Kerry Co-op, the farmer-owned holding company with a 13.7% stake in Kerry Group plc, has paid a dividend of €3.15 per share to its shareholders for 2017. This amounts to almost €12.4m that was issued to shareholders in the co-op.

The 2017 dividend payment to shareholders is a 15% increase on the €2.75 per share payment made in 2016.

The increased dividend payment is a result of the improved performance of Kerry Group last year, with the flavours and ingredients business recording a 4% increase in profits (EBITDA) to €918m, while revenues increased by almost 5% to reach €6.4bn.

The improved performance saw Kerry Group increase its dividend payment to shareholders by 12% to 62.7c per share.

As a result, Kerry Co-op saw its dividend income from its 13.7% stake in Kerry Group increase from €12.5m in 2016 to €14m last year.

Rising operating expenses

Annual operating expenses to run Kerry Co-op increased by a significant 43% last year to reach €2m as the co-op continues to fight a number of cases on behalf of its members.

The majority of this increase in expenditure relates to the ongoing costs of the appeal case taken by the co-op against Revenue over the patronage shares issued to farmers in 2011, 2012 and 2013.

The cost of this appeal case, which was submitted to the Tax Appeals Commission in November last year, stood at just over €630,000 in 2017. The result of the appeal case is likely to come by the end of 2018.

On top of this, the arbitration case between Kerry Co-op and Kerry Group over the so-called “thirteenth payment” for milk cost the co-op almost €223,000 last year.

Kerry Co-op also spent over €100,000 on specialist taxation advice in relation to qualifying for tax relief under Section 701 of the Taxes Consolidation Act 1997, which effectively allows the co-op spin out shares in Kerry Group plc to its members tax free.

At present, the co-op does not qualify for Section 701 relief were to spin out new shares to members.

Board fees

Aside from these exceptional costs, the biggest part of the expenditure at Kerry Co-op goes towards fees to board members of the co-op.

For 2017, directors’ fees at Kerry Co-op amounted to just under €487,000 – a 3% increase on the previous year.

The fees paid to 33 non-executive directors of the co-op board came to €462,200 last year, which averages €14,000 per board member. Some board members received more than others, with payments ranging from €1,250 to a high of €27,200 paid to co-op chair Mundy Hayes. Former board director James Doyle was also paid €24,500 in fees in 2017.

New appointment

In October last year, Kerry Co-op appointed Thomas Hunter McGowan as executive secretary/CFO for the co-op, following the departure of Stan McCarthy as CEO and Brian Durran as secretary of the co-op in 2016. Hunter McGowan is the first executive employed by Kerry Co-op in over 30 years.

At the end of 2017, the co-op’s 13.7% stake in Kerry Group plc was valued at €2.25bn based on a share price of €93.50. Kerry Group shares are this week trading at €93.80 each.

Kerry Co-op maintains an option to buy certain assets of Kerry Group’s agribusiness division, including 33 farm stores, an animal feed mill and the milk assembly business (milk collection and delivery service) but not Kerry Group’s milk processing business. This option must be exercised by January 2019 or it will expire.