Join our community of smart investors

Tate & Lyle changes course

Continuing operations posted robust revenue and profit growth, and there was a hefty payout for shareholders
June 9, 2022
  • £500mn special dividend
  • Chinese fibre business acquired

Tate & Lyle (TATE) now looks like a very different business. The former sugar refiner (that part of the business was disposed of more than a decade ago) sold a controlling stake in its plant-based and renewable sources primary products business, called Primient, on 1 April for a provisional $1.4bn (£1.1bn) in cash and $30mn of contingent consideration. The company is now focused on “sweetening, mouthfeel and fortification” and opportunities in high-growth markets.

The sale of Primient, a joint venture which was accounted for as discontinued operations in these results, let the company pay out a £500mn special dividend last month. On the downside for investors, a reduced final ordinary dividend “reflects [the] new earnings base and associated share consolidation”.

The company has been busy on the acquisition front, too. Chinese dietary fibre business Quantum Hi-Tech was snapped up for $237mn, as well as ingredient technology company Nutriati. Chief executive Nick Hampton told Investors’ Chronicle that there are significant growth opportunities for Tate in the Chinese market.

Tate’s core business, which is known as 'new Tate & Lyle' and is composed of the food and beverage solutions (FBS) and sucralose segments, put in a robust performance in the year. FBS revenue was up by a fifth to £1.2bn and sucralose up by 13 per cent to £163mn as volumes grew and consumer demand for both in-home and out-of-home products was strong.

The performance of new products (defined as products launched in the last seven years) shows that innovation is paying off. Sales were up by 35 per cent to £173mn, and the aim is for new products to grow to a fifth of total FBS revenue by 2027. Research and development intentions back up the innovation drive, with a target of increasing spending to more than 4 per cent of annual FBS revenue over the next five years.

Bank of America analysts said that “we view Tate & Lyle as a transformation story towards speciality ingredients, with structurally higher organic revenue growth and margins following the disposal of primary products as well as M&A optimality resulting from the strong balance sheet”. The shares are trading at 16 times the bank’s forward 2023 earnings forecast. This looks reasonable given growth prospects, with Tate aiming for organic revenue growth of mid-single digits and an average 50 to 100 basis points uplift in the operating margin each year for the next five years. Our bullishness in the company isn’t diminished on the back of these results. Buy.  

Last IC View: Buy, 756p, 24 Feb 2022

TATE & LYLE (TATE)   
ORD PRICE:757pMARKET VALUE:£ 3.04bn
TOUCH:755-757p12-MONTH HIGH:815pLOW: 628p
DIVIDEND YIELD:2.9%PE RATIO:138
NET ASSET VALUE:403pNET DEBT:35%
Year to 31 MarTurnover (£bn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
20182.7128666.533.5
20192.7624045.734.3
20202.8829661.634.5
2021 (restated)1.2190.019.330.8
20221.3842.05.5021.8
% change+14-53-72-29
Ex-div:30 Jun   
Payment:5 Aug   
NB: Historical per share figures adjusted to take account of 2022 six-for-seven share consolidation