Final Results - Part 1

Tate & Lyle PLC 7 June 2001 Part 1 ANNOUNCEMENT OF PRELIMINARY RESULTS For the 53 weeks ended 31 March 2001 ----------------------------------------------- 2001 2000 2000 PRELIMINARY RESULTS 53 52 78 TO MARCH weeks weeks weeks ----------------------------------------------- Audited Unaudited Audited Sales £4,146m £4,090m £6,183 Profit before tax, goodwill amortisation and exceptional items £113m £209m £300m (Loss)/profit before taxation (£228m) £191m £287m EPS (diluted) before goodwill amortisation and exceptional items 15.7p 29.9p 45.2p EPS (diluted) (57.1)p 24.2p 40.2p - Difficult market conditions continue - Energy costs up £45 million - Good progress on Amylum integration - Dividend maintained at 17.8p - Progress on disposal of US Sugar businesses 'Our immediate priorities are to complete the disposals of Western Sugar and Domino Sugar, to improve the performance of Amylum, and to deliver the benefits from integrating that company with Staley. Energy costs are substantially higher now than they were a year ago and look likely to remain so for at least the first half year. However these increased costs will be offset by improvements in pricing in European and North American cereal sweetener and starch markets, which started to become effective from the beginning of 2001. Together with the planned disposal of our US sugar businesses this leads us to view the current year with greater confidence. Our challenge is to restore profitability to an acceptable level and to continue with the pursuit of our strategy to revitalise the Group for the benefit of our shareholders.' Sir David Lees Chairman Copies of the Annual Report for the period ended 31 March 2001 will be available to shareholders shortly, and will be obtainable from Robert Gibber, Company Secretary, Tate & Lyle PLC, Sugar Quay, Lower Thames Street, London EC3R 6DQ PAGE ONE OF NINETEEN Chairman's Statement The past year has been a difficult one for the Group. Profit before tax, exceptional items and goodwill amortisation was £113 million, compared with £209 million for the unaudited 52-week period to 25 March 2000. This decline was largely driven by tough market conditions in US sugar, where pre-interest losses of £20 million were incurred, by pressure on cereal sweetener and starch margins and by a £45 million increase in energy costs. Results Loss before tax for the 53-week period to 31 March 2001 was £228 million after exceptional items of £336 million. Due to the change in our financial year end from September to March the previous audited results cover a 78-week period. In order to provide more meaningful comparative figures unaudited results for the 52-week period ended 25 March 2000 are also included in this report. Diluted earnings per share before exceptional items and goodwill amortisation for the 53-week period to 31 March 2001 were 15.7p compared with 29.9p in the year to 25 March 2000. Exceptional items include £9 million of net profit on disposal of businesses and a £345 million write down on planned sales of businesses, of which £227 million relates to Domino Sugar, £111 million to Western Sugar and £7 million to smaller businesses. The sale of Western is detailed in a separate announcement issued today. We have been seeking a strategic solution for Domino and, in the light of advanced negotiations, have written down Domino's assets to reflect our estimate of sale proceeds. £75 million of the write down in respect of Western Sugar was recognised in the first half of the year. The total net exceptional item of £336 million includes £193 million of goodwill previously written off to reserves. Operating cash flow was £219 million. Net borrowings were £963 million at 31 March 2001 compared with £805 million at 25 March 2000. During the year £281 million was expended on the acquisition of Amylum and Staley minorities of which £212 million was in cash. This was largely covered by the divestment of non-core businesses and assets, which realised £186 million. Dividend The total dividend proposed for the year is 17.8p and is covered 0.9 times by earnings before goodwill amortisation and exceptional items. The dividend has been maintained at the level of the year to September 1999, the most recent comparable period. The final dividend of 12.3p will be due and payable on 8 August 2001 to shareholders on the register on 13 July 2001. The Board Richard Delbridge was appointed to the Board as a non-executive director on 1 September 2000. He was formerly Chief Financial Officer of National Westminster Bank Plc and is currently a non- executive director of Egg plc and Innogy Holdings plc. Lord Walker retires from the Board following the AGM on 2 August 2001. He has been a director since 1990 and his wise counsel and experience have been of considerable value to the Group. PAGE TWO OF NINETEEN Strategy In a year in which trading conditions in almost all our businesses have been difficult, good strategic progress has been made. - We completed the disposal of Bundaberg Sugar and a number of other smaller businesses the proceeds from which have been recycled into the development of our core businesses. - We acquired the minority interest in Staley and Amylum which has made possible the creation of a low cost global starch and sweetener business offering growth opportunities in value added products. - We have become increasingly confident about the potential benefits from the integration of Amylum within the Group. - We are close to resolving the problems of our US sugar businesses, the divestments of which will eliminate the significant trading losses and strengthen our balance sheet. - We are continuing to reduce costs and enhance efficiency through our business improvement projects. Outlook Our immediate priorities are to complete the disposals of Western Sugar and Domino Sugar, to improve the performance of Amylum, and to deliver the benefits from integrating that company with Staley. Energy costs are substantially higher now than they were a year ago and look likely to remain so for at least the first half year. However these increased costs will be offset by improvements in pricing in European and North American cereal sweetener and starch markets, which started to become effective from the beginning of 2001. Together with the planned disposal of our US sugar businesses this leads us to view the current year with greater confidence. Our challenge is to restore profitability to an acceptable level and to continue with the pursuit of our strategy to revitalise the Group for the benefit of our shareholders. Sir David Lees Chairman 6 June 2001 PAGE THREE OF NINETEEN Chief Executive's Review Change of Year-end In order to provide meaningful comparisons in the review that follows the audited results for the 53 weeks to 31 March 2001 are compared with the unaudited results for the 52 weeks to 25 March 2000. Group Performance Results for the year were disappointing, with profit before tax, exceptional items and goodwill amortisation falling from £209 million to £113 million. The tough conditions faced in the US sugar market towards the end of the prior year have persisted throughout the year ended March 2001 and show no signs of improving. Our US sugar operations incurred a £20 million loss before interest. Increased energy costs across the Group, especially in the second half, have also squeezed margins by £45 million. Our sweetener and starch businesses on both sides of the Atlantic faced very competitive markets, with lower margins. Although energy costs remain high, there was good news in the pricing rounds for the 2001 calendar year, with Staley reporting double digit price rises for sweeteners and Amylum securing price rises of around 10% on most product lines. These price improvements will mainly benefit the financial year ending March 2002. Rising to these challenges, we have been focused on executing our strategy. We have delivered efficiency gains through reorganisation and consolidation and have continued to dispose of smaller businesses in non-core markets and those businesses from which we did not expect to achieve acceptable returns. Focus on Key Activities Good progress has been made to capture the full benefits from the acquisition of the Staley and Amylum minorities last August. We are already delivering benefits and are confident that we will achieve the target of £50 million benefit per annum by 2003/04. We completed the disposal of Bundaberg, our Australian sugar milling and related activity group, in July 2000. This disposal, coupled with the sale of ten smaller businesses in the Animal Feed and Other segments, will reduce overheads and provides a cash inflow of £180 million. The other disposals include animal feed and agribusiness companies. After the year end, we also sold Zambia Sugar. As you will have seen from the Chairman's Statement, we have also entered into an agreement that should lead to the disposal of Western and are in advanced negotiations for the sale of Domino. We announced last year that we were looking for a strategic solution for these under-performing businesses that continue to incur losses, this year totalling £20 million before interest. This is an industry wide issue, a result of a dysfunctional US sugar regime and an oversupply of beet and cane sugar in the market. These problems require a political solution that also addresses the disputes between Mexico and the US over NAFTA access for Mexican sugar to the US market, and US high fructose corn syrup to the Mexican market. We cannot be certain of any significant improvement to the US market in the near future. We have explored many alternatives for these businesses, from outright divestment to various forms of industry rationalisation. We are convinced that, provided this can be concluded on satisfactory terms, the sale of Western and Domino offers the best way forward for the Group. The completion of these disposals will be an important step in the delivery of our strategy to refocus our portfolio of assets on those that are core, and that we can expect to deliver an acceptable level of return. PAGE FOUR OF NINETEEN Performance of Main Businesses Increased energy costs reduced margins at all our main business units. Staley and Amylum profits were below those of the previous year, impacted also by lower sweetener and starch margins. The high fructose corn syrup market in the US showed little growth last year, reflecting reduced growth in carbonated soft drink sales. The industry did not bring any significant additional capacity on line and supply and demand moved more closely in balance due to some capacity being diverted to other higher margin products such as ethanol. The market for industrial starches, especially to the paper industry, was very competitive due to the strength of the US dollar and consolidation within the industry. Speciality food starches were resilient in difficult market conditions. Citric profitability declined slightly, with lower selling prices but higher volumes. Our announcement in August 2000 that we had signed a joint development agreement for bio-based polymers with DuPont provides a glimpse of the future for Tate & Lyle. This project will provide a significant step towards manufacturing advanced polymers from renewable resources, replacing products now made from petroleum. Producing products from carbohydrates will have a role in how the world manages carbon dioxide emissions in the future. This is an excellent fit with our global carbohydrates business and our proven Research & Development capabilities, and presents an important opportunity to advance our strategy of growing through the development of new value-added products. Our cane refineries in the UK, Canada and Portugal continued to perform well. In our North American sugar businesses losses increased as the oversupply of beet and cane sugar continued to squeeze margins to uneconomic levels, sending the largest US producer to seek 'Chapter 11' protection from its creditors. More positively, we have arrived at a settlement of the long running labour dispute at Domino's Brooklyn refinery. The new barge was commissioned in September, enabling the more cost-effective transfer of sugar syrup from Baltimore to Brooklyn. Performance of Other Businesses Many of the businesses in this category were sold during the year. Of the remaining businesses, both sugar and starch joint ventures in Central Europe performed well despite drought conditions, cutting costs and increasing profits as sugar regimes were introduced in preparation for entry to the European Union. Molasses trading had a difficult year, with demand impacted by problems in the farming sector. Sugar trading activity remained profitable, with Brazil and Thailand being the key suppliers. Demand for sucralose continues to grow, especially in Japan and the US. Plans for the development of this business globally await completion of the commissioning period of the new Johnson & Johnson production facility. New issues related to dietary guidelines recently developed by a number of governments and increasing concern with obesity will create many new opportunities for this product. PAGE FIVE OF NINETEEN Safety Safety continues to be a central concern and the past year has seen an improvement across the whole Group. We have a history as the leader in safety in the US corn wet milling industry statistics and have undertaken to transfer this expertise world- wide. Each business has been set safety targets and we publish a quarterly Safety Index in the employee magazine Tate & Lyle World. This is an invaluable tool for measuring, reporting and improving the Company's record on Health and Safety throughout its operations. The full Board reviews health and safety performance annually and supports the drive for continuous improvement. Energy We are committed to reducing energy consumption on both economic and environmental grounds. All businesses have been set a target to reduce energy consumption on a per unit basis by 3% per year. In December 2000, the Group published an Energy Index for each of our major plants which tracks energy consumption across the Group and is being used to focus conservation efforts. Employees This has been a challenging year of significant change for the Group and for employees. Some have left the Group with their businesses, and others are working in businesses where disposal plans have been announced. Our colleagues have responded with energy, initiative and determination. We thank them and their families for their continuing support. The Future We remain committed to our strategy of developing value-added products, continuing the rationalisation of our portfolio of assets and driving out costs. The Group is more focused and has better quality assets than it had 12 months ago. We are building a truly global business with proven world class research and development capabilities. We continue to improve our status as a low cost producer with very strong product development relationships with the world's top food and industrial businesses. We have positioned ourselves to take advantage of strategic opportunities to manufacture products from renewable carbohydrate resources, replacing petrochemicals. Looking forward, we are well positioned for growth. Larry Pillard Chief Executive 6 June 2001 PAGE SIX OF NINETEEN Operating & Financial Review - Financial Results Summary of Financial Results Change of Year-end Last year's change in financial year-end from September to March means that these results cover the 53-week period ended 31 March 2001, and are compared with those in the previous Annual Report, for the 78-week period ended 25 March 2000. In order to assist shareholders, unaudited results for the 52 weeks ended 25 March 2000, are also included. This Operating and Financial Review principally compares trading for the year ended 31 March 2001 with this unaudited comparative period. Trading Sales increased by £56 million. Disposals of businesses reduced sales by £406 million and exchange rate movements increased sales by £133 million. Group profit before interest, exceptional items and goodwill amortisation fell by £99 million from £284 million to £185 million. Exchange rate movements increased profits before interest by £7 million. Exceptional Items and Goodwill Amortisation Profits and losses on disposal have been classified as exceptional due to their size producing a net total loss of £336 million, which includes £193 million of goodwill previously written off to reserves. After a tax charge of £3 million on these exceptional items the effect of the exceptional profits and losses on shareholders' funds is a reduction of £146 million. The exceptional profit on sale of businesses was £9 million. The exceptional write-down in recognition of the planned sale of businesses was £345 million. The write-down comprises £111 million in respect of Western of which £75 million was charged at the half- year, £227 million in respect of Domino and £7 million in respect of other businesses. The write-down includes goodwill of £25 million relating to Western, and £149 million relating to Domino. The goodwill of £153 million arising on the acquisition of the Amylum and Staley minorities was capitalised. £5 million of capitalised goodwill was amortised in the year. Segmental analysis of Profit before Interest Sweeteners and Starches - Americas Profits before exceptional items and interest from continuing businesses fell by 38% from £156 million to £96 million. IMASA, the Argentinian starch and cereal sweetener business, made £5 million before it was sold in the previous year. Exchange rate movements increased profits by £14 million. PAGE SEVEN OF NINETEEN Staley and Tate & Lyle Citric Acid Although Staley's starch business began the year strongly this was not sustained. The strong dollar had a major impact on the sales of the US paper industry, Staley's largest starch market and the general economic slowdown in the US became increasingly felt as the year progressed. The sweetener market was weak due to low demand and low pricing. However, there were signs of improvement during January to March 2001. Double digit percentage increases in average selling prices were achieved, consistent with industry trends. Corn gluten meal pricing, and corn oil pricing remain at depressed levels in spite of some recovery in the former. Whilst the cost of corn per bushel is at reasonable levels, net corn costs were higher due to the low co-product values. Consolidation in the industry continued. Customers continued to grow in size through merger and acquisition, but, for the first time in many years, combinations also occurred among our competitors. In August an agreement was reached with DuPont for the joint development of the production of 1, 3-propanediol for the textile industry using a corn-based fermentation medium. Both a pilot and a demonstration plant were successfully commissioned. Energy costs at Staley rose following substantial increases in natural gas and electricity prices. The impact of these increases was moderated somewhat by Staley's reliance at its larger facilities on coal, which is protected from similar upward price pressures. Projects with excellent paybacks are underway to reduce energy usage further and also recycle steam and heat. A debottlenecking project at Loudon was completed and new drying facilities at Decatur are being installed. In Mexico the Almex joint venture performed well increasing sales, but higher corn costs reduced margins, and results were below last year's excellent performance. The market for citric acid was competitive during the year. Profit declined slightly, with lower selling prices but higher volumes. The creation of a global citric business continued. The Tate & Lyle Citric Acid brand is becoming recognised globally and product standards have been established among all the citric plants to ensure quality products for our customers, regardless of the plant from which the product is sourced. The citric plants were included in the global Tate & Lyle purchasing network, enabling the citric plants to obtain the best pricing available in the Group. We completed expansions to plants in the US, UK and Brazil and the full benefit of increased volumes will be seen next year. The global market for citric acid continues to grow at 5% annually. PAGE EIGHT OF NINETEEN North American Sugar Redpath, the Canadian sugar-refining business, performed strongly. Sales and market share increased, while margins were held at last year's levels. The increase in world raw sugar prices resulted in stockholding gains of £3 million. Cost reductions in a number of manufacturing areas were achieved, and these offset a significant increase in energy costs. The Canadian sugar industry obtained an extension to the anti- dumping and countervailing duties on imports of EU and US sugar for a further five years. This protects the market from the impact of these subsidised products. The US sugar refiner, Domino, continued to operate under extremely difficult market conditions which worsened as the year progressed. Losses were similar to the previous year, with cost savings offsetting the additional market squeeze and higher energy costs. The surplus sugar supply arising from record domestic beet and cane production in the 1999/2000 campaign resulted in a fall of almost 30% in white sugar prices and 15% in raw sugar prices. Following forfeiture of excess stocks by domestic raw sugar producers to the US Government in October 2000, raw prices returned to close to normal levels but white prices remained depressed. For several months white sugar traded at the same price as raw sugar, placing a severe squeeze on Domino. Further pressure on margins arose from an increase in energy prices of more than 100%. Despite these pressures, Domino made considerable progress in recovering the market share which it had previously lost. The capital investment at the Baltimore and Brooklyn refineries was completed, with Brooklyn now being supplied with partially processed sugar liquor by barge from Baltimore. Significant reductions in energy consumption and other operating costs were achieved. The strike at Brooklyn was settled on satisfactory terms during March 2001. Western, the US beet sugar business, also incurred losses and the results deteriorated in line with the decline in white sugar prices. Efforts by the US Government to support the market had very limited impact on white sugar prices. Western participated in two schemes, effectively resulting in sales to the Government of surplus stocks at prices somewhat higher than market levels. There was a significant increase in sales to industrial customers, again recovering market share which had been previously lost. The recent campaign has been difficult, with adverse weather conditions affecting the quality of the crop. Factory costs increased due to the higher price of natural gas. Occidente, our joint venture sugar business in Mexico, incurred a loss due to lower domestic prices, higher export tonnage at lower margins and the effect of a national strike. The new Mexican Government has started to take action to resolve some of the issues. The level of increased access to the US market under the NAFTA agreement remains to be resolved by the two governments. PAGE NINE OF NINETEEN Sweeteners and Starches - Europe Profits before exceptional items and interest from continuing businesses fell by 33% from £112 million to £75 million, of which £3 million was due to exchange rate movements. Amylum Amylum's cereal sweetener and starch businesses had a difficult year in EU countries. High energy costs impacted the business directly, increasing by £16 million, or almost 40%. These costs also contributed to increased expenditure on transport. The poor summer in Europe reduced beverage and ice cream consumption. Volumes increased by 10%. Most of this increase was in Central Europe due to increased high fructose corn syrup capacity and demand. Raw material costs, particularly wheat, fell but the cost of ingredients increased. On the positive side the strengthening European economy improved demand for industrial starches. Alcohol prices improved as demand increased. The pricing round in January 2001 saw selling price increases of around 10% for sweeteners and starches on most product lines. The joint-venture businesses in the EU candidate countries of Central Europe had a good year. A drought in Central Europe last summer pushed up maize prices towards the end of the year. The integration strategy aimed at delivering significant profit improvement was vigorously progressed. From April 2000 Amylum's operations in five EU countries were reorganised as a single business, and many functions were transferred to a shared service centre during the year. Some initial extra costs were incurred as a result. Orsan, the glutamate business based in France suffered from lower prices due to the availability of cheap imports, mainly from Asia. Some improvement in price occurred at the year end, as the supply situation tightened up. The glutamate businesses in China and Vietnam performed well. Tate & Lyle Europe The UK sugar refining business increased sales volumes and performed well, despite the continued weakness of the euro, which reduced operating profits by £9 million, and difficult market conditions in both retail and industrial markets. Marketing initiatives included the launch of an organic range of sugars and the convenient Shake and Pour packs. Operational costs reduced as a result of various initiatives, whilst the impact of high energy prices was mitigated by forward contracting before prices started increasing. Capital investment concentrated on two main initiatives; the £8 million move of the Millwall speciality syrups plant from the Isle of Dogs site in London to the Thames refinery site at nearby Silvertown, and the centralisation of all UK-based Tate & Lyle Europe support staff on one site. The latter initiative is part of the UK Business Improvement Project, one of the aims of which is to create a single management team for Tate & Lyle Europe. The Portuguese cane refining profits were slightly lower due to higher energy costs and market pressures. Capital investment concentrated on product quality improvements and cost reduction. Work continues on the sale of surplus assets. Sugar trading profits were slightly lower due to reduced throughput in Brazil following drought conditions and the decision to exit the Russian market. A specialist trading software package is planned as a further improvement in business processes. Eastern Sugar The Eastern Sugar Group, our beet sugar joint venture, had successful campaigns despite drought conditions in Hungary and Slovakia and increased energy costs. Although domestic volumes reduced and consequently export volumes increased, improved selling prices led to a profit performance well ahead of expectations. Working towards EU accession in 2005, Hungary has prepared a draft sugar market regulation. A sugar regime is being developed in the Czech Republic, but needs further refinement to comply with EU regulations. In Slovakia, safeguard measures limiting sugar imports have been introduced. In March 2001, Eastern Sugar announced the closure of the Zvoleneves factory north of Prague and the transfer of beets and production to its other factories in Bohemia and Moravia. Sweeteners and Starches - Rest of the World Profits before exceptional items and interest from continuing businesses were unchanged at £9 million. Net profits from the discontinued businesses rose from £3 million to £5 million with profits from Zambia Sugar partially offset by losses from Bundaberg Sugar. Adverse exchange rate movements reduced profit by £2 million. Zimbabwe - ZSR Corporation The year was characterised by extremely difficult trading conditions. Inflation was very high at over 50% for most of the financial year, and the economy was starved of foreign currency. Nevertheless profit increased in local currency, although it was impacted by adverse exchange rate movements on translation. Sales of refined sugar at 210,000 tonnes fell by less than 10%. ZSR maintained its share of export markets in Botswana and Namibia. The export revenues were used to import essential raw material for the packaging division and fuel for the transport division. Redstar Wholesalers expanded its branch network through an acquisition from 30 to 39 outlets. PAGE TEN OF NINETEEN Asian Sugar Businesses Nghe An Tate & Lyle's cane sugar business in Vietnam, in its third season, produced 76,000 tonnes of sugar, up from 33,000 tonnes. The mill has reached design capacity ahead of plan. The cane crop was successfully developed, and effort was also concentrated on developing the local market. Nghe An Tate & Lyle sugar is of high quality and enjoys preferred quality status. Prices have more than doubled from the lows of 2000 and the business was profitable before interest for the first time. UFIC, in which the Group has a 20% shareholding, remained profitable after servicing its restructured debt. It remains the pre-eminent sugar producer in Thailand and amongst the best in south east Asia. The Group purchased Swire's minority holding in one of its investments in China. The other Chinese investment, controlled by Mitr Phol, performed well and expanded production. The Group's 15% share of the United Sugar Company, a refinery in Saudi Arabia, was diluted to 10%, following a share issue not taken up by the Group. Animal Feed and Bulk Storage Profits before exceptional items and interest from continuing businesses fell by 18% from £17 million to £14 million. Losses from discontinued businesses were £5 million (2000 - £6 million). Molasses Trading Molasses trading profits were affected by increased worldwide freight costs, which were compounded in Europe by animal disease outbreaks including BSE and swine fever. The foot and mouth outbreak in the UK is not expected to affect results adversely, as the impact is not being felt in the dairy sector which is the main market. SAP was implemented, and the business relocated to the Silvertown site in March 2001. Other Businesses and Activities The net losses in this segment, which now consists primarily of head office costs, rose by 15% from £13 million to £15 million before taking account of discontinued businesses, where profits fell from £6 million to £1 million. Speciality Sweeteners A major regulatory milestone was passed in September 2000 when the EU Scientific Committee on Food completed its safety evaluation of sucralose and recommended that it be added to the list of permitted sweeteners. The EU Commission is currently drafting the proposed legislation for approval by the EU Parliament and the Council of Ministers. A permit has been issued for the sale of sucralose tabletop products in Germany. The UK Food Standards agency has accepted a petition seeking sucralose approval in the UK, in parallel with the EU process. This offers the possibility of gaining a national approval in the UK in advance of the amendment to the EU Sweeteners Directive being adopted. Our supply of sucralose is produced by Johnson & Johnson's McNeil Specialty Products Company, which is in the process of starting up its new Alabama manufacturing facility. Tate & Lyle Reinsurance The Group's Bermuda captive reinsurance company experienced a difficult year as a result of continuing adverse underwriting conditions, increased claims from Group businesses and the effects of marking its investment portfolio to market. Nevertheless, the medium-term outlook is favourable given expected improvements in reinsurance market conditions. The company continues to write Group and third party reinsurance contracts within strictly controlled exposure limits. Costs Costs totalling £3 million associated with the UK Business Improvement Project have been charged in the year. Cash payback is within the two-year target expected from the project. Interest The net Group interest charge was £72 million (2000 - £75 million). Average net debt for subsidiaries was £41 million lower. The interest rate for the year when measured against average net debt was 7.6% (2000 - 7.0%). Profit Before Tax Loss before tax was £228 million. Before goodwill amortisation and exceptional items, profit before tax was £113 million, a reduction of £96 million or 46% on the prior year. Exchange rate movements increased profit by £5 million. Taxation The Group taxation charge was £35 million. The underlying rate of tax, on profit before goodwill amortisation and exceptional items, was 28.3% (2000 - 26.7%). The increase was due to lower profits in low tax jurisdictions. Dividend A final dividend of 12.3p will be recommended as an ordinary dividend to be paid on 8 August 2001 to shareholders on the register on 13 July 2001. An interim dividend of 5.5p was paid on 16 January 2001. Dividend cover is 0.9 times before goodwill amortisation and exceptional items. PAGE ELEVEN OF NINETEEN Cash Flow and Debt Operating cash flow totalled £219 million (2000 - £450 million). £125 million (2000 - £191 million) was paid to providers of finance as dividends and interest. Taxation paid was £36 million (2000 - £44 million). Plant replacement, improvement and expansion expenditure of £124 million was below depreciation of £132 million. Investment expenditure was £224 million of which £212 million related to the cash element of the purchase of Amylum and Staley minorities. Disposals of fixed assets and investments generated cash of £186 million. Focus on these issues was assisted by Economic Value Added (EVA) techniques. Exchange translation, and other non-cash movements, increased debt by £54 million. The Group's net borrowing rose from £805 million to £963 million. The gearing ratio rose to 83% at 31 March 2001 (2000 - 64%). The average debt for the year was £885 million (2000 - £926 million). Net debt peaked at £982 million in January 2001 (June 1999 during the 12 months ended March 2000 - £1,016 million). Interest cover before exceptional items and goodwill amortisation decreased to 2.3 times (2000 - 3.6 times). Funding In March 2001, Tate & Lyle completed a £280 million three year syndicated facility. The proceeds of this facility were used to refinance existing debt obligations. At March 2001 the long-term credit ratings from Moody's and Standard and Poor's were Baa2 and BBB+ respectively. At the year-end the Group held cash and current asset investments of £117 million (2000 - £261 million) and had undrawn committed multicurrency facilities of £569 million (2000 - £378 million). These resources are maintained to meet the projected maximum cash outflow from debt repayment and seasonal working capital needs foreseen until the end of the next calendar year. 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. The maturity profile of the Group's debt has lengthened so that at the year-end the results of these calculations were 0% (so that the debt maturing within 12 months is fully backed by undrawn committed facilities) and 64% respectively (2000 - 10% and 61%). Euro borrowings were increased to match the increased exposure to euro assets following the purchase of the Amylum minority. The proceeds were converted into sterling and US dollars to reduce borrowings. The proportion of Group net debt denominated in US dollars and Canadian dollars fell from 69% on 25 March 2000 to 53% on 31 March 2001. Following the sale of Bundaberg the Group has no debt denominated in Australian dollars. Debt in euros rose from 13% to 32%. Share Issue 24,083,913 new ordinary shares valued at £69 million were issued as part consideration for the acquisition of the Amylum and Staley minorities in August 2000. Disposals The major disposal was Bundaberg, the Australian sugar and rum group, which was completed in July. Proceeds were £160 million, £6 million higher than assumed when the loss on sale was provided for in last year's accounts. Disposals in the Animal Feed segment involved the Grains business and the Sweetlix blocks business in the US and Rumenco (animal feed), UMT (feed mill engineering) and ABS (dry storage) in Europe. In the Other Segment, we sold our joint venture agribusinesses Fletcher Smith and Booker Tate, and a charcoal business. Total proceeds from disposals were £180 million. Pensions The valuation of the UK pension fund at 31 March 2001 will be completed in late summer. The results are likely to indicate a need for the resumption of contributions to the fund at an annual rate of around £10 million. This will impact cash flow but not profit. Post balance sheet event Zambia Sugar, in the Rest of the World segment, was sold for £8 million in April 2001, after the year end. In June 2001 a conditional agreement was entered into for the disposal of Western Sugar for £68 million. Simon Gifford Group Finance Director 6 June 2001 PAGE TWELVE OF NINETEEN TATE & LYLE GROUP PROFIT AND LOSS ACCOUNT Results for the 53 weeks to 31 March 2001 ---------------------------------------------------------------------------- Audited for the 53 weeks to 31 March 2001 Unaud- Audit- ited ed Total 52 78 Ongoing US* contin- Discont- weeks weeks activit- sugar uing inued** to 25 to 25 ies activit- activit- activit- March March ies ies ies Total 2000 2000 £m £m £m £m £m £m £m ---------------------------------------------------------------------------- Sales (Note 5) Group subsidiaries 2,983 684 3,667 160 3,827 3,738 5,646 Share of joint ventures 291 - 291 4 295 323 491 Share of associates 24 - 24 - 24 29 46 ------------------------------------------------------ 3,298 684 3,982 164 4,146 4,090 6,183 ====================================================== Group operating profit before goodwill amortisation 176 (20) 156 - 156 237 352 Goodwill amortisation (5) - (5) - (5) - - ------------------------------------------------------- Group operating profit 171 (20) 151 - 151 237 352 Share of operating profits of joint ventures 25 - 25 1 26 44 64 Share of operating profits of associates 3 - 3 - 3 3 4 ------------------------------------------------------- Total operating profit: Group and share of joint ventures and associates (Note 6) 199 (20) 179 1 180 284 420 Exceptional write downs on planned sales of businesses (3) (338) (341) (4) (345) (50) (50) Exceptional profit on sale of businesses 6 - 6 3 9 25 25 Exceptional profit on sale of fixed assets - - - - - 7 12 ------------------------------------------------------- (Loss)/profit before interest (Note 6) 202 (358) (156) - (156) 266 407 -------------------------------- Interest receivable and similar income 32 27 37 Interest payable and similar charges (99) (92) (139) Share of joint ventures' interest (4) (7) (14) Share of associates' interest (1) (3) (4) ---------------------- (Loss)/profit before taxation (228) 191 287 Taxation (35) (63) (89) ---------------------- (Loss)/profit after taxation (263) 128 198 Minority interests (7) (17) (14) ---------------------- (Loss)/profit for the period (270) 111 184 Dividends paid and proposed (86) (99) (124) ---------------------- Retained (loss)/profit (356) 12 60 ====================== (Loss)/earnings per share - basic (57.2)p 24.3p 40.3p - diluted (57.1)p 24.2p 40.2p Before goodwill amortisation and exceptional items Profit before taxation (£ million) 113 209 300 Diluted earnings per share (pence) 15.7 29.9 45.2 * It is planned to dispose of these businesses, which are therefore shown separately. The write-down is based on estimated sale proceeds. **'Discontinued' only includes profits and losses of businesses sold which constitute a significant part of their segment. PAGE OF THIRTEEN OF NINETEEN TATE & LYLE GROUP BALANCE SHEET Summarised balance sheet as at 31 March 2001 31 25 March March 2001 2000 £million £million ------------------------------------------------------------- Fixed assets Intangible assets 155 1 Tangible assets 1,449 1,678 Investments 203 175 ------ ------ 1,807 1,854 ------ ------ Current assets Stocks 497 479 Debtors 599 535 Investments and cash at bank and in hand (Note 3) 117 261 ------ ------ 1,213 1,275 Creditors - due within one year Borrowings (Note 3) (426) (434) Other (493) (530) ------ ------ Net current assets 294 311 Total assets less current liabilities 2,101 2,165 Creditors - due after more than one year Borrowings (Note 3) (654) (632) Other (3) (12) Provisions for liabilities and charges (290) (257) ------ ------ Total net assets 1,154 1,264 ====== ====== Capital and reserves Called up share capital 123 117 Share premium account and other reserves 502 445 Profit and loss account 475 539 ------ ------ Shareholders' funds 1,100 1,101 Minority interests 54 163 ------ ------ 1,154 1,264 ====== ====== ----------------------------------------------------------- Year end exchange rates US Dollar £1 = $ 1.42 1.59 Euro £1 = Euro 1.61 1.64 ----------------------------------------------------------- PAGE FOURTEEN OF NINETEEN TATE & LYLE STATEMENT OF CASH FLOWS For the 53 weeks to 31 March 2001 Audited Unaudited Audited 2001 2000 2000 53 weeks 52 weeks 78 weeks to to to 31 March 25 March 25 March £million £million £million ------------------------------------------------------------------------ Net cash inflow from operating activities (Note 2) 219 450 544 Dividends from joint ventures and associates 9 12 15 Returns on investment and servicing of finance Interest paid (97) (84) (140) Interest received 33 22 39 Dividends paid to minority interests in subsidiary undertakings (2) (6) (7) ------ ------ ------ (66) (68) (108) Taxation paid (36) (44) (80) Capital expenditure and financial investment Purchase of tangible fixed assets (124) (126) (179) Sale of tangible fixed assets 5 23 34 Purchase of fixed asset investments* (2) (11) (11) Sale of fixed asset investments 1 2 2 ------ ------ ------ (120) (112) (154) Acquisitions and disposals Purchase of businesses and subsidiaries (net of cash acquired) (217) (2) (19) Sale of businesses** 165 9 9 Refinancing of existing joint ventures* (5) (8) (16) Sale of interests in joint ventures and associates 15 68 68 Capital repayments by joint ventures - 1 34 ------ ------ ------ (42) 68 76 Equity dividends paid (68) (135)*** (135) Net cash (outflow)/inflow before ------ ------ ------ financing and management of liquid resources (104) 171 158 ====== ====== ====== * In addition to £16 million direct equity refinancing of joint ventures, £4 million increase in loans to joint ventures represented refinancing in the 78 weeks to March 2000. ** In addition, £8 million of borrowings were transferred out of the Group as part of the disposal of subsidiaries in the 53 weeks to 31 March 2001 (78 weeks to 25 March 2000- £1 million of deposits). *** Because the payment of the final dividend for the year ended September 1998 was delayed by two months, saving advance corporation tax,this figure includes an extra final dividend. TATE & LYLE COMBINED STATEMENT OF RECOGNISED GAINS AND LOSSES AND RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS For the 53 weeks to 31 March 2001 Audited Unaudited Audited 2001 2000 2000 53 weeks 52 weeks 78 weeks to to to 25 March 25 March 25 March £million £million £million ------------------------------------------------------------------- (Loss)/profit for the period (270) 111 184 Currency difference on foreign currency net investments 100 (1) 41 Reversal of past revaluation (7) - - ------ ------ ------ Total recognised (losses)/gains for the period (177) 110 225 ------ ------ ------ Dividends (86) (99) (124) Issue of shares 69 2 4 Adjustments to goodwill arising on acquisitions prior to September 1998 - - (2) Goodwill transferred to profit and loss account 193 67 67 ------ ------ ------ Net (reduction)/increase in shareholders' funds (1) 80 170 Opening shareholders' funds 1,101 1,021 931 ------ ------ ------ Closing shareholders' funds 1,100 1,101 1,101 ====== ====== ====== BASIS OF PREPARATION This preliminary announcement is prepared using accounting policies consistent with those set out in the Annual Report for the period ended 25 March 2000. 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