Interim Results
Treatt PLC
21 May 2007
TREATT PLC
INTERIM RESULTS ANNOUNCEMENT
SIX MONTHS ENDED 31 MARCH 2007
Treatt PLC, the manufacturer and supplier of conventional, organic and ethically-traded ingredients for
the flavour, fragrance and cosmetic industries announces today its interim results for the six months
ended 31 March 2007.
SUMMARY
• Group revenue up by 11% to £19,230,000 (2006: £17,322,000)
• Weak US$ reduces gross profit by almost £0.5m
• EBITDA decreased by 4% to £2,073,000 (2006: £2,164,000)
• Profit before tax for the period down by 11% to £1,439,000 (2006: £1,621,000)
• Sales & gross profits in Q2 significantly higher than Q1
• Interim dividend raised by 3% to 3.5p (2006: 3.4p)
• Acquired 50% of Earthoil, supplier of organic and ethically-traded essential and vegetable
oils, for £2.6m
Edward Dawnay, Chairman commented:
'After a slow start to the financial year, the Group recovered strongly in the second quarter with
sales up by 40% over Q1 and contribution increasing by 50%. The Group's UK subsidiary has continued to
perform well, whilst in the US there has been continued investment in new product innovation and
development. The acquisition of 50% of Earthoil is an exciting development for the Group which is
expected to open up significant new opportunities for growth.'
CHAIRMAN'S STATEMENT
'Group revenue has increased year on year by 11%'
The Group had a satisfactory result for the six months to 31 March 2007, with Group revenue growing by
11% to £19,230,000 (2006: £17,322,000). As expected, gross margins were lower and this resulted in
EBITDA (Earnings Before Interest, Tax, Depreciation and Amortisation) decreasing by 4% to £2,073,000
(2006: £2,164,000) and profit before tax falling by 11% to £1,439,000 (2006: £1,621,000). Earnings per
share have consequently reduced to 9.8 pence per share (2006: 11.1 pence per share). Overall, the Group
suffered from a weaker US Dollar which reduced gross profit by almost £0.5m, which was partly offset by
the Group's hedging policy.
The Board has declared an increase in the interim dividend of 2.9% to 3.5 pence per share (2006: 3.4
pence per share) which will be payable on 8 October 2007 to all shareholders on the register at close
of business on 31 August 2007.
The financial year started slowly for the Group, with the first quarter sales and margins being
significantly weaker than expected. However, the second quarter has been very strong in terms of
revenue together with some improvement in margins. Sales of aroma chemicals and TreattaromeTM natural
distillates have continued to perform well. During the period orange oil prices remained stable, well
above their long term historical average, whilst other flavour and fragrance raw material prices have
increased as energy costs remain high. The impact of continued consolidation among the top flavour and
fragrance companies has yet to be seen.
R.C. Treatt, the Group's UK operating subsidiary, had a good first six months with sales growing by
16%, despite the weaker US Dollar exerting significant downward pressure on margins. Within this
period, the contrast between the first and second quarters could not have been more marked, with sales
and contribution in quarter two being 50% up on quarter one. Indeed January and March were successively
record months for the UK company.
Treatt USA had a disappointing first half, although turnover grew by 6.5% in US Dollar terms. With
lower margins across a broad range of products, profits are down on last year. As expected, overheads
increased compared to the same period last year, which reflects the impact of last year's investment in
Treatt USA's infrastructure in order to provide the platform for continued growth. Following the
substantial product innovation and development of the last two years, including exciting products such
our range of tea TreattaromesTM, we do believe that sales and margins in the US will improve
significantly over the next twelve months.
Acquisition of 50% of Earthoil
We were delighted to announce at the end of February that we had acquired 50% of Earthoil Plantations
Limited, based in the UK, and 50% of Earthoil Kenya Pty EPZ Limited (together known as 'Earthoil')
which is based in a tax-free zone just outside Nairobi. Earthoil manufactures and supplies
organically-certified and ethically-traded essential oils and vegetable oils, mainly for the cosmetics
industry. The organic market represents a new area for Treatt with high growth potential. The total
consideration for the acquisition was £2.6 million, being satisfied by a mix of cash, loan notes and
ordinary Treatt shares. Additionally, Treatt has the option to acquire the remaining 50% of the issued
share capital of Earthoil from 2012. Full details of this transaction can be found on our web site.
Cash flow
During the period there was a net cash outflow for the Group of £6,448,000. Of this, £2.7m related to
the cost of acquiring Earthoil (together with associated loan notes), and £1m was in relation to the
previously announced special pension contribution. Inventory levels also continued to increase during
the period by £1.5m as part of the Group's strategic commitment to ensure it is able to meet future
customer demand. Although debtors have increased by £1.7m, this is a short term outflow which is
expected to reverse in the second half.
Prospects
The remainder of this financial year is likely to see margins remain under pressure with sales
continuing to exceed last year's levels. Although the second half has started a little slowly, this has
now picked up and Group order books are currently 20% higher than a year ago. As in previous years,
however, the Board believe it is too early to be certain that full year profits will meet current
market expectation of £3.3m.
Edward Dawnay
Chairman
18 May 2007
TREATT PLC
UNAUDITED INTERIM STATEMENT
For the six months ended 31 March 2007
GROUP INCOME STATEMENT
Six months ended Year
ended
31 March 31 March 30
September
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
Notes £'000 £'000 £'000
Revenue 3 19,230 17,322 35,411
Cost of sales (14,186) (12,178) (25,292)
______ ______ ______
Gross profit 5,044 5,144 10,119
Administrative expenses (3,394) (3,405) (6,621)
Share of results of joint ventures (23) - -
______ ______ ______
Operating profit 1,627 1,739 3,498
Finance revenue 41 99 243
Finance costs (229) (217) (453)
______ ______ ______
Profit before taxation 1,439 1,621 3,288
Taxation 4 (454) (508) (956)
______ ______ ______
Profit for the period attributable to equity shareholders 985 1,113 2,332
______ ______ ______
Earnings per share
- Basic 5a 9.8p 11.1p 23.3p
- Diluted 5b 9.7p 11.1p 23.2p
All amounts relate to continuing operations
GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE
Six months ended Year
ended
31 March 31 March 30
September
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Profit for the period 985 1,113 2,332
Currency translation differences on foreign currency net (267) 99 (293)
investments
Actuarial loss on defined benefit pension scheme - - (389)
Deferred tax on actuarial loss - - 117
______ ______ ______
Total recognised net income for the period 718 1,212 1,767
______ ______ ______
GROUP BALANCE SHEET
As at As at As at
31 March 31 March 30
September
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
ASSETS
Non-current assets
Property, plant and equipment 8,418 8,700 8,484
Intangible assets 493 640 581
Deferred tax 168 521 457
Interests in joint ventures 2,644 - -
Redeemable loan notes receivable 1,350 - -
______ ______ ______
13,073 9,861 9,522
______ ______ ______
Current assets
Inventories 15,501 12,727 13,958
Trade and other receivables 8,041 6,448 6,389
Cash and cash equivalents - 110 -
______ ______ ______
23,542 19,285 20,347
______ ______ ______
LIABILITIES
Current liabilities
Bank loans and overdrafts (9,151) (2,251) (2,710)
Trade and other payables (4,512) (3,505) (3,790)
Corporation tax payable (28) (420) (211)
______ ______ ______
(13,691) (6,176) (6,711)
______ ______ ______
______ ______ ______
Net current assets 9,851 13,109 13,636
______ ______ ______
Non-current liabilities
Bank loans (1,835) (2,222) (1,927)
Post-employment benefits (1,960) (3,254) (3,090)
Redeemable loan notes payable (675) - -
______ ______ ______
(4,470) (5,476) (5,017)
______ ______ ______
______ ______ ______
Net assets 18,454 17,494 18,141
______ ______ ______
SHAREHOLDERS' EQUITY
Called up share capital 1,048 1,029 1,029
Share premium account 2,757 2,143 2,143
Own shares in share trust (544) (625) (546)
Employee share option reserve 46 25 34
Foreign exchange reserve (1,259) (600) (992)
Profit and loss account 16,406 15,522 16,473
______ ______ ______
Shareholders' equity 18,454 17,494 18,141
______ ______ ______
GROUP STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
Six months ended Year
ended
31 March 31 March 30
September
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
Notes £'000 £'000 £'000
Total recognised net income for the period 718 1,212 1,767
Dividends 6 (1,053) (949) (949)
Share-based payments 12 11 23
Increase in share capital 633 - -
Movement in own shares in share trust 2 - 79
Gain on release of shares in share trust 1 - 1
______ ______ ______
Increase in shareholders' equity 313 274 921
Shareholders' equity at 1 October 18,141 17,220 17,220
______ ______ ______
Shareholders' equity at 31 March 18,454 17,494 18,141
______ ______ ______
GROUP CASH FLOW STATEMENT
Six months ended Year
ended
31 March 31 March 30
September
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Cash flow from operating activities
Profit before taxation 1,439 1,621 3,288
Adjusted for:
Foreign exchange (gain)/loss (188) 64 (210)
Depreciation of property, plant and equipment 357 425 685
Amortisation of intangible assets 89 - 182
Loss on disposal of property, plant and equipment 3 - 52
Loss on disposal of intangible assets - - 2
Net interest payable 218 120 235
Share-based payments 12 11 23
Share of results of joint ventures 23 - -
(Decrease)/increase in post-employment benefit (95) 15 (73)
obligation excluding special pension contribution
______ ______ ______
1,858 2,256 4,184
Special post-employment benefit contribution (1,035) - (465)
Changes in working capital:
Increase in inventories (1,543) (1,332) (2,563)
Increase in trade and other receivables (1,652) (730) (671)
Increase/(decrease) in trade and other payables 722 (429) (144)
______ ______ ______
Cash generated from operations (1,650) (235) 341
Taxation paid (348) (677) (1,153)
______ ______ ______
Net cash outflow from operating activities (1,998) (912) (812)
______ ______ ______
Cash flow from investing activities
Acquisition of investments in joint ventures (1,359) - -
Purchase of property, plant and equipment (472) (310) (775)
Purchase of intangible assets - - (41)
Purchase of redeemable loan notes (1,350) - -
Interest receivable 5 97 218
______ ______ ______
(3,176) (213) (598)
______ ______ ______
Cash flow from financing activities
Repayment of bank loans - - (137)
Interest payable (223) (217) (453)
Dividends paid (1,053) (949) (949)
Net acquisition of own shares by share trust 2 - 79
______ ______ ______
(1,274) (1,166) (1,460)
______ ______ ______
Net decrease in cash and cash equivalents (6,448) (2,291) (2,870)
Cash and cash equivalents at beginning of period (2,573) 297 297
______ ______ ______
Cash and cash equivalents at end of period (9,021) (1,994) (2,573)
______ ______ ______
Cash and cash equivalents comprise:
Cash and cash equivalents - 110 -
Bank overdrafts (9,021) (2,104) (2,573)
______ ______ ______
(9,021) (1,994) (2,573)
______ ______ ______
NOTES TO THE UNAUDITED INTERIM STATEMENT
(1) Basis of preparation
The Group is required to prepare its annual consolidated financial statements in
accordance with accounting standards adopted for use in the European Union
(International Financial Reporting Standards (IFRS)). The Group has not adopted the
reporting requirements of IAS 34 'Interim Financial Reporting'.
The consolidated interim statements 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 2007.
The information relating to the six months ended 31 March 2007 and 31 March 2006 is
unaudited and does not constitute statutory accounts. The statutory accounts for the
year ended 30 September 2006 have been reported on by the company's auditors and
delivered to the Registrar of Companies. The report of the auditors was unqualified and
did not contain a statement under section 237(2) or (3) of the Companies Act 1985.
These interim financial statements for the six months ended 31 March 2007 have neither
been audited nor reviewed by the Group's auditors.
(2) Accounting Policies
The interim financial statements have been prepared on the basis of the accounting
policies set out in the Group's 30 September 2006 annual report other than the
following:
Interests in joint ventures
The results, assets and liabilities of a jointly controlled entity are incorporated in
these financial statements using the equity method of accounting. Under the equity
method, the investment in a jointly controlled entity is carried in the balance sheet
at cost plus post-acquisition changes in the Group's share of net assets of the jointly
controlled entity, less distributions received and less any impairment in value of the
investment. The Group income statement reflects the Group's share of the results after
tax of the jointly controlled entity. The Group statement of recognised income and
expense reflects the Group's share of any income and expense recognised by the jointly
controlled entity outside profit and loss.
(3) Turnover by destination Six months ended Year ended
31 March 31 March 30
September
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
United Kingdom 3,412 3,118 6,460
Rest of Europe 6,018 4,998 10,542
The Americas 5,160 5,420 10,142
Rest of the World 4,640 3,786 8,267
______ ______ ______
19,230 17,322 35,411
______ ______ ______
(4) Taxation
Taxation has been provided at 30.0% (2006: 31.3%) which is the effective group rate
currently anticipated for the financial year ending 30 September 2007.
(5) Earnings per share
(a) Basic earnings per share for the six months ended 31 March 2007 are based on the
weighted average number of shares in issue and ranking for dividend in the period of
10,045,298 (2006: 9,991,890) and earnings of £985,000 (2006: £1,113,000) being the
profit after taxation.
(b) Diluted earnings per share for the six months ended 31 March 2007 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 10,109,421 (2006: 10,041,628) and the same
earnings as above.
(6) Dividends Six months ended Year ended
31 March 31 March 30
September
2007 2006 2006
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Equity dividends on ordinary shares:
Interim dividend for year ended 30 September 2005 - - 310 310
3.1p
Final dividend for year ended 30 September 2005 - - 639 639
6.4p
Interim dividend for year ended 30 September 2006 - 341 - -
3.4p
Final dividend for year ended 30 September 2006 - 712 - -
7.1p
______ ______ ______
1,053 949 949
______ ______ ______
The declared interim dividend for the year ended 30 September 2007 of 3.5p was approved
by the Board on 18 May 2007 and in accordance with IFRS has not been included as a
deduction from equity at 31 March 2007. The dividend will be paid on 8 October 2007 to
those shareholders on the register at 31 August 2007 and will, therefore, be accounted
for in the results for the year ended 30 September 2008.
This information is provided by RNS
The company news service from the London Stock Exchange
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