REG-Tate & Lyle PLC Final Results <Origin Href="QuoteRef">TATE.L</Origin> - Part 3
28/05/2015 07:00
- Part 3: For the preceding part double click ID:nBw2T3Y7Jb
Accounting standards issued but not yet adopted
A number of new standards and amendments to standards and interpretations have
been issued that are relevant to the Group but had not been adopted at 31 March
2015:
Standards to be adopted at the beginning of the 2016 financial year
* IAS 19 Defined Benefit Plans: Employee Contributions (Amendments)
The Amendments clarify how employee contributions that are linked to service
should be attributed to periods of service and when such contributions may be
treated as a reduction in the service cost that is recognised in the income
statement. Subject to its endorsement for use in the European Union, the Group
will adopt the Amendments with effect from 1 April 2015.
Standards to be adopted in subsequent years
* IFRS 9 Financial instruments
IFRS 9 addresses the classification, measurement and recognition of financial
assets and financial liabilities. The complete version of IFRS 9 was issued in
July 2014. It replaces the guidance in IAS 39 that relates to the classification
and measurement of financial instruments. IFRS 9 retains but simplifies the
mixed measurement model and establishes three primary measurement categories for
financial assets: amortised cost, fair value through other comprehensive income
and fair value through the income statement. The standard is expected to be
effective for accounting periods beginning on or after 1 January 2018. Early
adoption is permitted subject to EU endorsement.
* IFRS 15 Revenue from contracts with customers
IFRS 15 deals with revenue recognition and establishes principles for reporting
useful information to users of financial statements about the nature, amount,
timing and uncertainty of revenue and cash flows arising from an entity`s
contracts with customers. Revenue is recognised when a customer obtains control
of a good or service and thus has the ability to direct the use and obtain the
benefits from the good or service. The standard will replace IAS 18 Revenue and
IAS 11 Construction contracts and related interpretations. The IASB has
announced that it is considering deferral of the adoption until at least 1
January 2018.
* Other pronouncements
Various minor improvements to accounting standards have arisen from the IASB`s
2010-2012, 2011-2013 and 2012-2014 review cycles.
Whilst the directors do not expect that the adoption of the standards listed
above will have a material impact on the financial statements of the Group in
future periods, the Group has not yet undertaken a detailed impact assessment on
their effect.
3.Segment information
Segment information is presented on a consistent basis with the information
presented to the Board (the designated Chief Operating Decision Maker) for the
purposes of allocating resources within the Group and assessing the performance
of the Group`s businesses. Continuing operations comprise two operating
segments: Speciality Food Ingredients and Bulk Ingredients. Central, which
comprises central costs including head office, treasury and re-insurance
activities, does not meet the definition of an operating segment under IFRS 8
`Operating Segments` but no sub-total is shown for the Group`s operating
segments in the tables below so as to be consistent with the presentation of
segment information to the Board. Both segments are served by a single
manufacturing network, and receive services from a number of global support
functions. The segmental information presented below reflects the allocation of
assets and costs based on the most appropriate methodology in each case,
consistently applied over time.
The Board uses adjusted operating profit as the measure of the profitability of
the Group`s businesses. Adjusted operating profit is, therefore, the measure of
segment profit presented in the Group`s segment disclosures. Adjusted operating
profit represents operating profit before specific items that are considered to
hinder comparison of the trading performance of the Group`s businesses either
year-on-year or with other businesses. During the years presented, the items
excluded from operating profit in arriving at adjusted operating profit were the
amortisation of acquired intangible assets and exceptional items. The Group has
presented segment and adjusted financial information on a proportionate
consolidation basis, as this reflects the management of its joint ventures on an
integrated basis with the Group`s subsidiaries. The segmental classification of
exceptional items is detailed in Note 4. An analysis of total assets and total
liabilities by operating segment is not presented to the Board but it does
receive segmental analysis of net working capital (inventories, trade and other
receivables, less trade and other payables). Accordingly, the amounts presented
for segment assets and segment liabilities in the tables below represent those
assets and liabilities that comprise elements of net working capital. The
segment results were as follows:
(a) Segment sales Notes Year ended Restated*
31 March
Year ended
2015
31 March
£m
2014
£m
Sales
Speciality Food Ingredients 908 983
Bulk Ingredients 1 786 2 164
Adjusted sales 2 694 3 147
Elimination of proportionate consolidation (338) (393)
Sales 2 356 2 754
(b) Segment results Year ended Restated*
31 March Year ended
2015
31 March
£m
2014
£m
Operating profit
Speciality Food Ingredients 149 213
Bulk Ingredients 133 172
Central (35) (36)
Adjusted operating profit 247 349
Elimination of proportionate consolidation (63) (74)
184 275
Adjusting items:
- Exceptional items 4 (142) (14)
- Amortisation of acquired intangible assets (9) (10)
Operating profit 33 251
Finance income 5 1 2
Finance expense 5 (32) (37)
Share of profit after tax of joint ventures and associates 49 61
Profit before tax 51 277
* Restated for the adoption of IFRS 11 `Joint Arrangements` (see Note 19).
Year ended Year ended
31 March 31 March
2015
2014
Percentage
Percentage
Adjusted operating margin
Speciality Food Ingredients 16.4% 21.7%
Bulk Ingredients 7.4% 7.9%
Central n/a n/a
Total 9.2% 11.1%
(c) Segment assets / (liabilities)
At 31 March 2015
Assets Liabilities Net
£m £m £m
Net working capital
Speciality Food Ingredients 306 (132) 174
Bulk Ingredients 408 (199) 209
Central 48 (37) 11
Total working capital 762 (368) 394
Elimination of proportionate consolidation (107) 39 (68)
Group working capital 655 (329) 326
Other assets/(liabilities) 1 768 (1 158) 610
Group assets/(liabilities) 2 423 (1 487) 936
At 31 March 2014 (Restated*)
Assets Liabilities Net
£m £m £m
Net working capital
Speciality Food Ingredients 242 (94) 148
Bulk Ingredients 447 (181) 266
Central 44 (42) 2
Total working capital 733 (317) 416
Elimination of proportionate consolidation (96) 32 (64)
Group working capital 637 (285) 352
Other assets/(liabilities) 1 831 (1 133) 698
Group assets/(liabilities) 2 468 (1 418) 1 050
* Restated for the adoption of IFRS 11 `Joint Arrangements` (see Note 19).
4. Exceptional items
Exceptional items recognised in arriving at operating profit were as follows:
Year ended Year ended
31 March 31 March
2015 2014
£m £m
Continuing operations
Business transformation costs (a) (12) (14)
Business re-alignment - impairment and related costs (b) (118) -
Termination of distribution rights agreement (c) (12) -
(142) (14)
Continuing operations
(a) During the year, the Group recognised costs of £12 million (2014 - £14
million) in respect of the implementation of a common global IS/IT system, and
which did not meet the criteria to be capitalised. These costs are classified
within Central costs in each of the above disclosed periods. During the year, in
total we incurred £22 million of costs associated with the implementation of the
common global IS/IT system. This brings total expenditure on the project to £146
million, including £5 million of hardware, software and associated costs.
(b) As part of the major business re-alignment announced on 21 April 2015, the
Group announced its intention to consolidate all SPLENDA® Sucralose production
into our facility in the US and close the Singapore facility which will not be
cost competitive going forward. The Group recognised an impairment charge of
£113 million within the SFI segment, comprising a full impairment of property,
plant and equipment (£108 million) and associated intangible assets (£5
million). In addition, the Group incurred £5 million of one-off costs associated
with the business re-alignment (primarily consultancy and redundancy costs)
which were classified as Central costs.
(c) The Group made a payment of £12 million in December 2014 to terminate
distribution rights previously held by a third party to sell our crystalline
fructose to customers, primarily in Asia Pacific. The expense was recognised
within the SFI segment.
The tax impact on exceptional items was an £8 million credit (2014 - £9 million
credit). Tax credits on exceptional costs are only recognised to the extent that
losses incurred will result in tax recoverable in the future.
Discontinued operations
The Group did not recognise any exceptional items in respect of discontinued
operations during the year ended 31 March 2015.
During the year ended 31 March 2014, the Group recognised an exceptional tax
credit of £28 million in discontinued operations (see note 7) following the
favourable resolution of outstanding tax matters associated with the starch
facilities which formed part of the Group`s former Food and Industrial
Ingredients, Europe segment.
5. Finance income and finance expense
Continuing operations Year ended Restated*
31 March
Year ended
2015
31 March
£m
2014
£m
Finance income 1 2
Interest receivable
Total finance income 1 2
Finance expense
Interest payable on bank and other borrowings (23) (28)
Fair value hedges:
- fair value loss on interest rate derivatives (3) (20)
- fair value adjustment of hedged borrowings 3 20
Finance lease interest (1) (1)
Net retirement benefit interest (8) (8)
Total finance expense (32) (37)
Net finance expense (31) (35)
Reconciliation to adjusted net finance expense Note £m £m
Net finance expense (31) (35)
Net retirement benefit interest 11 8 8
Adjusted net finance expense 18 (23) (27)
Finance expense is shown net of borrowing costs of £1 million (2014 - £2
million) capitalised into the cost of assets at a capitalisation rate of 3.4%
(2014 - 3.9%). Finance income and finance expense relate wholly to continuing
operations.
* Restated for the adoption of IFRS 11 `Joint Arrangements` (see Note 19).
6. Income tax expense
Continuing operations Year ended Restated*
31 March
Year ended
2015
31 March
£m
2014
£m
Current tax: - -
In respect of the current period
- UK
- Overseas 15 27
Adjustments in respect of the previous years (2) -
13 27
Deferred tax charge 8 10
Adjustments in respect of previous years - (5)
Income tax expense 21 32
Reconciliation to adjusted income tax expense £m £m
Income tax expense 21 32
Tax on exceptional items, amortisation of acquired intangibles and net retirement benefit interest 13 15
Share of tax of joint ventures and associates 14 13
Adjusted income tax expense 48 60
Profit for the year from continuing operations reflected an income tax expense
of £21 million (2014 - expense of £32 million), including an income tax credit
of £8 million (2014 - credit of £9 million) in respect of exceptional items (see
Note 4).
The Group`s adjusted effective tax rate on continuing operations, calculated on
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