and demand.
The effort is ongoing and will deliver increasing
value throughout 2021 and 2022.
GPN Growth strategy
Sharper
geographic focus
Leading brands
outperforming our categories
Omni channel capability
across the organisation
• Leverage our scale in the US to drive
• These brands delivered 71% of GPN
• Our business has transformed
broader Americas growth.
branded revenues in 2020.
• Prioritise key Rest of World markets.
•
Increasing investment in marketing.
its channel exposure with most of
our business in growth channels.
• We have accelerated our investment
in global eCommerce.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATIONPERFORMANCE LIFESTYLE 36
Glanbia plc | Annual Report and Financial Statements 2020
Operations Review continued
Glanbia Nutritionals
Resilient performance
underpinned by strong
strategy execution
Performance
Overview
€’m
FY 2020
FY 2019
Change
Revenue
EBITA
EBITA margin
2,685.1
118.4
4.4%
2,511.9
130.4
5.2%
6.9%
(9.2%)
(80bps)
Constant
Currency
Change
9.0%
(7.4%)
(80bps)
Commentary on percentage movements is on a constant currency basis throughout.
GN recorded a good performance in FY 2020 with revenues up 9.0%
on prior year. Like-for-like revenue was up 10.0% which was driven
by volume increases of 4.2% and favourable pricing of 5.8%. Volume
increase was across both Nutritional Solutions and US Cheese as
the broad sectoral reach of the business resulted in robust end-
market demand through the year. Favourable pricing was driven by
US Cheese due to higher average market prices in the period versus
prior year. Acquisitions added a further 0.9% to revenues in 2020.
GN EBITA decreased in FY 2020 versus prior year by 7.4% as a result
of lower EBITA margins which declined by 80 basis points. EBITA
margins were impacted by dairy market dynamics.
Brian Phelan
CEO Glanbia Nutritionals
About Glanbia Nutritionals
Glanbia Nutritionals (GN) comprises: Nutritional Solutions (NS)
and US Cheese.
Nutritional Solutions (NS)
NS is a global provider of
innovative nutritional and
functional solutions. Through
its extensive portfolio of dairy
and non-dairy ingredients and
capabilities, NS provides a wide
range of science-led solutions
to customers across the globe.
US Cheese
GN is the number one producer
of American-style cheddar
cheese, supplying our natural
cheese to brand owners and
other leading food service
organisations globally.
Market
#1
Market
#1
Producer of US
whey protein isolate
Producer of American-style
cheddar cheese
Revenue by Division
NS Revenue
US Cheese Revenue
€746.8m
€1,938.3m
(2019: €744.9m)
(2019: €1,767.0m)
Nutritional Solutions 28%
US Cheese 72%
37
Edible film
Sustainable
technologies
and capabilities
GN’s continues to explore how food technologies
can be leveraged to improve the efficiency
and sustainability of producing, delivering and
enjoying food and ingredients. One of NS’s distinct
capabilities is edible film technologies enabling
the delivery of ingredients with strong visual cues
that are edible, biodegradable and clean labelled.
These attractive capabilities give NS the
competitive advantage which makes it a leading
player in edible films and glitter.
Currently some of the more popular applications
for our edible films are in the production of glitter
and flavour strips that are used in confection,
cake decorating, cookie toppings or other bakery
applications. NS’s edible film technologies are
also used in oral hygiene or breath freshening
applications like mints and gum. Applications are
being developed to deliver a serving of a ready-
to-mix beverage in a pre-weighed and packaged
sachet that can be used as a drop-in to protein
shakers for ready-to-mix beverage applications.
The global edible films and coatings market is
expected to experience steady growth over the
next decade owing to increased demand for edible
packaging as an alternative to plastic use.1 From
a sustainable materials perspective, edible films
and coatings are seen as an excellent solution
to minimising packaging material and wastage.
Rising consumption of convenient food offerings
especially in developed regions, will also boost
demand, as will the growing demand for the use
of edible films and coatings as additives.
1. Future market insights: edible films and coatings market
Nutritional Solutions
€’m
FY 2020
FY 2019
Change
Revenue
EBITA
EBITA margin
746.8
90.5
12.1%
744.9
100.0
13.4%
0.3%
(9.5%)
(130bps)
Constant
Currency
Change
2.0%
(7.7%)
(130bps)
Nutritional Solutions (NS) revenues increased in FY 2020 by 2.0%
versus prior year. Like-for-like revenue increased by 0.8% driven
by a 2.4% increase in volume and a 1.6% decrease in price. Volume
growth was broad based across the portfolio in essential micro-
nutrients as well as dairy solutions as a result of good end-market
demand. The price decrease primarily related to reduced dairy
ingredient pricing year-on-year. The Watson and Foodarom
acquisitions delivered a further 3.1% of revenue growth.
Demand for NS’s key ingredient solutions remained robust throughout
the year. The business did see a reduction in demand from customers
in the ready-to-eat category as Covid-19 restrictions reduced
consumer mobility however, this decline was offset by growth in
other aspects of the portfolio including a strong demand for immunity
enhancing consumer ready offerings.
NS pre-exceptional EBITA in FY 2020 was €90.5 million, 7.7% lower
than prior year due to lower margins. Margins declined by 130 basis
points versus prior year to 12.1% driven by reduced margins in dairy
solutions which were impacted by negative price and some adverse
business mix.
In August 2020 the Foodarom acquisition was completed by GN
for an effective consideration of CAD 60 million plus contingent
consideration. Foodarom is a Canadian flavours business with CAD
34 million annual revenue. It has strong flavour formulation capability
and is focused on segments complementary to NS.
NS growth strategy
NS has an ambitious growth strategy leveraging its existing portfolio
and market leadership in essential micro-nutrients and protein
solutions. The business has seen strong demand from customers
seeking solutions for products which provide immunity support
as well as essential nutrition. NS will continue to make selective
complementary acquisitions, which can build on existing platforms
as well as expand into adjacent capabilities.
Over the past two years GN has made two strategic acquisitions,
Watson and Foodarom. Watson is a US based essential micro-
nutrients business and has provided NS with additional scale as
well as new technologies which further build NS’s offerings within
vitamin and mineral premixes. Foodarom will support NS to scale
into the adjacent flavours technology platform. This area is highly
complementary as it is a key aspect of product formulation and
provides NS with the opportunity to further deepen engagement
with existing customers as well as gain new business relationships.
Both acquisitions have performed well since completion.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 38
Glanbia plc | Annual Report and Financial Statements 2020
Operations Review continued
Glanbia Nutritionals continued
US Cheese
US Cheese is a leading producer of American-style cheddar cheese
in the US supplying a broad range of customers, predominantly
US based, who participate in the food service and retail consumer
branded and private label end-markets. As well as selling its own
manufactured cheese, US Cheese is also the commercial and
operations partner to the MWC-Southwest Holdings joint venture
which owns Southwest Cheese, a cheese and whey plant
in Clovis, New Mexico, US and the new cheese, and whey plant
in St. Johns, Michigan, US.
€’m
FY 2020
FY 2019
Change
Revenue
EBITA
EBITA margin
1,938.3
27.9
1.4%
1,767.0
30.4
1.7%
9.7%
(8.2%)
(30bps)
Constant
Currency
Change
11.9.%
(6.4.%)
(30bps)
US Cheese revenue increased in FY 2020 by 11.9%, with like-for-like
revenue increasing 13.8%. This was driven by a 5.0% increase in
volume and an 8.8% increase in price. Volume growth reflected
good demand from customers with retail end-market exposure,
a category which was strong as a result of Covid-19. Pricing was
volatile throughout the year and averaged at higher levels than prior
year as a result of higher category demand. US Cheese operates
a business model which helped to negate the majority of the impact
of significant price volatility in the period.
US Cheese delivered a 6.4% decrease in pre-exceptional EBITA in
FY 2020 versus prior year. This was driven by reduced EBITA margin
which declined by 30 basis points as a result of higher operating
costs in the second half of the year.
US Cheese
Innovative Cheese Solutions
Glanbia Nutritionals is constantly breaking new
ground with cheeses that are delicious, nutritious
and functional. Innovative cheeses offer solutions
in an ever-evolving cheese market. In 2020 we
launched a series of classic cheddar cheeses for
ageing tailored to meet the flavour preferences
found across the US. We also developed several
blended cheese varieties including a cheddar-
parmesan, cheddar-mozzarella and a cheddar-
asiago. The blended cheeses provide unique
functionality, flavour and convenience giving consumers
preferred combinations in one finished product.
We also offered consumers probiotic cheeses with
viable probiotic cultures. Data generated at the Glanbia
Nutritionals’ Cheese Innovation Center demonstrated
that cheddar cheese made with probiotic strains
including Bidfidobacterium bifidum and Bifidobacterium
lactis had over a million viable cells, and offer a shelf life
of over six months. Best of all, the probiotics had no
adverse impact on flavour.
Foodarom
Acquisition expands flavours and
nutritional solutions capabilities
In August 2020, Glanbia Nutritionals acquired
Foodarom, a Canadian-based custom flavour
designer and manufacturer. The business services
the food, beverage and nutritional product
industries with turnkey flavours and formulation
support. Foodarom comprises a flavour library
of over 15,000 recipes and produces both liquid
and powder products for various applications.
The acquisition is highly complementary to GN’s
solutions-based customer approach and focus
areas, strengthening our capability in the area
of flavours and nutritional solutions. The knowledge and
experience of the combined research and development
teams will further strengthen our growing position in
flavours, and further enhance ability to provide optimised
ingredient systems to our customers.
15,000
recipes offered by Foodarom’s flavour library
39
Nutritional Solutions growth strategy
Harnessing end-market demand with leading technologies, customer engagement and expansion
Protect
and grow
the core
Expand
beyond the
core
Embed
enablers
Leading market positions
Geographical reach
Talent development
Essential micro-nutrients | Protein solutions
Additional technologies
Global innovation investment
Deep customer relationships
Adjacent platforms e.g. flavours
Attractive end-markets
Complementary acquisitions
Partnership mindset
Sustainability focused
New
brand growth
Shortening
product lifecycles
On-the-go
convenience
Clean
labelling
Population growth
and urbanisation
Increase in dairy
consumption
Key trends enabling our growth
NS’s opportunities and capabilities
Formulation
capability
Proactive
innovation
Application and
format expertise
Quality ingredients
and supply chain
Increasing
international
opportunity
Capital efficient
partnership model
NS is pursuing attractive end-markets which are on-trend and growing
Bakery and
confectionary
Sports
nutrition
Beverages
Infant
nutrition
Dairy
products
Dietary
products
Clinical
nutrition
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 40
Glanbia plc | Annual Report and Financial Statements 2020
Operations Review continued
Joint Ventures
Building on our core
strategic partnerships
Dairy has always been an important part of our business. With a
heritage in Ireland’s world-class dairy industry, we’ve brought this
expertise to the rest of our global operations. Our joint ventures (JVs)
make award-winning dairy products such as milk, butter, dairy
ingredients, cheese and nutritionally rich snacks and drinks.
Equity accounted investees (Glanbia share)
€’m
FY 2020
FY 2019
Change
Constant
Currency
Change
Share of profit after tax
(pre-exceptional)*
61.6
48.6
26.7%
28.1%
* Includes Glanbia’s share of profits from the Glanbia Ireland, Glanbia Cheese UK,
Glanbia Cheese EU and MWC-Southwest Holdings joint ventures.
Glanbia’s principal joint ventures include Glanbia Ireland, Glanbia
Cheese UK, Glanbia Cheese EU and MWC-Southwest Holdings.
Glanbia uses the equity method of accounting for its joint ventures
and includes its share of joint venture profit after tax in the adjusted
Earnings Per Share calculation.
Glanbia’s share of JVs’ profit after tax pre-exceptionals, increased by
€13.0 million to €61.6 million in FY 2020. This was driven by a strong
performance in the MWC-Southwest Holdings JV, due to favourable
dairy market dynamics which offset marginal declines in the European
joint ventures.
Robust Joint Venture models
Glanbia Ireland
The Glanbia Ireland (GI) joint venture is owned 60% by Glanbia
Co-operative Society Limited and 40% by Glanbia plc. GI is the
largest milk processor and grain buyer in Ireland, producing a range
of value-added dairy ingredients and consumer products as well
as selling farm inputs.
Despite the significant disruption caused by the Covid-19 pandemic,
GI delivered a solid performance with revenue down by 2.8%,
of which 2.0% was caused by volume decline and the balance due
to modest price deflation over the period. Volume decline in the
Agribusiness division was due to very favourable weather conditions
for farmers during 2020, leading to good grass growth and a
consequent reduction in demand for both feed and fertiliser.
The domestic foodservice element of the Consumer business was
significantly affected by lockdowns during much of 2020, but was
compensated by higher retail demand to a certain extent. Pricing
of ingredient dairy commodities remained robust, with a marked
decline in March after the initial wave of lockdowns but swift recovery
in pricing was seen over the summer months.
Milk volumes in 2020 increased by 4.9% on a like-for-like basis,
leading to over 3 billion litres of milk intake for the year. Another record
volume of 90.4 million litres was processed in the peak week for milk
in 2020, up 4.2% on the equivalent week in 2019. Planning for Brexit
Joint
Venture:
Glanbia Ireland
Glanbia Cheese UK
Glanbia Cheese EU
MWC-Southwest Holdings
Key
activities:
Largest Irish-based
integrated agri-food and
dairy nutrition business
Large-scale manufacturer
and marketer of
mozzarella cheese
JV established in 2018
to build a mozzarella
cheese plant
US producers of
American-style cheddar
cheese and whey ingredients
Location:
Ireland
United Kingdom
Ireland
New Mexico, US
(Southwest Cheese) and
Michigan, US (MWC)
41
provided a further challenge as the year progressed. GI sources
some 4% of its raw milk in Northern Ireland, and exports a range of
dairy products, primarily cheese and butter, to Great Britain. While the
EU–UK Trade and Cooperation Agreement has largely avoided the
imposition of tariffs on goods moving between the two trading blocs,
there is a considerable additional administrative burden. Some minor
logistics difficulties were encountered since the start of 2021 but,
overall, the impact of Brexit has been relatively minor to date.
As consumer behaviour evolved in 2020, GI experienced strong
growth in digital platforms including fresh doorstep delivery business
‘mymilkman.ie’, agri and gardening input business, ‘Glanbia Connect’,
and a new business-to-business ingredients trading platform,
‘Glanbia Direct’.
Continued progress was made in expanding GI’s consumer branded
offerings internationally, with substantial growth in sales of UHT milk
and cream into South East Asia.
The Truly Grass Fed brand, which offers a range of butter and cheese
products, continues to be well received in the US marketplace with
good momentum building as distribution ramps up. During the year,
GI commenced construction of a new €15 million Innovation Centre in
Ballyragget, Co Kilkenny, Ireland. The 2,000 square metre facility will
deliver significant capabilities when it comes on stream in late 2021.
In 2021, GI will deliver cheese ingredients to the new mozzarella plant
developed by Glanbia Cheese EU in Portlaoise, Co Laois. Importantly
it enables GI to diversify away from an over-reliance on the cheddar
market and certain geographical territories such as UK.
GI has entered into a strategic partnership with Royal A-ware,
a leading global cheese and dairy producer in the Netherlands,
to build a new continental cheese manufacturing facility in Belview,
Co. Kilkenny, Ireland. The new facility was granted planning approval
by An Bord Pleanála in June 2020 but this decision is currently the
subject of a judicial review.
During 2020, Gl was one of a select group of Irish food companies
to achieve Gold status in a sustainability ratings process run by
Origin Green, part of Bord Bia (the Irish Food Board).
Glanbia Cheese EU
Glanbia Cheese EU was established in 2018 as a 50:50 joint venture
between Glanbia plc and Leprino Foods Company. The new Glanbia
Cheese EU joint venture plant in Portlaoise, Ireland is on track with
construction largely completed at the end of 2020 and commissioning
expected to be completed by the second quarter of 2021. This plant
will further enhance the Group’s leading position in the mozzarella
cheese category.
MWC-Southwest Holdings
The new large-scale MWC-Southwest Holdings JV plant in Michigan
is on track and commenced commissioning in October 2020.
Commissioning is expected to be completed by the second quarter
of 2021. With the support of milk supplying partners the project is
progressing well and when fully operational, the facility will further
consolidate the Groups leading position in the US American-style
cheddar cheese and value-add whey markets. On a full year basis
this plant will increase Glanbia’s US Cheese production capacity
by over 30%.
Case study
Avonmore’s Super Milk Minis
At Avonmore we truly believe in the goodness of
dairy, which is why we carefully nurture everything
that nature provides so that we can bring families
across Ireland the very best. Avonmore’s Super Milk
Minis is designed to support the nutritional needs of
young kids. Formulated with extra calcium, Vitamin D
and a hint of natural strawberry it is an exciting
addition to the successful value-added milk range
from Ireland’s number one dairy brand. The pack is
designed specifically for little hands and comes in
a multi-pack format. In Ireland, consumers don’t get
enough sunshine generally and so the addition of
Vitamin D to the diet is essential to the development
of healthy bones.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 42
Glanbia plc | Annual Report and Financial Statements 2020
Group Finance Director’s Review
“ We remain focused on
delivering on our key metrics
and returning the Group
to its long-term trajectory
of profitable growth.”
As outlined earlier in this Report, 2020 was a challenging year
as Glanbia responded to an unprecedented and evolving global
pandemic. The Group reported adjusted EPS of 73.78 cent, down
14.9% constant currency on the prior year. The Covid-19 pandemic
impacted all areas of the business to differing degrees. Glanbia
Performance Nutrition (GPN) experienced the most significant impact
with the pandemic forcing the temporary closure of key sales
channels in the second quarter of 2020. Glanbia Nutritionals (GN)
and the joint ventures, were less impacted by these restrictions,
and delivered good performances over the year. Despite the ongoing
crisis, all businesses have shown resilience and performance has
continued to recover over H2, 2020 and into 2021.
The Group’s performance in 2020 was recorded over a 52 week
period, whereas the prior year was a 53 week period. For the
understanding of the reader, unless stated otherwise, certain
commentary related to volume and pricing in this review is on a
like-for-like basis, excluding the impact of the 53rd week of 2019.
GPN’s total revenues of €1.1 billion reflected a decrease of 15%
constant currency, comprising like-for-like volume declines of 13.4%,
with the overall pricing remaining in line with the prior year. Revenue
decline was driven by the impact of the pandemic, with most markets
negatively impacted. The specialty, distributor and gym channels
globally were significantly challenged by temporary market closures
in response to government imposed lock downs. These challenges
were mitigated by an acceleration of eCommerce channels globally,
a channel which is now the largest and fastest growing for our GPN
brands. Pricing remained in line with prior year with price increases
across North America Performance Nutrition and North America
Lifestyle businesses, offset by increased discounting in the Direct-
to-Consumer (DTC) business. The GPN transformation programme
continued at pace delivering initial long-term cost savings which
partially offset negative operating leverage. Overall, as a consequence
of the Covid-19 related revenue declines, GPN EBITA at €91.2 million,
was down 36.2% constant currency. EBITA margins were 8%,
a 270bps reduction from prior year due to negative operating
leverage albeit second half EBITA margins returned to planned
double-digit performance.
Mark Garvey
Group Finance Director
Adjusted EPS
Basic EPS
73.78 cent
48.72 cent
(2019: 88.10 cent)
-14.9% constant currency
-16.3% reported currency
(2019: 61.04 cent)
-18.9% constant currency
-20.2% reported currency
EBITA (Pre-exceptional)
ROCE
€209.6m
(2019: €276.8m)
-22.6% constant currency
-24.3% reported currency
9.0%
(2019: 10.9%)
-190bps
OCF cash conversion
122.4%
(2019: 86.0%)
OCF as % of EBITDA
Dividend payout ratio
36.1%
(2019: 30.2%)
Dividend per share as
a % of adjusted EPS
Revenues in GN, comprising Nutritional Solutions (NS) and US
Cheese businesses, were strong in the year, up 9% constant currency
to €2.7 billion, with like-for-like volumes up 4.2%, pricing up 5.8%
(primarily cheese related) and acquisitions contributing 0.9%. NS
like-for-like volumes were up 2.4% with good growth in dairy and premix.
US Cheese also had a very good year, with like-for-like volumes up
5.0% further enhanced by favourable pricing (+8.8%) due to strong
cheese markets. GN EBITA contracted 7.4% constant currency,
to €118.4 million, due to margin pressures in the dairy business
and some adverse business mix.
Operating cash flow (OCF) was strong at just over €334 million
converting over 122% of EBITDA into OCF, against a target of
80% conversion. Free cash flow for the year was €306.5 million.
In the third quarter the Group acquired Foodarom for a total
consideration of CAD 60 million plus contingent consideration,
and this business is performing well since acquisition. An additional
€9.6 million was invested in two significant joint venture projects
in MWC-Southwest Holdings and Glanbia Cheese EU, and
€64.2 million was invested in capital expenditure projects.
The Group’s Return on Capital Employed (ROCE) decreased by
190 basis points to 9%. This was primarily due to lower profitability
in GPN which was significantly impacted by the Covid-19 pandemic.
The Group is currently focused on executing a transformation
programme in GPN which will return the segment to profitable
growth in 2021 and consequently improve returns. Return of capital
to shareholders remains a key priority of the Group and the Group
are recommending a final dividend of 15.94 cent per share to bring
the total 2020 dividend to 26.62 cent per share, in line with 2019.
This represents a dividend payout ratio of 36.1% of adjusted
Earnings Per Share (EPS) in 2020 and a total of €78.5 million returned
to shareholders from 2020 earnings.
In November 2020, the Board commenced a share repurchase
programme of up to €50 million which is a further opportunity to
use strong cash flows of the business to allocate capital to benefit
shareholders. By the end of 2020 just under €17 million had been
spent on this programme resulting in 1,643,907 shares repurchased
at an average price of €10.097.
2021 Outlook
The Group currently expects pandemic related restrictions to ease
in key regions during the course of 2021 assuming the widespread
rollout of vaccines are successful in reducing Covid-19 infection rates,
however the duration and impact of the pandemic remains volatile.
In FY 2021, Glanbia expects to deliver adjusted EPS growth of 6% to
12%, constant currency, driven by revenue and EBITA growth in both
GPN and GN. Glanbia’s focus on the GPN transformation programme
will provide an opportunity to build on the achievements delivered
in the second half of 2020 and drive further margin improvement
in FY 2021 over FY 2020.
43
2020 Income Statement review
The 2020 results are for the 52 week period ended 2 January 2021
while 2019 comparatives are for the 53 week period ended 4 January
2020. Commentary on volume and pricing below excludes the impact
of the 53rd week unless stated otherwise.
Revenue and EBITA
Revenue and EBITA are Key Performance Indicators (KPIs) for the
Group. In particular the Group focuses on revenue volumes and
EBITA margins to assess underlying performance. Details of these
KPIs are as follows.
2020
2019
Change
Constant
currency
change
€’m
Revenue
GPN
GN
1,138.0
2,685.1
3,823.1
Total Revenue
EBITA (pre-exceptional)
GPN
GN
91.2
118.4
Total EBITA
209.6
EBITA Margin (pre-exceptional)
1,363.8
2,511.9
3,875.7
146.4
130.4
276.8
(16.6%)
6.9%
(15.0%)
9.0%
(1.4%)
0.6%
(37.7%)
(9.2%)
(36.2%)
(7.4%)
(24.3%)
(22.6%)
GPN
GN
Total EBITA Margin
8.0%
4.4%
5.5%
10.7%
(270bps)
(270bps)
5.2%
(80bps)
(80bps)
7.1%
(160bps)
(160bps)
Revenue
Revenue increased in 2020 by 0.6% versus prior year on a constant
currency basis to €3.8 billion, a decrease of 1.4% on a reported basis.
Like-for-like wholly-owned revenue increased by 1.8%, driven by price
increase of 3.8% offset by volume decline of 2%. The full year impact
of the 2019 Watson acquisition, and the recent Foodarom acquisition
added a further 0.6% to annual revenue. Detailed analysis of revenue
is set out below.
Glanbia Performance Nutrition
GPN recorded a total revenue decline of 15% constant currency
in 2020 versus prior year. Like-for-like branded revenue volumes
declined by 10.9%, primarily as a result of the disruption associated
with the Covid-19 pandemic in the second quarter which disrupted
the specialty and distributor channels globally. Pricing was broadly
in line with prior years reflecting positive year-on-year pricing across
North America and International, offset by increased levels of
discounting in DTC. Contract revenues in North America continued
to decline as per the plan to exit this business over 2020.
€1,400m
€1,364m
€1,338m
(13.4%)
(€26m)
€1,200m
€1,000m
€800m
0.1% (1.7%)
€1,138m
FY19
FX
FY19 CC
Volume
Price
53rd Week
FY20
Trends improved significantly in the third quarter, as route-to-markets
in International regions gradually reopened. Price trends also
improved and were positive over the second half of 2020.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 44
Glanbia plc | Annual Report and Financial Statements 2020
Group Finance Director’s Review continued
Glanbia Nutritionals
GN delivered revenue growth of 9.0% constant currency in 2020,
driven by increases in organic volumes and pricing of 4.2% and
5.8% respectively, and the incremental full year impact of acquisitions
contributing a further 0.9%. Volume growth was achieved across
all business lines. Favourable pricing in US Cheese was somewhat
offset by price declines in Nutritional Solutions due to lower dairy
ingredients pricing.
Net finance costs decreased by €5.8 million to €20.5 million (2019:
€26.3 million). The decrease was driven by reduced debt levels
across the group and favourable interest rates. The Group’s average
interest rate in 2020 was 2.9% (2019: 3.4%), with the reduction
on prior year being mainly due to lower US dollar interest rates.
Glanbia operates a policy of fixing a significant amount of its interest
exposure, with 90% of projected 2021 debt currently contracted
at fixed rates.
Nutritional Solutions
Share of results of joint ventures
€745m
(€13m)
€732m
2.4% (1.6%)
(1.9%) 3.1%
€747m
€’m
Share of profits of joint ventures
2020
61.6
2019
Change
48.6
13.0
8.8% (1.9%)
€1,938m
lncome taxes
€’m
2020
2019
Change
€800m
€700m
€600m
€500m
€400m
FY19
FX
FY19 CC Volume
Price
Acquisitions FY20
53rd
Week
US Cheese
€2,000m
€1,600m
€1,767m
€1,600m
€1,400m
€1,200m
5.0%
€1,732m
(€35m)
FY19
FX
FY19 CC
Volume
Price
53rd
Week
FY20
EBITA (pre-exceptional)
EBITA before exceptional items declined 22.6% constant currency
(down 24.3% reported) to €209.6 million (2019: €276.8 million)
primarily due to reduced EBITA in GPN. EBITA margin in FY 2020 was
5.5% a decline of 160 basis points reported versus prior year (2019:
7.1%). Margin decline was driven by both GPN and GN segments.
GPN pre-exceptional EBITA decreased by 36.2% constant currency
to €91.2 million (2019: €146.4 million), a decrease of 37.7% on a
reported basis. GPN pre-exceptional EBITA margin at 8.0% was
270 basis points lower than prior year reported, due to lower volumes
and resulting negative operating leverage arising from the impact
of Covid-19 restrictions, which resulted in temporary closure of
key sales channels globally during the height of the pandemic in
the second quarter.
GN pre-exceptional EBITA declined 7.4% constant currency to
€118.4 million (2019: €130.4 million), a decrease of 9.2% on a reported
basis. GN pre-exceptional EBITA margin was 4.4%, down 80 basis
points from 2019, due to the impact of product mix and unfavourable
dairy margin dynamics.
Net finance costs
€’m
Finance income
Finance costs
Net finance costs
2020
4.1
(24.6)
(20.5)
2019
Change
6.2
(32.5)
(26.3)
(2.1)
7.9
5.8
The Group’s share of joint venture (JV) profits increased by
€13.0 million to €61.6 million (2019: €48.6 million) in the year.
The share of results of joint ventures is stated after tax and before
exceptional items. The joint ventures performed strongly, with
year-on-year volume and price growth in the MWC-Southwest
Holdings joint venture slightly offset by declines in the European
joint ventures. Strong operational performance and favourable
market dynamics in the US drove the improved performance of
the MWC-Southwest Holdings JV.
Income taxes (pre-exceptional)
Effective tax rate
14.5
11.3%
23.4
(8.9)
12.3% (100bps)
The 2020 pre-exceptional tax charge decreased by €8.9 million
to €14.5 million (2019: €23.4 million). This represents an effective tax
rate, excluding joint ventures, of 11.3% (2019: 12.3%). The reduction
in the pre-exceptional tax rate is driven primarily by the geographic
mix of profits and a lower charge for uncertain tax risks. The tax credit
related to exceptional items is €4.2 million. The Group currently
expects that its effective tax rate for 2021 will be in the range of 12.0%
to 13.0%.
Exceptional items
€’m
Organisation redesign costs (note 1)
Covid-19 costs (note 2)
Acquisition integration costs (note 3)
Legal settlement gain (note 4)
Asset impairments (note 5)
Brexit related costs (note 6)
Wholly-owned exceptional charge before tax
Share of results of equity
accounted investees (note 2)
Exceptional tax credit
Exceptional charge after tax
2020
31.2
3.7
3.4
(3.4)
(0.4)
–
34.5
1.2
(4.2)
31.5
2019
12.7
–
6.8
–
17.3
2.3
39.1
–
(4.5)
34.6
During 2020 there were cash outflows of €23.5 million and €6.0
million in respect of exceptional charges recognised in FY 2020
and FY 2019 respectively. During 2019 there were cash outflows of
€12.0 million in respect of exceptional charges incurred in FY2019.
Details of the exceptional items are as follows:
1. Organisation redesign costs primarily relates to a fundamental
reorganisation of the GPN segment which commenced in 2019.
This global transformation programme aims to realign operating
and supply chain structures in support of growth ambitions,
sharpen focus on brands and optimise routes-to-market across
non-US markets to drive greater efficiencies, improve margin and
deliver top line growth. Costs incurred to date includes people
and property related costs, professional consulting fees and
costs associated with terminating and exiting certain contractual
arrangements. Given the scale of this project, further costs are
anticipated into 2021 with full completion of the project anticipated
by early 2022.
2. Covid-19 costs relate to the costs of dealing with the pandemic
in the first half of the year by the Group and its joint ventures, and
include the costs of implementing measures to protect people,
incremental payments to front line workers during the height
of the pandemic and other incidental labour related costs directly
associated with the onset of this global pandemic.
3. Acquisition integration costs comprise costs relating to the
integration and restructuring of acquired businesses and the
transaction costs incurred in completing the current year
acquisition. The charge primarily comprises professional fees
and related costs crystallised on post-acquisition integration.
4. Legal settlement gain relates to net compensation received
following the successful conclusion of a legacy case.
5. Prior year asset impairments relate to the write down of
inventory, development assets and fixed assets to their net
realisable value. These impairments primarily related to the
rationalisation and simplification of certain product lines and
related assets in the GPN business. The credit in 2020 relates
to the release of a provision not required on the disposal of
certain inventory items. No similar costs were incurred in 2020.
6. Prior year Brexit related costs were incurred in preparing the
organisation for the departure of the United Kingdom from the
European Union. Costs incurred include professional fees and
increased storage and production costs as the Group sought
to mitigate the potential risks related to Brexit during 2019.
No further significant costs were incurred during 2020.
Profit after tax
€’m
Profit after tax
2020
143.8
2019
Change
180.2
(36.4)
Profit after tax for the year was €143.8 million compared to
€180.2 million in 2019, comprising pre-exceptional profit after tax
of €175.3 million down €39.5 million on prior year and exceptional
charges of €31.5 million (2019: €34.6 million). The €39.5 million
decline in pre-exceptional profit after tax is driven by the reduced
profitability of wholly-owned businesses net of increased profitability
of joint ventures and associates.
Earnings per share
€’cent
Basic EPS
Adjusted EPS
2020
48.72
73.78
2019
61.04
88.10
Reported
change
(20.2%)
(16.3%)
Constant
currency
change
(18.9%)
(14.9%)
Basic EPS decreased by 20.2% reported versus prior year, driven
by a year-on-year reduction in pre-exceptional profitability.
45
Adjusted EPS is a Key Performance Indicator (KPI) of the Group and a
key metric guided to the market. During 2020 adjusted EPS guidance
was withdrawn as a result of uncertainties caused by the Covid-19
pandemic. Adjusted EPS declined by 14.9% constant currency
(16.3% reported) in the year, driven primarily by the reduction in
profitability of the GPN segment, offset by increased share of profits
of joint ventures, lower interest costs, and income taxes.
Cash flow
€’m
EBITDA pre-exceptional
Movement in working capital (pre-exceptional)
Business-sustaining capital expenditure
Operating cash flow
Net interest and tax paid
Dividends from equity accounted investees
Payment of lease liabilities
Other (outflows)
Free cash flow
Strategic capital expenditure
Dividends paid to Company shareholders
Share buyback (Purchase of own shares)
Payment for acquisition of subsidiaries,
2020
273.5
77.8
(16.5)
334.8
(43.0)
36.6
(19.2)
(2.7)
306.5
(47.7)
(78.6)
(16.6)
2019
324.9
(24.9)
(20.1)
279.9
(74.1)
35.3
–
(9.6)
231.5
(56.2)
(74.3)
–
net of cash and cash equivalents acquired
(21.9)
(58.3)
Proceeds from sale of property, plant
and equipment
Exceptional costs paid
Loans/investment in equity
accounted investees
Net cash flow
Exchange translation
Debt acquired on acquisition
Net debt movement
Opening net debt
Closing net debt
–
(29.5)
(9.6)
102.6
30.0
(12.2)
120.4
(614.3)
(493.9)
0.2
(12.0)
(47.4)
(16.5)
(10.5)
(10.6)
(37.6)
(576.7)
(614.3)
For more information on operating cash flow and free cash flow see glossary
pages 218-220.
The principal 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 cash flow
in the year before the following items: strategic capital expenditure,
equity dividends paid, expenditure on share buyback, acquisition
spend, proceeds received on disposal, exceptional costs paid, loans/
equity invested in joint ventures, and foreign exchange movements.
These metrics are used to monitor the cash conversion performance
of the Group and Business Units and identify available cash for
strategic investment. OCF conversion, which is OCF as a percentage
of EBITDA is a key element of Executive Directors and senior
management remuneration.
OCF was €334.8 million in the year (2019: €279.9 million) and
represents a strong cash conversion on EBITDA of 122.4% (2019:
86%). The OCF conversion target for the year was 80%. The increase
in OCF versus prior year was due primarily to favourable working
capital inflows and a reduction in operating lease charges that are
now presented differently under IFRS 16 and included after OCF.
The Group continues to actively manage its working capital. During
the year, the Group had strong management of inventory and
receivables, and continued on a programme to increase payables
terms with significant vendors in response to similar increased
receivables terms that have been agreed with certain customers.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 46
Glanbia plc | Annual Report and Financial Statements 2020
Group Finance Director’s Review continued
FCF was €306.5 million versus €231.5 million in 2019, with the
improvement primarily due to higher OCF, lower interest payments
and lower net tax payments. Lease payments (previously accounted
for in EBITDA) had no cash impact compared to prior periods but are
now shown separately following the adoption of IFRS 16.
Acquisition spend relates to the cost of Foodarom which was
acquired in August 2020. Loans to/equity in joint ventures includes
the continuation of the investments in Glanbia Cheese EU, the
mozzarella cheese joint venture in Portlaoise, Co. Laois, Ireland
and in MWC-Southwest Holdings, the joint venture cheese and
whey plant in Michigan, US.
Share buyback cash flows relate to a share repurchase programme
of up to €50 million launched in November 2020. This programme
provides an opportunity to allocate capital to the benefit of
shareholders and continued in 2021.
Group Financing
Net debt (€’m)
Net debt: adjusted EBITDA
Adjusted EBIT: net finance cost
2020
2019
493.9
1.70 times
10.0 times
614.3
1.71 times
9.3 times
The Group’s financial position continues to be strong. Net debt at the
end of 2020 was €493.9 million. This is a decrease of €120.4 million
from the prior year end net debt of €614.3 million. At year-end 2020,
Glanbia had committed debt facilities of €1.23 billion with a weighted
average maturity of 4.4 years. Glanbia’s ability to generate cash as
outlined above and its available debt facilities ensures the Group has
considerable capacity to finance future investments. Net debt to
adjusted EBITDA was 1.70 times and interest cover was 10.0 times,
both metrics remaining well within financing covenants.
During the year, the Group extended the maturity date of committed
debt facilities by arranging US$375 million of new facilities, maturing
between March 2028 and December 2031, and replaced existing
indebtedness with US$180 million of facilities, maturing in January
2024 (total of US$555 million). The facilities were used to repay
US$351 million of shorter maturing indebtedness in December 2020
and will additionally be used to repay US$156 million indebtedness
maturing in June 2021. Accordingly, of €1.23 billion committed debt
facilities at 2020 year-end, the Group had €1.1 billion facilities with a
weighted average maturity of 4.8 years and an earliest maturity date
of January 2024 (2019: €1.2 billion committed debt facilities with
a weighted average maturity of 2.8 years).
Use of capital
Capital expenditure
The cash outflow relating to capital expenditure for the year amounted
to €64.2 million (2019: €76.3 million) which includes €16.5 million of
business-sustaining capital expenditure and €47.7 million of strategic
capital expenditure. Key strategic projects completed in 2020
included investments in DTC eCommerce infrastructure as well as
extending solutions capabilities in GN.
During 2020 the Group also invested a further €3.0 million in Glanbia
Cheese EU, the joint venture mozzarella cheese plant in Portlaoise,
Ireland, bringing the total invested to €28.0 million with a further
€4.1 million committed. The remaining funding for this project will
come from the other joint venture partners, government grants and
dedicated joint venture banking facilities, which are non-recourse to
Glanbia plc. Construction was largely completed at the end of 2020
and the plant will be fully commissioned by Q2, 2021.
Return on Capital Employed
Return on Capital Employed
2020
9.0%
2019
Change
10.9%
(190bps)
Return on Capital Employed (ROCE) decreased in 2020 by 190 basis
points to 9.0%. This was primarily due to lower profitability in GPN
which was significantly impacted by the Covid-19 pandemic. The
Group is currently focused on executing a transformation programme
in GPN which will return the segment to profitable growth in 2021 and
consequently improve returns. Acquisitions remain a key part of the
growth strategy of the Group with investments assessed against
a target benchmark of 12% return after tax by the end of year three.
Annual impairment testing
The Group monitors the performance of acquisitions on an ongoing
basis and completes annual impairment reviews in respect of goodwill
and intangible assets. No impairments were identified from the 2020
review, however sensitivity analysis on the ‘think!™’ lifestyle brand
continues to show that a reasonably possible change in one of the
sensitivity assumptions could result in an impairment charge. The
think!™ (formerly thinkThin) brand was launched in 2019, leading
to growth in market share and improving consumption trends
throughout 2020. Additionally, price increases were successfully
introduced in 2020, which will further improve profitability from 2021.
For the purposes of impairment testing, assets are grouped at the
lowest level for which there are separately identifiable cash flows
and these Cash Generating Units (CGUs) are kept under review to
ensure that they reflect any changes to the interdependencies of cash
flows within the Group. CGUs remained under review during 2020
and we expect to complete the ongoing organisation redesign within
GPN and GN in 2021, which may result in further changes to the
number of CGUs reported.
Dividends
The Board is recommending a final dividend of 15.94 cent per share
which brings the total dividend for the year to 26.62 cent per share,
in line with the prior year. This total dividend represents a return of over
€78 million to shareholders from 2020 earnings and a payout ratio of
36.1% of 2020 adjusted Earnings Per Share which is marginally ahead
of the Board’s target dividend payout ratio of 25% to 35%. The Board
has decided to maintain the dividend in line with prior year as a result
of the strong cash performance during 2020, the reduction in net
debt during the year and the resultant strong financial position of the
Group. The final dividend will be paid on 7 May 2021 to shareholders
on the share register on 26 March 2021.
Investments in joint ventures
During 2020, the Group continued its investment in the new joint
ventures which commenced in 2018. In 2020 a total of US$7.5 million
(2019: US$35 million), was invested in the new cheese and whey
manufacturing facility in Michigan, US which is part of the MWC-
Southwest Holdings JV. This brings the total Group investment in
the new plant in Michigan to US$82.5 million. Construction is now
complete and the plant commenced commissioning in October 2020
with full commissioning expected to be complete by Q2, 2021.
Total Shareholder Returns
Total Shareholder Return (TSR) for 2020 was positive 5.0%. The
STOXX Europe 600 Food & Beverage Index (F&B Index) a key
benchmark for the Group, decreased by 6.5% in 2020. The three-year
period 2018 to 2020 Glanbia TSR was negative 25.9% versus the
F&B Index of +14.1%. The five-year Glanbia TSR to 2020 was negative
33.9% versus the F&B Index of +25.8%. Glanbia’s share price at
the end of the financial year was €10.38 compared to €10.16 at the
2019 year end, a 2.2% increase.
47
Impact of new accounting standards
While new accounting standards and improvements are issued
annually, one material new accounting standard was adopted during
2020. The impact of this standard is set out below:
The amount included a loss of €10.9 million on the retranslation of
non-euro denominated cash and cash equivalents as presented in the
cash flow statement. Average and year-end US dollar to euro rates
were as follows:
IFRS 16 ‘Leases’
IFRS 16 ‘Leases’ came into effect for the Group on 5 January 2020.
Under this new accounting standard, the fair value of all qualifying
operating leases, representing the present value of the lease
payments over the life of the lease, are recognised as lease liabilities
with corresponding right-of-use assets. The new standard results
in the removal of rental charges of qualifying leases from the Income
Statement and replacement with a depreciation charge in respect
of the right-of-use assets and an interest charge relating to the
lease liabilities.
The Group adopted 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 5 January 2020. Under this approach, the comparatives for the
2019 reporting period are not restated. The reclassifications and
the adjustments arising from the new leasing rules are therefore
recognised in the opening balance sheet on 5 January 2020.
On 5 January 2020, the Group recognised right-of-use assets
and lease liabilities of €106.4 million and €129.6 million respectively.
Changes brought about by this new accounting standard do not
have a material impact on the financial KPIs or adjusted EPS in
the period. Adjusted earnings used to calculate EPS decreased
by €0.4 million as a result of the adoption of IFRS 16.
Pension
The Group’s net pension liability under IAS 19 (revised) ‘Employee
Benefits’, before deferred tax, decreased by €17.0 million to
€29.3 million in 2020 (2019: €46.3 million). The defined benefit
pension liability is calculated by discounting the estimated future
cash outflows using appropriate corporate bond rates. During 2020,
returns on assets were greater than expected, as a result of a
conservative investment strategy previously adopted, which more
than offset modest increases in liabilities during this period of
global uncertainty.
Foreign exchange
Glanbia generates over 90% of its earnings in US dollar currency
and has significant assets and liabilities denominated in US dollars.
As a result, and as Glanbia’s reporting currency is euro, 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. Commentary has been provided within the
income statement 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 currency translation
loss arising primarily on the translation of US assets and liabilities into
euro which is presented within other comprehensive income and
amounted to €146.9 million in the year.
Average
Year-end
2020
2019
2020
2019
1 Euro converted to
US dollar
1.1423
1.1196
1.2271
1.1147
Investor relations
Glanbia has a proactive approach to shareholder engagement.
The Annual General Meeting is the key event in the year. Due
to the Covid-19 pandemic, the 2020 AGM was held as a closed
meeting. Shareholders were provided with an opportunity to submit
questions in advance of the meeting and were invited to follow the
proceedings of the AGM by listening via a teleconference. All details
relating to the AGM were published on the Company’s website:
www.glanbia.com/agm.
At the AGM, independent shareholders approved resolutions 12 and
13 where 56% and 70% of Independent shareholders voted in favour
respectively for the Company having the authority to execute a share
buyback at its discretion. In light of the voting outcome, Glanbia held
an engagement with shareholders to better understand shareholder
reasons behind the vote. The consultation was completed over May
and June 2020 and whilst the majority of Independent shareholders
supported Resolutions 12 and 13 as a useful tool for capital allocation
a significant minority preferred the Company not engage in a buyback
due to shareholder concentration concerns and prudent capital
preservation. In light of this, the Board delayed launching a share
buyback until 9 November 2020 when the company was successfully
navigating the crisis and was in a strong financial position due to its
cash flow. This engagement covered a shareholder base holding
approximately 70% of the Company’s equity.
In 2020, Glanbia virtually attended 10 international equities investor
conferences which were organised by a variety of independent
organisations. In addition to full year and half year results, Glanbia
publishes interim management statements after the first and third
quarters to provide investors with a regular update on performance
and expectations throughout the year. All releases, reports and
presentations are made available immediately on publication on
the Group’s investor relation website.
Following his appointment, the Group Chairman consulted directly
with shareholders in November and December 2020 to get their
perspectives on the Company. This feedback was shared with
and discussed by the Board at the December meeting.
Annual General Meeting (AGM)
Subject to the prevailing public health and government advice,
Glanbia plc’s AGM will be held on Thursday, 6 May 2021 at 11 a.m.,
in the Lyrath Estate Hotel, Lyrath, Kilkenny, Ireland.
Mark Garvey
Group Finance Director
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 48
Glanbia plc | Annual Report and Financial Statements 2020
Pure Food + Pure Planet
2030 Sustainability Strategy
Achieving a sustainable future
Glanbia’s continued long-term success depends on the people and
planet around us. As a global nutrition Group, the scale and breadth
of our activities mean that we naturally interact with the environment.
This symbiotic relationship provides us with a unique opportunity
to make an impact on sustainability beyond our four walls, working
with our supply chain.
As the world takes action, we are confident that food production
has an opportunity to be part of the solution in reducing greenhouse
gas emissions. Dairy is a significant producer of greenhouse gases,
however it is also a critical part of the world’s food supply chain.
We are acutely aware of Glanbia’s role as a substantial dairy
processor, both in reducing the carbon footprint of our operations
and supporting our suppliers to reduce carbon in the supply chain.
In 2020, we developed our long-term sustainability strategy,
‘Pure Food + Pure Planet’, which sets specific targets to 2030
and aims to achieve net zero carbon emissions no later than 2050.
Building on the progress we have made over the past five years,
our refreshed long-term strategy aims to accelerate our ambition
to put sustainable growth at the heart of our business model
and embed sustainability principles in all areas of our business.
Developing a new long-term
sustainability strategy
Glanbia’s Group Operating Executive established a Group-wide
project team to advance target setting on our most material
environmental pillars: carbon, water and waste.
In each area, we worked with an internal community of experts
across the three pillars. Leveraging external subject matter expertise
including Carbon Trust, EM3, Authenticity and Harbor Environmental,
we developed an ambitious sustainability strategy supplemented by
a deep dive analysis of our current and future state data needs. Our
new strategy, ‘Pure Food + Pure Planet’, outlines Group-wide goals,
which are aligned to the United Nations Sustainable Development
Goals (SDGs) across our three priority areas.
Achieving our goals
We recognise that we can only meet our long-term
strategic goals and the expectations of our stakeholders if
we operate in a sustainable manner. We are committed to
complying with the requirements of the EU Non-Financial
Reporting Directive as outlined on page 51 and to align
with developing best practice in sustainability frameworks.
This led us to focus on issues that are material at a Group
level. We emphasise on page 27 and 74-75 how important
it is that we address issues that matter to our stakeholders
and strengthen our business, deepening our connections
with consumers, customers, suppliers, investors and
communities. We will continue to evolve our business
model and practices in line with societal expectations
and best practice in sustainability.
By showing leadership and by working with others, we
aim to contribute to the delivery of the UN Sustainable
Development Goals (SDGs) in the critical decade of action
leading up to 2030, while giving our business a platform
for sustained quality growth. At Glanbia, we’re focusing
on the goals that are most relevant to our business,
working on meeting them in the best way we can, and
measuring our progress. Glanbia has adopted goals
2, 3, 12 and 13 as the most relevant areas where we
can meaningfully contribute.
Goal 2 – Zero hunger
Goal 3 – Good health and wellbeing
Goal 12 – Responsible production and consumption
Goal 13 – Climate action
49
Carbon
The cornerstone of Glanbia’s new strategy is an ambitious
commitment to decarbonise our operations and our supply chain.
Meeting our carbon targets is the most material and urgent
component of our overall strategy. Critically, the commitment is
underpinned by the scientific analysis to ensure Glanbia meets
the levels of decarbonisation called for in the Paris Agreement.
Throughout the project we analysed the details of our footprint,
examined technologies that can deliver the required levels of
decarbonisation, and provided a roadmap of activity to deliver the
ambition. As leaders in dairy sustainability, we are committed to
working towards a net zero or negative carbon footprint for our
business and our supply chain. In achieving our commitment to
a sustainable future, we will:
• Sign up to the Science Based Target initiative (SBTi) in 2021
• Commit to reduce carbon emissions by 30% in our manufacturing
sites* by 2030 (scope 1 and 2).
• Commit to reduce carbon emission intensity in our dairy supply
chain* by 25% by 2030 (scope 3)
30%
reduction in our carbon
emissions by 2030.
25%
reduction in our carbon
intensity in our dairy supply
by 2030.
In order to achieve our scope 1 and 2 target reduction, we will
prioritise renewable energy procurement and an energy efficiency
focus, informed by energy audits and centre of excellence approach.
To achieve our on-farm carbon targets (Scope 3), we will partner
with our suppliers and invest in on-farm advisory support and
communications, as well as reporting tools. We will leverage our
external partners including the Dairy Stewardship Commitment,
US Dairy Net Zero initiative and the Dairy Farmers of America, Inc.’s
(DFA’s) commitment to achieve dairy supply chain carbon reduction
of 30% by 2030. We recognise that the roadmap to decarbonisation
will require significant shifts in government policy, technological
advancements and partnerships but we are confident in the
robustness of our efforts and the strength of our partnerships
that are committed to the global imperative.
* Glanbia examined the GHG Protocol and selected the GHG emission boundary of
operational control. This will cover the Group’s wholly-owned operations as well as the
MWC-Southwest Holdings JV operations where Glanbia plc has full authority to introduce
and implement Glanbia operating policies in accordance with the GHG protocol. Our joint
venture partner Glanbia Ireland will shortly outline its own sustainability strategy, one that
is founded in the same comprehensive analysis and aligned on the ultimate objective.
Waste & packaging
Water intensity reduction
Managing waste sits at the heart of sustainability efficiency, whether
by diverting waste from landfill or by reducing food waste in our
operations, we have an opportunity to amplify our efforts to reduce,
reuse and recycle. As part of the strategy we commit to zero waste to
landfill at all our operational sites by 2025 as well as a 50% reduction
in food waste by 2030. A comprehensive programme to measure
all use of packaging across the Group will be completed in 2021,
allowing Glanbia to set clear targets and to transition to more
sustainable packaging where possible.
We will conduct water risk assessments across all our operating sites
and then perform water audits at our highest risk sites. The audits
will inform corrective actions that will be tracked. Over the term of
the previous strategy we made considerable progress in reducing
our water intensity. The project team analysed the breadth of water
accounting and in 2021 we will re-examine all the components of
water accounting, including the significant benefit of returned water,
before setting the next phase of targets.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 50
Glanbia plc | Annual Report and Financial Statements 2020
Environment
Committed to continually improving
our environmental performance
Measuring our progress from 2015 to 2020
Our ambition to date was supported by a comprehensive set of
targets and objectives that helped us drive, measure, and report
transparently on our progress. In 2015 we launched our first Group-
wide sustainability programme. The focus was primarily within our
four walls augmented by a robust sustainable dairy procurement
focus in the US and Ireland. In the intervening period we reported on
key milestones as we have built the governance of our environmental
programme through the Corporate Responsibility Council (CRC),
implemented a Group-wide environmental management system
(Intelex), and evolved the focus areas and strategic support pillars.
To that end our partnership with the Carbon Trust has stretched
our ambition from initial benchmarking work to cornerstone strategic
work on carbon footprinting, value chain mapping and assessing
science-based targets. In 2015, we set a range of environmental
and social targets for 2020 and we achieved them.
Results
When we set our strategy in 2015 we were pragmatic in phasing
the programme and setting clear measurable targets. Ultimately,
our 2015-2020 programme has delivered on the objective of reducing
our environmental impact on energy, water and waste. Over the
course of the programme we reported annually on progress against
2020 targets. As we close out the initial strategy we are pleased
to confirm we successfully achieved our environmental goals.
Renewable electricity use
56.86%
2020
51.23%
2018
54.8%
2019
51.62%
2017
Water
Water:
-17%
Carbon
Carbon:
-8%
Waste
Waste to landfill:
Zero
In 2015 we set an ambition to
reduce water use intensity by
8% by 2020. We exceeded this
ambition with water use intensity
across all manufacturing sites
reduced by 17%.
Since 2018 we have reduced
our scope 1 and scope 2 carbon
footprint by 8% for our operational
control boundary*. This has been
achieved with a particular focus on
scope 2 emission reduction (10%)
through renewable electricity
procurement.
In 2015 we targeted zero waste
to landfill at manufacturing sites.
Our Glanbia Performance Nutrition
manufacturing sites achieved zero
waste to landfill ahead of target in
2018. In our new strategy we aim
to achieve zero waste to landfill
at all manufacturing sites by 2025.
* Glanbia examined the GHG Protocol and selected the GHG emission boundary of
operational control. This will cover the Group’s wholly-owned operations as well as the
MWC-Southwest Holdings JV operations where Glanbia plc has full authority to introduce
and implement Glanbia operating policies in accordance with the GHG protocol. Our joint
venture partner Glanbia Ireland will shortly outline its own sustainability strategy, one that
is founded in the same comprehensive analysis and aligned on the ultimate objective.
Reduce, Recycle, Reuse
Amino Energy
Glanbia Performance Nutrition actively tries to
‘Reduce, Recycle and Reuse’ packaging materials
across its supply chain. Recent completed projects
include the transition of eight million Amino Energy
cans to 100% recyclable, consolidation and size
reduction of powder scoops to lower the amount of
plastic used and the introduction of biopolymer tubs
– sugar cane resin, carbon neutral – for the OPTIMUM
NUTRITION™ packaging in the EU.
Carbon footprint
In 2018, working with Carbon Trust and Harbor Environmental we
completed our first Group-wide carbon footprint. Over the past 2 years
we have continued to develop our Environmental Management System
(Intelex) analytics of the footprint. In 2020 our total Scope 1 and 2
carbon footprint for our manufacturing sites was 420,355t CO2e.
This represents an 3% decrease on the total footprint from a 2018
baseline, while our wholly-owned operations have reduced by 16%.
The work on measurement to date has built the foundation upon
which we can set ambitious carbon reduction targets to 2030.
CO2 emissions by scope (tonnes)
Scope 1 285,576 (68%)
Scope 2 134,779 (32%)
CO2 emissions by Business Unit (tonnes)
GN 112,057
GPN 9,178
GI 170,244
GCL 33,487
SWC 103,323
51
DISCLOSURE INSIGHT ACTION
Carbon Disclosure Project (CDP)
An important element of assessing our programme, and providing
transparency to our stakeholders, is the Carbon Disclosure Project
(CDP). Now in our 4th year of Group-wide CDP return, in 2020
we made our submission available to investor signatories as well
as customers who directly request our submission. In addition to
meeting the needs of our stakeholders, the platform provides us
with insights on our programme, particularly risks and opportunities.
In 2020 our CDP scores were consistent with 2019 noting that the
strategy work had not reached its conclusion. However, we have
leveraged CDP insights in our new strategy.
For example, by committing to science-based targets and building
out energy efficiency reviews and energy audits, revisiting water
baseline data, conducting water risk assessments and water site
audits we are using the CDP insights to elevate our ambition and
we expect our future scores to reflect this effort.
Climate Change
Glanbia
Sector Average
2020
2019
2018
D
D
C
B-
C
D
Water security
Glanbia
Sector Average
2020
2019
2018
B-
B-
B-
B
B
C
Supplier engagement
Glanbia
Sector Average
2020
2019
2018
C
B-
B-
B-
C
C
Non-Financial reporting statement
Glanbia aims to comply with the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings
and groups) Regulations 2017. The table below is designed to help stakeholders navigate to the relevant sections in this Annual Report
to understand the Group’s approach to these non-financial risks. Many of our policies can be viewed on www.glanbia.com.
Reporting Requirement Policies and standards which govern our approach
Risk management and additional information
Environmental
matters
• Environmental sustainability
• Supply chain and responsible sourcing
• Our new 2030 sustainability strategy – pages 48 and 49
• Site compliance risk and environmental, health and safety
and on-farm sustainability
Employee
matters
• Culture and engagement
• Group code of conduct
• Whistleblowing policy
• Diversity and Inclusion
Social Matters
• Education initiatives
• Community support
regulation risk management – pages 25, 60
• Corporate responsibility council – page 50
• Supply chain – page 52
• Employee engagement survey page 25
• Group Code of Conduct – page 62
• UK Corporate Governance code – page 64
• Diversity and Inclusion – page 26
• GPN Sports Nutrition School page 53
• Community and charity support – page 53
Human Rights
• Anti-slavery and human trafficking statement
• See page 52 and our policies can be viewed on https://www.
glanbia.com/investors/corporate-governance/our-policies
Anti-bribery
and corruption
• Group code of conduct and
Anti-bribery and corruption policy
• See page 53 and our policies can be viewed on https://www.
glanbia.com/investors/corporate-governance/our-policies
Description of principal risks and impact of business activity
• Principal risks – pages 58 to 61
• Potential impact of Coronavirus – page 21
Description of the business model
• Business Model – pages 28 and 29
Non-Financial KPIs
• Key Performance Indicators – pages 30 and 31
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 52
Glanbia plc | Annual Report and Financial Statements 2020
Supply Chain
A transparent, responsible
and sustainable supply chain
Procurement
In 2020, a new Global Procurement policy was launched across the
organisation setting out the principles that guide the required behaviours
in the procurement process to ensure value-focused, timely and
effective purchasing in the execution of Glanbia’s business.
Glanbia’s procurement teams work closely with key stakeholders to
manage activities in the areas of supplier selection, contract negotiation
and supplier performance. Under the policy, procurement teams are
required to apply responsible sourcing criteria to our selection decisions
and requires all suppliers to be compliant with laws, regulations and
social customs for the countries they operate in and to comply fully
with all human rights, labour, food safety, environment and health
and safety regulations.
In accordance with Glanbia’s commitment to zero tolerance of
slavery and human trafficking, our procurement teams use the
Global Slavery Index to identify high risk supply regions and ensure
all Glanbia suppliers from those regions are Sedex registered and
approved. Complementary policies include our Environmental Health
and Safety policy; Human Rights policy; Food Safety and Quality
Policy and Slavery and Trafficking Statement.
Sustainable dairy supply
Glanbia continues to drive best practice in our dairy supply chain.
Our partnerships with organisations including the Innovation Center
for US Dairy, National Milk Producers Federation and Bord Bia (Irish
Food Board) is critical, providing our farmers with the tools to assess
their performance and the technical support to deliver continuous
improvement. We continue to support the US Farmers Assuring
Responsible Management (FARM) programme which focuses on
animal welfare and environmental stewardship. We set a target
of full enrolment of our Idaho directly procured farms in FARM
Environmental Stewardship (ES). We are happy to report 97%
of our Idaho suppliers are enrolled in or have completed a FARM
environmental assessment thus far.
During the year, Glanbia Ireland was among the first companies
to achieve Gold status as part of Origin Green, Ireland’s national
sustainability programme. All of Glanbia’s Irish dairy suppliers are
accredited to Origin Green. The programme involves audits as part
of the Sustainable Dairy Assurance Scheme.
Food safety and quality
Glanbia remains a leader in food safety across the variety of products,
processes and brands we proudly produce. The Global Quality
Leadership Team (QLT) now in its sixth full year remains the centre
of excellence and network where Global standards and policies are
created and vetted. The Glanbia Quality System (GQS) – our food
safety code of practice – has continued to evolve new policies and
standards to address areas relevant to our businesses. In 2021
we will continue to develop standards and practices focused on
the important area of infant nutrition safety, serving our customers
who supply nourishment to one of the most sensitive category of
consumers. As part of our GQS, we completed almost 300 audits
within 12 core policy areas in 2020.
We verified that performance standards were met in 90% of these
GQS internal audits, and have clearly defined actionable plans
for areas where performance was rated less than satisfactory.
In addition, the Group-wide policy for sustaining a globally
recognised Quality and Food Safety certification (e.g. GFSI)
at all our manufacturing sites was verified at 100% compliance.
We also continued the ‘Investigative Excellence’ initiative to drive a
culture of learning and prevention. This policy requires the global
logging of all potentially significant quality incidences, and requires
a completed Root Cause Analysis (RCA) of acceptable quality,
and a post case review. In 2020 we achieved a 100% success rate
on this programme. In addition we held a Glanbia-wide Investigation
Excellence forum to showcase our work in this area across the
Glanbia teams. The impact of Covid-19 on Quality programmes
in Glanbia meant adapting to remote practices for audits and
inspections inclusive of our extended supply chain (contract
manufacturers, suppliers). This adaptation was successful and led
to a more focused approach to how we conduct quality operations,
testing and risk reviews to ensure continued safety of our raw
materials and products.
Ethical business behaviours
Glanbia’s Anti-Bribery and Corruption policy is published on our
Group website and describes our zero tolerance approach to bribery
or any other form of corrupt practice. This policy, along with our
Group Code of Conduct, our Whistle blowing policy and our
Procurement policy supports Glanbia’s efforts to ensure that our
business is conducted in a manner that does not involve corrupt
practices. Where employees have concerns about business conduct,
the Group provides clear guidance on how to report these. All policies
can be viewed on www.glanbia.com
53
Our Society
Supporting our communities
through Covid-19 and beyond
Education initiatives
GPN Global Education focused on consumer-facing digital education
in 2020. The entire Sports Nutrition School (SNS) programme
moved online during the year, condensing over 40 hours of
classroom learning into a streamlined digital offering. As a result,
the programme’s reach was significantly extended by inviting multiple
distributors and retailers from across the globe. 2020 also saw the
introduction of ‘The Optimum 5’, a consumer-facing, bite-sized
programme that aims to build a strong performance foundation by
focusing first on food, hydration, sleep and training and then adding
supplements. The Optimum 5 introduces new content weekly to
consumers around the world through our social and digital channels.
2020 also saw a partnership with ‘Tomorrow’s World Today’ to create
a TV episode ‘The Power of Protein’. The episode was viewed by over
one million viewers on Discovery and the Science Channel, charting
the journey of whey protein from farms, through our cheese and whey
facilities in Idaho to OPTIMUM NUTRITION’s™ cutting-edge R&D
facility, explaining along the way how Gold Standard 100% Whey
Protein has become the most-awarded, most-reviewed, best-selling
whey protein powder in the world.
Breast Cancer Ireland
Glanbia continued its partnership with Breast Cancer Ireland in 2020.
The Great Pink Run with Glanbia, in aid of breast cancer research
both went virtual and global this year for the first time ever. More than
450 Glanbia employees from all over the world took part in the virtual
event, joining 15,000 participants. This year’s event has raised in
excess of €930,000 for breast cancer research – a record total.
In North America, Glanbia Nutritionals (GN) continued its work with
local communities with the 26th Annual Charity Golf Tournament
taking place virtually, raising $170,000 for local charities. GN
supported foodbanks across Idaho and New Mexico donating cheese
and other produce to provide a much needed protein source for
food baskets at a difficult time for many in our community. We also
partnered with local patrons to support the important work of food
banks and our employees contributed to food drives across our
organisation. In Suzhou, China, our local team partnered with the
Amity Foundation, to help provide virus-fighting medical equipment
for Suzhou Children’s hospital.
In Ireland, Glanbia Ireland (GI) supports FoodCloud, a social
enterprise that combats food waste by connecting retailers and food
businesses that donate large volumes of food to charities in need.
In 2020, FoodCloud redistributed 128 tonnes of food on behalf of
Glanbia Ireland, an increase of 117% on last year.
Health and wellbeing for employees
Glanbia supports the physical, nutritional and mental health of our
people through health and wellbeing programmes. As well as putting
in place very detailed health and safety measures to protect our
frontline workers this year, we also provided care packs to employees
on the frontline and recognised their efforts through Appreciation
Awards in recognition of their service during Covid-19. For remote
workers, our focus is on ensuring that employees are supported to
cope well with new ways of working. We expanded our employee
assistance programmes and offer online exercise and wellbeing
classes while sharing communications highlighting the importance
of staying well both mentally and physically. Our annual Workplace
Wellbeing Day took place virtually this year, with employees from
all over the world participating.
Covid-19
The pandemic has vividly demonstrated that governments,
businesses and communities must work together to build
more resilient societies, better able to withstand major social and
economic shocks. Glanbia is proud to have donated more than
€1.5 million worth of sports and lifestyle nutrition products globally
to help support first responders, frontline workers and hospitals
who were leading the fight to keep people healthy throughout the
Covid-19 pandemic.
Brands involved include OPTIMUM NUTRITION™ (ON), ISOPURE™,
BSN™, AMAZING GRASS™ and think!™ with major donation efforts
in North America, India and the UK in particular. In India, as well as
supporting frontline workers, GPN partnered with the Akshaya Patra
Foundation and hunger relief centres to support migrant workers
who lost their livelihoods and shelter due to Covid-19 lockdown.
In North America, OPTIMUM NUTRITION™ partnered with Michelob
Ultra for Movement Live, donation-based, weekly workout classes.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 54
Glanbia plc | Annual Report and Financial Statements 2020
Risk Management
Maintaining our risk
resilience to minimise the
impact of Covid-19 on our
people and operations
while rebuilding our
growth momentum
systems to help improve our ability to anticipate and address significant
changes to the risk environment that may impact the delivery of
the Group’s strategic objectives. This includes closely monitoring,
by location, the rates of virus infection per one hundred thousand
population over the past fourteen days to ensure that Glanbia sites
can plan as effectively as possible with regard to areas including
on-site operational controls, potential additional staffing needs,
supply chain requirements, travel restrictions and site access
controls. The continuing global vaccination rollout offers some real
positivity for an effective longer-term solution and while comprehensive
return to office plans are in place which will be implemented when
the position improves, the current focus remains on ensuring strict
compliance with safety policies for our frontline workers.
Managing our risks
During the year, the business continued to adhere to our risk
management framework and disciplines while managing our evolving
risk environment in line with good practice. As outlined earlier in the
report, this has enabled the Group’s Covid-19 business continuity
planning teams to focus on three priorities: protecting employees,
continuing food supply and maintaining our strong financial position
to ensure Glanbia can emerge safely and strongly from the impact
of the pandemic.
Our risk management framework
The Board has implemented appropriate governance structures to
ensure that there is clarity of ownership and responsibility for risk
management throughout the Group. This is critical to correctly identify,
assess, prioritise and manage risks. Our risk management framework
outlines the key stakeholder responsibilities and is designed to ensure
that there is input across all levels of the business to the management
of risk. An overview of the Group’s risk management and internal
control framework is outlined in the diagram below.
To date there has been no material interruption to the Group’s
operations globally due to the exceptional work performed by Glanbia’s
employees, suppliers and customer partners. The impact of Covid-19
on the business is explained in various parts of the Strategic Report and
consequently the narrative included in the Group Managing Director,
Group Finance Director and Operations Review updates should be
read in conjunction with the disclosures below to provide an overall
understanding of the risks, economic uncertainties and challenges
which will continue in 2021.
Covid-19
The pandemic has demonstrated that the risk environment is anything
but static and while its impacts are difficult to predict, the Board and
management has invested in the development of our processes and
Board of Directors
The Board has overall responsibility for determining the nature and
extent of the significant risks it is willing to take in achieving the
Group’s strategic objectives and for setting the Group’s risk appetite.
This is achieved by carrying out a robust assessment of the Group’s
principal risks, including emerging risks. The focus of the Board
during such reviews is to ensure that the Group residual risk position
is within the Group’s risk appetite.
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, including emerging 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
Top Down Risk
Oversight
Identification
Assessment
Mitigation
Including the
identification
and mitigation
of emerging
risks
Board
Underpinned by:
Our Purpose
Our Values
Our Code
Our Strategic
Priorities
Protect and grow our
portfolio of core brands
and ingredients
Purposeful growth
through innovation and
acquisitions
Continue to embed
operating enablers
Governance
Supported through:
Audit Committee
Group Operating
Executive
Group Internal
Audit
Senior Leadership Team
Driven by:
Risk
awareness
Risk
ownership
Risk
monitoring
Risk
reporting
Bottom Up Risk
Oversight
Identification
Assessment
Mitigation
At Business
Unit and Group
Functional level
Including the
identification
and mitigation
of emerging
risks
55
emerging risks together with the methods by which these risks are
being managed. The Board and management use the same process
to assess and manage risks within our material joint ventures as it
does for the wholly-owned areas of the Group. We hold board
positions in all such entities.
The Board conducted a formal half-year and full-year review of the risk
register summary reports prepared by Group Internal Audit to ensure
that the Group’s principal risks and uncertainties, as outlined on pages
56 to 61, effectively describe the nature and extent of the Group’s
principal risks. The Board is satisfied that its risk management and
internal control processes are effective. However, as with all practices,
a mind-set of continuous improvement is required. 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 on pages 56 and 57.
Audit Committee oversight
The Board has delegated responsibility to the Audit Committee with
regard to monitoring the Group’s systems of risk management and
internal control including the review of their effectiveness. The Audit
Committee and Group Operating Executive, supported by Group
Internal Audit, are focused on ensuring that appropriate measures are
in place to validate the strength of internal controls and risk mitigation.
As part of this validation process in 2020 and early 2021, the Audit
Committee continued its approach to developing a deeper awareness
and insight into the Group’s principal risks by receiving ongoing
updates from senior executives and detailed presentations from
Group functional leads including the Group Head of:
• Health and Safety;
• Food Safety and Quality;
• Glanbia Business Services and IT; and
• Taxation.
These presentations typically provide the Committee with the
opportunity to review the Group’s risk appetite statements in relation
to the principal and emerging risks being examined.
As a follow-up to the prior year adverse market performance, the
Audit Committee also received market performance updates from
senior executives in 2020, particularly with regard to the status of the
management action improvement plans in the GPN non-US business
and think!™ lifestyle brand performance, both of which will continue to
be focus areas in 2021. A description of the activities carried out by
the Committee for the year is outlined in the Audit Committee report
on pages 84 to 89.
Group Operating Executive
The Group Operating Executive forum as outlined in the Corporate
Governance Report on page 76 also acts as the Group Risk
Committee and supports the Audit Committee in the risk management
process through the ongoing monitoring of the risk environment
and the effectiveness of the controls in place to identify, assess and
manage risk. The Group Operating Executive aims to ensure that
the risk management process supports the delivery of the Group’s
strategy by managing the risk of failing to achieve business objectives.
Group Internal Audit (GIA)
GIA assists in the process by preparing regular Group summary
risk management reports based on information submitted by
management throughout the year. These reports include:
• An analysis of key Group risks in terms of impact (assessed over
the following 12 months within defined monetary terms), likelihood
of occurrence (using defined probabilities of occurrence) and
velocity (speed at which the impact of the risk could materialise);
• A summary of the key movements in the identified risks, with
a particular focus on highlighting new or emerging risks;
• Management action plans (MAPs) to manage risk exposures; and
• An overview of the broader organisational, business and
emerging risks.
The Group Operating Executive reviews these reports regularly
during the year. The Audit Committee and the Board perform at least
a bi-annual review, with interim updates received from management
on significant issues.
Group Senior Leadership Team (SLT)
The management team of each business segment and the Group
functional leads are required to maintain and submit a risk register.
The register ensures consistency of approach in the reporting of risks
to Group defined guidelines. By focusing our risk management system
on the early identification of new or emerging 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 removal or reduction of the risk is not possible, the Group
formulates a MAP to respond to the risk should the risk materialise.
The quality and consistency of SLT risk reporting is supported by a
number of other monitoring and reporting processes including the:
• Group strategy process and Board review of key financial and
operational performance, including detailed finance, capex
planning and expenditure reviews;
• Bi-annual control self-assessment and management
representation letter processes;
• Post-acquisition completion and significant Capex project reviews;
• Risk-focused GIA plan; and
• The externally assessed Glanbia Risk Management System
(GRMS) reviews which assess operational risks across the Group
and the internal Glanbia Quality System (GQS) reviews.
Risk categories
Our approach recognises the external risks associated with
our operating environment, which are typically considered and
managed through our strategic processes, and the mainly internal
risks associated with our people, processes and systems which
are managed through our internal controls. Emerging risks with the
potential to impact our longer term success are also considered
to ensure that we plan appropriately to respond to them over time.
Identifying our principal risks and uncertainties
The Directors have carried out a robust assessment of the Group’s
principal risks, including those that may threaten our business model,
future performance, solvency or liquidity. Key risks are identified
based on the likelihood of occurrence, potential impact and velocity
on the Group using the process outlined on pages 54 and 55.
Risks are reported on a residual risk basis and represent a snapshot
of the Group’s 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.
The Board also fully recognises that many risks do not exist in
isolation and that one or more risks may crystallise at the same time
which could increase the impact to the Group. The interactions and
relationship between such risks are discussed and considered by
the Board throughout the year. In 2020, these discussions included
a detailed consideration of the consequences of the Covid-19 virus
on many of the underlying principal risks being faced by the business,
the impacts of which are varied. The disclosures on pages 21 to 23
consider the longer term impacts of Covid-19 on the business strategy.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 56
Glanbia plc | Annual Report and Financial Statements 2020
Risk Management continued
Strategic/
External
Strategic/External
Mainly external risks associated with our
operating environment
Operational/Regulatory
The people and processes we use to power
our business model
Emerging
Risk
Categories
Financial
Technological
Operational/
Regulatory
Economic, Industry and Political
Market Disruption
Customer Concentration
Financial
Our financial status and internal controls
Taxation Changes
Technological
The systems we use to drive the business
and the data they hold
Digital Transformation
Cyber Security and Data Protection
Talent Management
Health and Safety
Supply Chain
Product Safety and Compliance
Acquisition/Integration
Emerging
Emerging or developing risks with the
potential to impact in the longer term
Climate Change
Changes to risks in the year
• No new principal risks were identified during the year and while many
of the principal risks noted prior to the pandemic remain the same
in substance, they have been amplified by the impact of the virus
with the risk movements and trend outlined in the diagram above.
• A Covid-19 project team was immediately put in place to assess
these threats and ensure appropriate incident and response plans
are in place. As a provider of essential services, the Group has been
able to keep its supply chains, manufacturing plants and distribution
networks operating effectively during the pandemic. However,
similar to other companies, the Group has experienced operational
and market related challenges associated with Covid-19.
Ȋ Direct Covid-19 impacts included areas such as reduced
profitability, supply chain challenges, increased workforce
planning requirements and negative impacts to the credit
quality/liquidity of some of our customers and suppliers;
Ȋ Indirect consequences included broader shifts in the channels in
which we operate with a significant shift to online and increased
market and price volatility at different points during the year.
• Above all, we have reinforced our commitment to the health and
safety of our employees and customers by putting people first.
• One of the real positives for the Group was the strength of our IT
and digital infrastructure which operated relatively seamlessly with
the significantly increased number of employees working remotely.
• The end of the transition period on 31 December 2020 following
the withdrawal of the United Kingdom (“UK”) from the EU (‘Brexit’)
and the regulations associated with the EU–UK Trade and
Cooperation Agreement (“TCA”) which has been applied
provisionally since 1 January 2021 has reduced the uncertainty
surrounding issues such as tariffs and while some issues have still
to be worked through, no significant impact to the Group’s
financial performance is expected.
Principal risks and uncertainties
The key risk factors and uncertainties with the potential to impact
on the Group’s financial performance in 2021 include:
• Economic, industry and political risk – as an international business,
the Group operates in many countries and currencies where
changing economic conditions can impact on it. Covid-19 actions
taken by the countries in which the Group operates continue
to evolve resulting in a risk of continued or further disruption to
business activities, supply chains and employees. A prolonged
pandemic-driven global recession may pose longer term risks
as markets globally struggle to return to pre-Covid levels;
• Market disruption risk – Covid-19 restrictions have had and,
not withstanding the vaccination roll-out process, will most likely
continue to have a significant impact on commercial activity globally
with the closure and subsequent re-opening of restaurants/food
service outlets, gyms, convenience stores and the cancellation of
multiple sporting events. The risk of continuing and possibly more
aggressive waves of Covid-19 may further disrupt the ability of
markets to re-open fully in 2021 and delay the return to pre-Covid
sales levels, particularly in the GPN International markets,
distributor networks and/or the specialty channel;
• Supply chain risk – the ability of governments and medical agencies
to contain and suppress the spread of the Covid-19 virus continues
to be important in preventing unexpected supply chain disruptions
which could result in restrictions on the importation of key raw
materials and/or negative impacts on international sales channels.
The Group is holding appropriate safety stocks of core raw
materials, however a prolonged impact to supply chains would have
negative consequences from both a supply and pricing perspective;
• Customer concentration risk – while strategically the Group aims to
build strong customer relationships with major customers, material
disruption with, or loss of, one or more of these customers, or a
significant deterioration in commercial terms, could materially impact
profitability. It can also expose the Group to credit exposure and
other balance sheet risks. The Board is focused on utilising available
mitigation to limit such exposures where possible. This remains
relevant in 2021 as customers continue to navigate the challenges
imposed by Covid-19 restrictions on their operations; and
• Health and safety risk – a failure to maintain good health and safety
practices or a significant escalation in the spread of the virus or new
variants, in our core markets, may adversely impact performance.
The Group actively manages these risks and any emerging risks
through its risk management and internal control processes.
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 61. 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, liquidity,
borrowing facilities and related covenant requirements 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 25 to the Financial Statements and outlined
in the Group Finance Director’s review on pages 42 to 47;
• Glanbia’s financial risk management policies as described in
Note 29 to the Financial Statements, the nature of its business
57
activities and the factors likely to impact our operating
performance and future growth; and
See the Group’s business model on pages 28 to 29 and strategy on
pages 21 to 23 for more detail.
• The potential impact of the ongoing Covid-19 pandemic which the
Board have modelled a number of scenarios for in terms of future
trajectory and duration; and the recoverability of trade receivables,
inventory and other assets as outlined in Note 2 to the Financial
Statements. The longer term impacts of Covid-19 on the business
strategy have also been considered in the Strategic Report on
pages 21 to 23.
Long-term viability statement
Assessment of prospects
In accordance with the Code and Listing Rule 6.1.82 (3) of Euronext
Dublin, the Directors have assessed the viability of the Group and its
ability to meet its liabilities as they fall due over a period extending to
2023. This period was chosen as it is aligned to the Group’s budget
and strategy plans as approved at the Board strategy review session
in December 2020. The Board considers this the most appropriate
period to assess the Group’s prospects taking into account its current
financial position, the Group’s strategy and business model and the
potential impact arising from the principal risks and uncertainties.
Factors considered in assessing long-term prospects include:
(a) The Group’s current position
• Strong Group financial position, net debt at year end improved
by €120.4 million versus the prior year, with a net debt to adjusted
EBITDA ratio of 1.70 times with continuing good cash generation.
• Strong market positions in the wholly-owned segments GPN
and GN and robust joint venture business models.
• GPN transformation programme on-track and delivering
margin improvements.
• The global market trends in human nutrition remain positive
and will underpin the execution of the Group’s strategic ambition.
• Recent acquisitions Watson and Foodarom are performing well.
• Key long-term customer relationships, brands with strong equity
and leadership positions in ingredients.
• Board confidence in the strength of the Group’s financial position
enabled the quarter four launch of a share buyback programme
of up to €50 million and continued dividend payments.
• A team of talented and committed people, focused on the delivery
of Group targets in line with our Group purpose, vision and values.
See the Finance Director’s review on pages 42 to 47 for more detail.
(b) The Group’s strategy and business model
• Clearly articulated business model with well-defined and
communicated Group growth targets.
• The Group continues to focus on improving its financial position
while maintaining investment in growth, with all key strategic projects
on track and the acquisition of Foodarom closing in the third quarter.
• Clear priority of building GPN top line growth and driving earnings
to 2023 from our core platforms of GPN and NS.
• Wide-ranging GPN transformation project with a series of
initiatives across efficiency improvement and demand drivers
are well advanced. The business has realised benefits from the
programme which will build as the project advances during 2021
and is on-track to deliver an overall GPN EBITA margin ambition
by 2022 of between 12% and 13% in line with the strategic plan.
• Delivery of the defined strategic approaches will be focused on
growing market share where we have market leading capabilities,
underpinned by a simplification of the business across product
portfolios, routes-to-market and geographies.
• Ambition to grow through both organic investment and acquisition
activity within a framework of clear capital allocation priorities,
as demonstrated by our acquisitions and scale investments in
dairy processing conducted through robust joint venture models.
• Clear focus and prioritisation on the development of talent which
remains central to our strategy.
(c) Principal risks related to the Group’s business
See pages 58 to 61 for a detailed description of each of the Group’s
principal risks, related mitigation measures and 2021 focus areas.
Assessment of viability
The Directors’ assessment of the Group’s viability has been made with
reference to the 2020 performance, the principal risks and uncertainties
including emerging risks facing the Group and how these are managed
within the Board’s risk appetite as detailed on pages 55 to 61. The
Directors carried out a robust assessment of the consolidated financial
forecast for the current year and financial projections for future years to
2023 during its strategy and budget review session in December 2020
with due consideration to the impacts of Covid-19, particularly with
respect to the significant judgements and estimates made in the
application of its accounting policies and the continued pandemic-
related uncertainty on the Group’s performance.
The Board reviewed the assessment of the Group’s prospects made
by management, including:
• The development of a rigorous planning process, the outputs
of which comprises of a strategic plan, a consolidated financial
forecast for the current year and financial projections for future
years covering the period of the plan;
• A comprehensive review of the strategic plan as part of its annual
strategy review, with regular monitoring on 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
• A consideration of how the impact of one or more of the principal
risks and uncertainties, outlined on pages 58 to 61, could
materially impact the Group’s performance, solvency or liquidity.
These considerations include external factors such as the impacts
of lower economic growth, particularly in our key areas of operation;
a review of a number of scenario’s relating to the future potential
impacts of Covid-19 on the Group, unfavourable currency exchange
rate movements, principally the USD/euro rate; increased regulations;
and internal factors such as the strategic plan under-delivering; the
loss of a key production site; or a major food safety or health and
safety related event. These considerations also took into account
additional mitigating measures available to the Group, including the
ability to reduce capital expenditure and the potential availability of
additional debt facilities. The Board is satisfied that sufficient financial
headroom exists to address the potential negative impacts arising
from the events considered.
Conclusions
Having considered these elements and the Covid-19 related
challenges and impacts experienced in 2020 and anticipated for
the years ahead, the Board assessed the prospects and viability of
the Group in accordance with the UK Corporate Governance Code
requirements. The Board has a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as
they fall due over the period of the assessment. The Board does not
expect any reasonably anticipated coronavirus outcome to impact the
Group’s long-term viability or ability to continue as a going concern.
The Board, in considering its dividend policy for the years to 2023,
believes it will have sufficient distributable reserves to pay dividends.
The Board assesses the Group’s key financial metrics, liquidity
position and projected cash flows before declaring interim and
proposing final dividends. The Board is also satisfied that due to the
continued strong cash flows in the business, sufficient distributable
reserves are available to maintain the execution of the share buyback
programme, in line with the plans announced in October 2020.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 58
Glanbia plc | Annual Report and Financial Statements 2020
Principal Risks and Uncertainties
Link to Strategic Priorities (see pages 22 to 23)
Protect and grow our portfolio of core brands and ingredients
Purposeful growth through innovation and acquisitions
Continue to embed operating enablers
Risk
Potential Impact
Mitigation
Developments in 2020
2021 Focus Areas
Strategic/External
Economic, Industry
and Political
Our performance is influenced by global
economic conditions, consumer confidence
and the stability of the markets in which
we operate.
Market Disruption
Further waves of Covid-19 may continue
to disrupt the ability of markets to re-open
fully and delay growth plans.
Increasing competition across certain
channels through high promotional activity,
competitor product innovation and channel
shifts provides an ongoing challenge.
The inability to contain the spread
of the virus and in-country Covid-19
actions taken by governments may
create a risk of further business
interruption.
Deterioration in economic growth
or consumer confidence, significant
currency movements, political
instability or civil disturbance may
impact performance and the
achievement of growth targets.
Consumer channels have been
restricted and/or shut down entirely
during the pandemic. Consumer
spending habits have also altered
resulting in adverse impacts on
the Group’s financial performance.
Failing to recognise or obtain
accurate and relevant competitive
and environmental intelligence may
result in the adoption of incorrect
business strategies.™
Covid-19 actions taken by governments in the countries in which we operate
continue to evolve resulting in a risk of further disruption to business activities,
supply chains and consumer confidence. The UK’s exit from the European
Union and a change of President in the US also have the potential to create
short-term uncertainty. While certain elements are out of our control, the
Board and Group Operating Executive are focused on the effective
implementation by the GPN team of the transformation project objectives
which position us well to regain revenue and profitability growth.
Our strategy is aimed at the continued expansion of our geographic reach,
focusing on key customer relationships and investment in new product
development which help to protect the Group from economic fluctuations.
The Board regularly assesses key market trends and the implications for
Group performance and strategic objectives. Corrective actions are identified
and implemented as required.
The Board and management are focused on maintaining a strong balance
sheet during this volatile period; closely monitoring cash flow including
customer receipts, vendor payments, and capital expenditure.
Customer consumption data is monitored where available and credit limits
are reviewed on an ongoing basis and adjusted where required particularly
for customers within the consumer channels most affected by the pandemic.
Inventory levels are monitored closely and production is scaled to meet
demand to avoid building excess inventory during these uncertain times.
The Board considered the major trends impacting our businesses, such as
clean labelling, as part of our strategic review processes.
We invest in research and development expenditure focused on value-
added and customer-specific solutions, and invest in promotional activities
where required.
GN focuses on differentiating its capabilities from competitors through
innovation to enable it to be the partner of choice for nutritional and functional
solutions across both the dairy and non-dairy segments.
The spread of the Covid-19 virus and the restrictions implemented by governments
A prolonged pandemic-driven global recession may pose longer term risks as
in the countries in which the Group operates disrupted business activities, supply
markets globally struggle to return to pre-Covid levels. In 2021, the Group’s focus will
chains and employees at varying levels for the majority of 2020.
A project team and clear business continuity plans centred around the Group’s three
priorities of protecting employees, continuing food supply and maintaining our strong
remain on its three core pandemic related priorities to position the Group to emerge
safely and strongly from the pandemic’s impact and the successful execution of the
Group strategy as outlined on pages 22 to 23.
financial position, was successfully implemented to ensure the Group maintains its
The macroeconomic environment faces continued headwinds and developments
strong financial position.
Aside from the impact of the pandemic on the global economy, the geo-political
climate has settled somewhat with trade tensions easing between the US and China
and a Brexit deal and future trading relationship agreed between the EU and the UK.
risks where possible.
in global trade uncertainty, currency fluctuations and pandemic related market
impacts will continue to be closely monitored to ensure the Group mitigates the
Covid-19 restrictions had a significant impact on global commercial activity with a
The Board will keep the frequency and impact of any future waves of Covid-19 under
series of closures and re-openings in restaurants, food service outlets, gyms and
review to assess the level of potential market disruption and the ability of markets
convenience stores which impacted Group performance in a variety of ways.
to re-open fully in 2021 particularly in the GPN international markets, distributor
The progression of the transformation project objectives in GPN and strong
networks and specialty channel.
performance by GN and our joint ventures demonstrated the resilience of our
The continued successful implementation of the transformation project objectives
business and our people.
will also be integral to our growth ambitions.
The GPN team has invested in developing in-house capabilities to assess market
We will continue to invest in developing in-house capabilities to assess trends in key
trends and to improve the accuracy and relevance of data available to the Board and
market areas ensuring accurate and relevant data is available to management teams
management to support decision making.
to support decision making.
Customer Concentration
The Group benefits from close
commercial relationships with a number
of key customers.
The loss or material disruption with
one or more of these customers,
or a significant deterioration in
commercial terms, could have a
material impact on Group profitability.
Pricing risks associated with the
growth of the online channel.
The Group has developed strong relationships with major customers by
focusing on superior customer service, quality assurance and cost
competitiveness.
Credit exposure is actively reviewed and managed including the use of credit
insurance where possible.
The Board regularly reviews its exposure to individual customers and
considers the impact of acquisitions where relevant.
The Board reviewed the Group’s exposures to individual customers and channels
The Board will continue to monitor credit exposures in 2021 as customers navigate
during 2020 and is focused on utilising available mitigation to limit such exposures
the challenges imposed by Covid-19 restrictions on their operations.
where possible.
The impacts of channel shifts by consumers and the financial strength of our
customer base is continually assessed. In 2020, the impact of the pandemic
saw significant disruption in the market with a rapid increase in the level of
online purchasing.
The impact of potential pricing risks associated with the growth of the online
channel will also be closely monitored.
The Group will continue to build key customer partnerships through strategic
capacity expansions and product supply opportunities, particularly with our
core GN customers.
Financial
Taxation Changes
The Group’s tax strategy may be impacted
by legislative changes to local or
international tax rules.
Technological
Digital Transformation
The risk of the Group implementing an
ineffective digital strategy.
The Group may be exposed to
additional tax liabilities.
The Group employs a team of tax professionals to support the Group in
ensuring compliance with legislative requirements globally.
The Audit Committee received a detailed management presentation in January 2021
Management will continue to monitor potential further developments in international
on our tax structures and controls, the ongoing management of our current
tax legislation, particularly in the US under the new administration.
We constructively engage with tax authorities where appropriate and we
engage advisors to clarify tax legislation to ensure that we achieve compliance
with relevant tax law across the jurisdictions in which we operate.
operations and evolving tax legislation.
The Committee also received an update on, and was satisfied with, the outcome
of the various tax authority reviews which concluded in 2020 with no material
where required.
issues arising.
Focus will remain on ensuring continuing compliance with legislative requirements.
Pro-active engagement with tax authorities in all material jurisdictions will continue
A failure to adopt new technologies
may impact our targeted growth.
Significant investment by the Group in ensuring a leading eCommerce
platform and market-leading technologies have been deployed to drive
growth across the eCommerce landscape.
Executive commitment to ensuring the full benefits of the Group’s digital
capabilities are maximised to increase our speed to market, reduce costs
and improve customer experience.
Completion of a significant element of the phased migration to our preferred
Continued focus on ensuring eCommerce projects support business growth in DTC
eCommerce platform and the expansion to nine new countries on the secure platform.
and increased online shopping trends.
Closure of legacy websites where appropriate.
Completion of the remaining elements of the phased migration to our preferred
Fraud and cyber security exercises completed with vulnerability scans implemented
eCommerce platform.
across all eCommerce sites.
Cyber Security and
Data Protection
The Group is dependent on robust IT
systems and infrastructure for most of our
principal business processes which may
be impacted by the significant growth
of cyber threats.
An adverse event could result in
significant reputational damage due
to the potential loss or unauthorised
access to sensitive financial,
personal and commercial information
such as the Group’s intellectual
property (IP) and that of our
customers.
Dedicated Group IT Security team in place to manage IT risks.
Ensuring core platforms and remote access continue to perform for distributed
Evolve security and data privacy programmes to address new threats, working from
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.
Systems in place, including ongoing audit activities, to monitor compliance
with relevant privacy laws and regulations.
Regular security scanning across all eCommerce sites with penetration
testing completed on all new sites.
workforce during the Covid-19 pandemic.
home risks and increasing regulatory requirements.
Continued development of control processes to limit the risk of system intrusion
Continue to raise awareness of potential cyber-attack risks such as phishing and
and/or data loss with a particular focus on regulatory compliance.
social engineering.
Significant progress on the effective integration of our IT systems and related Group
The cross-functional teams involved will continue to ensure our IP is protected
monitoring controls within our recent acquisitions.
through appropriate IT security measures, patent applications and related
control procedures.
59
Risk
Potential Impact
Mitigation
Developments in 2020
2021 Focus Areas
Risk Trend
Increasing
Stable
Decreasing
Strategic/External
Economic, Industry
and Political
Our performance is influenced by global
economic conditions, consumer confidence
and the stability of the markets in which
interruption.
we operate.
The inability to contain the spread
Covid-19 actions taken by governments in the countries in which we operate
of the virus and in-country Covid-19
continue to evolve resulting in a risk of further disruption to business activities,
actions taken by governments may
supply chains and consumer confidence. The UK’s exit from the European
create a risk of further business
Union and a change of President in the US also have the potential to create
Deterioration in economic growth
or consumer confidence, significant
currency movements, political
short-term uncertainty. While certain elements are out of our control, the
Board and Group Operating Executive are focused on the effective
implementation by the GPN team of the transformation project objectives
which position us well to regain revenue and profitability growth.
instability or civil disturbance may
Our strategy is aimed at the continued expansion of our geographic reach,
impact performance and the
achievement of growth targets.
focusing on key customer relationships and investment in new product
development which help to protect the Group from economic fluctuations.
The Board regularly assesses key market trends and the implications for
Group performance and strategic objectives. Corrective actions are identified
and implemented as required.
Consumer channels have been
The Board and management are focused on maintaining a strong balance
restricted and/or shut down entirely
sheet during this volatile period; closely monitoring cash flow including
customer receipts, vendor payments, and capital expenditure.
Customer consumption data is monitored where available and credit limits
are reviewed on an ongoing basis and adjusted where required particularly
for customers within the consumer channels most affected by the pandemic.
Inventory levels are monitored closely and production is scaled to meet
demand to avoid building excess inventory during these uncertain times.
The Board considered the major trends impacting our businesses, such as
clean labelling, as part of our strategic review processes.
We invest in research and development expenditure focused on value-
added and customer-specific solutions, and invest in promotional activities
where required.
GN focuses on differentiating its capabilities from competitors through
innovation to enable it to be the partner of choice for nutritional and functional
solutions across both the dairy and non-dairy segments.
Market Disruption
Further waves of Covid-19 may continue
to disrupt the ability of markets to re-open
fully and delay growth plans.
Increasing competition across certain
channels through high promotional activity,
competitor product innovation and channel
shifts provides an ongoing challenge.
during the pandemic. Consumer
spending habits have also altered
resulting in adverse impacts on
the Group’s financial performance.
Failing to recognise or obtain
accurate and relevant competitive
and environmental intelligence may
result in the adoption of incorrect
business strategies.™
The spread of the Covid-19 virus and the restrictions implemented by governments
in the countries in which the Group operates disrupted business activities, supply
chains and employees at varying levels for the majority of 2020.
A project team and clear business continuity plans centred around the Group’s three
priorities of protecting employees, continuing food supply and maintaining our strong
financial position, was successfully implemented to ensure the Group maintains its
strong financial position.
Aside from the impact of the pandemic on the global economy, the geo-political
climate has settled somewhat with trade tensions easing between the US and China
and a Brexit deal and future trading relationship agreed between the EU and the UK.
A prolonged pandemic-driven global recession may pose longer term risks as
markets globally struggle to return to pre-Covid levels. In 2021, the Group’s focus will
remain on its three core pandemic related priorities to position the Group to emerge
safely and strongly from the pandemic’s impact and the successful execution of the
Group strategy as outlined on pages 22 to 23.
The macroeconomic environment faces continued headwinds and developments
in global trade uncertainty, currency fluctuations and pandemic related market
impacts will continue to be closely monitored to ensure the Group mitigates the
risks where possible.
Covid-19 restrictions had a significant impact on global commercial activity with a
series of closures and re-openings in restaurants, food service outlets, gyms and
convenience stores which impacted Group performance in a variety of ways.
The progression of the transformation project objectives in GPN and strong
performance by GN and our joint ventures demonstrated the resilience of our
business and our people.
The Board will keep the frequency and impact of any future waves of Covid-19 under
review to assess the level of potential market disruption and the ability of markets
to re-open fully in 2021 particularly in the GPN international markets, distributor
networks and specialty channel.
The continued successful implementation of the transformation project objectives
will also be integral to our growth ambitions.
The GPN team has invested in developing in-house capabilities to assess market
trends and to improve the accuracy and relevance of data available to the Board and
management to support decision making.
We will continue to invest in developing in-house capabilities to assess trends in key
market areas ensuring accurate and relevant data is available to management teams
to support decision making.
Financial
Taxation Changes
The Group’s tax strategy may be impacted
by legislative changes to local or
international tax rules.
Technological
Digital Transformation
The risk of the Group implementing an
ineffective digital strategy.
Customer Concentration
The Group benefits from close
commercial relationships with a number
of key customers.
The loss or material disruption with
The Group has developed strong relationships with major customers by
one or more of these customers,
focusing on superior customer service, quality assurance and cost
or a significant deterioration in
commercial terms, could have a
material impact on Group profitability.
Pricing risks associated with the
growth of the online channel.
competitiveness.
insurance where possible.
Credit exposure is actively reviewed and managed including the use of credit
The Board regularly reviews its exposure to individual customers and
considers the impact of acquisitions where relevant.
The Board reviewed the Group’s exposures to individual customers and channels
during 2020 and is focused on utilising available mitigation to limit such exposures
where possible.
The impacts of channel shifts by consumers and the financial strength of our
customer base is continually assessed. In 2020, the impact of the pandemic
saw significant disruption in the market with a rapid increase in the level of
online purchasing.
The Board will continue to monitor credit exposures in 2021 as customers navigate
the challenges imposed by Covid-19 restrictions on their operations.
The impact of potential pricing risks associated with the growth of the online
channel will also be closely monitored.
The Group will continue to build key customer partnerships through strategic
capacity expansions and product supply opportunities, particularly with our
core GN customers.
The Group may be exposed to
The Group employs a team of tax professionals to support the Group in
additional tax liabilities.
ensuring compliance with legislative requirements globally.
We constructively engage with tax authorities where appropriate and we
engage advisors to clarify tax legislation to ensure that we achieve compliance
with relevant tax law across the jurisdictions in which we operate.
The Audit Committee received a detailed management presentation in January 2021
on our tax structures and controls, the ongoing management of our current
operations and evolving tax legislation.
The Committee also received an update on, and was satisfied with, the outcome
of the various tax authority reviews which concluded in 2020 with no material
issues arising.
Management will continue to monitor potential further developments in international
tax legislation, particularly in the US under the new administration.
Focus will remain on ensuring continuing compliance with legislative requirements.
Pro-active engagement with tax authorities in all material jurisdictions will continue
where required.
A failure to adopt new technologies
Significant investment by the Group in ensuring a leading eCommerce
may impact our targeted growth.
platform and market-leading technologies have been deployed to drive
Completion of a significant element of the phased migration to our preferred
eCommerce platform and the expansion to nine new countries on the secure platform.
Continued focus on ensuring eCommerce projects support business growth in DTC
and increased online shopping trends.
growth across the eCommerce landscape.
Executive commitment to ensuring the full benefits of the Group’s digital
capabilities are maximised to increase our speed to market, reduce costs
and improve customer experience.
Closure of legacy websites where appropriate.
Fraud and cyber security exercises completed with vulnerability scans implemented
across all eCommerce sites.
Completion of the remaining elements of the phased migration to our preferred
eCommerce platform.
Cyber Security and
Data Protection
The Group is dependent on robust IT
systems and infrastructure for most of our
principal business processes which may
be impacted by the significant growth
of cyber threats.
An adverse event could result in
Dedicated Group IT Security team in place to manage IT risks.
significant reputational damage due
to the potential loss or unauthorised
access to sensitive financial,
personal and commercial information
such as the Group’s intellectual
property (IP) and that of our
customers.
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.
Systems in place, including ongoing audit activities, to monitor compliance
with relevant privacy laws and regulations.
Regular security scanning across all eCommerce sites with penetration
testing completed on all new sites.
Ensuring core platforms and remote access continue to perform for distributed
workforce during the Covid-19 pandemic.
Evolve security and data privacy programmes to address new threats, working from
home risks and increasing regulatory requirements.
Continued development of control processes to limit the risk of system intrusion
and/or data loss with a particular focus on regulatory compliance.
Continue to raise awareness of potential cyber-attack risks such as phishing and
social engineering.
Significant progress on the effective integration of our IT systems and related Group
monitoring controls within our recent acquisitions.
The cross-functional teams involved will continue to ensure our IP is protected
through appropriate IT security measures, patent applications and related
control procedures.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION
60
Glanbia plc | Annual Report and Financial Statements 2020
Principal Risks and Uncertainties continued
Link to Strategic Priorities (see pages 22 to 23)
Protect and grow our portfolio of core brands and ingredients
Purposeful growth through innovation and acquisitions
Continue to embed operating enablers
Risk
Potential Impact
Mitigation
Developments in 2020
2021 Focus Areas
Operational/Regulatory
Talent Management
The ability to attract, develop, engage
and retain appropriately qualified talent
is critical if the Group is to continue to
compete effectively.
A failure to retain, attract and/or
develop key talent, particularly in
emerging areas of talent need or
areas such as digital and robotics,
will impact on our ability to deliver
sustainable value for all our
stakeholders.
The Group’s purpose, vision and values are embedded across all levels of
the Group through defined training programmes.
A remuneration policy is in place with clear links to our strategic objectives.
This policy includes a balanced approach to short and long-term incentives
and is aimed at mitigating weak performance in any one year and utilising
appropriate retention tools for key individuals.
Strong recruitment processes, effective human resources (HR) policies and
procedures, robust succession management planning and talent management
initiatives are in place.
Health and Safety
The risk of an escalation in the spread
of Covid-19 or the spread of new
coronavirus strains.
The risk of non-compliance with building
and fire code regulations and/or zoning
restrictions resulting in a loss of capacity
or closure at a major site.
Health and safety risks to our people
and the wider public.
Reputational damage, regulatory
penalties and an inability to service
customer requirements due to
capacity restrictions or plant closure.
The Glanbia Corporate Responsibility Council (CRC) monitors progress against
our key health and safety, food safety and quality and environmental objectives.
The CRC includes two members of our Group Operating Executive to help
ensure an effective framework, Group policies and clear objectives are in place
and that corrective actions are implemented in a timely manner.
The Group monitors overall safety and loss prevention performance through
the independently assessed Glanbia Risk Management System (GRMS).
Supply Chain
Risks include the inability to contain the
spread of the coronavirus with resulting
prolonged supply chain disruptions and
the risk of the principal ingredient supplied,
milk, not achieving an appropriate balance
between sustainable supply and cost.
The coronavirus crisis could result
in unexpected restrictions on the
importation of key raw materials
and/or negative impacts on our
international sales channels.
Milk availability and pricing can
vary from quarter-to-quarter and
year-to-year with resulting impacts
on production levels and input costs.
Appropriate short-term safety stocks are in place for our core raw materials
and detailed monitoring of raw material delay risks are in place with alternative
sources of supply identified if required.
The majority of our dairy activities are in joint venture partnerships with
established, robust business models to manage this risk in our dairy
operations.
Our milk and procurement strategy teams work proactively with the US patron
supplier base to ensure the business remains competitive in its supplier
offerings to underpin long-term sustainable supply including the provision
of non-pricing value-added initiatives.
Protecting our employees was established as one of the three pillars of our Covid-19
Retaining focus on the protection of our employees by sustaining control procedures
business continuity plan with an analysis of our detailed performance in this area set
and employee communications throughout the pandemic and developing
out in the Our People section on page 24.
appropriate site policies for the vaccine rollout.
Remote working was promoted where possible, with a clear management focus
Continuing execution of our people strategy which aims to sustain a high-
on driving both employee productivity and engagement in the new environment.
performing, values driven and respectful culture.
Significant focus and investment in the development of our approach to increasing
Monitoring the evolving talent retention risks driven by the remote working options
diversity across the organisation, including our talent pipeline, new acquisitions and
which have become more widespread during the pandemic.
new geographies with a Board approved strategy in place.
Driving the HR transformation programme development particularly through the
Detailed analysis performed on the results of our Group-wide employee survey as
global talent centre of excellence and IT platform development work.
part of our employee engagement programme with appropriate action plans
developed where required.
Continue to evolve our graduate recruitment and mentor programmes to support
the Group’s succession planning processes.
A Group Crisis Command Team (CCT) was established in March 2020 to commence
The Group CCT will remain in place to provide ongoing surveillance and support
the Group’s business continuity plans in response to the pandemic.
across the Group with the key issues from the perspective of business continuity
These plans were tailored to the evolving situation throughout 2020 and into 2021
and employee welfare including:
where contingent workforce planning remains a key priority.
1. Maintaining effective employee engagement and welfare programmes.
All production sites remained operational throughout the pandemic, with
2. Sustaining operations through each wave of the virus.
approximately three quarters of employees working on site and the remainder
working remotely.
Employee engagement programmes were enhanced across the Group to provide
an additional level of support to both our frontline and remote workers while the
recruitment of on-site nurses at key Group locations was increased to ensure strict
compliance with procedures.
3. Ensuring site policies and procedures are in place for the vaccine rollout.
4. Managing the timely re-opening of offices when it is safe to do so.
5. Restricting business related travel to essential business only.
Ongoing assessment of business activities to ensure any required improvements
are implemented to limit potential future exposures.
Close monitoring of our accident rates continues with a clear focus on driving
Continue to monitor evolving health and safety regulatory requirements.
effective root cause analysis across the Group.
Significant management effort deployed to prevent unexpected supply
chain disruptions.
The continuing spread of the disease and subsequent government restrictions did
Continuing to monitor the potential impacts of the coronavirus, particularly on the
import of key raw materials and/or negative impacts on our international sales
channels and taking effective action where required.
negatively impact some sales channels with corrective actions taken where possible.
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.
Product Safety and
Compliance
A breakdown in control processes may
result in contamination of products resulting
in a breach of existing food safety legislation
and potential consumer or employee illness.
Acquisition/Integration
The anticipated benefits of acquisitions
may not be achieved if the Group fails to
conduct effective due diligence, complete
the transaction or properly integrate the
acquired businesses.
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.
Below expected performance of the
acquired business and the diversion
of management attention to
integration efforts could result in
significant value destruction.
The Glanbia Quality Leadership Team (QLT) has established governance,
benchmarking and KPI measurement processes to ensure the Group is
tracking to global standards and best practice.
Considerable focus on ensuring suitably qualified and experienced staff
are employed within the Group.
Covid-19 has added complexity but the flexibility and commitment of our people
Tailoring business continuity plans to the evolving pandemic situation while
has ensured robust quality and auditing standards have been maintained.
maintaining a clear focus on protecting our employees.
Continued progression in embedding our global reporting tool and core Glanbia
Ensuring new regulatory requirements and emerging issues are captured with
Quality Standards (GQS) across the Group.
appropriate team training on the revised requirements.
Focused on critical event management, effective root cause analysis and corrective
Maintaining standards as we optimise our supply chain globally by encompassing
Appropriate product liability insurance is maintained.
and preventive actions.
a mix of owned and contract manufacturer facilities.
The Board approves the business case and funding requirements for all
significant investments and has acquisition integration processes in place to
monitor the performance of acquired businesses.
Acquired entity management teams are typically strengthened by the transfer
of experienced Glanbia managers, which assists in increasing the efficiency
of integration efforts.
Mandatory post-acquisition completion and significant capital expenditure
project reviews are conducted, with regular Audit Committee updates.
All sites achieved or maintained a globally recognised food safety certification in 2020.
Working to continuously improve our operations while reducing our environmental
impacts in a cost effective and sustainable manner.
The Board considered and approved the acquisition of Foodarom, a Canadian
Acquisition integration and post-acquisition review processes will continue to be
flavours business, which completed in the third quarter.
monitored through Board and Audit Committee reviews, particularly in light of the
Management has continued to focus on ensuring the SLIMFAST™ brand and
Watson acquisitions were effectively integrated into the Group’s operations.
The Group continued to participate with its strategic joint venture partners in the
progression of a number of dairy-related investments with the commissioning
impacts of Covid-19 on the original business plans.
The Audit Committee will continue to review the impairment testing methodology,
inputs, assumptions, sensitivity analysis and results of any material business units
performing below expectations.
of the MWC-Southwest Holdings plant in Michigan, US and commissioning of
The Board will continue to review the Group’s overall portfolio as part of its strategic
the Glanbia Cheese EU plant to commence in quarter one 2021.
review processes and will evaluate potential acquisition opportunities to broaden
The Audit Committee assessed the impairment review of goodwill and intangibles,
including an appropriate consideration of the impacts of Covid-19 on the assessment,
as outlined on page 88.
the portfolio in this context.
Emerging
Climate Change
The risk of non-compliance with
regulations and/or the Group’s vision
to protect the environment through
responsible stewardship.
Changes in policy, regulation,
technologies and weather
conditions, may impact the Group
or influence consumer preferences.
Failure to comply with incident
reporting regulations may cause
reputational damage.
The Board recognises the scientific consensus that action is required to
address the impact of greenhouse gases on rising global temperatures and
has ensured that:
• Our operating sites are reporting on carbon, waste and water use.
• The Group-wide sustainability programme focuses on building a strong
culture, systems and governance model to oversee progress.
• A Board approved strategy is accelerating our climate change
commitments, targeting decarbonisation in our operations and supply
chain and addressing our most material sustainability focus areas.
A cross organisational team, led by the Group Sustainability function, and supported
The Board will ensure regular reviews of the environment related risks and
by a number of external experts developed an enhanced 2030 Group Sustainability
opportunities are performed as part of the sustainability agenda and look to
strategy, which was reviewed and approved by the Group Operating Executive and
incorporate environment initiatives into the overall Group strategy particularly with
Board in January 2021.
The 2030 strategy branded ‘Pure Food + Pure Planet’ represents a further evolution
regard to investment in energy efficiency advancements, carbon reduction and
emission management programmes.
of the phased Group-wide approach which commenced in 2015 and helps to ensure
The Audit Committee will assume responsibility for monitoring the effectiveness
that the Board and Group Operating Executive play a key role in maintaining and
of the environment metrics in assessing performance indicators.
developing clear alignment between business goals, the requirements of key
stakeholders and the ability of the Group to demonstrate a robust environmental,
social and corporate governance (ESG) framework.
Risk
Potential Impact
Mitigation
Developments in 2020
2021 Focus Areas
Risk Trend
Increasing
Stable
Decreasing
61
Protecting our employees was established as one of the three pillars of our Covid-19
business continuity plan with an analysis of our detailed performance in this area set
out in the Our People section on page 24.
Retaining focus on the protection of our employees by sustaining control procedures
and employee communications throughout the pandemic and developing
appropriate site policies for the vaccine rollout.
Remote working was promoted where possible, with a clear management focus
on driving both employee productivity and engagement in the new environment.
Continuing execution of our people strategy which aims to sustain a high-
performing, values driven and respectful culture.
Significant focus and investment in the development of our approach to increasing
diversity across the organisation, including our talent pipeline, new acquisitions and
new geographies with a Board approved strategy in place.
Detailed analysis performed on the results of our Group-wide employee survey as
part of our employee engagement programme with appropriate action plans
developed where required.
Monitoring the evolving talent retention risks driven by the remote working options
which have become more widespread during the pandemic.
Driving the HR transformation programme development particularly through the
global talent centre of excellence and IT platform development work.
Continue to evolve our graduate recruitment and mentor programmes to support
the Group’s succession planning processes.
A Group Crisis Command Team (CCT) was established in March 2020 to commence
the Group’s business continuity plans in response to the pandemic.
These plans were tailored to the evolving situation throughout 2020 and into 2021
where contingent workforce planning remains a key priority.
The Group CCT will remain in place to provide ongoing surveillance and support
across the Group with the key issues from the perspective of business continuity
and employee welfare including:
1. Maintaining effective employee engagement and welfare programmes.
All production sites remained operational throughout the pandemic, with
approximately three quarters of employees working on site and the remainder
working remotely.
Employee engagement programmes were enhanced across the Group to provide
an additional level of support to both our frontline and remote workers while the
recruitment of on-site nurses at key Group locations was increased to ensure strict
compliance with procedures.
Close monitoring of our accident rates continues with a clear focus on driving
effective root cause analysis across the Group.
2. Sustaining operations through each wave of the virus.
3. Ensuring site policies and procedures are in place for the vaccine rollout.
4. Managing the timely re-opening of offices when it is safe to do so.
5. Restricting business related travel to essential business only.
Ongoing assessment of business activities to ensure any required improvements
are implemented to limit potential future exposures.
Continue to monitor evolving health and safety regulatory requirements.
Significant management effort deployed to prevent unexpected supply
chain disruptions.
The continuing spread of the disease and subsequent government restrictions did
negatively impact some sales channels with corrective actions taken where possible.
Continuing to monitor the potential impacts of the coronavirus, particularly on the
import of key raw materials and/or negative impacts on our international sales
channels and taking effective action where required.
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.
Reputational damage, regulatory
penalties or restrictions, product
The Glanbia Quality Leadership Team (QLT) has established governance,
benchmarking and KPI measurement processes to ensure the Group is
Covid-19 has added complexity but the flexibility and commitment of our people
has ensured robust quality and auditing standards have been maintained.
Tailoring business continuity plans to the evolving pandemic situation while
maintaining a clear focus on protecting our employees.
Continued progression in embedding our global reporting tool and core Glanbia
Quality Standards (GQS) across the Group.
Ensuring new regulatory requirements and emerging issues are captured with
appropriate team training on the revised requirements.
Focused on critical event management, effective root cause analysis and corrective
and preventive actions.
Maintaining standards as we optimise our supply chain globally by encompassing
a mix of owned and contract manufacturer facilities.
All sites achieved or maintained a globally recognised food safety certification in 2020.
Working to continuously improve our operations while reducing our environmental
impacts in a cost effective and sustainable manner.
The Board considered and approved the acquisition of Foodarom, a Canadian
flavours business, which completed in the third quarter.
Management has continued to focus on ensuring the SLIMFAST™ brand and
Watson acquisitions were effectively integrated into the Group’s operations.
The Group continued to participate with its strategic joint venture partners in the
progression of a number of dairy-related investments with the commissioning
of the MWC-Southwest Holdings plant in Michigan, US and commissioning of
the Glanbia Cheese EU plant to commence in quarter one 2021.
The Audit Committee assessed the impairment review of goodwill and intangibles,
including an appropriate consideration of the impacts of Covid-19 on the assessment,
as outlined on page 88.
Acquisition integration and post-acquisition review processes will continue to be
monitored through Board and Audit Committee reviews, particularly in light of the
impacts of Covid-19 on the original business plans.
The Audit Committee will continue to review the impairment testing methodology,
inputs, assumptions, sensitivity analysis and results of any material business units
performing below expectations.
The Board will continue to review the Group’s overall portfolio as part of its strategic
review processes and will evaluate potential acquisition opportunities to broaden
the portfolio in this context.
Emerging
Climate Change
The risk of non-compliance with
regulations and/or the Group’s vision
to protect the environment through
responsible stewardship.
Changes in policy, regulation,
technologies and weather
The Board recognises the scientific consensus that action is required to
address the impact of greenhouse gases on rising global temperatures and
conditions, may impact the Group
has ensured that:
or influence consumer preferences.
Failure to comply with incident
reporting regulations may cause
reputational damage.
• Our operating sites are reporting on carbon, waste and water use.
• The Group-wide sustainability programme focuses on building a strong
culture, systems and governance model to oversee progress.
• A Board approved strategy is accelerating our climate change
commitments, targeting decarbonisation in our operations and supply
chain and addressing our most material sustainability focus areas.
A cross organisational team, led by the Group Sustainability function, and supported
by a number of external experts developed an enhanced 2030 Group Sustainability
strategy, which was reviewed and approved by the Group Operating Executive and
Board in January 2021.
The 2030 strategy branded ‘Pure Food + Pure Planet’ represents a further evolution
of the phased Group-wide approach which commenced in 2015 and helps to ensure
that the Board and Group Operating Executive play a key role in maintaining and
developing clear alignment between business goals, the requirements of key
stakeholders and the ability of the Group to demonstrate a robust environmental,
social and corporate governance (ESG) framework.
The Board will ensure regular reviews of the environment related risks and
opportunities are performed as part of the sustainability agenda and look to
incorporate environment initiatives into the overall Group strategy particularly with
regard to investment in energy efficiency advancements, carbon reduction and
emission management programmes.
The Audit Committee will assume responsibility for monitoring the effectiveness
of the environment metrics in assessing performance indicators.
Operational/Regulatory
Talent Management
The ability to attract, develop, engage
and retain appropriately qualified talent
is critical if the Group is to continue to
compete effectively.
A failure to retain, attract and/or
develop key talent, particularly in
emerging areas of talent need or
areas such as digital and robotics,
will impact on our ability to deliver
sustainable value for all our
stakeholders.
The Group’s purpose, vision and values are embedded across all levels of
the Group through defined training programmes.
A remuneration policy is in place with clear links to our strategic objectives.
This policy includes a balanced approach to short and long-term incentives
and is aimed at mitigating weak performance in any one year and utilising
appropriate retention tools for key individuals.
Strong recruitment processes, effective human resources (HR) policies and
procedures, robust succession management planning and talent management
initiatives are in place.
Health and Safety
The risk of an escalation in the spread
of Covid-19 or the spread of new
coronavirus strains.
The risk of non-compliance with building
and fire code regulations and/or zoning
restrictions resulting in a loss of capacity
or closure at a major site.
Health and safety risks to our people
The Glanbia Corporate Responsibility Council (CRC) monitors progress against
and the wider public.
Reputational damage, regulatory
penalties and an inability to service
customer requirements due to
our key health and safety, food safety and quality and environmental objectives.
The CRC includes two members of our Group Operating Executive to help
ensure an effective framework, Group policies and clear objectives are in place
and that corrective actions are implemented in a timely manner.
capacity restrictions or plant closure.
The Group monitors overall safety and loss prevention performance through
the independently assessed Glanbia Risk Management System (GRMS).
Supply Chain
Risks include the inability to contain the
spread of the coronavirus with resulting
prolonged supply chain disruptions and
the risk of the principal ingredient supplied,
milk, not achieving an appropriate balance
between sustainable supply and cost.
The coronavirus crisis could result
Appropriate short-term safety stocks are in place for our core raw materials
in unexpected restrictions on the
importation of key raw materials
and/or negative impacts on our
international sales channels.
Milk availability and pricing can
vary from quarter-to-quarter and
year-to-year with resulting impacts
on production levels and input costs.
and detailed monitoring of raw material delay risks are in place with alternative
sources of supply identified if required.
The majority of our dairy activities are in joint venture partnerships with
established, robust business models to manage this risk in our dairy
operations.
Our milk and procurement strategy teams work proactively with the US patron
supplier base to ensure the business remains competitive in its supplier
offerings to underpin long-term sustainable supply including the provision
of non-pricing value-added initiatives.
Product Safety and
Compliance
A breakdown in control processes may
result in contamination of products resulting
in a breach of existing food safety legislation
and potential consumer or employee illness.
Acquisition/Integration
The anticipated benefits of acquisitions
may not be achieved if the Group fails to
conduct effective due diligence, complete
the transaction or properly integrate the
acquired businesses.
of management attention to
integration efforts could result in
significant value destruction.
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.
tracking to global standards and best practice.
Considerable focus on ensuring suitably qualified and experienced staff
are employed within the Group.
Appropriate product liability insurance is maintained.
Below expected performance of the
The Board approves the business case and funding requirements for all
acquired business and the diversion
significant investments and has acquisition integration processes in place to
monitor the performance of acquired businesses.
Acquired entity management teams are typically strengthened by the transfer
of experienced Glanbia managers, which assists in increasing the efficiency
of integration efforts.
Mandatory post-acquisition completion and significant capital expenditure
project reviews are conducted, with regular Audit Committee updates.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION
62
Glanbia plc | Annual Report and Financial Statements 2020
Corporate Governance Report
Introduction from the Group Chairman
Committed to strong
governance and ethical
standards aligned with
our core values of respect
and integrity.
Donard Gaynor
Group Chairman
Dear shareholder,
On behalf of the Board, I am delighted to present my first Corporate
Governance Report for the year ended 2 January 2021. I was
privileged to be appointed Group Chairman on 8 October 2020 as
successor to Martin Keane. I look forward to working with the Glanbia
team and my Board colleagues on the successful delivery of strategy
and value creation for our stakeholders. On behalf of the Board,
I want to thank Martin for his stewardship of the Group, in particular
for his leadership through the current Covid-19 pandemic.
2020 was an unprecedented year that challenged all of us in ways
that we never imagined. The collective Glanbia spirit has never
been stronger and our values are being lived each day in the way
we work together, alongside our customers and suppliers to deliver
the essential nutrition to sustain people through this pandemic.
UK Corporate Governance Code (2018)
The timing of my first report coincides with the first year in which
Glanbia is required to report on its governance under the latest
Corporate Governance Code, published by the UK Financial
Reporting Council (FRC) in July 2018 (the ‘Code’). The aim of this
Corporate Governance Report is to explain the governance structure,
processes and procedures that are in place at Glanbia and how we
have applied the principles and complied with the provisions of the
Code. These governance structures, processes and procedures are
designed to ensure we carry out our business in line with applicable
laws and regulations and consider the requirements of our relevant
stakeholders, including shareholders, in Board discussions and
decision-making.
In keeping with prior years, details of our governance practices are
available in this Corporate Governance Report and the Committee
Reports which follow.
Stakeholder engagement
As Group Chairman, a core part of my role is stakeholder
engagement as outlined on page 27 and pages 74 and 75. Since my
appointment as Group Chairman on 8 October 2020, I met with a
number of our stakeholders to gain an understanding of their
perspectives on Glanbia.
In particular, I was keen to engage with Glanbia’s largest
shareholders, representing over 70% of Glanbia’s issued share capital
to schedule introductory virtual meetings with them. In addition to an
initial introduction, the purpose of the meetings was to listen to their
views on Glanbia and to set out my thinking in relation to the main
areas of focus for the Board.
Due to the Covid-19 pandemic, the 2020 Annual General Meeting
(‘AGM’) was held as a closed meeting. Shareholders were invited
to follow the proceedings of the AGM by listening via teleconference.
All details relating to the AGM were published on the Company’s
website: www.glanbia.com/agm. At the AGM, shareholders approved
the implementation of a share buyback programme by a 93% majority.
However, while the relevant waivers required under Rule 9 and Rule 37
of the Irish Takeover Panel Act 1997, Takeover Rules 2013 giving the
Company the authority to implement a share buyback programme
within certain specified limits were approved by the independent
shareholders by 56% and 70% respectively, these approvals were
less than 80%. Accordingly, in compliance with the Code, the Senior
Independent Director led an in-depth consultation with shareholders
to understand better their concerns. Details of the outcome of this
consultation were published on 12 August 2020 as part of the Group’s
2020 half year results release to the market and are summarised in
the 2020 Board Highlights on page 70.
Areas of focus for the Board
We last met together physically as a Board in February 2020. Since
then, the Board meetings have been held via conference calls with
several additional unscheduled meetings which were largely focused
on our response to the Covid-19 pandemic with three priorities of
protecting employees, continuing food supply and maintaining the
Group’s strong financial position being central agenda items to all the
meetings. Board deliberations in respect of the Group’s continued
response to the Covid-19 pandemic include the extensive people
and societal impact, business continuity planning, business resilience,
risk management, liquidity and funding to ensure that we oversee
and guide the business appropriately at this extraordinary time.
As an essential service, we are committed to our purpose to deliver
better nutrition for every step of life’s journey. We take seriously
our responsibility for ensuring the Group is capable of delivering on
our long-term strategic objectives and operating in the best interest
of our stakeholders.
During 2020, the Board also devoted a considerable amount of time
to reviewing and monitoring the progress of the Glanbia Performance
Nutrition business transformation programme and the Glanbia
Nutritionals’ acquisition of the Foodarom business. Throughout
2020 Group strategy, Board renewal, succession planning and talent
management, the share buyback programme and the market migration
to a new electronic share settlement system with Euroclear Belgium
post Brexit were also important topics on the Board agenda.
Culture
The Code emphasises the importance of culture. With the entire
world severely affected by the Covid-19 pandemic, the Board’s role
in promoting and monitoring a healthy and safe culture throughout
the business is now more important than ever. Bi-annually the Human
Resources & Corporate Affairs Director reports to the Board on HR
metrics. These include key employee engagement metrics, further
details of which are contained on page 25. In 2020 we also agreed
a new Diversity and Inclusion strategy aimed at embedding a more
equitable culture within the organisation.
63
Board composition, Board renewal
and Committee changes
There were a number of changes in the composition of the Board
and Committees during 2020 and early 2021 which are discussed
in more detail in the Nomination and Governance Committee Report
on pages 90 to 95.
From a governance perspective the most significant changes to the
Board were:
1. In accordance with the amended and restated Relationship
Agreement dated 2 July 2017 (the ‘Relationship Agreement’)
between the Company and Glanbia Co-operative Society Limited
(the ‘Society’), the appointment of an Independent Non-Executive
Director as Group Chairman, the reduction in 2020 of the number
of Non-Executive Directors nominated by the Society (‘Society
Nominee Directors’) from eight to seven consequently reducing the
overall size of the Board from 16 to 15 Directors. Society Nominee
Directors, Jer Doheny and Eamon Power retired from the Board at
the conclusion of the 2020 AGM and John Murphy was nominated
by the Society to join the Board on 8 October 2020. I thank Jer and
Eamon for their service and commitment to the Board during their
tenure and wish them success for the future;
2. The strategic decision on 23 February 2021 by the Society to reduce
its representation on the Board (from seven to three by 2023) in order
to facilitate the appointment of additional Independent Non-Executive
Directors and further strengthen the diversity of the Board; and
3. In line with the decision referred to in 2 above a reduction in the
size of the Board from 15 to 13 by 2023.
The Society and the Company plan to formally amend the Relationship
Agreement to reflect the changes agreed on 23 February 2021,
details of which are contained in the Nomination and Governance
Committee Report on page 92.
Richard Laube, John Daly and Mary Minnick stepped down as
Independent Non-Executive Directors from the Board effective
28 February 2020, 1 November 2020 and 31 December 2020
respectively. I thank Richard, John and Mary for their integrity and
valuable contributions to the Board during their tenure. We also
welcomed during the year the appointment of two new Independent
Non-Executive Directors, Jane Lodge on 1 November 2020 and
Roisin Brennan on 1 January 2021. Jane and Roisin bring a wealth of
experience from their prior leadership and non-executive directorship
roles. Full biographical details for the new Non-Executive Directors
are included on page 66.
On 23 February 2021 the Board approved the appointment of Paul
Duffy as Independent Non-Executive Director effective 1 March 2021.
Full biographical details for Paul can be found on pages 90 to 91.
We are also pleased that as at the date of this Report female
Directors comprise 40% of our Independent of the Society
Non-Executive Directors. The composition of the three main
Board Committees were also reorganised as set out on page 91.
Board evaluation
In 2020, the performance evaluation of the Board, its Committees and
individual Directors was externally facilitated by Independent Audit,
having been externally facilitated also in 2019. Further information of
Independent Audit’s appointment and a full description of the 2019
and 2020 Board evaluation process and results can be found on
pages 80 to 81.
Priorities for the Board and
Board Committees during 2020
Audit Committee
In 2020, in addition to its core responsibilities, the Audit Committee
paid particular attention to the impact of the Covid-19 pandemic
on the Group’s employees and operations with detailed risk
management presentations from the functional leads in Health and
Safety; IT and Food Safety and Quality. The financial impacts to the
macroeconomic projections and cash flow forecast assumptions
used during the impairment review of goodwill and intangible
balances were also assessed. Following detailed review, the Audit
Committee is satisfied that the current remote working environment
is not unduly impacting our financial reporting systems and controls
and that the internal and external audit processes remain effective.
Nomination and Governance Committee
During the year, the key focus of the Nomination and Governance
Committee was, in accordance with the Relationship Agreement,
the appointment of an Independent Non-Executive Director as Group
Chairman. On 5 October 2020 the Board approved my appointment
as Group Chairman with effect from 8 October 2020. The recruitment
and selection of new Independent Non-Executive Directors was
also a major priority for the Committee which successfully resulted
in the appointment of Jane Lodge, Roisin Brennan and Paul Duffy
to the Board.
Remuneration Committee
The Directors’ Remuneration Policy was last approved at the
Company’s 2018 AGM. In the current unprecedented environment,
the Company has decided to defer its Remuneration Policy Review
to 2022 in accordance with the European (Shareholder Rights)
Regulations 2020 (‘SRD II’). The decision to defer the policy renewal
until 2022 was supported by a thorough review of the current
Directors’ Remuneration Policy by the Remuneration Committee.
This review indicated that the current Directors’ Remuneration
Policy remains appropriate to support the business, is aligned
with shareholders’ interests and remains fit for purpose.
Looking ahead
I hope you find this Corporate Governance Report helpful in
understanding the arrangements and processes we have in place and
what we have done to comply with the recommendations of the Code.
I encourage all shareholders to use their proxy vote in respect of the
resolutions, as recommended in the 2021 Circular to be considered
at the Company’s 2021 AGM which will be held on 6 May 2021
at 11.00 a.m. (the location and form of the meeting will be subject
to the prevailing Covid-19 restrictions). This will enable us gain
a better understanding of your views. I also welcome questions
from shareholders either via our website www.glanbia.com, by e-mail
at ir@glanbia.ie or in person at the AGM.
I would like to thank all my colleagues on the Board for their
ongoing support and commitment to the business especially during
a very tough and unprecedented year navigating the impacts of
the Covid-19 pandemic.
I would also like to express my deep thanks for the agility, dedication
and commitment that Glanbia employees and particularly our frontline
workers and their families, suppliers and customer partners around
the world showed in quickly adopting new radical ways of working
and who continue to give enormous commitment to keep our supply
chain and operations running during the pandemic. As an essential
service, the food industry has a critical role to play and we are very
focused on continuing to serve our consumers, customers and
communities through this global crisis.
Donard Gaynor
Group Chairman
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 64
Glanbia plc | Annual Report and Financial Statements 2020
Corporate Governance Report continued
EU Non-Financial
Reporting Directive
The Group is required under the European Union
(Disclosure of Non-Financial and Diversity Information by
certain large undertakings and groups) Regulations 2017,
SI No 360 of 2017 (as amended) to provide disclosures
of the following on a comply or explain basis and has
done so for the past number of years:
Environmental
Social and Employee
Health and Safety
Pages 48 to 53 and 60
Pages 24 to 27 and 53
Pages 25 and 60
Anti-bribery and Corruption available on www.glanbia.com
Diversity
Pages 26 and 94
Stakeholder engagement
The approach of the Board to stakeholder engagement aligns with the
UK Corporate Governance Code (2018). While not directly applicable
to the Glanbia Group due to it being a provision of UK company law,
the Board welcomes the fresh stance on stakeholder engagement
introduced in 2019 under section 172 of the UK Companies Act 2006.
The Board acknowledges the benefits of considering the spirit intended
by such provisions as part of its decision making process. Further
detail on how the Board engages with its stakeholders is set out
on page 27 and pages 74 and 75.
Factor
Relevant disclosures
The long-term
Employees
Business
relationships –
suppliers and
occupiers
Page 28
Pages 28 to 29
Pages 21 to 31
Pages 57 and 86
Page 46
Pages 24 to 26
Page 26
Pages 24 to 27
Available on
www.glanbia.com
Available on
www.glanbia.com
Page 52
Company purpose
Business model
Strategy
Viability statement
Dividend policy
Our people
Diversity and inclusion
Employee engagement
Anti-bribery and
corruption
Modern slavery
Supply chain
sustainability
Standard
community and
environment
High standards of
business conduct
Pages 48 to 53
Page 53
Sustainability strategy
Our community
Pages 24 to 26
Page 89
Pages 54 to 61, 82 and 87
Culture and values
Whistleblowing
Internal controls
Shareholders
Pages 27 and pages 74
to 75
Shareholder
engagement
UK Corporate Governance Code
The Company has adopted the Irish Corporate
Governance Annex (2010) and the UK Corporate
Governance Code 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. The Company is reporting
in accordance with the 2018 edition of the UK Corporate
Governance Code (the ‘Code’) which applied to Glanbia
plc for the first time for the year ended 2 January 2021.
The Board considers that the Company has, throughout
the year ended 2 January 2021, complied fully with the
provisions of the Codes with the exception of Provision 11
(Composition of the Board of Directors), Provisions 24 and
32 (Composition of Board Committees) and Provision 36
(Post-employment shareholding policy) of the Code.
The current composition of the Board reflects the historical
shareholding and relationship of the Company with the
Society which is documented in the amended and restated
Relationship Agreement dated 2 July 2017, the provisions
of which were approved by shareholders at the
Extraordinary General Meeting held on 22 May 2017.
On 23 February 2021, the Society and the Board agreed
a number of changes which will impact the composition
and size of the Board over the period between 2021
to 2023 and which will reduce the number of Directors
nominated by the Society on the Board from the current
level of seven to three and the Board size from 15 to 13
(details of which are set out in the Nomination and
Governance Committee Report on page 92). The Board
is satisfied that the current composition and size of the
Board is justified in our particular circumstances.
The Group Chairman appointed on 8 October 2020
continued as a member of the Audit Committee until
20 January 2021 and will remain as Chairman of the
Remuneration Committee until 28 February 2021 to
facilitate the completion of the 2020 year end remuneration
processes. The Board is satisfied that the approach being
taken by the Company is practical as it ensures orderly
transition to the new Remuneration Committee chair.
The Remuneration Committee will introduce post
cessation of employment share ownership guidelines
as part of its Remuneration Policy review during 2021.
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.
UK Corporate Governance Code
Board Leadership and
Company Purpose
Division of Responsibilities
Composition Succession
and Evaluation
Pages 70 to 75
Pages 76 to 77
Pages 78 to 81 and 90 to 95
Audit Risk and Internal Controls
Pages 82 and 84 to 89
Remuneration
Pages 96 to 117
Board of Directors and Senior Management
Group Chairman, Executive Directors and Group Secretary
65
Donard Gaynor
Group Chairman and
Non-Executive Director
Age: 64
Term of office
Date of Appointment: 12 March 2013
Tenure: Seven full years
Committee Membership
Nomination and Governance Committee (Chair)
Remuneration Committee (Chair) stepping down on 28 February 2021.
Remuneration Committee (Member)
Skills and Expertise
Extensive knowledge of the food and beverage industry with significant
commercial acumen and deep insight into international business.
Experience
Donard Gaynor was appointed Group Chairman on 8 October 2020. 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. 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 Demense Limited, ‘The Lough Gill Distillery’
Company.
Key External Appointments
Chairman of Hazelwood Demesne Limited.
Siobhán Talbot
Group Managing Director and Executive Director
(Group Operating Executive)
Age: 57
Term of office
Date of Appointment: 1 July 2009
Tenure: 11 full years
Skills and Expertise
Strong leadership qualities, and deep knowledge of management, finance and
strategic planning acquired from a successful career path within Glanbia.
Experience
Siobhán Talbot was appointed as Group Managing Director on 12 November 2013,
having been appointed Group Managing Director Designate on 1 June 2013. She
was previously Group Finance Director and her role encompassed responsibility
for Group strategic planning. She has been a member of the Group 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) and was appointed as a Non-Executive
Director of CRH plc effective 1 December 2018. 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 degree and Diploma in Professional Accounting.
Key External Appointments
Non-Executive Director of CRH plc and Director of the Irish Business Employers’
Confederation (IBEC).
Mark Garvey
Group Finance Director and Executive Director
(Group Operating Executive)
Age: 56
Term of office
Date of Appointment: 12 November 2013
Tenure: Seven full years
Michael Horan
Group Secretary
(Group Operating Executive)
Age: 56
Term of office
Date of Appointment: 9 June 2005
Tenure: 15 full years
Skills and Expertise
Strong background in finance and global executive management and extensive
experience in the food and beverage industry.
Experience
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 degree and Diploma in Professional
Accounting and has an Executive MBA from Northwestern University, Illinois.
Key External Appointments
None.
Skills and Expertise
In-depth knowledge of financial and management reporting, regulatory
compliance, operational and risk matters in a global food and beverage
manufacturing and distribution landscape.
Experience
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 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 degree.
Key External Appointments
None.
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Corporate Governance Report continued
Board of Directors and Senior Management continued
Senior Independent Director, Non-Executive Directors
Dan O’Connor
Senior Independent Director and Non-Executive Director
Age: 61
Term of office
Date of Appointment: 1 December 2014
Tenure: Six full years
Committee Membership
Audit Committee (Chair)
Nomination and Governance Committee (Member)
Remuneration Committee (Member)
Skills and Expertise
Strong, strategic leadership acquired from 30 years international and financial
services sector experience.
Experience
Dan O’Connor is currently Chairman of Activate Capital Limited and a Director of
Oriel Windfarm Limited. He is former Chairman of International Personal Finance
plc and a former Non-Executive Director of CRH plc. Dan is a former President
and Chief Executive Officer of GE Consumer Finance Europe and a former Senior
Vice-President of GE. He was Executive Chairman of Allied Irish Banks plc from
November 2009 until October 2010. A fellow of Chartered Accountants Ireland,
Dan graduated from University College Dublin with a Bachelor of Commerce
degree and Diploma in Professional Accounting.
Key External Appointments
Chairman of Activate Capital Limited and Director of Oriel Windfarm Limited.
Roisin Brennan
Non-Executive Director
Age: 56
Term of office
Date of Appointment: 1 January 2021
Tenure: Less than one full year
Committee Membership
Nomination and Governance Committee/Remuneration Committee (Member)
Skills and Expertise
Extensive strategic and financial advisory experience across many sectors
including food and FMCG.
Experience
Roisin Brennan is a former Chief Executive of IBI Corporate Finance Ltd and
has over 20 years of investment banking experience, particularly advising public
companies in Ireland. She brings strong strategic and financial advisory experience
across many sectors including food and FMCG to the Board. Roisin is currently
a Non-Executive Director of Ryanair Holdings plc, Hibernia REIT plc, Musgrave
Group plc and Dell Bank International DAC. Formerly, she was a Non-Executive
Director of DCC plc from 2005 until 2016 and is also a former Non-Executive
Director of Wireless Group plc, Coillte DAC and The Irish Takeover Panel. A fellow
of Chartered Accountants Ireland, Roisin graduated from University College Dublin
with a Bachelor of Civil Law degree.
Key External Appointments
Non-Executive Director of Ryanair Holdings plc, Hibernia REIT plc, Musgrave
Group plc and Dell Bank International DAC.
Patrick Coveney
Non-Executive Director
Age: 50
Term of office
Date of Appointment: 30 May 2014
Tenure: Six full years
Committee Membership
Audit Committee (Member)
Skills and Expertise
Experienced chief executive officer who has gained extensive strategic, corporate
development and transactional experience.
Experience
Patrick Coveney is Chief Executive Officer (CEO) of Greencore Group plc, a leading
convenience foods manufacturer. Prior to becoming CEO of Greencore, Patrick
served as the Chief Financial Officer for Greencore 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. Patrick served as President of the Dublin Chamber of
Commerce in 2012, having been a Council member since 2003.
Key External Appointments
CEO of Greencore Group plc and Non-Executive Chairman of Core Media Group.
Jane Lodge
Non-Executive Director
Age: 65
Term of office
Date of Appointment: 1 November 2020
Tenure: Less than one full year
Committee Membership
Audit Committee /Remuneration Committee (Member)
Remuneration Committee (Chair) effective 1 March 2021
Skills and Expertise
In-depth knowledge of international business, management, corporate transactions,
corporate governance and reporting gained from a successful career with Deloitte.
Experience
Jane Lodge is a former Senior Audit Partner of Deloitte with extensive knowledge
and experience of international businesses in a wide range of sectors. Jane served
on the Deloitte UK Board of Partners and was the UK Manufacturing Industry Lead
Partner. She is currently a Non-Executive Director and Audit Committee Chair of
DCC plc and Bakkavor Group plc and Senior Independent Director, Audit Committee
Chair and Remuneration Committee member of Costain Group plc. She is a former
Non-Executive Director and Remuneration Committee member of Devro plc and
Sirius Minerals plc. A fellow of the Institute of Chartered Accountants in England and
Wales, Jane graduated from University of Birmingham with a BSc in Geology.
Key External Appointments
Non-Executive Director and Audit Committee Chair of DCC plc and Bakkavor
Group plc, Senior Independent Director, Audit Committee Chair and Remuneration
Committee member of Costain Group plc.
Board of Directors and Senior Management continued
Non-Executive Directors nominated by Glanbia Co-operative Society Limited (the ‘Society’)
67
Patsy Ahern
Non-Executive Director nominated by the Society
Vincent Gorman
Non-Executive Director nominated by the Society
Age: 63
Term of office
Date of Appointment: 21 June 2018
Tenure: Five full years (over each of his terms)
Age: 64
Term of office
Date of Appointment: 27 June 2013
Tenure: Seven full years
Skills and Expertise
Extensive knowledge of the global dairy and agribusiness industry and significant
experience in the governance and strategic management of a global business
gained from his tenure on the Boards of Glanbia Co-operative Society Limited
and Glanbia plc.
Skills and Expertise
Extensive knowledge of the global dairy and agribusiness industry and significant
experience in the governance and strategic management of a global business
gained from his tenure on the Boards of Glanbia Co-operative Society Limited
and Glanbia plc.
Experience
Patsy Ahern farms at Sheanmore, Ballyduff Upper, Co. Waterford and previously
served two full years on the Board. Patsy has completed the University College
Cork Diploma in Corporate Direction.
Key External Appointments
Director of Irish Co-operative Organisation Society Limited.
Experience
Vincent Gorman farms at Ballindrum, Athy, Co. Kildare. Vincent is also Chairman
of Progressive Genetics Co-operative Society Limited.
Key External Appointments
Chairman of Progressive Genetics Co-operative Society Limited.
Brendan Hayes
Non-Executive Director nominated by the Society
Martin Keane
Non-Executive Director nominated by the Society
Age: 60
Term of office
Date of Appointment: 2 June 2017
Tenure: Eight full years (over each of his terms)
Age: 65
Term of office
Date of Appointment: 24 May 2006
Tenure: 14 full years
Skills and Expertise
Extensive knowledge of the global dairy and agribusiness industry and significant
experience in the governance and strategic management of a global business
gained from his tenure on the Boards of Glanbia Co-operative Society Limited and
Glanbia plc.
Skills and Expertise
Extensive knowledge of the global dairy and agribusiness industry and significant
experience in the governance and strategic management of a global business
gained from his tenure on the Boards of Glanbia Co-operative Society Limited and
Glanbia plc.
Experience
Brendan Hayes farms at Ballyquinn, Carrick-on-Suir, Co. Waterford and previously
served four full years on the Board. He was appointed Vice-Chairman of Glanbia
Co-operative Society Limited on 8 October 2020. Brendan has completed the
University College Cork Diploma in Corporate Direction.
Key External Appointments
None.
Experience
Martin Keane farms at Errill, Portlaoise, Co. Laois. Martin served as Group
Chairman between 1 June 2018 and 8 October 2020, having previously served
eight years as Vice-Chairman. Martin retired as Chairman of Glanbia Co-operative
Society Limited and as a Director of Ornua Co-operative Limited in October 2020.
Martin is also a former President of Irish Co-operative Organisation Society
Limited. Martin has completed the ICOS Co-operative Leadership Programme.
Key External Appointments
None.
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Glanbia plc | Annual Report and Financial Statements 2020
Corporate Governance Report continued
Board of Directors and Senior Management continued
Non-Executive Directors nominated by Glanbia Co-operative Society Limited (the ‘Society’)
John G Murphy
Non-Executive Director nominated by the Society
John Murphy
Non-Executive Director nominated by the Society
Age: 58
Term of office
Date of Appointment: 29 June 2010
Tenure: 10 full years
Age: 61
Term of office
Date of Appointment: 8 October 2020
Tenure: Less than one full year
Skills and Expertise
Extensive knowledge of the global dairy and agribusiness industry and significant
experience in the governance and strategic management of a global business
gained from his tenure on the Boards of Glanbia Co-operative Society Limited
and Glanbia plc.
Skills and Expertise
Extensive knowledge of the global dairy and agribusiness industry and significant
experience in the governance and strategic management of a global business
gained from his tenure on the Boards of Glanbia Co-operative Society Limited
and Glanbia plc.
Experience
John G Murphy farms at Ballinacoola, Craanford, Gorey, Co. Wexford. John served
as Group Vice-Chairman between 2 June 2017 and 8 October 2020. John was
appointed Chairman of Glanbia Co-operative Society Limited on 8 October 2020.
John is Vice-Chairman of the National Dairy Council and has completed the
University College Cork Diploma in Corporate Direction.
Experience
John Murphy farms at High Down Hill, Newcastle, Co Dublin.
Key External Appointments
None.
Key External Appointments
Vice-Chairman of the National Dairy Council.
Composition of the Board
Group Chairman
Non-Executive Directors nominated by
Glanbia Co-operative Society Limited
Other Non-Executive Directors
Executive Directors
Directors’ tenure on the Board
Less than 3 years
Between 3 and 6 years
Between 6 and 9 years
Over 9 years
Board gender diversity
Male
Female
Patrick Murphy
Non-Executive Director nominated by the Society
Age: 62
Term of office
Date of Appointment: 26 May 2011
Tenure: Nine full years
Skills and Expertise
Extensive knowledge of the global dairy and agribusiness industry and significant
experience in the governance and strategic management of a global business
gained from his tenure on the Boards of Glanbia Co-operative Society Limited
and Glanbia plc.
Experience
Patrick Murphy farms at Smithstown, Maddoxtown, Co. Kilkenny. Patrick stepped
down as Group Vice-Chairman on 8 October 2020 having served as a Vice-
Chairman for over five years over two separate terms. He is Vice-Chairman of
Glanbia Co-operative Society Limited. Patrick is a Director of Farmer Business
Developments plc.
Key External Appointments
Director of Farmer Business Developments plc.
Senior Management
Group Operating Executive
69
Jim Bergin
CEO Glanbia Ireland
Age: 58
Term of office
Date of Appointment: 2 July 2017
Tenure: Three full years
Skills and Expertise
Strong leadership qualities, and deep knowledge of management, finance and
strategic planning acquired from a successful career within Glanbia Ireland.
Experience
Jim Bergin was appointed as Director and CEO of Glanbia Ireland, a joint venture
of the Group, in 2017 having previously been Director and CEO of Glanbia
Ingredients Ireland since 2012. He worked for the Group between 1984 and 2012
and held a number of senior positions during that time. Jim retired as Director of
Ornua Co-operative Limited in October 2020. Jim graduated from University
College Cork with a Bachelor of Commerce degree and has a M.Sc.
in Management Practice from Smurfit Business School.
Key External Appointments
None.
Hugh McGuire
CEO Glanbia Performance Nutrition
Age: 50
Term of office
Date of Appointment: 1 June 2013
Tenure: Seven full years
Skills and Expertise
Experienced chief executive officer who has extensive strategic, corporate
development and acquisition experience. Strong leadership qualities acquired from
a successful career within Glanbia.
Experience
Hugh McGuire is CEO of Glanbia Performance Nutrition. Hugh was appointed
to the Board on 1 June 2013 and served as a Director of the Company between
June 2013 and April 2019. 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 Nestle 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.
Key External Appointments
None.
Michael Patten
Group Human Resources & Corporate Affairs Director
Age: 58
Term of office
Date of Appointment: 11 December 2014
Tenure: Six full years
Brian Phelan
CEO Glanbia Nutritionals
Age: 54
Term of office
Date of Appointment: 1 January 2004
Tenure: 17 full years
Skills and Expertise
A deep understanding of the Group’s global reputation, public affairs, sustainability
agenda and how shareholders and other audiences are viewing the business.
Experience
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.
Key External Appointments
None.
Skills and Expertise
Experienced chief executive officer who has extensive strategic, commercial
and corporate development experience. Strong leadership qualities acquired
from a successful career within Glanbia.
Experience
Brian Phelan was appointed as CEO of Glanbia Nutritionals on 1 June 2013
and served as a Director of the Company between January 2013 and April 2019.
Brian was previously Group Human Resources & Operations Development Director
from 2004 to 2012. 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 degree and is a fellow of Chartered Accountants Ireland.
Key External Appointments
None
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 70
Glanbia plc | Annual Report and Financial Statements 2020
Corporate Governance Report continued
Board Leadership and Company Purpose
2020 Board Highlights
During 2020 the Board remained committed to its purpose to deliver better nutrition for every step of life’s journey. The following pages offer
some insight into the broad range of matters reviewed and discussed by the Board during the year and how the Board uses its meetings
as a mechanism for discharging its duties. A description of how the Board engaged with our key stakeholders is also provided.
Strategy and Corporate Development
How Board/Committee has had regard to stakeholder interests
Stakeholder Groups
Strategic Response to the Covid-19 Pandemic
During the Covid-19 pandemic we maintained a strategic focus across the Group; broadened the ambition
within the transformation programme in Glanbia Performance Nutrition (GPN) as the pandemic accelerated
trends, such as health and wellness and eCommerce. The Board broadened the reach of this programme
to drive further opportunities across all aspects of the business and we continued to scale our capabilities
in Glanbia Nutritionals (GN). Several additional unscheduled Board meetings were held throughout the
year to monitor the implications of the Covid-19 pandemic and guide the business appropriately.
Stakeholders: Employees,
investors, governments and
regulators, consumers, suppliers,
communities and charities.
Contributions: Long-term
results, employees, business
relationships and reputation.
Further details are available on pages 16 to 20, 24 and 32 to 47
Glanbia Performance Nutrition Transformation
The Board oversaw and monitored the significant transformation initiative in the GPN business to address
the challenges encountered in 2019 while focusing on a return to revenue growth and delivery of an overall
margin improvement ambition by 2022. A global management consulting firm was retained to advise and
support this initiative.
The Board received regular progress updates throughout the year on the planned benefits, and related
investment and exceptional costs arising as a result of the transformation process and where relevant,
any implications of the Covid-19 pandemic on the strategic ambition of GPN were reviewed and addressed.
Stakeholders: Investors,
employees, consumers
and suppliers.
Contributions: Long-term
results, business relationships
and reputation.
Further details are available on pages 19 and 32 to 35
Stakeholders: Employees,
investors, consumers and
suppliers.
Contributions: Long-term results
and business relationships.
Stakeholders: Investors,
employees, consumers and
suppliers.
Contributions: Long-term results
and business relationships.
Foodarom Acquisition
Following consideration of the proposed transaction, its strategic fit and key information and financial
dynamics, the Board approved the acquisition of Foodarom, a Canadian flavours business that is focused
on segments complementary to Nutritional Solutions.
Further details are available on pages 20 and 36 to 39
Share Buyback Programme
The Board approved the launch of a share buyback programme of up to €50 million of Glanbia shares.
93% shareholder approval was obtained at the Company’s 2020 Annual General Meeting (‘AGM’) to
implement the share buyback programme, however the relevant waiver resolutions required under Rule 9
and Rule 37 of the Irish Takeover Panel Act 1997, Takeover Rules 2013 were passed by 56% and 70%
approval respectively of the independent shareholders. In accordance with the UK Governance Corporate
Code (2018) Glanbia engaged with shareholders to understand better shareholder reasons behind a vote
less than 80% and published an update to shareholders on that consultation process as part of its 2020
half year results release to the market.
A number of investors had a preference that the Company not engage in a buyback due to shareholder
concentration concerns and prudent capital preservation. In light of this, the Board delayed launching
a share buyback until 9 November 2020 when the Company was successfully navigating the crisis and
was in a strong financial position due to its cash flow. The holding of Glanbia Co-operative Society Limited
(the ‘Society’), the Company’s largest shareholder has increased by less than 0.6%, as a result of the largest
concentration from this share buyback programme. At the end of 2020, the Company had repurchased
1,643,907 ordinary shares at a total cost of €16.6 million. This buyback programme has continued in 2021.
The Board will seek to renew shareholder authorisation for a share buyback programme at the 2021 AGM.
Further details are available on pages 42 to 47 and 120
71
Strategy and Corporate Development continued
How Board/Committee has had regard to stakeholder interests
Stakeholder Groups
Glanbia Ireland DAC and Royal A-ware Joint Venture
The Board approved a strategic joint venture between Glanbia Ireland DAC and Royal A-ware, a leading global
cheese and dairy producer based in the Netherlands, to build a new continental cheese manufacturing facility
at Belview, Co. Kilkenny. Once fully commissioned the new facility will have a processing capacity of 533 million
litres of milk per annum together with the creation of approximately 80 full time jobs at the facility. The milk for the
new facility will be sourced exclusively from Glanbia Ireland and the cheese will be marketed to global customers.
Stakeholders: Investors,
employees, consumer, suppliers
and communities.
Contributions: Long-term results
and business relationships.
Further details are available on pages 40 to 41 and 46
Diversity and Inclusion Policy
During 2020, a working group was established tasked with developing a Diversity and Inclusion (D&I)
strategy for Glanbia, under the executive sponsorship of Group Finance Director, Mark Garvey. The work
was supported by Mix Diversity, a specialist UK-based D&I advisory firm. In September 2020, a D&I survey
was undertaken. The information from the survey was taken into consideration in the D&I strategy which
was brought to the Board for input and approval.
Further details are available on pages 26 and 94
Procurement Policy
To support our growth and innovation ambitions, a formal procurement policy was adopted to assist
the Group in securing high-quality goods and services at a competitive value while minimising risk.
The Board approved a transition to a fully electronic ordering and invoicing model using SAP Ariba as
its principal system for transacting with suppliers for both direct and indirect spend. This means that all
purchase order confirmations, advance shipping notes and invoices can now be exchanged electronically.
By the end of 2020, 80% of all transactions between the Group and its supplier base occurred electronically.
Further details are available on pages 52
Stakeholders: Employees,
investors, governments and
regulators, consumers and
suppliers.
Contributions: Long-term
results, employees, business
relationships and reputation.
Stakeholders: Employees,
investors, consumers, suppliers
and communities
Contributions: Long-term
results, employees, business
relationships and reputation.
Sustainability
In 2020 the Group Operating Executive established a group-wide strategy team to advance target setting
in our most material environmental pillars: carbon, water and waste under the sponsorship of Group Human
Resources & Corporate Affairs Director, Michael Patten. A community of internal subject matter experts,
supported by external advisors including Carbon Trust, EM3, Harbor Environmental and Authenticity
delivered recommendations that were adopted by the Board and sees Glanbia set an ambitious commitment
to decarbonise our operations and our supply chain, tackle water risk, and evolve our waste commitments.
Stakeholders: Employees,
investors, governments and
regulators, consumers and
suppliers.
Contributions: Long-term
results, employees, business
relationships and reputation.
Further details are available on pages 48 to 53
Operational and Financial Performance
How the Board/Committee had regard to stakeholder interests
Stakeholder Groups
Financing and Refinancing
The Board approved new financing facilities and amended and renewed existing facilities. During the year,
the Group extended the maturity date of committed debt facilities considerably by arranging US$375 million
new facilities, maturing March 2028 – December 2031 and replaced existing indebtedness with US$180 million
of facilities, maturing January 2024 (total US$555 million). These facilities were used to repay US$351 million
of shorter maturing indebtedness in December 2020 and will additionally be used to repay US$156 million
indebtedness maturing June 2021.
Stakeholders: Employees,
investors, governments and
regulators, consumers, suppliers
and communities.
Contributions: Long-term
results, employees, business
relationships and reputation.
Accordingly, of €1.23 billion committed debt facilities at 2020 year end, the Group had €1.10 billion
facilities with a weighted average maturity of 4.8 years and an earliest maturity date of January 2024
(2019: €1.2 billion committed debt facilities, weighted average maturity of 2.8 years).
Further details are available on page 46
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 72
Glanbia plc | Annual Report and Financial Statements 2020
Corporate Governance Report continued
Board Leadership and Company Purpose continued
2020 Board Highlights
Operational and Financial Performance continued
How the Board/Committee had regard to stakeholder interests
Stakeholder Groups
Operational Response to the Covid-19 Pandemic
Since the beginning of the Covid-19 pandemic the Board received regular updates and continues to monitor
the implications of the pandemic for the business, our employees and stakeholders. Group-wide business
continuity planning was put in place managed by the Group Business Continuity Planning (BCP) team,
Business Unit BCP teams and Group Crisis Control Team (CCT).
The BCP priorities were:
1. Protect our people;
2. Maintain operations and service our customers and consumers; and
3. Manage our financial resources.
Stakeholders: Employees,
investors, governments and
regulators, consumers, suppliers
and communities.
Contributions: Long-term
results, employees, business
relationships and reputation.
The Group continuously monitored and mitigated against all risks related to the Covid-19 pandemic. The
Group also successfully adopted new and radical ways of operating throughout the pandemic. Stringent
protocols to protect employees, operations and keep our essential supply chains running were implemented.
The Board met more frequently to monitor Group performance as the Covid-19 pandemic progressed.
On 22 April 2020 we withdrew our 2020 full year financial guidance due to the uncertainty of the duration
and impact of the pandemic. Guidance remained withdrawn for the whole of 2020.
A mitigation plan was developed in the event trading were to deteriorate significantly which involved
reviewing all discretionary spend, the acquisition pipeline and capital expenditure phasing.
We ensured that many of the initiatives, which commenced during 2019 to simplify business and focus
on cost containment and margin improvement across the Group continued. All these measures provided
a solid platform to help mitigate the Covid-19 challenges of 2020.
In March 2020, it was decided to mobilise a Glanbia-wide procurement group to ensure that critical items
could be sourced globally if appropriate, to allow sharing and leverage of the global supply base in the event
of supply constraints and to give an overview of critical stock levels. This team comprised of procurement
team members from across our business units.
The Board also reviewed and monitored the HR management of the Covid-19 pandemic in terms of setting
up the policies, systems, processes, equipment, training, monitoring and corrective actions to protect
employees. A comprehensive set of health and safety measures was implemented at all operational sites
including health monitoring, occupational health support, employee welfare supports, physical distancing,
hygiene and personal protection equipment, temperature checking and sanitation measures.
Further details are available on pages 32 to 47
Cash Flow
From the onset of the Covid-19 pandemic, the Group’s financial priority was its financial strength, and this
delivered strong operating cash flow performance. During the year, the Group acquired Foodarom and
spent €48 million on strategic capital expenditure. In addition the strong cash flow enabled a dividend payout
ratio of 36.1% and the launch of a €50 million share buyback programme.
An interim dividend of 10.68 cent per share was paid on 2 October 2020 to shareholders on the share register
at the close of business on 21 August 2020. (HY 2019: 10.68 cent per share). The Board is recommending
a final dividend of 15.94 cent per share which brings the total dividend for the year to 26.62 cent per share,
in line with the prior year. This total dividend represents a return of over €78 million to shareholders from 2020
earnings and a payout ratio of 36.1% of 2020 adjusted Earnings Per Share. While the planned 2020 dividend
payout ratio is marginally ahead of the target payout ratio of 25% to 35%, the Board has decided to maintain
the dividend in line with prior year due to the strong cash performance during 2020, the reduction in net debt
during the year and the robust financial position of the Group. The final dividend will be paid on 7 May 2021
to shareholders on the share register on 26 March 2021.
Further details are available on pages 45 to 46
Stakeholders: Employees,
investors, governments and
regulators, consumers, suppliers
and communities.
Contributions: Long-term
results, employees, business
relationships and reputation.
73
Operational and Financial Performance continued
How the Board/Committee had regard to stakeholder interests
Stakeholder Groups
MWC Michigan
In 2020 the Board continued to monitor the progress of MWC (part of the MWC-Southwest Holdings joint venture)
in Michigan. This joint venture between Glanbia Nutritionals, Dairy Farmers of America, Inc. (DFA), and Select
Milk Producers Inc., will result in one of the most technically advanced dairy processing facilities in the US.
Designed and built over a two-year period, the new $470 million state-of-the-art cheese and whey plant in St. Johns,
Michigan commenced its commissioning phase on 21 October 2020 and will be fully commissioned by Q2, 2021.
When fully operational, the 375,000 square foot facility based on a 120 acre site will process 3.6 million litres of
milk per day (8 million pounds) into a range of superior quality block cheese and value-added whey products.
The Board received regular updates on the progress of this project throughout the year.
Stakeholders: Employees,
investors, governments and
regulators, consumers, suppliers
and charities.
Contributions: Long-term
results, employees, business
relationships and reputation.
Further details are available on pages 40 to 41 and 46
Glanbia Cheese EU
In 2018, the Board approved the €130 million investment in a new mozzarella cheese plant in Portlaoise by the
new joint venture, Glanbia Cheese EU a partnership with Leprino Foods Company. It is planned that Glanbia
Cheese EU will begin operations in 2021 and will produce 45,000 tons of mozzarella every year. The Board
received regular updates on the progress of this project throughout the year.
Further details are available on pages 40 to 41 and 46
Stakeholders: Employees,
investors, governments and
regulators, consumers, suppliers
and communities.
Contributions: Long-term
results, employees, business
relationships and reputation.
Investors Relations, Governance and Legal
How Board/Committee has had regard to stakeholder interests
Stakeholder Groups
Board Composition and Size
There was a refreshment and reconstitution of the Board during the year. In accordance with the Relationship
Agreement, an Independent Non-Executive Director was appointed as Group Chairman and there was a
reduction in the number of Society Nominee Directors on the Board from eight to seven. These changes reduced
the overall Board size from 16 to 15. We also welcomed three new Independent Non-Executive Directors to the
Board during 2020 and early 2021 following the decision of three Independent Non-Executive Directors to step
down as Board Members. The composition and size of the Board was reviewed in February 2021, details of
which are contained on page 78.
Stakeholders: Employees,
investors, consumers, and
suppliers.
Contributions: Long-term
results, employees, business
relationships and reputation.
Further details are available on pages 65 to 68 and 90 to 95
Board Committees
Following the appointment of a new Independent Group Chairman and the appointment of two new Independent
Non-Executive Directors during the year it was timely to carry out a review of the Board Committees to maintain
compliance with the UK Corporate Governance Code, balance Committee membership across the Independent
Non-Executive Directors and to ensure diversity in each of the three Board Committees. Committee changes
approved by the Board are set out in detail in the Nomination and Governance Committee Report on page 92.
Stakeholders: Employees,
investors, consumers, and
suppliers.
Contributions: Long-term
results, employees, business
relationships and reputation.
Further details are available on pages 65 to 68 and 90 to 95
Board Evaluation
In 2019, taking into account the significant changes to the Board, it was decided to carry out two successive
annual external reviews, with the evaluation spanning two years, 2019 and 2020, rather than the usual one year
review to ensure a consistent approach to development. The Board engaged external consultants ‘Independent
Audit’ to undertake this evaluation. The evaluation carried out in 2019 was questionnaire based. The 2020
evaluation was interview based and included observations of meetings.
Stakeholders: Employees,
investors, consumers, and
suppliers.
Contributions: Long-term
results, employees, business
relationships and reputation.
Further details are available on pages 80 to 81
Investor Relations
The Senior Independent Director led the investor engagements on the share buyback programme and the
subsequent shareholder consultation process as required by the UK Corporate Governance Code (2018).
The new Group Chairman has actively completed numerous investor engagements following his appointment
to the Chair to formally introduce himself to investors. Both engagements covered a shareholder base
representing approximately 70% of the Company’s equity.
Stakeholders: Investors and
proxy advisers.
Contributions: Long-term
results, employees, business
relationships and reputation.
Further details are available on page 47
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 74
Glanbia plc | Annual Report and Financial Statements 2020
Corporate Governance Report continued
Board Leadership and Company Purpose continued
Board Members’ Stakeholder Engagement
Understanding and engaging with our stakeholders
Understanding the views and interests of our key stakeholders is important to the Board. We have taken steps to consider stakeholders’ views
in Board discussions and decision making, as described in the following two pages. In addition to direct Board engagement, significant levels
of engagement are undertaken by the broader businesses.
Customers and Consumers
Suppliers
Society
As people worldwide embrace healthy
living, demand is growing for protein-
rich, convenient and nutritious foods.
We are constantly exploring new ways
to meet consumers’ and customers
needs by listening to our consumers’
needs and collaborating with
our customers.
We believe that good nutrition should
be accessible, so that everyone can eat
well and meet their nutritional needs.
How we engage:
• We evaluate insights from customer
and consumer research gathered
as part of our stakeholders’ surveys;
• As a Board, we assess
recommendations in respect
of our brands’ positioning;
• We receive updates on key
customer relationships; and
• We assessed detailed consumer
analysis on our key brands
OPTIMUM NUTRITION™
and SLIMFAST™. We focus
on household penetration,
net promoter scores and
consumption rates.
Main shareholder events in 2020
2020
Annual General Meeting
We held our Annual General
Meeting (AGM) as a virtual event
in 2020. The AGM was broadcast
as an audiocast at which the
Group Chairman and Group
Managing Director presented
Group information.
We aim to sustainably source all raw
materials. We are committed to
excellence in food safety and quality
and adhere to international standards
at our manufacturing sites. We take
environmental stewardship seriously,
supporting our suppliers and
safeguarding animal welfare and
life on land.
Our suppliers must be compliant with
the regulations and social customs of
the countries in which they operate.
How we engage:
•
In 2020, the Board agreed a new
and ambitious 10 year sustainability
strategy with progressive
stakeholder targets;
• The Board receives updates
on the operation of the Group
procurement function and supply
chain priorities and initiatives; and
• We continuously engage with dairy
producers as part of the review
of our joint venture operations.
Our vision is to have a positive social and
economic impact on our communities,
by promoting health and wellbeing.
We make nutrition accessible, with
innovative products that support a
healthy, active life. We educate and
advocate, sharing our knowledge with
employees, consumers, governments
and the world at large. Day-to-day, we
bring opportunities to the communities
we operate in and support the causes
that matter to them, continuing a long
tradition that goes back to our co-
operative roots.
How we engage:
• We receive progress updates
against sustainability targets
including environment, supply
chain and society programmes;
• We support and receive updates
on Glanbia’s involvement in local
communities and charitable
partnerships; and
• Our flagship partnership with
Breast Cancer Ireland raises
thousands of euro for breast
cancer research each year.
Investor conferences
Throughout the year the Group
participated in 10 investors
conferences all in a virtual setting.
Investor engagement
on share buyback
Our Senior Independent Director
Dan O’Connor led and completed
a series of investor engagement
events on Glanbia’s share
buyback. This engagement
covered a shareholder base
holding approximately 70%
of the Company’s equity.
75
People
Dedicated
Workforce Director
Our Workforce Director Donard
Gaynor attended a series of virtual
workforce engagement meetings in
2020. He reviewed the findings of our
employee engagement surveys and
was involved in the development of
our Diversity and Inclusion strategy.
‘Townhall’ meetings
In 2020 we held virtual roadshows
across the US, Europe and Asia
Pacific. We engaged with thousands
of employees at these town hall-style
meetings. Following his appointment,
Group Chairman Donard Gaynor
participated in the leadership team
meetings.
Culture
The Board and senior management
team act with integrity and lead by
example promoting our culture to our
employees through living our values.
Our Glanbia recognition awards is an
opportunity to recognise employees
who live our values.
Employee
surveys
We continuously listen to our
employees. We act on their
feedback leveraging insights from
our surveys into leadership
development programmes and
engagement initiatives.
How do we
engage with
our people?
Intranet
Our global intranet is one of our main
internal communications channels.
Our Group Managing Director,
Siobhán Talbot regularly
communicates with our employees
through the ‘Our Glanbia’ platform,
which also publishes the Group’s
financial results and Company
announcements.
Career development
We develop our leaders through
a range of leadership programmes
for all levels. Our Talent Centre of
Excellence leads the way. We run
training days each year across the
Group, including Leading the Glanbia
Way and Reverse Mentoring.
Responsible business
We strive to be a responsible
business; one which benefits society
and addresses the negative impacts
it might have on society, people and
the planet. In 2020 we committed to
our 2030 ‘Pure Food + Pure Planet’
sustainability strategy.
Whistleblowing
Employees can raise concerns with
a member of the management team
in their business unit or with the
Group Secretary or with the Group’s
externally managed and confidential
SafeCall service provider.
Half Year Results
Coinciding with the release of our
half-year results, investors were
updated on our financial targets,
strategic goals and governance
procedures.
Briefing from
Corporate Broker
Following Donard Gaynor’s
appointment as Group Chairman,
he received a briefing from the
Group’s Corporate Broker on
external market perspectives
on Glanbia.
2020
Chairman engagement
Donard Gaynor completed
a series of engagements with
a number of investors, including
Glanbia Co-operative Society
Limited following his appointment
as Group Chairman. These
engagements covered a
shareholder base holding
approximately 70% of the
Company’s equity.
Main shareholder events in 2020
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 76
Glanbia plc | Annual Report and Financial Statements 2020
Corporate Governance Report continued
Division of Responsibilities
Board
Board Committees
Audit Committee
Nomination and Governance Committee
Remuneration Committee
Key activities: review of Annual Report and
Financial Statements and statutory Auditor’s
independence and fees, internal controls,
risk management systems, post-acquisition
reviews and the effectiveness of the Group
Internal Audit and Group Finance functions.
Key activities: making recommendations on
appointments to the Board (including the
Group Chairman), 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
remain in line with best practice.
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.
Managing
Director
Group Management
Group Operating Executive
Group Senior Leadership Team
This group is comprised of the two Executive Directors, the Group
Secretary, the CEO of Glanbia Performance Nutrition, the CEO of
Glanbia Nutritionals, the Group Human Resources & Corporate Affairs
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 and the
Group Investment Committee.
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.
The Disclosure Committee is in place to oversee the timely and accurate disclosure
of all information required to be so disclosed by the Company to meet the legal and regulatory
obligations required by its stock exchange listings. It also continues to assist in the design,
implementation and periodic evaluation of disclosure controls and procedures.
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, ensuring
that any necessary corrective/transformative action is taken;
• Ultimate oversight of risk, including determining the Group’s
risk profile and risk appetite;
• Capital expenditure, including annual approval of capital
expenditure budgets and any material changes to them
in line with the Group-wide policy on capital expenditure;
• Dividend policy, including annual review of the dividend policy
and declaration of the interim dividend and recommendation
of the final dividend;
• Approval of acquisitions, disposals and other transactions
• 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.
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 and provides the information necessary
for shareholders to assess the Group’s position, performance,
business model and strategy;
• Assessment of the Group’s viability and ability to continue as
a going concern;
77
Board meeting attendance
The Board held 6 scheduled meetings and 13 unscheduled meetings in 2020 with Board member meeting attendance as follows:
Director
D Gaynor
S Talbot
P Ahern (Note 1)
R Brennan
P Coveney
J Daly (Note 2)
J Doheny (Note 3)
M Garvey
V Gorman
B Hayes (Note 4)
Mn Keane
R Laube (Note 5)
J Lodge
M Minnick (Note 6)
JG Murphy
J Murphy
P Murphy
D O’Connor
E Power (Note 7)
Appointed
12 March 2013
01 July 2009
21 June 2018
1 January 2021
30 May 2014
1 May 2019
1 June 2018
12 November 2013
27 June 2013
2 June 2017
24 May 2006
1 May 2019
1 November 2020
1 May 2019
29 June 2010
8 October 2020
26 May 2011
1 December 2014
2 June 2017
Years on the Board
Scheduled
Unscheduled
7
11
5
< 1
6
1
6
7
7
8
14
< 1
< 1
1
10
< 1
9
6
16
6/6
6/6
6/6
0/0
6/6
5/5
2/2
6/6
6/6
6/6
6/6
0/1
1/1
6/6
6/6
2/2
6/6
6/6
2/2
13/13
13/13
13/13
0/0
11/13
9/11
5/5
13/13
12/13
13/13
13/13
1/2
2/2
12/13
13/13
3/3
13/13
13/13
4/5
1. P Ahern retired from the Board on 1 June 2018 and was re-appointed to the Board
on 21 June 2018 having previously served two full years on the Board.
2. J Daly stepped down from the Board on 1 November 2020.
3. J Doheny was re-appointed to the Board on 1 June 2018 having previously served
five full years on the Board and retired on 22 April 2020.
4. B Hayes was re-appointed to the Board on 2 June 2017 having previously served
four full years on the Board.
5. R Laube stepped down from the Board on 28 February 2020.
6. M Minnick stepped down from the Board on 31 December 2020.
7. E Power was re-appointed to the Board on 2 June 2017 having previously served
13 full years on the Board and retired on 22 April 2020.
Board responsibilities
To ensure that the Group operates efficiently and effectively, the Directors, the Group Secretary and the Group Operating Executive have clearly defined
responsibilities which are set out below. There is a clear division of responsibility between the Group Chairman and the Group Managing Director.
Donard Gaynor, Group Chairman
• Leads the Board, sets the agenda and promotes a culture of
open debate between Executive and Non-Executive Directors
and sets the highest standards of corporate governance;
• Regularly meets with the Group Managing Director and other
senior management to stay informed; and
• Ensures effective communication with our stakeholders.
Siobhán Talbot, Group Managing Director
• Develops and implements strategy and chairs the Group
Operating Executive;
• Leads the Group through the Group Operating Executive; and
• Promotes the purpose, vision and values of the organisation
internally and externally.
Dan O’Connor, Senior Independent Director
• Provides a sounding board to the Group Chairman and appraises
his performance;
• Acts as intermediary for other Directors, if needed; and
•
Is available to respond to shareholder concerns when contact
through the normal channels is inappropriate.
Mark Garvey, Group Finance Director
• Manages the effectiveness and profitability of the Group including
financial and operational risk management;
• Develops appropriate capital and corporate structures to ensure
the Group’s strategy is met; and
• Oversees Group corporate development.
Non-Executive Directors
• Provide independent insight based on relevant experience;
• Contribute to developing strategy; and
• Scrutinise and constructively challenge business performance
and strategic execution.
Michael Horan, Group Secretary
• Monitors the Group’s compliance with legal, regulatory,
governance, ethics, policy and procedural matters;
• Ensures that the correct Board procedures are followed.
In conjunction with the Group Chairman, ensures that the
Directors receive timely and clear information so that the Directors
are equipped for robust debate and informed decision making;
and Supports the Group Chairman by organising induction and
training programmes for Directors.
Group Operating Executive
• With the Group Managing Director, develops and executes the
Group’s strategy in line with the policies and objectives agreed
by the Board;
• Manages operational effectiveness and profitability of the Group; and
Is the Group Risk Committee and Group Investment Committee.
•
Read more on pages 65 to 69
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Glanbia plc | Annual Report and Financial Statements 2020
Corporate Governance Report continued
Composition, Succession and Evaluation
The Board has a clear governance framework with defined
responsibilities and accountabilities which ensures that policies and
procedures set at Board level are effectively communicated across
the whole Group. The Board has established certain principal
Committees to assist it in fulfilling its oversight responsibilities,
providing detailed focus on particular areas as set out in the
respective Committee Reports that follow.
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 of an
appropriate quality that enables them to discharge their duties. Board
papers are published seven days prior to each meeting to ensure
the Board has sufficient time to read the papers and presentations
and be prepared in advance of the meeting. 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.
Each scheduled Board meeting follows a carefully tailored agenda
agreed in advance by the Group Chairman, the Group Managing
Director and the Group Secretary. At each scheduled Board meeting,
the Group Managing Director, the Group Finance Director and CEOs
of the Group’s two global growth platforms, Glanbia Performance
Nutrition (GPN) and Glanbia Nutritionals (GN), provide detailed
operational and financial updates. Depending on the nature of the
agenda item 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.
Throughout the year the Chairmen of the Audit, Nomination and
Governance and Remuneration Committees updated the Board on
the proceedings of their meetings, including the key discussion points
and any particular areas of concern.
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 coordinated through the Group Secretary.
Board structure
The Board currently comprises 14 Directors: two Executive Directors,
the Group Chairman and 11 Non-Executive Directors of whom seven
are currently nominated by Glanbia Co-operative Society Limited (the
‘Society’). There are currently four other Independent Non-Executive
Directors. Paul Duffy, Independent Non-Executive Director, joins the
Board effective 1 March 2021 bringing the Board size to 15.
Avonmore Foods plc and Waterford Foods plc merged in 1997 to
form Glanbia plc, the Company. At the same time, their respective
major shareholders also merged to form the Society. The Society
retains a major shareholding in the Company and currently nominates
from its board of directors up to seven Non-Executive Directors for
appointment to the Board of the Company. On 23 February 2021,
the Society and the Board agreed a number of changes which
will impact the composition and size of the Board over the period
between 2021 to 2023 and which will reduce the number of Directors
nominated by the Society on the Board from the current level of seven
to three and the Board size from 15 to 13 (details of which are set out
in the Nomination and Governance Committee Report on page 92).
Our Directors come from diverse backgrounds, ranging from
corporate finance, accountancy and banking to industry (dairy,
fast moving consumer goods and production).
Appointments to the Board: policy, diversity
and succession planning
During 2018, the Board approved a Board Diversity Policy which
recognises the benefits of diversity. Having regard to the right of
the Society to nominate Directors to the Board, the Nomination
and Governance Committee keeps the Board’s balance of skills,
knowledge, experience and the tenure of Directors under constant
review. The Group has agreed that as new Director appointments
are made, the target is that a minimum of 50% of the Independent
of the Society Non-Executive Directors will be female. The Group has
progressed this in 2020 and to date in 2021 with two of its three most
recent appointments being female. 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 Nomination and Governance 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 each three-year term and annually after six years.
Induction and Board development
A robust induction and site visits pre-pandemic are an integral
part of performing one’s duties as a Director. They are invaluable
in enabling Board members to develop a greater understanding
of the opportunities and challenges affecting the business, leading
to more informed discussions around the Board table.
The Company puts full, formal and tailored induction programmes
in place for all of its new Directors. While Directors’ backgrounds and
experience are taken into account, the induction programme is aimed
to be a broad introduction to the Group’s businesses and its areas of
significant risk. Key elements include meeting the Executive Directors
and senior management as well as visiting the Group’s main sites
to be briefed on Group strategy and on their individual businesses.
John Murphy joined the Board on 8 October 2020, Jane Lodge joined
the Board on 1 November 2020 and Roisin Brennan joined the Board
on 1 January 2021. Each new Director received an extensive and
thorough induction involving one-to-one virtual meetings with the
Group Chairman, Group Managing Director, the Group Finance
Director and other members of senior management from various
Group functions including Group Treasury, Group Tax and Group HR.
79
Independence
The Board and the 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. An explanation of the basis for this
belief is set out in the Nomination and Governance Committee Report
on page 95. While the Company regards the Directors nominated by
the Society (the ‘Society Nominee Directors’) as being independent,
the Society Nominee Directors are not being designated as
Independent Directors for the purpose of either the UK Corporate
Governance Code (2018) or Listing Rule 6.1.7 (2) of Euronext
Dublin/Listing Rule 9.2.2 AD of the United Kingdom Listing
Authority (UKLA). This is to ensure consistency with the Relationship
Agreement between the Company and the Society with regard
to the composition and size of the Board and allowing for the
planned reduction of the Society’s representation on the Board.
In compliance with Listing Rule 6.1.7 (2) of Euronext Dublin/Listing
Rule 9.2.2 AD of the UKLA, the Company has entered into a written
legally binding agreement with the Society (the ‘Relationship
Agreement’), the only controlling shareholder, which is intended to
ensure that the Society complies with the independence provisions/
undertakings set out in Listing Rule 2.2.15 of Euronext Dublin and
6.5.4 R of the UKLA (the ‘Independence Provisions’). The Society
and the Company plan to formally amend the Relationship Agreement
to reflect (1) the planned reduction of the Society’s representation
on the Board and (2) the size of the Board as described on page 92
of the Nomination and Governance Committee Report.
During 2020, 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
6.1.7 (2) of Euronext Dublin/Listing Rule 9.2.2 AD of the UKLA,
to be conducted in accordance with the election provisions for
such Directors in the Euronext Dublin/UKLA Listing Rules.
Re-election of Directors
In accordance with the UK Corporate Governance Code (2018),
all of the Directors are subject to annual re-election by shareholders.
Accordingly, each of the Directors, with the exception of Martin Keane
who is not putting himself forward for re-election at the AGM, will
seek re-election at the 2021 AGM. Additionally the re-election of
Roisin Brennan, Patrick Coveney, Paul Duffy, Donard Gaynor,
Jane Lodge and Dan O’Connor will be subject to the approval by
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 resolutions.
They also met virtually with the Group Secretary who explained the
obligations of a Director of an Irish and UK listed company, and the
relevant rules, regulations, and supporting governance processes
at Glanbia.
As part of their induction, they also met virtually with the CEOs of
GPN and GN. Each CEO provided an introductory presentation
of their business to the new Directors and members of the senior
leadership teams of both businesses also gave business overview
presentations to them.
New Director induction usually requires Directors to undertake site
visits but due to the travel restrictions imposed by the Government
in respect of foreign travel as a result of the Covid-19 pandemic,
site visits have been deferred until it is deemed safe to travel. Future
engagements will be planned with the CEOs and members of the
senior leadership teams of both businesses. The Group Chairman
regularly encourages the Non-Executive Directors to update their
skills, expertise and knowledge of the Group in order to carry out their
responsibilities competently. This is achieved by regular presentations
at Board meetings from senior management on matters of significance.
Examples during the year included regular presentations from senior
management of our two wholly-owned business segments GPN and
GN and from our strategic joint ventures. The Board and Committees
also received presentations from the Group Secretary, Group Human
Resources & Corporate Affairs Director, General Manager of Group
Business Services, Director of Global Business Solutions and Group
Head of Quality and Safety.
In addition to the induction programme that all Directors undertake
on joining the Board, an ongoing programme of Director development
has been established. For example, as part of the annual programme
of Board meetings, Directors would ordinarily visit some of the
Group’s principal operations to meet employees and gain an
understanding of the business operations and strategy. Opportunities
to visit our operations globally and learn more about the business
continue to be very important and valuable for the Board, and for
new members in particular, as they provide the opportunity for our
Directors to understand operations, performance and challenges
in a regional context. Board members also get a chance to engage
with local employees in different roles at different levels of seniority
and from varying backgrounds. This aspect of Board visits provides
real insight into the culture of the business. These visits also afford
Directors the opportunity to interact with employees and develop
deeper insights into the quality of our current senior management
and the potential for succession. It also helps the Directors to actively
embed the values of Glanbia across key locations.
During 2020, all site visits had to be cancelled but as soon as it is
deemed safe to travel there will be an opportunity for all Directors
to visit some of the international sites and meet the teams.
Directors are regularly provided with updates on corporate
governance, legislative and regulatory issues. During 2020, updates
included a presentation from the Group Secretary on the impact
of Brexit from a governance perspective and an investor relations
update presentation from the Head of Investor Relations.
As part of their annual performance evaluation, Directors are given
the opportunity to discuss their own training and development needs.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 80
Glanbia plc | Annual Report and Financial Statements 2020
Corporate Governance Report continued
Composition, Succession and Evaluation continued
Board evaluation
The annual Board evaluation process
is an important element in ensuring
and enhancing 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, including a triennial external evaluation. The external
evaluation supplements our existing internal Board performance
evaluation processes. During 2019, in accordance with our triennial
cycle of Board performance evaluations and taking into account the
significant changes to the Board in 2019, it was decided to carry
out two successive external reviews to ensure a consistent approach
to development. External consultants, ‘Independent Audit’, were
engaged to facilitate the external evaluation of the effectiveness of
the Board and its Committees, the purpose of which was to review
and further improve the performance of the Board and its
Committees and identify any development needs. Independent Audit
was retained following a detailed selection process undertaken by
the Committee which involved the evaluation of eight providers, the
consideration
of three written proposals and meetings with two providers.
Independent Audit has no other connection with the Group or
with the individual Directors.
The process that was followed for the 2019/2020 review and
the conclusions of the evaluation are set out below:
1. Each Director and key contributors to the Board and Committees
completed a detailed online questionnaire produced by
Independent Audit;
2. Independent Audit conducted a review of the Board and
Committee papers and key governance policies and procedures;
3. The results of stages 1-2 were collected and analysed by
Independent Audit and a report was prepared and discussed
with the then Group Chairman and the Group Secretary;
4. The results were presented by Independent Audit to the Board
and discussed at its meeting in January 2020. An action plan for
2020, listing areas of focus from the evaluation, was agreed at the
February 2020 Board meeting and reviewed as part of the 2020
continued evaluation;
5. Between May and June 2020 Independent Audit conducted
full interviews virtually with each Director and the key contributors
to the Board and Committees. Independent Audit also attended
virtually and observed meetings of the Board and Committees;
6. The results of the evaluation were collected and analysed by
Independent Audit and a report was prepared and discussed
with the then Group Chairman and the Group Secretary; and
7. The results were presented by Independent Audit to the Board
and discussed at its meeting in August 2020.
Year 1 – 2019/2020
External evaluation – During 2019, taking
into account the significant changes to
the Board, it was decided to carry out
two successive annual external reviews,
with the evaluation spanning two years
rather than the usual one year.
81
An action plan for 2021, listing areas of focus from the evaluation,
was agreed at 7 August 2020 Board meeting. These are
summarised below.
1. Due to the challenges and restrictions imposed by the
Covid-19 pandemic regarding travel and social distancing,
Board and Committee meetings have to be held virtually and
as a consequence there has been no in-person Board or
Committee meetings held since February 2020. While the use
of video technology for virtual Board and Committee meetings
has proven very effective during the year, it was recognised that
virtual meetings reduce the opportunity for informal discussions
between Non-Executive Directors which facilitates enhanced
collaboration and deliberation of Board matters. To better facilitate
open, candid debate and discussion, Non-Executive Director
Executive Sessions have been introduced at the end of selected
Board meetings.
2. As the Board agenda continues to expand to address new,
significant and ever-emerging matters, the Board needs strong
and tailored information practices that provide them with timely
and relevant information. To ensure Board information needs are
met, the quality, timeliness, sources and flow of Board information
was reviewed during 2020. In response, Board papers and
agendas were refined to enhance the efficient operation of the
Board and its Committees by focusing on the medium/long-term
priorities for the Board and contextualising the papers to highlight
emerging issues, performance drivers (including non-financial
drivers and related indicators) and their link to strategic goals.
3. The Board’s responsibilities can only be properly
discharged by frequent interaction with the Company
and its management. The Board has met more frequently
during 2020; there has been a number of unscheduled
Board meetings for specific agenda items, which has
facilitated constructive engagement and debate. For 2021,
it is scheduled that the Board will meet seven times and
unscheduled meetings will be convened as deemed
required by the Group Chairman.
The evaluation of the then Group Chairman’s performance
formed a part of the external evaluation. The performance of
the current Group Chairman was also separately evaluated by
the Board led by the Senior Independent Director. As part of
the current Group Chairman’s evaluation, the Non-Executive
Directors met separately under the chairmanship of the Senior
Independent Director.
Independent Audit assessed each Committee’s performance
covering each of their terms of reference, composition,
procedures, contribution and effectiveness. As a result of
that assessment, the Board and each Committee is satisfied
that each Committee is functioning effectively and continues
to meet its terms of reference.
Year 2 – 2021
Internal evaluation of the detailed
2019/2020 external evaluation results
focusing on progress against the
key objectives highlighted by
the external evaluations.
Year 3 – 2022
Internal evaluation facilitated
by the Group Chairman which
will include a combination of
questionnaires and interviews.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 82
Glanbia plc | Annual Report and Financial Statements 2020
Corporate Governance Report continued
Audit, Risk, Internal Control and Remuneration
Audit, Risk and Internal Control
Risk management and internal control
Effective risk management underpins our operating, financial and
governance activities. The Board continues to place particular
emphasis on monitoring both principal and emerging risks 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 risk
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. This work provided a comprehensive 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 Report is contained on pages
54 to 61.
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 61.
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. The full
Going Concern Statement is contained on pages 56 and 57.
Long-term viability statement
In accordance with the UK Corporate Governance Code (2018) and
Listing Rule 6.1.82(3) of Euronext Dublin Listing Rules, the Directors
have assessed the viability of the Group and its ability to meet its
liabilities as they fall due over a period extending to 2023, taking into
account the Group’s current financial position, the Group’s strategy
and business model and the potential impact arising from the
principal risks and uncertainties. The factors considered in assessing
the long-term prospects are detailed on page 57.
Having considered these factors and the Covid-19 pandemic-related
challenges and impacts experienced in 2020 and anticipated for the
years ahead, the Board assessed the prospects and viability of the
Group in accordance with the UK Corporate Governance Code (2018)
requirements. The Board has a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities
as they fall due over the period of the assessment. The full viability
statement is contained on page 57.
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 and provides the information
necessary for shareholders to assess the Group’s position,
performance, business model and strategy. This assessment
was completed by the Audit Committee as outlined in its Report
on page 86.
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 Glanbia House, Kilkenny, R95 E866, Ireland, 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 124.
The Independent Auditor’s Report details the respective
responsibilities of Directors and the statutory Auditor.
Statutory Auditor
The statutory Auditor, Deloitte Ireland LLP, continues in office in
accordance with section 383(2) of the Companies Act 2014. Deloitte
(who was succeeded by Deloitte Ireland LLP) was originally appointed
on 27 April 2016.
Disclosure of information to statutory Auditor
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.
Remuneration
The Remuneration Committee’s agenda continued to apply
focus to the key matters of Group and individual Executive Director
performance and the consideration of appropriate targets for 2021
and beyond. 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 96 to 117.
83
During 2020 the Group was subject to the Irish Corporate
Governance Annex (2010) and the UK Corporate
Governance Code (2018), the ‘Codes’. Our Corporate
Governance Statement can be found on page 64.
UK Corporate Governance Code
Board Leadership and
Company Purpose
Pages 28 to 29 and 62 to 75
Division of Responsibilities
Pages 76 to 77
Composition Succession
and Evaluation
Pages 78 to 81 and 90 to 95
Audit Risk and Internal Controls
Pages 82 to 89
Remuneration
Pages 96 to 117
Irish Corporate Governance Annex
Board Composition
Pages 65 to 81
Board Appointments
Pages 63, 78 and 90 to 95
Board Evaluation
Board Re-election
Audit Committee
Remuneration
Pages 63 and 80 to 81
Pages 79 and 95
Pages 84 to 89
Pages 96 to 117
Section 1373 Companies Act 2014
Applicable Codes
Departures from the Codes
Risk Management and Internal Control
Takeover Regulations
Shareholder Information
Board and Committees
Pages 64 and 83
Pages 64 and 83
Pages 54 to 61,
82 and 87
Pages 118 to 123
Pages 222 to 225
Pages 62 to 117
Compliance Statements
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.
Corporate Governance Statement
During 2020 the Group was subject to the Irish Corporate Governance
Annex (2010) and the UK Corporate Governance Code (2018),
the ‘Codes’. The Group has complied with the detailed provisions
of the Codes throughout 2020 with the exception of Provision 11
(Composition of the Board), Provisions 24 and 32 (Composition of
Board Committees) and Provision 36 (Post-employment shareholding
policy) of the code. The rationale for these departures is explained
on pages 64 and 92. 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 Euronext Dublin, previously named as the Irish Stock Exchange
is publicly available on the website: www.ise.ie/Products-Services/
Sponsors-and-Advisors/Irish-Corporate-Governance-Annex.pdf.
The UK Corporate Governance Code is publicly available on the
Financial Reporting Council website: www.frc.org.uk/
getattachment/88bd8c45-50ea-4841-95b0-d2f4f48069a2/2018-UK-
Corporate-Governance-Code-FINAL.PDF.
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 Report (all of which are deemed to be incorporated in
this Corporate Governance Report). 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 61. The Strategic Report also includes
other important information relating to Governance including our
approach to People, Sustainability and Stakeholders. 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.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 84
Glanbia plc | Annual Report and Financial Statements 2020
Audit Committee Report
The Committee is
focused on continuing
to provide independent
challenge and oversight
in the current difficult
operating environment
Dan O’Connor
Audit Committee Chairman
Key responsibilities
Monitoring the integrity of the Group’s Financial Statements including
reviewing the significant financial reporting issues or judgements.
Reviewing the appropriateness of Group accounting policies and
providing advice on whether the Annual Report and Financial
Statements, taken as a whole, is fair, balanced and understandable.
Advising the Board in relation to its responsibilities with regard to
monitoring the Group’s systems of risk management and internal
controls including its review of effectiveness.
Receiving updates on the work undertaken to improve the Group IT
and cyber security capabilities.
Advising the Board on whether it believes there are any material
uncertainties that may impact the Group’s ability to continue as
a going concern or impact the Group’s long-term viability.
Overseeing the relationship with the statutory Auditor, including
approving the terms of engagement, remuneration and assessment
of independence and effectiveness of the process.
Making recommendations to the Board in relation to the appointment,
re-appointment and removal of the Group’s statutory Auditor.
Ensuring that an audit tender is conducted at least every 10 years.
Reviewing the operation and effectiveness of the Internal Audit function.
Assessing the Group’s procedures for fraud prevention and detection.
Supporting the Board in assessing the Group’s whistleblowing
arrangements.
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.
Dear shareholder,
As Chairman of the Audit Committee (the ‘Committee’), I am pleased
to present the Committee’s report for the year ended 2 January 2021.
This report provides an overview of the Committee’s principal
activities during the year, its role in ensuring the integrity of the
Group’s published financial information and an outline of the
Committee’s priorities for the year ahead.
Committee structure
As noted in the 2019 Annual Report, Richard Laube retired from
the Board as Non-Executive Director and Committee member on
28 February 2020. The new Group Chairman, Donard Gaynor retired
as a Committee member in line with best practice on 20 January
2021 and Jane Lodge was appointed as a member of the Committee
on that date.
Responsibilities
The Committee is responsible for monitoring the integrity of the
Group’s Financial Statements and for assisting the Board in
determining that the Annual Report and Accounts, taken as a whole,
is fair, balanced and understandable and provides the information
necessary for shareholders to assess the Group’s position and
performance, business model and strategy. The work performed in
this regard and our engagement with the statutory Auditor is detailed
on pages 86 and 87.
The Committee reviewed the management actions implemented
during 2020 to address the forecasting challenges encountered in
2019 in some of our non-US markets where the availability of robust
market data was limited. In doing so, the Committee considered
the potential impacts of these challenges in the development of the
overall Group budget and forecasting processes and is satisfied
that the improvements made substantially address the weaknesses
identified in 2019.
The Committee also supports the Board in reviewing the
effectiveness of the Group’s risk management and internal control
systems and for ensuring a robust assessment of the emerging and
principal risks facing the Company. During 2020, the Committee
evaluated key areas of risk such as health and safety, financial
reporting and tax, IT security and food safety and quality by receiving
direct presentations from the relevant Group functional leads.
The work performed in this regard is detailed on page 87.
Covid-19
The Committee is very conscious of the impact of the Covid-19
pandemic on the Group’s employees and operations. The Committee
believes that the resilience displayed across the Group, the effective
execution of the business continuity plans and the focus on the
Group’s three priorities of protecting employees, continuing food
supply and maintaining the Group’s strong financial position is helping
to position the Group to emerge safely and strongly from the main
impacts of the pandemic.
The Committee will continue to monitor the effectiveness of the
internal control and risk management systems and the additional
pressures on management and employees as a result of the
pandemic to limit the risk of negative impacts to the health and safety
of our employees and the Group’s performance.
We have discussed with Group management the additional work
performed in respect of the Going Concern and Viability Statements,
the goodwill and intangible assets impairment reviews and the
evaluation of exceptional items. Impacts to the internal and external
audit processes, which are largely being conducted remotely,
have also been considered.
85
Committee members and attendance
Member
D O’Connor
P Coveney
D Gaynor1
R Laube2
J Lodge
Appointed
1 Dec 14
30 Sep 14
24 Feb 15
20 Jun 19
20 Jan 21
Number of full
years on the
Committee
2020 meeting
attendance
6
6
5
<1
<1
10/10
9/10
10/10
2/4
0/0
1. D Gaynor retired from the Audit Committee on 20 January 2021.
2.
R Laube retired from the Board and the Audit Committee on 28 February 2020.
See page 66 for more information on the current
Audit Committee members.
Allocation of time
Financial and corporate governance activities
Statutory Auditor
Risk management and internal controls
Internal Audit
Other
Engagement
In fulfilling its key oversight responsibilities the Committee engaged
regularly with management, Group Internal Audit and the statutory
Auditor to ensure the provision of timely and accurate information
to the Committee. Our engagement with the Group Internal Audit
function and the statutory Auditor is detailed on pages 87 and 89
together with an explanation of how the Committee has assessed
the independence and effectiveness of the external audit process.
The Committee is satisfied, based on the evidence obtained
throughout the external audit process that a robust, effective and
efficient process is taking place across the Group. In particular,
the Committee reviewed the key audit risk areas, and the work
undertaken by the statutory Auditor to address those risks, in detail.
Priorities for 2021
The Committee’s key priorities for 2021 include:
• Continued focus on the impact of the Covid-19 pandemic on
the business, principal risks, cash flow, accounting disclosures
and financial controls;
• Detailed monitoring of the Group’s principal risks and uncertainties
including cybersecurity, data protection, health and safety risks
and their related controls;
• Ensuring the Group’s Financial Statements are accurate and
reflect the balanced and consistent application of financial and
non-financial reporting requirements;
• Providing an independent challenge and oversight on areas of
key judgement or estimation;
• Maintaining a continued focus on our impairment testing methodology,
inputs, assumptions, sensitivity analysis and results; and
• Ensuring that robust due diligence is performed, acquisition
integration is closely monitored and post completion reviews are
conducted on all material investments.
The Committee will continue its programme of direct presentations
from management to ensure that effective risk management
processes are implemented to address these key risk areas in
a manner consistent with the Group’s risk appetite.
Review of Audit 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.
On behalf of the Audit Committee
Dan O’Connor
Audit Committee Chairman
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Audit Committee Report continued
Governance
Committee Membership
The Committee was in place throughout 2020. At present, the
Committee comprises of three Independent Non-Executive Directors,
Dan O’Connor (Senior Independent Director and Committee Chairman),
Patrick Coveney and Jane Lodge. Two members constitute a quorum.
The Group Secretary acts as secretary to the Committee.
Membership is reviewed annually by the Chairman of the Committee
and the Group Chairman who recommend new appointments to the
Nomination and Governance Committee for consideration and
onward recommendation to the Board.
The Board is satisfied that all three Committee members meet the
requirements for recent and relevant financial experience, as set out in
the UK Corporate Governance Code. The Board is also satisfied that
the Committee, as a whole, has 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 as set out in their biographical details on page 66.
Meetings
The Committee met ten times during the year ended 2 January 2021
and attendance at these meetings is detailed on page 85. Jane
Lodge attended all of the January and February 2021 Committee
meetings and as part of her induction attended two of the 2020
Committee meetings. The increase in meetings held during the year
reflected the time required to consider the resolution of the challenges
encountered during 2019 and the additional time required by the
Committee to consider the financial reporting and risk oversight
requirements arising from the pandemic.
Typically the Group Managing Director, Group Finance Director, Group
Secretary, Group Head of Internal Audit, Group Financial Controller and
representatives of the statutory Auditor are invited to attend all meetings
of the Committee. Where required other key executives or members of
the senior management team are invited to attend meetings to provide
a deeper insight on agenda items related to the Group’s principal risks.
The Committee meet with the statutory Auditor, without other
executive management being present, on an annual basis to discuss
any issues which may have arisen in the year under review. This
meeting was held in February 2021 following the completion of the
2020 audit to review the findings from the audit of the Financial
Statements. The Group Head of Internal Audit also has direct access
to the Chairman of the Committee.
After each Committee meeting, the Chairman of the Committee
reports to the Board on the key issues which have been discussed.
The allocation of time across each of the key Committee activities
is set out on page 85.
Audit Committee key activities
Financial reporting and significant financial judgements
The Committee reviewed the Interim Management Statements,
the Interim and Annual Consolidated Financial Statements and all
formal announcements relating to these statements before submitting
them to the Board of Directors with a recommendation to approve.
These reviews were focused on but not limited to:
•
the appropriateness and consistency of application of accounting
policies and practices;
• compliance with financial reporting standards and corporate
governance requirements; and
• significant areas in which estimation or judgement had been
applied in the preparation of the Financial Statements.
As outlined in our accounting policies on page 152, the Group has
adopted an income statement format that seeks to highlight significant
items within the Group results for the year (‘exceptional items’).
Judgement is applied by the Directors in assessing the particular items
which by virtue of their scale and nature should be disclosed in the
Income Statement and Financial Statement notes as exceptional
items. A number of significant items have been highlighted as
exceptional items in both 2019 and 2020 and the Committee is
satisfied that this is appropriate and consistent with the Group’s
policy in this area. The table on page 88 sets out the 2020 significant
Financial Statements reporting judgements and disclosures and
how the Committee addressed these matters.
The Committee considered the Directors’ Responsibility Statement
and the Group principal risks and uncertainties within the 2020
Annual Report and Financial Statements and the half-year results and
were satisfied with the adequacy of the disclosures.
Fair, balanced and understandable
At the request of the Board, the Audit Committee reviewed the
content of the Annual Report to ensure that it is a fair, balanced
and understandable assessment of the Company’s position and
prospects and that it considers the Annual Report and Accounts
taken as a whole, is fair, balanced and understandable.
In satisfying this responsibility the Committee considered
the following:
•
the documented process and timelines for the co-ordination,
preparation and review of the Annual Report and Financial
Statements;
• a dedicated project manager is in place to drive adherence to
•
•
deadlines, reporting standards and consistency and this is aligned
with the external audit process undertaken by Deloitte Ireland LLP;
the senior finance management and executive team review and
approval procedures;
the key process milestones, in particular to ensure the draft Annual
Report and Financial Statements were available to the Committee
in sufficient time in advance of the Committee meeting to facilitate
adequate review and effective challenge at the meeting;
• a detailed management report was presented to the Committee
outlining the process by which they assessed the narrative and
financial sections and disclosures of the 2020 Annual Report to
ensure that the criteria of fair, balanced and understandable has
been achieved; and
the effectiveness of the key features of internal control.
•
Having considered the above, in conjunction with the regular updates
the Committee receives from management and the reports received
from the statutory Auditor, Deloitte Ireland LLP, the Committee
confirmed to the Board 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 Group and the Company position, performance, business model
and strategy.
Going Concern and Viability Statements
The Audit Committee reviewed the draft Going Concern and Viability
Statements prior to recommending them for approval by the Board.
These statements are included in the Risk Management Report on
pages 56 and 57.
This review included assessing the effectiveness of the process
undertaken by the Directors to evaluate going concern, including
the impact of the pandemic and 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.
87
The Committee also reviewed the Directors’ Viability Statement
which is supported by the work conducted in the strategy and budget
review in December 2020 and the Board’s ongoing review of monthly
and year-to-date business performance versus budget and forecast.
Further detail is provided within the Viability Statement on page 57.
The Committee, having assessed the above information, is satisfied
that the Group’s systems of internal control and risk management are
operating effectively and has reported that opinion to the Board who
has conducted its own review and is also satisfied that these systems
are operating effectively.
Internal Audit
To fulfil its responsibilities for monitoring and reviewing the operation
and effectiveness of the Internal Audit function the Committee:
• approved the Group Internal Audit annual work plan and the
required amendments as a result of the Covid-19 risk impacts
and travel restrictions;
•
• ensured that it is adequately resourced with a strong mix of skills
and expertise capable of conducting effective internal audits,
IT audits and special investigations;
received regular reports from the Group Head of Internal Audit
covering team development, progress against the audit plan,
amendments required and best practice risk management
procedures. This included receiving a self-assessment report from
the Group Head of Internal Audit assessing the function’s
conformance with the Institute of Internal Auditors quality
requirements which will be externally validated in 2021. The Group
Head of Internal Audit will review any resulting improvement
opportunities with the Committee in 2021;
• noted that the Group Internal Audit team utilises a market-leading
audit management system and appropriate data analytics tools
to maintain the effectiveness of the Internal Audit processes; and
regularly reviewed progress on the status of management action
plans to address control weaknesses identified during the Internal
Audit reviews which are tracked to closure using the audit
management system.
•
The Group Head of Internal Audit routinely meets with the Chairman
of the Committee, in preparation for upcoming Committee meetings,
to review the meeting agenda and draft papers and to ensure that
the overall Committee work plan remains aligned to the current and
emerging areas of key Group risk. Where required, the relevant Board
or Committee agendas are amended to include items that require
more detailed consideration, typically by a direct presentation to the
Committee or Board by the relevant business unit or functional lead.
On the basis of the above, the Committee concluded that the Internal
Audit function was performing well and is satisfied that the quality,
experience and expertise of the function is appropriate for the Group.
The Committee also encourages effective coordination between
the external and internal audit teams to maximise the benefits from
coordinated activities and ensures that this is in place through the
regular Committee meetings.
Directors’ Compliance Statement
The Committee considered the requirements of the Irish Companies
Act 2014 in relation to the Directors’ Compliance Statement and
received a report from senior management on the review undertaken
during the financial year of the compliance structures and
arrangements in place to ensure the Company’s material compliance
with its relevant obligations. On the basis of this review, the Committee
confirmed to the Board that it is satisfied that appropriate steps have
been undertaken to ensure that Glanbia plc is in material compliance
with its relevant obligations.
Covid-19
The pandemic has had a range of implications on risk management
and corporate reporting in the period. The impacts on the Group’s
principal risks and uncertainties and going concern have been
reviewed in depth together with the related mitigations in the Risk
Management Report on pages 56 to 61. The increased uncertainty
of duration and impact of Covid-19 also led to a decision by the
Board to remove the financial guidance issued on 26 February 2020
in April 2020.
Risk management and internal control systems
The Committee receives regular Group key risk summary reports,
prepared by the Internal Audit team, tracking residual key 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 and to remain alert to emerging risks as they are
identified through the review process. The Risk Management Report
on pages 54 to 61 sets out the detailed steps in the process and the
Group’s principal risks. The Committee’s risk management focus
during 2020 included:
•
reviewing and approving the assessment of the principal risks and
uncertainties that could impact the achievement of the Group’s
strategic objectives as outlined on pages 58 to 61;
• evaluating the impacts of Covid-19 on the business and the health
•
and safety of its employees;
receiving direct risk presentations from a number of Group
functional leads;
• developing a detailed understanding of the risks within each of
these core functions, our improvement opportunities and areas
of emerging risk;
•
•
• a consideration of the detailed business unit performance updates
on Group investments and the impairment review methodology
and outcomes outlined in Note 16;
receiving updates from the Group Finance Director and Group
Financial Controller on the forecasting improvements implemented
in 2020;
receiving updates from the Group Head of Internal Audit outlining
areas of non-compliance with Group policies and controls
identified during the year, fraud investigation reports and
management actions to address the weaknesses noted;
• assessing the Group’s risk management and internal control
systems in line with the Financial Reporting Council (FRC)
guidance on risk management and internal control; and
reviewing reports from the statutory Auditor in respect of
significant financial accounting and reporting issues, together
with management’s plans in place to address any internal control
weaknesses noted.
•
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Audit Committee Report continued
2020 significant financial reporting judgements and disclosures
The areas considered and the actions taken by the Committee in relation to the 2020 Annual Report are outlined in the table below. For each
area, following their enquiries, the Committee was satisfied with the key assumptions made, the accounting treatment applied and the disclosures
in the Financial Statements.
Key financial judgement and disclosures
How the Audit Committee addressed these matters
Impairment review of goodwill
and intangibles
Judgement decisions largely relate to
the assumptions used to assess the
value-in-use of the assets being tested.
These assumptions typically include
short and long-term business and
macroeconomic projections, cash flow
forecasts and associated discount rates.
Exceptional items
Judgement decisions relate to the
assessment of the items identified
as being exceptional in nature and the
appropriateness of the presentation
in the Financial Statements.
• Management provided the Committee with detailed reports to support the recoverable value
of the balances included in Note 16 to the Financial Statements. The Committee also received
additional performance updates on the Group investments where the headroom between
the carrying value of the asset and the value-in-use has reduced in recent years;
• The Committee reviewed and discussed the reports with management and challenged
the consistent application of managements’ methodology, the appropriateness of the
assumptions made for future cash flows, discount rates, terminal values and growth rates,
and the achievability of the business plans with consideration of different scenarios;
• The Committee considered the updates made to assumptions and Financial Statement
disclosures as a result of managements’ assessment of the impact of Covid-19 on forecasted
business performance and cash flows, particularly for the cash generating units most
impacted and the extent of sensitivity disclosures provided; and
• The Committee considered the output from the sensitivity analysis performed at 2020
year-end, in particular they noted that a reasonably possible change in a key assumption
used in the think! impairment assessment could result in an impairment charge.
• The Committee reviewed the nature of the exceptional items identified and after a robust
challenge and consideration of the disclosures is satisfied that the treatment is in line with
Group policy, consistently applied across years and appropriately presented in the Financial
Statements with sufficient detail to allow users of the Financial Statements to understand the
nature and extent of the exceptional items and how they arose.
Revenue recognition
Revenue is a risk given the inherent
complexity of IFRS 15 accounting
requirements, the nature of some customer
relationships and the manual adjustments
recorded to ensure the timing of revenue
recognition and the basis of year-end rebate
provisions are appropriate.
• All revenue across the Group is recorded automatically at the point of dispatch as part of
our sales systems. Manual adjustments are recorded to ensure revenue is recorded in line
with the underlying contractual terms with customers and the requirements of IFRS 15
‘Revenue from Contracts with Customers’;
• The Group Finance team outlined to the Committee the established review processes in place
to ensure the accuracy of manual revenue reversals for which performance obligations have
not been met;
• Within the GPN segment revenue is recognised net of rebate, discount, deduction and
Uncertain tax provisions
Significant judgement is applied in
assessing current and deferred tax
exposures in relation to the interpretation
of local and international tax laws, rates
and treaties relating to the worldwide
uncertain tax provisions.
allowance claims where the amounts payable can vary depending on the arrangements
made with individual customers and the volume of trade entered into; and
• Key areas of focus and challenge from the Committee were in relation to the period-end close
process and the basis of any significant year-end rebate provisions to ensure they were
adequate and appropriate. The Group Finance team provided the Committee with a paper
outlining the key considerations and financial controls in this regard.
• The Committee received a presentation from the Group Finance Director and the Group Head
of Tax on various tax matters including legislative changes, tax structures and controls, and
the status or outcome of any tax authority reviews conducted during the financial period;
• The Committee considered in detail the impact of the refinancing activity conducted during
the year and the Group’s compliance with the increasing legislative requirements in this area;
• The Committee received an analysis of movements in the year-end uncertain tax provisions,
reviewed the key judgements in relation to the calculation of the uncertain tax provisions, the
external professional advice obtained to support the provisions and the Financial Statements
disclosure requirements; and
• The Committee challenged management on the key judgements and estimates underpinning
both the provisioning and disclosures adopted for the most significant components of the
taxation liabilities and the underlying assumptions for the recognition of deferred tax assets,
principally the availability of future taxable profits and the utilisation period.
89
•
•
reviews audit partner rotation requirements, and assesses
their independence on an ongoing basis. In line with regulatory
requirements for listed companies, the statutory Auditor is required
to rotate the audit partner responsible for the Group audit every
five years. Kevin Sheehan has been the Group lead audit
engagement partner, since 2016 and the 2020 audit is his final
Glanbia audit. Emer O’Shaughnessy has been identified to
succeed Kevin in this role and as part of the preparation process
to ensure a smooth audit transition Emer has shadowed the 2020
audit process; and
requests the statutory Auditor to formally confirm its 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. These safeguards will always include ensuring:
Ȋ that the statutory Auditor does not play any part in the
management or decision-making of Glanbia; and
Ȋ the individuals involved in providing any non-audit services are not
members of the audit engagement team.
Non-audit services
The Glanbia Auditor Relationship and Independence Policy includes
a clearly defined pre-approval process, subject to defined monetary
thresholds, 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 Ireland LLP rather than another
service provider and confirmation that the service requested is not
a prohibited service. The provision of all non-audit services which are
not prohibited and approved in line with our policy must be ratified
by the Committee at the following meeting of the Committee, who
also ensures that the total fees for non-audit services will not exceed
the defined thresholds and that the defined authorisation process
is followed.
Fees paid to Deloitte Ireland LLP for audit-related and non-audit
related services are analysed in Note 5 to the Financial Statements.
The Committee is pleased that this policy has been effectively
implemented since the appointment of Deloitte Ireland LLP as
statutory Auditor.
Effectiveness
The Group Finance Director confirmed to the Committee that
the actions arising from the prior year Group-wide review of the
effectiveness of the statutory audit process were implemented in
2020 to further enhance the audit process. He also confirmed that
feedback from the Group and subsidiary finance executives, who
had the most interaction with Deloitte Ireland LLP in 2020, remained
consistently positive.
Overall, the Committee remains satisfied with the effectiveness of
the statutory Auditor based on:
•
its own interactions with Deloitte Ireland LLP during
Committee meetings;
the quality of the reports and presentations received;
the robustness of the challenge provided, particularly in relation
to judgmental and complex areas;
their technical insight; and
their demonstration of a clear understanding of the Group’s
business and its key risks.
•
•
•
•
Whistleblowing and fraud
The Board has delegated responsibility to the Committee for ensuring
that the Group maintains suitable arrangements for its employees to
raise concerns, in confidence, about possible wrong doing in financial
reporting and other matters. These arrangements are outlined in
our Code of Conduct which is available on the Company’s website
www.glanbia.com and on our Group intranet.
The Committee receives bi-annual presentations from the Group
Secretary providing an overview of how concerns raised are
categorised, investigated, monitored and reported, together with
a review of the main themes, issues and resolution actions arising.
Opportunities to improve the effectiveness of the Group’s
whistleblowing arrangements are also considered.
The Committee concluded, and confirmed to the Board, that it was
satisfied that the Group’s whistleblowing and other fraud prevention
and detection procedures, including the Internal Audit team activities,
are adequate and allow for the proportionate and independent
investigation of such matters and appropriate follow up action.
Review of statutory Auditor
The Committee oversees the relationship with the statutory Auditor,
including ensuring that the statutory audit contract is put out to tender
at least every 10 years. Deloitte (who were succeeded by Deloitte
Ireland LLP) were appointed as the Group’s statutory Auditor on
27 April 2016 following a formal tender process.
At the Committee’s November 2020 meeting it reviewed the approach
and scope of the annual audit work to be undertaken by the statutory
Auditor, which included planned levels of materiality, significant risks
and key audit matters, the audit of the Group’s core financial IT
systems, fraud responsibilities and representations, the Group’s
processes for disclosing information to the statutory Auditor, the
proposed audit fee and the approval of the terms of engagement
for the audit. Particular consideration was given to the planning
considerations associated with conducting the audit remotely.
The Committee is satisfied, based on discussions with the Group
lead audit engagement partner, that the effectiveness of the audit
procedures performed were not unduly impacted as a result of
being unable to perform on-site testing, with appropriate alternative
procedures conducted.
The Committee discussed recent corporate governance updates
including:
•
investor and regulator expectations in relation to the disclosure
of the financial and other impacts arising from the pandemic;
• UK Corporate Governance Code requirements;
•
the increasing appetite for environmental, social and governance
information; and
• FRC and IFRS technical updates and commentary.
The Committee also received reports from the statutory Auditor
at its meetings in December 2020 and February 2021.
Independence of the statutory Auditor
To ensure the independence and objectivity of the statutory Auditor,
the Committee:
• maintains and regularly reviews the Group’s Auditor Relationship
and Independence Policy;
• considers the performance of the statutory Auditor each year;
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Glanbia plc | Annual Report and Financial Statements 2020
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.
Donard Gaynor
Nomination and Governance
Committee Chairman
Key responsibilities
Assessing the composition, structure and size (including skills,
knowledge, experience and diversity) of the Board and its
Committees and making recommendations on appointments and
re-appointments to the Board;
Recommending to the Board the membership and chairmanship
of the Audit and Remuneration Committees respectively;
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;
Keeping the extent of Directors’ other interests under review to ensure
that the effectiveness of the Board is not compromised;
Overseeing the performance evaluation of the Board, its Committees
and individual Directors;
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; 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.
Dear shareholder,
On behalf of the Board and the Nomination and Governance
Committee (the ‘Committee’), I am pleased to present the
Nomination and Governance Committee Report for the year ended
2 January 2021.
2020 and 2021 to date have been further years of significant change
in terms of Board size and composition and these changes are
detailed below.
Group Chairman succession
During 2020, the key focus of the Committee was, in accordance
with the amended and restated Relationship Agreement between the
Company and Glanbia Co-operative Society Limited (the ‘Society’)
dated 2 July 2017 (the ‘Relationship Agreement’), on Chairman
succession. Our Senior Independent Director, Dan O’Connor
led the process that resulted in my appointment as Independent
Non-Executive Group Chairman. A summary of the process is
outlined on page 93. In line with my appointment as Group Chairman
the Vice-Chairmen positions no longer apply for the Board.
2020 Non-Executive Director changes
In accordance with the Relationship Agreement, in 2020 the
number of Directors nominated by the Society (the ‘Society Nominee
Directors’) on the Board reduced from eight to seven and the size
of the Board reduced from 16 to 15. At the conclusion of the 2020
Annual General Meeting (‘AGM’), Jer Doheny and Eamon Power
retired from the Board. On 8 October 2020, in line with the reduced
Society representation of the Board, in accordance with the
Relationship Agreement, John Murphy joined the Board as a
Non-Executive Director on the nomination of the Society.
Richard Laube, John Daly and Mary Minnick stepped down as
Independent Non-Executive Directors from the Board effective
28 February 2020, 1 November 2020 and 31 December 2020
respectively. Jane Lodge joined the Board as Independent Non-
Executive Director on 1 November 2020 and Roisin Brennan joined
the Board as Independent Non-Executive Director 1 January 2021.
Jane and Roisin bring valuable experience to the Glanbia Board.
Jane is a former Senior Audit Partner of Deloitte. In Jane’s 25 years as
an audit partner, she gained extensive knowledge and experience of
international businesses in a wide variety of sectors – manufacturing
(including food), complex engineering, construction, distribution and
financial services. Roisin Brennan is a former chief executive of IBI
Corporate Finance Ltd and has over 20 years of investment banking
experience, particularly advising public companies in Ireland. Roisin
brings strong strategic and financial advisory experience across many
sectors including food and FMCG to the Board. Full biographical
details for each of Jane and Roisin are set out on page 66.
2021 changes
On 23 February 2021 the Board approved the appointment of Paul
Duffy as Independent Non-Executive Director effective 1 March 2021.
Paul is the former Chairman and CEO of Pernod Ricard North
America, a global leader in the Wine and Spirits industry. He brings
extensive strategic and brand experience of the consumer packaged
goods sector to the Board including brand prioritisation, brand
planning, route-to-market, portfolio management and restructuring.
During his 25 year career with Pernod Ricard, Paul held a number
of senior management positions including Chairman and CEO roles
at Pernod Ricard UK, The Absolut Company (Sweden) and Irish
Distillers. He served on the Pernod Ricard worldwide management
executive committee.
91
Committee members and attendance
Member
D Gaynor
R Brennan
P Coveney*
D O’Connor
Appointed
12 Dec 14
20 Jan 21
23 Feb 16
12 Dec 14
Number of full years
on the Committee
2020 meeting
attendance
6
<1
4
6
6/6
0/0
6/6
6/6
* P Coveney retired from the Nomination and Governance Committee on 20 January 2021.
See page 65 and 66 for more information on current
Nomination and Governance Committee members.
Allocation of time
Governance
Board and Committee composition
Succession planning
Paul is currently a director of W.A. Baxter & Sons (a UK Food Group)
and is a former director of Corby Spirit and Wine Limited, a leading
Canadian marketer and distributor of spirits and wines listed on the
Toronto Stock Exchange.
Paul is a Fellow of Chartered Accountants Ireland and is a graduate
of Trinity College Dublin.
After 14 years of tenure on the Board, Martin Keane will not be seeking
re-election at the 2021 AGM; however I am pleased to report that
Martin will remain on the Board of the Company until his retirement
at the AGM.
Glanbia Co-operative Society representation changes
The Society has taken a strategic decision to reduce the Society’s
representation on the Board (from seven to three by 2023) in order
to facilitate the appointment of additional Independent Non-Executive
Directors and further strengthen the diversity of the Board. In line with
this the size of the Board will also be reduced, further details of how
will this will be effected are contained on page 92.
Committee changes
There has also been a number of changes to the membership of
the Board Committees which were driven directly by the changes
in the composition of the Board during 2020.
On 14 December 2020, Jane Lodge was appointed as a member
of the Remuneration Committee.
On 20 January 2021, the Board approved the appointment of
Jane Lodge as successor to Donard Gaynor as Chairman of the
Remuneration Committee effective 1 March 2021. Jane is currently
a Remuneration Committee member of Costain Group plc and is
a former Remuneration Committee member of both Devro plc and
Sirius Minerals plc.
On 20 January 2021, the Board also approved the following
Committee changes effective immediately:
• Jane Lodge replaced Donard Gaynor as a member of the
Audit Committee;
• Group Chairman Donard Gaynor succeeded Dan O’Connor
as Chairman of the Nomination and Governance Committee
and Roisin Brennan replaced Patrick Coveney as a member
of the Nomination and Governance Committee; and
• Roisin Brennan was appointed as a member of the
Remuneration Committee.
In compliance with the UK Corporate Governance Code (2018)
(the ‘Code’), the membership of the Nomination and Governance,
and Remuneration Committees continues to comprise only the
Group Chairman and Independent Non-Executive Directors.
The Audit Committee continues to comprise only Independent
Non-Executive Directors.
The following pages provide further details on the roles and
responsibilities of the Committee and its governance duties.
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
Donard Gaynor
Nomination and Governance Committee Chairman
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Nomination and Governance Committee Report continued
Glanbia Co-operative Society Limited – Right to nominate Non-Executive Directors
The Society currently owns 31.9% (31.7% as at 2 January 2021) of the issued share capital of the Company. 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 Relationship Agreement.
On 23 February 2021, the Society and the Board, in order to facilitate the appointment of additional Independent Non-Executive Directors and
further strengthen the diversity of the Board, agreed the changes set out in the table below, which will impact the composition and size of the
Board between 2021 and 2023. It has been agreed, as part of the Nomination and Governance Committee process to select and appoint the
three new diverse Independent Non-Executive Directors, that the Chairman and Vice-Chairmen of the Society (who will be the continuing Society
Nominee Directors on the Board) will be invited to participate in the selection process. The Society and the Company plan to formally amend
the Relationship Agreement to reflect the changes agreed on 23 February 2021. The Society and the Company have further agreed that these
changes will remain applicable for a period of five years and will be reviewed thereafter by the Society and the Company.
Year
2021
2022
2023
Changes to the number
of Non-Executive
Directors nominated
by the Society
(the ‘Society Nominee
Directors’)
Changes to the number of
Other Non-Executive Directors
Changes
to the number
of Executive
Directors
Changes to
Board Size
The number of
Society Nominee Directors
will reduce from seven
to six.
The number of Independent of the Society
Non-Executive Directors will increase from
six to seven.
The number of
Executive Directors
remains at two.
The size of the
Board remains
unchanged
at 15.
The number of Society
Nominee Directors will
reduce from six to five.
The number of Independent of the Society
Non-Executive Directors remains at seven.
The number of
Executive Directors
remains at two.
The size of the
Board reduces
to 14.
The number of Society
Nominee Directors will
reduce from five to three.
The number of Independent of the Society
Non-Executive Directors will increase from
seven to eight as it is intended:
• Two of the Society Nominee Directors
will retire;
• One of the current Independent
Non-Executive Directors will retire; and
• Two new Independent of the Society
Non-Executive Directors will
be appointed.
The number of
Executive Directors
remains at two.
The size of the
Board reduces
to 13.
93
Governance
The Committee was in place throughout 2020 and Donard Gaynor
succeeded Dan O’Connor as Committee Chairman on 20 January
2021. The Committee comprises the Group Chairman and two
Independent Non-Executive Directors, of whom two members
constitute a quorum. The Group Secretary acts as secretary to the
Committee. The Group Managing Director attends by invitation only.
Board size, composition and renewal
Board renewal and composition is an ongoing and dynamic process.
The Committee regularly reviews Board composition and structure and is
focused on ensuring that we have the right balance of skills, knowledge
and experience on the Board, taking account of our business model
and the specific sectors in which the Group operates and developments
in terms of scale, geographic expansion and external factors.
Group Chairman succession planning
and selection process
In accordance with the Relationship Agreement, a process to identify
a successor to Martin Keane as Group Chairman commenced in early
2020. To assist the Board in the identification of a new Group Chairman,
the Board unanimously agreed to the Nomination and Governance
Committee’s recommendation to establish a Chair Selection sub-
committee of the Board (comprising Dan O’Connor, as Chairman
of the sub-committee, John G Murphy, Patrick Murphy and Patrick
Coveney) assisted by an external advisor Egon Zehnder. Egon
Zehnder is a global management consulting and executive search firm
who does not have any other connection with the Group or any of the
individual Directors. A Chairman role specification was drawn up to
determine the key skills, experience, characteristics and requirements
for the role.
In accordance with good governance, it was agreed that Martin Keane
should not be involved in the process to appoint his successor.
As part of the succession planning and selection process,
Egon Zehnder met with:
• The four members of the Chair Selection sub-committee to better
understand the role and requirements of the Group Chairman;
• All of the Independent of the Society Non-Executive Directors
as they were the only Directors on the Board that met the UK
Corporate Governance Code independence criteria for
appointment as Group Chairman; and
• Martin Keane, the then Group Chairman to get his input on the
role of Group Chairman, although Martin Keane, from a proper
governance perspective, did not have any say in the process
to appoint his successor.
Over a number of months during 2020, Egon Zehnder held a series
of virtual meetings with the Chair Selection sub-committee, all of the
Independent of the Society Non-Executive Directors and the Group
Chairman. Egon Zehnder also met with Siobhán Talbot, Group
Managing Director.
On 5 October 2020, the Board unanimously agreed on the
recommendation of the Chair Selection sub-committee that
Independent Non-Executive Director, Donard Gaynor, be appointed
as Group Chairman with effect from 8 October 2020. Donard Gaynor
has been a Director of the Company since March 2013 and is
Chairman of the Nomination and Governance Committee and
Remuneration Committee (although he will retire from this
Chair effective 28 February 2021) as well as Workforce Director.
Since joining the Board Donard has brought experience and energy
to Glanbia in his role as Remuneration Committee Chairman and he
has led prior engagements with our shareholders. Full biographical
details are on page 65.
Donard met the independence requirements set out in the Code on
appointment. Additionally, his existing commitments were disclosed
and taken into consideration prior to his appointment
In compliance with Provision 32 of the Code, following the finalisation
of all remuneration-related decisions for 2020, Jane Lodge will
succeed Donard Gaynor as Chairman of the Remuneration
Committee with effect from 1 March 2021. The Board recognises
that for a short period (i.e. 8 October 2020 to 28 February 2021)
Donard Gaynor will serve as outgoing Chairman of the Remuneration
Committee while also being Chairman of the Board. The Board
considered this period as an effective means of ensuring an orderly
transition of the role of Remuneration Chair to Jane Lodge. The Board
is satisfied that this decision, grounded in orderly and effective
succession, is in the interests of shareholders and aligns with the
spirit of the Code and good governance practice.
Succession planning
The Committee is heavily focused on the leadership needs of the
organisation at Board and senior management level. The Committee
gives full consideration to succession planning for Directors, taking into
account Group strategy, as well as the challenges and opportunities
facing the Group and the skills, knowledge diversity, independent
perspective and the experience required. This is achieved through
effective succession planning. During 2020, the Committee continued
to focus on the succession pipeline with consideration of both
Board-level plans to ensure orderly refreshment of membership, and
longer term talent strategy to understand the changing competencies
required to ensure the development of a skilled workforce which will
support the Group’s strategy, purpose, culture and values.
Internal talent development and the attraction and retention of
skilled individuals is facilitated through engagement with HR to ensure
that the broader people strategy supports the development of the
internal talent pipeline and ensures access to a diverse and inclusive
external talent pool. We look to identify, harness and accelerate the
development of talent at all levels, based on an assessment of successor
readiness in respect of senior positions. Generally, at least one Board
meeting is held annually at one of the wholly-owned business sites which
provide an opportunity for interaction with employees and a chance
for Non-Executive Directors to develop deeper insights into the quality
of our senior management in their current roles and their potential
for succession. This did not occur in 2020 due to the Covid-19
restrictions; however, senior managers continued to present to the
Board virtually throughout the year.
Our culture is a major contributing factor to the delivery of long-term
success for our stakeholders. The Committee plays a key role in
embedding a positive culture by ensuring that our succession
planning and appointment process identifies candidates who are
exemplars of our values. Our induction and training programmes and
the annual performance evaluation process promotes these values
in all our Directors and employees.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 94
Glanbia plc | Annual Report and Financial Statements 2020
Nomination and Governance Committee Report continued
Independent Non-Executive Director recruitment
and selection process
Simultaneous with the Group Chairman appointment process,
the Committee appointed Egon Zehnder to assist in the identification
of suitable candidates for appointment as Non-Executive Directors
to the Board.
A role specification was drawn up to determine the key skills,
experience, characteristics and requirements for the role having
regard to the challenges and demands of the future operating
environment, growth opportunities for Glanbia and Board diversity
with a strong emphasis placed on gender diversity.
Egon Zehnder established a long list of potential candidates for
consideration, which was then reduced to a strong shortlist for more
detailed consideration and interview. A majority of the shortlisted
candidates were female with a diverse range of skills and experience
and each was capable of making a valued contribution to the Board
and had the necessary skillset to chair Board Committees.
Shortlisted candidates went through a two-stage video conferencing
interview process:
• Firstly with the Senior Independent Director and the Group
Secretary; and
• Secondly with the then Group Chairman and Group Vice-
Chairmen of the Company, the members of the Committee and
the Executive Directors.
On 28 October 2020, on the recommendation of the Committee, the
Board approved the appointment of Jane Lodge and Roisin Brennan
as Independent Non-Executive Directors with effect from 1 November
2020 and 1 January 2021 respectively. Full biographical details for
each of Jane and Roisin can be found on page 66.
On 23 February 2021, on the recommendation of the Committee,
the Board approved the appointment of Paul Duffy as Independent
Non-Executive Director with effect from 1 March 2021. Full
biographical details can be found on pages 90 to 91.
Workforce Director
During 2019, the role of Donard Gaynor, an Independent Non-
Executive Director, was expanded to include oversight of workforce
engagement to further improve Board involvement in this area.
Details of Donard’s engagements with employees during 2020
are set out in the ‘Our People’ section on pages 25, 27 and 75.
Diversity and Inclusion
At Glanbia we are committed to maintaining an inclusive culture
where talent and individuality is nurtured, where people feel
respected and valued for who they are and appreciated for the
diverse perspectives they bring to Glanbia. On 15 December 2020
a new Group Diversity and Inclusion strategy was approved by
the Board.
Details of our diversity objectives, policy on inclusion and linkage
to Company strategy and progress on achieving the objectives are
contained in ‘Our People’ on page 26.
A description of our Board Diversity Policy is contained on page 78.
During 2020, the Group agreed that as new appointments are made,
the target is that a minimum of 50% of the Independent of the Society
Non-Executive Directors will be female. The Group has progressed
this in 2020 and to date in 2021 with two of its three most recent
appointments being female.
Developing a culture
of Diversity and Inclusion
At Glanbia, we aspire to create a company where Diversity
and Inclusion (D&I) is achievable for all; where respect and
inclusion are the cornerstones of our culture; where equal
access and opportunity to learn, grow, succeed and thrive
are available to everyone. We believe in the power of our
differences and the impact we can make when we come
together united by shared values and purpose.
While we have made inroads in this area, the ‘Your Voice’
survey in January 2020 highlighted some gaps and
areas which need to be addressed. Consequently the
establishment of a compelling D&I vision, strategy and
action plan for Glanbia was a key priority for our Board
and senior management team in 2020.
Following the establishment of a D&I Working Group,
a deep internal listening exercise was undertaken with
over one hundred hours of focus groups, twenty individual
interviews with members of the Board, the Group
Executive and Senior Leaders and a Group-wide D&I
survey. From the outset, a key priority was to ensure
all voices were heard and reflected in the process,
particularly those from diverse populations that we
have not previously been able to access.
A comprehensive review of policies and procedures
was also completed, as was an external benchmarking
exercise.
Through this review we learned that there are some things
we are doing well and a number of areas where we need
to improve upon if we are to realise our D&I ambition.
The findings have led us to identify four strategic priority
areas: leadership, talent, commercial and inclusion, and
collaboration, that will guide us as we develop and embed
our D&I culture over the coming years. The strategy is
completely aligned to Glanbia’s Purpose, Vision and
Values and is an extension of the work we have been
doing over the past number of years to embed
values-based behaviours.
I am proud to lead an organisation that is committed to
achieving a culture that celebrates individuality, knowing
that together we are more.
Donard Gaynor
Group Chairman
95
Re-election of Directors
The Committee continues to be of the view that all Directors should
be re-elected to the Board at the Company’s AGM. All Directors who
sought re-election at the 2020 AGM were re-elected. All Directors,
with the exception of Martin Keane (who is not putting himself forward
for re-election at the AGM) are seeking re-election at the 2021 AGM.
The Committee is satisfied that the backgrounds, skills, knowledge
of the Group and experience of the continuing Directors collectively
enables the Board and its Committees to discharge their respective
duties and responsibilities effectively. Each Director is committed to
their role, provides constructive challenge and devotes sufficient time
to contribute to the performance of the Board. The Group Chairman
is also chairman of Hazelwood Demense Limited ‘The Lough Gill
Distillery’ Company, but the Committee and the Board consider that
this does not interfere with the discharge of his duties to the Group.
The Directors’ individual biographies on pages 65 to 68 provide a
summary of the key skills/competencies, important to the long-term
success of the Group, that each Director brings to the Board.
Additionally in 2021, as in 2020, the re-election of each of the
Independent of the Society Non-Executive Directors, Roisin Brennan,
Patrick Coveney, Paul Duffy, Donard Gaynor, Jane Lodge and Dan
O’Connor will be subject to approval by the independent shareholders
(i.e. all of the shareholders save the Society and its subsidiary
companies and related parties). 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 2021 AGM to be published, to enable shareholders
to make an informed decision.
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.
Regular matters
A number of regular matters were considered by the Committee
in accordance with its terms of reference, details of which are:
Review of Non-Executive Directors’ independence in
accordance with the guidance in the Irish Corporate
Governance Annex and the UK Corporate Governance Code
(2018) (the ‘Codes’)
The Board evaluation and review process considered the
independence of each of the Non-Executive Directors, taking into
account their integrity, objectivity and contribution to the Board and
its Committees. A rigorous internal review was carried out in respect
of those Non-Executive Directors who served longer than six years.
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 Martin Keane,
John G Murphy and Patrick Murphy have each served on the Board
for more than nine years (Martin serving eleven and a half years
coterminously with the Group Managing Director, the longest
coterminous period with a current Executive Director) and that
seven of the current Non-Executive Directors are Society Nominee
Directors, both of which factors the Codes state could be relevant to
the determination of a Non-Executive Director’s independence. The
Codes also make it clear, however, 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 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. Notwithstanding this, however, the Society Nominee
Directors are not being designated as Independent Directors for the
purpose of either the Code or Listing Rule 6.1.7 (2) of Euronext Dublin/
Listing Rule 9.2.2 AD of the UKLA. This conclusion was presented to,
and agreed by, the Board. This is to ensure consistency with the
Relationship Agreement between the Company and the Society
with regard to the composition and size of the Board and allowing for
the planned reduction of the Society’s representation on the Board.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 96
Glanbia plc | Annual Report and Financial Statements 2020
Remuneration Committee Report
Supporting our
employees to sustain
strong performance
despite unprecedented
global pandemic
challenges
Donard Gaynor
Remuneration
Committee Chairman
Key responsibilities
Determine and agree with the Board the framework and policy for
remuneration of the Executive Directors and other Senior Executives
as required.
Oversee remuneration design and target setting of annual and
long-term incentive arrangements to ensure comprehensive linkages
between performance and reward and to incentivise delivery of
Group strategy.
Determine, within the agreed policy, individual total compensation
packages for the Executive Directors and other Senior Executives
as required.
Determine any employee share-based incentive award and any
performance conditions to be used for such awards.
Consider and approve Executive Directors’ and other Senior
Executives’ total compensation arrangements annually.
Determine the achievement of performance conditions for vesting
of Annual and Long-Term Incentive Plans.
Review and understanding of reward policies and practices
throughout the Glanbia Group.
Terms of reference
The full terms of reference of the Remuneration Committee can be
found on the Group’s website: www.glanbia.com or obtained from the
Group Secretary.
Dear shareholder,
On behalf of the Board and Remuneration Committee, I am pleased
to present the Directors’ Remuneration Committee Report for the
year ended 2 January 2021.
The Directors’ Remuneration Committee Report sets out the
operation of the Directors’ Remuneration Policy in 2020 and proposed
operation in 2021. Our current Remuneration Policy runs from 2018
to 2020 inclusive and was approved at our 2018 AGM. As set out
in the Annual Report 2019, the Committee committed to undertake
a comprehensive review and renewal of the Remuneration Policy
in 2020, and to bring the 2021 policy to the 2021 AGM for approval.
As the impact of Covid-19 unfolded during 2020, the Committee
decided not to pursue the Policy review and to extend the current
policy by one year, 2018 to 2021 inclusive. This policy extension
to four years aligns with the Irish regulation which implements the
EU Shareholder Rights Directive. The Policy review will be carried
out in 2021 with the new policy running from 2022.
Business Performance 2020
As set out in the Group Chairman’s statement, 2020 was an
extraordinary year for Glanbia as we navigated a once in a lifetime
pandemic. After a strong first quarter of the year, the full economic
impact of the pandemic occurred in the second quarter as lockdowns
and economic headwinds heavily impacted consumer behaviours
which particularly impacted Glanbia Performance Nutrition (GPN)
as speciality stores and gyms closed across much of the world,
suppressing demand. Market conditions improved thereafter and
the Company gained momentum and drove competitiveness,
finishing the year with earnings above (unguided) market consensus,
a strengthened balance sheet, excellent liquidity and importantly
a restoration of double-digit margins in GPN during the second
half of the year.
In the Board’s opinion, the performance of the leadership,
management and all employees during the most difficult period in
the history of the Company was superb. The business undertook
at the outset to sustain all important food supply chains despite the
formidable challenges experienced at the global peak of the first wave
of the pandemic. The Group also committed to take good care of our
people through ramped up safety measures and protocols at all sites
and enhanced occupational health and sick pay support for all staff,
especially those who unfortunately contracted Covid-19 or were
close contacts. Market financial guidance was withdrawn in April.
The Board and management agreed actions to protect the business
including managing liquidity, managing costs aggressively and
sustaining critical customer relationships, all of which supported
renewed momentum as the Group exited the worst phase of
the pandemic impact. In addition, the Group progressed the
transformation of Glanbia Performance Nutrition, substantially
completed the construction and commenced commissioning
of its US$470 million joint venture cheese and whey facility in
Michigan, US and its mozzarella cheese facility in Ireland and evolved
Glanbia’s internal ways of working without loss of productivity.
Progress was also achieved in advancing Environmental, Societal
and Governance (ESG) goals, including a Board approved Diversity
and Inclusion (D&I) ambition and a reset of decarbonisation targets,
including a commitment to reduce carbon emissions by 30% by
2030 on a glide path to net neutral carbon emissions by 2050 in line
with Science Based Targets.
Responding to Covid-19 in 2020
The unwavering resilience of our people in the face of constantly
evolving challenges was pivotal for us delivering a robust performance
through the pandemic. No employee suffered pay cuts or furloughs,
there were no pandemic-related job losses and impacted employees
97
experienced enhanced occupational health and sick pay/quarantine
pay supports where necessary. Pay increases were implemented for
frontline hourly workers although a wage freeze was implemented
for all salaried staff. The Group was not in receipt of any government
supports during the period and continued to implement its dividend
policy as normal with the payout at the top of our stated range. The
planned share buyback was implemented following an assessment
of liquidity in the immediate aftermath of the first global lockdowns.
In addition the Group’s share price finished the year neutral overall
with recovery in quarter four (once shareholders had some insight on
likely impacts and our progress on strategic imperatives) after some
in-year volatility.
government assistance had occurred. Accordingly, having assessed
all of these factors, the Committee approved payment of incentives
to all employees below Executive Directors but applied its discretion
to limit bonus payment for cash generation to 1.5 times target versus
the 2 times target delivered.
Remuneration in respect of 2020
Executive Director base salary and benefits
There was no increase in the base salaries of the Executive Directors
in 2020. The salaries of €1,050,000 for the Group Managing Director
and €581,000 for the Group Finance Director remain unchanged from
1 January 2019. There were no changes to benefits during 2020.
Throughout the year the Committee continuously assessed the
situation and evaluated the best options in respect of the Group’s
annual incentive scheme, taking into account the performance
of management and employees and the need to maintain some
incentives in the face of unprecedented challenges. As shareholders
will recall, as the Group exited a challenging 2019, the Committee had
introduced a modifier to the 2020 annual incentive scheme whereby
the bonus pool available across the Group may be reduced if the
Group’s 2020 adjusted Earnings Per Share (EPS) target was not met.
Within four weeks of setting targets, the world began shutdown
protocol in many of our prime markets and this accelerated in April
to the point where we withdrew guidance at the end of April and
deferred internal communications on the annual bonus plan until
the impact of the pandemic could be assessed.
At its June and August meetings the Committee considered the
wider Group performance and outlook. While it was becoming
increasingly clear that the Group’s original adjusted EPS target
would not be achieved for reasons completely outside the business’s
control, the Committee wanted to continue to incentivise the wider
employee population to deliver remaining business unit revenue and
earnings targets as well as deliver operating cash flow targets and
individual performance objectives. The Committee decided in August
that the annual incentive performance conditions and targets set
at the beginning of the year would remain unchanged (therefore
confirming no bonus for EPS delivery). To encourage the optimisation
of performance in a year significantly impacted by Covid-19, the
Committee further decided to use its discretion to remove the
proposed EPS modifier whereby bonus metric payments could
potentially be reduced on a sliding scale to 75% of target per metric
dependent on the extent to which EPS target was not met. In its place,
the Committee retained its right to use its discretion to limit payouts
for any business metric above target at year end, if appropriate.
While these revised conditions applied to employees below Executive
Directors with immediate effect, the Committee further decided to
defer any consideration of incentives for Executive Directors until after
year end. At that point it would apply judgement in respect of bonus
outcomes for Executive Directors by taking into account overall
performance, the wider employee experience and indeed wider
considerations such as dividend payments, share price performance
and whether any external factors such as forced furloughs or
government assistance had occurred. As noted above, such was
not the case.
On a full-year basis the business delivered a strong and resilient
performance with earnings ahead of market consensus
(notwithstanding that guidance had been withdrawn) with good
performances in particular in Glanbia Nutritionals (GN) and joint
ventures, improved margin momentum in GPN, a strong balance
sheet with cash conversion at 122.4% of EBITDA, debt gearing
reduced to 1.7 times and good momentum heading into 2021.
The Company also progressed the launch of the share buyback
which was welcomed by shareholders and no forced furloughs or
2020 Annual Incentive
The Group Managing Director and Group Finance Director
continued to participate in the annual incentive plan in 2020 based
on a combination of business (80% weighting) and personal
(20% weighting) objectives, with target and maximum payments
remaining at 75% and 150% of base salary.
Post year-end the Committee took full account of the strong and
resilient leadership of the Executive Directors in a very difficult period.
It noted the wider business performance achieved in the context
of the pandemic, the experiences of employees and shareholders
and the fact that no government Covid-19 relief funding had been
obtained during the pandemic. Accordingly, it is the Committee’s
judgement that the most equitable approach is that Executive
Directors should be treated no differently than other employees,
which is set out earlier. Therefore the Committee proposes payment
of incentives with zero payout for adjusted EPS, operating cash flow
delivery payout scaled back to 1.5 times target (from 2 times target
achieved) and payment of personal objectives in accordance with
actual delivery. Under this approach the maximum potential bonus
payable to the Group Managing Director and the Group Finance
Director in 2020 is no more than 36.7% of their maximum bonus
opportunity under the Group’s policy. The Committee considers that
the 2020 annual incentive outcome for the Group Managing Director
and the Group Finance Director fairly recognises the combined
business and personal performance during the year. Full details
are provided on pages 107 and 108.
In exercising its discretion for both employees and Executive Directors
(with positive and negative impacts) the Committee is satisfied that, in
the context of the pandemic, the risks to the Group were substantially
mitigated. Additionally, the Committee noted that negative discretion
was applied in relation to 2019 pay outcomes. The strong performance
of the Executive Directors and Group employees in these
circumstances warrants this equitable approach. The Committee
plans to brief major shareholders on the decision and its rationale.
2018 Share Awards granted under the 2018 Long-Term
Incentive Plan (2018 LTIP)
Under the 2018 LTIP, the 2018 share awards over the three year
performance period 2018 to 2020 focused on long-term delivery
of Group EPS (40%), Group ROCE (40%) and TSR (20%). There
were performance challenges in 2019 as discussed last year and
an unforeseen Covid-19 impact as noted above having a material
unexpected impact in 2020. The vesting outcome for both the Group
Managing Director and Group Finance Director is 21.0% for the
2018 share awards. The 2018 share awards will vest no earlier than
26 April 2021, the third anniversary of their grant. Full details on the
2018 share awards can be found in the Directors’ Remuneration
Implementation Report on page 109.
Notwithstanding the unforeseen impact of Covid-19 in 2020, the
Committee has determined that the 2018 award, which takes into
account performance in the 2018-2020 period, will vest as normal.
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Glanbia plc | Annual Report and Financial Statements 2020
Remuneration Committee Report continued
2021 Share Awards granted under the 2018 Long-Term
Incentive Plan (2018 LTIP)
The Group Managing Director and Group Finance Director will
continue to participate in the 2018 LTIP in 2021. For 2021 the share
award levels for the Group Managing Director and Group Finance
Director are expected to be in line with policy. Performance and
vesting will continue to be determined by the key Group performance
metrics of adjusted EPS, ROCE and relative TSR against the STOXX
Europe 600 Food and Beverage Index. Similar to the annual incentive
plan an element of the long-term incentive will be linked to the
achievement against Group ESG metrics. However, given the
continued volatility arising from the Covid-19 pandemic, the
Committee has decided to defer finalising the target ranges to be
applied to the performance conditions, until no later than six months
after the granting of the awards, to allow for greater visibility of market
conditions. In any case the Committee will ensure the target ranges
will continue to be as stretching as Glanbia share awards normally
are. The target ranges for the awards will be communicated to
shareholders via a RNS when finalised. Full details on weightings
and performance conditions are set out on page 113.
Directors’ Remuneration Policy Review and Transposition
of the EU Shareholder Rights Directive into Irish Law
The current Remuneration Policy, 2018-2020, has been extended
to 2021 and will be reviewed during 2021 with a new policy brought
to shareholders for approval at our 2022 AGM. During 2020 the
Remuneration Policy review commenced but as the impact of Covid-19
unfolded it was decided to postpone the policy review until 2021 and
to extend the current policy by one year, 2018 to 2021 inclusive.
Following the implementation of the EU Shareholder Rights’ Directive
into Irish law the Committee has reviewed its remuneration reporting
to ensure compliance with Irish law and as a matter of best practice
voluntary reporting to UK regulation. As a result, a number of additional
disclosures are provided in this 2020 Remuneration Report, building
on the increased disclosure provided in 2019. These disclosures
include remuneration scenario charts to demonstrate how our policy
will operate in 2021, a complete single total figure pay table, Group
Managing Director total remuneration shown over five years, the
change in remuneration of Executive Directors compared to employees
and the Group Managing Director to all-employee pay ratio.
As already mentioned, during 2020 the Committee continued to review
the Directors’ pensions and agreed that incumbent Directors’ pension
rates will align to the wider workforce by the end of 2022. Any new
appointments will align immediately on appointment. The Committee
will review other corporate governance and best practice remuneration
matters such as post cessation of employment share ownership
guidelines which will be introduced as part of its wider policy review
during 2021. In 2019 and 2020 the Group also undertook an analysis
of gender representation and pay. Insights and recommendations were
presented to the Board. We will continue to proactively monitor to
ensure equitable representation and pay.
The pandemic has however heavily impacted the inflight awards for
2019 and particularly 2020, the performance conditions for which
were set only weeks before the onset of the pandemic. The incentives
for management in these schemes have been largely eroded and
therefore lack impact for both motivation and retention.
The Committee has decided to take no action at this time but intends
to consult with shareholders during 2021 in respect of what actions,
if any, should be taken to re-incentivise management through a
restructuring of these inflight awards. If action is deemed warranted
it will be subject to a separate resolution for shareholder approval
at the 2022 AGM.
Non-Executive Director remuneration
In connection with the position of Group Chairman moving from
one nominated by the major shareholder to an Independent Chairman
for the first time in the Group’s history, Korn Ferry, advisors to the
Committee, carried out a review as to appropriate remuneration
arrangements consistent with the responsibilities of the Group
Chairman as set out on page 100. This review was led by the Senior
Independent Director and I, as Group Chairman, recused myself from
that process. The outcome of this review was a recommendation
to increase the Annual Fee to €325,000 which was approved by the
Committee and communicated to the Board. The Non-Executive
Director fees are outlined on page 105.
Executive Director remuneration for 2021
The Committee has carefully considered the operation of the current
policy for 2021. Whilst the Remuneration Policy 2018-2020 will
continue to apply in 2021, the Committee has agreed to make some
revisions to the application of the policy in 2021 to recognise the
strategic importance of focusing on earnings and to introduce ESG
metrics which are appropriate given the growth and strategic focus
of the Company. Feedback received from shareholders as part of
the Group Chairman’s consultation with investors, following his
appointment, supports these revisions.
The Committee will review the current Remuneration Policy from first
principles during 2021 with any substantive changes to the operation
of policy being introduced in 2022.
Executive Director base salary
The base salaries of the Group Managing Director and Group Finance
Director were not increased in 2020. The base salary of the Group
Managing Director and the Group Finance Director will increase by
2.5% to €1,076,250 and €595,525, respectively, effective 1 January
2021, in line with the standard increase for other employees.
Executive Director pension
Further to the change for new Executive Director appointments
made from 2020, where pensions would be set in line with the wider
workforce rate in the relevant location, the Committee determined
that pensions of the incumbent Executive Directors will be aligned
to the rate applicable to the majority of the workforce in the country
of appointment, Ireland, by the end of 2022.
2021 Annual Incentive
The Group Managing Director and Group Finance Director will
continue to participate in the annual incentive plan based on
a combination of business and personal objectives. The 2021
bonus structure will however be adjusted to recognise the Group’s
commitment to social matters relevant to our business. The target
and maximum payments will remain at 75% and 150% of base
salary respectively.
99
Committee members and attendance
Member
D Gaynor1
D O’Connor
J Daly2
M Minnick3
J Lodge4
R Brennan5
Appointed to the
Committee
13-May-14
1-Dec-14
20-June-19
20-June-19
14-Dec-20
20-Jan-21
Number of full
years on the
Committee
2020 meeting
attendance
6
6
1
1
<1
<1
5/5
5/5
4/4
5/5
0/0
0/0
1. D Gaynor will step down as Chairman of the Committee on 28 February 2021
but will remain as a member of the Committee.
2. J Daly stepped down from the Board and the Committee on 1 November 2020.
3. M Minnick stepped down from the Board and the Committee on 31 December 2020.
4. J Lodge will succeed D Gaynor as Chairman of the Committee effective 1 March 2021.
5. R Brennan was appointed to the Board on 1 January 2021 and assumed a seat on
the Committee effective 20 January 2021.
Allocation of time
Framework and policy
Annual incentive plan
Long-Term Incentive Plan
Total compensation package
Wider group reward
Committee changes
As set out on page 63 a number of Board changes were made during
the year. I was appointed Group Chairman in place of Martin Keane
with effect from 8th October 2020. I continue as Remuneration
Committee Chairman to 28 February 2021. Jane Lodge was
appointed Non-Executive Director to the Board on 1 November 2020,
taking a seat on the Committee on 14 December 2020, Jane will
assume responsibility as Remuneration Committee Chairman on
1 March 2021. Both John Daly and Mary Minnick stepped down from
the Board and the Remuneration Committee, effective 1 November
2020 and 31 December 2020 respectively. Roisin Brennan was
appointed to the Board on 1 January 2021 and assumed a seat
on the Committee effective 20 January 2021. Further details of
Remuneration Committee members and meeting attendance
is set out on the table, opposite.
Voting and Shareholder engagement
An advisory non-binding resolution to receive and consider the 2020
Remuneration Committee Annual Report on Remuneration will be
put to the AGM on 6 May 2021.
I and my fellow Committee members are committed to strong
and effective engagement with our shareholders and to providing
remuneration reporting disclosures that effectively explain our
remuneration decisions. Given we are rolling over our current policy
for another year we had no direct engagement with shareholders
on remuneration matters in 2020 however the Senior Independent
Director did engage with shareholders on the share buyback
programme and I, as Group Chairman, engaged on their priorities
immediately after my appointment. The Committee looks forward
to engagement again as the review of the Directors’ Remuneration
Policy progresses, in advance of the shareholder vote on a revised
policy at our 2022 AGM.
During 2020 the Group continued to execute its strategic ambitions,
despite the performance headwinds and difficulties presented by
the Covid-19 pandemic detailed in my Group Chairman’s Statement.
The Committee is confident that, following its judgement and
consistency with all other employees, the remuneration outcomes
for the Executive Directors are aligned to that performance.
I am available through our Group Secretary if you wish to engage with
me prior to our 2021 AGM.
Donard Gaynor
Remuneration Committee Chairman
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Remuneration Committee Report continued
Remuneration Committee Governance
Currently, the Remuneration Committee comprises of the Group Chairman and three Independent Non-Executive Directors, of whom two
members constitute a quorum.
The Group Managing Director, Group Finance Director and the Group Human Resources & Corporate Affairs Director attend Committee meetings
by invitation only and as necessary. No Director or member of Group Operating Executive is involved in considering his/her own remuneration,
they absent themselves when their remuneration is discussed. The Group Secretary acts as secretary to the Remuneration Committee.
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 Euronext Dublin. With a secondary listing on the London Stock Exchange, the Committee has also resolved on a
voluntary basis to align, to the extent it considers possible and appropriate having had regard to Irish law, the Directors’ Remuneration Policy
and Remuneration Reporting with UK remuneration best practices including the regulations applicable to UK incorporated and listed companies.
Additionally, the 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.
The Committee receives independent external advice on executive remuneration from Korn Ferry who were appointed as Remuneration Advisers
in 2019 following a competitive selection process in the same year. Korn Ferry, who do not have any connection with any Directors of the
Company, provide advice to the Committee which supports robust and sound decision making. Korn Ferry fees for advising the Remuneration
Committee during 2020 were €134,695.
The Committee is committed to strong and effective engagement with our shareholders and to provide remuneration reporting disclosures that
effectively explain our remuneration decisions. As noted in the Remuneration Committee Chairman’s letter, because we postponed the review
of our policy until 2021 we did not engage directly with our shareholders in 2020 specifically on remuneration matters, and will do so as part of
the policy review in 2021.
The Committee continues to actively listen and incorporate, as far as possible, the views of the shareholders when determining the Directors’
Remuneration Policy and making remuneration decisions. Furthermore, through the advice of its independent external Remuneration Advisers,
Korn Ferry, the Committee monitors and incorporates, as appropriate, best practice developments for remuneration policies. The Committee
is currently operating within the Directors’ Remuneration Policy 2018-2020 which will also apply for 2021, the policy received 99.83% approval
of shareholders at the AGM on 25 April 2018.
Review of Remuneration 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.
Remuneration Committee report results at 2020 AGM
Resolution to receive and consider the Remuneration Committee report for the year ended 4 January 2020
For
%
Against
%
Total excluding withheld
%
Withheld
%
Total including withheld
%
204,453,009
98.96% 2,145,140
1.04%
206,598,149
100.00%
3,299
0.00%
206,601,448
100.00%
Remuneration Policy Results at 2018 AGM
Resolution to receive and consider the Directors’ Remuneration Policy 2018-2020
For
%
Against
%
Total excluding withheld
%
Withheld
%
Total including withheld
%
185,508,946
99.83% 309,270
0.17%
185,818,216
100.00%
2,403
0.00%
185,820,619
100.00%
101
Section A: Directors’ Remuneration Policy 2018-2020 (extended to 2021)
The 2018-2020 Directors’ Remuneration Policy applies to the Group’s Executive Directors. The 2018-2020 Directors’ Remuneration Policy was
approved at the Company’s 2018 AGM. Under Statutory Instrument No. 81 of 2020 transposing the EU Shareholder Rights’ Directive into Irish
law, the Company is required to obtain shareholder approval of its Directors’ Remuneration Policy every four years, or sooner if changes are
required. As explained in the Chairman’s letter, the Committee has agreed to postpone the review of the current policy until 2021 and it will
therefore apply until 2021 and be renewed at the Company’s 2022 AGM.
Remuneration strategy, policy and purpose
The Directors’ 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 business
performance and individual performance, while aligning the interests of Executive Directors with those of shareholders.
The Directors’ 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 performance for our shareholders over the long-term through the strong performance of high-quality and committed leadership, critical
to the future development of the Group.
The Group Key Performance Indicators (KPIs), which are detailed on pages 30 and 31, underpin the selection of performance criteria used within
the incentive arrangements. On subsequent pages we have provided specifics in summary form on the individual elements of the remuneration
packages for Executive Directors, including personal objectives.
Summary Executive Directors’ Remuneration Policy
The following table summarises the key elements of the Directors’ Remuneration Policy for the Group’s Executive Directors. The operational
elements are subject to annual adjustment. The content is consistent with the policy presented to shareholders at the 2018 AGM. There are some
formatting and language refinements to give better clarity.
Element
Objective
Description, Performance Measures and Maximum Value
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.
Individual performance targets and assessment are set and reviewed annually.
Pension (fixed)
Retirement benefit
Provide competitive, affordable and
sustainable retirement benefits.
Determined as a percentage of base salary.
During 2020 the Remuneration Committee determined that pensions of incumbent Executive
Directors will be aligned to the rate applicable to the majority of the workforce in the country
of appointment, Ireland, by the end of 2022.
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.
Other benefits include company car or equivalent, benefit in lieu of personal future service pension
benefit, medical/life assurance, tax equalisation payments and relocation or other business-related
allowances where appropriate.
Short-Term
Performance
Related Incentive
(variable)
Incentivise Executive Directors
to achieve specific performance
goals and personal performance
objectives which are linked to the
Group’s business plans 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.
Based on growth in annual Group adjusted EPS on a constant currency basis, Group Operating
Cash flow and individual performance objectives. An ESG metric is introduced for the operation
of the policy in 2021.
All performance metrics and calibration of targets are determined by the Remuneration Committee
annually.
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 102.
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Remuneration Committee Report continued
Element
Objective
Description, Performance Measures and Maximum Value
Shareholding
Requirement
Minimum share ownership
requirements to be built
up over a five-year period
Ensure a greater alignment with
shareholders’ interests.
Executive Directors are expected to build a shareholding through the vesting of shares under the
Group’s schemes.
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.
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.
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.
Long-term incentive individual annual share award level ordinarily cannot exceed 250% of base
salary, dependent on the level of job responsibilities and with reference to companies of similar
size and complexity in Europe and US. This may vary where necessitated by the recruitment or
retention of key Executives as determined by the Remuneration Committee.
• Group Managing Director, maximum award level of 250%.
• Group Finance Director, maximum award level of 200%.
The Remuneration Committee reviews and determines the financial metrics annually. The 2021
share award is to be determined with an increased focus on earnings and the inclusion of an
ESG metric as follows:
• 50% Group adjusted EPS (previously 40%);
• 30% Group ROCE (previously 40%);
• 10% relative TSR against the STOXX Europe 600 Food and Beverage Index (previously 20%);
• 10% ESG metric (previously 0%).
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, measured over a three-year
period, of the relevant performance conditions. The Remuneration Committee has the discretion
to change the performance criteria (including the measures, their weighting and calibration) where
deemed appropriate for new Long-term incentive awards to ensure they continue to reflect the
strategic priorities of the business. 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. Quality of earnings review/underpin will continue to be exercised at the discretion
of the Remuneration Committee.
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.
Executive Directors will be required to hold shares received pursuant to the vesting of share
awards for a minimum period of two years post vesting. Share awards are subject to malus
and clawback (during the two-year holding period following vesting), to the extent determined
by the Remuneration Committee as outlined in Note 1 below.
Note 1: Malus and clawback – the Committee may, at any time within two years of a 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 a 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.
103
Executive Director employment conditions
The Remuneration Committee adopts a transparent framework when making Board appointments of either external or internal candidates.
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 being 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 below. Each element of remuneration
to be included in the package offered to a new Executive Director would be considered.
Element
Description
Base salary (fixed)
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 (fixed)
Will be considered in light of relevant market practice for the role, the retirement arrangements of the wider workforce and consideration
by the Remuneration Committee of the new recruit’s package as a whole.
During 2020 the Remuneration Committee concluded that new appointments will be made with a pension aligned to the wider workforce
in the country of appointment.
Other benefits
(fixed)
Short-Term
Performance
Related Incentive
(variable)
Long-Term
Performance
Related Incentive
(variable)
Will be considered in light of relevant market practice for the role and the provisions in place for other Executive Directors.
The maximum level of short-term variable remuneration which may be granted to a new recruit is 150% (total maximum variable
remuneration is 400%, annual and long-term variable). This excludes any buyout share awards that might arise.
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.
The maximum level of long-term variable remuneration which may be granted to a new recruit is 250% (total maximum variable
remuneration is 400%, annual and long-term variable). This excludes any buyout share awards that might arise.
The award of long-term incentives will depend on the timing of the appointment and where this fits into the typical annual grant cycles.
In exceptional circumstances or where the Committee determines that it is necessary for the recruitment or retention of key executives, the
Committee reserves the right to offer additional cash and/or share-based payments. 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 Committee may also grant share awards on hiring an external candidate to buyout awards which will be forfeited on leaving
the previous employer.
The 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 Committee will consider the vesting period; the award exercise period if applicable; whether the awards are cash
or share-based; performance-related or not; the former employer’s recent performance and payout levels and any other factors the 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 their employment 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 payout 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 Committee. The Committee reserves
the right to offer additional cash and/or share-based payments on an internal promotion when it considers this to be in the best interests of the
Group and its shareholders.
Executive Director Service Agreements
The Group Managing Director, Siobhán Talbot, and the Group Finance Director, Mark Garvey, have renewable three year service agreements
effective from 1 January 2019. The service agreements for the Group Managing Director and the Group Finance Director, in line with market
practice, include a standard 12 month notice obligation from either side. The service agreements are capable of being terminated by either party
on not more than 12 months’ notice, provided however that no notice obligation for the executives shall be for a period longer than 6 months after
the end of the initial three year contract period, if not renewed. The Group retains the sole right to terminate with pay in lieu of 12 months’ notice,
or part thereof, at any time.
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 under the contract upon termination is limited to a maximum
of 12 months’ remuneration. If so required, the Group reserves the right to make necessary payments in settlement of a Director’s statutory
employment rights.
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Remuneration Committee Report continued
Both the Group Managing Director and Group Finance Director have additional 12 month restrictive covenant agreements which were introduced
in 2019 and are in addition to the contract of service and notice period. These are necessary as a matter of law and aligned to market practice in
Ireland to ensure enforceability of non-compete obligations. The Committee will ensure that careful consideration is given to the remuneration
payable on any termination of employment including whether an Executive Director is required to work his or her notice period to minimise the
total cost of severance.
Exit pay policy
The Group’s exit pay policy for the variable pay of Executive Directors is as follows;
• STIP awards – STIP awards will vest pro-rata to reflect the performance period which was worked and the performance outcomes achieved,
in accordance with plan rules with the Remuneration Committee applying its discretion to allow all or part of STIP award to vest.
• LTIP awards – In the event an Executive Director leaves before an award vests for reasons of death, redundancy, injury, ill health or disability
retirement with the agreement of the Remuneration Committee or any other reason approved by the Committee, the awards of the Executive
Director will lapse except that the Committee will have the discretion to allow all or some of the Executive Director’s awards to vest subject to
pro-rate for time and to the extent to which the performance conditions of the award are met (save in the case of death or if the circumstances
are sufficiently exceptional as determined by the Committee where the Committee may allow some or all awards to vest). The Committee may
at any time prior to vesting, in its absolute discretion, revoke any determination to permit awards to vest where an Executive Director breaches
a protective covenant.
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 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.
• Other payments, such as legal or other professional fees, relocation or outplacement costs, may be paid if it is considered appropriate and
is at the absolute discretion of the Committee.
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 Committee
will continue. The Committee considers that external directorships provide the Group’s Executive Directors with valuable experience that is
of benefit to Glanbia. The Committee believes that it is reasonable for the individual Executive Director to retain any fees received from such
appointments given the additional personal responsibility that this entails. Siobhán Talbot is a Non-Executive Director of CRH plc effective from
1 December 2018, for which Siobhán received an annual fee in 2020 of €135,000. Siobhán Talbot also holds a position on the IBEC board,
for which she does not receive any fee. The Group Finance Director has no external directorships and no other fees earned.
Consideration of employment conditions elsewhere in the Group
The 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 Committee has not previously consulted 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 its Remuneration
Advisers. The Committee will consider, as part of the policy review to be carried out during 2021, the best approach to address the requirements
of the UK Corporate Governance Code in respect of engaging with employees to explain the alignment of the Executive Directors’ Remuneration
Policy to the wider workforce.
105
Remuneration below Executive Directors
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 relevant
local market practice.
The table below outlines the reward elements which apply to employees across the Group depending on their level of seniority and market location.
Element
Description
Base salary (fixed)
Set by reference to role responsibilities relative to the relevant local market based on external independent market data against appropriate
peer companies. Reviewed annually in consideration of personal performance with any change of pay approved by a member of the Group
Operating Executive (and by the Remuneration Committee for senior executives falling under its remit).
Pension (fixed)
Employees participate in retirement benefits applicable to their local market and in line with relevant scheme rules and Company practice.
Other benefits
(fixed)
Short-Term
Performance
Related Incentive
(variable)
Long-Term
Performance
Related Incentive
(variable)
Employees participate in other benefits applicable to their local market and in line with relevant rules and Company practice. Other benefits
may include car benefit, illness benefit, medical insurance, relocation expenses/payments.
The annual incentive potential is based on appropriate and specific Group or 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 75% of base salary
which, once the appropriate taxation and social security deductions have been made, will be invested in shares in the Company and
delivered two years following investment.
The Long-Term Incentive Plan is focused on key Group financial metrics and TSR. Additionally, where relevant, appropriate specific
Business Unit measures, as determined by the Remuneration Committee, emphasise long-term Business Unit achievement.
The Remuneration Committee may also assign a portion of the share award as restricted stock, focusing on individual performance
over the performance period. A one year holding period applies below Executive Directors.
Non-Executive Directors’ Remuneration
The Directors’ Remuneration Policy for the Group Chairman and Non-Executive Directors is summarised below.
Element
Objective
Description
Annual Fees
Recognise market value of role, job size,
responsibility and reflects individual skills
and experience.
Set by reference to the relevant market median based on an external independent evaluation
of comparator companies of a similar scale and complexity. Reflects a 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.
Benefits and
expenses
Reimburse role-based expenses incurred
during performance of the duties of the role.
No additional benefits are provided other than direct expenses relating to the role.
Such expenses may include travel in the course of the role for the Group.
Non-Executive Director fees
In accordance with the Relationship Agreement between the Company and the Society, on 8 October 2020, Donard Gaynor, was appointed
as the first Independent Non-Executive Chairman of the Board. As part of the Group Chairman appointment process, the Committee, supported
by Korn Ferry, carried out an external review of the applicable fees against other listed companies of a comparable size and complexity, taking
into account the skills, experience and time commitment required for the role. As a result, the Committee increased the Group Chairman’s fee to
€325,000 per annum to bring it in line with the relevant market median for an Independent Non-Executive chair appointment. There were no other
changes to Non-Executive Director fees in the year.
A summary of the fee levels is provided below:
Role
Group Chairman
Senior Independent Director/Committee Chairman
Non-Executive Director
Society-nominated Non-Executive Director
2021
€
325,0001
95,000
85,000
42,500
2020
€
112,500
95,000
85,000
42,500
1. The annual fee of the Group Chairman has been revised to €325,000 to reflect the changed responsibilities of the role and alignment with companies of a comparable size and complexity,
taking into account the skills and experience and time commitment required for the role.
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 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.
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Glanbia plc | Annual Report and Financial Statements 2020
Remuneration Committee Report continued
Section B: Directors’ Remuneration Implementation Report
Executive Directors’ Remuneration Elements 2020
The Remuneration elements and 2020 delivery for the Executive Directors is summarised in the table below.
1. 2020 share awards for the Group Managing Director and the Group Finance Director were revised by 20% from 250% and 200% respectively, acknowledging the decline in the
2019 share price.
Executive Director Remuneration Payments 2020
Further details of actual 2020 payments are set out in the subsequent table and later in this report.
Fixed Pay
Annual Incentives
Long-term
Incentives
Total
Fixed
Pay
Total
Variable
Pay
Total
Executive Directors
Full Year
Base salary
€’000
Pension
contribution1
€’000
Other
benefits2
€’000
S Talbot
M Garvey
2020
2019
2020
2019
1,050
1,050
581
581
–
–
145
145
349
344
33
35
Annual
incentive
(payable
in cash)3
€’000
572
–
320
–
Annual
incentive
(deferred
shares)4
€’000
–
–
–
256
Long-term
incentive5
€’000
339
183
159
86
1,399
1,394
759
761
911
183
479
342
2,310
1,577
1,238
1,103
Further explanatory notes relating to each remuneration element follow.
1. M Garvey participates in the Glanbia defined contribution plan with a contribution of 25%.
2. Other benefits include company car or equivalent, medical/life assurance and taxable cash in lieu of pension payments of 26.5% of salary to S Talbot.
3. This reflects the proportion of the annual incentive payable in cash to Executive Directors in respect of performance for full year 2019 and 2020 performance. In 2019 S Talbot waived
the annual incentive payable of 33.4% of salary whilst M Garvey waived 7.2% and agreed to his bonus being paid entirely in shares rather than cash. 2020 annual incentive payments
will be paid through salary in 2021.
4. This reflects the proportion of the gross annual incentive (over 75% of base salary) which will be invested in shares and retained for two years, following appropriate taxation and social
security deductions. For 2019 the full amount of M Garvey’s bonus was paid entirely in shares.
5. For 2019, this reflects the value of the 2017 share award which vested on 24 April 2020. The gross value is calculated using the official opening share price on the date of vest of €9.24.
2017 vested awards are held for a 2 year period to April 2022. For 2020, this reflects the value of the 2018 share award which will vest on 26 April 2021, earliest, where the performance
period for which ended on 2 January 2021. The gross value is calculated using the official closing share price on 31 December 2020 (last day of trading for the 2020 financial year)
of €10.38. 2018 vested awards are held for a 2 year period from the date of vest.
Fixed Pay 2020
Base salary 2020
The Group Managing Director and Group Finance Director‘s base salaries of €1,050,000 and €581,000 were not increased for 2020. The base salary
for the broader employee population also remained unchanged in 2020 other than some frontline workers where the increase was up to 3%.
Pension 2020
Mark Garvey participates in a defined contribution retirement plan, to which contributions are made at an agreed rate of 25%.
Other benefits 2020
Other benefits include employment-related benefits such as the use of a company car or equivalent, benefit in lieu of personal future service
pension benefit, medical/life assurance and relocation or other business-related allowances where appropriate. All benefits are subject to
normal deductions per the relevant regulations.
Siobhán Talbot is a member of the Glanbia defined benefit scheme but, effective 1 January 2012, is no longer accruing personal pension
benefits under this scheme. 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 Committee reviewed the pension arrangements for Executive Directors and agreed to offer
Siobhán Talbot the option to receive a taxable payment (26.5% of base salary) in lieu of the personal future service pension benefit.
Fixed Pay 2020Base salaryPensionOther benefitsBase salary increase in 20200%Up to 150% of base salary for maximum performanceMeasured by Adjusted EPS, Group OCF and Personal Objectives2020 incentive payments36.3% to 36.7% of maximumGroup MD, 200%Group FD, 160% (% of base salary)Measured by Adjusted EPS, Group ROCE and TSR2018 share award vesting21.0%Annual Incentive 2020Long-term Incentive 20201 Section B: Directors’ Remuneration Implementation Report
Executive Directors’ Remuneration Elements 2020
The Remuneration elements and 2020 delivery for the Executive Directors is summarised in the table below.
1. 2020 share awards for the Group Managing Director and the Group Finance Director were revised by 20% from 250% and 200% respectively, acknowledging the decline in the
2019 share price.
Executive Director Remuneration Payments 2020
Further details of actual 2020 payments are set out in the subsequent table and later in this report.
Fixed Pay
Annual Incentives
Long-term
Incentives
Total
Fixed
Pay
Total
Pay
Variable
Total
Annual
incentive
(payable
in cash)3
€’000
572
–
–
320
Annual
incentive
(deferred
shares)4
€’000
–
–
–
256
Long-term
incentive5
€’000
339
183
159
86
1,399
1,394
759
761
911
183
479
342
2,310
1,577
1,238
1,103
Executive Directors
Full Year
S Talbot
M Garvey
Base salary
contribution1
Pension
2020
2019
2020
2019
€’000
1,050
1,050
581
581
€’000
–
–
145
145
Other
benefits2
€’000
349
344
33
35
Further explanatory notes relating to each remuneration element follow.
1. M Garvey participates in the Glanbia defined contribution plan with a contribution of 25%.
2. Other benefits include company car or equivalent, medical/life assurance and taxable cash in lieu of pension payments of 26.5% of salary to S Talbot.
3. This reflects the proportion of the annual incentive payable in cash to Executive Directors in respect of performance for full year 2019 and 2020 performance. In 2019 S Talbot waived
the annual incentive payable of 33.4% of salary whilst M Garvey waived 7.2% and agreed to his bonus being paid entirely in shares rather than cash. 2020 annual incentive payments
will be paid through salary in 2021.
4. This reflects the proportion of the gross annual incentive (over 75% of base salary) which will be invested in shares and retained for two years, following appropriate taxation and social
security deductions. For 2019 the full amount of M Garvey’s bonus was paid entirely in shares.
5. For 2019, this reflects the value of the 2017 share award which vested on 24 April 2020. The gross value is calculated using the official opening share price on the date of vest of €9.24.
2017 vested awards are held for a 2 year period to April 2022. For 2020, this reflects the value of the 2018 share award which will vest on 26 April 2021, earliest, where the performance
period for which ended on 2 January 2021. The gross value is calculated using the official closing share price on 31 December 2020 (last day of trading for the 2020 financial year)
of €10.38. 2018 vested awards are held for a 2 year period from the date of vest.
Fixed Pay 2020
Base salary 2020
Pension 2020
Other benefits 2020
The Group Managing Director and Group Finance Director‘s base salaries of €1,050,000 and €581,000 were not increased for 2020. The base salary
for the broader employee population also remained unchanged in 2020 other than some frontline workers where the increase was up to 3%.
Mark Garvey participates in a defined contribution retirement plan, to which contributions are made at an agreed rate of 25%.
Other benefits include employment-related benefits such as the use of a company car or equivalent, benefit in lieu of personal future service
pension benefit, medical/life assurance and relocation or other business-related allowances where appropriate. All benefits are subject to
normal deductions per the relevant regulations.
Siobhán Talbot is a member of the Glanbia defined benefit scheme but, effective 1 January 2012, is no longer accruing personal pension
benefits under this scheme. 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 Committee reviewed the pension arrangements for Executive Directors and agreed to offer
Siobhán Talbot the option to receive a taxable payment (26.5% of base salary) in lieu of the personal future service pension benefit.
107
Annual Incentive 2020
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 Committee annually. Other senior executives including the members of the Group’s
Operating Executive 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 interests of the Group and the shareholders.
For the financial year to 2 January 2021, 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 an Operating Cash Conversion basis and individual
performance objectives. The mix of weightings for all objectives at target reflected 15% of base salary for personal objectives and 60% of base
salary for business objectives (EPS and OCF), doubling at maximum performance to 30% of base salary for personal objectives and 120% of
base salary for business objectives. Both personal and business objectives are specific and measurable, determined and communicated at the
start of the financial year.
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 leadership, organisational effectiveness (including growth and innovation), the execution of the
strategic growth plan and driving innovation capability. Progress on personal objectives for each of the Executive Directors is detailed in the 2020
annual incentive outcomes.
In light of overall Group financial performance in 2019 and to increase focus on EPS achievement in 2020 the Committee agreed to the
introduction of a bonus modifier in 2020 whereby the bonus may be reduced where the Group EPS target is not achieved. Within weeks
of the 2020 targets being set the Covid-19 pandemic hit at which time the Committee decided not to communicate annual bonus incentive
targets across the organisation. The Committee reviewed and considered the impact of the pandemic on performance delivery and incentives,
and agreed to not amend performance targets for Executive Directors. Instead the Committee agreed to defer any consideration of incentives
for Executive Directors until after year end when it would apply judgement in respect of bonus outcomes for Executive Directors by taking
into account overall performance, the wider employee experience and indeed wider considerations such as dividend payments, share price
performance and whether any external factors such as forced furloughs or government assistance had occurred. The Committee did agree,
to remove the EPS bonus modifier for all other employees and in its place retained its right to use its discretion to limit payouts for any business
metric above target at year end, if appropriate.
In February 2021, the Committee considered bonuses payable based on a formulaic basis (no bonus payable for earnings performance), the
commitment to modify 2020 bonuses based on earnings achievement and the wider performance of the Executive Directors and employees in
navigating the pandemic. The Committee decided to scale back payment of the cash metric to 1.5 times from 2 times as otherwise determined
based on the formulaic basis for all employees. Accordingly, the Committee applied its judgement that the most equitable approach is that
Executive Directors should be treated no differently than other employees. For the Group Managing Director and the Group Finance Director
this resulted in the bonus being modified from 42.3% to 36.3% of maximum and from 42.7% to 36.7% of maximum, respectively.
The table below outlines the 2020 annual incentive design and respective weightings for each Executive Director. It also details the 2020
performance assessment %, actual bonus to be paid following the Committee’s use of discretion and the full year 2020 actual incentive payable
as a percentage of maximum opportunity.
Annual incentive weighting
Executive Directors
Adjusted EPS
Group OCF1 Personal objectives
S Talbot
M Garvey
56%
56%
24%
24%
20%
20%
Annual Incentive
opportunity as %
of salary
0%-150%
0%-150%
Total
100%
100%
2020
performance
assessment as a
% of maximum
opportunity
2020
Actual Incentive
payable as a %
of maximum
opportunity
42.3%
42.7%
36.3%
36.7%
1. Group OCF is measured using Operating Cash Conversion defined as OCF divided by pre-exceptional earnings before interest, tax, depreciation and amortisation (EBITDA). This cash
measure aligns with the Group’s working capital management programme as introduced at the Group’s Capital Markets Day in May 2018.
Key Business Objectives 2020
The table below sets out actual performance relative to target for the Group financial measures.
Performance Assessment in 2020
Performance range
Actual
% of
maximum
vesting
Below
Threshold
(zero vesting)
Threshold to
Target
(pro-rata
vesting)
Target (100%
vesting)
Adjusted EPS Growth1
Group OCF (%)2
84.6 to 91.5 cent
75% to 90%
73.8 cent
122.4%
0%
100%
Target to
Maximum
(pro-rata
vesting)
3
Maximum
(200%
vesting)
1. Adjusted EPS growth is measured on a constant currency basis to reflect the underlying performance of the Group. For 2020 the Executive Directors’ targeted constant currency
adjusted EPS of 86.6 cent with a maximum incentive achievable at 91.5 cent. The 2020 performance outcome was below threshold for the year.
2. OCF was measured as Operating Cash Conversion and is defined as OCF divided by pre-exceptional earnings before interest, tax, depreciation and amortisation (EBITDA). Cash
conversion is a measure of the Group’s ability to convert trading profits into cash and is an important metric in the Group’s working capital management programme. For 2020 the
Executive Directors’ target Group Operating Cash Conversion was 80% with a maximum incentive achievable at 90%. The 2020 outcome was above maximum at 122.4% actual delivery.
3. The 2020 outcome was above maximum at 122.4% actual delivery. The Committee agreed to a scale back payment of the cash metric to 1.5 times from 2 times as otherwise determined
based on the formulaic basis.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATIONFixed Pay 2020Base salaryPensionOther benefitsBase salary increase in 20200%Up to 150% of base salary for maximum performanceMeasured by Adjusted EPS, Group OCF and Personal Objectives2020 incentive payments36.3% to 36.7% of maximumGroup MD, 200%Group FD, 160% (% of base salary)Measured by Adjusted EPS, Group ROCE and TSR2018 share award vesting21.0%Annual Incentive 2020Long-term Incentive 20201
108
Glanbia plc | Annual Report and Financial Statements 2020
Remuneration Committee Report continued
Key Personal Objectives 2020
Personal objectives are aligned with the Group strategy reflecting the Executive Director’s personal contribution to organisational effectiveness,
the execution of the strategic growth plan and driving innovation capability. The Group Managing Director set the personal performance
objectives for the Group Finance Director, with the Group Managing Director’s personal objectives set by the Group Chairman in conjunction
with the Committee. All personal objectives were then agreed with the Committee who monitored their progress throughout the year.
Group Managing Director,
Siobhán Talbot
Personal Objectives at Maximum:
Overall Performance Assessment:
Personal Objectives Bonus Payout:
30%
91.5%
27.5%
Measure/Objective
Weighting % Performance Assessment
Achievement %
Complete detailed Group Organisation
& People Review (OPR). Focus on critical
senior leadership succession and
development in 2020. Sponsor hiring
for identified critical senior roles and
evolution of BU and corporate team
capabilities. Develop succession planning
across Group Operating Executive roles.
Lead Group business continuity
processes during Covid-19 pandemic to
minimise risks to employees, production,
supply chain, customer support and
group finances/liquidity.
Deliver key business initiatives for 2020
across 1) brand health and growth,
2) increased penetration of target growth
categories by Nutritional Solutions,
3) expanding Group capabilities
through M&A, 4) delivery of key
strategic expansions by joint ventures.
Develop and deliver the GPN
transformation programme to underpin
margin and revenue growth ambitions
identified for this initiative.
Group Finance Director,
Mark Garvey
10% OPR review of all business units completed. Significant re-organisation of GPN senior
9%
team well advanced with key senior hires onboarded. Senior leadership team in GN
also evolved. Succession planning for Group Operating Executive well advanced.
8% Decisive and focused actions executed across the identified three priorities of health
8%
and welfare of our people, maintaining supply of food and sustaining financial strength.
New protocols, protective arrangements and processes across all locations swiftly
embedded the priorities with no loss of productivity. Robust planning resulted in
no material disruption to supply chain and costs and liquidity were tightly managed.
No pandemic related job losses or pay cuts or government supports accessed.
After a challenging quarter 2, the business was well positioned to regain momentum
as markets re-opened.
7% Overall delivery somewhat impacted by conflicting pressures of Covid-19 business
5.5%
continuity focus (which impacted a number of key consumer facing categories in
particular) while maintaining momentum on growth drivers. Key deliverables included
good performance delivery in GN including the acquisition of Foodarom which
broadened capabilities in the flavours sector; continued development of GPN brands
achieving US consumption growth in the key pillar brands of OPTIMUM NUTRITION™
and SLIMFAST™ and the successful build out of major JV projects – MWC-Southwest
Holdings in Michigan, US and Glanbia Cheese EU.
5% Very good progress achieved in this key strategic project. Project scope was
5%
broadened and deepened in 2020 and encompasses GPN organisation redesign,
market and channel prioritisation, productivity and demand focused initiatives, with
the programme delivering in-year returns ahead of plan and supporting double-digit
GPN margins in the second half of the year. The programme is on track for 2022 target
delivery with full benefits.
Personal Objectives at Maximum:
Overall Performance Assessment:
Personal Objectives Bonus Payout:
30%
93%
28%
Measure/Objective
Weighting % Performance Assessment
Sustain focus on liquidity – EBITDA cash
conversion, cost and working capital
management, particularly through
Covid-19 volatility.
10% Building on a very strong base further financial disciplines were extremely well
marshalled across the Group to ensure excellent overall liquidity management.
2020 cash conversion was 122% facilitating the acquisition of Foodarom, payment
of dividends in line with 2019 and share buyback. Year end debt/EBITDA were reduced
to 1.7x with facilities extended to an earliest maturity of 2024.
Strategic portfolio development review
to enhance Group agility to execute
corporate strategy and optimise capital
utilisation.
Continue to deliver M&A targets in
support of Group strategic plan.
Strategic stakeholder management
including shareholders and wider capital
markets during period of unprecedented
volatility and associated withdrawal of
guidance, to sustain stakeholder support.
10% Significant progress achieved, however some aspects delayed due to impact of
Covid-19 on priorities. Work to continue in 2021 (business confidential).
5% Continued good progress in identification and evaluation of opportunities during the
year. Foodarom acquisition concluded, enhancing Glanbia Nutritionals’ capabilities
in the flavours space.
5% Ongoing programme of appropriate engagement and communication with capital
markets stakeholders through the pandemic on the business response and continued
focus on strategy and pending capital allocation options, maintained stakeholder
interest and support through a highly volatile period.
Achievement %
10%
8%
5%
5%
109
Long-Term Incentive Share Awards 2018
The 2018 share awards granted on 26 April 2018 had a three-year performance period (2018 to 2020) which ended on 2 January 2021.
Under the 2018 LTIP, the 2018 share awards incorporated Group performance conditions which are measured in respect of performance
in the three-year period and independently verified by external advisers on behalf of the Committee.
For share awards from 2018 onwards, performance targets are set with future acquisitions in mind and are therefore reflective of the expected impact
acquisitions may have on key performance conditions. This approach acknowledges the strategic importance of acquisitions to the Company’s
long-term performance and strategy.
For the Group Managing Director and Group Finance Director the 2018 performance conditions were; growth in annual adjusted EPS,
Group ROCE and the Group’s relative TSR measured against a peer group of the STOXX Europe 600 Food & Beverage Index.
2018 LTIP – 2018 share award vesting
The following table sets out the performance measures, weightings, targets and actual vesting outcome for the 2018 share awards,
for the three-year performance period 2018-2020.
Performance Condition
Weighting (% of maximum)
Threshold (25% vesting)
Maximum (100% vesting)
Actual
Group EPS
40%
Three-year adjusted EPS
growth equal to 4% CAGR
Three-year adjusted EPS
growth equal to or greater
than 9% CAGR
Less than threshold
CAGR of -4.97%
Vesting 0%
Group ROCE
40%
Three-year simple ROCE
average equal to 10%
Three-year simple ROCE
average equal to 13%
Above threshold ROCE
average of 11.02%
Vesting 52.6%
Group TSR
20%
Ranked at the median of
the STOXX Europe 600
Food & Beverage Index
Ranked in the top quartile
of the STOXX Europe 600
Food & Beverage Index
Ranked below Median
Vesting 0%
The share awards granted to Executive Directors in 2018, under the 2018 LTIP, for the three-year performance period 2018-2020, vest no earlier
than 26 April 2021 (3 years from the date of grant) as follows:
Executive Directors
S Talbot
M Garvey
Total number of
shares awarded
Number of shares
awarded expected
to vest in 2021
155,005
72,935
32,613
15,346
Percentage
outcome %
21.0%
21.0%
Value at grant of
the shares vesting
(A)
Change in value
over vesting period
of share vesting (B)
Total vesting value
(A+B)1
€452,179
€212,772
-€113,656
-€53,481
€338,523
€159,291
1. This reflects the value of share awards expected to vest in 2021 with a three year performance period ended in January 2021. The total vesting values have been estimated using the
official closing share price on 31 December 2020 (last day of trading for FY 2020) of €10.38. The value at grant of the shares vesting was €13.865 being the median between the high and
low of a Glanbia plc share on 25 April 2018 the day of grant, which was the value used to determine the number of shares of the 2018 award.
Share Awards to past Executive Directors
The 2018 share awards granted to Hugh McGuire and Brian Phelan, who retired from the Board on 24 April 2019, have a 3-year performance
period which ended on 2 January 2021. These awards will vest no earlier than 26 April 2021 as set out below. The awards were based on 30%
Group EPS, 25% Group ROCE, 15% relative TSR along with 10% ROCE and 20% EBITA for GPN and GN as appropriate. Performance against
Group targets is set out above. The Divisional targets and actual performance are not disclosed due to commercial sensitivity.
Past Directors
H McGuire, CEO of Glanbia Performance Nutrition
B Phelan, CEO of Glanbia Nutritionals
Total number of
shares awarded
Number of shares
expected to vest
Percentage
outcome % Total vesting value1
73,927
64,479
9,721
12,612
13.1%
19.6%
€100,904
€130,913
1. This reflects the value of share awards expected to vest in 2021 with a three year performance period ended in January 2021. The total vesting values have been estimated using the
official closing share price on 31 December 2020 (last day of trading for FY 2020) of €10.38.
There are no other elements of remuneration to disclose in respect FY 2020 for past Directors.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 110
Glanbia plc | Annual Report and Financial Statements 2020
Remuneration Committee Report continued
Methodology
The Committee has agreed that the target ranges of awards under LTIP 2018 are set in consideration of acquisitions and disposals over the
three-year performance period and therefore no adjustment is made for acquisitions and disposals to determine vesting.
Group EPS
The Group’s Compound Annual Growth Rate (CAGR) of adjusted EPS over the three-year performance period was a key metric for the
Executive Directors’ 2018 share award, representing a 40% weighting. Adjusted EPS is calculated as the profit attributable to the equity holders
of the Company before exceptional items and intangible asset amortisation and impairment (excluding software amortisation) net of related tax,
divided 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. The EPS performance condition is measured using constant currency to reflect more accurately underlying earnings performance
and remove any distortionary effect of currency volatility.
Investors consider adjusted EPS to be a key indicator of long-term financial performance and value creation of a public limited company.
Therefore adjusted EPS is a key metric to incentivise long-term sustainable business performance.
The table below shows the Group’s reported adjusted EPS over the performance period from continuing operations.
2017
2020
Group ROCE
85.96c
73.78c
Group ROCE over the three-year performance period represented a 40% weighting for the 2018 share award. Group 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 and impairment less current liabilities and deferred tax liabilities excluding all borrowings, lease liabilities and acquisition related
liabilities; retirement benefit assets and cash. It is calculated by taking the average of the relevant opening and closing balance sheet amounts.
Group TSR
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. This metric attracts a 20% weighting.
Long-Term Incentive Share Awards 2019 and 2020
2019 share awards and 2020 share awards were made to the Executive Directors on 21 March 2019 and 23 March 2020 respectively. Both
awards are subject to the achievement of Group TSR, Group EPS and Group ROCE performance conditions, as set out below, measured over
the relevant three year performance period. 2019 share awards will vest no earlier than 21 March 2022 with 2020 share awards vesting no earlier
than 23 March 2023. Any vested shares are subject to a two-year holding period from date of vesting.
The performance conditions and weightings for all outstanding share awards under LTIP 2018 are set out in the following table.
Performance Condition
Group EPS
Three-year adjusted EPS
Group ROCE
Group TSR
Ranking in STOXX Europe 600 Food
and Beverage Index
Weighting
% of max
40%
40%
20%
2019 Performance Metrics
Financial Period 2019 – 2021
2020 Performance Metrics
Financial Period 2020 – 2022
Vesting 0%
< 4%
CAGR
Vesting 25%
(Threshold)*
Vesting 100%
(Maximum)*
= 4%
CAGR
≥ 9%
CAGR
Vesting 0%
< 4%
CAGR
Vesting 25%
(Threshold)*
Vesting 100%
(Maximum)*
= 4%
CAGR
≥ 9%
CAGR
< 9%
= 9%
≥ 12%
< 9%
= 9%
≥ 12%
Below the
median
At median
In the top
quartile
Below the
median
At median
In the top
quartile
*
Straight line vesting between threshold performance and maximum performance.
Achievement against performance conditions is determined on a constant currency basis to reflect more accurately underlying earnings
performance and remove any distortionary effect of currency volatility. LTIP performance targets are set with future acquisitions in mind and are
therefore reflective of the expected impact acquisitions may have on key performance conditions. This approach acknowledges the strategic
importance of acquisitions to the Group’s long-term performance and strategy.
111
Covid-19 and Long-Term Incentive Awards 2019 and 2020
As referenced in the Committee Chairman’s letter, Covid-19 has had a significant impact on the inflight awards for 2019 and 2020, with the
performance conditions for 2020 awards set only weeks before the onset of the pandemic. The ability for the 2019 and 2020 awards to achieve
the objective of ‘long-term retention and reward for sustainable performance’ has been largely eroded. Whilst the Committee recognises this, it
has decided not to take any action at this time but to consult with shareholders during 2021 in respect of what actions, if any, should be taken to
re-incentivise management through these inflight awards. If action is deemed warranted it will be subject to a separate resolution for shareholder
approval at the 2022 AGM.
TSR Performance
The graph illustrates the TSR performance of the Group over the past five years showing the change in value of €100 invested in Group’s shares
from 3 January 2016 to 2 January 2021 (dates aligning with opening and closing financial periods) compared with the STOXX Europe 600 Food &
Beverage Index of which the Group is a constituent.
€160
€120
€80
€40
€0
2015
2016
2017
2018
2019
2020
Glanbia
STOXX Europe 600 Food and Beverage Index
Group Managing Director Total Remuneration
The table below sets out the remuneration received by the Group Managing Director. This table will be extended each year to cover a 10 year period.
Siobhán Talbot – Group Managing Director
Total Remuneration €’000
Annual Incentive
achieved as a % of maximum
Long-term Incentives
achieved as a % of maximum
2015
2,631
2016
3,133
2017
3,229
2018
3,466
2019
1,5771
2020
2,310
81.2%
90.5%
71.6%
92.8%
0.0%1
36.3%
74.98%
81.07%
76.79%
58.13%
17.64%
21.0%
1. S Talbot voluntarily waived the entire 2019 annual incentive which would have otherwise resulted in a Total Remuneration earned in 2019 of €2.104 million. Annual Incentive earned in 2019
was 33.4% of maximum.
Directors’ shareholdings
As at 2 January 2021 the Executive Directors’ share ownership against the guidelines was as follows:
Executive Directors
S Talbot
M Garvey
% of base salary as
at 2 January 2020,
based on market
value as at
2 January 20211
Shares held as at
2 January 2021
317,798
111,285
306.5%
194.0%
Shareholding
guidance
250%
150%
1. The market values have been estimated using the official closing price of a Glanbia plc share on 2 January 2021 of €10.38.
Dilution
Share awards granted under the 2008 LTIP, 2018 LTIP and the Annual Deferred Incentive are satisfied through the funding of employee benefit
trusts which acquire shares in the market. The Company’s employee benefit trusts held 692,698 shares at 2 January 2021.
The exercise of share options under the 2002 LTIP (which expired in 2012) is satisfied by the allotment of newly issued shares. At 2 January 2021
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.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 112
Glanbia plc | Annual Report and Financial Statements 2020
Remuneration Committee Report continued
Change in remuneration of Directors compared to employees
The table below shows the percentage change in total remuneration using the single figure methodology for the years ended 4 January 2020 and
2 January 2021 for the Directors of the Company and the average of all permanent employees of the Group on a full time equivalent basis. For the
purpose of this disclosure the Group is defined as all employees of wholly-owned entities in US and Ireland who are deemed to be most
representative of the global workforce.
Executive Directors
S Talbot1
M Garvey2
Non-Executive Directors
Mn Keane3
J Murphy3
P Murphy3
P Ahern
P Coveney
J Daly4
D Gaynor5
V Gorman
B Hayes
M Minnick4
D O’Connor
Average remuneration on full-time equivalent basis
Employees of the Group6
Earned
Paid
Earned
Paid
2019-2020
Total
remuneration
2020, €’000
Total
remuneration
2019, €’000
Change in total
remuneration %
2019 to 2020
2,310
2,310
1,238
1,238
97
56
56
43
85
71
150
43
43
85
95
81
2,104
1,577
1,165
1,103
113
60
60
43
85
57
95
43
43
57
95
75
9.8%1
46.5%1
6.3%2
12.2%2
-14.2%
-6.7%
-6.7%
0.0%
0.0%
24.6%
57.9%
0.0%
0.0%
49.1%
0.0%
8%
1. S Talbot earned Total Remuneration of €2.104 million in 2019 but was paid €1.577 million due to the entire 2019 annual incentive being voluntarily waived. 2020 earned total remuneration
is +9.8% on 2019 earned Total Remuneration.
2. M Garvey earned Total Remuneration of €1.165 million in 2019 but was paid €1.103 million due to a portion of the 2019 annual incentive being voluntarily waved. 2020 earned total
remuneration is +6.3% on 2019 earned Total Remuneration.
3. Following the appointment of an independent of the Society, Non-Executive Director, D Gaynor as Group Chairman, the Society-nominated positions of Group Chairman (Mn Keane)
and Vice Chairmen (J Murphy and P Murphy) were no longer applicable for the Glanbia plc Board. This is reflected in the % change in total remuneration from 2019 to 2020.
4. J Daly and M Minnick were both appointed 1 May 2019 and stepped down 1 November 2020 and 31 December 2020 respectively. The % change of +24.6% and +49.1% reflects total
remuneration for service in 2019 and 2020.
5. D Gaynor was appointed Group Chairman effective 8 October 2020, the % change in total remuneration from 2019 to 2020 reflects his appointment and the increase in Group Chairman
fees as set out page 105.
6. Average remuneration has been determined based on the workforce of wholly-owned entities in US and Ireland which is most representative of the global workforce.
Chief Executive to all-employee pay ratio
Whilst not a reporting-requirement, a voluntary disclosure on CEO pay ratio for 2020 and 2019 is set out below. The disclosure is based on
the workforce of wholly-owned entities in US and Ireland which is most representative of the global workforce. Total remuneration has been
determined using the ‘single total figure’ methodology as it provides a like-for-like comparison between the Chief Executive and other employees.
All elements of remuneration were calculated on a full-time and full-year equivalent basis and no adjustments or assumptions were made by the
Committee. A significant portion of the Chief Executive Officer’s total remuneration is delivered through the Group’s short-term and long-term
incentives, where awards are aligned to strategic objectives and share awards are subject to share price movements over time. The fluctuation
of variable payments can be seen in comparing the Total Remuneration ratios from 2019 to 2020 where the median CEO pay ratio, for example,
is 28 times and 41 times respectively. This variation reflects the Chief Executive Officer’s voluntary waiver of the entire annual incentive payment
in 2019 and 2017 share award vesting as compared with the 2020 annual incentive and 2018 share award vesting, as set out on the total
remuneration table on page 106. The Committee will monitor both the absolute ratios and the trend over time, and seek to understand the
underlying drivers of these.
Financial Year
2019
2020
Total Remuneration (€)
Total Remuneration Ratio
Base Salary (€)
Base Salary Ratio
Total Remuneration (€)
Total Remuneration Ratio
Base Salary (€)
Base Salary Ratio
P25
(Lower Quartile)
€’000
P50
(Median)
€’000
P75
(Upper Quartile)
€’000
Chief Executive
€’000
38
41
32
32
41
57
33
32
57
28
43
25
57
41
44
24
85
18
70
15
91
26
70
15
1,5771
n/a
1,050
n/a
2,310
n/a
1,050
n/a
1.
In 2019 S Talbot was paid Total Remuneration of €1.577 million but earned €2.104 million. S Talbot voluntarily waived the entire 2019 annual incentive, 33.4% of maximum.
113
Implementation of policy in 2021
Salary, pension and benefits
The base salaries of the Group Managing Director and Group Finance Director are increased by 2.5% to €1,076,250 and €595,525 respectively,
effective 1 January 2021.
All pension and other benefits will remain unchanged for 2021 with the Executive Directors’ pension provision being aligned to the workforce
in Ireland by 31 December 2022.
2021 Annual Incentive
Annual Incentive opportunity for the Group Managing Director and Group Finance Director in 2021 will remain unchanged at 150% of salary.
Annual Incentive will continue to be based on EPS, Group Operating Cash flow and individual performance objectives. For 2021, noting investor
and proxy agency policy to consider the use of ESG metrics in incentives and acknowledging the importance to our business we are introducing
to the STIP an ESG metric which will focus on the execution of the Group’s Diversity and Inclusion (D&I) strategy. In response to shareholders’
feedback the Committee continues to review the use of adjusted EPS in both the Annual and Long-Term Incentive Plan and whether there is
an alternative measure of profit that might be used in the Annual Incentive. The Committee concluded that adjusted EPS be retained for 2021
for both the annual and long-term incentive. EPS in the Annual Incentive measures EPS over one year only and in the long-term incentive over a
three year period and management is therefore being rewarded for short term profit and separately for critically long-term sustainable profit over
a three year period. In addition, EPS includes profit derived from our significant joint ventures which is not captured by alternative measures of
profit. The Committee believes that the targets being set for 2021 reflect internal planning and are appropriately challenging relative to prior years
given the current commercial circumstances. The Committee will consider all aspects of the Annual Incentive as part of the policy review in 2021.
2021 LTIP share awards
The share award levels in 2020 were scaled back to 200% of salary (from 250% of salary) for the Group Managing Director and 160% of salary
(from 200% of salary) for the Group Finance Director to reflect the decline in share price over 2019. The 2021 share awards are expected to be
made in line with policy at 250% and 200% of salary for the Group Managing Director and Group Finance Director respectively.
The vesting criteria for 2021 share awards for the Group Managing Director and Group Finance Director will be adjusted to reflect the
increased focus on earnings recovery and introduction of an environmental metric again reflecting its importance to Group business strategy
and noting investor and proxy agency feedback. For 2021 the environmental metric will focus on implementation of carbon emission reduction
measures, including conversion to renewable electricity where available.
Executive Directors
S Talbot / M Garvey
2018 Long-Term Incentive Plan
2021 share award
Adjusted EPS growth
(constant currency)
50%
Group ROCE
30%
TSR ranking In the
comparator group
Environmental Metric
10%
10%
In the context of the continuing challenging environment due to the Covid-19 pandemic, the Committee will take time to consider the
appropriate target range for the EPS and ROCE measures, ensuring targets continue to be challenging and consistent with the Committee’s
focus on incentivising a long-term profitable growth. The Committee expects to be in a position to disclose the target range by way of a regulatory
announcement not later than six months after the award is granted. Full disclosure of the target ranges will also be provided in next year’s
Remuneration Committee Report.
Application of Remuneration Policy for 2021
The chart below shows how the composition of each of the Executive Directors’ packages varies at different levels of performance under the
operation of the Remuneration Policy for 2021. The assumptions noted for “target” performance are provided for illustration purposes only.
7,082
19%
5,737
47% 38%
28% 23%
2,913
23%
28%
1,433
100% 49% 25% 20%
7,000
6,000
5,000
s
0
0
0
€
4,000
3,000
2,000
1,000
0
x
x
Performance Levels
Threshold Target
Maximum
1) assuming constant share price and
2) assuming 50% increase in share price
Fixed Pay
Fixed pay, being base salary, pension allowances for the 2021 financial year
and other benefits taken from the single total figure for the prior period
Annual
Incentives
Nil
75% of salary for both
Group Managing Director
and Group Finance
Director
150% of salary for both Group
Managing Director and Group
Finance Director
4,900
22%
3,824
56% 44%
2,417
49%
23% 18%
18%
778
100% 32% 20% 16%
Long-term
Incentives
Nil
25% vesting of share awards
100% vesting of share awards
25% x 250% of Group
Managing Director salary
100% x 250% of Group
Managing Director salary
25% x 200% of Group
Finance Director salary
100% x 200% of Group Finance
Director salary
Threshold
Target
Max
Max+50%
Threshold
Target
Max
Max+50%
Group Managing Director
Group Finance Director
Long-term Share Price Growth
Long-term Share Awards
Annual Bonus
Salary, Benefits, Pension
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION
114
Glanbia plc | Annual Report and Financial Statements 2020
Remuneration Committee Report continued
Directors’ remuneration and interests in shares in Glanbia plc
Tables A to G on the following pages give details of the Directors’ remuneration and interests in shares in Glanbia plc held by Directors and the
Group Secretary and their connected persons as at 2 January 2021. There have been no changes in the interests listed in Tables B to G between
2 January 2021 and 23 February 2021. The official closing share price on 31 December 2020 (last day of trading for the 2020 financial year)
was €10.38 and the range during the year was €11.49 to €7.70. The average price for the year was €9.75.
Table A: 2020 Directors’ Remuneration
The salary, fees, incentives and other benefits pursuant to the remuneration package of each Director during the year are set out below.
Consistent with disclosures in this years Annual Report, Total Remuneration for 2019 and 2020 reflects the value of relevant vested share awards.
Date of Directorship
appointment/retirement
Salary
€’000
Fees
€’000
Pension
contribution1
€’000
Other
benefits2
€’000
Annual
Incentive
(payable in
cash)3
€’000
Annual
Incentive
(deferred
shares)4
€’000
Long-Term
Incentive5
€’000
2019
Total6
(Restated)
€’000
2020
Total
€’000
Executive Directors
S Talbot
M Garvey
H McGuire7
B Phelan7
2020
2019
Stepped down 24 April 2019
Stepped down 24 April 2019
Non-Executive Directors
D Gaynor8
P Ahern
R Brennan
P Coveney
J Daly
App. 1 January 2021
App. 1 May 2019 and
Ret. 1 November 2020
Ret. 22 April 2020
Ret. 1 May 2019
Ret. as Chairman 8 October 2020
App. 1 May 2019 and
Ret. 28 February 2020
App. 1 November 2020
App. 1 May 2019 and
Ret. 31 December 2020
App. 8 October 2020
Ret. 22 April 2020
J Doheny
V Gorman
P Haran
B Hayes
Mn Keane
R Laube
J Lodge
M Minnick
J G Murphy
J Murphy
P Murphy
D O’Connor
E Power
2020
2019
Total 2020
Total 2019
1,050
581
–
–
1,631
1,942
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,631
1,942
–
–
–
–
–
–
150
43
–
85
71
13
43
–
43
97
14
14
85
56
10
56
95
13
888
926
888
926
–
145
–
–
145
145
349
33
–
–
382
486
572
320
–
–
892
93
–
–
–
–
–
256
2,310
1,238
101
131
3,780
339
159
101
131
730
396
1,577
1,103
279
359
3,318
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
145
145
382
486
892
93
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
256
150
43
–
85
71
13
43
–
43
97
14
14
85
56
10
56
95
13
95
43
–
85
57
43
43
32
43
113
57
–
57
60
–
60
95
43
888
4,668
926
4,244
730
396
1. M Garvey participates in the Glanbia defined contribution plan with a contribution of 25%.
2. Other benefits include company car or equivalent, medical/life assurance and taxable cash in lieu of pension payments of 26.5% of salary to S Talbot.
3. This reflects the proportion of the Annual Incentive payable in cash to Executive Directors in respect of performance for full year 2020.
4. This reflects the proportion of the Annual Incentive (over 75% of base salary) which is nil for 2020. This would ordinarily be invested in shares and retained for two years, following
appropriate taxation and social security deductions.
5. For 2019, this reflects the value of the 2017 share awards which vested on 24 April 2020. The gross value is calculated using the official opening share price on the date
of vest of €9.24. 2017 vested share awards are held for a 2 year period to April 2022. For 2020, this reflects the value of the 2018 share awards which will vest on 26 April 2021,
earliest, the performance period for which ended on 2 January 2021. The gross value is calculated using the official closing share price on 31 December 2020 (last day of trading for
the 2020 financial year) of €10.38. 2018 vested share awards are held for a 2 year period from the date of vest.
6. 2019 Total Remuneration is restated to include the value of the 2017 share awards as outlined in note 5.
7. H McGuire and B Phelan stepped down as Executive Directors on 24 April 2019. The vest value of share awards granted while Executive Directors in 2017 and 2018, in respect
of performance periods ending in 2019 and 2020 respectively, are included in the table above. The total remuneration for 2019 also reflects other remuneration paid in the period
of qualifying service to 24 April 2019.
8. D Gaynor was appointed Group Chairman effective 8 October 2020, the % change in total remuneration from 2019 to 2020 reflects his appointment and the increase in Group Chairman
fees as set out page 105.
Details of Directors’ long-term awards expected to vest in respect of performance to 2 January 2021 are set out on pages 109 to 110.
115
The defined pension benefit of the Executive Directors during the year was as follows:
Transfer value of
increase in accrued
pension
€’ 000
Annual pension
accrued in 2020 in
excess of inflation
€’ 000
Total annual
accrued pension at
2 January 2021
€’ 000
S Talbot
2020
2019
Table B: Directors’ and Secretary’s interests in ordinary shares in Glanbia plc
Directors
D Gaynor
S Talbot
P Ahern
R Brennan
P Coveney
M Garvey
V Gorman
B Hayes
Mn Keane
J Lodge
J G Murphy
J Murphy
P Murphy
D O’Connor
Secretary
M Horan
* or at date of original appointment to the Board
1. Executive Director.
2. Appointed 1 January 2021.
3. Appointed 1 November 2020.
4. Appointed 8 October 2020.
–
–
–
1
2
1
3
4
–
–
–
159
159
159
As at 2 January
2021
As at 5 January
2020
Ordinary Shares
Ordinary Shares*
10,000
317,798
14,091
–
3,900
111,285
6,033
34,846
33,742
–
7,283
1,292
11,506
7,680
10,000
297,192
14,091
–
3,900
92,255
6,033
34,846
33,742
–
7,283
1,292
11,506
7,680
41,990
39,755
Note: The ordinary shares held in trust for the Directors and Secretary disclosed in Table C below are included in the total number of ordinary
shares held by the Directors and Secretary above.
None of the Directors have used the shares above as security.
Table C: Directors’ and Secretary’s interests in ordinary shares in Glanbia plc subject to restriction
Executive Directors
S Talbot
M Garvey
Secretary
M Horan
2008 LTIP2
2008 LTIP3
2018
Annual Deferred
Incentive4
2019
Annual Deferred
Incentive5
32,259
13,763
10,606
4,990
17,124
10,071
–
14,040
Total1
59,989
42,864
11,837
2,235
5,442
–
19,514
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 11 March 2021.
3. Subject to restriction on sale until 24 April 2022.
4. Subject to restriction on sale until 28 March 2021.
5. Subject to restriction on sale until 27 March 2022.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 116
Glanbia plc | Annual Report and Financial Statements 2020
Remuneration Committee Report continued
Table D: Summary of Directors’ and Secretary’s interests in Glanbia plc 2018 and 2008 LTIP
Directors
S Talbot
M Garvey
Secretary
M Horan
As at 2 January
2021
As at 5 January
2020
As at 2 January
2021
As at 5 January
2020
2018 LTIP
Share awards
2018 LTIP
Share awards
2008 LTIP
Share awards
2008 LTIP
Share awards
539,733
243,242
300,757
137,455
108,952
63,228
–
–
–
112,451
52,911
23,702
Table E: Directors’ and Secretary’s interests in 2018 LTIP
Date of Grant
As at
5 January
2020
Granted
during
the year
Vested during
the year
Lapsed
during
the year
As at
2 January
2021
Market price
at date of
award €
Earliest date
for vesting
Expiry date
Notes
Directors
S Talbot
Total:
M Garvey
Total:
Secretary
M Horan
Total:
26-Apr-18
21-Mar-19
23-Mar-20
155,005
145,752
–
–
–
238,976
300,757
238,976
26-Apr-18
21-Mar-19
23-Mar-20
72,935
64,520
–
–
–
105,787
137,455
105,787
26-Apr-18
21-Mar-19
23-Mar-20
35,341
27,887
–
–
–
45,724
63,228
45,724
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
155,005
145,752
238,976
–
539,733
–
–
–
–
–
–
–
–
72,935
64,520
105,787
243,242
35,341
27,887
45,724
108,952
13.86 26-Apr-21 26-Apr-22
17.73 21-Mar-22 21-Mar-23
8.24 23-Mar-23 23-Mar-24
13.86 26-Apr-21 26-Apr-22
17.73 21-Mar-22 21-Mar-23
8.24 23-Mar-23 23-Mar-24
13.86 26-Apr-21 26-Apr-22
17.73 21-Mar-22 21-Mar-23
8.24 23-Mar-23 23-Mar-24
1
2
3
1
2
3
1
2
3
1. Share awards granted on 26 April 2018 were subject to performance conditions measured over the three financial years ended 2 January 2021. The outcome of these performance
conditions and the number of share awards expected to vest to Executive Directors during 2021 are set out on page 109. The vested share award, net of relevant taxation and social
security deductions, will be restricted from sale for two years and be held on trust for them by the trustee of the Glanbia plc section 128D Employee Benefit Trust.
2. The performance period in respect of the 2018 LTIP awards made in 2019 is the three financial years ending 2021.
3. The performance period in respect of the 2018 LTIP awards made in 2020 is the three financial years ending 2022.
The performance conditions attached to the awards granted in 2019 and 2020 are detailed in the section entitled ‘Long-Term Incentive Awards
2019 and 2020’ on page 110.
117
Table F: Directors’ and Secretary’s interests in 2008 LTIP
Date of Grant
As at
5 January
2020
Granted
during
the year
Vested during
the year
Lapsed
during
the year
As at
2 January
2021
Market price
at date of
award €
Earliest date
for vesting
Expiry date
Notes
Directors
S Talbot
Total:
M Garvey
Total:
Secretary
M Horan
Total:
23-Feb-17
112,451
112,451
23-Feb-17
52,911
52,911
23-Feb-17
23,702
23,702
–
–
–
–
–
–
19,837
92,614
19,837
92,614
9,334
9,334
43,577
43,577
4,181
4,181
19,521
19,521
–
–
–
–
–
–
18.05 23-Feb-20 23-Feb-21
1,2,3
18.05 23-Feb-20 23-Feb-21
1,2,3
18.05 23-Feb-20 23-Feb-21
1,2,3
1. Share awards granted on 23 February 2017 were subject to performance conditions measured over the three financial years ended 4 January 2020. The awards vested on 24 April 2020
and the percentage of the awards vested are shown in Table H below.
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 the Directors by the trustee of the Glanbia plc Section 128D Employee Benefit Trust.
3. The total number of shares subject to restriction are included in the total number of ordinary shares disclosed in Table B on Page 115.
Table G: Directors’ and Secretary’s Annual Deferred Incentive
Directors
S Talbot
2018 Annual Deferred Incentive
2019 Annual Deferred Incentive
M Garvey
2018 Annual Deferred Incentive
2019 Annual Deferred Incentive
Secretary
M Horan
2018 Annual Deferred Incentive
2019 Annual Deferred Incentive
Value of Annual
Incentive converted
into shares €1
Date of conversion/
acquisition of
shares
Acquisition price
per share at date of
conversion
Number of
shares acquired
€553,000
–
28-Mar-19
–
€325,000
€256,000
28-Mar-19
27-Mar-20
€17.285
–
€17.285
€9.750
31,966
–
18,801
26,208
€176,000
–
28-Mar-19
–
€17.285
–
10,160
–
1. Numbers are rounded to the nearest thousand.
2. Directors were permitted to sell sufficient shares to satisfy any tax or social security deductions arising on the acquisition of the shares. The balance of the shares are restricted from sale
for two years and are held on trust for the Directors by the trustee of the Glanbia plc Section 128D Employee Benefit Trust.
3. The total number of shares subject to restriction are included in the total number of ordinary shares disclosed in Table B on Page 115.
Table H: Value of Awards expected to vest in 2021 and awards vested in 2020
Executive Directors
S Talbot
M Garvey
Number of shares
awarded expected
to vest in 2021
Percentage
Outcome %
Estimated Market
Value € 1
Number of shares
vested in 2020
Percentage
Outcomes %
Estimated Market
Value € 2
32,613
15,346
21.0%
21.0%
338,523
159,291
19,837
9,334
17.7%
17.7%
183,294
86,246
1. This reflects the value of long-term incentive share awards expected to vest in 2021 with a three year performance period ended in 2020.
The market values have been estimated using the official closing price of a Glanbia plc share on 31 December 2020 (being the last day of trading on the Euronext Dublin before year end
2 January 2021) of €10.38.
2. This reflects the value of long-term incentive share awards vested in 2020 with a three year performance period ended in 2019. These have been valued at the market value of the shares
on the date of vesting €9.24 per share (official opening price).
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION
118
Glanbia plc | Annual Report and Financial Statements 2020
Other Statutory Information
Principal activities, strategy and business model
Glanbia plc is a global nutrition group, headquartered in Ireland, with a direct presence in 32 countries worldwide.
The Group’s business model and strategy are summarised in the Strategic Report on pages 21 to 23.
The Group Chairman’s statement on pages 16 and 17, the Group Managing Director’s review on pages 18 to 20, the Operations review on
pages 32 to 41 and the Group Finance Director’s review on pages 42 to 47 contain a review of the development and performance of the Group’s
business during the year, of the state of affairs of the business at 2 January 2021, 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 36 to the Financial Statements.
As set out in the Group Income Statement on page 136, the Group reported a profit for the period of €143.8 million after exceptionals.
Comprehensive reviews of the financial and operating performance of the Group during 2020 are set out in the Group Finance Director’s review
on pages 42 to 47 and in the Operations review on pages 32 to 41. Key Performance Indicators are set out on pages 30 and 31. The treasury
policy and the financial risk management objectives of the Group are set out in detail in Note 29 to the Financial Statements. Our approach
to our people and our stakeholders is discussed on pages 24 to 27 and 74 to 75 and sustainability is discussed on pages 48 to 53.
Non-Financial Reporting Statement
The Group aims to comply with the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and
groups) Regulations 2017, SI No. 360 of 2017 (as amended). The table on page 64 is designed to help stakeholders navigate to the relevant
sections in this Annual Report to understand the Group’s approach to these non-financial risks. Many of our policies can be viewed on www.
glanbia.com.
Process for appointment/retirement of Directors
In addition to the Companies Act 2014, the constitution of the Company contains provisions regarding the appointment and retirement of
Directors. At each Annual General Meeting (AGM) the constitution of the Company 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 (2018), all of the Directors are
subject to annual re-election. Each of the Directors, with the exception of Martin Keane (who is not putting himself forward for re-election at
the AGM), will retire at the 2021 AGM and, being eligible, offer themselves for re-appointment. The constitution of the Company 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 Euronext Dublin 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/she 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 of the Company 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 of the Company also contains provisions regarding the automatic retirement of a Director in certain other limited circumstances.
Annual General Meeting
The Company’s 2021 AGM will be held on 6 May 2021. Full details of the 2021 AGM, together with explanations of the resolutions to be proposed,
will be contained in the Notice of the 2021 AGM. The record date for the 2021 AGM will be determined in accordance with section 1087G and
1105 of the Companies Act 2014.
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 of the Company. At the 2020 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
2021 AGM or 21 July 2021. Accordingly, a resolution will be proposed at the 2021 AGM to renew the Company’s authority to issue new shares.
At the 2020 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 2021 AGM or 21 July 2021, whichever is earlier. Accordingly, resolutions will be proposed at the
2021 AGM to renew these authorities.
It is the Directors’ intention to follow the provisions of the Pre-emption Group Statement of 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 a company’s issued share capital in any rolling three-year period.
119
At the 2020 AGM, the Directors were also given the power to buy back a maximum number of 29,604,568 ordinary shares at a minimum price of
€0.06 each. The maximum price was an amount equal to 105% of the average of the middle market quotations of the Company’s ordinary shares
as derived from the Euronext Dublin Daily Official List for the five business days immediately preceding the day on which such ordinary shares
are contracted to be purchased. This power will expire at the earlier of the conclusion of the 2021 AGM or 21 July 2021 and a resolution will be
proposed at the 2021 AGM to renew this power. A special resolution will be proposed at the 2021 AGM to renew the Company’s authority to
acquire its own shares. At the 2020 AGM, shareholders also authorised the maximum and minimum prices at which the Company may reissue
off-market such shares as it may purchase. This authority will expire at the earlier of the conclusion of the 2021 AGM or 21 July 2021 and
a resolution will be proposed at the 2021 AGM to renew this authority.
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 €17.3 million
in 2020 (2019: €12.7 million) as disclosed in Note 5 to the Financial Statements.
Dividends
An interim dividend of 10.68 cent per share was paid on 2 October 2020 (an aggregate of €31.5 million) to shareholders on the share register at
the close of business on 21 August 2020. The Directors propose a final dividend of 15.94 cent per share (an aggregate of €46.8 million) bringing
the total dividend in respect of 2020 to 26.62 cent per share (an aggregate of €78.3 million). Subject to shareholder approval, the final dividend will
be paid on 7 May 2021 to shareholders on the share register on 26 March 2021. The foregoing amounts paid are net of dividends waived by the
Group’s Employee Trusts.
Total dividends paid during 2020 amounted to an aggregate of €78.6 million (being a final dividend of 15.94 cent per share paid on 24 April 2020
(an aggregate of €47.1 million) and an interim dividend of 10.68 cent per share paid on 2 October 2020 (an aggregate of €31.5 million). The
foregoing amounts paid are net of dividends waived by the Group’s Employee Trusts.
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.
For the past number of years, dividends have been paid in sterling to shareholders whose address, according to the Glanbia share register,
is in the UK (unless they have elected otherwise). From Monday, 15 March 2021 this structure will change and a default currency of euro will
be applied to all new shareholders who come on to the Glanbia plc share register, regardless of their registered address. Where an existing
shareholder holds shares in certificated (i.e. paper) form and has previously received sterling because his/her registered address is in the UK
or because he/she has previously elected to receive sterling, he/she will continue to receive sterling after 15 March 2021 unless he/she elects
otherwise. All other shareholders will henceforth automatically be paid in euro unless a sterling currency election is made (including those
shareholders who hold their shares in uncertificated (i.e. dematerialised) form).
Currently all trades on both Euronext Dublin and the London Stock Exchange are settled via the CREST securities settlement system in the UK.
However, with the UK’s departure from the EU, the Company has no choice but to migrate from the CREST securities settlement system to a new
depository arrangement involving a combination of Euroclear Bank in Brussels and the CREST system (the “Migration”). Shareholders holding
their shares, subject to Migration in March 2021, via the central securities depository operated by Euroclear Bank or CREST will receive dividends
electronically via such systems. To avail of these facilities, shareholders should follow the applicable procedures in the EB Services Description,
the EB Rights of Participants Document and the CREST International Manual. It is important to note that any previously recorded currency/tax
elections for shares in uncertificated (i.e. dematerialised) form will not apply after the Migration and we have been advised that where shares
are held via the central securities depository operated by Euroclear Bank or CREST, it will be necessary for the relevant shareholders to submit
their currency elections and any appropriate tax certification declaration in accordance with the respective procedures prior to each payment.
Irish Dividend Withholding Tax (DWT) must be deducted from dividends paid by an Irish resident company, unless a shareholder is entitled
to an exemption and has submitted a properly completed exemption form to the Company’s Registrar. DWT is deducted at the standard rate
of Income Tax (25%). Non-resident shareholders located in countries with a double tax treaty with Ireland and certain Irish companies, trusts,
pension schemes, investment undertakings and charities may be entitled to claim exemption from DWT. Copies of the exemption form may
be obtained from the Company’s Registrar. Shareholders should note that DWT will be deducted from dividends in cases where a properly
completed form has not been received by the market deadline for the dividend. Individuals who are resident in Ireland for tax purposes are
not entitled to an exemption. If shares are held via Euroclear Bank or CREST, the owners of the shares will need to contact the intermediary
through whom the shares are held to ascertain arrangements for tax relief to be applied at source.
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 2 January 2021 the authorised share capital of the Company was 350,000,000 ordinary shares of €0.06 each and the issued share capital
was 294,401,777 (2019: 296,045,684) ordinary shares of €0.06 each, of which 31.7% was held by the Society. All the Company’s shares are fully
paid up and quoted on Euronext Dublin and the London Stock Exchange. The Company did not allot any shares during the year. The Company
repurchased 1,643,907 shares during the year as part of the share buyback programme.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 120
Glanbia plc | Annual Report and Financial Statements 2020
Other Statutory Information continued
Details of the Company’s share capital and shares under share award at 2 January 2021 are given in Notes 22 and 23, respectively,
to the Financial Statements.
Share Buyback
In October 2020, the Company announced the introduction of a share Buyback Programme to repurchase ordinary shares of up to €50 million
(the ‘Buyback Programme’).
During 2020, the Company repurchased a total of 1,643,907 ordinary shares under the Buyback Programme, returning a total of circa
€16.6 million in cash to shareholders.
The table below sets out the ordinary shares repurchased under the Buyback Programme.
Month
November
December
Total 2020
Total number of share
buyback purchases
Average price paid
per share
883,907
760,000
1,643,907
€9.83
€10.41
€10.10
See Note 23 to the Consolidated Financial Statements for further details.
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 of the Company, 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 Group’s share schemes, (while the shares are subject to such 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.
Certain restrictions on transfers of shares may from time to time be imposed by the Group’s share dealing rules and/or the Market Abuse
Regulation (EU) No 596/2014. Directors and certain employees are required to seek the Company’s approval to deal in its shares. Additionally,
members of the Group Operating Executive are required to hold a proportion of the value of their base salary in shares. These shares may
not normally be transferred during the individuals’ period in office. Where participants in a Group share scheme operated by the Group are
the beneficial owners of shares but not the registered owner, the voting rights are normally exercised by the registered owner at the direction
of the participants.
Article 2 of the constitution of the Company 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 23 to the Financial Statements at 2 January 2021, 692,698 ordinary shares were held in employee benefit trusts for the
purpose of the Company’s employee share schemes.
The Group’s employee benefit trusts have waived dividends due to them in respect of unallocated shares save a nominal amount.
The Trustees of the Group’s 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 2021 AGM.
121
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 of the Company
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 Company’s 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 ventures with Leprino Foods Company and the shareholders agreement with the Society in respect of Glanbia Ireland Designated
Activity Company. If a third party were to acquire control of the Group, Leprino Foods Company could elect to terminate its joint ventures with
the Group and, if this were to occur, the Group could then be required to sell its shareholding in the joint ventures to Leprino Foods Company
at a price equal to its fair value. In the same circumstances, the Society could within one year exercise the call option described on page 122.
In addition, the Company’s employee share plans contain change of control provisions which can allow for the acceleration of the exercisability
of share options and the vesting of share awards in the event of a change of control.
The Board is satisfied that no change of control has occurred in respect of these agreements.
Substantial interests
The Company has been advised of the following notifiable interests in its ordinary share capital:
Shareholder
Glanbia Co-operative Society Limited
Mawer Investment Management Limited
Black Creek Investment Management Inc.*
No. of ordinary shares
as at 2 Jan 2021
% of issued share capital
as at 2 Jan 2021
No. of ordinary shares
as at 23 Feb 2021
% of issued share capital
as at 23 Feb 2021
93,276,241
14,852,659
11,874,803
31.7%
5.0%
4.0%
93,276,241
15,956,460
11,874,803
31.9%
5.5%
4.1%
* Black Creek Investment Management Inc. (‘Black Creek’) is an investment management company. The shares are beneficially owned by 21 separate funds and clients which Black Creek
advises regarding their investment portfolios. Shares held directly are by funds for which Black Creek also acts as investment fund manager. None of the funds or clients by itself reaches
or exceeds the 3% threshold. The funds and clients give a proxy to Black Creek who can exercise the voting rights for the shares in its own discretion.
Contracts of significance for the purpose of LR 6.8.1,
Euronext Dublin Listing Rules/LR 9.8.4 R, UKLA Listing Rules
The Company has entered into an amended and restated Relationship Agreement with the Society, as also described in the Circular sent
to shareholders on 28 April 2017 and the key provisions of which are contained on page 81 of the 2019 Annual Report. The Society and
the Company plan to formally amend the Relationship Agreement to reflect the changes agreed on 23 February 2021 which are set out
in the Nomination and Governance Committee Report on page 92.
The Company has also entered into a shareholders agreement dated 2 July 2017 with the Society in respect of Glanbia Ireland Designated
Activity Company (GI). The key terms of the shareholders agreement are as set out below.
The board of directors of GI
The board of directors of GI will comprise of 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 Executive 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.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 122
Glanbia plc | Annual Report and Financial Statements 2020
Other Statutory Information continued
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 are not included in the business plan or which does not arise in the ordinary
course of trading.
Future capital contributions to GI
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 of GI
Profit retention
A minimum profit policy 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 business 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).
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 of GI
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. The 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 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 its subsidiary 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.
123
Effect of termination of the Gl 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 AGM 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.
•
Information required to be disclosed by LR 6.1.77, Euronext Dublin Listing Rules/LR 9.8.4 R, UKLA Listing Rules
For the purposes of LR 6.1.77/LR 9.8.4 R, the information required to be disclosed by LR 6.1.77/LR 9.8.4 R can be found in the following locations:
Section
Topic
(1)
(2)
(3)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Interest capitalised and related tax relief
Publication of unaudited financial information
Small related party transactions
Details of long-term incentive schemes
Waiver of emoluments by a director
Waiver of future emoluments by a director
Non pre-emptive issues of equity for cash
Item (7) in relation to major subsidiary undertakings
Parent participation in a placing by a listed subsidiary
Contracts of significance
Provision of services by a controlling shareholder
Shareholder waivers of dividends
Shareholder waivers of future dividends
Location
Financial Statements, Note 11
Not applicable
Not applicable
Remuneration Committee Report
Not applicable
Not applicable
Not applicable
Not applicable
Not applicable
Other Statutory Information
Not applicable
Other Statutory Information
Other Statutory Information
Agreement with controlling shareholders and independence provisions/undertakings
Pages 79 and 92
All the information cross-referenced above is hereby incorporated by reference into this Directors’ Report.
Subsidiary and associated undertakings/branches outside the State
A list of the principal subsidiary and associated undertakings and their activities including details of any branches of the Group outside the State
is included in Note 37 to the Financial Statements
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Glanbia plc | Annual Report and Financial Statements 2020
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 Central Bank (Investment Market
Conduct) Rules 2019, the Companies Act 2014 and the Listing Rules issued by Euronext Dublin 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 65 to 68 (‘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 Central Bank (Investment
Market Conduct) Rules 2019, the Companies Act 2014 and the Listing Rules issued by Euronext Dublin consists of pages 1 to 124.
Directors’ Report
On behalf of the Board
Donard Gaynor
Directors
23 February, 2021
Siobhán Talbot
Mark Garvey
125
Financial
Statements
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Glanbia plc | Annual Report and Financial Statements 2020
127
Independent Auditor’s Report to the Members of Glanbia plc
Report on the audit of the financial statements
Opinion on the financial statements of Glanbia plc (the ‘Company’)
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 Company as at 2 January 2021 and of the profit
of the Group for the financial period 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 37, 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; and
•
the related notes 1 to 11, including a summary of significant accounting policies as set out in note 1.
•
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) and IFRIC interpretations as adopted by the European Union and interpretations as approved
by the International Accounting Standards Board (IASB) (“the 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 FRS 101 “Reduced Disclosure Framework” issued by the Financial Reporting Council (“the 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 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 (IAASA), 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.
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Summary of our audit approach
Key audit matters
Materiality
Scoping
The key audit matters that we identified in the current year, and consistent with those reported on in the prior year, were:
• Exceptional items
• Provisions for uncertain tax positions;
•
• Revenue recognition
Impairment of goodwill and other intangible assets; and
The materiality that we used for the Group in the current year was €9m which was determined on the basis of profit
before tax and exceptional items. The materiality that we used for the Company was €3.6m which was determined based
on net assets.
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 45 components, 12 of
these were subject to a full audit, whilst the remaining 33 were subject to audits of specified balances where the extent
of our testing was based on our assessment of the associated risks of material misstatement, and of the materiality
of the component’s operations to the Group. Analytical review procedures were performed by the Group audit team
on all other components within the Group.
Significant changes
in our approach
Impact of COVID-19 on our audit approach
As the COVID-19 pandemic continues to spread globally it has had an impact on all elements of local and international
economies. We have considered the impact of COVID-19 on the Group’s business as part of our audit risk assessment
and planning. This assessment resulted in an increased audit scope on key audit areas including the consideration of
changes in manual and automated internal controls as a result of remote working by Glanbia personnel and increased
focus on the Group’s key judgement and estimates in relation to future strategic plans and profitability forecasts which
are key inputs into the group’s asset impairment model and going concern assessment, most notably in the Performance
Nutrition division which has experienced the greatest impact of the pandemic on revenue and profitability in 2020.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation
of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the Group and Company’s ability to continue to adopt the going concern basis of accounting
is set out below:
• We evaluated the design and implementation of the relevant controls in place for the directors’ review of the budgets and forecasts for
at least a period of 12 months from the date of signing of the Annual Report, including reviewing their challenge of these;
• We evaluated the Group’s and Company’s financing arrangements, including the agreements in respect of the undrawn committed bank
facilities in place within the Group;
• We challenged the directors’ assumptions and the basis for their evaluation and the inclusion of sensitivities incorporated in the budget and
also the impact of Covid-19 on future trading;
• We evaluated the completeness and accuracy of the disclosures made in the Basis of Preparation note on page 141 by reference to the
understanding we have obtained of the Group’s and Company’s financial performance during 2020, our assessment of the directors’
projections and our reading of the Group’s and Company’s financing agreements. We also evaluated the directors’ assessment of the impact
of Covid-19 and the adequacy of disclosures in relation to the specific risks posed by the pandemic. We considered throughout the audit
any contradictory information to the directors’ confirmation that the Group and Company is a going concern, including evaluating whether
the assumptions are realistic, achievable and consistent with the external and internal environment.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or
collectively, may cast significant doubt on the Group and Company’s ability to continue as a going concern for a period of at least twelve months
from when the financial statements are authorised for issue.
In relation to the reporting on how the Group has applied the UK Corporate Governance Code and the Irish Corporate Governance Annex, we
have nothing material to add or draw attention to in relation to the directors’ statement in the financial statements about whether the directors
considered it appropriate to continue to adopt the going concern basis of accounting.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
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 period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified,
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
audit 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.
129
Exceptional items
Key audit matter
description
As described in note 2 (summary of significant accounting polices) and note 6 (exceptional items) the Group, in
accordance with its stated accounting policy, classified a number of significant items of income and expense totalling
€34.5m as exceptional items. These exceptional items relate to organisational redesign costs, Covid-19 related costs,
acquisition integration costs, a legal settlement gain and asset impairments.
Earnings before interest, tax and amortisation (EBITA) is disclosed throughout the Annual Report on a pre-exceptional
basis and is one of the Group’s key performance indicators. The classification of items as exceptional affects adjusted
earnings per share and is inherently judgemental. As a result there is a risk that items are not consistently classified as
exceptional items in line with the Group’s accounting policy, or are not adequately disclosed.
How the scope
of our audit
responded to the
key audit matter
Refer also to page 88 (Audit Committee Report), and page 152 (Exceptional Items accounting policy).
We documented our understanding of the process the Directors undertook to identify and present exceptional items
within the Annual Report.
We challenged the nature and classification of transactions as exceptional items in accordance with the Group’s
accounting policy, whilst also challenging whether the accounting policy for exceptional items is appropriate and has
been applied consistently with previous periods.
We reviewed the presentation and disclosures in the Group’s financial statements against requirements under the
relevant financial reporting framework.
Key observations
We have no observations that impact on our audit in respect of the amounts and disclosures related to exceptional items.
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Provisions for uncertain tax positions
Key audit matter
description
The Group operates across numerous multinational jurisdictions, the most significant of which are Ireland and the US,
and are subject to periodic challenge by local tax authorities on a range of tax matters during the normal course of
business including transfer pricing, Group financing arrangements and transactions related tax matters.
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.
As a result there is a significant risk that tax authorities could have different interpretations to those of the directors
resulting in potential misstatement of tax provisions.
Refer also to page 88 (Audit Committee Report), Page 150 (Income taxes accounting policy), note 3 (Critical accounting
estimates and judgements) and notes 12 and 26 to the financial statements.
How the scope
of our audit
responded to the
key audit matter
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, the impact of new
jurisdictions arising from recent acquisitions and amendments to the Group’s tax structures during the financial period
arising from global changes in tax legislation.
We evaluated the design and determined the implementation of the relevant controls in respect of the tax computation
process and tax risk management process.
We also reviewed the directors’ assessment of related tax risks and exposures across the Group.
We engaged our Irish and International tax specialists as part of our audit team, including US and other jurisdictional
tax specialists, to analyse and challenge the appropriateness of the assumptions made by the directors in determining
adjustments to current and deferred tax provisions.
We challenged and evaluated directors’ assumptions and estimates, including external advice obtained, in respect
of tax risks and related provisions. We focused particularly on the directors’ judgements made in relation to transfer
pricing models, interpretations of relevant tax laws, new and amended Group financing arrangements 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.
Key observations
We evaluated the completeness and accuracy of current and deferred tax disclosures for compliance with the relevant
financial reporting framework.
As the international corporation tax environment has undergone unprecedented change over recent years, and is likely to
continue to evolve over the coming years, judgements around tax structures and related uncertain tax positions continue
to be a focus area for the Group. We have discussed the evolving tax environment with management, and the impact on
uncertain tax positions, and following the completion of our procedures outlined above, have no observations that impact
on our audit.
131
Impairment of goodwill and other intangible assets
Key audit matter
description
The Group’s goodwill and other intangible assets of €1,243m, which are held across 8 (2019: 15) individual Cash
Generating Units (CGUs), represent approximately 40% of the Group’s total assets at year end. The Glanbia Performance
Nutrition (“GPN”) business accounts for 82% of total goodwill and other intangible assets of the Group.
How the scope
of our audit
responded to the
key audit matter
As a result of the Group’s fundamental re-organisation of the GPN business, which commenced in 2019, the Group
formed a number of distinct CGUs in GPN during the year, namely, North America Performance Nutrition, North America
Lifestyle, International and Direct-to-Consumer. With the exception of North America Lifestyle, each of the above distinct
lines of business now represent a stand-alone CGU within GPN. In Glanbia Nutritionals (“GN”), a number of changes
underpinned the interdependency of the cash inflows of the previously separately identifiable CGUs (other than US
Cheese) into a single CGU. As a result of these changes the number of significant CGUs in the Group has decreased
from 15 to 8.
The directors completed their impairment reviews on the 8 CGUs during the year. In carrying out this review, judgement is
required by the directors in identifying indicators of impairment and estimation is required in determining the recoverable
amount of the Group’s CGUs. There is a significant risk that the net present value of future cashflows within the CGUs will
not be sufficient to recover the Group’s carrying value of each CGU including goodwill and intangible assets, leading to
an impairment charge that has not been recognised in the financial statements.
This risk was pinpointed to 7 CGUs with a particular focus on the think! CGU, where the directors noted in their sensitivity
analysis that a reasonably possible change in a key assumption used in their impairment assessment could result in an
impairment charge.
The recoverable amount used in the impairment assessment is determined based on value in use calculations which rely
on directors’ assumptions and estimates of future trading performance.
The key assumptions utilised by the directors in the impairment reviews are discount rates and long term growth rates.
Refer also to page 88 (Audit Committee Report), page 145 (Intangible assets accounting policy), note 3 (Critical
accounting estimates and judgements) and note 16 to the financial statements.
We, in conjunction with our valuation specialists, evaluated the Group’s impairment review methodology applied by the
directors in preparing the value in use calculations.
We also evaluated the judgements applied in determining the CGUs, particularly in relation to the transformation project
across the Group that resulted in a significant change to the composition of the CGUs within the Group. In addition, we
evaluated the design and determined the implementation of relevant 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 understood and challenged the underlying key assumptions within the Group’s impairment model by developing
an independent view of the Group discount rate and long term growth rates where, in conjunction with our valuation
specialists, we benchmarked the rates used by the directors against market data and comparable organisations.
We obtained and challenged cash flow projections by comparing them to historic growth rates and the Group’s strategic
plans, including those effected by the Covid-19 pandemic. We challenged the Group’s forecasts with reference to recent
performance, economic and industry forecasts and trend analysis including comparing recent historic performance
to budgets for CGUs where revenue growth has significantly fallen behind plans or where sensitivity analysis in respect
of key assumptions in the Group’s impairment model indicates a potential impairment.
Where we noted any significant reduction in headroom for a CGU since the prior year, we gained an understanding
of the reasons giving rise to the reduction and performed additional procedures to substantiate these reasons. We held
discussions with the business unit controllers to understand the changes being implemented at the site level to achieve
the targets set in the strategic plans.
We evaluated the directors’ sensitivity analysis and performed our own sensitivity analysis on the key assumptions used.
Key observations
We evaluated the completeness and accuracy of the disclosures in relation to goodwill and other intangible assets for
compliance with the relevant financial reporting framework.
We noted that Covid-19 has had a significant impact on the results of the Group in 2020, most notably in the GPN
division, and will continue to have an impact in 2021, and that a number of actions are required by the Group to achieve
the forecasts outlined in the Group’s strategic plans over the short and medium term. However we concluded that the
assumptions in the impairment models, specifically in the value in use calculations, are within an acceptable range.
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Revenue recognition
Key audit matter
description
The Group sells products to customers under a variety of contractual terms.
When assessing the potential risk of fraud in relation to revenue recognition, we considered the nature of the automated and
manual transactions recorded across the Group. All revenue across the Group is recorded automatically at point of dispatch.
Management record manual adjustments to revenue to ensure revenue is accounted for in line with the underlying contractual
terms with customers. We have therefore pinpointed the significant risk across the Group to manual adjustments to revenue
including all sales for which the performance obligation had not been met at the year-end date.
Furthermore, within the GPN division, 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 significant 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.
Refer also to page 88 (Audit Committee Report), and page 151 (Revenue recognition accounting policy).
How the scope
of our audit
responded to the
key audit matter
We obtained an understanding of the various revenue 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 relevant controls in respect of revenue recognition.
Where possible, operating effectiveness testing was performed and controls were relied upon.
We recalculated year end accruals based on underlying contracts with customers and assessed whether there was any
evidence of management bias in key judgements made by management. We also performed year end cut-off procedures
and reviewed goods in transit at the year-end date to ensure transactions were recorded in the correct period.
As revenue is recognised automatically on despatch within the Group’s accounting systems we selected a sample of
manual journal entries posted to revenue to ensure amounts were recorded in line with underlying contracts for a
selection of invoices and customers. We also tested higher risk transactions including agency arrangements by assessing
if these transactions were appropriately accounted for in accordance with the relevant accounting standards.
In addition, we selected a sample of post year end credit notes and rebate payments to identify any invalid sales
transactions recorded in the period.
Key observations
We have no observations that impact on our audit in respect of the amounts and disclosures related to revenue recognition.
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.
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 audit to be €9m which is approximately 5% of profit before tax (PBT) excluding exceptional items.
We have considered PBT excluding exceptional items to be the critical component for determining materiality because it is the most important
measure for the users of the Group’s financial statements and the impact of exceptionals is excluded to avoid distortion of the critical component
on an annual basis.
We determined materiality for the Company audit to be €3.6m which is between 0.5% and 1% of net assets. As a non-trading company,
it does not generate significant revenues but instead incurs costs, thus net assets are of most relevance to the users of the Company
financial statements.
We have considered quantitative and qualitative factors such as our understanding of the Group and its environment, history of misstatements,
complexity of the Group and reliability of control environment.
PBT excluding
exceptional items
Materiality
PBT excluding
exceptional items
€189.8m
Materiality €9m
Audit Committee reporting threshold
€0.45m
133
We agreed with the Audit Committee that we would report to them any audit differences in excess of €0.45m, as well as differences below that
threshold which, 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 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 45 components. 12 of these were subject to a full audit, whilst the remaining 33 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 components operations to the Group. Analytical review procedures were performed by the Group audit team on all other
components within the Group.
These components were selected based on the level of coverage achieved on revenue and net assets, the qualitative and risk considerations
of these components and to provide an appropriate basis for undertaking audit work to address the risks of material misstatement identified.
Our audit work for all components was executed at levels of materiality applicable to each individual unit which were lower than Group materiality
and ranged from €1.8m to €5.8m.
We have considered the impact of COVID-19 on the Group’s business as part of our audit risk assessment and planning. This assessment
resulted in an increased audit scope on key audit areas including the consideration of changes in manual and automated internal controls as
a result of remote working by Glanbia personnel and increased focus on the Group’s key judgement and estimates in relation to future strategic
plans and profitability forecasts which are key inputs into the group’s asset impairment model and going concern assessment, most notably
in the GPN division which has experienced the greatest impact of the pandemic on revenue and profitability in 2020.
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 or
specified audit procedures.
External Revenue % Tested
Net Assets % Tested
Full Audit
Specified Audit Balances
Analytic Procedures
7%
37%
11%
41%
56%
48%
The Group audit team attended the planning meetings of a number of significant components, 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 client planning and closing meetings, and, for certain significant risks and judgemental areas, reviewed their
audit working papers.
Other information
The other information comprises the information included in the Annual Report, other than the financial statements and our auditor’s report
thereon. The directors are responsible for the other information contained within the Annual Report.
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.
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.
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.
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In preparing the financial statements, the directors are responsible for assessing the Group and 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 or 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 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 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 consolidated 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.
For listed entities and public interest entities, the auditor also provides those charged with governance with a statement that the auditor
has complied with relevant ethical requirements regarding independence, including the Ethical Standard for Auditors (Ireland) 2016, and
communicates with them all relationships and other matters that may reasonably be thought to bear on the auditor’s independence, and where
applicable, related safeguards.
Where the auditor is required to report on key audit matters, from the matters communicated with those charged with governance, the auditor
determines those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key
audit matters. The auditor describes these matters in the auditor’s report unless law or regulation precludes public disclosure about the matter
or when, in extremely rare circumstances, the auditor determines that a matter should not be communicated in the auditor’s report because
the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
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.
•
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 those parts of the directors’ report as specified for our review is consistent with the financial statements
and the directors’ report has been prepared in accordance with the Companies Act 2014.
Corporate Governance Statement required by Companies Act 2014
We report, in relation to information given in the Corporate Governance Statement on pages 62 to 83 that:
•
In our opinion, based on the work undertaken during the course of the audit, the information given in the Corporate Governance Statement
pursuant to subsections 2(c) and (d) of section 1373 of the 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 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.
135
•
•
In our opinion, based on the work undertaken during the course of the audit, the Corporate Governance Statement contains the information
required by Regulation 6(2) of the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and
groups) Regulations 2017 (as amended); and
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.
Corporate Governance Statement
The Listing Rules and ISAs (Ireland) require us to review the directors’ statement in relation to going concern, longer-term viability and the part
of the Corporate Governance Statement relating to the Group’s compliance with the provisions of the UK Corporate Governance Code and
Irish Corporate Governance Annex specified for our review.
Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the Corporate Governance
Statement is materially consistent with the financial statements and our knowledge obtained during the audit:
•
the directors’ statement with regards the appropriateness of adopting the going concern basis of accounting and any material uncertainties
identified set out on page 56 and page 209;
the directors’ explanation as to its assessment of the Group’s prospects, the period this assessment covers and why the period is appropriate
set out on page 57;
the directors’ statement on fair, balanced and understandable set out on page 82;
the board’s confirmation that it has carried out a robust assessment of the emerging and principal risks and the disclosures in the annual
report that describe the principal risks and the procedures in place to identify emerging risks and an explanation of how they are being
managed or mitigated set out on pages 55 to 57;
the section of the annual report that describes the review of effectiveness of risk management and internal control systems set out on pages
54 to 57; and
the section describing the work of the audit committee set out on pages 84 to 89.
•
•
•
•
•
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 those parts of the directors’ report as specified for our review.
The Companies Act 2014 requires us to report to you if, in our opinion, the Company has not provided the information required by Regulation 5(2)
to 5(7) of the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017
(as amended) for the financial period ended 2 January 2021. We have nothing to report in this regard.
The Companies Act 2014 also requires us to report to you if, in our opinion, the Company has not provided the information required by
Section 1110N in relation to its remuneration report. We have nothing to report in this regard.
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 Euronext Dublin 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 period ended 31 December 2016 and
subsequent financial periods. The period of total uninterrupted engagement including previous renewals and reappointments of the firm is five
years, covering the financial periods ending 31 December 2016, 30 December 2017, 29 December 2018, 4 January 2020 and 2 January 2021.
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.
Use of our report
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.
Kevin Sheehan
For and on behalf of Deloitte Ireland LLP
Chartered Accountants and Statutory Audit Firm
Deloitte & Touche House, Earlsfort Terrace, Dublin 2
23 February 2021
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 136
Glanbia plc | Annual Report and Financial Statements 2020
Group Income Statement
for the financial year ended 2 January 2021
Pre-
exceptional
€’m
Notes
2020
Exceptional
€’m
(note 6)
Total
€’m
Pre-
exceptional
€’m
2019
Exceptional
€’m
(note 6)
Total
€’m
Revenue
5
3,823.1
–
3,823.1
3,875.7
–
3,875.7
Earnings before interest, tax and amortisation (EBITA)
Intangible asset amortisation and impairment
Operating profit
Finance income
Finance costs
Share of results of equity accounted investees
Profit before taxation
Income taxes
5
16
5
11
11
17
12
209.6
(60.9)
(34.5)
–
175.1
(60.9)
276.8
(60.9)
(37.1)
(2.0)
239.7
(62.9)
148.7
(34.5)
114.2
215.9
(39.1)
176.8
4.1
(24.6)
61.6
–
–
(1.2)
4.1
(24.6)
60.4
6.2
(32.5)
48.6
–
–
–
189.8
(14.5)
(35.7)
4.2
154.1
(10.3)
238.2
(23.4)
(39.1)
4.5
6.2
(32.5)
48.6
199.1
(18.9)
Profit attributable to the equity holders of the Company
175.3
(31.5)
143.8
214.8
(34.6)
180.2
Earnings Per Share attributable to the equity holders of the Company
Basic Earnings Per Share (cent)
Diluted Earnings Per Share (cent)
13
13
48.72
48.59
61.04
60.92
Group Statement of Comprehensive Income
for the financial year ended 2 January 2021
Profit for the year
Other comprehensive income
Items that will not be reclassified subsequently to the Group income statement:
Remeasurements on defined benefit plans, net of deferred tax
Share of other comprehensive income of equity accounted investees, net of deferred tax
Revaluation of equity investments at FVOCI*, net of deferred tax
Items that may be reclassified subsequently to the Group income statement:
Currency translation differences
Currency translation difference arising on net investment hedge
Loss on cash flow hedges, net of deferred tax
Share of other comprehensive income of equity accounted investees, net of deferred tax
Other comprehensive income for the year, net of tax
137
2019
€’m
180.2
(14.1)
(8.3)
(0.1)
46.7
(2.4)
(2.0)
(10.0)
9.8
Notes
17
23
23
23
23(d)
17
2020
€’m
143.8
8.3
7.0
–
(146.9)
8.1
(0.9)
(6.7)
(131.1)
Total comprehensive income for the year attributable to equity holders of the Company
12.7
190.0
* Fair value through other comprehensive income (‘FVOCI’)
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 138
Glanbia plc | Annual Report and Financial Statements 2020
Group Balance Sheet
as at 2 January 2021
ASSETS
Non-current assets
Property, plant and equipment
Right-of-use assets
Intangible assets
Equity accounted investees
Other financial assets
Loans to equity accounted investees
Deferred tax assets
Retirement benefit assets
Current assets
Inventories
Trade and other receivables
Current tax assets
Derivative financial instruments
Cash and cash equivalents (excluding bank overdrafts)
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
Borrowings
Lease liabilities
Other payables
Retirement benefit obligations
Deferred tax liabilities
Provisions
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Current tax liabilities
Derivative financial instruments
Provisions
Total liabilities
Total equity and liabilities
On behalf of the Board
Donard Gaynor
Directors
23 February, 2021
Siobhán Talbot
Mark Garvey
2 January
2021
€’m
4 January
2020
€’m
Notes
15
31
16
17
18
35
26
9
20
19
29
21
22
23
24
25
31
9
26
27
28
25
31
29
27
433.3
90.5
1,243.3
395.9
3.2
31.8
2.4
2.6
2,203.0
377.6
319.2
–
1.3
164.3
862.4
474.1
–
1,344.6
373.2
3.4
28.8
1.9
2.1
2,228.1
447.5
432.3
23.7
0.3
269.0
1,172.8
3,065.4
3,400.9
105.3
126.0
1,380.5
1,611.8
105.4
269.1
1,327.4
1,701.9
458.4
94.4
–
31.9
146.5
3.3
734.5
441.6
199.8
15.8
50.3
3.7
7.9
719.1
514.2
–
12.5
48.4
168.6
–
743.7
512.5
369.1
–
67.7
2.4
3.6
955.3
1,453.6
1,699.0
3,065.4
3,400.9
Group Statement of Changes in Equity
for the financial year ended 2 January 2021
Balance at 4 January 2020
Effect of adoption of IFRS 16
Balance at 5 January 2020
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with equity holders of the Company
Contributions and distributions
Dividends
Purchase of own shares
Cancellation of own shares
Cost of share-based payments
Transfer on exercise, vesting or expiry of share-based payments
Deferred tax on share-based payments
139
Attributable to equity holders of the Company
Share
capital and
share
premium
€’m
(note 22)
105.4
–
105.4
–
–
–
–
–
(0.1)
–
–
–
Other
reserves
€’m
(note 23)
269.1
–
269.1
–
(146.4)
(146.4)
–
(17.6)
16.7
5.2
(1.0)
–
Retained
earnings
€’m
(note 24)
1,327.4
(12.4)
Total
€’m
1,701.9
(12.4)
1,315.0
1,689.5
143.8
15.3
159.1
(78.6)
–
(16.6)
–
1.0
0.6
143.8
(131.1)
12.7
(78.6)
(17.6)
–
5.2
–
0.6
Balance at 2 January 2021
105.3
126.0
1,380.5
1,611.8
Balance at 30 December 2018
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with equity holders of the Company
Contributions and distributions
Dividends
Purchase of own shares
Cost of share-based payments
Transfer on exercise, vesting or expiry of share-based payments
Deferred tax on share-based payments
105.4
240.9
1,242.8
1,589.1
–
–
–
–
–
–
–
–
–
32.2
32.2
–
(7.6)
4.6
(1.0)
–
180.2
(22.4)
157.8
(74.3)
–
–
1.0
0.1
180.2
9.8
190.0
(74.3)
(7.6)
4.6
–
0.1
Balance at 4 January 2020
105.4
269.1
1,327.4
1,701.9
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 140
Glanbia plc | Annual Report and Financial Statements 2020
Group Statement of Cash Flows
for the financial year ended 2 January 2021
Cash flows from operating activities
Cash generated from operating activities
Interest received
Interest paid (including leases*)
Tax paid
Net cash inflow from operating activities
Cash flows from investing activities
Payment for acquisition of subsidiaries, net of cash and cash equivalents acquired
Purchase of property, plant and equipment
Purchase of intangible assets
Interest paid in relation to property, plant and equipment
Proceeds from sale of property, plant and equipment
Dividends received from equity accounted investees
Loans advanced to equity accounted investees
Repayment of loans advanced to equity accounted investees
Investment in equity accounted investees
Proceeds from disposal/redemption of FVOCI financial assets
Payments for FVOCI financial assets
Net cash outflow from investing activities
Cash flows from financing activities
Purchase of own shares
Drawdown of borrowings
Repayment of borrowings
Payment of lease liabilities*
Dividends paid to Company shareholders
Net cash outflow from financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash acquired on acquisition
Effects of exchange rate changes on cash and cash equivalents
Notes
32
34
16
11
17/35
35
35
18
18
23
25/33
25/33
33
14/24
2020
€’m
319.9
4.6
(25.0)
(22.1)
277.4
(21.9)
(38.0)
(26.2)
(0.5)
–
36.6
(3.0)
–
(6.6)
0.3
(0.1)
(59.4)
(17.6)
1,057.2
(1,222.0)
(19.2)
(78.6)
(280.2)
(62.2)
164.7
–
(10.9)
2019
€’m
285.9
3.7
(32.5)
(44.6)
212.5
(58.3)
(42.7)
(33.6)
(0.7)
0.2
35.3
–
1.0
(48.4)
0.5
(0.4)
(147.1)
(7.6)
606.2
(599.9)
–
(74.3)
(75.6)
(10.2)
175.7
(4.2)
3.4
Cash and cash equivalents at the end of the year
21
91.6
164.7
* Repayment of lease liabilities capitalised under IFRS 16 during the year ended 2 January 2021 amounted to €22.0 million, of which €2.8 million (2019: nil) related to interest expense (note 11) paid
which is presented in cash flows from operating activities.
141
Notes to the Financial Statements
for the financial year ended 2 January 2021
1. General information
Glanbia plc (the ‘Company’) and its subsidiaries (together the ‘Group’) is a leading global nutrition group with geographical presence in regions
that include North America, Europe, Asia Pacific and LATAM. 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, R95 E866. Glanbia Co-operative Society Limited, (the ‘Society’), together with its
subsidiaries, holds 31.7% (2019: 31.5%) of the issued share capital of the Company. The Board of Directors as at 4 January 2020 was comprised
of 16 members, of which up to eight, including the Chairman who had the casting vote, were nominated by the Society. In accordance with IFRS 10
‘Consolidated Financial Statements’, the Society controlled the Group and was the ultimate parent of the Group up to 30 June 2020. From 1 July
2020 in accordance with the Relationship Agreement between the Society and the Company, the number of directors that can be nominated by
the Society reduced to seven in a board comprising of 15 members. Thereafter the Society no longer controlled the Group, and the Company
became the ultimate parent company of the Group.
The Company’s shares are quoted on Euronext Dublin and London Stock Exchange. The consolidated financial statements were approved
and authorised for issue by the Board of Directors on 23 February 2021.
2. Summary of significant accounting policies
The Group adopted new and amended accounting standards, and International Financial Reporting Interpretations Committee (‘IFRIC’)
interpretations during the year ended 2 January 2021 as detailed in the section ‘Adoption of new and amended standards and interpretations’
herein.
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 Group and equity accounted investees unless otherwise stated.
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 consolidated financial statements have been prepared under the historical cost convention as modified by use of fair values for certain
other financial assets and derivative financial instruments.
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
2 January 2021. Comparatives are for the 53-week period ended 4 January 2020. The balance sheets for 2020 and 2019 have been drawn
up as at 2 January 2021 and 4 January 2020 respectively.
Going concern
Having given due regard to the considerations below, the Directors, after making appropriate enquiries, 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
consolidated financial statements. The Group therefore considers it appropriate to adopt the going concern basis in preparing its consolidated
financial statements.
The 2021 budget and strategic plan for 2022 and 2023 represent the Board’s best estimate of future cash flows. Having reviewed the budget and
strategic plan, and applied the reverse stress test as described below, it is considered highly likely that the Group will continue to have significant
financial headroom over the next 12 months from the date of approval of these financial statements.
At 2 January 2021, the Group had cash and cash equivalents of €164.3 million, undrawn revolving committed bank facilities of €647.8 million,
undrawn bank facilities of €20.0 million renewable on an annual basis, and net debt of €493.9 million with a maturity profile as disclosed in note
25. The amount of cash, available undrawn facilities and the maturity dates of the borrowings provide confidence that the Group will be able
to meet its obligations as they fall due within the next 12 months from the approval of these financial statements.
In the opinion of the Directors, the Group’s financing covenants were fully met in 2020. The Group has reverse stress-tested its forecasts to
determine the level of reduced earnings before interest, tax, depreciation and amortisation (‘EBITDA’) that would result in a breach of the financing
covenants during the period in which the going concern basis is applied. The likelihood of this level of reduced EBITDA is considered remote
based on the Group’s past experience. Therefore, the Group is expected to have significant headroom against the financing covenants during
the 12 months after the approval of the financial statements.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 142
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
While the ongoing Covid-19 pandemic continues to evolve with no certainty of future trajectory or duration, the Group has been highly cash
generative and profit making since the onset of the pandemic and is expected to remain in a strong financial position in the foreseeable future.
The Group’s strong financial position is evidenced by certain events during the year such as the completion of the Foodarom acquisition (note 34)
during the third quarter of 2020, a share repurchase programme that commenced in 2020 (note 29(c)), an interim dividend, and a final dividend
recommended by the Directors and subject to shareholder approval after year-end (note 14).
Impact of Covid-19
Critical accounting judgements and estimates
The Group has considered the impact of Covid-19 with respect to the significant judgements and estimates it makes in the application of its
accounting policies. No new sources of significant judgements and estimates were identified that would have a material impact on the financial
statements.
Judgement was applied in determining the amount of Covid-19 costs to be disclosed as exceptional items (notes 3 and 6). The estimates
pertaining to retirement benefit obligations (notes 3 and 9) incorporated the effects of Covid-19 based on actuarial advice where applicable.
The estimates relating to impairment reviews of goodwill and indefinite life intangibles (notes 3 and 16) are described in the section “Impairment
of non-financial assets” below.
Impairment of non-financial assets
The Group continues to actively manage its working capital including inventory. Appropriate inventory levels are held to minimise the likelihood
of future potential stock obsolescence. Accordingly, the amount of write down of inventory to net realisable value recognised directly arising from
the pandemic is not material (note 20).
In accordance with our accounting policy, other non-financial assets (such as property, plant and equipment, right-of-use assets and definite
life intangible assets) were reviewed for indicators of impairment at the end of the reporting period. Where indicators of impairment are present,
they are tested for impairment. Where a non-financial asset does not generate largely independent cash inflows, it is assessed for impairment
on a cash-generating unit (‘CGU’) level and included in the impairment testing of goodwill and indefinite life intangibles as described below.
The amount of impairment recognised on other non-financial assets during the period is not material (note 5).
In the impairment testing of goodwill and indefinite life intangibles (notes 3 and 16), the Group considered the effects of the pandemic on the
key assumptions for calculating value in use of the CGUs as follows:
Cash flows
The cash flow projections are generally based on three years of cash flows being, the 2021 budget formally approved by, and the strategic plan
for 2022 and 2023 as presented to, the Board of Directors. The budget and the strategic plan incorporated the Directors’ best estimate of the
impact of Covid-19. Given the economic and political uncertainty resulting from Covid-19, it is difficult to ascertain the impact on the Group’s
prospective financial performance. The Group’s budget and strategic plan reflect cash flows that management consider most likely over the
three-year period.
Sensitivity analysis has been conducted in respect of each of the CGUs using the following sensitivity assumptions: 1% increase in the discount
rate; 10% decrease in EBITDA growth; and nil terminal value growth (note 16). The Group believes that there may be increased uncertainties
relating to 2021 and 2022 and a trading environment with reduced uncertainties in 2023, as global economic activities adjust to the effects of
Covid-19. In view of the foregoing, as an additional analysis, the Group has increased the sensitivities over EBITDA growth in 2021 and 2022.
If the Group experienced 20% decrease EBITDA growth in years 1 and 2, there would have been no change to the conclusion of the sensitivity
analysis in note 16.
Discount rates and growth rates
The range of discount rates applied do not reflect risks which are already reflected in the cash flow projections. The growth rates used to
extrapolate cash flows beyond the budget and strategic plan period do not exceed the long-term average growth rate for the industries in which
each CGU operates.
Impairment of trade receivables and loans to equity accounted investees, and credit risk
Note 29(d) describes how the Group manages credit risk. The Group continues to actively manage its working capital including trade receivables.
Outstanding customer balances are actively monitored and reviews for indicators of impairment are done on an ongoing basis. Furthermore,
trade credit is extended to customers after careful consideration and thereafter continuously monitored. Where the extension of credit is
considered inappropriate, payment in advance is required. Where appropriate, the Group utilise a receivables sale programme to partially
offset increases in credit terms for certain trade receivables (note 29(d)). Regarding the loans to joint ventures, the Group continues to monitor
the joint ventures’ ability to repay them.
The Group has adjusted the historical loss rates that are used in the calculation of expected credit losses (ECL) on trade receivables and loans to
equity accounted investees to reflect future economic conditions (including the effects of Covid-19) where appropriate. The adjustment took into
account the Group’s credit exposure to the debtors, their credit quality and associated loss rates based on external information from credit rating
companies such as Standard and Poor’s. There were no significant judgements or estimates made in the calculation that would have a material
impact on the Group.
143
Hedge accounting
The Group’s carrying amount of derivatives for which hedge accounting is applied is not material (note 29(a)). Notwithstanding the foregoing,
the timing and volume of forecasted transactions hedged via cash flow hedges remains largely highly probable. Therefore no material hedge
ineffectiveness has been recognised in the year ended 2 January 2021.
Liquidity and cash flow risk
Note 29(d) describes how the Group manages liquidity and cash flow risk. In 2020, the Group completed the financing of US$555 million*
of debt facilities maturing between January 2024 and December 2031 to optimise the Group’s liquidity and cash flows in light of the Covid-19
environment. These facilities were used to repay US$351 million of shorter maturing indebtedness in December 2020 and will additionally be
used to repay US$156 million of indebtedness maturing June 2021. The Group has no other committed facilities due prior to January 2024.
Accordingly, the repayment profile of the Group’s borrowings as at 2 January 2021 is predominantly non-current (note 25) with liquidity and
cash flow risk being minimised.
In the opinion of the Directors, the Group fully complied with the financing covenants attached to its borrowings during the year ended
2 January 2021 and is expected to continue to do so with adequate headroom against the covenants over the next 12 months from the
approval of these financial statements. Refer to the going concern section for more details.
* This comprised US$175 million or €142.6 million of private placement debt facility which commenced in December 2020 (note 25), US$200 million of private placement debt facilities
with a delayed drawdown until 15 March 2021, and US$180 million of bank facilities of which €55.9 million was drawn down and included within non-current bank borrowings (note 25)
as at 2 January 2021.
Others
The Group did not avail of government support and assistance during the year ended 2 January 2021. The Covid-19 related rent concessions
received by the Group during the year ended 2 January 2021 were not material. Accordingly, the Group did not early adopt the amendment
to IFRS 16 ‘Covid-19-Related Rent Concessions’.
Impact of Brexit and climate change
Before the deal between the UK and the EU was agreed in December 2020, the principal risk to the Group was increased tariffs and uncertain
trade agreements arising from a no-deal Brexit. The deal between the two parties allows for the continuation of tariff-free, quota-free access
to each other’s market for goods amongst other matters. Consequently, the impact of Brexit to the Group is not material.
The Group has considered the impact of climate change on the financial statements including impairment of non-financial and financial assets,
the useful lives of assets, and provisions. Management has considered expected changing customer sentiments due to climate change in the
Group’s 2021 budget and strategic plans for 2022 and 2023 where applicable.
Basis of consolidation
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 assets and liabilities, equity, income, expenses and cash flows relating to transactions between members of the Group
are eliminated on consolidation.
Equity accounted investees – 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. Under the equity method of accounting, interests in joint
ventures are initially recognised at cost. The Group’s share of joint ventures 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 post acquisition movement in
reserves is recognised in the Group statement of 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 is tested for impairment by comparing its recoverable amount against its carrying value.
Unrealised gains arising from transactions with joint ventures 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 of a transferred asset.
When the Group’s share of losses in a joint venture equals or exceeds its interest in the joint venture, the Group does not recognise further losses
unless the Group has incurred obligations or made payments on behalf of the joint venture.
When the Group ceases to have joint control, any retained interest in the entity is re-measured to its fair value at the date when joint control 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.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 144
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
Business combinations
The Group uses the acquisition method of accounting to account for business combinations. The acquisition date is defined as 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.
Upon acquisition, the Group assesses the assets acquired and liabilities assumed for appropriate classification and designation in accordance
with the contractual terms, economic circumstances and pertinent conditions as at the acquisition date. Identifiable assets acquired, 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.
Goodwill represents the excess of the aggregate of the consideration transferred and the amount of any non-controlling interest in the acquired
entity over the net identifiable assets acquired. 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 acquired and liabilities assumed 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.
Any contingent consideration to be transferred by the acquirer will be recognised at fair value at the acquisition date. Contingent consideration is
classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes
in fair value recognised in the income statement.
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.
Foreign currency translation
Functional and presentation currency
Items included in the financial statements of each of the Group’s subsidiaries and joint ventures 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.
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.
Subsidiaries and joint ventures
The income statement and balance sheet of subsidiaries and joint ventures 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
when they 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 of 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:
1 euro =
US dollar
Pound sterling
Average
Year end
2020
1.1423
0.8898
2019
1.1196
0.8772
2020
1.2271
0.8990
2019
1.1147
0.8512
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Business combinations
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are denominated in the functional currency of the foreign entity,
recorded at the exchange rate at the date of the transaction and subsequently retranslated at the applicable closing rates.
Property, plant and equipment
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 which take a substantial period of time to get ready
for its intended use are capitalised as part of the cost of the assets.
Depreciation
Depreciation is calculated on the straight-line method to write off the cost (less residual value) of each asset over its estimated useful life at the
following rates:
Land
Buildings
Plant and equipment
Motor vehicles
%
Nil
2.5–5
4–33
20–25
Land is not depreciated. Residual values and useful lives are reviewed and adjusted if appropriate at each reporting date.
Impairment
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.
Intangible assets
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 or joint venture at the date of acquisition. Goodwill on acquisition of
subsidiaries is included within intangible assets. Goodwill associated with the acquisition of joint ventures is not recognised separately and
included within the interest in joint ventures 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.
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.
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. The useful life is typically three years.
Brands, customer relationships, recipes, know-how and other intangibles
Brands, customer relationships, recipes, know-how and other intangibles acquired as part of a business combination are stated at their fair value
at the date control is achieved.
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Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
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 intangible assets as indefinite is assessed annually.
Definite life brands, customer relationships, recipes, know-how and other intangibles are amortised using the straight-line method over their
useful life as follows:
Brands
Customer relationships
Recipes, know-how and other intangibles
Years
3–40
5–15
2–15
The useful life used to amortise definite life brands, customer relationships, recipes, know-how 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, recipes, know-how 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.
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.
Impairment of intangible assets
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for impairment, or more
frequently if events or changes in circumstances indicate that they might be impaired. Other assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not be recoverable.
For the purposes of impairment testing, assets are grouped at the lowest level for which there are separately identifiable cash flows (CGUs).
An impairment 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.
Equity instruments
The Group classifies and measures its equity instruments at fair value. Changes in their fair value are recognised in the income statement unless
management has elected to present fair value gains and losses in other comprehensive income (‘OCI’) on an investment by investment basis.
When an election is made for an investment, there is no subsequent reclassification of fair value gains and losses related to the investment to
profit or loss following the derecognition of the investment. Dividends from such investments are recognised in profit or loss when the Group’s
right to receive payments is established.
Trade and other receivables, loans to equity accounted investees and financial assets at amortised cost
Trade and other receivables, loans to equity accounted investees and financial assets at amortised cost are classified and measured at amortised
cost as they are held to collect contractual cash flows which comprise solely payments of principal and interest, where applicable. They are
recognised initially at fair value plus transaction costs, except trade receivables that do not contain significant financing components which are
recognised at transaction price. They are subsequently measured at amortised cost using the effective interest method less expected credit loss
allowance. They are classified as non-current assets except for those maturing within 12 months of the reporting date.
The Group recognises an allowance for expected credit losses (‘ECL’) for financial assets not held at fair value through profit or loss. For credit
exposures for which there has not been a significant increase in credit risk since initial recognition, ECL are provided for credit losses that result
from default events that are possible within the next 12 months. For those credit exposures for which there has been a significant increase in
credit risk since initial recognition or where there has been a credit impaired event, a lifetime expected loss allowance is recognised, irrespective
of the timing of the default.
The Group applies the IFRS 9 simplified approach to measuring ECL which uses a lifetime expected loss allowance for all trade receivables.
A loss allowance for receivables is estimated based on expected credit losses. To measure ECL, historical loss rates are calculated based on
historical credit loss experience. The loss allowance based on historical loss rates is adjusted where appropriate to reflect current information
and forward-looking information on macroeconomic factors, including the trading environment of countries in which the Group sells its goods,
which affect the ability of the debtors to settle the receivables.
The above financial assets are written off when there is no reasonable expectation of recovery such as a debtor failing to engage in a repayment
plan with the Group.
147
Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and deposits held on call with banks. For the purposes of the Group statement of cash flows,
cash and cash equivalents consists of cash and cash equivalents net of bank overdrafts as bank overdrafts are repayable on demand and they
form an integral part of cash management.
Derecognition of financial assets
Financial assets are derecognised when the rights to receive cash flows from financial assets have expired or have been transferred and the
Group has transferred substantially all the risks and rewards of ownership. If the Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred asset, the Group recognises its retained interest in the asset and an associated
liability for amounts it may have to pay.
On derecognition of a financial asset measured at amortised cost, the difference between the asset’s carrying amount and the sum of the
consideration received and receivable is recognised in profit or loss.
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-term nature of these liabilities. These amounts represent liabilities for goods and services provided to the Group prior to,
or at the end of the financial year which are unpaid.
The amounts are unsecured and are usually paid within 30–90 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.
Borrowings
Borrowings are recognised initially at fair value and are subsequently stated at amortised cost. They 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.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled or expires. When an existing financial
liability is replaced by another from the same lender on substantially different terms, or the terms of an existing liability are substantially modified,
such an exchange or modification is treated as the derecognition of the original liability and the recognition of a new liability.
On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any
non-cash assets transferred or liabilities assumed) is recognised in profit or loss.
Offsetting
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 Group or the counterparty.
Derivative financial instruments
Derivatives are initially recorded at fair value and subsequently remeasured at their fair value at the reporting date. Derivative contracts are
recognised on the trade date, other than ‘regular way’ contracts for which settlement date accounting is applied.
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. Changes in the fair value of any derivative instruments that do not qualify for hedge accounting are recognised
in the income statement. The Group adopts the hedge accounting model in IFRS 9.
The Group designates certain derivatives as either: (i) hedges of the fair value of recognised assets or liabilities or an unrecognised firm
commitment (fair value hedge); or (ii) hedges of a cash flow risk associated with the cash flows of 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 half yearly, of whether the derivatives that are used in hedging transactions are effective in offsetting changes in fair values or cash
flows of hedged items.
The fair values of various derivative instruments used for hedging purposes are disclosed in note 29. 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.
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Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
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.
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. Where option
contracts are used to hedge forecast transactions, the Group designates only the intrinsic value of the options as the hedging instrument.
Gains or losses relating to the effective portion of the change in intrinsic value of the options are recognised in the hedging reserve within equity.
The changes in the time value of the options that relate to the hedged item are recognised within other OCI in the cost of hedging reserve
within equity.
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). Where the hedged item subsequently results in the recognition of a non-financial asset
(such as inventory), the amounts accumulated in equity are included within the initial cost of the asset. 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. The recycled gain
or loss relating to the time value and the effective portion of the intrinsic value of commodity option contracts are included within the initial cost
of an asset.
The Group discontinues hedge accounting only when the hedging relationship (or a part thereof) ceases to meet the qualifying criteria (after
rebalancing, if applicable). This includes instances when the hedging instrument expires or is sold, terminated or exercised. The discontinuation
is accounted for prospectively. Any gain or loss recognised in OCI and accumulated in cash flow hedge reserve at that time remains in equity
and is reclassified to the income statement when the forecast transaction occurs. When a forecast transaction is no longer expected to occur,
the gain or loss accumulated in the cash flow hedge reserve is reclassified immediately to the income statement.
Net investment hedge
Net investment hedges, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way
similar to cash flow hedges. Gains or losses on the hedging instrument (for instance foreign currency borrowings) relating to the effective portion
of the hedge are recognised as OCI while any gains or losses relating to the ineffective portion are recognised in the income statement. On
disposal of the foreign operation, the cumulative value of any such gains or losses recorded in equity is transferred to the income statement.
Financial guarantee contracts
• Financial guarantee contracts are recognised as a financial liability at the time the guarantee is issued. The liability is initially measured at fair
value and subsequently at the higher of: the amount determined in accordance with the expected credit loss model under IFRS 9 Financial
Instruments; and
the amount initially recognised less, where appropriate, the cumulative amount of income recognised in accordance with the principles of
IFRS 15 ‘Revenue from Contracts with Customers’.
•
The fair value of financial guarantees is determined based on the present value of the difference in cash flows between the contractual payments
required under the debt instrument and the payments that would be required without the guarantee, or the estimated amount that would be
payable to a third party for assuming the obligations.
Inventories
Inventories are stated at the lower of cost and 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.
Allowance is made, where necessary, for aged, slow moving, obsolete and defective inventories.
Provisions, contingent liabilities and contingent assets
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.
149
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.
Leases
Right-of-use assets
The Group recognises right-of-use assets at the commencement date of the lease (i.e., the date the underlying asset is available for use).
Right-of-use assets are measured at cost, less any accumulated depreciation and impairment losses, and adjusted for any remeasurement of
lease liabilities. The cost of right-of-use assets includes the initial amount of lease liabilities recognised, initial direct costs incurred, and lease
payments made at or before the commencement date less any lease incentives received. The recognised right-of-use assets are generally
depreciated on a straight-line basis over the shorter of its estimated useful life and the lease term. If the Group is reasonably certain to exercise
a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life.
Lease liabilities
At the commencement date of the lease, the Group recognises lease liabilities measured at the present value of lease payments to be made over
the lease term. The lease payments include fixed payments (including in-substance fixed payments) less any lease incentives receivable, variable
lease payments that depend on an index or a rate, and amounts expected to be paid under residual value guarantees. The lease payments also
include the exercise price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for terminating a
lease, if the lease term reflects the Group exercising the option to terminate. The variable lease payments that do not depend on an index or
a rate are recognised as an expense in the period on which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses the incremental borrowing rate (‘IBR’) at the lease commencement date if the
interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect
the accretion of interest and reduced for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is
a modification, a change in the lease term, a change in the in-substance fixed lease payments or a change in the assessment to purchase the
underlying asset.
For leases of plant and equipment, and motor vehicles for which the Group is a lessee, it has elected not to separate lease and non-lease
components, and instead account for these as a single lease component.
Short-term leases and leases of low-value assets
The Group applies the short-term lease recognition exemption to its short-term leases i.e. those leases that have a lease term of 12 months
or less from the commencement date and do not contain a purchase option. It also applies the lease of low-value assets recognition exemption
to leases of assets that are considered of low value. Lease payments on short-term leases and leases of low-value assets are recognised as
expense on a straight-line basis over the lease term.
Leases policy applicable before 5 January 2020 (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.
Employee benefits
Pension obligations
The Group operates various pension plans. The plans are funded through payments to trustee-administered funds. The Group has both defined
contribution and defined benefit 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.
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Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
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 a loss (when benefits are introduced or changed so that the present value of the defined benefit obligation increases) or
a gain (when benefits are withdrawn or changed so that the present value of the defined benefit obligation decreases).
A settlement occurs when an entity enters into a transaction that eliminates all further legal or constructive obligation for part or all of the benefits
provided under a defined benefit plan (other than a payment of benefits to, or on behalf of, employees in accordance with the terms of the plan
and included in the actuarial assumptions). The gain or loss on a settlement is the difference between:
(a) the present value of the defined benefit obligation being settled, as determined on the date of settlement; and
(b) 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.
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 Annual incentive deferred into shares scheme (AIDIS)
The fair value of shares awarded is determined in line with the Group’s Annual Incentive Scheme rules 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.
Awards under the 2008 and 2018 Long-term incentive plan (2008 LTIP and 2018 LTIP)
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 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.
Awards under the 2019 Restricted share plan (2019 RSP)
The fair value of the awards is calculated using the discounted cash flow method. The awards typically contain only non-market vesting and
service conditions.
In respect of 2008 LTIP, 2018 LTIP and 2019 RSP, non-market vesting and service 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 and service 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.
When the awards are exercised, the Company reissues shares from own shares and the fair value of the awards exercised is reclassified from
the share-based payment reserve to retained earnings.
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.
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.
A provision is recognised for those matters for which the tax determination is uncertain but it is considered probable that there will be a
future outflow of funds to a tax authority. The provisions are measured at the best estimate of the amount expected to become payable.
The assessment is based on the judgement of in-house tax experts, professional firms and previous experience of the Group. Further detail
on estimates and judgements are set out in note 3.
Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis,
or to realise the asset and settle the liability simultaneously.
151
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.
Deferred tax is provided on temporary differences arising on investments in subsidiaries and joint ventures except where the timing of the reversal of
the temporary difference can be controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable future.
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.
Share capital
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.
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 and 2018 Long-term incentive plan, the 2019 Restricted share plan and the Annual incentive deferred into shares scheme, the
consideration paid is deducted from distributable reserves 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 proceeds on re-issue of own shares are transferred from own shares to retained earnings.
Revenue recognition
The Group manufactures and sells performance nutrition and lifestyle nutrition products, cheese and dairy, and non-dairy nutritional and functional
ingredients. In general, there is one performance obligation relating to the sale of products in a contract with a customer. Performance obligations
are met at the point in time when control of the products has transferred to the customer, which is dependent on the contractual terms with each
customer. In most cases, control transfers to the customer when the products are dispatched or delivered to the customer. Delivery occurs when
the products have been delivered to the specific location. The Group is deemed to be a principal in an arrangement when it controls the promised
goods before transferring them to a customer, and accordingly recognises revenue on a gross basis.
Rebates and discounts are provided for based on agreements or contracts with customers, agreed promotional arrangements and accumulated
experience using the most likely method. Judgement is exercised by management in the determination of quantum and likelihood of rebates and
discounts based on experience and historical trading patterns. Rebates and discounts are recorded in the same period as the original revenue.
Generally, payment of the transaction price is due within credit terms that are consistent with industry practices, with no element of financing.
Thus, the Group does not adjust any of the transaction prices for the time value of money as a practical expedient as the Group does not expect
to have any contracts where the period between the transfer of the promised products to the customer and payment by the customer exceeds
one year.
Segment reporting
As outlined in note 4, the Group reports across the following three reporting segments: Glanbia Performance Nutrition, Glanbia Nutritionals
and Glanbia Ireland. The segments reflect the Group’s organisation structure and the nature of the information reported to the Chief Operating
Decision Maker (‘CODM’) who is identified as the Group Operating Executive.
the Group’s organisational structure, namely Glanbia Performance Nutrition, Glanbia Nutritionals and joint ventures
In identifying the Group’s operating segments, management considered the following principal factors:
•
• how financial information is reported to the CODM
• existence of managers responsible for the components
•
•
the nature of the component business activities; refer to note 4 for details
the degree of similarity of products and services, and production processes
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,
other financial assets, financial liabilities and derivatives. Inter-segment revenue is determined on an arm’s-length basis. Where a material dependency
or concentration on an individual customer would warrant disclosure, this is disclosed in note 4.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 152
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
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. Interim dividends are recognised when paid.
Proposed dividends that are approved after the balance sheet date are not recognised as a liability but are disclosed in the dividends note.
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, the unwinding of discounts on provisions and the interest expense component of lease
liabilities.
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.
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.
Earnings Per Share
Earnings Per Share (‘EPS’) 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 EPS is calculated on the net profit attributable to the owners of the Company before exceptional items and intangible asset amortisation
and impairment (excluding software amortisation), net of related tax, divided by the weighted average number of ordinary shares in issue during
the period excluding own shares. Full details on the calculation and reconciliation to IFRS reported numbers are included in the Glossary section.
Diluted EPS is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential
ordinary shares.
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:
(i) when the Group can no longer withdraw the offer of those benefits; and (ii) 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.
Income statement format
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 impairment of assets, including material adjustments arising from the re-assessment of asset lives, adjustments to contingent
consideration, material acquisition integration costs, restructuring costs including termination benefits, 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,
external events including disasters relating to weather, pandemics, wars and other acts of God and natural disasters, 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.
Earnings before interest, tax and amortisation
The Group believes that Earnings before interest, tax and amortisation (‘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.
Adoption of new and amended standards and interpretations
The Group has adopted the following standards, interpretations and amendments to existing standards during the financial year:
IFRS 16 ‘Leases’
The Group adopted 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 5 January 2020. Under this approach, the comparatives for the 2019 reporting period
are not restated. The reclassifications and the adjustments arising from the new leasing rules are therefore recognised in the opening balance
sheet on 5 January 2020.
The Group recognised right-of-use assets and lease liabilities for those leases previously classified as operating leases, except for short-term
leases and leases of low-value assets. The right-of-use assets for leases were recognised based on the carrying amount as if the standard had
always been applied, apart from the use of incremental borrowing rate at the date of initial application. Lease liabilities were recognised based on
the present value of the remaining lease payments, discounted using the incremental borrowing rate at the date of initial application. There were
no leases previously classified as finance leases as at 4 January 2020.
153
In applying IFRS 16 for the first time, the Group has availed of practical expedients/exemptions including:
• applying a single discount rate to a portfolio of leases with reasonably similar characteristics
•
relying on previous assessments on whether leases are onerous as an alternative to performing an impairment review
• accounting for operating leases with a remaining lease term of within 12 months of 5 January 2020 as short-term leases
• using hindsight in determining the lease term where the contract contains options to extend or terminate the lease
• not reassessing whether a contract is, or contains a lease at the date of initial application
• not making any adjustments on transition for leases for which the underlying asset is of low value
right-of-use asset and lease liabilities: initial recognition of €106.4 million and €129.6 million respectively as at 5 January 2020
The impact of the adoption of IFRS 16 on the 2020 financial year is as follows:
•
• non-current other payables*: decrease of €12.5 million as at 5 January 2020
• depreciation charge: increase of €18.0 million
•
• earnings used to calculate EPS: decrease of €0.4 million**
finance costs: increase of €2.8 million
* Relate to lease incentives on non-cancellable operating leases under IAS 17 as at 4 January 2020.
** Same impact on the adjusted earnings used to calculate adjusted EPS. The impact of the adoption of IFRS 16 on operating profit for the year ended 2 January 2021 is an increase of €2.4 million
and has been calculated based on the portfolio of leases which existed at 4 January 2020.
The lease liabilities as at 5 January 2020 can be reconciled to the operating lease commitments as of 4 January 2020 as follows:
Operating lease commitments disclosed as at 4 January 2020
Less: short-term leases recognised as expense
Add: adjustments as a result of a different treatment of extension and termination options
Total future lease payments
Effect of discounting (lessee’s weighted average incremental borrowing rate of 2.29% on 5 January 2020)
Lease liability recognised as at 5 January 2020
2020
€’m
128.8
(0.7)
16.8
144.9
(15.3)
129.6
No significant judgements or estimates were made in applying IFRS 16 that would have a material impact on the Group. However, it is noted
that estimation is involved in determining IBR which is used to measure lease liabilities. The Group estimates the IBR based on the currency
and country/region in which a lease is based, the lease term, and the credit quality of the Group. In addition, judgement is involved in determining
the lease term where there are extension or termination options. In determining the lease term, the Group considers all relevant factors that
create an economic incentive for it to exercise the renewal or not exercise the termination of the lease such as the length of the non-cancellable
period of a lease, costs relating to the termination of a lease, and the amount of leasehold improvements that have been or are expected to be
undertaken. The Group assesses at lease commencement date whether it is reasonably certain to exercise an extension option or not to exercise
a termination option for the lease. The Group reassesses whether it is reasonably certain to exercise or not to exercise them if there is a significant
event or change in circumstances within its control.
IFRIC 23 ‘Uncertainty over Income Tax Treatments’
This 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’. The adoption of this interpretation did not have a material impact on the
financial statements as the Group already applied the principles of IFRIC 23 in determining its provisions for uncertain tax treatments.
Amendments to IFRS 3 ‘Business Combinations’
The amendments clarify the definition of a business to help entities determine whether an acquired set of activities and assets is a business
or not. The adoption of the amendments did not have a material impact on the financial statements.
Other IFRS changes
The following changes to IFRS became effective for the Group during the financial year but did not result in material changes to the Group’s
consolidated financial statements:
• Amendments to IFRS 9 ‘Prepayment Features with Negative Compensation’
• Amendments to IAS 28 ‘Long-term Interests in Associates and Joint Ventures’
• Annual Improvements to IFRS Standards 2015–2017 Cycle: IFRS 11 Joint Arrangements, IAS 12 Income Taxes and IAS 23 Borrowing Costs
• Amendments to IAS 19 ‘Employee Benefits Plan Amendment, Curtailment or Settlement’
• Amendments to IAS 1 and IAS 8 ‘Definition of Material’
• Amendments to References to the Conceptual Framework in IFRS Standards
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 154
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
2. Summary of significant accounting policies continued
New and amended standards and interpretations that are not yet effective
The Group has not applied certain new standards, amendments to existing standards and interpretations that have been issued but are not yet
effective. The most significant of which are as follows:
Amendment to IFRS 16 ‘Covid-19-Related Rent Concessions’ (EU effective date: on or after 1 June 2020)
As a practical expedient, a lessee may elect not to assess whether a Covid-19 related rent concession from a lessor is a lease modification.
A lessee that makes this election accounts for any change in lease payments resulting from the Covid-19 related rent concession the same way
it would account for the change under IFRS 16, if the change were not a lease modification. The Group does not expect the adoption of this
amendment to have a material impact on the financial statements, as the Covid-19 related rent concessions received by the Group were
not material.
Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 ‘Interest Rate Benchmark Reform – Phase 2’ (EU effective date:
on or after 1 January 2021)
The amendments provide temporary reliefs which address the financial reporting effects when an interbank offered rate (‘IBOR’) is replaced with
an alternative nearly risk-free interest rate. The reliefs include practical expedient for changes in the basis for determining the contractual cash
flows as a result of IBOR reform, relief from discontinuing hedging relationships and relief relating to separately identifiable risk components.
Additional disclosures relating to the interest rate benchmark reform are required. The Group is currently evaluating the impact of the
amendments on future periods.
Amendments to IAS 16 ‘Property, Plant and Equipment: Proceeds before Intended Use‘ (IASB effective date: on or after 1 January 2022
– not yet endorsed)
The amendment prohibits entities from deducting from the cost of an item of property, plant and equipment, any proceeds of the sale of
items produced while bringing that asset to the location and condition necessary for it to be capable of operating in the manner intended by
management. Instead, an entity recognises the proceeds from selling such items, and the costs of producing those items, in profit or loss.
The Group is currently evaluating the impact of the amendments on future periods.
Other changes to IFRS have been issued but are not yet effective for the Group. However, they are either not expected to have a material impact
on the Group or they are not currently relevant for the Group.
3. Critical accounting judgements and estimates
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. Significant judgements and estimates made in the preparation of these
financial statements are set out below.
Judgements
Exceptional items
The Group considers that items of income or expense which are significant by virtue of their scale and nature should be disclosed separately if the
Group financial statements are to fairly present the financial performance and financial position of the Group. Determining which transactions are to
be considered exceptional in nature is often a subjective matter. However, circumstances that the Group believes would give rise to exceptional items
for separate disclosure are outlined in the accounting policy on exceptional items in note 2. Exceptional items are included on the income statement
line item to which they relate. In addition, for clarity, separate disclosure is made of all items in one column on the face of the Group income statement.
Interests in joint ventures
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 along with its joint venture partner Leprino Foods Company, it has equal representation on the Board of Directors who directs
the relevant activities of the business. Decisions about the relevant activities require unanimous consent of the Group and the joint venture partner.
The Group controls 50% of the voting rights and is entitled to appoint 50% of the total number of Directors to the Board.
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 Glanbia
Co-operative Society Limited which holds the remaining 60% shareholding.
Estimates
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. Key areas where estimates are required include:
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. Refer to note 9 for the amounts associated with the Irish and UK plans.
155
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.
The Group disclose the UK defined benefit pension plan details separately from the Irish plans to identify the impact of a change in UK
assumptions on the Group’s defined benefit pension plans. The estimates pertaining to retirement benefit obligations incorporated the effects
of Covid-19 based on actuarial advice where applicable.
The discount rate is a highly sensitive input to the calculation of scheme liabilities. Sensitivity analysis has been completed to assess the impact
of a change in the discount rate used and other principal actuarial assumptions. Refer to note 9 for the sensitivity analysis.
Impairment reviews of goodwill and indefinite life intangibles
The Group tests annually whether goodwill and indefinite life intangibles have suffered any impairment, in accordance with the accounting policy
stated in note 2. The recoverable amounts of CGUs have been determined based on value in use calculations. These calculations require the
use of estimates.
Goodwill and intangible assets in respect of CGUs within the Glanbia Performance Nutrition and Glanbia Nutritionals operating segments are 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. Discount rates are based on the Group weighted average cost of capital adjusted for company risk factors and specific
country risk. A terminal value assuming 2% growth into perpetuity is also applied. Refer to note 16 for the sensitivity analysis on the key assumptions
used for calculating value in use of the CGUs.
Additional information in relation to impairment reviews is disclosed in note 16.
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, the best
estimate of the amount expected to become payable, 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.
Income taxes and deferred taxes are disclosed in notes 12 and 26 respectively.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 156
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
4. Segment information
In accordance with IFRS 8 ‘Operating Segments’, the Group, including its joint ventures, has identified three reportable segments as follows:
Glanbia Performance Nutrition
Glanbia Performance Nutrition manufactures and sells sports nutrition and lifestyle nutrition products through a variety of channels including
specialty retail, e-Commerce, Food/Drug/Mass/Club (FDMC), 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 and functional ingredients, and vitamin and mineral premixes
targeting the increased market focus on health and nutrition.
Glanbia Ireland
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 nutrition and fertiliser as well as having a chain of agricultural retail outlets in Ireland. Glanbia Ireland
is an equity accounted investee and the amounts stated represent the Group’s share (note 17).
Other segments and unallocated
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 2020 or 2019.
These segments align with the Group’s internal financial reporting system and the way in which the Chief Operating Decision Maker (‘CODM’)
assesses performance and allocates the Group’s resources. Each segment is reviewed in its totality by the CODM. The CODM assesses the
trading performance of operating segments based on a measure of earnings before interest, tax, amortisation and exceptional items. Given
that net finance costs and income tax are managed on a centralised basis, these items are not allocated between operating segments for the
purposes of the information presented to the CODM and are accordingly omitted from the detailed segmental analysis below.
Amounts stated for equity accounted investees represents the Group’s share.
Pre-exceptional segment results are as follows:
2020
Total gross segment revenue
Inter-segment revenue
Glanbia
Performance
Nutrition
€’m
1,138.1
(0.1)
Glanbia
Nutritionals
€’m
2,706.5
(21.4)
Revenue
1,138.0
2,685.1
Total Group earnings before interest, tax,
amortisation and exceptional items
91.2
118.4
Glanbia
Ireland
€’m
–
–
–
–
Total
reportable
segments
€’m
3,844.6
(21.5)
3,823.1
209.6
All other
segments and
unallocated
€’m
–
–
–
–
Total
Group
€’m
3,844.6
(21.5)
3,823.1
209.6
Share of results of equity accounted investees
–
–
23.9
23.9
37.7
61.6
2019
Total gross segment revenue
Inter-segment revenue
1,363.8
–
2,547.8
(35.9)
Revenue
1,363.8
2,511.9
Total Group earnings before interest, tax,
amortisation and exceptional items
146.4
130.4
–
–
–
–
3,911.6
(35.9)
3,875.7
276.8
–
–
–
–
3,911.6
(35.9)
3,875.7
276.8
Share of results of equity accounted investees
–
–
22.2
22.2
26.4
48.6
157
Included in external revenue are related party sales between Glanbia Nutritionals and Glanbia Ireland of €0.6 million (2019: €0.4 million).
Inter-segment transfers or transactions are entered into under the normal commercial terms and conditions that would also be available to
unrelated third parties.
Revenue of approximately €513.7 million (2019: €405.6 million) and €681.2 million (2019: €705.4 million) is derived from two external customers
respectively within the Glanbia Nutritionals segment.
Segment earnings before interest, tax, amortisation and exceptional items are reconciled to reported profit before tax and profit after tax in the
Group income statement.
Other pre-exceptional segment information is as follows:
2020
Depreciation and impairment of PP&E and
ROU assets
Amortisation and impairment of intangible assets
Capital expenditure – additions
Capital expenditure – business combinations
2019
Depreciation and impairment of PP&E
Amortisation and impairment of intangible assets
Capital expenditure – additions
Capital expenditure – business combinations
The segment assets and liabilities are as follows:
2020
Segment assets
Segment liabilities
2019
Segment assets
Segment liabilities
Glanbia
Performance
Nutrition
€’m
Notes
Glanbia
Nutritionals
€’m
Glanbia
Ireland
€’m
Total
reportable
segments
€’m
All other
segments and
unallocated
€’m
16
16
25.4
44.2
37.4
–
17.5
44.3
23.6
1.2
38.5
16.7
40.5
52.6
30.6
16.6
47.1
51.5
–
–
–
–
–
–
–
–
63.9
60.9
77.9
52.6
48.1
60.9
70.7
52.7
–
–
3.9
–
–
–
4.6
–
Total
Group
€’m
63.9
60.9
81.8
52.6
48.1
60.9
75.3
52.7
Glanbia
Performance
Nutrition
€’m
1,481.2
321.4
Glanbia
Nutritionals
€’m
943.6
344.8
Glanbia
Ireland
€’m
246.2
–
Total
reportable
segments
€’m
All other
segments and
unallocated
€’m
2,671.0
666.2
394.4
787.4
Total
Group
€’m
3,065.4
1,453.6
1,709.1
350.8
977.6
331.8
227.0
–
2,913.7
682.6
487.2
1,016.4
3,400.9
1,699.0
Geographical information
Non-current assets
The total of non-current assets, other than financial instruments, deferred tax assets, and retirement benefit assets attributable to the country
of domicile and all foreign countries of operation for which non-current assets exceed 10% of total Group non-current assets are set out below.
Ireland (country of domicile)
US
Others
2020
€’m
880.4
1,101.3
181.3
2019
€’m
892.3
1,127.4
172.2
2,163.0
2,191.9
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 158
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
4. Segment information continued
Revenue
Revenue from external customers is allocated to geographical areas based on the place of delivery or collection of the products sold as agreed
with customers as opposed to the end use market where the product may be consumed.
North America
– US
– Canada
Europe
– Ireland (country of domicile)
– UK
– Netherlands
– Germany
– Other
Asia Pacific & LATAM
– China
– Australia
– Japan
– New Zealand
– Other
Rest of World
Glanbia
Performance
Nutrition
€’m
2020
Glanbia
Nutritionals
€’m
Glanbia
Performance
Nutrition
€’m
Total
€’m
2019
Glanbia
Nutritionals
€’m
Total
€’m
802.8
14.7
2,374.7
53.4
3,177.5
68.1
941.0
15.9
2,185.4
58.2
3,126.4
74.1
3.0
81.1
52.2
10.6
69.9
13.6
23.1
4.3
5.6
47.1
10.0
1.7
17.3
27.7
19.0
29.8
57.5
5.6
26.2
7.9
57.5
6.8
4.7
98.4
79.9
29.6
99.7
71.1
28.7
30.5
13.5
104.6
16.8
3.0
92.3
55.5
11.3
80.6
20.1
27.3
4.7
5.5
88.5
18.1
2.3
15.4
29.0
19.4
29.6
51.1
7.3
24.9
8.2
76.2
4.9
5.3
107.7
84.5
30.7
110.2
71.2
34.6
29.6
13.7
164.7
23.0
Total
1,138.0
2,685.1
3,823.1
1,363.8
2,511.9
3,875.7
Disaggregation of revenue
Revenue is disaggregated based on the primary geographical markets in which the Group operates (see table above within Geographical
Information). Revenue has also been disaggregated based on the Group’s internal reporting structures, the timing of revenue recognition,
and channel mix as set out in the following tables.
North America Performance Nutrition
North America Lifestyle
International
Direct-to-Consumer
Nutritional Solutions
US Cheese
Glanbia
Performance
Nutrition
€’m
434.8
357.3
270.9
75.0
–
–
2020
Glanbia
Nutritionals
€’m
–
–
–
–
746.8
1,938.3
Glanbia
Performance
Nutrition
€’m
538.3
392.0
358.7
74.8
–
–
Total
€’m
434.8
357.3
270.9
75.0
746.8
1,938.3
2019
Glanbia
Nutritionals
€’m
–
–
–
–
744.9
1,767.0
Total
€’m
538.3
392.0
358.7
74.8
744.9
1,767.0
Total
1,138.0
2,685.1
3,823.1
1,363.8
2,511.9
3,875.7
Products transferred at point in time
Products transferred over time
1,138.0
–
2,685.1
–
3,823.1
–
1,363.8
–
2,511.9
–
3,875.7
–
Total
1,138.0
2,685.1
3,823.1
1,363.8
2,511.9
3,875.7
Glanbia Performance Nutrition
Distributor
Food, Drug, Mass, Club (FDMC)
Online
Specialty
Total
The disaggregation of revenue by channel mix is most relevant for Glanbia Performance Nutrition.
2020
€’m
180.3
428.0
372.8
156.9
2019
€’m
277.4
456.0
363.7
266.7
1,138.0
1,363.8
159
5. Operating profit
Revenue
Cost of goods sold
Gross profit
Selling and distribution expenses
Administration expenses
Net impairment losses on financial assets
Notes
Pre-
exceptional
€’m
3,823.1
(3,134.1)
689.0
(310.8)
(164.0)
(4.6)
2020
Exceptional
€’m
–
(12.6)
(12.6)
(3.1)
(18.8)
–
Total
€’m
3,823.1
(3,146.7)
676.4
(313.9)
(182.8)
(4.6)
Pre-
exceptional
€’m
3,875.7
(3,095.8)
779.9
(338.5)
(162.7)
(1.9)
Earnings before interest, tax and
amortisation (EBITA)
Intangible asset amortisation and impairment
16
209.6
(60.9)
(34.5)
–
175.1
(60.9)
276.8
(60.9)
2019
Exceptional
€’m
–
(19.1)
(19.1)
–
(18.0)
–
(37.1)
(2.0)
Total
€’m
3,875.7
(3,114.9)
760.8
(338.5)
(180.7)
(1.9)
239.7
(62.9)
Operating profit
148.7
(34.5)
114.2
215.9
(39.1)
176.8
Operating profit is stated after (charging)/crediting:
Cost of inventories recognised as an expense
in Cost of Goods Sold
Depreciation of property, plant and equipment
Impairment of property, plant and equipment
Depreciation of right-of-use assets
Impairment of right-of-use assets
Lease rentals
Amortisation of intangible assets
Impairment of intangible assets
Employee benefit expense
Auditor’s remuneration
Research and development costs
Net foreign exchange loss
Loss on disposal of property, plant
and equipment
20
15
15
31
31
16
16
7
32
2020
Pre-
exceptional
€’m
Notes
Exceptional
€’m
Total
€’m
Pre-
exceptional
€’m
2019
Exceptional
€’m
(2,794.8)
(45.9)
–
(18.0)
–
(2.9)
(60.9)
–
(350.6)
(1.5)
(17.3)
(1.3)
–
–
(1.3)
–
(1.0)
–
–
–
(10.8)
–
–
–
(2,794.8)
(45.9)
(1.3)
(18.0)
(1.0)
(2.9)
(60.9)
–
(361.4)
(1.5)
(17.3)
(1.3)
(2,748.2)
(48.1)
–
–
–
(24.0)
(60.9)
–
(343.9)
(1.5)
(12.7)
(1.5)
(19.1)
–
(0.4)
–
–
–
–
(2.0)
(4.3)
–
–
–
Total
€’m
(2,767.3)
(48.1)
(0.4)
–
–
(24.0)
(60.9)
(2.0)
(348.2)
(1.5)
(12.7)
(1.5)
(0.8)
(1.1)
(1.9)
(0.2)
–
(0.2)
The following table discloses the fees paid or payable to Deloitte Ireland LLP, the Group auditor, and to other statutory audit firms in the Deloitte network:
The audit of the Group financial statements
Other assurance services
Tax advisory services
Other non-audit services
Statutory auditor
Other statutory auditor network firms
2020
€’m
0.7
–
–
–
0.7
2019
€’m
0.7
–
–
–
0.7
2020
€’m
0.8
–
–
–
0.8
2019
€’m
0.8
–
–
–
0.8
In addition to the above, Deloitte Ireland LLP and Deloitte network member firms received fees of €0.3 million (2019: €0.3 million) in respect of the
audit of the Group’s equity accounted investees.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 160
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
6. Exceptional items
The nature of the total exceptional operating loss is as follows:
Organisation redesign costs
Covid-19 costs
Acquisition integration costs
Legal settlement gain
Asset impairments
Brexit related costs
Total exceptional charge before taxation
Share of results of equity accounted investees
Exceptional tax credit
Total exceptional charge after taxation
Details of the exceptional items are as follows:
Notes
(a)
(b)
(c)
(d)
(e)
(f)
(b)
12
2020
€’m
31.2
3.7
3.4
(3.4)
(0.4)
–
34.5
1.2
(4.2)
31.5
2019
€’m
12.7
–
6.8
–
17.3
2.3
39.1
–
(4.5)
34.6
(a) Organisation redesign costs primarily relates to a fundamental reorganisation of the GPN segment which commenced in 2019. This global
transformation programme aims to realign operating and supply chain structures in support of growth ambitions, sharpen focus on brands
and optimise routes-to-market across non-US markets to drive greater efficiencies, improve margin and deliver top line growth. Costs incurred
to date includes people and property related costs, professional consulting fees and costs associated with terminating and exiting certain
contractual arrangements. Given the scale of this project, further costs are anticipated into 2021 with full completion of the project anticipated
by early 2022.
(b) Covid-19 costs relate to the costs of dealing with this pandemic in the first half of the year by the Group and its joint ventures and include
the costs of implementing measures to protect people, incremental payments to front line workers and other incidental labour related costs
directly associated with the onset of this global pandemic. Refer to note 2 for considerations of Covid-19 on the financial statements.
(c) Acquisition integration costs comprise costs relating to the integration and restructuring of acquired businesses and the transaction costs
incurred in completing the current year acquisition. The charge primarily comprises professional fees and related costs crystallised on
post-acquisition integration.
(d) Legal settlement gain relates to net compensation received following the successful conclusion of a legacy case.
(e) Prior year asset impairments relate to the write down of inventory, development assets and fixed assets to their net realisable value.
These impairments primarily related to the rationalisation and simplification of certain product lines and related assets in the GPN business.
The credit in 2020 relates to the release of a provision not required on the disposal of certain inventory items. No similar costs were incurred
in 2020.
(f) Prior year Brexit related costs were incurred in preparing the organisation for the departure of the United Kingdom from the European Union.
Costs incurred included professional fees and increased storage and production costs as the Group sought to mitigate the potential risks
related to Brexit during 2019. No further significant costs were incurred during 2020.
During 2020 there were cash outflows of €23.5 million and €6.0 million in respect of exceptional charges recognised in FY 2020 and FY 2019
respectively. During 2019 there were cash outflows of €12.0 million in respect of exceptional charges recognised in FY 2019.
7. Employment
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
161
2019
€’m
298.2
25.2
11.5
1.2
4.6
1.5
20.9
Notes
9
9
10
2020
€’m
306.8
25.2
10.8
2.8
5.2
1.7
22.3
Included within the aggregate payroll costs are exceptional items of €10.8 million (2019: €4.3 million) which include redundancy costs of
€7.3 million (2019: €2.4 million). Capitalised labour costs of €13.4 million (2019: €14.9 million) are included within the aggregate payroll costs
while the remaining post-exceptional cost of €361.4 million (2019: €348.2 million) are recognised as an expense (note 5).
The average number of employees, excluding the Group’s equity accounted investees, is analysed into the following reportable segments:
374.8
363.1
Glanbia Performance Nutrition
Glanbia Nutritionals
2020
2,031
2,500
2019
2,115
2,427
4,531
4,542
8. Directors’ remuneration
The Directors’ remuneration information is shown on tables A to H on pages 114 to 117 in the Remuneration Committee Report.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 162
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
9. Retirement benefit obligations
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:
Defined contribution pension plan expense
Notes
7
2020
€’m
10.8
2019
€’m
11.5
Defined benefit pension plans
The Group operates two defined benefit pension plans in the Republic of Ireland (‘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 independent Boards of Trustees through separate trustee controlled
funds. These Boards are responsible for the management and governance of the pension plans including compliance with all relevant laws
and regulations. Each of the Group’s defined benefit pension plans operate under their respective regulatory frameworks and minimum funding
requirements in Ireland and the statutory funding objective in the UK. The UK pension plans comprise solely of 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 5 April 2017 and 1 January 2019.
During 2019 changes to certain assumptions underlying the past service cost were agreed with the Trustees which resulted in a credit to past
service cost of €1.2 million.
Recognition 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
2020
€’m
2.6
2019
€’m
2.1
(31.9)
(48.4)
(29.3)
(46.3)
163
The amounts recognised in the balance sheet and the movements in the net defined benefit obligations over the year are as follows:
Present value of obligation
Fair value of plan assets
2020
ROI
€’m
UK
€’m
Total
€’m
ROI
€’m
At the beginning of the year
(142.5)
(111.0)
(253.5)
116.3
Current service cost
Past service cost
Interest (expense)/income
Total amount recognised in profit or loss
Remeasurements
– Return of plan assets in excess of interest income
– Actuarial loss arising from experience adjustments
– Actuarial loss arising from changes in demographic
assumptions
– Actuarial loss arising from changes in financial
assumptions
Total amount recognised in other comprehensive income
Exchange differences
Contributions paid by the employer
Contributions paid by the employee
Benefits paid
(1.9)
–
(1.4)
(3.3)
–
(0.2)
–
(6.7)
(6.9)
–
–
(0.3)
6.7
–
(0.3)
(1.9)
(2.2)
–
(0.5)
(0.6)
(7.9)
(9.0)
5.9
–
–
3.9
(1.9)
(0.3)
(3.3)
(5.5)
–
(0.7)
(0.6)
(14.6)
(15.9)
5.9
–
(0.3)
10.6
Total net
defined
liability
€’m
Total
€’m
207.2
(46.3)
UK
€’m
90.9
–
–
1.6
1.6
12.9
–
–
–
–
–
1.1
1.1
11.8
–
–
–
–
–
2.7
2.7
24.7
–
–
–
11.8
12.9
24.7
–
2.3
0.3
(6.7)
(4.9)
7.7
–
(3.9)
(4.9)
10.0
0.3
(10.6)
(1.9)
(0.3)
(0.6)
(2.8)
24.7
(0.7)
(0.6)
(14.6)
8.8
1.0
10.0
–
–
At the end of the year
(146.3)
(112.4)
(258.7)
125.1
104.3
229.4
(29.3)
2019
ROI
€’m
UK
€’m
Total
€’m
ROI
€’m
At the beginning of the year
(127.3)
(97.5)
(224.8)
105.9
UK
€’m
80.4
Total
€’m
186.3
Present value of obligation
Fair value of plan assets
Current service cost
Past service cost
Interest (expense)/income
Total amount recognised in profit or loss
Remeasurements
– Return of plan assets in excess of interest income
– Actuarial loss arising from experience adjustments
– Actuarial loss arising from changes in demographic
assumptions
– Actuarial loss arising from changes in financial
assumptions
Total amount recognised in other comprehensive income
Exchange differences
Contributions paid by the employer
Contributions paid by the employee
Benefits paid
(1.7)
–
(2.3)
(4.0)
–
(0.7)
–
1.2
(2.5)
(1.3)
–
–
–
(0.6)
(14.2)
(14.9)
–
–
(0.3)
4.0
(10.4)
(11.0)
(5.8)
–
–
4.6
(1.7)
1.2
(4.8)
(5.3)
–
(0.7)
(0.6)
(24.6)
(25.9)
(5.8)
–
(0.3)
8.6
–
–
1.9
1.9
10.2
–
–
–
10.2
–
2.0
0.3
(4.0)
–
–
2.2
2.2
1.1
–
–
–
1.1
5.0
6.8
–
(4.6)
–
–
4.1
4.1
11.3
–
–
–
11.3
5.0
8.8
0.3
(8.6)
Total net
defined
liability
€’m
(38.5)
(1.7)
1.2
(0.7)
(1.2)
11.3
(0.7)
(0.6)
(24.6)
(14.6)
(0.8)
8.8
–
–
At the end of the year
(142.5)
(111.0)
(253.5)
116.3
90.9
207.2
(46.3)
The net liability disclosed above relates to funded plans.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 164
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
9. Retirement benefit obligations continued
The fair value of plan assets at the end of the reporting period are as follows:
Equities
– Consumer
– Financials
– Information technology
– Other
Corporate bonds
– Investment grade
– Non-investment grade
Government bonds and gilts
Property
Cash
Investment funds
Other
2020
Quoted
€’m
Unquoted
€’m
4.2
4.2
4.7
12.2
9.5
1.6
51.3
−
2.3
11.0
−
−
−
−
−
−
−
−
2.3
6.7
108.9
10.5
Total
€’m
4.2
4.2
4.7
12.2
9.5
1.6
51.3
2.3
9.0
119.9
10.5
2019
Quoted
€’m
Unquoted
€’m
2.6
4.5
4.1
12.4
8.8
1.0
48.1
−
1.3
−
−
−
−
−
−
−
−
−
2.4
9.7
101.6
10.7
Total
€’m
2.6
4.5
4.1
12.4
8.8
1.0
48.1
2.4
11.0
101.6
10.7
%
2
2
2
5
4
1
22
1
4
52
5
%
1
2
2
6
4
1
23
1
6
49
5
101.0
128.4
229.4
100
82.8
124.4
207.2
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.
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 liabilities are discounted using market yields on high-quality corporate bonds. If the return on plan assets is below this rate, it will
create a plan deficit. Currently, the pension plans hold investments in primarily investment funds and government bonds and gilts. 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
A decrease in corporate bond yields will increase plan liabilities, although this will be partially offset by an increase in the value of the plans’ bond
holdings. A change in the net 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.
165
Principal assumptions used in the defined benefit pension plans
The principal assumptions used for the purposes of the actuarial valuations were as follows:
Discount rate
Inflation rate
Future salary increases*
Future pension increases
Mortality rates (years)
– 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
2020
ROI
2020
UK
0.70%
1.45%
1.10% 2.25%–2.90%
2.10%
0.00%
0.00% 2.25%–2.80%
2019
ROI
2019
UK
1.00%
1.10%–1.20%
2.20%
0.00%
1.85%
2.05%–2.95%
0.00%
2.15%–2.80%
24.0
26.1
21.7
24.1
22.1
24.4
21.1
23.2
23.8
25.9
21.4
23.9
22.0
24.2
20.9
22.9
*
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.
Assumptions regarding future mortality experience are set based on actuarial advice in accordance with published statistics and experience
in each territory.
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
in the Group balance sheet.
There have been no changes from the previous year in the methods and assumptions used in preparing the sensitivity analysis.
Assumption
Change in assumption
2020
Discount rate
Inflation rate
Mortality rate
Future salary increases*
Future pension increases**
2019
Discount rate
Inflation rate
Mortality rate
Future salary increases*
Future pension increases**
0.25% movement
0.25% movement
1 year movement
0.25% movement
0.25% movement
1 year movement
ROI plans
UK plans
Increase
€’m
Decrease
€’m
Increase
€’m
Decrease
€’m
(6.2)
1.8
5.0
(6.0)
1.8
4.7
6.6
(1.8)
(4.9)
6.4
(1.8)
(4.6)
(4.2)
3.7
5.5
(4.2)
3.7
5.1
4.5
(3.5)
(5.4)
4.5
(3.6)
(5.1)
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.
Expected contributions to the defined benefit plans for the coming year (€’m)
Weighted average duration of the defined benefit plans
2020
ROI plans
3.9
17 years
2020
UK plans
3.6
16 years
2019
ROI plans
2.2
17 years
2019
UK plans
7.0
15 years
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION
166
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
10. Share-based payment expense
The Group operates various equity settled share-based payment arrangements which are described in this note. Further details of the plans are
available in the Remuneration Committee Report on pages 96 to 117.
The total cost recognised in the Group income statement is analysed as follows:
The 2008 Long-term incentive plan (2008 LTIP)
The 2018 Long-term incentive plan (2018 LTIP)
The 2019 Restricted Share Plan (2019 RSP)
The annual incentive deferred into shares scheme (AIDIS)
Notes
7/32
2020
€’m
–
4.2
1.0
–
5.2
2019
€’m
0.3
2.4
1.6
0.3
4.6
Refer to note 23 for the movement in the share-based payment reserve recognised in the Group balance sheet.
2008 LTIP and 2018 LTIP
The 2008 LTIP 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. The 2008 LTIP expired on
4 March 2018 and was replaced by the 2018 LTIP. No further awards were made under the 2008 LTIP after 4 March 2018.
Awards granted under the 2008 LTIP and 2018 LTIP are scheduled to vest 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. Awards
lapse/expire by the fourth anniversary of the date of a grant. The maximum annual award level is 250% of base salary. Vesting is determined
on a straight line basis between threshold and maximum. There is a requirement to hold shares received pursuant to the vesting of LTIP awards
for a minimum period of one year post-vesting (two years for members of the Group Operating Executive).
The extent of vesting for awards outstanding is determined based on a combination of performance metrics comprised of Group adjusted
Earnings Per Share, relative Total Shareholder Return performance (‘TSR’) against the STOXX Europe 600 Food & Beverage index, Group Return
on Capital Employed (‘ROCE’), business segment EBITA and ROCE where applicable, a service condition and in certain circumstances a
personal objective.
2019 RSP
This scheme was introduced in 2019 to provide share awards to certain employees. The maximum award level is 250% of base salary. The extent
of vesting for awards outstanding is generally determined based on a service condition and personal objectives.
AIDIS
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 nil in 2020 (2019: €0.3 million) and equates to the cash value of the portion of the
annual incentive that will be settled by way of shares. The 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.
2002 LTIP
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 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. The fair value of the share options was calculated using
the Binomial Model.
There is no movement in the number of options outstanding under 2002 LTIP for the year ended 2 January 2021 and 4 January 2020.
The number of share options outstanding and exercisable as at 2 January 2021 and 4 January 2020 is 40,000. They have a weighted average
exercise price of €4.38 per share and expire in 2021.
167
Movement in the number of awards of the 2018 LTIP, 2008 LTIP and 2019 RSP, and the weighted average fair value of grants during the years
ended 2 January 2021 and 4 January 2020 are as follows:
At the beginning of the year
Granted
Vested
Lapsed
2018 LTIP
2008 LTIP
2019 RSP
2020
Number
1,832,628
1,859,687
–
(169,933)
2019
Number
1,002,386
925,522
–
(95,280)
2020
Number
692,603
–
(196,452)
(496,151)
2019
Number
1,349,801
–
(304,444)
(352,754)
2020
Number
159,659
360,478
(5,033)
(12,032)
2019
Number
–
222,116
(56,457)
(6,000)
At the end of the year
3,522,382
1,832,628
Weighted average fair value of awards
granted
€7.43
€15.94
–
–
692,603
503,072
159,659
–
€10.35
€14.41
The assumptions used in the valuation of the awards granted under 2018 LTIP and 2019 RSP during the years ended 2 January 2021 and
4 January 2020 included:
2018 LTIP –
2020 awards
2018 LTIP –
2019 awards
2019 RSP –
2020 awards
2019 RSP –
2019 awards
Model used
Monte Carlo
Year of earliest vesting date
Share price at date of award
Risk-free interest rate
Expected volatility*
Expected dividend yield
Fair value – TSR component
Fair value – non-market performance component
2023
€8.24
(0.68%)
32.5%
2.15%
€4.62
€7.72
Monte Carlo
Discounted
cash flow
2021-2023
€9.19-€10.42
–
–
Discounted
cash flow
2022
2019-2022
€17.73
€9.91-€17.01
(0.63%)
–
–
25.7%
1.56% 2.57%-2.60% 1.55%–1.69%
–
€8.68
–
€16.92
–
–
* 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.
11. Finance income and costs
Finance income
Interest income on loans at amortised cost to related parties
Interest income on deposits
Net interest income on swaps
Total finance income
Finance costs
Bank borrowing costs
Facility fees including cost amortisation
Finance cost of private placement debt
Interest expense on lease liabilities
Total finance costs
Net finance costs
Notes
35
32
31
32
2020
€’m
1.3
2.2
0.6
4.1
(12.8)
(1.7)
(7.3)
(2.8)
2019
€’m
1.3
4.7
0.2
6.2
(24.0)
(1.1)
(7.4)
–
(24.6)
(32.5)
(20.5)
(26.3)
Net finance costs do not include bank borrowing costs of €0.5 million (2019: €0.7 million) attributable to the acquisition, construction or
production of a qualifying asset, which have been capitalised, as disclosed in note 15. Interest is capitalised at the Group’s average interest rate
for the period of 2.9% (2019: 3.4%). Where relevant, tax deduction for capitalised interest was taken in accordance with Sec 81(3), TCA 1997.
Tax relief in relation to capitalised interest is nil (2019: nil).
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 168
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
12. Income taxes
Current tax
Irish current tax charge
Adjustments in respect of prior years
Irish current tax for the year
Foreign current tax
Adjustments in respect of prior years
Foreign current tax for the year
Total current tax
Deferred tax
Deferred tax – current year
Adjustments in respect of prior years
Total deferred tax
Tax charge
The tax credit on exceptional items included in the above amounts is as follows:
Current tax credit on exceptional items
Deferred tax credit on exceptional items
Total tax credit on exceptional items for the year
Notes
26
32
Notes
6
2020
€’m
5.7
0.1
5.8
14.8
(1.4)
13.4
19.2
(11.6)
2.7
(8.9)
10.3
2020
€’m
(4.2)
–
(4.2)
2019
€’m
3.2
0.9
4.1
16.0
(0.9)
15.1
19.2
(1.2)
0.9
(0.3)
18.9
2019
€’m
(4.4)
(0.1)
(4.5)
The net tax credit on exceptional items has been disclosed separately above as it relates to costs and income which have been presented
as exceptional.
The tax on the Group’s profit before tax differs from the theoretical amount that would arise applying the corporation tax rate in Ireland, as follows:
Profit before tax
Income tax calculated at Irish rate of 12.5% (2019: 12.5%)
Earnings at higher Irish rates
Difference due to overseas tax rates (capital and trading)
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 items
Total tax charge
2020
€’m
154.1
19.3
2.0
8.1
1.4
(7.6)
(12.9)
10.3
2019
€’m
199.1
24.9
0.2
4.0
0.9
(6.2)
(4.9)
18.9
Details of deferred tax charged or credited directly to other comprehensive income during the year are outlined in note 26.
Factors that may affect future tax charges and other disclosure requirements
The total tax charge in future periods will be affected by any changes to the applicable tax rates in force in jurisdictions in which the Group
operates and other relevant changes in tax legislation, including amendments impacting on the excess of tax depreciation over accounting
depreciation. The total tax charge of the Group may also be influenced by the effects of corporate development activity and the resolution
of uncertain tax positions where the final outcome of those matters is different than the amounts recorded (note 3).
169
13. 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 23). The
weighted average number of ordinary shares in issue used in the calculation of Basic Earnings Per Share is 295,173,279 (2019: 295,215,046).
Profit after tax attributable to equity holders of the Company (€’m)
Basic Earnings Per Share (cent)
2020
143.8
2019
180.2
48.72
61.04
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.
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. The number of share options represents the number expected to be exercised.
Weighted average number of ordinary shares in issue
Shares deemed to be issued for no consideration in respect of:
– Share awards
– Share options
2020
2019
295,173,279
295,215,046
762,861
22,031
543,676
27,441
Weighted average number of shares used in the calculation of Diluted Earnings Per Share
295,958,171
295,786,163
Diluted Earnings Per Share (cent)
48.59
60.92
14. Dividends
The dividends paid and recommended on ordinary share capital are as follows:
Equity dividends to shareholders
Final – paid 15.94c per ordinary share (2019: 14.49c)
Interim – paid 10.68c per ordinary share (2019: 10.68c)
Total
Reconciliation to Group statement of cash flows and statement of changes in equity
Dividends to shareholders
Waived dividends in relation to own shares
Total dividends paid to equity holders of the Company
Equity dividends recommended
Final 2020 – proposed 15.94c per ordinary share (2019: 15.94c)
Notes
24
36
2020
€’m
47.2
31.6
78.8
78.8
(0.2)
78.6
2019
€’m
42.9
31.6
74.5
74.5
(0.2)
74.3
46.9
47.2
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 170
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
15. Property, plant and equipment
Year ended 2 January 2021
Opening carrying amount
Exchange differences
Acquisitions
Additions
Impairment
Disposal of assets
Depreciation charge
Closing carrying amount
Land and
buildings
€’m
Plant and
equipment
€’m
Motor
vehicles
€’m
201.2
(14.9)
3.9
10.0
(0.5)
(0.3)
(10.9)
272.2
(22.9)
3.1
29.2
(0.8)
(1.6)
(34.7)
0.7
(0.1)
–
–
–
–
(0.3)
Notes
34
5
5/32
Total
€’m
474.1
(37.9)
7.0
39.2
(1.3)
(1.9)
(45.9)
188.5
244.5
0.3
433.3
At 2 January 2021
Cost
Accumulated depreciation and impairment
280.1
(91.6)
560.0
(315.5)
2.7
(2.4)
842.8
(409.5)
Carrying amount
188.5
244.5
0.3
433.3
Year ended 4 January 2020
Opening carrying amount
Exchange differences
Acquisitions
Additions
Impairment
Disposal of assets
Depreciation charge
Closing carrying amount
At 4 January 2020
Cost
Accumulated depreciation and impairment
Carrying amount
5
5/32
186.9
4.3
11.5
9.3
–
–
(10.8)
265.2
7.4
5.1
32.3
(0.4)
(0.4)
(37.0)
201.2
272.2
290.5
(89.3)
594.7
(322.5)
201.2
272.2
0.9
–
–
0.1
–
–
(0.3)
0.7
3.1
(2.4)
0.7
453.0
11.7
16.6
41.7
(0.4)
(0.4)
(48.1)
474.1
888.3
(414.2)
474.1
Included in the closing cost at 2 January 2021 is an amount of €25.2 million (2019: €14.7 million) incurred in respect of assets under construction.
Included in the cost of additions for 2020 is €0.5 million (2019: €0.3 million) incurred in respect of staff costs capitalised into assets. Included
in the cost of additions for 2020 is €0.5 million (2019: €0.7 million) incurred in respect of borrowing cost capitalised into assets.
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
2020
€’m
7.9
2019
€’m
8.3
171
16. Intangible assets
Year ended 2 January 2021
Opening carrying amount
Exchange differences
Acquisitions
Additions
Amortisation
Notes
Goodwill
€’m
574.3
(48.9)
23.0
–
–
34
4/5/32
Brands
and other
intangibles
€’m
684.1
(58.7)
21.8
0.7
(38.2)
Software
costs
€’m
Development
costs
€’m
64.4
(2.1)
0.2
15.0
(12.9)
21.8
(1.9)
–
10.5
(9.8)
Total
€’m
1,344.6
(111.6)
45.0
26.2
(60.9)
Closing carrying amount
548.4
609.7
64.6
20.6
1,243.3
At 2 January 2021
Cost
Accumulated amortisation and impairment
548.4
–
853.0
(243.3)
123.0
(58.4)
82.1
(61.5)
1,606.5
(363.2)
Carrying amount
548.4
609.7
64.6
20.6
1,243.3
Year ended 4 January 2020
Opening carrying amount
Exchange differences
Acquisitions
Additions
Impairment
Amortisation
549.8
14.2
10.3
–
–
–
680.1
18.1
25.5
0.5
–
(40.1)
5
4/5/32
Closing carrying amount
574.3
684.1
53.9
0.9
0.3
18.8
–
(9.5)
64.4
20.2
0.6
–
14.3
(2.0)
(11.3)
1,304.0
33.8
36.1
33.6
(2.0)
(60.9)
21.8
1,344.6
At 4 January 2020
Cost
Accumulated amortisation and impairment
574.3
–
915.6
(231.5)
112.9
(48.5)
101.9
(80.1)
1,704.7
(360.1)
Carrying amount
574.3
684.1
64.4
21.8
1,344.6
The average remaining amortisation period for software costs is 5.2 years (2019: 5.6 years) and development costs is 2.2 years (2019: 2.1 years).
Approximately €13.5 million (2019: €8.8 million) of software additions during the year were internally generated which included €6.2 million
(2019: €7.5 million) of staff costs capitalised. Approximately €10.5 million of development cost additions during the year (2019: €14.2 million)
were internally generated which included €6.7 million (2019: €7.1 million) of staff costs capitalised.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 172
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
16. Intangible assets continued
Brands and other intangibles
Year ended 2 January 2021
Opening carrying amount
Exchange differences
Acquisitions
Additions
Amortisation
Closing carrying amount
At 2 January 2021
Cost
Accumulated amortisation and impairment
Carrying amount
Year ended 4 January 2020
Opening carrying amount
Exchange differences
Acquisitions
Additions
Amortisation
Closing carrying amount
At 4 January 2020
Cost
Accumulated amortisation and impairment
Notes
34
Customer
relationships
€’m
Recipes,
Know-how and
other
€’m
209.9
(17.2)
3.3
–
(25.2)
9.6
(1.3)
13.9
0.7
(1.6)
Brands
€’m
464.6
(40.2)
4.6
–
(11.4)
Total
€’m
684.1
(58.7)
21.8
0.7
(38.2)
417.6
170.8
21.3
609.7
478.5
(60.9)
351.0
(180.2)
23.5
(2.2)
853.0
(243.3)
417.6
170.8
21.3
609.7
463.4
12.3
1.1
0.5
(12.7)
214.7
5.9
15.6
–
(26.3)
464.6
209.9
2.0
(0.1)
8.8
–
(1.1)
9.6
680.1
18.1
25.5
0.5
(40.1)
684.1
519.2
(54.6)
386.1
(176.2)
10.3
(0.7)
915.6
(231.5)
Carrying amount
464.6
209.9
9.6
684.1
Individually material intangible assets with definite useful lives
Brands
Glanbia Performance Nutrition – BSN
Glanbia Performance Nutrition – Isopure
Glanbia Performance Nutrition – think!
Glanbia Performance Nutrition – Amazing Grass
Glanbia Performance Nutrition – Body & Fit
Glanbia Performance Nutrition – SlimFast North America
Glanbia Performance Nutrition – SlimFast International
Customer relationships
Glanbia Performance Nutrition – Optimum Nutrition
Glanbia Performance Nutrition – BSN
Glanbia Performance Nutrition – Isopure
Glanbia Performance Nutrition – think!
Glanbia Performance Nutrition – Amazing Grass
Glanbia Performance Nutrition – SlimFast North America
Glanbia Performance Nutrition – SlimFast International
Average
remaining
amortisation
period
2020
Years
Carrying
amount
2020
€’m
Average
remaining
amortisation
period
2019
Years
Carrying
amount
2019
€’m
39.0
49.8
61.2
30.1
11.0
87.9
18.0
12.7
11.8
14.2
38.1
24.6
37.2
14.2
30
34
35
36
36
38
38
2
5
7
8
11
13
13
44.4
56.4
69.3
34.0
11.3
99.6
20.4
19.3
16.1
18.0
47.5
29.5
44.5
16.9
31
35
36
37
37
39
39
3
6
8
9
12
14
14
173
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
2020
€’m
Useful life
2020
Years
Carrying
amount
2019
€’m
Useful life
2019
Years
100.0
Indefinite
110.1
Indefinite
The movement in the carrying amount of the asset is in relation to exchange differences arising on translation at year end.
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. 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 and indefinite life intangibles acquired in business combinations are allocated to the Group’s cash generating units (‘CGUs’) that are
expected to benefit from the business acquisition, rather than where the assets are owned. The CGUs represent the lowest level within the Group
at which the associated goodwill and indefinite life intangibles are monitored for internal management purposes and are not larger than the
operating segments determined in accordance with IFRS 8 ‘Operating Segments’. CGUs are kept under review to ensure that they reflect
changing interdependencies of cash inflows within the Group and how management monitors operations.
Cash generating units (CGUs)
During the current year, the fundamental reorganisation of the GPN segment, which commenced in 2019, continued to progress. This global
transformation project aims to realign operating and supply chain structures in support of individual businesses, sharpen focus on brands and
optimise routes-to-market across non-US markets to drive greater efficiencies, improve margin and deliver top line growth. Consequently, this
project led to the formation of distinct lines of business within the GPN segment, including (i) North America Performance Nutrition (ii) North
America Lifestyle (iii) International and (iv) Direct-to-Consumer businesses. To date, each of these businesses with the exception of North America
Lifestyle represents a stand-alone CGU within the GPN business unit, as cash flows across geographies and markets are largely interdependent,
and the structure mirrors how management now monitor operations. Work is ongoing within the North America Lifestyle line of business which is
represented as three CGUs (SlimFast North America, think! and Amazing Grass) at 2 January 2021, whilst the full reorganisation efforts continue.
In the Glanbia Nutritionals segment, a number of changes underpinned the interdependency of the cash inflows of the previously separately
identifiable CGUs (other than US Cheese) into a single CGU. The changes include the integration of the Watson acquisition within Nutritional
Solutions, a reorganisation of the sales team to focus on overall product sales, and re-deployment of assets across different product lines and
regions to optimise supply chain structure. The changes in CGUs are consistent with how management now monitor operations.
The intangible assets including goodwill of the CGUs as at 4 January 2020 were allocated to the CGUs as at 2 January 2021 based on the
lines of business within GPN or GN that they fall under. As a result of the changes in CGUs, the CGUs to which significant amounts of goodwill
and indefinite life intangibles have been allocated and the associated discount rates used for impairment testing as at 2 January 2021 are
set out below:
North America Performance Nutrition
North America Lifestyle
– SlimFast North America
– think!
– Amazing Grass
International
Direct-to-Consumer
Nutritional Solutions
Other CGUs without individually significant goodwill
Goodwill
2020
€’m
125.7
100.2
75.9
34.6
49.2
27.1
130.2
5.5
Indefinite life
intangibles
2020
€’m
Discount
rate
92.1
7.39%
–
–
–
7.9
–
–
–
7.39%
7.39%
7.39%
8.82%
8.13%
7.39%
8.13%
548.4
100.0
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 174
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
16. Intangible assets continued
The intangible assets including goodwill of the CGUs as at 4 January 2020 were allocated to the CGUs as at 2 January 2021 based on the lines
of business within GPN or GN that they fall under.
The CGUs to which significant amounts of goodwill and indefinite life intangibles have been allocated and the associated discount rates used for
impairment testing as at 4 January 2020 are set out below:
Glanbia Performance Nutrition – Optimum Nutrition
Glanbia Performance Nutrition – Isopure
Glanbia Performance Nutrition – SlimFast North America
Glanbia Performance Nutrition – think!
Glanbia Performance Nutrition – Amazing Grass
Glanbia Performance Nutrition – SlimFast International
Glanbia Performance Nutrition – Body & Fit
Glanbia Nutritionals – Premix and non-dairy bioactives – Americas
Other CGUs without individually significant goodwill
Goodwill
2019
€’m
Indefinite life
intangibles
2019
€’m
Discount
rate
2019
77.4
56.9
112.6
83.5
38.1
26.3
28.5
72.2
78.8
574.3
7.55%
110.1
7.58%
–
7.12%
–
7.12%
–
7.12%
–
7.49%
–
6.95%
–
–
7.12%
– 7.12% – 7.89%
110.1
Key assumptions
Refer to note 2 for Covid-19 considerations relating to the key assumptions. The recoverable amount of goodwill and indefinite life intangibles
allocated to a CGU is determined based on a value in use computation. The key assumptions for calculating value in use of the CGUs are
discount rates, growth rates and cash flows. They are described as follows:
Discount rates
Refer to the tables within this section for the pre-tax discount rates that are applied to the cash flow projections in the value in use computations.
The pre-tax discount rates are based on 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 to take account of the countries from where the CGU derives its cash
flows.
Growth rates
A terminal value of 2% growth into perpetuity was used to extrapolate cash flows beyond the budget and strategic plan period. 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 position, playing in large and growing markets which centre around nutrition and healthy lifestyles.
Cash flows
The cash flow projections are based on three years of cash flows being, the 2021 budget formally approved by, and the strategic plan for 2022 and
2023 as presented to, the Board of Directors. In cases where management have strategic plans beyond 2023 these numbers are also used in the
projections. Due to management’s plan as part of the Direct-to-Consumer business model to reinvest the profits of the business for a number
of years to drive revenue growth and build the brand for potential expansion into other markets, the cash flows of the CGU relating to Direct-to-
Consumer (formerly Body & Fit) are forecast over a period of six years. In respect of think! lifestyle business the strategy presented to the Board
covered a five year period from 2021 to 2025 and these cash flows have been used in the impairment calculations.
In preparing the 2021 budget and strategic plan, management considered the Group’s history of earnings, past experience, cash flow generation,
and the impact of Covid-19 and climate change (note 2). 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.
No impairments relating to goodwill, brands and other intangibles, and software costs arose in either 2020 or 2019.
Sensitivity analysis
The key assumptions underlying the impairment reviews are set out above. Sensitivity analysis has been conducted in respect of each of the CGUs
using the following sensitivity assumptions: 1% increase in the discount rate; 10% decrease in EBITDA growth; and nil terminal value growth.
From our sensitivity analysis, we have identified one CGU, the think! lifestyle business, where a reasonably possible change in the terminal value
growth rate could result in an impairment charge. The recoverable amount of this CGU exceeds its carrying amount by €50.9 million. Terminal
value growth of 2% would have to decrease by 175bps for the carrying amount to equal its recoverable amount. In view of Covid-19, as an
additional analysis, the Group has increased the sensitivities over EBITDA growth in 2021 and 2022 (note 2). There is no change to the conclusion
of the original sensitivity analysis.
17. Equity accounted investees
The Group’s interests in equity accounted investees at the end of the reporting period is as follows:
MWC-Southwest Holdings LLC
Glanbia Cheese Limited
Glanbia Cheese EU Limited
Glanbia Ireland DAC
Interests in joint ventures
175
Notes
(a)
(b)
(c)
(d)
2020
€’m
122.7
36.3
22.5
214.4
2019
€’m
110.7
40.1
24.2
198.2
395.9
373.2
The joint ventures have share capital, consisting solely of ordinary shares, membership interests or membership units and preference shares.
Decisions about the relevant activities of the joint ventures require unanimous consent of the Group and the respective joint venture partners.
(a) MWC-Southwest Holdings LLC was established in 2018 to hold 100% of the ownership interest in Southwest Cheese Company, LLC
(‘Southwest Cheese’) and MWC (Michigan) LLC. Consequently, the Group owns 50% of MWC-Southwest Holdings LLC and its two
subsidiaries. The Group controls 50% of the voting rights and is entitled to appoint 50% of the total number of Directors to the Board.
Southwest Cheese is a large scale manufacturer of premium quality block cheese and whey protein ingredients for consumer foods markets
internationally. MWC will also be a large scale manufacturer of premium quality block cheese and whey protein ingredients for consumer foods
markets internationally. The plant is currently being commissioned with full commissioning expected to be completed in the first half of 2021.
(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 along with its joint partner Leprino Foods Company it has equal representation on the Board of Directors,
who directs the relevant activities of the business. The Group controls 50% of the voting rights and is entitled to appoint 50% of the total
number of Directors to the Board.
(c) Glanbia Cheese EU Limited was established in 2018 and is a joint venture with Leprino Foods Company with each party owning 50% of the
share capital of the company. The Group controls 50% of the voting rights and is entitled to appoint 50% of the total number of Directors to the
Board. When operating, the company will be a producer of mozzarella cheese with a plant situated in Portlaoise, Ireland. It is expected to be
fully commissioned in the first half of 2021.
(d) Glanbia Ireland DAC is the largest dairy and agribusiness in Ireland. It owns leading consumer and agri brands such as Avonmore, GAIN Animal
Nutrition, 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 Glanbia Co-operative Society Limited which holds the remaining 60%
shareholding.
Refer to note 37 for further details of the joint ventures.
The movement in the equity accounted investees recognised in the Group balance sheet is as follows:
At the beginning of the year
Investment in joint ventures
Share of profit after tax (post-exceptional)
Share of other comprehensive income
– Remeasurements on defined benefit plan, net of deferred tax
– Fair value movement on cash flow hedges, net of deferred tax
Dividends received
Income tax movement
IFRS 16 transition equity adjustment
Exchange differences
Notes
24
23(d)
35
2020
€’m
373.2
6.6
60.4
7.0
(6.7)
(36.6)
8.8
(1.7)
(15.1)
2019
€’m
334.5
36.6
48.6
(8.3)
(10.0)
(35.3)
2.7
–
4.4
At the end of the year
395.9
373.2
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 176
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
17. 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, 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 the
carrying value of the Group’s interest in equity accounted investees.
2020
Summarised balance sheet (100%):
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Non-current liabilities
Financial liabilities
Other non-current liabilities
Current liabilities
Bank overdrafts and loans
Other current liabilities
Net assets (100%)
Net assets attributable to equity holders of the Company
Reconciliation to carrying amount:
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 amount
Summarised income statement (100%):
Revenue
Depreciation
Amortisation
Interest (expense)/income
Tax
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 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
Glanbia
Ireland
DAC*
€’m
Glanbia
Cheese
Limited
€’m
Glanbia
Cheese
EU Limited
€’m
Notes
MWC-
Southwest
Holdings
LLC
€’m
730.7
35.4
139.4
646.1
66.6
425.5
492.1
(227.8)
(177.9)
(405.7)
(69.7)
(282.8)
(352.5)
464.6
451.9
180.8
(2.0)
35.6
–
214.4
1,906.2
(39.9)
(2.1)
(11.7)
(8.9)
60.0
18.6
78.6
59.1
77.6
31.0
0.5
(1.1)
–
30.4
35.0
49.7
84.7
–
(5.0)
(5.0)
–
(47.1)
(47.1)
68.0
68.0
34.0
–
–
2.3
36.3
320.7
(0.1)
–
–
(5.1)
19.7
(1.5)
18.2
19.7
18.2
9.1
–
–
2.3
11.4
14.6
3.6
18.2
(96.5)
–
(96.5)
–
(16.1)
(16.1)
45.0
45.0
22.5
–
–
–
22.5
–
–
–
0.6
0.5
(3.4)
–
(3.4)
(3.4)
(3.4)
(1.7)
–
–
–
(1.7)
65.6
154.1
219.7
(442.2)
(32.7)
(474.9)
–
(145.5)
(145.5)
245.4
245.4
122.7
–
–
–
122.7
1,147.2
(18.8)
(0.1)
(9.5)
(20.3)
53.8
28.9
82.7
53.8
82.7
41.4
–
–
–
41.4
Dividends received by Group
35
12.6
13.1
–
10.9
* The difference between the net assets and the net assets attributable to equity holders of the Company is the portion of net assets attributable to non-controlling interests.
177
2019
Summarised balance sheet (100%):
Non-current assets
Current assets
Cash and cash equivalents
Other current assets
Non-current liabilities
Financial liabilities
Other non-current liabilities
Current liabilities
Bank overdrafts and loans
Other current liabilities
Net assets (100%)
Net assets attributable to equity holders of the Company
Reconciliation to carrying amount:
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 amount
Summarised income statement (100%):
Revenue
Depreciation
Amortisation
Interest (expense)/income
Tax
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 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
Glanbia
Ireland
DAC*
€’m
Glanbia
Cheese
Limited
€’m
Glanbia
Cheese
EU Limited
€’m
Notes
MWC-
Southwest
Holdings
LLC
€’m
711.8
41.3
72.6
563.8
47.9
421.3
469.2
(274.0)
(176.7)
(450.7)
(61.5)
(247.0)
(308.5)
421.8
410.0
164.0
(2.5)
36.7
–
198.2
1,961.8
(30.4)
(2.7)
(11.9)
(9.4)
62.8
(22.5)
40.3
61.7
39.3
15.7
(1.3)
(1.1)
–
13.3
46.5
44.5
91.0
–
(6.0)
(6.0)
–
(52.4)
(52.4)
73.9
73.9
37.7
–
–
2.4
40.1
341.7
(5.0)
(0.2)
0.2
(7.1)
26.6
(1.0)
25.6
26.6
25.6
13.1
–
–
2.4
15.5
8.3
2.0
10.3
–
(24.3)
(24.3)
–
(10.3)
(10.3)
48.3
48.3
24.2
–
–
–
24.2
–
–
–
–
0.1
(1.1)
–
(1.1)
(1.1)
(1.1)
(0.6)
–
–
–
(0.6)
11.4
140.3
151.7
(312.2)
(17.2)
(329.4)
–
(164.7)
(164.7)
221.4
221.4
110.7
–
–
–
110.7
1,034.2
(19.0)
(0.1)
(11.2)
(8.2)
21.7
(17.6)
4.1
21.7
4.1
2.1
–
–
–
2.1
Dividends received by Group
35
11.6
12.5
–
11.2
* The difference between the net assets and the net assets attributable to equity holders of the Company is the portion of net assets attributable to non-controlling interests.
Commitments and contingent liabilities in respect of equity accounted investees
As at 2 January 2021, the Group has committed to invest €4.1 million cash contributions in Glanbia Cheese EU Limited (2019: €10.0 million).
No further investment is currently committed to MWC-Southwest Holdings LLC as at 2 January 2021 (2019: $7.5 million).
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 178
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
18. Other financial assets
Other financial assets comprise the following:
Financial assets at amortised cost
Ornua Co-operative Limited*
Equity instruments designated at FVOCI
The BDO Development Capital Fund
Others
* This is a loan note receivable from Ornua Co-operative Limited.
Notes
29(b)/29(f)
2020
€’m
0.4
2.2
0.6
3.2
2019
€’m
0.7
2.1
0.6
3.4
Other 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.
The movement in other financial assets is as follows:
At the beginning of the year
Disposals/redemption
Fair value adjustment
Additions
At the end of the year
19. Trade and other receivables
Current assets
Trade receivables
Less: loss allowance
Trade receivables – net
Receivables from equity accounted investees
Receivables from other related parties
Interest on loans to equity accounted investees
Value added tax
Prepayments
Other receivables
2020
€’m
3.4
(0.3)
–
0.1
3.2
2020
€’m
283.5
(11.2)
272.3
7.2
0.3
0.1
11.2
14.4
13.7
2019
€’m
3.7
(0.5)
(0.2)
0.4
3.4
2019
€’m
389.6
(6.6)
383.0
8.0
0.2
0.1
3.7
16.6
20.7
319.2
432.3
Notes
29(d)
35(c)
35(c)
35
See note 32(a) 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 29.
The currency profile of trade and other receivables is as follows:
At 2 January 2021
At 4 January 2020
euro
€’m
38.8
43.8
US dollar
€’m
Pound sterling
€’m
Australian dollar
€’m
249.6
334.9
16.3
30.6
2.0
3.1
Other
€’m
12.5
19.9
Total
€’m
319.2
432.3
Principal currencies in “other” include Indian Rupee and Chinese renminbi.
20. Inventories
Raw materials
Work in progress
Finished goods
Consumables
Recognition in the Group income statement:
Cost of inventories recognised as an expense in Cost of Goods Sold
Write down of inventory to net realisable value during the year
Previous write downs of inventories reversed during the year*
* Previous write downs have been reversed as a result of increased sales prices in certain markets.
21. Cash and cash equivalents
Cash at bank and in hand
Short term bank deposits
Cash and cash equivalents in the Group balance sheet
Bank overdrafts used for cash management purposes
Cash and cash equivalents in the Group statement of cash flows
22. Share capital and share premium
At 4 January 2020
Cancellation of own shares
At 2 January 2021
179
2020
€’m
120.1
9.1
218.5
29.9
2019
€’m
136.6
8.0
266.5
36.4
377.6
447.5
Notes
5
2020
€’m
2019
€’m
2,794.8
2,767.3
28.1
(5.1)
23.0
2020
€’m
164.2
0.1
164.3
(72.7)
26.1
(2.8)
23.3
2019
€’m
260.1
8.9
269.0
(104.3)
91.6
164.7
Share
premium
€’m
87.6
–
87.6
Total
€’m
105.4
(0.1)
105.3
Notes
29(e)
25
25
Ordinary
shares
€’m
17.8
(0.1)
17.7
Number
of shares
(thousands)
296,046
(1,644)
294,402
The total authorised number of ordinary shares is 350 million shares (2019: 350 million shares) with a par value of €0.06 per share (2019: €0.06
per share). All issued shares are fully paid, carry one vote per share and a right to dividends. The rights and obligations of the ordinary shares and
the restrictions on the transfer of shares and voting rights are provided in Other Statutory Information.
During the year ended 2 January 2021 there were no 2002 LTIP share options exercised (2019: nil). Details of share options and awards granted
under the Long-term and Annual Incentive Schemes are provided in note 10 and in the Remuneration Committee Report on pages 96 to 117.
During 2020, 1.6 million ordinary shares were cancelled on the share buyback programme (note 23(f)). The amount paid to repurchase these
shares was initially recognised in the own shares reserve and was transferred to retained earnings on cancellation.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 180
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
23. Other reserves
Capital
reserve
€’m
note (a)
Merger
reserve
€’m
note (b)
Currency
reserve
€’m
note (c)
Hedging
reserve
€’m
note (d)
Cost of
hedging
reserve
€’m
note (d)
FVOCI
reserve
€’m
note (e)
Own
shares
€’m
note (f)
Share-
based
payment
reserve
€’m
note (g)
Total
€’m
Balance at 5 January 2020
2.8
113.1
170.7
(13.0)
–
(0.2)
(14.0)
9.7
269.1
Currency translation differences
Net investment hedge
Revaluation – gross
Reclassification to profit or loss – gross
Reclassification to inventory – gross
Deferred tax
Net change in OCI
Purchase of own shares
Cancellation of own shares
Cost of share-based payments
Transfer on exercise, vesting or expiry
of share-based payments
–
–
–
–
–
–
–
–
0.1
–
–
–
–
–
–
–
–
–
–
–
–
–
(146.9)
8.1
–
–
–
–
(138.8)
–
–
–
–
–
(9.8)
(0.2)
–
2.4
(7.6)
–
–
–
–
–
Balance at 2 January 2021
2.9
113.1
31.9
(20.6)
Balance at 30 December 2018
2.8
113.1
126.4
(1.0)
Currency translation differences
Net investment hedge
Revaluation – gross
Reclassification to profit or loss – gross
Deferred tax
Net change in OCI
Purchase of own shares
Cost of share-based payments
Transfer on exercise, vesting or expiry
of share-based payments
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
46.7
(2.4)
–
–
–
44.3
–
–
–
–
(16.9)
1.3
3.6
(12.0)
–
–
–
–
Balance at 4 January 2020
2.8
113.1
170.7
(13.0)
–
–
0.5
–
(0.5)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(17.6)
16.6
–
–
–
–
–
–
–
–
–
–
5.2
(146.9)
8.1
(9.3)
(0.2)
(0.5)
2.4
(146.4)
(17.6)
16.7
5.2
3.6
(4.6)
(1.0)
(0.2)
(11.4)
10.3
126.0
(0.1)
(14.4)
14.1
240.9
–
–
(0.2)
–
0.1
(0.1)
–
–
–
–
–
–
–
–
–
(7.6)
–
8.0
–
–
–
–
–
–
–
4.6
46.7
(2.4)
(17.1)
1.3
3.7
32.2
(7.6)
4.6
(9.0)
(1.0)
(0.2)
(14.0)
9.7
269.1
(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. The reserve also includes €0.1 million undenominated share capital that arose on the cancellation of own
shares in 2020.
(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 current and prior year
€’m
355.3
(327.2)
85.0
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 US dollar foreign exchange rates from 1.1147
as at 4 January 2020 to 1.2271 as at 2 January 2021 is the primary driver of the movement in the currency reserve in the year. When an entity is
disposed of the accumulated foreign currency gains and losses are recycled to the income statement.
181
(d) Hedging and cost of hedging reserve
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, or are included in the initial cost of a hedged non-financial item, depending on the hedged item. 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 29(a)).
The movements on the hedging reserve for the years ended 2 January 2021 and 4 January 2020 are as follows:
Balance at 5 January 2020
Revaluation – gross
– Foreign exchange contracts – gain/(loss) in year (currency risk)
– Commodity contracts – (loss)/gain in year (commodity price risk)
– Interest rate swaps – loss in year (interest rate risk)
Recognised in OCI
Reclassification to profit or loss – gross
– Foreign exchange contracts – (gain)/loss in year (currency risk)
– Commodity contracts – gain in year (commodity price risk)
Reclassified from OCI to profit or loss
Deferred tax
Net change in OCI
Balance at 2 January 2021
Balance at 30 December 2018
Revaluation – gross
– Foreign exchange contracts – loss in year (currency risk)
– Commodity contracts – loss in year (commodity price risk)
– Interest rate swaps – loss in year (interest rate risk)
Recognised in OCI
Reclassification to profit or loss – gross
– Foreign exchange contracts – loss/(gain) in year (currency risk)
– Commodity contracts – loss in year (commodity price risk)
Reclassified from OCI to profit or loss
Deferred tax
Net change in OCI
Balance at 4 January 2020
Equity
accounted
investees
€’m
(10.9)
0.5
(0.1)
(8.8)
(8.4)
(0.6)
–
(0.6)
2.3
(6.7)
(17.6)
(0.9)
(0.7)
(0.1)
(14.1)
(14.9)
1.3
0.3
1.6
3.3
(10.0)
(10.9)
Group
€’m
(2.1)
(1.1)
0.1
(0.4)
(1.4)
0.5
(0.1)
0.4
0.1
(0.9)
(3.0)
(0.1)
–
–
(2.0)
(2.0)
(0.3)
–
(0.3)
0.3
(2.0)
(2.1)
Total
hedging
reserve
€’m
(13.0)
(0.6)
–
(9.2)
(9.8)
(0.1)
(0.1)
(0.2)
2.4
(7.6)
(20.6)
(1.0)
(0.7)
(0.1)
(16.1)
(16.9)
1.0
0.3
1.3
3.6
(12.0)
(13.0)
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 182
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
23. Other reserves continued
Cost of hedging reserve
The cost of hedging reserve includes the effects of the changes in fair value of the time value of commodity options when only the intrinsic value
of the options is designated as the hedging instrument. The recycled gain or loss relating to the time value of the option contracts is included
within the initial cost of an asset where the hedged item subsequently results in the recognition of a non-financial asset (such as inventory).
The movements on the cost of hedging reserve for the year ended 2 January 2021 (2019: nil) are as follows:
Balance at 5 January 2020
Revaluation – gross (commodity price risk)
Reclassification to inventory – gross (commodity price risk)
Balance at 2 January 2021
Equity
accounted
investees
€’m
–
–
–
–
Group
€’m
–
0.5
(0.5)
–
Total
hedging
reserve
€’m
–
0.5
(0.5)
–
(e) FVOCI reserve
Unrealised gains and losses arising from changes in the fair value of equity instruments measured at FVOCI are recognised in the FVOCI reserve.
On derecognition of such an equity instrument, the accumulated balances of an instrument associated with it is reclassified to retained earnings.
(f) Own shares
The own shares reserve reflects the ordinary shares of Glanbia plc which are held in trust.
An Employee Share Trust was established in May 2002 to operate initially in connection with the Company’s Saving Related Share Option Scheme
and subsequently for the vesting of shares under the 2008 LTIP, 2018 LTIP and 2019 RSP (note 10). 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 cent per share. An Employee Share Scheme Trust was established in April 2013 to operate in connection with the Company’s
AIDIS. 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.
In October 2020, the Group announced its intention to commence a share buyback programme of up to €50 million in total value in Glanbia
plc ordinary shares. During 2020, the Group repurchased 1.6 million ordinary shares under the programme (2019: nil) which were subsequently
cancelled (note 22).
The movement in own shares for the years ended 2 January 2021 and 4 January 2020 is as follows:
At the beginning of the year
Purchased by Employee Share (Scheme) Trust
Purchased under share buyback
Allocated under Employee Share (Scheme) Trust
Cancelled under share buyback
At the end of the year
2020
Nominal
value
€’m
0.1
–
0.1
–
(0.1)
Number
of Shares
820,302
103,709
1,643,907
(231,313)
(1,643,907)
0.1
692,698
Value
€’m
14.0
1.0
16.6
(3.6)
(16.6)
11.4
2019
Nominal
value
€’m
0.1
–
–
–
–
0.1
Value
€’m
14.4
7.6
–
(8.0)
–
14.0
Number
of Shares
871,335
425,082
–
(476,115)
–
820,302
The shares purchased during the year and those held in trust are allocated to employees under the various share-based schemes. Shares
purchased under the share buyback programme during 2020 were cancelled. The shares acquired during the year represented an insignificant
amount of the total share capital at the beginning and end of the year. Shares purchased are deemed to be own shares in accordance with IAS
32 ‘Financial Instruments’. The own shares at 2 January 2021 restrict distributable profits by €11.4 million (2019: €14.0 million) and had a market
value of €7.2 million (2019: €8.5 million).
(g) Share-based payment reserve
The share-based payment reserve reflects the equity settled share-based payment plans in operation by the Group (note 10).
24. Retained earnings
At the beginning of the year
Effect of adoption of IFRS 16*
At the beginning of the year, after the effect of adoption of IFRS 16
Profit for the year
Other comprehensive income
– Remeasurement on defined benefit plans
– Deferred tax on remeasurements on defined benefit plans
– Share of remeasurements on defined benefit plans from equity accounted investees, net of
deferred tax
Net change in OCI
Dividends
Cancellation of own shares
Transfer on exercise, vesting or expiry of share-based payments
Deferred tax on share-based payments
Notes
9
26
17
14
23(f)
26
2020
€’m
1,327.4
(12.4)
1,315.0
143.8
8.8
(0.5)
7.0
15.3
(78.6)
(16.6)
1.0
0.6
183
2019
€’m
1,242.8
–
1,242.8
180.2
(14.6)
0.5
(8.3)
(22.4)
(74.3)
–
1.0
0.1
At the end of the year
* Includes the impact of deferred tax.
25. Borrowings
Non-current
Bank borrowings
Private placement debt
Current
Bank borrowings
Private placement debt
Bank overdrafts
1,380.5
1,327.4
Notes
2020
€’m
2019
€’m
29(b)
21
315.8
142.6
458.4
–
127.1
72.7
199.8
374.3
139.9
514.2
264.8
–
104.3
369.1
Total borrowings
29(e)
658.2
883.3
At the year-end, the Group had multi-currency committed term facilities of €1.2 billion (2019: €1.2 billion) of which €647.8 million (2019:
€353.4 million) were undrawn.
The maturity profile of borrowings, and undrawn committed and uncommitted facilities is as follows:
12 months or less
Between 1 and 2 years
Between 2 and 5 years
More than 5 years
2020
Undrawn
committed
facilities
€’m
–
–
484.8
163.0
Borrowings
€’m
199.8
–
315.8
142.6
658.2
647.8
Undrawn
uncommitted
facilities
€’m
20.0
–
–
–
20.0
2019
Undrawn
committed
facilities
€’m
53.8
–
299.6
–
Borrowings
€’m
369.1
139.9
374.3
–
883.3
353.4
Undrawn
uncommitted
facilities
€’m
12.4
–
–
–
12.4
The weighted average maturity of committed facilities is 4.4 years (2019: 2.8 years).
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 184
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
25. Borrowings continued
The currency profile of borrowings is as follows:
At 2 January 2021
At 4 January 2020
euro
€’m
169.2
265.4
US dollar
€’m
Pound sterling
€’m
Australian dollar
€’m
471.5
602.0
11.3
6.8
0.3
3.6
Other
€’m
5.9
5.5
Total
€’m
658.2
883.3
Principal currencies in “other” include New Zealand dollar and Canadian dollar (2019: New Zealand dollar and Indian Rupee).
Bank borrowings
The Group has committed unsecured bank facilities maturing in 2024. They are borrowed at fixed and floating interest rates. At 2 January 2021,
€137.7 million of bank borrowings denominated in USD are at fixed nominal interest rate of 3.30% (2019: €151.6 million at 3.30%). The remaining
bank borrowings are subject to interest rate changes, taking into account of contractual repricing dates. Nominal interest rates of these
borrowings range primarily from 0.28% – 1.34% (2019: 0.39% – 8.80%). The floating interest rates are set at commercial rates based on a margin
over EURIBOR, US dollar LIBOR, Canadian dollar and Australian dollar interest rates for periods of up to six months.
Private placement debt
At 2 January 2021, €127.1 million (2019: €139.9 million) of private placement debt matures in June 2021, bears interest at a fixed 5.40% nominal
interest rate and is denominated in USD. There was €142.6 million of an additional private placement debt facility which commenced in December
2020. It matures in December 2031, bears interest at fixed 2.75% nominal interest rate and is denominated in USD.
Bank overdrafts
Bank overdraft interest rates are variable and range from 0.35% – 1.25% (2019: 0.55% – 12.5%). At 2 January 2021, the Group had undrawn
uncommitted bank overdraft facilities of €10.6 million (2019: €10.9 million).
Debt issue costs
Included within the carrying value of borrowings are deferred debt issue costs of nil (2019: €0.1 million), all of which were 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 subsidiary(ies). The Group has complied with the
financial covenants of its borrowing facilities during 2020 and 2019 (note 29(c)).
Net debt is a non-IFRS measure which we provide to investors as we believe they find it useful. It is also used to calculate leverage under the
Group’s financing arrangements, as defined within covenants. Refer to the Financing Key Performance Indicators section in the Glossary for more
details. Net debt comprises the following:
Private placement debt
Bank borrowings
Not subject to interest rate changes*
Bank borrowings
Cash and cash equivalents net of bank overdrafts
Subject to interest rate changes*
* Taking into account of contractual repricing dates at the reporting date.
Notes
21
2020
€’m
269.7
137.7
407.4
178.1
(91.6)
86.5
2019
€’m
139.9
151.6
291.5
487.5
(164.7)
322.8
29(c)
493.9
614.3
185
The movement in net debt is as follows:
At 5 January 2020
Drawdown of borrowings
Repayment of borrowings
Net change in cash and cash equivalents
Acquisitions
Exchange differences
At 2 January 2021
At 30 December 2018
Drawdown of borrowings
Repayment of borrowings
Net change in cash and cash equivalents
Acquisitions
Exchange differences
Notes
33
33
34
33
33
Cash and
short-term
bank deposits
€’m
(note 21)
(269.0)
–
–
93.6
–
11.1
(164.3)
(224.6)
–
–
(36.2)
(4.6)
(3.6)
Overdrafts
€’m
(note 21)
104.3
–
–
(31.4)
–
(0.2)
72.7
48.9
–
–
46.4
8.8
0.2
Borrowings
€’m
Private
placement debt
€’m
639.1
913.3
(1,222.0)
–
12.2
(26.8)
139.9
143.9
–
–
–
(14.1)
Total
€’m
614.3
1,057.2
(1,222.0)
62.2
12.2
(30.0)
315.8
269.7
493.9
616.2
606.2
(599.9)
–
6.4
10.2
136.2
–
–
–
–
3.7
576.7
606.2
(599.9)
10.2
10.6
10.5
At 4 January 2020
(269.0)
104.3
639.1
139.9
614.3
26. Deferred taxes
Recognition in the Group balance sheet:
Deferred tax assets/(liabilities) before set off
Set off of deferred tax
Deferred tax
assets
€’m
29.7
(27.3)
2020
Deferred tax
liabilities
€’m
(173.8)
27.3
Net
€’m
(144.1)
–
Deferred tax
assets
€’m
27.6
(25.7)
2019
Deferred tax
liabilities
€’m
(194.3)
25.7
Net
€’m
(166.7)
–
Deferred tax assets/(liabilities) after set off
2.4
(146.5)
(144.1)
1.9
(168.6)
(166.7)
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 credit
Deferred tax (charge)/credit to other comprehensive income
– on remeasurement of defined benefit plans
– on fair value movements
Deferred tax credit/(charge) to equity
– on share-based payments
– on acquisition of subsidiaries
– on adoption of IFRS 16
Reclassification
Exchange differences
Notes
12
24
24
34
2020
€’m
(166.7)
8.9
(0.5)
0.1
0.6
(0.8)
1.5
–
12.8
2019
€’m
(158.2)
0.3
0.5
0.4
0.1
(0.5)
–
(5.6)
(3.7)
At the end of the year
(144.1)
(166.7)
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION
186
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
26. Deferred taxes continued
The movement in deferred tax assets during the year is as follows:
At 5 January 2020
Credit to income statement
Charge to other comprehensive income
Credit to equity
Exchange differences
At 2 January 2021
At 30 December 2018
Credit/(charge) to income statement
Credit to other comprehensive income
Credit to equity
Exchange differences
At 4 January 2020
Retirement
benefit
obligations
Other
employee
obligations
€’m
6.0
0.7
(0.5)
–
(0.7)
5.5
5.0
0.4
0.5
–
0.1
6.0
€’m
8.1
0.8
–
0.6
(0.7)
8.8
9.3
(1.5)
–
0.1
0.2
8.1
The movement in deferred tax liabilities during the year is as follows:
At 5 January 2020
(Charge)/credit to income statement
Credit to other comprehensive income
Credit to equity
Acquisition of subsidiaries and intellectual properties
Exchange differences
At 2 January 2021
At 30 December 2018
(Charge)/credit to income statement
Credit to other comprehensive income
Acquisition of subsidiaries and intellectual properties
Reclassification
Exchange differences
At 4 January 2020
Accelerated tax
depreciation
€’m
Fair value
gain
€’m
(66.0)
(1.9)
–
1.5
(0.3)
6.0
(60.7)
(62.6)
(1.8)
–
–
–
(1.6)
(66.0)
0.4
–
0.1
–
–
(0.1)
0.4
–
–
0.4
–
–
–
0.4
Tax
losses
€’m
2.5
0.6
–
–
(0.1)
3.0
2.8
(0.4)
–
–
0.1
2.5
Development
costs and other
intangibles
€’m
(92.3)
5.7
–
–
(0.5)
7.3
Other
€’m
11.0
2.4
–
–
(1.0)
12.4
12.2
(1.5)
–
–
0.3
11.0
Other
€’m
(36.4)
0.6
–
–
–
2.1
Total
€’m
27.6
4.5
(0.5)
0.6
(2.5)
29.7
29.3
(3.0)
0.5
0.1
0.7
27.6
Total
€’m
(194.3)
4.4
0.1
1.5
(0.8)
15.3
(79.8)
(33.7)
(173.8)
(99.2)
10.9
–
(1.4)
–
(2.6)
(25.7)
(5.8)
–
0.9
(5.6)
(0.2)
(187.5)
3.3
0.4
(0.5)
(5.6)
(4.4)
(92.3)
(36.4)
(194.3)
A deferred tax asset has been recognised on the basis that the realisation of the related tax benefit through future taxable profits is probable.
This includes deferred tax assets which are recognised for tax losses carried forward to the extent that realisation of the related tax benefit
through future taxable profits is probable.
At the balance sheet date, the Group has unused tax losses of €75.4 million (2019: €77.1 million) available for offset against future profits. A deferred
tax asset has been recognised in respect of €3.0 million (2019: €2.5 million) of such losses. No deferred tax asset has been recognised in respect
of the remaining €72.4 million (2019: €74.6 million) as it is not considered probable that there will be future taxable profits available. All tax losses
may be carried forward indefinitely. Also included in unrecognised tax losses are €44.1 million (2019: €46.6 million) of capital losses.
No deferred tax liability has been recognised on temporary differences of €42.3 million (2019: €41.8 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.
27. Provisions
Balance at 5 January 2020 – current
Amount provided for in the year
Utilised in the year
Unused amounts reversed in the year
Unwinding of discount
Exchange differences
Balance at 2 January 2021
Non-current
Current
187
Total
€’m
3.6
11.2
(2.5)
(0.7)
0.1
(0.5)
11.2
3.3
7.9
11.2
Restructuring
€’m
note (a)
0.9
4.8
(2.4)
(0.7)
–
(0.1)
2.5
–
2.5
2.5
Property and
lease
commitments
€’m
note (b)
Operational
€’m
note (c)
2.1
5.0
(0.1)
–
0.1
(0.3)
6.8
3.3
3.5
6.8
0.6
1.4
–
–
–
(0.1)
1.9
–
1.9
1.9
(a) The restructuring provision relates mainly to a redundancy provision arising from the ongoing strategic review within the Glanbia Performance
Nutrition segment. The provision at 2 January 2021 is expected to be settled within the next 12 months.
(b) The property and lease commitments provision relates to property remediation works and is based on the estimated cost of reinstating
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.
(c) The operational provision represents provisions relating to certain insurance claims and other items. Due to the nature of these items,
there is some uncertainty around the amount and timing of payments.
28. Trade and other payables
Current
Trade payables
Amounts due to equity accounted investees
Amounts due to other related parties
Social security costs
Contingent consideration
Accrued expenses
Non-current
Other payables
Total
Notes
35(c)
35(c)
29(b)/29(f)
2020
€’m
2019
€’m
181.8
78.5
–
4.8
17.4
159.1
257.9
91.6
0.1
4.5
–
158.4
441.6
512.5
–
12.5
441.6
525.0
See note 32(a) for analysis of the movement in trade and other payables. See note 29(b) for information on the Group’s fair value estimation
process.
Other payables in 2019 related primarily to lease incentives on non-cancellable operating leases under IAS 17 and were amortised on a straight
line basis over the lease term. The amount decreased in 2020 due to the adoption of IFRS 16 (note 2).
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 188
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
29. Derivative financial instruments and financial risk management
(a) Derivative financial instruments
2020
Assets
Cross currency swaps – fair value through income statement
Foreign exchange contracts – cash flow hedges (currency risk)
Interest rate swaps – cash flow hedges (interest rate risk)
Total
Non-current
Current
Notes
29(e)/29(f)
€’m
1.1
0.2
–
1.3
–
1.3
1.3
2020
Liabilities
€’m
–
(1.2)
(2.5)
(3.7)
(2.5)
(1.2)
(3.7)
2019
Assets
€’m
0.3
–
–
0.3
–
0.3
0.3
2019
Liabilities
€’m
–
(0.4)
(2.0)
(2.4)
(2.0)
(0.4)
(2.4)
Derivatives recognised at fair value through income statement
Included in cross currency swaps is a pound sterling euro cross currency swap with a notional amount of £80.0 million (2019: £60.0 million)
and €87.9 million (2019: €70.2 million). The translation gain included in the Group income statement in respect of this swap is €1.1 million
(2019: €0.3 million).
Hedge accounting
The Group enters into hedge relationships when there is an economic relationship between the hedged item and the hedging instrument. When
the critical terms of the hedged item and hedging instrument are closely aligned for the prospective assessment of effectiveness, a qualitative
assessment is performed. In instances where changes occur to the hedged item which result in the critical terms being no longer closely aligned,
the Group uses the hypothetical derivative method to assess the ineffectiveness. A hedge ratio of one to one is established as the quantities of
the hedged item and the hedging instrument used to hedge that hedged item are the same. Potential sources of ineffectiveness may include the
timing and amounts of cash flows, and changes in credit risk of the hedging instruments or hedged items.
Derivative assets and liabilities designated as cash flow hedges
Foreign exchange contracts
The Group may use foreign exchange contracts to hedge its future cash flow risk from movements in foreign exchange rates on foreign
denominated sales or purchases. Such contracts are generally designated as cash flow hedges. Weighted average hedged rate of foreign
exchange contracts (including forward points) as at 2 January 2021 is 1 euro = 1.2160 US dollar (2019: 1 euro = 1.0925 US dollar).
The notional principal amounts of the outstanding foreign exchange contracts as at 2 January 2021 were €18.9 million (2019: €18.2 million).
All outstanding foreign exchange contracts will mature and be released to the Group income statement within 12 months of the reporting date
(2019: within 12 months of the reporting date).
Interest rate swaps
The Group may use floating to fixed interest rate swaps to hedge against its future cash flow risk from its exposure to variable rates on its
long-term borrowings with floating rates. The notional principal amounts of the outstanding EURIBOR linked interest rate swaps designated as
cash flow hedges affected by interest rate benchmark reform as at 2 January 2021 were €120.0 million (2019: €120.0 million). Weighted average
hedged rate of interest rate swaps as at 2 January 2021 is 0.20% (2019: 0.20%). All outstanding interest rate swaps mature in 2023.
Commodity contracts
The Group may use commodity options to hedge its future cash flow risk from movement in milk prices. There were no outstanding commodity
options contracts as at 2 January 2021 (2019: nil). All commodity options that were entered into during the period had expired as at the end of the
reporting period.
(Loss)/gain recognised in other comprehensive income
Foreign exchange contracts
Commodity contracts
Interest rate swaps
Gain/(loss) transferred from cash flow hedge reserve to the Group income statement
Foreign exchange contracts
Commodity contracts
Notes
23(d)
23(d)
23(d)
Notes
23(d)
23(d)
2020
€’m
(1.1)
0.1
(0.4)
(1.4)
2020
€’m
0.5
(0.1)
0.4
2019
€’m
–
–
(2.0)
(2.0)
2019
€’m
(0.3)
–
(0.3)
189
The transferred amounts relating to foreign exchange and commodity contracts are recorded in the line item “Administration expenses” in the
income statement and “Inventories” in the balance sheet respectively.
Gain transferred from cost of hedging reserve to the Group balance sheet
Commodity options
Notes
23(d)
2020
€’m
(0.5)
2019
€’m
–
The transferred amounts relating to commodity options are recorded in the line item “Inventories” in the balance sheet.
No material ineffectiveness has been recognised in respect of the cash flow hedges in 2020 (2019: nil). If ineffectiveness had been recognised,
it would have been recorded in “Administration expenses” in the income statement.
Refer to note 23(d) for the balances in the cash flow hedge reserve and cost of hedging reserve. The maturity profile of the cash flows of the
derivative financial instruments is included in note 29(d).
Derivative financial instruments entered into by equity accounted investees
The Group’s equity accounted investees enter into interest rate swaps, commodity contracts (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 movement recognised in other comprehensive income on interest rate swaps (note 23(d)) 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.
Net investment hedge
A portion of the Group’s US dollar denominated borrowings (see note 25) with a nominal amount of US$98.5 million (2019: US$98.5 million) is
designated as a hedge of a portion of the net investment in the Group’s US dollar net assets amounting to US$98.5 million (2019: US$98.5 million).
Therefore, hedge ratio is 1:1.
Carrying value of net investment hedge
Gain/(loss) recognised in other comprehensive income
Notes
23
2020
€’m
80.3
8.1
2019
€’m
88.4
(2.4)
The borrowings of US$98.5 million is translated at year end exchange rate of 1 euro = 1.2271 US dollar (2019: 1 euro = 1.1147 US dollar) to arrive
at carrying amount of €80.3 million (2019: €88.4 million). €3.9 million (2019: €12.0 million) of the currency reserve (see note 23) relates to the net
investment hedge. There was no ineffectiveness recognised in the Group income statement during the year (2019: nil). If ineffectiveness had been
recognised, it would have been recorded in “Administration expenses” in the income statement.
(b) Fair value and fair value estimation
Fair value of financial instruments measured at amortised cost
Except as detailed in the following table the Group deemed that the carrying amounts of financial instruments measured at amortised cost in the
Group financial statements approximate their fair value due to their short term nature:
Financial assets
– Non-current loans to equity accounted investees
– Non-current financial asset at amortised cost – Ornua Co-Operative Limited
Financial liabilities
– Non-current borrowings
Carrying
amount
2020
€’m
Fair value
2020
€’m
Carrying
amount
2019
€’m
Fair value
2019
€’m
31.8
0.4
32.1
0.4
28.8
0.7
28.8
0.7
458.4
463.8
514.2
523.6
Notes
35
18
25
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 (classified as level 2 in the fair value hierarchy).
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.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 190
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
29. Derivative financial instruments and financial risk management continued
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 or liabilities (Level 1);
•
inputs, other than quoted prices included in Level 1, that are observable for the asset or 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).
•
Fair value of financial instruments carried at fair value
The following table shows the fair values of financial instruments measured at fair value:
Cross currency swaps – fair value through income statement
Foreign exchange contracts – cash flow hedges
Interest rate swaps – cash flow hedges
Equity instrument designated at FVOCI – The BDO Development Capital Fund
Contingent consideration
Notes
(a)
(b)
(c)
(d)
(e)
Fair value
hierarchy
Level 2
Level 2
Level 2
Level 2
Level 3
2020
€’m
1.1
(1.0)
(2.5)
2.2
(17.4)
2019
€’m
0.3
(0.4)
(2.0)
2.1
–
(a) Fair value is determined by reference to the current foreign exchange rates at the end of the reporting period.
(b) Fair value is estimated by discounting the difference between the contractual forward exchange rates and the current forward exchange rates
(from observable forward exchange rates at the end of the reporting period). The effect of discounting was insignificant in 2020 and 2019.
(c) Fair value is estimated by discounting the difference between the contractual interest rate swap rates and the current interest rate swap rates
(from observable interest rate swap rates at the end of the reporting period). The effect of discounting was insignificant in 2020 and 2019.
(d) The investment in the BDO Development Capital Fund (note 18) is fair valued by reference to the latest quarterly report available to the limited
partners.
(e) Refer to note 34 for a description of how the fair value of contingent consideration is estimated.
There were no transfers in either direction between Level 1 and Level 2 in 2020 and 2019. The Group did not hold any Level 3 financial assets
or liabilities carried at FVTPL other than the contingent consideration at 2 January 2021 or 4 January 2020.
(c) 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:
Equity
Net debt
Total capital
Notes
25
2020
€’m
1,611.8
493.9
2019
€’m
1,701.9
614.3
2,105.7
2,316.2
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 Board received approval for a share buyback programme at the Annual General Meeting on the 22 April 2020. Subsequently, in November
2020, the Group announced its intention to commence a share buyback programme of up to €50 million in total value in Glanbia plc ordinary
shares. The purpose of the share buyback programme is to reduce the share capital of the Company. Any shares repurchased for this purpose will
be cancelled. The programme will run from 9 November 2020 through to the conclusion of the Company’s next Annual General Meeting, expected
to be held in May 2021. The Board will seek approval for another share buyback programme at the Annual General Meeting on 6 May 2021.
The Group’s key financing arrangements are: adjusted EBIT: net finance cost and net debt: adjusted EBITDA ratios, as defined within covenants.
191
At 2 January 2021 the Group’s adjusted EBIT: net finance cost was 10.0 times (2019: 9.3 times) which is within the Group’s financing covenants.
Adjusted EBIT: net finance cost is calculated as pre-exceptional 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 2 January 2021, the Group’s net debt: adjusted EBITDA ratio was 1.70 times (2019: 1.71 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 borrowings excluding debt issue costs less cash and cash equivalents. Adjusted EBITDA
is calculated as pre-exceptional 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.
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 2020 and 2019.
(d) 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: market risk comprising of currency risk, interest rate risk and price risk, liquidity risk and 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 undrawn 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 foreign exchange risk, interest rate risk, price risk, liquidity and cash flow risk, and credit risk, use of
derivative financial instruments and non-derivative financial instruments and investment of excess liquidity.
There has been no significant change during the financial year or since the end of the year to the types of financial risks faced by the Group
or the Group’s approach to the management of those risks.
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. Group Treasury monitors and manages these
currency exposures on a continuous basis, using approved hedging strategies 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**
2020
€’m
-/+7.4
-/+54.2
2019
€’m
-/+9.0
-/+63.1
* 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.
The Group is exposed to transactional foreign currency risk that arises from sales or purchases by an operating unit in currencies other than the
operating unit’s functional currency. Group companies are required to manage their foreign exchange risk against their functional currency and
spot and forward exchange contracts are primarily used to hedge foreign exchange risk exposure on foreign currency denominated sales and
purchases.
The notional principal amounts of the outstanding foreign exchange contracts as at 2 January 2021 were €18.9 million (2019: €18.2 million),
which substantially covers the operating units currency exposure. Refer to note 29(a) for further details of the foreign exchange contracts.
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 (i) the amount of floating rate indebtedness anticipated over such a period and (ii) 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.
The Group’s main interest rate risk arises from long-term borrowings with floating rates, due to the borrowings being periodically contractually
repriced within 12 months from the reporting date. These borrowings expose the Group to cash flow interest rate risk.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 192
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
29. Derivative financial instruments and financial risk management continued
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 the 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 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.
The exposure of the Group’s borrowings subject to interest rate changes taking into account contractual repricing dates at the end of the
reporting period is €178.1 million (2019: €487.5 million) (note 25). The Group fix a portion of the floating rate bank borrowings for 6 month periods
in line with Group policies. See note 29(a) for the floating to fixed interest rate swaps entered into by the Group to hedge against this exposure.
The Group does not hedge 100% of its floating rate loans, therefore the amount hedged is a proportion of the outstanding loans up to the
notional amount of the swaps.
The Group enters into interest rate swaps that have similar critical terms as the hedged item. As all critical terms matched during the year, there
is an economic relationship between the interest rate swaps (hedging instruments) and floating rate borrowings (hedged items).
Sensitivity analysis
The Group does not 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 or lower with all
other variables held constant:
+/-1% change in market interest rates
Impact on profit before tax
Impact on total equity
2020
€’m
-/+0.9
-/+0.8
2019
€’m
-/+2.0
-/+1.8
Price risk
Equity price risk
The Group’s objective is to minimise the price risk the Group is exposed to because of equity instruments held by the Group (note 18).
These equity instruments are classified in the Group balance sheet as FVOCI. To manage its price risk arising from these equity securities,
the Group does not maintain a significant balance with any one equity. Diversification of the equity instruments held by the Group must be done
in accordance with the limits set by the Group. The impact of a 5% increase or decrease in equity indices across the eurozone countries would
not have any material impact on Group profit before tax or total equity.
Commodity price risk
Commodity price risk in the Group arises primarily from price fluctuations of commodities. The Group’s objective is to minimise commodity price
risk through entering into commodity options and future contracts for instance 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’ as
they were entered into in accordance with the Group’s expected purchase, sale or usage requirements. 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.
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.
Refer to note 25 for details of the Group’s committed facilities.
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 financial
covenants is monitored continually based on statutory and management accounts and financial projections. All covenants have been complied
with in 2020 and 2019.
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. For further details regarding the Group’s
borrowing facilities see note 25.
193
The table below analyses the Group’s non-derivative financial liabilities and derivative financial liabilities 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.
At 2 January 2021
Non-derivative financial liabilities
Borrowings
Trade payables, amounts due to equity accounted investees
and contingent consideration
Lease liabilities
Less future finance costs
Less than
1 year
€’m
Between
1 and 2
years
€’m
Between
2 and 5
years
€’m
More than
5 years
€’m
Total
€’m
221.3
18.4
350.6
182.4
772.7
277.7
18.0
517.0
(23.7)
–
14.7
33.1
(20.4)
–
38.6
389.2
(39.3)
–
51.1
277.7
122.4
233.5
(43.3)
1,172.8
(126.7)
493.3
12.7
349.9
190.2
1,046.1
Derivative financial liabilities
1.2
–
2.5
At 4 January 2020
Non-derivative financial liabilities
Borrowings
Trade payables and amounts due to equity accounted investees
Less future finance costs
Derivative financial liabilities
397.1
349.5
746.6
(28.0)
157.9
–
157.9
(18.0)
403.6
–
403.6
(29.3)
718.6
139.9
374.3
0.4
–
2.0
–
–
–
–
–
–
–
3.7
958.6
349.5
1,308.1
(75.3)
1,232.8
2.4
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,
credit exposures to customers, including outstanding receivables and committed transactions, and loans to equity accounted investees.
Other financial assets (note 18) are not material and accordingly, loss allowance of ECL is not material.
Financial assets subject to credit risk are written off when there is no reasonable expectation of recovery such as debtor failing to engage in a
repayment plan with a company. Subsequent recoveries of amounts written off are recognised in the Group income statement. 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.
Refer to note 2 for Covid-19 considerations relating to credit risk.
Cash and cash equivalents
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’s cash and cash equivalents (note
21) at 2 January 2021 and 4 January 2020 were held within financial institutions which complied with Group policy. Accordingly, the Group
considers its cash and cash equivalents to be of low credit risk and does not expect any expected credit loss in relation to them.
Trade receivables
The Group’s credit risk management policy requires that, where possible, all debt is insured with an external credit insurance underwriter. Covid-19
had an effect on the availability of credit insurance which has resulted in higher credit risk. This heightened risk has been managed closely by the
Group, with a strong focus on tighter cash collection and credit terms. 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. Outstanding customer balances are regularly monitored and a review for indicators of impairment (evidence of financial
difficulty of the customer, payment default, breach of contract etc.) is carried out at each reporting date.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 194
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
29. Derivative financial instruments and financial risk management continued
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.
See note 19 for the carrying amount of the Group’s trade and other receivables.
At the end of the reporting period, the Group derecognised €33.7 million of certain trade receivables related to one customer through the use
of a limited receivables sale programme (2019: nil). This programme was entered into to partially mitigate but not fully offset an increase in credit
terms relating to these trade receivables during the period. Under this programme, the Group has the option to sell certain trade receivable
invoices to a third party financial institution. This third party may accept this offer for sale by way of a non-recourse payment to the Group
(for face value of the receivables net of transaction fees), upon which the Group no longer retains any risks and rewards in the receivables sold,
resulting in the derecognition of these receivables from the Group balance sheet. The proceeds from these sales of receivables are included
in cash from operating activities in the Group statement of cash flows. The fair value of the receivables equals to its amortised cost as they
are transferred at the face value of the trade receivable invoices.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade
receivables. To measure the expected credit losses, historical loss rates of operating units are calculated based on their recent historical credit
loss experience and applied to the operating units trade receivables at the reporting date. The loss allowance is estimated based on historical
loss rules and adjusted where appropriate to reflect current information and forward-looking information on macroeconomic factors which affect
the ability of the debtors to settle the receivables. The increase in loss allowance recognised during the year reflect current and forward-looking
information including the effects of Covid-19 on the trading environment in which the Group sells its goods.
The movement in the expected credit loss allowance for trade receivables is as follows:
At the beginning of the year
Exchange differences
Increase in loss allowance recognised during the year
Receivables written off during the year as uncollectible
Unused amounts reversed
Notes
2020
€’m
6.6
(0.6)
9.1
(2.0)
(1.9)
At the end of the year
19
11.2
2019
€’m
4.7
0.1
5.1
(2.3)
(1.0)
6.6
The net movement in the loss allowance has been included within the Group income statement.
Trade receivables amounted to €283.5 million at 2 January 2021 (2019: €389.6 million) (note 19). Receivable balances that are neither past due
nor impaired amounted to €259.8 million (2019: €342.0 million). Past due information is reported to key management personnel for credit risk
management purposes. At 2 January 2021, trade receivables of €23.7 million (2019: €47.6 million) were past due and analysed as follows:
Past due
Less than 30 days
1 to 3 months
4 to 6 months
Over 6 months
Less expected credit loss allowance
Total
2020
€’m
16.4
2.5
0.8
4.0
23.7
(11.2)
12.5
2019
€’m
24.7
11.2
4.3
7.4
47.6
(6.6)
41.0
Loans to equity accounted investees
The Group advanced interest bearing loans to its joint ventures for the purposes of funding capital expenditure. See note 35 for details of the
loans. The loans receivable are considered to have low credit risk as there is a low risk of default and the joint ventures are expected to meet their
contractual cash flow obligations in the near term. The Group considers information such as cash flow forecasts of the joint ventures to determine
whether they have the ability to repay the intercompany loans. Management does not expect significant adverse changes in economic and
business conditions which would reduce the ability of the joint ventures to repay the intercompany loans. Consequently, the Group has
determined that the loans are of low credit risk.
195
Where a loan is considered not to have low credit risk at the reporting date and to assess whether there is a significant increase in credit risk
of the loan since initial recognition, the Group considers information such as actual or expected significant adverse changes in economic or
business conditions that are expected to cause a significant change in a joint venture’s ability to meet its obligations, and significant increases in
credit risk on other financial instruments of the joint venture. A loan would be considered to be in default if a joint venture did not make contractual
repayments within 90 days after they fell due unless evidenced otherwise. Evidence that an intercompany loan is credit-impaired would include
information such as significant financial difficulty of the joint venture, or the probability that the joint venture will enter bankruptcy.
In calculating the expected credit loss rates, the Group considers historical loss rate on its loans advanced to the joint ventures, internal credit
rating of the joint ventures based on experience of Group Treasury and recent pricing provided by external credit providers and adjusts for
forward-looking macroeconomic data. There were no historical losses for loans advanced to the joint ventures and internal credit rating of the
joint ventures is considered to be about investment grade. Expected credit loss allowance is accordingly not material.
(e) Offsetting financial assets and financial liabilities
The Group enters into derivative transactions under International Swaps and Derivatives Association (ISDA) master netting arrangements. In relation
to certain deposits, the Group was required to maintain cash on deposit in respect of certain borrowings which were repaid during 2020. The
Group and the lender intended to net settle or realise the asset and settle the liability simultaneously, and the Group had a legally enforceable
right to offset recognised amounts which was not conditional on the occurrence of a future event. As a result, the Group’s borrowings at
4 January 2020 were presented net of these deposits as the requirements for offsetting were met.
The following tables set out the carrying amounts of recognised financial instruments that are subject to the above agreements:
Financial assets
At 2 January 2021
Derivative financial assets
Cash and cash equivalents
At 4 January 2020
Derivative financial assets
Cash and cash equivalents
Financial liabilities
At 2 January 2021
Derivative financial liabilities
Borrowings including bank overdrafts
At 4 January 2020
Derivative financial liabilities
Borrowings including bank overdrafts
Gross amounts
of recognised
financial assets
€’m
1.3
164.3
Notes
29(a)
21
Gross amounts
of recognised
financial
liabilities offset in
the balance sheet
€’m
–
–
Net amounts of
financial assets
presented in the
balance sheet
€’m
1.3
164.3
29(a)
21
0.3
381.1
–
(112.1)
0.3
269.0
Gross amounts
of recognised
financial
liabilities
€’m
(3.7)
(658.2)
Gross amounts
of recognised
financial assets
offset in the
balance sheet
€’m
–
–
Net amounts of
financial
liabilities
presented in the
balance sheet
€’m
(3.7)
(658.2)
(2.4)
(995.4)
–
112.1
(2.4)
(883.3)
29(a)
25
29(a)
25
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 196
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
29. Derivative financial instruments and financial risk management continued
(f) Carrying amounts of financial instruments
Financial assets measured at amortised cost
Trade receivables and receivables from related parties
Loans to equity accounted investees
Ornua Co-operative Limited
Financial liabilities measured at amortised cost
Borrowings
Trade payables and amounts due to related parties
Lease liabilities
Equity instruments designated at FVOCI
Financial assets measured at FVTPL – derivatives
Financial liabilities measured at FVTPL – derivatives
Contingent consideration
Notes
35
18
25
29(a)
29(a)
28
2020
€’m
279.9
31.8
0.4
2019
€’m
391.3
28.8
0.7
312.1
420.8
(658.2)
(260.3)
(110.2)
(883.3)
(349.6)
–
(1,028.7)
(1,232.9)
2.8
1.3
(3.7)
(17.4)
2.7
0.3
(2.4)
–
30. Contingent liabilities
Bank guarantees amounting to €4.4 million (2019: €4.7 million) are outstanding at 2 January 2021. 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 and a
matter on the settlement of value added tax. It is not anticipated that any material liability will arise from these contingent liabilities other than
those provided for.
Any Irish registered wholly-owned subsidiary of the Company may avail of the exemption from filing its statutory financial statements for the
year ended 2 January 2021 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 2 January 2021.
Within the scope of benefitting from the exemption related to the filing of the statutory financial statements for the financial year ended
31 December 2020 of Glanbia Foods B.V. (see note 37), the Company has guaranteed the liabilities ensuing from legal acts performed by this
subsidiary from 1 January 2020 in accordance with and to the extent as set out in section 2:403.1(b and f) of the Dutch Civil Code. Therefore
Glanbia Foods B.V. is exempt from the obligation to publish its statutory financial statements and its obligations to file statutory 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 statutory financial statements for the financial year ended
31 December 2020 of the three Luxembourg subsidiaries (see note 37), the Company has guaranteed the liabilities of these subsidiaries in
respect of any losses or liabilities (as provided by Article 70 (c) of the Luxembourg Law of 19 December 2002 on the register of commerce and
companies and the accounting and annual accounts of undertakings) for the financial year ended on 31 December 2020. These subsidiaries
avail of the exemption from filing of their statutory 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.
31. Leasing
The movement in right-of-use assets during the year is as follows:
Land and
buildings
€’m
Plant and
equipment
€’m
Motor
vehicles
€’m
Notes
Year ended 2 January 2021
Opening carrying amount
Effect of adopting IFRS 16
Exchange differences
Acquisitions
Additions
Disposals
Impairment
Depreciation charge
Closing carrying amount
At 2 January 2021
Cost
Accumulated depreciation
Carrying amount
34
5
5/32
–
97.9
(7.3)
0.6
11.9
(4.4)
(1.0)
(13.7)
84.0
97.5
(13.5)
84.0
–
5.2
(0.4)
–
2.6
(1.3)
–
(2.7)
3.4
5.6
(2.2)
3.4
Lease liabilities shown in the Group balance sheet are as follows:
Current
Non-current
Total
Refer to note 29(d) for a maturity analysis of the lease liabilities arising from the Group’s leasing activities.
Amounts recognised in the Group income statement included the following:
Depreciation charge of right-of-use assets
Impairment of right-of-use assets
Interest expense on lease liabilities
Expense relating to short-term leases
Expense relating to variable lease payments not included in lease liabilities
–
3.3
(0.3)
–
1.9
(0.2)
–
(1.6)
3.1
4.6
(1.5)
3.1
Notes
5
5
11
197
Total
€’m
–
106.4
(8.0)
0.6
16.4
(5.9)
(1.0)
(18.0)
90.5
107.7
(17.2)
90.5
2020
€’m
15.8
94.4
110.2
2020
€’m
18.0
1.0
2.8
2.4
0.5
There was no income from subleasing and gains/losses on sale and leaseback transactions. The total cash outflow for lease payments during
the year was €21.9 million. At 2 January 2021, the Group was committed to €1.0 million for short-term leases.
Certain building leases contain extension options exercisable by the Group. As at 2 January 2021, undiscounted potential future lease payments
of €90.0 million have not been included in lease liabilities because it is not reasonably certain that the extension options, €77.1 million of which
relate to periods more than five years from the reporting date, will be availed of. The undiscounted future lease payments relating to leases that
have not yet commenced which the Group is committed as at 2 January 2021 were not material. The effect of excluding future cash outflows
arising from variable lease payments, termination options, and residual value guarantees from lease liabilities is not material for the Group.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 198
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
32. Cash generated from operating activities
Profit after taxation
Income taxes
Net write down of inventories (pre-exceptional)
Non-cash movement in allowance for impairment of receivables
Non-cash element of exceptional charge before taxation
Non-cash movement in provisions (pre-exceptional)
Non-cash movement on cross currency swaps
Non-cash movement on disposal of leases
Share of results of equity accounted investees (pre-exceptional)
Depreciation of tangible assets
Amortisation of intangible assets
Depreciation of right-of-use assets
Cost of share-based payments
Difference between pension charge and cash contributions
Loss on disposal of property, plant and equipment (pre-exceptional)
Finance income
Finance expense
Operating cash flows before movement in working capital
Decrease/(increase) in inventories
Decrease in short-term receivables
(Decrease)/increase in short-term liabilities
Decrease in provisions
Notes
12
15
16
31
10/23
5
11
11
(a)
(a)
(a)
(a)
2020
€’m
143.8
10.3
23.0
5.2
12.2
3.3
(0.7)
(0.7)
(61.6)
45.9
60.9
18.0
5.2
(7.2)
0.8
(4.1)
24.6
278.9
18.7
80.7
(55.9)
(2.5)
2019
€’m
180.2
18.9
5.3
1.8
27.1
(0.9)
0.8
–
(48.6)
48.1
60.9
–
4.6
(7.6)
0.2
(6.2)
32.5
317.1
(61.4)
1.4
31.3
(2.5)
Cash generated from operating activities
319.9
285.9
(a) The movement in working capital is as follows:
2020
At 5 January 2020
Exchange differences
Arising on acquisition (note 34)
Loans/amounts payable to equity accounted investees, interest
accruals, capital creditors and other non-operating items
Increase/(decrease) in working capital
At 2 January 2021
2019
Inventories
€’m
(note 20)
Trade and other
receivables
€’m
(note 19)
Trade and other
payables
€’m
(note 28)
447.5
(31.3)
3.2
(23.1)
(18.7)
432.3
(29.8)
3.2
(5.8)
(80.7)
(525.0)
35.8
(5.5)
(2.8)
55.9
Provisions
€’m
(note 27)
(3.6)
0.2
–
(10.3)
2.5
Total
€’m
351.2
(25.1)
0.9
(42.0)
(41.0)
377.6
319.2
(441.6)
(11.2)
244.0
At 30 December 2018
Exchange differences
Arising on acquisition
Reclassification
Loans/amounts payable to equity accounted investees, interest
accruals, capital creditors and other non-operating items
Increase/(decrease) in working capital
384.6
9.5
15.3
–
(23.3)
61.4
411.6
10.8
10.5
–
0.8
(1.4)
(481.4)
(10.7)
(9.1)
(0.7)
8.2
(31.3)
At 4 January 2020
447.5
432.3
(525.0)
(28.2)
(0.1)
–
22.8
(0.6)
2.5
(3.6)
286.6
9.5
16.7
22.1
(14.9)
31.2
351.2
199
Lease
liabilities
€’m
–
–
–
128.8
(19.2)
0.6
–
Total
€’m
779.0
1,057.2
(1,222.0)
128.8
(19.2)
12.8
(40.9)
33. Changes in liabilities arising from financing activities
Notes
Borrowings
€’m
Private
Placement Debt
€’m
At 5 January 2020
Drawdown of borrowings
Repayment of borrowings
Leases
Payment of lease liabilities
Acquisitions
Exchange differences
At 2 January 2021
At 30 December 2018
Drawdown of borrowings
Repayment of borrowings
Acquisitions
Exchange differences
At 4 January 2020
25
25
34
25
25
639.1
913.3
(1,222.0)
–
–
12.2
(26.8)
139.9
143.9
–
–
–
–
(14.1)
315.8
269.7
110.2
695.7
616.2
606.2
(599.9)
6.4
10.2
136.2
–
–
–
3.7
639.1
139.9
–
–
–
–
–
–
–
752.4
606.2
(599.9)
6.4
13.9
779.0
34. Business combinations
Acquisitions in 2020
On 17 August 2020, the Group acquired 100% of the voting shares of Foodarom Group Inc., Foodarom USA, Inc. and Foodarom Germany GmbH
(collectively known as ‘Foodarom’). Foodarom is a Canadian headquartered flavour solutions business, which is a complementary acquisition for
the Group and forms part of the Glanbia Nutritionals segment. The acquisition will strengthen the Group’s capability in flavours and nutritional
solutions, growing position in flavours, and enhance its ability to provide optimised ingredient systems to its customers. The goodwill relates to
the acquired workforce, the expectation that the business will give rise to synergies across the Glanbia Nutritionals segment, will generate future
sales beyond the existing customer base, as well as the opportunity to expand the business into new markets, where there are no existing
customers, and further complements the recipes and know-how across the Glanbia Nutritionals segment. Goodwill of €10.5 million is not
deductible for tax purposes.
Details of the net assets acquired and goodwill arising from the acquisition are as follows:
Purchase consideration – cash paid
Contingent consideration
Total consideration
Less: Fair value of net assets acquired
Goodwill
The fair value of assets and liabilities arising from the acquisition are as follows:
Property, plant and equipment
Right-of-use assets
Software
Intangible assets – brands
Intangible assets – customer relationships
Intangible assets – recipes and know-how
Inventories
Trade and other receivables
Trade and other payables
Loans
Lease liabilities
Deferred tax liabilities
Fair value of net assets acquired
Notes
Total
€’m
21.9
18.0
39.9
(16.9)
16
23.0
Notes
15
31
16
16
16
16
32(a)
32(a)
32(a)
25/33
31/33
26
Total
€’m
7.0
0.6
0.2
4.6
3.3
13.9
3.2
3.2
(5.5)
(12.2)
(0.6)
(0.8)
16.9
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 200
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
34. Business combinations continued
The contingent consideration arrangement requires the Group to pay the former owners of Foodarom an earnout if a pre-defined earnings
threshold is exceeded within a defined period post acquisition. Under the acquisition agreement, the undiscounted amount of future payments
for which the Group may be liable ranges from nil to €18.0 million.
The fair value of the contingent consideration was estimated by calculating the present value of the future expected payments. As the contingent
consideration is due to be paid within 12 months, the effect of discounting is not material. The main significant unobservable input in the
calculation is the forecast EBITDA of Foodarom over the relevant period. As it is deemed highly probable that the higher end of the EBITDA
range will be met, the Group have assumed that the upper limit of the earnout will be payable. A 5% increase in the forecast EBITDA would not
change the fair value of the contingent consideration. A 5% decrease in forecast EBITDA would result in a decrease in fair value of the contingent
consideration by €2.8 million.
The fair value of Foodarom’s trade and other receivables at the acquisition date amounted to €3.2 million. The gross contractual amount for
receivables due is €3.2 million which is expected to be received in full. Acquisition-related costs of €1.6 million incurred primarily on professional
fees are included in administrative expenses.
Combined impact of acquisitions
The revenue and profit before taxation and exceptional items of the Group, including the post acquisition impact of acquisitions completed during
the year ended 2 January 2021, were as follows:
Revenue
Profit before taxation
2020
Acquisitions
€’m
9.9
0.8
Group excluding
acquisitions
Consolidated
group including
acquisitions
€’m
3,813.2
189.0
€’m
3,823.1
189.8
The revenue and profit before taxation and exceptional items of the Group for the year ended 2 January 2021 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
2020
Acquisitions
Group excluding
acquisitions
€’m
24.7
0.9
€’m
3,813.2
189.0
Pro-forma
consolidated
group
€’m
3,837.9
189.9
Acquisitions in 2019
The Group acquired Watson LLC and Polymer Films LLC (collectively known as ‘Watson’) in 2019. Refer to 2019 Annual Report for details
of the Watson acquisition.
35. Related party transactions
Related parties of the Group include Glanbia Co-operative Society Limited (the Group’s ultimate parent up to 30 June 2020), subsidiary
undertakings, equity accounted investees, key management personnel and connected parties. A listing of the principal subsidiaries and equity
accounted investees is provided in note 37.
Transactions with Glanbia Co-operative Society Limited
Glanbia Co-operative Society Limited (the ‘Society’), together with its subsidiaries, holds 31.7% (2019: 31.5%) of the issued share capital of the
Company. The Board of Directors as at 4 January 2020 was comprised of 16 members, of which up to eight, including the Chairman who had
the casting vote, were nominated by the Society. In accordance with IFRS 10 ‘Consolidated Financial Statements’, the Society controlled the
Group and was the ultimate parent of the Group up to 30 June 2020. From 1 July 2020 in accordance with the Relationship Agreement between
Society and the Company, the number of directors that can be nominated by the Society reduced to seven in a board comprising of 15 members.
Thereafter the Society no longer controlled the Group, and the Company became the ultimate parent company of the Group.
During 2020, dividends of €24.8* million (2019: €23.5 million) were paid to the Society and its wholly owned subsidiaries based on their
shareholding in Glanbia plc. Dividends of €0.1** million (2019: €0.1 million) 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.
€14.9 million of this amount pertained to the period ended 30 June 2020 when the Society was the ultimate parent of the Group.
*
** €nil million of this amount pertained to the period ended 30 June 2020 when the Society was the ultimate parent of the Group.
201
Transactions with equity accounted investees
The Group trades in the normal course of business with its equity accounted investees. Refer to note 35(a) to (c) for the transactions carried out
with them and the balances relating to them at year end. 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:
Entity
Glanbia Ireland DAC
Glanbia Cheese Limited
Southwest Cheese Company, LLC
Nature of investment
Joint venture
Joint venture
Joint venture
Notes
17
17
17
17
2020
€’m
12.6
13.1
10.9
2019
€’m
11.6
12.5
11.2
36.6
35.3
Dividends receivable from Glanbia Cheese Limited (joint venture) of €2.3 million (2019: €2.4 million) were recognised by the Group.
Loans to equity accounted investees
Loans to equity accounted investees
At the beginning of the year
Loan repayments received
Loans advanced during the year
At the end of the year
Interest on loans to equity accounted investees
At the beginning of the year
Interest charged
Interest received
At the end of the year
Total loans and interest at the end of the year
Notes
29(b)/29(f)
11
19
2020
€’m
28.8
–
3.0
31.8
0.1
1.3
(1.3)
0.1
31.9
2019
€’m
29.8
(1.0)
–
28.8
0.1
1.3
(1.3)
0.1
28.9
On 16 December 2020 the Group advanced a loan of €3.0 million at arm’s length to Glanbia Cheese EU Limited, a joint venture of the Group,
which is repayable on 27 December 2024. During 2018 the Group advanced a loan of €16.0 million at arm’s length to Glanbia Ireland DAC, a joint
venture of the Group, which is repayable on 6 August 2024 and a loan of €1.0 million at arm’s length to Glanbia Cheese EU Limited, a joint venture
of the Group, which was repaid during 2019. On 21 January 2016 a subordinated loan of €12.8 million was advanced to Glanbia Ireland DAC,
a joint venture of the Group, which is repayable on 6 August 2024.
The following transactions were carried out with related parties:
(a) Sales of goods and services
Sales of goods:
– joint ventures
Sales of services:
– Glanbia Co-operative Society Limited*
– joint ventures
*
There were €1.1 million of sales of goods and services during the period ended 30 June 2020 when the Society was the ultimate parent of the Group.
Sales to related parties were carried out under normal commercial terms and conditions.
2020
€’m
0.6
2.2
37.8
2019
€’m
0.4
2.4
38.9
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 202
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
35. Related party transactions continued
(b) Purchases of goods and services
Purchases of goods:
– joint ventures
Purchases of services:
– Glanbia Co-operative Society Limited*
– joint ventures
2020
€’m
2019
€’m
1,191.0
1,077.9
0.3
0.2
0.3
0.7
*
There were €0.1 million of purchases of goods and services during the period ended 30 June 2020 when the Society was the ultimate parent of the Group.
Purchases from related parties were carried out under normal commercial terms and conditions.
(c) Year end balances (excluding loans)
Receivables from related parties:
– Glanbia Co-operative Society Limited
– joint ventures
Payables to related parties:
– Glanbia Co-operative Society Limited
– joint ventures
Notes
19
19
28
28
2020
€’m
0.3
7.2
–
78.5
2019
€’m
0.2
8.0
0.1
91.6
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.
(d) Contributions to retirement benefit plans
Information in relation to the Group’s contributions to retirement benefit plans is disclosed in note 9.
(e) Key management compensation
IAS 24 ‘Related Party Disclosures’ requires the disclosure of compensation paid to the Group’s key management.
The Board of Directors and Glanbia Operating Executive are deemed to be key management personnel as they are responsible for planning,
directing and controlling the activities of the Group.
Key management compensation includes the compensation of the Board of Directors (Executive and Non-Executive) and members of the Glanbia
Operating Executive, including the Group Secretary. Dividends totalling €0.3 million (2019: €0.3 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 (note 9) on behalf of key management
personnel and these personnel also participate in the Group’s various share-based payment arrangements (note 10). No loans were made to key
management during the year (2019: nil).
Salaries and other short-term employee benefits
Post-employment benefits
Share-based payments
Non-Executive Directors fees
2020
€’m
7.8
1.3
1.4
0.9
11.4
2019
€’m
5.3
1.0
0.6
0.9
7.8
Retirement benefits of €0.4 million (2019: €0.4 million) were accrued in the year to four members of key management (2019: four) under a
post retirement defined benefit plan. Total retirement benefits accrued to key management under the post retirement defined benefit plan are
€8.6 million (2019: €7.6 million).
The Group through Employee Benefit Trusts reacquired Company shares from key management personnel; the total number reacquired was
28,631 ordinary shares at an average price of €9.40 per share (2019: 81,172 ordinary shares at an average price of €17.59 per share).
Details of the Directors’ compensation including salary, fees, various share-based payment arrangements and other benefits, together with
their interest in Glanbia plc is disclosed in the Remuneration Committee Report on pages 96 to 117.
203
36. Events after the reporting period
See note 14 for the final dividend, recommended by the Directors. Subject to shareholder approval, this dividend will be paid on 7 May 2021
to shareholders on the register of members on 26 March 2021, the record date.
Subsequent to the year end, the Society, who is the largest shareholder of the Company, announced that it will further reduce its representation
on the Board of the Company, in order to facilitate the appointment of additional independent non-executive directors. Accordingly, the current
Society representation on the Board will reduce from seven to three directors by June 2023. In addition, the overall board size of the Company
will reduce from 15 to 13 by 2023.
37. Principal subsidiaries and equity accounted investees
The information outlined in section (a) below relates only to the principal undertakings in the Group as at 2 January 2021 and as at 4 January
2020. The Group has availed of the exemption under section 316 of the Companies Act 2014. The information required under section 314 of the
Companies Act 2014 including a full listing of subsidiaries and joint venture 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
Ireland
Alanfield Society Limited
Avonmore Proteins Designated Activity Company 5
Avonmore Skim Milk Products Limited 5
Glanbia Cheesip Limited 1
Glanbia Commercial Limited 5
Glanbia Commsa Limited 5
Glanbia Commus Limited 5
Glanbia Estates Limited
Glanbia Finance Designated Activity Company 5
Glanbia Finance International Designated Activity Company
Glanbia Financial Services Unlimited Company
Glanbia GNPN Holding Limited
Glanbia Holdfin Limited
Glanbia Investipr Designated Activity Company 3
Glanbia Investment Holding Limited
Glanbia Management Services Limited
Glanbia Nutritionals (Blending) Limited 5
Glanbia Nutritionals (Ireland) Limited
Glanbia Nutritionals Limited
Glanbia Performance Nutrition Limited
Glanbia Property Holding Designated Activity Company
Glanbia Property Rentals Designated Activity Company 5
Glanbia Support Services Limited
Glassonby Unlimited Company
ON Optimum Nutrition Limited 5
Waterford Foods Designated Activity Company
United States of America
Aseptic Solutions USA Ventures, LLC
Foodarom USA, Inc. 4
Glanbia Business Services, Inc.
Glanbia (Delaware), Inc.
Glanbia Foods, Inc.
Glanbia, Inc.
Glanbia Nutritionals (NA), Inc.
Registered
office
Principal activity
Beneficial
% interest
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
1
2
3
2
2
4
2
2
Holding society
Financing
Financing
Research and development
Financing
Financing
Financing
Property and land dealing
Financing
Financing
Financing
Holding company
Holding company
Holding and managing receivables
Holding company
Management and general business services
Financing
Nutritional ingredients and performance nutrition
Nutritional ingredients
Performance nutrition
Holding company
Property lessor
Holding company
Financing
Financing
Holding company
Nutritional ingredients
Flavours solutions
Business services
Holding company
Cheese and nutritional ingredients
Holding company
Nutritional ingredients
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
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 204
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
37. Principal subsidiaries and equity accounted investees continued
Incorporated and operating in
United States of America continued
Glanbia Nutritionals, Inc.
Glanbia Nutritionals Services, LLC
Glanbia Performance Nutrition (Manufacturing), Inc.
Glanbia Performance Nutrition (NA), Inc.
GPN Commercial, LLC
GPN Slimfast Commercial, LLC
Grass Advantage, LLC
KSF Acquisition Corporation
Lifeagen Biosciences of Florida, Inc.
Watson 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
KSF Acquisition UK Limited
Waterford Foods International Limited
Australia
Glanbia Performance Nutrition Pty Ltd
Brazil
Glanbia Marketing de Produtos de
Nutriçâo e Performance do Brasil Ltda 3
Canada
Foodarom Group Inc. 4
Glanbia Nutritionals (Canada) Inc. 3
Glanbia Performance Nutrition Canada Inc. 3
China
Glanbia Nutritionals (Suzhou) Co., Ltd. 3
Glanbia Performance Nutrition Trading (Shanghai) Co., Ltd. 3
Glanbia (Shanghai) International Trading Co., Ltd. 3
Denmark
Nutramino Holding ApS 3
Nutramino Int. ApS 3
France
Glanbia Performance Nutrition France SAS 3
Germany
Body & Fit Nutrition GmbH 3
Foodarom Germany GmbH 4
Glanbia Nutritionals Deutschland GmbH 3
Glanbia Performance Nutrition GmbH 3
India
Glanbia India Private Limited 2
Glanbia Performance Nutrition (India) Private Limited 2
Registered
office
Principal activity
Beneficial
% interest
2
2
2
5
2
2
6
2
5
7
8
8
8
8
8
8
8
8
9
10
11
12
12
13
14
15
16
16
17
18
19
20
21
22
23
Nutritional ingredients
Management services (nutritional ingredients)
Performance nutrition
Performance nutrition
Performance nutrition
Weight management solutions
Performance nutrition
Weight management solutions
Mineral and vitamin supplements
General business services
Financing
Holding company
Management services
Performance nutrition
Performance nutrition
Holding company
Weight management solutions
Holding company
Performance nutrition
Performance nutrition
Flavours solutions
Nutritional ingredients
Performance nutrition
Nutritional ingredients
Performance nutrition
Nutritional ingredients
Holding company
Performance nutrition
Performance nutrition
Performance nutrition
Flavours solutions
Nutritional ingredients
Performance nutrition
Nutritional ingredients
Performance nutrition
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
205
Registered
office
Principal activity
Beneficial
% interest
Incorporated and operating in
Japan
Glanbia Japan K.K. 3
Korea (Republic of)
Glanbia Performance Nutrition Korea, LLC 3
Luxembourg
Glanbia Luxembourg SA 3
Glanbia Luxfin SA 3
Glanbia Luxinvest SA 3
Malta
Glanbia Maltinvest Limited
Glanbia Maltfin Limited
Mexico
Glanbia, S.A. de C.V. 3
Netherlands
Body & Fit Sportsnutrition B.V. (formerly known as B&F
Vastgoed B.V.) 3
Glanbia Foods B.V. 3
New Zealand
Glanbia Performance Nutrition (New Zealand) Limited 3
Norway
Nutramino NO AS 3
Philippines
Glanbia Performance Nutrition Philippines, Inc. 3
Portugal
24
25
26
26
26
27
27
28
29
30
31
32
33
Nutritional ingredients
Performance nutrition
Financing
Financing
Financing
Financing
Financing
Nutritional ingredients
Performance nutrition
Holding company
Performance nutrition
Performance nutrition
Performance nutrition
Glanbia Nutritionals (Portugal), Sociedade Unipessoal Lda. 3
34
Performance nutrition
Russian Federation
LLC Glanbia 3
Singapore
Glanbia Nutritionals Singapore Pte Limited 3
Glanbia Performance Nutrition Singapore Pte. Ltd
South Africa
Glanbia (Pty) Limited 3
Sweden
Nutramino AB 3
Turkey
35
36
37
38
39
Nutritional ingredients
Nutritional ingredients
Performance nutrition
Nutritional ingredients
Performance nutrition
Glanbia Besin Ürünleri Pazarlama ve Ticaret Limited
irketi 3
40
Performance nutrition
United Arab Emirates
Glanbia Performance Nutrition DMCC 3
Uruguay
Glanbia (Uruguay Exports) SA 3
41
42
Performance nutrition
Nutritional ingredients
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1. Glanbia Cheesip Limited has a branch at 1 rue Hildegard von Bingen L–1282 Luxembourg. The company and its branch have a statutory year end fixed at 31 December each year to comply
with statutory requirements.
2. The statutory year end of this subsidiary is 31 March, which coincides with the tax year in India.
3. The statutory year end of these subsidiaries is fixed at 31 December each year to comply with statutory requirements.
4. Acquired in 2020.
5. The statutory year end of these subsidiaries is 23 December.
The Group has no significant restrictions in relation to its ability to access or use the assets and settle the liabilities of its subsidiaries.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 206
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Financial Statements continued
37. Principal subsidiaries and equity accounted investees continued
(b) Equity accounted investees – Joint ventures
Incorporated and operating in
Ireland
Date to which
results are included
Registered
office
Principal activity1
Beneficial
% interest
Glanbia Cheese EU Limited
2/01/2021
Glanbia Ireland Designated Activity Company
2/01/2021
United States of America
MWC-Southwest Holdings LLC
2/01/2021
1
1
2
Cheese products
Milk products, consumer goods and agri trading
Holding company of two cheese and nutritional
ingredients companies
Britain and Northern Ireland
Glanbia Cheese Limited
2/01/2021
43
Cheese products
50
40
50
51
1. Refer to note 17 for further details.
The Group’s interests in joint ventures are subject to certain restrictions, however these are not material.
Level 10, 68 Pitt Street, Sydney NSW 2000, Australia
3411 Silverside Road Tatnall Building 104, Wilmington, New Castle County, DE 19810, United States
1925 Lovering Ave, Wilmington, DE 19806, United States
950 W Bannock Street 1100, Boise, ID83702, Ada County, United States
11380 Prosperity Farms Rd 221E, Palm Beach Gardens FL 33410, United States
251 Little Falls Drive, Wilmington, New Castle County, DE 19808, United States
Registered office
1 Glanbia House, Kilkenny, Ireland, R95 E866
2
3
4
5
6
7 Kiernan Herner LLP, 105 Danbury Road, Suite 203, Ridgefield, CT 06877, United States
8 One Victoria Square, Birmingham, B1 1BD, United Kingdom
9
10 Avenida Brigadeiro Faria Lima, No 4221, 1 andar, salas 124, 128 e 142, Itaim Bibi, São Paula, CEP 04538-133, Brazil
11 5400, rue Armand-Frappier, Saint-Hubert, Quebec, J3Z 1G5, Canada
12 1700-242 Hargrave Street, Winnipeg MB, R3C 0V1, Canada
13 No. 128 Fangzong Street SIP, Suzhou, Jiangsu Province, PRC 215025, China
14 Room 101, Building D, the Bund SOHO, Zhongshan East 2nd Road 88, Shanghai, 200001, China
15 Room 228, 2/F, Building 1, No. 239, Gang’ao Road, Shanghai New Free Trade Zone, China
16 Landgreven 3, 1. tv., 1301, København K, Denmark
17 8, Avenue Hoche, 75008, Paris, France
18 Hohenstaufenring 62, 50674, Köln, Germany
19 Gutenbergstraße 1, 28844 Weyhe, Germany
20 Gewerbestrasse 3, 78359 Orsingen – Nenzingen, Germany
21 District court München: Anwesen Freudenbergerweg 11, 81669, München, Germany
22 Ground Floor, No. 12/47, 7th Cross, Swimming Pool Extension, Malleshwaram, Bangalore KA, 560003, India
23 Allied House, Nelson Mandela Marg Pocket 10, Sector B, Vasant Kunj, New Delhi, DL110070, India
24 Level 18 Yebisu Garden Place, Tower 4–20–3, Ebisu Shibuya-ku, Tokyo, Japan
25 1319, 13th floor, 311 Gangnam-daero, Seocho-gu, Seoul, Korea (Republic of)
26 15, Boulevard Friedrich Wilhelm Raiffeisen, L-2411, Luxembourg
27 Vision Exchange Building, Level 2, Triq it-Territorjals, Zone 1, Central Business District, Birkirkara, CBD 1070, Malta
28 Av. Prolongación Paseo de la Reforma No. 115–1006, Col. Paseo de las Lomas, C.P. 01330, Mexico
29 Mars 10, 8448CP, Heerenveen, Netherlands
30 Herikerbergweg 88, 1101 CM Amsterdam, Netherlands
31 C/–Martelli Mckegg, Level 20, PwC Tower, 188 Quay Street, Auckland, 1010, New Zealand
32 Fillpstad brygge 1, 0252, Oslo, Norway
33 146 Yakal Street, San Antonio Village, Makati City 1203, Phillipines
34 Miraflores, Torre de Mansanto, Rua Afonso Praça, 30–7o e 8o piso, 1495–061 Miraflores, Portugal
35 6 Vernadskogo prospect, Office 614, 119311, Moscow, Russian Federation
36 Helios, 03-03/04, 11 Biopolis Way, Singapore, 138667, Singapore
37 300 Beach Road, 35-06/07, The Concourse, 199555, Singapore
38 Stand 893, 7 Forbes Street, Midstream Estate – Windsor Gate, Brakfontein Road, Guateng, South Africa, 2192, South Africa
39 Ostermalinstorg.1, 4 tr, 114 42, Stockholm, Sweden
40 Kocatepe Mah., Lamartin Cad. No:5, Ofis Lamartine Kat:6, Taksim, Beyoglu, Istanbul, 34437, Turkey
41 Unit No. 3406, Liwa Heights 1, Plot No: JLT – PH2-W3A, Jumeirah Lake Towers, Dubai, United Arab Emirates
42 Copacabana Street, Block 26 – S 12, Médanos de Solymar City, Canelones, Uruguay
43 4 Royal Mews, Gadbrook Park, Rudheath, Northwich, Cheshire, CW9 7UD, United Kingdom
Company Balance Sheet
as at 2 January 2021
ASSETS
Non-current assets
Investment in joint venture
Investment in subsidiaries
Other financial assets
Deferred tax assets
Current assets
Trade and other receivables
Cash at bank and in hand
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
Bank borrowings
Current liabilities
Bank overdraft
Provisions
Trade and other payables
Total liabilities
Total equity and liabilities
207
2 January
2021
€’m
4 January
2020
€’m
Notes
2
3
4
5
6
7
95.4
585.6
2.6
0.5
684.1
7.1
10.7
17.8
95.4
660.5
2.8
0.4
759.1
6.9
8.2
15.1
701.9
774.2
460.6
3.0
121.5
585.1
35.0
9.2
0.6
72.0
81.8
116.8
460.7
(0.3)
102.8
563.2
105.0
22.7
0.6
82.7
106.0
211.0
701.9
774.2
As permitted by section 304 of the Companies Act 2014, the Company is availing of the exemption from presenting its separate profit and loss
account 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 €112.9 million (2019: €5.3 million).
On behalf of the Board
Donard Gaynor
Directors
23 February, 2021
Siobhán Talbot
Mark Garvey
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 208
Glanbia plc | Annual Report and Financial Statements 2020
Company Statement of Changes in Equity
for the financial year ended 2 January 2021
Other reserves
Capital
reserve
€’m
Own
shares
€’m
Share-
based
payment
reserve
€’m
Share
capital and
share
premium
€’m
(note 6)
FVOCI
reserve
€’m
Retained
earnings
€’m
Total
Equity
€’m
Balance at 5 January 2020
460.7
4.2
(14.0)
9.7
(0.2)
102.8
563.2
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded directly
in equity
Dividends
Cost of share–based payments
Transfer on exercise, vesting or expiry
of share–based payments
Purchase of own shares
Cancellation of own shares
Total contributions by and distributions to
owners
Balance at 2 January 2021
Balance at 30 December 2018
Profit for the year
Other comprehensive income
Total comprehensive income for the year
Transactions with owners, recorded directly
in equity
Fair value movement
Deferred tax on fair value movement
Dividends
Cost of share–based payments
Transfer on exercise, vesting or expiry of
share–based payments
Purchase of own shares
Total contributions by and distributions to
owners
–
–
–
–
–
–
–
(0.1)
(0.1)
460.6
460.7
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.1
0.1
4.3
4.2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3.6
(17.6)
16.6
–
–
–
–
5.2
(4.6)
–
–
2.6
0.6
–
–
–
–
–
–
–
–
–
112.9
–
112.9
112.9
–
112.9
(78.6)
–
1.0
–
(16.6)
(78.6)
5.2
–
(17.6)
–
(94.2)
(91.0)
(11.4)
10.3
(0.2)
121.5
585.1
(14.4)
14.1
(0.1)
170.8
635.3
–
–
–
–
–
–
–
8.0
(7.6)
–
–
–
–
–
–
4.6
(9.0)
–
–
–
–
(0.2)
0.1
–
–
–
–
5.3
–
5.3
–
–
(74.3)
–
1.0
–
5.3
–
5.3
(0.2)
0.1
(74.3)
4.6
–
(7.6)
0.4
(4.4)
(0.1)
(73.3)
(77.4)
Balance at 4 January 2020
460.7
4.2
(14.0)
9.7
(0.2)
102.8
563.2
See note 23 of the Group financial statements for a description of the individual components in other reserves.
209
Notes to the Company Financial Statements
for the financial year ended 2 January 2021
1. Accounting policies
Basis of preparation
Glanbia plc (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, R95 E866.
These financial statements are prepared for the 52-week period ended 2 January 2021. Comparatives are for the 53-week period ended
4 January 2020. The balance sheets for 2020 and 2019 have been drawn up as at 2 January 2021 and 4 January 2020 respectively.
The Company financial statements were approved and authorised for issue by the Board of Directors on 23 February 2021.
The Company meets the definition of a qualifying entity under Financial Reporting Standard (‘FRS’) 100 issued by the Financial Reporting Council
(‘FRC’). Accordingly, in the year ended 4 January 2020, the Company transitioned from reporting under International Financial Reporting
Standards adopted by the European Union (‘IFRS’) to FRS 101 ‘Reduced Disclosure Framework’ as issued by the FRC. The transition was
not considered to have had a material effect on the financial statements.
The financial statements are prepared on a going concern basis under the historical cost basis in accordance with the Companies Act 2014
and FRS 101. The Company has taken advantage of the following disclosure exemptions under FRS 101:
• a Cash Flow Statement and related notes;
• disclosures in respect of transactions with wholly owned subsidiaries;
• disclosures in respect of capital management;
•
• disclosures in respect of the compensation of key management personnel.
the effects of new but not yet effective IFRS; and
As the consolidated financial statements of the Company and its subsidiaries include the equivalent disclosures, the Company has also availed
of the following disclosure exemptions under FRS 101:
•
• paragraphs 91 to 99 of IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instrument Disclosures.
IFRS 2 Share Based Payments in respect of group settled share based payments; and
The financial statements have been prepared in euro and presented in millions.
During the year ended 2 January 2021, the Company adopted IFRS 16 ‘Leases’ with no material impact to the financial statements. The
Company adopted IFRS 9 ‘Financial instruments’ and IFRS 15 ‘Revenue from Contracts with Customers’ during the year ended 4 January 2020
with no material impact to the financial statements. The accounting policies set out below have, unless otherwise stated, been applied consistently
to all periods presented in these financial statements.
Going concern
The Company is in a net current liabilities position at 2 January 2021. The Company and its subsidiaries (the ‘Group’) is profit-making and cash
generative, having made a profit after tax of €143.8 million and generated cash from operating activities of €277.4 million in 2020. The Company
made a profit of €112.9 million in 2020 (2019: €5.3 million). The Group expects to continue to be profitable and cash generative for at least
12 months from the date of approval of these financial statements based on approved budgets and strategic plans. The Company has control
over its subsidiaries, it can therefore direct its subsidiary entities to distribute or make available funds to the parent company to ensure that the
Company can repay its creditors as they fall due. The Directors have a reasonable expectation that these funds will be available within the Group
based on current budgets and strategic plans. Accordingly, the financial statements of the Company for the financial year ended 2 January 2021
have been prepared on a going concern basis.
Investment in joint venture and subsidiaries
Investments in joint venture and subsidiaries are held at cost less, if any, accumulated impairment. The Company assesses investments for
impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. If any such
indication of impairment exists, the Company makes an estimate of its recoverable amount. When the carrying amount of an investment exceeds
its recoverable amount, the investment is considered impaired and is written down to its recoverable amount. In the opinion of the Directors the
shares in the joint venture and subsidiaries are worth at least the amounts at which they are stated in the balance sheet.
Other financial assets
The Company classifies and initially measures its equity instruments at fair value and are subsequently adjusted to fair value at each reporting
date. If the market for a financial asset is not active or unquoted, the Company establishes fair value using valuation techniques. The investment
in BDO Development Capital Fund is fair valued by reference to the latest quarterly report available to the limited partners. Changes in their fair
value are recognised in the profit and loss account unless management has elected to present changes in fair value through other comprehensive
income (‘FVOCI’) on an investment by investment basis. When an election is made for an investment, there is no subsequent reclassification
of fair value gains and losses related to the investment to profit or loss following the derecognition of the investment. Dividends from such
investments are recognised in profit or loss when the Company’s right to receive payments is established.
Financial assets are derecognised when the rights to receive cash flows from financial assets have expired or have been transferred and the
Company has transferred substantially all the risks and rewards of ownership.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 210
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Company Financial Statements continued
1. Accounting policies continued
Trade and other receivables and payables
Receivables and payables are recognised initially at fair value except trade receivables that do not contain significant financing components which
are recognised at transaction price. They are subsequently measured at amortised cost using the effective interest method less any allowance
for expected credit loss for receivables.
Impairment
The Company applies the simplified approach under IFRS 9 to measuring ECL which uses a lifetime expected loss allowance for all trade
receivables. A loss allowance for receivables is estimated based on expected credit losses. To measure ECL, historical loss rates are calculated
based on historical credit loss experience. The loss allowance based on historical loss rates is adjusted to reflect current information and
forward-looking information on macroeconomic factors if there is evidence to suggest these factors will affect the ability of the counterparty
to settle the receivables. Trade and other receivables are written off when there is no reasonable expectation of recovery such as a debtor failing
to engage in a repayment plan with the Company.
The Company’s intercompany receivables at 2 January 2021 amounted to €6.9 million (2019: €6.8 million). There is no material ECL in respect
of intercompany receivables as at 2 January 2021.
Cash at bank and in hand
Cash includes cash, in any currency, in hand or deposited with financial institutions repayable without penalty on notice of not more than 24 hours.
Share capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as
a deduction from the proceeds.
Own shares
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 and 2018 Long-term incentive plan, the 2019 Restricted share plan, and the Annual incentive deferred into shares
scheme, the consideration paid is deducted from distributable reserves 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 proceeds from re-issue of own shares are transferred from own shares to
retained earnings.
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. Interim dividends are recognised when paid. Proposed dividends that are approved after the balance sheet date are not recognised
as a liability but are disclosed in note 14 of the Group financial statements.
Bank borrowings
Bank borrowings are recognised initially at fair value and are subsequently stated at amortised cost. They are classified as current liabilities unless
the Company has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date.
Foreign currency translation
The functional and presentation currency of the Company is euro. Transactions in foreign currencies are translated at the rates of exchange ruling
at the transaction date. Monetary assets and liabilities denominated in foreign currencies are translated into euro at the rates of exchange ruling
at the balance sheet date, with a corresponding charge or credit to the income statement.
Dividend income
Dividend income is recognised in the profit and loss account on the date the entity’s right to receive payment is established.
Share-based payments
The Company operates equity settled share-based payment arrangements. The arrangements include both share option and share award
schemes open to both Executive Directors and certain senior management. The Company also 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 and a restricted share 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.
Taxation
The tax expense for the year 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.
Current tax is calculated on the basis of tax laws enacted or substantively enacted at the Company balance sheet date in countries where the
Company operates and generates taxable income, taking into account adjustments relating to prior years. A provision is recognised for those
matters for which the tax determination is uncertain but it is considered probable that there will be a future outflow of funds to a tax authority.
The provisions are measured at the best estimate of the amount expected to become payable.
211
Deferred tax is determined using tax rates and laws enacted or substantively enacted by the reporting date. Deferred tax is provided on a non-
discounted basis, using the balance sheet liability method, providing for temporary differences on the reporting date between the tax bases of assets
and liabilities and their carrying amounts in the financial statements. However, deferred tax is not accounted for if it arises from initial recognition of an
asset or liability in a transaction, other than a business combination, that at the time of the transaction affects neither accounting nor taxable profit or
loss. Deferred tax liabilities are not recognised to the extent they arise from the initial recognition of goodwill not having full tax basis. Deferred tax
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.
Critical accounting judgements and estimates
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. There were no critical accounting estimates or significant judgements used
in the preparation of these financial statements.
2. Investment in joint venture
At the beginning and end of the year
The investment in a joint venture relates to Glanbia Ireland DAC.
3. Investment in subsidiaries
At the beginning of the year
Additions
Impairment
Disposals
At the end of the year
2020
€’m
95.4
2019
€’m
95.4
2020
€’m
660.5
–
(74.5)
(0.4)
2019
€’m
489.4
436.1
(189.3)
(75.7)
585.6
660.5
Details of the Company’s principal subsidiaries are set out in note 37 of the Group financial statements. At reporting date, the carrying amount
of the investment in subsidiaries is assessed for impairment when indications of impairment exist. During the current year, €74.5 million of
impairment was recognised where the recoverable amount was determined based on the estimated cash flows generated by the underlying
assets of the subsidiaries.
4. Other financial assets
At the beginning of the year
Additions
Disposals/redemption
Fair value adjustment
At the end of the year
2020
€’m
2.8
0.1
(0.3)
–
2.6
2019
€’m
3.1
0.3
(0.4)
(0.2)
2.8
Other financial assets comprised an equity instrument at FVOCI (The BDO Development Capital Fund) of €2.2 million (2019: €2.1 million) and
a financial asset at amortised cost (a loan note receivable from Ornua Co-operative Limited) of €0.4 million (2019: €0.7 million).
5. Trade and other receivables
Amounts owed by subsidiaries
Amounts owed by Glanbia Co-operative Society Limited
Prepayments
2020
€’m
6.9
0.1
0.1
7.1
2019
€’m
6.8
–
0.1
6.9
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 212
Glanbia plc | Annual Report and Financial Statements 2020
Notes to the Company Financial Statements continued
6. Share capital and share premium
At 2 January 2021, share capital and share premium were €17.7 million (2019: €17.8 million) and €442.9 million (€442.9 million) respectively.
The movement in the share capital was due to cancellation of ordinary shares on the share buyback programme (note 22 of the Group financial
statements). 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 23(b) of the Group financial statements for further details.
7. Trade and other payables
Amounts owed to subsidiaries
Amounts owed to Glanbia Co-operative Society Limited
Accruals
2020
€’m
54.7
–
17.3
72.0
2019
€’m
68.7
0.1
13.9
82.7
8. Contingent liabilities
Any Irish registered wholly-owned subsidiary of the Company may avail of the exemption from filing its statutory financial statements for the year
ended 2 January 2021 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 2 January 2021.
Within the scope of benefitting from the exemption related to the filing of the statutory financial statements for the financial year ended
31 December 2020 of Glanbia Foods B.V. (see note 37 of the Group financial statements), the Company has guaranteed the liabilities ensuing
from legal acts performed by this subsidiary from 1 January 2020 in accordance with and to the extent as set out in section 2:403.1(b and f) of
the Dutch Civil Code. Therefore Glanbia Foods B.V. is exempt from the obligation to publish its statutory financial statements and its obligations
to file statutory 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 statutory financial statements for the financial year ended
31 December 2020 of the three Luxembourg subsidiaries (see note 37 of the Group financial statements), the Company has guaranteed the
liabilities of these subsidiaries in respect of any losses or liabilities (as provided by Article 70 (c) of the Luxembourg Law of 19 December 2002
on the register of commerce and companies and the accounting and annual accounts of undertakings) for the financial year ended on
31 December 2020. These subsidiaries avail of the exemption from filing of their statutory 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’s financial liabilities are secured by cross-guarantees by the Company and certain principal subsidiary(ies). Expected credit loss
allowance in relation to these guarantees is not material.
9. Related party transactions
During 2020, dividends of €24.8* million (2019: €23.5 million) were paid to Glanbia Co-operative Society Limited (the ‘Society’) and its wholly
owned subsidiaries based on their shareholding in the Company. Non-Executive Directors fees of €0.5 million (2019: €0.5 million) were recharged
from the Company to the Society during 2020. See note 7 for outstanding balances due to the Society at the reporting date.
* €14.9 million of this amount pertained to the period ended 30 June 2020 when the Society was the ultimate parent of the Company.
10. Statutory information
The following table discloses the fees paid or payable to Deloitte Ireland LLP:
Statutory audit*
Other assurance services
Tax advisory services
Other non-audit services
2020
€’m
–
0.7
–
–
0.7
2019
€’m
–
0.7
–
–
0.7
* The audit fee for the Company is €38,000 (2019: €35,700) and is payable to Deloitte Ireland LLP, the statutory auditor.
Directors’ remuneration is disclosed in the Remuneration Committee Report on pages 96 to 117 and in note 35(e) of the Group financial statements.
11. Events after the reporting period
Refer to note 36 of the Group financial statements.
213
Other
Information
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 214
Glanbia plc | Annual Report and Financial Statements 2020
Glossary
Key Performance Indicators and non-IFRS performance measures
NOT COVERED BY INDEPENDENT AUDITOR’S 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. Revenue
G 3. EBITA
G 4. EBITA margin %
G 5. EBITDA
G 6. Constant Currency Basic and Adjusted Earnings Per Share (EPS)
G 7. Financing Key Performance Indicators
G 8. Volume and pricing increase/(decrease)
G 9. Like-for-like revenue increase/(decrease)
G 10. Effective tax rate
G 11. Average interest rate
G 12. Operating cash conversion
G 13. Operating cash flow and free cash flow
G 14. Return on capital employed (ROCE)
G 15. Total shareholder return (TSR)
G 16. Dividend payout ratio
G 17. Compound annual growth rate (CAGR)
G 18. Exceptional Items
These principal non-IFRS performance measures are defined below with a reconciliation of these measures to IFRS measures where applicable.
In the prior year the Group disclosed two non-IFRS measures (Total Group and Innovation rate) which are not included in the current year.
Total Group is no longer used to describe trends and performance across the Group, with commentary now concentrated on IFRS measures
that reference individual components of the Group and equity accounted investments. Innovation rate is no longer a performance condition
of Glanbia’s Annual Incentive Plan for Glanbia Performance Nutrition Senior Management hence not disclosed as an Alternative Performance
measure of the Group.
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 2020 and 2019 are set out below:
1 euro =
US dollar
Pound sterling
2020
1.1423
0.8898
2019
1.1196
0.8772
All non–IFRS performance measures have been presented on a constant currency basis, where relevant, within this glossary.
215
G 2. Revenue
Revenue comprises sales of goods and services of the wholly-owned (Group) 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.
G 2.1 Wholly-owned (Group) revenue:
Reference to the
Financial Statements/
Glossary
Nutritional Solutions
US Cheese
Glanbia Nutritionals
North America Performance Nutrition –
Branded
North America Performance Nutrition –
Contract
North America Performance Nutrition
North America Lifestyle
International
Direct-to-Consumer
Glanbia Performance Nutrition
Note 4
Note 4
Note 4
Note 4
Note 4
Note 4
Note 4
Note 4
2020
€’m
746.8
1,938.3
2,685.1
411.4
23.4
434.8
357.3
270.9
75.0
2019
Reported
€’m
744.9
1,767.0
2,511.9
469.8
68.5
538.3
392.0
358.7
74.8
2019
Retranslated
€’m
731.8
1,731.9
2,463.7
460.3
67.2
527.5
384.2
351.8
74.9
1,138.0
1,363.8
1,338.4
Constant
currency
growth
%
2.0%
11.9%
9.0%
Like-for-like
Growth
%
0.8%
13.8%
10.0%
-10.6%
-9.0%
-65.2%
-17.6%
-7.0%
-23.0%
0.1%
-15.0%
-63.5%
-15.9%
-5.3%
-21.3%
1.9%
-13.3%
Wholly-owned (Group) revenue
3,823.1
3,875.7
3,802.1
0.6%
1.8%
G 3. 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 of the financial statements for the reconciliation of wholly-owned (Group) EBITA.
G 3.1 Wholly-owned (Group) EBITA:
Nutritional Solutions
US Cheese
Glanbia Nutritionals
Glanbia Performance Nutrition
Wholly-owned (Group) EBITA
Reference to the Financial
Statements/Glossary
Note 4
Note 4
2020
€’m
90.5
27.9
118.4
91.2
209.6
2019
Reported
€’m
100.0
30.4
130.4
146.4
276.8
2019
Retranslated
€’m
98.1
29.8
127.9
143.0
270.9
Constant
currency
growth
%
-7.7%
-6.4%
-7.4%
-36.2%
-22.6%
G 4. EBITA margin %
EBITA margin % is defined as EBITA as a percentage of revenue. Wholly-owned (Group) EBITA margin % is defined as wholly-owned (Group)
EBITA as a percentage of wholly-owned (Group) revenue. Refer to G 2.1 and G 3.1 for reconciliations of wholly-owned (Group) revenue and
wholly-owned (Group) EBITA respectively. EBITA references throughout the annual report are on a pre-exceptional basis unless otherwise
indicated.
G 5. 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 5.1 Wholly-owned (Group) EBITDA:
Wholly-owned (Group) earnings before interest, tax and amortisation
(pre-exceptional EBITA)
Depreciation*
Wholly-owned (Group) earnings before interest, tax, depreciation
and amortisation
(pre-exceptional EBITDA)
Reference to the Financial
Statements/Glossary
G 3.1
Note 5
2020
€’m
209.6
63.9
2019
€’m
276.8
48.1
G 7, G 13
273.5
324.9
* Depreciation – includes depreciation of tangible assets of €45.9 million (2019 €48.1 million) and depreciation of right of use assets of €18.0 million (2019: nil).
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 216
Glanbia plc | Annual Report and Financial Statements 2020
Glossary continued
Key Performance Indicators and non-IFRS performance measures continued
G 6. Constant Currency Basic and Adjusted Earnings Per Share (EPS)
G 6.1 Constant Currency Basic Earnings Per Share (EPS)
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 23).
Profit attributable to equity holders of the Company
Weighted average number of ordinary shares
in issue (thousands)
Basic Earnings Per Share (cent)
Constant Currency Change
Reference to the Financial
Statements/Glossary
2020
€’m
2019
Reported
€’m
2019
Retranslated
€’m
Group income
statement
Note 13
Note 13
143.8
180.2
177.3
295,173
48.72
-18.9%
295,215
295,215
61.04
60.06
G 6.2 Constant Currency Adjusted Earnings Per Share (EPS)
Adjusted EPS is defined as the net profit attributable to the equity holders of the Company, before exceptional items and intangible asset amortisation
and impairment (excluding software amortisation), net of related tax, divided by the weighted average number of ordinary shares in issue during the
year, excluding ordinary shares purchased by the Group and held as own shares (note 23). 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 ongoing 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 and in Glanbia’s Long-Term Incentive Plan.
Profit attributable to equity holders of the Company
(pre-exceptional)
Amortisation and impairment of intangible assets
(excluding software amortisation) net of related tax
of €7.2 million (2019: €8.1 million)
Adjusted net income
Weighted average number of ordinary shares in issue
(thousands)
Adjusted Earnings Per Share (cent)
Constant currency change
Reference to the Financial
Statements/Glossary
2020
€’m
2019
Reported
€’m
2019
Retranslated
€’m
Group income
statement
175.3
214.8
211.4
42.5
217.8
45.3
260.1
44.4
255.8
Note 13
G 16
295,173
73.78
-14.9%
295,215
295,215
88.10
86.66
G 7. Financing Key Performance Indicators
The following are the financing key performance indicators defined as per the Group’s financing agreements.
G 7.1 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 in accordance with lenders’ facility agreements definitions which adjust
pre-exceptional EBITDA for items such as dividends received from equity accounted investees, acquisitions or disposals and to reverse the net
impact on EBITDA as a result of adopting IFRS 16 ‘Leases’. Adjusted EBITDA is a rolling 12 month measure.
Net debt
EBITDA
IFRS 16 adjustment
Adjustments in line with lenders’ facility agreements
Adjusted EBITDA
Reference to the Financial
Statements/Glossary
Note 25
G 5
2020
€’m
493.9
273.5
(22.0)
38.8
290.3
2019
€’m
614.3
324.9
–
35.0
359.9
Net debt: adjusted EBITDA
Note 29(c)
1.70
1.71
217
G 7.2 Adjusted EBIT: adjusted net finance cost
Adjusted EBIT: net finance cost is calculated as earnings before interest and tax adjusted for the IFRS 16 ‘Leases’ impact on operating profit plus
dividends received from equity accounted investees divided by net finance cost. Adjusted net finance cost comprises finance costs less finance
income per the Group income statement plus capitalised borrowing costs and excludes interest expense on lease liabilities. Adjusted EBIT and
net finance cost are rolling 12 month measures.
Reference to the Financial
Statements/Glossary
2020
€’m
2019
€’m
Operating profit (pre-exceptional)
Dividends received from equity accounted investees
IFRS 16 adjustment – interest
Adjusted EBIT
Adjusted net finance costs
Group income statement
Group statement of cash flows
Group statement of cash flows
Note 11, Note 15, Note 31
Adjusted EBIT: adjusted net finance cost
Note 29(c)
148.7
36.6
(2.8)
182.5
18.2
10.0
215.9
35.3
–
251.2
27.0
9.3
G 8. 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 (including trade spend) within revenue movement year-on-year, excluding
acquisitions, on a constant currency basis.
G 8.1 Reconciliation of volume and pricing increase/(decrease) to constant currency revenue growth:
Nutritional Solutions
US Cheese
Glanbia Nutritionals
Glanbia Performance Nutrition
Reference to
the Financial
Statements/
Glossary
G.2.1
G.2.1
G 2.1
G 2.1
Volume
increase/
(decrease)
2.4%
5.0%
4.2%
-13.4%
53rd Week
Adjustment*
-1.9%
-1.9%
-1.9%
-1.7%
Price
increase/
(decrease)
-1.6%
8.8%
5.8%
0.1%
Acquisitions/
(disposals)
3.1%
0.0%
0.9%
0.0%
Revenue
increase/
(decrease)
2.0%
11.9%
9.0%
-15.0%
2020 increase/(decrease) % – wholly-owned
(Group) revenue
G 2.1
-2.0%
-1.8%
3.8%
0.6%
0.6%
*
The 2020 results are for a 52 week period ended 2 January 2021 while the 2019 results are for the 53 week period ended 4 January 2020. The 53rd week adjustment is to allow for consistent
comparison of this metric.
G 9. Like-for-like revenue increase/(decrease)
G 9.1 Glanbia Performance Nutrition (GPN) like-for-like revenue
GPN like-for-like total revenue represents the sales increase/(decrease) year-on-year, excluding acquisitions and the impact of a 53rd week (when
applicable), on a constant currency basis.
GPN like-for-like branded revenue represents the sales increase/(decrease) year-on-year on branded sales, excluding acquisitions and the impact
of a 53rd week (when applicable), on a constant currency basis. Like-for-like branded revenue increase/(decrease) is one of the GPN segment’s
Key Performance Indicators. Like-for-like branded revenue increase/(decrease) is one of the performance conditions in Glanbia’s Annual Incentive
Plan for GPN Senior Management.
G 9.2 Glanbia Nutritionals like-for-like revenue
This represents the sales increase/(decrease) year-on-year, excluding acquisitions and the impact of a 53rd week (when applicable), on a constant
currency basis.
G 10. 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 (pre-exceptional)
Less share of results of equity accounted investees (pre-exceptional)
Group income statement
Group income statement
Reference to the Financial
Statements/Glossary
Income tax (pre-exceptional)
Effective tax rate
Group income statement
2020
€’m
189.8
(61.6)
128.2
14.5
11.3%
2019
€’m
238.2
(48.6)
189.6
23.4
12.3%
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 218
Glanbia plc | Annual Report and Financial Statements 2020
Glossary continued
Key Performance Indicators and non-IFRS performance measures continued
G 11. Average interest rate
The average interest rate is defined as the annualised net finance costs (pre-capitalised borrowing costs and excluding interest expense on lease
liabilities) divided by the average net debt during the reporting period.
G 12. Operating cash conversion
Operating cash conversion is defined as Operating Cash Flow (OCF) divided by pre-exceptional EBITDA. Cash conversion is a measure of the
Group’s ability to convert trading profits into cash and is an important metric in the Group’s working capital management programme.
G 13. 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. Operating cash flow is one of the performance conditions in Glanbia’s
Annual Incentive Plan.
Free cash flow is calculated as the net cash flow in the year before the following items: strategic capital expenditure, equity dividends paid,
loans/investments in equity accounted investees, exceptional costs paid, acquisition spend, proceeds received on disposals, purchases under
share buyback 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 received from equity accounted investees
Payments of lease liabilities
Other outflows
Free cash flow
Strategic capital expenditure
Dividends paid to Company shareholders
Purchase of own shares
Loans/investment in equity accounted investees
Exceptional costs paid
Payment for acquisition of subsidiaries, net of cash and
cash equivalents acquired
Proceeds from the sale of property, plant and equipment
Net cash flow
Exchange translation
Debt acquired on acquisition
Net debt movement
Opening net debt
Closing net debt
Reference to the Financial
Statements/Glossary
G 5
G 13.3
G 13.5
G 13.1
G 13.4
Group statement of cash flows
Group statement of cash flows
G 13.6
G 13.5
Group statement of cash flows
Note 23
Group statement of cash flows
G 13.2
Group statement of cash flows
Group statement of cash flows
Note 25
Note 25/Note 34
Note 25
Note 25
G 13.1 Reconciliation of operating cash flow to the Group statement of cash flows in the Financial Statements:
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:
Cost of share-based payments
Difference between pension charge and cash contributions
Other items
Amounts payable to the MWC-Southwest Holdings LLC joint venture partners
Reference to the Financial
Statements/Glossary
Note 32
G 13.2
G 13.5
Note 32
Note 32
2020
€’m
273.5
77.8
(16.5)
334.8
(43.0)
36.6
(19.2)
(2.7)
306.5
(47.7)
(78.6)
(16.6)
(9.6)
(29.5)
(21.9)
–
102.6
30.0
(12.2)
120.4
(614.3)
2019
€’m
324.9
(24.9)
(20.1)
279.9
(74.1)
35.3
–
(9.6)
231.5
(56.2)
(74.3)
–
(47.4)
(12.0)
(58.3)
0.2
(16.5)
(10.5)
(10.6)
(37.6)
(576.7)
(493.9)
(614.3)
2020
€’m
319.9
29.5
(16.5)
(5.2)
7.2
(0.1)
–
2019
€’m
285.9
12.0
(20.1)
(4.6)
7.6
(0.2)
(0.7)
Operating cash flow
G 13
334.8
279.9
G 13.2 Exceptional cash flow in the year:
Pre–tax exceptional charge in the year
Non–cash element of pre-tax exceptional charge in the year
Current year exceptional items paid in the year
Prior year exceptional items paid in the year
Total exceptional cash outflow in the year
G 13.3 Movement in working capital:
Reference to the Financial
Statements/Glossary
Group income statement
Note 32
Note 6
Note 6
Note 6
Reference to the Financial
Statements/Glossary
Movement in working capital (pre-exceptional)
Net write back of inventories (pre-exceptional)
Non-cash movement in allowance for impairment of receivables
Prior year exceptional items paid in the year
Non-cash movement in provisions (pre-exceptional)
Non-cash movement on cross currency swaps
Amounts payable to the MWC-Southwest Holdings LLC joint venture partners
Note 32
Note 32
G 13.2, Note 6
Note 32
Note 32
Movement in working capital
Note 32(a)
G 13.4 Net interest and tax paid:
Interest received
Interest paid (including leases)
Tax paid
Interest paid in relation to property, plant and equipment
Net interest and tax paid
G 13.5 Capital expenditure:
Business sustaining capital expenditure
Strategic capital expenditure
Total capital expenditure
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
Reference to the Financial
Statements/Glossary
G 13
G 13
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
219
2019
€’m
(39.1)
27.1
(12.0)
–
(12.0)
2019
€’m
(24.9)
(5.3)
(1.8)
–
0.9
(0.8)
0.7
(31.2)
2019
€’m
3.7
(32.5)
(44.6)
(0.7)
2020
€’m
(35.7)
12.2
(23.5)
(6.0)
(29.5)
2020
€’m
77.8
(23.0)
(5.2)
(6.0)
(3.3)
0.7
–
41.0
2020
€’m
4.6
(25.0)
(22.1)
(0.5)
(43.0)
(74.1)
2020
€’m
16.5
47.7
64.2
38.0
26.2
64.2
2019
€’m
20.1
56.2
76.3
42.7
33.6
76.3
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
operating 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.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 220
Glanbia plc | Annual Report and Financial Statements 2020
Glossary continued
Key Performance Indicators and non-IFRS performance measures continued
G 13. Operating cash flow and free cash flow continued
G 13.6 Other (outflows)/inflows:
Cost of share-based payments
Difference between pension charge and cash contributions
Loss on disposal of property, plant and equipment (pre-exceptional)
Proceeds from disposals/redemption of FVOCI financial assets
Payments for FVOCI financial assets
Purchase of own shares
Non cash movement on disposal of leases
Amounts payable to the MWC-Southwest Holdings LLC joint venture partners
Total other outflows
Reference to the Financial
Statements/Glossary
Note 32
Note 32
Note 32
Group statement of cash flows
Group statement of cash flows
Note 32
G 13
2020
€’m
5.2
(7.2)
0.8
0.3
(0.1)
(1.0)
(0.7)
–
(2.7)
2019
€’m
4.6
(7.6)
0.2
0.5
(0.4)
(7.6)
–
0.7
(9.6)
G 14. 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 and impairment less current liabilities and deferred tax liabilities excluding all borrowings, lease liabilities
and acquisition related 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 30 to 31). ROCE is one of the performance conditions in Glanbia’s Long-Term
Incentive Plan. See Remuneration Committee Report on pages 96 to 117 for more information.
Operating profit (pre-exceptional)
Tax on operating profit
Amortisation and impairment of intangible assets net of related tax of €9.5m
(2019: €9.6m)
Reference to the Financial
Statements/Glossary
Group income statement
Share of results of equity accounted investees (pre-exceptional)
Group income statement
Return
Total assets
Adjustment for effect of adoption of IFRS 16
Current liabilities
Deferred tax liabilities
Less cash and cash equivalents
Plus current financial liabilities
Plus acquisition related liabilities
Plus short term lease 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
Group balance sheet
Note 31
Group balance sheet
Group balance sheet
Group balance sheet
Group balance sheet
Group balance sheet
Group balance sheet
Note 16
G 14.1
2020
€’m
148.7
(16.8)
51.4
61.6
244.9
3,065.4
106.4
(719.1)
(146.5)
(164.3)
199.8
17.4
15.8
(2.6)
363.2
2,735.5
(12.0)
2,723.5
2,729.3
2019
€’m
215.9
(26.6)
51.3
48.6
289.2
3,400.9
–
(955.3)
(168.6)
(269.0)
369.1
–
–
(2.1)
360.1
2,735.1
49.4
2,784.5
2,664.0
9.0%
10.9%
G 14.1. Adjustment for acquisitions
This adjustment is required to ensure the capital employed of the Foodarom (2020) and Watson (2019) acquisitions are appropriately time
apportioned in the denominator.
221
G 15. 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 30 to 31). TSR is one of the performance conditions in Glanbia’s Long-Term
Incentive Plan. See Remuneration Committee Report on pages 96 to 117 for more information.
G 16. Dividend payout ratio
Dividend payout ratio is defined as the annual dividend per ordinary share divided by the Adjusted Earnings Per Share. The dividend payout ratio
provides an indication of the value returned to shareholders relative to the Group’s total earnings.
Adjusted Earnings Per Share
Dividend recommended/paid per ordinary share
Dividend payout %
Reference to the Financial
Statements/Glossary
G 6.2
Note 14
2020
€ cent
73.78
26.62
2019
€ cent
88.10
26.62
36.1%
30.2%
G 17. Compound annual growth rate (CAGR)
The compound annual growth rate is the annual growth rate over a period of years. It is calculated on the basis that each year’s growth is compounded.
G 18. Exceptional items
The Group considers that items of income or expense which are material by virtue of their scale and nature should be disclosed separately if the
Group financial statements are to fairly present the financial performance and financial position of the Group. Determining which transactions are
to be considered exceptional in nature is often a subjective matter. However, circumstances that the Group believes would give rise to exceptional
items for separate disclosure are outlined in the accounting policy on exceptional items in note 2. Exceptional items are included on the income
statement line item to which they relate. In addition, for clarity, separate disclosure is made of all items in one column on the face of the Group
income statement. Refer to note 6 for an analysis of exceptional items recognised in 2020.
STRATEGIC REPORT | DIRECTORS’ REPORT | FINANCIAL STATEMENTS | OTHER INFORMATION 222
Glanbia plc | Annual Report and Financial Statements 2020
Shareholder Information
Stock exchange listings
The Company’s shares are listed on the main market of the Euronext Dublin 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:
Contact details:
Computershare Investor Services (Ireland) Limited, 3100 Lake Drive, Citywest Business Campus, Dublin 24, Ireland. Telephone number
01 247 5349 (within Ireland), +353 1 247 5349 (outside Ireland), or by logging on to: www.investorcentre.com/ie/contactus.
Share price data
Share price as at financial year end
Market capitalisation as at financial year end
Share price movements during the year:
– high
– low
2020
€
10.38
3,056m
11.49
7.70
2019
€
10.16
3,008m
19.05
9.64
The current share price of Glanbia plc ordinary shares can be accessed at: https://www.glanbia.com/investors/share-price-information/detailed-
share-price
Shareholder analysis
Geographic Location*
Institutional
North America
UK
Rest of world
Retail
Glanbia Co-operative Society Ltd
*
This represents a best estimate of the number of shares held by geographic locations at 02 January 2021.
North America – 22.9%
UK – 8.3%
Rest of the World – 11.4%
Retail – 25.8%
Glanbia Co-operative Society Ltd – 31.7%
Number of
shares held
67,468,894
24,402,632
33,440,522
75,813,488
93,276,241
% of
total
22.9
8.3
11.4
25.8
31.7
Share capital
The authorised share capital of the Company at 02 January 2021 was 350,000,000 ordinary shares at €0.06 each. The issued share capital
at 02 January 2021 was 294,401,777 ordinary shares of €0.06 each.
223
Substantial shareholdings
The table below details the major shareholdings (3% or more) in the Company’s ordinary share capital that has been disclosed to the Company
at 02 January 2021 and 23 February 2021 in accordance with the requirements of Regulation 14 of the Transparency (Directive 2004/109/EC)
Regulations 2007 and Rule 13 of the Central Bank (Investment Market Conduct) Rules 2019.
Shareholder
Glanbia Co-operative Society Limited
Mawer Investment Management Limited
Black Creek Investment Management Inc.*
Shareholder
Glanbia Co-operative Society Limited
Mawer Investment Management Limited
Black Creek Investment Management Inc.*
No. of ordinary
shares as at
02 January 2021
% of issued share
capital as at
02 January 2021
93,276,241
14,852,659
11,874,803
31.7
5.0
4.0
No. of ordinary
shares as at
23 February 2021
% of issued share
capital as at
23 February 2021
93,276,241
15,956,460
11,874,803
31.9
5.5
4.1
* Black Creek Investment Management Inc. (‘Black Creek’) is an investment management company. The shares are beneficially owned by 21 separate funds and clients which Black Creek advises
regarding their investment portfolios. Shares held directly are by funds for which Black Creek also acts as investment fund manager. None of the funds or clients by itself reaches or exceeds the
3% threshold. The funds and clients give a proxy to Black Creek who can exercise the voting rights for the shares in its own discretion.
Employee share schemes
The Company operates a number of employee share schemes. At 02 January 2021, 692,698 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 10.68 cent per share was paid in respect of ordinary shares on 02 October 2020.
Subject to shareholders’ approval, a final dividend of 15.94 cent per share will be paid in respect of ordinary shares on 07 May 2021 to
shareholders on the register of members on 26 March 2021. 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. For the past number of years, dividends have been paid in sterling to shareholders whose address, according to the Glanbia
share register, is in the UK (unless they have elected otherwise). From Monday, 15 March 2021 this structure will change and a default currency
of euro will be applied to all new shareholders who come on to the Glanbia plc share register, regardless of their registered address. Where an
existing shareholder holds shares in certificated (i.e. paper) form and has previously received sterling because his/her registered address is in the
UK or because he/she has previously elected to receive sterling, he/she will continue to receive sterling after 15 March 2021 unless he/she elects
otherwise. All other shareholders will henceforth automatically be paid in euro unless a sterling currency election is made (including those
shareholders who hold their shares in uncertificated (i.e. dematerialised) form).
Currently all trades on both Euronext Dublin and the London Stock Exchange are settled via the CREST securities settlement system in the UK.
However, with the UK’s departure from the EU, the Company has no choice but to migrate from the CREST securities settlement system to a new
depository arrangement involving a combination of Euroclear Bank in Brussels and the CREST system (the “Migration”). Shareholders holding
their shares, subject to Migration in March 2021, via the central securities depository operated by Euroclear Bank or CREST will receive dividends
electronically via such systems. To avail of these facilities, shareholders should follow the applicable procedures in the EB Services Description,
the EB Rights of Participants Document and the CREST International Manual. It is important to note that any previously recorded currency/tax
elections for shares in uncertificated (i.e. dematerialised) form will not apply after the Migration and we have been advised that where shares
are held via the central securities depository operated by Euroclear Bank or CREST, it will be necessary for the relevant shareholders to submit
their currency elections and any appropriate tax certification declaration in accordance with the respective procedures prior to each payment.
Irish Dividend Withholding Tax (DWT) must be deducted from dividends paid by an Irish resident company, unless a shareholder is entitled
to an exemption and has submitted a properly completed exemption form to the Company’s Registrars. DWT is deducted at the standard rate
of Income Tax (25%). Non-resident shareholders located in countries with a double tax treaty with Ireland and certain Irish companies, trusts,
pension schemes, investment undertakings and charities may be entitled to claim exemption from DWT. Copies of the exemption form may
be obtained from the Company’s Registrars. Shareholders should note that DWT will be deducted from dividends in cases where a properly
completed form has not been received by the market deadline for the dividend. Individuals who are resident in Ireland for tax purposes are not
entitled to an exemption. If shares are held via Euroclear Bank or CREST, the owners of the shares will need to contact the intermediary through
whom the shares are held in order to ascertain arrangements for tax relief to be applied at source.
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.
Shareholders may visit: https://www.glanbia.com/investors/shareholder-information for up-to-date investor information.
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Shareholder Information continued
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 2020 Full Year Results
Ex-dividend date
Record date for dividend
Date for receipt of proxy forms
AGM
Dividend payment date
24 February 2021
25 March 2021
26 March 2021
04 May 2021
06 May 2021
07 May 2021
AGM
The AGM will be held on 06 May 2021. 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
We are closely monitoring the situation and the measures advised by the Government of Ireland in relation to the ongoing COVID-19 pandemic
and will endeavour to take all recommended actions into account in the conduct of the AGM.
The voting results for the 2021 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 2021 AGM
the record date is to be determined in accordance with sections 1087G and 1105 of the Companies Act 2014.
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.
How to exercise shareholders’ rights
Shareholders have several ways to exercise their right to vote at forthcoming Annual General Meeting:
• by attending the AGM in person; or
• by submitting a validly completed proxy form appointing the Chairman of the meeting or another person as a proxy to vote on their behalf; or
• by visiting www.eproxyappointment.com and submitting their proxy details; or
• by visiting the Lumi platform; or
• by appointing a proxy via the CREST System if you hold Crest Depository Interests (“CDIs”) via CREST; or
• Euroclear Bank participants (“EB Participants”) may send electronic voting instructions to Euroclear Bank via SWIFT or EasyWay Corporate
Actions; or
• EB Participants may send a proxy voting instruction to Euroclear Bank to appoint a third party (i.e. other than Euroclear Nominees Limited
or the Chairman of the meeting) to attend and vote at the meeting.
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.
225
New arrangements post Migration to Euroclear Bank
New arrangements regarding voting and the exercise of shareholder rights will apply to all dematerialised shares once the migration to
Euroclear Bank (EB) becomes effective in March 2021.
EB Participants holding Belgian law rights via the Euroclear System can instruct Euroclear Bank to vote in favour, against or abstain, in advance of
the relevant Euroclear Bank voting deadline. EB Participants can also, in advance of the Euroclear Bank voting deadline, instruct Euroclear Bank
to appoint a third party (other than Euroclear Bank’s nominee or the chairman of the meeting) identified by the EB Participant to attend and vote at
a general meeting for the number of shares specified in the proxy voting instruction. For example, such third party may be the EB Participant or,
where the EB Participant is a broker or custodian, the client of that broker or custodian or a corporate representative. If a corporate is appointed
as a proxy, it may in turn appoint its own corporate representative to represent itself at the meeting.
CDI holders are able to instruct Broadridge Proxy Voting Service (“Broadridge”), in advance of the relevant Broadridge voting deadline, to vote in
favour, against or abstain. CDI holders can also, in advance of the Broadridge deadline, instruct Broadridge to appoint a third party (other than
Euroclear Bank’s nominee or the chairman of the meeting) identified by the CDI holder to attend and vote at a general meeting for the number
of shares specified in the proxy voting instruction. The third party identified in the proxy instruction could be, for example, the CREST member,
the client of a CREST member or a corporate representative. The CREST Nominee (as EB Participant) will then action that instruction to Euroclear
Bank as set out above.
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 2021 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 26 March 2021 (i.e. 42 days before the AGM).
An item cannot be included on the AGM agenda unless it is accompanied by the written explanation and received at either of these addresses
by this deadline.
Tabling draft resolutions
A shareholder, or a group of shareholders acting together, who hold at least 3% of the issued share capital of the Company, has the right to table
a draft resolution for inclusion on the agenda of the 2021 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 26 March 2021
(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 2021 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 Group Chairman during the question and answer session. Before the 2021
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
2021 AGM (i.e. 30 April 2021) 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.
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Contacts
Group Secretary and Registered Office
Michael Horan,
Glanbia plc,
Glanbia House,
Kilkenny,
Ireland,
R95 E866.
Stockbrokers
Davy Stockbrokers,
49 Dawson Street,
Dublin 2,
Ireland.
(Joint Broker)
Jefferies,
100 Bishopsgate,
London EC2N 4JL,
United Kingdom.
(Joint Broker)
Auditor
Deloitte Ireland LLP
Deloitte & Touche House,
Earlsfort Terrace,
Dublin 2,
Ireland.
Solicitors
Arthur Cox,
10 Earlsfort Terrace,
Dublin 2,
Ireland.
Principal Bankers
Allied Irish Banks, p.l.c.
The Governor and Company of the Bank of Ireland
Barclays Bank Ireland PLC
Danske Bank A/S
Coöperatieve Rabobank UA, trading as Rabobank Dublin
Ulster Bank Ireland DAC
Citibank N.A., London Branch
BNP Paribas, Dublin Branch
HSBC Bank plc
Registrar
Computershare Investor Services (Ireland) Limited,
3100 Lake Drive,
Citywest Business Campus,
Dublin 24,
Ireland.
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Glanbia plc
Glanbia House
Kilkenny
Ireland
R95 E866
Tel: +353 56 777 2200
Email: ir@glanbia.ie
www.glanbia.com