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COMPANY REPORT

Twenty per cent rise in Tate & Lyle’s group-adjusted profit before tax
Saturday, 27 May, 2017, 08 : 00 AM [IST]
London
There was a 20 per cent increase in group-adjusted profit before tax (PBT) with good performance and increased margins in both business divisions.

Specialty food ingredients’ adjusted operating profit increased by five per cent to £181 million.
  • There was an eight per cent profit growth in core business, despite North America volume growth remaining challenging
  • Sucralose profit rose by £30m, following actions taken to refocus business
  • Food Systems’ profit decreased by £19m, with significant decline in Europe
Sales from New Products increased by 22 per cent to $105 million.

Bulk Ingredients’ adjusted operating profit increased by 32 per cent to £129 million.
  • There was strong commercial and operational execution, good demand and robust margins
  • The profit from commodities was £17 million higher
There was a £40-million benefit from currency translation within adjusted profit before tax.

The group-reported PBT was 85 per cent higher, with improved trading, currency translation benefit and lower exceptionals.

Adjusted free cash flow from higher earnings, lower capex and currency translation increased by £121 million.

The full-year dividend was maintained. There was a proposed final of 19.8p, with continued focus on building sustainable cash cover.

Javed Ahmed, the company’s chief executive officer, said, “This has been a year of strong performance. Both business divisions delivered good profit growth, with Bulk Ingredients delivering particularly good results, driven by excellent commercial and manufacturing performance.”

“Specialty food ingredients performed well delivering profit growth and margin expansion, and continued to strengthen its focus on commercial execution, particularly in North America, where volume growth remains challenging. The innovation pipeline is healthy, with New Product sales exceeding $100 million for the first time,” he added.

“Cash generation was especially pleasing, with adjusted free cash flow more than three times higher than the previous year, supporting improved dividend cover and a strong balance sheet,” Ahmed said.

“Overall, these results reflect strong execution of the company’s strategy and continued progress towards its 2020 ambition, and are a testament to the talent and commitment of our people,” he added.

“This has been a very encouraging year that reflects the steps the company has taken, and continues to take, to build a stronger business with higher quality earnings, capable of delivering sustainable long-term growth,” Ahmed said.

“Turning to the outlook, the group is confident that it will continue to make underlying progress in the 2018 financial year,” he added.

Performance benefited from good profit growth in core specialty food ingredients and strong Sucralose performance, supported by lower costs from a single production facility and one-off inventory sell-down.

In Food Systems, performance was held back by lower volume in Europe due to consolidation of blending facilities which took longer than expected and management of a credit issue.

Bulk Ingredients’ performance benefited from good US bulk sweetener and industrial starch demand and strong commercial execution. Adjusted operating margins increased in both divisions.

Volume in both divisions benefited from the acquisition of 100 per cent of the Slovakian facility from November 1, 2015.

The adjusted effective tax rate for continuing operations in the year was 18.2 per cent (2016 – 16.5 per cent).

The company estimates that with an increasing mix of US profits, the impact of changes to its internal financing structure and under the currently enacted legislation, the adjusted effective tax rate for the 2018 financial year will be between 21 per cent and 24 per cent.

The reported effective tax rate was a credit of 9.6 per cent (2016 – charge of four per cent), and in the current year, includes the recognition of exceptional deferred tax credits, totalling £65 million.

Statutory diluted earnings per share from continuing operations increased by 109 per cent to 54.2p as a result of strong operating performance, favourable impact of currency translation, lower operating exceptional costs of £19 million (2016 – £50 million) and exceptional tax credits.

Adjusted diluted earnings per share from continuing operations were 47.1p, up by 12.6p or 37 per cent (16 per cent in constant currency), with 5.6p of growth coming from underlying performance and 7p from currency translation.

Return on capital employed (ROCE) increased by 300 basis points (bps) to 14.3 per cent.

Adjusted free cash flow increased to £174 million, benefiting from higher earnings, lower capital expenditure at £153 million (2016 – £198 million) and currency translation. The company expects capital expenditure in the 2018 financial year to be around £150 million.

Net debt was £18 million higher at £452 million, with £57 million adverse impact of foreign exchange translation and the dividend payment of £130 million, offsetting strong cash flow generation. Net debt/earnings before interest, taxes, depreciation and amortisation (EBITDA) reduces to 0.9x (2016 – 1.2x).

Final dividend unchanged at 19.8 pence per share to make an unchanged total dividend for the year of 28 pence.
 
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