The Directors present their report and the audited financial statements of Bord na Móna plc for the period from 27 March 2008 to 25 March 2009.
Principal Activities and Review
The Group supplies electricity generated from peat at its generating station and supplies peat as a fuel to other electricity generating stations. It also supplies resource recovery services, peat briquettes, coal and oil, horticultural products, and pollution abatement products, environmental consultancy and commercial laboratory services.
The Chairman’s Statement on pages 2 and 3, the Managing Director‘s Review, Operational and Financial Review on pages 4 to 19 contain a review of the development of the Group’s business during the year, of the state of affairs of the businesses at 25 March 2009, of recent events and of likely future developments.
|Results for the period||€000|
|Profit after tax||15,930|
|Profit retained for financial year||3,036|
Details of the financial results of Bord na Móna plc for the period 27 March 2008 to 25 March 2009 are given on pages 34 to 61.
Policy in Bord na Móna is determined by a twelve member Board appointed by the Government. The names of the persons who were Directors during the period are set out below.
Fergus McArdle, Chairman
Gabriel D’Arcy, Managing Director
Gabriel Cribbin - Term of office expired 8 September 2008; reappointed with effect from 21 October 2008
Anne Heraty - resigned with effect from 24 February 2009
Pam Kearney - Term of office expired with effect from
8 September 2008
Rose McHugh - appointed with effect from 21 October 2008
Conor Skehan - appointed with effect from 2 May 2008.
Peter Wyer - appointed with effect from 2 May 2008.
There was one vacant Directorship as at 25 March 2009. Mr David Taylor was appointed as a Director with effect from 9 June 2009.
As part of its commitment to quality the Group has continued to implement best practice in relation to the conduct of its business and in relation to financial and general reporting.
The Group complies with the provisions of the Department of Finance’s “Code of Practice for the Governance of State Bodies” and has applied the principles of good corporate governance.
The Group established the Bord na Móna Employee Ownership Plan (ESOP) during the year, in accordance with the approvals of the Minister for Finance and the Minister for Communications, Energy and Natural Resources and applicable legislation. Under the Plan, Bord na Móna plc issued new shares and subsequently transferred 5% of its total ordinary shares to the ESOP. These shares are now held on behalf of 2,102 eligible participants (serving and retired employees) in the Bord na Móna Employee Share Ownership Trust or the Bord na Móna Approved Profit Sharing Scheme.
The Board met 11 times during the financial year.
Committees of the Board
There are three standing Committees of the Board which operate under formal terms of reference.
The members of the Risk and Audit Committee as at 25 March 2009 were Peter Wyer (Chairman), Rory Scanlan and Gabriel Cribbin. The Committee met three times during the financial year. The Committee meets periodically with the internal auditor and the external auditors to discuss the Group’s internal accounting controls, the internal audit function, the choice of accounting policies and estimation techniques, the external audit plan, the statutory audit report, financial reporting and other related matters. The internal auditor and external auditors have unrestricted access to the Risk and Audit Committee. The Chairman of the Committee reports to the Board on all significant issues considered by the Committee and the minutes of its meetings are circulated to all directors.
The Remuneration Committee deals with the remuneration and expenses of the Managing Director and senior management within Government guidelines. The members as at 25 March 2009 were Fergus McArdle (Chairman), Paddy Fox, Pat Kane and Rose McHugh. The Managing Director, Gabriel D’Arcy, attends the Committee except when his own position is being discussed. The Committee met three times during the financial year.
The Finance Committee considers and makes recommendations to the Board on the five year plan and annual budget and on other finance related matters such as the procurement, disposal and leasing of land, buildings and facilities. The members as at 25 March 2009 were Fergus McArdle (Chairman), Paudge Bennett, Gabriel D’Arcy, Paddy Rowland and Conor Skehan. The Committee met five times during the financial year.
From time to time the Board also establishes temporary Committees to deal with specific matters under defined terms of reference. The Board established such a Committee to deal with the ESOP with Fergus McArdle, Gabriel D’Arcy and Rory Scanlan as members. The Committee met once and dealt with all relevant matters at that meeting. Accordingly, the Committee is no longer in existence.
Attendance at Board and Committee Meetings
The table below summarises the attendance of Directors at Board and Committee meetings which they were eligible to attend during the year ended 25 March 2009.
|F McArdle, Chairman||11/11||9/9|
|G D’Arcy, Managing Director||11/11||9/9|
Financial Risk Management
The Group’s operations expose it to a variety of financial risks that include the effects of changes in foreign exchange risk, credit risk, liquidity and interest rate risk. The Group has in place a risk management programme that seeks to manage the financial exposures of the Group by monitoring foreign exchange exposure together with debt finance and the related finance costs.
In order to ensure stability of cash outflows and hence manage interest rate risk, the Group has a policy of maintaining at least 50 per cent of its debt at fixed rate. At March 2009, the Group had fixed 98% (2008: 99%) of its debt. Further to this the Group seeks to minimise the risk of uncertain funding in its operations by borrowing within a spread of maturity periods. Financial instruments are used to manage interest rate and financial risk. The Group does not engage in speculative activity and the treasury operating policy is risk averse.
The Group’s treasury operations are managed centrally by the treasury function and in accordance with policies approved by the Board. These policies provide principles for overall financial risk management and cover specific areas such as interest rate, liquidity and foreign exchange risk.
The Group is exposed to commodity price risk as a result of its operations. However, given the size of the Group’s operations, the costs of managing exposure to commodity price risk exceed any potential benefits. The Directors will revisit the appropriateness of this policy should the Group’s operations change in size or nature. The Group has no exposure to equity securities price risk as it holds no listed or other equity investments.
Foreign exchange risk
Bord na Móna’s reporting currency and that in which its share capital is denominated is the euro. The Group is exposed to foreign exchange risks in the normal course of business, principally on the sale and purchase of sterling and US dollar. Certain natural economic hedges exist within the Group.
The Group had $150,000,000 fixed rate debt which was hedged by cross currency swaps.
The Group has refreshed its credit policies in light of the changing economic conditions that the Group operates in. Management, with the approval of the Board, has an ongoing programme of mitigating actions which included additional resources, improved reporting and a restructure of the credit control function to manage the risk. In addition, credit insurance is also put in place for the larger customers of the Group.
The Group’s operations are highly cash generative. The Group has historically utilised this cash to retire medium and long term debt and to fund capital expenditure. Following on the completion of the private placement of debt in 2006, the Group is now primarily financed by long-term debt with maturities between 2013 and 2018. The Group has sufficient access to further sources of short, medium and long-term debt to enable it to fund both existing operations and planned expansions.
Interest rate and cash flow risk
The Group has both interest bearing assets and interest bearing liabilities. Cash balances are the only interest bearing asset which earn interest at a variable rate. The Group has a policy of maintaining at least 50% of debt at fixed rate to ensure certainty of future interest cash flows. The Directors will revisit the appropriateness of this policy should the Group’s operations change in size or nature. Through a series of interest rate swaps, the Group has fixed the interest rates on its long-term debt.
Directors’ responsibilities for financial statements
The Directors are responsible for preparing the annual report and the financial statements in accordance with applicable Irish law and generally accepted accounting practice in Ireland including the accounting standards issued by the Accounting Standards Board and published by the Institute of Chartered Accountants in Ireland.
Irish company law requires the Directors to prepare financial statements for each financial year that give a true and fair view of the state of affairs of the Company and the Group and of the profit or loss of the Group for that period. In preparing the financial statements, the Directors are required to:
|•||select suitable accounting policies and then apply them consistently;|
|•||make judgements and estimates that are reasonable and prudent;|
|•||prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.|
The Directors confirm that they have complied with the above requirements in preparing the financial statements.
The Directors are responsible for keeping proper books of account, which disclose with reasonable accuracy at any time the financial position of the Group and Company and to enable them to ensure that the financial statements are prepared in accordance with accounting standards generally accepted in Ireland and Irish Statutes comprising the Companies Acts, 1963 to 2006 and the European Communities (Companies: Group Accounts Regulations 1992). They are also responsible for safeguarding the assets of the Company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The measures taken by Directors to secure compliance with the Company’s obligation to keep proper books of account are the use of appropriate systems and procedures and the employment of competent persons. The books of account are kept at the registered office of the Company.
The Directors are responsible for the maintenance and integrity of the corporate and financial information available on Bord na Móna’s website. Legislation in the Republic of Ireland governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.
The Directors have overall responsibility for the Group’s systems of internal control and for reviewing their effectiveness. Management is responsible for the identification and evaluation of significant risks together with design and operation of suitable internal control systems. These systems are designed to ensure that transactions are executed in accordance with management’s authorisation, that reasonable steps are taken to safeguard assets and to prevent fraud, and that proper financial records are maintained. These systems are designed to manage risk and can give reasonable, but not absolute, assurance against material misstatement or loss.
The principal procedures which have been put in place by the Board to provide effective internal control include:
|•||clearly defined management responsibilities have been established throughout the Group and the services of qualified personnel have been secured and duties properly allocated among them;|
|•||a statement of decisions reserved to the Board;|
|•||a process is in place whereby business risks are identified and their implications evaluated;|
|•||a formal budgeting process for each business and the group centre culminating in an annual Group budget approved by the Board;|
|•||actual performance against budget is reported monthly to the Board;|
|•||procedures are in place for addressing the financial implications of major business risks, including financial instructions, delegation practices, and segregation of duties and these are supported by monitoring procedures;|
|•||management at all levels is responsible for internal control over its respective business functions;|
|•||procedures for monitoring the effectiveness of the internal control systems include the work of the Risk and Audit Committee, management reviews, the use of external consultants, and internal audit;|
|•||defined procedures for the appraisal, review and control of capital expenditure.|
Internal audit monitors the Group’s control systems by examining financial reports, by testing the accuracy of transactions and by otherwise obtaining assurances that the systems are operating in accordance with the Group’s objectives.
The Board has reviewed the effectiveness of the systems of internal control up to the date of approval of the financial statements. In general, adequate controls were found to exist and where new controls were required these are being implemented.
The Directors have reviewed the Group’s businesses and other relevant information and confirm that Bord na Móna plc has adequate resources to continue operating for the foreseeable future. For this reason, the going concern basis continues to be adopted in preparing the financial statements. In general, adequate controls were found to exist and where new controls were required these are being implemented.
Directors’ and Secretary’s Shareholdings
Mr P Bennett, Mr P Fox, Mr P Kane and Mr P Rowland and the Secretary are participants in the Bord na Móna Employee Share Ownership Plan and each has a notional allocation of 1,771 ordinary shares in Bord na Móna plc which are held in the Bord na Móna Approved Profit Sharing Scheme or Bord na Móna Employee Ownership Trust. The other Directors and their families had no interests in the shares of Bord na Móna plc or any other Group company during the year ended 25 March 2009.
Codes of Conduct
The Code of Conduct for Employees continued in place during the 2008/2009 financial year. A Code of Conduct for Directors was adopted in April 2002 and remains in place.
Bord na Móna seeks to implement its human resources policies through participative structures and with an emphasis on personal development and performance. It aims to provide employees with a working environment characterised by respect and with competitive take-home pay using performance-related systems.
In the year under review Bord na Móna maintained its partnership relationship with its employees and their Trade Union representatives. Both sides recognise that this approach has delivered sustained results for the Group, and allowed the Group to continue its policy of enhancing working conditions and future prospects for its employees.
The Group has a policy of constantly improving health and safety in the workplace by fully integrating health and safety best practice into business management at all levels.
An update on human resource matters is contained in the Sustainability Report which is published concurrently with this Report.
Quality and Customer Service
The Board has adopted a policy that Bord na Móna will voluntarily obtain the relevant ISO accreditation and/or other relevant accreditation for all its activities. Details of the accreditations in place are given in the sections on each of the businesses.
The Group has adopted the Code of Practice for the Delivery of Services to Customers of Commercial State Companies.
The measures taken by the Directors to secure compliance with the Group’s obligation to keep proper books of account are the use of appropriate systems and procedures and employment of competent persons. The books of account are kept at the Group’s registered office, Main Street, Newbridge, Co Kildare.
Payment of Accounts
The Directors acknowledge their responsibility for ensuring compliance, in all material respects, with the provisions of the European Communities (Late Payment in Commercial Transactions) Regulations 2002 (“the Regulations”). Procedures have been implemented to identify the dates upon which invoices fall due for payment and to ensure that payments are made by such dates. Such procedures provide reasonable assurance against material non-compliance with the Regulations. The payment policy during the year under review was to comply with the requirements of the Regulations.
The auditors, PricewaterhouseCoopers have indicated their willingness to continue in office in accordance with Section 160(2) of the Companies Acts 1963.
|Fergus McArdle||Gabriel D’Arcy|
23 June 2009