WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 - WorldReginfo annual report 2006

g r e e n c o r e g r o u p a n n u a l r e p o r t 2 0 0 6 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Our Business

Greencore is a leading producer of convenient, premium quality meal and snack solutions for retailers and food service providers at prices which the majority of consumers can afford. We are an acknowledged leader supplying markets where quality, freshness and convenience are valued. We complement convenience categories with our established ingredients, agribusiness and related property activities.

n Greencore is Europe’s largest sandwich manufacturer, producing more than 200 million sandwiches per annum

n Greencore is the UK’s largest Christmas cake manufacturer with a 31% market share1

n Greencore has a No.1 market share in UK customer branded mineral water producing 180 million units of bottled water per annum1

n Greencore is the leading malt supplier in Ireland, the UK and Belgium

Continuing operating Continuing operating profit Continuing operating Continuing operating profit profit by division – Convenience Foods profit by division – Convenience Foods

80 80 %69.0m %69.0m 70 %65.2m 70 %65.2m Convenience Foods Convenience Foods %58.9m %58.9m 92.4% 60 92.4% 60

50 50

Ingredients Agribusiness 40 Ingredients Agribusiness 40 & Related Property & Related Property 7.6% 30 7.6% 30 20 20

10 10

0 0 2004* 2005 2006 2004* 2005 2006

1 Source: TNS 2006 * As reported under Irish GAAP

Greencore Group plc Annual Report 2006  WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Contents

Board of Directors 4

Chairman’s Statement 6

Chief Executive’s Review 8

Operating Review 10

Corporate Responsibility 20

Financial Review 24

Report of the Directors 26

Statement of the Directors’ Responsibilities 39

Independent Auditors’ Report 40

Group Income Statement 42

Group Statement of Recognised Income and Expense 43

Group Statement of Changes in Equity 43

Group Balance Sheet 44

Group Cash Flow Statement 45

Group Statement of Accounting Policies 46

Notes to the Group Financial Statements 58

Company Balance Sheet 108

Company Statement of Accounting Policies 109

Notes to the Company Balance Sheet 111

Shareholder and Other Information 114 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Board of Directors

E.F. Sullivan*, B Comm, MBS (aged D.J. Dilger, BA, FCA, CBE (aged 50), Chief 58), joined the Board in March 2002 Executive, joined the Board in January and became Chairman in February 1992 and was appointed to his current 2003. He was previously Group position in May 1995 having previously Managing Director of Glanbia plc and, held the position of Chief Operating prior to that, held a number of senior Officer. Prior to joining Greencore, he positions with Grand Metropolitan plc was Chief Executive of Food Industries in London and Dublin. He is a Director plc and, previously held the position of of Anglo Irish Bank Corporation plc and Group Finance Director of Woodchester ned sullivan David Dilger Chairman of McInerney Holdings plc. Investments plc. He is a member of the He was the first Chairman of An Bord Court of Directors of the Bank of Ireland Bia (The Irish Food Board). and of the Policy Issues Committee of the Institute of Grocery Distribution.

G.M.N. Corbett*, MA, MSC (aged G.P. Doherty, B Comm, ACA (aged 55), joined the Board in December 35), Group Development Director, 2004. He is Chairman of Britvic plc, joined the Company in 2001 as Group Woolworths Group plc and SSL Financial Controller and the Board in International plc. Previously, he was July 2005. Prior to joining Greencore, he Chief Executive of Railtrack plc and, was Group Financial Controller of IWP prior to that, was Group Finance International plc and previously worked Director of Grand Metropolitan plc. with PricewaterhouseCoopers and BDO Simpson Xavier accountants in Dublin. Gerald Corbett Geoff Doherty

P.F. Coveney, B Comm, M Phil, D S.P. FitzPatrick*, FCA (aged 58), joined Phil (aged 36), Chief Financial Officer, the Board in January 2003. He is joined the Board in September 2005. Chairman of Anglo Irish Bank Corporation Prior to joining Greencore, he was a plc since January 2005 and was formerly partner with McKinsey and Company, its Chief Executive, a position he held serving as Managing Partner of since 1986. He is a Director of Aer McKinsey, Ireland. He is a member Lingus plc and the Dublin Docklands of the Council of the Dublin Chamber Development Authority and a past of Commerce where he acts as President of the Irish Bankers Federation. Patrick Coveney Sean FitzPatrick Hon. Treasurer.

C.M. Bergin, BA, Dip Legal Studies, Solicitor (aged 45), Group Company Secretary, joined the company in 1991 as Company Solicitor from A&L Goodbody, Solicitors. She was promoted to Deputy Group Secretary in 1999 and was appointed to her current position in July 2002.

Caroline Bergin

 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 A.M. Hynes (aged 55), Chief D.M. Simons*, BSc Econ, FCMA Operating Officer, joined the Board in (aged 59), was appointed to the Board December 2001. He was previously in July 2004. He is the Chairman of Managing Director of Green Isle Littlewoods Shop Direct Group and Foods Limited, part of Northern Foods a Director of Woolworths Group plc. plc. Prior to joining Green Isle, he Previously, he was Chief Executive of held senior management positions Somerfield plc and, prior to that, held in China, France and Ireland with a number of senior positions with other Essilor International, the worldwide retail companies including Storehouse Tony Hynes David Simons ophthalmic optics group. plc, House of Fraser Limited and Toys R Us Limited.

P.A. McCann* (aged 55), joined the D.A. Sugden*, BSc, FCA (aged 55), Board in November 2003. He is a joined the Board in April 2002. He is consultant to the hospitality and Chairman of BPP Holdings plc and a leisure industry in Ireland and the UK former Chairman of MSB International and was formerly the Chief Executive plc. Prior to that, he was Group of Jurys Doyle Hotel Group plc, a Chief Executive of Geest plc, which position he held from 2000 until he joined from Spear & Jackson 2006. He is currently a member of International plc where he had been the National Executive Council of Group Finance Director. Pat McCann David Sugden IBEC and a past President of the Irish Hotels Federation.

P.R. O’Donoghue* (aged 63), joined the Board in December 1999. He is a Non-Executive Director of Waterford Wedgwood plc, having been the Chief Executive and a Director since 1985. Previously, he held senior management positions with the Ford Motor Company in Ireland, Spain and the UK. He is Chairman of the Governing Body of Redmond Waterford Institute of Technology and O’Donoghue a former Chairman of both Bord Failte and the Marketing Institute of Ireland.

Board Audit Nomination Option and Remuneration Committees: Committee Committee Committee P.A. McCann* D.J. Dilger G.M.N. Corbett* D.M. Simons* P.A. McCann* S.P. FitzPatrick* D.A. Sugden* D.M. Simons* P.R. O’Donoghue* E.F. Sullivan* E.F. Sullivan*

* Denotes Non-Executive Director

Greencore Group plc Annual Report 2006  WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Chairman’s Statement

I am pleased to report a strong performance by Greencore during 2006, a year in which its transformation from a principally agribusiness based operation into one of Europe’s leading convenience food producers was completed.

The Convenience Foods division delivered excellent revenue and profit growth while the Ingredients, Agribusiness and Related Property division performed well, despite significant challenges, Ned Sullivan most notably the exit from sugar processing in Ireland.

Overview of results As anticipated, over-capacity in The Convenience Foods division, which European malt markets and significant now accounts for 92.4% of the Group’s energy price inflation adversely continuing operating profits, performed impacted on the performance of strongly with turnover growth of 8.3% the Malt business. The Group is, and an operating profit increase of however, currently seeing a significant 5.7%, whilst maintaining operating improvement in the malt cycle that margins broadly in line with the prior commenced in the latter half of 2006. year level (7.7% versus 7.8% in 2005). During the year, Greencore also This margin performance was achieved significantly increased its focus on despite divisional energy cost increases unlocking the value from the Group’s of more than €5m year on year. property assets.

The Ingredients, Agribusiness and The Group continued to prioritise Related Property division delivered cash generation. Despite incurring total operating profits of €27.6m in exceptional cash costs, primarily 2006. This was a strong result given associated with the exit from the dramatic developments in this sugar processing, comparable net 2 € division during the year. Regulatory debt at year end was 385.4m, € change in the EU sugar regime posed an improvement of 14.3m on an insurmountable challenge to the September 2005. competitiveness of the sugar industry in Ireland. The Group responded to Exit from sugar processing this challenge by committing early to Sugar processing flourished in Ireland exit sugar production in Ireland and for 80 years. Greencore Sugar had by strongly defending the Group’s a highly effective workforce, strong entitlement to restructuring aid under operational capability and a culture EU law. rooted in processing excellence.

2 Comparable net debt excludes the impact of fair valuing the Group borrowings.

 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Its contribution to Irish agribusiness shareholders, this will result in a total Despite significant increases in input was considerable. The decision of dividend of 12.63 cent which is in line price inflation, the Group believes that the EU Council of Ministers on 24 with last year’s level. the strong strategic and operational November 2005, effectively resulted in model that has been put in place the end of sugar processing in Ireland. Shareholders will once again be offered positions Convenience Foods well Greencore had hoped to be able to the option of receiving dividends in the for continued growth through 2007 undertake ‘one more campaign’ in form of cash or shares. and beyond. 2006/2007, but unfortunately and despite considerable efforts on the part Management and staff A recovery in the EU malt market should of many parties, it was not feasible to The success of Greencore Group deliver a trading improvement in the do so. This resulted in the closure of plc is a direct consequence of the Malt business and that, allied to the the last Irish sugar processing facility at hard work and dedication of our exciting property opportunities that the Mallow, Co. Cork. highly committed colleagues across Group is pursuing, represents a positive the Group in Ireland, the UK and outlook for the Ingredients, Agribusiness While Greencore exited sugar Continental Europe. In addition, our and Related Property division. processing in 2006, the matter of ability to attract and retain highly The Board believes that the Group is well allocation of EU restructuring aid motivated and talented individuals, positioned to deliver substantial value still requires resolution. This issue is provides a strong platform for the to shareholders over the coming years. currently the subject of a High Court future success of the Group. judicial review process. Ned Sullivan I would like to thank the entire team Chairman I would like to thank our dedicated for their contribution to another workforce at all sugar locations over strong year for the Group. 21 December 2006 the last 80 years and our loyal growers whose dedication to this industry made Outlook it the success it was. Greencore is now a fundamentally different business to that of twelve Dividend months ago, with its key focus now The Directors recommend a final on driving forward its successful dividend of 7.58 cent. If approved by Convenience Foods business.

Greencore Group plc Annual Report 2006  WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Chief Executive’s Review

The Chairman has reported on the progress made during 2006 when the continued strong performance from Convenience Foods helped to offset the anticipated decline in operating profitability in Ingredients, Agribusiness and Related Property. In all of the circumstances, this represents outstanding performance which is a testament to both good strategy david dilger together with focused and single-minded execution by our entire management team. It is a real privilege to lead that team.

Sugar Processing lower prices but significant numbers In last year’s Chief Executive’s of growers determined that the best Review, I reported on the November strategy for them involved cessation 2005 decision by the EU Council of of beet growing together with a strong Agriculture Ministers to fundamentally lobbying effort to persuade the Irish reform the EU Sugar Regime. This Government to allocate a significant decision imposed price cuts of some part or all of EU restructuring aid to 36% on EU sugar processors and beet growers. some 40% on EU sugar beet growers To these factors were added the over a four year period. I further considerable operating risks inherent reported that many beet growers in in attempting to process a sugar beet Ireland would be unable to profitably crop in circumstances where all of the grow sugar beet at the price levels stakeholders in the business would which will pertain towards the end of have known that this was the last this transitional four year period. On processing campaign. that basis, it seemed certain that the Group would be forced at some point These issues, taken together, led to renounce its EU sugar quota and Greencore to the inevitable conclusion participate in the EU Restructuring that the best interests of the business Fund for sugar processors. would be served by a decision to exit sugar processing and renounce EU In the event, that time came more sugar quota. Subsequent events have quickly than the Group had hoped. established beyond doubt that this exit Sugar prices declined sharply in decision enabled the Group to avoid advance of reform as EU sugar significant losses. processors fought to establish market share in markets where existing sugar Greencore Sugar continued to trade processors were perceived to have a successfully and realise the optimum limited probability of survival. Sugar value for many of its assets throughout beet growers in Ireland became divided the remainder of 2006. It was a about whether another beet crop terrific achievement on the part of our could or should profitably be grown. sugar management team to bring in Many wanted to continue growing at results which substantially exceeded

 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 the Group’s expectations in this Convenience Foods The combination of better returns and extraordinarily difficult environment. The The Operating Review on pages 10 lower risk levels will be the key driver appreciation of the Group to, among to 15 of this Annual Report sets out of superior performance. Therefore, many others, Dr. Sean Brady, Joe the detailed financial performance of this combination is at the heart of Walsh, Pat Norris, Niall Swords, Martin our Convenience Foods Division. It Greencore’s Convenience Food Ryan and Gerry Norton requires to be also sets out the key strategic themes strategy. It forms the rationale for: publicly acknowledged. which we use to set the priorities for n Our significant market shares within the Division and provides examples of Turning to the Group’s entitlement our diversified category portfolio how these priorities contributed to a to EU restructuring aid, the present n Our convenience store and successful year in 2006. position is clearly set out in the foodservice strategy

Operating and Financial Reviews on We have built a consistently successful n Our evolving brand strategies pages 16 to 19 and 24 to 25 of this business in Convenience Foods in spite n Our relentless focus on Total Annual Report and in note 7 to the of the fact that the industry, as a whole, Lowest Cost (TLC) accompanying financial statements. has produced patchy overall financial n Our investment in innovation The Group remains confident of its performance in recent years. This n Our dedication to food safety entitlement to EU restructuring aid and lacklustre industry performance has and security awaits the outcome of the forthcoming been characterised by over-investment judicial review of the Irish Government’s in capacity, too little focus on cash-flow, n Our rigorous financial discipline decision on the allocation of such aid. too much focus on activity growth and n Our aspirations for further insufficient focus on great cost control, geographical diversification Malt service levels, innovation, health The Group’s malt business experienced and dietary challenges and general All of these are based on the a difficult year in which global malt execution. requirement to achieve better returns prices reached unsustainably low while operating at lower levels of risk. levels causing serious financial This is not a bad industry – it is not I am reasonably confident that the under-performance among maltsters condemned to perform poorly. In fact, entire convenience foods industry throughout the world. In this demographic factors continue to drive will perform better in the foreseeable environment, it was not possible for an expectation that Convenience Foods future as many industry participants even the most efficient maltsters to growth will continue at levels which focus more sharply on performance deliver an adequate or appropriate greatly exceed growth in the overall improvement. However, whether the return on investment in this capital food market place. While product and rest of the industry does or not, I am intensive industry. category tastes will inevitably change, the underlying consumer demand for confident that our Group has the However, all unsustainable markets more convenience food propositions strategy and the people to ensure come to an end and the first quarter will, if anything, accelerate. that we can continue to win and of the current financial year has seen stand out as a leader in value creation unprecedented levels of price increase The key challenge for food both for our customers and our in both malt and malting barley manufacturers is to harness this shareholders. These are not mutually markets. This volatility imposes different attractive market growth into attractive exclusive concepts - they are both vital types of challenge but the environment returns for owners and investors. pre-requisites for the achievement of now is conducive to reasonable returns our ambitions. I am confident that Greencore’s for businesses with appropriate scale consistent strategy and relentless and levels of efficiency. Therefore, David Dilger execution will deliver increasingly we confidently expect a measurable Chief Executive attractive returns from a platform which performance improvement in malt in we will continuously modify in order to 21 December 2006 the current year. drive more diversified and, therefore, lower risk levels.

Greencore Group plc Annual Report 2006  WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 OPERATING REVIEW Convenience Foods Division

2006 2005 €m €m Change Turnover (continuing operations) 901.4 832.6 +8.3% Operating Profit (continuing operations)* 69.0 65.2 +5.7% * before exceptional items

The Convenience Foods n Strong margin performance categories growing above their division accounted for 92.4% The division delivered operating relevant category growth rates3. The of continuing operating margins of 7.7% for the full year, main exception was Greencore’s profits in 2006. The division broadly in line with the 2005 figure Grocery business, which delivered performed strongly to deliver of 7.8%. This was achieved despite a solid performance relative both energy cost increases, year on year, to historic levels and expectation, full year turnover growth of more than €5m - equivalent to but compared unfavourably with its of 8.3%, operating profit 0.6% of margin reduction. 2005 performance, a period in which growth of 5.7% and healthy its successful response to a fire at operating margins of 7.7%, n Turnover growth a competitor’s facility helped deliver despite challenging pricing The division has continued to deliver above normal sales and profit. and input cost environments. strong organic growth. Turnover The demanding objectives growth was 8.3% for the year, a level The division is now consistently that have been set in the that is more than double the overall delivering operating profit growth. 3 key areas of operational food market growth rate of 3.4% . This delivery reflects both the clear choices that the Group has made cost reduction, channel and n Robust performance across on where it competes and the strong customer diversification, the entire division capabilities that have been built across innovation and operational The strong sales performance the businesses to successfully execute performance, continue to extended across the division, with the Group’s strategy: be achieved. In particular, in seven of the Group’s nine business 2006, this division delivered:

3 Source: TNS 2006

10 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Leadership of growing product categories Greencore has No.1 or No.2 positions3 in all of the product categories where it competes and most of these categories are growing faster than their markets.

helen warner National Account Manager, Cakes & Desserts

1. Well chosen categories that are growing faster than the Celebrations Cakes segment grew

Greencore believes in the overall market and that deliver at 13%, while the Group’s growth 3 fundamental attractiveness of the high economic returns both for was approximately 18% . customers and for the Group. convenience foods market. It is at 2. Balanced channel exposure the core of the Group’s strategy. Greencore’s success to date, A core feature of the Greencore Greencore actively seeks out has been driven by these specific model is the balance that is sought No.1 or strong No.2 market share market, segment and format across channels and customers. positions in product categories choices. For example, in Mineral In 2006, two thirds of the Group’s with relatively concentrated Water, where Greencore leads the business was conducted through ownership. In seven of the Group’s customer brand market with a the ‘multiple channel’. Within nine convenience food categories 34% market share, annual market that channel, the relative share of it holds the No.1 position, while growth was 6% while the Group’s individual customers has remained holding the No.2 position in the growth was 10%3. In Cakes, where broadly stable and reflects the other categories3. Furthermore, the overall market grew at 6%, the market share of those retailers Greencore competes in categories

3 Source: TNS 2006

Greencore Group plc Annual Report 2006 11 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Broad channel exposure Increasing sales to non-multiple customers with growth of 26% in the year. The key driver is the unique Greencore Food-To-Go operation.

david williams Managing Director of Food to Go

in the UK grocery market. The greater movements of business about process and efficiency. Over quality of Greencore’s relationships than the multiple channel. In 2006, the past three years, this culture has with these customers remains sales to non-multiple channels grew been deeply embedded at all levels central to the Group’s business by 26%. The Greencore Food-To- of the Group’s business. In 2006, model. Excellent customer service Go operation drives much of this nearly 200 TLC initiatives were underpins these relationships, with strategy. In 2006, this business implemented across the division. customer service levels across the delivered individually ordered fresh Taken together, these initiatives Group averaging 99% for the year. sandwiches and other chilled have delivered operational cost products to approximately 7,000 improvements that total in excess Greencore is also committed to individual outlets six days per week. of 2% of sales, or more than €18m building a material non-multiple of divisional operating profits. business reflecting the fact that 3. A commitment to being the lowest cost competitor nearly a quarter of total food Included in the TLC programme this and beverage spend in the UK Greencore is committed to being year were a number of initiatives is now focused on out-of-home the Total Lowest Cost (TLC) across all categories focused on consumption3. This is a dynamic competitor in convenience foods. waste reduction. As a result, total and vibrant channel characterised The TLC imperative is as much waste across the division reduced by higher levels of growth and about culture and leadership as it is by more than 10%. In addition,

3 Source: TNS 2006

12 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Relentless focus on Total Lowest Cost (TLC) Real operational cost reduction totalled more than 2% with significant focus on waste reduction, process automation and purchasing efficiency. TLC continues to be an important part of the Group’s culture.

David gallagher Managing Director of Frozen Foods

david williams Managing Director of Food to Go

the division’s ‘Lean Greencore’ reformulation and packaging to consumers and customers, while programme saw approximately re-design. sustaining margins. At the end of 600 process leaders complete September 2006, more than 50% These operational and efficiency training in ‘lean principles’ that, of the Group’s portfolio comprised improvements enabled the business in turn, directly resulted in nearly products that are less than one to offset input price inflation, as well 100 new cost reduction projects. year old. For example, in response as improve terms with customers, This was supported by many to significant changes in consumer without sacrificing the Group’s discrete projects and investments and customer preferences in commitment to quality and margin directed at increased automation, the Chilled Meals category, the performance. The division expects productivity improvement and business replaced or refreshed all to deliver similar levels of cost efficiency enhancement. of its lines, the majority being new reduction going forward. products and the remainder being Purchasing efficiency is also critical 4. Aggressive innovation, changes in packaging. to the TLC effort and this year saw especially in the areas of nearly 350 individual initiatives (in premium and health Health remains important to addition to the main TLC initiatives), Innovation is the lifeblood of the the Group’s innovation agenda, to drive savings through supplier convenience foods business. It is with various initiatives delivering concentration as well as product how Greencore delivers excitement wholesome ingredients and

Greencore Group plc Annual Report 2006 13 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 kevin moore Managing Director of Prepared Foods

Aggressive product development and mix management More than 50% of the product range is less than 1 year old. Initiatives such as the launch of WeightWatchers® prepared meals and the branded frozen desserts called ‘PUDZ’ are just some of the exciting developments this year.

healthier choices. One example is in brand with strong margins, delivering commercial, operational and the area of salt reduction, where the retail sales of approximately €25m. financial demands necessary to Group has reduced the average salt A 10% market share3 in the total drive profit and cash performance. content in its quiche and prepared healthy chilled meals sector has 6. Robust financial discipline meal products by 38% and 31% been achieved, including the number Rigorous management of the respectively. one selling individual product. Group’s resources, in particular fixed Greencore has begun to roll out The license agreement that was put and working capital investments, this brand to a number of other in place with WeightWatchers®, in is a core feature of how Greencore convenience foods categories. June 2005, has been a particularly competes. €34.2m was invested important initiative. Greencore has 5. A decentralised model that in Convenience Foods in 2006. bestows ‘true ownership’ to the since launched a range of chilled businesses This spend was tightly managed prepared meals, produced under and focused on driving efficiency Greencore businesses ‘own’ their license from WeightWatchers® and, improvement projects, such as, P&L and Cash Flow statement over the course of 2006, has built new automated lines in Sandwiches – that is the ‘Greencore way’. distribution through all of the major and real-time on-line data capture This enables front-line leaders to UK and Irish retailers. In a little over systems in Cakes, or facilitated entry make the daily trade-offs between a year, the Group has built a retail into new market sectors, such as

3 Source: TNS 2006

14 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Robust financial discipline and management Rigorous management of fixed asset investments, working capital and margins are core features of the robust financial discipline in place across the Group. In addition to managing and monitoring these disciplines, the finance team also successfully led the Group’s transition to International Financial Reporting Standards.

imelda hurley Group Financial Controller

the move into the filled baguette, to selected food categories, the raw materials and commodity snack salad and WeightWatchers® overall pricing environment remains ingredients. To absorb these prepared meal markets. challenging. inflationary pressures, the division is pursuing a combination of further The Group’s relentless focus on these n Significant input price inflation operational cost reduction and strategic and operational imperatives The energy price increases of where appropriate, selected price is critical to continued success, given 2005 and 2006, have been widely increases. some significant market challenges: reported across the food industry. In 2006, the division incurred energy n A challenging retail environment cost increases of more than 50% UK multiples continued to drive (adding more than €5m to its retail price deflation across cost base). The division does not many categories, particularly in anticipate similar levels of price the first half of this year, placing inflation in 2007. However, farm even greater importance on cost gate prices increased sharply in reduction and innovation processes. the later part of the year, impacting While there is some recent evidence the cost of a wide range of of retail price inflation returning

Greencore Group plc Annual Report 2006 15 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 OPERATING REVIEW Ingredients, Agribusiness and Related Property Division

2006 2005 €m €m Change Turnover (continuing and discontinued operations) 450.5 492.5 -8.5% Operating Profit (continuing and discontinued operations)* 27.6 36.7 -24.7% * before exceptional items

In the year under review, the The division delivered total operating and put in place a process to wind Ingredients, Agribusiness and profit (pre-tax) of€ 27.6m, consisting down its sugar operations, prepare Related Property division was of continuing operating profits of a restructuring plan and claim its subjected to unprecedented €5.6m and discontinued operating entitlement to restructuring aid in change. The Group exited profits of €22.0m. This represents a accordance with EU regulations. sugar processing, with 2006 fall of €9.1m (24.7%) on 2005 levels, In July 2006, the Irish Government representing the final year of operations. This brought driven by upheavals in the EU sugar announced its decision in relation to an end to 80 years of sugar market both in anticipation of and the allocation of the €145.5m of EU processing in Ireland. As following the introduction of the restructuring aid (in the context of anticipated, over-capacity in new EU sugar regime, and by a a separate additional €123m to be European malt markets and significant fall in profits at Malt, which paid to beet growers over the next significant energy price inflation, absorbed energy cost increases of seven years, as part of the single adversely impacted on the approximately €4m. farm payment scheme and €44m performance of Greencore Malt. Management of the in diversification aid, also allocated 1. Exit from sugar processing Group’s 970 acres of property to growers). Greencore did not assets was refocused under The decision of the EU Council regard that decision as lawful and Board level leadership and of Ministers in November 2005, was granted leave to seek a judicial this delivered a positive profit effectively brought an end to the review of the decision in the High contribution in 2006. This has sugar industry in Ireland. In March Court. On 31 July 2006, Greencore created a strong platform for 2006, Greencore announced its formally applied for restructuring aid significant value enhancement intention to exit sugar processing in the future.

16 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Maintaining Siucra and McKinney’s Greencore has set up a joint venture with Nordzucker AG called Sugar Partners which will continue to distribute sugar to its customers and maintain the Siúcra® and McKinney brands.

niall SWORDS Chief Executive of Sugar Partners

by renouncing its sugar quota and The financial effects of exiting demolition, environmental and submitting a restructuring plan to sugar processing and related remediation. Cash costs of the Irish Government. activities are severe. €11.2m were incurred in 2006.

Greencore subsequently agreed n Profit impact n Receipt of EU restructuring aid with the Irish Government that, Pre-tax profits from sugar These exit costs will be partially conditional upon Greencore’s operations totalled €22.0m offset by the receipt of EU restructuring plan being approved, (including related activities also restructuring aid. The Board the Group would amend the plan discontinued by the Group), a (having taken independent legal, to reflect any lawful decision of fall of €5.3m on 2005, but better economic and financial advice) Government taken pursuant to the than expected due to a stronger believes that Greencore is outcome of the legal proceedings. than anticipated operating and entitled to €130.9m of EU aid, On 19 September 2006, the commercial performance. representing 90% of the EU aid Government deemed Greencore’s available to Ireland. However, this n Gross costs of exit restructuring plan to be eligible entitlement is currently subject to Gross exit costs are expected for restructuring aid. This decision the outcome of the judicial review to total €164.8m (net of tax). Of ensures that the payment of EU process. The 2006 financial these costs, €115.0m reflects aid can begin in June 2007. Legal statements recognise an asset the write-off of Greencore Sugar proceedings continue with a trial of €95.9m of EU aid (reflecting assets, with the remainder, date likely to be fixed shortly. the present value of the €98.4m largely cash costs, principally allocated to Greencore in the associated with redundancy,

Greencore Group plc Annual Report 2006 17 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Strong Malt franchise The Malt business is positioned to benefit from an industry recovery through its strong operational capability and leading market positions in UK, Ireland, Belgium and Russia.

peter nallon Business Development Director at Greencore Malt

Government’s decision of July Looking forward, Greencore prices reached a low point in the 2006). In addition, the financial remains committed to serving its cycle last winter, driven in large statements disclose a contingent sugar customers. Sugar Partners, part, by industry over-capacity. asset of €32.5m (representing the Group’s joint venture with That negative pricing impact, the difference between the Nordzucker AG, started to trade allied to energy cost increases Board’s view of Greencore’s in October 2006, taking on all of approximately €4m, had a lawful entitlement and the the customer commitments of negative impact on the profitability Government’s decision). The Greencore Sugar and preserving of the Group’s malt business. Last EU restructuring aid will be paid much of the brand value of Siúcra® year, Greencore took the step of in two tranches – 40% in June and McKinney’s. However, the restructuring its portfolio of malting 2007 and 60% in February 2008. contribution to Group profits assets, resulting in the closure of from this activity is not expected three maltings. This year, the Group Note 7 to the consolidated to be substantial. restructured its core operations in financial statements sets out the the UK and Ireland, the costs of accounting treatment for the net 2. Malt performance and restructuring which totalled €5.2m. The Malt costs associated with the exit business also benefited from a from sugar processing. Malt experienced a very difficult legal settlement receipt of €4.9m year in 2006. International malt

18 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Momentum in the management of property assets Creating a strong platform for significant value enhancement of the Group’s property assets, the Carlow Gateway proposal is an exciting example of the Group’s approach to proactively add value to sites over time.

(net of costs). Both the restructuring 3. Related Property properties was centralised under

costs and legal settlement have Greencore has always been the Group Development Director, been treated as exceptional items involved in developing and trading in addition to which a set of ‘site- (note 7). surplus property assets within the specific’ expert teams were put in Ingredients and Agribusiness area. place. These teams are focused on The combination of a better balance This continued in 2006 with the maximising the value available to between supply and demand, a disposal of a property to a related shareholders from all of the Group poor barley harvest across Europe party (note 37) and the sale of property assets. affecting malt prices and more a surplus property asset within stable energy prices has led to a Operating profits in the Group’s other the Malt business. Cumulatively, recovery during the latter half of ingredients and agribusinesses and the profits on the disposals of related 2006. This industry recovery, along Group share of profits from associates properties were up modestly on with a strong operational capability, were modestly down. those delivered in 2005. high quality malting assets and

leading market positions (clear No.1 The Group retains significant market share position in Ireland, property assets, the management UK and Belgium), should deliver a of which changed during the year. considerable trading improvement Management of all significant in 2007.

Greencore Group plc Annual Report 2006 19 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Corporate Responsibility

Greencore recognises that its success depends not only on the quality, price and uniqueness of its product ranges, but also on how it interacts with its workforce, other companies, the community and the environment. The Group aims to operate to the highest standards and is constantly seeking ways to further best practice standards in the workplace, environment, the marketplace and with local communities.

Workplace The Group has a clear policy which selected by the HSE for involvement Colleagues details required labour standards in in their ‘Leadership in Health and Greencore has a talented, dedicated, line with the Ethical Trading Initiative Safety’ programme. efficient and motivated workforce base code. This policy applies both to The Group’s health and safety operating across Ireland, the UK colleagues and those working within standards are regularly challenged, and Continental Europe. The Group the wider supply chain. Greencore is both by external bodies and by its has a comprehensive performance also a member of Sedex in the UK, own internal review programmes. It review process which sets individual which is a web-based system that constantly seeks to improve and share objectives and which helps identify maintains data on ethical standards best practice across businesses. By training and development needs. This in the Group’s facilities. way of example, the process by which process, known as ‘PRIDE’, aims to Health and Safety Malt, Chilled Meals and Sandwiches assist colleagues to maximise their Effective management of health achieved accreditation to OHSAS potential and helps develop training and safety is integral to the way 18001 (the industry recognised system courses which vary from IT related the Group operates. Group policy for effective management of health seminars to ‘lean’ manufacturing is to ensure, by all reasonable and and safety) will be used in other parts programmes. practical means, that its colleagues of the Group. The Group recognises its are protected against the risk of injury Greencore also promotes active risk responsibilities in respect of the or occupational ill health. The Group’s management in the broader food multicultural environments in which commitment to the health and safety industry. This year, it was instrumental it operates. Greencore was the lead of its staff has been recognised not in establishing and chairing a new manufacturer in the development only by key bodies such as the HSE specialist group for food and drink at and publication of ‘Working Safely in the UK but also by insurers. An the Institute of Occupational Safety in a Multi-cultural Food and Drinks example of the Group’s performance and Health in the UK. Industry’. This publication has received is demonstrated by yet another acclaim from the Health and Safety successful year-on-year reduction Greencore has also developed a Executive (HSE) in the UK. of approximately 24% in work-place unique ‘Food First’ programme accidents. In recognition of these which focuses on food training achievements, Greencore has been and awareness as well as food

20 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 development and credibility. In addition to develop a carbon footprint for the sites are fully decommissioned and to the Group’s existing occupational business which measures the total returned to environmentally clean health programme, Food First has carbon impact on the environment brownfield sites. The Company will seen the launch of a ‘health first’ from Greencore facilities. Three of the continue to review all aspects of the programme focused on nutrition, Group’s largest manufacturing sites remediation plans with the EPA during education, cooking skills, well-being have embarked on a pilot energy the implementation phase. and activity. management programme to drive down carbon emissions and develop The Group has a number of activities Environment a best practice model that can be in place to raise environmental awareness, including an environmental Greencore recognises that applied to the rest of the Group. responsibilities training programme environmental protection is essential Across Greencore, waste minimisation and an environmental activities week. to the well being of colleagues, the and increased recycling is actively An environmental newsletter ‘Green- general public and the natural habitat. pursued. The Group became the first to-the-Core’ has been developed and The Group is therefore committed major UK manufacturer to commit to is published to support communication to ensuring that the development an innovative project to eliminate waste and sharing of best practice across of its business is conducted in an from landfill. This project, which will be the Group. environmentally responsible and implemented during 2007, is expected sustainable manner. to virtually eliminate landfill as a Marketplace Environmental management systems disposal route for waste, and instead, Food Safety are being developed across the this waste will be converted into a Food safety is a key priority for the business with particular recognition bio-fuel where appropriate. Elimination Group. In this area, the Group is being achieved by Malt, in achieving of landfill has already been achieved at constantly challenged by customers, ISO 14001 and the Grocery business our sites in the Netherlands. governmental and accreditation achieving certification to BS8555 bodies. The Group’s high standards Following the closure of the Carlow level 3. The Group continues to meet have been and continue to be regularly and Mallow sugar factories in Ireland, its obligations under the UK climate acknowledged through the receipt the Group has been proactively change levy scheme and, with support of numerous customer awards and working with the Environmental from the Carbon Trust, has started recognition reflecting both individual Protection Agency to ensure that the

Greencore Group plc Annual Report 2006 21 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 and team performance. While it is Achieving accreditation is just the removing artificial colourings, an honour to be acknowledged, beginning of the Group’s continuous flavourings and preservatives from its these standards are the ‘Greencore improvement program. ingredient lists, so that increasingly Way’ and no other measures are products only contain ingredients that acceptable. Health consumers would normally have in As a leading food manufacturer, their own kitchens. In order to keep up-to-date in the Greencore recognises its role in area of food safety, the Group works helping to change dietary habits In Ireland, Sugar Partners is actively closely with industry and government in the communities it serves. involved in the Nutrition and Health bodies and holds positions on key Foundation which promotes balanced groups including, in the UK, the The Group has a responsibility to its and healthy lifestyles. Chilled Food Association, DEFRA customers and colleagues as well Link, Food Chain Centre of Industrial as a commitment to deliver against Local Communities government challenges and targets Collaboration, IGD Contaminants Greencore is conscious of the (such as those set out in the UK Working Group and Leeds University positive impact it can have in Government’s 2004 white paper Food Science Committee. All supporting its local communities. ‘Choosing Health’). Greencore is convenience foods locations in the UK The Group endeavours to support committed to offering healthier and the Netherlands are accredited colleagues by encouraging businesses choices in each of its product to the BRC standard Grade A (the to acknowledge individuals who give categories. In particular, the Group highest possible), while Malt has to their communities in some way has an ongoing programme of accreditation to ISO 9001:2000 and, where possible, to match funds salt, fat and sugar reduction and a and played an active part in the raised in support of specific charities programme of removing/replacing development of Assured UK Malt, such as Children in Need and Breast ‘bad’ fats with ‘good’ alternatives. the world’s first independently Cancer Awareness. audited assurance scheme for malt. The Group has also focused on

22 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Education and the welfare of children established learning centres at some level, to give students a better is also an important focus for the of its larger convenience food sites, understanding of food manufacturing Group. It has supported the launch which offer training in key skills such and the benefits of good nutrition. of a Cancer Research initiative called as English language and IT. The most ‘Pound a Poem’ in the UK and also a recently established centre, at the In Summary foundation called ‘Kinderhartenfonds’ Cakes & Desserts facility in Hull, was Greencore takes seriously its duty to in the Netherlands. Both initiatives aim opened by the Secretary of State treat colleagues fairly, to protect the to raise awareness amongst children for Education in the UK at the end health & safety of both colleagues and of the benefits of healthy eating. of November 2006. At Chilled Meals consumers and to conform to laws (Warrington site), the learning centre and regulations in the jurisdictions The Group gives strong support is open to the local community. The in which it operates. Additionally, to the UK’s trade charity, Caravan, Sandwiches facility at Manton Wood however, the Group seeks to which plays an important role in both has established a partnership with extend beyond what is expected looking after those suffering hardship North Nottingham College, which by committing to improve the in retirement, as well as encouraging runs specialist English and Polish workplaces in which it operates and better pension provision across the courses to support the integration the communities it serves. Maintaining food industry as a whole. of the multicultural workforce into good corporate responsibility is the community. This activity is being a process to which Greencore is Through the Siúcra® brand, the Group expanded to other local colleges committed. has also supported sports days for located near the Group’s workplaces. about 1,500 primary schools in Ireland, Greencore’s code of Business aimed at encouraging participation in Throughout the year, the majority Practice is published in the Corporate school events. of Group sites worked with local Governance section of its website educational establishments, from (www.greencore.com). In conjunction with the Trade Unions primary to college and university Congress in the UK, the Group has

Greencore Group plc Annual Report 2006 23 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Financial Review

International Financial Reporting Standards n The Group’s tax charge on continuing operations (IFRS) excluding associates was €11.4m. The effective The Group’s 2006 financial statements are the first tax rate on continuing operations increased during to be prepared in accordance with IFRS. In previous the year as a result of the increased proportion of years, Greencore’s financial statements were prepared Group profits earned in the UK. in accordance with Generally Accepted Accounting n Exceptional items from continuing operations Practice in the Republic of Ireland (Irish GAAP). All gave rise to a net gain (after tax) of €1.8m while 2005 figures presented for comparative purposes exceptional items from discontinued operations in these financial statements have been restated in resulted in an after tax loss of €68.9m. A detailed accordance with IFRS with the exception of those analysis of these exceptional items is included in policies pertaining to IAS 32 Financial Instruments: note 7 to the Group financial statements. Disclosure and Presentation and IAS 39: Financial Instruments: Recognition and Measurement. In n Significant capital investment was made in addition, in order to identify the impact of the transition the period. Capital expenditure invested in to IFRS on Greencore’s previously reported financial Convenience Foods amounted to €34.2m. performance and position, reconciliations of selected There was a total investment of €13.7m in 2005 financial information (previously reported under the Ingredients, Agribusiness and Related Irish GAAP), to the restated information under IFRS Property division. are given in note 39 to the financial statements. n Adjusted earnings per share (EPS) for 2006 was 31.1 cent versus 32.5 cent in 2005. This is based Analysis of results on a weighted average number of ordinary shares of 196.2m (2005: 193.3m). Group continuing operating profit (pre-exceptional) totalled €74.6m for 2006 (€74.7m in 2005), while operating profit for discontinued operations after Employee benefits taxation totalled €19.4m for 2006 (€20.6m in 2005). In compliance with IFRS, the net assets and actuarial A comprehensive review of Group revenue and liabilities of the defined benefit pension schemes operating profit is included in the Convenience Foods operated by various Group companies, computed and Ingredients, Agribusiness and Related Property in accordance with IAS 19 Employee Benefits, have Operating Reviews. been included on the face of the balance sheet under retirement benefit assets and retirement benefit n Net financing costs totalled€ 18.1m, a reduction obligations. of €7.0m on the 2005 level. This €7.0m reduction is inclusive of a net gain of €5.2m, resulting from the impact of implementing IAS 39 Financial Instruments: Recognition and Measurement. Group net debt4 reduced by €44.8m due to a €30.5m gain as a result of marking-to-market the Group’s debt (relating to the impact of implementing IAS 39 Financial Instruments: Recognition and Measurement), together with an underlying reduction of €14.3m in the Group’s borrowings.

4 Includes cash, cash equivalents and borrowings

24 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Financial Review continued

The fair value of total plan assets relating to the Key performance indicators (KPIs) Group’s defined benefit pension schemes (excluding The Group considers the following measures to be associates), increased to €539.9m at 29 September important indicators of the underlying performance of 2006 from €494.2m at 30 September 2005. The the business: present value of total pension liabilities for these € € schemes increased to 591.5m from 576.1m over n Adjusted earnings per share (EPS) the same period. This is reflected in a reduction in Adjusted EPS for 2006 was 31.1 cent versus the net pension deficit (before related deferred tax), 32.5 cent in 2005. This decrease is primarily due to €51.6m at 29 September 2006 (from €81.9m at to a decrease in profitability of the Ingredients, 30 September 2005). The Group has agreed funding Agribusiness and Related Property division. proposals in place to address the relevant deficits. n Return on investment The primary Irish scheme, the Greencore Group Return on investment is measured by the Group Pension Scheme, had a surplus (before related in a number of ways. However, primary among deferred taxation) of €25.0m as of 29 September these, is return on shareholders equity. The return 2006. on average shareholders equity in 2006 was 17.6% (2005: 16.0%).

Insurance n Free cash flow Free cash flow is considered an important indicator The Group is highly focused on risk and its of the quality of earnings generated by the Group. management. Accordingly, insurance is held for Net cash inflow from operating activities after all significant insurable risks. The Group generally exceptional items totalled €110.9m in 2006 (2005: has chosen to bear an initial cost before external €101.8m). cover begins.

n Convenience Foods – operating margin

Financial risk management Operating margin is a primary KPI in the management of the Convenience Foods division. The Group’s activities expose it to a variety of The Group prioritises sustaining or improving financial risks including interest rate, foreign currency, operating margin over revenue growth. The division liquidity and credit risk. These financial risks are delivered an operating margin of 7.7% (2005: managed by the Group under policies approved by 7.8%) despite challenging pricing and input cost the Board of Directors. The Group uses derivative environments. financial instruments, in particular forward currency contracts, currency swaps and interest rate swaps, n Convenience Foods – customer service levels to manage the financial risks associated with the Producing products to the required specification underlying business activities of the Group and the and delivering those products to customers at the financing of those activities. The Group does not required delivery time is a KPI of the Convenience use derivative financial instruments for trading or Foods division. Customer service levels averaged speculative purposes. 99% across the division for 2006.

Further detail on the Group’s policy on financial risk management is included in note 24.

Greencore Group plc Annual Report 2006 25 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors year ended 29 September 2006

Introduction Future Developments

The Directors submit their Annual Report to the The Group showed further growth and development shareholders together with the audited financial during the year. Future prospects are outlined in the statements for the year ended 29 September 2006. Chairman’s Statement, the Chief Executive’s, Operating and Financial Reviews, on pages 6 to 19 and pages 24 to 25. Review of Business

Greencore is a major European manufacturer and Principal Risks and Uncertainties supplier of convenience foods and ingredients to consumer, industrial and food service markets. As with any large group, Greencore faces a number Detailed commentaries on the Group’s performance of risks and uncertainties. Individual business unit are contained in the Chairman’s Statement, the Chief management teams primarily drive the process by Executive’s Review and the Operating and Financial which individual risks and uncertainties are identified, Reviews, on pages 6 to 19 and pages 24 to 25. The these teams being best placed to identify significant principal subsidiary and associated undertakings are and emerging risks and uncertainties in their listed in note 40 to the Group financial statements. businesses. The output from this process feeds into the regular management reporting structures.

Results Risks and mitigating controls common across The results of the Group for the year are set out in the categories, are managed and reviewed at Group level. Group Income Statement on page 42. The profit for Risks identified and associated mitigating controls are the year after taxation and exceptional charges was subject to review as part of the Group’s health and €0.260m (2005: loss €39.867m). safety, technical compliance and operational/financial audit programmes.

Dividends The Group faces a number of risks and uncertainties

An interim ordinary dividend of 5.05c per share was that can be summarised into five categories, as follows: paid on 5 October 2006. The Directors recommend the payment of a final ordinary dividend of 7.58c per share. Commercial Subject to shareholders’ approval, this dividend is to be n The loss of a significant manufacturing/operational paid on 5 April 2007 to shareholders who were on the site through fire, natural catastrophe, act of register of members at 5.00pm on 15 December 2006. vandalism or critical plant failure could potentially have a material impact on the Group. Share Capital Greencore mitigates these risks through robust During the year 571,726 ordinary shares were issued security and comprehensive operational disaster under the Company’s Share Option and Sharesave recovery plans. In addition, the Group undertakes schemes and 2,132,166 ordinary shares were issued regular reviews of all sites with external insurance under the Company’s Scrip Dividend scheme. Further and risk management experts, with these reviews details are shown in note 30 to the Group financial being aimed at improving the Group’s risk profile. statements. n Greencore’s cost base can be affected by fluctuating raw material and energy prices.

26 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors continued year ended 29 September 2006

The Group maintains a strong commercial focus Group also regularly audits supplier facilities to on purchasing, process and cost improvement to ensure both product traceability and compliance manage and mitigate these risks. In addition, the with Group standards. In addition, Greencore closely Group adopts strategies that diversify risk, thereby monitors emerging issues in an ever-changing improving the positioning of its businesses and the regulatory environment, to address increasing defensibility of its margins. compliance requirements particularly in the areas of health and safety, emissions and effluent control. n The Group benefits from close commercial

relationships with a number of key customers. The n In common with other food industry manufacturers, loss of any of these key customers, or a significant unforeseen changes in food consumption patterns, worsening in commercial terms, could result in a or changes in Government legislation regarding material impact on the Group’s results. the composition of food products may impact the Group. The Group invests significant resources to maintain deep, multi-level relationships which drive value and Greencore works closely with its customers to minimise risk for both itself and its key customers. adapt to changing consumer trends and invests in In addition, the Group mitigates this risk through (i) innovation and new product development, to ensure increasing focus on customers outside the grocery regulatory, customer and consumer requirements multiple retailer channel, with this non-multiple retail are being consistently met. channel now accounting for in excess of 30% of n The ongoing success of the Group is dependent Convenience Foods turnover and (ii) the exploration on attracting and retaining high quality senior of other geographic markets. management and staff. Greencore mitigates any risk

n The Group operates in highly competitive markets, associated with loss of key personnel through robust particularly within the Convenience Foods division. succession planning, strong recruitment processes, Significant product innovations, technical advances, long term management incentives and retention or the intensification of price competition could initiatives. adversely affect the Group’s results.

Greencore invests in research and development and Financial

ensures that the introduction of both new products n The principal financial risks including interest rate, and improved production processes places the foreign currency, liquidity and credit risks are Group at the forefront of its chosen markets. The actively managed by the Group’s central Treasury Group also continually works to streamline its cost Department. This Department operates within base to ensure it remains competitive. strict Board approved policies and guidelines. These are explained further in note 24 of the Operational Group financial statements.

n As a producer of convenience food, Greencore is n The Group’s defined benefit pension funds are subject to general market related risks including exposed to the risk of changes in interest rates product contamination and general food scares. and the market values of investments as well as inflation and the increasing longevity of scheme Greencore maintains a strong technical function, members. The assumptions used in calculating the which sets high standards for hygiene, health and funding position of the pension funds are shown in safety systems and environmental controls. The detail in note 29 to the Group financial statements.

Greencore Group plc Annual Report 2006 27 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors continued year ended 29 September 2006

These risks are mitigated by paying appropriate Simons and Mr. Sullivan do not have service contracts contributions into the funds and through a balanced with the Company. investment strategy designed to avoid a material worsening of the current surplus or deficit in each The Board recommends the appointment of these fund. In addition, the Group has closed off a number Directors. of its significant defined benefit pension schemes to Directors’ and Company Secretary’s new members. Share Interests The beneficial interests of the Directors and Company Systems Secretary (including their respective family interests), in

n A significant IT system failure could adversely the share capital of the Company were as follows: impact on operations. Consequently, IT disaster Ordinary shares recovery plans and system backup processes are in place. Directors At 29/09/06 At 30/09/05 G.M.N. Corbett -- --

Other risks and uncertainties P.F. Coveney -- -- D.J. Dilger 167,330 167,330 n Greencore is currently engaged in a judicial review in the Irish High Court in relation to the allocation of G.P. Doherty -- -- EU restructuring aid. Further detail in relation to this S.P. FitzPatrick 22,457 21,798 matter is included at note 7 to the Group financial A.M. Hynes 19,466 18,895 statements. P.A. McCann 5,000 5,000 The Group has significant experience of managing P.R. O’Donoghue 5,000 5,000 risks while delivering profit growth. Greencore has D.M. Simons 1,000 1,000 invested significant time and resources in identifying D.A. Sugden -- -- the specific risks and developing risk minimisation E.F. Sullivan 21,728 21,091 strategies through its system of risk management and internal controls. Further detail in relation to the Group Company Secretary Group’s internal controls are included on pages 37 to C.M. Bergin 7,477 7,258 38 of this report. Following the year-end, Mr. S.P. FitzPatrick was in receipt of 247 additional ordinary shares, Mr. A.M. Directors Hynes was in receipt of 215 additional ordinary shares and Ms. C.M. Bergin was in receipt of 83 additional In accordance with the Articles of Association of the ordinary shares, as they availed of the Company Scrip Company, Gerald M.N. Corbett, Anthony M. Hynes, Dividend Offer on 5 October 2006. David M. Simons and Edmond F. Sullivan retire from the Board by rotation at the forthcoming Annual There were no other changes in the interests of General Meeting. Mr. Corbett, Mr. Hynes, Mr. Simons Directors and the Company Secretary, between and Mr. Sullivan being eligible, offer themselves for 29 September 2006 and 21 December 2006. re-appointment. Mr Corbett and Mr. Simons have completed two years of their initial term of three years and Mr. Sullivan, the Chairman, has completed one year of his second three year term. Mr. Corbett, Mr.

28 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors continued year ended 29 September 2006

Directors’ and Company Secretary’s Share Options Details of movements on outstanding options over the Company’s ordinary share capital and those granted during the year are set out below. No options were exercised by Directors during the year. Outstanding options are exercisable on dates between 2006 and 2016.

Number of Options At start Granted Exercised or At end Weighted of year during lapsed of year average year during year exercise price at 29 Sept 06 E

P.F. Coveney Basic - 420,000 - 420,000 3.41

D.J. Dilger Basic 410,000 250,000 - 660,000 3.13 Second Tier 75,000 - - 75,000 4.61

G.P. Doherty Basic 100,000 250,000 - 350,000 3.21 Sharesave 4,484 - - 4,484 2.64

A.M. Hynes Basic 350,000 150,000 - 500,000 2.80 Sharesave 8,691 - - 8,691 2.43

C.M. Bergin Basic 125,000 100,000 - 225,000 3.11 Sharesave 4,995 - - 4,995 2.37

There were no changes in the interests of the Directors and the Company Secretary between 29 September 2006 and 21 December 2006.

Share Options Options outstanding under the Company’s Share Option scheme and Sharesave schemes as at 29 September 2006, amounted to 9,184,423 ordinary shares (2005: 8,880,169), made up as follows:

No of Ordinary Price Range Normal Shares Dates Exercisable Share option schemes Basic tier 7,250,000 €2.45 - €4.66 2006 – 2016 Second Tier 240,000 €4.61 - €4.66 2006 – 2008 Sharesave Scheme 316,270 €1.84 - €3.40 2006 – 2012 1,378,153 stg£1.18 - £2.10 2006 – 2013 9,184,423

Greencore Group plc Annual Report 2006 29 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors continued year ended 29 September 2006

Significant Shareholdings ****Millgate Capital Inc has confirmed that it has no beneficial interest in the shares but holds them on At 21 December 2006, the Company has been behalf of Millgate Masterfund Limited. advised of the following notifiable interests in its ordinary share capital: Apart from these holdings, the Company has not been

Shareholder No of % of notified at 21 December 2006, of any interest of 3% or ordinary issued more in its ordinary share capital. shares capital

Aurum Nominees Corporate Governance Limited* 42,474,251 21.39% Corporate Governance is concerned with how Bank of Ireland Asset companies are managed and controlled. The Board Management Limited** 18,605,942 9.37% is committed to the highest standards in that regard. AXA Financial Inc*** 12,895,194 6.49% This statement explains how the Company has applied the principles set out in the Combined Code Millgate Capital Inc**** 8,390,783 4.23% on Corporate Governance (the Code), adopted by the

Polaris Capital Management 8,025,650 4.04% Irish Stock Exchange and the London Stock Exchange in July 2003. The Board believes it has complied fully *Aurum Nominees Limited has confirmed that it has with the Code and that it has complied throughout no beneficial interest in the shares but holds them on the financial year ended 29 September 2006, with the behalf of Bloomburg Limited (26,821,490 ordinary provisions where the requirements are of a continuing shares (13.51%)) and Gainsco Limited (15,652,761 nature. ordinary shares (7.88%)), which were stated to be companies under the control of Mr Liam Carroll. Separate notifications issued on behalf of Bloomburg The Board Limited, Gainsco Limited, Cradder, Danninger and The Board is responsible for the leadership and control Liam and Roisin Carroll have disclosed that Cradder of the Company. The Board is made up of 4 Executive and Liam and Roisin Carroll are deemed to have an and 7 Non-Executive Directors. Biographies of each interest in the beneficial shareholding of Bloomburg of the Directors are set out on pages 4 and 5. The Limited by virtue of sections 72(1) and 72(2)(a) and Board considers that, between them, the Directors (b) of the Companies Act, 1990 and that Danninger bring the range of skills, knowledge and experience, and Liam and Roisin Carroll are deemed to have an including international experience, necessary to lead interest in the beneficial shareholding of Gainsco the Company. All the Directors bring independent Limited by virtue of sections 72(1) and 72(2)(a) and (b) judgement to bear on issues of strategy, performance, of the Companies Act, 1990. resources, key appointments and standards. The Board has determined that each of the Non-Executive **Bank of Ireland Asset Management has confirmed Directors is independent. They have no material that it has no beneficial interest in the 18,605,942 interest or other relationship with the Group. In shares and of this shareholding 17,576,987 (8.85%) is reaching that conclusion, the Board took into account held on behalf of Bank of Ireland Nominees Limited. a number of cross directorships that might appear to affect the independence of some of the Directors. In ***AXA Investment Managers UK Limited has confirmed each case, the Board decided that the independence that this shareholding is beneficially held on behalf of of the relevant Director was not compromised. Bernstein and Alliance Capital Management LLP.

30 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors continued year ended 29 September 2006

The Board agrees a schedule of regular meetings The roles of Chairman and Chief Executive are to be held in each calendar year and also meets on separate and there is a clear division of responsibilities other occasions as necessary. Meetings are held at between them which is set out in writing and has the head office in Dublin as well as at the offices of the been approved by the Board. The Board has Group’s operating subsidiaries. delegated responsibility for the management of the Group, through the Chief Executive, to executive There is an agreed list of matters which the Board has management, and the Chief Executive is accountable formally reserved to itself for decision such as approval to the Board for all authority so delegated. of the Group’s commercial strategy, trading and capital budgets, financial statements, Board membership, The Board has acknowledged that there should be major acquisitions and disposals, major capital a recognised senior member of the Board, known expenditure, risk management and treasury policies. as the Senior Independent Director and that position is rotated among the Non-Executive Directors, all of There is an agreed procedure for Directors to whom are independent. Mr. P. Redmond O’Donoghue take independent legal advice at the expense of is currently the Senior Independent Director. Mr. the Company, in the furtherance of their duties as O’ Donoghue is available to shareholders who Directors of the Company. The Group has a policy have concerns that cannot be addressed through in place which indemnifies the Directors in respect the Chairman, Chief Executive or Chief Financial of legal action taken against them. The Company Officer. As part of the performance evaluation Secretary is responsible for ensuring that Board process, the Non-Executive Directors, led by the procedures are followed and all Directors have access Senior Independent Director, meet annually without to the advice and services of the Company Secretary. the Chairman present to appraise the Chairman’s The appointment and removal of the Company performance, having taken the views of the Executive Secretary is a matter for the Board as a whole. Directors and the Company Secretary into account. All Directors receive regular Group management accounts, reports and full Board papers are sent Board Committees to each Director in sufficient time before Board meetings. Any further backup papers and information The Board has established an effective committee are readily available to all Directors on request. The structure to assist in the discharge of its Board papers include the minutes of all committees responsibilities. The committees and their members of the Board which have been held since the previous are listed on page 5 of this report. All committees of Board meeting and the chairman of each committee the Board have written terms of reference dealing is available to give a report on the committee’s with their authority and duties which are available proceedings at Board meetings, if appropriate. on the Group’s website, www.greencore.com and accessed through the Corporate Governance The Board has a formal process whereby each Section. Membership of the Audit and Option and Director and the Company Secretary individually meet Remuneration Committees is comprised exclusively the Chairman annually to review individual Directors’ of Non-Executive Directors. The Company Secretary performance, the conduct of Board meetings, the acts as secretary to each of these committees. performance of the Board and its Committees and the general corporate governance of the Group. In The Audit Committee reviews the accounting addition, the Chairman meets at least once annually principles, policies and practices adopted in the with the Non-Executive Directors without the preparation of the interim statements and annual Executive Directors present.

Greencore Group plc Annual Report 2006 31 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors continued year ended 29 September 2006

Group and Company financial statements. The with the Board’s agreement for a further term of three Committee also discusses with the Group’s external years, but subject to re-election by shareholders on auditors the results and scope of their audit. In the normal rotation basis. Subject to the unanimous addition, it reviews the scope and performance request of the Board, a Director may go forward to of the Group’s internal audit function and the cost seek election for a third term. effectiveness, independence and objectivity of the external auditors. The Committee assists the Board in The terms and conditions of appointment of Non- meeting its obligations under the Combined Code on Executive Directors are available for inspection at the Corporate Governance in the areas of risk assessment Company’s registered office during normal office hours and internal controls. The external auditors are invited and at the Annual General Meeting of the Company. to attend Audit Committee meetings, along with the An introduction programme to the Group is arranged Chief Executive, the Chief Financial Officer and the for all new Directors including visits to the trading Group Chief Internal Auditor. The external auditors and operations of subsidiaries. Mr. Edmond F. Sullivan, the Group Chief Internal Auditor have the opportunity the Chairman of the Company, is Chairman of the to meet with the members of the Audit Committee Nomination Committee. alone at least once a year. The Group has a policy The Option and Remuneration Committee operates governing the conduct of non-audit work by the the Company’s Share Option schemes, Sharesave auditors. The engagement of the external auditors to schemes and Long Term Incentive schemes. It provide any non-audit services must be pre-approved is responsible for determining the remuneration by the Audit Committee. No non-audit related services packages of the Executive Directors and Senior were provided by the external auditor in the financial Management and for making recommendations year to 29 September 2006. The Audit Committee has in regard to the Chairman’s and Directors’ fees, determined that both Mr. D.M. Simons and Mr. D.A. which are fixed by the Board on the authority of Sugden have recent and relevant financial experience the shareholders. Where necessary, the Committee and therefore satisfy the requirements of the Code. Mr. consults with remuneration consultants. David A. Sugden is Chairman of the Audit Committee.

Mr. P. Redmond O’Donoghue is Chairman of the The Nomination Committee is responsible for Option and Remuneration Committee. proposing to the Board any new appointments, whether of Executive or Non-Executive Directors of the Company. To facilitate the search for suitable Shareholders candidates, the Committee uses the services of The Company has a regular dialogue with institutional independent consultants. Appointments to the and major shareholders throughout the year, other Board are approved by the Board as a whole. In than during close periods. All Directors are available so doing, the Board considers the skill, knowledge to meet with such shareholders throughout the year. and experience necessary to allow it to meet the The Company also encourages communication strategic vision for the Group. Newly appointed with private shareholders throughout the year and Directors are subject to election by shareholders at the welcomes their participation at general meetings. All Annual General Meeting following their appointment. new private shareholders receive a guide which deals Excluding any such newly appointed Directors, one with a range of administrative matters to assist them. third of the Board is subject to re-election each year. The views of the shareholders are communicated to Non-Executive Directors are normally appointed to the Board on a regular basis, as are expressed views the Board for an initial term of three years, renewable on Corporate Governance and strategy, as well as

32 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors continued year ended 29 September 2006

the outcome of analysts’ and brokers’ briefings. The Basic Salary Group’s website, www.greencore.com provides the The salaries for Executive Directors are reviewed full text of the Annual Reports, Interim Statements and annually having regard to the job size, responsibility presentations to analysts and investors. These can be levels, personal performance and competitive market accessed through the Investor Relations Section of practice. the website. Stock Exchange announcements are also made available in the Investor Relations Section of the website, after release to the Stock Exchange. Performance Related Annual Bonus

The Group operates a performance related annual All Board members attend the Annual General Meeting Bonus Scheme for Executive Directors and Senior and are available to answer questions. Separate Managers. Payment of an annual bonus depends on resolutions are proposed on substantially different the achievement of targets relating to the Group’s issues and the agenda of business to be conducted earnings per share, return on capital employed and at the Annual General Meeting includes a resolution to pre-determined personal goals. A proportion of any receive and consider the Annual Report and financial annual bonus payable is retained by the Group for statements. The Chairmen of the Board’s committees twelve months and is forfeited in the event that the are available at the Annual General Meeting. Notice Executive Director or Senior Manager is no longer an of the Annual General Meeting, together with the employee at the end of the period as a consequence Annual Report and financial statements, are sent to of his or her voluntary resignation. shareholders at least 20 working days before the meeting, and details of the proxy votes for and against each resolution and the number of abstentions are Long Term Incentive Scheme and Performance Share Plan announced after the vote on the show of hands. The Group operates a Long Term Incentive Scheme for Executive Directors and Senior Managers, effective Remuneration Policy from January 1994, and is designed to align their The main aim of the Company’s remuneration policy is interests with those of the shareholders and give to pay the Group’s Executive Directors competitively Executive Directors an incentive to perform at the having regard to comparable public companies and highest level over an extended period. The Scheme the need to ensure they are properly remunerated requires participants to invest in and hold Company and motivated to perform in the best interests of shares. Amounts payable under the Scheme are shareholders. The Remuneration Committee obtains dependant on the growth in the Company’s share external advice on remuneration in comparable price over a period of at least five years, so as to place companies as necessary and has given full it in the top five of a table of share price growth, of the consideration to Schedule A to the Code. twenty largest companies by market capitalisation, listed on the Irish Stock Exchange. The Option and The main elements of the remuneration package for Remuneration Committee has discretion to determine Executive Directors are basic salary, performance the amount payable if the share price growth has related annual bonus, long-term incentive scheme, been in the top ten. Below the predetermined targets pension benefits and share options. there can be no payment under the Scheme. Any entitlements under the Scheme cannot vest until at the earliest, the end of any five year period. This Long Term Incentive scheme expired in January 2004 and no further grants may be made under it.

Greencore Group plc Annual Report 2006 33 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors continued year ended 29 September 2006

At the Annual General Meeting in 2004 shareholders Consumer Price Index over a three year period plus approved the introduction of a new Long Term 5% compounded per annum and second tier options Incentive Scheme for Senior Executives described as can only be exercised where: a Performance Share Plan (the Plan). The Plan is for Senior Executives who are best placed to maximise (i) there has been an increase in the earnings per stockholder value and operates on the basis of the share of the Company of at least the increase in the making of conditional share awards using Greencore Consumer Price Index over a five year period plus shares as the underlying unit of value. In the financial 10% compounded per annum; and year to 29 September 2006, no conditional awards (ii) the rate of increase in the earnings per share of the have been made to any executive. Company, places it at the top quarter of a table of growth rates of earnings per share of comparative companies over that period. Share Option Schemes

The Group operates Share Option and Sharesave The Group encourages eligible employees to save in schemes which are based on approvals by order to buy shares in the Company. The Sharesave shareholders in 1991, 1994 and 2001. It is policy schemes provide a means of saving and gives to grant options under the Share Option scheme employees the opportunity to become shareholders. to key executives across the Group to encourage To date approximately 2,800 employees have been identification with shareholders’ interests. Options granted options under the Sharesave schemes. have been granted to some 226 executives to date. During 2006, the Committee, with the assistance of Non-Executive Directors do not participate in the independent external advisors, undertook a thorough Scheme. Under the 1991 and 1994 Schemes, basic review of the Group’s compensation arrangements for options cannot be exercised before the expiration of Executive Directors and Senior Managers to ensure three years from the date of grant and only then, if the that the Company’s arrangements continued to be Company’s earnings per share has grown over three aligned with the business strategy and current best years, at least to the same extent as the growth in the practice. The following principles were adopted as Consumer Price Index over the same period. a framework for evaluating changes to executive Second tier options cannot be exercised before the remuneration. The remuneration arrangements for expiration of five years from the date of grant and only Executive Directors are designed to: then, if the Company’s earnings per share growth over n support the business strategy; five years, has been such as to place the Company

in the top quartile of companies listed on the Irish n align the financial interests of executives and Stock Exchange, by reference to growth in earnings shareholders; and per share over the same period, provided that second tier options shall in any case be exercisable n provide market competitive reward opportunities for if the Company’s earnings per share growth, over performance in line with expectations.

the relevant period is greater, by not less than 10% The business strategy has been developed to reflect on an annualised basis, than the increase in the the cessation of sugar production and loss of its Consumer Price Index over that period. Under the earnings stream. The review took account of these 2001 Scheme, basic options can only be exercised issues, as well as the need to have competitive where there has been an increase in the earnings per compensation packages, which will attract and retain share of the Company, of at least the increase in the managers of the highest calibre and also took into

34 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors continued year ended 29 September 2006

consideration the changes in the accounting treatment These changes have been recommended to the of long-term incentive schemes and developments in Board by the Committee. market practice in relation to such schemes. Mercer Human Resource Consulting Limited (Mercer) The review concluded that the annual performance was appointed as remuneration advisors to the related bonus scheme needed some modifications Committee in 2006, following a competitive tendering to remain competitive and as a result the Committee process. Mercer provided advice on remuneration agreed to amend the scheme for 2007 and policy and philosophy, benchmarking exercises for subsequent financial years to ensure that: Executive Directors and remuneration packages based on current market trends. Mercer, separately, through n the budgeted performance targets were clearly its retirement business, provides administration, defined and stretching consulting and actuarial services in relation to the various occupational pension schemes sponsored by n the maximum annual performance related bonuses the Group. The Committee does not consider there were competitive with peer group companies of the to be any conflict in Mercer acting both for the Group Group and the pension trustees. n 75% of performance targets were weighted towards financial targets with a 25% weighting for Pension Benefits personal and strategic goals. In accordance with the terms agreed on appointment, The long-term incentive schemes which included the pension benefits for Executive Directors appointed Executive Share Option scheme which had operated before 1992 are based on two-thirds of earnings at since 2001 and the Performance Share Plan which normal retirement date but excluding any payments was adopted by shareholders in 2004 but never which may be made under the Long Term Incentive implemented were reviewed. It was concluded that an schemes and any gains made on the exercise of any alternative incentive plan for senior executives should share options. be adopted. This plan would operate by increasing the annual bonus opportunity by agreed percentages Normal retirement age for Executive Directors is aged and thereafter, deferring half the annual bonus earned 60. In the case of the Chief Executive, should he into Company Stock to be held for three years without choose to retire at any time having attained age 50, any additional performance requirements or matching. retirement benefits will be available based on actual The shares vest after three years but will be forfeited years of service, rather than full service. should an executive voluntarily leave the Group within the three year time period. The rationale for Service Contracts implementing this type of plan includes the retention of key executives, aligning pay with short-term Executive Directors have contracts requiring less than performance, simplifying the current arrangements a year’s notice to terminate them. The Non-Executive and aligning executives with shareholders interests Directors do not have service contracts but have through deferral into shares. Not all eligible executives letters of appointment. will necessarily receive an award in any single year and no executive will receive awards from the long-term incentive scheme or option plan in the same year as they receive the benefit of an additional bonus.

Greencore Group plc Annual Report 2006 35 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors continued year ended 29 September 2006

Attendance at scheduled Board and Board Committee meetings during the year ended 29 September 2006:

Board Audit Nomination Option and Remuneration

A B A B A B A B G. M. N. Corbett 8 7 - - - - 3 2 P.F. Coveney 8 8 ------D.J. Dilger 8 7 ------G.P. Doherty 8 8 ------S.P. FitzPatrick 8 7 - - - - 3 2 A.M. Hynes 8 8 ------P.A. McCann 8 8 6 6 - - - - P.R. O’Donoghue 8 8 - - - - 3 3 D.M. Simons 8 8 6 6 - - - - D.A. Sugden 8 8 6 6 - - - - E.F. Sullivan 8 8 - - - - 3 3

Column A indicates the number of scheduled meetings held during the period the Director was a member of the Board and/or Committee.

Column B indicates the number of scheduled meetings attended during the period the Director was a member of the Board and/or Committee.

There were no scheduled meetings of the Nomination Committee during the financial year.

36 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors continued year ended 29 September 2006

Going Concern The risks faced by the Group are reviewed regularly with management and with the Audit Committee of The Directors, after making enquiries, have a the Board, whose Terms of Reference require it to reasonable expectation that the Group has adequate conduct an annual assessment and make a report to resources to continue operating for the foreseeable the Board, on the nature and extent of the significant future. For this reason, the going concern basis risks facing the Group, the design, operation and continues to be adopted in preparing the financial monitoring by management of internal control systems statements. and the adequacy and frequency of reports from management to the Board and whether they give Internal Control a balanced assessment of the significant risks and

The Board has overall responsibility for the the effectiveness of the system of internal control in Group’s system of internal control, for reviewing its managing those risks. effectiveness and for confirming that there is a process In accordance with the process outlined above, for identifying, evaluating and managing the significant the Board has satisfied itself on the effectiveness risks for the achievement of the Group’s strategic of the internal control systems in operation and it objectives. The process has been in place throughout has approved the reporting lines to it, to ensure the the financial year and up to the date of the approval ongoing effectiveness of the internal controls and of the Annual Report and financial statements and reporting structures. accords with the Turnbull guidance and is regularly

reviewed by the Board. This system of internal control The key elements of the system are as follows: can only provide reasonable, and not absolute assurance against material misstatement or loss. The n the Corporate Manual, which includes a statement systems involve the Board considering the following: of corporate values, distributed throughout the Group n the nature and extent of the risks facing the Group n clearly defined organisation structures and lines of n the extent and categories of risks it regards as authority acceptable for the Group to bear n corporate policies for financial reporting, treasury

n the likelihood of the risks concerned materialising and financial risk management, information technology and security, project appraisal and n the Group’s ability to reduce the incidence and corporate governance impact on its business of risks that do materialise n annual budgets and three year business plans and for all operating units, identifying key risks and n the costs of operating particular controls relative to opportunities the benefits thereby obtained in managing related n monitoring of performance against budgets and risks. reporting thereon to the Directors on a regular basis

n an internal audit department which reviews key business processes and controls

n an audit committee which approves plans and deals with significant control issues raised by internal or external audit.

Greencore Group plc Annual Report 2006 37 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Report of the Directors continued year ended 29 September 2006

Finally, the Directors through the use of appropriate Auditors procedures, systems and the employment of The auditors, PricewaterhouseCoopers, continue competent persons have ensured that measures are in office in accordance with Section 160(2) of the in place to secure compliance with the Company’s Companies Act, 1963. obligation to keep proper books of account. The books of account are kept at the registered office of the Company. Notice of Annual General Meeting and Special Business

Notice of the Annual General Meeting together with Research and Development details of special business to be considered at the The Group continued its research and development meeting, is set out in a separate circular which is programme in relation to its principal activities during enclosed with the Annual Report. the year. Further information is contained in the reviews on pages 10 to 19. On behalf of the Board

E.F. Sullivan Directors Taxation Status P.F. Coveney } So far as the Directors are aware, the Company Dublin is not a close company within the meaning of the 21 December 2006 Corporation Tax Acts.

Events Since the Year End

There have been no significant events affecting the Group since the year-end and the Directors do not anticipate any substantial changes to the nature of the business.

38 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Statement of the Directors’ Responsibilities

The Directors are responsible for preparing the n state that the Group financial statements comply Annual Report and the Group and Company financial with applicable IFRS subject to any material statements in accordance with applicable law and departures disclosed in the financial statements regulations. and

Irish Company law requires the Directors to prepare n prepare the financial statements on the going Group and Company financial statements for each concern basis unless it is inappropriate to presume financial year which give a true and fair view of the that the Company, and the Group as a whole, will state of affairs of the Group and the Company and continue in business. of the profit or loss of the Group for that period. The Directors confirm that they have complied with Under that law, the Directors are required to prepare the above requirements in preparing the financial the Group financial statements in accordance with statements. International Financial Reporting Standards (IFRS) and IFRIC interpretations as adopted by the European The Directors are responsible for keeping proper Union (EU) and with those parts of the Companies books of account that disclose with reasonable Acts, 1963 to 2005, applicable to companies reporting accuracy at any time the financial position of the under IFRS and Article 4 of the IAS Regulation. The Company and to enable them to ensure that Directors have elected to prepare the Company the Group financial statements are prepared financial statements in accordance with Generally in accordance with applicable IFRS and IFRIC Accepted Accounting Practice in Ireland (Irish GAAP), interpretations as adopted by the EU and comply comprising the financial reporting standards issued by with those parts of the Companies Acts, 1963 to the Accounting Standards Board (ASB) and published 2005 applicable to companies reporting under IFRS by the Institute of Chartered Accountants in Ireland and Article 4 of the IAS Regulation. The Directors (ICAI) together with the Companies Acts, 1963 to are also responsible for safeguarding the assets of 2005. the Company and the Group and hence for taking reasonable steps for the prevention and detection of In preparing these financial statements, the Directors fraud and other irregularities. are required to: The Directors are responsible for the maintenance n select suitable accounting policies and then apply and integrity of the corporate and financial information them consistently included on the Group’s website. Legislation in Ireland

n make judgements and estimates that are governing the preparation and dissemination of reasonable and prudent financial statements may differ from legislation in other jurisdictions.

Greencore Group plc Annual Report 2006 39 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Independent Auditors’ Report to the Members of Greencore Group plc

We have audited the Group and parent Company We report to you our opinion as to whether the financial statements of Greencore Group plc for the Group financial statements give a true and fair year ended 29 September 2006 which comprise view, in accordance with IFRSs as adopted by the the Group Income Statement, the Group Statement European Union, and have been properly prepared of Recognised Income and Expenses, the Group in accordance with Irish statute comprising the Statement of Changes in Equity, the Group and Companies Acts, 1963 to 2005 and Article 4 of the parent Company Balance Sheets, the Group Cash IAS Regulation. We report to you our opinion as to Flow Statement and the related notes. These financial whether the parent Company financial statements statements have been prepared under the accounting give a true and fair view, in accordance with Generally policies set out therein. We also audited the detailed Accepted Accounting Practice in Ireland, and have information on Directors interests in shares and shares been properly prepared in accordance with Irish options on pages 28 and 29. statute comprising the Companies Acts, 1963 to 2005. We state whether we have obtained all the information and explanations we consider necessary Respective Responsibilities of Directors and Auditors for the purposes of our audit, and whether the parent Company financial statements are in agreement with The Directors’ responsibilities for preparing the the books of account. We also report to you our Annual Report and the Group financial statements opinion as to: in accordance with applicable law and International

Financial Reporting Standards (IFRSs) as adopted n whether the Company has kept proper books of by the European Union, and for preparing the parent account; Company financial statements in accordance with n whether the Directors’ Report is consistent with the applicable Irish law and the accounting standards financial statements; and issued by the Accounting Standards Board and

published by the Institute of Chartered Accountants n whether at the balance sheet date there existed a in Ireland (Generally Accepted Accounting Practice financial situation which may require the company in Ireland), are set out in the Statement of Directors’ to convene an extraordinary general meeting of Responsibilities. the Company; such a financial situation may exist if the net assets of the Company, as stated in the Our responsibility is to audit the financial statements Company balance sheet, are not more than half of in accordance with relevant legal and regulatory its called-up share capital. requirements and International Standards on Auditing (UK and Ireland). This report, including the opinion, We also report to you if, in our opinion, any information has been prepared for and only for the Company’s specified by law or the Listing Rules of the Irish Stock members as a body in accordance with Section 193 Exchange regarding Directors’ remuneration and of the Companies Act, 1990 and for no other purpose. Directors’ transactions is not disclosed and, where We do not, in giving this opinion, accept or assume practicable, include such information in our report. responsibility for any other purpose or to any other person to whom this report is shown or into whose We review whether the Corporate Governance hands it may come save where expressly agreed by Statement reflects the Company’s compliance with our prior consent in writing. the nine provisions of the 2003 FRC Combined Code specified for our review by the Listing Rules of the Irish Stock Exchange, and we report if it does not. We are not required to consider whether the Board’s

40 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Independent Auditors’ Report to the Members of Greencore Group plc continued

statements on internal control cover all risks and Opinion controls, or form an opinion on the effectiveness of the In our opinion: Group’s corporate governance procedures or its risk

and control procedures. n the consolidated financial statements give a true and fair view, in accordance with IFRSs as adopted We read the other information contained in the by the European Union, of the state of the Group’s Annual Report and consider whether it is consistent affairs as at 29 September 2006 and of its profit with the audited financial statements. The other and cash flows for the year then ended; information comprises only the Chairman’s Statement, the Chief Executive’s Review, the Operating and n the consolidated financial statements have Financial Reviews, the Report of the Directors and been properly prepared in accordance with the the Statement of Directors’ Responsibilities. We Companies Acts, 1963 to 2005 and Article 4 of the consider the implications for our report if we become IAS Regulation;

aware of any apparent misstatements or material n the parent Company financial statements give a inconsistencies with the financial statements. Our true and fair view, in accordance with Generally responsibilities do not extend to any other information. Accepted Accounting Practice in Ireland, of the state of the parent Company’s affairs as at 29 September 2006; Basis of Audit Opinion

n the parent Company financial statements have We conducted our audit in accordance with been properly prepared in accordance with the International Standards on Auditing (UK and Ireland) Companies Acts, 1963 to 2005. issued by the Auditing Practices Board. An audit

includes examination, on a test basis, of evidence We have obtained all the information and explanations relevant to the amounts and disclosures in the which we consider necessary for the purposes of our financial statements. It also includes an assessment of audit. In our opinion proper books of account have the significant estimates and judgments made by the been kept by the Company. The Company balance Directors in the preparation of the financial statements, sheet is in agreement with the books of account. and of whether the accounting policies are appropriate to the Group’s and Company’s circumstances, In our opinion the information given in the Directors’ consistently applied and adequately disclosed. Report is consistent with the financial statements.

We planned and performed our audit so as to The net assets of the Company, as stated in the obtain all the information and explanations which Company balance sheet are more than half of the we considered necessary in order to provide us with amount of its called-up share capital and, in our sufficient evidence to give reasonable assurance opinion, on that basis there did not exist at 29 that the financial statements are free from material September 2006 a financial situation which under misstatement, whether caused by fraud or other Section 40 (1) of the Companies (Amendment) Act, irregularity or error. In forming our opinion we also 1983 would require the convening of an extraordinary evaluated the overall adequacy of the presentation of general meeting of the Company. information in the financial statements. PricewaterhouseCoopers Chartered Accountants and Registered Auditors Dublin 21 December 2006

Greencore Group plc Annual Report 2006 41 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Group Income Statement year ended 29 September 2006

2006 2005 Notes Pre - Exceptional Total Pre - Exceptional Total exceptional exceptional €’000 €’000 €’000 €’000 €’000 €’000

Continuing operations Revenue 1 1,176,784 – 1,176,784 1,105,366 – 1,105,366 Cost of sales (826,666) (181) (826,847) (779,549) – (779,549) Gross profit 350,118 (181) 349,937 325,817 – 325,817

Operating costs, net 2 (275,508) 1,998 (273,510) (251,133) – (251,133) Group operating profit 74,610 1,817 76,427 74,684 – 74,684

Finance income 8 35,929 – 35,929 33,179 – 33,179 Finance costs 8 (54,002) – (54,002) (58,202) – (58,202) Share of profit of associates after tax 9 2,848 – 2,848 3,559 – 3,559 Profit before taxation 59,385 1,817 61,202 53,220 – 53,220

Taxation 10 (11,447) 10 (11,437) (9,386) – (9,386) Result for the period from continuing operations 47,938 1,827 49,765 43,834 – 43,834

Discontinued operations Profit/(loss) from discontinued operations 11 19,398 (68,903) (49,505) 20,600 (104,301) (83,701) Result for the financial period 67,336 (67,076) 260 64,434 (104,301) (39,867)

Attributable to: Equity shareholders 66,620 (67,076) (456) 62,894 (104,301) (41,407) Minority interests 32 716 – 716 1,540 – 1,540 67,336 (67,076) 260 64,434 (104,301) (39,867)

Basic earnings per share (cent) Continuing operations 25.0 21.9 Discontinued operations (25.2) (43.3) 12 (0.2) (21.4)

Diluted earnings per share (cent) Continuing operations 24.9 21.8 Discontinued operations (25.1) (43.1) 12 (0.2) (21.3)

E.F. Sullivan Directors P.F. Coveney }

42 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Group Statement of Recognised Income and Expense year ended 29 September 2006

Notes 2006 2005 €’000 €’000

Items of income and expense taken directly within equity Currency translation differences 31 50 766 Actuarial gain/(loss) on Group defined benefit pension schemes 29 11,187 (30,754) Deferred tax on Group defined benefit pension schemes 10 (1,352) 6,419 Share of actuarial gain/(loss) on defined benefit pension schemes of associates (net) 20 490 (1,660) Fair value of available for sale financial assets 21 (406) – Cash flow hedges: Gains taken to equity 31 389 – Transferred to profit and loss for the period 31 (169) – Deferred tax on cash flow hedge 10 (66) – Net income/(expense) recognised directly within equity 10,123 (25,229) Group profit/(loss) for the financial year 260 (39,867) Total recognised income and expense for the financial year 10,383 (65,096)

Attributable to: Equity shareholders 9,667 (66,636) Minority interests 716 1,540 Total recognised income and expense for the financial year 10,383 (65,096)

Group Statement of Changes in Equity year ended 29 September 2006

Notes 2006 2005 €’000 €’000

Total equity at beginning of year 197,877 281,044 Impact of adoption of IAS 32 & IAS 39 38 (7,414) – At beginning of year, as adjusted 190,463 281,044 Issue of share capital 8,352 7,574 Employee share option expense 6 430 153 Deferred tax on employee share option expense taken directly within equity 10 (283) 257 Dividends 13 (24,814) (24,378) Movement in minority interests 32 (870) (137) Total recognised income and expense for the year attributable to equity holders 9,667 (66,636) Total equity at end of year 182,945 197,877

Greencore Group plc Annual Report 2006 43 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Group Balance Sheet at 29 September 2006

2006 2005 Notes €’000 €’000

ASSETS Non-current assets Intangible assets 14 353,897 353,814 Property, plant and equipment 15 385,771 484,595 Investment property 16 1,003 1,101 Investments in associates 20 8,216 6,012 Financial assets 21 – 645 Trade and other receivables 18 56,508 – Retirement benefit assets 29 24,981 6,598 Deferred tax assets 27 24,957 34,962 Total non-current assets 855,333 887,727

Current assets Inventories 17 126,774 132,982 Trade and other receivables 18 154,324 135,460 Cash and cash equivalents 22 78,967 74,102 Available for sale financial assets 21 530 – Derivative financial instruments 24 389 – Total current assets 360,984 342,544 Total assets 1,216,317 1,230,271

EQUITY Capital and reserves attributable to equity holders of the Company Share capital 30 126,820 125,116 Share premium 31 104,137 97,489 Other reserves 31 2,572 1,944 Retained earnings 31 (54,156) (31,054) 179,373 193,495 Minority interest in equity 32 3,572 4,382 Total equity 182,945 197,877

LIABILITIES Non-current liabilities Borrowings 23 433,657 473,541 Derivative financial instruments 24 32,043 – Retirement benefit obligations 29 76,603 88,486 Other payables 19 11,818 8,836 Provisions for other liabilities and charges 26 14,422 14,732 Deferred tax liabilities 27 42,202 41,373 Government grants 28 1,182 1,452 Total non-current liabilities 611,927 628,420

Current liabilities Borrowings 23 265 325 Derivative financial instruments 24 1,153 – Trade and other payables 19 362,285 382,527 Provisions for other liabilities and charges 26 33,230 – Income taxes payable 24,512 21,122 Total current liabilities 421,445 403,974 Total liabilities 1,033,372 1,032,394 Total equity and liabilities 1,216,317 1,230,271

E.F. Sullivan Directors P.F. Coveney }

44 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Group Cash Flow Statement year ended 29 September 2006

2006 2005 Notes €’000 €’000

Cash flows from operating activities Cash generated from operations before exceptional items 33 125,905 117,390 Cash outflows related to exceptional items (15,011) (15,598) Interest paid (32,767) (32,482) Tax received/(paid) 395 (2,268) Net cash inflow from operating activities 78,522 67,042

Cash flows from investing activities Dividends received from associates 20 1,205 3,385 Purchase of property, plant and equipment (47,924) (57,393) Acquisition of subsidiary – (15,245) Disposal of subsidiary – 9,158 Disposal of available for sale financial assets – 2,626 Interest received 2,139 1,379 Government grants (repaid)/received 28 (27) 427 Net cash outflows from investing activities (44,607) (55,663)

Cash flows from financing activities Proceeds from issue of shares 1,183 727 Decrease in borrowings 25 (9,527) (3,908) Decrease in finance lease liabilities 25 (1,944) (366) Dividends paid to equity holders of the Company (17,470) (18,444) Dividends paid to minority interests 32 (1,586) (1,452) Net cash outflows from financing activities (29,344) (23,443)

Net increase/(decrease) in cash & cash equivalents 4,571 (12,064)

Reconciliation of opening to closing cash and cash equivalents Cash and cash equivalents at beginning of year 22 74,102 86,278 Translation adjustment 25 294 (112) Increase/(decrease) in cash and cash equivalents 25 4,571 (12,064) Cash and cash equivalents at end of year 22 78,967 74,102

Greencore Group plc Annual Report 2006 45 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Group Statement of Accounting Policies year ended 29 September 2006

Statement of compliance

The Group financial statements of Greencore Group plc have been prepared in accordance with International Financial Reporting Standards (IFRS) and their interpretations approved by the International Accounting Standards Board (IASB) as adopted by the European Union (EU) and those parts of the Companies Acts, 1963 to 2005, applicable to companies reporting under IFRS.

The accounting policies applied in the preparation of the financial statements for the year ended 29 September 2006 are set out below. These policies have been applied consistently, with the exception of those accounting policies pertaining to IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement which, in accordance with the transitional provisions of IFRS 1 First-time adoption of International Financial Reporting Standards, were not applied in the restatement of the 2005 comparatives presented in these financial statements.

These consolidated financial statements are the Group’s first financial statements to be prepared in accordance with IFRS. The IFRS adopted by the EU and applied by the Group in the preparation of these financial statements are those that were effective at 29 September 2006, together with the early adoption of the Amendment to IAS 19 Employee Benefits, allowing recognition in full of actuarial gains and losses in the statement of recognised income and expense as they arise. Reconciliations to IFRS from the previously reported Irish GAAP primary financial statements are shown in note 39 to the Group financial statements.

Basis of preparation

The consolidated financial statements, which are presented in euro, rounded to the nearest thousand (unless otherwise stated), have been prepared under the historical cost convention, as modified by the revaluation of plant, property and equipment (these revaluations being considered ‘deemed cost’ at the date of transition to IFRS), and the measurement at fair value of certain financial assets and financial liabilities including, share options, available for sale financial assets and derivative financial instruments. The carrying values of recognised assets and liabilities that are hedged, are adjusted to record the changes in the fair values attributable to the risks that are being hedged.

The accounting policies set out below have been applied consistently by all the Group’s subsidiaries and associates, to all periods presented in these Group financial statements and in preparing the opening IFRS balance sheet as at 25 September 2004, for the purposes of the transition to IFRS reporting, with the exception of IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement which, as noted above, were not applied in the restatement of the 2005 comparatives.

The transition to IFRS is accounted for in accordance with IFRS 1 First-time adoption of International Financial Reporting Standards. This standard sets out how to adopt IFRS for the first time and mandates that most standards are to be applied retrospectively. There are certain limited exemptions to full retrospective application. The exemptions availed of by the Group are outlined in note 39 to the Group financial statements.

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on management’s best knowledge of the amount, event or actions, actual results ultimately may differ from those estimates.

The financial statements of the Group are prepared for a 52 week period ending on 29 September 2006. Comparatives are for a 53 week period ended 30 September 2005. The balance sheets for 2006 and 2005 have been drawn up as at 29 September 2006 and 30 September 2005 respectively.

The profit attributable to equity shareholders dealt with in the financial statements of the parent Company was E107.824m (2005: E23.015m). In accordance with section 148(8) of the Companies Act, 1963 and section 7(1A) of the Companies Amendment Act, 1986, the Company is availing of the exemption from presenting its individual profit and loss account to the Annual General meeting and from filing it with the Registrar of Companies.

46 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Group Statement of Accounting Policies continued year ended 29 September 2006

New standards and interpretations not applied

During the year, the IASB and the International Financial Reporting Interpretations Committee (IFRIC) issued the following standards and interpretations with an effective date after the date of these financial statements, which the Group has not early adopted:

International Accounting Standards (IFRS) Effective Date

IFRS 1 Amendments relating to IFRS 1 and IFRS 6 1 January 2006 IFRS 4 Insurance Contracts (amendments to IAS 39 and IFRS 4 - Financial Guarantee Contracts) 1 January 2006 IFRS 6 Exploration for and Evaluation of Mineral Resources 1 January 2006 IFRS 6 Amendments relating to IFRS 1 and IFRS 6 1 January 2006 IFRS 7 Financial Instruments: Disclosures 1 January 2007 IAS 1 Amendment to IAS 1- Presentation of Financial Statements: Capital Disclosures 1 January 2007 IAS 21 Amendment to IAS 21 - Net Investment in a Foreign Operation 1 January 2006 IAS 39 Amendments to IAS 39 - The Fair Value Option 1 January 2006 IAS 39 Amendments to IAS 39 - Cash Flow Hedge Accounting of Forecast Intra-group Transactions 1 January 2006 IAS 39 Amendments to IAS 39 and IFRS 4 - Financial Guarantee Contracts 1 January 2006

International Financial Reporting Interpretations Committee (IFRIC)

IFRIC 4 Determining whether an arrangement contains a lease 1 January 2006 IFRIC 5 Rights of Interests Arising from Decommissioning, Restoration and Environmental Rehabilitation Funds 1 January 2006 IFRIC 6 Liabilities arising from Participating in a Specific Market - Waste Electrical and Electronic Equipment 1 December 2005 IFRIC 7 Applying the Restatement Approach under IAS 29 ‘Financial Reporting in Hyperinflationary Economies’ 1 March 2006 IFRIC 8 Scope of IFRS 2 1 May 2006 IFRIC 9 Reassessment of Embedded Derivatives 1 June 2006 IFRIC 10 Interim Financial Reporting and Impairment 1 November 2006 IFRIC 11 IFRS 2 – Group and Treasury Share Transactions 1 March 2007

The Directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group financial statements in the period of initial application.

Upon adoption of IFRS 7 Financial Instruments: Disclosures, the Group will disclose additional information about its financial instruments, their significance and the nature and extent of risks to which they give rise. More specifically, the Group will be required to disclose the fair value of its financial instruments and its risk exposure in greater detail. There will be no effect on reported income or net assets.

Basis of consolidation

The Group financial statements comprise the financial statements of the parent undertaking and its subsidiary undertakings, together with the Group’s share of the results of associated undertakings.

Greencore Group plc Annual Report 2006 47 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Group Statement of Accounting Policies continued year ended 29 September 2006

Subsidiaries Subsidiary undertakings are included in the Group financial statements from the date on which control over the operating and financial policies is obtained, and cease to be consolidated from the date on which control is transferred out of the Group. Control exists when the Group has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain economic benefits from its activities. The existence and effect of potential voting rights that are currently exercisable or convertible are considered in determining the existence or otherwise of control. All inter-group transactions, balances, and unrealised gains on transactions between Group undertakings are eliminated on consolidation.

Associates An associate is an enterprise over which the Group is in a position to exercise significant influence through participation in the financial and operating policy decisions of the investee, but which is not a subsidiary or a jointly controlled entity.

The Group’s share of the results, assets and liabilities of an associate are included in these financial statements using the equity method of accounting. Under the equity method of accounting, the investment in the associate is carried in the balance sheet at cost plus post-acquisition changes in the Group’s share of net assets of the associate, less distributions received, less any impairments in value of the investment. The Group income statement reflects the Group’s share of the results after tax of the associate. The Group statement of recognised income and expense reflects the Group’s share of any income and expense recognised by the associate outside of profit and loss.

Unrealised gains on the sale of fixed assets between the Group and its associates are eliminated to the extent of the Group’s interest in the associate. Such gains are deducted from the Group’s equity, carried as deferred income and released to the Group accounts over the same period as depreciation is charged. Unrealised losses are also eliminated, unless the transaction provides evidence of an impairment of the asset transferred. When the Group’s share of losses of an associate equals or exceeds its interest in the associate, the Group does not recognise further losses unless the Group has incurred obligations or made payments on behalf of the associate. The Group ceases to use the equity method of accounting on the date from which it no longer has significant influence in the associate, or when the interest becomes held for sale.

Revenue recognition

Revenue represents the fair value of the sale of goods and services to external customers, excluding trade discounts and value added tax. Revenue from the sale of goods is recognised when significant risks and rewards of ownership of the goods are transferred to the buyer, it is probable that the economic benefits will flow to the Group, and the amount of revenue can be measured reliably. Revenue from the rendering of services is recognised in the period in which the services are rendered.

Interest income is recognised on a time apportioned basis, taking account of the principal outstanding and the effective rate over the period to expected maturity. Dividend income is recognised when the right to receive payment is established.

Property, plant and equipment

Property, plant and equipment is shown at cost less depreciation and any impairments. The cost of property, plant and equipment comprises its purchase price and any directly attributable costs, or its deemed cost on transition to IFRS.

Depreciation is provided so as to write off the cost less residual value of each fixed asset during its expected useful life, using the straight line, or reducing balance methods over the following periods:

Freehold and long leasehold buildings 40 - 50 years Plant, equipment, fixtures and fittings 3 - 25 years Freehold land is not depreciated

Useful lives and residual values are reassessed annually.

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The carrying values of property, plant and equipment are reviewed for impairment when events or changes in circumstances indicate the carrying values may not be recoverable. When the carrying value exceeds the estimated recoverable amount, the assets are written down to their recoverable amount.

The recoverable amount of property, plant and equipment is the greater of net selling price and value in use. In assessing value in use, estimated future cash flows are discounted to their present value using a pre tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. Impairment losses are recognised in the income statement.

An assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased. If such indication exists the recoverable amount is estimated. A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. If that is the case, the carrying amount of the asset is increased to its recoverable amount. That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement. Following the recognition or reversal of an impairment loss, the depreciation charge applicable to the asset is adjusted prospectively in order to systematically allocate the revised carrying amount, net of any residual value, over the remaining useful life.

Gains or losses on the disposal of property, plant and equipment represent the difference between the net proceeds and the carrying value at the date of sale. Sales are accounted for when there is an unconditional exchange of contracts, or when all necessary terms and conditions have been fulfilled.

Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic benefits associated with the item will flow to the Group, and the cost of the item can be measured reliably. All other repairs and maintenance are charged to the income statement during the financial period in which they are incurred.

Finance costs attributable to significant capital expenditure is capitalised and written off as part of the total cost of the asset over the estimated useful economic life of the asset. All other finance costs are expensed as incurred.

Assets held under leases

Finance leases Leases of property, plant and equipment, where the Group has substantially all the risks and rewards of ownership, are classified as finance leases. Finance leases are capitalised at the inception of the lease at the lower of the fair value of the leased item, or the present value of the minimum lease payments. Each lease payment is allocated between the liability and finance charges so as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations, net of finance charges, are included in interest bearing loans and borrowings, split between current and non-current as appropriate. The interest element of the finance cost is charged to the income statement over the lease period. Assets held under finance leases are depreciated over their expected useful lives, taking into account the time period over which benefits from the leased assets are expected to accrue to the Group.

Operating leases Leases, where a significant portion of the risks and rewards of ownership are retained by the lessor, are classified as operating leases. Payments made under operating leases net of incentives received from the lessor are charged to the income statement on a straight line basis over the period of the lease. Income earned under operating leases is credited to the income statement when earned.

Greencore Group plc Annual Report 2006 49 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Group Statement of Accounting Policies continued year ended 29 September 2006

Business combinations

The purchase method of accounting is employed in accounting for the acquisition of businesses. In accordance with IFRS 3 Business Combinations, the cost of a business combination is measured as the aggregate of the fair values at the date of exchange of assets given and liabilities incurred or assumed in exchange for control, together with any directly attributable expenses. The assets, liabilities and contingent liabilities of the acquired entity are measured at their fair values at the date of acquisition. When the initial accounting for a business combination is determined provisionally, any adjustments to the provisional values allocated, are made within twelve months of the acquisition date and are effected prospectively from that date.

Intangible assets

Goodwill Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of the identifiable net assets of the acquired subsidiary at the date of acquisition. Any deficiency of the cost of acquisition below the fair values of the identifiable net assets acquired (i.e. discount on acquisition), is credited to the income statement in the period of acquisition.

In line with the provisions applicable to a first-time adopter under IFRS, the accounting treatment of business combinations undertaken prior to the transition date has not been reconsidered in preparing the opening IFRS balance sheet at 25 September 2004 and goodwill amortisation has ceased with effect from the transition date.

Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. On acquisition, goodwill is allocated to the cash-generating unit expected to benefit from the combination’s synergies. Goodwill is reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. Any impairment is recognised immediately in the income statement.

Goodwill arising on investments in associates, is included in the carrying amount of the investment, and any impairment of the goodwill is included in income from associates.

Computer software Costs incurred on the acquisition of computer software and software licences are capitalised. Other costs directly associated with developing and maintaining computer software programmes are capitalised once the recognition criteria set out in IAS 38 Intangible Assets are met. Once the software is ready for its intended use, these costs are amortised on a straight line basis over the estimated useful life of the software.

Investments

Year ended 30 September 2005 Financial fixed assets are stated at cost less provision for permanent diminution in value. Income from financial fixed assets is recognised in the profit and loss account in the year in which it is receivable.

Year ended 29 September 2006 Financial fixed assets (non-derivatives) are classified as available for sale and are initially recognised at fair value, and valued at fair value at each balance sheet date. Unrealised gains and losses arising from changes in the fair value of investments classified as available for sale are recognised within equity. When such investments are sold or impaired, the accumulated fair value adjustments are included in the income statement as gains or losses from investments.

The fair value of quoted investments is based on current bid prices.

Available for sale financial assets are classified as non-current assets, unless they are expected to be realised within 12 months of the balance sheet date.

50 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Group Statement of Accounting Policies continued year ended 29 September 2006

Investment property

Investment property is shown at cost less depreciation and any impairments. The cost of investment property comprises its purchase price and any costs directly attributable to bringing it into working condition for its intended use or its deemed cost on transition to IFRS. Investment property is depreciated so as to write off the cost, less residual value on a straight line basis over the expected life of each property, normally assumed to be 20 years.

Rental income arising on investment property is accounted for on a straight line basis over the lease term on the ongoing leases.

Discontinued operations and non-current assets held for sale

A discontinued operation is a component of an entity that either has been disposed, abandoned, or is classified as held for sale and:

• represents a separate major line of business or geographical area of operations; or

• is part of a single coordinated plan to dispose of a separate major line of business or geographical area of operations; or

• is a subsidiary acquired exclusively with a view to resale.

Classification as a discontinued operation occurs upon disposal, abandonment, or when the operations meet the criteria to be classified as held for sale.

Non-current assets and disposal groups classified as held for sale, are measured at the lower of the carrying amount and the fair value less costs to sell. Non-current assets and disposal groups, are classified as held for sale if their carrying amounts will be recovered through a sale transaction rather than continued use. This condition is regarded as met only when the sale is highly probable and the asset or disposal group is available for immediate sale in its present condition. Management must be committed to the sale, which should be expected to qualify for recognition as a completed sale within one year from the date of classification. Property, plant and equipment and intangible assets once classified as held for sale are not depreciated.

Inventories

Inventories are valued at the lower of cost and net realisable value. Cost is calculated based on first-in, first-out (FIFO) or weighted average as most appropriate. Cost includes raw materials, direct labour expenses, along with related production and other overheads. Net realisable value is the estimated selling price, in the ordinary course of business, less costs to completion and appropriate selling and distribution expenses.

Trade and other receivables

Trade and other receivables are initially recognised at fair value and subsequently valued net of provision for impairment. A provision is made when there is objective evidence that the Group will be unable to recover balances in full. Balances are written off when the probability of recovery is assessed as being remote.

Any trade and other receivables included in non-current assets are carried at amortised cost (i.e. adjusted for the time value of money).

Cash and cash equivalents

Cash and cash equivalents include cash in hand, deposits held on call with banks, and other short term highly liquid investments that are readily convertible to known amounts of cash, are subject to insignificant risk of changes in value, and have an original maturity of three months or less.

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Trade and other payables

Trade and other payables are carried at payment or settlement amounts. Where the time value of money is material, payables are carried at amortised cost.

Provisions

Provisions are recognised, when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation.

Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligation as a whole. A provision is recognised even if the likelihood of an outflow with respect to any one item included in the same class of obligation may be small.

Where the Group expects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, but only when the reimbursement is virtually certain. The expense relating to any provision is presented in the income statement net of any reimbursement.

A contingent liability is disclosed where the existence of an obligation will only be confirmed by future events, or where the amount of the obligation cannot be measured with reasonable reliability. Contingent assets are not recognised, but are disclosed where an inflow of economic benefits is probable.

Borrowings

All loans and borrowings are initially recognised at cost, being the fair value of the proceeds net of issue costs associated with the borrowing. After initial recognition, interest-bearing loans and borrowings are subsequently measured at amortised cost using the effective interest method. Amortised cost is calculated by taking into account any issue costs and any discount or premium settlement. Gains and losses arising on the settlement, or cancellation of liabilities are recognised respectively in finance income and finance costs.

Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement of the liability, for at least 12 months after the balance sheet date.

Derecognition of financial assets and liabilities

Financial assets A financial asset is derecognised when the Group no longer controls the contractual rights that comprise the financial asset which is normally the case when the asset is sold or the rights to receive cash flows from the asset have expired, and the Group has transferred substantially all risks and rewards of ownership. Any gains or losses arising from the changes in the fair value of financial assets at fair value through profit or loss are recognised in the income statement in the period in which they arise.

Financial liabilities A financial liability is derecognised when the obligation under the liability is discharged, cancelled or expires. When an existing financial liability is replaced by another from the same lender on substantially different terms, or the terms, of an existing liability are substantially modified, such an exchange or modification is treated as a derecognition of the original liability, and the recognition of a new liability with the result that the difference in the respective carrying amounts, together with any costs or fees incurred are recognised in the income statement.

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Derivative financial instruments

The activities of the Group expose it primarily to the financial risks of changes in foreign exchange rates and interest rates. The Group uses derivative financial instruments such as forward foreign exchange contracts and interest rate swap agreements to hedge these exposures.

Financial instruments - year ended 30 September 2005 Forward foreign exchange contracts and currency options are used to hedge foreign transactional cash flows and accordingly any gains and losses on these contracts, are recognised in the income statement when the underlying transaction is settled.

Interest rate swap agreements and similar contracts are used to manage interest rate exposures. Amounts payable or receivable in respect of these derivatives are recognised as adjustments to the interest expense over the period of the contracts.

Financial instruments - year ended 29 September 2006 From 1 October 2005, derivative financial instruments are initially recognised at fair value on the date a derivative contract is entered into and are subsequently remeasured at fair value. Derivatives are carried as assets when the fair value is positive and as liabilities when the fair value is negative. Derivative instruments which are not designated as effective hedging instruments (i.e. trading derivatives), are classified as a current asset or liability regardless of maturity. The full fair value of a hedging derivative is classified as a non-current asset or liability, if the remaining maturity of the hedged item is more than twelve months and as a current asset or liability, if the maturity of the hedged item is less than twelve months.

The fair value of financial instruments that are not traded in an active market is determined by using valuation techniques. The Group uses its judgment to select a variety of methods and make assumptions that are mainly based on market conditions existing at the balance sheet date.

For those derivatives designated as hedges and for which hedge accounting is desired, the hedging relationship is documented at its inception. This documentation identifies the hedging instrument, the hedged item or transaction, the nature of the risk being hedged and how effectiveness will be measured throughout its duration. Such hedges are expected at inception to be highly effective.

For the purposes of hedge accounting, hedges are classified as:

• fair value hedges, when hedging the exposure of changes in the fair value of a recognised asset or liability; or

• cash flow hedges, when hedging the exposure to variability in cash flows that are either attributable to a particular risk associated with a recognised asset or liability, or a highly probable forecast transaction including intra-group transactions.

Any gains or losses arising from the changes in the fair value of all other derivatives which are classified as held for trading, are taken to the income statement. These may arise from derivatives for which hedge accounting is not applied because they are not designated as hedging instruments. The Group does not use derivatives for trading or speculative purposes.

The treatment of gains and losses arising from revaluing derivatives designated as hedging instruments, depends on the nature of the hedging relationship as follows:

Fair value hedge In the case of fair value hedges which are designated and qualify for hedge accounting, any gain or loss stemming from the remeasurement of the hedging instrument to fair value is reported in the income statement. In addition, any fair value gain or loss attributable to the hedged risk, is adjusted against the carrying amount of the hedged item and reflected in the income statement. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of the hedged item is amortised on an effective interest basis to the income statement with the objective of achieving full amortisation by maturity of the hedged item.

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Cash flow hedge Where a derivative financial instrument is designated as a hedge of the variability in cash flows of a recognised asset or liability, or a highly probable forecasted transaction, the effective part of any gain or loss on the derivative financial instrument is recognised as a separate component of equity, with the ineffective portion being reported in the income statement. When a highly probable forecast transaction results in the recognition of a non-financial asset or liability, the cumulative gain or loss is removed from equity and included in the initial measurement of the non financial asset or liability. Otherwise, the associated gains and losses that had previously been recognised in equity are transferred to the income statement as the cash flows of the hedged item effect the income statement.

Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated, exercised, or no longer qualifies for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised as a separate component of equity is kept in equity until the forecast transaction occurs. If a hedged transaction is no longer anticipated to occur, the net cumulative gain or loss recognised in equity is transferred immediately to the income statement.

Income tax

Current tax represents the expected tax payable on the taxable income of the year, using tax rates and tax laws enacted or substantively enacted, at the balance sheet date along with any adjustment to tax payable in respect of previous years.

The Group provides in full for deferred tax assets and liabilities (using the liability method), arising from temporary differences between the tax base of assets and liabilities and their carrying amounts in the financial statements. Such differences result in an obligation to pay more tax or a right to pay less tax in future periods. A deferred tax asset is only recognised, where it is probable, that future taxable profits will be available against which the temporary differences giving rise to the asset can be utilised.

Deferred tax assets and liabilities are not subject to discounting and are measured at the tax rates that are anticipated to apply in the year in which the asset is realised or the liability settled.

Deferred tax is provided on temporary differences arising on investments in subsidiaries and associates, except where the timing of the reversal of the temporary difference can be controlled and it is probable that the temporary difference will not reverse in the foreseeable future.

Employee benefits

Wages, salaries, bonuses, social security contributions, paid annual leave and sick leave are accrued in the period in which the associated services are rendered by the employees of the Group. Termination benefits are payable when employment is terminated by the Group before the normal retirement date, or whenever an employee accepts voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed to either, terminating the employment of current employees according to a detailed formal plan without the possibility of withdrawal, or providing termination benefits as a result of an offer made to encourage voluntary redundancy.

Retirement benefit obligations

Defined contribution pension plans A defined contribution plan, is a pension plan under which the Group pays fixed contributions into a separate defined contribution scheme. Obligations for contributions to defined contribution pension plans are recognised as an expense in the income statement as due. Prepaid contributions are recognised as an asset to the extent that a cash refund or a reduction in future payments is available.

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Defined benefit pension plan The cost of providing benefits under the Group’s defined benefit plans is determined separately for each plan, using the projected unit credit method by professionally qualified actuaries and arrived at using actuarial assumptions based on market expectations at the balance sheet date. These valuations attribute entitlement benefits to the current period (to determine current service cost), and to the current and prior periods (to determine the present value of defined benefit obligations). Past service costs are recognised in the income statement on a straight line basis over the vesting period, or immediately if the benefits have vested. When a settlement (eliminating all obligations for benefits already accrued), or a curtailment (reducing future obligations as a result of a material reduction in the scheme membership or a reduction in future entitlement) occurs, the obligation and related plan assets are remeasured using current actuarial assumptions and the resultant gain or loss recognised in the income statement during the period in which the settlement or curtailment occurs.

The interest element of the defined benefit cost represents the change in present value of scheme obligations resulting from the passage of time, and is determined by applying the discount rate to the opening present value of the benefit obligation taking into account material changes in the obligation during the year. The expected return on plan assets is based on an assessment made at the beginning of the year of long-term market returns on scheme assets, adjusted for the effect on the fair value of plan assets of contributions received and benefits paid during the year. The difference between the expected return on plan assets and the interest cost, is recognised in the income statement as finance income or expense.

Actuarial gains and losses are recognised, in full, in the Group statement of recognised income and expense in the period in which they occur.

The defined benefit pension asset or liability in the balance sheet comprises the total for each plan, of the present value of the defined benefit obligation (using a discount rate based on high quality corporate bonds), less any past service cost not yet recognised, less the fair value of plan assets out of which the obligations are to be settled directly. Fair value is based on market price information, and in the case of quoted securities, is the published bid price. The value of a net pension benefit asset is the present value of any amount the Group reasonably expects to recover by way of refund of surplus from the plan at the end of the plan’s life.

Employee share options

The Group grants equity settled share based payments to employees (through executive share option schemes and employee sharesave schemes). The fair value is expensed to the income statement on a straight line basis over the vesting period. In the case of these options, the fair value is determined using a trinomial valuation model, as measured at the date of grant, excluding the impact of any non-market conditions. Non-market vesting conditions are included in assumptions about the number of options that are expected to vest. At each balance sheet date, the Group revises its estimates of the number of options that are expected to vest recognising any adjustment in the income statement, with a corresponding adjustment to equity.

To the extent that the Group receives a tax deduction relating to the services paid in shares, deferred tax in respect of share options is provided on the basis of the difference between the market price of the underlying equity as at the date of the financial statements, and the exercise price of the option. As a result, the deferred tax impact of share options will not directly correlate with the expense reported in the income statement.

The proceeds received when options are exercised, net of any directly attributable transaction costs, are credited to share capital and share premium.

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Foreign currency

Functional and presentation currency The individual financial statements of each Group entity are measured in the currency of the primary economic environment in which the entity operates (‘the functional currency’). The consolidated financial statements are presented in euro which is the Company’s functional and presentation currency.

Transactions and balances Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions, and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currencies, are recognised in the income statement, except when deferred in equity as qualifying net investment hedges and qualifying cash flow hedges.

Translation differences on non-monetary financial assets and liabilities are reported as part of the fair value gain or loss. Translation differences on non-monetary financial assets and liabilities such as equities held at fair value through profit or loss are recognised in profit or loss, as part of the fair value gain or loss. Translation differences on non-monetary financial assets such as equities classified as available for sale, are included in the available for sale reserve in equity.

Goodwill and fair value adjustments arising on the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and translated at the closing rate.

Group companies The income statement and balance sheet of Group companies that have a functional currency different from the presentation currency, are translated into the presentation currency as follows:

• assets and liabilities at each balance sheet date are translated at the closing rate at the date of the balance sheet • income and expenses in the income statement are translated at average exchange rates • all resulting exchange differences are recognised as a separate component of equity

On consolidation, exchange differences arising from the translation of the net investment in foreign operations and on borrowings and other currency instruments designated as hedges of such investments, are taken to shareholders’ equity. When a foreign operation is sold, exchange differences that were recorded in equity are recognised in the income statement as part of the gain or loss on sale.

Government grants

Government grants for the acquisition of assets are recognised at their fair value when there is reasonable assurance that the grant will be received and any conditions attached to them have been fulfilled. The grant is held on the balance sheet as a deferred credit and released to the income statement over the periods necessary to match the related depreciation charges, or other expenses of the asset, as they are incurred.

Research and development

Expenditure on research and development is recognised as an expense in the period in which it is incurred. An asset is recognised when all of the following conditions are met:

• an asset is created that can be identified • it is probable that the asset created will generate future economic benefits • the development cost of the asset can be measured reliably

Any asset recognised is amortised on a straight line basis over its estimated useful economic life. The carrying value of the asset is reviewed annually for impairment when the asset is not yet in use and subsequently when events or changes in circumstances indicate that the carrying value may not be recoverable.

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Segmental reporting

The Group reports segmental information by class of business and by geographical area. The Group’s primary reporting segment, for which more detailed disclosures will be made is by class of business. The Group has two primary reporting segments (i) Convenience Foods and (ii) Ingredients, Agribusiness & Related Property.

Exceptional items

Exceptional items are those that, in management’s judgment, need to be disclosed by virtue of their nature or amount. Such items are included within the income statement caption to which they relate and are separately disclosed in the notes to the Group financial statements.

Minority interests

The interest of the minority shareholders is stated at the minority’s proportion of the fair values of the assets and liabilities recognised. Subsequently, any losses applicable to the minority interest in excess of the minority interest, are allocated against the interest of the parent.

Share capital

Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options, are taken as a deduction within equity, net of tax, from the proceeds.

Treasury shares Where the Company purchases the Company’s equity share capital, the consideration paid is deducted from total shareholders’ equity and classified as treasury shares until such shares are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in total shareholders’ equity.

Dividends Interim dividends payable are recognised as a liability of the Company when the Board of Directors resolves to pay the dividend and the shareholders have been notified in accordance with the Company’s Articles of Association. Final dividends of the Company are recognised as a liability when they have been approved by the Company’s shareholders.

Critical accounting estimates and assumptions

Group management make estimates and assumptions concerning the future in the preparation of the Group financial statements, which can significantly impact the reported amounts of assets and liabilities. The significant estimates and assumptions used in the preparation of the Group’s financial statements are outlined in the relevant notes.

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1. Segment information The Group is analysed into two primary business segments: (i) Convenience Foods and (ii) Ingredients, Agribusiness and Related Property. The Convenience Foods segment, is a leading player in the delivery of convenient, premium quality, meal and snack solutions to retailers and food service providers mainly in the UK, Ireland, and Continental Europe. The Ingredients, Agribusiness and Related Property segment, comprises businesses including sugar processing and related activities (discontinued during 2006), malt production in Ireland, the UK and Belgium, together with the development and trading of surplus property assets.

Intersegment revenue is not material and thus not subject to separate disclosure.

Income statement items Convenience Foods Ingredients, Agri and Total Group Related Property 2006 2005 2006 2005 2006 2005 €’000 €’000 €’000 €’000 €’000 €’000 Continuing operations Segment revenue 901,443 832,554 275,341 272,812 1,176,784 1,105,366

Operating profit 68,967 65,242 5,643 9,442 74,610 74,684

Exceptional items 2,132 _ (315) – 1,817 – Finance income 35,929 33,179 Finance costs (54,002) (58,202) Share of profit of associates after tax – – 2,848 3,559 2,848 3,559 Profit before taxation 61,202 53,220 Taxation (11,437) (9,386) Profit from continuing operations 49,765 43,834 Discontinued operations Loss from discontinued operations – (41,906) (49,505) (41,795) (49,505) (83,701) Result for the financial year 260 (39,867)

Balance sheet items

Segment assets Convenience Foods Ingredients, Agri and Total Group Related Property 2006 2005 2006 2005 2006 2005 €’000 €’000 €’000 €’000 €’000 €’000

Assets 776,527 773,144 326,731 341,406 1,103,258 1,114,550 Investments in associates – – 8,216 6,012 8,216 6,012 Total assets 776,527 773,144 334,947 347,418 1,111,474 1,120,562

Reconciliation to total assets as reported in the Group balance sheet Financial assets – 645 Available for sale financial assets 530 – Deferred tax assets 24,957 34,962 Cash and cash equivalents 78,967 74,102 Derivative financial instruments 389 – Total assets as reported in the Group balance sheet 1,216,317 1,230,271

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1. Segment information (continued) Segment liabilities Convenience Foods Ingredients, Agri and Total Group Related Property 2006 2005 2006 2005 2006 2005 €’000 €’000 €’000 €’000 €’000 €’000 Segment liabilities 283,153 306,272 205,244 178,505 488,397 484,777

Reconciliation to total liabilities as reported in the Group balance sheet Borrowings (current and non-current) 433,922 473,866 Derivative financial instruments (current and non-current) 33,196 – Government grants 1,182 1,452 Declared interim dividend 9,961 9,804 Income tax liabilities (current and deferred) 66,714 62,495 Total liabilities as reported in the Group balance sheet 1,033,372 1,032,394

Other segment information Continuing operations Convenience Foods Ingredients, Agri and Total Group Related Property 2006 2005 2006 2005 2006 2005 €’000 €’000 €’000 €’000 €’000 €’000

Capital expenditure 34,176 32,581 4,371 5,608 38,547 38,189 Depreciation included in segment result 25,858 23,751 6,558 6,298 32,416 30,049 Amortisation of intangible assets included in segment result 615 663 173 130 788 793 Impairment of inventory 2,417 2,254 773 254 3,190 2,508

Discontinued operations Convenience Foods Ingredients, Agri and Total Group Related Property 2006 2005 2006 2005 2006 2005 €’000 €’000 €’000 €’000 €’000 €’000

Impairment of inventory - - 8,943 820 8,943 820 Impairment of property, plant and equipment - 32,303 106,230 38,438 106,230 70,741

Geographical analysis (secondary segment) The following is a geographical analysis of the segment information presented above. Ireland United Kingdom Total Group and Rest of World 2006 2005 2006 2005 2006 2005 €’000 €’000 €’000 €’000 €’000 €’000

Segment revenue (continuing operations) 154,996 148,397 1,021,788 956,969 1,176,784 1,105,366 Capital expenditure (continuing operations) 1,887 2,717 36,660 35,472 38,547 38,189

Segment assets 259,557 268,190 851,917 852,372 1,111,474 1,120,562

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2. Operating costs, net

2006 2005 €’000 €’000

Distribution costs 73,861 69,845 Administrative expenses 201,941 180,244 Research and development 7,024 6,496 Other operating costs 2,499 2,200 Other operating income (9,817) (7,652) Total operating costs, net* 275,508 251,133 *before operating exceptional items (note 7)

3. Result for the financial period

Result for the financial period has been arrived at after charging/(crediting) the following amounts:

2006 2005 €’000 €’000 Depreciation: Owned assets 32,869 35,982 Leased assets 2,640 4,324 35,509 40,306

Amortisation of intangible assets 1,014 940 Operating lease rentals: Plant and equipment 8,709 7,866 Land and buildings 11,854 11,982 20,563 19,848

Auditors’ remuneration 829 705 Audit related fees 150 - 979 705

Government grants released (243) (606)

Rental income from investment properties (247) (208)

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4 Directors’ Emoluments Directors’ remuneration:

Fees Fees Basic Pension Other Performance 2006 2005 Ordinary Special Salary Contributions Benefits Bonus Total Total Executive Directors €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000 D.J. Dilger - - 634 68 42 289 1,033 884 P.F. Coveney - - 400 43 36 173 652 30 G.P. Doherty - - 290 31 33 132 486 96 A.M. Hynes - - 423 51 26 177 677 581 P.T. Kennedy (1) ------537 A.A. Truelove (2) ------679 F.P. Woodall (3) ------152 - - 1,747 193 137 771 2,848 2,959 Non-Executive Directors E.F. Sullivan 38 162 - - - - 200 170 G.M.N. Corbett 38 10 - - - - 48 36 S.P. FitzPatrick 38 10 - - - - 48 45 P.A. McCann 38 10 - - - - 48 45 P.R. O’Donoghue 38 21 - - - - 59 45 D.M. Simons 38 10 - - - - 48 45 D.A. Sugden 38 21 - - - - 59 49 J.F. Casey (4) ------23 266 244 - - - - 510 458 Total remuneration 266 244 1,747 193 137 771 3,358 3,417

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4 Directors’ Emoluments (continued)

The expense recognised in the income statement in the year calculated in accordance with IFRS 2 Share- based Payment in respect of options issued to Executive Directors under the Group Share option schemes and Sharesave schemes was €0.087m (2005: €0.003m).

2006 2005 No. No. Average number of executive directors 4 3.5 Average number of non-executive directors 7 7.2 11 10.7

1. P.T. Kennedy resigned as a Director on 5 September 2005. 2. A.A. Truelove resigned as a Director on 9 December 2004. 3. F.P. Woodall resigned as a Director on 7 November 2003. 4. J.F. Casey resigned as a Director on 10 February 2005.

Details of Directors’ share options and long term incentive arrangements are set out on pages 29, and 33 to 35.

Directors’ pension: The following table sets out the pension benefits earned by Directors during the year and the transfer value of the increase in accrued benefit, under the Company’s defined benefit pension scheme.

Increase Accrued in accrued Transfer benefit benefits during value of at year-end the year increase €’000 €’000 €’000

D.J. Dilger 398 7 79 P.F. Coveney 8 7 36 G.P. Doherty 26 7 33 A.M. Hynes 85 19 339

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5. Employment

The average number of persons (including Executive Directors) employed by the Group during the year, analysed by business segment was:

2006 2005 Number Number

Convenience Foods 7,813 9,286 Ingredients, Agribusiness and Related Property 621 812 8,434 10,098

The staff costs for the above were: 2006 2005 €’000 €’000

Wages and salaries 240,388 254,095 Social welfare costs 21,299 24,275 Employee share option expense (note 6) 430 153 Pension costs - defined contribution plans (note 29) 707 1,210 Pension costs - defined benefit plans (note 29) (154) 13,325 262,670 293,058

6. Employee share options

Executive share option scheme The Group’s employee share options are equity-settled share based payments as defined in IFRS 2 Share- based Payment. The IFRS requires that a recognised valuation methodology be employed to determine the fair value of share options granted. The expense reported in the income statement of €0.227m (2005: €nil) has been arrived at through applying a trinomial model, which is a lattice option-pricing model. To the extent any options vest they will ordinarily remain exercisable at any time up to 10 years from the date of grant and are settled in equity once exercised.

The general terms and conditions applicable to the share options granted by the Group are addressed in the Report of the Directors on pages 34 and 35.

Options were granted over 770,000, 250,000 and 325,000 ordinary shares on 1 December 2005, 2 December 2005 and 22 June 2006, respectively. These awards will be exercisable, subject to the performance measurement targets being attained between 1 December 2008 and 21 June 2016, at an exercise price of €3.35, €3.35 and €3.60, respectively. The weighted average fair value of share options granted during the year ended 29 September 2006, was €0.79 (2005: none granted).

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6. Employee share options (continued)

The following table illustrates the number and weighted average exercise prices of, and movements in, share options during the year under the plan.

2006 2006 2005 2005 Weighted Weighted average average Number exercise Number exercise outstanding price outstanding price € €

At beginning of year 6,540,000 3.10 8,655,000 3.11 Granted 1,345,000 3.41 – – Exercised (25,000) 2.82 – – Expired – – (220,000) 2.84 Lapsed (370,000) 3.04 (1,895,000) 3.19 At end of year 7,490,000 3.16 6,540,000 3.10 Exercisable at end of year – – – –

Range of exercise prices for the share option plan

Weighted Weighted Weighted average average average Number contract exercise Number exercise outstanding life price exercisable price years € € 2006 €2.45 - €3.25 4,815,000 4.92 2.75 – – €3.26 - €4.05 1,640,000 7.52 3.44 – – €4.06 - €4.66 1,035,000 0.81 4.64 – – 7,490,000 4.92 3.16 – – 2005 €2.45 - €3.25 5,100,000 5.99 2.75 – – €3.26 - €4.05 405,000 2.94 3.54 – – €4.06 - €4.66 1,035,000 1.81 4.64 – – 6,540,000 5.14 3.10 – –

Sharesave scheme The Group operates a savings-related share option scheme in both Ireland and the UK. Options are granted at a discount of between 15% and 25% of the market price at the date of invitation over three, five and seven year savings contracts, and options are exercisable during the six month period, following completion of the savings contract. Options are valued using a trinomial model, which is a lattice option-pricing model.

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6. Employee share options (continued)

During the year ended 29 September 2006, sharesave scheme options were granted over 27,076 and 434,694 shares, which will ordinarily be exercisable at an exercise price (expressed in euro) of €2.70 and €3.10 per share during the period: 21 July 2009 to 21 January 2010 for the three year scheme 21 July 2011 to 21 January 2012 for the five year scheme and 21 July 2013 to 21 January 2014 for the seven year scheme. The weighted average fair value of share options granted during the year ended 29 September 2006 was €1.33 (2005: €0.89). The expense recognised in the income statement in the year for the Sharesave scheme is €0.203m (2005: €0.153m).

The following table illustrates the number and weighted average exercise prices (expressed in euro) of, and movements in, share options during the year under the plan.

2006 2006 2005 2005 Weighted Weighted average average Number exercise Number exercise outstanding price outstanding price € €

At beginning of year 2,340,169 2.53 2,580,679 2.40 Granted 461,770 3.08 498,076 2.89 Exercised (546,726) 2.04 (315,009) 2.29 Expired (6,898) 2.84 (2,432) 2.29 Lapsed (553,892) 3.03 (421,145) 2.35 At end of year 1,694,423 2.67 2,340,169 2.53 Exercisable at end of year 24,924 2.16 267,085 3.67

Range of exercise prices for the share option plan (expressed in euro)

Weighted Weighted Weighted average average average Number contract exercise Number exercise outstanding life price exercisable price years € € 2006 €1.74 - €2.79 885,732 2.19 2.34 22,035 2.06 €2.79 - €3.84 808,691 3.46 3.03 2,889 2.90 1,694,423 2.80 2.67 24,924 2.16 2005 €1.74 - €2.79 1,674,773 2.42 2.23 75,966 2.29 €2.79 - €3.84 540,056 3.62 2.97 65,779 3.32 €3.84 - €4.89 125,340 0.39 4.68 125,340 4.68 2,340,169 2.59 2.53 267,085 3.67

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6. Employee share options (continued)

The following two tables show the assumptions used to fair value the equity settled options granted in the Executive share option scheme and the Sharesave scheme.

2006 Executive share option Sharesave Sharesave Sharesave scheme 3 year 5 year 7 year

Dividend yield (%) 3.45% 3.45% 3.45% 3.45% Expected volatility (%) 28% 28% 28% 28% Weighted average risk-free interest rate (%) 3.50% 3.65% 3.78% 3.88% Weighted average expected life of option (years) 7.7 3.5 5.5 7.5 Weighted average share price at grant (€) 3.41 4.20 4.20 4.20 Weighted average exercise price (€) 3.41 3.08 3.08 3.08

2005 Executive share option Sharesave Sharesave Sharesave scheme 3 year 5 year 7 year

Dividend yield (%) – 3.77% 3.77% 3.77% Expected volatility (%) – 28% 28% 28% Weighted average risk-free interest rate (%) – 2.33% 2.64% 2.97% Weighted average expected life of option (years) – 3.5 5.5 7.5 Weighted average share price at grant (€) – 3.62 3.62 3.62 Weighted average exercise price (€) – 2.89 2.89 2.89

The average share price during the year was €3.71 (2005: €3.24).

The expected volatility is based on historic volatility over the past 10 years. The risk free rate of return is the yield on a zero coupon government bond of a term consistent with the life of the option.

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7. Exceptional items

2006 2005 €’000 €’000

Continuing operations Malt legal settlement (a) 4,930 – Malt restructuring (b) (5,245) – Pension curtailment gain (c) 4,807 – Chilled Sauce business restructuring (d) (2,675) – 1,817 – Tax on exceptional items 10 – Total continuing operations 1,827 – Discontinued operations Exit from sugar processing (net of tax) (e) (68,903) – Fundamental reorganisation of Greencore Sugar (net of tax) (f) – (66,038) Provision for loss on termination of operations (net of tax) (g) – (40,090) Disposal of interest in subsidiaries (net of tax) (h) – 1,827 Total discontinued operations (net of tax) (68,903) (104,301) Total exceptional costs (net of tax) (67,076) (104,301)

Continuing operations (a) Malt legal settlement The Group settled an outstanding claim related to Greencore Malt at €4.9m (net of costs).

(b) Malt restructuring Following on from the closure of three maltings during 2005, Greencore Malt focused on restructuring its core operations in both Ireland and the UK. The exceptional loss represents the costs associated with this business restructuring.

(c) Pension curtailment gain In April 2006 a number of changes in benefit design were implemented in respect of the Hazlewood Foods Retirement Benefits Scheme. These changes included a shift to a career average revalued basis in respect of accrued benefits with revaluation set at the level of limited price inflation and the integration of the scheme with the basic state pension in respect of future service. These scheme amendments net of related costs resulted in an exceptional pension curtailment gain of €4.8m.

(d) Chilled Sauce business restructuring Following a strategic review at Greencore Chilled Sauces, a decision was made to consolidate all chilled sauce manufacturing at the Bristol facility, and to close the Chesterfield factory. The exceptional loss represents the costs associated with this decision.

Discontinued operations

(e) Exit from sugar processing On 15 March 2006, Greencore confirmed its intention to exit sugar processing in Ireland, renounce its quota, and apply for the EU restructuring aid which is available under the Council Regulations (EC) No 320/2006 (the Regulation). The total EU restructuring aid available for the sugar quota renounced by Greencore is €145.5m. This Regulation states, inter alia, that at least 10% of the restructuring aid shall be reserved for sugar beet growers and machinery contractors. The Regulation gives the Member State the responsibility to determine if this percentage is to be increased, but imposes on the Member State the requirement, using objective and non-discriminatory criteria, to ensure an economically sound balance between the elements of the restructuring plan.

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7. Exceptional items (continued)

On 12 July 2006, the Member State announced that it was allocating 67.6% (representing €98.4m) to Greencore, with the balance of the EU aid to be allocated to sugar beet growers and machinery contractors. The Board of Greencore rejected the basis of this allocation. That Government decision is currently subject to a judicial review in the Irish High Court.

On 31 July 2006, Greencore formally applied for restructuring aid by renouncing its sugar quota, and submitting a restructuring plan to the Irish Government. Greencore subsequently agreed with the Irish Government that, conditional upon Greencore’s restructuring plan being approved, the Group would amend the plan to reflect any lawful decision of the Government taken pursuant to the outcome of the legal proceedings. On 19 September 2006, the Government deemed Greencore’s restructuring plan to be eligible for restructuring aid.

The financial consequences to Greencore are as follows:

€’m

Write-down and impairment of assets (115.0) Environmental, remediation, demolition, redundancy & other costs (49.8) (164.8) Less: present value of EU restructuring aid receivable which may be regarded as virtually certain 95.9 Net exceptional charge (post-tax) (68.9)

Restructuring costs As at 29 September 2006, the costs associated with the exit from sugar processing are estimated at €164.8m.

The Government in announcing its decision in relation to the allocation of EU restructuring aid included an ‘illustrative’ allocation of €50.0m to the Greencore Group Pension Scheme. At 29 September 2006, this pension scheme did not require such an allocation as it had a net retirement benefit asset of €25.0m (an asset which takes account of the present value of all anticipated obligations of the pension scheme). The Board believes that the Government was not entitled to direct the allocation of aid in this manner. Accordingly, the Board has concluded that such an allocation will not have to be made.

Accounting for the receipt of EU aid The Group’s entitlement to EU Restructuring Aid is estimated to be €130.9m. As of 29 September 2006, the receipt of €98.4m is regarded as virtually certain and the present value of this amount (being €95.9m) has therefore been included in the year-end balance sheet as a receivable and netted against the related gross exceptional costs in the Group income statement.

The balance of the Group’s entitlement of €32.5m which cannot at year-end be reasonably regarded as virtually certain is treated as a contingent asset, and therefore, disclosed but not recognised as a receivable until its receipt becomes virtually certain.

Timing of receipt of Restructuring Aid The EU regulations (320/2006 and 968/2006 ) set out a timetable for the payment of restructuring aid in two tranches, 40% in June 2007 and 60% in February 2008. The related amounts are included in the financial statements as follows:

€’m

Current assets – EU restructuring aid receivable 39.4 Non-current assets – EU restructuring aid receivable 56.5 95.9

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7. Exceptional items (continued)

(f) Fundamental reorganisation of Greencore Sugar In January 2005, the Group announced its decision to consolidate all sugar processing at Mallow and to close the Carlow facility. The costs associated with this fundamental restructuring totalled €66.0m.

(g) Provision for loss on termination of operations In October 2005, the Group disposed of its UK Pizza business for a nominal consideration. The exceptional item booked during the year ended September 2005, included a provision to write down all of the assets related to the pizza business to their recoverable amounts, and to cover all costs directly related to the decision to sell the pizza business.

(h) Disposal of interest in subsidiary In August 2005, a small non-core, deli-style, meat business with operations in Ireland and Germany was sold, resulting in a profit of €1.8m, net of tax.

8. Finance costs and finance income

2006 2005 Finance costs €’000 €’000 On bank borrowings repayable within five years, other than by instalments 16,508 14,876 On other loans repayable within five years 258 593 On lease finance 190 219 On bank and other borrowings repayable within five years, other than by instalments 6,706 – repayable after more than five years, other than by instalments 9,194 16,796 32,856 32,484 Other finance costs Interest on defined benefit pension scheme liabilities 26,803 25,790 Fair value of derivative financial instruments and related debt cross currency interest rate swaps designated as fair value hedges 13,837 – adjusted hedged fixed rate debt (13,313) – interest rate swaps not designated as hedges (6,430) – forward foreign exchange contracts not designated as hedges 749 – Foreign exchange movements on inter-company balances (500) (72) Total finance costs 54,002 58,202 Finance income Interest on cash and cash equivalents (2,139) (1,977) Expected return on defined benefit pension scheme assets (33,790) (31,202) Total finance income (35,929) (33,179)

Finance costs (net) 18,073 25,023

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9. Share of profit of associates after tax

The Group’s share of profit of associates after tax is equity accounted and is presented as a single line item in the Group income statement.

2006 2005 €’000 €’000 Group share of: Revenue 44,184 43,189

Profit before finance costs 3,857 4,549 Finance costs (net) (514) (386) Profit before taxation 3,343 4,163 Taxation (495) (604) Profit after taxation 2,848 3,559

10. Taxation

2006 2005 Continuing operations €’000 €’000

Current tax Corporation tax charge/(credit) - continuing operations 5,041 (2,021) Overseas tax credit - continuing operations (867) (636) Total current tax 4,174 (2,657)

Deferred tax Origination and reversal of temporary differences 4,942 11,520 Defined benefit pension obligations 2,331 569 Employee share options – (46) Total deferred tax 7,273 12,043 Income tax expense (pre-exceptional) 11,447 9,386

Tax credit on exceptional items Current tax (1,452) – Deferred tax 1,442 –

Exceptional tax credit (10) –

Total income tax charge from continuing operations 11,437 9,386

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10. Taxation (continued)

2006 2005 €’000 €’000 Discontinued operations Pre-exceptional Current tax charge for the year 2,593 1,605

Exceptional Current tax charge for the year – 82 Deferred tax charge/(credit) for the year 221 (19,405) 221 (19,323)

Total income tax charge/(credit) from discontinued operations 2,814 (17,718)

Total income tax charge/(credit) for the year 14,251 (8,332)

Deferred tax relating to items charged/(credited) to equity

Actuarial gains/(losses) on pension liability 1,352 (6,419) Cash flow hedges 66 – Employee share options 283 (257) 1,701 (6,676)

Reconciliation of total tax expense

The tax charge for the year can be reconciled to the profit/(loss) per the income statement as follows:

2006 2005 €’000 €’000

Profit/(loss) for the year 260 (39,867) Total tax charge/(credit) for the year 14,251 (8,332) Less share of profit of associates after tax (2,848) (3,559) 11,663 (51,758)

Tax expense at Irish corporation tax rate of 12.5% (2005: 12.5%) 1,458 (6,470) Effects of: Expenses not deductible for tax purposes 10,997 5,297 Differences in effective tax rates on overseas earnings 4,149 (5,122) Net utilisation of tax losses (612) (569) Tax exempted earnings and earnings at reduced Irish rates (797) (497) Other (944) (971) Tax charge/(credit) for the year 14,251 (8,332)

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10. Taxation (continued)

Factors that may impact future tax charges and other disclosures

The Group has not provided deferred tax for temporary differences applicable to investments in subsidiaries on the basis that the Group can control the timing and realisation of these temporary differences, and it is probable that the temporary difference will not reverse in the foreseeable future. No provision has been recognised in respect of the unremitted earnings of subsidiaries as there is no commitment to remit earnings.

The tax charge in future periods will be impacted by any changes to the corporation tax rate in force in the countries in which the Group operates.

The Group is subject to income taxes in numerous jurisdictions. Significant judgment is required in determining the Group’s provision for income taxes. There are many transactions and calculations for which the ultimate tax determination is uncertain during the ordinary course of business. The Group recognises liabilities for anticipated tax audit issues based on estimates of whether additional taxes will be due. Where the final tax outcome of these matters is different from the amounts that were initially recorded, such differences will impact the income tax and deferred tax provisions in the period in which such determination is made.

11. Discontinued operations

In March 2006, the Group announced its intention to exit sugar processing entirely. The Group has since renounced its quota and ceased operations. In accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the operations of Irish Sugar and related businesses are therefore considered discontinued as at 29 September 2006 (note 7).

In August 2005 the Group disposed of a small non-core, deli style, meat business with operations in Ireland and Germany. In October 2005, the Group also disposed of its UK Pizza business for a nominal consideration (note 7).

The sales, results and cash flows of the businesses were as follows:

2006 2005 €’000 €’000

Revenue 175,161 295,771 Cost of sales (119,894) (209,951) Operating costs, net (33,276) (63,615) Operating profit 21,991 22,205 Finance income and costs (net) – – Profit before taxation and loss on disposal/abandonment 21,991 22,205 Taxation on profit before loss on disposal/abandonment (2,593) (1,605) Profit from operations before loss on disposal/abandonment 19,398 20,600 Loss before taxation on disposal/abandonment (note 7) (68,682) (123,624) Taxation on loss on disposal/abandonment (note 7) (221) 19,323 Loss on disposal/abandonment (note 7) (68,903) (104,301) Loss from discontinued operations (49,505) (83,701)

Cash flows of discontinued operations Operating cash flows 20,564 26,487 Investing cash flows (9,338) (23,347) Financing cash flows – – Total cash flows 11,226 3,140

Net cash outflows on disposal/abandonment (16,783) (6,509)

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12. Earnings per ordinary share Basic earnings per ordinary share is calculated by dividing the loss attributable to equity holders of the Company by the weighted average number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held as treasury shares. The adjusted figures for basic earnings per ordinary share are after the elimination of exceptional items, inter-company foreign exchange, and the fair value of all derivative financial instruments and related debt. 2006 2005 €’000 €’000 Loss attributable to equity holders of the Company (456) (41,407) Exceptional items 67,076 104,301 Fair value of derivative financial instruments and related debt (5,157) – Effect of inter-company foreign exchange (500) (72) Adjusted profit after taxation and minority interests 60,963 62,822

2006 2005 cent cent Basic earnings per ordinary share (0.2) (21.4) Exceptional items 34.2 53.9 Fair value of derivative financial instruments and related debt (2.6) – Effect of inter-company foreign exchange (0.3) – Adjusted basic earnings per ordinary share 31.1 32.5 Weighted average number of ordinary shares in issue during the year (thousands) 196,223 193,347

Diluted earnings per ordinary share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume conversion of all dilutive potential ordinary shares. Employee share options, which are performance based, are treated as contingently issuable shares, because their issue is contingent upon satisfaction of specified performance conditions in addition to the passage of time. These contingently issuable ordinary shares are excluded from the computation of diluted earnings per ordinary share where the conditions governing exercisability have not been satisfied as at the end of the reporting period. Options over 7,490,000 (2005: 7,219,408) shares were excluded from the diluted EPS calculation as they were either antidilutive, or contingently issuable ordinary shares which had not satisfied the performance conditions attaching at the end of the reporting period. 2006 2005 cent cent Diluted earnings per ordinary share (0.2) (21.3) Exceptional items 34.1 53.7 Fair value of derivative financial instruments and related debt (2.6) – Effect of trading inter-company foreign exchange (0.3) – Adjusted diluted earnings per ordinary share 31.0 32.4

Weighted average number of ordinary shares (thousands) 196,924 194,246

A reconciliation of the weighted average number of ordinary shares used for the purposes of calculating the diluted earning per share amounts is as follows: 2006 2005 Weighted average number of ordinary shares in issue during the year (thousands) 196,223 193,347 Dilutive effect for share options (thousands) 701 899 Weighted average number of ordinary shares for diluted earnings per share (thousands) 196,924 194,246

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13. Dividends paid and proposed 2006 2005 €’000 €’000

Amounts recognised as distributions to equity holders in the year: Equity dividends on ordinary shares: Final dividend of 7.58c for the year ended 30 September 2005 (2004: 7.58c) 14,853 14,574 Interim dividend of 5.05c for the year ended 29 September 2006 (2005: 5.05c) 9,961 9,804 Total 24,814 24,378

Proposed for approval at AGM: Equity dividends on ordinary shares: Final dividend of 7.58c for the year ended 29 September 2006 (2005: 7.58c) 15,053 14,853

The proposed final dividend for year ended 29 September 2006, is subject to approval by the shareholders at the AGM and has not been included as a liability in these Group accounts in accordance with IAS 10 Events After the Balance Sheet Date.

14. Intangible assets Goodwill Software Total €’000 €’000 €’000 Year ended 29 September 2006 Opening net book amount 351,281 2,533 353,814 Additions – 999 999 Currency translation differences 85 13 98 Amortisation charge – (1,014) (1,014) Closing net book amount 351,366 2,531 353,897

At 29 September 2006 Cost 351,366 7,217 358,583 Accumulated depreciation – (4,686) (4,686) Net book amount 351,366 2,531 353,897

Year ended 30 September 2005 Opening net book amount 336,865 1,962 338,827 Additions – 1,506 1,506 Arising on acquisition 14,416 – 14,416 Currency translation differences – 5 5 Amortisation charge – (940) (940) Closing net book amount 351,281 2,533 353,814

At 30 September 2005 Cost/deemed cost 351,281 6,184 357,465 Accumulated depreciation – (3,651) (3,651) Net book amount 351,281 2,533 353,814

At 24 September 2004 Cost/deemed cost 336,865 4,676 341,541 Accumulated depreciation – (2,714) (2,714) Net book amount 336,865 1,962 338,827

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14. Intangible assets (continued)

Goodwill acquired in business combinations is allocated at acquisition, to the cash generating units (CGUs) that are expected to benefit from that business combination. A summary of the allocation of the carrying value of goodwill by segment is as follows:

2006 2005 €’000 €’000

Convenience Foods 349,302 349,217 Ingredients, Agribusiness and Related Property 2,064 2,064 351,366 351,281

Impairment testing and goodwill Goodwill acquired through business combinations has been allocated to CGUs for the purposes of impairment testing. The CGUs represent the lowest level within the Group at which the associated goodwill is monitored for internal management purposes, and are not larger than the primary and secondary segments determined in accordance with IAS 14 Segment Reporting.

The recoverable amount of each CGU is based on a value in use computation. The cash flow forecasts employed for this computation are extracted from a three year strategic plan document formally approved by the Board of Directors, and specifically excludes incremental profits and other cash flows stemming from future acquisitions. Cash flows for a further two years are based on the assumptions underlying the three year plan. A terminal value reflecting inflation is applied to the year five cash flows. A present value of the future cash flows is calculated using a before-tax discount rate of 7%. Applying these techniques, no impairment arose in either 2006 or 2005.

The key assumptions include management’s estimates of future profitability, capital expenditure requirements, and working capital investments. The values applied to the key assumptions are derived from a combination of external and internal factors based on historical experience, and take into account management’s expectation of future trends affecting the industry and other developments and initiatives in the business.

Sensitivity analysis If the estimated pre-tax discount rate applied to the discounted cash flows had been 10% higher than management’s estimates, there would have been no requirement on the Group to recognise any impairment against goodwill.

If the estimated cash flow forecasts used in the value in use computations had been 10% lower than management’s estimates, again there would have been no requirement on the Group to recognise any impairment against goodwill.

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15. Property, plant and equipment Land and Plant and Fixtures Capital work Total buildings machinery and fittings in progress €’000 €’000 €’000 €’000 €’000

Year ended 29 September 2006 Opening net book amount 199,726 267,463 8,069 9,337 484,595 Additions 3,367 27,275 1,606 14,103 46,351 Disposals (2,534) (3,086) (41) – (5,661) Reclassifications 825 10,338 471 (11,634) – Currency translation differences 878 995 42 212 2,127 Exceptional provision for impairment (28,696) (77,170) (364) – (106,230) Depreciation charge (4,144) (29,205) (2,062) – (35,411) Closing net book amount 169,422 196,610 7,721 12,018 385,771

At 29 September 2006 Cost/deemed cost 207,607 463,739 33,948 12,018 717,312 Accumulated depreciation (38,185) (267,129) (26,227) – (331,541) Net book amount 169,422 196,610 7,721 12,018 385,771

Year ended 30 September 2005 Opening net book amount 220,301 289,067 9,274 20,714 539,356 Additions 2,287 26,915 1,705 25,223 56,130 Acquisitions 4,376 4,094 516 – 8,986 Disposals (3,708) (5,162) (580) (82) (9,532) Reclassifications 5,449 30,144 969 (36,562) – Currency translation differences 236 310 14 44 604 Exceptional provision for impairment (25,010) (45,698) (33) – (70,741) Depreciation charge (4,205) (32,207) (3,796) – (40,208) Closing net book amount 199,726 267,463 8,069 9,337 484,595

At 30 September 2005 Cost/deemed cost 278,028 686,311 37,440 9,337 1,011,116 Accumulated depreciation (78,302) (418,848) (29,371) – (526,521) Net book amount 199,726 267,463 8,069 9,337 484,595

At 24 September 2004 Cost/deemed cost 269,450 654,017 37,622 20,714 981,803 Accumulated depreciation (49,149) (364,950) (28,348) – (442,447) Net book amount 220,301 289,067 9,274 20,714 539,356

Leased assets The net book amount and the depreciation charge during the year in respect of leased assets are as follows: 2006 2005 €’000 €’000 Cost 54,898 107,009 Accumulated depreciation (19,673) (51,253) Net book amount 35,225 55,756 Depreciation charge for the year (2,640) (4,324)

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16. Investment property

2006 2005 €’000 €’000

Opening net book amount 1,101 1,199 Depreciation charge (98) (98) Closing net book amount 1,003 1,101

Analysed as: Cost 1,956 1,956 Accumulated depreciation (953) (855) Net book amount 1,003 1,101

The fair value of the Group’s investment properties at 29 September 2006 was €1.8m (2005: €1.8m). The valuation was carried out by GVA Donal O’Buachalla, having the appropriate qualifications and recent experience of valuation of properties in the relevant locations. The valuation, which conforms to international standards was arrived at by reference to market evidence of transaction prices for similar properties.

17. Inventories

2006 2005 €’000 €’000

Raw materials and consumables 56,568 61,141 Work in progress 6,197 7,460 Finished goods and goods for resale 64,009 64,381 126,774 132,982

Write-down of inventories recognised as an expense within cost of sales 2,675 2,508 Write-down of inventories recognised as an expense within discontinued operations (pre-exceptional) 125 167 Write-down of inventories included in exceptional costs Continuing operations 515 – Discontinued operations 8,818 653 9,333 653

None of the above carrying amounts has been pledged as security for liabilities entered into by the Group.

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18. Trade and other receivables

2006 2005 €’000 €’000

Current Trade receivables 81,194 90,258 Amounts receivable from associates 165 40 Prepayments and accrued income 10,347 10,335 VAT 7,290 7,761 EU restructuring aid receivable (due within one year) 39,351 – Other receivables 15,977 27,066 Subtotal - current 154,324 135,460

Non-current EU restructuring aid receivable (due after one year) 56,508 – Total 210,832 135,460

The fair value of current receivables approximates book value due to their size and short term nature. Non-current receivables are carried at amortised cost.

19. Trade and other payables

2006 2005 €’000 €’000 Current Trade payables 242,865 243,705 Employment related taxes 5,351 6,786 Accrued expenses 102,780 119,765 VAT 1,328 2,467 Declared interim dividend 9,961 9,804 Subtotal - current 362,285 382,527

Non-current Other payables 11,818 8,836 Total 374,103 391,363

The fair value of current and non-current payables approximates book value due to their size and/or short term nature.

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20. Investments in associates 2006 2005 €’000 €’000

Share of associate’s balance sheet: Current assets 14,988 15,038 Non-current assets 14,006 11,279 Current liabilities (16,475) (15,788) Non-current liabilities * (4,303) (4,517) Net Assets 8,216 6,012

Carrying amount associates At beginning of year 6,012 7,388 Impact of adoption of IAS 32 & 39 60 – At beginning of year, as adjusted 6,072 7,388 Share of profit of associates after tax (note 9) 2,848 3,559 Share of items taken directly within equity (note 31) 490 (1,660) Dividends received (1,205) (3,385) Currency translation differences and other 11 110 At end of year 8,216 6,012

* Included within non-current liabilities is the Group’s share of the net pension liability of associates of €2.906m (2005: €3.479m) Details of the Group’s principal associates, all of which are unlisted are shown in note 40 to the Group financial statements.

21. Available for sale financial assets Available for sale Other investments investments 2006 2005 €’000 €’000

At beginning of year 645 2,605 Impact of adoption of IAS 32 & IAS 39 282 – At beginning of year, as adjusted 927 2,605 Currency translation differences 9 (10) Disposals – (1,950) Fair value adjustment (note 31) (406) – At end of year 530 645

Non-current – 645 Current 530 – 530 645

The Group has availed of the option under IFRS 1 First-time Adoption of International Financial Reporting Standards, to implement IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement, only in respect of the 2006 figures and not the comparative period. Therefore, the 2005 figure above is stated at cost less provision for impairment rather than at fair value.

Available for sale investments are fair valued semi-annually at the close of business at each reporting period end. The above investment represents a listed investment traded on an active market. Fair value is determined by reference to Stock Exchange quoted bid prices.

Available for sale investments are classified as non-current assets, unless they are expected to be realised within 12 months of the balance sheet date.

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22. Cash and cash equivalents

2006 2005 €’000 €’000

Cash at bank and in hand 78,967 74,102 Included in Group balance sheet and Group cash flow statement 78,967 74,102

Cash at bank earns interest at floating rates based on daily bank deposit rates. Short-term deposits are made for varying periods, between one day and three months depending on the immediate cash requirements of the Group and earn interest at the respective short-term deposit rates. The fair value of cash and cash equivalents equals the carrying amount.

23. Borrowings

2006 2005 €’000 €’000 Non-current Bank borrowings 192,241 191,952 Finance leases* 1,847 3,731 Loan notes 2,951 12,435 Private Placement Notes 236,618 265,423 433,657 473,541 Current Finance leases* 265 325 Total borrowings 433,922 473,866

*Secured on specific plant and equipment

The maturity of non-current borrowings is as follows: Between 1 and 2 years 99,523 2,431 Between 2 and 5 years 197,369 203,174 Over 5 years 136,765 267,936 433,657 473,541

The exposure of the Group’s borrowings to interest rate changes and the contractual repricing dates at the balance sheet date are as follows:

6 months or less 218,801 218,347 6-12 months – – 1-5 years 75,441 11,715 Over 5 years 139,680 243,804 433,922 473,866

80 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes to the Group Financial Statements continued year ended 29 September 2006

23. Borrowings (continued) Bank borrowings The Group’s bank borrowings bear floating rate interest, set at commercial rates based on EURIBOR and sterling LIBOR, for periods ranging from overnight to six months. €117.7m of the Group’s floating rate bank borrowings at 29 September 2006, has been swapped from floating to fixed rate debt (using interest rate swaps not designated as hedges under IAS 39 Financial Instruments: Recognition and Measurement), repricing semi-annually at commercial rates based on EURIBOR and sterling LIBOR. At 29 September 2006, the Group has available €235.8m (2005: €235.8m) of undrawn committed borrowing facilities in respect of which all conditions precedent had been met. Uncommitted facilities undrawn at 29 September 2006, amounted to €58.7m (2005: €38.0m).

Finance leases The Group has finance leases for various items of property, plant and equipment. Future minimum lease payments under finance leases, together with the present value of the net mimimum lease payments, are set out in note 34 to the Group financial statements.

Loan notes Loan notes were issued to vendors of businesses acquired and are redeemable at the option of the note holders with six months notice to the Group. These loan notes bear interest at a fixed rate of 5.5%.

Private Placement Notes The Group’s Private Placement Notes comprise fixed rate debt of US$230m issued in October 2003 and maturing in 2010, 2013 and 2015 (the US$ Notes), floating rate debt based on six month LIBOR of stg£18m and fixed rate debt of stg£25m issued in October 2003 and maturing in 2010 and 2013 respectively (the ‘stg£ Notes’). The fixed rate debt bears interest rates ranging from 4.98% to 6.19%. The US$ Notes have been swapped (using cross currency interest rate swaps designated as fair value hedges under IAS 39 Financial Instruments: Recognition and Measurement), from fixed US$ to floating sterling rates, repricing semi- annually at commercial rates based on sterling LIBOR. This debt has been further swapped (using interest rate swaps not designated as hedges under IAS 39 Financial Instruments: Recognition and Measurement), from floating stg£ to fixed stg£ repricing semi-annually based on sterling LIBOR. The floating rate stg£ Notes have been swapped from floating to fixed sterling rates (using interest rate swaps not designated as hedges under IAS 39 Financial Instruments: Recognition and Measurement), repricing semi-annually at commercial rates based on sterling LIBOR.

Guarantees The Group’s bank and Private Placement borrowings are secured by guarantees from Greencore Group plc, and cross guarantees from various companies within the Group. The Group treats these guarantees as insurance contracts and accounts for them as such.

Adoption of IAS 32 and IAS 39 Under Irish GAAP at 30 September 2005, the Private Placement Notes were carried at cost of €265.4m, with no fair value gains recognised. The Group adopted IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement from 1 October 2005 (note 38). The Group has recognised at 29 September 2006, a net fair value loss of €8.2m on all swaps. The cross currency interest rate swaps have been designated as fair value hedges under IAS 39 Financial Instruments: Recognition and Measurement, and the E13.3m gain attributable to the hedged risk, has been adjusted against the Private Placement Notes and reflected in the income statement. A reconciliation of the movement in the balance on the Private Placement Notes is included in note 25 to the Group financial statements. The fair value at 29 September 2006, of the Private Placement Notes approximates their fair value adjusted amortised cost of €236.6m. The equivalent approximate fair value at 30 September 2005, was €248.5m. The fair value of bank borrowings and loan notes approximates their carrying amount as the impact of discounting is not significant.

Information presented in accordance with previous Irish GAAP The interest rate and currency profile of the Group’s net debt including 2005 Irish GAAP comparatives is included in note 25 to the Group financial statements. The fixed rate borrowings at year end 2005, had a weighted average interest rate on a LIBOR/EURIBOR equivalent basis of sterling 5.15%, euro 4.36%, overall 4.99%. Floating rate borrowing at year end 2005 had interest rates based on EURIBOR and LIBOR.

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24. Derivative financial instruments

Financial risk management objectives and policies

The Group’s activities expose it to a variety of financial risks including interest rate risk, foreign currency risk, liquidity risk and credit risk. These financial risks are managed by the Group under policies approved by the Board of Directors. The Group uses derivative financial instruments, in particular forward currency contracts, currency swaps and interest rate swaps, to manage the financial risks associated with the underlying business activities of the Group and the financing of those activities. The Group does not use derivative financial instruments for trading or speculative purposes.

Interest rate risk The Group’s exposure to market risk for changes in interest rates arises from its floating rate borrowings. The Group’s policy is to optimise interest cost, and reduce volatility in reporting earnings. This is managed by reviewing the debt profile of the Group regularly on a currency by currency basis, and by selectively using interest rate swaps to limit the level of floating interest rate exposure.

Foreign currency risk The Group operates internationally with the majority of its profits earned outside of Ireland. It has significant investments outside of Ireland with the largest single investment being in the UK. In order to protect the Group’s euro balance sheet, and reduce cash flow risk the Group has financed most of its investment in the UK by borrowing sterling. Although a portion of this funding is obtained by directly borrowing sterling, a significant element of the funding is achieved through US$ borrowings converted to sterling using currency swaps.

The Group employs forward exchange contracts to hedge foreign exchange exposures arising from forecast receipts and payments in foreign currencies. These are designated and accounted for as cash flow hedges. The majority of the cash flows are expected to occur and the hedge effect realised in the income statement within 12 months of the balance sheet date.

Liquidity risk The Group’s policy on funding capacity is to ensure that it always has sufficient long term funding and committed bank facilities in place to meet foreseeable peak borrowing requirements. The Group also operates a prudent approach to liquidity risk management by spreading the maturities of its debt from short-term to long- term.

Credit risk The Group derives a significant proportion of its revenue from sales to a limited number of major customers. Sales to individual customers can be of significant value and the failure of any such customer to honour its debts could materially impact the Group’s results. The Group derives significant benefit from trading with its large customers and manages the risk by regularly reviewing the credit history and rating of all significant customers.

The credit risk on cash and derivative financial instruments is limited, as the counterparties are financial institutions with high credit ratings.

82 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes to the Group Financial Statements continued year ended 29 September 2006

24. Derivative financial instruments (continued)

Derivative financial instruments recognised as assets and liabilities in the Group balance sheet are analysed as follows:

2006 Assets Liabilities Net €’000 €’000 €’000 Current Interest rate swaps - not designated as fair value hedges – (556) (556) Forward foreign exchange contracts - cash flow hedges 389 – 389 Forward foreign exchange contracts - not designated as cash flow hedges – (597) (597) 389 (1,153) (764) Non-current Cross currency interest rate swaps - fair value hedges – (32,043) (32,043) Total 389 (33,196) (32,807)

Derivative instruments, which are not designated as effective hedging instruments (i.e. trading derivatives), are classified as a current asset or liability regardless of maturity. The full fair value of a hedging derivative is classified as a non-current asset or liability, if the remaining maturity of the hedged item, is more than twelve months and as a current asset or liability if the maturity of the hedged item is less than twelve months.

Cross currency interest rate swaps The Group utilises cross currency interest rate swaps to swap fixed rate US$ denominated debt of US$230m, into floating rate sterling debt of stg£138m. The floating rates are based on sterling LIBOR. These swaps are designated as fair value hedges under IAS 39 Financial Instruments: Recognition and Measurement.

Interest rate swaps The Group utilises interest rate swaps, not designated as fair value hedges under IAS 39 Financial Instruments: Recognition and Measurement, to swap floating rate euro and sterling liabilities into fixed rate euro and sterling liabilities respectively. The notional amounts of the Group’s interest rate risk which is swapped at 29 September 2006, total €75m and stg£185m. At 29 September 2006, the fixed interest rates vary from 4.33% to 5.39% and the floating rates are based on sterling LIBOR and EURIBOR.

Forward foreign exchange contracts The notional amounts of outstanding forward foreign exchange contracts at 29 September 2006, total €138m. Gains and losses of €0.389m recognised in the cash flow reserve in equity at 29 September 2006, on forward foreign exchange contracts designated as cash flow hedges under IAS 39 Financial Instruments: Recognition and Measurement, will be released to the income statement at various dates up to 12 months after the balance sheet date.

Adoption of IAS 32 and IAS 39 The Group adopted IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement from 1 October 2005 (note 38). Derivative balances at 30 September 2005, were in accordance with Irish GAAP, disclosed rather than recognised in the financial statements for the year then ended. The fair value loss on derivatives at 30 September 2005, amounted to €24.6m with €18.0m of this relating to derivative instruments associated with the Group’s Private Placement Notes. Under Irish GAAP at 30 September 2005, the Group’s Private Placement Notes were carried at cost of €265.4m not recognising fair value gains (note 23). The movement in the Group’s net debt during the financial year, including the adoption of IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement, is included in note 25 to the Group financial statements.

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25. Analysis of net debt

Reconciliation of opening to closing net debt Net debt is current and non-current borrowings less cash and cash equivalents

The reconciliation of opening to closing net debt for year ended 29 September 2006, is as follows:

At 1 Transition Cash flow Hedge Translation At 29 October adjustment adjustment adjustment September 2005 2006 €’000 €’000 €’000 €’000 €’000 €’000

Cash and cash equivalents 74,102 – 4,571 – 294 78,967 Bank borrowings (191,952) – 50 – (339) (192,241) Loan notes (12,435) – 9,477 – 7 (2,951) Finance leases (4,056) – 1,944 – – (2,112) Private Placement Notes (265,423) 16,929 – 13,313 (1,437) (236,618) Group net debt (399,764) 16,929 16,042 13,313 (1,475) (354,955)

The reconciliation of opening to closing net debt for year ended 29 September 2006, excluding the impact of derivative financial instruments and fair value of the Private Placement Notes is as follows:

At 1 Cash flow Translation At 29 October adjustment September 2005 2006 €’000 €’000 €’000 €’000

Cash and cash equivalents 74,102 4,571 294 78,967 Bank borrowings (191,952) 50 (339) (192,241) Loan notes (12,435) 9,477 7 (2,951) Finance leases (4,056) 1,944 – (2,112) Private Placement Notes (265,423) – (1,665) (267,088) (399,764) 16,042 (1,703) (385,425)

The reconciliation of opening to closing net debt for year ended 30 September 2005, is as follows:

At 25 Cash flow Acquisition Translation At 30 September adjustment September 2004 2005 €’000 €’000 €’000 €’000 €’000

Cash and cash equivalents 86,278 (12,064) – (112) 74,102 Bank borrowings (195,841) 3,908 – (19) (191,952) Loan notes (10,291) – (2,126) (18) (12,435) Finance leases (4,424) 366 – 2 (4,056) Private Placement Notes (264,957) – – (466) (265,423) Group net debt (389,235) (7,790) (2,126) (613) (399,764)

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25. Analysis of net debt (continued)

Currency profile The currency profile of net debt at 29 September 2006, is as follows:

euro sterling Total €’000 €’000 €’000

Cash and cash equivalents 36,798 42,169 78,967 Borrowings (139,842) (294,080) (433,922) (103,044) (251,911) (354,955)

The currency profile of net debt at 30 September 2005, is as follows:

Cash and cash equivalents 43,858 30,244 74,102 Borrowings (141,775) (332,091) (473,866) (97,917) (301,847) (399,764)

Interest rate profile The interest rate profile of net debt at 29 September 2006, is as follows:

Floating Fixed rate debt rate debt Total €’000 €’000 €’000

euro (25,938) (77,106) (103,044) sterling 30,442 (282,353) (251,911) 4,504 (359,459) (354,955)

The interest rate profile of net debt at 30 September 2005, is as follows:

euro (18,860) (79,057) (97,917) sterling 18,527 (320,374) (301,847) (333) (399,431) (399,764)

26. Provisions for liabilities and charges

Environmental Restructuring Other Total €’000 €’000 €’000 €’000

At beginning of year – 7,940 6,792 14,732 Provided in year 12,784 22,134 – 34,918 Utilised in year – (579) (1,089) (1,668) Transferred to accruals – – (370) (370) Currency translation differences – – 40 40 At end of year 12,784 29,495 5,373 47,652

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26. Provisions for liabilities and charges (continued)

2006 2005 €’000 €’000 Analysed as: Non-current liabilities 14,422 14,732 Current liabilities 33,230 – 47,652 14,732

Environmental Environmental obligations and related costs arose primarily from the Group’s discontinued sugar processing operations and have been established to cover either a statutory or constructive obligation of the Group to carry out remedial works.

Restructuring Restructuring provisions relate to irrevocable commitments in respect of programmes commenced and committed to in the Ingredients, Agribusiness and Related Property segment.

Other Other provisions primarily relate to property related costs.

27. Deferred taxation

The movement in deferred income tax in the balance sheet in the year is as follows:

2006 2005 €’000 €’000

At beginning of year 6,411 20,995 Deferred tax on adoption of IAS 32 & IAS 39 (note 38) 51 – Arising on acquisition – (572) Income statement charge/(credit) (note 10) 8,936 (7,362) Tax charged/(credited) to equity (note 10) 1,701 (6,676) Currency translation differences 146 26 At end of year 17,245 6,411

The Group’s deferred tax assets and liabilities are analysed in the Group balance sheet as follows:

2006 2005 €’000 €’000 Deferred income tax assets (deductible temporary differences) Property, plant and equipment 4,176 6,844 Deficits on Group defined benefit pension obligations 17,700 23,046 Employee share options 394 677 Other deductible temporary differences 2,687 4,395 Total 24,957 34,962

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27. Deferred taxation (continued)

2006 2005 €’000 €’000 Deferred income tax liabilities (taxable temporary differences) Property, plant and equipment 42,048 41,274 Revaluations of derivative financial instruments 117 – Other 37 99 Total 42,202 41,373

Net deferred tax liability 17,245 6,411

28. Government grants

2006 2005 €’000 €’000

At beginning of year 1,452 1,634 Received in year – 427 Amortised in year (243) (606) Repaid in year (27) – Currency translation differences – (3) At end of year 1,182 1,452

Government grants received of €3.0m (2005: €3.2m) are repayable under certain circumstances as set out in the grant agreements.

29. Retirement benefit obligations

Retirement benefit obligation The Group operates either defined benefit or defined contribution pension schemes in all of its main operating locations. Scheme assets are held in separate trustee administered funds.

Defined contribution schemes The total cost charged to income of €0.71m (2005: €1.21m) represents employer contributions payable to these schemes at rates specified in the rules of the plans. At year-end, €0.02m (2005: €0.01m) was included in other receivables in respect of defined contribution pension prepayments.

Defined benefit schemes The Group operates four different defined benefit schemes in the Republic of Ireland and one in the Netherlands (the Eurozone schemes). The Group also operates three defined benefit schemes in the UK (the UK schemes). The Projected Unit Credit actuarial cost method has been employed in determining the present value of the defined benefit obligation arising, the related current service cost and, where applicable, past service cost.

The Group elected to avail of the early implementation of the Amendment to IAS 19 Actuarial Gains and Losses, Group Plans and Disclosures, which enables the recognition of actuarial gains and losses, and the associated movement in the deferred tax asset in retained income via the statement of recognised income and expense.

Full actuarial valuations were carried out between 30 September 2004 and 31 December 2005. In general, actuarial valuations are not available for public inspection, however, the results of valuations are advised to the members of the various schemes.

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29. Retirement benefit obligations (continued)

The principal actuarial assumptions are as follows:

2006 2005

Eurozone schemes Rate of increase in salaries 3.5%-4.0% 3.5%-4.0% Rate of increase in pension payment 2.25% 2.00% Discount rate 4.50% 4.20% Inflation assumptions 2.25% 2.00%

UK schemes Rate of increase in salaries 3.70% 3.70% Rate of increase in pension payment 2.70% 2.70% Discount rate 5.25% 5.40% Inflation assumptions 2.70% 2.70%

The expected long term rates of return on the assets of the schemes were as follows:

Eurozone schemes Equities 7.90% 7.80% Bonds 4.00% 3.50% Property 6.90% 5.80% Cash/Other 3.00% –

UK schemes Equities 7.90% 7.80% Bonds 4.40% 4.30% Property 6.90% 5.80%

Assumptions regarding future mortality experience are set based on information from published statistics and experience in each geographic region. The average life expectancy, in years, of a pensioner retiring at 65 is as follows:

2006 2005 years years

Male 19 - 20.5 19 - 20.5 Female 22 - 23.2 22 - 23.2

The Group does not operate any post employment medical benefit schemes.

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29. Retirement benefit obligations (continued)

The market value of the assets of the schemes were as follows:

2006 Eurozone UK Total €’000 €’000 €’000

Equities 268,342 142,382 410,724 Bonds 44,910 43,211 88,121 Property 30,118 225 30,343 Cash/Other 10,710 – 10,710 Total market value at 29 September 2006 354,080 185,818 539,898 Present value of scheme liabilities (338,780) (252,740) (591,520) Surplus/(deficit) in schemes 15,300 (66,922) (51,622) Deferred tax (liability)/asset (2,479) 20,179 17,700 Net present asset/(liability) at 29 September 2006 12,821 (46,743) (33,922)

2005 Eurozone UK Total €’000 €’000 €’000

Equities 252,722 121,966 374,688 Bonds 50,584 37,332 87,916 Property/Other 31,361 265 31,626 Total market value at 30 September 2005 334,667 159,563 494,230 Present value of scheme liabilities (339,953) (236,165) (576,118) Deficit in schemes (5,286) (76,602) (81,888) Deferred tax asset 65 22,981 23,046 Net present liability at 30 September 2005 (5,221) (53,621) (58,842)

The Group’s defined benefit pension assets and liabilities are analysed in the Group balance sheet as follows:

2006 2005 €’000 €’000

Non-current assets * 24,981 6,598 Non-current liabilities (76,603) (88,486) (51,622) (81,888)

* The value of a net pension benefit asset is the present value of any amount the Group reasonably expects to recover by way of refund of surplus from the remaining assets of a plan at the end of the plan’s life.

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29. Retirement benefit obligations (continued)

The cumulative actuarial loss recognised in the statement of recognised income and expense is as follows (post 25 September 2004, being the date of transition to IFRS):

2006 €’000

Recognised in the 2005 financial year (30,754) Recognised in the 2006 financial year 11,187 Cumulative actuarial loss recognised (19,567)

The total expense charged in the Group income statement in respect of defined benefit pension schemes is as follows:

2006 2005 €’000 €’000

Current service costs 8,636 9,415 Past service costs – 1,210 (Gain)/loss on curtailment * (8,790) 2,700 Total included in staff costs (note 5) (154) 13,325

Interest cost 26,803 25,790 Expected return on plan assets (33,790) (31,202) Total, included in finance costs (note 8) (6,987) (5,412)

The actuarial gains/(losses) recognised in the statement of recognised income and expense are as follows:

Actual return less expected return on pension scheme assets 21,457 45,065 Actuarial gains and losses arising on the scheme liabilities (10,270) (75,819) Total included in the statement of recognised income and expense 11,187 (30,754)

* The current year gain on curtailment is due to (a) a number of changes in benefit design which were implemented during the year in respect of the Hazlewood Foods Retirement Benefits Scheme, resulting in a pension curtailment gain (note 7), and (b) a gain relating to the Greencore Group Retirement Benefits Scheme following the closure of Irish Sugar during the year. This is due to the pension transfer value for individuals in certain age brackets, which now allows for growth in line with price inflation as compared to the IAS 19 Employee Benefits liability for the year ended 30 September 2005, which allowed for full salary escalation to retirement, together with the costs associated with giving individuals, in certain age brackets, enhanced pension benefits. The loss in the prior year arose following the termination of sugar processing at Carlow.

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29. Retirement benefit obligations (continued)

The movement in the fair value of the plan assets is as follows: 2006 2005 €’000 €’000

At beginning of year 494,230 433,136 Expected return on plan assets 33,790 31,202 Actuarial gain 21,457 45,065 Contributions by employers 12,328 7,108 Contributions by members 3,776 3,780 Benefits paid (26,908) (26,510) Exchange gains 1,225 449 At end of year 539,898 494,230

The movement in the present value of defined benefit obligations is as follows: At beginning of year 576,118 483,235 Current service costs 8,636 9,415 Past service cost – 1,210 Interest cost 26,803 25,790 Actuarial loss 10,270 75,819 Contributions by members 3,776 3,780 Benefits paid (26,908) (26,510) Curtailments (8,790) 2,700 Exchange losses 1,615 679 At end of year 591,520 576,118

Actuarial gains and losses: Difference between the expected and actual return on scheme assets (€’000) 21,457 45,065 As a percentage of scheme assets 4.0% 9.1%

Actuarial gains and losses on scheme liabilities (€’000) (10,270) (75,819) As a percentage of the present value of scheme liabilities 1.7% 13.2%

Total recognised in statement of recognised income and expenses (€’000) 11,187 (30,754) As a percentage of the present value of the scheme liabilities (1.9%) 5.3%

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30. Equity share capital

2006 2005 Authorised Authorised €’000 €’000

300,000,000 ordinary shares of €0.63c each 189,000 189,000 1 special rights preference share of €1.26 (see (a)) - - 189,000 189,000

2006 2005 Issued and Issued and fully paid fully paid €’000 €’000

197,396,341 (2005: 194,692,449) ordinary shares of €0.63c each 124,360 122,656 3,904,716 (2005: 3,904,716) ordinary shares of €0.63c each held as treasury shares (see (d)) 2,460 2,460 1 special rights preference share of €1.26 (see (a)) - - 126,820 125,116

(a) The special share is owned by the Minister for Agriculture and Food, on behalf of the Irish State. This gives the owner certain rights, inter alia, in relation to the shares, sugar quota and sugar producing assets of Irish Sugar Limited.

(b) Details of share options granted under the Company’s executive share option scheme and savings- related share option scheme and the terms attaching thereto are provided in note 6 to the Group financial statements and in the Report on Directors’ Remuneration on pages 29 and 34 to 35.

(c) During the year 2,132,166 shares (2005: 2,014,208) were issued in respect of the scrip dividend scheme.

(d) In 1998, the company re-purchased 4,906,250 ordinary shares. During the year none (2005: 319,807) of these shares were re-issued. The remaining 3,904,716 shares are held as treasury shares, and are not eligible for dividends or voting.

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31. Reconciliation of movements in equity Other reserves Capital Foreign Available conversion currency for sale Share Share reserve Hedging translation investment Retained premium options fund reserve reserve reserve earnings Total €’000 €’000 €’000 €’000 €’000 €’000 €’000 €’000

At 24 September 2004 92,459 91 934 – – – 59,394 152,878 Premium on issue of shares 5,030 – – – – – – 5,030 Actuarial loss on Group defined benefit pension schemes – – – – – – (30,754) (30,754) Share of actuarial loss on pension of associates (net) – – – – – – (1,660) (1,660) Employee share option expense – 153 – – – – – 153 Dividends – – – – – – (24,378) (24,378) Currency translation differences – – – – 766 – – 766 Deferred tax on employee share options – – – – – – 257 257 Deferred tax on Group defined benefit pension schemes – – – – – – 6,419 6,419 Re-issue of treasury shares (net of expenses) – – – – – – 1,075 1,075 Group loss for the financial year attributable to equity holders of the Company – – – – – – (41,407) (41,407) At 30 September 2005 97,489 244 934 – 766 – (31,054) 68,379 Impact of adoption of IAS 39 (net of tax) (note 38) – – – 118 – 282 (7,874) (7,474)

Balance at 1 October 2005, as adjusted 97,489 244 934 118 766 282 (38,928) 60,905 Premium on issue of shares 6,648 – – – – – – 6,648 Actuarial gain on Group defined benefit pension schemes – – – – – – 11,187 11,187 Share of actuarial gains on pension of associates (net) – – – – – – 490 490 Employee share option expense – 430 – – – – – 430 Dividends – – – – – – (24,814) (24,814) Cash flow hedges fair value gains in year – – – 389 – – – 389 tax on fair value gains – – – (117) – – – (117) transfers to profit and loss – – – (169) – – – (169) tax on transfers to profit and loss – – – 51 – – – 51 Fair value available for sale financial assets – – – – – (406) – (406) Currency translation differences – – – – 41 9 – 50 Deferred tax on employee share options – – – – – – (283) (283) Deferred tax on Group defined benefit pension schemes – – – – – – (1,352) (1,352) Group loss for the financial year attributable to equity holders of the Company – – – – – – (456) (456) At 29 September 2006 104,137 674 934 272 807 (115) (54,156) 52,553

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32. Minority interest

2006 2005 €’000 €’000

At beginning of year 4,382 4,519 Impact of adoption of IAS 32 & IAS 39 60 – At beginning of year, as adjusted 4,442 4,519 Arising on acquisition – (225) Profit after tax (less attributable to associates) 716 1,540 Dividends to minorities (1,586) (1,452) At end of year 3,572 4,382

33. Reconciliation of operating profit to net cash flow from operating activities before exceptional items

2006 2005 €’000 €’000

Operating profit (pre-exceptional) 74,610 74,684 Profit on discontinued operations (pre-exceptional) (note 11) 21,991 22,205 Depreciation 35,509 40,306 Amortisation of intangibles (note 14) 1,014 940 Employee share option expense (note 6) 430 153 Amortisation of Government grants (note 28) (243) (606) Difference between pension charge and cash contributions (pre-exceptional) (3,692) 3,517 Inventories (2,265) 2,902 Trade and other receivables 18,530 (848) Trade and other payables (16,368) (20,393) Other movements (3,611) (5,470) Net cash inflow from operating activities before exceptional items 125,905 117,390

34. Commitments under operating and finance leases

Operating leases Future minimum rentals payable under non-cancellable operating leases at year end are as follows:

2006 2005 €’000 €’000

Within one year 15,032 14,871 After one year but not more than five years 32,085 35,901 More than five years 69,587 73,930 116,704 124,702

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34. Commitments under operating and finance leases (continued)

Finance leases Future minimum lease payments under finance leases together with the present value of the net minimum lease payments are as follows:

2006 2005 Present Present Minimum value of Minimum value of payments payments payments payments €’000 €’000 €’000 €’000

Within one year 194 191 511 500 After one year but not more than five years 588 537 1,955 1,771 More than five years 6,577 1,804 7,336 2,435 Total minimum lease payments 7,359 9,802 Less: amounts allocated to future finance costs (4,827) (5,096) Present value of minimum lease payments 2,532 2,532 4,706 4,706

35. Capital expenditure commitments

2006 2005 €’000 €’000 Capital expenditure that has been contracted for but not been provided for in the financial statements 5,247 9,313 Capital expenditure that has been authorised by the Directors but has not yet been contracted for 8,042 8,504 13,289 17,817

36. Contingencies

The Company and certain subsidiaries have given guarantees in respect of borrowings and other obligations arising in the ordinary course of the business of the Company and other Group undertakings. The Company and other Group undertakings consider these guarantees to be insurance contracts and account for them as such. The Company treats these guarantee contracts as contingent liabilities until such time as it becomes probable that a payment will be required under such guarantees.

Pursuant to the provisions of Section 17, Companies (Amendment) Act, 1986, the Company has guaranteed the liabilities of certain subsidiary undertakings in the Republic of Ireland for the financial year ended 29 September 2006, and as a result, such subsidiary undertakings have been exempted from the filing provisions of Section 7, Companies (Amendment) Act, 1986.

The Group discloses a contingent asset of €32.5m related to the allocation of EU restructuring aid (note 7).

Various of the Group’s subsidiaries are subject to a number of legal proceedings. Provisions for anticipated settlement costs and associated expenses arising from legal disputes are made when a reliable estimate can be made of the probable outcome of the proceedings.

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37. Related party disclosures

The principal related party relationships requiring disclosure in the consolidated financial statements of the Group under IAS 24 Related Party Disclosures, pertain to the existence of subsidiaries and associates and transactions with these entities entered into by the Group and the identification and compensation of key management personnel as addressed in greater detail below.

Subsidiaries and associates The Group financial statements include the financial statements of the Company (Greencore Group plc, the ultimate parent), and its subsidiaries and associates as documented in the accounting policies on pages 46 to 57. A listing of the principal subsidiaries and associates is provided in note 40 to the Group financial statements.

Sales to and purchases from, together with outstanding payables and receivables to and from, subsidiaries are eliminated in the preparation of the Group financial statements in accordance with IAS 27 Consolidated and Separate Financial Statements. Amounts receivable from and payable to associates as at the balance sheet date are included as separate line items in the notes to the Group financial statements. During the year the Group disposed of a property to its associate, Odlum Group. A profit of €3.7m was recognised on this disposal, being that portion of the gain on disposal realised.

Terms and conditions of transactions with subsidiaries and associates In general, sales to and purchases from other related parties (associates), are on terms equivalent to those that prevail in arm’s-length transactions. The outstanding balances included in receivables and payables at the balance sheet date in respect of transactions with associates are unsecured, interest free and settlement arises in cash. No guarantees have been either requested or provided in relation to the related party receivables and payables.

Key management personnel For the purposes of the disclosure requirements of IAS 24 Related Party Disclosures, the term “key management personnel” (i.e. those persons having the authority and responsibility for planning, directing and controlling the activities of the Company), comprise the Board of Directors which manages the business and affairs of the Company. As identified in the Report on Directors’ Remuneration on pages 33 to 35, the Directors, other than the Non-Executive Directors, serve as executive officers of the Company. Full disclosure in relation to compensation entitlements of the Board of Directors is provided in the Report on Directors’ Remuneration on pages 33 to 35 of this annual report and note 4 to the Group financial statements.

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38. Impact of adoption of IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement

As permitted under IFRS 1 First-time Adoption of International Financial Reporting Standards, the Group adopted IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement, from 1 October 2005. The following details the adjustments made to the Group balance sheet as at 1 October 2005 on adoption of these standards.

IFRS Impact of 30 September adoption of IFRS 2005 IAS 32 & IAS 39 1 October 2005 €’000 €’000 €’000

Non-current assets (a) 887,727 342 888,069 Current assets (b) 342,544 320 342,864 Current liabilities (c) (403,974) (6,986) (410,960) Non-current liabilities (d) (628,420) (1,090) (629,510) 197,877 (7,414) 190,463

Shareholders’ equity (e) 193,495 (7,474) 186,021 Minority interests (f) 4,382 60 4,442 Total equity 197,877 (7,414) 190,463

(a) The carrying value of available for sale financial assets increased, €0.282m being the fair value adjustment at 1 October 2005 (note 21).

The carrying value of investments in associates increased, €0.060m being the Group’s share of derivative financial instruments recognised at fair value (note 20).

(b) €0.320m has been included in current assets as financial derivatives. This is the recognition of derivative financial instruments (cash flow hedges and trading derivatives) at fair value.

(c) €6.986m has been included in current liabilities as financial derivatives. This is the recognition of derivative financial instruments (trading derivatives) at fair value.

(d) €17.968m has been included in non-current liabilities as financial derivatives. This is the recognition of derivative financial instruments (fair value hedges) at fair value.

€16.929m has been recognised as a reduction in financial liabilities as the fair value movement of the Group’s Private Placement Notes.

€0.051m has been included in non-current liabilities as deferred tax. This is the deferred tax impact in relation to the recognition of derivative financial instruments (cash flow hedges) at fair value.

(e) €0.118m has been included as a hedging reserve. This is the recognition of derivative financial instruments (cash flow hedges) at fair value, net of related deferred tax (note 31).

€0.282m has been included as an available for sale financial assets reserve. This is the impact of the fair value of available for sale financial assets (note 31).

€7.874m has been debited to retained earnings, being the net impact of derivative financial instruments and financial liabilities recognised on the Group balance sheet at fair value (note 31).

(f) €0.060m has been credited to minority interests being the relevant portion of financial derivatives recognised as current assets (note 32).

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39. Explanation of transition to IFRS

International Financial Reporting Standards (IFRS)

This is the first year the Group has prepared its consolidated financial statements in accordance with IFRS. Formally the Group prepared its consolidated financial statements in accordance with generally accepted accounting practice in Ireland (Irish GAAP). The following is a summary of the changes on transition to IFRS.

First-time adoption exemptions

In restating the Group’s financial statements, Greencore has availed of the following exemptions as permitted by IFRS 1 First-time Adoption of International Financial Reporting Standards.

IFRS 3 Business combinations The Group has availed of the exemption allowed under IFRS 1 First-time Adoption of International Financial Reporting Standards not to recalculate goodwill for all business combinations. As such, the Group has not adjusted the carrying amount of goodwill at 25 September 2004 (being the date of transition to IFRS), from that previously disclosed under Irish GAAP.

IAS 19 Employee benefits Under IAS 19 Employee Benefits, all cumulative pension actuarial gains and losses arising on the Group’s defined benefit pension schemes have been recognised in full on the balance sheet at the transition date and adjusted against reserves. The Group decided to early adopt the amended version of IAS 19 Employee Benefits, and recognises actuarial gains and losses in full in the statement of recognised income and expense as they arise.

IAS 21 Cumulative translation differences Under IAS 21 The Effects of Changes in Foreign Exchange Rates, the Group is required to classify all cumulative translation differences as a separate component of equity. As a first time adopter, the Group elected not to apply this requirement retrospectively. As a result, cumulative translation differences for all foreign operations are deemed to be zero at the transition date. Any gains or losses on subsequent disposals of foreign operations will exclude foreign currency translation differences arising before 25 September 2004.

IAS 32 & 39 Financial instruments The Group took the option to defer the implementation of IAS 32 Financial Instruments: Disclosure and Presentation and IAS 39 Financial Instruments: Recognition and Measurement to the financial year ending 29 September 2006. Accordingly, comparative information disclosed in the 2006 annual report will be presented on the same basis as reported in the 2005 Greencore Group plc annual report.

IAS 16 Valuation of properties Fair value, or a previous revaluation to fair value adjusted for subsequent depreciation, may be used as deemed cost for any item of property, plant and equipment at the transition date. The Group elected to use a previous revaluation to fair value adjusted for depreciation as deemed cost for any items of property, plant and equipment which were held at valuation under Irish GAAP.

IFRS 2 Employee share options IFRS 1 First-time Adoption of International Financial Reporting Standards provides an exemption which allows entities to only apply IFRS 2 Share Based Payments to share based payment awards granted after 7 November 2002 and which had not vested as at 1 January 2005. The Group elected to apply this exemption.

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39. Explanation of transition to IFRS (continued)

Group Income Statement for year ended 30 September 2005

Impact of Irish transition GAAP to IFRS IFRS €’000 €’000 €’000 Continuing operations Revenue (a),(b) 1,414,960 (309,594) 1,105,366 Cost of sales (a),(c) (1,008,380) 228,831 (779,549)

Gross profit 406,580 (80,763) 325,817 Operating costs, net (a),(d) (323,260) 72,127 (251,133)

Group operating profit/(loss) 83,320 (8,636) 74,684 Fundamental reorganisation of Greencore Sugar (a),(e) (71,627) 71,627 – Provision for loss on termination of operations (a),(e) (51,171) 51,171 – Disposal of interest in subsidiary (a),(e) 1,909 (1,909) – Profit/(loss) before financing, associates and tax (37,569) 112,253 74,684 Finance income (f) 1,977 31,202 33,179 Finance costs (f) (32,389) (25,813) (58,202) Share of profit of associates (g) 4,446 (887) 3,559 Share of interest payable - associates (g) (386) 386 – Profit before taxation (63,921) 117,141 53,220

Taxation (a),(h) 6,398 (15,784) (9,386) Result for the period from continuing operations (57,523) 101,357 43,834

Discontinued operations Loss from discontinued operations (a),(i) – (83,701) (83,701)

Result for the financial period (57,523) 17,656 (39,867)

Attributable to: Equity shareholders (59,063) 17,656 (41,407) Minority interests 1,540 – 1,540 (57,523) 17,656 (39,867)

Basic earnings per share (cent) (30.5) (21.4)

Diluted earnings per share (cent) (30.3) (21.3)

Greencore Group plc Annual Report 2006 99 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes to the Group Financial Statements continued year ended 29 September 2006

39. Explanation of transition to IFRS (continued)

Explanation of major differences between Irish GAAP and IFRS

(a) Under IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the post tax profit of discontinued operations and the post tax gain/(loss) on disposal/abandonment of those operations is disclosed as a single line item in the income statement. Refer to note 11 for analysis of the line item amounts for revenue, cost of sales, operating costs and tax reclassified to loss from discontinued operations.

(b) Under Irish GAAP, the Group included certain volume rebates as part of cost of sales. In order to comply with IAS 18 Revenue, volume rebates have been reclassified as a reduction in revenue. The Group also previously included distribution revenue recognised as a reduction in distribution costs. This has been reclassified as an increase in revenue. The resultant net decrease in revenue of €13.823m has no impact on operating profit.

(c) Certain overhead and warehousing attributable costs included in the carrying value of inventory under Irish GAAP, are not allowed under IAS 2 Inventories. As such, cost of sales increased by €0.087m for the year ended 30 September 2005, in relation to this item. The balance of the movement related to a reclassification for discontinued operations as discussed in (a) above and the reclassification of volume rebates as discussed in (b) above.

(d) Under IFRS 2 Share-based Payment, the Group is required to recognise a charge to income in respect of the fair value of outstanding share options granted to employees after 7 November 2002. This resulted in an increase in operating costs for 2005 of €0.153m.

Under IFRS 3 Business Combinations, goodwill is no longer amortised, but rather an annual impairment review is conducted (or more frequently if conditions of impairment are noted). This resulted in a decrease in operating costs of €20.718m in 2005, due to the reinstatement of goodwill amortised under Irish GAAP.

Under Irish GAAP, lease incentives are spread over the period to the first rent review date, in circumstances where the rent review is to market rent. In accordance with IFRS, SIC 15 Operating Leases - Incentives, the lease incentive is spread over the life of the lease. This resulted in an increase in operating costs for 2005 of €1.408m.

Under Irish GAAP, pension costs were spread over the employee’s periods of service and accounted for as a component of operating costs. In accordance with IAS 19 Employee Benefits, an amount equal to the current service costs, and any past service costs stemming from benefit enhancement or curtailments, are dealt with as components of operating costs. The change in the accounting treatment resulted in a €5.872m increase in operating costs for 2005.

IAS 19 Employee Benefits, also introduces specific guidance in relation to accumulating compensated absences requiring that an entity recognises the cost of these absences, when the employee renders the service that increases their entitlement to future compensated absences. The impact of this was a decrease in operating costs of €0.129m being the movement in the balance sheet accrual from the transition date to 30 September 2005.

Under IAS 17 Leases, one property, accounted for as an operating lease under previous GAAP was reclassified as a finance lease. This resulted in a decrease in operating costs of €0.068m, being the difference between the depreciation charge on the newly capitalised property and, the former operating lease rental charge.

The balance of the movement is related to the reclassification of discontinued operations, as discussed in (a) above and the reclassification of volume rebates as discussed in (b) above.

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39. Explanation of transition to IFRS (continued)

(e) Under IFRS, all exceptional items are disclosed in the appropriate line item of the income statement. As all exceptional items in 2005, related to discontinued operations, they have been reclassified to results from discontinued operations.

(f) Under IAS 19 Employee Benefits, the interest cost associated with pension scheme liabilities, together with the expected return on pension scheme assets, are included within finance costs and finance revenue resulting in a net decrease in finance cost of €5.412m.

Under IFRS, an intra-group monetary asset (or liability), whether short term or long term, cannot be eliminated against the corresponding intra-group liability (or asset) without showing the results of currency fluctuations in the consolidated financial statements, unless the exchange differences arise on a monetary item that forms part of a net investment in a foreign operation. The financial impact of this requirement is a decrease in operating costs of €0.072m for 2005.

As noted in (d) above, in accordance with IAS 17 Leases, a lease previously accounted for as an operating lease, has been reclassified as a finance lease. As such, the finance charge on this finance lease has resulted in a €0.095m increase in finance costs in 2005.

(g) Under IAS 28 Investments in Associates, the results of associated undertakings are presented net of interest and tax, as a single line item in the income statement. Accordingly, interest costs and taxation relating to associated undertakings were reclassified to a single line item, share of profit of associates after tax. The profit from associates also increased, €0.103m from previous GAAP, due to an increase in operating profit following the adoption of IAS 19 Employee Benefits, resulting in a decreased net pension charge compared to previous GAAP.

(h) Under IAS 12 Income Taxes, the Group is providing for deferred tax on capital gains rolled over which it did not provide for under Irish GAAP. Other adjustments are to provide for deferred tax on the other IFRS accounting changes. Also in accordance with IFRS 5 Non-current Assets Held for Sale and Discontinued Operations, the tax effect relating to discontinued operations has been reclassified to the single line item loss from discontinued operations.

(i) As noted in (a) above the results from discontinued operations are disclosed as a single line item on the face of the income statement. In addition, the change in accounting policy in relation to defined benefit pension schemes in accordance with IAS 19 Employee Benefits, resulted in an increase in the loss from discontinued operations due to an additional charge of €2.700m, being a curtailment loss on the relevant defined benefit pension scheme following the closure of the Carlow sugar factory.

Greencore Group plc Annual Report 2006 101 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes to the Group Financial Statements continued year ended 29 September 2006

39. Explanation of transition to IFRS (continued)

Group Balance Sheet at 30 September 2005 Impact of Irish transition GAAP to IFRS IFRS €’000 €’000 €’000 ASSETS Non-current assets Intangible assets (a),(g) 330,563 23,251 353,814 Property, plant and equipment (a),(b),(i) 487,492 (2,897) 484,595 Investment property (b) – 1,101 1,101 Investments in associates (c) 9,969 (3,957) 6,012 Financial assets 645 – 645 Trade and other receivables – – – Retirement benefit assets (d) – 6,598 6,598 Deferred tax assets (e) – 34,962 34,962 Total non-current assets 828,669 59,058 887,727 Current assets Inventories (f) 133,556 (574) 132,982 Trade and other receivables (g) 135,495 (35) 135,460 Cash and cash equivalents 74,102 – 74,102 Available for sale financial assets – – – Derivative financial instruments – – – Total current assets 343,153 (609) 342,544 Total assets 1,171,822 58,449 1,230,271

EQUITY Capital and reserves attributable to equity holders of the Company Share capital 125,116 – 125,116 Share premium 97,489 – 97,489 Other reserves (h) 934 1,010 1,944 Retained earnings (5,667) (25,387) (31,054) 217,872 (24,377) 193,495 Minority interest in equity 4,382 – 4,382 Total equity 222,254 (24,377) 197,877

LIABILITIES Non-current liabilities Borrowings (i) 471,698 1,843 473,541 Derivative financial instruments – – – Retirement benefit obligations (d) – 88,486 88,486 Other payables (j) 17,588 (8,752) 8,836 Provisions for other liabilities and charges 14,732 – 14,732 Deferred tax liabilities (e) 31,445 9,928 41,373 Government grants 1,452 – 1,452 Total non-current liabilities 536,915 91,505 628,420

Current liabilities Borrowings 325 – 325 Derivative financial instruments – – – Trade and other payables (j),(k) 389,820 (7,293) 382,527 Provisions for other liabilities and charges – – – Income taxes payable (k) 22,508 (1,386) 21,122 Total current liabilities 412,653 (8,679) 403,974 Total liabilities 949,568 82,826 1,032,394 Total equity and liabilities 1,171,822 58,449 1,230,271

102 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes to the Group Financial Statements continued year ended 29 September 2006

39. Explanation of transition to IFRS (continued)

Group Balance Sheet at 25 September 2004 (date of transition to IFRS) Impact of Irish transition GAAP to IFRS IFRS €’000 €’000 €’000 ASSETS Non-current assets Intangible assets (a) 336,865 1,962 338,827 Property, plant and equipment (a),(b),(i) 541,786 (2,430) 539,356 Investment property (b) – 1,199 1,199 Investments in associates (c) 9,804 (2,416) 7,388 Financial assets 2,605 – 2,605 Trade and other receivables – – – Retirement benefit assets (d) – 18,058 18,058 Deferred tax assets (e) – 32,356 32,356 Total non-current assets 891,060 48,729 939,789 Current assets Inventories (f) 141,279 (662) 140,617 Trade and other receivables 130,771 – 130,771 Cash and cash equivalents 86,278 – 86,278 Available for sale financial assets – – – Derivative financial instruments – – – Total current assets 358,328 (662) 357,666 Total assets 1,249,388 48,067 1,297,455

EQUITY Capital and reserves attributable to equity holders of the Company Share capital 123,647 – 123,647 Share premium 92,459 – 92,459 Other reserves (h) 934 91 1,025 Retained earnings 75,945 (16,551) 59,394 292,985 (16,460) 276,525 Minority interest in equity 4,519 – 4,519 Total equity 297,504 (16,460) 281,044

LIABILITIES Non-current liabilities Borrowings (i) 473,305 1,845 475,150 Derivative financial instruments – – – Retirement benefit obligations (d) – 68,156 68,156 Other payables (j) 19,861 (12,152) 7,709 Provisions for other liabilities and charges 8,102 – 8,102 Deferred tax liabilities (e) 38,040 15,311 53,351 Government grants 1,634 – 1,634 Total non-current liabilities 540,942 73,160 614,102

Current liabilities Borrowings 363 – 363 Derivative financial instruments – – – Trade and other payables (j),(k) 381,891 (3,692) 378,199 Provisions for other liabilities and charges – – – Income taxes payable (k) 28,688 (4,941) 23,747 Total current liabilities 410,942 (8,633) 402,309 Total liabilities 951,884 64,527 1,016,411 Total equity and liabilities 1,249,388 48,067 1,297,455

Greencore Group plc Annual Report 2006 103 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes to the Group Financial Statements continued year ended 29 September 2006

39. Explanation of transition to IFRS (continued)

Explanation of major differences between Irish GAAP and IFRS

(a) Under IFRS 3 Business Combinations, goodwill is no longer amortised (post the date of transition to IFRS), but rather an annual impairment review is conducted (or more frequently if conditions of impairment are noted). The impact of this is an increase of €20.718m in the carrying value of goodwill at 30 September 2005.

Under IAS 38 Intangible Assets, capitalised software that is not an integral part of the related hardware is reclassified from property, plant and equipment to intangible assets. The net impact is €2.533m at year end 2005 and €1.962m at the date of transition.

(b) In addition to the adjustments noted in (a) above and (i) below, under IAS 40 Investment Property, property which is held to earn rentals or for capital appreciation, is classified as an investment property. On transition to IFRS, the Group identified a number of properties which meet this classification criteria and as such €1.101m and €1.199m have been reclassified from property, plant and equipment to investment property at year end 2005 and the date of transition respectively.

(c) Under IAS 19 Employee Benefits, certain of the Group’s associated undertakings were required to recognise a net pension deficit in relation to their defined benefit pension schemes. As the Group equity accounts for all associated undertakings, this, together with a tax adjustment required under IAS 12, resulted in a net €3.957m and €2.416m decrease in the carrying value of associated undertakings on the Group’s balance sheet at year end 2005 and the date of transition respectively.

(d) Under IAS 19 Employee Benefits, the Group elected for full recognition of pension surpluses/deficits on the Group’s balance sheet. In accordance with IAS 19 Employee Benefits, assets and liabilities of individual schemes are not netted on the face of the balance sheet resulting in both a retirement benefit asset and obligation at both year end 2005 and the date of transition.

(e) Deferred tax assets have been separately recognised on the face of the balance sheet where there is no right of offset against deferred tax liabilities. This includes amounts reclassified from deferred tax liabilities under Irish GAAP, and deferred tax assets recognised in relation to adjustments made under IAS 12 Income Taxes.

(f) Certain overhead and warehousing attributable costs included in the carrying value of inventory under Irish GAAP are not allowed under IAS 2 Inventories. As such, the carrying value of inventories has been adjusted against cost of sales and retained earnings at year end 2005 and the date of transition respectively.

104 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes to the Group Financial Statements continued year ended 29 September 2006

39. Explanation of transition to IFRS (continued)

(g) In accordance with IAS 38 Intangible Assets, costs associated with the purchase of a brand name previously included in other receivables have been reclassified to intangible assets.

(h) Under IFRS 2 Share-based Payment, the Group recognises a charge to income in respect of the fair value of outstanding options granted to employees after 7 November 2002. The credit side of the entry is to a separate component of equity included within other reserves.

(i) Under IAS 17 Leases, the Group has recognised a lease formally accounted for as an operating lease, as a finance lease. Accordingly an asset of€ 0.702m and €0.731m and related finance liability of €1.843m and €1.845m have been recognised within property, plant and equipment and non-current borrowings at year end 2005 and the date of transition respectively.

(j) Under previous GAAP, pension related provisions included within non-current payables were €17.088m and €19.199m and current payables were €0.217m and €0.460m at year end 2005 and the date of transition respectively. These were reversed on adoption of IAS 19 Employee Benefits.

Under IAS 19 Employee Benefits, the Group also accrued for paid annual leave and other short and long term employee benefits not required under previous GAAP. This resulted in an increase in non-current payables of €1.815m and €1.927m, and current payables of €0.749m and €0.766m at year end 2005 and the date of transition respectively.

Under Irish GAAP, lease incentives are spread over the period to the first rent review date in circumstances where the rent review is to market rent. In accordance with IFRS, SIC 15 Operating Leases - Incentives, the lease incentive is spread over the life of the lease. This resulted in an increase in non-current other payables of €6.521m and €5.120m, and current payables of €0.242m and €0.235m at year end 2005 and the date of transition respectively.

Under IAS 10 Events After the Balance Sheet Date, dividends declared after the balance sheet date are not recognised as a liability on the balance sheet, and so, the final dividend of €14.853m at year end 2005 and €14.574m at the date of transition, have not been provided for on the Group balance sheet under IFRS.

(k) Under IAS 12 Income Taxes, the Group recognised deferred tax on all temporary differences that existed at the balance sheet date, together with the tax effect of the IFRS adjustments noted above. In addition, €6.786m and €10.341m relating to payroll taxes were reclassified to trade and other payables, to more clearly disclose only corporate taxes payable on the face of the Group balance sheet.

Greencore Group plc Annual Report 2006 105 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes to the Group Financial Statements continued year ended 29 September 2006

40. Subsidiary and associated undertakings

The principal subsidiary and associated undertakings are as follows: Percentage Name of subsidiary Nature of business share Registered office Belgomalt SA** Maltsters 100 40 Chaussee de Charleroi, 5030 Gembloux.

Breadwinner Foods Limited * Food Processors 100 Greencore Sandwiches, Manton Wood Enterprise Park, Worksop, Nottinghamshire S80 2RS.

Drummonds Limited Grain Merchants 100 Paddingstown, Clonee, Co Meath.

Greencore Advances Limited Finance Company 100 St. Stephen’s Green House, Earlsfort Terrace, Dublin 2.

Greencore Agribusiness Limited Agriproducts Manufacturers 100 Athy Road, Carlow.

Greencore Agrisales Limited Agriproducts Distributors 100 As above.

Greencore Finance Limited Finance Company 100 St. Stephen’s Green House, Earlsfort Terrace, Dublin 2.

Greencore Funding Limited**** Finance Company 100 P.O. Box 87, 22 Grenville Street, St. Helier, Jersey JE4 8PX.

Hazlewood Convenience Group 1 Limited* Food Processors 100 Greencore Sandwiches, Manton Wood Enterprise Park, Worksop, Nottinghamshire S80 2RS.

Hazlewood Convenience Foods Alphen BV*** Food Processors 100 van Foreestlaan 3, 2404 Hc Alphen Ad Rijn.

Hazlewood Convenience Food Group Limited* Food Processors 100 Greencore Sandwiches, Manton Wood Enterprise Park, Worksop, Nottinghamshire S80 2RS.

Hazlewood Convenience Foods Liessel BV*** Food Processors 100 Willige Laagt 2, 5757 Pz Liessel.

Hazlewood Foods Limited* Holding Company 100 Greencore Sandwiches, Manton Wood Enterprise Park, Worksop, Nottinghamshire S80 2RS.

Hazlewood Grocery Limited* Food Processors 100 As above.

Interchem Limited Agrichemicals 100 Cherry Orchard Industrial Est., Dublin 10.

Irish Sugar Limited Production of Sugar 100 Athy Road, Carlow.

106 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes to the Group Financial Statements continued year ended 29 September 2006

40. Subsidiary and associated undertakings (continued) Percentage Name of subsidiary Nature of business share Registered office Minch Malt Limited Maltsters 100 The Maltings, Athy, Co. Kildare.

Oldfields Limited* Food Processors 100 Greencore Sandwiches, Manton Wood Enterprise Park, Worksop, Nottinghamshire S80 2RS.

Premier Molasses Company Limited Molasses Trading 50 Harbour Road, Foynes, Co. Limerick.

Pauls Malt Limited* Maltsters 100 24-25 Eastern Way, Bury St. Edmund, Suffolk, IP32 7AD.

R & B (Bristol) Limited* Food Processors 100 Greencore Sandwiches, Manton Wood Enterprise Park, Worksop, Nottinghamshire S80 2RS.

Sugar Distributors Limited Sugar Wholesalers 100 Athy Road, Carlow.

The Robert’s Group Limited * Food Processors 100 Midland Road, Hunslet, Leeds, LS10 2RJ.

Trilby Trading Limited Food Industry Suppliers 83.5 St. Stephen’s Green House, Earlsfort Terrace, Dublin 2.

William McKinney (1975) Limited* Sugar Wholesalers 70 Waterford Plaza, 8 Lagan Bank Road, Belfast, Co Antrim, BT1 3LR.

Percentage Name of associated undertaking Nature of business share Registered office Odlum Group Flour Millers 50 St. Stephen’s Green House, Earlsfort Terrace, Dublin 2.

United Molasses (Ireland) Limited* Molasses Trading 50 Duncrue Street, Belfast BT3 9AQ.

Yeast Products Company Yeast Manufacturers 40 Griffith Avenue Ext., Dublin 11.

All the above companies are incorporated in the Republic of Ireland except those indicated with * which are incorporated within the United Kingdom, that marked with ** which is incorporated in Belgium, those marked *** which are incorporated in the Netherlands and that marked **** which is incorporated in Jersey. The principal country of operation of each company is the country in which it is incorporated.

40. Board Approval

The Group IFRS financial statements, together with the Company financial statements for the year ended 29 September 2006, were approved by the Board of Directors and authorised for issue on 21 December 2006.

Greencore Group plc Annual Report 2006 107 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Company Balance Sheet at 29 September 2006

2006 2005 (restated) Notes €’000 €’000

Fixed assets Tangible assets 1 224 346 Financial assets 2 112,633 112,633 112,857 112,979

Current assets Trade and other receivables 3 1,466,535 1,251,018 Cash and liquid investments 41 2 1,466,576 1,251,020 Creditors (amounts due within one year) Trade and other payables 4 1,220,265 1,096,576 Bank overdrafts and other short-term obligations 2 49 1,220,267 1,096,625

Net current assets 246,309 154,395

Total assets less current liabilities 359,166 267,374

Net assets 359,166 267,374

Capital and reserves Share capital 5 126,820 125,116 Capital conversion reserve fund 6 934 934 Share premium account 6 104,137 97,489 Other reserves 6 674 244 Profit and loss account 6 126,601 43,591 Company shareholders’ funds - all equity interests 359,166 267,374

E.F. Sullivan Directors P.F. Coveney }

108 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Company Statement of Accounting Policies year ended 29 September 2006

Accounting standards

The Company financial statements are prepared in accordance with accounting standards generally accepted in Ireland and with the Companies Acts, 1963 to 2005.

Accounting convention

The Company financial statements are prepared under the historical cost convention.

Profit and loss

The profit attributable to equity shareholders dealt with in the financial statements of the parent Company was €107.824m (2005: €23.015m). In accordance with section 148(8) of the Companies Act, 1963 and section 7(1A) of the Companies Amendment Act, 1986, the Company is availing of the exemption from presenting its individual profit and loss account to the Annual General Meeting and from filing it with the Registrar of Companies.

Foreign currency

Foreign currency transactions are booked in the functional currency at the exchange rate ruling on the date of the transaction. Foreign currency monetary asset and liabilities are translated into the functional currency at rates of exchange ruling at the balance sheet date. Exchange differences are included in profit or loss for the year.

Investments

Investments in subsidiaries and associated undertakings are held at cost. The Company assesses investments for impairment whenever events or changes in circumstances indicate that the carrying value of an investment may not be recoverable. If any such indication of impairment exists the Company makes an estimate of its recoverable amount. When the carrying amount of an investment exceeds its recoverable amount, the investment is considered impaired and is written down to its recoverable amount.

Employee share options

The Company grants equity settled share based payments to employees (through executive share option schemes and employee sharesave schemes). In the case of these options, the fair value is determined using a trinomial valuation model, as measured at the date of grant. The fair value is expensed to the profit and loss account on a straight line basis over the vesting period, based on an estimate of the number of shares that will eventually vest.

The proceeds received when options are exercised, net of any directly attributable transaction costs are credited to share capital and share premium.

Deferred tax

Deferred tax is recognised in respect of all timing differences which have originated but not reversed at the balance sheet date where transactions or events that result in an obligation to pay more tax in the future, or a right to pay less tax in the future have occurred at the balance sheet date.

Timing differences are temporary differences between profit as computed for taxation purposes and profit as stated in the financial statements which arise because certain items of income and expenditure in the financial statements are dealt with in different periods for taxation purposes.

Deferred tax assets are recognised to the extent which they are regarded as recoverable. Recoverability is assessed on the basis that more likely than not there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted.

Greencore Group plc Annual Report 2006 109 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Company Statement of Accounting Policies continued year ended 29 September 2006

Retirement benefits

Defined contribution pension plans A defined contribution plan is a pension plan under which the Company pays fixed contributions into a separate defined contribution scheme. Obligations for contributions to defined contribution pension plans are recognised as an expense in the profit and loss account as due. Any difference between the amounts charged to the profit and loss account and contributions paid to the pension scheme are included in debtors or creditors in the balance sheet.

Defined benefit pension plan Pension benefits are funded over the employees’ years of service by way of contributions to a defined benefit scheme operated by the Company. Pursuant to paragraph 9 (b) of FRS 17, as the directors of the Company are unable to determine the portion of the pension scheme assets and liabilities which relate to the employees of the Company, the Company has accounted for the contributions as if the scheme were a defined contribution scheme. Contributions to the plan are charged to the profit and loss account as due. Any difference between the amounts charged to the profit and loss account, and contributions paid to the pension scheme are included in debtors or creditors in the balance sheet.

Share capital

Ordinary shares Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are taken as a deduction within equity, net of tax, from the proceeds.

Treasury shares Where the Company purchases the Company’s equity share capital, the consideration paid is deducted from the total shareholders’ equity and classified as treasury shares until they are cancelled. Where such shares are subsequently sold or reissued, any consideration received is included in total shareholders’ equity.

Dividends Interim dividends payable are recognised as a liability of the Company when the Board of Directors resolves to pay the dividend and the shareholders have been notified in accordance with the Company’s Articles of Association. Final dividends of the Company are recognised as a liability when they have been approved by the Company’s shareholders.

Cash flow The Company has taken advantage of the exemption available to it under FRS1 Cash flow Statements, not to prepare a statement of cash flows.

Changes in accounting policy In preparing the financial statements for the current year, the Company has adopted Financial Reporting Standards (FRS) 20 Share-based Payment, FRS 21 Events after the Balance Sheet Date, FRS 22 Earnings per share, FRS 23 The Effects of Changes in Foreign Exchange Rates, FRS 24 Financial Reporting in Hyperinflationary Economies, FRS 25 Financial Instruments: Disclosure and Presentation, FRS 26 Financial Instruments: Measurement, FRS 27 Insurance Contracts, and FRS 28 Corresponding Amounts.

The adoption of FRS 20 Share-based Payment has resulted in a change in accounting policy for share-based payment transactions, and the adoption of FRS 21 Events after the Balance Sheet Date, has resulted in changes in the accounting policy for dividends. FRS 20 Share-based Payment, requires that the fair value of options awarded to employees is charged to the income statement over the vesting period. Under Irish GAAP, no charge was made in respect of such options. Dividends proposed or declared on equity instruments after the balance sheet date are no longer recognised as a liability at the balance sheet date. These changes in accounting policy have resulted in a prior year adjustment. The retained profit for the year ended 30 September 2005, has increased by €14.845m, dividend accruals have decreased €14.853m, trade and other receivables (amounts due from subsidiary undertakings) have increased by €0.236m. The net impact is to increase shareholders’ funds at year ended 30 September 2005, by €15.089m.

110 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes to the Company Balance Sheet year ended 29 September 2006

1. Tangible assets

Plant and Fixtures machinery and fittings Total €’000 €’000 €’000

Cost At 30 September 2005 312 2,672 2,984 At 29 September 2006 312 2,672 2,984

Depreciation At 30 September 2005 227 2,411 2,638 Charge for the year 25 97 122 At 29 September 2006 252 2,508 2,760

Net book amount At 29 September 2006 60 164 224

At 30 September 2005 85 261 346

2. Financial assets

Interest in subsidiary undertakings 2006 2005 €’000 €’000

At beginning of year 112,633 112,595 Movement in year – 38 At end of year 112,633 112,633

Principal trading subsidiary and associated undertakings are set out in note 40 to the Group financial statements.

3. Trade and other receivables

2006 2005 €’000 €’000 Amounts falling due within one year: Amounts owed by subsidiary undertakings* 1,465,922 1,250,608 Other debtors 255 129 Prepayments and accrued income 358 281 1,466,535 1,251,018

* Amounts due from and to subsidiary undertakings are classified as current, as all inter-company receivables are repayable on demand however, the Company has no present intention of demanding repayment of amounts due from subsidiaries, nor does the Company expect amounts due to subsidiaries to be repayable in the foreseeable future.

Greencore Group plc Annual Report 2006 111 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes to the Company Balance Sheet continued year ended 29 September 2006

4. Trade and other payables 2006 2005 €’000 €’000 Amounts falling due within one year: Amounts owed to subsidiary undertakings* 1,208,477 1,084,970 Trade and other payables 459 739 Declared interim dividend 9,961 9,804 Accruals 1,368 1,063 1,220,265 1,096,576

* Amounts due from and to subsidiary undertakings are classified as current, as all inter-company receivables are repayable on demand however, the Company has no present intention of demanding repayment of amounts due from subsidiaries, nor does the Company expect amounts due to subsidiaries to be repayable in the foreseeable future.

5. Share capital

Details in respect of share capital are presented in note 30 of the Group financial statements.

6. Equity reserves 2006 Capital conversion Share Share option Profit & loss reserve fund premium reserve account €’000 €’000 €’000 €’000

At beginning of year (as restated) 934 97,489 244 43,591 Premium on issue of shares – 6,648 – – Employee share options – – 430 – Profit for the financial year attributable to equity holders of the Company – – – 83,010 At end of year 934 104,137 674 126,601

112 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes to the Company Balance Sheet continued year ended 29 September 2006

7. Retirement benefits

The Company operates a defined benefit pension scheme and a defined contribution scheme with assets held in separate trustee administered funds.

Some employees of the Company are members of the multi-employer defined benefit pension scheme, which is operated in conjunction with other Group companies. The defined benefit scheme is accounted for as if it were a defined contribution scheme, on the grounds that the Company is unable to identify its share of the underlying assets and liabilities in the scheme, on a consistent and reasonable basis.

Total pension costs for the year amounted to €0.422m (2005: €nil), in respect of defined benefit schemes and €0.011m (2005: €nil) in respect of defined contribution schemes. At the year-end, €0.123m (2005: €0.215m) was included in creditors in respect of pension liabilities.

The defined benefit scheme, of which some employees are members, had a net surplus at 29 September 2006, of €24.981m (2005: net surplus €6.598m).

Disclosures in relation to this and all other Group defined benefit pension schemes are given in note 29 to the Group financial statements.

8. Employee share options

The Company grants share options under various share option plans as detailed in the Report of the Directors on pages 34 and 35. All disclosures relating to the plans are given in note 6 to the Group financial statements.

9. Financial guarantee contracts

Pursuant to the provisions of Section 17, Companies (Amendment) Act, 1986, the Company has guaranteed the liabilities of certain subsidiary undertakings in the Republic of Ireland for the financial year ended 29 September 2006. Where the Company has entered into financial guarantee contracts to guarantee the indebtedness of such subsidiaries, the Company considers these to be insurance contracts and accounts for them as such.

The Company is party to cross guarantees on Group borrowings. These are treated as insurance contracts and accounted for as such.

Greencore Group plc Annual Report 2006 113 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Shareholder and Other Information

Greencore Group plc is an Irish registered company. Its ordinary shares are quoted on the Irish Stock Exchange and on the London Stock Exchange. Greencore has a level 1 American Depositary Receipts (ADR) programme for which the Bank of New York acts as depositary (Symbol: GNCGY). Each ADR share represents four Greencore ordinary shares.

Shareholding statistics as at 13 December 2006

Range of shares held Number of holders Ordinary Shares Number % Number % 1 - 1,000 5,730 52.2% 2,167,038 1.1% 1,001 - 5,000 3,990 36.3% 8,786,072 4.4% 5,001 - 10,000 698 6.4% 4,944,020 2.5% 10,001 – 25,000 326 3.0% 4,956,439 2.5% 25,001 - 100,000 128 1.2% 6,391,986 3.2% 100,001 – 250,000 31 0.3% 4,756,223 2.4% 250,001 – 500,000 25 0.2% 9,014,995 4.6% Over 500,000 46 0.4% 157,576,519 79.3% 10,974 100.0% 198,593,292 100.0%

Financial calendar

Record date for 2006 final dividend - 15 December 2006 Annual General Meeting -15 February 2007 Payment date for 2006 final dividend - 5 April 2007 Interim results - May 2007 Financial year end - 28 September 2007 Interim dividend payment - October 2007 Preliminary announcement of results - November 2007

Advisors and Registered Office Company Secretary Auditors Stockbrokers C.M. Bergin B.A., PricewaterhouseCoopers, Davy Stockbrokers, Dip. Legal Studies, Solicitor. George’s Quay, 49 Dawson Street, Dublin 2. Dublin 2. Registered Office St. Stephen’s Green House, Solicitors Goodbody Stockbrokers, Earlsfort Terrace, Arthur Cox, Ballsbridge Business Park, Dublin 2. Earlsfort Centre, Ballsbridge, Earlsfort Terrace, Dublin 4. Registrar & Transfer Office Dublin 2. Computershare Investor Investec Securities, Services (Ireland) Limited, Slaughter and May, 2 Gresham Street, Heron House, One Bunhill Row, London EC2V 7QP. Corrig Road, London EC1Y 8YY. Sandyford Industrial Estate, American Depositary Receipts Dublin 18. The Bank of New York, 101 Barclay Street, 22nd Floor - West, New York NY 10286.

Website

Further information on Greencore Group plc is available at www.greencore.com

114 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes

Greencore Group plc Annual Report 2006 115 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Notes

116 Greencore Group plc Annual Report 2006 WorldReginfo - bda44ff4-a2ea-4a10-bf9e-057ea07b1498 Greencore Group plc St. Stephen’s Green House Earlsfort Terrace, Dublin 2 tel: 353 1 605 1000 fax: 353 1 605 1100 www.greencore.com e r o c n e e r g

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