Annual Financial Report

RNS Number : 3774Q

Glanbia PLC

08 April 2009

 



Glanbia plc

2008 Annual Report

8 April 2009 - Glanbia plc announces that it will today publish electronic versions of its 2008 Annual Report for the year ended 3 January 2009 together with its notice of its annual general meeting on its website, www.glanbia.com.

For online version of the 2008 Annual Report - please go to http://www.glanbia.com/annualreport2008/pdf/ar2008.pdf

To download the 2008 Annual Report - please go to http://www.glanbia.com/download/pdf/2008_annual_report.pdf

To download the notice of the Annual General Meeting - please go to http://www.glanbia.com/download/pdf/Glanbia_AGM_Notice09.pdf

Copies of the following documents which are being posted to shareholders will also be submitted to:

Companies Announcements Office,

Irish Stock Exchange,

28 Anglesea Street,

Dublin 2,

Ireland

and 

Financial Services Authority, 

25 The North Colonnade, 

Canary Wharf, 

London E14 5HS

• 2008 Annual Report for the year ended 3 January 2009;

• Notice of the Annual General Meeting to be held on 13 May 2009; and

• Proxy form for the Annual General Meeting to be held on 13 May 2009.

As is required by Rule 6.3.5(2)(b) of the Disclosure and Transparency Rules (DTR) the additional information set out below includes;

• The Directors' Statement pursuant to the DTR; 

• Related party transaction disclosures; and

• Principal risks to the business.

The additional information is provided in unedited full text and has been extracted from the Glanbia plc 2008 Annual Report. Accordingly page numbers and note references refer to those in the Annual Report.

The Glanbia plc 2008 full year results announcement which was issued on 4 March 2009 included;

• A set of condensed financial statements;

• A fair review of the development and performance of the business and the position of the Company and Group; and

• A description of the principal risks and uncertainties that they face.

For further information please contact:

Michael Horan, Company Secretary [phone]

Additional Information extracted from the Glanbia plc 2008 Annual Report.

Statement of Directors' responsibilities (page 44 of the annual report)

The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable law and regulations.

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have prepared the group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. The financial statements are required by law to give a true and fair view of the assets, liabilities and financial position of the Company and the Group and of the profit of the Group for that period.

In preparing these financial statements the Directors are required to:

• Select suitable accounting policies and then apply them consistently;

• Make judgements and estimates that are reasonable and prudent;

• State that the financial statements comply with IFRSs as adopted by the European Union; and

• Prepare the financial statements on the going concern basis, unless it is inappropriate to presume that the Group will continue in business, in which case there should be  supporting assumptions or qualifications as necessary.

The Directors are also required by the Transparency (Directive 2004/109/EC) Regulations 2007 to include a management report containing a fair review of the development and performance of the business, the position of the Company and the Group and a description of the principal risks and uncertainties facing the Group.

The Directors confirm to the best of each person's knowledge and belief that they have complied with the above requirements in preparing the financial statements.

The Directors are responsible for keeping proper books of account that disclose with reasonable accuracy at any time the financial position of the Company and the Group and to enable them to ensure that the financial statements comply with the Companies Acts 1963 to 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the website. Legislation in the Republic of Ireland concerning the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Note 42. Related party transactions (Page 110 of the annual report)

The Group is controlled by Glanbia Co-operative Society Limited ('the Society'), which holds 54.6% of the issued share capital of the Company and is the ultimate parent of the Group.  The following transactions were carried out with related parties:

  (a) Sales of goods and services

	2008	2008	2007	2007
	Company	Group	Company	Group
	€'000	€'000	€'000	€'000
- Associates	-	5,875	-	3,871
- Joint ventures	-	69,484	-	82,543
- Key management*	-	829	-	578
	--------	--------	--------	--------
	-	76,188	-	86,992
	--------	--------	--------	--------
Sales of services: - The Society	-	212	-	187
- Associates	-	22	-	20
- Joint ventures	-	6,429	-	4,671
- Subsidiaries	17,651	-	11,684	-
	--------	--------	--------	--------
	17,651	6,663	11,684	4,878
	--------	--------	--------	--------

Sales to related parties were carried out on normal commercial terms and conditions.

(b) Purchases of goods and services

	2008	2008	2007	2007
	Company	Group	Company	Group
	€'000	€'000	€'000	€'000
- Associates	-	10,468	-	10,675
- Joint ventures	-	5,467	-	14,221
- Key management*	-	2,646	-	2,169
	--------	--------	--------	--------
	-	18,581	-	27,065
	--------	--------	--------	--------
Purchases of services:  - Associates	-	2,470	-	1,953
- Joint ventures	-	424,680	-	374,593
- Key management*	-	-	-	4
- Subsidiaries	2,139	-	1,702	-
	--------	--------	--------	--------
	2,139	427,150	1,702	376,550
	--------	--------	--------	--------

Purchases from related parties were carried out on normal commercial terms and conditions.

  (c) Key management compensation1

	2008	2008	2007	2007
	Company	Group	Company	Group
	€'000	€'000	€'000	€'000
Salaries and other short-term employee benefits	-	3,817	-	4,123
Post-employment benefits	-	624	-	582
Share based payments	-	645	-	159
	--------	--------	--------	--------
	-	5,086	-	4,864
	--------	--------	--------	--------

1 Key management compensation includes Board of Directors and Glanbia Executive Committee.

(d) Year-end balances arising from sales/purchases of goods/services

	2008	2008	2007	2007
	Company	Group	Company	Group
	€'000	€'000	€'000	€'000
Receivables from related parties
- Associates	-	447	-	42
- Joint ventures	-	1,983	-	6,715
- Key management*	-	139	-	88
- Subsidiaries	51,617	-	23,984	-
	--------	--------	--------	--------
	51,617	2,569	23,984	6,845
	--------	--------	--------	--------
Payables to related parties: - The Society	-	1,148	-	930
- Associates	-	1,338	-	1,749
- Joint ventures	-	38,385	-	31,119
- Key management*	-	3	-	5
	--------	--------	--------	--------
	-	40,874	-	33,803
	--------	--------	--------	--------

(e) Loans to Joint Ventures

	2008	2008	2007	2007
	Company	Group	Company	Group
	€'000	€'000	€'000	€'000
Loan to Southwest Cheese Company, LLC	-	6,930	-	6,971
-----------------------------	--------	--------	--------	--------
Loan to Milk Ventures (UK) Limited	-	4,999	-	-
-----------------------------	--------	--------	--------	--------

  Glanbia Co-operative Society Limited approved the payment of a milk and grain bonus of €6.7 million to the suppliers of Glanbia plc for 2008 on 15 January 2009. Glanbia Co-operative Society Limited is the ultimate holding company of Glanbia plc. The cost of this milk/grain bonus top up will be borne by Glanbia Co-operative Society Limited.

During 2008, the Company disposed of 800,000 shares of its investment in One51 plc for a consideration of €3,139,000 to its ultimate parent company Glanbia Co-operative Society Limited.

*Purchases, sales and related year end balances to key management refer to trading balances with Directors who are engaged in farming activities.

Risk and risk management (Pages 36-37 of the annual report)

The management of risk is central to achieving Glanbia's strategic and financial objectives that are set out on page 6 to 7 of this report. The Board of Glanbia is responsible for the Group's risk management systems, which are designed to manage and mitigate the risk of failure to achieve strategic and business objectives.

Global economic downturn and dairy market volatility

Impact

Mitigation

Demand for the Group's products could be curtailed, which when coupled with dairy market volatility represents a very material risk to the operating performance and financial stability of the Group.

The Group maintains a balanced spread of businesses and continues to diversify its earnings base to reduce volatility in financial performance. In 2008, 71% of Group revenue and 65% of Group operating profit pre exceptional was generated from the International Division. The Group also continues to streamline its cost base to ensure it remains competitive. In 2008, Glanbia initiated a rationalisation programme costing €14.5 million, focused on Consumer Foods, Agribusiness and Food Ingredients Ireland.

Financing and liquidity constraints, associated with current credit markets

Impact

Mitigation

Lack of financial capacity could affect the Group's ability to conduct its business and maintain capital investment programmes, dividend payments and debt service commitments.

The Group closely monitors and manages its cash flow, with regular forecasting. Glanbia has in place total debt facilities of €661.5 million with a weighted average maturity of 4.2 years. The Group manages its bank debt position within a number of financial covenants that are closely monitored for compliance by Group Treasury. Strong banking relationships are maintained through regular meetings and updates.

  Inability to leverage the Group's significant recent investment in acquisitions

Impact

Mitigation

There is a risk to the business if the Group is unable to deliver significant organic growth from recent acquisitions and fully integrate  the operations of the acquired businesses.

The Group's management team has significant experience in the areas of pre acquisition due diligence and post acquisition integration. Specific information on Nutritionals growth strategy is outlined on page 16 of this report. For 2009, Glanbia will concentrate on organic growth opportunities within the existing business, adopting a conservative approach to further acquisitive growth in the context of the challenging external environment.

Recruitment and retention

Impact

Mitigation

The ongoing success of the Group is dependent on attracting and retaining high quality management and staff throughout the business.

The Group mitigates any risk associated with loss of key personnel through sustained succession management, strong recruitment processes, long-term incentives and retention initiatives. Glanbia also operates management development programmes to ensure there is a continuous pipeline of talent within the Group to support the ongoing growth and development of the business. Further information is contained in the Our people section on pages 26 to 28.

Increasing competition

Impact	Mitigation
Significant product innovations, technical advances or the intensification of competition could adversely affect the Group.	The Group invests in research and development and ensures that the introduction of new products and product formats and improved production processes positions the Group well in its chosen markets. Glanbia has Innovation Centres located in Ireland and the USA as well as associations with a number of research programmes at third level institutions.

  Financial and taxation risk

Impact	Mitigation
The conduct of ordinary business operations necessitates the holding and issuing of financial instruments and derivative financial instruments by the Group. The main risks arising from issuing, holding and managing these financial instruments typically include liquidity risk, interest rate risk  and currency risk.	The Group's approach is to centrally manage financial and taxation risks against comprehensive policy guidelines, details of which are outlined in Note 3.1 Financial Risk Factors in the notes to the financial statements. The Board agrees and regularly reviews these guidelines. Group corporate taxation planning and compliance is managed centrally.

Across the business, there is an ongoing process in place for identifying, assessing, managing, monitoring and reporting on the significant risks faced by individual business units and by the Group as a whole. This process has been in place for the year under review and up to and including the date of approval of the 2008 Annual Report.

Food safety legislation and regulation

Impact	Mitigation
Glanbia must maintain the highest standards of food safety in the interest of the health and well being of its consumers and sustaining its strong reputation as a leading international cheese and nutritional ingredients group.	Group operations in processing, distribution, packaging and labelling of food are governed by extensive legislation, regulation, codes of practice and guidance. The Group conforms fully to international and local food safety, quality and environmental regulations and employs best practice across all of its production facilities to maintain the highest standards.

Supply chain

Impact	Mitigation
The Group's ability to fulfill the demand for its products is dependent on an efficient supply chain. Glanbia also needs to ensure that its own suppliers comply with  the highest health and safety standards.	The Group mitigates supply chain risk by maintaining a broad supplier base and the Group is committed to ensuring that suppliers continue to choose Glanbia as their partner of choice. All of the Group's key sites operate quality control assessments on products supplied to ensure world-class quality and food safety targets are maintained throughout the supply chain.

  Health and safety

Impact

Mitigation

Ensuring the safety, health and welfare of employees, visitors to Glanbia operations, surrounding communities and the public.

Processes and policies have been put in place throughout the Group to ensure that workplace conditions, practices and procedures are maintained to high levels of safety in line with relevant safety, health and welfare legislation. An independent risk manager carries out an annual risk management audit for all the Group's main locations in accordance with the Glanbia risk management system and this incorporates a separately reported health and safety audit.

Environment

Impact

Mitigation

The Group is subject to strict and developing environmental laws and regulations which could result in an increase in the cost of achieving compliance that might impact the Group's operational or financial performance.

The inclusion of environmental and sustainability objectives and risk management as part of the Group's overall business strategy, together with a commitment to continuous improvement ensures that Glanbia is ahead of evolving environmental standards. The 'Our responsibilities' section of this report starting on page 29 outlines a number of key initiatives from around the Group which demonstrate the Group's commitment and investment in energy efficiency, carbon reduction, recycling and emissions programmes.

Loss of a major site

Impact

Mitigation

The loss or significant destruction of any one of the Group's key sites would present significant operational and financial difficulties for Glanbia.

The Group's operations have business continuity and communication plans in place to manage the impact of the loss of a major site. The Group also monitors overall safety and loss prevention performance through its risk management system to assist operational management responsible for the day-to-day management of business risk. An insurance cover programme is in place for all significant insurable risks and major catastrophes to mitigate the financial consequences.

  Energy costs

Impact

Mitigation

Large scale processing is an energy intensive operation.

Energy efficiency programmes are operated across all sites and the Group was the first dairy processor in the world to be accredited with the IS393 Energy Management Standard at its processing site in Ballyragget, Co. Kilkenny. In order to minimise the impact on energy costs of price volatility, the Group will, where necessary, enter into fixed price arrangements to cover certain future energy requirements.

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