Assessment of Kerry Group plc's Risk Management, Financial Performance, and Position in 2020

Question 1: Assessing Kerry's Risk Management using the COSO framework

Answer all Four questions 

Question 1

For the purposes of this question, you should refer to the Kerry Group plc  2020 Annual Report, the full report accompanies this exam paper.. Availing of the COSO framework, assess Kerry’s efforts at Risk Management.15 marks

Question 2

For the purposes of this question, you should refer to the Kerry Group 2020 Annual Report, an extract of which is attached to this paper.

From Kerry’s Strategic Report (P.10), the CEO finishes his Review report by stating the following:

“We will continue to invest for growth and enablement of our business model, while continuing to pursue M&A opportunities aligned to our strategic growth priorities. Kerry’s unique business model, broad taste and nutrition portfolio and industry leading integrated solutions capabilities are more critical than ever, as we support our customers through this dynamic environment” Edmond Scanlon (page 13).

Later in the Annual Report this extract is taken from the Directors’ Report:

“The going concern and longer-term viability statements in the Risk Management Report on page 83 set out the Company’s basis for the adoption of the going concern basis of accounting in preparing the Consolidated Financial Statements and the basis for the Directors’ conclusion that they have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the next three years.” Directors’ Report (page 91)

Required

In your capacity as a financial advisor, one of your clients has approached you seeking some advice on her current equity investment in Kerry plc. Despite being comforted by the above assertive statements and also that she received a dividend. She is concerned that Revenue has dropped slightly from 2019 and that there is a lot of debt (€2.5bn). Collectively she worries these issues may cause a liquidity problem at Kerry and thus preventing the firm from growing. She asks that in your review that you address Kerry’s cash cycle. 

Using a number of relevant key ratios/financial measures to inform your analysis, prepare a report for your client assessing Kerry’s financial performance and position in 2020. Your report should include the following:

(i) An evaluation of the Kerry’s dividend strategy                    (10 marks)

(ii) An evaluation of its Liquidity position                        (16 marks)

(iii) An analysis of its ROCE performance                         (14 marks)

Your report should advise “for” or “against” continued investment in Kerry. Your report must also include justification for your position.  Total 40 marks

Question 3

 

Prior to the close of its September 30 fiscal quarter, a manufacturer(seller) completes production of 50,000 specialised gas valves. The valves sell for 60 each and were ordered by customers that assemble and sell gas fireplaces. The customers are unable to take delivery by Sept 30 for reasons that include: (1) lack of available space, (2) having ample inventory on hand to cover production for the next month, and (3) delayed production schedules. The seller segregates the valves awaiting shipment from other unsold products in its own warehouse and wishes to recognise 3,000,000 of revenue in the current quarter from these goods produced, but not shipped. Can the seller do this? Justify your answer