23rd May 2007 07:00
Tate & Lyle PLC - 23 May 2007 PRELIMINARY ANNOUNCEMENT OF RESULTS For the year ended 31 March 2007 \* TPRELIMINARY RESULTS TO Total Continuing31 MARCH (Audited) Operations Operations(2)--------------------------------------------------------------------------------------------- 2007 2006 2007 2006---------------------------------------------------------------------------------------------Sales £4,070m £3,720m £3,814m £3,465mAdjusted profit before tax(1) £336m £295m £317m £267mProfit before taxation £337m £42m £295m £14mAdjusted diluted earnings per share(1) 47.9p 41.7p 45.2p 37.8pDiluted earnings / (loss) per share 43.6p (6.3)p 38.1p (10.3)pDividend per share 21.5p 20.0p 21.5p 20.0p---------------------------------------------------------------------------------------------\* T (1) Before exceptional items and amortisation of acquired intangible assets asset out in the Operating and Financial Review. (2) Excluding the results of Redpath and Eastern Sugar. -- Adjusted profit before tax from total operations up 14% (from continuing operations up 19%) -- Adjusted diluted earnings per share from total operations up 15% (from continuing operations up 20%) -- Proposed total dividend per share increased by 7.5% to 21.5p -- Net debt £34 million higher at £900 million "This is the third consecutive year in which Tate & Lyle has reported doubledigit pre-tax profit growth. Growth this year has been driven substantially byour Food & Industrial Ingredients businesses which together achieved a 36%increase in adjusted operating profit. The closure of Eastern Sugar and the advanced discussions on the partialdisposal of Food & Industrial Ingredients, Europe (if completed as anticipated)will significantly reduce the Group's exposure to the new EU sugar regime whichcame into effect during the year. These actions, together with the £131 milliondisposal of Redpath, our Canadian sugar refining business, after the end of theyear, and the proposed £79 million investment in the German specialty foodingredients group G.C. Hahn & Co, represent further significant steps inrepositioning and strengthening our business for future growth. On the assumption that an agreement on the terms currently contemplated for thepartial disposal of Food & Industrial Ingredients, Europe is entered into at theend of the summer, the Board is now actively considering the utilisation of theproceeds as part of a return of capital to shareholders and expects to be in aposition to update shareholders in this regard at the AGM on 18 July 2007. As we look forward to the year to 31 March 2008, a number of factors will impactour profits in comparison with the year to 31 March 2007. We do not expect arepeat of this year's unusually high profits in ethanol. We anticipate that thecontinuing oversupply of sugar in the EU market will have a further negativeimpact on our sugar refining businesses. The anticipated partial disposal ofFood & Industrial Ingredients, Europe will reduce operating profits, and thecommissioning of the Singapore SPLENDA(R) Sucralose facility will increase fixedcosts, offsetting the benefits of expected continued growth in sales in thisdivision. On the other hand, we anticipate making further progress in value added productsas we bring on stream new capacity at our Sagamore and Loudon facilities, and aswe continue to grow sales of SPLENDA(R) Sucralose. We will also benefit from theimproved sweetener pricing secured at Food & Industrial Ingredients, Americas inthe 2007 calendar year pricing round. Furthermore, were the EU Commission's mostrecent proposals for stabilising the EU sugar market to be adopted, marketsentiment for the next pricing round would improve and the threat of a quotareduction for our European Sugars business for the sugar year commencing 1October 2007 would be removed. Over the last few years, the Group has embarked on a strategy of building astronger value added business from a low-cost commodity base whilst, at the sametime, reducing the impact of our exposure to volatile markets. Our strategycontinues to be successful and, whilst the coming year will essentially be oneof transition, it has provided the Group with a stronger base from which to takeadvantage of the growth opportunities that lie ahead." \* TSir David LeesChairman\* T Copies of the Annual Report for the year ended 31 March 2007 (including the fullChairman's Statement) will be available to shareholders shortly, and will beobtainable from The Company Secretary, Tate & Lyle PLC, Sugar Quay, Lower ThamesStreet, London EC3R 6DQ. SPLENDA(R) is a trademark of McNeil Nutritionals, LLC. The DuPont Oval Logo, DuPont(TM) and Sorona(R) are trademarks or registeredtrademarks of E.I. du Pont Nemours and Company. Webcast and Conference Call Presentation A presentation of the results by Chief Executive, Iain Ferguson and GroupFinance Director, John Nicholas will be audio webcast live at 10.00 (BST) today.To view and/or listen to a live audiocast of the presentation, visithttp://www.tateandlyle.com/TateAndLyle/investor_relations/results/default.htm orhttp://phx.corporate-ir.net/phoenix.zhtml?p=irol-eventDetails&c=81336&eventID=1562007. Please note that remote listeners will not be able to ask questionsduring the Q&A session. A webcast replay of the presentation will be availablefor six months, on the link above. For those without video-streaming facilities, there will also be ateleconference facility for the presentation. Details are given below: UK Toll-Free No.: +44 (0) 80 8109 5741US Toll-Free No.: +1 866 432 7175 Replay Number (available for 1 week): +44 (0) 20 8196 1998Replay Access code: 691691# For those listening to the audio presentation via teleconference who would alsolike to view the live slideshow, please click on the webcast link above andselect the "Non-Streaming" presentation option when prompted. Global Conference Call In addition to the presentation, a conference call for analysts and investorswill be held today at 15.30 (BST), 10.30 (Eastern). Details are given below: International dial-in number: +1 347 284 6930US / Canada dial-in number (toll-free): 866 550 6338 7 day replayInternational Instant Replay: +1 719 457 0820US Instant Replay: 888 203 1112Passcode: 4376934 TATE & LYLE PLC EXTRACTS FROM THE CHAIRMAN'S STATEMENT Results Tate & Lyle performed well in the 2007 financial year delivering a thirdconsecutive year of double digit pre-tax profit growth despite the headwinds ofenergy cost increases, EU sugar regime reform and adverse currency movements.The latter was more than offset by a lower depreciation charge arising from theimpairment of Food & Industrial Ingredients, Europe's assets in 2006. Followingthe sale of Redpath, our Canadian sugar refining business, and the surrender ofquota at Eastern Sugar, these businesses have been classified as discontinued. Growth this year has been driven substantially by our Food & IndustrialIngredients businesses which together achieved a 36% increase in adjustedoperating profit. Last year we set a demanding target for the contribution fromvalue added products to grow by 30% in the year to 31 March 2007. Although wedid not achieve the target, profits from value added products were 14% higherthan in the previous year on a constant currency basis. We remain committed toand confident in our strategy to achieve further growth from this part of ourbusiness. Sales from total operations (including both continuing and discontinuedoperations) were £4,070 million (2006 - £3,720 million). Adjusted profit beforetax(1) from total operations increased by 14% to £336 million (2006 - £295million). Profit before tax from total operations including a net gain fromexceptional items of £10 million and amortisation of £9 million was £337 million(2006 - £42 million). The Group's continuing operations produced strong results. Sales from continuingoperations increased by 10% to £3,814 million (2006 - £3,465 million) and theadjusted profit before tax£ increased by 19% to £317 million (2006 - £267million). Profit before tax from continuing operations was £295 million (2006 -£14 million). Adjusted diluted earnings per share£ from continuing operations increased by 20%to 45.2p (2006 - 37.8p), and from total operations increased by 15% to 47.9p(2006 - 41.7p). Diluted earnings per share from continuing operations afterexceptional items and amortisation were 38.1p (2006 - loss of 10.3p). Proceeds from the sale of Redpath of £131 million were received after the yearend. After investment and capital expenditure of £257 million, net debtincreased by £34 million to £900 million. Interest cover remained strong at 10.1times (2006 - 9.9 times). Dividend The Board proposes an increase of 1.5p (7.5%) in the total dividend for the yearto 21.5p. This is covered 2.3 times by earnings before exceptional items andamortisation. The proposed final dividend of 15.3p (2006 - 14.1p) will be dueand payable on 26 July 2007 to all shareholders on the register at 29 June 2007. (1) Adjusted profit before tax is before exceptional items and amortisation ofacquired intangible assets. Unless stated otherwise, the use of the word"amortisation" in this announcement relates to the amortisation of intangibleassets arising on acquisition of businesses. Outlook The closure of Eastern Sugar and the advanced discussions on the partialdisposal of Food & Industrial Ingredients, Europe (if completed as anticipated)will significantly reduce the Group's exposure to the new EU sugar regime whichcame into effect during the year. These actions, together with the £131 milliondisposal of Redpath, our Canadian sugar refining business, after the end of theyear, and the proposed £79 million investment in the German specialty foodingredients group G.C. Hahn & Co, represent further significant steps inrepositioning and strengthening our business for future growth. On the assumption that an agreement on the terms currently contemplated for thepartial disposal of Food & Industrial Ingredients, Europe is entered into at theend of the summer, the Board is now actively considering the utilisation of theproceeds as part of a return of capital to shareholders and expects to be in aposition to update shareholders in this regard at the AGM on 18 July 2007. As we look forward to the year to 31 March 2008, a number of factors will impactour profits in comparison with the year to 31 March 2007. We do not expect arepeat of this year's unusually high profits in ethanol. We anticipate that thecontinuing oversupply of sugar in the EU market will have a further negativeimpact on our sugar refining businesses. The anticipated partial disposal ofFood & Industrial Ingredients, Europe will reduce operating profits, and thecommissioning of the Singapore SPLENDA(R) Sucralose facility will increase fixedcosts, offsetting the benefits of expected continued growth in sales in thisdivision. On the other hand, we anticipate making further progress in value added productsas we bring on stream new capacity at our Sagamore and Loudon facilities, and aswe continue to grow sales of SPLENDA(R) Sucralose. We will also benefit from theimproved sweetener pricing secured at Food & Industrial Ingredients, Americas inthe 2007 calendar year pricing round. Furthermore, were the EU Commission's mostrecent proposals for stabilising the EU sugar market to be adopted, marketsentiment for the next pricing round would improve and the threat of a quotareduction for our European Sugars business for the sugar year commencing 1October 2007 would be removed. Over the last few years, the Group has embarked on a strategy of building astronger value added business from a low-cost commodity base whilst, at the sametime, reducing the impact of our exposure to volatile markets. Our strategycontinues to be successful and, whilst the coming year will essentially be oneof transition, it has provided the Group with a stronger base from which to takeadvantage of the growth opportunities that lie ahead. \* TSir David LeesChairman\* T CHIEF EXECUTIVE'S REVIEW Overview Overall Tate & Lyle performed strongly again in the 2007 financial year andachieved good profit growth despite the negative impacts of increases in globalenergy prices which added £28 million to our energy costs, reform of the EUsugar regime, and foreign exchange translation. Core value added ingredientsachieved good growth and margin gains were achieved on commodity products in the2007 calendar year sweetener pricing round in both the US and Europe. Growth was driven mainly by another strong performance in both commodity andvalued added products at Food & Industrial Ingredients, Americas. Food &Industrial Ingredients, Europe (which benefited from £25 million lowerdepreciation due to the impairment charge taken in the year to 31 March 2006)also performed better than expected in the second half-year. SPLENDA(R)Sucralose operating profit grew modestly, by 3% to £70 million, due to a slowerthan anticipated acceleration of uptake from major customers. In constantcurrency terms growth was 9% and, despite a strong performance from core valueadded products which grew by 19%, total value added operating profit growth of14% did not achieve our target of 30%. Operating profit at Sugars, Europe waslower than the prior year despite a good performance in sugar trading, althoughthis was somewhat lower than the unusually high result that trading delivered inthe year to 31 March 2006. Exchange translation reduced Group operating profitby £16 million. SPLENDA(R) Sucralose As stated in our announcement on 23 January 2007, the SPLENDA(R) Sucralosebusiness achieved only modest growth in the year, a disappointment in what wasotherwise a successful year for the Group. A number of factors caused the slower than anticipated acceleration of uptakefrom our major customers: product development life-cycles returning to morenormal levels following the Atkins diet period; the depletion of customers'security stocks of SPLENDA(R) Sucralose in response to our new capacity comingon stream; and volumes to the US carbonated soft drink sector not meeting ourexpectations. We expect the global market for high intensity sweeteners to grow by 3% to 4%annually by volume and we expect to increase our market share, which wecurrently estimate at 28%. Despite this expected growth in sales, higher costsof production as we commission the Singapore plant and increased patent defencecosts mean that we expect any growth in operating profit of the division in theyear ending 31 March 2008 will be modest and second half-year weighted. SPLENDA(R) Sucralose is a highly successful product. During our three years ofownership of the business we have made excellent progress in establishingmanufacturing scale and reliability, and putting in place the distribution andmarketing organisation that will be essential to fulfil its potential in thisgrowing market. We have an extensive product development pipeline across severalmarkets and additional resources have been deployed to help facilitate theprocess of reformulating our customers' products to include SPLENDA(R)Sucralose. Looking forward, a key focus will be the geographic and productexpansion of SPLENDA(R) Sucralose as we complete commissioning and bring the newproduction capacity in Singapore on stream. Expansion projects All of our expansion projects, which will promote longer term value added growthacross our business, continue to progress satisfactorily. Our joint venture plant with DuPont in Loudon, Tennessee to produce Bio-PDO(TM)from renewable resources was completed on time and has begun sales acrossseveral categories, including for polymerisation for apparel and carpets, andfor direct applications (in cosmetics and as de-icing fluid). This has been atremendous achievement in bringing on-line a unique bio-refinery process. The expansion of our Sagamore plant in the US is now complete. This increasescapacity for making a variety of value added starches used by customers indairy, beverages, baking, snacks and dressings. The Loudon expansion which isadding capacity for value added starches, substrate to the Bio-PDO(TM) jointventure and ethanol is on track to be completed in October 2007. Both theseexpansions also bring significant environmental benefits by reducing energyconsumption and emissions. Construction has begun on the first phase of our new corn wet mill in FortDodge, Iowa, which is due to be completed by March 2009. The doubling of production capacity at the McIntosh, Alabama SPLENDA(R)Sucralose facility has been achieved and the new Singapore facility wascompleted on time and is being commissioned. Reshaping our business During the year we have continued to restructure our portfolio of businesses tohelp deliver our strategy to grow our business by improving the contributionfrom value added products and by reducing the impact of our exposures tovolatile raw material and commodity markets and also markets subject toregulatory change. On 16 April 2007 we announced the signing of an agreement to acquire an 80%holding in German speciality food ingredients group G.C. Hahn & Co for a totalcash consideration of £79 million (EUR 116 million). This investment, which weexpect to complete in June 2007, will broaden both our product offering and ourcustomer base. On 23 April 2007 we announced that we had completed the disposal of our Canadiancane sugar refining business ("Redpath") for a net consideration of £131 millionsubject to closing adjustments relating to working capital. The approximate gainon disposal of £55 million will be reported in the year to 31 March 2008.Redpath, which is reported as a discontinued business in the year to 31 March2007, was exposed to mark-to-market movements on inventory driven by changes involatile world sugar prices. On 9 May 2007 we announced that we are at an advanced stage of exclusivediscussions with Syral SAS (a subsidiary of Tereos of France) which may lead tothe disposal of our interest in the facilities of Food & Industrial Ingredients,Europe in the UK, Belgium, France, Spain and Italy. The transaction contemplatedwould give rise to a gross cash consideration expected to be in the range of£200 million to £220 million before restructuring costs. It would be subject toanti-trust approval and could take several months to complete from any signingdate. Further announcements will be made as appropriate. Tate & Lyle's operations in Koog, Netherlands (the main site in Western Europefor corn-based value added starch production), Morocco and the Eaststarch jointventure are excluded from these discussions. Tate & Lyle will continue todevelop its value added ingredients business in Europe through these businessestogether with its Global Food Ingredients Group, which includes Cesalpinia Food,and, upon completion, G.C. Hahn & Co. European Sugar Regime The reforms of the EU sugar regime came into effect on 1 July 2006. Ourrefineries in London and Lisbon continue to be affected by oversupply of sugarwithin the EU and this has reduced the profitability of those businesses in theyear to 31 March 2007. A number of actions are being taken to mitigate theimpact of the new regime, for example through the development of new exportmarkets within the EU such as Italy, significant investments in efficiencyprojects at Thames Refinery, and the surrender of quota in Eastern Sugar. Safety Tate & Lyle has no higher priority than safety, which we believe is fundamentalto running a successful business. Whilst our commitment is to provide a safeworkplace for all our employees, the 2006 calendar year was one of starkcontrasts in safety. Despite many of our sites achieving world-class safetyperformance, I am sorry to report that in July 2006, a tragic accident occurredat our Decatur, Illinois plant, in which one employee died and two werehospitalised. As a result of the severity of this incident the Group safetyindex declined by 40%. This comes after three years of continuous improvementand reminds us that we must never relax our efforts to achieve and maintain thehighest standards of safety. Environment Environmental impacts are many and varied. Our three most significantenvironmental impacts are energy use, water use and non-hazardous solid wasteproduction. Energy use is by far our most significant impact, and we thereforegive it the highest priority. Managing our impacts to produce a more positiveresult is good for the environment and also brings economic benefits to Tate &Lyle. In early 2007 we began a major new environmental project at Thames Refinery togenerate significant energy savings. By March 2009, the Refinery will userenewable biomass to supply 70% of its energy requirements. By replacing the useof a fossil fuel (natural gas) with a renewable resource, this project will havesignificant environmental benefits while considerably reducing manufacturingcosts and our carbon footprint. We are also working with external environmentalconsultants to start research into our carbon footprint. Conclusion This has been a year of considerable activity and challenge as we faced thenegative impact of reform of the EU sugar regime, higher energy costs andexchange translation. In response, we have taken a number of significant actionstowards reshaping our business to reposition the Group for future growth. Allthese activities have had, and continue to have, a considerable impact on ourpeople around the world and I would like to thank them for their dedication,effort and commitment. Our key areas of focus for the year to 31 March 2008 will be: -- To continue the geographic and product expansion of SPLENDA(R) Sucralose by establishing it as the high intensity sweetener of choice and by implementing long term growth and cost reduction plans; -- To reshape our European ingredients business (after the assumed completion of the partial disposal of Food & Industrial Ingredients, Europe); -- To complete our expansionary capital project in Loudon, to bring on stream our new capacity in Sagamore and Singapore, and to progress the construction at Fort Dodge; -- To continue the reshaping of our European Sugars business to face the challenges and opportunities of the EU sugar market beyond 2009; and -- To improve productivity and balance sheet efficiency. Our long-term strategy continues to serve us well and, as we reshape ourbusiness, I am confident that we will be well-placed to deliver further growthin the years ahead. \* TIain Ferguson CBEChief Executive\* T Operating and Financial Review Basis of Preparation Operating profit and discontinued operations In the following review operating profit refers to profit from continuingoperations before interest, exceptional items and amortisation of acquiredintangibles unless otherwise stated. Following the sale of Redpath and thesurrender of quota and termination of operations at Eastern Sugar, thesebusinesses have been classified as discontinued operations. Accounting policies The Group has adopted IFRIC 4 'Determining whether an arrangement contains alease' in the current financial year. Comparative information has been restated.The adoption of this interpretation increased net debt and property, plant andequipment at 31 March 2006 by £8 million and did not materially impact theincome statement. Impact of changes in exchange rates The Group's results have been negatively impacted this year by exchange ratetranslation, in particular due to the weakening of the US Dollar againstSterling. Exchange rates used to translate reported results were as follows: \* T Average rates Closing rates --------------------------------- ---------------------------------- 2007 2006 Impact 2007 2006 ImpactUS Dollar : Sterling 1.89 1.79 -5.6% 1.97 1.74 -13.2%Euro : Sterling 1.48 1.47 -0.7% 1.47 1.43 -2.8%\* T Unless otherwise stated, the financial information presented in this review isstated at the relevant prevailing exchange rate for the year described. Summary of Financial Results The Group's financial results are summarised as follows: \* T Year ended 31 March 2007 Year ended 31 March 2006 -------------------------------- -------------------------------£m Continuing Discont'd Total Continuing Discont'd TotalStatutory information Sales 3 814 256 4 070 3 465 255 3 720 ---------- ---------- ---------- ----------- --------- --------- Operating profit 333 41 374 47 28 75Net finance costs (38) 1 (37) (33) - (33) ---------- ---------- ---------- ----------- --------- ---------Profit before taxation 295 42 337 14 28 42Taxation (105) (15) (120) (60) (9) (69) ---------- ---------- ---------- ----------- --------- ---------Profit after taxation 190 27 217 (46) 19 (27) ---------- ---------- ---------- ----------- --------- --------- Adjustments to operating profit and taxation Exceptional items 13 (23) (10) 248 - 248Amortisation 9 - 9 5 - 5 ---------- ---------- ---------- ----------- --------- ---------Adjustment to operating profit 22 (23) (1) 253 - 253Taxation (comprising exceptional taxation items and the effect of above adjustments) 13 9 22 (20) - (20) ---------- ---------- ---------- ----------- --------- ---------Adjustments to profit after taxation 35 (14) 21 233 - 233 ---------- ---------- ---------- ----------- --------- --------- Adjusted information Operating profit 355 18 373 300 28 328Net finance costs (38) 1 (37) (33) - (33) ---------- ---------- ---------- ----------- --------- ---------Profit before taxation 317 19 336 267 28 295Taxation (92) (6) (98) (80) (9) (89) ---------- ---------- ---------- ----------- --------- ---------Profit after taxation 225 13 238 187 19 206 ---------- ---------- ---------- ----------- --------- ---------\* T Sales from continuing operations of £3,814 million were £349 million or 10%above last year. Adjusting for the adverse impact of exchange rate translation,which reduced sales by £152 million, underlying sales increased by 15%. In thetwo Food & Industrial Ingredients divisions higher raw material and energy costswere recovered in the pricing rounds. Sales were also well ahead in the sugartrading business due mainly to increased volumes. Operating profit from continuing operations increased by 18% from £300 millionto £355 million due to strongly improved sales and margins in Food & IndustrialIngredients, Americas and the benefit of lower depreciation in Food & IndustrialIngredients, Europe following the asset impairment in the previous financialyear. Profits from the SPLENDA(R) Sucralose business were modestly ahead of theprior year. These improvements were partially offset by the adverse impact ofexchange rate translation, which reduced Group operating profit by £16 million,and lower profits in Sugars, Europe due mainly to the oversupply of sugar in theEU. The margin of operating profit as a percentage of sales increased from 8.7%to 9.3%. Exceptional items from continuing operations amounted to a net loss before taxof £13 million (2006 - loss of £248 million). A charge of £33 million wasrecognised in Food & Industrial Ingredients, Americas following the decision toclose the citric acid facilities at Selby, UK and a fundamental review of theAstaxanthin business. This was partially offset by a gain in Sucralose of £20million due to releasing part of a provision for deferred consideration set upat the time of the April 2004 realignment. An exceptional gain of £23 millionwas recognised in respect of the discontinued Eastern Sugar joint venturefollowing the decision to surrender quota to the EU Restructuring Fund and asuccessful litigation claim. Amortisation increased to £9 million from £5 million in 2006 reflecting thefirst full year of amortisation of intangible assets arising on the acquisitionsof Cesalpinia Food and Tate & Lyle Custom Ingredients in the second half of theprevious financial year. Operating profit from continuing operations including exceptional items andamortisation was £333 million, compared with £47 million in the year to 31 March2006. The net finance expense from continuing operations increased from £33 million to£38 million. Interest cover on total operations before exceptional items andamortisation was 10.1 times compared to 9.9 times in the prior year. Profit before tax, exceptional items and amortisation from continuing operationswas £317 million, £50 million or 19% above last year's profit of £267 million.Profit before tax, exceptional items and amortisation at constant exchange ratesincreased by 26%, after adjusting for a £15 million adverse impact of exchangetranslation. Profit before tax including exceptional items and amortisation was£295 million compared with £14 million in the year to 31 March 2006. The Group taxation charge on continuing operations was £105 million (2006 - £60million). The effective rate of tax on profit before amortisation andexceptional items was 29.0% (2006 - 30.0%). The reduction was due mainly to theutilisation of tax losses in Europe not previously recognised. Diluted earnings per share from continuing operations and excluding exceptionalitems and amortisation for the year to 31 March 2007 increased by 20% to 45.2pfrom 37.8p. The diluted earnings per share including exceptional items andamortisation for the total business were 43.6p (2006 - loss of 6.3p). Discontinued operations comprise Redpath, which was sold in April 2007, andEastern Sugar, which surrendered its quota to the EU Restructuring Fund in thesecond half of the year. These businesses together reported profit after tax of£27 million including exceptional items. Operating profit was £18 millioncompared to £28 million in 2006. The reduction in profit is due mainly to a £5million mark-to-market loss on raw sugar stocks in the Canadian businesscompared to a gain of £7 million in 2006. Net debt increased by £34 million from £866 million to £900 million. Segmental Analysis Divisional performance from continuing operations, adjusting for the impact ofexchange rate movements and after allocating £35 million of central costs (2006- £34 million), was as follows: \* T Sales Adjusted operating profit --------------------------------------- --------------------------------------Division 2007 2006 2006(a) Mvt (a) 2007 2006 2006(a) Mvt (a) £m £m £m % £m £m £m %Food & Industrial Ingredients, Americas 1 255 1 127 1 051 +19 163 125 117 +39Food & Industrial Ingredients, Europe 825 719 716 +15 70 46 45 +56Sucralose 147 142 136 +8 70 68 64 +9Sugars, Americas & Asia 95 96 89 +7 11 9 9 +22Sugars, Europe 1 492 1 381 1 321 +13 41 52 49 -16 -------- --------- --------- ---------- -------- --------- --------- ---------Continuing operations 3 814 3 465 3 313 +15 355 300 284 +25 -------- --------- --------- ---------- -------- --------- --------- ---------\* T (a) On a constant currency basis (adjusting 2006 reported figures using 2007exchange rates). Food & Industrial Ingredients, Americas Food & Industrial Ingredients, Americas had an exceptional year. At constantexchange rates, sales of £1,255 million were up 19% and operating profitincreased by £46 million to £163 million. The margin of profit before interest,exceptional items and amortisation over sales increased from 11.1% to 13.0%. The sweetener and ethanol businesses both performed strongly with operatingprofits well ahead of the prior year. Overall sweetener volumes were similar tothe prior year, but margins increased due to improved selling prices. Ethanolmargins benefited from higher prices for gasoline. Value added food ingredientshad a good year with higher sales to major food manufacturing customers. Net corn costs increased as the corn price rose to over US$4.00 per bushel dueto the growing demand for corn as a raw material to produce ethanol.Manufacturing expenses also increased due to higher costs of energy. Our mainplants continued to operate at capacity for most of the year. At Almex, our joint venture in Mexico, profits continued to improve primarilydue to higher selling prices. High fructose corn syrup (HFCS) volumes to softdrink customers also increased. On 1 January 2007 the tax on beveragescontaining HFCS was repealed. The tariff rate quota (TRQ) program, which allowsa cane sugar / HFCS exchange between the US and Mexico, continued in place.Additional TRQ volume for the October - December 2007 period was alsonegotiated. Free market access is anticipated for HFCS under the North AmericanFree Trade Agreement from 1 January 2008. Citric Acid profits were below prior year. Although selling prices were in linewith expectations, sales volumes were lower as a result of increased Chinesecompetition. The high cost of raw materials and energy also impacted profits.Production ceased at our UK plant in Selby, Yorkshire due to extreme costpressures and oversupply in the world market. The market for Aquasta(TM) astaxanthin, a natural nutrient and pigment forfarm-raised fish, remained difficult. While sales volumes increased over theyear to plant capacity levels, selling prices decreased. Production continued tooperate at capacity, but manufacturing costs were impacted by higher energy andraw material costs. As a result of the underperformance of the UK Citric and Astaxanthin businessesan exceptional charge of £33 million has been recognised in the year to 31 March2007 comprising closure costs of the citric acid line at Selby, UK and animpairment charge on our investment in Astaxanthin. Tate & Lyle Custom Ingredients successfully completed a first full year withTate & Lyle. Contribution to 2007 results was in line with our expectations. Commercial production was achieved at our Bio-PDO(TM) joint venture facility inLoudon, Tennessee during the last quarter of the 2006 calendar year asanticipated. Start-up losses of £6 million were incurred (2006 - £3 million). Commissioning of the expansion project at the Sagamore plant in Lafayette,Indiana commenced earlier this year as planned. Other key capital projects atLoudon, Tennessee and Fort Dodge, Iowa remain on schedule. Food & Industrial Ingredients, Europe Food & Industrial Ingredients, Europe performed ahead of expectations,particularly in the second half of the year. At constant exchange rates, salesof £825 million were up 15% and operating profit increased by £25 million from£45 million to £70 million. Operating profit benefited from a £25 million reduction in the depreciationcharge following the impairment recorded in the previous financial year.Excluding this item, operating profit was similar to the previous year despitesignificant increases in energy and raw material costs and a levy paid on theisoglucose quota to the EU Restructuring Fund of £6 million under the new EUSugar Regime. Food ingredient sales volumes and product mix improved following thecommissioning of recent investments, but liquid sweetener volumes were slightlylower as capacity was used for higher margin products. Selling prices improvedthroughout the year and there were significant increases in the 2007 calendaryear pricing round across most product lines. Prices for isoglucose were onlymodestly higher as increases were constrained by the price of the alternative,sugar. Current prices should recover the higher raw material and energy coststhat were experienced in the year to 31 March 2007. Raw material costs increased significantly after very hot weather shortly beforethe 2006 EU harvest, but also due to increased global demand for biofuels andsome supply constraints, particularly the low Australian crop following adrought. Feed by-product prices also increased as a result and strong demanddrove improved pricing for vital wheat gluten. The Eaststarch joint ventures in Eastern and Central Europe produced resultsbroadly in line with the prior year, including only partial benefits from theaccession of Bulgaria and Romania to the EU on 1 January 2007. Cesalpinia Food's underlying results were in line with our expectations in thefirst full year under Tate & Lyle ownership. On 9 May 2007 the Group announced that it was in an advanced stage of exclusivediscussions which may lead to the disposal of its interest in those facilitiesof the Food & Industrial Ingredients, Europe division located in the UK,Belgium, France, Spain and Italy. These businesses contributed approximately £38million to operating profit before allocation of Group central costs and £520million to sales in the year ended 31 March 2007. Sucralose At constant exchange rates, sales of SPLENDA(R) Sucralose of £147 million were8% ahead of the prior year and operating profit increased by £6 million from £64million to £70 million despite £8 million of start-up costs at the new Singaporefactory (2006 - £5 million). During the year we continued to expand the business with a number of productlaunches by our major multinational customers and we have continued to work withour customers both in the USA and internationally to broaden their pipeline offood and beverage products using SPLENDA(R) Sucralose. Outside the USA we haveseen particular success in Mexico, where we estimate that SPLENDA(R) Sucralosehas already become the market leader, and in Europe where leading UK retailers JSainsbury and Asda have announced they are reformulating a range of their ownlabel products to include SPLENDA(R) Sucralose. The expansion of the McIntosh, Alabama plant and construction of the newSingapore facility were completed during the year on schedule. A new pilot plantfacility is under construction in Alabama that will facilitate processimprovements that have been demonstrated in the laboratory and forms part of ourstrategy to maintain leadership in sucralose manufacturing technology. TheSingapore facility is being commissioned and production will be ramped up overthe next 12 months. In response to customer demand, a new improved dry form ofpure SPLENDA(R) Sucralose is now being produced in Singapore. The new form iseasier for our ingredient customers to handle and is packaged in a newre-sealable pouch. As evidence of our commitment to vigorously defend and enforce our sucralosepatents, we announced on 10 April 2007 that our US subsidiary, Tate & LyleSucralose, Inc had filed a United States International Trade Commission (ITC)Case in Washington alleging patent infringement against three Chinesemanufacturing groups as well as 18 importers and distributors. The proceedingsallege infringement of patented sucralose manufacturing technology in respect ofsucralose manufactured in China and imported to the US by the defendants namedin the case. The ITC has the right to exclude products from importation into theUS that are shown to infringe a US patent. The ITC announced on 7 May 2007 thatit has formally instituted its investigation of the infringements alleged in ourclaim. This action follows the filing with the US Federal District Court in May2006, which so far has resulted in favourable settlements with three of the tendefendants cited in that case. As part of the realignment with McNeil Nutritionals, LLC ("McNeil") in April2004 a provision was set up for deferred consideration payable to McNeil basedon the growth in sales of SPLENDA(R) Sucralose by Tate & Lyle over a period of 5years to 31 March 2009. It is anticipated that this provision will not now befully utilised and consequently £20 million has been released to the incomestatement in the year. This has been shown as an exceptional item. Sugars, Americas & Asia The Sugars, Americas & Asia division which, with the sale of Redpath, nowcomprises the joint venture cane sugar business in Mexico and the cane sugarbusiness in Vietnam, had a mixed year. Occidente, in Mexico, reported higherprofits due to strong domestic demand replacing lower margin exports. InVietnam, following a steady decline in international sugar prices and increasedpayments to farmers, Nghe An Tate & Lyle's profits fell from the previous year'speak. Nevertheless the business continued to make an acceptable return in thegrowing Vietnamese market and a dividend was paid to shareholders for the firsttime. Cane volumes increased substantially as the region recovered from drought. Sugars, Europe The Sugars, Europe division, excluding the discontinued Eastern Sugar jointventure, had a mixed year. In constant currency, sales increased by 13% to£1,492 million while operating profit reduced by £8 million to £41 million, withboth refining and sugar trading activities reporting lower profits. The UK refining businesses reported profits significantly lower than the prioryear whilst the Portuguese operation was broadly in line. In common with otherEU sugar producers, the UK refining business has been faced with lower marketprices as a result of the slower than expected pace of quota surrender andlimited availability and high competition for Export Licences making worldmarket exports uneconomic. In the short term, the EU has announced the withdrawal of at least 2.0 milliontonnes of quota for the sugar year starting on 1 October 2007. This shouldimprove market sentiment for the next pricing round but the extent cannot beevaluated at this time. Cane refineries are included in this quota cut althoughthe EU Commission's most recent proposals, which remain subject to consultation,reverse this and exclude the cane refiners from the cut. As part of the drive to develop new markets in response to the EU Sugar Regimereform a joint venture with Eridania Sadam ("Eridania"), the Italian sugarproducer was formed. The joint venture, "Eridania Tate & Lyle", is exclusivelyresponsible for the marketing and sales of all sugar products from the twoparent companies into the Italian market. Tate & Lyle holds 35% of the jointventure, for which it has invested £2 million (EUR 2.8 million), with Eridaniaholding the remaining 65%. Eridania is a beet sugar processor and is the marketleader in the Italian sugar sector. Profits from the sugar trading and molasses businesses before Group centralcosts at £28 million (2006 - £33 million) remained strong. The impact of lessvolatile world sugar markets reduced trading activity although this waspartially offset by a good performance from physical sugar trading in Brazilwhere profits and volumes were significantly higher than the prior year.Molasses trading maintained its performance at similar levels to last year withweaker results from London-based trading being offset by a strong performancefrom the UK storage activities. Discontinued Businesses Redpath was sold to American Sugar Refining, Inc. on 21 April 2007 for £131million. It is expected that the sale will generate a profit on disposal in theyear ending 31 March 2008 of approximately £55 million. Profit after tax in theyear to 31 March 2007 was lower than the comparative period due to amark-to-market loss on raw sugar stocks of £5 million (2006 - gain of £7million) as the world raw sugar price eased following the highs in the prioryear. Excluding this impact, the underlying business performed broadly in linewith the prior year. The assets and liabilities of Redpath are shown as 'Heldfor Sale' in the consolidated balance sheet. In November 2006 Eastern Sugar, our European beet sugar joint venture operationin Hungary, Slovakia and the Czech Republic, announced the surrender of itsquota to the EU Restructuring Fund. Manufacturing operations in all threecountries ceased by 31 March 2007. Sugar remaining from the 2006 campaign willcontinue to be sold in the new financial year. The business expects to receivecash compensation of £51 million during the year ended 31 March 2009 and hasrecognised an overall exceptional surplus on termination of operations of £14million. A further £9 million exceptional gain has been recognised in the yearto 31 March 2007 following the successful outcome of a long running litigationclaim against the government of the Czech Republic relating to the unfairallocation of sugar quotas during the period 2000-2003. Excluding exceptionalitems the business recorded profit after tax broadly in line with the prioryear. Net Finance Expense The net finance expense from continuing operations was £38 million compared with£33 million in the year to 31 March 2006, due principally to higher net debt tofund both investments in capital and acquisitions during the year. This includesa net credit of £2 million (2006 - net charge of £3 million) relating toretirement benefits. The interest rate in the year, calculated as net finance expense on totaloperations divided by average net debt, was 4.6% (2006 - 5.2%). Interest coverbased on total operations was 10.1 times (2006 - 9.9 times). Taxation The taxation charge from continuing businesses was £105 million (2006 - £60million). The increase in the charge is due mainly to tax credits in the prioryear relating to exceptional charges. The effective rate of tax on profitexcluding exceptional items and amortisation was 29.0% (2006 - 30.0%). Thedecrease in the effective tax rate was mainly due to the utilisation ofpreviously unrecognised losses in Europe. Dividend The Board is recommending a final dividend of 15.3p as an ordinary dividend tobe paid on 26 July 2007 to shareholders on the register on 29 June 2007. Thisrepresents an increase in the total dividend for the year of 1.5p per share. Aninterim dividend of 6.2p (2006 - 5.9p) was paid on 9 January 2007. Totalearnings before exceptional items and amortisation covered the proposed totaldividend 2.3 times. Retirement Benefits Under IAS19 the income statement contains two main elements: a service charge tooperating profit, representing the annual ongoing cost of providing benefits toactive members; and a net finance cost or credit, representing the differencebetween the expected return on the assets in the funds and interest on servicingfuture liabilities, calculated using a corporate bond yield. The charge to operating profit before exceptional items for retirement benefitsin the year to 31 March 2007 for the total Group was £21 million (2006 - £20million). Under IAS19 the net pension deficit decreased by £25 million to £52million, and the US healthcare provision decreased by £18 million to £77million. Contributions to the Group's pension funds, both regular and supplementary,totalled £40 million (2006 - £40 million). Supplementary payments totalled £16million (2006 - £17 million). Net Debt and Cash Flow The Group's net debt increased from £866 million to £900 million. The adoptionof IFRIC 4 increased opening net debt of £858 million at 31 March 2006 aspreviously reported by £8 million. The increase in net debt comprised a strongoperating cash flow which was more than offset by continued investment in theGroup's capital programme, dividends and taxation. Exchange translation reducednet debt by £58 million. Operating cash flow before working capital totalled £298 million compared with£307 million in the previous year. There was a working capital outflow fromcontinuing operations of £71 million (2006 - £220 million outflow). This wasprincipally caused by increased inventory in Food & Industrial Ingredients,Americas partially offset by inflows in the sugar trading operations as lowerworld sugar prices resulted in lower stock values compared to the high values at31 March 2006. Net interest paid totalled £44 million (2006 - £27 million). Nettaxation paid from continuing operations was £87 million (2006 - £90 million). Capital expenditure was £251 million (2006 - £273 million). Free cash inflow (representing cash generated from operations after interest,taxation and capital expenditure) totalled £9 million (2006 - outflow £148million). Equity dividends were £98 million (2006 - £93 million). In total, a net £142million (2006 - £120 million) was paid to providers of finance as dividends andinterest. A net inflow of £16 million was received relating to employees exercising shareoptions during the year (2006 - £16 million). The ratio of net debt to total earnings before exceptional items, interest, tax,depreciation and total amortisation (EBITDA) was 1.9 times, the same as in theprior year. During the year net debt peaked at £900 million in March 2007 (March 2006 duringthe year ended 31 March 2006 - £866 million). The average net debt was £804million, an increase of £166 million from £638 million in the prior year. Shareholders' Equity Shareholders' Equity at 31 March 2007 was £995 million, £55 million higher thanat 31 March 2006. The increase is due mainly to the retained profit in the yearoffset by the impact of exchange translation on US Dollar net assets. Funding and Liquidity Management The Group funds its operations through a mixture of retained earnings andborrowing facilities, including capital markets and bank borrowings. In order to ensure maximum flexibility in meeting changing business needs, theGroup seeks to maintain access to a wide range of funding sources. In June 2006,Tate & Lyle International Finance PLC issued a dual tranche US$550 million 144Abond with US$300 million at 6.125% maturing in June 2011 and US$250 million at6.625% maturing in June 2016. The proceeds of this issue have been used to repaycertain maturing debt obligations and for general corporate purposes. Othercapital market borrowings outstanding at 31 March 2007 include the £200 million6.50% bond maturing in 2012 and the US$500 million 5.00% 144A bond maturing in2014. At 31 March 2007 the Group's long term credit ratings from Moody's andStandard & Poor's were Baa2 and BBB respectively. The Group ensures that it has sufficient undrawn committed bank facilities toprovide liquidity back-up for its US commercial paper programme and othershort-term money market borrowing for the foreseeable future. The Group hascommitted bank facilities of US$615 million which mature in 2009 with a core ofhighly rated banks. These facilities are unsecured and contain common financialcovenants for Tate & Lyle and its subsidiary companies that the pre-exceptionaland amortisation interest cover ratio should not be less than 2.5 times and themultiple of net debt to EBITDA, as defined in our financial covenants, shouldnot be greater than 4.0 times. The internal targets for these items are aminimum of 5.0 times and a maximum of 2.5 times, respectively. The Groupmonitors compliance against all its financial obligations and it is Group policyto manage the consolidated balance sheet so as to operate well within covenantedrestrictions at all times. The majority of the Group's borrowings are raisedthrough the Group treasury company, Tate & Lyle International Finance PLC, andare then on-lent to the business units on an arms length basis. The Group manages its exposure to liquidity risk by ensuring a diversity offunding sources and debt maturities. Group policy is to ensure that, aftersubtracting the total of undrawn committed facilities, no more than 30% of grossdebt matures within 12 months and at least 50% has a maturity of more than twoand a half years. At the year end, after subtracting total undrawn committedfacilities, there was no debt maturing within 12 months and 75% of debt had amaturity of two and a half years or more (2006 - 10% and 90%). The averagematurity of the Group's gross debt was 6.2 years (2006 - 4.8 years). At the yearend the Group held cash and cash equivalents of £189 million (2006 - £158million) and committed facilities of £312 million (2006 - £354 million) of which£236 million (2006 - £354 million) were undrawn. These resources are maintainedto provide liquidity back-up and to meet the projected maximum cash outflow fromdebt repayment, capital expenditure and seasonal working capital needs foreseenfor at least a year into the future at any one time. Funding not treated as debt The Group seeks to optimise its financing costs in respect of all financingtransactions. Where it is economically beneficial, operating leases areundertaken in preference to purchasing assets. Leases of property, plant andequipment where the lessor assumes substantially all the risks and rewards ofownership are treated as operating leases with annual rentals charged to theincome statement over the term of the lease. Commitments under operating leasesto pay rentals in future years totalled £201 million (2006 - £229 million) andrelated primarily to railcar leases in the US. CONSOLIDATED INCOME STATEMENT \* T Year to Year to 31-Mar 31-Mar 2007 2006 Notes £m £m------------------------------------------------------------------------------------------------------------------------Continuing operationsSales 3 3 814 3 465 --------------- --------------- Operating profit 3 333 47Finance income 5 51 45Finance expense 5 (89) (78) --------------- ---------------Profit before tax 295 14Income tax expense 6 (105) (60) --------------- ---------------Profit/(loss) for the year from continuing operations 190 (46)Profit for the year from discontinued operations 27 19 --------------- ---------------Profit/(loss) for the year 217 (27) --------------- --------------- Profit/(loss) for the year attributable to:Equity holders of the Company 214 (30)Minority interest 3 3 --------------- --------------- 217 (27) --------------- --------------- Earnings/(loss) per share attributable to the equity holders of 7 the Company from continuing and discontinued operations Pence Pence- Basic 44.3 (6.3)- Diluted 43.6 (6.3) --------------- --------------- Earnings/(loss) per share attributable to the equity holders of 7 the Company from continuing operations- Basic 38.7 (10.3)- Diluted 38.1 (10.3) --------------- --------------- Dividends per share 8- Interim paid 6.2 5.9- Final proposed 15.3 14.1 --------------- --------------- 21.5 20.0 --------------- --------------- ------------------------------------------------------------------------------------------------------------------------ Analysis of profit before tax from continuing operations £m £m --------------- ---------------Profit before tax 295 14Add back:Exceptional items 4 13 248Amortisation of acquired intangible assets 9 5 --------------- ---------------Profit before tax, exceptional items and amortisation of acquired intangible assets 317 267 --------------- ---------------\* T CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE \* T Year to Year to 31 March 31 March Notes 2007 2006 £m £m---------------------------------------------------------------------------------------------------Net exchange differences (81) 23Employee post-employment benefits:- net actuarial (losses)/gains in post-employment benefit plans (1) 40- deferred taxation recognised directly in equity - (12)Net valuation losses on available-for-sale financial assets - (1)Net losses on cash flow hedges (4) (3) ------------ ------------Net (loss)/profit recognised directly in equity (86) 47Profit/(loss) for the year 217 (27) ------------ ------------Total recognised income and expense for the year 131 20 ------------ ------------ Attributable to:Equity holders of the Company 131 17Minority interests - 3 ------------ ------------ 131 20 ------------ ------------\* T CONSOLIDATED BALANCE SHEET \* T Year to Year to 31 March 31 March 2007 2006 Notes Restated £m £m---------------------------------------------------------------------------------------------------ASSETSNon-current assetsIntangible assets 232 263Property, plant and equipment 1 217 1 217Investments in associates 7 4Available-for-sale financial assets 18 17Derivative financial instruments 36 28Deferred tax assets 8 7Trade and other receivables 64 8 ------------ ------------ 1 582 1 544 ------------ ------------Current assetsInventories 503 456Trade and other receivables 558 482Current tax assets 39 32Derivative financial instruments 102 282Cash and cash equivalents 9 189 158Assets held for sale 89 - ------------ ------------ 1 480 1 410 ------------ ------------TOTAL ASSETS 3 062 2 954 ------------ ------------ SHAREHOLDERS' EQUITYCapital and reserves attributable to the Company's equity holders:Share capital 122 122Share premium 403 400Other reserves 50 56Retained earnings 385 327 ------------ ------------ 960 905Minority interest 35 35 ------------ ------------TOTAL SHAREHOLDERS' EQUITY 995 940 ------------ ------------ LIABILITIESNon-current liabilitiesTrade and other payables 6 3Borrowings 9 842 543Derivative financial instruments 19 28Deferred tax liabilities 85 60Retirement benefit obligations 131 172Provisions for other liabilities and charges 51 71 ------------ ------------ 1 134 877 ------------ ------------Current liabilitiesTrade and other payables 420 382Current tax liabilities 47 30Borrowings and bank overdrafts 9 271 493Derivative financial instruments 123 202Provisions for other liabilities and charges 44 30Liabilities held for sale 28 - ------------ ------------ 933 1 137 ------------ ------------TOTAL LIABILITIES 2 067 2 014 ------------ ------------TOTAL EQUITY AND LIABILITIES 3 062 2 954 ------------ ------------\* T CONSOLIDATED CASHFLOW STATEMENT \* T Year to Year to 31 March 31 March Notes 2007 2006 £m £m-------------------------------------------------------------------------------------------------Cash flows from operating activitiesProfit before tax from continuing operations 295 14Adjustments for:Depreciation of property, plant and equipment 93 119Non-cash exceptional items 13 248Amortisation of intangible assets 13 8Share based payments 6 5Interest income 5 (51) (45)Finance expense 5 89 78Changes in working capital (71) (220) ------------ ------------Cash generated from continuing operations 387 207Interest paid (77) (65)Income tax paid (87) (90)Cash generated from discontinued operations 4 35 ------------ ------------Net cash generated from operating activities 227 87 ------------ ------------ Cash flows from investing activitiesProceeds on disposal of property, plant and equipment 8 4Purchase of available-for-sale financial assets (1) -Interest received 33 38Acquisitions of subsidiaries, net of cash and cash equivalents acquired (3) (69)Investment in associates (3) -Purchase of property, plant and equipment (251) (273)Purchase of intangible assets and other non-current assets (6) (2) ------------ ------------Net cash flows used in investing activities (223) (302) ------------ ------------ Cash flows from financing activitiesProceeds from issuance of ordinary shares 16 16Cash inflow from additional borrowings 416 78Cash outflow from repayment of borrowings (304) -Cash outflow from repayment of capital element of finance leases (1) -Dividends paid to the Company's equity holders (98) (93) ------------ ------------Net cash flows from financing activities 29 1 ------------ ------------ ------------ ------------Net increase/(decrease) in cash and cash equivalents 9 33 (214) ------------ ------------ Cash and cash equivalents:Balance at beginning of year 158 375Effect of changes in foreign exchange rates (2) (3)Net increase/(decrease) in cash and cash equivalents 33 (214) ------------ ------------Balance at end of year 189 158 ------------ ------------\* T NOTES TO FINANCIAL INFORMATION For the Year to 31 March 2007 1. Basis of preparation The preliminary results for the year ended 31 March 2007 have been extractedfrom audited consolidated financial statements which have not yet been deliveredto the Registrar of Companies. The financial information in this announcementdoes not constitute the Group's Annual Report and Accounts. The auditors havereported on the Group's statutory accounts for the year ended 31 March 2007. Thereport was unqualified and did not contain a statement under Section 237 of theCompanies Act 1985. The financial information for the year ended 31 March 2006is derived from the statutory accounts for that year, except that thecomparative information has been restated as a result of the adoption of IFRIC 4'Determining whether an arrangement contains a lease'. 2. International Financial Reporting Standards (IFRS) The consolidated financial statements have been prepared in accordance with IFRSas adopted by the European Union, and with those parts of the Companies Act 1985applicable to companies reporting under IFRS. In accordance with IAS1 'Presentation of Financial Statements', certain itemswhich are material to the result for the year and are of a non-recurring natureare presented separately. These are classified as exceptional items whichcomprise items of income and expense that are material in amount and unlikely torecur, and which merit separate disclosure in order to provide an understandingof the Group's underlying financial performance. 3. Segment information The segment results for the year to 31 March 2007 were as follows: \* T Continuing operations ------------------------------------------------------------------------- Total from Food & Food & continuing Industrial Industrial Sugars, and Ingredients, Ingredients, Americas Sugars, Total Discontinued discontinued Americas Europe Sucralose & Asia Europe operations operations £m £m £m £m £m £m £m £m------------------------------------------------------------------------------------------------------------------------SalesTotal sales 1 259 852 147 96 1 611 3 965 256 4 221Inter-segment sales (4) (27) - (1) (119) (151) - (151) -------------- -------------- ------------- ----------- ---------- ------ --------------- -------------External sales 1 255 825 147 95 1 492 3 814 256 4 070 -------------- -------------- ------------- ----------- ---------- ------ --------------- ------------- Operating profitBefore exceptional items and amortisation of acquired intangible assets 163 70 70 11 41 355 18 373Exceptional items (33) - 20 - - (13) 23 10Amortisation of acquired intangible assets (3) (2) (4) - - (9) - (9) -------------- -------------- ------------- ----------- ---------- ------ --------------- -------------Operating profit 127 68 86 11 41 333 41 374 -------------- -------------- ------------- ----------- ----------Net finance expense (38) 1 (37) ------ --------------- -------------Profit before tax 295 42 337 ------ --------------- -------------\* T The segment results for the year to 31 March 2006 were as follows: \* T Continuing operations ------------------------------------------------------------------------- Total from Food & Food & continuing Industrial Industrial Sugars, and Ingredients, Ingredients, Americas Sugars, Total Discontinued discontinued Americas Europe Sucralose & Asia Europe operations operations £m £m £m £m £m £m £m------------------------------------------------------------------------------------------------------------------------SalesTotal sales 1 133 759 142 96 1 481 3 611 255 3 866Inter-segment sales (6) (40) - - (100) (146) - (146) -------------- -------------- ------------- ----------- ---------- ------ --------------- -------------External sales 1 127 719 142 96 1 381 3 465 255 3 720 -------------- -------------- ------------- ----------- ---------- ------ --------------- ------------- Operating profitBefore exceptional items and amortisation of acquired intangible assets 125 46 68 9 52 300 28 328Exceptional items 14 (263) - 1 - (248) - (248)Amortisation of acquired intangible assets (1) - (4) - - (5) - (5) -------------- -------------- ------------- ----------- ---------- ------ --------------- -------------Operating profit 138 (217) 64 10 52 47 28 75 -------------- -------------- ------------- ----------- ----------Net finance expense (33) - (33) ------ --------------- -------------Profit before tax 14 28 42 ------ --------------- -------------\* T 4. Exceptional items Exceptional items are as follows: \* T Year to Year to 31 March 31 March 2007 2006 £m £m--------------------------------------------------------------------------------------------------ContinuingImpairment and closure costs (a) (33) (272)Deferred payment provision release (b) 20 -US healthcare benefit curtailment (c) - 24 -------------- ---------------- (13) (248)DiscontinuedEastern Sugar (d) 23 - -------------- ---------------- 10 (248) -------------- ----------------\* T (a) Impairment and closure costs of £33 million have been recognised in 2007following a review of the manufacturing activities at the Selby, UK factory forcitric acid and Astaxanthin. Both of these activities continued to be lossmaking in the year to 31 March 2007. The exceptional loss also includes costs ofclosure of the citric acid line following the decision to cease production andthe write down of goodwill and other assets relating to the Astaxanthinbusiness. These businesses are both reported within the Food & IndustrialIngredients, Americas division. The impairment losses recognised in 2006 comprised two items: a £263 millionimpairment of property, plant and equipment in Food & Industrial Ingredients,Europe arising from the expected impact of the new EU sugar regime regulationsand a £9 million impairment of property, plant and equipment in the UK citricacid business. (b) The deferred payment provision credit of £20 million relates to theSucralose business. As part of the realignment of Sucralose activities withMcNeil Nutritionals, LLC ('McNeil') in April 2004 a provision was set up fordeferred consideration payable to McNeil based on the growth in sales ofSPLENDA(R) Sucralose by Tate & Lyle over a period of 5 years to March 2009. Itis anticipated that the provision will not now be fully utilised andconsequently £20 million has been released to the income statement in the year. (c) An exceptional credit of £24 million arose in 2006 from a change in benefitsprovided to certain members of the Group's US Healthcare Scheme followingchanges to US Government healthcare provisions. (d) Exceptional items of £23 million in discontinued operations relate to theGroup's Eastern Sugar joint venture. These comprise a £14 million net gainexpected on termination of operations following surrender of sugar quota to theEU Restructuring Fund under the terms of the EU Sugar Regime and a £9 milliongain following a favourable outcome to a long running litigation dispute withthe government of the Czech Republic. The tax impact on continuing net exceptional items was a £3 million charge (2006- £19 million credit) and on total net exceptional items was a £7 million charge(2006 - £19 million credit). Tax credits on exceptional items are onlyrecognised to the extent that losses created are expected to be recoverable inthe future. In addition a further £18 million exceptional tax charge wasrecognised in the year to 31 March 2007 (2006 - nil) of which £13 millionrelated to an adjustment to the tax credit recognised on the impairment in Food& Industrial Ingredients, Europe in the year ended 31 March 2006. The balancerelates to a one-off charge relating to discontinued operations. Exceptional items include £nil million (2006 - £1 million) attributable tominority interests. 5. Net finance expense \* T Year to Year to 31 March 31 March 2007 2006 £m £m----------------------------------------------------------------------------------------------------Finance incomeInterest receivable 49 45Net finance income arising on defined benefit retirement schemes:- interest cost (66) -- expected return on plan assets 68 - ------------- ------------Total finance income 51 45 ------------- ------------Finance expenseInterest payable on bank borrowings (3) (2)Interest payable on other borrowings (80) (71)Net finance cost arising on defined benefit retirement schemes:- interest cost - (68)- expected return on plan assets - 65Unwinding of discounts in provisions (3) (2)Finance lease charges (3) - ------------- ------------Total finance expense (89) (78) ------------- ------------Net finance expense (38) (33) ------------- ------------\* T 6. Taxation \* T Year to Year to 31 March 31 March 2007 2006 £m £m----------------------------------------------------------------------------------------------------Current tax- UK (24) 18- Overseas 107 45 ------------- ------------ 83 63Deferred tax 22 (3) ------------- ------------Taxation charge - continuing operations 105 60 ------------- ------------\* T The taxation charge on continuing operations in the year to 31 March 2007 of£105 million (2006 - £60 million) includes a charge of £16 million in respect ofexceptional items (2006 - £19 million credit). The taxation charge ondiscontinued operations was £15 million (2006 - £9 million). 7. Earnings / (loss) per share Basic Basic earnings/(loss) per share is calculated by dividing the profit/(loss)attributable to equity holders of the Company by the weighted average number ofordinary shares in issue during the year, excluding ordinary shares purchased bythe Company and held in the employee share ownership trust. \* T Year to 31 March 2007 Year to 31 March 2006 ----------------------------------- ----------------------------------- Continuing Discontinued Total Continuing Discontinued Total operations operations operations operations-----------------------------------------------------------------------------------------------------Profit/(loss) attributable to equity holders of the Company (£million) 187 27 214 (49) 19 (30)Weighted average number of ordinary shares in issue (millions) 482.8 482.8 482.8 476.7 476.7 476.7Basic earnings/(loss) per share 38.7p 5.6p 44.3p (10.3p) 4.0p (6.3)p ----------- ------------ -------- ----------- ------------ --------\* T Diluted Diluted earnings/(loss) per share is calculated by adjusting the weightedaverage number of ordinary shares outstanding to assume conversion of allpotential dilutive ordinary shares. Potential dilutive ordinary shares arisefrom share options. For these, a calculation is performed to determine thenumber of shares that could have been acquired at fair value (determined as theaverage annual market share price of the Company's shares) based on the monetaryvalue of the subscription rights attached to outstanding share options. Thenumber of shares calculated as above is compared with the number of shares thatwould have been issued assuming the exercise of the share options. \* T Year to 31 March 2007 Year to 31 March 2006 ----------------------------------- ----------------------------------- Continuing Discontinued Total Continuing Discontinued Total operations operations operations operations-----------------------------------------------------------------------------------------------------Profit/(loss) attributable to equity holders of the Company (£million) 187 27 214 (49) 19 (30)Weighted average number of diluted shares in issue (millions) 491.0 491.0 491.0 476.7 476.7 476.7Diluted earnings/(loss) per share 38.1p 5.5p 43.6p (10.3p) 4.0p (6.3)p ----------- ------------ -------- ----------- ------------ --------\* T The adjustment for the dilutive effect of share options at 31 March 2007 was 8.2million (2006 - 7.6 million). The adjustment for the dilutive effect of shareoptions in the year to 31 March 2006 has not been reflected in the calculationof the diluted loss per share as the effect would have been anti-dilutive. Adjusted earnings per share Adjusted earnings per share is stated excluding exceptional items andamortisation of acquired intangible assets, as follows: \* TContinuing Operations Year to Year to 31 March 31 March 2007 2006----------------------------------------------------------------------------------------------------Profit/(loss) attributable to equity holders of the Company (£million) 187 (49)Adjustments for:- exceptional items (note 4) 13 248- exceptional items attributable to minority interests - (1)- amortisation of acquired intangible assets 9 5- tax effect on the above adjustments and exceptional tax items 13 (20) ------------- ------------Adjusted profit (£million) 222 183 ------------- ------------ Adjusted basic earnings per share from continuing operations 46.0p 38.4pAdjusted diluted earnings per share from continuing operations 45.2p 37.8p----------------------------------------------------------------------------------------------------\* T \* TTotal Operations Year to Year to 31 March 31 March 2007 2006----------------------------------------------------------------------------------------------------Profit/(loss) attributable to equity holders of the Company (£million) 214 (30)Adjustments for:- exceptional items (note 4) (10) 248- exceptional items attributable to minority interests - (1)- amortisation of acquired intangible assets 9 5- tax effect on the above adjustments and exceptional tax items 22 (20) ------------- ------------Adjusted profit (£million) 235 202 ------------- ------------ Adjusted basic earnings per share from total operations 48.7p 42.4pAdjusted diluted earnings per share from total operations 47.9p 41.7p----------------------------------------------------------------------------------------------------\* T 8. Dividends \* T Year to Year to 31 March 31 March 2007 2006---------------------------------------------------------------------------------------------------Dividends on ordinary equity shares- Final paid relating to prior year (£million) 68 65- Interim paid relating to current year (£million) 30 28 ------------ -----------Total dividend paid (£ million) 98 93 ------------ -----------The total ordinary dividend is 21.5p (2006 - 20.0p) made up as follows :- Interim dividend paid 6.2p 5.9p- Final dividend proposed 15.3p 14.1p ------------ ----------- 21.5p 20.0p ------------ -----------\* T The final dividend proposed for the year, which has not been recognised as aliability, will be paid subject to approval by shareholders at the Company'sAnnual General Meeting on 18 July 2007 to shareholders who are on the registerof members on 29 June 2007. 9. Net debt The components of the Group's net debt profile are as follows: \* T 31 March 31 March 2007 2006 £m Restated £m---------------------------------------------------------------------------------------------------Non-current borrowings (842) (543)Borrowings and overdrafts (a) (271) (493)Debt-related derivative instruments (b) 24 12Cash and cash equivalents 189 158 ------------ -----------Net debt (900) (866) ------------ -----------\* T (a) Borrowings and overdrafts at 31 March 2007 include £95 million (31 March2006 - £101 million) in respect of securitised receivables. (b) Derivative financial instruments presented within assets and liabilities inthe balance sheet of £4 million (net liability) comprise net debt-relatedinstruments of £24 million (asset) and net non debt-related instruments of £28million liability (2006 - £80 million asset) comprising net debt-relatedinstruments of £12 million and net non-debt-related instruments of £68 million).Additional net non-debt related instruments of £1 million asset are included inassets held for sale. Movements in the Group's net debt profile are as follows: \* T Year to Year to 31 March 31 March 2007 2006 £m £m---------------------------------------------------------------------------------------------------Balance at 31 March (866) (529)Impact of IFRIC 4 adoption - (3) ------------ -----------Balance at 1 April (866) (532) ------------ ----------- Increase/(decrease) in cash and cash equivalents in the year 33 (214)Cash inflow from increase in borrowings (111) (78)Borrowings arising on acquisitions - (6) ------------ -----------Increase in net debt resulting from cash flows (78) (298)Inception of finance leases (14) (5)Exchange differences 58 (31) ------------ -----------Increase in net debt in the year (34) (334) ------------ ----------- Balance at 31 March (900) (866) ------------ -----------\* T 10. Foreign exchange rates \* T Year to Year to 31 March 31 MarchAverage exchange rates 2007 2006--------------------------------------------------------------------------------------------------US Dollar £1 = $ 1.89 1.79Euro £1 = EUR 1.48 1.47Canadian Dollar £1 = C$ 2.16 2.13\* T \* T 31 March 31 MarchYear end exchange rates 2007 2006--------------------------------------------------------------------------------------------------US Dollar £1 = $ 1.97 1.74Euro £1 = EUR 1.47 1.43Canadian Dollar £1 = C$ 2.27 2.03\* T ADDITIONAL INFORMATION For the Year to 31 March 2007 Net margin analysis (note a) \* T Year to Year to 31 March 2007 31 March 2006 % %--------------------------------------------------------------------------------------------------- Before exceptional items and amortisation------------------------------------------------------------------- Food & Industrial Ingredients, Americas 13.0 11.1 Food & Industrial Ingredients, Europe 8.5 6.4 Sucralose 47.6 47.9 Sugars, Americas & Asia 6.7 9.9 Sugars, Europe 3.3 4.2 Group 9.2 8.8 After exceptional items and amortisation------------------------------------------------------------------- Food & Industrial Ingredients, Americas 10.1 12.2 Food & Industrial Ingredients, Europe 8.2 (30.2) Sucralose 58.5 45.1 Sugars, Americas & Asia 6.7 10.3 Sugars, Europe 3.3 4.2 Group 9.2 2.0\* T (a) Above margins are based on total operations and calculated as profit beforeinterest, tax, exceptional items and amortisation of acquired intangible assetsdivided by external sales. Ratio analysis (note a) \* T Year to Year to 31 March 31 March 2007 2006 Restated--------------------------------------------------------------------------------------------- Net debt to EBITDA = Net debt/Pre-exceptional EBITDA 900/477 866/456 = 1.9 times = 1.9 times Gearing = Net debt/Total shareholders' equity 900/995 866/940 = 90% = 92% Interest cover = Operating profit before amortisation of acquired intangibles and exceptional items/Net finance expense 373/37 328/33 = 10.1 times = 9.9 times Dividend Cover = Adjusted basic earnings per share/Dividend per share 48.7/21.5 42.4/20.0 = 2.3 times = 2.1 times Return on Net Operating Assets = Profit before interest, tax and exceptional items/Average net operating assets 364/1 926 323/1 712 = 18.9% =18.9% £m £mNet operating assets are calculated as:Total shareholders' equity 995 940Add back net debt (see note 9) 900 866Add back tax liabilities 99 51 --------------- -------------Net operating assets 1 994 1 857 --------------- ------------- Average net operating assets (b) 1 926 1 710 --------------- -------------\* T (a) Ratios are based on financial information from total operations. (b) Average Net Operating Assets for the period to 31 March 2006 were calculatedusing opening net operating assets at 1 April 2005 which, following the adoptionof IAS39, were £69 million higher than at 31 March 2005. Copyright Business Wire 2007Related Shares:
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