TIDMTET
RNS Number : 6474Y
Treatt PLC
09 May 2023
TREATT PLC
HALF YEAR RESULTS
SIX MONTHSED 31 MARCH 2023
9 May 2023
Record H1 revenue and strong profit growth; trading in line with
expectations for the full year
Treatt Plc ('Treatt' or the 'Group'), the manufacturer and
supplier of a diverse and sustainable portfolio of natural extracts
and ingredients for the beverage, flavour and fragrance industries,
announces its half year results for the six months ended 31 March
2023 (the "Period").
FINANCIAL HIGHLIGHTS:
Half year Half year Change
ended ended
31 March 31 March
2023 2022
===================================== ========== ========== =======
Revenue GBP76.0m GBP66.3m +14.6%
Gross profit margin 28.2% 27.5% +70bps
Operating profit before exceptional
items GBP7.7m GBP6.6m +17.1%
Profit before tax and exceptional
items GBP7.3m GBP6.3m +15.0%
Profit before tax GBP6.6m GBP9.0m -26.0%
Adjusted basic earnings per share 9.04p 8.21p +10.1%
Basic earnings per share 8.15p 12.72p -35.9%
Dividend per share 2.55p 2.50p +2.0%
------------------------------------- ---------- ---------- -------
HIGHLIGHTS & OUTLOOK:
-- Record H1 revenue with 14.6% growth across the product portfolio (8.5% in constant currency)
-- Strong performance in citrus and good momentum in both China and coffee
-- Pricing actions and cost discipline implemented to recover raw material inflation
-- Profit before tax and exceptional items of GBP7.3m, up by 15.0% (H1 2022: GBP6.3m)
-- Inventory reduction of GBP7.7m since FY22 notwithstanding record high orange oil prices
-- Net debt reduced to GBP17.7m (FY22: GBP22.4m) despite normal
working capital build in first half
-- Good momentum into H2 and expect to report full year profit
before tax and exceptionals in line with Board expectations
-- The Board has declared an interim dividend at 2.55 pence per share
Commenting on the results, Group CEO, Daemmon Reeve, said:
"We came into this financial year determined to continue
pursuing the exciting growth opportunities available to Treatt with
a focus on cost discipline and pricing initiatives to counter the
inflationary backdrop. These actions have proved effective and we
have achieved record sales for the period and a strong profit
performance.
"We remain well-positioned to capitalise on prevailing trends in
a resilient beverage market. We are winning new customers and
deepening our relationships with our existing ones. This has led to
a very strong performance in our higher margin citrus category,
growth in China following its re-opening and we have also seen some
good early wins in the exciting coffee market.
"Treatt has good momentum going into the second half to support
our continued confidence in the group's future prospects."
Analyst and investor conference call
An in-person presentation for analysts and investors will be
held at 9.30 a.m. today, 9 May 2023. For details and to confirm
attendance, or for webcast information, please contact MHP at
treatt@mhpgroup.com. A recording will be made available after the
event.
In accordance with DTR 6.3.5 please find below the unedited full
text of the half year results.
A copy of the half year results will be submitted to the
National Storage Mechanism and will shortly be available for
inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism . It will
also be available on the Treatt website at
www.treatt.com/investor-relations .
Enquiries:
Treatt plc +44 (0)1284 702500
Daemmon Reeve Chief Executive Officer
Ryan Govender 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
Mike Burke
Financial PR
MHP +44 (0) 20 3128 8789
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 approximately 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
.
HALF YEAR RESULTS STATEMENT
Introduction
The Group has made a strong start to FY23, with record H1 sales
14.6% ahead of the prior year and 8.5% ahead at constant
currency.
Our volumes into the beverage market have shown resilience
despite the uncertain macro environment. We continue to win
business with both new and existing customers through direct sales
to FMCG brands, as well as indirectly through flavour and fragrance
houses, demonstrating the strength of the Group's diverse business
model.
Gross profit margins were higher in the Period (28.2% vs 27.5%
in H1 2022), reflecting the successful execution of price increases
to recover raw material inflation. and a positive mix effect in
citrus.
Strong cost discipline and other self-help measures have also
helped to deliver growth in Profit before tax and exceptional items
to GBP7.3m, which is 15.0% ahead of the prior year (H1 2022:
GBP6.3m).
Strategic focus
Our citrus category remains core to the Group's strategy as we
continue to see good growth in providing more complex, higher
value, and bespoke citrus solutions for our large beverage
customers.
We continue to benefit from underlying beverage trends, and
consumer appetite for natural, authentic, 'better for you' products
that has underpinned the consistent growth of our healthier living
categories (tea, health & wellness and fruit & vegetables)
in recent years; and it is encouraging to see momentum continue
across these categories in the Period.
Although it remains early days, coffee sales growth is promising
and provides optimism for the breadth of opportunities in this
category. The good performance in H1 came as we focused on the
premium cold brew coffee and ready-to-drink (RTD) markets. We
continue to see growth in sales and in our pipeline across these
markets. We expect to optimise our manufacturing platform further
which will enable us to attract more customers in US and
Europe.
China continues to be an important strategic region for the
Group and our China subsidiary is making encouraging progress, with
sales into the region increasing by 38.6% in H1 following the
country re-opening post Covid lockdowns. Citrus is a key driver for
medium term growth and we had customer wins with 3 of the 4 largest
beverage brands in the country. We have recently invested in
technical lab equipment in China to further accelerate sales growth
and we will look to evolve our local operational partnerships.
Category developments
Citrus
The Group's strategy to diversify away from minimally processed
citrus towards more value-added ingredients continued to drive a
strong performance from our largest category. Citrus, which
represented 54.2% of Group revenue in the Period (H1 2022: 46.8%),
grew by 32.6% as we benefitted from the execution of our
procurement and pricing strategies and increased our value-added
citrus sales to existing FMCG beverage customers. Volumes in our
lower margin products were actively managed downwards given our
strategic focus.
Synthetic aroma
Synthetic aromas, which relates primarily to food ingredients,
represented 13.5% of Group revenue in the Period (H1 2022: 19.9%),
and has declined in volume due to customer destocking of products
used to flavour savoury snacks and alternative proteins foods.
However, sales volumes were largely offset by sales price increases
and a lower cost to serve, maintaining the contribution level from
this product category. Volumes are anticipated to normalise in
H2.
Herbs, spices & florals (HSF)
The HSF category consists of a wide range of traded and
manufactured essential oils including key beverage ingredients,
representing 7.7% of revenue in the Period (H1 2022: 9.7%). Sales
declined 9.5% in the Period reflecting raw material quality
constraints which are expected to normalise in H2, however, price
increases mitigated any impact on the value of product margins
which remained consistent with H1 2022.
Health & wellness
Our health & wellness category continues to perform well,
representing 7.0% of Group revenue (H1 2022: 7.9%), with modest
growth of 2.7% compared with H1 2022. Our technical expertise in
delivering solutions in the complex area of sugar reduction science
continues to drive growth alongside sustained demand from consumers
for healthy-living products, in particular, reducing the calorific
content in beverages.
Fruit & vegetables
The fruit & vegetables category is a range of natural
extracts which lend themselves very well to a wide range of largely
premium beverage applications and the demand from health-conscious
consumers favouring products that promote clean-label ingredients.
This category reported strong growth of 23.1% compared with H1 2022
and represented 10.2% of revenue in the Period (H1 2022: 9.5%),
with passion fruit and watermelon performing particularly
strongly.
Tea
Revenue performance in the tea category was, as expected,
consistent with the prior year with our natural and authentic tea
solutions represented 4.8% of Group revenue in the Period (H1 2022:
5.6%). We anticipate a stronger performance from this category in
H2 driven by RTD tea consumption in North America which is
seasonally stronger in the summer months.
Coffee
Our investment in coffee innovation continues, and we have seen
encouraging demand for our premium natural coffee extracts with the
category reporting sales of GBP2.0m in the Period (H1 2021:
GBP0.4m), representing 2.6% of Group revenue (H1 2022: 0.6%).
Current opportunities are focussed on the premium cold brew coffee
and ready-to-drink (RTD) markets, where we continue to see growth
in sales and in our pipeline.
Geographical markets
Our largest region, the US, accounted for 37.2% of Group revenue
in the Period (H1 2022: 35.9%) and has grown 18.9% (6.5% in
constant currency) mainly as a result of higher prices to recover
raw material inflation and favourable citrus mix Fruit &
vegetables and coffee volumes improved in the Period driven by
demand in premium and authentic FMCG brands and cold brew coffee
with a large US retailer.
Europe, excluding UK, has continued to perform well,
representing 26.6% of Group revenue (H1 2022: 25.5%), with growth
of 19.9% in the Period driven by strong citrus performance.
Revenue attributable to UK customers which represented 5.1% of
Group revenue (H1 2022: 7.4%) has reduced by 21.1% impacted
particularly by a decline in synthetic aroma volumes.
China continues to offer a significant geographical opportunity
for the Group, contributing 6.5% of Group revenue (H1 2022: 5.4%),
with growth of 38.6% against the comparable period. Our China team
are committed to developing innovative solutions relevant to
consumer beverage demands and positioning Treatt with the leading
manufacturers. We continue to invest in the capability of our China
business, both in terms of technical lab equipment and headcount,
enabling new business wins and building our sustained confidence in
the longer-term outlook for the region.
Capital Investment Programme
The final transition to the new UK facility is on course to be
completed by the end of the current financial year. We estimate
that the final costs incurred in relation to the UK site investment
and relocation will be approximately GBP46m-GBP47m in line with the
original management expectations. Three years post completion, we
expect to be generating a 10-15% return on investment ('ROI') from
this site, with process efficiencies and initial headcount savings
already taking effect. Having secured our foundations, we are
looking to optimise our increased global capacity and create the
platform to deliver Treatt's ambitious growth plans.
Environmental, Social and Corporate Governance (ESG)
We remain committed to embedding sustainability throughout our
business and our value chain. Around 80% of our sales, and over 90%
of our purchases, are natural products and our largest product
category, Citrus, is entirely derived from by-products which might
otherwise go to waste. For us, it is about continuous improvement
and moving at a pace which ensures we are acting responsibly and
transparently whilst operating successfully and sustainably.
Further to setting incremental carbon reduction targets we have
started our net zero transition planning, alongside continuing to
deliver of our global sustainability strategy. This includes the
roll out of our responsible and sustainable sourcing policy which
is bringing us enhanced visibility across our supply chain;
invaluable in delivering our ESG goals.
Financial review
Group revenue grew by 14.6% to an H1 record of GBP76.0m (H1
2022: GBP66.3m), with profit before tax and exceptionals increasing
by 15.0% to GBP7.3m (H1 2022: GBP6.3m). In constant currency terms,
revenue increased by 8.5%(1) . The diversity across our product
categories, our particular strength in citrus and relevance of our
innovative range of solutions continues to result in sizeable
opportunities with both new and existing customers. Gross margin
increased by 70 bps to 28.2% during the Period as a result of price
increases offsetting raw material cost inflation.
Operating costs increased by 17.4% (10.7% in constant currency)
to GBP13.7m (H1 2022: GBP11.7m) with increased depreciation in the
UK of GBP0.5m and general cost inflation being key drivers. After
substantial investment in our people and production facilities in
the past 18 months to support the Group's next phase of expansion,
we do not anticipate any significant increase in administrative
expenses in the short to medium term above the normal rate of
inflation. Group headcount has reduced by 7.1% since September 2022
with the benefits of relocating to our new UK facility beginning to
show the expected efficiencies.
Exceptional costs in the Period totalled GBP0.7m (H1 2022:
GBP2.6m net gain, including GBP3.3m profit on the sale of the
previous UK facility) related to one-off expenses in respect of the
UK site relocation and restructuring costs.
Having implemented a revised hedging and currency management
strategy, providing increased visibility and controls over our
currency exposures, foreign exchange impacts during the Period were
successfully managed with a net loss of GBP0.2m (H1 2022: GBP0.6m
loss).
Reported profit for the Period of GBP4.9m represents a 35.6%
decline against the comparable period last year, however, on a
like-for-like basis (excluding the gain on disposal in H1 2022)
profit for the Period saw 13.6% growth, with basic adjusted
earnings per share increasing to 9.04p (H1 2022: 8.21p).
Cash flow
The Group generated cash of GBP2.1m in the Period. Net cash
generated from operations was GBP9.4m (H1 2022: GBP6.8m outflow)
while net capital expenditure of GBP2.4m was incurred (H1 2022:
GBP6.7m), GBP0.5m of which related to the new UK facility.
The working capital inflow for the Period of GBP0.6m (H1 2022:
GBP15.1m outflow) was driven by a decrease in trade and other
receivables, and a reduction in inventory despite higher raw
material prices, in particular orange oil, which is at an all-time
high. This was offset by a decrease in trade and other payables
with the FY2022 closing balance carrying a higher value of
inventory-in-transit accruals.
Balance sheet
The Group ended the half year with net debt of GBP17.7m (FY22:
GBP22.4m) despite the normal working capital build in the first
half. This was made up of bank loans and borrowings of GBP19.8m,
gross cash of GBP2.5m, and net lease liabilities of GBP0.4m.
During the Period the Group embarked on the refinancing of
bilateral facilities for the UK and US entities with headroom to
support future investment. The US refinancing of a $25m facility
with Bank of America is now complete and we are in the final stages
of completing a GBP25m UK facility with HSBC, having obtained
credit approval. We anticipate the UK facility being operational by
end-May 2023. Both facilities have a minimum term of three
years.
The UK final salary pension scheme has been closed to both new
entrants and future accruals for many years. The scheme's funding
position has recently benefitted from an increase in the discount
rate applied to the liabilities of the scheme and is currently in
an accounting surplus. Under accounting standard IAS 19, the
post-employment benefits surplus in the balance sheet increased
from GBP1.8m to GBP1.9m in the Period. Despite the surplus, the
Company has agreed with the trustees to maintain the current level
of annual contributions at GBP0.45m.
Dividend
The Board has declared an interim dividend of 2.55 pence per
share (2022 interim: 2.50 pence per share). This reflects a balance
of the Board's understanding of the importance of dividend payments
to shareholders, effective financial discipline and transitioning
towards a healthy long term dividend cover of up to 3 times. The
interim dividend will be payable on 10 August 2023 to shareholders
on the register at close of business on 30 June 2023.
Outlook
We are pleased with the strong performance year to date and we
have good confidence in Treatt's proposition and its ability to
deliver growth, supported by positive market dynamics. Q2 momentum
was particularly encouraging and we enter H2 with a strong order
book and sales pipeline and trading continues in line with the
Board's expectations for the full year.
(1) Constant currency revenue growth is calculated on the
movement from prior period comparative restated at the current
period average exchange rate.
TREATT PLC
HALF YEAR FINANCIAL STATEMENTS
CONDENSED GROUP INCOME STATEMENT
for the six months ended 31 March 2023
Six months to Six months to
31 March 2023 (unaudited) 31 March 2022 (unaudited)
Before Before
exceptional Exceptional exceptional Exceptional
items items Total items items Total
Notes GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================= ======= ============ ============ ========== ============ ============ ==========
Revenue 7 75,951 - 75,951 66,283 - 66,283
Cost of sales (54,550) - (54,550) (48,036) - (48,036)
----------------- ------- ------------ ------------ ---------- ------------ ------------ ----------
- -
Gross profit 21,401 - 21,401 18,247 - 18,247
Administrative
expenses (13,695) (119) (13,814) (11,668) - (11,668)
Gain on property
sale 8 - - - - 3,323 3,323
Relocation
expenses 8 - (544) (544) - (709) (709)
----------------- ------- ------------ ------------ ---------- ------------ ------------ ----------
-
Operating
profit(1) 7,706 (663) 7,043 6,579 2,614 9,193
Finance income - - - 9 - 9
Finance costs (417) - (417) (250) - (250)
Profit before
taxation 7,289 (663) 6,626 6,338 2,614 8,952
Taxation 9 (1,801) 121 (1,680) (1,384) 109 (1,275)
----------------- ------- ------------ ------------ ---------- ------------ ------------ ----------
Profit for the period
attributable to owners
of the
Parent Company 5,488 (542) 4,946 4,954 2,723 7,677
-------------------------- ------------ ------------ ---------- ------------ ------------ ----------
Earnings per share
attributable
to equity holders of the
Parent Company Adjusted(2) Statutory Adjusted(2) Statutory
Basic 11 9.04p 8.15p 8.21p 12.72p
Diluted 11 9.00p 8.11p 8.12p 12.59p
----------------- ------- ------------ ------------ ---------- ------------ ------------ ----------
(1) Operating profit is calculated as profit before net finance costs
and taxation.
(2) All adjusted measures exclude exceptional items and the related
tax effect, details of which are given in note 8.
Notes 1 - 12 form part of these condensed half year financial
statements.
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the six months ended 31 March 2023
Six months Six months
to to
31 March 31 March
2023 2022
(unaudited) (unaudited)
GBP'000 GBP'000
========================================================= ============ ============
Profit for the period attributable to owners of
the Parent Company 4,946 7,677
Items that may be reclassified subsequently to
profit or loss:
Currency translation differences on foreign currency
net investments (6,889) 1,325
Current tax on foreign currency translation differences (64) 7
Fair value movement on cash flow hedges 432 149
Deferred tax on fair value movement (85) (28)
--------------------------------------------------------- ------------ ------------
(6,606) 1,453
--------------------------------------------------------- ------------ ------------
Items that will not be reclassified subsequently
to profit or loss:
Actuarial (loss)/gain on defined benefit pension
scheme (109) 2,729
Current tax on pension liability - -
Deferred tax on actuarial gain or loss - (682)
--------------------------------------------------------- ------------ ------------
(109) 2,047
--------------------------------------------------------- ------------ ------------
Other comprehensive (expense)/income for the period (6,715) 3,500
--------------------------------------------------------- ------------ ------------
Total comprehensive (expense)/income for the period
attributable
to owners of the Parent Company (1,769) 11,177
--------------------------------------------------------- ------------ ------------
Notes 1 - 12 form part of these condensed half year financial statements.
CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 March 2022 (unaudited)
Share Foreign
premium Own shares in Hedging exchange Retained
Share capital account share trusts reserve reserve earnings Total equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
=============== ============== =============== ============== ========= ========== ============== =============
1 October 2021 1,208 23,484 (4) (292) 1,820 80,083 106,299
--------------- -------------- --------------- -------------- --------- ---------- -------------- -------------
Profit for the
period 7,677 7,677
Exchange
differences - - - - 1,325 - 1,325
Fair value
movement on
cash flow
hedges - - - 149 - - 149
Actuarial gain
on defined
benefit
pension
scheme - - - - - 2,729 2,729
Taxation
relating to
items above - - - (28) 7 (682) (703)
--------------- -------------- --------------- -------------- --------- ---------- -------------- -------------
Total
comprehensive
income - - - 121 1,332 9,724 11,177
--------------- -------------- --------------- -------------- --------- ---------- -------------- -------------
Transactions
with owners:
Dividends - - - - - (3,322) (3,322)
Share-based
payments - - - - - 616 616
Issue of new
shares 1 - (1) - - - -
Movement in
own shares in
share trusts - - 4 - - - 4
Gain on
release of
shares in
share trusts - - - - - 214 214
--------------- -------------- --------------- -------------- --------- ---------- -------------- -------------
Total
transactions
with owners 1 - 3 - - (2,492) (2,488)
--------------- -------------- --------------- -------------- --------- ---------- -------------- -------------
As at 31 March
2022 1,209 23,484 (1) (171) 3,152 87,315 114,988
--------------- -------------- --------------- -------------- --------- ---------- -------------- -------------
for the six months ended 31 March 2023 (unaudited)
Foreign
Share Own shares in Hedging exchange Retained Total
Share capital premium account share trusts reserve reserve earnings equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
================ ============== ================ =============== ========= ========== ================ ========
1 October 2022 1,217 23,484 (5) (311) 13,383 96,082 133,850
---------------- -------------- ---------------- --------------- --------- ---------- ---------------- --------
Profit for the
period - - - - - 4,946 4,946
Exchange
differences - - - - (6,889) - (6,889)
Fair value
movement on
cash flow
hedges - - - 432 - - 432
Actuarial loss
on defined
benefit
pension scheme - - - - - (109) (109)
Taxation
relating to
items above - - - (85) (64) - (149)
---------------- -------------- ---------------- --------------- --------- ---------- ---------------- --------
Total
comprehensive
income - - - 347 (6,953) 4,837 (1,769)
---------------- -------------- ---------------- --------------- --------- ---------- ---------------- --------
Transactions
with owners:
Dividends - - - - - (3,250) (3,250)
Share-based
payments - - - - - 646 646
Issue of new
shares 1 - (1) - - - -
Movement in own
shares in share
trusts - - - - - - -
Gain on release
of shares in
share trusts - - - - - 208 208
---------------- -------------- ---------------- --------------- --------- ---------- ---------------- --------
Total
transactions
with owners 1 - (1) - - (2,396) (2,396)
---------------- -------------- ---------------- --------------- --------- ---------- ---------------- --------
As at 31 March
2023 1,218 23,484 (6) 36 6,430 98,523 129,685
---------------- -------------- ---------------- --------------- --------- ---------- ---------------- --------
Notes 1 - 12 form part of these condensed half year financial statements.
CONDENSED GROUP BALANCE SHEET
as at 31 March 2023
As at As at
31 March 30 September
2023 2022
(unaudited) (audited)
GBP'000 GBP'000
================================== ============ =============
ASSETS
Non-current assets
Intangible assets 3,035 3,206
Property, plant and equipment 70,242 74,281
Right-of-use assets 457 375
Post-employment benefits 1,898 1,782
75,632 79,644
---------------------------------- ------------ -------------
Current assets
Inventories 60,688 68,351
Trade and other receivables 33,381 37,113
Current tax assets 499 719
Derivative financial instruments 181 -
Cash and bank balances 2,511 2,354
----------------------------------- ------------ -------------
97,260 108,537
---------------------------------- ------------ -------------
Total assets 172,892 188,181
----------------------------------- ------------ -------------
LIABILITIES
Current liabilities
Bank overdrafts (4,227) (6,174)
Borrowings (13,745) (15,861)
Provisions (289) (397)
Trade and other payables (16,588) (22,903)
Lease liabilities (103) (105)
Current tax liabilities (1,012) (223)
Derivative financial instruments - (666)
----------------------------------- ------------ -------------
(35,964) (46,329)
---------------------------------- ------------ -------------
Net current assets 61,296 62,208
----------------------------------- ------------ -------------
Non-current liabilities
Borrowings (1,800) (2,342)
Lease liabilities (340) (291)
Deferred tax liabilities (5,103) (5,369)
----------------------------------- ------------ -------------
(7,243) (8,002)
---------------------------------- ------------ -------------
Total liabilities (43,207) (54,331)
----------------------------------- ------------ -------------
Net assets 129,685 133,850
----------------------------------- ------------ -------------
CONDENSED GROUP BALANCE SHEET (continued)
as at 31 March 2023
As at As at
31 March 30 September
2023 2022
(unaudited) (audited)
GBP'000 GBP'000
============================================ ============ =============
EQUITY
Share capital 1,218 1,217
Share premium account 23,484 23,484
Own shares in share trusts (6) (5)
Hedging reserve 36 (311)
Foreign exchange reserve 6,430 13,383
Retained earnings 98,523 96,082
--------------------------------------------- ------------ -------------
Total equity attributable to owners of the
Parent Company 129,685 133,850
--------------------------------------------- ------------ -------------
Notes 1 - 12 form part of these condensed half year financial
statements.
CONDENSED GROUP STATEMENT OF CASH FLOWS
for the six months ended 31 March 2023
Six months Six months
to to
31 March 31 March
2023 2022
(unaudited) (unaudited)
GBP'000 GBP'000
========================================================== ============ ============
Cash flow from operating activities
Profit before taxation including discontinued operations 6,626 8,952
Adjusted for:
Depreciation of property, plant and equipment 2,031 1,100
Amortisation of intangible assets 205 81
Loss/(gain) on disposal of property, plant and equipment 86 (3,323)
Net finance costs excluding pensions cost 417 172
Employer contributions to defined benefit pension
scheme (225) (225)
Share-based payments 688 603
(Increase)/decrease in fair value of derivatives (416) 43
Increase in post-employment benefit obligations - 69
---------------------------------------------------------- ------------ ------------
Operating cash flow before movements in working
capital 9,412 7,472
---------------------------------------------------------- ------------ ------------
Movements in working capital:
Decrease/(increase) in inventories 3,732 (9,749)
Decrease/(increase) in receivables 2,339 (5,498)
(Decrease)/increase in payables (5,440) 197
---------------------------------------------------------- ------------ ------------
Cash generated from operations 10,043 (7,578)
Taxation (paid)/received (681) 811
---------------------------------------------------------- ------------ ------------
Net cash from operating activities 9,362 (6,767)
---------------------------------------------------------- ------------ ------------
Cash flow from investing activities
Proceeds on disposal of property, plant and equipment 1,103 5,597
Purchase of property, plant and equipment (2,318) (6,231)
Purchase of intangible assets (64) (474)
Interest received - 9
---------------------------------------------------------- ------------ ------------
Net cash used in investing activities (1,279) (1,099)
---------------------------------------------------------- ------------ ------------
CONDENSED GROUP STATEMENT OF CASH FLOWS (continued)
for the six months ended 31 March 2023
Six months Six months
to to
31 March 31 March
2023 2022
(unaudited) (unaudited)
GBP'000 GBP'000
======================================================== ============ ============
Cash flow from financing activities
Increase of bank loans - 9,649
Repayment of bank loans (2,223) (461)
Interest paid (417) (181)
Repayment of lease liabilities (96) (33)
Dividends paid (3,250) (3,322)
Proceeds on issue of shares 1 1
Net sale of own shares by share trusts 207 217
-------------------------------------------------------- ------------ ------------
Net cash (used in)/generated from financing activities (5,778) 5,870
-------------------------------------------------------- ------------ ------------
Net increase in cash and cash equivalents 2,305 (1,996)
Effect of foreign exchange rates (201) 18
-------------------------------------------------------- ------------ ------------
Movement in cash and cash equivalents in the period 2,104 (1,978)
Cash and cash equivalents at beginning of period (3,820) 247
-------------------------------------------------------- ------------ ------------
Cash and cash equivalents at end of period (1,716) (1,731)
-------------------------------------------------------- ------------ ------------
Cash and cash equivalents comprise:
Cash and bank balances 2,511 4,875
Bank overdrafts (4,227) (6,606)
-------------------------------------------------------- ------------ ------------
(1,716) (1,731)
-------------------------------------------------------- ------------ ------------
Notes 1 - 12 form part of these condensed half year financial statements.
CONDENSED GROUP RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT
for the six months ended 31 March 2023
Six months Six months
to to
31 March 31 March
2023 2022
(unaudited) (unaudited)
GBP'000 GBP'000
================================================== ============= ============
Movement in cash and cash equivalents in the
period 2,104 (1,978)
Increase of bank loans - (9,649)
Repayment of bank loans 2,223 461
(Increase)/decrease of lease liabilities (47) 641
-------------------------------------------------- ------------- ------------
Cash outflow from changes in net cash in the
period 4,280 (10,525)
Effect of foreign exchange rates 435 (148)
-------------------------------------------------- ------------- ------------
Movement in net cash in the period 4,715 (10,673)
Net debt at beginning of period (22,419) (9,114)
-------------------------------------------------- ------------- ------------
Net debt at end of period (17,704) (19,787)
-------------------------------------------------- ------------- ------------
Notes 1 - 12 form part of these condensed half year financial statements.
Responsibility statement
We confirm that to the best of our knowledge:
(a) the condensed set of financial statements for the six months
ended 31 March 2023 has been prepared in accordance with IAS 34
(b) the half year report and condensed financial statements
includes a fair review of the information required by DTR 4.2.7R
(indication of important events during the first six months and
description of principal risks and uncertainties for the remaining
six months of the year)
(c) the half year report and condensed financial statements
includes a fair review of the information required by DTR 4.2.8R
(disclosure of related party transactions and changes therein).
By order of the Board
RYAN GOVER
Chief Financial Officer
9 May 2023
NOTES TO THE UNAUDITED HALF YEAR FINANCIAL STATEMENTS
1. Basis of preparation
The Group has prepared its condensed half year financial
statements in accordance with the Disclosure Guidance and
Transparency Rules of the Financial Conduct Authority and the
reporting requirements of IAS 34, 'Interim Financial
Reporting'.
The information relating to the six months ended 31 March 2023
and 31 March 2022 is unaudited and does not constitute statutory
accounts. The statutory accounts for the year ended 30 September
2022 have been reported on by the Group's auditors and delivered to
the Registrar of Companies. The report of the auditors was
unqualified, did not include a reference to any matters to which
the auditors drew attention by way of emphasis without qualifying
their report and did not contain a statement under section 498 of
the Companies Act 2006. These condensed half year financial
statements for the six months ended 31 March 2023 have neither been
audited nor formally reviewed by the Group's auditors.
2. Accounting policies
These condensed half year financial statements have been
prepared on the basis of the same accounting policies and methods
of computation as set out in the Group's 30 September 2022 annual
report.
There were no new standards, or amendments to standards, which
are mandatory and relevant to the Group for the first time for the
financial year ending 30 September 2023 which have had a material
effect on these condensed half year financial statements.
3. Accounting estimates
The preparation of the condensed half year financial statements
requires management to make judgements, estimates and assumptions
that affect the application of accounting policies and the reported
amounts of assets and liabilities, income and expenses. In
preparing these condensed half year financial statements, 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 consolidated
financial statements as at, and for the year ended, 30 September
2022.
4. Going concern
As at the date of this report, the Directors have a reasonable
expectation that the Group has adequate resources to continue in
business for the foreseeable future. Accordingly, the condensed
half year financial statements have been prepared on the going
concern basis.
5. Risks and uncertainties
The Group's operations involve a series of risks and
uncertainties across a range of strategic, commercial, operational
and financial areas and a process is in place to identify and
assess their potential impact on the Group's business, which is
regularly updated. The principal risks and uncertainties for the
remainder of the financial year are not expected to change
materially from those included on pages 62 - 67 of the 2022 Annual
Report and Financial Statements.
6. Russian invasion of Ukraine
The Group has considered the impact on its business of Russia's
invasion of Ukraine, which commenced on 24 February 2022, and does
not expect there to be any adverse consequences to its trading
performance in the immediate future. On 4 March 2022 the Group
suspended all offers, orders, and shipments to Russia.
NOTES TO THE UNAUDITED HALF YEAR FINANCIAL STATEMENTS
(continued)
7. Segmental information
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, 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 for continuing operations.
Year on
Year
Six months Six months
to to Growth
Year on
31 March 31 March Year - constant
2023 2022 Growth currency
(unaudited) (unaudited) (unaudited) (unaudited)
Revenue by destination GBP'000 GBP'000 % %
============================= ============ ============ ============ ============
United Kingdom 3,850 4,882 -21.1% -21.1%
Rest of Europe - Germany 3,414 3,910 -12.7% -14.3%
- Ireland 10,059 5,244 91.8% 85.3%
- Other 6,766 7,724 -12.4% -13.5%
The Americas - USA 28,280 23,781 18.9% 6.5%
- Other 6,546 6,529 0.3% -5.5%
Rest of the
World - China 4,919 3,549 38.6% 37.2%
- Other 12,117 10,664 13.6% 11.9%
75,951 66,283 14.6% 8.5%
----------------------------- ------------ ------------ ------------ ------------
NOTES TO THE UNAUDITED HALF YEAR FINANCIAL STATEMENTS
(continued)
8. Exceptional items
The exceptional items referred to in the income statement can be
categorised as follows:
Six months Six months
to to
31 March 31 March
2023 2022
(unaudited) (unaudited)
GBP'000 GBP'000
========================================= ============ ============
Disposal of Northern Way premises
Gain on disposal of land and buildings - 3,323
Less: tax effect of property sale - -
UK relocation project
Relocation expenses (544) (709)
Less: tax effect of relocation expenses 102 109
Restructuring costs
Restructuring costs (119) -
Less: tax effect of restructuring costs 19 -
----------------------------------------- ------------ ------------
(542) 2,723
----------------------------------------- ------------ ------------
The exceptional items all relate to non-recurring items.
On 28 February 2022, the Group successfully disposed of its
former UK premises at Northern Way, Bury St. Edmunds. The proceeds
of the sale, net of selling costs were GBP5,597,000 and the
associated gain on disposal was GBP3,323,000. The gain on the sale
of property is not expected to be taxable as indexation allowances
are available which fully offset the taxable gain.
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.
Restructuring costs relate to expenses arising from a
significant change in the senior management structure that was
largely executed in FY2022.
9. Taxation
The effective tax rate for the six months ended 31 March 2023
has been estimated at 21.5% (H1 2022: 21.8%).
10. Dividends
Equity dividends on ordinary shares
Six months Six months
to to
31 March 31 March
2023 2022
(unaudited) (unaudited)
GBP'000 GBP'000
================================================ ============ ============
Final dividend for the year ended 30 September
2022 of 5.35p per share
(2021: 5.50p per share) 3,250 3,322
------------------------------------------------ ------------ ------------
NOTES TO THE UNAUDITED HALF YEAR FINANCIAL STATEMENTS
(continued)
11. 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), together with shares held
in respect of the Treatt Share Incentive Plan (SIP) which do not
rank for dividend.
Six months Six months
to to
31 March 31 March
2023 2022
(unaudited) (unaudited)
============================================== ============ ============
Profit after taxation attributable to owners
of the Parent Company (GBP'000) 4,946 7,677
---------------------------------------------- ------------ ------------
Weighted average number of ordinary shares
in issue (No: '000) 60,681 60,334
---------------------------------------------- ------------ ------------
Basic earnings per share (pence) 8.15p 12.72p
============================================== ============ ============
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:
Six months Six months
to to
31 March 31 March
2023 2022
(unaudited) (unaudited)
No ('000) No ('000)
=================================================== ============ ============
Weighted average number of shares 60,902 60,442
Weighted average number of shares held in the
EBT and SIP (221) (108)
--------------------------------------------------- ------------ ------------
Weighted average number of shares for calculating
basic EPS 60,681 60,334
Executive share option schemes 287 495
All-employee share options 40 171
--------------------------------------------------- ------------ ------------
Weighted average number of shares for calculating
diluted EPS 61,008 61,000
--------------------------------------------------- ------------ ------------
Diluted earnings per share (pence) 8.11p 12.59p
--------------------------------------------------- ------------ ------------
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:
Six months Six months
to to
31 March 31 March
2023 2022
(unaudited) (unaudited)
GBP'000 GBP'000
============================================== ============ ============
Profit after taxation attributable to owners
of the Parent Company 4,946 7,677
Adjusted for exceptional items (see note 8):
- Gain on property sale - (3,323)
- Relocation costs 544 709
- Restructuring costs 119 -
- Taxation thereon (121) (109)
Adjusted earnings from continuing operations 5,488 4,954
---------------------------------------------- ------------ ------------
Adjusted basic earnings per share (pence) 9.04p 8.21p
Adjusted diluted earnings per share (pence) 9.00p 8.12p
NOTES TO THE UNAUDITED HALF YEAR FINANCIAL STATEMENTS
(continued)
12. Capital commitments
The Group has entered into material contracts in connection with
the UK relocation project totaling GBP1,164,000 (H1 2022:
GBP2,762,000), with a further GBP276,000 and GBP216,000 (H1 2022:
GBP1,874,000) committed to capital projects in the UK and US
respectively, all of which was unprovided for at the period end
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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END
IR FZGGKVKNGFZM
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May 09, 2023 02:00 ET (06:00 GMT)
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