Despite a cyclical fall in raw material prices depressing citrus revenue by 2.1 per cent, Treatt (TET) saw adjusted pre-tax profit increase by 7.3 per cent to £6.2m at the half-year stage. Citrus remains the largest product category, but the higher-margin segments of fruit and vegetables, tea and sugar reduction are driving top-line growth.
With increasing demand for lower-calorie beverages, aided by policies such as the UK’s sugar tax, the group’s “natural calorie-free sugar solutions” delivered revenue growth of 37.7 per cent. Fruit and vegetables, the fastest growing division, surged by 64.3 per cent thanks to previous business wins from 2018 and new contract wins linked to cucumber and watermelon supplies.
With capital expenditure of £4.9m, the group is investing in operational capacity and innovative capability for long-term growth. This includes the now completed expansion of its US facility (expected to become operational in June), which should bring significant additional capacity for the fast-growing non-citrus categories.
An improved cash position should enable continued investment. A free cash inflow of £1.3m contrasts the £1.8m outflow in the same period last year, while working capital has improved by £1.7m. With a positive cash balance, house broker Investec expects the group to remain in net cash for FY2019.
Investec forecasts adjusted pre-tax profit of £13.2m and EPS of 17.5p in FY2019, rising to £14.0m and 18.5p in 2020.
| TREATT (TET) | ||||
| ORD PRICE: | 400p | MARKET VALUE: | £ 235m | |
| TOUCH: | 398-403p | 12-MONTH HIGH: | 508p | LOW: 383p |
| DIVIDEND YIELD: | 1.3 % | PE RATIO: | 25 | |
| NET ASSET VALUE: | 139p* | NET CASH: | £9.4m | |
| Half-year to 31 Mar | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018 | 53.6 | 5.6 | 8.3 | 1.6 |
| 2019 | 56.6 | 5.9 | 8.0 | 1.7 |
| % change | +6 | +7 | -3 | +6 |
| Ex-div: | 04 Jul | |||
| Payment: | 15 Aug | |||
| *Include intangible assets of £0.72m, or 1p a share | ||||
