Treatt PLC - Final Results

The Group delivers further strong growth with revenue up 10.8% resulting in adjusted* earnings per share up 9.8%

 

Treatt plc, the manufacturer and supplier of innovative ingredient solutions for the flavour, fragrance, beverage and consumer product industries, announces today its results for the year ended 30 September 2018.

FINANCIAL HIGHLIGHTS*:

 

Financial
year ended
30 September 2018

Financial
year ended
30 September 2017

Change

Revenue1

£112.2m

£101.3m

+10.8%

Gross profit

£27.8m

£25.3m

+9.9%

Operating profit

£13.9m

£12.5m

+11.1%

Adjusted profit before tax

£12.6m

£11.7m

+8.1%

Adjusted basic earnings per share

18.02p

16.41p

+9.8%

1 In constant currency revenue grew by 14.1%

 

OPERATIONAL HIGHLIGHTS:

·    2022 strategic growth plan on track

·    Won significant new business with global FMCG companies through our continued focus on the key growth drivers of citrus, tea and sugar reduction solutions

·    Material advances made on our capital investment programme:

US expansion project on time and on budget and expected to be completed in 2018 and fully operational in Spring 2019

UK relocation at advanced stages of design optimisation and progressing well

·    Successful disposal of non-core subsidiary, Earthoil Plantations, for enterprise value of £11.3m

 

Commenting on the results, CEO Daemmon Reeve said:

"I am delighted to report another year of strong growth for Treatt. Last year's performance set the bar high, so I am delighted to report that Treatt's teams from across the business have built upon that performance and secured further success in the year.

"The Group has had a steady start to the new financial year with a number of attractive opportunities in our pipeline of projects with both existing and new customers. We are well placed to capitalise on these opportunities with our capacity expansion in the US expected to complete in the coming weeks. Whilst still early in the financial year, the Group continues to perform in line with the Board's expectations for the full year."

* All measures are based on continuing operations and exclude exceptional items.

Chairman's statement

A year of significant progress for Treatt, with funding in place to support future growth

 

Excellent results

This has been another year of significant progress for Treatt. The team met the targets that had been set, with revenues* up by 11% to a record £112.2m (2017: £101.3m), and profit before tax* reaching £12.6m (2017: £11.7m).

We also completed the disposal of Earthoil Plantations, a non-core business, for an enterprise value of £11.3m.  This provided additional growth capital and allows us to focus on the pursuit of our 2022 strategic plan based around our core markets of citrus, tea and sugar reduction.

This strong performance derives from a resolute focus on executing our clear strategy and an uncompromising commitment to operational excellence, founded on supplying high quality, consistent products that meet customer needs, engineered for optimum value.

Favourable market dynamics

Notwithstanding economic and political uncertainties around the world, long-term trends including health and wellness, an increasing desire for innovative flavours and the burgeoning middle class in emerging markets, point to a growing market for our customers' products, and associated opportunities for Treatt's inventive and value-adding solutions.

Our specialist focus areas of citrus, tea and sugar reduction all sit at the centre of trends we are seeing in beverage markets across the 90 countries in which we operate.  This gives us confidence that Treatt is well positioned to deliver long term growth.

Looking back on the last financial year, our customers' end markets were buoyed by a particularly hot summer which drove beverage consumption in the northern hemisphere.

Successful placing

Last year we successfully raised net proceeds of £20.8m by way of an equity placing with new and existing shareholders in order to invest in expanding our operations in the US and UK. 

On-going expansion

Our expansion plans in the US are proceeding at pace and we are on schedule to increase our footprint in Florida substantially. The resulting increased capacity cannot come too soon and I'm pleased to report we remain on time and on budget.  In addition, plans for our new UK headquarters are underway and we expect building to commence mid 2019.

Aside from our investment in physical infrastructure, we have also grown our sales teams and supporting resource in the US, to capitalise on growth opportunities in North America, the dominant market for
new beverages.

Well placed for future growth

Treatt is well positioned for future growth. We are recognised as a trusted provider of flavours that are natural, authentic and meet the aspirations of our customers, which is reflected in the attractive contracts we continue to secure.

We have a clear strategy and know where our niches lie. With liquidity from our share placing and the divestment of Earthoil, we are well placed to capitalise on the opportunities in the markets in which we participate. We have also made good progress in our newer territories in the Far East and India and have plans to take advantage of the sizeable potential in those markets. Our expansion in the UK and US will put in place the resources we need to better serve our more established territories as well as new markets around the world.

An enabling culture

Treatt is a dynamic and exciting business, with a culture built on focus, passion and collaboration. Our teams are integrated and there is a holistic work ethos, with colleagues working closely together to deliver to customers the right products, at the right time and at the right price.

As well as its work on succession planning, the Board places a high degree of importance on the culture, values and essence of Treatt. Our culture is extremely important; our people genuinely value one another and feel part of Treatt. That is also reflected in the collegiate yet challenging style of the Board, where we like to reach unanimous decisions. If something isn't right, we keep at it until it is and we can all get to an agreed position.

The Board also engages regularly with the staff in the business. The entire Board visits the US at least once a year and are visible in our Bury St Edmunds head office. We get involved with fundraising initiatives such as Macmillan coffee mornings, and I have an open door policy for staff and individual Board members to approach me with any concerns or opportunities.

We have a very well balanced Board, with world-class experience and depth of insight across functional as well as geographical areas.  At our AGM in January we will bid farewell to Anita Haines who first joined Treatt in 1988.  Having been on the Board for 16 years, firstly as HR Director and more recently as a Non-executive Director, Anita's contribution to Treatt has been immense.  We will all miss her wise counsel and wish her well in retirement.  A process is now underway to recruit a new Non-executive Director.

Working responsibly

Environmental, social and governance (ESG) matters are of particular importance to the Board and to Treatt generally. We seek to operate in a sustainable, low carbon way and of course we comply with regulatory requirements. Indeed this is an important design requirement for our new UK site. Treatt are adept at dealing with issues around extreme weather events impacting crops by having a robust risk mitigation strategy on sourcing.

We are also mindful of the communities in which we work, as well as those we serve. We focus on staff engagement, and a general awareness of sustainability. We aim to embed ESG matters more fully into our KPIs, taking account of the environmental impact of our decisions. For example, how sustainable is a particular product? Are we aware of any challenges and risks with sourcing? We are looking at how we can reflect, in our practical motivations and behaviours, the issues that are important.

We are also keen to work with local schools, particularly on STEM projects and generally in promoting science.

Growing dividend

The Directors propose to pay a final dividend of 3.50p per share (2017: 3.35p), increasing the total dividend for the year by 6.3% to 5.10p (2017: 4.80p). If approved by shareholders at the AGM, the final dividend will be payable on 21 March 2019 to all shareholders on the register at the close of business on 8 February 2019. Shareholders who wish to participate in the dividend re-investment plan for this and future dividends should elect to do so by 28 February 2019.

Outlook

We have made a steady start to our new financial year.  We know what our focus is, we know our markets, and we know we have to extend our capacity, and have clear plans to minimise any disruption during that process. There is plenty of demand and innovation in our established markets, as well as huge growth potential in China and India. There are uncertainties in relation to factors such as Brexit and US government policies, but in practice the desire of consumers to drink beverages is influenced far more by the weather than by politics.

We operate in a competitive market, but our strong relationships, values and culture are a very important part of what makes Treatt successful. On behalf of the Board, I wish to pay tribute to the dedicated people that make Treatt such a special company, and we look forward to further success in the year ahead and beyond.

Tim Jones

Chairman

26 November 2018