REG - Treatt PLC - Half Year Results
14/05/2024 07:00
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RNS Number : 2354O Treatt PLC 14 May 2024
14 May 2024
TREATT PLC
HALF YEAR RESULTS
SIX MONTHS ENDED 31 MARCH 2024
Solid H1 2024 performance, with profit growth and sales accelerating in Q2
Treatt Plc ('Treatt' or the 'Group'), the manufacturer and supplier of a
diverse and sustainable portfolio of natural extracts and ingredients for the
beverage, flavour and fragrance industries, announces its half year results
for the six months ended 31 March 2024 (the "Period").
FINANCIAL HIGHLIGHTS:
Half year ended Half year ended Change
31 March 2024 31 March 2023
Revenue £72.1m £76.0m -5.1%
Gross profit margin 27.8% 28.2% -40bps
Operating profit before exceptional items £8.2m £7.7m +5.9%
Operating profit margin before exceptional items 11.3% 10.1% +120bps
Profit before tax and exceptional items £7.6m £7.3m +4.5%
Profit before tax £7.1m £6.6m +7.9%
Adjusted basic earnings per share 9.35p 9.04p +3.4%
Basic earnings per share 8.72p 8.15p +7.0%
Dividend per share 2.60p 2.55p +2.0%
HIGHLIGHTS & OUTLOOK:
· Revenue acceleration in Q2 2024, growing by 5.1% (7.7% in constant
currency) with order patterns normalising and new business wins, a contrast to
Q1 2024, typically the quietest quarter, which was impacted by destocking as
expected
· 120 basis point improvement in operating profit margin from
embedded cost discipline and self-help measures annualising, in line with our
goal of sustainably increasing margin
· Net debt of £10.3m reduced 41.6% versus H1 2023. Good cash
generation expected in H2 2024
· Interim dividend up 2.0%, reflecting performance and progression
towards 3x dividend cover
· The Board continues to expect to report full year profits in line
with its expectations
· Good momentum into H2 2024 with a solid order book and healthy
sales pipeline giving tangible line of sight on H2 2024 delivery
Commenting on the results, Interim Group CEO, Ryan Govender, said:
"These results show a good growth in profit and operating margins. After the
expected impact of destocking softened in Q1 2024, momentum in the second
quarter was stronger as volumes grew, and we recorded our highest ever monthly
revenue in March. We are pleased with our progress in China, with new
opportunities being won with large local brands there. We also grew our higher
margin premium categories, especially in tea. There are plenty of active new
business opportunities, providing confidence for H2 2024. Momentum in the
order book going into H2 2024 is good with a healthy sales pipeline which we
are encouraged by."
Analyst and investor conference call
An in-person presentation for analysts and investors will be held at 9.30 a.m.
today, 14 May 2024. For details and to confirm attendance, or for webcast
information, please contact MHP at treatt@mhpgroup.com. A recording will be
made available after the event.
In accordance with DTR 6.3.5 please find below the unedited full text of the
half year results.
A copy of the half year results will be submitted to the National Storage
Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . It will also be
available on the Treatt website at www.treatt.com/investor-relations
(http://www.treatt.com/investor-relations) .
Enquiries:
Treatt plc +44 (0)1284 702500
Ryan Govender Interim Chief Executive Officer
Alison Sleight Interim Chief
Financial Officer
Joint Brokers
Investec Bank Plc +44 (0)20 7597 5970
Patrick Robb
David Anderson
Peel Hunt LLP +44 (0) 20 7418 8900
George Sellar
Financial PR
MHP
+44 (0) 20 3128 8789
Tim Rowntree
Eleni Menikou
Catherine Chapman
About the Group
Treatt is a global, independent manufacturer and supplier of a diverse and
sustainable portfolio of natural extracts and ingredients for the flavour,
fragrance and multinational consumer product industries, particularly in the
beverage sector. Renowned for its technical expertise and knowledge of
ingredients, their origins and market conditions, Treatt is recognised as a
leader in its field.
The Group employs around 350 staff in Europe, North America and Asia and has
manufacturing facilities in the UK and US. Its international footprint enables
the Group to deliver powerful and integrated solutions for the food, beverage
and fragrance industries across the globe.
For further information about the Group, visit www.treatt.com
(http://www.treatt.com) .
HALF YEAR RESULTS STATEMENT
Introduction
The Group is pleased to report an increase of 4.5% (8.6% in constant currency)
in profit before tax and exceptional items to £7.6m (H1 2023: £7.3m),
despite H1 2024 sales being 5.1% behind the prior year (2.7% behind at
constant currency). As previously reported, Q1 2024 was challenging, with a
volume decline as the impact of destocking lagged a normalised Q1 2023.
Encouragingly, though, Q2 2024 revenue increased year-on-year by 5.1% (7.7% in
constant currency), led by the performance of our tea category largely through
new business wins, and synthetic aroma where the effects of destocking
receding are evident. While we continue to navigate macro-economic challenges,
the Group achieved good operating momentum during a period of Executive
transition, building sales pipeline opportunities and a solid order book that
provides encouraging foundations as we enter H2 2024.
Whilst gross profit margins were 40 bps lower in the Period (27.8% vs 28.2% in
H1 2023), adjusted net operating margin increased by 120 bps to 11.3% (H1
2023: 10.1%). The gross margin decline was driven by product mix, in
particular H1 2024 growth in synthetic aroma and sustained higher citrus
pricing leading to more customers seeking alternative lower cost-in-use
products. Strong cost control discipline and ongoing self-help measures,
despite higher depreciation and increased borrowing costs, supported delivery
of the increased profit before tax and exceptional items and net operating
margin.
Strategic focus
Our heritage categories, whilst more mature, remain core to the Group's
strategy, representing 66.4% of revenue in the Period, with our expertise
providing a solid foundation for providing more complex, added value and
bespoke citrus solutions to existing and new customers.
Our premium categories continue to provide strong growth opportunities aligned
with consumer beverage trends, in particular an appetite for natural, low
calorie and ready-to-drink products. It is encouraging to see growth of 6.5%
across these categories in the Period.
China is an important strategic region for the Group, with our China
subsidiary broadening local manufacturing partnerships to support customer-led
diversification of our local portfolio. Citrus remains the key driver for
medium-term growth in the region and we secured customer wins with three of
the four largest beverage brands in the country during the Period.
Category performance
Heritage
Heritage categories, which includes citrus (excluding Treattzest), herbs,
spices & florals, and synthetic aroma, represented 66.4% of revenue in the
Period, at £47.9m (H1 2023: £51.8m), declining by 7.7% (6.0% decline in
constant currency).
Citrus, representing 47.2% of Group revenue in the Period (H1 2023: 48.3%),
declined by 7.2%, reflecting the impact of sustained higher prices, in
particular orange oil. Customers remain cautious about inventory levels in a
higher price market, which continues to impact volumes, with some electing for
cheaper alternatives to maintain a lower cost-in-use. The diversity in our
citrus product range has been instrumental in supporting our customers with
this required agility.
Synthetic aroma, which relates primarily to food ingredients, represented
13.8% of Group revenue in the Period (H1 2023: 12.6%), reporting 3.8% growth
in the Period. This category was notably impacted by a decline in volume last
financial year, due to customer destocking, and we remain encouraged by the
build in volumes over the course of H1.
Premium
Our higher margin premium categories, namely tea, health & wellness, and
fruits & vegetables, grew 6.5% (11.3% in constant currency) in the Period,
representing 24.5% of revenue at £17.7m (H1 2023: £16.6m). We anticipate
continued strong performance from these categories, which is typically H2
weighted.
Revenue performance in our tea category exceeded expectation with multiple
wins in the North American market amplifying this category to represent 7.7%
of Group revenue in the Period (H1 2023: 4.8%).
New markets
Whilst new markets, which encompass our geographical sales territory of China
and our expanding portfolio for Treattzest and coffee, declined by 13.2% in
the Period (10.9% decline in constant currency) driven by coffee, to £6.6m
revenue (H1 2023: £7.6m), we remain committed to further harnessing the
growth potential within this strategic category and we are excited by our
pipeline of tangible targets.
Our sales into China as a territory, including direct from the UK and USA,
reported modest growth of 1.0% in the Period (3.3% in constant currency),
however, our local entity, now in its third year of trading, grew its local
revenues to China-based customers by 27.8% in the Period. China remains a key
strategic growth opportunity as we broaden our base of local manufacturing
partners and increase our market penetration, having secured several wins with
leading local beverage brands in H1 2024, and developing and progressing
exciting pipeline opportunities in H2 2024.
Although coffee revenue halved in H1 2024 as we focus on customer
diversification, the impact of this was fully offset by considered sourcing
and the realisation of manufacturing efficiencies. Our leading ambition for
this product category is to diversify our customer base, and we remain
confident in our manufacturing capability and product range and continue to
work on diversifying our pipeline.
Treattzest was flat year-on-year. We are scaling up our global manufacturing
capability, with the new product range being launched in time for the H2
pipeline.
Geographical markets
Our largest region, the US, accounted for 39.7% of Group revenue in the Period
(H1 2023: 37.2%) growing 1.1% (5.8% in constant currency) mainly as a result
of tea wins with a number of our larger beverage customers.
Europe, excluding UK, represented 21.5% of Group revenue (H1 2023: 26.6%),
declining 23.5% in the Period due to volume being directed to alternative
manufacturing facilities for some of our larger customers. In exchange,
revenue to South America grew by 38.5%, this geography now representing 12.6%
of Group revenue (H1 2023: 8.6%).
Revenue attributable to UK customers, which represented 5.5% of Group revenue
(H1 2023: 5.1%), grew by 2.3% impacted, in the main, by the returning
synthetic aroma volumes.
Capital investment programme
The transition to the new UK facility was completed at the end of FY 2023,
with capital expenditure now expected to return to normalised levels as a
result, at c.£7.0m per annum, targeting innovative and fast-returning
investment for growth. Having secured our operational foundation, we will now
seek to optimise our increased global capacity to strengthen the platform from
which to deliver Treatt's ambitious growth strategy.
Environmental, social and corporate governance (ESG)
Sustainability is integral to our business strategy, and we remain committed
to ensuring our sustainability lens is preserved across our operating
practices, bringing us the supply chain transparency required to support both
our own and our customers commitments. Around 80% of our sales, and over 88%
of our purchases within H1 2024 were natural products. With a new ESG
governance structure providing increased support, we continue to drive impact
across our pillars of People, Planet and Performance. Our near-term SBTi
target to reduce scopes 1 & 2 by 42% by 2030 being validated early in
2024, we are working hard on projects that will continue to reduce our carbon
footprint and support our transition to net zero planning.
Financial review
Whilst revenues were lower, as expected, after a weak Q1 2024 due to
destocking, Q2 2024 saw a much-improved sales trend with order patterns
normalising and new business wins. Group revenue declined by 5.1% to £72.1m
(H1 2023: £76.0m), however, profit before tax and exceptionals increased by
4.5% to £7.6m (H1 2023: £7.3m). In constant currency(1) terms, revenue
declined by 2.7% and profit before tax and exceptionals increased by 8.6%. The
diversity of our product categories, our strength in citrus and focus on
consumer-led innovation continues to deliver opportunities with both new and
existing customers. Gross margin decreased by 40 bps to 27.8% during the
Period as a result of product mix and sustained higher citrus pricing.
Operating costs decreased by 13.3% to £11.9m (H1 2023: £13.7m) despite
increased depreciation of £0.2m and investment in our global commercial team
to expand both experience and reach to underpin our growth strategy. Having
successfully embedded and maintained cost disciplines aimed at increasing
profitability, we do not anticipate any significant increase in administrative
expenses in the short to medium-term above the normal rate of inflation.
Group headcount remained consistent with September 2023 as we continue to
drive operational efficiencies from our fully invested facilities and extend
the benefits of global process alignment and leadership. Foreign exchange
impacts continue to be successfully managed through our hedging and currency
management strategy, with a net gain of £0.1m (H1 2023: £0.2m loss) in the
Period. Exceptional costs in the Period totalled £0.5m (H1 2023: £0.7m),
related to one-off expenses in respect of the UK site relocation and
restructuring costs.
Adjusted net operating margin increased 120 bps to 11.3% (H1 2023: 10.1%),
through tight cost management, with net operating margin also increasing to
10.7% (H1 2023: 9.3%), as exceptional items reduce 29.9% against the
comparable period. We are seeking to sustainably increase adjusted net
operating margin towards 15%, from growth in higher margin categories
alongside a proportionately scaled cost base.
Reported profit for the Period of £5.3m represents a 7.5% increase against
the comparable period last year, with basic adjusted earnings per share
increasing to 9.35p (H1 2023: 9.04p).
Cash flow
The Group generated cash of £1.0m in the Period, with net capital expenditure
of £1.9m incurred (H1 2023: £1.2m), £1.1m of which related to the new UK
facility.
Net cash generated from operations was £5.8m (H1 2023: £9.4m inflow) after a
working capital outflow for the Period of £3.4m (H1 2023: £0.6m inflow)
which was driven by an increase in receivables (£4.9m), reflecting the strong
finish to half year trading. Inventory value remains consistent, despite a
5.6% volume reduction since September 2023, due to the sustained higher
commodity prices and seasonal build for strategic and premium demand.
Balance sheet
The Group ended the half year with net debt of £10.3m (FY23: £10.4m), made
up of bank loans and borrowings of £11.7m, gross cash of £1.8m, and net
lease liabilities of £0.4m. We anticipate a further reduction in net debt in
the second half, in line with Board expectations, as receivables convert to
cash. During H2 2023 the Group refinanced a $25m facility with Bank of America
and a £25m facility with HSBC, both with a minimum term of three years,
providing our UK and US entities with headroom to support future investment.
The UK defined benefit pension scheme has been closed to both new entrants and
future accruals since October 2001. Under accounting standard IAS 19, the
scheme's funding position is currently showing a net surplus of £4.3m, an
increase of £0.6m during the Period. The scheme has been in an accounting
surplus since September 2022, benefitting from an increase in the discount
rate applied to the liabilities of the scheme. Despite the surplus, the
Company has agreed with the trustees to maintain the current level of annual
contributions at £0.45m for now.
Dividend
The Board has declared an interim dividend of 2.60p per share (2023 interim:
2.55 pence per share), an increase of 2.0%, reflecting confidence in the
business' prospects. This reflects a balance of the Board's understanding of
the importance of dividend payments to shareholders, effective financial
discipline and transitioning towards a healthy long-term dividend cover of 3
times. The interim dividend will be payable on 15 August 2024 to shareholders
on the register at close of business on 5 July 2024.
Outlook
We are pleased with the strong performance in Q2 2024 and the overall growth
in profit before exceptional items in H1 2024, despite a subdued Q1 2024. We
have confidence in Treatt's proposition and its ability to deliver growth,
supported by the active partnership between our technical and commercial teams
to ensure we deliver against our customers' needs. The increase in sales
volume during Q2 2024 supports our confidence as we enter H2 2024 with a solid
order book and healthy sales pipeline which, combined, give us a tangible line
of sight on delivering H2 2024 revenue and profits. The Board continues to
expect to report full year profits in line with its expectations.
TREATT PLC
HALF YEAR FINANCIAL STATEMENTS
CONDENSED GROUP INCOME STATEMENT
for the six months ended 31 March 2024
Six months to Six months to
31 March 2024 (unaudited) 31 March 2023 (unaudited)
Before exceptional items Exceptional items Total Before exceptional items Exceptional items Total
Notes £'000 £'000 £'000 £'000 £'000 £'000
Revenue 6 72,100 - 72,100 75,951 - 75,951
Cost of sales (52,074) - (52,074) (54,550) - (54,550)
- -
Gross profit 20,026 - 20,026 21,401 - 21,401
Administrative expenses (11,867) (285) (12,152) (13,695) (119) (13,814)
Relocation expenses 7 - (180) (180) - (544) (544)
- -
Operating profit/(loss)(1) 8,159 (465) 7,694 7,706 (663) 7,043
Finance income 2 - 2 - - -
Finance costs (547) - (547) (417) - (417)
Profit/(loss) before taxation 7,614 (465) 7,149 7,289 (663) 6,626
Taxation 8 (1,912) 81 (1,831) (1,801) 121 (1,680)
Profit/(loss) for the period 5,702 (384) 5,318 5,488 (542) 4,946
attributable to owners of the
Parent Company
Earnings per share attributable to equity holders of the Parent Company Adjusted(2) Statutory Adjusted(2) Statutory
Basic 10 9.35p 8.72p 9.04p 8.15p
Diluted 10 9.32p 8.69p 9.00p 8.11p
(1) Operating profit is calculated as profit before net finance costs and
taxation.
(2) All adjusted measures exclude exceptional items and the related tax
effect, details of which are given in note 7.
Notes 1 - 11 form part of these condensed half year financial statements.
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 March 2024
Six months to Six months to
31 March 31 March
2024 2023
(unaudited) (unaudited)
£'000 £'000
Profit for the period attributable to owners of the Parent Company 5,318 4,946
Items that may be reclassified subsequently to profit or loss:
Currency translation differences on foreign currency net investments (2,409) (6,889)
Current tax on foreign currency translation differences (50) (64)
Deferred taxation on foreign currency translation differences 109 -
Fair value movement on cash flow hedges 140 432
Deferred tax on fair value movement (35) (85)
(2,245) (6,606)
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain/(loss) on defined benefit pension scheme 261 (109)
261 (109)
Other comprehensive expense for the period (1,984) (6,715)
Total comprehensive income/(expense) for the period attributable 3,334 (1,769)
to owners of the Parent Company
Notes 1 - 11 form part of these condensed half year financial statements.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 March 2023 (unaudited)
Share capital Share Own shares in share trusts Hedging Foreign Retained earnings Total equity
premium account reserve exchange
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
1 October 2022 1,217 23,484 (5) (311) 13,383 96,082 133,850
Profit for the period - - - - - 4,946 4,946
Exchange differences - - - - (6,889) - (6,889)
Fair value movement on cash flow hedges - - - 432 - - 432
Actuarial loss on defined benefit pension scheme - - - - - (109) (109)
Taxation relating to items above - - - (85) (64) - (149)
Total comprehensive expense - - - 347 (6,953) 4,837 (1,769)
Transactions with owners:
Dividends - - - - - (3,250) (3,250)
Share-based payments - - - - - 646 646
Issue of new shares 1 - (1) - - - -
Movement in own shares in share trusts - - - - - - -
Gain on release of shares in share trusts - - - - - 208 208
Total transactions with owners 1 - (1) - - (2,396) (2,396)
As at 31 March 2023 1,218 23,484 (6) 36 6,430 98,523 129,685
for the six months ended 31 March 2024 (unaudited)
Share capital Share Own shares in share trusts Hedging Foreign Retained earnings Total equity
premium account reserve exchange
reserve
£'000 £'000 £'000 £'000 £'000 £'000 £'000
1 October 2023 1,223 23,484 (2) (42) 7,463 105,120 137,246
Profit for the period - - - - - 5,318 5,318
Exchange differences - - - - (2,409) - (2,409)
Fair value movement on cash flow hedges - - - 140 - - 140
Actuarial gain on defined benefit pension scheme - - - - - 348 348
Taxation relating to items above - - - (35) 59 (87) (63)
Total comprehensive income - - - 105 (2,350) 5,579 3,334
Transactions with owners:
Dividends - - - - - (3,335) (3,335)
Share-based payments - - - - - 293 293
Issue of new shares 1 - (1) - - - -
Movement in own shares in share trusts - - 2 - - - 2
Gain on release of shares in share trusts - - - - - 107 107
Total transactions with owners 1 - 1 - - (2,935) (2,933)
As at 31 March 2024 1,224 23,484 (1) 63 5,113 107,764 137,647
Notes 1 - 11 form part of these condensed half year financial statements.
CONDENSED GROUP BALANCE SHEET
as at 31 March 2024
As at As at
31 March 30 September
2024 2023
(unaudited) (audited)
£'000 £'000
ASSETS
Non-current assets
Intangible assets 2,661 2,752
Property, plant and equipment 70,558 71,526
Right-of-use assets 453 538
Post-employment benefits 4,296 3,723
77,968 78,539
Current assets
Inventories 60,937 62,396
Trade and other receivables 37,369 32,969
Current tax assets 256 300
Derivative financial instruments - 8
Cash and bank balances 1,800 809
100,362 96,482
Total assets 178,330 175,021
LIABILITIES
Current liabilities
Borrowings (11,703) (10,642)
Provisions (153) (102)
Trade and other payables (22,051) (20,700)
Lease liabilities (175) (176)
Current tax liabilities (1,391) (755)
Derivative financial instruments (27) (176)
(35,500) (32,551)
Net current assets 64,862 63,931
Non-current liabilities
Lease liabilities (267) (373)
Deferred tax liabilities (4,916) (4,851)
(5,183) (5,224)
Total liabilities (40,683) (37,775)
Net assets 137,647 137,246
( )
( )
(
)
( )
CONDENSED GROUP BALANCE SHEET (continued)
as at 31 March 2024
As at As at
31 March 30 September
2024 2023
(unaudited) (audited)
£'000 £'000
EQUITY
Share capital 1,224 1,223
Share premium account 23,484 23,484
Own shares in share trusts (1) (2)
Hedging reserve 63 (42)
Foreign exchange reserve 5,113 7,463
Retained earnings 107,764 105,120
Total equity attributable to owners of the Parent Company 137,647 137,246
Notes 1 - 11 form part of these condensed half year financial statements.
CONDENSED GROUP STATEMENT OF CASH FLOWS
for the six months ended 31 March 2024
Six months to Six months to
31 March 31 March
2024 2023
(unaudited) (unaudited)
£'000 £'000
Cash flow from operating activities
Profit before taxation including discontinued operations 7,149 6,626
Adjusted for:
Depreciation of property, plant and equipment 2,278 2,031
Amortisation of intangible assets 212 205
Loss on disposal of property, plant and equipment 11 86
Net finance costs excluding pensions cost 545 417
Employer contributions to defined benefit pension scheme (225) (225)
Share-based payments 304 688
Increase in fair value of derivatives (1) (416)
Operating cash flow before movements in working capital 10,273 9,412
Movements in working capital:
Decrease in inventories 206 3,732
(Increase)/decrease in receivables (4,882) 2,339
Increase/(decrease) in payables 1,308 (5,440)
Cash generated from operations 6,905 10,043
Taxation paid (1,117) (681)
Net cash from operating activities 5,788 9,362
Cash flow from investing activities
Proceeds on disposal of property, plant and equipment 4 1,103
Purchase of property, plant and equipment (1,804) (2,318)
Purchase of intangible assets (134) (64)
Interest received 2 -
Net cash used in investing activities (1,932) (1,279)
CONDENSED GROUP STATEMENT OF CASH FLOWS (continued)
for the six months ended 31 March 2024
Six months to Six months to
31 March 31 March
2024 2023
(unaudited) (unaudited)
£'000 £'000
Cash flow from financing activities
Drawdown/(repayment) of bank loans 1,078 (2,223)
Interest paid (539) (417)
Repayment of lease liabilities (114) (96)
Dividends paid (3,335) (3,250)
Proceeds on issue of shares 2 1
Net sale of own shares by share trusts 107 207
Net cash used in financing activities (2,801) (5,778)
Net increase in cash and cash equivalents 1,055 2,305
Effect of foreign exchange rates (64) (201)
Movement in cash and cash equivalents in the period 991 2,104
Cash and cash equivalents at beginning of period 809 (3,820)
Cash and cash equivalents at end of period 1,800 (1,716)
Cash and cash equivalents comprise:
Cash and bank balances 1,800 2,511
Bank overdrafts - (4,227)
1,800 (1,716)
Notes 1 - 11 form part of these condensed half year financial statements.
CONDENSED GROUP RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the six months ended 31 March 2024
Six months to Six months to
31 March 31 March
2024 2023
(unaudited) (unaudited)
£'000 £'000
Movement in cash and cash equivalents in the period 991 2,104
(Drawdown)/repayment of bank loans (1,078) 2,223
Decrease/(increase) of lease liabilities 107 (47)
Cash inflow from changes in net cash in the period 20 4,280
Effect of foreign exchange rates 17 435
Movement in net cash in the period 37 4,715
Net debt at beginning of period (10,382) (22,419)
Net debt at end of period (10,345) (17,704)
Notes 1 - 11 form part of these condensed half year financial statements.
Responsibility statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements for the six months ended 31
March 2024 has been prepared in accordance with IAS 34
(b) the half year report and condensed financial statements includes a fair
review of the information required by DTR 4.2.7R (indication of important
events during the first six months and description of principal risks and
uncertainties for the remaining six months of the year)
(c) the half year report and condensed financial statements includes a fair
review of the information required by DTR 4.2.8R (disclosure of related party
transactions and changes therein).
By order of the Board
RYAN GOVENDER
Interim Chief Executive Officer
14 May 2024
NOTES TO THE UNAUDITED CONDENSED HALF YEAR FINANCIAL STATEMENTS
1. Basis of preparation
The Group has prepared its condensed half year financial statements in
accordance with the Disclosure Guidance and Transparency Rules of the
Financial Conduct Authority and the reporting requirements of IAS 34, 'Interim
Financial Reporting'.
The information relating to the six months ended 31 March 2024 and 31 March
2023 is unaudited and does not constitute statutory accounts. The statutory
accounts for the year ended 30 September 2023 have been reported on by the
Group's auditors and delivered to the Registrar of Companies. The report of
the auditors was unqualified, did not include a reference to any matters to
which the auditors drew attention by way of emphasis without qualifying their
report and did not contain a statement under section 498 of the Companies Act
2006. These condensed half year financial statements for the six months ended
31 March 2024 have neither been audited nor formally reviewed by the Group's
auditors.
2. Accounting policies
These condensed half year financial statements have been prepared on the basis
of the same accounting policies and methods of computation as set out in the
Group's 30 September 2023 annual report.
There were no new standards, or amendments to standards, which are mandatory
and relevant to the Group for the first time for the financial year ending 30
September 2024 which have had a material effect on these condensed half year
financial statements.
3. Accounting estimates
The preparation of the condensed half year financial statements requires
management to make judgements, estimates and assumptions that affect the
application of accounting policies and the reported amounts of assets and
liabilities, income and expenses. In preparing these condensed half year
financial statements, the significant judgements made by management in
applying the Group's accounting policies and the key sources of estimation
uncertainty were the same as those applied to the audited consolidated
financial statements as at, and for the year ended, 30 September 2023.
4. Going concern
As at the date of this report, the Directors have a reasonable expectation
that the Group has adequate resources to continue in business for the
foreseeable future. Accordingly, the condensed half year financial statements
have been prepared on the going concern basis.
5. Risks and uncertainties
The Group's operations involve a series of risks and uncertainties across a
range of strategic, commercial, operational and financial areas and a process
is in place to identify and assess their potential impact on the Group's
business, which is regularly updated. The principal risks and uncertainties
for the remainder of the financial year are not expected to change materially
from those included on pages 60 - 65 of the 2023 Annual Report and Financial
Statements.
NOTES TO THE UNAUDITED HALF YEAR FINANCIAL STATEMENTS (continued)
6. Segmental information
Business segments
IFRS 8 requires operating segments to be identified on the basis of internal
financial information reported to the Chief Operating Decision Maker (CODM).
The Group's CODM has been identified as the Board of Directors who are
primarily responsible for the allocation of resources to the segments and for
assessing their performance. The disclosure in the Group accounts of segmental
information is consistent with the information used by the CODM in order to
assess profit performance from the Group's operations. The Group operates one
global business segment engaging in the manufacture and supply of innovative
ingredient solutions for the beverage, flavour, fragrance and consumer product
industries with manufacturing sites in the UK and the US. Many of the Group's
activities, including sales, manufacturing, technical, IT and finance, are
managed globally on a Group basis.
Geographical segments
The following table provides an analysis of the Group's revenue by
geographical market for continuing operations.
Year-on-year
Six months to Six months to growth
31 March 31 March Year-on-year - constant
2024 2023 growth currency
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue by destination £'000 £'000 % %
United Kingdom 3,938 3,850 2.3% 2.3%
Rest of Europe - Germany 2,316 3,414 -32.2% -31.8%
- Ireland 6,738 10,059 -33.0% -31.7%
- Other 6,425 6,766 -5.0% -4.6%
The Americas - USA 28,604 28,280 1.1% 5.8%
- Other 9,063 6,546 38.5% 42.1%
Rest of the World - China 4,970 4,919 1.0% 3.3%
- Other 10,046 12,117 -17.1% -16.6%
72,100 75,951 -5.1% -2.7%
NOTES TO THE UNAUDITED HALF YEAR FINANCIAL STATEMENTS (continued)
7. Exceptional items
The exceptional items referred to in the income statement can be categorised
as follows:
Six months to Six months to
31 March 31 March
2024 2023
(unaudited) (unaudited)
£'000 £'000
UK relocation project
Relocation expenses (180) (544)
Less: tax effect of relocation expenses 10 102
Restructuring costs
Restructuring costs (285) (119)
Less: tax effect of restructuring costs 71 19
(384) (542)
The exceptional items all relate to non-recurring items.
Relocation expenses relate to one-off costs incurred in connection with the
relocation of the Group's UK operations that do not fall to be capitalised.
These costs are associated with the final stages of the manufacturing fit-out
of the Skyliner Way premises.
Restructuring costs comprise contractual employment and termination payments
in respect of changes to the global leadership structure, the process of which
began in August 2023. Amounts contractually due under employees' existing
terms and conditions are considered to be fully allowable for tax purposes.
8. Taxation
The effective tax rate for the six months ended 31 March 2024 has been
estimated at 25.0% (H1 2023: 21.5%).
9. Dividends
Equity dividends on ordinary shares
Six months to Six months to
31 March 31 March
2024 2023
(unaudited) (unaudited)
£'000 £'000
Final dividend for the year ended 30 September 2023 of 5.46p per share 3,335 3,250
(2022: 5.35p per share)
NOTES TO THE UNAUDITED HALF YEAR FINANCIAL STATEMENTS (continued)
10. Earnings per share
Basic earnings per share
Basic earnings per share is based on the weighted average number of ordinary
shares in issue and ranking for dividend during the year. The weighted average
number of shares excludes shares held by the Treatt Employee Benefit Trust
(EBT), together with shares held in respect of the Treatt Share Incentive Plan
(SIP) which do not rank for dividend.
Six months to Six months to
31 March 2024 31 March 2023
(unaudited) (unaudited)
Profit after taxation attributable to owners of the Parent Company (£'000) 5,318 4,946
Weighted average number of ordinary shares in issue (No: '000) 60,987 60,681
Basic earnings per share (pence) 8.72p 8.15p
Diluted earnings per share
Diluted earnings per share is based on the weighted average number of ordinary
shares in issue and ranking for dividend during the year, adjusted for the
effect of all dilutive potential ordinary shares. The number of shares used to
calculate earnings per share (EPS) have been derived as follows:
Six months to Six months to
31 March 2024 31 March 2023
(unaudited) (unaudited)
No ('000) No ('000)
Weighted average number of shares 61,210 60,902
Weighted average number of shares held in the EBT and SIP (223) (221)
Weighted average number of shares for calculating basic EPS 60,987 60,681
Executive share option schemes 173 287
All-employee share options 8 40
Weighted average number of shares for calculating diluted EPS 61,168 61,008
Diluted earnings per share (pence) 8.69p 8.11p
Adjusted earnings per share
Adjusted earnings per share measures are calculated based on profits for the
year attributable to owners of the Parent Company before exceptional items as
follows:
Six months to Six months to
31 March 2024 31 March 2023
(unaudited) (unaudited)
£'000 £'000
Profit after taxation attributable to owners of the Parent Company 5,318 4,946
Adjusted for exceptional items (see note 7):
- Relocation costs 180 544
- Restructuring costs 709 285 119
- Taxation thereon (81) (121)
Adjusted earnings from continuing operations 5,702 5,488
Adjusted basic earnings per share (pence) 9.35p 9.04p
Adjusted diluted earnings per share (pence) 9.32p 9.00p
285
119
- Taxation thereon
(81)
(121)
Adjusted earnings from continuing operations
5,702
5,488
Adjusted basic earnings per share (pence)
9.35p
9.04p
Adjusted diluted earnings per share (pence)
9.32p
9.00p
NOTES TO THE UNAUDITED HALF YEAR FINANCIAL STATEMENTS (continued)
( )
11. Capital commitments
The Group has entered into material contracts in connection with the UK
relocation project totaling £1,650,000 (H1 2023: £1,164,000), with a further
£225,000 and £594,000 (H1 2023: £492,000) committed to capital projects in
the UK and US respectively, all of which were unprovided for at the period
end.
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
This announcement contains forward-looking statements that are subject to risk
factors associated with, among other things, the economic and business
circumstances occurring from time to time in the countries, sectors and
markets in which the Group operates. It is believed that the expectations
reflected in these statements are reasonable, but they may be affected by a
wide range of variables which could cause actual results to differ materially
from those currently anticipated. No assurances can be given that the
forward-looking statements in this announcement will be realised. The
forward-looking statements reflect the knowledge and information available at
the date of preparation of this announcement and the Group undertakes no
obligation to update these forward-looking statements. Nothing in this
announcement should be construed as a profit forecast.
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