Kerry Group's Financial and Strategic Management

The assignment provides an analysis of Kerry Group's financial and strategic management in 2016. It discusses the company's focus on unique taste, nutrition, and functional ingredients, as well as its ability to adapt to changing market conditions. The report also explores Kerry Group's performance during the interim period, including revenue growth and strategic acquisitions. Overall, the assignment aims to provide a comprehensive understanding of Kerry Group's financial and strategic management practices.

FINANCE AND STRATEGIC MANAGEMENT

TABLE OF CONTENTS
INTRODUCTION...........................................................................................................................3
KERRY GROUP.............................................................................................................................3
Overall Interim performance.......................................................................................................3
Directors point of view.............................................................................................................11
CONCLUSION..............................................................................................................................12
REFERENCES..............................................................................................................................13

INTRODUCTION
Finance and strategic management is considered as study of funding with perspective of
long term aspect, which considers various strategic business enterprise. In the present scenario,
financial management is increasing in rapid aspect for the purpose of developing set of decisions.
It refers to particular planning for application of management for organizational financial
resources to accomplish its objectives and goals. Managing control over funds helps the business
in maximising value of shareholders for a long run. The present report has target organization
with financial and strategic management of Kerry Group. It will articulate directors point of view
with context to problems linked with financial and strategic management. In the same series, it
will also present information related to overall interim performance of year 2016. With the
context of interim performance, it had stated consolidated interim financial position of specific
business entity with its debt position.
KERRY GROUP
Kerry Group plc along with its subsidiaries manufacture, delivers and develop technology
which is based on nutrition and taste solution for beverages, pharmaceutical industries and food
in Europe, America, Asia pacific, Middle East and Africa. Generally, it operates in two segments
which are classified as Consumer food and nutrition manufacturers. The segment of consumer
food manufacturers and supply branded chilled food and added value branded food to Irish and
in market of United Kingdom. It also offers dairy products, meat, savoury products and various
meal solutions with retailer’s perspective to e-commerce channels and convenience stores under
different brands such as Dairygold, Fire & smoke, Galtee, Cheestrings and many more. The
products with private label are also produced such as, meals which are chilled and frozen, dairy
and cheese products and cooked meat. The taste and nutrition segment distribute and
manufactures portfolio of functional activities and ingredients as they offer technologies of
nutrition and taste along with system and solutions.
Overall Interim performance
Kerry Group has stated solid financial performance for the interim duration of year 2016.
Its overall performance had been highlighted with improvement in quality and operational
process along with increment in trading profits by 7.4% to 322 m and 70 basis points to 10.6%.
In the same series, there dividend got raised to 16.8% from 12%. In first half of 2016, firm
achieved growth by challenging different market conditions, slow economic growth, instability
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of geopolitical factors in specific developing market and currency volatility. In the same series,
there is increment in retail fragmentation, penetration of regional brands, online shopping and
ongoing growth with context of snacking had contributed for churning of significant product
along with raise in demand of product differentiation and offering in innovative aspect. The trend
of consumer reflects growth with reference to wealth, natural, health offerings and specific
propositions of clean label which, is highly focused on increasing attention towards development
of both segments and demand for meal solutions.
The combination of nutrition, taste and capabilities of general wellness along with
approach of unique system which had continued for increment in engaging customer and various
innovation. The Asia had attained strong growth in channel of food service in every region. In
the year 2015, internationalisation and integration with reference to business had been acquired
as its outcome was successful progress. The UK and Irish consumer food are very competitive
for alterations in market place and uncertainty of economy in market of UK. The portfolio had
been repositioned for continuing its performance with advantages such as convenience and
snacking trend. The growth rate of market was outperforming with proper maintenance of
momentum of good business. The revenue of group was not changed at €3 billion which
articulate appropriate growth of volume, as it is outset through movements in currency and
pricing had been lowered with context of first half of year 2015. The growth had been observed
in business volume by 3.2% which reflects very good performance of firm in market of America.
However, growth of volume was lower in EMEA region with context of specific regional
developing market. Simultaneously there was strong momentum of business growth in Asia.
Against the background its net pricing decreased by 2.2% and in same series cost of raw material
by approx. 4%.
In the year 2016, 3.5% growth was attained through taste and Nutrition with context of
volume of business and its pricing was lowered by 2.2%. In the same series, volume of Kerry's
food business was increased by2.3% and pricing were decreased by 2.1%. There was continuous
improvement in overall quality of business and efficiency of operations. There was increment in
trading profit by 7.4% with €322 million. It could be interpreted that its trading profit margin
was raised through 70 bps to 10.6%. It reflects that improvement of 70 bps in trading margin
with 12.8% in taste and nutrition and 30 bps with context of consumer food as it is margining to
8.3% and decreases spending on its connect programs with contribution of 10 bps. The earning
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per share was raised from 7.5% to 133.8 cent. In the same series its basic earnings per share was
reduced through 6.5% as 126.4. The dividend of H1 is of 16.8 cent per share with 12% increment
from year 2015.
Growth volume
1st half of year 2016
Total revenue 2379 million
Trading profit 304 million
Trading margin 12.80%
The innovative and largest portfolio had been provided through Kerry with context to
taste and nutrition solution. Further, various functional ingredients and actives for different
beverage, global food and pharmaceutical industry. Kerry's portfolio of taste and nutrition along
with general wellness had enabled platform of technology which had continued its advantages by
making services easy available for consumer who prefer local food, health and wellness.
Generally, consumers demand clean, simple edibles with clear labelling, functional indulgence,
variety in culinary and enhanced nutritional value. It had indirectly driven requirements of retail
and food services with innovation and market ready solutions. In the same series, Kerry was
capable to maintain a specific and strong innovation and pipeline with context to every region in
particular duration along with acquisition investment in year 2015 which had achieved progress
integration of each acquired business. The acquired technologies are broadening with reference
to every region for developing unique taste and nutrition application. These businesses is
performing well for giving significant scope with context to expanding in international market.
There was increment in revenue by €2,379 million through taste and nutrition which reflects
growth of 3.5% in business volume and states 2.2% lower net pricing.
Growth in volume in each region
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Illustration 1: Volume growth by
Region
(Source: Kerry Interim Management
Report, 2016)
Americas Region
Solid performance had been maintained by Kerry in North America and its performance
was improved in market of Latin American in year 2016. In the same series, its performance was
boosted through technology which was acquired by firm in 2015. This reflected progress for
integration of its acquisitions strategy. The sales revenue was increased by 15.2% to €1244
million which reflects progress of business volume by 3.5% and lower pricing by 2%.
EMEA Region
The market conditions of EMEA was challenging because of continuous price deflation
with reference to regional developed markets and geopolitical instability. There was presence of
significant product churn which is considered as dominant market feature of manufacturers of
food and beverages. and various retailers had responded competitively for raising consumer
demand for purpose of enhancing convenience line and nutritional offerings with context to
deflationary environment. There was appropriate growth in regional food service sector for
giving the best growth opportunity with reference to consumer proposition of Kerry. The sales
revenue of 734 million is representing business volume as it signifies specific growth in volume
of business of 0.3% and lower pricing for 2.7%. The growth of competitive market was
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developed along with economic and geopolitical issues which directly gives challenging impacts
on market place.
Asia pacific
Kerry attained excellent performance in H1 of Asia pacific region. There was
establishment of technologies for market development across regional markets which is highly
successful. The volume of business had raised by 9.5% and net pricing was lowered by 1.8%.
The total reported revenue was €367 million which represents decrement of 11.4% because of
business disposal which gives adverse impact on net acquisitions and translation of negative
currency provides major impact of 5.8%. The key drivers of firm are its food service, beverage
and food service as it helps enterprise in managing continuous growth via lifestyle nutrition.
As per its financial outcomes it is struggling with its market scope, solid performance had
been delivered by market expansion, appropriate cash generation by 7.5% increment in its
adjusted earnings per share. Kerry Group had kept its performance in very efficient aspect,
especially in North America as it had improved its performance in Latin America Its growth was
lowered in EMEA region which had contrasted with 0.3% and simultaneously excellent
performance in Asia with increased volume of business by 9.5%.
Consumer foods
1st half of year 2016
Total revenue 697 million
Trading profit 58 million
Trading margin 8.30%
There are various conditions of trading in consumer food market of UK and Irish which
are very competitive due to adaption of alteration in market landscape through its retailers,
different consumer trend which consist of e-tail's growth and trends which are deflationary.
Market share was gained by discounters as they had continued for broadening r focus of retailer
on EDLP strategies. Its volume growth was directly led by strong performance with context of
meal solutions. With reference to its trading profit it improved business which is underlying and
offset via currency and disposals. Its margin improved and driven via efficiency program on
ongoing aspect and portfolio had been repositioned.
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It had been interpreted in interim management report about its issues such as global
market conditions, slow economic growth, geopolitical instability and currency volatility in
different regional developing markets. There are various changes in consumer challenges along
with innovations of customer investing. Partnership model was delivered along with deflationary
input cost environment.
Financial Highlights
The revenue of Kerry Group has raised by 0.3% to 3.4 billion. The business attained
growth by 3.2% hike in volume in specific duration. Its net pricing is presented as lower by 2.2%
as it reflects decrement in cost of raw material along with adverse effect via currency transaction
of 0.2%. In the same series, business acquisitions with appropriate contribution of 5.3% of net
disposals more than outset through currency headwind of translation is of 3.8%. With context to
consumer food, Kerry's report stated that its revenue declined by 7% to €697 million. The
volume of business raised by 2.3% as compared to year 2015. Its net pricing decreased by 2.1%
which provides adverse impact and transaction currency of 0.3%. It had signified negative aspect
of business disposals with reference to its net of acquisition of 3.8% through currency headwind
of translation of 3.1%.
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Illustration 2: Issues faced by Kerry
(Source: Kerry Interim Management
Report, 2016)
The trading profit of Kerry's group was raised by 7.4% to €322 million. As its trading
margin increased on basis of 70 bps to 10.6%. With reference to improvisation in product mix,
business efficiency programmes and operating leverage, together gives positive effect on
acquisitions as it exits all non-core activities of business. The finance cost in this duration raised
to 39 million because of acquisition which is financing in partly aspect and it offset strong cash
flow. In the same series, Kerry Group had undertaken two bolt-on-acquisition as it helps in
establishing manufacturer based in new geographies. The charges of tax of this specific period
was €36 million which represent effective tax rates due to variations in geographical split of
earned margin, appropriate investment in R&D and alterations in local statutory tax rates. With
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reference to items of non-trading, it gave charge of €3 in its 1st half of year 2016, initially
because of integration cost of acquisition. In its initial period, there was gain of €27 million as
result of profit with context to businesses disposal. Further, with free cash flow Kerry Group had
attained FCF of €379 million in H1. The cash flow improvement was because of low level of
investment in non-current assets and working capital in similar duration.
With context of balance sheet of Kerry Group, it could be stated that there was decrement
in property, equipment and plant by €46 million to €1385 million. All specified additions were
articulated in particular period for out-setting translation movements of foreign exchange and
alteration in depreciation. There was decrement in intangible assets from €35 million to €3414
million, but initially it was because of exchange rate which helps in translating tangible assets
with proper comparison to assets which are not denominated in Euro. In the same series, current
assets of firm increased through €147 million to €1989 as initially it was due to increment in
cash in hand. In this statement, its net deficit with context of benefit schemes was stated as €314
million. There was increase in its net deficit by the end of year because of decline in discount
rate of UK, US and Eurozone's which is partially outset through increase in contribution of cash.
Kerry's net debt which was around €1520 million with decrement of €130 million as
compared to previous financial year. In this duration end, gross debt of 64% was traced at fixed
rate along with weighted average periods of fixed rate which was 7.1 years. By observing its
interim financial statement, its financial position is considered as very healthy along with net
debt to EBITDA of 1.7 times and business entity has enough of plans for supporting it s for
future perspective. There was absence of alteration in its transactions from related party which is
observed from annual report of year 2015 with presence of material effect on its financial
performance of specific group in H1 of 2015.
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For quantifying implications of Brexit, in its interim duration it was very difficult to state
it, the Kerry Group had recognized uncertainty in broader aspect of macroeconomic which is
caused through voting of UK electorate for leaving European union. It had weakened consumer
confidence as outcome of this particular uncertainty but Kerry group was confident about its
positioning of business for addressing different opportunities and challenges for presenting this
decision. In the same series, uncertainties and risk was faced by founded group such as
integration and identification of acquisition target for decreasing its innovation rate, risks of
safety of quality and food, fails to retain key talents, systems of implementing risk, growth in
developing market, risk which are ongoing operational and compliance along with application of
unauthorised group Intellectual property. On the contrary, increment of risk along with potential
impact in H2 of 2015 which consist of fluctuations in cost of raw material along with currency
volatility and uncertainty link to macroeconomic from electorate of UK voting for leaving
European Union. This group usually manages specific risk with the help of control and risk
management process (Kerry Toward 2020, 2018).
Directors point of view
The Kerry Group has prepared its interim financial statements by following going
concern concept. There is presence of various resources for managing its operational existence
with reference to predictable future prospective. The directors represented the budget of this
specific group for duration which is not less than 1 year, as it plans for medium term are set on
its five year plan. They have also considered implications of cash flow with its plans as it
consists of proposed capital expenditure and it is compared along with borrowing committed
facilities are forecasted with its gearing ratio (Kerry Group revenues steady despite challenging
market conditions, 2016).
With context of dividend, board had declared 16.8 percent per share as its interim
dividend. Anticipating, the international trading environment would be challenging for second
half of 2016 for unique nutrition and taste, positioning of system model for attaining
requirements of customer and functional ingredients which are altering in marketplace. They
provide surety for delivering underlying performance of trading in full year as it had considered
increased currency headwinds of exchange rate of 5%. Its growth had been adjusted in earning
per share of year 2016 which is expected towards middle till lower end of range of 6% to 10% of
320 to 332 cents per share.
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The directors had taken responsibility for interim report with context of transparency
regulations 2007 of Ireland. It had gained capability for growth and development in this
changing market place. Its business model would be focussing on customer needs and will work
on taste, nutrition and general wellness of system and technology which supported by group's
industry leading technology. It signifies strategic advantage with context of trend of consumer
along with its requirements (Kerry Group AGM, 2016). This model would be delivering across
broad e-commerce landscape, retail and food service throughout its global market. It would be
sustaining growth, as it developed market with established technology, strong alliances of
customer and leadership via convenience, nutritional beverage and food solution and tasteful. It
would be directly laying emphasis on opportunities of business development in different regional
markets along with prospects for surviving in Asian markets.
CONCLUSION
From the above study it had been concluded that financial and strategic management is
very important for purpose of accomplishing goals and objectives of an organization. It had been
assessed that it directly involves in defining business of organization along with identifying and
quantifying availability of potential resources. Kerry Group had played well by considering
unique taste, nutrition, functional ingredients and capabilities of system along with localised
innovation. Further, it articulated that Kerry's model is resilient and placed in efficient aspect for
responding to volatility and alteration in macroeconomic and consumer landscape. It had shown
that 2015 acquisition of group performed very well in interim duration.
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REFERENCES
ONLINE
Kerry Group revenues steady despite challenging market conditions. 2016. [Online]. Available
through: <https://www.agriland.ie/farming-news/kerry-group-revenues-steady-despite-
challenging-market-conditions/>.
Kerry Group AGM. 2016. [Online]. Available
through:<https://www.kerrygroup.com/investors/news/Interim-Management-Statement-
Q1-2016.pdf>.
Kerry Interim Management Report. 2016. [Online]. Available
through:<https://www.kerrygroup.com/investors/results-presentations/2016-H1-Results-
Presentation-4-8-16.pdf>.
Kerry Toward 2020. 2018. [Online]. Available
through:<https://www.kerrygroup.com/sustainability/towards-2020-1/>.
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