REG-Tate & Lyle PLC Final Results <Origin Href="QuoteRef">TATE.L</Origin> - Part 3
25/05/2017 07:05
- Part 3: For the preceding part double click ID:nBwbHCRQvb
Speciality Food Ingredients 339 (150) 189
Bulk Ingredients 341 (146) 195
Central 11 (54) (43)
Group working capital – continuing operations 691 (350) 341
Group working capital – discontinued operations 5 (2) 3
Group working capital – total operations 696 (352) 344
Other assets/(liabilities) 1 858 (1 173) 685
Group assets/(liabilities) 2 554 (1 525) 1 029
5. Exceptional items
Exceptional items recognised in arriving at operating profit were as follows:
Year ended 31 March
2017 2016
Footnotes £m £m
Continuing operations
Business re-alignment – impairment, restructuring and other net costs (a) (5) (48)
Asset (impairments)/reversals and related costs (b) (26) 3
US retirement benefit obligation settlement gain (c) 9 –
Tate & Lyle Ventures disposals (d) 3 7
SPLENDA(®) Sucralose – revised table top commercial (e) – (2)
agreement
US litigation (f) – (15)
Slovakia re-measurement gain (g) – 5
Exceptional items – continuing operations* (19) (50)
Discontinued operations
Business re-alignment – Eaststarch and Morocco disposals (h) 1 64
ASR litigation settlement (i) – (18)
Exceptional items – discontinued operations 1 46
Exceptional items – total operations (18) (4)
* Net tax on exceptional items within continuing operations was £nil (2016
– £21 million net credit).
In addition, the following exceptional tax items were recognised in the
current and comparative year:
Year ended 31 March
2017 2016
Footnotes £m £m
Continuing operations
Recognition of UK tax losses (j) 34 –
Sucralose IP transfer (k) 31 –
Exceptional deferred tax credit – continuing operations 65 –
Discontinued operations
Moroccan tax matters (l) – (5)
Exceptional tax charge – discontinued operations – (5)
Exceptional tax credit/(charge) – total operations 65 (5)
Continuing operations – within operating profit
(a) In the year ended 31 March 2017, the Group recognised a further net £5
million charge (£6 million of additional cash costs offset by a £1 million
non-cash credit) in respect of the business re-alignment of SPLENDA(®)
Sucralose and its European operations. Cash payments in respect of this
re-alignment were £21 million. The net £5 million charge was recognised
within the Speciality Food Ingredients segment.
In the year ended 31 March 2016, the Group recognised exceptional costs
relating to business re-alignment totalling £48 million. Of this charge, £43
million was recognised within the Speciality Food Ingredients segment, and £5
million was classified within Central costs. Of this total charge, £29
million was paid in cash in 2016.
The final total of business re-alignment costs relating to the Group’s
restructuring programme announced in April 2015 was £171 million, with £61
million being cash costs and £110 million being non-cash costs.
(b) In the year ended 31 March 2017, the Group recognised a net £13 million
exceptional charge in respect of its Brazilian Food Systems business, Gemacom
Tech Indústria E Comércio S.A.. The charge comprised a partial impairment of
goodwill totalling £16 million, reflecting lower growth expectations against
the backdrop of a significantly weakened macroeconomic outlook in Brazil, and
a credit of £3 million arising from lower contingent consideration now
expected to fall due in 2019 under the terms of the December 2014 acquisition
agreement. The net charge was recognised within the Speciality Food
Ingredients segment.
In the year ended 31 March 2017, the Group recognised a £7 million charge in
respect of its equity interest in Jiangsu Tate & Lyle Howbetter Food Co.,
Ltd, its Food Systems subsidiary in China, which the Group sold on 23 December
2016. The charge comprised a £3 million cost reflecting the impact of
impairing and deconsolidating the Group’s investment (itself a cash
generating unit) before disposal, together with a £4 million charge for
associated costs. Accordingly, the Group has derecognised the £3 million
financial liability previously recorded in equity for the written put option
over the minority shareholder’s equity interest. Cash payments for costs
totalled £3 million to date. This charge was recognised within the Speciality
Food Ingredients segment.
Also recognised in the year ended 31 March 2017 was a non-cash charge of £6
million in respect of the impairment of certain redundant assets at our
Decatur facility in the US, that are no longer in use in the business. The
charge was recognised within the Bulk Ingredients segment.
In the year ended 31 March 2016, the Group recognised a non-cash exceptional
credit of £3 million in respect of the recognition of a partial reversal of
an impairment of plant and equipment assets which were previously impaired
through an exceptional charge. The exceptional credit was classified within
the Bulk Ingredients segment.
(c) During the year ended 31 March 2017, the Group recognised a £9 million
non-cash gain in respect of the settlement of certain elements of its US
retirement benefit plan obligations. Under the settlement, some deferred
members of the plans elected to receive a lump sum during the year ended 31
March 2017, in exchange for surrendering their rights to future payments under
the scheme. The exceptional gain was recognised within the Bulk Ingredients
segment (£6 million) and the Speciality Food Ingredients segment (£3
million).
(d) In the year ended 31 March 2017, the Group recognised a £3 million cash
gain, primarily in respect of deferred consideration received following
disposal of part of its venture fund portfolio which was previously classified
as an available-for-sale financial asset. This profit was classified within
central costs.
In the year ended 31 March 2016, the Group recognised a net £7 million gain
(£9 million gain partially offset by a £2 million loss), primarily from
disposals in its venture fund portfolio.
(e) In the year ended 31 March 2016, the Group received cash compensation of
£5 million related to SPLENDA(®) Sucralose and the renegotiation of our
commercial agreements for the SPLENDA(®) Sucralose brand table top business.
The Group also wrote off a marketing related intangible asset (loss of £9
million) and wrote back an associated payable (gain of £2 million). These
amounts were all classified within the Speciality Food Ingredients segment.
(f) In the year ended 31 March 2016, the Group recognised a £15 million
exceptional charge in respect of two US litigation cases: one brought by the
American Sugar Association (£9 million – cash settled); and another in
respect of the Passaic River litigation (£6 million). See Note 14 for further
details.
(g) In the year ended 31 March 2016, as part of the re-alignment of the
Eaststarch joint venture, the Group recognised an exceptional gain of £5
million within continuing operations reflecting the re-measurement to fair
value of its existing investment in Slovakia. This gain was classified within
the Speciality Food Ingredients segment.
Net tax on exceptional items within continuing operations was £nil (2016 –
£21 million net credit). Tax credits/charges on exceptional items are only
recognised to the extent that gains/losses incurred are expected to result in
tax recoverable/payable in the future.
Discontinued operations – within operating profit
(h) On 1 June 2016, the Group completed the sale of its corn wet mill in
Casablanca, Morocco to ADM, receiving gross cash proceeds of £4 million. In
the year ended 31 March 2017, following completion of this disposal, the Group
recognised a £1 million exceptional gain resulting from the recycling of
cumulative foreign exchange translation gains from reserves to the income
statement. This non-cash gain was recognised within the Bulk Ingredients
segment.
In the year ended 31 March 2016, the Group recognised a net exceptional gain
of £64 million in relation to the exit from a substantial part of its
European Bulk Ingredients business. The Group recognised an exceptional profit
on disposal of £68 million in respect of the disposal of its share in the
Eaststarch joint venture (see Note 16). The Group also recognised a £4
million non-cash impairment charge in respect of its Bulk Ingredients facility
in Morocco with an agreement reached with ADM to purchase this facility. The
impairment represented the excess of book carrying value over the expected
proceeds.
(i) In the year ended 31 March 2016, the Group recognised an £18 million
exceptional charge within discontinued operations for settlement made with
American Sugar Refining, Inc. (‘ASR’) in respect of claims made in
relation to its acquisition of the Group’s EU Sugars business in September
2010.
There was no tax on discontinued exceptional items in either the current or
comparative year.
Continuing operations – exceptional taxation items
(j) In the year ended 31 March 2017, following changes in UK tax legislation
and changes to the internal financing arrangements we use to fund our
international businesses, the Group recognised an exceptional deferred tax
credit of £34 million, reflecting previously unrecognised tax losses in the
UK, which, based on enacted legislation, are now expected to be utilised
against future UK taxable profits.
(k) During the year ended 31 March 2017, the Group undertook the transfer at
fair value of its sucralose intellectual property assets from the UK to the
US, to align ownership with the corresponding manufacturing base following the
move to consolidate all sucralose production into our US facility in the 2016
financial year. This transaction led to the recognition of an exceptional
deferred tax credit of £31 million, reflecting the anticipated future tax
benefits.
Discontinued operations – exceptional taxation items
(l) During the year ended 31 March 2016, the Group recognised an exceptional
tax charge of £5 million in discontinued operations in respect of historical
tax matters relating to the Moroccan facility which the Group has now sold to
ADM.
Exceptional cash flows
Year ended 31 March
2017 2016
Net cash outflow on exceptional items: Footnotes £m £m
Continuing operations
Business re-alignment – impairment, restructuring and other net costs (a) (21) (29)
Asset (impairment)/reversals and related costs (b) (3) –
SPLENDA(®) Sucralose – revised table top commercial (e) – 5
agreement
US litigation (f) – (9)
Net cash outflow – exceptional items (24) (33)
Income statement charge – included in profit before tax 19 50
Adjustment for: exceptional items – per cash flow statement (5) 17
In addition, in the year ended 31 March 2017, there were exceptional cash
flows relating to the sale of assets from the Group’s venture fund portfolio
totalling £2 million (2016 – £18 million) recognised within cash from
investing activities.
6. Finance income and finance expense
Year ended 31 March
Continuing operations Note 2017 2016
£m £m
Net finance expense
Interest payable on bank and other borrowings (25) (22)
Fair value hedges:
– fair value loss on interest rate derivatives (4) (4)
– fair value adjustment of hedged borrowings 4 4
Finance lease interest (1) (1)
Net retirement benefit interest 13 (7) (6)
Unwinding of discount on liabilities (1) (1)
Finance expense (34) (30)
Finance income 2 1
Net finance expense (32) (29)
Reconciliation to adjusted net finance expense Note £m £m
Net finance expense (32) (29)
Net retirement benefit interest 7 6
Adjusted net finance expense – continuing operations 3 (25) (23)
Finance expense is shown net of borrowing costs capitalised within property,
plant and equipment of £2 million (2016 – £2 million) at a capitalisation
rate of 3.8% (2016 – 3.3%).
Interest payable on other borrowings includes £0.2 million (2016 – £0.2
million) of dividends in respect of the Group’s 6.5% cumulative preference
shares. Finance income and finance expense relate wholly to continuing
operations.
7. Income tax expense
Year ended 31 March
Continuing operations 2017 2016
£m £m
Current tax:
– United Kingdom – –
– Overseas (23) (32)
Adjustments in respect of previous years – 2
(23) (30)
Deferred tax:
Credit for the year 45 24
Adjustments in respect of previous years – 1
Income tax credit/(expense) 22 (5)
Reconciliation to adjusted income tax expense – continuing Note £m £m
operations
Income tax credit/(expense) 22 (5)
Taxation on exceptional items, amortisation of acquired intangibles and (6) (27)
net retirement benefit interest
Exceptional deferred tax credits 5 (65) –
Adjusted income tax expense – continuing operations 3 (49) (32)
The Group’s adjusted effective tax rate on continuing operations, calculated
on the basis of the adjusted income tax expense of £49 million (2016 – £32
million) as a proportion of adjusted profit before tax of £271 million (2016
– £193 million) was 18.2% (2016 – 16.5%).
The Group’s reported tax rate on continuing operations, calculated on the
basis of the reported income tax credit of £22 million (2016 – charge of
£5 million) as a proportion of profit before tax of £233 million (2016 –
£126 million) was a credit of 9.6% (2016 – charge of 4.0%).
The Group’s income tax credit for the year ended 31 March 2017 of £22
million (2016 – charge of £5 million) is stated after recognition of a net
deferred tax credit of £45 million (2016 – £25 million). The deferred tax
credit comprises exceptional deferred tax credits of £65 million (2016 –
£nil) partially offset by underlying net deferred tax charges of £20 million
(2016 – £25 million net credit).
Exceptional deferred tax credits recognised in the year of £65 million
comprised two items. Firstly, changes to UK tax legislation and the Group’s
internal financing structure which led to the recognition of an exceptional
deferred tax credit of £34 million arising from previously unrecognised tax
losses in the UK, which, based on enacted legislation, are now expected to be
utilised against future UK taxable profits. Secondly, the Group also
transferred at fair value its sucralose intellectual property assets from the
UK to the US. This transfer led to the recognition of an exceptional deferred
tax credit of £31 million. Further details can be found in Note 5.
The Group’s adjusted income tax charge of £49 million (2016 – £32
million) is stated before the exceptional deferred tax credits above, and the
tax impact of the adjustments made between reported and adjusted profit before
tax (being adjustments for amortisation of acquired intangibles, exceptional
items in operating profit and net retirement benefit interest items).
The Group had tax losses of £508 million at 31 March 2017 (2016 – £753
million) for which no deferred tax has been recognised as there is uncertainty
as to whether taxable profits against which these assets may be recovered,
will be available.
The standard rate of corporation tax in the UK reduced from 20% to 19% with
effect from 1 April 2017 and is expected to reduce from 19% to 17% with effect
from 1 April 2020. Tax legislation in the countries the Group operates in,
notably the US is subject to increased levels of geopolitical uncertainty.
Further changes in tax legislation could have a material impact on the
Group’s tax charge and/or the amount of deferred tax recognised in future
accounting periods.
8. Discontinued operations and assets classified as held for sale
The discontinued operations of the Group are disclosed in Note 2.
The results of the discontinued operations which have been included in the
consolidated income statement were as follows:
Year ended 31 March 2017
Discontinued operations Notes Eaststarch / Morocco Total Discontinued £m
Sales 4 3
Operating profit including exceptional items 1
Profit for the year – discontinued operations 1
Basic and diluted earnings per share – discontinued operations 9 0.2p
On 1 June 2016, the Group completed the sale of its corn wet mill in
Casablanca, Morocco to ADM, receiving gross cash proceeds of £4 million and
recognising a £1 million exceptional gain in the year ended 31 March 2017
(see Note 5).
Year ended 31 March 2016
Discontinued operations Notes Eaststarch / Morocco £m Sugars / EU Starch £m Total Discontinued £m
Sales 4 13 – 13
Operating profit/(loss) including exceptional items 65 (20) 45
Share of profit after tax of joint ventures and associates 2 – 2
Profit/(loss) before tax 67 (20) 47
Income tax charge (exceptional item) 5 (5) – (5)
Profit/(loss) for the year – discontinued operations 62 (20) 42
Basic earnings per share – discontinued operations 9 9.0p
Diluted earnings per share – discontinued operations 9 8.9p
In the year ended 31 March 2016, sales of £13 million were recognised by the
Group’s corn wet mill in Casablanca, Morocco. The Group realised an
exceptional profit on disposal of £68 million in respect of the disposal of
the Hungarian, Bulgarian and Turkish Eaststarch plants. This exceptional
profit was partially offset by a £3 million operating loss in relation to the
Group’s corn wet mill in Casablanca, Morocco which included an exceptional
impairment charge of £4 million (see Note 5). The £20 million loss relating
to Sugars and EU Starch comprised the £18 million ASR charge as described in
Note 5 and a £2 million Amylum UK Pension Scheme payment.
The results of the discontinued operations which have been included in the
consolidated statement of cash flows were as follows:
Year ended 31 March 2017
Discontinued operations Eaststarch / Morocco
Total Discontinued
£m
Profit before tax from discontinued operations 1
Adjustment for: (4)
Exceptional items and changes in working capital
Cash used in discontinued operations (3)
Year ended 31 March 2016
Discontinued operations Eaststarch / Morocco £m Sugars / EU starch £m Total Discontinued £m
Profit/(loss) before tax from discontinued operations 67 (20) 47
Adjustments for: (69) (5) (74)
Exceptional items and changes in working capital
Share of profit after tax of joint ventures and associates (2) – (2)
Cash used in discontinued operations (4) (25) (29)
Assets classified as held for sale
There were no assets or liabilities classified as held for sale at 31 March
2017.
At 31 March 2016, the assets and liabilities of Tate & Lyle Morocco SA
were classified as held for sale, based on the agreement to sell to ADM, which
completed on 1 June 2016. The carrying amounts of assets and liabilities
totalled £5 million (consisting of assets totalling £7 million and
liabilities totalling £2 million) after recognition of a £4 million
impairment charge (see Note 5).
9. 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 an average of 4 million shares (2016 – 4
million 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 to assume conversion of potentially
dilutive ordinary shares, reflecting vesting assumptions on employee share
plans, as well as the profit attributable to owners of the Company for any
proceeds on such conversions. Potentially dilutive ordinary shares arise from
awards made under the Group’s share-based incentive plans. Potentially
dilutive ordinary shares are dilutive only when the average market price of
the Company’s ordinary shares during the period exceeds their exercise price
(options) or issue price (other awards). The greater any such excess, the
greater the dilutive effect. The average market price of the Company’s
ordinary shares during the year was 695p (2016 – 574p). The dilutive effect
of share-based incentives was 7.1 million shares (2016 – 3.4 million
shares).
Year ended 31 March 2017 Year ended 31 March 2016
Continuing Discontinued Total Continuing Discontinued Total
operations operations operations Operations
Profit attributable to owners of the Company (£ million) 255 1 256 121 42 163
Weighted average number of ordinary shares (millions) – basic 464.1 464.1 464.1 464.3 464.3 464.3
Basic earnings per share 55.0p 0.2p 55.2p 26.1p 9.0p 35.1p
Weighted average number of ordinary shares (millions) – diluted 471.2 471.2 471.2 467.7 467.7 467.7
Diluted earnings per share 54.2p 0.2p 54.4p 25.9p 8.9p 34.8p
Adjusted earnings per share
A reconciliation between profit attributable to owners of the Company from
continuing operations and the equivalent adjusted metric, together with the
resulting adjusted earnings per share metrics can be found below:
Year ended 31 March
Continuing operations Notes 2017 2016
£m £m
Profit attributable to owners of the Company 255 121
Adjusting items:
– exceptional items 5 19 50
– amortisation of acquired intangible assets 12 11
– net retirement benefit interest 6,13 7 6
– tax effect of the above adjustments 7 (6) (27)
– exceptional deferred tax credits 5,7 (65) –
Adjusted profit attributable to owners of the Company 3 222 161
Adjusted basic earnings per share (pence) – continuing operations 47.8p 34.7p
Adjusted diluted earnings per share (pence) – continuing operations 47.1p 34.5p
10. Dividends on ordinary shares
The Directors propose a final dividend for the financial year of 19.8p per
ordinary share that, subject to approval by shareholders, will be paid on 1
August 2017 to shareholders on the Register of Members on 30 June 2017.
Based on the number of ordinary shares outstanding at 31 March 2017 and the
proposed amount, the final dividend for the financial year is expected to
amount to £92 million. Total dividends paid during the year were £130
million (2016 – £130 million).
Dividends on ordinary shares in respect of the financial year:
Year ended 31 March
2017 2016
Pence Pence
Proposed in respect of the financial year:
Interim 8.2 8.2
Final 19.8 19.8
28.0 28.0
Paid in the financial year:
Interim – in respect of the financial year 8.2 8.2
Final – in respect of the prior financial year 19.8 19.8
28.0 28.0
11. Net debt
The components of the Group’s net debt are as follows:
At 31 March
2017 2016
£m £m
Non-current borrowings (604) (556)
Current borrowings and bank overdrafts (88) (200)
Debt-related derivative financial instruments (21) 5
Cash and cash equivalents 261 317
Net debt (452) (434)
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. At 31 March 2017, the net
fair value of these derivatives comprised assets of £17 million (2016 –
£24 million) and liabilities of £38 million (2016 – £19 million).
Movements in the Group’s net debt were as follows:
Year ended 31 March
2017 2016
£m £m
Net debt at beginning of the year (434) (555)
(Decrease)/increase in cash and cash equivalents in the year (88) 108
Net decrease in borrowings(*) 124 29
Fair value and other movements 3 (1)
Currency translation differences (57) (15)
(Increase)/decrease in net debt in the year (18) 121
Net debt at end of the year (452) (434)
* Where relevant, net change in borrowings includes repayments of capital
elements of finance leases of £1 million (2016 - £4 million).
12. Investments in Joint Ventures
A reconciliation of the carrying amount of the Group’s interest in joint
ventures (at share) can be found in the below table:
Year ended 31 March
2017 2016
£m £m
Investments in joint ventures at beginning of the year 82 323
Share of profit after tax of joint ventures – total operations 32 30
Disposal (including goodwill) – (177)
Dividends paid (29) (82)
Other comprehensive income/(expense) (including exchange) 7 (12)
Investments in joint ventures at end of the year 92 82
The disposal in the year ended 31 March 2016 reflects the re-alignment of the
Group’s interest in the Eaststarch joint venture.
13. Retirement benefit obligations
At 31 March 2017, the net liability in respect of retirement benefits was
£139 million (2016 – £208 million). The £69 million deficit improvement
was driven primarily by an increase in the surplus of the main UK scheme
reflecting an increase in the value of all asset classes and lower retirement
benefit obligations driven by reduced mortality rates, partially offset by a
reduction in the discount rate used to discount future pension obligations.
The movement in the net liability is analysed as follows:
At 31 March 2017 At 31 March 2016
Pensions Medical Total Pensions Medical Total
£m benefits £m £m benefits £m
£m £m
Present value of the benefit obligation (1 693) (76) (1 769) (1 568) (66) (1 634)
Fair value of plan assets 1 630 – 1 630 1 426 – 1 426
Net liability (63) (76) (139) (142) (66) (208)
Presented as:
Deficits (183) (76) (259) (187) (66) (253)
Surpluses 120 – 120 45 – 45
Net liability (63) (76) (139) (142) (66) (208)
Changes in the net liability during the year are analysed as follows:
Year ended 31 March 2017
Pensions Medical Total
£m benefits £m
£m
Net liability at 1 April 2016 (142) (66) (208)
(Increase)/decrease in the benefit obligation:
– service cost - current (2) (1) (3)
– plan administration costs (3) – (3)
– interest on benefit obligation (56) (2) (58)
– net actuarial loss (105) (1) (106)
– benefits paid 120 4 124
– settlement gain (exceptional item – see Note 5) 9 – 9
– re-measurement of non-qualified deferred compensation arrangements (2) – (2)
– currency translation differences (86) (10) (96)
Net increase in the benefit obligation (125) (10) (135)
Increase/(decrease) in the fair value of plan assets:
– interest on plan assets 51 – 51
– actual return higher than interest on plan assets 179 – 179
– employer’s contributions 38 4 42
– benefits paid (120) (4) (124)
– currency translation differences 56 – 56
Net increase in the fair value of plan assets 204 – 204
Net liability at 31 March 2017 (63) (76) (139)
The main UK scheme triennial valuation as at 31 March 2016 was concluded
during the year, with core funding contributions maintained at £12 million
per year, with the Group also committing to extend the supplementary
contributions payable into the secured funding account of £6 million per year
until 31 March 2023.
14. Contingent liabilities
Passaic River
The Group remains subject to a legal case arising from the notification in
2007 by the U.S. Environmental Protection Agency (‘USEPA’) that Tate &
Lyle, along with approximately 70+ others, is a potentially responsible party
(‘PRP’) for a 17 mile section of the northern New Jersey Passaic River, a
major ‘Superfund’ site. In March 2016, the USEPA issued its Record of
Decision (‘ROD’) on the likely cost for the remediation of the lower 8
mile section of the river (the most contaminated). Whilst Tate & Lyle will
continue to vigorously defend itself in this matter, in light of the
publication of the ROD, the Group took an exceptional charge of £6 million in
the year ended 31 March 2016. The Group continues to be unable to estimate a
reasonably possible range of loss in respect of the remaining 9 mile section
of the river and therefore has not recognised a provision in this regard.
Other claims
The Group is subject to claims and litigation generally arising in the
ordinary course of its business, some of which are for substantial amounts.
All such actions are strenuously defended but provision is made for
liabilities that are considered likely to arise on the basis of current
information and legal advice. While there is always uncertainty as to the
outcome of any claim or litigation, it is not expected that claims and
litigation existing at 31 March 2017 will have a material adverse effect on
the Group’s financial position.
15. Capital expenditure and commitments
In the year ended 31 March 2017, there were additions to intangible assets
(excluding goodwill and acquired intangibles) of £26 million (2016 – £19
million) and additions to property, plant and equipment of £128 million (2016
– £175 million).
Commitments at the balance sheet date were as follows:
At 31 March
2017 2016
£m £m
Commitments for the purchase of intangible assets – 1
Commitments for the purchase of property, plant and equipment 25 47
Total commitments 25 48
16. Acquisitions and disposals
Completion of Moroccan Disposal
On 1 June 2016, the Group completed the sale of its corn wet mill in
Casablanca, Morocco to ADM, receiving gross cash proceeds of £4 million. The
investment had previously been classified as held for sale at 31 March 2016.
The Group recognised an operating exceptional impairment charge of £4 million
in the year ended 31 March 2016, aligning book value with expected proceeds
after allowing for working capital and cash extracted from the business before
completion. In the current financial year, the Group recognised a £1 million
exceptional gain resulting from the recycling of cumulative foreign exchange
translation gains from reserves to the income statement upon disposal of the
investment.
During the year ended 31 March 2016, the Group recognised an exceptional tax
charge of £5 million within discontinued operations in respect of historical
tax matters in Morocco.
Completion of Howbetter disposal
On 23 December 2016, the Group completed the disposal of Jiangsu Tate &
Lyle Howbetter Food Co., Ltd, its Food Systems subsidiary in China,
recognising a £7 million operating exceptional charge in respect of impairing
and deconsolidating the entity prior to disposal, and the associated costs of
exiting (see Note 5).
Eaststarch re-alignment
Update in the current financial year
During the year ended 31 March 2017, the Group concluded its purchase price
allocation in respect of the acquisition of the remaining 50% of the plant in
Slovakia, Amylum Slovakia s.r.o (subsequently renamed Tate & Lyle Boleraz
s.r.o.). The Group recognised a £1 million increase to the provisional
goodwill that was recognised at 31 March 2016 following a re-measurement of
net assets acquired.
Eaststarch re-alignment made during the year ended 31 March 2016
On 31 October 2015, the Group completed the re-alignment of its Eaststarch
joint venture with ADM. Under the re-alignment, the Group disposed of the
predominantly bulk ingredients plants in Bulgaria, Turkey and Hungary and
acquired the remaining 50% interest in the more speciality food ingredients
focused plant in Slovakia not already owned by the Group. The Group received
net cash consideration of £173 million (€240 million) at closing.
Although the cash consideration was received as a single net amount, IFRS
requires this consideration to be grossed-up to determine the cash effectively
paid to acquire the 50% interest in the Slovakia business and the cash
received for the disposal of the plants in Bulgaria, Turkey and Hungary. In
addition, as the acquisition of the Slovakian business was a step acquisition,
the Group’s existing interest in this plant was required to be re-measured
to its fair value, which was then included as a component of the consideration
paid for the acquisition. This gross-up of the net cash consideration was done
at fair value. The result was that consideration of £112 million (€156
million) was paid for the acquired business, comprising £56 million (€78
million) of cash consideration and £56 million (€78 million) for the fair
value of the Group’s existing interest in Slovakia. Each of the components
of the Eaststarch re-alignment, comprising the acquisition accounting for the
Slovakia business, the gain on re-measurement of the Group’s existing
interest in that plant and the disposal of the plants in Bulgaria, Turkey and
Hungary, are outlined below.
Acquisition of Amylum Slovakia s.r.o.
As noted above, as part of the re-alignment of the Eaststarch joint venture,
the Group acquired the remaining 50% of the more speciality focused plant in
Slovakia, Amylum Slovakia s.r.o., and subsequently renamed it Tate & Lyle
Boleraz s.r.o. Total consideration in respect of the Slovakian acquisition was
£115 million. The fair value of identifiable net assets acquired was £80
million, resulting in provisional goodwill as at 31 March 2016 of £35 million
(which was not deductible for tax purposes).
The plant in Slovakia provides a solid base from which to grow the Group’s
Speciality Food Ingredients business in Europe and an opportunity to increase
production at the plant over time. Provisional goodwill of £35 million
primarily represented the premium paid to acquire an established business with
a proven workforce and growth potential in the Speciality Food Ingredients
market.
At the same time, two long-term distribution agreements were also put in place
under which the Group distributes crystalline fructose, a speciality
sweetener, produced by ADM in Turkey and ADM acts as exclusive distributor for
bulk ingredients, produced in the Group’s Slovakia and Netherlands
facilities.
The acquired business in Slovakia contributed sales of £52 million and an
operating profit of £2 million for the period from acquisition on 31 October
2015 until the end of the 2016 financial year (including the amortisation of
acquired intangibles recognised from the acquisition). Had the business been
acquired at the beginning of the 2016 financial year, it would have
contributed sales of £130 million and an operating profit of £5 million in
the 2016 financial year. Acquisition related costs were recognised as part of
the overall Eaststarch re-alignment transaction costs (within exceptional
items) and in cash flows from operating activities in the consolidated
statement of cash flows.
The following tables provide a summary of the acquisition accounting:
Year ended
31 March
2016
£m
Consideration 56
Non cash consideration (fair value of existing interest in Slovakian 56
joint venture)
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