Annual Financial Report

Annual Financial Report

Tate & Lyle PLC

Tate & Lyle PLC

Annual Financial Report

Tate & Lyle PLC (the “Company”) confirms that copies of the following documents have been submitted to the National Storage Mechanism and will shortly be available for inspection at: www.morningstar.co.uk/uk/NSM.

1. Annual Report 2018;

2. Notice of Annual General Meeting 2018;

3. Notice of Availability; and

4. Proxy Form.

The Annual Report 2018, Notice of Annual General Meeting 2018 and Notice of Availability are also available on Tate & Lyle’s website at www.tateandlyle.com/investors/annual-reports.

For the purposes of complying with Disclosure Guidance and Transparency Rule (DTR) 6.3.5R and the requirements it imposes on issuers as to how to make public annual financial reports, we set out below:

- in Appendix A, the principal risks and uncertainties facing the Company;

- in Appendix B, the Directors' responsibility statement; and

- in Appendix C, the disclosure regarding related party transactions.

The appendices have been extracted from the Annual Report 2018 in unedited full text and the page numbers in the text refer to the page numbers in that document. This information should be read in conjunction with the Company's 2018 full-year results announcement, released on 24 May 2018, which contained a condensed set of financial statements and which can be found at www.tateandlyle.com/Investors/results-and-presentations. Together, these constitute the material required by DTR 6.3.5R to be communicated to the media in unedited full text through a Regulatory Information Service.

Claire-Marie O’Grady
Company Secretary
21 June 2018

APPENDIX A
RISK FACTORS

Principal risks
The Board has carefully considered the type and extent of the principal risks to the Group achieving its objectives. While the Group seeks to manage risk carefully, at the same time the Board recognises that some risk needs to be taken for the Group to achieve its strategic goals.

Over time, the Group’s risk profile evolves and the Board’s view of the principal risks is updated accordingly. Following a number of changes to the principal risks over the last few years, the Board decided this year that no changes to the principal risks were required.

The Board confirms that a robust assessment of the principal risks facing the Company, including those that would threaten its business model, performance, solvency and liquidity, has been carried out. The principal risks identified as part of the process undertaken during the year, together with examples of the mitigating actions being taken, are set out on pages 40 and 41. It is not possible to identify or anticipate every risk that may affect the Group.

Safety
Act safely and maintain the safe operation of our facilities
The safety of our employees, contractors, suppliers, and the communities in which we operate is paramount. We must operate within local laws, regulations, rules and ordinances relating to health, safety and the environment, including emissions. Failure to act safely, which could lead to loss of life or serious injury, may give rise to fines or penalties for breach of safety laws, interruptions in operations or loss of our licence to operate, liability payments and costs arising from injuries or damage, and damage to our reputation.

Examples of how we manage the risk

• Health and safety policies and procedures are in place at all facilities with dedicated staff to ensure they are embedded and measured

• Regular review of performance and policies by the Board

• Maintenance of suitable insurance programme

• Programme of global compliance audits

• SafeStart^® behavioural safety training programme rolled out across plants, offices and labs

• During the year, a comprehensive review of Group-wide safety protocols, procedures and culture was undertaken with the support of an independent external expert consultancy. As a result, a new strategy and approach to safety was implemented called ‘Journey to EHS Excellence’

• A new global environment, health and safety (EHS) organisation was put in place to support our Journey to EHS Excellence (see pages 46 and 47 for more information).

Strategy
Growth in food and beverage solutions
Our ability to deliver our strategy to grow our Food & Beverage Solutions business may be affected by a number of factors such as delivering growth in emerging markets, customers’ readiness to adopt new ingredients and incorporate them in new product launches, competitor actions, and growing key product or product families. Furthermore, failure to make acquisitions and create value by integrating them into the Group effectively, may also affect our ability to deliver growth. Failure to deliver our strategy over the longer term would negatively affect our credibility, reputation and profitability.

Examples of how we manage the risk

• Investments to increase sales and technical resources, and infrastructure, particularly in emerging markets (laboratories expanded in Shanghai, Singapore and Mexico City during the year)

• New staff recruited and existing staff developed to upgrade skillsets in customer-facing areas and innovation

• Global programme to increase customer focus in key areas such as customer account management, planning and execution

• Programme put in place to sharpen focus on our customers

• Commercial organisation re-aligned to focus on key categories.

Innovation
Innovate and commercialise new products
Failure to identify important consumer trends and provide innovative solutions, and the inability to successfully commercialise new products, could impact the delivery of our strategy. This would affect our performance and reputation.

Examples of how we manage the risk

• Innovation and Commercial Development team conducts research and works closely with customers and other external organisations to identify emerging consumer trends

• Open innovation team actively scouts for breakthrough technologies and opportunities across industries and universities

• Strategic marketing organisation provides support for new product launches and consumer and category insight

• Prioritisation of ‘partnership’ opportunities with customers to accelerate development cycles and bring new ingredients to market more quickly

• Tate & Lyle Ventures invests in early-stage companies in food science and technology by partnering with research institutions, entrepreneurs and other venture funds.

People
Attract, develop, engage and retain key personnel
The performance, knowledge and skills of employees are central to our success. We must attract, integrate, engage and retain the talent we need to deliver our strategy, and have the appropriate processes and culture in place. Being unable to retain key people and adequately plan for succession could have a negative impact on our performance.

Examples of how we manage the risk

• Remuneration policies designed to attract, retain and reward employees with ability and experience to execute Group strategy

• Talent development strategy to provide opportunities for employees, as well as training to close skills gaps

• Single global performance management system and talent planning processes in place

• Focus by the Board on succession planning for business-critical roles

• Measurement of progress against cultural objectives, for example, global employee surveys.

Legal and compliance
Comply with legal or regulatory requirements, and our Code of Ethics
We operate in a variety of markets and are therefore exposed to a wide range of legal and regulatory frameworks. We must understand and comply with all applicable legislation. Any breach could have a financial impact and damage our reputation.

Examples of how we manage the risk

• Regular monitoring and review of changes in law and regulation in areas such as health and safety, environment, quality, food safety, corporate governance and data protection

• Legal teams maintain compliance policies in areas such as anti-trust and anti-corruption law; and provide ongoing training to employees

• Ethics training provided to employees

• Full-time global Head of Ethics and Compliance appointed during the year

• Whistleblowing process in place (Speak Up programme)

• Compliance with the EU General Data Protection Regulation.

Cyber security
Maintain the security of our information systems and data
A cyber security breach, whether as a result of human error, deliberate action or the failure of technology systems, could result in unauthorised access to or misuse of information systems, technology or data. This could cause harm to our assets, loss of data, business disruption, legal liabilities and damage to our reputation.

Examples of how we manage the risk

• Cyber security enhancement programme in place focused on strengthening people, process and technology defences

• Compulsory cyber security training

• Cyber security breach scenario exercises

• Advanced perimeter defences in place

• Continuous vulnerability detection and defences

• Separation of systems within plant network

• Third-party Security Operations Centre providing 24/7 security monitoring, security event correlation and threat counter-measures.

Operations and supply chain
Maintain the continuous operation of our plant network and supply chain, including high standards of customer service
Operating plants involves many risks which could cause temporary or permanent breaks in production. We must have a robust sales and operations planning process to avoid disruption to the supply chain and maintain high standards of customer service. Failure to do any of these things could have a material adverse effect on our performance and reputation.

Examples of how we manage the risk

• Preventive maintenance programme across the plant network

• Ongoing programme to improve global supply chain processes

• Business continuity capabilities in place to enable supply, as quickly as practicable, of product to customers from alternative sources in the event of a natural disaster or major equipment or plant failure

• Dedicated internal resources allocated to key projects in conjunction with business teams to ensure business continuity is not compromised

• Customer service managed by Global Operations as part of integrated end-to-end supply chain process.

Raw materials
Fluctuations in prices and availability of raw materials, energy, freight and other operating inputs
Our margins may be affected by fluctuations in crop prices due to factors such as alternative crops, co-product values and the variability of local or regional harvests caused by, for example, weather conditions, crop disease, climate change or crop yields. In some cases, due to the basis for pricing in sales contracts, or due to competitive markets, we may not be able to pass on to customers the full increase in raw material prices or higher energy, freight or other operating costs. Additionally, margins may be affected by customers not taking expected volumes.

Examples of how we manage the risk

• Strategic relationships with suppliers and trading companies including multi-year agreements

• Balanced portfolio of supply and tolling contracts in operation with customers to manage balance of raw material prices and product sales prices and volume risks

• Raw material and energy purchasing policies to provide security of supply

• Network of corn elevators to enhance security of supply

• New or back-up supply sources in place in case primary suppliers face localised challenges

• Use of derivatives and forward contracts where practical, to hedge and manage our exposure to raw material and co-product prices.

Quality
Maintain the quality and safety of our products
The safety of the consumers of our products is critical. Poor quality or sub-standard products could have a negative impact on consumer safety and on our reputation and relationships with customers.

Examples of how we manage the risk

• Strict quality control and product testing procedures to ensure products are released only with full quality control clearance

• Quality policies, procedures and performance reviewed by the Board

• Hazard Analysis and Critical Control Points plans updated at all plants to be fully compliant with new US Food Safety Modernization Act

• Immediate response Recall Committee meets promptly if a recall event occurs

• Third-party audit programme supplemented by internal global compliance audits

• Regular recall simulation exercises.

Consumer concerns and food regulation
Changes in consumer, customer or government attitudes to our products
Our freedom or ability to operate may be affected by changes in consumer or customer attitudes, food law and regulatory changes, campaigns targeted at specific ingredients or technologies or other factors that may impact the regulatory status or perception of our products or of their functionality, efficacy or use. We must ensure that the science behind our ingredients (for example, health claims, nutritional impact) is supported by credible sources, clearly communicated and understood by relevant regulatory authorities. Failure to do so may restrict the markets for our products.

Examples of how we manage the risk

• Global regulatory team, supported by external consultants, monitors local regulatory requirements affecting our products

• Global nutrition team initiates and monitors research and publications concerning the use and functionality of our ingredients and maintains global network of health and nutrition clinicians, academics and experts

• Membership of trade organisations provides access to broader sources of information and ensures, where appropriate, a single voice for the industry on regulatory and public interest issues affecting our ingredients

• Maintenance of relations with regulatory authorities

• Provision of clear information on ingredients’ provenance and traceability

• Research Advisory Group, chaired by a non-executive director and comprising leading scientific experts, reviews critical aspects of the Group’s innovation activities and provides guidance.

Government regulations and trade policies
Changes in government regulations and/or trade policies
Government actions or policies causing changes in tariffs, customs duties, or imposing import/export limitations, or other barriers, may lead to our business incurring additional costs, or may restrict opportunities for growth or prevent or limit our ability to operate in certain markets.

Examples of how we manage the risk

• Programme in place to ensure that we actively engage in discussions with political parties, influencers and regulatory authorities in the main countries we operate in

• Active member of relevant industry trade associations

• Model in place enabling production across the plant network to be adapted or optimised in the event of market restrictions in certain countries

• Operation of a global plant network means customers can be served from different countries if products from certain markets are restricted or become economically less attractive

• Continue to invest in resources and infrastructure across different markets and geographies to diversify business mix.

Financial controls
Maintain an effective system of internal financial controls
Without effective internal financial controls, we could be exposed to financial irregularities and losses from acts which could have a significant impact on the ability of the business to operate. We must safeguard business assets and ensure the accuracy and reliability of our records and financial reporting.

Examples of how we manage the risk

• Financial policies and standards are in place supported by procedures for key financial processes, for example, capital expenditure

• Financial risks are monitored and managed through a number of forums, for example, the regional Control Environment Councils

• Chief Executive and Chief Financial Officer undertake detailed quarterly business and financial reviews

• Minimum control standards are confirmed at the half-year and at the end of the financial year

• Automated controls are built into systems where possible.

APPENDIX B
DIRECTORS’ RESPONSIBILITY STATEMENT

Each of the Directors, whose names and functions are listed on page 52, confirms that, to the best of his or her knowledge:

• The Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company’s and the Group’s position and performance, business model and strategy
• The Group Financial Statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group
• The Company Financial Statements, which have been prepared in accordance with UK GAAP (United Kingdom Accounting Standards, comprising FRS 101 ‘Reduced Disclosure Framework’ and applicable law) give a true and fair view of the assets, liabilities, financial position and profit of the Company
• The Strategic Report and the Directors’ Report include a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties that it faces.

APPENDIX C
RELATED PARTY DISCLOSURES

Identity of related parties
The Group has related party relationships with its joint ventures and associates, the Group’s pension schemes and with key management, being its Directors and executive officers. No related party transaction with close family members of the Group’s key management occurred in the current or comparative year.

Subsidiaries, joint ventures and associates
Transactions entered into by the Company, Tate & Lyle PLC, with subsidiaries and between subsidiaries as well as the resultant balances of receivables and payables are eliminated on consolidation and are not required to be disclosed. Transactions and balances with and between joint ventures are as shown below. There are no such transactions with associates.

In the year ended 31 March 2018, the Group disposed of its 33.3% interest in Tapioca Development Corporation, a company based in Thailand, its only associate. See Notes 21 and 34.

In the year ended 31 March 2017, the Group disposed of, and therefore ceased to have related party transactions with two of its subsidiaries. The Group disposed of its equity interest in Jiangsu Tate & Lyle Howbetter Food Co., Ltd, its Food Systems business in China. The Group also completed the disposal of its interest in its corn wet mill in Casablanca, Morocco.

There were no other material changes in related parties or in the nature of related party transactions during the year.

Year ended 31 March
Â	Â	2018 £m	Â	2017 £m
Sales of goods and services
– to joint ventures		147		133
Purchases of goods and services
– from joint ventures		-		-

At 31 March
Â	Â	2018 £m	Â	2017 £m
Receivables
– due from joint ventures		20		24
Payables
– due to joint ventures		-		-

The Group had no material related party transactions containing unusual commercial terms in the current or prior year.

Key management compensation is disclosed in Note 10. There were no other related party transactions with key management.

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