Final Results

Final Results LONDON--(BUSINESS WIRE)--June 5, 2003-- PRELIMINARY ANNOUNCEMENT OF RESULTS For the year ended 31 March 2003 PRELIMINARY RESULTS TO 31 MARCH 2003 2002 -------------------------------------------------------------------------------------- Audited Audited Total sales £3,167m £3,944m Profit before tax, exceptional items and goodwill amortisation £228m £159m Profit before taxation £187m £159m Diluted earnings per share before exceptional items and goodwill amortisation 33.6p 22.1p Diluted earnings per share 27.7p 24.6p Dividend per share 18.3p 17.8p - Profit before tax, exceptional items and goodwill amortisation increased by 43% - Profit before tax increased by 18% - Diluted earnings per share before exceptional items and goodwill amortisation increased by 52% to 33.6p - Diluted earnings per share increased by 13% to 27.7p - Amylum integration benefits net of costs exceeded £25 million - Interest cover increased from 3.3 times to 7.6 times (underlying 6.8 times) - Net debt reduced by £168 million to £471 million - Proposed dividend of 18.3p per share, an increase of 2.8% 'The year to 31 March 2003 saw another significant improvement in profitability building on the progress made in the year to 31 March 2002. With profit last year having benefited from £11 million of unusual income, profit growth in the current year will be primarily dependent on our ability to improve efficiency, to further reduce our cost base and to continue the development of the market for our value added and branded products. This is the challenge which our new management team has accepted.' Sir David Lees Chairman Copies of the Annual Report for year ended 31 March 2003 will be available to shareholders shortly, and will be obtainable from The Company Secretary, Tate & Lyle PLC, Sugar Quay, Lower Thames Street, London EC3R 6DQ. Chairman's Statement Overview The year to 31 March 2003 saw another significant improvement in profitability building on the progress made in the year to 31 March 2002. The margin on sales increased and the Group's return on net operating assets of more than 14% is starting to look respectable although there is more to go for. The balance sheet is stronger as a result of a good cash flow performance and net debt of £471 million was less than half of what it was two years ago and is lower than it has been at any time in the last ten years. Interest cover at 6.8 times, excluding unusual interest credits, was also much improved. Results Profit before tax, exceptional items and goodwill amortisation increased to £228 million (2002 - £159 million) with a stronger performance from Amylum and the full year benefit from the disposal of our loss making US sugar businesses. Profit before tax after exceptional items and goodwill amortisation was £187 million (2002 - £159 million). Exceptional items in the year to 31 March 2003 amounted to a net £33 million charge (2002 - £8 million credit) and include an operating exceptional charge of £39 million primarily to write down the US and Mexican citric acid assets to their estimated recoverable value. Goodwill amortisation was £8 million (2002 - £8 million). Diluted earnings per share before exceptional items and goodwill amortisation for the year to 31 March 2003 were 33.6p (2002 - 22.1p). Diluted earnings per share after exceptional items and goodwill amortisation were 27.7p (2002 - 24.6p). There was a strong cash inflow of £189 million (2002 - £318 million) after payment of dividends of £84 million. Net debt at 31 March 2003 was £471 million (2002 - £639 million). Interest cover, excluding unusual interest credits, improved to an underlying 6.8 times (2002 - 3.3 times). Dividend Although we have maintained the dividend for the last two years the Board has felt unable to recommend an increase with a cover of less than 1.5 times and with relatively high net debt. In the year just ended the key financial ratios have all improved and the Board therefore feels it appropriate to resume the progressive dividend policy to which it is committed in principle. The total dividend proposed for the year is 18.3p (2002 - 17.8p) and is covered 1.8 times by earnings before exceptional items and goodwill amortisation. The proposed final dividend of 12.8p will be due and payable on 6 August 2003 to all shareholders on the register at 11 July 2003. Directors As previously announced, Larry Pillard relinquished his position as Chief Executive at the end of 2002 and became a Non-Executive Director on 1 January 2003. Larry joined Tate & Lyle in 1992, became a Director in 1994 and Chief Executive in 1996. The Board is grateful to him for the contribution he has made to the Group as an Executive over the last 10 years. It is also grateful to John Walker who retired from the Board on 2 April 2003. John joined the Group over 35 years ago and had been a member of the Board since 1993. Iain Ferguson joined the Board as Chief Executive on 1 May 2003. Iain was an Executive with Unilever for 26 years and his most recent appointment was as Senior Vice President, Corporate Development prior to which he was Executive Chairman of Birds Eye Walls. He has considerable experience of the global food industry and his background in science and technology equips him well to lead Tate & Lyle through the next phase of its development. Stanley Musesengwa was appointed to the Board as an Executive Director on 2 April 2003 having joined Tate & Lyle in 1979. He has held a number of different executive positions in the Group and on 1 May 2003 was appointed to the new role of Chief Operating Officer, reporting to the Chief Executive. This new management structure, comprising a Chief Executive and a Chief Operating Officer, has been created to ensure that every opportunity is taken to enhance Group-wide operating efficiency while at the same time facilitating the development of our strategy. Corporate Social Responsibility The Annual Report will set out our performance and policies as they relate to health and safety, the environment, employees, commercial partners and suppliers, and the communities in which we are involved. It is encouraging to note that in most cases the Group continues to improve its performance and although the Group Safety Index for calendar year 2002 contained in the Annual Report shows some slippage compared with 2001, this is due to a rise in the severity of some accidents rather than a rise in the overall number of incidents, which continue to decrease. The Group successfully met the criteria for entry to FTSE4Good, the UK corporate social responsibility index. Progress in all areas of corporate social responsibility depends on the involvement and commitment of our employees and our appreciation for their efforts is recorded here. Corporate Governance In the last year, two further Reports relating to the governance of companies have become available for comment. The Smith Report, which provides guidance to assist Company Boards in making suitable arrangements for their Audit Committees is uncontentious as far as Tate & Lyle is concerned and we will have no difficulty in being compliant with all its main recommendations. The Higgs Report on the Role and Effectiveness of Non-Executive Directors contains a number of suggested changes to the Combined Code on Corporate Governance. Most of these suggestions are uncontroversial but there are a few which the Board believes should be given further consideration by the Financial Reporting Council whose responsibility it is to make amendments to the Combined Code. In particular the Board believes that further consideration should be given to the Higgs suggestion concerning the relationship between the Senior Non-Executive Director, the major Institutional Shareholders and the other Non-Executive Directors. The Board also believes that further thought should be given to the proposals that the Chairman should not chair the Nominations Committee, that no individual Non-Executive Director should sit on all three principal Board Committees and that it should be exceptional for a Non-Executive Director to serve on a Board for more than six years. Notwithstanding the above, Tate & Lyle continues to be a strong supporter of high corporate governance standards fully recognising the importance of adherence to the spirit as well as the letter of the law. Strategy Over the last two years the Group's balance sheet has been significantly strengthened and our businesses are now increasingly focused. The Amylum integration project has delivered net benefits ahead of our original plans. Our value added and branded products now form a larger share of our total business. Our strategy is to continue this trend while never losing sight of the opportunities available to us as a high quality low cost global starch and sweetener business. Outlook Most of our businesses continue to perform well although the difficulties experienced in our Eastern Sugar and Citric Acid operations, which worsened as last year progressed, show no sign of abating. Consequently, we expect a more even split of profits in the current year than in the previous year when the first half was particularly strong. We assess the outturn of the annual US and European sweetener pricing rounds concluded last March as being sufficient to cover cost increases but insufficient to impact on margins. With profits last year having benefited from £11 million of unusual income, profit growth in the current year will be primarily dependent on our ability to improve efficiency, to further reduce our cost base and to continue the development of the market for our value added and branded products. This is the challenge which our new management team has accepted. Sir David Lees Chairman Chief Executive's Review Group Performance I joined the Group after the year-end and the improved financial results and a much stronger balance sheet reflect the performance of the management team led by Larry Pillard until the end of December 2002, and then by Simon Gifford until the end of April 2003. Group profit before tax, exceptional items and goodwill amortisation of £228 million was a £69 million (43%) improvement on the £159 million for the year to 31 March 2002. Group profit before tax after exceptional items and goodwill amortisation was £187 million (2002 - £159 million). Net debt has been reduced by strong cash generation to £471 million at 31 March 2003 from £639 million at 31 March 2002. The net debt to Group EBITDA (earnings before interest, tax, depreciation and goodwill amortisation) multiple has improved from 2.1 times to 1.4 times and gearing (net borrowings as a percentage of net assets) has reduced from 59% to 45%. Group Targets The Group set itself a number of financial and other targets and has made significant progress on all of them in the year to 31 March 2003. - Our target to return interest cover to 4.0 times (from a low of 2.3 times in the year to March 2001) has been exceeded with cover at 6.8 times after excluding unusual interest credits. - The interim target is to restore the overall Group Return on Net Operating Assets (RONOA) to at least 15%. We achieved 14.2%, up from 10.5% in the year to 31 March 2002 and 8.5% in the year to 31 March 2001. - We have grown the contribution of value added and branded products as a percentage of Group profit before interest, exceptional items and goodwill amortisation to 52%, exceeding our target of 50%. - We have accelerated the delivery of benefits from the Amylum integration programme with gross benefits this financial year exceeding £35 million against our target of £20 million. - All businesses have been set a target on both economic and environmental grounds to reduce energy consumption on a per unit basis by 3% per year. Overall, the Group has exceeded this target in each of the last three calendar years. Focus on Key Activities We generated £60 million in proceeds from the sale of businesses and assets in the year (2002 - £137 million) and the programme to dispose of non-core and underperforming businesses is now largely complete. The majority of the proceeds came from the completion of the sale of Western Sugar early in the year and the sale of the North American molasses and third party liquid storage businesses. Performance of Main Businesses Staley, our American cereal sweetener and starch business, achieved margin gains in high fructose corn syrup (HFCS) pricing in the 2002 calendar year and better by-product prices but these were offset by lower citric acid and ethanol margins. Staley's citric acid division operated well and benefited from cost reduction initiatives. However, these were unable to keep pace with the continuing decline in selling prices due to global oversupply. Whilst the business was profitable for the year, we incurred a trading loss in the second half year. We have taken a £39 million operating exceptional charge primarily for the impairment of our citric acid assets in the USA and Mexico. The Mexican factory will close completely before the end of the 2003 calendar year. Ethanol margins were down, reflecting lower average gasoline prices and oversupply as the industry added new capacity in anticipation of increased demand. There are early signs that the market for industrial starches is beginning to show some signs of recovery. Speciality food starches were again resilient. Amylum performed well and improved sales of products with higher margins offset price reductions in the 2002 calendar year. Eaststarch, our starch joint venture in Central and Eastern Europe had a good year, with the four main plants increasing profitability. Amylum also benefited from the earlier than expected delivery of savings resulting from its integration into the Group. Benefits exceeded £35 million, against our target of £20 million, with costs of £10 million, in line with the target. Whilst the majority of the net benefits accrued directly to Amylum, this is a Group-wide initiative and some benefits are reported in Tate & Lyle Europe, and in Staley. This accelerated progress reflects an excellent performance by the integration team, which is drawn from people throughout the Group. The 2003/04 financial year will be the final year of the formal integration programme and we are confident of reaching our benefits target of £50 million per annum. We also anticipate integration costs will not exceed £10 million. In the last quarter of the financial year to 31 March 2003, industry pressures meant that both Staley and Amylum were unable to secure margin increases in sweetener prices for the calendar year 2003. Staley recovered higher corn costs and increased margins on basic starch and food ingredient products but citric acid prices continued to decline. In Europe, small pricing gains at Amylum in certain markets and products (such as vital wheat gluten) have been offset by price reductions elsewhere. Our cane refineries in the UK and Portugal continued to perform well. Redpath, our Canadian refinery, benefited from both good operations and a small stock holding gain due to higher world raw sugar prices. Performance of Other Businesses Eastern Sugar, our sugar joint venture in Central Europe, which was profitable in the previous year, incurred losses overall. This was due to the collapse of the sugar regime in the Czech Republic, which caused a significant erosion of sugar selling prices in that country. Whilst we believe this issue will be resolved when the Czech Republic accedes to the EU in May 2004, we do not expect Eastern Sugar to return to profit in the year to 31 March 2004. Almex, our Mexican joint venture corn wet miller, suffered lower profits due to the continued imposition of a tax on soft drinks containing HFCS. A dispute with the Mexican Government over import duties was satisfactorily resolved. Occidente, our Mexican cane sugar miller, had an improved performance due to increased demand for sugar as a result of the same tax on drinks containing HFCS. NAT&L, our cane sugar factory in Vietnam, continued to trade profitably but was affected by lower domestic sugar selling prices. Sugar trading performed strongly and had an exceptional year. Tate & Lyle Sucralose received the second annual US$10 million licence payment under the Global Alliance announced in September 2001. Tate & Lyle Reinsurance, the Group's captive reinsurance company, had a better year as the prior year included a charge in respect of exposure to the terrorist attacks in the USA on 11 September 2001. Safety Tate & Lyle believes that no business activity is of such urgency or importance that it may be carried out in an unsafe manner and our aim is continually to improve our safety record. We use a Group Safety Index to compare safety performance across the Tate & Lyle Group. This approach highlights good practices and indicates where further work is needed. The Index covers calendar years and we have a target to reduce it to zero for every Tate & Lyle operation. In 2002, 63% of locations either repeated or improved on their 2001 safety performance. However, the Group Index for the calendar year 2002 rose slightly compared with 2001. This occurred because although we maintained a pattern of continuously reducing the number of recordable and lost time injuries, serious injuries in three locations resulted in a higher overall severity rate than reported in 2001. All locations have redoubled their efforts to improve our performance in this important area. Community Involvement Tate & Lyle has operations in more than 20 countries and we regard our impact on the communities where we work as being an important measure of our performance. We maintain strong and diverse community involvement and we work alongside community partners with whom we enjoy shared objectives. It is in our interests to operate in strong, safe and healthy communities and if we can help achieve this it improves the quality of life for employees as well as our neighbours. I also believe that levels of commitment and motivation are increased if employees hold Tate & Lyle in high esteem. The community involvement policy is reviewed annually by the Board. The programmes are managed locally. Conclusion I am delighted to have joined Tate & Lyle at this important point in its development. Over the last three years, the Group has substantially improved its cost structure and focused on its core activities. The programme to dispose of non-core and underperforming businesses is now largely complete. On behalf of the Board, I would like to thank employees around the Group for their efforts during the last year that resulted in the improved profitability. I look forward to working with them and the Board to build on this solid platform and to continue the drive for efficiency and growth. Iain Ferguson Chief Executive Operating and Financial Review Summary of Financial Results Total sales decreased by £777 million to £3,167 million. Discontinued activities and exchange rate translation on continuing activities reduced sales by £552 million and £111 million respectively. Sugar trading sales reduced by £154 million. Sales from other continuing activities increased by £40 million. Profit before interest, tax, exceptional items and goodwill amortisation increased by 18% from £216 million to £254 million due mainly to improvements at Amylum and the completion of the disposal of the loss-making US sugar businesses early in the year. Profit before interest and tax after exceptional charges of £33 million (2002 - credits of £8 million) and the goodwill amortisation charge of £8 million (2002 - £8 million) was £213 million, compared with £216 million in the year to 31 March 2002. Interest costs reduced from £57 million to £26 million. Of this reduction, £8 million was due to unusual interest income on tax and duty. Interest cover improved from 3.3 times to 7.6 times, or 6.8 times excluding the unusual credits. Profit before tax, exceptional items and goodwill amortisation was £228 million, an improvement of 43%. Profit before tax included unusual income of £11 million. We reported £5m of this, relating to interest received on tax refunds and exchange gains on foreign currency balances, in the results for the six months to 30 September 2002. In the second half of the financial year this was reduced by a £1 million exchange loss on foreign currency. The balance was a £7 million credit for a refund of duty in Mexico, of which £4 million was interest received. Profit before tax, after exceptional items and goodwill amortisation was £187 million compared with £159 million in the year to 31 March 2002. Diluted earnings per share before exceptional items and goodwill amortisation for the year to 31 March 2003 were 33.6p (2002 - 22.1p). Diluted earnings per share after exceptional items and goodwill amortisation were 27.7p (2002 - 24.6p). The Board is recommending a 0.5 pence per share increase in the final dividend to bring the total dividend for the year to 18.3 pence per share. The proposed dividend is covered 1.8 times by earnings before goodwill amortisation and exceptional items, an improvement from 1.2 times in the previous year. Earnings after exceptional items and goodwill amortisation covered the dividend 1.5 times (2002 - 1.4 times). Net debt reduced by £168 million from £639 million to £471 million, assisted by £60 million proceeds from disposals. Exceptional Items and Goodwill Amortisation Exceptional items totalled a net charge of £33 million. An impairment charge of £39 million was taken as an operating exceptional item primarily to write down the assets of the US and Mexican citric acid operations to their recoverable values, following continued global pressure on selling prices. The Mexican factory will be closed completely before the end of the calendar year 2003. The balance was an exceptional non-operating net profit of £6 million. Included within this was a £14 million profit following the disposal of the US sugar businesses in November 2001 and April 2002 and a £12 million anticipated loss on a planned disposal, which was after a £9 million charge for goodwill previously written off to reserves. Amortisation of capitalised goodwill totalled £8 million in the year (2002 - £8 million). Segmental Analysis of Profit Before Interest The following paragraphs refer to profit before interest and exceptional items but after the amortisation of capitalised goodwill. The segmental analysis of continuing and discontinued activities for the year to 31 March 2002 has been restated to reflect disposals of companies completed since the publication of last year's Annual Report. Exchange rate translations reduced Group profit before interest by £10 million. Sweeteners & Starches - Americas: continuing activities Profits before exceptional items and interest fell by £4 million to £135 million. Exchange rate translation reduced profits by £11 million. Staley Despite continuing difficult market conditions in Staley's cereal sweetener and starch business, growth was experienced in nearly all major product lines, particularly in higher value added food ingredients. Higher corn costs were covered by price increases, and cost reduction initiatives continue to enhance results. Food ingredients generated improved results, particularly through working closely with our customers on product development. Increased sales were made to export markets and benefits were seen from further integration with Amylum in Europe, especially from unifying research and development. US sweetener market volumes remained similar to the prior year, and the trend continued of bottled water and fruit-flavoured beverage sales increasing at the expense of carbonated soft drinks. Price increases for the 2002 calendar year resulted in stronger overall sweetener margins. The paper industry showed signs of recovery towards the end of the year and margins on industrial starches improved. Corn costs rose during the year following a drought which reduced the crop, but this was partially mitigated by higher corn oil and corn gluten meal prices. In the 2003 calendar pricing round we recovered the higher net corn costs through selling price increases. Ethanol selling prices fell sharply in the year both in response to lower average gasoline prices and as the industry added new capacity. Industry production has increased in anticipation of increased demand from the banning of methyl tertiary butyl ether (MTBE), the alternative fuel oxygenate, in California (now deferred until January 2004) and the impact of the US Energy Bill. Manufacturing operations continued to perform well, and both fixed and unit costs were reduced. Energy costs were lower and rising natural gas prices underscored the importance of our conservation programme. A small potato starch plant was closed. Much of the process development on 1,3-propanediol, which uses corn as a feedstock, is complete. We continue to work with DuPont to move this fermentation project to the next stage of development, providing we can anticipate an adequate return on further investment. We are also building a xanthan gum production facility, scheduled for commissioning in 2004. In Mexico, high fructose corn syrup (HFCS) sales were significantly lower at Almex, our joint venture, as the tax on soft drinks containing HFCS remains in place. Although the industry is suffering from inefficient plant utilisation, prices on the rest of the product portfolio increased. A long-running dispute with the government over import duties was resolved and a refund of £7 million has been recognised in the accounts for the year ended 31 March 2003, of which £3 million is included in profit before interest, with the balance reducing the interest charge. Access into Mexico for US HFCS under the North American Free Trade Agreement remains unresolved between the Mexican and US governments. There remains significant over-supply to the global citric acid market. Prices continued to decline under pressure from Asian imports, and again we managed only a small operating profit, despite making further significant cost reductions. Our Mexican plant will close by the end of the calendar year, and an impairment charge has been taken against this and the US operation. We anticipate a modest exceptional charge for the closure, which will be booked in the year to 31 March 2004. Plant closures have been announced by competitors in Ireland, China and the Czech Republic. We announced that part of our UK factory will be converted to produce AstaXin(R), a natural source of astaxanthin, which is widely used in the aquaculture industry. Despite these signs of industry rationalisation the market is likely to remain difficult in the near term, and we do not expect to make a profit from citric acid in the year to 31 March 2004. North American Sugar Redpath, in Canada, had an exceptional year, once again achieving record sales with strong growth in the industrial sector. Food manufacturers continue to relocate production from the USA to Canada where the cost base is lower. Profits improved due to the higher sales volumes, lower energy costs and improved productivity. The increase in the world price of raw sugar resulted in a stockholding gain of £2 million compared with a £2 million loss in the previous year. Occidente, our joint venture cane sugar business in Mexico, achieved a significant improvement in operating profit despite an adverse movement in exchange rates. Record sugar production from the campaign that ended in June 2002 exceeded 340,000 tonnes. Technical performance of all three mills has improved under new operational management. In Mexico, sugar has replaced HFCS in soft drinks since the imposition of the tax on HFCS-containing soft drinks. This has increased domestic demand for sugar, with the consequence of firmer pricing. The prospects for the coming year are good with the probability that most of the production will be sold onto the higher price domestic market with very little exported at world prices. A new sugar blending operation in Mexico was commissioned, in association with Redpath's Canadian blending operation, and Occidente has begun to export sugar-containing products to the USA. Sweeteners & Starches - Europe: continuing activities Profit before exceptional items and interest increased by 23% from £87 million to £107 million. Exchange rate translation increased profits by £1 million. Amylum Amylum's cereal sweetener and starch business accounted for the majority of the improvement in the sector. The integration and cost reduction project delivered benefits exceeding £35 million, well ahead of the £20 million target. Costs of £10 million were in line with expectations. The benefits were primarily generated by lower manning levels, and purchasing and manufacturing efficiencies. Volumes improved for both sweeteners and starches. Wheat costs fell following good harvests and increased imports into the EU from Russia and the Ukraine. Maize prices were also reduced due to improved crops and the initial impact of imports from countries listed for the first wave of accession to the EU. By-product selling prices were also lower. Small pricing gains in certain markets and products (such as vital wheat gluten) were offset by price reductions elsewhere. Monosodium glutamate pricing continued to improve and even though Orsan reported a small loss for the year, it was less than in prior years. Progress towards completing the sale of Orsan France, particularly as regards obtaining competition authority approvals, remains satisfactory. Manufacturing costs decreased despite increased local taxes and higher insurance and post retirement costs. Energy costs reduced and forward cover mitigated price increases in the second half of the year. The Eaststarch joint venture businesses in Central and Eastern Europe had an excellent year with higher volumes and improved selling prices aided by lower maize costs. Greater stability in Turkey and improved operating efficiencies were the primary drivers, including the benefits of the integration programme. The imposition of sweetener quotas in Turkey will limit a repeat performance in the coming year. Tate & Lyle Europe The UK and Portuguese sugar businesses continued to perform satisfactorily. The UK operations benefited from the strengthening of the euro. Energy costs were higher following the expiry of a medium-term contract in the year to 31 March 2002. Lyle's Golden Syrup sales grew in new export markets and franchises with United Biscuits for McVitie's Lyle's Golden Syrup Cream Biscuits and McVitie's Lyle's Black Treacle Cream Biscuits were established. Lyle's Coffee Syrups consolidated their leading position in the UK retail market and Tate & Lyle Sugars' product range was rationalised to concentrate on higher added-value lines. Capital expenditure was below depreciation with the businesses contributing strong cash flow to the Group. As part of the integration programme, an outsourcing agreement for the provision of IT services in the UK was terminated, and this function has been re-absorbed by existing support functions within the Group at substantially lower cost. Eastern Sugar The Eastern Sugar Group, our European beet sugar joint venture, experienced a difficult year and made losses overall. This was in contrast to a successful previous campaign and profitable year to 31 March 2002. In the Czech Republic, the developing sugar regime collapsed in November 2002 following a successful challenge in the constitutional court and selling prices plummeted. The Government is taking steps to stabilise selling prices at more normal levels but the volume of sugar in the hands of traders may hinder its effort. We do not anticipate a return to profit in the short term prior to the Czech Republic's accession to the EU. The Slovakian business had a satisfactory year. Domestic sales in Hungary were weak as imports of sugar, sugar substitutes and sugar-containing products took market share. Hungary, Slovakia and the Czech Republic will accede to the EU in May 2004 and will enter the EU sugar regime. Preparations continue in all countries for accession. Sweeteners & Starches - Rest of the World: continuing activities Profits before exceptional items and interest increased from £4 million to £11 million. Exchange rate translation reduced profits by £1 million. Sugar trading profits were exceptionally strong and improved mainly through sales of Brazilian raw sugar. Building on the successful implementation of specialist trading software in the previous year, a thorough review of sugar trading risk management policies and procedures was undertaken and recommended actions successfully implemented towards the end of the year. Asian Sugar Businesses Nghe An Tate & Lyle (NAT&L), the Group's cane sugar business in Vietnam, achieved a further record production of 95,870 tonnes of sugar in the financial year, 13% higher than the previous year. NAT&L is now the largest sugar producer in Vietnam and its quality is recognised in the marketplace. Selling prices were under pressure as Vietnam achieved surplus production over local demand. The remaining investment in Chinese sugar factories, which were sold during the year, did not have a material impact on operating profit. Animal Feed and Bulk Storage: continuing activities Profits before exceptional items and interest on continuing activities fell from £10 million to £4 million. We announced in February 2002 that we would pursue the sale of the worldwide molasses and storage businesses. However, negotiations did not produce an offer for the business as a whole that reflected its contribution to the Group, and the business was withdrawn from sale as a single entity in September 2002. We examined other opportunities to maximise returns from the business, including partial disposals, and sold the North American molasses and third party liquid storage businesses during the year. In the business retained, and in contrast to the prior year, international freight rates increased significantly. This was as a result of the tensions over Iraq and instability in Venezuela. The limited availability of Thai molasses and difficult feed markets in both the UK and Germany were contributory factors to the reduction in profitability. The costs of the disposal process prior to withdrawing the business as a whole from sale were charged against operating profit in the year to 31 March 2003. Other Businesses and Activities: continuing activities This segment, which includes head office activities, reduced costs from £22 million to £10 million, primarily because of the negative impact in the prior year on our captive reinsurance company of the terrorist attacks of 11 September 2001. Exchange rate translation reduced losses by £1 million. Tate & Lyle Sucralose The global commercialisation of sucralose, the no calorie sweetener made from sugar, continues with sales growth exceeding expectations. This business is operated under a Global Alliance Agreement with McNeil Nutritionals, a Johnson & Johnson company. Sucralose is now used as an ingredient in over 2,000 products worldwide. It was introduced as an ingredient to the UK market last year and is being used in a number of carbonated beverages, flavoured waters, alcoholic beverages and dairy products. Meanwhile, national approvals were granted in the Republic of Ireland and Netherlands, in advance of the anticipated adoption of the EU Sweeteners Directive. A £7 million (US$10 million) licence fee was received from McNeil Nutritionals under the Global Alliance Agreement. Tate & Lyle Process Technology (TLPT) TLPT, the Group's sugar technology company, improved its profitability having previously disposed of its chemical and filter businesses. TLPT have developed technology for the transformation of raw sugar to liquid sugar that could find a ready market with the worldwide beverage manufacturers. Tate & Lyle Reinsurance The Group's Bermuda-based captive reinsurance company reported an underwriting profit for the year ended 31 March 2003. The previous year's results were adversely affected by increased claims from third-party business and in particular our exposure to the terrorist attacks of 11 September 2001. Conditions improved in the third-party insurance market and, together with good results from internal exposures to the rest of the Group, led to a positive underwriting result. The company decided to discontinue writing non-Group risks with effect from 1 January 2003 and is now in the process of running-off the existing third party liabilities. To date a third of these liabilities have been commuted. The Group continues to believe it can minimise the effect of higher insurance costs as well as provide stability by continuing the policy of retaining risk and premium in its own reinsurance company. Discontinued Activities During the year, the major operating profit impacts were caused by the sales of Western Sugar and the North American molasses and third party liquid storage businesses. The US sugar businesses lost £18 million in the year to 31 March 2002. Western Sugar was sold in April 2002 and contributed a small operating profit in the year to 31 March 2003. The US and Canadian molasses and third party liquid storage businesses made a loss prior to their disposal in March 2003. Interest, Tax and Dividend Interest The net Group interest charge was £26 million compared with £57 million in the year to 31 March 2002. Interest income includes £4 million from the loan notes issued to the purchasers of Domino and Western. During the year, interest receivable and similar income benefited from a number of unusual items totalling £8 million. These included recoveries of tax interest and, in the joint ventures, from interest refunds on duty. Average net debt of Tate & Lyle PLC and its subsidiaries was £530 million, a reduction of £294 million on £824 million the previous year. The reduction in net debt accounted for £20 million of the £31 million reduction in the net interest charge. The interest rate for subsidiaries in the year when measured against average net debt was 5.5% (2002 - 6.7%). Interest cover based on profit before exceptional items, goodwill amortisation and interest of Tate & Lyle PLC and its subsidiaries improved from 3.3 times to 7.6 times. Excluding the unusual interest receipts, interest cover was 6.8 times. Profit before Tax Profit before tax but after exceptional items and goodwill amortisation was £187 million, compared with £159 million in the prior year. Exchange rate movements reduced profit before tax by £9 million. Taxation The Group taxation charge was £57 million (2002 - £39 million). The effective rate of tax, on profit before exceptional items and goodwill amortisation, was 30.7% (2002 - 32.1%). Dividend A final dividend of 12.8p will be recommended as an ordinary dividend to be paid on 6 August 2003 to shareholders on the register on 11 July 2003. This is an increase of 0.5p per share. An unchanged interim dividend of 5.5p was paid on 14 January 2003. Earnings before exceptional items and goodwill amortisation covered the proposed total dividend by 1.8 times. Disposals We received £60 million proceeds from the disposal of businesses and assets during the year to 31 March 2003, compared with £137 million in the previous year. The sale of Domino, the US cane sugar refiner, was completed in November 2001. Under the terms of an earn-out clause in the sale agreement, we received deferred proceeds of £8 million in the year. As reported in last year's Annual Report, Western, the US beet sugar business, was sold to the Rocky Mountain Sugar Growers Co-operative. Sales proceeds total £51 million, £17 million of which have been received. Loan notes are outstanding of £34 million, which will be repaid through instalments by January 2007. In anticipation of disposal, Western's assets were written down in previous financial years, and £9 million of this was reversed as a profit on disposal. The conditional sale of Orsan France, the monosodium glutamate business, was announced in November 2002 and satisfactory progress is being made to completion. The anticipated loss on disposal charged in these accounts is £12 million, of which £9 million results from goodwill previously written off to reserves. In December 2002, the Group sold Well Pure, the Hong Kong holding company for the Group's majority interests in two cane sugar factories in China. The company was bought by a group of private Chinese investors and a profit on disposal was made. In December 2002 and March 2003 respectively, the molasses and third party liquid storage terminals in the USA and Canada, were sold, but both still remain subject to closing balance sheet adjustments. Proceeds received were £18 million and a further £10 million was recovered from retained receivables. Retirement Benefits The charge for retirement benefits, calculated under SSAP24, was £24 million, an increase of £11 million over the prior year. The pension charge has increased by £6 million on the assumption that the main UK scheme will no longer record a surplus when the actuarial valuation at 31 March 2003 is completed. The UK Tate & Lyle Group Pension Scheme fund was valued at 31 March 2001 and a valuation as at 31 March 2003 is currently underway. The results of the 2001 actuarial valuation indicated no need to resume contributions at that stage, but informal valuations were performed during the year to 31 March 2003, all of which indicated that the fund had gone into deficit. Annual cash contributions of around £8 million recommenced with effect from 1 April 2002, and £32 million of supplementary contributions have been made in the year to 31 March 2003 to the fund to eliminate estimated shortfalls, making a total contribution of £40 million. The valuation of the fund at 31 March 2003 has still to be completed, but it is not anticipated that the fund will record a surplus. Accordingly the Group has not recognised any amortisation of the surplus indicated by the 31 March 2001 valuation, and this has increased the pension charge by £6 million in the year to 31 March 2003. From 1 April 2002, the UK defined benefit scheme was closed to new members, and a defined contribution scheme has been established. SSAP24 spreads pension surpluses and deficits over the service lives of employees. Under SSAP24 the net pension liability reduced by £41 million to a net asset of £9 million and the US healthcare provision reduced by £12 million to £118 million. Under FRS17 the current service cost charged against profit each year is calculated using corporate bond yields, and any change in yields generates volatility in the pensions charge. The use of market values in the balance sheet is likely to give rise to volatile changes in the amounts reported as pension assets and liabilities. If the accounts had been prepared under FRS17, the net position for all Group defined benefit pension schemes at 31 March 2003 would have been a deficit of £196 million, a movement of £146 million from the deficit of £50 million that would have been recorded under the new standard at 31 March 2002, but an improvement of £54 million from the deficit of £250 million at 30 September 2002. The potential US healthcare liability would have reduced from £117 million at 31 March 2002 and £111 million at 30 September 2002 to £104 million at 31 March 2003. After taking account of deferred tax, the Group's net assets at 31 March 2003 would have reduced by £138 million from £1,044 million under SSAP24 to £906 million if the financial statements had been prepared under FRS17. Profit before interest would have increased by £5 million, compared with a £9 million reduction in the previous year, and the net interest charge would have increased by £4 million. The total charge to profit under FRS17 would have been £23 million compared with £24 million under SSAP24. Cash Flow and Balance Sheet Cash Flow and Debt Operating cash flow totalled £323 million compared with £445 million in the previous year. There was an operating working capital inflow of £36 million but, after the reduction in pension provisions due to supplementary contributions of £42 million, there was a net £6 million working capital outflow (2002 - £143 million inflow). A net £97 million (2002 - £140 million) was paid to providers of finance as dividends and interest. Net taxation paid reduced from £35 million to £7 million, reflecting a number of refunds in the year in the UK and USA. Contributions to the Group's pension funds, both regular and supplementary, increased from £3 million in the previous year to £61 million. Plant replacement, improvement and expansion expenditure of £75 million was below underlying depreciation of £110 million. Investment expenditure was £15 million, being primarily an injection of funds into the Tate & Lyle Employee Benefit Trust which purchases shares to satisfy options granted under the Executive Share Option Scheme. Disposals of fixed assets and businesses generated cash of £60 million. Exchange translation, and other non-cash movements, increased debt by £21 million. The Group's net borrowings fell from £639 million to £471 million. The ratio of net borrowings to earnings before interest, tax, depreciation and amortisation ('EBITDA') (before exceptional items) has improved from 2.1 times to 1.4 times and the gearing ratio reduced to 45% at 31 March 2003 (2002 - 59%). During the year net debt peaked at £605 million in April 2002 (April 2001 during the year ended 31 March 2002 - £959 million). Funding and Liquidity Management The Group funds its operations through a mixture of retained earnings and borrowing facilities, including capital markets and bank borrowings. In order to ensure maximum flexibility in meeting changing business needs the Group seeks to maintain access to a wide range of funding sources. The Group has a euro medium term note programme and a US commercial paper programme. At 31 March 2003 the Group's long term credit ratings from Moody's and Standard and Poor's were Baa2 and BBB respectively. Capital markets borrowings include the 300 million 5.75% bonds and the 150 million Floating Rate Note which mature in 2006 and 2007 respectively. During the year the Group issued £200 million 6.50% Eurosterling bonds which mature in 2012 which further extends the maturity profile of Group debt. The Group ensures that it has sufficient undrawn committed bank facilities to provide liquidity back-up for its US commercial paper and other short term money market borrowing for the foreseeable future. During the year the Group arranged committed bank facilities of US$510 million with a core of highly rated banks. These new facilities have a maturity date of five years and they refinanced existing undrawn committed bank facilities with shorter maturity dates. These facilities are unsecured and contain common financial covenants for Tate & Lyle and its subsidiary companies that the interest cover ratio should not be less than 2.5 times and the ratio of net debt to EBITDA should not be greater than four times. The Group monitors compliance against all its financial obligations and it is Group policy to manage the consolidated balance sheet so as to operate well within covenanted restrictions at all times. The majority of the Group's borrowings are raised through the Group treasury company and are then on-lent to the business units on an arms-length basis. The Group manages its exposure to liquidity risk by ensuring a diversity of funding sources and debt maturities. Group policy is to ensure that, after subtracting the total of undrawn committed facilities, no more than 30% of gross debt matures within 12 months and at least 50% has a maturity of more than two and a half years. At the end of the year after subtracting total undrawn committed facilities there was no debt maturing within 12 months and all debt had a maturity of two and a half years or more (2002 - 0% and 51%). The average maturity of the Group's gross debt was 5.4 years (2002 - 3.2 years). At the year end the Group held cash and current asset investments of £172 million (2002 - £135 million) and had undrawn committed facilities of £348 million (2002 - £461 million). These resources are maintained to provide liquidity back-up and to meet the projected maximum cash outflow from debt repayment and seasonal working capital needs foreseen for at least a year into the future at any one time. Funding not Treated as Debt In respect of all financing transactions, the Group seeks to optimise its financing costs. The following items are not included in net debt under UK accounting conventions. At Amylum, the Group receives cash from selling amounts receivable from customers. The facility allows the sale of up to US$85 million (£53 million) of receivables, and was fully utilised at both 31 March 2003 and 31 March 2002. Where financially beneficial, operating leases are undertaken in preference to purchasing assets. Commitments under operating leases to pay rentals in future years totalled £209 million (2002 - £166 million) and related primarily to railcar leases in the USA. Net debt of joint ventures and associates totalling £60 million at 31 March 2003 (2002 - £145 million) was not consolidated in the Group balance sheet. Of Tate & Lyle's £29 million share of net debt of joint ventures and associates, £9 million was subject to recourse to the Group. Simon Gifford Group Finance Director TATE & LYLE GROUP PROFIT AND LOSS ACCOUNT Year to 31 March 2003 Continuing Discontinued Year to 31 activities activities Total March 2002 £ million £ million £ million £ million ------------------------------------------------------------------------------------------------ Group sales 2 758 91 2 849 3 616 Share of sales of joint ventures and associates 318 - 318 328 ------------------------------------------------ Total sales (Note 2) 3 076 91 3 167 3 944 ------------------------------------------------ Group operating profit ------------------------------------------------ Before goodwill amortisation and operating exceptional items 220 (1) 219 180 Goodwill amortisation (8) - (8) (8) Operating exceptional items - impairment of assets (Note 4) (39) - (39) - ------------------------------------------------ Group operating profit 173 (1) 172 172 Share of operating profits of joint ventures and associates 35 - 35 36 ------------------------------------------------ - Total operating profit 208 (1) 207 208 Non-operating exceptional items (Note 4): Write-downs on planned sales of businesses (12) - (12) - Profit/(loss) on sale of businesses 4 15 19 (5) (Loss)/profit on sale of fixed assets (1) - (1) 13 ------------------------------------------------ - Profit before interest 199 14 213 216 ------------------------ Interest receivable and similar income 31 47 Interest payable and similar charges (60) (102) Share of net interest receivable/(payable) of joint ventures and associates 3 (2) ------------------------ Profit before taxation (Note 3) 187 159 Taxation (57) (39) ------------------------ Profit after taxation 130 120 Minority interests - equity 2 (2) ------------------------ Profit for the period 132 118 Dividends paid and proposed (86) (85) ------------------------ Retained profit for the period 46 33 ------------------------ Earnings per share (Note 5) Basic 27.8p 24.7p Diluted 27.7p 24.6p ------------------------ ------------------------------------------------------------------------------------------------ Before goodwill amortisation and exceptional items Profit before taxation 228 159 Diluted earnings per share (Note 5) 33.6p 22.1p ------------------------------------------------------------------------------------------------ TATE & LYLE SUMMARISED GROUP BALANCE SHEET As at As at 31 March 31 March 2003 2002 £ million £ million -------------------------------------------------------------------------------------------- Fixed assets Intangible assets 154 158 Tangible assets 1 176 1 303 Investments 235 238 ---------- ---------- 1 565 1 699 ---------- ---------- Current assets Stocks 310 400 Debtors 398 467 Investments and cash at bank and in hand (Note 6) 172 135 ---------- ---------- 880 1 002 Creditors - due within one year Borrowings (Note 6) (100) (151) Other (493) (502) ---------- ---------- Net current assets 287 349 ---------- ---------- Total assets less current liabilities 1 852 2 048 Creditors - due after more than one year Borrowings (Note 6) (543) (623) Other (4) (3) Provisions for liabilities and charges (261) (341) ---------- ---------- Total net assets 1 044 1 081 ========== ========== Capital and reserves Called up share capital 123 123 Share premium account and other reserves 487 489 Profit and loss account 402 431 ---------- ---------- Shareholders' funds 1 012 1 043 Minority interests 32 38 ---------- ---------- 1 044 1 081 ========== ========== TATE & LYLE STATEMENT OF GROUP CASH FLOWS Year to Year to 31 March 31 March 2003 2002 £ million £ million ---------------------------------------------------------------------------------------------- ----------- ----------- Operating profit 172 172 Depreciation of tangible fixed assets 110 121 Operating exceptional items - impairment of assets 39 - Amortisation of goodwill 8 8 Change in working capital (6) 143 Write-downs against fixed asset investments - 1 ----------- ----------- Net cash inflow from operating activities 323 445 Dividends from joint ventures and associates 10 7 Returns on investment and servicing of finance ----------- ----------- Interest paid (51) (109) Interest received 30 48 Dividends paid to minority interests in subsidiary undertakings (2) (1) ----------- ----------- (23) (62) Taxation paid (7) (35) Capital expenditure and financial investment ----------- ----------- Purchase of tangible fixed assets (75) (76) Sale of tangible fixed assets 1 15 Purchase of fixed asset investments (15) (12) Sale of fixed asset investments 4 12 ----------- ----------- (85) (61) Acquisitions and disposals ----------- ----------- Sale of subsidiaries 55 103 Net overdrafts of subsidiaries sold - 2 Refinancing of existing joint ventures - (3) Sale of interests in joint ventures and associates - 7 ----------- ----------- 55 109 Equity dividends paid (84) (85) ----------- ----------- Net cash inflow before financing and management of liquid resources 189 318 =========== =========== Reconciliation of cash flow to net debt ---------------------------------------------------------------------------------------------- Net cash inflow before financing and management of liquid resources 189 318 Changes in debt not involving cash flow: - Reduction on disposal of subsidiaries - 1 - Exchange movements (19) 7 - Amortisation of bond discount (2) (2) ----------- ----------- Reduction in net debt 168 324 Net debt at start of period (639) (963) ----------- ----------- Net debt at end of period (Note 6) (471) (639) =========== =========== TATE & LYLE STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES Year to Year to 31 March 31 March 2003 2002 £ million £ million -------------------------------------------------------------------------------------------- Profit for the period - Group 116 99 - Joint ventures and associates 16 19 ----------- ---------- 132 118 Exchange difference on foreign currency net investments (66) (3) Taxation on exchange difference on foreign currency net investments (21) 1 ----------- ---------- Total recognised gains and losses for the period 45 116 ----------- ---------- GROUP RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Year to Year to 31 March 31 March 2003 2002 £ million £ million -------------------------------------------------------------------------------------------- Opening shareholders' funds 1 043 1 008 Movements during the period Total recognised gains and losses for the period 45 116 Dividends (86) (85) Issues of shares 1 - Goodwill on disposals transferred to the profit and loss account 9 4 ----------- ---------- (31) 35 ----------- ---------- Closing shareholders' funds 1 012 1 043 ----------- ---------- TATE & LYLE PLC NOTES TO STATEMENTS For the year to 31 March 2003 1. Basis of preparation (a) Audited information The financial information contained in this announcement is derived from the Group's financial statements for the year ended 31 March 2003 on which the Company's auditors, PricewaterhouseCoopers LLP, have issued an unqualified audit opinion. Subject to their adoption by shareholders, the Group's financial statements will be filed with the Registrar of Companies following the Company's Annual General Meeting on 31 July 2003. (b) Accounting policies The Group's accounting policies are unchanged compared with the year ended 31 March 2002. (c) Discontinued activities Discontinued activities represents the results of businesses now sold that were individually significant to their segment and include Western, the US beet sugar producer, and the North American molasses and third party liquid storage businesses, which were sold in 2003, and Domino, the US cane sugar refiner, the African and Thai sugar assets and the storage businesses in East Africa and the Caribbean, which were sold in 2002. TATE & LYLE NOTES TO STATEMENTS (continued) For the year to 31 March 2003 2. Segmental analysis of sales Continuing Discontinued activities activities Total Year to 31 March 2003 £ million £ million £ million -------------------------------------------------------------------------------------- Sweeteners and starches - Americas 1 137 10 1 147 - Europe 1 331 - 1 331 - Rest of the world 354 - 354 -------------- ------------- ------------- 2 822 10 2 832 Animal feed and bulk storage 227 81 308 Other businesses and activities 27 - 27 -------------- ------------- ------------- 3 076 91 3 167 ============== ============= ============= Year to 31 March 2002 -------------------------------------------------------------------------------------- Sweeteners and starches - Americas 1 269 428 1 697 - Europe 1 323 - 1 323 - Rest of the world 422 50 472 -------------- ------------- ------------- 3 014 478 3 492 Animal feed and bulk storage 248 130 378 Other businesses and activities 39 35 74 -------------- ------------- ------------- 3 301 643 3 944 ============== ============= ============= Comparative figures have been reclassified to include within discontinued activities the results of businesses that are now discontinued but in the previous year were classified as ongoing activities. Included in the analysis of total sales are the following amounts relating to joint ventures and associates. In the year to 31 March 2002, the Group sold its investments in African and Thai cane sugar and included their results for that year in discontinued activities. In the year under review, all sales in joint ventures and associates arose from continuing activities. Year to Year to 31 March 31 March 2003 2002 £ million £ million -------------------------------------------------------------------------------------- Sweeteners and starches - Americas 145 155 - Europe 167 149 - Rest of the world 2 20 ------------- ------------- 314 324 Animal feed and bulk storage 4 4 Other businesses and activities - - ------------- ------------- 318 328 ============= ============= TATE & LYLE PLC NOTES TO STATEMENTS (continued) For the year to 31 March 2003 3. Analysis of profit before taxation Before After Continuing Discontinued exceptional Exceptional exceptional activities activities items items items Year to 31 March 2003 £ million £ million £ million £ million £ million ------------------------------------------------------------------------------------------------- Sweeteners and starches - Americas 135 1 136 (25) 111 - Europe 107 - 107 (12) 95 - Rest of the world 11 - 11 4 15 ---------- ------------ ------------ ------------ ------------ 253 1 254 (33) 221 Animal feed and bulk storage 4 (2) 2 1 3 Other businesses and activities (10) - (10) (1) (11) ---------- ------------ ------------ ------------ ------------ 247 (1) 246 (33) 213 Net interest expense (26) - (26) ------------ ------------ ------------ Profit before taxation 220 (33) 187 ------------ ------------ ------------ Included within exceptional items above is an operating exceptional charge of £39 million, taken primarily to write down the assets of the US and Mexican citric acid businesses to their recoverable values. The operating exceptional item is disclosed within Sweeteners and starches - Americas (£38 million) and Other businesses and activities (£1 million). Year to 31 March 2002 --------------------------------------------------------------------------------------------------- Sweeteners and starches - Americas 139 (18) 121 1 122 - Europe 87 - 87 4 91 - Rest of the world 4 1 5 1 6 ---------- --------- ----------- --------- --------- 230 (17) 213 6 219 Animal feed and bulk storage 10 3 13 (1) 12 Other businesses and activities (22) 4 (18) 3 (15) ---------- --------- ----------- --------- --------- 218 (10) 208 8 216 Net interest expense (57) - (57) ----------- --------- --------- Profit before taxation 151 8 159 ----------- --------- --------- Comparative figures have been reclassified to include within discontinued activities the results of businesses that are now discontinued but in the previous year were classified as continuing activities. The above figures include the amortisation of capitalised goodwill charged to the ongoing activities of the sweeteners and starches businesses as follows: Americas £4 million (2002 - £4 million); Europe £4 million (2002 - £4 million). TATE & LYLE NOTES TO STATEMENTS (continued) For the year to 31 March 2003 4. Exceptional items Profit/(loss) before Profit/(loss) Profit/(loss) goodwill Goodwill before Tax for the and tax reinstated tax period Year to 31 March 2003 £ million £ million £ million £ million £ million ------------------------------------------------------------------------------------------------ Operating exceptional items - impairment of assets (39) - (39) 13 (26) Write-downs on planned sales of businesses (3) (9) (12) - (12) Profit on sale of businesses 19 - 19 - 19 Loss on sale of fixed assets (1) - (1) - (1) ------------- ---------- ------------- -------- ------------ (24) (9) (33) 13 (20) ------------- ---------- ------------- -------- ------------ The operating exceptional charge of £39 million was taken primarily to write down the assets of the US and Mexican citric acid businesses to their recoverable values. Year to 31 March 2002 ------------------------------------------------------------------------------------------------ (Loss)/profit on sale of businesses (1) (4) (5) 15 10 Profit on sale of fixed assets 13 - 13 (3) 10 ------------- ---------- ------------- -------- ------------ 12 (4) 8 12 20 ------------- ---------- ------------- -------- ------------ 5. Earnings per share Basic earnings per share is calculated by dividing profit after taxation, minority interests and preference dividends of £132 million (2002 - £118 million), by the weighted average number of ordinary shares in issue during the period of 474.3 million shares (2002 - 478.0 million shares). For this purpose, the weighted average number of ordinary shares in issue excludes an average of 7.7 million shares (2002 - 3.7 million shares) held by an ESOP trust that have not vested unconditionally in the participating employees. Diluted earnings per share take into account the dilutive effect of share options outstanding under the Company's employee share schemes. Diluted earnings per share before the amortisation of capitalised goodwill and exceptional items is presented in order to assist in the understanding of the underlying performance of the Group's business. Year to 31 March 2003 Year to 31 March 2002 Earnings Earnings Earnings Shares per share Earnings Shares per share £ million millions pence £ million millions pence ----------------------------------------------------------------------------------------------- Basic 132 474.3 27.8 118 478.0 24.7 Dilutive effect of share options - 2.0 (0.1) - 1.0 (0.1) --------- -------- --------- -------- -------- ------------ Diluted 132 476.3 27.7 118 479.0 24.6 Goodwill amortisation 8 - 1.7 8 - 1.7 Exceptional items (note 4) 20 - 4.2 (20) - (4.2) --------- -------- --------- -------- -------- ------------ Diluted before goodwill amortisation and exceptional items 160 476.3 33.6 106 479.0 22.1 ========= ======== ========= ======== ======== ============ TATE & LYLE NOTES TO STATEMENTS (continued) For the year to 31 March 2003 6. Analysis of net debt 31 March 31 March 2003 2002 £ million £ million --------------------------------------------------------------------------------------------- Investments and cash at bank and in hand 172 135 Borrowings due within one year (100) (151) Borrowings due after more than one year (543) (623) ---------- --------- (471) (639) ========== ========= 7. Exchange rates --------------------------------------------------------------------------------------------- Average rate Period end rate Year to Year to 31 March 31 March 31 March 31 March 2003 2002 2003 2002 --------------------------------------------------------------------------------------------- US Dollar £1 = $ 1.54 1.43 1.58 1.42 Euro £1 = 1.56 1.62 1.45 1.63 Canadian Dollar £1 = C$ 2.40 2.24 2.33 2.27 8. Net margin analysis (profit before interest as a percentage of total sales) Year to 31 March 2003 Year to 31 March 2002 Before goodwill amortisation and Continuing All Continuing All exceptional items activities % activities % activities % activities % ----------------------------------------------------------------------------------------------- Sweeteners and starches - Americas 12.2 12.2 11.3 7.4 - Europe 8.3 8.3 6.9 6.9 - Rest of the world 3.1 3.1 0.9 1.1 Sweeteners and starches average 9.2 9.3 7.9 6.3 Animal feed and bulk storage 1.8 0.6 4.0 3.4 Group 8.3 8.0 6.8 5.5 After goodwill amortisation and exceptional items ----------------------------------------------------------------------------------------------- Sweeteners and starches - Americas 9.7 7.2 - Europe 7.1 6.9 - Rest of the world 4.2 1.3 Sweeteners and starches average 7.8 6.3 Animal feed and bulk storage 1.0 3.2 Group 6.7 5.5 TATE & LYLE PLC NOTES TO STATEMENTS (continued) For the year to 31 March 2003 9. Ratio analysis ----------------------------------------------------------------------------------------- Year to Year to 31 March 31 March 2003 2002 ----------------------------------------------------------------------------------------- Net Borrowings to EBITDA - Tate & Lyle PLC and its subsidiaries Net borrowings 471 639 -------------- --- --- Pre-exceptional EBITDA 329 301 = 1.4 times = 2.1 times Gearing Gearing = Net borrowings 471 639 --------------------- --- --- Total net assets 1 044 1,081 = 45% = 59% Interest Cover - Tate & Lyle PLC and its subsidiaries = Operating profit before goodwill amortisation and exceptional items ------------------------------------------------------------------- Net interest payable 219 180 --- --- 29 55 = 7.6 times = 3.3 times Dividend Cover before goodwill amortisation and exceptional items = EPS (basic) ----------- Total ordinary dividend/share 33.7 22.2 --- --- 18.3 17.8 = 1.8 times = 1.2 times Return on Net Operating Assets = Profit before interest, tax and exceptional items ------------------------------------------------- Average net operating assets 246 208 --- --- 1 736 1 990 = 14.2% = 10.5% Net operating assets are calculated as: Total net assets 1 044 1 081 Add back:Net borrowings 471 639 Add back unallocated liabilities - dividends and tax 144 93 ----------------- --------------- Net operating assets 1 659 1 813 ----------------- --------------- Average net operating assets 1 736 1 990 www.tateandlyle.com Short Name: Tate & Lyle PLC Category Code: FR Sequence Number: 00005495 Time of Receipt (offset from UTC): 20030604T135404+0100

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