Annual Report 2009 - Dairygold
Annual Report 2009 - Dairygold
Annual Report 2009 - Dairygold
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The Natural Source of Quality<br />
<strong>Dairygold</strong> Co-operative Society Limited<br />
<strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
<strong>Dairygold</strong> Co-operative Society Limited<br />
<strong>Annual</strong> <strong>Report</strong> and Accounts
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Contents<br />
CHAIRMAN’S STATEMENT 5<br />
CHIEF EXECUTIVE’S REVIEW 9<br />
FINANCIAL OVERVIEW 15<br />
DIRECTORS, COMMITTEES AND OTHER INFORMATION 19<br />
STATEMENT OF BOARD RESPONSIBILITIES 24<br />
INDEPENDENT AUDITOR’S REPORT 25<br />
Consolidated Profit and LOss Account 26<br />
Consolidated Balance sheet 27<br />
Consolidated Cash Flow STATEMENT 28<br />
Consolidated STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES 29<br />
RECONCILIATION OF MOVEMENT IN SHAREHOLDERS’ FUNDS 29<br />
STATEMENT OF ACCOUNTING POLICIES 30<br />
NOTES TO FINANCIAL STATEMENTS 32<br />
FIVE YEAR HISTORICAL INFORMATION 50<br />
3
4<br />
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong>
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Chairman’s<br />
Statement<br />
In economic terms, <strong>2009</strong> was certainly one of the most challenging<br />
years in living memory and as a sector, agriculture was badly hit.<br />
In economic terms, <strong>2009</strong> was certainly<br />
one of the most challenging years<br />
in living memory and as a sector,<br />
agriculture was badly hit. The farming<br />
community was already reeling from<br />
the near collapse in world prices which<br />
had occurred during the previous<br />
twelve months and then had to contend<br />
with further price falls, resulting from<br />
weakening demand.<br />
A third consecutive poor summer and a<br />
late harvest exacerbated an already very<br />
difficult situation and placed all farmers<br />
and rural communities under severe<br />
pressure.<br />
The Society has emerged from <strong>2009</strong> in<br />
a stronger position having managed to<br />
improve its overall profitability during<br />
the year whilst still lifting the milk price<br />
in September at the earliest sign of a<br />
possible recovery in market returns.<br />
It is our role to supply farm inputs at<br />
least possible cost, to process our<br />
Members’ milk efficiently and to offer the<br />
highest price possible consistent with<br />
achieving a commensurate return in the<br />
dairy marketplace.<br />
Dr. Anthony Crudden -<br />
in <strong>Dairygold</strong>'s Innovation Centre<br />
“The Society<br />
has emerged<br />
from <strong>2009</strong><br />
in a stronger<br />
position”<br />
For the dairy industry, with the milk<br />
price at a 25 year low and limited EU<br />
supports, <strong>2009</strong> was certainly among<br />
the worst years on record. No industry<br />
could experience such precipitous price<br />
falls and not experience a crisis but the<br />
problems besetting the dairy sector<br />
were compounded as the crisis in Irish<br />
and international banking restricted<br />
credit availability and credit insurance.<br />
Uncertainty is the only constant we can<br />
look forward to in the near term.<br />
I am pleased to state that your Society<br />
responded to these challenges and<br />
despite the extraordinarily difficult<br />
environment it delivered on its financial<br />
targets. It brought to fruition important<br />
capital projects and successfully<br />
concluded the acquisition of the<br />
Solailoire cheese business in France and<br />
the acquisition from Reox Holdings plc of<br />
seven 4HOME Stores, now rebranded as<br />
Co-Op Superstores.<br />
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<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Milk Price<br />
<strong>Dairygold</strong> is fortunate to be among the<br />
most efficient dairy processors in the<br />
country, nevertheless no one can defend<br />
the milk price levels which farmers were<br />
forced to accept during <strong>2009</strong>. The fact<br />
remains that no other industry sector<br />
or group of people has been asked to<br />
accept prices or rates of pay less than<br />
they received three decades ago. It is<br />
no consolation whatsoever to any dairy<br />
farmer to know that the events which<br />
have conspired to create this situation<br />
are completely beyond either their<br />
control, or that of their processors.<br />
I am pleased to say that we are seeing<br />
the first sign of an upturn in world<br />
markets, but a note of caution should<br />
be sounded here. These are just early<br />
signs and while encouraging, are by no<br />
means an indication that the market is<br />
going to quickly return to acceptable and<br />
sustainable price levels for producers.<br />
Despite this continuing uncertainty, we<br />
still took the lead in the Irish dairy sector<br />
and have increased the milk price by 4.7<br />
cent per litre between September <strong>2009</strong><br />
and February 2010.<br />
This was in line with our duty and<br />
responsibility as a Co-Operative Society<br />
to deliver the best prices possible to our<br />
Member suppliers.<br />
It has to be acknowledged that this is<br />
of little comfort when it is seen in the<br />
context of the price reductions which<br />
preceded it. On the other hand it is at<br />
least a move in the right direction and<br />
a move which shows <strong>Dairygold</strong>’s desire<br />
to return the maximum to our farmers<br />
within the constraints of market returns,<br />
financial investments and financial<br />
commitments.<br />
<strong>2009</strong> saw the successful introduction of<br />
the new A+B-c milk payment system.<br />
This has helped shift the financial<br />
reward in favour of the milk suppliers<br />
who supply high milk solids. Under this<br />
system, suppliers are paid on the basis<br />
of the kgs of protein (A) and butterfat<br />
(B) produced, less a volume adjustment<br />
(c). This gives a greater reward to those<br />
suppliers with high milk solids as it costs<br />
less to transport and process than milk<br />
with lower milk solids equivalent.<br />
If we are to sustain the upward trend in<br />
milk price and take full advantage of any<br />
upturn in markets we must continue our<br />
drive for greater levels of efficiency.<br />
There is little point in adding value to<br />
milk if that value is eaten up by inefficient<br />
processing. Our goal is to continue to<br />
pay a leading milk price and to remain<br />
competitive through our own efficiency<br />
and maximising market opportunities.<br />
Looking at <strong>Dairygold</strong>’s core milk<br />
business we have to recognise that<br />
our future does not solely lie in being a<br />
commodities business at the whim of<br />
global market forces beyond our control.<br />
The future will see increased production<br />
of milk in Ireland and in our competitor<br />
countries and therefore one where the<br />
focus must be squarely on value added.<br />
Our strategy is to optimise commercial<br />
returns through maximising our product<br />
mix, developing the most efficient<br />
routes to market and investing in tightly<br />
focused research and development, with<br />
<strong>Dairygold</strong> Food Ingredients as a centre of<br />
dairy processing excellence.<br />
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<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
The Industry on a<br />
National Scale<br />
The industry debate currently taking place<br />
on the rationalisation of the Irish dairy<br />
processing and commercial sectors remains<br />
an issue for all involved. <strong>Dairygold</strong> has long<br />
been at the forefront of rationalisation efforts<br />
and indeed was founded out of the merger<br />
of two of Munster’s leading dairy Co-Ops.<br />
This is a never-ending journey and we are<br />
constantly striving for greater efficiencies<br />
and economies of scale.<br />
In this context <strong>Dairygold</strong> is always open and<br />
willing to explore all relevant and appropriate<br />
options for operational and commercial<br />
improvements and we are currently active<br />
participants in the ICOS ‘Milk Ireland’<br />
discussions. <strong>Dairygold</strong> has also established<br />
an in-house team to analyse how we might<br />
best progress the ongoing development of<br />
the business to the benefit of Members.<br />
We will not enter into any co-operation or<br />
further co-processing arrangements unless<br />
we are fully convinced that they will deliver<br />
value to <strong>Dairygold</strong> suppliers in terms of<br />
a higher milk price. Our guiding principle<br />
when seeking efficiency improvements and<br />
cost reductions has always been to pass the<br />
benefit on to our Members and suppliers and<br />
this will remain the case.<br />
Milk Testing<br />
An ICOS initiative to establish a<br />
centralised milk testing laboratory had<br />
the potential to deliver benefits to dairy<br />
farmers throughout Ireland. It was<br />
planned that this facility would provide<br />
testing services for eight Co-Ops with<br />
more than 7,000 milk suppliers.<br />
<strong>Dairygold</strong> supported the proposal<br />
which unfortunately failed to attract<br />
the industry consensus required<br />
to proceed. While it is unfortunate<br />
that this industry initiative was not<br />
achieved, you can be assured that<br />
<strong>Dairygold</strong>’s own milk testing facility<br />
continues to operate to the highest<br />
standards.<br />
In addition, the <strong>Dairygold</strong> milk<br />
testing laboratory is undergoing<br />
an independent accreditation<br />
process which your Board believes<br />
is a necessary enhancement going<br />
forward. It will also be expanded<br />
to cater for extra milk testing and<br />
various disease testing. The inclusion<br />
of disease testing is seen as key to<br />
assisting farmers in their individual<br />
herd health programmes.<br />
Grain<br />
Grain growers had one of the most<br />
challenging years in living memory.<br />
Difficult weather conditions saw yield<br />
significantly down in Ireland and a<br />
collapse in grain prices worldwide.<br />
These and other factors combined<br />
to decimate the profitability of the<br />
enterprise at farm level. <strong>Dairygold</strong><br />
offered growers the opportunity to<br />
supply the grain for drying and storage<br />
whilst retaining ownership until sold at<br />
a later date in the expectation of higher<br />
market returns prevailing. Present<br />
indicators are for a challenging year<br />
for growers in 2010 based on trends in<br />
the futures market.<br />
Board and<br />
Management<br />
I would like to note a change to your<br />
Board of Directors. Mr. Terence<br />
O’Donnell retired at the end of the year<br />
by rotational retirement. I would like<br />
to thank Terence for his contribution<br />
and commitment to the Society and<br />
the Board during his tenure and for his<br />
assistance to me over the years.<br />
I would like to formally welcome Mr. Tom<br />
Feeney to the Board and I look forward to<br />
Tom’s contribution and working with him.<br />
I wish to thank the management and staff of<br />
the Society for their work and commitment<br />
over the last year and to place on record<br />
my gratitude for their help and support,<br />
in particular during the periods of change<br />
in the CEO position. I wish to express the<br />
gratitude of the entire Board to Interim<br />
Chief Executive Mr. Michael Harte who took<br />
the reins for six months and guided the<br />
business safely through a difficult period.<br />
On that note I formally congratulate Mr.<br />
Jim Woulfe on his appointment as Chief<br />
Executive of the Society and acknowledge<br />
his commitment and achievements since<br />
taking up office. I wish him all the very best<br />
for the future as he continues in his task<br />
of leading <strong>Dairygold</strong> through the current<br />
challenging environment.<br />
Conclusion<br />
My Board colleagues and I fully understand<br />
and appreciate the difficult situation<br />
prevailing at farm level resulting from low<br />
produce prices. We have worked through<br />
what has been a most difficult year for all<br />
concerned. We are presently seeing an<br />
improvement in dairy market returns and<br />
are cautiously optimistic for the future.<br />
Whilst many businesses have been<br />
impacted by the recent economic turmoil,<br />
our business is still fundamentally sound<br />
with a strong and united management team<br />
in place.<br />
The Board and management recognise<br />
the future milk processing challenges<br />
and is focused on delivering a sustainable<br />
business performance that will allow<br />
the business develop and grow in order<br />
to return to our producers a strong and<br />
competitive milk and grain price.<br />
I wish to acknowledge and thank you for<br />
your continued support of our Society.<br />
Your custom and business are greatly<br />
appreciated and are vital for the continued<br />
success of the organisation.<br />
Vincent Buckley<br />
Chairman<br />
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<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Svitlana Binns, <strong>Dairygold</strong> Food Ingredient’s Marketing Manager<br />
in the Food Tasting Kitchen in <strong>Dairygold</strong>’s Innovation Centre<br />
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<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Chief Executive’s<br />
Review<br />
The market environment for <strong>Dairygold</strong> and its various operations<br />
remained extremely challenging throughout <strong>2009</strong>.<br />
“all divisions<br />
of the business<br />
made a positive<br />
contribution to<br />
the bottom line”<br />
The slump in returns from world dairy<br />
markets combined with the ongoing<br />
turmoil in financial markets created<br />
what has probably been the most difficult<br />
operating climate in our history.<br />
Despite these difficulties, <strong>Dairygold</strong><br />
delivered retained profit for the <strong>2009</strong><br />
financial year of €8.1 million on a<br />
turnover of €555 million. I’m pleased<br />
to be in a position to report that all<br />
divisions of the business made a positive<br />
contribution towards the bottom line.<br />
The <strong>2009</strong> profit was delivered against<br />
a backdrop of borrowings increasing<br />
by €9.7 million on 2008 to €77.9<br />
million. This increase in borrowings<br />
was necessary to fund the increase in<br />
farmer debtors, capital investment in the<br />
business and the acquisition of seven<br />
4HOME stores and a small industrial<br />
cheese business in France.<br />
<strong>Dairygold</strong> has significant borrowings and<br />
requires a defined level of profitability<br />
to secure the support of our bankers<br />
for the ongoing financing of the<br />
business. The current phase of our Dairy<br />
capital investment programme is now<br />
largely complete and our borrowing<br />
requirements should be reduced over the<br />
coming years from the performance of<br />
our existing activities.<br />
As a Co-Op we were disappointed with<br />
the returns available for our Members’<br />
milk. While cognisant of the low returns<br />
from international markets and our<br />
requirement to fulfil our financial<br />
obligations, <strong>Dairygold</strong> nonetheless lifted<br />
the milk price paid to Members at the<br />
first available opportunity.<br />
True to our Co-Operative ethos, <strong>Dairygold</strong><br />
raised its milk price in response to early<br />
signs of some recovery in world prices<br />
which began to emerge in the latter part<br />
of the year.<br />
On the efficiency side, payroll savings<br />
of some €3 million were achieved over<br />
the course of the year through the<br />
implementation of a number of initiatives<br />
including, among others, a pay freeze<br />
across the Society, a 40% cut in variable<br />
pay and a base salary reduction for<br />
senior management, strict control of<br />
overtime, a reduction in temporary and<br />
contract work and some 35 redundancies.<br />
Further operational efficiencies were<br />
achieved including a re-alignment of work<br />
practices.<br />
9
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Management<br />
I was appointed Chief Executive in July<br />
<strong>2009</strong> and I feel privileged to have been<br />
selected by the Board to take on this<br />
role of responsibility within the Society,<br />
only the third to do so since <strong>Dairygold</strong>’s<br />
establishment through merger in 1990.<br />
I would like to thank the Board for its<br />
ongoing encouragement and support<br />
during my tenure to-date as Chief<br />
Executive.<br />
I accepted the position knowing full well<br />
the challenges that lay ahead. <strong>Dairygold</strong>’s<br />
success is largely reliant on international<br />
market factors outside of our control. I<br />
am confident that the new management<br />
team with its skillset and the organisation<br />
structure put in place will help ensure<br />
that the hard work required to succeed is<br />
delivered.<br />
The new structure will see each person<br />
take full responsibility for their functional<br />
areas across our entire business both in<br />
Ireland and overseas where applicable. The<br />
changes are also designed to facilitate clear<br />
lines of responsibility and accountability<br />
while creating a single point of ownership<br />
and focus on growing the business.<br />
ERP<br />
In <strong>2009</strong> the Society successfully<br />
implemented an integrated business<br />
information system, covering all Financial,<br />
Sales, Procurement, Inventory, Payroll,<br />
Point of Sale, Milk Management and<br />
Share Management activities for its Irish<br />
operations. The new business information<br />
system provides management with<br />
enhanced capability to optimise the<br />
performance of the business.<br />
Dairy Markets<br />
For all dairy processing businesses<br />
the continuing slump in returns from<br />
international dairy markets presents<br />
the most severe of challenges. The well<br />
documented fall in international demand<br />
for dairy produce resulted in milk price<br />
returns being forced down to 25 year<br />
lows for most of <strong>2009</strong>.<br />
The supply side is now slowly correcting<br />
itself with production easing back in<br />
most geographies. The EU will be under<br />
quota by as much as 5% in this current<br />
quota year to March 2010. The global<br />
demand for dairy produce remains weak,<br />
as buyers are slow to commit to longer<br />
term contracts or to invest in stocks.<br />
Underpinning all expectations for a<br />
sustained recovery in dairy prices<br />
is the expectation of some form of<br />
economic recovery globally. Consumer<br />
confidence will not return without it.<br />
Despite all of these factors, <strong>Dairygold</strong><br />
remains cautiously optimistic about an<br />
improvement in market returns in 2010.<br />
As a Co-Op, milk price is at the core of<br />
our commitment to Members and we will<br />
continue to strive to pay the best milk<br />
price possible within prevailing market<br />
conditions.<br />
<strong>Dairygold</strong> Food<br />
Ingredients<br />
<strong>Dairygold</strong>’s strategy in milk utilisation is<br />
to follow the European model by directing<br />
more milk away from butterfat and<br />
towards cheese and added value dairy<br />
ingredients, both products which are<br />
on the growth curve globally. Our dairy<br />
processing business, <strong>Dairygold</strong> Food<br />
Ingredients, is now firmly focussed on<br />
providing cheese and dairy ingredient<br />
solutions to the international food<br />
processing, baby food and ready meals<br />
sectors.<br />
Over the past number of years we<br />
have invested in modernising plant<br />
and operations to target these product<br />
areas and provide greater flexibility in<br />
manufacturing customised products to<br />
deliver on individual customer needs.<br />
These investments have put <strong>Dairygold</strong> in<br />
a very strong position to compete for an<br />
increased share of these markets.<br />
In our ingredients business the<br />
Castlefarm, Mitchelstown site has<br />
one of the largest demineralised whey<br />
manufacturing plants in Europe and is the<br />
foundation for <strong>Dairygold</strong>’s focus on the<br />
premium Baby Food market. The delivery<br />
of this strategy was made possible by<br />
significant investment in the Castlefarm<br />
facility.<br />
Our ingredients business has a particular<br />
focus on the infant milk formula sector<br />
and <strong>Dairygold</strong> has developed strong<br />
commercial relationships with a number<br />
of key players. The business is developing<br />
a foothold in the Asian market where<br />
there is significant growth potential. In<br />
China alone some 18 million babies are<br />
born each year - more than the total born<br />
each year in Europe and the Americas<br />
combined.<br />
In our cheese business the Clonmel<br />
Road, Mitchelstown site has one of the<br />
most efficient cheddar cheese plants in<br />
Britain and Ireland whilst our Mogeely<br />
site remains a dedicated producer of<br />
speciality cheeses for export, including<br />
the leading brands Jarlsberg and Regato.<br />
Meanwhile our Mallow site continues to<br />
provide the additional capacity needed to<br />
manage peak milk intake and ingredient<br />
processing during the summer season.<br />
In the UK, our <strong>Dairygold</strong> Food Ingredients<br />
businesses, based in Leeds and in<br />
Crewe, are both profitable and growing<br />
businesses. They have established<br />
<strong>Dairygold</strong> as a leading supplier of a<br />
range of formatted cheeses and soft<br />
cheeses to the UK’s Ready Meals and<br />
Food Manufacturing sectors. Following an<br />
investment programme at both facilities<br />
during <strong>2009</strong>, the manufacturing capability<br />
now exists to meet significant increases<br />
in demand from their industrial customer<br />
base over the coming years.<br />
In September, <strong>Dairygold</strong> acquired<br />
the French based cheese ingredients<br />
supplier, Solailoire. The company, based<br />
near Nantes, offers customised cheese<br />
solutions to industrial customers in<br />
the ready meals and snack sectors.<br />
The acquisition provides <strong>Dairygold</strong><br />
with access to the French and broader<br />
European markets while the technology<br />
allows us to extend our overall value<br />
added product offering.<br />
10
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Ms Andrea Coleman - in <strong>Dairygold</strong>’s<br />
Centralised Product Testing Laboratory<br />
The acquisition, coupled with our existing<br />
commercial operations based in Germany<br />
and Spain will help <strong>Dairygold</strong> in realising<br />
its ambition of replicating and extending<br />
our successful UK cheese solutions<br />
business in the wider European market.<br />
<strong>Dairygold</strong> Food Ingredients in the UK,<br />
<strong>Dairygold</strong> Germany and now Solailoire in<br />
France are examples of modest but very<br />
successful businesses that are utilising<br />
<strong>Dairygold</strong>’s expertise in cheese to find<br />
higher value sales avenues. They are<br />
helping to strengthen and consolidate our<br />
relationship with all the leading operators<br />
in the Ready Meals and broader Food<br />
Manufacturing sectors. These businesses<br />
are also benefiting from the support and<br />
skillset offered by <strong>Dairygold</strong>’s Innovation<br />
Centre in Mitchelstown, in terms of<br />
Product and Process Re-engineering,<br />
Research and Development and New<br />
Product Development.<br />
<strong>2009</strong> represented the first full year of<br />
operation for our new Innovation Centre<br />
in Mitchelstown. The Centre is focussing<br />
on the development of new solutions for<br />
our Food Ingredients business and its<br />
industrial customers. The Centre is also<br />
active in industry collaboration, working<br />
with Enterprise Ireland’s Food Health<br />
Ireland initiative, involving four dairy<br />
processors, Teagasc, and a number of<br />
universities.<br />
Overall, the level of efficiency of our<br />
dairy processing division combined<br />
with our clear strategy to drive higher<br />
value sales has enabled <strong>Dairygold</strong><br />
Food Ingredients to maintain its<br />
performance in what has been one of<br />
the worst years for the dairy industry.<br />
We recognise that there is scope at<br />
industry level for further improvement<br />
in the Irish dairy processing and<br />
marketing sectors. Your Board and<br />
management team is conscious<br />
of this challenge and any proposal<br />
that can deliver improved returns to<br />
our Members will be given serious<br />
evaluation and consideration.<br />
<strong>Dairygold</strong> Agri Operations<br />
The operating environment for <strong>Dairygold</strong><br />
Agri remained challenging during the year.<br />
<strong>2009</strong> marked the third consecutive year of<br />
extremely unfavourable weather conditions<br />
for farmers and the Society worked hard to<br />
lessen the impact of this on Members in a<br />
number of ways.<br />
During the year <strong>Dairygold</strong> Agri made a<br />
particular effort to offset the volatility in<br />
international fertiliser prices through its<br />
management of purchasing and stocking<br />
arrangements. This deliberate strategy<br />
combined with price reductions in the latter<br />
part of the year enabled us to close the year<br />
in a very competitive position.<br />
In June, <strong>Dairygold</strong> took account of the<br />
very unfavourable weather conditions and<br />
gave our customers a rebate on dairy feed<br />
purchases to the value of €400,000 in order<br />
to support their milk production operations<br />
at this critical time of the year for dairy<br />
farming.<br />
The tough conditions for dairy farming<br />
created feeding challenges at farm level.<br />
Recognising this issue, <strong>Dairygold</strong> Agri<br />
expanded its feed range to offer greater<br />
flexibility and choice. The feed range<br />
available over the year covered the full<br />
spectrum of product specification and<br />
price. This allowed our customers the<br />
flexibility to make the feed investment<br />
decisions that best suited their individual<br />
farming operations knowing that there was<br />
no compromise on product quality.<br />
On a like-for-like basis <strong>Dairygold</strong>’s<br />
feed prices remained very competitive<br />
throughout the year, maintaining good<br />
throughputs in the feed mills.<br />
<strong>Dairygold</strong> Agri exists to service our<br />
farming Members’ needs. To fulfil this<br />
objective the management team is<br />
focussed on constantly driving out cost<br />
and consolidating the business in a highly<br />
competitive and shrinking market. The<br />
strategy also seeks to maintain a modest<br />
operating profit that will allow the operation<br />
to remain an asset to our farmer Members<br />
into the future. With that in mind we<br />
would encourage all Members to support<br />
the business. In doing so, you will help<br />
us achieve our aim to continue to grow<br />
your Society’s position as the leading Agri<br />
supplier in Munster.<br />
11
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Agri Retail -<br />
Co-Op Superstores<br />
As with our entire Agri business, the<br />
Co-Op Superstores business provides an<br />
important service to our Members. The<br />
business priorities remain customers’<br />
needs and improving operational efficiency<br />
while retaining a modest profit to support<br />
the ongoing development of the business.<br />
The highlight of <strong>2009</strong> was the acquisition<br />
of seven profitable and strategically<br />
located 4HOME Superstores. These seven<br />
stores traditionally have had a strong<br />
affinity with our <strong>Dairygold</strong> customer base.<br />
The acquisition will strengthen the Co-<br />
Op Superstores brand, provide valuable<br />
economies of scale and will be central to<br />
any future rationalised structure.<br />
The acquisition will help strengthen<br />
the geographic structure with a strong<br />
spine of stores now operating across<br />
our catchment area which will allow us<br />
to develop an optimal structure for the<br />
future.<br />
Munster AI<br />
<strong>2009</strong> was a defining year in cattle<br />
breeding in that genomic selection of<br />
bulls was finally adopted. This is an<br />
important progression for the Dairy<br />
industry as it faces into the post<br />
quota era. Irish dairy farmers need<br />
their animals to be the most efficient<br />
converters of grass into milk solids.<br />
The EBI evaluation process readily<br />
identifies the best bulls and breeding<br />
strategy to enable that to happen.<br />
In that context Munster AI, in which<br />
the Society has a 66% shareholding,<br />
offers a very important service and<br />
will play a central role in the Society’s<br />
future milk production strategy.<br />
Reox Holdings plc<br />
<strong>Dairygold</strong> has a substantial<br />
investment in Reox, so naturally<br />
we are deeply interested in how<br />
that business is performing. After<br />
a particularly difficult year in <strong>2009</strong>,<br />
Reox is focussed on protecting<br />
shareholders’ investment in the<br />
current difficult economic climate.<br />
Responsibility for the operation of<br />
the business lies with the Board and<br />
management of Reox Holdings plc.<br />
Conclusion<br />
As we close out on the <strong>2009</strong> financial year I want<br />
to offer particular thanks to the Chairman and<br />
Board members, management team and staff,<br />
all of whom have given me great encouragement<br />
and support for which I am grateful. Your Board<br />
and management team are presiding over a<br />
strong business which is meeting all of its<br />
financial commitments. We are well positioned in<br />
the market with a hard working and committed<br />
team and good facilities to take advantage of the<br />
opportunities that will most assuredly come<br />
our way.<br />
Looking forward, one of our key aims is to prepare<br />
for the new quota-less world in which we will find<br />
ourselves in the not too distant future. We would<br />
encourage all milk suppliers and customers to<br />
become Members of the Society so that we can<br />
use our combined strength to prepare for the<br />
future together.<br />
<strong>Dairygold</strong> will continue to focus on high value<br />
added market segments where the quality of our<br />
raw materials and our innovation expertise can<br />
give us real advantage.<br />
Our business is fundamentally sound and stable<br />
and stability is a good place to be at this time. We<br />
await the inevitable recovery and are well placed to<br />
survive the worst ravages of the current recession.<br />
Jim Woulfe<br />
Chief Executive<br />
12
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Operational Footprint-Dairy Business<br />
Infant Nutrition and<br />
Functional Powders<br />
Mitchelstown<br />
(Castlefarm)<br />
Cheddar Cheese<br />
Mitchelstown<br />
(Clonmel Road)<br />
Soft<br />
Cheeses<br />
Leeds<br />
Ireland<br />
Cheese<br />
Formatting<br />
Crewe<br />
Dairy Powders<br />
Mallow<br />
United Kingdom<br />
Germany<br />
Speciality<br />
Cheeses<br />
Mogeely<br />
DFI (Germany)<br />
Mainz<br />
France<br />
DFI (France)<br />
Nantes<br />
13
14<br />
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong>
<strong>Dairygold</strong> Co-Operative Society Limited <strong>2009</strong> <strong>Annual</strong> Operations <strong>Report</strong> and and Financial Accounts Review <strong>2009</strong><br />
Financial Overview<br />
In <strong>2009</strong> <strong>Dairygold</strong> Co-Operative Society Limited generated an operating profit of €13.5<br />
million of which €11.8m was generated from its core activities, with all the individual<br />
businesses contributing to the performance.<br />
<strong>2009</strong> Key Financials<br />
In <strong>2009</strong>:<br />
» <strong>Dairygold</strong> generated an<br />
operating profit for the year<br />
of €13.5 million - a profit of<br />
€11.8 million on dairy (both<br />
Ireland and overseas) and<br />
agri-trading activities, with<br />
a profit of €1.7 million from<br />
share trading.<br />
» <strong>Dairygold</strong>’s Shareholders’<br />
Funds increased by €14.8<br />
million from its 2008 position<br />
of €205.3 million to €220.1<br />
million.<br />
» <strong>Dairygold</strong>’s Net debt position<br />
increased from €68.2 million<br />
to €77.9 million, an increase<br />
of €9.7 million compared to its<br />
2008 position.<br />
» <strong>Dairygold</strong> invested a total of<br />
€21.6 million of its cash in<br />
capital expenditure (net of<br />
grants) across the business<br />
and in acquisitions, to meet<br />
the future challenges of the<br />
business.<br />
Profit and Loss Account<br />
» The turnover generated in <strong>2009</strong><br />
decreased by €132.9 million versus<br />
2008 from €688.1 million to €555.2<br />
million. The decrease occurred<br />
across the main business activities,<br />
as dairy commodity product prices<br />
fell significantly year on year as did<br />
feed and fertiliser prices.<br />
» The operating profit of €13.5 million<br />
achieved in <strong>2009</strong> was an increase of<br />
€11.2 million on 2008, an increase of<br />
€12.3 million on core activities and<br />
a reduction of €1.1 million on share<br />
trading.<br />
The increase in operating profit<br />
from core activities was principally<br />
attributable to the:<br />
» performance of the individual<br />
businesses which benefited<br />
from the restructuring and<br />
investment programmes over<br />
recent years;<br />
» achievement of significant<br />
payroll reductions and lower<br />
energy costs;<br />
» re-alignment in the year of<br />
milk and grain prices with<br />
market returns, whereas in<br />
2008 the Society supported<br />
Members by paying milk<br />
and grain prices in excess of<br />
market returns.<br />
» The share of associates’<br />
performance before related<br />
taxation was a loss of €1.0 million<br />
in <strong>2009</strong> compared to a loss of<br />
€1.9 million in 2008. The loss of<br />
€1.0 million is driven primarily<br />
by <strong>Dairygold</strong>’s share of the<br />
performance of Reox Holdings plc.<br />
» Net interest payable was €1.0<br />
million. Net bank interest payable<br />
of €4.3 million was offset by<br />
RIBB interest of €2.5 million and<br />
a finance credit of €0.8 million<br />
relating to investment returns from<br />
the pension schemes.<br />
» The taxation charge for the year<br />
of €0.9 million relates primarily<br />
to share trading and overseas<br />
subsidiaries.<br />
» The profit for the financial year<br />
was €9.3 million and the retained<br />
profit was €8.1 million after paying<br />
share interest of €1.2 million to<br />
Members.<br />
Balance Sheet<br />
15
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
The Balance Sheet of the Society<br />
strengthened in <strong>2009</strong> with shareholders<br />
funds increasing by €14.8 million to<br />
€220.1 million. The increase was driven<br />
primarily by a retained profit for the<br />
year of €8.1 million, an increase in the<br />
pension asset of €7.4 million, the positive<br />
impact of currency movements on net<br />
investment of €2.6 million, a reduction in<br />
share of associates reserve movements<br />
of €2.1 million and shares redeemed of<br />
€1.3 million.<br />
» Fixed assets of €209.0 million<br />
comprising tangible assets,<br />
intangible assets and financial<br />
assets, increased by €1.6 million,<br />
from €207.4 million as a result of:<br />
» investments of €19.3 million in<br />
capital expenditure, acquisitions<br />
and shares and the impact of<br />
positive currency movements<br />
of €1.2 million, which was<br />
offset by:<br />
» depreciation and amortisation<br />
charges of €16.0 million and<br />
a reduction in the share of<br />
associates net assets of<br />
€2.9 million.<br />
» Net current assets less creditors<br />
falling due after more than one year,<br />
of €8.3 million were up €4.8 million<br />
on 2008, explained by:<br />
» a €12.3 million reduction<br />
in stocks to €73.1 million,<br />
reflecting lower prices and a<br />
reduction in stock volumes.<br />
» an increase in debtors of €2.6<br />
million to €99.0 million.<br />
» a reduction in total creditors<br />
of €24.3 million, incorporating<br />
a reduction in capital accruals<br />
and trade creditors.<br />
» an increase in net debt of €9.7<br />
million, required to meet the<br />
financing needs of the business.<br />
» The net pension asset increased<br />
by €7.4 million, resulting primarily<br />
from gains of €5.3 million arising<br />
from the withdrawal of Reox<br />
Holdings plc as a participating<br />
employer from the pension schemes<br />
and an increase in the value of the<br />
scheme’s assets over liabilities of<br />
€2.2 million.<br />
» The capital grants’ liability of €6.3<br />
million was in line with 2008, as<br />
the grants received during the<br />
year of €0.8 million equalled the<br />
amortisation credit for the year. The<br />
deferred tax liability decreased by<br />
€1.3 million reflecting the deferred<br />
tax assets acquired during the year<br />
as part of the acquisition activity.<br />
» The share capital decreased by €0.4<br />
million to €98.6 million reflecting<br />
the shares redeemed and cancelled<br />
of €1.4m offset by shares issued of<br />
€1.0m.<br />
» The revenue reserves increased<br />
by €16.3 million to €113.4 million,<br />
resulting primarily from the<br />
increase in the net pension asset of<br />
€7.4 million, the positive currency<br />
movements of €2.6 million, a<br />
reduction in share of associates’<br />
reserves of €2.1 million and the<br />
retained profit for the year of €8.1<br />
million.<br />
Scientist Haiyan Yu - working in<br />
<strong>Dairygold</strong>’s Innovation Centre<br />
16
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Cash Flow<br />
The cash out-flow of €7.5 million, the debt<br />
acquired from acquisitions of €4.7 million<br />
and the positive non cash movement of<br />
€2.5 million are the key drivers of the<br />
increase in net debt of €9.7 million to<br />
€77.9 million.<br />
The cash out-flow of €7.5 million results<br />
from an EBITDA (Earnings Before Interest<br />
Taxation Depreciation and Amortisation),<br />
of €29.6 million, which was generated<br />
from the business, adjusted for the actual<br />
pension cost and was offset by:<br />
» the investment in the business of<br />
€23.6 million incorporating capital<br />
expenditure, acquisitions, purchases<br />
of investments, and restructuring<br />
costs.<br />
» increased working capital<br />
requirements of €8.5 million.<br />
» paying €5.1 million to cover net<br />
finance costs, taxation and share<br />
interest.<br />
The increase in the net debt to €77.9<br />
million was a consequence of the<br />
continued investment in the business,<br />
increased working capital requirements<br />
incorporating the acquisitions and<br />
increased dairy and agri debtors.<br />
Pension Assets<br />
In <strong>2009</strong>, the Society and Reox Holdings<br />
plc reached agreement in relation to the<br />
future management and control of the<br />
common pension schemes. It was agreed<br />
that Reox Holdings plc would voluntarily<br />
exit as a participating employer in the<br />
pension schemes. As a result the Society<br />
has assumed full responsibility for such<br />
pension schemes.<br />
On the basis of the Society taking on<br />
the Reox Holdings plc share of funds, it<br />
realised a gain of €5.3 million, based on<br />
the FRS17 valuation at 31 December <strong>2009</strong>.<br />
Financial Assets<br />
The Society’s investment portfolio,<br />
managed in conjunction with a third party<br />
investment manager, had a market value<br />
of €34.7 million including ARYZTA AG<br />
at €16.4 million (€25.70 per share) and<br />
One51 plc. at €10.7 million (€2.80 per<br />
share), which was carried on the Society<br />
Balance Sheet at cost, of €9.6 million as at<br />
31 December <strong>2009</strong>.<br />
During <strong>2009</strong>, <strong>Dairygold</strong> Finance realised<br />
€0.5 million from sales from its original<br />
investment base and given the negligible<br />
book value of these original shares, the<br />
Society realised a profit equivalent to<br />
the sales proceeds of these shares. In<br />
addition, the Society traded €17.4 million<br />
of shares during the period on which it<br />
realised a profit of €1.2m, giving a total<br />
operating profit on Share Trading of €1.7<br />
million.<br />
Reox Holdings plc<br />
<strong>Dairygold</strong> has a 26.1% shareholding in<br />
Reox Holdings plc, however a market<br />
value is not available, due to the lack of<br />
current market trading activity.<br />
<strong>Dairygold</strong>’s <strong>2009</strong> balance sheet reflects<br />
the following:<br />
» its shareholding of €7.3 million,<br />
based on its share of the net assets of<br />
the company,<br />
» the Redeemable Interest Bearing<br />
Bond (“RIBB”) of €33.0 million, and<br />
» €12.1m of other assets primarily<br />
relating to the disposal of<br />
Breeo Foods Limited, Property<br />
Commitments and RIBB Interest<br />
prepaid (payable in March 2010).<br />
The Society decided, on reviewing its<br />
overall investment in Reox Holdings plc,<br />
to provide for some of this investment.<br />
€6 million has been provided for due<br />
to uncertainty about the timing of the<br />
recoverability of these assets, reducing<br />
the value of its investment by c. €3.5<br />
million.<br />
Conclusion<br />
In summary, for <strong>2009</strong>, the Society<br />
in a very challenging environment,<br />
which resulted in reduced returns<br />
to Members and a higher debt<br />
position, delivered a strong financial<br />
performance.<br />
In 2010, the Society will be focussed<br />
on reducing the debt level, while<br />
maximising returns to Members.<br />
This will require an improved financial<br />
performance in line with our 2010<br />
targets.<br />
17
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
<strong>Dairygold</strong> management team (l to r)<br />
Tim Healy, Dairy Operations Director, Chris Edge, Dairy Commercial Director,<br />
Sean O’Sullivan, General Manager Agri Operations, Eamonn Looney, Company Secretary,<br />
Michael Harte, Chief Financial Officer, John O’Carroll, General Manager Agri Retail,<br />
Declan Carville, Head of Human Resources, Jim Woulfe, Chief Executive.<br />
18
Directors, Committees<br />
and Other Information<br />
19
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Board of Directors and Officers<br />
Seated left to right<br />
John McKeogh<br />
Patrick Healy<br />
Bertie O’Leary (Vice Chairman)<br />
Vincent Buckley (Chairman)<br />
Jim Woulfe (Chief Executive)<br />
Flor Riordan<br />
Adrian Burke<br />
Standing left to right<br />
Thomas Feeney<br />
Donal Buckley<br />
John Malone<br />
Eamonn Looney (Secretary)<br />
John Hally<br />
James Lynch<br />
Patrick O’Keeffe<br />
Chief Executive<br />
Jim Woulfe<br />
Secretary<br />
Eamonn Looney<br />
Registered Office<br />
Clonmel Road, Mitchelstown,<br />
Co. Cork.<br />
Principal Bankers<br />
Allied Irish Banks plc<br />
Bank of Ireland<br />
Ulster Bank<br />
Auditors<br />
Deloitte & Touche<br />
No. 6 Lapps Quay, Cork.<br />
20
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Board Committees<br />
The Board has established a committee<br />
structure to assist it in the discharge<br />
of its responsibilities in compliance<br />
with the highest standards of corporate<br />
governance. The committees and their<br />
membership are detailed below. All<br />
committees of the Board have written<br />
terms of reference dealing with their<br />
role and authority delegated by the<br />
Board. The Secretary of the Society,<br />
acts as secretary to each of these<br />
committees.<br />
Audit Committee<br />
The Audit Committee comprises Messrs<br />
Adrian Burke (Chairman), John Hally,<br />
John McKeogh and Patrick O’Keeffe. The<br />
Chief Executive, Chief Financial Officer,<br />
Head of Internal Audit, other Directors,<br />
Senior Management and representatives<br />
of the external auditors may be invited to<br />
attend all or part of any meeting.<br />
The role and responsibilities of the Audit<br />
Committee are set out in its written<br />
terms of reference and include:<br />
» monitoring the integrity of the<br />
financial statements of the Society<br />
and reviewing significant financial<br />
reporting judgements contained in<br />
them;<br />
» reviewing the annual financial<br />
statements before submission to<br />
the Board;<br />
» monitoring and reviewing the<br />
operation and effectiveness of the<br />
internal audit function;<br />
» considering and making<br />
recommendations to the Board<br />
in relation to the appointment,<br />
reappointment and removal of<br />
the external auditors and terms<br />
of engagement of the external<br />
auditors;<br />
» approving the remuneration of the<br />
external auditors, whether fees for<br />
audit or non-audit services, and<br />
ensuring that the level of fees is<br />
appropriate to enable an adequate<br />
audit to be conducted;<br />
» assessing annually the<br />
independence and objectivity of<br />
the external auditors and the<br />
effectiveness of the audit process,<br />
taking into consideration relevant<br />
professional and regulatory<br />
requirements and the relationship<br />
with the auditors as a whole,<br />
including the provision of any nonaudit<br />
services;<br />
» reporting to the Board on<br />
the operation of the Society’s<br />
system of internal control and<br />
risk management, making any<br />
recommendations to the Board<br />
thereon;<br />
» reviewing the arrangements by<br />
which employees of the Society may,<br />
in confidence, raise concerns about<br />
possible improprieties in matters<br />
of financial reporting or other<br />
matters and ensuring that these<br />
arrangements allow proportionate<br />
and independent investigation of<br />
such matters and appropriate follow<br />
up action;<br />
» reviewing its own effectiveness<br />
as a committee and making any<br />
necessary recommendations for<br />
change to the Board.<br />
21
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Remuneration Committee<br />
General Committee 2010<br />
The Remuneration Committee comprises<br />
Messrs John Malone (Chairman), Vincent<br />
Buckley, Bertie O’Leary and Flor Riordan.<br />
The role and responsibilities of the<br />
Remuneration Committee are set out in its<br />
written terms of reference. The principal<br />
responsibilities of the Committee are:<br />
Region 1<br />
MALLOW - 13<br />
Mr. Donal Buckley<br />
Mr. Vincent Buckley<br />
Mr. Ivor Dulohery<br />
Region 3<br />
MID-CORK - 14<br />
Mr. Patrick Ahern<br />
Mr. John Bernard<br />
Mr. Donal Creedon<br />
Region 6<br />
CORK/EAST CORK - 8<br />
Mr. Liam Lane<br />
Mr. Edmond C. Lynch<br />
Mr. Patrick Millerick<br />
» to determine the policy for the<br />
remuneration of the Chief Executive,<br />
Secretary and Direct <strong>Report</strong>s to<br />
the Chief Executive as well as the<br />
Society’s policy on remuneration and<br />
or expenses payable to members of<br />
the Board, members of the Regional<br />
Committees, General Committee<br />
and members of any sub committee<br />
established from time to time;<br />
» review and sanction new or amended<br />
salary, incentive bonus, retirement<br />
benefit and or other benefits for<br />
Senior Executives of the Society<br />
whose remuneration is to be<br />
determined by the Committee;<br />
» agree the policy and or procedures<br />
for authorisation of claims for<br />
expenses of Senior Executives, the<br />
Board, and members of the Regional<br />
Committees, General Committee and<br />
any other sub committee established<br />
from time to time.<br />
Mr. Patrick Fleming<br />
Mr. Liam Foley<br />
Mr. John Hedigan<br />
Mr. Tim Leader<br />
Mr. Timothy McSweeney<br />
Mr. Damian Murphy<br />
Mr. Noel O’Keeffe<br />
Mr. Thomas O’Regan<br />
Mr. Donal Shinnick<br />
Mr. Peter Twomey<br />
Region 2<br />
MITCHELSTOWN - 10<br />
Mr. Patrick Clancy<br />
Mr. Thomas G. Coffey<br />
Mr. John W. Coughlan<br />
Mr. Robert Drake<br />
Mr. Thomas Feeney<br />
Mr. Michael Gowen<br />
Mr. Jerome Desmond<br />
Mr. Patrick Healy<br />
Mr. Richard Hinchion<br />
Mr. Donal F. Hurley<br />
Mr. John Joe Kelleher<br />
Mr. Sean MacSweeney<br />
Mr. Don McSweeney<br />
Mr. Michael Murphy<br />
Mr. Gerard O’Connell<br />
Mr. Bertie O’Leary<br />
Mr. Cornelius O’Riordan<br />
Region 4<br />
TIPPERARY - 5<br />
Mr. Philip Coman<br />
Mr. John Hally<br />
Mr. Ciaran McGrath<br />
Mr. Michael Tobin<br />
Mr. William Walsh<br />
Mr. Sean O’Brien<br />
Mr. Barry O’Connor<br />
Mr. Timothy O’Leary<br />
Mr. John O’Sullivan<br />
Mr. Flor Riordan<br />
Region 7<br />
LIMERICK - 10<br />
Mr. Timothy Blackburn<br />
Mr. William Hickey<br />
Mr. Daniel Hogan<br />
Mr. John Hough<br />
Mr. James Lynch<br />
Mr. John McKeogh<br />
Mr. Patrick Ryan<br />
Mr. Martin Stapleton<br />
Mr. Tony Tuohy<br />
Mr. David Woulfe<br />
Mr. Thomas Hyland<br />
Mr. Philip Leahy<br />
Mr. Patrick O’Keeffe<br />
Ms. Mary Twomey-Casey<br />
Solailoire Facility,<br />
Nantes, France<br />
22
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Regional Committees<br />
AGHABULLOGUE/<br />
RYLANE<br />
P. Ahern<br />
M. Twomey<br />
AHADILLANE<br />
P. Fleming<br />
J. Holmes<br />
ALLENSBRIDGE<br />
C. Murphy<br />
D. Murphy<br />
ANGLESBORO<br />
M. Lenihan<br />
M. Martin<br />
ANNACOTTY/<br />
BIRDHILL/<br />
KILLALOE<br />
M. Caplis<br />
J. McKeogh<br />
L. McNamara<br />
ARAGLEN<br />
T. Feeney<br />
P. O’Donoghue<br />
ARDAGH/OLDMILL<br />
D. Hayes<br />
J. Hough<br />
D. Woulfe<br />
ARDFINNAN<br />
W. Walsh<br />
BALLINAMONA<br />
T. O’Regan<br />
BALLINDANGAN<br />
M. O’Doherty<br />
P. O’Keeffe<br />
BALLINGEARY<br />
S. O’Sullivan<br />
BALLINHASSIG<br />
T. Allen<br />
J. Crowley<br />
BALLYCLOUGH<br />
D. Buckley<br />
I. Dulohery<br />
A. O’Keeffe<br />
BALLYHOOLY<br />
P. Leahy<br />
J. Lenihan<br />
BALLYLOOBY<br />
L. Fitzgerald<br />
E. Morrissey<br />
BALLYMAKEERA<br />
D. Hallissey<br />
B. O’Leary<br />
BALLYPOREEN<br />
P. Clancy<br />
M. Sweeney<br />
BALLYRICHARD/<br />
COBH<br />
A. Barry<br />
A. Bird<br />
J. Cashman<br />
P. O’Donovan<br />
M. O’Neill<br />
T. Russell<br />
BAWNMORE<br />
C. O’Riordan<br />
BENGOUR<br />
P. O’Driscoll<br />
BERRINGS/DRIPSEY<br />
E. Casey<br />
P. Healy<br />
BLACK ABBEY/<br />
KILDIMO<br />
R. Foley<br />
S. O’Riordan<br />
M. Reidy<br />
BOHERLAHAN<br />
P. Coman<br />
M. Tuohy<br />
BUNRATTY<br />
J. Lynch<br />
K. McInerney<br />
BUTTEVANT/<br />
TEMPLEMARY<br />
D. O’Connell<br />
N. O’Keeffe<br />
D. Shinnick<br />
CAHIR<br />
T. Marnane<br />
M. Tobin<br />
CAPPAMORE<br />
S. Meehan<br />
M. O’Donoghue<br />
CARRIGALINE<br />
J. Bernard<br />
D. Lynch<br />
J. McCarthy<br />
G. O’Connell<br />
CARRIGNAVAR<br />
Vacancy<br />
CASTLETOWNROCHE/<br />
KILLAVULLEN<br />
H. Fitzgerald<br />
B. Lenihan<br />
F. Magner<br />
CAUM/MACROOM<br />
M. Murphy<br />
CHURCHTOWN<br />
J. Hedigan<br />
CLOGHEEN<br />
J. Flynn<br />
J. F. O’Gorman<br />
CLONDROHID<br />
P. Kelleher<br />
S. Roche<br />
CLOVERFIELD/<br />
CORELISH<br />
S. O’Brien<br />
T. Tuohy<br />
COACHFORD/<br />
KILCOLMAN<br />
D. Finnegan<br />
J. Kelleher<br />
C.M.P.<br />
T. Cashman<br />
P. Lehane<br />
J. Murphy<br />
D. O’Brien<br />
T. O’Leary<br />
J. O’Sullivan<br />
F. Riordan<br />
CORROGHURM/<br />
MITCHELSTOWN<br />
M. Fox<br />
D. Kent Jnr<br />
E. O’Brien<br />
E. Quinlan<br />
Vacancy<br />
COURTBRACK<br />
V. Buckley<br />
T. McSweeney<br />
DARRAGH<br />
T.G. Coffey<br />
T. Hyland<br />
DONERAILE<br />
M. Duane<br />
E. Sheehan<br />
DONOUGHMORE<br />
L. Foley<br />
F. McSweeney<br />
DROMBANNA<br />
W. Hickey<br />
J. O’Brien<br />
W. Walsh<br />
DROMTARIFFE<br />
J. Lenihan<br />
J. F. Tarrant<br />
GALBALLY<br />
T. Blackburn<br />
M. Donovan<br />
GARRYSPILLANE<br />
M. Murphy<br />
J. P. Tobin<br />
GLANWORTH<br />
D. Joyce<br />
M. Twomey-Casey<br />
GLOSHA/<br />
REARCROSS<br />
R. Keogh<br />
E. O’Toole<br />
GRANAGH/MILTOWN<br />
G. Kennedy<br />
Vacancy<br />
HOLLYFORD<br />
M. O’Connell<br />
HOSPITAL/KILTEELY/<br />
SARSFIELD<br />
J. Burke<br />
P. Hanley<br />
M. Hayes<br />
INCHIGEELA/<br />
TEERGAY<br />
D. Creedon<br />
M. McSweeney<br />
KILBEHENNY<br />
W. O’Doherty<br />
M. Russell<br />
KILCORNEY<br />
J. Browne<br />
T. Leader<br />
KILDORRERY<br />
R. Drake<br />
T. O’Donnell<br />
KILLOWEN/<br />
MOSSGROVE<br />
J. Canty<br />
D. McSweeney<br />
KILLUMNEY<br />
J. Desmond<br />
T. Griffin<br />
KILNAMARTYRA<br />
P. Cronin<br />
B. Hinchion<br />
KILROSS<br />
D. Hogan<br />
J. O’Neill<br />
KILWORTH<br />
J. Clancy<br />
M. Gowen<br />
KNOCKADEA<br />
J.W. Coughlan<br />
J. Fox<br />
KNOCKLONG/<br />
GORMANSTOWN<br />
G. Walsh<br />
LISCARROLL<br />
T. Brosnan<br />
W.J. Egan<br />
LISSARDA<br />
R. Hinchion<br />
S. MacSweeney<br />
LOMBARDSTOWN<br />
F. O’Connor<br />
M. O’Hanlon<br />
P. Twomey<br />
MALLOW<br />
C. Cronin<br />
J. Kenny<br />
MILLSTREET/<br />
BALLYDALY<br />
C. Buckley<br />
D. Corkery<br />
MOGEELY<br />
A. DeCogan<br />
J. Dunne<br />
L. Lane<br />
E.C. Lynch<br />
P. Millerick<br />
D. O’Brien<br />
S. O’Brien<br />
MOURNEABBEY<br />
D. Cronin<br />
J.C. Fitzgerald<br />
MUSKERRY<br />
D. O’Donovan<br />
NEWMARKET-ON-<br />
FERGUS<br />
K. Woods<br />
OOLA<br />
P. Ryan<br />
M. Stapleton<br />
OUTRATH<br />
J. Hally<br />
C. McGrath<br />
M. Moloney<br />
J. O’Donnell<br />
T. Prendergast<br />
T. Ryan<br />
PARK<br />
A. Flavin<br />
K. Galvin<br />
B. O’Connor<br />
M. Riordan<br />
RATHDUFF<br />
J. Aherne<br />
T. Buckley<br />
RUSHEEN<br />
G. Buckley<br />
SHINAUGH<br />
Vacancy<br />
SHOUNLARAGH/<br />
TOGHER<br />
D. F. Hurley<br />
TEMPLEMARTIN<br />
M. P. Murphy<br />
TERELTON/TOAMES<br />
J. J. Kelleher<br />
L. O’Riordan<br />
TOURNAFULLA/<br />
MEENAHELA<br />
D. Aherne<br />
M. Curtin<br />
D. Fitzgerald<br />
23
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Statement of Board Responsibilities<br />
The Industrial and Provident Societies Acts, 1893 to 1978 require the Board to provide for the preparation of financial<br />
statements, in accordance with accounting standards generally accepted in Ireland, for each financial year which gives a<br />
true and fair view of the state of affairs of the Society and of the result of the Society for that period. In preparing those<br />
financial statements, the board shall cause:<br />
» suitable accounting policies to be selected and applied consistently;<br />
» reasonable and prudent judgements and estimates to be made;<br />
» the financial statements to be prepared on the going concern basis.<br />
In accordance with Rule 63 of the Society’s rules the Board shall cause proper books of account and records to be kept<br />
as are necessary to give a true and fair view of the Society’s business and affairs. The Board is also responsible for<br />
safeguarding the assets of the Society and shall cause reasonable steps to be taken to provide adequate protection in this<br />
regard.<br />
On behalf of the Board:<br />
Vincent Buckley, Chairman<br />
Bertie O’Leary, Vice Chairman<br />
16 March 2010 16 March 2010<br />
24
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Independent Auditor’s <strong>Report</strong><br />
to the Members of <strong>Dairygold</strong> Co-operative Society Limited<br />
We have audited the financial<br />
statements of <strong>Dairygold</strong> Co-Operative<br />
Society Limited for the year ended<br />
31 December <strong>2009</strong>, which comprise<br />
the Consolidated Profit and Loss<br />
Account, the Consolidated Balance<br />
Sheet, the Consolidated Cash Flow<br />
Statement, the Consolidated Statement<br />
of Total Recognised Gains and Losses,<br />
the Reconciliation of Movement in<br />
Shareholders’ Funds, the Statement<br />
of Accounting Policies and the related<br />
notes on pages 32 to 49 inclusive. These<br />
financial statements have been prepared<br />
under the accounting policies set out in<br />
the Statement of Accounting Policies.<br />
This report is made solely to the<br />
Society’s Members, as a body, in<br />
accordance with Section 13 of the<br />
Industrial and Provident Societies<br />
Act 1893. Our audit work has been<br />
undertaken so that we might state to the<br />
Society’s Members those matters we are<br />
required to state to them in an auditors’<br />
report and for no other purpose. To the<br />
fullest extent permitted by law, we do<br />
not accept or assume responsibility to<br />
anyone other than the Society and the<br />
Society’s Members as a body, for our<br />
audit work, for this report, or for the<br />
opinions we have formed.<br />
Respective<br />
responsibilities of<br />
directors and auditors<br />
The Directors are responsible for<br />
preparing the <strong>Annual</strong> <strong>Report</strong>, including<br />
as set out in the Statement of Board<br />
Members’ Responsibilities, the<br />
preparation of the financial statements<br />
in accordance with applicable law<br />
and accounting standards issued by<br />
the Accounting Standards Board and<br />
published by the Institute of Chartered<br />
Accountants in Ireland (Generally<br />
Accepted Accounting Practice in<br />
Ireland). The Directors are also<br />
responsible for the safeguarding of the<br />
assets of the Society.<br />
Our responsibility, as independent<br />
auditor, is to audit the financial<br />
statements in accordance with relevant<br />
legal and regulatory requirements and<br />
International Standards on Auditing (UK<br />
and Ireland).<br />
We report to you our opinion as to<br />
whether the financial statements give<br />
a true and fair view, in accordance<br />
with Generally Accepted Accounting<br />
Practice in Ireland. We are also required<br />
to examine the balance sheet showing<br />
the receipts and expenditure, funds<br />
and effects of the Society and verify the<br />
same with the books, deeds, documents,<br />
accounts and vouchers relating thereto<br />
and to either sign the same as found<br />
by us to be correct, duly vouched and<br />
in accordance with law, or specifically<br />
report to the Society in what respects we<br />
find them incorrect, unvouched, or not in<br />
accordance with law.<br />
We read the other information contained<br />
in the <strong>Annual</strong> <strong>Report</strong> and consider the<br />
implications for our report if we become<br />
aware of any apparent misstatement<br />
or material inconsistencies with the<br />
financial statements.<br />
The other information comprises only the<br />
Chairman’s Statement, Chief Executive’s<br />
Review and Financial Review. Our<br />
responsibilities do not extend to other<br />
information.<br />
Basis of audit opinion<br />
We conducted our audit in accordance<br />
with the International Standards on<br />
Auditing (UK and Ireland) issued by<br />
the Auditing Practices Board. An audit<br />
includes examination, on a test basis,<br />
of evidence relevant to the amounts and<br />
disclosures in the financial statements.<br />
It also includes an assessment of the<br />
significant estimates and judgements<br />
made by the Directors in the preparation<br />
of the financial statements and of<br />
whether the accounting policies are<br />
appropriate to the Society’s and the<br />
Group circumstances, consistently<br />
applied and adequately disclosed.<br />
We planned and performed our audit<br />
so as to obtain all the information and<br />
explanations which we considered<br />
necessary in order to provide us with<br />
sufficient evidence to give reasonable<br />
assurance that the financial statements<br />
are free from material misstatement,<br />
whether caused by fraud or other<br />
irregularity or error. In forming our<br />
opinion we also evaluated the overall<br />
adequacy of the presentation of<br />
information in the financial statements.<br />
Opinion<br />
In our opinion the financial statements<br />
give a true and fair view of the state of<br />
affairs of the Society as at 31 December<br />
<strong>2009</strong> and of the profit of the Society for<br />
the year then ended.<br />
The Society’s balance sheet is in<br />
agreement with the books of account<br />
which, in our opinion, have been<br />
properly kept.<br />
As required by section 13(2) of the<br />
Industrial and Provident Societies Acts<br />
1893 having examined the balance<br />
sheet showing the receipts and<br />
expenditure, funds and effects of the<br />
Society, and verified the same with the<br />
books, deeds, documents, accounts and<br />
vouchers relating thereto, we sign the<br />
same as found by us to be correct, duly<br />
vouched, and in accordance with law.<br />
Chartered Accountants<br />
and Registered Auditors<br />
No. 6 Lapp’s Quay, Cork.<br />
16 March 2010<br />
25
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Consolidated profit and loss account<br />
for the year ended 31 December <strong>2009</strong><br />
<strong>2009</strong> 2008<br />
Notes E’000 E’000<br />
TURNOVER 1 555,175 688,127<br />
OPERATING PROFIT<br />
before goodwill amortisation and exceptional items 2 14,520 3,199<br />
Goodwill amortisation 10 (1,061) (932)<br />
OPERATING PROFIT 13,459 2,267<br />
Share of losses of associates (1,044) (1,857)<br />
Fundamental reorganisation and restructuring costs 3 (1,019) -<br />
Profit arising from disposal of fixed assets 4 - 58<br />
Interest payable and similar charges 5 (4,369) (4,185)<br />
Interest receivable and similar income 5 3,419 5,027<br />
PROFIT on ordinary activities before taxation 10,446 1,310<br />
Taxation charge on profit on ordinary activities 7 (875) (1,998)<br />
PROFIT/(LOSS) after taxation 9,571 (688)<br />
Minority interest 22 (258) (149)<br />
PROFIT/(LOSS) for the financial year 9,313 (837)<br />
Share interest 8 (1,238) (2,370)<br />
Retained Profit/(Loss) for the year 20 8,075 (3,207)<br />
The above results are derived from continuing operations.<br />
On behalf of the Board:<br />
Vincent Buckley, Chairman<br />
Bertie O’Leary, Vice Chairman<br />
16 March 2010 16 March 2010<br />
26
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Consolidated balance sheet<br />
as at 31 December <strong>2009</strong><br />
<strong>2009</strong> 2008<br />
Notes E’000 E’000<br />
FIXED ASSETS<br />
Tangible assets 9 127,948 122,875<br />
Intangible assets 10 14,668 14,844<br />
Financial assets 11 66,423 69,711<br />
209,039 207,430<br />
CURRENT ASSETS<br />
Stocks 12 73,086 85,419<br />
Debtors 13 98,963 96,415<br />
Bank and cash 9,533 8,090<br />
181,582 189,924<br />
CREDITORS falling due within one year 14 (105,129) (114,919)<br />
NET CURRENT ASSETS 76,453 75,005<br />
TOTAL ASSETS LESS CURRENT LIABILITIES 285,492 282,435<br />
Less:<br />
CREDITORS falling due after more than one year 15 (68,116) (71,423)<br />
PROVISION FOR LIABILITIES AND CHARGES<br />
Capital grants 16 (6,311) (6,301)<br />
Deferred taxation 17 (441) (1,754)<br />
210,624 202,957<br />
PENSION ASSET 18 10,100 2,671<br />
NET ASSETS 220,724 205,628<br />
CAPITAL AND RESERVES<br />
Share capital 19 98,617 98,997<br />
Capital reserves 20 1,007 1,007<br />
Revaluation reserve 20 6,946 6,946<br />
Bonus reserve 20 138 1,177<br />
Profit and loss account 20 113,382 97,125<br />
SHAREHOLDERS’ FUNDS 220,090 205,252<br />
Minority interest 22 634 376<br />
CAPITAL EMPLOYED 220,724 205,628<br />
On behalf of the Board:<br />
Vincent Buckley, Chairman<br />
Bertie O’Leary, Vice Chairman<br />
16 March 2010 16 March 2010<br />
27
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Consolidated cash flow statement<br />
for the year ended 31 December <strong>2009</strong><br />
<strong>2009</strong> 2008<br />
Notes E’000 E’000<br />
Net cash inflow from operating activities 24 19,176 7,641<br />
Returns on investments and servicing of finance 25 (1,869) (1,464)<br />
Taxation paid (619) (3,535)<br />
Capital expenditure and financial investment 26 (18,942) (24,797)<br />
Acquisitions and disposals 27 (2,643) -<br />
Equity share interest paid (1,296) (2,351)<br />
Financing 28 (1,338) (205)<br />
Decrease in cash in the year (7,531) (24,711)<br />
Reconciliation of net cash flow to movement in net debt<br />
for the year ended 31 December <strong>2009</strong><br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Decrease in cash in the year (7,531) (24,711)<br />
Loans / leases acquired (4,653) -<br />
Non cash movements 2,502 (5,150)<br />
Movement in net debt (9,682) (29,861)<br />
Net debt at 1 January (68,204) (38,343)<br />
Net debt at 31 December (77,886) (68,204)<br />
Analysis of net debt<br />
At Non At<br />
1 January Cash Acquisition cash 31 December<br />
<strong>2009</strong> flow movement movement <strong>2009</strong><br />
E’000 E’000 E’000 E’000 E’000<br />
Cash and bank balances 8,090 68 - 1,375 9,533<br />
Overdrafts (794) 794 - - -<br />
Finance leases - 609 (834) - (225)<br />
7,296 1,471 (834) 1,375 9,308<br />
Debt due within one year (5,000) (15,000) - - (20,000)<br />
Debt due after one year (70,500) 6,502 (2,125) 623 (65,500)<br />
Finance leases - (504) (1,694) 504 (1,694)<br />
(75,500) (9,002) (3,819) 1,127 (87,194)<br />
(68,204) (7,531) (4,653) 2,502 (77,886)<br />
28
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Consolidated statement of total recognised gains and losses<br />
for the year ended 31 December <strong>2009</strong><br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Profit/(Loss) for the financial year 9,313 (837)<br />
Share of associates’ reserves movements (2,068) (4,838)<br />
Currency translation difference on net investment 2,572 (10,051)<br />
Difference between actual and expected return on pension schemes’ assets 9,974 (36,630)<br />
Experience gains/(losses) arising on pension schemes’ liabilities 2,624 (1,584)<br />
Effects of changes in assumptions underlying the present value of pension schemes’ liabilities (10,061) 10,630<br />
Gain arising on exit of a participating employer from pension scheme 6,090 -<br />
Deferred tax associated with gain arising on exit of a participating employer from pension scheme (761) -<br />
Deferred tax associated with movement on pension schemes (300) 3,368<br />
Total recognised gains/(losses) relating to the year 17,383 (39,942)<br />
Reconciliation of movement in shareholders’ funds<br />
for the year ended 31 December <strong>2009</strong><br />
<strong>2009</strong> 2008<br />
Notes E’000 E’000<br />
Total recognised gains/(losses) relating to the year 17,383 (39,942)<br />
Share interest 8 (1,238) (2,370)<br />
Issue of ordinary shares including conversions 19 4 59<br />
Dividends associated with cancelled shares 31 31<br />
Shares redeemed 19 (1,342) (1,167)<br />
Net change in shareholders’ funds 14,838 (43,389)<br />
Opening shareholders’ funds 205,252 248,641<br />
Closing shareholders’ funds 220,090 205,252<br />
29
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Statement of Accounting Policies<br />
The significant accounting policies adopted by the Society are:<br />
Basis of Preparation:<br />
The financial statements have been<br />
prepared in accordance with generally<br />
accepted accounting standards in Ireland<br />
and the Irish Industrial and Provident<br />
Societies Acts, 1893 to 1978.<br />
Accounting Convention:<br />
The financial statements, which are<br />
denominated in euros, are prepared<br />
under the historical cost convention as<br />
modified by the revaluation of certain<br />
fixed assets.<br />
Basis of Consolidation:<br />
The consolidated financial statements<br />
incorporate:<br />
a) the accounts of <strong>Dairygold</strong> Co-<br />
Operative Society Limited (“the<br />
Society”) and its subsidiaries for the<br />
year to 31 December <strong>2009</strong>,<br />
b) the Society’s share of the results<br />
and post acquisition reserves of<br />
associates as reported in the latest<br />
audited financial statements. This is<br />
to 30 June <strong>2009</strong> for Reox Holdings plc<br />
and 31 October <strong>2009</strong> for The Malting<br />
Company of Ireland. Other associates<br />
results are included to 31 December<br />
2008.<br />
c) any material adjustments for<br />
associates arising between the date<br />
of their latest financial statements as<br />
above and the year end of the Society<br />
and consequently Reox Holdings<br />
plc results are incorporated to 31<br />
December <strong>2009</strong>.<br />
The results of subsidiaries acquired or<br />
disposed of are included in or excluded<br />
from the financial statements from the<br />
effective date of acquisition or disposal.<br />
The interests of minority shareholders<br />
in subsidiary companies reflect the<br />
minority’s proportion of the net assets of<br />
the relevant subsidiaries.<br />
The results of overseas subsidiary<br />
companies are translated into euros at<br />
the average rate for the year. The assets<br />
and liabilities of overseas subsidiary<br />
companies have been consolidated at the<br />
rate of exchange ruling on the balance<br />
sheet date. Surpluses or deficits arising<br />
on the translation of overseas subsidiary<br />
companies’ net assets are included in<br />
reserves.<br />
Turnover:<br />
Turnover represents the invoiced value<br />
of goods and services to third parties,<br />
including EU export refunds and<br />
excluding value added tax. Turnover is<br />
recognised when the Society receives<br />
the right to consideration as ownership<br />
passes to third parties.<br />
Share Trading:<br />
Accounting for Transactions<br />
Investment transactions are accounted<br />
for on the trade date. All investments are<br />
stated at cost and are not subsequently<br />
revalued. Realised gains and losses on<br />
investment disposals are calculated<br />
using the first in first out method based<br />
on the difference between the original<br />
cost and the disposal amount.<br />
A provision is made for impairment in<br />
value particularly in the case where<br />
impairment is permanent as evidenced<br />
by losses crystallised post year end.<br />
Investment Income and Expenses<br />
Dividends are recognised as income on<br />
the dates that securities are first quoted<br />
“ex-dividend” to the extent information<br />
thereon is reasonably available to the<br />
Society. Interest income is recognised by<br />
the Society on an accruals basis. Income<br />
from quoted companies is stated gross<br />
of withholding tax, which is disclosed<br />
separately in the profit and loss account.<br />
Tangible Fixed Assets and<br />
Depreciation:<br />
Tangible fixed assets are stated at cost or<br />
valuation less accumulated depreciation.<br />
Depreciation is calculated to write off<br />
the cost or valuation of tangible fixed<br />
assets other than freehold land over their<br />
estimated useful lives by equal annual<br />
instalments at the following annual<br />
rates:<br />
Buildings<br />
2.0% - 10.0%<br />
Plant and machinery<br />
7.5% - 33.3%<br />
Motor vehicles<br />
20.0% - 25.0%<br />
The carrying value of tangible assets<br />
is reviewed for impairment if events or<br />
changes in circumstances indicate the<br />
carrying value may not be recoverable.<br />
Impairment is assessed by comparing<br />
the carrying value of an asset with its<br />
recoverable amount (being the higher<br />
of net realisable value and value in<br />
use). Net realisable value is defined<br />
as the amount at which an asset could<br />
be disposed of net of any direct selling<br />
costs. Value in use is defined as the<br />
present value of the future cash flows<br />
obtainable through continued use of an<br />
asset including those to be realised on its<br />
eventual disposal.<br />
Leased Assets:<br />
Assets held under leasing arrangements<br />
that transfer substantially all the<br />
risks and rewards of ownership are<br />
capitalised. The capital element of the<br />
related rental obligations is included in<br />
creditors. The interest element of the<br />
rental obligations is charged to the profit<br />
and loss account so as to produce a<br />
constant periodic rate of charge. Rentals<br />
in respect of all other leases are charged<br />
to the profit and loss account as incurred.<br />
Goodwill:<br />
Goodwill arising on acquisitions<br />
representing the excess of the total cost<br />
of the Society’s investment over the<br />
fair value of the separable net assets<br />
acquired is amortised over its expected<br />
useful economic life of twenty years, on<br />
a straight line basis. The carrying value<br />
of goodwill is reviewed annually and<br />
provision is made for any impairment.<br />
Intangible Assets:<br />
Purchased intangible assets are included<br />
at cost and amortised in equal annual<br />
instalments over a period of twenty<br />
years which is their estimated useful<br />
economic life. A provision is made for<br />
any impairment in value.<br />
30
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Statement of Accounting Policies (continued)<br />
Financial Fixed Assets:<br />
Associated undertakings<br />
Associated undertakings are those<br />
undertakings in which the Society has a<br />
significant participating interest in the<br />
equity capital and over which it is able<br />
to exercise significant influence. The<br />
Society’s interest is stated at cost plus its<br />
share of post acquisition reserves.<br />
Other investments<br />
Trade investments are those<br />
undertakings in which the Society does<br />
not exercise a significant or participating<br />
interest. The Society’s interest in these<br />
undertakings is stated at cost less<br />
provision for permanent diminuition in<br />
value.<br />
Stocks:<br />
Stocks are valued at the lower of cost and<br />
net realisable value.<br />
Cost in the case of raw materials, goods<br />
for resale and expense stocks comprise<br />
the purchase price including transport<br />
and other directly attributable costs.<br />
Cost in the case of work-in-progress and<br />
finished goods comprises direct material<br />
and labour costs and an appropriate<br />
proportion of manufacturing overheads<br />
based on normal production levels.<br />
Net realisable value represents the<br />
estimated sales price less costs to<br />
completion and all appropriate holding,<br />
selling and distribution expenses.<br />
Taxation:<br />
Corporation tax is calculated on the<br />
result for the year after taking account<br />
of capital allowances and manufacturing<br />
relief.<br />
Deferred Taxation:<br />
Deferred taxation is provided in respect<br />
of all timing differences that have<br />
originated but not reversed at the<br />
balance sheet date where transactions<br />
or events have occurred at that date that<br />
will result in an obligation to pay more,<br />
or right to pay less or to receive more tax,<br />
with the following exceptions:<br />
i) provision is not made for tax on gains<br />
arising from the revaluation of fixed<br />
assets unless there is a binding<br />
agreement for the disposal of assets.<br />
ii) deferred tax assets are recognised<br />
only to the extent that the board of<br />
directors consider that it is more<br />
likely than not that there will be<br />
suitable future taxable profits<br />
from which the underlying timing<br />
differences can be deducted.<br />
Deferred tax is measured on an<br />
undiscounted basis at the tax rates that<br />
are expected to apply in the periods in<br />
which the timing differences reverse<br />
based on existing tax rates and law.<br />
Capital Grants:<br />
Grants receivable in respect of tangible<br />
fixed assets are included in the financial<br />
statements when the amounts have<br />
been ascertained and are released to the<br />
profit and loss account in equal annual<br />
instalments over the expected useful<br />
lives of the relevant assets.<br />
Revenue Grants:<br />
Revenue based grants are accounted<br />
for in the year in which the related<br />
expenditure is incurred and are dealt<br />
with directly through the profit and loss<br />
account.<br />
Debtors:<br />
Known bad debts are written off and<br />
specific provision is made for any amount<br />
the collection of which is considered<br />
doubtful. A further general provision is<br />
also maintained.<br />
Research and Development:<br />
Expenditure on research and<br />
development is written off to the profit<br />
and loss account in the year in which it is<br />
incurred.<br />
Foreign Currencies:<br />
Foreign currency transactions by Irish<br />
entities during the year have been<br />
translated into Euro at the rates ruling at<br />
the time of the transactions.<br />
Monetary assets and liabilities of Irish<br />
entities arising in foreign currencies<br />
have been retranslated into Euro at rates<br />
ruling at the balance sheet date.<br />
Exchange differences have been included<br />
in the profit and loss account for the year.<br />
Pensions:<br />
Defined Benefit:<br />
Under Financial <strong>Report</strong>ing Standard 17<br />
Retirement Benefits, pension scheme<br />
assets are measured using fair values.<br />
Pension scheme liabilities are measured<br />
using a projected unit method and<br />
discounted at the current rate of return<br />
on a high quality corporate bond of<br />
equivalent term to the liability.<br />
Each pension scheme surplus (to the<br />
extent that it is recoverable) or deficit<br />
is recognised in full, net of deferred tax<br />
and presented on the face of the balance<br />
sheet. The movement in the scheme<br />
surplus/deficit is split between operating<br />
and financing items in the profit and<br />
loss account and the statement of total<br />
recognised gains and losses.<br />
The full service cost of the pension<br />
provision is charged to operating profit.<br />
The net impact of the unwinding of the<br />
discount rate on scheme liabilities and<br />
the expected return of the scheme assets<br />
is charged and credited to finance costs.<br />
Any difference between the expected<br />
return on assets and that actually<br />
achieved is charged through the<br />
statement of total recognised gains and<br />
losses. Similarly, any differences that<br />
arise from experience or assumption<br />
changes are charged through the<br />
statement of total recognised gains and<br />
losses.<br />
Defined Contribution:<br />
Retirement benefits to employees<br />
are funded by contributions from the<br />
company and employees. Payments<br />
are made to pension trusts which are<br />
financially separate from the Society.<br />
31
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Notes to financial statements<br />
1 Turnover<br />
Geographical Analysis by Destination:<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Ireland 245,076 298,277<br />
United Kingdom 131,167 148,814<br />
Rest of Europe 103,082 135,389<br />
Rest of World 75,850 105,647<br />
555,175 688,127<br />
Principal Activities by Class of Business:<br />
<strong>Dairygold</strong> Food Ingredients 366,018 454,899<br />
Agricultural and Retailing 170,714 204,245<br />
Finance 18,443 28,983<br />
555,175 688,127<br />
The turnover for <strong>2009</strong> incorporates €5.9 million from a subsidiary, Solailoire SARL and the business of seven 4Home stores,<br />
both acquired during the year.<br />
Segmental information, by market, has not been given because, in the opinion of the Board of Directors, to do so would<br />
be prejudicial to the interests of the Society.<br />
2 Operating profit<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Turnover - Note 1 555,175 688,127<br />
Less:<br />
Raw materials and consumables 447,037 571,238<br />
Payroll costs - Note 6 45,493 47,832<br />
Operating costs 45,071 47,308<br />
Depreciation - Note 9 14,941 14,392<br />
Grant amortisation - Note 16 (804) (943)<br />
Change in stock of finished goods and goods for resale (11,083) 5,101<br />
Operating profit before goodwill<br />
amortisation and exceptional items 14,520 3,199<br />
32
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
3 Fundamental reorganisation and restructuring costs<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Cost of reorganisation and restructuring of on-going businesses (1,019) -<br />
The costs in <strong>2009</strong> reflect the cost of reorganisation and restructuring programmes in the Society.<br />
4 Profit arising from disposal of fixed assets<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Profit on disposal of tangible fixed assets - 58<br />
5 Interest payable and receivable<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Interest payable and similar charges (4,369) (4,185)<br />
Interest receivable and similar income<br />
RIBB interest receivable - Note 11 2,475 2,443<br />
Bank interest receivable 125 116<br />
Interest receivable and similar income relating to pensions 819 2,468<br />
3,419 5,027<br />
Interest (Payable)/Receivable (950) 842<br />
6 Payroll costs<br />
The weekly average number of employees:<br />
<strong>2009</strong> 2008<br />
Number<br />
Number<br />
<strong>Dairygold</strong> Food Ingredients 516 537<br />
Agricultural and Retailing 418 372<br />
934 909<br />
Payroll costs charged to profit and loss comprise: E’000 E’000<br />
Wages and salaries 39,707 41,394<br />
Social welfare costs 3,575 3,734<br />
Pension costs 2,211 2,704<br />
45,493 47,832<br />
33
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
7 Taxation charge on profit on ordinary activities<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Irish tax:<br />
Irish corporation tax (see below) (845) (202)<br />
Prior year over provision 158 25<br />
Share of associates’ tax 184 147<br />
(503) (30)<br />
Foreign tax:<br />
Foreign corporation tax (see below) (1,077) (1,037)<br />
Prior year under provision (41) -<br />
(1,118) (1,037)<br />
Total corporation tax (1,621) (1,067)<br />
Deferred taxation - Note 17 746 (931)<br />
(875) (1,998)<br />
The tax assessed for the year is different from the standard rate of corporation tax in Ireland (12.5%), as follows:<br />
Profit on ordinary activities before taxation 10,446 1,310<br />
Corporation tax at standard rate 1,306 164<br />
Effects of:<br />
Expenses not deductible/allowable for tax purposes 221 (4)<br />
Manufacturing relief (92) (43)<br />
Excess depreciation over capital allowances 313 665<br />
Higher tax rates (non-trading income) 12 19<br />
Non taxable income (39) -<br />
Losses brought forward (377) (24)<br />
Higher tax rates (overseas) 578 462<br />
1,922 1,239<br />
8 Share interest<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Share interest paid @ 1.25% (2008 : 3.75%)<br />
Ordinary share capital 1,238 2,370<br />
1,238 2,370<br />
The Board has recommended that share interest of 1.25% be paid in 2010 on the Share Capital and Permanent<br />
Convertible Loan Capital in issue at 31 December <strong>2009</strong>. This will amount to €1,236,000 and is subject to approval at<br />
the <strong>Annual</strong> General Meeting.<br />
34
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
9 Tangible assets<br />
Land & Plant & Motor<br />
buildings machinery vehicles Total<br />
E’000 E’000 E’000 E’000<br />
COST OR VALUATION<br />
At 1 January<br />
Cost 35,716 134,600 3,113 173,429<br />
Valuation 35,749 55,872 - 91,621<br />
71,465 190,472 3,113 265,050<br />
Additions 612 12,929 182 13,723<br />
Acquisitions 3,405 4,130 3 7,538<br />
Translation adjustments 222 452 1 675<br />
At 31 December<br />
Cost 39,955 152,111 3,299 195,365<br />
Valuation 35,749 55,872 - 91,621<br />
75,704 207,983 3,299 286,986<br />
DEPRECIATION<br />
At 1 January 22,251 118,572 1,352 142,175<br />
Relating to acquisitions 477 1,080 3 1,560<br />
Charged during year 2,516 11,966 459 14,941<br />
Translation adjustments 46 315 1 362<br />
At 31 December 25,290 131,933 1,815 159,038<br />
NET BOOK VALUE<br />
At 31 December <strong>2009</strong> 50,414 76,050 1,484 127,948<br />
At 31 December 2008 49,214 71,900 1,761 122,875<br />
HISTORICAL COST BASIS<br />
At 31 December <strong>2009</strong><br />
Cost 92,309 338,713 3,299 434,321<br />
Aggregate depreciation (70,359) (275,272) (1,815) (347,446)<br />
21,950 63,441 1,484 86,875<br />
A professional valuation of substantially all the Society’s land, buildings and plant and machinery was undertaken<br />
by Lisney during 1996. The basis of valuation was depreciated replacement cost in existing use or, where<br />
appropriate, open market value. The valuation was incorporated into the financial statements and the surplus<br />
arising taken to the revaluation reserve.<br />
The valuers also estimated the remaining useful lives of the assets.<br />
The Society has not adopted a policy of annual revaluations as permitted by Financial <strong>Report</strong>ing Standard 15.<br />
35
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
10 Intangible assets<br />
<strong>2009</strong> 2008<br />
GOODWILL E’000 E’000<br />
COST<br />
At 1 January 19,130 22,426<br />
Additions - 1,862<br />
Translation adjustment 1,252 (5,158)<br />
At 31 December 20,382 19,130<br />
AMORTISATION<br />
At 1 January 5,112 5,452<br />
Charged during year 1,018 914<br />
Translation adjustments 367 (1,254)<br />
At 31 December 6,497 5,112<br />
NET BOOK VALUE<br />
At 31 December 13,885 14,018<br />
<strong>2009</strong> 2008<br />
OTHER INTANGIBLE ASSETS E’000 E’000<br />
COST<br />
At 1 January 844 -<br />
Additions - 844<br />
At 31 December 844 844<br />
AMORTISATION<br />
At 1 January 18 -<br />
Charged during year 43 18<br />
At 31 December 61 18<br />
NET BOOK VALUE<br />
At 31 December 783 826<br />
NET BOOK VALUE<br />
TOTAL 14,668 14,844<br />
During 2008 the group purchased intangible assets, including intellectual property and customer lists as part of the<br />
acquisition of a number of businesses. The cost of the assets acquired in excess of the identifiable fair value of the<br />
net assets has been included in goodwill for the year.<br />
36
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
11 Financial assets<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
ASSOCIATES<br />
Share of net assets - 1 January<br />
Net assets other than goodwill 9,885 16,446<br />
Goodwill 5,854 5,841<br />
Share of results (net of taxation) (860) (1,710)<br />
Share of associates reserve movements (2,068) (4,838)<br />
Share of net assets - 31 December<br />
Net assets other than goodwill 9,914 9,885<br />
Goodwill 2,897 5,854<br />
12,811 15,739<br />
Loans to associates 85 85<br />
Redeemable Interest Bearing Bond (RIBB) see below 33,000 33,000<br />
At - 31 December 45,896 48,824<br />
UNQUOTED<br />
Shares at cost 139 139<br />
QUOTED<br />
Shares at cost - 1 January 9,115 6,856<br />
Additions 21,318 28,798<br />
Disposals (20,733) (22,635)<br />
Impairment (81) (3,904)<br />
Shares at cost - 31 December 9,619 9,115<br />
LOAN STOCK<br />
At - 1 January 11,633 11,482<br />
Additions 705 1,638<br />
Redemptions (1,569) (1,487)<br />
At - 31 December 10,769 11,633<br />
TOTAL 66,423 69,711<br />
a) The associates are included in the accounts at the cost of the investment and the Society’s share of post<br />
acquisition reserves.<br />
b) The share of reserve movements of associates in <strong>2009</strong> includes an amount of €27,000 (2008: €40,000) relating to<br />
changes in shareholding structures of associated groups.<br />
c) In the opinion of the Board of Directors, the value of the unquoted investments is not less than that shown above.<br />
d) The market value of the quoted investments excluding Reox Holdings plc at 31 December <strong>2009</strong> was €34,658,000<br />
(2008: €41,978,000).<br />
e) The loan stock refers to unconverted loan stock received from the Irish Dairy Board based on the Society’s trading<br />
activity with it.<br />
37
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
11 Financial assets - continued<br />
Details of principal subsidiaries and associates are included in Note 35 to these financial statements.<br />
The Redeemable Interest Bearing Bond (RIBB) was issued on 3 March 2006 by Reox Holdings plc to the Society.<br />
The principal conditions attaching to the RIBB are:<br />
» Interest for first four years will be at a rate of 7.5% per annum.<br />
» Interest for remaining years will be 6% per annum.<br />
» Redemption of the RIBB may commence on the day after the fifth anniversary of the date of issue at the discretion<br />
of the holder.<br />
» Redemption is permitted at a rate of €6,600,000 per annum.<br />
The following additional disclosures are required by Financial <strong>Report</strong>ing Standard 9, Associates and Joint Ventures, as<br />
the Co-Op’s share of the results of its associate entities and joint ventures exceed certain thresholds specified in the<br />
standard.<br />
Disclosure in aggregate of the Co-Op’s share of results of all associates and joint ventures:<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Turnover 61,107 94,198<br />
Fixed assets 36,042 54,111<br />
Current assets 12,946 33,201<br />
Liabilities due within one year (22,140) (40,249)<br />
Liabilities due after one year (13,332) (30,122)<br />
The results detailed below for Reox Holdings plc are disclosed separately based on criterion specified in Financial<br />
<strong>Report</strong>ing Standard 9, Associates and Joint Ventures, as follows:<br />
Name:<br />
Reox Holdings plc<br />
E’000<br />
Co-Op’s share of:<br />
Turnover 40,348<br />
Loss before exceptional items (2,584)<br />
Exceptional items 1,251<br />
Loss before taxation (1,333)<br />
Taxation 219<br />
Loss after taxation (1,114)<br />
Fixed assets 30,573<br />
Current assets 3,886<br />
Liabilities due within one year (14,746)<br />
Liabilities due after one year (12,411)<br />
38
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
12 Stocks<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Raw materials 6,652 7,730<br />
Finished goods 40,914 49,469<br />
Goods for resale 22,127 24,655<br />
Expense stocks 3,393 3,565<br />
73,086 85,419<br />
There is no material difference between the above amounts and the replacement cost of stocks.<br />
13 Debtors falling due within one year<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Trade debtors 82,201 81,440<br />
Prepayments and accrued income 9,034 5,474<br />
Amounts due from related parties - Note 30 6,164 7,004<br />
V.A.T. 1,564 2,166<br />
Corporation tax - 331<br />
98,963 96,415<br />
14 Creditors falling due within one year<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Bank loans and overdrafts 20,000 5,794<br />
Obligations under finance leases 225 -<br />
Trade creditors 30,283 49,407<br />
Accruals and deferred income 49,800 54,316<br />
Amounts due to related parties - Note 30 2,122 3,651<br />
Corporation tax 854 -<br />
PAYE and PRSI 1,845 1,751<br />
105,129 114,919<br />
15 Creditors falling due after more than one year<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Bank loans falling due between one and two years 65,500 5,000<br />
Bank loans falling due between two and five years - 65,500<br />
Obligations under finance leases 1,694 -<br />
Other loans 680 680<br />
Convertible stock - Note 21 242 243<br />
68,116 71,423<br />
39
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
16 Capital grants<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
At 1 January 6,301 1,265<br />
Receivable during year 814 5,979<br />
Credited to profit and loss account (804) (943)<br />
At 31 December 6,311 6,301<br />
17 Deferred taxation<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
At 1 January 1,754 823<br />
Relating to an acquisition of a subsidiary and a business (567) -<br />
(Credited)/Charged to profit and loss account (746) 931<br />
At 31 December 441 1,754<br />
The deferred tax arose due to timing differences, relating to the manner in which items are treated in the profit and loss<br />
account from an accounting perspective as opposed to from a taxation perspective, in addition to the existence of losses<br />
forward.<br />
Deferred tax in relation to the pension schemes is dealt with under the pension’s note 18 in accordance with the provisions<br />
of Financial <strong>Report</strong>ing Standard 17, Retirement Benefits.<br />
18 Pensions<br />
<strong>Dairygold</strong> Pension Schemes<br />
The Society operates and contributes to a number of externally funded defined benefit and defined contribution pension<br />
schemes in Ireland.<br />
The valuation of the pension plan was performed in accordance with generally accepted actuarial principles and<br />
procedures. The accounting calculations reported herein are based on the assumptions, methods and accounting policies<br />
selected by Mercer, professional pension service providers, on behalf of the Society. The pension cost is assessed in<br />
accordance with the advice of qualified actuaries using the projected unit method of funding.<br />
The most recent full actuarial valuations in respect of the Irish Funds were carried out as at 1 January 2008. The principal<br />
assumptions used in the actuarial valuations were that the difference between the investment return and general payroll<br />
increases and future pension payments would be 2.5% greater. At the date of the latest actuarial valuations, the market<br />
value of the assets was €242.6 million and the actuarial value of the assets was sufficient to cover in excess of 100% of<br />
the benefits that had accrued to Members, after allowing for future expected increases in pensionable remuneration.<br />
The actuaries’ reports are not available for public inspection but the results are advised to the Members of the various<br />
Schemes.<br />
To develop the expected long-term rate of return on asset assumptions, the Trustees considered the current level of<br />
expected returns on risk free investment (government bonds), the historical level of risk premium associated with the<br />
other classes in which the portfolio is invested (equities) and the expectations for future returns of each asset class. The<br />
expected return for each asset class was then weighted based on the actual asset allocation to develop the expected long<br />
term rate of return on asset assumptions for the portfolio.<br />
40
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
18 Pensions continued<br />
The main financial assumptions are:<br />
<strong>2009</strong> 2008 2007<br />
% % %<br />
Inflation rate increase 2.00 2.00 2.25<br />
General payroll rate increase 3.50 3.50 3.75<br />
Pension payment increase 2.00 2.00 2.25<br />
Discount rate 5.25 5.75 5.50<br />
The expected long-term rates of return for:<br />
Equities 8.60 8.50 7.60<br />
Bonds 3.80 3.70 4.20<br />
Property 7.60 6.00 6.60<br />
Mortality assumptions:<br />
Membership of the Group’s pension plans is too small to allow a statistical analysis of mortality experience suitable for<br />
facilitating a scheme specific projection of future experience. In the circumstances standard mortality tables have been<br />
employed. These tables include allowance for future improvements in mortality rates. The assumed life expectations on<br />
retirement at age 65 are:<br />
As at December <strong>2009</strong> As at December 2008<br />
Male Female Male Female<br />
Members age 65 (current life expectancy) 21.3 24.6 21.3 24.6<br />
Members age 45 (current life expectancy) 22.2 25.2 22.2 25.2<br />
The sensitivities regarding the principal assumptions used to measure the scheme liabilities are set out below:<br />
Change in<br />
assumption<br />
% Impact on<br />
scheme liabilities<br />
Discount rate Increase by 0.5% Decrease by 9%<br />
Rate of inflation Increase by 0.5% Increase by 9%<br />
Rate of salary growth Increase by 0.5% Increase by 2%<br />
Rate of mortality Increase by 1 year Increase by 3%<br />
Plan Assets<br />
The weighted average asset allocation at the year end was as follows:<br />
<strong>2009</strong> 2008<br />
% %<br />
Equities 58.3% 53.1%<br />
Bonds 36.3% 39.5%<br />
Property 5.4% 7.4%<br />
100% 100%<br />
41
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
18 Pensions continued<br />
The overall surplus in the schemes at 31 December is:<br />
<strong>2009</strong> 2008 2007<br />
E’000 E’000 E’000<br />
Fair value of assets:<br />
Equities 121,303 59,365 74,845<br />
Bonds 75,499 44,225 56,507<br />
Property 11,137 8,266 12,060<br />
207,939 111,856 143,412<br />
Present value of schemes’ liabilities (190,672) (108,803) (113,426)<br />
Effects of surplus cap (5,725) - -<br />
Surplus in schemes 11,542 3,053 29,986<br />
Related deferred tax (1,442) (382) (3,748)<br />
Closing pension asset 10,100 2,671 26,238<br />
The closing pension asset relates only to schemes operating in Ireland.<br />
The amounts included within operating profit for the year under FRS 17 are as follows:<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Current service cost 1,780 2,330<br />
Total charged within operating profit 1,780 2,330<br />
The amounts included within finance income for the year under FRS 17 are as follows:<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Expected return on the pension schemes’ assets 7,087 8,744<br />
Interest on the past service schemes’ liabilities (6,268) (6,276)<br />
Net finance credit within finance costs 819 2,468<br />
The analysis of amounts recognised in the statement of total recognised gains and losses:<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Actual return less expected return on the pension schemes’ assets 9,974 (36,630)<br />
Experience gains/(loss) arising on the schemes’ liabilities 2,624 (1,584)<br />
Changes in assumptions underlying the present value of the schemes’ liabilities (10,061) 10,630<br />
Actuarial gain/(loss) recognised in statement of total recognised gains and losses 2,537 (27,584)<br />
42
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
18 Pensions continued<br />
The movement in surplus during the year: <strong>2009</strong> 2008<br />
E’000 E’000<br />
Surplus in schemes at beginning of year 3,053 29,986<br />
Employer contributions paid 823 513<br />
Current service costs (1,780) (2,330)<br />
Other finance income 819 2,468<br />
Actuarial gain/(loss) 2,537 (27,584)<br />
Gain arising on exit of a participating employer from pension scheme 6,090 -<br />
Surplus in schemes at end of year 11,542 3,053<br />
The profit and loss balance is analysed below:<br />
Profit and loss balance excluding pension reserve 103,282 94,454<br />
Pension reserve 10,100 2,671<br />
Profit and loss balance 113,382 97,125<br />
The history of experience losses and gains has been:<br />
<strong>2009</strong> 2008 2007 2006 2005<br />
E’000 E’000 E’000 E’000 E’000<br />
Difference between the expected and<br />
actual return on schemes’ assets 9,974 (36,630) (3,600) 4,169 34,141<br />
Percentage of schemes’ assets 4.8% (32.7%) (2.5%) 2.9% 14.3%<br />
Experience gains and losses arising on<br />
the schemes’ liabilities 2,624 (1,584) (1,882) (8,135) 4,700<br />
Percentage of past service schemes’ liabilities 1.4% (1.5%) (1.7%) (7.0%) 2.1%<br />
Amount that has been recognised in statement<br />
of total recognised gains and losses 2,537 (27,584) 2,284 10,465 18,361<br />
Percentage of past service schemes’ liabilities 1.3% (25.4%) 2.0% 9.1% 8.3%<br />
Irish Co-Operative Societies Pension Scheme<br />
The Society also participates in an industry wide Irish Co-Operative Societies Pension Scheme. This is a multi-employer<br />
defined benefit scheme. However as the underlying assets and liabilities attributable to individual employers cannot<br />
be identified on a consistent and reasonable basis, the Society is accounting for the pension scheme as if it were a<br />
defined contribution scheme in accordance with FRS 17. The charge in the profit and loss account in respect of this<br />
plan was €282,000 (2008: €295,000).<br />
The most recent actuarial valuation of the scheme was carried out as at 1 July 2008 and updated to 1 February <strong>2009</strong>.<br />
At this date the actuarial value of the assets of the scheme was insufficient to cover 100% of the benefits that had<br />
accrued to Members. The funding level was 69% at 1 February <strong>2009</strong>. The actuarial report for this scheme is available<br />
for inspection by Members of the scheme but not for public inspection.<br />
Pension Cost<br />
The total pension cost charged to the operating profit was €2,211,000 (2008: €2,704,000). Valuations have been<br />
performed in accordance with the requirements of Financial <strong>Report</strong>ing Standard 17, Retirement Benefits, as at 31<br />
December <strong>2009</strong>. Scheme liabilities have been calculated using a consistent projected unit valuation method and<br />
compared to the schemes’ assets at the valuation date.<br />
43
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
19 Share capital - Issued ordinary shares of E1 each<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
At 1 January 98,997 63,209<br />
Shares issued 4 59<br />
Bonus issues from bonus reserve - Note 20 1,039 2,193<br />
Conversion of convertible stock - Note 21 1 1<br />
Shares redeemed (1,342) (1,167)<br />
Bonus issue - 34,781<br />
Shares cancelled (82) (79)<br />
At 31 December 98,617 98,997<br />
In common with other Societies incorporated under the Industrial and Provident Societies Acts, 1893 to 1978, the<br />
Society does not have an authorised share capital. The rules make provision for the issue of shares at the discretion<br />
of the Board and for the issue of convertible stock and loan capital. Any issues have taken place at par.<br />
A bonus issue of 11 new shares for every 20 shares held by Members as at 19th May 2008 in accordance with the<br />
resolution passed by Members at the <strong>Annual</strong> General Meeting held on 20th May 2008, was incorporated in 2008.<br />
20 Reserves<br />
Capital Revaluation Bonus Profit & Loss<br />
reserves reserve reserve account<br />
E’000 E’000 E’000 E’000<br />
At 1 January 1,007 6,946 1,177 97,125<br />
Conversion to share capital - Note 19 - - (1,039) -<br />
Arising on currency translation - - 2,572<br />
Actuarial gain recognised in the statement<br />
of total recognised gains and losses<br />
(net of deferred tax) - - - 2,237<br />
Gain arising on exit of a participating<br />
employer from pension scheme<br />
(net of deferred tax) - - 5,329<br />
Share of associates’ reserves movements - - - (2,068)<br />
Cancellation of shares and related dividends - - - 112<br />
Profit for year - - - 8,075<br />
At 31 December 1,007 6,946 138 113,382<br />
Society and subsidiaries 1,007 6,946 138 108,209<br />
Associates - - - 5,173<br />
At 31 December 1,007 6,946 138 113,382<br />
44
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
21 Convertible stock<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
At 1 January 243 247<br />
Conversion to share capital - Note 19 (1) (1)<br />
Stock redeemed - (3)<br />
At 31 December 242 243<br />
‘A’ convertible stock can be converted into ordinary shares based on conditions set out in the rules of the Society<br />
and subject to agreements at the time of the stock issue.<br />
22 Minority Interest<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
At 1 January 376 -<br />
Arising during the year - 227<br />
Profit on ordinary activities after taxation 258 149<br />
At 31 December 634 376<br />
23 Acquisition of a Subsidiary and Business<br />
On 15 September <strong>2009</strong>, <strong>Dairygold</strong> Food Ingredients (France) SAS acquired the entire share capital of Solailoire<br />
SARL and on 21 October <strong>2009</strong> <strong>Dairygold</strong> Agri Business Limited acquired the business of seven 4HOME stores.<br />
The book value of the assets acquired and consideration paid were as follows:<br />
Book value Fair value Value<br />
acquired adjustments acquired<br />
E’000 E’000 E’000<br />
Tangible fixed assets 5,913 562 6,475<br />
Stocks 1,635 - 1,635<br />
Debtors 275 - 275<br />
Creditors (1,205) - (1,205)<br />
Bank loans (2,719) - (2,719)<br />
Finance leases (1,935) - (1,935)<br />
Bank overdraft (177) - (177)<br />
Pension 300 - 300<br />
Deferred tax 567 - 567<br />
Value acquired 2,654 562 3,216<br />
Satisfied by:<br />
Consideration paid 1,867<br />
Consideration deferred 750<br />
Acquisition costs 599<br />
3,216<br />
Cash impact of acquisition:<br />
Consideration paid 1,867<br />
Bank overdrafts acquired 177<br />
Acquisition costs 599<br />
2,643<br />
45
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
24 Reconciliation of operating profit to net cash inflow from operating activities<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Operating profit 13,459 2,267<br />
Depreciation 14,941 14,392<br />
Difference between current service pension cost and payments made 957 1,817<br />
Capital grants credit (804) (943)<br />
Goodwill and other intangible asset amortisation 1,061 932<br />
Cash related to reorganisation and fundamental restructuring (1,992) (2,236)<br />
Profit on disposal of fixed assets - (58)<br />
Decrease in stocks 13,968 3,884<br />
Increase in debtors (2,305) (5,731)<br />
Decrease in creditors (20,109) (6,683)<br />
Net cash inflow from operating activities 19,176 7,641<br />
25 Returns on investments and servicing of finance<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Interest received 2,600 2,590<br />
Interest paid (4,469) (4,054)<br />
(1,869) (1,464)<br />
26 Capital expenditure and financial investment<br />
<strong>2009</strong> 2008<br />
E’000 E’00<br />
Payments to acquire tangible fixed assets (20,115) (25,738)<br />
Payments to acquire intangible fixed assets - (2,706)<br />
Payments to acquire financial fixed assets (20,792) (30,436)<br />
Receipts on disposals of tangible fixed assets - 78<br />
Receipts on disposals of financial fixed assets 21,151 28,026<br />
Capital grants 814 5,979<br />
(18,942) (24,797)<br />
27 Acquisitions and disposals<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Payments to acquire a subsidary and a business - Note 23 (2,643) -<br />
46
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
28 Financing<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Issue of share capital 4 59<br />
Loan received from shareholders - 906<br />
Redemption of shares (1,342) (1,167)<br />
Redemption of convertible stock - (3)<br />
(1,338) (205)<br />
29 Financial commitments<br />
Future investments and capital expenditure approved by the Board and not provided for in these financial statements<br />
amounted to €4,486,000 (2008 : €5,752,000).<br />
The Society has operating lease commitments, as set out below:<br />
<strong>2009</strong> 2008<br />
E’000 E’000<br />
Payable within 12 months 347 -<br />
Payable within 1 - 2 years 497 -<br />
Payable 3 - 5 years 1,746 -<br />
Payable greater than 5 years 65 -<br />
2,655 -<br />
30 Related party transactions<br />
The Group’s related parties, as defined by Financial <strong>Report</strong>ing Standard No. 8, Related Party disclosures, the nature of<br />
the relationships and the extent of transactions with them are summarised below. The Group views key management<br />
personnel, directors and companies controlled by them, associate undertakings and non-wholly owned subsidiaries as<br />
related parties under the standard.<br />
The Society purchases goods and services from its associates and sells goods and services to its associates on standard<br />
commercial terms. The purchases from and sales to the associates during <strong>2009</strong> amounted to €6,932,000 (2008:<br />
€8,540,000) and €6,767,000 (2008 : €14,299,000) respectively. The trading balances outstanding by and to the Society<br />
amounted to €1,532,000 (2008 : €3,651,000) and €26,000 (2008 : €958,000) respectively at the year end.<br />
The Society purchases and sells goods and services from and to a non-wholly owned subsidiary, Munster Cattle<br />
Breeding Group Limited and its subsidiaries, on standard commercial terms. During <strong>2009</strong> the purchases from and<br />
sales to Munster Cattle Breeding Group Limited amounted to €73,000 (2008 : €78,000) and €393,000 (2008 : €691,000)<br />
respectively. The trading balance outstanding to the Society amounted to €25,000 (2008 : €25,000) at the year end. On<br />
the establishment of this venture, the Society provided a loan of €1,320,000 to its non-wholly owned subsidiary, which<br />
was still in place at the year end.<br />
In the ordinary course of business, some key management and directors, in their capacity as farmers and or directors<br />
of other companies, trade with the Society on standard commercial terms. The aggregate level of purchases from and<br />
sales to these individuals during the year amounted to €912,000 (2008 : €1,386,000) and €467,000 (2008 : €588,000)<br />
respectively. The trading balances outstanding to the Society at the year end were €40,000 (2008 : €223,000). No reserve<br />
has been required in <strong>2009</strong> (2008 : nil) for bad or doubtful debts in respect of amounts owed by key management or<br />
directors and companies controlled by them.<br />
47
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
30 Related party transactions continued<br />
Reox Holdings plc<br />
In 2006, <strong>Dairygold</strong> Co-Operative Society Limited (<strong>Dairygold</strong>) and Reox Holdings plc (Reox) entered into a number of arms<br />
length commercial arrangements as part of the de-merger of Reox. All agreements are based on an open and transparent<br />
basis and reflect the agreed actual cost of providing the services to both parties. These are summarised below:<br />
i) Up to 26 January <strong>2009</strong>, the former chief executive of Reox was also chief executive of <strong>Dairygold</strong> under the terms of<br />
Agreement for Services between the two companies. The costs relating to these services were charged by Reox to<br />
<strong>Dairygold</strong>.<br />
ii)<br />
<strong>Dairygold</strong> and its subsidiaries sold goods to Reox on a commercial arms length basis during <strong>2009</strong>. The sale of goods<br />
between the two groups has now discontinued following the sale of Breeo Foods Limited and the closure by Reox of its<br />
4HOME business.<br />
iii) There is a Redeemable Interest Bearing Bond in place between <strong>Dairygold</strong> and Reox and subsidiaries in the sum of €33<br />
million. The interest rate attaching to this bond and the terms of repayment are outlined in Note 11 to these financial<br />
statements.<br />
iv)<br />
IT systems support agreement. This agreement is for the support of certain software and certain shared servers and<br />
network components. This agreement expired on 31 December <strong>2009</strong>.<br />
v) Licence Agreements. A number of the sites which are owned by <strong>Dairygold</strong> had a license agreement (999 year term) in<br />
place and were used by Reox. This arrangement ceased following the sale of Breeo Foods Limited.<br />
A number of the sites which are owned by Reox have a license agreement in place and will be used by <strong>Dairygold</strong> until<br />
an acceptable replacement site is provided for use by <strong>Dairygold</strong>.<br />
vi)<br />
vii)<br />
Lease Agreements. A number of sites which are owned by Reox are leased by <strong>Dairygold</strong> on a commercial arms length<br />
basis.<br />
Shared Services: Pursuant to shared services agreements, certain shared services, including effluent treatment,<br />
energy, water and security, with respect to both the Dairy Spreads Site and the Process Cheese Factory, were provided<br />
by <strong>Dairygold</strong> to Reox on arm’s length commercial terms, payment for such services to be made annually by Reox to<br />
<strong>Dairygold</strong> on a cost-basis. This agreement ceased on 25 March <strong>2009</strong> following the sale of Breeo Foods Limited.<br />
During the year an amount of €5 million was recorded in the financial statements, due from Reox to <strong>Dairygold</strong>, following<br />
the disposal of Breeo Foods Limited. This remained outstanding at the year end. There is a further €7.1 million due from<br />
Reox relating primarily to property commitments and RIBB Interest (payable in March 2010). In addition to these property<br />
commitments, due to <strong>Dairygold</strong> from Reox, <strong>Dairygold</strong> has received an indemnity from Reox in relation to some obligations<br />
and liabilities which may arise. <strong>Dairygold</strong> decided on reviewing its overall investment in Reox to provide for some of this<br />
investment by €6 million which is due to uncertainty around the timing of the recoverability of these assets, thus reducing its<br />
investment holding on the 2008 value by c. €3.5 million.<br />
On 21 October <strong>2009</strong>, <strong>Dairygold</strong> acquired the business of seven 4HOME stores from Reox for a consideration of €1,842,000.<br />
During <strong>2009</strong> Reox voluntarily exited as a participating employer from the <strong>Dairygold</strong> pension schemes. As a result <strong>Dairygold</strong><br />
has assumed full responsibility for such pension schemes.<br />
31 Contingent liabilities<br />
Sales to the Irish Dairy Board are based on “on account” prices and are subject to adjustment when the prices are finally<br />
agreed. Provision is made as and when required for future deficits in the product categories.<br />
The Society has guaranteed the liabilities (as defined in Section 5 (c) (iii) of the Companies (Amendment) Act, 1986) for the<br />
financial year ended 31 December <strong>2009</strong> of its Irish subsidiaries and as a result they are exempted from filing their individual<br />
financial statements under the provisions of Section 17 of the Companies (Amendment) Act, 1986.<br />
Grants of €8,338,000 (2008 : €7,616,000) which have been received under agreements between the Society, its subsidiaries,<br />
Enterprise Ireland and the European Agricultural Guidance and Guarantee Fund may become repayable should certain<br />
circumstances set out in the agreements occur.<br />
48
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
32 Securities and Guarantees<br />
The Society has entered into bank guarantees on behalf of its subsidiaries. The amounts guaranteed at the balance sheet date<br />
were €90,500,000 (2008 : €75,500,000) and they are secured by fixed and floating charges on the assets of the Society and its<br />
subsidiaries.<br />
33 Restatement of Comparatives<br />
Certain prior year figures included within the financial statements and related notes have been reclassified to ensure<br />
comparability with the current year presentation.<br />
34 Post balance sheet events<br />
No significant post balance sheet events have occurred that require reporting in the financial statements.<br />
35 Principal operating subsidiaries and associates<br />
Subsidiaries<br />
Country of<br />
Incorporation % Holding Activity<br />
Agricola Properties Limited Ireland 100.0% Property Management<br />
<strong>Dairygold</strong> Agri Business Limited Ireland 100.0% Procuring, distribution and<br />
retailing of agri and non agri<br />
supplies and farm inputs<br />
<strong>Dairygold</strong> Deutschland Handlesgesellschaft mbH Germany 100.0% Sales and distribution<br />
<strong>Dairygold</strong> Farms Limited Ireland 100.0% Farming<br />
<strong>Dairygold</strong> Finance Limited Ireland 100.0% Finance company<br />
<strong>Dairygold</strong> Food Ingredients Limited Ireland 100.0% Dairy products<br />
<strong>Dairygold</strong> Food Ingredients (U.K.) Limited U.K. 100.0% Dairy products<br />
<strong>Dairygold</strong> Food Ingredients (France) SAS France 100.0% Holding Company<br />
<strong>Dairygold</strong> Mills Limited Ireland 100.0% Milling<br />
<strong>Dairygold</strong> Trading Limited Ireland 100.0% Agri retailing<br />
Dan Dairies (U.K.) Limited U.K. 100.0% Dairy products<br />
Solailoire SARL France 100.0% Dairy products<br />
Munster Cattle Breeding Group Limited Ireland 66.0% AI and farm services<br />
Associates<br />
Country of<br />
Incorporation % Holding Activity<br />
Co-Operative Animal Health Limited * Ireland 50.0% Farm services<br />
National Cattle Breeding Centre Limited Ireland 20.0% AI services<br />
Reox Holdings plc Ireland 26.1% Holding company<br />
The Malting Company of Ireland Limited Ireland 33.3% Malting<br />
* This entity is treated as an associate due to the voting rights attached to the Society’s capital holdings therein.<br />
The companies and societies operate principally from their countries of incorporation. Only the principal operating subsidiaries<br />
are listed above. The names, addresses and registered offices of all the subsidiaries and associates are available from the<br />
Secretary of <strong>Dairygold</strong> Co-Operative Society Limited.<br />
36 Approval of financial statements<br />
The financial statements were approved by the Board of Directors on 16 March 2010.<br />
49
<strong>Dairygold</strong> Co-Operative Society Limited <strong>Annual</strong> <strong>Report</strong> and Accounts <strong>2009</strong><br />
Five year historical information<br />
Five year profit and loss account<br />
<strong>2009</strong> 2008 2007 2006 2005<br />
E’000 E’000 E’000 E’000 E’000<br />
TURNOVER 555,175 688,127 625,100 543,037 866,482<br />
Operating profit before goodwill amortisation<br />
and exceptional items 14,520 3,199 22,653 1,169 19,597<br />
Goodwill amortisation (1,061) (932) (1,192) (929) (811)<br />
Share of associates (1,044) (1,857) (3,423) 11,279 3,485<br />
Exceptional costs (1,019) - (4,485) (4,524) (15,153)<br />
Profit arising from disposal of fixed assets - 58 85 424 -<br />
Net interest (payable)/receivable (950) 842 2,334 1,435 (2,397)<br />
PROFIT before taxation 10,446 1,310 15,972 8,854 4,721<br />
Taxation (875) (1,998) (3,618) (3,200) 602<br />
PROFIT/(LOSS) after taxation 9,571 (688) 12,354 5,654 5,323<br />
Minority interest (258) (149) - - -<br />
PROFIT/(LOSS) for the financial year 9,313 (837) 12,354 5,654 5,323<br />
Share interest (1,238) (2,370) (2,294) (3,716) (2,173)<br />
RETAINED PROFIT/(LOSS) 8,075 (3,207) 10,060 1,938 3,150<br />
Five year balance sheet<br />
<strong>2009</strong> 2008 2007 2006 2005<br />
E’000 E’000 E’000 E’000 E’000<br />
Net Assets Employed:<br />
Fixed assets 209,039 207,430 209,450 194,456 250,485<br />
Stock 73,086 85,419 89,303 72,655 115,751<br />
Debtors 98,963 96,415 90,384 71,235 115,035<br />
Current cash & bank balances (10,467) 2,296 (8,344) (4,975) (17,626)<br />
Creditors (85,129) (109,125) (126,056) (82,459) (127,287)<br />
Medium/long term creditors (68,116) (71,423) (30,246) (37,429) (105,699)<br />
Capital grants (6,311) (6,301) (1,265) (1,475) (3,315)<br />
Deferred taxation liability (441) (1,754) (823) (424) 2,000<br />
Pension asset 10,100 2,671 26,238 23,063 14,253<br />
Net Assets Employed 220,724 205,628 248,641 234,647 243,597<br />
Financed by:<br />
Shareholders funds 220,090 205,252 248,641 234,647 243,597<br />
Minority interest 634 376 - - -<br />
Capital employed 220,724 205,628 248,641 234,647 243,597<br />
50
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