REG-Tate & Lyle PLC Half-year Report <Origin Href="QuoteRef">TATE.L</Origin> - Part 2
02/11/2017 07:05
- Part 2: For the preceding part double click ID:nBw4dJ7sHa
Profit for the period – continuing operations 124 129 255
Profit for the period – discontinued operations 6 – 1 1
Profit for the period – total operations 124 130 256
Profit for the period from total operations is entirely attributable to owners
of the Company.
Earnings per share Pence Pence Pence
Continuing operations 7
– basic 26.8p 27.7p 55.0p
– diluted 26.5p 27.4p 54.2p
Total operations: 7
– basic 26.8p 28.0p 55.2p
– diluted 26.5p 27.7p 54.4p
Analysis of adjusted profit for the period – continuing operations £m £m £m
Profit before tax – continuing operations 161 128 233
Adjusted for:
Net charge for exceptional items 4 – 3 19
Amortisation of acquired intangible assets 5 6 12
Net retirement benefit interest 13 3 3 7
Adjusted profit before tax – continuing operations 2 169 140 271
Adjusted income tax expense – continuing operations 2, 5 (40) (26) (49)
Adjusted profit for the period – continuing operations 2 129 114 222
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Six months to Six months to Year to
30 September 30 September 31 March
Notes 2017 2016 2017
£m £m £m
Profit for the period 124 130 256
Other comprehensive income/(expense)
Items that have been/may be reclassified to profit or loss:
Fair value gain on cash flow hedges – 1 1
Fair value (gain)/loss on cash flow hedges transferred to the income statement (2) 4 4
Reclassified and reported in the income statement in respect of – – (1)
available-for-sale financial assets
Fair value gain on available-for-sale financial assets 1 – –
(Loss)/gain on currency translation of foreign operations (65) 147 185
Fair value gain/(loss) on net investment hedges 22 (54) (69)
Share of other comprehensive (expense)/income of joint ventures and (7) 4 7
associates
Amounts transferred to the income statement upon disposal of – (1) (1)
subsidiary
Tax effect of the above items (1) (2) –
(52) 99 126
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 13 (14) 219 179
– net actuarial gain/(loss) on net retirement benefit obligations 13 1 (279) (106)
Tax effect of the above items 1 3 (30)
(12) (57) 43
Total other comprehensive (expense)/income (64) 42 169
Total comprehensive income 60 172 425
Analysed by:
– continuing operations 60 172 425
– discontinued operations – – –
Total comprehensive income 60 172 425
Total comprehensive income is entirely attributable to owners of the Company.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)
At At At
Notes 30 September 30 September 31 March
2017 2016 2017
£m £m £m
ASSETS
Non-current assets
Goodwill and other intangible assets 381 415 401
Property, plant and equipment 1 001 1 033 1 061
Investments in joint ventures 73 83 92
Investments in associates – 4 4
Available-for-sale financial assets 35 24 30
Derivative financial instruments 10 18 15
Deferred tax assets 13 29 22
Trade and other receivables 1 – 1
Retirement benefit surpluses 13 123 8 120
1 637 1 614 1 746
Current assets
Inventories 380 365 441
Trade and other receivables 317 302 291
Current tax assets 1 2 1
Available-for-sale financial assets 1 4 –
Derivative financial instruments 35 58 31
Cash and cash equivalents 9 242 289 261
Assets classified as held for sale 15 4 – –
980 1 020 1 025
TOTAL ASSETS 2 617 2 634 2 771
EQUITY
Capital and reserves
Share capital 117 117 117
Share premium 406 406 406
Capital redemption reserve 8 8 8
Other reserves 201 226 253
Retained earnings 562 362 548
EQUITY ATTRIBUTABLE TO OWNERS OF THE COMPANY –TOTAL EQUITY 1 294 1 119 1 332
LIABILITIES
Non-current liabilities
Trade and other payables 10 11 10
Borrowings 9 574 594 604
Derivative financial instruments 27 32 37
Deferred tax liabilities 30 33 25
Retirement benefit deficits 13 242 280 259
Provisions for other liabilities and charges 16 15 17
899 965 952
Current liabilities
Trade and other payables 316 323 315
Current tax liabilities 55 66 57
Borrowings and bank overdrafts 9 28 105 88
Derivative financial instruments 17 30 17
Provisions for other liabilities and charges 8 26 10
424 550 487
TOTAL LIABILITIES 1 323 1 515 1 439
TOTAL EQUITY AND LIABILITIES 2 617 2 634 2 771
CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)
Six months to Six months to Year to
30 September 30 September 31 March
Notes 2017 2016 2017
£m £m £m
Cash flows from operating activities
Profit before tax from continuing operations 161 128 233
Adjustments for:
Depreciation of property, plant and equipment 56 50 109
Amortisation of intangible assets 20 19 40
Share-based payments 8 8 21
Exceptional items 4 (2) (10) (5)
Finance income (1) (1) (2)
Finance expense 18 16 34
Share of profit after tax of joint ventures and associates (13) (19) (32)
Changes in working capital and other non-cash movements 16 62 4
Net retirement benefit obligations (20) (20) (36)
Cash generated from continuing operations 243 233 366
Interest paid (12) (15) (30)
Net income tax paid (22) (17) (35)
Cash used in discontinued operations – (2) (3)
Net cash generated from operating activities 209 199 298
Cash flows from investing activities
Purchase of property, plant and equipment (51) (69) (127)
Purchase of intangible assets (10) (8) (26)
Disposal of property, plant and equipment – 2 2
Cash adjustment in respect of previous acquisitions – 3 3
Disposal of businesses, net of cash disposed – 3 3
Purchase of available-for-sale financial assets (7) (3) (4)
Disposal of available-for-sale financial assets 1 1 4
Interest received 1 1 2
Dividends received from joint ventures and associates 25 22 29
Net cash used in investing activities (41) (48) (114)
Cash flows from financing activities
Purchase of own shares to trust or treasury (14) – (18)
Cash inflow from additional borrowings 2 73 66
Cash outflow from repayment of borrowings (69) (182) (189)
Repayment of capital element of finance leases – – (1)
Dividends paid to the owners of the Company 8 (92) (92) (130)
Net cash used in financing activities (173) (201) (272)
Net decrease in cash and cash equivalents 9 (5) (50) (88)
Cash and cash equivalents
Balance at beginning of period 261 317 317
Net decrease in cash and cash equivalents (5) (50) (88)
Currency translation differences (14) 22 32
Balance at end of period 9 242 289 261
A reconciliation of the movement in cash and cash equivalents to the movement
in net debt is presented in Note 9.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
Attributable
Share Capital to the owners Non-controlling Totalequity
capital and redemptionreserve Other Retained of the Interests £m
share £m reserves earnings Company (NCI)
premium £m £m £m £m
£m
At 1 April 2017 523 8 253 548 1 332 – 1 332
Six months to 30 September 2017:
Profit for the period – total operations – – – 124 124 – 124
Other comprehensive expense – – (52) (12) (64) – (64)
Total comprehensive (expense)/income – – (52) 112 60 – 60
Share-based payments, net of tax – – – 8 8 – 8
Purchase of own shares to trust or treasury – – – (14) (14) – (14)
Dividends paid (Note 8) – – – (92) (92) – (92)
At 30 September 2017 523 8 201 562 1 294 – 1 294
At 1 April 2016 523 8 127 370 1 028 1 1 029
Six months to 30 September 2016:
Profit for the period – total operations – – – 130 130 – 130
Other comprehensive income/(expense) – – 99 (57) 42 – 42
Total comprehensive income – – 99 73 172 – 172
Share-based payments, net of tax – – – 8 8 – 8
Derecognition of put option on NCI – – – 3 3 – 3
Movement on NCI – – – – – (1) (1)
Dividends paid – – – (92) (92) – (92)
At 30 September 2016 523 8 226 362 1 119 – 1 119
At 1 April 2016 523 8 127 370 1 028 1 1 029
Year to 31 March 2017:
Profit for the year – total operations – – – 256 256 – 256
Other comprehensive income – – 126 43 169 – 169
Total comprehensive income – – 126 299 425 – 425
Share-based payments, net of tax – – – 24 24 – 24
Purchase of own shares to trust or treasury – – – (18) (18) – (18)
Derecognition of put option on NCI – – – 3 3 – 3
Movement on NCI – – – – – (1) (1)
Dividends paid – – – (130) (130) – (130)
At 31 March 2017 523 8 253 548 1 332 – 1 332
TATE & LYLE PLC
NOTES TO THE FINANCIAL INFORMATION For the six months to 30 September 2017
1. Presentation of half year financial information
The principal activity of Tate & Lyle PLC and its subsidiaries, together
with its joint ventures and associated undertakings, is the global provision
of ingredients and solutions to the food, beverage and other industries.
The Company is a public limited company incorporated and domiciled in the
United Kingdom and registered in England. The address of its registered office
is 1 Kingsway, London WC2B 6AT. The Company has its primary listing on the
London Stock Exchange.
Basis of preparation
This condensed set of consolidated financial information for the six months to
30 September 2017 has been prepared on a going concern basis in accordance
with the Disclosure and Transparency Rules of the Financial Conduct Authority
and with IAS 34 Interim Financial Reporting as adopted by the European Union
(EU). The condensed set of consolidated financial information should be read
in conjunction with the annual financial statements for the year to 31 March
2017, which have been prepared in accordance with IFRSs as adopted by the EU.
Having reviewed the Group’s latest projected results, cash flows, liquidity
position and borrowing facilities, 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 condensed set of financial information
and that there are no material uncertainties around their assessment.
Accordingly, the Directors continue to adopt the going concern basis of
accounting in preparing the condensed set of consolidated financial
information.
The condensed set of consolidated financial information is unaudited, but has
been reviewed by the external auditors. The condensed set of consolidated
financial information in the Statement of Half Year Results does not
constitute statutory accounts within the meaning of Section 434 of the
Companies Act 2006. The Group’s published consolidated financial statements
for the year to 31 March 2017 were approved by the Board of Directors on 24
May 2017 and filed with the Registrar of Companies. The report of the auditors
on those accounts was unqualified and did not contain an emphasis of matter
paragraph or a statement under Section 498 (2) or (3) of the Companies Act
2006. The condensed set of consolidated financial information for the six
months to 30 September 2017 on pages 15 to 34 was approved by the Board of
Directors on 1 November 2017.
Changes in accounting policy and disclosures
The accounting policies adopted in the preparation of the condensed set of
consolidated financial information are consistent with those of the Group’s
Annual Report and Accounts for the year to 31 March 2017, but also reflect the
adoption, with effect from 1 April 2017, of new or revised accounting
standards, as set out below:
- IAS 12 Income taxes (Amendments) (effective 1 January 2017)
- IAS 7 Statement of Cash Flows (Amendments) (effective 1 January 2017)
- Annual Improvements to IFRS – 2014-16 cycle
The adoption of these amendments from 1 April 2017 has had no material effect
on the Group’s financial statements.
The following new standards have been issued and are relevant to the Group,
but were not effective for the financial year beginning 1 April 2017, and have
not been adopted early:
- IFRS 15 – Revenue from Contracts with Customers (effective for the year
ending 31 March 2019)
As disclosed in May 2017, the Group has undertaken a review of its commercial
arrangements across all significant revenue streams and geographies including
assessing the timing of revenue recognition as well as focusing on the
accounting for principal and agency relationships, consignment stocks and
discounts provided. As a result of the review, the Group has concluded that
the adoption of IFRS 15 is not expected to have a material impact on reported
revenue or revenue growth rates, and will continue to review its contracts and
transactions with customers to ensure compliance with IFRS 15 on adoption.
- IFRS 9 – Financial Instruments (effective for the year ending 31 March
2019)
As also disclosed in May 2017, the Group has undertaken a review of the key
areas of IFRS 9 focused principally on classification and measurement of
financial assets and liabilities, impairment of financial assets and hedge
accounting. The Group has concluded that the adoption of IFRS 9 will not have
a material impact on its consolidated results or financial position, and will
continue to review its activities in these areas to ensure compliance with
IFRS 9 upon adoption.
- IFRS 16 – Leases (effective for the year ending 31 March 2020, subject to
endorsement by the EU)
The standard eliminates the classification of leases as either operating or
finance leases and introduces a single accounting model, and will require the
Group to recognise substantially all of its current operating lease
commitments on the statement of financial position. The Group will undertake a
review of its lease arrangements and intends to provide an update of the
impact in the Group’s 2018 Annual Report.
-IFRIC 23 – Uncertainty over Income Tax Treatments (effective for the year
ending 31 March 2020, subject to EU endorsement)
The interpretation is to be applied to the determination of taxable profit
(tax loss), tax bases, unused tax losses, unused tax credits and tax rates,
when there is uncertainty over income tax treatments under IAS 12. The
financial impact of this, together with any other implications of this
interpretation, will be assessed during the 2019 financial year.
There are no other new standards, new interpretations or amendments to
standards or interpretations that have been published that are expected to
have a significant impact on the Group’s financial statements.
Seasonality
The Group's principal exposure to seasonality is in relation to working
capital. The Group's inventories are subject to seasonal fluctuations
reflecting crop harvesting and purchases. Inventory levels typically increase
progressively from September to November and gradually reduce in the first six
months of the calendar year.
Changes in constant currency
Where changes in constant currency are presented in this statement, they are
calculated by retranslating current period results at prior period exchange
rates. Reconciliations of the movement in constant currency have been included
in the additional information within this document.
Use of alternative performance measures
The Group also presents alternative performance measures, including adjusted
operating profit, adjusted profit before tax, adjusted earnings per share,
adjusted operating cash flow and adjusted free cash flow, which are used for
internal performance analysis and incentive compensation arrangements for
employees. These measures are presented because they provide investors with
valuable additional information about the performance of the business. For the
periods presented, alternative performance measures exclude, where relevant:
- Exceptional items (excluded as they relate to events which are unlikely to
recur, are outside the normal course of business 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);
- Net retirement benefit interest (accounting charges or credits which are not
linked to the underlying performance of the business. The amounts excluded
reflect the net interest cost of post-retirement benefit plans substantially
closed to future accrual); and
- Tax on the above items and tax items that themselves meet these definitions.
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
2.
Exceptional items
Exceptional items comprise items of income and expense, including tax items
that are material in amount, relate to events which are unlikely to recur, are
outside the normal course of business 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 and expense as exceptional items include, but are not limited
to: impairment events; significant business transformation activities;
disposals of operations or significant individual assets; litigation claims by
or against the Group; changes in tax legislation; and restructuring of
components of the Group’s operations.
All material amounts relating to exceptional items in the Group’s financial
statements are classified on a consistent basis across accounting periods.
Discontinued operations
An operation is classified as discontinued if it is a component of the Group
that: (i) has been disposed of, or meets the criteria to be classified as held
for sale; and (ii) represents a separate major line of business or geographic
area of operations or will be disposed of as part of a single co-ordinated
plan to dispose of a separate major line of business or geographic area of
operations. The results, assets and liabilities and cash flows of discontinued
operations are presented separately from those of continuing operations.
There was no activity classified within discontinued operations in the six
months to 30 September 2017.
Discontinued operations in the comparative periods related to the disposal of
the Group’s Moroccan subsidiary. As part of a broader transaction with
Archer Daniels Midland Inc. (ADM), the Group sold its corn wet mill in
Casablanca, Morocco to ADM on 1 June 2016.
2. Reconciliation of alternative performance measures
For the reasons set out in Note 1, the Group presents alternative performance
measures including adjusted operating profit, adjusted profit before tax and
adjusted earnings per share.
For the periods presented, these alternative performance measures exclude,
where relevant:
– exceptional items;
– the amortisation of acquired intangible assets;
– net retirement benefit interest; and
– tax on the above items and tax items that themselves meet these
definitions.
The following table shows the reconciliation of the key alternative
performance measures to the most directly comparable measures reported in
accordance with IFRS:
Six months to 30 September 2017 Six months to 30 September 2016
£m unless otherwise stated IFRS Adjustingitems Adjusted IFRS Adjusting Adjusted
Continuing operations reported reported reported items reported
Sales 1 398 – 1 398 1 321 – 1 321
Operating profit 165 5 170 124 9 133
Net finance expense (17) 3 (14) (15) 3 (12)
Share of profit after tax of joint ventures and associates 13 – 13 19 – 19
Profit before tax 161 8 169 128 12 140
Income tax (expense)/credit (37) (3) (40) 1 (27) (26)
Profit for the year 124 5 129 129 (15) 114
Basic earnings per share 26.8p 1.2p 28.0p 27.7p (3.1p) 24.6p
Diluted earnings per share 26.5p 1.1p 27.6p 27.4p (3.1p) 24.3p
Effective tax rate expense/(credit) 22.8% 23.5% (0.9%) 18.3%
Year to 31 March 2017
Continuing operations IFRS Adjusting Adjusted
reported items reported
Sales 2 753 – 2 753
Operating profit 233 31 264
Net finance expense (32) 7 (25)
Share of profit after tax of joint ventures and associates 32 – 32
Profit before tax 233 38 271
Income tax credit/(expense) 22 (71) (49)
Profit for the year 255 (33) 222
Basic earnings per share 55.0p (7.2p) 47.8p
Diluted earnings per share 54.2p (7.1p) 47.1p
Effective tax rate (credit)/expense (9.6%) 18.2%
The following table shows the reconciliation of the adjusting items in the
current and comparative periods:
Continuing operations Six months to Six months to Year to
30 September 30 September 31 March
Notes 2017 2016 2017
£m £m £m
Exceptional items in operating profit 4 – 3 19
Amortisation of acquired intangible assets 5 6 12
Total excluded from adjusted operating profit 5 9 31
Net retirement benefit interest 13 3 3 7
Total excluded from adjusted profit before tax 8 12 38
Tax on adjusting items 5 (3) (1) (6)
Exceptional deferred tax credits 4, 5 – (26) (65)
Total excluded from adjusted profit for the period 5 (15) (33)
The Group also presents two alternative cash flow measures which are defined
as follows:
(a) Adjusted free cash flow represents cash generated from continuing
operations after net interest paid, income tax paid, and capital expenditure,
and excluding the impact of exceptional items.
(b) Adjusted operating cash flow is defined as adjusted free cash flow from
continuing operations, adding back net interest and tax paid, retirement cash
contributions, and excluding derivative and margin call movements within
working capital.
The following table shows the reconciliation of these alternative cash flow
performance measures:
Six months to Six months to Year to 31
30 September 30 September March
2017 2016 2017
£m £m £m
Adjusted operating profit from continuing operations 170 133 264
Adjusted for:
Depreciation and adjusted amortisation 71 63 137
Share-based payments charge 8 8 21
Changes in working capital and other non-cash movements 16 62 4
Net retirement benefit obligations (20) (20) (36)
Capital expenditure (61) (77) (153)
Net interest and tax paid (33) (31) (63)
Adjusted free cash flow 151 138 174
Add back: net interest and tax paid 33 31 63
Add back: net retirement cash contributions 25 23 42
Less: derivatives and margin call movements within changes in 4 (7) (6)
working capital
Adjusted operating cash flow 213 185 273
The Group presents certain financial measures as defined in its external
financial covenants as Key Performance Indicators. Net debt to EBITDA and
interest cover are defined under the Group’s financial covenants and are
required to be reported on a proportionate consolidation basis. For financial
covenant purposes these ratios are calculated based on the accounting
standards that applied for the 2014 financial year, with new accounting
standards adopted by the Group subsequent to 1 April 2014 disregarded, with
performance based on the preceding 12 months’ results. Net debt is
calculated using average currency exchange rates. All ratios are calculated
based on unrounded figures in £ million. The following table presents the
calculation of these alternative measures:
30 September 30 September 31 March
2017 2016 2017
£m £m £m
Calculation of Net debt to EBITDA ratio – on a financial covenant
basis
Net debt (see Note 9) 371 418 452
Further adjustments set out in financial covenants:
to reflect use of average exchange rates in translating net debt and 28 (33) (13)
proportionate consolidation
Net debt – on a financial covenant basis 399 385 439
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