TIDMTATE
RNS Number : 5497N
Tate & Lyle PLC
21 May 2020
TATE & LYLE PLC
FULL-YEAR RESULTS
For the year ended 31 March 2020
Adjusted results(1) Statutory results
2020 2019 vs 2019 2020 2019 vs 2019
Revenue GBP2 882m GBP2 755m +2% +5%
Profit before tax
(PBT) GBP331m GBP309m +4% GBP296m GBP240m +23%
Diluted earnings per
share 57.8p 52.0p +8% 52.1p 38.6p +35%
Free cash flow(2) GBP247m GBP212m +GBP35m
Net debt(2) GBP451m GBP337m
Dividend per share 29.6p 29.4p +0.7%
---------- ---------- -------- -------- -------- --------
Movements in adjusted results are shown in constant currency
throughout this statement
Key highlights
-- Year of strong performance
-- Food & Beverage Solutions delivered strong revenue and double-digit profit(3) growth
-- Sucralose profit(3) slightly ahead
-- Primary Products profit(3) higher despite challenging market conditions
-- Priorities to 'Sharpen, Accelerate and Simplify' underpinning performance
-- Productivity programme increased from US$100m over 4 years to US$150m over 6 years
-- Strong balance sheet and access to over US$1billion in available liquidity
-- New commitments for living our Purpose including ambitious sustainability targets
Financial highlights
-- +10% increase in Food & Beverage Solutions profit(3) to GBP162m; +1% volume; +5% revenue
-- +1% increase in Sucralose profit(3) to GBP63m
-- +3% increase in Primary Products profit(3) to GBP158m with
Sweeteners & Starches +1%, Commodities +17%
-- +23% increase in Group statutory profit before tax due to lower exceptional costs
-- +4% increase in adjusted profit before tax
-- +8% increase in adjusted diluted EPS benefitting from lower
effective tax rate of 17.9% (2019: 21.0%)
-- +GBP35m higher adjusted free cash flow at GBP247m; Net debt / EBITDA ratio 0.9x
-- +40bps improvement in return on capital employed to 17.5%
-- Final dividend unchanged at 20.8p, making a full-year dividend of 29.6p, up 0.7%
Covid-19 and trading in April 2020
-- Measures in place to protect employees, keep operations running and serve customers
-- Actions taken in March to reduce costs, preserve cash and maintain financial strength
-- Food & Beverage Solutions volume in line with comparative period; Sucralose volume 18% higher
-- Primary Products bulk sweetener volume 26% lower; industrial starch volume 9% lower
1 The adjusted results for the year ended 31 March 2020 have
been adjusted to exclude exceptional items, amortisation of
acquired intangible assets and the tax on those adjustments. A
reconciliation of statutory and adjusted information is included in
Note 3 to the Financial Information. Growth percentages are
calculated on unrounded numbers. Changes in adjusted performance
metrics are in constant currency.
2 IFRS 16 Leases adoption increased net debt by GBP162 million
at 31 March 2020 and adjusted free cash flow by GBP34 million.
Comparatives have not been restated.
3 Adjusted operating profit.
NICK HAMPTON, CHIEF EXECUTIVE, SAID:
"This has been another year of consistent delivery. We made good
progress executing our strategy with strong revenue and profit
growth from Food & Beverage Solutions and profit growth from
Primary Products in more challenging markets.
Food & Beverage Solutions delivered revenue growth in each
region with revenue from New Products 15% higher. Operational
execution was excellent and our three priorities to 'Sharpen,
Accelerate and Simplify' the business continued to support
performance. Customer focus was sharper, our innovation delivered
strong growth and we delivered productivity ahead of target. Our
culture is enabling us to move with greater pace and agility and we
entered the new financial year with real momentum.
Our purpose of Improving Lives for Generations drives what we do
and today we are announcing ambitious new commitments to help
support healthy living, build thriving communities and care for our
planet.
I am very proud of the way we have responded to the
unprecedented challenges of Covid-19. Our purpose has been at the
heart of our response, ensuring we care for our colleagues, their
families and local communities as well as playing our part in
supporting the food supply chain. Throughout the pandemic, we have
continued to work very closely with our customers and support them
as they have adapted to a rapidly changing operating environment. I
want to thank all my colleagues for their extraordinary commitment,
courage and agility in the face of Covid-19, and for truly living
our purpose during these most difficult of times.
At the start of our 2021 financial year, with lockdowns in the
US and Europe, trading in April was mixed. Food & Beverage
Solutions performed well in the month but reduced out-of-home
consumption in the US significantly impacted Primary Products. As
the length and extent of the pandemic remains uncertain, we are not
issuing guidance for the year ending 31 March 2021. To keep all
stakeholders informed of our progress during these uncertain times,
we will issue an exceptional first quarter trading update on 23
July 2020.
In the year ahead our priorities are clear - to look after our
people and communities, strengthen our relationships with
customers, continue to progress our strategy and maintain our
financial strength.
Tate & Lyle is a resilient business that meets challenges
head-on. The fundamentals of our business remain sound despite the
challenges of Covid-19. Our high-quality portfolio of ingredients
and solutions enable consumers to enjoy healthier and tastier food
products and drinks. Demand for these products is growing and this
trend is here to stay. Combined with our financial strength, this
gives me confidence we will navigate this period successfully and
that our future prospects remain strong."
21 May 2020
COVID-19
In March, as the Covid-19 pandemic was unfolding, a Global
Pandemic Response Team was formed to develop, co-ordinate and
execute our plans, and local response teams formed at every site to
oversee the safety of our people and ensure business continuity. We
implemented an extensive customer and employee communication
programme, and held a daily meeting of senior management, chaired
by our Chief Executive, to ensure we moved quickly and
decisively.
In responding to the pandemic, our priorities are to look after
the health, safety and wellbeing of our colleagues, their families
and our local communities, keep our operations running and serve
our customers.
People and communities
A key pillar of our purpose is to look after our people and
support the communities in which we operate. Examples of our
Covid-19 initiatives include:
People
-- Hygiene protocols in place at all facilities and labs
including sanitisation, hand washing and face masks
-- Reduced shift teams with no physical meetings between shifts
-- Restructured work areas to ensure social distancing, and closed social and canteen areas
-- Training programmes provided for colleagues on health protection and sanitisation protocols
-- Full pay for colleagues ill with Covid-19 or in isolation
-- Special cash bonus paid to front-line workers in plants, labs and other key sites
-- Programme to keep colleagues working from home connected and productive during lockdown
-- Initiatives to look after colleagues' mental health and wellbeing
-- Extensive internal communications programme.
Communities
-- Supporting 20+ food banks globally to provide around 500,000
meals for people in need in our communities
-- Reformulated ethanol in the US for use in hand sanitiser
-- Donated PPE and hand sanitiser to front-line health workers.
Operations and customers
All our manufacturing facilities have remained fully operational
during the pandemic and customer orders continue to be fulfilled
often at very short notice. Our operations and customer-facing
teams have adapted quickly to a new working environment and our
response has included:
Operations
-- Modified demand planning process to meet customer needs
-- Operating highly flexible supply chain
-- Regular supplier and customer communications
-- New procedures to enable key capital projects to continue in a Covid-19 environment
-- Virtual assessment of safety performance to maintain momentum of global safety programme.
Customers
-- Increased connectivity utilising digital technology
-- Webinars and/or video sessions with customers to drive new and existing innovation projects
-- Virtual tasting sessions where prototypes are sent to
customers in advance and discussed over a video link
-- Remote product training sessions
-- Videos showcasing expertise in high demand categories (e.g. sauces for home cooking).
Our focus remains on keeping our operations running and staying
close to our customers so we can adapt quickly and effectively to
their changing demand needs.
Trading in April 2020
As we stated in our trading update on 4 May 2020, trading in
March showed limited impact from the Covid-19 pandemic. However,
the imposition of lockdowns in many countries throughout April,
most notably in our largest markets of the US and Europe, led to
significant changes in demand patterns for our products.
Food & Beverage Solutions and Sucralose
Food & Beverage Solutions and Sucralose continued to perform
well with volume for Food & Beverage Solutions in line with the
comparative period and Sucralose 18% higher due to phasing of
customer orders. Early in the month, demand was strong for
ingredients used in packaged and shelf-stable foods as consumers in
North America and Europe filled their pantries for consumption at
home. As the month progressed, this was offset by lower demand for
products consumed out-of-home, such as in the food service sector
in North America.
Primary Products
Primary Products volume was significantly impacted by the first
full month of lockdown in the US. Bulk sweetener volume was 26%
lower from reduced out-of-home consumption as bars, cinemas,
restaurants and sporting events were either shut or cancelled.
Industrial starch volume was 9% lower reflecting reduced demand for
paper and packaging following the closure of schools, offices and a
decline in economic activity. Commodities were also impacted as
ethanol prices decreased sharply.
Actions to reduce costs and preserve cash
The financial impact of lower demand was partially mitigated by
actions taken in March to reduce costs and preserve cash as we saw
the pandemic unfolding. These include:
-- Freezing all discretionary salary increases
-- Stopping non-essential discretionary spend
-- Halting recruitment of all but essential new staff
-- Reprioritising capital commitments
-- Careful management of receivables.
No employees have been furloughed and no government aid
sought.
Strong balance sheet
The strength of our balance sheet means we are well-placed to
manage through this challenging period:
-- Low leverage with net debt / EBITDA ratio of 0.9x at 31 March 2020 (0.6x on a covenant basis)
-- Strong liquidity headroom with access to more than US$1
billion through cash on hand and a committed and undrawn revolving
credit facility
-- Significant covenant headroom on borrowings (Covenant: net
debt / EBITDA not greater than 3.5x)
-- No debt maturity until 2023.
We also benefited from actions taken over the past 12 months to
further strengthen and de-risk our balance sheet. In September, we
supported the trustees of our main UK pension scheme in completing
a GBP930 million bulk annuity insurance 'buy-in' of the scheme
without incremental funding by the Group. This will create an
annual cash benefit of GBP20 million from our 2021 financial year.
In November 2019, we drew down US$200 million of long-term debt and
refinanced a maturing debt facility at lower cost.
After the end of the financial year, in May 2020, we extended
the maturity of our committed but undrawn US$800 million revolving
credit facility by one year to 2025 and priced a US$200 million
debt private placement at an average coupon of 2.96%.
Looking ahead
The length and depth of the impact of the pandemic remains
uncertain and is expected to vary by country. It is also difficult
at this stage to predict how consumer behaviour will evolve as
countries exit from lockdown. As a result, we are not issuing
guidance for the year ending 31 March 2021. To keep all
stakeholders informed of our progress during these uncertain times,
we will issue an exceptional first quarter trading update on 23
July 2020.
In the year ahead our priorities are clear - to continue to look
after our people and communities, strengthen our relationships with
customers, continue to progress our strategy and maintain our
financial strength. We will also look to adapt to, and embrace, the
new business environment and ways of working. With the momentum we
have built over the last two years, our high-quality product
portfolio, the attractive markets we operate in, the skill of our
people and our strong operating capabilities, we are well-placed to
emerge from this period as an even stronger and more agile
business.
NEW COMMITMENTS TO LIVE OUR PURPOSE
Tate & Lyle's purpose is Improving Lives for Generations.
Our people believe passionately that, through our purpose, we can
successfully grow our business and have a positive impact on
society. We live our purpose through three pillars and, with the
onset of Covid-19, these have never been more important. Firstly,
we support healthy living by using our ingredients and expertise to
help people make healthier and tastier choices when they eat and
drink, and lead a more balanced lifestyle. Secondly, we help build
thriving communities where we operate and support people to achieve
their potential. Thirdly, we care for the planet we live on and
help protect its natural resources for the benefit of future
generations.
Our purpose touches all parts of our business and drives what we
do. For example, this year, in support of our Caring for our Planet
pillar, we announced a multi-year partnership with Truterra(TM)
(formerly Land O' Lakes SUSTAIN(TM) ), a US conservation solutions
provider , to support sustainable agriculture practices on 1.5
million acres of US-grown corn. This is equivalent to every single
acre of corn we buy globally each year. We are also constructing a
new natural-gas fired combined heat and power system at our
Lafayette South corn wet-mill in Indiana. This US$75 million
investment will deliver significant improvements in energy and
operational efficiency and substantially reduce greenhouse gas
emissions.
But we want to do more. This led us to consider which of the 17
UN Sustainable Development Goals are closest to our Purpose and
determined these to be : Zero Hunger; Good Health and Wellbeing;
Gender Equality; Responsible Consumption and Production; and
Climate Action. From this, we have developed a set of new,
ambitious commitments for each pillar of our purpose as
follows:
Supporting Healthy Living
-- By 2025, we will have helped improve the lives of over
250,000 people by supporting programmes that promote healthier
lifestyles and activities.
-- By 2025, through our no/low calorie sweeteners and fibres, we
will have helped remove 9 million tonnes of sugar from people's
diets, equivalent to 36 trillion calories.
-- By 2025, we will have helped our colleagues improve how they
look after their physical and mental wellbeing so they can be their
best at work and in their daily lives.
Building Thriving Communities
-- By 2025, we will achieve gender parity in leadership roles.
-- By 2025, we will have provided over 3 million nutritious meals for people in need.
-- By 2025, we will have supported the education of over 100,000
children and students through learning programmes and grants and
helped them attain skills for life.
Caring for our Planet
-- By 2030, we will deliver 30% absolute reduction in Scope 1
and 2 CO(2) e emissions, with an ambition to reach 20% reduction by
2025.
-- By 2030, we will deliver 15% absolute reduction in Scope 3 CO(2) e emissions.
-- Our Scope 1, 2 and 3 CO(2) e emissions reduction targets will
be established as Science-Based Targets.
-- By 2025, we will eliminate coal from all our operations.
-- By 2030, 100% of our waste will be beneficially used, with a target to reach 75% by 2025.
-- By 2030, we will reduce water use by 15%.
-- We will maintain sustainable acreage equivalent to the volume
of corn we buy globally each year, currently 1.5 million acres, and
through partnerships accelerate the adoption of conservation
practices.
We will measure our progress against each of these targets in
our Annual Report each year.
We demonstrated our commitment to our new environmental targets
by linking the pricing of our US$800 million revolving credit
facility, extended in May 2020, to the delivery of our new Scope 1
and 2 CO(2) e emissions, water use and waste reduction targets.
THREE PRIORITIES SUPPORTING PERFORMANCE
Our three priorities launched in May 2018 continue to support
business performance.
Sharpen the focus on our customers
We continue to seek new ways to collaborate with customers.
During the year, we held our first two-day Fibre Symposium for
around 50 customers at our Innovation Centre in Chicago, as well as
a two-day sugar-reduction event in Shanghai with more than 80
customers. We held workshops in Singapore, Malaysia and Vietnam
bringing together customers, academia, trade associations and NGOs
with our technical experts, to look at ways to drive thinking on
healthier food and drink, and how our ingredients can be used to
tackle growing levels of obesity, diabetes and digestive health
concerns.
In October, we opened a new office and expanded lab in Sao
Paulo, Brazil, and a further expansion of our application lab in
Singapore. Both will allow us to collaborate more closely with
customers and help them develop products to meet increasing
consumer demand for healthier, tastier food and beverages.
At the end of the year, we simplified our customer teams in both
divisions to make them more agile, drive faster decision making and
get closer to customers in their local markets.
Accelerate portfolio development
New Product sales were 15% higher in constant currency with
progress across our three ingredient platforms. We launched 11 new
products during the year including CLARIA EVERLAST(R) , a
clean-label starch delivering superior shelf stability which helps
to preserve food quality in frozen products.
Our stevia solutions continue to grow strongly with sales up 23%
from increased consumer demand for reduced sugar and clean-label
solutions. We have appointed dedicated stevia commercial business
development leads in each region as well as a global Stevia General
Manager to accelerate growth working closely with our partner,
Sweet Green Fields.
In February, Primary Products entered the personal care category
in North America with TEXTURLUX(R) Personal Care Additives, a range
of bio-based specialty polymers for skin, hair and sun care
applications. This is an example of our strategy to diversify
product mix by moving into new and growing end-markets.
We also expanded our global open innovation network. Through our
partnership with TERRA, a leading Food & Agriculture Incubator,
we announced a new partnership and investment in Zymtronix, a
developer of revolutionary enzyme immobilisation technologies.
Simplify our business
In May 2018, we announced a programme to deliver US$100 million
of productivity benefits over four years. This programme is ahead
of expectations having delivered US$87 million of productivity
benefits in the first two years. These benefits have come from a
wide of range of areas including capital investments to reduce
energy costs, efficiency improvements in our supply chain,
simplifying the organisation, implementation of zero-based
budgeting, and new systems and processes to automate and accelerate
decision making.
As we continue to identify additional savings opportunities, we
are extending the programme by US$50 million and two years so that
it delivers a total of US$150 million over a six-year period ending
31 March 2024. The total cash exceptional cost to deliver the
programme has increased from around US$40 million to around US$75
million.
SEGMENTAL OPERATING PERFORMANCE
Year ended 31 March 2020 Volume Revenue Revenue Adjusted Adjusted
change growth operating operating
profit profit
change
-------- ---------- -------- ----------- -----------
North America +2% GBP470m +6% - -
Asia Pacific and Latin
America +1% GBP214m +7% - -
Europe, Middle East and
Africa (1%) GBP258m +1% - -
-------- ---------- -------- ----------- -----------
Food & Beverage Solutions 1% GBP942m +5% GBP162m +10%
-------- ----------- -----------
Sucralose (4%) GBP161m (4%) GBP63m +1%
Sweeteners and Starches - - - GBP133m +1%
Commodities - - - GBP25m +17%
-------- ---------- -------- ----------- -----------
Primary Products (2%) GBP1 779m +2% GBP158m +3%
-------- ----------- -----------
Central costs GBP(52)m (9%)
---------- -------- ----------- -----------
Total Group GBP2 882m +2% GBP331m +5%
--------------------------- -------- ---------- -------- ----------- -----------
The adjusted results for the year ended 31 March 2020 have been
adjusted to exclude exceptional items, amortisation of acquired
intangible assets and the tax on those adjustments. A
reconciliation of statutory and adjusted information is included in
Note 3 to the Financial Information. Growth percentages are
calculated on unrounded numbers. Changes in revenue and adjusted
operating profit are in constant currency.
FOOD & BEVERAGE SOLUTIONS
Strong revenue and profit growth
Volume was 1% higher while revenue increased by 5% in constant
currency to GBP942 million from good price and mix management, as
well as the impact of passing through higher net corn costs .
Adjusted operating profit was 10% higher in constant currency with
good revenue growth, cost discipline and operating leverage.
Operating margin increased by 110 basis points to 17.2%. The effect
of currency translation was to increase revenue by GBP11 million
and adjusted operating profit by GBP5 million.
North America
Top-line momentum continued with volume up 2% and revenue up 6%
in constant currency to GBP470 million, with good progress across a
range of categories notably beverage, dairy, bakery and nutrition.
While growth in the overall US food and beverage market remained
largely flat, we continued to see strong customer demand in
beverage, dairy, bakery and nutrition, particularly to deliver
sugar and calorie reduction in packaged and shelf-stable foods.
Asia Pacific and Latin America
Volume increased by 1%. Revenue increased by 7% in constant
currency to GBP214 million with mid-single digit growth in Asia
Pacific and double-digit growth in Latin America. In Asia Pacific,
revenue growth softened in the second half as demand across China
weakened in the face of the Covid-19 pandemic, while growth
remained firm in South East Asia, particularly in dairy and soups,
sauces and dressings. In Latin America, revenue growth remained
strong, with good growth in Brazil and in the Andean region. In
much of Latin America new front-of-pack labelling rules led to
increased reformulation opportunities with customers.
Europe, Middle East and Africa
Volume decreased by 1%, while revenue at GBP258 million was 1%
higher in constant currency as we continued to exit lower margin
texturant business to improve mix. Revenue was in line with the
prior year in our more mature western European business which
included revenues from our oats ingredients business which we sold
at the end of the prior year, while in Turkey, Middle East and
Africa we saw high single-digit growth. In October 2019 we opened
the expansion of our facility in Slovakia, doubling capacity of
high-grade maltodextrin (used in categories such as baby food).
New Products
Revenue from New Products (products launched in the last seven
years) increased by 15% in constant currency to GBP113 million with
each of our sweeteners, health and wellness and texturants
platforms delivering double-digit revenue growth. New Products now
represent 12% of Food & Beverage Solutions revenues. Sugar and
calorie reduction particularly in beverage, dairy, confectionery
and bakery is a key focus for customers and consumers. As a result,
we saw strong growth in revenue from stevia sweeteners, as well as
PROMITOR(R) Soluble Fibre, reflecting its use as a sugar
replacement and fibre enrichment solution. We also saw good growth
in Non-GMO texturants and clean label starches from our CLARIA(R)
line of functional starches.
SUCRALOSE
Solid results
Sucralose volume and revenue in constant currency decreased by
4% reflecting the impact of the prior year programme to optimise
inventory. Excluding the impact of inventory optimisation,
underlying volume was 1% higher. Revenues were GBP161 million with
good customer mix management. Adjusted operating profit at GBP63
million was 1% higher in constant currency reflecting good cost
management which offset a GBP3 million one-off gain from a supply
contract in the prior year. Currency translation increased revenue
by GBP3 million and adjusted operating profit by GBP2 million.
PRIMARY PRODUCTS
Profit higher despite challenging market conditions
Volume was 2% lower with North American sweetener volume 2%
lower and North American industrial starch volume 8% lower. Revenue
at GBP1,779 million was up 2% in constant currency reflecting the
pass through of higher net corn costs. Adjusted operating profit at
GBP158 million was 3% higher in constant currency. Currency
translation increased revenue by GBP51 million and adjusted
operating profit by GBP5 million.
Adjusted operating profit in Sweeteners and Starches was 1%
higher in constant currency with good performance from
manufacturing and supply chain together with strong cost
discipline, offsetting cost inflation and weaker volume. The
results also reflected the impact of the GBP4 million insurance
recovery in the prior year. Commodities adjusted operating profit
at GBP25 million was 17% higher in constant currency.
To simplify our business and focus capital investment on key
priorities, in December 2019 we closed our small, non-core, savoury
ingredients business after deciding not to invest the significant
capital required to sustain it. This decision led to an exceptional
charge of GBP5 million, mainly to write off the associated assets.
This business generated profit of GBP7 million in the year ended 31
March 2020.
Sweeteners
Volume was 2% lower due to lower demand from our Bio-PDO(TM)
joint venture reflecting competitive cost pressure for its
products. Excluding this impact, sweetener volume was slightly
higher than the prior year despite a decline in carbonated soft
drinks consumption in the US, partly reflecting higher pricing and
lower promotional intensity within that category.
Industrial Starches
Volume was 8% lower due to the closure of paper capacity at a
customer's facility combined with weaker demand for paper and for
packaging as e-commerce operators sought to reduce packaging. In
the second half of the year our strategy to diversify product mix
and a recovery of domestic paper production delivered improved
performance. An example of this was our entry into the personal
care category in North America with TEXTURLUX(R) Personal Care
Additives. This created a range of bio-based speciality polymers
for skin, hair and sun care applications. Early customer interest
has been encouraging.
Commodities
Commodities delivered adjusted operating profit of GBP25
million, 17% higher in constant currency. Co-product recoveries
from corn gluten meal and corn oil were stronger than the prior
year while ethanol cash margins declined and moved sharply lower at
the end of the year.
ADDITIONAL COMMENTARY ON FINANCIAL STATEMENTS
Constant
currency
Year ended 31 March (1) 2020 2019 Change change
Continuing and total operations GBPm GBPm % %
--------------------------------------------- ------ ------ ------- ----------
Revenue 2 882 2 755 5% 2%
Adjusted operating profit
- Food & Beverage Solutions 162 143 13% 10%
- Sucralose 63 61 4% 1%
- Primary Products 158 148 7% 3%
- Central (52) (47) (10%) (9%)
Adjusted operating profit 331 305 9% 5%
Net finance expense (28) (26) (7%) (4%)
Share of profit after tax of joint ventures 28 30 (8%) (9%)
--------------------------------------------- ------ ------ ------- ----------
Adjusted profit before tax 331 309 7% 4%
Exceptional items (24) (58) 58% 59%
Amortisation of acquired intangible assets (11) (11) - -
Profit before tax 296 240 23% 20%
Income tax expense (51) (59) 13% 15%
--------------------------------------------- ------ ------ ------- ----------
Profit for the year 245 181 35% 31%
Earnings per share (pence)
Adjusted diluted 57.8p 52.0p 11% 8%
Diluted 52.1p 38.6p 35% 31%
--------------------------------------------- ------ ------ ------- ----------
Cash flow and net debt(2)
Adjusted free cash flow 247 212
Net debt 451 337
--------------------------------------------- ------ ------ ------- ----------
1 Adjusted results and a number of other terms and performance
measures used in this document are not directly defined within
IFRS. We have provided descriptions of the various metrics and
their reconciliation to the most directly comparable measures
reported in accordance with IFRS and the calculation (where
relevant) of any ratios in Note 3.
2 IFRS 16 Leases was adopted at the beginning of the year,
without restating comparatives. Lease payments are now classified
as financing rather than operating cash flows, increasing adjusted
free cash flow in the year ended 31 March 2020 by GBP34 million.
IFRS 16 lease liabilities increased net debt by GBP162 million at
31 March 2020.
Central costs
Central costs, which include head office costs and certain
treasury and legal activities, were 10% higher (9% in constant
currency) at GBP52 million, primarily driven by incremental costs
as part of our overall Covid-19 response. Such increases were
partially offset by strong overhead cost discipline.
Net finance expense
Net finance expense from continuing operations was GBP2 million
higher at GBP28 million, reflecting the adoption of the new leasing
standard, IFRS 16, which increased finance expense by GBP6 million.
This has been partially offset by lower borrowing costs.
The Group has raised new debt and refinanced maturing debt, both
lowering its overall borrowing rates and increasing its access to
liquidity. In November 2019, the Group issued a US$200 million
private placement, comprising US$100 million 3.31% notes due 2029
and US$100 million 3.41% notes due 2031, and used the proceeds to
refinance a GBP200 million 6.75% bond maturing at that time. In May
2020, the Group extended the maturity of its US$800 million
revolving credit facility by a year to 2025 and priced a committed
US$200 million debt private placement which will be issued on 6
August 2020, at which point US$100 million 2.91% notes maturing in
2030 and US$100 million 3.01% notes maturing in 2032 will be drawn
down.
Following the buy-in of the main UK defined benefit pension
scheme, interest income of about GBP5 million per year on the
accounting surplus of the plan will no longer be recognised from
the start of the 2021 fiscal year.
Share of profit after tax of joint ventures
The Group's share of profit after tax of joint ventures of GBP28
million was 8% lower (9% lower in constant currency) principally
reflecting weaker demand at DuPont Tate & Lyle Bio Products
(Bio-PDO(TM) ), which is expected to continue into the 2021 fiscal
year.
Exceptional items
The Group recorded a net exceptional charge of GBP24 million,
which principally comprised GBP19 million of restructuring charges
for the previously-announced simplification programme, consisting
of the following:
-- GBP5 million of severance costs for roles removed from the organisation; and
-- GBP14 million of productivity costs including the accelerated
depreciation of assets being replaced with more efficient
alternatives, Global Operations cost saving initiatives, and other
associated project costs.
The Group also recorded a GBP5 million charge following the
decision in the first half of the year to exit the Primary
Products' small, non-core savoury ingredients business, mainly
comprising the cost of writing off the associated assets.
The exceptional cash outflows for the year totaled GBP24
million, comprising GBP9 million of cash outflows related to
charges recorded in the current financial year and GBP15 million of
cash outflows resulting from exceptional costs recorded in the
prior year.
In May 2018, as part of its simplification programme, the Group
announced a plan to generate productivity benefits of US$100
million over a four-year period to 2022, and that the cash costs of
delivering this would be around US$40 million. During the year
ended 31 March 2020, exceptional cash costs in respect of this
programme of US$19 million were recognised, bringing the total to
date to US$33 million.
During the year ended 31 March 2019, the Group recorded a net
exceptional charge of GBP58 million which mainly comprised a GBP43
million non-cash impairment charge on the oats ingredients
business.
Taxation
The adjusted effective tax rate was 17.9% (2019 - 21.0%). The
rate was lower than the prior year as a result of the recognition
of a deferred tax asset following the pension buy-in transaction
which enabled the utilisation of some previously unrecognised tax
losses, the re-measurement of deferred tax assets in the UK
following the reversal of the UK government's previously-enacted
decision to reduce the standard rate of corporation tax from 19% to
17%, and the expiry of the statute of limitations on a number of
uncertain tax provisions. Of these items, the latter two were
discrete items recorded in the second half of the year ended 31
March 2020, causing the full year rate to be lower than that of the
first half.
We expect the rate for the year ended 31 March 2021 to be
between 17% and 19%.
Earnings per share
Adjusted basic earnings per share increased by 11% (8% in
constant currency) to 58.6p and adjusted diluted earnings per share
at 57.8p were also 11% higher (8% in constant currency). Statutory
diluted earnings per share increased by 13.5p to 52.1p reflecting
increased earnings and lower exceptional charges in the year.
Dividend
The Board is recommending an unchanged final dividend of 20.8p
per share, bringing the full year dividend to 29.6p per share (2019
- 29.4p), up 0.7% on the prior year. The final dividend is subject
to approval by shareholders at the AGM on 23 July 2020. Subject to
shareholder approval, the final dividend will be due and payable on
31 July 2020 to all shareholders on the Register of Members on 19
June 2020. In addition to the cash dividend option, shareholders
will continue to be offered a Dividend Reinvestment Plan
alternative.
Cash flow, net debt and liquidity
Adjusted free cash flow was GBP247 million (2019 - GBP212
million). The increase of GBP35 million reflects a favourable
impact of GBP34 million from IFRS 16. Excluding this impact, the
increase was GBP1 million, with higher capital expenditure of
GBP166 million (2019 - GBP130 million) being offset by higher
operating profit, better working capital performance and lower
retirement benefit contributions and tax payments.
We expect capital expenditure for the 2021 financial year to be
between GBP140 million and GBP160 million.
Overall net debt at 31 March 2020 of GBP451 million was GBP114
million higher than at 31 March 2019. The adoption of IFRS 16
increased net debt by GBP162 million at 31 March 2020. Excluding
the impact of IFRS 16, net debt would have been lower due to net
cash flow generated from operating and investing activities,
partially offset by the translation impact of the stronger US
dollar on US-denominated borrowings.
At 31 March 2020, the Group held cash and cash equivalents of
GBP271 million and had a committed, undrawn revolving credit
facility of US$800 million. Net debt / EBITDA ratio was 0.9 times
(2019 - 0.8 times), with the increase driven by the impact of IFRS
16. On a covenant-testing basis, net debt / EBITDA ratio was 0.6
times, which was significantly lower than the covenant ratio of not
greater than 3.5 times, demonstrating significant headroom above
this covenant requirement.
Retirement benefits
The Group maintains pension plans for its current employees and
former employees in a number of countries. Certain of these
arrangements are defined benefit pension schemes. All funded
schemes in the UK and US are closed for further accrual. In the US,
the Group also continues to provide an unfunded post-retirement
medical benefit scheme.
On 18 September, the Group further de-risked its retirement
benefit obligations by supporting the trustees of the main UK
defined benefit pension scheme in completing a GBP930 million bulk
annuity insurance policy 'buy-in' for that scheme. The 'buy-in'
secured an insurance asset that fully matches the remaining pension
liabilities of the scheme, with the result that the Company no
longer bears any investment, longevity, interest rate or inflation
risk.
As the scheme was in surplus on an accounting basis, in
accordance with the relevant accounting standard the impact of this
transaction was to record a re-measurement loss of GBP195 million
to other comprehensive income. There was no impact on profit before
tax and no incremental funding by the Group was required.
The other significant movements in retirement benefit
obligations relate to actuarial losses recognised in other
comprehensive income of GBP46 million, with the main driver being
the reduction in the discount rates applied to US pension
liabilities leading to increased liabilities which were only
partially offset by higher returns on plan assets of GBP20
million.
While discount rates applied to UK pension liabilities also
decreased, this impact was more than offset by the decrease in
inflation assumptions, resulting in an overall actuarial gain for
the UK pension liabilities. However, for the main UK pension plan,
this actuarial gain was offset by an equal and opposite decrease on
the return on plan assets because of the nature of such assets
following the 'buy-in' described above.
The Group's retirement benefit obligations are now in a net
deficit of GBP203 million (31 March 2019 - surplus of
GBP24 million). Such movement reflects the re-measurement loss
on the 'buy-in' described above. The largest component of the net
deficit are certain deliberately unfunded schemes in the US.
As a result of the 'buy-in' cash contributions into the main UK
scheme will cease, saving approximately GBP20 million of cash
annually from the 2021 financial year. In addition, the Group will
no longer record non-cash interest income on the accounting surplus
of about GBP5 million per year.
CAUTIONARY STATEMENT AND CONFERENCE CALL DETAILS
Cautionary statement
This statement of Full Year Results contains certain
forward-looking statements with respect to the financial condition,
results, operations and businesses of Tate & Lyle PLC. These
statements and forecasts involve risk and uncertainty because they
relate to events and depend upon circumstances that will occur in
the future. There are a number of factors that could cause actual
results or developments to differ materially from those expressed
or implied by these forward-looking statements and forecasts.
A copy of this statement of Full Year Results for the year ended
31 March 2020 can be found on our website at www.tateandlyle.com. A
hard copy of this statement is also available from the Company
Secretary, Tate & Lyle PLC, 1 Kingsway, London WC2B 6AT.
Webcast and Q&A Details
An audio presentation of the results by Chief Executive, Nick
Hampton, and Chief Financial Officer, Imran Nawaz, will be
available to view on our website from 07.00 (BST) on Thursday 21
May 2020. To access the presentation, visit
https://brrmedia.news/dkh3f .
This presentation will be live streamed at 10.00 (BST), and will
then be followed by a live Q&A session. To view and listen to
this audio webcast and Q&A, visit https://brrmedia.news/wfues .
Please note that only sell-side analysts and any pre-registered
buy-side investors will be able to ask questions during the Q&A
session. Sell-side analysts will be automatically pre-registered.
To pre-register, please contact Lucy Huang at
lucy.huang@tateandlyle.com .
The archive version of the audio webcast with Q&A will be
available on the same link at https://brrmedia.news/wfues within
two hours of the end of the live broadcast.
For more information contact Tate & Lyle PLC:
Christopher Marsh, VP Investor Relations
Tel: Mobile: +44 (0) 7796 192 688
Andrew Lorenz, FTI Consulting (Media)
Tel: Mobile: +44 (0) 7775 641 807
CONSOLIDATED INCOME STATEMENT
Year ended 31 March
----------------------
2020 2019
Notes GBPm GBPm
--------------------------------------------------- ---------- ---------- ----------
Continuing operations
Revenue 4 2 882 2 755
---------------------------------------------------- ---------- ---------- ----------
Operating profit 296 236
Finance income 6 5 5
Finance expense 6 (33) (31)
Share of profit after tax of joint
ventures 28 30
---------------------------------------------------- ---------- ---------- ----------
Profit before tax 296 240
Income tax expense 7 (51) (59)
---------------------------------------------------- ---------- ---------- ----------
Profit for the year - continuing
operations 245 181
Profit for the year - discontinued - -
operations
--------------------------------------------------- ---------- ---------- ----------
Profit for the year - total operations 245 181
---------------------------------------------------- ---------- ---------- ----------
Profit for the years presented from total operations is entirely attributable
to owners of the Company.
Earnings per share Pence Pence
--------------------------------------------------- ---------- ---------- ----------
Continuing operations:
- basic 8 52.8p 39.2p
- diluted 8 52.1p 38.6p
---------------------------------------------------- ---------- ---------- ----------
Total operations:
- basic 8 52.8p 39.2p
- diluted 8 52.1p 38.6p
---------------------------------------------------- ---------- ---------- ----------
Analysis of adjusted profit for the year -
continuing operations GBPm GBPm
-------
Profit before tax 296 240
Adjusted for:
Net exceptional charge 5 24 58
Amortisation of acquired intangible
assets 11 11
Adjusted profit before tax 3 331 309
Adjusted income tax expense 3, 7 (59) (65)
---------------------------------------- ----- ------- -------
Adjusted profit for the year 3 272 244
---------------------------------------- ----- ------- -------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Year ended 31 March
----------------------
2020 2019
Notes GBPm GBPm
---------------------------------------------------- -------- ---------- ----------
Profit for the year 245 181
---------------------------------------------------- -------- ---------- ----------
Other comprehensive income/(expense)
Items that have been/may be reclassified to
profit or loss:
Gain on currency translation of foreign operations 46 75
Fair value loss on net investment hedges (18) (24)
Net loss on cash flow hedges (1) -
Share of other comprehensive (expense)/ income
of joint ventures (3) 4
24 55
Items that will not be reclassified to profit
or loss:
Re-measurement of retirement benefit plans
- actual return (lower)/higher than interest
on plan assets 11 (58) 29
- impact of 'buy-in' on main UK pension scheme 11 (195) -
- net actuarial gain/(loss) on retirement
benefit obligations 11 12 (34)
Changes in the fair value of equity investments
at fair value through OCI 2 2
Tax effect of the above items 41 10
---------------------------------------------------- -------- ---------- ----------
(198) 7
Total other comprehensive (expense)/income (174) 62
---------------------------------------------------- -------- ---------- ----------
Total comprehensive income 71 243
---------------------------------------------------- -------- ---------- ----------
Total comprehensive income all relates to continuing operations
and is entirely attributable to owners of the Company.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 31 March
--------------
2020 2019
Notes GBPm GBPm
------------------------------------- -------- ------ ------
ASSETS
Non-current assets
Goodwill and other intangible
assets 340 342
Property, plant and equipment 1 190 982
Investments in joint ventures 91 102
Investments in equities 63 59
Retirement benefit surplus 11 4 207
Deferred tax assets 30 3
Trade and other receivables - 2
Derivative financial instruments 1 -
------------------------------------- -------- ------ ------
1 719 1 697
------------------------------------- -------- ------ ------
Current assets
Inventories 456 434
Trade and other receivables 323 325
Current tax assets 10 4
Derivative financial instruments 5 48
Other current financial assets 67 -
Cash and cash equivalents 10 271 285
1 132 1 096
------------------------------------- -------- ------ ------
TOTAL ASSETS 2 851 2 793
-------------------------------------- -------- ------ ------
EQUITY
Capital and reserves
Share capital 117 117
Share premium 406 406
Capital redemption reserve 8 8
Other reserves 239 217
Retained earnings 629 741
-------------------------------------- -------- ------ ------
TOTAL EQUITY 1 399 1 489
-------------------------------------- -------- ------ ------
LIABILITIES
Non-current liabilities
Borrowings 10 682 373
Retirement benefit deficit 11 207 183
Deferred tax liabilities 42 46
Provisions 11 20
Derivative financial instruments 2 1
944 623
------------------------------------- -------- ------ ------
Current liabilities
Borrowings 10 40 224
Trade and other payables 370 342
Provisions 21 24
Current tax liabilities 38 45
Derivative financial instruments 20 46
Other current financial liabilities 19 -
508 681
------------------------------------- -------- ------ ------
Total liabilities 1 452 1 304
-------------------------------------- -------- ------ ------
TOTAL EQUITY AND LIABILITIES 2 851 2 793
-------------------------------------- -------- ------ ------
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended 31 March
----------------------
2020 2019
Notes GBPm GBPm
Cash flows from operating activities
Profit before tax from continuing
operations 296 240
Adjustments for:
Depreciation of property, plant
and equipment (excluding exceptional
items) 137 112
Amortisation of intangible assets 35 40
Share-based payments 14 18
Exceptional income statement items 5 1 51
Net finance expense 6 28 26
Share of profit after tax of joint
ventures (28 ) (30)
Net retirement benefit obligations (21) (25)
Changes in working capital and other
non-cash movements 2 (16)
----------------------------------------------- -------- ---------- ----------
Cash generated from continuing operations 464 416
Net income tax paid (49) (58)
Interest paid (30) (28)
Net cash generated from operating
activities 385 330
----------------------------------------------- -------- ---------- ----------
Cash flows from investing activities
Purchase of property, plant and
equipment (141) (103)
Disposal of property, plant and
equipment (exceptional) 5 (1) 3
Investments in intangible assets (25) (27)
Purchase of equity investments (6) (20)
Disposal of equity investments 4 3
Interest received 5 5
Dividends received from joint ventures 35 21
Sale and leaseback of railcars (exceptional) 5 - 16
Other investing cash flows - (9)
----------------------------------------------- -------- ---------- ----------
Net cash used in investing activities (129) (111)
----------------------------------------------- -------- ---------- ----------
Cash flows from financing activities
Purchase of own shares including
net settlement (22) (8)
Cash inflow from additional borrowings 157 5
Cash outflow from repayment of borrowings (234) (1)
Repayment of leases (37) (2)
Dividends paid to the owners of
the Company 9 (137) (134)
Net cash used in financing activities (273) (140)
----------------------------------------------- -------- ---------- ----------
Net (decrease)/increase in cash
and cash equivalents 10 (17) 79
----------------------------------------------- -------- ---------- ----------
Cash and cash equivalents:
Balance at beginning of year 285 190
Net (decrease)/increase in cash
and cash equivalents (17) 79
Currency translation differences 3 16
----------------------------------------------- -------- ---------- ----------
Balance at end of year 10 271 285
----------------------------------------------- -------- ---------- ----------
A reconciliation of the movement in cash and cash equivalents to
the movement in net debt is presented in Note 10.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share
capital Capital
and share redemption Other Retained Total
premium reserve reserves earnings equity
GBPm GBPm GBPm GBPm GBPm
----------------------------------------- ----------- ------------- ----------- ----------- ---------
At 1 April 2018 523 8 159 677 1 367
Profit for the year - total operations - - - 181 181
Other comprehensive income - - 57 5 62
----------------------------------------- ----------- ------------- ----------- ----------- ---------
Total comprehensive income - - 57 186 243
Hedging losses transferred to inventory - - 1 - 1
Transactions with owners:
Share-based payments, net of tax - - - 20 20
Purchase of own shares including
net settlement - - - (8) (8)
Dividends paid (Note 9) - - - (134) (134)
----------------------------------------- ----------- ------------- ----------- ----------- ---------
At 31 March 2019 523 8 217 741 1 489
----------------------------------------- ----------- ------------- ----------- ----------- ---------
IFRS 16 Lease adoption - - - (8) (8)
----------------------------------------- ----------- ------------- ----------- ----------- ---------
At 1 April 2019 restated 523 8 217 733 1 481
----------------------------------------- ----------- ------------- ----------- ----------- ---------
Profit for the year - total operations - - - 245 245
Other comprehensive income/(expense) - - 26 (200) (174)
----------------------------------------- ----------- ------------- ----------- ----------- ---------
Total comprehensive income - - 26 45 71
Hedging gains transferred to inventory - - (6) - (6)
Tax effect of the above item - - 2 - 2
Transactions with owners:
Share-based payments, net of tax - - - 14 14
Purchase of own shares including
net settlement - - - (22) (22)
Dividends paid (Note 9) - - - (137) (137)
Other movements - - - (4) (4)
----------------------------------------- ----------- ------------- ----------- ----------- ---------
At 31 March 2020 523 8 239 629 1 399
----------------------------------------- ----------- ------------- ----------- ----------- ---------
Total equity is entirely attributable to owners of the
Company.
TATE & LYLE PLC
NOTES TO THE FINANCIAL INFORMATION
FOR THE YEARED 31 MARCH 2020
1. Background
The financial information on pages 13 to 32 is extracted from
the Group's consolidated financial statements for the year ended 31
March 2020, which were approved by the Board of Directors on 20 May
2020.
The financial information does not constitute statutory accounts
within the meaning of sections 434(3) and 435(3) of the Companies
Act 2006 or contain sufficient information to comply with the
disclosure requirements of International Financial Reporting
Standards (IFRS) and related interpretations as adopted for use in
the European Union.
The Company's auditor, Ernst & Young LLP, has given an
unqualified report on the consolidated financial statements for the
year ended 31 March 2020. The auditor's report did not include
reference to any matters to which the auditor drew attention
without qualifying its report and did not contain any statement
under section 498 of the Companies Act 2006. The consolidated
financial statements will be filed with the Registrar of Companies,
subject to their approval by the Company's shareholders on 23 July
2020 at the Company's Annual General Meeting.
2. Basis of preparation
Basis of accounting
The Group's consolidated financial statements for the year ended
31 March 2020 have been prepared in accordance with International
Financial Reporting Standards (IFRS) and related interpretations as
adopted for use in the European Union and those parts of the
Companies Act 2006 that are applicable to companies reporting under
IFRS.
The Directors are satisfied that the Group has adequate
resources to continue to operate for a period not less than 12
months from the date of approval of the financial statements and
that there are no material uncertainties around their assessment.
Accordingly, the Directors continue to adopt the going concern
basis of accounting.
In making this assessment, the Directors have taken into
consideration that, since the balance sheet date, significant
actions have been taken by most governments to contain the spread
of Covid-19, which have had a severe effect on economic activity in
the countries in which the Group operates.
While the Group's trading in March showed limited impact from
the Covid-19 pandemic, the lockdowns in place in many countries
across the world throughout April, most notably in its largest
markets of the US and Europe, have led to some significant changes
in demand patterns for its products. Primary Products volume was
significantly impacted by the first full month of lockdown in the
US. While consumption at home provided a degree of underpin, bulk
sweetener volume was 26% lower from reduced out of home consumption
as bars, cinemas, restaurants and sporting events were either shut
or cancelled. Industrial starch volume was 9% lower reflecting
reduced demand for paper and packaging following the closure of
schools, offices and a general decline in economic activity.
The impact of lower demand was partially mitigated by prompt
actions taken in March to optimise cash and reduce costs as we saw
the pandemic unfolding. These include freezing salary increases and
recruitment, stopping non-essential discretionary spend and
reprioritising capital commitments.
At the year end, the group held cash and cash equivalents of
GBP271 million and had an undrawn, committed revolving credit
facility of US$800 million (GBP642 million). In addition, during
May 2020, the Group successfully obtained further committed
borrowings through a US$200 million US private placement at an
average coupon of 2.96% and extended the term of its US$800 million
revolving credit facility by one year to March 2025.
In concluding that the going concern basis is appropriate, the
Directors have modelled the impact of a 'worst case scenario' which
includes the potential impact in aggregate of three plausible but
severe downside risks. It specifically included a severe extended
impact from lower out-of-home consumption across our Primary
Products and Food & Beverage Solutions businesses due to
Covid-19. In addition, this 'worst case scenario' also included two
other risks from the Group's viability assessment unrelated to
Covid-19; being a major operational failure causing an extended
shutdown of our largest manufacturing facility and the loss of two
of our largest Food & Beverage Solutions customers.
Having reviewed this 'worst case scenario' forecast for the
coming year, and having applied reverse stress tests, the Directors
consider it remote that available liquidity could be exhausted. In
addition, even under the 'worst case scenario' there remains no
forecast breach of the Group's covenant ratio of 3.5 times net debt
to EBITDA.
The Group's principal accounting policies have been consistently
applied throughout the year and will be set out in the notes to the
Group's 2020 Annual Report.
Accounting standards adopted during the year
In the current year, the Group has adopted, with effect from 1
April 2019, the following new accounting standards:
- IFRS 16 Leases
- IFRIC 23 Uncertainty over Income Tax Treatments
In accordance with the transitional provisions in IFRS 16
comparative figures have not been restated. The adoption of IFRS 16
Leases had a material impact on Group net debt and adjusted free
cash flow. IFRIC 23 Uncertainty over Income Tax Treatments had no
material impact. Refer to Note 14 for further details.
Accounting standards issued but not yet adopted
The following new standards have been issued and are relevant to
the Group, but were not effective for the financial year beginning
1 April 2019, and have not been adopted early:
- Amendments to IFRS 3 Definition of a Business
- Amendments to IAS 1 and IAS 8 Definition of Material
Neither are expected to have a significant impact on the Group's
financial statements.
No other new standards, new interpretations or amendments to
standards or interpretations have been published which are expected
to have a significant impact on the Group's financial
statements.
Changes in constant currency
Where year-on-year changes in constant currency are presented in
this statement, they are calculated by retranslating current year
results at prior year exchange rates. Reconciliations of the
movement in constant currency have been included in 'Additional
information' within this document.
Alternative performance measures
The Group also presents alternative performance measures,
including adjusted operating profit, adjusted profit before tax,
adjusted earnings per share and adjusted free cash flow, which are
used for internal performance analysis and incentive compensation
arrangements for employees. They are presented because they provide
investors with additional information about the performance of the
business which the Directors consider to be valuable. For the years
presented, alternative performance measures exclude, where
relevant:
- Exceptional items (excluded as they are material in amount;
and are outside the normal course of business or relate to events
which do not frequently recur, and therefore merit separate
disclosure in order to provide a better understanding of the
Group's underlying financial performance);
- Amortisation of acquired intangible assets (costs associated
with amounts recognised through acquisition accounting that impact
earnings compared to organic investments); and
- Tax on the above items and tax items that themselves meet
these definitions. For tax items to be treated as exceptional,
amounts must be material and their treatment as exceptional enable
a better understanding of the Group's underlying financial
performance.
Alternative performance measures reported by the Group are not
defined terms under IFRS and may therefore not be comparable with
similarly-titled measures reported by other companies.
Reconciliations of the alternative performance measures to the most
directly comparable IFRS measures are presented in Note 3.
Exceptional items
Exceptional items comprise items of income, expense and cash
flow, including tax items that: are material in amount; and are
outside the normal course of business or relate to events which do
not frequently recur, and therefore merit separate disclosure in
order to provide a better understanding of the Group's underlying
financial performance. Examples of events that give rise to the
disclosure of material items of income, expense and cash flow as
exceptional items include, but are not limited to:
-- significant impairment events;
-- significant business transformation activities;
-- disposals of operations or significant individual assets;
-- litigation claims by or against the Group; and
-- restructuring of components of the Group's operations.
For tax items to be treated as exceptional, amounts must be
material and their treatment as exceptional enable a better
understanding of the Group's underlying financial performance.
Exceptional items in the Group's financial statements are
classified on a consistent basis across accounting periods.
3. Reconciliation of alternative performance measures
Income statement measures
For the reasons set out in Note 2, the Group presents
alternative performance measures including adjusted operating
profit, adjusted profit before tax and adjusted earnings per
share.
The following table shows the reconciliation of the key income
statement alternative performance measures to the most directly
comparable measures reported in accordance with IFRS:
Year ended 31 March Year ended 31 March 2019
2020
---------------------------------- ----------------------------------
GBPm unless otherwise IFRS Adjusting Adjusted IFRS Adjusting Adjusted
stated Continuing operations reported items reported reported items reported
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Revenue 2 882 - 2 882 2 755 - 2 755
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Operating profit 296 35 331 236 69 305
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Profit before tax 296 35 331 240 69 309
Income tax expense (51) (8) (59) (59) (6) (65)
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Profit for the year 245 27 272 181 63 244
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
Basic earnings per share
(pence) 52.8p 5.8p 58.6p 39.2p 13.6p 52.8p
Diluted earnings per
share (pence) 52.1p 5.7p 57.8p 38.6p 13.4p 52.0p
Effective tax rate % 17.1% 0.8% 17.9% 24.4% (3.4%) 21.0%
------------------------------- ---------- ---------- ---------- ---------- ---------- ----------
The following table shows the reconciliation of the adjusting
items impacting adjusted profit for the year in the current and
comparative year:
Year ended 31 March
----------------------
2020 2019
Continuing operations Notes GBPm GBPm
--------------------------------------------- -------- ---------- ----------
Exceptional costs in operating profit 5 24 58
Amortisation of acquired intangible assets 11 11
--------------------------------------------- -------- ---------- ----------
Total excluded from adjusted profit before
tax 35 69
Tax credit on adjusting items 7 (8) (6)
Total excluded from adjusted profit for the
year 27 63
--------------------------------------------- -------- ---------- ----------
Cash flow measure
The Group also presents an alternative cash flow measure, 'A
djusted free cash flow' which is defined as cash generated from
continuing operations after net interest and tax paid, after
capital expenditure, and excluding the impact of exceptional
items.
The following table shows the reconciliation of adjusted free
cash flow:
Year ended 31
March
-----------------
2020 2019
GBPm GBPm
---------------------------------------------------------- -------- -------
Adjusted operating profit from continuing operations 331 305
Adjusted for:
Depreciation and adjusted amortisation (1) 161 141
Share-based payments charge 14 18
Changes in working capital and other non-cash movements 2 (16)
Net retirement benefit obligations (21) (25)
Capital expenditure (166) (130)
Net interest and tax paid (74) (81)
---------------------------------------------------------- -------- -------
Adjusted free cash flow(2) 247 212
---------------------------------------------------------- -------- -------
1 Total depreciation of GBP145 million and amortisation of GBP35
million less GBP8 million of accelerated depreciation recognised in
exceptional items and GBP11 million of amortisation of acquired
intangibles.
2 IFRS 16 Leases was adopted in the year without restating
comparatives. Lease payments are now classified as financing rather
than operating cash flows, increasing adjusted free cash flow by
GBP34 million.
Financial strength measures
The Group uses two financial metrics as key performance measures
to assess its financial strength. These are the net debt to EBITDA
ratio and the return on capital employed ratio. The Group no longer
uses the interest cover ratio and so this has been removed
(principally as a result of it no longer being a covenant for the
US private placements notes).
All ratios are calculated based on unrounded figures in GBP
million.
The net debt to EBITDA ratio is as follows:
31 March
----- ---------
2020 2019
GBPm GBPm
Calculation of net debt to EBITDA ratio
Net debt(1) (Note 10) 451 337
------------------------------------------------- ----- ---------
Adjusted operating profit 331 305
Add back depreciation and adjusted amortisation 161 141
EBITDA(2) 492 446
------------------------------------------------- ----- ---------
Net debt to EBITDA ratio (times) 0.9 0.8
------------------------------------------------- ----- ---------
1 IFRS 16 Leases was adopted in the year without restating
comparatives. For the ratio calculated at 31 March 2020, IFRS 16
Lease liabilities increased net debt by GBP162 million and EBITDA
by GBP35 million. On a like-for-like basis, the net debt to EBITDA
ratio was 0.6 times. The composition of line items that make up net
debt is set out in Note 10.
2 EBITDA is calculated as adjusted operating profit (GBP331
million) adding back depreciation of GBP137 million (total
depreciation of GBP145 million less
GBP8 million of accelerated depreciation recognised in
exceptional items) and amortisation of GBP24 million (total
amortisation of GBP35 million less
GBP11 million of amortisation of acquired intangible
assets).
The return on capital employed calculation is as follows:
31 March
---------
2020 2019 2018
GBPm GBPm GBPm
----------------------------------------------------- ------- ------- ---------
Calculation of return on capital employed
Adjusted operating profit(1) 331 305
Deduct: amortisation of acquired intangible assets (11) (11)
----------------------------------------------------- ------- -------
Profit before interest, tax and exceptional items
from continuing operations for ROCE 320 294
----------------------------------------------------- ------- -------
Goodwill and other intangible assets 340 342 360
Property, plant and equipment 1 190 982 965
Working capital, provisions and non-debt-related
derivatives* 409 401 385
Invested operating capital of continuing operations 1 939 1 725 1 710
----------------------------------------------------- ------- ------- ---------
Average invested operating capital** 1 832 1 718
----------------------------------------------------- ------- -------
17.1
Return on capital employed (ROCE) % 17.5% %
----------------------------------------------------- ------- -------
1 IFRS 16 Leases was adopted in the year without restating
comparatives. For the ratio calculated at 31 March 2020, IFRS 16
Lease liabilities increased adjusted operating profit by GBP5
million and property, plant and equipment by GBP143 million. On a
like-for-like basis, the return on capital employed ratio was
17.9%.
* All derivatives held at 31 March 2020 were non-debt-related
derivatives. For the purpose of this calculation other current
financial assets and liabilities are also included.
** Average invested operating capital represents the average at
the beginning and end of the year of goodwill and other intangible
assets, property, plant and equipment, working capital, provisions
and non-debt-related derivatives.
4. Segment information
Segment information is presented on a basis consistent with the
information presented to the Board (the designated Chief Operating
Decision Maker). All revenue is from external customers.
(a) Segment results
Year ended 31 March 2020
-------------------------- ------------ -----------------------------
Food & Beverage Solutions
GBPm Primary
Sucralose Products Central Total
Continuing operations GBPm GBPm GBPm GBPm
---------------------------- -------------------------- ------------ ----------- -------- ------
Revenue 942 161 1 779 - 2 882
Adjusted operating profit* 162 63 158 (52) 331
------------------------------- -------------------------- ------------ ----------- -------- ------
Adjusted operating margin 17.2% 39.3% 8.9% n/a 11.5%
------------------------------- -------------------------- ------------ ----------- -------- ------
* Reconciled to statutory profit for the year in Note 3
Year ended 31 March 2019
-------------------------- ------------ -----------------------------
Food & Beverage Solutions
GBPm Primary
Sucralose Products Central Total
Continuing operations GBPm GBPm GBPm GBPm
---------------------------- -------------------------- ------------ ----------- -------- ------
Revenue 889 164 1 702 - 2 755
Adjusted operating profit* 143 61 148 (47) 305
------------------------------- -------------------------- ------------ ----------- -------- ------
Adjusted operating margin 16.1% 37.0% 8.7% n/a 11.1%
------------------------------- -------------------------- ------------ ----------- -------- ------
* Reconciled to statutory profit for the year in Note 3
(b) Geographic disclosures: revenue
Year ended 31
March
----------------
2020 2019
GBPm GBPm
----------------------------------- ------- -------
Food & Beverage Solutions
North America 470 430
Asia Pacific and Latin America 214 201
Europe, Middle East and Africa 258 258
Food & Beverage Solutions - total 942 889
----------------------------------- ------- -------
Sucralose - total 161 164
----------------------------------- ------- -------
Primary Products
Americas 1 683 1 588
Rest of the World 96 114
Primary Products - total 1 779 1 702
----------------------------------- ------- -------
Total 2 882 2 755
----------------------------------- ------- -------
5. Exceptional items
Exceptional items recognised in the income statement are as
follows:
Year ended 31 March
---------------------------
2020 2019
Income statement - continuing operations Footnotes GBPm GBPm
-------------------------------------------------- ----------- ----- -----
Restructuring costs (a) (19) (13)
Primary Products' savoury business exit (b) (5) -
Oats ingredients business disposal - (43)
Gain on sale and leaseback of railcars - 14
Asset remediation - (16)
Exceptional items included in profit before tax (24) (58)
-------------------------------------------------- ----------- ----- -----
In the year ended 31 March 2020, costs recorded as exceptional
related to the Group's previously-announced programme to simplify
the business and drive productivity. These are set out below:
(a) GBP19 million of restructuring costs, principally comprising
GBP5 million of severance costs for roles removed from the
organisation, and GBP14 million of productivity costs including
accelerated depreciation of assets being replaced with more
efficient alternatives, Global Operations cost saving initiatives
and other associated project costs. GBP5 million was recorded in
each of the Food & Beverage Solutions and Primary Products
operating segments and GBP9 million was recognised within
Central.
(b) A GBP5 million charge following the decision in the first
half of the year to exit the Primary Products' small, non-core
savoury ingredients business, mainly comprising the cost of writing
off the associated assets of the business.
Of the GBP24 million exceptional charge recorded during the
year, GBP9 million was reflected in exceptional cash flow. In
addition,
GBP15 million of exceptional costs recorded in the prior year
resulted in cash outflows in the year ended 31 March 2020, such
that net cash outflow from exceptional items was GBP24 million.
The most significant exceptional cost in the comparative period
related to the impairment and subsequent disposal of the Group's
oats ingredients business, all of which was recorded within the
Food & Beverage Solutions operating segment. Other exceptional
costs in the prior year included a restructuring charge, the
recognition of a provision to remediate environmental health and
safety risks associated primarily with idle assets at manufacturing
sites in North America and a gain on sale and leaseback of
railcars.
Cash flows from exceptional items are set out below.
Year ended 31
March
----------------
2020 2019
Net cash (outflows)/inflows on exceptional items Footnotes GBPm GBPm
-------------------------------------------------- ----------- ------- -------
Restructuring charges (a) (13) (6)
Primary Products' savoury business exit (b) (1) -
Oats ingredients business disposal (1) 3
Gain on sale and leaseback of railcars - 16
Asset remediation (9) (1)
Net cash (outflows)/inflows (24) 12
--------------------------------------------------------------- ------- -------
Exceptional cash flows
The total cash flows on exceptional items are included in the
statement of cash flows as follows:
Year ended 31 March
------------------------
Reconciliation to the statement of cash 2020 2019
flows Footnotes GBPm GBPm
----------------------------------------------- ------------ ---------- ----------
Exceptional charge included in profit
before tax 24 58
Cash outflows relating to restructuring
charge (a) (13) (6)
Cash outflows relating to Primary Products' (b) (1) -
savoury business exit
Cash outflows relating to asset remediation (9) (1)
--------------------------------------------------------------- ---------- ----------
As presented within cash flows from operating
activities 1 51
--------------------------------------------------------------- ---------- ----------
Cash flows relating to oats ingredients
business disposal (1) 3
Cash inflows on gain on sale and leaseback
of railcars - 16
--------------------------------------------------------------- ---------- ----------
As presented within cash flows from investing
activities (1) 19
--------------------------------------------------------------- ---------- ----------
6. Finance income and finance expense
Year ended 31 March
------------------------
2020 2019
Continuing operations GBPm GBPm
-------------------------------------------------- ---------- ----------
Interest payable on bank and other borrowings (26) (30)
Fair value hedges:
- fair value loss on interest rate derivatives (3) (4)
- fair value adjustment of hedged borrowings 3 4
Lease interest (7) (1)
Finance expense (33) (31)
----------------------------------------------------- ---------- ----------
Finance income 5 5
----------------------------------------------------- ---------- ----------
Net finance expense (28) (26)
----------------------------------------------------- ---------- ----------
7. Income tax expense
Analysis of charge for the year Year ended 31 March
----------------------
2020 2019
Continuing operations GBPm GBPm
-------------------------------------------------- ---------- ----------
Current tax:
- United Kingdom (8) (7)
- Overseas (42) (47)
- Exceptional tax credit 3 1
- Adjustments in respect of previous financial
year 6 3
---------------------------------------------------- ---------- ----------
(41) (50)
Deferred tax:
Expense for the year (10) (4)
Adjustments in respect of previous years (2) -
Exceptional tax credit/(expense) 2 (5)
Income tax expense (51) (59)
---------------------------------------------------- ---------- ----------
Statutory effective tax rate % 17.1% 24.4%
---------------------------------------------------- ---------- ----------
Year ended 31 March
----------------------
2020 2019
Reconciliation to adjusted income tax expense Note GBPm GBPm
-------------------------------------------------------------------------------- ------- ---------- ----------
Income tax expense (51) (59)
Adjusted for:
Taxation credit on exceptional items and amortisation of acquired intangibles (8) (6)
Adjusted income tax expense 3 (59) (65)
--------------------------------------------------------------------------------- ------- ---------- ----------
Adjusted effective tax rate % 17.9% 21.0%
--------------------------------------------------------------------------------- ------- ---------- ----------
8. Earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to owners of the Company by the weighted average
number of ordinary shares in issue during the year (excluding
shares held by the Company and the Employee Benefit Trust to
satisfy awards made under the Group's share-based incentive
plans).
Diluted earnings per share is calculated by adjusting the
weighted average number of ordinary shares in issue assuming
conversion of potentially dilutive ordinary shares, reflecting
vesting assumptions on employee share plans, as well as the deemed
profit attributable to owners of the Company for any proceeds on
such conversions.
The average market price of the Company's ordinary shares during
the year was 733p (2019 - 658p). The dilutive effect of share-based
incentives was 6.4 million shares (2019 - 6.9 million shares).
Year ended 31 March 2020 Year ended 31 March 2019
----------------------------------- -------------------------------------
Continuing Discontinued Continuing Discontinued
operations operations Total operations operations Total
------------------------ ------------ ------------- ------ ------------ ------------- --------
Profit attributable
to owners of the
Company (GBP million) 245 - 245 181 - 181
Weighted average
number of ordinary
shares (million)
- basic 464.2 - 464.2 462.6 - 462.6
Basic earnings per
share 52.8p - 52.8p 39.2p - 39.2p
------------------------ ------------ ------------- ------ ------------ ------------- --------
Weighted average
number of ordinary
shares (million)
- diluted 470.6 - 470.6 469.5 - 469.5
Diluted earnings
per share 52.1p - 52.1p 38.6p - 38.6p
------------------------ ------------ ------------- ------ ------------ ------------- --------
Adjusted earnings per share
A reconciliation between profit attributable to owners of the
Company from continuing operations and the equivalent adjusted
measure, together with the resulting adjusted earnings per share
measures are set out below:
Year ended 31 March
----------------------
2020 2019
Continuing operations Notes GBPm GBPm
---------------------------------------------- -------- ---------- ----------
Profit attributable to owners of the Company 245 181
Adjusting items:
- exceptional items 5 24 58
- amortisation of acquired intangible assets 11 11
- tax impact of adjusting items 7 (8) (6)
Adjusted profit attributable to owners
of the Company 3 272 244
---------------------------------------------- -------- ---------- ----------
Adjusted basic earnings per share (pence) 58.6p 52.8p
Adjusted diluted earnings per share (pence) 57.8p 52.0p
---------------------------------------------- -------- ---------- ----------
.
9. Dividends on ordinary shares
Dividends on ordinary shares in respect of the financial
year:
Year ended 31 March
----------------------
2020 2019
Pence Pence
------------------------- ---------- ----------
Per ordinary share:
Interim dividend paid 8.8 8.6
Final dividend proposed 20.8 20.8
------------------------- ---------- ----------
Total dividend 29.6 29.4
------------------------- ---------- ----------
The Directors propose a final dividend for the financial year of
20.8p per ordinary share that, subject to approval by shareholders,
will be paid on 31 July 2020 to shareholders who are on the
Register of Members on 19 June 2020.
Dividends on ordinary shares paid in the financial year:
Year ended 31 March
----------------------
2020 2019
GBPm GBPm
----------------------------------------------------- ---------- ----------
Final dividend paid relating to the prior financial
year 97 94
Interim dividend paid relating to the financial
year 40 40
Total dividend paid 137 134
----------------------------------------------------- ---------- ----------
Based on the number of ordinary shares outstanding at 31 March
2020 and the proposed amount, the final dividend for the financial
year is expected to amount to GBP96 million.
10. Net debt
The components of the Group's net debt are as follows:
At 31 March
---------------
2020 2019
GBPm GBPm
----------------------------------------------- ------- ------
Borrowings(1) (551 ) (597)
Debt-related derivative financial instruments - (25)
Lease liabilities(1) (171) -
Cash and cash equivalents 271 285
------
Net debt (451) (337)
----------------------------------------------- ------- ------
1 IFRS 16 Leases was adopted in the year without restating
comparatives. IFRS 16 lease liabilities increased net debt by
GBP162 million at 31 March 2020. During the year, GBP9 million
(2019 - GBP11 million) relating to IAS 17 finance leases has been
reclassified from borrowings to lease liabilities.
On 19 November 2019, the Group refinanced its maturing GBP200
million 6.75% bond with the proceeds from drawing down US$100
million (GBP77 million) 3.31% notes due 2029 and US$100 million
(GBP77 million) 3.41% notes due 2031, with the remaining amount
made up from cash balances. In May 2020, the Group priced a US$200
million debt private placement which will be issued on 6 August
2020 at which point US$100 million 2.91% notes maturing in 2030 and
US$100 million 3.01% notes maturing in 2032 will be drawn down.
Debt-related derivative financial instruments represent the net
fair value of currency and interest rate swaps that are used to
manage the currency and interest rate profile of the Group's net
debt. These derivative financial instruments matured during the
year at the date of the refinancing of the GBP200 million bond and
no additional debt-related derivative financial instruments were
entered into during the year. At 31 March 2019, the net fair value
of these derivatives comprised assets of GBP6 million and
liabilities of GBP31 million.
Reconciliation of the movement in cash and cash equivalents to
the movement in net debt is as follows:
Year ended 31 March
----------------------
2020 2019
GBPm GBPm
------------------------------------------------------ ---------- ----------
Net debt carried forward from the prior year (337) (392)
IFRS 16 adoption at beginning of the year(1) (167) -
------------------------------------------------------ ---------- ----------
Net debt at beginning of the year (504) (392)
------------------------------------------------------ ---------- ----------
Net (decrease)/increase in cash and cash equivalents (17) 79
Net decrease/(increase) in borrowings and leases
during the year 114 (2)
------------------------------------------------------ ---------- ----------
Decrease in net debt resulting from cash flows 97 77
Currency translation differences(2) (22) (21)
Fair value and other movements 2 (1)
Leases non-cash movements (24) -
Decrease in net debt in the year 53 55
------------------------------------------------------ ---------- ----------
Net debt at end of the year (451) (337)
------------------------------------------------------ ---------- ----------
1 IFRS 16 Leases was adopted at the beginning of the year
without restating comparatives. IFRS 16 Lease liabilities increased
net debt by
GBP162 million at 31 March 2020.
2 Includes the foreign currency element of the fair value
movement on cross currency swaps and the translation of foreign
denominated borrowings.
Movements in the Group's net debt were as follows:
Borrowings and lease liabilities
-----------------------------------
Cash and cash Debt-related
equivalents Current Non-current derivatives Total
GBPm GBPm GBPm GBPm GBPm
----------------------- ----------------------- -------------- ------------------- ----------------------- ------
At 31 March 2019 285 (224) (373) (25) (337)
----------------------- ----------------------- -------------- ------------------- ----------------------- ------
IFRS 16 adoption at
the beginning of the
year(1) - (25) (142) - (167)
----------------------- ----------------------- -------------- ------------------- ----------------------- ------
At 1 April 2019 285 (249) (515) (25) (504)
----------------------- ----------------------- -------------- ------------------- ----------------------- ------
Movements from cash
flows (17) 242 (157) 29 97
Reclassification - (30) 30 - -
Currency translation
differences 3 1 (25) (1) (22)
Fair value and other
movements - 5 - (3) 2
Lease and non-cash
movements - (9) (15) - (24)
----------------------- ----------------------- -------------- ------------------- ----------------------- ------
At 31 March 2020 271 (40) (682) - (451)
----------------------- ----------------------- -------------- ------------------- ----------------------- ------
11. Retirement benefit obligations
On 18 September, the Group supported the trustees of the main UK
pension scheme in completing a GBP930 million bulk annuity
insurance policy 'buy-in' with Legal & General Assurance
Society Limited ("Legal & General"). As a result, the assets of
the main UK pension scheme were replaced with an insurance asset
matching UK scheme liabilities.
Under the 'buy-in', Legal & General undertook to provide an
insurance policy that exactly matches the pension scheme
liabilities of the main UK pension scheme. As a result, the Group
no longer bears any investment, longevity, interest rate or
inflation risk with respect to that scheme.
A 'buy-in' is not a settlement and the liability is not
de-recognised as the Group retains ultimate responsibility for
funding the plan, although this funding is through the insurance
policy provided by Legal & General. As a result of the 'buy-in'
cash contributions into the main UK scheme will cease, saving
approximately GBP20 million of cash annually from the 2021
financial year. In addition, the Group will no longer record
interest income on the accounting surplus of about GBP5 million per
year. The impact of this transaction was to record a re-measurement
loss of GBP195 million to other comprehensive income. There was no
impact on profit before tax.
At 31 March 2020, the Group's retirement benefit obligations are
in a net deficit of GBP203 million (31 March 2019 - surplus of
GBP24 million), principally due to the impact of the 'buy-in'
transaction described above. The closing total net deficit
substantially comprises the unfunded schemes in the US. The net
deficit of GBP19 million relating to a smaller UK plan was not
subject to the 'buy-in'.
The other significant movement in retirement benefit obligations
in the year are as follows, each of which is recorded in other
comprehensive income and has no impact on profit and loss.
-- GBP60 million increase in net deficit in the US principally
from the impact of lower discount rate (from 3.8% to 2.9%);
-- GBP35 million reduction in the UK net deficit principally
from lower inflation assumptions (from 3.3% to 2.8%);
-- GBP58 million increase in net deficit from actual return on
plan assets before the 'buy-in' being lower than the interest on
these assets in the UK, partially offset by higher returns on
funded plans in the US.
Total movements are set out in the table below.
Year ended 31 March 2020
---------------------------------------------
US plans US plans
UK plans (funded) (unfunded) Total
GBPm GBPm GBPm GBPm
-------------------------------------------------- --------- ---------- ------------ ------
Net surplus/(deficit) at 1 April
2019 181 (23) (134) 24
--------------------------------------------------- --------- ---------- ------
Income statement:
- current service costs - - (2) (2)
- administration costs (1) (1) - (2)
- net interest income UK plans 5 - - 5
- net interest expense US plans - - (5) (5)
Other comprehensive income:
- actual return (lower)/higher than
interest on plan assets (78) 20 - (58)
- actuarial (loss)/gain:
- impact of the 'buy-in' (195) - - (195)
- changes in financial assumptions 35 (50) (10) (25)
- changes in demographic assumptions 12 6 5 23
- experience against assumptions 8 2 4 14
Other movements:
- employer's contributions 15 2 8 25
- non-qualified deferred compensation
arrangements - 2 - 2
- currency translation differences (1) (1) (7) (9)
Net deficit at 31 March 2020 (19) (43) (141) (203)
As the liabilities of the main UK plan were secured through the
purchase of a bulk annuity insurance policy, both core
contributions to the scheme and supplementary contributions to the
secured funding account (GBP12 million per annum and GBP6 million
per annum, respectively), ceased with effect from 1 October 2019.
Other than meeting ongoing administration costs the Group does not
expect to make any further contributions in relation to the main UK
scheme until the financial year ending 31 March 2022 when the Group
anticipates a one-off contribution to settle a post transaction
price adjustment in respect of the bulk annuity insurance policy.
Payments to the main UK scheme of GBP14 million in the year ended
31 March 2020 include a principal funding contribution of GBP6
million, a supplementary contribution of GBP6 million and GBP2
million in fees and expenses met on behalf of the scheme. During
the year ending 31 March 2021 the Group expects to contribute
approximately GBP9 million to its defined benefit pension plans and
to pay approximately GBP5 million in relation to retirement medical
benefits, principally in the US.
12. Contingent liabilities
The Group is subject to claims and litigation generally arising
in the ordinary course of its business. Provision is made when
liabilities are considered likely to arise and the expected quantum
of the exposure can be estimated reliably. The risk in relation to
claims and litigation is monitored on an ongoing basis and
provisions amended accordingly. It is not expected that claims and
litigation existing at 31 March 2020 will have a material adverse
effect on the Group's financial position.
13. Capital expenditure and commitments
In the year ended 31 March 2020, there were additions to
intangible assets (excluding goodwill and acquired intangibles)
of
GBP25 million (2019 - GBP31 million) and additions to property,
plant and equipment of GBP165 million (2019 - GBP114 million).
Total commitments for the purchase of tangible and intangible
non-current assets are GBP51 million (2019 - GBP35 million). In
addition, commitments in respect of retirement benefit obligations
and leases are detailed in Notes 11 and 14 respectively.
14. Change in accounting policies
As explained in Note 2, the Group has adopted IFRS 16 Leases and
IFRIC 23 Uncertainty over Income Tax Treatments. The impact of the
adoption of these standards is set out below. Comparatives have not
been restated.
IFRS 16 Leases
The Group has adopted IFRS 16 from 1 April 2019 using the
modified retrospective approach. The Group's leases principally
comprise railcars, properties and other miscellaneous leases such
as motor vehicles or machinery. The Group has not restated
comparatives for the 2019 financial year as permitted. The
reclassifications and the adjustments arising from the new leasing
standard are therefore recognised in the opening balance sheet on 1
April 2019.
Adjustments recognised on adoption of IFRS 16
31 March 2019
as originally presented Adjustment 1 April 2019
GBPm GBPm GBPm
Non-current assets
Property, plant and equipment 982 151 1 133
Liabilities
Trade and other payables 342 (5) 337
Borrowings 597 167 764
Deferred tax liabilities 46 (3) 43
Equity
Retained earnings 741 (8) 733
The Group has recognised liabilities for leases which had
previously been classified as 'operating leases' under IAS 17.
These liabilities were measured at the present value of the
remaining lease payments, discounted using the lessee's incremental
borrowing rate as at 1 April 2019. The weighted average incremental
borrowing rate applied to the lease liabilities on 1 April 2019 was
4%.
For leases previously classified as finance leases, the Group
recognised the carrying amount of the lease asset and lease
liability immediately before transition as the carrying amount of
the right-of-use asset and the lease liability at the date of
initial application.
1 April 2019
GBPm
Operating lease commitments disclosed as at 31 March 2019 308
Less: contract not recognised as an IFRS 16 Lease (112)
Discounted using the Group's incremental borrowing rate at the date of initial application (29)
Recognised as IFRS 16 Leases as at 31 March 2019 167
Add: finance lease liabilities as at 31 March 2019 11
Lease liability at 1 April 2019 178
Of which:
Current lease liabilities 26
Non-current lease liabilities 152
At 31 March 2019 the Group had an IAS 17 operating lease
commitment of GBP112 million in respect of an energy procurement
contract and related infrastructure. This contract was not
recognised as an IFRS 16 lease as the Group determined that it does
not have the right to direct the use of the related asset.
Where practicable the associated right-of-use assets were
measured on a retrospective basis, as if the new rules had always
been applied. Where this was not possible, right-of-use assets were
measured at the amount equal to the lease liability as at 1 April
2019. There were no onerous lease contracts that would have
required an adjustment to the right-of-use assets at the date of
initial application. The recognised right-of-use assets relate to
the following types of asset:
1 April 2019
GBPm
Railcars 97
Properties 51
Other 3
Right-of-use assets 151
In applying IFRS 16 for the first time, the Group has used the
following practical expedients permitted by the standard:
- Reliance on previous assessments of whether leases are onerous;
- Accounting for operating leases, with a remaining lease term
of less than 12 months as at 1 April 2019, as short-term leases;
and
- Excluding initial direct costs for the measurement of the
right-of-use asset at the date of initial application.
Accounting policy and key judgements
Having adopted IFRS 16 the Group applies the following approach.
At the commencement date of the lease, the Group recognises lease
liabilities measured at the present value of lease payments to be
made over the lease term which includes periods covered by renewal
options the Group is reasonably certain to exercise. In calculating
the present value of lease payments, the Group uses the incremental
borrowing rate at the lease commencement date.
The Group recognises right-of-use assets at the commencement
date of the lease. Right-of-use assets are measured at cost
including the amount of lease liabilities recognised and initial
direct costs incurred less any incentives granted by the lessor.
Right-of-use assets are subject to impairment. Right-of-use assets
are depreciated over the shorter of the lease term and the useful
life of the right-of-use assets, unless there is a transfer of
ownership or purchase option which is reasonably certain to be
exercised at the end of the lease term, in which case depreciation
is over the useful life of the underlying asset.
The carrying amounts of assets recorded as a result of IFRS 16
(included under Property, plant and equipment) and movements during
the year are set out below:
Land and buildings Plant and machinery Total
GBPm GBPm GBPm
Cost
At 1 April 2019* 51 108 159
Additions to right-of-use assets 3 14 17
Depreciation charge (7) (24) (31)
Derecognition of right-of-use assets 1 4 5
At 31 March 2020 48 102 150
*This includes GBP8 million of plant and machinery that was
previously recognised as an asset held under finances leases in
accordance with IAS 17.
The statement of profit or loss shows the following amounts in
relation to leases:
31 March 2020
GBPm
Depreciation expense of right-of-use assets 31
Interest expense on lease liabilities 7
Expense relating to short-term leases -
Expense relating to leases of low value assets 2
Expense relating to variable lease payments not included in the measurement of lease liability -
Income from sub-leasing right-of-use assets (1)
At 31 March 2020 39
The total cash outflow for leases in the year ended 31 March
2020 was GBP37 million (excluding cash outflow of GBP2 million
relating to leases of low value items).
The Group has several lease contracts that include extension and
termination options. The Group has estimated that the potential
future lease payments, should it exercise the extension option,
would result in an increase in lease liability of GBP1 million.
Lease terms are negotiated on an individual basis and contain a
wide range of different terms and conditions. The lease agreements
do not impose any covenants other than the security interests in
the leased assets that are held by the lessor. Leased assets may
not be used as security for borrowing purposes.
IFRIC 23 Uncertainty over Income Tax Treatments
The interpretation is to be applied to the determination of
taxable profit, tax bases, unused tax losses, unused tax credits
and tax rates, when there is uncertainty over income tax treatments
under IAS 12. The interpretation specifically addresses the
following:
- Whether an entity considers uncertain tax treatments separately
- The assumptions an entity makes about the examination of tax
treatments by taxation authorities
- How an entity determines taxable profit (tax loss), tax bases,
unused tax losses, unused tax credits and tax rates
- How an entity considers changes in facts and circumstances
The Group applies significant judgement in identifying
uncertainties over income tax treatments and operates in a complex
multinational environment. Following a detailed assessment the
Group has determined that the adoption of this interpretation has
not had a material impact on the Group's financial statements.
15. Events after the balance sheet date
In May 2020 the Group extended the maturity of its US$800
million revolving credit facility by a year to 2025 and priced a
committed US$200 million debt private placement which will be
issued on 6 August 2020 at which point US$100 million 2.91% notes
maturing in 2030 and US$100 million 3.01% notes maturing in 2032
will be drawn down. There are no other post balance sheet events
requiring disclosure in respect of the year ended 31 March
2020.
ADDITIONAL INFORMATION
Calculation of changes in constant currency
Where changes in constant currency are presented in this
statement, they are calculated by retranslating current year
results at prior year exchange rates. The following table provides
a reconciliation between the 2020 performance at actual exchange
rates and at constant currency exchange rates. Absolute numbers
presented in the tables are rounded for presentational purposes,
whereas the growth percentages are calculated on unrounded
numbers.
2020 Change
at constant Underlying in
2020 FX currency growth 2019 Change constant
Adjusted performance GBPm GBPm GBPm GBPm GBPm % currency
Continuing operations %
Revenue 2 882 (65) 2 817 62 2 755 5% 2%
Food & Beverage Solutions 162 (5) 157 14 143 13% 10%
Sucralose 63 (2) 61 - 61 4% 1%
Primary Products 158 (5) 153 5 148 7% 3%
Central (52) 1 (51) (4) (47) (10%) (9%)
------ ------------- ----------- ---------
Adjusted operating
profit 331 (11) 320 15 305 9% 5%
Net finance expense (28) 1 (27) (1) (26) (7%) (4%)
Share of profit after
tax of joint ventures 28 (1) 27 (3) 30 (8%) (9%)
------ ------------- ----------- ---------
Adjusted profit before
tax 331 (11) 320 11 309 7% 4%
Adjusted income tax
expense (59) 1 (58) 7 (65) 9% 11%
------ ------------- ----------- ---------
Adjusted profit after
tax 272 (10) 262 18 244 11% 8%
------ ------------- ----------- ---------
Adjusted diluted EPS
(pence) 57.8p (1.7)p 56.1p 4.1p 52.0p 11% 8%
------ ------------- ----------- ---------
Impact of changes in exchange rates
The Group's reported financial performance at average rates of
exchange for the year ended 31 March 2020 was favourably impacted
by currency translation. The average and closing US dollar and euro
exchange rates used to translate reported results were as
follows:
Average rates Closing rates
Year ended 31 March 2020 2019 2020 2019
US dollar : sterling 1.27 1.31 1.25 1.30
Euro : sterling 1.14 1.13 1.13 1.16
For the year ended 31 March 2020, net foreign exchange
translation increased Food & Beverage Solutions adjusted
operating profit by GBP5 million, increased Sucralose adjusted
operating profit by GBP2 million and increased Primary Products
adjusted operating profit by GBP5 million, with adjusted profit
before tax for the Group increasing in total by GBP11 million.
The sensitivity of the Group's results to changes in US dollar
currency translation rates for the year ending 31 March 2021 is
expected to be around GBP2.5 million for the annual impact of a one
cent change on adjusted profit before tax.
RATIO ANALYSIS
31 March 31 March
2020 2019
Net debt to EBITDA
= Net debt(1) 451 337
EBITDA 492 446
= 0.9 times = 0.8 times
Earnings dividend cover
= Adjusted basic earnings per share from continuing
operations 58.6 52.8
Dividend per share 29.6 28.9
= 2.0 times = 1.8 times
Cash dividend cover
= Adjusted free cash flow from continuing operations(2) 247 212
Cash dividends 137 134
= 1.8 times = 1.6 times
Return on capital employed
= Profit before interest, tax and exceptional items
from continuing operations 320 294
Average invested operating capital from continuing
operations 1 832 1 718
= 17.5% = 17.1%
Gearing (3)
= Net debt(1) 451 337
Total equity 1 399 1 489
= 32% = 23%
1 IFRS 16 Leases was adopted at the beginning of the year
without restating comparatives. For the ratio calculated at 31
March 2020, IFRS 16 Lease liabilities increased net debt by GBP162
million and EBITDA by GBP35 million. On a like-for-like basis, the
net debt to EBITDA ratio was 0.6 times.
2 Also as a result of the adoption of IFRS 16 Leases without
restating comparatives, lease payments are now classified as
financing rather than operating cash flows, increasing adjusted
free cash flow by GBP34 million.
3 IFRS 16 Leases was adopted at the beginning of the year
without restating comparatives. On a like-for-like basis the
gearing ratio was 20%.
All ratios are calculated based on unrounded figures in GBP
million. Net debt to EBITDA, Adjusted Free cash flow, Average
invested operating capital and return on capital employed are
defined and reconciled in Note 3 of the attached financial
information.
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(END) Dow Jones Newswires
May 21, 2020 02:00 ET (06:00 GMT)
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