Interim Results

RNS Number : 4393E

Treatt PLC

13 May 2013

 



TREATT PLC

HALF YEAR RESULTS ANNOUNCEMENT

SIX MONTHS ENDED 31 MARCH 2013

"Earnings per share increased by 40% and dividends up 8% as strategy roll-out continues"

Treatt PLC, the manufacturer and supplier of conventional, organic and fair trade ingredient solutions for the flavour, fragrance and consumer goods industries announces today its half year results for the six months ended 31 March 2013.

HIGHLIGHTS of our half year:

·   New strategy showing early signs of success

·   Revenues for the six months were £33.6 million (H1 2012: £36.0 million)

·   EBITDA up by 25% to £3.0m (H1 2012: £2.4m)

·   Profit before tax rose by 29% to £2.0m (H1 2012: £1.6m)

·   Earnings per share increased by 40% to 14.1 pence (H1 2012: 10.1 pence)

·   Interim dividend raised by 8% to 5.5p (2012 interim dividend: 5.1p)

Commenting on the results, Group CEO Daemmon Reeve said:

"It has been an exciting and busy six months for the business, and these results are a reflection that this effort and focus is translating into profits.  We could not do this without the great team we have across all our operations.  Treatt is well positioned to take advantage of the many opportunities ahead of us."

Enquiries:                     Tel: [phone]

Daemmon Reeve       Chief Executive Officer

Richard Hope              Finance Director

 

CHAIRMAN'S STATEMENT

I am pleased to report that the Group has had an encouraging first half of its financial year, with EBITDA up by 25% to £3.0m (2012: £2.4m) and profit before tax increasing by 29% to £2.0m (2012: £1.6m).  This has resulted in earnings per share rising by 40% to 14.1 pence per share (2012: 10.1 pence per share).

The Board has consequently declared an increase in the interim dividend of 8% to 5.5 pence per share (2012: 5.1 pence per share) which will be payable on 18 October 2013 to all shareholders on the register at close of business on 13 September 2013.

The first half year has seen the Group's new strategic focus under the leadership of Daemmon Reeve bearing fruit. The strategy focuses the Group's efforts, resources and capital on achieving a leading position as an ingredient solutions provider to the flavour, fragrance and consumer goods industries with a particular emphasis on the beverage market.  This both builds on our core strengths and relationships and also provides a focus for managing the Group's resources and activities going forward.  These results show the initial impact of some of the measures taken, most notably:

·     Re-alignment of resources across the Group to support our sales efforts, especially to multi-national companies;

·     The establishment of a global Group sales structure;

·     A heavy investment in R&D and new product development, especially in the value added sectors of our markets; and

·     Tight control of costs.

The Group has manufacturing bases in the UK, US and Kenya and volumes in the first six months of the year are up by 33% with plant utilisation at high levels.  Sales of tea and citrus ingredients are performing particularly well and the new strategy is enabling the Group to win new business with large multi-national consumer goods corporations across a wide range of new and existing ingredient solutions, with a very clear emphasis on quality and customer service.  In addition, revenue derived from the Earthoil branded range of organic and fair trade cosmetic ingredients continues to grow at a steady pace.

As we transition the product mix increasingly towards added-value manufactured ingredients, gross margins have improved by 3% and at the same time cost control has also played its part in reporting improved results with overheads down by 9% compared with the same period last year.

Just as pleasing has been the level of employee engagement across the Group and I am extremely grateful to all Treatt employees across the globe for the efforts they are making to deliver the Group's new strategic objectives.  Treatt has a very positive 'can do' culture and as a result we are able to exceed customer expectations and so my sincere thanks go to everyone for their hard work and dedication.

Prospects

The Group is building up a good level of momentum in Q3 with strong sales and order books up significantly on a year ago with the increased focus on multi-national companies continuing to feed through.  The second half of the year is also expected to benefit from both a continual improvement in margins as well as from further cost saving initiatives coming to fruition.  Consequently whilst it is still relatively early in H2, the Board remains confident that results for the full year will meet its expectations. 

Tim Jones

Chairman

10 May 2013

TREATT PLC
UNAUDITED HALF YEAR RESULTS
For the six months ended 31 March 2013
CONDENSED GROUP INCOME STATEMENT
										Six months ended			Year ended
										31 March	31 March		30 September
										2013	2012		2012
										(Unaudited)		(Unaudited)	(Audited)
								Notes		£'000	£'000		£'000
Revenue								5		33,572	36,026		74,009
Cost of sales										(25,967)	(28,835)		(57,319)
										______	______		______
Gross profit										7,605	7,191		16,690
Administrative expenses										(5,056)	(5,536)		(11,320)
										______	______		______
Operating profit before foreign exchange (loss)/gain										2,549	1,655		5,370
Foreign exchange (loss)/gain										(197)	171		258
										______	______		______
Operating profit after foreign exchange (loss)/gain										2,352	1,826		5,628
Loss on disposal of subsidiary										(24)	-		-
Finance revenue										43	60		108
Finance costs										(363)	(330)		(676)
										______	______		______
Profit before taxation and exceptional item										2,008	1,556		5,060
Exceptional item										-	-		(598)
										______	______		______
Profit before taxation										2,008	1,556		4,462
Taxation								6		(566)	(523)		(1,390)
										______	______		______
Profit for the period attributable to owners of the Parent Company										1,442	1,033		3,072
										______	______		______
Earnings per share
			- Basic before exceptional item						7	14.1p	10.1p		34.4p
			- Basic after exceptional item						7	14.1p	10.1p		30.0p
			- Diluted after exceptional item						7	14.1p	10.1p		29.9p
All amounts relate to continuing operations

CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
					Six months ended					Year ended
					31 March			31 March		30 September
					2013			2012		2012
						(Unaudited)			(Unaudited)	(Audited)
					£'000			£'000		£'000
	Profit for the period				1,442			1,033		3,072
	Other comprehensive income/(expense):
	Items that may be reclassified subsequently to profit or loss:
	Currency translation differences on foreign currency net investments						681	(187)		(339)
	Current taxation on foreign currency translation differences				4			3		9
	Deferred taxation on foreign currency translation differences				-			(7)		(12)
	Fair value movement on cash flow hedge				84			81		(169)
	Deferred taxation on fair value movement				(29)			(27)		30
					______			______		______
					740			(137)		(481)
					______			______		______
	Items that will not be reclassified subsequently to profit or loss:
	Actuarial loss on defined benefit pension scheme				(594)			(1,260)		(478)
	Deferred tax on actuarial loss				131			290		110
					______			______		______
					(463)			(970)		(368)
					______			______		______
					______			______		______
	Other comprehensive income/(expense) for the period				277			(1,107)		(849)
					______			______		______
	Total comprehensive income/(expense) for the period attributable    to owners of the Parent Company				1,719			(74)		2,223
					______			______		______

	CONDENSED GROUP STATEMENT OF CHANGES IN EQUITY
			Share capital				Share premium	Own shares in share trust	Hedging reserve		Foreign exchange reserve		Retained earnings		Total equity
			£'000				£'000	£'000	£'000		£'000		£'000		£'000
	1 October 2011			1,048			2,757	(485)	(864)		974		22,121		25,551
	Net profit for the period			-			-	-	-		-		1,033		1,033
	Exchange differences net of tax			-			-	-	-		(187)		(4)		(191)
	Fair value movement on cash    flow hedge			-			-	-	81		-		(27)		54
	Actuarial loss on defined benefit    pension scheme net of tax			-			-	-	-		-		(970)		(970)
	Total comprehensive      (expense)/income			-			-	-	81		(187)		32		(74)
	Transactions with owners:
	Dividends			-			-	-	-		-		(1,490)		(1,490)
	Share-based payments			-			-	-	-		-		12		12
	Movement in own shares in    share trust			-			-	(385)	-		-		-		(385)
	Gain on release of shares   in share trust			-			-	-	-		-		1		1
	1 April 2012			1,048			2,757	(870)	(783)		787		20,676		23,615
	Net profit for the period			-			-	-	-		-		2,039		2,039
	Exchange differences net of tax			-			-	-	-		(152)		1		(151)
	Fair value movement on cash    flow hedge			-			-	-	(250)		-		57		(193)
	Actuarial gain on defined benefit    pension scheme net of tax			-			-	-	-		-		602		602
	Total comprehensive    (expense)/income			-			-	-	(250)		(152)		2,699		2,297
	Transactions with owners:
	Share-based payments			-			-	-	-		-		13		13
	Movement in own shares in    share trust			-			-	134	-		-		-		134
	Loss on release of shares in    share trust			-			-	-	-		-		(56)		(56)
	1 October 2012			1,048			2,757	(736)	(1,033)		635		23,332		26,003
	Net profit for the period			-			-	-	-		-		1,442		1,442
	Exchange differences net of tax			-			-	-	-		681		4		685
	Fair value movement on cash    flow hedge			-			-	-	84		-		(29)		55
	Actuarial loss on defined benefit    pension scheme net of tax			-			-	-	-		-		(463)		(463)
	Total comprehensive income			-			-	-	84		681		954		1,719
	Transactions with owners:
	Dividends			-			-	-	-		-		(1,585)		(1,585)
	Share-based payments			-			-	-	-		-		11		11
	31 March 2013			1,048			2,757	(736)	(949)		1,316		22,712		26,148
	CONDENSED GROUP BALANCE SHEET
										As at  31 March 2013		As at 31 March 2012		As at 30 September 2012
										(Unaudited)		(Unaudited)		(Audited)
										£'000		£'000		£'000
	ASSETS
	Non-current assets
		Goodwill								1,075		1,192		1,080
		Other intangible assets								763		765		718
		Property, plant and equipment								12,044		11,213		11,543
		Deferred tax assets								354		447		286
		Trade and other  receivables								586		586		586
										______		______		______
										14,822		14,203		14,213
										______		______		______
	Current assets
		Inventories								24,884		19,961		22,915
		Trade and other receivables								14,028		14,246		13,959
		Current tax assets								3		8		252
		Cash and cash equivalents								448		3,572		927
										______		______		______
										39,363		37,787		38,053
										______		______		______
	Total assets									54,185		51,990		52,266
										______		______		______
	LIABILITIES
	Current liabilities
		Borrowings								(10,851)		(6,601)		(8,407)
		Trade and other payables								(7,155)		(9,374)		(8,938)
		Current tax liabilities								(173)		(110)		-
										______		______		______
										(18,179)		(16,085)		(17,345)
										______		______		______
	Net current assets									21,184		21,702		20,708
										______		______		______
	Non-current liabilities
		Deferred tax liabilities								(939)		(520)		(880)
		Borrowings								(5,926)		(8,272)		(5,469)
		Trade and other payables								(23)		(135)		(23)
		Post-employment benefits								(1,346)		(1,905)		(838)
		Derivative financial instruments								(949)		(783)		(1,033)
		Redeemable loan notes payable								(675)		(675)		(675)
										______		______		______
										(9,858)		(12,290)		(8,918)
										______		______		______
	Total liabilities									(28,037)		(28,375)		(26,263)
										______		______		______
	Net assets									26,148		23,615		26,003
										______		______		______

CONDENSED GROUP BALANCE SHEET (continued)
															As at  31 March 2013		As at 31 March 2012		As at 30 September 2012
												(Unaudited)					(Unaudited)		(Audited)
															£'000		£'000		£'000
EQUITY
	Share capital														1,048		1,048		1,048
	Share premium account														2,757		2,757		2,757
	Own shares in share trust														(736)		(870)		(736)
	Hedging reserve														(949)		(783)		(1,033)
	Foreign exchange reserve														1,316		787		635
	Retained earnings														22,712		20,676		23,332
															______		______		______
Total equity attributable to owners of the Parent Company															26,148		23,615		26,003
															______		______		______
CONDENSED GROUP STATEMENT OF CASH FLOWS
													Six months ended						Year ended
													31 March			31 March			30 September
													2013			2012			2012
												(Unaudited)				(Unaudited)			(Audited)
													£'000			£'000			£'000
Cash flow from operating activities
Profit before taxation													2,008			1,556			4,462
Adjusted for:
				Foreign exchange loss/(gain)									358			(150)			(258)
				Depreciation of property, plant and equipment									600			515			1,104
				Amortisation of intangible assets									89			76			159
				Loss/(profit) on disposal of property, plant and equipment									1			(1)			-
				Loss on disposal of subsidiary									24			-			-
				Net interest payable									350			292			618
				Share-based payments									11			12			25
				Decrease in post-employment benefit obligation									(86)			(159)			(443)
													______			______			______
													3,355			2,141			5,667
Changes in working capital:
				(Increase)/decrease  in inventories									(1,980)			377			(2,578)
				Increase in trade and other receivables									(99)			(2,392)			(2,104)
				(Decrease)/increase in trade and other payables									(1,737)			931			497
													______			______			______
Cash flow from operations													(461)			1,057			1,482
				Taxation paid									(47)			(457)			(1,279)
													______			______			______
Net cash from operating activities													(508)			600			203
													______			______			______
Cash flow from investing activities
			Disposal of investments in subsidiaries										(10)			(1)			-
			Purchase of property, plant and equipment										(735)			(1,686)			(2,651)
			Purchase of intangible assets										(134)			(99)			(136)
			Interest received										13			38			58
													______			______			______
													(866)			(1,748)			(2,729)
													______			______			______

CONDENSED GROUP STATEMENT OF CASH FLOWS (continued)
									Six months ended				Year ended
									31 March		31 March		30 September
									2013		2012		2012
										(Unaudited)		(Unaudited)	(Audited)
									£'000		£'000		£'000
Cash flow from financing activities
		Increase in bank loans							680		921		692
		Amounts converted to non-current borrowings							-		-		3,158
		Interest payable							(363)		(330)		(676)
		Dividends paid							(1,585)		(1,485)		(1,490)
		Net purchase of own shares by share trust							-		(384)		(306)
									______		______		______
									(1,268)		(1,278)		1,378
									______		______		______
Net decrease in cash and cash equivalents									(2,642)		(2,426)		(1,148)
Cash and cash equivalents at beginning of period									(1,341)		(178)		(178)
Effect of foreign exchange rate changes									33		(1)		(15)
									______		______		______
Cash and cash equivalents at end of period									(3,950)		(2,605)		(1,341)
									______		______		______

Cash and cash equivalents comprise:
Cash and cash equivalents					448	3,572	927
Bank borrowings					(4,398)	(6,177)	(2,268)
					______	______	______
					(3,950)	(2,605)	(1,341)
					______	______	______

Responsibility statement

We confirm that to the best of our knowledge:

(a) the half year results announcement for the six months ended 31 March 2013 'the announcement' has been prepared in accordance with IAS 34

(b) the announcement includes a fair review of the information required by DTR 4.2.7R (indication of important events during the first six months and description of principal risks and uncertainties for the remaining six months of the year)

(c) the announcement includes a fair review of the information required by DTR 4.2.8R (disclosure of related party transactions and changes therein).

By order of the Board

Finance Director

R.A. Hope

10 May 2013

	NOTES TO THE UNAUDITED HALF YEAR RESULTS ANNOUNCEMENT
	1.      Basis of preparation
		The Group is required to prepare its half year results in accordance with accounting standards adopted for use in the European Union (International Financial Reporting Standards (IFRS)).  The Group has adopted the reporting requirements of IAS 34 'Interim Financial Reporting'.
		The consolidated half year results are prepared on the basis of all International Accounting Standards (IAS) and IFRS published by the International Accounting Standards Board (IASB) that are currently in issue. New interpretations may be issued by the International Financial Reporting Interpretations Committee (IFRIC) on existing standards and best practice continues to evolve. It is therefore possible that the accounting policies set out below may be updated by the time the Group prepares its full set of financial statements under IFRS for the year ending 30 September 2013.
		The information relating to the six months ended 31 March 2013 and 31 March 2012 is unaudited and does not constitute statutory accounts. The statutory accounts for the year ended 30 September 2012 have been reported on by the company's auditors and delivered to the Registrar of Companies. The report of the auditors was unqualified, did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498 of the Companies Act 2006.  These half year results for the six months ended 31 March 2013 have neither been audited nor reviewed by the Group's auditors.
	2.      Accounting policies
		These half year results have been prepared on the basis of the same accounting policies and presentation (other than segmental information - see note 5 below) set out in the Group's 30 September 2012 annual report.
	3.      Going concern
As at the date of this report, the Directors have a reasonable expectation that the Group has adequate resources to continue in business for the foreseeable future. Since the period end all the Group's expiring banking facilities have been renewed on existing terms.  Accordingly, the half year results have been prepared on the going concern basis.
4.      Risks and uncertainties The operation of a public company involves a series of risks and uncertainties across a range of strategic, commercial, operational and financial areas. The principal risks and uncertainties that could have a material impact on the Group's performance over the remaining six months of this financial year (for example, causing actual results to differ materially from expected results or from those experienced previously) are the same as those detailed on page 11 of the 2012 Annual Report and Financial Statements.
5.      Segmental information
(a) Business segments IFRS 8 requires operating segments to be identified on the basis of internal financial information reported to the Chief Operating Decision Maker (CODM).  The Group's CODM has been identified as the Board of Directors who are primarily responsible for the allocation of resources to the segments and for assessing their performance.  The disclosure in the Group accounts of segmental information is consistent with the information used by the CODM in order to assess profit performance from the Group's operations.  During the year, following the implementation of a new strategy by the Board, the Group now operates as one global business segment.  The Group is engaged in the manufacture and supply of ingredient solutions for the flavour, fragrance and consumer goods markets with manufacturing sites in the UK, US and Kenya.  Many of the Group's activities, including sales, purchasing, manufacturing, technical, IT and finance are now being managed globally on a Group basis.

(b) Geographical segments

The following table provides an analysis of the Group's revenue by geographical market, irrespective of the origin of the goods or services:

				Six months ended		Year ended
				31 March	31 March	30 September
				2013	2012	2012
				(Unaudited)	(Unaudited)	(Audited)
				£'000	£'000	£'000
	United Kingdom			5,130	4,599	9,764
	Rest of Europe			8,763	9,075	17,830
	The Americas			11,548	13,578	28,792
	Rest of the World			8,131	8,774	17,623
				______	______	______
				33,572	36,026	74,009
				______	______	______
6.      Taxation
	Taxation has been provided at 28.2% (six months ended 31 March 2012: 33.6%) which is the effective group rate currently anticipated for the financial year ending 30 September 2013.

7.      Earnings per share
		(a) Basic earnings per share for the six months ended 31 March 2013 are based on the weighted average number of shares in issue and ranking for dividend in the period of 10,224,726 (2012: 10,269,779) and earnings of £1,442,000 (six months ended 31 March 2012: £1,033,000) being the profit after taxation.
		(b) Diluted earnings per share for the six months ended 31 March 2013 are based on the weighted average number of shares in issue in the period, adjusted for the effects of all dilutive potential ordinary shares of 10,250,065 (2012: 10,309,287) and the same earnings as above.
8.      Dividends
					Six months ended		Year ended
					31 March	31 March	30 September
					2013	2012	2012
					(Unaudited)	(Unaudited)	(Audited)
					£'000	£'000	£'000
	Equity dividends on ordinary shares:
	Interim dividend for year ended 30 September 2011 - 4.8p				-	493	493
	Final dividend for year ended 30 September 2011 - 9.7p				-	997	997
	Interim dividend for year ended 30 September 2012 - 5.1p				521	-	-
	Final dividend for year ended 30 September 2012 - 10.4p				1,064	-	-
					______	______	______
					1,585	1,490	1,490
					______	______	______
	The declared interim dividend for the year ended 30 September 2013 of 5.5p was approved by the Board on 10 May 2013 and in accordance with IFRS has not been included as a deduction from equity at 31 March 2013.  The dividend will be paid on 18 October 2013 to those shareholders on the register at 13 September 2013 and will, therefore, be accounted for in the results for the year ended 30 September 2014.

9.      Contingent liabilities As disclosed in note 27 of the 2012 annual report and accounts, the sellers of the Earthoil Group, which was acquired by the Group in April 2008, have filed a claim in the Chancery Division of the High Court against the Group for £1.8m.  Since the year end this claim has been increased to £2.1m.  The claim relates to various matters in respect of the earn-out, being the deferred consideration payable to the sellers in respect of the acquisition of the Earthoil Group.  The Group will defend the claim vigorously as the Board considers that no sums are due to the sellers in relation to this claim.
10.    Related party transactions Treatt Plc, the Parent Company, entered into the following material transactions with related parties:
					31 March	31 March	30 September
					2013	2012	2012
					(Unaudited)	(Unaudited)	(Audited)
Interest received on loan notes from:
Earthoil Plantations Limited					7	24	31
Earthoil Kenya PTY EPZ Limited					3	3	6
Dividends received from:
R.C.Treatt & Co Limited					520	1,491	1,491
Treatt USA Inc					654	641	641
Redeemable loan notes receivable:
Earthoil Plantations Limited					950	950	950
Earthoil Kenya PTY EPZ Limited					400	400	400
Amounts owed to/(by) parent undertaking:
Earthoil Plantations Limited					127	15	45
R.C.Treatt & Co Limited					(524)	986	(27)

The redeemable loan notes are redeemable in full on 31 December 2015 or from 31 March 2009 on request from the issuer.  Interest is receivable at 1% above UK base rate.  Amounts owed to the Parent Company are unsecured and will be settled in cash.

 

END

 

 

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