The current report is based on the study of Kerry Group which is the public listed company reporting under the International Financial Reporting Standard. The report will evidently provide the description of the business that is carried on by the company along with the areas of its operations. Additionally the report will provide an analysis of the publications issued by the CEO of the Kerry Group in order to discuss the information that is necessary for the shareholders.
Furthermore, the report will also discuss the commitments that is made by Kerry Group along with the contingencies together with the significances of such commitments. An in depth analysis will be performed to assess the profit and cash flow performance of the organization for the year with additionally focus will be paid on understanding the accounting standards used by the Kerry Group. Finally, on reviewing the accounts a discussion will be made regarding the future prospects of Kerry Group.
Kerry Group is considered as the international leader in taste and nutrition as serves food, liquid refreshment and medicinal businesses. The company is the prominent dealer of significant brands and consumer exclusive foods in Ireland, UK and chosen overseas marketplaces (Kerrygroup.com 2017). With annual revenue of circa amounting to €6 billion, the company provides employment to around 23,000 people and provides service to customers across the globe in more than 140 nations.
Kerry Group has it’s headquarter in Tralee, Ireland and it is listed on the Irish Stock Exchange. The company has balanced strategy for achieving growth by embracing the group’s international taste and nutrition business and Kerry Food’s consumer foods business. Kerry Foods one of the organizations consumer food department has grown into a robust planned and profitable alliance by forming partnership around the Irish, UK and chosen European markets (Kerrygroup.com 2017). The business model of Kerry Group is based on upholding the competitive advantage by promoting excellence in innovations and service to its valued customers.
According to the statement issued by the Chairman of Kerry Group, it stated that even though the economic conditions were less than floating in several of the Kerry Group market, the chairman was pleased to report that the company to achieve growth satisfactorily in 2016 (Kerrygroup.com 2017). The chairman reported that the present fitness and wellness that are dynamic innovations across all the food and liquid refreshment markets in the advanced and emerging areas directs to the significance of the company’s nourishment wellness technologies for present-day evolving markets.
The chairman report stated that the company continued to attain marketplace expansion in all the areas with robust development attained in the Asian marketplaces. Such is considered to be satisfying given the vibrant industry and changing demographic tendencies of Asian markets (Wang 2014). The chairman reported that the adjusted after tax prior to the brand associated intangible asset amortization and non-trading items has grown by 7.2% to €569.1m (Kerrygroup.com 2017). The adjusted earnings per share grow by 7.1% to 323.4 cents.
The group yielded beyond the target of return on capital employed that stood 12.9%. Concerning the shareholders the chairman reported stated that the panel has recommended a final dividend of 39.2 cents per share with an rise of 12% on the final dividend paid in 2015 (Kerrygroup.com 2017). The same was be payable on 19th May 2017 to the registered shareholders based on the recorded date of 28th April 2017. On combining the provisional dividend of 16.8 cents each share, it was found that the total dividend for the year stood 56 cents representing an increase of 12% from the year 2015.
On the other hand, the chief executive statement stated that the Kerry Group has attained a strong momentum in its business growth under the competitive marketplace atmosphere by rendering a strong business presentation with record volume of cash generation in 2016 (Brown, Preiato and Tarca 2014). According to chief executive statement the trading profit of the group improved by 70 basis points to 12.2%. The chief executive report stated that the group unique combination of taste and preference with technologies and systems became the forefront in meeting the innovating needs of the customers by retorting to the customer wants.
The company current investment in international, domestic and provincial market technology led to a significant increase in the research and development expenses in Taste & Nutrition by 5.1% of the divisional revenue in 2016. In spite of the volatile market conditions, Kerry Group continued to grow satisfactorily in all the areas and recorded robust development in the fourth quarter particularly from the Asian markets (Du, Givoly and Alhusaini 2017).
Kerry Group is committed in delivering nutrition and taste to its millions of customers across the world each day. An assertion can be bought forward by stating that the company is committed to the premier principles of the business and promotes moral conduct so that it can accomplish its accountabilities that are directed towards the community that it serves (Yu and Wahid 2014). The company is committed to the establishment of long-term value for its stakeholders both in respect of the socially and environmentally sustainable basis. With the help of the skills and wholehearted commitment from its employees, Kerry Group aims to be the leader in its markets by achieving excellence in the quality of product, technology, marketing, creativity and service to its customers.
As evident from the analysis, it can be said that Kerry Group is enthusiastically committed in contributing to the accomplishment of its clienteles and the group as a whole (Dufour, Teller and Luu 2014). Kerry Group takes immense pride in its food and liquid refreshment legacy and constantly support its knowledge, expertise and applications skill to ardently serve its customers. As stated in the mission statement the group is committed to accountable business practice and the company’s present sustainability journey forms an essential share of its commercial model (Kerrygroup.com 2017). The company is also committed to the present indulgence, which facilitates in better understanding of the stakeholders needs and the methods through which it addresses the needs of its stakeholders.
In spite of the strong performance during 2016 in the regional areas, Kerry Group met challenges in attaining its 2016 carbon target for the company. This was because of the phasing of the centre projects, which proposed to render the needed carbon savings (Chen, Ding and Xu 2014). The company is entirely committed in meeting its 2020 target of attaining 13% reduction and the group is confident that its current programs both in respect of planned and initiated would render against the overall target.
On the other hand, the considerations for the acquisition comprises of the assets or liabilities that results from the contingent considerations arrangement measured in terms of the fair value at the data control is attained by the group. Any form of succeeding variations in the fair worth is attuned alongside the cost of attainment where they qualify in the form of measurement period adjustment (Francis, Huang and Khurana 2016). It can be said that all other succeeding deviations in the fair value of the contingent considerations is categorised as the asset or liability and are accounted in compliance with the applicable IFRS’s.
As evident from the report, the trading profit of the Kerry Group grew by 7.1% to €749.6m from the previous reported figure of €700.1m in 2015. As understood the Kerry Group trading profit margin has improved by 70 basis points to 12.2%. Such progress in the trading profit margin of the Kerry Group is largely accredited to the better-quality product mix. The constructive influence that is created because of acquisition of net disposal, operating leverage is the resultant from the benefit of lower spending on the Kerry business transformation programme. On the other hand, the trading profit margin in the Taste & Nutrition has augmented by 60 basis points that amounted to 14.7% (Kerrygroup.com 2017). This is primarily attributed to the benefits from enhanced product mix, which supported from the growth in investment of Research and Development, resulting in positive impact arising out of the net of disposal, operational leverage and positive denominator valuing outcome.
Figure 1: Figure representing Trading Margin Profit of Kerry Group
(Source: Kerrygroup.com 2017)
Consequently, it is noticed that the trading profit from the consumer foods has increased by 30 basis points, which amounted to 8.8% because of the benefits from the enhanced product mix and positive denominator effect of pricing. The taste and nutrition revenue that was reported by the company has increased by 3.5% to €4.9 billion that ultimately reflected a growth in volume of 4% with 2.1% lower pricing (Kerrygroup.com 2017). The trading profit of Kerry Group increased by 8.1% to €716m highlighting an improvement of 60 basis in the divisional trading margin to 14.7%. In the financial year of 2016, the taste and nutrition comprised of the 79% of the Kerry Group revenue and 86% of the groups trading profit.
Free cash flow is regarded as the significant factor of indicating the strong point and excellence of the business along with the obtainability of reserves to the Kerry Group for reinvesting the same or generating return to the stakeholder (Lode and Napier 2014). The committee of the group considers that appropriate free cash flow should be available to align with the strategic plan. In the financial year of 2016, Kerry Group attained a record amount of free cash flow, which stood €569.9m from the previous reported figure of €452.6m. The figures reflect that Kerry Group generates stronger profit, appropriate administration of the average working capital and timing of the capital expenses spend.
Figure 2: Figure representing Free Cash Flow of Kerry Group
(Source: Kerrygroup.com 2017)
The financial assets and liabilities of the group is classified under special categories that are in agreement with the “IAS 39 Financial Instruments for recognition and measurement”. The sorting is done during the preliminary identification of the financial assets or liabilities and the same is based on the nature and objective (Glaum et al. 2013).
The categories include the following;
Available for sale investments is stated in respect of the fair value in the balance sheet. Any activities in the fair value is documented in other all-inclusive statement unless the assets is disposed of or there is a deemed impairment on the original cost.
The financial asset investments are categorised in the form of available for sale since they are considered as non-derivative assets. Additionally the not designated at fiscal asset at fair value obtained through profit and loss. Referring to “IAS 39” assets that are available for sale are stated based on their fair value on the balance sheet. Any movements in the fair value of the asset is identified in the comprehensive income statement unless the asset is believed to carry an impairment on the actual cost.
The Kerry Group follows the “IAS 19 for Employee benefits”. The values that are reported in the financial statement of the group is based on the most current actuarial value that are reorganised by the separate arrangements which is self-governing and professionally competent actualities so that the group can incorporate the requirements of the IAS 19. The group uses the IAS 19 “Employee Benefits” so that it can evaluate the liabilities of the numerous schemes as on 31st December by making use of the projected unit credit method (Mullinova 2016). All the assets that are involved in the scheme are measured at the fair value and the same is incorporated in the balance sheet in agreement with the requirements of the IAS 19. In compliance with the IAS 19 the group entire actual valuations for funding purpose is carried out in the pension plan of the group that are in line with the domestic requirements.
Referring to the “IAS 19 for Employee Benefits” compensation and the benefits forms the central part of the employee management. In accordance to the “IAS 19 for Employee Benefits” the employee are rewarded in respect of their business and individual performance. This comprises of the accomplishment against the key sustainable metrics for important colleagues. The compensation payment are regarded as the chief portion of the employee benefit package that are tailored to assist in meeting the numerous short and long term requirements.
The Kerry Group follows the “IAS 1 for the purpose of Preparation and Presentation of Financial Statements”. The consolidated financial statement of the company is prepared in compliance with the International Financial Reporting Standard and those portions of the “Companies Act 2014”, which is appropriate on the businesses that are reporting under the IFRS (Jack 2015).
The financial statements of the company takes into the account the information relating to the remuneration that is regarded as the essential portion of the financial statements. Referring to the “IAS 1 purpose of preparation and presentation of financial statements” the financial statements provides interpretations that complies with the International Accounting Standard.
The monetary reports of the group meet the terms of the “Article 4 of the EU IAS Regulations”. The consolidated financial statement of the company is prepared and in respect of the historical cost convention, as altered by the revaluation of specific business assets and liabilities and the fiscal assets investments that are held by the company at the fair value. The group classifies the assets that are held for sale at the lesser of the carrying value and fair value after deducting the cost involved in sale (Picker et al. 2016). Furthermore, referring to the “IAS 1” the investments made in associates are recorded by using the equity method.
Concerning the future prospects of the company the group remains confident regarding its capability of constantly yielding profit and development under the evolving international market (Doni, Rossetti and Verona 2017). The customer oriented business model with unrivalled depth of Taste, Nutrition & Wellness technological advancement and innovation would represent the company in attaining tactical gain by retorting to the current customer trends and necessities. The business model of the group supports delivery through the expanding retail and food service backdrop across the international markets. In the developed market, the company has well established technology to uphold the strong consumer alliance by sustaining development through distribution of customer favoured nutritive food and liquid refreshment.
The company is centrally focussed on business expansion openings in the provincial emerging marketplaces with better future predictions of sustained development across the Asian markets (Glaum, Keller and Street 2017). However, there are concerns relating to the fall in revenue of 2.4% because of the 7.2% adverse effect on the business disposal net acquisition. A major expansion program and distribution centre at China, which was recently completed, would help the company in overcoming the adverse impact on business.
Conclusion:
Conclusively it can be stated from the analysis that the Kerry Group has reflected its resilience and the capability of constantly responding to the needs of the consumer in the increasingly uneven retail, foodservice and e-commerce chains. The company has attained an outstanding business and market performance with increased in free cash flow and trading profit margin both domestically and internationally.
Reference List:
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Chen, C.J., Ding, Y. and Xu, B., 2014. Convergence of accounting standards and foreign direct investment. The International Journal of Accounting, 49(1), pp.53-86.
Doni, F., Rossetti, S. and Verona, R., 2017. Performance Reporting Choices after the Adoption of IAS 1 Revised: Comparative Evidence from Europe and the USA. International Journal of Economics and Financial Issues, 7(4), pp.558-574.
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