Results from Tate & Lyle left a sweet taste in investors' mouths, as steady demand for its speciality food ingredients (SFI) saw it comfortably beat analysts' profit forecasts.
Underlying pre-tax profits, which exclude £55m of exceptional restructuring costs incurred in 2009 and £25m this year, climbed 21 per cent to £136m, due mainly to margin improvement in SFI. Operating margins climbed from 5.8 percentage points to 26.1 per cent, thanks to a 7 per cent rise in sales volumes, a more profitable mix and efficiencies gained from the transfer of sucralose manufacturing to a single plant in Singapore. That pushed the division's profits up by nearly a third to £108m, and chief executive Javed Ahmed said that he expects steady demand patterns to result in further improvement over the remainder of the year. Its bulk ingredients business also benefited from steady volume growth, particularly for corn sweeteners in Mexico.
Meanwhile, Mr Ahmed's plan to "focus, fix and grow" the business is now well under way. The disposal of the sugars business helped the company to wipe a third off net debt, which now stands at £540m. And a £97m transformation programme to improve its IT, back office and research and development function kicks off in January.
Broker RBS expects underlying pre-tax profits of £238m and EPS of 41.7p in the 12 months to March 2011 (from £199m and 38p last year).
TATE & LYLE (TATE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 523p | MARKET VALUE: | £2.44bn | |
| TOUCH: | 523-525p | 12-MONTH HIGH: | 529p | LOW: 388p |
| DIVIDEND YIELD: | 4.4% | PE RATIO: | 58 | |
| NET ASSET VALUE: | 173p* | NET DEBT: | 67% | |
| Half-year to 30 Sep | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 1.30 | 45 | 9.5 | 6.8 |
| 2010 | 1.35 | 104 | 15.2 | 6.8 |
| % change | +4 | +131 | +60 | - |
Ex-div: 1 Dec Payment: 7 Jan *Includes intangible assets of £322m, or 69p a share | ||||
