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It all starts here
Annual Report 2008
Tate & Lyle is a world-leading manufacturer
of renewable food and industrial ingredients.
We use innovative technology to transform corn
and sugar into quality ingredients used by millions
of people every day.
Cautionary statement
Please read the full cautionary and non-reliance
statements, which can be found on page 164.
Environmental statement
This report is printed on ‘Look!’ and Revive 50/50
paper and has been independently certified on behalf
of the Forest Stewardship Council (FSC).
Printed at St Ives Westerham Press Ltd, ISO14001,
FSC certified and CarbonNeutral®
Tate & Lyle PLC
Tate & Lyle PLC is a public limited company listed on
the London Stock Exchange and registered in England.
This is the report and accounts for the year ended
31 March 2008. More information about Tate & Lyle
can be found on our website at www.tateandlyle.com
Definitions
In this report, ‘Company’ means Tate & Lyle PLC.
‘Tate & Lyle’ or ‘Group’ means Tate & Lyle PLC and
its subsidiary and joint venture companies.
Trademarks
SPLENDA® and the SPLENDA® logo are trademarks
of McNeil Nutritionals, LLC.
The DuPont Oval logo, Dupont™ and Sorona® are
trademarks or registered trademarks of E.I. du Pont
de Nemours and Company.
Overview of the year
Sir David Lees and Iain Ferguson summarise
Tate & Lyle’s performance in the past year.
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4
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10
Performance highlights
Chairman’s statement
Chief Executive’s review
Vision, strategy and
business objectives
What we do
Dividends per share
+5%
Find out how we make our ingredients, which markets we operate in, how we serve our customers,
and what we are doing to grow our business.
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14
18
22
24
Overview
Sustainable sourcing
Creating volume
Preserving value
Adding value
28
32
34
Going to market
People
External environment and
risk factors
How we performed
How we measure our performance, and the results for the
Group and each business division for the financial year.
38
40
41
Our operations
Key performance indicators
Operating and financial review
41
44
52
Group results
Divisional performance
Other financial information
How we run the business
Find out who Tate & Lyle’s directors are and how we
apply our values to the way we run our business.
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60
61
68
Board of directors
Executive management
Corporate governance
Corporate social responsibility
Statutory information
Our detailed financial statements and other statutory
information such as directors’ pay.
79 Directors’ report
82 Directors’ remuneration report
94 Group financial statements
154 Parent company financial statements
160 Ten-year review (non-statutory)
162 Information for investors (non-statutory)
Tate & Lyle Annual Report 2008
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Overview of the year
Overview of the year
Performance highlights
Primary and value added
products Value added products
are those that utilise technology or
intellectual property enabling our
customers to produce distinctive
products and Tate & Lyle to obtain
a price premium and/or sustainable
higher margins. Other products
from our commodity corn milling
and sugars businesses are classified
as primary.
Sales
Year to 31 March
£m
2 622
2 535
3 424
3 225
802
690
2007
2008
Primary
2008
2007
Value added
2007
2008
Total1
Adjusted operating profit
Year to 31 March
£m
187
157
159
160
311
286
2007
2008
Primary
2007
2008
Value added
2007
2008
Total1
1 Total includes central costs of £31 million in 2008 and £35 million in 2007
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Tate & Lyle Annual Report 2008
Tate & Lyle Annual Report 2008
Basis of preparation Unless stated
otherwise, the Group’s financial statements
are prepared in accordance with International
Financial Reporting Standards (IFRS).
Information prior to 2005 is shown under
Generally Accepted Accounting Practice
in the United Kingdom (UK GAAP).
Adjusted operating profit and adjusted
earnings per share Unless stated
otherwise, adjusted operating profit and
adjusted earnings per share in this annual
report and accounts excludes discontinued
operations and are before exceptional items
and amortisation.
Amortisation Unless stated otherwise,
the use of the word ‘amortisation’ on pages
1 to 92 in this annual report relates to the
amortisation of acquired intangible assets.
Continuing operations Unless stated
otherwise, all comments in this annual report
and accounts refer to the continuing operations
adjusted to exclude exceptional items and
amortisation of acquired intangible assets.
Total shareholder return performance
The graph shows the cumulative total
shareholder return performance (share
price growth plus reinvested dividends)
of Tate & Lyle over the past five years
compared with the FTSE 100 Index.
Tate & Lyle
FTSE 100 Index
Adjusted diluted earnings per share
Year to 31 March
pence
Dividends per share
Year to 31 March
pence
37.5
32.7
22.6
21.5
2007
2008
2007
2008
Tate & Lyle’s five-year cumulative total shareholder return
Value of £100 invested on 31 March 2003
£
250
200
150
100
50
31 March 2003
31 March 2004
31 March 2005
31 March 2006
31 March 2007
31 March 2008
Source: Kepler Associates
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Tate & Lyle Annual Report 2008
Tate & Lyle Annual Report 2008
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Overview of the year
Chairman’s statement
2008 was a year of significant change and progress
for Tate & Lyle. We successfully achieved a number
of steps to reshape our business in line with our
strategy to build a stronger value added business
on a low-cost commodity base. This reshaping
process is largely complete and, taken together
with some important changes in the management
structure, the Group is now well positioned to benefit
from the growth opportunities in our chosen markets.
Results of continuing operations
Sales for the year ended 31 March 2008 were £3,424 million, 6% higher
(10% in constant currency) than the prior year. Profit before tax, adjusted
to exclude exceptional items and amortisation of acquired intangible
assets, at £244 million was 11% lower (7% in constant currency) than
the prior year, and diluted earnings per share at 32.7p were 13% lower
(8% in constant currency). Net debt at £1,041 million increased
by £141 million.
The Group’s results of continuing operations were adversely affected
by a very disappointing performance in international sugar trading and
by the weak US dollar. These two factors more than account for the
lower profit before tax referred to above. In international sugar trading,
we have taken the necessary actions to restructure its activities and
re-focus management priorities to ensure that this year’s loss of £9 million
is not repeated. The results of the rest of the Group’s operations were
encouraging, demonstrating considerable resilience in the face of both
the unprecedented increase in global commodity prices and the impact
of the EU sugar regime reform. Food & Industrial Ingredients, Americas
once again performed strongly, achieving a fourth consecutive year of
record profits. The 13% increase in profits from core value added food
ingredients and the 6% increase in SPLENDA® Sucralose sales, both
in constant currency, were also pleasing and demonstrate the good
progress we are making to grow our business in those areas of
strategic focus and investment.
Dividend
The Board proposes an increase of 1.1p (5%) in the total dividend for
the year to 22.6p. This is covered 1.5 times by adjusted basic earnings
before exceptional items and amortisation of acquired intangible assets
from continuing operations, and 1.8 times from total operations.
The proposed final dividend of 16.1p (2007 – 15.3p) will be due
and payable on 31 July 2008 to all shareholders on the Register
of Members at 4 July 2008.
4
Tate & Lyle Annual Report 2008
Return of capital
We returned £159 million to shareholders through the
repurchase of 33.6 million shares representing 69% of
the approval given by shareholders at the Annual General
Meeting (AGM) in July 2007. Given current worldwide
economic conditions, we have decided to suspend the
remainder of the repurchase programme. We will be
asking shareholders to renew the Company’s authority
to buy back shares at the AGM on 23 July 2008.
The Board
On 2 May 2008, we announced that Stanley Musesengwa,
Chief Executive, International, and Stuart Strathdee,
Corporate Development Director, will retire from Tate & Lyle’s
Board of Directors at the AGM on 23 July 2008.
Stanley Musesengwa has worked for Tate & Lyle for
over 28 years and has been a Director since April 2003.
He has served Tate & Lyle with great distinction over the
years and we wish him every success for the future.
Stuart Strathdee has worked for Tate & Lyle for over
31 years and has been a Director since November 1994.
The Board is deeply appreciative of his loyal service and
is delighted that the Company will continue to benefit from
his considerable knowledge and expertise for a further
year after he stands down from the Board.
Kai Nargolwala stood down as a Non-Executive Director
from 31 December 2007 due to his new commitments
with Credit Suisse. He served on the Board for three
years and in that time made a valuable contribution
much appreciated by his colleagues.
Governance
The pie chart below shows the time spent by the Board
at its meetings in the 2008 financial year allocated between
various responsibilities. As can be seen, just over 50%
of the Board’s time was spent on strategy, reflecting the
significant reshaping of the business referred to in
this annual report.
Board allocation of time
Year ended 31 March 2008
Governance
9%
Operations
12%
Finance
and risk
23%
Strategy
51%
Capital expenditure
and investments
5%
Tate & Lyle Annual Report 2008
During the year the Board carried out its annual evaluation
of the effectiveness of the Board. This year the Board
engaged Dr Tracy Long of Boardroom Review to act
as an independent facilitator for the review. Dr Long’s
report was presented to and discussed by the Board
and the recommendations made are being implemented.
Outlook
Looking forward to the year to 31 March 2009:
■ We anticipate the Food & Industrial Ingredients
businesses in the Americas and Europe, which together
accounted for 72% of the Group’s continuing operating
profit before central costs in the 2008 financial year,
will make further progress benefiting in the Americas
both from improved high fructose corn syrup pricing
achieved for the 2008 calendar year and from additional
value added capacity now on stream. In Europe, the
results will be significantly influenced by European
cereal prices following the 2008 harvest.
■ The EU sugar regime reforms have proved successful
in eliminating all but 6% of the quota production
capacity targeted for reduction. Surplus refined sugar
stocks will need to be absorbed over at least the first
half of the year, during which time the market is likely
to remain very difficult and challenging. However, we
look forward to market equilibrium being re-established
during the second half of our financial year which,
together with the actions we have taken on international
sugar trading, should enable a progressive restoration
of margins in the Sugars business.
■ The SPLENDA® Sucralose business is now fully invested.
While the incremental impact of a first full year of costs
associated with the Singapore facility will restrict profit
growth in the first half year, we expect continued sales
growth to offset these costs and to lead to improved
profits in the full year.
For the Group, the 2009 financial year has started in
line with plan and we continue to expect to make good
progress in the year as a whole.
Sir David Lees
Chairman
21 May 2008
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Overview of the year
Chief Executive’s review
The actions we have taken this year, together with our
expansion projects to increase value added production,
give us a solid platform from which to grow our business
in the years ahead.
Delivering on our strategy
2008 was a year of considerable activity and progress for Tate & Lyle.
We successfully achieved a number of important steps to reshape our
business in line with our strategy to build a stronger value added
business on a low-cost commodity base.
■ We simplified and de-layered the Group’s organisational structure
into four divisions, each reporting to the Chief Executive. A new
management structure was put in place and key hires made to lead
the Sucralose and Food & Industrial Ingredients, Americas divisions.
■ We removed substantial risks from the Group by exiting markets
(European wheat and Canadian and Mexican sugar) where we could
not hedge to an acceptable level our exposure to raw material and
commodity pricing volatility and regulation.
■ We continued to implement our four-year major capital investment
programme to support long-term growth, which we expect will be
completed by March 2009.
■ We took actions to restructure our international sugar trading activities
to reduce future earnings volatility and re-focus management priorities
to ensure that this year’s result is not repeated.
We continued to grow those areas of our business of key strategic
focus and investment. Our core value added food ingredients business
achieved a profit of £89 million, a 13% increase over the prior year,
while sales of SPLENDA® Sucralose increased by 6% (both in constant
currency) and new product launches featuring SPLENDA® Sucralose
increased by 30% over the prior year.
The process of reshaping the Group’s business is now largely complete.
The actions we have taken this year, together with our expansion
projects to increase value added production, give us a solid platform
from which to grow our business and to improve further the quality
of the Group’s earnings.
6
Tate & Lyle Annual Report 2008
New management structure
Following the Group’s reshaping process we have
simplified and de-layered the Group’s organisational
structure. The Group now consists of four distinct
business divisions, each reporting to the Chief Executive:
Food & Industrial Ingredients, Americas; Food & Industrial
Ingredients, Europe; Sucralose; and Sugars. These divisions
are supported by our Research and Development team,
which also reports to the Chief Executive, and other
Central functions.
To drive our business forward, we have appointed
new heads for three of the four divisions. Matt Wineinger
joined Tate & Lyle in March 2008 and will take over from
Lynn Grider as President, Food & Industrial Ingredients,
Americas after he retires at the end of June 2008. Matt
has worked for a number of major companies in the
food sector, most recently as President of Swift & Co’s
Australian meat division, and before that at Cargill, where
he held a number of senior roles in sales and marketing.
Olivier Rigaud, who has worked for Tate & Lyle for
19 years in our European food ingredients business,
has been promoted to President, Food & Industrial
Ingredients, Europe.
Ian Bacon continues as Chief Executive, Sugars.
Karl Kramer joined Tate & Lyle in April and will become
President, Sucralose from 1 June 2008. He joins us
from Givaudan, the flavour company, prior to which he
worked for the NutraSweet Kelco division of Monsanto.
The four heads of the divisions, together with
John Nicholas, Group Finance Director; Robert Gibber,
Company Secretary and General Counsel; and
Dr Bob Fisher, President, Research and Development,
will sit on a new Group Executive Committee, which
I will chair. This Committee will replace the existing
Group Management Committee.
This is a strong new management team with the
appropriate skills, knowledge and experience to drive
forward each division and the Group as a whole in
the years ahead.
Acquisitions and divestments
We sold three businesses during the year to exit markets
where we could not hedge to an acceptable level our
exposure to raw material and commodity pricing volatility
and regulation.
We completed the sale of our sugar operations in Canada
and Mexico on 22 April 2007 and 28 December 2007
respectively, and the sale of five of our European starch
plants, including all four that processed wheat, on
1 October 2007. The unprecedented increase in European
cereal prices since last summer, up by more than 80%
since May 2007 when we announced we were in
advanced discussions over the sale of our European
starch plants, and the recent decline in the Mexican
sugar price following changes introduced by the North
American Free Trade Agreement, underline our rationale
for selling these businesses.
We strengthened our value added offering during the year
through the acquisition of an 80% holding in the German
speciality food ingredients group, G.C. HAHN & Co. (Hahn)
on 15 June 2007. Hahn has a leadership position in dairy
and convenience food stabiliser systems and, when
combined with Tate & Lyle’s existing products, systems
and applications skills, provides our customers with a
comprehensive texturant offering.
Major capital investment programme
nearing completion
The expansion of our Sagamore corn wet mill in Indiana
was commissioned during the year. This increases
capacity for a variety of value added starches used by
customers in dairy, beverages, baking, snacks and
dressings. The expansion of our Loudon, Tennessee,
plant, which is adding capacity for value added ingredients,
ethanol and substrate for the Bio-PDOTM joint venture
with DuPont, was effectively completed at the end of the
financial year. Our unique bio-refining joint venture plant
continues to operate well and is currently undertaking
market-proving activities with sales across several categories,
including polymerisation for clothing and carpets, and direct
applications in cosmetics, deodorants and as de-icing fluid.
The construction of the new corn wet mill in Fort Dodge,
Iowa, and the biomass boiler at the cane sugar refinery
in London are progressing satisfactorily and we continue
to anticipate that both will be mechanically complete by
the end of March 2009. The Fort Dodge plant will produce
industrial starches and ethanol. Its completion will enable
a reconfiguration of finishing capacities in the USA to optimise
production, particularly at the Sagamore plant, which will
now focus predominantly on value added food ingredients.
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Tate & Lyle Annual Report 2008
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7
Overview of the year Chief Executive’s review
Food & Industrial Ingredients, Europe saw profits increase
by 3% to £41 million (a reduction of 1% in constant
currency). This was a pleasing result given the very
significant disruption faced by the business during
the year as the non-manufacturing operations were
completely re-engineered following the sale of five of its
starch plants. A strong performance in the first half year
was offset in the second half year by significantly higher
corn costs. In Europe, the ability to pass increased costs
through to customers is limited for those products that
have a clear link to the price of sugar, although we were
able to pass on more of the increase than we had
expected. The initial £8 million profit contribution from
Hahn following its acquisition in June 2007 was ahead
of our expectations. We continue to work with our
partners in the Eaststarch joint venture in Central and
Eastern Europe on how we can generate optimal
returns for shareholders.
Sugars profits were £24 million, down from £60 million in
the prior year. The European sugar refining business was
profitable in a market made difficult by the implementation
of the EU sugar regime reform. We were delighted with
the reaction to our announcement that our UK retail
sugars range will move to Fairtrade by the end of 2009,
and we are investing in reducing our carbon footprint
through a new biomass boiler at the London refinery
to help drive efficiency and differentiation of cane sugar.
A number of other projects, including cost-saving
initiatives by the operations based at our London refinery
totalling £7 million on an annualised basis, were delivered
during the year. Despite the challenges it faces, our
European sugar refining operation remains a good business
within an evolving industry and we are increasingly positive
for the future once the EU sugar regime reforms are fully
implemented in 2010. The molasses business performed
strongly, benefiting from a sharp increase in EU animal
feed ingredient prices. However, this was insufficient
to compensate for the loss of £9 million incurred by
international sugar trading, which was especially
disappointing when compared with a profit of £22 million
in the previous year.
The new Singapore SPLENDA® Sucralose facility was
commissioned during the year and we were able to prove
the capacity of the plant more smoothly and much
earlier than expected.
By March 2009, Tate & Lyle will have completed a
four-year programme of major capital investment to
support long-term growth. Over the first three years of
this programme, capital expenditure totalled more than
£500 million above ongoing levels of depreciation. The total
investment programme has raised capital expenditure to
levels above £250 million in each of these three years.
In the year ended 31 March 2008, capital expenditure
was £264 million, which was 2.6 times depreciation.
To complete the investment programme, the Group’s
total capital expenditure forecast for the year ending
31 March 2009 is £200 million. Beyond this, we believe
that we can adequately invest going forward with capital
expenditure running at around 1.25 times depreciation.
International sugar trading
The performance in our international sugar trading
operations was very disappointing, more so after the
excellent performance in the prior year. This business
suffered from a mark-to-market charge for increased
freight costs, which were hedged in the first half of the
year, and lower trading profits. We have reviewed its
activities in light of the changes to our Sugars asset
base and the reforms of the EU sugar regime. We have
restructured the business and re-focused management
priorities to ensure that this year’s result is not repeated.
Overview of business performance
The Group’s profit before tax, adjusted to exclude
exceptional items and amortisation of acquired intangible
assets, at £244 million was 11% lower (7% in constant
currency) than the prior year. The reduction in profit before
tax was more than accounted for by a £9 million operating
loss in international sugar trading from a £22 million profit
in the prior year, and an £11 million adverse impact
from exchange translation.
Food & Industrial Ingredients, Americas, our largest division,
representing almost 60% of the Group’s adjusted operating
profit before central costs, performed strongly achieving
a fourth consecutive year of record profits. Operating profit
of £186 million increased by 6% (13% in constant currency).
Both value added and primary product lines performed
well, the latter assisted by firmer by-product prices.
We were pleased by the outcome of the 2008 calendar
year pricing round, which has resulted in modest margin
improvements. As expected, ethanol profits returned to
more normal levels reflecting the impact of increased
industry production and higher corn costs, following the
very strong profits achieved in the prior year.
8
Tate & Lyle Annual Report 2008
Sales of SPLENDA® Sucralose of £148 million were
1% ahead of the prior year (6% in constant currency).
New product launches were some 30% ahead of the prior
year. Following the doubling of capacity at the McIntosh,
Alabama, facility last year, and the successful commissioning
of the Singapore facility this year, we have completed the
major expansion projects for sucralose and will need only
limited further capital investment in the coming years.
Operating profit for the year at £66 million was 7% lower
(3% in constant currency) affected by fixed costs from
the second plant and also by legal costs of £6 million
(2007 – £3 million) incurred in defending against alleged
infringement of our patents in the US International Trade
Commission (ITC). This case went to trial in February
2008. The proceedings allege infringement of patented
sucralose manufacturing technology in respect of sucralose
manufactured in China and imported into the USA. So far,
seven of the 27 respondents in the ITC matter have been
held in default by the judge and are now barred from
contesting the case. The judge’s initial and non-binding
determination is expected in June 2008, leading to a final
ruling by the ITC in October 2008.
European sugar regime
Our European sugar business has been operating in
a highly competitive market while the EU sugar regime
undergoes reform. The target of the reforms is to
eliminate 6.0 million tonnes of quota production through
a process of voluntary surrender from which full-time cane
sugar refiners are excluded. Following amendments to the
EU sugar restructuring fund agreed in September 2007,
on 8 May 2008, the EU announced that 5.65 million
tonnes out of the 6.0 million tonne target had been
surrendered. While there is still surplus sugar to be
absorbed by the market, the reforms’ aim of reducing
supply is substantially complete. There will be two
reductions in the EU reference price of refined sugar
and in raw material costs, which will be implemented in
October 2008 and October 2009. However, we expect
that market equilibrium will be restored during the second
half of our 2009 financial year, which should lead to
progressively firmer refining margins. We believe cane
sugar refineries have a superior economic model
in the post-reform EU market.
Energy
Energy costs for the continuing operations were
£150 million, an increase of 2% over the prior year
(6% in constant currency). We have covered over half the
costs for the 2009 financial year but still anticipate costs
will increase by £35 million from higher prices and also
higher consumption because of capacity expansion.
Rising fossil fuel prices increase the benefits of our
investments in biomass boilers under construction in
London and Fort Dodge, Iowa.
Safety
Tate & Lyle is committed to providing safe and healthy
conditions for its employees, contractors and visitors.
The Group has no higher priority than safety and we
target continuous improvement to reduce recordable
injury and lost-time accident rates to zero in every plant.
We measure and report our safety performance in
calendar years and, for 2007, most Tate & Lyle locations
equalled or improved their 2006 performance, including
15 that reported no lost-time accidents and ten that
reported no recordable injuries for the year.
Central costs
A review of central functions across the Group was
completed during the year in light of the significant
reshaping of the business. Central costs decreased
from £35 million to £31 million. This decrease reflects
a £1 million reduction in underlying costs. There was
a one-off benefit totalling £7 million from insurance and
reallocation of costs to the divisions offset by costs
relating to the realignment of the Group’s management
and organisational structure. Our review of central costs
realised savings of £3 million in 2008, benefits which
should double by 2010.
Conclusion
2008 was a year of considerable activity and progress
for Tate & Lyle as we reshaped our business in line with
our strategy to build a stronger value added business
on a low-cost commodity base. Implementing so much
change while also managing the impact of significant
movements in global commodity prices and the
consequences of the EU sugar regime reforms has only
been possible thanks to the dedication, diligence and
commitment of our people, for which I would like to
express my sincere gratitude.
We expected 2008 to be a year of transition and that
proved to be the case. With our strategic reshaping largely
complete, our priority is clear – to deliver our longer-term
target of a return on net operating assets of 20%. With all
that we have achieved this year, and with the new
management structure in place, we now have the platform
from which that longer-term target can be delivered and
we are committed to that goal.
Iain Ferguson CBE
Chief Executive
21 May 2008
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Overview of the year
Vision, strategy and
business objectives
Vision
Tate & Lyle’s vision is to create the world’s leading
renewable ingredients business. We aim to achieve this
by building a consistent portfolio of distinctive, profitable,
high-value solutions in products and services for
our customers.
Strategy
Tate & Lyle is committed to providing long-term value for
our shareholders. Our strategy is to build a stronger value
added business on a low-cost commodity base. To deliver
growth, we focus on five key business objectives.
Invest in acquisitions and partnerships
We continually evaluate acquisition opportunities that
would add strategic value by enabling us to enter new
markets or add products, technologies and knowledge
more efficiently than we could organically. We also aim
to grow our business by forming joint ventures and
partnerships to develop and distribute new products,
and to enhance the capabilities of our existing ingredient
portfolio. Using alliances and joint ventures can be an
efficient way to lower our cost of investing in new areas
and markets, and help secure access to new and
complementary technology and expertise.
Business objectives
Serve our customers
Delivering excellent customer service is at the core of
everything we do. Our aim is to be the partner of choice
in our customers’ innovation processes and to help them
develop more successful consumer products. Throughout
our business we have set up cross-functional teams
to work with our customers to provide consumer and
customer insights and to support them in looking for
new product innovation opportunities.
Invest in technology and people
We are investing in our research and development
capabilities to help us develop innovative solutions that
meet our customers’ product challenges. We are also
complementing our own capabilities through business
and technology partnerships, university collaborations
and investments in start-up companies. To develop talent,
improve leadership and help our employees succeed, we
operate various programmes designed to ensure we have
the right skills at all levels to grow our business.
Operate efficiently and safely
We aim to be the lowest-cost and most efficient producer
in all our markets. Through our expertise in high-volume
process management, our focus on technical and
manufacturing excellence and the efficient use of services
such as logistics and utilities, we are continually working
to improve the efficiency of our operations. We also strive
to ensure that there are safe and healthy conditions for
everyone at our sites.
Grow the contribution from value added products
We are committed to continuing to grow the contribution
from our value added products. Value added ingredients
utilise technology or intellectual property enabling our
customers to produce distinctive products and Tate & Lyle
to obtain a price premium and/or sustainable higher margins.
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Tate & Lyle Annual Report 2008
This section shows how we use raw
materials to create endless possibilities
for our customers.
It all starts here
What we do
12 Overview
14 Sustainable sourcing
18 Creating volume
22 Preserving value
24 Adding value
28 Going to market
32 People
34 External environment
and risk factors
Tate & Lyle Annual Report 2008
Tate & Lyle Annual Report 2008
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What we do
Through our production facilities around the world
we turn raw materials – corn or cane sugar –
into quality ingredients used by millions of people
every day. This diagram explains how.
Sustainable sourcing
Creating volume
Ensuring we have a long-term,
reliable supply of corn and cane
sugar for our plants is essential.
This involves developing
long-term, mutually beneficial
relationships with growers,
farmers and other commercial
partners to secure supply,
understanding commodity
markets, and hedging costs
where feasible.
Sustainable sourcing
To create the hundreds
of quality ingredients our
customers want, we begin
by processing large volumes
of raw materials from which
we create basic products that
are either sold on or used as
the starting point for developing
speciality ingredients and
branded goods. Creating
this volume and operating
large-scale, efficient plants,
allow us to keep unit costs
low across the business.
Sagamore plant, Indiana, USA
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Tate & Lyle Annual Report 2008
Heading Heading
Preserving value
Adding value
You are here:
Sustainable sourcing
£
Generating optimal returns
from large-scale commodity
manufacturing requires firm
cost and risk control. This
involves careful management
of any commodity exposure,
negotiating the right price for
our ingredients, and providing
our customers with quality
products, within specification,
on time, first time.
Rapidly changing lifestyles
are causing consumers to
demand more from the
products they buy – be they
good food on-the-go or natural
cosmetics. Our expertise
in carbohydrate processing
and blending, specialist R&D
knowledge and insights into
the market give us an edge
in developing ingredients that
help add taste, nutrition and
increased functionality to
our customers’ products.
Going to market
We provide customers in four
key markets with quality services
and ingredients made from corn
or cane sugar, which impart
functionality that is vital for
our customers’ products.
Generating returns and growing
our business requires carefully
managing the product mix.
This involves maintaining a
high-volume, low-cost commodity
base to help produce our higher-
margin, value added ingredients
and services.
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People
Running a diverse business like
Tate & Lyle, which develops,
manufactures and sells a huge
variety of products and services
to customers in different markets
across the world, relies on a team
of highly skilled, motivated people
from a wide range of disciplines.
External environment
and risk factors
Every business needs to be
responsive to its competitive
and regulatory environments.
Understanding the issues that
could have an impact on our
business is vital for good risk
management and long-term
commercial success.
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What we do
Sustainable sourcing
Ensuring we have a long-term, reliable supply of corn
and cane sugar for our plants is essential. This involves
developing long-term, mutually beneficial relationships
with growers, farmers and other commercial partners
to secure supply, understanding commodity markets,
and hedging costs where feasible.
Tate & Lyle was founded in the UK in 1921 but its roots can be traced back
to a number of companies established in the middle of the 19th century
focused on sugars in Europe, and corn milling in the USA and Europe.
Tate & Lyle has been purchasing corn from US farmers and cane sugar from
a variety of countries for over a century. Making sure we have high-quality raw
materials at the right price is the starting point for how we do business.
Corn
Tate & Lyle purchases two types of corn: dent and waxy. Dent corn is the
most common crop and is used to make high fructose corn syrup, food starch,
alcohol and animal feed. Waxy corn has to be contracted direct from the
farmer and has special functionality that makes it ideal for creating stabilisers,
thickeners and emulsifiers for the food industry. It is also used in adhesives
and gums for the paper industry.
USA
Running our plants 24 hours a day relies on good management of the corn
supply chain. We own a network of elevators (silos) that is responsible for
purchasing millions of bushels of corn every year for our plants from farmer-
owned co-operatives, family-owned grain companies and farmer producers.
Corn purchase contracts may be negotiated with corn suppliers for delivery the
same day, or in some cases delivery price and terms may be for delivery up to
18 months forward. Tate & Lyle has recently added corn storage and unloading
capacity at our processing plants and country elevator network to better
service our suppliers.
Europe
Our European business has three wholly owned plants, with another five in
Central and Eastern Europe as part of our joint venture, Eaststarch. Due to
the sweetener quota system in Europe and other factors such as transport
infrastructure, our plants primarily serve local markets and are therefore
significantly smaller than our US plants, processing in total just over two million
tonnes of corn per year. We purchase dent corn locally where possible, and
commission waxy corn direct from European farmers for speciality food starch
production at our plant in The Netherlands.
From farm to factory
Providing an efficient, high-quality service
at our elevators helps us build strong, long-
term relationships with our corn suppliers.
In the USA, at harvest time, due to the high
volumes, corn is delivered initially to the
elevators then sent on to our plants by
river barge, rail car, or truck; during the
rest of the year corn may also be
delivered direct to the plants.
Wapella corn elevator at dusk,
Illinois, USA
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What we do Sustainable sourcing
this is the biggest ever
Fairtrade switch by a UK
company and it’s tremendous
this iconic UK brand is
“ In terms of size and scale,
backing Fairtrade.”
Harriet Lamb, Executive Director,
Fairtrade Foundation
great opportunity within our
community: it can help us build
schools, health centres, clinics
and much more. For us, Fairtrade
“ Fairtrade is like a door to a
is a new beginning.”
Giovanni Loria, Chairman of Corozal (district),
Belize Sugar Cane Farmers’ Association
“ Fairtrade has become
increasingly visible on
the high street and this
will only strengthen its
presence up and down
the country – ultimately
guaranteeing more
farmers a fair price.”
David McCullough,
Trading Director, Oxfam
Just good business
Tate & Lyle’s UK retail sugar business
goes Fairtrade.
Our decision to move our entire range of UK retail cane
sugars involved two years of planning and working in
partnership with the Fairtrade Foundation to help cane
farmers in Belize to meet Fairtrade standards. This involved
working with over 6,000 smallholder farmers represented by
the Belize Sugar Cane Farmers’ Association, and with Belize
Sugar Industries, the sole sugar processor in the country.
Over the years, these farming communities in Belize have
been affected by higher input prices and changes in the
EU market, not to mention natural disasters. Now, every time
a customer buys a pack of Tate & Lyle Fairtrade cane sugar,
the farmers will benefit from our commitment. In the first
year alone, our move to Fairtrade will create an additional
return of at least £2 million in premiums for these
communities. This money will be invested collectively
by farmers who decide democratically how to use it,
overseen by an elected committee.
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Tate & Lyle Annual Report 2008
Cane sugar
Tate & Lyle produces over 1.3 million tonnes of cane sugar per year
from our two refineries in Europe, and processes over a million tonnes
of sugar cane at our factory in Vietnam. While our Vietnamese operation
sources from local growers, our European business secures supply from
African, Caribbean and Pacific countries and least-developed countries
under the EU sugar regime. These suppliers have preferential access
to the European sugar market under various agreements with the EU.
Reform of the EU sugar regime and resulting price cuts are affecting
the whole of the supply chain, including the growers. This means that
maintaining strong working relationships with our suppliers is increasingly
important to improve the profitability of the industry for all stakeholders
and to ensure we can continue to source the cane sugar we need
for our refineries.
Good relationships are based on open dialogue and ensuring that
our refineries remain attractive destinations for suppliers. This means
investing in our plants both to expand our business and increase
efficiency. One example from our UK refinery is the installation of new
cranes. In 2007, our unloading equipment, which, over 20 years,
had lifted some 18 million tonnes of raw sugar from vessels from across
the world, was replaced with new cranes, which will significantly increase
reliability and prepare us for future opportunities for expanding output
at the refinery.
As well as refining sugar, our international sugar trading operation
purchases and trades sugar in markets across the world.
Ensuring a fair price through Fairtrade
In February 2008, we announced our decision to convert all UK retail
cane sugar to Fairtrade by the end of 2009, the largest ever switch to
the ethical labelling scheme by any major UK food or drink brand. The first
product licensed to carry the Fairtrade mark is Tate & Lyle Granulated
White Cane Sugar. Tate & Lyle’s first accredited grower–partner is Belize,
from whom we have purchased sugar for over 35 years. This commitment
will help small-scale sugar cane farmers in Belize to improve their
livelihoods, and the Fairtrade premium they receive from us will be
invested to develop sustainable communities.
“ During regular visits to our cane sugar
suppliers, we listen to what’s important
to them. It could be that they are
concerned about changes to EU
legislation, or perhaps they have a
production or logistical constraint.
Whatever the issue, we always aim
to find suitable solutions, which can
sometimes be found from other parts
of the business. In doing this and by
promoting responsible trade, we not
only forge close partnerships, but also
maintain the integrity of our cane sugar
supply chain.”
Gavin Wakley,
Raw Materials Purchasing Director, Sugars
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What we do
Creating volume
To create the hundreds of quality ingredients our
customers want, we begin by processing large volumes
of raw materials from which we create basic products
that are either sold on or used as the starting point for
developing speciality ingredients and branded goods.
Creating this volume and operating large-scale, efficient
plants, allow us to keep unit costs
low across the business.
Corn elevator at the Decatur plant, Illinois, USA
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Tate & Lyle Annual Report 2008
US corn plants
and elevators
Our four major corn wet mills in the USA
are strategically located in prime corn growing
areas or near key markets. These plants
process around 2% of the US corn crop every
year. We are also constructing a new corn
wet mill in Fort Dodge, Iowa, which is due
to be completed by March 2009, our first in
the western corn belt.
Fort Dodge
(under construction)
US cornbelt
Sagamore
Lafayette
Decatur
Loudon
Corn processing plants
Corn elevators (as at
31 March 2008)
Tate & Lyle operates over 50 production facilities mainly
in the USA, Europe and South East Asia. Tate & Lyle is
the largest cane sugar refiner in Europe, and in the USA,
our corn milling plants process some 2% of the
annual corn crop.
Investing in capacity
To grow our business to meet the increasing demands
of customers as they respond to consumer needs, we
are investing in capacity, both by expanding existing
plants and by building new plants. By March 2009,
we will have completed a major four-year programme
of capital investment to support long-term growth.
Over the first three years of this programme, capital
expenditure totalled more than £500 million above
ongoing levels of depreciation.
We have recently expanded our US ingredient
manufacturing facilities in Loudon, Tennessee, and
Sagamore, Indiana. We have also doubled capacity
at our US SPLENDA® Sucralose plant in McIntosh,
Alabama, and have started up our new SPLENDA®
Sucralose facility in Singapore.
We are constructing a new corn wet mill in Fort Dodge,
Iowa, which is due to be completed by March 2009.
This plant will produce industrial starch and ethanol.
It will free up capacity at our Sagamore, Indiana, plant,
which is currently used for producing industrial starches,
to make value added food ingredients.
Manufacturing efficiency
Operating our plants efficiently and safely at high volumes
requires reliable and up-to-date manufacturing processes.
We have a highly qualified team of engineers who ensure
that our plants function effectively and efficiently. Our
engineers are actively involved in the manufacturing line,
and use a number of sophisticated computer-based
process tools to track and model data to help identify
opportunities for production efficiencies such as improving
yields, saving energy or minimising waste.
When new products or processes have been developed,
our team of engineers ensures that these are incorporated
into our existing facilities quickly and efficiently, with minimum
interruption to production.
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What we do Creating volume
Meeting demand
for growth
Tate & Lyle acquired the SPLENDA®
Sucralose manufacturing business in 2004,
consisting of one plant in McIntosh, Alabama.
To enable us to grow this business, our major
customers needed the security of supply
afforded by a second facility. Therefore, we
built a new facility in Singapore, which was
completed in 2007. This facility makes a
new granulated form of SPLENDA® Sucralose,
specially developed for food customers.
This incorporated new technology, developed
by our engineering team, and required
recruiting around 40 Singaporeans who
were trained at our McIntosh, Alabama,
plant. Sharing engineering expertise helps
us to continue to develop the world’s most
efficient methods for manufacturing quality
sucralose on a commercial scale while
meeting rigorous purity and hygiene standards.
Researching new technologies
Our research and technology team is dedicated to developing the latest
engineering technologies, both for our existing plants and for new builds.
Our new plant in Fort Dodge, Iowa, is being constructed using new
proprietary technology that will increase starch yields and reduce energy
consumption per unit. This energy conservation technology, which will use
a renewable energy source rather than fossil fuels, is also being introduced
in one of our oldest plants – our UK cane sugar refinery in London –
and will be operational by March 2009 (see page 22).
Tate & Lyle Process Technology
As part of our Sugars business, we have a specialist team, Tate & Lyle Process
Technology, which provides support services, process engineering and design
expertise to the sugar cane industry worldwide. At any one time, the team is
working on around 20 projects, which range from engineering feasibility studies
to full refinery design. Recent projects include designing new processes
for customers in the Far East and India, designing and assisting with the
commissioning of a large cane sugar refinery in Egypt and a liquid sugar
plant in Israel, and similar, smaller projects in Mexico, Central and
South America.
Protecting our technical expertise
To support our businesses and protect our competitive advantage, we maintain
a significant number of patents. Much of the product innovation and development
work we do results in patentable or proprietary new technology. We monitor
market developments closely to identify any potential violations of our patents and
intellectual property and take appropriate legal action where considered necessary.
A training session at our SPLENDA®
Sucralose facility, McIntosh, Alabama, USA
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Tate & Lyle Annual Report 2008
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Tate & Lyle Annual Report 2008
Clockwise from top:
Sagamore plant, Indiana, USA
Lafayette plant, Indiana, USA
Thames Refinery, London, UK
Decatur plant, Illinois, USA
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What we do
Preserving value
Generating optimal returns from large-scale commodity
manufacturing requires firm cost and risk control.
This involves careful management of any commodity
exposure, negotiating the right price for our ingredients
and providing our customers with quality products,
within specification, on time, first time.
Getting the most out of raw materials is essential to keeping unit costs low.
This can be done by increasing yields through innovative manufacturing and
by ensuring that nothing is wasted in the manufacturing process.
Process efficiency
Tate & Lyle has recently developed patented, proprietary process technology,
known as CORNBELT®, which will enable our newest plant (a corn wet mill in
Fort Dodge, Iowa) and our expanded plant at Loudon, Tennessee, to produce
corn starch and ethanol more efficiently than using traditional corn wet milling
techniques. CORNBELT® increases starch yields and at the same time
reduces per unit energy consumption.
We have also used similar technology to develop a £20 million biomass
boiler at our UK cane sugar refinery, which will be operational by March 2009.
This will not only reduce the carbon footprint of our UK refinery by 25% but will
also cut manufacturing costs significantly by replacing 70% of the plant’s fossil
fuel use with a renewable energy source.
Using every part of the raw material
In our production processes, nothing is wasted. In sugar refining, molasses
(a by-product of the refining process) is sold as animal feed or used as a raw
material for fermentation-based ingredients like citric acid and alcohol. We also
capitalise on our expertise in molasses storage and distribution to sell these
services commercially.
Nothing is wasted
Tate & Lyle uses every part of the corn
kernel; nothing is wasted. Corn is broken
down into 57% corn starch (used to make
food and industrial ingredients); 22% corn
gluten feed (made from the hull and fibre
and used in cattle feed); 4% corn gluten
meal (extracted from the endosperm and
used in aquaculture feed and pet food);
3% corn oil (made from the germ and
used by the food industry); and the
remaining 14% is water.
Hull and
fibre
m
r
e
p
s
o
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n
E
Starch
Starch
and
gluten
Germ
Likewise, in corn processing, every part of the kernel is valuable, and selling
on those parts we do not use ourselves helps manage the net cost of corn.
Corn gluten feed is sold to the beef and dairy industries, corn gluten meal to
aquaculture and pet food customers, and corn oil to the food industry.
We also sell some of the more unexpected by-products of ingredient
manufacturing on a very small scale. We generate enough steam from our cane
sugar refining business in the UK to generate and sell electricity back to the
National Grid, and in the USA, we sell raw carbon dioxide gas, a by-product of
ethanol production, to be made into carbonated gas for soft drinks and dry ice.
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Raw material hedging
In the USA, Tate & Lyle uses hedging
procedures to protect against price
changes in purchased corn. This involves
entering into a futures contract at the
Chicago Mercantile Exchange (CME)
whenever we take an order from a
customer, which means we can buy corn
at a specific price at a set date in the
future, allowing us to budget without
considering fluctuating corn prices. CME
contracts offer the opportunity to establish
raw material values as quoted today for
periods up to two years in advance.
Greg Hibner, Manager Co-Product Sales,
corn trading desk, Decatur, Illinois, USA
Ensuring quality
Because Tate & Lyle’s ingredients enter the food chain in consumer
products, stringent quality standards are enforced at every site. Quality
assurance also reduces waste (and costs) and fosters good customer relations.
Every Tate & Lyle manufacturing facility has to comply with Group minimum
standards, which include third-party validation of food safety and quality
systems, and sites are benchmarked against each other and ranked in
annual quality awards.
Negotiating prices and volumes
Selling corn-based commodity products in both the USA and Europe is
usually done through annual pricing rounds. These involve a series of
face-to-face meetings with key customers, held over a number of months,
where prices for products like high fructose corn syrup, or charges for toll
production are negotiated for the next 12 months or on a multi-year basis
at an agreed volume. The majority of our commodity ingredients, both food
and industrial, are sold through this mechanism, with only a small amount
sold on a spot (or ad hoc) basis.
The pricing rounds are highly commercial and it is the responsibility of our sales
teams to ensure that we get the best price for our products, while remaining
competitive against other ingredient suppliers who may sell the same ingredient
or substitute products.
In the USA, as soon as a customer order is agreed, if we do not hold actual
corn in storage, we manage the risk of changing corn prices by hedging
corn costs on the Chicago Mercantile Exchange.
In Europe, a smaller market for us than the USA, there is no liquid corn futures
market, which means we cannot hedge the full corn price cost as we can in
the USA. It is not possible to use hedging procedures to lock in the majority
of by-product revenues in either Europe or the USA. Our European sugars
business is also different because the cost of purchasing cane sugar and the final
selling price of the finished product are largely determined by the EU sugar regime.
Logistics
Our logistics teams are responsible for warehousing, freight costs and customer
service. All of our businesses measure service delivery performance against the
same metric: ‘on time, in full, no invoice errors’. We work closely with carriers
to achieve the highest standards while controlling freight costs. Our largest
logistics hub is based in Lafayette, Indiana, which is broadly central to all our
US plants. This facility enables us to send mixed loads to customers who
buy across our product range and so create cost savings.
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A
Understanding consumers
Canvassing consumers’ views helps us to
develop new, relevant products and services
for our customers. For example, a report by
the US Department of Agriculture found that
only 21.4% of US consumers eat enough fibre
each day. So we undertook a study to find out
what US consumers thought about fibre and
its incorporation into their diet.
How acceptable do you
find the use of fibre in food
or drink products?
(very/somewhat
acceptable)1
Percentage of adults who
said fibre is ‘useful in
helping to maintain or
control your weight’.1
1 Source: Illuminas
76%
52%
24
Tate & Lyle Annual Report 2008
Adding value
Rapidly changing lifestyles are causing consumers to
demand more from the products they buy – be they good
food on-the-go or natural cosmetics. Our expertise in
carbohydrate processing and blending, specialist R&D
knowledge and insights into the market give us an edge
in developing ingredients that help add taste, nutrition
and increased functionality to our customers’ products.
Our high-volume commodity base allows us to run our plants efficiently
and so produce a low-cost substrate we can then use to make more
speciality, higher-margin products for both food and industrial customers.
These products, some of which are branded, add value through the fact
that they are either proprietary to Tate & Lyle, have greater functionality
than alternatives or come with an additional service for the customer.
Consumer insights
At the heart of our customer approach is the use of market research to
understand the consumer (our customers’ customer), the markets we operate
in and our customers’ needs. In 2005, we were one of the first food ingredients
companies to go direct to the consumer to understand for ourselves what
drives purchasing habits, and what consumers might look for in future products.
We use this to drive our own product development, to differentiate ourselves
from our competitors and, importantly, to give our customers an advantage by
working with Tate & Lyle.
Each year we run a programme of studies to canvass the views of consumers
in Europe, the Americas and Asia. We typically use basic attitudinal research
(such as focus groups) as a starting point, then complete the programme with a
detailed quantitative study (such as an internet survey). Our most recent US survey
totalled more than 4,000 consumers, across a spectrum of ages and social
groups. In the last year, we focused our efforts on consumer attitudes towards
dietary fibre and no-calorie sweeteners in response to the growing market for
health and wellness products. Due to this interest, development work for
customers can include information on nutritional labelling and product positioning.
Tate & Lyle’s research and development (R&D), marketing and regulatory teams
work together to provide insights from consumer research, input on labelling
regulations and detailed technical assistance on meeting specific product claims.
Research and development
We have over 280 people in our R&D team worldwide working to develop
innovative ingredients from renewable resources. Our R&D network includes
facilities around the world (see pages 38 and 39), and is headquartered in
our largest US facility, Decatur, Illinois. Most recently, we have opened satellite
laboratories in China, India and Australia to support our sales effort, while in
Europe we have established a wellness and nutrition centre in Lille, France,
which includes laboratories and pilot plant facilities for customers.
Tate & Lyle Annual Report 2008
Market drivers
The key driver of growth for our
business is value added food ingredients.
In this market we operate primarily within
three categories: sweeteners, texturants,
and wellness ingredients. In 2007,
the addressable global market in these
categories was estimated to be worth
£6.1 billion, and is forecast to grow at
a compound average annual rate of
4.3% to £7.2 billion in 2011.
Global value added food
ingredients market
Addressable market size £bn
6.1
6.4
6.6
7.0
7.2
1.2
1.4
1.5
1.7
1.8
1.7
1.7
1.7
1.8
1.8
3.2
3.3
3.4
3.5
3.6
2007 2008 2009 2010 2011
Texturants
Sweeteners
Wellness
Sources: Leatherhead Food Ingredients Report
2005, SRI Flavours Report 2004, SRI Nutraceuticals
Report 2007, Company estimates
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What we do Adding value
Our in-house research and development capability is organised into three
primary groups: product development, technology, and customer solutions.
Product development is divided into sweeteners, wellness, texturants and
bio-materials. This group focuses on developing new and improving existing
products. The technology group covers process engineering, analytical and
carbohydrate chemistry, and biochemicals. Its role is to determine how to
create, analyse and manufacture ingredients. The customer solutions group
includes applications and technical service teams. The applications teams
develop prototypes for customers using our ingredients, while the technical
services teams work directly with our customers to incorporate our
ingredients into their products.
Research partnerships
To give us fresh ideas and insights into the market, we develop partnerships
with the external research community.
In 2006, we announced that we would be making a £4.5 million contribution
over five years to King’s College London to set up a new centre for research
into the link between nutrition and health. The Tate & Lyle Health Research
Centre focuses on gastrointestinal health, carbohydrate metabolism, and
medical conditions such as obesity, diabetes and cardiovascular disorders.
This partnership will allow us to share knowledge and ultimately bring new
products and technologies to market. We have also established a Research
Advisory Group comprising a panel of six international industry and academic
experts, chaired by Dr Barry Zoumas, which reviews our research and
development portfolio and provides insight into how leading-edge
technologies could apply to future developments.
In 2006, we launched our venture capital fund, Tate & Lyle Ventures, which
invests in high-growth companies that specialise in renewable ingredients,
food technologies, renewable resources (such as biomaterials and biofuels) and
industrial processing technologies. In the past 12 months, it invested in Allylix
(natural flavour and fragrance production), Aquapharm (marine-based nutrients),
and BioFilm Ltd (edible film used in medicines and personal care products).
Target R&D spend
Tate & Lyle
Ventures
2%
Process
improvement
11%
Leadership
building
research
20%
Investment in R&D
Most of our spend is on internal capabilities – fundamental research, product
development and process improvement. The remainder is spent on developing
relationships with the external research community, through our venture fund
and alliances with key academic institutions. Our target is to spend 4% to 5%
of value added turnover on R&D. In the year ended 31 March 2008, we spent
US$64 million (£32 million) on R&D.
External
alliances
17%
Application/product
development
50%
Blending and speciality ingredients businesses
In certain geographies where there is growth potential in the food ingredients
market, we have taken the opportunity to invest in blending and speciality
ingredients businesses. These businesses open up new avenues for selling
ingredients through their relationships with small to medium-sized customers
and their expertise in specific areas such as the dairy industry, gums and
custom formulations. These businesses, based in South Africa, Germany,
Italy and North America, source ingredients and develop solutions from them
for customers. Their specialist knowledge supplements our existing
in-house R&D capability.
26
Tate & Lyle Annual Report 2008
These businesses often act as an R&D team for small to medium-sized
customers and, by building close working relationships, often become trusted
development partners.
Commercial partnerships
One way of growing our business is to form joint ventures or partnerships to
develop and distribute new products, and to enhance the capabilities of our
existing portfolio of ingredients. Using alliances and joint ventures can be an
efficient way to lower our cost of investing in new areas and markets, and to help
secure access to new and complementary technology and expertise. Examples
include our partnership with McNeil Nutritionals (a Johnson & Johnson company)
on SPLENDA® Sucralose, and with DuPont on Bio-PDO™.
Translating science
into business results
Dr Bob Fisher, President,
Research and Development
What’s the purpose of research
and development (R&D)? Good R&D
is not just about pure innovation,
it’s about translating science into
business results by developing
ingredients that have benefits that
customers will pay for. Customers
always look to control costs –
particularly in the current inflationary
environment – but our aim is that
price is determined ‘per unit of
functionality’ rather than per gram
of product. That’s the driver behind
our value added strategy.
What’s driving change in the food
industry? Food is no longer
considered just fuel, it’s a lifestyle
choice, and consumers are
increasingly interested in health
issues. Both ingredient functionality
and product claims have to become
more sophisticated, while the need
to test the veracity of product claims
brings a new dimension to food
ingredient development. It’s fair to say
that the science has become more
complex: not so long ago products
were ‘fat-free’; now consumers want
products to help sustain energy levels,
feel fuller for longer, or improve gut
health, for example.
Tate & Lyle Annual Report 2008
How is Tate & Lyle responding?
Traditionally in our industry only
technical service and application
scientists were customer facing.
At Tate & Lyle we have responded
by restructuring our R&D team to
get our ‘bench-top’ scientists
closer to customers. In part this
has been driven by the increased
interest of customers in the molecular
functionality of ingredients, for
example looking at how ingredients
are metabolised in the body.
In our R&D teams, it’s no longer
enough to be a scientist: you need to
be a technical business person; you
need to turn science into a consumer
benefit quickly; and importantly, you
need to understand what customers
are prepared to pay for.
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What we do
A brand at work
In the last year, 65%1 of US households
purchased a product displaying the
SPLENDA® logo on its packaging.
The most popular product category was
yoghurt, purchased by over a quarter
of US households. Tabletop sweeteners
and juice drinks were the second and
third most popular categories.
1 Approximately 75 million households
Source: IRI Consumer Network™
(52 weeks ending 27 January 2008)
Going to market
We provide customers in four key markets with quality
services and ingredients made from corn or cane sugar,
which impart functionality that is vital for our customers’
products. Generating returns and growing our business
requires carefully managing the product mix. This involves
maintaining a high-volume, low-cost commodity base to
help produce our higher-margin, value added ingredients
and services.
Food and beverage
The global food and beverage ingredient market is currently worth US$30 billion
and is growing at a rate of 3.1% per year. We count the vast majority of the
world’s top 100 food and beverage companies as our customers. Food and
beverage is Tate & Lyle’s largest market, with sugars and food ingredients
contributing over three-quarters of Group operating profit. Key drivers in this
market are the need for convenience and an interest in healthy eating, as
people live longer, busier lives. The development of emerging economies,
like Brazil, India and China, is also fuelling the growth in demand for
food ingredients in general.
Industrial
Industrial ingredients represent a potential area of growth for Tate & Lyle as the
trend towards greener living and the replacement of petrochemicals stimulates
demand for ingredients made from renewable sources. Traditional industrial
markets for Tate & Lyle have included paper and board (starches), fuels (ethanol)
and household goods (acidulants). New markets for us include oil-well drilling
(biogums), textiles and plastics (Bio-PDO™). We are also in the early stages
of developing other biomaterials. This market has great potential since annual
demand for petrochemical-derived plastics alone exceeds US$245 billion.
Animal feed
Rising cereal prices have seen this market become increasingly topical, and
have fuelled demand for molasses in Europe and corn gluten meal and corn
gluten feed in both Europe and the USA. Tate & Lyle serves this market because
the by-products of our key production processes are sold as nourishing feed
ingredients for livestock, fish and pet foods. This is important because selling
on these products helps us manage the net cost of our raw materials.
Pharmaceutical and personal care
A nascent market for Tate & Lyle, pharmaceutical and personal care is one we
expect will grow in the future although remaining relatively small. At the moment,
we sell two value added ingredients into this market: Zemea™ (cosmetics and
creams) through our joint venture DuPont Tate & Lyle BioProducts, and SPLENDA®
Sucralose (to sweeten medicines without adding calories).
28
Tate & Lyle Annual Report 2008
Heading Heading
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What we do Going to market
Food and beverage
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■ Health and wellness
- digestive health and immunity
- weight management
- children’s health/development
- heart health
■ Convenience
■ Indulgence
■ Clean label/
natural/organics
■ Sustainability/ethical sourcing
■ Portion/calorie control
■ Home baking (sugars)
■ Rising cost consciousness
■ Increasing pressure for high
- increasing raw material prices
- rise of private label (own-label)
- cost-effective ways of delivering
nutritional benefits
quality from suppliers
■ Supply chain ethics
■ Dealing with a changing
regulatory environment
■ Traceability
■ Manufacturers
(branded and contract)
- beverage
- dairy
- bakery
- snack food/convenience
- confectionery
■ Retailers
■ Food service operators
■ PROMITOR™ dietary fibres
■ KRYSTAR® crystalline fructose
■ STA-Lite® polydextrose
■ SPLENDA® Sucralose
■ Value added starches, e.g.
STA-Slim™, TENDERJEL®, Merigel,
ResistamyI and FREEZIST®
■ Food stabilising systems,
e.g. Hamulsion® and Frimulsion®
Retail brands:
■ Lyle’s Golden Syrup
■ Branded retail sugars
- Tate & Lyle/Tate & Lyle
Fairtrade (UK)
- Sidul/Sores (Portugal)
Services:
■ CREATE® – innovations in shape,
structure, taste and texture
■ OPTIMIZE® – maximising
efficiency and value
■ REBALANCE® – reformulating
to lower-fat, lower-sugar and
lower-calorie positions
■ ENRICH® – enhancing
nutritional benefits of foods
and beverages
■ High fructose corn syrup
■ Corn syrup/glucose
■ Citric acid
■ Pearl starch
■ Corn oil
■ Industrial sugars
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PROMITOR™ fibres
HFCS/isoglucose
SPLENDA® Sucralose
30
Tate & Lyle Annual Report 2008
Industrial
Animal feed
Personal care and
pharmaceuticals
■ Increased awareness of green
issues/environmental footprint
■ Replacement of plastics/
petrochemicals
■ High nutrient digestibility/
nutrient efficiency
■ Animal health
■ Replacement of petrochemicals/
preference for ‘natural’ products
■ Increased awareness of petrochemical
■ Rising cereal costs (global) putting
■ Pricing awareness but willingness
vs. renewable options
pressure on feed costs
■ Rising cost consciousness (increasing
raw material prices)
to pay for functionality
■ Natural product claims
(personal care)
■ Manufacturers
- paper
- detergent
- packaging/
plastics
- adhesives
- de-icing
- textiles
- building products
■ Producers
- dairy
- beef
- pig
- poultry
- aquaculture
- pet
■ Manufacturers
- cosmetics and personal care
(hand creams, deodorants)
- over-the-counter (OTC)
pharmaceuticals
■ Oil-well drilling
■ Fuel suppliers
■ ETHYLEX® paper starch
■ STA-LOK® cationic starches
■ STADEX® dextrin
■ STARPOL® water soluble polymers
■ StaZan X™ industrial xanthan gums
■ Susterra™ industrial grade Bio-PDO™
■ Zemea™ personal care grade
Bio-PDO™
■ SPLENDA® Sucralose
■ Pearl starches
■ Ethanol
■ Citric acid
■ Molasses
■ Corn gluten feed
■ Corn gluten meal
■ Corn syrup/glucose
■ Sugar
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Biofuel
Corn gluten feed
Bio-PDO™
Tate & Lyle Annual Report 2008
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What we do
People
Running a diverse business like Tate & Lyle, which
develops, manufactures and sells a huge variety of
products and services to customers in different markets
across the world, relies on a team of highly skilled,
motivated people from a wide range of disciplines.
Working across
the world
The pie chart below shows the split of
employees between our four divisions.1
Sucralose
4%
Food & Industrial
Ingredients, Americas
39%
Sugars
22%
At 31 March 2008, Tate & Lyle employed 6,488 people in its subsidiaries
and joint ventures. Our workforce encompasses a broad range of skills and
experience in areas such as food science, sales and marketing, engineering
and business support services.
Talent management
It is a key objective for the Group to attract and retain top-quality recruits,
and to ensure that our employees develop and grow in their roles and meet
new challenges as their careers progress. To help achieve these objectives,
we have developed and are implementing ‘The Tate & Lyle People Strategy’.
This consists of four main components:
Food & Industrial
Ingredients, Europe
35%
1 For the continuing operations as at 31 March 2008
■ Behaviours for Success – these encourage our people to display
strong leadership at all stages of seniority by exhibiting identified key
characteristics and behaviours we need for success, such as a focus
on excellent customer service.
■ Talent Management – a system which addresses key business issues
such as succession planning and filling development gaps to ensure
we have the right skills to grow the Group at all levels.
■ Leadership Curriculum – this provides opportunities for all managers
across the Group to improve their skills and expand their knowledge
through a number of tailored programmes, seminars and courses.
■ Graduate Development – a Group-wide graduate recruitment and
development programme to attract and develop top talent and prepare
them for key roles across the Group.
Our remuneration policies are designed to attract, retain and reward employees
of the highest calibre and experience to help execute the Group’s strategy.
32
Tate & Lyle Annual Report 2008
“ Working with talented
people across diverse
business functions – from
R&D to logistics – both in
the USA and internationally,
is stimulating and hugely
rewarding.”
Mark Wenda, Vice President Sales
and Marketing, Sweeteners, Americas
Decatur, USA
Year started: 1991
Heading Heading
“ Due to our network of plants
worldwide, opportunities
exist within Tate & Lyle to
develop professionally and
gain experience across a
range of engineering and
science-related disciplines.”
Marvin Wiederhold, Operations
Manager, Sagamore, USA
Year started: 1990
“ Since joining as a graduate,
support from peers and
encouragement to take on
responsibility has meant that
my career has developed
significantly in just five years.”
Michelle Kozora, Food Scientist,
Technical Services, Decatur, USA
Year started: 2003
Tate & Lyle Annual Report 2008
“ Promotion through the ranks,
from window clerk 12 years ago,
means I have a solid understanding
of how distribution fits our strategy
and adds value to the business.”
Gary Copeland, Industrial Distribution
Manager, Sugars, London, UK
Year started: 1996
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What we do
External environment
and risk factors
Every business needs to be responsive to its
competitive and regulatory environments. Understanding
the issues that could have an impact on our business
is vital for good risk management and long-term
commercial success.
External environment
Competition
The starch industry is concentrated around a small number of large participants
who operate in many different application areas, including food, beverage,
paper and pharmaceuticals. The USA accounts for over half of global starch
production. Our main competitors in the USA for corn wet milling and starch-
based products are Archer Daniels Midland Company, Corn Products
International and Cargill. National Starch (part of Akzo Nobel N.V.) is another
significant competitor in the USA, particularly in relation to some higher-value
modified food and industrial starches, as is Penford Corporation in the North
American paper starch industry. In Europe, our main competitors in the
starch industry are Cargill, Syral (part of Tereos) and Roquette Frères.
Competition for our European sugar business comes mainly from British Sugar
(a subsidiary of Associated British Foods plc), Südzucker, Nordzucker and
Tereos. The main competitors for our global food ingredients business are
Cargill, Danisco, Kerry and National Starch.
Governmental regulation
Some of the markets in which Tate & Lyle operates are subject to significant
influence from legislation or regulation. The main regulatory development related
to the reform of the EU sugar regime. More information on the impact of this
reform on the Group is given in the Chief Executive’s review on page 9 and in
the operating and financial review on pages 41 to 56.
Risk factors
Tate & Lyle may be affected by a number of risks, not all of which are within our
control. Outlined on pages 35 and 36 is a description of some of the risk factors
that may affect our business and share price. Other factors besides those listed
below may also adversely affect the Group. The process Tate & Lyle has in place
for managing these risks is described in the corporate governance report on page 66.
There are inherent risks and uncertainties behind all the forward-looking
statements contained in this annual report, which could have a material impact
on future results. Along with those discussed in the operating and financial
review, the following section contains our perception of particular important risks
and uncertainties facing the Group. These risks could have a material adverse
effect on our business. Our overall success as a global business depends,
in part, upon our ability to succeed in different economic, social and political
environments and to manage and to mitigate these risks.
34
Tate & Lyle Annual Report 2008
Failure to act safely could have a detrimental impact on Tate & Lyle’s operations
The safety of our employees, contractors, suppliers, the communities in which
we operate and the consumers of our products, is of paramount importance for
Tate & Lyle. Around the world, the Group is subject to laws, regulations, rules
and ordinances relating to health, safety and the environment, including pollution.
The Group recognises the negative impacts that could arise from a major
safety or environmental incident, which include:
■ fines or penalties for breach of safety laws;
■ interruptions in operations or loss of licence to operate;
■ liability payments and costs to employees or third parties arising
from injury or damage; and
■ damage to reputation.
Our success depends upon our employees and the recruitment
and retention of key personnel
Central to the success of Tate & Lyle’s growth strategy is the performance,
knowledge and skill-sets of our employees around the world. We recognise
the need to attract, integrate and retain the talent required to fulfil our ambitions
and understand the negative impact on results that could arise from an inability
to retain key knowledge and adequately plan succession.
Non-compliance with legislation can lead to financial and reputational damage
The Group is aware of the importance of complying with all applicable legislation
affecting its business activities and of the potential damage to reputation and
financial impact that can result from any breach.
Fluctuations in prices and availability of raw material, energy,
freight and other operating inputs may affect our margins
All of our finished products are derived from renewable agricultural raw materials.
All of these materials are subject to fluctuations in price due to factors such as
harvest and weather conditions, crop disease, crop yields, alternative crops and
by-product values. Energy usage in our production facilities represents one of our
main production costs. In some cases, due to the basis for pricing in our sales
contracts, or due to competitive markets, we may not be able to pass on to
our customers the full amount of raw material price increases or higher energy,
freight or other operating costs and this could reduce our profitability.
Tate & Lyle relies on the continued safe operation and the sufficiency
of our geographically dispersed manufacturing facilities
The Group’s revenues are dependent on the continued operation of our various
manufacturing facilities and the consistent production of finished products that
meet our customers’ specifications. The operation of our plants involves many
risks, including the failure or sub-standard performance of equipment, the improper
installation or operation of equipment, natural disasters and potential product
contamination. Any significant manufacturing disruptions or product contamination
could adversely affect our ability to make and sell our products, which could
cause our sales and operating profits to decline.
Competitors may achieve significant competitive advantage through
technological step change or higher service levels
If our competitors were able to identify, develop and introduce on a commercial
basis a major technological step change, such as significantly improving the
efficiency of the production process and lowering costs or introducing a new
product with better functionality, we may not be able to introduce a comparable
change. Similarly, we must ensure we at least match or exceed competitors’
service and quality performance. If we cannot compete effectively with such
innovation or service levels, our sales and profitability could decline.
Tate & Lyle Annual Report 2008
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What we do External environment and risk factors
We may not be able to protect our intellectual property
Our commercial success depends, in part, on obtaining and maintaining patent
protection on certain of our products and successfully defending these patents
against third-party challenge or infringements. Others may independently develop
technologies similar to ours or independently duplicate our technologies. Our patents
may expire or remain in existence for only a short period following commercialisation.
This would reduce or eliminate any advantage of the patents. We may face litigation
to assert claims of infringement, enforce our patents, protect our trade secrets or
know-how, or determine the scope and validity of the proprietary rights of others.
We may be unable to enforce our patents or otherwise protect our proprietary rights,
which could have a material adverse effect on our business, financial condition
and results of operations.
The commoditisation of products or a failure to achieve appropriate
margins could lead to greater price volatility
The natural life cycle of many products means that products that currently generate
higher margins could become commoditised in the future. Equally, a failure to
recognise the true value that the market places on our products may mean that
we do not sell at the appropriate price and fail to achieve their full profitability.
Failure to manage capital expenditure and working capital during a period
when external credit markets are distressed
The Group recognises the importance of managing its finances within strictly
controlled parameters, particularly when external financial conditions are uncertain
and highly changeable.
Failure to maintain an effective system of internal financial controls
could lead to financial irregularities and loss
Without effective internal financial controls, the Company could be exposed to
financial irregularities and losses from acts, which could have a significant impact
on the ability of the business to operate. This covers a variety of areas ranging
from safeguarding the assets of the business to the accuracy and reliability of its
records and financial reporting.
As a public company Tate & Lyle must enunciate a clear strategic vision
as well as provide accurate and timely information to the market to deliver
long-term shareholder value
The share price on the stock market is based on the expectations of a wide
variety of market participants such as analysts, brokers, investment funds and
other investors. Media stories or rumours can influence these expectations. Failure
to maintain a clear vision of the future business strategy, failure to provide accurate
and timely information, failure to meet Group targets, or failure to respond in an
appropriate way could lead to uncertainty and volatility in the share price and
the erosion of shareholder value.
Exchange rate fluctuations could create earnings and balance sheet volatility
The Group operates in many different countries and is subject to currency
fluctuations arising on transactional foreign currency exposures and the translation
of overseas subsidiaries’ results. For example, a weakening of the US dollar and
euro against sterling would have a negative impact on the sterling reported net
assets and shareholders’ funds.
Failure to identify important consumer trends and/or counter negative
perceptions of the Group’s products
We recognise the risks associated with falling behind the curve where emerging
dietary trends are concerned, as well as not being fully prepared to counter
unexpected and unfounded negative publicity in relation to our product offering.
36
Tate & Lyle Annual Report 2008
This section shows how we measure our
performance, and sets out the results of
the Group and the financial and operational
performance of each division for the year
ended 31 March 2008.
How we performed
38 Our operations
40 Key performance indicators
41 Operating and financial review
41 Group results
44 Divisional performance
52 Other financial information
Product ready to be delivered to customers, Lafayette, Indiana, USA
Tate & Lyle Annual Report 2008
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How we performed
Our operations
Tate & Lyle has more than 50 production facilities across
the world. Headquartered in London, UK, Tate & Lyle
operates through four business divisions:
• Food & Industrial Ingredients, Americas
• Food & Industrial Ingredients, Europe
• Sugars
• Sucralose
The locations of the main production and
blending facilities (including the main joint
ventures) for each of our four divisions are
set out on the map opposite.
Research and Development
Our main Research and Development
centre is in Decatur, Illinois. This is
supported by centres in Europe such as
in Lille, France, and Lübeck, Germany.
In countries such as China, India and
Australia, we also have application
laboratories, which are combined
with sales offices.
• Research and Development
H oulton, M aine
S ucro miles, C olo m bia
Alm ex,
M exico
Tennessee
D u P ont Tate & Lyle Bio Pro ducts, Loud on,
G.C. H ahn & C o.,
Pleasant Prairie,
W isconsin
S aga m ore, Indiana
Lafayette, Indiana
D ayton, O hio
Loud on, Tennessee
M cIntosh, Alaba m a
D uluth, Minnesota
(under construction)
Fort D o d ge, Io w a
Syca m ore, Illinois
D ecatur, Illinois
Van B uren, Arkansas
B uenos Aires, Argentina
S anta R osa, Brazil
38
Tate & Lyle Annual Report 2008
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G.C. H ahn & C o., St. P etersburg, R ussia
G.C. H ahn & C o., M old, U K
K oog an der Zaan, The N etherlands
G.C. H ahn & C o., Lübeck, G er m any
Plaisto w, U K
Tha m es, U K
Szabadegyháza, H ungary
Tirgu S ecuiesc, R o m ania
R azgrad, B ulgaria
B oleráz, Slovakia
Lille, France
A dana, Turkey
Milan, Italy
B erga m o, Italy
H aifa, Israel
Thessaloniki, Greece
N oto, Sicily
Lisb on,
P ortugal
C asablanca,
M orocco
Johannesburg, S outh Africa
Tate & Lyle Annual Report 2008
S hanghai, C hina
M u m bai, India
N ghe A n, Vietna m
Orsan, C hina
Jurong, Singap ore
G.C. H ahn & C o.,
Brisbane, A ustralia
M elb ourne, A ustralia
How we performed
Key performance indicators
Tate & Lyle’s Board and executive
management (see pages 58 to 60)
monitor a range of financial and
non-financial performance indicators,
reported on a periodic basis, to
measure the Group’s performance
over time. Annual targets are set for
these key performance indicators
(KPIs) in line with the Company’s
strategic objectives.
Interest cover1
Net debt to EBITDA multiple 1
Target
2008
2007
2006
min 5.0 times
Target
max 2.5 times
8.1 times
10.1 times
9.9 times
2008
2007
2006
2.4 times
1.9 times
1.9 times
1 Measured by financial year on
total operations
1 Measured by financial year on
total operations
Description
This is the Group’s total operating profit
before exceptional items and amortisation
divided by the net finance expense.
Or, the number of times the profit of the
Group exceeds the interest payments
made to service its debt.
Comment on performance
Our interest cover remains strong,
underpinning our investments in future
growth and our dividend policy.
Description
This is a measure of the number of
times the Group’s net borrowings exceed
our trading cash flow. EBITDA is profit
before exceptional items, interest, tax,
depreciation and total amortisation.
Comment on performance
Our target provides a margin of protection
compared to the bank covenant we
usually give. We continue to remain within
our target and comfortably within that of
our bank covenants.
Return on net operating assets1
Energy reduction1
Safety index1
Target (longer-term)
2008
2007
2006
20.0%
15.5%
18.9%
18.9%
Target
2007
2006
2005
3.0%
1.3%
1.2%
3.6%
Target
2007
2006
2005
1 Measured by financial year on
1 Measured by calendar year
1 Measured by calendar year
zero
2.08
2.41
1.72
total operations
Description
This is the Group’s profit before interest,
tax and exceptional items divided by the
average net operating assets.
Comment on performance
We are ahead of our initial target of a
Group return on net operating assets
(RONOA) of 15%. As explained in the
Chief Executive’s Review on pages 6 to 9,
our longer-term target is a Group RONOA
of 20%.
Description
Energy use is our most significant
environmental impact. Our businesses
have a target to reduce energy
consumption on a per unit basis by
3% per year. More details are on page 71.
Comment on performance
Our 3% target is becoming increasingly
challenging as value added products use
more energy than our traditional products.
Our new biomass boilers being built in
the USA and UK will help reduce energy
consumption and our carbon footprint.
Description
Our safety index compares safety
performance across the Group and is
a weighted average of injuries sustained in
the workplace, with more severe incidents
having greater impact. A decrease in the
index reflects improved performance.
Comment on performance
Many of our sites achieved world-class
safety performance during the year, and
we are pleased we improved on last
year’s performance. Further information
can be found on page 68.
40
Tate & Lyle Annual Report 2008
Operating and financial review
Summary of Group financial results
Year to
31 March
2008
£m
Year to
31 March
2007
£m
Actual
change
%
Constant
currency
change
%
Continuing operations
Sales
Adjusted operating profit
Net finance expense
Profit before tax, exceptional items and amortisation
Exceptional items
Amortisation of acquired intangibles
Profit before tax
Income tax expense
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
Earnings per share
Basic
Diluted
3 424
3 225
286
(42)
244
(59)
(12)
173
(76)
97
90
187
311
(36)
275
(13)
(9)
253
(88)
165
52
217
40.9p
40.4p
44.3p
43.6p
Adjusted earnings per share from continuing operations
Basic
Diluted
33.1p
32.7p
38.1p
37.5p
6
(8)
(11)
(32)
(41)
(14)
(8)
(7)
(13)
(13)
10
(4)
(7)
(26)
(35)
(8)
(3)
(3)
(9)
(8)
Dividends per share
Interim paid
Final proposed
Net debt
At 31 March
Tate & Lyle Annual Report 2008
6.5p
16.1p
22.6p
6.2p
15.3p
21.5p
5
n/a
1 041
900
16
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How we performed Operating and financial review
Basis of preparation
Adjusted performance
Adjusted profit is presented as it provides both
management and investors with valuable additional
information on the performance of the business.
The following items are excluded from adjusted profit:
■ results of discontinued operations, including gains and
losses on disposal (Note 12 to the financial statements);
■ exceptional items from continuing operations (Note 8 to
the financial statements); and
■ amortisation of acquired intangibles.
This adjusted information is used by management
internally for analysing the performance of the business.
A reconciliation of reported and adjusted information is
included in Note 44 to the financial statements.
Summary of Group performance
Sales of £3,424 million from continuing operations
were 6% higher (10% in constant currency). Growth
was reported in all divisions other than Sugars, which saw
reduced sales in its international sugar trading business.
The acquisition of G.C. HAHN & Co. (Hahn) contributed
sales of £60 million.
Despite the reduction in our international sugar trading
business, primary sales increased by 3% (7% in constant
currency) to £2,622 million, with strong performances
in our Americas and retained European ingredients
businesses and our sugar refining operations. Value added
sales increased by 16% (20% in constant currency) to
£802 million, again driven by our Food & Industrial
Ingredients businesses which benefited from the
acquisition of Hahn.
Overall adjusted operating profit decreased by 8% to
£286 million (4% in constant currency) as we incurred
losses of £9 million in our international sugar trading
operations. Value added operating profit increased
by 1% to £160 million (3% in constant currency),
and primary operating profit decreased by 16% (12%
in constant currency) to £157 million. Central costs
decreased from £35 million to £31 million in the year.
Exceptional items from continuing operations amounted
to a net loss before tax of £59 million (2007 – loss of
£13 million). Following the disposal of five of the European
starch plants, and the closure of the Aalst head office, the
significant reduction in central support functions required
by the retained Food & Industrial Ingredients, Europe
business resulted in an exceptional restructuring charge of
£30 million comprising redundancy and other restructuring
costs. We have also recognised an impairment of
£12 million to our citric acid business as a result of industry
oversupply and Chinese competition and an impairment of
£17 million to our Orsan monosodium glutamate business
in China, as we do not expect profit recovery in the near
term due to uncertain market conditions. After minority
interests of £10 million, the charge against profit for the
year attributable to equity holders of the Company in
respect of the Orsan impairment is £7 million.
Impact of changes in exchange rates
Our results have been negatively impacted this year
by exchange rate translation, in particular due to the
weakening of the US dollar against sterling. This was
partially offset by the strengthening of the euro against
sterling. Exchange rates used to translate reported
results were as follows:
US dollar: sterling
Euro: sterling
Average rates
Closing rates
2008
2.01
1.42
2007
1.89
1.48
2008
1.99
1.26
2007
1.97
1.47
Constant currency comparisons in this review have
been calculated by translating underlying currencies for
the prior year at the average rates for the current year.
Constant currency comparisons provide an insight into the
movements in sales and cost levels driven by the real local
changes, demonstrating underlying profitability progression
of the business.
Central costs
Previously the Group’s central costs were allocated to
the segments. Central costs are no longer allocated and
are presented separately and the comparative segmental
information has been reclassified.
Primary and value added products
Value added products are those that utilise technology
or intellectual property, enabling our customers to produce
distinctive products and us to obtain a price premium
and/or sustainable higher margins.
Other products from our commodity corn milling and
sugars businesses are classified as primary.
42
Tate & Lyle Annual Report 2008
Amortisation of acquired intangibles increased to
£12 million from £9 million in 2007, reflecting the
acquisition of Hahn in the first half of the financial year.
The net finance expense from continuing operations
increased from £36 million to £42 million as a result of
the increase in average net debt. Net debt increased
to accommodate our capital expenditure, acquisition
and share buy back programmes and working capital
requirements, the latter of which were driven primarily
by increasing raw material costs.
Profit before tax from continuing operations on a statutory
basis decreased by 32% (26% in constant currency) from
£253 million to £173 million.
The effective rate of tax on adjusted profit was 34.4%
(2007 – 32.0%). The increase was due mainly to the
increased levels of profits in the USA and the full
consequences of the disposal of five of our European
starch plants, and the associated single billing entity,
with their tax losses.
Discontinued operations comprising our former activities
in sugar processing in Canada and Mexico, and our
Eastern Sugar business and the five disposed starch
plants in Europe, reported profit after tax of £90 million
including exceptional items.
Total diluted earnings per share were 40.4p, down 7%
from 43.6p in the prior year. Total basic earnings per share
were 40.9p, down 8%. Diluted earnings per share from
continuing operations adjusted to exclude exceptional
items and amortisation of acquired intangibles were 32.7p,
a reduction of 13%. On the same basis, basic earnings
per share of 33.1p also reduced by 13%.
Divisional/primary and value added performance
Division
Food & Industrial
Ingredients, Americas
Food & Industrial
Ingredients, Europe
Sugars
Sucralose
Central
Continuing operations
Sales
Adjusted operating profit
2008
£m
2007
£m
Movement1
%
2008
£m
2007
£m
Movement1
%
1 386
1 255
461
305
1 429
1 518
148
–
147
–
3 424
3 225
17
44
(2)
6
–
10
186
175
41
24
66
(31)
286
40
60
71
(35)
311
13
(1)
(59)
(3)
12
(4)
1 On a constant currency basis (adjusting 2007 reported figures using 2008 exchange rates)
Primary
Value added
Central
Continuing operations
Sales
Adjusted operating profit
2008
£m
2007
£m
Movement1
%
2 622
2 535
802
–
690
–
3 424
3 225
7
20
–
10
2008
£m
157
160
(31)
286
2007
£m
187
159
(35)
311
Movement1
%
(12)
3
12
(4)
1 On a constant currency basis (adjusting 2007 reported figures using 2008 exchange rates)
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Tate & Lyle Annual Report 2008
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43
How we performed Operating and financial review
Food & Industrial Ingredients, Americas
Sales
Food
Industrial
Operating profit
Food
Industrial
Margin
Food
Industrial
Total
Year to 31 March 2008
Year to 31 March 2007
Primary
£m
651
309
960
76
42
118
Value
added
£m
293
133
426
68
–
68
Total
£m
Primary
£m
944
442
1 386
144
42
186
543
315
858
61
43
104
Value
added
£m
277
120
397
70
1
71
11.7%
13.6%
12.3%
23.2%
–
16.0%
15.3%
9.5%
13.4%
11.2%
13.7%
12.1%
25.3%
0.8%
17.9%
Total
£m
820
435
1 255
131
44
175
16.0%
10.1%
13.9%
Products and services
Cereal sweeteners and starches
Proteins
Acidulants
Biogums
Ethanol
Bio-PDO™
Blending
Blending facilities
2 USA
1 Mexico
Processes and raw materials
Corn (maize) milling
Cereal sweetener, sugar
or molasses fermentation
Main joint ventures
Almex
Cereal sweeteners and starches
DuPont Tate & Lyle BioProducts
Bio-PDO™
Sucromiles
Citric acid and alco-chemicals
Plants (excluding joint ventures)
9 USA (including 1 under construction)
1 South America
Markets
The US corn wet milling industry has been operating at or
close to capacity since 2004. This is expected to continue
due to the growing demand for ethanol and the opening
of the market for US exports of high fructose corn syrup
(HFCS) to Mexico. Corn prices, together with most
agricultural commodities, have increased to unprecedented
levels. Corn gluten feed values have also risen, but the
price increase has been limited by additional tonnage of
distillers dried grain from the numerous dry mill ethanol
plants coming on stream.
Ethanol demand in the USA has been stimulated by the
enactment of the Energy Independence and Security Act
of 2007, requiring greater renewable fuel use, although
prices have decreased from the peaks seen in 2007.
The market for citric acid has been characterised by
oversupply, continued Chinese competition, and further
devaluation of the US dollar in key regional markets.
Performance
Food & Industrial Ingredients, Americas enjoyed another
exceptional year. Sales of £1,386 million were 10% higher
than the prior year (17% in constant currency). Operating
profit, which accounts for almost 60% of the Group’s
adjusted operating profit before central costs, increased
by 6% to £186 million (13% in constant currency).
In primary products, sales were 12% higher (19% in
constant currency) and profits were 13% higher (24% in
constant currency). US sweetener and industrial starch
volumes were largely in line with the prior year, and sales
and by-product price increases more than covered higher
input costs. As expected, ethanol profits were lower
primarily due to higher corn costs.
Citric acid profits were in line with the prior year despite
industry oversupply, continued Chinese competition, and
further devaluation of the US dollar in key regional markets.
Our current assessment of this business has resulted
44
Tate & Lyle Annual Report 2008
in an exceptional impairment charge of £12 million.
Anti-dumping actions have been initiated against Chinese
producers by European and US producers. The closure
of the Selby, UK, facility, announced last year, was
successfully completed, and the site was sold.
Value added food ingredients achieved robust volume
growth following the completion of the capital project at
the plant in Sagamore, Indiana, during the year with sales
up by 6% (12% in constant currency). Start-up costs and
fixed costs were incurred following commissioning in
October. Performance at Custom Ingredients was ahead
of the prior year, despite a difficult year for the US dairy
industry as dairy prices were pushed to record levels by
higher fuel and corn prices. Value added food profits were
down 3% (nil in constant currency). However, following a
review of central costs, various tasks and the associated
costs were delegated to the appropriate divisions. During
the year, £5 million of costs were incurred to Food &
Industrial Ingredients, Americas and the vast majority
was within value added food. Accordingly, underlying
profit growth from value added food was 4% (8% in
constant currency), reflecting improved pricing and
better product mix.
Value added industrial starch volumes were similar to
the prior year but price increases more than covered
input cost increases.
The Bio-PDO™ joint venture plant in Loudon, Tennessee,
continued to operate well during the year. Market-proving
activities continue to be undertaken with Bio-PDO™ sales
across several categories including for polymerisation for
clothing and carpets, and for direct applications in
cosmetics, deodorants and as de-icing fluid. While the
global customer base for Bio-PDO™ continues to broaden,
as expected, the business incurred a modest loss, similar in
size to the prior year, in its first full year of operation.
On 31 October 2007, we completed the separation from
our Astaxanthin joint venture with Igene Biotechnology, Inc.
The manufacturing facility was closed and included in the
sale of the Selby site.
Corn prices increased significantly in the second half of
the year, driven by strong demand from China and as a
raw material for ethanol, and this affected all product
categories. Corn costs are hedged either by physical
purchases, or on futures markets at the point of
contracting with the customer, or are for the customer’s
account in the case of toll contracts. It is only possible
to hedge some by-product prices, which mostly increase
when corn and soy meal prices increase. As both corn
and soy meal prices rose following the annual contracting
round, which this year was largely completed in October
2007, we received a benefit from this subsequent increase
in soft commodity prices.
Manufacturing costs rose due to increased energy and
process ingredient costs, and higher depreciation costs
from the large capital projects which came on stream.
Tate & Lyle Annual Report 2008
Selling, general and administrative costs were impacted
by additional research project expenses and increased
allocation of support costs following the disposal of
our sugar assets in North America.
The sale of an investment in the Chicago Mercantile
Exchange contributed a one-off profit of £4 million.
Looking forward
The capacity expansion of the Sagamore, Indiana, plant
to produce value added food ingredients was completed
in September 2007 and the expansion in Loudon,
Tennessee, to produce ethanol, value added ingredients
and substrate for the Bio-PDO™ plant, is essentially
complete. Construction of the greenfield corn wet mill in
Fort Dodge, Iowa, is progressing well and is on track for
mechanical completion by March 2009. Its completion
will enable a reconfiguration of finishing capacities in the
USA to optimise production, particularly at the Sagamore
plant, which will now focus predominantly on value added
food ingredients. These major capital projects will increase
production and will play a significant role in maximising
operational efficiencies. Moreover, innovative CORNBELT®
technology associated with the Fort Dodge and Loudon
projects will greatly lower overall costs and reduce
Tate & Lyle’s carbon footprint.
Growth prospects are encouraging as we remain focused
on, and have invested in new capacity for the production
of, value added food ingredients which satisfy consumer
trends for food products with nutritional benefits.
Net corn prices have recently reached record highs on
the back of strong global demand and the fundamentals
seem likely to support continuing high prices for corn
and its by-products. The differential between corn-based
HFCS and its substitute, sugar, will be an important factor
at the time of the negotiations at the end of the calendar
year. At current corn and sugar prices, we would expect to
be able to maintain satisfactory headroom for HFCS below
the price of sugar without compromising margins. We have
some multi-year agreements, which means that not every
contract is negotiated annually.
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How we performed Operating and financial review
Food & Industrial Ingredients, Europe
Sales
Food
Industrial
Operating profit
Food
Industrial
Margin
Food
Industrial
Total
Year to 31 March 2008
Year to 31 March 2007
Primary
£m
168
138
306
14
6
20
Value
added
£m
155
–
155
21
–
21
Total
£m
323
138
461
35
6
41
Primary
£m
Value
added
£m
139
92
231
27
3
30
74
–
74
10
–
10
Total
£m
213
92
305
37
3
40
8.3%
4.3%
6.5%
13.5%
–
13.5%
10.8%
4.3%
8.9%
19.4%
3.3%
13.0%
13.5%
–
13.5%
17.4%
3.3%
13.1%
Products and services
Cereal sweeteners and starches
Biogums
Blending
Plants (excluding joint ventures)
3 EU
1 Morocco
Blending facilities
1 Australia
4 EU
1 South Africa
1 USA
Processes and raw materials
Corn (maize) milling
Main joint ventures
Eaststarch
Cereal sweeteners and starches
Hungrana (part of Eaststarch)
Cereal sweeteners and starches,
and potable alcohol
Orsan Guangzhou Gourmet
Powder Co.
Glutamate (flavour enhancer) producer
Markets
The European market for starch-based food and
industrial ingredients is characterised by being relatively
concentrated with three companies accounting for some
two-thirds of the total market. Following the completion
on 1 October 2007 of the disposal of five of our starch
plants, we have concentrated our production activities
in Central and Eastern Europe where we are the market
leader through our Eaststarch joint venture.
The industry was adversely affected during the year by
the steep rise in raw material costs arising from the poor
2007 harvest (following a dry winter and a summer
drought), compounded by rising world prices due to
increased demand for biofuels. The linking of the price of
liquid sweeteners to the sugar price in Europe has limited
the ability to pass through these cost increases to customers.
The reform of the EU sugar regime continued, with further
surrender of production quotas in early 2008 (see page 9
for further information).
Performance
On 1 October 2007, five of our plants, including the
four that process wheat, were sold and these are treated
as discontinued and excluded from the results for the
continuing businesses as shown in the table above.
The former divisional head office and single billing entity in
Aalst, Belgium, was closed and a new centre established
in Slovakia, with associated changes to systems, staffing
and management. This relocation was achieved without
major disruption to the business. This division now comprises:
the wholly owned speciality starch plant in Koog, The
Netherlands; small facilities in Greece (scheduled for closure
in September 2008) and Morocco; five joint venture plants
in Central and Eastern Europe; our speciality food ingredient
operations Cesalpinia, G.C. HAHN & Co. (Hahn) and
Tate & Lyle South Africa; and Orsan, the monosodium
glutamate operation in China.
46
Tate & Lyle Annual Report 2008
On 15 June 2007, we acquired an 80% holding in
Hahn strengthening our value added offering through
its leadership position in dairy and convenience food
stabiliser systems, and complementing our activities
in Cesalpinia, South Africa and the USA. Hahn is based
in Germany and also has manufacturing operations in
the UK and Australia and sales offices in 22 countries.
Sales from the continuing operations at £461 million
increased by 51% (44% in constant currency) over the
prior year, reflecting expansions in the Hungarian and
Bulgarian joint ventures and a £60 million initial contribution
from Hahn. Raw material price increases following the
2006 harvest were largely passed through to customers,
but only partially following the unprecedented increases
after the 2007 harvest.
The continuing operations contributed £41 million of
operating profit, 13% of the Group’s adjusted operating
profit before central costs, an increase of 3% (reduction
of 1% in constant currency).
Primary product sales increased by 32% (28% in constant
currency). Increases in food, mostly isoglucose, although
significant at 21% (19% in constant currency), were capped
by sweetener products performance where prices are
linked to the regulated sugar price in Europe. However,
prices achieved were better than we expected, and in some
cases the discounts to sugar prices were reduced. Volumes
for isoglucose were higher as production quotas were
increased as part of the EU sugar regime reforms, granted
as compensation for the reference price reductions. For
isoglucose, these price reductions affect selling prices
but, unlike sugar, raw material costs are unaffected by
the regulatory changes. Because of the sugar price cap
on sweetener products, we were not able to raise prices
sufficiently to cover higher net raw material costs. Industrial
starch sales increased by 50% (41% in constant currency)
and more than recovered higher input costs.
In value added, sales increased following the addition
of Hahn. Higher raw material costs were passed through
to customers and there was growth in our dry sweetener
ingredient range. Operating profits increased from the initial
£8 million contribution from Hahn and from growth in the
value added starch portfolio. We have invested in a Health
and Wellness Research Centre in Lille, France, to support
the development of new functional starches and fibres.
The applications laboratory will provide technical expertise
for beverage customers in the region and will support the
European speciality sweetener portfolio as well as
SPLENDA® Sucralose.
Raw material costs rose in an unprecedented fashion,
driven both by drought in the key corn-growing areas of
Central and Eastern Europe and by the global fundamentals
of supply and demand. In Europe, the futures markets do
not have sufficient liquidity for us to hedge annual contracts
with customers as we can in the USA. In addition, higher
energy prices increased manufacturing costs during the year.
Tate & Lyle Annual Report 2008
In China, Orsan, the monosodium glutamate producer,
suffered from an over-supplied market with increased
industry capacity coming on stream and a change in
tax incentives discouraging exports. Given uncertainty
as to whether market conditions will recover in the near
term, we recorded an impairment of £17 million as an
exceptional charge. After minority interests of £10 million,
the charge against profit for the year attributable to equity
holders of the Company is £7 million.
Looking forward
The outlook for the second half year is expected to be
significantly influenced by European cereal prices following
the harvest. While it is still too soon to predict with certainty
the outcome of the 2008 harvest, growing conditions have
been good to date, although it is likely that corn prices will
remain high until stocks are rebuilt.
The year ending 31 March 2009 will see the last full year
of payments of our share of the levy on the isoglucose
quota to the EU Restructuring Fund anticipated at
€11 million, with final payments anticipated at €4 million
in the first half of the following financial year.
As previously announced, the facility in Greece will be
closed at the end of September 2008 and the isoglucose
quota surrendered. The isoglucose quota in The Netherlands
will also be surrendered; while continuing to manufacture
starches and glucose, the plant is being developed further
as a location for speciality products.
Sales volumes are expected to grow following the
increases in capacity in the Eaststarch joint venture
facilities. Recent upgrading of the facility in Turkey will
enable the developing European market for crystalline
fructose to be supplied with a high-quality product to
replace chicory-based fructose.
In June 2007, we completed the acquisition of an 80% holding in
German speciality food ingredients group G.C. HAHN & Co.
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How we performed Operating and financial review
Sugars
Sales
Products
Trading
Operating profit
Products
Trading
Margin
Products
Trading
Total
Year to 31 March 2008
Year to 31 March 2007
Primary
£m
572
784
1 356
15
4
19
2.6%
0.5%
1.4%
Value
added
£m
73
–
73
5
–
5
6.8%
–
6.8%
Total
£m
645
784
Primary
£m
461
985
1 429
1 446
20
4
24
3.1%
0.5%
1.7%
25
28
53
5.4%
2.8%
3.7%
Value
added
£m
72
–
72
7
–
7
9.7%
–
9.7%
Total
£m
533
985
1 518
32
28
60
6.0%
2.8%
4.0%
Products and services
Sugars, syrups and molasses
Sugar and ethanol trading,
molasses distribution and blending
and liquid storage
Process technology and engineering
Main consumer brands
Melli
Tate & Lyle
Tate & Lyle Fairtrade
Lyle’s Golden Syrup
Sidul
Sores
Plants (excluding joint ventures)
3 EU
1 Israel
1 Vietnam
Blending facilities
12 global molasses blending facilities
Processes and raw materials
Cane sugar refining
Main joint ventures
Compania de Melazas
Molasses
Premier Molasses Company
Molasses
Markets
Our European sugar business has been operating in
a highly competitive market while the EU sugar regime
undergoes reform (this is described in detail on page 9).
The market is expected to remain very difficult until surplus
stocks are absorbed. However, we expect that market
equilibrium will be restored during the second half of
the Group’s 2009 financial year, which should lead to
progressively firmer refining margins.
There was a significant growth of sales into Italy through
Eridania Tate & Lyle S.A., largely replacing sales previously
made onto the world market. In Portugal, we successfully
introduced continuous working, significantly increasing
capacity to capitalise on the emerging deficit sugar market
in the Iberian Peninsula.
In Vietnam, the market is growing both in line with the
population and the high rate of economic expansion.
Vietnam is broadly self-sufficient in sugar and the market is
balanced, though pricing can be influenced by international
sugar trends.
In the international sugar trading and molasses markets,
a large increase in freight rates and a shortage of available
shipping have seen delivered prices into consumer markets
rise rapidly.
48
Tate & Lyle Annual Report 2008
Performance
During the year, the continuing sugar operations were
merged into one Sugars division. This follows the
completion of the sale of Redpath in Canada on 22 April
2007, the sale of our 49% interest in Occidente in Mexico
on 28 December 2007, and the closure of our Eastern
Sugar joint venture factories. Sugars’ continuing operations
comprise our sugar refining activities in the UK and
Portugal, sugar processing in Vietnam and international
sugar and molasses trading.
Sales of £1,429 million were lower by 6% from £1,518
million in the prior year (2% in constant currency), mostly
driven by lower turnover in international sugar trading.
Operating profit decreased from £60 million to £24 million,
down 60% (59% in constant currency). International sugar
trading produced a very disappointing performance in
the year with a £9 million loss compared with a profit of
£22 million in the prior year. Excluding this, adjusted
operating profit fell from £38 million to £33 million.
Our Trading businesses had a mixed performance,
with overall profits lower than the prior year. The molasses
business performed strongly, benefiting from a sharp
increase in EU animal feed ingredient prices, with demand
for molasses increasing as a result. However, this was
insufficient to compensate for the loss incurred by international
sugar trading, which suffered from increased freight costs
which were hedged in the first half of the year. Brazilian
raw sugar prices were under pressure throughout the year,
reflecting the availability of Indian export sugar in the markets.
India had an unusually large surplus to export from its
harvest, a situation not expected to recur in the coming
year. We have taken the necessary action to restructure
our international sugar trading activities and re-focus
management priorities to ensure this year’s results are
not repeated.
In products (predominantly EU refining), the EU market
remained disrupted by the significant changes brought
about by the reform of the EU sugar regime. The market
suffered excess supply and prices have fallen to a discount
to the regulated reference price. Our UK and Portuguese
refineries performed satisfactorily given these challenging
conditions, with profits falling despite increased sales.
Our EU operations benefited from transitional aid amounting
to £17 million (2007 – £13 million), and made only a small
operating profit after taking this into account.
As discussed in the Chief Executive’s review, the reforms
of the EU sugar market have made significant progress.
There is still surplus sugar to be absorbed by the market
and that will make the market very difficult in the near term.
We were delighted with the reaction to our announcement
that our entire range of UK retail sugars would move to
Fairtrade by the end of the 2009 calendar year.
The operations based at our London refinery achieved
its target of £7 million cost reductions on an annualised
basis ahead of plan and we also implemented operational
efficiency improvements. Two new sugar unloading cranes
were successfully installed at the London refinery. Ongoing
projects include investments to allow increased throughput
at the Lisbon refinery. We have developed new markets
through our association with Eridania Tate & Lyle in Italy.
We are making good progress in securing long-term raw
sugar supplies, both with new suppliers (for example, through
our investment in the Democratic People’s Republic of
Laos) and through new agreements with traditional suppliers
(for example, the announcement after the year end that
we have entered into a long-term agreement for the supply
of up to 300,000 tonnes of raw sugar per year from Fiji).
In Vietnam, despite a hesitant start to the crop caused by
the weather, the current season has gone well with 100,000
tonnes of sugar sold.
Looking forward
We expect improved performance from our trading
businesses, particularly after the action we have taken to
avoid a repetition of the losses in international sugar trading.
The EU market is expected to remain very challenging
in the first half of the year ending 31 March 2009 but
we anticipate an improvement in relative pricing once
equilibrium is restored during the second half of the year.
The most cost-effective model for serving sophisticated
refined sugar markets is through refining raw cane sugar
at full-time, large-scale port-based refineries, such as our
refineries in London and Lisbon. One of the consequences
of the EU sugar regime reforms is the near doubling of
cane sugar imports, which should provide opportunities
for increasing our share once the market has settled.
In celebration of Lyle’s Golden
Syrup’s 125th anniversary, the
iconic tin, with its Victorian design,
got a birthday makeover. For a
limited time, it’s gone gold!
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Tate & Lyle Annual Report 2008
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How we performed Operating and financial review
Sucralose
Sales
Operating profit
Margin
Products and services
SPLENDA® Sucralose
Year to 31 March 2008
Year to 31 March 2007
Primary
£m
–
–
–
Value
added
£m
148
66
44.6%
Total
£m
148
66
44.6%
Primary
£m
–
–
–
Value
added
£m
147
71
48.3%
Total
£m
147
71
48.3%
Plants
1 USA
1 Singapore
Processes and raw materials
Patented sucralose manufacturing
process
Markets
We estimate the value of the global high-intensity sweetener
market at around £1.3 billion. SPLENDA® Sucralose is
currently the global number three high-intensity sweetener,
just behind saccharin whose price has increased by over
three times in the past year following the closure and
expected relocation of a major Chinese producer.
North America remains the most important market for
intense sweeteners, primarily due to its well developed
low-calorie beverage and food sectors. SPLENDA®
Sucralose is the market leader in terms of value in the
North American market and dominates the low-calorie
food segment.
Use of high-intensity sweeteners in Latin America is
considerably less well developed compared with North
America. Sales of SPLENDA® Sucralose in the region
have recently grown substantially.
Sucralose was approved for use in Europe in 2005,
and therefore has had less time to establish itself in
this market. The beverage sector remains a significant
opportunity for growth.
The Asia-Pacific market for high-intensity sweeteners
is the second largest market after North America and
it is presently characterised by the predominant use of
low-cost sweeteners such as saccharin and cyclamate.
This presents an opportunity for positioning SPLENDA®
Sucralose as the high-intensity sweetener of choice for
premium products in these high-growth markets.
Performance
Sales of SPLENDA® Sucralose of £148 million were
1% ahead of the prior year (6% in constant currency).
Operating profit for the year at £66 million was 7% lower
(3% in constant currency). This reflects £6 million
(2007 – £3 million) in costs in pursuit of our patent
infringement action in the United States International
Trade Commission (ITC).
During the year, we have continued to focus on expanding
the business and have seen a 30% increase in new
product launches by our customers as we have continued
to work with them, both in the USA and internationally,
to broaden their pipeline of food and beverage products
using SPLENDA® Sucralose. Strong sales growth was
seen in Latin America, Europe and Asia, while sales in
North America decreased slightly compared with the prior
year during which customers built inventory. In addition,
McNeil Nutritionals, LLC maintained its leadership position
in the tabletop segment of the intense sweetener market
in the USA with SPLENDA® No Calorie Sweetener, and
gained significant market share for the franchise in Latin
America as well. It also launched SPLENDA® No Calorie
Sweetener into the food service channel in China, in
advance of the 2008 Olympic Games in Beijing.
With security of supply from the two production facilities
in McIntosh, Alabama, and Singapore, we believe that
surplus stocks, which had been built up by customers
when there was only the Alabama facility in production,
have now been released.
50
Tate & Lyle Annual Report 2008
The new Singapore facility was commissioned in June
2007 and we now have a fully invested asset base.
A new pilot plant facility was completed and commissioned
at our McIntosh, Alabama, plant, which will facilitate the
implementation of process improvements that have
been demonstrated in the laboratory. This forms part
of our strategy to maintain leadership in sucralose
manufacturing technology.
With the commissioning of the Singapore facility and the
pilot plant at McIntosh, fixed costs were higher, particularly
due to an additional depreciation charge of £13 million.
Unit costs increased as the fixed costs from the two
facilities were spread over a production volume that
increased by only a relatively small amount in the year
when compared with the additional capacity available.
We continued to defend our patents and incurred
US$11 million (£6 million) in costs in pursuit of our patent
infringement action in the ITC. The ITC case now involves
four manufacturers and 18 importers and distributors.
The ITC proceeding alleges infringement of patented
sucralose manufacturing technology in respect of
sucralose manufactured in China and imported into the
USA by the defendants named in the case. The ITC has
the right to exclude products from importation into the
USA that are shown to infringe a US patent. The ITC
hearing was concluded in February 2008, with a preliminary
non-binding decision by the judge currently anticipated
no earlier than June 2008 and the subsequent review and
formal decision by the full ITC Board another four months
after the judge’s decision.
Our suite of patents is one of the elements of our
considerable competitive advantage in the global sucralose
market. Our sucralose manufacturing facilities operate at
a level of cost, efficiency and environmental stewardship
surpassed by none. We can achieve significant economies
of scale as we ramp up our production beyond our current
45% capacity utilisation in the two plants. It is the combination
of our unique technology and intellectual property, built
up over many years, in solving the immense technical
challenges involved in producing sucralose reliably and
with cost-competitive economies of scale that underpin
our position as the world’s leading supplier of sucralose.
This strong competitive position is further enhanced by
our comprehensive applications know-how and service
offering. These factors give us great confidence in the
continued ability of the Sucralose business to make a
significant contribution to the Group’s results.
Looking forward
Sales of SPLENDA® Sucralose are expected to increase
year on year, driven by four primary sources of growth.
Firstly, through the replacement of existing high-intensity
sweeteners (particularly aspartame), not only in value
added food but also in high-volume beverages. Secondly,
there remains a significant opportunity to capitalise on
the unique properties of SPLENDA® Sucralose for partial
replacement of nutritive sweeteners (i.e. sugar and HFCS)
without compromising on taste. Thirdly, food and beverage
manufacturers will continue to innovate in order to meet
both known and perceived consumer needs. Finally, there
also remain significant opportunities for growth outside
the USA, particularly in Latin America and Europe.
Average selling prices should be expected to fall over
time as we widen our customer offering. However, as
sales increase, unit costs of production should also
decline as fixed costs are spread over a wider base.
The SPLENDA® Sucralose business is now fully invested.
While the incremental impact of a first full year of costs
associated with the Singapore facility will restrict profit
growth in the first half year, we expect continued sales
growth to offset these costs and to lead to improved
profits in the full year.
Our new Singapore facility incorporates new technology that
has enabled us to produce a new granular form of SPLENDA®
Sucralose for food customers.
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How we performed Operating and financial review
Other financial information
Central
Central costs, which include head office, treasury and
reinsurance activities, have decreased by £4 million to
£31 million. This decrease reflects a £1 million reduction
in underlying costs. There was a one-off benefit totalling
£7 million from insurance and reallocation of costs to
the divisions offset by costs relating to the re-alignment
of the Group’s management and organisational structure.
Our review of central costs realised savings of about
£3 million in 2008, benefits which should double by 2010.
Exceptional items from continuing operations
£m
Restructuring costs
Citric/Astaxanthin impairment and closure
Orsan impairment
Sucralose deferred payment provision release
Exceptional items
2008
Total
(30)
(12)
(17)
–
(59)
2007
Total
–
(33)
–
20
(13)
Exceptional items from continuing operations comprised
restructuring and relocation charges in respect of our
remaining Food & Industrial Ingredients, Europe operations
amounting to £30 million, and impairment charges in
respect of citric acid and our monosodium glutamate
business in China (Orsan) of £12 million and £17 million,
respectively. Our effective ownership of Orsan is 41% and,
as a result, the impact on profit attributable to shareholders
in respect of that impairment is a charge of £7 million.
Net finance expense
The net finance expense from continuing operations
was £42 million compared with £36 million in the year to
31 March 2007 and was principally due to higher net debt
levels. Completion of other capital expenditure projects
are expected to add a further £8 million to interest in
2009 and an additional £4 million in 2010.
The effective interest rate in the year, calculated as net
finance expense on total operations divided by average
net debt, was 4.9% (2007 – 4.6%). Interest cover based
on total operations was 8.1 times (2007 – 10.1 times) and
for continuing operations was 6.8 times (2007 – 8.6 times).
Taxation
The taxation charge from continuing operations was
£76 million (2007 – £88 million). The effective rate of tax on
adjusted profit was 34.4% (2007 – 32.0%). The increase
was due mainly to the increased levels of profits in the
USA, which are typically taxed at between 37% and 39%,
and higher unrelieved losses in the UK.
An internal financing plan has been implemented, which
is expected to deliver substantial savings. While we are
confident of regulatory clearance, there is a small chance
of a one-off tax cost on implementation. Subject to this,
and the expected geographical mix of profits, we are
targeting a tax rate for the next financial year at the top
end of the 20% range.
Discontinued operations
Discontinued operations comprise our former activities
in sugar processing in Canada and Mexico, our Eastern
Sugar business and the five disposed starch plants in
Europe. Sales for the year amounted to £394 million
(2007 – £845 million), with adjusted operating profits
of £45 million (2007 – £62 million). After finance costs,
income tax expense and gains and losses on disposals,
the contribution to profit for the year was £90 million
(2007 – £52 million).
Earnings per share
Total diluted earnings per share were 40.4p, down 7%
(3% in constant currency) from 43.6p in the prior year.
Total basic earnings per share were 40.9p, down 8%
(3% in constant currency). Diluted earnings per share
from continuing operations adjusted to exclude exceptional
items and amortisation were 32.7p, a reduction of 13%
(8% in constant currency). On the same basis, basic
earnings per share of 33.1p also reduced by 13%
(9% in constant currency).
Dividend
The Board is recommending a final dividend of 16.1p
as an ordinary dividend to be paid on 31 July 2008 to
shareholders on the Register of Members on 4 July 2008.
This represents an increase in the total dividend for the
year of 1.1p per share. An interim dividend of 6.5p
(2007 – 6.2p) was paid on 8 January 2008. Dividend
cover based on total operations was 1.8 times (2007 –
2.1 times) and for continuing operations was 1.0 times
(2007 – 1.6 times).
Net debt
The Group’s net debt increased from £900 million to
£1,041 million. Working capital increases drove down
operating cash generation, while the proceeds from
business disposals were reinvested in the capital
expenditure programme, business acquisitions and returns
to shareholders. Debt is expected to remain close to this
level in the forthcoming financial year. Exchange translation
increased net debt by £32 million.
The ratio of net debt to total earnings before exceptional
items, interest, tax, depreciation and total amortisation
(EBITDA) was 2.4 times (2007 – 1.9 times). During the
year, net debt peaked at £1,041 million in March 2008
(in the prior year, it peaked at £900 million in March 2007).
The average net debt was £845 million, an increase
of £41 million from £804 million in the prior year.
52
Tate & Lyle Annual Report 2008
Cash flow
£m
Adjusted operating cash flow
Depreciation/amortisation
Working capital and other movements
Share based payments
Operating cash flow
Capital expenditure
Operating cash flow less capital expenditure
£m
Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Europe
Sugars
Sucralose
Central
Operating cash flow
Food & Industrial Ingredients, Americas
capital expenditure
Other capital expenditure
Operating cash flow less
capital expenditure
2008
286
103
(270)
7
126
(264)
(138)
2008
195
(45)
(11)
62
(75)
126
2007
311
84
(75)
5
325
(251)
74
2007
159
36
117
31
(18)
325
(150)
(114)
(116)
(135)
(138)
74
Cash inflow from continuing operations was £126 million,
down from £325 million in 2007. The effects on cash
of lower profit before tax of £244 million (compared to
£275 million) were largely offset by higher depreciation
charges. However, outflows from working capital effects
(principally inventory increases in Sucralose and Food &
Industrial Ingredients, Americas and Europe, higher
receivables in Sugars and Food & Industrial Ingredients,
Americas, offset by creditor levels in all divisions except
Sucralose) together with cash spend connected with
restructuring and closure activities resulted in lower cash
generation. Cash inflows in 2008 were improved by the
full receipt of sugar transitional aid of £74 million, which
is being credited to income up to 2011.
Net interest paid totalled £34 million (2007 – £42 million).
Net taxation paid from total operations was £75 million
(2007 – £78 million).
Capital expenditure remained at similar levels to 2007
as capacity expansion projects and the construction of
the new plant at Fort Dodge, Iowa, continued.
Free cash outflow (representing cash generated from
continuing operations after interest, taxation and capital
expenditure) totalled £247 million (2007 – £46 million outflow).
Proceeds from disposals of businesses amounted
to £383 million and £75 million was spent on the
Hahn acquisition.
Tate & Lyle Annual Report 2008
Equity dividends were £105 million (2007 – £98 million).
In total, a net of £139 million (2007 – £140 million) was paid
to providers of finance as dividends and interest. A net
inflow of £8 million was received relating to employees
exercising share options during the year (2007 – £16 million).
Net assets and return on net operating assets
£m
Net operating assets
As at 31 March
Return on net
operating assets
%
2008
2007
2008
2007
Food & Industrial Ingredients,
Americas
836
725
Food & Industrial Ingredients,
Europe
Sugars
Sucralose
Central
288
320
264
27
Total net operating assets 2 017 1 624
489
419
275
43
23
10
6
23
–
16
25
14
17
31
–
19
Other
Net assets held for sale
Net debt
Net assets
(71)
–
210
61
1 991 1 895
1 041
950
900
995
Net assets were £950 million at the year end (2007 –
£995 million). Current assets less current liabilities were
marginally lower at £491 million. Return on net operating
assets was 15.5%, down from 2007 as the performance
in Food & Industrial Ingredients, Americas was offset by
significant declines in Sugars.
Shareholders’ equity
During the year, 33.6 million shares were repurchased for
a total cost of £159 million. Of these shares, 30.3 million
were cancelled and the remainder held in treasury. At the
year end, there were 459.9 million shares in issue.
Funding and liquidity management
The Group manages its exposure to liquidity risk and
ensures maximum flexibility in meeting changing business
needs by maintaining access to a wide range of funding
sources, including capital markets and bank borrowings.
During the year ended 31 March 2008, Tate & Lyle
International Finance PLC arranged a US$1 billion five-year
committed club facility with a core of highly rated banks to
replace certain other committed bank facilities.
Capital market issues outstanding at 31 March 2008
include the US$300 million 6.125% 144A bond maturing in
2011, the £200 million 6.50% bond maturing in 2012, the
US$500 million 5.00% 144A bond maturing in 2014 and
the US$250 million 6.625% 144A bond maturing in 2016.
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53
How we performed Operating and financial review
The Group ensures that it has sufficient undrawn
committed bank facilities to provide liquidity back-up for
its US commercial paper programme and other short-term
money market borrowing for the foreseeable future. The
Group has committed bank facilities of US$1,110 million,
of which US$110 million mature in 2009 and US$1 billion
mature in 2012. These facilities are unsecured and contain
common financial covenants for Tate & Lyle and its subsidiary
companies that the pre-exceptional and amortisation interest
cover ratio should not be less than 2.5 times and the
multiple of net debt to EBITDA, as defined in our financial
covenants, should not be greater than 4.0 times. The Group
monitors compliance against all its financial obligations and
it is Group policy to manage the consolidated balance sheet
so as to operate well within these covenanted restrictions
at all times. The majority of the Group’s borrowings are
raised through the Group treasury company, Tate & Lyle
International Finance PLC, and are then on-lent to the
business units on an arm’s-length basis.
Current Group policy is to ensure that, after subtracting
the total of undrawn committed facilities, no more than
10% of gross debt matures within 12 months and no
more than 35% has a maturity within two-and-a-half years.
At the year end, after subtracting total undrawn committed
facilities, there was no debt maturing within 12 months
or within two-and-a-half years (2007 – none and 25%).
The average maturity of the Group’s gross debt was 5.8
years (2007 – 6.2 years). At the year end, the Group held
cash and cash equivalents of £165 million (2007 – £189
million) and committed facilities of £559 million (2007 –
£312 million), of which £438 million (2007 – £236 million)
were undrawn. These resources are maintained to provide
liquidity back-up and to meet the projected maximum
cash outflow from debt repayment, capital expenditure
and seasonal working capital needs foreseen for at least
a year into the future at any one time.
Capital risk management
The Group’s primary objectives in managing its capital are
to safeguard the business as a going concern; to maintain
sufficient financial flexibility to undertake its investment
plans; to retain as a minimum an investment grade credit
rating that enables consistent access to debt capital
markets, and to optimise capital structure in order to
reduce the cost of capital.
The Group’s financial profile and level of financial risk
are assessed on a regular basis in the light of changes to
the economic conditions, business environment, changes
to the Group’s business profile and the risk characteristics
of its businesses. During the current financial year, in light
of recent disposals, the Group has returned capital to
shareholders through an on-market share repurchase
programme. 33.6 million shares were re-purchased for
a total cost of £159 million, of which 30.3 million were
cancelled and the balance held in treasury. The total number
of shares in issue at 31 March 2008 was 459.9 million. The
share re-purchase programme is calculated to have added
0.3p to earnings per share during the year ended 31 March
2008, after allowing for an estimate of the opportunity cost.
Tate & Lyle has contractual relationships with Moody’s and
Standard and Poor’s (S&P) for the provision of credit ratings.
At 31 March 2008, the long-term credit ratings from these
agencies were Baa2 and BBB respectively (2007 – Baa2
and BBB respectively). It is Group’s policy to keep the
rating agencies informed of all major developments.
As part of the Tate & Lyle’s Board performance monitoring,
it has set two ongoing key performance indicators (KPIs)
to measure the Group’s financial strength. The target levels
for these financial KPIs are that the ratio of net debt/
EBITDA should not exceed 2.5 times and interest cover
should exceed five times. For the year ended 31 March
2008, the ratio of net debt/EBITDA increased to 2.4 times
(2007 – 1.9 times) and interest cover fell to 8.1 times
(2007 – 10.1 times), principally because of the increase
in net debt as a result of the continued high level of capital
expenditure, higher working capital requirements and
implementation of the share buyback programme.
Off balance sheet arrangements
In the ordinary course of business, to manage the Group’s
operations and financing, Tate & Lyle enters into certain
trade guarantees and commitments for capital expenditure
and other expenditure.
The aggregate amount of guarantees of loans of joint
ventures and associates and trade guarantees, on which
no material loss has arisen, was £43 million at 31 March
2008 (2007 – £33 million).
The Group seeks to optimise its financing costs in respect
of all financing transactions. Where it is economically
beneficial, operating leases are undertaken in preference
to purchasing assets. Leases of property, plant and
equipment, where the lessor assumes substantially all the
risks and rewards of ownership, are treated as operating
leases with annual rentals charged to the income
statement over the term of the lease. Commitments under
operating leases to pay rentals in future years totalled
£228 million (2007 – £201 million) and related primarily
to railcar leases in the USA. Rental charges for the year
ended 31 March 2008 in respect of continuing operations
were £21 million (2007 – £27 million).
Post retirement benefits
The Group maintains pension plans for its operations
throughout the world. Some of these arrangements
are defined benefit pension schemes. In the USA, it also
provides retirement medical and life assurance benefits.
Further details are set out on Note 32 of the financial
statements. At 31 March 2008, there was a net deficit
in respect of these arrangements of £91 million
(2007 – £129 million). The liabilities under these
arrangements are valued using actuarial assumptions
under IAS19 ‘Employee Benefits’. There are alternative
54
Tate & Lyle Annual Report 2008
How we performed Operating and financial review
methods of valuation, such as discontinuance (in the event
of an employer’s insolvency) or buyout. Such methods
depend on a range of different assumptions and, in the
case of buyouts, market quotations, based on the
individual scheme’s circumstances.
Financial risk controls
Management of financial risk
The main financial risks faced by the Group are credit risk,
liquidity risk and market risks, which include interest rate
risk, currency risk and certain commodity price risks.
Tate & Lyle also faces risks which are non-financial or non-
quantifiable; these are set out in ‘risk factors’ on pages 34
to 36. The Board regularly reviews these risks and approves
written policies covering the use of financial instruments to
manage these risks and sets overall risk limits.
The Group Finance Director retains the overall responsibility
and management of financial risk for the Group. Most of
Group’s financing, interest rate and foreign exchange
risks are managed through the Group treasury company,
Tate & Lyle International Finance PLC, whose operations
are controlled by its Board. The treasury company is
chaired by the Group Finance Director and has other board
members comprising executives who are independent of
the treasury function. The Tate & Lyle PLC Board approves
policies and procedures setting out permissible funding
and hedging instruments, exposure limits and a system
of authorities for the approval of transactions.
Group interest rate and currency exposures are
concentrated either in the treasury company or in
appropriate holding companies through market-related
transactions with Group subsidiaries. These acquired
positions are managed by the treasury company
within its authorised limits.
Commodity price risks are managed through divisional
commodity trading functions in Europe and the USA,
whose operations are controlled by the divisional Executive
Committee. The committee meets on a periodic basis and
is responsible for ratifying general strategy and oversees
performance on a monthly basis. Commodity price
contracts are categorised as being held either for trading
or used for hedging price exposures. Commodity contracts
held for trading within the Group are limited, confined
only to tightly controlled areas within the sugar and
corn pricing operations.
The derivative financial instruments approved by the
Tate & Lyle PLC Board to manage financial risks include
swaps, both interest rate and currency, swaptions, caps,
forward rate agreements, financial and commodity forward
contracts and options, and commodity futures.
Interest rate risk
The Group has an exposure to interest rate risk arising
principally from changes in US dollar, sterling and euro
interest rates. This risk is managed by fixing or capping
portions of debt using interest rate derivatives to achieve
a target level of fixed/floating rate net debt, which aims
to optimise net finance expense and reduce volatility in
reported earnings. The Group’s policy is that between 30%
and 75% of Group net debt (excluding the Group’s share
of joint venture net debt) is fixed or capped (excluding out-
of-the-money caps) for more than one year and that no
interest rate fixings are undertaken for more than 12 years.
At 31 March 2008, the longest term of any fixed rate debt
held by the Group was until June 2016. The proportion of
net debt (excluding the Group’s share of joint venture net
debt) that was fixed or capped for more than one year
was 62% (2007 – 58%).
If the interest rates applicable to the Group’s floating rate
debt rise from the levels at the end of March 2008 by an
average of 100 basis points over the year to 31 March
2009, with all other variables held constant, this would
reduce Group profit before tax by approximately £4 million
(2007 – £3 million).
Management of foreign exchange risk
The Group’s shareholders’ equity, earnings and cash
flows are exposed to foreign exchange risks due to the
geographic diversity of its sales and the different countries
in which it operates. Tate & Lyle has significant investment
in overseas operations, particularly in the USA and Europe.
The Group’s policy requires subsidiaries to hedge transactional
currency exposures against their functional currency once
they are committed or highly probable, mainly through the
use of forward foreign exchange contracts.
The Group’s accounting policy is to translate profits of
overseas companies using average exchange rates. It is
the Group’s policy not to hedge exposures arising from
profit translation; as a result in any particular financial year,
currency fluctuations may have a significant impact on
Tate & Lyle’s financial results. In particular, a weakening
of the US dollar against sterling will have an adverse
effect on the Group’s reported results.
The Group manages foreign exchange translation exposure
on its net investments in overseas operations, particularly
in the USA and Europe, by maintaining a percentage of
net debt in US dollars and euros to mitigate the effect of
these risks. This is achieved by borrowing principally in
US dollars and euros, which provide a partial match for
the Group’s major foreign currency assets. A weakening
of the US dollar and euro against sterling would result
in exchange gains on net debt denominated in these
currencies, which would be offset against the losses on
the underlying foreign currency assets. At the year end,
net debt (excluding the Group’s share of joint venture net
debt) was held in the following currencies: net borrowings
of US dollars 81% (2007 – 69%), euros 23% (2007 – 20%),
other currencies nil% (2007 – 8%) and sterling net deposits
of 4% (2007 – net borrowings of 3%).
Tate & Lyle Annual Report 2008
55
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How we performed Operating and financial review
The fair value of other derivative financial instruments
hedging future currency and commodity transactions was
£7 million liability (2007 – £1 million asset). In currency
exposure management, the instruments used are spot
and forward purchases and sales, and options.
The fair value of derivative financial instruments held for
trading was £9 million asset (2007 – £28 million liability)
arising in the commodity trading and reinsurance operations.
Fair value estimation
The fair value of derivative financial instruments is based on
the market price of comparable instruments at the balance
sheet date if they are publicly traded. The fair value of the
forward currency contracts has been determined based
on market forward exchange rates at the balance sheet
date. The fair values of short-term deposits, receivables,
payables, loans and overdrafts with a maturity of less than
one year are assumed to approximate their book values.
The fair values of bonds, bank and other loans, including
finance lease liabilities due in more than one year, are
estimated by discounting the future contractual cash flows
at the current market interest rate available to the Group
for similar financial instruments, adjusted for the fair
valuation effects of currency and interest rate risk
exposures where those instruments form part of a related
hedging relationship, financial and commodity forward
contracts and options, and commodity futures. The value
of certain items of merchandisable agricultural commodities
that are included in inventories are based on market prices.
Going concern
After making enquiries, the directors have a reasonable
expectation that the Company and the Group have
adequate resources to continue in operational existence
for the foreseeable future. For this reason they continue to
adopt the going concern basis in preparing the accounts.
The following table illustrates the Group sensitivity to
the fluctuation of the Group’s major currencies in which
it transacts. Sensitivity is calculated on financial assets
and liabilities as at 31 March 2008 denominated in non-
functional currencies for all operating units within the Group.
The percentage movement applied to each currency is
based on the average movements in the previous three
reporting periods.
-/+£m
GBP/USD 5% change
GBP/EUR 5% change
Income
statement
1
2
2008
Income
Equity statement
1
2
35
14
31 March
2007
Equity
28
4
Counterparty credit risk
Counterparty credit risk arises from placing deposits and
entering into derivative financial instruments with banks
and other financial institutions, as well as credit exposures
in outstanding trade receivables.
The Group manages credit risk by placing deposits and
entering into financial instruments only with highly credit-
rated authorised counterparties, which are reviewed and
approved regularly by the Board. The Group has Board-
approved maximum counterparty exposure limits for
specified banks and financial institutions based on
long-term credit ratings (typically A-/A3 or higher) of
Standard & Poor’s and Moody’s. Counterparties’ positions
are monitored on a regular basis to ensure that they are
within the approved limits and there are no significant
concentrations of credit risks.
Price risk
Derivatives are used to hedge movements in the future
prices of commodities in those domestic and international
markets where the Group buys and sells sugar, corn and
wheat. Commodity futures and options are used to hedge
inventories and the costs of raw materials for unpriced and
prospective contracts not covered by forward product
sales. The options and futures hedging contracts generally
mature within one year and are either traded on organised
exchanges or over the counter.
Use and fair value of financial instruments
In the normal course of business, the Group uses derivative
financial instruments and non-derivative financial instruments.
The fair value of Group net borrowings at the year end
was £1,106 million against a book value of £1,041 million
(2007 – fair value £950 million; book value £900 million).
Derivative financial instruments used to manage the
interest rate and currency of borrowings had a fair value
of £12 million asset (2007 – £24 million asset). The main
types of instrument used are interest rate swaps, interest
rate options (caps or floors) and cross-currency interest
rate swaps.
56
Tate & Lyle Annual Report 2008
This section shows how our Board and
executive management aim to uphold the
highest standards of corporate governance,
and how we apply our four core values –
safety, integrity, knowledge, innovation –
to everything we do.
How we run the
business
58 Board of directors
60 Executive management
61 Corporate governance
68 Corporate social responsibility
Tate & Lyle Annual Report 2008
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How we run the business
Board of directors
1
5
9
2
6
3
7
4
8
10
11
58
Tate & Lyle Annual Report 2008
1 Sir David Lees
Chairman
Joined the Board and was appointed
Chairman in October 1998. He joined GKN
plc in 1970 and was appointed Group
Finance Director in 1982, Group Managing
Director in 1987 and then Chairman and
Chief Executive in 1988 before becoming
non-executive Chairman of GKN in 1997
until his retirement in May 2004. He served
as a non-executive director of the Bank
of England from 1991 to 1999 and as
Chairman of Courtaulds plc from 1996 to
1998. He is currently Deputy Chairman
and Senior Independent Director of
QinetiQ Group plc, a director of Royal
Opera House, Covent Garden Limited,
a member of the Panel on Takeovers and
Mergers and is a former Chairman of the
Governing Body of Shrewsbury School.
He is a Fellow of the Institute of Chartered
Accountants in England and Wales, and
is a Deputy Lieutenant of the County of
Shropshire. Aged 71.
2 Iain Ferguson, CBE
Chief Executive
Joined the Group and was appointed
Chief Executive in May 2003. Previously,
he worked for Unilever where he held
a number of senior positions including
Executive Chairman of Birds Eye Walls
and Senior Vice-President, Corporate
Development. He is a former Commissioner
on the UK Government’s Policy Commission
on the Future of Farming and Food and
also a former President of the Institute
of Grocery Distribution. He is currently
President of the UK Food and Drink
Federation and Honorary Vice-President of
the British Nutrition Foundation. Aged 52.
3 Richard Delbridge
Senior Independent Director
Joined the Board in September 2000
and was appointed Senior Independent
Director in December 2003. A Chartered
Accountant, he is a former Partner of
Arthur Andersen & Co. In 1976, he joined
JP Morgan and was Group Comptroller
and later Managing Director of the London
offices. In 1989, he was appointed
Director, Group Finance at Midland Bank
plc, later becoming Group Finance
Director, HSBC Holdings plc. In 1996, he
was appointed Director and Group Chief
Financial Officer of National Westminster
Bank Plc, a position he held until April
2000. He is a non-executive director of
JP Morgan Cazenove Holdings and Fortis
Group, and a Council Member and
Treasurer of The Open University.
Aged 66.
4 Elisabeth Airey
Independent Non-Executive Director
Joined the Board in January 2007. From
1990 to 1999, she served as Finance
Director of Monument Oil and Gas plc until
its sale to Lasmo plc. She is currently the
Senior Independent Director of Amec PLC
and a non-executive director and Chairman
of both the JP Morgan European Fledgeling
Investment Trust PLC and Zetex PLC. She
is also a non-executive director of Dunedin
Enterprise Investment Trust PLC. Aged 49.
5 Evert Henkes
Independent Non-Executive Director
Joined the Board in December 2003.
He worked for Royal Dutch Shell plc for
30 years, during which time he held a
number of senior management positions
in Europe and Asia Pacific, culminating in
his appointment as Chief Executive of Shell
Chemicals in 1998. He retired from Shell in
April 2003. He is also a non-executive
director of CNOOC Ltd, Outokumpu OYJ,
Air Products and Chemicals Inc, and
SembCorp Industries Ltd. Aged 64.
6 Stanley Musesengwa
Chief Executive, International
Joined the Group in 1979 as a refinery
manager and subsequently performed a
number of roles before becoming Regional
Director, Tate & Lyle Africa in 1995.
In December 1999, he was appointed
Chief Executive of Tate & Lyle’s European
sugar refining businesses and its global
sugar and molasses trading activities. He
was appointed to the Tate & Lyle Board in
April 2003 and as Chief Operating Officer
in May 2003. He was then appointed
Chief Executive, International in October
2007. He is a non-executive director of
Croda International PLC. Aged 55.
7 John Nicholas
Group Finance Director
Joined the Group in June 2006 and was
appointed Group Finance Director in July
2006. Having worked for Fisons plc for ten
years in its Scientific Equipment Division,
in 1992 he joined Williams Plc as a
Divisional Finance Director. In 2000, he
became Group Finance Director of Kidde
Plc when it was demerged from Williams.
He left Kidde in July 2005 following its
purchase by United Technologies
Corporation. He is a non-executive
director of Rotork p.l.c. and a Fellow of
the Chartered Association of Certified
Accountants. Aged 51.
Tate & Lyle Annual Report 2008
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8 Stuart Strathdee
Corporate Development Director
Joined the Group in 1977. He has
served in a variety of senior management
positions including Group Treasurer,
Managing Director of United Molasses
and Managing Director, International
Division. He was appointed to the
Tate & Lyle Board in November 1994
and to his current position as Corporate
Development Director in July 2003.
He is a non-executive director of
James Finlay Limited. Aged 56.
9 Robert Walker
Independent Non-Executive Director
Joined the Board in January 2006. He is
currently Chairman of WH Smith PLC and
of BCA Europe Ltd and is a non-executive
director of Signet Group Plc and Williams
Lea Holdings Plc. He started his career at
Procter & Gamble and McKinsey & Co.,
then spent over 20 years with PepsiCo
International, culminating as a Division
President. In May 1996, he joined the
Board of Severn Trent Plc as a non-
executive director and then served as
Group Chief Executive from August 2000
until his retirement in February 2005.
Aged 63.
10 Dr Barry Zoumas
Independent Non-Executive Director
Joined the Board in May 2005. He is
currently the Alan R. Warehime Professor
of Agribusiness and Professor of Food
Science and Nutrition at Penn State
University, USA. He is also the Global
Chairman of the International Life Sciences
Institute. He worked for Hershey Foods
Corporation for 27 years, the last 16 as
Corporate Vice-President, Science and
Technology. Aged 65.
11 Robert Gibber
Company Secretary
A solicitor, he joined Tate & Lyle in 1990
as a commercial lawyer. He was appointed
General Counsel in 1997 and then also
Company Secretary in 2001. Aged 45.
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How we run the business
Executive management
Group Management Committee
The Group Management Committee is chaired by
Iain Ferguson, Chief Executive, and oversees the
development and execution of the Group’s strategy.
It also has overall responsibility for achieving business
results. The current members of the Group Management
Committee are listed opposite.
Changes to executive management
As explained in the Chief Executive’s review on page 7,
a number of changes are being made to the executive
management team.
From 1 July 2008, the Group Management Committee
will be replaced by a new Group Executive Committee.
This Committee will be chaired by the Chief Executive and
will comprise the Group Finance Director (John Nicholas),
Company Secretary and General Counsel (Robert Gibber),
President of Research and Development (Dr Bob Fisher),
and the Presidents of the four business divisions. The new
management structure is shown in the diagram below.
Members of the Group Management Committee
(At 21 May 2008)
Iain Ferguson (Chairman)
Chief Executive
Stanley Musesengwa1
Chief Executive, International
John Nicholas
Group Finance Director
Stuart Strathdee2
Corporate Development Director
D. Lynn Grider 3
President, Food & Industrial Ingredients,
Americas
Robert Gibber
Company Secretary and General Counsel
1 Retiring from the Board on 23 July 2008 and leaving Tate & Lyle
2 Retiring from the Board on 23 July 2008
3 Retiring from Tate & Lyle on 30 June 2008
Executive management structure
From 1 July 2008
Iain Ferguson
Chief Executive
Central functions
Finance, Legal,
Human Resources,
Secretariat, Corporate
Development,
Corporate Affairs
Research and
Development
President
Dr Bob Fisher
Food & Industrial
Ingredients,
Americas
President
Matt Wineinger
Food & Industrial
Ingredients, Europe
President
Olivier Rigaud
Sugars
Chief Executive
Ian Bacon
Sucralose
President
Karl Kramer
Support functions
Business divisions
60
Tate & Lyle Annual Report 2008
Corporate governance
Tate & Lyle is committed to high standards of corporate
governance, business integrity and professionalism in the
way it conducts its activities. Throughout the year ended
31 March 2008, the Company complied with the Combined
Code on Corporate Governance published in June 2006 by
the Financial Reporting Council (the Code). The paragraphs
below, together with the directors’ remuneration report
on pages 82 to 92, provide details of how the Company
applies the principles and complies with the provisions
of the Code.
There are eight scheduled Board meetings each year.
Two of these meetings usually take place at an operating
company. The Board also meets off-site for a day each
year to consider the Group’s strategy. In the year ended
31 March 2008, in addition to the eight scheduled meetings,
four further meetings were held primarily to approve such
matters as the publication of trading updates and interim
management statements. Attendance at the eight
scheduled meetings was 100%, other than one meeting
where one director was absent.
Board of directors
The Board is collectively responsible for promoting the
success of the Company and for providing entrepreneurial
leadership within a framework of prudent and effective
controls that enable risk to be assessed and managed.
It sets the Company’s strategic aims and ensures that
necessary financial and human resources are in place to
enable these objectives to be met and undertakes reviews
of management performance. In addition, the Board sets
the Company’s values and standards and ensures that
its obligations to its shareholders and others are
understood and met.
The Board has a formal schedule of matters reserved to
it for its decision. This schedule is reviewed annually and
includes approval of:
■ Group strategy;
■ annual budget and operating plans;
■ major capital expenditure, acquisitions or divestments;
■ annual and half-year financial results and interim
management statements;
■ safety and environmental policies;
■ appointments to the Board and as Company Secretary;
■ senior management structure, responsibilities and
succession plans;
■ treasury policies;
■ system of internal control and risk management; and
■ dividend policy.
Other specific responsibilities are delegated to Board
Committees, which operate within clearly defined terms
of reference. Details of the responsibilities delegated to
the Board Committees are given on pages 63 to 66.
Tate & Lyle Annual Report 2008
The attendance of individual directors at all the Board
meetings held during the year which they were eligible to
attend is shown in the table below.
Meetings attended
Sir David Lees, Chairman
Elisabeth Airey
Richard Delbridge
Iain Ferguson
Evert Henkes
Stanley Musesengwa
Kai Nargolwala (until 31 December 2007)
John Nicholas
Stuart Strathdee
Robert Walker
Dr Barry Zoumas
12/12
10/12
11/12
12/12
12/12
12/12
6/8
11/12
11/12
10/12
12/12
In the few instances where a director is unable to attend
a Board or Committee meeting, his or her comments on
the briefing papers to be considered at that meeting are
given in advance to the relevant Chairman.
The Company Secretary is responsible for ensuring that
Board procedures are followed and that applicable rules
and regulations are complied with. All directors have access
to the advice and services of the Company Secretary,
whose appointment or removal is a matter for the Board
as a whole. In addition, there is a formal procedure in place
whereby, in the furtherance of their duties, directors can
obtain independent professional advice, if necessary,
at the Company’s expense.
Board meetings are structured to allow open discussion
and all directors participate in discussing the strategy,
trading and financial performance and risk management
of the Company.
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How we run the business Corporate governance
All substantive agenda items have comprehensive briefing
papers, which are circulated five days before the meeting.
Members of executive management attend Board meetings
and make presentations to the Board on a regular basis.
The chart below shows the approximate time the Board has
taken to consider agenda items during the year separated
into general categories.
The non-executive directors have a wide range of skills and
knowledge and combine broad business and commercial
experience with independent and objective judgement.
The Board is aware of the other commitments of its
non-executive directors and is satisfied that these do not
conflict with their duties as directors of the Company.
Changes to the commitments of the non-executive
directors are reported to the Board.
Board allocation of time
Year ended 31 March 2008
Strategy
51%
Governance
9%
Operations
12%
Finance
and risk
23%
Capital expenditure
and investment
5%
The Company maintains appropriate insurance cover
in respect of legal proceedings and other claims against
its directors.
Chairman and Chief Executive
The roles of the Chairman and Chief Executive are
separated and their responsibilities are clearly established,
set out in writing and agreed by the Board. The Chairman
is responsible for the leadership and workings of the Board
and ensuring its effectiveness, and the Chief Executive for
the running of the business and the implementation of
Board strategy and policy.
The significant current commitments of the Chairman,
Sir David Lees, are set out in his biography on page 59.
The Board is satisfied that his other commitments do not
unduly restrict him from carrying out his duties effectively.
Board balance and independence
The Board currently comprises the Chairman, who has no
executive responsibilities, four executive directors and five
non-executive directors.
With the exception of the Chairman, who is presumed under
the Code not to be independent, the Board considers all the
non-executive directors to be independent.
Richard Delbridge is the Senior Independent Director and is
available to shareholders if they have any issues or concerns.
The names and biographical details of the current directors
are given on page 59.
The terms and conditions of appointment of the
non-executive directors are available for inspection at
the Company’s registered office and will be available for
inspection at the Annual General Meeting (AGM).
Re-election of directors
The Company’s Articles of Association require the
re-election of one-third of the Board (or the nearest whole
number below one-third) at each AGM. All directors are
subject to re-election at least once every three years. Any
directors appointed by the Board since the last AGM must
stand for re-election at the next AGM. Any non-executive
directors who have served for more than nine years
will be subject to annual re-election.
The names of the directors retiring and standing for
re-election at the 2008 AGM are set out on page 80.
Further details are given in the letter from the Chairman
to shareholders in relation to the 2008 AGM.
Information, induction and professional development
The Chairman, with the assistance of the Company
Secretary, is responsible for ensuring that the directors
receive accurate, timely and clear information on all relevant
matters. On appointment to the Board, directors receive
a comprehensive induction programme, which includes site
visits and meetings with senior management across the
businesses and Group functions. New directors also receive
a pack of background reading about the Group and details
of Board procedures and other governance-related matters.
Major shareholders have been offered the opportunity
to meet new non-executive directors as part of their
induction programme.
Training and updates on particular issues are arranged for
directors, as appropriate, on an ongoing basis, taking into
account their individual qualifications and experience. The
Company Secretary also helps directors to undertake any
other professional development they consider necessary
or desirable to assist them in carrying out their duties as
directors or as members of the relevant Board Committees.
Visits to external events or organisations are also arranged
for the Board to help the non-executive directors in
particular to gain a deeper insight into the Group’s
strategy and business activities.
62
Tate & Lyle Annual Report 2008
Performance evaluation
In previous years, the Board’s performance evaluation has
been an internal exercise led by the Chairman. In 2008,
however, to ensure that the annual evaluation process
remained fresh and relevant, the Board engaged Dr Tracy
Long of Boardroom Review to act as an independent
facilitator. The evaluation process comprised of a written
questionnaire supplemented by one-to-one interviews with
each director and the Company Secretary. Dr Long also
attended a Board meeting as an observer. Dr Long’s report
was presented to the Board as a whole for discussion.
The review found that the Board continues to operate in an
effective manner. However, a number of recommendations
were made for improvements such as to the timing and
location of Board meetings, the format and content of
Board papers, ways by which the non-executive directors
can improve their understanding of the business and its
operating environment, and succession planning. Actions
are being taken to address each of the matters raised
by the evaluation.
The performance of the individual directors is evaluated by
the Chairman. Following this year’s evaluation process, the
Chairman concluded that each director continues to make
an effective contribution to the work of the Board, is well
prepared and informed concerning items to be considered
by the Board, and that their commitment to the role
remains strong.
During the year, the non-executive directors met together
without the Chairman present, under the chairmanship of
the Senior Independent Director, to appraise the Chairman’s
performance (the Senior Independent Director having first
sought the views of the executive directors). In addition,
the Chairman held a private meeting with the non-executive
directors to appraise the Chief Executive’s performance and
to address any other matters the non-executive directors
wished to raise.
The Audit, Nominations and Remuneration Committees
each also held an evaluation of their work and effectiveness
during the year, the results of which were reported to the
Board by the respective Committee Chairmen. The reviews
concluded that each Committee was operating in an
effective manner.
Shareholder communications
The Chief Executive, Group Finance Director and Director
of Investor Relations maintain a regular programme of visits
and presentations to major institutional shareholders both
in the UK and overseas. The Chairman and Senior
Independent Director participate in this programme as
appropriate. The Investor Relations Department provides
the Board with a detailed report on discussions with major
institutional shareholders each time it meets. In addition,
all directors receive copies of analysts’ reports on the
Company, and the Board is briefed periodically by the
Company’s financial advisers on investors’ perceptions
of Tate & Lyle and its investor relations activities.
The non-executive directors are encouraged to attend
presentations to analysts and shareholders, and in particular
the presentations that take place on the publication of the
Company’s annual and half-year results.
The Chairman provides feedback to the Board on any
matters raised with him by major shareholders. Some 250
shareholders normally attend the AGM and are invited to
ask questions and meet informally with the directors after
the formal proceedings have ended. The level of proxy
votes lodged for and against each resolution, together with
the level of abstentions, are announced to shareholders at
the AGM and are published on our website.
The Company aims to present a balanced and
understandable assessment in all its reports to the public
and to regulators. Key announcements, financial reports
and other information about the Group can be found on
the Company’s website at www.tateandlyle.com.
Board Committees
There are four main Board Committees: Chairman’s,
Nominations, Remuneration, and Audit. The terms of
reference of each Committee are reviewed annually by
the Board, are available upon request and are on the
Company’s website at www.tateandlyle.com.
The Committees are provided with sufficient resources
to undertake their duties through access to the services
of the Company Secretariat and, if deemed necessary, can
obtain independent professional advice at the Company’s
expense. The Company Secretary, Robert Gibber,
is Secretary to each Board Committee.
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Tate & Lyle Annual Report 2008
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How we run the business Corporate governance
Chairman’s Committee
The members of the Committee during the year, together
with a record of their attendance at meetings that they were
eligible to attend, are set out below.
Sir David Lees, Chairman
Elisabeth Airey
Richard Delbridge
Iain Ferguson
Evert Henkes
Kai Nargolwala (until 31 December 2007)
Robert Walker
Dr Barry Zoumas
Meetings attended
7/7
7/7
7/7
7/7
7/7
5/5
6/7
7/7
The Committee comprises the non-executive directors
and the Chief Executive under the chairmanship of the
Chairman of the Board. The Committee meets before each
Board meeting, as required, and provides an opportunity
for the Chairman and Chief Executive to brief and obtain
the views of the non-executive directors on specific issues.
Remuneration Committee
The members of the Committee during the year, together
with a record of their attendance at meetings that they were
eligible to attend, are set out below.
Evert Henkes, Chairman
Elisabeth Airey
Richard Delbridge
Sir David Lees
Kai Nargolwala (until 31 December 2007)
Robert Walker
Dr Barry Zoumas
Meetings attended
7/7
7/7
7/7
7/7
4/4
6/7
7/7
The Committee meets as required, usually before each
Board meeting. The Committee consists of the independent
non-executive directors and the Chairman of the Board.
The Chairman of the Board, Sir David Lees, was appointed
as a member of the Committee from 1 April 2007 as
permitted under the Code published in June 2006.
The Board considers that the Chairman’s membership of
this Committee helps to ensure that the Company’s
remuneration policy is aligned with its strategic objectives.
The Committee determines the individual remuneration
packages of each executive director and other members
of the Group Management Committee. This includes base
salary, bonus, long-term incentives, benefits and terms of
employment, including those upon which their service may
be terminated. Additionally, the Committee approves the
base salary, long-term incentives and benefits of certain
other senior executives. In consultation with the Chief
Executive, the Committee also determines the
remuneration of the Chairman.
The remuneration of non-executive directors is determined
by the Board, excluding the non-executive directors. The
directors’ remuneration report on pages 82 to 92 provides
more information on the Company’s executive remuneration
policy and practice, and on the working of the Committee.
Nominations Committee
The members of the Committee during the year, together
with a record of their attendance at meetings that they were
eligible to attend, are set out below.
Sir David Lees, Chairman
Elisabeth Airey
Richard Delbridge
Iain Ferguson
Evert Henkes
Kai Nargolwala (until 31 December 2007)
Robert Walker
Dr Barry Zoumas
Meetings attended
4/4
4/4
4/4
4/4
4/4
3/3
4/4
4/4
The Committee comprises the non-executive directors
and the Chief Executive under the chairmanship of the
Chairman of the Board (except when the Committee is
dealing with the appointment of a successor to the
Chairman of the Board when the Senior Independent
Director chairs the Committee). The main responsibilities
of the Committee are to:
■ review the size and composition of the Board, including
the planning of succession to the Board and the
leadership needs of the Group generally;
■ make recommendations to the Board on candidates for
appointment as executive and non-executive directors
and as Company Secretary, taking into account the
balance of the Board and the required blend of skills
and experience;
■ make recommendations to the Board on the appropriate
processes for the appointment of the Chairman of
the Board;
■ review annually the performance of each member of
the Group Management Committee and to report on
that review to the Remuneration Committee; and
■ make recommendations to the Board on the nomination
of the Senior Independent Director, the reappointment of
non-executive directors upon the expiry of their term of
office and the proposed re-election of directors retiring
by rotation at the AGM.
When recruiting non-executive directors, the Committee
considers the particular skills, knowledge and experience
that would most benefit the Board, and external recruitment
consultants are engaged to assist in the recruitment process.
64
Tate & Lyle Annual Report 2008
No new non-executive or executive directors were
appointed during the year. Kai Nargolwala resigned as a
non-executive director from 31 December 2007, following
his appointment as Chief Executive Officer of the Asia-
Pacific Region for the Credit Suisse Group. Mr Nargolwala
stood down from the Board as the requirement of his new
role at Credit Suisse meant that he was no longer able to
commit the required time to travel to the UK on a regular
basis to attend Tate & Lyle Board meetings. Despite
Mr Nargolwala’s departure, the Committee considered
that the Board continued to have a strong mix of skills
and experience and that a replacement non-executive
director was not currently required.
Audit Committee
The members of the Committee during the year, together
with a record of their attendance at meetings which they
were eligible to attend, are set out below.
The main responsibilities of the Committee are to:
■ monitor the integrity of the annual and half-year financial
statements and any formal announcements relating to
the Company’s financial performance, paying particular
attention to significant reporting judgements contained
therein, including critical accounting policies and practices;
■ review the Group’s internal financial controls and its
internal control and risk management systems;
■ review and monitor the external auditors’ independence
and objectivity and the effectiveness of the audit process,
taking into consideration relevant UK professional and
regulatory requirements;
■ make recommendations to the Board, for submission
to shareholders for their approval in general meeting,
in relation to the appointment, reappointment and
removal of the external auditors and to approve the
remuneration and terms of engagement of the
external auditors;
Richard Delbridge, Chairman
Elisabeth Airey
Evert Henkes
Kai Nargolwala (until 31 December 2007)
Robert Walker
Dr Barry Zoumas
Meetings attended
■ monitor and review the effectiveness of the Global Audit
4/4
4/4
3/4
3/3
1/4
4/4
and Assurance function;
■ develop and implement a policy on the engagement of
the external auditors to supply non-audit services; and
■ review arrangements by which employees may,
in confidence, raise concerns about possible
improprieties in matters of financial reporting,
financial control or other matters.
The Committee consists solely of independent non-
executive directors. Following the AGM on 23 July 2008,
Richard Delbridge will retire as Chairman of the Committee
and will be succeeded by Elisabeth Airey. Richard Delbridge
will continue to serve as a member of the Committee.
All the Committee members have extensive management
experience in large international organisations and the
Chairman, Richard Delbridge, who is a chartered
accountant, is a former group finance director of a FTSE
100 company. The new Chairman, Elisabeth Airey, is a
former finance director of Monument Oil and Gas plc.
The Committee meets four times each year. The Chairman,
Chief Executive, Group Finance Director, Head of Global
Audit and Assurance and other members of the senior
management team (as invited by the Committee), together
with the external auditors, usually attend meetings. The
minutes of each meeting are circulated to all members of
the Board. Both the Head of Global Audit and Assurance
and the external auditors have access to the Chairman of
the Committee outside of formal Committee meetings.
The Committee maintains a formal calendar of items
that are to be considered at each Committee meeting and
within the annual audit cycle to ensure that its work is in line
with the requirements of the Code.
During the year and up to the date of this annual report, the
Audit Committee discharged its responsibilities as set out in
its terms of reference by undertaking the following work:
■ meeting prior to the Board meeting at which the annual
report and financial statements, the half-year report and
interim management statements were approved. In doing
so, the Committee reviewed significant accounting policies,
financial reporting issues and judgements and reports
from the external auditors;
■ reviewing the effectiveness of the external audit process,
the external auditors’ strategy and plan for the audit, and
the qualifications, expertise, resources and independence
of the external auditors;
■ agreeing the terms of engagement and fee of the external
auditors for the audit and recommending to the Board
that PricewaterhouseCoopers LLP be proposed to
shareholders at the AGM for reappointment as external
auditors to the Company;
■ reviewing the policy on auditor independence and the
provision of non-audit services by the external auditors;
■ receiving and considering regular reports from the Head
of Global Audit and Assurance on the Group’s risk
management system, findings from reviews of internal
financial controls, including those relating to tax risk and
compliance, and the remit, organisation, annual plan and
resources of the Global Audit and Assurance function;
Tate & Lyle Annual Report 2008
65
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How we run the business Corporate governance
■ undertaking a review of the effectiveness of the Global
Audit and Assurance function. The review in 2008 was
generally positive but some areas were identified where
improvements to processes and practices could be
made, such as to further align the scope of the function’s
work with the Group’s risk assessment process, and
these are being implemented;
The procedure for the provision of non-audit related
services by the external auditors is governed by a
schedule appended to the policy on auditor independence.
This schedule categorises such services between:
■ those services which the external auditors are
permitted to provide;
■ reviewing the Committee’s terms of reference and its
■ those services which the external auditors are not
effectiveness, and recommending changes to the Board
as a result of this review. The review in 2008 concluded
that no substantive amendments to the terms of
reference were required and that the Committee had
fulfilled its role and responsibilities appropriately;
■ reviewing the annual report disclosure items relevant to
the Committee, including the going concern statement
and the reports on risk management and internal control;
■ reviewing the potential impact on the Group’s financial
statements of significant corporate governance and
accounting matters;
■ reviewing the findings of the external auditors, their
management letters on accounting procedures and
internal financial controls and audit representation letters;
■ meeting separately with the Chief Executive, Group
Finance Director, external auditors and the Head of
Global Audit and Assurance in order to understand
any concerns relevant to the Audit Committee that
they might have;
■ reviewing procedures under which employees may, in
confidence, raise concerns about possible improprieties
in matters of financial reporting, financial control or
other matters; and
■ reviewing an annual report on the Group’s systems of
internal control and its effectiveness, and reporting the
results of the review to the Board.
During the year, training was also provided to Board and
Committee members outside the scheduled meetings on
subjects of particular relevance, such as the impact of
changes to accounting standards.
The Committee operates a policy to safeguard the
objectivity and independence of the external auditors.
This policy sets out certain disclosure requirements by
the external auditors to the Committee, restrictions on the
employment of the external auditors’ former employees,
partner rotation and procedures for the approval of
non-audit services by the external auditors. During the
year, the Committee reviewed the processes that
PricewaterhouseCoopers LLP have in place to safeguard
their independence and received a letter from them
confirming that, in their opinion, they remained independent.
permitted to provide; and
■ those services which require approval of the
Audit Committee before the external auditors
can be appointed.
A report is made to the Committee each time it meets
setting out the non-audit services provided by the external
auditors during the year and the fees charged. Details of the
amounts paid to the external auditors are given in Note 7
to the Group financial statements on page 110. Having
undertaken a review of the non-audit related services
provided during the year, the Committee is satisfied that
they did not prejudice the external auditors’ independence.
Risk management
The Board of Directors has overall responsibility for the
Group’s system of internal control and risk management.
The schedule of matters reserved to the Board ensures that
the directors control, among other matters, all significant
strategic, financial and organisational issues.
The Group’s enterprise-wide risk management and
reporting process, which was developed, defined and rolled
out across the Group by a risk management team, assists
management throughout the Group to identify, assess and
mitigate risk. The process, which is designed to deliver
competitive advantage for the Group, involves the
identification and prioritisation of key risks through an
ongoing programme of workshops, facilitated by the risk
management team, held around the Group. During the
year, 150 employees attended 12 risk workshops held
throughout the Group in order to identify risks to the
business. The identified risks then cascade up through
functional and divisional levels to the Group Management
Committee. This culminates in the identification of the
Group’s key business, financial, operational and compliance
risks with associated action plans and controls to mitigate
them where possible (and to the extent deemed
appropriate taking account of costs and benefits).
Under the process, senior executive management confirms
to the Audit Committee at least twice a year that these
key risks are being managed appropriately within their
operations and controls have been examined and are
effective. Responsibility for managing each key risk and the
associated mitigating controls is allocated to an individual
executive within each division. Changes in the status of the
key risks and changes to the risk matrix are reported
regularly to executive management and to the Board.
66
Tate & Lyle Annual Report 2008
The Board intends to conduct a review of the risk
management and reporting process in the year ending
31 March 2009.
Internal control
The Board of Directors has overall responsibility for
the Group’s system of internal control and for reviewing
its effectiveness. The Board delegates to executive
management the responsibility for designing, operating
and monitoring both the system and the maintenance
of effective internal control in each of the businesses that
comprise the Group. These systems of internal control are
designed to manage rather than eliminate risk, and can
only provide reasonable and not absolute assurance
against material errors, losses, fraud or breaches of laws
or regulations. All the material joint ventures that the Group
is party to currently follow the Group’s formal systems
of internal control and their internal control procedures
are regularly reviewed by the Group’s Global Audit and
Assurance function. The systems of internal control are
based on a process of identifying, evaluating and managing
risks and include the risk management processes set out
above. These accord with the guidance in the Turnbull
Report and were in place throughout the year and up to
the date of the signing of this annual report. The key risks
that might hinder the achievement of the Group’s business
objectives are managed, controlled and monitored by
the following processes:
■ the Group’s businesses operate under mandatory
written policies and procedural manuals to provide an
appropriate control environment. The Group policies
and procedures set out the Group’s commitment to
competence, integrity and ethical values. These policies
are reviewed by the Board annually and changes are
made as appropriate to enhance existing control
procedures;
■ key strategic risks are addressed through the Group’s
process of preparation of plans by each operating unit
and the compilation of these risks in the Group’s
operating plan;
■ there is a comprehensive annual planning and financial
reporting system comparing results with plan and the
previous year on a monthly and cumulative basis. The
process of planning, budgeting and making short-term
forecasts, which is subject to an ongoing review, should
provide early warning of potential financial risks. Revised
forecasts for the year are produced at least quarterly.
Reports include a monthly cash flow statement
projected for 15 months;
■ the Chief Executive and Group Finance Director
undertake regular financial and operational reviews
of the major operating units within the Group;
Tate & Lyle Annual Report 2008
■ the Chief Executive and the Group Finance Director
submit written reports to each Board meeting,
which include consideration of changing threats
and opportunities within the business. The standard
Board review of investments and disposals includes
identification of major risks that could affect the
outcome of each project, with a sensitivity analysis;
■ the Company has defined procedures for the
authorisation and project management of capital
expenditure and investment, granting of guarantees,
trading and hedging of currencies and commodities
and use of treasury products; and
■ formal annual reports and presentations are received by
the Board on certain areas of special risk. These include
insurance, treasury management, commodity trading,
pensions, safety and environmental issues.
The Audit Committee periodically reviews the effectiveness
of the system of internal control through reports from the
external auditors and the Global Audit and Assurance
function. The Global Audit and Assurance function follows
a planned programme of reviews that are aligned to the
risks existing in the Group’s businesses. It has the authority
to review any relevant aspect of the business.
The Board, with assistance of the Audit Committee,
has conducted an annual assessment of the effectiveness
of the systems of risk management and internal control
during the financial year and up to the date of this annual
report. The review, which is co-ordinated by the Global
Audit and Assurance function, includes a Group-wide
certification that appropriate internal controls are in place
and on the state of their effectiveness. The internal audit
function monitors and selectively checks the results of
this exercise, ensuring that the representations made are
consistent with the results of the department’s work during
the year. Where weaknesses have been identified, plans
for correcting them are also reported. The results of this
exercise are summarised for the Audit Committee and the
Board. In the event that any significant losses were to be
incurred during the year as a result of the failure of controls,
a detailed analysis would be provided to the Audit
Committee and the Board. The Board confirms that where
significant weaknesses were identified in relation to the
review conducted during the year, necessary remedial
action has been or is being taken.
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67
How we run the business
Corporate social responsibility
For Tate & Lyle, corporate social responsibility equates to applying our
four core values – safety, integrity, knowledge and innovation – to the
way we run our business. This means continuous progress in achieving
the highest standards of safety, considering the environmental impact
of every aspect of what we do, and treating our employees, suppliers
and the communities in which we work as long-term partners.
Putting these concerns at the centre of our business
requires proactive management at every level within the
Company. The Board reviews Tate & Lyle’s policies and
performance annually, and the Chief Executive is the
Board member accountable for all aspects of
corporate social responsibility.
Revising the Business Code of Conduct
Our Business Code of Conduct (the Code) governs our
approach to corporate social responsibility. The Code
applies unconditionally to all parts of the wholly owned
Group, and we also aim to apply the Code in those
operations in which we have a 50% stake or more.
Where we have a minority stake, we encourage our
partners to adopt the Code.
Over the past year, we have updated our Code to ensure
it is relevant to today’s business, and the expectations of
external stakeholders. Our first step was to conduct an
internal consultation process with senior managers from
all parts of our global operations, to get their views on
what is important to their part of the business, and to their
customers and suppliers, in their respective geographies.
We then worked with the consultancy Business for
Social Responsibility, a global expert in corporate social
responsibility, to redraft the Code in light of these views
and taking into account best practice.
The new Code was approved by the Board in April 2008.
We are now communicating the Code to business partners
and all employees, and will include training where relevant.
The Code will help us ensure our business sets and
upholds consistently high standards across the world.
Safety
Tate & Lyle has no higher priority than safety, which we
believe is fundamental to running a successful business.
This means ensuring safe and healthy conditions for
everyone at our sites: employees, contractors and
visitors. By reporting, recognising and rewarding safety
performance, we aim to ensure that all our operations
focus on continuous improvement.
Overview
Our employee safety performance showed good
improvement in 2007, with progress in all areas.
However, while employees’ efforts have paid off,
we were disappointed that our contractors’ safety
results were down on a particularly good previous year.
Our lockout–tagout system helps ensure the safety of everyone
working on a piece of equipment.
68
Tate & Lyle Annual Report 2008
Group safety index
Benchmarking safety
recordable injury rate*
Benchmarking safety
lost-time accident rate*
3.51
2.84 1.72
2.41 2.08
7.40
5.30 2.00
5.80 1.92 0.80 1.03
4.80
3.00 1.10
3.00 0.51 0.29 0.92
US industry
4.40
US industry
2.30
2003 2004 2005 2006 2007
A
B
C
D
E
F
G
A
B
C
D
E
F
G
The smaller the index, the better
the performance.
Our target is zero for every
Tate & Lyle operation.
A US food manufacturing
B US grain milling
C US corn refiners
D US sugar industry
A US food manufacturing
B US grain milling
C US corn refiners
D US sugar industry
Tate & Lyle
E Food & Industrial Ingredients, Americas
F Food & Industrial Ingredients, Europe
G Sugars (Europe)
Tate & Lyle
E Food & Industrial Ingredients, Americas
F Food & Industrial Ingredients, Europe
G Sugars (Europe)
* Number of injuries per 200,000 employee hours
requiring more than first aid.
* Rate of recordable injuries sufficiently serious to
result in lost work days or restricted work activities.
US industry statistics as reported by the
US Bureau of Labor Statistics.
US industry statistics as reported by the
US Bureau of Labor Statistics.
Contractor safety results for calendar year 2007
For the fourth consecutive year we have compiled
contractor safety statistics. One consequence of heavy
construction activity this year has been an unfortunate
worsening of our contractor safety statistics, although
they are still considerably better than 2005. We are
pleased, however, that our contractor safety statistics
still compare favourably with those reported by the
US Bureau of Labor Statistics.
Compared with the 2006 calendar year results:
■ Contractor safety index worsened by 22.6%.
■ Recordable injury rate improved by 2.9%.
■ Lost-time accident rate worsened by 1.9%.
■ Severity rate worsened by 30.6%.
Benchmarking results
Contractor safety continues to compare well with the
US Bureau of Labor Statistics 2006 (the most recent data
available). The Bureau reports the overall recordable injury
rate per 200,000 employee hours for US contractors to be
5.50 against 1.67 at Tate & Lyle, and the overall lost-time
accident rate to be 2.00 against our 0.55.
Employee safety results for calendar year 2007
Most locations equalled or improved on their 2006
performance, including 15 that reported no lost-time
accidents and ten that reported no recordable injuries for
the year. We were pleased that our overall results returned
to the pattern of improvement we had seen in previous
years, with all our measures showing better performance
compared with calendar year 2006 results.
■ Group safety index (weighted average of injuries
sustained in the workplace across Tate & Lyle, with
more severe incidents having greater impact)
improved by 13.7%.
■ Recordable injury rate (injury requiring treatment
beyond first aid) improved by 19.7%.
■ Lost-time accident rate (recordable injury sufficiently
severe to result in lost work days or to restrict the
employee’s ability to perform his/her job) improved
by 13.5%.
■ Severity rate (number of work days lost due to injuries
per 200,000 employee hours) improved by 13.1%.
Benchmarking results
The USA and Europe compile safety statistics differently
and therefore comparisons are difficult. However, we can
compare the performance of each of our divisions with
results from the US Bureau of Labor Statistics. The most
recent results available from the Bureau are from 2006, with
the exception of the US corn refiners, whose results are
from 2007. Again this year, our divisions are outperforming
the average reported standard for their peers in their
respective sectors and in the US private sector as a whole.
Tate & Lyle Annual Report 2008
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69
How we run the business Corporate social responsibility
Contractor safety index
Benchmarking
contractor safety
recordable injury rate*
Benchmarking
contractor safety
lost-time accident
rate*
1.25
1.77 4.32
14.80 7.45 3.36 4.61 0.17 3.63 5.32 3.77 12.48 2.86 6.04 0.97 2.05 0.00 0.00
1.67
5.50
0.55
2.00
A
A
A
B
B
B
C
C
C
D
D
D
E
E
E
F
F
F
A
B
2005 2006 2007 2005 2006 2007 2005 2006 2007 2005 2006 2007 2005 2006 2007 2005 2006 2007
A Food & Industrial Ingredients, Americas
B Food & Industrial Ingredients, Europe
C Sucralose
D Sugars (Europe)
E Citric acid
F Sugars (Vietnam)
A Tate & Lyle
B US industry
* Number of injuries per
200,000 employee hours
requiring more than first aid.
US industry statistics as
reported by the US Bureau
of Labor Statistics.
A
B
A Tate & Lyle
B US industry
* Rate of recordable injuries
sufficiently serious to result
in lost work days or restricted
work activities.
US industry statistics as
reported by the US Bureau
of Labor Statistics.
Managing safety
Maintaining a consistently safe and healthy workplace for
our people requires effective, proactive management.
We operate network safety committees in the Americas
and Europe that share knowledge and experience between
plants with the aim of ensuring consistently high standards
of safety across Tate & Lyle. The core elements of our
approach to safety are:
■ emphasis on the importance of behaviour by
encouraging a culture of safety at all locations;
Awards
To qualify for entry to our World Class Safety Excellence
awards programme, plants must:
■ operate the entire year without lost time;
■ have active employee participation in their safety
programme;
■ have an active auditing programme; and
■ demonstrate adherence to Tate & Lyle’s standards during
executive, management and network audits.
■ improving communications and sharing best practice
2007 winners were:
throughout the Group;
■ the auditing of safety and loss control programmes; and
■ the active involvement of senior executives in auditing
and promoting safety.
Projects and activities
Our network safety committees have worked on a number
of programmes this year, including:
■ establishing a technical framework for applying
Tate & Lyle’s safety and safety engineering standards
globally;
■ conducting behavioural audits across the Group; and
■ recognising and encouraging contractor safety
performance through contractor safety committees
and award schemes.
■ large plant (over 250,000 employee hours per year):
Jurong Island, Singapore;
■ small plant (fewer than 250,000 employee hours
per year): Plaistow, UK; and
■ most improved safety performance
– Europe: Koog an de zaan, The Netherlands
– Americas: Tate & Lyle Grain, USA.
Outlook
Contractor safety and behavioural auditing will be
important areas to focus on in 2008. We are developing
a tracking system for behavioural audits, which will allow
us to analyse trends more effectively and therefore focus
better on what our main issues are. By focusing on the
importance of behaviour, increasing our efforts to improve
contractor safeworking systems, focusing on leading safety
indicators, confirming best practice and promoting the
active involvement of employees in safety efforts, our aim
is to improve performance against all our safety
measures in 2008.
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Tate & Lyle Annual Report 2008
Environment
Tate & Lyle believes that companies must take steps
to manage their impact on the natural environment.
As a consequence, we are committed to conducting our
business in a manner that is sensitive to the environmental
needs of the communities within which we operate. We aim
to achieve this by upholding defined, key environmental
standards in all of our operations, and we actively
encourage our business partners to demonstrate similar
levels of commitment.
All our locations fully integrate environmental management
into their operational systems and procedures. The Board
reviews environmental performance and our policy annually.
Overview
Managing our impacts to produce a more positive result
is good for the environment and also brings economic
benefits to Tate & Lyle. When reviewing our environmental
footprint, it has always been Tate & Lyle’s policy to focus
particularly on those impacts that have most effect on
the environment and over which we have direct control.
Our three most significant environmental impacts are,
in order of magnitude, energy use, water use and
non-hazardous solid waste production. Energy use is
by far our most significant impact, and we therefore
give it the highest priority.
The new water treatment system at our Sagamore, Indiana, plant
has reduced water discharge to the city of Lafayette by 330,000
gallons per day.
Carbon footprint
In 2007, with the help of environmental consultancy URS,
we developed a carbon footprint model to measure the
impact of our operations on the environment. We began
by measuring the carbon footprint of our UK cane sugar
refining business from sugar cane field to supermarket
shelf. This is known as secondary carbon footprint data,
as it covers cultivation to disposal. Raw cane sugar milling
is almost carbon neutral. Cane grows in the field, waste
fibre from the cane powers the factory and the cane
re-grows each year, usually up to five times without the
Tate & Lyle Annual Report 2008
need for replanting. It is then transported to our European
refineries by ship. Our current secondary carbon footprint
is around 0.43 tonnes of CO2 per one tonne of sugar
produced, which means that the carbon footprint of a
bag of sugar made from cane sugar is currently about
half that of beet sugar. The carbon footprint of cane sugar
produced at our Thames Refinery will be reduced by 25%
in just over one year when our new biomass boiler comes
on stream in March 2009.
We then rolled out a model to measure the primary carbon
footprint for our large sites across all divisions. A primary
carbon footprint measures the carbon associated with
production at a specific site. This is the most applicable
measure for a business-to-business company, as the
ingredients produced are then used in a wide range of
other goods.
Our current primary carbon footprint across all major sites
is 0.39 tonnes of CO2 per tonne of production. Because
this is a relatively new area of analysis, it is difficult at this
stage to benchmark our performance against others.
However, we hope that by calculating our total carbon
footprint, we will be much better able to manage our
overall impact on the environment and can use it to
benchmark our own performance year on year.
Revising our environmental policy
Tate & Lyle’s environmental policy, which applies to all
parts of the Group, was updated this year to bring it into
line with current best practice. A copy of our policy can
be found on our website at www.tateandlyle.com. We also
adopted an environmental mission statement covering
the following points:
■ as a minimum, we comply with all applicable laws
and regulations, and we exceed local requirements
or legislation where commercially feasible;
■ we make continuous efforts to prevent pollution
and improve environmental performance throughout
all our activities;
■ we seek to minimise the use of energy, materials
and natural resources;
■ we strive to develop renewable sources for energy
and materials used in our processes;
■ we assess environmental risks associated with existing
and new activities (or when decommissioning facilities),
and establish controls to ensure that any risks remain
at an acceptable level;
■ we develop renewable products for our customers
to help them reduce their impact on the natural
environment;
■ we encourage all employees to respect and have
concern for the environment through procedures
and training; and
■ we have clearly defined and communicated procedures
as part of our management systems for achieving
these commitments.
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71
How we run the business Corporate social responsibility
Group energy index
Group water index
Group non-hazardous
solid waste index
0.83
0.84 0.81
0.80 0.79
0.81
0.80 0.80
0.78 0.81
1.07
1.16 1.32
0.93 1.02
2003
2004 2005 2006 2007
2003 2004 2005 2006 2007
2003 2004 2005 2006 2007
The smaller the index, the better
the performance.
The smaller the index, the better
the performance.
The smaller the index, the better
the performance.
Calendar year 2007 results
We focus our measurement and our improvement efforts
on the areas that have most environmental and financial
impact. Compared with 2006 results:
■ Energy consumption reduced by 1.3%.
■ Water consumption increased by 3.8%.
■ Non-hazardous solid waste production
increased by 9.7%.
Every 1% improvement in our energy index offers a
cost saving estimated at £1.7 million. An equivalent
improvement in the water index would save £100,000
and, in the non-hazardous solid waste index, £17,500.
This year we again did not achieve our Group target
of an annual 3% reduction on a per unit basis in energy
consumption, although as a result of our continuous
investment programmes we were pleased to have achieved
a slightly greater reduction than the previous year. However,
we did not succeed in reducing Group water consumption
or non-hazardous solid waste production, and therefore
improvements to both these indices are important targets
for 2008.
In January 2008, Tate & Lyle was one of 20 leading food
and drink companies to agree to a UK industry-wide
commitment to improve water efficiency and reduce
water use. This agreement was jointly developed by the
UK Food and Drink Federation and resource efficiency
experts Envirowise.
Investing in renewable energy sources
Reducing energy consumption gets more difficult each
year as we produce more value added products, which
use more energy than producing our traditional products.
Energy is a particular concern for us, because not only
is it a big contributor to our overall carbon footprint, but
it is also one of the most significant costs in our business.
To help reduce energy costs and to improve our
environmental performance, we have developed proprietary
technology to use renewable energy sources (biomass) in
our plants. During the year, construction began on our
£20 million project to build a biomass boiler at Thames
Refinery, UK, which is on target to be completed by
March 2009. This will supply 70% of the refinery’s energy
requirements. We are using similar technology at our new
corn wet mill which is under construction at Fort Dodge,
Iowa. We are also exploring the potential application of
this technology at other plants around the world.
Violation, abatement and compliance orders
The vast majority of our operations completed 2007
without incident. Where Tate & Lyle inadvertently
contravened regulations, largely to do with emission
levels, we reacted immediately to correct the problems.
Managing environmental impacts
Managing environmental impacts is very important at
Tate & Lyle. Environmental risks are included in the
Group-wide risk management process, and are reviewed
and assessed regularly. For more information, see risk
factors on page 34 and corporate governance on page 66.
Measuring data
We collect detailed data and report results from each
operating unit quarterly, using a comprehensive system
that has been validated by our Global Audit and Assurance
department. We then normalise the data to reflect the
amount of product manufactured. This protects the
commercial sensitivities of the data while allowing us to
report publicly on our progress, and make comparisons
between years. The results are then aggregated to create
a single set of indices for the Group, adjusted to take
account of acquisitions and disposals.
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Management systems
Every operating unit has an environmental management
system. Each unit is required to assess its environmental
impact and develop an improvement plan based on
identified areas of priority, focus and opportunity, in line with
the Group’s overall environmental management strategy.
Capital projects are assessed for their environmental
impact, and we investigate whether there are more
environmentally sound ways of achieving our aims.
Each operating unit has incident, emergency and
contingency plans. These are regularly updated to
meet new conditions and requirements. We have crisis
management procedures to provide an effective response
in case of incident or emergency, including escalation to
the Group Crisis Management Team when appropriate.
Training
Employees receive regular training on managing
environmental impacts and changes in legislation, so that
they are always aware of relevant issues. Many operating
units have environmental management committees that
meet regularly to discuss progress.
Customers and suppliers
We work closely with our customers to ensure our
systems meet their requirements. We brief all contractors
on key environmental issues to make sure that we and
they are managing our environmental impact effectively.
Outlook
Energy consumption will continue to be our major
environmental challenge, as energy costs rise and we look
to reduce our per unit carbon emissions. By continuing
to invest in reducing per unit consumption, exploring
alternative energy sources and technology, and encouraging
a culture of concern for environmental issues at all our
plants, we aim both to control costs and improve our
impact on the environment.
Employee health and wellbeing
At Tate & Lyle, we aim to lead the way in employee health.
Programmes will differ across the Group according to local
needs, but all are based on the principle that the Company
has a role to play in helping employees improve their health
by providing information, advice and other support on
health and wellbeing.
The occupational health clinic at Thames Refinery, London, UK.
Calendar year 2007 highlights
UK
Tate & Lyle’s occupational health programme includes
health promotion activities, an occupational health clinic,
and advice on healthy eating and counselling services.
It has been used as a model for other businesses and
public sector organisations by the UK Department of
Health’s Business Communities of Health initiative.
In 2007, we were invited to run workshops at the Skills
for Health Pan London Healthcare Employer Fair to help
others learn from our programme.
Tate & Lyle won a number of awards in 2007, including
the vocational rehabilitation award from Occupational
Health magazine, and a silver award for our active back-
care management programme at the UK Food and Drink
Federation Community Partnership Awards.
Sandra Neylon, who leads our occupational programme,
was also awarded the East London Business Alliance’s
Health Programme Supporter of the Year Award for her
wide-ranging contribution.
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How we run the business Corporate social responsibility
Developments in our UK programme this year include:
Commercial partners/suppliers
■ support for giving up smoking in association with the
statutory ban on smoking in public places, which came
into force on 1 July 2007;
■ stress risk assessment training for managers in line
with the Health and Safety Executive’s best practice
guidelines;
■ baby care first aid classes;
■ comprehensive travel advice and support, including
inoculations;
■ participation in the training of general practitioners
(doctors); and
■ support for national campaigns for back care,
prostate and breast cancer.
Europe
Many of our mainland European plants offer similar
health programmes to the UK. These include Company-
sponsored fitness programmes, health and wellbeing
awareness campaigns, healthy menu options in employee
restaurants and annual health and fitness check-ups.
USA
Tate & Lyle continues to encourage employees to adopt
healthy lifestyles by offering tools and programmes,
such as:
■ ‘Blue Points’ system: we offer this web-based system
to all employees via our healthcare provider. It provides
a platform for employees to initiate and track healthy
behaviours. Employees earn points for meeting certain
health targets, which can be redeemed online for health-
related items such as yoga mats and gym bags.
■ Health risk self-assessment: we encourage employees
to complete this online self-assessment, which is then
reviewed by medical experts from our healthcare
provider. These experts then give feedback and
recommendations to employees.
■ Health and fitness: many plants offer exercise facilities
or Company-sponsored fitness programmes.
■ Stopping smoking/weight management: employees
enrolled in the Blue Cross Blue Shield health plan have
access to various programmes either to help stop
smoking or to manage their weight.
Outlook
Our long-term goal is to raise the standards of employee
health and wellbeing throughout Tate & Lyle. We will
continue to share best practice and ideas more widely
across the Group, as well as with other employers
and healthcare partners, particularly in the UK.
Good, long-term relationships with our partners and
suppliers are very important at Tate & Lyle. We have a
consistent, Group-wide approach, based on our Code
of Conduct, which covers purchasing strategies at global,
regional and local levels. Supply chain ethics are important
to us, and we are committed to sharing best practice
and improving standards among suppliers.
Sugar cane growing in the People’s Democratic Republic of Laos
from where raw sugar will be shipped to Tate & Lyle for refining
from mid-2009 onwards.
Raw material suppliers
Growers and producers of corn and sugar cane, the raw
materials we use to make our products, are our biggest
suppliers, and we have developed long-standing and
mutually beneficial relationships with them over many
years. We apply rigorous standards to our raw materials
suppliers, and survey many of them on their ethical
commitment. We work closely with them to ensure
compliance with our needs, implementing traceability and
ensuring that our customers’ requirements are fully met.
Sugar cane
Auditing the supply chain
During the year, we introduced an auditing programme
designed to evaluate the social, ethical and environmental
performance of our suppliers and to identify any
shortcomings. Where these are found, we will work with
that supplier to encourage the necessary improvement.
We do not purchase our raw sugar from farmers or sugar
mills, but from contract parties, which are government
organisations, co-operatives, etc. Auditing the contract
party alone will not necessarily determine or improve
conditions in the mills supplying sugar for our refining
operations, or of the farmers themselves. We have
therefore taken the decision to audit our second-tier
suppliers with, at this stage, some random sampling
of farmers included.
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Tate & Lyle Annual Report 2008
In order to ensure independence, we have contracted
a third-party organisation, Cert ID, to run this auditing
programme for us. Cert ID is a European certification body
that undertakes social, ethical and sustainable auditing
against the internationally recognised ProTerra standard.
In a rolling three-year period, the auditing programme will
cover over 80 supplying mills in 18 countries, with annual
repeat audits scheduled for those operations based in
countries of particularly high risk.
Fairtrade
Reflecting our long-term commitment to our suppliers,
in February 2008 we announced our decision to convert
all UK retail cane sugar to Fairtrade by the end of 2009.
See page 16 in the sustainable sourcing section for
more details.
Better Sugarcane Initiative
We continue to support the Better Sugarcane Initiative
(BSI), a multi-stakeholder collaboration, whose mission
is to promote measurable improvements in the key
environmental and social impacts of sugar cane production
and primary processing. Hari Morar, Technical Director,
Sugars for Tate & Lyle, is now chairing the BSI. Over the
last year, the initiative has made good progress in
establishing itself on a firm operational footing, including
finalising its core principles and criteria, terms of reference
for technical working groups and appointing the group
leaders, gaining recognition within the UK and internationally,
and recruiting new members and supporters.
Corn
We process around 2% of the US corn crop each year.
The long-term relationships we have built over the years
with the family-owned grain businesses, local farmers
and other commercial partners who provide us with corn
ensure we have the supplies we need for our corn wet
mills. See page 14 in the sustainable sourcing section
for more details.
Sustainable procurement
Aside from our raw material suppliers, we continue to
review procurement to look at how we can encompass
sustainability more fully in our strategies.
Outlook
We aim to continue to improve standards in our supply
chain through developing our work on supply chain ethics,
risk management and sustainable procurement, and by
working increasingly closely with suppliers to share best
practice on a range of issues. We will continue to develop
our supplier audit programme to ensure consistently high
standards across the Group.
Tate & Lyle Annual Report 2008
Communities
Tate & Lyle aims to play a positive role in all the
communities in which we operate. Over the years we have
developed a Group-wide community involvement policy
that forms one of the core components underpinning
our ethical behaviour. Our programme involves building
long-term relationships with local partners to deliver a
shared objective: establishing strong, safe and healthy
communities by investing time and resources into
projects that directly address local needs.
Children from Drew Primary School learn through art on the
VerbalEyes programme with Tate Britain, London, UK.
Overview
Our community partnerships are well supported by
employees, many of whom take part in our programmes.
Tate & Lyle’s community involvement benefits our
employees by enhancing their own local community,
offering significant personal development opportunities
and making Tate & Lyle a company for which they are
proud to work.
Each year we support around 300 organisations, ranging
from long-established charities to fledgling community
organisations. Community support takes many forms,
depending on the needs of the organisation, and includes
funding, employee volunteering, consultancy, donation of
products and equipment donation and, for selected
partners, free use of the Company’s warehousing, office
accommodation and meeting room facilities.
We were delighted to win a silver ‘Big Tick’ award at the
UK’s Business in the Community’s 2007 Jubilee Awards
in recognition of our long-term partnerships with local
organisations. These stretch back almost 30 years in the
case of Community Links and are aimed at supporting
the regeneration of the local community around
Thames Refinery.
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How we run the business Corporate social responsibility
Charitable donations
Our Corporate Donations Committee oversees community
policy throughout the world. Our aims are to select projects
that target local needs and deliver the most positive
impact, and to ensure that ultimately our community
involvement work reflects our broader responsibilities as
a company. Our guidelines for funding and support are:
Europe (not UK)
■ Support for children: our German business,
G.C. HAHN & Co., supports a programme in Upsala-
circus, St Petersburg, that helps reintegrate children
who have been at risk back into the community.
■ Veronesi: our Italian business, Cesalpinia, supports
this cancer research charity.
■ Education – 50%;
■ Environment – 25%;
■ Health – 15%; and
■ Arts – 10%.
Actual community spend by allocation
Year ended 31 March 2008
Arts
9%
Health
15%
Education
56%
Environment
20%
In the financial year to 31 March 2008, Tate & Lyle’s total
worldwide charitable donations were £642,000 (2007 –
£687,000). Our total global pro bono contribution in goods
and services is estimated to have been £254,000, up from
£218,000 in the previous year.
We support many initiatives and local organisations
involved in community regeneration around the world.
Listed here is a selection from each region in the past year.
UK
■ VerbalEyes: in partnership with Tate Britain, we continue
to support this programme in which primary school
children complete a six-month project that uses original
works of art to improve language and literacy skills.
■ Community Links: a local charity working to regenerate
the area of Newham in east London.
■ Community Food Enterprise: a social enterprise
improving community access to affordable fresh fruit
and vegetables in east London.
■ Eastside Young Leaders Academy: east London
institution that works with young African and Caribbean
men to inspire them to become leaders.
■ Hoops4Health: a group of professional basketball
players who work with primary schools to promote
healthy eating and emphasise the importance of
physical exercise.
USA
■ Boys & Girls Club of America: a programme
in Decatur, Illinois, designed to inspire and enable
all young people to realise their full potential.
■ Education: Tate & Lyle gives regular support to a
number of educational institutions, including Brush
College, Associated Colleges of Illinois, and Milliken
and Purdue universities.
■ Loudon Tate & Lyle Performing Arts Center: an
amphitheatre that holds a variety of entertainment
such as seasonal concerts and events.
South Africa
■ Domino Servite School: Tate & Lyle has funded
developments at this school in Kwazulu Natal, and is
partnering with them in the long term to support the
running of the science laboratory.
■ Helenic Community of the West Rand: we support
this Greek school community.
■ Kid’s Haven: we provide support for this children’s
care centre.
Vietnam
Nghe An Tate & Lyle, our sugar business in Vietnam,
supports the following programmes:
■ Roads: provincial and communal road maintenance
in the factory’s cane plantation area.
■ For the Future: supplying text books and school
stationery for under-privileged children when they
start school.
■ Housing: helping to improve housing for cane farmers.
China
■ Nanji village, Nanj Cun West district: we provide waste
clearance and improvements to the village environment.
Employee volunteering
Tate & Lyle employees around the world make huge efforts
to support their local communities. Their involvement is
vital to maintain the long-term good relationships we have
developed with these communities; volunteering also
brings skills and experience from the workplace into the
community that corporate funding alone cannot achieve.
Of the organisations we support, several have been
partners for over a decade and our employees join their
committees, advocate their causes in the wider community
and provide mentoring and business skills.
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Tate & Lyle Annual Report 2008
Results of 2007 Community Involvement Report UK survey:
Tate & Lyle’s performance
Marks out of 4
3.7
3.8
3.9
3.8
3.7
3.8
4.0
3.9
3.6
3.7
3.8
3.9
3.8
3.8
3.7
A
B
2003 2004 2005 2006 2007 2003 2004 2005 2006 2007 2003 2004 2005 2006 2007
C
C
C
C
B
B
B
B
A
A
A
A
C
A Efficiency of response
B Willingness to support
C Contribution to the community
Volunteering also brings benefits to Tate & Lyle. Employees
tell us that they benefit hugely from community work,
which helps them develop their skills and become more
rounded as individuals. A strong volunteer network is vital
to the success of our community involvement programme,
and developing that network across Tate & Lyle is an
important ongoing aim. Here we highlight some of our
employees’ volunteering activities from around the world.
UK
■ Educational visits: 850 students and 100 teachers
visited Thames Refinery, Plaistow Wharf and Sugar Quay
during 50 curriculum-based visits.
■ Gifted & Talented: Tate & Lyle supports the UK
government’s programme for gifted and talented
children, including an art project hosted at Sugar Quay
and a maths event held at Thames Refinery.
■ Supporting teachers: working with the Newham
Education Business Partnership and the Royal Academy
of Engineers, we hosted a ‘Shape the Future’ personal
development day for school teachers at our London plants.
USA
■ Supporting universities: Tate & Lyle supports a number
of research initiatives at local universities, while a number
of senior executives support various educational
programmes.
■ Agricultural Day at Lafayette: employees from our
plants in Lafayette and Sagamore volunteer to help
run the local agricultural day each year.
■ BabyTalk: Tate & Lyle employees are supporters of this
local organisation in Decatur, Illinois, which helps
positively impact early child development.
Tate & Lyle Annual Report 2008
Managing our impact
Our aim is to ensure that all our sites around the
world develop programmes in line with our community
involvement policy, which is ratified by the Board. We
continue to make progress in this, but there are different
levels of activity reflecting the history of Tate & Lyle’s
involvement in the area and the size of our presence.
In locations where we have operated for a long time,
such as the East End of London around Thames Refinery
and Plaistow Wharf, and the Decatur, Illinois, area, we have
long-running partnerships with local organisations and
make a considerable contribution. In other areas where
we have recently acquired sites or built new plants, our
involvement is at an earlier stage. Our aim continues to be
to share best practice and improve internal standards and
reporting around the world through our global Corporate
Donations Committee, so that all parts of the Group develop
mutually beneficial long-term community partnerships.
UK community survey results
Finding out from our partners what they think of our
community involvement work is very important if we are
to continue to improve our programmes and encourage
more employees to volunteer.
This year, responses showed that we are continuing to
maintain our traditionally high level of performance. Our
contribution to the community was rated at 3.7 out of 4,
while 69% of respondents reported an improved capability
to help their target cause, which, while not as high as last
year, still remains significantly higher than previous years.
Outlook
The aim for the coming year will be to integrate further
our community efforts around the world and particularly
to share the benefits of our community involvement
programmes with operations new to the Group.
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This section sets out our financial statements
and other statutory information. Our aim is to
provide clear and comprehensive information
to investors and other stakeholders in
a manner that meets their needs.
Statutory information
79 Directors’ report
82 Directors’ remuneration report
94 Group financial statements
154 Parent company financial
statements
160 Ten-year review (non-statutory)
162 Information for investors
(non-statutory)
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Tate & Lyle Annual Report 2008
Directors’ report
Principal activities of the Group
The principal activities of Tate & Lyle PLC and its subsidiary
and associated undertakings are developing, manufacturing
and marketing food and industrial ingredients that have been
made from renewable resources.
Business review
A review of the Group’s business, its activities and performance
during the year, use of financial instruments, post balance
sheet events and likely future developments is on pages 4 to
56, and the corporate social responsibility report is on pages
68 to 77. The information on these pages that is required to
fulfil the requirements of the business review is incorporated
in this directors’ report by reference.
Results and dividend
The results are considered in detail in the operating and
financial review on pages 41 to 56.
An interim dividend of 6.5p per ordinary share was paid on
8 January 2008. The directors recommend a final dividend
of 16.1p per ordinary share to be paid on 31 July 2008 to
shareholders on the register on 4 July 2008, subject to
approval at the 2008 Annual General Meeting (AGM).
The total dividend for the year is 22.6p per ordinary
share (2007 – 21.5p).
Annual General Meeting
The AGM will be held at the Queen Elizabeth II Centre, Broad
Sanctuary, Westminster, London SW1P 3EE, on Wednesday
23 July 2008 at 11.15 am. Enclosed with this report is a letter
from the Chairman to shareholders. Attached as an appendix
to the letter is the notice convening the meeting, which
includes five items of special business. The letter includes an
explanation of all the resolutions to be proposed at the AGM.
Financial risk policies
A summary of the Company’s treasury policies and objectives
relating to financial risk management, including exposure to
associated risks, is on pages 52 to 56.
Share capital
As at 31 March 2008, the Company had nominal issued
ordinary and preference share capital of £117 million comprising
£115 million in ordinary shares, which includes £1 million in
treasury shares and £2 million in preference shares.
Holders of ordinary shares have the rights accorded to them
under UK Company law, including the right to receive the
Company’s annual report and accounts, attend and speak at
general meetings, appoint proxies and exercise voting rights.
Holders of preference shares have limited voting rights and
may not vote on the disposal of surplus profits after the
dividend on the preference shares has been provided for,
the election of directors, their remuneration, any agreement
between the directors and the Company, or the alteration
of the Articles of Association dealing with any of such matters.
Further details regarding the rights and obligations attached
to share classes are contained in the Articles of Association,
which are available on the Company’s website,
www.tateandlyle.com.
There are no restrictions on the transfer of shares and prior
approval is not required from the Company nor from other
holders for such a transfer. No limitations are placed on the
holding of shares and no share class carries special rights
with regard to the control of the Company. No restrictions
are placed on voting rights other than as outlined above with
respect to preference shares. The Company is not aware of
any agreements between shareholders that may restrict the
transfer or exercise of voting rights.
The Company was given authority at the 2007 AGM to make
market purchases of up to 48,985,295 of its own ordinary
shares. This authority will expire at the 2008 AGM and
approval will be sought from shareholders at that meeting
for a similar authority to be given for a further year.
During the year ended 31 March 2008, the Company
purchased 33,627,000 ordinary shares, at a total cost
of £159,327,758 under the share buyback programme
announced on 18 July 2007. This represents 6.86% of the
issued share capital as at 18 July 2007. Of these, 30,327,000
shares were cancelled and 3,300,000 shares were held
as treasury shares.
To satisfy obligations under employee share plans, the
Company issued 413,068 ordinary shares during the year
and reissued 544,927 ordinary shares from treasury. During
the period 1 April 2008 to 21 May 2008, the Company issued
21,406 ordinary shares and reissued 709,481 ordinary shares
from treasury in connection with employee share plans.
Further information about the Company’s share capital is
on page 131. Information about options granted under the
Company’s employee share schemes is on pages 133 and 134.
Change of control
The Company has committed bank facilities of US$1,110
million, of which US$110 million matures in 2009 and
US$1 billion matures in 2012. Under the terms of these
facilities, the banks can give notice to Tate & Lyle to prepay
outstanding amounts and cancel the commitments where
there is a change of control of the Company.
All of the Company’s share schemes contain provisions
relating to a change of control. Outstanding options and
awards normally vest and become exercisable on a change
of control subject to the satisfaction of any performance
conditions at that time.
Substantial shareholdings
As at 21 May 2008, the Company had been notified under
Rule 5 of the Disclosure and Transparency Rules of the
Financial Services Authority of the following holdings of
voting rights in its shares:
INVESCO plc
Harbert Fund Advisers
Lehman Brothers
International (Europe)
AXA S.A.
Legal & General Group plc
Barclays Global Investors
No. of shares
75,787,643
69,811,234
30,274,961
24,341,998
19,827,451
17,568,133
% held
15.68%
15.28%
6.62%
4.97%
4.12%
3.59%
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Directors’ report
Directors
The current members of the Board, together with their
biographical details, are set out on page 59. Kai Nargolwala
resigned as a director from 31 December 2007.
Retirement and re-election of directors
In accordance with its Articles of Association, one-third
(or the nearest whole number below one-third) of the directors
of Tate & Lyle PLC are required to retire at each AGM, together
with directors appointed by the Board since the previous AGM.
In addition, under the Combined Code (Code), directors are
required to submit themselves for re-election by shareholders
every three years and non-executive directors who have
served more than nine years are subject to annual re-election.
The directors retiring by rotation at the 2008 AGM and offering
themselves for re-election are Sir David Lees and Dr Barry
Zoumas. Sir David Lees, Chairman, has served on the Board
for more than nine years and so is retiring and offering himself
for re-election in accordance with the provisions of the Code.
Stanley Musesengwa and Stuart Strathdee will also be
retiring at the 2008 AGM but will not be offering themselves
for re-election.
Sir David Lees and Dr Barry Zoumas do not have service
contracts. At no time during the year has any director had any
material interest in a contract with the Group, being a contract
of significance in relation to the Group’s business. A statement
of directors’ interests in shares of the Company is on page 92.
Research and development
The Group spent £32 million (2007 – £22 million) on research
and development during the year.
Employment policy and involvement
The average number of employees in the Group during the year
is given in Note 9 on page 111.
Group companies operate within a framework of human
resources policies, practices and regulations appropriate to
their own market sector and country of operation. Policies and
procedures for recruitment, training and career development
promote equality of opportunity regardless of gender, sexual
orientation, age, marital status, disability, race, religion or other
beliefs and ethnic or national origin. The aim is to encourage
a culture in which all employees have the opportunity to develop
as fully as possible in accordance with their individual abilities and
the needs of the Group. The Group remains committed to the
full and fair treatment of people with disabilities in relation to
applications, training, promotion and career development.
Training is concentrated on multi-skilling to encourage flexibility
in working practices. The Group runs a series of international
management programmes to develop management skills and
create valuable opportunities for the cross-fertilisation of
management ideas across the Group.
Employee involvement and feedback is actively encouraged.
A variety of ways are used to consult and inform employees
including a Group-wide magazine, electronic mail, the Group’s
intranet, briefings and roadshows. These arrangements are
designed to facilitate a two-way dialogue and also enable the
development of a common awareness among employees of
the factors affecting the performance of the Group.
Donations
Worldwide charitable donations during the year totalled
£642,000 (2007 – £687,000), of which £412,000 (2007 –
£440,000) was donated in the UK. More details of the Group’s
community involvement can be found on pages 75 to 77.
Again this year, in line with the Group’s policy, no political
donations were made in the European Union (EU). Outside
the EU, the Group’s US business made contributions during
the year totalling US$46,000 (£23,000) (2007 – US$34,000;
£18,000) to state and national political party committees
and to the campaign committees of state candidates affiliated
to the major parties. The total includes US$15,000 (£7,500)
(2007 – US$10,000; £5,000) contributed by the Tate & Lyle
Political Action Committee (PAC). The PAC is funded entirely
by US employees. Employee contributions are entirely
voluntary and no pressure is placed on US employees to
participate. No funds are provided to the PAC by Tate & Lyle
but under US law, an employee-funded PAC must bear the
name of the employing company.
Payment to suppliers
It is the Group’s policy that UK operating companies should
follow the CBI Prompt Payers’ Code. The Code requires the
Company to agree the terms of payment with its suppliers,
to ensure its suppliers are aware of those terms and to
abide by them. It is the Group’s policy also to apply the
requirements of the Code to wholly owned companies
around the world, wherever possible.
Tate & Lyle PLC is a holding company and had no amounts
owing to trade creditors at 31 March 2008. The Group’s
creditor days outstanding at 31 March 2008 were 42 days
(2007 – 41 days).
Directors’ responsibilities for the financial statements
The directors are responsible for preparing the annual report,
the directors’ remuneration report and the Group financial
statements in accordance with applicable law and International
Financial Reporting Standards (IFRS) as adopted by the EU,
and for preparing the parent company financial statements
and the directors’ remuneration report in accordance with
applicable law and United Kingdom Accounting Standards
(United Kingdom Generally Accepted Accounting Practice).
The directors are responsible for preparing financial
statements for each financial year that give a true and fair
view, in accordance with IFRS as adopted by the EU, of the
state of affairs of the Group and of the profit or loss of the
Group and a true and fair view, in accordance with United
Kingdom Generally Accepted Accounting Practice, of the
state of affairs of the Company for that period. In preparing
those financial statements, the directors are required to:
■
select suitable accounting policies and then apply
them consistently;
■ make judgements and estimates that are reasonable
■
and prudent; and
state whether the Group financial statements comply
with IFRS as adopted by the EU and, with regard to the
parent company financial statements, whether applicable
accounting standards have been followed, subject to
any material departures disclosed and explained in the
financial statements.
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Tate & Lyle Annual Report 2008
Directors’ report
The directors confirm that they have complied with the
above requirements in preparing the financial statements.
The directors are responsible for keeping proper accounting
records that disclose with reasonable accuracy at any time
the financial position of the Company and the Group and to
enable them to ensure that the Group financial statements
comply with the Companies Act 1985 and Article 4 of the IAS
Regulation and that the parent company financial statements
and the directors’ remuneration report comply with the
Companies Act 1985. They are also responsible for
safeguarding the assets of the Company and the Group
and hence for taking reasonable steps for the prevention
and detection of fraud and other irregularities.
The directors also confirm that, in accordance with the
Disclosure and Transparency Rules of the Financial Services
Authority, the business review includes a fair review of the
development and performance of the business and the
position of the Company and Group taken as a whole,
together with a description of the principal risks and
uncertainties they face.
So far as each director is aware, there is no relevant audit
information (that is, information needed by the Company’s
auditors in connection with preparing their reports) of which
the Company’s auditors are unaware. Each director has taken
all the steps that he/she ought to have taken in his/her duty
as a director in order to make himself/herself aware of any
relevant audit information and to establish that the Company’s
auditors are aware of that information.
Auditors
The auditors, PricewaterhouseCoopers LLP, have signified their
willingness to continue in office and a resolution reappointing
them as auditors will be proposed at the 2008 AGM.
On behalf of the Board
Robert Gibber
Company Secretary
21 May 2008
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Tate & Lyle Annual Report 2008
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Directors’ remuneration report
This report has been prepared in accordance with the
requirements of Schedule 7A of the Companies Act 1985
(the Act) and the Listing Rules of the UK Listing Authority.
PricewaterhouseCoopers LLP have audited the contents of
the report to the extent required by the Act (the tabular
information on pages 89 to 92). A resolution to approve this
report will be proposed at the Annual General Meeting (AGM)
on 23 July 2008.
Remuneration Committee
The Remuneration Committee (the Committee) comprises all
the independent non-executive directors of the Company and
the Chairman of the Company. The following are the members
who served during the year: Evert Henkes (Chairman),
Elisabeth Airey, Richard Delbridge, Sir David Lees, Kai
Nargolwala (until 31 December 2007), Robert Walker
and Dr Barry Zoumas.
The Chairman of the Company, Sir David Lees, was appointed
a member of the Committee from 1 April 2007 as permitted
under the revised Combined Code published in June 2006.
He does not participate in discussions or decisions relating
to his own remuneration arrangements. The Committee met
seven times during the year. Individual members’ attendance
records at meetings during the year are given in the table on
page 64.
The terms of reference of the Committee, a copy of which can
be found on the Company’s website at www.tateandlyle.com,
are reviewed annually to ensure they meet best practice.
The Committee conducts a review of its work and effectiveness
each year and any recommendations from this review are
reported to the Board. The 2008 review concluded that the
Committee had fulfilled its role and responsibilities appropriately.
The Committee determines the individual remuneration
packages of each executive director and other members
of the Group Management Committee (see page 60). This
includes base salary, bonus, long-term incentives, benefits
and terms of employment, including those upon which their
service may be terminated. Additionally, the Committee
approves the base salary, long-term incentives and benefits
of certain other senior executives. In consultation with the
Chief Executive, the Committee also determines the
remuneration of the Chairman. The Chief Executive
(Iain Ferguson), Group Compensation Manager (Matt Smith)
and Company Secretary and General Counsel (Robert Gibber),
who acts as Secretary to the Committee, are normally invited
to attend meetings, although not when their own remuneration
arrangements are discussed.
To ensure that the Group’s remuneration practices remain
market competitive, the Committee receives advice from
independent remuneration consultants. During the year, a full
external review of executive remuneration advisors was carried
out. Following this review, the Committee decided to appoint
Jeremy Orbell of Hewitt Associates (Hewitt) to act as its
principal adviser on executive remuneration arrangements.
This appointment was in accordance with the Committee’s
policy whereby an individual consultant appointed to advise
the Committee on the remuneration of executive directors
and certain other senior executives shall not also advise
Group management on the remuneration of any other
executives in the Group.
In addition to market remuneration data provided by Hewitt,
the Committee is provided with data from a survey published
by Towers Perrin, and with Total Shareholder Return
performance data and ranking information for the Performance
Share Plan and Deferred Bonus Share Plan from Kepler
Associates. Towers Perrin and Kepler Associates provided
no other services to the Group.
Remuneration policy
The Remuneration Committee is responsible for setting the
remuneration of the executive directors in accordance with
a policy determined by the Committee and agreed with the
Board. The remuneration policy for executive directors and
senior executives is to provide remuneration packages that
attract, retain and motivate high-calibre individuals to ensure
that the Group is managed successfully to the benefit of
shareholders. To achieve this, the remuneration package
is designed to:
■
■
■
■
■
be competitive and commensurate with other UK-based
international businesses of similar size;
align the interests of executives and shareholders by
rewarding the creation of sustained growth in
shareholder value;
reward above-average performance;
ensure that performance-related elements form a
significant proportion of the total remuneration package;
and
take into account local country practice.
It is intended that this policy continues to apply for the year
ending 31 March 2009 and subsequent years.
Review of executive remuneration
Each year, with the help of its independent remuneration
adviser, the Committee reviews the appropriateness of the
Company’s executive remuneration arrangements. Following
its review in 2008, the Committee considers that the existing
executive remuneration package remains broadly appropriate
and no changes to the current arrangements are proposed other
than two changes to the Deferred Bonus Share Plan (DBSP).
Currently, under the DBSP, participants are awarded one
matching share for every three lodged shares based upon
continued employment over the three-year performance
period. In addition, when measuring the performance
condition, there is no apportionment for intermediate rankings
in the comparator group between median and upper quartile.
Following its review in 2008, the Committee concluded that
these features of the DBSP were no longer in line with
accepted best practice. Accordingly, for awards under the
DBSP for the year ending 31 March 2009 and thereafter, the
one-for-three share match based on continued employment
will be removed and the pro rata apportionment of awards
between median and upper quartile vesting will be introduced.
Neither of these changes require shareholder approval. Full
details of how the DBSP operates can be found on page 85.
No changes are proposed to either the annual bonus
scheme or the Performance Share Plan for the year
ending 31 March 2009.
The last comprehensive review of all aspects of the executive
remuneration package was undertaken in 2005. Therefore,
the Committee has decided to undertake a further full review
by the end of the 2008 calendar year. The review process is
underway and its conclusions will be reported in next year’s
directors’ remuneration report.
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Tate & Lyle Annual Report 2008
Directors’ remuneration report
Remuneration package
Composition
The current remuneration package for executive directors
consists of base salary, annual bonus, long-term incentives,
pension and other benefits. The Company’s policy is to ensure
that a significant proportion of the total remuneration package
is performance-related, even at target levels.
The relative proportions of the Chief Executive’s and the
other executive directors’ remuneration, when valued at both
on-target and stretch performance levels (on the basis of the
expected value of the long-term incentives but excluding post-
retirement benefits and allowances paid in lieu of pensions),
are shown in the charts below.
Target performance
Chief Executive
Other executive directors
Non-performance-
related pay 47%
Non-performance-
related pay 48%
53%
Performance-
related pay
52%
Performance-
related pay
Stretch performance
Chief Executive
Other executive directors
Non-performance-
related pay 22%
Non-performance-
related pay 24%
78%
Performance-
related pay
76%
Performance-
related pay
Base salary
The Group’s policy is for base salaries to take account of the
median relative to similar companies (generally taken as those
occupying positions 50 to 130 of the FTSE Index, where
equivalent or similar roles are deemed to exist) and also to
reflect job responsibilities and the sustained level of individual
performance. The Committee reviews the base salary of each
executive director annually.
The most recent annual review of executive directors’ base
salaries occurred on 1 April 2008. When undertaking this
review, the Committee considered external market data
supplied by its independent remuneration adviser, individual
performance, the Group’s financial performance and also the
level of pay awards made to other employees and executives.
Following this review, the Committee decided to award a
3.0% increase to each executive director. The base salaries
for each executive director are shown in the table above.
Tate & Lyle Annual Report 2008
Director
As at 1 April 2008 As at 1 April 2007
Iain Ferguson
Stanley Musesengwa1
John Nicholas
Stuart Strathdee1
£726,000
£504,500
£417,000
£343,000
£705,000
£490,000
£405,000
£333,000
1. As announced on 2 May 2008 Stanley Musesengwa and Stuart Strathdee
will stand down from the Board at the AGM on 23 July 2008.
Stanley Musesengwa will then leave the Group. Stuart Strathdee will
remain with Tate & Lyle until July 2009.
Benefits
Benefits comprise principally a company car, or a cash
allowance in lieu; health insurance; and premiums paid on
life assurance policies. These benefits do not form part of
pensionable earnings.
Annual bonus scheme
The Group operates an annual cash bonus scheme for
executive directors and senior executives, which is determined
by reference to the performance of the Group, or appropriate
division or subsidiary, primarily against financial objectives.
The Group’s policy is that annual bonuses payable under
the scheme are capped at 100% of base salary or lower,
dependent on the executive’s responsibilities. There is a
threshold level below which no bonus is paid. The Committee
reviews the attainment of the financial targets and agrees the
bonus payments. Bonuses paid to executive directors do not
form part of pensionable earnings.
For the year ended 31 March 2008, the threshold, target and
maximum award level for all the executive directors was 10%,
50% and 100% of base salary respectively.
The performance criteria for the annual bonus scheme are
set by the Committee at the beginning of each financial
year. In setting these targets, the Committee considers both
the Group’s annual operating plan and the need to show
continuous year-on-year improvement. For the year ended
31 March 2008, the target criteria consisted of threshold and
target awards payable on the achievement of a predetermined
level of Group profit before tax, exceptional items and
amortisation (PBTEA), and a maximum award payable for the
achievement of a PBTEA level in excess of target performance.
For the year ended 31 March 2008, for bonus purposes,
PBTEA was based on the performance of the Group’s
continuing businesses (excluding the results of businesses
sold during the year).
To ensure that bonuses are not inflated or deflated as
a result of exchange rate movements during the year,
the PBTEA numbers for bonus purposes are re-stated on
the basis of the exchange rates used for the Group’s annual
operating plan agreed by the Board at the start of the year.
For both the prior year ended 31 March 2007 and current
year ended 31 March 2008, this had a favourable impact,
increasing the publicly stated profit figure for the bonus
calculation, while for the year ended 31 March 2006,
it had an adverse effect.
The PBTEA achieved by the Group in its continuing
businesses for the year ended 31 March 2008, restated on
a constant exchange rate basis, exceeded the threshold level
of performance but did not reach the predetermined target
level of performance. As a result, the executive directors
received a bonus of 35.5% of base salary.
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Directors’ remuneration report
Executive directors and other selected senior executives have
the opportunity to invest up to 50% of their cash bonus for
the year ended 31 March 2008 in Tate & Lyle shares through
the Deferred Bonus Share Plan, details of which can be found
on page 85.
Long-term incentive arrangements
The Committee believes that performance-based long-term
incentive plans (LTIPs) provide executive directors and senior
executives with long-term rewards that closely align with
shareholders’ interests and are an important component
of the overall executive remuneration package.
The Company currently operates two LTIPs, the Tate & Lyle
2003 Performance Share Plan and the Tate & Lyle 2005
Deferred Bonus Share Plan. The Remuneration Committee
is responsible for the operation of both LTIPs.
Between August 2000 and June 2004, options were granted
under the 2000 Executive Share Option Scheme (2000
Scheme) to executive directors and other senior employees.
In June 2005, the Committee decided to suspend granting
options under the 2000 Scheme. While the Committee retains
the discretion to make option grants in the future in exceptional
circumstances, for example, in hiring packages, there is no
current intention to make use of this discretionary power.
No options have been granted under the 2000 Scheme
since it was suspended.
Performance Share Plan
Shareholders approved the Performance Share Plan (PSP) at
the AGM in July 2003. Executive directors and other selected
senior executives are eligible to participate in the PSP at the
discretion of the Committee. Awards of shares under the PSP
are not pensionable in any circumstances.
Participants are awarded annually a conditional right to
receive a number of Tate & Lyle ordinary shares in value up
to a maximum of 175% of base salary and calculated by
reference to the average of the daily closing prices of
Tate & Lyle ordinary shares during the six months preceding
the beginning of the measurement period. The number of
shares that a participant receives depends on the Group’s
performance during the measurement period, which is the
three years commencing on 1 April in the year of the award.
Performance is measured by comparing the Total Shareholder
Return, or TSR (share price growth plus reinvested dividends),
from Tate & Lyle relative to a comparator group of companies.
All share prices for the purposes of the TSR calculation are
based on a six-month average. The Committee chose relative
TSR for the PSP as it closely aligns executives’ and
shareholders’ interests and is an objective measure of the
value created for shareholders. The comparator group consists
of the companies occupying positions 50 to 130 of the FTSE
Index at the beginning of the measurement period. The
Committee considers this to be an appropriate comparator
group for Tate & Lyle given the Company’s position in the
FTSE, the wide range of market capitalisation between the
lower and upper ends of the FTSE Index, and the fact that the
Company is expected to remain within the proposed peer
group for the foreseeable future. The Committee reviews the
performance measurement metrics and the continued validity
of the comparator group annually.
If, at the end of the measurement period, Tate & Lyle ranks in
the upper quartile of the comparator group, participants in the
PSP will receive all of the shares conditionally awarded to
them. If the ranking is at the median level, 25% of the shares
will be received. No shares will be received for below median
performance. For intermediate rankings between median and
upper quartile, participants will receive a proportionate number
of shares increasing on a straight-line basis. The vesting scale
is shown in the graph below. There is no re-testing of the
performance condition.
PSP vesting schedule
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100%
75%
50%
25%
0%
Median
Upper
quartile
Irrespective of Tate & Lyle’s TSR, before any shares become
eligible for release, the Committee must be satisfied that this is
justified by the underlying financial performance of the Group
over the measurement period.
At the end of the three-year measurement period, the
conditional award is converted into a deferred right to acquire
the appropriate number of shares, which will not be released
to the participant for one further year other than in the specific
circumstances set out in the rules of the PSP. As approved by
shareholders at the 2005 AGM, for awards made since 2005
participants will benefit from payments in lieu of dividends
during the retention period on those shares which have
already vested. If a participant resigns during the one-year
retention period, the deferred right to acquire the appropriate
number of shares will lapse.
In the event of a change of control of the Company in the first
year of the performance period, participants will receive no
shares. However, in the event of a change of control in the
second or third year, participants will receive a proportion of
the potential award, calculated according to the degree of
satisfaction of the performance condition and the length of
time elapsed. In the event of a change of control in the fourth
year, participants will receive the full number of shares which
vest on satisfaction of the performance condition. If the
performance condition is not satisfied, participants will not
receive any shares.
Details of the measurement of the performance condition for
the PSP award in June 2005 are set out on page 88.
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Tate & Lyle Annual Report 2008
Directors’ remuneration report
Deferred Bonus Share Plan
Shareholders approved the Deferred Bonus Share Plan
(DBSP) at the AGM in July 2005. The Committee has the
discretion to select senior employees of the Group to
participate in the DBSP. Currently, participation is restricted to
the executive directors and other key senior executives.
Under the DBSP, executives have the opportunity to defer
up to 50% of their annual cash bonus (after deduction of tax,
national insurance or other social security payments) and
invest the amount deferred in the Company’s shares.
Subject to the satisfaction of employment conditions and a
performance condition over the performance period,
participants will receive awards of matching shares based on
the number of shares which could have been acquired from
the gross bonus amount deferred by the participant (lodged
shares). Awards of matching shares are not pensionable in
any circumstances.
The performance target is linked to the Company’s TSR
relative to a comparator group of companies over a three-year
period. The Committee chose relative TSR for the DBSP as it
closely aligns executives’ and shareholders’ interests and is an
objective measure of the value created for shareholders. For
the DBSP, the comparator group against which Tate & Lyle’s
relative TSR performance is measured is the same as for the
PSP, being companies at positions 50 to 130 of the FTSE
Index at the start of the performance period. All share prices
for the purposes of the TSR calculation are based on a
six-month average.
The ratio of matching shares awarded under the DBSP is:
■
■
if Tate & Lyle’s relative TSR during the three-year
performance period is between median and upper quartile
of the comparator group of companies, one matching
share will be awarded for each lodged share; or
if Tate & Lyle’s relative TSR during the three-year
performance period reaches the upper quartile of the
comparator group, two matching shares will be awarded
for each lodged share.
There is no re-testing of the performance condition. For
intermediate rankings in the comparator group between
median and upper quartile, pro rata apportionment has been
introduced for awards granted in 2008, but it does not apply
to awards in prior years. During the performance period,
dividends are paid on the deferred shares (since the shares
in effect already belong to the executive) but not on
matching shares.
For awards between 2005 and 2007, if the shares are
held throughout the three-year performance period, and
the executive continues to be employed by the Company,
matching shares are awarded on the basis of one matching
share for every three lodged shares. However, as explained
on page 82, for awards made in 2008 (in respect of bonuses
paid for the year ended 31 March 2008) and thereafter, the
Committee has decided to remove the one-for-three share
match based on continued employment.
In the event of a change of control of the Company, the
number of matching shares will be calculated by pro-rating
to reflect the part of the performance period that has elapsed
up to the date of change of control, and by applying the
performance condition. If the date of change of control is within
the first year of the performance period, no matching shares
will be received.
Details of the measurement of the performance condition for
the DBSP award in August 2005 are set out on page 88.
The Committee has given careful consideration to the use of
relative TSR measured against the same comparator group
of companies for the DBSP and the PSP. The Committee
considers relative TSR to be the most objective measure of
the value created for shareholders and, as such, it remains
appropriate to use this performance condition for both LTIPs.
The Committee will reconsider this as part of the full review
of the Group’s executive remuneration arrangements to be
undertaken later this year.
Sharesave Scheme
The Company has a Sharesave Scheme that is open to
all employees in the UK, including executive directors.
No performance conditions are attached to options granted
under the Scheme as it is an all-employee scheme. Options
granted to Scheme participants are normally set at a discount
of 10% to the market value of the shares at grant.
Change of control and voting
Some of the Company’s employee share plans include
restrictions on transfer of shares while the shares are subject
to the plan. All of the Company’s share plans contain
provisions relating to a change of control (as explained in more
detail above). Outstanding awards and options would normally
vest and become exercisable on a change in control, subject
to the satisfaction of any performance conditions at that time.
Where participants are the beneficial owners of the shares
under an employee share plan, but not the registered owner,
the voting rights are normally exercised by the registered
owner at the direction of the participants.
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Dilution
To satisfy options granted under the 1992 Executive Share
Option Scheme (which was closed in July 2000) and the UK
all-employee Sharesave Scheme, the Company issues new
shares. To satisfy outstanding awards under the LTIPs, the
Company either uses the re-issue of Treasury shares or
existing shares that have been purchased by the Trustees of
the Tate & Lyle Employee Benefit Trust. In the ten-year period
to 31 March 2008, awards made under the Company’s share
schemes represented 3.6% (2007 – 2.7%) of the Company’s
issued ordinary share capital, leaving available dilution
headroom of 6.4% (2007 – 7.3%).
Executive shareholding policy
To align the interests of executive directors with those of
shareholders, a policy is in place under which executive
directors are expected to build and maintain a shareholding
in the Company equivalent to one times base salary. Executive
directors who have not met their target shareholding are
expected to retain a significant proportion of shares acquired
through the Company’s long-term incentive plans in order to
meet their target.
External appointments
The Board believes that the Company can benefit from
its executive directors holding a non-executive directorship.
Such appointments are subject to the approval of the Board
and are normally restricted to one for each executive director.
Fees may be retained by the executive director concerned.
Stuart Strathdee is a non-executive director of James Finlay
Limited, from which he retains the fees payable of £16,500
per annum. Stanley Musesengwa is a non-executive director of
Croda International PLC, from which he retains the fees payable
of £37,500 per annum. John Nicholas is a non-executive
director of Rotork p.l.c (appointed from 28 February 2008),
from which he retains the fees payable of £38,000 per annum.
Pensions
Policy
The Company’s policy is to provide retirement and other
benefits which reflect local market practice at median levels.
Retirement benefits, in the form of pension and/or lump sums,
are provided through tax-approved schemes, where possible
covering executives in the country and business sector in
which they perform their principal duties.
The Group’s largest pension scheme is the UK-based
Tate & Lyle Group Pension Scheme (Group Scheme), which
is a defined benefit arrangement. The Company closed the
Group Scheme to new entrants from 1 April 2002 and since
then new employees have been offered defined contribution
type pension provision through a Stakeholder Plan, which is
an insurance-based contract.
Individual executive directors
Stanley Musesengwa is a member of the Group Scheme who
accrues pension at a rate of 1/30th of pensionable earnings
for each year of service. Prior to 6 April 2006, the extent to
which his basic salary was pensionable was restricted by the
Statutory Earnings Cap and he received a cash allowance
based on a percentage of his basic salary in excess of this
Cap. The new tax regime introduced on 6 April 2006 removed
the Statutory Earnings Cap and Stanley Musesengwa elected
to forego his cash allowance and receive pension accrual after
this date based on his full basic salary without restriction.
His pensionable earnings in relation to pensionable service
accrued before 6 April 2006 remain restricted by an Earnings
Cap which is Scheme-specific and increased each year on
the same basis that applied to the Statutory Earnings Cap.
His final pensionable earnings will be his highest basic salary
in the last five completed tax years before retirement or
leaving, subject to the Earnings Cap restriction explained
above. The benefit also includes a widow’s pension payable
on his death and a lump sum on death in service. Once in
payment to him or his widow, the pension is increased each
year in line with the RPI up to a maximum of 5%, with a
minimum of 3%. Bonuses are not pensionable.
Stuart Strathdee is a member of the Group Scheme
and is eligible for a pension equal to two-thirds of his final
pensionable earnings (highest basic salary in the last five
completed tax years) payable from his normal retirement date.
The benefit also includes a widow’s pension payable on his
death and a lump sum on death in service. Once in payment,
his pension (and any subsequent widow’s pension) is
increased each year in line with the UK Retail Price Index (RPI)
up to a maximum of 5%, with a minimum of 3%. Bonuses
are not pensionable. During the course of the year, Stuart
Strathdee completed the maximum service that counts for
pension purposes so he no longer accrues any additional
pensionable service. His accrued pension, however, will
continue to increase in line with his pensionable earnings
while he remains in the Company’s employment. When the
new tax regime for UK pensions was introduced on 6 April
2006, Stuart Strathdee elected to continue with future pension
accrual, as opposed to taking the cash alternative, so
potentially he could incur a tax charge on the value of any
benefits in excess of the relevant lifetime tax allowance.
Iain Ferguson and John Nicholas are not members of the
Group Scheme for pension purposes and accordingly accrue
no pension benefits under this Scheme. Both of them are
provided with life assurance cover and they also participate
in the Group Income Protection Scheme, which applies to all
UK employees who are not otherwise covered for ill-health
benefits under the Group Scheme. The Group’s policy is that,
to the extent that executive directors receive salary that is not
pensionable on a tax-approved basis, they are paid a cash
allowance calculated as a percentage of base salary from
which they make their own pension arrangements.
Details of the accrued pension benefits for those executive
directors who participate in the Group Scheme are given
on page 92. Details of amounts paid in lieu of pensions are
included in the table on page 89, under Pension Allowance.
86
Tate & Lyle Annual Report 2008
Directors’ remuneration report
Service contracts
Policy
The Company’s policy is that contracts for executive directors
should be terminable by the Company on a maximum of one
year’s notice, except in special circumstances, and by the
individual director on up to six months’ notice. In the event
of early termination of an executive director’s contract,
the Company’s policy is to take legally appropriate mitigation
factors into account in determining the amount of
compensation payable to an executive director.
Executive directors
All the executive directors have contracts that are terminable
by the Company on not more than one year’s notice and
by the individual director on six months’ notice. As regards
mitigation, in a case where the Company seeks early
termination of the contract (other than where summary
dismissal is appropriate), under the service contracts for
Iain Ferguson, Stanley Musesengwa and John Nicholas, the
Company has the right, but not the obligation, to pay in lieu
of notice, the salary and contractual benefits that the director
would have received during the notice period. The Company
may as a consequence make a reduced payment, or require
phased payment, so as to ensure the relevant director fulfils
his obligation to mitigate his losses.
In the case of the older contract of Stuart Strathdee, if the
Company seeks early termination of the service contract
(other than where summary dismissal is appropriate), the
Company is contractually obliged to provide compensation
to the director equivalent to the value of the salary and
contractual benefits that he would have received during
the notice period.
The details of the executive directors’ service contracts as at
31 March 2008 are given in the table below.
Director
Notes
Date of contract
Unexpired
term
Notice
period
1
Iain Ferguson
John Nicholas
1
Stanley Musesengwa 1,3
Stuart Strathdee
15 April 2003 52 weeks
1 June 2006 52 weeks
4 June 2003 52 weeks
2,3 1 November 1995 52 weeks
52 weeks
52 weeks
52 weeks
52 weeks
1.
2.
In the event of early termination of the director’s service contract
(other than where summary dismissal is appropriate), the Company
has the right to pay, in lieu of notice, the salary and contractual benefits
that he would have received during the relevant notice period.
In the event of early termination of the director’s service contract
(other than where summary dismissal is appropriate), the Company is
liable to provide compensation to the director equivalent to the value of
the salary and contractual benefits that he would have received during
the relevant notice period.
3. As announced on 2 May 2008, Stanley Musesengwa and Stuart Strathdee
will stand down from the Board at the AGM on 23 July 2008.
Stanley Musesengwa will then leave the Group. Stuart Strathdee will
remain with Tate & Lyle until July 2009.
Chairman and non-executive directors
Chairman
Sir David Lees was appointed non-executive Chairman
on 1 October 1998 for an initial period of three years.
This appointment was extended by the Board upon the
recommendation of the Nominations Committee until
30 September 2002, and continues thereafter terminable by
the Company or Sir David on not less than one year’s notice.
His fees, which are reviewed annually, are determined by
the Remuneration Committee in consultation with the Chief
Executive. Following the most recent review on 1 October
2007, the Remuneration Committee approved an increase
in the Chairman’s fee to £330,500 (2007 – £312,500).
Non-executive directors
The Company’s policy is that the fees of non-executive
directors, which are determined by the Board, are set
at a level which will attract individuals with the necessary
experience and ability to make a substantial contribution
to the Group’s affairs. The fees paid are commensurate
with those paid by other UK listed companies.
The non-executive directors do not participate in the Group’s
incentive or pension schemes, nor do they receive other
benefits. The non-executive directors do not have service
contracts or notice periods, but under the terms of their
appointment they are usually expected to serve on the
Board for between three and nine years, with a review every
three years, subject to their re-election by shareholders in
general meeting. Non-executive directors have no right to
compensation on the early termination of their appointment.
The fees received by the non-executive directors are
determined by the Board and are reviewed annually.
In addition to the basic fee for each non-executive director
and the Senior Independent Director, supplements are paid
to the Chairmen of the Audit and Remuneration Committees
to reflect the extra responsibilities attached to these positions.
A supplement is also paid to Dr Barry Zoumas for chairing
the Tate & Lyle Research Advisory Group.
The most recent review of non-executive directors’ fees
occurred on 1 April 2008. The fees are shown in the
table below.
Basic fees (per annum)
As at 1 April 2008 As at 1 April 2007
Non-executive director
Senior Independent Director
£48,000
£54,500
£46,500
£53,000
Supplements (per annum)
As at 1 April 2008 As at 1 April 2007
Chairman of Audit Committee
Chairman of Remuneration Committee
Chairman of Research Advisory Group
£15,000
£10,000
£21,000
£15,000
£8,500
£21,000
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2005 PSP and DBSP awards total shareholder return
Tate & Lyle and the comparator group (FTSE 50 to 130)
1 April 2005 to 31 March 2008
R
S
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r
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y
-
3
%
300
250
200
150
100
50
0
-50
-100
Tate & Lyle
Bottom
quartile
Third
quartile
Second
quartile
Top
quartile
Each bar in the chart represents a company in the comparator group.
Source: Kepler Associates
Directors’ remuneration report
Total shareholder return (TSR) performance
The graph below, as required under Schedule 7A of the Act,
illustrates the cumulative TSR performance (share price
growth plus reinvested dividends) of Tate & Lyle against
a ‘broad equity market index’ over the past five years.
The FTSE 100 Index is considered to be the most appropriate
benchmark for this purpose as the Company has remained
in or just outside the UK’s top 100 companies by market
capitalisation during the relevant period. The graph shows
the TSR for the FTSE 100 Index and Tate & Lyle in the five
years from 31 March 2003.
Tate & Lyle’s five-year cumulative total shareholder return
Value of £100 invested on 31 March 2003
Tate & Lyle
FTSE 100 Index
£
250
200
150
100
50
March 03
March 04
March 05
March 06
March 07
March 08
Source: Kepler Associates
2004 PSP award – TSR performance
As stated in last year’s annual report, 100% of the conditional
award made in June 2004 converted into a deferred right to
acquire Tate & Lyle shares. In accordance with the rules of the
PSP, on 1 April 2008 these deferred shares became eligible
for release following the end of the one-year retention period.
2005 PSP and DBSP awards – TSR performance
As shown in the table above, for the performance period from
1 April 2005 to 31 March 2008 in relation to the PSP award
made in June 2005 and the DBSP award made in August
2005, Tate & Lyle’s share price growth and dividend yields
resulted in a TSR that ranked Tate & Lyle at 58th position
(28th percentile) in the comparator group of companies
(being companies occupying the position of 50 to 130 in the
FTSE Index at the start of the measurement period). This is
below the minimum required median performance and as
such the PSP award in June 2005 has not vested and has
lapsed. There is no retesting of the performance condition.
The DBSP award in August 2005 has also not met the
TSR element of the performance condition. Accordingly,
participants who have remained in continuous employment for
the three-year performance period will receive one matching
share for every three lodged shares.
88
Tate & Lyle Annual Report 2008
Directors’ remuneration report
Directors’ emoluments
The following table shows the emoluments of Tate & Lyle PLC directors for the year ended 31 March 2008.
Salary
and fees
£000
Pension
allowance
£000
Benefits
and other
allowances1
£000
Annual
bonus
£000
Total
year to
31 March
2008
£000
Total
year to
31 March
2007
£000
Chairman
Sir David Lees
Executive directors
Iain Ferguson
Stanley Musesengwa2
John Nicholas
Stuart Strathdee
Non-executive directors
Elisabeth Airey
Richard Delbridge
Evert Henkes
Robert Walker
Dr Barry Zoumas
Former directors
Kai Nargolwala3
Directors who retired before
31 March 2007
Totals
321
705
490
405
333
47
68
55
47
68
35
–
–
282
–
101
–
–
–
–
–
–
–
–
27
27
11
14
12
–
–
–
–
–
–
–
–
348
330
250
174
144
118
1 264
675
664
463
1 590
873
616
600
–
–
–
–
–
–
–
47
68
55
47
68
35
–
11
63
50
44
64
44
351
4 636
2 574
383
91
686
3 734
1. Benefits for the Chairman and the executive directors include the provision of a car (or cash allowance in lieu). Other benefits for the executive directors include
health insurance and premiums on life assurance policies (where not provided by pension benefit plans). Allowances comprise payments made in relation to life
assurance policies (where not provided by pension benefit plans).
2. As announced on 2 May 2008, Stanley Musesengwa will leave Tate & Lyle at the end of July 2008. Under the terms of his leaving arrangements, he will be
paid the equivalent of nine months’ salary in lieu of notice, which is £378,375. He will also be eligible to receive a bonus in respect of the period from 1 April
to 31 July 2008.
3. Kai Nargolwala resigned from the Board from 31 December 2007.
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Directors’ remuneration report
Performance Share Plan
Conditional rights to Tate & Lyle PLC ordinary shares under the Performance Share Plan (PSP) held by directors at 1 April 2007 and
31 March 2008, together with awards made during the year, were as follows:
Director
Iain Ferguson
Stanley Musesengwa
John Nicholas
Stuart Strathdee
Conditional
awards
Awards held at made during
the year
1 April 2007
Conditional
Deferred
575 742
362 786
69 902
244 679
147 308
80 350
–
50 218
151 730
87 881
72 636
59 723
Awards
released
during the
year
147 308
80 350
–
50 218
Awards
deferred
during the
year
192 401
137 779
–
91 309
Awards held at
31 March 2008
Conditional
Deferred
535 071
312 888
142 538
213 093
192 401
137 779
–
91 309
1. On 1 April 2006, 84% of the conditional award made in 2003 was converted into a deferred right to acquire the relevant number of Tate & Lyle shares.
The share price at the date of award on 1 August 2003 and on 1 April 2006 was 343p and 571p respectively. Subject to the rules of the PSP, these deferred
shares became eligible for release on 1 April 2007, and the share price on that day was 575p.
2. On 1 April 2007, 100% of the conditional award made in 2004 was converted into a deferred right to acquire the relevant number of Tate & Lyle shares.
The share price on 1 April 2007 was 575p. Subject to the rules of the PSP, these deferred shares became eligible for release at the end of the one-year
retention period.
For awards made during the year, the performance period is from 1 April 2007 to 31 March 2010.
The conditional awards shown in the table are the maximum amount of shares that can vest under the performance condition.
The performance conditions attached to the awards are described on page 84 (TSR relative to a comparator group of companies).
3.
4.
5.
6. No awards lapsed during the year.
7. Awards take the form of nil cost options.
8.
9.
The closing mid-market price on the date of the award during the year was 577.5p.
The aggregate of the theoretical gain made by directors on the exercise of awards during the year was £1,672,529 (2007 – £nil). This is calculated
by reference to the difference between the closing mid-market price of the shares on the date of exercise and the exercise price of the options, disregarding
whether such shares were sold or retained on exercise, and is stated before tax.
Deferred Bonus Share Plan
Conditional rights to receive matching shares over Tate & Lyle PLC ordinary shares under the Deferred Bonus Share Plan held by
directors at 1 April 2007 and 31 March 2008, together with awards made during the year, were as follows:
Director
Iain Ferguson
Stanley Musesengwa
John Nicholas
Stuart Strathdee
Shares
acquired with
net bonus at
1 April 2007
Shares
acquired with
net bonus
during the year
Shares
acquired with
net bonus at
31 March 2008
Maximum
matching
shares on
gross bonus at
1 April 2007
Maximum
matching
shares
awarded
during the year
Maximum
matching
shares on
gross bonus at
31 March 2008
63 663
38 259
–
6 300
32 302
20 260
16 596
6 897
95 965
58 519
16 596
13 197
215 807
129 691
–
21 356
109 498
68 678
56 258
23 380
325 305
198 369
56 258
44 736
The awards shown are the maximum amount of shares that could be received under the performance condition.
The performance condition is described on page 85 (TSR relative to a comparator group of companies and/or the satisfaction of employment conditions).
1.
2.
3. No awards vested or lapsed during the year.
4.
5.
6.
The closing mid-market price on the date of award during the year was 568p.
The performance period for the award made during the year is from 1 April 2007 to 31 March 2010.
Testing of the performance condition by the Remuneration Committee on 20 May 2008 for the award made in August 2005 resulted in the award of one
matching share for every three lodged shares held equating to the following number of matching shares for each executive director: Iain Ferguson 21,428,
Stanley Musesengwa 12,276 and Stuart Strathdee 3,559.
90
Tate & Lyle Annual Report 2008
Directors’ remuneration report
Share Option Schemes
Options over Tate & Lyle PLC ordinary shares each granted under the 1992 and 2000 Executive Share Option Schemes and
Sharesave Scheme and held by directors as at 1 April 2007 and 31 March 2008, and during the year, were as follows:
Director
Iain Ferguson
Stanley Musesengwa
John Nicholas
Stuart Strathdee
At 1 April
2007
245 718
272 307
6 032
524 057
130 000
2 310
132 310
1 319
1 319
55 845
86 153
263
–
142 261
Granted
At 31 March
2008
–
–
–
–
–
–
–
–
–
–
1 423
1 423
245 718
272 307
6 032
524 057
130 000
2 310
132 310
1 319
1 319
55 845
86 153
263
1 423
143 684
Exercise
price
(pence)
335.75
325
264
Earliest
exercise date
Latest
exercise date
Notes
18.06.06
18.06.07
01.08.08
17.06.13
17.06.14
31.01.09
325
410
18.06.07
01.03.08
17.06.14
31.08.08
716
01.03.10
31.08.10
335.75
325
716
531
18.06.06
18.06.07
01.03.10
01.08.10
17.06.13
17.06.14
31.08.10
31.01.11
2
2
3
2
3
3
2
2
3
3
1.
In June 2005, the Committee decided to suspend granting options under the 2000 Scheme. While the Committee retains the discretion to make option grants
in the future in exceptional circumstances, for example in hiring packages, there is no current intention to make use of this discretionary power.
No options have been granted under the 2000 Scheme since it was suspended.
2. Granted between 2000 and 2004 under the 2000 Scheme. The options were subject to a performance condition that was scaled such that, if over the first
three consecutive years, the growth in the Company’s normalised earnings per share (EPS) exceeded the growth in the UK Retail Price Index excluding
mortgage interest payments (RPIX) by an average of at least 3% per year (9.3% over three years), then 50% of options granted could be exercised; or by at an
average of at least 4% per year (12.5% over three years), then 100% of options granted could be exercised. All options granted under the 2000 Scheme have
met their performance condition and are exercisable.
3. Options held, granted or exercised under the Sharesave Scheme. As this is an all-employee share scheme, no performance conditions are attached.
4. No options were lapsed or exercised during the year under the 1992 Scheme, the 2000 Scheme and the Sharesave Scheme.
5.
The aggregate gain made by directors on the exercise of options during the year was £nil (2007 – £3,335,961).
The market price of the Company’s ordinary shares at the close of business on 31 March 2008 was 540.00p and the range during
the year to 31 March 2008 was 402.50p to 664.50p.
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Directors’ remuneration report
Directors’ pension provision
Iain Ferguson and John Nicholas are not members of the Tate & Lyle Group Pension Scheme (Group Scheme) and accordingly they
accrue no pension benefits. Instead, they receive cash allowances (included in the Pension Allowance column in the table on page 89)
from which they make their own pension arrangements. Stanley Musesengwa and Stuart Strathdee are members of the Group Scheme
and the information below sets out the disclosures required for them under both the Listing Rules of the UK Listing Authority and the
Directors’ Remuneration Report Regulations 2002.
Defined Benefit Schemes
Director
Age at
31 March
2008
Accumulated
total
Directors’
accrued contributions
during
the year
£000
pension at
year-end1
£000
Increase
in accrued
pension
during
the year2
£000
Increase
Transfer
value of
increase in
accrued
Transfer
in accrued pension (net
value of
of inflation)
accrued
less
pension at
directors’
inflation)3 contributions4 start of year5
£000
pension
during the
year (net of
£000
£000
Increase
in transfer
value for
the year
less
directors’
at year-end6 contributions7
£000
Transfer
value
of accrued
pension
£000
Stanley Musesengwa8
Stuart Strathdee
55
56
56
222
7
2
18
12
16
4
299
83
665
3 954
1 050
4 650
378
694
1.
2.
3.
4.
5.
6.
7.
The figure shown represents the amount of pension benefits, based on service, pensionable earnings and, where appropriate, transferred pension rights,
which would have been preserved for each director had he left service on 31 March 2008.
For each director, the figure represents the difference between the accrued pension at 31 March 2008 and the corresponding pension a year earlier.
No allowance is made for inflation.
For each director, the figure represents the difference between the accrued pension at 31 March 2008 and the corresponding pension a year earlier.
The figures shown include an adjustment for inflation in accordance with the Listing Rules of the UK Listing Authority.
The figures shown represent the transfer value, calculated in accordance with Guidance Note 11 issued by the Faculty and Institute of Actuaries and adopted
by the Board of Actuarial Standards, of the inflation adjusted increase in the total accrued pension for the year, net of the Director’s own contributions.
The figures shown represent the transfer value, calculated in accordance with Guidance Note 11 issued by the Institute and Faculty of Actuaries and adopted
by the Board of Actuarial Standards, of the accumulated total accrued pension at 31 March 2007.
The figures shown represent the transfer value, calculated in accordance with Guidance Note 11 issued by the Institute and Faculty of Actuaries and adopted
by the Board of Actuarial Standards, of the accumulated total accrued pension at 31 March 2008. During the course of the year, the actuarial basis used
within the Tate & Lyle Group Pension Scheme for the purpose of determining transfer values in accordance with Guidance Note 11 was amended by the
Trustee, generally resulting in an increase in transfer value amounts. The transfer values quoted have been calculated using the actuarial bases that applied
at each reporting date. Part of the increase in the transfer values over the year is attributable to the change in actuarial basis.
The figures shown represent the increase in the transfer values from 31 March 2007 to 31 March 2008. The transfer values quoted have been calculated
using the actuarial bases which applied at each reporting date, net of the Director’s own contributions.
8. As announced on 2 May 2008, Stanley Musesengawa will leave Tate & Lyle on 31 July 2008. Stanley Musesengawa has worked for Tate & Lyle for over 28
years, most of which were in Africa. The value of his pension accrued during his service in Africa is minimal and significantly less than would have been the
case had he served that time in the UK. Accordingly, the Committee has decided to augment his total accumulated pension value by around £290,000 in
excess of his contractual entitlement. This will bring his total accumulated pension value to the level of the ‘Lifetime Allowance’ permitted under the UK tax
regime to partially offset the negative impact of his African service on his pension entitlement. The final pension payable to Stanley Musesengawa will still be
very considerably less than a comparable director who had completed his service in the UK.
Directors’ interests in Tate & Lyle shares
Elisabeth Airey
Richard Delbridge
Iain Ferguson1
Evert Henkes
Sir David Lees
Stanley Musesengwa1
John Nicholas1
Stuart Strathdee1
Robert Walker
Dr Barry Zoumas
Ordinary shares
At 31 March
2008
At 1 April
2007
9 000
45 000
204 092
1 000
60 000
161 750
51 596
141 849
3 665
13 000
9 000
30 000
85 091
1 000
40 000
94 200
35 000
84 566
3 665
7 000
1. The number of shares shown as at 31 March 2008 for Iain Ferguson, Stanley Musesengwa, John Nicholas and Stuart Strathdee includes shares acquired in
relation to the Deferred Bonus Share Plan as detailed in the table on page 90.
2. All the above interests are beneficially held.
3. There were no changes in directors’ interests in the period from 1 April 2008 to 21 May 2008.
4. No director had interests in any class of shares other than ordinary shares.
5.
The Register of Directors’ Interests, which is open to inspection, contains full details of directors’ shareholdings and options to subscribe for shares.
On behalf of the Board
Evert Henkes
Chairman, Remuneration Committee
21 May 2008
92
Tate & Lyle Annual Report 2008
Index to the financial statements for the year to 31 March 2008
94
Independent Auditors’ Report to the Members
of Tate & Lyle PLC: Group financial statements
95 Consolidated income statement
96 Consolidated statement of recognised income
and expense
97 Consolidated balance sheet
98 Consolidated cash flow statement
99 Notes to the consolidated financial statements
1 Presentation of financial statements
2 Group accounting policies
3 Critical accounting estimates
and judgements
4 Segment information
5 Sales from continuing operations
6 Operating profit
7 Auditors’ remuneration
8 Exceptional items
9 Staff costs
33 Provisions for other liabilities and charges
34 Change in working capital
35 Cash and cash equivalents
36 Net debt
37 Contingent liabilities
38 Commitments
39 Acquisitions and disposals of subsidiaries
40 Post balance sheet events
41 Related party disclosures
42 Foreign exchange rates
43 Main subsidiaries and investments
44 Reconciliation of adjusted information
154 Independent Auditors’ Report to the
Members of Tate & Lyle PLC:
parent company financial statements
155 Parent company balance sheet
156 Notes to the parent company financial
10 Finance income and finance expense
statements
11 Income tax expense
12 Discontinued operations
13 Earnings per share
14 Dividends
15 Goodwill and intangible assets
16 Property, plant and equipment
1 Parent company accounting policies
2 Tangible fixed assets
3 Investments in subsidiary undertakings
4 Investments in associates
5 Debtors
6 Creditors – due within one year
17 Investments in associates and joint ventures
7 Creditors – due after more than one year
18 Available-for-sale financial assets
19 Financial instruments by category
20 Derivative financial instruments
21 Financial risk factors
22 Inventories
23 Trade and other receivables
24 Assets and liabilities classified
as held for sale
8 Deferred taxation
9 Provisions for liabilities and charges
10 Contingent liabilities
11 Financial commitments
12 Share capital
13 Reconciliation of movements
in shareholders’ funds
14 Related parties
25 Share capital and share premium
15 Profit and loss account disclosures
26 Consolidated statement of changes
16 Dividends
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in shareholders’ equity
27 Other reserves
28 Share-based payments
29 Trade and other payables
30 Borrowings
31 Deferred tax
32 Retirement benefit obligations
Tate & Lyle Annual Report 2008
Information for shareholders
(non-statutory)
160 Ten-year review
162 Information for investors
163 Useful addresses and telephone numbers
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93
Independent Auditors’ Report to the Members of Tate & Lyle PLC:
Group financial statements
We have audited the Group financial statements of Tate & Lyle
PLC for the year ended 31 March 2008, which comprise the
consolidated income statement, the consolidated statement
of recognised income and expense, the consolidated balance
sheet, the consolidated cash flow statement, and the notes to
the consolidated financial statements. These Group financial
statements have been prepared under the accounting policies
set out therein.
We have reported separately on the parent company financial
statements of Tate & Lyle PLC for the year ended 31 March
2008 and on the information in the directors’ remuneration
report that is described as having been audited.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the annual report
and the Group financial statements in accordance with
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union are set out in the
statement of directors’ responsibilities.
Our responsibility is to audit the Group financial statements
in accordance with relevant legal and regulatory requirements
and International Standards on Auditing (UK and Ireland).
This report, including the opinion, has been prepared for and
only for the Company’s members as a body in accordance
with Section 235 of the Companies Act 1985 and for no other
purpose. We do not, in giving this opinion, accept or assume
responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come
save where expressly agreed by our prior consent in writing.
We report to you our opinion as to whether the Group
financial statements give a true and fair view and whether the
Group financial statements have been properly prepared in
accordance with the Companies Act 1985 and Article 4 of
the IAS Regulation. We also report to you as to whether in
our opinion the information given in the directors’ report
is consistent with the Group financial statements.
The information given in the directors’ report includes that
specific information presented in the operating and financial
review that is cross-referred from the business review section
of the directors’ report. We also report to you if, in our opinion,
we have not received all the information and explanations
we require for our audit, or if information specified by law
regarding directors’ remuneration and other transactions
is not disclosed.
We review whether the corporate governance statement
reflects the Company’s compliance with the nine provisions
of the 2006 FRC Combined Code specified for our review by
the Listing Rules of the Financial Services Authority, and we
report if it does not. We are not required to consider whether
the Board’s statements on internal control cover all risks
and controls, or form an opinion on the effectiveness of the
Group’s corporate governance procedures or its risk and
control procedures.
We read other information contained in the annual report
and consider whether it is consistent with the audited Group
financial statements. The other information comprises the
‘Overview of the year’, the ‘What we do’, ‘How we performed’
and the ‘How we run the business’ sections, the directors
report, the directors remuneration report, the parent company
financial statements, the ten-year review and the information
for investors. We consider the implications for our report if we
become aware of any apparent misstatements or material
inconsistencies with the Group financial statements. Our
responsibilities do not extend to any other information.
Basis of audit opinion
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test
basis, of evidence relevant to the amounts and disclosures in
the Group financial statements. It also includes an assessment
of the significant estimates and judgements made by the
directors in the preparation of the Group financial statements,
and of whether the accounting policies are appropriate
to the Group’s circumstances, consistently applied and
adequately disclosed.
We planned and performed our audit so as to obtain all
the information and explanations which we considered
necessary in order to provide us with sufficient evidence to
give reasonable assurance that the Group financial statements
are free from material misstatement, whether caused by fraud
or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of
information in the Group financial statements.
Opinion
In our opinion:
■
■
■
the Group financial statements give a true and fair view,
in accordance with IFRSs as adopted by the European
Union, of the state of the Group’s affairs as at
31 March 2008 and of its profit and cash flows for
the year then ended;
the Group financial statements have been properly
prepared in accordance with the Companies Act 1985
and Article 4 of the IAS Regulation; and
the information given in the directors’ report is consistent
with the Group financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and
Registered Auditors
1 Embankment Place
London WC2N 6RH
21 May 2008
94
Tate & Lyle Annual Report 2008
Consolidated income statement
Continuing operations
Sales
Operating profit
Finance income
Finance expense
Profit before tax
Income tax expense
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
Profit/(loss) for the year attributable to:
Equity holders of the Company
Minority interests
Earnings per share attributable to the equity holders of the Company
from continuing and discontinued operations
Basic
Diluted
Earnings per share attributable to the equity holders of the Company
from continuing operations
Basic
Diluted
Dividends per share
Interim paid
Final proposed
Analysis of profit before tax from continuing operations
Profit before tax
Add back:
Exceptional items
Amortisation of acquired intangible assets
Profit before tax, exceptional items and amortisation of acquired intangible assets
The notes on pages 99 to 153 form part of these Group financial statements.
Notes
4, 5
4, 6
10
10
11
12
13
13
14
8
15
Year to 31 March
2008
£m
2007
£m
3 424
3 225
215
38
(80)
173
(76)
97
90
187
194
(7)
187
289
50
(86)
253
(88)
165
52
217
214
3
217
pence
pence
40.9
40.4
21.9
21.7
6.5
16.1
22.6
£m
173
59
12
244
44.3
43.6
33.6
33.0
6.2
15.3
21.5
£m
253
13
9
275
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Tate & Lyle Annual Report 2008
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Consolidated statement of recognised
income and expense
Net exchange differences
Net actuarial (losses) in post-employment benefit plans
Net gains/(losses) on cash flow hedges
Losses on revaluation of available-for-sale financial assets
Net gain/(loss) recognised directly in equity
Profit for the year
Total recognised income and expense for the year
Attributable to:
Equity holders of the Company
Minority interests
The notes on pages 99 to 153 form part of these Group financial statements.
Notes
32
27
18
26
Year to 31 March
2007
£m
(81)
(1)
(4)
–
(86)
217
131
131
–
131
2008
£m
57
(7)
1
(3)
48
187
235
242
(7)
235
96
Tate & Lyle Annual Report 2008
Consolidated balance sheet
31 March
2008
£m
31 March
2007
£m
Notes
ASSETS
Non-current assets
Goodwill and intangible assets
Property, plant and equipment
Investments in associates
Available-for-sale financial assets
Derivative financial instruments
Deferred tax assets
Trade and other receivables
Retirement benefit surplus
Current assets
Inventories
Trade and other receivables
Current tax assets
Derivative financial instruments
Cash and cash equivalents
Assets held for sale
TOTAL ASSETS
SHAREHOLDERS’ EQUITY
Capital and reserves attributable to the Company’s equity holders
Share capital
Share premium
Capital redemption reserve
Other reserves
Retained earnings
Minority interest
TOTAL SHAREHOLDERS’ EQUITY
LIABILITIES
Non-current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Deferred tax liabilities
Retirement benefit obligations
Provisions for other liabilities and charges
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings and bank overdrafts
Derivative financial instruments
Provisions for other liabilities and charges
Liabilities held for sale
TOTAL LIABILITIES
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
15
16
17
18
20
31
23
32
22
23
20
35
24
25
25
26
27
26
26
26
29
30
20
31
32
33
29
30
20
33
24
320
1 196
7
15
36
1
11
53
1 639
562
675
18
275
165
–
1 695
3 334
114
404
8
91
317
934
16
950
27
858
30
107
144
14
232
1 217
7
18
36
8
64
–
1 582
503
558
39
102
189
89
1 480
3 062
122
403
–
50
385
960
35
995
6
842
19
85
131
51
1 180
1 134
488
35
360
267
54
–
1 204
2 384
3 334
420
47
271
123
44
28
933
2 067
3 062
The Group financial statements were approved by the Board of Directors on 21 May 2008 and signed on its behalf by:
Sir David Lees, Iain Ferguson, John Nicholas
Directors
The notes on pages 99 to 153 form part of these Group financial statements.
Tate & Lyle Annual Report 2008
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Consolidated cash flow statement
Cash flows from operating activities
Profit before tax from continuing operations
Adjustments for:
Depreciation of property, plant and equipment
Exceptional items
Amortisation of intangible assets
Share-based payments
Finance income
Finance expense
Working capital, non cash movements and other operating cash
Cash generated from continuing operations
Interest paid
Income tax paid
Cash generated from discontinued operations
Net cash flows generated from operating activities
Cash flows from investing activities
Proceeds on disposal of property, plant and equipment
Purchase of available-for-sale financial assets
Proceeds on disposal of available-for-sale financial assets
Interest received
Acquisitions of subsidiaries, net of cash and cash equivalents acquired
Disposal of subsidiaries, net of cash and cash equivalents disposed
Disposal of joint ventures, net of cash and cash equivalents disposed
Investment in associates
Purchase of property, plant and equipment
Purchase of intangible assets and other non-current assets
Net cash flows generated from/(used in) investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Repurchase of ordinary shares
Cash inflow from additional borrowings
Cash outflow from repayment of borrowings
Cash outflow from repayment of capital element of finance leases
Dividends paid to the Company’s equity holders
Dividends paid to minority interests
Net cash flows (used in)/generated from financing activities
Net (decrease)/increase in cash and cash equivalents
Cash and cash equivalents
Balance at beginning of year
Effect of changes in foreign exchange rates
Net (decrease)/increase in cash and cash equivalents
Balance at end of year
The notes on pages 99 to 153 form part of these Group financial statements.
Notes
6
8
6
9
10
10
34
12
18
39
39
39
17
15
25
14
26
36
35
Year to 31 March
2007
£m
253
80
13
13
5
(50)
86
(75)
325
(75)
(78)
55
227
8
(1)
–
33
(3)
–
–
(3)
(251)
(6)
(223)
16
–
416
(304)
(1)
(98)
–
29
33
158
(2)
33
189
2008
£m
173
100
59
15
7
(38)
80
(270)
126
(87)
(75)
36
–
7
(4)
4
53
(75)
341
42
–
(264)
(7)
97
8
(159)
152
(23)
(1)
(105)
(1)
(129)
(32)
189
8
(32)
165
98
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
1 Presentation of financial statements
General information
The principal activities of Tate & Lyle PLC are the
development, manufacture and marketing of food and
industrial ingredients that have been made from renewable
resources. The Group operates more than 50 production
facilities and in numerous partnerships and joint ventures
throughout Europe, the Americas and South East Asia.
The Company is a public limited company incorporated
and domiciled in the United Kingdom. The Company has
its primary listing on the London Stock Exchange.
Basis of preparation
These consolidated financial statements are presented on
the basis of International Financial Reporting Standards (IFRS)
adopted by the European Union and interpretations issued by
the International Financial Reporting Interpretations Committee
(IFRIC) and have been prepared in accordance with the
Listing Rules of the UK Financial Services Authority and the
Companies Act 1985, as applicable to companies
reporting under IFRS.
These consolidated financial statements have been prepared in
accordance with the accounting policies set out in Note 2 and
under the historical cost convention, except where modified by
the revaluation of certain financial instruments and commodities.
These consolidated financial statements are presented in
pounds sterling, which is the Group’s presentational currency.
The preparation of financial statements in conformity with IFRS
requires the use of certain critical accounting estimates. It also
requires management to exercise its judgement in the process
of applying the Company’s accounting policies. The areas
involving a higher degree of judgement or complexity and
areas where assumptions and estimates are significant to
the consolidated financial statements are disclosed in Note 3.
The financial information for the year ended 31 March 2007 is
derived from the statutory financial statements for that year,
except that the comparative information has been reclassified
as a result of the realignment of the segment disclosed in
Note 4 and the results of the discontinued operations of
Occidente and the disposed European starch plants.
Use of adjusted measures
Tate & Lyle presents adjusted profit before tax and adjusted
earnings per share information. These measures are used
by Tate & Lyle for internal performance analysis and incentive
compensation arrangements for employees. The terms
‘adjusted’ and ‘exceptional items’ are not defined terms
under IFRS and may therefore not be comparable with
similarly titled measures reported by other companies.
They are not intended to be a substitute for, or superior
to, GAAP measurements of profit. The term ‘adjusted’ refers
to the relevant measure being reported, excluding exceptional
items and amortisation of intangible assets arising on
acquisition of businesses. A reconciliation of statutory to
adjusted information is provided in Note 44.
New IFRS standards and interpretations adopted
From 1 April 2007 the following standards, amendments
and interpretations became effective and were adopted
by the Group:
■
■
■
■
■
IFRIC8 Scope of IFRS2 Share-based Payment;
IFRIC9 Reassessment of Embedded Derivatives;
IFRIC10 Interim Financial Reporting and Impairment;
IFRIC11 IFRS2 Group and Treasury Share Transactions;
IFRS4 Insurance Contracts revised Implementation
Guidance;
IFRS7 Financial instruments: Disclosures; and
■
■ Amendment to IAS1 Capital Disclosures.
The adoption of these amendments and interpretations has
not had a significant impact on the Group’s profit for the year
or equity. IFRS7 has impacted the disclosures in the notes to
the consolidated financial statements.
From 1 April 2007, the following standards, amendments and
interpretations became effective but are not relevant for the
Group’s operations:
■
IFRIC7 Applying IAS29 Financial Reporting in
Hyperinflationary Economies for the First Time.
New IFRS standards and interpretations not adopted
The following standards, amendments and interpretations are
not yet effective and have not been adopted early by the Group:
■
■
■
IFRIC12 Service Concession Arrangements;
IFRIC13 Customer Loyalty Programmes;
IFRIC14 – IAS19 – The limit on a defined benefit asset,
minimum funding requirements and their interaction;
IFRS8 Operating Segments;
■
■ Revised IAS1 Presentation of Financial Statements;
■ Revised IAS23 Borrowing Costs;
■ Revised IFRS3 Business Combinations;
■ Revised IAS27 Consolidated and Separate
Financial Statements;
■ Amendment to IFRS2 Share-based Payment;
■ Amendment to IAS32 Financial Instruments: Presentation
and IAS1 Presentation of Financial Statements.
IFRIC12 and IFRIC14 are effective for the Group from 1 April
2008. IFRIC13 is effective from 1 April 2009. Revised IFRS3
and revised IAS27 are effective for the Group from 1 July
2009. The other standards, amendments and revisions are
effective for the Group from 1 January 2009. The adoption of
these standards, amendments and interpretations is not
expected to have a material impact on the Group’s profit for
the year or equity. The adoptions may affect disclosures in the
Group’s financial statements.
The parent company, Tate & Lyle PLC, has not adopted IFRS
as its statutory reporting basis. Audited financial statements
for the parent company, prepared in accordance with UK
GAAP, are set out on pages 154 to 159.
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Tate & Lyle Annual Report 2008
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Notes to the consolidated financial statements
2 Group accounting policies
Basis of consolidation
(a) Subsidiaries
Subsidiaries are all entities over which the Group has the
power to govern the financial and operating policies, generally
accompanying a shareholding of more than one half of the
voting rights and taking into account the existence of potential
voting rights. Subsidiaries are fully consolidated from the
date on which control is transferred to the Group. They are
de-consolidated from the date that control ceases.
The purchase method of accounting is used to account for
the acquisition of subsidiaries by the Group. The recognised
identifiable assets, liabilities and contingent liabilities of
a subsidiary are measured at their fair values at the date
of acquisition. The interest of minority shareholders is stated
at the minority’s proportion of the fair values of the identifiable
assets, liabilities and contingent liabilities recognised.
Where necessary, adjustments are made to the financial
statements of subsidiaries to bring the accounting policies
used into line with those used by the Group. All inter-company
transactions and balances between Group entities are
eliminated on consolidation.
(b) Joint ventures
An entity is regarded as a joint venture if the Group has joint
control over its operating and financial policies. The Group’s
interests in jointly-controlled entities are accounted for by
proportionate consolidation, whereby the Group’s share of the
joint ventures’ income and expenses, assets and liabilities and
cash flows are combined on a line-by-line basis with similar
items in the Group’s financial statements. Where necessary,
adjustments are made to the financial statements of joint
ventures to bring the accounting policies used into line with
those used by the Group. The Group recognises the portion
of gains or losses on the sale of assets to the joint venture
that is attributable to the other venturers. The Group does not
recognise its share of profits or losses from the joint venture
that result from the Group’s purchase of assets from the joint
venture until it resells the assets to an external entity.
(c) Associates
An entity is regarded as an associate if the Group has
significant influence, but not control, over its operating and
financial policies. Significant influence generally exists where
the Group holds more than 20% and less than 50% of the
shareholders’ voting rights. Associates are accounted for
under the equity method whereby the Group’s income
statement includes its share of their profits and losses and
the Group’s balance sheet includes its share of their net assets.
Where necessary, adjustments are made to the financial
statements of associates to bring the accounting policies used
into line with those used by the Group. When the Group’s share
of losses in an associate equals or exceeds its interest in the
associate, including any other unsecured receivables, the Group
does not recognise further losses, unless it has incurred
obligations or made payments on behalf of the associate.
Foreign currency translation
(a) Functional and presentational currency
Items included in the financial statements of each of the
Group’s entities are measured using the currency of the
primary economic environment in which the entity operates
(the ‘functional currency’). The consolidated financial
statements are presented in pounds sterling, which is the
Group’s presentational currency.
(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of
the transactions. Foreign exchange gains and losses resulting
from the settlement of such transactions and from the
translation at period end exchange rates of monetary assets
and liabilities denominated in foreign currencies are recognised
in the income statement, except when deferred in equity
as qualifying cash flow hedges and qualifying net
investment hedges.
(c) Group entities
From 1 April 2004, the results and financial position of all the
Group’s entities that have a functional currency different from
the presentational currency are translated into the presentation
currency as follows:
(i) assets and liabilities, including goodwill and fair value
adjustments for each balance sheet presented,
are translated at the closing rate at the date of that
balance sheet;
income and expenses for each income statement are
translated at average exchange rates as a reasonable
approximation to the rates prevailing on the transaction
dates; and
(ii)
(iii) all resulting exchange differences are recognised as
a separate component of equity.
Prior to 1 April 2004, exchange differences were recognised
in retained earnings.
On consolidation, exchange differences arising from the
translation of the net investment in foreign entities, and of
borrowings and other currency instruments designated as
hedges of such investments, are taken to equity.
When a foreign operation is sold, such exchange differences
that have accumulated since 1 April 2004 are recognised
in the income statement as part of the gain or loss on sale.
Property, plant and equipment
Land and buildings mainly comprise manufacturing sites and
administrative facilities.
Property, plant and equipment is stated at historical cost
less depreciation and impairment. Historical cost includes
expenditure that is directly attributable to the acquisition
of the items. Subsequent costs are included in the asset’s
carrying amount or recognised as a separate asset,
as appropriate, only when it is probable that future economic
benefits associated with the expenditure will flow to the
Group and the cost of the item can be measured reliably.
All repairs and maintenance expenditures are charged to
the income statement during the financial period in which
they are incurred.
Depreciation is calculated using the straight-line method
to allocate the cost or revalued amount of each asset to
its residual value over its useful economic life as follows:
Freehold land:
Freehold buildings:
Leasehold property:
Bulk liquid storage tanks:
Plant and machinery:
No depreciation
20 to 50 years
Period of the lease
12 to 20 years
3 to 28 years
The assets’ residual values and useful lives are reviewed
at each balance sheet date and adjusted if appropriate.
An asset’s carrying amount is written down immediately
to its recoverable amount if the asset’s carrying amount
is greater than its estimated recoverable amount.
100
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
2 Group accounting policies (continued)
Gains and losses on disposals are determined by comparing
the disposal proceeds with the carrying amount and are
included in the income statement.
Leased assets
Leases of property, plant and equipment where the Group
assumes substantially all the risks and rewards of ownership
are classified as finance leases. Assets held under finance
leases are capitalised at the lower of the fair value of the
leased asset and the present value of the minimum lease
payments. The corresponding leasing commitments, net
of finance charges, are included in liabilities.
Leasing payments are analysed between capital and interest
components so that the interest element is charged to the
income statement over the period of the lease at a constant
periodic rate of interest on the remaining balance of the
liability outstanding.
Depreciation on assets held under finance leases is charged
to the income statement.
All other leases are treated as operating leases with annual
rentals charged to the income statement, net of any incentives
granted to the lessee, over the term of the lease.
Intangible assets
(a) Goodwill
Goodwill is calculated as the difference between the fair value
of the consideration exchanged in a business combination,
including directly attributable acquisition costs, and the net fair
values of the identifiable assets and liabilities acquired and is
capitalised. Goodwill is tested for impairment annually and
whenever there is an indication of impairment and is carried
at cost less accumulated impairment losses.
Where the acquired interest in the net fair value of the
identifiable assets and liabilities exceeds the cost of the
business combination, the excess is recognised immediately
in the income statement.
Gains and losses on the disposal of a business component
include the carrying amount of goodwill relating to the
entity sold.
(b) Patents and other intellectual property
Patents and other intellectual property are shown at historical
cost less accumulated amortisation and impairment losses.
Where the assets are acquired as part of a business
combination, historical cost is based on their fair values as
at the date of the combination. Amortisation of the assets
is recognised on a straight-line basis over the period of their
expected benefit.
(c) Other acquired intangible assets
Other acquired intangible assets are intangible assets arising
on consolidation of acquired businesses and include brands,
recipes, customer relationships and supplier networks.
Amortisation of the assets is recognised on a straight-line
basis over the period of their expected benefit.
(d) Other intangible assets
Other intangible assets mainly include certain development
expenditure and software costs. Costs incurred on
development projects (relating to the design and testing
of new or improved products) are recognised as intangible
assets when the IAS38 recognition criteria are met.
Capitalised development costs are amortised from the
commencement of the commercial production of the product
on a straight-line basis over the period of its expected benefit.
Research and other development expenditures are recognised
as an expense as incurred. Development costs previously
recognised as an expense are not recognised as an asset in
a subsequent period.
Impairment
Assets that have an indefinite useful life are not subject
to amortisation and are tested annually for impairment.
In addition, assets under the course of construction are
not depreciated and are subject to annual impairment review.
Assets that are subject to amortisation or depreciation are
reviewed for impairment whenever events or changes in
circumstances indicate that their carrying amounts may not be
recoverable. An impairment loss is recognised for the amount
by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s
fair value less costs to sell and value in use. For the purposes
of assessing impairment, assets other than goodwill are
grouped at the lowest levels for which there are separately
identifiable cash inflows. Goodwill is allocated to units
representing the lowest level at which goodwill is monitored
by the Group’s Board of directors for internal management
purposes. Further details are given in Note 3.
Financial instruments
(a) Available-for-sale financial assets
Equity instruments held by the Group and designated as
available-for-sale are carried at fair value, with movements
in fair value recognised directly in equity. Cumulative fair
value gains or losses on an asset are recycled through the
income statement when the asset is disposed or impaired.
A significant or prolonged decline in the fair value of the
security below its cost is considered as an indicator that
the securities are impaired.
(b) Loans and receivables
Non-current and current receivables and loans granted are
recognised initially at fair value and thereafter carried at amortised
cost less provisions for impairment. Movements in carrying
value are recognised in the income statement.
(c) Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Where borrowings are designated
as hedged items under fair value hedges, they are subsequently
remeasured for fair value changes in respect of the hedged
risk with such changes recognised in the income statement.
Otherwise, borrowings are subsequently stated at amortised
cost; any difference between the proceeds (net of transaction
costs) and the redemption value is recognised in the income
statement over the period of the borrowings using the
effective interest method. Borrowings are classified as current
liabilities unless the Group has an unconditional right to defer
settlement of the liability for at least 12 months after the
balance sheet date.
(d) Commodity trading instruments
Commodity instruments acquired for trading purposes are
carried at fair value. Movements in fair value are recognised
in the income statement.
Tate & Lyle Annual Report 2008
101
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Notes to the consolidated financial statements
2 Group accounting policies (continued)
(e) Commodity and treasury hedging instruments
Under IAS39, hedging relationships are categorised by type
and must meet strict criteria to qualify for hedge accounting.
(i) Cash flow hedges
Hedges of firm commitments and highly probable forecast
transactions, including forecast intra-group transactions
that are expected to affect consolidated profit or loss,
are designated as cash flow hedges. To the extent that
movements in the fair values of these instruments
effectively offset the underlying risk being hedged they are
recognised in the hedging reserve in equity until the period
during which the hedged forecast transaction affects profit
or loss, at which point the cumulative gain or loss is
recognised in the income statement, offsetting the
value of the hedged transaction.
(ii) Fair value hedges
Hedges against the movement in fair value of recognised
assets and liabilities are designated as fair value hedges.
To the extent that movements in the fair values of these
instruments effectively offset the underlying risk being
hedged they are recognised in the income statement
by offset against the hedged transaction.
(iii) Hedges of net investments
Hedges of a net investment in a foreign operation are
designated as net investment hedges. To the extent
that movements in the fair values of these instruments
effectively offset the underlying risk being hedged they
are recognised in the translation reserve until the period
during which a foreign operation is disposed of or partially
disposed of, at which point the cumulative gain or loss
is recognised in profit or loss, offsetting the cumulative
difference recognised on the translation of the
net investment.
Hedge accounting is discontinued at the point when the
hedging relationship no longer qualifies for hedge accounting.
In the case of cash flow hedging relationships, the cumulative
movement in the fair value of the hedging instrument
previously recognised in equity up to that point is retained
there until the forecast transaction affects profit or loss,
unless the hedged transaction is no longer expected to occur,
in which case the cumulative movement in fair value is
transferred to profit or loss immediately. Movements in the
fair value of hedging instruments where the relationship failed
to meet the IAS39 hedge accounting criteria or where the
movement represents the ineffective portion of a qualifying
hedging relationship are recognised in the income statement
immediately as other income and expense or net finance
expense, as appropriate.
(f) Embedded derivatives
Where an embedded derivative is not closely related to the
host contract and where the host contract itself is not already
recognised at fair value, movements in the fair value of the
embedded derivative are separated from the associated
transaction and, except where the embedded derivative is
designated as a cash flow hedging instrument, recognised
in the income statement.
(g) Fair valuation
Fair values are based on market values where they are
available. For unlisted securities the Group establishes fair
value using valuation techniques. These include the use of
recent arm’s length transactions, reference to other similar
instruments and discounted cash flow analysis.
Where no market prices are available, the fair value of financial
liabilities is calculated with reference to discounted expected
future cash flows.
Inventories
Inventories are stated at the lower of cost and net realisable
value with the exception of certain items of merchandisable
agricultural commodities which are stated at market value,
in line with regional industry accounting practices.
Cost comprises direct materials and, where applicable, direct
labour costs and those overheads that have been incurred in
bringing the inventories to their present location and condition.
Cost is calculated using the ‘first in – first out’ or weighted
average cost methods, appropriate to the materials and
production processes involved. Net realisable value represents
the estimated selling price less all estimated costs to
completion and costs to be incurred in marketing, selling
and distribution.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held
at call with banks, other short-term highly liquid investments
with original maturities of three months or less, and bank
overdrafts which are not considered to be borrowings in nature.
Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares are shown in
equity as a deduction, net of tax, from the proceeds.
Where any Group company purchases the Company’s equity
share capital and holds that share either directly as treasury
shares or indirectly within an ESOP trust, the consideration
paid, including any directly attributable incremental costs
(net of income taxes), is deducted from equity attributable to
the Company’s equity holders until the shares are cancelled,
reissued or disposed. Where such shares are subsequently
sold or reissued, any consideration received, net of any
directly attributable incremental transaction costs and the
related income tax effects, is included in equity attributable
to the Company’s equity holders. These shares are used to
satisfy share options granted to employees under the Group’s
share option schemes. The trustee of the ESOP trust
purchases the Company’s shares on the open market using
loans made by the Company or other loans guaranteed
by the Company.
Provisions
Provisions for liabilities and charges are recognised when
the Group has a present legal or constructive obligation as a
result of past events, it is more likely than not that an outflow
of resources will be required to settle the obligation and the
amount can be reliably measured. If the effect is material,
provisions are measured using expected future cash flows
discounted at a pre-tax rate that reflects current market
assessments of the time value of money and, where
appropriate, the risks specific to the liability. The impact
of unwinding any discount is taken to finance expense.
Provisions are not recognised for future operating losses.
A provision for onerous contracts is recognised when the
expected benefits to be derived by the Group from a contract
are lower than the unavoidable cost of meeting its obligations
under the contract.
102
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
2 Group accounting policies (continued)
Income taxes
The charge for current tax is based on the results for the year
as adjusted for items which are non-taxable or disallowed. It is
calculated using rates that have been enacted or substantively
enacted by the balance sheet date.
Deferred tax is accounted for using the balance sheet liability
method in respect of temporary differences arising from
differences between the carrying amount of assets and
liabilities in the financial statements and the corresponding tax
basis used in the computation of taxable profit. In principle,
deferred tax liabilities are recognised for all taxable temporary
differences (except as noted below) and deferred tax assets
are recognised to the extent that it is probable that taxable
profits will be available against which deductible temporary
differences can be utilised. Such assets and liabilities are
not recognised if the temporary differences arise from goodwill
or from the initial recognition (other than in a business
combination) of other assets and liabilities in a transaction
which affects neither the tax profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries and
associates, and interests in joint ventures, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax is calculated using the enacted or substantively
enacted rates that are expected to apply when the asset or
liability is settled. Deferred tax is charged or credited in the
income statement, except when it relates to items credited
or charged directly to equity, in which case the deferred tax
is also dealt with in equity.
Deferred tax assets and liabilities are offset when they relate
to income taxes levied by the same taxation authority and the
Group intends to settle its current tax assets and liabilities on
a net basis.
Revenue recognition
(a) Sales of goods and services
Sales comprise the amount receivable in the ordinary course
of business, net of value added and sales taxes, for goods
and services provided. Sales are recognised at the point or
points at which the Group has performed its obligations in
connection with the contractual terms of the sales agreement,
and in exchange obtains the right to consideration.
(b) Interest income
Interest income is recognised on a time-proportion basis
using the effective interest method.
(c) Dividend income
Dividend income is recognised when the right to receive
payment is established.
Employee benefits
(a) Pension obligations
Group companies operate various pension schemes.
The schemes are generally funded through payments to
insurance companies or trustee payments to insurance
companies or trustee-administered funds, determined by
periodic actuarial calculations. The Group has both defined
benefit and defined contribution plans.
Tate & Lyle Annual Report 2008
A defined benefit plan is a pension plan that defines an
amount of pension benefit that an employee will receive on
retirement, usually dependent on one or more factors such
as age, years of service and compensation.
A defined contribution plan is a pension plan under which
the Group pays fixed contributions into a separate entity.
The Group has no legal or constructive obligations to pay
further contributions if the fund does not hold sufficient assets
to pay all employees the benefits relating to employee service
in the current and prior periods.
The amounts recognised in the balance sheet in respect of
defined benefit pension plans are the present value of the
defined benefit obligation at the balance sheet date less
the fair value of plan assets, together with adjustments for
actuarial gains or losses charged or credited to equity and
past service costs. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit
credit method. The present value of the defined benefit
obligation is determined by discounting the estimated future
cash outflows using interest rates of high-quality corporate
bonds that are denominated in the currency in which the
benefits will be paid, and that have terms to maturity
approximating to the terms of the related pension liability.
Past service costs are recognised immediately in income,
unless the changes to the pension plan are conditional on
the employees remaining in service for a specified period of
time (the vesting period). In this case, the past service costs
are amortised on a straight-line basis over the vesting period.
Actuarial gains and losses arising from experience
adjustments and changes in actuarial assumptions are
charged or credited to equity immediately.
Where the actuarial valuation of a scheme demonstrates that
the scheme is in surplus, the recognised asset is limited to
that for which the Group expects to benefit in future by
refunds or a reduction in contribution.
For defined contribution plans, the Group pays contributions
to publicly or privately administered pension insurance plans
on a mandatory, contractual or voluntary basis. The Group
has no further payment obligations once the contributions
have been paid. The contributions are recognised as
employee benefit expense when they are due. Prepaid
contributions are recognised as an asset to the extent that a
cash refund or a reduction in the future payments is available.
(b) Other post-employment obligations
Some Group companies provide post-employment healthcare
benefits to their retirees. The entitlement to these benefits is
usually conditional on the employee remaining in service up
to retirement age and the completion of a minimum service
period. The expected costs of these benefits are accrued over
the period of employment using an accounting methodology
similar to that for defined benefit pension plans. Actuarial gains
and losses arising from experience adjustments and changes
in actuarial assumptions are charged or credited to equity
immediately. These obligations are valued annually by
independent qualified actuaries.
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Notes to the consolidated financial statements
2 Group accounting policies (continued)
(c) Share-based compensation
The Group operates a number of equity-settled, share-based
compensation plans. The fair value of employee services
received in exchange for the grant of the options is recognised
as an expense. The total amount to be expensed over the
vesting period is determined by reference to the fair value of
the options granted, excluding the impact of any non-market
vesting conditions (for example, earnings targets). Non-market
vesting conditions are included in assumptions about the
number of options that are expected to become exercisable.
At each balance sheet date, for options granted with non-
market vesting conditions, the Group revises its estimates
of the number of options that are expected to become
exercisable. It recognises the impact of the revision of original
estimates, if any, in the income statement, and a corresponding
adjustment to equity. The proceeds received net of any directly
attributable transaction costs are credited to share capital and
share premium when the options are exercised.
Research and development
Research expenditure is recognised in the income statement
in the year in which it is incurred. Development expenditure
is recognised in the income statement in the year in which it
is incurred unless it is probable that future economic benefits
will flow to the Group from the asset being developed, the cost
of the asset can be reliably measured and technical feasibility
can be demonstrated. When the recognition criteria are met,
development costs are capitalised as an intangible asset and
are amortised on a straight line basis over the estimated useful
life from the time the asset is available for use.
Borrowing costs
Borrowing costs directly arising from the purchase,
construction or production of an asset are capitalised
as part of the cost of that asset.
Exceptional items
Exceptional items comprise items of income and expense that
are material in amount and unlikely to recur and which merit
separate disclosure in order to provide an understanding of
the Group’s underlying financial performance. Examples of
events giving rise to the disclosure of material items of income
and expense as exceptional items include, but are not limited
to, impairment events, disposals of operations or individual
assets, litigation claims by or against the Group and the
restructuring of components of the Group’s operations.
Government grants
A government grant is recognised when there is reasonable
assurance that any conditions attached to the grant will
be satisfied and the grants will be received. A government
grant is recognised at its fair value and is accounted for as a
deduction against the cost concerned or within other income
over the periods necessary to match the grants with the
related costs that they are intended to compensate.
Dividend distribution
A dividend distribution to the Company’s equity holders is
recognised as a liability in the Group’s financial statements
in the period in which the dividends are approved by the
Company’s shareholders or, in the case of interim dividends,
by the Board of directors.
Segment reporting
A business segment is a group of assets or operations
engaged in providing products or services that are subject
to risks and returns that are different from those of other
business segments. A geographical segment is engaged in
providing products or services within a particular economic
environment that are subject to risks and returns that
are different from those segments operating in other
economic environments.
Discontinued operations and non-current assets
held for sale
Business components that represent separate major lines of
business or geographical areas of operations are recognised
as discontinued if the operations have been disposed of,
are being abandoned or meet the criteria to be classified
as held for sale.
Non-current assets and disposal groups are classified as
held for sale if their carrying amount will be principally
recovered through a sale transaction rather than through
continuing use. This condition is regarded as met only when
the sale is highly probable, expected to be completed within
one year and the asset (or disposal group) is available for
immediate sale in its present condition. Operations held
for sale are held at the lower of their carrying amount on
the date they are classified as held for sale and fair value
less costs to sell.
3 Critical accounting estimates and judgements
In order to prepare these consolidated financial statements
in accordance with the accounting policies set out in Note 2,
management has used estimates and judgements to establish
the amounts at which certain items are recorded. Critical
accounting estimates and judgements are those that have the
greatest impact on the financial statements and require
the most difficult, subjective and complex judgements about
matters that are inherently uncertain. Estimates are based
on factors including historical experience and expectations
of future events that management believe to be reasonable.
However, given the judgemental nature of such estimates,
actual results could be different from the assumptions used.
The critical accounting policies are set out below.
Impairment of assets
Asset impairments have the potential to significantly impact
income. In order to determine whether impairments are
required the Group estimates the recoverable amount of the
asset. This calculation is usually based on projecting future
cash flows over a five-year period and using a terminal value
to incorporate expectations of growth thereafter. A discount
factor is applied to obtain a current value (‘value in use’).
The ‘fair value less costs to sell’ of an asset is used if this
results in an amount in excess of ‘value in use’.
Estimated future cash flows for impairment calculations are
based on management’s expectations of future volumes and
margins based on plans and best estimates of the productivity
of the assets in their current condition. Future cash flows
therefore exclude benefits from major expansion projects
requiring future capital expenditure where that expenditure
has not been approved at the balance sheet date.
104
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
Provisions
The Group recognises a provision where a legal or
constructive obligation exists at the balance sheet date
and a reliable estimate can be made of the likely outcome.
Where appropriate, future cash outflows that are expected
to arise over a number of years are discounted to a present
value using a relevant discount rate.
At the balance sheet date, provisions included amounts
for insurance claims payable by the Group’s reinsurance
company, legal matters, employee termination and other
restructuring costs and amounts payable under the deferred
consideration clauses of the realignment of the Sucralose
business in April 2004.
Although provisions are reviewed on a regular basis and
adjusted for management’s best current estimates, the
judgemental nature of these items means that future amounts
settled may be different from those provided.
Further details are set out in Note 33.
Taxation
The Group operates in a large number of tax jurisdictions
around the world. Tax regulations generally are complex
and in some jurisdictions agreeing tax liabilities with local
tax authorities can take several years. Consequently, at the
balance sheet date, tax liabilities and assets are based on
management’s best estimate of the future amounts that will
be settled. While the Group aims to ensure that the estimates
recorded are accurate, the actual amounts could be different
from those expected. Deferred tax assets mainly represent
past tax losses that the Group expects to recover at some
time in the future and by their nature the amounts recorded
are therefore dependent on management’s judgement
about future events.
Further details are set out in Notes 11 and 31.
3 Critical accounting estimates and judgements (continued)
Future cash flows are discounted using a discount rate based
on the Group’s weighted average cost of capital, adjusted
if appropriate for circumstances specific to the asset being
tested. The weighted average cost of capital is impacted
by estimates of interest rates, equity returns and market
and country related risks. The Group’s weighted average
cost of capital is reviewed on an annual basis.
Further details are set out in Notes 15 and 16.
Retirement benefits
Among the range of retirement benefits provided in
businesses around the Group are a number of defined benefit
pension plans and an unfunded healthcare benefit scheme
in the USA. The amounts recorded in the financial statements
for both of these types of arrangement are based on a
number of assumptions, changes to which could have
a material impact on the reported amounts.
Any net deficit or surplus arising on defined benefit plans and
the liability under the healthcare plan is shown in the balance
sheet. The amount recorded is the difference between plan
assets and liabilities at the balance sheet date. Plan assets are
based on market value at that date. Plan liabilities, including
healthcare liabilities, are based on actuarial estimates of the
present value of future pension or other benefits that will be
payable to members. The most sensitive assumptions
involved in calculating the expected liabilities are mortality
rates and the discount rate used to calculate the present
value. If the mortality rates assumption changed, a one year
increase to longevity at age 60 would increase the liability by
2.6%. The main financial assumption is the real discount rate,
being the excess of the discount rate over the rate of inflation.
If this assumption changed by 0.1%, the gross plan liabilities
would change by approximately £15 million.
The income statement generally comprises a regular charge
to operating profit and a finance charge, which represents
the net of expected income from plan assets and an interest
charge on plan liabilities. These calculations are based on
expected outcomes at the start of the financial year. The
income statement is most sensitive to changes in expected
returns from plan assets and the discount rate used to
calculate the interest charge on plan liabilities. A 0.1% change
in the assumption of the real discount rate would change
the finance expense by approximately £0.3 million.
Full details of these assumptions, which are based on advice
from the Group’s actuaries, are set out in Note 32.
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Notes to the consolidated financial statements
4 Segment information
Primary format – business segments
Following the disposal of Tate & Lyle Canada (Redpath) and Grupo Industrial Azucarero de Occidente, S.A. de C.V. (Occidente) and
the cessation of the Group’s Eastern Sugar joint venture, the Sugars, Americas and Asia and Sugars, Europe segments have been
combined into one segment, ‘Sugars’, and the comparative segmental information has been reclassified.
In a further change to our segmental information we have separated central costs, which were previously allocated to the segments,
as this is the way the business is managed and financial information is presented to the decision makers on this basis. Comparative
information has been reclassified for this change.
Discontinued operations comprise Redpath, Eastern Sugar, the disposed European starch plants and Occidente.
The segment results for the year to 31 March 2008 are as follows:
Continuing operations
Food &
Industrial
Ingredients,
Americas
£m
Food &
Industrial
Ingredients,
Europe
£m
Sucralose
£m
Sugars
£m
Central
costs
£m
148
–
148
1 438
(9)
1 429
Total from
Discontinued continuing &
operations discontinued
operations
£m
(Note 12)
£m
Total
£m
3 446
(22)
3 424
423
(29)
394
3 869
(51)
3 818
Sales
Total sales
Inter-segment sales
External sales
Operating profit
Before exceptional items and
amortisation of acquired
intangible assets
Exceptional items (Note 8)
Amortisation of acquired
intangible assets
Operating profit
Net finance (expense)/income
Profit before tax
Segment assets (note a)
Unallocated assets:
– current tax assets
– deferred tax assets
– debt related derivative assets
– cash and cash equivalents
Total assets
Segment liabilities (note a)
Unallocated liabilities:
– corporate borrowings
– debt related derivative liabilities
– current tax liabilities
– deferred tax liabilities
Total liabilities
Other segment information
(note a)
Net operating assets
Capital investments (note b)
Depreciation (Note 16)
Amortisation of intangible
assets (Note 15)
Impairment charges
Share-based payments (Note 28)
1 390
(4)
1 386
186
(12)
(3)
171
470
(9)
461
41
(47)
(5)
(11)
66
–
(4)
62
24
–
–
24
(31)
–
–
(31)
286
(59)
(12)
215
(42)
173
45
60
–
105
1
106
75
1 250
601
297
821
58
3 027
18
1
48
165
414
112
22
402
15
965
23
1 218
36
35
107
2 062
326
100
15
30
7
52
26
7
1
–
(2)
836
152
42
4
12
1
489
112
12
7
17
2
275
11
27
4
–
–
419
44
17
–
–
1
43
7
2
–
1
3
331
1
(12)
320
(41)
279
3 102
18
1
48
165
3 334
988
1 218
36
35
107
2 384
2 114
352
107
16
30
5
(a) The segment assets and liabilities disclosed as discontinued relate to Eastern Sugar. Production at the Eastern Sugar facilities
ceased in the year ended 31 March 2007 and the operations are currently being dismantled.
(b) Capital investments comprise capital expenditure on property, plant and equipment, intangible assets and investments.
These items include amounts arising on acquisition of businesses.
106
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
4 Segment information (continued)
The segment results for the year to 31 March 2007 are as follows:
Continuing operations
Food &
Industrial
Ingredients,
Americas
£m
Food &
Industrial
Ingredients,
Europe
£m
Sucralose
£m
Sugars
£m
Central
costs
£m
1 259
(4)
1 255
175
(33)
(3)
139
316
(11)
305
40
–
(2)
38
147
–
147
1 638
(120)
1 518
71
20
(4)
87
60
–
–
60
(35)
–
–
(35)
Total from
Discontinued continuing &
operations discontinued
operations
£m
(Note 12)
£m
879
(34)
845
4 239
(169)
4 070
62
23
–
85
(1)
84
373
10
(9)
374
(37)
337
Total
£m
3 360
(135)
3 225
311
(13)
(9)
289
(36)
253
956
308
295
608
40
2 207
484
2 691
–
231
–
20
–
31
–
288
–
–
–
–
725
116
39
3
11
1
288
21
8
6
–
–
264
55
15
4
–
–
320
28
16
–
–
1
39
8
46
189
–
89
583
189
1 113
22
47
85
–
1 624
223
80
13
12
5
28
370
46
20
–
16
1
39
8
46
189
89
3 062
772
1 113
22
47
85
28
2 067
1 994
269
100
13
28
6
–
13
–
27
3
2
–
1
3
Sales
Total sales
Inter-segment sales
External sales
Operating profit
Before exceptional items and
amortisation of acquired
intangible assets
Exceptional items (Note 8)
Amortisation of acquired
intangible assets
Operating profit
Net finance (expense)/income
Profit before tax
Segment assets
Unallocated assets:
– current tax assets
– deferred tax assets
– debt related derivative assets
– cash and cash equivalents
Assets held for sale
Total assets
Segment liabilities
Unallocated liabilities:
– corporate borrowings
– debt related derivative liabilities
– current tax liabilities
– deferred tax liabilities
Liabilities held for sale (note a)
Total liabilities
Other segment information
Net operating assets
Capital investments (note b)
Depreciation (Note 16)
Amortisation of intangible
assets (Note 15)
Impairment charges
Share-based payments
(a)
Included in liabilities held for sale are non-operating items amounting to £14 million.
(b) Capital investments comprise capital expenditure on property, plant and equipment, intangible assets and investments.
These items include amounts arising on acquisition of businesses.
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Notes to the consolidated financial statements
4 Segment information (continued)
Secondary format – geographical segments
The Group’s operations are based in four main geographical areas. The United Kingdom is the home country of the parent.
Sales, assets, and investments in the principal territories are as follows:
External sales (note a)
Year to 31 March
Segment assets
At 31 March
Capital investments
Year to 31 March
2008
£m
606
641
1 470
707
3 424
–
3 424
2007
£m
619
484
1 441
681
3 225
–
3 225
2008
£m
746
719
1 331
306
3 102
232
3 334
2007
£m
497
732
1 173
289
2 691
371
3 062
2008
£m
37
136
159
20
352
–
352
2007
£m
18
61
144
46
269
–
269
United Kingdom
Other European countries
North America
Rest of the world
Total
Unallocated assets
(a) External sales are from continuing operations.
5 Sales from continuing operations
Analysis of sales by category:
Sales of goods and services (excluding share of joint ventures’ sales)
Share of sales of joint ventures
Notes
17
Year to 31 March
2007
£m
3 024
201
3 225
2008
£m
3 177
247
3 424
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Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
6 Operating profit
Continuing operations
External sales
Staff costs
Inventories:
– cost of inventories recognised as an expense (included in cost of sales)
– fair value loss on derivatives held for trading (included in cost of sales)
– impairment of inventory recognised in the year
Depreciation of property, plant and equipment:
– owned assets
– leased assets
Exceptional items
Amortisation of intangible assets:
– intangible assets arising on acquisition of businesses
– other intangible assets
Operating lease rentals:
– property
– plant and machinery
Research and development expenditure
Impairment of trade receivables
Impairment of property, plant and equipment
Government grant income
Other net operating expenses:
– ineffectiveness loss on derivatives designated as cash flow hedges
– ineffectiveness gain on derivatives designated as net investment hedges
– other operating expenses
Total
Operating profit from continuing operations
Discontinued operations
External sales
Staff costs
Inventories:
– cost of inventories recognised as an expense (included in cost of sales)
Depreciation of property, plant and equipment:
– owned assets
Exceptional items
Amortisation of intangible assets:
– other intangible assets
Operating lease rentals:
– plant and machinery
Research and development expenditure
Other net operating expenses:
– other operating expenses
Total
Notes
9
8
23
20
20
Notes
12
9
8
Operating profit from discontinued operations
12
Year to 31 March
2007
£m
3 225
212
1 978
5
1
79
1
13
9
4
2
25
15
1
–
(18)
–
(2)
611
2 936
289
Year to 31 March
2007
£m
845
90
458
20
(23)
–
2
7
206
760
85
2008
£m
3 424
234
2 052
23
–
98
2
59
12
3
–
21
29
–
1
(17)
2
–
690
3 209
215
2008
£m
394
29
185
7
(60)
1
1
3
123
289
105
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Notes to the consolidated financial statements
7 Auditors’ remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditors
as detailed below:
Fees payable to the Company’s auditors for the audit of the Company’s annual
financial statements
Fees payable to the Company’s auditors and its associates for other services:
– the audit of the Company’s subsidiaries, pursuant to legislation
Total audit fees
Other services pursuant to legislation
Other services relating to corporate finance transactions entered into or proposed to enter into
All other services
Year to 31 March
2007
£m
0.6
1.5
2.1
0.1
–
0.1
2.3
2008
£m
0.7
1.3
2.0
0.3
0.3
0.1
2.7
In addition to the above, fees totalling £0.1 million (2007 – £0.1 million) were paid to the Company’s auditors in respect of the audit
of Group pension schemes.
8 Exceptional items
Exceptional items are as follows:
Continuing
Restructuring costs (note a)
Impairment and closure costs (note b)
Deferred payment provision release (note c)
Discontinued
European starch plants (note a)
Redpath (note d)
Occidente (note e)
Eastern Sugar (note f)
Year to 31 March
2007
£m
–
(33)
20
(13)
–
–
–
23
23
2008
£m
(30)
(29)
–
(59)
(8)
60
8
–
60
(a) Overall, the net loss on disposal of the European starch plants in France, Belgium, Italy, Spain and the UK is £38 million,
comprising £30 million of redundancy and other restructuring costs within continuing operations, and a net loss of £8 million in
discontinued operations (comprising £7 million profit on disposal offset by goodwill written off of £15 million). The restructuring
costs result from the significant reduction in central support functions required by the retained Food & Industrial Ingredients,
Europe business.
(b) Following a review of the global citric acid business, an impairment charge of £12 million relating to property, plant and
equipment has been recognised. The citric acid business is reported in the Food & Industrial Ingredients, Americas division.
The Group is also taking on impairment charge of £17 million in its monosodium glutamate business in China, inventory
(£7 million); property, plant and equipment (£9 million) and intangible assets (£1 million). £10 million of this impairment relates
to minority interests. This business is currently reported in the Food and Industrial Ingredients, Europe division.
Impairment and closure costs in the prior year of £33 million were recognised following a review of the manufacturing activities
at the Selby, UK, factory for citric acid and astaxanthin. These businesses are both reported within the Food & Industrial
Ingredients, Americas division.
(c) The deferred payment provision release in the year ended 31 March 2007 of £20 million related to the Sucralose business.
As part of the realignment of Sucralose activities with McNeil Nutritionals, LLC (McNeil) in April 2004 a provision was set up
for deferred consideration payable to McNeil. It was anticipated that the provision would not be fully utilised and consequently
£20 million was released to the income statement.
(d) The Group disposed of its shareholding of Redpath resulting in a profit on disposal of £60 million (see Note 39).
110
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
8 Exceptional items (continued)
(e) The Group disposed of its interest in its Mexican cane sugar business, Occidente, resulting in a profit on disposal of £8 million
(see Note 39).
(f) The exceptional gain of £23 million in discontinued operations in 2007 related to the Group’s Eastern Sugar joint venture.
This comprised a £14 million net gain expected on termination of operations following surrender of sugar quota to the EU
Restructuring Fund under the terms of the EU Sugar Regime and a £9 million gain following a favourable outcome to a long
running litigation dispute with the government of the Czech Republic.
The tax impact on continuing net exceptional items is a £5 million credit (2007 – £3 million charge) and on total net exceptional items
is a £3 million charge (2007 – £7 million charge). Tax credits on exceptional items are only recognised to the extent that losses
created are expected to be recoverable in the future. In the year to 31 March 2007, a further £18 million exceptional tax charge was
recognised in relation to discontinued operations.
Exceptional items includes a £10 million loss (2007 – £nil) attributable to minority interests.
9 Staff costs
Staff costs for the Group during the year were as follows:
Wages and salaries
Social security costs
Other pension costs:
– defined benefit schemes
– defined contribution schemes
– retirement healthcare benefits
Share-based payments
Year to 31 March 2008
Year to 31 March 2007
Continuing
operations
£m
Discontinued
operations
£m
Continuing
operations
£m
Discontinued
operations
£m
194
17
13
1
2
7
234
24
7
1
–
(1)
(2)
29
173
17
15
1
1
5
212
69
16
3
–
1
1
90
The average number of people employed by the Group, excluding associates’ employees and including a proportionate share of
people employed by joint ventures, is set out below. As required by the Companies Act 1985, this includes part-time employees:
By business segment
Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Europe
Sucralose
Sugars
Year to 31 March
2007
2 601
3 123
279
3 179
9 182
2008
2 500
2 857
267
2 240
7 864
Included in the above numbers are 1,478 (2007 – 2,900) employees relating to discontinued operations, where 803 (2007 – 1,659)
were employed by Sugars and 675 (2007 – 1,241) by Food & Industrial Ingredients, Europe.
The number of people employed by the Group at 31 March 2008 was 6,488 (2007 – 9,194).
Key management compensation
Salaries and short-term employee benefits
Post-employment benefits
Share-based payments
Share option gains
Year to 31 March
2007
£m
4
1
2
3
10
2008
£m
4
1
2
2
9
Key management includes the Company’s executive directors, details of whose remuneration are given in the directors’ remuneration
report on pages 82 to 92, the Company Secretary, the former Group Human Resources Director and as of 8 October 2007 the
President of Food & Industrial Ingredients, Americas, when it was announced he would be joining the Group Management Committee.
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The aggregate emoluments of directors in respect of qualifying services to the Company were £4 million (2007 – £5 million).
Tate & Lyle Annual Report 2008
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Notes to the consolidated financial statements
10 Finance income and finance expense
Continuing
Finance income
Interest receivable
Net finance income/(cost) arising on defined benefit retirement schemes:
– interest cost
– expected return on plan assets
Total finance income
Finance expense
Interest payable on bank borrowings
Interest payable on other borrowings
Unwinding of discounts in provisions
Finance lease charges
Fair value gain/(loss) on interest-related derivative financial instruments:
– Interest rate swaps – fair value hedges
– Derivatives not designated as hedges
Fair value adjustment of borrowings attributable to interest rate risk
Total finance expense
Net finance expense
Notes
32
32
Year to 31 March
2008
£m
2007
£m
34
(67)
71
38
(6)
(69)
(1)
(3)
16
1
(18)
(80)
(42)
48
(66)
68
50
(3)
(77)
(3)
(3)
(4)
(1)
5
(86)
(36)
Finance expense is shown net of borrowing costs capitalised into the cost of assets of £8 million (2007 – £7 million) at a capitalisation
rate of 5.4% (2007 – 4.7%).
Interest payable on other borrowings includes £0.2 million (2007 – £0.2 million) of dividends in respect of the Group’s 6.5%
cumulative preference shares.
Discontinued
Included within profit for the year in relation to discontinued operations (Note 12) is net finance income of £1 million (2007 – net
finance expense of £1 million).
11 Income tax expense
Analysis of charge for the year
Continuing
Current tax:
– In respect of the current year
– UK
– Overseas
– Adjustments in respect of previous years
Deferred tax
Income tax expense
Year to 31 March
2008
£m
2007
£m
–
87
(4)
83
(7)
76
(33)
96
6
69
19
88
The taxation charge on continuing operations in the year to 31 March 2008 of £76 million (2007 – £88 million) includes a credit of
£5 million in respect of exceptional items (2007 – £3 million charge).
Discontinued
The taxation charge in respect of discontinued operations in the year to 31 March 2008 is £16 million (2007 – £32 million).
112
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
11 Income tax expense (continued)
Tax on items recognised directly in equity
Deferred tax charge/(credit) on share-based payments
Deferred tax charge on retirement benefits
Deferred tax (credit) on foreign exchange
Current tax (credit)/charge on foreign exchange
Year to 31 March
2007
£m
(2)
–
–
21
19
2008
£m
3
10
(1)
(21)
(9)
The effective tax rate for the year, calculated on the basis of the total income tax expense relating to continuing operations as a
proportion of profit before tax, is 43.9% (2007 – 34.8%). This compares with the standard rate of corporation tax in the United
Kingdom of 30% (2007 – 30%) as follows:
Profit before tax
Corporation tax charge thereon at 30% (2007 – 30%)
Adjusted for the effects of:
– exceptional items
– expenses not deductible for tax purposes
– losses not recognised
– adjustments to tax in respect of previous periods
– different tax rates applied on overseas earnings
Year to 31 March
2007
£m
253
76
20
1
(17)
1
7
88
2008
£m
173
52
13
(1)
3
(7)
16
76
The effective rate of tax relating to continuing operations on profit before exceptional items and amortisation was 34.4% (2007 – 32.0%).
12 Discontinued operations
On 22 April 2007, the Group completed the sale of Redpath to American Sugar Refining, Inc. Accordingly the results of Redpath
are presented as discontinued operations for the years ended 31 March 2008 and 31 March 2007. The related assets and liabilities
were held for sale at 31 March 2007.
On 1 October 2007, the Group completed the sale to Syral SAS (a subsidiary of Tereos of France) of its starch facilities forming part
of the Food & Industrial Ingredients, Europe segment in the UK, Belgium, France, Spain and Italy (together ‘the European starch
plants’). Accordingly the results of the European starch plants that have been disposed of are presented as discontinued operations
for the years ended 31 March 2008 and 31 March 2007.
On 28 December 2007, the Group disposed of its 49% indirect shareholding in Occidente to E D & F Man Holdings Limited.
Accordingly, the results of Occidente are presented as discontinued operations for the years ended 31 March 2008 and 31 March 2007.
Following an extensive review of the impact of the new EU sugar regime, the Group’s Eastern Sugar joint venture ceased processing
beets by March 2007 and renounced its sugar quotas in Hungary, Czech Republic and Slovakia in return for Restructuring Aid.
Accordingly the results of Eastern Sugar are presented as discontinued operations for the years ended 31 March 2008 and
31 March 2007.
The results of Redpath, Occidente and Eastern Sugar were previously reported in the Sugars segment. The disposed European
starch plants were previously reported as part of the Food & Industrial Ingredients, Europe segment.
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Notes to the consolidated financial statements
12 Discontinued operations (continued)
Year to 31 March 2008
Notes
Redpath
£m
Eastern Sugar
£m
European
Starch Plants
£m
Occidente
£m
Sales
Operating profit before
exceptional items
Exceptional items
Operating profit
Finance income
Finance expense
Profit before tax from
discontinued operations
Income tax expense (note a)
Profit for the year from
discontinued operations
Sales
Operating profit before
exceptional items
Exceptional items
Operating profit
Finance income
Finance expense
Profit before tax from
discontinued operations
Income tax expense (note a)
Profit for the year from
discontinued operations
8
Notes
8
11
–
60
60
–
–
60
–
60
Redpath
£m
189
8
–
8
1
–
9
(9)
–
31
308
5
–
5
2
–
7
(1)
6
38
(8)
30
–
(1)
29
(7)
22
44
2
8
10
1
(1)
10
(8)
2
Total
£m
394
45
60
105
3
(2)
106
(16)
90
Year to 31 March 2007
Eastern Sugar
£m
67
10
23
33
–
–
33
(6)
27
European
Starch Plants
£m
520
Occidente
£m
69
38
–
38
–
(2)
36
(15)
21
6
–
6
1
(1)
6
(2)
4
Total
£m
845
62
23
85
2
(3)
84
(32)
52
(a)
Income tax expense in Occidente in the year to 31 March 2008 includes an £8 million charge in respect of exceptional items.
Income tax expense in Redpath in the year to 31 March 2007 included a £5 million exceptional charge. Income tax expense
in Eastern Sugar in the year to 31 March 2007 included a £4 million charge in respect of exceptional items.
Net cash flows from discontinued operations are as follows:
Net cash (outflows)/inflows from
operating activities
Net cash inflows/(outflows)
from investing activities
Net cash inflows from
operating activities
Net cash (outflows)/inflows
from investing activities
Year to 31 March 2008
Redpath
£m
Eastern Sugar
£m
European
Starch Plants
£m
Occidente
£m
(8)
–
22
1
22
(23)
–
(2)
Total
£m
36
(24)
Year to 31 March 2007
Redpath
£m
Eastern Sugar
£m
European
Starch Plants
£m
Occidente
£m
4
(1)
–
3
44
(39)
7
(6)
Total
£m
55
(43)
There were no cash flows to or from financing activities in the years ended 31 March 2008 or 31 March 2007.
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Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
13 Earnings per share
Basic
Basic earnings per share is calculated by dividing the profit attributable to equity holders of the Company by the weighted average
number of ordinary shares in issue during the year, excluding ordinary shares purchased by the Company and held in the Employee
Share Ownership Trust or in Treasury.
Year to 31 March 2008
Year to 31 March 2007
Profit attributable to equity
shareholders of the
Company (£million)
Weighted average number of
ordinary shares
in issue (millions)
Basic earnings per share
Continuing
operations
Discontinued
operations
Total
Continuing
operations
Discontinued
operations
104
90
194
162
52
474.7
21.9p
474.7
19.0p
474.7
40.9p
482.8
33.6p
482.8
10.7p
Total
214
482.8
44.3p
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares outstanding to assume
conversion of all potential dilutive ordinary shares. Potential dilutive ordinary shares arise from share options. For these, a calculation
is performed to determine the number of shares that could have been acquired at fair value (determined as the average annual market
share price of the Company’s shares) based on the monetary value of the subscription rights attached to outstanding share options.
Year to 31 March 2008
Year to 31 March 2007
Profit attributable to
equity shareholders of
the Company (£million)
Weighted average number of
diluted shares in issue
(millions)
Diluted earnings per share
Continuing
operations
Discontinued
operations
Total
Continuing
operations
Discontinued
operations
104
90
194
162
52
480.4
21.7p
480.4
18.7p
480.4
40.4p
491.0
33.0p
491.0
10.6p
Total
214
491.0
43.6p
The adjustment for the dilutive effect of share options at 31 March 2008 was 5.7 million shares (2007 – 8.2 million shares).
Adjusted earnings per share
Adjusted earnings per share is stated excluding exceptional items and amortisation of acquired intangible assets as follows:
Continuing operations
Profit attributable to equity shareholders of the Company (£million)
Adjustments:
– exceptional items
– amortisation of acquired intangible assets
– tax effect of the above adjustments
– minority interest share of exceptional items
Adjusted profit (£million)
Notes
8
15
8
Year to 31 March
2007
162
13
9
–
–
184
2008
104
59
12
(8)
(10)
157
Adjusted basic earnings per share from continuing operations
Adjusted diluted earnings per share from continuing operations
33.1p
32.7p
38.1p
37.5p
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Notes to the consolidated financial statements
14 Dividends
Dividends paid on ordinary equity shares:
– final paid relating to prior year (£million)
– interim paid relating to current year (£million)
Total dividend paid (£million)
The total ordinary dividend is 22.6p (2007 – 21.5p) made up as follows:
– interim dividend paid
– final dividend proposed
Year to 31 March
2007
68
30
98
6.2p
15.3p
21.5p
2008
74
31
105
6.5p
16.1p
22.6p
The final dividend proposed for the year, which has not been recognised as a liability, will be paid subject to approval by
shareholders at the Company’s Annual General Meeting on 23 July 2008 to shareholders who are on the Register of Members
on 4 July 2008.
15 Goodwill and intangible assets
Notes
Goodwill
£m
Patents
£m
Other
acquired
intangible
assets
£m
Total
acquired
intangibles
£m
Other
intangible
assets
£m
39
39
39
Cost
At 1 April 2007
Businesses acquired
Additions at cost
Businesses sold
Exchange differences
At 31 March 2008
Accumulated amortisation
and impairments
At 1 April 2007
Businesses sold
Amortisation charge
Impairment charge (note a)
Exchange differences
At 31 March 2008
Net book value at
31 March 2008
167
36
–
(15)
14
202
8
–
–
–
–
8
194
32
–
–
–
1
33
12
–
4
–
–
16
17
44
52
–
–
12
108
6
–
8
–
1
15
93
243
88
–
(15)
27
343
26
–
12
–
1
39
304
38
–
7
(26)
3
22
23
(24)
4
1
2
6
16
Total
£m
281
88
7
(41)
30
365
49
(24)
16
1
3
45
320
(a) The impairment charge relates to Orsan China and is included within continuing exceptional items in the income statement.
116
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
15 Goodwill and intangible assets (continued)
Goodwill
£m
Patents
£m
Other
acquired
intangible
assets
£m
Total
acquired
intangibles
£m
Other
intangible
assets
£m
Cost
At 1 April 2006
Additions at cost
Exchange differences
At 31 March 2007
Accumulated amortisation
and impairments
At 1 April 2006
Amortisation charge
Impairment charge
At 31 March 2007
Net book value at
31 March 2007
179
–
(12)
167
–
–
8
8
159
32
–
–
32
8
4
–
12
20
48
–
(4)
44
1
5
–
6
38
259
–
(16)
243
9
9
8
26
217
Goodwill
The carrying amounts of goodwill by business segment are as follows:
Food & Industrial Ingredients, Americas (note a)
Food & Industrial Ingredients, Europe (note b)
Sugars
32
6
–
38
19
4
–
23
15
2008
£m
57
136
1
194
Total
£m
291
6
(16)
281
28
13
8
49
232
31 March
2007
£m
57
101
1
159
Goodwill is tested for impairment annually and whenever there is an indication of impairment. Unless otherwise stated, impairment
reviews are carried out in accordance with the methodology set out in Notes 2 and 3.
(a) Food & Industrial Ingredients, Americas goodwill of £57 million includes £47 million (2007 – £47 million) relating to the Staley
acquisition, which is treated as one cash generating unit (CGU) for impairment testing purposes as the business is managed as
one entity and it is therefore not appropriate to allocate goodwill to individual plants. Cash flows used were based on the latest
approved plans for five years discounted using a pre-tax rate of 11% (2007 – 13%). Remaining goodwill relates to Continental
Custom Ingredients, which was acquired in 2006. This business has also been tested for impairment using management
projections of cash flows for five years and a pre-tax discount rate of 11% (2007 – 13%). In both cases, zero growth was
assumed in perpetuity. No impairment is required for either business.
(b) Goodwill in the Food & Industrial Ingredients, Europe division of £136 million includes £76 million (2007 – £86 million) relating
to the acquisition in 2000 of the minority of 34% of shares of the former Amylum business. Although cash flows have been
identified for certain individual plants for the purposes of assessing the recoverable amounts of property, plant and equipment
(as described in Note 16) the business is managed as a network, with a large amount of interdependency between plants and
centralised decision-making. Consequently, goodwill is monitored at a divisional level and allocated to a group of plant CGUs
for the purposes of impairment testing. On disposal of the European starch plants, an exercise was carried out to assess the
amount of goodwill that could be allocated to those businesses that had not been impaired in 2006 and subsequently
£15 million was written off. The remaining goodwill in the former Amylum businesses has been tested for impairment using
management projection of cash flows for five years. The pre-tax discount rate used was 10% and zero growth was assumed
in perpetuity. Management has concluded that no impairment is required. In 2007, a similar approach was adopted to the
impairment test, although fair value less costs to sell was used for the part of the business identified for potential disposal.
For the part of the business that is retained by the Group the recoverable amount was calculated using the same methodology
and similar assumptions to the current year. The pre-tax discount rate used was 12%.
During the year goodwill of £36 million has been recognised on the acquisition of G.C. Hahn & Co., part of Food and Industrial
Ingredients, Europe. No impairment loss was identified in respect of this business.
The remaining goodwill relates to a number of smaller acquisitions, each of which has been tested for impairment using
management projections for five years, pre-tax discount rates in the range of 10% to 11% (2007 – 10% to 13%), and zero
growth assumed in perpetuity.
Tate & Lyle Annual Report 2008
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F
O
W
E
V
R
E
V
O
O
D
E
W
T
A
H
W
D
E
M
R
O
F
R
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W
W
O
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E
N
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U
B
E
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Notes to the consolidated financial statements
16 Property, plant and equipment
Notes
Land and
buildings
£m
Plant and
machinery
£m
Assets
in the
course of
construction
£m
Cost
At 1 April 2007
Additions at cost
Transfers on completion
Additions through business combinations
Businesses sold
Disposals
Exchange differences
At 31 March 2008
Accumulated depreciation and impairments
At 1 April 2007
Depreciation charge
Impairment losses
Businesses sold
Disposals
Exchange differences
At 31 March 2008
Net book value at 31 March 2008
Cost
At 1 April 2006
Additions at cost
Transfers on completion
Disposals
Transfer to assets held for sale
Exchange differences
At 31 March 2007
Accumulated depreciation and impairments
At 1 April 2006
Depreciation charge
Impairment losses
Disposals
Transfer to assets held for sale
Other transfers
Exchange differences
At 31 March 2007
Net book value at 31 March 2007
546
19
15
5
(117)
(14)
12
466
285
13
–
(78)
(9)
8
219
247
581
20
11
(8)
(26)
(32)
546
290
17
8
(6)
(9)
–
(15)
285
261
2 209
128
161
4
(669)
(72)
54
1 815
1 541
94
23
(541)
(71)
42
1 088
727
2 303
48
116
(37)
(70)
(151)
2 209
1 602
83
12
(34)
(38)
11
(95)
1 541
668
288
136
(176)
3
(32)
(1)
4
222
–
–
–
–
–
–
–
222
236
210
(127)
(1)
(2)
(28)
288
11
–
–
–
–
(11)
–
–
288
24
24
Total
£m
3 043
283
–
12
(818)
(87)
70
2 503
1 826
107
23
(619)
(80)
50
1 307
1 196
3 120
278
–
(46)
(98)
(211)
3 043
1 903
100
20
(40)
(47)
–
(110)
1 826
1 217
118
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
16 Property, plant and equipment (continued)
Impairment losses
It is the Group’s policy to test assets for impairment whenever events or changes in circumstances indicate that their carrying
amounts may not be recoverable.
(a) Impact of changes to the EU sugar regime
The Group continues to monitor the impact of the announced changes to the EU sugar regime, which were implemented in July
2006 and significantly reduce both EU refined sugar prices, raw sugar prices, and EU subsidised exports of sugar.
The UK and Portuguese Sugars businesses are impacted by the proposed changes to the EU sugar regime. Management’s
impairment review of these businesses was based on internal forecasts of future cash flows for the next five years, a pre-tax
discount rate of 11% (2007 – 12%) and a zero growth rate assumed in perpetuity. This did not result in an impairment in either the
year ended 31 March 2007 or 31 March 2008.
Food & Industrial Ingredients, Europe is a major supplier of sweeteners which operates in competition to sugar throughout Europe.
Following the disposal of five European starch plants in October 2007, the Group carried out an impairment review in respect of the
remaining cash generating units. Recoverable amount was based on value in use, calculated based on estimated future cash flows
using management’s internal forecasts of future margins for the next five years. The pre-tax discount rate used was 10% (2007 –
12%) and a zero growth rate assumed in perpetuity. Taking all factors into account management concluded that no further
impairment or reversal of previous impairments were required.
(b) Other impairment reviews
The Group has carried out a review of its global citric acid business following on from the closure of its citric acid facility in Selby, UK
in October 2007 and as a result of intense competition from Chinese exports and oversupply in the world market. The recoverable
amount was based on value in use, calculated based on management’s internal forecasts of future cash flows for the next ten years,
a pre-tax discount rate of 12%. As a result, an impairment charge of £12 million has been recognised relating to property, plant and
equipment. This charge is included in exceptional items relating to continuing business.
In addition, the Group’s monosodium glutamate business in China, Orsan GGP, suffered from an over-supplied market with
increased industry capacity coming on stream and a change in tax incentives discouraging exports. Given the uncertainty that
market conditions will recover in the short term, the Group has taken an impairment charge of £17 million through continuing
exceptional items to write the business down to its recoverable amount. £10 million of this impairment relates to minority interest.
The recoverable amount was based on management’s internal forecasts of future cash flows for the next five years, a pre-tax
discount rate of 14% and a zero growth rate assumed in perpetuity. £9 million of this charge relates to property, plant and equipment.
Leased assets
Included in property, plant and equipment is plant and machinery held under finance leases with a net book value of £22 million
(2007 – £22 million). During the year ended 31 March 2008, £2 million of additions were recognised on the inception of finance
leases (2007 – £14 million).
Capitalised borrowing costs
The aggregate amount of borrowing costs included in the cost of property, plant and equipment is £21 million (2007 – £46 million),
of which £8 million (2007 – £7 million) was capitalised during the year.
17 Investments in associates and joint ventures
Associates
At 1 April 2006
Additions
At 31 March 2007 and at 31 March 2008
Total
£m
4
3
7
The Group’s associates, which are equity accounted, are listed in Note 43.
The Group owns an overall holding of 14% in Microbia Precision Engineering Inc. The Group considers the investment to be an
associate due to the Group’s ability to exercise significant influence over the company.
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Notes to the consolidated financial statements
17 Investments in associates and joint ventures (continued)
The amounts equity accounted in the Group income statement and balance sheet are summarised below:
Income statement
Sales
Expenses
Profit before tax
Income tax expense
Profit for the year
Balance sheet
Assets
Liabilities
Net assets
Year to 31 March
2007
£m
4
(4)
–
–
–
31 March
2007
£m
14
7
7
2008
£m
2
(2)
–
–
–
2008
£m
19
12
7
Joint ventures
The Group’s joint ventures are proportionately consolidated and the continuing businesses are listed in Note 43. The amounts
proportionately consolidated in the Group income statement and balance sheet are summarised below:
Income statement
Sales
Expenses
Profit before tax
Income tax expense
Profit for the year
Balance sheet
Assets
Non-current assets
Cash and cash equivalents
Other current assets
Liabilities
Non-current borrowings
Other non-current liabilities
Current borrowings
Other current liabilities
Net assets
Year to 31 March 2008
Year to 31 March 2007
Continuing
operations
£m
Discontinued
operations
£m
Continuing
operations
£m
Discontinued
operations
£m
247
(227)
20
(6)
14
107
(91)
16
(10)
6
201
(175)
26
(8)
18
2008
£m
160
51
184
395
4
28
41
44
117
278
188
(138)
50
(9)
41
31 March
2007
£m
221
45
183
449
4
45
25
61
135
314
The Group’s proportionate interest in joint ventures commitments and contingent liabilities was £14 million (2007 – £11 million).
120
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
18 Available-for-sale financial assets
At 1 April 2006
Additions
At 31 March 2007
Additions
Disposals
Fair value losses
At 31 March 2008
Available-for-sale financial assets include the following:
Listed securities
Unlisted securities
£m
17
1
18
4
(4)
(3)
15
2008
£m
–
15
15
31 March
2007
£m
7
11
18
Listed securities are stated at market valuation.
The fair values of unlisted securities are based on cash flows discounted using a risk-adjusted average discount rate of 10%
(2007 – 12%).
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Notes to the consolidated financial statements
19 Financial instruments by category
Set out below is a comparison by category of carrying values and fair values of all of the Group’s financial assets and financial
liabilities as at 31 March 2008 and 31 March 2007.
Notes
18
35
20
30
20
Notes
18
35
20
30
20
Derivatives
and other
items at
fair value
£m
Amortised
cost
£m
Held for
trading
£m
Available-
for-sale
£m
–
623
165
–
(851)
–
(489)
(552)
–
–
–
52
(367)
(46)
–
(361)
–
–
–
259
–
(251)
–
8
15
–
–
–
–
–
–
15
Derivatives
and other
items at
fair value
£m
Amortised
cost
£m
Held for
trading
£m
Available-
for-sale
£m
–
603
189
–
(460)
–
(426)
(94)
–
–
–
58
(653)
(34)
–
(629)
–
–
–
87
–
(114)
–
(27)
18
–
–
–
–
–
–
18
31 March 2008
Fair
value
£m
15
623
165
311
(1 283)
(297)
(489)
(955)
31 March 2007
Fair
value
£m
18
603
189
145
(1 163)
(148)
(426)
(782)
Total
carrying
value
£m
15
623
165
311
(1 218)
(297)
(489)
(890)
Total
carrying
value
£m
18
603
189
145
(1 113)
(148)
(426)
(732)
Available-for-sale financial assets
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments – assets
Borrowings
Derivative financial instruments – liabilities
Trade and other payables
Total
Available-for-sale financial assets
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments – assets
Borrowings
Derivative financial instruments – liabilities
Trade and other payables
Total
Trade and other receivables presented above excludes £63 million (2007 – £19 million) relating to prepayments.
Trade and other payables presented above excludes £26 million (2007 – £nil million) of deferred income relating to Transitional Aid.
122
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
20 Derivative financial instruments
Notes
Assets
£m
31 March 2008
Liabilities
£m
Assets
£m
31 March 2007
Liabilities
£m
Non-current derivative financial instruments used
to manage the Group’s net debt profile
Currency swaps – net investment hedges
Currency swaps – fair value hedges
Currency swaps – cash flow hedges
Interest rate swaps – fair value hedges
Interest rate caps – held for trading
Current derivative financial instruments used to
manage the Group’s net debt profile
Currency swaps – accrued interest
Interest rate swaps – held for trading
Total derivative financial instruments used to manage
the Group’s net debt profile
Other non-current derivative financial instruments
Forward foreign exchange contracts – cash flow hedges
Commodity pricing contracts – cash flow hedges
Other current derivative financial instruments
Forward foreign exchange contracts – cash flow hedges
Commodity pricing contracts – cash flow hedges
Commodity pricing contracts – held for trading
Total other derivative financial instruments
Total derivative financial instruments
Presented in the balance sheet as follows:
Non-current derivative financial instruments
Current derivative financial instruments
Classified as derivative financial instruments
held for sale
24
21
2
1
10
–
34
10
4
14
48
1
1
2
4
2
255
261
263
311
36
275
–
311
(22)
–
–
(6)
–
(28)
(3)
(5)
(8)
(36)
(2)
–
(2)
(13)
–
(246)
(259)
(261)
(297)
(30)
(267)
–
(297)
24
–
–
11
1
36
10
–
10
46
–
–
–
2
11
86
99
99
145
36
102
7
145
(5)
(2)
–
(12)
–
(19)
(3)
–
(3)
(22)
–
–
–
(4)
(8)
(114)
(126)
(126)
(148)
(19)
(123)
(6)
(148)
The ineffective portion recognised in operating profit that arises from cash flow hedges amounts to a loss of £2 million
(2007 – £nil million).
The ineffective portion recognised in operating profit that arises from net investment hedges amounts to £nil million
(2007 – £2 million gain).
The ineffective portion recognised in net finance expense that arises from fair value hedges amounts to a loss of £1 million
(2007 – £nil million).
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Notes to the consolidated financial statements
20 Derivative financial instruments (continued)
Cash flow hedges
The Group employs forward foreign exchange contracts and commodity pricing contracts to hedge cash flow risk associated with
forecast transactions. The notional principal amounts of the outstanding forward foreign exchange contracts are as follows:
Euro
US dollar
Canadian dollar
Norwegian krone
Sterling
Singapore dollar
Other
2008
£m
(70)
(23)
(5)
–
77
18
(15)
31 March
2007
£m
(139)
(38)
(105)
(8)
285
10
9
Gains and losses recognised in the cash flow hedge reserve in equity (Note 27) on forward foreign exchange and commodity pricing
contracts as of 31 March 2008 will be released to the income statement at various dates up to 12 months from the balance sheet date.
The Group hedges the interest cost of certain of its borrowings through the use of interest rate swaps. Gains and losses recognised in
the cash flow hedge reserve in equity on interest rate swaps as of 31 March 2008 will be released to the income statement at various
dates up to until the maturity of the underlying borrowings. The notional principal amount of the outstanding interest rate swaps is
£122 million (2007 – £nil million).
Fair value hedges
The Group employs currency and interest rate swap contracts to hedge the currency and interest rate risks associated with its
borrowings. The notional principal amounts of the outstanding interest rate and currency swap contracts applied in fair value hedging
relationships as of 31 March 2008 were £164 million and £200 million respectively (2007 – £457 million and £200 million respectively).
Net investment hedges
The Group employs currency swap contracts to hedge the currency risk associated with its net investments in subsidiaries located
primarily in the USA and Europe. The notional principal amounts of the outstanding currency swap contracts applied in net
investment hedging relationships as of 31 March 2008 were £200 million (31 March 2007 – £182 million). The fair value loss of
£17 million (2007 – £13 million gain) on translation of the currency swap contracts to sterling at the balance sheet date was
recognised in the translation reserve in shareholders’ equity (Note 27).
In addition, of the Group’s borrowings, a total of £756 million (2007 – £566 million) is designated as hedges of the net investments
in overseas subsidiaries.
Interest rate derivatives held for trading
Interest rate caps and some of the Group’s interest rate swap contracts hedge the Group’s exposure to interest rate risk, but do
not qualify for hedge accounting. The notional amounts of the outstanding interest rate caps and interest rate swap contracts not
designated within hedge relationships as of 31 March 2008 were £83 million and £191 million, respectively (2007 – £198 million
and £nil million).
Trading contracts
Commodity pricing contracts held for trading relate to the Group’s commodity trading activities.
21 Financial risk factors
Management of financial risk
The main financial risks faced by the Group are credit risk, liquidity risk, and market risks, which include interest rate risk, currency
risk and certain commodity price risks. The Board regularly reviews these risks and approves written policies covering the use of
financial instruments to manage these risks and set overall risk limits.
The Group Finance Director retains the overall responsibility and management of financial risk for the Group. Most of the Group’s
financing, interest rate and foreign exchange risk are managed through the Group treasury company, Tate & Lyle International
Finance PLC, whose operations are controlled by its Board. The treasury company is chaired by the Group Finance Director and has
other Board members who are independent of the treasury function. The Board of Tate & Lyle International Finance PLC approves
policies and procedures setting out permissible funding and hedging instruments, and a system of authorities for the approval of
transactions and exposures within the Group Board approved limits.
Group interest rate and currency exposures are concentrated either in the treasury company or in appropriate holding companies through
market-related transactions with Group subsidiaries. These positions are managed by the treasury company within its authorised limits.
Commodity price risks are managed through divisional commodity trading functions in the USA and Europe, whose operations are
controlled by the divisional Executive Committee. The committee meets on a periodic basis and is responsible for ratifying general
strategy and overviewing performance on a monthly basis. Commodity price contracts are categorised as being held either for
trading or used for hedging price exposures. Commodity contracts held for trading within the Group are limited, confined only
to tightly controlled areas within the sugar and corn pricing operations.
124
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
21 Financial risk factors (continued)
The derivative financial instruments approved by the Board of Tate & Lyle PLC to manage financial risks include swaps, both interest
rate and currency, swaptions, caps, forward rate agreements, financial and commodity forward contracts and options, and
commodity futures.
Market risks
Foreign exchange management
Tate & Lyle operates internationally and is exposed to foreign exchange risks arising from commercial transactions, and from
recognised assets, liabilities and investments in overseas operations.
Transaction exposure
The Group’s policy requires subsidiaries to hedge transactional currency exposures against their functional currency once the
transaction is committed or highly probable, mainly through the use of forward foreign exchange contracts.
The amounts deferred in equity from derivative financial instruments designated as cash flow hedges are released to the income
statement and offset against the movement in underlying transactions only when the forecast transactions affect the income statement.
Translation exposure
The Group manages the foreign exchange exposure to net investments in overseas operations, particularly in the United States
and Europe, by maintaining a percentage of net debt in US dollars and euro to mitigate the effect of these risks. This is achieved
by borrowing principally in US dollar and euros, which provide a partial match for the Group’s major foreign currency assets. A
weakening of the US dollar and euro against sterling would result in exchange gains on net debt denominated in these currencies
which would be offset against the losses on the underlying foreign currency assets. At the year end, net debt (excluding the Group’s
share of joint venture net debt) amounting to £1,036 million was held in the following currencies: net borrowings of US dollars 81%
(2007 – 69%), euro 23% (2007 – 20%), other currencies 0% (2007 – 8%) and sterling net deposits of 4% (2007 – net borrowings
of 3%). The Group’s interest cost through the income statement is impacted by changes in the relevant exchange rates.
The following table, as required by IFRS 7, illustrates only the Group’s sensitivity to the fluctuation of the major currencies on its
financial assets and liabilities, as defined and set out in Note 19. Sensitivity is calculated on financial assets and liabilities as of
31 March denominated in non-functional currencies for all operating units within the Group. The percentage movement applied
to each currency is an approximation based on the average movements in the previous three reporting periods.
GBP/USD 5% change
GBP/EUR 5% change
31 March 2008
31 March 2007
Income
statement
–/+£m
1
2
Equity
–/+£m
35
14
Income
statement
–/+£m
1
2
Equity
–/+£m
28
4
The Group also manages its foreign exchange exposure to net investments in overseas operations through the use of currency swap
contracts. The amount deferred in equity from derivative financial instruments designated as net investment hedges is offset against
the foreign currency translation effect of the net investment in overseas operations, and is released to the income statement upon
disposal of those investments.
Interest rate management
The Group has an exposure to interest rate risk, arising principally from changes in US dollar, sterling and euro interest rates. This
risk is managed by fixing or capping portions of debt using interest rate derivatives to achieve a target level of fixed/ floating rate net
debt, which aims to optimise net finance expense and reduce volatility in reported earnings. The Group’s policy is that between 30%
and 75% of Group net debt (excluding the Group’s share of joint venture net debt) is fixed or capped (excluding out-of-the-money
caps) for more than one year and that no interest rates are fixed for more than 12 years. At 31 March 2008, the longest term of any
fixed rate debt held by the Group was until June 2016 (2007 – same). The proportion of net debt (excluding the Group’s share of
joint venture net debt) that was fixed or capped for more than one year was 62% (2007 – 58%).
If the interest rates applicable to the Group’s floating rate debt rise/fall from the levels at the end of March 2008 by an average of
100 basis points over the year to 31 March 2009, Group profit before tax will reduce/increase by approximately £4 million (2007 –
£3 million) respectively. In 2008 a cash flow hedging relationship was established to hedge floating rate interest payments on
£122 million of the Group’s borrowings. The Group does not expect this hedging relationship to have any material impact on equity.
Movements in interest rates will impact the fair value of the Group’s fixed and capped rate debt. If the interest rates applicable to the
Group’s fixed and capped rate debt were to rise by 1% from the levels at 31 March 2008, the fair value of the debt would reduce by
approximately £27 million (2007 – £17 million). If interest rates were to fall by 1% from the levels at 31 March 2008, the fair value of
the debt would increase by approximately £29 million (2007 – £17 million).
Price risk management
Tate & Lyle participates mainly in four markets: food and beverage; industrial; pharmaceutical and personal care; and animal feed.
Food and beverage and industrial ingredients are the most significant. All ingredients are produced from renewable crops,
predominantly corn (maize) and sugar cane.
Tate & Lyle Annual Report 2008
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Notes to the consolidated financial statements
21 Financial risk factors (continued)
Tate & Lyle is exposed to movements in the future prices of commodities in those domestic and international markets where the
Group buys and sells corn, sugar and energy for production. Commodity futures, forwards and options are used where available
to hedge inventories and the costs of raw materials for unpriced and prospective contracts not covered by forward product sales.
In most cases, these hedging contracts mature within one year and are either traded on organised exchanges or over the counter.
The Group’s Sugar Trading business trades sugar on the world market, buying and selling the physical commodity and taking positions
within the framework of Board-approved limits to achieve planned target results. The positions include physical commodity contracts
(mainly of white and raw sugar) and derivative instruments such as futures and options. All commodity pricing contracts and derivatives
in the Sugar Trading business are classified as held for trading and fair value gains and losses taken through the income statement.
The table below illustrates the sensitivity of the Group’s commodity pricing contracts as of 31 March to the price movement of
commodities. The percentage movement applied to each commodity product is based on an approximation of the average
movements in the last three years.
Corn 30% change
Sugar 20% change
31 March 2008
31 March 2007
Income
statement
–/+£m
4
1
Equity
–/+£m
3
–
Income
statement
–/+£m
2
6
Equity
–/+£m
–
–
The majority of the Group commodity pricing contracts are held for trading and changes in mark-to-market values of these contracts
are taken directly into the income statement. Amounts deferred in equity from commodity pricing contracts designated as cash flow
hedges are released to the income statement and offset against the movement in underlying transactions when they occur.
Credit risk management
Counterparty credit risk arises from the placing of deposits and entering into derivative financial instrument contracts with banks and
financial institutions, as well as credit exposures inherent within the Group’s outstanding receivables.
The Group manages credit risk by entering into financial instrument contracts only with highly credit-rated authorised counterparties
which are reviewed and approved annually by the Board. In addition, the Sugar Trading business has access to broker facilities, on
standard terms, to cover initial and variation margin calls.
The Group has Board approved maximum counterparty exposure limits for specified banks and financial institutions based on the
long-term credit ratings of Standard & Poor’s and Moody’s (typically single A long-term credit ratings or higher). Trading limits
assigned to commercial customers are based on ratings from Dun & Bradstreet and Credit Risk Monitor. In cases where published
financial ratings are not available or inconclusive, credit application, reference checking, and obtaining of customers confidential
financial information such as liquidity and turnover ratio, are required to evaluate customer’s credit worthiness.
Counterparties’ positions are monitored on a regular basis to ensure that they are within the approved limits and there are no
significant concentrations of credit risks.
The Group considers its maximum exposure to credit risk as follows:
Cash and cash equivalents
Trade and other receivables
Derivatives financial instruments – assets
31 March 2008
£m
31 March 2007
£m
165
686
311
189
622
138
The Group’s trade receivables are short term in nature and largely comprise amounts receivable from consumers and business
customers. Included in trade receivables are amounts received of £50 million (2007 – £95 million) in respect of securitised
receivables, which are also included in current borrowings. Concentrations of credit risk with respect to trade receivables are limited
due to the Group’s customer base being large, unrelated and internationally dispersed.
Liquidity risk management
The Group manages its exposure to liquidity risk and ensures maximum flexibility in meeting changing business needs, by
maintaining access to a wide range of funding sources, including capital markets and bank borrowings. Capital market issues
outstanding at 31 March 2008 include the US$300 million 6.125% 144A bond maturing in 2011, the £200 million 6.50% bond
maturing in 2012, the US$500 million 5.00% 144A bond maturing in 2014 and the US$250 million 6.625% 144A bond maturing in 2016.
The Group ensures that it has sufficient undrawn committed bank facilities to provide liquidity back-up for its US commercial paper
programme and other short-term money market borrowing for the foreseeable future. During the year ended 31 March 2008, Tate &
Lyle International Finance PLC arranged a US$1 billion five year committed club facility with a core of highly rated banks to replace
certain other committed bank facilities. The Group has committed bank facilities of US$1,110 million of which US$110 million mature
in 2009 and US$1 billion mature in 2012. These facilities are unsecured and contain common financial covenants for Tate & Lyle and
its subsidiary companies that the pre-exceptional and amortisation interest cover ratio should not be less than 2.5 times and the
multiple of net debt to EBITDA, as defined in our financial covenants, should not be greater than 4.0 times. The Group monitors
compliance against all its financial obligations and it is Group policy to manage the consolidated balance sheet so as to operate well
within these covenanted restrictions at all times. The majority of the Group’s borrowings are raised through the Group treasury
company, Tate & Lyle International Finance PLC, and are then on-lent to the business units on an arms length basis.
126
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
21 Financial risk factors (continued)
Current Group policy is to ensure that, after subtracting the total of undrawn committed facilities, no more than 10% of gross debt
matures within 12 months and no more than 35% has a maturity within two and a half years. At the year end, after subtracting total
undrawn committed facilities, there was no debt maturing within 12 months or within two and a half years (2007 – none and 25%).
The average maturity of the Group’s gross debt was 5.8 years (2007 – 6.2 years). At the year end the Group held cash and cash
equivalents of £165 million (2007 – £189 million) and committed facilities of £559 million (2007 – £312 million) of which £438 million
(2007 – £236 million) were undrawn. These resources are maintained to provide liquidity back-up and to meet the projected
maximum cash outflow from debt repayment, capital expenditure and seasonal working capital needs foreseen for at least a year
into the future at any one time.
The table below analyses the Group’s financial liabilities and derivative assets and liabilities based on the remaining period at the
balance sheet date to the contractual maturity date. The amounts disclosed in the table are the contractual undiscounted cash flows.
Liquidity analysis
Borrowings
Interest on borrowings
Trades and other payables
Derivatives contracts – receipts
Derivatives contracts – payments
Commodity contracts
Borrowings
Interest on borrowings
Trade and other payables
Derivatives contracts – receipts
Derivatives contracts – payments
Commodity contracts
<1 year
£m
1-5 years
£m
31 March 2008
> 5 years
£m
(231)
(48)
(447)
388
(393)
(265)
(395)
(167)
(14)
156
(134)
(85)
(414)
(86)
(10)
39
(39)
–
<1 year
£m
1-5 years
£m
31 March 2007
> 5 years
£m
(96)
(48)
(401)
699
(695)
(260)
(205)
(180)
(13)
137
(124)
(25)
(618)
(125)
(10)
56
(54)
–
Included in borrowings are £2,394,000 of 6.5% cumulative preference shares. Only one year’s worth of interest payable on these
cumulative preference shares is included in the less than one year category above.
Interest on borrowings is calculated based on borrowings held at year end without taking into account future issues. Floating-rate
interest is calculated using forward interest rates derived from interest rate yield curves as at year end.
Derivative contracts include currency swaps, forward exchange contracts, interest rate swaps, and interest rate caps. All commodity
pricing contracts such as options and futures are shown separately under commodity contracts.
Commodity contracts include only net settled commodity derivative contracts and gross settled commodity purchase contracts with
negative fair values. Purchase contracts outflows represent actual contractual cashflows under the purchase contracts and not their
fair values. Cash outflows from the purchase contracts are offset by cash inflows received from sale contracts; however, these
inflows are not included as part of this analysis.
Financial liabilities denominated in currencies other than Sterling are converted to Sterling using year end exchange rates.
Capital risk management
The Group’s primary objectives in managing its capital are to safeguard the business as a going concern; to maintain sufficient
financial flexibility to undertake its investment plans; to retain as a minimum an investment grade credit rating which enables
consistent access to debt capital markets, and to optimise capital structure in order to reduce the cost of capital.
The Group’s financial profile and level of financial risk is assessed on a regular basis in the light of changes to the economic
conditions, business environment, changes to the Group’s business profile and the risk characteristics of its businesses. During
the current financial year, in light of recent disposals the Group has returned capital to shareholders through an on-market share
repurchase programme. 33,627,000 shares were re-purchased for a total cost of £159 million, of which 30,327,000 were cancelled
and the balance held in treasury. The total number of shares in treasury at 31 March 2008 was 2,755,073. The share re-purchase
programme is calculated to have added 0.3 pence to earnings per share during the year ended 31 March 2008, after allowing
for an estimate of the opportunity cost.
Tate & Lyle has contractual relationships with Moody’s and Standard and Poor’s (S&P) for the provision of credit ratings.
At 31 March 2008, the long-term credit ratings from these agencies remain unchanged from the prior year at Baa2 and BBB,
respectively. It is the Group’s policy to keep the rating agencies informed of all major developments.
Tate & Lyle Annual Report 2008
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D
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T
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W
D
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O
F
R
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P
E
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W
O
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S
U
B
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W
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Notes to the consolidated financial statements
21 Financial risk factors (continued)
The Board of Tate & Lyle PLC has set two ongoing key performance indicators (KPIs) to measure the Group’s financial strength.
The target levels for these financial KPIs are that the ratio of net debt/EBITDA should not exceed 2.5 times and interest cover
should exceed 5 times. The ratios for these KPIs for the financial years ended 31 March 2008 and 31 March 2007 are:
Net debt/EBITDA
Non-current borrowings
Current borrowings and overdrafts
Less: debt-related derivative instruments
Less: cash and cash equivalents
Net debt
Pre-exceptional EBITDA
Net debt/EBITDA
Notes
30
30
20
35
Interest cover
Operating profit before amortisation of acquired intangibles and exceptional items
Net finance expense
4
4
Interest cover ratio
22 Inventories
Raw materials and consumables
Work in progress
Finished goods
2008
858
360
(12)
(165)
1 041
442
2.4
331
41
8.1
2008
£m
287
21
254
562
31 March
2007
842
271
(24)
(189)
900
477
1.9
373
37
10.1
31 March
2007
£m
229
26
248
503
Finished goods inventories of £1 million (2007 – £3 million) are carried at realisable value, this being lower than cost. Inventories of
£213 million (2007 – £156 million) are carried at market value.
128
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
23 Trade and other receivables
Non-current trade and other receivables
Trade receivables
Government grants receivable
Other receivables
Current trade and other receivables
Trade receivables
Less: provision for impairment of receivables
Trade receivables – net
Amounts owed by related parties
Prepayments and accrued income
Government grants receivable
Other receivables
2008
£m
5
–
6
11
483
(9)
474
–
63
60
78
675
31 March
2007
£m
6
54
4
64
486
(9)
477
3
19
13
46
558
Note
41
The fair values of the non-current trade and other receivables are not materially different from their carrying values. The fair values
of the current trade and other receivables are equivalent to their carrying values due to being short-term in nature.
Included in trade receivables are amounts received of £50 million (2007 – £95 million) in respect of securitised receivables, which
are also included in current borrowings. There is no concentration of credit risk with respect to trade receivables, as the Group has
a large number of customers, internationally dispersed. The carrying value of trade and other receivables represents the maximum
credit exposure.
Government grants are receivable under the Transitional Aid and Restructuring Aid provisions of the EU sugar regime. These
amounts are receivable subject to audit by the governments of the jurisdictions to which they relate.
The carrying amount of trade and other receivables are denominated in the following currencies:
US dollar
Euro (note a)
British pound
Mexican peso
Other
Total
2008
£m
290
166
87
26
117
686
31 March
2007
£m
224
246
71
27
54
622
(a)
Includes £60 million (2007 – £67 million) of government grants receivable under the Transitional and Restructuring Aid provisions
of the EU sugar regime.
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Notes to the consolidated financial statements
23 Trade and other receivables (continued)
Provision for impairment of receivables
At 1 April 2006
Charge for the year
Uncollectable amounts written off
At 31 March 2007 and at 31 March 2008
£m
(8)
(2)
1
(9)
The creation and release of provision for impaired receivables have been included in the income statement (Note 6).
The Group recognised a loss of £nil million (2007 – £1 million) for impairment of its trade receivables during the year. This loss has
been included in operating profit in the income statement.
As at 31 March 2008, trade receivables of £101 million (2007 – £63 million) were past due but not impaired. The ageing analysis of
these trade receivables is as follows:
Up to 30 days past due
1-3 months past due
Over 3 months past due
Total
2008
£m
64
24
13
101
31 March
2007
£m
42
7
14
63
24 Assets and liabilities classified as held for sale
No assets and liabilities were classified as held for sale as at 31 March 2008. Tate & Lyle Canada was disposed of on 22 April 2007,
and accordingly the assets and liabilities were shown as held for sale as at 31 March 2007.
Assets
Property, plant and equipment
Retirement benefit surplus
Inventories
Trade and other receivables
Derivative financial instruments
Total assets held for sale
Liabilities
Trade and other payables
Derivative financial instruments
Current tax liabilities
Deferred tax liabilities
Total liabilities held for sale
31 March 2007
£m
51
2
19
10
7
89
8
6
5
9
28
130
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
25 Share capital and share premium
At 1 April 2006
Proceeds from shares issued
At 1 April 2007
Proceeds from shares issued
Share buybacks
At 31 March 2008
Ordinary
share capital
£m
Share
premium
£m
122
–
122
–
(8)
114
400
3
403
1
–
404
Total
£m
522
3
525
1
(8)
518
Ordinary shares carry the right to participate in dividends and each share entitles the holder to one vote on matters requiring
shareholder approval.
Authorised equity share capital
790,424,000 ordinary shares of 25p each (2007 – 790,424,000)
Allotted, called up and fully paid equity share capital
At 1 April
Allotted under share option schemes
Market purchases
At 31 March
2008
£m
198
31 March
2007
£m
198
31 March 2008
31 March 2007
Shares
489 824 398
413 068
(30 327 000)
459 910 466
£m
122
–
(8)
114
Shares
488 740 116
1 084 282
–
489 824 398
£m
122
–
–
122
Treasury shares and shares held in ESOP trust
As part of the Group’s share buy back programme, the Company repurchased 33,627,000 shares (2007 – nil) for £159 million
(2007 – £nil). Of these 30,327,000 were cancelled during the year and 2,755,073 were held in Treasury at 31 March 2008. The
remaining 544,927 were released from Treasury to satisfy share options granted to employees under the Group’s share option
schemes that were exercised during the year. The shares repurchased represent 7.3% of the Company’s called up share capital
at 31 March 2008 and had a nominal value of £8 million. The shares held in Treasury at 31 March 2008 represent 0.6% of the
Company’s share capital and had a nominal value of £1 million.
As at 31 March 2008, the Group held 2,044,493 shares (2007 – 5,016,404 shares) in an ESOP trust.
Analysis of ordinary shareholders
Up to 500 shares of 25p each
501 – 1 000
1 001 – 1 500
1 501 – 2 000
2 001 – 5 000
5 001 – 10 000
10 001 – 200 000
200 001 – 500 000
Above 500 000
Number of
holdings
5 554
4 914
2 499
1 743
2 761
669
691
81
108
19 020
%
29.2
25.8
13.1
9.2
14.5
3.6
3.6
0.4
0.6
100
Total
1 519 591
3 905 297
3 152 609
3 164 501
8 659 795
4 755 511
31 888 614
26 573 106
376 291 442
459 910 466
31 March 2008
%
0.3
0.9
0.7
0.7
1.9
1.0
6.9
5.8
81.8
100
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Notes to the consolidated financial statements
26 Consolidated statement of changes in shareholders’ equity
Share capital
and share
premium
(Note 25)
£m
522
Notes
Balance at 1 April 2006
Net loss recognised
directly in equity
Profit for the year
Share-based payments,
including tax
Proceeds from shares issued
Transfers
Dividends paid
27
14
Balance at 31 March 2007
525
Net profit/(loss) recognised directly
in equity
Profit/(loss) for the year
Share-based payments,
including tax
Proceeds from shares issued
Items transferred to income
on disposal
Share buybacks
Dividends paid
Minority interest disposed
25
14
–
–
–
1
–
(8)
–
–
Balance at 31 March 2008
518
–
–
–
3
–
–
Capital
redemption Other reserves
(Note 27)
£m
reserve
£m
Attributable
to the equity
Retained holders of the
Company
earnings
£m
£m
Minority
interest
£m
Total equity
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
8
–
–
8
56
(82)
–
–
–
76
–
50
55
–
–
–
(14)
–
–
–
91
327
(1)
214
5
14
(76)
(98)
385
(7)
194
2
7
–
(159)
(105)
–
317
905
(83)
214
5
17
–
(98)
960
48
194
2
8
(14)
(159)
(105)
–
934
35
(3)
3
–
–
–
–
35
–
(7)
–
–
(1)
–
(1)
(10)
16
940
(86)
217
5
17
–
(98)
995
48
187
2
8
(15)
(159)
(106)
(10)
950
Retained earnings at 31 March 2008 include a deduction for own shares held by the ESOP trust of £7 million (2007 – £17 million).
All but 0.01 pence per share of the dividends arising on these shares have been waived by the trust.
27 Other reserves
At 1 April 2006
Net loss on cash flow hedges
Currency translation differences:
– net investment hedging gains in the year
Net exchange differences on consolidation (note b)
Transfers (note c)
At 31 March 2007
Net gain on cash flow hedges
Losses on revaluation of available-for-sale financial assets
Currency translation differences:
– net investment hedging losses in the year
Net exchange differences on consolidation (note b)
Items transferred to income on disposal
At 31 March 2008
Hedging
reserve
£m
Translation
reserve
£m
Other
reserves
(note a)
£m
4
(4)
–
–
–
–
1
–
–
–
1
2
(48)
–
74
(152)
72
(54)
–
–
(50)
107
(12)
(9)
100
–
–
–
4
104
–
(3)
–
–
(3)
98
Total
£m
56
(4)
74
(152)
76
50
1
(3)
(50)
107
(14)
91
(a) Other reserves include the merger reserve, the available-for-sale fair value reserve, and the statutory reserves of certain overseas
subsidiaries, all of which are non-distributable.
(b) Net exchange differences on consolidation in the year includes a taxation credit of £21 million (2007 – charge of £21 million).
(c) Transfers principally relate to net exchange differences arising on consolidation previously classified in retained earnings.
132
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
28 Share-based payments
During the year to 31 March 2008, various equity-settled share-based payment arrangements existed, which are described below:
Type of arrangement
Timing of grant
Number of options/shares
granted in year to
31 March 2008
Number of options/shares
granted in year to
31 March 2007
Fair value per share for 2008
grant (p)
Fair value per share for 2007
grant (p)
Performance
share plan
Executive share
option scheme
Bi-annually
in June and
November
Annually in June
(note a)
Deferred
bonus
share plan
Duration
in years
Sharesave scheme
Annually in July
Annually in June
Annually in
December
1 511 463
1 923 730
141
277
–
–
–
–
429 612
324 828
194
287
3
5
3
5
3
5
3
5
102 128
57 335
215 130
104 183
58 956
49 899
59 496
34 329
120
138
127
160
97
105
158
204
Valuation basis
Contractual life
Vesting conditions
Monte Carlo
10 years
(note b)
Binomial Lattice
10 years
(note c)
Monte Carlo
3 years
(note d)
Black-Scholes
3/5 years
(note e)
Black-Scholes
3/5 years
(note e)
(a) The last grant under this scheme was made in June 2004.
(b) Exercise is dependent on total shareholder return as measured by reference to a comparator group over a three-year period
following grant. Participants are not entitled to dividends prior to the exercise of options.
(c) Exercise is dependent on earnings per share performance relative to inflation over a three-year period following grant.
Participants are not entitled to dividends prior to the exercise of options.
(d) Executives have the opportunity to defer up to 50% of their annual cash bonus (after deduction of tax, national insurance
or other social security payment) and invest the amount deferred in the Company’s shares. Subject to the satisfaction of
employment conditions and a performance target over the performance period, participants will receive awards of matching
shares based on the number of shares which could have been acquired from the gross bonus amount deferred by the
participant. During the performance period, dividends are paid on the deferred shares but not on matching shares. Further
details are set out in the directors’ remuneration report on page 85.
(e) Options granted in the years to 31 March 2007 and 31 March 2008 were by invitation at a 10% discount to the market price.
Options are exercisable at the end of a three-year or five-year savings contract.
The Group recognised total expenses of £5 million (2007 – £6 million) related to equity-settled share-based payment transactions
during the year.
Details of the movements for equity-settled share option schemes during the year to 31 March were as follows:
Outstanding at 1 April
Granted
Exercised
Lapsed
Outstanding at 31 March
2008
Weighted
average
exercise
price
pence
164
87
233
315
104
Number
16 942 061
2 451 238
(5 043 739)
(229 739)
14 119 821
2007
Weighted
average
exercise
price
pence
230
50
263
294
164
Number
14 119 821
2 419 851
(3 929 906)
(864 360)
11 745 406
Tate & Lyle Annual Report 2008
133
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W
T
A
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O
F
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P
E
W
W
O
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I
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S
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U
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U
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Notes to the consolidated financial statements
28 Share-based payments (continued)
The weighted average Tate & Lyle PLC share price at the date of exercise for share options exercised during the year was
551 pence (2007 – 670 pence). At 31 March 2008, 3,346,475 (2007 – 2,874,160) of the outstanding options were exercisable at a
weighted average exercise price of 328 pence (2007 – 219 pence). A detailed breakdown of the range of exercise prices for options
outstanding at 31 March is shown in the table below:
Number
outstanding
at end of year
7 729 733
–
3 711 091
304 582
11 745 406
Weighted
average
remaining
contractual
life in months
53.7
–
64.7
26.6
56.5
2008
Weighted
average
exercise
price
pence
–
–
289
482
104
Number
outstanding
at end of year
7 277 251
51 083
6 239 844
551 643
14 119 821
Weighted
average
remaining
contractual
life in months
99.5
17.0
76.2
39.6
86.6
2007
Weighted
average
exercise
price
pence
–
182
325
487
164
At nil cost
£0.01 to £1.99
£2.00 to £3.99
£4.00 to £7.99
Total
The fair value of grants is measured using the valuation technique that is considered to be the most appropriate to value each class
of grant. These include Binomial Lattice models, Black-Scholes calculations and Monte Carlo simulations. These valuations take into
account factors such as non-transferability, exercise restrictions and behavioural considerations. Key assumptions are detailed below:
At 31 March 2008
Expected volatility
Expected life
Risk-free rate
Expected dividend yield
Forfeiture rate
Correlation with comparators
Volatility of comparators
Expectations of meeting performance criteria
Weighted average market price at date of grant (p)
At 31 March 2007
Expected volatility
Expected life
Risk-free rate
Expected dividend yield
Forfeiture rate
Correlation with comparators
Volatility of comparators
Expectations of meeting performance criteria
Weighted average market price at date of grant (p)
Deferred
bonus plan
Performance
share plan
Sharesave
scheme
June
Sharesave
scheme
December
25%
n/a
n/a
3.6%
0%
20%
5-47%
100%
568
25%
n/a
n/a
3.5%
0%
20%
5-47%
100%
576
25%
3.5/5.5 years
6.0%/5.9%
3.8%
10%
n/a
n/a
n/a
531
30%
3.5/5.5 years
4.5%/4.6%
4.9%
10%
n/a
n/a
n/a
439
Deferred
bonus plan
Performance
share plan
Sharesave
scheme
20%
n/a
n/a
3.3%
0%
20%
8-52%
100%
590
20%
n/a
n/a
3.4%
0%
20%
8-52%
100%
581
22%
3.5/5.5 years
4.9%
3.3%
10%
n/a
n/a
n/a
695
The expected volatility is based on the Company’s historical volatility over the three-year period prior to each award date.
134
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
29 Trade and other payables
Non-current payables
Accruals and deferred income
Other payables
Current payables
Trade payables
Social security
Amounts owed to related parties
Deferred consideration (note a)
Accruals and deferred income (note b)
Other payables
2008
£m
27
–
27
258
7
1
23
155
44
488
31 March
2007
£m
1
5
6
263
20
1
–
87
49
420
(a) Deferred consideration relates to the acquisition of G.C. Hahn & Co. (Note 39).
(b)
Includes government grant deferred income of £26 million (2007 – £nil) under the Transitional Aid provisions of the EU
Sugar Regime.
The fair values of non-current payables are not materially different from their carrying values. The fair values of current payables
are equivalent to their carrying values.
30 Borrowings
Non-current borrowings
Unsecured borrowings
2,394,000 6.5% cumulative preference shares of £1 each (2007 – £2,394,000)
Industrial Revenue Bonds 2016-2036 (US$92,000,000)
6.5% Guaranteed Notes 2012 (£200,000,000)
5.0% Guaranteed Notes 2014 (US$500,000,000)
6.125% Guaranteed Notes 2011 (US$300,000,000)
6.625% Guaranteed Notes 2016 (US$250,000,000)
Bank loans
Variable unsecured loans (euro)
Variable unsecured loans (US$)
Other borrowings
Obligations under finance leases
Total non-current borrowings
2008
£m
2
46
199
255
156
135
793
40
5
45
20
20
858
31 March
2007
£m
2
47
197
248
154
131
779
34
8
42
21
21
842
On a return of capital on a winding-up, the holders of 6.5% cumulative preference shares shall be entitled to £1 per share, in
preference to all other classes of shareholders. Holders of these shares are entitled to vote at meetings, except on the following
matters: any question as to the disposal of the surplus profits after the dividend on these shares has been provided for, the election
of directors, their remuneration, any agreement between the directors and the Company, or the alteration of the Articles of
Association dealing with any such matters.
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Notes to the consolidated financial statements
30 Borrowings (continued)
Current borrowings
Unsecured bank overdrafts
Receivables securitisation
Drawdown of committed facilities
Short-term loans
– unsecured
– secured
Current portion of non-current borrowings
Obligations under finance leases
Total current borrowings
2008
£m
24
50
123
153
5
3
2
360
31 March
2007
£m
22
95
76
57
17
3
1
271
Secured borrowings
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
Other secured borrowings are secured on property, plant and equipment, receivables and inventories.
Fair values
The fair values of the Group’s borrowings compared with their book values are as follows:
Unsecured borrowings
Non-current bank loans
Other non-current borrowings
Other current borrowings
Total
Interest rate risks and maturity of borrowings
The maturity profile of the Group’s non-current borrowings is as follows:
One to two years
Two to five years
After five years
Total non-current borrowings
31 March
2008
Book value
£m
793
45
20
360
31 March
2008
Fair value
£m
858
45
20
360
31 March
2007
Book value
£m
779
42
21
271
31 March
2007
Fair value
£m
829
42
21
271
1 218
1 283
1 113
1 163
2008
£m
4
406
448
858
31 March
2007
£m
5
197
640
842
Floating rate borrowings bear interest based on relevant national LIBOR equivalents. If the interest rates applicable to the Group’s
floating rate debt rise from the levels at 31 March 2008 by an average of 1% over the year to 31 March 2009, this would reduce
Group profit before tax by approximately £4 million (2007 – £3 million).
As part of its interest rate management strategy, the Group has entered into interest rate caps for a notional principal amount of
£83 million (2007 – £198 million), capping interest rates at 4% until 2009.
136
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
30 Borrowings (continued)
Taking into account the Group’s interest rate swap and cap contracts, the effective interest rates of its borrowings are as follows:
2,394,000 6.5% cumulative preference shares of £1 each
Industrial Revenue Bonds (US$92,000,000)
6.5% Guaranteed Notes 2012 (£200,000,000)
5.0% Guaranteed Notes 2014 (US$500,000,000)
6.125% Guaranteed Notes 2011 (US$300,000,000)
6.625% Guaranteed Notes 2016 (US$250,000,000)
2008
6.5%
2.2%
5.3%
4.9%
5.0%
6.0%
31 March
2007
6.5%
3.7%
5.5%
4.9%
5.9%
6.4%
Short-term loans and overdrafts
Current short-term loans mature within the next 12 months and overdrafts are repayable on demand. Both short-term loans and
bank overdrafts are arranged at floating rates of interest and expose the Group to cash flow interest rate risk.
Credit facilities and arrangements
The Group has undrawn committed multi-currency facilities of £438 million (2007 – £236 million), of which £55 million matures in
September 2009 and £383 million matures in October 2012. These facilities incur commitment fees at market rates. The facilities
may only be withdrawn in the event of specified events of default. In addition, the Group has substantial uncommitted facilities.
At 31 March 2007, a US subsidiary had outstanding external borrowings of US$800 million, the principal amount of which was
guaranteed by another Group company by way of credit-linked deposits with a bank of US$680 million and pledged bank securities
of US$120 million. The guarantees resulted in these borrowings being, in substance, non-recourse to the Group as to principal in the
event of default and accordingly the borrowings and deposits were offset at that date. This arrangement ceased during the year
ended 31 March 2008.
Finance lease commitments
Amounts payable under finance lease commitments are as follows:
Within one year
Between one and five years
After five years
Less future finance charges
Present value of minimum lease payments
31 March 2008
Present value of
Minimum lease minimum lease
payments
£m
payments
£m
Minimum lease
payments
£m
31 March 2007
Present value of
minimum lease
payments
£m
2
12
8
22
3
14
10
27
(5)
22
3
13
10
26
(4)
22
1
12
9
22
Finance lease agreements allow for renewal at the end of the original ten-year lease term at the option of the Group.
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Notes to the consolidated financial statements
31 Deferred tax
Deferred tax is calculated in full on temporary differences using tax rates applicable in the jurisdictions where such differences arise.
Movements in deferred income tax net liabilities in the year are as follows:
Deferred tax
At 1 April 2006
Reclassification to current tax
Transferred to held for sale
Charged to income
Exchange differences
At 31 March 2007
Reclassification to current tax
Fair value adjustments on acquisition of subsidiaries
Credited to income
Charged to statement of recognised income and expense
Exchange differences
At 31 March 2008
Total
£m
53
4
(9)
32
(3)
77
–
17
(4)
12
4
106
Of the amounts of deferred tax charged to income and equity, £nil million (2007 – £1 million credited) arises from changes in tax
rates and none arises on the imposition of new taxes.
Deferred tax assets in respect of unutilised tax losses of £128 million (2007 – £60 million) have not been recognised to the extent
that they exceed taxable profits against which these assets may be recovered. Unrelieved tax losses of £nil million expired under
current tax legislation on 31 March 2008.
No deferred tax has been recognised in respect of unremitted earnings of £1.0 billion (2007 – £1.4 billion) where the Group is both
able to control dividend policy and does not anticipate dividends to be remitted in the foreseeable future.
The impact of the change in the UK tax rate from 30% to 28% on deferred tax is a £3 million credit taken directly to equity.
The movements in deferred tax assets and liabilities during the period are as follows:
Deferred tax liabilities
At 1 April 2006
Charged to income
Transferred to held for sale
Exchange differences
At 31 March 2007
Acquisitions
Charged to income
Exchange differences
At 31 March 2008
Deferred tax assets
At 1 April 2006
Reclassification to current tax
(Charged)/credited to income
(Charged)/credited to equity
Exchange differences
At 31 March 2007
(Charged)/credited to income
(Charged)/credited to equity
At 31 March 2008
Capital
allowances in
excess of
depreciation
£m
137
2
–
(1)
138
–
(12)
–
126
Retirement
benefit
obligations
£m
Share-based
payments
£m
Tax
losses
£m
68
–
(16)
–
1
53
(8)
(10)
35
8
–
1
2
–
11
(4)
(3)
4
2
–
1
–
–
3
(1)
–
2
Other
£m
23
7
(9)
–
21
17
5
4
47
Other
£m
29
(4)
(9)
(2)
1
15
10
1
26
Total
£m
160
9
(9)
(1)
159
17
(7)
4
173
Total
£m
107
(4)
(23)
–
2
82
(3)
(12)
67
138
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
31 Deferred tax (continued)
Deferred tax assets and liabilities are offset where there is a legally enforceable right of offset and there is an intention to settle
the balances net.
As a result of these offsets, the deferred tax balances are presented in the balance sheet as follows:
Deferred tax liabilities
Deferred tax assets
32 Retirement benefit obligations
2008
£m
107
(1)
106
31 March
2007
£m
85
(8)
77
(a) Plan information
The Group maintains pension plans for its operations throughout the world. Most of these arrangements are defined benefit pension
schemes with retirement, disability, death and termination income benefits. The retirement income benefits are generally a function of
years of employment and final salary.
The principal schemes are funded and their assets held in separate trustee-administered funds. The schemes are funded in line with
local practice and contributions are assessed in accordance with local independent actuarial advice. The schemes operated by the
Group are subject to independent actuarial valuation at regular intervals using consistent assumptions appropriate to conditions
prevailing in the relevant country. The most recent actuarial valuations of plan assets and the present value of the defined benefit
obligations were carried out as at 31 March 2007 by independent actuaries.
The Group also maintains defined contribution pension schemes and some fully insured pension schemes.
On 1 April 2002, the main United Kingdom scheme was closed to new members. A defined contribution pension scheme has been
established to provide pension benefits to new United Kingdom employees. Under the projected unit method, the service cost of the
closed scheme will increase as the members approach retirement.
The Group’s subsidiaries in the United States provide unfunded retirement medical and life assurance benefits to their employees.
The Group expects to contribute approximately £21 million to its defined benefit plans in the year to 31 March 2009.
(b) Principal assumptions
The principal assumptions used for the purpose of the actuarial valuations were as follows:
Year to 31 March 2008
Inflation rate
Expected rate of salary increases
Expected rate of pension increases
Discount rate
Expected return on plan assets (total)
Expected equity return on plan assets
Year to 31 March 2007
Inflation rate
Expected rate of salary increases
Expected rate of pension increases
Discount rate
Expected return on plan assets (total)
Expected equity return on plan assets
Mortality assumptions – Year to 31 March 2008
Male aged 60 now
Male aged 60 in 15 years’ time
Female aged 60 now
Female aged 60 in 15 years’ time
UK
3.6%
5.4%
3.6%
6.6%
6.1%
8.5%
UK
3.0%
4.8%
3.0%
5.4%
5.7%
7.8%
Pension benefits
Others
2.0%
2.0-3.6%
0.0-1.8%
5.9%
4.0-6.0%
7.0%
Pension benefits
Others
2.0-2.5%
2.0-4.0%
0.0-1.8%
4.9-5.2%
4.4-6.8%
5.8-8.0%
US
3.5%
4.5%
n/a
6.5%
7.8%
8.8%
US
3.5%
4.5%
0.0%
5.8%
7.8%
8.8%
Medical
benefits
3.5%
n/a
n/a
6.3%
n/a
n/a
Medical
benefits
3.5%
n/a
n/a
5.8%
n/a
n/a
Expected longevity post age 60
UK
26 years
28 years
27 years
28 years
US
23 years
23 years
25 years
25 years
Tate & Lyle Annual Report 2008
139
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Notes to the consolidated financial statements
32 Retirement benefit obligations (continued)
Mortality assumptions – Year to 31 March 2007
Male aged 60 now
Male aged 60 in 15 years’ time
Female aged 60 now
Female aged 60 in 15 years’ time
Expected longevity post age 60
UK
24 years
25 years
25 years
26 years
US
22 years
22 years
24 years
24 years
Shorter longevity assumptions are used for members who retire on grounds of ill-health.
The expected rates of return on individual categories of plan assets are estimated by reference to indices published by the relevant
exchanges. The overall expected rate of return is calculated by weighting the individual rates in accordance with the anticipated
balance in the plan’s investment portfolio. The actual rate of return on the plan assets for the year was 0.2% (2007 – positive 5.6%),
and amounted to a gain of £2 million (2007 – £66 million).
Medical cost trend rates are estimated at between 9.0% and 11.0% per annum (2007 – 8.9%-9.0%), grading down to 5% by 2012.
If medical cost trend rates were to increase or decrease by 1%, the effects are estimated as follows:
Increase in medical benefits current service and interest cost
Increase/(decrease) in medical benefits obligation
(c) Amounts recognised in the income statement
Year to 31 March 2008
Current service cost
The effect of any curtailments,
settlements or
termination benefits
Charged to operating profit
Interest cost
Expected return on plan assets
(Credited)/charged to
finance income
Total
Year to 31 March 2007
Current service cost
Charged to operating profit
Interest cost
Expected return on plan assets
(Credited)/charged to
finance income
Total
UK
£m
8
(3)
5
45
(51)
(6)
(1)
UK
£m
11
11
42
(46)
(4)
7
US
£m
3
–
3
15
(17)
(2)
1
US
£m
5
5
15
(17)
(2)
3
Increase
£m
1
5
Others
£m
3
2
5
3
(3)
–
5
Others
£m
2
2
4
(5)
(1)
1
2008
Decrease
£m
–
(5)
Pension benefits
Total
£m
14
(1)
13
63
(71)
(8)
5
Pension benefits
Total
£m
18
18
61
(68)
(7)
11
Increase
£m
1
6
Medical
benefits
£m
1
–
1
4
–
4
5
Medical
benefits
£m
2
2
5
–
5
7
2007
Decrease
£m
–
(5)
Total
£m
15
(1)
14
67
(71)
(4)
10
Total
£m
20
20
66
(68)
(2)
18
Current service costs are presented in staff costs (Note 9); expected return on plan assets and interest cost are presented in net
finance expense (Note 10).
140
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
32 Retirement benefit obligations (continued)
(d) Amounts recognised in the balance sheet
% of
plan
assets
29%
26%
45%
% of
plan
assets
33%
51%
16%
At 31 March 2008
Fair value of plan assets:
Equities
Bonds
Property and other
Present value of funded obligations
Present value of unfunded obligations
Net asset/(liability) recognised in the
Group balance sheet
Analysed in the balance sheet as:
Retirement benefit surplus
Retirement benefit obligation
At 31 March 2007
Notes
Fair value of plan assets:
Equities
Bonds
Property and other
Present value of funded obligations
Present value of unfunded obligations
Net asset/(liability) recognised in the
Group balance sheet, including
amounts held for sale
Analysed in the balance sheet as:
Retirement benefit obligations
Amounts held for sale
24
% of
UK
plan
£m assets
% of
US
plan
£m assets
Others
% of
plan
£m assets
Medical
Total benefits
£m
£m
Pension benefits
55%
28%
17%
% of
plan
assets
59%
30%
11%
245
220
394
859
(810)
–
49
49
–
UK
£m
286
439
144
869
(864)
–
25%
43%
32%
% of
plan
assets
41%
42%
17%
115
59
35
209
(273)
–
(64)
–
(64)
US
£m
131
68
25
224
(279)
–
5
(55)
11
19
14
44
(45)
–
(1)
4
(5)
Others
£m
39
40
16
95
(97)
–
(2)
Total
£m
371
298
443
–
–
–
1 112
(1 128)
(75)
–
(75)
33%
27%
40%
371
298
443
1 112
(1 128)
–
(16)
(75)
(91)
53
(69)
–
(75)
53
(144)
Pension benefits
% of
plan
assets
38%
46%
16%
Medical
benefits
£m
–
–
–
Total
£m
456
547
185
Total
£m
456
547
185
1 188
(1 240)
–
–
–
(77)
1 188
(1 240)
(77)
(52)
(77)
(129)
(131)
2
The plan assets do not include any of the Group’s financial instruments, nor any property occupied by, or other assets used by,
the Group.
At 31 March 2007 the surplus within the UK pension defined benefit schemes was disclosed within Retirement benefit obligations.
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141
Notes to the consolidated financial statements
32 Retirement benefit obligations (continued)
(e) Reconciliation of movement in plan assets and liabilities
Liabilities
At 31 March 2006
Total service cost
Interest cost
Actuarial (gain)/loss
Contributions paid
by employees
Benefits paid
Exchange differences
At 31 March 2007
Total service cost
Interest cost
Actuarial gain
Contributions paid
by employees
Disposals
Benefits paid
Curtailments, settlements
and termination benefits
Exchange differences
At 31 March 2008
Assets
At 31 March 2006
Expected return on assets
Actuarial (loss)/gain
Contributions paid
by employer
Contributions paid
by employees
Benefits paid
Exchange differences
At 31 March 2007
Expected return on assets
Actuarial loss
Contributions paid
by employer
Contributions paid
by employees
Disposals
Benefits paid
Curtailments, settlements
and termination benefits
Exchange differences
At 31 March 2008
UK
£m
883
11
42
(25)
–
(46)
(1)
864
8
45
(58)
–
–
(46)
(3)
–
810
UK
£m
852
46
(5)
22
–
(46)
–
869
51
(42)
27
–
–
(46)
–
–
859
US
£m
278
5
15
30
–
(15)
(34)
279
3
15
(7)
–
–
(15)
–
(2)
273
US
£m
232
17
4
15
–
(15)
(29)
224
17
(24)
9
–
–
(15)
–
(2)
209
Pension benefits
Total
£m
1 256
18
61
8
1
(64)
(40)
1 240
14
63
(70)
1
(37)
(62)
(24)
3
1 128
Pension benefits
Total
£m
1 179
68
(2)
40
1
(64)
(34)
1 188
71
(69)
38
1
(33)
(62)
(23)
1
1 112
Others
£m
95
2
4
3
1
(3)
(5)
97
3
3
(5)
1
(37)
(1)
(21)
5
45
Others
£m
95
5
(1)
3
1
(3)
(5)
95
3
(3)
2
1
(33)
(1)
(23)
3
44
Medical
benefits
£m
95
2
5
(9)
–
(5)
(11)
77
1
4
(2)
–
–
(4)
–
(1)
75
Medical
benefits
£m
–
–
–
5
–
(5)
–
–
–
–
4
–
–
(4)
–
–
–
Total
£m
1 351
20
66
(1)
1
(69)
(51)
1 317
15
67
(72)
1
(37)
(66)
(24)
2
1 203
Total
£m
1 179
68
(2)
45
1
(69)
(34)
1 188
71
(69)
42
1
(33)
(66)
(23)
1
1 112
142
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
32 Retirement benefit obligations (continued)
(f) Analysis of actuarial (gain)/loss recognised in the consolidated statement of recognised income and expense
Difference between the actual return and the expected return on plan assets
Experience gains and losses arising on scheme liabilities
Changes in assumptions underlying the present value of scheme liabilities
Actuarial (gain)/loss to be recognised in the consolidated statement of recognised
income and expense before tax
Year to 31 March
2007
£m
3
25
(27)
1
2008
£m
69
(9)
(63)
(3)
Deferred taxation taken directly to equity on retirement benefit obligations was £10 million (2007 – £nil million).
Cumulative actuarial gains and losses recognised in the consolidated statement
of recognised income and expense
(16)
(13)
(g) History of the plans and experience adjustments
Present value of defined benefit obligation and medical benefits
Fair value of plan assets
Net deficit
Experience adjustments on plan liabilities – loss/(gain)
Experience adjustments on plan assets – (gain)/loss
2008
£m
1 203
(1 112)
91
(9)
69
2007
£m
1 317
(1 188)
129
25
3
2006
£m
1 351
(1 179)
172
7
(108)
2005
£m
1 256
(1 012)
244
30
(11)
All experience adjustments are recognised directly in equity, net of related tax (see the consolidated statement of recognised income
and expense).
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Notes to the consolidated financial statements
33 Provisions for other liabilities and charges
Insurance
funds
£m
Deferred
consideration
£m
Restructuring
and closure
provisions
£m
Other
provisions
£m
At 1 April 2006
Charged/(credited) to the income statement
Utilised in the year
Exchange differences
At 31 March 2007
Charged/(credited) to the income statement
Utilised in the year
Exchange differences
Businesses sold
Businesses acquired
At 31 March 2008
23
3
(3)
(3)
20
–
(3)
–
(7)
–
10
49
(20)
(5)
(5)
19
(1)
(8)
–
–
–
10
9
31
(3)
–
37
32
(40)
6
(3)
–
32
Provisions are expected to be utilised as follows:
Within one year
After more than one year
20
5
(3)
(3)
19
8
(11)
–
(2)
2
16
2008
£m
54
14
68
Total
£m
101
19
(14)
(11)
95
39
(62)
6
(12)
2
68
31 March
2007
£m
44
51
95
Insurance funds represent amounts provided by the Group’s captive insurance subsidiary in respect of the expected level of
insurance claims. These provisions are expected to be utilised within five years.
The deferred consideration provision relates to the deferred payments arising until the year ending 31 March 2009 from the
Sucralose realignment in 2004. Payments are made to McNeil based on the achievement of certain minimum targets in respect
of sales of Sucralose made by the Group. Another feature of the realignment is that the Group receives amounts from the vendor,
McNeil, based on sales of Sucralose tabletop products made by McNeil for ten years from the date of the realignment. These
receipts are only recognised in the periods in which they are earned, and were shown up to 31 March 2006 as a deduction from
goodwill. Since the elimination of goodwill the receipts are recognised in the income statement. In the year ended 31 March 2008
£7 million of receipts were recognised in the income statement (31 March 2007 – £6 million).
Restructuring and closure provisions primarily relate to the businesses which have been closed and to a reorganisation as a result
of the disposal of the five starch plants in Europe which accounted for the majority of the charge and utilisation in the year. It is
expected that the provision will be fully utilised within the next four years. Included within other provisions are amounts provided for
claims under clauses in the disposal agreements of businesses disposed. These provisions are expected to be utilised within the
next few years.
34 Change in working capital
Increase in inventories
Increase in receivables
Increase in payables
(Increase)/decrease in derivative financial instruments
Decrease in provisions for other liabilities and charges
Decrease in retirement benefit obligations
Decrease in assets held for sale
Movement during year
The above movements include the following elements:
Exchange differences
Acquisitions and disposals during the year
Deferred consideration
Other items
Increase in working capital
2008
£m
(59)
(64)
89
(18)
(27)
(40)
24
(95)
(12)
(97)
(23)
(43)
(270)
31 March
2007
£m
(76)
(78)
50
90
(24)
(41)
–
(79)
(26)
–
–
30
(75)
Other items include non-cash movements in retirement benefits and derivatives, and the elimination of balances within debtors and
creditors attributable to interest, property, plant and equipment and investments.
144
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
35 Cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
2008
£m
101
64
165
31 March
2007
£m
136
53
189
The effective interest rate on short-term deposits was 5.7% (2007 – 5.3%), which have an average maturity of 53 days (2007 – 45 days).
The carrying amount of cash and cash equivalents are denominated in the following currencies:
Euro
US dollar
British pound
Other
Total
36 Net debt
The components of the Group’s net debt are as follows:
Non-current borrowings
Current borrowings and overdrafts (note a)
Debt-related derivative instruments (note b)
Cash and cash equivalents
Net debt
2008
£m
68
48
11
38
165
2008
£m
(858)
(360)
12
165
(1 041)
31 March
2007
£m
50
123
5
11
189
31 March
2007
£m
(842)
(271)
24
189
(900)
Notes
30
30
20
35
(a) Current borrowings and overdrafts at 31 March 2008 include £50 million (31 March 2007 – £95 million) in respect of
securitised receivables.
(b) Derivative financial instruments presented within assets and liabilities in the balance sheet of £14 million net asset comprise net
debt-related instruments of £12 million asset and net non-debt-related instruments of £2 million asset (2007 – £4 million net
liability comprising net debt-related instruments of £24 million asset and net non-debt-related instruments of £28 million liability).
There were no derivative financial instruments held for sale at 31 March 2008 (2007 – £1 million net non-debt-related assets).
Movements in the Group’s net debt are as follows:
Balance at 1 April
(Decrease)/increase in cash and cash equivalents in the year
Cash inflow from increase in borrowings
Borrowings arising on acquisitions
Debt transferred on disposal of subsidiaries
Increase in net debt resulting from cash flows
Inception of finance leases
Exchange differences
Increase in net debt in the year
Balance at 31 March
Notes
39
39
2008
£m
(900)
(32)
(128)
(2)
55
(107)
(2)
(32)
(141)
(1 041)
2007
£m
(866)
33
(111)
–
–
(78)
(14)
58
(34)
(900)
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Notes to the consolidated financial statements
37 Contingent liabilities
Guarantees of loans and overdrafts of joint ventures and associates
Trade guarantees
2008
£m
14
29
31 March
2007
£m
10
23
Other trade guarantees have been given in the normal course of business by the Group at both 31 March 2008 and 31 March 2007.
These are excluded from the figures given above and are in respect of Revenue and Customs and the Rural Payments Agency for
Agricultural Produce bonds, ECGD recourse agreements, letters of credit and tender and performance bonds.
The Group is subject to claims and litigation generally arising in the ordinary course of its business, some of which are for substantial
amounts. All such actions are strenuously defended but provision is made for liabilities that are considered likely to arise on the basis
of current information and legal advice and after taking into account the Group’s insurance arrangements.
While there is always uncertainty as to the outcome of any claim or litigation, it is not expected that claims and litigation existing at
the balance sheet date will have a material adverse effect on the Group’s financial position.
38 Commitments
Capital commitments
Commitments for the acquisition of property, plant and equipment
2008
£m
69
31 March
2007
£m
77
Operating lease arrangements
Operating lease payments represent rentals payable by the Group for certain of its land, buildings, plant and equipment. Certain
operating lease agreements allow for renewal at the end of the original term at the option of the Group.
At the balance sheet date the Group has outstanding commitments under non-cancellable operating leases which, fall due as follows:
Within one year
Later than 1 year and no later than 5 years
After five years
2008
£m
32
98
98
228
31 March
2007
£m
30
79
92
201
39 Acquisitions and disposals of subsidiaries
Acquisitions
G.C. Hahn & Co.
On 15 June 2007, the Group acquired 80% of the issued share capital of G.C. Hahn & Co. (Hahn). Hahn provides customised
ingredient solutions to global customers. Hahn’s primary operations are located in Lübeck, Germany. It also has production
operations in the UK, USA and Australia, and sales offices in 22 countries.
The acquisition agreement allows for the Group to acquire the remaining 20% of the issued share capital prior to 1 January 2020
through put and call options. The owner of the remaining 20% of the issued share capital is entitled to fixed dividends until the
options are exercised. The Group effectively bears all the risks and rewards for 100% of the business and therefore no minority
interest is recognised in the Group’s financial statements.
The acquisition has contributed £60 million to sales and £5 million to operating profit post amortisation of acquired intangibles in the
period since acquisition. If the acquisition of Hahn had been completed on 1 April 2007, Group sales for the year would have been
£3,439 million and Group profit attributable to equity holders of the Company would have been unchanged.
146
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
39 Acquisitions and disposals of subsidiaries (continued)
Book value on
acquisition
£m
Provisional
fair value
adjustments
£m
Provisional
fair value
£m
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Provisions
Borrowings
Deferred tax liabilities
Goodwill
Consideration payable
Satisfied by:
Cash consideration, including costs
Deferred consideration
Cash movement:
Cash consideration, including costs
Less cash acquired
Net cash outflow in the year
–
11
8
18
5
(9)
–
(2)
–
31
52
1
2
(2)
–
(1)
(2)
–
(17)
33
52
12
10
16
5
(10)
(2)
(2)
(17)
64
36
100
80
20
100
80
(5)
75
Goodwill on acquisition relates to anticipated synergies that do not meet the criteria for recognition as an intangible asset at the date
of acquisition.
The fair value adjustments above are provisional, based on management’s best estimates. The fair value adjustments will be finalised
in the 2008/09 financial year.
In the year ended 31 March 2007 the Group acquired the assets and intellectual property of Hycail BV and its Finnish subsidiary
Hycail Finland Oy for £2 million of cash.
Disposals
On 22 April 2007, the Group disposed of its shareholding in Redpath. Total consideration, net of disposal costs was £140 million.
On 1 October 2007, the Group completed the disposal of five of its starch plants within the Food & Industrial Ingredients, Europe
segment in the UK, Belgium, France, Spain and Italy. Total consideration, net of disposal costs was £212 million.
On 28 December 2007, the Company disposed of its 49% indirect shareholding in Occidente. Total consideration, net of disposal
costs was £46 million.
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Notes to the consolidated financial statements
39 Acquisitions and disposals of subsidiaries (continued)
Total consideration, net of costs
Net assets disposed
Goodwill written off
Other items, including exchange differences transferred from equity
Profit/(loss) on disposal
Cash flows:
Cash consideration, net of costs
Cash disposed
Cash inflow in the year
Net assets disposed comprised:
Property, plant and equipment
Available-for-sale financial assets
Intangible assets
Inventories
Provisions
Retirement benefit surplus/(obligation)
Trade and other receivables
Cash and cash equivalents
Trade and other payables
Borrowings
Net assets disposed
Other disposals
Redpath
£m
European
starch
plants
£m
Occidente
£m
140
(85)
–
5
60
139
(6)
133
212
(217)
(15)
12
(8)
223
(20)
203
46
(36)
–
(2)
8
46
(4)
42
Redpath
£m
European
starch
plants
£m
Occidente
£m
51
–
–
22
–
2
22
6
(18)
–
85
172
–
2
42
(4)
(4)
150
20
(118)
(43)
217
26
1
–
19
(1)
–
5
4
(6)
(12)
36
On 26 April 2007, the Group disposed of its shareholding in Pure Cane Molasses for cash consideration of £4 million, resulting in a loss
on disposal of £1 million.
On 15 June 2007, the Group disposed of its shareholding in Tate & Lyle Reinsurance, comprising part of its reinsurance operations
and including cash balances of £2 million, for cash consideration of £3 million. The loss on disposal was £1 million.
148
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
40 Post balance sheet events
There are no post balance sheet events requiring disclosure.
41 Related party disclosures
Identity of related parties
The Group has related party relationships with its subsidiaries, joint ventures and associates, the Group’s pension schemes and
with key management being its directors and executive officers. No related party relationships with close family members of the
Group’s key management existed in the current or prior year.
Subsidiaries, joint ventures and associates
Transactions entered into by the Company with subsidiaries and between subsidiaries as well as the resultant balances of receivables
and payables are eliminated on consolidation and are not required to be disclosed. Similarly, the Group’s share of transactions
entered into by the Company and its subsidiaries with joint ventures and between joint ventures as well as the Group’s share of the
resultant balances of receivables and payables are eliminated on consolidation. Transactions and balances with subsidiaries and joint
ventures (before consolidation eliminations) and with associates are as follows:
Continuing
Sales of goods and services
– to joint ventures
Purchases of goods and services
– from joint ventures
Receivables
– due from joint ventures
– due from associates
Payables
– due to joint ventures
– due to associates
Discontinued
Sales of goods and services
– to joint ventures
Purchases of goods and services
– from joint ventures
Receivables
– due from joint ventures
– due from associates
Payables
– due to joint ventures
– due to associates
The Group had no material related party transactions containing unusual commercial terms.
Key management
Key management compensation is disclosed in Note 9.
2008
£m
33
43
12
–
27
1
2008
£m
8
4
–
–
–
–
31 March
2007
£m
35
15
4
3
13
1
31 March
2007
£m
13
9
–
–
–
–
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Notes to the consolidated financial statements
42 Foreign exchange rates
The following exchange rates have been applied in the translation of the financial statements of foreign subsidiaries, joint ventures
and associates:
Average foreign exchange rates
US dollar £1 = $
Euro £1 = €
Year-end foreign exchange rates
US dollar £1 = $
Euro £1 = €
43 Main subsidiaries and investments
Subsidiaries based in the UK1
G.C. Hahn & Co. Limited
Cesalpinia UK Limited
Orsan SA Limited
Tate & Lyle Holdings Limited2
Tate & Lyle Industrial Holdings Limited2
Tate & Lyle Industries Limited
Tate & Lyle International Finance PLC2
Tate & Lyle Investment Services Limited
Tate & Lyle Investments Limited2
The Molasses Trading Company Limited
United Molasses (Ireland) Limited3
Year to 31 March
2007
£m
1.89
1.48
31 March
2007
£m
1.97
1.47
2008
£m
2.01
1.42
2008
£m
1.99
1.26
Type of business
Blending
Blending
Holding company
Holding company
Holding company
See below
In-house treasury company
Holding company
Holding company
Holding company
Molasses
Percentage
of equity
attributable to
Tate & Lyle PLC
100.0
100.0
80.4
100.0
100.0
100.0
100.0
100.0
100.0
100.0
50.0
1. Registered in England and Wales, except United Molasses (Ireland) Limited, which is registered in Northern Ireland.
2. Direct subsidiaries of Tate & Lyle PLC.
3. Non-coterminous year end.
4.
The Group holds 80% of the issued capital of Hahn and has the right to acquire the remaining 20% through a call option. However, due to the structure of the
acquisition agreement, the Group effectively bears all the risks and rewards for 100% of the business and therefore no minority interest is recognised.
Main operating units of Tate & Lyle Industries Limited
Type of business
Tate & Lyle Thames (Process Technology)
Tate & Lyle Sugars, Europe
Sugar technology
Sugar refining and trading,
molasses and bulk liquid storage
150
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
43 Main subsidiaries and investments (continued)
Subsidiaries operating overseas
Australia
Tate & Lyle ANZ Pty Ltd
G.C. Hahn & Co. (Australia) Pty Ltd2
Tate & Lyle Molasses Belgium NV
Tate & Lyle Management & Finance Limited
Tate & Lyle Brasil SA1
Belgium
Bermuda
Brazil
British Virgin Islands Anglo Vietnam Sugar Investments Limited
China
Finland
France
Type of business
Sucralose distribution
Blending
Molasses
Management & finance
Citric acid and sugar trading
Holding company
Orsan Guangzhou Gourmet Powder Company Limited1 Glutamate producer
Hycail Oy
France Melasse SA1
Société Européenne des Mélasses SA1
G.C. Hahn & Co. Stabilisierungstechnik GmbH
Tate & Lyle Molasses Germany GmbH
Cesalpinia Germany GmbH
Tate & Lyle Insurance (Gibraltar) Ltd
Tate & Lyle Greece SA
Tate & Lyle Asia Limited
Tate & Lyle Gadot Manufacturing
Cesalpinia Food SPA
Tate & Lyle Molasses Italy SrL
The Mauritius Molasses Company Limited
Continental Colloids Mexicana SA
Mexama, SA de CV1
Tate & Lyle Mexico SA de CV1
Tate & Lyle Morocco SA
Companhia Exportadora de Melaços
Tate & Lyle Netherlands BV
Tate & Lyle Molasses Holland BV
Tate & Lyle Holland BV
Tate & Lyle Norge A/S
Alcântara Empreendimentos SGPS, SA1
Tate & Lyle Açucares Portugal, SA1
Tate & Lyle Molasses Portugal Ltda
Tate & Lyle Singapore Pte Ltd
Tate & Lyle South Africa
Tate & Lyle Molasses Spain SA
Caribbean Bulk Storage and Trading Company Ltd1
Tate & Lyle Custom Ingredients Inc
Tate & Lyle Ingredients Americas, Inc
Staley Holdings Inc
Tate & Lyle Finance, Inc
Tate & Lyle LLC
Tate & Lyle Holdings (US) LLP
Tate & Lyle Sucralose, Inc
TLI Holdings Inc
Nghe An Tate & Lyle Sugar Company Limited
Bio-development
Molasses
Holding company
Blending
Molasses
Blending
Reinsurance
Cereal sweeteners & starches
Sucralose distribution
Sugar refining
Blending
Molasses
Molasses
Blending
Citric acid
Holding company
Cereal sweeteners & starches
Molasses
Cereal sweeteners & starches
Molasses
Holding company
Sugar distribution
Holding company
Sugar refining
Molasses
High intensity sweeteners
Blending
Molasses
Molasses
Blending
Cereal sweeteners & starches
Holding company
In-house banking
Holding company
Holding company
High intensity sweeteners
In-house banking
Cane sugar manufacture
Germany
Gibraltar
Greece
Hong Kong
Israel
Italy
Mauritius
Mexico
Morocco
Mozambique
Netherlands
Norway
Portugal
Singapore
South Africa
Spain
Trinidad
USA
Vietnam
Percentage
of equity
attributable to
Tate & Lyle PLC
100.0
100.0
100.0
100.0
100.0
75.0
41.0
100.0
66.6
66.6
100.0
100.0
100.0
100.0
99.0
100.0
65.0
100.0
100.0
66.7
100.0
65.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
60.7
(51.0)
(80.9)
1. Non-coterminous year end.
2.
The Group holds 80% of the issued capital of Hahn and has the right to acquire the remaining 20% through a call option. However, due to the structure of the
acquisition agreement, the Group effectively bears all the risks and rewards for 100% of the business and therefore no minority interest is recognised.
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Notes to the consolidated financial statements
43 Main subsidiaries and investments (continued)
Joint ventures
Bulgaria
Colombia
Hungary
Ireland
Mexico
Netherlands
Romania
Slovakia
Spain
Turkey
USA
Amylum Bulgaria AD1, 3
Sucromiles SA3
Hungrana kft1, 3
Premier Molasses Company Ltd3
Almidones Mexicanos SA3
Eastern Sugar BV 3
Eaststarch CV
Amylum Romania SA1, 3
Amylum Slovakia spol sro1, 3
Compania de Melazas SA3
Amylum Nisasta1
DuPont Staley Bio-Products Company LLC
The share capital held is of ordinary shares.
1. Share capital held by Eaststarch CV.
2. Share capital held by Eastern Sugar BV.
3. Non-coterminous year end.
Type of business
Percentage
of equity
attributable to
Tate & Lyle PLC
(50.0)
Cereal sweeteners & starches (100.0)
Citric acid
Cereal sweeteners & starches
Molasses
Cereal sweeteners & starches
Holding company
Holding company
Cereal sweeteners & starches
(99.4)
Cereal sweeteners & starches (100.0)
Molasses
Cereal sweeteners & starches (100.0)
Industrial Ingredients
50.0
50.0
25.0
50.0
50.0
50.0
50.0
49.7
50.0
50.0
50.0
50.0
Associates
Italy
Thailand
UK
USA
Eridania Sadam
Tapioca Development Corporation1
Lumora Limited
Microbia Precision Engineering Inc.2
Type of business
Sugars
Starch production
Bio-development
Bio-development
1. Non-coterminous year end.
2.
The Group exercises significant influence over Microbia and the investment is accounted for as an associate.
Percentage
of equity
attributable to
Tate & Lyle PLC
35.0
33.3
39.4
14.0
The proportion of shares held by Tate & Lyle PLC, its subsidiaries, joint ventures and associates is shown in brackets where
it is different from the percentage of equity attributable to Tate & Lyle PLC.
Those entities which have non-coterminous year ends are consolidated in the Group accounts using management accounts for
the period to 31 March.
152
Tate & Lyle Annual Report 2008
Notes to the consolidated financial statements
44 Reconciliation to adjusted information
As explained in Note 1, adjusted information is presented as it provides both management and investors with valuable additional
information on the performance of the business. The following items are excluded from adjusted information:
■ Discontinued operations;
■ Exceptional items including profits/losses on disposals of businesses and impairments; and
■ Amortisation of acquired intangibles.
The following table shows the reconciliation of the statutory information presented in the income statement to the adjusted information:
Year to 31 March 2008
Year to 31 March 2007
Continuing operations
Sales
Operating profit
Net finance costs
Profit before tax
Income tax expense
Minority interest
Earnings attributable to equity
shareholders of the Company
Basic EPS (p)
Diluted EPS (p)
Tax rate
Discontinued operations
Sales
Operating profit
Net finance costs
Profit before tax
Income tax expense
Minority interest
Earnings attributable to equity
shareholders of the Company
Basic EPS (p)
Diluted EPS (p)
Tax rate
Total operations
Sales
Operating profit
Net finance costs
Profit before tax
Income tax expense
Minority interest
Earnings attributable to equity
shareholders of the Company
Basic EPS (p)
Diluted EPS (p)
Tax rate
Reported
£m
3 424
215
(42)
173
(76)
7
104
21.9
21.7
43.9%
394
105
1
106
(16)
–
90
19.0
18.7
15.1%
3 818
320
(41)
279
(92)
7
194
40.9
40.4
33.0%
Exceptional/
amortisation
£m
Adjusted
£m
Reported
£m
Exceptional/
amortisation
£m
–
71
–
71
(8)
(10)
53
11.2
11.0
–
(60)
–
(60)
8
–
(52)
(11.0)
(10.8)
–
11
–
11
–
(10)
1
0.2
0.2
3 424
3 225
286
(42)
244
(84)
(3)
157
33.1
32.7
289
(36)
253
(88)
(3)
162
33.6
33.0
34.4%
34.8%
394
45
1
46
(8)
–
38
8.0
7.9
17.4%
845
85
(1)
84
(32)
–
52
10.7
10.6
38.1%
3 818
4 070
331
(41)
290
(92)
(3)
195
41.1
40.6
31.7%
374
(37)
337
(120)
(3)
214
44.3
43.6
35.6%
–
22
–
22
–
–
22
4.5
4.5
–
(23)
–
(23)
22
–
(1)
(0.1)
(0.2)
–
(1)
–
(1)
22
–
21
4.4
4.3
Adjusted
£m
3 225
311
(36)
275
(88)
(3)
184
38.1
37.5
32.0%
845
62
(1)
61
(10)
–
51
10.6
10.4
16.4%
4 070
373
(37)
336
(98)
(3)
235
48.7
47.9
29.2%
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Independent Auditors’ Report to the Members of Tate & Lyle PLC:
parent company financial statements
Basis of audit opinion
We conducted our audit in accordance with International
Standards on Auditing (UK and Ireland) issued by the Auditing
Practices Board. An audit includes examination, on a test
basis, of evidence relevant to the amounts and disclosures in
the parent company financial statements and the part of the
directors’ remuneration report to be audited. It also includes
an assessment of the significant estimates and judgements
made by the directors in the preparation of the parent
company financial statements, and of whether the accounting
policies are appropriate to the company’s circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all
the information and explanations which we considered
necessary in order to provide us with sufficient evidence
to give reasonable assurance that the parent company
financial statements and the part of the directors’
remuneration report to be audited are free from material
misstatement, whether caused by fraud or other irregularity
or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the parent
company financial statements and the part of the directors’
remuneration report to be audited.
Opinion
In our opinion:
■
■
■
the parent company financial statements give a true and
fair view, in accordance with United Kingdom Generally
Accepted Accounting Practice, of the state of the parent
company’s affairs as at 31 March 2008;
the parent company financial statements and the part
of the directors’ remuneration report to be audited
have been properly prepared in accordance with the
Companies Act 1985; and
the information given in the directors’ report is consistent
with the financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and
Registered Auditors
1 Embankment Place
London WC2N 6RH
21 May 2008
We have audited the parent company financial statements
of Tate & Lyle PLC for the year ended 31 March 2008 which
comprise the parent company balance sheet and the notes
to the parent company financial statements. These parent
company financial statements have been prepared under the
accounting policies set out therein. We have also audited
the information in the directors’ remuneration report that is
described as having been audited.
We have reported separately on the Group financial
statements of Tate & Lyle PLC for the year ended
31 March 2008.
Respective responsibilities of directors and auditors
The directors’ responsibilities for preparing the annual report,
the directors’ remuneration report and the parent company
financial statements in accordance with applicable law and
United Kingdom Accounting Standards (United Kingdom
Generally Accepted Accounting Practice) are set out in the
Statement of Directors’ Responsibilities.
Our responsibility is to audit the parent company financial
statements and the part of the directors’ remuneration report
to be audited in accordance with relevant legal and regulatory
requirements and International Standards on Auditing (UK and
Ireland). This report, including the opinion, has been prepared
for and only for the Company’s members as a body in
accordance with Section 235 of the Companies Act 1985 and
for no other purpose. We do not, in giving this opinion, accept
or assume responsibility for any other purpose or to any other
person to whom this report is shown or into whose hands it
may come save where expressly agreed by our prior consent
in writing.
We report to you our opinion as to whether the parent
company financial statements give a true and fair view and
whether the parent company financial statements and the part
of the directors’ remuneration report to be audited have been
properly prepared in accordance with the Companies Act
1985. We also report to you as to whether in our opinion the
information given in the directors’ report is consistent with
the parent company financial statements. The information
given in the directors’ report includes that specific information
presented in the operating and financial review that is cross-
referred from the business review section of the directors’
report. We also report to you if, in our opinion, the Company
has not kept proper accounting records, if we have not
received all the information and explanations we require for
our audit, or if information specified by law regarding directors’
remuneration and other transactions is not disclosed.
We read other information contained in the annual report
and consider whether it is consistent with the audited parent
company financial statements. The other information
comprises only the overview of the year, the ‘What we do’,
‘How we performed’ and the ‘How we run the business’
sections, the directors’ report, the unaudited part of the
directors’ remuneration report, the Group financial statements,
the ten-year review and the information for investors.
154
Tate & Lyle Annual Report 2008
Parent company balance sheet
Fixed assets
Tangible assets
Investments in subsidiary undertakings
Investment in associates
Current assets
Debtors – due within one year
Debtors – due after more than one year
Creditors – due within one year
Net current liabilities
Total assets less current liabilities
Creditors – due after more than one year
Provisions for liabilities and charges
Total net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Profit and loss account
Shareholders’ funds
Notes
2
3
4
5
5
6
7
9
12
13
13
13
Year to 31 March
2007
restated
£m
2
2 001
–
2 003
62
11
73
(359)
(286)
1 717
(431)
(1)
1 285
122
403
–
760
1 285
2008
£m
2
1 828
1
1 831
45
5
50
(585)
(535)
1 296
(428)
(3)
865
114
404
8
339
865
The parent company financial statements were approved by the Board of Directors on 21 May 2008 and signed on its behalf by:
Sir David Lees, Iain Ferguson, John Nicholas
Directors
Registered No. 76535
The notes on pages 156 to 159 form part of these parent company financial statements.
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Notes to the parent company financial statements
1 Parent company accounting policies
Accounting basis
The parent company financial statements are prepared
under the historical cost convention in accordance with
the Companies Act 1985 and applicable UK accounting
standards. As permitted by Section 230 of the Companies
Act 1985, the Company’s profit and loss account and
statement of total recognised gains and losses are not
presented in these financial statements. The Tate & Lyle
PLC consolidated financial statements for the year ended
31 March 2008 contain a consolidated statement of cash
flows. Consequently the Company has taken the exemption
available in FRS1 (Revised 1996) Cash flow statements, and
has not presented its own cash flow statement.
New UK GAAP interpretations adopted
In preparing these financial statements the Company has
adopted for the first time UITF44 ‘Group and Treasury Share
Transactions’. UITF44 requires the fair value of the award of
share options to subsidiary employees to be treated as a
capital contribution.
Consequently, the Company has recognised an addition to
investments of the aggregate amount of these contributions
for all grants of equity instruments made subsequent to
1 April 2004. The increase in respect of 2008 was £2 million.
The adoption of this pronouncement has required the
restatement of the comparative results, where £4 million was
recognised as the opening adjustment at 1 April 2007, with
a further £3 million recognised in 2007.
Tangible fixed assets
Depreciation is provided on a straight-line basis to write off
the cost of tangible fixed assets over their estimated useful life.
The tangible fixed assets comprise plant and machinery which
are depreciated over a period of three to 28 years. Impairment
reviews are undertaken if there are indications that the carrying
values may not be recoverable.
Investments
Fixed asset investments are included in the balance sheet at
cost, less any provision for impairment.
Investments in subsidiaries and associates are accounted for
at cost. Such investments include both investments in shares
issued by the subsidiary or associates and other parent entity
interests that in substance form part of the parent entity’s
investment. In the case of subsidiaries these include
investments in the form of interest-free loans that have no
fixed repayment terms and which have been provided to
subsidiaries as an additional source of long-term capital.
Leases
Operating lease costs are charged to profit as incurred.
Research and development
All expenditure on research and development is charged
to profit as incurred.
Retirement benefits
The Company contributes to the Group pension plan operated
in the UK. Details of the plan are included within Note 32 of
the Group financial statements. As permitted under FRS17
Retirement Benefits, the plan is accounted for as a defined
contribution plan, as the employer cannot identify its share of
the underlying assets and liabilities of the plan. The employer’s
contributions relate to the current service period only and are
charged to the income statement as they are incurred.
Deferred tax
Deferred tax is recognised on a full provision basis on
timing differences between the recognition of gains and losses
in the accounts and their recognition for tax purposes that
have arisen but not reversed at the balance sheet date.
Deferred tax is not recognised on permanent differences or
on timing differences arising on unremitted profits of overseas
subsidiaries. Deferred tax assets are recognised only to the
extent that it is considered more likely than not that there will
be sufficient future taxable profits to permit tax relief of the
underlying timing differences.
Foreign currencies
Assets and liabilities in foreign currencies are translated
into sterling at the rates of exchange ruling on the last day
of the financial period (the closing rate). Profits and losses
are translated into sterling at the prevailing rate at the time
of transaction and credited or charged to the profit and
loss account.
Share-based compensation
The Company operates a number of equity-settled,
share-based compensation plans. Details of the plans are
included within Note 28 of the Group financial statements.
The fair value of employee services received in exchange
for the grant of the options is recognised as an expense.
The total amount to be expensed over the vesting period
is determined by reference to the fair value of the options
granted, excluding the impact of any non-market vesting
conditions (for example, earnings targets). Non-market vesting
conditions are included in assumptions about the number of
options that are expected to become exercisable. At each
balance sheet date, for options granted with non-market
vesting conditions, the Company revises its estimates of the
number of options that are expected to become exercisable.
It recognises the impact of the revision of original estimates,
if any, in the profit and loss account, and a corresponding
adjustment to equity. The proceeds received net of any
directly attributable transaction costs are credited to share
capital and share premium when the options are exercised.
Dividend distribution
A dividend distribution to the Company’s equity holders is
recognised as a liability in the Group’s financial statements
in the period in which the dividends are approved by the
Company’s shareholders or, in the case of interim dividends,
by the Board of Directors.
Share capital
Ordinary shares are classified as equity. Incremental costs
directly attributable to the issue of new shares or options are
shown in equity as a deduction, net of tax, from the proceeds.
Where any Group company purchases the Company’s equity
share capital and holds that share either directly as treasury
shares or indirectly within an ESOP trust, the consideration
paid, including any directly attributable incremental costs (net
of income taxes), is deducted from equity attributable to the
Company’s equity holders until the shares are cancelled,
reissued or disposed of. Where such shares are subsequently
sold or reissued, any consideration received, net of any
directly attributable incremental transaction costs and the
related income tax effects, is included in equity attributable
to the Company’s equity holders. These shares are used to
satisfy share options granted to employees under the Group’s
share option schemes. The trustee purchases the Company’s
shares on the open market using loans made by the
Company or other loans guaranteed by the Company.
156
Tate & Lyle Annual Report 2008
Notes to the parent company financial statements
2 Tangible fixed assets
The net book value of tangible fixed assets of £2 million (2007 – £2 million) comprises plant and machinery. Net book value
comprised cost of £4 million (2007 – £4 million) less accumulated depreciation of £2 million (2007 – £2 million).
3 Investments in subsidiary undertakings
At 31 March 2007 as previously reported
Prior year adjustment – see Note 1
At 1 April 2007 as restated
Additions
Increase – share based payments
Disposals
Exchange differences
At 31 March 2008
Shares in
subsidiary
undertakings
£m
Loans to
subsidiary
undertakings
£m
Loans to
subsidiary
undertakings
£m
1 767
7
1 774
206
2
(411)
30
1 601
227
–
227
–
–
–
–
227
1 994
7
2 001
206
2
(411)
30
1 828
Shares in subsidiary undertakings are stated at cost or earliest ascribed value less amounts provided of £70 million
(2007 – £70 million). Loans to subsidiary undertakings are stated net of amounts provided of £9 million (2007 – £9 million).
A list of the Company’s significant investments is provided in Note 43.
4 Investments in associates
In September 2007, the Company acquired a 16.6% interest in Tapioca Development Corporation, a company incorporated in
Thailand, for consideration of £1 million.
5 Debtors
Due within one year
UK taxation
Amounts due from subsidiary undertaking
Other debtors
Prepayments and accrued income
Due after more than one year
Deferred taxation
6 Creditors – due within one year
Amounts owed to subsidiary undertakings
Other creditors
Accruals and deferred income
Notes
8
2008
£m
3
33
8
1
45
5
5
2008
£m
563
1
21
585
31 March
2007
£m
32
22
7
1
62
11
11
31 March
2007
£m
328
1
30
359
The effective interest rates applicable to amounts owed to subsidiary undertakings at 31 March 2008 is 4.8%. Amounts owed
to subsidiary undertakings are repayable on demand.
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Notes to the parent company financial statements
7 Creditors – due after more than one year
Amounts owed to subsidiary undertakings
Preference shares
2008
£m
426
2
428
31 March
2007
£m
429
2
431
The effective interest rate applicable to amounts owed to subsidiary undertakings at 31 March 2008 is 6.5%. Amounts owed to
subsidiary undertakings at year end mature after more than four years (2007 – mature after more than five years).
8 Deferred taxation
Deferred taxation charged to profit in the year was £6 million (2007 – £1 million).
9 Provisions for liabilities and charges
At 1 April 2006 and 31 March 2007
Charged to the profit and loss account
Utilised in the year
At 31 March 2008
Restructuring
£m
–
5
(3)
2
Other
£m
1
4
(4)
1
Total
£m
1
9
(7)
3
Provisions for liabilities and charges of £3 million (2007 – £1 million) primarily relate to restructuring as a result of the disposal of the
five European starch plants and are expected to be utilised within the next 12 months.
10 Contingent liabilities
Loans and overdrafts of subsidiaries, joint ventures and associates
and former subsidiaries guaranteed
2008
£m
1 039
31 March
2007
£m
899
Guarantees given in respect of loans and overdrafts by Tate & Lyle PLC may not exceed £2,041 million (2007 – £1,711 million).
Other trade guarantees have been given in the normal course of business by Tate & Lyle PLC at both 31 March 2008 and
31 March 2007. These are excluded from the figures given above and are in respect of Revenue and Customs and the
Rural Payments Agency for Agricultural Produce bonds, ECGD recourse agreements, letters of credit and tender and
performance bonds.
11 Financial commitments
Annual payments made by the Company in the year ended 31 March 2008 in respect of operating leases that expire later than one
year and no later than five years were £4 million (2007 – £4 million expiring after more than five years).
12 Share capital
Authorised equity share capital
790,424,000 ordinary shares of 25p each (2007 – 790,424,000)
Allotted, called up and fully paid equity share capital
2008
£m
198
31 March
2007
£m
198
At 1 April
Allotted under share option schemes
Market purchases
At 31 March
31 March 2008
31 March 2007
Shares
489 824 398
413 068
(30 327 000)
459 910 466
£m
122
–
(8)
114
Shares
488 740 116
1 084 282
–
489 824 398
£m
122
–
–
122
158
Tate & Lyle Annual Report 2008
Notes to the parent company financial statements
12 Share capital (continued)
Treasury shares and shares held in ESOP trust
As part of the Company’s share buy back programme, the Company repurchased 33,627,000 shares (2007 – nil) for £159 million
(2007 – £nil million). Of these, 30,327,000 were cancelled during the year and 2,755,073 were held in Treasury at 31 March 2008.
The remaining 544,927 were released from Treasury to satisfy share options exercised during the year. The shares repurchased
represent 7.3% of the Company’s called up share capital at 31 March 2008 and had a nominal value of £8 million. The shares
held in Treasury at 31 March 2008 represent 0.6% of the Company’s share capital and had a nominal value of £1 million.
As at 31 March 2008, the Group held 2,044,493 shares (2007 – 5,016,404 shares) in an ESOP trust.
13 Reconciliation of movements in shareholders’ funds
At 31 March 2007 as previously reported
Prior year adjustment – see Note 1
At 1 April 2007 restated
Proceeds from shares issued
Share-based payments
Share buybacks
Ordinary dividends paid
Profit for the year
At 31 March 2008
Ordinary
shares
£m
Share
premium
£m
Capital
redemption
reserve
£m
Profit and
loss account
£m
122
–
122
–
–
(8)
–
–
114
403
–
403
1
–
–
–
–
404
–
–
–
–
–
8
–
–
8
753
7
760
7
4
(159)
(105)
(168)
339
Total
£m
1 278
7
1 285
8
4
(159)
(105)
(168)
865
The loss for the year before dividends dealt with in the financial statements of the Company amounted to £168 million
(2007 – £35 million loss).
The remaining amount available for the payment of dividends by the Company at 31 March 2008 was £339 million
(2007 – £760 million).
14 Related parties
As permitted by FRS8 Related Party Disclosures, disclosure of related party transactions with other companies controlled by
Tate & Lyle PLC is not provided and there were no reportable transactions with other related parties.
15 Profit and loss account disclosures
As permitted by Section 230 of the Companies Act 1985, the Company has not presented its own profit and loss account.
The Company employed 89 staff including directors (2007 – 95) and the total staff costs are shown below:
Wages and salaries
Social security
Retirement benefits
Year to 31 March
2007
£m
13
1
2
16
2008
£m
16
2
2
20
Directors’ emoluments disclosures are provided in the directors’ remuneration report on pages 82 to 92 of this annual report and in
Note 9 of the Group financial statements.
16 Dividends
Details of the Company’s dividends are set out in Note 14 of the Group financial statements.
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Ten-year review financial years to March
Share information
Pence per 25p ordinary share
Closing share price
Earnings – basic6
basic, before amortisation
and exceptional items6
Earnings – diluted6
diluted, before amortisation
and exceptional items6
Dividend
Closing market capitalisation £ million
Including convertible redeemable
preference shares £ million
Business ratios
Interest cover – times
Profit before interest, exceptional
items and amortisation divided
by net finance expense5,6
Gearing
Net borrowings as a percentage of
total net assets
Net margin
Profit before interest, exceptional
items and amortisation as a
percentage of sales6
Return on net operating assets
Profit before interest and exceptional
items as a percentage of average
net operating assets
Dividend cover – times
Basic earnings per share after
exceptional items and amortisation
divided by dividends per share6
Basic earnings per share before
exceptional items and amortisation
divided by dividends per share6
UK GAAP2
IFRS
1999
2000
2001
2002
2003
20041
20053,4,7
20064,7
20074
20084
401.0
30.4
227.0
24.3
228.8
(50.0)
349.2
24.7
299.0
27.8
297.2
32.7
531.5
31.0
571.0
(6.3)
575.0
44.3
540.0
40.9
28.5
30.4
28.4
17.2
30.0
24.2
29.9
17.8
14.8
(49.8)
14.8
17.8
22.2
24.6
22.1
17.8
33.1
27.7
33.0
18.3
34.0
32.6
33.9
18.8
37.7
30.6
37.4
19.4
42.4
(6.3)
41.7
20.0
48.7
43.6
47.9
21.5
41.1
40.4
40.6
22.6
1 832
1 039
1 102
1 683
1 441
1 435
2 586
2 791
2 816
2 484
–
–
–
–
–
–
–
–
–
–
3.0
3.6
2.3
3.3
7.6
9.3
11.6
9.9
10.1
8.1
84% 64% 91% 59% 45% 40% 48% 92% 90% 110%
5.9% 7.0% 4.3% 5.3% 7.8% 7.7% 8.3% 8.8% 9.2% 8.7%
11.9% 13.5% 8.5% 10.5% 14.2% 15.4% 18.8% 18.9% 18.9% 15.5%
1.8
1.4
(2.8)
1.4
1.5
1.7
1.6
(0.3)
2.1
1.8
1.7
1.7
0.8
1.2
1.8
1.8
1.9
2.1
2.3
1.8
1. Comparative figures for 2004 have been restated to reflect the adoption of UITF38 Accounting for ESOP Trusts.
2. Comparative figures for 1999 to 2004 have not been restated to reflect the adoption of IFRS from 1 April 2004.
3. Comparative figures for 2005 have not been restated to reflect the adoption of IAS32/39 from 1 April 2005.
4.
5. Under UK GAAP interest cover was calculated using only the profit before interest, exceptional items and amortisation, and the net finance expense of
‘Amortisation’ relates to the amortisation of intangible assets arising on acquisition of businesses.
Tate & Lyle PLC and its subsidiaries.
These ratios have been calculated using the results of both continuing and discontinued operations.
6.
7. Comparative figures for 2005 and 2006 have been restated to reflect the adoption of IFRIC4.
In 2000, the Group changed its accounting reference date from 30 September to 31 March, resulting in an extended accounting
period of 18 months to March 2000.
Results presented above are for years to 31 March and have been calculated using the Group’s published interim and full-year
financial statements.
In order to show the underlying trend of dividend payments, dividends shown in the above table have been adjusted to exclude from
the dividend of 26.9p per share paid in respect of the 18 months to March 2000 the final dividend of 9.1p per share paid in respect
of the transitional six-month period to March 2000 with the effect that the dividend of 17.8p per share for the year to March 2000
shown above is presented on an annualised basis.
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Ten-year review financial years to March
Employment of capital
Goodwill, intangible assets and
property, plant and equipment
Other non-current assets
Working capital
Net assets held for sale
Net operating assets
Net borrowings
Net (liabilities)/assets for
dividends and tax
Total net assets
Capital employed
Called up share capital
Reserves
Minority interests
Profit summary5
Sales
Group operating profit:
Before exceptional items
and amortisation
Amortisation
Operating exceptional items
Group operating profit
Share of profits of joint ventures
and associates
Total operating profit
Non-operating exceptional items:
Write-downs on planned sale of business
Profit/(loss) on sale or termination
of businesses
Profit/(loss) on sale of fixed assets
Profit/(loss) before net finance expense
Net finance expense
Net finance (expense)/income of
joint ventures and associates
Profit/(loss) before taxation
Taxation
Profit/(loss) after taxation
Minority interests
Discontinued operations
Profit/(loss) for the year
UK GAAP2
IFRS
1999
£m
2000
£m
2001
£m
2002
£m
2003
£m
20041
£m
20053,4,6
£m
20064,6
£m
20074
£m
20084
£m
1 892
–
288
1 854
–
211
1 860
–
307
1 699
–
114
1 565
–
94
1 414
–
107
1 461
3
37
1 480
21
356
–
1 449
25
445
61
1 516
22
576
–
2 180
(986)
2 065
(805)
2 167
(963)
1 813
(639)
1 659
(471)
1 521
(388)
1 501
(474)
1 857
(866)
1 980
(900)
2 114
(1 041)
(23)
4
(142)
(93)
(144)
(155)
1 171
1 264
1 062
1 081
1 044
978
(44)
983
(51)
940
(85)
995
(123)
950
117
904
117
984
123
885
123
920
123
889
1 021
150
1 101
163
1 008
54
1 043
38
1 012
32
1 171
1 264
1 062
1 081
1 044
123
828
951
27
978
124
827
951
32
983
122
783
905
35
940
122
838
960
35
995
114
820
934
16
950
4 359
4 090
4 146
3 944
3 167
3 167
3 339
3 465
3 225
3 424
220
–
(5)
215
37
252
–
–
18
270
(73)
(13)
184
(49)
135
4
–
139
237
–
–
237
47
284
156
(5)
–
151
29
180
180
(8)
–
172
36
208
219
(8)
(39)
172
35
207
(50)
(307)
–
(12)
25
7
266
(65)
(10)
191
(63)
128
(17)
–
111
9
–
(118)
(67)
(5)
(190)
(40)
(230)
(6)
–
(236)
(5)
13
216
(55)
(2)
159
(39)
120
(2)
–
118
19
(1)
213
(29)
3
187
(57)
130
2
–
132
214
(8)
–
206
43
249
–
(6)
–
243
(23)
4
224
(69)
155
(1)
–
154
278
(4)
(45)
229
–
229
–
–
–
229
(24)
–
205
(55)
150
(4)
–
146
300
(5)
(248)
47
–
47
–
–
–
47
(33)
–
14
(60)
(46)
(3)
19
(30)
311
(9)
(13)
289
–
289
–
–
–
289
(36)
–
253
(88)
165
(3)
52
214
286
(12)
(59)
215
–
215
–
–
–
215
(42)
–
173
(76)
97
7
90
194
Profit before tax, exceptional items
and amortisation
171
209
113
159
228
227
254
267
275
244
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‘Amortisation’ relates to the amortisation of acquired intangible assets.
1. Comparative figures for 2004 have been restated to reflect the adoption of UITF38 Accounting for ESOP Trusts.
2. Comparative figures for 1999 to 2004 have not been restated to reflect the adoption of IFRS from 1 April 2004.
3. Comparative figures for 2005 have not been restated to reflect the adoption of IAS32/39 from 1 April 2005.
4.
5. Profit summary information for the years ended 31 March 2007 and 31 March 2008 is presented in accordance with the presentation adopted in the 2008
Group financial statements and unless otherwise stated represents continuing operations only. Profit summary information for the year 31 March 2006 is
presented in accordance with the presentation adopted in the 2007 Group Financial Statements and unless otherwise stated represents continuing operations
as defined in those statements.
The comparative figures for 2005 and 2006 have been restated to reflect the adoption of IFRIC4.
6.
Tate & Lyle Annual Report 2008
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Information for investors
Addresses and telephone numbers
Useful addresses and telephone numbers are set out on page 163.
Dividends on ordinary shares
Two payments were made during the tax year 2007/2008 as follows:
Payment date
26 July 2007
8 January 2008
Dividend description
Final 2007
Interim 2008
Dividend per share
15.3p
6.5p
Services
Single Company Individual Savings Account (ISA)
Tate & Lyle’s ordinary shares can be held in a Single Company ISA. For information, please call the Equiniti ISA Helpline on
0871 384 2244.
Shareholding enquiries
Queries on shareholdings should be addressed to Tate & Lyle’s Registrar, Equiniti (see page 163 for contact details).
Tate & Lyle’s website (www.tateandlyle.com) and share price information
Tate & Lyle’s website provides direct links to other Group company sites and to sites providing financial and other information
relevant to the Company. The share price is available on the website with a 20-minute delay. Similar information is available on many
specialist websites, on Teletext and in several national newspapers.
Capital gains tax
The market values on 31 March 1982 for the purposes of indexation up to April 1998 in relation to capital gains tax of
Tate & Lyle PLC shares then in issue were:
Ordinary shares of £1 each
Equivalent value per ordinary share of 25p
61⁄2% cumulative preference shares
201.00p
50.25p
43.50p
Tate & Lyle American Depositary Shares (ADSs)
The Company’s shares trade in the United States on the NASDAQ over the counter (OTC) market in the form of ADSs and these are
evidenced by American Depositary Receipts (ADRs). The shares are traded under the symbol TATYY. Each ADS is equivalent to four
ordinary shares. For more information, contact the Bank of New York Mellon at the address given on page 163.
On 10 April 2007, Tate & Lyle was approved for the International PremierQX tier of International OTCQX. This provides a gateway
to US securities markets for international companies that are listed on a qualified international exchange. Tate & Lyle’s ADR is
identified with an International PremierQX logo and investors can find current financial information and other disclosure
on www.otcqx.com and www.pinksheets.com
Financial calendar (dates are provisional except those marked with an asterisk)
2008 Annual General Meeting
Announcement of interim results for six months to 30 September 2008
Announcement of preliminary results for the year ending 31 March 2009
2009 Annual General Meeting
23 July 2008*
6 November 2008
28 May 2009
23 July 2009
Dividend on ordinary shares
Announced
Payment date
2008 final
22 May 2008*
31 July 2008*1
2009 interim
6 November 2008
9 January 2009
2009 final
28 May 2009
31 July 20091
1. Subject to the approval of shareholders.
Dividends on 61⁄2% cumulative preference shares
Paid 31 March and 30 September.
Shareholder documents
Following a change to company law, and subsequent shareholder approval at the 2007 AGM, shareholder documents are only sent
in paper format to shareholders who have elected to receive documents in this way. This approach enables the Company to reduce
printing and distribution costs and its impact on the environment.
Shareholders who have not elected to receive paper copies are sent a letter whenever shareholder documents are published, to advise
them how to access the documents via the Tate & Lyle website, www.tateandlyle.com. Shareholders may also choose to receive this
notification via email with a link to the relevant page on the website. Shareholders who wish to receive email notification should register
online at www.shareview.co.uk, using their reference number that is either on their share certificate or other correspondence.
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Useful addresses and telephone numbers
Registered Office
Tate & Lyle PLC
Sugar Quay
Lower Thames Street
London EC3R 6DQ
Tel: +44 (0)20 7626 6525
Fax: +44 (0)20 7623 5213
Company number: 76535
Website
www.tateandlyle.com
Registrar
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex BN99 6DA
Tel: 0871 384 2063 (for UK calls)
+44 (0)121 415 7047 (for calls from overseas)
www.equiniti.com
www.shareview.co.uk
Calls to 0871 numbers are charged at 8 pence per
minute from a BT landline. Other telephone providers’
costs may vary.
ADR Depositary
The Bank of New York Mellon
Shareowner Services
PO Box 358516
Pittsburgh
PA 15252-8516
Tel: +1 888 269 2377
Corporate Brokers
Citigroup
33 Canada Square
Canary Wharf
London E14 5LB
Hoare Govett
250 Bishopsgate
London EC2M 4AA
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Non-reliance statement
This annual report and accounts has
been prepared solely to provide additional
information to shareholders to assess the
Group’s strategy and the potential of that
strategy to succeed and should not be
relied upon by any other party or for
any other purpose.
Cautionary statement
This annual report and accounts contains
certain forward-looking statements with
respect to the financial condition, results,
operations and businesses of Tate & Lyle PLC.
These statements and forecasts involve risk
and uncertainty because they relate to events
and depend upon circumstances that may
occur in the future. There are a number of
factors that could cause actual results or
developments to differ materially from those
expressed or implied by these forward-looking
statements and forecasts. Nothing in this
annual report and accounts should be
construed as a profit forecast.
164
Tate & Lyle Annual Report 2008
Designed and produced by
www.berghindjoseph.com
Typeset by Orb Solutions
Printed by St Ives Westerham Press Ltd
Photography by
Peter Thompson, David Rees
VerbalEyes image
on page 75 courtesy of Karen Logan
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