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8
A LEADING
CONVENIENCE FOOD
MANUFACTURER
Annual Report and Financial Statements 2018
GREENCORE IS A LEADING
MANUFACTURER OF CONVENIENCE
FOOD IN THE UK.
WE SERVE OUR CUSTOMERS ACROSS
A BROAD RANGE OF CATEGORIES
INCLUDING: SANDWICHES, SUSHI,
SALADS, CHILLED READY MEALS, CHILLED
SOUPS AND SAUCES, CHILLED QUICHE,
AMBIENT SAUCES AND PICKLES AND
FROZEN YORKSHIRE PUDDINGS.
WE SUPPLY GROCERY AND OTHER
RETAILERS, INCLUDING ALL OF THE
MAJOR UK SUPERMARKETS.
Employees across the UK and Ireland
UK manufacturing facilities
c.11,300
15
Revenue (continuing operations)
£1,498.5m
Adjusted Operating Profit (continuing
operations)
£104.6m
OUR INVESTMENT CASE
OUR VISION IS TO BE A
FAST-GROWING LEADER
IN UK CONVENIENCE FOOD
The reasons to invest in Greencore are:
WE OPERATE IN A DYNAMIC CONSUMER MARKET IN THE UK
• We participate in a vibrant and prosperous market of approximately 67 million consumers.
• We are a food manufacturer of scale in the UK with revenue of £1.5 billion and a well-invested
network of 15 facilities.
• We are relevant to key players across multiple channels in the retail market.
Read more:
What We Do – page 4
WE ARE A LEADER IN STRUCTURALLY ADVANTAGED FOOD CATEGORIES
• We lead in attractive and structurally growing categories and formats in convenience food.
• This growth is driven by positive customer and channel dynamics.
• These are underpinned by convenience and health trends.
Read more:
Market Review – page 12
WE HAVE ENDURING AND VALUED CUSTOMER RELATIONSHIPS
• Our relentless focus on customer centricity makes us a trusted partner in the industry.
• We develop multiple personal relationships across functions and levels, underpinned by long-term
customer agreements.
• We are strategic partners for our customers, supporting them throughout the supply chain.
Read more:
Our Strateg y – page 14
WE STRIVE FOR EXCELLENCE IN WHAT WE DO – THE GREENCORE WAY
• We have a highly regarded core expertise in value-added, assembly led manufacturing of convenience
food; this expertise is extending across all areas of the supply chain.
• We are committed to invest in people, infrastructure and capability to support this expertise;
underpinned by a strong management team.
• We have a constant focus on continuous improvement – the need to adapt and innovate flows through
The Greencore Way and is reflected in our culture.
Read more:
Our Strateg y – page 14
WE HAVE A STRONG FINANCIAL AND ECONOMIC MODEL THAT ALLOWS
US TO EXECUTE ON VALUE CREATING INITIATIVES
• Structural growth, strong operational execution and our ability to adapt drives revenue and profit growth.
• We generate cashflow through careful control of working capital and capital expenditure.
• We have a strong track record of executing multiple strategic initiatives to drive organic and inorganic
investment in the UK, delivering overall attractive returns.
Read more:
Our Strateg y – page 14
Premium prawn sandwich
The Greencore Way defines who we are and how we succeed. It is a simple model that brings together the
key elements of what we are about at Greencore. It is based on four core principles that are central to how
we deliver our vision.
OUR PRINCIPLES
PEOPLE AT THE CORE
We differentiate as
a company through our
people; people are key to
the delivery of our consistent,
high standard capabilities.
GREAT FOOD
We stand out when it comes
to our food by providing great,
safe, tasty and nutritious food.
BUSINESS EFFECTIVENESS
We create our competitive
edge in the market by being
continuously effective at
executing our business plans.
COST EFFICIENCY
We always seek to deliver real
value. It’s not just about cost,
it’s about cost efficiency.
Read more:
Our Stakeholder Report – page 36
Read more:
What We Do – page 4
Read more:
Delivering on our Strateg y – page 20
Read more:
Delivering on our Strateg y – page 20
CONTENTS
STRATEGIC REPORT
DIRECTORS’ REPORT
FINANCIAL STATEMENTS
Our Investment Case
IFC
Our Board of Directors
Directors’ Report
Corporate Governance Report
Report on Directors’ Remuneration
Report of the Audit Committee
Report of the Nomination
and Governance Committee
Statement of Directors’ Responsibilities
Highlights
What We Do
How We Do It
Chairman’s Statement
Chief Executive’s Review
Market Review
Our Strategy
Key Performance Indicators
Delivering on our Strategy (Strategy in Action)
Operating and Financial Review
Risks and Risk Management
Our Stakeholder Report
Meet the Senior Team
2
4
6
8
10
12
14
16
20
24
30
36
46
48
50
53
60
78
82
84
Independent Auditor’s Report
Group Income Statement
Group Statement of Recognised
Income and Expense
Group Balance Sheet
Group Cash Flow Statement
Group Statement of Changes in Equity
Notes to the Group Financial Statements
Company Balance Sheet
Company Statement of Changes in Equity
Notes to the Company Financial Statements
OTHER INFORMATION
Alternative Performance Measures
Shareholder and Other Information
86
92
93
94
95
96
98
151
152
153
158
IBC
Certain statements made in this Annual Report are forward-looking. These represent expectations for the Group’s business, and involve known and unknown risks and
uncertainties, many of which are beyond the Group’s control. The Group has based these forward-looking statements on current expectations and projections about future
events. These forward-looking statements may generally, but not always, be identified by the use of words such as ‘will’, ‘aims’ ‘anticipates’, ‘continue’, ‘could’, ‘should’, ‘expects’,
‘is expected to’, ‘may’, ‘estimates’, ‘believes’, ‘intends’, ‘projects’, ‘targets’, or the negative thereof, or similar expressions.
By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that may or may not occur in the future
and reflect the Group’s current expectations and assumptions as to such future events and circumstances that may not prove accurate. A number of material factors could
cause actual results and developments to differ materially from those expressed or implied by forward-looking statements. You should not place undue reliance on any
forward-looking statements. These forward-looking statements are made as of the date of this Annual Report. The Group expressly disclaims any obligation to publicly
update or review these forward-looking statements other than as required by law.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
1
HIGHLIGHTS1
OUR YEAR AT A GLANCE
CONTINUING OPERATIONS
Revenue
£1,498.5m
+4.2%
Pro Forma Revenue Growth
+8.7%
Adjusted Operating Profit
£104.6m
+1.7%
Group Operating Profit
£49.8m
(FY17: £45.5m)
GROUP OPERATIONS
Adjusted Earnings per Share (Adjusted ‘EPS’)
Free Cash Flow
15.1p
-1.9%
£92.4m
+£14.4m
Basic Earnings per Share (Basic ‘EPS’)
Return on Invested Capital (‘ROIC’)
FY18 ROIC (continuing operations)
4.8p
(FY17: 1.9p)
10.2%
(FY17: 12.2%)
15.6%
(FY17: 16.0%)
1 The Group uses Alternative Performance Measures
(‘APMs’) which are non-IFRS measures to monitor
the performance of its operations and of the Group
as a whole. These APMs along with their definitions
and reconciliations to IFRS measures are provided
in the APMs section on pages 158 to 162.
Breakfast rolls
2
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT POST YEAR END DISPOSAL OF US BUSINESS
In November 2018 we completed the disposal of our
entire US business to Hearthside Food Solutions LLC
(‘Hearthside’) for $1,075m.
In late August 2018, the Group received an
unsolicited approach from Hearthside, a US
food contract manufacturer, with an indicative
offer to acquire our entire US business. The
offer was highly compelling and the Board
unanimously concluded that accepting the
offer was in the best interest of shareholders.
The transaction was approved in November
by shareholders at an Extraordinary General
Meeting and was successfully completed
on 25 November 2018.
We would like to take this opportunity to
thank all the US team for their hard work
and dedication to the business over the last
decade and we wish the team every success
in continuing to drive the business forward
under Hearthside’s ownership.
The disposal of the US business is discussed
in the Chairman’s Statement on pages 8 and 9,
the Chief Executive’s Review on pages 10 and
11, and the Operating and Financial Review on
pages 24 to 29. The US business is presented
as a discontinued operation in the Financial
Statements, with details of the FY18 US
performance provided in Note 9 on pages
118 to 120.
Turkey sub
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
3
WHAT WE DO
WE DEVELOP, MANUFACTURE
AND DISTRIBUTE A WIDE RANGE
OF CHILLED, AMBIENT AND FROZEN
CONVENIENCE FOOD IN THE UK
WE SOURCE...
Greencore’s central purchasing team
in the UK sources from 3,600 different
suppliers and has strategic
partnerships with its largest suppliers.
WE INNOVATE...
Greencore’s highly skilled team
of development chefs and product
developers are constantly creating new
and interesting food ranges, based
on key consumer needs and customer
requirements.
WE MANUFACTURE...
Greencore operates 15 highly efficient
manufacturing facilities across the
UK, many of which have multiple
manufacturing units – each specialising
within specific product categories.
Nearly two-thirds of Greencore’s total
purchasing spend is on ingredients,
with the remainder being spent on
packaging and other items.
Different products produced, UK FY18
New to market products, UK FY18
2,300
35%
Greencore Manufacturing Excellence
is a common approach to efficient
manufacturing across Greencore’s
facilities. Launched in FY18
this programme will continue
to be deployed across our
manufacturing facilities.
WE SERVE...
On time delivery and product
availability is important to Greencore’s
customers and consumers. Greencore’s
planning and supply chain teams
ensure that the right products are
at the right location at the right time.
Greencore’s category management
team works closely with customers
to ensure in-store availability
of products to meet consumer
requirements and expectations.
In this regard Greencore holds
strong category leadership positions
with many of its customers.
WE DISTRIBUTE...
Greencore supplies primarily multiple
retailers and convenience stores
throughout the UK. To facilitate this
Greencore operates its own chilled
HGV fleet with 25 units, completing up
to 65 main depot deliveries each day.
Greencore has built a strong
‘Direct to Store’ operation,
comprising 17 distribution centres,
six picking depots and a fleet
of 374 vehicles making 7,500 daily
convenience store deliveries,
distributing 270m units annually.
Daily convenience store deliveries, UK
FY18
7,500
4
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT Suppliers across the UK
3,600
We operate in food to go categories
such as sandwiches, salads and sushi
as well as activities in complementary
convenience food categories including
chilled ready meals, chilled soups
and sauces, chilled quiche, ambient
sauces and pickles, and frozen
Yorkshire Puddings.
Greencore average service levels, UK
FY18
98.2%
Read more:
Key Performance Indicators – page 18
Number of delivery days each year, UK
364
“We are proud to supply a wide range of convenience food
to some of the most successful retail customers in the UK.”
WE ADAPT...
The very nature of the product categories
in which Greencore operates demands
a high degree of operational and commercial
flexibility to fulfil our customers’ needs.
Product orders are placed just-in-time, and this requires a high level
of responsiveness and agility across our teams. The need to adapt
and innovate flows through all The Greencore Way principles and
is reflected in our culture.
Read more:
Our Market Review – page 12
Read more:
How We Do It – page 6
Mini roll selection
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
5
HOW WE DO IT
OUR
BUSINESS
MODEL
Our vision is to be a
fast-growing leader in UK
convenience food. Our core
expertise is in manufacturing
processes that are high-volume
and high-touch (people
intensive) and in environments
that are high-care (in terms
of complexity and food safety).
We supply grocery and other
retailers, including all of the
major supermarkets in the UK.
Revenue (continuing operations)
£1,498.5m
Employees across the UK and Ireland
c.11,300
UK manufacturing facilities
15
UK distribution centres
17
6
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
OUR MARKETS:
OUR BUSINESS
RELIES ON:
We are focused
on attractive and
structurally growing
categories and formats
in convenience food.
These are driven
by positive customer
and channel dynamics
and underpinned
by convenience and
health trends.
Read more:
Market Review – page 12
Our business primarily operates
in the attractive convenience
foods sector in the UK.
We operate in food to go
categories such as sandwiches,
salads and sushi as well as
activities in complementary
convenience food categories
including chilled ready meals,
chilled soups and sauces,
chilled quiche, ambient
sauces and pickles, and
frozen Yorkshire Puddings.
Our products are manufactured
for grocery and other retailers,
including all of the major
UK supermarkets.
Read more:
Operating and Financial Review –
page 24
EXCEPTIONAL PEOPLE
We employ c.11,300 talented, committed and
experienced people across our UK and Irish
operations, including production, distribution
and administration teams.
A WELL INVESTED OPERATING NETWORK
Greencore operates 15 highly efficient manufacturing
sites across the UK, many of which have multiple
manufacturing units – each specialising within
specific product categories. The Group also operates
a Direct-to-Store distribution operation that makes
daily deliveries to small format stores across the UK.
INDUSTRY-LEADING SAFETY
AND TECHNICAL STANDARDS
We invest sensibly and effectively in food safety and
technical capabilities that support product quality
in the high-care environment required for most
convenience food products.
EFFICIENT COST CONTROL
Our programme of continuous operational
improvement provides us with an effective and
cost efficient platform to ensure we create value
for our customers and for our business.
A BROAD RANGE OF RAW MATERIALS
We use approximately 9,000 different ingredient and
packaging materials, from UK and international sources,
to produce our customers’ convenience food products.
SECURE AND SUSTAINABLE LONG-TERM
RELATIONSHIPS WITH SUPPLIERS
AND PRODUCERS
We work with approximately 3,600 trusted suppliers
across the UK and Ireland.
PRUDENT FINANCIAL MANAGEMENT
We maintain a strong balance sheet and debt profile,
with prudent, relatively low levels of financial risk and a
target medium term leverage ratio of 1.5-2.0x Net Debt
to EBITDA (as measured under financing agreements).
Improving cash flows are generated by a growing profits
base, tightly managed working capital and normalising
capital expenditure levels.
ALL UNDERPINNED BY THE PRINCIPLES OF THE GREENCORE WAY:
STRATEGIC REPORT WE’RE DIFFERENT
BECAUSE:
KEY REVENUE
AND PROFIT DRIVERS:
STAKEHOLDER
OUTCOMES:
PEOPLE AT THE CORE
People at the Core is at the centre
of The Greencore Way, the model that
defines who we are and how we succeed.
ENVIRONMENT
Efficiently using and respecting
all resources.
COMMUNITIES
Doing the right thing for our industry
and communities.
SUPPLIERS
Building effective and transparent
supply chains.
CUSTOMERS
Delivering excitement, intimacy,
growth and trust.
SHAREHOLDERS
Delivering industry leading
economic performance.
Read more:
Our Stakeholder Report – page 36
WE ARE A LEADER IN STRUCTURALLY
ADVANTAGED CATEGORIES
We lead across a number of convenience
food categories.
WE HAVE BUILT MANY LONG-TERM
CUSTOMER PARTNERSHIPS
We have become a trusted supply chain
partner with our customers, with specific
sets of products and bespoke solutions
for each of our customers.
WE ARE HIGHLY REGARDED
EXPERTS IN ALL ASPECTS
OF FOOD MANUFACTURING
Greencore creates Great Food by delivering
industry-leading food safety and technical
standards, innovating in recipes and
technologies, and investing to understand
consumers’ tastes and preferences.
WE HAVE AN EFFECTIVE
OPERATIONAL FRAMEWORK
Our investment in supply chain capabilities,
our constant focus on operational
improvement, and our expertise in labour
management allow us to excel in high-touch
processes of often complex product assembly.
WE LEVERAGE OUR SCALE
Our well invested network of 15 manufacturing
facilities provide the scale for high-volume
assembly-led manufacturing across multiple
temperature regimes.
WE ARE AGILE, RESPONSIVE
AND ADAPTABLE
In what is a dynamic marketplace, we
apply a high level of insight and attention
to developments from a consumer,
customer, operations, economic and
strategic perspective.
HELPING OUR
CUSTOMERS OUTPERFORM
Deepening our long-term partnerships
with key customers enables them to
grow their business.
GROWTH FROM EXISTING CATEGORIES
Our convenience food categories are driven
by positive long-term structural dynamics.
BROADENING OUR CHANNEL MIX
We work with existing and new customers
in multiple channels reflecting the dynamic
nature of consumer demand for
convenience food.
EXPANDING OUR PRODUCT RANGE
Our innovation capabilities, strong
customer relationships, and flexibility
to adapt allows us with develop new
products and formats for food to go
and other complementary convenience
food categories.
STRONG OPERATIONAL EXECUTION
AND EFFICIENCY
A programme of continuous operational
improvement, underpinned by a strong
culture of cost efficiency, reflects our
emphasis on maintaining an effective
infrastructure to create value for our
customers and the business.
EXECUTING ON VALUE CREATING
INITIATIVES
We have a strong track record of executing
multiple strategic initiatives to drive organic
and inorganic investment. Organic
investment includes partnering with
customers on key strategic projects to
develop new capacity and capabilities.
Read more:
Delivering on our Strateg y – page 20
ALL UNDERPINNED BY THE PRINCIPLES OF THE GREENCORE WAY:
PEOPLE AT THE CORE, GREAT FOOD, BUSINESS EFFECTIVENESS, COST EFFICIENCY.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
7
CHAIRMAN’S STATEMENT1
Gary Kennedy
FOCUSED ON
A DYNAMIC UK
MARKETPLACE
Underpinned by enhanced strategic and financial
flexibility, the Group is well positioned and confident
for the opportunities and challenges in the UK market.
8
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DEAR SHAREHOLDER,
FY18 has proved to be another year of
change for Greencore, where we faced several
challenges but also made much progress at
a strategic, commercial and operational level.
STRATEGIC DEVELOPMENT
The key strategic decision since our last
annual report was the decision to announce
the proposed disposal of our US business,
a transaction that we discuss on page 3. Whilst
it is never easy to consider such an approach
so soon after making material improvements
in the strategic and commercial direction
of the business, our duty to shareholders
continued to be of paramount importance.
The potential to immediately realise value for
the future growth potential of the US business
made it a highly compelling transaction for
shareholders. The disposal was completed
on 25 November 2018.
In our continuing business in the UK,
we strengthened our leadership position
in convenience food. In food to go categories
we extended several long-term partnership
agreements with core customers, while also
securing new business wins. We opened
a new centre of excellence for ready meals
at Warrington, the last substantial project in
our recent intensive phase of strategic capex.
We also rationalised the UK portfolio by
completing our exit from the cakes and
desserts category and the restructuring
of our longer life ready meals network. We
made significant progress during the year in
streamlining our UK organisation and we are
already seeing the benefits of this in overall
business performance.
Our vision to be a fast-growing leader in UK
convenience food is now central to the strategy,
shape and direction of the Group. A complete
outline of our strategic framework is provided
on pages 14 to 23, with examples of how this
was implemented in FY18 and the priorities
in place for FY19.
FINANCIAL PERFORMANCE
We assess financial performance across
the Group using a framework of profitability,
return and cash flow measures. This framework
underpins our financial Key Performance
Indicators (pages 16 and 17) and our criteria
for remuneration (pages 60 to 77).
1 The Group uses Alternative Performance Measures
(‘APMs’) which are non-IFRS measures to monitor
the performance of its operations and of the Group
as a whole. These APMs along with their definitions
and reconciliations to IFRS measures are provided
in the APMs section on pages 158 to 162.
STRATEGIC REPORT Overall, it has felt tough at times from a
financial perspective this year. In the US,
it was very disappointing that the challenges
in our business in the first half of FY18 led us to
revise our Group earnings estimates in March.
However, our decisive action in refining our
US strategy formed the basis for a much
improved commercial, operational and
financial performance in the second half.
Our continuing business in the UK saw some
modest progress in Adjusted Operating Profit,
increasing by 1.7% to £104.6m. Our level of
exceptional charges in continuing operations,
at £52.2m before tax, were still high albeit
as a result of sensible restructuring and
rationalisation of our portfolio during the year.
Overall, we did not meet the demanding
Adjusted EPS and ROIC targets that we set
ourselves but I have been pleased with the
increased focus and progress on cash flow
and returns. This will continue to be a theme
for the business in FY19 and beyond.
BREXIT
As I write the exact nature of the UK’s exit
from the EU is unclear. As a Board, we continue
to monitor closely its potential implications
on the business, including, in particular, any
potential changes to costs in the supply chain
and the availability and cost of labour. Whilst
there will be Brexit related challenges for
everyone involved in the UK food industry, the
dynamic nature of the UK consumer will also
continue to provide opportunities and we are
confident that we are well placed to work with
our customers to take advantage of these as
they arise.
CAPITAL MANAGEMENT
As a Board we are committed to dynamic
capital management, balancing the strategic
and investment needs of the Group, leverage
reduction, returns to shareholders and
a progressive dividend policy.
In this context, we will use a substantial
portion (£509m) of the net proceeds from the
disposal of the US business to return capital
to shareholders. The disposal proceeds also
allows us to reduce leverage, and then target
a medium term leverage ratio of 1.5-2.0x
Net Debt to EBITDA (as measured under
financing agreements).
In addition, the Board of Directors is
recommending a final ordinary dividend
for FY18 of 3.37 pence per share. This will result
in a total dividend for the year of 5.57 pence
per share (FY17: 5.47 pence per share). The
total dividend represents a pay-out amount
of approximately 37% of Adjusted Earnings.
CORPORATE GOVERNANCE
We continue to strive for transparency for
shareholders and other stakeholders, with
a view to enhancing our corporate culture
and governance framework. The Directors’
Report set out on pages 48 to 85 provides
biographical details for each Director and
details of priorities and activities of the Board
and its Committees. The Directors’ Report
also contains important updates on Board
diversity and renewal, as well as consideration
of the disposal of the US business.
In December 2017, Eric Nicoli retired from the
Board as Non-Executive Director and Senior
Independent Director. Upon his retirement,
Sly Bailey was appointed Senior Independent
Director. In April 2018, Helen Rose joined the
Board as Non-Executive Director. Helen brings
deep operational knowledge with a detailed
financial focus and valuable experience of
the food industry and I extend a very warm
welcome to her.
The disposal of our US business has led to
a reshaped and refocused UK strategy, and as
a result both of our US based Non-Executive
Directors, Thomas Sampson and Kevin
O’Malley, have confirmed that they will not
seek re-election at the 2019 Annual General
meeting (‘AGM’). I would like to express
my appreciation to both Tom and Kevin
for their individual valuable input and time
commitment over their tenure.
Conor O’Leary, our Group Company
Secretary, has confirmed his intention to retire
from his role after the 2019 AGM. Conor was
appointed Group Company Secretary in June
2010 and has contributed to the development
and progress of Greencore and I would like
to thank him for his service to the Board over
the past 16 years. I am delighted that Jolene
Gacquin will take up the role as Group
Company Secretary post the 2019 AGM.
CULTURE AND VALUES
Throughout the year, the Group has continued
to develop our environmental, social and
governance agenda. Further details are set out
in our Stakeholder Report. Though FY18 was
another year of significant change for our
colleagues, The Greencore Way continues to
drive our culture and our values. Through my
visits to the sites during the year, I witnessed
the enthusiasm and input of all of our
employees and I am particularly impressed by
the way our new employees have integrated
and strengthened our capabilities in many
areas. I wish all our former US colleagues the
very best in their future endeavours. I want to
take this opportunity to thank my fellow Board
members and all our employees for their
support and hard work throughout the year.
OUTLOOK
The Group entered FY19 with a stronger
and leaner business in the UK following
the refinement of its portfolio and the
implementation of its streamlining and
efficiency programme.
The Group anticipates continued underlying
revenue growth in its key convenience food
categories. Adjusted Operating Profit growth
will be driven by this revenue growth,
improved operational performance, and by a
planned review of central overheads. Although
the Group believes the risks from Brexit
are manageable in the medium-term,
the near-term challenges associated with
a ‘no withdrawal agreement’ are uncertain.
A strengthened balance sheet and strong
underlying free cash generation leaves the
Group well positioned to consider organic and
inorganic investment as opportunities arise.
Over the medium term the Group expects that
its market positioning, capability set, customer
profile, well invested asset network and proven
economic model will generate strong growth,
cash generation and returns.
Gary Kennedy
Chairman
3 December 2018
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
9
CHIEF EXECUTIVE’S REVIEW
Patrick Coveney
BETTER POSITIONED TO
DELIVER AN IMPROVED
PERFORMANCE
This past financial year saw significant change and
opportunity for Greencore.
This past year has seen significant change
at Greencore. Having made important
operational and organisational enhancements
to our US business earlier in the year, we
completed the sale our US business on
25 November 2018 for nearly $1.1 billion,
realising material value for shareholders.
We also drove change across our UK business,
strengthening our team and network, while
deepening a number of our key customer
relationships. As we look ahead to FY19 and
beyond, I am convinced that we have a bright
future as a fast-growing UK convenience
food leader.
TRANSFORMATION AND DISPOSAL
OF OUR US BUSINESS
FY18 was the first full year of our ownership of
the Peacock Foods business, and this part of
the US portfolio (representing the significant
majority of US revenue) performed well, most
particularly in the second half of the year.
However, operational challenges at a number
of smaller sites (in our original US network)
resulted in underperformance for the US
business in aggregate in the first half of
the year.
We addressed these challenges head on
during Q2: we re-shaped our US leadership
model and senior team; we ceased production
at our Rhode Island facility, and subsequently
disposed of the asset; we revised our US
strategy to focus on Branded Food Partner
customers; we accelerated the rollout of the
Greencore Production System to improve
operational performance across the network;
and we drove hard on our commercial agenda
to secure a number of significant new business
wins. Collectively these contributed to a
strong performance in the second half of the
year, with strong Pro Forma Revenue Growth,
good profit progression and positive
momentum for the business going forward.
This positive momentum enhanced the
attractiveness of Greencore to a strategic
buyer that approached us in August of this
year – the combination of a well-performing
10
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT Revenue (continuing operations)
£1,498.5m
+4.2%
m
5
.
8
9
4
,
1
£
m
4
.
8
3
4
,
1
£
FY17
FY18
We are also conscious that we are operating
in an environment that is seeing consolidation
and change across the UK food value chain.
We anticipate that this trend will continue and
believe we have the capability, relationships
and financial flexibility to invest strategically
in this dynamic market.
Despite some uncertainty on the UK economic
outlook in light of Brexit, we believe we are
largely insulated from some of the most widely
cited potential negative effects – we are
in most respects a ‘domestic’ UK business
producing almost exclusively for the UK
market and sourcing most of our ingredients
from within the UK. We also know from the
experience of the most recent recession in
the UK that convenience food volumes held
relatively firm even in times of economic
pressure. Ultimately, we will continue to
operate in a market of 67 million relatively
high-income consumers, with a sustained
underlying demand for convenient, fresh,
locally-sourced food.
Finally, I would like to thank my Board
colleagues, the other senior leaders in
our Group and the thousands of colleagues
across the business for their commitment
to delivering Great Food. I would especially
like to thank our customers and shareholders
for their continued support. Personally, I am
more excited than ever to lead a growing,
high-performing UK food business with a
bright future and a busy strategic, commercial,
operational and people agenda. I look forward
to driving on this agenda in the months and
years ahead.
Patrick Coveney
Chief Executive Officer
3 December 2018
US business with Hearthside, a leading US
co-manufacturer, generates substantial value
and enabled them to propose a consideration
that immediately and fully realised the value
of our strategy for the US business. The
transaction value represented a premium to
both the price paid for Peacock Foods in 2016
and Greencore’s total invested capital in the US.
A STREAMLINED, STRENGTHENED
UK BUSINESS
FY18 saw further growth in our continuing
operations, with pro forma revenue up 8.7%,
and Adjusted Operating Profit up from
£102.9m to £104.6m. We have made a series of
organisational and operational enhancements
too: we reshaped our senior team, appointing
Peter Haden to lead a unified team with
operational responsibility for the UK; we
drove significant operational improvement,
particularly in our food to go categories
through the rollout of Greencore Manufacturing
Excellence; and we tightened our portfolio,
by completing our exit from the cakes and
desserts category through the sale of our Hull
facility and closure of our Evercreech facility.
In addition to this, we have deepened
a number of our commercial relationships
throughout the year; in food to go, we
extended contracts with three of our five
largest customers, with 90% of sandwich
sales now sold under three-year+ contracts
(compared to 23% in 2012). We also opened
a new centre of excellence for ready meals
at Warrington, to support growth with our
strategically significant customer base there.
We did face some headwinds, in particular in
our ready meals business where a changed
revenue mix and the residual impact from
commercial investments made in FY17, put
some downward pressure on operating profit.
Despite these challenges, we delivered solid
pro forma revenue and profit growth in the UK
overall and believe we are well set up to step
up on our performance in FY19 and beyond.
A PROMISING FUTURE IN THE UK
Our conviction on the strategic attractiveness
of the UK market rests on our belief both in
strong fundamentals of the categories in which
we play, as well as on our ability to execute well
in these places.
We participate in categories that are exciting
to our retail customers and to the end
consumer, and we continue to extend our
leading position in the growing food to go
market, where compounded annual growth
is projected to be 5% over the next five years.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
11
MARKET REVIEW
RESPONDING TO KEY
CONSUMER TRENDS
We operate in attractive markets that demonstrate
strong underlying growth. Our markets are driven
by structural trends that generate high returns with
good growth opportunities.
MARKET TRENDS
CONVENIENCE
Convenience might well be the defining fundamental trend of
our generation. Our society demands products and services that
deliver quickly, make life easier, or both. The enormous growth
of the convenience food industry in recent decades is evidence
of this, with an increase in meal occasions where consumers opt for
convenience food. In this environment, consumers are constantly
seeking more and more convenience and will switch products or
stores if they are not satisfied.
HEALTH AND WELLNESS
Health and wellness is a complex topic, not least because
how consumers express their desire for ‘better for you’ choices
changes over time. However, we believe that there are a proportion
of consumers in each category that we operate in for which
making a healthy choice is one of their top decision criteria,
and a large majority for which it is at least a factor in the way
they shop and consume.
INDULGENCE
The need for indulgence remains a key consumer trend. At heart,
we strongly believe that whatever the additional benefits we
offer to consumers, our food should always fulfil this expectation
and taste great. Enjoying food is a critical part of life and is not
necessarily about being ’premium‘, gourmet, or expensive as some
of the cheapest, simplest, most basic products can be the most
pleasurable to eat.
GREAT VALUE
Value for money is top of mind for both our customers and our
consumers, particularly over recent times. As there is enormous
choice within the food industry, it is essential that a proposition
represents value for money. This comes from doing other
fundamentals extremely well. Though ‘great value’ does not
necessarily mean ‘lowest price’, we can’t lose sight of the fact
that some can’t afford to make that choice.
12
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
Health and
wellness
Indulgence
Convenience
Market
trends
Great value
STRATEGIC REPORT Market
understanding
Food
expertise
Customer
partnerships
How we
address
them
Ability
to adapt
WE ARE WELL
POSITIONED TO
ADDRESS THESE TRENDS
MARKET UNDERSTANDING
Greencore has important positions in many of the product
categories in which it operates. These positions have been
built through a deep understanding of market trends, an
understanding of consumer and customer needs and the
expertise within our team to convert these insights into
winning products.
As a key market leader, and in many cases the sole
supplier of specific product categories for our customers,
Greencore is responsible for growing the market through
product innovation, availability and supporting new format
and channel growth strategies for its customers.
FOOD EXPERTISE
Greencore has a team of highly skilled and knowledgeable
food and packaging experts that understand and shape
current and future shopper and consumer trends, ensuring
that the right product and packaging formats are available
at the right place and time.
Greencore operates to the highest technical and food safety
standards and is subject to rigorous internal and customer
audits to ensure these standards are consistently met.
CUSTOMER PARTNERSHIPS
Greencore has deep, long-term partnerships with its
customers, operating as an extension of our customers’
brands to meet the needs and expectations of consumers.
The Group develops and produces bespoke solutions
for each of our customers. Through our insight, product
development and category management functions
Greencore works on behalf of its customers to drive
overall category growth and returns.
ABILITY TO ADAPT
The very nature of the product categories in which
Greencore operates demands a high degree of operational
and commercial flexibility to fulfil our customers’ needs.
The need to adapt and innovate flows through all
The Greencore Way principles and is reflected in
our culture.
Read more:
What We Do – page 4
Read more:
Our Strateg y – page 14
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
13
OUR STRATEGY1
DELIVERING SUSTAINABLE
GROWTH
Our vision and our strateg y define the direction of the Group.
In light of the disposal of our entire US business (for more detail,
see page 3), our strateg y is reshaped and is now focused solely on
the UK market. Our strategic framework is now aligned around four
strategic priorities that we use to optimise Greencore’s growth potential.
STRATEGIC PRIORITY
2018 PERFORMANCE
OUTLOOK
ENHANCE OUR LEADERSHIP
POSITION IN UK
CONVENIENCE FOOD
The Group continued to develop and strengthen its commercial relationships
to support growth, especially in the food to go category. In all categories, we
worked with customers to implement initiatives to maximise returns and drive
category growth.
We will continue to enhance our commercial collaboration with existing customers in existing channels
RELATED RISKS
to drive growth and maximise product returns.
We will also seek to expand our product range and broaden our channel reach by utilising our
investment in consumer insight and our additional capacity to develop new business opportunities
RELATED KPIs
FY18 Pro Forma Revenue Growth was 8.7%, comprising a 10.8% advance
in food to go categories and a 4.9% increase in other business.
with and for customers.
We will also underpin this activity with disciplined strategic and tactical M&A activity.
DEVELOP ENDURING
AND VALUED CUSTOMER
RELATIONSHIPS
We continued to deepen strategic relationships with our customers to achieve
the best outcome for them, their consumers, and Greencore. This has allowed
us to provide a broader capability set to customers including new product
development, technical and food safety, sourcing, order management,
manufacturing, distribution and merchandising.
customer service.
markets via acquisition.
We will continue to expand our capability set throughout the supply chain, underpinned by excellent
We will engage openly with customers as they seek to grow in new formats and channels or to consolidate
INVEST IN PEOPLE,
INFRASTRUCTURE
AND CAPABILITY
MAINTAIN A STRONG
FINANCIAL AND
ECONOMIC MODEL
We have underpinned our commercial capability with enhanced productivity in
our UK infrastructure. This has involved the implementation of a more compact
and dynamic divisional structure, with a resulting overhead reduction, and an
enhanced focus on operational capability and delivery.
We have also further developed our employee engagement and retention
policies so as to continue to differentiate ourselves through our people.
We successfully expanded our workforce to support underlying growth and
adopted a more consistent approach to divisional and functional deployment.
Careful strategic capital investment in infrastructure and capacity was made
to support growth opportunities and create a platform for enhanced returns.
We will ensure that we have an aligned cost infrastructure to fit the scale and growth opportunities
available to the business. We will also continue to drive operational improvement, focusing on all areas
of the supply chain.
We will continue to enhance our engagement and retention strategy and maintain pay structures and
RELATED KPIs
employment conditions to ensure labour availability.
Infrastructure and capacity are important elements of our strategic growth plan and investment opportunities
will be considered to maintain this capability in a disciplined manner.
We generated increased Free Cash Flow from a combination of a solid earnings
base, tightly managed working capital, and reduced capital expenditure levels.
We will generate increased cash flow from the business by maintaining close control of key drivers
RELATED RISKS
such as working capital management, capital expenditure levels, and other operating cash flows.
Financial and other risks
We will use a substantial portion of the net proceeds from the disposal of the US business to reduce
leverage, and then target a medium-term leverage ratio of 1.5-2.0x Net Debt to EBITDA (as measured
RELATED KPIs
under financing agreements).
(see page 35)
Adjusted EPS and ROIC
(see page 16)
We are committed to dynamic capital management, balancing the strategic and investment needs
of the Group, leverage reduction, returns to shareholders and a progressive dividend policy.
RELATED RISKS/KPIs
Strategic risks
(see page 32)
Pro Forma Revenue Growth
(see page 16)
RELATED RISKS
Commercial risks
(see pages 32 and 33)
RELATED KPIs
Food safety and service
(see page 18)
RELATED RISKS
Operational risks
(see pages 33 to 35)
Employee engagement and
health and safety (see page 18)
Free Cash Flow (see page 17)
1 The Group uses Alternative Performance Measures (‘APMs’) which are non-IFRS measures to monitor the performance of its operations and of the Group as a whole.
These APMs along with their definitions and reconciliations to IFRS measures are provided in the APMs section on pages 158 to 162.
14
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT STRATEGIC PRIORITY
2018 PERFORMANCE
OUTLOOK
ENHANCE OUR LEADERSHIP
POSITION IN UK
CONVENIENCE FOOD
The Group continued to develop and strengthen its commercial relationships
to support growth, especially in the food to go category. In all categories, we
worked with customers to implement initiatives to maximise returns and drive
category growth.
FY18 Pro Forma Revenue Growth was 8.7%, comprising a 10.8% advance
in food to go categories and a 4.9% increase in other business.
We will continue to enhance our commercial collaboration with existing customers in existing channels
to drive growth and maximise product returns.
We will also seek to expand our product range and broaden our channel reach by utilising our
investment in consumer insight and our additional capacity to develop new business opportunities
with and for customers.
We will also underpin this activity with disciplined strategic and tactical M&A activity.
DEVELOP ENDURING
AND VALUED CUSTOMER
RELATIONSHIPS
We continued to deepen strategic relationships with our customers to achieve
the best outcome for them, their consumers, and Greencore. This has allowed
us to provide a broader capability set to customers including new product
development, technical and food safety, sourcing, order management,
manufacturing, distribution and merchandising.
We will continue to expand our capability set throughout the supply chain, underpinned by excellent
customer service.
We will engage openly with customers as they seek to grow in new formats and channels or to consolidate
markets via acquisition.
RELATED RISKS/KPIs
RELATED RISKS
Strategic risks
(see page 32)
RELATED KPIs
Pro Forma Revenue Growth
(see page 16)
RELATED RISKS
Commercial risks
(see pages 32 and 33)
RELATED KPIs
Food safety and service
(see page 18)
We will ensure that we have an aligned cost infrastructure to fit the scale and growth opportunities
available to the business. We will also continue to drive operational improvement, focusing on all areas
of the supply chain.
RELATED RISKS
Operational risks
(see pages 33 to 35)
We will continue to enhance our engagement and retention strategy and maintain pay structures and
employment conditions to ensure labour availability.
Infrastructure and capacity are important elements of our strategic growth plan and investment opportunities
will be considered to maintain this capability in a disciplined manner.
RELATED KPIs
Employee engagement and
health and safety (see page 18)
Free Cash Flow (see page 17)
We generated increased Free Cash Flow from a combination of a solid earnings
base, tightly managed working capital, and reduced capital expenditure levels.
We will generate increased cash flow from the business by maintaining close control of key drivers
such as working capital management, capital expenditure levels, and other operating cash flows.
We will use a substantial portion of the net proceeds from the disposal of the US business to reduce
leverage, and then target a medium-term leverage ratio of 1.5-2.0x Net Debt to EBITDA (as measured
under financing agreements).
We are committed to dynamic capital management, balancing the strategic and investment needs
of the Group, leverage reduction, returns to shareholders and a progressive dividend policy.
RELATED RISKS
Financial and other risks
(see page 35)
RELATED KPIs
Adjusted EPS and ROIC
(see page 16)
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
15
INVEST IN PEOPLE,
INFRASTRUCTURE
AND CAPABILITY
MAINTAIN A STRONG
FINANCIAL AND
ECONOMIC MODEL
We have underpinned our commercial capability with enhanced productivity in
our UK infrastructure. This has involved the implementation of a more compact
and dynamic divisional structure, with a resulting overhead reduction, and an
enhanced focus on operational capability and delivery.
We have also further developed our employee engagement and retention
policies so as to continue to differentiate ourselves through our people.
We successfully expanded our workforce to support underlying growth and
adopted a more consistent approach to divisional and functional deployment.
Careful strategic capital investment in infrastructure and capacity was made
to support growth opportunities and create a platform for enhanced returns.
KEY PERFORMANCE INDICATORS
Financial
The Group uses a set of headline Key Performance Indicators (‘KPIs’) to measure
the performance of its operations and of the Group as a whole.
The Group has identified these financial KPIs to measure progress of our strategic priorities in delivering profitability, returns and
cashflow generation. Following the disposal of our US business the majority of these KPIs are shown on a continuing basis except
for Adjusted EPS and Free Cash Flow which are shown as total measures. Although the measures are separate, the relationship
between them is also monitored. All these KPIs are non-IFRS measures or Alternative Performance Measures (‘APMs’). The definitions,
calculations and reconciliations of all APMs (including these KPIs) to IFRS are set out within the APMs section on pages 158 to 162.
PROFITABILITY
PRO FORMA REVENUE GROWTH
The Group uses Pro Forma Revenue Growth as it
believes this provides a more accurate guide to underlying
revenue performance.
FY18 Pro Forma Revenue Growth
(continuing operations)
+8.7%
Continuing Pro Forma Revenue
increased by 8.7% in FY18 primarily
driven by strong growth in food to
go categories.
ADJUSTED OPERATING PROFIT
The Group uses Adjusted Operating Profit to measure the
underlying and ongoing operating performance of each business
unit and of the Group as a whole. This measure now includes
central costs previously allocated to discontinued operations.
Adjusted Operating Profit (£m)
(continuing operations)
FY18
FY17
ADJUSTED EARNINGS PER SHARE (ADJUSTED ‘EPS’)
The Group uses Adjusted EPS as a key measure of the overall
underlying performance of the Group and returns generated
for each share. This is shown at a Group level because the KPI
on a continuing basis does not yet reflect the full financial effects
of the disposal of the US business and related return on capital.
Adjusted EPS (p)
FY18
FY17
Continuing Adjusted Operating Profit
was £104.6m, compared to £102.9m
in FY17, an increase of £1.7m with
an improved performance in food to
go categories offset by performance
in other parts of the UK and Ireland
portfolio notably in ready meals.
Adjusted EPS was 15.1 pence
compared to 15.4 pence in FY17,
a decrease of 1.9%. The decrease
reflects an increase in Adjusted
Earnings offset by an increase in
weighted average number of shares.
104.6
102.9
15.1
15.4
RETURNS
RETURN ON INVESTED CAPITAL (‘ROIC’)
The Group uses ROIC as a key measure to determine returns
from each business unit and of the Group as a whole, and as
a key measure to determine potential new investments.
ROIC (%)
(continuing operations)
The Group’s ROIC in FY18 was 15.6%
on a continuing basis. FY18 ROIC was
negatively impacted by an increase
in the effective tax rate.
FY18
FY17
15.6
16.0
16
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT CASH FLOW
FREE CASH FLOW
This is a new KPI and replaces Operating Cash Flow which
continues to be an APM. The Group uses Free Cash Flow
to measure the amount of cash available for distribution
and allocation.
Free Cash Flow (£m)
FY18
FY17
Free Cash Flow was £92.4m
compared to £78.0m in FY17,
an increase of £14.4m reflecting
increased EBITDA, reduced
cash exceptionals and reduced
maintenance capital expenditure
in the period partly offset by
a working capital outflow and
increased pension payments.
92.4
78.0
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
17
KEY PERFORMANCE INDICATORS
Non-financial
The Group measures progress against a number of non-financial Key Performance Indicators (‘KPIs’).
In all instances, the non-financial KPIs shown are for the continuing business. Further details on our measurement and improvement
actions, including certain details for our discontinued US business, can be found in our Stakeholder Report on pages 36 to 45.
HEALTH AND SAFETY
The health and safety of our colleagues are fundamental to the
Greencore principle of ‘People at the Core’. Keeping people
healthy and safe is a top priority. The key way we monitor this
is through our Accident Incidence Rate (‘AIR’). This measures
the number of accidents per 100 employees.
EMPLOYEE ENGAGEMENT
At Greencore, we seek to fully engage our colleagues to drive
their understanding, awareness and connectivity to the business
and to fellow colleagues.
We formally measure engagement through regular surveys, with
specific markers which collectively add to a single engagement
score. We are currently reviewing our survey mechanism to ensure
its continued effectiveness. We also carry out regular listening
groups to engage with colleagues directly.
FOOD SAFETY
Providing safe, authentic and excellent quality food is at the
heart of what we do at Greencore. Our key measure is how
our manufacturing facilities perform in auditing against
Global Food Safety Initiative (‘GFSI’) standards.
SERVICE
Our customer relationships are based on our ability to deliver
excitement, intimacy, growth and trust. A critical component of
this is our service level. We track this by measuring the product
we deliver to customers, on time and in full, compared to what
they ordered from us.
Accident Incident Rate
per 100 employees (UK)
FY18
FY17
0.51
0.57
Employee Engagement (UK)
FY17 – most recent survey
80%
In the UK, we have made progress
in reducing our AIR, from 0.57 in FY17
to 0.51 in FY18, through continued
focus and investment.
The last time we carried out our
engagement survey, in FY17, the
engagement score in the UK was
80%. During the year, we carried
out a number of colleague forums
and listening groups to continue to
build and understand engagement,
and we understand that it continues
to be high.
Percentage of BRC unannounced
audits with AA* or A* grades (UK %)
FY18
FY17
100
88.9
In the UK, all of our facilities
are certified to the British Retail
Consortium (‘BRC’) Global Standard
for Food Safety, through its
unannounced audit programme,
and all of our facilities received AA*
or A* grades in 100% of these audits.
This represents an improvement
on last year when we achieved these
standards in 88.9% of such audits.
Percentage of products delivered
on time and in full (UK %)
FY18
FY17
98.2
98.9
Over FY18, in the UK, our average
service levels were 98.2%. This is
a slight drop off from FY17, when
we achieved service levels of 98.9%,
largely due to specific operational
challenges at certain facilities.
18
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT FOOD WASTE
This year has seen increased focus from the food sector on
reducing food waste, in particular in light of the United Nations’
Sustainable Development Goal (‘UN SDG’) which targets a 50%
reduction in food waste globally by 2030. To track progress
towards this target, we measure food waste as a percentage
of production.
For our UK business, we established a baseline for FY17 at 10.7%,
and have committed to reducing this to 5.35% by 2030, in line with
the UN SDG.
CARBON INTENSITY
At Greencore, we are committed to managing our carbon
footprint and aim to significantly reduce this over time. We
measure our annual carbon intensity ratio on the basis of
kilograms of carbon dioxide equivalent per £1 of sales revenue
(‘KgCO2e per £1 of sales revenue’). Our reporting has been
produced using the UK’s Department for Environment,
Food and Rural Affairs environmental reporting guidelines
and UK government conversion factors for company reporting.
Food waste as a percentage
of total food production (UK %)
FY18
FY17
10.5
10.7
We have made progress towards
this goal in FY18, reducing our food
waste to 10.5%, through a series
of waste avoidance and food
redistribution initiatives.
Carbon intensity ratio (UK –
KgCO2e per £1 sales revenue)
FY18
FY17
0.253
0.297
This year, we reduced the carbon
intensity of our UK operations from
0.297 to 0.253, largely reflecting an
increased share of renewable energy
in UK electricity generation, but
also driven by energy efficiency
improvements we have implemented
and the disposal of two of our more
energy intensive UK facilities.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
19
DELIVERING ON OUR STRATEGY
(STRATEGY IN ACTION)
ENHANCE OUR
LEADERSHIP
POSITION IN UK
CONVENIENCE
FOOD
Read more:
Financial KPIs – page 16
Sandwiches and other food to go items, UK
706m
Ready meal items, UK
614m
20
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
Our performance in the UK continues to benefit
from growth in structurally attractive convenience
food categories.
Our Pro Forma Revenue Growth of 8.7% overall and 10.8% in
food to go categories continued to exceed the 3.7%1 growth
in the overall food market.
We continue to operate substantial activities in food to go categories
such as: sandwiches, sushi and salads, as well as in complementary
convenience food categories including; chilled ready meals, chilled
soups and sauces, chilled quiche, ambient sauces and pickles, and
frozen Yorkshire Puddings.
These categories continue to benefit from positive channel and
consumer trends. Customers in supermarket and specialist channels
continue to invest in what generally are categories of strategic
importance. We have built strong long-term partnerships with our
customers who are also looking to these categories for growth.
1 Market/category growth rates are based on various Nielsen data for the
52 weeks to 6 October 2018.
FY18 IN ACTION
We have expanded our capabilities throughout the supply chain to
deliver a set of configured skills to customers that extend significantly
beyond product manufacturing. Examples of this include where we
began to operate order management for customers and determining
which products go to which stores using our merchandising expertise
and capability. In technical and food safety, we have moved to ‘earned
recognition’ status with some customers so as to remove the
requirement for internal auditing and management. These expanded
capabilities provide us with a real point of difference in the marketplace.
Another example of a category initiative is our distribution capability.
Our Direct to Store network is a chilled distribution operation that
makes daily deliveries to small format retail stores across the UK. It
comprises 17 distribution depots, six picking centres and a fleet of small
chilled vans which deliver to numerous outlets daily. The business has
grown strongly in recent years. Recent consolidation in the distribution
industry has also provided opportunities for new business in the Direct
to Store network.
STRATEGIC REPORT DEVELOP
ENDURING
AND VALUED
CUSTOMER
RELATIONSHIPS
Read more:
Non-Financial KPIs – page 18
Net sandwich sales sold under long-term
customer contracts, UK
90%
Source: Greencore commissioned research.
Strong relationships with our customers has been a
critical element of Greencore’s success for many years.
We have a broad retail customer base in the UK, with significant sales
to each of the largest supermarket customers and expanding coverage
of other specialist customers and channels. We have developed sole
supply status in certain categories and have expanded our capabilities
across all areas of the supply chain including new product development,
technical and food safety, sourcing, order management, distribution
and merchandising.
Our relationships with our customers are characterised by strong
partnerships underpinned by long-term agreements, a track record
of excellent customer service and multiple personal relationships
across functions and levels.
FY18 IN ACTION
Relationships with customers are often and increasingly underpinned
by long-term agreements. Approximately 90% of our net sandwich
sales in FY18 were pursuant to customer contracts with a duration
of three years or more. During FY18 we extended contracts with
three of our largest grocery retail customers, while adding several
new customers in new channels.
We also continued to innovate at all levels with the business. During
FY18, 35% of our products in the UK were new to market, as we worked
with customers on product or packaging development initiatives.
We have also won many customer and industry awards in recognition
of our track record and sustained performance with and for customers.
In addition, in FY18, we again achieved a leading performance in
retailers’ ranking of suppliers in The Advantage Report, part of
a worldwide programme where retailers rate and rank all of their
suppliers, both branded and own-label.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
21
DELIVERING ON OUR STRATEGY CONTINUED
(STRATEGY IN ACTION)
INVEST IN PEOPLE,
INFRASTRUCTURE
AND CAPABILITY
Read more:
Financial KPIs – page 16
Read more:
Non-Financial KPIs – page 18
The business has a highly experienced leadership
team with wide-ranging food sector knowledge.
Industry-leading expertise in commercial, manufacturing, technical/
food safety and sourcing is combined with a strong track record
of people development and colleague engagement.
We provide an integrated approach to staff and leadership
development that we believe is critical to our continued success.
A programme of continuous operational improvement, underpinned
by a strong culture of Cost Efficiency, reflects our emphasis on
maintaining an effective infrastructure to create value for our customers
and to enhance our long-term returns profile. The business continues
to invest carefully in its UK infrastructure overall to ensure it continues
to have the right platform for its customers and for enhanced returns.
FY18 IN ACTION
We have worked through FY18 to more tightly align our UK business
into a single operational structure with a single leadership team.
We underpinned this new structure and our commercial capability
with a programme of operational effectiveness. This targets continuous
improvement in two key areas – labour productivity and waste
reduction – across all of our sites. The overall programme will help
underpin operating leverage progression in FY19 and beyond.
In FY18 we marked the opening of one of our most significant strategic
investments in the UK, the refurbishment and extension of the Group’s
largest ready meals facility in Warrington. In a project that was first
agreed in FY16, we created a state of the art production facility with
a significantly enhanced environment for colleagues. This will enable
us maintain a low cost manufacturing base through automation
and market leading efficiency. It provides the Group with a centre
of excellence in fresh ready meals at a time when supply chains
continue to consolidate in the fresh ready meals sector.
Strategic capital expenditure
FY18 (continuing operations)
£24.6m
22
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT MAINTAIN
A STRONG
FINANCIAL AND
ECONOMIC MODEL
Read more:
Financial KPIs – page 16
In pursuing our strategic priorities we maintain
prudent, relatively low levels of financial risk. This
provides us with a platform to generate sustainable
cash flow that is used for effective capital allocation.
ROIC is a key internal measure of value creation and is driven by
increased profit conversion from the existing asset base, managing
capital allocation effectively, and maintaining robust internal disciplines
and metrics.
Free Cash Flow
£92.4m
FY18 IN ACTION
We reduced the trajectory of capital expenditure during the period,
after a phase of significant investment through FY16 and FY17 to
support future growth. This decrease in capital expenditure, supported
by an increase in Operating Cash Flow, underpinned Free Cash Flow
generation and supported Net Debt reduction during the year.
Capital expenditure in continuing operations reduced from £97.5m
in FY17 to £51.6m, driven by a £37.8m reduction in strategic capital
expenditure levels.
In February 2018 the Group sold its cakes and desserts business
in Hull to Bright Blue Foods Ltd. The phased closure of the desserts
manufacturing facility in Evercreech was completed in June 2018 and
the site was subsequently divested. Together these initiatives marked
Greencore’s exit from the UK cakes and desserts category, and will
improve the long-term returns profile of the Group.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
23
OPERATING AND FINANCIAL REVIEW1,2,3
Eoin Tonge, Chief Financial Officer
PROGRESS IN
CONTINUING
OPERATIONS
Though it was a challenging
year in many respects, we
delivered Pro Forma Revenue
Growth of 8.7% and further
advanced Adjusted Operating
Profit in continuing operations,
and delivered on our FY18
guidance provided in March.
Revenue (continuing operations)
£1,498.5m
+4.2%
FY18
FY17
£1,498.5m
£1,438.4m
Adjusted Operating Profit
(continuing operations)
£104.6m
+1.7%
FY18
FY17
£104.6m
£102.9m
1 The Group uses Alternative Performance Measures
(‘APMs’) which are non-IFRS measures to monitor
the performance of its operations and of the Group
as a whole. These APMs along with their definitions
are provided on pages 158 to 162.
2 Continuing operations for FY17 and FY18
include central costs previously allocated
to discontinued operations.
3 Market/category growth rates are based on various
Nielsen data for the 52 weeks to 6 October 2018.
24
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT OPERATING REVIEW
CONVENIENCE FOODS UK AND IRELAND (CONTINUING OPERATIONS)
Revenue
1,498.5
1,438.4
+4.2%
+8.7%
FY18
£m
FY17
£m
Change
(As reported)
Change
(Pro forma basis)
Adjusted Operating Profit
(before reallocated central costs)
Adjusted Operating Profit
Adjusted Operating Margin %
110.6
104.6
7.0%
106.8
102.9
7.2%
+3.6%
+1.7%
-20 bps
STRATEGIC DEVELOPMENTS
FY18 was a year of strategic progress and
development in the Group’s UK operations
in several respects.
The Group’s business in food to go categories
(comprising sandwiches, sushi and salads)
generated revenue growth of 10.8% on
a pro forma basis and continued to extend
its leadership position. In these and many
other categories, the Group continued to play
an increasing role in supporting customer
growth in new channels, formats and
product types.
The Group continued to optimise its portfolio
in the UK, exiting the cakes and desserts
category with the phased closure of the
desserts manufacturing facility in Evercreech
and the disposal of the business in Hull.
As part of the strategy to transition part
of its ready meals portfolio to fresher meal
propositions, the Group also announced
it will phase out longer life ready meals
manufacturing at Kiveton (where it
continues to manufacture quiche and soup)
by March 2019 and transfer volume to
other facilities.
The Group extended its long‐term partnership
model with key customers in FY18, with several
important business wins and commercial
launches delivered during the year across
several categories. The business also
extended a number of contracts with its
core customers and added new customers
in multiple channels.
The Group implemented a streamlining and
efficiency programme across its operations
in FY18. This involved the implementation
of a more compact and dynamic divisional
structure, an accompanying overhead
reduction, and an enhanced focus on
operational capability and delivery.
The overall programme is on track and
will help underpin operating margins.
Careful strategic capital investment in
infrastructure and capacity was made to
support growth opportunities and create a
platform for enhanced returns. The extended
and refurbished ready meals facility in
Warrington was opened in September, and
provides the Group with a centre of excellence
for its customer base in fresh ready meals.
There were exceptional charges relating to
these strategic developments and they are
detailed in the Financial Review.
PERFORMANCE
Reported revenue from continuing operations
increased by 4.2% to £1,498.5m. Pro Forma
Revenue Growth was 8.7%. Adjusted
Operating Profit rose by 1.7% to £104.6m,
with Adjusted Operating Margin down 20bps
to 7.0%. This includes central costs previously
allocated to discontinued operations.
Excluding this impact, Adjusted Operating
Profit rose by 3.6% to £110.6m, with improved
profits in food to go categories being partly
offset by a decline in other activities, notably
ready meals. On this basis, Adjusted
Operating Margin for FY18 was flat at 7.4% for
the full year, with a year on year improvement
of 30bps in the second half. This performance
was delivered against the backdrop of a UK
trading environment which was characterised
by retail competition, cost inflation, and
operational disruption from adverse weather.
The Group’s activities in food to go categories
accounted for over 60% of revenue from
continuing operations in FY18. Reported
revenue growth in these categories was
11.1%, and Pro Forma Revenue Growth was
10.8% when the impact of the Heathrow
sandwich facility acquisition in FY17 is
excluded. This pro forma growth accelerated
in the second half of the year.
FY18 Pro Forma Revenue Growth in these
categories was driven by solid category
growth and an increased revenue contribution
from the distribution of third party products
through the Direct to Store network.
Underlying growth in the food to go category
was approximately 3%. The Group remains
confident in growth prospects for the broader
category, which are underpinned by
favourable consumer trends and ongoing
investment by retail customers.
Following substantial investment in its
distribution capability in recent years, this part
of the business helped drive strong growth
again in FY18. Consolidation in the overall
distribution market allowed this part of the
business to grow faster than originally
anticipated. Revenue for the distribution of
third party products accounts for just under
10% of sales in continuing operations. It is
one of a set of capabilities beyond product
manufacturing that the Group is developing
with customers, which deepen and enhance
these commercial relationships.
The other parts of the business comprise
activities in the chilled ready meals, chilled
soups and sauces, chilled quiche, ambient
sauces and pickles, and frozen Yorkshire
Pudding categories, as well the Irish ingredient
trading businesses. Reported revenue across
these businesses declined by 5.5%, but
increased by 4.9% on a pro forma basis when
excluding the disposed and exited businesses
in Hull and Evercreech respectively, as well
as foreign exchange movements.
Pro Forma Revenue Growth was driven by the
ready meals and cooking sauce businesses.
Performance in ready meals was primarily
driven by stronger pricing, though volume
trends deteriorated as the year progressed.
The performance in the cooking sauce
business was driven by higher volumes as
own label penetration increased in a low
growth category. Solid progress was also
made in the Group’s Irish trading businesses,
driven by increased volumes.
Inflation trends in the Group’s main UK cost
components were broadly as anticipated.
Raw material and packaging costs rose
by approximately 3% in FY18 as certain
commodity costs continued to increase.
Labour inflation in the UK was approximately
4% in the year, primarily due to the effect
of increased National Living Wage levels
on the Group’s wage structure. The Group
successfully mitigated the overall effects
of this inflation during FY18 by working with
customers on a variety of cost and innovation
programmes, and by continued internal cost
efficiency initiatives.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
25
OPERATING AND FINANCIAL REVIEW CONTINUED
PERFORMANCE CONTINUED
As noted previously, Adjusted Operating
Profit in continuing operations was negatively
impacted by the adverse weather in the first
half. In the second half of the year, the Group
was encouraged by the year on year uplift in
operating leverage. This was most notable in
its food to go categories where an improved
performance in the year was built on volume
growth, recovery in its salads business, and the
rollout of the operational efficiency programme.
There were operating profit declines elsewhere
in the year, most notably in the ready meals part
of the business where a weaker volume and mix
performance in the second half was combined
with the residual impact of commercial
investments made during FY17.
BREXIT
Greencore continues to monitor closely the
potential implications of Brexit on its business,
particularly in the areas of volume, material
sourcing and labour availability. The Group
has been engaged in Brexit planning since the
result of the referendum was first announced.
A multi-functional team meets on an ongoing
basis to assess Brexit-related risks, build
mitigation plans, test alternative scenarios
and support dialogue with our customers,
government, the wider industry and other
stakeholders. Although the Group believes
the risks from Brexit are manageable in the
medium-term, the near-term challenges
associated with ‘no withdrawal agreement
being reached’ remain uncertain.
CONVENIENCE FOODS US (DISCONTINUED OPERATIONS)
Revenue
Adjusted Operating Profit
Adjusted Operating Margin
FY18
£m
1,061.8
48.0
4.5%
FY17
£m
Change
(As reported)
Change
(Pro forma basis)
881.3
37.2
4.2%
+20.5%
+29.0%
+30 bps
+6.6%
DISPOSAL OF US BUSINESS
On 15 October 2018 the Group announced
a proposed agreement to sell its entire US
business to Hearthside Food Solutions LLC
for $1,075m. The transaction subsequently
completed on 25 November. Results for the
US business are presented as discontinued
operations in the Financial Statements.
PERFORMANCE
After a challenging first half of the year, the
discontinued US operations demonstrated
significant commercial and operational
improvement as the year progressed,
driven by the former Peacock Foods part
of the business.
Reported revenue in discontinued operations
increased by 20.5% to £1,061.8m, and by 6.6%
on a pro forma basis when adjusted for foreign
exchange, for the ownership of Peacock Foods
for the full period of FY17, and for the exclusion
of Rhode Island which ceased trading during
the year. Revenue in the former Peacock
Foods part of the business accounted for
approximately 83% of revenue in the period.
In this part of the business pro forma revenue
grew by 15.1%, driven by underlying category
growth and the impact of new business.
Pro forma revenue in the original part of the
US business declined by 22.4%, reflecting
previously announced volume losses.
Adjusted Operating Profit from discontinued
operations increased by 29.0% to £48.0m
in the period. The contribution of an extra
quarter of Peacock Foods compared to FY17,
and the strong pro forma volume growth and
good operational performance in the former
Peacock Foods part of the business, more
than offset the decline in the original part
of the business. There was a modest foreign
exchange translation benefit in FY18.
In March 2018 the Group decided to exit
production at its Rhode Island business
and completed the disposal of the facility in
September 2018 for a consideration of $10.8m.
26
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT GROUP CASH FLOW AND RETURNS
Operating Cash Flow
Free Cash Flow
Net Debt
Net Debt: EBITDA as per financing agreements
ROIC % – continuing operations
STRATEGIC DEVELOPMENTS
Following the completion of the disposal of
our US business, the Group received net cash
proceeds of $1,055m (approximately £802m
as at the rate of the announcement date) after
the payment of costs relating to the disposal.
The final amount is subject to customary
adjustments for cash, debt and working
capital. The Group intends to use these
net proceeds to return £509m of value
to shareholders and to use the remainder
of the net proceeds to reduce leverage.
During FY18, the Group normalised the
trajectory of capital spend across the business,
after a phase of significant investment through
FY16 and FY17 to support future growth, most
notably in its continuing operations. As a result,
strategic capital expenditure in its continuing
operations was £24.6m (FY17: £62.4m).
PERFORMANCE
Operating Cash Flow is used to measure the
Group’s net generation of cash through
business operations. The Group calculates this
measure as the net cash flow from operating
and investing activities before strategic capital
expenditure, contributions to legacy defined
benefit pension schemes, interest paid,
tax paid, and acquisitions and disposals.
Operating Cash Flow increased by £18.8m to
£136.6m in FY18, driven by increased Adjusted
EBITDA, reduced capital expenditure and
reduced exceptional cash outflows, offset
by increases in working capital.
Change
+£18.8m
+£14.4m
FY18
£m
136.6
92.4
501.1
2.3x
15.6%
FY17
£m
117.8
78.0
519.2
2.4x
16.0%
Free Cash Flow is used to measure the level of
cash available for allocation and distribution.
This measure is calculated as the net cash
inflow/outflow before the following items:
strategic capital expenditure, M&A activity,
issue and purchase of shares, dividends paid
to equity holders and translation and other
cash movements. Free Cash Flow increased by
£14.4m to £92.4m in FY18, primarily reflecting
the increase in Operating Cash Flow.
Maintenance capital expenditure was £36.7m
in the period, a decrease of £3.0m year on
year. Strategic capital expenditure in the
period was £26.8m for the Group (FY17:
£83.6m), as investment normalised after a
phase of significant spending in FY16 and
FY17. Cash tax remained very low. Overall,
Net Debt decreased to £501.1m (FY17: £519.2m).
Group ROIC for FY18 was 10.2% (FY17: 12.2%)
primarily reflecting the full year dilutive impact
of the addition of Peacock Foods and an
increased tax rate. ROIC in continuing
operations was 15.6% in FY18, a modest
decline of 40bps. Improved profitability on a
broadly unchanged capital base supported an
underlying increase but this was offset by an
increase in central costs previously allocated
to discontinued operations and the impact
of an increased tax rate.
CAPITAL MANAGEMENT
At the end of the financial year the Group’s
Net Debt: EBITDA leverage as measured
under financing agreements was 2.3x. The
Group was well financed with committed
facilities of £728.5m at the end of the fiscal year
and a weighted average maturity of 3.6 years.
The Group plans to enter into discussions
with its lenders to refinance its existing debt
agreements in the first half of FY19, taking into
account the return of capital to shareholders.
Following the disposal of the entire US
operations and the related return of capital
to shareholders as noted above, the Group
is committed to focussing on dynamic capital
management, balancing the ongoing strategic
and investment needs of the Group, leverage
reduction, returns to shareholders and a
progressive dividend policy. In this context
the Board intends to target a leverage ratio
of between 1.5x to 2.0x Net Debt to EBITDA
(as measured under financing agreements)
over the medium term. Managing to within this
range will enable the Group to make organic
and inorganic investments that fit with
the Group’s strategy and/or return further
cash to shareholders in an efficient manner,
whether through dividends or other forms
of return of value.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
27
OPERATING AND FINANCIAL REVIEW CONTINUED
FINANCIAL REVIEW
The Group announced the disposal of its
entire US business on 25 November 2018.
The results of this business have been
included as discontinued operations in
the Group Financial Statements in FY18
and the comparatives for FY17 have been
re-presented on the same basis.
REVENUE AND ADJUSTED OPERATING
PROFIT – CONTINUING OPERATIONS
Reported revenue in the year was £1,498.5m,
an increase of 4.2% versus FY17. Pro Forma
Revenue Growth was 8.7%. Adjusted
Operating Profit of £104.6m was 1.7% higher
than in FY17, and Adjusted Operating Margin
was 7.0%, 20 basis points below the prior
year, primarily due to the increase in central
costs that were previously allocated to the
discontinued US business. Excluding the
impact of central costs previously allocated
to discontinued operations, Adjusted
Operating Profit rose by 3.6% to £110.6m.
NET FINANCE COSTS –
CONTINUING OPERATIONS
The Group’s bank interest payable in FY18 was
£26.2m, an increase of £2.5m. The increase was
driven by higher average Net Debt through
the year. £0.4m of interest on major projects
was capitalised during the period (FY17: £1.8m).
The Group’s non-cash finance charge in
FY18 was £6.7m (FY17: £6.7m). The change in
the fair value of derivatives and related debt
adjustments was a non-cash charge of £3.3m
(FY17: charge of £2.8m) reflecting the foreign
exchange movement on balances where hedge
accounting is not applied. The non-cash
pension financing charge of £3.4m was £0.5m
lower than the FY17 charge of £3.9m.
TAXATION – CONTINUING OPERATIONS
The Group’s effective tax rate in FY18
(including the tax impact associated with
pension finance items) was 13% (FY17: 8%). The
rate had been lower as a result of the benefit
of tax attributes including those acquired as
part of the Uniq plc acquisition. Substantially
all UK tax attributes have now been recognised
on the balance sheet such that there is no
further rate benefit in the current year, nor
expected in the future.
There is a degree of uncertainty over the level
of this effective rate, due to a combination
of factors including Base Erosion and Profit
Shifting (‘BEPS’) actions and the impact
of Brexit on levels of UK taxation.
28
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
EXCEPTIONAL ITEMS
Exceptional Item
Continuing operations
Network rationalisation and optimisation: related to the ready
meals manufacturing network
Reorganisation and integration: costs relating to the
streamlining and efficiency programme in the UK
Business exit costs: relating to the Group’s exit from its cakes
and desserts businesses
Pre-commissioning and start-up costs: relating to the ready
meals facility in Warrington
Exceptional items (pre-tax) – continuing operations
Tax on exceptional items – continuing operations
Exceptional items (after tax) – continuing operations
Discontinued operations
Exceptional items (pre-tax) – discontinued operations
Tax on exceptional items – discontinued operations
Exceptional items (after tax) – discontinued operations
FY18 Income
Statement
£m
FY18
Cashflow
£m
(21.2)
(15.9)
(13.9)
(1.2)
(52.2)
7.8
(44.4)
(27.9)
20.6
(7.3)
–
(12.1)
1.5
(1.0)
(11.6)
(11.6)
3.2
–
3.2
EXCEPTIONAL ITEMS
The Group incurred a pre‐tax exceptional
charge of £52.2m in its continuing operations
in FY18, and an after tax charge of £44.4m. The
potential cash outflow associated with these
charges in continuing operations is £21.4m,
with £11.6m spent during the year. The overall
exceptional charge, including exceptional
charges related to discontinued operations,
is comprised as seen in the table above.
EARNINGS PER SHARE
Adjusted Earnings were £105.9m in the period,
5.4% ahead of the prior year. Adjusted Earnings
per Share for total operations of 15.1 pence was
1.9% behind FY17 which reflects the impact
of an increased number of shares in issue as
a result of the rights issue in December 2016.
On 13 March 2018, the Group issued a profit
forecast stating ‘For FY18 the Group now
anticipates Adjusted EPS in the range of
14.7p-15.7p’. It subsequently confirmed that
guidance on 22 May 2018, 31 July 2018 and
15 October 2018. Actual FY18 Adjusted EPS
was 15.1p, which was in line with the previously
announced guidance. Basic earnings per share
was 4.8 pence (FY17: 1.9 pence). The weighted
average number of shares in issue in FY18 was
703.3m (FY17: 652.5m).
CASH FLOW AND NET DEBT
Operating Cash Flow was £136.6m in FY18,
an increase of £18.8m driven by increased
Adjusted EBITDA, reduced capital
expenditures and reduced exceptional cash
outflows, offset by increases in working capital.
Free Cash Flow increased by £14.4m to £92.4m
in FY18, primarily reflecting the increase
in Operating Cash Flow, partly offset by a
modest increase in contributions to legacy
defined pension schemes.
Adjusted EBITDA grew by 1.7% to £140.0m.
A working capital outflow of £15.9m was
incurred, including a £17.0m outflow
associated with businesses disposed or exited
during FY18. Capital expenditure of £63.5m
was incurred in the period (FY17: £123.3m),
as strategic investment spending normalised.
The total cash outflow during the year in
respect of exceptional charges was £15.0m
(FY17: £33.7m), of which £6.6m was in respect
of prior year exceptional charges.
Cash tax continues to be low as the Group
utilises historical tax attributes in both the
UK and the US. The cash tax rate in the period
was 1% (FY17: 0%). The cash tax rate for the
Group is expected to rise towards the Group’s
effective rate in the short term as a result of
increased profitability and a reduction in the
degree to which UK losses may be utilised in
any one year.
STRATEGIC REPORT SUMMARY
The Group entered FY19 with a stronger
and leaner business in the UK following
the refinement of its portfolio and the
implementation of its streamlining and
efficiency programme.
Over the medium term the Group expects
that its market positioning, capability set,
customer profile, well invested asset network
and proven economic model will generate
strong growth, cash generation and returns.
Eoin Tonge
Chief Financial Officer
3 December 2018
The Group’s Net Debt at 28 September 2018
was £501.1m, a decrease of £18.1m from
29 September 2017, primarily reflecting
an increase in Free Cash Flow.
FINANCING
The Group remains well financed with
committed facilities of £728.5m at the end
of September 2018 and a weighted average
maturity of 3.6 years.
Following the disposal of its US business
the Group announced its intention to return
£509m to shareholders and utilise the
remainder of the net sales proceeds to reduce
leverage. In addition, the Group plans to enter
into discussions with its lenders to refinance its
existing debt agreements in the first half of
FY19, taking into account the return of capital
to shareholders.
PENSIONS
All legacy defined benefit pension schemes
are closed to future accrual and the Group’s
pension policy with effect from 1 January 2010
is that future service for current employees
and new entrants is provided under defined
contribution pension arrangements.
The net pension deficit relating to legacy
defined pension schemes, before related
deferred tax, at 28 September 2018 was
£89.3m, £35.5m lower than the position at
29 September 2017. The net pension deficit
after related deferred tax was £73.6m,
a decrease of £29.5m from 29 September 2017.
The decrease in net pension deficit was
driven principally by a reduction in UK
scheme liabilities.
The valuations and funding obligations of
the Group’s legacy defined benefit pension
schemes are assessed on a triennial basis
with the relevant trustees. Following the most
recent reviews, including the latest agreed
actuarial valuation for the Greencore UK
Defined Benefit Pension Scheme, the Group
expects the annual cash funding requirement
for defined benefit pension schemes to remain
unchanged at approximately £15m.
DIVIDENDS
The Board of Directors is recommending
a final dividend of 3.37 pence per share.
This will result in a total dividend for the year
of 5.57 pence per share (FY17: 5.47 pence
per share). The total dividend represents
a pay-out amount of approximately 37%
of Adjusted Earnings.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
29
RISKS AND RISK MANAGEMENT
HOW WE MANAGE RISK
As a leading food manufacturer in a highly competitive environment, it is critical that Greencore identifies,
assesses and prioritises its risks in order to help mitigate the probability and impact of these risks.
Following the disposal of the US business, the Group has focused its risk management process
on those risks facing the UK business.
OUR APPROACH TO RISK MANAGEMENT
Risk management is the responsibility of
the Board and is integral to the ability of the
Group to deliver on its strategic objectives.
The Board recognises the need for a
robust system of internal control and risk
management in accordance with the UK
Corporate Governance Code. There is a clear
link between risk and risk management and
the Company’s ability to continue as a viable
entity. This is set out in further detail on pages
58 and 59.
The Board establishes the culture of effective
risk management throughout the business
by identifying and monitoring the material
risks, setting risk appetite and determining
the risk tolerance of the Group. The Board is
responsible for establishing and maintaining
appropriate systems and controls to manage
risk within the Group and to ensure
compliance with relevant regulation.
Under delegation from the Board, the Audit
Committee regularly monitors the Group’s risk
management systems. The Audit Committee
is responsible for overseeing the effectiveness
of the internal control environment of the
Group. Details of the activities of the Audit
Committee for the year under review can be
found in the Report of the Audit Committee
set out on pages 78 to 81.
The Group has a well-established internal
audit function, known as the Risk Management
Group (‘RMG’) whose role is to provide
independent assurance that the Group’s risk
management, governance and internal control
processes remain appropriate and continue
to operate effectively.
IDENTIFYING AND MONITORING
PRINCIPAL RISKS
Principal risks are identified through
a well-established business-wide risk
assessment process, which is known as
a ‘bottom up approach’, along with an
evaluation of the strategy and operating
environment of the Group, which is known
as a ‘top down approach’.
The bottom up review encompasses the
identification, management and monitoring of
risks in each area of the business and ensures
risk management controls are embedded
within the business’ operations. This process
includes an assessment of the risks to
determine the likelihood of occurrence,
potential impact and the adequacy of the
mitigation or control in place. A full review is
then undertaken by operational management,
who evaluate the material risks of the Group
with reference to its strategy and the
operating environment.
The Audit Committee monitors these
processes, reviewing the risk register
and reporting material risks to the Board.
The Group’s principal risks and uncertainties
facing the Group are summarised in the risk
profile table as set out in pages 32 to 35.
BREXIT
We have been engaged in planning for the
UK’s exit from the EU since the result of the
referendum was first announced. Our Brexit
taskforce brings together a multi-functional
team on an ongoing basis to assess Brexit-
related risks, build mitigation plans, test
alternative scenarios and support dialogue
with our customers, the government, the wider
industry and other stakeholders.
We have identified three primary areas of
potential risk, in particular if the UK leaves
the EU without a withdrawal agreement:
VOLUME
We are largely a ‘domestic UK’ business from
a production and commercial standpoint, as
the vast majority of the consumer products we
produce in the UK are sold in the UK. We also
believe, based on our experience from the last
UK recession, that volumes in the categories in
which we operate would be relatively resilient
to any headwinds to the UK economy following
Brexit. We therefore anticipate limited risk to
our volumes post-Brexit.
MATERIAL SOURCING
We estimate that we source approximately
80% of our raw materials from UK-based
suppliers. Even taking account of raw materials
which are in turn sourced from outside the UK
by our suppliers, we estimate that less than a
third of our raw materials are imported from
the EU-27. For these materials, we are actively
making alternative sourcing arrangements
and contingency planning, including forward
buying, qualification of alternative suppliers,
storage of raw materials, and flexibility in
recipes. We are also confident in our ability
to largely pass through any associated cost
increases, given our track record of inflation
management with our customers, and the
heightened attention on continuity of supply
during the transition period.
LABOUR AVAILABILITY
We note the increased pressure on the
availability of lower skilled labour in recent
years, and the reduction in migration from
EU-27 countries since the Brexit referendum.
While we anticipate that these trends will
continue, we expect this to play out over a
period of years, and are adapting our labour
model accordingly. The UK government has
stated that EU citizens would be allowed to
remain in the UK until at least the end of 2020
even in the absence of a withdrawal agreement.
30
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT We are engaged in ongoing dialogue with
our customers, the government and with
the wider food industry to help coordinate
Brexit preparations and mitigate negative
consequences, including being a member of
the Brexit advisory boards of a number of our
larger customers and participation in multiple
industry forums. Consideration of these risks
has been incorporated into the Group’s
principal risks as appropriate.
RISK APPETITE
The Board considers and assesses risks
in four broad categories, namely; strategic,
commercial, operational and financial. As
a consumer foods business, the Board has
a low risk appetite for risks which may impact
the Group’s reputation or brand in financial,
compliance or operational areas such as
product quality and safety, health and safety
and compliance with laws and regulations.
However, the Board recognises that, in pursuit
of strategic growth objectives, there is a
trade-off between risk and reward in making
certain strategic investment decisions, for
example, acquisitions, capital investments
or new category expansions. In these cases,
a higher level of risk may be accepted.
Through the risk management framework
outlined above, all strategic investment
decisions are approved by the Board. These
are supported by detailed documentation and
analysis, along with senior management input,
to ensure that the risks associated with each
decision, and the related execution plan,
are fully understood and accepted.
RISK ASSURANCE
The Group operates a three lines of defence model to provide
assurance that each risk has adequate control and mitigation.
1st
LINE OF DEFENCE
Source
Operational management/business operations
Nature of Assurance
Direct assurance at the business level – including direct
management monitoring, management controls, policy and
procedure, KPIs and self-assessment.
2nd
LINE OF DEFENCE
Source
Group corporate governance oversight
Nature of Assurance
Risk assurance – including corporate risk assessment and management
process, central technical and health and safety and environment
resource at business level. Central corporate governance processes
including policy, procedure and training.
3rd
LINE OF DEFENCE
Source
Third party and independent review
Nature of Assurance
Independent assurance – including internal audit review (RMG),
external audit, customer, regulatory review and insurance.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
31
RISKS AND RISK MANAGEMENT CONTINUED
RISK TREND
Risk increased
Risk unchanged
Risk decreased
Risk area
Description of risk
Control
Movement
STRATEGIC
COMPETITOR
ACTIVITY
GROWTH AND
CHANGE
COMMERCIAL
CHANGES IN
CONSUMER
BEHAVIOUR
AND DEMAND
KEY CUSTOMER
RELATIONSHIPS
AND GROCERY
INDUSTRY
STRUCTURE
The Group operates in highly competitive
markets. Significant product innovations,
technical advances or the intensification
of price competition by competitors could
adversely affect the Group’s results.
The Group continues to pursue a strategy
of growth and expansion. Delivering this
strategy necessitates organisational change
and investment, major capital investments
and potential further corporate development
opportunities. Major capital investments and
corporate development opportunities are
often high cost, may involve significant change,
and may result in the addition of material
numbers of new employees.
The risk has stayed
the same.
The risk will reduce
following the Group’s
exit from the US.
The Group develops long-term relationships
with its customers that are based on several
factors including quality, service, innovation and
costs effectiveness. The Group continually works
to streamline its cost base to ensure it remains
competitive. The Group also invests in research
and development and continuous improvement
to ensure that the introduction of both new
products and improved production processes
places the Group at the forefront of customer
needs in its chosen markets.
The Board and senior management engage
in a robust, formal and thorough process for
identifying, measuring and deciding on the
suitability of such growth and change initiatives.
In the case of acquisitions, an integration team
reporting to senior Group management and
the Board is established to ensure a successful
integration. Resources are put in place as
deemed necessary to manage business change.
Post project reviews are carried out on all
major capital investment projects to monitor
the effectiveness of execution. The Group
opened the extended and refurbished ready
meals facility in Warrington, carried out a
substantial restructure in the UK to deliver
on a more compact, dynamic divisional
structure and implemented a new operational
effectiveness programme.
In common with other food industry
manufacturers, unforeseen changes in food
consumption patterns or in weather patterns
may impact the Group. In addition, demand
for a number of the Group’s products can
be adversely affected by fluctuations in
the economy.
The Group benefits from close commercial
relationships with a number of key customers.
The loss of any of these key customers, or an
impact to the relevant brand reputation, or
a significant worsening in commercial terms,
could result in a material impact on the Group’s
results. In addition, changes to the grocery
industry structure in the UK may also adversely
affect performance. For example, the grocery
market is undergoing significant change with
increasing consolidation and the growth of
limited assortment discounters, small stores
and online sales.
The Group works closely with its customers to
adapt to changing consumer trends and invests
in market research, innovation and new product
development to ensure regulatory, customer
and consumer requirements are addressed.
The Group invests significant resources to
maintain deep, multi-level relationships which
drive value and minimise risk for both itself and
its key customers. The Group also continues
to focus on a broad range of customers across
all formats. The Group has moved to secure
longer-term supply arrangements, for example,
in 2018 90% of sandwich sales were sold under
three-year+ contracts compared to 23% in 2012.
The gross risk
has increased, due
to the continuing
uncertainty
associated
with Brexit.
The risk has stayed
the same.
32
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT
STRATEGIC PRIORITIES
Enhance our leadership
position in UK
convenience food
Develop enduring
customer partnerships
Invest in people,
infrastructure and capability
Maintain a strong financial
and economic model
Risk area
Description of risk
Control
Movement
COMMERCIAL (continued)
RAW MATERIAL
AND INPUT
COST INFLATION
The Group’s cost base and margin can be
affected by fluctuating raw material and energy
prices and changes in cost and price profile.
The Group may also be impacted by the
loss of a key supplier. The Group relies on a
concentrated number of key suppliers. A loss
of, or interruption of supply from a key supplier
could cause short-term disruption to the
operational ability of the Group and adversely
affect its results.
As a producer of convenience food and
ingredients, Greencore is subject to rigorous
and constantly evolving regulations and
legislation, particularly in the areas of food
safety and environmental protection. Failure
to comply with such regulations may lead to
serious financial, reputational or legal risk.
The Group produces a large volume of
food annually and there are risks of product
contamination through either accidental or
deliberate means. This may lead to products
being recalled as well as being a significant
draw on resources and could therefore result
in both a financial and/or reputational impact
on the Group.
OPERATIONAL
FOOD
INDUSTRY AND
ENVIRONMENTAL
REGULATIONS
PRODUCT
CONTAMINATION
HEALTH AND
SAFETY
In addition to the obvious human cost, a serious
workplace injury or fatality could inevitably carry
serious financial, reputational and legal risk.
The Group maintains a strong commercial focus
on purchasing, process and cost improvement
to manage and mitigate these risks. In addition,
the Group adopts strategies that diversify
risk thereby improving the positioning of
its businesses and the defensibility of its
margins. The Group now has a number of cost
transparency models with its customers, which
also seek to mitigate the impact of input cost
fluctuations. The Group has mitigated the
impact of approximately 3% cost inflation in
FY18 in the UK through this combined approach.
The gross risk has
increased, due to
currency volatility
and the continuing
uncertainty
associated
with Brexit.
The Group maintains a strong technical function
in which sets high standards for food safety and
environmental controls, striving for best practice
above and beyond the minimum compliance
requirements. In addition, Greencore closely
monitors emerging issues in an ever-changing
regulatory environment to address increasing
compliance requirements. An example of
this is the increase of the use of plastics in
food packaging.
The Group maintains industry leading food
safety and traceability processes and
procedures. Each facility has a team dedicated
to ensuring compliance with Group and industry
standards in this area and the Group constantly
monitors performance against a detailed set
of metrics and measures. They are subject to a
significant number of audits by internal teams,
customers and independent bodies auditing
against recognised global food safety standards.
The Group also operates stringent controls
across its supply chain, including audits and
strict approval of its suppliers, supported by
rigorous ethical and quality checking of all
ingredients. In FY18, 32,300 internal audits and
295 external audits were carried out at our UK
facilities and 142 audits were carried out on
Group suppliers.
The Group has in place strong processes and
procedures in health and safety, supported
by an established review programme across all
sites. We also have a culture of engagement
throughout the business from executive
management through to the shop floor.
The risk has stayed
the same.
The risk has stayed
the same.
The risk has stayed
the same.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
33
RISKS AND RISK MANAGEMENT CONTINUED
RISK TREND
Risk increased
Risk unchanged
Risk decreased
Risk area
Description of risk
Control
Movement
OPERATIONAL (continued)
DISRUPTION
TO DAY-TO-DAY
GROUP
OPERATIONS
The Group is at risk of disruption to its
day-to-day operations from poor operational
management, the breakdown of individual
facilities or the loss of a significant
manufacturing plant.
RECRUITMENT
AND RETENTION
OF KEY
PERSONNEL
The ongoing success of the Group is dependent
on attracting and retaining high quality senior
management who can effectively implement
the Group’s strategy.
LABOUR
AVAILABILITY
AND COST
Due to political and economic pressures and
changes, there may be a risk that labour cost
and availability may be affected and this would
have a detrimental impact on the Group. The
Group needs to also ensure it is compliant with
any ethical legislation, such as the ‘Working
Time Directive’ and ‘Eligibility to Work’ in the
UK. Failure to comply could result in heavy
fines and reputational damage.
The risk has stayed
the same.
The risk has
increased due
to the smaller
size of the Group.
The gross risk
has increased,
due to continuing
uncertainty
associated
with Brexit.
The Group maintains operational processes
and procedures to ensure effective operational
management at each facility. The Group invests
in high calibre on-site teams, with responsibility
across engineering and maintenance, supply
chain, planning and operational excellence.
The Group also maintains robust security and
comprehensive operational disaster recovery
plans. In addition, the Group undertakes regular
reviews of all sites with external insurance
and risk management experts, with these
reviews being aimed at improving the
Group’s risk profile.
The Group mitigates the risk through robust
succession planning and strong recruitment
processes, offering competitive and attractive
remuneration and benefits packages. In
addition, during the year the Group announced
a new senior team, which supports succession
planning at the senior management level.
The Group is continually reviewing and
improving its recruitment processes to reflect
changing market conditions, including rigorous
compliance checks. The Group also has a strong
commitment to excellent working conditions,
on-the-job training and specific programmes
to enhance communication and colleague
engagement. The Group also maintains
a strong commercial focus on process and
cost improvement to manage and mitigate the
increased cost of labour. There are over 1,670
registered users on the Greencore line manager
framework (the tool used to help build
management capability). Greencore regularly
reviews employee engagement through surveys
or listening groups. Employment compliance
checks are carried out on all new employees
and an independent review is carried out by
RMG on an annual basis.
34
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT STRATEGIC PRIORITIES
Enhance our leadership
position in UK
convenience food
Develop enduring
customer partnerships
Invest in people,
infrastructure and capability
Maintain a strong financial
and economic model
Risk area
Description of risk
Control
Movement
OPERATIONAL (continued)
IT SYSTEMS
AND CYBER RISK
The Group relies heavily on information
technology and continuous investment in
systems to support our business. An extended
failure of our core systems, caused by accidental
or malicious actions, including those resulting
from a cyber-security attack, could result in a
significant impact on the business. In common
with most large global companies, the Group is
susceptible to cyber-attacks with the threat to
the confidentiality, integrity and availability of
such systems. Whilst no material losses related
to cyber-security breaches have been suffered,
given the increasing sophistication and evolving
nature of this threat, we cannot rule out the
possibility of them occurring in the future.
Greencore maintains a program of controls and
processes, including disaster recovery to protect
the confidentiality, integrity and availability of
information across the Group. Recent Group
business wins have highlighted that the Group
will increasingly be required by its clients to
show compliance with accepted Information
Security Standards and the Group plans to
review the full set of control documents against
the requirements of ISO27001. In addition, the
Group has cyber insurance to transfer part of the
risk of any deliberate attack over to our insurer.
Furthermore, a dedicated IT security team has
been established to assess cyber-security and
a budget has been agreed for security-related
activities. An IT security programme has
been implemented to ensure a secure position
going forward.
The gross risk has
increased, principally
due to heightened
cyber threat
levels globally.
FINANCIAL AND OTHER
INTEREST
RATES, FOREIGN
EXCHANGE
RATES, LIQUIDITY
AND CREDIT
In the capital markets environment in which
the Group operates, there are inherent risks
associated with fluctuations in both foreign
exchange rates and interest rates. In addition,
in the current economic climate, the Group’s
credit rating and its related ability to obtain
funding for future development and expansion
are specific risks.
These risks are actively managed by the
Group’s treasury team, which operates within
the framework of strict Board approved policies
and procedures which are explained further
in Note 22 to the Group Financial Statements.
EMPLOYEE
RETIREMENT
OBLIGATIONS
TAXATION
The Group’s legacy defined benefit pension
funds are exposed to the risk of changes
in interest rates and the market values of
investments, as well as inflation and the
increasing longevity of scheme members.
The recent volatility in worldwide equity
markets and decline in bond yields
has highlighted the risk of employee
retirement valuations.
In an increasingly complex, international tax
environment, such matters as changes in tax
laws, changing legal interpretations, tax audits
and transfer pricing judgements may impact the
Group’s tax liability or reporting requirements.
Failure to accumulate and consider relevant tax
information may result in non-compliance with
tax regulations or adverse tax consequences.
These risks are mitigated by paying appropriate
contributions into the funds and through
balanced investment strategies which are
designed to avoid a material worsening of
the current surplus or deficit in each fund.
The Group has closed all legacy defined
benefit pension schemes to future accrual.
Where relevant, the Group also uses specific
arrangements with schemes to improve
the security of scheme benefits, while
reducing contributions.
The Group employs internal tax experts who
support the Group in ensuring compliance with
all taxation matters globally. The Group also
engages external taxation advisors for research,
use of economic statistical studies and guidance
on matters of compliance where appropriate.
The level of foreign
exchange risk has
increased principally
due to global
uncertainty
associated
with Brexit.
The risk has stayed
the same.
The risk will reduce
following the Group’s
exit from the US.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
35
OUR STAKEHOLDER REPORT
CORPORATE SOCIAL RESPONSIBILITY
GROUNDED IN THE GREENCORE WAY
The focus of this report is on our continuing business in the UK, but where relevant we have highlighted
notable performance in our discontinued US business.
We have already introduced The Greencore Way on page 1 – it is who we are and how we win. The Greencore Way is integrated into every aspect
of how we do business, and thus it is appropriate that we focus our corporate social responsibility report on how we deliver for each of the six
stakeholders to The Greencore Way: our own ‘People at the Core’, as well as the environment, the communities in which we operate, our suppliers,
our customers and our shareholders.
In building our reporting, we share material information on how our operations affect each of these stakeholders and how we aim to maximise
benefit to them while minimising or mitigating negative impacts. Targets are in place for us to improve on these metrics over time and our
corporate social responsibility agenda has Board sponsorship through the CEO, CFO and Senior Independent Director.
OUR STAKEHOLDERS
ENVIRONMENT
COMMUNITIES
SUPPLIERS
CUSTOMERS
SHAREHOLDERS
Efficiently using
and respecting
all resources
Doing the right thing
for our industry and
our communities
Building effective
and transparent
supply chains
Delivering excitement,
intimacy, growth
and trust
Delivering industry
leading economic
performance
OUR PRINCIPLES
PEOPLE AT THE CORE
• Keep people healthy and safe
• Respect, recognise and reward
everyone’s contribution
GREAT FOOD
• Deliver industry leading food
safety standards every day
• Put great tasting food at the
• Ensure responsibility is owned
heart of our culture
by the right people
• Support one another to fulfil
each person’s potential
• Build a sense of
excitement and fun into
the work environment
• Continuously innovate food
recipes and technologies
• Establish industry recognised
food expertise and credibility
BUSINESS EFFECTIVENESS
• Drive growth and performance
with and for our customers
• Operate as a lean enterprise
– right across our supply chain
• Align our resources to
our strategy
• Maintain control and discipline
across the business
COST EFFICIENCY
• Embed the importance
of cost efficiency
• Develop a constant pipeline
of cost initiatives across all
parts of our business
• Challenge the status quo to
deliver substantial value for
all stakeholders
• Share a strong sense of
personal responsibility and
care for all Group resources
36
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT PEOPLE AT THE CORE
Putting People at the Core is the underlying
principle of The Greencore Way. We want
Greencore to be a great place to work where
our people are healthy and safe and have real
opportunities to develop their careers.
Treating our colleagues with dignity and
respect is a cornerstone of this, and we also
recognise our role in confronting people
challenges in the global supply chain,
including modern slavery.
HEALTH, SAFETY AND WELLBEING
The health, safety and wellbeing of our
colleagues are fundamental to the Greencore
principle of People at the Core. We aim to keep
people healthy and safe by first and foremost
providing a safe working environment, with a
culture that promotes healthy life choices and
supports physical and emotional wellbeing.
Our health and safety performance metrics
have shown good improvement across both
geographies, with the average Accident
Incidence Rate per 100 employees in the UK
reducing from 0.57 in FY17 to 0.51 this year.
The equivalent metric in the US, reduced
from 0.63 to 0.34. In the UK, we are pleased
to be recognised by the Royal Society for
the Prevention of Accidents at Northampton
(President’s award), Wisbech (gold award) and
Park Royal (silver award). This year, each of our
UK facilities was subject to an independent
third party health and safety compliance audit.
Our facilities continue to develop in line with
our health and safety roadmap and in FY18 we
have focused on machinery safety, engaging
an independent assessment in line with the
‘Provision and Use of Work Equipment’
Regulations across the UK facilities. Another
priority has been improving our contractor
management, with new procedures launched
and full training across the business.
Accident Incidence Rate per 100 employees
(UK)
Our focus in the year has also been on
delivering a consistent occupational health
service for the future. This model will be
more progressive, as we standardise our
occupational health services and implement
an Employee Assistance Programme. In the
UK, we are progressing with accreditation to
relevant standards and now have nine of our
facilities independently accredited to OHSAS
180011. Some of the key activities we will build
upon in the coming year include: ‘Know
your numbers’ educational support days
encouraging employees to learn more about
their health and wellbeing; rollout of ‘Mental
Health First Aid’ training to managers; and
organisation of monthly wellbeing themes
across facilities, to shine a spotlight on health
issues as well as to provide wellbeing tips
and activities to support healthy lifestyles.
EMPLOYEE ENGAGEMENT
People are at the heart of what we do at
Greencore. As such, we seek to fully engage
our colleagues, to drive understanding,
awareness and connectivity to the business
and fellow colleagues.
The Greencore ‘People at the Core’ survey has
shown that engagement is strong. In our most
recent survey, overall engagement was 81%
across the Group (82% in the US and 80% in
the UK). We are in the process of reviewing our
survey mechanism to ensure its effectiveness.
Across the Group, we use colleague forums
and listening groups to continue to build
engagement and drive improvements,
while in the UK, union forums provide
another mechanism for communication
and engagement.
We also operate the ‘My Core Benefits’ online
portal, giving colleagues access to benefits
against a range of shopping, leisure and service
providers. Having launched this in the UK in
FY17, we rolled it out to US colleagues in FY18.
FY18
FY17
0.51
0.57
DIVERSITY
At Greencore, we aim to ensure that all our
colleagues have the opportunity to grow their
careers and be themselves at work. This is not
only the right thing to do for our people –
we believe that diversity also enables us
to achieve better business outcomes.
Accident Incidence Rate per 100 employees
(US)
FY18
FY17
0.34
0.63
In striving for this, we use a broad definition
of diversity, to encompass age, gender,
sexual orientation and ethnicity as well
1 Occupational Health and Safety Assessment Series,
recognised standard for occupational health and
safety management systems.
as educational, attainment social background
and experience. Our Diversity and Inclusion
Policy, which was launched this year, outlines
our commitment not to discriminate (nor
tolerate any colleague discriminating) against
any colleague or potential colleague on such
grounds. We will rollout and measure against
the policy over the course of FY19.
This year, we have also taken a number of
actions to further develop and diversify our
pool of operational managers, including the
introduction of our trainee manager scheme in
the UK. We have ran diversity listening groups
across the country to better understand the
barriers to career progression. Overall, we
received good engagement, with feedback
from the groups indicating that colleagues felt
they could grow their careers in the way best
suited to their needs. In the US, we completed
annual Equal Employment Opportunities
Commission reporting, to demonstrate our
commitment to equal opportunity employment.
In terms of the gender mix of our employees,
we have 40% female and 60% male colleagues
in the UK, while in the US, the split is 54%
male and 46% female. During FY18, we
published information on pay by gender in
our UK business, in accordance with new UK
regulations. Across the four Greencore entities
reported, the pay gap between male and
female colleagues was below the national
median pay gap of 18.4%. We continue
to review our recruitment, retention
and development practices surrounding
under-represented groups.
NON-FINANCIAL
INFORMATION REPORTING
New regulations on non-financial
information mean that we must report
on a series of topics listed below. We
provide information on these matters
across this report, as well as in our
Directors’ Report. We have included
page references to the most relevant
information on these topics below:
• Employee matters – see People
•
•
•
•
•
section, pages 37-38
Respect for human rights – see
People section, pages 37-38 and
Suppliers section, pages 42-43
Environmental matters – see
Environment section, pages 39-41
Social matters – see Communities
section, page 42
Anti-corruption and bribery –
see People section, page 38
Diversity – see page 37 (above)
and our Directors’ Report, page 56
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
37
OUR STAKEHOLDER REPORT CONTINUED
LEARNING AND DEVELOPMENT
The focus for our learning and development
function is to build capability among our
people and to support them in developing
themselves and our business.
During FY18, in the UK, we launched ‘Grow
with Greencore’, a learning resource that
builds capability aimed at our management
and leadership populations. This has been
a great success with over 1,200 live users
regularly accessing the material. The initiative
has been recognised externally with multiple
awards including the Chartered Institute of
Personnel and Development award for ‘Best
Learning & Development Initiative’ and the
Institute of Grocery Distribution ‘Learning &
Development’ award. Additionally, there are
over 1,670 registered users on the Greencore
line manager framework, a tool used to help
build management capability.
In addition, we have launched the Greencore
‘Trainee Manager’ programme in the UK,
an entry-level talent programme, aimed at
people entering the workforce for the first
time or those wanting to restart their career.
The initiative places people in roles within
Greencore, supported by a structured
development plan, while in parallel they
participate in a degree programme which
is funded by the apprenticeship levy.
In the US, we launched the ‘Back to Basics’
programme, a standardised new hire and
refresher training course aimed at improving
knowledge of workplace safety, food safety
and human resources across our network.
We also introduced a ‘Core4’ supervisory
training programme in early 2018 which
aims to upgrade capability across the
supervisory population.
ETHICS
Our approach to ethical trading is outlined in
our Ethical Code and Employment Standards
Policy, which highlights our commitment to
high standards of ethical and environmental
practices. Our approach is informed by
the International Labour Organization’s
‘Declaration on Fundamental Principles
and Rights at Work’ and the United Nations
(‘UN’) ‘Guiding Principles on Business and
Human Rights’.
Each of our UK facilities is subject to an ethical
audit and we conduct regular reviews of
ethical priorities with our customers as part
of our ongoing relationships with them.
Integrity is a fundamental principle of our
Code of Business Practice, and we have
many policies in place across the business
to support this. This includes an Anti-Bribery
and Corruption Policy as well as a detailed
manual, explaining, in clear language, what
is considered as bribery and corruption and
the implications of such offences. Refresher
training on anti-bribery and corruption is
planned for FY19. Other policies include
our Code of Conduct Policy, Dignity at
Work Policy, our Diversity and Inclusion Policy,
Ethical Code and Employment Standards
Policy and our Inclusive Recruitment Policy.
MODERN SLAVERY
We strive to achieve a workplace free of
modern slavery and adopt a zero-tolerance
approach to this issue. In support of this
aim, we have created an internal steering
committee to drive progress in combatting
modern slavery. In the UK, all of our facilities
are ‘Business Partners’ with Stronger Together,
a multi-stakeholder, business-led initiative
aiming to reduce modern slavery.
In addition to this, we have implemented a
comprehensive education programme, which
includes the development of procedures for
managing incidents of modern slavery and
training on how to spot the signs of slavery
for key members of our human resources
team and for our agency colleague providers.
This initiative is supported by the UK’s
‘Gangmasters and Labour Abuse Authority’.
We have also reviewed our eligibility to work
systems and started implementation of new
pre-employment checks.
Greencore complies with the requirement
of the Modern Slavery Act 2015, to produce
a slavery and human trafficking statement
for each financial year of the organisation.
This is published on our website.
WHISTLEBLOWER
Greencore provides an independent
whistleblower line which is available
to all employees to report any
concerns anonymously.
The Risk Management Group provides
independent oversight of any whistleblower
reports to the Group Audit Committee,
ensuring any concerns raised are
investigated fully and appropriate
actions taken where required.
GREENCORE QUALIFICATIONS
In the UK, our ‘Greencore Qualifications’, a
programme, funded by the UK apprenticeship
levy, enables us to further build capability
in food technical, management, project
management and human resources, by
awarding formal qualifications up to degree
level. Anyone can apply, with over 230
people starting in FY18, studying across
nine different qualifications.
“I see the qualification as a very
important step in my professional
and personal development.”
“You can learn so much, not just
from the course content, but from
the other students on the course
from the different backgrounds,
ages etc.”
Greencore Qualifications participant
feedback, 2018.
38
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT ENVIRONMENT
At Greencore, we are committed to
conducting our business activities in an
environmentally responsible and sustainable
manner, efficiently using and respecting
all resources.
During FY18 we have rolled out our
environmental roadmap to all UK facilities to
provide a framework for improvement that is
routinely measured and reviewed. We have
implemented formal reviews, risk assessment
processes and best practice sharing to help
drive improvement across the business.
In FY18 we also completed re-certification
of the environmental management systems
(‘EMS’) of certain facilities, in line with
the updated EMS standard (‘ISO14001’)
introduced in 2015. Our certification of three
facilities in FY18 means that all previously
certified facilities have now transitioned
to the new standard.
Our sustainability team continues to work
closely with a number of our UK customers
to support their sustainability aims and
commitments and actively support the
Chilled Food Association’s sustainability
working group.
WASTE
Food waste has been a major focus for the
food sector this year. We have committed to
the UN Sustainable Development Goal (‘SDG’)
‘target 12.3’ to halve our food waste by 2030,
and have joined a group of companies leading
progress to achieve this target, the ‘Friends
of Champions 12.3’. We have also been
recognised by the ‘Support the Goals’
non-profit initiative which celebrates
businesses which support the SDGs.
In September 2018, we published our food
waste inventory for FY17 for our UK business,
which provided a comprehensive assessment
UK food waste and surplus data FY18
Description of destination
Waste
avoided
Redistribution for human
consumption (Company Shop,
Community Shop, Fareshare)
of food waste to all destinations and
established a baseline of 10.7% food waste
as a percentage of production. Our target
for 2030 is, therefore, to achieve below 5.35%
food waste by 2030 in the UK in line with
the UN target of 12.3. During the year we
contributed to workshops leading to the
publication of the joint Institute of Grocery
Distribution/Waste and Resources Action
Programme (‘IGD/WRAP’) food waste
reduction roadmap and provided input
into the development of guidance on
assessing food waste losses to drain.
We have also continued to develop our
partnerships with key organisations to
support the redistribution of food for human
consumption in the UK. During the year we
redistributed 791 tonnes of food to Fareshare,
and The Company Shop/Community Shop,
equivalent to around 1.9 million meals,
and established a new outlet with the
redistribution charity The Felix Project
in West London.
In the UK, our total food waste for FY18 was
40,912 tonnes, a reduction of 1,268 tonnes
versus FY17. Waste as a percentage of
production was down from 10.7% to 10.5%.
Tonnes
791
As % of
production
Total tonnes
Total as % of
production
0.2%
5,686
1.5%
Animal Feed
Food
waste
Co/Anaerobic Digestion
Controlled Combustion
Sewer
4,895
32,202
1,964
6,395
1.3%
8.3%
0.5%
1.7%
40,912
10.5%
One of our distribution depots
A significant contributor to this was a new
operational excellence team which was
established to drive performance, initially
focusing primarily on our sandwich facilities.
Total solid waste removal from sites
(UK manufacturing)
67.0
25.7 7.3
68.9
24.4 6.7
FY18
FY17
0.0
0.0
Disposal 0%
Recovery
Recycling
Re-use
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
39
OUR STAKEHOLDER REPORT CONTINUED
PLASTICS
During FY18, teams from our purchasing,
technical, development and sustainability
departments have been engaged in cross-
functional activities to review our use of
plastics in product packaging and identify
ways to remove it or improve recyclability
and recycled content. Greencore supports
the ‘Plastic Pact’ commitments for 2025
which were signed by the UK’s Chilled Food
Association on behalf of its membership.
In the UK, we introduced a peelable sandwich
skillet lining enabling the cardboard to be
separated and recycled. In total we have
removed over 350 tonnes of plastics from
our UK products during the year, including
293 tonnes of hard plastic lids from a ready
meal range.
We continue to work with our packaging
suppliers to increase the levels of recycled
content in packaging and have been engaged
in pilot trials to improve recyclability of black
plastic trays.
We are exploring opportunities to recycle
more plastic waste generated throughout our
operations. As part of our celebration of World
Environment Day in June 2018 we provided
1,500 reusable water bottles to UK colleagues
as part of our commitment to phase out
single-use plastic water bottles in favour
of on-site drinking water facilities.
ENERGY AND CLIMATE CHANGE
At Greencore, we are committed to managing
our carbon footprint and aim to significantly
reduce this over time. Our annual carbon
footprint has been produced using the UK’s
Department for Environment, Food and Rural
Affairs environmental reporting guidelines and
the UK government conversion factors for
company reporting. We have included both
Scope 1 emissions (fossil fuels for process,
transport fuel and refrigerant losses) and
Scope 2 (electricity).
Overall, we have seen a reduction in our
total emissions from last year, largely due to a
reduction in our Scope 2 emissions (reflecting
an increased share of renewable energy in UK
electricity generation). The reduction is also
driven by further energy efficiency
improvements we have implemented
and changes to our portfolio of facilities.
As part of the UK government’s Energy
Savings Opportunity Scheme (‘ESOS’), all of
our UK facilities are subject to a mandatory
energy assessment every four years, with a
view to improving their energy efficiency. In
the intervening years, we continue to assess
our facilities on a rolling basis against in-house
best practice guides to maintain momentum
towards our improvements goals. During FY18,
we completed such assessments on one-third
of our UK facilities to identify further
opportunities for energy efficiency and carbon
reduction. We have also established a plan for
compliance with the second phase of ESOS
assessments which will take place in 2019.
Emissions are summarised below, all reported as CO2 equivalent (‘CO2e’):
Tonnes of CO2e 2
US
UK & I
Emissions from:
FY17
FY18
FY17
FY18
Combustion of fuel and operation of facilities
9,536
9,264
71,648
66,336
(Scope 1)
Electricity, heat, steam and cooling purchased
36,138
35,365
44,903
32,389
for own use (Scope 2)
Total emissions (Scope 1 & 2)
45,674
44,629
116,551
98,725
Ratio (KgCO2e per £1 sales revenue)
0.052
0.042
0.297
0.253
2
In FY18 we have moved to a new bespoke reporting tool resulting in a correction to our Scope 1 & 2 emissions
reported for FY17.
40
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT Primary energy consumption per tonne
of product (UK manufacturing)
FY18
FY17
1,299
1,419
Primary energy consumption per tonne of
product for our UK manufacturing operations
has reduced 8.5% from last year. This is due
in part to the closure of Evercreech and sale
of Hull (two of our more energy intensive
production facilities), but also due to continued
focus on delivering energy efficiency
improvements. In the last five years, we have
achieved a total reduction in primary energy
per tonne of product of 22%. An example of
our improvement efforts can be seen with the
combined heat & power (‘CHP’) plant at our
Selby facility. The CHP plant runs off biogas
from the on-site anaerobic digestion plant for
effluent treatment, and in FY18, generated
around 11% of the site’s electricity. From
1 October 2018 we have moved to a 100%
renewable electricity supply for all of our
UK operations.
Looking to FY19, we will evaluate the
opportunity either to establish science-
based targets for emission reductions, or to
establish an alternative quantifiable target to
support our aims to significantly reduce our
carbon footprint.
WATER
We continue to promote the efficient use
of water, and encourage water conservation
measures, without compromising
hygiene standards.
Water consumption per tonne of product
(UK manufacturing)
FY18
FY17
6.45
6.59
In the UK, our overall water consumption per
tonne of product reduced by 2% year-on-year
from 6.59 to 6.45, giving a cumulative
reduction of 7.2% in the last five years.
During the year, we have completed a number
of projects that will help to reduce our water
consumption. This has included a new
Colleagues review line performance
standard for tray wash facilities at our food
to go sites, reducing both energy and
water consumption. Our Crosby facility has
successfully trialled an alternative cleaning
regime that improved standards while
delivering a 40% reduction in water usage.
We will evaluate the new process for potential
rollout to other facilities next year.
LOGISTICS
This year, we have upgraded our chilled
distribution fleet in the UK with enhanced
engine technology and improved
aerodynamics. We have seen improved
fuel efficiency and a 25% reduction
in CO2e emissions per mile.
Our logistics team has focused on improved
vehicle optimisation, achieving 90% use during
engine running time, and upgrading our van
specification with 330 ‘Lightfoot’ units installed
over the last two years. These units provide
live, in-cab coaching to help drivers improve
both fuel efficiency and road safety, delivering
a 14% reduction in fuel use and a 112 tonne
reduction in emissions.
We have also engaged in water reduction
activities within the supply chain. For example,
we have worked with a key supplier of lettuce
to our sandwich business to start supplying
from a new facility using hydroponics.
This has enabled a 90% reduction in
water consumption for this product.
POLLUTION PREVENTION
We endeavour to minimise the impact of
our facilities on the local environment and
communities in which we operate.
In the UK, as part of our extensive
redevelopment of our Warrington facility,
we have significantly invested in a new odour
abatement system to minimise potential
nuisance to the local community. Throughout
the site development, the local residents’
committee regularly visited the site and
received updates on actions to minimise
impact on them from the development and
expanded operation.
We have also sought to actively manage
impacts from a new effluent treatment plant
at our Park Royal facility, due for completion
by early 2019. We have used innovative 3D spill
modelling to identify potential pollution risks
and plan key containment measures. This will
enable us to prevent pollutants from escaping
the site either in case of a spillage incident
or in the case of a fire, which raises a pollution
risk from fire-fighting water run-off.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
41
OUR STAKEHOLDER REPORT CONTINUED
COMMUNITIES
As a large and growing business, we are aware
of the significant impact we have on the world
around us. This is why we are committed to
doing the right thing for the communities in
which we operate and the industry in which
we aspire to be a leader.
During FY18, we supported our local
communities through a number of country-
wide activities in the UK and many local,
site-based initiatives across the UK and US.
At national level in the UK, we work with
GroceryAid, a grocery industry charity
supporting former and current grocery
industry workers and their dependents
who find themselves in financial difficulty.
We participate in the committee work at
GroceryAid, support the charity’s various
fundraising activities and provide marketing
support on social media – helping the
charity to raise its profile further.
We also support the Institute of Grocery
Distribution (‘IGD’). IGD is a research and
training charity which sits at the heart of the
UK’s food and grocery industry. IGD’s ‘Feeding
Britain’s Future’ initiative brings together
stakeholders from across the grocery industry
to support young people and equip them with
skills to be successful in the workplace. Since
its launch in 2012, Greencore has played a key
role in the initiative as an active committee
member, providing volunteers to support
engagement programmes in schools
across the UK.
At the local level, the majority of our
manufacturing facilities across the Group, work
with organisations in their local communities,
providing support through volunteering,
sponsored fundraising events and donations
of food and other items.
Within the community of the UK food industry
itself, we have funded places at ‘Food Science
Summer Schools’ both directly and through
our membership of the Chilled Food
Association and the IGD. Members of our
technical team are Science, Technology,
Engineering and Maths (‘STEM’) ambassadors
and regularly give presentations to school
students on careers in the food industry.
Also in the UK, we are represented on
the review panel for the AgriFood Training
Partnership. This is a consortium of
universities, funded by the Biotechnology and
Biological Sciences Research Council, which
provides specialist training to technical staff
working in the agriculture and food sector.
We are also an advisory member to the
‘Knowledge Transfer Network’ providing
a valuable connection between industry
and academia.
A customer and colleague harvest festival event at Manton Wood
42
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
SUPPLIERS
SUPPLIER MANAGEMENT
Greencore places great emphasis on the
integrity of our supply chain. In the UK,
we have a dedicated team of auditors
who approve all suppliers. In the last year,
this team has conducted 142 audits, 985
approvals, and 130 matrix reviews of agents
and brokers. We require all suppliers to
achieve recognised food safety standards,
including BRC (formerly ‘British Retail
Consortium’) certification for agents and
brokers. Outbound storage and distribution
services, including our own, also require
BRC certification.
In the UK, we have a team of Subject Matter
Experts (‘SMEs’) who work closely with
our procurement team on supply chain
coordination, and manage supply chain
events, such as the discovery of avian
influenza in the UK’s egg supply chain
last year. During FY18, our SMEs and
raw material technologists carried out
140 supplier visits, and have delivered
innovations such as hydroponic ‘ready-to-
eat’ herbs which achieve improved quality,
higher microbiological standards and
greater sustainability, with less water usage.
We source ingredients for our products
from global supply chains, and we
understand the impact of supply chains
on the environment, biodiversity and
populations. We have implemented
standards for certain raw materials using,
for example, the ‘British Lion’ (egg
traceability), the British ‘Duck Assurance
Scheme’ as well as salmon assured by the
Royal Society for the Prevention of Cruelty
to Animals. Beyond this, we continually
review and develop our sourcing standards
in partnership with our suppliers.
Greencore is a member of the Roundtable
on Sustainable Palm Oil (‘RSPO’) and we
maintain multi-site RSPO certification for
certain UK facilities. We carry out annual
internal audits for compliance with the
RSPO chain of custody standards at each of
the facilities in the programme. A number
of these are also selected for surveillance
audits by an authorised certification body.
Our aim is to use 100% certified sustainable
palm oil in our products, and we achieved
99% certification in our most recent
communication of progress to the RSPO.
We have also completed the annual CDP
(formerly Carbon Disclosure Project) forests
questionnaire for several years including
data on timber products and palm oil.
STRATEGIC REPORT 90% of the card used in our primary packaging
is from sustainable sources.
In addition to this, we hold Group Marine
Stewardship Council certification for our
UK food to go facilities, demonstrating
our commitment to sustainable fisheries.
These also receive annual compliance audits
as part of our internal governance with
a sample selected for surveillance by the
certification body.
ANIMAL WELFARE
Greencore takes animal welfare seriously
and we influence best practice by requiring
appropriate standards from our suppliers
and other participants within the supply chain.
We take animal welfare standards into account
during our supplier approval process, and
require our suppliers to comply with certain
welfare standards for eggs, poultry and red
meats. All UK suppliers use material approved
with the ‘Red Tractor’ traceability and quality
standard, with seven welfare schemes
currently in use.
Our Animal Welfare Policy specifically excludes
the use of raw materials from slaughterhouses
that practice unstunned slaughter. During
FY18, a new state of the art CO2 chicken
slaughterhouse was introduced to current
supply chains in the UK.
Our technical team has expertise in animal
products spanning meat, fish, poultry and
eggs and gives guidance on sourcing
strategies and supply chains, while our UK
‘protein’ SME is a member of the Humane
Slaughter Association. During FY18, we visited
10 slaughterhouses and three farms supplying
meat into our UK manufacturing facilities.
ETHICAL TRADING
We work with our suppliers to build effective
and transparent supply chains. This includes
understanding social standards in our supply
chain and encouraging our suppliers to
operate to the same ethical standards that
we employ ourselves.
In the UK, during our supplier approval
process, suppliers are provided with a copy
of our Ethical Trade Policy, which is aligned to
the base code of the Ethical Trading Initiative,
a multi-stakeholder group which promotes
ethical trade. They are also required to register
on the Supplier Ethical Data Exchange
(‘SEDEX’). We have achieved 95% registration
of our top 500 raw material suppliers, and
have also begun a programme of engagement
with suppliers to ensure that they understand
our expectations on ethical trading and
to provide support where possible.
In addition to this, we are members of the
Food Network for Ethical Trade (‘FNET’),
an initiative within the UK food industry
that aims to improve human rights in global
food supply chains through a common
approach to managing ethical trade.
Greencore coordinates a working group
focused on ethical trade within the spices
supply chain, involving seven suppliers
and three retailers.
In our Slavery and Human Trafficking
Transparency Statement, we set out the
measures we are taking to prevent modern
slavery in our supply chains, in addition to
our own operations. We have carried out
an assessment of our raw materials to
identify areas most at risk of modern
slavery and human rights abuses and
we are targeting these through our
supplier engagement programme.
FOOD SECURITY
Climate change, the growing global
population and pressure on resources all
threaten food supply chains. We aim to
develop sourcing strategies that promote
security of supply and enable us to deliver
Great Food to our customers.
Our sourcing strategies are informed
by horizon scanning for future risks. Other
strategies include promotion of integrated
supply chains, reduction of supply chain
complexity and adoption of assured standards
for certain raw materials. Diversification of
our ranges with an increase in production of
plant-based products is also helping to meet
increased consumer demand for vegan and
vegetarian options.
Greencore is represented on the Global Food
Security Strategy Advisory Board for the UK.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
43
OUR STAKEHOLDER REPORT CONTINUED
CUSTOMERS
FOOD SAFETY
Providing safe, authentic and excellent
quality food is at the heart of what we do
at Greencore.
In the UK, each of our manufacturing facilities
is compliant with the Global Food Safety
Initiative (‘GFSI’). They are also certified to
the BRC Global Standard for Food Safety,
through its unannounced audit programme.
Performance in these audits is a key metric
for managing our food safety performance,
and in FY18 we achieved AA* or A* grades
in all of these audits.
Our UK technical team also conducts
separate technical and compliance audits
across all facilities as part of our governance
programme. In the last year, the team carried
out 20 hygiene audits and 34 audits against
our technical standard. Additionally, over
32,300 routine audits were conducted by
site teams across our UK facilities. In addition
to BRC compliance audits, our UK facilities
received 295 inspections from external
organisations during the year, including
customers and assured standards
certification bodies.
From a training standpoint, we continue to
deliver our graduate programme in the UK,
recruiting recently qualified food science
graduates. As part of our Trainee Manager
programme, we also now offer the ‘Food
Industry Technical Professional’ degree
apprenticeship. In addition, Greencore
technical teams have access to our ‘Technical
Toolbox’ training programme, offering
continued professional development to
technical experts across the business.
In the US, Greencore’s facilities were
GFSI compliant in all locations and were
externally audited by the US Food and
Drug Administration, the US Department of
Agriculture and large customers on a regular
basis. Over FY18, all facilities achieved either
BRC AA grades or a Safe Quality Food (‘SQF’)
score of >90%.
In FY18, we further integrated systems in the
US and completed additional training, site and
supply chain work to ensure compliance with
the Food Safety Modernisation Act. We also
created a ‘Sanitation Excellence Program’ to
standardise best practice in the delivery of
sanitation across the business.
FOOD AUTHENTICITY AND INTEGRITY
Protecting food integrity and authenticity are
important challenges for our industry and we
work to reduce the vulnerability of our supply
chains to this threat.
In the UK, Greencore played a leading role
in establishing the Food Industry Intelligence
Network (‘Fiin’) in 2015 with 20 other industry
participants and we continue to co-Chair the
Fiin governing board. The network has now
grown to over 30 members who share
sanitised data on authenticity, helping to
identify potentially vulnerable supply chains.
We monitor risks to raw materials both through
a horizon-scanning process and a testing
schedule implemented by our central technical
team. These actions inform our purchasing
strategy across ingredient categories and
feed into vulnerability assessments for site
Threat Assessment and Critical Control
Point (‘TACCP’) plans. Training on TACCP
is coordinated centrally for our UK facilities.
We have also expanded our UK raw materials
team. This now includes four Subject Matter
Experts (‘SMEs’) for key categories, as well as
specialist technologists who support our team
in ensuring the safety, integrity and authenticity
of the raw materials in our products.
HEALTH AND NUTRITION
As a responsible food manufacturer,
Greencore recognises the importance of
producing healthy and nutritious foods and
we seek to offer healthy options in each
of the categories in which we operate.
Innovation in both our foods and packaging
is at the heart of what we do and, in FY18, 35%
of our products were new to market. In the UK,
we began reformulating products to reduce
salt content as far back as 2004 and we
continue to align product ranges with nutrient
and energy targets set by Public Health
44
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT England. During FY18, we have removed
over 80 tonnes of sugar from sauces produced
at our Selby facility. Where reformulation is
challenging due to the nature of some of our
raw materials, we look for other innovations.
For example, we lead an ‘Innovate UK’-funded
project to reduce the fat and salt content of
baked cheese products.
options, with 23 vegan and 54 vegetarian
products in our UK food to go ranges.
We also work with the wider industry
on nutrition issues, and in the UK, we are
represented in nutrition groups with the
Institute of Grocery Distribution and
Campden BRI.
We are also responsive to health trends
to ensure our products can be enjoyed by
all consumers. It is especially important to
provide choices for vulnerable groups and
those with specific dietary needs. In support
of this goal, we have a food to go facility in
the UK dedicated to gluten-free products and
have increased the availability of meat-free
SHAREHOLDERS
Greencore is committed to ensuring that
our corporate governance arrangements
are effective and continue to evolve with
best practice. The Board of Directors is
responsible for the governance of the
Group. It is also responsible for leading,
monitoring and controlling the Group, and
for promoting its long-term success. More
information on our corporate governance
practices can be found in our Corporate
Governance Report on pages 53 to 59.
The Group operates a transparent and
responsible approach to the management
of taxes. Since FY17, the Group publishes
a Board-endorsed Group Tax Policy and
Code of Conduct for each financial year.
This policy provides further detail in relation
to our approach to taxation and is available
on our website.
In addition, Greencore is committed to
ensuring active engagement with our
shareholders. Our investor relations team
holds meetings with institutional and major
shareholders at certain times throughout
the year as well as regular capital market
engagements. All shareholder presentations,
as well as announcements which have been
submitted via the Regulatory News Service
of the London Stock Exchange are also
made available on our website. Further
information on shareholder engagement
is set out on pages 56 and 57.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
45
MEET THE SENIOR TEAM
Patrick Coveney*
Eoin Tonge*
Nigel Blakey
Tracy Costello
Guy Dullage
Chief Executive Officer
Chief Financial Officer
Finance Director
Chief Information
Officer
HR Director
IN FY18, THE SENIOR TEAM, UPON
DELEGATION BY THE BOARD,
UNDERTOOK THE RESPONSIBILITY
FOR DELIVERING THE STRATEGY
AND LEADING THE ORGANISATIONAL
AND CAPABILITY PERFORMANCE.
THE GROUP RECENTLY ANNOUNCED
A NEW SENIOR TEAM STRUCTURE.
Biography
Nigel became Finance
Director in August 2018.
Nigel leads the UK
finance teams, and is
responsible for financial
planning and analysis,
business partnering
and shared services.
He works with senior
management and the
Board on performance
and strategy.
Before taking up this
role, Nigel held the
position of UK
Corporate Development
& Strategy Director. Prior
to that he held a number
of senior operational
roles, including
Managing Director of
our Grocery division.
Tracy became Chief
Information Officer in
July 2017. As Chief
Information Officer,
Tracy is responsible for
the technology agenda
for the Group and
ensuring the security,
scalability, efficiency
and performance
of our IT systems.
Before taking up the
role in Greencore,
Tracy was a Director in a
technology-led financial
services start-up and
prior to that was the
Chief Information
Officer of a multinational
foodservice company.
Guy became HR
Director in August 2018,
and is responsible for
human resources across
the Group. Guy joined
Greencore in March
2015 as HR Director
for the Prepared
Meals division.
Prior to this he held a
variety of senior HR roles
in the UK and Europe
for nearly twenty years,
with the majority of his
experience over this
time within the
manufacturing sector.
Guy has also held a
number of directorships,
board and pension
trustee roles during
his career.
* Denotes Greencore Group plc Board Director.
For full biography see page 48.
46
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
STRATEGIC REPORT Martin Ford
Jolene Gacquin
Peter Haden
Alwen Hill
Kevin Moore
Clare Rees
Technical Director
Incoming Group
Company Secretary
Managing Director
Purchasing Director
Chief Operating
Officer
Manufacturing
Director
Biography
Martin was appointed
Technical Director in
November 2018. He
has responsibility for
food safety, quality and
sustainability as well
as the leadership of the
central technical team,
which manages supplier
performance and our
technical systems.
Martin has 10 years’
experience at
Greencore, having
worked across all our
manufacturing sites
during this time.
Prior to joining
Greencore, Martin
worked at NSF
International supporting
the technical standards
of Whitbread and other
foodservice brands.
With effect from the
end of January 2019,
Jolene will take up the
role of Group Company
Secretary. Jolene is
currently Head of Legal
and Compliance, with
responsibility for driving
legal compliance and
best practice across
the Group.
Before taking up
her current role, Jolene
was Deputy Group
Secretary, having
joined the Group in
August 2008. Jolene
is also Director and
Company Secretary
of Simon Community
Galway, Ireland.
Peter was appointed
to lead our UK senior
team in July 2018 and
is responsible for
running our UK business
day-to-day. Peter joined
Greencore in 2015 and
has held prior roles as
Group Chief Operating
Officer and Chief
Development Officer.
Prior to joining
Greencore, Peter was a
Partner with McKinsey
& Co., where he led the
UK Consumer Practice.
Before McKinsey, he was
a brand manager with
Procter & Gamble.
Alwen is the Group’s
Purchasing Director.
Alwen joined the
business over 20 years
ago and has held
several roles including
Purchasing Manager,
divisional Purchasing
Director and Interim
Managing Director.
During her time with
the Group she also
worked in IT ‘over the
millennium’ and led
the integration of both
the Atherstone and
Heathrow sites.
Prior to joining
Greencore, Alwen
worked in procurement
at Northern Foods,
and in the textiles
manufacturing industry.
Kevin is Chief
Operating Officer
with responsibility for
commercial, marketing
and insight, end-to-
end value chain
optimisation, new
product development,
purchasing and
Greencore’s Direct to
Store and distribution
operations. Kevin joined
the Group in 1999 and
prior to his current
appointment, he served
as Managing Director of
Greencore’s Food to Go
and previously Prepared
Meals divisions.
Before joining the
business, Kevin
worked for more than
a decade in senior
roles in management
consultancy and retail.
Clare became
Manufacturing Director
in October 2018.
In this role, she
leads all aspects of
manufacturing across
the UK network,
including operational
performance across
our 15 sites, Greencore
Manufacturing
Excellence, engineering,
health and safety and
supply chain planning.
Clare joined Greencore
as a graduate in 1996
and has held a variety of
senior roles in Greencore
including Commercial
Director of Greencore
Food to Go, Business
Unit Managing Director
of Greencore Food To
Go Retail and Managing
Director of Greencore
Convenience Foods.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
47
OUR BOARD OF DIRECTORS
SG Bailey
HA McSharry,
B Comm, MBS
JJ Moloney,
B Ag. Sc., MBA
Non-Executive
Director
Senior Independent
Director
(Aged 56)
Sly joined the Board as a
Non-Executive Director
on 17 May 2013 and
became Senior
Independent Director
in December 2017. Sly
currently serves as a
Non-Executive Director
of the IPSX Group
Limited. Previously,
she held the position of
Chief Executive Officer
of Trinity Mirror plc,
as well as serving as a
Non-Executive Director
on the boards of
Ladbrokes plc and EMI
plc, where she was Chair
of the Remuneration
Committee and Senior
Independent Director.
She has also served
as a Non-Executive
Director and Chair
of the Remuneration
Committee for the
Press Association.
Non-Executive
Director
(Aged 57)
Non-Executive
Director
(Aged 64)
Heather Ann joined
the Board as a
Non-Executive Director
on 30 January 2013.
Currently, she serves
as a Non-Executive
Director of CRH plc, Jazz
Pharmaceuticals plc and
Ergonomics Solutions
International. Heather
Ann has also held the
position of Managing
Director for Reckitt
Benckiser and Boots
Healthcare in Ireland
and previously served as
a Board Director of the
Governor and Company
of the Bank of Ireland.
John joined the Board
on 8 February 2013.
He currently serves as a
Non-Executive Director
of Smurfit Kappa Group
plc and holds the
position of Chairman
at DCC plc and Coillte
Teoranta (the Irish State
Forestry Company).
John is also a director
in a number of private
companies. John was
Group Managing
Director of Glanbia plc
from 2001 to November
2013 having also held
senior management
positions within the
organisation, including
the position of Chief
Executive of Food
Ingredients and
Agribusiness.
Audit Committee
Audit Committee
Nomination and
Governance Committee
Remuneration
Committee*
Nomination and
Governance
Committee*
Remuneration
Committee
PG Kennedy,
BA, FCA
PF Coveney,
B Comm, M Phil,
D Phil
EP Tonge,
B Eng
Non-Executive
Director
Chief Executive
Officer
(Aged 48)
Chief Financial
Officer
(Aged 46)
Chairman
(Aged 60)
Biography
Gary joined the Board as
a Non-Executive Director
on 20 November 2008
and was appointed
Chairman in January
2013. Gary has extensive
board experience,
currently serving as
Chairman of Connect
Group plc and Green
REIT plc and previously
holding positions on the
boards of Elan plc, Allied
Irish Bank plc and Friends
First Holdings Ltd. In the
past he also served on
the Board of the IDA
Ireland and was a
Government appointed
Director of IBRC.
Patrick joined the Board
on 5 September 2005
and held the position of
Chief Financial Officer
until March 2008, when
he was appointed Chief
Executive Officer. Before
joining Greencore,
Patrick was Managing
Partner of McKinsey
& Co., Ireland. Currently,
Patrick serves as a
Non-Executive Director
of Glanbia plc and is
also Non-Executive
Chairman of Core
Media. Patrick is also a
Director of Irish Sailing
Foundation Company
Limited By Guarantee.
Eoin joined the Board
and was appointed
Chief Financial Officer
on 3 October 2016,
having previously led
Greencore’s Grocery
division and serving in a
number of other senior
roles throughout the
Group, including Chief
Strategy Officer. Prior
to joining Greencore
in 2006, Eoin worked for
Goldman Sachs where
he held a variety of
finance, treasury and
capital market roles.
Committee membership
Nomination and
Governance Committee
Remuneration
Committee
* Denotes Committee Chair.
48
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT
KF O’Malley,
AB, JD
HC Rose,
FCA
TH Sampson
JA Warren,
BSc, FCA
CM O’Leary,
FCIS
BOARD DIVERSITY
By gender
Non-Executive
Director
(Aged 71)
Non-Executive
Director
(Aged 53)
Non-Executive
Director
(Aged 59)
Non-Executive
Director
(Aged 65)
Group Company
Secretary
(Aged 49)
30%
Biography
Kevin joined the Board
as Non-Executive
Director on 14 March
2017. He has spent the
majority of his career
in legal and regulatory
affairs, including
spending 11 years as a
Partner of Greensfelder,
Hemker & Gale, PC
in the US. He also
served as United States
Ambassador to Ireland
from 2014 to 2017. Kevin
was also a member of
the Missouri, Illinois and
District of Columbia Bar
Associations and he was
awarded an Honorary
Doctorate from Saint
Louis University.
Helen joined the Board
as Non-Executive
Director on 11 April
2018. Helen is currently
Chief Operating Officer
at TSB Banking Group
plc, a subsidiary of
Sabadell. Helen has
extensive operational,
financial, risk and UK
retail experience and
has held a number of
senior finance roles at
Dixons, Forte, Safeway
and Lloyds Banking
Group. She is a Fellow
of the Institute of
Chartered Accountants
having qualified at
Coopers & Lybrand.
Tom joined the Board as
Non-Executive Director
on 1 February 2017. Tom
has held a number of
senior management
positions including Chief
Executive Officer of
Peacock Foods from
2013 to 2016, prior to
that he was President
of Kraft North American
Food Service for
10 years. A former
Chairman of the
International
Foodservice
Manufacturers
Association, Tom
currently serves as
President of Chicago
Children’s Advocacy
Center and as a board
member of American
Hotel Register Company
and the Community
Coffee Company LLC.
John joined the Board as
Non-Executive Director
on 30 January 2013.
Currently, John serves
as Senior Independent
Director and Chairman
of the Audit Committee
at Bloomsbury
Publishing Plc and
4imprint plc and as
Director and Chairman
of the Audit Committee
at Welsh Water. He has
extensive financial
experience and has
held the role of Group
Financial Director
of United Biscuits
(Holdings) Plc and
WH Smith PLC. He also
previously served as
Chairman of Uniq Plc
and as a Non-Executive
Director of Bovis Homes
Group PLC, Spectris plc,
The Rank Group Plc,
BPP Holdings plc, Aria
Foods UK plc, RAC Plc
and Rexam Plc.
Conor was appointed
Group Company
Secretary on 4 June
2010, having previously
served as Deputy
Group Secretary since
2005. Before joining
Greencore in 2001,
Conor held senior
company secretarial
positions in Glanbia plc
and Cable and Wireless
plc and trained with
Pricewaterhouse
Coopers. Conor is
currently a member of
the steering committee
of the 30% Club Ireland.
Conor is retiring from
his role with effect from
the conclusion of the
2019 AGM.
Committee membership
Audit Committee
Audit Committee*
70%
Male
Female
By role
20%
80%
Non-Executive
Executive
By tenure
10%
10%
50%
20%
10%
<1 year
1-2 years
3-5 years
5-10 years
>10 years
* Denotes Committee Chair.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
49
DIRECTORS’ REPORT
INTRODUCTION
The Directors present their Report and Financial Statements for the year ended 28 September 2018. The Directors’ Report is contained on pages
48 to 85.
PRINCIPAL ACTIVITIES AND REVIEW OF BUSINESS
Our business primarily operates in the attractive convenience food sector in the UK. We operate in food to go categories such as sandwiches,
salads and sushi as well as activities in complementary convenience food categories including chilled ready meals, chilled soups and sauces,
chilled quiche, ambient sauces and pickles, and frozen Yorkshire Puddings.
On 15 October 2018, we issued a circular to shareholders proposing the sale of our US business. At an Extraordinary General Meeting (‘EGM’) held
on 7 November 2018, a large majority of shareholders approved the sale and subsequent resolutions regarding the share capital of the Company.
Further details are set out below.
The Group’s performance and development activity is summarised in the Operating and Financial Review set out in pages 24 to 29. The principal
subsidiary and associate undertakings are listed in Note 34 to the Group Financial Statements and form part of this report.
RESULTS FOR THE YEAR
Following the disposal of our entire US business, results are presented on a continuing and discontinued basis. See Note 9 to the Financial
Statements for further detail. The Group Income Statement, which is set out on page 92 details the Group’s results for the year. The Group
reported Adjusted Operating Profit for the year before exceptional items of £104.6m (FY17: £102.9m) for continuing operations, whilst the profit
after taxation and exceptional charges was £36.5m (FY17: £13.9m).
DIVIDENDS
An interim dividend of 2.20 pence (FY17: 2.10 pence) per share was paid on 4 October 2018. The Directors are recommending a final ordinary dividend
of 3.37 pence (FY17: 3.37 pence) per share. Subject to shareholder approval, this dividend is to be paid on 5 February 2019 to shareholders who are
on the register of members at 5.00 pm on 11 January 2019. This will give a total dividend of 5.57 pence for the year.
At the Annual General Meeting (‘AGM’) held on 30 January 2018, shareholders were informed that the Board had decided to cease offering the
scrip dividend. The final dividend in respect of FY17, which was paid in April 2018, was the last dividend where shareholders could elect to receive
shares in lieu of cash. It is intended that all future payments will be made by cash.
SHARE CAPITAL
During the year 1,210,655 (FY17: 4,250,498) Ordinary Shares were issued under the Company’s Scrip Dividend Scheme and 120,950 (FY17: 714,595)
Ordinary Shares were issued under the Company’s ShareSave Schemes. Further details are set out in Note 26 to the Group Financial Statements.
On 28 November 2018, the Company completed the capital reduction of £650,785,438.98 of share premium, which was converted into profits
available for distribution. The capital reduction had previously been approved by a special resolution of shareholders on 7 November 2018 and
was confirmed by the High Court on 28 November 2018.
One Special Share of €1.26 exists in the share capital of the Company. The Articles of Association provide that the Special Share may be held
only by, or transferred only to, the Minister for Agriculture, Food & the Marine or some other person appointed by the Minister. Under the Articles
of Association, the consent of the holder of the Special Share is required in the winding up of the Company. Many of the rights attached to the
Special Share were abolished in 2011.
At the 2018 AGM, the shareholders gave the Directors the authority to allot shares up to a maximum nominal amount equal to £2,331,237.61.
This authority will expire at the forthcoming AGM and therefore, shareholders will be asked to renew, until the date of the AGM to be held in 2020
or 29 April 2020, whichever is earlier, the authority of the Directors to allot new shares. This authority will be limited to the allotment of up to an
aggregate nominal value of 33% of the nominal value of the Company’s issued share capital.
Shareholders will also be asked at the forthcoming AGM to approve until the date of the AGM to be held in 2020, or 29 April 2020, whichever is earlier,
the Directors’ power to disapply the strict statutory pre-emption provisions relating to the issue of new equity for cash. The disapplication will be
limited to the allotment of equity securities in connection with any rights issue or any open offer to shareholders and the allotment of shares in lieu of
dividends, and/or the allotment of shares up to an aggregate nominal value equal to 5% of the nominal value of the Company’s issued share capital.
At the 2018 AGM, the shareholders passed a resolution to give the Company, or any of its subsidiaries, the authority to make market purchases
of up to 10% of its own shares. At the forthcoming AGM, it is expected that shareholders will be asked to authorise the Directors to make market
purchases or overseas market purchases of its own shares. Any purchases would be made only at price levels which the Directors consider to be
in the best interests of the shareholders generally, taking into consideration the Group’s overall financial position.
This authority will be separate from any other authorities that may be sought from shareholders from time to time for specific share repurchase
programmes or tender offers.
50
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT Shareholders will be asked to pass a resolution at the forthcoming AGM authorising the Company to re-allot shares purchased by it and not
cancelled as treasury shares. If the resolution is passed, the authority will expire on the earlier date of the AGM in 2020 or 29 April 2020 and the
minimum price at which treasury shares may be re-allotted shall be set at the nominal value of the share where such a share is required to satisfy
an obligation under an employees share scheme or, in all other cases, an amount equal to 95% of the then market price of such shares and the
maximum price at which treasury shares may be re-allotted shall be set at 120% of the then market price of such shares.
FUTURE DEVELOPMENTS
The Group entered FY19 with a stronger and leaner business in the UK following the refinement of its portfolio and the implementation of its
streamlining and efficiency programme. The Group anticipates continued underlying revenue growth in its key convenience food categories.
Adjusted Operating Profit growth will be driven by this revenue growth, improved operational performance, and by a planned review of central
overheads. Although the Group believes the risks from Brexit are manageable in the medium-term, the near-term challenges associated with
a ‘no withdrawal agreement’ are uncertain. A strengthened balance sheet and strong underlying free cash generation leaves the Group well
positioned to consider organic and inorganic investment as opportunities arise. Over the medium-term the Group expects that its market
positioning, capability set, customer profile, well invested asset network and proven economic model will generate strong growth, cash generation
and returns.
DIRECTORS
Ms SG Bailey was appointed Senior Independent Director upon the retirement of Mr EL Nicoli in December 2017. On 11 April 2018, Ms HC Rose
was appointed to the Board as Non-Executive Director. Mr TH Sampson and Mr KF O’Malley confirmed their intention not to seek re-election
at the 2019 AGM.
In accordance with the Greencore Group plc Articles of Association and Provision B.7.1. of the 2016 UK Corporate Governance Code (the
‘2016 Code’) each of the Directors individually retire at each AGM of the Company and where appropriate submit themselves for re-election.
No re-appointment is automatic and all Directors who intend to submit themselves for re-election are subject to a full and rigorous evaluation.
One of the main purposes of the evaluation is to assess each Director’s suitability for re-election. If a Director is not deemed to be effective
in carrying out their required duties, the Board will not recommend that Director for re-election.
In line with the 2016 Code, in the year under review, each Director was subject to an internal evaluation. Following on from the review, the
Chairman and Board are pleased to recommend for re-election of those Directors who are seeking re-appointment at the forthcoming AGM
as they continue to be effective and remain committed to their role on the Board.
DIRECTORS’ INTERESTS IN THE ORDINARY SHARES AT 28 SEPTEMBER 2018
The interests of Directors and Group Company Secretary in the shares of the Company are set out in the Report on Directors’ Remuneration.
The Directors and Group Company Secretary have no beneficial interests in any of the Group’s subsidiary or associated undertakings.
SIGNIFICANT SHAREHOLDINGS
At 28 September 2018, the Company has been advised of the following notifiable interests in its Ordinary Share Capital:
FMR, LLC
Polaris Capital Management, LLC
Melqart Asset Management (UK) Ltd
Axxion SA
BlackRock Inc
Prudential plc (M&G Investments)
No. of interests in
Ordinary Shares
% of Issued Share
Capital
61,229,409
57,060,715
48,423,867
35,599,710
28,103,374
21,453,748
8.67
8.07
6.85
5.04
3.98
3.03
At 3 December 2018, the Company has been advised of the following notifiable interests in its Ordinary Share Capital:
Polaris Capital Management, LLC
FMR, LLC
Melqart Asset Management (UK) Ltd
BlackRock Inc
Axxion SA
Prudential plc (M&G Investments)
No. of interests in
Ordinary Shares
% of Issued Share
Capital
66,827,515
59,837,561
48,423,867
28,103,374
26,487,075
21,453,748
9.45
8.46
6.85
3.98
3.75
3.03
Other than these holdings, the Company has not been notified as at 3 December 2018 of any interest of 3% or more in its Ordinary Share Capital.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
51
DIRECTORS’ REPORT CONTINUED
CORPORATE GOVERNANCE
Statements by the Directors relating to the Group’s application of corporate governance principles, compliance with the provisions of the 2016
Code and the Irish Corporate Governance Annex (‘Annex’), the Group’s system of internal controls and the adoption of the going concern basis
in the preparation of the Financial Statements are set out on pages 53 to 59, 78 to 81 and 84 and 85.
Greencore Group plc is registered in Ireland and as an Irish incorporated company it is not subject to the UK executive remuneration requirements
as set out in the Large and Medium-sized Companies and Groups (Accounts and Reports) (Amendment) Regulations 2013. Nonetheless, in order
to ensure transparency to all of our stakeholders, we have sought to comply with these requirements on a voluntary basis, to the extent possible
under Irish law. The Report on Directors’ Remuneration is contained on pages 60 to 77.
OUR STAKEHOLDERS
The Group is committed to maintaining sustainable and ethically responsible corporate and social practices in every aspect of it’s business for
the benefit of its stakeholders. More details in relation to our corporate social responsibility agenda is set out in our Stakeholder Report, which
includes our disclosures on non-financial information, which can be found on pages 36 to 45.
RESEARCH AND DEVELOPMENT
The Group continued its research and development programme in relation to its principal activities during the year under review. Further information
is contained in Note 3 to the Group Financial Statements.
TAXATION STATUS
So far as the Directors are aware, the Company is not a close company within the meaning of the Taxes Consolidation Act 1997.
ACCOUNTING RECORDS
The Directors believe that they have complied with the requirements of Sections 281 to 286 of the Companies Act 2014 with regard to accounting
records by employing accounting personnel with appropriate expertise and by providing adequate resources to the finance function. The accounting
records of the Company are maintained at No. 2 Northwood Avenue, Northwood Business Park, Santry, Dublin 9, D09 X5N9, Ireland.
DIRECTORS’ COMPLIANCE STATEMENT
The Directors acknowledge that they are responsible for securing compliance by the Company of its relevant obligations as set out in the
Companies Act 2014 (‘Relevant Obligations’). The Directors further confirm that there is a Compliance Policy Statement in place setting out
the Company’s policies which, in the Directors’ opinion, are appropriate to ensure compliance with the Company’s Relevant Obligations. The
Directors also confirm that appropriate arrangements and structures are in place which, in the Directors’ opinion, are designed to secure material
compliance with the Company’s Relevant Obligations. For the year ended 28 September 2018, the Directors, with the assistance of the Risk
Management Group, conducted a review of the arrangements and structures in place. In discharging their responsibilities under Section 225 of
the Companies Act 2014, the Directors relied on the advice of persons who the Directors believe have the requisite knowledge and experience
to advise the Company on compliance with its Relevant Obligations.
DISCLOSURE OF INFORMATION TO THE AUDITOR
Each of the Directors individually confirm that:
In so far as they are aware, there is no relevant audit information of which the Company’s auditor is unaware; and
•
• That they have taken all the steps that they ought to have taken as a Director in order to make themselves aware of any relevant audit
information and to establish that the Company’s auditor is aware of such information.
AUDITOR
As set out in the 2017 Annual Report, following a tender process which was conducted during FY17, Deloitte’s tenure takes effect in respect
of FY19. The Board will be proposing to shareholders at the 2019 AGM that Deloitte replace KPMG as external auditor with effect from FY19.
NOTICE OF ANNUAL GENERAL MEETING AND SPECIAL BUSINESS
The Notice of the 2019 AGM, together with details of special business to be considered at the meeting, will be circulated to shareholders during
December 2018.
On behalf of the Board
PG Kennedy
Chairman
Dublin
3 December 2018
EP Tonge
Director
52
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT CORPORATE GOVERNANCE REPORT
PG Kennedy
The Board is committed to ensuring that the Group
has the best people, culture, structure and strateg y
in place to support the delivery of the Group’s
long-term success.
The Board is committed to ensuring that the
Group’s corporate governance arrangements
are effective and continue to evolve with best
practice. The benchmark used by the Group
for measuring corporate governance is the
2016 UK Corporate Governance Code (the
‘2016 Code’). This statement explains how
the Company has applied the principles
and complied with the provisions set out
in the 2016 Code.
Whilst Greencore is not listed on Euronext
Dublin, for increased transparency, we have
chosen to voluntarily adopt the provisions
of the Irish Corporate Governance Annex
(the ‘Annex’).
The Board believes that the Group continued
to fully comply with the 2016 Code and the
relevant provisions of the Annex throughout
the financial year ended 28 September 2018
where the requirements are of a continuing
nature. The full text of the 2016 Code can be
found on the Financial Reporting Council’s
website, www.frc.org.uk, whilst the Annex
can be found on the Euronext Dublin’s
website, www.ise.ie.
The Board keeps corporate governance
developments under continuous review
in order to ensure that the Group’s
governance structures evolve as necessary
and remain appropriate for a Group of our
size and complexity.
The Greencore Way principles set out
the values which underpin the culture of
Greencore and are drivers for our behaviour.
My colleagues on the Board and I believe
that effective governance set from Board level
is realised through leadership, diversity,
teamwork and commitment. This collaboration
drives a culture of continuous improvement
and performance across our business.
Throughout the year, the Board has visited
many of the Group sites, and the Board
recognises that spending time in the business
is critical for getting a true sense of the culture
in different parts of the business.
We believe that having a healthy and enduring
culture both protects and generates value
for our stakeholders. This is exemplified in
our Stakeholder Report, set out on pages 36
to 45, which details the immense effort taken
across the Group to maximise benefits for
our stakeholders.
PG Kennedy
Chairman
3 December 2018
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
53
CORPORATE GOVERNANCE REPORT CONTINUED
BOARD OF DIRECTORS
The Board is responsible for the corporate governance of the Group. It is also responsible for leading, monitoring and controlling the Group, and
for promoting its long-term corporate success. The Board consists of two Executive Directors and eight Non-Executive Directors. The biographical
details of each of the Directors, along with each of their individual dates of appointment, are set out on pages 48 and 49.
Both on an individual and collective basis, the Directors have the range of skills, understanding, experience and expertise necessary to ensure the
effective leadership of the Group and to ensure high corporate governance standards are maintained.
The Board is comprised of Directors from a diverse range of backgrounds, each of whom brings independent judgement to bear on a number
of key issues for the Group, including risk, strategy, performance, culture, environmental matters, health and safety, resourcing, ethics and
regulation. In accordance with Provision B.1.2. of the 2016 Code at least half of the Board, excluding the Chairman, are independent. Where
appropriate, it is Board policy to ensure that the independence of each Non-Executive Director is determined prior to his or her appointment
and is reviewed annually thereafter.
CHANGES TO THE BOARD
During the period under review, Mr EL Nicoli formally retired from the Board following the December 2017 Board meeting. Ms SG Bailey replaced
Mr Nicoli as Senior Independent Director upon his retirement. On 11 April 2018, Ms HC Rose was appointed to the Board as Non-Executive
Director and has since joined the Audit Committee. With her extensive operational, financial, risk and UK retail experience, Ms Rose’s appointment
complements the widely experienced Board.
INDEPENDENCE AND BOARD RENEWAL
Following the above changes made to the composition of the Board and Committees during the year under review, it was determined that both
the Board and the Committees are of the correct size and structure with no one individual or small group having the ability to dominate decision
making. Furthermore, given the current composition of the Board, no undue reliance is placed on any individual Non-Executive Director. The
Board continues to ensure that each of the Non-Executive Directors, where possible, remain impartial and independent. The Board is confident
that the Board’s composition is sufficiently independent in order to meet the collective challenges of their roles.
As the Group has disposed of the US business, both of our US-based Non-Executive Directors, Mr TH Sampson and Mr KF O’Malley have
confirmed their intention to retire from the Board and will not be submitting themselves for re-election at the 2019 Annual General Meeting
(‘AGM’). The Board acknowledges that Mr PG Kennedy, the Group’s Chairman, is currently serving his tenth year as Non-Executive Director of the
Company and his fifth year as Chairman of the Company. The Board is satisfied that Mr Kennedy remains key to the continuity of leadership of the
Group. The Board reviewed the independence of each of the Non-Executive Directors who are submitting themselves forward for re-election
at the forthcoming AGM and confirmed that each of the Non-Executive Directors are independent. In addition, none of the other Non-Executive
Directors have any material or other relationship with the Group.
TIME COMMITMENT
Each year, a schedule of regular meetings to be held in the following calendar year is agreed with each of the Directors. A list of the Directors’ attendance
at scheduled meetings throughout the year can be found on page 56. Additional Board meetings are held on an ad hoc basis as required throughout the
year. In advance of the disposal of the US business in November 2018 further Board and Audit Committee meetings were held. Board meetings
generally take place at the Group’s head office in Dublin along with the offices of the Group’s operating subsidiaries, wherein tours of the local facilities,
and visits to customer stores, where appropriate, are also incorporated into the Board agenda. In FY18, the Board held two strategy sessions,
which took place in the US at the Downers Grove office, and in the UK at the Warrington facility. Each session was held over the course of two days.
Prior to the appointment of any Non-Executive Director, he or she is provided with details of the time commitment required for the role to ensure
the Directors devote sufficient time to discharge their responsibilities effectively. If a Director is unable to attend a Board meeting, either in person
or remotely, he or she will receive meeting papers in advance and is encouraged to communicate his or her views on any particular topic to the
Chairman, the Chief Executive Officer, the Senior Independent Director or the Group Company Secretary in advance of the meeting. These views
are then communicated at the Board meeting on behalf of the absent Director.
KEY BOARD ACTIVITIES
There is an agreed formal list of matters reserved for Board consideration and decision. The list includes, but is not limited to, approving the half
year (interim) and full year (final) results statements, Annual Report and Financial Statements, approving the interim dividend and recommending
a final dividend to shareholders, Board membership, major acquisitions and disposals, major capital expenditure, risk management, internal
controls, treasury policies and the approval of all circulars and listing particulars. The list of matters reserved for Board decision is available
under the Corporate Governance section of the Group’s website, www.greencore.com, and is reviewed regularly by the Board and updated
as appropriate. The matters and agenda reserved for Board consideration are planned in order to best utilise the skills, expertise and experience
of the Directors.
In addition, the Board is responsible for the approval of the Group’s commercial strategy, trading, capital budgets and capital management.
The Directors acknowledge that they are responsible for the proper stewardship of the Group’s affairs, both on an individual and collective
basis, and it is the Board alone which has the authority and responsibility for planning, directing and controlling the activities of the Group.
54
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT The Board meets with senior management in the Group on a regular basis to ensure that the Board remains fully aware of the business and its
operating performance. Legislative changes along with any developments in accounting, governance and other standards are communicated to,
and discussed with, the Board and the Committees as appropriate.
There is an agreed procedure for Directors to take independent legal advice at the expense of the Company in the furtherance of their duties
as Directors of the Company. In addition, the Directors are indemnified for any legal action taken against them in respect of matters pertaining
to their duties as Directors, subject always to the limitations under Irish company law. The Group Company Secretary, whose appointment and
removal is a matter for the Board as a whole, is responsible for ensuring that Board procedures are followed. The Group Company Secretary
is available to each of the Directors for any advice or additional services they may require.
Each month the Directors receive Group management accounts and reports. Full Board papers are sent to each Director in a timely manner
in advance of the Board meetings. The Board papers include the minutes of all previous Board and where appropriate, Committee meetings.
In addition, the Chair of each Committee provides a verbal update on the relevant Committee meeting’s proceedings at the following meeting
of the Board.
In accordance with best practice and the 2016 Code, the Board acknowledges the importance of having a recognised senior member of the Board,
referred to as the ‘Senior Independent Director’. It is the role of the Senior Independent Director to act as a confidential sounding board for the
Chairman and to serve as an intermediary for the other Directors when necessary. The Senior Independent Director is available to shareholders,
and other stakeholders, if they have concerns which they have been unable to resolve through the normal channels of Chairman, Chief Executive
Officer or Chief Financial Officer, or indeed where such contact through the aforementioned channels is deemed inappropriate.
The roles of the Chairman and Chief Executive Officer are separate and distinct and there is a clear division of responsibilities between the two
roles. The operational responsibility for the management of the Group has been delegated to the Chief Executive Officer who is accountable
to the Board, whilst it is the role of the Chairman to ensure the effective running of the Board.
The role of a Non-Executive Director includes providing entrepreneurial leadership, setting the Group’s strategy, acting as a conduit between
shareholders and management, reviewing management performance and challenging management proposals as appropriate in a clear and
constructive manner. Non-Executive Directors must also utilise their expertise and experience to contribute to the development of the Group
as a whole. As outlined earlier, before a Non-Executive Director is appointed to the Board, or any of its Committees, he or she is advised of the
scheduled calendar of meetings and the time commitment involved in the role. Furthermore, he or she is required to confirm that he or she is
able to meet the time commitment required.
The Board understands the importance of an effective evaluation process. As set out on page 51, each year the Board undertakes an annual
internal evaluation, which is led by the Chairman, as well as a triennial external evaluation. The evaluation focuses on individual Board members,
Board effectiveness, the composition of the Board, the interaction between Board members, Board and Committee meetings and the
performance of the Board as a whole in the year under review. Each year, as part of the performance evaluation process, the Non-Executive
Directors, led by the Senior Independent Director, undertake an evaluation process without the Chairman’s involvement, to evaluate the
Chairman’s performance. The views of the Executive Directors and the Group Company Secretary are also taken into account. This forms part
of the broader Board effectiveness review and assists in ensuring a robust, independent and effective Board. In accordance with Provision B.6.2.
of the 2016 Code, during the year, an externally facilitated review of its Directors, the Board and each of the Committees was undertaken by the
ICSA: The Governance Institute, (‘ICSA’), a body which does not have any other connection with the Group. The review took the form of interviews,
meetings and questionnaires. ICSA presented their report to the Board at the November 2018 meeting. The Board are currently reviewing the
recommendations of ICSA and will implement changes where necessary.
In addition to the above, at least annually, the Chairman meets with the Non-Executive Directors without the Executive Directors present to
discuss, amongst other matters, the Executive Directors, the Board as a whole, the Committees and the interaction between the Executive and
Non-Executive Directors.
BOARD COMMITTEES
In order to ensure that it discharges its role appropriately, the Board has established an effective Committee structure in order to assist the Board
in the fulfilment of its responsibilities. Details of the various Committee memberships, together with the relevant biographies are set out on pages
48 and 49 of this report. Further details on the role of the Committees and the work undertaken by each Committee in the year under review can
be found on pages 60 to 83.
Average number of Executive Directors
Average number of Non-Executive Directors
FY18
2
8
FY17
2
8
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
55
CORPORATE GOVERNANCE REPORT CONTINUED
ATTENDANCE AT SCHEDULED BOARD AND COMMITTEE MEETINGS
Attendance at scheduled Board and Committee meetings during the financial year under review was as follows:
PG Kennedy
PF Coveney
EP Tonge
SG Bailey
HA McSharry
JJ Moloney
EL Nicoli 2
KF O’Malley
HC Rose 3
TH Sampson
JA Warren
Board
Audit
Committee 1
Nomination and
Governance
Committee 1
Remuneration
Committee 1
8/8
8/8
8/8
8/8
8/8
7/8
2/2
7/8
4/4
8/8
8/8
–
–
–
3/3
3/3
–
–
–
2/2
–
3/3
2/2
–
–
2/2
–
2/2
–
–
–
–
–
4/4
–
–
–
4/4
4/4
–
–
–
–
–
1 Each Committee held additional meetings throughout the year. Further detail of these meetings is set out in the respective Committee reports.
2 Mr EL Nicoli retired from the Board on 14 December 2017.
3 Ms HC Rose joined the Board on 11 April 2018.
Where appropriate, the Board also establishes sub-committees on an ad-hoc basis in order to deal with any additional items of business which
arise throughout the year. The membership of the sub-committees will depend upon the purpose for which it was established and will take into
account the skills and expertise necessary.
DIVERSITY
During the year, the Board adopted a Board Diversity Policy (‘Policy’). The Policy recognises and places great emphasis on the principle of diversity,
including gender diversity. The Board is committed to ensuring that its composition is diverse and balanced, and that all appointments will be made
on merit against objective criteria, in the context of the overall balance of skills and backgrounds that the Board needs to maintain in order to remain
effective. When carrying out its duty of reviewing the Board composition, including when considering new Board candidates, the Nomination and
Governance Committee will give due regard to diversity. The Nomination and Governance Committee will monitor progress and report annually,
in the Corporate Governance section of the Company’s annual report, on the process it has used in relation to Board appointments.
US ADVISORY COUNCIL
The US Advisory Council (‘Council’) met during the year. Due to the change in the geographical portfolio of the Group, the Council has been
disbanded.
ENGAGEMENT WITH SHAREHOLDERS
The Board recognises the importance of engaging with all shareholders on a regular basis to ensure that we capture and embrace feedback and
to ensure that our obligations to shareholders and other stakeholders are met. The Group gives priority to effective dialogue with shareholders to
allow shareholders the opportunity to discuss areas of interest and areas of concern. In advance of the 2018 AGM, the Group communicated with
shareholders who queried or expressed concern about the resolutions proposed, including, our approach to remuneration. Throughout the year,
the Chairman together with management engaged with a number of major shareholders following the announcement of significant developments.
The Group promotes communication with shareholders and welcomes queries via telephone, post or email. Throughout the year, apart from when
the Group is in a close period, the investor relations team meets and communicates with institutional and major shareholders.
In addition, the Group runs an active investor relations management programme that comprises results releases, trading updates, conference
presentations and regular ongoing dialogue with the investment community. Shareholder presentations are made at the time of issue of the
Group’s half year and full year results, following which the Chief Financial Officer provides the Board with an update on feedback received.
The Board receives regular updates on analyst coverage, along with details in relation to share price movements and analysis of any significant
changes in the shareholder base from the Head of Investor Relations. Periodically, additional events are held which provide the opportunity
for the investment community to increase its knowledge in relation to the Group’s vision, strategy, organisation and business model.
Details of any significant matters concerning the Group, including Board compositional changes, major mergers and acquisitions, divestments and
other significant strategic developments are announced through a Regulatory News Service of the London Stock Exchange. The investor relations
section of the Group’s website, www.greencore.com, provides the full text of the Annual Reports and Financial Statements, trading updates,
half year and full year results statements and presentations to analysts and investors, along with announcements released to the London
Stock Exchange. A significant amount of other published material including news releases and share price information is also accessible to all
shareholders on the Group’s website. Shareholders and stakeholders can subscribe to receive automated email alerts when new information
is posted to the site.
56
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT Shareholders can elect to receive the Annual Report and Financial Statements in paper form, or may elect to receive an email notification advising
that the Annual Report and Financial Statements is available on the Group’s website.
The Board welcomes the attendance and questions of shareholders at the AGM. The Board also encourages shareholders to make use of their
votes at all general meetings. The Chairman, along with the Senior Independent Director and each of the Non-Executive Directors, are available
to meet with shareholders at the AGM and also throughout the year upon request. At the AGM, separate resolutions are proposed on substantially
different issues. The agenda of business to be conducted at the AGM includes a resolution to receive and consider the Annual Report and
Financial Statements. The Chair of each Committee is available at the AGM to address any queries shareholders may have in relation to the
role and/or activities of the relevant Committee for the year under review.
The notice of the AGM together with the Annual Report and Financial Statements are sent to shareholders at least 20 working days before the
date of the AGM meeting and details of the total number of votes cast, the number of votes for and against each resolution and the number of
abstentions are announced at the AGM meeting and are also available on the Group’s website following the conclusion of the AGM. The Company
held its AGM on 30 January 2018, along with an Extraordinary General Meeting (‘EGM’) on the 7 November 2018, wherein all shareholders were
given the opportunity to ask questions or voice any concerns.
SHAREHOLDERS’ MEETINGS
The Company operates under the Companies Act 2014 (the ‘Act’). The Act provides for two types of shareholder meetings: the AGM with all other
general meetings being called an EGM.
The Company must hold a general meeting each year as its AGM, in addition to any other general meetings held in that year. Not more than
15 months may elapse between the date of one AGM and the next. EGMs can also be convened at the request of members holding not less than
5% of the voting share capital of the Company. The notice period for an AGM and an EGM to consider any special resolution (a resolution which
requires a 75% majority vote, not a simple majority) is 21 days.
No business shall be transacted at any general meeting unless a quorum is present at the time when the meeting proceeds to business. Three
members present in person or by proxy and entitled to vote shall be a quorum. Only those shareholders registered on the Company’s register of
members at the prescribed record date, being a date not more than 48 hours before the general meeting to which it relates, are entitled to attend
and vote at a general meeting.
Under the Act, ordinary resolutions may be passed by a majority of votes cast in favour, while special resolutions require a 75% majority of votes
cast in favour. Any shareholder who is entitled to attend, speak and vote at a general meeting is entitled to appoint one or more proxies to attend,
speak and vote on his or her behalf. A proxy need not be a member of the Company. All resolutions are determined by a poll.
The business of the Company is managed by the Directors who may exercise all the powers of the Company unless they are required to be
exercised by the Company in general meeting. Matters reserved to shareholders in general meetings include the election of Directors, the
declaration of final dividends on the recommendation of the Directors, the fixing of the remuneration of the external auditor, amendments
to the Articles of Association, measures to increase or reduce the Ordinary Share Capital and the authority to issue shares.
The information required to be provided to shareholders in accordance with Sections 1099 to 1110 of the Companies Act 2014 is available
on the Group’s website.
PRINCIPAL RISKS AND UNCERTAINTIES
Similar to any large group, Greencore faces a number of risks and uncertainties. The key risks facing the Group include strategic risks,
commercial risks, operational risks and financial risks. Under Irish company law (Section 327(1) (b) of the Companies Act 2014 and the Transparency
(Directive 2004/109/EC) Regulations 2007, as amended), the Directors are required to give a description of the principal risks and uncertainties
which the Group faces. The principal risks and uncertainties identified are set out on pages 30 to 35 and form part of this report.
Whilst the Board as a whole is responsible for the Group’s system of internal control, each of the individual business unit management teams
drive the process through which individual business unit risks and uncertainties are identified. The Board understands that the individual business
unit management teams are in the best position to identify the principal significant and emerging risks and uncertainties associated with their
respective business. Risks and mitigating controls common across business categories are managed and reviewed at Group level. Risks identified
and associated mitigating controls are subject to review by the Board and the Audit Committee on a regular basis and form part of the Group’s
health and safety, technical compliance and operational/financial audit programmes.
Further details on risks and uncertainties are outlined on pages 30 to 35.
Further details on how the Board and the Audit Committee have discharged their responsibilities along with the reviews undertaken by the
Audit Committee in the financial year can be found on pages 78 to 81.
Details regarding the Group’s internal controls are highlighted on pages 58 and 59 of this report. Details of the Group’s financial risk management
and hedging policies are set out in Note 22 to the Group Financial Statements. Details of the Group’s financial key performance indicators are set
out on pages 16 and 17. These disclosures form part of this report.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
57
CORPORATE GOVERNANCE REPORT CONTINUED
GOING CONCERN
The Directors, after making enquiries, have a reasonable expectation that the Company, and the Group as a whole, have adequate
resources to continue operating for the foreseeable future. For this reason, the going concern basis continues to be adopted in preparing
the Financial Statements.
VIABILITY STATEMENT
In line with the Provision C.2.2. of the 2016 Code, the Directors have carried out a rigorous review of the prospects of the current business and
its ability to meet its liabilities as they fall due over the medium term. In undertaking this review, the Directors have concluded that a three-year
timeframe continues to be an appropriate period for this assessment given that this is the typical period for visibility of commercial arrangements
with the Group’s customers in the Group’s strategic planning process. The objectives of the annual strategic planning process are to consider the
key strategic choices facing the Group and to build a consolidated financial model with various scenarios, taking into account the principal risks
and uncertainties facing the Company, including Brexit, which may threaten the Company’s solvency, liquidity, cash flow and business model.
Assumptions are built for the Group Income Statement, Balance Sheet and cash flow. These are rigorously tested by management and the
Directors. Sensitivity analysis has been applied to reflect the potential impact of some of the principal strategic and commercial risks of the
Company as described on pages 30 to 35. These risks could affect the level of sales and profitability of the Company and the amount of capital
required to deliver them. A model of financing requirements is also built for the same time period taking into account the base plan and
sensitivities against this, together with the likelihood of being able to refinance maturing committed facilities. Based on the results of this analysis,
the Directors have a reasonable expectation that the Company will be able to continue in operation and meet its liabilities as they fall due over
the three year period of their assessment.
INTERNAL CONTROL
The Board is responsible for the Group’s system of internal control, for reviewing its effectiveness and for confirming that there is a process
in place for identifying, evaluating and managing the significant risks to the achievement of the Group’s strategic objectives.
The process for identifying, evaluating and managing the significant risks has been in place throughout the financial year and up to the date of
the approval of the Annual Report and Financial Statements, accords with the Financial Reporting Council (‘FRC’) Guidance on Risk Management,
Internal Control and Related Financial and Business Reporting and is regularly reviewed by the Board. This system of internal control is designed
to manage, rather than eliminate, the risk of failure to achieve business objectives. The internal control systems can only provide reasonable
assurance, rather than absolute assurance, against material misstatement or loss.
The process involves the Board reviewing and analysing the following:
• The nature and extent of the risks, including principal risks, facing the Group;
• The extent and categories of risks it regards as desirable or acceptable for the Group to bear;
• The likelihood of the risk concerned materialising and the impact of associated risks materialising as a consequence;
• The Group’s ability to reduce the incidence and impact on its business of risks that do materialise;
• The operation of the relevant controls and control processes;
• The costs of operating particular controls relative to the benefits thereby obtained in managing related risks; and
• The Group’s risk culture.
On a regular basis, the risks faced by the Group are reviewed with management and also the Audit Committee. The Audit Committee’s Terms
of Reference (which are available under the Corporate Governance section of the Group’s website, www.greencore.com) stipulate that it must
conduct an annual risk and internal control assessment, following on from which it must present a report to the Board on: (a) the nature and extent
of the significant risks facing the Group; (b) the design, operation and monitoring by management of internal control systems and the adequacy
and frequency of reports from management to the Board; (c) whether the reports give a balanced assessment of the significant risks and the
effectiveness of the system of internal control in managing those risks; and (d) the Going Concern and Viability Statements.
The key elements of the system of internal control are as follows:
• Clearly defined organisation structures and lines of authority;
• Corporate policies for financial reporting, treasury and financial risk management, information technology and security, project appraisal
and corporate governance;
• Annual budgets and strategic business plans for all operating units, identifying key risks and opportunities;
• Monitoring of performance against budgets and forecasts and reporting thereon to the Directors on a regular basis;
• A Risk Management Group which reviews key business processes and controls and their effectiveness; and
• The Audit Committee which approves audit plans and deals with significant control issues raised by the Risk Management Group
or external audit.
58
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT The preparation and issue of financial reports is managed by the Group finance department, as delegated by the Board. The Group financial
reporting process is controlled using the Group accounting policies and reporting systems. The Group finance team supports all reporting entities
with guidance on the preparation of financial information. Each division has a Finance Director or Controller who is responsible for information
which accords with agreed policies.
In FY18, the financial information for each division was subject to a review at reporting entity and Group level by the Chief Executive Officer
and the Chief Financial Officer, along with the divisional Managing Directors. The Annual Report and Financial Statements are reviewed by
the Audit Committee in advance of its presentation to the Board for approval.
During the year under review, the Managing Director or the Finance Director of each division completed a Financial Internal Control Questionnaire
which was used to identify control strengths and weaknesses across all financial areas and any weaknesses were subsequently addressed.
The Group also maintains a Risk Register which sets out the nature and extent of the risks facing each division and the Group as a whole. Each of
the risks are prioritised in terms of likelihood and impact. The purpose of the Risk Register is to ensure that all significant risks within each business
unit have been appropriately identified and also to ensure that all risk is mitigated or managed as appropriate. It is understood that regular and
detailed assessment is critical due to the volatile and uncertain economic environment. Further detail on risk and risk management is set out
on pages 30 to 35 and in Note 22 to the Group Financial Statements.
Finally, the Directors, through the use of appropriate procedures, systems and the employment of competent personnel, have ensured that
measures are in place to secure compliance with the Company’s obligation to keep adequate accounting records. The accounting records
are kept at the registered office of the Company.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
59
REPORT ON DIRECTORS’ REMUNERATION
HA McSharry
The Committee continues to focus diligently on our
approach to remuneration and has placed significant
emphasis on ensuring pay-for-performance and
a high level of transparency.
LETTER FROM THE REMUNERATION COMMITTEE CHAIR
DEAR SHAREHOLDER,
On behalf of the Remuneration Committee and the Board, I am pleased to present the Report on Directors’ Remuneration for the 2018 financial
year. Since the end of our financial year, the Group has completed the sale of its US business and this report is being written as the Group’s
strategy is being refocused on the continuing business in the UK. At this point, management are still working through the strategic and financial
implications for the Group post completion and the Committee will review and take into account the impact on strategy and our future approach
to remuneration in early 2019 when the overall detail is confirmed.
Notwithstanding the sale of the US business, the Committee continued to focus diligently on our approach to remuneration and has placed
significant emphasis on ensuring pay-for-performance and a high level of transparency which we hope we have demonstrated again in this year’s
report. In light of the significant changes to the incentive structure during FY17, the Committee has not implemented any material alterations
to the remuneration framework during FY18.
During FY17, after consulting with shareholders holding circa 55% of our issued share capital, the Committee made a number of substantive
changes to our incentive arrangements, including the addition of a relative Total Shareholder Return (‘TSR’) measure under the Performance Share
Plan (‘PSP’), the extension of recovery provisions to incorporate clawback on all variable remuneration, and the implementation of an increase
in the shareholding guideline for the Chief Financial Officer (‘CFO’) from 150% to 200% of salary. Each of these changes were implemented to
further augment the alignment between the interests of management and shareholders. These changes have now been fully incorporated into
our incentive framework, which we believe continues to promote the long-term success of the Group for all our stakeholders.
Following significant consultation with shareholders, our Annual Report on Remuneration received 83.68% support at our 2018 Annual General
meeting (‘AGM’). While satisfied with the clear majority of support for our approach to remuneration, the Committee continues to communicate
with and take into account the feedback from all shareholders including those that abstained from voting on the Annual Report on Remuneration.
There are, and will continue to be, circumstances and occasions where our approach may not align fully with the views of all our shareholders.
Nonetheless, while those opinions may not always coincide, the views of individual shareholders are always taken into consideration and respected
at Greencore. Such an approach is at the core of our commitment to openness and shareholder engagement.
BUSINESS PERFORMANCE
As referenced earlier in this Annual Report and Financial Statements, a number of factors impacted financial performance for FY18. In March 2018,
we issued a trading update detailing the Group’s challenges in the US during the first half of FY18 which reduced the expected profit contribution
from the US portion of our business. The Group refined its US strategy and organisation, by focusing on the large and structurally growing Branded
Food Partners channel and strengthening its US leadership team, which led to an uplift in US operational and financial performance from Q2 FY18.
Adjusted Operating Profit in the US grew from £15.3m in H1 FY18 to £32.7m in H2 FY18. This positive business momentum enabled an attractive
acquisition offer for the entire US business and resulted in its disposal for $1,075m. This represented a premium to both the amount paid for Peacock
Foods in 2016 and the total Greencore invested capital at the end of FY18, and it is proposed to return £509m of the proceeds to shareholders.
Against this backdrop, the Group continued to focus on its key strategic ambitions in the UK resulting in positive growth in both revenue and
profitability. Adjusted Operating Profit in the UK grew from £44.4m in H1 FY18 to £60.2m in H2 FY18 with strong performance in H2 driving growth
in the revenue and Adjusted Operating Profit from FY17 to FY18.
60
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT REMUNERATION OUTCOME FY18
As outlined above, FY18 delivered positive revenue and profit progression across the Group, driven by the strong turnaround in US performance in
the second half of FY18 and positive revenue and profit growth in the continuing UK business.
Notwithstanding the progress in positioning the Group for future growth, we have not met the demanding Adjusted Earnings per Share (‘Adjusted
EPS’) and Return on Invested Capital (‘ROIC’) targets we set for ourselves. Performance outcomes were below the target ranges set for the FY18
bonus and FY16 PSP awards, resulting in the following:
REMUNERATION OUTCOMES FY18 IN SUMMARY
Award
Annual bonus
Outcome
Financial metrics below target
Personal and strategic objectives payout
PSPs awarded in December 2015 (FY16)
Financial metrics below target
CEO Payout
of maximum
CFO Payout
of maximum
0%
18%
0%
0%
18%
0%
FY18 ANNUAL BONUS
Executive Directors’ maximum potential annual bonus is 150% of salary. Annual bonuses are determined based on the delivery of a mix of
financial (75%) and personal and strategic objectives (25%). As outlined earlier Adjusted EPS and ROIC performance was below target, resulting
in nil payout of the financial element. Against the personal and strategic objectives set, the Chief Executive Officer (‘CEO’) and CFO performed
strongly. In assessing the outcome of this element for both the CEO and CFO, the Committee took particular account of the key objectives
prioritised following the trading update issued in March 2018, specifically the sharp focus required to deliver the turnaround of the US business
and continuing to build revenue and profit momentum from the core UK market.
The CEO and CFO were critical in ensuring the successful turnaround of the US business since the trading update issued to the market in March
2018. The stabilisation of the financial and operational performance of the US business provided the platform from which Greencore secured its
successful disposal, thus facilitating the proposed return of capital to all shareholders while also enhancing the strategic and financial flexibility
for the Group. Given the significant issues identified in the US business as recently as March, the progress made by management to put us in
a position to receive such a compelling offer was a significant contribution.
In addition, the CEO and CFO made significant contributions in continuing to positively develop our core UK business which has become
significantly more important following the successful disposal of our US business. Specifically, during FY18, the CEO instigated operational and
organisation enhancements through the establishment of one unified UK team with responsibility for all UK operations, and ensured we sustained
our market leading customer satisfaction levels, (exemplified by the continued growth in our ‘food to go’ business and the further deepening
of existing customer relationships). The CFO delivered significant operational efficiencies at a number of our UK sites, as well as further embedding
cost saving measures across the region to protect profitability, and maintained a tight control on capital expenditure.
Together, both Executive Directors have performed to a very high standard, worked exceptionally hard and demonstrated unwavering commitment
to deliver a strong financial outturn for FY18 following a disappointing trading update in March. This progress has ensured that the Group is very
well positioned to drive growth and generate further value for shareholders as we refocus our strategy on the UK.
The Committee remains committed to incentivising and, if appropriate, rewarding strong performance under measures considered central to
the delivery of our long-term strategy. It is for this very reason that such measures are included in the incentive framework. Mindful of the need
to show restraint in years of below target financial performance, the Committee determined that 18% out of 25% was warranted for the personal
and strategic component of the annual bonus.
FY16 PERFORMANCE SHARE PLAN
The awards eligible to vest under the PSP during FY18 were those granted in December 2015. Those awards were subject to equally weighted
Adjusted EPS and ROIC performance conditions. Over the three-year performance period, underlying Adjusted EPS growth of 0.7% and
underlying FY18 ROIC of 10.2% was achieved. Against the targets set, this level of performance warranted nil vesting of the awards granted
in December 2015.
The Committee continues to set challenging targets and the absence of any vesting is reflective of the level of stretch included in the incentive
framework as well as performance falling below our expectations. Overall for FY18 the total remuneration for CEO and CFO has reduced
year-on-year (FY18 total remuneration is 13.9% less for the CEO and 13.1% less for the CFO from FY17).
Further details in relation to the FY18 remuneration for Executive Directors is provided on pages 63 to 77.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
61
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
LETTER FROM THE REMUNERATION COMMITTEE CHAIR CONTINUED
FY16 PERFORMANCE SHARE PLAN CONTINUED
As detailed last year, the Committee embedded principles into our approach to remuneration:
• Alignment and fairness;
• Pay-for-performance; and,
• Transparency and simplicity.
The Committee has continued to incorporate and reflect these principles in to its decision-making and is fully satisfied that the remuneration outcomes
for the Executive Directors for FY18 are fair, appropriate and aligned with the performance of the Company and in the interests of our shareholders.
MARKET DEVELOPMENTS
The Committee remains fully apprised of all key market developments relating to remuneration each year, so as to ensure our incentive framework
remains aligned with market best practice. During FY18, the UK Corporate Governance Code (‘Code’) was updated, with specific alterations made
to the section on remuneration. The Committee has reviewed the new Code, which is effective for accounting periods beginning on or after
1 January 2019, and will be considering the implications of the new Code on executive remuneration at Greencore (as well as updated investor
guidance on remuneration and the latest reporting requirements) as part of the review of the Remuneration Policy (‘Policy’) in FY19.
REMUNERATION IN FY19
The annual bonus remains unchanged from FY18 and will continue to be based on financial targets (currently 75%) and personal and strategic objectives
(25%). The maximum opportunity will remain at 150% of salary. The Committee continues to believe the most appropriate financial measures for bonus
performance are ROIC and Adjusted EPS. Personal and strategic objectives have been designed to draw sharp focus to the activities that are most
critical to continue to grow our market leading position in the UK.
For FY19, there will be no change to grant levels for Executive Directors under the PSP, which will be maintained at 200% of salary for the CEO and 150%
of salary for the CFO. However, given the significant change to our overall business post the sale of the US business, the Committee will review our PSP
framework to ensure it is structured to promote the delivery of strategy in order to drive long-term value creation for all our stakeholders. In confirming
the targets for awards, the Committee will be provided with an extensive presentation from management on the impact the disposal will have on the
business and the key measures to deliver our strategy in order to create value for all stakeholders.
The Committee will also take into consideration external expectations for performance in setting targets that are appropriately stretching.
Following a review of internal and external data, the Committee confirmed that the CEO and CFO would receive a salary increase of 2% for FY19.
This is marginally below the average salary increase awarded to the wider workforce and reflects the Committee’s practice in recent years in aligning
salary increases across the Group. Full details of the Executive Directors’ remuneration is included on pages 63 to 77.
Our Policy is due to be submitted for approval by shareholders at the 2020 AGM. As part of this review of the Policy we will once again engage
with shareholders and proxy advisers in FY19 to seek their input and to foster mutual understanding of expectations on our overall remuneration
approach. Engagement with our shareholders over the coming year will provide invaluable input to the Committee in finalising the Policy to be
proposed at the 2020 AGM, and help ensure it is aligned with our overall strategy and shareholder interests, while reflecting the current landscape
for executive remuneration.
IN SUMMARY
The Committee believes the implementation of our Policy continues to deliver remuneration outcomes which are fair and appropriately reflect
the performance of the Company and actual shareholder experience. As we embark on a review of our Policy in FY19 we look forward to engaging
with our shareholders to ensure it remains appropriate for our refocused business strategy and to drive future value creation for our shareholders.
Together with the rest of the Committee, I look forward to hearing your views and hope to receive your support for the Annual Report on Directors’
Remuneration at the 2019 AGM where I will be available to respond to your questions.
Finally I would like to thank my fellow Committee members Mr PG Kennedy and Mr JJ Moloney for all their commitment and support throughout
the year.
On behalf of the Remuneration Committee
Heather Ann McSharry
3 December 2018
62
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT REMUNERATION AT A GLANCE
This section is a snapshot of the Group’s performance over the FY18 year and the remuneration received by our Executive Directors. Full details
can be found in the Annual Report on Remuneration on pages 65 to 77.
The Director’s Remuneration Policy (the ‘Policy’) was approved by an advisory, non-binding shareholder vote at the 2017 Annual General Meeting
(‘AGM’) and took effect from the date of that AGM. The full Policy is available on our website, www.greencore.com, and was most recently included
in our 2017 Annual Report and Financial Statements. As the Company is not seeking approval for any revisions to the Policy in 2019, the full text
has not been reproduced in this report. The following paragraphs and pages 65 to 77 provide a summary of the key elements of the Policy.
The Committee applies the following overarching remuneration principles in the design and implementation of our remuneration Policy:
• Alignment and fairness: aligning Executive Directors’ and shareholders’ interests, and ensuring pay arrangements are fair and equitable across
the Group;
• Pay-for-performance: ensuring targets are appropriately stretching, and setting safeguards against paying for failure; and
• Transparency and simplicity: designing a simple remuneration structure, and clearly communicating remuneration decisions to shareholders.
It is in this context that remuneration outcomes for FY18 and implementation of the 2017 Policy for FY19 have been determined, as follows.
FY18 REMUNERATION OUTCOMES
ANNUAL BONUS
The maximum annual bonus potential of 150% of basic salary for executives was based on a mix of financial (weighted 75% of the total) and
personal and strategic (weighted 25% of the total) performance measures for FY18. The performance targets and actual underlying performance
are set out below:
Measure
Adjusted EPS
ROIC
Financial element
Personal and strategic objectives
16.2p
10.5%
50%
25%
75%
25%
Weighting
(% of bonus)
Target
(50% payout)
Performance targets
Stretch
(100% payout)
17.9p
11.7%
CEO
• Turnaround of the US business performance leading
to its successful disposal
• Deepening market leading positions in the UK,
personally leading senior customer relationships
• Rebalancing the UK portfolio
• Delivering UK reorganisation
CFO
• Strong improvement in cash flow
• Execution of the disposal of US business
• Leading operational efficiencies
• Leading the corporate social responsibility
and sustainability business activity
Personal and strategic element
Total
25%
100%
Actual underlying
FY18 performance
Below target
Below target
0%
Total: 18 out of 25
Total: 18 out of 25
18%
18%
Executive Directors received 18% of the maximum bonus, which represents 27% of salary, half of which is deferred in shares for a three-year period.
FY16 PSP AWARD
The Performance Share Plan (‘PSP’) values in respect of the FY18 single figure relate to awards granted in December 2015. Awards were subject
to Adjusted EPS and ROIC performance targets measured over the period FY15 to FY18. Target and actual underlying outturn are set out in the
table below. This resulted in the awards lapsing in full on 2 December 2018.
Adjusted EPS growth
FY18 ROIC
Total
Weighting
(% of award)
Performance
range
Actual
underlying
outturn
Vesting
(% of award)
50% 5 – 15% p.a.
0.7% p.a.
50% 12.5 – 15%
10.2%
0%
0%
0%
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
63
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
REMUNERATION AT A GLANCE CONTINUED
IMPLEMENTATION OF THE REMUNERATION POLICY IN FY19
Element of pay
Implementation for FY19
Fixed remuneration
Base salary
2% increase which is marginally below the average increase awarded to the wider workforce.
Pension and benefits
Pay for performance
Safeguards and risk management
Salaries for FY19 are: Patrick Coveney €840,202 and Eoin Tonge £418,200.
Per the terms of his contract, Patrick Coveney receives a taxable non-pensionable cash allowance equivalent to
35% of his pensionable earnings in lieu of participation in a Defined Contribution Pension Scheme. Eoin Tonge
participates in the Greencore UK Master Trust Pension Scheme which is a Defined Contribution Pension Scheme
and receives a partial non-pensionable cash allowance equivalent to 25% of his pensionable earnings. No change
proposed for FY19.
Effective from FY18, malus and clawback provisions apply to the annual bonus and the PSP both prior to
vesting and for a period of two years post-vesting. This enables the Company to withhold payment/vesting of
any sums and/or recover sums paid on the occurrence of specific trigger events (e.g. a material misstatement
of the Company’s audited results, a material failure of risk management, a material breach of health and safety
regulations, or serious reputational damage).
Annual bonus and Deferred
Bonus Plan (‘DBP’)
No change to maximum opportunity: 150% of salary.
The performance measures and weightings also remain unchanged: 50% Adjusted EPS, 25% ROIC and
25% personal and strategic objectives.
PSP 1
200% of salary for Patrick Coveney and 150% of salary for Eoin Tonge.
50% of bonus earned will be deferred in shares for three years under the DBP.
The performance measures and weightings will be: 1/3rd EPS, 1/3rd ROIC and 1/3rd relative TSR.
PSP awards are subject to a three-year performance period and an additional two-year holding period.
Vested awards may not be sold during the holding period except to cover tax liabilities.
1 Following the disposal of the US business, PSP awards will be made in early 2019.
ALIGNING LONG-TERM AWARDS
Both EPS and ROIC are Group financial KPIs.
Read more:
Financial KPIs – page 16
Remuneration performance measures for FY19 and how these relate to our strategic priorities
Performance measure
Adjusted EPS
ROIC
TSR
Incentive plan
Annual Bonus
PSP
Annual Bonus
PSP
PSP
Personal and strategic objectives
Annual Bonus
Reason for selection
Captures long-term growth and
improves financial returns by leveraging
operational efficiency
Improves capital discipline and efficiency
Provides alignment with shareholder value
Aligned with short and medium-term strategic
objectives to promote long-term performance
64
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT ANNUAL REPORT ON REMUNERATION
The following section sets out our Annual Report on Remuneration, outlines decisions made by the Committee in relation to Directors’
remuneration in respect of FY18 and how the Committee intends to apply the remuneration Policy for FY19. The Annual Report on Remuneration
will be subject to an advisory shareholder vote at the AGM to be held on 29 January 2019. Where information has been audited by KPMG,
this has been stated. All other information in this report is unaudited.
ROLE AND RESPONSIBILITIES OF THE REMUNERATION COMMITTEE
The Committee currently consists of three Non-Executive Directors whose collective role is to ensure that the Group’s remuneration arrangements
are aligned with the Group’s strategy and vision. The Terms of Reference of the Committee include the determination of the remuneration
packages for Executive Directors, the Group Company Secretary and other members of the senior management team. The Board Chairman
and the Executive Directors determine the fees for the Non-Executive Directors.
The Terms of Reference for the Committee are updated as appropriate and are available under the Corporate Governance section of the Group’s
website, www.greencore.com.
MEMBERS
The Committee currently comprises the following Non-Executive Directors:
Name
HA McSharry
PG Kennedy
JJ Moloney
Remuneration Committee position
Chair (appointed to Committee on 28 January 2014; Chair from 31 January 2017)
Member (appointed to Committee on 11 March 2010)
Member (appointed to Committee on 31 January 2017)
The Group Company Secretary acts as Secretary to the Committee. During the year, the Chief Executive Officer, Chief Financial Officer and
the Chief People Officer attended meetings on an ad hoc basis at the invitation of the Committee and provided information and support
as requested. However, no individual was present when his/her own remuneration was being discussed.
ADVISORS
The Committee’s independent advisor during the year was Mercer Kepler, having been appointed in September 2016 following a competitive
tender process. Mercer Kepler attends Committee meetings on an ad hoc basis and provides advice on remuneration for executives, benchmarking
analysis, and updates on market developments and best practice. Mercer Kepler is a founding member of the Remuneration Consultants Group
and adheres to its code of conduct. Mercer Limited (Mercer Kepler’s parent company) additionally provided the Group with pension actuarial
services during FY18. The Committee reviews the performance of its advisors annually, and remains satisfied that Mercer Kepler provides
independent and objective remuneration advice to the Committee, and does not have any connections with Greencore which may impair its
independence. The fees paid to Mercer Kepler in respect of work carried out for the Committee in the year under review amounted to £58,250.
KEY ACTIVITIES DURING THE YEAR
During FY18, the Committee held four scheduled meetings. Details of the attendances at these meetings are set out on page 56. The Committee
held three additional meetings to cover the significant amount of work undertaken by the Committee during the year. The key activities and
matters discussed at these meetings included:
• Review and approval of the FY17 Report on Directors’ Remuneration;
• Review of changes to legislative, regulatory and corporate governance environment, and consideration of trends in executive remuneration;
• Review of the remuneration structure in the context of Group strategy and market developments, as well as remuneration policies throughout
the Group;
• Review and approval of performance and payout in respect of FY17 annual bonus and FY15 PSP awards;
• Shareholder engagement, both prior to and following the 2018 AGM;
• Review of feedback received after the 2018 AGM;
• Approval of opportunities/award levels and performance targets for FY18 annual bonus and PSP awards;
• Approval of award levels and performance metrics for FY18 PSP awards;
•
• Review of the Committee’s Terms of Reference; and
• Review of Committee effectiveness.
Irish and UK ShareSave Schemes;
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
65
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED
SHAREHOLDER VOTING
The table below shows the voting outcome of the resolution proposed at the 2018 AGM in relation to remuneration.
FY17 Annual Report on Remuneration
For
Against
Total votes
Votes withheld
83.68%
16.32%
398,436,668
78,275,976
The table below shows the voting outcome of the latest remuneration Policy, which was last approved at the 2017 AGM.
Remuneration Policy (‘Policy’)
For
59.9%
Against
Total votes
Votes withheld
40.1%
446,480,145
7,914
Following the low level of support received at the 2017 AGM, the Committee welcomed the increased level of shareholder support at the 2018 AGM.
The Committee notes that a certain number of shareholders expressed concerns about our approach to implementing the Policy. During
engagement, certain shareholders noted concerns regarding the grant of PSP awards at 200%. While the Committee welcomes the significant
majority of shareholders that supported the FY17 Annual Report on Remuneration, it continues to analyse feedback from those shareholders
that voted against the FY17 Annual Report on Remuneration, as well as those that abstained. The various issues noted during engagement with
shareholders over the past 18 months will form a key part of the review of the Policy during FY19.
The Committee keeps under regular review the PSP award sizes for each Executive Director. These are set in the context of the market
competitiveness of the total remuneration opportunity, and to support the Committee’s overarching principle that package design should
reinforce a performance culture.
Total remuneration is periodically assessed against sector comparators as well as FTSE-listed companies of similar size; against these benchmarks,
the Committee concluded that the FY18 packages for the Executive Directors were appropriate – and not excessive – and that the pay mix was
appropriately weighted towards variable elements of remuneration (in particular longer-term variable pay). The Committee also reviews carefully
the targets it sets for each incentive cycle immediately prior to grant, to ensure that these are appropriately stretching in the context of our
internal strategic plan, external expectations for the Group’s performance over the incentive time horizon, and the award opportunity.
This Policy will remain unchanged for FY19; PSP award opportunities and targets will be finalised in early 2019 in the context of the shape of the
Group going forward, following the completion of the sale of our US business. The Committee is committed to meaningful engagement with
our shareholders as part of our approach to strong governance, and continues to welcome comments from shareholders.
66
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT SINGLE FIGURE OF TOTAL REMUNERATION (AUDITED)
The following table sets out the single figure of total remuneration for Directors in FY18 and FY17.
NB: The exchange rates used for the conversion of remuneration from euro to sterling for FY18 and FY17 were €1:£0.8857 and €1:£0.8705, respectively, which were the average
exchange rates for the two respective years.
Executive Directors
Patrick Coveney1
Eoin Tonge
Non-Executive Directors
Gary Kennedy
Sly Bailey
Heather Ann McSharry
John Moloney
Eric Nicoli 5
Kevin O’Malley
Helen Rose 7
Tom Sampson 6
John Warren
Annual bonus2 (£000)
Salary/fee
(£000)
Benefits
(£000)
Deferred
Share Award
Cash
Long-Term
Incentive
(£000)
Pension
(£000)
Total
remuneration
(£000)
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY17
FY18
FY18
FY17
FY18
FY17
730
699
410
400
288
282
81
67
80
74
78
76
21
82
69
37
33
69
45
84
82
52
50
31
24
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
98
0
55
0
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
98
230
55
132
0 3
2134
03
964
274
262
102
100
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1,252
1,454
653
752
288
282
81
67
80
74
78
76
21
82
69
37
33
69
45
84
82
1 Patrick Coveney’s salary for FY18 is €823,728 and has been converted to sterling using the exchange rate €1:£0.8857 which is the average exchange rate for FY18.
2 For FY18, half of the annual bonus is payable as a cash award and half as a Deferred Share Award. For FY17, 100% of the bonus was payable as a Deferred Share Award.
3 FY18 values: FY16 PSP awards lapsed in full on 2 December 2018.
4 FY17 values: FY15 PSP awards partially vested on 2 December 2017, based on performance to 29 September 2017 and subject to continued employment on the vesting
date. The award values have been revised from last year’s report to reflect the actual share price on vesting of £2.173.
5 Eric Nicoli retired on the 14 December 2017. His FY18 remuneration relates to the period 30 September 2017 to 14 December 2017.
6 Thomas Sampson was paid an additional fee of £124,203 for extra responsibilities undertaken throughout the year in relation to his role on the Group US Advisory Council.
7 Helen Rose was appointed to the Board on 11 April 2018. Her remuneration relates to the period 11 April 2018 to 28 September 2018.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
67
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED
NOTES TO THE TABLE (AUDITED)
BASE SALARY
The Committee reviewed the Executive Directors’ salaries in November 2017 and determined that the salary of Patrick Coveney and Eoin Tonge
would be increased in line with the wider workforce by 2.5% to €823,728 and £410,000 respectively.
ANNUAL BONUS
The maximum bonus opportunity for FY18 was 150% of salary for both Executive Directors. Performance against targets for annual bonus payment
is subject to personal and strategic objectives (25% of total) as well as the achievement of demanding short-term financial targets (making up 75%
of the total potential bonus). The bonus was based 75% on financial measures (Adjusted EPS and ROIC), and 25% on personal performance against
strategic goals. The annual bonus measures reflect the Committee’s aim of providing an appropriate balance between incentivising the achievement
of key financial targets and specific personal and strategic objectives. Performance targets and actual outturn are provided in the table below:
Measure
Adjusted EPS
ROIC
Financial element
Personal and strategic objectives
16.2p
10.5%
50%
25%
75%
25%
Weighting
(% of bonus)
Target
(50% payout)
Performance targets
Stretch
(100% payout)
17.9p
11.7%
CEO
• Turnaround of the US business performance leading
to its successful disposal
• Deepening market leading positions in the UK,
personally leading senior customer relationships
• Rebalancing the UK portfolio
• Delivering UK reorganisation
CFO
• Strong improvement in cash flow
• Execution of the disposal of US business
• Leading operational efficiencies
• Leading the corporate social responsibility and sustainability
business activity
Personal and strategic element
Total
25%
100%
Actual underlying
FY18 performance
Below target
Below target
0%
Total: 18 out of 25
Total: 18 out of 25
18%
18%
Executive Directors were entitled to receive 18% of the maximum bonus, which represents 27% of salary, half of which is deferred in shares for
a three-year period.
Although trading performance was below expectations, and resulted in no payouts under the Adjusted EPS and ROIC measures, both Executive
Directors played a significant role in the progress made against certain key strategic and personal objectives during FY18.
The personal and strategic objectives are set out in full on page 69 and included a significant focus on continuing to promote strong relations with
our stakeholders, increasing cash generation and delivering operational and organisational efficiencies. Additionally, following the trading update
issued in March 2018, the alteration in the Group’s priorities were reflected in the personal and strategic objectives. The Committee has
acknowledged the significant contribution of the Executive Directors in respect of such a successful turnaround of the US business, which
culminated in the disposal and return of capital to shareholders.
In terms of personal and strategic performance, both Patrick Coveney and Eoin Tonge have had a strong year, delivering considerable progress
against key personal and strategic objectives for the Group, including as those objectives developed rapidly during the year. In this context,
the Committee determined that both Patrick Coveney and Eoin Tonge would receive 18% out of 25% of the total personal and strategic element
of their respective bonuses.
68
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT STRATEGIC PRIORITIES
Enhance our leadership
position in UK
convenience food
Develop enduring
customer partnerships
Invest in people,
infrastructure and capability
Maintain a strong financial
and economic model
Patrick Coveney
Link to Group
strategic priorities
Personal and strategic
objectives
Turnaround of the
US business
performance
leading to its
successful disposal
Performance assessment
Following on from the trading update in March 2018, Patrick spent half his time in the US
dedicated to the US business. He refined and refocused the US strategy and undertook
a direct role in the strategic, organisational and commercial leadership of the US business
up until a new US CEO was appointed in July 2018. This led to the highly compelling
unsolicited offer for the purchase of the US business. Patrick negotiated the terms of the
agreement, which was approved by over 97% of shareholders and resulted in the
disposal of the US business for nearly $1.1 billion, realising material value for shareholders.
Deepening market
leading positions
in the UK,
personally leading
senior customer
relationships
In FY18, the Group has increased its overall market share by continuing to secure
several significant new business wins and by developing a sole supply partnership
model with key customers. Patrick has been instrumental in building these
relationships and has played a pivotal role in delivering extensions in contracts. As
at FY18, Greencore has extended contracts with three of our five largest customers
and the average sandwich contract length has moved from approximately 2 years
to 4.4 years since 2015. These key steps to enhance our market leading positions
are of particular importance in light of the refocusing of our strategy in the UK.
Rebalancing the
UK portfolio
Delivering UK
reorganisation
Eoin Tonge
Strong
improvement
in cash flow
Execution of the
disposal of US
business
The strategic exit from the highly intensive cakes and desserts market was led
by Patrick. Tightening our portfolio facilitated the Group in avoiding significant
maintenance capital if we had continued that business. This allowed the Group
to refocus on the growing fresh ready meal market while protecting key customer
relationships. Further, to support growth in the fresh ready meal category,
the Group recently opened a new centre of excellence for ready meals at
our Warrington facility.
Patrick continued to drive the talent development process to build a pipeline
of future leadership succession candidates. Amongst the change within the
Group during FY18, Patrick oversaw the rebalancing of operations from a divisional
structure to a single UK leadership team. All members of the new leadership team
derive from Greencore’s existing talent pool demonstrating the significant progress
Patrick has made in developing a wide team of existing talent.
Eoin maintained strong financial rigour, particularly with regard to tighter
management of cash which resulted in a strong improvement in cash flow
in FY18. There were prudent reductions in maintenance capital expenditure
(FY17: £35.1, FY18: £20.6m) in continuing operations and the generation of Free
Cash Flow increased from £78.0m in FY17 to £92.4m in FY18. There were also
significant reductions in strategic capital expenditure (FY17: £62.10, FY18: £24.6m)
and this is reflected in a Net Debt reduction of £18.1m to £501.1m.
Eoin structured and executed all elements of the disposal of the US business
including all legal, tax and finance matters. He effectively managed capital market
implications surrounding the transaction. During the disposal period, Eoin also
ensured consistent delivery of financial management across the Group delivering
growth in revenue in both the continued and discontinued operations. This is
explained in detail in his Operating and Financial Review set out on pages 24 to 29.
Leading
operational
efficiencies
During FY18 Eoin led a cost reduction and streamlining efficiency programmes
in the UK, defending the Group’s margin in a competitive and inflationary market.
It is anticipated that these initiatives will further protect the margin going forward.
Leading the
corporate social
responsibility
and sustainable
business activity
Eoin oversaw the implementation of the Group’s corporate social responsibility
activity with particular emphasis on developing a new framework for the overall
agenda and ensuring the importance of our sustainable practices were understood
and shared throughout the Group. During FY18, progress was made in a number
of areas, with continued emphasis on the integration of sustainability criteria into
the business model. Further information on the Group’s initiatives are set out in
our Stakeholder report on pages 36 to 45.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
69
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED
The resulting bonus outcomes for FY18 for Patrick Coveney and Eoin Tonge are therefore as set out below:
Executive Director
Patrick Coveney
Eoin Tonge
Bonus
outcome
(% of maximum)
Bonus
outcome
(£000)
18%
18%
£197
£111
In line with our Policy, the bonus outcome will be paid 50% in cash and 50% in deferred shares in three years time dependent on continued
employment.
LONG-TERM INCENTIVES: VESTING OF FY16 PSP AWARDS
On 2 December 2015, Patrick Coveney and Eoin Tonge received awards under the PSP as set out in the table below:
Executive Director
Patrick Coveney
Eoin Tonge 2
Date
of grant
Number of
shares
granted
Share price
on date of
grant 1
Face
value
Award as
% of salary
Vesting
date
2 December 2015
2 December 2015
211,0343
107,9903
£2.62343
£2.62343
£553,637
£283,306
100%
n/a
2 December 2018
2 December 2018
1 Average share price for the three year days following 24 November 2015.
2 Eoin Tonge was not an Executive Director at the time of the award was granted; his award is disclosed here for transparency.
3 The number of awards and share price for awards granted in FY16 have been adjusted in line with the rights issue which completed in December 2016.
PSP awards granted in December 2015 were subject to Adjusted EPS and ROIC performance targets measured over the period FY15 to FY18.
Target and actual outturn have been as follows:
Measure
Adjusted EPS growth
ROIC
Total
Weighting
(% of award)
Performance
range
Underlying
outturn
Vesting
(% of award)
50%
50%
5 – 15% p.a.
0.7% p.a.
12.5 – 15%
10.2%
0%
0%
0%
Based on performance over the performance period, FY16 PSP awards lapsed in full.
PENSION
Patrick Coveney received a taxable non-pensionable cash allowance equivalent to 35% of his pensionable earnings in lieu of participation in a
Defined Contribution Pension Scheme. Eoin Tonge participates in the Greencore UK Master Trust Pension Scheme which is a Defined Contribution
Pension Scheme and receives a taxable non-pensionable cash allowance equivalent to 25% of his pensionable earnings.
Patrick Coveney is also a deferred member of the Group’s Irish Defined Benefit Pension Scheme which closed to future accrual with effect from
31 December 2009. The value of the frozen scheme benefits for the Chief Executive Officer was £51,108 as at 28 September 2018. His normal
retirement age under the scheme is 60 and he will not be entitled to any augmentation of benefit in the event that he retires early.
70
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT LONG-TERM INCENTIVES: PSP AWARDS GRANTED IN FY18
On 18 December 2017, Patrick Coveney and Eoin Tonge received awards under the PSP as set out in the table below:
Executive Director
Patrick Coveney
Eoin Tonge
Date of grant
Number of
shares
granted
Share price
on date
of grant 1
Face value
on date of
grant
Award as
% of salary
Vesting date
Holding
period after
vesting date
18 December 2017
18 December 2017
708,744
300,587
£2.046 £1,450,090
£615,001
£2.046
200%
150%
18 December 2020
18 December 2020
2 years
2 years
1 Average share price for 28, 29 and 30 November 2017.
Vesting of these awards will be subject to Adjusted EPS, ROIC and TSR performance targets measured over the period FY17 to FY20.
The performance conditions are as follows:
Measure
EPS growth
FY20 ROIC
Relative TSR v.s a bespoke group of sector peers
Weighting
(% of award)
1/3rd
1/3rd
1/3rd
Performance targets
Below 5% p.a.: 0% vesting;
5% p.a.: 25% vesting;
15% p.a.: 100% vesting
(Straight-line vesting applies between 5% and 15% p.a.)
Below 10%: 0% vesting;
10%: 25% vesting;
13%: 100% vesting
(Straight-line vesting applies between 10% and 13%)
Below median: 0% vesting
Median: 25% vesting
Upper quartile: 100% vesting
(Straight-line vesting applies between median and
upper quartile)
As in prior years, prior to determining the level of vesting, the Committee will also consider the underlying financial performance of the business,
as well as the value added to shareholders, and the level of vesting may be adjusted where it considers that there is a material difference between
the formulaic vesting outcome and underlying performance.
The awards will vest three years from the grant date, subject to meeting the performance conditions and continued employment. Clawback
and malus provisions apply to the FY18 PSP awards. The Company introduced a mandatory two-year holding period for vested PSP awards made
to Executive Directors in FY17 and subsequent years. Vested awards may not be sold during the holding period except to cover tax liabilities.
LONG-TERM INCENTIVES: DEFERRED BONUS PLAN (‘DBP’) AWARDS GRANTED IN FY18
During the year, the following deferred bonus shares were awarded to Patrick Coveney and Eoin Tonge in respect of FY17. The awards relate
to the bonus awarded for performance during FY17.
Executive Director
Patrick Coveney
Eoin Tonge
Date of grant
Number of
shares
granted
Share price
on date
of grant 1
Face value
on date of
grant
Vesting date
18 December 2017
18 December 2017
114,090
64,516
£2.046
£2.046
£233,428
£131,999
18 December 2020
18 December 2020
1 Average share price for the 28, 29 and 30 November 2017.
PAYMENTS FOR LOSS OF OFFICE
No payments for loss of office were made during the year under review.
PAYMENT TO PAST DIRECTORS
No payments were made to past Directors during the year under review.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
71
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED
IMPLEMENTATION OF THE REMUNERATION POLICY IN FY19
A summary of how the remuneration Policy will be applied for FY19 is set out below.
BASE SALARY
The Committee reviewed Executive Directors’ salaries in late 2018 and agreed to award an increase of 2% for FY19 to both Patrick Coveney
and Eoin Tonge, marginally below the average increase awarded to the wider workforce. The new salaries, effective from 1 October 2018,
will be as follows:
Executive Director
Patrick Coveney
Eoin Tonge
PENSION AND BENEFITS
Provisions remain unchanged from FY18.
Salary from
1 October
2018
Salary from
1 October
2017
€840,202
£418,200
€823,728
£410,000
% increase
2%
2%
ANNUAL BONUS
The performance measures and bonus opportunity for the FY19 remain unchanged from FY18. The maximum opportunity will continue to be 150%
of salary. Half of any bonus earned will be deferred in shares, vesting after three years subject to continued employment. Both the cash bonus and
deferred bonus awards are subject to malus and clawback provisions.
As in previous years, bonus will be based on Group financial targets (75% of maximum bonus) and on personal and strategic goals (25% of
maximum bonus). The financial targets are Adjusted EPS (50%) and ROIC (25%). Personal and strategic goals are set in relation to each Executive
Director’s responsibilities and are aligned with the Company’s short and medium term strategic priorities but include a long-term focus.
As in previous years, the targets for FY19 will be set with reference to budget as well as broker forecasts and other external considerations,
and the Committee considers its approach to target-setting to be robust. If maximum performance targets are achieved, the Committee
considers that this would represent exceptional performance and add significant value for shareholders. Performance targets are considered
by the Committee to be commercially sensitive and have therefore not been disclosed on a prospective basis. Full retrospective disclosure
of the targets and performance against them will be provided in next year’s report.
LONG-TERM INCENTIVE
For FY19, Patrick Coveney and Eoin Tonge will receive awards under the PSP of 200% and 150% of salary, respectively, in early 2019.
The performance measures will continue to be Adjusted EPS, ROIC and TSR. Performance will be assessed over the period FY18 to FY21.
As outlined previously, the Committee is currently reviewing the targets for the FY19 awards in light of the significant changes to our business
as a consequence of the recent disposal of our entire US business. Consistent with that review, targets for the EPS and ROIC measures and an
appropriate TSR peer group will be finalised shortly before awards are made and will be disclosed in the RNS announcement made in relation
to the granting of the awards. The Committee continues to believe that Adjusted EPS, ROIC and TSR are the most appropriate measures for the
next three year cycle for growth and returns in the business. The Committee has a robust approach to target-setting, taking into account internal
and external forecasts, as well as market practice for similar-sized companies, and the need to set targets that are stretching yet achievable.
72
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT As in previous years, the Committee will consider the underlying financial performance of the business as well as the value added to shareholders
in adjudicating the final overall PSP vesting level.
The awards will vest three years from the grant date, subject to meeting the performance conditions and continued employment. Malus and
clawback provisions apply to the FY19 PSP awards both prior to vesting and for a period of two years post-vesting and vested awards may not
be sold during the holding period except to cover tax liabilities.
NON-EXECUTIVE DIRECTOR FEES FOR FY19
Non-Executive Director fees are determined by the Board within the limit approved by shareholders in the Articles of Association, with the
exception of the Chairman of the Board, whose remuneration is determined by the Committee. The fees for the Chairman and the Non-Executive
Directors shall remain unchanged for FY19.
Basic fee
Chairman
Non-Executive Director
Additional fees
Chairman
Senior Independent Director
Audit Committee Chair
Remuneration Committee Chair
Nomination and Governance Committee Chair
FY18
(€)
FY17
(€)
78,000
78,000
78,000
78,000
247,000
16,500
16,500
12,000
10,000
247,000
16,500
16,500
12,000
10,000
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
73
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED
RELATIVE IMPORTANCE OF SPEND ON PAY
The table below illustrates shareholder distributions (i.e. dividends and share buybacks) and total employee pay for FY18 and FY17, and the year
on year change.
FY18
FY17
% change
Distributions
to
shareholders
(£000)
39,364
31,816
23.7%
Total
employee
pay1
(£000)
372,500
369,600
0.8%
1 Total employee pay in 2018 for UK & Ireland employees was £272.5m (2017: £286.1m) and for the US employees it was £100.0m (2017: £83.5m). See Note 5 for UK & Ireland
employees in relation to continuing operations and see Note 9 for US employees as part of the discontinued operations.
HISTORICAL TSR PERFORMANCE AND REMUNERATION OUTCOMES FOR THE CHIEF EXECUTIVE OFFICER
The graph below compares the Company’s TSR against the FTSE All-Share Index and the FTSE 250 Index for over a period of nine years up
to 28 September 2018. It reflects the change in a hypothetical £100 holding in shares. The FTSE 250 Index has been chosen as the Company
is a constituent of this index, whilst the FTSE All-Share Index has been chosen to provide a more broad-based comparator group.
£450
£400
£350
£300
£250
£200
£150
£100
£50
£0
Sep
09
Sep
10
Sep
11
Sep
12
Sep
13
Sep
14
Sep
15
Sep
16
Sep
17
Sep
18
Greencore
FTSE All-Share
FTSE 250
FTSE 250
FTSE All-Share
Greencore Group Plc
The table below illustrates the CEO’s single figure of total remuneration over the same nine year period to 28 September 2018.
Single Figure (£000)
Annual Bonus
PSP vesting 1
FY10
1,920
95%
–
FY11
1,933
78%
–
FY12
2,029
92%
–
FY13
1,740
89%
–
FY14
2,130
98%
–
FY15
3,750
73%
92.3%
FY16
2,424
83%
79%
FY17
1,454
22%
35%
FY18
1,252
18%
0%
1 No performance-based long-term incentive awards were awarded prior to March 2013.
Each year the CEO’s single figure of total remuneration is converted from euro to sterling using the average exchange rate over the relevant
financial year. The CEO’s salary for FY18 was €823,728 and has been converted to sterling using the exchange rate €1:£0.8857 which is the average
exchange rate for FY18.
74
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT
EXTERNAL APPOINTMENTS
We recognise the opportunities and benefits to both the Company and to our Executive Directors of serving as Non-Executive Directors of other
companies. Executive Directors are permitted to take on a Non-Executive Directorship with another publicly listed company with the approval
of the Nomination and Governance Committee. Any fees arising from such appointments will generally be retained by the individual.
On 30 May 2014, Patrick Coveney was appointed as a Non-Executive Director of Glanbia plc. In FY18, Patrick received €81,250 for this role.
OUTSTANDING SHARE AWARDS (AUDITED)
Details of the Executive Directors’ existing share awards as at 28 September 2018 in the Company’s share schemes are set out in the table below.
Number of
options/
awards at
start of year
Granted/
awarded
during the
year
Date of
grant
Vested/
exercised in
the year
Lapsed
during the
year
Number of
options
awarded at
year end
Market price
of date of
grant
Exercise
price
Earliest date
of exercise
Expiry date
Patrick Coveney
Deferred Bonus Plan
Performance
Share Plan 3
ShareSave
Eoin Tonge
Deferred Bonus Plan
Performance
Share Plan 3
ShareSave
02.12.14
02.12.15
10.01.17
18.12.17
02.12.14
02.12.15
07.02.17
18.12.17
06.07.16
06.07.18
02.12.14
02.12.15
10.01.17
18.12.17
02.12.14
02.12.15
07.02.17
18.12.17
23.07.15
06.07.18
192,3151
115,9641
175,197
–
266,886 1
211,034 1
562,829
–
7,004 1
–
84,1121
59,742 1
63,717
–
121,050 1
107,990 1
243,572
–
8,649 1
–
–
–
–
114,090
–
–
–
708,744
–
11,522
–
–
–
64,516
–
–
–
300,587
–
12,162
198,8722
–
–
–
97,978 4
–
–
–
–
–
–
–
–
–
–
–
–
115,964
175,197
114,090
–
211,034
562,829
708,744
£2.31721
£2.62341
£2.4260
£2.0460
£2.31721
£2.6234 1
£2.4633
£2.0460
–
–
–
–
–
–
–
–
–
–
7,004
–
–
11,522
£3.2970
–
€2.1795 1
€1.5700
86,9772
–
–
–
44,4394
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
59,742
63,717
64,516
–
107,990
243,572
300,587
£2.31721
£2.6234 1
£2.4260 1
£2.0460
£2.31721
£2.6234 1
£2.4633 1
£2.0460
–
–
–
–
–
–
–
–
8,649
12,162
£3.1530
–
£2.0800 1
£1.4800
02.12.17
02.12.18
10.01.20
18.12.20
02.12.17
02.12.18
07.02.20
18.12.20
01.09.19
01.09.21
02.12.17
02.12.18
10.01.20
18.12.20
02.12.17
02.12.18
07.02.20
18.12.20
01.09.18
01.09.21
02.12.17
02.12.18
10.01.20
18.12.20
02.12.17
02.12.18
07.02.20
18.12.20
29.02.20
28.02.22
02.12.17
02.12.18
10.01.20
18.12.20
02.12.17
02.12.18
07.02.20
18.12.20
28.02.19
28.02.22
1 The number of options and the market price for awards granted in FY15 and FY16 have been adjusted in line with the rights issue which completed in December 2016.
2 The difference between awards granted in 2014 and shares exercised in 2017 represents scrip dividend payments on the awards.
3 The share price used to calculate the number of shares under the award was the average share price for the three dealing days after the release of the Group’s results.
4 The difference between awards granted in 2014 and shares exercised in 2017 represents satisfaction of the performance conditions and scrip dividend payments on
the awards.
For the purposes of Section 305 of the Companies Act 2014, the aggregate gains by Executive Directors on the exercise of share options during
the year ended 28 September 2018 was £916,189.46.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
75
REPORT ON DIRECTORS’ REMUNERATION CONTINUED
ANNUAL REPORT ON REMUNERATION CONTINUED
STATEMENT OF DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS (AUDITED)
The Company has adopted Executive Director shareholding guidelines whereby all Executive Directors shall acquire a holding of shares
in the Company equal to 200% of base salary, typically over a five year period commencing on the date of their appointment to the Board.
The guideline was previously set at 150% of salary for the CFO, but was increased to 200% of salary for all Executive Directors from FY18 in
response to shareholder feedback and in line with best practice.
There are currently no shareholding guidelines in place for Non-Executive Directors, though all Non-Executive Directors are encouraged
to hold shares in the Company.
The table below shows the beneficial interests of Directors on 28 September 2018 (including the beneficial interest of their spouses, civil partners,
children and stepchildren) in the Ordinary Shares of the Company, as well as unvested awards.
Shareholding requirement
Ordinary
Shares held
at 29 Sep
2017
Ordinary
Shares held
at 28 Sep
2018
Ordinary
Shares held
at 03 Dec
2018
% of salary
required
% of salary
held
Value of
shares held
at 28 Sep
20181
Unvested
performance
shares
subject to
performance
Unvested
awards not
subject to
performance
Vested
options not
exercised
Executive Directors
Patrick Coveney
Eoin Tonge
Non-Executive Directors
Gary Kennedy
Sly Bailey
Heather Ann McSharry
John Moloney
Eric Nicoli 2
Kevin O’Malley
Helen Rose 3
Tom Sampson
John Warren
Group Company Secretary
3,478,366
458,616
3,613,544
553,552
3,613,544
553,552
200%
200%
893%
243%
£6,521k
£999k
1,482,607
652,149
405,251
187,975
101,087
55,576
27,377
47,307
28,769
19,500
–
35,000
60,000
153,363
55,576
57,903
47,307
–
29,742
–
85,000
60,000
153,363
55,576
57,903
47,307
–
29,742
–
85,000
60,000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Conor O’Leary
125,324
125,324
125,324
1 Calculated based on the average share price between 1 July 2018 and 28 September 2018 of £1.80467.
2 Eric Nicoli retired from the Board on 14 December 2017.
3 Helen Rose was appointed to the Board on 11 April 2018.
The table above reflects changes to current Directors’ interests in Greencore shares during the period 29 September 2018 to 03 December 2018.
None of the Directors had a material interest in any contract of significance, other than a service contract in the case of Executive Directors,
with the Company or any of its subsidiaries at any time during the period.
76
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT
SHARE-BASED PAYMENTS
The Group operates a ShareSave Scheme in both Ireland and in the UK which encourages eligible employees to save in order to buy shares in
the Company. The ShareSave Schemes provide a means of saving and give employees the opportunity to become shareholders. Currently, there
are approximately 1,350 participants in the schemes. The Group’s Financial Statements recognise an Income Statement charge in accordance
with IFRS 2 Share-based payment in respect of options issued under the ShareSave Scheme, and awards granted under the DBP and the PSP.
The related charge in respect of share-based payments issued to Executive Directors totalled £0.3m (FY17: £0.9m). Further detail in respect
of the DBP and PSP awards is outlined in Note 6 of the Financial Statements.
Options outstanding under the Company’s DBP, PSP and ShareSave Schemes at 28 September 2018 amounted to 15,635,761 Ordinary Shares
(FY17: 12,217,828) made up as follows:
Deferred Bonus Plan
Performance Share Plan
ShareSave Scheme
Number of
ordinary shares 1
Price
range 1
Normal exercise
dates
1,543,189
8,553,037
140,223
5,399,312
–
–
€1.57–€2.58
£1.48–£2.17
2018–2021
2018–2021
2018–2022
2018–2022
1 The number of shares and the prices have been adjusted in line with the rights issue which completed in December 2016.
FUNDING OF EQUITY AWARDS
Executive incentive arrangements are funded by a mix of newly issued shares and shares purchased in the market. Where shares are newly issued,
the Company complies with the Investment Association guidelines in relation to issuing a maximum of 5% of share capital in respect of discretionary
schemes and a maximum of 10% in respect of all share schemes in a rolling ten-year period. At 28 September 2018, there were 3,386,641 shares
in the Company’s share ownership trust (as at 29 September 2017: 4,085,161). Current shareholder dilution is circa 0.48%.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
77
REPORT OF THE AUDIT COMMITTEE
John Warren
This report aims to provide an insight of the Audit
Committee’s essential role in protecting the interests
of the Group and our shareholders.
DEAR SHAREHOLDER,
On behalf of the Audit Committee (the ‘Committee’) and the Board, it is my pleasure to present the Report of the Committee for the year ended
28 September 2018. The purpose of this report is to provide an understanding of the work of the Committee, including an overview of the principal
matters which the Committee has assessed during the year. The report aims to provide an insight of its essential role in protecting the interests
of the Group and our shareholders through ensuring the integrity of the Group’s published financial information and the effectiveness of the risk
management process.
ROLE OF THE COMMITTEE
The role, authority, responsibilities and scope of the Committee are set out in its Terms of Reference which are available on the Corporate
Governance section of our website, www.greencore.com. The Terms of Reference are reviewed on an annual basis and were reviewed in
September 2018 with minor amendments made.
MEMBERSHIP OF THE COMMITTEE
Ms HC Rose was appointed to the Audit Committee in April 2018. The Committee now consists of four Non-Executive Directors: Ms SG Bailey,
Ms HA McSharry, Ms HC Rose and myself, each considered by the Board to be independent. Further details of the Committee members’
experience and qualifications can be found in our biographical details as set out on pages 48 and 49.
The Board has determined that Ms Rose and I both have recent and relevant financial experience. Ms Rose also has specific risk expertise, being
involved in risk management in TSB Banking Group plc. The Committee as a whole, brings a broad range of relevant experience and expertise
from a variety of industries as well as knowledge of the Company which enables it provide effective governance. Following a review, the
Committee has confirmed that, as a collective, it is competent in the manufacturing sector.
In accordance with the Committee’s Terms of Reference, the Group Company Secretary acts as Secretary to the Committee. In line with Principle
C.3 of the 2016 Corporate Governance Code (‘2016 Code’) and its associated provisions, the Board ensures that there are formal and transparent
arrangements in place for considering how corporate reporting is applied, monitoring risk management and internal control principles and
maintaining a suitable relationship with the external auditor.
The Committee meets at least three times in the financial year and attendance at the meetings held during FY18 is shown on page 56 of the
Corporate Governance Report. The meetings of the Committee are scheduled to take place in advance of Board meetings. This allows me the
opportunity to keep the Board apprised of the key items discussed at Committee meetings. The Board also receive copies of the minutes of
the Committee meetings.
During FY18, meetings of the Committee were attended by the Chief Executive Officer, Chief Financial Officer (‘CFO’), Group Finance Director,
Head of Risk Management and Head of Legal and Compliance, together with any other individuals the Committee deemed appropriate upon
invitation. Representatives of the external auditor also attended Committee meetings upon invitation. Given his knowledge of the US business,
Non-Executive Director Mr TH Sampson attended the meetings during FY18. In addition, other individuals from within the Group attended
Committee meetings during the year, and provided the Committee with an update on certain key areas of the business, such as health and safety,
cyber risk, food safety, environment, insurance and IT.
In my capacity as Chair of the Committee, I am available to all Board members to discuss any audit or risk related issues they may have, either
on a collective or individual basis. I meet with the external auditor and the Head of Risk Management, absent management, on an annual basis
in order to discuss any issues which may have arisen during the year under review. In addition, the Head of Risk Management, whose appointment
or removal is subject to Committee approval, has direct access to both the Board Chairman and myself.
78
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT HOW THE COMMITTEE HAS DISCHARGED ITS RESPONSIBILITIES
KEY AREAS OF FOCUS
The work of the Committee principally fell under the following key areas:
Key areas of focus
NEW ACCOUNTING
STANDARDS
The Committee, together with management, considered the potential impact and proposed timeframe for the Group
to implement the new accounting standards in relation to Financial Instruments (IFRS 9), Revenue from Contracts with
Customers (IFRS 15) and Leases (IFRS 16).
RISK MANAGEMENT
AND INTERNAL
CONTROLS
The Committee continued to monitor and review the progress of the risk management framework, further details are set
out on page 80.
EXTERNAL AUDIT
FY18
The Committee monitored the activities undertaken by KPMG, the Group’s current external auditor, to ensure external
auditor independence and that an effective audit was carried out. In September 2018, the Committee met with KPMG
to discuss and approve the FY18 external audit plan.
DISPOSAL OF THE
US BUSINESS
The Committee reviewed, with the external auditor, the half year results statement, full year results statement and the
FY18 Annual Report and Financial Statements for recommendation to the Board. Further detail in relation to the external
audit is set out on pages 80 and 81. The critical accounting policies and judgements which applied are set out below.
In October 2018, the Group announced the disposal of the entire US business. Given the complexity and scale of the
disposal expertise was relied on from various professional service providers. The Committee considered the working
capital statement and profit estimate analysis provided by both management and KPMG. KPMG also provided an
Unaudited Pro Forma Statement of Net Assets of the Retained Group which is contained in the Group’s circular to
shareholders dated 15 October 2018. The Committee took comfort in external professional expertise when considering
the appropriateness of these calculations. Committee members received detailed briefings from senior management
and expert service providers on the disposal as part of additional Committee and Board meetings. On 7 November 2018,
the Group’s shareholders approved the sale of the US business, which completed on 25 November 2018. Details of the
significant judgements in relation to the disposal are set out below.
MONITORING THE INTEGRITY OF THE FINANCIAL STATEMENTS INCLUDING SIGNIFICANT JUDGEMENTS
• We reviewed the appropriateness of Group accounting principles, practices and policies and monitored changes to, and compliance with,
accounting standards on an ongoing basis;
• We reviewed the half year and full year results statements for FY18, having discussed them with the external auditor and compared the results
to management accounts and budgets, focusing on key areas of judgement before recommending to the Board their release; and
• We reviewed, prior to making recommendations to the Board, the Annual Report and Financial Statements for the year ended 28 September 2018.
In undertaking this review we discussed with management and the external auditor the critical accounting policies and judgements that had been
applied. These were:
EXCEPTIONAL
ITEMS
ACCOUNTING FOR
THE DISPOSAL OF
THE US BUSINESS
Exceptional items are items which have been disclosed separately due to their amount or nature, the purpose of which
is to assist the user in understanding underlying performance. Group management exercises judgement in assessing
each exceptional item and analysing whether the treatment of exceptional items is consistent with accounting policies
and practice. During the year, the Group had exceptional costs of £44.4m in its continuing operations, largely due to
network rationalisation and optimisation costs, business exit costs and integration and reorganisation costs and £7.3m
in its discontinued operations. During the audit, KPMG reviewed the treatment of exceptional items and discussed the
application of the accounting policy and the related disclosures with management. Following discussions, the Committee
was satisfied that the identification of items as exceptional items was applied on a consistent basis and the accounting
policy and disclosures were in line with previous practice.
In advance of the disposal of the US operations, management presented an analysis to the Committee which outlined
why the business was to be classified as a held for sale on the Group’s Balance Sheet at 28 September 2018 and as a
discontinued operation in the Income Statement accordance with IFRS 5: Non-current assets held for sale and discontinued
operations (see Note 9 for more detail). KPMG have reported to the Committee on the appropriateness of valuations and
judgements made with regards to the value of the US business net assets and on the completeness of relevant disclosures
in the Group Financial Statements to ensure statutory reporting requirements have been met. Following discussion with
management and KPMG, the Committee was satisfied that the accounting treatment applied to the disposal is appropriate
and represents a true and fair view in the Financial Statements.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
79
REPORT OF THE AUDIT COMMITTEE CONTINUED
GOODWILL
TAXATION
The Group had goodwill of £409.7m for continuing operations as at 28 September 2018 and as set out in Note 14 to the
Group Financial Statements. As part of its audit, KPMG assessed the Group’s impairment model for each Cash Generating
Unit and performed analysis on the assumptions which had been used by the Group in the impairment model. Following
a detailed review and discussions with KPMG, the Committee was satisfied that the assumptions used were appropriate.
As there was sufficient headroom, the Committee was satisfied that no impairment was required.
The recognition of deferred tax assets and current and deferred tax provisions represents a key area of judgement
in the preparation of the Group’s Financial Statements. The Group’s current and deferred tax balances are sensitive
to assumptions used in determining the appropriate liabilities and assets. The Group is required to consider the range
of possible outcomes for a number of transactions/calculations across all the jurisdictions where the Group is subject
to income tax and to provide for current and deferred taxes accordingly.
As part of the audit, KPMG reviewed the corporation tax computations, the calculation of the deferred tax asset and
liabilities and uncertain tax provision and discussed the application of the Group’s accounting policy with management.
Following discussion with management, the Committee was satisfied that the accounting treatment applied with regards
to current and deferred tax and the level of tax provisioning is appropriate.
FAIR, BALANCED AND UNDERSTANDABLE ASSESSMENT
Under Provision C.3.4. of the 2016 Code, the Committee, upon request from its Board, should ‘provide advice on whether the annual report and
accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company’s
position and performance, business model and strategy.’
The Board has tasked the Committee with this role, which is incorporated into the Committee’s Terms of Reference.
In line with the above, the Committee has undertaken a review of the Annual Report and Financial Statements and confirmed to the Board that it
was the opinion of the Committee that, taken as a whole, the Annual Report and Financial Statements was fair, balanced and understandable and
provided the information necessary for shareholders to assess the Group’s position and performance, business model and strategy. In advance
of providing such a confirmation to the Board, the Committee considered the adequacy of the systems and internal controls, the consistency of
the various elements of the Annual Report and Financial Statements (taking into account reports received by the Board during the year), the level
of information provided, the narrative reporting and the language used.
RISK MANAGEMENT AND INTERNAL CONTROLS
Whilst it is the Board which is responsible for the Group’s system of internal control, the Committee assists the Board in meeting its obligations
in this regard. The Group’s internal control framework is set out on pages 58 and 59.
At least twice in the financial year, the Committee formally meets with the Head of Risk Management who provides the Committee with reports
on the Risk Management Group’s key findings from business process and control reviews and management’s response to same.
In May 2018, the Committee received an update from the Head of Risk Management on progress against the FY18 Risk Management Plan which
had been approved by the Committee in September 2017. It focussed mainly on the ongoing integration and transition of the enlarged US business.
Presentations on the reports actioned to date, including reviews and inputs concerning cyber risks, IT roadmaps, replacement of the Group
corporate performance management system, GDPR readiness and updates on the risk management charter, were also provided to the Committee.
In September 2018, the Committee reviewed the Risk Management Plan for FY19 which set out the planned activities, including staffing and
resources, for the Risk Management Group for the year ahead driven by the maturity of the business and perceived risk level. The Committee
also received and reviewed the final comprehensive report on the activities of the Risk Management Group for FY18. The report included detailed
information in relation to how the Risk Management Group had delivered against the FY18 plan, a summary of its risk assessment process for
the year under review, its key findings and comprehensive information in relation to each of the risk management reports which had been issued
since the previous report. The Committee also undertook a review of the Risk Management Group’s mission and objectives along with its internal
audit charter in order to assess how effectively it had performed during the year. Following the review, the Committee was satisfied that the Risk
Management Group had performed well against its mission and objectives. Furthermore, the deployment of its formalised audit approach had
ensured appropriate escalation and accountability processes remained in place.
In light of the above, the Committee continues to be satisfied that the Group control environment remains appropriate and effective.
In May and September 2018, the Committee also noted reports from the Head of Risk Management in relation to good faith reporting
(‘whistleblowing’). Under the Group’s whistleblowing policy, arrangements are in place for individuals to raise any issue, in confidence, relating to
accounting, risk issues, auditing issues or any other impropriety or area of concern. The whistleblowing reports included information on the nature
of issues reported, an analysis of the issues raised by location, category and type along with the outcome of the investigations into the allegations.
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DIRECTORS’ REPORT EXTERNAL AUDIT EFFECTIVENESS
The Committee, on behalf of the Board, is responsible for monitoring the quality, objectivity and effectiveness of the external auditor. In order to assist
the Committee in evaluating the external audit process and to ensure continuous improvement, following the completion of the audit each Committee
and relevant management team member completes a questionnaire on the effectiveness of the external auditor and the external audit process generally.
The assessment of the FY17 audit highlighted a number of strengths, in particular, the external auditor’s technical knowledge and professional
scepticism with regards to key judgements, as well as their growing understanding of the Group’s industry, business and risks facing the Group.
In line with previous years, KPMG performed additional analytics to support their output, providing useful insights which were welcomed by
the Committee. Overall the Committee was satisfied with the high level of services provided by KPMG to Greencore throughout the year.
In advance of the commencement of the annual audit in FY18, the Committee reviewed a letter provided by the external auditor confirming
their independence within the meaning of the regulations and professional standards.
In September 2018, the Committee met with the external auditor to agree the FY18 audit plan. To ensure a quality audit, the external auditor
needs to be aware of the business risks, therefore the Committee discussed and agreed the key business, financial statement and audit risks with
the external auditor to ensure that the audit was appropriately directed. In addition, the external auditor’s Letter of Engagement was reviewed
by the Committee and signed on behalf of the Group in advance of the commencement of the audit.
In November 2018, in advance of the finalisation of the Group’s Financial Statements, the Committee reviewed a report from KPMG on their key
audit findings, including the key risk areas and significant judgements, and discussed it with them in order for the Committee to form a judgement
on the Financial Statements. In addition, we considered the Letter of Representation and the management letter. At least annually, the Committee
meets with the external auditor absent management to discuss any issues the external auditor may wish to raise.
As reported in our FY17 report, KPMG’s tenure as the Group’s statutory auditor concluded at the end of the FY18 audit.
EXTERNAL AUDIT FY19
The Committee undertook a tender process during FY17, after which the Committee recommended to the Board that Deloitte be appointed
as external auditor. Deloitte’s tenure takes effect in respect of FY19. It is intended that the lead partner will be rotated every five years to ensure
continued independence and objectivity.
TRANSITIONAL PROCESS
To ensure that Deloitte is well prepared for its engagement as the Group’s external auditor, transition meetings took place throughout FY18 with
Group management, Deloitte and KPMG to fully understand the audit approach taken and conclusions reached on significant audit issues and
judgements. During FY18 the Group also managed the transition of the services previously provided by Deloitte including tax and payroll.
NON-AUDIT SERVICES
The Committee has a formal approved policy on the provision of audit and non-audit services by the external auditor, which is reviewed on an
annual basis, the aim of which is to ensure external auditor independence and objectivity. The policy details a schedule of prohibited non-audit
services and sets out that no other non-audit work may be undertaken by the external auditor without the prior written approval of the CFO and
the Committee, whose role also includes monitoring the level of fees incurred for the provision of non-audit services.
In FY18 the external auditor provided a number of non-audit related services including acting as reporting accountant for the disposal of the
US business. A total sum of £471k non-audit fees were incurred by the Group, £437k of which related to the US disposal. The Committee believes
that the external auditor’s knowledge and objectivity were required and these were important factors in choosing KPMG to provide this service.
No other fees were paid to other firms in the lead audit firms network during the year.
COMMITTEE EFFECTIVENESS
During FY18, the Board and the Committee reviewed the performance and effectiveness of the Committee, and I can confirm that the Committee
continues to operate effectively and efficiently.
I would like to thank my fellow Committee members for their commitment and input to the work of the Committee over the past year. I will be
available to shareholders at the forthcoming AGM to answer any questions relating to the role of the Committee.
Yours sincerely
John Warren
On behalf of the Audit Committee
3 December 2018
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
81
REPORT OF THE NOMINATION AND GOVERNANCE COMMITTEE
John Moloney
The Nomination and Governance Committee focused
on diversity as a top priority throughout the year.
DEAR SHAREHOLDER,
As Chair of the Nomination and Governance Committee (the ‘Committee’) I am pleased to present the Committee’s report for the year ended
28 September 2018 (‘FY18’), which outlines the role of the Committee and the work it has undertaken during the year. The role of the Committee
is defined within its Terms of Reference, which can be found under the Corporate Governance section of our website, www.greencore.com.
MEMBERSHIP OF THE COMMITTEE
The Committee consists of three Non-Executive Directors: Ms SG Bailey, Mr PG Kennedy and myself. Further details of the Committee members’
experience and qualifications can be found in our biographical details as set out on pages 48 and 49.
The Committee believes that the composition of the Committee remains suitably equipped to perform both its nomination and governance
duties effectively.
ACTIVITIES OF THE COMMITTEE
During FY18, the Committee focused on board renewal and the appointment of senior executive leadership positions within the Group.
The Committee also concentrated on securing a suitable replacement for our Group Company Secretary who is due to retire from the Group
in January 2019.
During the year, the Committee held two scheduled meetings and further additional meetings, which all members attended.
BOARD AND COMMITTEE COMPOSITION FY18
During FY18, Mr EL Nicoli retired from the Board as Non-Executive Director and Senior Independent Director. Upon his retirement, Ms Bailey
took on the role of Senior Independent Director. The Committee identified and recommended to the Board that Ms HC Rose be appointed
to the Board as Non-Executive Director. Ms Rose who was appointed to the Board on 11 April 2018 brings a wealth of operational, financial,
risk and UK retail expertise to the Board. Ms Rose is also a member of the Audit Committee.
As part of the renewal process of the Board during FY18, the Committee evaluated the balance of skills, knowledge, experience, independence
and diversity of the Board and the committees. The Board member’s individual expertise and experience complemented each other and together
formulated a Board and Board committees of appropriate size and structure.
BOARD RENEWAL AND EFFECTIVENESS
As the Group has disposed of the US business, both of our US-based Non-Executive Directors, Mr TH Sampson and Mr KF O’Malley have confirmed
their intention not to seek re-election at the 2019 Annual General Meeting (‘AGM’).
The Committee together with the Board, continues to keep the composition of the Board and the membership of each of the committees under
continuous review to ensure that each remains appropriately constituted.
The Committee acknowledges that Mr PG Kennedy, the Group’s Chairman, is currently serving his tenth year as Non-Executive Director of the
Company and his fifth year as Chairman of the Company. The Committee is satisfied that Mr Kennedy remains key to the continuity of leadership
of the Group.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT To ensure that the independence of the independent Non-Executive Directors is maintained, the Committee keeps the tenure and agreed
timelines, within which tenure would not normally be extended, for each of the Non-Executive Directors, under review. Each year, the Committee
reviews the time required to fulfil the roles of Chairman, Senior Independent Director and Non-Executive Director and ensures that all members
of the Board continue to devote appropriate time to their duties and to be effective representatives of shareholder interests. As per previous years,
all Directors will retire at the 2019 AGM and, where appropriate, submit themselves for re-election.
Our Non-Executive Directors’ tenure on our Board as at 28 September 2018 was as follows:
Length of service
Less than 1 year
Between 1-2 years
Between 3-5 years
Between 5-10 years
More than 10 years
Number of Directors
1
2
1
5
1
The Letters of Appointment of each of the Non-Executive Directors are available for inspection at the Company’s registered office during normal
office hours and at the Company’s AGM.
The Committee is also tasked with ensuring that succession plans are in place for the Directors and other key executives within the Group taking
into consideration the current Board structure, the leadership requirements of the organisation and the commercial environment within which
the Group operates, along with the wider market.
The Committee engaged MwM Consulting, who have no other affiliation with the Group, during FY18 to assist with identifying suitable Board
candidates.
COMPANY SECRETARY
Mr CM O’Leary has confirmed his intention to step down as Group Company Secretary and Secretary to each of the Committees after the AGM
in 2019. Ms JA Gacquin, current Group Head of Legal and Compliance will take on this role.
DIVERSITY
The Committee focused on diversity as a top priority throughout the year. As a result of our Board changes during the year, the number of female
Directors increased from 20% to 30%. Gender diversity has been a commitment of the Committee for some time and the Committee is proud
that the Board is progressing in this area. Additionally, the Board adopted a Board Diversity Policy during the year which is highlighted on page 56.
In terms of the gender mix of our employees, in FY18 40% of the workforce in the UK were female, while in the US, females made up 46% of the
workforce. Further details on the breakdown of female and male employees can be found on page 37.
GOVERNANCE
The Committee continues to work with the Board to enhance the corporate governance processes and developments in legislation and regulation.
During FY18, the Committee assisted the Group Chairman in the external evaluation of the Board. Further details are set out on page 55.
The Committee reviewed its Terms of Reference and concluded that they reflect the Committee’s remit and remain appropriate.
Two key areas of focus for the Committee over the coming year will continue to be succession planning and diversity.
I will be available at the forthcoming AGM of the Company to answer any queries that shareholders may have in relation to my role, or the role
of the Committee generally.
John Moloney
On behalf of the Nomination and Governance Committee
3 December 2018
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
83
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report and Financial Statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare Financial Statements for each financial year which give a true and fair view of the state of affairs of
the Company and of the Group and of the profit or loss of the Group for that period. The Directors have prepared the Group Financial Statements
in accordance with International Financial Reporting Standards (‘IFRS’) as adopted by the European Union (‘EU’) and applicable accounting law
including Article 4 of the International Accounting Standards (‘IAS’) Regulation. The Directors have elected to prepare the Company Financial
Statements in accordance with FRS 101: Reduced Disclosure Framework, comprising the financial reporting standards issued by the Financial
Reporting Council and published by the Institute of Chartered Accountants in Ireland, together with the Companies Act 2014.
Under company law directors must not approve the Group and Company Financial Statements unless they are satisfied that they give a true
and fair view of assets, liabilities and financial position of the Group and Company of the Group’s profit for that year.
In preparing these Group and Company Financial Statements, the Directors are required to:
• Select suitable accounting policies and apply them consistently;
• Make judgements and estimates that are reasonable and prudent;
• State that the Group Financial Statements comply with IFRS as adopted by the EU and as regards the Company, comply with FRS 101
as applicable in accordance with the Companies Act 2014;
• Assess the Group Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and
• Prepare the Financial Statements on the going concern basis, unless it is inappropriate to presume that the Group will continue in business.
The Directors are also required by the Transparency (Directive 2004/109/EC) Regulations 2007 (as amended) (the ‘Transparency Regulations’)
and the Transparency Rules of the Central Bank to include a management report containing a fair review of the business and a description
of the principal risks and uncertainties facing the Group.
The Directors confirm that they have complied with the above requirements in preparing the Annual Report and Financial Statements.
The Directors are responsible for keeping adequate accounting records which disclose with reasonable accuracy at any time the assets, liabilities,
financial position and profit or loss of the Group and Company and which enable them to ensure that the Financial Statements of the Group and
Company comply with the provision of the Companies Act 2014. The Directors are also responsible for taking all reasonable steps to ensure such
records are kept by its subsidiaries which enable them to ensure that the Financial Statements of the Group comply with the provisions of the
Companies Act 2014 including Article 4 of the IAS Regulation. They are responsible for such internal controls as they determine is necessary
to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error, and have general
responsibility 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 also responsible for preparing a Directors’ report that complies with the requirements of the
Companies Act 2014.
The Directors are responsible for the maintenance and integrity of the website (www.greencore.com). Legislation in Ireland concerning the
preparation and dissemination of Financial Statements may differ from legislation in other jurisdictions.
In accordance with the 2016 UK Corporate Governance Code, the Directors, having taken all relevant matters into consideration, believe that the
Annual Report and Financial Statements, taken as a whole, is fair, balanced and understandable and gives shareholders the information needed
to assess the Group’s performance, business model and strategy.
REGULATION 21 OF SI 255/2006 ‘EC (TAKEOVER BIDS DIRECTIVE) REGULATIONS 2006’
For the purposes of Regulation 21 of SI 255/2006 ‘EC (Takeover Bids Directive) Regulations 2006’, the information given under the following
heading on page 50 (Share Capital), 48, 49 and 51 (Directors), 51 (Significant Shareholdings), 68 (Performance Related Annual Bonus and
Deferred Bonus Plan, 70 (Performance Share Plan), 77 (Share Option Schemes), 76 (Directors’ and Company Secretary’s Shares Interests), 75 and 77
(Share Options), 77 (Share-Based Payments) and 67 (Remuneration and Fees Paid in respect of FY18) are deemed to be incorporated in this part
of the Director’s Report. In addition, the Company’s Memorandum and Articles of Association, which set out the rules that apply in relation to the
appointment and replacement of Directors and the amendments of the Articles of Association, are available on the Greencore website and are
deemed to be incorporated in this part of the Directors’ Report.
The Group’s financing facilities contain provisions that may require repayment in the event that a change in control of the Company occurs,
in addition, the Company’s ShareSave Schemes allow for the early exercise of outstanding options upon a change in control of the Company,
subject to the approval of the Remuneration Committee.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
DIRECTORS’ REPORT RESPONSIBILITY STATEMENT IN REGARD TO ANNUAL REPORT
Each of the Directors, whose names and functions are listed on pages 48 and 49 of this Annual Report, confirm that, to the best of each person’s
knowledge and belief:
As required by the Transparency Regulations:
• The Group Financial Statements, prepared in accordance with IFRS as adopted by the EU and the Company Financial Statements prepared
in accordance with FRS 101: Reduced Disclosure Framework, give a true and fair view of the assets, liabilities, financial position of the Group
and Company at 28 September 2018 and the profit/loss of the Group for the year then ended; and
• The Directors’ Report contained in the Annual Report and Financial Statements includes a fair review of the development and performance
of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that they face.
As required by the 2016 UK Corporate Governance Code:
• The Annual Report and Financial Statements, taken as a whole, provides the information necessary to assess the Group’s performance business
model and strategy is fair, balance and understandable.
On behalf of the Board
PG Kennedy
Chairman
Dublin
3 December 2018
EP Tonge
Director
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
85
INDEPENDENT AUDITOR’S REPORT
to the Members of Greencore Group plc
OPINIONS AND CONCLUSIONS ARISING FROM OUR AUDIT
1. OPINION: OUR OPINION ON THE FINANCIAL STATEMENTS IS UNMODIFIED
We have audited the Group and Company Financial Statements of Greencore Group plc for the year ended 28 September 2018 which comprise
the Group Income Statement, the Group Statement of Recognised Income and Expense, the Group Balance Sheet, the Group Cash Flow
Statement, the Group Statement of Changes in Equity, the Company Balance Sheet, Company Statement of Changes in Equity and the related
notes, including the accounting policies in Note 1.
The financial reporting framework that has been applied in their preparation is Irish Law and International Financial Reporting Standards (‘IFRS’)
as adopted by the European Union and, as regards the Company Financial Statements, Irish Law and FRS 101 Reduced Disclosure Framework.
In our opinion:
• the Group Financial Statements give a true and fair view of the assets, liabilities and financial position of the group as at 28 September 2018
and of its profit for the year then ended;
• the Company Balance Sheet gives a true and fair view of the assets, liabilities and financial position of the Company as at 28 September 2018;
• the Group Financial Statements have been properly prepared in accordance with IFRS as adopted by the European Union;
• the Company Financial Statements have been properly prepared in accordance with FRS 101 Reduced Disclosure Framework issued by the
UK’s Financial Reporting Council; and
• the Group Financial Statements and Company Financial Statements have been properly prepared in accordance with the requirements
of the Companies Act 2014 and, as regards the Group Financial Statements, Article 4 of the IAS Regulation.
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 further described in the Auditor’s Responsibilities section of our report. We believe that the audit evidence we have
obtained is a sufficient and appropriate basis for our opinion. Our audit opinion is consistent with our report to the Audit Committee.
We were appointed as auditor by the Directors on 19 August 2008 and subsequently re-appointed by shareholders at each subsequent Annual
General Meeting to date. The period of total uninterrupted engagement is the 11 years ended 28 September 2018. We have fulfilled our ethical
responsibilities under, and we remained independent of the Group in accordance with, ethical requirements applicable in Ireland, including
the Ethical Standard issued by the Irish Auditing and Accounting Supervisory Authority (‘IAASA’) as applied to listed public interest entities.
No non-audit services prohibited by that standard were provided.
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ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS 2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the Financial Statements and
include the most significant assessed risks of material misstatement (whether or not due to fraud) identified by us, including those which had
the greatest effect on: the overall audit strategy; the allocation of resources in the audit; and directing the efforts of the engagement team.
These matters were addressed in the context of our audit of the Financial Statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
In arriving at our audit opinion above, the key audit matters relating to the Group and Company, in decreasing order of audit significance,
were as follows:
1. DISPOSAL GROUP HELD FOR SALE AND DISCONTINUED OPERATIONS
Refer to page 104 (accounting policy) and pages 118 to 120 (financial disclosures)
The key audit matter
How the matter was addressed in our audit
The Group has agreed to sell the entire
US business for $1,075m. The risks relating
to the transaction include the incorrect
measurement and presentation of:
• Results relating to the discontinued
operations (£23.9m); and
• Assets held for sale (£944.7m) and
associated liabilities (£203.0m).
Our audit procedures included, among others:
• Obtaining and documenting our understanding of the process management undertook
to present the results and assets and liabilities of the US business as discontinued
operations. In addition, we identified relevant controls in this process and tested their
design and implementation.
Inspecting management’s assessment of how the transaction complies with the
requirements of IFRS 5.
•
• Testing the reclassification of the performance of the US division from continuing
to discontinued operations for the current and prior year.
• Testing the reclassification of the assets held for sale and liabilities held for sale of the
US business in the Group Balance Sheet.
• Assessing the disclosures in relation to the assets and liabilities held for sale and the results
from discontinued operations in the Annual Report and Financial Statements were in line
with IFRS 5.
• Assessing if assets and liabilities have been held at the lower of carrying value or fair value
less costs to sell.
As a result of our work, we determined that the transaction has been presented in accordance
with IFRS 5 criteria for assets held for sale and discontinued operations.
2. PRESENTATION OF EXCEPTIONAL ITEMS – GROUP £80.1M (2017 – £78.2M) AND COMPANY £1.0M (2017 – £2.5M)
Refer to page 108 (accounting policy) and pages 116 to 118 (financial disclosures)
The key audit matter
How the matter was addressed in our audit
The Group and Company has identified and
the Group has presented a significant amount
of costs as exceptional in the year ended
28 September 2018 in accordance with its
stated accounting policy.
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.
The Group exceptional cost recognised
during the year relates to continuing (£52.2m)
and discontinued (£27.9m) operations.
Our audit procedures included, among others:
• Obtaining and documenting our understanding of the process management undertook
to identify and present exceptional items and testing the design and implementation
of the relevant controls therein.
• Evaluating the classification of transactions as exceptional in accordance with the Group
and Company’s accounting policy, whilst also, evaluating whether the accounting policy
for exceptional items is appropriate and is consistent with previous periods.
• Assessing whether items are appropriately and consistently classified as exceptional items.
In addition, assessing the appropriateness of disclosures made in relation to each item
classified as exceptional.
As a result of our work, we determined that items identified as exceptional items are presented
in accordance with the Group and Company’s stated accounting policy.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
87
INDEPENDENT AUDITOR’S REPORT CONTINUED
to the Members of Greencore Group plc
OPINIONS AND CONCLUSIONS ARISING FROM OUR AUDIT CONTINUED
2. KEY AUDIT MATTERS: OUR ASSESSMENT OF RISKS OF MATERIAL MISSTATEMENT CONTINUED
3. POST-RETIREMENT BENEFITS OBLIGATIONS NET DEFICIT £89.3M (2017 – £124.8M)
Refer to page 106 (accounting policy) and pages 140 to 144 (financial disclosures)
The key audit matter
How the matter was addressed in our audit
Significant estimates are made in valuing
the Group’s post-retirement defined benefit
schemes, particularly the discount rate.
Small changes in assumptions and estimates
used to value the Group’s pension deficit
would have a significant effect on the results
and financial position of the Group.
Our audit procedures included, among others:
• Obtaining and documenting our understanding of the process management undertook
to value post-retirement benefits and testing the design and implementation of the relevant
controls therein.
• With the support of our actuarial specialists, challenging the key assumptions applied in
determining the Group’s net deficit, being the discount rate, inflation rate and mortality/life
expectancy, including a comparison of these key assumptions against externally derived data.
• Considering the adequacy of the Group’s disclosures in respect of the sensitivity of deficits
to these assumptions against externally derived data.
Overall, we found the key assumptions used in, and the resulting estimate of, the valuation
of the retirement benefit obligations of the Group to be appropriate.
We also found the disclosures in respect of post-retirement benefits to be reasonable.
4. GOODWILL £807M (2017 – £797.1M)
Refer to page 102 (accounting policy) and pages 126 to 128 (financial disclosures)
The key audit matter
How the matter was addressed in our audit
There is a risk of irrecoverability of the Group’s
significant goodwill balance (of which £409.7m
relates to continuing and £397.3m relates
to discontinued operations) due to potential
changes in customer demand and preferences
in certain markets and general cost inflation
across the industry.
Due to the inherent uncertainty involved in
forecasting and discounting future cash flows,
which rely on the directors’ assumptions and
estimates of future trading performance,
there is a risk that the Group’s goodwill
needs to be impaired.
Our audit procedures included, among others:
• Obtaining and documenting our understanding of the process management undertook to
review goodwill for impairment and testing the design and implementation of the relevant
controls therein.
• Considering the appropriateness of the methodology applied by the Directors in determining
the Cash Generating Units (‘CGUs’) and calculating the impairment charges.
• Evaluating the budgeting process upon which the Group’s discounted cash flow model
is based. Also, testing the integrity and mathematical accuracy of this cash flow model.
• Comparing the sum of the discounted cash flows to the Group’s market capitalisation
to assess the reasonableness of those cash flows.
• Evaluating the assumptions and methodologies used by the Group, in particular those
relating to the forecast revenue growth and profit margins.
• Comparing the Group’s assumptions in relation to key inputs such as projected cost inflation
and discount rates to externally derived data and our own assessments of these inputs.
Also, performing additional sensitivity analysis on these assumptions.
• Assessing whether the Group’s disclosures about the sensitivity of the outcome of the
impairment assessment to changes in key assessments reflected the risks inherent in
valuation of goodwill.
Management have recognised an impairment charge of £1.4m. As a result of our work,
we found that this impairment is in line with the relevant accounting standards. We also
found that management’s judgement that no other impairment was required was appropriate,
and supported by reasonable assumptions. We found the disclosures to be adequate.
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GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS 3. OUR APPLICATION OF MATERIALITY AND AN OVERVIEW OF THE SCOPE OF OUR AUDIT
The materiality for the Group Financial Statements as a whole decreased to £3.0m (2017: £4.0m). This has been calculated using a benchmark
of Group’s profit before taxation normalised to exclude the impact of the exceptional costs.
Both Group and component audit teams performed work over the excluded items.
This materiality measure represents 3% (2017: 4%) of this benchmark and 30% of total reported profit before tax. We carry out audit procedures
to assess the accuracy of the excluded exceptional items as part of our audit.
We report to the Audit Committee all material corrected identified misstatements, all uncorrected identified misstatements exceeding £150,000
(2017: £150,000) and other identified misstatements that warrant reporting on qualitative grounds.
Materiality for the Company Financial Statements as a whole was set at £1.7m (2017: £3m), determined with reference to a benchmark of Company
total assets, of which it represents 0.11% (2017: 0.21%).
The structure of the Group’s finance function is such that certain transactions and balances are accounted for by central Group and divisional
finance teams, with the remainder accounted for in the operating units. We performed comprehensive audit procedures, including those
in relation to the significant risks above, on those transactions and balances accounted for at Group, divisional and operating unit level.
We subjected 19 (2017: 18) of the Group’s reporting components to audits for group reporting and 7 (2017: 5) to specified risk-focused audit
procedures. The latter were not individually sufficiently financially significant to require an audit for group reporting purposes. For the remaining
components, the Group audit team performed analysis at a Group or divisional level to re-examine our assessment that there were no significant
risks of material misstatement within these components.
SUMMARY OF SCOPE
Profit before Tax
(pre-exceptional items)
Revenue
Total Assets
Audit for Group
Reporting Purposes
– 90%
Specified Risk
Based Procedures
– 0%
Group-level
Procedures only
– 10%
Audit for Group
Reporting Purposes
– 87%
Specified Risk
Based Procedures
– 5%
Group-level
Procedures only
– 8%
Audit for Group
Reporting Purposes
– 95%
Specified Risk
Based Procedures
– 1%
Group-level
Procedures only
– 4%
In relation to the Group’s operating units, audits for Group reporting purposes were performed at identified key reporting components in Ireland,
the UK and the US, augmented by risk focused audit procedures which were performed for all other components. The audit of the parent
company was performed by the Group audit team. As set out in the tables above, these audits covered 90% of Group profit before taxation
(and pre-exceptional items), 96% of the Group’s total assets and 92% of total Group revenue.
The Group audit team instructed component auditors as to the significant areas to be covered, including the relevant risks detailed above, and
the information to be reported back. The Group audit team approved the component materiality assessments, which ranged from £40k to £2.6m,
having regards to the mix of size and risk profile of the Group across the components. The work on all components was performed by KPMG
Ireland. Senior members of the Group audit team, including the lead engagement partner, either physically attended divisional closing meetings
or attended via telephone conferencing facilities, at which the results of component audits were discussed with divisional and Group management.
4. WE HAVE NOTHING TO REPORT ON GOING CONCERN
We are required to report to you if:
• we have anything material to add or draw attention to in relation to the Directors’ statement in Note 1 to the Financial Statements on the
use of the going concern basis of accounting with no material uncertainties that may cast significant doubt over the Group and Company’s
use of that basis for a period of at least twelve months from the date of approval of the Financial Statements; or
if the related statement under the Listing Rules is materially inconsistent with our audit knowledge.
•
We have nothing to report in these respects.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
89
INDEPENDENT AUDITOR’S REPORT CONTINUED
to the Members of Greencore Group plc
OPINIONS AND CONCLUSIONS ARISING FROM OUR AUDIT CONTINUED
5. WE HAVE NOTHING TO REPORT ON THE OTHER INFORMATION IN THE ANNUAL REPORT
The Directors are responsible for the other information presented in the Annual Report together with the Financial Statements. The other
information comprises the information included in the Annual Report other than the Financial Statements and our auditor’s report thereon.
Our opinion on the Financial Statements does not cover the other information and, accordingly, we do not express an audit opinion or, except
as explicitly stated below, any form of assurance conclusion thereon.
Our responsibility is to read the other information and, in doing so, consider whether, based on our Financial Statements audit work, the information
therein is materially misstated or inconsistent with the Financial Statements or our audit knowledge. Based solely on that work we have not identified
material misstatements in the other information.
Based solely on our work we report that:
• we have not identified material misstatements in the Directors’ Report;
•
•
in our opinion, the information given in the Directors’ Report or other accompanying information is consistent with the Financial Statements; and
in our opinion, the Directors’ Report has been prepared in accordance with the Companies Act 2014.
DISCLOSURES OF PRINCIPAL RISKS AND LONGER-TERM VIABILITY
Based on the knowledge we acquired during our Financial Statements audit, we have nothing material to add or draw attention to in relation to:
• the Principal Risks disclosures describing these risks and explaining how they are being managed and mitigated;
• the Directors’ confirmation within the statement of Risk and Risk Management on pages 57 to 59 that they have carried out a robust assessment
of the principal risks facing the Group, including those that would threaten its business model, future performance, solvency and liquidity; and
• the Directors’ explanation in the statement of Risk and Risk Management of how they have assessed the prospects of the Group, over what
period they have done so and why they considered that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their assessment,
including any related disclosures drawing attention to any necessary qualifications or assumptions.
OTHER CORPORATE GOVERNANCE DISCLOSURES
We are required to address the following items and report to you in the following circumstances:
• Fair, balanced and understandable: if we have identified material inconsistencies between the knowledge we acquired during our Financial
Statements audit and the Directors’ statement that they consider that the Annual Report and Financial Statements taken as a whole is fair,
balanced and understandable and provides the information necessary for shareholders to assess the Group’s position and performance,
business model and strategy;
• Report of the Audit Committee: if the section of the Annual Report describing the work of the Audit Committee does not appropriately
address matters communicated by us to the Audit Committee;
• Statement of compliance with UK Corporate Governance Code: if the Directors’ statement does not properly disclose a departure from
provisions of the UK Corporate Governance Code specified by the Listing Rules for our review.
We have nothing to report in these respects.
In addition as required by the Companies Act 2014, we report, in relation to information given in the Corporate Governance statement
on pages 53 to 59, that:
• based on the work undertaken for our audit, in our opinion, the description of the main features of internal control and risk management
systems in relation to the financial reporting process, and information relating to voting rights and other matters required by the European
Communities (Takeover Bids (Directive 2004/EC) Regulations 2016 and specified for our consideration, is consistent with the Financial
Statements and has been prepared in accordance with the Act;
• based on our knowledge and understanding of the Company and its environment obtained in the course of our audit, we have not identified
any material misstatements in that information; and
• the Corporate Governance statement contains the information required by the European Union (Disclosure of Non-Financial and Diversity
Information by certain large undertakings and groups) Regulations 2017.
We also report that, based on work undertaken for our audit, other information required by the Act is contained in the Corporate Governance statement.
6. OUR OPINIONS ON OTHER MATTERS PRESCRIBED BY THE COMPANIES ACT 2014 ARE UNMODIFIED
We have obtained all the information and explanations which we consider necessary for the purpose of our audit.
In our opinion, the accounting records of the Group and Company were sufficient to permit the Group and Company Financial Statements
to be readily and properly audited and the Group and Company’s Balance Sheet and the Group’s Income Statement is in agreement with the
accounting records.
90
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS 7. WE HAVE NOTHING TO REPORT ON OTHER MATTERS ON WHICH WE ARE REQUIRED TO REPORT BY EXCEPTION
The Companies Act 2014 requires us to report to you if, in our opinion, the disclosures of directors’ remuneration and transactions required
by Sections 305 to 312 of the Act are not made.
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 5(2)
to (7) of the European Union (Disclosure of Non-Financial and Diversity Information by certain large undertakings and groups) Regulations 2017
for the year ended 28 September 2018 as required by the European Union (Disclosure of Non-Financial and Diversity Information by certain large
undertakings and groups) (amendment) Regulations 2018.
The Listing Rules of Euronext Dublin and the UK Listing Authority require us to review:
• the Directors’ statement, set out on page 58, in relation to going concern and longer-term viability;
• the part of the Corporate Governance statement on page 53 relating to the Company’s compliance with the provisions of the UK Corporate
Governance Code and the Irish Corporate Governance Annex specified for our review; and
• certain elements of disclosures in the report to shareholders by the Board of Directors’ Remuneration Committee.
8. RESPECTIVE RESPONSIBILITIES
DIRECTORS’ RESPONSIBILITIES
As explained more fully in their statement set out on pages 84 and 85, the Directors are responsible for: the preparation of the Financial
Statements including being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the
preparation of Financial Statements that are free from material misstatement, whether due to fraud or error; assessing the Group and parent
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 they either intend to liquidate the Group or the parent Company or to cease operations, or have no realistic
alternative but to do so.
AUDITOR’S RESPONSIBILITIES
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 our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not
guarantee that an audit conducted in accordance with ISAs (Ireland) will always detect a material misstatement when it exists. Misstatements
can arise from fraud, other irregularities or error and are considered material if, individually or in aggregate, they could reasonably be expected
to influence the economic decisions of users taken on the basis of the Financial Statements. The risk of not detecting a material misstatement
resulting from fraud or other irregularities is higher than for one resulting from error, as they may involve collusion, forgery, intentional omissions,
misrepresentations, or the override of internal control and may involve any area of law and regulation not just those directly affecting the
Financial Statements.
A fuller description of our responsibilities is provided on IAASA’s website at http://www.iaasa.ie/getmedia/b2389013-1cf6-458b-9b8f-a98202dc9c3a/
Description_of_auditors_responsiblities_for_audit.pdf
9. THE PURPOSE OF OUR AUDIT WORK AND TO WHOM WE OWE OUR RESPONSIBILITIES
Our 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 our report, or for the opinions we have formed.
Tom McEvoy
for and on behalf of
KPMG
Chartered Accountants, Statutory Audit Firm
1 Stokes Place, St. Stephen’s Green Dublin 2
D02 DE03 Ireland
3 December 2018
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
91
GROUP INCOME STATEMENT
year ended 28 September 2018
Continuing operations
Revenue
Cost of sales
Gross profit
Operating costs, net
Group Operating Profit before acquisition
related amortisation
Amortisation of acquisition related intangibles
Group Operating Profit
Finance income
Finance costs
Share of profit of associates after tax
Profit before taxation
Taxation
Profit for the period from continuing operations
Discontinued operations
Result from discontinued operations
Profit for the financial year
Attributable to:
Equity shareholders
Non-controlling interests
Earnings per share
Basic earnings per share (pence)
Diluted earnings per share (pence)
2018
2017
Pre-
exceptional
£m
Exceptional
(Note 7)
£m
Notes
Total
£m
Pre-
exceptional*
£m
Exceptional
(Note 7)*
£m
2
3
2
8
8
10
11
9
4
27
12
12
1,498.5
(1,023.0)
475.5
(370.9)
–
–
1,498.5
(1,023.0)
–
(52.2)
475.5
(423.1)
1,438.4
(970.2)
468.2
(365.3)
104.6
(2.6)
102.0
0.2
(33.1)
0.9
70.0
(13.0)
57.0
31.2
88.2
85.5
2.7
88.2
(52.2)
–
(52.2)
–
–
–
(52.2)
7.8
(44.4)
(7.3)
(51.7)
(51.7)
–
(51.7)
102.9
(4.2)
98.7
–
(30.4)
0.7
69.0
(7.4)
61.6
21.6
83.2
81.5
1.7
83.2
52.4
(2.6)
49.8
0.2
(33.1)
0.9
17.8
(5.2)
12.6
23.9
36.5
33.8
2.7
36.5
4.8
4.8
–
–
–
(53.2)
(53.2)
–
(53.2)
–
–
–
(53.2)
8.9
(44.3)
(25.0)
(69.3)
(69.3)
–
(69.3)
Total*
£m
1,438.4
(970.2)
468.2
(418.5)
49.7
(4.2)
45.5
–
(30.4)
0.7
15.8
1.5
17.3
(3.4)
13.9
12.2
1.7
13.9
1.9
1.9
* Re-presented to reflect the change in presentation of discontinued operations and categorisation of costs on a basis consistent with the current year as set out in Note 1.
92
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
year ended 28 September 2018
Items of income and expense taken directly to equity for continuing
and discontinued operations
Items that will not be reclassified to profit or loss:
Actuarial gain on Group legacy defined benefit pension schemes
Tax charge on Group legacy defined benefit pension schemes
Items that may subsequently be reclassified to profit or loss:
Currency translation adjustment
Tax on currency translation adjustment
Hedge of net investment in foreign currency subsidiaries
Cash flow hedges:
fair value movement taken to equity
transfer to Income Statement for the year
Tax on cash flow hedges
Net income recognised directly within equity
Profit for the financial year
Total recognised income and expense for the financial year
Attributable to:
Equity shareholders
Non-controlling interests
Total recognised income and expense for the financial year
Attributable to:
Continuing operations
Discontinued operations
Total recognised income and expense for the financial year
Notes
2018
£m
2017
£m
5
11
11
11
24.3
(4.5)
19.8
15.4
–
(10.6)
4.1
5.9
–
14.8
34.6
36.5
71.1
68.4
2.7
71.1
27.4
43.7
71.1
30.1
(5.1)
25.0
(45.2)
0.1
25.8
1.9
1.5
(0.1)
(16.0)
9.0
13.9
22.9
21.1
1.8
22.9
78.6
(55.7)
22.9
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
93
GROUP BALANCE SHEET
at 28 September 2018
ASSETS
Non-current assets
Goodwill and intangible assets
Property, plant and equipment
Investment property
Investment in associates
Retirement benefit assets
Derivative financial instruments
Deferred tax assets
Total non-current assets
Current assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Assets held for sale
Total current assets
Total assets
EQUITY
Capital and reserves attributable to equity holders of the Company
Share capital
Share premium
Reserves
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Borrowings
Derivative financial instruments
Retirement benefit obligations
Other payables
Provisions for liabilities
Deferred tax liabilities
Total non-current liabilities
Current liabilities
Borrowings
Derivative financial instruments
Trade and other payables
Provisions for liabilities
Current tax payable
Liabilities directly associated with assets held for sale
Total current liabilities
Total liabilities
Total equity and liabilities
PG Kennedy
Director
EP Tonge
Director
94
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
Notes
2018
£m
2017
£m
14
15
16
10
25
22
11
17
18
22
20
9
26
27
21
22
25
19
24
11
21
22
19
24
9
425.3
323.0
6.3
1.3
15.3
0.5
41.7
813.4
39.1
181.0
0.3
37.0
944.7
1,202.1
2,015.5
7.1
650.8
79.3
737.2
6.4
743.6
537.9
13.4
104.6
3.7
8.9
4.2
672.7
0.2
0.1
377.9
6.7
11.3
203.0
599.2
1,077.6
485.7
6.3
1.2
17.3
–
93.5
1,681.6
81.9
254.8
0.3
19.8
–
356.8
2,038.4
7.1
647.8
50.7
705.6
5.2
710.8
539.0
14.3
142.1
11.9
29.8
111.5
848.6
–
–
460.3
8.4
10.3
–
479.0
1,271.9
2,015.5
1,327.6
2,038.4
FINANCIAL STATEMENTS GROUP CASH FLOW STATEMENT
year ended 28 September 2018
Profit before taxation
Finance income
Finance costs
Share of profit of associates (after tax)
Exceptional items
Continuing Operating Profit (pre-exceptional)
Discontinued Operating Profit (pre-exceptional)
Operating Profit (pre-exceptional)
Depreciation of property, plant and equipment
Amortisation of intangible assets
Employee share-based payment expense
Contributions to legacy defined benefit pension scheme
Working capital movement
Other movements
Net cash inflow from operating activities pre-exceptional items
Cash outflow related to exceptional items
Interest paid
Tax paid
Net cash inflow from operating activities
Cash flow from investing activities
Dividends received from associates
Purchase of property, plant and equipment
Purchase of intangible assets
Acquisition of undertakings, net of cash acquired
Disposal of undertakings
Net cash outflow from investing activities
Cash flow from financing activities
Proceeds from issue of shares
Ordinary shares purchased – own shares
Drawdown of bank borrowings
Repayment of bank borrowings
Decrease in finance lease liabilities
Dividends paid to equity holders of the Company
Dividends paid to non-controlling interests
Net cash (outflow)/inflow from financing activities
Net increase/(decrease) in cash and cash equivalents
Reconciliation of opening to closing cash and cash equivalents
Cash and cash equivalents at beginning of year
Translation adjustment
Increase/(decrease) in cash and cash equivalents
Net cash and cash equivalents at end of year
Notes
8
8
10
7
15
14
28
7
10
23
23
23
27
20
23
23
20
2018
£m
17.8
(0.2)
33.1
(0.9)
52.2
102.0
30.4
132.4
47.3
25.3
1.6
(15.1)
(15.9)
(3.2)
172.4
(15.0)
(26.7)
(0.9)
129.8
0.8
(60.5)
(3.0)
–
–
(62.7)
0.2
(2.0)
–
(9.6)
(1.3)
(35.7)
(1.5)
(49.9)
17.2
19.8
–
17.2
37.0
2017
£m
15.8
–
30.4
(0.7)
53.2
98.7
22.2
120.9
45.1
23.7
3.5
(11.1)
(3.0)
0.5
179.6
(33.7)
(27.2)
(0.5)
118.2
0.5
(105.4)
(17.9)
(606.2)
2.9
(726.1)
427.7
(7.2)
199.7
–
(0.1)
(16.5)
(1.0)
602.6
(5.3)
25.5
(0.4)
(5.3)
19.8
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
95
GROUP STATEMENT OF CHANGES IN EQUITY
year ended 28 September 2018
Share
capital
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings
£m
Non-
controlling
interests
£m
Total
£m
Total
equity
£m
7.1
647.8
92.2
(41.5)
705.6
5.2
710.8
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
0.2
–
–
2.8
15.4
(10.6)
–
–
15.4
(10.6)
–
24.3
24.3
–
4.1
5.9
–
14.8
1.6
(4.0)
(2.2)
2.7
–
(4.5)
–
–
33.8
53.6
–
4.0
0.2
(2.7)
(39.4)
(25.8)
(4.5)
4.1
5.9
33.8
68.4
1.6
0.2
(2.0)
–
(36.6)
737.2
–
–
–
–
–
–
2.7
2.7
–
–
–
–
(1.5)
6.4
7.1
650.8
105.1
Share
capital
£m
Share
premium
£m
Other
reserves
£m
Retained
earnings
£m
Non-
controlling
interests
£m
Total
£m
4.1
198.9
110.5
(32.3)
281.2
–
–
–
–
–
–
–
–
–
–
–
–
–
2.9
–
–
–
0.1
7.1
–
–
–
–
–
–
–
–
–
–
–
–
1.1
436.7
–
–
–
11.1
647.8
(45.3)
–
25.8
–
–
1.9
1.5
(0.1)
–
(16.2)
3.5
–
(4.5)
–
–
(7.4)
6.3
–
92.2
–
0.1
–
30.1
(5.1)
–
–
–
12.2
37.3
–
0.1
4.5
–
(13.0)
–
(6.3)
(31.8)
(41.5)
(45.3)
0.1
25.8
30.1
(5.1)
1.9
1.5
(0.1)
12.2
21.1
3.5
0.1
1.1
439.6
(13.0)
(7.4)
–
(20.6)
705.6
4.4
0.1
–
–
–
–
–
–
–
1.7
1.8
–
–
–
–
–
–
–
(1.0)
5.2
15.4
(10.6)
24.3
(4.5)
4.1
5.9
36.5
71.1
1.6
0.2
(2.0)
–
(38.1)
743.6
Total
equity
£m
285.6
(45.2)
0.1
25.8
30.1
(5.1)
1.9
1.5
(0.1)
13.9
22.9
3.5
0.1
1.1
439.6
(13.0)
(7.4)
–
(21.6)
710.8
At 29 September 2017
Items of income and expense taken directly to equity
Currency translation adjustment
Net investment hedge
Actuarial gain on Group legacy defined benefit
pension schemes
Tax charge on Group legacy defined benefit
pension schemes
Cash flow hedge fair value movement taken to equity
Cash flow hedge transferred to Income Statement
Profit for the financial year
Total recognised income and expense for the
financial year
Employee share-based payments expense
Exercise, lapse or forfeit of share-based payments*
Shares acquired by Employee Benefit Trust (A)
Transfer to retained earnings on grant of shares
to beneficiaries of the Employee Benefit Trust (B)
Dividends
At 28 September 2018
At 30 September 2016
Items of income and expense taken directly to equity
Currency translation adjustment
Tax on currency translation adjustment
Net investment hedge
Actuarial gain on Group legacy defined benefit
pension schemes
Tax charge on Group legacy defined benefit
pension schemes
Cash flow hedge fair value movement taken to equity
Cash flow hedge transferred to Income Statement
Tax on cash flow hedge
Profit for the financial year
Total recognised income and expense for the
financial year
Employee share-based payments expense
Tax on share-based payments
Exercise, lapse or forfeit of share-based payments*
Issue of shares – Rights Issue
Costs associated with the issue of shares
Shares acquired by Employee Benefit Trust (A)
Transfer to retained earnings on grant of shares
to beneficiaries of the Employee Benefit Trust (B)
Dividends
At 29 September 2017
* See Note 26.
96
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS OTHER RESERVES
At 29 September 2017
Items of income and expense taken directly to equity
Currency translation adjustment
Net investment hedge
Cash flow hedge fair value movement taken to equity
Cash flow hedge transferred to Income Statement
Total recognised income and expense for the
financial year
Employee share-based payments expense
Exercise, lapse or forfeit of share options
Shares acquired by Employee Benefit Trust (A)
Transfer to retained earnings on grant of shares to beneficiaries
of the Employee Benefit Trust (B)
At 28 September 2018
At 30 September 2016
Items of income and expense taken directly to equity
Currency translation adjustment
Net investment hedge
Cash flow hedge fair value movement taken to equity
Cash flow hedge transferred to Income Statement
Tax on cash flow hedge
Total recognised income and expense for the
financial year
Employee share-based payments expense
Exercise, lapse or forfeit of share options
Shares acquired by Employee Benefit Trust (A)
Transfer to retained earnings on grant of shares to beneficiaries
of the Employee Benefit Trust (B)
At 29 September 2017
Share
options (C)
£m
Own
shares (D)
£m
Undenominated
capital
reserve (E)
£m
Hedging
reserve (F)
£m
Foreign
currency
translation
reserve (G)
£m
6.6
(8.6)
117.8
(11.5)
(12.1)
–
–
–
–
–
–
–
–
–
–
–
4.1
5.9
15.4
(10.6)
–
–
10.0
4.8
–
–
–
–
–
–
–
–
117.8
(1.5)
(7.3)
105.1
Share
options (C)
£m
Own
shares (D)
£m
Undenominated
capital
reserve (E)
£m
Hedging
reserve (F)
£m
Foreign
currency
translation
reserve (G)
£m
7.6
(7.5)
117.8
(14.8)
7.4
–
–
–
–
–
1.6
(4.0)
–
–
4.2
–
–
–
–
–
–
–
(2.2)
2.7
(8.1)
–
–
–
–
–
–
3.5
(4.5)
–
–
6.6
–
–
–
–
–
–
–
–
(7.4)
6.3
(8.6)
–
–
–
–
–
–
–
–
–
–
–
–
1.9
1.5
(0.1)
(45.3)
25.8
–
–
–
–
–
–
–
–
–
–
–
117.8
(11.5)
(12.1)
3.3
(19.5)
(16.2)
Total
£m
92.2
15.4
(10.6)
4.1
5.9
14.8
1.6
(4.0)
(2.2)
2.7
Total
£m
110.5
(45.3)
25.8
1.9
1.5
(0.1)
3.5
(4.5)
(7.4)
6.3
92.2
(A) The Employee Benefit Trust acquired 56,858 (2017: 45,228) shares in the Group with a combined value of £0.2m (2017: £0.2m) and a nominal value at the date of purchase
of £0.0006m (2017: £0.0005m) through the Scrip Dividend Scheme and utilisation of dividend income. Pursuant to the terms of the Employee Benefit Trust 984,678
(2017: 3,231,732) shares were purchased during the financial year ended 28 September 2018 at a cost of £2.0m (2017: £7.2m). The nominal value of these shares, on which dividends
have not been waived by the Employee Benefit Trust was £0.01m (2017: £0.03m) at the date of purchase.
(B) During the year 1,248,039 (2017: 2,105,187) shares with a nominal value at the date of transfer of £0.01m (2017: £0.02m) at a cost of £2.7m (2017: £6.3m) were transferred
to beneficiaries of the Annual Bonus Plan, the Performance Share Plan and the Executive Share Option Scheme.
(C) The share-based payments reserve relates to equity settled share-based payments made to employees through the Performance Share Plan, the Annual Bonus Plan,
ShareSave Scheme and the Executive Share Option Scheme. Further information in relation to these share-based payments schemes is set out in Note 6.
(D) The amount included as own shares relates to Ordinary Shares in Greencore Group plc which are held in trust. The shares held in trust are granted to beneficiaries
of the Group’s share-based payment scheme when the relevant conditions of the scheme are satisfied.
(E) The undenominated capital reserve represents the nominal cost of cancelled shares and the amount transferred to reserves as a result of renominalising the share capital
of Greencore Group plc on conversion to the euro.
(F) The hedging reserve represents the effective portion of gains or losses on hedging instruments from the application of cash flow hedge accounting for which the
underlying hedged transaction is not impacting profit or loss. The cumulative deferred gain or loss on the hedging instrument is reclassified to profit or loss only when
the hedged transaction is no longer expected to occur.
(G) The currency reserve reflects the exchange difference arising from the translation of the net investments in foreign operations and on borrowings and other currency
instruments designated as hedges of such investments which are taken to equity. When a foreign operation is sold, exchange differences that are recorded in equity
are recognised in the Group Income Statement as part of the gain or loss on sale.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
97
NOTES TO THE GROUP FINANCIAL STATEMENTS
year ended 28 September 2018
1. GROUP STATEMENT OF ACCOUNTING POLICIES
STATEMENT OF COMPLIANCE
The Group Financial Statements of Greencore Group plc have been prepared in accordance with International Financial Reporting Standards
(‘IFRS’) and their interpretations approved by the International Accounting Standards Board (‘IASB’) as adopted by the European Union (‘EU’)
and those parts of the Companies Act 2014, applicable to companies reporting under IFRS and Article 4 of the IAS Regulation.
The accounting policies applied in the preparation of the Group Financial Statements for the year ended 28 September 2018 are set out below.
The IFRS adopted by the EU and applied by the Group in the preparation of these Financial Statements are those that were effective for the
accounting period ending 28 September 2018.
BASIS OF PREPARATION
The Group Financial Statements, which are presented in sterling and rounded to the nearest million (unless otherwise stated), have been prepared
on a going concern basis under the historical cost convention, except where assets and liabilities are stated at fair value in accordance with
relevant accounting policies.
The accounting policies set out below have been applied consistently by all the Group’s subsidiaries and associates and have been consistently
applied to all years presented, unless otherwise stated.
The preparation of the Group Financial Statements requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues
and expenses during the reporting period. Although these estimates are based on management’s best estimate of the amount, event or actions,
actual results ultimately may differ from those estimates.
The Financial Statements of the Group are prepared to the Friday nearest to 30 September. Accordingly these Financial Statements are prepared
for the 52 week period ended 28 September 2018. Comparatives are for the 52 week period ended 29 September 2017. The Balance Sheets for
2018 and 2017 have been prepared as at 28 September 2018 and 29 September 2017 respectively.
The profit attributable to equity shareholders dealt with in the Financial Statements of the Parent Company was £94.5m (2017: profit of £17.9m).
In accordance with section 304 of the Companies Act 2014, the Company is availing of the exemption from presenting its individual profit and loss
account, which forms part of the approved Financial Statements, to the Annual General Meeting and from filing it with the Registrar of Companies.
Certain comparative amounts in the Group Income Statement have been reclassified or re-presented, to achieve a more appropriate presentation
as required by IFRS 5: Non-current assets held for sale and discontinued operations. Following the announcement in October 2018 of the disposal
of Greencore’s US business, the results of the business have been presented within profit from discontinued operations in the Group Income
Statement with the prior period comparatives re-presented accordingly.
In the year, an analysis of expenses between direct and indirect costs was carried out and a more appropriate presentation was identified
which resulted in a reclassification of certain indirect costs from cost of sales to operating costs. As a result, the prior year comparatives were
re-presented on a consistent basis. There was no impact to previously reported profit.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The preparation of the Group Financial Statements in accordance with IFRS, requires management to make certain estimates, assumptions and
judgements that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Estimates
and underlying assumptions are reviewed on an ongoing basis. Changes in accounting estimates may be necessary if there are changes in the
circumstances on which the estimate was based or as a result of new information or more experience. Such changes are recognised in the period
in which the estimate is revised.
Critical Accounting Judgements
The critical accounting judgements exercised in applying the Group accounting policies are:
Accounting for exceptional items (Note 7)
The Group consider that items of income or expense which are material by virtue of their nature and amount should be disclosed separately
if the Group Financial Statements are to fairly present the financial position and financial performance of the entity. The Group label these items
collectively as ‘exceptional items’.
Determining which transactions are to be considered exceptional in nature is often a subjective matter. However, circumstances that the Group
believe would give rise to exceptional items for separate disclosure are outlined in the exceptional accounting policy on page 108. All exceptional
items are included on the appropriate 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.
98
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS Recognition of provisions for current and deferred tax; including deferred tax asset recognition (Note 11)
The Group considers provisions for current and deferred taxes requires significant judgement in areas where the treatment of certain items may
be the subject of debate with tax authorities. The Group provide for current and deferred taxes on the basis of the most likely single outcome,
in the event of a tax authority audit. The Group is required to consider the range of possible outcomes for a number of transactions/calculations
across all the jurisdictions where the Group is subject to income taxes and to provide for current and deferred taxes accordingly. The Group
consider this to be a significant judgemental area, due to the number of jurisdictions to be considered, along with increasing complexity and
a period of significant change in tax legislation worldwide.
Recognition of deferred tax assets requires consideration of the value of those assets and the likelihood that those assets will be utilised in the
foreseeable future. The recognition relies on the availability of sound and relatively detailed forecast information regarding the future performance
of the business which has the legal right to utilise the deferred tax assets. As the Group has material tax attributes, consideration is given to the
forecasting of performance, and the recognition of related deferred tax assets constitutes a key area of judgement in the preparation of the Group
Financial Statements.
Assessment of carrying value of goodwill (Note 14)
Goodwill has been recognised in accounting for the acquisition of undertakings in a business combination. Management’s judgement is required
in testing the carrying value of goodwill for impairment when comparing the value in use of the cash generating unit (‘CGU’) to the carrying value
of the CGUs.
The value in use calculation is based on an estimate of future cash flows expected to arise from the CGUs and these are discounted to net present
value using an appropriate discount rate. The tests are dependent on management’s estimates and judgements, in particular in relation to the
forecasting of future cash flows, the discount rates applied to those cash flows, the expected long term growth rate of the applicable businesses
and terminal values. Such estimates and judgements are subject to change as a result of changing economic conditions. Details of the assumptions
used are detailed in Note 14 to the Group Financial Statements.
Provisions for liabilities (Note 24)
The estimation of provisions is a key judgement area in the preparation of the Financial Statements due to the uncertainty around the timing
or amount for which the provision will be settled. As a result, there is a level of judgement required in the recognition of provisions. A provision
for closure costs is required when the Group has a legal or constructive obligation with regards to the exit of manufacturing or closure of
a Group facility and judgement is required relating to the level of restructuring provision required at the reporting date to satisfy the obligation.
Accounting for acquisitions and disposals (Note 9 and Note 32)
When acquiring a business, the Group is required to bring acquired assets and liabilities on to the Group Balance Sheet at their fair value,
the determination of which requires a significant degree of judgement.
Acquisitions may also result in intangible benefits being brought into the Group, some of which qualify for recognition as intangible assets
while other such benefits do not meet the recognition requirements of IFRS and therefore form part of goodwill. Judgement is required in the
assessment and valuation of these intangible assets. For intangible assets acquired, the Group bases the valuation on expected future cash flows.
This method employs a discounted cash flow analysis using the present value of the estimated after tax cash flows expected to be generated from
the purchased intangible assets using risk adjusted discount rates, revenue forecasts and estimated customer attrition as appropriate. The period
of expected cash flows is based on the expected useful life of the intangible asset acquired.
When disposing of a business, the Group are required to apply IFRS 5: Non-current assets held for sale and discontinued operations. There is
judgement involved in whether the disposal group meets the reclassification criteria at the balance sheet date. In addition, the Group are required
to carry the disposal group at the lower of its carrying value and fair value less costs to sell. Judgement is required to assess the fair value by
considering expected disposal proceeds less any necessary adjustments for debt, cash and working capital.
Critical Accounting Estimates
The Group has identified Post-Retirement Benefits as a significant source of estimation uncertainty in the preparation of the Group Financial
Statements. The estimation of and accounting for retirement benefits obligations involves judgements made in conjunction with independent
actuaries. These involve estimating the actuarial assumptions including mortality rates of members, increase in pension payments and inflation
linked to certain obligations and discount rates used in estimating the present value of the schemes assets and liabilities. Details of the financial
position of the Post-Retirement Benefit Schemes are set out in Note 25.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
99
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
1. GROUP STATEMENT OF ACCOUNTING POLICIES CONTINUED
NEW STANDARDS AND INTERPRETATION
There are no changes to IFRS which became effective for the Group during the financial year which resulted in material changes to the Group
Financial Statements. A number of new standards and amendments to standards and interpretations are effective for annual reporting periods
beginning from 1 January 2018 and have not been applied in preparing these Group Financial Statements.
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments addresses the classification, measurement and recognition of financial assets and liabilities. The standard replaces
IAS 39 Financial Instruments: Recognition and Measurement and has been completed in a number of stages with the final version issued by
the IASB in July 2014. IFRS 9 Financial Instruments introduces new rules for hedge accounting and a new impairment model for financial assets.
The Group will apply the standard for the reporting period commencing 29 September 2018. The Group’s evaluation of the effect of IFRS 9 is
outlined below.
The new impairment model requires the recognition of impairment provisions based on expected credit losses rather than only incurred credit
losses. The standard provides a simplified approach as a practical expedient which the Group will adopt on transition. In applying this simplified
approach, the Group does not expect any material adjustments to be made to receivables impairment provision.
The hedge accounting requirements in IFRS 9 are optional. Under the transition requirements of the new standard, the Group may choose to
apply, as its accounting policy IAS 39. The Group have decided not to adopt the hedge accounting requirements under IFRS 9 and will continue
to apply IAS 39. This decisions has no impact on the current effective hedging relationships.
IFRS 15 Revenue from Contracts with Customers
IFRS 15 Revenue from Contracts with Customers specifies how and when an IFRS reporter will recognise revenue as well as requiring such entities
to provide users of Financial Statements with more informative, relevant disclosures. The standard provides a single, principles based five-step
model to be applied to all contracts with customers. The Group will apply the standard for the reporting period commencing 29 September 2018
and have elected to adopt the new standard using the modified retrospective method. Under this method the Group will apply the new standard
at the date of application with no restatement of the prior period comparatives.
Under IFRS 15, an entity recognises revenue when a performance obligation is satisfied, i.e. when control of the goods or services underlying the
particular performance obligation is transferred to the customer. The Group’s customer contracts typically include one performance obligation
(e.g. manufacture and distribution of sandwiches) with revenue recognised on despatch. The Group has assessed the potential impact on its
Consolidated Financial Statements resulting from the application of IFRS 15, based on the analysis of customer contracts conducted to date
and the findings are outlined below.
Following a review of customer contracts for third party supplied goods, in line with the agent-principal considerations under IFRS 15, a small number
of contracts in the Convenience Foods UK and Ireland reporting segment, may transition from a principal to an agent relationship. This will result
in a decrease in revenue and cost of sales with no impact on operating profit. The decrease in revenue will have an accretive impact on operating
profit margin.
Based on the Group’s contractual and trading relationships, the impact of adopting IFRS 15 on the Consolidated Financial Statements is not
material for the Group and there is not expected to be any adjustment to retained earnings on application at 29 September 2018.
IFRS 16 Leases
IFRS 16 Leases sets out the principle for the recognition, measurement, presentation and disclosure of leases for both lessee and lessor.
It eliminates the classification of leases as either operating leases or finance leases and introduces a single lessee accounting model where
the lessee is required to recognise assets and liabilities for all material leases that have a term of greater than a year.
The Group will apply the standard for the reporting period commencing 28 September 2019. The Group is assessing the potential impact on its
Consolidated Financial Statements resulting from the application of IFRS 16 and during the year the Group commenced a review of its contractual
leases. The Group’s evaluation of the effect of IFRS 16 is ongoing and the Group’s initial findings are outlined below:
The Group expects that the adoption of IFRS 16 will have a material impact on the Consolidated Financial Statements, significantly increasing
the Group’s recognised assets and liabilities. The Group has approximately 500 operating leases for a range of assets principally relating to
property, equipment and vehicles in Convenience Foods UK & Ireland and the Group. The fair values of these leases are currently being evaluated.
As a result of the transition to IFRS 16, the fair value of these leases representing the present value of the lease payments over the expected lease
contract period will be recognised as a right of use asset with a corresponding value recognised as a lease liability. Note 29 Commitments under
operating and finance leases outlines the Group’s lease obligations as at 28 September 2018.
There are no other IFRS standards or interpretations that are not yet effective that would be expected to have a material impact on the Group.
100 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS BASIS OF CONSOLIDATION
The Group Financial Statements comprise the Financial Statements of the parent undertaking and its subsidiary undertakings, together with
the Group’s share of the results of associated undertakings.
Subsidiaries
Subsidiary undertakings are included in the Group Financial Statements from the date on which control over the operating and financial policies
is obtained, and cease to be consolidated from the date on which control is transferred out of the Group. The Group controls an entity when
it is exposed to, or has the rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its
power over the entity. All inter-group transactions, balances and unrealised gains on transactions between Group undertakings are eliminated
on consolidation. Unrealised losses are also eliminated, except where they provide evidence of impairment.
Associates
An associate is an enterprise over which the Group is in a position to exercise significant influence through participation in the financial and
operating policy decisions of the investee, but which is not a subsidiary or a jointly controlled entity.
The Group’s share of the results, assets and liabilities of an associate are included in the Financial Statements using the equity method of
accounting. Under the equity method of accounting, the investment in the associate is carried in the Balance Sheet at cost plus post-acquisition
changes in the Group’s share of net assets of the associate, less distributions received, less any impairments in the value of the investment.
The Group Income Statement reflects the Group’s share of the results after tax of the associate. The Group Statement of Recognised Income
and Expense reflects the Group’s share of any income and expense recognised by the associate outside of profit or loss.
REVENUE RECOGNITION
Revenue represents the fair value of the sale of goods and rendering of services to external customers, net of trade discounts and value added tax
in the ordinary course of the Group’s activities. The Group provides trade discounts, primarily in the form of rebate arrangements or other incentive
arrangements, to its customers. The arrangements can take the form of volume related rebates, marketing fund contributions, promotional fund
contributions or lump sum incentives. The Group recognises revenue net of such discounts over the period to which the arrangement applies.
Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer,
it is probable that the economic benefits will flow to the Group and the amount of revenue can be measured reliably, which generally arises
on delivery or in accordance with specific terms and conditions agreed with customers. Revenue from the rendering of services is recognised
in the period in which the services are rendered on the basis of services provided.
SUPPLIER REBATES
The Group enters into rebate arrangements with its suppliers. The arrangements are primarily volume related. These supplier rebates received
are recognised primarily as a deduction from cost of sales, based on the entitlement that has been earned up to the balance sheet date, for each
relevant supplier arrangement.
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is shown at cost less depreciation and any impairments. The cost of property, plant and equipment comprises its
purchase price and any directly attributable costs.
Depreciation is provided so as to write off the cost less residual value of each item of property, plant and equipment during its expected useful life
using the straight-line method over the following periods:
Freehold and long leasehold buildings
Plant, machinery, equipment, fixtures and fittings
Freehold land is not depreciated
25 – 50 years
3 – 25 years
Useful lives and residual values are reassessed annually.
Subsequent costs incurred relating to specific assets are included in an 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. All other costs are charged to the profit or loss during the financial period in which they are incurred.
The carrying amounts of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate that the
carrying amounts may not be recoverable. When the carrying amount exceeds the estimated recoverable amount, the assets are written down
to their recoverable amount.
The recoverable amount of property, plant and equipment is the greater of fair value less costs to sell and value in use. In assessing value in use,
estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time
value of money and the risks specific to the asset. Impairment losses are recognised in the profit or loss.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
101
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
1. GROUP STATEMENT OF ACCOUNTING POLICIES CONTINUED
PROPERTY, PLANT AND EQUIPMENT CONTINUED
An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer
exist or may have decreased. If such indication exists, the recoverable amount is estimated. A previously recognised impairment loss is reversed
only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised.
If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying
amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal
is recognised in the profit or loss. Following the recognition or reversal 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.
Gains or losses on the disposal of property, plant and equipment represent the difference between the net proceeds and the carrying value
at the date of sale.
ASSETS HELD UNDER LEASES
Finance Leases
Leases of property, plant and equipment, where the Group obtains substantially all the risks and rewards of ownership are classified as finance
leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased item and the present value of the
minimum lease payments. Each lease payment is allocated between the liability and finance charge so as to achieve a constant interest charge
on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in interest-bearing loans and
borrowings, allocated between current and non-current as appropriate. The interest element of the finance cost is charged to the profit or
loss over the lease period. Assets held under finance leases are depreciated over the shorter of their expected useful lives or the lease term,
taking into account the time period over which benefits from the leased assets are expected to accrue to the Group.
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 incentives received from the lessor, are charged to the profit or loss on a straight-line basis over the period
of the lease. Income earned from operating leases is credited to the profit or loss when earned.
BUSINESS COMBINATIONS
The purchase method of accounting is used in accounting for the acquisition of businesses. In accordance with IFRS 3 Business Combinations, the
fair value of the consideration for a business combination is measured as the aggregate of the fair values at the date of exchange of assets given
and liabilities incurred or assumed in exchange for control. The assets, liabilities and contingent liabilities of the acquired entity are measured at
their fair values at the date of acquisition. When the initial accounting for a business combination is determined provisionally, any adjustments to
the provisional values allocated are made within 12 months of the acquisition date and are effected from the date of acquisition.
Where a business combination agreement provides for an adjustment to the cost of a business acquired contingent on future events, the Group
accrues the fair value of the additional consideration payable as a liability at the acquisition date where this can be measured reliably. This amount
is reassessed at each subsequent balance sheet date with any adjustments to the liability recognised in the profit or loss.
To the extent that deferred purchase consideration and earn-out obligations are payable after one year from the date of acquisition, they are
discounted at an appropriate interest rate and, accordingly, are carried at net present value in the Group Balance Sheet. An appropriate interest
charge, at a constant interest rate on the carrying amount, adjusted to reflect material conditions, is reflected in the profit or loss over the earn-out
period, increasing the value of the provision so that the obligation will reflect its settlement value at the time of maturity.
Transaction costs are expensed as incurred.
GOODWILL
Goodwill represents the difference between the fair value of the consideration given over the fair value of the Group’s share of the identifiable
net assets of the acquired subsidiary at the date of acquisition. Any excess of the fair value of the net assets acquired over the fair value of the
consideration given (i.e. discount on acquisition) is credited to the profit or loss in the period of acquisition.
Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. On acquisition, goodwill is allocated to CGUs
expected to benefit from the combination’s synergies. Goodwill is tested annually for impairment or more frequently if events or changes in
circumstances indicate that the carrying value may be impaired. Any impairment is recognised immediately in the profit or loss.
Goodwill arising on investments in associates is included in the carrying amount of the investment and any impairment of the goodwill is included
in income from associates.
102 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS ACQUISITION RELATED INTANGIBLES
An intangible asset, which is an identifiable non-monetary asset without physical substance, is capitalised separately from goodwill as part of a
business combination to the extent that it is probable that the expected future economic benefits attributable to the asset will accrue to the Group
and that its fair value can be measured reliably. The asset is deemed to be identifiable when it is separable (i.e. capable of being divided from
the entity and sold, transferred, licensed, rented or exchanged, either individually or together with a related contract, asset or liability) or when it
arises from contractual or other legal rights, regardless of whether those rights are transferable or separable from the Group or from other rights
and obligations.
Subsequent to initial recognition, acquisition related intangible assets are carried at cost less any accumulated amortisation and any accumulated
impairment losses. The carrying amounts of finite intangible assets are reviewed for indicators of impairment at each reporting date and are
subject to impairment testing when events or changes in circumstances indicate that the carrying values may not be recoverable. Any impairment
charge is taken to the profit or loss.
The amortisation of intangible assets is calculated to write off the book value of finite intangible assets over their useful lives on a straight-line basis
on the assumption of zero residual value. Customer related intangible assets are amortised over periods ranging from 1–18 years. The useful life
used to amortise intangible assets relates to the future performance of the assets acquired and management’s judgement of the period over
which economic benefit will be derived from the asset. The remaining useful life of finite intangible assets are reviewed at reporting periods
and revised where appropriate to reflect the period over which the Group will receive the economic benefit from use.
COMPUTER SOFTWARE
Costs incurred on the acquisition of computer software and software licences are capitalised. Other costs directly associated with developing
and upgrading computer software programs are capitalised once the recognition criteria set out in IAS 38 Intangible Assets are met.
Computer software is amortised over 5–7 years.
INVESTMENT PROPERTY
Investment property is shown at cost less depreciation and any impairment. The cost of investment property comprises its purchase price and any
costs directly attributable to bringing it into working condition for its intended use. Investment property is depreciated so as to write off the cost,
less residual value, on a straight-line basis over the expected life of each property. Freehold buildings held as investment property are depreciated
over their expected useful life, normally assumed to be 40–50 years. Freehold land is not depreciated.
Rental income arising on investment property is accounted for on a straight-line basis over the lease term of the ongoing leases and is recognised
within other income.
In relation to the recognition of income on the disposal of property, income is recognised when there is an unconditional exchange of contracts,
or when all necessary terms and conditions have been fulfilled.
INVENTORIES
Inventories are valued at the lower of cost and net realisable value. Cost is calculated based on first-in, first-out or weighted average as
appropriate. Cost includes raw materials, direct labour expenses and related production and other overheads. Net realisable value is the
estimated selling price, in the ordinary course of business, less costs to completion and appropriate selling and distribution expenses.
TRADE RECEIVABLES
Trade and other receivables are initially recognised at fair value and subsequently carried at amortised cost, net of provision for impairment.
A provision is made when there is objective evidence that the Group will be unable to recover balances in full. Balances are written off when the
probability of recovery is assessed as being remote.
Any trade and other receivables included in non-current assets are carried at amortised cost in accordance with the effective interest rate method.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are initially recognised at fair value and subsequently carried at amortised cost. Cash and cash equivalents include
cash in hand, deposits held on call with banks and other short-term highly liquid investments that are readily convertible to known amounts
of cash. These are subject to insignificant risk of changes in value and have an original maturity of three months or less.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
103
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
1. GROUP STATEMENT OF ACCOUNTING POLICIES CONTINUED
DISCONTINUED OPERATIONS AND DISPOSAL GROUP HELD FOR SALE
Discontinued operations and disposal group held for sale is a component of the Group’s business, the operations and cashflows of which
can be clearly distinguished from the rest of the Group and which:
• represents a separate major line of business or geographical area of operation; or
•
•
is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operation; or
is a subsidiary acquired exclusively with a view to resale.
Classification as a discontinued operation occurs upon disposal, abandonment or when the operations meet the criteria to be classified as held
for sale. This condition is regarded as satisfied only when the sale is highly probable and the asset or disposal group is available for immediate
sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed
sale within one year of the date of classification. Property, plant and equipment and intangible assets, once classified as held for sale, are not
depreciated or amortised.
Disposal groups classified as held for sale are measured at the lower of the carrying value and the fair value less costs to sell. Non-current assets
and disposal groups are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than continued use.
When an operation is classified as a discontinued operation, the comparative statement of profit or loss and other comprehensive income is
re-presented as if the operation had been discontinued from the start of the comparative year.
When the Group ceases to have control of an undertaking (disposal group), it is at this point that the Group ceases to consolidate the operations
and any gain or loss on disposal is recognised in the Group Income statement. In addition, any movements previously recognised in other
comprehensive income in respect of that entity are accounted for as if the Group had directly disposed of the related assets or liabilities. This may
mean that amounts previously recognised in other comprehensive income are reclassified to profit or loss.
TRADE AND OTHER PAYABLES
Trade and other payables are initially recorded at fair value and subsequently at the higher of cost or payment or settlement amounts. Where the
time value of money is material, payables are initially recorded at fair value and subsequently carried at amortised cost.
PROVISIONS
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an
outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount
of the obligation.
Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the
class of obligation as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same
class of obligation may be small.
Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when
the reimbursement is virtually certain. The expense relating to any provision is recognised in the profit or loss net of any reimbursement.
A contingent liability is disclosed where the existence of an obligation will only be confirmed by future events, 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.
BORROWINGS
All loans and borrowings are initially recognised at fair value less any directly attributable transaction costs. After initial recognition, interest-
bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Gains and losses arising on
the settlement or cancellation of liabilities are recognised in finance income and finance costs as appropriate.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months
after the balance sheet date.
FINANCE INCOME AND EXPENSE
Finance income comprises interest income on funds invested and the unwind of discount on assets. Interest income is recognised in profit or loss
as it accrues, using the effective interest method.
Finance expense comprises interest expense on borrowings, unwind of discount on liabilities, interest on the net defined benefit pension scheme
liabilities, changes in fair value of hedging instruments and other derivatives that are recognised in profit or loss. All borrowing costs are
recognised in profit or loss using the effective interest method.
104 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS DERECOGNITION OF FINANCIAL ASSETS AND LIABILITIES
Financial Assets
A financial asset is derecognised when the Group no longer controls the contractual rights that comprise the financial asset, which is normally
the case when the asset is sold or the rights to receive cash flows from the asset have expired, and the Group has not retained substantially all
risks and rewards of ownership and has transferred control of the asset.
Financial Liabilities
A financial liability is derecognised when the obligation under the liability is discharged, 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 a derecognition of the original liability, and the recognition of a new liability with the result
that the difference in the respective carrying amounts, together with any costs.
DERIVATIVE FINANCIAL INSTRUMENTS
The activities of the Group expose it to the financial risks of changes in foreign exchange rates and interest rates. The Group uses derivative
financial instruments, such as forward foreign exchange contracts, cross-currency swaps and interest rate swap agreements, to hedge these
exposures.
Derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently
remeasured at fair value.
Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Derivative instruments which are
held for trading and are not designated as effective hedging instruments are classified as a current asset or liability (as appropriate) regardless
of maturity if the Group expects that they may be settled within 12 months of the balance sheet date. All other derivative instruments that are not
designated as effective hedging instruments are classified by reference to their maturity date. 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
maturity of the hedged item is less than 12 months.
The fair value of derivative instruments is determined by using valuation techniques. The Group uses its judgement to select the most appropriate
valuation methods and makes assumptions that are mainly based on observable market conditions existing at the balance sheet date.
For those derivatives designated as hedges and for which hedge accounting is sought, the hedging relationship is documented at its inception.
This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how hedge
effectiveness will be measured throughout its duration. Such hedges are expected at inception to be highly effective in offsetting changes
in fair values or cash flows of hedged items.
For the purposes of hedge accounting, derivatives are classified as:
• Fair value hedges, when hedging the exposure of changes in the fair value of a recognised asset or liability; or
• Cash flow hedges, when hedging the exposure to variability in cash flows that are either attributable to a particular risk associated with
a recognised asset or liability, or a highly probable forecast transaction; or
• Net investment hedges, when hedging the exposure to foreign currency differences between the functional currency of a foreign operation
and the functional currency of the parent.
Any gains or losses arising from changes in the fair value of all other derivatives which are classified as held for trading are taken to the profit
or loss and charged to finance income or expense. These may arise from derivatives for which hedge accounting is not applied because they
are not designated as hedging instruments. The Group does not use derivatives for trading or speculative purposes.
The treatment of gains and losses arising from remeasuring derivatives designated as hedging instruments depends on the nature of the hedging
relationship, as follows:
Fair Value Hedges
In the case of fair value hedges which are designated and qualify for hedge accounting, any gain or loss arising from the remeasurement of the
hedging instrument to fair value is reported in the profit or loss as finance costs. In addition, any fair value gain or loss attributable to the hedged
risk is adjusted against the carrying amount of the hedged item and reflected in the profit or loss as finance income or finance costs. If the hedge
no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of the hedged item is amortised on an effective interest
basis to the profit or loss with the objective of achieving full amortisation by maturity of the hedged item.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
105
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
1. GROUP STATEMENT OF ACCOUNTING POLICIES CONTINUED
DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED
Cash Flow Hedge
Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly
probable forecast transaction, the effective part of any gain or loss on the derivative financial instrument is recognised within equity in the hedging
reserve, with the ineffective portion being reported in the profit or loss as finance income or finance costs. When a highly probable forecast
transaction results in the recognition of a non-financial asset or liability, the cumulative gain or loss is removed from the hedging reserve in equity
and included in the initial measurement of the non-financial asset or liability. Otherwise, the associated gains and losses that had previously been
recognised within equity in the hedging reserve are transferred to the profit or loss as the cash flows of the hedged item impact the profit or loss.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised or no longer qualifies for hedge
accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised within equity in the hedging reserve is kept
in the hedging reserve until the forecast transaction occurs. If a hedged transaction is no longer anticipated to occur, the net cumulative gain
or loss recognised within equity in the hedging reserve is transferred immediately to the profit or loss as finance costs.
Net Investment Hedge
Foreign currency differences arising on the retranslation of a financial liability designated as a hedge of a net investment in a foreign operation are
recognised directly in equity in the foreign currency translation reserve, to the extent that the hedge is effective. To the extent that the hedge is
ineffective, such differences are recognised in profit or loss. When the hedged part of a net investment is disposed of, the associated cumulative
amount in equity is transferred to profit or loss as an adjustment to the profit or loss on disposal.
TAXATION
The charge/credit for the year comprises current and deferred tax. Tax is recognised in the profit or loss except to the extent that it relates to items
recognised in the Statement of Recognised Income and Expense or directly in equity, in which case the tax is also recognised in the Statement
of Recognised Income and Expense or directly in equity, respectively.
Current tax payable represents the expected tax payable on the taxable income for the year, using tax rates and tax laws enacted or substantively
enacted at the balance sheet date, along with any adjustment to tax payable in respect of previous years.
The Group provides in full for deferred tax assets and liabilities (using the liability method), arising from temporary differences between the tax
base of assets and liabilities and their carrying amounts in the Group Financial Statements except where they arise from the initial recognition of
goodwill or from the initial recognition of an asset or liability that at the date of initial recognition does not affect accounting or taxable profit or
loss on a transaction that is not a business combination. Such differences result in an obligation to pay more tax or a right to pay less tax in future
periods. A deferred tax asset is only recognised where it is probable that future taxable profits will be available against which the temporary
differences giving rise to the asset can be utilised.
Deferred tax assets and liabilities are not subject to discounting and are measured at the tax rates that are enacted or substantively enacted at the
balance sheet date.
Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal
of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the Group’s provision for income
taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business.
The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax
outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax
provisions in the period in which such determination is made. Once it has been concluded that a liability needs to be recognised, the liability is
measured. We consider the range of possible outcomes and record a liability based on the most likely single outcome, rather than alternative
approaches which could include a weighted average probability of outcomes or an ‘all or nothing’ approach.
EMPLOYEE BENEFITS
Defined Contribution Pension Plans
A defined contribution pension plan is a plan under which the Group pays fixed contributions into a separate defined contribution scheme.
Obligations for contributions to defined contribution pension plans are recognised as an expense within profit or loss as employee service
is received. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
Defined Benefit Pension Plans
All of the legacy defined benefit pension schemes have been closed to future accrual since 31 December 2009. The cost of providing benefits
under the Group’s defined benefit pension plans is determined separately for each plan, using the projected unit credit method, by professionally
qualified actuaries and arrived at using actuarial assumptions based on market expectations at the balance sheet date. These valuations attribute
entitlement benefits to the current and prior periods to determine current service costs and the present value of defined benefit pension obligations.
106 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS Re-measurements, comprising of actuarial gains and losses and the return on plan assets (excluding net interest), are recognised immediately
in the Balance Sheet with a corresponding debit or credit to retained earnings through the Statement of Recognised Income and Expense
in the period in which they occur. Re-measurements are not reclassified to profit or loss in subsequent periods.
Past service costs are recognised in profit or loss on the earlier of:
• The date of the plan amendment or curtailment; and
• The date that the Group recognises restructuring-related costs.
Net interest is calculated by applying the discount rate to the net defined benefit pension liability or asset.
When a settlement (eliminating all obligations for defined benefits already accrued) or a curtailment (reducing future obligations as a result of a
material reduction in the scheme membership or a reduction in future entitlement) occurs, the obligation and related plan assets are remeasured
using current actuarial assumptions and the resultant gain or loss is recognised in the profit or loss during the period in which the settlement
or curtailment occurs.
The defined benefit pension asset or liability in the Group Balance Sheet comprises the total, for each plan, of the present value of the defined
benefit pension obligation (using a discount rate based on high quality corporate bonds) less the fair value of plan assets out of which the
obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities is the published bid
price. The value of a net pension benefit asset is the present value of any economic benefit the Group reasonably expects to recover by way
of refund of surplus from the plan at the end of the plan’s life or reduction in future contributions to the plan.
EMPLOYEE SHARE-BASED PAYMENTS
The Group grants equity settled share-based payments to employees (through the Performance Share Plan, the Deferred Bonus Plan, the
Employee ShareSave Scheme and the Executive Option Scheme). The fair value of these is determined at the date of grant and is expensed
to the profit or loss with a corresponding increase in equity on a straight-line basis over the vesting period. The fair value is determined using an
appropriate valuation model, as measured at the date of grant, excluding the impact of any non-market conditions. Non-market vesting conditions
are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the Group revises its estimates
of the number of options or awards that are expected to vest, recognising any adjustment in the profit or loss, with a corresponding adjustment
to equity.
To the extent that the Group receives a tax deduction relating to services paid for by means of share awards or options, deferred tax is provided on
the basis of the difference between the market price of the underlying equity as at the date of the Balance Sheet and the exercise price of the option.
As a result, the deferred tax impact of share options will not directly correlate with the expense reported in the profit or loss. To the extent that the
deductible difference exceeds the cumulative charge to the profit or loss, it is recorded in Equity.
When the exercise of share options results in the issuance of shares, the proceeds received are credited to the share capital and share
premium accounts.
FOREIGN CURRENCY
Functional and Presentational Currency
The individual Financial Statements of each Group entity are measured in the currency of the primary economic environment in which the
entity operates (the functional currency). The Group Financial Statements are presented in sterling, which is also the Company’s functional
and presentation currency.
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, and from the translation at year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies, are recognised in the profit or loss, except when deferred in equity as qualifying
net investment hedges and qualifying cash flow hedges.
Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are
translated at the closing rate.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
107
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
1. GROUP STATEMENT OF ACCOUNTING POLICIES CONTINUED
FOREIGN CURRENCY CONTINUED
Foreign Operations
The Income Statement and Balance Sheet of Group entities that have a functional currency different from the presentation currency of the
Company are translated into the presentation currency as follows:
• Assets and liabilities are translated at the closing rate at the date of the Balance Sheet;
•
• All resulting exchange differences are recognised as a separate component of equity.
Income and expenses are translated at the rates at the date of the transaction, normally estimated using average exchange rates; and
On consolidation, exchange differences arising from the translation of the net investment in foreign operations and on long-term borrowings and
other currency instruments designated as hedges of such investments, are taken to equity. When a foreign operation is sold, exchange differences
that were recorded in equity are recognised in the profit or loss as part of the gain or loss on sale.
GOVERNMENT GRANTS
Government grants for the acquisition of assets are recognised at their fair value when there is reasonable assurance that the grant will be received
and any conditions attached to them have been fulfilled. The grant is held on the Balance Sheet as a deferred credit and released to the profit
or loss over the periods necessary to match the related depreciation charges, or other expenses of the asset, as they are incurred.
RESEARCH AND DEVELOPMENT
Expenditure on research and development is recognised as an expense in the period in which it is incurred. An asset is recognised only when all
the conditions set out in IAS 38 Intangible Assets are met.
SEGMENTAL REPORTING
Operating segments are reported in a manner consistent with the internal management structure of the Group and the internal financial
information provided to the Group’s Chief Operating Decision Maker who is responsible for making strategic decisions, allocating resources,
monitoring and assessing the performance of each segment. The Group reports segmental information by class of business and by geographical
area. The Group’s primary reporting segment, for which more detailed disclosures are made, is by class of business. Note 2 sets out the operating
and reportable segments of the Group.
EXCEPTIONAL ITEMS
Exceptional items are those that are separately disclosed by virtue of their nature or amount in order to highlight such items within the Group
Income Statement and results for the year. Examples of such items may include but are not limited to, significant reorganisation programmes,
profits or losses on termination of operations, impact of significant plant development and related onboarding of business, significant impairments
of assets, transaction and integration costs related to acquisition activity, transaction costs related to disposal activity and litigation costs and
settlements. Group management exercises judgement in assessing each particular item which, by virtue of its scale or nature, should be highlighted
and disclosed in the Group Income Statement and notes to the Group Financial Statements as exceptional items. Exceptional items are included
within the Income Statement caption to which they relate and are separately disclosed in the notes to the Group Financial Statements.
NON-CONTROLLING INTEREST
Non-controlling interests are stated at their proportion of the fair values of the identifiable assets and liabilities recognised. Subsequently,
any losses applicable to non-controlling interests continue to be recognised and attributed to non-controlling interests.
SHARE CAPITAL
Ordinary Shares
Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are taken as a deduction
within equity, net of tax, from the proceeds.
Treasury Shares
Where the Company purchases its own share capital, the consideration paid is deducted from total shareholders’ equity and classified as treasury
shares until such shares are cancelled or reissued. Where such shares are subsequently sold or reissued, any consideration received is included
in total shareholders’ equity.
108 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS 2. SEGMENT INFORMATION
The Chief Operating Decision Maker monitors the operating results of segments separately in order to allocate resources between segments and
to assess performance. Segment performance is predominantly evaluated based on operating profit before exceptional items and acquisition
related amortisation. Net finance costs and income tax are managed on a centralised basis, therefore, these items are not allocated between
operating segments for the purposes of the information presented to the Chief Operating Decision Maker and are accordingly omitted from
the segmental information below.
The Group has two operating segments Convenience Foods UK & Ireland and Convenience Foods US. Following the Group’s decision to dispose
of Greencore’s US business during the year, the Convenience Foods US operating segment is now classified as a discontinued operation, which is
a reporting segment, and the continuing operations of the Group represents the Convenience Foods UK and Ireland reporting segment.
Convenience Foods UK & Ireland: incorporating many UK Convenience Food categories including sandwiches, sushi, salads, chilled ready meals,
chilled soups and sauces, chilled quiche, ambient sauces and pickles, frozen Yorkshire Puddings and cakes and desserts categories as well as Irish
Ingredient trading businesses.
Discontinued operations: comprising the Convenience Foods US segment, manufacturing convenience food products for many of the largest food
brands, convenience retail and food service leaders in the US. The segment produces a wide range of fresh, frozen and ambient products
including sandwiches, meal kits and salad kits.
The comparative amounts for profit and loss information have been reclassified in line with the requirements of IFRS 5: Non-current assets held
for sale and discontinued operations.
Intersegment revenue is not material and thus not subject to separate disclosure.
Revenue
Group operating profit before exceptional items and amortisation
of acquisition related intangible assets*
Amortisation of acquisition related intangible assets
Exceptional items
Group operating profit
Finance income
Finance costs
Share of profit of associates after tax
Taxation
Profit for the period
Convenience Foods
UK & Ireland
Discontinued
operations
2018
£m
2017
£m
2018
£m
2017
£m
Total
2018
£m
2017
£m
1,498.5
1,438.4
1,061.8
881.3
2,560.3
2,319.7
104.6
(2.6)
(52.2)
49.8
102.9
(4.2)
(53.2)
45.5
48.0
(17.6)
(27.9)
2.5
37.2
(15.0)
(25.0)
(2.8)
152.6
(20.2)
(80.1)
52.3
0.2
(34.1)
0.9
17.2
36.5
140.1
(19.2)
(78.2)
42.7
–
(31.0)
0.7
1.5
13.9
* The current year includes £6.0m of central costs previously allocated to discontinued operations, and the prior year has been re-presented to reflect £3.9m of central costs
previously allocated to discontinued operations.
Segment assets
Assets
Reconciliation to total assets as reported in the
Group Balance Sheet
Investments in associates
Retirement benefit asset
Derivative financial instruments (current and non-current)
Deferred tax assets
Cash and cash equivalents
Total assets as reported in the Group Balance Sheet
Convenience Foods
UK & Ireland
Discontinued
operations
2018
£m
2017
£m
2018
£m
2017
£m
Total
2018
£m
2017
£m
974.7
991.0
944.7
915.3
1,919.4
1,906.3
1.3
15.3
0.8
41.7
37.0
1.2
17.3
0.3
93.5
19.8
2,015.5
2,038.4
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
109
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
2. SEGMENT INFORMATION CONTINUED
Segment liabilities
Liabilities
Reconciliation to total liabilities as reported in the
Group Balance Sheet
Borrowings
Derivative financial instruments (current and non-current)
Retirement benefit obligations
Provisions for liabilities (current and non-current)
Income tax liabilities (current and deferred)
Declared interim dividend
Interest payable
Total liabilities as reported in the Group Balance Sheet
OTHER SEGMENT INFORMATION
Convenience Foods
UK & Ireland
Discontinued
operations
2018
£m
2017
£m
2018
£m
2017
£m
Total
2018
£m
2017
£m
362.2
361.1
203.0
92.7
565.2
453.8
538.1
13.5
104.6
15.6
15.5
15.6
3.8
539.0
14.3
142.1
38.2
121.8
14.8
3.6
1,271.9
1,327.6
Capital expenditure
Depreciation
Amortisation of computer software and other intangibles
Amortisation of acquisition related intangible assets – customer related
Non-current assets (excluding derivative financial instruments,
Convenience Foods
UK & Ireland
Discontinued
operations
2018
£m
51.6
31.2
4.2
2.6
2017
£m
97.5
31.2
3.6
4.2
2018
£m
11.9
16.1
0.9
17.6
2017
£m
25.8
13.9
0.9
15.0
Total
2018
£m
63.5
47.3
5.1
20.2
2017
£m
123.3
45.1
4.5
19.2
retirement benefit assets and deferred tax assets)
755.9
774.5
767.6
796.3
1,523.5
1,570.8
3. OPERATING COSTS, NET
Continuing operations
Distribution costs
Administrative expenses
Research and development
Other operating costs
Other operating income
Total operating costs pre-exceptional, net
Exceptional charge (Note 7)
Total operating costs, net
2018
£m
2017*
£m
68.0
299.2
3.0
1.2
(0.5)
370.9
52.2
423.1
63.9
296.7
4.8
1.4
(1.5)
365.3
53.2
418.5
* Re-presented to reflect the change in presentation of discontinued operations and categorisation of certain indirect costs from cost of sales to operating costs to be
consistent with the current year
110 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS 4. RESULT FOR THE FINANCIAL PERIOD
The result for the Group for the financial year has been arrived at after charging/(crediting) the following amounts:
Depreciation:
Owned assets
Assets held under finance lease
Amortisation of intangible assets
Operating lease rentals:
Premises, plant and equipment
Rental income from investment properties
Auditor’s remuneration
Fees paid to the lead audit firm:
Audit of the Group Financial Statements
Audit of subsidiary Financial Statements
Other non-audit services
Total
2018
£m
47.2
0.1
47.3
2017
£m
44.0
1.1
45.1
25.3
23.7
25.5
20.9
(0.1)
(0.1)
£’000
£’000
819
53
471
905
60
647
1,343
1,612
Directors’ remuneration is shown in the Report on Directors’ Remuneration and in Note 33.
In the current year non-audit fees of £0.5m were incurred by the Group primarily relating to consultancy fees associated with the disposal of our
US business. The Audit Committee took comfort in external professional expertise when considering the appropriateness of the working capital
statement and profit estimate analysis as disclosed in the circular. There were no fees paid to other firms in the lead audit firm’s network in the
current or prior year.
5. EMPLOYMENT
The average monthly number of persons (including Executive Directors) employed by the Group in continuing operations during the year was:
Production
Distribution
Administration
* Re-presented to show only continuing operations. Employment information relating to discontinued operations is included in Note 9.
The staff costs for the year for the above employees were:
Wages and salaries
Social welfare costs
Employee share-based payment expense (Note 6)
Pension costs – defined contribution plans (Note 25)
Pension – settlement gain (Note 25)
Legacy defined benefit pension interest cost (Note 25)
2018
Number
2017*
Number
8,434
1,076
2,170
9,196
1,014
1,977
11,680
12,187
2018
£m
272.5
23.9
1.6
7.8
–
305.8
3.4
309.2
2017*
£m
286.1
24.3
3.5
7.5
(0.7)
320.7
3.9
324.6
* Re-presented to show only continuing operations. Employment information relating to discontinued operations is included in Note 9.
Total staff costs of continuing operations included above capitalised during the year were £3.3m (2017: £6.2m).
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
111
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
5. EMPLOYMENT CONTINUED
Actuarial gain on Group defined benefit pension schemes recognised in the Group Statement of Recognised Income and Expense:
Return on plan assets (Note 25)
Actuarial gains arising on scheme liabilities (Note 25)
Total gain included in the Statement of Recognised Income and Expense
2018
£m
2.5
21.8
24.3
2017
£m
(10.1)
40.2
30.1
6. SHARE-BASED PAYMENTS
The Group operates a number of employee share schemes which are equity settled share-based payments as defined in IFRS 2 Share-based
payments. A recognised valuation methodology is employed to determine the fair value of awards and options granted as set out in the standard.
The charge incurred relating to these schemes is recognised within operating costs. Detail of each of the employee share schemes operated
by the Group are set out below:
ANNUAL BONUS PLAN
Senior Executives participate in the Annual Bonus Plan as outlined in the Report on Directors’ Remuneration. In accordance with this plan, a deferred
share award equal to a proportion of the cash bonus is awarded to the participating executives, the number of shares is calculated at market value
on the date of allocation, to be held by a trustee for the benefit of individual participants without any additional performance conditions other
than three years of service. The shares vest after three years but are forfeit should an executive voluntarily leave the Group within the three year
time period, subject to normal ‘good leaver’ provisions. The charge recognised in the Group Income Statement was £0.8m (2017: £1.6m). The fair
value of the award is equal to the share price on the grant date. The share price on the grant date, for awards granted in December 2017 was
£2.05 (2017: £2.43).
On 1 December 2017 and 1 December 2016, 652,571 and 599,359, respectively, awards were granted to Senior Executives of the Group under the
Annual Bonus Plan.
The following table illustrates the number of, and movements in, share awards during the year under the plan:
At beginning of year
Granted
Vested
Forfeit
Adjustment in respect of Rights Issue*
At end of year
Exercisable at end of year
2018
Number
outstanding
1,612,706
652,571
(573,045)
(149,043)
–
2017
Number
outstanding
1,836,020
599,359
(804,697)
(197,820)
179,844
1,543,189
1,612,706
–
–
* The number of options outstanding and their exercise prices were adjusted to take account for the effect of the Rights Issue so that holders of options remain in the same
position as they would have been before the Rights Issue.
Awards will be granted to Senior Executives of the Group under the Annual Bonus Plan in respect of the year ended 28 September 2018. A charge
amounting to £0.1m (2017: £0.1m) relating to awards to Executive Directors and £0.2m (2017: £0.4m) relating to awards to other senior executives
has been included in the Group Income Statement in respect of the estimated 2018 charge. The total fair value of the awards will be taken as a
charge to the Group Income Statement over the vesting period of the awards.
PERFORMANCE SHARE PLAN
Certain employees participate in a long-term incentive scheme, the Performance Share Plan. In accordance with this scheme, participants are
awarded an allotment of shares which will vest over three years subject to vesting conditions based on growth in Adjusted Earnings per Share and
Return on Invested Capital. In December 2017 the Group introduced an additional vesting condition for relative Total Shareholder Return for all
awards granted from this date. These measures will be equally weighted when assessing vesting conditions. An additional two year future service
period will apply to Executive Directors vested shares before they are released.
The number of shares granted is calculated based on the market value on the date of allocation. Shares awards are forfeit should an executive
voluntarily leave the Group prior to the vesting date, subject to normal ‘good leaver’ provisions. The fair value of the award has attributed a value
to each vesting condition, equally weighted. Two thirds of the awards have a value that is equal to the share price on the grant date and the
remaining one third relating to the TSR has been fair valued using a Monte Carlo simulation model which incorporates the relative volatility of the
identified peer group against whom the Group are compared to assess the TSR vesting condition. Further description of the scheme can be found
in the Report on Directors’ Remuneration. A charge amounting to £0.1m (2017: £1.2m) was included in the Group Income Statement in the 2018
financial year related to these awards for all Performance Share Plan awards granted from December 2016 onwards.
112 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS The grant price of shares awarded in December 2017 was a weighted average price of £2.16 (granted in December 2016: £2.43).
The following table illustrates the number of, and movements in, share awards during the year under the plan:
At beginning of year
Granted
Vested
Forfeit
Adjustment in respect of Rights Issue*
At end of year
Exercisable at end of year
2018
Number
outstanding
5,406,319
4,234,819
(473,887)
(614,214)
–
2017
Number
outstanding
4,417,763
2,686,426
(1,213,953)
(966,673)
482,756
8,553,037
5,406,319
–
–
* The number of options outstanding and their exercise prices were adjusted to take account for the effect of the Rights Issue so that holders of options remain in the same
position as they would have been before the Rights Issue.
SHARESAVE SCHEMES
The Group operates savings-related share option schemes in both the UK and Ireland. Options are granted at a discount of between 20% and
25% of the market price at the date of invitation over three, five and seven year savings contracts and options are exercisable during the six month
period following completion of the savings contract. The charge recognised in the Group Income Statement in respect of these options was £0.7m
(2017: £0.7m). Grant date fair value was arrived at through applying a trinomial model, which is a lattice option-pricing model.
During the year ended 28 September 2018, ShareSave Scheme options were granted over 3,408,536 shares (UK) and 107,568 shares (Ireland), which
will ordinarily be exercisable at an exercise price of £1.48 and €1.57 per share respectively, during the period 1 September 2021 to 28 February 2022.
The weighted average fair value of share options granted during the year ended 28 September 2018 was £0.52 (UK) and £0.52 (Ireland).
During the prior year ended 29 September 2017, ShareSave Scheme options were granted over 2,410,569 shares (UK) and 30,429 shares (Ireland),
which will ordinarily be exercisable at an exercise price of £1.98 and €2.11 per share respectively, during the period 1 September 2020 to
28 February 2021. The weighted average fair value of share options granted during the year ended 29 September 2017 was £0.62 (UK) and
£0.66 (Ireland).
Number and Weighted Average Exercise Price for the UK ShareSave Scheme (expressed in sterling)
The following table sets out the number and weighted average exercise prices (expressed in sterling) of, and movements in, share options during
the year under the UK ShareSave Scheme:
At beginning of year
Granted
Exercised
Expired
Forfeit
Adjustment in respect of Right Issue*
At end of year
Exercisable at end of year
2018
2017
Number
outstanding
4,948,146
3,408,536
(117,632)
(726,281)
(2,113,457)
–
5,399,312
236,266
Weighted
average
exercise
price
£
2.04
1.48
1.87
2.05
2.04
–
1.69
2.08
Number
outstanding
3,192,526
2,410,569
(690,501)
(30,601)
(415,321)
481,474
4,948,146
231,452
Weighted
average
exercise
price
£
2.49
1.98
1.65
1.29
2.09
2.03
2.04
1.88
* The number of options outstanding and their exercise prices were adjusted to take account for the effect of the Rights Issue so that holders of options remain in the same
position as they would have been before the Rights Issue.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
113
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
6. SHARE-BASED PAYMENTS CONTINUED
SHARESAVE SCHEMES CONTINUED
Range of Exercise Prices for the UK ShareSave Scheme (expressed in sterling)
At 28 September 2018
£1.01–£2.00
£2.01–£3.00
At 29 September 2017
£0.01–£1.00
£1.01–£2.00
£2.01–£3.00
Weighted
average
contract life
years
Weighted
average
exercise
price
£
3.02
0.97
2.71
0.26
3.01
1.72
2.40
1.61
2.15
1.69
0.59
1.97
2.12
2.04
Number
outstanding
4,573,088
826,224
5,399,312
2,206
2,606,637
2,339,303
4,948,146
Number
exercisable
–
236,266
236,266
2,206
229,246
–
231,452
Weighted
average
exercise
price
£
–
2.08
2.08
0.59
1.89
–
1.88
Number and Weighted Average Exercise Prices for the Irish ShareSave Scheme (expressed in euro)
The following table sets out the number and weighted average exercise prices (expressed in euro) of, and movements in, share options during
the year under the Irish ShareSave Scheme:
At beginning of year
Granted
Exercised
Expired
Forfeit
Adjustment in respect of Right Issue*
At end of year
Exercisable at end of year
2018
2017
Number
outstanding
90,596
107,568
(3,318)
(8,299)
(46,314)
–
140,233
25,094
Weighted
average
exercise
price
€
2.43
1.57
2.18
2.18
2.16
–
1.88
2.74
Number
outstanding
80,781
30,429
(23,825)
–
(14,214)
17,425
90,596
11,617
Weighted
average
exercise
price
€
2.62
2.11
0.99
–
2.29
2.15
2.43
2.18
* The number of options outstanding and their exercise prices were adjusted to take account for the effect of the Rights Issue so that holders of options remain in the same
position as they would have been before the Rights Issue.
Range of Exercise Prices for the Irish ShareSave Scheme (expressed in euro)
Weighted
average
contract life
years
Weighted
average
exercise
price
€
3.27
0.97
2.55
2.04
2.04
1.57
2.54
1.88
2.43
2.43
Number
outstanding
96,046
44,187
140,233
90,596
90,596
Number
exercisable
–
25,094
25,094
11,617
11,617
Weighted
average
exercise
price
€
–
2.74
2.74
2.18
2.18
At 28 September 2018
€1.01–€2.00
€2.01–€3.00
At 29 September 2017
€2.01–€3.00
114 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS EXECUTIVE SHARE OPTION SCHEME
The charge relating to the Executive Share Option Scheme recognised in the Group Income Statement for the year was £nil (2017: £nil). Grant
date fair value was arrived at through applying a trinomial model, which is a lattice option-pricing model. To the extent that options have vested,
they will ordinarily remain exercisable for a period up to ten years from the grant date and are settled in equity through the issue of shares once
exercised. The general terms and conditions applicable to the share options granted by the Group are addressed in the Report on Directors’
Remuneration. All conditions are non-market based.
The Executive Share Option Scheme expired in 2011 and no further options have been granted under this scheme. During the year, all outstanding
options were exercised.
The following table illustrates the number and weighted average exercise prices (expressed in euro) of, and movements in, share options during
the year under the plan:
At beginning of year
Exercised
Expired
Adjustment in respect of Rights Issue*
At end of year
Exercisable at end of year
2018
2017
Number
outstanding
160,061
(160,061)
–
–
–
–
Weighted
average
exercise
price
€
0.69
0.69
–
–
–
–
Number
outstanding
257,533
–
(153,054)
55,582
160,061
160,061
Weighted
average
exercise
price
€
2.33
–
3.19
1.92
0.69
0.69
* The number of options outstanding and their exercise prices were adjusted to take account for the effect of the Rights Issue so that holders of options remain in the same
position as they would have been before the Rights Issue.
RANGE OF EXERCISE PRICES FOR THE EXECUTIVE SHARE OPTION SCHEME
At 29 September 2017
€0.01 – €1.00
Weighted
average
contract life
years
Weighted
average
exercise
price
€
Number
exercisable
3.25
3.25
0.69
0.69
160,061
160,061
Number
outstanding
160,061
160,061
WEIGHTED AVERAGE ASSUMPTIONS USED TO VALUE THE SHARE SCHEMES
ANNUAL BONUS PLAN
The fair value of awards granted under the Annual Bonus Plan is equal to the share price on the grant date.
PERFORMANCE SHARE PLAN
All awards granted under the PSP plans up to and including December 2016 are valued at a fair value equal to the share price on the grant date.
Awards granted in December 2017, have an additional vesting condition for relative Total Shareholder Return (‘TSR’). All vesting conditions
relating to the awards will be equally weighted when assessing the fair value at grant date. As such two thirds of the award has a fair value equal
to the share price on the grant date and the remaining one third relating to the TSR has been fair valued using a different methodology. The TSR
component has been valued using a Monte Carlo simulation model which also incorporates the relative volatility of the identified peer group with
whom the Group are compared to assess the TSR vesting condition. The following table shows the weighted average assumptions used to fair
value the equity settled awards granted.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Share price at grant (£)
Fair value (£)
FY18
PSP TSR
2.98%
29.42%
0.48%
3 – 5
£2.05
£0.22
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
115
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
6. SHARE-BASED PAYMENTS CONTINUED
WEIGHTED AVERAGE ASSUMPTIONS USED TO VALUE THE SHARE SCHEMES CONTINUED
ShareSave Schemes
The ShareSave Schemes equity settled options are also valued at the fair value on grant date in July 2018 and are calculated by applying
a trinomial model. The following table shows the weighted average assumptions used to fair value the equity settled options granted.
Dividend yield (%)
Expected volatility (%)
Risk-free interest rate (%)
Expected life of option (years)
Share price at grant (£/€)
Exercise price (£/€)
Fair value (£/€)
2018
2017
UK
ShareSave
Ireland
ShareSave
UK
ShareSave
Ireland
ShareSave
2.98%
32.29%
0.76%
3
£1.87
£1.48
£0.49
2.98%
32.29%
(0.24%)
3
€ 2.09
€ 1.57
€ 0.57
3.00%
31.31%
0.41%
3
£2.46
£1.98
£0.62
3.00%
31.31%
(0.44%)
3
€ 2.81
€ 2.11
€ 0.75
The average share price during the 2018 financial year was £1.83 (2017: £2.38).
The expected volatility is estimated based on the historic volatility of the Company’s share price over a period equivalent to the life of the relevant
option. The risk-free rate of return is the yield on a government bond of a term consistent with the life of the option.
The range of the Company’s share price during the year was £1.27–£2.30 (2017: £1.87–£2.77) .
7. EXCEPTIONAL ITEMS
Exceptional items are those which, in management’s judgement, should be disclosed separately by virtue of their nature or amount. Such items
are included within the Income Statement caption to which they relate and are separately disclosed in the notes to the Group Financial
Statements.
The Group reports the following exceptional items:
Network rationalisation and optimisation
Exit from cakes and desserts
Reorganisation and integration costs
Pre-commissioning and start up costs
Transaction costs
Intangible asset impairment
Legal settlement
Tax on exceptional items
Tax credit
Total exceptional charge
2018
Continuing
operations
£m
Discontinued
operations
£m
(21.2)
(13.9)
(15.9)
(1.2)
–
–
–
(52.2)
7.8
–
(44.4)
(23.6)
–
(3.0)
–
(1.3)
–
–
(27.9)
–
20.6
(7.3)
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(H)
(I)
2017
Continuing
operations
£m
Discontinued
operations
£m
–
(16.5)
(1.9)
(3.6)
(0.4)
(29.7)
(1.1)
(53.2)
8.9
–
(44.3)
–
–
(9.3)
(0.5)
(15.2)
–
–
(25.0)
–
–
(25.0)
Total
£m
(44.8)
(13.9)
(18.9)
(1.2)
(1.3)
–
–
(80.1)
7.8
20.6
(51.7)
Total
£m
–
(16.5)
(11.2)
(4.1)
(15.6)
(29.7)
(1.1)
(78.2)
8.9
–
(69.3)
(A) NETWORK RATIONALISATION AND OPTIMISATION
Continuing operations
In the year, the Group recognised a charge of £21.2m relating to the rationalisation and optimisation of its prepared meals manufacturing network
in the UK, following the Group’s announcement in July 2018 to phase out of manufacturing of longer life ready meals at its Kiveton facility. The
charge comprises an impairment of property, plant and equipment of £15.6m (Note 15), an impairment of goodwill of £1.4m (Note 14) and a
provision for other costs associated with the exit (Note 24).
Discontinued operations
In the year, the Group recognised a charge of £23.6m relating to the optimisation of its manufacturing network in its US operations. The Group
recognised an impairment charge of £20.6m in relation to the exit from the Rhode Island business and subsequent disposal, and in relation
to the repurposing of its Jacksonville manufacturing facility. The charge also includes other onetime costs associated with the closure of the
Rhode Island facility.
116 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS (B) EXIT FROM CAKES AND DESSERTS
Continuing operations
In February 2018, the Group disposed of its cakes and desserts business in Hull to Bright Blue Foods Ltd and subsequently disposed of its dessert
manufacturing facility at Evercreech in July 2018, following its closure as announced in 2017 leading to a net loss of £13.9m. The sale of the business
in Hull and the exit from dessert manufacturing at Evercreech marks Greencore’s complete exit from the UK cakes and desserts sector.
In the prior year, a charge of £16.5m was recognised related to business exit costs associated with the exit from manufacturing at Evercreech.
(C) REORGANISATION AND INTEGRATION COSTS
Continuing operations
In the year, the Group recognised a charge of £15.9m relating to the implementation of its streamlining and efficiency programme across
Convenience Foods UK & Ireland.
In the prior year, the Group recognised a charge of £1.9m in relation to the new organisation structure within Convenience Foods UK & Ireland
and the integration of The Sandwich Factory Holdings Limited in the UK.
Discontinued operations
In the year, the Group recognised a charge of £3.0m in relation to the restructure of the US leadership team and ongoing integration costs
associated with the Peacock Foods acquisition.
In the prior year, the Group recognised a charge of £9.3m in relation to the integration of the Peacock Foods acquisition, which completed
in December 2016.
(D) PRE-COMMISSIONING AND START-UP COSTS
Continuing operations
In the year, the Group recognised a charge of £1.2m in relation to pre-commissioning and start-up activities on the expansion of its facility in Warrington.
In the prior year, the Group recognised a £3.6m charge in relation to pre-commissioning and start-up costs relating to significant plant
development and related onboarding of new business at its facilities in Warrington and Northampton in the UK.
Discontinued operations
In the prior year, the Group recognised a £0.5m charge in relation to pre-commissioning and start-up costs relating to significant plant
development and related onboarding of new business.
(E) TRANSACTION COSTS
Continuing operations
In the prior year the Group recognised a charge of £0.4m comprising transaction costs relating to the acquisition of its facility at Heathrow
in June 2017.
Discontinued operations
In the year, the Group recognised a £1.3m charge comprising transactions costs associated with the disposal of Greencore’s US business which
completed in November 2018.
In the prior year, the Group recognised a £15.2m charge in relation to the acquisition of Peacock Foods in December 2016.
(F) INTANGIBLE ASSET IMPAIRMENT
Continuing operations
In the prior year, the Group recognised a charge of £29.7m relating to the impairment of software assets, associated with the decision not to
proceed with the planned rollout of a common ERP platform across the UK business.
(G) LEGAL SETTLEMENT
Continuing operations
In the prior year, the Group incurred a charge of £1.1m in respect of a legal settlement and related costs.
(H) TAX ON EXCEPTIONAL ITEMS
Continuing operations
The Group recognised a tax credit of £7.8m in respect of exceptional charges.
(I) TAX CREDIT
Discontinued operations
In the year, the Group recognised a tax credit of £20.6m on the revaluation of tax assets and liabilities as a result of the rate change in the US.
The tax credit was recognised within profit from discontinued operations.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
117
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
7. EXCEPTIONAL ITEMS CONTINUED
CASH FLOW ON EXCEPTIONAL ITEMS
The total net cash outflow during the year in respect of exceptional charges was £15.0m (2017: £33.7m), of which £6.5m was in respect of prior year
exceptional charges. The remaining current year exceptional cash flow includes proceeds received for assets divested during the year including
Hull, Evercreech and Rhode Island.
8. FINANCE COSTS AND FINANCE INCOME
Continuing operations
Finance income
Interest on bank deposits
Total finance income recognised in the Income Statement
Continuing operations
Finance costs
Bank overdrafts and other financing costs
Other borrowings
Interest on obligations under finance leases
Interest on legacy defined benefit pension scheme liabilities (Note 25)
Fair value movement on swaps not designated as hedges
Fair value movement on forward foreign exchange contracts not designated as hedges
Foreign exchange on inter-company and external balances where hedge accounting is not applied
Total finance expense recognised in the Income Statement
Total net finance expense recognised in the Income Statement
Recognised directly in equity for continuing operations
Currency translation adjustment
Hedge of net investment in foreign operations
Effective portion of changes in fair value of cash flow hedges
2018
£m
2017*
£m
(0.2)
(0.2)
15.7
10.6
0.1
3.4
3.4
–
(0.1)
33.1
32.9
15.4
(10.6)
4.1
8.9
–
–
13.5
10.0
0.2
3.9
(0.7)
0.5
3.0
30.4
30.4
(45.2)
25.8
1.9
(17.5)
* Prior year re-presented to show finance income and expenses relating to continuing operations. For discontinued operations, please see Note 9.
Interest costs capitalised in the year were £0.4m (2017: £1.8m).
9. DISCONTINUED OPERATIONS AND DISPOSAL GROUP HELD FOR SALE
On 15 October 2018, the Group announced that it had reached an agreement to sell Greencore’s US business to Hearthside Food Solutions LLC
for cash consideration of $1,075m, subject to customary adjustments for cash, debt and working capital. On 7 November 2018 the shareholders
approved disposal and the transaction subsequently completed on 25 November 2018.
At 28 September 2018, the disposal of Greencore’s US business met the recognition criteria under IFRS 5 Non-current assets held for sale and
discontinued operations. The results of the US business are presented as discontinued and are shown separately from continuing operations.
The comparative 2017 financial information in the Group Income Statement has also been presented as discontinued for the purposes of enabling
meaningful comparison.
Greencore’s US business is included within the Convenience Foods US operating segment which has been presented as a discontinued reporting
segment (Note 2).
118 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS RESULTS OF DISCONTINUED OPERATIONS
Revenue
Cost of sales
Gross profit
Operating costs, net
Group Operating Profit before acquisition related amortisation and exceptional items
Amortisation of acquisition related intangibles
Group Operating Profit before exceptional items
Exceptional items
Finance costs
Taxation
Profit/(loss) for the year from discontinued operations
2018
£m
1,061.8
(836.2)
225.6
(177.6)
48.0
(17.6)
30.4
(27.9)
(1.0)
22.4
23.9
2017
£m
881.3
(697.5)
183.8
(146.6)
37.2
(15.0)
22.2
(25.0)
(0.6)
–
(3.4)
The profit from discontinued operations of £23.9 million (2017: loss of £3.4 million) is attributable entirely to the owners of the Company.
EMPLOYMENT RELATING TO DISCONTINUED OPERATIONS
The average monthly number of persons employed by the discontinued operation during the year was:
Production
Distribution
Administration
The staff costs for the year for the above employees was:
Wages and Salaries
Social Welfare costs
Pension costs – defined contribution plans
CASH INFLOWS/(OUTFLOWS) FROM DISCONTINUED OPERATIONS
Cash inflow from operating activities
Cash outflow from investing activities
Cash outflow from financing activities
Net cash inflow/(outflow) for the year
2018
Number
2017
Number
2,284
102
568
2,954
2018
£m
100.0
8.3
1.8
110.1
2018
£m
26.8
(16.8)
(0.5)
9.5
2,398
171
448
3,017
2017
£m
83.5
6.5
1.5
91.5
2017
£m
6.5
(7.4)
(2.8)
(3.7)
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
119
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
9. DISCONTINUED OPERATIONS AND DISPOSAL GROUP HELD FOR SALE CONTINUED
ASSETS AND LIABILITIES OF DISPOSAL GROUP HELD FOR SALE
At 28 September 2018, the following assets and liabilities were classified as held for sale:
Goodwill and intangible assets
Property, plant and equipment
Deferred tax assets
Inventory
Trade and other receivables
Assets held for sale
Trade and other payables
Provisions for liabilities
Deferred tax liabilities
Liabilities directly associated with the assets held for sale
2018
£m
644.9
122.7
28.0
38.7
110.4
944.7
111.4
22.0
69.6
203.0
CUMULATIVE INCOME OR EXPENSE INCLUDED IN OTHER COMPREHENSIVE INCOME
The movement in Other Comprehensive Income in the year is a credit of £43.7m related to disposal group held for sale (2017: charge of £55.7m).
The total cumulative amount carried in the foreign currency translation reserve at year end related to the disposal group held for sale is a gain
of £8.2m.
MEASUREMENT OF FAIR VALUE
The disposal group was measured at its carrying value which was lower than its fair value less costs to sell. No impairment to the disposal group
was necessary at 28 September 2018.
FAIR VALUE HIERARCHY AND VALUATION TECHNIQUE
Fair value less costs to sell is based on the agreed consideration for Greencore’s US business as per the Stock Purchase Agreement with the
vendor. This is a Level 3 on the fair value hierarchy.
10. INVESTMENT IN ASSOCIATES
The following table summarises the financial information of the Group’s associates as included in their own Financial Statements:
Associates’ Income Statement
Revenue
Profit before taxation
Taxation
Profit after taxation
Group’s share of profit after tax (50%)
Associates’ Balance Sheet
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Net assets
Group’s share of net assets (50%)
120 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
2018
£m
2017
£m
9.3
8.5
2.3
(0.5)
1.8
0.9
2018
£m
3.2
0.1
(0.5)
(0.2)
2.6
1.3
1.8
(0.4)
1.4
0.7
2017
£m
2.9
0.1
(0.4)
(0.2)
2.4
1.2
FINANCIAL STATEMENTS The following table reconciles the summarised financial position to the carrying amount of the Group’s interest in its associates:
Carrying amount of associates
At beginning of year
Share of profit after tax of associates
Dividends received
At end of year
Details of the Group’s principal associates, all of which are unlisted, are shown in Note 34.
11. TAXATION
Continuing and discontinued operations
Current tax
Corporation tax charge
Overseas tax charge
Adjustment in respect of prior years
Total current tax charge (pre-exceptional)
Deferred tax
Origination and reversal of temporary differences
Legacy defined benefit pension obligations
Effect of tax rate change
Employee share-based payments
Increase in asset recognised
Adjustment in respect of prior years
Total deferred tax charge
Income tax expense (pre-exceptional)
The total income tax expense (pre-exceptional) for the financial year is analysed as follows:
Continuing operations
Discontinued operations
Income tax expense (pre-exceptional)
Tax on exceptional items
Current tax credit
Deferred tax credit
Tax credit on exceptional items
The total exceptional tax expense for the financial year is analysed as follows:
Continuing operations
Discontinued operations
Tax credit on exceptional items
Total tax credit for the year
2018
£m
1.2
0.9
(0.8)
1.3
2017
£m
1.0
0.7
(0.5)
1.2
2018
£m
2017
£m
2.5
5.6
(1.3)
6.8
3.4
1.5
1.2
0.4
(1.8)
(0.3)
4.4
11.2
13.0
(1.8)
11.2
(4.5)
(23.9)
(28.4)
(7.8)
(20.6)
(28.4)
(17.2)
2.9
3.9
(6.1)
0.7
6.7
0.8
0.6
0.1
(0.1)
(1.4)
6.7
7.4
7.4
–
7.4
(2.3)
(6.6)
(8.9)
(8.9)
–
(8.9)
(1.5)
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
121
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
11. TAXATION CONTINUED
Tax relating to items taken directly to equity
Current tax relating to items taken directly to equity
Income tax relating to foreign currency exchange
Employee share-based payments
Deferred tax relating to items taken directly to equity
Actuarial gain on Group legacy defined benefit pension schemes
Adjustment in respect of prior years on Group on legacy defined benefit pension schemes
Cash flow hedges transferred to Income Statement
Employee share-based payments
RECONCILIATION OF TOTAL TAX CREDIT
The tax credit for the year can be reconciled to the profit per the Income Statement as follows:
Profit for the year
Total tax credit for the year
Less: share of profit of associates after tax
Profit before tax
Tax charge at Irish corporation tax rate of 12.5%
Effects of:
Expenses not deductible for tax purposes
Differences in effective tax rates on overseas earnings
Effect of current year losses not recognised
Utilisation of losses not previously recognised
Recognition of previously unrecognised deferred tax asset
Effect of rate change
Exceptional items
Effect of the tax rate change in the US
Adjustment in respect of prior years
Other
Total tax credit for the year
2018
£m
2017
£m
–
–
–
4.5
–
–
–
4.5
4.5
2018
£m
36.5
(17.2)
(0.9)
18.4
2.3
4.1
(5.3)
5.1
(2.7)
(1.8)
1.2
1.8
(20.6)
(1.7)
0.4
(17.2)
(0.1)
(0.4)
(0.5)
4.8
0.3
0.1
0.3
5.5
5.0
2017
£m
13.9
(1.5)
(0.7)
11.7
1.5
4.6
(7.6)
9.2
(4.2)
(0.1)
0.6
1.5
–
(7.5)
0.5
(1.5)
122 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS DEFERRED TAXATION
The Group’s deferred tax assets and liabilities are analysed as follows:
Property,
plant and
equipment
£m
Acquisition
related
intangibles
£m
Retirement
benefit
obligations
£m
Derivative
financial
instruments
£m
Employee
share-based
payment
£m
Tax losses
£m
Other
£m
Total
£m
Year ended 28 September 2018
At beginning of year
Income Statement (charge)/credit
Tax credited to equity
Currency translation adjustment and other
At end of year
Deferred tax assets (deductible
temporary differences)
– continued operations
– discontinued operations
Deferred tax liabilities (taxable
temporary differences)
– continued operations
– discontinued operations
Net deferred tax asset/(liability)
(13.8)
7.4
–
(0.2)
(6.6)
3.9
–
(3.0)
(7.5)
(6.6)
The net deferred tax asset/(liability) is analysed as follows:
Continuing operations
Discontinued operations
0.9
(7.5)
Net deferred tax asset/(liability)
(6.6)
(91.5)
30.6
–
(1.4)
(62.3)
–
–
(1.1)
(61.2)
(62.3)
(1.1)
(61.2)
(62.3)
21.7
(1.5)
(4.5)
–
15.7
15.7
–
–
–
15.7
15.7
–
15.7
(0.1)
–
–
–
(0.1)
–
–
(0.1)
–
(0.1)
(0.1)
–
(0.1)
49.8
(12.1)
–
0.4
38.1
20.6
17.5
–
–
38.1
20.6
17.5
38.1
0.7
(0.4)
–
–
0.3
0.3
–
–
–
0.3
0.3
–
0.3
Year ended 29 September 2017
At beginning of year
Income Statement (charge)/credit
Tax credited to equity
Reclassification
Arising on acquisition (Note 32)
Currency translation adjustment and other
At end of year
Deferred tax assets (deductible
temporary differences)
Deferred tax liabilities (taxable
temporary differences)
Net deferred tax asset/(liability)
Property,
plant and
equipment
£m
Acquisition
related
intangibles
£m
Retirement
benefit
obligations
£m
Derivative
financial
instruments
£m
Employee
share-based
payment
£m
Tax losses
£m
(1.7)
(0.1)
–
(3.7)
(9.3)
1.0
(13.8)
4.9
(18.7)
(13.8)
(2.4)
(0.2)
–
(1.1)
(95.3)
7.5
(91.5)
–
(91.5)
(91.5)
27.6
(0.8)
(5.1)
–
–
–
21.7
21.7
–
21.7
–
–
(0.1)
–
–
–
(0.1)
–
(0.1)
(0.1)
25.0
1.0
–
4.8
21.0
(2.0)
49.8
49.8
–
49.8
1.1
(0.1)
(0.3)
–
–
–
0.7
0.7
–
0.7
15.2
(4.5)
–
0.1
10.8
1.2
10.5
–
(0.9)
10.8
1.2
9.6
10.8
Other
£m
1.2
0.1
–
–
15.0
(1.1)
15.2
16.4
(1.2)
15.2
(18.0)
19.5
(4.5)
(1.1)
(4.1)
41.7
28.0
(4.2)
(69.6)
(4.1)
37.5
(41.6)
(4.1)
Total
£m
50.8
(0.1)
(5.5)
–
(68.6)
5.4
(18.0)
93.5
(111.5)
(18.0)
The Group has not provided deferred tax in relation to temporary differences applicable to investments in subsidiaries on the basis that the
Group can control the timing and realisation of these temporary differences, and it is probable that the temporary difference will not reverse in the
foreseeable future. Given that participation exemptions and tax credits would be available in the context of the Group’s investments in subsidiaries
and joint ventures in the majority of the jurisdictions in which the Group operates, the aggregate amount of any unrecognised deferred tax liability
arising in respect of temporary differences would be immaterial. No provision has been recognised in respect of deferred tax relating to unremitted
earnings of subsidiaries as there is no commitment to remit earnings.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
123
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
11. TAXATION CONTINUED
DEFERRED TAXATION CONTINUED
No deferred tax asset is recognised in respect of certain tax losses and other attributes by the Group on the grounds that there is insufficient
evidence that the assets will be recoverable. In the event that sufficient profits are generated in the relevant jurisdictions in the future, these assets
may be recovered. The unrecognised deferred tax asset at 28 September 2018 was £50.7m (2017: £52.6m) which has been calculated based on the
tax rate applicable to the jurisdiction in which the losses relate and have been translated to the reporting currency (GBP) at the closing balance
sheet rate at 28 September 2018.
The total gross unrecognised tax losses are £241.5m (2017: £216.4m) of which £138.4m relate to continuing operations and £103.1m relate to
discontinued operations. Trading losses arising in the US incurred prior to 2018 have a 20 year expiry. The US gross losses expire in 2030 – 2038.
There is no expiry date for other losses in other jurisdictions. Deferred tax assets, to the extent that the Directors believe they are recoverable,
have been recognised. The unrecognised deferred tax asset at 28 September 2018 in respect of capital losses was £11.4m, which has been
translated to GBP calculated at the balance sheet rate at 28 September 2018 and which corresponds to gross unrecognised tax losses of
£58.8m (2017: £57.1m). There is no expiry date for these losses in any jurisdiction. Recognition of deferred tax assets is a key judgement in
the Financial Statements.
FACTORS THAT MAY IMPACT FUTURE TAX CHARGES AND OTHER DISCLOSURES
The tax charge in future periods will be impacted by any changes to the corporation tax rate in force in the countries in which the Group operates.
There is a degree of uncertainty over the level of the future tax rate, due to a combination of factors including US tax reform, BEPS (Base Erosion
and Profit Shifting) actions and the impact of Brexit on levels of UK taxation.
The main rate of UK corporation tax will reduce to 17% with effect from 1 April 2020. The rate reduction was enacted during a prior period and
therefore has been taken into account in the calculation of the UK-related deferred tax balances.
In the US, the Federal rate is taken into account in the calculation of the US related balances with the State rate determined by the States in which
the Group operates. The proposal to reduce the Federal rate from 35% to 21% was enacted during the period and therefore has been taken into
account in the calculation of the US related deferred tax balances. The current tax rate is a blended rate reflecting the 35% for three months and
21% for nine months.
The Group is subject to income taxes in numerous jurisdictions. Significant judgement is required in determining the Group’s provision for income
taxes and deferred taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary
course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due.
Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income
tax and deferred tax provisions in the period in which such determination is made. Adjustments in respect of prior periods arose largely on the
settlement of tax authority enquiries and/or closure of open periods.
12. EARNINGS PER ORDINARY SHARE
BASIC EARNINGS PER ORDINARY SHARE
Basic earnings per Ordinary Share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average
number of Ordinary Shares in issue during the period, excluding Ordinary Shares purchased by the Company and held in trust in respect of the
Annual Bonus Scheme, the Performance Share Plan and the Executive Share Option Scheme. The adjusted figures for basic and diluted earnings
per Ordinary Share is calculated as profit attributable to equity holders of the Company adjusted to exclude exceptional items (net of tax), the
effect of foreign exchange (‘FX’) on intercompany and certain external balances where hedge accounting is not applied, the movement in the fair
value of all derivative financial instruments and related debt adjustments, the amortisation of acquisition related intangible assets (net of tax) and
the effect of the interest expense relating to legacy defined benefit pension liabilities, net of tax.
NUMERATOR FOR EARNINGS PER SHARE AND DILUTED EARNINGS PER SHARE CALCULATION
2018
2017
Continuing
operations
£m
Discontinued
operations
£m
Total
£m
Continuing
operations
£m
Discontinued
operations
£m
Profit attributable to equity holders of the Company
(numerator for basic earnings per share calculation)
Exceptional items (net of tax)
Movement on fair value of derivative financial instruments and
related debt adjustments
FX effect on inter-company and external balances where hedge
accounting is not applied
Amortisation of acquisition related intangibles (net of tax)
Pension financing (net of tax)
Numerator for adjusted earnings per share calculation
9.9
44.4
3.4
(0.1)
2.1
2.7
62.4
23.9
7.3
–
–
12.3
–
43.5
33.8
51.7
3.4
(0.1)
14.4
2.7
105.9
15.6
44.3
(0.2)
3.0
3.4
3.1
69.2
124 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
Total
£m
12.2
69.3
(0.2)
3.0
13.1
3.1
(3.4)
25.0
–
–
9.7
–
31.3
100.5
FINANCIAL STATEMENTS DENOMINATOR FOR EARNINGS PER SHARE CALCULATION
Shares in issue at the beginning of the year
Effect of shares held by Employee Benefit Trust
Effect of shares issued during the year
Effect of bonus issue relating to Rights Issue
Weighted average number of Ordinary Shares in issue during the year
2018
‘000
705,647
(3,389)
1,054
–
2017
‘000
413,468
(3,283)
220,704
21,592
703,312
652,481
Basic earnings per Ordinary Share
Adjusted earnings per Ordinary Share
2018
Continuing
operations
pence
Discontinued
operations
pence
1.4
3.4
2017
Continuing
operations
pence
Discontinued
operations
pence
2.4
(0.5)
Total
pence
4.8
15.1
Total
pence
1.9
15.4
DILUTED EARNINGS PER ORDINARY SHARE
Diluted earnings per Ordinary Share is calculated by adjusting the weighted average number of Ordinary Shares outstanding to assume
conversion of all dilutive potential Ordinary Shares. Employee Performance Share Plan awards, which are performance based, are treated as
contingently issuable shares, because their issue is contingent upon satisfaction of specified performance conditions in addition to the passage
of time. These contingently issuable Ordinary Shares are excluded from the computation of diluted earnings per Ordinary Share where the
conditions governing exercisability have not been satisfied as at the end of the reporting period. A total of 12,886,062 (2017: 6,619,322) unvested
shares were excluded from the diluted earnings per share calculation as they were either antidilutive or contingently issuable Ordinary Shares
which had not satisfied the performance conditions attaching at the end of the 2018 financial year.
DENOMINATOR FOR DILUTED EARNINGS PER SHARE CALCULATION
A reconciliation of the weighted average number of Ordinary Shares used for the purpose of calculating the diluted earnings per share amounts
is as follows:
Weighted average number of Ordinary Shares in issue during the year
Dilutive effect of share options
Weighted average number of Ordinary Shares for diluted earnings per share
2018
‘000
2017
‘000
703,312
747
652,481
2,257
704,059
654,738
Diluted earnings per Ordinary Share
Adjusted earnings per Ordinary Share
2018
Continuing
operations
pence
Discontinued
operations
pence
1.4
3.4
2017
Continuing
operations
pence
Discontinued
operations
pence
2.4
(0.5)
Total
pence
4.8
15.1
Total
pence
1.9
15.4
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
125
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
13. DIVIDENDS PAID AND PROPOSED
Amounts recognised as distributions to equity holders in the year:
Equity dividends on Ordinary Shares:
Final dividend of 3.37 pence for the year ended 29 September 2017 (2016: 3.37 pence)
Interim dividend of 2.20 pence for the year ended 28 September 2018 (2017: 2.10 pence)
Total
Proposed for approval at AGM:
Equity dividends on Ordinary Shares:
2018
£m
2017
£m
23.8
15.6
39.4
17.0
14.8
31.8
Final dividend of 3.37 pence for the year ended 28 September 2018 (2017: 3.37 pence)
23.8
23.8
During the year, 1,210,655 (2017: 4,250,498) shares were issued in respect of the Scrip Dividend Scheme at a weighted average share price
of £2.37 per share (2017: £2.58).
The proposed final dividend for the year ended 28 September 2018 will be payable on 5 February 2019 to shareholders on the Register of Members
at 11 January 2019.
14. GOODWILL AND INTANGIBLE ASSETS
Year ended 28 September 2018
Opening net book amount
Additions
Disposals
Currency translation adjustment
Amortisation charge
Impairment charge
Assets transferred to assets held for sale (Note 9)
Closing net book amount
At 28 September 2018
Cost
Accumulated impairment/amortisation
Net book amount
Year ended 29 September 2017
Opening net book amount
Acquisitions through business combinations (Note 32)
Additions
Currency translation adjustment
Amortisation charge
Impairment charge
Closing net book amount
At 29 September 2017
Cost
Accumulated impairment/amortisation
Net book amount
126 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
Computer
software and
other intangibles
£m
Goodwill
£m
Acquisition
related
intangible assets
– customer
related
£m
797.1
–
–
11.3
–
(1.4)
(397.3)
409.7
420.3
(10.6)
409.7
17.3
3.0
(0.2)
–
(5.1)
(0.8)
(4.5)
9.7
64.1
(54.4)
9.7
263.2
–
–
6.2
(20.2)
(0.2)
(243.1)
5.9
34.8
(28.9)
5.9
Computer
software and
other intangibles
£m
Goodwill
£m
Acquisition
related
intangible assets
– customer
related
£m
476.9
344.1
–
(23.9)
–
–
797.1
806.4
(9.3)
797.1
34.1
–
17.8
(0.2)
(4.5)
(29.9)
17.3
63.1
(45.8)
17.3
41.4
261.5
–
(20.5)
(19.2)
–
263.2
330.5
(67.3)
263.2
Total
£m
1,077.6
3.0
(0.2)
17.5
(25.3)
(2.4)
(644.9)
425.3
519.2
(93.9)
425.3
Total
£m
552.4
605.6
17.8
(44.6)
(23.7)
(29.9)
1,077.6
1,200.0
(122.4)
1,077.6
FINANCIAL STATEMENTS During the year the Group recognised an impairment charge of £2.4m, which includes the impairment of goodwill of £1.4m relating to the
prepared meals business following the rationalisation and optimisation of its longer life ready meals manufacturing network. The impairment
charge is included as an exceptional item in operating costs within the Group Income Statement (Note 7).
During the prior year the Group recognised a £29.9m impairment charge relating to computer software and intangible assets. This charge was
included as an exceptional item in operating costs in the Group Income Statement (Note 7).
Upon review of the useful economic lives of intangible assets in the year, it was identified that the useful economic life of an acquisition related
intangible asset required a revision to extend the useful life by a further six years due to an extension of key customer contracts. In the current
period this resulted in a reduced charge to the Group Income Statement of £1.6m.
At September 2018, £243.1m of acquisition related intangible assets were transferred to assets held for sale. These mainly relate to the
Customer related intangible assets which were acquired as part of the acquisition of Peacock Foods in December 2016. These related to
a number of significant customers including Tyson, Kraft, Nestle, General Mills and Kelloggs, and are considered to have a remaining useful
life of approximately 16 years.
Goodwill acquired in business combinations is allocated, at acquisition, to the cash generating units (‘CGU’s) that are expected to benefit from
that business combination. A summary of the allocation of the carrying value of goodwill by CGU is as follows:
Convenience Foods UK
Convenience Foods US*
Ingredients and Property
2018
£m
407.6
–
2.1
409.7
2017
£m
408.9
386.1
2.1
797.1
* Transferred to assets held for sale at 28 September 2018, see Note 9.
IMPAIRMENT TESTING AND GOODWILL
Goodwill acquired through business combinations has been allocated to CGUs for the purposes of impairment testing based on the business
unit into which the business will be assimilated. Previously goodwill has been allocated to three individual cash-generating units which included
Convenience Foods UK, Convenience Foods US and Ingredients and Property, however, with the disposal of Greencore’s US business announced
after the year end date, and the reclassification of the Convenience Foods US CGU as held for sale under IFRS 5: Non-current assets held for sale
and discontinued operations, there are now only two individual cash-generating units for the purposes of impairment testing.
The recoverable amount of all of the Group’s CGUs has been determined based on a value in use calculation. The calculation uses cash flow
projections of CGUs based on the 2019 budget and the four year strategic plan formally approved by the Board of Directors and specifically
exclude incremental profits and other cash flows stemming from any potential future acquisitions. Cash flows beyond the five year budget period
have been calculated by extrapolating the year five forecast cash flows using a steady 2% (2017: 2%) rate (reflecting inflation but no other growth) for
a further period of 25 years and discounting these back to present values. Applying these techniques, no impairment arose in either 2018 or 2017.
The application of a terminal value of 30 years to the cash flows has been arrived at after taking account of the Group’s strong financial position,
its established history of earnings growth and cash flow generation, its proven ability to pursue and integrate value enhancing acquisitions and
the nature of the consumer foods market.
KEY ASSUMPTIONS USED IN THE VALUE IN USE CALCULATIONS
Estimation of the carrying value of goodwill is a critical accounting judgement in the preparation of the Group Financial Statements.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
127
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
14. GOODWILL AND INTANGIBLE ASSETS CONTINUED
CONVENIENCE FOODS UK CGU AND INGREDIENTS AND PROPERTY CGU
Discount Rate
A present value of the future cash flows of the Convenience Foods UK CGU and the Ingredients and Property CGU is calculated using a discount
rate of 8% (2017: 8%). The discount rate used is 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. The value assigned to the UK CGU discount rate is
consistent with external sources of information.
The table below is a description of the approach used to determine the values assigned to each key assumption for the purpose of impairment
testing for the Convenience Foods UK CGU and the Ingredients and Property CGU:
Key assumptions
Basis for determining values assigned to key assumptions
Profitability
growth
Future profitability is based on
a four year plan and takes past
experience into account as
management places value
on this key assumption
based on the Group’s
established history of sales
and earnings growth.
Management also considers
external sources of
information, such as Nielsen
market data and IGD research,
pertaining to the estimated
growth of the UK market as
well as the edible oil and
molasses food business,
UK and Irish property market
data, customer behaviour,
consumer behaviour,
competitor activity, long and
short-term customer growth
targets, contract wins and
customer attrition.
In any areas of significant
uncertainty management
seek to take a conservative
approach to attributing
values to key assumptions.
The value assigned to
profitability reflects modest
revenue growth and increased
average future profitability
growth rates. Revenue and
profitability estimates are
consistent with external
sources of information
pertaining to estimated
growth of the UK convenience
food market and profitability
is consistent with past
experience of the Group.
Capital
expenditure
Capital expenditure is
budgeted and forecast
by assigning values to
the investment required
to deliver the estimated
future profitability growth
of the category and
to deliver cost savings.
Management assigns
this value based on past
experience of the Group’s
capital expenditure
requirements as well
as external sources
such as quotes from
suppliers/contractors.
Working
capital
Working capital requirements
are based on historical trends
and past experience taking
the budgeted future
profitability into account.
Inflation
Management considers the
UK and Ireland inflation rate.
As a group, Greencore has
negative working capital.
This is borne out by past
experience. The Group
assumes no change in working
capital estimates after year
one of the budget period.
Values assigned to the
inflation rate are consistent
with external sources
of information such
as government and
analyst predictions.
The prior year assumptions were prepared on the same basis.
SENSITIVITY ANALYSIS
Sensitivity analysis has been carried out on each of the key assumptions used in the value in use calculation for each CGU identified. The Group
believe that any reasonable change in the assumptions applied would not give rise to the carrying value of goodwill exceeding the recoverable
amount of each CGU. Changes in the assumptions would lead to an impairment where there is a decline of 60% in projected cash flows, a reduction
in the inflationary linked long term growth rate by 19% or an increase in the discount rate to 20%.
128 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS 15. PROPERTY, PLANT AND EQUIPMENT
Year ended 28 September 2018
Opening net book amount
Additions
Disposals
Impairments
Reclassifications
Currency translation adjustment
Depreciation charge
Assets transferred to held for sale (Note 9)
Closing net book amount
At 28 September 2018
Cost
Accumulated depreciation
Net book amount
Year ended 29 September 2017
Opening net book amount
Acquisitions through business combinations
Additions
Impairments
Reclassifications
Currency translation adjustment
Depreciation charge
Closing net book amount
At 29 September 2017
Cost
Accumulated depreciation
Net book amount
Land and
buildings
£m
Plant and
machinery
£m
Fixtures and
fittings
£m
Capital
work in
progress
£m
231.3
5.1
(11.8)
(18.3)
9.6
1.7
(16.1)
(73.3)
171.5
12.0
(8.3)
(17.2)
14.1
0.6
(25.7)
(41.7)
128.2
105.3
37.4
4.4
(0.3)
(0.7)
2.5
0.2
(5.5)
(2.9)
35.1
192.4
(64.2)
128.2
345.0
(239.7)
105.3
57.4
(22.3)
35.1
164.5
43.3
24.7
–
16.1
(3.1)
(14.2)
231.3
302.5
(71.2)
231.3
130.6
32.6
27.2
(9.2)
22.8
(5.7)
(26.8)
171.5
415.8
(244.3)
171.5
31.7
1.3
7.1
(0.5)
1.6
0.3
(4.1)
37.4
57.1
(19.7)
37.4
45.5
40.7
(1.0)
–
(26.2)
0.2
–
(4.8)
54.4
54.4
–
54.4
40.5
6.8
39.0
–
(40.5)
(0.3)
–
45.5
45.5
–
45.5
Total
£m
485.7
62.2
(21.4)
(36.2)
–
2.7
(47.3)
(122.7)
323.0
649.2
(326.2)
323.0
367.3
84.0
98.0
(9.7)
–
(8.8)
(45.1)
485.7
820.9
(335.2)
485.7
During the year the Group recognised a £36.2m impairment charge comprising of a £15.6m charge relating to its prepared meals manufacturing
network in the UK, and a £20.6m impairment charge in relation to ceasing production at its Rhode Island facility and the repurposing of its
Jacksonville facility. This charge was included as an exceptional item in operating costs in the Group Income Statement (Note 7).
Disposals of property, plant and equipment of £21.4m during the year related to the disposal of the Group’s cakes and desserts operating sites
and the Rhode Island facility (Note 7).
In 2017, an impairment charge of £9.7m arose in relation to the Evercreech facility, which the Group exited during 2018. This charge was included
as an exceptional item in operating costs in the Group Income Statement.
ASSETS HELD UNDER FINANCE LEASES
All assets under finance leases have been reclassified as part of the disposal group held for sale (Note 9). In the prior year the total net book value
of assets held under finance leases was £1.0m.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
129
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
16. INVESTMENT PROPERTY
Opening net book amount
Currency translation adjustment
Closing net book amount
Analysed as:
Cost
Net book amount
2018
£m
6.3
–
6.3
6.3
6.3
2017
£m
6.2
0.1
6.3
6.3
6.3
The majority of the Group’s Investment Property portfolio is land and therefore is not depreciated.
The fair value of the Group’s investment properties at 28 September 2018 was £6.5m (2017: £7.3m). The valuation was carried out by the Group
during the current financial year, using external independent advisors, and was arrived at by reference to location, market conditions and status
of planning applications. The fair values of investment properties are considered a Level 3 fair value measurement.
An increase or decrease in the price per hectare of 5% would result in a 5% increase or decrease in the fair value of the land.
17. INVENTORIES
Raw materials and consumables
Work in progress
Finished goods and goods for resale
2018
£m
20.6
0.3
18.2
39.1
2017
£m
53.6
0.9
27.4
81.9
None of the above carrying amounts have been pledged as security for liabilities entered into by the Group.
Inventory recognised within cost of sales for continuing operations
929.7
893.0
The amount recognised as an expense for inventory write-downs for the year was £2.2m (2017: £0.9m), of which £0.7m relates to the exit of
manufacturing at Evercreech.
18. TRADE AND OTHER RECEIVABLES
Current
Trade receivables
Prepayments
VAT
Other receivables
Total
2018
£m
2017
£m
129.6
13.0
8.1
30.3
181.0
193.9
21.7
9.8
29.4
254.8
The fair value of current receivables approximates book value due to their size and short-term nature.
Non-current receivables bear interest at market rates or are discounted to present value and accordingly approximate fair value.
The Group’s exposure to credit and currency risk and impairment losses related to trade and other receivables is set out in Note 22.
130 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS 19. TRADE AND OTHER PAYABLES
Current
Trade payables
Employment related taxes
Other payables and accrued expenses
Declared interim dividend
Subtotal – current
Non-current
Other payables
Total
The Group’s exposure to liquidity and currency risk is disclosed in Note 22.
20. CASH AND CASH EQUIVALENTS
Cash at bank and in hand, being cash and cash equivalents
2018
£m
2017
£m
242.6
6.6
113.1
15.6
377.9
305.3
7.0
133.2
14.8
460.3
3.7
381.6
11.9
472.2
2018
£m
37.0
2017
£m
19.8
Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods, between one
day and one month, depending on the immediate cash requirements of the Group, and earn interest at the respective short-term deposit rates.
The fair value of cash and cash equivalents equals the carrying amount. Note 23 includes details of the Group’s net debt at 28 September 2018.
21. BORROWINGS
Current
Finance leases
Sub-total – current
Non-current
Bank borrowings
Private Placement Notes
Non-bank borrowings
Finance leases
Subtotal – non-current borrowings
Total borrowings
The maturity of non-current borrowings is as follows:
Between 1 and 2 years
Between 2 and 5 years
Over 5 years
2018
£m
0.2
0.2
350.5
124.8
62.3
0.3
537.9
538.1
2018
£m
112.6
369.0
56.3
537.9
2017
£m
–
–
353.7
121.9
61.6
1.8
539.0
539.0
2017
£m
0.5
464.5
74.0
539.0
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
131
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
21. BORROWINGS CONTINUED
The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the balance sheet date are as follows:
6 months or less
1 – 5 years
Over 5 years
2018
£m
350.9
130.9
56.3
538.1
2017
£m
353.7
111.3
74.0
539.0
The average spread that the Group paid on its financing facilities in the year ended 28 September 2018 was 2.29% (2017: 2.33%).
BANK BORROWINGS
The Group’s bank borrowings are denominated in sterling, US dollar and euro and bear floating rate interest. Interest is set at commercial rates
based on a spread over sterling LIBOR, US dollar LIBOR and EURIBOR for periods of up to six months. At 28 September 2018, the Group’s bank
borrowings comprised of £148m, $261m and €5m (2017: £123m, $307m and €5m), with maturities ranging from March 2020 to December 2022.
At 28 September 2018, the Group had available £188.3m (2017: £179.3m) of undrawn committed borrowing facilities in respect of which all
conditions precedent had been met. Uncommitted facilities undrawn at 28 September 2018 amounted to £33m (2017: £25.1m).
The disposal of Greencore’s US business triggered mandatory prepayment offers under certain of the Group debt arrangements, however the
Group’s lenders have waived these prepayment obligations. In October 2018, the Group announced its intention to return £509m to shareholders
and utilise the remainder of the net sales proceeds to reduce leverage. In addition, the Group plans to enter into discussions with its lenders
to refinance its existing debt agreements in the first half of 2019, taking into account the return of capital to shareholders.
PRIVATE PLACEMENT NOTES
The Group’s outstanding Private Placement Notes of $139.5m and £18m at 28 September 2018 (2017: $139.5 and £18m) were issued as fixed rate
debt in October 2013 ($65m) and June 2016 ($74.5m and £18m) with maturities ranging between October 2021 and June 2026. The applicable
fixed rates as at 28 September 2018 ranged from 4.14% to 6.15%.
NON-BANK BORROWINGS
The Group’s non-bank borrowings were drawn in March 2014 and bear floating rate interest that is based on a spread over EURIBOR for periods
of six months. The funds received were swapped (using cross-currency interest rate swaps designated as cash flow hedges under IAS 39 Financial
Instruments: Recognition and Measurement) from floating euro to fixed US dollar rates. At 28 September 2018, the Group’s non-bank borrowings
comprised €70m (2017: €70m), maturing March 2020.
FINANCE LEASES
The Group has finance leases for property, plant and equipment. Future minimum lease payments under finance leases together with the present
value of the net minimum lease payments are set out in Note 29.
GUARANTEES
The Group’s financing facilities are secured by guarantees from Greencore Group plc and cross-guarantees from various companies within the
Group. The Group treats these guarantees as insurance contracts and accounts for them as such.
22. FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS
FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s activities expose it to a variety of financial risks that include interest rate risk, foreign currency risk, liquidity risk, credit risk and price risk.
These financial risks are actively managed by the Group’s treasury department under strict policies and guidelines approved by the Board of Directors.
The Group’s treasury department actively monitors market conditions with a view to minimising the exposure of the Group to changing market factors
while at the same time minimising the volatility of the funding costs of the Group. The Group uses derivative financial instruments such as foreign currency
contracts, cross-currency swaps and interest rate swaps to manage the financial risks associated with the underlying business activities of the Group.
The risks relating to discontinued operations up to 28 September 2018, have been managed in the same manner as the rest of the Group at this time.
From the date of transfer these risks reside with fair value of the disposal group held for sale.
FAIR VALUE HIERARCHY
The following table analyses financial instruments carried at fair value, by valuation method. The different levels have been defined as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets and liabilities.
Level 2:
Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices).
Inputs for the asset or liability that are not observable market data (un-observable inputs).
Level 3:
During the year, there were no transfers between the different levels identified above.
132 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS
Assets carried at fair value
Forward foreign exchange contracts – not designated as hedges
Interest rate swaps – not designated as hedges
Liabilities carried at fair value
Interest rate swaps – cash flow hedges
Interest rate swaps – not designated as hedges
Cross-currency interest rate swaps – cash flow hedges
Cross-currency interest rate swaps – not designated as hedges
Forward foreign exchange contracts – not designated as hedges
2018
Level 2
£m
2017
Level 2
£m
0.3
0.5
0.8
(1.5)
(0.1)
–
(11.8)
(0.1)
(13.5)
0.3
–
0.3
(1.9)
(0.5)
(11.8)
–
(0.1)
(14.3)
FINANCIAL ASSETS AND LIABILITIES
The carrying value of trade and other receivables and trade and other payables are considered a reasonable approximation of fair value.
The fair value of the financial liabilities held at amortised cost and the financial liabilities in fair value hedges are within Level 2 of the fair value
hierarchy and have been calculated by discounting the expected future cash flows at prevailing interest rates and by applying period end
exchange rates.
Trade and other receivables
Cash and cash equivalents*
Derivative financial instruments*
Bank borrowings*
Private Placement Notes*
Non-bank borrowings*
Finance lease*
Trade and other payables
Level 2 denoted by *
Trade and other receivables
Cash and cash equivalents*
Derivative financial instruments*
Bank borrowings*
Private Placement Notes*
Non-bank borrowings*
Finance lease*
Trade and other payables
Level 2 denoted by *
2018
Loans and
receivables
£m
FV through
Income
Statement
£m
Cash flow
hedges
£m
Financial
liabilities at
amortised
cost
£m
Carrying
value
£m
Fair value
£m
168.0
37.0
–
–
–
–
–
–
–
–
(11.2)
–
–
–
–
(2.8)
–
–
(1.5)
–
–
–
–
–
–
–
–
(350.5)
(124.8)
(62.3)
(0.5)
(372.2)
168.0
37.0
(12.7)
(350.5)
(124.8)
(62.3)
(0.5)
(375.0)
168.0
37.0
(12.7)
(349.4)
(127.2)
(62.6)
(0.5)
(375.0)
2017
Loans and
receivables
£m
FV through
Income
Statement
£m
Cash flow
hedges
£m
233.1
19.8
–
–
–
–
–
–
–
–
(0.2)
–
–
–
–
–
–
–
(13.8)
–
–
–
–
–
Financial
liabilities at
amortised
cost
£m
–
–
–
(353.7)
(121.9)
(61.6)
(1.8)
(456.1)
Carrying
value
£m
Fair value
£m
233.1
19.8
(14.0)
(353.7)
(121.9)
(61.6)
(1.8)
(456.1)
233.1
19.8
(14.0)
(354.3)
(127.6)
(63.6)
(2.0)
(456.1)
INTEREST RATE RISK
The Group’s exposure to market risk for changes in interest rates arises from its floating rate borrowings, cash and cash equivalents and derivatives.
The Group’s policy is to optimise interest cost and reduce volatility in reported earnings. This is managed by reviewing the debt profile of the Group
regularly on a currency by currency basis and by selectively using interest rate swaps to manage the level of floating interest rate exposure.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
133
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
22. FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS CONTINUED
INTEREST RATE RISK CONTINUED
Sensitivity Analysis for Floating Rate Debt
The full year impact of both an upward and downward movement in each applicable interest rate and interest rate curve by 100 basis points
(assuming all the other variables remain constant) is shown below.
Effect of a downward movement of 100 basis points
Effect of an upward movement of 100 basis points
negative = cost, positive = gain
FOREIGN CURRENCY RISK
The Group is exposed to currency risk as follows:
• Sales and purchases in certain businesses; and
• Financing.
On profit after tax
On equity
2018
£m
2.2
(2.4)
2017
£m
1.6
(2.2)
2018
£m
(2.4)
2.1
2017
£m
(3.9)
2.4
Sales and Purchases in Certain Businesses
The Group is exposed to currency risk on sales and purchases in certain businesses that are denominated in currencies other than the functional
currency of the entity concerned. The Group utilises foreign currency contracts to economically hedge foreign exchange exposures arising from
these transactions.
The Group’s trading entity exposures to foreign currency risk for amounts not denominated in the functional currency of the relevant entity at the
balance sheet date were as follows (excluding derivative financial instruments):
Denominated in:
Trade receivables
Trade payables
Cash and cash equivalents
Gross Balance Sheet exposure
Euro
£m
0.1
(1.3)
1.4
0.2
2018
US dollars
£m
1.3
(0.7)
0.4
1.0
Sterling
£m
1.1
(0.8)
0.5
0.8
Euro
£m
0.4
(0.7)
0.4
0.1
2017
US dollars
£m
0.7
(0.5)
3.5
3.7
Sterling
£m
0.6
(0.5)
–
0.1
Financing
The Group finances its operations by obtaining funding at Group level through external borrowings, and where appropriate, these borrowings are
designated as net investment hedges. This enables gains and losses arising on the retranslation of foreign currency borrowings to be recognised
in equity, providing a partial offset in equity against the gains and losses arising on translation of the net assets of the foreign operations. A foreign
exchange loss of £10.6m (2017: gain of £25.8m) was recognised in equity during the period in respect of borrowings designated as net investment
hedges.
The Group has financed its investment in the UK by directly borrowing in sterling, with the US business being funded in US dollar. Although the
majority of the US funding is obtained by directly borrowing US dollar, an element of the funding is achieved through euro borrowings converted
to US dollar using cross-currency interest rate swaps.
Sensitivity Analysis for Primary Foreign Currency Risk
A 10% strengthening of the sterling exchange rate against the euro or US dollar exchange rates in respect of the translation of amounts not
denominated in the functional currency of relevant entities into the functional currency would impact profit after tax and equity by the amount
shown below. This assumes that all other variables remain constant. A 10% weakening of the sterling exchange rate against the euro or US dollar
exchange rates would have an equal and opposite effect.
Impact of 10% strengthening of sterling vs euro gain/(loss)
Impact of 10% strengthening of sterling vs dollar gain/(loss)
On Profit after tax
On Equity
2018
£m
(0.8)
0.3
2017
£m
(0.3)
0.5
2018
£m
2.7
67.9
2017
£m
0.3
36.7
The effect on equity of a movement between sterling, US dollar and euro would be offset by the translation of the net assets of the subsidiaries
against which the US dollar and euro borrowings are hedged. The above calculations do not include the variability in Group profitability which
arises on the translation of foreign currency subsidiaries’ Financial Statements to Group presentation currency.
134 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS LIQUIDITY RISK
The Group’s policy on funding capacity is to ensure that it always has sufficient long-term funding and committed bank facilities in place to meet
foreseeable peak borrowing requirements with an appropriate level of additional headroom. A prudent approach to liquidity risk management is
taken by the Group by spreading the maturities of its debt using long-term financing. The Group’s treasury department actively monitors the
current and future funding requirements of the business on a daily basis. Excess funds are placed on short-term deposit for up to one month
whilst ensuring that sufficient cash is available on demand to meet expected operational requirements.
The following are the carrying amounts and contractual liabilities of financial liabilities (including interest payments):
28 September 2018
Non-Derivative Financial Instruments
Bank borrowings
Private Placement Notes
Non-bank borrowings
Finance leases
Trade and other payables
Other financial liabilities
Derivative Financial Instruments
Interest rate swaps – cash flow hedges
Inflow/(outflow)
Interest rate swaps – not designated as hedges
Inflow/(outflow)
Cross-currency interest rate swaps –
not designated as hedges
Inflow
(Outflow)
Forward foreign exchange contracts
Inflow
(Outflow)
29 September 2017
Non-Derivative Financial Instruments
Bank borrowings
Private Placement Notes
Non-bank borrowings
Finance leases
Trade and other payables
Derivative Financial Instruments
Interest rate swaps – cash flow hedges
Inflow/(outflow)
Interest rate swaps – not designated as hedges
Inflow/(outflow)
Cross-currency interest rate swaps –
cash flow hedges
Inflow
(Outflow)
Forward foreign exchange contracts
Inflow
(Outflow)
Carrying
amount
£m
Contractual
amount
£m
Period
1–6 months
£m
Period
6–12 months
£m
Period
1–5 years
£m
Period
> 5 years
£m
(350.5)
(124.8)
(62.3)
(0.5)
(372.2)
(2.8)
(1.5)
0.4
(11.8)
0.2
(378.0)
(156.1)
(65.3)
(0.5)
(372.2)
(2.8)
(1.9)
0.4
65.3
(80.5)
34.0
(33.7)
(3.5)
(3.3)
(1.0)
(0.1)
(372.2)
–
0.3
–
1.0
(2.2)
28.3
(28.2)
(3.5)
(3.3)
(1.0)
(0.1)
–
(1.1)
(0.9)
–
1.0
(2.2)
5.1
(5.1)
(371.0)
(88.6)
(63.3)
(0.3)
–
(2.7)
(1.3)
0.4
63.3
(76.1)
0.6
(0.4)
–
(60.9)
–
–
–
–
–
–
–
–
–
–
Carrying
amount
£m
Contractual
amount
£m
Period
1–6 months
£m
Period
6–12 months
£m
Period
1–5 years
£m
Period
> 5 years
£m
(353.7)
(121.9)
(61.6)
(1.8)
(456.1)
(2.0)
(0.5)
(11.8)
0.3
(410.2)
(158.8)
(66.8)
(2.2)
(456.1)
(2.9)
(0.5)
66.8
(82.5)
13.9
(13.9)
(5.6)
(3.2)
(1.0)
(0.3)
(456.1)
(0.5)
(0.2)
1.0
(2.1)
10.8
(10.7)
(6.0)
(3.2)
(1.0)
(0.3)
–
–
(0.2)
1.0
(2.1)
2.9
(2.8)
(398.6)
(71.2)
(64.8)
(1.2)
–
(2.4)
(0.1)
64.8
(78.3)
0.2
(0.4)
–
(81.2)
–
(0.4)
–
–
–
–
–
–
–
CREDIT RISK
Credit risk refers to the risk of financial loss to the Group if a counterparty defaults on its contractual obligations on financial assets held in the
balance sheet. Risk is monitored both centrally and locally. The Group derives a significant proportion of its revenue from sales to a limited number of
major customers. Sales to individual customers can be of significant value and the failure of any such customer to honour its debts could materially
impact the Group’s results. The Group derives significant benefit from trading with its large customers and manages the risk by regularly reviewing
the credit history and rating of all significant customers.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
135
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
22. FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS CONTINUED
CREDIT RISK CONTINUED
The Group assessed the carrying value of other receivables based on management’s assessment and knowledge of the counterparty.
The amounts due were neither past due nor impaired at 28 September 2018.
The maximum exposure for continuing operations to credit risk is represented by the carrying amount of each financial asset in the Balance Sheet:
Trade receivables
Other receivables
Cash and cash equivalents
Derivative financial instruments
Carrying Amount
2018
£m
129.6
30.3
37.0
0.8
2017
£m
193.9
29.4
19.8
0.3
Trade receivables
Revenue earned individually from two customers in Convenience Foods UK & Ireland of £283.0m and £240.1m, respectively, represents more than
10% of the Group’s revenue (2017: revenue earned individually from two customers in Convenience Foods UK & Ireland of £274.4m and £249.3m,
respectively, represented more than 10% of the Group’s revenue).
The Group also manages credit risk in the UK and US through the use of a receivables purchase arrangement. Under the terms of this agreement
the Group has transferred substantially all of the credit risk and control of the receivables, which are subject to this agreement, and accordingly,
£52.0m (2017: £41.2m) has been derecognised at year end.
The maximum exposure for continuing operations to credit risk for trade receivables at the reporting date by geographic region is:
UK & Ireland
US
Rest of World
Carrying Amount
2018
£m
127.0
–
2.6
129.6
2017
£m
117.2
74.7
2.0
193.9
Ageing of Trade Receivables
The aged analysis of trade receivables for continuing operations split between amounts that were neither past due nor impaired, amounts past
due but not impaired and amounts that are impaired at 28 September 2018 and 29 September 2017 were as follows:
Neither past due nor impaired:
Receivable within 3 months of the Balance Sheet date
Past due but not impaired:
Receivable between 1 and 6 months of the Balance Sheet date
Total
2018
£m
2017
£m
125.3
4.3
129.6
176.5
17.4
193.9
Trade receivables are generally receivable within 90 days of the balance sheet date and are unsecured and non interest bearing. The movements
in the provision for impairment of receivables are as follows:
At beginning of year
Provided during year
Written off during year
Arising on acquisition
Translation adjustment
Reclassed to assets held for sale
At end of year
136 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
2018
£m
(1.1)
(1.7)
0.8
–
–
0.4
(1.6)
2017
£m
(0.9)
(0.3)
0.5
(0.5)
0.1
–
(1.1)
FINANCIAL STATEMENTS Cash and Cash Equivalents
Exposure to credit risk on cash and derivative financial instruments is actively monitored by the Group’s treasury department. The maximum
exposure to credit risk for cash and cash equivalents by geographic location of financial institution was as follows:
UK
US
Ireland
Carrying Amount
2018
£m
15.2
12.6
9.2
37.0
2017
£m
16.8
2.8
0.2
19.8
PRICE RISK
The Group purchases a variety of commodities which can be subject to significant price volatility. The price risk on these commodities is managed
by the Group’s purchasing function. It is the Group policy to minimise its exposure to volatility by adopting an appropriate forward purchase strategy.
CAPITAL RISK MANAGEMENT
The Group manages its capital to ensure that entities in the Group will be able to trade on a going concern basis while maximising the return
to stakeholders through the optimisation of the debt and equity balance. Invested Capital is defined as the sum of all current and non-current assets
(including intangibles), less current and non-current liabilities with the exception of debt items, derivatives and retirement benefit obligations. The Group
monitors the return on invested capital of the Group as a key performance indicator, the calculation is set out in the Alternative Performance Measures.
DERIVATIVE FINANCIAL INSTRUMENTS
Derivative financial instruments recognised as assets and liabilities in the Balance Sheet are analysed as follows:
Current
Forward foreign exchange contracts – not designated as hedges
Non-current
Cross-currency interest rate swaps – not designated as hedges
Interest rate swaps – cash flow hedges
Interest rate swaps – not designated as hedges
Total
Current
Forward foreign exchange contracts – not designated as hedges
Non-current
Cross-currency interest rate swaps – cash flow hedges
Forward foreign exchange contracts – not designated as hedges
Interest rate swaps – not designated as hedges
Interest rate swaps – cash flow hedges
Total
Assets
£m
2018
Liabilities
£m
0.3
0.3
–
–
0.5
0.5
0.8
(0.1)
(0.1)
(11.8)
(1.5)
(0.1)
(13.4)
(13.5)
Assets
£m
2017
Liabilities
£m
0.3
0.3
–
–
–
–
–
0.3
–
–
(11.8)
(0.1)
(0.5)
(1.9)
(14.3)
(14.3)
Net
£m
0.2
0.2
(11.8)
(1.5)
0.4
(12.9)
(12.7)
Net
£m
0.3
0.3
(11.8)
(0.1)
(0.5)
(1.9)
(14.3)
(14.0)
Derivative instruments which are held for trading and are not designated as effective hedging instruments are classified as a current asset
or liability (as appropriate) regardless of maturity if the Group expects that they may be settled within 12 months of the balance sheet date.
Derivative instruments that are designated as effective hedging instruments are classified as a current or non-current asset or liability by reference
to the maturity of the hedged item. All other derivative instruments are classified by reference to their maturity date.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
137
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
22. FINANCIAL RISK MANAGEMENT AND FINANCIAL INSTRUMENTS CONTINUED
DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED
Cross-Currency Interest Rate Swaps
The Group utilises cross-currency interest rate swaps to swap floating rate euro denominated debt of €70m into fixed rate US dollar debt of $96.7m.
The floating rate is based on EURIBOR. During the year, the euro to US dollar swaps are designated as cash flow hedges under IAS 39 Financial
Instruments: Recognition and Measurement.
The cash flow hedge accounting has been discontinued for the cross currency interest rate swap as at 28 September 2018, given the Group’s
intention to repay non-bank borrowings following the disposal of Greencore’s US business, the hedged future cash flows are no longer expected
to occur. The cumulative loss on the hedging instrument in equity has been recycled to the Group Income Statement as at 28 September 2018.
Refer to Note 8 finance costs and income.
Interest Rate Swaps
The Group utilises interest rate swaps to convert floating rate sterling and US dollar debt into fixed rate debt liabilities. The principal amount of
the Group’s borrowings which are swapped at 28 September 2018 total £90m and $30m (2017: £90m and $30m). In addition, the Group has entered
into forward starting interest rate swaps of £100m and $70m. The GBP is split into one tranche of £50m and two tranches of £25m. The $70m is split
into eight tranches of $5m, three individual tranches of $15m, $8m and $7m. These are commencing in October 2018 and October 2019, respectively,
with maturities in October 2020 and 2021 and November 2021.
The total value of GBP interest rate swaps designated as cash flow hedges under lAS 39 Financial Instruments: Recognition and Measurement at
28 September 2018 was £140m inclusive of forward starting derivatives (2017: £140m). At 28 September 2018, the fixed interest rates varied from
0.558% to 2.930% (2017: 0.558% to 2.387%) with maturities ranging from October 2018 to November 2021 (2017: October 2018 to October 2021).
In the prior year, USD interest rate swaps were designated as cash flow hedges under IAS 39 with a value of $70m which was inclusive of forward
starting derivatives. In the current year, USD interest rate swaps have a value of $100m inclusive of forward starting derivatives. These swaps
are no longer considered effective as at 28 September 2018, given the Group’s intention to repay debt following the disposal of Greencore US,
as the hedged future cash flows are no longer expected to occur. The cumulative gain in equity has been recycled to the Group Income Statement.
Refer to Note 8 finance costs and income.
Forward Foreign Exchange Contracts
The notional principal amounts of outstanding forward foreign exchange contracts at 28 September 2018 total £39.0m (2017: £13.9m). No outstanding
forward foreign exchange contracts are designated as cash flow hedges as at the 28 September 2018.
23. ANALYSIS OF NET DEBT
RECONCILIATION OF OPENING TO CLOSING NET DEBT
Net debt is a non-IFRS measure which comprises current and non-current borrowings less net cash and cash equivalents.
The reconciliation of opening to closing net debt for the year ended 28 September 2018 is as follows:
At
29 September
2017
£m
Translation and
non-cash
adjustments
£m
At
28 September
2018
£m
Cash flow
£m
19.8
(353.7)
(1.8)
(61.6)
(121.9)
(519.2)
17.2
9.6
1.3
–
–
28.1
–
(6.4)
–
(0.7)
(2.9)
(10.0)
37.0
(350.5)
(0.5)
(62.3)
(124.8)
(501.1)
At
30 September
2016
£m
25.5
(170.6)
(1.0)
(60.5)
(125.2)
(331.8)
Acquisitions
£m
Cash flow
£m
Translation and
non-cash
adjustments
£m
At
29 September
2017
£m
7.8
–
(1.0)
–
–
6.8
(13.1)
(199.7)
0.1
–
–
(212.7)
(0.4)
16.6
0.1
(1.1)
3.3
18.5
19.8
(353.7)
(1.8)
(61.6)
(121.9)
(519.2)
Net cash and cash equivalents
Bank borrowings
Finance leases
Non-bank borrowings
Private Placement Notes
Total
Net cash and cash equivalents
Bank borrowings
Finance leases
Non-bank borrowings
Private Placement Notes
Total
138 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS
CURRENCY PROFILE
The currency profile of net debt and derivative financial instruments at 28 September 2018 was as follows:
Net cash and cash equivalents
Borrowings
Net Debt
Other derivative financial instruments
Total
US dollar
£m
13.0
(306.2)
(293.2)
(11.2)
(304.4)
The currency profile of net debt and derivative financial instruments at 29 September 2017 was as follows:
Net cash and cash equivalents
Borrowings
Net Debt
Other derivative financial instruments
Total
US dollar
£m
6.3
(332.0)
(325.7)
(11.9)
(337.6)
Euro
£m
9.7
(66.7)
(57.0)
–
(57.0)
Euro
£m
2.4
(66.0)
(63.6)
–
(63.6)
INTEREST RATE PROFILE
The interest rate profile of net debt before other derivative financial instruments at 28 September 2018 was as follows:
Floating rate net debt
Fixed rate net debt
US dollar
£m
(163.0)
(130.2)
(293.2)
Euro
£m
5.3
(62.3)
(57.0)
The interest rate profile of net debt before other derivative financial instruments at 29 September 2017 was as follows:
Floating rate net debt
Fixed rate net debt
US dollar
£m
(198.8)
(126.9)
(325.7)
Euro
£m
(1.9)
(61.7)
(63.6)
Sterling
£m
14.3
(165.2)
(150.9)
(1.5)
(152.4)
Sterling
£m
11.1
(141.0)
(129.9)
(2.1)
(132.0)
Sterling
£m
(43.2)
(107.7)
(150.9)
Sterling
£m
(21.4)
(108.5)
(129.9)
Total
£m
37.0
(538.1)
(501.1)
(12.7)
(513.8)
Total
£m
19.8
(539.0)
(519.2)
(14.0)
(533.2)
Total
£m
(200.9)
(300.2)
(501.1)
Total
£m
(222.1)
(297.1)
(519.2)
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
139
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
24. PROVISIONS FOR LIABILITIES
At beginning of year
Provided in year
Utilised in year
Unwind of discount to present value in the year
Reclassified to liabilities held for sale (Note 9)
Currency translation adjustment
At end of year
Analysed as:
Non-current liabilities
Current liabilities
Leases
£m
25.6
–
(0.8)
0.4
(22.0)
0.6
3.8
Remediation
and closure
£m
6.5
6.0
(6.5)
–
–
–
6.0
Other
£m
6.1
–
(0.4)
–
–
0.1
5.8
2018
£m
8.9
6.7
15.6
Total
£m
38.2
6.0
(7.7)
0.4
(22.0)
0.7
15.6
2017
£m
29.8
8.4
38.2
The estimation of provisions is a key judgement in the preparation of the Group Financial Statements.
LEASE
Lease provisions consist of: (a) provisions for leasehold dilapidations in respect of certain leases, relating to the estimated cost of reinstating
leasehold premises to their original condition at the time of the inception of the lease as provided for in the lease agreement; and (b) provisions
for onerous contractual obligations for properties held under operating lease. It is anticipated that these will be payable within ten years.
Provisions utilised in the year relate to onerous leases.
REMEDIATION AND CLOSURE
Remediation and closure obligations were established to cover either a statutory, contractual or constructive obligation of the Group.
Remediation and closure obligations provided in the year related to the optimisation of longer life ready meals manufacturing network in the UK.
In addition warranties related to the disposal of the cakes and desserts business, and the exit and subsequent disposal from Evercreech and
Rhode Island facilities were also provided. Provisions utilised in the year primarily relate to the exit from the Evercreech facility.
OTHER
Other provisions consist of potential litigation and warranty claims arising from the acquisition of Peacock Foods. £0.4m of this was utilised
in the year.
25. RETIREMENT BENEFIT OBLIGATIONS
The Group operates defined contribution pension schemes in all of its main operating locations. The Group also has legacy defined benefit
pension schemes, which were closed to future accrual on 31 December 2009.
DEFINED CONTRIBUTION PENSION SCHEMES
The total cost charged to income relating to continued operations of £7.8m (2017: £7.5m) represents employer contributions payable to the defined
contribution pension schemes at rates specified in the rules of the schemes. At year end, £1.0m (2017: £0.6m) was included in other accruals in
respect of defined contribution pension accruals.
LEGACY DEFINED BENEFIT PENSION SCHEMES
The Group operates four legacy defined benefit pension schemes in the Republic of Ireland (the ‘Irish schemes’) and three legacy defined benefit
pension schemes and two legacy defined benefit commitments in the UK (the UK schemes). The Projected Unit Credit actuarial cost method
has been employed in determining the present value of the defined benefit pension obligation arising, the related current service cost and,
where applicable, past service cost.
These plans have broadly similar regulatory frameworks. Responsibility for governance of the plans, including investment decisions and
contribution schedules, lies with the Company and the respective boards of trustees.
All of the legacy defined benefit pension schemes are closed to future accrual and there is an assumption applied in the valuation of the
schemes that there will be no discretionary increases in pensions in payment. Scheme assets are held in separate trustee administered funds.
140 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS The Group’s cash contributions to its pension schemes are generally determined by reference to actuarial valuations undertaken by the schemes’
actuaries at intervals not exceeding three years and not by the provisions of IAS 19 Employee Benefits. These funding valuations can differ
materially from the requirements of IAS 19. In particular the discount rate used to determine the value of liabilities under IAS 19 Employee Benefits
is determined by reference to the yield on high grade corporate bonds of comparable duration to the liabilities. In contrast the discount rate used
in the ongoing valuation is generally determined by reference to the yield on the scheme’s current and projected future investment portfolio.
Where a funding valuation reveals a deficit in a scheme, the Group will generally agree a schedule of contributions with the Trustees designed to
address the deficit over an agreed future time horizon. The Group has agreed funding valuations in respect of all its relevant obligations including
the UK Defined Benefit Scheme in March 2017. Based on current discussions with the Trustees of the scheme cash contributions are expected
to remain unchanged at approximately £15m in FY19. All of the schemes are operating under the terms of funding proposals agreed with the
relevant pension authorities.
Actuarial gains and losses and the associated movement in deferred tax are recognised in retained income via the Group Statement of Recognised
Income and Expense.
Full actuarial valuations were carried out between 31 March 2016 and 31 March 2017. In general, actuarial valuations are not available for public
inspection, however, the results of valuations are advised to the members of the various schemes.
LEGACY DEFINED BENEFIT PENSION ASSETS AND LIABILITIES ARE ANALYSED IN THE GROUP BALANCE SHEET
Fair value of plan assets
Present value of scheme liabilities
(Deficit)/surplus in schemes
Deferred tax asset (Note 11)
Net (liability)/asset at end of year
Presented as:
Retirement benefit asset*
Retirement benefit obligation
UK Schemes
£m
Irish Schemes
£m
217.9
(318.1)
(100.2)
17.0
(83.2)
255.5
(244.6)
10.9
(1.3)
9.6
Total
2018
£m
473.4
(562.7)
(89.3)
15.7
(73.6)
15.3
(104.6)
2017
£m
478.6
(603.4)
(124.8)
21.7
(103.1)
17.3
(142.1)
* The value of a net pension benefit asset is the value of any amount the Group reasonably expects to recover by way of refund of surplus from the remaining assets of a plan
at the end of the plan’s life.
EMPLOYEE BENEFIT PLAN RISKS
The employee benefit plans expose the Group to a number of risks, the most significant of which are:
Asset volatility: The plan liabilities are calculated using a discount rate set with reference to corporate bond yields. If assets underperform this
yield this will create a deficit. The plans hold equities which, though expected to outperform corporate bonds in the long term, create volatility
and risk in the short term. The allocation to equities is monitored to ensure that it remains appropriate given the plans’ long term objectives.
Discount rates: The discount rates employed in determining the present value of the schemes’ liabilities are determined by reference to market
yields at the balance sheet date on high-quality corporate bonds of a currency and term consistent with the currency and term of the associated
post-employment benefit obligations. Changes in discount rates impact the quantum of the liabilities.
Inflation risk: Some of the Group’s pension obligations have an inflation linkage; higher inflation will lead to higher liabilities (although in most
cases, caps on the level of inflationary increases are in place to protect the plan against extreme inflation). The rate of inflation is derived from
the RPI in the UK. The breakeven rate in the Eurozone is used for the basis for the Irish inflation assumption.
Longevity risk: In the majority of cases, the Group’s legacy defined benefit pension schemes provide benefits for the life of the member,
so increases in life expectancy will therefore give rise to higher liabilities.
The size of the obligation is sensitive to judgemental actuarial assumptions. These include demographic assumptions covering mortality,
economic assumptions covering price inflation and benefit increases, together with the discount rate.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
141
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
25. RETIREMENT BENEFIT OBLIGATIONS CONTINUED
EMPLOYEE BENEFIT PLAN RISKS CONTINUED
The principal actuarial assumptions are as follows:
Rate of increase in pension payments*
Discount rate
Inflation rate**
UK Schemes
Irish Schemes
2018
3.10%
2.90%
3.20%
2017
3.05%
2.75%
3.10%
2018
0%
1.60%
1.60%
2017
0%
1.65%
1.45%
* The rate of increase in pension payments applies to the majority of the liability base, however, there are certain categories within the Group’s Irish Schemes that have an
entitlement to pension indexation and this is allowed for in the calculation.
Inflation is RPI for UK schemes, for reference CPI is assumed to be 1% less than RPI.
**
Assumptions regarding future mortality experience are set based on information from published statistics and experience in all geographic
regions and are selected to reflect the characteristics and experience of the membership of the relevant plans. In relation to the UK, this has been
done by reflecting the characteristics of the membership using Club Vita research combined with the CMI 2017 model for future improvements
in mortality. The average life expectancy, in years, of a pensioner retiring at 65 is as follows:
Male
Female
UK Schemes
Irish Schemes
2018
years
23–24
23–24
2017
years
22–24
24–26
2018
years
23
24
2017
years
23
24
On 26 October 2018, the High Court of Justice of England and Wales issued a judgement on a claim regarding the rights of members to equality
in defined benefit pension schemes. The judgement concluded that schemes are under a duty to equalise benefits for all members, regardless of
gender, in relation to minimum pension benefits. The ruling will potentially change the assumptions used in the valuation of the scheme liabilities
and while a full assessment has not yet been undertaken, it is likely to result in an increase in the Group’s pension scheme obligation in the future.
SENSITIVITY OF PENSION LIABILITY TO JUDGEMENTAL ASSUMPTIONS
Assumption
Change in assumption
Discount rate
Discount rate
Rate of inflation
Rate of inflation
Rate of mortality
Increase by 0.5%
Decrease by 0.5%
Increase by 0.5%
Decrease by 0.5%
Members assumed to live 1 year longer
SENSITIVITY OF PENSION SCHEME ASSETS TO YIELD MOVEMENTS
Assumption
Change in assumption
Change in bond yields
Decrease by 0.5%
Impact on Scheme Liabilities
UK
Schemes
Irish
Schemes
Total
▼ £27.5m ▼ £17.6m ▼ £45.1m
s £31.5m s £18.2m s £49.7m
s £20.1m s £6.7m s £26.8m
▼ £18.5m ▼ £6.5m ▼ £25.0m
s £12.7m s £7.8m s £20.5m
Impact on Scheme Assets
UK
Schemes
Irish
Schemes
Total
s £12.5m s £13.0m s £25.5m
The above sensitivity analysis are based on a change in an assumption while holding all other assumptions constant. The sensitivity analysis
intends to provide assistance in understanding the sensitivity of the valuation of pension liabilities to market movements on discount rates,
inflation rates and mortality assumptions for scheme beneficiaries.
The Trustees invest the funds in a range of assets with the objective of maximising the fund return with a view to containing the cost of funding the
scheme whilst at the same time maintaining an acceptable risk profile. In assessing the risk profile the Trustees take account of the nature and duration
of the liabilities. Approximately 32% (2017: 29%) of the UK funds and 76% (2017: 70%) of the Irish funds are invested in liability matching investments.
The Greencore Group Scheme has a Liability Driven Investment (‘LDI’) portfolio which hedges 80% of the interest rate and inflation risk in the
scheme (when measured as a % of the ongoing liabilities). The hedging is provided via a mix of interest rate and inflation swaps and a buy and
hold credit portfolio. The interest rate and inflation swaps held are an exchange of cash flows where the initial market value of the bond portfolio
on one side of the swap equals the present value of the pre-defined payments on the other side of the swap. A limited amount of leverage is used
to enable a greater reduction in liability risk. This hedging portfolio is provided via a bespoke sub-fund. Due to the use of swaps and leverage,
142 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS collateral is held in cash form and the collateral risks that the scheme is exposed to are managed and reviewed by the trustees on a regular
basis. The buy and hold credit portfolio contains corporate bonds with an average credit rating of BBB+ and an average duration of 4.5 years.
The Greencore UK DB Scheme has leveraged LDI funds which hedge broadly 35% of the interest rate risk and 45% of the inflation risk (when
measured as a % of the liabilities). The hedging is provided via pooled fund manager funds which have specified limits on leverage.
The Trustees review investment strategy regularly.
Plan assets are comprised as follows:
Quoted
£m
6.7
76.3
199.7
21.2
57.2
112.0
–
473.1
2018
Unquoted
£m
–
–
–
–
–
–
0.3
0.3
Total
£m
6.7
76.3
199.7
21.2
57.2
112.0
0.3
473.4
Quoted
£m
11.1
95.2
191.9
16.7
55.4
86.8
–
457.1
2017
Unquoted
£m
–
–
–
18.9
–
–
2.6
21.5
Cash
Equity instruments
Debt instruments
Real estate
Derivatives
Investment funds
Insurance contracts
Fair value of plan assets
MOVEMENT IN THE FAIR VALUE OF PLAN ASSETS
Change in plan assets
Fair value of plan assets at beginning of year
Interest income on plan assets
Actuarial gain/(loss)
Administrative expenses paid from plan assets
Employer contributions
Benefit payments
Effect of exchange rate changes
Fair value of plan assets at end of year
MOVEMENT IN THE PRESENT VALUE OF LEGACY DEFINED BENEFIT OBLIGATIONS
Change in benefit obligation
Benefit obligation at beginning of year
Interest expense
Actuarial gain on financial assumptions
Actuarial gain on demographic assumptions
Actuarial (gain)/loss on experience
Plan settlements
Benefit payments
Effect of exchange rate changes
Liability recognised in Balance Sheet at end of year
Total
£m
11.1
95.2
191.9
35.6
55.4
86.8
2.6
478.6
2017
£m
497.8
7.9
(10.1)
(0.7)
10.8
(32.0)
4.9
478.6
2017
£m
660.1
11.8
(37.9)
(3.8)
1.5
(0.7)
(32.1)
4.5
603.4
2018
£m
478.6
10.1
2.5
(0.7)
15.1
(34.7)
2.5
473.4
2018
£m
603.4
13.5
(3.1)
(2.5)
(16.2)
–
(34.8)
2.4
562.7
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
143
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
25. RETIREMENT BENEFIT OBLIGATIONS CONTINUED
MATURITY ANALYSIS
The expected maturity analysis is set out in the table below:
Expected benefit payments:
Within 5 years
Between 6 and 10 years
Between 11 and 15 years
Between 16 and 20 years
Between 21 and 25 years
Over 25 years
UK Schemes
% of benefits
Irish Schemes
% of benefits
8%
10%
12%
14%
14%
43%
18%
17%
17%
16%
14%
17%
The weighted average duration of the UK and Irish legacy defined benefit obligations are 18 years and 13 years, respectively.
GREENCORE GROUP PENSION SCHEME CONTINGENT ASSET
The Greencore Group Pension Scheme (‘the Scheme’) has a mortgage and charge relating to certain property assets of the Group with a carrying
value of £5.2m (2017: £5.2m) for use as a contingent asset of the Scheme. Under the terms of the mortgage and charge, should a disposal of these
property assets occur that meets certain requirements, the Scheme is entitled to a portion of the sale proceeds. The maximum amount recoverable
by the Trustees of the Scheme under the mortgage and charge is the amount required for the Scheme to meet the minimum funding standard
under the Pension Acts 1990–2009.
GREENCORE UK LEGACY DEFINED BENEFIT SCHEME
In 2013, the Group entered into arrangements with the Greencore UK Retirement Legacy Defined Benefit Scheme (‘the UK Scheme’) to address
£40.0m of the actuarial deficit in the UK Scheme. The substance of this arrangement is to reduce the cash funding which would otherwise be
required based on the latest actuarial valuation, whilst improving the security of the UK Scheme members’ benefits.
On 10 May 2013, the Group made a contribution to the UK Scheme of £32.8m. On the same day, the UK Scheme’s trustees invested £32.8m
in Greencore Convenience Foods Limited Partnership (‘SLP’) as a limited partner. SLP was established by Greencore Prepared Meals Limited, a
wholly owned subsidiary of the Group, to hold properties of the Group and loan notes issued by Greencore Convenience Foods I Limited Liability
Partnership (‘LLP’). LLP was established by SLP and holds certain trade receivables of the Group. As at 28 September 2018, SLP held properties
with a carrying value of £16.5m (2017: £17.1m), trade receivables with a carrying value of £36.0m (2017: £36.0m), and a call on restricted cash of £nil
(2017: £nil) in the Group Financial Statements. The properties are leased to other Group undertakings. As a partner in the SLP, the Scheme is
entitled to a semi-annual share of the profits of SLP until 2029.
These partnerships are controlled by the Group, and as such, they are fully consolidated as wholly owned subsidiaries in accordance with IFRS 10
Consolidated Financial Statements. Under IAS 19 Employee Benefits, the investment held by the Scheme in SLP, does not represent a plan asset for
the purposes of the Group’s consolidated accounts. Accordingly, the Scheme’s deficit position presented in the Group Financial Statements does
not reflect the investment in SLP held by the Scheme. Distributions from SLP to the Scheme are treated as contributions by employers in the Group
Financial Statements on a cash basis.
144 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS
26. SHARE CAPITAL
EQUITY SHARE CAPITAL
Authorised
1,000,000,000 Ordinary Shares of £0.01 each (2017: 1,000,000,000 Ordinary Shares of £0.01 each)
500,000,000 Deferred Shares of €0.01 each
300,000,000 Deferred Shares of €0.62 each
1 Special Rights Preference Share of €1.26(A)
Issued and fully paid
706,978,416 (2017: 705,646,811) Ordinary Shares of £0.01 each
1 Special Rights Preference Share of €1.26(A)
Reconciliation of movements on Equity Share Capital
Share capital, at beginning of year
Exercise of share options(B)
Scrip dividends(C)
Rights Issue(D)
2018
£m
10.0
4.3
160.1
–
174.4
2018
£m
7.1
–
7.1
2018
£’000
7,057
1
12
–
7,070
2017
£m
10.0
4.3
160.1
–
174.4
2017
£m
7.1
–
7.1
2017
£’000
4,136
7
42
2,872
7,057
(A) There is one Special Share of €1.26 in the capital of the Company. The Articles of Association provide that the Special Share may be held only by, or transferred only to, the
Minister for Agriculture, Food and the Marine or some other person appointed by the Minister. In 2011, many of the rights attaching to the Special Share were abolished.
(B) 120,950 share options (2017: 714,326) granted under the ShareSave scheme were exercised in the year at a nominal value of £0.001m (2017:£0.007m). See Note 6.
(C) During the year 1,210,655 (2017: 4,250,498) shares were issued in respect of the Scrip Dividend Scheme for £2.8m (2017: £11.2m).
(D) A Rights Issue was undertaken in December 2016 and 287,214,963 shares were issued to part fund the Peacock Foods acquisition. The offer to shareholders was 9 for 13
Rights Issue at a discounted share price of £1.53 per new share and it raised £439.4m.
All shares, with the exception of the Special Rights Preference Share, carry equal voting rights and rank for dividends to the extent to which the
total amount payable in each share is paid up.
On 28 November 2018, Greencore Group plc completed the share capital reduction of £650.8m of share premium, which was converted into
profits available for distribution. The capital reduction had previously been approved by a special resolution of shareholders of 7 November 2018
and was confirmed by the High Court on 28 November 2018.
OWN SHARE RESERVE
The Employee Benefit Trust had an opening balance of 3,593,144 (2017: 2,421,371) shares with a value of £8.6m (2017: £7.5m) and nominal value of
£0.04m (2017: £0.02m). Pursuant to the terms of the Employee Benefit Trust, 984,678 shares were acquired by the Trust for £2.0m (2017: 3,231,732
shares for £7.4m) at a nominal value of £0.01m (2017: £0.03m)and a further 56,858 shares (2017: 45,228) were acquired by the Trust through the Scrip
Dividend and utilisation of dividend income of £0.2m (2017: £0.0m) with a nominal value of £0.0006m (2017: £0.0005m). During the year, 1,248,039
shares (2017: 2,105,187) at a cost of £2.7m (2017: £6.3m) and nominal value of £0.01m (2017: £0.02m) were transferred to beneficiaries of the Annual
Bonus Plan and the Performance Share Plan. The closing balance of the Employee Benefit Trust is 3,386,641 (2017: 3,593,144) shares with a value
of £8.1m (2017: £8.6m) and a nominal value of £0.03m (2017: £0.04m).
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
145
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
27. NON-CONTROLLING INTERESTS
At beginning of year
Profit after tax
Dividends paid to non-controlling interests
Currency translation adjustment
At end of year
28. WORKING CAPITAL MOVEMENT
The following represents the Group’s working capital movement:
Inventories
Trade and other receivables
Trade and other payables
2018
£m
5.2
2.7
(1.5)
–
6.4
2018
£m
5.1
(33.9)
12.9
(15.9)
29. COMMITMENTS UNDER OPERATING AND FINANCE LEASES
OPERATING LEASES
Future minimum rentals payable under non-cancellable operating leases at year end in respect of continuing operations are as follows:
Continuing operations
Within one year
After one year but not more than five years
More than five years
2018
£m
9.3
22.2
12.9
44.4
2017
£m
4.4
1.7
(1.0)
0.1
5.2
2017
£m
6.9
(55.3)
45.4
(3.0)
2017*
£m
12.7
23.8
18.4
54.9
* Prior year re-presented to exclude discontinued operations.
Operating lease commitments relate to property, plant and machinery and fixtures and fittings.
FINANCE LEASES
The future minimum lease payments under finance leases at 28 September 2018, together with the present value of the net minimum lease
payments were as follows:
Within one year
After one year but not more than five years
More than five years
Total minimum lease payments
Less: amounts allocated to future finance costs
Present value of minimum lease payments
2018
2017
Minimum
payments
£m
Present value of
payments
£m
Minimum
payments
£m
Present value of
payments
£m
0.2
0.3
–
0.5
–
0.5
0.2
0.3
–
0.5
–
0.5
0.6
1.2
0.4
2.2
(0.4)
1.8
0.5
0.9
0.4
1.8
–
1.8
146 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS
30. CAPITAL EXPENDITURE COMMITMENTS
The table below includes the capital commitments at 28 September 2018 for both continuing and discontinued operations.
Capital expenditure that has been contracted but not been provided for
Capital expenditure that has been authorised by the Directors but not yet contracted
2018
£m
4.7
6.1
10.8
2017
£m
21.1
21.2
42.3
31. CONTINGENCIES
The Company and certain subsidiaries have given guarantees in respect of borrowings and other obligations arising in the ordinary course of the
business of the Company and other Group undertakings. The Company and other Group undertakings consider these guarantees to be insurance
contracts and account for them as such. The Company treats these guarantee contracts as contingent liabilities until such time as it becomes
probable that a payment will be required under such guarantees.
Pursuant to the provisions of Section 357, Companies Act 2014, the Company has guaranteed the liabilities of certain subsidiary undertakings
in the Republic of Ireland for the financial year ended 28 September 2018 and as a result, such subsidiary undertakings have been exempted
from the filing provisions of Companies Act 2014.
Various subsidiaries of the Group are subject to legal proceedings. Provisions for anticipated settlement costs and associated expenses arising
from legal and other disputes are made where a reliable estimate can be made of the probable outcome of the proceedings.
The Group provided bank guarantees to third parties in relation to continuing operations for amounts of £5.4m (2017: £4.5m) and in relation
to discontinued operations for amounts of £4.8m (2017: £4.7m).
32. ACQUISITIONS AND DISPOSAL OF UNDERTAKINGS
ACQUISITIONS IN THE PRIOR YEAR
Peacock Foods
On 30 December 2016, the Group acquired 100% of CB-Peacock Holdings Inc. (‘Peacock Foods’), a US based convenience food manufacturer.
Details of the acquisition are set out in Note 31 to the 2017 Annual Report. The fair value of the assets and liabilities acquired were provisional at
29 September 2017 and have subsequently been finalised. There have been no adjustments made to provisional fair values of assets and liabilities
as presented in the 2017 Annual Report.
Heathrow
On 26 June 2017, the Group entered into an asset purchase agreement with Tasties of Chester Limited. Details of the acquisition are set out in
Note 31 to the 2017 Annual Report. The fair value assets and liabilities acquired were provisional at 29 September 2017 and have subsequently
been finalised. There have been no adjustments made to provisional fair values of assets and liabilities as presented in the 2017 Annual Report.
DISPOSAL IN THE CURRENT YEAR
Hull
On 10 February 2018, the Group reached an agreement to dispose of its cakes and desserts manufacturing facility at Hull to Bright Blue Foods
Limited. Under terms of the agreement the trade and assets of the business were transferred to the purchaser for cash consideration of £1.0m
deferred for 12 months. In addition, cash consideration for working capital of £2.9m was received during the period.
The net assets of Hull at the date of disposal were as follows:
Property, plant and equipment
Intangible assets
Inventory
Trade and other receivables
Net assets and liabilities
Satisfied by:
Consideration received, satisfied in cash
Deferred consideration
Net cash inflows
2018
£m
12.0
0.6
3.1
0.3
16.0
2.9
1.0
3.9
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
147
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
33. RELATED PARTY DISCLOSURES
The principal related party relationships requiring disclosure in the Group Financial Statements under IAS 24 Related Party Disclosures pertain
to the existence of subsidiaries and associates and transactions with these entities entered into by the Group, as well as the identification and
compensation of key management personnel, as addressed in greater detail below.
SUBSIDIARIES AND ASSOCIATES
The Group Financial Statements include the Financial Statements of the Company (Greencore Group plc, the ultimate parent) and its subsidiaries
and associates. A listing of the principal subsidiaries and associates is provided in Note 34 of the Group Financial Statements.
Sales to and purchases from, together with outstanding payables and receivables to and from, subsidiaries, are eliminated in the preparation of
the Group Financial Statements in accordance with IFRS 10 Consolidated Financial Statements. Amounts receivable from and payable to associates
as at the balance sheet date are included as separate line items in the notes to the Group Financial Statements.
TERMS AND CONDITIONS OF TRANSACTIONS WITH ASSOCIATES
In general, sales to and purchases from associates are on terms equivalent to those that prevail in arm’s length transactions. The outstanding
balances included in receivables and payables at the balance sheet date in respect of transactions with associates are unsecured, interest-free and
settlement arises in cash. No guarantees have been either requested or provided in relation to the associates’ company receivables and payables.
KEY MANAGEMENT PERSONNEL
For the purposes of the disclosure requirements of IAS 24 Related Party Disclosures, the term ‘Key Management Personnel’ (i.e. those persons
having the authority and responsibility for planning, directing and controlling the activities of the Company), comprise the Board of Directors
which manages the business and affairs of the Group. As identified in the Report on Directors’ Remuneration, the Directors who served during
the period, other than the Non-Executive Directors, serve as executive officers of the Group.
Key management personnel compensation was as follows:
Salaries and other short-term employee benefits
Post-employment benefits
Share-based payments**
2018
£m
2.1
0.4
0.3
2.8
2017*
£m
1.9
0.4
0.9
3.2
* Prior year has been re-presented to include the Non-Executive Directors’ fees.
** This is the Income Statement charge for the year which represents the fair value of the share-based payments, relating to Executive Directors. Details of the Group’s
share-based payments and the basis of calculation are set out in Note 6. This differs from the amount included in the single total figure for remuneration included
in the Directors’ Report which is not an IFRS metric.
The aggregate gain of awards that vested in the year for key management personnel was £0.9m.
34. PRINCIPAL SUBSIDIARIES AND ASSOCIATED UNDERTAKINGS
Name of undertaking
Nature of business
Percentage share
Registered office
Greencore Advances Designated Activity Company
Finance Company
100
Greencore Beechwood Limited*
Holding Company
100
Greencore Convenience Foods Limited Partnership*
Pension Funding
100
Greencore Convenience Foods I Limited
Liability Partnership*
Pension Funding
100
148 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
No. 2 Northwood Avenue
Northwood Business Park, Santry
Dublin 9, D09 X5N9
Greencore Group
UK Centre
Midland Way
Barlborough Links Business Park
Barlborough
Chesterfield S43 4XA
c/o Eversheds LLP
3–5 Melville Street
Edinburgh EH3 7PE
Greencore Group
UK Centre
Midland Way
Barlborough Links Business Park
Barlborough
Chesterfield S43 4XA
FINANCIAL STATEMENTS Name of undertaking
Nature of business
Percentage share
Registered office
Greencore Developments Designated Activity Company
Property Company
100
Greencore Finance Designated Activity Company
Finance Company
100
Greencore Foods Limited*
Holding and
Management
Services Company
100
Greencore Food to Go Limited*
Food Processor
100
Greencore Funding Limited**
Finance Company
100
Greencore Grocery Limited*
Food Processor
100
Greencore Prepared Meals Limited*
Food Processor
100
Greencore UK Holdings Limited*
Holding Company
100
Hazlewood (Blackditch) Limited*
Property Company
100
Hazlewood Foods Limited*
Holding Company
100
Irish Sugar Designated Activity Company
General Trading
Company
100
Premier Molasses Company Limited
Molasses Trading
50
No. 2 Northwood Avenue
Northwood Business Park, Santry
Dublin 9, D09 X5N9
No. 2 Northwood Avenue
Northwood Business Park, Santry
Dublin 9, D09 X5N9
Greencore Group
UK Centre
Midland Way
Barlborough Links Business Park
Barlborough
Chesterfield S43 4XA
Greencore Group
UK Centre
Midland Way
Barlborough Links Business Park
Barlborough
Chesterfield S43 4XA
13 Castle Street
St. Helier
Jersey JE4 5UT
Greencore Group
UK Centre
Midland Way
Barlborough Links Business Park
Barlborough
Chesterfield S43 4XA
Greencore Group
UK Centre
Midland Way
Barlborough Links Business Park
Barlborough
Chesterfield S43 4XA
Greencore Group
UK Centre
Midland Way
Barlborough Links Business Park
Barlborough
Chesterfield S43 4XA
Greencore Group
UK Centre
Midland Way
Barlborough Links Business Park
Barlborough
Chesterfield S43 4XA
Greencore Group
UK Centre
Midland Way
Barlborough Links Business Park
Barlborough
Chesterfield S43 4XA
No. 2 Northwood Avenue
Northwood Business Park, Santry
Dublin 9, D09 X5N9
Harbour Road
Foynes
Co. Limerick
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
149
NOTES TO THE GROUP FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
34. PRINCIPAL SUBSIDIARIES AND ASSOCIATED UNDERTAKINGS CONTINUED
Name of undertaking
Trilby Trading Limited
Nature of business
Percentage share
Registered office
Food Industry
Supplier
100
United Molasses (Ireland) Limited*
Molasses Trading
50
Greencore USA, LLC.***
Food Processor
100
Greencore USA – CPG Partners LLC***
Food Processor
100
Greencore USA – Produce & Foodservice LLC***
Food Processor
100
Greencore US Holdings LLC***
Holding Company
100
No. 2 Northwood Avenue
Northwood Business Park, Santry
Dublin 9, D09 X5N9
Duncrue Street
Belfast BT3 9AQ
National Registered Agents
160 Greentree Drive,
Suite 101 Dover, DE 19904 USA
National Registered Agents Inc.,
160 Greentree Drive,
Suite 101 Dover, DE 19904 USA
National Registered Agents Inc.,
160 Greentree Drive,
Suite 101 Dover, DE 19904 USA
National Registered Agents Inc.,
160 Greentree Drive,
Suite 101 Dover, DE 19904 USA
All the above entities are registered in the Republic of Ireland except those marked with * which are registered within the UK, that marked with **
which is registered in Jersey, and those marked with *** which are registered in the US and have subsequently been disposed of.
All companies registered in the Republic of Ireland are covered by s357 of the Companies Act 2014.
35. SUBSEQUENT EVENTS
DISPOSAL OF DISCONTINUED OPERATIONS
The transaction to dispose of Greencore’s US business was completed on 25 November 2018, of which details have been included at Note 9.
The disposal will be recognised in the Greencore Group plc half year Financial Statements for the period ended 29 March 2019. The transaction
will be accounted for as a 100% disposal of Greencore’s US business in consideration for the cash payments outlined above.
36. BOARD APPROVAL
The Group Financial Statements, together with the Company Financial Statements, for the year ended 28 September 2018 were approved
by the Board of Directors and authorised for issue on 3 December 2018.
150 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS COMPANY BALANCE SHEET
at 28 September 2018
ASSETS
Non-current assets
Tangible assets
Intangible assets
Financial assets
Total non-current assets
Current assets
Trade and other receivables
Cash and cash equivalents
Total current assets
Total assets
EQUITY
Capital and reserves
Share capital
Share premium
Undenominated capital reserve
Other reserves
Retained earnings
Total equity
LIABILITIES
Current liabilities
Trade and other payables
Total liabilities
Total equity and liabilities
PG Kennedy
Director
EP Tonge
Director
Notes
2018
£m
2017
£m
2
3
4
5
7
6
0.7
1.8
176.8
179.3
1,314.0
–
1,314.0
1,493.3
7.1
650.8
117.8
(3.9)
177.7
949.5
543.8
543.8
0.7
2.1
176.8
179.6
1,244.7
3.8
1,248.5
1,428.1
7.1
647.8
117.8
(2.0)
121.1
891.8
536.3
536.3
1,493.3
1,428.1
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
151
COMPANY STATEMENT OF CHANGES IN EQUITY
year ended 28 September 2018
At 29 September 2017
Items of income and expense taken directly to equity
Profit for the financial year
Total recognised income and expense for
the financial year
Employee share-based payment expense
Exercise, forfeit or lapse of share based payments
Shares acquired by Employee Benefit Trust (A)
Transfer to retained earnings on grant of shares
to beneficiaries of the Employee Benefit Trust (B)
Dividends
At 28 September 2018
At 30 September 2016
Items of income and expense taken directly to equity
Profit for the financial year
Total recognised income and expense for the
financial year
Employee share-based payment expense
Exercise, forfeit or lapse of share based payments
Issue of shares – Rights Issue
Costs associated with the issue of shares
Shares acquired by Employee Benefit Trust (A)
Transfer to retained earnings on grant of shares
to beneficiaries of the Employee Benefit Trust (B)
Dividends
At 29 September 2017
Share
capital
£m
Share
premium
£m
Undenominated
capital
reserve (C)
£m
Share based
payment
reserve (D)
£m
Own share
reserve (E)
£m
Retained
Earnings
£m
Total
equity
£m
7.1
647.8
117.8
6.6
(8.6)
121.1
891.8
–
–
–
–
–
–
–
–
–
–
0.2
–
–
2.8
–
–
–
–
–
–
–
–
–
1.6
(4.0)
–
–
–
7.1
650.8
117.8
4.2
–
–
–
–
(2.2)
2.7
–
(8.1)
94.5
94.5
94.5
–
4.0
0.2
(2.7)
(39.4)
94.5
1.6
0.2
(2.0)
–
(36.6)
177.7
949.5
Share
capital
£m
Share
premium
£m
Undenominated
capital
reserve (C)
£m
Share based
payment
reserve (D)
£m
Own share
reserve (E)
£m
Retained
Earnings
£m
4.1
198.9
117.8
7.6
(7.5)
149.8
Total
equity
£m
470.7
–
–
–
–
2.9
–
–
–
0.1
7.1
–
–
–
1.1
436.7
–
–
–
11.1
647.8
–
–
–
–
–
–
–
–
–
117.8
–
–
3.5
(4.5)
–
–
–
–
–
6.6
–
–
–
–
–
–
(7.4)
6.3
–
(8.6)
17.9
17.9
17.9
–
4.5
–
(13.0)
–
(6.3)
(31.8)
121.1
17.9
3.5
1.1
439.6
(13.0)
(7.4)
–
(20.6)
891.8
(A) The Employee Benefit Trust acquired 56,858 (2017: 45,228) shares in the Group with a combined value of £0.2m (2017: £0.2m) and a nominal value at the date of purchase
of £0.0006m (2017: £0.0004m) through the Scrip Dividend Scheme and utilisation of dividend income. Pursuant to the terms of the Employee Benefit Trust 984,678
(2017: 3,231,732) shares were purchased during the financial year ended 28 September 2018 at a cost of £2.0m (2017: £7.2m). The nominal value of these shares, on which
dividends have not been waived by the Employee Benefit Trust was £0.01m (2017: £0.03m) at the date of purchase.
(B) During the year 1,248,039 (2017: 2,105,187) shares with a nominal value at the date of transfer of £0.01m (2017: £0.02m ) were transferred to beneficiaries of the Deferred
Bonus Plan.
(C) The undenominated capital reserve represents the nominal cost of cancelled shares and the amount transferred to reserves as a result of renominalising the share capital
of Greencore Group plc on conversion to the euro.
(D) The share-based payment reserve relates to equity settled share-based payments made to employees through the Performance Share Plan, the Deferred Bonus Plan,
the Employee ShareSave Scheme and the Executive Option Scheme. Further information in relation to this share-based payment is set out in Note 6 of the Group
Financial Statements.
(E) The amount included as own shares relates to Ordinary Shares in Greencore Group plc which are held in trust. The shares held in trust are granted to beneficiaries
of the Group’s share-based payment schemes when the relevant conditions are satisfied.
152 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS
year ended 28 September 2018
1. COMPANY STATEMENT OF ACCOUNTING POLICIES
BASIS OF PREPARATION
The Company Financial Statements of Greencore Group plc (‘the Company’) were prepared under the historical cost convention, in accordance
with Financial Reporting Standard 101 Reduced Disclosure Framework (‘FRS 101’). In preparing these Financial Statements, the Company applies
the recognition, measurement and disclosure requirements of International Financial Reporting Standards as adopted by the EU (‘Adopted IFRSs’),
but makes amendments where necessary in order to comply with the Companies Acts 2014 and has set out below where advantage of the FRS 101
disclosure exemptions has been taken.
In these Financial Statements, the company has applied the exemptions available under FRS 101 in respect of the following disclosures:
• A Cash Flow Statement and related notes;
• Comparative period reconciliations for tangible fixed assets and share capital;
• Disclosures in respect of transactions with wholly owned subsidiaries;
• Disclosures in respect of capital management;
• The effects of new but not yet effective IFRSs; and
• Disclosures in respect of the compensation of Key Management Personnel.
As the Consolidated Financial Statements of the Group are prepared in accordance with IFRS as adopted by the EU and include the equivalent
disclosures, the Company has also taken the exemptions under FRS 101 available in respect of the following disclosures:
• Certain disclosures required by IFRS 2 Share-Based Payments; and
• Certain disclosures required by IFRS 13 Fair Value Measurement and the disclosures required by IFRS 7 Financial Instruments: disclosures.
The accounting policies set out below have, unless otherwise stated, been applied consistently to all periods presented in these Financial
Statements.
The Financial Statements have been prepared in sterling and are rounded to the nearest million.
PROFIT AND LOSS
The profit attributable to equity shareholders dealt with in the Financial Statements of the Company was £94.5m (2017: £17.9m). In accordance with
section 304 of the Companies Act 2014, the Company is availing of the exemption from presenting its individual Income Statement to the Annual
General Meeting and from filing it with the Registrar of Companies.
FOREIGN CURRENCIES
Transactions in foreign currencies are translated to the Company’s functional currency at the foreign exchange rate ruling at the date of the
transaction. Monetary assets and liabilities denominated in foreign currencies at the Balance Sheet date are retranslated to the functional currency
at the foreign exchange rate ruling at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign
currency are translated using the exchange rate at the date of the transaction. Foreign exchange differences arising on translation are recognised
in the Income Statement.
TRADE AND OTHER RECEIVABLES
Trade and other receivables are initially recognised at fair value and subsequently carried at amortised cost net of provision for impairment.
A provision is made when there is objective evidence that the Group will be unable to recover balances in full. Balances are written off when
the probability of recovery is assessed as being remote.
Any trade and other receivables included in non-current assets are carried at amortised cost in accordance with the effective interest rate method.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents are initially recognised at fair value and subsequently carried at amortised cost. Cash and cash equivalents include
cash in hand, deposits held on call with banks and other short-term highly liquid investments that are readily convertible to known amounts of
cash, are subject to insignificant risk of changes in value and have an original maturity of three months or less.
TRADE AND OTHER PAYABLES
Trade and other payables are initially recorded at fair value and subsequently at the higher of cost or payment or settlement amounts.
Where the time value of money is material, payables are initially recorded at fair value and subsequently carried at amortised cost.
INTRA-GROUP GUARANTEES
Where the Company enters into financial guarantee contracts to guarantee the indebtedness of other companies within its group, the Company
considers these to be insurance arrangements and accounts for them as such. In this respect, the Company treats the guarantee contract
as a contingent liability until such time as it becomes probable that the Company will be required to make a payment under the guarantee.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
153
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
1. COMPANY STATEMENT OF ACCOUNTING POLICIES CONTINUED
FINANCIAL ASSETS
Investments in subsidiaries and associated undertakings are held at cost. 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.
TANGIBLE ASSETS
Depreciation is calculated so as to write off the cost or valuation, less estimated residual value, of each fixed asset during its expected useful life
using the straight-line or reducing balance methods over the following periods:
Plant, machinery, equipment, fixtures and fittings
3–25 years
No depreciation is provided on freehold land.
INTANGIBLE ASSETS
Costs incurred on the acquisition of computer software and software licences are capitalised. Other costs directly associated with developing
and upgrading computer software programs are capitalised once the recognition criteria set out in IAS 38 Intangible Assets are met.
Computer software is amortised over 5–7 years.
EMPLOYEE SHARE-BASED PAYMENTS
The Group grants equity settled share-based payments to employees (through the Performance Share Plan, the Deferred Bonus Plan, the
Employee ShareSave Scheme and the Executive Option Scheme). The fair value of these is determined at the date of grant and is expensed
to the profit or loss with a corresponding increase in equity on a straight-line basis over the vesting period. The fair value is determined using an
appropriate valuation model, as measured at the date of grant, excluding the impact of any non-market conditions. Non-market vesting conditions
are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the Group revises its estimates
of the number of options or awards that are expected to vest, recognising any adjustment in the profit or loss, with a corresponding adjustment
to equity.
To the extent that the Group receives a tax deduction relating to services paid for by means of share awards or options, deferred tax is provided
on the basis of the difference between the market price of the underlying equity as at the date of the Balance Sheet and the exercise price of the
option. As a result, the deferred tax impact of share options will not directly correlate with the expense reported in the profit or loss. To the extent
that the deductible difference exceeds the cumulative charge to the profit or loss, it is recorded in Equity.
When the exercise of share options results in the issuance of shares, the proceeds received are credited to the share capital and share
premium accounts.
TAXATION
The expense charge 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 the Statement of Recognised Income and Expense or directly in equity, in which case the tax is also recognised
in the Statement of Recognised Income and Expense or directly in equity.
Current tax represents the expected tax payable on the taxable income for the year, using tax rates and tax laws enacted or substantively enacted,
at the balance sheet date along with any adjustment to tax payable in respect of previous years.
The Company provides in full for deferred tax assets and liabilities (using the liability method), arising from temporary differences between the tax
base of assets and liabilities and their carrying amounts in the Financial Statements except where they arise from the initial recognition of goodwill
or from the initial recognition of an asset or liability that at the date of initial recognition does not affect accounting or taxable profit or loss on
a transaction that is not a business combination. Such differences result in an obligation to pay more tax or a right to pay less tax in future periods.
A deferred tax asset is only recognised where it is probable that future taxable profits will be available against which the temporary differences
giving rise to the asset can be utilised.
Deferred tax assets and liabilities are not subject to discounting and are measured at the tax rates that are enacted or substantively enacted at the
balance sheet date. Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing
of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.
154 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS
EMPLOYEE BENEFITS
Defined Contribution Pension Plans
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a separate defined contribution scheme.
Obligations for contributions to defined contribution pension plans are recognised as an expense in the Income Statement as employee service
is received. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.
Defined Benefit Pension Plans
Pension benefits are funded over the employees’ years of service by way of contributions to a legacy defined benefit scheme operated by a
fellow group company. Defined benefit schemes are funded, with the assets of the scheme held separately from those of the company, in separate
trustee administered funds. Pension scheme assets are measured at fair value and liabilities are measured on an actuarial basis using the projected
unit method and discounted at a rate equivalent to the current rate of return on a high quality corporate bond of equivalent currency and term to
the scheme liabilities. The actuarial valuations are obtained at least triennially and are updated at each balance sheet date. The resulting defined
benefit asset or liability, net of the related deferred tax, is presented separately after other net assets on the face of the balance sheet.
SHARE CAPITAL
Ordinary Shares
Ordinary Shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are taken as a deduction,
within equity net of tax, from the proceeds.
Treasury Shares
Where the Company purchases the Company’s equity share capital, the consideration paid is deducted from the total shareholders’ equity and
classified as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included
in total shareholders’ equity.
DIVIDENDS
Interim dividends payable are recognised as a liability of the Company when the Board of Directors’ resolves to pay the dividend and the
shareholders have been notified in accordance with the Company’s Articles of Association. Final dividends of the Company are recognised
as a liability when they have been approved by the Company’s shareholders.
CASH FLOW
The Company has taken advantage of the exemption available to it under FRS 101 not to prepare a statement of cash flows.
2. TANGIBLE ASSETS
Cost
At 29 September 2017
At 28 September 2018
Depreciation
At 29 September 2017
At 28 September 2018
Net book value
At 28 September 2018
At 29 September 2017
Fixtures
and fittings
£m
1.3
1.3
0.6
0.6
0.7
0.7
Total
£m
1.3
1.3
0.6
0.6
0.7
0.7
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
155
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
year ended 28 September 2018
3. INTANGIBLE ASSETS
Cost
At 29 September 2017
At 28 September 2018
Amortisation
At 29 September 2017
Charge for the year
At 28 September 2018
Net book value
At 28 September 2018
At 29 September 2017
4. FINANCIAL ASSETS
Interest in subsidiary undertakings
At beginning and end of the year
Computer
software
£m
2.1
2.1
–
0.3
0.3
1.8
2.1
Total
£m
2.1
2.1
–
0.3
0.3
1.8
2.1
2018
£m
176.8
2017
£m
176.8
The principal trading subsidiaries and associated undertakings are set out in Note 34 to the Group Financial Statements.
5. TRADE AND OTHER RECEIVABLES
Amounts falling due within one year
Amounts owed by subsidiary undertakings*
Other receivables
Prepayments and accrued income
2018
£m
1,313.3
0.3
0.4
1,314.0
* Amounts due from subsidiary undertakings are classified as current, as all inter-company receivables and payables are repayable on demand.
6. TRADE AND OTHER PAYABLES
Amounts falling due within one year
Amounts owed to subsidiary undertakings*
Declared interim dividend
Trade and other payables
Accruals
Bank overdraft
2018
£m
514.8
15.6
2.5
10.2
0.7
543.8
* Amounts due to subsidiary undertakings are classified as current, as all inter-company receivables and payables are repayable on demand.
7. SHARE CAPITAL
Details in respect of called-up share capital are presented in Note 26 of the Group Financial Statements.
2017
£m
1,244.2
–
0.5
1,244.7
2017
£m
510.3
14.8
2.4
8.8
–
536.3
156 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
FINANCIAL STATEMENTS 8. EMPLOYEE BENEFITS
A fellow group company, Irish Sugar DAC, operates a funded defined benefit pension scheme for its employees, including certain employees of
the Company. The scheme assets are held in separate Trustee administered funds. Contributions to these funds, which are charged against profits,
are based on independent actuarial advice following the most recent valuation of such funds.
Full actuarial valuations were carried out between 31 March 2016 and 31 March 2017. In general, actuarial valuations are not available for public
inspection, however, the results of valuations are advised to the members of the various schemes. This scheme had a net surplus at 28 September
2018 of £7.6 million (2017: £10.6 million) as measured on a lAS 19 employee benefits basis. The contribution for the period was £nil (2017: £nil).
At year end, £nil (2017: £nil) was included in other accruals in respect of amounts owed to the scheme. The scheme was closed to future benefit
accrual on 31 December 2009.
The Company also contributes to a defined benefit contribution scheme for its’ employees. At year end, £nil (2017: £0.03m) was included in other
accruals in respect of amounts owed to the scheme.
Disclosures in relation to this and all other Group legacy defined benefit pension schemes are given in Note 25 to the Group Financial Statements.
9. SHARE-BASED PAYMENTS
The Company grants share awards and options under various share option plans as detailed in the Report of the Directors. A charge of £1.7m
(2017: £3.5m) was recognised in the Income Statement of the Company in respect of the employees of the Company. All disclosures relating
to the plans are given in Note 6 to the Group Financial Statements.
10. FINANCIAL GUARANTEE CONTRACTS
Pursuant to the provisions of Section 357, Companies Act 2014, the Company has guaranteed the liabilities of certain subsidiary undertakings
in the Republic of Ireland for the financial year ended 28 September 2018. Where the Company has entered into financial guarantee contracts
to guarantee the indebtedness of such subsidiaries, the Company considers these to be insurance contracts and accounts for them as such.
The Company is party to cross guarantees on Group borrowings. These are treated as insurance contracts and accounted for as such.
11. STATUTORY INFORMATION
During the period the average number of persons employed by the Company (excluding Non-Executive Directors) was 33 (2017: 26).
Directors’ remuneration is disclosed in the Report on Directors’ Remuneration and in Note 33 to the Group Financial Statements.
Auditor’s remuneration for the year was as follows:
Audit of the Company Financial Statements
2018
£’000
39
2017
£’000
26
The Company has annual commitments under operating leases expiring between two and five years of £0.9m (2017: £1.1m) and after five years
of £0.1m (2017: £0.5m).
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
157
ALTERNATIVE PERFORMANCE MEASURES
The Group uses the following Alternative Performance Measures (‘APMs’) which are non-IFRS measures to monitor the performance of its
operations and of the Group as a whole: Pro Forma Revenue Growth, Adjusted EBITDA, Adjusted Operating Profit, Adjusted Operating Margin,
Adjusted Profit before Tax (‘PBT’), Adjusted Earnings, Adjusted Earnings per Share, Maintenance and Strategic Capital Expenditure, Operating
Cash Flow, Free Cash Flow and Net Debt.
The Group believes that these APMs provide useful historical information to help investors evaluate the performance of the underlying business
and are measures commonly used by certain investors and security analysts for evaluating the performance of the Group. In addition, the Group
uses certain APMs which reflect the underlying performance on the basis that this provides a more relevant focus on the core business performance
of the Group.
PRO FORMA REVENUE GROWTH
The Group uses Pro Forma Revenue Growth as a supplemental measure of its performance. The Group believes that Pro Forma Revenue Growth
provides a more accurate guide to underlying revenue performance. Pro Forma Revenue Growth for continuing operations in FY18 adjusts
reported revenue to exclude the impact of the Heathrow Acquisition in both years, and excludes the cakes and desserts category, representing
Hull and Evercreech which have been disposed of in the year. The discontinued Pro Forma Revenue Growth has been adjusted to reflect the
ownership of Peacock Foods for the full period in FY17 and has excluded the Rhode Island site which ceased trading in the current year. These
figures are reported on a constant currency basis.
Pro Forma Revenue Growth (%)
Reported revenue
Impact of acquisitions
Impact of disposals
Impact of currency
Pro Forma Revenue Growth (%)
2018
Convenience
Foods
UK & Ireland
Discontinued
operations
8.7%
6.6%
2018
Convenience
Foods
UK & Ireland
%
Discontinued
operations
%
4.2%
(0.2%)
4.8%
(0.1%)
8.7%
20.5%
(24.1%)
0.3%
9.9%
6.6%
ADJUSTED EBITDA, ADJUSTED OPERATING PROFIT AND ADJUSTED OPERATING MARGIN
Adjusted EBITDA, Adjusted Operating Profit and Adjusted Operating Margin are used by the Group to measure the underlying and ongoing
operating performance of each business unit and of the Group as a whole.
The Group calculates Adjusted Operating Profit as operating profit before amortisation of acquisition related intangibles and exceptional charges.
Adjusted EBITDA is calculated as Adjusted Operating Profit plus deprecation and amortisation. Adjusted Operating Margin is calculated as Adjusted
Operating Profit divided by reported revenue.
158 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
OTHER INFORMATION ADJUSTED EBITDA, ADJUSTED OPERATING PROFIT AND ADJUSTED OPERATING MARGIN CONTINUED
The following table sets forth a reconciliation from the Group’s Profit for the financial year to Adjusted Operating Profit, Adjusted EBITDA and
Adjusted Operating Margin:
Profit for the financial year
Taxation(A)
Net finance costs(B)
Share of profit of associates after tax
Exceptional items
Amortisation of acquisition related intangibles
Adjusted Operating Profit
Depreciation and amortisation(c)
Adjusted EBITDA
Adjusted Operating Margin (%)
2018
Convenience
Foods
UK & Ireland
Discontinued
operations
£m
12.6
5.2
32.9
(0.9)
52.2
2.6
104.6
35.4
140.0
7.0%
£m
23.9
(22.4)
1.0
–
27.9
17.6
48.0
17.0
65.0
4.5%
Convenience
Foods
UK & Ireland
2017
Discontinued
operations
£m
17.3
(1.5)
30.4
(0.7)
53.2
4.2
102.9
34.8
137.7
7.2%
£m
(3.4)
–
0.6
–
25.0
15.0
37.2
14.8
52.0
4.2%
Total
£m
36.5
(17.2)
33.9
(0.9)
80.1
20.2
152.6
52.4
205.0
6.0%
Total
£m
13.9
(1.5)
31.0
(0.7)
78.2
19.2
140.1
49.6
189.7
6.0%
(A) Includes tax credit on exceptional items for continuing operations of £7.8m (2017: £8.9m) and for discontinued operations £20.6m (2017: £nil).
(B) Finance costs less finance income.
(C) Excludes amortisation of acquisition related intangibles.
ADJUSTED PROFIT BEFORE TAX (‘PBT’) FOR CONTINUING OPERATIONS
Adjusted PBT is used as a measure by the Group to measure overall performance before associated tax charge and exceptional items.
The Group calculates Adjusted PBT as profit before taxation, excluding tax on share of profit of associate and before exceptional items,
pension finance items, amortisation of acquisition related intangibles, FX on inter-company and certain external balances and the movement
in the fair value of all derivative financial instruments and related debt adjustments.
The following table sets out the calculation of Adjusted PBT:
Profit before taxation for continuing operations
Taxation on share of profit of associates
Exceptional items
Pension finance items
Amortisation of acquisition related intangibles
FX and fair value movements(A)
Adjusted Profit Before Tax
2018
£m
17.8
0.3
52.2
3.4
2.6
3.3
79.6
2017
£m
15.8
0.2
53.2
3.9
4.2
2.8
80.1
(A) FX on inter-company and certain external balances and the movement in the fair value of all derivative financial instruments and related debt adjustments.
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
159
ALTERNATIVE PERFORMANCE MEASURES CONTINUED
ADJUSTED BASIC EARNINGS PER SHARE (‘EPS’)
The Group uses Adjusted Earnings and Adjusted EPS as key measures of the overall underlying performance of the Group and returns generated
for each share.
Adjusted Earnings is calculated as profit attributable to equity holders (as shown on the Group’s Income Statement) adjusted to exclude
exceptional items (net of tax), the effect of foreign exchange (FX) on inter-company and external balances where hedge accounting is not applied,
the movement in the fair value of all derivative financial instruments and related debt adjustments, the amortisation of acquisition related
intangible assets (net of tax) and the interest expense relating to legacy defined benefit pension liabilities (net of tax). Adjusted EPS is calculated
by dividing Adjusted Earnings by the weighted average number of Ordinary Shares in issue during the year, excluding Ordinary Shares purchased
by Greencore and held in trust in respect of the Annual Bonus Plan, the Performance Share Plan and the Executive Share Option Scheme, and after
adjusting the weighted average number of shares in the prior year for the effect of the rights issue and related bonus issue on the average number
of shares in issue. Adjusted EPS is also referred to as Adjusted Basic EPS.
The following table sets forth a reconciliation of the Group’s profit attributable to equity holders of Greencore to its Adjusted Earnings for the
financial years indicated.
Profit attributable to equity holders of Greencore
Exceptional items (net of tax)
FX effect on inter-company and external balances where hedge accounting is not applied
Movement in fair value of derivative financial instruments and related debt adjustments
Amortisation of acquisition related intangible assets (net of tax)
Pension financing (net of tax)
Adjusted Earnings
Weighted average number of Ordinary Shares in issue during the year
Adjusted Basic Earnings Per Share
2018
£m
33.8
51.7
(0.1)
3.4
14.4
2.7
2017
£m
12.2
69.3
3.0
(0.2)
13.1
3.1
105.9
100.5
2018
‘000
2017
‘000
703,312
652,481
Pence
15.1
Pence
15.4
CAPITAL EXPENDITURE
Maintenance Capital Expenditure
The Group defines Maintenance Capital Expenditure as the expenditure required for the purpose of sustaining the operating capacity and asset
base of the Group, and of complying with applicable laws and regulations. It includes continuous improvement projects of less than £1m that will
generate additional returns for the Group.
Strategic Capital Expenditure
The Group defines Strategic Capital Expenditure as the expenditure required for the purpose of facilitating growth and developing and
enhancing relationships with existing and new customers. It includes continuous improvement projects of greater than £1m that will generate
additional returns for the Group. Strategic Capital Expenditure is generally expansionary expenditure creating additional capacity beyond what
is necessary to maintain the Group’s current competitive position and enables the Group to service new customers and/or contracts or to enter
into new categories and/or new manufacturing competencies.
The following table sets forth the breakdown of the Groups purchase of property, plant and equipment and purchase of intangible assets between
Strategic Capital Expenditure and Maintenance Capital Expenditure:
2018
Convenience
Foods
UK & Ireland
Discontinued
operations
£m
48.8
2.8
51.6
24.6
27.0
51.6
£m
11.7
0.2
11.9
2.2
9.7
11.9
Convenience
Foods
UK & Ireland
£m
80.3
17.2
97.5
62.4
35.1
97.5
Total
£m
60.5
3.0
63.5
26.8
36.7
63.5
2017
Discontinued
operations
£m
25.1
0.7
25.8
21.2
4.6
25.8
Total
£m
105.4
17.9
123.3
83.6
39.7
123.3
Purchase of property, plant and equipment
Purchase of intangible assets
Net cash outflow from capital expenditure
Strategic Capital Expenditure
Maintenance Capital Expenditure
Net cash outflow from capital expenditure
160 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
OTHER INFORMATION OPERATING CASH FLOW AND FREE CASH FLOW
The Group uses Operating Cash Flow to measure the amount of cash generated by the operating activities of each business unit and of the
Group as a whole.
The Group calculates Operating Cash Flow as the net cash inflow/(outflow) from operating and investing activities before Strategic Capital
Expenditure, contributions to legacy defined benefit pension schemes, interest paid, tax paid, acquisition of undertakings, net of cash acquired,
disposal of undertakings, contract acquisition costs and disposal of investment property.
Free Cash Flow is a new APM. The Group uses Free Cash Flow to measure the amount of cash available for distribution and allocation.
The Group calculates Free Cash Flow as the net cash inflow/outflow before the following items: Strategic Capital Expenditure, acquisition
of undertakings, net of cash, disposal of undertakings, issue and purchase of shares, dividends paid to equity holders, translation and other
cash movements.
The following table sets forth a reconciliation from the Group’s net cash inflow from operating activities and net cash outflow from investing
activities to Operating Cash Flow and Free Cash Flow:
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from operating and investing activities
Strategic Capital Expenditure
Contributions to legacy defined pension schemes
Tax paid
Interest paid
Acquisition of undertakings, net of cash acquired
Disposal of undertakings
Operating Cash Flow
Contributions to legacy defined pension schemes
Tax paid
Interest paid
Dividends paid to non-controlling interests
Free Cash Flow
2018
£m
129.8
(62.7)
67.1
26.8
15.1
0.9
26.7
–
–
136.6
(15.1)
(0.9)
(26.7)
(1.5)
92.4
2017
£m
118.2
(726.1)
(607.9)
83.6
11.1
0.5
27.2
606.2
(2.9)
117.8
(11.1)
(0.5)
(27.2)
(1.0)
78.0
NET DEBT
Net Debt is used by the Group to measure overall cash generation of the Group and to identify cash available to reduce borrowings.
Net Debt comprises current and non-current borrowings less net cash and cash equivalents.
The following table sets out the calculation of Net Debt:
Non-current
Bank borrowings
Private Placement Notes
Non-bank borrowings
Finance leases
Total borrowings
Cash and cash equivalents
Net Debt
2018
£m
2017
£m
(350.5)
(124.8)
(62.3)
(0.5)
(538.1)
37.0
(501.1)
(353.7)
(121.9)
(61.6)
(1.8)
(539.0)
19.8
(519.2)
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
161
ALTERNATIVE PERFORMANCE MEASURES CONTINUED
RETURN ON INVESTED CAPITAL (‘ROIC’)
The Group uses ROIC as a key measure to determine returns from each business unit and the Group as a whole, and as a key measure to
determine potential new investments.
The Group uses invested capital as a basis for this calculation as it reflects tangible and intangible assets the Group has added through its
capital investment programme, the intangible assets the Group has added through acquisition, as well as the working capital requirements
of the business.
The Group calculates ROIC as net Adjusted Operating Profit after tax (‘NOPAT’) divided by average invested capital. NOPAT is calculated as
Adjusted Operating Profit plus share of profit of associates before tax, less tax at the effective rate in the Income Statement. Invested Capital
is calculated as net assets (total assets less total liabilities) excluding Net Debt and the balance sheet value of derivatives not designated as
fair value hedges, it also excludes retirement benefit obligations (net of deferred tax assets). Average Invested Capital is calculated by adding
together the invested capital from the opening and closing balance sheet and dividing by two.
The following table sets forth the calculation of net operating profit after tax (‘NOPAT’) and invested capital used in the calculation of ROIC
for the financial years indicated in respect of the Group and continuing operations.
Adjusted Operating Profit
Share of profit of associates before tax
Taxation at the effective tax rate(A)
Group NOPAT
Invested capital
Total assets
Total liabilities
Net Debt
Derivatives not designated as fair value hedges
Retirement benefit obligation (net of deferred tax asset)
Invested capital for the Group
Average invested capital for ROIC calculation for Group(B)
ROIC (%) for the Group
2018
£m
152.6
1.1
(16.9)
136.8
2018
£m
2,015.5
(1,271.9)
501.1
12.7
73.6
1,331.0
1,339.1
10.2
2017
£m
140.1
0.9
(11.3)
129.7
2017
£m
2,038.4
(1,327.6)
519.2
14.0
103.1
1,347.1
1,060.9
12.2
(A) The effective tax rates for the Group for the financial year ended 28 September 2018 and 29 September 2017 were 11% and 8%, respectively. This is a blended rate
for continuing and discontinued operations.
(B) The invested capital for the Group in 2016 was £774.6m.
Adjusted Operating Profit for continuing operations
Share of profit of associates before tax
Taxation at the effective tax rate(C)
NOPAT for continuing operation
Invested Capital
Invested Capital for the Group
Net assets of disposal group held for sale
Average invested capital for ROIC calculation for continuing operations(D)
ROIC (%) for continuing operations
2018
£m
104.6
1.1
(13.7)
92.0
2018
£m
1,331.0
(741.7)
589.3
590.4
15.6
2017
£m
102.9
0.9
(8.3)
95.5
2017
£m
1,347.1
(755.7)
591.4
596.7
16.0
(C) The effective tax rates for continuing operations for the financial year ended 28 September 2018 and 29 September 2017, were 13% and 8%, respectively.
(D) The invested capital for continuing operations was £601.9m in 2016 which excludes £172.7m of invested capital in respect of discontinued operations.
162 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
OTHER INFORMATION
NOTES
GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
163
NOTES
164 GREENCORE GROUP PLC
ANNUAL REPORT AND FINANCIAL STATEMENTS 2018
OTHER INFORMATION SHAREHOLDER AND OTHER INFORMATION
Greencore Group plc is an Irish registered company. Its Ordinary Shares are quoted on the London Stock Exchange (Symbol: GNC). Greencore has
a Level 1 American Depositary Receipts programme (Symbol: GNCGY).
SHAREHOLDING STATISTICS AS AT 3 DECEMBER 2018
Range of units
0–1,000
1,001–5,000
5,001–10,000
10,001–25,000
25,001–100,000
100,001–250,000
250,001–500,000
Over 500,000
Total
Total holders
4,949
3,647
967
643
271
85
46
151
10,759
Units
1,655,572
8,937,950
6,792,506
9,866,061
12,407,928
12,996,041
16,309,812
638,012,546
706,978,416
% of Issued Capital
0.23%
1.26%
0.96%
1.40%
1.76%
1.84%
2.31%
90.24%
100.00%
FINANCIAL CALENDAR
Record date for 2018 final dividend
Annual General Meeting
Payment date for 2018 final dividend
Half year financial report
2019 financial year end
Announcement of final results
11 January 2019
29 January 2019
5 February 2019
21 May 2019
27 September 2019
26 November 2019
ADVISORS AND REGISTERED OFFICE
COMPANY SECRETARY
Conor O’Leary FCIS
REGISTERED OFFICE
No. 2 Northwood Avenue
Northwood Business Park
Santry
Dublin 9
D09 X5N9
Ireland
AUDITOR
KPMG
1 Stokes Place
St Stephen’s Green
Dublin 2
D02 DE03
Ireland
REGISTRAR AND
TRANSFER OFFICE
Computershare Investor
Services (Ireland) Limited
Heron House
Corrig Road
Sandyford Industrial Estate
Dublin 18
D18 Y2X6
Ireland
SOLICITORS
Arthur Cox
Ten Earlsfort Terrace
Dublin 2
D02 T380
Ireland
Eversheds
Bridgewater Place
Water Lane
Leeds
LS11 5DR
UK
Bryan Cave LLP
One Metropolitan Square
211 North Broadway, Suite 3600
St. Louis MO 63102–2750
US
STOCKBROKERS
Goodbody Stockbrokers
Ballsbridge Business Park
Ballsbridge
Dublin 4
D04 YW83
Ireland
Jefferies Hoare Govett
Vintners Place
68 Upper Thames Street
London
EC4V 3BJ
UK
AMERICAN DEPOSITARY
RECEIPTS
BNY Mellon
101 Barclay Street
22nd Floor – West
New York NY 10286
US
Website
www.greencore.com
Follow Greencore on Twitter
@GreencoreGroup
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GREENCORE GROUP PLC
No. 2 Northwood Avenue
Northwood Business Park
Santry, Dublin 9, DO9 X5N9
Tel: +353 (0) 1 605 1000
(2,050kg of material have been carbon neutralised).