On behalf of the Board I am pleased to present the Group’s annual report as Chairman of
Bord na Móna plc.
The year 2009/2010 was hugely significant for Bord na Móna, as it celebrated 75 years in existence. To mark the occasion, the Company organised a major exhibition showcasing its history and setting out how the Group expect to build on those foundations to secure its future.
The Heartland exhibition held to mark the Group’s 75th anniversary was launched by the President, Mary McAleese at the Office of Public Works, St. Stephen’s Green, Dublin in September 2009 and in the interim has been opened to the public in Newbridge, Co. Kildare, Tullamore, Co. Offaly and in Crossmolina, Co. Mayo. The exhibition features documentation and most importantly video interviews with former and current employees detailing the impact of Bord na Móna on their lives and on the communities we serve.
The publication of “Brown Gold”, written by Donal Clarke, formerly Company Secretary of Bord na Móna also marked this significant anniversary. The book recounts all the key events in the period since 1934 and charts the evolution of the Group to a modern industrial enterprise.
While rightly proud of our history, I am pleased to report that Bord na Móna continued to perform successfully in 2009/2010. Notwithstanding a number of significant obstacles which emerged in the period, the Group delivered a sound financial performance and progressed its strategic growth and development, particularly in the Energy, Horticulture and Resource Recovery sectors. At the same time, the Group continued to focus on maximising returns from its traditional businesses.
In the year ended March 2010, Bord na Móna took a number of steps to progress our vision for the Group, including:
| • | commencing the construction of a 112MW peaking plant installation at Edenderry, Co. Offaly; |
| • | obtaining the necessary approvals for the construction of a composting facility, capable of processing 25,000 tonnes per annum, at our site at Drehid, Co. Kildare; |
| • | the conclusion of a very successful further private placement of debt in the US which raised $205 million (€146.4 million); |
| • | the agreement of certain proposals to reform our current pension arrangements; |
| • | a significant turnaround of the Horticulture business following successful restructuring and reorganisation; |
| • | acquiring the business of O’Hagan Waste to increase the geographical reach and customer base of our Resource Recovery business, and |
| • | securing planning permission and other permits to construct a gas-fired power plant at our site at Derrygreenagh, Co. Offaly. |
The financial results showed turnover at €384.4 million for 2009/2010, down 4.3% on 2008/2009. Earnings before interest, taxation, depreciation and amortisation (EBITDA) for the Group was €64.6 million, up €7.4 million (13%) on 2008/2009. The Energy business was adversely impacted by poor summer weather which disrupted peat harvesting. The winter flooding in the Shannon region followed by extreme cold weather reduced our ability to deliver peat for energy generation. The Resource Recovery business experienced the effects of the general downturn in economic activity, particularly in the construction and retail sectors. On the positive side, our Fuels and Horticulture businesses delivered strong performances.
Operating profit for the year at €23.0 million was €0.7 million down on the previous year as explained in more detail in the Managing Director’s Review. Operating profit performance in 2009/2010 was adversely impacted by:
| • | adverse weather conditions which restricted the peat harvest to 75% of the annual target; |
| • | stock losses incurred in the November floods; |
| • | increased competition in the Resource Recovery sector leading to reduced gross margins, and |
| • | a goodwill impairment charge of €5.2 million. |
In common with all businesses, Bord na Móna continues to operate in the current difficult economic environment. Reflecting on that, the Board decided that increases in employee pay would be inappropriate and has agreed to hold pay at current levels. In common with other State bodies, fees payable to Directors were reduced by 10% with effect from 1 May 2009.
The situation regarding defined benefit pension schemes operated by Bord na Móna is a matter of concern to the Board, given the severe volatility continuing to affect investment markets and the growth in scheme liabilities. The Group’s approach is to reform the current arrangements as appropriate in order to balance the interests of the Group and of members and pensioners of the schemes. In this regard, agreement was reached with member representatives and regulatory authorities to reform the Regular Works Employee Superannuation Scheme (RWESS) with effect from 1 January 2010 and to introduce a defined contribution pension scheme for new employees. In relation to the General Employee Superannuation Scheme (GESS), a defined benefit scheme operated by the Group, discussions are continuing with member representatives and the regulatory authorities on the issues involved.
The Board continues to prioritise an approach to corporate governance which is based on best practice and emerging regulation and trends. The Directors held a workshop on corporate governance, facilitated by external experts, during the year. In addition, a full review of the revised Code of Practice for the Corporate Governance of State Bodies was undertaken during the year and any required changes were implemented. The process confirmed that the Group has an appropriate and responsive system of internal controls to mitigate significant risks which acts to keep exposures at an acceptable level. The Board is satisfied that Bord na Móna has a very effective system of corporate governance.
The Group also continues to deliver value to its shareholders and paid a dividend amounting to €5.3 million during the year, with €5.0 million paid to the State and €0.3 million paid to the Employee Share Ownership Plan (ESOP).
I would like to thank my Board colleagues for their commitment and support during the year. I would also like to take this opportunity to express my sincere thanks to the Group’s Managing Director, Gabriel D’Arcy, and to the management team that he leads. I thank Gabriel, his colleagues and all our employees for their dedication and hard work in delivering another year of progress for the Group, despite the challenges which emerged.
I would like to thank the Minister for Communications, Energy and Natural Resources, Mr. Eamon Ryan, T.D., for his ongoing support to Bord na Móna. I also express my appreciation to Mr. Aidan Dunning, Secretary General of the Department, Ms. Sara White, Deputy Secretary General and the other officers of the Department for their interest and advice.
The Board is pleased to report continuing progress in the implementation of the strategic plan for Bord na Móna. The long history of the Group demonstrates an ability to implement change and to adapt to the pressures of the environment in which the businesses operate. We believe that these strengths, together with the implementation of the Group’s strategy of diversification, will secure a successful and vibrant future for the Group and enhance the interests of shareholders, management and employees. The Board is committed to fulfilling its role of providing the environment and resources which will enable the delivery of this strategy.
Bord na Móna is also ready to play its part in contributing to a sustainable future for Ireland by its advancement of environmentally friendly policies in energy, water, resource recovery and biodiversity.
The founding fathers of Bord na Móna provided a sound foundation which enabled the organisation to prosper and grow over its first 75 years. We are determined to build on this foundation and continue this progress for the next 75 years and beyond.
Fergus McArdle
Chairman
1 July 2010