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Tate & Lyle has posted double digit sales and profit growth from continuing operations as the drive to reformulate food and drinks boosted its performance.
Continuing operations (not including its sale of its primary products instrial starches business in the US) delivered strong revenue and profit growth, with sales up 18% to £1.4bn and adjusted profit before tax up 14% to £145m.
The company said it saw improved customer demand in many key markets, despite the trading environment remained challenging as it managed significant supply chain disruption, evolving Covid-19 restrictions, rapidly increasing cost inflation and, latterly, uncertainty related to the conflict in Ukraine.
Food & Beverage Solutions saw strong demand as in-home consumption remained robust and out-of-home consumption continued to recover. The business continues to benefit from increasing global consumer awareness of the importance of a healthier diet.
The dvision’s volumes were up 5% with particularly strong performance from Asia, Middle East, Africa and Latin America
Revenues jumped 19% with double-digit organic growth across all regions with profit up 12% as it benefitted from positive mix.
Sucralose benefited from a combination of recovering out-of-home consumption leading to strong volume growth in beverages, increased volume from the optimisation of production at its plant in McIntosh, Alabama, and being the only sucralose plant based outside China.
Volumes were up 15% led by strong demand in beverages and the benefit of production optimisation, with revenues up 13% as higher volume was partially offset by customer mix and profit up 15%.
In the continuing business the group saw cost inflation totaling £100m during the year in areas such as energy, labour, consumables and transportation. This was mitigated by a combination of pricing, productivity benefits, cost discipline, and volume growth and mix improvement.
In discontinued operations (Primient), sweetener volume was in line with the prior year with stronger demand offset by operational disruption.
The group said it entered the 2022 calendar year with renewed customer contracts that offset expected inflation.
However, since then, the conflict in Ukraine has caused significant further inflation in raw material (including corn), energy and logistics costs globally, especially in Europe.
It said a programme of supplementary price increases has been implemented across our main markets to recover incremental input costs together with a continued focus on productivity and cost control.
To ensure supply continuity it has committed agreements in place for key production inputs such as corn and energy covering the majority of the first half of the 2023 financial year.
CEO Nick Hampton commented: “This has been a landmark year for the company. New Tate & Lyle delivered double-digit organic revenue growth across all regions and double-digit profit growth despite significant inflation across the supply chain. We also passed a major strategic milestone by refocusing the group on our faster growing speciality food and beverage solutions business. To do this during a global pandemic, while serving our customers, accelerating innovation and living our purpose is a testament to the resilience, ambition and agility of all my colleagues.
“Tate & Lyle is now a focused global leader in sweetening, mouthfeel and fortification, and very well-placed to benefit from growing consumer demand for healthier food and drink. Our strong balance sheet allows us to invest in organic and inorganic growth and the acquisition of Quantum Hi-Tech, a leading dietary fibre business in China, demonstrates our ability to further strengthen our portfolio and deliver on our growth agenda.
“We entered the 2023 financial year with strong top-line momentum, innovation gathering pace and our productivity programme continuing to deliver benefits. Customer demand remains high and while the conflict in Ukraine has caused significant inflation in raw material, energy and logistics costs globally, we are taking actions to mitigate these pressures including supplementary pricing.
“For the year ending 31 March 2023, we expect further progress with adjusted profit before tax in line with market expectations and revenue growth reflecting top-line momentum and the pricing through of higher input costs.”
The shares are up 3.4% this morning to 770.3p.
Morning update
European discouter Pepco Group, owner of the Pepco and Dealz brands in Europe and Poundland in the UK, has posted strong revenue growth in the first half ending 31 March.
First half Group revenue of €2,4bn was up 18.9% YoY led by PEPCO delivering 26.1% growth.
The group posted strong half year like for like growth of of 5.3% driven by accelerated growth of 12.1% in the second quarter:
PEPCO saw 18.5% like for like growth in Q2 to take like for like growth in the first half to 7.2%.
Poundland saw a more modest second quarter rebound to 5.9% to bring first half like for like growth to 3.3%.
The group said its first half continued to see the ongoing impact of Covid-19 restrictions on stores, which impacted performance.
However, by the end of the half restrictions had eased, with the group March exit like for like rate of 19.4% “demonstrating the strong underlying customer demand for the Group’s offer supporting our confidence for the second half”.
Gross margin also declined by 137bps, with increased freight costs as the key drag, partially offset by strong markdown management.
However, first half underlying EBITDA of €347m grew by 7.3% driven by continued revenue growth, particularly in the PEPCO (apparel-led multi-price) segment.
Underlying profit before tax growth of 28.5% benefitted from lower interest costs year-on-year following the IPO-linked refinancing in May 2021 where the company refinanced at a significantly more favourable interest rate.
CEO Trevor Masters commented: “We are proud of the group’s performance in the first half of this year and the strategic progress made across the business. Despite a challenging macro environment, we accelerated our strategy, including our store opening programme, which remains the key driver of value creation for the business. As pandemic restrictions progressively eased, it was also encouraging to see the strong return of customers and the continuation of this into Q3 resulted in the group’s like-for-like sales rising above pre-Covid levels for the comparable period three years ago.”
“We have emerged a stronger, more resilient operator from this unprecedented recent period by being a bigger Group through accelerating our store openings, a better retailer through store and proposition renewal, and a simpler business through scale-led cost reductions.”
“We have maintained our market leading position on prices and through our continued focus on reducing the cost of doing business, we have been able to shield customers from price rises on some of our products at a time of significant inflationary pressure on household budgets.”
Elsewhere, British American Tobacco has updated the market ahead of closed period commencing 26 June 2022.
CEO Jack Bowles said the group’s “transformation continues at pace”, with strong revenue and volume growth in all three new categories driving share gains across key markets.
He said the group continues to increase the scale of its three global drive brands, and are continuing to reduce New Category losses.
Vuse is now value share leader in the US, extending global leadership position in Vapour, while its heated products category volume share was up 1.5 ppts in the top nine markets to reach 19.6% April.
Its new category business is increasingly contributing to group performance, and it is confident in delivering our £5bn new category revenue and profitability targets by 2025.
On combustibles, it is making “strong” progress towards achieving at least £1.5bn savings from our business simplification programme, Quantum.
Bowles commented: “We are highly cash generative. In line with our active capital allocation framework, and in addition to our growing dividend, we are on track to return £2bn to shareholders through our 2022 share buyback. We are committed to delivering superior long term shareholder returns.
“While we recognise that there will be challenges ahead and that there is more work to do, our execution capabilities continue to evolve, and we are rapidly transforming the business. We are now in our Faster Transformation phase and making strong progress.”
As previously announced, it is working towards transferring its Russian business. However, the conflict is increasing global uncertainty and disruption, further exacerbating inflationary pressures on supply chains, impacting consumer consumption and resulting in increased finance costs.
“While we are not immune to these pressures, we are confident in delivering on our current financial targets, irrespective of the timing of the transfer of our Russian business”, he said. “This is thanks to our well-established multi-category strategy, our strong portfolio of global brands and our resilient, highly cash generative business.”
Finally, THG has announced non-executive director Dominic Murphy will step down from the board with immediate effect.
Murphy said: “It has been nearly 8 years since I joined the Board of THG, during which time I have had the privilege to witness the Group’s journey through a period of profound transformational growth. Considering the length of my tenure, I feel that now is the right time to step down as an independent non-executive Director of THG.
“I would like to thank THG for allowing me to serve on its Board for this period. It has been a remarkable journey and the Group has grown to be a genuine market leader in its chosen markets. I wish THG and the Board all the best for the future.”
Matthew Moulding, CEO added: “”Dominic has brought a wealth of experience to the board and I would like to sincerely thank him for his invaluable contribution to THG over its transformational journey during his tenure. We wish Dominic the very best for the future”
THG said it will continue their search for suitable additional independent non-executive directors to further strengthen the board.
On the markets this morning, the FTSE 100 has slipped 0.6% to 7,548pts.
Fallers include Sainsbury’s, down 5.3% to 210.5p, B&M European Value Retail, down 3.2% to 362.4p and Devro, down 3.2% to 195.5p.
Risers include McBride, up 3.5% to 30.6p, Bakkavor, up 0.8% to 100.8p and Britvic, up 0.7% to 805p.
Yesterday in the City
The FTSE 10 closed the day edging down 0.1% to 7,593pts.
Tech-focussed stocks were again on the up, with Ocado rising 3.5% to 952.6p, Just Eat Takeaway.com, up 2.2% to 1,853.2p, Deliveroo up 2.2% to 98.8p and Naked Wines up 2% to 358p.
Other risers included Hilton Food Group, up 1.9% to 358p and WH Smith, up 1.4% to 1,576.5p.
The day’s fallers included Glanbia, down 3.2% to €10.57, Hotel Chocolat, down 3.1% to 315p, Parsley Box, down 2.8% to 17.5p, SSP Group, down 2.8% to 258.4p, Kerry Group, down 2.7% to 91.7p, Greencore, down 2.4% to 110.3p and Bakkavor, down 2.3% to 100p.
The FTSE 10 closed the day edging down 0.1% to 7,593pts.
Tech-focussed stocks were again on the up, with Ocado rising 3.5% to 952.6p, Just Eat Takeaway.com, up 2.2% to 1,853.2p, Deliveroo up 2.2% to 98.8p and Naked Wines up 2% to 358p.
Other risers included Hilton Food Group, up 1.9% to 358p and WH Smith, up 1.4% to 1,576.5p.
The day’s fallers included Glanbia, down 3.2% to €10.57, Hotel Chocolat, down 3.1% to 315p, Parsley Box, down 2.8% to 17.5p, SSP Group, down 2.8% to 258.4p, Kerry Group, down 2.7% to 91.7p, Greencore, down 2.4% to 110.3p and Bakkavor, down 2.3% to 100p.
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