It would be difficult to find fault with Treatt’s (TET) half-year figures. Last November’s £21.6m placing left the ingredients specialist in a net cash position at the period-end, while the group’s core sugar reduction and tea product categories registered double-digit sales growth.
Much of that sales growth was driven by burgeoning demand from the UK and US markets, an encouraging sign given that Treatt has been targeting US expansion and is in the process of relocating and upgrading its manufacturing facility in the UK.
The transition from top-line growth through to earnings has been eased by the cut in the US corporate tax rate (the US accounts for 37 per cent of group revenues). But it’s not all down to Donald Trump; tighter controls on administrative expenses also contributed to a 38 basis point increase in the operating margin.
Profitability aside, investors will note a net working capital outflow of £6.7m, driven by a steep rise in receivables, although management notes that there “has not been any material change in the average day's sales outstanding”. Instead, the increase was due to a strong finish to the period and is expected to unwind over the second half.
Edison gives adjusted pre-tax profits of £14.4m for the September 2018 year-end, leading to EPS of 18.7p, against £14m and 20.4p in 2017.
| TREATT (TET) | ||||
| ORD PRICE: | 483p | MARKET VALUE: | £278m | |
| TOUCH: | 482-485p | 12-MONTH HIGH: | 524p | LOW: 388p |
| DIVIDEND YIELD: | 1.0% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 120p | NET CASH: | £6.5m | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 47.1 | 4.8 | 6.6 | 1.45 |
| 2018 | 53.6 | 5.6 | 8.3 | 1.60 |
| % change | +14 | +16 | +26 | +10 |
| Ex-div: | 5 Jul | |||
| Payment: | 16 Aug |
