REG - Treatt PLC - Half Year Trading Update and Notice of Results

TreattAnnouncement

11/04/2022 07:00

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RNS Number : 8727H  Treatt PLC  11 April 2022

11 April 2022

 

TREATT PLC

("Treatt" or "the Group")

 
Half Year Trading Update
and
Notice of Results

 

Good revenue growth continues; full year trading in line with expectations

 

Treatt, the manufacturer and supplier of a diverse and sustainable portfolio
of natural extracts and ingredients for the beverage, flavour and fragrance
industries, today publishes a trading update for the half year ended 31 March
2022 (the "Period").

 

Highlights

 

·      Revenue grew by 9% (11% in constant currency) to £66.3m (H1
2021: £60.8m)

·      Order book up in excess of 15%, with a particularly strong
pipeline in healthier living, citrus and coffee categories

·      As previously guided, a return to pre COVID-19 seasonality with
operating profit H2 weighted

·      Investment in skills and expertise across all levels of the
business continues to support long-term growth

·      Trading in line with the Board's expectations for the full year
 

 

Trading performance

 

The Board is pleased to confirm that revenue momentum has continued across the
business.  Expected revenue growth for the half year of 9% (11% in constant
currency) has been driven by the Group's largest category, citrus, as the
Group's renowned expertise and value-add solutions continued to demonstrate
its strong market position in this market.

 

As previously guided, following an unusually strong H1 in FY21, driven by a
shift in demand from on to off trade caused by COVID-19, FY22 has returned to
more normal spring/summer beverage consumption seasonality; as a result both
margins and profits are expected to be materially H2 weighted.

 

Revenue in synthetic aroma and herbs, spices & florals, being two of the
Group's larger categories, grew strongly in the Period.  Whilst good progress
continued in the Group's higher margin healthier living categories of tea,
health & wellness and fruit & vegetables, materially stronger
performance is expected from these categories in H2, as evidenced by a good
pipeline.

 

The Group continues to win new business with both new and existing customers
through direct sales to global and local FMCG brands, as well as indirectly
through the flavour and fragrance houses, demonstrating the strength of the
Group's diverse business model. Further significant progress was also made
with building out the Group's coffee platform which is focussed on the premium
ready-to-drink and cold brew coffee markets, where we continue to see material
growth in the opportunity pipeline.

 

The Group's investment in its substantial inventory holdings (equating to
approximately six months trading) has helped the Group to successfully
navigate various supply chain challenges.  In addition the Group has decades
of experience in managing movements in raw material prices which are impacted,
not only by general inflation, but also by specific supply and demand factors
such as climatic conditions.  For example, in the Period orange oil prices
continued to build to all-time highs, whereas lemon oil prices fell.

 

Our new UK facility is fully open for office-based employees as well as some
of our R&D and technical teams.  The operational commissioning continues
apace and we are looking forward to most of our manufacturing being up and
running by the middle of this calendar year. Thereafter will be a final phase
of gradually transferring our most complex manufacturing activities to the new
site by the middle of 2023.  We believe this site, along with our recently
expanded US facility, will provide Treatt with a much stronger platform to
support its growth ambitions.

 

With the UK relocation nearing completion, and a strategic investment in
inventory levels reflecting both higher orange oil prices and a strong order
book, net debt at the end of the Period was approximately £20m.

 

The Group's hedging strategy is intended to mitigate the impact of long term
exchange rate movements, which can mean fluctuations in the short term. During
the Period there was a weakening of Sterling against the US Dollar and, as a
result, the Board anticipates a net negative FX impact on the results for the
Period of approximately £0.6m (H1 2021: £0.4m gain).

 

Outlook

 

H1 ended strongly and this momentum has continued into H2 with order books at
record levels. With stronger growth coming through in H2 from the higher
margin healthier living categories, the Group expects to deliver materially
stronger margins in H2.

 

Notice of Results

 

Treatt's half year results for the six months ended 31 March 2022 will be
announced on 10 May 2022 and the Group will also be hosting a Capital Markets
Day on 27 May 2022. To register interest please contact MHP on the details
below.

 

Daemmon Reeve, CEO, commented:

 

"After a record performance for the business last year, we've continued the
momentum into the first half with a good sales performance, particularly
driven by our largest category, citrus, where we have grown a number of
longstanding relationships working with some of the biggest beverage
companies.

 

"This year's performance is expected to reflect a reversion to more normalised
beverage trends and overall trading continues in line with the Board's
expectations. Despite the wider macro uncertainties, our second half pipeline
is strong, we are bringing more of our new UK site into operation and we are
seeing good opportunities across a number of categories, so remain confident
for the future."

 

 

Enquiries:

Treatt plc                      +44 (0)1284 702500

Daemmon Reeve           Chief Executive Officer

Richard Hope                 Chief Financial Officer

 

Joint Brokers

Investec Bank Plc          +44 (0)20 7597 5970

Patrick Robb

David Anderson

 

Peel Hunt LLP               +44 (0) 20 7418 8900

George Sellar

Andrew Clark

Lalit Bose

 

Financial PR

MHP Communications   +44 (0) 20 3128 8789 / Treatt@mhpc.c
(mailto:Treatt@mhpc.com) om (mailto:Treatt@mhpc.com)

Tim Rowntree

Simon Hockridge

Catherine Chapman

 

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 over 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
(http://www.treatt.com) .

 

 

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.

 

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