REG - Treatt PLC - Full Year Results
04/12/2024 07:00
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RNS Number : 7551O Treatt PLC 04 December 2024
TREATT PLC
FULL YEAR RESULTS
YEAR ENDED 30 SEPTEMBER 2024
Strong performance, poised to accelerate growth
Treatt, the manufacturer and supplier of a diverse and sustainable portfolio
of natural extracts and ingredients for the beverage, flavour and fragrance
industries, announces today its audited results for the financial year ended
30 September 2024.
Financial Financial Change
year ended
year ended
30 September 2024
30 September
2023
Revenue £153.1m £147.4m +3.8%
Gross profit £44.5m £44.8m (0.8)%
Gross profit margin 29.1% 30.4% (130)bps
Profit before tax and exceptional items £19.1m £17.3m +10.1%
Profit before tax £18.5m £13.5m +36.3%
Adjusted EBITDA(1) £24.9m £23.0m +8.4%
Adjusted basic earnings per share(2) 24.47p 22.94p +6.7%
Basic earnings per share 23.61p 18.01p +31.1%
Total dividend per share 8.41p 8.01p +5.0%
Net debt £0.7m £10.4m (92.9)%
Adjusted net operating margin 13.0% 12.4% +60bps
Adjusted return on average capital employed(3) 13.6% 12.2% +140bps
Return on average capital employed 12.6% 9.0% +360bps
(1) EBITDA is calculated as operating profit plus depreciation and
amortisation. The adjusted measure excludes exceptional items.
(2) Adjusted earnings per share measures exclude exceptional items and the
related tax effect.
(3) Return on average capital employed is calculated by dividing operating
profit before exceptional items (as shown in the Group income statement) by
the average capital employed in the business, which is calculated as total
equity (as shown in the Group balance sheet) plus net debt or minus net cash
(as shown in the Group reconciliation of net cash flow to movement in net
debt), averaged over the opening, interim and closing amounts. The adjusted
measure excludes exceptional items.
FINANCIAL HIGHLIGHTS:
· Revenue growth of 4% (6% in constant currency), driven by strong
H2 revenue growth of 13% reflecting organic growth from new business wins and
a normalisation in industry demand
· Full year revenue was marginally lower than anticipated (by 1.4%)
as extreme weather in the US delayed a large shipment at year-end, shifting
associated revenue into 2025
· Record adjusted EBITDA of £24.9m, growth of 8% (FY23: £23.0m),
reflecting strong cost disciplines and other self-help measures embedded
· Profit before tax and exceptional items growth of 10% (13% in
constant currency) to £19.1m (2023: £17.3m), slightly ahead of Board
expectations
· Year-end net debt significantly reduced to £0.7m (2023:
£10.4m), reflecting the robust cash generation and investment discipline
· Full year dividend of 8.41p up 5%, reflecting our progressive
dividend policy
OPERATIONAL HIGHLIGHTS:
· Strong Heritage growth, with a focus on utilising capacity,
growing volumes with strategic customers and price increases in Citrus due to
sustained higher commodity prices. Treatt remains a key strategic supplier to
flavour houses as demand normalised in Synthetic Aroma
· China continues growth momentum; new Shanghai innovation facility
approved to accelerate localised innovation and customer collaboration
· Strong growth in Tea underpinned by multiple branded wins in
North America; progressing with investment in pilot plant to accelerate new
product trials and scale up across our Premium segment
· Focus on driving revenue growth, including recruitment of
experienced industry experts based closer to our customers.
David Shannon, CEO of Treatt, commented:
"I'm pleased to be delivering a strong set of results for the year, my first
since joining Treatt in June.
"We made great progress, with growth in both sales and profit, boosted by a
really strong revenue performance in the second half, up 13%. And I am
particularly pleased that we have brought net debt right down thanks to our
strong cash generation, with further momentum to be cash positive in the new
financial year. This performance not only reflects good conversion of the
order book and the strong cost discipline that's now embedded across the
Group, but also normalising demand trends and the benefits of investment. We
have invested for growth, expanding our commercial teams, bringing them closer
to customers, and are close to opening our new Shanghai innovation centre, in
line with our strategic focus in the region.
"Since I started, my reasons for joining Treatt have been reinforced. I have
seen firsthand that it has a great reputation in the market. This is a strong
business with a leading market position, perhaps no surprise, as it is full of
talented people. We punch above our weight, with innovative products offering,
cutting edge technologies and deep, longstanding relationships with our
customers.
"I'm excited about the future and I see clear opportunities to build on what
has been achieved so far. We will look to enhance our agility and explore new
areas within existing, adjacent and new markets. We are well positioned for
the future and I look forward to working with the talented team to achieve
Treatt's longer term ambitions."
Analyst and investor conference call
A conference call for analysts and investors will be held at 9a.m. today, 4
December 2024. For dial-in details, please contact MHP at treatt@mhpc.com
(mailto:treatt@mhpc.com) .
Enquiries:
Treatt plc +44 (0)1284 702500
David Shannon Chief Executive Officer
Ryan Chief Financial Officer
Govender
Joint Broker +44 (0)20 7597 5970
Investec Bank plc
Patrick Robb
David Anderson
Joint Broker +44 (0)20 7418 8900
Peel Hunt Plc
George Sellar
Finn Nugent
Financial PR +44 (0)20 3128 8339
MHP
Tim Rowntree
Eleni Menikou
About the Group
Treatt is a global, independent manufacturer and supplier of a diverse and
sustainable portfolio of natural extracts and ingredients for the flavour,
fragrance and multinational consumer product industries, particularly in the
beverage sector. Renowned for its technical expertise and knowledge of
ingredients, their origins and market conditions, Treatt is recognised as a
leader in its field.
The Group employs in the region of 400 staff in Europe, North America and Asia
and has manufacturing facilities in the UK and US. Its international footprint
enables the Group to deliver powerful and integrated solutions for the food,
beverage and fragrance industries across the globe.
For further information about the Group, visit www.treatt.com
(https://protect.checkpoint.com/v2/___http:/www.treatt.com___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzo0YTUwYjc1ZGVhNTZhNjIxZjM1MTljMjkxZmY0MzA0NDo2OjM5MGM6MzBkMzAyNjM0NGVkNzYxZWM1YjNkMjBkMTdkMmE1NTZhZDYzMmI3MWZjNDA3NmZkNjRmYTE2OGZhNTY2YjUxNTpwOkY6Tg)
.
CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING STATEMENTS
This announcement contains forward-looking statements that are subject to risk
factors associated with, among other things, the economic and business
circumstances occurring from time to time in the countries, sectors and
markets in which the Group operates. It is believed that the expectations
reflected in these statements are reasonable, but they may be affected by a
wide range of variables which could cause actual results to differ materially
from those currently anticipated. No assurances can be given that the
forward-looking statements in this announcement will be realised. The
forward-looking statements reflect the knowledge and information available at
the date of preparation of this announcement and the Group undertakes no
obligation to update these forward-looking statements. Nothing in this
announcement should be construed as a profit forecast.
Chairman's statement
"Treatt is in a strong position to deliver further growth. With the arrival of
our new CEO, we are well-positioned to build on the strengths of our talented
colleagues, enviable reputation, and state-of-the-art facilities to sustain
and accelerate growth in existing, adjacent and new markets."
Performance - financial and environmental
I am pleased to report that Treatt has delivered another strong year, with
progress in a number of areas as summarised below.
Revenues grew by 3.8% to £153.1m (2023: £147.4m) and profits before tax and
exceptional items by 10.1% to £19.1m (2023: £17.3m), with profits before tax
growing by 36.3% from £13.5m to £18.5m. Adjusted EBITDA was also at a record
£24.9m (2023: £23.0m). As anticipated, our first quarter was impacted by
global customer destocking. Pleasingly, our team delivered growth in each of
the following three quarters, to achieve results for the year as a whole in
line with expectations. Through strong discipline, net debt was reduced by
£9.7m to £0.7m.
We are proud to have accelerated our sustainability journey, after the
formation of our ESG Board Advisory Panel last year. We have now achieved a
4.6% reduction towards our near-term SBTi validated 42% carbon reduction
target by 2030. We are working to embed sustainability into every part of our
business as we look to further differentiate ourselves and drive growth, by
providing customers with value-add solutions that support their environmental
commitments.
Our remarkable people
Our full year performance is a significant achievement in the context of
challenging market conditions and internal management changes. Full credit
goes to our resilient colleagues for their hard work, commitment, and agility
during the year and I would like to express my thanks to each of them.
Board and leadership
I am delighted that David Shannon joined the Board as our CEO in June 2024 to
help drive Treatt's growth and deliver its considerable potential. He has
significant experience of delivering growth in an innovation-led environment,
having spent over 25 years at Croda. David is already making an impressive
impact with colleagues, customers, suppliers, investors and other
stakeholders.
I would like to thank Ryan Govender, our CFO, who led the Company as Interim
CEO between January and June 2024. Having seamlessly transitioned the CEO role
to David, Ryan has now added the Europe Managing Director role to his
responsibilities. Together, I know they will make a formidable team.
I would also like to thank Alison Sleight for leading the Company's financial
operations in the Interim CFO role until June 2024. She did an outstanding
job, and continues to make a huge contribution in her role as Group Finance
and IT Director.
Finally, as announced in November 2024, I extend my sincere gratitude to our
Non-Executive Director David Johnston who has decided to retire following the
AGM in January 2025. David has been a dedicated and valued member of our Board
and we are grateful for his insight and counsel during the 14 years of his
tenure.
Defined benefit pension scheme
Our defined benefit pension scheme has an accounting surplus of £5.6m (2023:
£3.7m) and we have reached agreement with the trustees to suspend further
pension contributions as the scheme is self-sufficient under its 2024
actuarial valuation. This will save approximately £450,000 cash annually,
freeing up funds to invest in driving business growth. We will continue to
work collaboratively with the scheme trustees to further secure the scheme's
long-term position.
Dividend
The Board proposes a final dividend of 5.81p (2023: 5.46p) which, if approved
by shareholders, will make a total dividend for the year of 8.41p (2023:
8.01p), in line with our progressive dividend policy and medium-term objective
of three times cover.
Outlook and our significant growth potential
Treatt has developed many strengths over its 138-year history, including deep
customer relationships, extensive technical and sourcing expertise, a
reputation for quality and fantastic facilities.
We now have the opportunity to significantly leverage these strengths by
generating more revenues in existing, adjacent and new markets. Capitalising
on this potential, alongside enhancing our processes, is a key priority for
David, Ryan, and the management team. They are highly motivated to grow the
business and increase shareholder value, supported by improving market
conditions and an energised team. Based on these factors, and Treatt's
delivery of solid profit growth for two consecutive years in challenging
markets, the Board is optimistic about the prospects for the business.
Vijay Thakrar
Chair
4 December 2024
Chief Executive's review
David Shannon shares his perspectives since joining Treatt in June, as well as
his priorities and views on the outlook for the business.
What attracted you to join Treatt?
I am honoured and excited to be the new CEO of Treatt. It's a business that
has had an impressive success story over the last decade and I am confident
that my experience working in a global speciality ingredients company will
drive continued success well into the future.
It was a combination of factors that align closely with my personal and
professional values that attracted me to the business. Firstly, the Company's
inclusive culture fosters a genuine family feel and makes everyone feel
supported and part of something special.
I'm also really impressed by Treatt's focus on speciality ingredients and how
the team are leveraging technology to lead in some exciting niches. The
Company is not just keeping up with fast-growing markets but setting the pace.
Sustainability is another huge factor for me. It's great to see a company
that's not only innovative, but also committed to making a positive impact on
the environment and for its stakeholders more broadly.
And let's not forget the Company's reputation in the industry. It's fantastic
to be part of a team that's known for excellence and forward-thinking
strategies, and I am excited by the opportunities for further growth.
How would you describe your impressions of the business so far?
Treatt has a strong track record of growth historically, well run, with a wide
customer base and broad product portfolio, and innovation at its heart. It has
a state-of-the-art head office, laboratory and factory in the UK, as well as a
facility in the citrus heartland of Florida, US, with great potential and
capacity for growth. The Company is very well positioned to take advantage of
both global and local trends in the flavours industry and has strong growth
prospects. With my perspectives from the wider industry, I have identified
some further focus areas as we develop our strategy for the future.
Which insights from your previous roles are you bringing to your new position?
Based on my experience in a larger, global business, I believe Treatt can
unlock growth by expanding beyond its core markets of the US and Western
Europe. Being closer to our customers is key to understanding their needs and
developing novel solutions to help them win. In addition, to driving
best-in-class customer experience, I can help accelerate our innovation to
develop a rich pipeline of short-, medium- and longer-term transformational
R&D.
I am also focused on ensuring Treatt's value-added services, including
industry-leading quality assurance behind our products, and a sustainability
programme working towards full transparency and traceability on our raw
materials, are fully recognised by our customers. As well as simplifying and
standardising internal processes.
Finally, I want to continue to embed a strong safety culture, positioning
safety as value within the organisation.
Looking ahead, what are your priorities for the next year and beyond?
I believe Treatt has the potential to accelerate its growth and fully deliver
on its strategic objectives, which are being refined to capture the
opportunities we have identified. In the next 12 months we plan to push into
new geographies in Asia and Latin America in particular, while enhancing
customer intimacy in the markets we serve today through investment in sales,
market insights and longer-term transformational innovation to enhance our
product offering and stay ahead of industry trends. I'm exploring
diversification of the business in our adjacent markets, and to expand in
known markets and beyond.
It is important the strategy is cascaded through the organisation such that
everyone can see how their role contributes. Treatt's culture - warm,
inclusive, low ego, supportive, resilient and tenacious - is a great asset to
help us execute our strategy, but we also need to ensure the business is
structured optimally and "match fit" for the future. There is scope to
simplify and standardise some of our internal processes to be more agile and
efficient.
How do you see the outlook for Treatt, and what do you see as the greatest
opportunities and challenges for the business?
We will continue to develop our heritage business including our citrus
platform, while turbocharging efforts on the premium end of our range. Health
& wellness and fruit & vegetables are fast-growth markets that we are
well positioned to take advantage of. We are excited with the growth
opportunities brought by the newly expanded TreattZest ingredient portfolio,
as well as the opportunities in new markets such as China. In addition to our
longer-term programme to develop transformational technology, we will continue
to innovate locally for our customers to give them a fast route to market with
on-trend solutions.
Treatt has made strong progress in this area, and there is an opportunity to
further embed sustainability into everything we do and to take more of a
leadership role in the industry when it comes to transparency, traceability
and a well-developed decarbonisation strategy, allowing our customers to buy
lower carbon ingredients and solutions to help them meet their own
sustainability objectives.
In the medium term I envisage Treatt being a truly global solutions provider
of sustainably led flavour technologies. We will be recognised for our highly
talented people, state-of-the-art innovation, diverse product portfolio and we
will be admired by our stakeholders.
I am excited for the future and look forward to continuing to work with our
talented and dedicated colleagues to realise our ambitions.
David Shannon
Chief Executive Officer
4 December 2024
Financial review
Overview
During a year of management transition, I am particularly pleased with the
growth in revenue, adjusted EBITDA and profit before tax and exceptionals
(PBTE) of the Group in 2024. The Business Leadership Team and all our
colleagues at Treatt have shown strong resilience in the year.
We delivered record revenue, with growth of 3.8% to £153.1m (5.7% in constant
currency). In the second half, we accelerated revenue growth, reflecting new
business wins and a normalisation in industry demand.
We continued to embed strong cost disciplines and other self-help measures
implemented in the prior year, which allowed us to deliver record adjusted
EBITDA of £24.9m, and grow PBTE by 10.1% to £19.1m. Foreign exchange impacts
were minimal in the year.
Year end net debt significantly reduced to £0.7m (2023: £10.4m), ahead of
Board expectations, reflecting the robust cash generation and financial
discipline of the business.
Our focus on strategic action in the year allowed us to deliver significant
growth in China, launch a new range of Treattzest products and invest in
expanding our commercial teams, with experienced industry experts based closer
to our customers.
Our strong customer base, well invested infrastructure, and strategic
relevance in the beverage market will allow us to seize multiple commercial
opportunities and accelerate growth.
Income statement
Revenue
Revenue for the year increased by 3.8% to £153.1m (2023: £147.4m), and by
5.7% in constant currency. Growth accelerated in the second half, with 13%
revenue year on year growth, driven by favourable sales in citrus and China.
Categories % share of sales
% of revenue Citrus Herbs, spices & florals Synthetic aroma Tea Health & wellness Fruit & vegetables Coffee
2024 56% 5% 14% 7% 8% 9% 1%
2023 53% 7% 13% 5% 8% 11% 3%
Revenue in our heritage segment, which includes citrus (excluding China and
Treattzest), herbs, spices & florals and synthetic aroma grew by 8.2% with
revenue of £104.3m (2023: £96.4m). Citrus represents 56% of total revenue,
and continues to be a core focus for Treatt, growing by 8.8% year-on-year,
driven by increased volumes in strategic accounts and price increases required
due to sustained higher citrus commodity prices. Synthetic aroma grew by 19.3%
year-on-year as flavour house demand normalised and our focussed sales efforts
showed results.
Premium, which includes tea, health & wellness and fruit & vegetables,
were in line with the prior year with revenue of £34.8m (2023: £34.9m) as
strong growth in tea, underpinned by multiple FMCG iced tea wins in the North
American market, was offset with slower consumer demand in other premium
beverage categories in the second half. Innovation, including collaboration
with our customers, remains a key focus in order to convert our healthy
pipeline of opportunities in this segment.
New markets, which include China, Treattzest citrus, and coffee declined as
expected by 13.0% with revenue of £14.0m (2023: £16.1m). However, China
revenues grew 20.0% in the year, with multiple second-half wins with local
beverage brands. Coffee, which is still a nascent category for Treatt,
declined with lower volumes in ready-to-drink cold brew coffee in North
America. We remain confident in our coffee products and have a healthy
pipeline.
Geographical % share of sales:
% of revenue UK Germany Ireland Rest of Europe USA Rest of the Americas China Rest of the world
2024 5% 3% 12% 10% 38% 9% 8% 15%
2023 6% 4% 10% 9% 42% 9% 7% 13%
Geographical analysis of revenues shows that the UK and Europe improved due to
markets recovering from destocking, as well as increased sales activity in
Europe, whereas the USA declined mainly due to lower coffee volumes and slower
end consumer demand.
Revenue in the Group's largest market, the USA, declined by 5.5% to £58.0m
(2023: £61.4m) representing 38% of the Group total (2023: 42%). Within the
US, the Group saw a slowdown in end consumer demand, as well as lower coffee
volumes.
In the UK, revenues increased to £8.1m (2023: £8.0m). Sales to Europe, which
represented 25% of Group revenue (2023: 23%), reporting total sales of £37.7m
(2023: £33.6m), as flavour house demand normalised, as well as increased
sales presence in Europe being beneficial.
China growth has been exciting, reported revenue to the country increased by
19.9% to £11.4m (2023: £9.5m). We continue to be optimistic about the
commercial opportunities in this market with a large proportion of the growth
from new business wins, particularly in local FMCG beverage customers in
China.
Sales to the rest of the world (excluding China) grew by 5.0%, to £23.4m
(2023: £22.3m), reflecting growth in Asia which is increasingly important as
we expand our global reach.
Profit
Gross profit margin was 29.1% (29.2% in constant currency) declining by 130
basis points (2023: 30.4%). The movement was mainly driven by growth in lower
margin Heritage sales. We focussed on maintaining cash contribution despite
high commodity prices in citrus, and we are pleased to be able to support
customers with reformulation on cheaper substitutes.
Administrative expenses (excluding exceptional items) reduced by 7.1% in the
year to £24.6m (2023: £26.5m) despite inflationary pressures, with strong
discipline and other self-help measures embedded. This was a result of the
strong cost disciplines embedded in the business in the prior year. During the
year we have invested for revenue growth, by expanding our commercial teams
with experienced industry experts based closer to our customers. Headcount
across the Group only increased by 9 heads to 374 heads in September 2024
(September 2023: 365).
Operating profit (excluding exceptional items) increased 8.4% to £19.9m
(2023: £18.3m) and statutory operating profit increased 32.5% to £19.2m
(2023: £14.5m).
Adjusted net operating margin increased in the year to 13.0% (2023: 12.4%),
despite the decline in gross profit margin due to the significant reduction in
administrative expenses (excluding exceptional items). Net operating margin
significantly increased in the year to 12.6% (2023: 9.9%), with higher
operating profit and reduction in exceptional costs. Our medium-term target
for adjusted net operating margin remains at 15%.
Adjusted return on average capital employed (ROACE) increased by 140 basis
points to 13.6% (2023: 12.2%) as a consequence of the increase in operating
profits during the year whilst capital employed decreased with good working
capital disciplines in place. Statutory return on average capital employed
increased to 12.6% (2023: 9.0%) over the year. As well as growth in adjusted
basic earnings per share, ROACE is included as a performance metric for LTIPs.
Our medium-term target range for ROACE remains at 15 to 20%.
Exceptional items (see note 8 to the financial statements) were minimal in the
year at £0.6m, (2023: £3.8m), included restructuring costs and final
expenses in relation to the relocation of the UK business.
Adjusted earnings before interest, tax, depreciation and amortisation
(adjusted EBITDA(3) ) for the year increased by 8.4% to £24.9m (2023:
£23.0m) whereas statutory EBITDA reported a 26.6% increase to £24.3m (2023:
£19.2m).
Profit before tax and exceptional items from continuing operations grew by
10.1% to £19.1m (2023: £17.3m). Reported profit after tax for the year of
£14.4m represents an increase of 31.6% on the prior year.
Foreign exchange gains and losses
The Group's functional currency is the British Pound (Sterling) but the
majority of the Group's business is transacted in other currencies which
creates a foreign exchange exposure, particularly in the US Dollar and, to a
lesser extent, the Euro.
During the year Sterling strengthened against the US Dollar, ending the year
9.7% stronger at £1 = $1.34 (2023: £1 = $1.22); the average Sterling/US
Dollar exchange rate for the year was 3.3% stronger compared with the prior
year.
The overall impact in 2024 of the transactional foreign exchange gains and
losses in the UK operations was a total gain of £0.1m (2023: £0.1m loss).
This comprised £0.7m (2023: £0.5m) of transactional FX losses, mitigated by
the recognition of £0.8m (2023: £0.4m) of gains on FX contracts. This
successful mitigation of the risk is down to continued implementation of the
principles of the Group's FX risk management policy.
Finance costs
The Group's finance costs were £1.0m (2023: £1.1m). Despite a significant
reduction in net debt in the year, the group was impacted by an increase in
the average interest rates on borrowings.
Included in net finance costs are fixed facility fees for maintaining
facilities for future use. Group interest cover for the year before
exceptional items increased to 25.6 times (2023: 18.8 times), this is well
above the covenant of 1.5 times.
Group tax charge
After providing for deferred tax, the Group tax charge increased by £1.5m to
£4.1m (2023: £2.6m); an effective tax rate (after exceptional items) of
22.0% (2023: 19.2%).
Earnings per share
Basic earnings per share increased by 31.1% to 23.61p (2023: 18.01p). Adjusted
basic earnings per share for the year increased by 6.7% to 24.47p (2023:
22.94p). The calculation of earnings per share excludes those shares which are
held by the Treatt Employee Benefit Trust (EBT), which are not beneficially
owned by employees since they do not rank for dividend and are based upon
profit after tax.
Dividends
The proposed final dividend increases by 6.4% to 5.81p per share (2023:
5.46p). The total dividend per share increases by 5.0% to 8.41p (2023: 8.01p),
representing dividend cover of 2.8 times earnings for the year and a rolling
three-year cover after exceptional items of 2.9 times. The Board considers
this to be appropriate cover at this stage of the Group's development and
against our aim to work towards our historical level of dividend cover of
three times earnings.
Balance sheet
Shareholders' funds grew in the year by £4.8m to £142.0m (2023: £137.2m),
with net assets per share increasing by 3.3% to £2.32 (2023: £2.25). Over
the last five years net assets per share have grown by 60.2%. The Board has
chosen not to avail itself of the option under IFRS to revalue land and
buildings annually and, therefore, all the Group's land and buildings are held
at historical cost, net of depreciation, on the balance sheet.
Inventory held at the year-end was £51.9m (2023: £62.4m), a decrease of
£10.5m. This decrease was driven by a reduction in inventory volume, as
supply chains normalised, partially offset with higher raw material costs. One
factor in the success of the business is our management of risks, such as
geographic, political and climatic, to ensure continuity of supply for our
customers. Consequently, the overall level of inventory held by the Group is
highly significant in cash terms.
Net debt
At the year-end date the Group's net debt position was £0.7m (2023: £10.4m)
including leases of £0.4m (2023: £0.5m), with available unused facilities of
£43.3m (2023: £35.7m). This is the result of a focus on cash generation and
disciplines in place. This allows us to focus on future capital allocation,
invest in the right areas for the business, and also helps mitigate against
higher interest costs.
The Group retains a mix of secured and unsecured borrowing facilities, which
now total £43.7m (2023: £45.4m) across the UK and the US. In the UK, the
Group has a £25.0m asset-based lending facility with HSBC for a three-year
term, with an optional accordion (pre-approved facility) of £10.0m and option
to extend the term of facility for a further year. This facility lends against
the value and quality of inventory and receivables within the UK business and
strengthens the ability of the Group to borrow in the UK.
The US business has a $25.0m revolving credit facility with Bank of America
with an optional accordion of $10.0m and falls for renewal in May 2026.
The Group continues to enjoy positive relationships with its banks and expects
all facilities to be renewed or refinanced successfully when they fall due.
Cash flow
Net cash inflow for the year was £9.6m (2023: £12.0m) when excluding the
repayment of bank facilities and leases. This is due to the continuing focus
across the business on working capital efficiency, cash generation and cash
retention.
During the year the Group invested £5.7m (2023: £4.1m) on capital projects.,
details of which are set out below.
There was an overall improvement in working capital, generating an inflow of
£0.6m (2023: £3.5m), which was as a result of a continued focus on working
capital efficiency.
Capital investment programme
Group capital expenditure was £5.7m (2023: £4.2m), of which £2.2m was
invested at the Group's US operations and £2.3m was incurred on the UK
relocation project.
Capital expenditure in the Group's US operations was £2.2m, focussed on
process improvements, efficiency upgrades as well as improvements to existing
equipment.
Investment in the UK included the was focussed on process improvements, solar
panels, efficiency upgrades as well as £2.3m spend on the final phase of the
relocation project.
The Board has approved an investment in a new Shanghai Commercial and
Innovation Centre, to accelerate innovation and customer collaboration in
China. The estimated capital spend is £1.0m, and the project will commence in
2025.
The level of annual capital investment remains closely managed within the
Group with priority given to higher payback projects.
The respective total costs of each phase of the UK relocation project are
broken down as follows:
£'000 Phase Phase Total
one two
Capital expenditure 41,277 4,113 45,390
Previous site disposal (5,592) - (5,592)
Exceptional items 4,820 2,381 7,201
Total costs 40,505 6,494 46,999
Treatt Employee Benefit Trust and Treatt SIP Trust
The Group has an HMRC-approved Share Incentive Plan (SIP) for its UK
employees, and as far as practicable, also offers a similar scheme to its US
employees. All UK employees with a year's service were awarded £700 (2023:
£700) of "Free Shares" during the year as part of the Group's employee
incentive and engagement programme as the Board is firmly of the view that
increased employee share ownership is an important tool for driving positive
employee engagement in the business.
A similar scheme exists for US employees who were awarded $1,000 (2023:
$1,000) of Restricted Stock Units during the year. These shares are forfeited
by employees who leave within three years from the date of grant.
Under the SIP, UK employees are offered the opportunity each year to purchase
up to £1,800 (or 10.0% of salary, whichever is lower) of Treatt shares out of
gross income, which the Group continues to match on a one and a half for one
basis. In the year, a total of 32,000 (2023: 30,000) matching shares were
granted.
The SIP currently holds 444,000 shares (2023: 380,000) and is administered by
Link Asset Services Trustees. All shares are allocated to participants under
the SIP. It is anticipated that going forward the obligations under the SIP
will continue to be satisfied through the issue of new shares.
In addition, the Group continued its annual programme of offering share option
saving schemes to employees in the UK and US. Under US tax legislation,
employees at Treatt USA are able to exercise options annually, whilst the UK
schemes provide for three-year saving plans.
Under the Long-Term Incentive Plan, which was approved by shareholders at the
2019 Annual General Meeting, Executive Directors and certain key employees
were granted 263,000 (2023: 267,000) nil cost share options during the year
which will vest after three years on a sliding scale, subject to performance
conditions. In total, options were granted over 432,000 (2023: 355,000) shares
during the year, whilst 37,000 (2023: 299,000) were exercised from options
awarded in prior years which have now vested. During the year no shares (2023:
200,000) were issued to the Employee Benefit Trust (EBT) at par (2 pence per
share). The EBT currently holds 97,000 shares (2023: 162,000) in order to
satisfy future option schemes. It is anticipated that going forward,
all-employee savings-related share schemes will continue to be satisfied by
shares held within the EBT, to which further shares will be issued as
necessary.
Final salary pension scheme
The R C Treatt final salary pension scheme (the "scheme") has not been subject
to any further accruals since 31 December 2012 and instead members of the
scheme were offered membership of the UK defined contribution pension plan
with effect from 1 January 2013. The most recent triennial actuarial valuation
of the scheme was carried out as at 1 January 2024, the result of which was
that the scheme had an actuarial surplus of £2.4m (1 January 2021: deficit
£4.9m) and a funding level of 112.0%.
Consequently, in July 2024 the Company agreed with the trustees to cease
making further deficit reduction contributions to the scheme, and so
contributions in the year were £0.3m (2023: £0.5m) and are expected to be
nil in FY25.
Under IAS 19, "Employee Benefits" a valuation of the scheme is conducted at
the year-end date based on updating the valuation calculations from the most
recent actuarial valuation. In accordance with this valuation and having
sought legal advice as to the appropriateness of recognising a scheme surplus,
there is a pension surplus recognised on the balance sheet of £5.6m (2023:
£3.7m surplus). The increase in the pension asset is driven by investment
returns on assets net of interest of £1.6m.
Summary
We continue our ambition to drive profitable Revenue growth through focussed
innovation, expanding our customer reach and broadening our product offering
which will allow us to sustainably deliver our medium-term goals.
Ryan Govender
Chief Financial Officer
4 December 2024
GROUP INCOME STATEMENT
for the year ended 30 September 2024
2024 2023
Notes Before exceptional items Before exceptional items
£'000 Exceptional items £'000 Exceptional items
£'000 Total £'000 Total
£'000 £'000
Revenue 6 153,066 - 153,066 147,397 - 147,397
Cost of sales (108,580) - (108,580) (102,573) - (102,573)
Gross profit 44,486 - 44,486 44,824 - 44,824
Administrative expenses 7 (24,617) (328) (24,945) (26,503) (2,655) (29,158)
Relocation expenses 7 - (302) (302) - (1,145) (1,145)
Operating profit(1) 19,869 (630) 19,239 18,321 (3,800) 14,521
Finance income 229 - 229 112 - 112
Finance costs (1,005) - (1,005) (1,089) - (1,089)
Profit before taxation 19,093 (630) 18,463 17,344 (3,800) 13,544
Taxation 8 (4,164) 102 (4,062) (3,405) 803 (2,602)
Profit for the year attributable to owners of the Parent Company 14,929 (528) 14,401 13,939 (2,997) 10,942
Earnings per share Adjusted(2) Statutory Adjusted(2) Statutory
Basic 10 24.47p 23.61p 22.94p 18.01p
Diluted 10 24.34p 23.48p 22.81p 17.91p
1 Operating profit is calculated as profit before net finance costs and
taxation.
2 All adjusted earnings per share measures exclude exceptional items and the
related tax effect, details of which are given in note 7.
All financial information presented relates to continuing operations.
The group reconciliation of net cash flow to movement in net debt, together
with notes 1 to 12 form part of these financial statements.
GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2024
Notes 2024 2023
£'000 £'000
Profit for the year attributable to owners of the Parent Company 14,401 10,942
Items that will or may be reclassified subsequently to profit or loss:
Currency translation differences on foreign currency net investments (6,156) (6,188)
Current tax on foreign currency translation differences 8 - (33)
Deferred tax on foreign currency translation differences 8 (257) 301
Fair value movement on cash flow hedges 195 269
Deferred tax on fair value movement 8 (49) -
(6,267) (5,651)
Items that will not be reclassified subsequently to profit or loss:
Actuarial gain on defined benefit pension scheme 1,294 1,381
Deferred tax on actuarial gain 8 (323) (345)
971 1,036
Other comprehensive expense for the year (5,296) (4,615)
15,816
Total comprehensive income for the year attributable to owners 9,105 6,327
of the Parent Company
All financial information presented relates to continuing operations.
The group reconciliation of net cash flow to movement in net debt, together
with notes 1 to 12 form part of these financial statements.
GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2024
Share Share premium account Own shares in share trusts Hedging reserve Foreign exchange reserve Retained earnings Total
capital
equity
£'000 £'000 £'000 £'000 £'000
£'000 £'000
1 October 2022 1,217 23,484 (5) (311) 13,383 96,082 133,850
Profit for the year - - - - - 10,942 10,942
Other comprehensive income:
Exchange differences - - - - (6,188) - (6,188)
Fair value movement on cash flow hedges - - - 269 - - 269
Actuarial gain on defined benefit pension scheme - - - - - 1,381 1,381
Taxation relating to items above - - - - 268 (345) (77)
Total comprehensive income - - - 269 (5,920) 11,978 6,327
Transactions with owners:
Dividends - - - - - (4,802) (4,802)
Share-based payments - - - - - 1,189 1,189
Movement in own shares in share trusts - - 9 - - - 9
Gain on release of shares in share trusts - - - - - 620 620
Issue of share capital 6 - (6) - - - -
Taxation relating to items recognised directly in equity - - - - - 53 53
Total transactions with owners 6 - 3 - - (2,940) (2,931)
30 September 2023 1,223 23,484 (2) (42) 7,463 105,120 137,246
Profit for the year - - - - - 14,401 14,401
Other comprehensive income:
Exchange differences - - - - (6,156) - (6,156)
Fair value movement on cash flow hedges - - - 195 - - 195
Actuarial gain on defined benefit pension scheme - - - - - 1,294 1,294
Taxation relating to items above - - - (49) (257) (323) (629)
Total comprehensive income - - - 146 (6,413) 15,372 9,105
Transactions with owners:
Dividends - - - - - (4,924) (4,924)
Share-based payments - - - - - 492 492
Movement in own shares in share trusts - - 2 - - - 2
Gain on release of shares in share trusts - - - - - 116 116
Issue of share capital 2 - (2) - - - -
Taxation relating to items recognised directly in equity - - - - - (23) (23)
Total transactions with owners 2 - - - - (4,339) (4,337)
30 September 2024 1,225 23,484 (2) 104 1,050 116,153 142,014
The group reconciliation of net cash flow to movement in net debt, together
with notes 1 to 12 form part of these financial statements.
GROUP BALANCE SHEET
as at 30 September 2024
Registered Number: 01568937
2024 2023
£'000 £'000
ASSETS
Non-current assets
Intangible assets 2,534 2,752
Property, plant and equipment 69,808 71,526
Right-of-use assets 379 538
Post-employment benefits 5,578 3,723
78,299 78,539
Current assets
Inventories 51,878 62,396
Trade and other receivables 37,078 32,969
Current tax assets 430 300
Derivative financial instruments 380 8
Cash and bank balances 1,786 809
91,552 96,482
Total assets 169,851 175,021
LIABILITIES
Current liabilities
Borrowings (2,134) (10,642)
Provisions (245) (102)
Trade and other payables (18,695) (20,700)
Lease liabilities (172) (176)
Derivative financial instruments - (176)
Current tax liabilities (1,324) (755)
(22,570) (32,551)
Net current assets 68,982 63,931
Non-current liabilities
Lease liabilities (219) (373)
Deferred tax liabilities (5,048) (4,851)
(5,267) (5,224)
Total liabilities (27,837) (37,775)
Net assets 142,014 137,246
GROUP BALANCE SHEET (continued)
as at 30 September 2024
Notes 2024 2023
£'000 £'000
EQUITY
Share capital 11 1,225 1,223
Share premium account 23,484 23,484
Own shares in share trusts (2) (2)
Hedging reserve 104 (42)
Foreign exchange reserve 1,050 7,463
Retained earnings 116,153 105,120
Total equity attributable to owners of the Parent Company 142,014 137,246
The group reconciliation of net cash flow to movement in net debt, together
with notes 1 to 12 form part of these financial statements.
GROUP STATEMENT OF CASH FLOWS
for the year ended 30 September 2024
Notes 2024 2023
£'000 £'000
Cash flow from operating activities
Profit before taxation 18,463 13,544
Adjusted for:
Depreciation of property, plant and equipment and right-of-use assets 4,640 4,277
Amortisation of intangible assets 426 399
Impairment charge on intangible assets - 228
Loss on disposal of property, plant and equipment 28 241
Net finance costs excluding post-employment benefit expense 1,000 1,087
Share-based payments 512 1,222
Increase in fair value of derivatives (353) (230)
Employer contributions to defined benefit pension scheme (338) (450)
Post-employment benefit income (224) (110)
Operating cash flow before movements in working capital 24,154 20,208
Movements in working capital:
Decrease in inventories 7,231 2,507
(Increase)/decrease in receivables (5,651) 3,004
Decrease in payables (939) (2,054)
Cash generated from operations 24,795 23,665
Taxation paid (3,727) (2,174)
Net cash generated from operating activities 21,068 21,491
Cash flow from investing activities:
Proceeds on disposal of property, plant and equipment 36 1,557
Purchase of property, plant and equipment (5,425) (5,507)
Purchase of intangible assets (243) (207)
Interest received 5 2
Net cash used in investing activities (5,627) (4,155)
GROUP STATEMENT OF CASH FLOWS (continued)
Notes 2024 2023
£'000 £'000
Cash flow from financing activities:
Repayment of borrowings and loans (9,952) (17,737)
Proceeds from bank borrowings 1,559 10,642
Repayment of lease liabilities (176) (161)
Interest paid (992) (1,080)
Dividends paid 9 (4,924) (4,802)
Proceeds on issue of shares 11 2 6
Sale of own shares by share trusts 116 623
Net cash used in financing activities (14,367) (12,509)
Net increase in cash and cash equivalents 1,074 4,827
Effect of foreign exchange rates (97) (198)
Movement in cash and cash equivalents in the year 977 4,629
Cash and cash equivalents at beginning of year 809 (3,820)
Cash and cash equivalents at end of year 1,786 809
Cash and cash equivalents comprise:
Cash and bank balances 1,786 809
1,786 809
The group reconciliation of net cash flow to movement in net debt, together
with notes 1 to 12 form part of these financial statements.
GROUP RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the year ended 30 September 2024
2024 2023
£'000 £'000
Movement in cash and cash equivalents in the year 977 4,629
Repayment of borrowings and loans 9,952 17,737
Proceeds from bank borrowings (1,559) (10,642)
(Increase)/reduction in lease liabilities 158 (153)
Cash inflow/(outflow) from changes in net debt in the year 9,528 11,571
Effect of foreign exchange rates 115 466
Movement in net debt in the year 9,643 12,037
Net debt at beginning of year (10,382) (22,419)
Net debt at end of year (739) (10,382)
Analysis of movement in net debt during the year:
At 1 October Cash flow Foreign exchange movements £'000 At 30 September
2023 £'000 Non-cash movements 2024
£'000 £'000 £'000
Cash and bank balances 809 1,074 - (97) 1,786
Bank overdrafts - - - - -
Cash and cash equivalents 809 1,074 - (97) 1,786
Bank borrowings and term loans (10,642) 8,393 - 115 (2,134)
Lease liabilities (549) 176 (22) 4 (391)
Net debt (10,382) 9,643 (22) 22 (739)
At 1 October Cash flow Non-cash movements Foreign exchange movements At 30 September
2022
£'000
£'000
2023
£'000 £'000
£'000
Cash and bank balances 2,354 (1,347) - (198) 809
Bank overdrafts (6,174) 6,174 - - -
Cash and cash equivalents (3,820) 4,827 - (198) 809
Bank borrowings and term loans (18,203) 7,095 - 466 (10,642)
Lease liabilities (396) 161 (317) 3 (549)
Net cash/(debt) (22,419) 12,083 (317) 271 (10,382)
This statement of reconciliation of net cash flow to movement in net debt
above does not form part of the primary statements. Notes 1 to 12 form part of
these financial statements.
NOTES TO THE FULL YEAR RESULTS
1. BASIS OF PREPARATION
In accordance with Section 435 of the Companies Act 2006, the Group confirms
that the financial information for the years ended 30 September 2024 and 2023
are derived from the Group's audited financial statements and that these are
not statutory accounts and, as such, do not contain all information required
to be disclosed in the financial statements prepared in accordance with
UK-adopted international accounting standards.. The statutory accounts for the
year ended 30 September 2023 have been delivered to the Registrar of
Companies. The statutory accounts for the year ended 30 September 2024 have
been audited and approved but have not yet been filed.
The Group's audited financial statements for the year ended 30 September 2024
received an unqualified audit opinion and the auditor's report contained no
statement under section 498(2) or 498(3) of the Companies Act 2006.
The financial information contained within this full year results statement
was approved and authorised for issue by the Board on 4 December 2024.
2. ACCOUNTING POLICIES
These financial statements have been prepared in accordance with the
accounting policies set out in the audited Group financial statements as at,
and for the year ended 30 September 2023.
There were no new standards and amendments to standards which are mandatory
and relevant to the Group for the first time for the financial year ended 30
September 2024 which had a material effect on this full year results
announcement.
3. ACCOUNTING ESTIMATES
The preparation of this statement requires management to make judgements,
estimates and assumptions that affect the application of accounting policies
and the reported amounts of assets, liabilities, income and expenses. In
preparing this preliminary statement, the significant judgements made by
management in applying the Group's accounting policies and the key sources of
estimation uncertainty were the same as those applied to the audited Group
financial statements as at, and for the year ended 30 September 2023.
4. GOING CONCERN
The Directors have concluded that it is reasonable to adopt the going concern
basis in preparing these financial statements based on the expectation that
the Group has adequate resources to continue as a going concern for a period
of twelve months from the date these financial statements are approved.
The process adopted to assess the viability of the Group involved the
modelling of a series of theoretical stress test scenarios linked to the
Group's principal risks as set out on pages 52 to 57 most significantly severe
business interruption like that which was experienced during the pandemic, or
that could arise through the impact of climate change or through global
conflict.
The Group successfully refinanced all of its banking facilities in the prior
year, agreeing a £25.0m asset-based lending facility with HSBC in the UK
(June 2023) and extending the existing revolving credit facility with Bank of
America in the US to $25.0m (May 2023). Both facilities are for a minimum term
of three years and contain pre-agreed accordion elements of £10.0m and $10.0m
respectively, these accordions are disregarded for the purposes of the going
concern and viability assessment. At the year-end date, the Group had net debt
of £0.7m (2023: £10.4m) and headroom on facilities of £43.3m.
In assessing the Group's prospects and resilience, the Directors have done so
with reference to its current financial position and prospects, its credit
facilities, its recent and historical financial performance, and forecasts.
The Directors have modelled scenarios representing varying degrees of severity
and have considered the impact of adverse changes, by 10% or more, in
revenues, margins and foreign exchange rates both separately and
simultaneously. These assumptions represent a manifestation of the
aforementioned business risks that could adversely impact cash generation and
profitability. Using these assumptions, Group headroom and covenant compliance
have been assessed throughout the going concern (twelve-month) and viability
(three-year) periods. Through the modelling of these scenarios, it was found
that the Group would retain sufficient headroom on its total facilities and
comply with its banking covenants throughout the tested periods, even in a
scenario when all three adverse assumptions were tested simultaneously.
A further "reverse stress test" scenario was modelled to find a sustained
reduction in gross profit across the Group that would give rise to a breach of
the Group's covenant conditions and the Group's headroom on facilities within
the viability period. Under this particularly extreme reverse-engineered
scenario, it was determined that a sustained reduction in gross profit of
around 55% compared with the previously forecasted levels over the viability
period, with no mitigating measures put in place, would result in a breach of
the financial covenants in R C Treatt's facility limit by around June 2026,
followed by a breach of overall Group facility limits in December 2027. Such a
scenario was found to be the equivalent of Group losses before taxation of
£15m or more for each year of the viability period.
The possibility of these severe scenarios materialising is considered
extremely remote. In addition, it is implausible that the Group would not act
swiftly and decisively to activate mitigations such as operating cost savings,
reduction in capital expenditure, and delaying or cancelling future dividend
payments to avoid a breach of its banking limits or covenants.
Having considered the range of stress-test scenarios and the Group's proven
ability to adapt to and manage adversity, the Directors have not identified
any material uncertainties which would affect the Group's ability to continue
as a going concern for a period of at least twelve months from the date this
report is approved. Accordingly, they continue to adopt the going concern
basis of accounting in preparing these financial statements.
5. RISKS AND UNCERTAINTIES
The operation of a public company involves a series of risks and uncertainties
across a range of strategic, commercial, operational and financial areas. The
principal risks and uncertainties that could have a material impact on the
Group's performance over the next twelve months (for example, causing actual
results to differ materially from expected results or from those experienced
previously) are the same in all material respects as those detailed on pages
52 to 57 of the audited 2024 Annual Report and Financial Statements.
6. SEGMENTAL INFORMATION
Group
Business segments
IFRS 8 requires operating segments to be identified on the basis of internal
financial information reported to the Chief Operating Decision Maker ('CODM').
The Group's CODM has been identified as the Board of Directors who are
primarily responsible for the allocation of resources to the segments and for
assessing their performance. The disclosure in the Group accounts of segmental
information is consistent with the information used by the CODM in order to
assess profit performance from the Group's operations.
The Group operates one global business segment engaging in the manufacture and
supply of innovative ingredient solutions for the beverage, flavour, fragrance
and consumer product industries with manufacturing sites in the UK and the US.
Many of the Group's activities, including sales, manufacturing, supply chain,
technical, IT and finance, are managed globally on a Group basis.
Geographical segments
The following table provides an analysis of the Group's revenue by
geographical market:
Revenue by destination 2024 2023
£'000 Total
United Kingdom 8,099 8,039
Rest of Europe - Germany 4,950 5,937
- Ireland 18,114 14,653
- Other 14,676 13,006
The Americas - USA 58,001 61,407
- Other 14,403 12,549
Rest of the World - China 11,426 9,525
- Other 23,397 22,281
153,066 147,397
All Group revenue is in respect of the sale of goods. No country included
within 'Other' contributes more than 5.0% of the Group's total revenue. The
Group revenue generated by customers accounting for more than 10% each of the
Group's overall revenue is £25,492,000 (2023: £15,472,000).
Non-current assets by geographical location, excluding post-employment benefit
surplus, were as follows:
Continuing operations 2024 2023
£'000 £'000
United Kingdom 45,698 44,800
United States 26,925 29,908
China 98 108
72,721 74,816
7. EXCEPTIONAL ITEMS
The exceptional items referred to in the income statement can be categorised
as follows:
2024 2023
£'000 £'000
UK relocation project
Relocation expenses (302) (1,145)
Less: tax effect of relocation expenses 20 205
Restructuring costs
Restructuring costs (328) (2,655)
Less: tax effect of restructuring costs 82 598
(528) (2,997)
The exceptional items all relate to non-recurring costs which are considered
material and discrete in nature; therefore, the Group considers them
exceptional in order to provide a more meaningful view of the Group's
underlying business performance.
Relocation expenses relate to one-off costs incurred in connection with the
relocation of the Group's UK operations that do not fall to be capitalised.
These costs arose in relation to the final stages of the manufacturing fit-out
at the Skyliner Way premises.
Restructuring costs principally comprise further termination payments and
associated advisory costs relating to those employees impacted by the
transition to the new senior leadership structure. Amounts which are
contractually due under employees' existing terms and conditions are
considered to be fully allowable for tax purposes.
During the financial year, payments totalling £2,048,000 were made in respect
of the restructuring costs, thereby concluding the cash flow impact of the
restructure.
8. TAXATION
Analysis of tax charge in income statement:
2024 2023
£'000 £'000
Current tax:
UK corporation tax on profits for the year - (32)
Adjustments to UK tax in respect of previous periods - (41)
Overseas corporation tax on profits for the year 4,230 3,577
Adjustments to overseas tax in respect of previous periods 30 (365)
Total current tax 4,260 3,139
Deferred tax:
Origination and reversal of temporary differences (120) (141)
Effect of change of tax rate on opening deferred tax (77) (29)
Adjustments in respect of previous periods (1) (367)
Total deferred tax (198) (537)
Tax on profit on ordinary activities 4,062 2,602
Analysis of tax charge in other comprehensive income:
2024 2023
£'000 £'000
Current tax:
Foreign currency translation differences - 33
Total current tax - 33
Deferred tax:
Cash flow hedges 49 -
Foreign currency translation differences 257 (301)
Defined benefit pension scheme 323 345
Total deferred tax 629 44
Total tax expense recognised in other comprehensive income 629 77
8. TAXATION (continued)
Analysis of tax charge/(credit) in equity:
2024 2023
£'000 £'000
Current tax:
Share-based payments - (28)
Deferred tax:
Share-based payments 23 (25)
Total tax charge/(credit) recognised in equity 23 (53)
Factors affecting tax charge for the year:
The tax assessed for the year is different from that calculated at the
standard rate of corporation tax in the UK applicable to the Group of 25.0%
(2023: 22.0%). The differences are explained below:
2024 2023
£'000 £'000
Profit before tax multiplied by standard rate of UK corporation tax at 25.0% 4,616
(2023: 22.0%)
2,980
Effects of:
Expenses not deductible in determining taxable profit 116 276
Adjustments in respect of overseas state taxes 309 363
Benefits of overseas tax incentives (320) (304)
Research and development tax credits (19) (20)
Difference in tax rates on overseas earnings (654) 49
Adjustments to tax charge in respect of prior years 29 (732)
Effect of change of tax rate on opening deferred tax - (47)
Deferred tax not recognised (15) 37
Total tax charge for the year 4,062 2,602
The adjustments in respect of prior years relate to the finalisation of
previous years' tax computations.
9. DIVIDENDS
Equity dividends on ordinary shares:
Dividend per share for years
ended 30 September
2024 2023 2022 2024 2023
Pence Pence Pence £'000 £'000
Interim dividend 2.60p(3) 2.55p(2) 2.50p(1) 1,589 1,552
Final dividend 5.81p(4) 5.46p(3) 5.35p(2) 3,335 3,250
8.41p 8.01p 7.85p 4,924 4,802
1 Accounted for in the year ended 30 September 2022.
2 Accounted for in the year ended 30 September 2023, totalling £4,802,000 as
reported.
3 Accounted for in the year ended 30 September 2024, totalling £4,924,000 as
reported.
4 The proposed final dividend for the year ended 30 September 2024 of 5.81p
pence will be voted on at the Annual General Meeting on 30 January 2025 and
will therefore be accounted for in the financial statements for the year
ending 30 September 2025.
10. EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share is based on the weighted average number of ordinary
shares in issue and ranking for dividend during the year. The weighted average
number of shares excludes shares held by the Treatt Employee Benefit Trust
(EBT) as these do not rank for dividend.
2024 2023
Profit after taxation attributable to owners of the Parent Company (£'000) 14,401 10,942
Weighted average number of ordinary shares in issue (No: '000) 61,006 60,762
Basic earnings per share (pence) 23.61p 18.01p
Diluted earnings per share
Diluted earnings per share is based on the weighted average number of ordinary
shares in issue and ranking for dividend during the year, adjusted for the
effect of all dilutive potential ordinary shares.
The number of shares used to calculate earnings per share ('EPS') have been
derived as follows:
2024 2023
No ('000) No ('000)
Weighted average number of shares 61,210 60,916
Weighted average number of shares held in the EBT (204) (154)
Weighted average number of shares used for calculating basic EPS 61,006 60,762
Executive share option schemes 269 301
All-employee share options 69 45
Weighted average number of shares used for calculating diluted EPS 61,344 61,108
Diluted earnings per share (pence) 23.48p 17.91p
10. EARNINGS PER SHARE (continued)
Adjusted earnings per share
Adjusted earnings per share measures are calculated based on profits for the
year attributable to owners of the Parent Company before exceptional items as
follows:
2024 2023
£'000 £'000
Profit after taxation attributable to owners of the Parent Company 14,401 10,942
Adjusted for:
Exceptional items - relocation expenses (see note 7) 302 1,145
Exceptional items - restructuring costs (see note 7) 328 2,655
Taxation thereon (102) (803)
Adjusted earnings 14,929 13,939
Adjusted basic earnings per share (pence) 24.47p 22.94p
Adjusted diluted earnings per share (pence) 24.34p 22.81p
11. SHARE CAPITAL
Called up, allotted and fully paid 2024 2024 2023 2023
£'000 Number £'000 Number
At start of year 1,223 61,129,589 1,217 60,864,564
Issued in year 2 80,172 6 265,025
At end of year 1,225 61,209,761 1,223 61,129,589
The Parent Company has one class of ordinary shares with a nominal value of 2p
each, which carry no right to fixed income.
During the year the Parent Company issued nil (2023: 200,000) ordinary shares
to the Employee Benefit Trust, and 80,000 (2023: 65,000) ordinary shares to
the SIP Trust, at nominal value of 2p per share, for the purpose of meeting
obligations under employee share option schemes.
The number of shares held in the EBT at 30 September 2024 is 97,000 (2023:
162,000) and the number of shares held in the SIP is 361,000 (2023: 380,000).
12. ALTERNATIVE PERFORMANCE MEASURES
The Group reports certain alternative performance measures (APMs) that are not
required under IFRS. The Group believes that these APMs, when viewed in
conjunction with its IFRS financial information, provide valuable and more
meaningful information regarding the underlying financial and operating
performance of the Group to its stakeholders.
APMs referenced throughout the Annual Report which are not possible to easily
derive from the financial statements, are shown in the reconciliations below
alongside their statutory equivalent measures.
Return on average capital employed
Adjusted return on average capital employed (ROACE) is considered to be a key
performance indicator (KPI) and is an APM which enables stakeholders to see
the profitability of the business as a function of how much capital has been
invested in the business.
The derivation of this percentage, along with the statutory equivalent
measure, is shown below:
ROACE - APM measure
Group 2024 2023
£'000 £'000
Total equity 142,014 137,246
Net debt 739 10,382
Capital employed 142,753 147,628
Interim total equity¹ 137,647 129,685
Interim net debt¹ 10,345 17,704
Interim capital employed¹ 147,992 147,389
Average capital employed² 146,124 150,429
Adjusted operating profit³ 19,869 18,321
ROACE % 13.6% 12.2%
ROACE - statutory measure
Group 2024 2023
£'000 £'000
Average capital employed² 146,124 150,429
Profit before taxation 18,463 13,544
ROACE % 12.6% 9.0%
12. ALTERNATIVE PERFORMANCE MEASURES (continued)
Net debt to adjusted EBITDA
The net debt to adjusted EBITDA ratio is useful to ensure that the level of
borrowings in the business can be supported by the cashflow in the business,
and as it is measured by reference to adjusted EBITDA, is considered to be an
APM.
The derivation of this ratio, along with its statutory equivalent measure is
shown below:
Net debt to adjusted EBITDA - APM measure
Group 2024 2023
£'000 £'000
Profit before taxation 18,463 13,544
Exceptional items 630 3,800
Profit before taxation and exceptional items 19,093 17,344
Interest receivable (229) (112)
Interest payable 1,005 1,089
Depreciation of property, plant and equipment and right-of-use assets 4,640 4,277
Amortisation of intangible assets 426 399
Adjusted EBITDA 24,935 22,997
Net debt 739 10,382
Net debt to adjusted EBITDA 0.03 0.45
Net debt to adjusted EBITDA - statutory measure
Group 2024 2023
£'000 £'000
Profit before taxation 18,463 13,544
Interest receivable (229) (112)
Interest payable 1,005 1,089
Depreciation of property, plant and equipment and right-of-use assets 4,640 4,277
Amortisation of intangible assets 426 399
EBITDA 24,305 19,197
Net debt 739 10,382
Net debt to EBITDA 0.03 0.54
1 Interim total equity and interim net debt for a given year are taken from
the unaudited half year condensed financial statements made out to 31 March
2024, which can be found on www.treatt.com
(https://protect.checkpoint.com/v2/___http:/www.treatt.com___.bXQtcHJvZC1jcC1ldXcyLTE6bmV4dDE1OmM6bzo5MjhmZmQ0NDYyMGY0ZTQ2MzU3MThjZTI0NDllMzY3NTo2OjhiY2I6MmU1NzhiNzI2ZmU0ZjAzYTRiMGE3NzkxZWRhMWIzYjljMTNkNDE5Y2ZhMGE1Y2RjOGUxNmI0MTBiMWQ0OGI5ZDpwOlQ6Tg)
.
2 Average capital employed for a given year is calculated as the average of
the opening, interim and closing capital employed.
3 Adjusted operating profit for ROACE purposes is operating profit before
exceptional items as defined in the Group income statement.
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