Firm's future appears brighter after rocky year

A good start to 2007 has given the Kerry Group a boost after results for last year were just on the positive side of neutral, writes Laura Slattery

Kerry, the business behind brands such as Denny, EasiSingles and LowLow, scores points for consistency.

In 21 years as a public company it has always turned in an annual profit. In 2006, however, it was much reduced.

The full-year results were nevertheless slightly ahead of expectations, which were modest following last May's profit warning.

As food sector analyst Liam Igoe, of Goodbody Stockbrokers, put it, the figures were "on the positive side of neutral".

Brokers yesterday issued buy recommendations and upgraded their 2007 earnings per share (eps) forecasts after Kerry spoke of a good start to 2007 and "solid" prospects of organic growth.

Kerry's adjusted eps growth of 1.7 per cent beat Goodbody's flat forecast, and it now anticipates increasing its 2007 eps forecast by a similar percentage. NCB Stockbrokers upgraded its full-year 2007 eps forecasts by 2 per cent to around 140 cent and Davy said eps should reach 140.6 cent.

Dolmen Stockbrokers commented that Kerry, which is trading at a discount to its closest peers, would benefit from further bolt-on acquisitions in food and ingredients, particularly in the flavours and bio-science sectors.

Igoe does not anticipate any large-scale acquisitions in the next six months. But eventually the additional growth the group is capable of achieving will require acquisitions, he notes.

Getting the right acquisitions at the right prices - particularly in the growing Asian market - could prove difficult, chief executive Hugh Friel admitted.

"Our balance sheet is in good shape. Any opportunity that comes our way, we will be ready for it," he said, before cautioning patience and saying that the company would have to consider value for shareholders.

"I acknowledge that we will have to compete with private buyers for the few [opportunities in Asia] that are out there, but I wouldn't be unduly perturbed."

Although Kerry's frozen food interests are not specifically earmarked for disposal under its rationalisation programme, it would not surprise the market if, given its failure to buy Birds Eye last year, the group decided to follow food sector fashion by concentrating on chilled foods at the expense of frozen.