Interim Results - Part 1

Tate & Lyle PLC 8 November 2001 PART 1 ANNOUNCEMENT OF INTERIM RESULTS For the six months ended 30 September 2001 ---------------------------------------------------------------- INTERIM RESULTS TO SEPTEMBER 2001 2000 ---------------------------------------------------------------- Sales £2,133m £2,122m Profit before interest, goodwill amortisation and exceptional items £97m £107m Profit before tax, goodwill amortisation and £64m £68m exceptional items Profit before taxation £64m *£2m Diluted earnings per share before goodwill 9.4p *9.3p amortisation and exceptional items Interim dividend declared 5.5p 5.5p ---------------------------------------------------------------- - Overall trading in line with expectation - Net debt reduced by £115 million - Amylum/Staley integration well advanced - Domino disposal completed after period end 'Substantial progress has been made in our strategy to reshape Tate & Lyle. The important completion of the disposal of Domino was announced on 6 November 2001. The integration of Amylum and Staley continues according to plan. Overall, trading in this half year has been in line with our expectations. The outlook for the second half year is positive notwithstanding increasingly difficult global economic conditions. We remain committed to improving overall shareholder returns and rebuilding interest and dividend cover.' Sir David Lees Larry Pillard Chairman Chief Executive An interim statement incorporating the Group profit and loss account for the six months ended 30 September 2001 will be posted to shareholders. Copies of this Announcement are available from: Robert Gibber, Company Secretary, Tate & Lyle PLC, Sugar Quay, Lower Thames Street, London EC3R 6DQ * Comparative figures have been restated following the adoption of a new accounting standard FRS 19 on deferred taxation. PAGE ONE OF THIRTEEN INTERIM REPORT Comparisons are with the 27-week period to 30 September 2000 unless stated otherwise. The comparatives have been restated to reflect the adoption of FRS 19 on deferred taxation. Overview Profit before tax, goodwill amortisation and exceptional items for the six months to 30 September 2001 was £64 million. As expected, this was below the £68 million achieved in the corresponding period to 30 September 2000, mainly because of a £10 million increase, to £19 million, in losses before interest in the US sugar businesses. Progress on the disposal of these businesses is referred to below. Trading in our three main businesses has been equal to or ahead of the comparative period. Energy costs increased by £11 million in the half year before mitigation by internal action on energy conservation. In the second half year we hope to contain the increase to single figures. We announced on 26 September 2001 the signing of an agreement to realign our sucralose activities into a new global alliance with McNeil Nutritionals ('McNeil'), a Johnson & Johnson Company. Under this agreement, Tate & Lyle has received the first of three annual advance license fees from McNeil of US$10 million each. These annual fees are effective from 1 October and had no impact on the first half year results. In the second half year, profit before interest will include £3 million (US$5 million) from the first instalment. We continue to refocus the Group towards higher-margin and higher-growth businesses, disposing of underperforming or non- core assets and eliminating costs. The sale of Zambia Sugar together with the disposal of other smaller businesses and surplus assets generated proceeds of £20 million. This, together with the containment of capital expenditure below the level of depreciation and a reduction in working capital, enabled net debt to be reduced by £115 million. We announced on 6 November 2001 that we have completed the disposal of Tate & Lyle North American Sugars ('Domino') for a cash consideration of £86 million (US$125 million). Total proceeds are the same as detailed in the announcement of the sale dated 26 July 2001, except for an adjustment for the level of working capital. This disposal again demonstrates that we are delivering on our strategy to retain only those assets that produce acceptable returns. Proceeds will be used to further reduce Group debt. We announced on 26 September 2001 that the sale of the Western Sugar Company is progressing more slowly than anticipated and the date for closing has been extended to 31 January 2002 to coincide with the completion of the current beet processing campaign. The Board has declared an unchanged interim dividend of 5.5p per share, to be paid on 15 January 2002 to shareholders registered on 7 December 2001. Results for the six months to 30 September 2001 Sales were £2,133 million (£2,122 million). Profit before interest and exceptional items was £93 million (£106 million) after a £4 million (£1 million) charge for amortisation of goodwill relating to the purchase of minorities in Amylum and Staley in August 2000. Exceptional items totalled a profit of £4 million (loss £65 million), mainly comprising profit on the sale of assets. PAGE TWO OF THIRTEEN Profit before tax, goodwill amortisation and exceptional items was £64 million (£68 million). Currency movements reduced profits by £2 million, mainly due to the impact of the Zimbabwe Dollar on ZSR Corporation. Profit before tax and after goodwill amortisation and exceptional items was also £64 million (£2 million). The underlying rate of tax on profit before goodwill amortisation and exceptional items of 30% increased by 3 percentage points due to the adoption of Financial Reporting Standard 19 on deferred taxation. The prior period tax charge has been restated (and increased by 2 percentage points to 29%) to reflect this change. Diluted earnings per share before goodwill amortisation and exceptional items were 9.4p (9.3p), and after exceptional items and goodwill amortisation were 9.4p (loss of 5.8p). The Group generated strong net cash inflow from operating activities of £215 million (£195 million). Capital expenditure at £39 million (£57million), remained below depreciation. Interest cover improves from 2.3 times in the 53 weeks to 31 March 2001 to 3.0 times in the half year to 30 September 2001. On a proforma basis had the sale of Domino taken place at the beginning of the half year interest cover would have been 3.8 times. Amylum Integration Good progress has been made on the integration of Amylum and Staley as part of our global ingredients business. As anticipated, little net benefit has accrued in the six month period to 30 September 2001 because of one-off integration costs. We are in consultation with works councils throughout our European operations to discuss the cost improvement programme. We remain confident that we will achieve our original target for annual benefits of £50 million by the financial year ending March 2004. Segmental Analysis before Exceptional Items Americas Profits in the segment were £45 million (£57 million). This was after a £10 million increase in losses in the US sugar businesses to £19 million. Domino accounted for £18 million of this loss, Western £1 million. Profits at Staley were higher, despite increased energy costs and a reduced performance from the citric acid product line. Sweetener volumes increased and margins improved reflecting price rises announced at the beginning of the calendar year. Starch volumes increased but industrial starch margins continue to suffer from lower pricing, in particular from the paper industry. The contribution from ethanol improved. Energy conservation measures partially offset increased energy costs. By-product pricing, especially corn oil, has improved from the low level of last year. The citric acid industry faces competition from Asian imports and new capacity. We have undertaken a number of cost reduction initiatives to respond to this challenge. These included the eight-week closure of the Mexican factory, which we re-opened in September with a reduced workforce, the sourcing of lower-cost raw materials in the USA, and delivering energy efficiency improvements in Brazil. In our North American sugar business Redpath, our Canadian refiner, performed well despite overall profits being lower due to the recent fall in world raw sugar prices. In the US sugar businesses, the sugar market remained substantially oversupplied and losses increased by £10 million as margins and volumes were squeezed in the early part of the financial year. As the six months progressed the situation eased. There are signs of an improvement in sugar prices as a result of a smaller beet crop in the US and the impact of the renewal of the government 'Payment In Kind' programme. PAGE THREE OF THIRTEEN Europe Profits in the segment improved to £53 million (£48 million). Amylum, our European cereal sweetener and starch business, showed improved results due to a combination of better pricing, volumes (related to good summer weather), and higher by-product revenues. Results were enhanced by efficiency improvements and energy conservation efforts, which partially offset the effect of higher energy prices and increased raw material and ingredient costs. In European Sugar, our refineries in London and Lisbon performed well. The European Union beet sugar regime was renewed from July 2001. A reduction in export revenues as a consequence of the removal of the storage levy had a minor impact on profits. Our beet operations in Central Europe continued to make satisfactory returns, with better margins compensating for lower volumes. Rest of the World The sale of Zambia Sugar, which was the largest unit in this segment, was completed on 2 April 2001. In Zimbabwe, ZSR Corporation remained profitable in local currency but its contribution fell in Sterling terms. Profits from sugar production in Vietnam increased with both higher volumes and margins. Animal Feed and Bulk Storage Profit in this sector, now mainly molasses and storage, was £1 million (£2 million), due to a competitive market in the UK. The molasses business is expected to improve in the second half year following the normal seasonal trend. Other Businesses and Activities Our reinsurance business had a modest exposure to the terrorist attacks in the USA on 11 September and this, combined with the mark to market of investments associated with its business, reduced profits by £6 million. The Board Lord Walker retired from the Board at the end of the Annual General Meeting in August having served the Board with great distinction since 1990. We thank him again for his outstanding service and contribution. Outlook Substantial progress has been made in our strategy to reshape Tate & Lyle. The important completion of the disposal of Domino was announced on 6 November 2001. The integration of Amylum and Staley continues according to plan. Overall, trading in this half year has been in line with our expectations. The outlook for the second half year is positive notwithstanding increasingly difficult global economic conditions. We remain committed to improving overall shareholder returns and rebuilding interest and dividend cover. Sir David Lees Larry Pillard Chairman Chief Executive 7 November 2001 7 November 2001 PAGE FOUR OF THIRTEEN TATE & LYLE GROUP PROFIT AND LOSS ACCOUNT Unaudited results for the 6 months to 30 September 2001 --------------------------------------------------------------------- Unaudited for the 6 months Unaud- Audit- to 30 September 2001 ited ed resta- resta- Ongo- West- Contin- Discon ted** ed** ing ern uing tinued 27 53 acti- Sugar* activi- activi- weeks weeks vities ties ties Total to 30 to 31 £million £million £million £million £million Sept March 2000 2000 £million £million --------------------------------------------------------------------- Sales (Note 1) Group subsidiaries 1,636 75 1,711 246 1,957 1,947 3,827 Share of joint 176 - - 176 175 319 ventures and associates -------------------------------------------------- 1,812 75 1,887 246 2,133 2,122 4,146 ================================================== Group operating profit before goodwill 100 (1) 99 (18) 81 91 156 amortisation Goodwill amortisation (4) - (4) - (4) (1) (5) ------------------------------------------------ Group operating profit 96 (1) 95 (18) 77 90 151 Share of operating profits of joint 16 - 16 - 16 16 29 ventures and associates ------------------------------------------------ Total operating profit: Group and share of joint 112 (1) 111 (18) 93 106 180 ventures and associates Exceptional write downs on planned sales - - - - - (70) (307) of businesses Exceptional (loss)/profit on sale - - - (2) (2) 5 9 of businesses Exceptional profit on 6 - 6 - 6 - - sale of fixed assets -------------------------------------------------- Profit/(loss) before interest 118 (1) 117 (20) 97 41 (118) (Note 2) ----------------------------- Net interest payable (27) (35) (67) Share of joint ventures' and (6) (4) (5) associates' interest ----------------------- Profit/(loss) before 64 2 (190) taxation Taxation (19) (24) (40) ----------------------- Profit/(loss) after 45 (22) (230) taxation Minority interests - (5) (6) ----------------------- Profit/(loss) for the 45 (27) (236) period Dividends paid and (26) (28) (86) proposed ----------------------- Retained profit/(loss) 19 (55) (322) ======================= Earnings/(losses) per share (Note 3) - basic 9.4p (5.8)p (50.0)p - diluted 9.4p (5.8)p (50.0)p ----------------------------------------------------------------------------- Before goodwill amortisation and exceptional items Profit before taxation 64 68 113 (£ million) Diluted earnings per share (penc 9.4p 9.3p 14.8p * It is planned to dispose of this business, which is therefore shown separately. ** Comparative figures have been restated following the adoption of a new accounting standard FRS 19 on deferred taxation, as described in note 9. PAGE FIVE OF THIRTEEN TATE & LYLE GROUP BALANCE SHEET Summarised balance sheet as at 30 September 2001 Unaudited Audited Unaudited restated* restated* 30 Sept 30 Sept 31 March 2001 2000 2001 £ million £ million £ million ------------------------------------------------------------------- Fixed assets Intangible assets 162 166 169 Tangible assets 1,414 1,535 1,488 Investments 215 176 203 ----- ----- ----- 1,791 1,877 1,860 ----- ----- ----- Current assets Stocks 408 375 497 Debtors 478 475 547 Investments and cash at bank 166 176 117 and in hand (Note 6) ----- ----- ----- 1,052 1,026 1,161 Creditors - due within one year Borrowings (Note 6) (443) (158) (426) Other (440) (418) (493) ----- ----- ----- Net current assets 169 450 242 ----- ----- ----- Total assets less current 1,960 2,327 2,102 liabilities Creditors - due after more than one year Borrowings (Note 6) (571) (856) (654) Other (2) (7) (3) Provisions for liabilities (351) (339) (383) and charges ----- ----- ----- Total net assets 1,036 1,125 1,062 ----- ----- ----- Capital and reserves Called up share capital 123 123 123 Share premium account and 499 496 502 other reserves Profit and loss account 378 460 383 ----- ----- ----- Shareholders' funds 1,000 1,079 1,008 Minority interests 36 46 54 ----- ----- ----- 1,036 1,125 1,062 ===== ===== ===== * Comparative figures have been restated following the adoption of a new accounting standard FRS 19 on deferred taxation, as described in note 9. PAGE SIX OF THIRTEEN TATE & LYLE STATEMENT OF CASH FLOWS For the 6 months to 30 September 2001 Unaudited Unaudited Audited 6 months 27 weeks 53 weeks to to to 31 March 30 September 30 September 2001 2000 2001 £million £million £million Net cash inflow from operating 215 195 219 activities (Note 4) Dividends from joint ventures and 6 7 9 associates Returns on investment and servicing of finance ---- ---- ---- Net interest paid (31) (44) (64) Dividends paid to minority interests (1) (1) (2) in subsidiary undertakings ---- ---- ---- (32) (45) (66) Taxation paid (5) (34) (36) Capital expenditure and financial investment ---- ---- ---- Purchase of tangible fixed assets (39) (57) (124) Sale of tangible fixed assets 9 - 5 Purchase of fixed asset investments (15) - (2) Sale of fixed asset investments - - 1 ---- ---- ---- (45) (57) (120) Acquisitions and disposals ---- ---- ---- Purchase of businesses and - (217) (217) subsidiaries (net of cash acquired) Sale of businesses1 10 153 165 Refinancing of existing joint - - (5) ventures Sale of interests in joint ventures 1 15 15 and associates ---- ----- ---- 11 (49) (42) Equity dividends paid (58) (42) (68) ---- ---- ---- Net cash inflow/(outflow) before financing and management of liquid 92 (25) (104) resources ==== ==== ==== * In addition, £12 million of borrowings were transferred out of the Group as part of the disposal of subsidiaries in the 6 months to 30 September 2001 (53 weeks to 31 March 2001 - £8 million). PAGE SEVEN OF THIRTEEN TATE & LYLE COMBINED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES AND RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS For the 6 months to 30 September 2001 Unaudited Audited Unaudited restated* restated* 6 months 27 weeks 53 weeks to to to 30 Sept 30 Sept 31 March 2001 2000 2001 £million £million £million ------------------------------------------------------------------------- Profit/(loss) for the period 45 (27) (236) Currency difference on foreign (27) 47 93 currency net investments Reversal of past revaluation - (7) (7) ----- ----- ----- Total recognised gains/(losses) 18 13 (150) for the period Dividends (26) (28) (86) Issue of shares - 69 69 Goodwill transferred to profit and - 43 193 loss account ----- ----- ----- Net (reduction)/increase in (8) 97 26 shareholders' funds ----- ----- ----- Opening shareholders' funds as 1,100 1,101 1,101 previously reported Prior period adjustment (as (92) (119) (119) described in note 9) ----- ----- ----- Opening shareholders' funds 1,008 982 982 restated ----- ----- ----- Closing shareholders' funds 1,000 1,079 1,008 ===== ===== ===== * Comparative figures have been restated following the adoption of a new accounting standard FRS 19 on deferred taxation, as described in note 9. PAGE EIGHT OF THIRTEEN MORE TO FOLLOW

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