10th Dec 2007 07:00
Treatt PLC10 December 2007 TREATT PLC PRELIMINARY STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2007 Treatt Plc, the manufacturer and supplier of conventional, organic andethically-traded ingredients for the flavour, fragrance and cosmetic industries,announces today its preliminary results for the year ended 30 September 2007. SummaryGroup revenue increased by 7.5% to £38.07 million (2006: £35.41 million)Dividends increased 2.9% to 10.8p per share (2006: 10.5p)EBITDA decreased 5% to £4.2m (2006: £4.4m)Profit before tax 14% lower at £2.83 million (2006: £3.29 million)Earnings per share down 14% to 20.0p (2006: 23.3p) Enquiries:Treatt plc Tel: 01284 702500Hugo Bovill Managing DirectorRichard Hope Finance Director (Mobile on 10 December 2007: 07881 508437) CHAIRMAN'S STATEMENT________________________________________________________________________________ "The Group had a mixed performance with sales increasing by 7.5% to £38.1m" In 2007, Group revenue continued to grow with an increase for the year of 7.5%to £38.07m (2006: £35.41m). Group earnings before interest, tax, depreciationand amortisation decreased by 4.4% to £4.17m (2006: £4.36m) with profit beforetax for the year reducing by 14% to £2.83m (2006: £3.29m). Basic earnings pershare reduced to 20.0 pence (2006: 23.3 pence). The level of the Group's netdebt/equity ratio* ended the year at 32% (2006: 14%). The Board is proposing a final dividend of 7.3 pence (2006: 7.1 pence),increasing the total dividend for the year by 2.9% to 10.8 pence (2006: 10.5pence) per share. The final dividend will be payable on 7 March 2008 to allshareholders on the register at close of business on 1 February 2008. The performance of the Group as a whole was disappointing as a result of a poorperformance in the USA, together with the UK business being affected by thesignificant adverse movement in the value of the US Dollar versus Sterling.Sales of orange oil products (which represent 16% of Group revenue) increased by20% during the year whilst contribution fell by 2% as a result of product mixand exchange rate factors. The price of orange oil has remained above $2 perkilo throughout the year. R.C. Treatt, the Group's UK operating subsidiary, continued to operate stronglywith growth in both essential oils (particularly to the Middle East) and alsoglobal aroma chemical sales in spite of strong competition. The Company hascontinued to strengthen over the last year and is now focusing more on its ownbranded aroma chemicals than the distribution of major companies' products.Turnover has increased by 8% to £29.7m (2006: £27.5m), with profits remainingunchanged. The weakening of the US Dollar had a seriously negative impact on theUK business and resulted in sales (on a constant currency basis) being £1.2mlower than would otherwise have been the case. Indeed, R.C. Treatt's grossmargins for the year suffered foreign exchange losses of more than £600k, whichwas partly offset by hedging gains totalling £300k. Without these foreignexchange losses, R.C. Treatt's profits would have shown strong growth. Marginson non-orange citrus oils were further reduced due to a major supplier defaulteven though the materials concerned were nevertheless covered in (at higherprices) and delivered on time. Treatt USA, continues to have a challenging time but we have strengthened thesales force and remain confident of future growth. Whilst sales in US Dollarsgrew by more than 15%, the sales mix in the year resulted in a significant fallin the gross margin percentage. Grapefruit oil sales remain weak but there ismore demand for the Company's tea products (part of the TreattaromeTM productrange) which are beginning to show signs of success. Overall, the growth inTreattaromeTM sales continued with an increase, in US Dollars, of 13%. With a presence in Europe, the United States and China, over the last yearTreatt has continued to strengthen its position as a world leader inagricultural food science and analysis, whilst continuing to be a leadingindependent manufacturer of natural ingredients for the flavour and fragranceindustry. Acquisition of 50% of Earthoil We were delighted to announce at the end of February that we had acquired 50% ofEarthoil Plantations Limited, based in the UK, and 50% of Earthoil Kenya Pty EPZLimited (together known as 'Earthoil') which is based in a tax-free zone justoutside Nairobi. Earthoil manufactures and supplies organically-certified andethically-traded essential oils and vegetable oils, mainly for the cosmeticsindustry. The organic market represents a new area for Treatt with high growthpotential. The total consideration for the acquisition was £2.7m, beingsatisfied by a mix of cash, loan notes and Treatt shares. Additionally, Treatthas the option to acquire the remaining 50% of the issued share capital ofEarthoil from 2012. Although in the seven months to 30 September 2007 theGroup's share of Earthoil incurred a loss of £70k these are very early days forthis investment, which we expect to become of significant and strategic valueover the coming years. Pension Deficit As previously announced, the Company made a special pension contribution of £1min October 2006. This, together with a strong investment performance andstandard changes in actuarial assumptions, has resulted in last year's liabilityof £3.1m turning into a small pension asset this year. For further informationon this please see the Financial Review. As a result, net assets per share haveincreased by 10.4% to 194.6 pence per share (2006: 176.3 pence per share). Prospects The new financial year has got off to a solid start, with Treatt USA performingmuch better than in the same period last year. Over the coming year, margins areexpected to remain under significant pressure as a consequence of continuedweakness in the US Dollar. We are expecting sales growth to continue across thebroad product range, with continued strong performance in the Middle East andChina, whilst sales to mainland Europe are expected to perform well. As reported last year, the industry continues to undergo change and with two ofthe top ten flavour and fragrance companies being taken over by others withinthe top ten it can make the future look uncertain for sales to these companies.On the positive side, with an increasing number of defaults from Far Eastsuppliers, buyers are becoming more and more aware of the value of sourcingthrough reliable, independent, companies like Treatt. With petroleum prices remaining high, and thereby underpinning many essentialoil and aroma chemical prices, the price of the majority of raw materials usedby the Group are expected to remain firm or increase. Orange oil prices areexpected to remain at relatively high levels for the foreseeable future. People Finally, the Board would like to place on record its thanks to colleaguesthroughout the world, for their effort, commitment and dedication to Treatt. Edward Dawnay Chairman 7 December 2007 * Equity is defined as the market value of the Company's share capital as at 30September of the corresponding year. OPERATING REVIEW 2007________________________________________________________________________________ "The Group's competitiveness has been enhanced through investment in increasedmanufacturing capacity and efficiency improvements" The Group continued to make substantial operational improvements throughout2007, particularly through investment in its manufacturing capabilities, withmuch of this investment having payback periods of less than one year. Thisinvestment will enable the Group to increase production of added-valuemanufactured products at the same time as reducing their production costs. Intime, this should enable the Group to increase market share, whilst maintainingmargins. In addition, the Group continues to leverage its Enterprise Resource Planning(ERP) system through a process of continuous enhancement. During the year, R.C.Treatt completed the implementation of its bar coding system which has now beenfully integrated with the ERP system. With the Group's relatively high levels ofinventory (see Financial Review for details), a very high priority is placed onthe accuracy, management and control of inventory, such that old age andobsolescence provisions are consistently below 1% of total inventory values. As the Group continues to grow, we are extremely focussed on maximising thepotential from our properties and are constantly seeking ways of improving ouruse of the resources available to us. Nevertheless, we are regularly reviewingour property requirements and if appropriate additional premises becomeavailable in suitable locations then the Board will give such property purchasestheir full consideration. Treatt continue to take a leading role in the implementation process for theEuropean REACH (Registration, Evaluation and Authorisation of Chemicals)legislation which will have a major impact on the industry over the next fewyears and we have already taken early steps to ensure that we are well placed toimplement the requirements of this highly complex and costly legislation as andwhen required. Indeed, Treatt remain committed to playing an active role indebating, lobbying and implementing legislative change and we also continue todemonstrate our commitment to trade organisations throughout the industry, withthe Group's Managing Director currently holding the position of President of theInternational Federation of Essential Oils and Aroma Trades (IFEAT). During the course of the year, Treatt bought and sold materials in almost onehundred countries around the world and we believe that this global reach enablesthe Group to be especially well placed to meet the needs of major multi-nationalbusinesses that look to Treatt to address seamlessly the many complexities ofimporting and exporting goods to or from any corner of the world. Trading Group Over the year, orange oil, an orange juice by-product which represents about 16%of Group revenue, remained at historically high levels, being consistently above$2 per kilo. In addition, the market price of orange terpenes, in turn acommodity co-product from orange oil, has remained firm for most of the year. R.C. Treatt Revenue increased by 8% with sales to the top ten customers again representingjust over one third of turnover. Underlying this there was a significantincrease in activity levels with a 9% increase in the number of customer ordersprocessed, resulting in a net productivity improvement of 23%. This demonstratesthe fact that, without the adverse impact of foreign currency movements, theunderlying performance of the UK business remains strong. As explained in theChairman's Statement, the net impact of the weakening US Dollar has been toreduce the Company's profits by about £300,000. The overall diversity of R.C.Treatt's product range and customer base, both in terms of size and location,continues to provide a well-balanced risk profile. Treatt USA 2007 has proved to be a difficult year for Treatt USA because although sales inUS Dollars grew by 15%, margins were significantly lower due to the adverseproduct mix with weaker than expected revenue from added-value citrus oilproducts. TreattaromeTM products continue to provide exciting and innovativeopportunities for growth with tea products, in particular, proving to bepopular. Treatt China Following the opening of our Shanghai office in 2006, the Board continue toreview the progress of its activities in China which we consider to be anessential part of the Group's long term growth plans. On a constant currencybasis, sales continued to perform well to China and Hong Kong, but again marginswere adversely affected by the impact of the weakening US Dollar. Investment for the Future R.C. Treatt The level of capital expenditure in 2007 of £0.9m (2006: £0.6m) was, asexpected, in line with historic levels. As well as the investment inmanufacturing and bar coding referred to above, the Company continued toincrease the capabilities of its laboratories with state of the art analyticalequipment. Over the coming year, the Company plans to continue its investment inthe manufacturing area and will also need to significantly increase itsexpenditure in relation to regulatory matters in response to changes in both UKand European legislation. As ever, the Company will keep under constant reviewthe facilities and logistical set up at its plant in England and will makeappropriate investments as and when required. Treatt USA In recent months, Treatt USA has expanded its laboratories and relocated anumber of administration functions to the new building which it acquired in2005. Over the coming year the Company will continue to invest in theTreattaromeTM business and plans to invest in enhancements to its principalmanufacturing capabilities. In addition, there may be some purely "businessdriven" capital expenditure which may arise in relation to new business. Research and Development (R&D) Following the investment last year by R.C. Treatt in a new, multi-functional,pilot plant the Company is already reaping the rewards of this investment withnew discoveries which, in themselves, have driven some of the proposals forfurther investment in manufacturing. Treatt USA will, over the coming year, beinvesting further to increase its laboratory capabilities, particularly withregard to industrial contaminant and agricultural residue detection. In additionto the on-going strengthening of our R&D capabilities, the Group will continueto invest in high calibre technical personnel in order to enhance the Group'sservice offering to its customers. The Group also carries out a significantamount of global research into new and changing raw materials from around theworld and continues to develop close partnerships with companies in producingcountries in order to develop new sources of raw materials on a financiallysustainable basis. Personnel The Board recognises the importance of continually updating its long termpersonnel strategy and as part of this succession planning R.C. Treatt hascontinued to develop its Graduate Trainee Programme. As well as bringing newtalent into the business this has provided a dedicated resource into specialistareas such as REACH as well as enabling the recruitment of more multi-lingualemployees. In addition an exchange programme has been implemented between R.C.Treatt and Treatt USA enabling ideas and expertise to be shared throughout theGroup. FINANCIAL REVIEW 2007_______________________________________________________________________ "R.C. Treatt's revenue increased by 8%, with net profit unchanged, despiteadverse impact of weak US Dollar" Performance Analysis Income Statement Group revenue increased by 7.5% during the year to £38.07m (2006: £35.41m).R.C. Treatt's sales rose by 8.1% whilst in constant currency, sales at our USAsubsidiary, Treatt USA, increased in US Dollars by 15.2%. Earnings beforeinterest, tax, depreciation and amortisation for the year fell by 4.4% to £4.17m(2006: £4.36m) and Group profit before tax fell by 14% to £2.83m (2006: £3.29m). The total dividend for the year has been increased by 2.9% to 10.8p per share,resulting in a dividend cover of 1.85 times earnings. Over the last two years, the US Dollar has weakened against Sterling by morethan 15% which, as explained in the Chairman's Statement, has had a significantimpact on operating margins. In 2007 the US Dollar (being Treatt's mostsignificant currency) weakened from $1.87 to $2.04, a movement of 9.1%. Sales ofaromatic chemicals remained strong and TreattaromeTM products continued toperform well. Revenue from orange oil products rose during the year by almost20%, although the contribution from these products actually fell due to theadverse product mix combined with the foreign currency effect. Gross margins of 26.8% were achieved this year (2006: 28.6%) despite the foreignexchange impact. Over the last year, Aroma Chemical margins have again remainedsteady despite fierce competition as customers look to Treatt not just forcompetitive pricing, but excellent service too. The Group's administrative expenses increased approximately in line withinflation, by 3.8% to £6.87m (2006: £6.62m). This follows a 6% reduction inoverhead costs in the preceding year. Staff numbers across the Group increasedto 188 employees, having grown by 4% on the previous year. This increase inheadcount included some key appointments in sales at Treatt USA as well asgrowth driven increases in operations where required. There was a substantial increase in the Group's net finance costs which morethan doubled from £210,000 to £436,000. This resulted from the combined effectof increasing US and UK base rates together with the impact of higher levels ofborrowing as explained below. Interest cover for the year was still acomfortable 7.5 times (2006: 16.7 times). Basic earnings per share for the year decreased to 20.0 pence (2006: 23.3pence). The calculation of earnings per share excludes those shares which areheld by the Treatt Employee Benefit Trust (EBT) since they do not rank fordividend. During the year the Group continued its annual programme of offering sharesaving schemes for staff in the UK and USA. Under US tax legislation, staff atTreatt USA are able to exercise options annually, whilst the UK schemes providefor three-year savings plans. As part of this programme, options were grantedover a further 48,000 shares during the year, whilst 53,000 were exercised by UKemployees under the 2004 Save As You Earn scheme. Following its establishment in2004, the EBT currently holds 309,000 shares (2006: 262,000) acquired in themarket in order to satisfy future option schemes without causing any shareholderdilution. Furthermore, by holding shares in the EBT for some time before theyare required in order to satisfy the exercise of options, it is expected thatthe current programme of employee share option schemes will be self-financing. Interests in Joint Ventures As explained in the Chairman's statement, in February 2007 the Group acquired50% of 'Earthoil'. Established in 2001 and based in Lichfield, Staffordshire,and Nairobi, Kenya, Earthoil is a specialist in its field, growing,manufacturing, sourcing and trading high quality, organically-certified andethically-traded essential oils and vegetable oils (also known as "nut" or"seed" oils) as well as other natural extracts. More information on Earthoil canbe found at www.earthoil.com. The organic and fair trade markets offer substantial growth opportunities in thecosmetics industry as well as in the flavour and fragrance industry. There isconsiderable and growing demand in international markets for organic andethically-traded raw materials for use in food and health and beauty-relatedproducts. The total consideration for this investment was £2.7m, comprising £1.3m in cash,£0.7m in Loan Notes, £0.64m satisfied through the issue of 188,945 TreattOrdinary Shares at a price of 337.4 pence and £0.1m of transaction costs. From 2012, the Group also has the option to acquire (the "Call Option") theremaining 50% of Earthoil. In addition to this, the existing Earthoilshareholders will have the option to oblige Treatt to buy (the "Put Option"),the remaining 50% of Earthoil shares (which continue to be held by the existingEarthoil shareholders) at the "Option Price". Exercise of either option issubject to Treatt shareholder approval. The existing Earthoil shareholders willnot be able to enforce the Put Option unless Earthoil has met a certain level ofpre-tax profit. The Option Price will be 50% of eleven times the average pre-tax profit (forboth Earthoil companies combined) of the two audited financial years ended 31December prior to exercising the option. Cash Flow During the year, total borrowings of the Group increased by £5.4m to £10.0m(2006: £4.6m). The increased level of borrowings can be attributed to three mainfactors being the investment in Earthoil of £2.7m, a special pensioncontribution of £1m and a £2.3m increase in inventory balances. The Groupremains committed to holding appropriate levels of inventory in order to securesupply and maintain long term delivery commitments to customers. Capital expenditure for the year increased to £1.1m (2006: £0.8m), details ofwhich are provided in the Operating Review. Final Salary Pension Scheme Following the last three-year actuarial review in January 2006, contributions tothe scheme were increased in order to eliminate the actuarial deficit by 2017.In addition, over the last two year's special contributions totalling £1.5m havealso been made. As a result of these additional contributions together with a £1.9m actuarialgain, the IAS 19, "Employee Benefits" pension deficit at the start of the yearof £3.1m has become an asset of £70,000 as at 30 September 2007. The £1.9m actuarial gain consisted of investment returns exceeding expectationsby £342,000 with the balance of the gain relating mainly to changes in actuarialassumptions, the most significant of which has been the increase in the rate atwhich the future liabilities of the scheme have been discounted to the balancesheet date. Following the changes made to the pension scheme in recent years (see note 23),one third of Group employees remain as members of the final salary scheme andthis proportion will continue to decline over time. Balance Sheet Over the year Group shareholders' funds have grown to £20,397,000 (2006:£18,141,000), with net assets per share increasing by 10% to £1.946 (2006:£1.763) largely as a result of the elimination of the pension deficit referredto above. Net current assets represent 50% (2006: 75%) of shareholders' fundsand the Group's land and buildings are all held at historical cost. It should benoted, however, that net assets have been reduced by £743,000 (2006: £546,000)as a result of shares held by the EBT due to the accounting requirements foremployee trusts. This impact will be reversed when these shares are used tosatisfy employee share saving schemes. Treasury Policies The Group operates a conservative set of treasury policies to ensure that nounnecessary risks are taken with the Group's assets. No investments other than cash and other short-term deposits are currentlypermitted. Where appropriate these balances are held in foreign currencies, butonly as part of the Group's overall hedging activity as explained below. The nature of Treatt's activities is such that the Group could be affected bymovements in certain exchange rates, principally between Sterling and the USDollar. This risk manifests itself in a number of ways. Firstly, the value of the foreign currency net assets of Treatt USA canfluctuate with Sterling. Currently these are not hedged, as the risks are notconsidered sufficient to justify the cost of putting the hedge in place. Secondly, with R.C. Treatt exporting to over 80 countries, fluctuations inSterling's value can affect both the gross margin and operating costs. Sales areprincipally made in three currencies in addition to Sterling, with the US Dollarbeing by far the most significant. Even if a sale is made in Sterling, its pricemay be set by reference to its US Dollar denominated commodity price andtherefore have an impact on the Sterling gross margin. Raw materials are alsomainly purchased in US Dollars and therefore a US Dollar bank account isoperated, through which Dollar denominated sales and purchases flow. If there isa mismatch in any one accounting period and the Sterling to US Dollar exchangerate changes, an exchange difference will arise. Hence it is Sterling's relativestrength against the US Dollar that is of prime importance. As well as affecting the cash value of sales, US Dollar exchange movements canalso have a significant effect on the replacement cost of stocks, which affectsfuture profitability and competitiveness. The Group therefore has a policy of maintaining the majority of cash balances,including the main Group overdraft facilities, in US Dollars as this is the mostcost effective means of providing a natural hedge against movements in the USDollar/Sterling exchange rate. Currency accounts are also run for the other maincurrencies to which R.C. Treatt is exposed. This policy will protect the Groupagainst the worst of any short-term swings in currencies. Group Tax Charge The Group's current year tax charge of £383,000 (2006: £762,000) represents aneffective tax rate of 14% (2006: 23%). This is significantly lower than thestandard rate of UK corporation tax of 30% as a result of tax relief received inrelation to cash contributions to the final salary pension scheme during theyear, including a one-off payment of £1m. The overall tax charge of £801,000(2006: £956,000) has fallen in line with profits. There were no significantadjustments required to the previous year's tax estimates. TREATT PLC PRELIMINARY STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2007 GROUP INCOME STATEMENT Notes 2007 2006 £'000 £'000 Revenue 3 38,066 35,411 Cost of sales (27,858) (25,292) --------- ---------Gross profit 10,208 10,119 Administrative expenses (6,874) (6,621)Share of results of joint ventures (70) - --------- ---------Operating profit 3,264 3,498 Finance revenue 136 243Finance costs (572) (453) --------- ---------Profit before taxation 2,828 3,288 Taxation 4 (801) (956) --------- ---------Profit for the period attributable to equity 2,027 2,332shareholders --------- --------- Earnings per share Basic 6 20.0p 23.3pDiluted 6 19.9p 23.2p All amounts relate to continuing operations TREATT PLC PRELIMINARY STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2007 GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE 2007 2006 £'000 £'000 Profit for the period 2,027 2,332 Currency translation differences on foreign currency net (509) (293)investmentActuarial gain/(loss) on defined benefit pension scheme 1,900 (389)Deferred taxation on actuarial (gain)/loss (532) 117 --------- ---------Total recognised net income for the period 2,886 1,767 --------- --------- GROUP STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY 2007 2006 £'000 £'000 Total recognised net income for the period 2,886 1,767 Dividends (1,053) (949) Share-based payments 21 23 Increase in share capital 633 - Movement in own shares in share trust (197) 79 (Loss)/gain on release of shares in share trust (34) 1 --------- ---------Increase in shareholders' equity 2,256 921 Opening shareholders' equity 18,141 17,220 --------- ---------Closing shareholders' equity 20,397 18,141 --------- --------- TREATT PLC PRELIMINARY STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2007 GROUP BALANCE SHEET 2007 2006 £'000 £'000ASSETSNon-current assetsProperty, plant and equipment 8,456 8,484Intangible assets 455 581Post-employment benefits 70 -Interest in joint ventures 2,613 -Deferred tax assets - 693Redeemable loan notes receivable 1,350 - --------- --------- 12,944 9,758 --------- ---------Current assetsInventories 16,238 13,958Trade and other receivables 6,785 6,389Corporation tax receivable 52 118 --------- --------- 23,075 20,465 --------- --------- --------- ---------Total assets 36,019 30,223 --------- ---------LIABILITIESCurrent liabilitiesBank loans and overdrafts (8,382) (2,710)Trade and other payables (4,412) (3,790)Corporation tax payable (37) (329) --------- --------- (12,831) (6,829) --------- --------- --------- ---------Net current assets 10,244 13,636 --------- ---------Non-current liabilitiesBank loans (1,642) (1,927)Post-employment benefits - (3,090)Deferred tax liabilities (474) (236)Redeemable loan notes payable (675) - --------- --------- (2,791) (5,253) --------- --------- --------- ---------Total liabilities (15,622) (12,082) --------- --------- --------- ---------Net assets 20,397 18,141 --------- --------- SHAREHOLDERS' EQUITYCalled up share capital 1,048 1,029Share premium account 2,757 2,143Own shares in share trust (743) (546)Employee share option reserve 29 34Foreign exchange reserve (1,501) (992)Retained earnings 18,807 16,473 --------- ---------Shareholders' Equity 20,397 18,141 --------- --------- TREATT PLC PRELIMINARY STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2007 GROUP CASH FLOW STATEMENT 2007 2006 £'000 £'000Cash flow from operating activitiesProfit before taxation 2,828 3,288Adjusted for: Foreign exchange gain (373) (210) Depreciation of property, plant and equipment 733 685 Amortisation of intangible assets 176 182 Loss on disposal of property, plant and equipment 3 52 Loss on disposal of intangible assets - 2 Net interest payable 512 235 Share-based payments 21 23 Share of results of joint ventures 70 - Decrease in post-employment benefit (225) (73) obligation excluding special contribution --------- ---------Operating cash flow beforemovements in working capital 3,745 4,184and special post-employment benefit contribution Special post-employment benefit contribution (1,035) (465) Changes in working capital: Increase in inventories (2,280) (2,563) Increase in trade and other receivables (395) (671) Increase/(decrease) in trade and other payables 622 (144) --------- ---------Cash generated from operations 657 341 Taxation (paid)/received (628) (1,153) --------- ---------Net cash from operating activities 29 (812) --------- ---------Cash flow from investing activities Acquisition of investments in joint ventures (1,375) - Purchase of property, plant and equipment (1,017) (775) Purchase of intangible assets (50) (41) Purchase of redeemable loan notes (1,350) - Interest receivable 60 218 --------- --------- (3,732) (598) --------- ---------Cash flow from financing activities Repayment of bank loans (125) (137) Interest payable (572) (453) Dividends paid (1,053) (949) Net sale/(purchase) of own shares by share trust (231) 79 --------- --------- (1,981) (1,460) --------- ---------Net decrease in cash and cash equivalents (5,684) (2,870) Cash and cash equivalents at beginning of period (2,573) 297 --------- ---------Cash and cash equivalents at end of period (8,257) (2,573) --------- ---------Cash and cash equivalents comprise:Cash and cash equivalents - -Bank overdrafts (8,257) (2,573) --------- --------- (8,257) (2,573) --------- --------- TREATT PLC PRELIMINARY STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2007 GROUP RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT 2007 2006 £'000 £'000 Decrease in cash and cash equivalents (5,684) (2,870)Repayment of borrowings 125 137 --------- ---------Cash outflow from change in net debt in the period (5,559) (2,733) Effect of foreign exchange rates 172 122 --------- ---------Movement in net debt in the period (5,387) (2,611)Net debt at start of the period (4,637) (2,026) --------- ---------Net debt at end of the period (10,024) (4,637) --------- --------- TREATT PLC PRELIMINARY STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2007 NOTES TO THE PRELIMINARY STATEMENT 1. Basis of preparation In accordance with Section 240 of the Companies Act 1985, the Company confirmsthat the financial information for the years ended 30 September 2007 and 2006are derived from the Group's audited financial statements and that these are notstatutory accounts and, as such, do not contain all information required to bedisclosed in the financial statements prepared in accordance with InternationalFinancial Reporting Standards ("IFRS"). The Group's audited financialstatements received an unqualified audit opinion and the auditor's reportcontained no statement under section 237(2) or 237(3) of the Companies Act 1985. The financial information contained within this preliminary statement wasapproved and authorised for issue by the Board on 7 December 2007. 2. Accounting policies These financial statements have been prepared in accordance with the accountingpolicies set out in the full financial statements for the period ending 30September 2006 other than as follows: Interests in joint ventures The results, assets and liabilities of a jointly controlled entity areincorporated in these financial statements using the equity method ofaccounting. Under the equity method, the investment in a jointly controlledentity is carried in the balance sheet at cost plus post-acquisition changes inthe Group's share of net assets of the jointly controlled entity, lessdistributions received and less any impairment in value of the investment. TheGroup income statement reflects the Group's share of the results after tax ofthe jointly controlled entity. The Group statement of recognised income andexpense reflects the Group's share of any income and expense recognised by thejointly controlled entity outside profit and loss. 3. Segmental information Geographical Segments The following table provides an analysis of the Group's revenue by geographicalmarket, irrespective of the origin of the goods or services: 2007 2006 £'000 £'000Revenue by destination United Kingdom 6,576 6,460Rest of Europe 11,694 10,542The Americas 10,263 10,142Rest of the World 9,533 8,267 --------- --------- 38,066 35,411 --------- --------- 4. Taxation 2007 2006 £'000 £'000Analysis of tax charge for the year Current tax:UK Corporation tax on UK profits for period 300 655Adjustments to UK tax in respect of previous periods 13 10US federal and state tax on US profits for the period 70 133Adjustments to US tax in respect of previous periods - (36) --------- ---------Total current tax 383 762 --------- --------- Deferred tax:Origination and reversal of timing differences 382 194Effect of reduced tax rate on opening asset or liability 46 -Adjustments in respect of previous periods (10) - --------- ---------Total deferred tax 418 194 --------- --------- --------- ---------Tax on profit on ordinary activities 801 956 --------- --------- Deferred tax of £532,000 (2006: £117,000) was charged to equity in respect ofpost-employment benefit obligations. 5. Dividends 2007 2006 £'000 £'000Equity dividends on ordinary shares:Interim dividend for year ended 30 September 2006 - 3.4p pershare 341Final dividend for year ended 30 September 2006 - 7.1p per share 712Interim dividend for year ended 30 September 2005 - 3.1p pershare 310Final dividend for year ended 30 September 2005 - 6.4p per share 639 --------- --------- 1,053 949 --------- --------- The declared interim dividend for the year ended 30 September 2007 of 3.5 pencewas approved by the Board on 18 May 2007 and was paid on 1 October 2007.Accordingly it has not been included as a deduction from equity at 30 September2007. The proposed final dividend for the year ended 30 September 2007 of 7.3pence will be voted on at the Annual General Meeting on 18 February 2008. Bothdividends will therefore be accounted for in the results for the year ended 30September 2008. 6. Earnings per Ordinary Share (1) Basic earnings per share Basic earnings per share is based on the weighted average number of ordinaryshares in issue and ranking for dividend during the year of 10,136,986 (2006:9,998,572) and earnings of £2,027,429 (2006: £2,332,000), being the profit onordinary activities after taxation. The weighted average number of shares excludes shares held by the "TreattEmployee Benefit Trust". (2) Diluted earnings per share Diluted earnings per share is based on the weighted average number of ordinaryshares in issue and ranking for dividend during the year, adjusted for theeffect of all dilutive potential ordinary shares, of 10,174,314 (2006:10,049,544), and the same earnings as above. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Treatt