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Transforming raw materials into
quality ingredients used by millions
of people every day.
www.tateandlyle.com
Annual Report 2009
0920_T&L_ Covers.qxd 15/6/09 12:13 Page 2
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 168.
Environmental statement
This report is printed on ‘Look!’ 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 2009. 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, DuPontTM and Sorona®
are trademarks or registered trademarks of
E.I. du Pont de Nemours and Company.
Designed and produced by
www.berghindjoseph.com
Typeset by Orb Solutions
Printed by St Ives Westerham Press Ltd
Photography by
David Rees, Peter Thompson,
Chris Brown, Detlev Klockow
0920_T&L_ Front_01-59.qxd 12/6/09 16:23 Page 01
Overview of the year
Sir David Lees and Iain Ferguson summarise
Tate & Lyle’s results for the past year and how
we measure our performance.
2
4
6
8
Performance highlights
Group at a glance
Chairman’s statement
Chief Executive’s review
(including the Group’s vision, strategy and
key performance indicators)
What we do
Find out how we make our ingredients,
which markets we operate in and how
we serve our customers.
14 Overview
16 Sustainable sourcing
18 Creating volume
19 Preserving value
20 Adding value
22 Going to market
26 People
27 External environment
and risk management
How we performed
Find out the results for the Group and each
business division for the financial year.
32 Group financial results
36 Divisional performance
Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Europe
36
40
44 Sugars
48 Sucralose
52 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.
60 Board of directors
62 Executive management
63 Corporate governance
70 Corporate social responsibility
Statutory information
Our detailed financial statements and other
statutory information such as directors’ pay.
81 Directors’ report
84 Directors’ remuneration report
98 Group financial statements
156 Parent company financial statements
164 Ten-year review (non-statutory)
166 Information for investors (non-statutory)
Sales
Year to 31 March
£m
2 584
2 065
Adjusted operating profit
Year to 31 March
£m
3 553
2 867
295
298
969
802
166
132
184
160
08
09
Primary
08
09
Value added
08
09
Total
08
09
Primary
08
09
Value added
08
09
Total1
1 Total includes central costs of £18 million in 2009 and £31 million in 2008.
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Tate & Lyle Annual Report 2009
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Overview of the year
Performance highlights
Tate & Lyle performed soundly despite an increasingly challenging
economic environment as the year progressed. The Board is
recommending a maintained final dividend of 16.1p per share,
making a full year dividend of 22.9p per share, an increase of
1.3% over the prior year.
Statutory results
Profit before tax (continuing operations)
Profit for the year (total operations)
Diluted earnings per share (continuing operations)
Year ended
Year ended
31 March 2009 31 March 2008
£113m
£70m
19.4p
£182m
£187m
23.6p
Sales
Year to 31 March
£m
2 584
2 065
Adjusted operating profit
Year to 31 March
£m
3 553
2 867
295
298
969
802
166
132
184
160
08
09
Primary
08
09
Value added
08
09
Total
08
09
Primary
08
09
Value added
08
09
Total1
1 Total includes central costs of £18 million in 2009 and £31 million in 2008.
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 sugar businesses are
classified as primary.
02
Tate & Lyle Annual Report 2009
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Adjusted diluted earnings per share
Year to 31 March
pence
Dividends per share
Year to 31 March
pence
34.6
38.0
19.4
20.0
21.5
22.6
22.9
08
09
05
06
07
08
09
Net debt
As at 31 March
£m
Free cash flow3
Year to 31 March
£m
1 2312
1 041
08
09
154
(127)
(167)
07
08
09
2 Exchange rate movements increased net debt by £378 million in the year ended
31 March 2009. Excluding movements in exchange rates, net debt reduced by
£188 million.
3 Free cash flow is defined as cash flow from continuing operations after interest,
taxation and capital expenditure.
Basis of preparation
Unless stated otherwise, the Group’s financial statements are
prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the EU. Information prior to
2005 is shown under Generally Accepted Accounting Practice
in the UK (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
exclude discontinued operations and are before exceptional
items and amortisation of acquired intangible assets.
Amortisation
Unless stated otherwise, the use of the word ‘amortisation’
on pages 1 to 96 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.
Tate & Lyle Annual Report 2009
03
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0920_T&L_ Front_01-59.qxd 15/6/09 13:56 Page 04
Overview of the year
Group at a glance
Through our four divisions based largely in the Americas, Europe and South
East Asia, Tate & Lyle makes quality ingredients for customers all over the world
in the food and beverage, industrial, pharmaceutical and animal feed markets.
Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Europe
– Large-scale corn processor with plants centred
in the US corn belt or near key markets
– Produces a range of ingredients including
starches (food and industrial), sweeteners,
proteins, acidulants, biogums and ethanol,
and provides speciality blending services
– Employees at 31 March 2009: 2,513
– Single Ingredients and Food Systems businesses
– Single Ingredients (corn processing) produces a
range of ingredients including starches (food and
industrial), sweeteners and ethanol
– Food Systems provides stabiliser systems,
hydrocolloids and speciality blending services
– Employees at 31 March 2009: 1,325
Contribution
to sales
51%
Contribution to
adjusted operating profit1
Contribution
to sales
Contribution to
adjusted operating profit1
57%
15%
16%
Plants
10 USA2, 1 Mexico,
2 South America
Blending facilities
2 USA, 1 Mexico
Plants
6 EU, 1 Morocco,
1 Turkey
Blending facilities
4 EU, 1 South Africa
1 Australia
1 For the year ended 31 March 2009 and excluding central costs.
2 Including Fort Dodge, Iowa under construction.
04
Tate & Lyle Annual Report 2009
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Sugars
Sucralose
– Largest cane sugar refiner in EU
– Produces a range of sugars, syrups and molasses
– Sugar brands: Tate & Lyle Sugars (UK); Melli
(Vietnam); and Sidul/Sores (Portugal)
– Syrup brand: Lyle’s Golden Syrup (UK)
– Molasses distribution, blending and liquid storage
– Employees at 31 March 2009: 1,339
– Producer of SPLENDA® Sucralose,
a no-calorie high-intensity sweetener
– Manufactured by a patented process
starting with cane sugar
– Used to sweeten over 4,000 products worldwide
in the food, beverage and pharmaceutical markets
– Employees at 31 March 2009: 260
Contribution
to sales
29%
Contribution to
adjusted operating profit1
Contribution
to sales
Contribution to
adjusted operating profit1
4%
5%
23%
Plants
3 EU, 1 Israel, 1 Vietnam,
Blending facilities
10 global molasses
Plants
1 Singapore, 1 USA3
1 For year ended 31 March 2009 and excluding central costs.
3 McIntosh, Alabama being mothballed.
Tate & Lyle Annual Report 2009
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Overview of the year
Chairman’s statement
Balance sheet management has been and
continues to be a top priority.
Sir David Lees
Results
Tate & Lyle performed soundly
despite an economic environment
that grew increasingly challenging
as the year progressed. Balance
sheet management has been and
continues to be a top priority. At
31 March 2009 undrawn committed
bank facilities amounted to more
than £500 million, and, including
immediately available cash
resources, our liquidity headroom
rises to approximately £750 million.
We remain comfortably within our
banking covenants.
Sales for the year ended 31 March
2009 were £3,553 million, 24%
higher (8% in constant currency)
than the prior year. Profit before tax,
adjusted to exclude exceptional
items and amortisation of acquired
intangible assets at £247 million
was 2% lower (18% in constant
currency) than the prior year, and
adjusted diluted earnings per
share at 38.0p were 10% higher
(8% lower in constant currency).
Exchange translation increased
profit before tax by £49 million
compared to the prior year. The
stronger US dollar contributed
83% of this increase, although it
also reduced the competitiveness
of products from our US
ingredients business in overseas
markets, particularly Mexico
and South America.
Net debt increased by £190 million
to £1,231 million. Before the effects
of exchange, net debt decreased
by £188 million. The impact of
exchange movements during the
year, which increased debt by
£378 million, was due principally
to the weakness of sterling
against the US dollar.
Dividend
The Board is recommending a
maintained final dividend of 16.1p,
making a full year dividend of
22.9p per share, an increase of
1.3% over the prior year. In reaching
this decision, the Board was mindful
of the need to at least maintain the
Company’s investment-grade credit
ratings. The full year dividend is
covered 1.7 times by earnings
from continuing operations before
exceptional items and amortisation
of acquired intangible assets.
The proposed final dividend will be
due and payable on 31 July 2009,
subject to shareholder approval,
to all shareholders on the Register
of Members at 3 July 2009.
The Board
There have been significant
changes on the Board since
the last AGM. Tim Lodge was
appointed Group Finance Director
in December 2008 following a
short period as Acting Group
Finance Director. Tim has worked
for Tate & Lyle for over 20 years
and has held a variety of senior
operational and financial roles.
His comprehensive knowledge
and understanding of our business
is a considerable asset.
Last year the Board agreed a
succession plan to address the
anticipated retirements of both
Iain Ferguson and myself.
06
Tate & Lyle Annual Report 2009
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In the second half of the 2010
financial year, our performance
will also be influenced by pricing in
the EU sugar operations following
the final institutional price reduction
on 1 October 2009. We expect
this to generate improved margins.
Of likely greater influence will be
the timing of the recovery in ethanol
margins and the outcome of the
2010 calendar year US sweetener
pricing round.
Tate & Lyle’s inherent ability to
generate strong cash flows, assisted
by the ending of our major capital
expenditure programme, will help
drive a stronger balance sheet in
the year ahead. By delivering this,
and continuing to take decisive and
timely actions where necessary,
Tate & Lyle will emerge a leaner,
stronger and more flexible business,
well-positioned to benefit from
the economic recovery as and
when it comes.
Sir David Lees
Chairman
27 May 2009
Postscript
This will be my last Chairman’s
statement before I hand on to
Sir Peter. Tate & Lyle is a great
company that has existed for over
100 years. Corporate longevity is
only possible through an endless
process of regeneration which, inter
alia, involves responding to the
changing needs of customers and
reliance on the integrity and loyalty
of employees. Continuing to follow
these principles should ensure a
successful future for Tate & Lyle.
In November 2008 we announced
that Sir Peter Gershon had been
appointed as a non-executive
director of the Company from
1 February 2009, and that he would
succeed me as Chairman by the
end of the 2009 calendar year.
Sir Peter’s biographical details are
set out on page 60 of this annual
report. I am delighted that Sir Peter
has joined the Board and we are
working closely together as we
transition the chairmanship.
Sir Peter’s appointment as
Chairman-elect was a necessary
precursor to the recruitment of a
new Chief Executive to succeed
Iain Ferguson. In May 2009 we
announced that Javed Ahmed
would take over from Iain later this
year. Javed is currently Executive
Vice President, Europe for Reckitt
Benckiser having held a number of
senior leadership roles within that
group over the last 17 years in both
Europe and North America. He
started his career with Procter &
Gamble before spending five years
with Bain & Co working in both
London and Boston.
Iain Ferguson joined Tate & Lyle
six years ago. He has brought
considerable change to Tate & Lyle
in particular with regard to the
implementation of our value added
strategy, the reduction in the
Group’s exposure to risks in our
commodities businesses and, more
recently, in the re-organisation of
the Group’s senior management
structure. The Board is greatly
appreciative of his contribution.
Governance
The chart above shows the time
spent by the Board at its meetings
in the year ended 31 March 2009
allocated between various
responsibilities. While the Board
continues to spend the largest
amount of its time on strategy
(42%), this was 9% less than last
year as the increasingly challenging
economic environment led to the
Board spending more time on
operations, finance and risk
management.
Board allocation of time
Year ended 31 March 2009
Governance
8%
Operations
16%
Strategy
42%
Finance/Risk
29%
Capital expenditure
and investment
5%
During the year the Board carried
out its annual evaluation of the
effectiveness of the Board. Having
used an independent facilitator for
the previous year’s evaluation, the
2009 evaluation was carried out
by myself. The evaluation involved
one-to-one performance evaluation
meetings with each director and
the Company Secretary. The main
themes and comments arising from
these meetings were presented to
the Board for discussion and the
recommendations made are being
or will be implemented. As is
invariably the case, the exercise
has proved rewarding.
Outlook
The continuing global recession,
and its uncertain impact on
customer demand, makes it
difficult to predict with confidence
the outlook for the year ending
31 March 2010.
In the near term, the actual level
of customer demand and net
corn costs will be key factors
in determining our performance.
Following destocking at the end of
the 2008 calendar year, order levels
from food and beverage customers
appear to have stabilised, although
at lower levels than the prior year.
Demand for industrial starches
remains weak.
Tate & Lyle Annual Report 2009
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0920_T&L_ Front_01-59.qxd 12/6/09 16:24 Page 08
Overview of the year
Chief Executive’s review
Tate & Lyle delivered a sound set of results underpinned by
continuing growth from core value added food ingredients.
Iain Ferguson CBE
Overview
Overall, Tate & Lyle delivered a
sound set of results. Sales for the
year ended 31 March 2009 were
£3,553 million, 24% higher (8% in
constant currency) than the prior year.
Adjusted profit before tax was £247
million, 2% lower (18% in constant
currency) than the prior year. Profit
before tax, after exceptional items and
amortisation of acquired intangible
assets, decreased by 38% (47% in
constant currency) to £113 million.
Adjusted diluted earnings per share of
38.0p were 10% higher (8% decrease
in constant currency), benefiting from
a lower effective tax rate of 27.3%
(2008 – 33.2%).
Exchange translation increased
adjusted profit before tax by
£49 million compared to the prior
year. The strengthening of the US
dollar contributed 83% of this
increase, although it also reduced
the competitiveness of products
from our US ingredients business
in overseas markets, particularly
Mexico and South America.
Following a breakthrough in
sucralose manufacturing yields,
we have taken the decision to
mothball our McIntosh, Alabama
facility and produce all of our
sucralose from the newer and
more efficient fourth-generation
facility in Singapore. We have
recognised an exceptional charge
of £97 million in the 2009 financial
year reflecting the impairment of
the carrying value of our McIntosh
plant. Anticipated cash costs of
£60 million associated with this
decision will be paid over three
years and recognised as an
exceptional charge in the year
ending 31 March 2010. These cash
costs are expected to have a three
year payback resulting from the
reduced operating costs of having
a single plant. The McIntosh facility
will retain a core group of employees
and, if needed, can be restarted
and begin manufacturing sucralose
within a few months.
Net debt increased by £190 million
to £1,231 million. Before the effects
of exchange, net debt decreased
by £188 million. The impact of
exchange movements during the year,
which increased debt by £378 million,
was due principally to the weakness
of sterling against the US dollar.
A well-financed business
Tate & Lyle is a well-financed business
with an inherent ability to generate
strong cash flows. In the year ended
31 March 2009, the final year of our
four-year major capital investment
programme, our total operations
generated £245 million (2008 –
absorbed £160 million) of cash after
the payment of dividends. Net debt at
31 March 2009 of £1,231 million was
£188 million lower than net debt at
31 March 2008 before the effects of
exchange. A number of projects have
been established to reduce debt
further and we are pleased with their
progress to date.
The key performance indicators (KPIs)
of our financial strength, the ratio of
net debt to earnings before interest,
tax, depreciation and amortisation
(EBITDA) and interest cover, remain
within our internal targets.
08
Tate & Lyle Annual Report 2009
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At 31 March 2009 the net debt to
EBITDA ratio was 2.4 times (2008 – 2.5
times)1, compared to our internal target
of 2.5 times or less and comfortably
within our bank covenants. Interest
cover on total operations at 31 March
2009 was 6.1 times (2008 – 7.8 times),
again ahead of our internal target of
above 5.0 times and well ahead of our
bank covenants.
At the same time, the opportunity
was taken to re-engineer the plant’s
manufacturing footprint to provide
additional flexibility to swing capacity
between key product lines. Also in
March 2009, the new biomass boiler
at our London sugar cane refinery
was mechanically completed
and commissioning work is
currently underway.
Return on net operating assets reduced
to 12.7% from 15.5% in the prior year.
This reduction was principally due to
the lower returns from our EU sugar
business, reduced profits from industrial
starches and the investment in our
new corn wet mill in Fort Dodge, Iowa,
which was not commissioned during
the financial year.
We continue to have a conservative
debt maturity profile. The Group’s
undrawn committed bank facilities
at 31 March 2009 were US$752 million
(£524 million) and, additionally, cash
resources were £434 million. Average
gross debt maturity at 31 March
2009 was 4.8 years. Our next major
refinancing is due in June 2011 when
the US$300 million 144A bond matures.
A solid platform for growth
Our four-year major capital investment
programme to support long-term
growth in our business was essentially
completed during the year.
The expansion of our corn wet mill
in Sagamore, Indiana, to increase
capacity for a variety of value added
starches used by customers in dairy,
beverages, snacks and dressings, was
commissioned in the 2008 financial
year and is performing in line with
our expectations. Value added food
production has been a key area of
strategic focus and investment for
Tate & Lyle over the past four years,
so it is pleasing to report that adjusted
operating profit from core value added
food ingredients across the business
in the year to 31 March 2009 increased
by 20% (3% in constant currency) to
£107 million (2008 – £89 million).
In March 2009 the second tranche
of equipment required to meet design
capacity at our corn wet mill in Loudon,
Tennessee was installed.
In April 2009, in light of the continuing
short-term severe pressure on ethanol
margins, we announced our decision
to postpone final completion of the
construction and start-up of the new
corn wet mill at Fort Dodge, Iowa
until market conditions improve.
Construction activities at the plant had
been progressing satisfactorily and
the facility is about 95% complete. We
are keeping the situation under review.
We continue to believe that the US
government’s commitment to bio-fuels
through the Renewable Fuel Standard
(RFS) underpins the future viability
of the US ethanol industry.
Our investment programme has
established a solid platform for future
growth. While the current economic
environment has led utilisation rates
to be somewhat below our original
expectations, our enhanced asset
base leaves us well positioned to
benefit as market conditions improve.
Within this, the flexibility we have built
into our US plant network (to switch
between finished products) gives us
added protection against the impact
of lower utilisation rates.
Taking decisive actions
to maximise cash flow
To sustain the health of our business
in the face of challenging and
unpredictable market conditions,
we have taken a number of decisive
actions to maximise cash flow and
defend our profitability. We have
accelerated existing cost reduction
projects, launched new cost reduction
projects and taken a number of tough
decisions to ensure our cost base
is appropriate in light of the new
economic realities. Actions taken
to date include initiatives to reduce
working capital, a pay freeze at all
levels, plant shutdowns, a wide-
ranging review of discretionary
expenditure and headcount reductions
across the business. Management of
capital expenditure is a key area of
focus, and we will restrict expenditure
to below the depreciation charge in
the year ending 31 March 2010.
Benefiting from a breakthrough
in sucralose manufacturing yields
In the last year, our sucralose
manufacturing facilities have achieved
significant and sustainable yield
improvements of over 25% which
have had the effect of significantly
increasing production capacity.
Consequently, we have taken the
decision to mothball our McIntosh,
Alabama facility, and produce all our
sucralose from our newer and more
efficient fourth generation facility in
Singapore. The McIntosh facility will
retain a core group of employees and,
if needed, can be re-started and begin
manufacturing sucralose within
a few months.
The McIntosh facility has played
a key role in establishing the prominent
position of sucralose in the global
high-intensity sweetener market.
The expansions of the facility from
2004 were critical for the development
of sucralose as we had to move
swiftly to meet the surge in customer
demand that created the platform
for its subsequent success.
Our decision to mothball the
McIntosh facility, made possible by
the breakthrough in manufacturing
yield achieved over the last 12 months,
will ensure that we remain the most
efficient and lowest cost producer of
sucralose in the market. This action
will have no impact on our customers
as, due to the yield increases and our
ability to maintain high levels of safety
stocks, the Singapore facility has
more than enough capacity to meet
current market needs. Our SPLENDA®
Sucralose business continues to
perform well and we remain confident
of its long-term future. The financial
impacts arising from our decision to
mothball the McIntosh plant are set
out in the Overview section above
and the Exceptional items
section on page 12.
1 In prior years, net debt for covenant calculation was translated at year-end exchange rates while EBITDA from continuing operations was translated at average exchange
rates. So that the ratio reflects the underlying economic conditions, an amendment was unanimously agreed with the participants in the US$1 billion Revolving Credit Facility
that net debt and EBITDA be both calculated on average exchange rates. Under the previous calculation, net debt/EBITDA would have been 2.9 times (2008 – 2.6 times).
Tate & Lyle Annual Report 2009
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Overview of the year
Chief Executive’s review
continued
Vision
To create the world’s leading
renewable ingredients business.
Strategy
To build a stronger value added business
on a low-cost commodity base.
Key performance indicators
Tate & Lyle’s Board and executive
management (see pages 60 to 62)
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
base key performance indicators
(KPIs) in line with the Company’s
strategic objectives.
Interest cover1
Target
2009
2008
2007
1 Measured by financial year on total operations
min 5.0 times
6.1 times
7.8 times
8.4 times
Description. This is the Group’s total operating
profit before exceptional items and amortisation
divided by net finance expense, as defined in
our bank covenants. Or, the number of times
the profit of the Group exceeds interest
payments made to service its debt.
Comment. Our interest cover remains above
our target.
Net debt to EBITDA multiple1
Target
2009
2008
2007
1 Measured by financial year on continuing operations
max 2.5 times
2.4 times
2.5 times
1.9 times
and translating net debt at the same average
exchange rates as EBITDA
Description. This is the number of times the
Group’s net borrowing exceeds its trading cash
flow. EBITDA is earnings before exceptional
items, interest, tax, depreciation and total
amortisation.
Comment. We are within our target and
comfortably within that of our bank covenants.
Return on net operating assets1
Energy use1
Target (longer-term)
2009
2008
2007
1 Measured by financial year on total operations
20.0%
12.7%
15.5%
18.9%
Description. This is the Group’s total profit
before interest, tax and exceptional items
divided by the average net operating assets.
Comment. We are below both our initial target
of a Group return on net operating assets
(RONOA) of 15%, and our longer-term target
of a RONOA of 20%.
Target
2008
2007
2006
1 Measured by calendar year
3.0% reduction
zero
1.3% reduction
1.2% reduction
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% each year.
Comment. Our 3% target is becoming
increasingly challenging as value added
products typically use more energy than our
traditional products. Further information on
the Group’s energy use can be found on
pages 73 to 75.
Safety index1
Target
2008
2007
2006
1 Measured by calendar year
zero
1.16
2.08
2.41
Description. Our safety index compares safety
performance across the Group and is a
weighted average of injuries sustained in the
workplace, with severe accidents having
greater impact. The lower the index, the better
the performance.
Comment. Employee safety showed good
progress in 2008 with a 44.2% improvement
on 2007. Further information can be found
on pages 70 to 72.
Information on the RONOA, energy use and safety performance of each business division can be found on pages 36 to 51.
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0920_T&L_ Front_01-59.qxd 12/6/09 16:24 Page 11
Overview of divisional
business performance
The Group’s adjusted profit before
tax was 2% lower (18% in constant
currency) than the prior year.
Adjusted operating profit from
core value added food ingredients
increased by 20% (3% in constant
currency), but this was more than
offset by lower profits from our EU
sugar business, industrial starches
and US ethanol. Energy costs at
£208 million were 34% higher
(17% in constant currency).
Operating profits at Food & Industrial
Ingredients, Americas was
£181 million, a reduction of 3%
from the prior year (19% in constant
currency). Sales and profits from
value added food ingredients were
resilient. Performance in primary food
ingredients was above the prior year
due to improved margins and a good
performance by citric acid. However,
operating profits from both primary
and value added industrial starches,
primarily used by the paper and board
industries, were significantly lower
than the prior year due to reduced
sales volumes during the second half
of the year as both domestic and
export demand deteriorated rapidly.
Export markets were adversely
affected by the strengthening US
dollar. The contribution from ethanol
was also significantly below the prior
year due to lower unit margins as
we operated in a difficult industry
environment. We have taken a
number of actions to manage our
capacity in the face of these impacts.
At Food & Industrial Ingredients,
Europe, operating profits increased
by 24% to £51 million (7% in constant
currency). Within Single Ingredients,
margins for both value added and
primary products benefited from lower
corn costs during the second half of
the year. Demand for food ingredients
proved more resilient in Central and
Eastern Europe, where the majority
of our Single Ingredients capacity
is located.
Operating profits from Food Systems
were higher than the prior year, and
benefited from a full year contribution
from G. C. HAHN & Co (Hahn), which
was acquired in June 2007.
Sugars operating profits were
significantly lower than the comparative
period, reducing by 64% (66% in
constant currency) to £12 million.
Although improved balance between
supply and demand within the EU
sugar market began to return during
the second half, the year as a whole
was characterised by oversupply
of refined sugar in the EU and an
extremely competitive UK market.
Margins are expected to improve
following the final institutional price
change on 1 October 2009. The
competitive advantages of our London
and Lisbon refineries will become
increasingly apparent as the market
returns to balance. The molasses
business had an outstanding year as
both volumes and margins benefited
from high world cereal prices.
Sales of SPLENDA® Sucralose of
£169 million were 14% above the
prior year (4% reduction in constant
currency). Operating profits increased
by 9% to £72 million (reduced by 4%
in constant currency) compared to
the prior year. We achieved solid
volume growth in international
markets, particularly Europe where
there were significant gains in
retailer own-label ranges. In the
USA, McNeil Nutritionals launched
‘SPLENDA® with Fiber’ formulated
with SPLENDA® Sucralose and our
PROMITORTM Soluble Corn Fiber.
A reshaped business
Over the past few years, we have
taken 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. A key part of this reshaping
process has been to remove
substantial risks by exiting markets
where we could not manage to an
acceptable level our exposure to
raw material and commodity pricing
volatility and regulation. In the 2008
financial year we exited European
wheat and Canadian and Mexican
sugar, and in the 2009 financial
year we sold our International Sugar
Trading business to Bunge. This sale
was announced on 2 July 2008
and completed as scheduled on
31 March 2009. The financial impacts
arising from this sale are set out
in the Discontinued operations
section on page 53.
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Business drivers
We focus on five areas
to deliver our strategy.
Operate efficiently and safely
To be the lowest-cost, most efficient
producer in all our markets, with safe
conditions at our sites for everyone.
We continually work to improve our
operational efficiency through our
expertise in high-volume process
management, our focus on technical and
manufacturing excellence, and efficiently
using services like logistics and utilities.
Serve our customers
To deliver excellent customer service,
be the partner of choice in our customers’
innovation processes and help them
develop successful consumer products.
Our cross-functional teams work with
customers to provide consumer and
customer insights and to support new
product innovation opportunities.
Grow the contribution from
value added products
This is a key driver of our strategy.
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.
Invest in technology and people
To invest in developing innovative
solutions that meet our customers’
product challenges, and in developing
our people so we have the right skills
at all levels to grow our business.
We complement our R&D skills through
start-up investments and collaborations
with the external research community.
Invest in acquisitions and partnerships
To grow our business by acquisition or by
forming joint ventures and partnerships.
We continually evaluate acquisition
opportunities that enable us to enter new
markets or add products, technologies
and knowledge more efficiently than we
could organically. Alliances and joint
ventures can also be an efficient way
to do this and to lower our cost of
investing in new areas and markets.
Tate & Lyle Annual Report 2009
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Overview of the year
Chief Executive’s review
continued
The Food Systems businesses which
we acquired over the past four years
to strengthen our value added offering
(Cesalpinia Foods in 2005, Custom
Ingredients in 2006, and Hahn in 2007)
continue to perform well, and ahead
of our expectations.
The simplified organisational
structure we implemented last year,
consisting of four distinct business
divisions each reporting into the
Chief Executive, is working well.
We are confident that our de-layered
organisational structure, led by a
strong management team, is well
placed to meet successfully the
current challenging market conditions.
Our people
The difficult economic climate
places people and organisations
under notable pressure. We remain
committed to taking the tough
decisions needed to manage our
cost base through this difficult time.
However, we remain conscious of
the need to continue to develop and
invest in our people to ensure that
the foundations of our business
are protected, and we are well
positioned to benefit when
market conditions improve.
Individual responsibility and
accountability are critical in times
like these and we have made sure
all our staff are aware of the need
to meet our key priorities of defending
our short-term profitability, optimising
cash flow, reducing costs and
continuing to serve our customers.
The professionalism and commitment
shown by our people to embrace
these priorities and to take necessary
tough decisions is impressive.
Exceptional items
Exceptional items totalling a net
charge of £119 million have been
recognised in continuing operations
in the 2009 financial year. We have
recognised a charge of £97 million in
the 2009 financial year reflecting the
impairment of the carrying value of
our McIntosh, Alabama plant following
the decision to mothball this facility
and produce all our sucralose at our
Singapore facility. This decision, made
possible by the significant increase
in manufacturing yields over the last
12 months, will ensure that we remain
the most efficient and lowest cost
producer of sucralose. Anticipated
cash costs of £60 million associated
with this decision will be paid over
three years and recognised as an
exceptional charge in the year ending
31 March 2010. These cash costs
are expected to have a three year
payback resulting from the reduced
operating costs of having a single
plant. Should future demand require it,
we can bring the McIntosh plant back
into production within a few months.
As reported in our pre-close
trading update of 2 April 2009, we
are in dispute with a supplier over
performance and suitability of ethanol
dehydration equipment at our Loudon,
Tennessee and Fort Dodge, Iowa
plants. We have provided an
exceptional charge of £24 million
associated with this issue.
We have reviewed the carrying
value of many of the Group’s assets
given the changes to the economic
environments in which we operate.
The review of our sugar refining
operation in Israel indicated an
impairment charge of £9 million
which has also been recognised
in the year.
During March 2009, we received
the first tranche of a settlement from
the Mexican government following
a dispute over a tax on soft drinks
containing high fructose corn syrup
between 2002 and 2006. We have
since received the second tranche.
Our share of the total settlement is
£11 million, and this amount has
been recognised as an exceptional
gain in the 2009 financial year.
Central costs
Central costs decreased from
£31 million in the 2008 financial year
to £18 million in the 2009 financial
year. This was due to several factors:
underlying costs reduced by £4 million
compared to the prior year; one-off
credits of £6 million in the 2009
financial year arose principally from
the termination of a property lease;
and redundancy and other one-off
costs totalling £4 million, following
the simplification of the Group’s
organisational structure, were
recognised in the prior year. Central
costs in the 2010 financial year are
expected to be broadly in line with
underlying costs in the 2009
financial year.
A good safety performance
Tate & Lyle maintains no priority higher
than safety. We measure and report
our safety performance in calendar
years. In 2008, our Group employee
safety index improved by 44.2% and
our Group contractor safety index by
28.6%. While the performance of our
employees and contractors in 2008 is
very encouraging, our target remains
a safety index of zero for all our
operations and we will continue to work
towards that goal in the year ahead.
Conclusion
Market conditions over the past
few months have proved challenging,
but our focus on the food and
beverage sector, which comprises
over 70% of our total sales, gives us
a measure of resilience, although not
immunity, to the economic downturn.
In times like these, the actions we
must take to sustain the health of our
business are clear. We are optimising
cash flow and actively managing our
cost base, while maintaining a keen
focus on serving our customers.
We are making good progress in
the delivery of these priorities.
Iain Ferguson CBE
Chief Executive
27 May 2009
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0920_T&L_ Front_01-59.qxd 12/6/09 16:25 Page 13
This section shows how we use raw materials to
make our ingredients, what markets we operate
in and how we serve our customers.
What we do
14 Overview
16 Sustainable sourcing
18 Creating volume
19 Preserving value
20 Adding value
22 Going to market
26 People
27 External environment
and risk management
Tate & Lyle Annual Report 2009
Unloading corn from a barge
13
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0920_T&L_ Front_01-59.qxd 12/6/09 16:25 Page 14
What we do
Through our production facilities around the world
Through our production facilities around the world
we turn raw materials – corn or cane sugar – into quality
we turn raw materials – corn or cane sugar – into quality
ingredients used by millions of people every day.
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
Sustainable sourcing
with growers, farmers and other
commercial partners to secure
Ensuring we have a long-term,
supply; understanding commodity
reliable supply of corn and cane
markets; and hedging costs
sugar for our plants is essential.
where feasible.
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.
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, allows us to keep
unit costs low across the business.
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.
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0920_T&L_ Front_01-59.qxd 12/6/09 16:26 Page 15
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 help
us develop ingredients that 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.
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, every time.
People
Running a diverse business
like Tate & Lyle, which develops,
manufactures and sells a wide
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 management
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.
Tate & Lyle Annual Report 2009
15
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0920_T&L_ Front_01-59.qxd 12/6/09 16:26 Page 16
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.
Waxy corn is 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 large corn wet
milling plants in the USA efficiently
24 hours a day relies on good
management of the corn supply
chain. Our Food & Industrial
Ingredients, Americas division
owns a network of elevators (silos)
to purchase corn directly from
farmer producers. Farmer-owned
co-operatives and family-owned
grain companies supply millions
of bushels of corn each year for
our plants to grind. Corn purchase
contracts may be negotiated with
corn suppliers for delivery the same
day, or in some cases price and
terms may be for delivery up to
18 months forward.
During the year we added corn
storage and unloading capacity at
our processing plants and country
elevator network to service our
suppliers better.
Europe
Our European division, Food &
Industrial Ingredients, Europe,
has two 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.
01.
02.
History
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
Our Food & Industrial Ingredients
businesses in the Americas and
Europe are both large-scale
processors of 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 (ethanol) and
animal feed.
01/02. 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 rail car, truck
or river barge; during the rest of the
year corn may also be delivered
direct to the plants.
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To meet our future raw sugar
supply needs, we have entered into
long-term agreements with both
traditional and new suppliers. For
example, in May 2008 we signed a
long-term agreement with Fiji for the
supply of up to 300,000 tonnes of
raw sugar each year. In addition, in
the summer of 2009, our European
refineries will start to receive the
first shipments of sugar from one
of our new suppliers in the Lao
People’s Democratic Republic.
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 to increase efficiency. Over
the last two years we have made
significant investments in our two
European sugar refineries, including
a new biomass boiler and two new
cranes for unloading sugar at our
London refinery, and new facilities
at our Lisbon refinery to enable
increased throughput.
Cane sugar
Our Sugars division uses cane
sugar as the raw material for its
business. Cane sugar is a tropical
crop grown in areas of high
sunshine and rainfall. It accounts
for around 80% of world sugar
production.
Tate & Lyle’s Sugars division
produces about 1.3 million tonnes
of cane sugar each year from its
two refineries in Europe, and
processes up to a million tonnes
of sugar cane at its 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
raw sugar suppliers. 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.
03.
04.
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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. At that time this was 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 was Tate & Lyle
Granulated White Cane Sugar.
As at 31 March 2009, Tate & Lyle
Caster Sugar, Tate & Lyle Preserving
Sugar, Tate & Lyle Icing Sugar and
Tate & Lyle Royal Traditional Icing
Sugar also now carry the Fairtrade
mark, with the rest of the
range to follow.
Tate & Lyle’s first accredited Fairtrade
grower–partner is Belize, from whom
we have purchased sugar for over
35 years. In the first year since
Tate & Lyle moved to Fairtrade,
sugar cane farmers in Belize have
received nearly US$4 million in
Fairtrade premiums from Tate & Lyle
which has been used to improve
their livelihoods and develop more
sustainable communities. So every
time a customer buys a pack of
Tate & Lyle Fairtrade cane sugar,
these farmers benefit from our
commitment.
03/04. Helping create
sustainable communities
Over the past year, farmers in Belize
have used the Fairtrade premium paid
to them by Tate & Lyle in many different
ways. They have invested in fertiliser
and pesticides to improve crops
damaged after Hurricane Dean, and
have started to improve roads, which
are essential for the harvesting and
delivery of the sugar cane. Money has
also been spent on providing education
grants for children and on school meals
for primary school children.
Tate & Lyle Annual Report 2009
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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, allows us to keep unit costs low
across the business.
We operate more than 45 production
facilities mainly in the Americas,
Europe and South East Asia.
Tate & Lyle is the largest cane sugar
refiner in Europe, and in the USA,
our corn wet milling plants process
some 2% of the annual corn crop.
which are used to identify ways to
make our manufacturing processes
more efficient. Process improvements
identified at our sucralose pilot plant
over the last 12 months have
enabled us to achieve a breakthrough
in manufacturing yields.
Manufacturing efficiency
Operating our plants safely and
efficiently at high volumes requires
reliable and up-to-date manufacturing
processes. All our divisions have
highly qualified teams of engineers
who make sure our plants function
effectively, efficiently and safely.
The engineers are actively involved
in the manufacturing line and use a
number of computer-based process
tools to track and model data
to help identify opportunities for
efficiency improvements such as
increasing yields, minimising
waste and saving energy.
Our US corn wet milling and
sucralose businesses both have
pilot plants run by dedicated teams
Developing new technologies
Our research and technology teams
are dedicated to developing the
latest engineering technologies,
both for our existing plants and
for new builds. Tate & Lyle has
developed patented, proprietary
technology, known as CORNBELT®,
which has been installed at our
Loudon, Tennessee, plant. This is
designed to help increase starch
yields while at the same time
reducing per unit energy
consumption. Its energy
conservation technology is also
being used at our cane sugar
refinery in London. The refinery’s
new £20 million biomass boiler
was mechanically complete in
March 2009 and is now being
01.
02.
US cornbelt
European
cornbelt
commissioned. Once it is fully
operational, the biomass boiler
will reduce the refinery’s carbon
footprint by more than 20%, and
replace 70% of its fossil fuel use
with a renewable energy source.
Our Sugars business also has a
specialist team, Tate & Lyle Process
Technology, which provides support
services, process engineering and
design expertise to the sugar
cane industry worldwide.
Protecting our 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
we consider it necessary.
01/02. Well-positioned plants
Our four large corn wet mills in the USA
(with a fifth in Fort Dodge, Iowa, under
construction) and our corn wet mills
in and around Europe are strategically
located either in prime corn growing
areas or near key markets to help
us serve our customers.
Corn wet mills
18
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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, every time.
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. 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.
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 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 in some cases
on a multi-year basis.
03.
m
r
e
p
s
o
d
n
E
Starch
Starch
and
gluten
Hull and
fibre
Germ
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 risk as we
can in the USA. It is not possible to
use hedging procedures to lock in
the majority of by-product revenues
03. Nothing is wasted
We use every part of the corn kernel.
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.
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.
Ensuring quality
Because our 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.
Logistics
Our logistics teams are responsible
for warehousing, freight costs and
customer service. Our largest
logistics hub is based in Lafayette,
Indiana, which is broadly central
to all our US plants.
Raw material hedging
In the USA, we use hedging
procedures to protect against price
changes in purchased corn. This
generally 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.
Tate & Lyle Annual Report 2009
19
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What we do
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 help us develop ingredients that add taste,
nutrition and increased functionality to our customers’ products.
Our Research and Development
(R&D), marketing and regulatory
teams work together to provide
insights from consumer research,
support on labelling requirements,
and assistance on meeting
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
function is headquartered in our
largest US facility, Decatur, Illinois.
In September 2008 we opened
our new Innovation Centre in Lille,
France, and we also have application
laboratories in countries such as
China, India and Australia which are
combined with our sales offices.
Our in-house research and
development capability is organised
into three primary groups: product
development, technology, and
customer solutions.
02.
Our high-volume commodity
base allows us to run our plants
efficiently and produce a low-cost
substrate we can then use to make
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.
01. Market drivers
The key driver of long-term growth
for our business is value added food
ingredients. In this market we operate
primarily within three categories:
sweeteners, texturants, and wellness
ingredients. In 2008, the addressable
global market in these categories was
estimated to be worth £6.4 billion, and
is forecast to grow at a compound
average annual rate of 4.3% to
£7.2 billion in 2011. The food sector
has proven to be relatively resilient
to global recessionary pressures and
therefore growth is currently expected
to continue broadly in line with
this forecast.
We use this insight 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
detailed quantitative studies. In
one of our more recent surveys,
we canvassed more than 10,000
consumers in Europe, the USA,
Mexico and Brazil on their attitudes
to dietary fibre. This research
demonstrated a growing
understanding of the benefits of
fibre in a healthy diet, which we are
addressing with our PROMITOR™
range of dietary fibres.
01. Global value added food ingredients
market Addressable market size £bn
2
.
7
0
.
7
4
.
6
6
.
6
4
.
1
7
.
1
3
.
3
08
5
.
1
7
.
1
4
.
3
09
7
.
1
8
.
1
5
.
3
10
8
.
1
8
.
1
6
.
3
11
Texturants Sweeteners Wellness
Sources: Leatherhead Food Ingredients Report
2007, SRI Flavours Report 2007, SRI Nutraceuticals
Report 2007, Company estimates
20
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Product development is divided
into sweeteners, wellness,
texturants, bio-products, industrial
and animal feed. This group focuses
on developing new products 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 and provide
sensory analysis 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 October 2008, with the support
of a £4.5 million contribution over five
years from Tate & Lyle, a new Clinical
Research Facility was opened by
King’s College London at St Thomas’
Hospital to undertake research into
areas such as gastrointestinal health,
carbohydrate metabolism, and
medical conditions such as obesity,
diabetes and cardiovascular disorders.
Our partnership with King’s College
London will allow us to share
knowledge and ultimately bring new
products and technologies to market.
We also have a Research Advisory
Group comprising a panel of six
international industry and academic
experts, chaired by one of our non-
executive directors, Dr Barry Zoumas,
which reviews our research and
development portfolio and provides
insight into how leading-edge
technologies could apply to
future developments.
Our venture capital fund, Tate & Lyle
Ventures, which was launched in
2006, invests in early stage high-
growth companies that specialise
in renewable ingredients, food
technologies, renewable resources
and industrial processing
technologies. Since 2006 the
fund has made five investments,
the most recent in May 2008 in
Fugeia, a Belgian company focusing
on gut health technology.
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 partnerships with McNeil
Nutritionals (a Johnson & Johnson
company) on SPLENDA® Sucralose,
and with DuPont on Bio-PDO™.
Food Systems businesses
In certain geographies where there
is growth potential in the food
ingredients market, we have taken
the opportunity to invest in food
systems, or 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. Primarily based in
North America, Germany, Italy and
South Africa, these businesses
source ingredients and use them
to develop solutions for customers.
Their specialist knowledge
supplements our existing in-house
R&D capability. These businesses
also often act as an R&D team for
small- to medium-sized customers
and, by building close working
relationships, become trusted
development partners.
02. Bringing innovation to our customers
Our new Innovation Centre in Lille,
France, focuses on developing
ingredients for four distinct fields: weight
management; digestive health and
immunity; vitality; and healthy ageing.
This centre is not only used by our own
scientists, but is also made available
to our customers who, with the help
of our technical service teams, can
use our state-of-the art facilities to
develop and refine new food and
beverage products.
03. 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 2009, we spent
£28 million on R&D.
03. Target R&D spend
Tate & Lyle
Ventures
2%
External alliances
15%
Leadership
building research
14%
Process
improvement
14%
Application product
development
55%
Tate & Lyle Annual Report 2009
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0920_T&L_ Front_01-59.qxd 15/6/09 16:24 Page 22
What we do
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
about US$30 billion and historically
has grown at a rate of around
3% each 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,
comprising over 70% of the Group’s
total sales. 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, has also fuelled growth
in demand for food ingredients
in recent years.
Industrial
The global market for industrial
ingredients has come under severe
pressure as a result of the continuing
global recession. However, over the
longer term, industrial ingredients
remain 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™).
01.
Animal feed
We serve this market with molasses
produced in Europe and corn gluten
meal and corn gluten feed produced
in both Europe and the USA.
These are by-products of our key
production processes and 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).
01. Our ingredients are everywhere
Going shopping? You are likely to buy
products made with our ingredients.
Filling up the car? Bio-ethanol.
Cakes and drinks? Sweetened with
high fructose corn syrup, sugar or
SPLENDA® Sucralose. Detergents to
get clothes really clean? Citric acid.
Your favourite monthly magazine?
Strong and glossy thanks to our paper
starch. Our ingredients are everywhere.
22
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Nicholas Fosteras, Vice President
Sales, Global Enterprise Accounts,
Food & Industrial Ingredients, Americas
‘Partnership with customers has never been more
important. Our relationships are for the long term,
so we’re looking together at the whole supply chain
to work out how we can manage risk together
and save costs.’
Caroline Sanders, Marketing Director
Food & Industrial Ingredients, Europe
‘Challenging economic circumstances offer us new
ways to help customers. Our Optimize™ formulation
service, by which we modify customers’ recipes to reduce
costs without compromising the taste of the product,
is particularly interesting for food and beverage
customers right now.’
Andrew Jones, Sales & Marketing Director, Sugars
‘Both we and our customers want to get through these
difficult economic times with success, so it makes
sense to help each other. We’re working with our
customers to find ways of dealing with operational
and business issues for our mutual benefit.’
Rheem Lock, Senior Product Manager, Sucralose
‘Our history of excellent product quality, with purity levels
consistently above 99%, makes us the safest option for
customers, who also value the complete traceability
of our SPLENDA® Sucralose and our reliability in
shipping on time, every time.’
Tate & Lyle Annual Report 2009
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What we do
Going to market
continued
Food and beverage
s
d
n
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/
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e
k
r
a
M
r
e
m
u
s
n
o
c
■ 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)
■ Cost consciousness
■ Increasing pressure for high
- volatile 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 (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 starches
■ Corn oil
■ Industrial sugars
s
t
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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
■ Volatile cereal costs (global)
■ Pricing awareness but willingness
petrochemical vs. renewable options
impacting feed costs
■ Cost consciousness (volatile raw
material prices)
to pay for functionality
■ Natural product claims
(personal care)
■ Manufacturers
- paper
- detergent
- packaging/
plastics
- adhesives
- de-icing
- textiles
- building
products
■ 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™
■ Producers
- dairy
- beef
- pig
- poultry
- aquaculture
- pet
■ Manufacturers
- cosmetics and personal care
(hand creams, deodorants)
- over-the-counter (OTC)
pharmaceuticals
■ Zemea™ personal care grade
Bio-PDO™
■ SPLENDA® Sucralose
■ Pearl starches
■ Ethanol
■ Citric acid
■ Molasses
■ Corn gluten feed
■ Corn gluten meal
■ Corn syrup/glucose
■ Sugar
Tate & Lyle Annual Report 2009
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What we do
People
Running a diverse business like Tate & Lyle, which develops, manufactures
and sells a wide 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.
Our workforce encompasses a
broad range of skills and experience
in areas such as food science, sales
and marketing, engineering and
support services.
At 31 March 2009, Tate & Lyle
employed 5,718 people across the
Group. The chart below shows the
split of employees between our
four business divisions.
Divisional employees
At 31 March 2009
Sucralose
5%
Food & Industrial
Ingredients, Americas
46%
Sugars
25%
Food & Industrial
Ingredients, Europe
24%
Developing careers
Developing careers
Our employees are vital to the
success of our business. 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’ which consists
of four main components:
(cid:2) Behaviours for Success –
these encourage our people to
display strong leadership at all
levels of seniority by exhibiting
identified key characteristics and
behaviours we need for success,
such as a focus on excellent
customer service.
(cid:2) 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.
(cid:2) Leadership Curriculum –
this provides opportunities for
managers across the Group
to improve their skills and
expand their knowledge through
a number of tailored programmes,
seminars and courses.
(cid:2) 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.
Remuneration
We review our remuneration policies
regularly in light of market trends,
the needs of the business and the
prevailing economic environment.
Our policies are designed to attract,
retain and reward employees with
the ability and experience to
execute the Group’s strategy.
Serah Adegbenro, Process Engineer,
Thames Refinery, UK
Year started: 2005
Michelle Kozora, Food Scientist,
Technical Services. Decatur. USA.
Year started: 2003
Weston Adcock, Accountant,
Decatur, USA
Year started: 2007
26
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External environment and
risk management
Every business needs to be responsive to its competitive and regulatory
environment. 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, within which
our food and industrial ingredients
businesses compete, 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 (ADM),
Corn Products International and
Cargill. National Starch (part of Akzo
Nobel N.V.) is another competitor,
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 food ingredients
businesses 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. In Europe, the main
regulations and legislation relevant
to Tate & Lyle are the EU Sugar
Regime, which affects our Sugars
and Food & Industrial Ingredients,
Europe businesses. More information
on the impact of the reform of the
EU Sugar Regime is given on
pages 46 and 47. In the USA, the
main regulation is the Renewable
Fuel Standard programme, which
requires that gasoline sold contains
a minimum volume of fuel from
renewable sources, and affects our
Food & Industrial Ingredients,
Americas business.
Risk management
Tate & Lyle could be affected
by a number of risks, which may
have a material adverse effect
on our reputation, operations
and financial performance.
The Group’s enterprise-wide risk
management and reporting process
helps Group management to
identify, assess and mitigate risk.
The process involves the
identification and prioritisation of
key risks, together with associated
controls and plans for mitigation,
through an ongoing programme of
workshops, facilitated by the risk
management function.
The risks identified cascade up
through functional and divisional
levels to the Group Executive
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 after
assessing the costs and benefits).
Further details of the risk
management process are on
page 68 and the key risks and
uncertainties identified as part of
this process, together with some
of the mitigating actions that we are
taking, are listed on pages 28 to 30.
The Group is exposed to a number
of other risks, some of which may
have a material impact on its
results. It is not possible to identify
or anticipate every risk that may
affect the Group, some of which
may not be known or may not have
been assessed. 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.
Tate & Lyle Annual Report 2009
27
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What we do
External environment and
risk management continued
Key risks
Failure to act safely and to
maintain the continued safe
operation of our facilities 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 to
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’s
revenues depend 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 and
natural disasters.
Mitigating actions
– We have health and safety
policies and procedures in place
at all our facilities and employ
dedicated staff at all locations
to ensure that these policies
are understood, measured and
embedded. The Board reviews
the Group’s safety performance
and policies annually.
– Our commitment to environmental
performance runs throughout the
Group and the Board reviews our
environmental performance and
policy every year. We maintain
environmental management
systems at our production
facilities and work closely with
local environmental agencies
to ensure we meet at least the
requisite standards. We also
employ specialist consultants
when required.
– We ensure that product quality
and safety are monitored at
each stage of production, and
we have thorough product safety
policies and procedures in place
to prevent contamination. These
safety policies and procedures
are carefully followed and
rigorously enforced.
Our success depends upon our
employees and the recruitment
and retention of key personnel
Central to the success of
Tate & Lyle 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
we understand the negative impact
on results that could arise from an
inability to retain key knowledge and
adequately plan for succession.
Mitigating actions
– Tate & Lyle’s remuneration
policies are designed to attract,
retain and reward employees
with the ability and experience
to execute the Group’s strategy.
– We have developed the
‘Tate & Lyle People Strategy’
to provide opportunities for our
employees to develop and grow
in their roles and meet new
challenges as their careers
progress (for more details
see page 26).
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
our business activities and of the
potential financial impact and
damage to reputation that can
result from any breach.
Mitigating actions
– We have regulatory managers
who monitor changes in
legislation and develop action
plans to deal with such changes.
This team is supplemented by a
worldwide network of external
consultants who provide quarterly
reports on regulatory change
and how it affects the Group.
– Our legal teams maintain
compliance policies in areas such
as antitrust, money laundering
and anti-corruption laws and
provide ongoing training to
employees as needed.
Fluctuations in prices, offtake
and availability of raw materials,
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, which could also affect
contract offtake, and this could
reduce our profitability.
Mitigating actions
– We aim to build strategic
relationships with our suppliers
to ensure we have a secure
supply of raw materials.
28
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– We seek to operate a balanced
portfolio of supply and tolling
contracts with our customers in
order to manage the balance of
raw material prices and product
sales prices and volume risks.
– Multiple source supply
agreements are in place for
key ingredient supplies.
– Raw material and energy
purchasing policies govern
our actions in this area and also
provide security of supply.
– We use derivatives, where
available, to hedge our exposure
to movements in the future
prices of commodities.
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 (and thereby
commoditising products) 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.
Mitigating actions
– We have an internal R&D team
of around 280 people who work
to produce innovations in product
development, applications,
manufacturing technology
and customer services.
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.
Mitigating actions
– Our technical sales and R&D
teams work closely with our
customers and advisors to
identify emerging trends.
– Our investment is directed
towards ensuring our operations
are equipped to satisfy
product demand.
– Our marketing departments carry
out consumer-facing research
annually to ensure they are aware
of consumers’ needs and
expectations.
– Through our R&D and regulatory
teams, we ensure we are able
to substantiate relevant claims
relating to products as required
by legislation and the needs
of our customers.
– Our media relations department
monitors the Group’s press
coverage and has action plans to
deal with any negative publicity.
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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
technology, and successfully
defending these patents against
third-party challenge or
infringements. Where we choose
not to prosecute patent protection,
it is important that we protect our
confidential information and
proprietary trade secrets. 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 those 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 our proprietary rights or
the proprietary rights of others.
We may be unable to enforce our
patents or intellectual property or
otherwise protect our proprietary
rights, which could have a material
adverse effect on our business,
financial condition and results
of operations.
Mitigating actions
– Our Group legal department
monitors all our patents and
is supported by expert patent
lawyers, and we will take action
where it is deemed necessary.
– Our R&D teams operate an
organised and secure process
for the identification and recording
of innovations, new discoveries,
trade secrets and potential
patentable ideas, with appropriate
safeguards to ensure that the
confidentiality of that information
is maintained.
Tate & Lyle Annual Report 2009
29
0920_T&L_ Front_01-59.qxd 12/6/09 16:28 Page 30
What we do
External environment and
risk management continued
Failure to manage capital
expenditure and working capital
during the current period of
uncertainty and global
economic crisis
The Group recognises the
importance of managing our
finances within strictly controlled
parameters, particularly when
external financial conditions are
uncertain and highly changeable.
Mitigating actions
– Tate & Lyle has capital
expenditure procedures in
place to control and monitor the
allocation and spend of capital.
Significant projects are approved
and monitored by the Board.
– The Group’s debt and working
capital levels are constantly
monitored and reported
monthly to the Board.
Failure to maintain an effective
system of internal financial
controls could lead to financial
irregularities and loss
Without effective internal financial
controls, Tate & Lyle could be
exposed to financial irregularities
and losses from acts which could
have a significant impact on the
ability of the business to operate.
These range from safeguarding
the assets of the business to the
accuracy and reliability of our
records and financial reporting.
Mitigating actions
– The Group has authorisation
policies in place and ensures
that key tasks are segregated
to safeguard assets.
– The Group has detailed internal
Finance and Capital Expenditure
Manuals which set out the
procedures to be followed.
– The Board monitors the financial
performance of the Group via
monthly reports and a regular
forecasting process.
– The Chief Executive and Group
Finance Director undertake
detailed quarterly business and
financial reviews.
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 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.
Mitigating actions
– Procedures are in place to
monitor the Group’s financial
performance and communicate
with the market via regular
trading updates.
– The investor relations department,
supported by external advisors,
ensures that all communications
are timely, clear and consistent
and that they comply with
regulatory and legislative
requirements.
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 the euro against sterling
would have a negative impact on
the net assets and shareholders’
funds reported in sterling.
Mitigating actions
– The Group internal Finance
Manual sets out the procedures
to be followed.
– We borrow in different foreign
currencies, principally US dollars,
so as to provide a partial match
for the Group’s major foreign
currency assets.
– We have adjusted the banking
covenants for the US$1 billion
Revolving Credit Facility to
eliminate the distortion of foreign
exchange volatility.
30
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This section sets out the results of the Group and
the financial and operational performance of each
division for the year ended 31 March 2009.
How we performed
32 Group financial results
36 Divisional performance
36 Food & Industrial Ingredients, Americas
40 Food & Industrial Ingredients, Europe
44 Sugars
48 Sucralose
52 Other financial information
Tate & Lyle Annual Report 2009
Managing a starch packing line
31
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0920_T&L_ Front_01-59.qxd 15/6/09 16:21 Page 32
How we performed
Group financial results
Positive free cash flow1
Year to 31 March
£m
Underlying improvement
in net debt
Year to 31 March
£m
Improvement in net debt
to EBITDA2 multiple
Year to 31 March
154
188
2.5
2.4
1.9
(46)
07
07
(127)
08
08
09
09
1 Free cash flow is defined as cash flow from
continuing operations after interest, taxation
and capital expenditure.
Free cash flow improved from an
outflow of £127 million in 2008 to
an inflow of £154 million in 2009.
This improvement was principally
driven by working capital inflows,
particularly during the second
half of the year.
(92)
07
07
(109)
08
08
09
09
07
07
08
08
09
09
2 EBITDA is defined as earnings before interest,
tax, depreciation and amortisation.
Before the effects of exchange,
the underlying movement in net
debt improved from increases of
£92 million and £109 million in 2007
and 2008 respectively to a reduction
of £188 million in 2009. Good
progress has been made by all
areas of the business through
a continuous focus on working
capital, cost base, capacity
management and control
of capital expenditure.
Net debt to EBITDA multiple is one
of the business key performance
indicators of our financial strength.
The ratio improved to 2.4 times in
2009 compared to 2.5 times in
the comparative period. In 2009,
we amended the calculation basis
so that net debt is translated at
the same average exchange
rates as EBITDA.
32
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Tate & Lyle continues to be a well-financed business
and our inherent ability to generate strong cash flows,
assisted by the ending of our major capital expenditure
programme, will help drive a stronger balance sheet
in the year ahead.
Tim Lodge, Group Finance Director
Summary of Group financial results
£m (unless stated otherwise)
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
(Loss)/profit for the year from discontinued operations
Profit for the year
Earnings per share
Basic
Diluted
Adjusted earnings per share from continuing operations
Basic
Diluted
Dividends per share
Interim paid
Final proposed
Net debt
At 31 March
Actual
change
%
Constant
currency
change
%
Year to
31 March 2009 31 March 2008
Year to
3 553
2 867
298
(51)
247
(119)
(15)
113
(19)
94
(24)
70
14.2p
14.1p
38.2p
38.0p
6.8p
16.1p
22.9p
295
(42)
253
(59)
(12)
182
(76)
106
81
187
40.9p
40.4p
35.0p
34.6p
6.5p
16.1p
22.6p
24
1
(2)
(38)
(11)
(63)
(65)
(65)
9
10
1
1 231
1 041
(18)
8
(15)
(18)
(47)
(21)
(67)
(70)
(69)
(8)
(8)
1
18
Tate & Lyle Annual Report 2009
33
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0920_T&L_ Front_01-59.qxd 12/6/09 16:28 Page 34
How we performed
Group financial results
continued
Basis of preparation
Adjusted performance
We present adjusted profit figures as
they provide 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 (see Note 12
to the financial statements);
■ exceptional items from continuing
operations (see Note 8 to the
financial statements); and
■ amortisation of acquired
intangibles.
We use this adjusted information
internally for analysing the
performance of the business.
A reconciliation of reported and
adjusted information is included in
Note 43 to the financial statements.
Impact of changes in
exchange rates
Our results have been positively
impacted this year by exchange rate
translation, in particular due to the
strengthening of the US dollar and
euro against sterling. The average
and closing exchange rates used
to translate reported results
were as follows:
Average rates
Closing rates
2009
2008
2009
2008
US dollar:
1.80 2.01 1.43 1.99
sterling
Euro:sterling 1.19 1.42 1.08 1.26
Constant currency comparisons
have been calculated by translating
sales and profits in 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
the progress in the underlying
profitability of the business.
In addition to the impact on profits,
the weakening of sterling has had
the effect of increasing our net debt
even though we have generated
cash through the year. Further
details are set out in the net
debt section below.
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.
Summary of Group performance
Sales
Sales of £3,553 million from
continuing operations were 24%
higher than the prior year. After
excluding the effects of exchange,
sales were 8% higher. Growth
was reported in all divisions.
Primary sales increased by 25%
(10% in constant currency) from
£2,065 million to £2,584 million
with exchange accounting for
£290 million of the increase. All
divisions except Food & Industrial
Ingredients, Europe reported growth
in primary sales on a constant
currency basis. Value added sales
increased by 21% (4% in constant
currency) to £969 million, driven by
a full year’s contribution from Hahn
and exchange effects.
Adjusted operating profit
Overall adjusted operating profit
increased by 1% (decreased by 15%
in constant currency) to £298 million.
Value added operating profit
increased by 15% to £184 million
(decreased by 1% in constant
currency), while primary operating
profit decreased by 20% (33% in
constant currency) to £132 million.
Central costs decreased from
£31 million to £18 million in the year.
In addition to the effects of
exchange rate changes, operating
profit has been affected by several
one-off items. We recognised
additional costs of £28 million
associated with ethanol and the
commissioning of the capacity
expansion at our plant in Loudon,
Tennessee. We recognised gains
totalling £11 million from
restructuring aid in Greece and the
Netherlands, a gain of £3 million
on the final settlement of deferred
consideration payable arising from
the realignment of our global
sucralose alliance with McNeil
Nutritionals in 2004, and profits
on the sale of property and a lease
curtailment totalling £7 million.
The mechanical failure of a boiler
in April 2008 at our Decatur, Illinois
plant resulted in costs of £5 million.
Amortisation of acquired intangibles
increased to £15 million from
£12 million in 2008, reflecting the
impact of exchange translation and
the full year effect of the intangibles
acquired with Hahn.
We recognised exceptional items of
£119 million. The mothballing of our
McIntosh, Alabama sucralose facility
resulted in an impairment charge
of £97 million in the year ended
31 March 2009. Within our Food &
Industrial Ingredients, Americas
division, we incurred an exceptional
charge of £24 million in relation
to a dispute with a supplier over
the performance and suitability
of ethanol dehydration equipment
at our Loudon, Tennessee and Fort
Dodge, Iowa plants, and recognised
a credit of £11 million representing
our share of the £22 million
settlement of the NAFTA case
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against the Mexican government
in relation to the sales tax imposed
on soft drinks containing imported
high fructose corn syrup.
Within the Sugars division, a review
of the carrying value of our sugar
refinery in Israel resulted in an
impairment charge of £9 million
which has been recognised in
the year.
The net finance expense from
continuing operations increased
from £42 million to £51 million.
The exchange impact within interest
accounted for an increase of
£7 million compared to the prior
year. We recognised a charge within
interest expense in the current year
relating to post-retirement benefit
plans of £3 million (compared with a
credit of £4 million in the prior year).
At constant currency, we benefited
from lower average interest rates
compared to the prior year.
Profit before tax from continuing
operations on a statutory basis
decreased by 38% (47% in
constant currency) from £182 million
to £113 million.
The effective rate of tax on adjusted
profit was 27.3% (2008 – 33.2%).
The decrease was due mainly to
changes in the geographical origin
of profits, especially lower levels
of profits in the US, and the
implementation of our internal
financing plan.
Discontinued operations,
comprising our former activities in
International Sugar Trading and our
Eastern Sugar business, reported
a loss after tax of £24 million
including an exceptional loss on
disposal of the International Sugar
Trading business of £22 million.
We expect gains in the 2010
financial year from anticipated
disposals of investments not
included in the sale, but held in
connection with our International
Sugar Trading business to largely
offset this exceptional loss.
Discontinued operations in the
2008 financial year also comprised
our Canadian and Mexican sugar
businesses and the disposed
European starch plants, and
we recorded an overall profit
of £81 million (after exceptional
gains of £60 million) in that year.
Total basic earnings per share were
14.2p (2008 – 40.9p), 65% lower
than the prior year. Total diluted
earnings per share were 14.1p
(2008 – 40.4p), down 65% from the
prior year. Adjusted diluted earnings
per share from continuing operations
were 38.0p (2008 – 34.6p), an
increase of 10% (decrease of 8%
in constant currency). On the same
basis, basic earnings per share were
higher by 9% (8% lower in constant
currency) at 38.2p (2008 – 35.0p).
Divisional primary and value added performance
Division
Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Europe
Sugars
Sucralose
Central
2009
£m
1 797
539
1 048
169
–
2008
£m
1 386
461
872
148
–
Continuing operations
3 553
2 867
Primary
Value added
Central
2009
£m
2 584
969
–
2008
£m
2 065
802
–
Continuing operations
3 553
2 867
1 On a constant currency basis (adjusting 2008 reported figures using 2009 exchange rates).
Sales
Movement1
%
9
(1)
13
(4)
n/a
8
Sales
Movement1
%
10
4
n/a
8
2009
£m
181
51
12
72
(18)
298
2009
£m
132
184
(18)
298
Adjusted operating profit
2008
£m
186
41
33
66
(31)
295
Movement1
%
(19)
7
(66)
(4)
42
(15)
Adjusted operating profit
2008
£m
166
160
(31)
295
Movement1
%
(33)
(1)
42
(15)
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How we performed
Food & Industrial Ingredients, Americas
Our largest division, Food & Industrial Ingredients, Americas represented 57% of our
adjusted operating profit this year. From large-scale, efficient plants mainly in the US
corn belt, this division produces both primary ingredients and, with our R&D expertise,
value added ingredients for the food and beverage, industrial, animal feed and
pharmaceutical markets.
Key performance indicators
Return on net operating assets1
Energy use2
20%
Target (longer-term)
18%
2009
23%
2008
2007
25%
1 Measured by financial year on continuing operations
Target
2008
2007
2006
2 Measured by calendar year
3.0% reduction
1.3% increase
4.0% increase
1.3% reduction
Safety index3
Target
2008
2007
2006
3 Measured by calendar year
zero
1.26
2.88
5.39
Description. This is the division’s profit
before interest, tax and exceptional items
divided by the average net operating
assets. The Group’s initial target is to
achieve a return on net operating assets
of 15%, with a longer-term target of 20%.
Description. Our businesses have a
target to reduce energy consumption
on a per unit basis by 3% each year.
The figures above show the percentage
movement in the division’s energy index
each year. More details on the Group’s
energy use are on page 73.
Description. Our safety index compares
safety performance across the division
and is a weighted average of injuries
sustained in the workplace, with more
severe incidents having greater impact.
The lower the index, the better the
performance. More details are on page 71.
What we do
10
Plants
Blending facilities
2
USA1
1
1
Mexico
PROMITOR™ Dietary Fibers
Our new range of PROMITOR™ Dietary
Fibers, launched in 2008, allows our
customers to deliver the goodness of
fibre in mainstream food and beverage
products without compromising their
great taste. Our range currently includes
soluble corn fibre and resistant starch.
2
South America
1 Including Fort Dodge, Iowa
under construction
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
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While our food and beverage business
has been relatively resilient to the economic
downturn, demand for industrial starches
and ethanol margins have come
under severe pressure.
Matt Wineinger
President, Food & Industrial Ingredients, Americas
Financial highlights
£m
Sales
Food
Industrial
Adjusted operating profit
Food
Industrial
Margin
Food
Industrial
Total
Key markets
Year to 31 March 2009
Year to 31 March 2008
Primary
Value added
Total
Primary
Value added
878
393
1 271
95
3
98
10.8%
0.8%
7.7%
369
157
526
83
–
83
22.5%
–
15.8%
1 247
550
1 797
178
3
181
14.3%
0.5%
10.1%
651
309
960
76
42
118
293
133
426
68
–
68
11.7%
13.6%
12.3%
23.2%
–
16.0%
Total
944
442
1 386
144
42
186
15.3%
9.5%
13.4%
Primary food
Primary industrial
Value added food
Value added industrial
■ High fructose corn syrup,
dextrose, corn syrup
– Sweeten food and
beverages
■ Native industrial starch
– Gives strength and finish
■ Speciality sweeteners
– Sweeten food and
to paper and card
beverages
■ Ethylated and cationic
starch
– Gives strength and finish
to paper and card
■ Native food starch
– Provides texture and
mouthfeel
■ Ethanol
– Oxygenates motor
vehicle fuels
■ Value added food starch
– Provides texture and
■ Bio-PDO™
– Used in applications
mouthfeel
– Health and wellness
from plastics and textiles
to de-icing fluid
■ Citric acid
– Adds acidic or sour
taste to food
Tate & Lyle Annual Report 2009
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How we performed
Food & Industrial Ingredients, Americas
continued
Highlights
■ Launch of PROMITOR™
Soluble Corn Fiber
■ Expansion at Sagamore, Indiana
complete; expansion at Loudon,
Tennessee being commissioned
■ New plant at Fort Dodge, Iowa
largely complete, final construction
postponed due to ethanol
market conditions
■ Safety record improved
Strategy
Our strategy continues to be to
use our low-cost commodity base
to provide a platform from which
to grow our value added business.
Our success lies in operating
efficient, low-cost manufacturing
facilities while developing more
profitable business in value added
ingredients, with the flexibility to
change our product offering in
line with customer demand.
Markets
We sell ingredients made from
corn and related services into four
markets: food and beverage (our
largest market), industrial, animal
feed (where we sell the by-products
produced from our processes) and
pharmaceuticals. We sell both
primary and value added products
into all these markets, with the
exception of animal feed into which
we sell primary products only.
Primary
Corn prices in the USA saw an
unprecedented spike in the 2008
calendar year, reaching almost
US$8 per bushel in July. Prices have
since retreated to approximately
half this level, although they remain
above historic trend. Oil prices also
peaked in July 2008 at almost
US$150 per barrel, but fell rapidly
to below US$40 per barrel during
the second half of the 2008
calendar year.
These dramatic changes in oil and
corn prices inverted the economics
of ethanol, making it less attractive
to gasoline blenders, and the
ethanol market became significantly
oversupplied from the final quarter
of the 2008 calendar year. Supply in
the 2009 calendar year continues
to exceed the mandated demand
contained in the Renewable Fuel
Standard (RFS), particularly as
effective demand in the year has
been reduced by carry forward
provisions contained in the RFS.
The consequent collapse of ethanol
margins drove a number of recently
constructed dry-mill ethanol
producers into bankruptcy
proceedings. Market commentators
continue to express their belief in
the viability of the US ethanol
industry, underpinned by the RFS.
Domestic US demand for nutritive
sweeteners in the 2008 calendar
year continued its long-term trend
of reduction. Duty free access into
Mexico for US high fructose corn
syrup (HFCS) was granted under
the provisions of NAFTA from the
beginning of the 2008 calendar
year. However, exports have
been constrained by the sudden
weakening of the Mexican peso
half-way through our 2009 financial
year and relatively low sugar prices
in the Mexican market.
Demand for industrial starches,
which are primarily used in the
manufacture of paper and
packaging, fell between 20% and
25%, in line with the demand for
the products in which they are used.
This sharp decline was not only the
impact of recessionary pressures
in the US but also due to the
significant strengthening of the US
dollar which severely reduced the
sales of the US paper and packaging
industry as it became less able to
compete in its export markets.
Corn by-product values peaked
during the third quarter of the
2008 calendar year. However, the
subsequent fall in corn and soy
prices resulted in corresponding
price declines for corn gluten feed
and meal, and corn oil. Additionally,
the competitive impact of the supply
of distillers’ dry grains produced by
the rapidly expanded number of dry
mill ethanol producers increased the
supply of ingredients to the animal
feed industry at the same time as
US livestock numbers reduced.
Value added
Demand for value added food
ingredients was relatively resilient
despite the economic downturn
experienced during the second half
of the financial year. Markets for
value added industrial ingredients
deteriorated during the second half
of the financial year as demand fell
in line with significant reductions in
paper and packaging production.
Business performance
Sales of £1,797 million were 30%
above the prior year (9% at
constant currency). The increase in
constant currency was driven by the
recovery of higher corn input costs
and increased by-product values.
Adjusted operating profit decreased
by 3% (19% in constant currency)
from £186 million to £181 million.
Primary
Sales increased by 32% to
£1,271 million (12% in constant
currency). Operating profits
reduced by £20 million to
£98 million, a reduction of 17%
(31% in constant currency).
Primary food sales were 35% higher
than the prior year (16% in constant
currency), and operating profits
were 25% higher (3% in constant
currency). Although sweetener
volumes were marginally below
the level of the prior year, primary
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sweetener profits increased due
to the modest pricing increases
achieved in the 2008 calendar year
pricing round. Primary food starch
volumes and unit margins were
both slightly above the prior year.
By-product income was above the
prior year, as the business benefited
from strong refined corn oil selling
prices during the second half of
the 2008 calendar year and the
by-products which are sold into
animal feed increased broadly in
line with corn and soya prices which
hit unparalleled peaks during the
summer of 2008. Profits at Almex,
our Mexican cereal sweeteners and
starches joint venture, were broadly
in line with the prior year.
Our citric acid business performed
well and delivered solid profit
improvement over the prior year.
Fundamentals have become more
positive during the financial year,
with a tightening in global supply.
The International Trade Commission
(ITC), in its final determination, has
imposed anti-dumping duties on
Chinese citric acid imports entering
the USA. We realised a profit of
£4 million from selling land in
Mexico owned by our citric acid
joint venture which ceased
production in 2003.
Primary industrial sales (comprising
ethanol and native industrial
starches) of £393 million were 27%
above the prior year (4% in constant
currency). However, operating
profits of £3 million were 93% below
(93% in constant currency) the total
of £42 million achieved in the prior
year. We recognised losses from
ethanol, due to significantly lower
unit margins particularly during
the second half of the financial year
and additional costs associated with
the commissioning of the Loudon,
Tennessee capacity expansion, with
a combined effect of £28 million.
Primary industrial starch volumes
were 9% below the prior year,
although unit margins were
marginally higher. Volumes during the
first half of the 2009 financial year
benefited from additional demand
following floods in Iowa, which
affected production at competitor
plants. Volumes during the second
half fell to levels appreciably below
the comparative period as demand
from the paper and packaging
industries reduced significantly.
Value added
Value added ingredients sales
increased by 23% to £526 million
(4% in constant currency).
Operating profits increased by
22% to £83 million (4% in
constant currency).
Food volumes were below the prior
year, due principally to a reduction
in value added sweetener sales, but
pricing improved over the prior year
to a level which more than covered
input cost increases. Profits in local
currency at our US Food Systems
business, Custom Ingredients, were
in line with the prior year.
Value added industrial ingredients
broke even, in line with the prior
year. Sales volumes during the
second half of the 2009 financial
year were adversely impacted by
lower levels of US domestic and
export demand, leading to volumes
well below the comparative period.
This impact was offset by firmer
pricing compared with the prior year
which more than covered higher corn
prices. The Bio-PDOTM loss in the
year was smaller than the prior year.
Looking ahead
With the capacity expansion
for value added food ingredients
at Sagamore, Indiana complete
and the expansion at Loudon,
Tennessee being commissioned
to produce ethanol, value added
ingredients and substrate for the
Bio-PDO™ plant, we now have an
asset base from which to develop
our business in the future. Food and
beverage ingredient volumes have
been reasonably resilient in the face
of the economic downturn, and we
expect this to continue.
Construction activities at the new
corn wet mill at Fort Dodge, Iowa,
which is designed to produce
industrial starches and ethanol, had
been progressing satisfactorily and
are 95% complete. However, we
have decided to postpone final
construction and start-up of this
plant until ethanol market conditions
improve. With a number of dry mill
ethanol producers operating within
Chapter 11 bankruptcy, and
reduced consumption of US
gasoline, ethanol margins are
likely to remain under pressure in
the short term. We continue to
believe that the RFS will underpin
profitability in this industry over
the medium to long term.
In the near term, the actual level
of customer demand and net
corn costs will be key factors in
determining our performance. In the
second half of the 2010 financial
year, our performance will also be
influenced by the timing of the
recovery in ethanol margins and the
outcome of the 2010 calendar year
US sweetener pricing round.
Industrial starches have fallen in
line with paper and packaging
production and we would expect
some recovery as and when the
major economies emerge from the
current recession. However, the
competitiveness of the US paper
and board industry will be
dependent also on any further
change in the relative strength
of the US dollar against currencies
of major export markets.
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How we performed
Food & Industrial Ingredients, Europe
Our Food & Industrial Ingredients, Europe division has two parts, Single Ingredients
and Food Systems, linked by a strong R&D network. Our Single Ingredients business
includes the Eaststarch joint venture (five corn plants in Central Europe) which produces
sweeteners and starches, and our corn plant in the Netherlands which produces
speciality starches. Our Food Systems business makes bespoke stabilising systems.
Key performance indicators
Return on net operating assets1
Energy use2
20%
Target (longer-term)
8%
2009
10%
2008
2007
14%
1 Measured by financial year on continuing operations
Target
2008
2007
2006
2 Measured by calendar year
3.0% reduction
1.2% increase
1.2% reduction
2.4% reduction
Safety index3
Target
2008
2007
2006
3 Measured by calendar year
zero
0.42
2.52
1.28
Description. This is the division’s profit
before interest, tax and exceptional items
divided by the average net operating
assets. The Group’s initial target is to
achieve a return on net operating assets
of 15%, with a longer-term target of 20%.
Description. Our businesses have a
target to reduce energy consumption
on a per unit basis by 3% each year.
The figures above show the percentage
movement in the division’s energy index
each year. More details on the Group’s
energy use are on page 73.
Description. Our safety index compares
safety performance across the division
and is a weighted average of injuries
sustained in the workplace, with more
severe incidents having greater impact.
The lower the index, the better the
performance. More details are on page 71.
What we do
6
4
EU
1
Turkey
1
Morocco
Plants
Blending facilities
Processes and
raw materials
Corn (maize) milling
Food systems
Locust bean gums
Main joint venture
Eaststarch: cereal
sweeteners and
starches
Combining our expertise
Through our Food Systems businesses,
Hahn and Cesalpinia, we are a leading
provider of stabiliser systems in Europe,
particularly for packaged foods such as
mayonnaise, yoghurts and ice cream.
In 2008, we restructured these two
businesses and our South African
business into a single unit to align their
activities and share knowledge.
1
South Africa
Australia
1
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Having restructured the division during
the year to focus on Single Ingredients
and Food Systems, we performed well
achieving a 24% increase in adjusted
operating profit.
Olivier Rigaud
President, Food & Industrial Ingredients, Europe
Financial highlights
£m
Sales
Food
Industrial
Adjusted operating profit
Food
Industrial
Margin
Food
Industrial
Total
Key markets
Year to 31 March 2009
Year to 31 March 2008
Primary
Value added
Total
Primary
Value added
170
163
333
27
–
27
206
–
206
24
–
24
376
163
539
51
–
51
15.9%
–
8.1%
11.7%
–
11.7%
13.6%
–
9.5%
168
138
306
14
6
20
8.3%
4.3%
6.5%
Total
323
138
461
35
6
41
155
–
155
21
–
21
13.5%
–
13.5%
10.8%
4.3%
8.9%
Primary food
Primary industrial
■ Isoglucose, dextrose
– Sweeten food and drinks
■ Native food starch
– Provides texture
and mouthfeel
■ Industrial starch
(native, cationic, dextrins)
– Gives strength and
finish to paper
– Adhesives for packaging
– Binders for construction
materials
Value added single
ingredients
■ Speciality sweeteners
– Sweeten food and drinks
– Enhance flavour
Value added food systems
■ Stabiliser systems
– Stabilise packaged food
– Improve mouthfeel
and texture
– Act as a preservative
■ Food starch
– Provides texture and
mouthfeel
– Replaces fat
■ Natural/high value
hydrocolloids (locust
bean gum, pectin)
– ‘Label-friendly’ products
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How we performed
Food & Industrial Ingredients, Europe
continued
Highlights
Successful reshaping of
the business with:
■ Opening of the new Innovation
Centre in Lille, France
■ Expansion of grind capacity
underway at the Boleraz,
Slovakia plant to fulfil additional
isoglucose quotas
■ Commissioned expansions in
our joint-venture businesses
in Hungary and Bulgaria
■ Construction underway of the
first European polydextrose
fibre facility at the Koog,
the Netherlands plant
■ Food Systems businesses,
Cesalpinia, Hahn and South Africa
merged into a single unit
■ Safety record improved
Strategy
Our strategy continues to be to
use the low-cost commodity base
of our Single Ingredients business
to improve margins and provide a
platform from which to grow our
value added starch-based business,
and to grow our Food Systems
business to increase further the
contribution from value added
products and solutions.
Markets
The division comprises two
distinct businesses which are
linked by a strong R&D network.
The Single Ingredients business
is focused around our joint-venture
corn wet milling plants in Eastern
Europe and our wholly-owned corn
wet milling plant in the Netherlands.
Our joint-venture plants in Eastern
Europe convert corn into a mixture
of primary and valued added
sweeteners and industrial starches.
Our plant in the Netherlands
produces speciality starches and
will also produce polydextrose
fibres towards the end of the 2010
financial year, positioning it well to
take advantage of the consumer
trend for health and wellness
products. The Single Ingredients
business serves many of the leading
multinational branded and private
label food and beverage producers.
Food Systems, consisting primarily
of Hahn and Cesalpinia, is an asset-
light, knowledge-based business
serving medium-sized food and
beverage companies across
Europe, the Middle East and Asia.
It produces highly functional systems
formulated for customers from a
combination of different ingredients.
Primary
The poor harvest in 2007 resulted
in high corn costs in the first half
of the 2009 financial year. A good
crop in 2008, however, contributed
to significantly lower net corn costs
in the second half.
Volumes of isoglucose (as HFCS is
called in Europe) produced within
the EU are regulated via quota as
part of the EU Sugar Regime. The
selling price of isoglucose is linked
to the price of sugar although, unlike
sugar, the raw material input price is
not regulated. European demand for
corn-based sweeteners for use in
fermentation (which is not subject
to quota control) was adversely
affected throughout the 2009
financial year by competition from
out-of-quota sugar stocks (which
act as a substitute for this purpose).
The progress of the reforms of the
EU Sugar Regime are discussed
later within the commentary on the
Sugars division. Unlike our EU cane
refineries, isoglucose producers
must pay a restructuring levy during
the period of the reforms, but have
had their quotas increased by 60%.
Producers can also surrender quota
in return for restructuring aid.
Restructuring levies were charged
throughout the financial year to
31 March 2009 and will continue
until 30 September 2009.
Industrial starch demand (for
products predominantly used in
the paper and packaging industries)
experienced a reduction similar
to that in the US of approximately
20% during the second half of the
financial year. As a result, pricing
for industrial starches has come
under pressure.
Value added
Food ingredient demand has
remained relatively stable, despite
the deterioration in the economic
climate. Pricing has generally
proved to be robust, even during
the final quarter of the 2009
financial year.
Consumers continue to focus
on foods which provide nutritional
benefits, although there was
evidence during the final quarter of
the 2009 financial year that demand
for Food Systems’ products and
solutions was affected by customer
destocking and lower levels of
consumer demand. There was
greater interest from customers in
reformulating their existing products
to address rising ingredient costs.
Business performance
Sales increased by 17% to
£539 million (1% decrease in
constant currency). Adjusted
operating profit increased by
24% to £51 million (7% increase
in constant currency). The Single
Ingredients business performed
well in the first full year following
the disposal of five European starch
plants which was completed on
1 October 2007. The business
benefited from the lower cost
structure achieved by relocating its
head office to Slovakia. The second
half year benefited from lower net
corn costs after the better harvest
in 2008. Good progress was also
made in reorganising the Food
Systems business.
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Primary
Sales of primary products increased
by 9% to £333 million (9% decrease
in constant currency). Operating
profit increased from £20 million
to £27 million, an increase of 35%
(18% in constant currency).
Within primary food ingredients,
liquid sweetener volumes were
marginally above the prior year, as
higher isoglucose volumes arising
from EU quota increases were
partially offset by lower dextrose
sales to the fermentation industry
(which were adversely impacted by
competition from out-of-quota
sugar). Margins were significantly
higher because of the lower corn
input prices, particularly in the
second half of the 2009 financial
year. The plants with the larger
isoglucose quotas have a strategic
advantage as they are located in
Europe’s corn-growing areas of
Central and Eastern Europe in what
have become sugar deficit markets.
During the year, Food & Industrial
Ingredients, Europe paid levies into
the EU restructuring fund totalling
£10 million (2008 – £8 million).
Restructuring aid of £11 million
(2008 – £nil million) was recognised
following the surrender of the small
isoglucose quotas in the Netherlands
and Greece. The small Greek plant
was closed in September 2008.
In the six months to 30 September
2009, after which restructuring
levies are removed, the division
will incur £4 million in levies, and
is expected to recognise income
of £3 million for our share of
restructuring aid for the surrender
of the Romanian isoglucose quota
in September 2009, following which
the plant will be closed.
Primary industrial ingredients broke
even, compared with an operating
profit of £6 million in the prior year.
Volumes were below the prior year,
particularly towards the end of the
financial year, where demand fell
in line with the paper and
packaging markets.
Value added
Value added sales increased from
£155 million to £206 million, an
increase of 33% (15% in constant
currency). Operating profits increased
by 14% to £24 million (a reduction
of 3% in constant currency).
Crystalline sweetener volumes
increased due to growth in the
dairy and beverage markets in
southern Europe. Profits from
modified food starches were slightly
lower due to weaker pricing during
the second half of the year although
volumes increased.
The Food Systems business
previously comprised three separate
businesses: Hahn, Cesalpinia and
our blending operation in South
Africa. In order to align their
activities and allow knowledge and
expertise to be shared more readily,
we restructured these businesses
into a single unit during the year.
Value added profits benefited from
this reorganisation, as well as a
full-year contribution from Hahn
(which was acquired in June 2007).
The second half of the year saw
pressure from the global economic
downturn and changes to export
markets caused by currency
volatility depressing sales volumes
slightly, although pricing of many
key raw materials has also shown
a downward trend over the
same period.
Looking ahead
The outlook, particularly for the
second half of the 2010 financial year,
will be influenced by European cereal
prices following the 2009 harvest.
An investment to double capacity
at the Hungrana joint-venture
facility, now one of the largest corn
wet mills in Europe, came on stream
as planned during 2008. This allows
the plant to manufacture its increased
isoglucose quota (the largest in the
EU) and become an important
producer of bioethanol. An expansion
at the Bulgarian joint venture was
also completed successfully.
Production of polydextrose, a value
added soluble fibre, is being added
to the value added starch facility in
the Netherlands to address a market
which has been developed with
product processed in our sister US
facilities. The Slovakian joint-venture
facility is being expanded in order
to supply the increased EU
isoglucose quota.
Isoglucose prices will continue
to be linked to EU sugar prices,
and the impact on sugar selling
prices of the final EU Sugar Regime
reference price reduction on
1 October 2009 will be important
in establishing a price level for
isoglucose. We will benefit from
the ending of restructuring levies
on isoglucose quotas from
1 October 2009.
Industrial starch volumes are likely
to remain under pressure until the
recessionary impact on the paper
and packaging industry starts
to reverse.
Value added food ingredients
are expected to remain relatively
resilient and will benefit from the
new polydextrose capacity in the
Netherlands which will come on
line towards the end of the 2010
financial year.
Tate & Lyle Annual Report 2009
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How we performed
Sugars
Our Sugars division is the largest cane sugar refiner in the EU. It has well-known
brands such as Tate & Lyle Sugars and Lyle’s Golden Syrup in the UK; Sidul and
Sores in Portugal; and Melli in Vietnam. It also distributes molasses, a by-product
of cane sugar processing, throughout the world.
Key performance indicators
Return on net operating assets1
Energy use2
20%
Target (longer-term)
4%
2009
11%
2008
2007
12%
1 Measured by financial year on continuing operations
Target
2008
2007
2006
2 Measured by calendar year
3.0% reduction
zero
zero
3.4% reduction
Safety index3
Target
2008
2007
2006
3 Measured by calendar year
zero
2.04
2.86
2.35
Description. This is the division’s profit
before interest, tax and exceptional items
divided by the average net operating
assets. The Group’s initial target is to
achieve a return on net operating assets
of 15%, with a longer-term target of 20%.
Description. Our businesses have a
target to reduce energy consumption
on a per unit basis by 3% each year.
The figures above show the percentage
movement in the division’s energy index
each year. More details on the Group’s
energy use are on page 73.
Description. Our safety index compares
safety performance across the division
and is a weighted average of injuries
sustained in the workplace, with more
severe incidents having greater impact.
The lower the index, the better the
performance. More details are on page 71.
What we do
10
3
EU
Global (molasses)
1
Israel
Vietnam
1
Plants
Blending facilities
(molasses)
Processes and
raw materials
Cane sugar refining
Main joint ventures
Compania de
Melazas: molasses
Premier Molasses
Company: molasses
An iconic brand
In 2008, in celebration of Lyle’s Golden
Syrup’s 125th anniversary, the iconic tin,
with its Victorian design, went gold.
We also introduced new non-drip caps
for our range of convenient plastic
Lyle’s Golden Syrup Pouring bottles
and Lyle’s Squeezy Syrup.
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It has been a difficult year, but as we
near the end of the EU Sugar Regime
restructuring period, we see increasing
evidence of equilibrium returning to
the EU sugar market.
Ian Bacon
Chief Executive, Sugars
Financial highlights
£m
Sales
Products
Molasses
Adjusted operating (loss)/profit
Products
Molasses
Margin
Products
Molasses
Total
Key markets
Year to 31 March 2009
Year to 31 March 2008
Primary
Value added
Total
Primary
Value added
Total
711
269
980
(11)
18
7
68
–
68
5
–
5
779
269
1 048
(6)
18
12
(1.5)%
6.7%
0.7%
7.4%
–
7.4%
(0.8)%
6.7%
1.1%
596
203
799
15
13
28
2.5%
6.4%
3.5%
73
–
73
5
–
5
6.8%
–
6.8%
669
203
872
20
13
33
3.0%
6.4%
3.8%
Primary products
Value added products
Molasses
(cid:2) Granulated and liquid sugars
– Sweeten food and drinks
(cid:2) Tate & Lyle branded sugars,
including Fairtrade (UK)
(cid:2) Molasses distribution
– Animal feed ingredient
– Food ingredient
– Industrial ingredient
(cid:2) Lyle’s Golden Syrup (UK)
(cid:2) Sidul/Sores branded sugars (Portugal)
(cid:2) Melli branded sugar (Vietnam)
Tate & Lyle Annual Report 2009
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How we performed
Sugars
continued
Highlights
■ Reform of EU Sugar Regime has
been successfully implemented
and is nearing completion
■ Disposal of International Sugar
Trading business to Bunge
■ Excellent performance from
molasses business
■ Switch to Fairtrade for all UK
retail sugars by end of the 2009
calendar year progressing well
■ Safety record improved
Strategy
In our EU sugar refining business
our strategy continues to be
to adapt to the new market
environment created by the
reform of the EU Sugar Regime.
This means ensuring that we have
a low-cost refining base; that we are
in the right markets; and that we are
the most attractive destination for
raw cane sugar suppliers. For our
molasses and Vietnam businesses,
our objective is to maintain our
leading position in these markets.
Markets
The markets for sugar and
isoglucose within the EU are
regulated through a framework
of provisions (the EU Sugar Regime)
as part of the Common Agricultural
Policy. Historically, the EU Sugar
Regime has principally provided
support for the production and
processing of sugar beet. Import
duties have protected EU prices
for sugar at levels well above world
market prices, and export refunds
have been used to dispose of
surplus production. Production
levels have been controlled through
quotas held by individual
member states.
In November 2005, the EU
introduced changes to the EU
Sugar Regime with the intention
of reducing the total quantity of
sugar produced within the EU and,
at the same time, reducing the EU
minimum price structures by 36%.
The reforms markedly increase
the volume of raw and refined cane
sugar that will need to be imported
into the EU with cane sugar imports
set to nearly double, which we see
as positive for EU cane refining
prospects.
In the molasses market, demand
has benefited from the high prices
of alternative raw materials that can
be used in the animal feed sector.
This kept molasses prices strong
and margins good, particularly in
the early part of the year.
Our biggest market is food
and beverage, with many of our
customers being large, international
branded food and beverage
businesses. We sell mostly
granulated and liquid sugars
(primary products) and speciality
sugar products and syrups (value
added). We also sell branded (value
added) products directly to retail
customers. In the UK our brands are
Tate & Lyle Fairtrade Granulated
Sugars, other Tate & Lyle speciality
sugars, and Lyle’s Golden Syrup;
in Portugal, Sores and Sidul; and
in Vietnam, Melli. Through our
molasses business we also supply
products into industrial and
animal feed markets.
The EU market is coming to the
end of the restructuring process
agreed in November 2005. The EU
Commission’s expectation that six
million tonnes of sweetener quota
would be surrendered has been
substantially met, and the
Commissioner for Agriculture and
Rural Development has declared
the reform process a success. The
actual timing of the quota surrender
was later than initially expected,
and the market has therefore been
characterised by surplus stocks,
albeit reducing, throughout the 2009
financial year, which has led to
continued pressure on prices and
refining margins.
There are clear signs of improving
market conditions resulting from the
completion of the voluntary quota
surrender from October 2009. This
is particularly true of markets in
areas where quota surrender has
been greatest relative to domestic
market size, such as the Iberian
peninsula. October 2009 is the final
point of the formal restructuring
process, when both the last
voluntary quota surrender and
final institutional price cut are
implemented.
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Negotiations remain on track for
raw sugar supply under the new
regulatory arrangements effective
from 1 October 2009.
The commissioning of the biomass
boiler at our London refinery, along
with the new raw sugar unloading
cranes, will improve the UK
refinery’s cost structure and provide
important protection from energy
price and demurrage risks. Our
capacity expansion at Lisbon is
providing a platform from which to
grow our business in the Iberian
peninsula.
With cereal prices reducing to
levels closer to historic trend, and
reduced volumes of molasses being
traded on world markets, we expect
the performance of the molasses
business in the year ending
31 March 2010 to be below the
exceptional levels achieved
in the last two years.
In our Vietnamese sugar business,
the current crop is suffering from
grassy green shoot disease, which
has reduced the sugar cane
available from our growers and
will depress profits in the 2010
financial year.
Business performance
Sales increased by 20% to
£1,048 million (13% in constant
currency). Volumes of sugar
processed in the EU were 6%
ahead of the prior year. Higher
prices reflected the changes
to destination markets.
Adjusted operating profit fell by
64% (66% in constant currency)
to £12 million reflecting the surplus
for most of the year in the EU sugar
market, a highly competitive UK
retail market and record energy
prices. We recognised £17 million
of transitional aid in the year
(2008 – £17 million). Selling, general
and administration costs within our
European refining business reduced
by £5 million compared with the
prior year, due to reductions in staff,
site and marketing costs.
Our Vietnamese cane sugar
business, Nghe An Tate & Lyle,
performed broadly in line with
the prior year.
Our refinery in Israel made a
small loss as it was commissioned.
An impairment charge of £9 million
was taken against these assets in
the 2009 financial year.
Primary
Operating profit reduced to
£7 million from £28 million in the
prior year. Surplus sugar stocks in
Northern Europe and an extremely
competitive UK market depressed
refining margins at our UK sugar
business. Energy costs at our UK
refinery more than doubled year-on-
year, and added £11 million to our
cost base, reflecting the impact of
significantly higher gas prices.
However, capacity expansion at
our Lisbon refinery enabled us to
achieve a 20% increase in volumes
from this plant and improve profits
compared with the prior year, with
notable growth in the Spanish
industrial market.
Our molasses storage and
distribution business had another
exceptional year. Demand and
pricing benefited from exceptionally
high prices in alternative ingredients
into animal nutrition.
Value added
Operating profit was flat at
£5 million. EU retail volumes were
below the prior year due to volume
losses in the UK grocery channel.
Pricing was broadly in line with
the prior year.
We are pleased with the consumer
response to our commitment to
move all of our UK retail products
to Fairtrade by the end of the
2009 calendar year.
Looking ahead
We see increasing evidence of
equilibrium returning to EU sugar
markets. We therefore expect our
European sugar business to benefit
from stronger refining margins
after the October 2009 final price
change under the reform of the
EU Sugar Regime.
Although it is unclear exactly
how the market will evolve once
reform is complete, we continue
to believe that the cane-only refining
model, based at deep water ports,
which we operate at both our
refineries, will provide the cost
structure and operational flexibility
necessary to compete effectively
in the EU market.
Tate & Lyle Annual Report 2009
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How we performed
Sucralose
Our Sucralose division makes SPLENDA® Sucralose, the no-calorie sweetener.
SPLENDA® Sucralose is used to sweeten over 4,000 foods and beverages
globally, is used in many leading brands of reduced-calorie products, and also
in pharmaceuticals. We are the exclusive supplier of sucralose to McNeil Nutritionals
for its SPLENDA® No-Calorie Sweetener tabletop products sold in over
50 countries around the world.
Key performance indicators
Return on net operating assets1
Energy use2
20%
Target (longer-term)
26%
2009
23%
2008
2007
31%
1 Measured by financial year on continuing operations
Target
2008
2007
2006
2 Measured by calendar year
3.0% reduction
14.9% reduction
6.9% reduction
12.9% reduction
Safety index3
Target
2008
2007
2006
3 Measured by calendar year
zero
zero
0.04
0.13
Description. This is the division’s profit
before interest, tax and exceptional items
divided by the average net operating
assets. The Group’s initial target is to
achieve a return on net operating assets
of 15%, with a longer-term target of 20%.
Description. Our businesses have a
target to reduce energy consumption
on a per unit basis by 3% each year.
The figures above show the percentage
movement in the division’s energy index
each year. More details on the Group’s
energy use are on page 73.
Description. Our safety index compares
safety performance across the division
and is a weighted average of injuries
sustained in the workplace, with more
severe incidents having greater impact.
The lower the index, the better the
performance. More details are on page 71.
What we do
1
USA1
A brand at work
In the last year, 71% of US households,
or 82 million people, purchased a
product displaying the ‘Sweetened with
SPLENDA® Brand’ logo on its packaging.
The most popular product category was
yoghurt, purchased by over a quarter of
US households, with juice drinks the
second most popular category.
Source: IRI Consumer Network™
(52 weeks ending 28 December 2008)
1 McIntosh, Alabama being mothballed
Plants
Processes and
raw materials
Patented sucralose
manufacturing
process
Singapore
1
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Sales volumes grew by 6% in the year
with a particularly strong performance
in the UK where three of the top four
grocery retailers reformulated their
own-label food and beverage ranges
to include SPLENDA® Sucralose.
Karl Kramer
President, Sucralose
Financial highlights
£m
Sales
Adjusted operating profit
Margin
Key markets
Year to 31 March 2009
Year to 31 March 2008
Primary
Value added
Primary
Value added
169
72
Total
169
72
–
–
–
–
–
–
148
66
Total
148
66
42.6%
42.6%
44.6%
44.6%
Value added food
Value added beverage
Value added pharmaceutical
■ SPLENDA® Sucralose – Micronised
■ SPLENDA® Sucralose – Granular
■ SPLENDA® Sucralose Liquid
Concentrate
■ SPLENDA® Sucralose – Granular
■ SPLENDA® Sucralose –
Pharmaceutical Grade
Tate & Lyle Annual Report 2009
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How we performed
Sucralose
continued
Highlights
■ Sales volume growth of 6%
driven primarily by growth in
international (non-US) markets
■ Strong volume growth in Europe
with significant gains in retailer
own-label ranges
■ A breakthrough in manufacturing
yields has increased plant
capacity and led to the decision
to mothball the McIntosh,
Alabama, facility
■ Safety index achieved Group
target of zero
Strategy
Our strategy is to position
SPLENDA® Sucralose, a value
added product, as the no-calorie
sweetener of choice in no-calorie
products or those involving the
partial replacement of nutritive
sweeteners, either as a single
ingredient or in formulation with
other Tate & Lyle ingredients. Our
strategic alliance with McNeil
Nutritionals LLC (McNeil), the
owner of the SPLENDA® brand,
and our ability to use that brand,
give us a strong consumer presence
and a distinct competitive advantage.
This is enhanced by our extensive
manufacturing expertise which
allows us to remain the lowest
cost and most environmentally
responsible manufacturer
of sucralose.
Markets
We sell SPLENDA® Sucralose as
an ingredient to food, beverage
and pharmaceutical manufacturers
around the world. It is used to
sweeten over 4,000 foods and
beverages globally and is used in
many leading brands of reduced-
calorie products.
We estimate that the value of the
global market for high-intensity
sweeteners (HIS) reduced by 11%
in the 2008 calendar year, returning
to prior levels following the impact
of Chinese saccharin supply issues
in the 2007 calendar year which
caused saccharin prices to treble.
The North American market
experienced a 6% value decline;
price competition continues in this
market from both incumbents and
new entrants.
Global new product launches
containing HIS in the 2009 financial
year decreased by 5% compared
to the prior year, although launches
containing SPLENDA® Sucralose
increased by 7% over the
same period.
Business performance
Total sales volumes increased by
6% compared to the comparative
period, with volume increase
greatest in European food and
beverage applications. Sales
increased by 14% to £169 million
(reduced by 4% in constant
currency) primarily due to lower
average selling prices compared
to the prior year.
Adjusted operating profit increased
by 9% to £72 million (reduced by
4% in constant currency), reflecting
lower gross margins due to selling
price reductions and changes in
customer mix.
Margins at 42.6% were below the
prior year. After adjusting for one-off
credits, including those arising from
the final settlement of deferred
consideration payable to McNeil,
underlying operating margins for the
year were in the high 30% range.
SPLENDA® Sucralose increased its
share by value of the global HIS
market from 23% in the 2008
financial year to 25% in the 2009
financial year. During the year,
we had a number of notable
customer product launches and
reformulations with SPLENDA®
Sucralose, including Diet Coke and
Coke Zero in China to coincide with
the Beijing Olympics. Coke Zero has
also been formulated to contain
SPLENDA® Sucralose in Japan,
Singapore, Indonesia and Thailand.
In the USA, our partner McNeil
launched ‘SPLENDA® with Fiber’,
which used both SPLENDA®
Sucralose and another one of our
value added products, PROMITORTM
Soluble Corn Fiber.
In Europe, sales growth continues
to be driven by strong sales to UK
grocery retailers. Three of the top
four have reformulated their own-
label food and beverage ranges
to include SPLENDA® Sucralose.
We also negotiated a new global
distribution agreement with
pharmaceutical company Merck to
grow sales in the pharmaceutical/
over-the-counter segments.
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Anticipated cash costs of
£60 million associated with the
decision to mothball the McIntosh,
Alabama facility will be paid over
three years and recognised as an
exceptional charge in the year
ending 31 March 2010. These cash
costs are expected to have a three-
year payback resulting from the
reduced operating costs of having
a single plant. Costs of £25 million
are expected to be paid in the
2010 financial year.
In the last year, our sucralose
manufacturing facilities have
achieved significant and sustainable
yield improvements of over 25%
which has had the effect of
significantly increasing
production capacity.
Consequently, we have taken the
decision to mothball our McIntosh,
Alabama facility, and produce all
our sucralose from the newer
and more energy efficient fourth-
generation facility in Singapore.
We have recognised an impairment
charge against the McIntosh assets
of £97 million in the 2009 financial
year. The McIntosh facility will retain
a core group of employees and,
if needed, can be re-started and
begin manufacturing sucralose
within a few months.
Our decision to mothball the
McIntosh facility will ensure that we
remain the most efficient and lowest
cost producer of sucralose in the
market. This action will have no
impact on our customers as, due
to the yield increases and our ability
to maintain high levels of safety
stocks, the Singapore facility has
more than enough capacity to
meet current market needs.
In our patent infringement
case at the US International Trade
Commission (ITC), the Administrative
Law Judge gave his Initial
Determination in the case on
22 September 2008. The judge
did not find that Tate & Lyle’s
patents were infringed and his
finding was upheld by the full six-
person Commission in April 2009.
We do not intend to file a notice of
appeal to the ITC decision. Selling,
general and administration costs
were £7 million below the prior
year principally due to lower legal
costs arising from the ITC patent
infringement case.
Looking forward
We anticipate modest growth in
sales volumes in the 2010 financial
year, as we further develop our
close working relationships with
our key customers and continue
to develop European and other
international markets.
After adjusting for one-off credits,
underlying margins in the 2009
financial year were in the high
30 percent range. The higher cost of
sales brought forward, together with
costs arising from the reorganisation
of the sucralose manufacturing
footprint which cannot be classed
as exceptional, partially offset by
lower depreciation costs, will cause
operating margins to be somewhat
lower in the 2010 financial year.
Tate & Lyle Annual Report 2009
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How we performed
Other financial information
Central costs
Central costs, which include head office, treasury
and reinsurance activities, decreased by £13 million to
£18 million. This decrease reflects a £4 million reduction
in underlying head office costs. There were also one-off
credits totalling £6 million (including a gain of £3 million
on curtailment of a property lease) in 2009 compared
with one-off redundancy costs in 2008 of £4 million
arising from the simplification of the Group’s
organisational structure.
Energy costs
Energy costs for the year were £208 million (2008 –
£155 million), an increase of 34% (17% in constant
currency). Higher prices accounted for most of the
underlying increase. We have covered approximately
70% of our estimated energy needs for the 2010
financial year at prices broadly in line with levels
in the 2009 financial year.
Exceptional items from continuing operations
£m
Write-off of equipment
Settlement with Mexican government
Impairment charges
Restructuring costs
Citric/astaxanthin impairment and closure
Orsan impairment
Exceptional items
2009
2008
(24)
11
(106)
–
–
–
(119)
–
–
–
(30)
(12)
(17)
(59)
Exceptional items within our continuing operations
during the year totalled a net charge of £119 million.
The mothballing of our McIntosh, Alabama sucralose
facility gave rise to an impairment charge of £97 million
in the year ended 31 March 2009. Anticipated cash
costs of £60 million associated with the decision to
mothball McIntosh will be paid over three years and
recognised as an exceptional charge in the year ending
31 March 2010. Costs of £25 million are expected
to be paid in the 2010 financial year.
Within our Food & Industrial Ingredients, Americas
division, we incurred an exceptional charge of
£24 million in relation to a dispute with a supplier over
the performance and suitability of ethanol dehydration
equipment and recognised a credit of £11 million
representing our share of the £22 million settlement
of the NAFTA case against the Mexican government
in relation to the sales tax imposed on soft drinks
containing imported high fructose corn syrup (HFCS).
Within the Sugars division, a review of the carrying value
of our sugar refinery in Israel resulted in an impairment
of £9 million which has also been recognised in the year.
Exceptional items from continuing operations in the
2008 financial year comprised restructuring and
relocation charges in respect of our remaining Food &
Industrial Ingredients, Europe operations amounting to
£30 million; impairment charges in respect of our citric
acid business of £12 million; and of our monosodium
glutamate business in China (Orsan) of £17 million. Our
effective ownership of Orsan was 41% and, as a result,
the impact on profit attributable to shareholders was a
charge of £7 million.
Net finance expense
The net finance expense from continuing operations
increased from £42 million to £51 million. The exchange
impact within interest accounted for an increase of
£7 million compared with the prior year. We recognised
a charge within interest expense in the current year
relating to post-retirement benefit plans of £3 million
(compared with a credit of £4 million in the prior year).
At constant currency, we benefited from lower average
interest rates compared to the prior year.
Interest cost is expected to be somewhat higher in
the 2010 financial year due to slightly higher levels of
average net debt; an increase of £12 million in charges
related to post-retirement benefit plans; and the
suspension of interest capitalisation in respect of
the Fort Dodge, Iowa plant while final completion
is postponed.
The effective interest rate in the year on total operations,
calculated as net finance expense divided by average
net debt, was 4.3% (2008 – 4.9%). Interest cover for
total operations was 6.1 times (2008 – 7.8 times).
Taxation
The taxation charge from continuing operations
before exceptional items and amortisation of acquired
intangible assets was £68 million (2008 – £84 million).
The effective rate of tax on adjusted profit was 27.3%
(2008 – 33.2%). The decrease was due mainly to
changes in the geographical origin of profits, especially
lower levels of profits in the USA, to which the tax
rate is particularly sensitive, and the implementation
of our internal financing plan.
If the mix in the geographical origin of profits in the
year to 31 March 2010 is similar to those in the six
months to 31 March 2009, the tax rate is expected
to fall to below 25%.
52
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Discontinued operations
Discontinued operations comprise our former
International Sugar Trading business, residual activities
in Eastern Sugar, our former sugar businesses in Canada
and Mexico and the five starch plants we disposed of in
Europe. Sales from discontinued operations for the year
amounted to £852 million (2008 – £951 million).
The operating loss from discontinued operations totalled
£21 million (2008 – profit of £96 million), comprising a
profit of £1 million before exceptional items (2008 –
profit of £36 million) and exceptional losses of
£22 million (2008 – profits of £60 million).
Exceptional items for the year totalling a charge of
£22 million arose from the disposal of our International
Sugar Trading business. A small number of minority
interests related to the International Sugar Trading
business were not included in the sale and are being
addressed separately in accordance with the related
shareholders’ agreements. The sale of the International
Sugar Trading business and the anticipated disposal of
the minority interests are together unlikely to generate
a material profit or loss on disposal. The sale of these
minority interests is expected to occur in the 2010
financial year; the appropriate fair value gains have
been recognised in the 2009 financial year through
the statement of recognised income and expense.
Exceptional items from discontinued operations in the
prior year amounted to a profit of £60 million and
comprised gains and losses from our former sugar
processing businesses and the European starch plants.
The loss from discontinued operations after taxation for
the year was £24 million (2008 – profit of £81 million).
Earnings per share
Adjusted diluted earnings per share from continuing
operations were 38.0p (2008 – 34.6p), an increase of
10% (decrease of 8% in constant currency). On the
same basis, basic earnings per share were higher by 9%
(8% lower in constant currency) at 38.2p (2008 – 35.0p).
The proposed final dividend of 16.1p (2008 – 16.1p) will
be due and payable on 31 July 2009 to all shareholders
on the Register of Members at 3 July 2009.
An interim dividend of 6.8p (2008 – 6.5p) was paid on
9 January 2009. Adjusted dividend cover based on total
operations was 1.7 times (2008 – 1.8 times) and for
continuing operations was 1.7 times (2008 – 1.5 times).
The dividend was covered 1.5 times by free cash flow.
At the Annual General Meeting on 23 July 2009,
shareholders will be asked to approve the issuing of
scrip dividends, where shareholders can elect to accept
newly issued shares in place of a cash dividend. If
approved, scrip dividends could be offered for the
first time for the year ending 31 March 2010.
Cash flow
£m
Adjusted operating profit
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
2009
2008
298
117
31
5
451
(224)
227
295
103
(159)
7
246
(264)
(18)
2009
2008
293
102
10
70
(24)
451
(158)
(66)
227
195
(45)
109
62
(75)
246
(150)
(114)
(18)
Total basic earnings per share were 14.2p (2008 –
40.9p), 65% lower than the prior year. Total diluted
earnings per share were 14.1p (2008 – 40.4p), also
down 65% from the prior year.
Dividend
The Board is recommending a maintained final dividend
of 16.1p making a full year dividend of 22.9p per share,
an increase of 1.3% over the prior year. In reaching this
decision, the Board was mindful of the need to at least
maintain the Company’s investment-grade credit ratings.
Operating cash flow from continuing operations
amounted to £451 million, an increase of over £200
million compared with the prior year. The improvement
was driven principally by improvements in working
capital, particularly in the second half of the year.
The adverse effects of margin calls of about £70 million,
primarily against future corn purchases in the USA,
were more than compensated for by the decreases
in inventory (principally in the USA) and receivables
amounting to £190 million.
Tate & Lyle Annual Report 2009
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How we performed
Other financial information
continued
There were outflows from provisions of £75 million,
primarily from pension payments of £31 million and the
payment of exceptional restructuring and redundancy
costs in respect of the European starch plants. The
operating cash flows in the prior year also benefited
from the receipt of transitional aid of £74 million for
the EU sugar operations which is being recognised
in income up to September 2010.
Net interest paid totalled £56 million (2008 – £34 million).
Income tax paid from continuing operations was
£17 million (2008 – £75 million); the lower level was
driven in part by refunds relating to prior years totalling
about £35 million in the UK and the USA.
Capital expenditure remained at similar levels to 2008
as capacity expansion projects and the construction of
the new plant at Fort Dodge, Iowa, continued. These
projects are now largely completed. Capital expenditure
was 2.0 times depreciation in the year. In the year
ending 31 March 2010, capital expenditure will be
held below the depreciation charge.
Free cash inflow (representing cash generated from
continuing operations less interest, taxation and capital
expenditure) totalled £154 million (2008 – outflow of
£127 million).
Cash generation from discontinued operations in the
year amounted to £206 million (2008 – outflow of
£108 million). The disposal and cessation of our
International Sugar Trading activities realised cash of
£57 million; there will be additional cash flows from
these activities in the 2010 financial year as we settle
retained creditor balances and run off the contractual
arrangements not transferred to Bunge. In the 2010
financial year, we anticipate cash outflows to Bunge
will be approximately £29 million. In addition, the
Eastern Sugar restructuring funds were received this
year, with our share being £53 million.
Equity dividends were £104 million (2008 – £105 million).
In total, we paid a net of £160 million (2008 – £139 million)
to providers of finance in the form of dividends and
interest. We recognised a net inflow of £3 million relating
to employees exercising share options during the year
(2008 – £8 million).
Net cash generated (defined as cash from operating
activities, investing activities and share issues, less
shares repurchased and dividends) amounted to
£245 million compared with absorption of cash in
2008 of £160 million.
Net debt
Despite the strong cash generation in the year, net debt
increased from £1,041 million to £1,231 million due to
the effects of exchange (£378 million) and other non-
cash movements (£57 million). The Group’s debt is
primarily denominated in US dollars and euros to match
the underlying currencies of the operational cash flows
and net assets and, therefore, as sterling has weakened
against the US dollar and the euro, net debt reported
in sterling has increased.
During the year, net debt peaked at £1,530 million
in December 2008 (in the prior year, it peaked at
£1,041 million in March 2008). The average net
debt was £1,230 million, an increase of £385 million
from £845 million in the prior year.
Net assets and return on net operating assets
As at 31 March
Return on net
operating assets
%
£m
2009
2008
2009
2008
Net operating assets
Food & Industrial
Ingredients, Americas
1 186
836
Food & Industrial
Ingredients, Europe
Sugars
Sucralose
Central
530
335
243
65
489
304
275
43
Total net operating assets
2 359 1 947
18
8
4
26
–
13
23
10
11
23
–
16
Other
Net debt
Net assets
(115)
44
2 244 1 991
(1 231) (1 041)
1 013
950
Net assets at 31 March 2009 were £1,013 million
(2008 – £950 million). This increase was driven by
retained profits of £70 million, exchange effects (net of
hedging effects) of £139 million and gains on available
for sale investments of £24 million, offset by post-
retirement benefit actuarial losses of £40 million, cash
flow hedge losses of £25 million and dividends of
£104 million. Net current assets were marginally higher
at £510 million. Return on net operating assets was
12.7% (2008 – 15.5%).
54
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Shareholders’ equity
During the year, 0.1 million shares were issued and
1.4 million shares were released from treasury for a total
consideration of £3 million. No shares were repurchased
during the year. At 31 March 2009, there were 460.0
million shares in issue of which 1.3 million were
held in treasury.
Funding and liquidity management
We manage our exposure to liquidity risk and ensure
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 2009
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.
We ensure that we have sufficient undrawn committed
bank facilities to provide liquidity back-up to cover our
funding requirements for the foreseeable future. We have
committed bank facilities of US$1,130 million of which
US$85 million mature in September 2009; US$45 million
mature in November 2009; and US$1 billion mature in
October 2012. These facilities are unsecured and
contain common financial covenants for Tate & Lyle and
our subsidiary companies that: pre-exceptional and
amortisation interest cover ratio based on total Group
operations should not be less than 2.5 times; and the
multiple of net debt to EBITDA, as defined in our bank
covenants, should not be greater than 4.0 times.
Interest cover fell to 6.1 times (2008 – 7.8 times).
The effects of exchange rate changes are felt more
gradually in earnings, which are translated using
average rates, than in debt, which is translated at the
closing exchange rates. To eliminate the distortion this
would otherwise cause, and to reflect more accurately
the underlying economic conditions, net debt and
EBITDA are now both calculated using average
exchange rates. On this basis, the ratio of the year
end was 2.4 times (2008 – 2.5 times). An amendment
was unanimously agreed with the participants in the
US$1 billion Revolving Credit Facility to change the
calculation of this ratio to use average exchange rates
to translate net debt. Under the previous covenant
calculation, the ratio of net debt to EBITDA would have
been 2.9 times (2008 – 2.6 times).
We monitor compliance against all our financial
obligations, and it is our policy to manage the
consolidated balance sheet so as to operate well
within covenanted restrictions at all times. The majority
of our 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 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 (2008 – none and none).
The average maturity of our gross debt was approximately
five years (2008 – approximately six years). At the year
end we held cash and cash equivalents of £434 million
(2008 – £165 million) and committed facilities of
£788 million (2008 – £559 million) of which £524 million
(2008 – £438 million) were undrawn. We maintain these
resources 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
Our primary objectives in managing capital are to
safeguard the business as a going concern; to maintain
sufficient financial flexibility to undertake our investment
plans; at least maintain an investment-grade credit
rating which enables consistent access to debt capital
markets; and to optimise our 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 economic conditions;
business environment; our business profile; and the
risk characteristics of our businesses.
Tate & Lyle has contractual relationships with Moody’s
and Standard and Poor’s (S&P) for the provision of
credit ratings, and it is our policy to keep them
informed of all major developments. In February 2009,
S&P downgraded Tate & Lyle’s long-term credit rating
from BBB (negative outlook) to BBB- (negative outlook).
In April 2009, Moody’s downgraded the Group’s long-
term credit rating from Baa2 (negative outlook) to Baa3
(stable outlook). We are committed to maintaining
investment-grade credit ratings.
Tate & Lyle Annual Report 2009
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How we performed
Other financial information
continued
As part of the Board’s monitoring of performance, it
has set two ongoing key performance indicators (KPIs)
to measure the Group’s financial strength. The basis for
these ratios is the same as the external debt covenants,
except that the ratio of net debt to EBITDA should not
exceed 2.5 times, and that interest cover should
exceed 5 times.
Off balance sheet arrangements
In the ordinary course of business, to manage our
operations and financing, we enter into certain
performance guarantees and commitments for capital
and other expenditure.
The aggregate amount of indemnities and other
performance guarantees, on which no material loss
has arisen, including those related to joint ventures
and associates, was £97 million at 31 March 2009
(2008 – £43 million).
We aim to optimise financing costs in respect of
all financing transactions. Where it is economically
beneficial, we choose to operate leases rather than
purchase 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 £237 million (2008 – £228 million)
and related primarily to railcar leases in the USA. Rental
charges for the year ended 31 March 2009 in respect
of continuing operations were £27 million
(2008 – £21 million).
Post-retirement benefits
We maintain pension plans for our employees
throughout the world. Some of these arrangements are
defined-benefit pension schemes. In the USA, we also
provide medical and life assurance benefits as part of
the retirement package. Further details are set out in
Note 31 to the financial statements. At 31 March 2009,
there was a net deficit in respect of these arrangements
of £211 million (2008 – £91 million). The increase in the
deficit was driven by an exchange loss of £63 million,
and a reduction in assets of £247 million, partly offset
by a reduction in benefit obligations of £176 million.
The liabilities under these arrangements are valued
using actuarial assumptions under IAS19 ‘Employee
Benefits’. There are alternative 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 are based on the individual scheme’s
circumstances.
The service charge is forecast to reduce slightly from
£14 million to £12 million in the 2010 financial year,
whilst the net interest cost is expected to increase
by £12 million to £15 million.
Financial risk controls
Management of financial risk
Our main financial risks are credit, liquidity, and market
risks. These latter include interest rate risk, currency risk
and certain commodity price risks. We also face certain
non-financial or non-quantifiable risks; these are set out
on pages 27 to 30. The Board sets overall risk limits,
and regularly reviews financial risks and approves
written policies concerning the use of financial
instruments to manage them.
The Group Finance Director retains overall responsibility
and management of financial risk for the Group. Most of
our 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. It is chaired by the Group
Finance Director and has other board members who
are 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 periodically,
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 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.
56
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0920_T&L_ Front_01-59.qxd 12/6/09 16:30 Page 57
The derivative financial instruments we use 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
We are exposed to interest rate changes, arising
principally from changes in borrowing rates in US
dollars, sterling and euros. We manage this risk 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. Our 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 2009
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 55% (2008 – 62%).
If the interest rates applicable to our floating-rate debt
rise from the levels at the end of March 2009 by an
average of 100 basis points over the year to 31 March
2010, with all other variables held constant, this
would reduce Group operating profit before tax by
approximately £4 million (2008 – £4 million).
Foreign exchange risk
We have significant investment in overseas operations,
particularly in the USA and Europe. Earnings, cash flows
and shareholders’ equity are therefore exposed to
foreign exchange risks.
We require our 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.
Our accounting policy is to translate profits of overseas
companies using average exchange rates. We do
not hedge exposures arising from profit translation.
As a result, in any particular financial year, currency
fluctuations may have a significant impact on our
financial results. In particular, a strengthening or
weakening of the US dollar against sterling will have
a favourable or adverse effect respectively on the
Group’s reported results.
We manage foreign exchange translation exposure on
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 was held in the following currencies: net
borrowings of US dollars 77% (2008 – 81%), euros 20%
(2008 – 21%), sterling 3% (2008 – deposits of 4%)
and other currency deposits of 0% (2008 –
borrowings of 2%).
The following table illustrates our sensitivity to the
fluctuation of the major currencies in which we transact
business. Sensitivity is calculated on financial assets
and liabilities as at 31 March 2009, denominated in
non-functional currencies for all operating units
within the Group.
31 March 2009
31 March 2008
-/+ £m
Income
statement
Income
Equity statement
Sterling/US$ 5% change
Sterling/euro 5% change
1
1
40
13
1
2
Equity
35
14
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.
We manage this 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 Board approves
maximum counterparty exposure limits for specified
banks and financial institutions based on long-term
credit ratings (typically A-/A3 or higher) of S&P and
Moody’s. We monitor counterparties’ positions
regularly to ensure that they are within the approved
limits and that there are no significant concentrations
of credit risks.
Tate & Lyle Annual Report 2009
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How we performed
Other financial information
continued
Price risk
We use derivatives to hedge movements in the
future prices of commodities in those domestic and
international markets in which we buy and sell sugar,
corn and energy for production. We use commodity
futures and options 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 recognised exchanges
or over the counter.
Use and fair value of financial instruments
In the normal course of business we use both derivative
and non-derivative financial instruments.
The fair value of Group net borrowings at the year
end was £1,332 million against a book value of
£1,231 million (2008 – fair value £1,106 million;
book value £1,041 million).
Derivative financial instruments used to manage the
interest rate and currency of borrowings had a fair value
of £13 million liability (2008 – £12 million asset). The
main types of instrument used are interest rate swaps,
interest rate options (caps or floors) and cross-currency
interest rate swaps.
The fair value of other derivative financial instruments
hedging future currency and commodity transactions
was £36 million liability (2008 – £7 million liability). When
managing currency exposure, we use spot and forward
purchases and sales, and options.
The fair value of derivative financial instruments held for
trading was £44 million liability (2008 – £9 million asset)
arising in our commodity trading 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 related hedging relationship
agreements, 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
The Group’s business activities, together with the factors
likely to affect its future development, performance and
position are set out in the ‘What we do’ and ‘How we
performed’ sections on pages 13 to 58. The financial
position of the Group, its cash flows, liquidity position
and borrowing facilities are described in the same
sections on pages 52 to 58. In addition, Note 21 to the
financial statements includes the Group’s objectives,
policies and processes for managing its capital; its
financial risk management objectives; details of its
financial instruments and hedging activities; and its
exposures to credit risk and liquidity risk.
As set out in the sections and note referenced above,
the market conditions of the areas in which the Group
operates have been, and are likely to continue to be,
challenging. However, with some 70% of revenues
from food and beverage ingredients, the Group has a
measure of resilience (although not immunity) to the
economic downturn. In addition, the Group has access
to considerable financial resources through its facilities
as described in Note 21 to the financial statements.
In making their assessment of the going concern basis,
the directors have reviewed the maturities of these
facilities, the headroom available from them and the
Group’s ability to meet the covenant requirements
of certain of them. As a consequence, the directors
believe that the Group is well placed to manage
its business risks successfully despite the current
uncertain economic outlook.
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. Accordingly, they continue to
adopt the going concern basis in preparing the annual
report and accounts.
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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
60 Board of directors
62 Executive management
63 Corporate governance
70 Corporate social responsibility
Tate & Lyle Annual Report 2009
Production meeting at Koog,
the Netherlands
59
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How we run the business
Board of directors
1 Sir David Lees
Chairman
2 Iain Ferguson CBE
Chief Executive
3 Tim Lodge
Group Finance Director
4 Sir Peter Gershon
Independent non-executive director
and Chairman-elect
5 Richard Delbridge
Senior Independent Director
6 Elisabeth Airey
Independent non-executive director
1 Sir David Lees
Chairman
Joined the Board and was appointed
Chairman in October 1998. Sir David 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 (1991-1999) and as Chairman
of Courtaulds plc (1996-1998). Sir David
is currently Deputy Chairman and Senior
Independent Director of QinetiQ Group plc;
a governor of the Royal Ballet School;
a member of the Panel on Takeovers and
Mergers and Chairman of the Court of the
Bank of England. 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 72.
2 Iain Ferguson CBE
Chief Executive
Joined the Group and was appointed
Chief Executive in May 2003. Previously
Iain worked for Unilever where he held
a number of senior positions including
Executive Chairman of Birds Eye Wall’s
in 1995 and then 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 a former President
of both the Food & Drink Federation
(2006-2008) and the Institute of Grocery
Distribution (2003-2004). Iain is currently
Chairman of the Wilton Park Departmental
Board and Advisory Council, a member
of the UK Government’s Council of Food
Policy Advisers, a member of the Institute of
Grocery Distribution’s Policy Issues Council,
a non-executive director of Greggs plc
and Honorary Vice President of the British
Nutrition Foundation. Aged 53.
3 Tim Lodge
Group Finance Director
Joined the Group in 1988 and joined
the Board in December 2008 as Group
Finance Director. Tim has held a number
of senior operational and financial roles
at Tate & Lyle, both in the UK and
internationally, including Managing Director
of Zambia Sugar; Group Financial
Controller; Finance Director of the Food &
Industrial Ingredients, Europe division; and
Director of Investor Relations. He is an
Associate of the Chartered Institute of
Management Accountants. Aged 44.
4 Sir Peter Gershon
Independent non-executive
director and Chairman-elect
Joined the Board in February 2009.
Sir Peter was formerly Chief Executive
of the Office of Government Commerce,
Managing Director of Marconi Electronic
Systems and a member of the
GEC plc Board.
60
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7 Evert Henkes
Independent non-executive director
Joined the Board in December 2003.
Evert worked for the Royal Dutch/Shell
Group of companies 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 member of the international advisory
board of CNOOC Ltd and a non-executive
director of Outokumpu OYJ, Air Products
and Chemicals Inc, and SembCorp
Industries Ltd. Aged 65.
8 Robert Walker
Independent non-executive director
Joined the Board in January 2006. Robert
is Chairman of WH Smith PLC and of BCA
Holdings Ltd. He was previously Chairman
of Williams Lea, and has served on various
FTSE 100 and 250 boards, including
Wolseley, BAA, Signet, Thomson Travel
Group and Severn Trent, where he was
Group Chief Executive. He has also served
as adviser to Cinven. He started his career
at Procter and Gamble and McKinsey &
Co., then spent over 20 years with PepsiCo,
culminating as Division President. Aged 64.
9 Dr Barry Zoumas
Independent non-executive director
Joined the Board in May 2005. Barry is
currently the Alan R. Warehime Professor
of Agribusiness and Professor of Food
Science and Nutrition at Penn State
University, USA. He is also Global Chairman
of the International Life Sciences Institute.
Barry spent his early career at Mead
Johnson before joining Hershey Foods
Corporation in 1970 where he worked for
27 years, holding a number of positions,
culminating as Corporate Vice President
of Science and Technology. Aged 66.
10 Robert Gibber
Company Secretary & General Counsel
A solicitor, Robert joined Tate & Lyle in
1990 as a commercial lawyer. He previously
worked for City law firms Wilde Sapte and
Herbert Oppenheimer. He graduated from
Wadham College, Oxford in Oriental Studies
(Chinese) in 1984. He was appointed
General Counsel in 1997 and then also
Company Secretary in 2001. Aged 46.
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7 Evert Henkes
Independent non-executive director
8 Robert Walker
Independent non-executive director
9 Dr Barry Zoumas
Independent non-executive director
10 Robert Gibber
Company Secretary & General Counsel
He is also Non-Executive Chairman of
Premier Farnell plc, GHG Limited (General
Healthcare Group) and Vertex Data Science
Limited; and a member of the Advisory
Board of the UK Defence Academy and
the Court and Council of Imperial College.
Aged 62.
In 1996, Richard 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 a Council Member and
Treasurer of The Open University. Aged 67.
5 Richard Delbridge
Senior Independent Director
Joined the Board in September 2000
and was appointed Senior Independent
Director in December 2003. A Chartered
Accountant, Richard 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.
6 Elisabeth Airey
Independent non-executive director
Joined the Board in January 2007. From
1990 to 1999 Elisabeth served as Finance
Director of Monument Oil and Gas plc
until its sale to Lasmo plc. She is currently
a non-executive director and Chairman of
the JP Morgan European Fledgeling
Investment Trust PLC. She is Chairman of
the Unilever UK Pension Fund and is also a
non-executive director of Dunedin Enterprise
Investment Trust PLC. Aged 50.
Tate & Lyle Annual Report 2009
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How we run the business
Executive management
The Group Executive Committee oversees the development and execution of
the Group’s strategy, and has overall responsibility for achieving business results.
Members of the
Group Executive Committee
Iain Ferguson (Chairman)
Chief Executive
Iain’s biography is on page 60.
Tim Lodge
Group Finance Director
Tim’s biography is on page 60.
Robert Gibber
Company Secretary and General Counsel
Robert’s biography is on page 61.
Ian Bacon
Chief Executive, Sugars
Ian joined Tate & Lyle in November 2005
and became Chief Executive, Sugars in
January 2006. He joined from Unilever
where he was Vice President, Global
Customer Development with responsibility
for increasing sales growth across the
business. A graduate of Birmingham
University, Ian began his 26-year career with
Unilever in 1979, holding a number of senior
positions including Vice President, Operations
North Africa, Middle East and Turkey; and
General Manager, Birds Eye Wall’s.
Dr Bob Fisher
President, Global R&D
Bob joined Tate & Lyle as Head of Global
R&D in December 2006 and was appointed
President Global R&D in July 2008. He
joined from the International Life Science
Institute, North America, where he was
Executive Director and Chief Operating
Officer. Prior to that, he was Executive
Vice President, Business Development and
New Technology for John I. Haas, a leading
producer and trader of hops, and before
that Vice President, Research & Development,
North America, for The Campbell Soup
Company. Bob has a PhD in Food Science.
Karl Kramer
President, Sucralose
Karl joined Tate & Lyle in April 2008 and
became President, Sucralose in June 2008.
A graduate of Chemical Engineering from
the New Jersey Institute of Technology, Karl
began his career in R&D at General Foods.
He then worked in brand management for
Nestlé, and in international sales for the
NutraSweet Kelco Division of Monsanto.
Before joining Tate & Lyle, Karl held various
general management roles in the flavour
division of Givaudan. Karl holds an MBA
from the New York University Stern School
of Business.
Olivier Rigaud
President, Food & Industrial
Ingredients, Europe
After graduating in Chemistry from
University Aix-Marseille in 1988 Olivier
joined Tate & Lyle (Amylum business) as
a sales manager in France. He then held
various management positions including
in industrial products, liquid sweeteners
and alcohol sales. In 2000, Olivier became
Vice President Food Ingredients, Europe.
In July 2008 he was appointed President,
Food & Industrial Ingredients, Europe.
Matt Wineinger
President, Food & Industrial
Ingredients, Americas
Matt joined Tate & Lyle in March 2008
and became President, Food & Industrial
Ingredients, Americas in July 2008. He
joined from Swift and Co, where he was
President of their Australian Meat Holdings
division. A graduate of Kansas State
University, Matt started his career in the
Food Products Division at Procter & Gamble
and then worked in a variety of roles for
Monsanto. In 2000 he joined Cargill,
becoming President of Sales, Marketing
and Research & Development in 2002 for
its Meat Solutions division in Kansas.
Executive management structure
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
62
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Corporate governance
Tate & Lyle is committed to high standards of corporate governance
which the Board believes are central to achieving the Group’s objectives and
maximising shareholder value.
Compliance with the Combined Code
Tate & Lyle’s ordinary shares are listed on the Official
List of the UK Listing Authority. Therefore, the Company
is required to state whether it has complied with the
provisions in Section 1 of the UK Financial Reporting
Council’s Combined Code on Corporate Governance
(as updated in 2006) (the Code) during the financial year
under review. The Board confirms that the Company
has complied with all the provisions set out in Section
1 of the Code during the financial year ended
31 March 2009.
This report, together with the directors’ remuneration
report on pages 84 to 96, provides details of how the
Company applies the principles and complies with
the provisions of the Code.
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 objectives and
ensures that the necessary financial and human
resources are in place to enable them to be met, and
reviews management performance. The Board also
sets the Company’s values and standards and ensures
that its obligations to shareholders and others are
understood and met.
The Board has a schedule of matters reserved to it
for its decision. This schedule is reviewed annually
and includes approval of:
(cid:2) Group strategy;
(cid:2) annual budget and operating plans;
(cid:2) major capital expenditure, acquisitions or divestments;
(cid:2) annual and half-year financial results and interim
management statements;
(cid:2) safety and environmental policies;
(cid:2) Board and Company Secretary appointments;
(cid:2) senior management structure, responsibilities and
succession plans;
(cid:2) treasury policies;
(cid:2) directors’ conflicts of interest;
(cid:2) system of internal control and risk management; and
(cid:2) dividend policy.
Other responsibilities are delegated to Board
Committees, which operate within defined terms of
reference. Details of these are given on pages 66 to 68.
The directors’ responsibilities for the preparation of
financial statements are explained on page 83 and
their statement on going concern is on page 58.
Board and Committee meetings
There were nine scheduled Board meetings during the
year ended 31 March 2009, with two held at operating
locations. Five additional meetings were held primarily
to approve such matters as the publication of trading
updates and changes to the composition of the Board.
All directors also met off-site for a day to consider the
Group’s strategy.
Directors’ attendance at the Board and Committee
meetings that they were eligible to attend is shown
in the table below.
Director
Board Committee
Audit Nominations Remuneration
Committee
Committee
13/14
Elisabeth Airey
Richard Delbridge 13/14
13/14
Iain Ferguson
2/2
Sir Peter Gershon
13/14
Evert Henkes
14/14
Sir David Lees
Tim Lodge
3/3
Stanley Musesengwa 4/4
4/5
John Nicholas
4/4
Stuart Strathdee
13/14
Robert Walker
13/14
Dr Barry Zoumas
5/5
5/5
–
–
4/5
–
–
–
–
–
5/5
4/5
11/12
11/12
10/12
1/1
11/12
12/12
–
–
–
–
11/12
11/12
11/11
10/11
–
2/2
11/11
11/11
–
–
–
–
11/11
9/11
In the few instances where a director is unable to attend
a meeting, his or her comments on the briefing papers
are given in advance to the relevant Chairman.
A rolling programme of items for discussion by the
Board, which is constantly updated to reflect topical
matters, has been in operation for a number of years.
Board meetings are structured to allow open discussion
and all directors participate in discussing strategy,
trading, financial performance and risk management.
Tate & Lyle Annual Report 2009
63
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How we run the business
Corporate governance
continued
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 regularly.
The chart below shows the approximate time the Board
has spent discussing agenda items during the year,
separated into broad categories.
Board allocation of time
Year ended 31 March 2009
Governance
8%
Operations
16%
Strategy
42%
Finance/Risk
29%
Capital expenditure
and investment
5%
Board support
All directors have access to the advice and services of
the Company Secretary who is responsible for ensuring
that Board processes are followed and that applicable
rules and regulations are complied with. The appointment
and removal of the Company Secretary is a matter for
the Board as a whole. There is also a formal procedure
whereby, in the furtherance of their duties, directors can
obtain independent professional advice, if necessary,
at the Company’s expense.
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,
while the Chief Executive is responsible for the running
of the business and implementing strategy and policy.
Other significant commitments of the Chairman,
Sir David Lees, are set out in his biography on page 60.
The Board is satisfied that they do not unduly restrict
him from carrying out his duties as Chairman effectively.
Board balance and independence
The Board currently comprises the Chairman, who has
no executive responsibilities, two executive directors
and six non-executive directors, including the Chairman-
elect. The names and biographies of the directors are
on pages 60 and 61.
With the exception of the Chairman, who is presumed
under the Code not to be independent, the Board
considers all the non-executive directors, including
the Chairman-elect, to be independent.
Richard Delbridge is the Senior Independent Director
and is available to shareholders if they have any issues
or concerns.
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 terms and conditions of appointment of the non-
executive directors can be inspected at the Company’s
registered office and will be available for inspection at
the Annual General Meeting (AGM).
Directors’ conflicts of interest
A new statutory duty on directors to avoid conflicts of
interest with the Company came into force on 1 October
2008. The Company’s Articles of Association, which
were amended in July 2008, permit directors to
authorise conflicts of interest and the Board has
adopted a policy and procedures for managing and,
where appropriate, authorising, actual or potential
conflicts of interest. Under those procedures, directors
are required to declare all directorships or other
appointments to organisations that are not part of the
Group and which could result in actual or potential
conflicts of interest, as well as other situations which
could result in a potential conflict of interest.
The Board is required to review directors’ actual or
potential conflicts of interest at least annually. Directors
are required to disclose proposed new appointments
to the Chairman before taking them on, to ensure that
any potential conflicts of interest can be identified and
addressed appropriately. Any potential conflicts of
interest in relation to proposed directors are considered
by the Board prior to appointment.
Re-election of directors
The Company’s Articles of Association require all
directors to seek re-election by shareholders at least
once every three years. In addition, any directors
appointed by the Board must stand for re-election at
the first AGM following their appointment. Any non-
executive directors who have served for more than
nine years are subject to annual re-election.
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The names of the directors retiring and standing for
re-election at the 2009 AGM are set out on page 82.
Further details are given in the letter from the Chairman
to shareholders in the Notice of Meeting document.
Information, induction and
professional development
The Chairman, assisted by 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 Group. New directors receive 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 the directors’
induction programme.
Directors receive ongoing training and updates on
relevant issues as appropriate, taking into account their
individual qualifications and experience. A number of
training sessions for directors were held outside the
scheduled meetings on subjects of particular relevance
during the year. The Company Secretary helps directors
undertake any other professional development they
consider necessary to assist them in carrying out their
duties. Visits to external events or organisations are also
arranged for the Board to help non-executive directors
in particular to gain a deeper insight into the Group’s
operating environment.
Performance evaluation
During the year, the Chairman led an exercise to
evaluate the effectiveness of the Board and its
Committees.
As part of the process, the Chairman held one-to-
one meetings with each director and the Company
Secretary. The main themes and observations on the
Board’s effectiveness were summarised in a report to
the Board. It concluded that the Board continued to
operate in an effective manner but made a number of
recommendations for improvements such as the timing
of Committee meetings and further enhancements to
the format and content of Board papers. Actions are
being or will be taken to address the matters raised
by the evaluation with progress monitored by the
Company Secretary.
With regards to the performance of individual directors,
the Chairman concluded that all directors continue to
make an effective contribution to the Board’s work, are
well prepared and informed about issues they need to
consider and that their commitment remains strong.
During the year, the non-executive directors met
together without the Chairman, 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
also undertook 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 effectively.
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 and the
Chairman provides feedback to the Board on any
matters raised with him by major shareholders. The
Investor Relations Department provides the Board with
a detailed report on discussions with major institutional
shareholders each time it meets. 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 full year and interim results presentations.
The Company aims to present a balanced and clear
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.
Shareholders who attend the AGM are given the
opportunity to put questions to the Board on matters
relating to the Group’s operations and performance.
Approximately 250 shareholders attended the AGM in
2008. The level of proxy votes received in respect of
each resolution, together with the level of abstentions,
are announced to shareholders at the AGM, notified to
the market and published on the Company’s website.
Tate & Lyle Annual Report 2009
65
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How we run the business
Corporate governance
continued
Board Committees
There are three main Board Committees: Remuneration,
Nominations and Audit. The terms of reference of
each Committee, which are reviewed annually by
the Board, are available on the Company’s website,
www.tateandlyle.com, or from the Company Secretariat
at the registered office.
The Committees are supported by 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.
Remuneration Committee
The Committee comprises the independent non-
executive directors and the Chairman of the Board.
The members of the Committee during the year and
up to the date of this report were:
Evert Henkes, Chairman
Elisabeth Airey
Richard Delbridge
Sir Peter Gershon (from 1 February 2009)
Sir David Lees
Robert Walker
Dr Barry Zoumas
The Committee meets as required, usually before each
Board meeting, and has a formal calendar of items for
consideration at each Committee meeting.
The Committee determines the remuneration packages
of each executive director and the other members of the
Group Executive Committee. This includes base salary,
bonus, long-term incentives, benefits and terms of
employment, including those upon which their service
may be terminated. The Committee also determines
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 executive
directors and the Chairman. More information on
policy, practice and the workings of the Committee
can be found in the directors’ remuneration report on
pages 84 to 96.
Nominations Committee
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, when the Senior Independent Director
chairs the Committee).
The members of the Committee during the year
and up to the date of this report were:
Sir David Lees, Chairman
Elisabeth Airey
Richard Delbridge
Iain Ferguson
Sir Peter Gershon (from 1 February 2009)
Evert Henkes
Robert Walker
Dr Barry Zoumas
The main responsibilities of the Committee are to:
■ review the size and composition of the Board,
including succession planning, and the leadership
needs of the Group generally;
■ make recommendations 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 on the processes for the
appointment of the Chairman of the Board;
■ review annually the performance of each member
of the Group Executive Committee and to report
on that review to the Remuneration Committee; and
■ make recommendations 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.
During the year, the Senior Independent Director,
Richard Delbridge, led the search for a successor to
the Chairman, with the help of external consultants.
The Chairman did not chair the Nominations Committee
meetings when the issue of his successor was being
discussed. As a result, the Committee recommended
the appointment of Sir Peter Gershon as a non-
executive director and Chairman-elect. Sir Peter was
appointed by the Board with effect from 1 February
2009 and his biography is set out on page 60.
With the help of external recruitment consultants
and following a competitive selection process, the
Committee also recommended that Tim Lodge be
appointed Group Finance Director from 4 December
2008. The recommendation was approved by the Board.
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Following the end of the financial year and after a
competitive selection process which was undertaken
with the assistance of external recruitment consultants,
the Committee recommended that Javed Ahmed be
appointed Chief Executive. The recommendation was
approved by the Board. As announced on 19 May 2009,
Javed Ahmed will join the Company and the Board by
15 November 2009.
Audit Committee
The Committee consists solely of independent non-
executive directors. Elisabeth Airey succeeded Richard
Delbridge as Chairman of the Audit Committee following
the AGM on 23 July 2008.
The members of the Committee during the year and up
to the date of this report were:
Elisabeth Airey, Chairman
Richard Delbridge
Sir Peter Gershon (from 1 February 2009)
Evert Henkes
Robert Walker
Dr Barry Zoumas
All the Committee members have extensive
management experience in large international
organisations and the Chairman, Elisabeth Airey,
is an investment banker and former finance director
of Monument Oil and Gas plc.
The Committee meets at least four times each year.
The Chairman of the Company, Chief Executive, Group
Finance Director, Head of Global Risk and Assurance
(who leads the internal audit function) 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 the Board. Both the Head of Global Risk
and Assurance and the external auditors have direct
access to, and meet regularly with, the Chairman of the
Committee outside formal Committee meetings.
The Committee maintains a formal calendar of items
for consideration at each meeting and within the annual
audit cycle to ensure that its work is in line with the
requirements of the Code.
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 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 their
remuneration and terms of engagement;
■ monitor and review the effectiveness of the internal
audit 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.
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 meetings 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 basis of the provision of non-audit services by
the external auditors;
■ meeting with representatives of the external auditors
in the USA (while on a scheduled site visit);
■ receiving and considering regular reports from the
Head of Global Risk and Assurance on the Group’s
risk management system, findings from reviews of
internal financial controls, and the remit, organisation,
annual plan and resources of the internal audit function;
■ undertaking a review of the effectiveness of the
internal audit function. The review in 2009 was
generally positive but some improvements to
processes and practices were identified and
are being implemented;
Tate & Lyle Annual Report 2009
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How we run the business
Corporate governance
continued
■ reviewing the Committee’s terms of reference and
its effectiveness, and recommending changes to the
Board as a result of this review. The review in 2009
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 Risk 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.
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.
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 which states the services that the
external auditors are not permitted to provide
and those that the external auditors may provide,
together with the appropriate approvals processes.
Each time it meets, the Committee receives a report
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 of the financial statements. Having
undertaken a review of the non-audit related services
provided during the year, the Committee is satisfied
that these services 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 helps Group management to identify,
assess and mitigate risk. The process involves the
identification and prioritisation of key risks through
an ongoing programme of workshops, facilitated by
the risk management function, held around the Group.
The risks identified cascade up through functional and
divisional levels to the Group Executive 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).
As part of this process, senior executive management
confirms to the Audit Committee once a year that these
key risks are being managed appropriately within their
operations, and that 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.
During the year ended 31 March 2009, the risk
assessment process was reviewed and changes were
made to the process across the Group. The enhanced
process broadly follows the Committee of Sponsoring
Organizations of the Treadway Commission (COSO)
Enterprise Risk Framework. The COSO framework
provides a process to manage the risk of failure to
achieve business objectives and assurance against
material loss or misstatement. A series of risk
assessments were carried out which culminated
in a workshop with the Group Executive Committee
at which the specific Group risks and the key risks
from each business area were considered. The output,
a Group Risk Assessment, was subsequently
reviewed by the Board.
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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 Group’s
businesses. These systems of internal control are
designed to manage rather than eliminate risk, and can
provide only 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 internal audit 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. These set out the
Group’s commitment to competence, integrity and
ethical values. The 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 four times a year;
■ the Chief Executive and Group Finance Director
undertake regular financial and operational reviews
of the major operating units within the Group;
■ 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 internal audit
function. The internal audit 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 internal
audit function, includes a Group-wide certification that
appropriate internal controls are in place to facilitate
the Board’s review of 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 no significant weaknesses were identified
in relation to the review conducted during the year
and accordingly no remedial action is required.
Tate & Lyle Annual Report 2009
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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 Group. 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.
Business Code of Conduct
Our Business Code of Conduct (the Code of Conduct)
governs our approach to corporate social responsibility.
The Code of Conduct applies unconditionally to all parts
of the wholly-owned Group, and we also aim to apply
the Code of Conduct 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 of Conduct.
A copy of the Code of Conduct can be found on
our website, www.tateandlyle.com. The Code of
Conduct sets out how we do business, explains what
stakeholders can expect from us and what we require
from our employees and look for in our business
partners. Doing business in a responsible manner is
not only in our long-term interests, but is in the interests
of all our stakeholders and of the environment.
This means operating to high social, ethical and
environmental standards in all circumstances.
Safety Tate & Lyle has no priority
higher 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
Overall, our employee safety performance
showed good progress in 2008, particularly in
reducing the severity rate. During another year of heavy
construction activity, we were pleased that our overall
contractor safety index also improved significantly,
although our lost-time and recordable injury rates
for contractors both worsened.
Employee safety results for calendar year 2008
Most locations equalled or improved on their 2007
performance, including 20 that reported no lost-time
accidents and 10 that reported no recordable injuries
for the year. Overall, we were pleased that our results
improved considerably compared with calendar year
2007 with all our measures showing an improved
performance other than the lost-time accident
rate which worsened slightly.
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Group safety index
Benchmark safety
recordable injury rate1
Benchmarking safety
lost-time accident rate2
US industry
4.20
US industry
2.10
4
8
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2
04
2
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1
4
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2
06
8
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2
07
6
1
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1
08
The smaller the index, the better the performance.
Our target is zero for every Tate & Lyle operation.
0
8
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A
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5
B
4
1
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2
C
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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
H Sucralose
Tate & Lyle
E Food & Industrial Ingredients, Americas
F Food & Industrial Ingredients, Europe
G Sugars
H Sucralose
1 Number of injuries per 200,000 employee hours
requiring more than first aid
2 Rate of accidents sufficiently serious to result
in lost workdays 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
– Group safety index (weighted average of injuries
sustained in the workplace across Tate & Lyle, with
more severe incidents having greater impact)
improved by 44.2%;
– Recordable injury rate (injury requiring treatment
beyond first aid) improved by 6.6%;
– 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) worsened
by 4.6%; and
– Severity rate (number of work days lost due to injuries
per 200,000 employee hours) improved by 63.4%.
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 2007 with the exception of the US corn refiners
whose results are from 2008. 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.
Contractor safety results for calendar year 2008
During another year of heavy construction activity, we
made significant efforts to improve our contractor safety
performance. Overall our contractor safety index rates
improved significantly, with all divisions reporting
improvements on the previous year. In particular, the
severity rate improved considerably, although both our
lost-time accident and recordable injury rates worsened
this year. We are pleased, however, that our contractor
safety statistics continue to compare favourably with
those reported by the US Bureau of Labor Statistics.
Compared with the 2007 calendar year results:
– Contractor safety index improved by 28.6%;
– Recordable injury rate worsened by 14.9%;
– Lost-time accident rate worsened by 37.6%; and
– Severity rate improved by 44.2%.
Benchmarking results
Contractor safety continues to compare well with
the US Bureau of Labor Statistics 2007 (the most
recent data available). The Bureau reports the overall
recordable injury rate per 200,000 employee hours for
US contractors to be 5.40 against 1.92 at Tate & Lyle,
and the overall lost-time accident rate to be 2.80
against our 0.76.
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How we run the business
Corporate social responsibility
continued
Contractor safety index
Benchmarking contractor safety
recordable injury rate1
Benchmarking contractor safety
lost-time accident rate2
7
7
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1
7
1
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2
3
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3
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A
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0
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3
6
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D
B
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1
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0
8
4
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2
1
A Food & Industrial Ingredients, Americas
B Food & Industrial Ingredients, Europe
C Sucralose
D Sugars
0
4
.
5
2
9
.
1
US industry
Tate & Lyle
1 Number of injuries per 200,000 employee
hours requiring more than first aid
0
8
.
2
6
7
.
0
US industry
Tate & Lyle
2 Rate of accidents sufficiently serious to result
in lost workdays 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
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;
– improving communications and sharing best
practice 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
The driving force behind our performance continues to
be our emphasis on behaviour, networking and sharing
best practice, auditing and the active involvement of
senior management to promote and audit safety
programmes. Our network safety committees focused
on a number of activities this year, including:
– Group-wide training and behavioural auditing;
– continuing to develop policies and procedures; and
– recognising and rewarding outstanding safety
performance through award schemes and by
marking significant milestones, both for
employees and contractors.
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.
2008 winners were:
– Large plant (over 250,000 employee hours
per year): Amylum Nisasta (Turkey)
– Small plant (fewer than 250,000 employee
hours per year): Dayton, Ohio (US)
– Most improved safety performance
– Europe: Amylum Nisasta (Turkey)
– Americas: Jurong Island (Singapore,
part of Sucralose division).
Outlook
We will concentrate on developing global safety
policies and procedures that can be easily shared
and referenced by all Tate & Lyle sites, and also audited
consistently. We will also review our benchmarking
and accident reporting procedures to ensure that
accurate data and comparisons can continue to be
made across our business units and to related outside
industries. Contractor safety training and physical and
behavioural auditing will continue to be key
activities at our sites.
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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 environmental
standards in all of our operations, and
we actively encourage our business
partners to demonstrate similar
levels of commitment.
Overview
All our locations fully integrate environmental
management into their operational systems and
procedures. The Board reviews environmental
performance and the policy annually. 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 which 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.
Environmental policy and mission statement
Tate & Lyle’s environmental policy applies to all parts
of the Group. A copy of the policy can be found on our
website, www.tateandlyle.com. The principles of the
policy are summarised in an environmental mission
statement which covers 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 our 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.
Calendar year 2008 results
We focus our measurement and our improvement
efforts on the areas that have most environmental
and financial impact. Compared with 2007 results:
– Energy consumption remained the same
– Water consumption increased by 3.7%
– Non-hazardous solid waste production
increased by 62%
Energy use is by far our most significant impact, and we
therefore give it the highest priority. Our particular focus
in 2008 was to minimise unit energy consumption during
start-up and expansion activities across the Group,
and the successful implementation of a wide range of
environment-related capital expenditure projects in
many of our plants.
Our energy consumption in 2008 remained the
same and, therefore, we did not meet our target
of a per unit 3% reduction. Increased energy usage
in our Americas and European ingredients businesses
due to construction and expansion activities was
offset by better performances in our Sugars and
Sucralose plants.
Group energy index
Group water index
Group non-hazardous
solid waste index
4
8
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The smaller the index, the better the performance
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The smaller the index, the better the performance
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The smaller the index, the better the performance
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How we run the business
Corporate social responsibility
continued
Both the Group water and non-hazardous solid
waste production indices increased during the year.
Improvements to both these indices are important
targets for 2009, not only because of the environmental
impacts, but also because improvements offer cost
savings. Every 1% improvement in our energy index
would save an estimated £2.3 million. An equivalent
improvement in the water index would save £120,000
and, in the non-hazardous solid waste index, £14,000.
These savings are per annum at 2008 input prices.
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 measures indirect
as well as direct emissions from the entire lifecycle
of a product or service.
We then rolled out a model to measure the primary
carbon footprint of our large sites across all our business
divisions. A primary carbon footprint measures the
carbon associated with production at a specific site,
covering emissions generated through the combustion
of fossil fuels and transport. The primary footprint is the
most applicable measure for a business-to-business
company, since the ingredients produced are then
used in a wide range of other goods.
Carbon footprint1
Tonnes of CO2 per tonne of production
9
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3
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08
Primary carbon footprint
Tate & Lyle’s primary carbon footprint in the 2008
calendar year across all its large sites was 0.33 tonnes
of CO2 per tonne of production. This represents a 15%
reduction from 0.39 tonnes in the 2007 calendar year.
Because this is a relatively new area of analysis, it is
difficult at this stage to benchmark our performance
against others. However, we expect that, by calculating
our carbon footprint, we will be much better able to
manage our overall impact on the environment as well
as using it to benchmark our own performance
year on year.
Secondary footprint – cane sugar
Raw cane sugar milling is almost carbon neutral.
Cane grows in the field, waste fibre from the cane
powers the factory and the cane regrows each year,
usually up to five times without the 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 London refinery will be reduced
by more than 20% when our new biomass boiler
comes on stream in 2009.
Investing in renewable energy sources
Reducing energy consumption gets more difficult
each year as we produce more value added products,
which typically 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 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. In 2009, our new £20 million
biomass boiler at our London refinery will come on
stream. This boiler will supply 70% of the refinery’s
energy requirements. Similar technology will be used
at our new corn wet mill at Fort Dodge, Iowa,
when it is completed and opened.
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FDF’s Five-fold Environmental Ambition
In 2008, as part of the UK Food and Drink Federation’s
(FDF) Five-fold Environmental Ambition, Tate & Lyle
signed up to two major environmental initiatives. 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
FDF and resource efficiency experts Envirowise. Then, in
July 2008, Tate & Lyle was one of 40 companies to sign
up to the FDF’s environmental ‘Checklist and Clause for
Greener Food Transport’ which encourages companies
to achieve fewer and friendlier food miles.
Violation, abatement and compliance orders
The vast majority of our operations completed 2008
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
‘External environment and risk management’ on page
27 and ‘Corporate Governance’ on page 68.
Measuring data
We collect detailed data and report results from
each operating unit quarterly, using a comprehensive
system that has been validated by our internal audit
function. 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.
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
Reducing per unit energy consumption and carbon
emissions will continue to be our major environmental
challenges in the year ahead. By continuing to invest
in reducing consumption per unit, 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.
Reducing road miles
Our target is to reduce road miles in
the UK by 2.1 million miles by the end
of 2009, as part of the UK Food and
Drink Federation’s aim to reduce the
impact of food transport by 20%
by 2012. A significant user of road
transport, we have already moved
bulk sugar distribution between our
London refinery and Glasgow from
road to rail freight, saving over
1.6 million road miles per year.
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How we run the business
Corporate social responsibility
continued
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.
Calendar year 2008 highlights
UK
Tate & Lyle’s nurse-led occupational health programme
emphasises education and prevention and has often
been referred to as a model for other businesses and
public sector organisations in the UK. Key initiatives
include educating employees in health and wellbeing,
and providing vocational rehabilitation as an alternative
to sickness absence certificates, as well as health
promotion activities, an occupational health clinic,
advice on healthy eating, and counselling services.
We also share elements of our programme with
partners. For example, we have helped two community
partners with absence management training and advice,
and we host regular visits from groups of trainee GPs
and doctors from Occupational Health Diploma courses
to help their understanding of occupational health in a
factory environment. We also offer work experience for
trainee occupational health nurses from South Bank
and Brunel Universities.
We were proud to receive external recognition of
the quality and benefits of our programme, winning
Gold in the UK Food and Drink Federation’s Community
Partnerships Awards for our Rehabilitation & Absence
Management Programme.
Europe
Many of our mainland Europe 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.
US
Tate & Lyle continues to provide programmes and tools
to help employees become better informed consumers
of their own healthcare services, as well as encouraging
them to adopt healthy lifestyles. Some examples of our
programmes include:
– ‘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 continues to be to raise the
standards of employee health and wellbeing throughout
Tate & Lyle, through sharing best practice and ideas
across the Company and with healthcare partners.
A particular focus for 2009 will be to make further
improvements to our successful UK active back
care management programme.
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Commercial partners/suppliers
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
amongst suppliers.
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
Cane sugar suppliers are key to the supply chains for
our EU sugar refineries. These are typically countries
that have preferential access to the EU sugar market,
implemented through the EU Sugar Regime. These
suppliers include those that we have long-standing
relationships with, such as the African, Caribbean
and Pacific (ACP) countries, as well as new suppliers
resulting from recent changes to EU legislation,
such as in the Lao People’s Democratic Republic.
In Vietnam, our suppliers are the sugar cane growers
themselves. Meanwhile, in our molasses business our
suppliers can be the same businesses that supply
our sugar refineries, or suppliers from other
parts of the world.
Auditing the supply chain
Our auditing programme, introduced in 2007,
is designed to evaluate the social, ethical and
environmental performance of our suppliers and to
identify any shortcomings. Where these are found, we
work with that supplier to encourage the necessary
improvement. We do not purchase our raw sugar from
farmers or sugar mills, but from contracting 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 therefore audit our second tier suppliers
including with some random sampling of farmers.
To ensure transparency, our audit programme is run by
Cert ID, an internationally recognised European auditing
body, which assesses our suppliers against a range
of social, ethical and sustainable criteria. During 2009
we will continue to use the process to address any
outstanding issues that arise from the audits, and
ensure that the process continues to help our suppliers
improve. Our aim is to have audited all suppliers at least
once by the end of 2010.
Fairtrade
Tate & Lyle’s ongoing commitment to Fairtrade saw
small-scale farmers in Belize receive nearly US$4 million
in Fairtrade premiums in 2008. The investment of this
premium has been divided between production, education
and social programmes that have had a direct benefit to
the 6,000 producers and their families. Looking forward,
there are plans to invest in longer-term projects to
develop the quality of the sugar cane as well as the
quantity of cane produced per acre.
Better Sugarcane Initiative
Tate & Lyle continues to work with Non Governmental
Organisations (NGOs), growers, unions, biofuels
companies, food manufacturers and other end users
to improve the social impact of sugar cane worldwide
through the Better Sugarcane Initiative (BSI).
Tate & Lyle chaired the BSI in 2008, which is developing
a practical standard that will make a real global
contribution towards reducing the environmental impact
of sugar cane production, the social aspects associated
with it and the products – mainly ethanol and sugar –
derived from it.
Corn
We purchase around 2% of the US corn crop each
year. The long-term relationships we have built up 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 16 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.
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How we run the business
Corporate social responsibility
continued
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.
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 and, for selected partners, free
use of the Company’s warehousing, office
accommodation and meeting room facilities.
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:
– Education – 50%;
– Environment – 25%;
– Health – 15%; and
– Arts – 10%.
Actual community spend by allocation
Year ended 31 March 2009
Arts
10%
Health
14%
Education
58%
Environment
18%
In the financial year ended 31 March 2009, Tate & Lyle’s
total worldwide charitable donations were £674,000,
up from £642,000 in the previous year, while our total
global pro bono contribution in goods and services
is estimated to have been £221,000, down from
£254,000 in the previous year. We support many
initiatives and local organisations involved in community
regeneration all around the world. Listed here is a
selection from each region in 2008.
UK
– Community Links: a local charity working to
regenerate the area of Newham in East London.
– Community Food Enterprise: a social food outlet
improving community access to fresh fruit and
vegetables in the East London area.
– Richard House Children’s Hospice: London’s first
hospice for terminally ill children, which we have
supported since it was founded in 1996.
– East London Business Alliance:
a regeneration agency for East London which
connects business to local people, alongside
public and community partners, to enable social,
economic and infrastructure change.
Americas
– United Way: employees from across the USA
donate through the payroll to this organisation
which gives money to local causes.
– Education: Tate & Lyle gives regular support to
a number of educational institutions including
Brush College, Associated Colleges of Illinois,
and Millikin and Purdue Universities.
– Boys & Girls Club: sponsorship of a Decatur
programme designed to inspire and enable young
people to realise their full potential.
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Vietnam
Our sugar business in Vietnam, Nghe An Tate & Lyle
(NAT&L), supports the following programmes:
– Roads: provincial and communal road
maintenance in the NAT&L cane catchment area.
– Schools: supplying text books and school stationery
for under-privileged children and funding for
outstanding students in primary,
middle and high school.
– University scholarships: funding for outstanding
students studying agriculture disciplines.
– Housing: contributing funds towards
housing units for farmers and their families.
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. Several
of the organisations we support have been partners
for over a decade.
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: 1,000 students and 100 teachers
visited Thames Refinery, Plaistow and Sugar Quay
during 50 curriculum-based visits.
– Gifted & Talented: Tate & Lyle continues to support
the UK Government’s programme for gifted and
talented children including, for secondary school
students, a ‘Science Challenge’ and for primary
school children a maths workshop.
US
– Supporting universities: Tate & Lyle supports a
number of research initiatives at local universities.
– Agricultural Day at Lafayette: employees from our
plants in Lafayette South and Sagamore volunteer
to help run the local agricultural day each year.
– Local fundraising and donations: many employees
from across our plants support local causes with
activities such as sponsored walks, food drives, and
donating clothing, gifts and supplies for schools.
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, 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 so that all parts of the Group develop mutually
beneficial long-term community partnerships.
Awards
While we do not actively seek or measure success in
terms of awards won, we value the external recognition
such awards convey. In 2008 we received a Silver Payroll
Giving Award in the UK which is given to businesses who
actively promote payroll giving in the workplace. We also
received a bronze award for our support for Caravan, a
UK charity set up to help support former employees of
the food manufacturing and retail sales industries.
Outlook
We continue to progress with integrating our community
efforts around the world, and to focus particularly on
sharing the benefits of our programmes with those
operations newer to the Group.
Actively supporting local charities
and communities
From helping disabled children ride
horses in Singapore, to sponsored
walks in the US and climbing
mountains in the UK (pictured,
employees doing the UK’s Three Peaks
Challenge), our employees everywhere
can be found supporting local charities
and communities. As well as Group-
organised events, many employees
take part in activities on their own
initiative, helping to ensure that we
play a full and positive part in the local
communities in which we operate.
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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
81 Directors’ report
84 Directors’ remuneration report
97 Index to the financial statements
98 Group financial statements
156 Parent company financial statements
164 Ten-year review (non-statutory)
166 Information for investors (non-statutory)
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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 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 6 to 58, and the corporate social responsibility
report is on pages 70 to 79. 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
A review of the results is on pages 32 to 58.
An interim dividend of 6.8p per ordinary share was paid on
9 January 2009. The directors recommend a final dividend
of 16.1p per ordinary share to be paid on 31 July 2009 to
shareholders on the register on 3 July 2009, subject to
approval at the 2009 Annual General Meeting (AGM). The total
dividend for the year is 22.9p per ordinary share (2008 – 22.6p).
Annual General Meeting
The AGM will be held at the Queen Elizabeth II Centre, Broad
Sanctuary, Westminster, London SW1P 3EE, on Thursday
23 July 2009 at 2.00 pm. The Notice of Meeting document
gives full details of the AGM.
Financial risk policies
A summary of the Company’s treasury policies and financial
risk management objectives, including exposure to associated
risks, is on pages 56 to 58.
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 of
control of the Company. There are no restrictions on voting
rights other than those outlined above on 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 2008 AGM to make
market purchases of up to 45,788,628 of its own ordinary
shares. The Company made no such purchases during the
year ended 31 March 2009. This authority will expire at the
2009 AGM and approval will be sought from shareholders for
a similar authority to be given for a further year.
To satisfy obligations under employee share plans, the
Company issued 102,335 ordinary shares during the year
and reissued 1,426,571 ordinary shares from treasury.
The Company did not issue any ordinary shares or reissue
any ordinary shares from treasury during the period from
1 April 2009 to 27 May 2009.
Further information about share capital is on page 133.
Information about options granted under the Company’s
employee share schemes is on pages 135 and 136.
Change of control
The Company has committed bank facilities of
US$1,130 million, of which US$130 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.
Share capital
At 31 March 2009, the Company had nominal issued ordinary
and preference share capital of £117 million comprising
£115 million in ordinary shares, including £1 million in treasury
shares, and £2 million in preference shares.
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.
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 such matters.
Further details regarding the rights and obligations attached
to share classes are contained in the Articles of Association,
available on www.tateandlyle.com.
Substantial shareholdings
At 27 May 2009, 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:
No. of
shares
INVESCO Limited
78,579,956
Harbinger Capital Partners LLC 60,037,554
AXA S.A.
26,686,761
Lehman Brothers
International (Europe)
Legal & General Group plc
Barclays Global Investors
18,122,510
18,062,288
17,568,133
% held
17.14%
13.09%
5.82%
3.95%
3.93%
3.59%
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Donations
Worldwide charitable donations during the year totalled
£674,000 (2008 – £642,000), of which £379,000 (2008 –
£412,000) was donated in the UK. More details of the Group’s
community involvement can be found on pages 78 and 79.
In line with Group policy, no political donations were made
in the EU during the year. Outside the EU, the Group’s US
business made contributions during the year totalling
US$48,000 (£28,000) (2008 – US$46,000; £23,000) to state
and national political party committees and to the campaign
committees of state candidates affiliated to the major parties.
The total includes US$23,000 (£13,000) (2008 – US$15,000;
£7,500) 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
Group policy is that UK operating companies should follow the
CBI Prompt Payers’ Code. The Code requires the Company
to agree terms of payment with suppliers, to ensure suppliers
are aware of those terms, and to abide by them. Our policy is,
wherever possible, to apply the requirements of the Code to
wholly-owned companies around the world.
Tate & Lyle PLC is a holding company and had no amounts
owing to trade creditors at 31 March 2009. The Group’s
creditor days outstanding at 31 March 2009 were 38 days
(2008 – 42 days).
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Directors’ report
Directors
Board directors and their biographies are on pages 60 and
61. Stuart Strathdee and Stanley Musesengwa ceased to be
directors with effect from 23 July 2008, and John Nicholas
ceased to be a director on 30 September 2008. Tim Lodge
was appointed an executive director and Group Finance
Director with effect from 4 December 2008. Sir Peter Gershon
was appointed a non-executive director and Chairman-elect
with effect from 1 February 2009.
Retirement and re-election of directors
The Company’s Articles of Association require all directors
to seek re-election by shareholders at least once every three
years. Any directors appointed by the Board must stand for
re-election at the first AGM following their appointment. Any
non-executive directors serving for more than nine years are
subject to annual re-election.
The directors standing for re-election this year are Iain
Ferguson and Robert Walker, last re-elected in 2006;
Sir Peter Gershon and Tim Lodge, appointed during the year;
and Sir David Lees, who has served for more than nine years.
Sir David, Robert Walker and Sir Peter 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 Company shares is on page 95.
Research and development
The Group spent £28 million (2008 – £32 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 115.
Group companies operate within a framework of HR policies,
practices and regulations appropriate to their 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 fully
according to their individual abilities and the needs of the
Group. The Group remains committed to the fair treatment
of people with disabilities regarding applications, training,
promotion and career development.
Training is concentrated on multi-skilling to encourage
flexibility. The Group runs a series of international programmes
to develop management skills and share 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, e-mail, intranet, briefings
and roadshows. These are designed to facilitate dialogue
while enabling the development of a common awareness
among employees of what affects business performance.
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Directors’ report
Directors’ responsibilities for the financial statements
The directors are responsible for preparing the annual report,
the directors’ remuneration report and the Group and the
parent Company financial statements in accordance with
applicable law and regulations.
Company law requires the directors to prepare financial
statements for each financial year. Under that law the directors
have prepared the Group financial statements in accordance
with International Financial Reporting Standards (IFRSs)
as adopted by the EU, and the parent Company financial
statements in accordance with applicable law and UK
Accounting Standards (UK Generally Accepted Accounting
Practice). The Group and parent Company financial
statements are required by law to give a true and fair
view of the state of affairs of the Company and the Group
and of the profit or loss of the Group 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;
state that the Group financial statements comply with
IFRSs as adopted by the EU, and with regard to the
parent Company financial statements that applicable UK
Accounting Standards have been followed, subject to any
material departures disclosed and explained in the financial
statements; and
■ prepare the Group and parent Company financial
statements on the going concern basis unless it is
inappropriate to presume that the Group will continue
in business, in which case necessary supporting
assumptions or qualifications should be given.
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 financial statements and the
Directors’ Remuneration Report comply with the Companies
Act 1985 and, as regards the Group financial statements,
Article 4 of the IAS Regulation. 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 are responsible for the maintenance and integrity
of the Company’s website. UK legislation governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
Each of the directors, whose names and functions are listed
on pages 60 and 61, confirms that, to the best of his/her
knowledge:
■
■
the Group financial statements, which have been prepared
in accordance with IFRSs as adopted by the EU, give a
true and fair view of the assets, liabilities, financial position
and profit of the Group; and
the directors’ report contained in the ‘What We Do’ and
‘How We Performed’ sections includes a fair review of
the development and performance of the business and
the position of the Group, together with a description
of the principal risks and uncertainties that it faces.
Disclosure of information to auditors
So far as each director is aware, there is no relevant audit
information of which the Company’s auditors are unaware;
and he/she has taken all the steps that he/she ought to have
taken 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
2009 AGM.
On behalf of the Board
Robert Gibber
Company Secretary
27 May 2009
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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
required by the Act (the tabular information on pages 90 to
95). A resolution to approve this report will be proposed at
the Annual General Meeting (AGM) on 23 July 2009.
Remuneration Committee
The Remuneration Committee (the Committee) comprises the
independent non-executive directors and the Chairman of the
Company. The following served during the year: Evert Henkes
(Committee Chairman), Elisabeth Airey, Richard Delbridge,
Sir David Lees, Robert Walker and Dr Barry Zoumas.
Sir Peter Gershon became a member of the Committee
on his appointment as a non-executive director and
Chairman-elect on 1 February 2009.
The Chief Executive, Human Resources Director – PLC,
Group Compensation Manager and Company Secretary and
General Counsel, who acts as Secretary to the Committee,
are normally invited to attend meetings, although not when
their own remuneration is discussed.
The Committee met 11 times during the year. Individual
members’ attendance records at meetings during the year
are given in the table on page 63.
The Committee’s terms of reference, which can be found on
www.tateandlyle.com, are reviewed annually to ensure they
reflect best practice.
The Committee reviews its work and effectiveness each year
and reports any recommendations to the Board. The 2009
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 Executive Committee (see page 62). This includes
base salary, benefits and other allowances, bonus, long-term
incentives and terms of employment, including those upon
which service may be terminated. Additionally, the Committee
approves the base salary, benefits and long-term incentives of
certain other senior executives. In consultation with the Chief
Executive, the Committee also determines the Chairman’s
remuneration. The Chairman does not participate in
discussions or decisions relating to his own remuneration.
The Committee is responsible for the long-term incentive
plans (LTIPs) operated by the Company.
To ensure that the Group’s remuneration practices remain
competitive, the Committee receives advice from independent
remuneration consultants. During the year, the Committee
reappointed Jeremy Orbell of Hewitt New Bridge Street
(Hewitt) to act as its principal adviser. 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 gets data from a Towers Perrin survey, and
Total Shareholder Return performance data and ranking
information for the Performance Share Plan (PSP) and
Deferred Bonus Share Plan (DBSP) from Kepler Associates.
Linklaters provides general legal advice on remuneration
matters. Hewitt, Towers Perrin and Kepler Associates
provided no other services to the Group. Linklaters gave
legal advice on a range of matters.
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. For executive directors and senior executives, the
policy is to provide packages that attract, motivate and retain
high-calibre individuals to manage the Group successfully for
the benefit of shareholders. They are designed to:
■ be competitive and commensurate with other UK-based
international businesses of similar size;
align the interests of executives and shareholders by
rewarding 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 will continue during the year
ending 31 March 2010.
Review of executive remuneration
Each year, with the help of its independent remuneration
adviser, the Committee reviews the appropriateness of
executive remuneration arrangements. During the year ended
31 March 2009 the Committee undertook a comprehensive
review to ensure that arrangements for executive directors
and others were fit for purpose and reflected both the
evolving strategic objectives and business needs of the Group
and changing competitive market trends and best practice.
The main conclusions were:
■
the overall approach to remuneration was generally well
aligned to Company performance and shareholder value;
for some executive roles, the levels of annual bonus or
long-term incentive opportunity were below the relevant
market median, but the Committee concluded that for the
executive directors these should, for the time being,
remain unchanged;
the annual bonus for division Presidents should give due
regard to the performance of their respective divisions;
for the PSP, an earnings per share performance measure
should be applied alongside the existing relative total
shareholder return (TSR) metric; and
to streamline the total remuneration package, the DBSP
should be suspended.
■
■
■
■
The changes to remuneration policy are explained in more
detail in the following sections.
Remuneration package
Composition
The current remuneration package for executive directors
consists of base salary, benefits and other allowances,
annual bonus, long-term incentives and pension. The
Company’s policy is to ensure that a significant proportion
of the total package is performance-related, at both target
and stretch levels.
The relative proportions of the Chief Executive’s and the
Group Finance Director’s remuneration, when valued at both
target and stretch performance levels (on the basis of the
award value of the long-term incentives which they would
normally be granted but excluding post-retirement benefits
and allowances paid in lieu of pensions), are shown in the
charts on the page opposite.
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Directors’ remuneration report
Target performance
Chief Executive
Non-performance-
related pay 53%
Group Finance Director
Non-performance-
related pay 55%
47%
Performance-
related pay
45%
Performance-
related pay
Stretch performance
Chief Executive
Non-performance-
related pay 29%
Group Finance Director
Non-performance-
related pay 31%
71%
Performance-
related pay
69%
Performance-
related pay
Base salary
Base salaries take account of the median relative to similar
companies (generally those occupying positions 50 to 130
of the FTSE rankings, 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. It considers the external economic
environment, market data, individual performance, the Group’s
financial performance and also the level of pay awards made to
other employees and executives elsewhere across the Group.
The Chief Executive’s base salary was reviewed on 1 April 2009.
No increase was awarded, consistent with the decision not to
award salary increases across Tate & Lyle for the 2010
financial year, with the exception of contractual and statutory
obligations and those obligations from previous negotiations
with Union-represented employees. Following his appointment
on 4 December 2008, the Group Finance Director’s base
salary will not be reviewed until 1 April 2010, in line with the
terms of his appointment.
Executive directors’ base salaries are shown in the table below.
Director
Iain Ferguson1
Tim Lodge
As at 1 April 2009 As at 1 April 2008
£726,000
£375,000
£726,000
–
1. As announced on 19 May 2009, Iain Ferguson will be leaving the Group
during the 2010 financial year.
Benefits and other allowances
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.
Tate & Lyle Annual Report 2009
Annual bonus scheme
Policy and award levels
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.
Annual bonuses payable under the scheme are capped at
100% of base salary or lower, depending on the executive’s
responsibilities. There is a threshold level below which
no bonus is paid. The Committee reviews the attainment
of 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 2009, the threshold, target and
maximum award level for executive directors was 10%, 50%
and 100% of base salary respectively.
Performance criteria for the scheme are set by the Committee
at the beginning of each financial year. In setting these targets,
the Committee considers the Group’s annual operating plan;
performance in previous years; market expectations; and the
prevailing economic climate.
To ensure that bonuses are not inflated or deflated as a result
of exchange rate movements, the Group profit before tax,
exceptional items and amortisation (PBTEA) numbers for
bonus purposes are restated 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.
Bonus for the year ended 31 March 2009
For the year ended 31 March 2009, the performance target
criteria consisted of threshold and target awards payable on
the achievement of a predetermined PBTEA level, and a
maximum award payable for the achievement of a PBTEA
level in excess of target performance. For bonus purposes,
PBTEA was based on the performance of the Group’s
continuing businesses (excluding the results of businesses
sold during the year).
The PBTEA achieved by continuing businesses for the year
ended 31 March 2009, restated on a constant exchange rate
basis, did not reach the threshold level of performance, and,
as a result, executive directors did not receive a bonus.
Executive directors and certain other senior executives used
to be offered the opportunity to invest up to 50% of their cash
bonus in Tate & Lyle shares through the DBSP. However, the
Committee has decided to suspend this arrangement for the
year ended 31 March 2009 and thereafter. Details of the
DBSP and an explanation of the Committee’s decision can
be found on page 87.
Bonus for the year ending 31 March 2010
For the year ending 31 March 2010, an operating cash flow
metric will be introduced as a secondary performance criterion
to supplement the existing PBTEA metric, weighted 75%
PBTEA, 25% cash flow. Reflecting current business
objectives, this emphasises the ongoing importance of cash
flow management, and will be reviewed at the end of the year.
Before any bonus becomes payable under the cash flow
metric, at least threshold PBTEA performance must be
achieved. Consistent with the treatment of PBTEA, the cash
flow numbers will be restated on the basis of exchange rates
used for the Group’s annual operating plan.
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Long-term incentive arrangements
The Committee believes that performance-based long-term
incentive plans (LTIPs) closely align executive directors’ and
senior executives’ interests with those of shareholders’ and
are therefore an important component of the overall package.
During the year ended 31 March 2009, the Company
operated two LTIPs, the Tate & Lyle 2003 PSP and the
Tate & Lyle 2005 DBSP.
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 and the authority to grant
options under this Scheme will expire in August 2010.
Performance Share Plan
Shareholders approved the 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.
Under the PSP, 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. This
is calculated by reference to the average of the daily closing
prices of Tate & Lyle ordinary shares preceding the beginning
of the performance measurement period. The average of the
daily closing prices is taken over six months for the awards
made in 2003 to 2008 and over three months for the 2009
award. The number of shares that a participant ultimately
receives depends on the Group’s performance during the
three-year performance period beginning on 1 April in the
year of the award.
TSR calculations are independently supplied by Kepler
Associates and reviewed by the Committee.
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. There is no retesting
of the performance conditions.
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. For awards made between
2003 and 2008, there is a one-year retention period so
shares arising from those awards 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. Following the executive
remuneration review, the Committee removed the one-year
retention period in line with market practice.
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
additional one-year retention period (PSP awards granted in
2003-2008), 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.
(i) 2003 to 2008 awards
For awards made from 2003 to 2008, performance is
measured by comparing the TSR (defined as share price
growth plus reinvested dividends) of Tate & Lyle relative to
a comparator group of companies. All share prices for the
purpose of the TSR calculation are based on a six-month
average. The Committee chose relative TSR for the PSP
since it closely aligns executives’ interests with those of
shareholders, being an objective measure of the value
created for shareholders. The comparator group consists
of the companies occupying positions 50 to 130 of the FTSE
rankings at the beginning of the relevant performance period.
The Committee considered this to be appropriate given the
Company’s position in the FTSE at the time of each grant. 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 be eligible to receive all of the shares conditionally
awarded to them. If the ranking is at the median level, 25%
of the shares may be received. No shares will be received
for below-median performance. For intermediate rankings
between median and upper quartile, participants may
receive a proportionate number of shares increasing on
a straight-line basis.
Details of the measurement of the performance condition for
the PSP award made in June 2006 are set out on page 89.
(ii) 2009 award
For awards to be granted in June 2009, the Committee has
decided to introduce a second performance criterion: 50%
of a participant’s annual award will be subject to the Group
meeting targets for adjusted diluted earnings per share
(EPS) from total operations. The other 50% of the award
will be subject to the same relative TSR performance used
in previous years (as explained above), although the TSR
calculation has been changed for the 2009 award from being
based on a six-month average period (as used for the awards
made in 2003 to 2008) to a three-month average period in line
with best practice. The vesting scale is shown below.
PSP vesting schedule – TSR measure
50%
37.5%
25%
12.5%
0%
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The Committee considers that the use of EPS alongside
relative TSR creates a balance between two commonly used
internal and external metrics, both being relevant measures
aligned to shareholder value.
For the 50% of the award relating to EPS performance to vest,
the compound annual growth rate (CAGR) of the Company’s
EPS over the three-year performance measurement period
must exceed the targets according to the vesting schedule
shown in the table below:
Annual CAGR of EPS during
the performance period
Percentage of total annual award which vests
0%
Below 5%
5%
12.5%
Between 5% and 15% On a straight line basis between
15% or more
12.5% and 50%
50%
Deferred Bonus Share Plan
Shareholders approved the DBSP at the AGM in July 2005.
However, as part of the executive remuneration review carried
out in 2008, the Committee concluded that the operation of
the DBSP should be suspended. The Committee believes that
this will help to streamline the total remuneration package, and
that the existing PSP, along with the executive shareholding
policy, sufficiently aligns the interests of the executives with
those of the shareholders.
Under the DBSP, executives had 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 for
awards made prior to 2008 and a performance condition
over the performance period, participants 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. Details of performance targets attached
to past awards made in 2005, 2006, 2007 and 2008 are
summarised on page 86. Details of the measurement of the
performance condition for the DBSP award in June 2006 are
set out on page 89.
Sharesave Scheme
This Scheme is open to all employees in the UK, including
executive directors. No performance conditions are attached
to options granted under the Scheme since it is an all-
employee scheme. Options granted to participants are
normally set at a discount of 10% to the market value of
the shares at the time of the 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.
Tate & Lyle Annual Report 2009
Dilution
To satisfy options granted under the 1992 Executive Share
Option Scheme (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
uses either Treasury shares or shares that have been
purchased by the Trustees of the Tate & Lyle Employee
Benefit Trust.
In the ten-year period to 31 March 2009, awards made under
the executive schemes represented 1.8% of the Company’s
issued ordinary share capital (2008 – 2.0%), leaving available
dilution headroom of 3.2% (2008 – 3.0%). Awards made
under all share schemes represented 3.1% of the Company’s
issued ordinary share capital (2008 – 3.6%) leaving available
dilution headroom of 6.9% (2008 – 6.4%).
Executive shareholding policy
To align the interests of executive directors with those of
shareholders, executive directors are expected to build and
maintain a shareholding in the Company equivalent to their
base salary. Executive directors who have not met their target
shareholding are expected to retain a significant proportion of
shares acquired through LTIPs in order to meet their target.
Pensions
Policy
Retirement benefits, in the form of pension and/or lump sums,
should reflect local market practice at median levels, and 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),
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. For the following
executive directors, both current and former, bonuses are
not pensionable.
Individual executive directors
Iain Ferguson is not a member of the Group Scheme for
pension purposes and accordingly has accrued no pension
benefits under it. He has been provided with life assurance
cover and has also participated 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. In accordance with Group policy he is paid
a cash allowance calculated as a percentage of base salary,
from which he makes his own pension arrangements.
Tim Lodge 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 subject to increases
in line with the UK Retail Price Index (RPI) up to a maximum
of 5%, with a minimum of 3%. Although the capital value of
his benefits were within the lifetime tax allowance at 5 April
2006, his continued accrual will ultimately result in a tax charge
under the new tax regime introduced on 6 April 2006.
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Former executive directors
Stanley Musesengwa, who left the Company on 31 July 2008,
is a member of the Group Scheme and accrued pension at
a rate of 1/30th of pensionable earnings for each year of
service. Before 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 this 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 have been restricted by a
scheme-specific earnings cap. His final pensionable earnings
were based on his highest basic salary in the last five
completed tax years before leaving, adjusted for the earnings
cap restriction explained above. The benefit also includes a
widow’s pension payable on his death, and, for the first four
months of the year ended 31 March 2009, he was covered
by a lump sum benefit which would have been payable upon
death in service. His pension and the contingent widow’s
pension are subject to increases in line with the RPI, as above.
Stuart Strathdee stepped down from the Board at the 2008
AGM but will remain with the Company until the end of July
2009. He 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 subject to annual
increases in line with the RPI as above.
During the year ended 31 March 2008, Stuart Strathdee
completed the maximum service that counts for pension
purposes, so over the current year he accrued no further
pensionable service. His accrued pension, however, was
increased in line with his pensionable earnings. 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.
John Nicholas left the Company on 30 September 2008.
He was not a member of the Group Scheme for pension
purposes and accordingly accrued no pension benefits under
it. He was paid a cash allowance calculated as a percentage
of base salary from which he made his own pension
arrangements. He was provided with life assurance cover and
also participated in the Group Income Protection Scheme.
On leaving service, John Nicholas’s participation in the Group
Income Protection Scheme and his life assurance cover ceased.
Details of the accrued pension benefits for those executive
directors who participate in the Group Scheme are given
on page 94. Details of amounts paid in lieu of pensions are
included in the table on page 90, under pension allowance.
Service contracts
Policy
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 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.
Executive directors
All the executive directors have contracts 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 contract for Iain Ferguson, 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 service contract
for Tim Lodge also entitles the Company to make staged
payments of pay in lieu of notice given by the Company. 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.
The details of the executive directors’ service contracts as at
31 March 2009 are given in the table below.
Director
Iain Ferguson1
Tim Lodge
Date of
contract
15/04/03
04/12/09
Unexpired
term
(weeks)
Notice
period
(weeks)
52
52
52
52
1. As announced on 19 May 2009, Iain Ferguson will be leaving the Group
during the 2010 financial year.
Former executive directors
Stuart Strathdee and Stanley Musesengwa retired as
executive directors and stepped down from the Board at the
2008 AGM. Since then, Stuart Strathdee has remained an
employee working on strategic development. His salary
remains at £343,000 per annum but will not be reviewed
again before he leaves the Group on 31 July 2009. He is
eligible to participate in the annual bonus scheme although
any payment will be pro-rated for the year ending 31 March
2010 for actual time served. He continues to be provided with
a company car and health insurance.
Stanley Musesengwa and John Nicholas left the Company
after stepping down from the Board and payments as
compensation for loss of office made to them pursuant to
the terms of their service contracts are detailed on page 90.
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 continued thereafter terminable by
the Company or Sir David Lees on not less than one year’s
notice. As announced on 28 November 2008, Sir David Lees
will leave the Company by the end of the 2009 calendar
year at which time he will be replaced as Chairman by
Sir Peter Gershon.
Following the most recent review of his fees on 1 October
2008, the Remuneration Committee approved an increase
in the Chairman’s fee to £340,000 (2008 – £330,500).
Chairman-elect
Sir Peter Gershon was appointed as a non-executive director
and Chairman-elect from 1 February 2009. The Remuneration
Committee approved an initial fee of £100,000 per annum,
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Directors’ remuneration report
increasing to £275,000 per annum upon his appointment
as Chairman.
Tate & Lyle’s five-year cumulative total shareholder return
Value of £100 invested on 31 March 2004
Non-executive directors
Non-executive directors’ fees, reviewed annually by the Board,
are set at a level to retain individuals with the necessary
experience and ability to make a substantial contribution to
the Group’s affairs. Fees paid are commensurate with those
paid by other UK listed companies. 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 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.
Non-executive directors have no right to compensation
on the early termination of their appointment.
The most recent review of non-executive directors’ fees, on
1 April 2009, concluded that having regard to levels of pay
increases elsewhere in the Group, it was appropriate that
there should be no change in any of the fees. The fees are
shown in the table below.
Basic fees (per annum)
Non-executive director and
Chairman-elect1
Non-executive director
Senior Independent Director
Supplements (per annum)
As at
1 April 2009
As at
1 April 2008
£100,000
£48,000
£54,500
–
£48,000
£54,500
As at
1 April 2009
As at
1 April 2008
Chairman of Audit Committee
Chairman of Remuneration Committee
Chairman of Research Advisory Group
£15,000
£10,000
£21,000
£15,000
£10,000
£21,000
1. Sir Peter Gershon was appointed to the Board as a non-executive
director and Chairman-elect from 1 February 2009.
External appointments
The Board believes that the Company benefits from executive
directors holding non-executive directorships. Such
appointments are subject to approval by the Board and
are normally restricted to one for each executive director.
Fees may be retained by the executive director concerned.
Iain Ferguson is a non-executive director of Greggs plc
(appointed from 31 March 2009), from which he retains the
fees payable of £35,500 per annum.
Total shareholder return 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 the FTSE 100
Index over the past five years. The FTSE 100 Index is
considered to be an appropriate benchmark for this purpose
as it is a commonly used comparison for companies of
Tate & Lyle’s size. The graph shows the TSR for the FTSE 100
Index and Tate & Lyle in the five years from 31 March 2004.
Tate & Lyle Annual Report 2009
£
250
200
150
100
50
Tate & Lyle
FTSE 100 Index
March 04
March 05
March 06
March 07
March 08
March 09
Source: Kepler Associates
2005 PSP and DBSP awards – TSR performance
As stated in last year’s annual report, Tate & Lyle’s TSR
performance was below the minimum required median
performance. Accordingly the PSP award in June 2005 did
not vest and lapsed; participants in the DBSP award in August
2005 who remained in continuous employment for the three-
year performance period received one matching share for every
three lodged shares during the year ended 31 March 2009.
2006 PSP and DBSP awards – TSR performance
As shown in the chart below, for the performance period from
1 April 2006 to 31 March 2009 in relation to the PSP and
DBSP awards made in June 2006, Tate & Lyle’s share price
growth and dividend yields resulted in a TSR that ranked
Tate & Lyle 43rd (47th percentile) in the comparator group of
companies (those occupying positions 50 to 130 in the FTSE
rankings at the start of the measurement period). This is below
the minimum required median performance, and, as such,
the 2006 PSP award did not vest and has lapsed. There is
no retesting of the performance condition.
DBSP participants who have remained in continuous
employment for the three-year performance period will
receive one matching share for every three lodged shares.
2006 PSP and DBSP awards total shareholder return
Tate & Lyle and the comparator group (FTSE 50 to 130)
1 April 2006 to 31 March 2009
R
S
T
r
a
e
y
-
3
%
150
100
50
0
-50
-100
Tate & Lyle
-27.3%
Bottom
quartile
Third
quartile
Second
quartile
Top
quartile
Each bar in the chart represents a company in the comparator group.
Source: Kepler Associates
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Directors’ emoluments
The following table shows the directors’ emoluments for the year ended 31 March 2009.
Salary
and fees
£000
Pension
allowance
£000
Benefits
and other
allowances1
£000
Annual
bonus
£000
Compensation
for loss
of office
£000
Chairman
Sir David Lees
Executive directors
Iain Ferguson
Tim Lodge2
Non-executive directors
Elisabeth Airey
Richard Delbridge
Sir Peter Gershon3
Evert Henkes
Robert Walker
Dr Barry Zoumas
Former directors
Stanley Musesengwa4
John Nicholas5
Stuart Strathdee6
Directors who retired before
31 March 2008
335
726
121
58
59
17
58
48
69
157
209
107
–
–
290
–
–
–
–
–
–
–
–
52
–
–
22
28
3
–
–
–
–
–
–
4
7
4
–
Totals
1 964
342
68
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
year to
31 March
2009
£000
Total
year to
31 March
2008
£000
357
348
1 044
124
1 264
–
58
59
17
58
48
69
1 332
878
111
–
47
68
–
55
47
68
675
664
463
35
–
–
–
–
–
–
–
–
–
1 171
610
–
–
1 781
4 155
3 734
1. Benefits for the Chairman and executive directors include the provision of a car (or cash allowance in lieu). Other benefits for 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. Tim Lodge was appointed to the Board from 4 December 2008 as Group Finance Director having previously held a number of positions within the Company.
The figures in the table above relate to the period he served as a director during the year.
3. Sir Peter Gershon was appointed to the Board as a non-executive director and Chairman-elect from 1 February 2009.
4. Stanley Musesengwa left Tate & Lyle at the end of July 2008. Compensation for redundancy and loss of office and other amounts payable under the terms
of his statutory and contractual leaving arrangements amounted to £417,425 plus an augmentation to his accumulated pension value of £754,000 as
described in note 5 on page 94. He was also eligible to receive a bonus in respect of the period from 1 April to 31 July 2008, but the minimum performance
criteria were not met and no bonus was payable. From the time he stepped down from the Board on 23 July 2008 until leaving he was paid £10,968 for
services provided as an employee.
5. John Nicholas stepped down from the Board and left the Company on 30 September 2008. Compensation for loss of office represents payments of £610,250
under the terms of his contractual leaving arrangements. He was also eligible to receive a bonus in respect of the period from 1 April to 30 September 2008
but the minimum performance criteria were not met and no bonus was payable.
6. Stuart Strathdee stepped down from the Board at the 2008 AGM but remained an employee. For the period during the year in which he did not serve as
a director he was paid a salary of £236,124 and received non-cash benefits of £9,230. He was also eligible to receive a bonus in respect of the year but the
minimum performance criteria were not met and no bonus was payable.
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Performance Share Plan – directors’ interests
Conditional rights to receive Tate & Lyle PLC ordinary shares under the PSP held by directors at 1 April 2008 (or date of appointment
if later) and 31 March 2009 (or date of cessation if earlier), together with awards made during the year, were as follows:
Conditional awards
held at 1 April 2008
(or date of
appointment if later)
Conditional
Deferred
Conditional
awards
becoming
eligible Conditional
awards
lapsed
in year3
for release
during
the year2
Conditional
awards
made
during
the year1
535 071
57 858
192 401
–
234 183
–
192 401
–
199 508
–
312 888
142 538
213 093
137 779
–
91 309
–
112 092
–
137 779
–
91 309
118 339
112 092
80 745
Directors
Iain Ferguson
Tim Lodge4
Former directors
Stanley Musesengwa5
John Nicholas6
Stuart Strathdee5
Conditional
awards
deferred
during
Conditional awards held at
31 March 2009
(or date of cessation if earlier)
the year Conditional
Deferred
–
–
–
–
–
569 746
57 858
194 549
142 538
132 348
–
–
–
–
–
Eligible
for release
192 401
–
137 779
–
91 309
1.
2.
The performance period for the awards made during the year is from 1 April 2008 to 31 March 2011. The closing mid-market share price on 19 June 2008
(the date of the 2008 award) was 394.25p.
The awards which became eligible for release during the year relate to the conditional awards made in 2004 which were converted into deferred shares
on 1 April 2007 and, in accordance with the rules of the PSP, became eligible for release on 1 April 2008. The closing mid-market share price on that day
was 541.50p.
Tim Lodge was appointed as a director with effect from 4 December 2008.
3. On 1 April 2008, 100% of the conditional awards made in 2005 lapsed because performance conditions were not met.
4.
5. Stanley Musesengwa and Stuart Strathdee ceased to be directors on 23 July 2008.
6.
John Nicholas ceased to be a director on 30 September 2008. The conditional awards made to him during the year lapsed on cessation, in accordance with
the rules of the PSP.
Awards made under the PSP are structured as nil-cost options and the performance conditions attaching to the awards made under
the PSP are described on page 86.
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Deferred Bonus Share Plan – directors’ interests
Conditional rights to receive matching shares over Tate & Lyle PLC ordinary shares under the DBSP held by directors at 1 April 2008
(or date of appointment if later) and 31 March 2009 (or date of cessation if earlier), together with awards made during the year, were
as follows:
Shares
acquired
with net
bonus at
1 April 20081
Shares
acquired
with
net bonus
during year
Shares
acquired
with net
bonus at
31 March
Maximum
matching
shares
on gross
bonus at
2009 2 1 April 20081
Maximum
matching
shares
awarded
during
the year
Matching
shares
released
during
the year 3,7
Matching
shares
lapsed
during
the year
Maximum
matching
shares
on gross
bonus at
31 March
2009 2,7,8
Directors
Iain Ferguson
Tim Lodge4
Former directors
Stanley Musesengwa5
John Nicholas6
Stuart Strathdee5
95 965
2 003
58 519
16 596
13 197
–
–
–
–
–
95 965
2 003
325 305
6 790
58 519
16 596
13 197
198 369
56 258
44 736
–
–
–
–
–
21 428
–
107 138
–
196 739
6 790
–
–
–
61 378
–
17 797
136 991
56 258
26 939
1. Or date of appointment if later.
2. Or date of cessation if earlier.
3.
The matching shares, representing the minimum one-for-three share match based on continued employment, were released on 29 July 2008 and the closing
mid-market share price on that day was 391.00p.
Tim Lodge was appointed as a director with effect from 4 December 2008.
4.
5. Stanley Musesengwa and Stuart Strathdee ceased to be directors on 23 July 2008.
6.
7.
John Nicholas ceased to be a director on 30 September 2008.
For awards made in 2005, 2006 and 2007, vesting is determined as follows:
■
■
■
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; or
for TSR during the three-year performance period of between median and upper quartile of the companies positioned 50 to 130 of the FTSE Index at the
start of the performance period, one matching share will be awarded for each lodged share; or
for TSR during the three-year performance period against the upper quartile of the companies positioned 50 to 130 of the FTSE Index at the start of the
performance period, two matching shares will be awarded for each lodged share.
8.
For awards made in 2008 (i.e. the last awards made under the DSBP prior to suspension of the arrangement), vesting is determined as follows:
■
■
for TSR during the three-year performance period of median against the companies positioned 50 to 130 of the FTSE Index at the start of the
performance period, one matching share will be awarded for each lodged share; increasing on a pro-rata basis so that
for TSR during the three-year performance period against the upper quartile of the companies positioned 50 to 130 of the FTSE Index at the start of the
performance period, two matching shares will be awarded for each lodged share.
9.
The notional aggregate gain made by directors on the exercise of options during the year was £83,783 (2008 – nil).
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Directors’ remuneration report
Share Option Schemes – directors’ interests
Options over Tate & Lyle PLC ordinary shares each granted under the 1992 and 2000 Executive Share Option Schemes (1992
ESOS and 2000 ESOS respectively) and Sharesave Scheme and held by directors as at 1 April 2008 (or date of appointment if later)
and 31 March 2009 (or date of cessation if earlier), and during the year, were as follows:
Earliest
exercise
date
Latest
exercise
date
Notes
Directors
Iain Ferguson
Tim Lodge3
Former directors
Stanley Musesengwa4
John Nicholas5
Stuart Strathdee4
At 1 April
20081
Exercised
during
the year
Granted
during At 31 March
20092
the year
245 718
272 307
6 032
–
524 057
4 253
4 253
130 000
2 310
132 310
1 319
55 845
86 153
263
1 423
143 684
–
–
6 032
–
6 032
–
–
–
3 988
3 988
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
245 718
272 307
–
3 988
522 013
4 253
4 253
130 000
2 310
132 310
1 319
55 845
86 153
263
1 423
143 684
Exercise
price
(pence)
335.75
325.00
264.00
408.00
18.06.06
18.06.07
01.08.08
01.08.13
17.06.13
17.06.14
31.01.09
31.01.14
395.00
01.03.11
31.08.11
325.00
410.00
18.06.07
01.03.08
17.06.14
31.08.08
716.00
01.03.10
31.08.10
335.75
325.00
716.00
531.00
18.06.06
18.06.07
01.03.10
01.08.10
17.06.13
17.06.14
31.08.10
01.01.11
6
6
7
7
7
6
7
7
6
6
7
7
John Nicholas ceased to be a director on 30 September 2008.
Tim Lodge was appointed as a director with effect from 4 December 2008.
1. Or date of appointment if later.
2. Or date of cessation if earlier.
3.
4. Stanley Musesengwa and Stuart Strathdee ceased to be directors on 23 July 2008.
5.
6. Granted between 2000 and 2004 under the 2000 ESOS. 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 exceeded the growth in the UK Retail Price Index excluding mortgage interest
payments by an average of at least 3% per year (9.3% over three years), then 50% of options granted could be exercised; or by 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 ESOS have met their performance
condition and are exercisable.
7. Granted under the Sharesave Scheme. Since it is an all-employee share scheme, no performance conditions are attached.
8. No other options were lapsed or exercised during the year under the 1992 ESOS, the 2000 ESOS or the Sharesave Scheme, save as disclosed above.
The closing mid-market share price on 1 August 2008 (the day on which Iain Ferguson exercised his Sharesave options) was 388.50p.
The notional aggregate gain made by directors on the exercise of options during the year was £7,510 (2008 – nil).
9.
The market price of the Company’s ordinary shares at the close of business on 31 March 2009 was 260.50p, and the range during
the year to 31 March 2009 was 229.50p to 543.50p.
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Directors’ remuneration report
Directors’ pension provision
Tim Lodge, 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
Increase
Transfer
value of
increase
(decrease)
in accrued
(decrease) pension (net
of inflation)
in accrued
less
pension
directors’
during the
contribu-
year (net of
tions5
inflation)4
£000
£000
Transfer
value of
accrued
pension
at start
of year6
£000
Transfer
value of
accrued
pension at
year-end7
£000
Increase
in transfer
value for
the year
less
directors’
contribu-
tions8
£000
Accumulated
total
accrued
pension at
year-end1
£000
Directors’
contribu-
tions
during
the year2
£000
Increase
in accrued
pension
during
the year3
£000
Age at
31 March
2009
£000
Directors
Tim Lodge
Former directors
Stanley Musesengwa9
Stuart Strathdee
44
56
57
105
106
222
2
5
–
34
50
–
33
432
934
1 395
459
49
(11)
967
(237)
1 050
4 650
2 098
4 740
1 043
90
1.
2.
3.
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 2009. The figure shown for Stanley Musesengwa includes his accrued
deferred pension as at 23 July 2008 when he stepped down from the Board. The augmentation that was granted to him on 31 July 2008, after converting
the immediate pension granted to a deferred pension using the Scheme’s early retirement factors, has been included.
For each director, the figure represents the contributions paid over the year. For Tim Lodge it represents the contributions paid since his appointment.
For each director, the figure represents the difference between the total accrued pension at 31 March 2009 and the corresponding accrued pension at the
beginning of the year. For Stanley Musesengwa and Stuart Strathdee, their accrued pensions at 31 July 2008, rather than 31 March 2009, have been used.
For the former, this includes the augmentation described in note 5. No allowance is made for inflation.
4. As note 3, except that the figures quoted include an adjustment for inflation in accordance with the Listing Rules of the Financial Services Authority.
5.
The figures shown represent the transfer value of the inflation-adjusted increase in the total accrued pension for the year, net of Directors’ own contributions.
Stanley Musesengwa 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 was
minimal and significantly less than would have been the case had he served in the UK. Accordingly, as part of his termination arrangements, the Committee
decided to augment his total accumulated pension value by £754,000, which, taken together with his compensation for loss of office described in note 4 on
page 90, represented an ex gratia enhancement of around £290,000 in excess of his contractual entitlement. This brought 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 Musesengwa will still be very considerably less than a comparable director who had completed his service
in the UK.
The figures shown represent the transfer value of the accumulated total accrued pension as at the beginning of the year or date of appointment in the case
of Tim Lodge.
The figures shown represent the transfer value of the accumulated total accrued pension at 31 March 2009. During the course of the year the actuarial basis
used by the Tate & Lyle Group Pension Scheme 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 which applied at 31 March 2009. 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 the beginning of the year or date of appointment in the case of Tim Lodge to 31 March
2009. The transfer values quoted have been calculated using the actuarial bases which applied at each reporting date, net of the directors’ own contributions.
6.
7.
8.
9. As a result of the changes to the taxation of UK pension benefits that took effect from 6 April 2006, benefits accrued by Stanley Musesengwa in respect of
service after that date are no longer subject to a cap on pensionable earnings. As a result, from 6 April 2006 the cash salary supplement previously paid
to him in lieu of pension benefits in excess of the earnings cap ceased. The earnings cap continued to apply to benefits accrued in respect of his service
prior to 6 April 2006.
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Directors’ remuneration report
Directors’ interests in Tate & Lyle shares
Elisabeth Airey
Richard Delbridge
Iain Ferguson2
Sir Peter Gershon3
Evert Henkes
Sir David Lees
Tim Lodge2,4
Robert Walker
Dr Barry Zoumas
Ordinary shares
At 31 March
2009
At 1 April
20081
16 000
50 000
232 735
34 700
1 000
70 000
26 818
10 265
27 000
9 000
45 000
204 092
–
1 000
60 000
26 818
3 665
13 000
1. Or date of appointment if later.
2.
The number of shares shown as at 31 March 2009 for Iain Ferguson and Tim Lodge includes shares acquired in relation to the DBSP as detailed in the table
on page 92.
3. Sir Peter Gershon was appointed as a director with effect from 1 February 2009.
Tim Lodge was appointed as a director with effect from 4 December 2008.
4.
All of the above interests are beneficially held and no director had interests in any class of shares other than ordinary shares.
There were no changes in directors’ interests in the period from 1 April 2009 to 27 May 2009.
On behalf of the Board
Evert Henkes
Chairman, Remuneration Committee
27 May 2009
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Directors’ remuneration report
Appointment of new Chief Executive
Since the year end, in order to facilitate the recruitment
of Javed Ahmed as Chief Executive, the Remuneration
Committee established the following incentive arrangements,
which apply only to Mr Ahmed. These were required to
compensate Mr Ahmed for significant retention incentives
and bonus entitlements he was required to forego with his
former employer as a consequence of joining Tate & Lyle.
The special compensatory arrangements take the form of
a cash payment for the year during which Mr Ahmed joins
the Company and a series of special awards of shares in
the Company as detailed below.
Mr Ahmed’s base salary, which will next be subject to review
in April 2010, will be £675,000 per annum. He will participate
in the annual cash bonus scheme with threshold, target and
maximum bonus payment levels of 10%, 75% and 150%.
In the year ending 31 March 2010, Mr Ahmed will, subject
to certain conditions, be entitled to a compensatory cash
payment, to recognise the value of bonus payments foregone
with his former employer, equal to 75% of his base salary,
payable on 31 March 2010. His entitlement to bonus under
the Tate & Lyle annual cash bonus scheme in that year will
be reduced by this compensatory cash payment.
The compensatory awards described below are designed
to compensate Mr Ahmed for certain long term incentives
given up by him as a consequence of his leaving his
former employer and to provide an appropriate degree
of performance-based incentivisation for an incoming
Chief Executive in the prevailing market and business
circumstances of the Company. The long-term incentive
awards described below are designed to provide a suitable
ongoing incentive during the early years of his career with
Tate & Lyle. Unless otherwise stated, all awards are on terms
similar to those set out in the Company’s Performance Share
Plan (‘PSP’).
Compensatory awards
Compensatory awards, to compensate for the loss of share
benefits relating to Mr Ahmed’s previous employment,
as follows:
■
■
£1,750,000 worth of shares (determined on the basis of
the average of the closing share prices of ordinary shares
of Tate & Lyle PLC on each of the five days following the
date on which Mr Ahmed joins Tate & Lyle) to be delivered
on the second anniversary of that date. Pending delivery
of those shares, Mr Ahmed will receive from the Company
a payment in lieu of dividend, which will be subject to
deduction of tax in the normal fashion, equivalent to any
dividend which would otherwise be payable on those
shares. In the event of a change of control, all the shares
will be delivered as soon as practicable.
£1,125,000 worth of shares (determined on the same
basis) will be delivered subject to the same performance
condition as applies to awards made under the PSP in
2008. Performance will be measured and the relevant
number of shares released after the performance period
ends on 31 March 2011, in parallel with the corresponding
releases under the PSP.
■
£1,500,000 worth of shares (determined on the same
basis) will be delivered subject to the same performance
condition as applies to awards which are to be made
under the PSP in 2009. Performance will be measured
and the relevant number of shares released after the
performance period ends on 31 March 2012, in parallel
with the corresponding releases under the PSP.
Long-term incentive awards
■ An award of shares (‘2009 LTI Award’) with a value of
£2,025,000, calculated according to the share price
applicable to awards which are to be made under the PSP
in 2009 (‘2009 PSP Awards’). The 2009 LTI Award will be
subject to the same performance condition as applies to
2009 PSP Awards. Performance will be measured and the
relevant number of shares released after the performance
period ends on 31 March 2012, in parallel with the
corresponding releases in respect of the 2009 PSP Awards.
■ An award of shares (‘2010 LTI Award’) with a value of
three times base salary, calculated according to the share
price applicable to the Company’s 2010 PSP Awards. The
2010 LTI Award will be subject to the same performance
condition as applies to the 2010 PSP Awards. Performance
will be measured and the relevant number of shares
released after the performance period ends on 31 March
2013, in parallel with the corresponding releases in respect
of the 2010 PSP Awards.
■ An award of shares (‘2011 LTI Award’) with a value of
three times base salary, calculated according to the share
price applicable to the Company’s 2011 PSP Awards. The
2011 LTI Award will be subject to the same performance
condition as applies to the 2011 PSP Awards. Performance
will be measured and the relevant number of shares
released after the performance period ends on 31 March
2014, in parallel with the corresponding releases in respect
of the 2011 PSP Awards.
Shareholding requirement
Mr Ahmed is required to accumulate a shareholding in
Tate & Lyle equivalent to four times base salary within
five years of joining the Company.
Service agreement
Mr Ahmed has agreed to enter into a service contract with
the Company upon his appointment which is in line with the
existing contracts with executive directors. That contract will
be terminable by the Company on one year’s notice and by
Mr Ahmed on six months’ notice (expiring, in either case, no
earlier than the second anniversary of his start date).
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Index to the financial statements for the year to 31 March 2009
Main Headers
98
Independent Auditors’ Report to the Members
of Tate & Lyle PLC: Group financial statements
99 Consolidated income statement
100 Consolidated statement of recognised income
and expense
101 Consolidated balance sheet
102 Consolidated cash flow statement
103 Notes to the consolidated financial statements
103
104
109
110
112
113
114
114
115
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
146 32 Provisions for other liabilities and charges
146 33 Change in working capital
147 34 Cash and cash equivalents
147 35 Net debt
148 36 Contingent liabilities
148 37 Commitments
149 38 Acquisitions and disposals
150 39 Post balance sheet events
151 40 Related party disclosures
152 41 Foreign exchange rates
152 42 Main subsidiaries and investments
155 43 Reconciliation to adjusted information
156 Independent Auditors’ Report to
the Members of Tate & Lyle PLC:
parent company financial statements
157 Parent company balance sheet
158 Notes to the parent company financial
116 10 Finance income and finance expense
statements
116 11 Income tax expense
117 12 Discontinued operations
119 13 Earnings per share
120 14 Dividends
120 15 Goodwill and intangible assets
121 16 Property, plant and equipment
123 17 Investments in associates and joint ventures
124 18 Available-for-sale financial assets
125 19 Financial instruments by category
158
160
160
160
160
161
161
161
161
1 Parent company accounting policies
2 Tangible fixed assets
3 Investments in subsidiary undertakings
4 Investment in associates
5 Debtors
6 Creditors – due within one year
7 Creditors – due after more than one year
8 Deferred tax
9 Provisions for liabilities and charges
126 20 Derivative financial instruments
161 10 Contingent liabilities
127 21 Financial risk factors
131 22 Inventories
162 11 Financial commitments
162 12 Called up share capital
131 23 Trade and other receivables
162 13 Reconciliation of movements
133 24 Share capital and share premium
134 25 Consolidated statement of changes
in shareholders’ funds
163 14 Related parties
in shareholders’ equity
163 15 Profit and loss account disclosures
134 26 Other reserves
135 27 Share-based payments
137 28 Trade and other payables
137 29 Borrowings
140 30 Deferred tax
141 31 Retirement benefit obligations
163 16 Dividends
Information for shareholders
(non-statutory)
164 Ten-year review
166 Information for investors
167 Useful addresses and telephone numbers
Tate & Lyle Annual Report 2009
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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 2009, 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
2009 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 ‘What we do’ and
‘How we performed’ sections that are 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 unaudited part of the directors’ remuneration
report, 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 2009 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
27 May 2009
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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
(Loss)/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 adjusted profit before tax from continuing operations
Statutory profit before tax
Add back:
Exceptional items
Amortisation of acquired intangible assets
Notes
4, 5
4, 6
10
10
11
12
13
13
14
8
15
Adjusted profit before tax, exceptional items and amortisation of acquired intangible assets
The notes on pages 103 to 155 form part of these Group financial statements.
Year to 31 March
2009
£m
2008
£m
3 553
2 867
164
27
(78)
113
(19)
94
(24)
70
65
5
70
224
38
(80)
182
(76)
106
81
187
194
(7)
187
pence
pence
14.2
14.1
19.5
19.4
6.8
16.1
22.9
£m
113
119
15
247
40.9
40.4
23.8
23.6
6.5
16.1
22.6
£m
182
59
12
253
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Consolidated statement of recognised
income and expense
Net exchange differences
Net actuarial loss on retirement benefit obligations
Net (loss)/gain on cash flow hedges
Gain/(loss) on revaluation of available-for-sale financial assets
Net income 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 103 to 155 form part of these Group financial statements.
Notes
31
26
18
25
Year to 31 March
2008
£m
57
(7)
1
(3)
48
187
235
242
(7)
235
2009
£m
139
(40)
(25)
24
98
70
168
157
11
168
100
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Consolidated balance sheet
31 March
2009
£m
31 March
2008
£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
Ordinary share capital
Share premium
Capital redemption reserve
Other reserves
Retained earnings
Minority interests
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
TOTAL LIABILITIES
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
15
16
17
18
20
30
23
31
22
23
20
34
18
24
24
25
26
25
25
25
28
29
20
30
31
32
28
29
20
32
374
1 548
8
11
34
30
5
47
2 057
538
723
6
213
434
28
1 942
3 999
115
404
8
219
241
987
26
1 013
11
1 129
57
78
258
21
1 554
538
77
523
283
11
1 432
2 986
3 999
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
1 180
488
35
360
267
54
1 204
2 384
3 334
The Group financial statements were approved by the Board of Directors on 27 May 2009 and signed on its behalf by:
Sir David Lees, Iain Ferguson, Tim Lodge
Directors
The notes on pages 103 to 155 form part of these Group financial statements.
Tate & Lyle Annual Report 2009
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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/(used in) discontinued operations
Net cash 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
Disposal of businesses
Purchase of property, plant and equipment
Purchase of other intangible assets
Net cash (used in)/generated from 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 used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents
Balance at beginning of year
Effect of changes in foreign exchange rates
Net increase/(decrease) in cash and cash equivalents
Balance at end of year
The notes on pages 103 to 155 form part of these Group financial statements.
Notes
6
8
6
9
10
10
33
12
18
38
38
38
38
15
25
25
14
25
35
34
Year to 31 March
2008
£m
182
100
59
15
7
(38)
80
(159)
246
(87)
(75)
(84)
–
7
(4)
4
53
(75)
341
42
–
(264)
(7)
97
8
(159)
152
(23)
(1)
(105)
(1)
(129)
(32)
189
8
(32)
165
2009
£m
113
112
119
20
5
(27)
78
31
451
(86)
(17)
140
488
5
(6)
9
30
(1)
(4)
–
57
(224)
(7)
(141)
3
–
1
(14)
(3)
(104)
(1)
(118)
229
165
40
229
434
102
Tate & Lyle Annual Report 2009
0920_T&L_Financials_01.qxd 16/6/09 18:05 Page 103
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 45 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
(IFRSs) 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 2008
is derived from the statutory financial statements for that year,
except that the comparative information has been reclassified
as a result of the discontinued operations of International
Sugar Trading. In addition, certain other comparative
information has been restated to conform with the current
year presentation.
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 43.
Tate & Lyle Annual Report 2009
New IFRS standards and interpretations adopted
From 1 April 2008 the following amendments and
interpretations became effective and were adopted
by the Group:
–
–
IFRIC12 Service Concession Arrangements
IFRIC14 – IAS19 The Limit on a Defined Benefit Asset
Minimum Funding Requirements and their Interaction
– Amendments to IAS39 Financial Instruments: Recognition
and Measurement and IFRS7 Financial Instruments:
Disclosure on reclassification of financial instruments
The adoption of these amendments and interpretations has
not had a significant impact on the Group’s profit for the year
or equity.
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:
IFRIC13 Customer Loyalty Programmes
IFRIC15 Agreements for the Construction of Real Estate
IFRIC16 Hedges of a Net Investment in a Foreign Operation
–
–
–
– Amendment to IFRS2 Share-based Payment – Vesting
conditions and cancellations
– Amendment to IFRS7 Financial Instruments: Disclosures –
Improving disclosures about financial instruments
IFRS8 Operating Segments
–
– Revised IAS1 Presentation of Financial Statements
– Revised IAS23 Borrowing Costs
– Revised IAS27 Consolidated and Separate Financial
Statements – Cost of an investment in a subsidiary, jointly
controlled entity or associate
–
– Amendment to IAS32 Financial Instruments: Presentation
and IAS1 Presentation of Financial Statements – Puttable
financial instruments and obligations arising on liquidation
Improvements to International Financial Reporting
Standards
IFRIC17 Distributions of Non-cash Assets to Owners
IFRIC18 Transfers of Assets from Customers
–
–
– Revised IFRS3 Business Combinations and amendment
to IAS27 Consolidated and Separate Financial Statements
– Amendment to IAS39 Financial Instruments: Recognition
and Measurement – Eligible hedged items
The above standards, amendments, interpretations and
improvements in IFRSs are all effective for the Group for the
financial year beginning on 1 April 2009, with the exception
of IFRIC17, IFRIC18, the revised IFRS3 (and associated
amendments to IAS27) and the amendment to IAS39 on
eligible hedged items, which will become effective for the
Group for the financial year beginning on 1 April 2010.
The adoption of these standards, amendments and
interpretations is not expected to have a material impact
on the Group’s profit for those years 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 156 to 163.
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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 and
cash flows are translated at weighted 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
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.
104
Tate & Lyle Annual Report 2009
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Notes to the consolidated financial statements
2 Group accounting policies (continued)
During the year the useful lives of certain assets were
adjusted, which resulted in a reduction in the depreciation
charge of approximately £6 million.
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 in 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. Impairments are recognised in the income statement.
(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 2009
105
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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 values
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.
106
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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 2009
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 through the
statement of other recognised income and expense.
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 and there is an intention to complete
and utilise the asset. 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 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.
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 estimates and judgements 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.
108
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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.
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 32.
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
retirement benefit obligations 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 30.
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
£30 million. The main financial assumption is the real discount
rate, being the excess of the discount rate over the rate of
inflation. If this assumption increased by 0.1%, the gross plan
liabilities would decrease by approximately £13 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%
increase in the assumption of the real discount rate would
increase the finance expense by approximately £0.2 million.
Full details of these assumptions, which are based on advice
from the Group’s actuaries, are set out in Note 31.
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Notes to the consolidated financial statements
4 Segment information
Primary format – business segments
Discontinued operations comprise International Sugar Trading, Eastern Sugar, Redpath, Occidente and the disposed European
starch plants.
The segment results for the year to 31 March 2009 are as follows:
Food &
Industrial
Ingredients,
Americas
£m
Food &
Industrial
Ingredients,
Europe
£m
Sugars
£m
Sucralose
£m
Central
costs
£m
Total from
Discontinued continuing &
operations discontinued
operations
£m
(Note 12)
£m
Total
£m
Continuing operations
1 810
(13)
1 797
541
(2)
539
1 053
(5)
1 048
181
(13)
(3)
165
51
–
(8)
43
12
(9)
–
3
169
–
169
72
(97)
(4)
(29)
–
–
–
3 573
(20)
3 553
874
(22)
852
4 447
(42)
4 405
(18)
–
–
(18)
298
(119)
(15)
164
(51)
113
1
(22)
–
(21)
(2)
(23)
299
(141)
(15)
143
(53)
90
1 723
606
512
272
181
3 294
175
3 469
537
76
177
29
116
935
171
1 186
164
55
6
3
1
530
33
14
9
1
–
335
31
16
–
10
1
243
5
25
5
97
–
65
9
2
–
–
3
2 359
242
112
20
111
5
4
–
–
–
12
–
434
60
6
30
3 999
1 106
1 652
73
77
78
2 986
2 363
242
112
20
123
5
Sales
Total sales
Inter-segment sales
External sales
Operating profit/(loss)
Before exceptional items and
amortisation of acquired
intangible assets
Exceptional items (Note 8)
Amortisation of acquired
intangible assets (Note 15)
Operating profit/(loss)
Net finance expense
Profit/(loss) before tax
Segment assets
Unallocated assets:
– cash and cash equivalents
– debt-related derivative assets
– current tax assets
– deferred tax assets
Total assets
Segment liabilities
Unallocated liabilities:
– corporate borrowings
– debt-related derivative liabilities
– current tax liabilities
– deferred tax liabilities
Total liabilities
Other segment information
Net operating assets
Capital investments (note a)
Depreciation (Note 16)
Amortisation of intangible
assets (Note 15)
Impairment charges
Share-based payments (Note 9)
(a) Capital investments comprise capital expenditure on property, plant and equipment, intangible assets and investments.
These items include amounts arising on acquisition of businesses.
110
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Notes to the consolidated financial statements
4 Segment information (continued)
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
Sugars
£m
Sucralose
£m
Central
costs
£m
1 390
(4)
1 386
186
(12)
(3)
171
470
(9)
461
41
(47)
(5)
(11)
888
(16)
872
33
–
–
33
148
–
148
66
–
(4)
62
–
–
–
(31)
–
–
(31)
Total from
Discontinued continuing &
operations discontinued
operations
£m
(Note 12)
£m
1 002
(51)
951
3 898
(80)
3 818
36
60
–
96
1
97
331
1
(12)
320
(41)
279
Total
£m
2 896
(29)
2 867
295
(59)
(12)
224
(42)
182
1 250
601
540
297
58
2 746
356
3 102
414
112
236
22
15
799
189
836
152
42
4
12
1
489
112
12
7
17
2
304
44
17
–
–
1
275
11
27
4
–
–
43
7
2
–
1
3
1 947
326
100
15
30
7
167
26
7
1
–
(2)
165
48
18
1
3 334
988
1 218
36
35
107
2 384
2 114
352
107
16
30
5
Sales
Total sales
Inter-segment sales
External sales
Operating profit/(loss)
Before exceptional items and
amortisation of acquired
intangible assets
Exceptional items (Note 8)
Amortisation of acquired
intangible assets (Note 15)
Operating profit/(loss)
Net finance (expense)/income
Profit before tax
Segment assets
Unallocated assets:
– cash and cash equivalents
– debt-related derivative assets
– current tax assets
– deferred tax assets
Total assets
Segment liabilities
Unallocated liabilities:
– corporate borrowings
– debt-related derivative liabilities
– current tax liabilities
– deferred tax liabilities
Total liabilities
Other segment information
Net operating assets
Capital investments (note a)
Depreciation (Note 16)
Amortisation of intangible
assets (Note 15)
Impairment charges
Share-based payments (Note 9)
(a) 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 (from continuing operations), assets, and investments in the principal territories are as follows:
External sales
by destination
Year to 31 March
External sales
by origin
Year to 31 March
Segment assets
At 31 March
Capital investments
Year to 31 March
2009
£m
461
954
1 748
390
3 553
–
3 553
2008
£m
368
836
1 375
288
2 867
–
2 867
2009
£m
710
686
1 868
289
3 553
–
3 553
2008
£m
588
568
1 464
247
2 867
–
2 867
2009
£m
717
645
1 784
323
3 469
530
3 999
2008
£m
746
719
1 331
306
3 102
232
3 334
2009
£m
35
35
167
5
242
–
242
2008
£m
37
136
159
20
352
–
352
United Kingdom
Other European countries
North America
Rest of the world
Total
Unallocated assets
Total
5 Sales from continuing operations
Analysis of sales by category:
Sales of goods and services (excluding share of sales of joint ventures)
Share of sales of joint ventures
Total
Notes
17
Year to 31 March
2008
£m
2 620
247
2 867
2009
£m
3 277
276
3 553
112
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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/(gain) 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:
– plant and machinery
Research and development expenditure
Impairment of trade receivables
Reversal of impairment of trade receivables
Impairment of property, plant and equipment
Government grant income, including Transitional Aid
Ineffectiveness on derivative financial instruments:
– ineffectiveness (gain)/loss on derivatives designated as cash flow hedges
– ineffectiveness loss 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)
– fair value loss on derivatives held for trading (included in cost of sales)
Depreciation of property, plant and equipment:
– owned assets
Exceptional items
Impairment of trade receivables
Amortisation of intangible assets:
– other intangible assets
Operating lease rentals:
– plant and machinery
Research and development expenditure
Other operating expenses
Total
Operating (loss)/profit from discontinued operations
Tate & Lyle Annual Report 2009
Notes
9
16
16
8
15
15
23
23
20
20
Notes
12
9
8
23
12
Year to 31 March
2008
£m
2 867
231
1 559
(16)
–
98
2
59
12
3
21
29
–
–
1
(17)
2
–
659
2 643
224
Year to 31 March
2008
£m
951
32
678
39
7
(60)
–
1
1
3
154
855
96
2009
£m
3 553
257
2 019
8
3
109
3
119
15
5
27
28
2
(3)
–
(28)
(4)
1
828
3 389
164
2009
£m
852
4
811
–
–
22
3
–
–
–
33
873
(21)
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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:
Year to 31 March
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
Total
2009
£m
0.7
1.5
2.2
0.1
–
0.1
2.4
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 (2008 – £0.1 million) were paid to the Company’s auditors in respect of certain of
the audit of Group pension schemes.
8 Exceptional items
Exceptional items are as follows:
Continuing operations
Write-down of assets (note a)
Settlement with Mexican government (note b)
Impairment charges (note c)
Restructuring costs (note e)
Total
Discontinued operations
Loss on disposal – International Sugar Trading (note d)
Loss on disposal – European starch plants (note e)
Gain on disposal – Redpath (note f)
Gain on disposal – Occidente (note f)
Total
Year to 31 March
2008
£m
–
–
(29)
(30)
(59)
–
(8)
60
8
60
2009
£m
(24)
11
(106)
–
(119)
(22)
–
–
–
(22)
(a) The Group wrote off £24 million in relation to a dispute with a supplier over the performance and suitability of certain equipment.
Of the £24 million, £6 million had previously been reported within property, plant and equipment and £18 million within
prepayments. These assets relate to operations reported in the Food & Industrial Ingredients, Americas segment.
(b) As a result of a settlement of a dispute with the Mexican government over tax on soft drinks containing HFCS, Almidones
Mexicanos SA, the Group’s joint venture in Mexico, received £22 million, of which the Group’s share is £11 million, as
compensation for lost revenue. The business is reported in the Food & Industrial Ingredients, Americas segment.
(c) The decision to mothball the Sucralose manufacturing facilities at McIntosh resulted in an impairment charge of £97 million being
recognised in the year ended 31 March 2009.
Following a review of its sugar refining business in Israel, an impairment charge of £9 million relating to property, plant and
equipment was recognised in the year ended 31 March 2009. The sugar refining business in Israel is reported in the Sugars segment.
The Group also recognised an impairment charge of £17 million on its monosodium glutamate business in China in the year
ended 31 March 2008. £10 million of this impairment related to minority interests. The impairment was reported in the
Food & Industrial Ingredients, Europe segment.
Following a review of the global citric acid business in the year to 31 March 2008, an impairment charge of £12 million relating
to property, plant and equipment was recognised. The citric acid business is reported in the Food & Industrial Ingredients,
Americas segment.
(d) During the year the Group recorded a loss of £22 million in relation to the disposal of its International Sugar Trading business
(Note 38). The loss is net of a gain of £4 million arising from the disposal of an available-for-sale investment held in connection
with the business. This business was previously reported in the Sugars segment.
114
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Notes to the consolidated financial statements
8 Exceptional items (continued)
(e)
(f)
In the year to 31 March 2008, the overall net loss on disposal of the European starch plants in France, Belgium, Italy, Spain and
the UK was £38 million, comprising £30 million of redundancy and other restructuring costs within continuing operations, and a
net loss of £8 million in discontinued operations. The restructuring costs resulted from the significant reduction in central support
functions required by the retained Food & Industrial Ingredients, Europe business.
In the year to 31 March 2008 the Group disposed of its shareholding of Tate & Lyle Canada Limited (Redpath) and its Mexican
cane sugar business, Occidente, resulting in profits on disposal of £60 million and £8 million respectively. Both businesses were
previously reported in the Sugars segment.
The tax impact on continuing net exceptional items is a £44 million credit (2008 – £5 million credit) and on total net exceptional items
is a £44 million credit (2008 – £3 million charge). Tax credits on exceptional items are only recognised to the extent that losses
incurred will result in tax recoverable in the future.
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
Total
Year to 31 March 2009
Year to 31 March 2008
Continuing
operations
£m
Discontinued
operations
£m
Continuing
operations
£m
Discontinued
operations
£m
215
22
12
1
2
5
257
4
–
–
–
–
–
4
191
17
13
1
2
7
231
27
7
1
–
(1)
(2)
32
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
Sugars
Sucralose
Central
Total
Year to 31 March
2008
2 390
2 822
2 126
256
270
7 864
2009
2 512
1 998
1 359
262
278
6 409
Included in the above numbers are 52 (2008 – 1,531) employees relating to discontinued operations, where 52 (2008 – 856) were
employed by Sugars and nil (2008 – 675) by Food & Industrial Ingredients, Europe.
The number of people employed by the Group at 31 March 2009 was 5,718 (2008 – 6,488).
Key management compensation
Salaries and short-term employee benefits
Post-employment benefits
Share-based payments
Share option gains
Termination benefits
Total
Year to 31 March
2009
£m
2008
£m
3
1
1
–
2
7
4
1
2
2
–
9
Key management are represented by the Group Executive Committee, which was formed on 1 July 2008 replacing the Group
Management Committee. The Group Executive Committee as detailed on page 62 consists of the Company’s executive directors,
details of whose remuneration are given in the directors’ remuneration report on pages 84 to 96, the Company Secretary and
General Counsel, the Presidents of the four business divisions and the President, Global R&D.
The aggregate emoluments of directors in respect of qualifying services to the Company were £4 million (2008 – £4 million).
Tate & Lyle Annual Report 2009
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Notes to the consolidated financial statements
10 Finance income and finance expense
Continuing
Finance income
Interest receivable
Net finance income 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
Net finance expense arising on defined benefit retirement schemes:
– interest cost
– expected return on plan assets
Unwinding of discounts in provisions
Finance lease charges
Fair value gains 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
31
31
31
31
Year to 31 March
2008
£m
34
(67)
71
38
(6)
(69)
–
–
(1)
(3)
16
1
(18)
(80)
(42)
2009
£m
27
–
–
27
(15)
(55)
(79)
76
(1)
(3)
30
1
(32)
(78)
(51)
Finance expense is shown net of borrowing costs capitalised into the cost of assets of £11 million (2008 – £8 million) at a
capitalisation rate of 5.0% (2008 – 5.4%).
Interest payable on other borrowings includes £0.2 million (2008 – £0.2 million) of dividends in respect of the Group’s 6.5%
cumulative preference shares.
Discontinued
Included within the loss for the year in relation to discontinued operations (Note 12) is net finance expense of £2 million (2008 – net
finance income 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
2009
£m
2008
£m
–
70
(14)
56
(37)
19
–
87
(4)
83
(7)
76
The income tax expense on continuing operations in the year to 31 March 2009 of £19 million (2008 – £76 million) includes a credit
of £44 million in respect of exceptional items (2008 – £5 million credit).
Discontinued
The income tax expense in respect of discontinued operations (Note 12) in the year to 31 March 2009 is £1 million (2008 –
£16 million).
116
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Notes to the consolidated financial statements
11 Income tax expense (continued)
Tax on items recognised directly in equity
Deferred tax charge on share-based payments
Deferred tax (credit)/charge on retirement benefits
Deferred tax credit on financial instruments
Deferred tax credit on foreign exchange
Current tax credit on foreign exchange
Total
Year to 31 March
2008
£m
3
10
–
(1)
(21)
(9)
2009
£m
4
(31)
(9)
–
–
(36)
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 16.8% (2008 – 41.8%). This compares with the standard rate of corporation tax in the United
Kingdom of 28% (2008 – 30%) as follows:
Profit before tax
Corporation tax charge thereon at 28% (2008 – 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
Total
Year to 31 March
2008
£m
182
55
13
(1)
18
(7)
(2)
76
2009
£m
113
32
3
2
29
(7)
(40)
19
The effective tax rate relating to continuing operations on profit before exceptional items and amortisation is 27.3% (2008 – 33.2%).
12 Discontinued operations
On 2 July 2008, the Group reached an agreement for the sale of its International Sugar Trading operations to Bunge Limited.
Accordingly, the results of the International Sugar Trading operations are presented as discontinued operations for the years ended
31 March 2009 and 31 March 2008.
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 2009 and 31 March 2008.
Discontinued operations in the year ended 31 March 2008 also include the results of the starch facilities in the UK, Belgium, France,
Spain and Italy (disposed of on 1 October 2007), Redpath (sold on 22 April 2007) and Occidente (sold on 28 December 2007).
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Notes to the consolidated financial statements
12 Discontinued operations (continued)
Sales
Operating (loss)/profit before
exceptional items
Exceptional items
Operating (loss)/profit
Finance income
Finance expense
(Loss)/profit before tax
Income tax expense
(Loss)/profit for the year
Sales
Operating (loss)/profit before
exceptional items
Exceptional items
Operating (loss)/profit
Finance income
Finance expense
(Loss)/profit before tax
Income tax expense (note a)
(Loss)/profit for the year
Notes
8
Notes
8
Sugar
Trading
£m
852
(1)
(22)
(23)
4
(8)
(27)
–
(27)
Sugar
Trading
£m
557
(9)
–
(9)
–
–
(9)
–
(9)
Redpath
£m
–
–
–
–
–
–
–
–
–
Redpath
£m
11
–
60
60
–
–
60
–
60
Eastern
European
Sugar Starch Plants
£m
£m
–
2
–
2
2
–
4
(1)
3
–
–
–
–
–
–
–
–
–
Year to 31 March 2009
Occidente
£m
–
–
–
–
–
–
–
–
–
Total
£m
852
1
(22)
(21)
6
(8)
(23)
(1)
(24)
Year to 31 March 2008
Eastern
Sugar
£m
European
Starch Plants
£m
31
308
5
–
5
2
–
7
(1)
6
38
(8)
30
–
(1)
29
(7)
22
Occidente
£m
44
2
8
10
1
(1)
10
(8)
2
Total
£m
951
36
60
96
3
(2)
97
(16)
81
(a)
Income tax expense in Occidente in the year to 31 March 2008 included an £8 million charge in respect of exceptional items.
Net cash flows from discontinued operations are as follows:
Year to 31 March 2009
Net cash generated from
operating activities
Net cash generated
from investing activities
Net cash (used in)/generated from
operating activities
Net cash generated from/
(used in) investing activities
87
62
Sugar
Trading
£m
(120)
–
Sugar
Trading
£m
Redpath
£m
Eastern
European
Sugar Starch Plants
£m
£m
Occidente
£m
–
–
53
4
–
–
–
–
Total
£m
140
66
Year to 31 March 2008
Redpath
£m
Eastern
Sugar
£m
European
Starch Plants
£m
Occidente
£m
(8)
–
22
1
22
(23)
–
(2)
Total
£m
(84)
(24)
There were no cash flows used in or generated from financing activities in the years ended 31 March 2009 or 31 March 2008.
118
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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 2009
Year to 31 March 2008
Profit/(loss) attributable to
equity holders 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
89
(24)
65
113
81
456.5
19.5p
456.5
(5.3)p
456.5
14.2p
474.7
23.8p
474.7
17.1p
Total
194
474.7
40.9p
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue 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 2009
Year to 31 March 2008
Profit/(loss) attributable to
equity holders 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
89
(24)
65
113
81
459.8
19.4p
459.8
(5.3)p
459.8
14.1p
480.4
23.6p
480.4
16.8p
Total
194
480.4
40.4p
The adjustment for the dilutive effect of share options at 31 March 2009 was 3.3 million shares (2008 – 5.7 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 holders 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
Year to 31 March
2008
113
59
12
(8)
(10)
166
2009
89
119
15
(49)
–
174
Adjusted basic earnings per share from continuing operations
Adjusted diluted earnings per share from continuing operations
38.2p
38.0p
35.0p
34.6p
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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 22.9p (2008 – 22.6p) made up as follows:
– interim dividend paid
– final dividend proposed
Year to 31 March
2008
74
31
105
6.5p
16.1p
22.6p
2009
73
31
104
6.8p
16.1p
22.9p
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 2009 to shareholders who are on the Register of Members
on 3 July 2009.
15 Goodwill and intangible assets
Notes
Goodwill
£m
Patents
£m
Other
acquired
intangible
assets
£m
Total
acquired
intangibles
£m
Other
intangible
assets
£m
Cost
At 1 April 2008
Businesses acquired
Additions at cost
Businesses sold
Exchange and other movements
38
At 31 March 2009
Accumulated amortisation
and impairments
At 1 April 2008
Businesses sold
Amortisation charge
Exchange and other movements
At 31 March 2009
Net book value at
31 March 2009
Cost
At 1 April 2007
Businesses acquired
Additions at cost
Businesses sold
38
Exchange and other movements
38
At 31 March 2008
Accumulated amortisation
and impairments
At 1 April 2007
Businesses sold
Amortisation charge
Impairment charge (note a)
Exchange and other movements
38
At 31 March 2008
Net book value at
31 March 2008
202
1
–
–
37
240
8
–
–
(8)
–
240
167
36
–
(15)
14
202
8
–
–
–
–
8
194
33
–
–
–
–
33
16
–
4
–
20
13
32
–
–
–
1
33
12
–
4
–
–
16
17
108
–
–
–
24
132
15
–
11
5
31
101
44
52
–
–
12
108
6
–
8
–
1
15
93
343
1
–
–
61
405
39
–
15
(3)
51
354
243
88
–
(15)
27
343
26
–
12
–
1
39
304
22
–
7
(1)
6
34
6
(1)
5
4
14
20
38
–
7
(26)
3
22
23
(24)
4
1
2
6
16
Total
£m
365
1
7
(1)
67
439
45
(1)
20
1
65
374
281
88
7
(41)
30
365
49
(24)
16
1
3
45
320
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Notes to the consolidated financial statements
15 Goodwill and intangible assets (continued)
a) The impairment charge in the year to 31 March 2008 related to Orsan China and is included within continuing exceptional items
in the income statement.
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
Total
2009
£m
77
161
2
240
31 March
2008
£m
57
136
1
194
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) Goodwill in the Food & Industrial Ingredients, Americas segment of £77 million includes £63 million (2008 – £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% (2008 – 11%).
The 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% (2008 –
11%). In both cases zero growth was assumed in perpetuity. Management has concluded that no impairment is required for
either business.
(b) Goodwill in the Food & Industrial Ingredients, Europe segment of £161 million includes £91 million (2008 – £76 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. The remaining goodwill in the former Amylum business has been tested for impairment
using management projections of cash flows for five years and a pre-tax discount rate of 11% (2008 – 10%). Zero growth was
assumed in perpetuity. Management has concluded that no impairment is required.
In addition, goodwill includes £42 million (2008 – £36 million) relating to the acquisition of G.C. Hahn & Co in June 2007. This
business has been tested for impairment using management projections of cash flows for five years and a pre-tax discount
rate of 11% (2008 – 11%). Zero growth was assumed in perpetuity. Management has concluded that no impairment is required.
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 of 11% (2008 – 10% to 11%), and zero growth assumed
in perpetuity. Management has concluded that no impairment is required.
16 Property, plant and equipment
Cost
At 1 April 2008
Additions at cost
Transfers on completion
Businesses sold
Disposals and write-offs
Exchange and other movements
At 31 March 2009
Accumulated depreciation and impairments
At 1 April 2008
Depreciation charge
Impairment losses
Businesses sold
Disposals and write-offs
Exchange and other movements
At 31 March 2009
Net book value at 31 March 2009
Land and
buildings
£m
Plant and
machinery
£m
Assets in the
course of
construction
£m
466
6
27
(6)
(18)
116
591
219
18
18
(4)
(15)
52
288
303
1 815
15
134
(32)
(37)
499
2 394
1 088
94
87
(32)
(34)
290
1 493
901
222
208
(161)
–
(6)
82
345
–
–
1
–
–
–
1
344
Total
£m
2 503
229
–
(38)
(61)
697
3 330
1 307
112
106
(36)
(49)
342
1 782
1 548
Tate & Lyle Annual Report 2009
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E
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Notes to the consolidated financial statements
16 Property, plant and equipment (continued)
Cost
At 1 April 2007
Additions at cost
Transfers on completion
Additions through business combinations
Businesses sold
Disposals
Exchange and other movements
At 31 March 2008
Accumulated depreciation and impairments
At 1 April 2007
Depreciation charge
Impairment losses
Businesses sold
Disposals
Exchange and other movements
At 31 March 2008
Net book value at 31 March 2008
Land and
buildings
£m
Plant and
machinery
£m
Assets
in the
course of
construction
£m
546
19
15
5
(117)
(14)
12
466
285
13
–
(78)
(9)
8
219
247
2 209
128
161
4
(669)
(72)
54
1 815
1 541
94
23
(541)
(71)
42
1 088
727
288
136
(176)
3
(32)
(1)
4
222
–
–
–
–
–
–
–
222
Total
£m
3 043
283
–
12
(818)
(87)
70
2 503
1 826
107
23
(619)
(80)
50
1 307
1 196
Additions to fixed assets includes capitalised borrowing costs of £11 million (2008 – £8 million).
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 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% (2008 – 11%) and a zero growth rate assumed in perpetuity. This did not result in an impairment in either the year ended
31 March 2009 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 at 31 March 2009. The 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 11% (2008 – 10%) and a zero growth rate assumed in perpetuity. Taking all factors into account management concluded
that no further impairment or reversal of previous impairments was required.
(b) Other impairment reviews
Following the decision to mothball the McIntosh, Alabama facility and produce all sucralose at the Singapore facility, the Group
has recognised a charge of £97 million in the year ended 31 March 2009, reflecting the impairment of the carrying value of the
McIntosh facility.
The Group has also carried out a review of its sugar refining operation in Israel. The recoverable amount was based on value in use,
calculated based on management’s internal forecasts of future cash flows for the remainder of the operation’s contractual life and
a pre-tax discount rate of 13%. An impairment of £9 million was recognised in the year.
The Group has carried out a review of its global citric acid business 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 (to cover the period when protection from Chinese imports ends), a pre-tax
discount rate of 11% (2008 – 12%). An impairment of £12 million was recognised in the prior year; no further impairment or reversal
is required.
Leased assets
Included in property, plant and equipment is plant and machinery held under finance leases with a net book value of £16 million
(2008 – £22 million). During the year ended 31 March 2009, £1 million of additions were recognised on the inception of finance
leases (2008 – £2 million) and £10 million of impairment losses related to leased assets of the Sucralose facility in McIntosh, Alabama.
122
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Notes to the consolidated financial statements
17 Investments in associates and joint ventures
Associates
At 1 April 2007 and at 31 March 2008
Exchange and other movements
At 31 March 2009
Total
£m
7
1
8
The Group’s associates, which are accounted for under the equity method, are listed in Note 42.
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.
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
2008
£m
2
(2)
–
–
–
31 March
2008
£m
19
12
7
2009
£m
2
(2)
–
–
–
2009
£m
14
6
8
Joint ventures
The Group’s joint ventures are proportionately consolidated and the continuing businesses are listed in Note 42. The amounts
proportionately consolidated in the Group income statement and balance sheet are summarised below:
Income statement
Sales
Other (expense)/income
Profit before tax
Income tax expense
Profit for the year
Year to 31 March 2009
Year to 31 March 2008
Continuing
operations
£m
Discontinued
operations
£m
Continuing
operations
£m
Discontinued
operations
£m
276
(236)
40
(11)
29
–
4
4
(1)
3
247
(227)
20
(6)
14
107
(91)
16
(10)
6
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31 March
2008
£m
160
51
184
395
4
28
41
44
117
278
£m
18
4
(4)
(3)
15
6
(6)
24
39
11
28
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Notes to the consolidated financial statements
17 Investments in associates and joint ventures (continued)
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
2009
£m
215
43
170
428
5
11
30
49
95
333
The Group’s proportionate interest in joint ventures’ commitments and contingent liabilities was £nil million (2008 – £nil million).
18 Available-for-sale financial assets
At 1 April 2007
Additions
Disposals
Fair value losses
At 31 March 2008
Additions
Disposals
Fair value gains
At 31 March 2009
Presented in the balance sheet as follows:
Non-current available-for-sale financial assets
Current asssets held for sale
Available-for-sale financial assets comprise £39 million (2008 – £15 million) of unlisted securities. The fair values of unlisted securities
are based on cash flows discounted using a risk-adjusted average discount rate of 11% (2008 – 10%).
The carrying value of the available-for-sale financial assets are denominated in the following currencies:
Saudi riyal (note a)
US dollar (note b)
Sterling
Euro
Total
(a) Saudi riyal comprises £23 million (2008 – £ nil million) of assets classified as held for sale in current assets.
(b) US dollar comprises £5 million (2008 – £ nil million) of assets classified as held for sale in current assets.
2009
£m
23
9
5
2
39
31 March
2008
£m
5
5
2
3
15
124
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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 2009 and 31 March 2008.
Amortised
cost
£m
Notes
Derivatives
and other
items at
fair value
£m
Held for
trading
£m
Available-
for-sale
£m
Available-for-sale financial assets
(including held for sale)
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments – assets
Borrowings
Derivative financial instruments – liabilities
Trade and other payables
18
23
34
20
29
20
28
Total
–
687
434
–
(1 187)
–
(522)
(588)
–
–
–
69
(465)
(116)
–
(512)
–
–
–
178
–
(224)
–
(46)
39
–
–
–
–
–
–
39
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
Notes
18
23
34
20
29
20
28
Derivatives
and other
items at
fair value
£m
Amortised
cost
£m
Held for
trading
£m
Available-
for-sale
£m
–
623
165
–
(851)
–
(472)
(535)
–
–
–
52
(367)
(46)
–
(361)
–
–
–
259
–
(251)
–
8
15
–
–
–
–
–
–
15
31 March 2009
Total
carrying
value
£m
39
687
434
247
(1 652)
(340)
(522)
(1 107)
Total
carrying
value
£m
15
623
165
311
(1 218)
(297)
(472)
(873)
Fair
value
£m
39
687
434
247
(1 753)
(340)
(522)
(1 208)
31 March 2008
Fair
value
£m
15
623
165
311
(1 283)
(297)
(472)
(938)
Trade and other receivables presented above excludes £41 million (2008 – £63 million) relating to prepayments.
Trade and other payables presented above excludes £27 million (2008 – £43 million) of deferred income relating to Transitional Aid.
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Notes to the consolidated financial statements
20 Derivative financial instruments
Non-current derivative financial instruments
used to manage the Group’s net debt profile
Currency swaps – fair value, net investment and cash flow
hedges
Interest rate swaps – fair value hedges
Current derivative financial instruments used
to manage the Group’s net debt profile
Currency swaps – accrued interest
Interest rate 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
Assets
£m
31 March 2009
Liabilities
£m
Assets
£m
31 March 2008
Liabilities
£m
5
29
34
10
3
13
26
60
–
–
–
12
10
165
187
187
247
34
213
247
(45)
(7)
(52)
(3)
(3)
(15)
(21)
(73)
(2)
(3)
(5)
(23)
(30)
(209)
(262)
(267)
(340)
(57)
(283)
(340)
24
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)
The ineffective portion recognised in operating profit that arises from cash flow hedges amounts to a gain of £4 million
(2008 – £2 million loss).
The ineffective portion recognised in operating profit that arises from net investment hedges amounts to a loss of £1 million
(2008 – £nil million).
The ineffective portion recognised in net finance expense that arises from fair value hedges amounts to a loss of £1 million
(2008 – £1 million loss).
126
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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
Sterling
Singapore dollar
Other
2009
£m
(50)
2
69
22
(13)
31 March
2008
£m
(70)
(23)
77
18
(20)
Gains and losses recognised in the hedging reserve in equity (Note 26) on forward foreign exchange and commodity pricing
contracts as of 31 March 2009 will be released to the income statement at various dates up to 30 months from the balance sheet date.
In addition, the Group hedges the interest cost of certain of its borrowings through the use of interest rate swaps. Gains and losses
recognised in the hedging reserve in equity on interest rate swaps as of 31 March 2009 will be released to the income statement at
various dates until the maturity of the underlying borrowings. The notional principal amount of the outstanding interest rate swaps
is £142 million (2008 – £122 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 2009 were £227 million and £200 million respectively (2008 – £164 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 2009 were £250 million (31 March 2008 – £200 million). The fair value loss of
£48 million (2008 – £17 million loss) on translation of the currency swap contracts to pounds sterling at the balance sheet date
was recognised in the translation reserve in shareholders’ equity (Note 26).
In addition, of the Group’s borrowings, a total of £860 million (2008 – £756 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 2009 were £109 million and £244 million, respectively (2008 – £83 million
and £191 million).
Trading contracts
Commodity pricing contracts held for trading relate to the Group’s commodity trading activities which are undertaken for the
purposes of supporting underlying operations.
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, foreign
exchange 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 limits approved by the Board of Tate & Lyle PLC.
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.
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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 overseeing performance on a monthly basis. Commodity price contracts are categorised as being held either for trading
or 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 areas.
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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 (transaction
exposure), and from recognised assets, liabilities and investments in overseas operations (translation exposure).
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 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 amounting to
£1,231 million (2008 – £1,041 million) was held in the following currencies: net borrowings of US dollars 77% (2008 – 81%),
euro 20% (2008 – 21%), pounds sterling 3% (2008 – net deposits of 4%) and net deposits of other currencies 0% (2008 – net
borrowings of 2%). The Group’s interest cost through the income statement is impacted by changes in the relevant exchange rates.
The following table, as required by IFRS7, 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.
Sterling/US dollar 5% change
Sterling/euro 5% change
31 March 2009
31 March 2008
Income
statement
–/+£m
1
1
Equity
–/+£m
40
13
Income
statement
–/+£m
1
2
Equity
–/+£m
35
14
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 2009, the longest term of any
fixed rate debt held by the Group was until June 2016 (2008 – 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 55% (2008 – 62%).
If the interest rates applicable to the Group’s floating rate debt rise/fall from the levels at the end of March 2009 by an average of
100 basis points over the year to 31 March 2010, Group profit before tax will reduce/increase by approximately £4 million (2008 –
£4 million) respectively. The floating rate interest payments on £142 million of the Group’s borrowings are hedged and designated
under cash flow hedge relationships.
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 2009, the fair value of the debt would reduce by
approximately £31 million (2008 – £27 million). If interest rates were to fall by 1% from the levels at 31 March 2009, the fair value of
the debt would increase by approximately £38 million (2008 – £29 million).
Price risk management
Tate & Lyle participates mainly in four markets: food and beverage; industrial ingredients; 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.
128
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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 recognised exchanges or over the counter.
The table below illustrates the sensitivity of the Group’s commodity pricing contracts as of 31 March to the price movement
of commodities.
Corn 30% change
Sugar 20% change
31 March 2009
31 March 2008
Income
statement
–/+£m
2
1
Equity
–/+£m
1
–
Income
statement
–/+£m
4
1
Equity
–/+£m
3
–
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.
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
Derivative financial instruments – assets
Available-for-sale financial assets
31 March 2009
£m
31 March 2008
£m
434
687
247
39
165
623
311
15
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 £98 million (2008 – £50 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 2009 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 to cover its funding
requirements for the foreseeable future. The Group has committed bank facilities of US$1,130 million of which US$85 million mature
in September 2009, US$45 million mature in November 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 has amended the definition of the net debt to EBITDA covenant in the US$1 billion
Revolving Credit Facility to eliminate the distortion of foreign exchange volatility, so that net debt is translated at the same average
exchange rates used to translate EBITDA.
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.
Tate & Lyle Annual Report 2009
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H
T
T
N
N
U
U
R
R
E
E
W
W
W
W
O
O
H
H
I
I
N
N
O
O
T
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A
A
M
M
R
R
O
O
F
F
N
N
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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 31 March 2009, after
subtracting total undrawn committed facilities, there was no debt maturing within two and a half years (2008 – none and none).
The average maturity of the Group’s gross debt was 4.8 years (2008 – 5.8 years). At the year end the Group held cash and cash
equivalents of £434 million (2008 – £165 million) and had committed facilities of £788 million (2008 – £559 million) of which £524
million (2008 – £438 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 including finance leases
Interest on borrowings
Trade and other payables
Derivative contracts – receipts
Derivative contracts – payments
Commodity contracts
<1 year
£m
1-5 years
£m
31 March 2009
> 5 years
£m
(525)
(61)
(516)
521
(505)
(232)
(483)
(183)
–
306
(351)
(9)
(598)
(81)
–
–
–
–
Of the £525 million borrowings with maturities of less than one year £255 million relates to the draw down of committed facilities
under the Revolving Credit Facility which matures in 2012.
Borrowings including finance leases
Interest on borrowings
Trade and other payables
Derivative contracts – receipts
Derivative contracts – payments
Commodity contracts
<1 year
£m
1-5 years
£m
31 March 2008
> 5 years
£m
(234)
(48)
(467)
388
(393)
(265)
(409)
(167)
–
156
(134)
(85)
(424)
(86)
–
39
(39)
–
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 pounds sterling are converted to pounds 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, to the Group’s business profile and the risk characteristics of its businesses.
Tate & Lyle has contractual relationships with Moody’s and Standard and Poor’s (S&P) for the provision of credit ratings, and it is the
Group’s policy to keep them informed of all major developments. In February 2009, S&P downgraded Tate & Lyle’s long-term credit
rating from BBB (negative outlook) to BBB– (negative outlook) and, in April 2009 Moody’s downgraded the Group’s long-term credit
rating from Baa2 (negative outlook) to Baa3 (stable outlook). We are committed to maintaining investment grade credit ratings.
130
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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. These ratios are calculated on the same basis as the external financial covenants noted above. The ratios for
these KPIs for the financial years ended 31 March 2009 and 31 March 2008 are:
Net debt/EBITDA
Interest cover
22 Inventories
Raw materials and consumables
Work in progress
Finished goods
Total
2009
2.4
6.1
2009
£m
227
24
287
538
31 March
2008
2.5
7.8
31 March
2008
£m
287
21
254
562
Finished goods inventories of £1 million (2008 – £1 million) are carried at realisable value, this being lower than cost. Inventories of
£99 million (2008 – £213 million) are carried at market value.
23 Trade and other receivables
Non-current trade and other receivables
Trade receivables
Prepayments and accrued income
Other receivables
Total
Current trade and other receivables
Trade receivables
Less: provision for impairment of receivables
Trade receivables – net
Prepayments and accrued income
Government grants receivable
Other receivables
Total
2009
£m
1
1
3
5
2009
£m
564
(21)
543
40
12
128
723
31 March
2008
£m
5
–
6
11
31 March
2008
£m
483
(9)
474
63
60
78
675
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.
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Notes to the consolidated financial statements
23 Trade and other receivables (continued)
Included in trade receivables are amounts received of £98 million (2008 – £50 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 internationally dispersed customers. 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)
Sterling
Mexican peso
Other
Total
2009
£m
455
183
38
7
45
728
31 March
2008
£m
290
166
87
26
117
686
(a)
Includes £12 million (2008 – £60 million) of government grants receivable under the Transitional Aid and Restructuring Aid
provisions of the EU Sugar Regime.
Provision for impairment of receivables
At 1 April 2008
Charge for the year
Reversal of impairment
Disposal of businesses
Exchange
At 31 March 2009
£m
(9)
(14)
3
2
(3)
(21)
The creation and release of provision for impaired receivables have been included in the income statement.
The Group recognised a loss of £14 million (2008 – £nil million) for impairment of its trade receivables during the year. Of this loss
£2 million from continuing operations and £3 million from discontinued operations has been included in operating profit (Note 6) in
the income statement and £9 million has been included in exceptional items.
As at 31 March 2009, trade receivables of £66 million (2008 – £101 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
2009
£m
37
16
13
66
31 March
2008
£m
64
24
13
101
132
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Notes to the consolidated financial statements
24 Share capital and share premium
At 1 April 2007
Proceeds from issuance of ordinary shares
Share buy backs
At 31 March 2008
Proceeds from issuance of ordinary shares
At 31 March 2009
Ordinary
share capital
£m
Share
premium
£m
122
–
(8)
114
1
115
403
1
–
404
–
404
Total
£m
525
1
(8)
518
1
519
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 (2008 – 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
2009
£m
198
31 March
2008
£m
198
Shares
459 910 466
102 335
–
460 012 801
31 March 2009
31 March 2008
£m
114
1
–
115
Shares
489 824 398
413 068
(30 327 000)
459 910 466
£m
122
–
(8)
114
Treasury shares and shares held in ESOP trust
As at 31 March 2009, the Group held 1,328,502 shares (2008 – 2,755,073 shares) in Treasury.
During the year 1,426,571 shares (2008 – 544,927 shares) were released from Treasury to satisfy share options exercised.
The shares held in Treasury at 31 March 2009 represent 0.3% (2008 – 0.6%) of the Parent Company’s share capital at the year end,
and have a nominal value of £0.3 million (2008 – £0.6 million).
As at 31 March 2009, the Group held 1,840,801 shares (2008 – 2,044,493 shares) in an ESOP trust.
Number of
holdings
5 543
4 636
2 313
1 605
2 578
608
687
112
100
%
30.5
25.5
12.7
8.8
14.2
3.3
3.8
0.6
0.6
Total
1 514 432
3 677 803
2 915 386
2 916 127
8 106 257
4 333 768
34 381 119
36 609 064
365 558 845
31 March 2009
%
0.3
0.8
0.6
0.6
1.8
0.9
7.5
8.0
79.5
18 182
100.0
460 012 801
100.0
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
Total
Tate & Lyle Annual Report 2009
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Notes to the consolidated financial statements
25 Consolidated statement of changes in shareholders’ equity
Balance at 1 April 2007
Net income/(expense) recognised
Notes
directly in equity
Profit/(loss) for the year
Share-based payments,
including tax
Proceeds from shares issued
Items transferred to income
on disposal
Share buy backs
Dividends paid
Minority interests disposed
24
14
Share capital
and share
premium
(Note 24)
£m
525
–
–
–
1
–
(8)
–
–
Balance at 31 March 2008
518
Net income/(expense) recognised
directly in equity
Profit for the year
Share-based payments,
including tax
Proceeds from shares issued
Items transferred to income
on disposal
Dividends paid
14
–
–
–
1
–
–
Balance at 31 March 2009
519
Capital
redemption
reserve
£m
Other
reserves
(Note 26)
£m
Attributable
to the equity
Retained holders of the
Company
earnings
£m
£m
Minority
interests
£m
Total equity
£m
–
–
–
–
–
–
8
–
–
8
–
–
–
–
–
–
8
50
55
–
–
–
(14)
–
–
–
91
132
–
–
–
(4)
–
219
385
(7)
194
2
7
–
(159)
(105)
–
317
(40)
65
1
2
–
(104)
241
960
48
194
2
8
(14)
(159)
(105)
–
934
92
65
1
3
(4)
(104)
987
35
–
(7)
–
–
(1)
–
(1)
(10)
16
6
5
–
–
–
(1)
26
995
48
187
2
8
(15)
(159)
(106)
(10)
950
98
70
1
3
(4)
(105)
1 013
Retained earnings at 31 March 2009 include a deduction for own shares held by the ESOP trust of £7 million (2008 – £7 million).
All but 0.01 pence per share of the dividends arising on these shares have been waived by the trust.
26 Other reserves
At 1 April 2007
Net gain on cash flow hedges
Loss 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
Net loss on cash flow hedges
Gain 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 2009
Hedging
reserve
£m
Translation
reserve
£m
–
1
–
–
–
1
2
(25)
–
–
–
–
(23)
(54)
–
–
(50)
107
(12)
(9)
–
–
(321)
454
(1)
123
Other
reserves
(note a)
£m
104
–
(3)
–
–
(3)
98
–
24
–
–
(3)
119
Total
£m
50
1
(3)
(50)
107
(14)
91
(25)
24
(321)
454
(4)
219
(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 impact of £nil million (2008 – credit of £21 million).
134
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Notes to the consolidated financial statements
27 Share-based payments
During the year to 31 March 2009, 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 2009
Number of options/shares
granted in year to
31 March 2008
Fair value per share for 2009
grant (p)
Fair value per share for 2008
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
2 478 568
1 511 463
170
141
–
–
–
–
19 026
429 612
215
194
3
5
3
5
3
5
3
5
66 029
31 340
148 132
61 893
102 128
57 335
215 130
104 183
66
75
120
138
67
76
97
105
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 as described in (b) above, 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. This plan was suspended during the year. Further details are set out in the directors’ remuneration report on page 87.
(e) Options granted in the years to 31 March 2008 and 31 March 2009 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 before tax of £5 million (2008 – £5 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
2009
Weighted
average
exercise
price
pence
117
42
149
47
111
Number
14 100 394
2 419 851
(3 929 906)
(925 822)
11 664 517
2008
Weighted
average
exercise
price
pence
163
87
233
314
117
Number
11 664 517
2 804 988
(1 732 598)
(2 910 404)
9 826 503
Tate & Lyle Annual Report 2009
135
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Notes to the consolidated financial statements
27 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 467 pence
(2008 – 551 pence). At 31 March 2009, 3,017,439 (2008 – 3,346,475) of the outstanding options were exercisable at a weighted
average exercise price of 280 pence (2008 – 328 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
6 676 569
–
2 926 169
223 765
9 826 503
Weighted
average
remaining
contractual
life in months
52.7
–
53.4
23.2
52.3
2009
Weighted
average
exercise
price
pence
–
–
338
466
93
Number
outstanding
at end of year
7 711 186
–
3 648 749
304 582
11 664 517
Weighted
average
remaining
contractual
life in months
53.6
–
64.7
26.6
56.5
2008
Weighted
average
exercise
price
pence
–
–
333
482
117
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 2009
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 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)
Deferred
bonus plan
Performance
share plan
Sharesave
scheme
June
Sharesave
scheme
December
30%
n/a
–
5.6%
0%
30%
17-56%
100%
401
30%
n/a
–
5.7%
0%
30%
17-53%
100%
392
30%
3.5/5.5 years
5.3%
5.7%
10%
n/a
n/a
n/a
398
30%
3.5/5.5 years
4.5%/4.6%
4.9%
10%
n/a
n/a
n/a
400
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
The expected volatility is based on the Company’s historical volatility over the three-year period prior to each award date.
136
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Notes to the consolidated financial statements
28 Trade and other payables
Non-current payables
Accruals and deferred income (note a)
Other payables
Total
Current payables
Trade payables
Social security
Amounts owed to related parties
Deferred consideration (note b)
Accruals and deferred income (note c)
Other payables
Total
2009
£m
10
1
11
2009
£m
295
9
–
28
178
28
538
31 March
2008
£m
27
–
27
31 March
2008
£m
258
7
1
23
155
44
488
(a)
Includes government grant deferred income of £9 million (2008 – £26 million) under the Transitional Aid provisions of the
EU Sugar Regime.
(b) Deferred consideration relates to the acquisition of G. C. HAHN & Co. (Note 38).
(c)
Includes government grant deferred income of £18 million (2008 – £17 million) under the Transitional Aid provisions of the
EU Sugar Regime.
29 Borrowings
Non-current borrowings
Unsecured borrowings
2,394,000 6.5% cumulative preference shares of £1 each (2008 – £2,394,000)
Industrial Revenue Bonds 2016-2036 (US$92,000,000)
6.125% Guaranteed Notes 2011 (US$300,000,000)
6.5% Guaranteed Notes 2012 (£200,000,000)
5.0% Guaranteed Notes 2014 (US$500,000,000)
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
2009
£m
2
64
214
215
366
189
1 050
47
7
54
25
25
1 129
31 March
2008
£m
2
46
156
199
255
135
793
40
5
45
20
20
858
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
29 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
2009
£m
23
98
257
141
–
1
3
523
31 March
2008
£m
24
50
123
153
5
3
2
360
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 2009
Book value
£m
Fair value
£m
Book value
£m
31 March 2008
Fair value
£m
1 050
54
25
523
1 652
1 151
54
25
523
1 753
793
45
20
360
858
45
20
360
1 218
1 283
2009
£m
49
446
634
1 129
31 March
2008
£m
4
406
448
858
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 2009 by an average of 1% over the year to 31 March 2010, this would reduce
Group profit before tax by approximately £4 million (2008 – £4 million).
As part of its interest rate management strategy, the Group has entered into interest rate caps for a notional principal amount of
£109 million (2008 – £83 million), capping interest rates at 4% until June 2009.
138
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Notes to the consolidated financial statements
29 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 2016–2036 (US$92,000,000)
6.125% Guaranteed Notes 2011 (US$300,000,000)
6.5% Guaranteed Notes 2012 (£200,000,000)
5.0% Guaranteed Notes 2014 (US$500,000,000)
6.625% Guaranteed Notes 2016 (US$250,000,000)
2009
6.5%
0.8%
5.0%
4.2%
4.9%
6.0%
31 March
2008
6.5%
2.2%
5.0%
5.3%
4.9%
6.0%
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 £524 million (2008 – £438 million), of which £59 million matures
in September 2009, £31 million matures in November 2009 and £434 million matures in October 2012. These facilities incur
commitment fees at market rates prevailing when the facilities were arranged. The facilities may only be withdrawn in the event
of specified events of default. In addition, the Group has substantial uncommitted facilities.
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 2009
Present value of
Minimum lease minimum lease
payments
£m
payments
£m
Minimum lease
payments
£m
31 March 2008
Present value of
minimum lease
payments
£m
3
13
12
28
4
20
9
33
(5)
28
3
14
10
27
(5)
22
2
12
8
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
30 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 2007
Fair value adjustments on acquisition of subsidiaries
Credited to income
Charged to statement of recognised income and expense
Exchange differences
At 31 March 2008
Credited to income
Credited to statement of recognised income and expense
Exchange differences
At 31 March 2009
Total
£m
77
17
(4)
12
4
106
(39)
(36)
17
48
Of the amounts of deferred tax credited to income and equity, £1 million (2008 – £nil million) arises from changes in tax rates. There
was no impact from the imposition of new taxes.
Deferred tax assets in respect of unutilised tax losses of £293 million (2008 – £184 million) have not been recognised to the extent
that they exceed taxable profits against which these assets may be recovered. No unrelieved tax losses expired under current tax
legislation in the year ended 31 March 2009.
No deferred tax has been recognised in respect of unremitted earnings of £1.1 billion (2008 – £1.0 billion) where the Group is both
able to control dividend policy and does not anticipate dividends to be remitted in the foreseeable future.
The movements in deferred tax assets and liabilities during the period are as follows:
Deferred tax liabilities
At 1 April 2007
Acquisitions
(Credited)/charged to income
Exchange differences
At 31 March 2008
Transfers between categories
(Credited)/charged to income
Exchange differences
At 31 March 2009
Deferred tax assets
At 1 April 2007
(Charged)/credited to income
(Charged)/credited to equity
At 31 March 2008
Transfers between categories
(Charged)/credited to income
Credited/(charged) to equity
Exchange differences
At 31 March 2009
Capital
allowances in
excess of
depreciation
£m
138
–
(12)
–
126
(21)
(32)
29
102
Other
£m
21
17
5
4
47
(3)
1
9
54
Retirement
benefit Share-based
payments
£m
obligations
£m
Tax
losses
£m
53
(8)
(10)
35
(2)
(4)
31
21
81
11
(4)
(3)
4
–
2
(4)
–
2
3
(1)
–
2
(2)
–
–
–
–
Other
£m
15
10
1
26
(20)
10
9
–
25
Total
£m
159
17
(7)
4
173
(24)
(31)
38
156
Total
£m
82
(3)
(12)
67
(24)
8
36
21
108
140
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Notes to the consolidated financial statements
30 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
Total
31 Retirement benefit obligations
2009
£m
78
(30)
48
31 March
2008
£m
107
(1)
106
(a) Plan information
The Group maintains pension plans for its operations throughout the world. Some 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 £23 million to its defined benefit plans in the year to 31 March 2010.
(b) Principal assumptions
The principal assumptions used for the purpose of the actuarial valuations were as follows:
Year to 31 March 2009
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 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
Mortality assumptions – Year to 31 March 2009
Male aged 60 now
Male aged 60 in 15 years’ time
Female aged 60 now
Female aged 60 in 15 years’ time
UK
2.7%
3.5%
2.7%
6.9%
6.6%
8.1%
UK
3.6%
5.4%
3.6%
6.6%
6.1%
8.5%
Pension benefits
Others
2.0%
2.0%
1.0%
6.3%
5.9%
7.5%
Pension benefits
Others
2.0%
2.0-3.6%
0.0-1.8%
5.9%
4.0-6.0%
7.0%
US
2.5%
3.5%
n/a
7.3%
7.9%
8.4%
US
3.5%
4.5%
n/a
6.5%
7.8%
8.8%
Medical
benefits
2.5%
n/a
n/a
7.1%
n/a
n/a
Medical
benefits
3.5%
n/a
n/a
6.3%
n/a
n/a
Expected longevity post age 60
UK
26 years
28 years
27 years
29 years
US
23 years
23 years
25 years
25 years
Tate & Lyle Annual Report 2009
141
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Notes to the consolidated financial statements
31 Retirement benefit obligations (continued)
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
Expected longevity post age 60
UK
26 years
28 years
27 years
28 years
US
23 years
23 years
25 years
25 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 negative 15.4% (2008 –
positive 0.2%), and amounted to a loss of £171 million (2008 – £2 million gain).
Medical cost trend rates are estimated at between 8.5% and 10.5% per annum (2008 – 9.0%-11.0%), 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/(decrease) 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 2009
Current service cost
charged to operating profit
Interest cost
Expected return on plan assets
(Credited)/charged to
finance expense
Total
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
UK
£m
5
52
(55)
(3)
2
UK
£m
8
(3)
5
45
(51)
(6)
(1)
US
£m
6
20
(19)
1
7
US
£m
3
–
3
15
(17)
(2)
1
Increase
£m
1
7
Others
£m
1
2
(2)
–
1
Others
£m
3
2
5
3
(3)
–
5
2009
Decrease
£m
(1)
(6)
Pension benefits
Total
£m
12
74
(76)
(2)
10
Pension benefits
Total
£m
14
(1)
13
63
(71)
(8)
5
Increase
£m
1
5
Medical
benefits
£m
2
5
–
5
7
Medical
benefits
£m
1
–
1
4
–
4
5
2008
Decrease
£m
–
(5)
Total
£m
14
79
(76)
3
17
Total
£m
15
(1)
14
67
(71)
(4)
10
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).
142
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Notes to the consolidated financial statements
31 Retirement benefit obligations (continued)
(d) Amounts recognised in the balance sheet
At 31 March 2009
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 obligations
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 obligations
% of
plan
assets
25%
36%
39%
% of
plan
assets
29%
26%
45%
UK
% of
plan
£m assets
49%
34%
17%
% of
plan
assets
55%
28%
17%
185
267
280
732
(687)
–
45
45
–
UK
£m
245
220
394
859
(810)
–
49
49
–
US
Others
Total
Pension benefits
% of
plan
£m assets
% of
plan
£m assets
30%
36%
34%
Medical
benefits
£m
–
–
–
£m
293
354
328
Total
£m
293
354
328
975
(1 055)
(37)
–
–
(94)
975
(1 055)
(131)
(117)
(94)
(211)
47
(164)
–
(94)
47
(258)
Pension benefits
% of
plan
assets
33%
27%
40%
Total
£m
371
298
443
Medical
benefits
£m
–
–
–
Total
£m
371
298
443
1 112
(1 101)
(27)
–
–
(75)
1 112
(1 101)
(102)
(16)
(75)
(91)
53
(69)
–
(75)
53
(144)
27%
42%
31%
% of
plan
assets
25%
43%
32%
96
68
34
198
(318)
(37)
(157)
–
(157)
US
£m
115
59
35
209
(246)
(27)
(64)
–
(64)
12
19
14
45
(50)
–
(5)
2
(7)
Others
£m
11
19
14
44
(45)
–
(1)
4
(5)
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.
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O
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Notes to the consolidated financial statements
31 Retirement benefit obligations (continued)
(e) Reconciliation of movement in plan assets and liabilities
Liabilities
At 1 April 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
Total service cost
Interest cost
Actuarial gain
Benefits paid
Exchange differences
At 31 March 2009
Assets
At 1 April 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
Expected return on assets
Actuarial loss
Contributions paid
by employer
Benefits paid
Exchange differences
At 31 March 2009
UK
£m
864
8
45
(58)
–
–
(46)
(3)
–
810
5
52
(136)
(47)
3
687
UK
£m
869
51
(42)
27
–
–
(46)
–
–
859
55
(148)
12
(47)
1
732
US
£m
279
3
15
(7)
–
–
(15)
–
(2)
273
6
20
(27)
(19)
102
355
US
£m
224
17
(24)
9
–
–
(15)
–
(2)
209
19
(89)
11
(19)
67
198
Pension benefits
Total
£m
1 240
14
63
(70)
1
(37)
(62)
(24)
3
1 128
12
74
(167)
(67)
112
1 092
Pension benefits
Total
£m
1 188
71
(69)
38
1
(33)
(62)
(23)
1
1 112
76
(247)
26
(67)
75
975
Others
£m
97
3
3
(5)
1
(37)
(1)
(21)
5
45
1
2
(4)
(1)
7
50
Others
£m
95
3
(3)
2
1
(33)
(1)
(23)
3
44
2
(10)
3
(1)
7
45
Medical
benefits
£m
77
1
4
(2)
–
–
(4)
–
(1)
75
2
5
(9)
(5)
26
94
Medical
benefits
£m
–
–
–
4
–
–
(4)
–
–
–
–
–
5
(5)
–
–
Total
£m
1 317
15
67
(72)
1
(37)
(66)
(24)
2
1 203
14
79
(176)
(72)
138
1 186
Total
£m
1 188
71
(69)
42
1
(33)
(66)
(23)
1
1 112
76
(247)
31
(72)
75
975
144
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Notes to the consolidated financial statements
31 Retirement benefit obligations (continued)
(f) Analysis of actuarial loss/(gain) recognised in the consolidated statement of recognised income and expense
Difference between the actual return and the expected return on plan assets
Experience gains arising on scheme liabilities
Changes in assumptions underlying the present value of scheme liabilities
Actuarial loss/(gain) recognised in the consolidated statement of recognised
income and expense before tax
Cumulative actuarial loss/(gain) recognised in the consolidated statement of recognised
income and expense
Year to 31 March
2008
£m
69
(9)
(63)
(3)
(16)
2009
£m
247
(18)
(158)
71
55
Deferred tax taken directly to equity on retirement benefit obligations was £31 million credit to equity (2008 – £10 million charge
to equity).
(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
– (gain)/loss
Experience adjustments on plan assets
– loss/(gain)
2009
£m
1 186
(975)
211
(18)
247
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
32 Provisions for other liabilities and charges
Insurance
funds
£m
Deferred
consideration
£m
Restructuring
and closure
provisions
£m
Other
provisions
£m
At 1 April 2007
(Credited)/charged to the income statement
Utilised in the year
Businesses sold
Businesses acquired
Exchange differences
At 31 March 2008
Charged/(credited) to the income statement
Utilised in the year
Exchange differences
At 31 March 2009
20
–
(3)
(7)
–
–
10
4
(4)
2
12
19
(1)
(8)
–
–
–
10
(2)
(8)
–
–
37
32
(40)
(3)
–
6
32
–
(27)
2
7
Provisions are expected to be utilised as follows:
Within one year
After more than one year
Total
19
8
(11)
(2)
2
–
16
(1)
(5)
3
13
2009
£m
11
21
32
Total
£m
95
39
(62)
(12)
2
6
68
1
(44)
7
32
31 March
2008
£m
54
14
68
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 ended 31 March 2009 from the Sucralose
realignment in 2004. Payments were made to McNeil based on the achievement of certain minimum targets in respect of sales of
Sucralose made by the Group. The Group continues to receive amounts from McNeil based on sales of Sucralose tabletop products
made by McNeil for ten years from the date of the realignment. These receipts 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 and only in the periods in which they are
earned. In the year ended 31 March 2009 £9 million of receipts were recognised in the income statement (31 March 2008 – £7 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. It is expected that the provisions will be fully utilised within the next three 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. During the year, £2 million in respect of closure costs for the astaxanthin
business was released to income.
The amount charged/credited to the income statement includes a charge of £1 million (2008 – £1 million) related to the unwinding of discounts.
33 Change in working capital
Decrease/(increase) in inventories
Increase in receivables
Increase in payables
Decrease/(increase) in derivative financial instruments
Decrease in provisions for other liabilities and charges
Increase/(decrease) in retirement benefit obligations
Decrease in working capital items held for sale
Movement during year
The above movements include the following elements:
Exchange differences
Acquisitions, disposals and discontinued operations during the year
Deferred consideration
Actuarial (loss)/gain
Other items
Decrease/(increase) in working capital (continuing operations)
2009
£m
24
(42)
34
107
(36)
120
–
207
97
(198)
–
(71)
(4)
31
31 March
2008
£m
(59)
(64)
89
(18)
(27)
(40)
24
(95)
(12)
14
(23)
3
(46)
(159)
Other items include non-cash movements in derivatives, and the elimination of balances within debtors and creditors attributable to
interest, property, plant and equipment and investments.
146
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Notes to the consolidated financial statements
34 Cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
Total
2009
£m
102
332
434
31 March
2008
£m
101
64
165
The effective interest rate on short-term deposits was 3.0% (2008 – 5.7%), which have an average maturity of 24 days (2008 – 53 days).
The carrying amount of cash and cash equivalents are denominated in the following currencies:
Euro
US dollar
Sterling
Other
Total
35 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
2009
£m
161
235
4
34
434
2009
£m
(1 129)
(523)
(13)
434
(1 231)
31 March
2008
£m
68
48
11
38
165
31 March
2008
£m
(858)
(360)
12
165
(1 041)
Notes
29
29
20
34
(a) Current borrowings and overdrafts at 31 March 2009 include £98 million (31 March 2008 – £50 million) in respect of
securitised receivables.
(b) Derivative financial instruments presented within assets and liabilities in the balance sheet of £93 million net liability comprise net
debt-related instruments of £13 million liability and net non-debt-related instruments of £80 million liability (2008 – £14 million net
asset comprising net debt-related instruments of £12 million asset and net non-debt-related instruments of £2 million asset).
Net debt is denominated in the following currencies:
2009
£m
250
947
38
(4)
31 March
2008
£m
222
843
(45)
21
1 231
1 041
Euro
US dollar
Sterling
Other
Total
Tate & Lyle Annual Report 2009
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Notes to the consolidated financial statements
35 Net debt (continued)
Movements in the Group’s net debt are as follows:
Balance at 1 April
Increase/(decrease) in cash and cash equivalents in the year
Cash outflow/(inflow) from decrease/(increase) in borrowings
Borrowings arising on acquisitions
Debt transferred on disposal of subsidiaries
Decrease/(increase) in net debt resulting from cash flows
Inception of finance leases
Trade finance recognised as debt
Fair value and other movements
Exchange differences
Increase in net debt in the year
Balance at 31 March
36 Contingent liabilities
Guarantees of loans and overdrafts of joint ventures and associates
Trade guarantees
2009
£m
(1 041)
229
16
–
8
253
(1)
(55)
(9)
(378)
(190)
2008
£m
(900)
(32)
(128)
(2)
55
(107)
(2)
–
–
(32)
(141)
(1 231)
(1 041)
2009
£m
9
22
31 March
2008
£m
14
29
In addition to the above we have guaranteed the obligations of certain joint ventures to Payment Agencies in connection with
Restructuring Aid. The Group’s share of these guarantees is £66 million (2008 – £nil million).
Other trade guarantees have been given in the normal course of business by the Group at both 31 March 2009 and 31 March 2008.
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.
37 Commitments
Capital commitments
Commitments for the acquisition of property, plant and equipment
2009
£m
29
31 March
2008
£m
69
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 one year and no later than five years
After five years
2009
£m
34
105
98
237
31 March
2008
£m
32
98
98
228
148
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Notes to the consolidated financial statements
38 Acquisitions and disposals
Acquisitions
During the year the Group paid £1 million of deferred consideration relating to the acquisition of Tate & Lyle South Africa in the year
ended 31 March 2005. The payment represents an adjustment to the purchase price and is recognised as an addition to goodwill
in the year (Note 15).
In the year ended 31 March 2008, the Group acquired 80% of the issued share capital of G. C. HAHN & Co. (Hahn). 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 agreement allows for the Group to acquire the remaining 20% of the issued share capital
of Hahn prior to 1 January 2020 through put and call options. As at 31 March 2009, this option had not yet been exercised.
At 31 March 2009 deferred consideration of £28 million is recognised in trade and other payables. The table below sets out the
fair value adjustments arising on this acquisition.
Book value on
acquisition
£m
Fair value
adjustments
£m
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 and cash equivalents 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.
Disposals
International Sugar Trading
On 31 March 2009, the Group completed the disposal of its International Sugar Trading business. Total consideration, net of
disposal costs was £57 million.
Total consideration, net of costs
Net assets disposed
Trade and other payables assumed
Other items, including risk transfer payments and fair value adjustments
Loss on disposal
Cash flows:
Cash consideration, net of costs
Cash inflow in the year
£m
57
(14)
(43)
(22)
(22)
57
57
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Notes to the consolidated financial statements
38 Acquisitions and disposals (continued)
Net assets disposed comprised inventories. The disposal generated a cash inflow of £57 million; an outflow is anticipated in the
forthcoming year of approximately £29 million.
A number of other investments relating to the International Sugar Trading business were not included in the initial sale and are
being addressed separately in accordance with the relevant shareholders’ agreements. The sales of some of these interests, with
associated profits, are expected to occur in the year ending 31 March 2010 and the investments are classified as held for sale.
The sale of the International Sugar Trading business and the anticipated disposal of the other investments are together unlikely to
generate a material profit or loss on disposal.
Other disposals
On 21 January 2009, the Group disposed of its shareholding in Orsan UK Ltd, the holding company of its Chinese monosodium
glutamate business. Total consideration, net of provisioning and disposal costs was £1 million and the profit on disposal was
£2 million. The cash impact of the disposal was an outflow of £4 million.
In the year ended 31 March 2008, the Group made the following disposals:
– Tate & Lyle Canada (Redpath) on 22 April 2007 for total consideration, net of disposal costs of £140 million;
–
–
five European starch plants on 1 October 2007 for total consideration, net of disposal costs of £212 million; and
its 49% indirect shareholding in Occidente on 28 December 2007 for total consideration, net of disposal costs
of £46 million.
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
Goodwill written-off
Other items, including exchange differences transferred from equity
Total consideration, net of costs
Profit/(loss) on disposal
Cash flows:
Cash consideration, net of costs
Cash disposed
Cash inflow in the year
Redpath
£m
European
starch plants
£m
Occidente
£m
51
–
–
22
–
2
22
6
(18)
–
85
–
5
140
60
139
(6)
133
172
–
2
42
(4)
(4)
150
20
(118)
(43)
217
(15)
12
212
(8)
223
(20)
203
26
1
–
19
(1)
–
5
4
(6)
(12)
36
–
(2)
46
8
46
(4)
42
On 26 April 2007, the Group disposed of its shareholding in Pure Cane Molasses for cash consideration of £4 million. The loss on
disposal was £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.
39 Post balance sheet events
Subsequent to the year end, the Board endorsed its decision to mothball the Sucralose McIntosh site. An impairment charge of
£97 million has been recognised in connection with this endorsement and the Group expects to incur charges in the region of
£60 million in the forthcoming year completing the mothballing.
150
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Notes to the consolidated financial statements
40 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 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
Financing
– loans to joint ventures
– deposits from joint ventures
Discontinued
Sales of goods and services
– to joint ventures
Purchases of goods and services
– from joint ventures
Financing
– loans to joint ventures
– deposits from joint ventures
The Group had no material related party transactions containing unusual commercial terms.
Key management
Key management compensation is disclosed in Note 9.
2009
£m
61
209
14
–
26
–
10
42
2009
£m
–
–
–
53
31 March
2008
£m
33
97
12
–
27
1
8
30
31 March
2008
£m
8
8
–
–
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Notes to the consolidated financial statements
41 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
£1 = US$
£1 = €
Year end foreign exchange rates
£1 = US$
£1 = €
42 Main subsidiaries and investments
Subsidiaries based in the UK1
Cesalpinia UK Limited
G. C. HAHN & Co. Limited4
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
Tate & Lyle LLC
The Molasses Trading Company Limited
United Molasses (Ireland) Limited3
Year to 31 March
2008
2.01
1.42
31 March
2008
1.99
1.26
2009
1.80
1.19
2009
1.43
1.08
Type of business
Blending
Blending
Holding company
Holding company
See below
In-house treasury company
Holding company
Holding company
Holding company
Holding company
Molasses
Percentage
of equity
attributable to
Tate & Lyle PLC
100.0
100.0
100.0
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 and Tate & Lyle LLC which is registered
in Delaware, USA.
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 Process Technology
Tate & Lyle Sugars, Europe
Sugar technology
Sugar refining,
molasses and bulk liquid storage
152
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Notes to the consolidated financial statements
42 Main subsidiaries and investments (continued)
Subsidiaries operating overseas
Australia
G. C. HAHN & Co. (Australia) Pty Ltd2
Tate & Lyle ANZ Pty Ltd
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
France
Germany
Gibraltar
Hong Kong
Israel
Italy
Mauritius
Mexico
Morocco
Mozambique
Netherlands
Norway
Portugal
Singapore
South Africa
Spain
Trinidad
USA
Vietnam
Tate & Lyle Trading (Shanghai) Ltd
France Melasse SA1
Société Européenne des Mélasses SA1
G. C. HAHN & Co. Stabilisierungstechnik GmbH2
Tate & Lyle Molasses Germany GmbH
Tate & Lyle Insurance (Gibraltar) Ltd
Tate & Lyle Asia Limited
Tate & Lyle Gadot Manufacturing Limited
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 Holland BV
Tate & Lyle Molasses Holland BV
Tate & Lyle Netherlands 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
Staley Holdings Inc
Tate & Lyle Custom Ingredients, LLC
Tate & Lyle Finance, Inc
Tate & Lyle Holdings (US) LLP
Tate & Lyle Ingredients Americas, Inc
Tate & Lyle Sucralose, LLC
TLI Holdings Inc
Nghe An Tate & Lyle Sugar Company Limited
Type of business
Blending
Sucralose distribution
Molasses
Management & finance
Citric acid and Sugar Trading
Holding company
Sucralose distribution
Molasses
Holding company
Blending
Molasses
Reinsurance
Sucralose distribution
Sugar refining
Blending
Molasses
Molasses
Blending
Citric acid
Holding company
Cereal sweeteners & starches
Molasses
Holding company
Molasses
Cereal sweeteners & starches
Sugar distribution
Holding company
Sugar refining
Molasses
High intensity sweeteners
Blending
Molasses
Molasses
Holding company
Blending
In-house banking
Holding company
Cereal sweeteners & starches
High intensity sweeteners
In-house banking
Cane sugar manufacture
Percentage
of equity
attributable to
Tate & Lyle PLC
100.0
100.0
100.0
100.0
100.0
75.0
100.0
66.6
66.6
100.0
100.0
100.0
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
60.7
(80.9)
1. Non-coterminous year end.
2.
The Group holds 80% of the issued capital of G. C. HAHN & Co. 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
42 Main subsidiaries and investments (continued)
Joint ventures
Bulgaria
Colombia
Hungary
Ireland
Mexico
Netherlands
Romania
Slovakia
Spain
Turkey
USA
Amylum Bulgaria EAD1, 2
Sucromiles SA2
Hungrana Kft1, 2
Premier Molasses Company Ltd2
Almidones Mexicanos SA2
Eaststarch CV
Amylum Romania SRL1, 2
Amylum Slovakia spol sro1,
Compania de Melazas SA2
Amylum Nisasta AS1
DuPont Tate & Lyle Bio Products Company, LLC
The share capital held is of ordinary shares.
1. Share capital held by Eaststarch CV.
2. 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
Cereal sweeteners & starches (100.0)
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
50.0
50.0
50.0
50.0
Associates
Italy
Thailand
USA
Eridania Sadam
Tapioca Development Corporation1
Microbia Precision Engineering Inc.2
Type of business
Sugars
Starch production
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
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.
154
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Notes to the consolidated financial statements
43 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 2009
Year to 31 March 2008
Reported
£m
Exceptional/
amortisation
£m
Adjusted
£m
Reported
£m
Exceptional/
amortisation
£m
3 553
164
(51)
113
(19)
(5)
89
19.5
19.4
16.8%
852
(21)
(2)
(23)
(1)
–
(24)
(5.3)
(5.3)
(3.8)%
4 405
143
(53)
90
(20)
(5)
65
14.2
14.1
22.2%
–
134
–
134
(49)
–
85
18.7
18.6
–
22
–
22
–
–
22
4.9
4.8
–
156
–
156
(49)
–
107
23.6
23.4
3 553
2 867
298
(51)
247
(68)
(5)
174
38.2
38.0
224
(42)
182
(76)
7
113
23.8
23.6
27.3%
41.8%
852
1
(2)
(1)
(1)
–
(2)
(0.4)
(0.5)
(75.0)%
951
96
1
97
(16)
–
81
17.1
16.8
16.5%
4 405
3 818
299
(53)
246
(69)
(5)
172
320
(41)
279
(92)
7
194
37.8
37.5
27.8%
40.9
40.4
33.0%
–
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
Adjusted
£m
2 867
295
(42)
253
(84)
(3)
166
35.0
34.6
33.2%
951
36
1
37
(8)
–
29
6.1
6.0
21.6%
3 818
331
(41)
290
(92)
(3)
195
41.1
40.6
31.7%
Continuing operations
Sales
Operating profit
Net finance expense
Profit before tax
Income tax expense
Minority interests
Profit attributable to equity
holders of the Company
Basic EPS (p)
Diluted EPS (p)
Tax rate
Discontinued operations
Sales
Operating (loss)/profit
Net finance (expense)/income
(Loss)/profit before tax
Income tax expense
Minority interests
(Loss)/profit attributable
to equity holders
of the Company
Basic EPS (p)
Diluted EPS (p)
Tax rate
Total operations
Sales
Operating profit
Net finance expense
Profit before tax
Income tax expense
Minority interests
Profit attributable to equity
holders of the Company
Basic EPS (p)
Diluted EPS (p)
Tax rate
Tate & Lyle Annual Report 2009
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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:
(cid:2)
(cid:2)
(cid:2)
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 2009;
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 parent company financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants and
Registered Auditors
1 Embankment Place
London WC2N 6RH
27 May 2009
We have audited the parent company financial statements
of Tate & Lyle PLC for the year ended 31 March 2009 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 2009.
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 ‘What we do’ and ‘How we performed’
sections that are 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 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 parent company financial
statements. Our responsibilities do not extend to any
other information.
156
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Parent company balance sheet
Year to 31 March
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
2009
£m
2
1 879
1
1 882
53
3
56
(135)
(79)
1 803
(514)
(3)
1 286
115
404
8
759
1 286
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 27 May 2009 and signed on its behalf by:
Sir David Lees, Iain Ferguson, Tim Lodge
Directors
Registered no. 76535
The notes on pages 158 to 163 form part of these parent company financial statements.
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Notes to the parent company financial statements
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 3 to 28 years. Impairment
reviews are undertaken if there are indications that the carrying
values may not be recoverable.
Investments
Unless they are financed by foreign currency borrowings and
designated as a fair value hedging relationship, investments in
subsidiaries and associates are shown at cost less amounts
written off where there is a permanent diminution in value.
Investments in shares in overseas undertakings that are
financed by foreign currency borrowings and designated as a
fair value hedging relationship are retranslated into pounds
sterling at the exchange rate ruling at the balance sheet date
and the resulting exchange gains and losses are recognised in
the profit and loss account. Exchange gains and losses on the
related foreign currency borrowings are also recognised in the
profit and loss account in accordance with FRS23 The Effects
of Changes in Foreign Exchange Rates.
An undertaking is regarded as a subsidiary undertaking if the
Company has control over its operating and financial policies.
An undertaking is regarded as an associate if the Company
holds a participating interest and has significant influence, but
not control, over its operating and financial policies. Significant
influence generally exists where the Company holds more than
20% and less than 50% of the shareholders’ voting rights.
All loans and receivables to and from subsidiary undertakings
are shown at cost less amounts written off where deemed
unrecoverable.
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.
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 2009 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 standards and interpretations adopted
The following new standards, amendments and interpretations
were adopted by the Company in the year. Adoption had no
effect on the results, financial position of the Company or its
disclosures.
– Amendment to FRS17: Retirement Benefits
– Amendments and clarification amendments to FRS26:
Financial Instruments: Recognition and Measurement
and FRS29 Financial Instruments: Disclosures and
consequential amendments to UITF42 Reassessment
of Embedded Derivatives
New UK standards and interpretations not adopted
The following amendments to Financial Reporting Standards
have been issued but have not been adopted yet by the
Company:
– Amendment to FRS8 Related Party Disclosures
– Amendment to FRS20 Share-based Payment – Vesting
conditions and cancellations
– UITF Abstract 46 Hedges of a Net Investment in a Foreign
Operation
– Amendment to FRS25 Financial Instruments: Presentation
– Puttable financial instruments and obligations arising on
liquidation
– Amendment to FRS26 Financial Instruments: Recognition
and Measurement – Eligible hedged items
Improvements to Financial Reporting Standards
–
The amendments to FRS8 and FRS20 and UITF Abstract 46
are effective for the Company in its accounting period
beginning on 1 April 2009. Amendments to FRS25, FRS26
and the improvements to Financial Reporting Standards are
effective for the Company in its accounting period beginning
on 1 April 2010.
The adoption of these amendments is not expected to have a
material impact on the Company's profit for the year or equity.
The adoptions may affect disclosures in the Company's
financial statements.
158
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Notes to the parent company financial statements
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.
1 Parent company accounting policies (continued)
Retirement benefits
The Company contributes to the Group pension plan operated
in the UK. Details of the plan are included within Note 31 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 pounds sterling at the rates of exchange ruling on the last
day of the financial period (the closing rate). Profits and losses
are translated into pounds 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 27 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.
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Notes to the parent company financial statements
2 Tangible fixed assets
The net book value of tangible fixed assets of £2 million (2008 – £2 million) comprises plant and machinery. Net book value
comprises cost of £4 million (2008 – £4 million) less accumulated depreciation of £2 million (2008 – £2 million).
3 Investments in subsidiary undertakings
At 1 April 2008
Increase – share-based payments
Impairment
Exchange differences
At 31 March 2009
Shares in
subsidiary
undertakings
£m
Loans to
subsidiary
undertakings
£m
1 601
2
(79)
111
1 635
227
–
–
17
244
Total
£m
1 828
2
(79)
128
1 879
Shares in subsidiary undertakings are stated at cost or earliest ascribed value less amounts provided of £149 million
(2008 – £70 million). Loans to subsidiary undertakings are stated net of amounts provided of £9 million (2008 – £9 million).
The impairment reflects the writedown to recoverable amount of the Company’s investment in Tate & Lyle Services Belgium NV.
A list of the Company’s significant investments is provided in Note 42 of the Group financial statements.
4 Investment in associates
The Company holds a 16.6% interest in Tapioca Development Corporation, a company incorporated in Thailand, for book value of
£1 million (2008 – £1 million).
5 Debtors
Due within one year
UK taxation
Amounts due from subsidiary undertaking
Other debtors
Prepayments and accrued income
Total
Due after more than one year
Deferred tax
Total
2009
£m
7
38
7
1
53
2009
£m
3
3
31 March
2008
£m
3
33
8
1
45
31 March
2008
£m
5
5
Note
8
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Notes to the parent company financial statements
6 Creditors – due within one year
Amounts owed to subsidiary undertakings
Other creditors
Accruals and deferred income
Total
2009
£m
126
5
4
135
The effective interest rate applicable to amounts owed to subsidiary undertakings at 31 March 2009 is 1.6% (2008 – 4.8%).
Amounts owed to subsidiary undertakings are repayable on demand.
7 Creditors – due after more than one year
Amounts owed to subsidiary undertakings
Preference shares
Total
2009
£m
512
2
514
31 March
2008
£m
563
1
21
585
31 March
2008
£m
426
2
428
The effective interest rate applicable to amounts owed to subsidiary undertakings at 31 March 2009 is 6.5% (2008 – 6.5%).
Amounts owed to subsidiary undertakings at year end mature after more than three years (2008 – mature after more than four years).
8 Deferred tax
Deferred tax charged to profit in the year was £2 million (2008 – £6 million).
9 Provisions for liabilities and charges
At 31 March 2008
Charged to the profit and loss account
Utilised in the year
At 31 March 2009
Restructuring
£m
Other
£m
2
1
(1)
2
1
–
–
1
Total
£m
3
1
(1)
3
Provisions 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
2009
£m
31 March
2008
£m
1 407
1 039
Guarantees given in respect of drawn and undrawn loans and overdrafts by Tate & Lyle PLC were £2,807 million at 31 March 2009
(2008 – £2,041 million).
Other trade guarantees have been given in the normal course of business by Tate & Lyle PLC at both 31 March 2009 and
31 March 2008. 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.
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Notes to the parent company financial statements
11 Financial commitments
Annual payments made by the Company in the year ended 31 March 2009 in respect of operating leases that expire later than
one year and no later than five years were £3 million (2008 – £4 million expiring after more than five years).
12 Called up share capital
Authorised equity share capital
790,424,000 ordinary shares of 25p each (2008 – 790,424,000)
Allotted, called up and fully paid equity share capital
2009
£m
198
31 March
2008
£m
198
At 1 April
Allotted under share option schemes
Market purchases
At 31 March
Shares
459 910 466
102 335
–
460 012 801
31 March 2009
31 March 2008
£m
114
1
–
115
Shares
489 824 398
413 068
(30 327 000)
459 910 466
£m
122
–
(8)
114
Treasury shares and shares held in ESOP trust
As at 31 March 2009, the Group held 1,328,502 shares (2008 – 2,755,073 shares) in Treasury.
During the year 1,426,571 shares (2008 – 544,927 shares) were released from Treasury to satisfy share options exercised.
The shares held in Treasury at 31 March 2009 represented 0.3% (2008 – 0.6%) of the share capital at the year end, and have a
nominal value of £0.3 million (2008 – £0.6 million).
13 Reconciliation of movements in shareholders’ funds
At 1 April 2008
Proceeds from shares issued
Share-based payments
Ordinary dividends paid
Profit for the year
At 31 March 2009
Ordinary
shares
£m
114
1
–
–
–
115
Share
premium
account
£m
Capital
redemption
reserve
£m
Profit and
loss account
£m
404
–
–
–
–
404
8
–
–
–
–
8
339
2
4
(104)
518
759
Total
£m
865
3
4
(104)
518
1 286
The profit for the year before dividends dealt with in the financial statements of the Company amounted to £518 million
(2008 – £168 million loss).
The remaining amount available for the payment of dividends by the Company at 31 March 2009 was £759 million (2008 – £339 million).
162
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Notes to the parent company financial statements
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 90 staff including directors (2008 – 89) and the total staff costs are shown below:
Wages and salaries
Social security
Retirement benefits
Total
Year to 31 March
2008
£m
16
2
2
20
2009
£m
11
1
1
13
Directors’ emoluments disclosures are provided in the directors’ remuneration report on pages 84 to 96 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 31 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
UK GAAP2
IFRS
2000
2001
2002
2003
20041
20053,4,7 20064,7
20074
20084
20094
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
260.5
14.2
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
37.8
14.1
37.5
22.9
Closing market capitalisation (£ million)
1 039
1 102
1 683
1 441
1 435
2 586
2 791
2 816
2 484
1 198
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 assets6
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 assets6
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
3.6
2.3
3.3
7.6
9.3
11.6
9.9
8.4
7.8
6.1
64% 91% 59% 45% 40% 48% 92% 90% 110% 122%
7.0% 4.3% 5.3% 7.8% 7.7% 8.3% 8.8% 9.2% 8.7% 6.8%
13.5% 8.5% 10.5% 14.2% 15.4% 18.8% 18.9% 18.9% 15.5% 12.7%
1.4
(2.8)
1.4
1.5
1.7
1.6
(0.3)
2.1
1.8
0.6
1.7
0.8
1.2
1.8
1.8
1.9
2.1
2.3
1.8
1.7
‘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. Under UK GAAP interest cover was calculated using only the profit before interest, exceptional items and amortisation, and the net finance expense
of Tate & Lyle PLC and its subsidiaries. From 2007, interest cover has been calculated using the same basis as set out in the Group’s external
bank covenants.
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 31 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 assets/(liabilities) 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 tax
Income tax expense
Profit/(loss) after tax
Minority interests
Discontinued operations
Profit/(loss) for the year
UK GAAP2
IFRS
2000
£m
2001
£m
2002
£m
2003
£m
20041
£m
20053,4,6 20064,6
£m
£m
20074
£m
20084
£m
20094
£m
1 854
–
211
1 860
–
307
1 699
–
114
1 565
–
94
1 414
–
107
1 461
3
37
2 065
(805)
2 167
(963)
1 813
(639)
1 659
(471)
1 521
(388)
1 501
(474)
1 480
21
356
–
1 857
(866)
1 449
25
445
61
1 980
(900)
1 516
22
576
–
2 114
(1 041)
1 922
19
394
28
2 363
(1 231)
4
(142)
(93)
(144)
(155)
1 264
1 062
1 081
1 044
978
(44)
983
(51)
940
(85)
995
(123)
(119)
950
1 013
117
984
123
885
123
920
123
889
1 101
163
1 008
54
1 043
38
1 012
32
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
115
872
987
26
1 013
4 090
4 146
3 944
3 167
3 167
3 339
3 465
3 225
2 867
3 553
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
295
(12)
(59)
224
–
224
–
–
–
224
(42)
–
182
(76)
106
7
81
194
298
(15)
(119)
164
–
164
–
–
–
164
(51)
–
113
(19)
94
(5)
(24)
65
Profit before tax, exceptional items
and amortisation
209
113
159
228
227
254
267
275
253
247
‘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 2008 and 31 March 2009 is presented in accordance with the presentation adopted in the 2009
Group financial statements and unless otherwise stated represents continuing operations only. Profit summary information for the years 31 March 2007 and
31 March 2006 is presented in accordance with the presentation adopted in the Group Financial Statements for 2008 and 2007 respectively 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 2009
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Information for investors
Addresses and telephone numbers
Useful addresses and telephone numbers are set out on page 167.
Dividends on ordinary shares
Two payments were made during the tax year 2008/2009 as follows:
Payment date
31 July 2008
9 January 2009
Dividend description
Final 2008
Interim 2009
Dividend per share
16.1p
6.8p
Services
Individual Savings Account (ISA)
Tate & Lyle’s ordinary shares can be held in an 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 167 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 167.
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)
2009 Annual General Meeting
Announcement of interim results for six months to 30 September 2009
Announcement of preliminary results for the year ending 31 March 2010
2010 Annual General Meeting
23 July 2009*
5 November 2009
27 May 2010
22 July 2010
Dividend on ordinary shares
Announced
Payment date
1. Subject to the approval of shareholders
Dividends on 61⁄2% cumulative preference shares
Paid 31 March and 30 September.
2009 final
28 May 2009*
31 July 20091
2010 interim
5 November 2009
8 January 2010
2010 final
27 May 2010
30 July 20101
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 notification 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
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
RBS 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.
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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 168.
Environmental statement
This report is printed on ‘Look!’ 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 2009. 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, DuPontTM and Sorona®
are trademarks or registered trademarks of
E.I. du Pont de Nemours and Company.
Designed and produced by
www.berghindjoseph.com
Typeset by Orb Solutions
Printed by St Ives Westerham Press Ltd
Photography by
David Rees, Peter Thompson,
Chris Brown, Detlev Klockow
0920_T&L_ Covers.qxd 15/6/09 13:53 Page 1
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Transforming raw materials into
quality ingredients used by millions
of people every day.
www.tateandlyle.com
Annual Report 2009