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www.tateandlyle.com
Annual Report 2010
Contents
Directors’ report
Overview
1 Performance highlights
2 Chairman’s statement
3 Chief Executive’s review
Business review
8 What we do
18 Performance
18 Group financial results
21 Food & Industrial Ingredients, Americas
23 Food & Industrial Ingredients, Europe
24 Sugars
26 Sucralose
27 Other financial information
32 Corporate social responsibility
Governance
38 Board of directors
40 Executive management
41 Corporate governance
47 Directors’ remuneration report
56 Other statutory and governance information
57 Directors’ statement of responsibilities
Financial statements and
other information
Financial statements
58 Independent Auditors’ Report to the
Members of Tate & Lyle PLC
59 Consolidated income statement
60 Consolidated statement of
comprehensive income
61 Consolidated statement of financial position
62 Consolidated statement of cash flows
63 Consolidated statement of changes in
shareholders’ equity
64 Notes to the consolidated financial statements
110 Parent company financial statements
Shareholder information
118 Ten-year review
120 Information for investors
www.tateandlyle.com
Tate & Lyle is a global provider of
ingredients and solutions to the food,
beverage and other industries. We
transform raw materials into distinctive,
high-quality ingredients for our customers
which are consumed or used by millions
of people every day.
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.
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 57 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.
A reconciliation of reported and adjusted information
is included in Note 42 on page 109.
A new way of reporting
You will notice that we have changed
the way we report this year. The focus of
this annual report is to fulfil our statutory
obligations to report on the performance
and prospects of the Company to our
shareholders. For everything else you
would like to know about Tate & Lyle,
please go to our new website,
www.tateandlyle.com.
Cautionary statement
Please read the full cautionary and non-reliance statements
which can be found on page 121.
Definitions
In this report, ‘Company’ means Tate & Lyle PLC; ‘Tate & Lyle’
or ‘Group’ means Tate & Lyle PLC and its subsidiary and
joint-venture companies.
Trademarks
SPLENDA® and the SPLENDA® logo are trademarks of
McNeil Nutritionals, LLC.
The DuPont Oval logo, DuPont™ and Sorona® are trademarks or
registered trademarks of E. I. du Pont de Nemours and Company.
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 2010.
More information about Tate & Lyle can be
found on our website at www.tateandlyle.com.
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®
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
Credits
Designed, typeset and produced by
www.berghindjoseph.com
Photography by David Rees
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.
Tate & Lyle Annual Report 2010 121
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Performance highlights
Sales
Year to 31 March
£m
2 584
2 476
2 065
969
1 030
802
Adjusted operating profit
Year to 31 March
£m
3 553
3 506
2 867
295
298
298
166
160
132
125
204
184
08
09
Primary
10
08
09
Value added
10
08
09
Total
10
08
09
Primary
10
08
09
Value added
10
08
09
Total1
10
1 Total includes central
costs of £31 million in
2010 and £18 million
in 2009.
Adjusted profit before tax2
Year to 31 March
£m
Adjusted diluted earnings per share
Year to 31 March
pence
253
247
229
38.0
38.9
34.6
08
09
10
08
09
10
Net debt
As at 31 March
£m
Free cash flow4
Year to 31 March
£m
1 231
1 041
8143
540
154
(127)
08
09
10
08
09
10
2 Before exceptional
items and amortisation
of acquired intangible
assets.
3 Exchange rate
movements reduced
net debt by £79 million
in the year ended
31 March 2010.
Excluding movements
in exchange rates,
net debt reduced by
£338 million.
4 Free cash flow is defined
as cash flow from
continuing operations
after interest, taxation
and capital expenditure.
Statutory results
Operating profit
(Loss)/profit before tax (continuing operations)
Profit for the year (total operations)
Diluted earnings per share (total operations)
Year to 31 March
2010
2009
£8m
£(61)m
£19m
3.3p
£164m
£113m
£70m
14.1p
Tate & Lyle Annual Report 2010 1
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Chairman’s statement
Results
In this, my first year as Chairman, I am pleased
to report that Tate & Lyle has responded well
to the near-term financial priorities set at the
start of the year, resulting in a stronger balance
sheet and a solid overall performance in what
have been challenging market conditions. I am
delighted to welcome our new Chief Executive,
Javed Ahmed, in whose report opposite you
will find details of the year’s results.
Regrettably, it has been necessary to recognise
total asset write-downs of £260 million, including
a very significant impairment of our investment
in the Fort Dodge, Iowa plant, in these accounts.
I also recognise that large impairments have
been made in each of the past five years. The
disciplines now being put in place are intended
to support an improvement in our investment
performance going forward.
Dividend
The Board is recommending a maintained
final dividend of 16.1p, making a full-year
dividend of 22.9p per share, in line with the
prior year. 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
30 July 2010 subject to shareholder approval,
to all shareholders on the Register of Members
on 25 June 2010.
Board
There have been a number of changes on
the Board since the last AGM. As announced
in June 2009, I succeeded Sir David Lees
as Chairman following last year’s AGM and,
on 1 October 2009, Javed Ahmed succeeded
Iain Ferguson as Chief Executive, thereby
completing the final steps in the succession plan.
The Board was further strengthened during the
period by the appointment of two new
non-executive directors, Douglas Hurt and
William Camp.
Sir Peter Gershon
Chairman
Richard Delbridge will be retiring as a non-
executive director at the end of our 2010 AGM
after serving on the Board for the last ten
years. During that time, Richard has served as
Chairman of our Audit Committee and as the
Senior Independent Director. On behalf of the
Board, I would like to take this opportunity to
thank him for his wise counsel and outstanding
service since 2000. Robert Walker will replace
Richard as Senior Independent Director
at the conclusion of this year’s AGM.
Strategy
We have announced our intention to refocus
our strategy and prioritise our future investment
in speciality food ingredients. We have also
announced a number of important changes
to our organisation and the way that we go to
market. These changes are described in more
detail in the Chief Executive’s review on pages
3 to 7. Through these changes we will build the
platform from which we will deliver sustainable
long-term growth.
Governance
Upon my succession as Chairman, in seeking
to continue to strengthen the governance
framework established under my predecessor, I
held a series of meetings with major shareholders
and directors. A number of recommendations
were agreed as an output from these meetings,
most of which have now been implemented.
In addition, I carried out the annual evaluation
of the Board’s effectiveness. The evaluation
consisted of one-to-one performance evaluation
meetings with each director and the Company
Secretary. The Board is currently implementing
a number of recommendations arising from
this process.
Overall, I am confident that the Tate & Lyle
Board remains fit for purpose and continues to
provide the highest standards of governance
and leadership.
Sir Peter Gershon
Chairman
26 May 2010
2 Tate & Lyle Annual Report 2010
Chief Executive’s review
Javed Ahmed
Chief Executive
Review of the year
Overview
Tate & Lyle delivered a solid performance in
the face of challenging conditions in a number
of our markets. Adjusted operating profits
from core value added food ingredients grew
strongly, increasing by 22% (14% in constant
currency) to £131 million. Profits within primary
ingredients in the Americas and Europe were
22% below the prior year at £98 million (27%
in constant currency), as lower co-product
income and weaker industrial profits adversely
impacted results.
Sales for the year were £3,506 million, 1%
lower (6% in constant currency) than the prior
year. Adjusted operating profit of £298 million
was in line with the prior year (7% lower in
constant currency). Adjusted profit before tax
was £229 million, 7% lower (14% in constant
currency) than the prior year, reflecting an
increase of £16 million in the net finance expense
for retirement benefit plans. Adjusted diluted
earnings per share of 38.9p were 2% higher (2%
lower in constant currency), benefiting from a
lower effective tax rate of 20.4% (2009 – 27.3%).
Exchange translation increased adjusted profit
before tax by £19 million compared to the prior
year. Loss before tax after exceptional items and
amortisation of acquired intangible assets was
£61 million compared to a profit of £113 million
in the prior year.
Total net exceptional charges before tax of
£276 million (2009 – £119 million) have been
recognised in the year.
With regard to our plant in Fort Dodge, Iowa, in
the last few months we have conducted detailed
analyses of the end markets which the plant
would supply under our new capital management
processes. The continuing depressed and volatile
outlook for ethanol, and uncertain conditions in
industrial starch and corn gluten feed markets,
do not provide any basis to complete and
commission the plant.
Changes in feed and energy markets,
together with the reconfiguration of technology
required following our experience of installing
new equipment at our Loudon plant, along with
remobilisation costs, would mean that, if we
were to complete Fort Dodge, total additional
costs would now be in the region of £70 million.
Factoring in the risks associated with future
returns from the plant, including the length of
time to complete, regulatory uncertainty and a
continuation of the current market conditions,
we have concluded that the plant is highly
unlikely to be completed or commissioned in
the foreseeable future. As a result, the facility
has been mothballed and has been written
down to £17 million, leading to an impairment
of £217 million which has been recognised as
an exceptional charge in the 2010 financial year.
A further exceptional charge of approximately
£25 million will be recognised during the 2011
financial year in respect of long-term contracts
relating to the facility. We will continue to seek
ways to maximise shareholder value from the
Fort Dodge plant in these circumstances.
Net debt decreased by £417 million, or 34%,
to £814 million, driven primarily by strong free
cash flows from continuing operations. Before
the effects of exchange, net debt decreased
by £338 million. The impact of exchange
movements during the year, which reduced
debt by £79 million, was due principally to the
strengthening of sterling against the US dollar
by 6% year on year.
The Board is recommending a maintained final
dividend of 16.1p (2009 – 16.1p), making a full-
year dividend of 22.9p per share, in line with the
prior year. The proposed final dividend will be
paid on 30 July 2010 to all shareholders on the
Register of Members at 25 June 2010.
During the year, we conducted a thorough, fact-
based review of the Company’s current position
and a detailed analysis of the opportunities and
challenges we face. Based on this review, we are
implementing a number of fundamental changes
to the way we are organised, in order to refocus
the Group to deliver sustainable long-term
growth. These changes are described in
greater detail below.
Safety
Safety remains the highest priority for us. We are
committed to providing safe and healthy working
conditions for our employees, contractors and
visitors. Every year, we measure and report our
safety performance and we aim for continuous
improvement. In 2009, our Group safety index
improved by 3% although our Group contractor
safety index worsened after significant
improvements in 2008. Safety, including that of
our contractors, will continue to be a major area
of focus for 2010 as we work towards our target
of a safety index of zero for all our operations. In
this regard, we were saddened to learn that last
week, a fatality occurred at our joint-venture plant
in Turkey. A full investigation is underway.
Delivering on our short-term priorities
At the beginning of the year, recognising the need
to act decisively and quickly in the face of the
global economic downturn, we set out our three
near-term financial priorities for the business: to
optimise working capital; implement tight capital
expenditure control; and reduce our cost base.
I am pleased to report that, due to the
outstanding efforts of our employees across the
business, we have made significant progress in
each of these areas. Working capital reductions
generated £291 million during the year, with
improvements delivered by each operating
Tate & Lyle Annual Report 2010 3
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Overview Chief executive’s review
division and within each major area of the working
capital base. Capital expenditure of £79 million
represented 68% of depreciation, in line with
our commitment stated at the beginning of the
financial year to hold expenditure below the
annual depreciation charge. Underlying costs
reduced by £30 million in the year compared
to the comparative period, including the cost
savings achieved from rationalising the sucralose
manufacturing footprint, with reductions achieved
through our focus on all areas of the cost base.
A stronger balance sheet
The Group’s balance sheet has been strengthened
significantly during the year. Net debt was reduced
by 34% to £814 million at 31 March 2010 (from
£1,231 million at 31 March 2009). This reduction
has been achieved through a relentless focus
on cash management within every area of the
business. Tate & Lyle is a strongly cash generative
business, and focus on cash management will
remain an ongoing priority.
our financial priorities, we
have significantly strengthened the
“Through resolute focus on
balance sheet. ”
The key performance indicators 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. Consistent with the Group’s
financial strategy at least to maintain our
investment-grade credit ratings, during the
year we tightened our maximum target for net
debt to EBITDA to 2.0 times from 2.5 times.
At 31 March 2010, the net debt to EBITDA ratio
was 1.8 times (2009 – 2.4 times), within our new
target and comfortably within our bank covenants.
Interest cover on total operations at 31 March 2010
was 5.8 times (2009 – 6.1 times), again ahead of
our minimum target of 5.0 times and well ahead
of our bank covenants.
During the year we announced that, with a view to
containing our pension costs and reducing balance
sheet volatility, we had entered into consultation
with employees who were active members of
the UK Group Pension Scheme on the closure
of that scheme to future accrual from April 2011.
Following completion of the consultation process,
the Company will close the Group scheme from
April 2011. We also took the decision to remove
the early retirement discretion from November
2009. We have recognised an exceptional gain of
£42 million in the 2010 financial year arising from
these changes.
Overview of divisional business
performance
Adjusted operating profit at Food & Industrial
Ingredients, Americas was £178 million, 2%
below the prior year (10% in constant currency).
Operating profits from value added food
ingredients increased by 18% (9% in constant
currency), reflecting firmer pricing and steadier
demand patterns. Operating profits in primary food
ingredients were below the prior year due to lower
co-product income from the sale of corn oil.
4 Tate & Lyle Annual Report 2010
Performance from primary industrial ingredients,
comprising ethanol, native industrial starches and
animal feed co-products was below the level of
the prior year due to lower animal feed co-product
income and reduced industrial starch margins.
At Food & Industrial Ingredients, Europe, adjusted
operating profits of £54 million were 6% above
the prior year (4% in constant currency). Within
Single Ingredients, profits from primary products
were lower as reduced levels of capacity utilisation
impacted unit margins, particularly in the second
half of the year, although the business continues
to benefit from the relative stability afforded by
isoglucose quotas in Europe. Demand for value
added food ingredients was steady, and unit
margins increased with improved pricing. Food
Systems performance was above the prior year,
as demand in key markets proved relatively
robust in the face of the economic downturn.
Adjusted operating profits within the Sugars
division increased by 150% to £30 million (100%
in constant currency) reflecting improved margins
in our EU sugar business during the second half
of the year following the final institutional price
change on 1 October 2009. Performance also
benefited from lower energy and distribution costs.
Our molasses and storage business performed
well in the year, with operating profit of £13 million,
although this was below the exceptionally strong
profits achieved in the comparative period when
the sharp spike in cereal prices during the
summer of 2008 led to very high demand
and prices for molasses.
Sales of SPLENDA® Sucralose of £187 million
were 11% above the prior year (4% in constant
currency). Following the significant yield
improvements achieved during the 2009 financial
year, and the consequent decision to produce
all sucralose at our fourth-generation facility in
Singapore, the process of mothballing the plant
in McIntosh, Alabama was completed ahead of
schedule. Adjusted operating profits decreased by
7% to £67 million (9% in constant currency) due
to one-off credits of £4 million in the prior year,
certain costs in the current year associated with
the rationalisation of the manufacturing footprint
and the relatively high costs in opening inventory
which impacted cost of sales in the 2010
financial year.
Central costs increased to £31 million from
£18 million in the prior year. During the year, we
incurred one-off costs of £5 million related to the
review and reorganisation of the Group’s activities,
while the prior year included one-off credits
totalling £6 million.
Exceptional items
Exceptional items within our continuing
operations during the year totalled a net charge
of £276 million (2009 – £119 million).
Following a detailed analysis of end markets, in
light of costs of around £70 million to complete
and commission our plant in Fort Dodge, and
factoring in the risks associated with future returns
from completing and operating the plant, we have
concluded that the plant is highly unlikely to be
completed or commissioned in the foreseeable
future. As a result, the facility has been mothballed
and written down to £17 million, leading to an
impairment of £217 million which has been
Key performance
indicators
Tate & Lyle’s Board and executive
management 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.
In light of the changes to our business
explained on pages 6 and 7, we will be
reporting on different KPIs in the Annual
Report 2011.
Interest cover1
Target
2010
2009
2008
2007
min 5.0 times
5.8 times
6.1 times
7.8 times
8.4 times
1 Measured by financial year on total operations.
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
Return on net operating assets1
Target
2010
2009
2008
2007
max 2.0 times
Target
1.8 times
2.4 times
2.5 times
1.9 times
2010
2009
2008
2007
20.0%
14.1%
12.7%
15.5%
18.9%
1 Measured by financial year on continuing operations
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 amortisation.
Comment: Consistent with the Group’s
financial strategy to at least maintain our
investment-grade credit ratings, during the
year we tightened our maximum target
to 2.0 times from 2.5 times. We are within
our new target and comfortably within that
of our bank covenants.
1 Measured by financial year on total operations.
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%.
Safety index1
Energy use1
Target
2009
2008
2007
2006
zero
1.12
1.16
2.08
2.41
Target (longer-term)
3% reduction
2009
2008
2007
2006
zero
zero
1.3% reduction
1.2% reduction
1 Measured by calendar year.
1 Measured by calendar year.
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 modest
progress in 2009 with a 3% improvement on
2008. Further information can be found on
pages 32 to 34.
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 continues to be more
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 34 to 36.
Tate & Lyle Annual Report 2010 5
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Overview Chief executive’s review
recognised as an exceptional charge in the 2010
financial year. A further exceptional charge of
approximately £25 million will be recognised during
the 2011 financial year in respect of long-term
contracts relating to the facility.
As reported at the half year, we recognised an
exceptional charge of £55 million following the
decision to mothball the sucralose manufacturing
facility in McIntosh, Alabama.
The reorganisation of our food systems business in
Europe will lead to exceptional cash costs totalling
£7 million, of which £3 million has been recognised
in the 2010 financial year, with the balance
recognised in the 2011 financial year.
In the Food & Industrial Ingredients, Americas
segment, following a review of the portfolio of
research and development projects in the context
of our new strategic focus, we have written off
£28 million relating to a xanthan gum pilot plant
and other related assets following the decision not
to pursue these products to full-scale production.
Our sugar refining business in Israel continues
to experience extremely challenging market
conditions, with surplus refined sugar supplies
placing considerable pressure on refining margins.
Given the continued decline in the business’s
commercial prospects, we have recognised a
further impairment charge of £15 million in addition
to the charge of £9 million recognised in 2009.
An exceptional gain of £42 million has been
recognised following the decision to close the UK
Group Pension Scheme to future accrual from
April 2011 and to remove the early retirement
discretion from November 2009.
The tax impact on continuing net exceptional items
totalled a £112 million credit (2009 – £44 million
credit). In addition, an exceptional tax credit of
£15 million has been recognised in the year relating
to the release of certain tax provisions following the
resolution of issues with tax authorities.
Outlook
Looking forward, we anticipate that steady demand
patterns for value added food ingredients will
continue and, combined with the benefits of a
single plant sucralose manufacturing base, we
expect a modest improvement in value added food
performance in the 2011 financial year.
Within our primary markets, we expect continuing
modest decline in US domestic sweetener demand
to be largely offset by increased demand from
Mexico, and stable demand in other markets
for primary food ingredients. Despite some
improvement in demand patterns, industrial starch
margins are expected to remain at lower levels,
reflecting industry overcapacity putting pressure on
pricing, and we see little near-term improvement in
ethanol markets. Within Sugars, whilst unit refining
margins have returned, profitability in the 2011
financial year will be constrained by short-term
supply challenges.
Overall, we anticipate progress in the coming
financial year as we maintain our focus on the
disciplines necessary to continue delivering
strong cash flows from our business.
Review of the business
Since joining Tate & Lyle in October last year,
I have led a thorough, fact-based review of the
Company’s current position, and an assessment
of the opportunities and challenges in front of us.
Tate & Lyle has some real strengths we can
build on. It was clear to me as soon as I joined
the Company that acting safely, responsibly
and sustainably, with high levels of integrity,
were hallmarks of Tate & Lyle. The Company
also has a large, cost efficient, and well invested
manufacturing footprint, and deep technical
process and applications expertise. Our customer
base includes many large, global companies with
whom we have strong, long-term relationships
based on our clear focus on quality, reliability and
customer service. We also have a long, successful
history of operating internationally and, as can
be seen from the past year’s results, the potential
for strong cash generation.
At the same time, we face a number of strategic
and operational challenges. Strategically, we
operate in a number of different markets with
different characteristics and needs. We have solid
competitive positions in some of these markets,
but in others a path to leadership is unclear. We
continue to have a relatively large exposure to
commodity markets, with their inherent volatility
and cyclicality, whilst, at the same time, having a
limited exposure to key avenues of longer-term
growth, in terms of categories and geographies.
Over the last few years there has also been
some inconsistency between strategic intent and
actual investment strategy, with the majority of
our capital having been spent on our commodity
rather than our speciality business. Additionally,
the operating model has lacked focus, and
constrained rather than driven performance.
Finally, a number of enablers, such as the capital
allocation and implementation process and the IS/
IT infrastructure, need significant strengthening.
In order to address these issues and reinvigorate
Tate & Lyle, we will take steps to focus, fix and
grow our business.
1. Focus
In future, our purpose will be to grow our
speciality food ingredients business. We will do
this through deeper customer understanding,
continuous innovation and agility, and through
building stronger positions in high-growth
markets. We will continue to drive sustained
cash generation from our bulk ingredients and
sugars businesses to fuel this growth.
2. Fix
Fixing the operating model
The current business operating structure, with a
mixture of regional and product-based business
units, does not support execution of the Group’s
strategy. From 1 June 2010 we will reorganise
and operate through three global business units:
Speciality Food Ingredients, Bulk Ingredients and
Sugars. Each business unit will have a distinct
go-to-market organisation to provide the necessary
focus and bring the required expertise to the
different markets we serve, and each will have a
dedicated manufacturing asset base.
6 Tate & Lyle Annual Report 2010
Fixing the operations
The review of our approach to capital
investment planning and implementation, which we
announced at our half-year results in November,
has been largely completed, and will lead to a
number of changes to the way we invest fixed
capital in our business in future. For all major
capital projects, the approval process has been
strengthened to incorporate a two-stage Board
approval, including a more rigorous technical and
commercial appraisal, supported where necessary
by external experts. Ongoing reviews performed
regularly by the Group Executive Committee, as
well as peer reviews, have also been added to
sharpen the investment appraisal process. We
will also create a dedicated, internal resource,
independent of the operations, with responsibility
for oversight of all capital expenditure.
We have already made huge strides in the way we
control working capital in our business, evident
from the improvement delivered in the 2010
financial year. There is a much clearer appreciation
within the organisation now of the need for working
capital optimisation and this is something I intend
to build on. To this end, we have implemented
standard measures of working capital efficiency
across the Group, and have set clear targets by
business. In the 2011 financial year, these targets
will, for the first time, be linked to management
incentive structures.
Our three business units will be supported by global
support services, using shared service centres
to eliminate duplication and rationalise resources
required. This will also allow us to redeploy some
needed resources to the ‘front end’ of our business.
strategy, with our speciality
“We are refocusing our
long-term growth. ”
food ingredients business being
the key focus of investment and
We have already started work to strengthen
operational enablers, by establishing a common set
of performance metrics across the business and we
will move to a single global IS/IT platform to drive
improved global decision making over the next two
years. Although it will take time, I am confident that
the steps we are taking now will lay the foundation
to deliver significant improvements in operational
execution over the coming months and years.
Exceptional costs of £8 million associated with
the reorganisation and restructuring of the Group’s
activities are expected to be recognised in the
2011 financial year, with further exceptional costs
expected to be in the region of £13 million the
following year. These cash costs are expected
subsequently to pay back within two years.
Additionally, we are developing a detailed
implementation plan for a common, global IS/IT
platform, which we anticipate will be implemented
over the next 24 months.
Fixing the organisation
In order to fix our organisation, we are taking action
to address our structure, our talent and our culture.
move management closer to the business. We
have developed clear guidelines on global talent
acquisition to upgrade our capabilities and fill skills
gaps in key areas. We are taking steps to embed
a common, performance-driven culture within the
organisation, and to define clear organisational
values. We are establishing a clearer, metric-driven,
performance management process which will be
implemented during the coming year. The Group’s
incentive system is also being restructured, to
ensure that at all levels of the organisation there
is a sharp focus on what drives behaviour and
results. A greater proportion of pay will be at
risk, with appropriate rewards to incentivise
outstanding performance.
Fixing the investment focus
Over the past four financial years, around two-
thirds of our capital has been invested in our
commodity business with one-third in our speciality
business. Geographically, investment has been
overwhelmingly focused on the developed markets
with emerging markets largely ignored.
Over time, our investment focus will be realigned
to our strategy: our engine of growth and the focus
of acquisitions will be speciality food ingredients,
with greater emphasis on emerging markets. Our
bulk ingredients and sugars businesses remain
strong and valued businesses, and we will continue
to invest appropriately in order to increase their
efficiency and generate cash.
3. Grow
A new unit, the Innovation and Commercial
Development group, will be established, dedicated
to driving sustained long-term growth, with a key
focus on speciality food ingredients. This unit
will integrate R&D, global marketing and global
product management, and will enable a fully
integrated approach to developing and
commercialising innovation.
We expect to achieve growth both in our existing
markets, through the benefits of our new operating
model and investment focus, and also in emerging
markets and in the small- and medium-sized
enterprise (SME) and private-label customer
segments, where we have limited presence today.
Our new operating structure will provide a clean
platform from which to grow the business, both
organically and through acquisitions.
Conclusion
This statement has outlined our strategy of
focusing on growing our speciality food ingredients
business, and set out a number of important
changes to our operating model and the way
we function. We will report a set of performance
metrics which will measure progress towards
delivery of this strategy, and are creating reward
structures aligned to these metrics.
Through these changes we will build the platform
to deliver sustainable long-term value for our
employees, our customers and our shareholders.
Javed Ahmed
Chief Executive
26 May 2010
We will simplify and de-layer the organisation
structure to accelerate decision-making and
Find out more about Tate & Lyle
at www.tateandlyle.com
Tate & Lyle Annual Report 2010 7
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Business review What we do
Overview
Tate & Lyle is a global provider of ingredients
and solutions to the food, beverage and other
industries. Through our large-scale, efficient
manufacturing plants, we turn raw materials
into distinctive, high quality ingredients for our
customers. Our ingredients and solutions add
taste, texture, nutrition and increased functionality
to products that millions of people around the
world use or consume every day.
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 is
headquartered in the UK and operates more than
45 production facilities around the world.
Purpose and strategy
Tate & Lyle’s purpose is to become the leading
global provider of speciality food ingredients
and solutions.
Our strategy is to deliver sustainable long-term
growth and returns for our shareholders through:
n disciplined focus on growing our speciality
food ingredients business
– deeper customer understanding, continuous
innovation and agility
– stronger positions in high-growth markets
n driving our bulk ingredients and sugars
businesses for sustained cash generation to
fuel this growth.
More details of how we will deliver on this
strategy are given in the Chief Executive’s review
on pages 3 to 7.
Organisational structure
During the year ended 31 March 2010, the Group
operated through four business divisions:
n Food & Industrial Ingredients, Americas;
n Food & Industrial Ingredients, Europe;
n Sugars; and
n Sucralose.
These divisions were supported by the corporate
head office in London and by a number of global
business groups with expertise in areas such
as procurement, information technology and
research and development. A description of the
performance of the Group and each of its four
divisions for the year ended 31 March 2010 can
be found on pages 18 to 31.
As explained in the Chief Executive’s review on
pages 3 to 7, with effect from 1 June 2010, the
Group will be reorganised into three new global
business divisions:
n Speciality Food Ingredients;
n Bulk Ingredients; and
n Sugars.
The business divisions will be supported by a
new Innovation and Commercial Development
group with responsibility for bringing innovation
to market; global business support functions; and
a corporate head office.
Our operations
Sourcing raw materials
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
our costs where necessary and feasible.
Corn
Tate & Lyle operates a network of corn wet mills
in both North America and Europe, processing
two types of corn: dent and waxy. Dent corn is
the most common crop and is used to make high
fructose corn syrup, basic food and industrial
starches, alcohol (ethanol) and animal feed. 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.
Running our large corn wet milling plants in the
USA efficiently 24 hours a day relies on good
management of the corn supply chain. We own
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. 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 ahead.
In Europe, we have one wholly-owned corn wet
milling plant, with another four as part of our joint
venture, Eaststarch. We also have one wholly-
owned corn wet milling plant in Morocco. 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 producing speciality
food starches at our plant in the Netherlands.
Cane sugar
Our Sugars business processes and refines
cane sugar, a tropical crop grown in areas of high
sunshine and rainfall. Cane sugar accounts for
around 80% of world sugar production.
In Europe, we have the capacity to refine about
1.4 million tonnes of sugar each year from our
two refineries, and we process up to one million
tonnes of sugar cane at our factory in Vietnam.
While our Vietnamese operation sources from
local growers, our European business secures
supply from African, Caribbean and Pacific
countries and least-developed countries under
the EU Sugar Regime. These suppliers have
preferential access to the European sugar market
under various agreements with the EU.
8 Tate & Lyle Annual Report 2010
Reform of the EU Sugar Regime over the last
four years and resulting price cuts have affected
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.
across the business make
sure our plants function effectively,
“Our highly qualified engineers
efficiently and safely. ”
In order to help our supplier partners to grow
their domestic sugar industries in a sustainable
way, during the year we formed a technical
support group of Tate & Lyle employees who
reside in supplier countries and work alongside
our suppliers to improve efficiency and increase
cane sugar output.
In 2008, we announced our decision to convert
all UK retail cane sugar to Fairtrade. At that time
this was the largest ever switch to the ethical
labelling scheme by any major UK food or drink
brand. We have substantially completed the
switch to Fairtrade for all UK retail sugars
during the year.
Tate & Lyle’s first accredited Fairtrade grower-
partner is Belize, from whom we have purchased
sugar for over 35 years. Since Tate & Lyle moved
to Fairtrade, sugar cane farmers in Belize have
received Fairtrade premiums from Tate & Lyle
which has been used to improve their livelihoods
and develop more sustainable communities.
Supply chain ethics
We have a consistent, Group-wide approach
to supplier relationships, based on our Business
Code of Conduct, which covers purchasing
strategies at global, regional and local levels.
We also survey many of our suppliers on their
ethical commitment. Our auditing programme
is designed to evaluate the social, ethical and
environmental performance of our suppliers
to identify any shortcomings and provide
them with the support they need to make
any necessary improvements.
We apply rigorous standards to our raw material
suppliers, both practical and ethical, and share
best practice and work with them to help them
meet our compliance needs. This is essential if
we are to deliver on our customers’ requirements
for traceability and quality throughout the
supply chain.
Manufacturing ingredients
We process large volumes of corn and sugar
in our network of manufacturing facilities to
create hundreds of quality ingredients for
our customers. Creating this volume and
operating large-scale, efficient plants gives us
a competitive cost position to compete in the
markets we serve.
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.
Operating our plants safely and efficiently
at high volumes requires reliable and up-
to-date manufacturing processes. We have
teams of highly qualified engineers across the
business who make sure our plants function
effectively, efficiently and safely. Our engineers
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.
In our production processes, nothing is wasted.
In sugar processing, molasses (a by-product of
the refining process) is sold as animal feed or
used as a raw material for fermentation-based
ingredients such as 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.
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Starch
Starch
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gluten
Hull and
fibre
Germ
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.
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.
Our logistics teams are responsible for
warehousing, freight costs and customer
service. Our largest logistics hub is based in
Lafayette, Indiana, which is most central to
all our US plants.
Tate & Lyle Annual Report 2010 9
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Business review What we do
Negotiating prices and volumes
Selling corn-based commodity products in
both the Americas 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.
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
our sales teams are responsible for ensuring
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 Americas, as soon as a customer order is
agreed, we manage the risk of fluctuating corn
prices by hedging this position on the Chicago
Mercantile Exchange. In Europe, a smaller
market for us than the Americas, there is no
liquid corn futures market, which means we
cannot hedge the full corn price risk as we can
in the Americas. It is not possible to use hedging
procedures to lock in the majority of by-product
revenues in either Europe or the Americas.
At our European sugars business, the cost of
purchasing cane sugar and the final selling price
of the finished product are determined within the
framework of the EU Sugar Regime.
Research and development
We have over 250 people in our R&D team
worldwide working to develop innovative
ingredients from renewable resources. We have
R&D laboratories in Decatur, Illinois and Lille,
France, but we also have application laboratories
in countries such as France, China, Germany,
Italy and Australia which are combined with
our sales offices.
Our in-house R&D capability is organised into
three primary groups: product development,
technology, and customer solutions. The product
development group focuses on developing
new products and improving existing products.
The technology group covers process
engineering, analytical and carbohydrate
chemistry, and biochemicals. The team focuses
on 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.
With effect from 1 June 2010, our product
development group will be combined with
our global marketing and global platform
management functions to form the new
Innovation and Commercial Development
group, dedicated to promoting innovation
and developing new products and markets
for Tate & Lyle.
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.
Our R&D laboratory in Lille, France, is an active
member of the Nutrition, Health and Longevity
cluster in Lille that fosters collaboration between
private and public research organisations and
companies. Through our participation, we have
been able to obtain funding for a research project
to develop new prebiotics and have also made
close ties with a research platform on extraction
and purification methods.
Our Research Advisory Group comprises a
panel of six international industry and academic
experts, chaired by one of our non-executive
directors, Dr Barry Zoumas. It reviews our
R&D 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.
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.
The markets we serve
We provide customers in four markets – food
and beverage, industrial, animal feed and
pharmaceutical and personal care – with quality
services and ingredients. Our customer base
includes many of the world’s major food,
beverage and industrial companies.
Food and beverage
Food and beverage is our most significant
market, comprising over 75% of the Group’s
total sales. In this sector, we also sell end-
products directly through retail distribution
channels to retail customers in certain markets.
Our ingredients can be found in the products
of nearly all the world’s top 100 food and
beverage companies.
We sell two distinct sets of ingredients and
services to food and beverage customers –
value added ingredients and primary ingredients.
10 Tate & Lyle Annual Report 2010
world’s major food, beverage
and industrial companies as our
“We count many of the
customers. ”
Value added ingredients are those ingredients
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.
In these markets, our customers value
technical and innovation capability, insight
and flexibility. Primary ingredients are relatively
undifferentiated ingredients, sold in markets
where customers principally value supplier
reliability, quality and value.
In the value added food ingredients market,
we currently operate within three categories:
sweeteners, such as SPLENDA® Sucralose and
crystalline fructose; texturants, such as starch
and gums; and wellness ingredients, such as
PROMITOR™ dietary fibres.
With effect from 1 June 2010, our Speciality
Food Ingredients business will be managed
separately as a single global business unit to
ensure an absolute focus on the end markets we
serve. We expect this business unit to be a key
driver of longer-term growth.
Customer understanding drives all that we do.
At the heart of our customer approach is the use
of market research to understand the consumer
(our customers’ customer), the markets we
operate in and our customers’ needs. In 2005,
we were one of the first food ingredients
companies to go direct to the consumer to
understand for ourselves what drives purchasing
habits, and what consumers might look for in
future products. We use this 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.
Our R&D, marketing and regulatory teams work
together to provide customers with insights
from consumer research, support on labelling
requirements, and assistance on meeting
product claims.
Over the last three years, we have also 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.
Industrial
The global market for industrial ingredients
came under severe pressure as a result of the
economic downturn towards the end of the
2008 calendar year, and demand has remained
at lower levels since then. Over the longer term,
however, we believe the trend towards greener
living and the replacement of petrochemicals
will continue to stimulate demand for industrial
ingredients made from renewable sources.
Traditional industrial markets for Tate & Lyle
have included paper and board (starches), fuels
(ethanol) and household goods (acidulants).
Newer markets for us include textiles and
plastics (Bio-PDO™).
Animal feed
We serve this market with molasses produced
and traded worldwide and corn gluten meal
and corn gluten feed produced in both Europe
and the Americas. The latter are by-products of
our key production processes and are sold as
nourishing feed ingredients for livestock, fish and
for use in pet foods. Selling on these products
is important because it helps us reduce the net
cost of our raw materials.
Pharmaceutical and personal care
A relatively small market for Tate & Lyle,
pharmaceutical and personal care is one we
expect will grow in the future although remaining
relatively modest. 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 (used in oral care
products and to sweeten medicines without
adding calories).
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Tate & Lyle Annual Report 2010 11
Business review What we do
Markets at a glance
Food and beverage
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n Health and wellness
- digestive health and immunity
- weight management
- children’s health/development
- heart health
n Convenience
n Indulgence
n Clean label/natural/organics
n Sustainability/ethical sourcing
n Portion/calorie control
n Home baking (sugars)
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n Cost consciousness
- volatile raw material prices
- rise of private label (own-label)
- cost-effective ways of delivering
nutritional benefits
n Manufacturers
(branded and contract)
- beverage
- dairy
- bakery
- snack food/convenience
- confectionery
n PROMITOR™ dietary fibres
n KRYSTAR® crystalline fructose
n STA-Lite® polydextrose
n SPLENDA® Sucralose
n Value added starches, e.g.
STA-Slim™, TENDERJEL®,
Merigel, ResistamyI
and FREEZIST®
n Food stabilising systems,
e.g. Hamulsion® and Frimulsion®
n Increasing pressure for high
quality from suppliers
n Supply chain ethics
n Dealing with a changing
regulatory environment
n Traceability
n Retailers
n Food service operators
Retail brands:
n Lyle’s Golden Syrup
n Branded retail sugars
- Tate & Lyle (UK)
- Sidul/Sores (Portugal)
Services:
n CREATE® – innovations
in shape, structure, taste
and texture
n OPTIMIZE® – maximising
efficiency and value
n REBALANCE® – reformulating
to lower-fat, lower-sugar and
lower-calorie positions
n ENRICH® – enhancing nutritional
benefits of foods and beverages
n High fructose corn syrup
n Corn syrup/glucose
n Citric acid
n Pearl starches
n Corn oil
n Industrial sugars
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12 Tate & Lyle Annual Report 2010
Industrial
Animal feed
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o
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n Increased awareness of green
issues/environmental footprint
n Replacement of plastics/
petrochemicals
n High nutrient digestibility/
nutrient efficiency
n Animal health
n Increased supply of competing
feed products from dry-mill
ethanol production
Personal care and
pharmaceuticals
n Replacement of petrochemicals/
preference for ‘natural’ products
n Increased awareness
of petrochemical vs.
renewable options
n Cost consciousness (volatile raw
material prices)
n Volatile cereal costs (global)
n Pricing awareness but willingness
impacting feed costs
to pay for functionality
n Natural product claims
(personal care)
n Producers
- dairy
- pig
- beef
- poultry
- aquaculture
- pet
n Manufacturers
- paper
- adhesives
- detergent
- de-icing
- packaging/plastics
- textiles
- building products
n Fuel suppliers
n ETHYLEX® paper starch
n STA-LOK® cationic starches
n STADEX® dextrin
n STARPOL® water
soluble polymers
n Susterra™ industrial-grade
Bio-PDO™
n Manufacturers
- cosmetics and personal care
(hand creams, deodorants)
- over-the-counter (OTC)
pharmaceuticals
n Zemea™ personal-care-grade
Bio-PDO™
n SPLENDA® Sucralose
s
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e
r
t
r
e
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n Pearl starches
n Ethanol
n Citric acid
n Molasses
n Corn gluten feed
n Corn gluten meal
n Corn syrup/glucose
n Sugar
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Tate & Lyle Annual Report 2010 13
Business review 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.
To attract and retain the best people, Tate & Lyle
must be a place where people want to work.
For us this is about giving people opportunities
and challenges to stretch themselves and make
the most of their potential; clear direction and
inspirational leadership; and a supportive
working environment.
New leadership
This financial year saw changes in the leadership
team at Tate & Lyle. Javed Ahmed became Chief
Executive in October 2009, and Rob Luijten joined
as Group HR Director in February 2010. Along with
the organisational changes explained in the Chief
Executive’s review, their priority for employees
will be to develop a stronger performance-driven
culture throughout the Company. This change
process was already underway as we published this
annual report and is focusing on values, behaviours
and HR processes across the world, to align these
more closely with performance and results.
Employees
We cover a wide geographical area and our people
encompass a broad range of skills and disciplines
in areas such as food science, sales and marketing,
engineering and support services. At 31 March 2010,
Tate & Lyle employed 5,666 people across the
Group. The average number of employees in the
Group during the year is given in Note 9 on page 74.
The following charts show the split of employees
by the four existing business divisions, and
by geography.
Employees by division
As at 31 March 2010
Employees by geography
As at 31 March 2010
Sucralose
4%
Sugars
26%
Food & Industrial
Ingredients, Europe
26%
Food & Industrial
Ingredients,
Americas
44%
Asia Pacific
11%
Latin
America
12%
North America
34%
Europe, Middle
East & Africa
43%
Equal opportunities
We believe in equal opportunities regardless of
gender, sexual orientation, age, marital status,
disability, race, religion or other beliefs and ethnic
or national origin. Our policies, practices and
regulations for recruitment, training and career
development promote equality of opportunity while
being appropriate for the relevant market sector
and country of operation. Our 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.
An employee who becomes disabled would,
where appropriate, be offered retraining.
14 Tate & Lyle Annual Report 2010
Training and development
Our employees are vital to the success of our
business. It is a key objective for the Group to
attract and retain top-quality talent, and to ensure
that our employees develop and grow in their roles
and meet new challenges as their careers progress.
We run a series of international programmes to
develop management skills and share management
ideas across the Group, as well as for graduate
trainees. As part of the changes announced
following the review of the Group, we will be
considering how our training and development
programmes most effectively support a
performance-driven culture.
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 needed
to execute the Group’s strategy. This year, in light
of the strategic changes to the business explained
in the Chief Executive’s review, the Remuneration
Committee has set out a new policy and strategy
for executive remuneration to focus more closely
on performance, and this is explained in the
Directors’ remuneration report. We will be looking
at similar principles in reviewing remuneration
policy throughout the Company in due course.
Communications
Good communication is essential if employees
are to understand and embrace the Company’s
goals and objectives. To be effective,
communication must be two-way, and
Tate & Lyle actively encourages employee
involvement and feedback. One of our principal
channels is the Group-wide quarterly magazine,
which includes Company information and
news as well as covering contributions from
employees. Other channels for consulting and
informing employees include e-mail, the intranet,
briefings and management roadshows.
Health and wellbeing
We aim to lead the way in employee health.
Programmes 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. Our long-term goal is 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.
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.
Tate & Lyle has long understood the benefits of
trying to help employees return to work as soon as
is practical after an illness or accident. Early return
to work in a well managed workplace through
vocational rehabilitation can have benefits
for both the employee and the employer.
After the end of the financial year, in April 2010,
the Government introduced the new ‘Fit Note’,
a new medical statement from doctors that
allows them to advise patients how they might
be able to work with the right support, rather
than simply saying they should or should not
work. This is in line with Tate & Lyle’s vocational
rehabilitation policy which was introduced in
2000. The adoption of this practice has proved
extremely effective in reducing sickness/
absence and expediting employee recovery
from illness and injury.
and challenges to stretch
themselves and make the most of
“We give people opportunities
their potential. ”
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.
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.
USA
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:
n ‘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.
n 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.
n Health and fitness: many plants offer
exercise facilities or Company-sponsored
fitness programmes.
n 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; this includes discounts
with various weight management firms.
n Communications: we are developing a
campaign to educate employees better
about the wellness programmes and services
available to them.
Volunteering
Many employees across Tate & Lyle contribute
their own time and money to charitable
enterprises and local concerns. We support
them with donations: every year we match
funds raised for charity by our employees, and
give donations to local community projects
our employees are involved in. We also
encourage employees to take part by promoting
volunteering across Tate & Lyle and celebrating
the work they do. Further information on how
we support our local communities is on
pages 36 and 37.
External environment
Competition
The bulk starch market, within which our food
and industrial ingredients businesses compete, is
concentrated around a relatively 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 also a competitor, particularly
in relation to some higher-value modified food
and industrial starches. Penford Corporation
is a competitor in the North American paper
starch industry.
In Europe our main competitors are Cargill, Syral
(part of Tereos), Roquette Frères, Danisco, Kerry
and National Starch.
Competition for our European sugar business
comes mainly from British Sugar (a subsidiary
of Associated British Foods plc), Südzucker,
Nordzucker and Tereos.
Governmental regulation
Some of the markets in which Tate & Lyle
operates are subject to significant influence
from legislation or regulation. In Europe, the
EU Sugar Regime is most relevant to Tate & Lyle
and affects our European sugar and corn
processing operations.
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 corn
processing operations in the USA, including
corn-based ethanol.
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Tate & Lyle Annual Report 2010 15
Business review What we do
Risk management
Tate & Lyle could be affected by a number of
risks, which might have a material adverse
effect on our reputation, operations and financial
performance.
The Group’s enterprise-wide risk management
and reporting process helps 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 are collated and reported
through functional and divisional levels to the
Group Executive Committee. This culminates in
the identification for the Board 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 45 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 below.
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. 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.
Key risks
Risk
Impact and description
Examples of mitigating actions
Failure to act safely
and to maintain
the continued safe
operation of our
facilities and quality
of our products
The safety of our employees, contractors,
suppliers, the communities in which we operate
and consumers of our products is paramount.
We must operate within local laws, regulations,
rules and ordinances relating to health, safety
and the environment, including pollution.
The operation of plants involves many risks,
including failure or sub-standard performance of
equipment; improper installation or operation
of equipment; and natural disasters.
Failure to attract,
develop and retain
key personnel
Non-compliance
with legislation and
regulation
Performance, knowledge and skills of employees
are central to success. We must attract,
integrate and retain the talent required to fulfil
our ambitions. Inability to retain key knowledge
and adequately plan for succession could have a
negative impact on Company performance.
The Group operates in diverse markets and
therefore is exposed to a wide range of
legal and regulatory frameworks. We must
understand and comply with all applicable
legislation. Any breach could have a financial
impact and damage our reputation.
Fluctuations in
prices, offtake and
availability of raw
materials, energy,
freight and other
operating inputs
Margins may be affected by fluctuations in
crop prices due to factors such as harvest and
weather conditions, crop disease, crop yields,
alternative crops and by-product values. In
some cases, due to the basis for pricing in sales
contracts, or due to competitive markets, we
may not be able to pass on to customers the full
amount of raw material price increases or higher
energy, freight or other operating costs.
Failure to protect
intellectual property
Our commercial success depends, in part, on
obtaining and maintaining patent protection
on certain products and technology. We must
successfully defend patents against third-party
challenges or infringements.
16 Tate & Lyle Annual Report 2010
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
Health and safety policies and procedures at
all facilities
Dedicated staff at all locations to ensure
policies are embedded and measured
Environmental management systems at
production facilities
Specialist environmental consultants brought
in when required
Product safety and quality policies and
procedures in place to prevent contamination
Board annual review of Group safety /
environmental performance / policies
Remuneration policies designed to attract,
retain and reward employees with ability
and experience to execute Group strategy
Talent strategy to provide opportunities for
employees to develop careers
Regulatory managers monitor changes in
legislation and develop action plans
External consultants provide quarterly
reports on regulatory change
Legal teams maintain compliance policies
in areas such as antitrust, money laundering
and anti-corruption laws; and provide
ongoing training to employees
Strategic relationships with suppliers
Multiple-source supply agreements for key
ingredient supplies
Balanced portfolio of supply and tolling
contracts in operation with customers to
manage balance of raw material prices and
product sales prices and volume risks
Raw material and energy purchasing policies
to provide security of supply
Derivatives used where possible to hedge
exposure to movements in future prices
of commodities
The Group legal department, supported by
expert patent lawyers, monitors all patents
Organised and secure process for identifying
and recording innovations, trade secrets and
potential patentable ideas
Key risks
Risk
Impact and description
Examples of mitigating actions
Competitors may
achieve significant
advantage through
technological step
change or higher
service levels
Competitors could introduce a major
technological step change, such as significantly
improving the efficiency of a production process
and lowering costs (and thereby commoditising
products); or introduce a new product with
better functionality which in turn could lead to a
decline in our sales and/or profitability. We must
ensure we exceed or at least match competitors’
service and quality performance.
Failure to counter
negative perceptions
of the Group’s
products
We must be fully prepared to counter
unexpected/unfounded negative publicity
about our products.
Failure to maintain
high standards of
customer service and
identify important
consumer trends
Not meeting the required service levels,
especially where the business is heavily
reliant on a particular customer, and/or falling
behind the curve on emerging dietary
trends could have a negative impact on
performance and reputation.
Failure to manage
capital expenditure
and working capital
during the current
period of uncertainty
and global economic
downturn
Failure to maintain
an effective system
of internal financial
controls
The ongoing relative scarcity of capital may
impact and restrict our investment decisions.
We must manage our finances within strictly
controlled parameters, particularly when
external financial conditions are uncertain
and highly changeable.
Without effective internal financial controls,
we could be exposed to financial irregularities
and losses from acts which could have a
significant impact on the ability of the business
to operate. We must safeguard business assets
and ensure accuracy and reliability of records
and financial reporting.
Failure to set out
a clear strategic
vision as well as
provide accurate
and timely information
to the market
Exchange rate
fluctuations
The share price 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. We must ensure
our communications are clear and timely to
enable the investment community to efficiently
assess the Company’s value, and reduce the risk
of uncertainty and volatility in the share price.
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
which could create earnings and balance sheet
volatility. For example, a weakening of the US
dollar and the euro against sterling would have a
negative impact on net assets and shareholders’
funds reported in sterling.
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
n
250-strong global Innovation and
Commercial Development team to produce
innovations in product development,
applications, manufacturing technology
and customer services
Innovation and Commercial Development
and regulatory teams substantiate relevant
product claims
Media relations department monitors Group
press coverage and has action plans to deal
with any negative publicity
Innovation and Commercial Development
team works closely with customers and
advisors to identify emerging trends
Annual consumer-facing research to
ensure we are aware of consumers’
needs and expectations
Global key account managers in place
for major customers
Capital expenditure procedures to control
and monitor allocation and spend
Significant projects approved and monitored
by the Board
Debt and working capital levels
monitored constantly and reported monthly
to the Board
Authorisation policies ensure that key tasks
are segregated to safeguard assets
Detailed internal finance and capital
expenditure manuals set out procedure
Group financial performance monitored
with monthly Board reports and regular
forecasting
Chief Executive and Group Finance Director
undertake detailed quarterly business and
financial reviews
Procedures to monitor Group financial
performance and communicate with the
market via regular trading updates
Investor relations department, supported
by external advisors, ensures all
communications are timely, clear and
consistent and comply with regulatory and
legislative requirements
Borrowings in different foreign currencies,
principally US dollars, to provide partial
match for the Group’s major foreign
currency assets
Banking covenants for US$1 billion revolving
credit facility to eliminate the distortion of
foreign exchange volatility
Group internal finance manual sets
out procedures on exchange rate risk
management policies
Tate & Lyle Annual Report 2010 17
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540
154
(127)
Actual
change
%
Constant
currency
change
%
08
09
10
(6)
(7)
(14)
(78)
(90)
(81)
(81)
(2)
(2)
(1)
–
(7)
(76)
(73)
338
2
2
–
–
–
10
Business review Performance
Group financial results
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
(Loss)/profit before tax
Income tax credit/(expense)
Profit for the year from continuing operations
Loss for the year from discontinued operations
Profit for the year
Earnings per share from continuing operations
Basic
Diluted
Year to
31 March 2010
Year to
31 March 2009
3 506
3 553
298
(69)
229
(276)
(14)
(61)
84
23
(4)
19
298
(51)
247
(119)
(15)
113
(19)
94
(24)
70
540
Adjusted earnings per share from continuing operations
Basic
Diluted
(127)
39.1p
38.9p
38.2p
38.0p
(109)
154
4.2p
4.2p
19.5p
19.4p
188
(78)
(78)
Dividends per share
Interim paid
Final proposed
Net debt
At 31 March
08
09
10
6.8p
16.1p
22.9p
6.8p
16.1p
08
22.9p
09
814
1 231
34
27
Improvement in 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
540
338
154
(127)
188
(109)
2.5
2.4
1.8
08
09
10
08
09
10
1 Free cash flow is defined as cash flow from
continuing operations after interest, taxation
and capital expenditure.
Free cash flow improved from an inflow
of £154 million in the 2009 financial year
to an inflow of £540 million in the 2010
financial year. This improvement was driven
principally by significant reductions in
working capital across the business.
338
Net debt reduced from £1,231 million
at 31 March 2009 to £814 million at
31 March 2010. Before the effects of
exchange rates, net debt reduced by
£338 million in the 2010 financial year. This
improvement reflects the resolute focus the
Group has placed on optimising cash flow
and actively managing our cost base.
08
09
10
2 EBITDA is defined as earnings before interest,
tax, depreciation and amortisation.
Net debt to EBITDA is one of the key
performance indicators of our financial
strength. The ratio improved to 1.8 times
in 2010 compared to 2.4 times in the
comparative period.
18 Tate & Lyle Annual Report 2010
188
2.5
2.4
1.8
(109)
08
09
10
08
09
10
2.5
2.4
1.8
08
09
10
Group financial results
Basis of preparation
Adjusted performance
Adjusted profit is reported as it provides both
management and investors with valuable
additional information on the performance of the
business. The following items are excluded from
adjusted profit:
n
n
n
results of discontinued operations, including
gains and losses on disposal (Note 12);
exceptional items from continuing
operations (Note 7); and
amortisation of acquired intangibles.
This adjusted information is used internally for
analysing the performance of the business.
A reconciliation of reported and adjusted
information is included in Note 42.
Impact of changes in exchange rates
Our reported financial performance has been
positively impacted this year by exchange rate
translation, in particular due to the strengthening
of the average US dollar and euro exchange
rates against sterling. The average and closing
exchange rates used to translate reported
results were as follows:
Average rates
Closing rates
2010
2009
2010
2009
US dollar:sterling
Euro:sterling
1.61
1.13
1.80 1.52 1.43
1.19 1.12 1.08
In addition to the impact on profits, the
strengthening of the sterling closing exchange
rate has had the effect of reducing our net debt,
thereby benefiting reported net debt. Further
details are set out in the net debt section below.
Divisional financial performance
In the discussion of divisional financial
performance, we discuss performance as
reported, with sales and profits earned in foreign
currencies translated at the relevant average
exchange rates. In the commentary, we also
discuss performance in constant currency.
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, measuring progress in the
underlying profitability of the business.
Primary and value added products
Value added products are defined as 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. Co-products
from our commodity corn milling and sugars
businesses are classified as primary. There have
been no material changes in classification of
products between value added and primary from
the comparative period.
Summary of Group
performance
Sales of £3,506 million from continuing
operations were 1% lower than the prior year.
After excluding the effects of exchange, sales
were 6% lower.
Primary sales decreased by 4% (8% in constant
currency) from £2,584 million to £2,476 million.
This reduction was principally due to lower co-
product income, lower industrial sales volumes
in both the Americas and Europe and reduced
selling prices of sugar and isoglucose in Europe,
reflecting the institutional price cuts implemented
under EU Sugar Regime reform. Value added
sales increased by 6% (flat in constant currency)
to £1,030 million, representing around 30% of
Group sales.
Overall adjusted operating profit was in line with
the prior year (decreased by 7% in constant
currency) at £298 million. Adjusted operating
profits in Food & Industrial Ingredients, Americas
of £178 million were 2% below the prior year
(10% in constant currency) as lower co-product
income and reduced industrial starch profits
were partly offset by increased profits from
value added food ingredients. Food & Industrial
Ingredients, Europe achieved an increase in
operating profits of 6% (4% in constant currency)
to £54 million, reflecting growth in value added
food ingredients and Food Systems, partly offset
by weaker primary food and industrial starch
margins. Sugars delivered an increase of 150%
(100% in constant currency) to £30 million,
reflecting the expected increase in unit margins
within EU sugar during the second half of the
year. Adjusted operating profits in Sucralose
reduced by 7% (9% in constant currency) to
£67 million, with lower unit operating margins
reflecting costs associated with the transition
to a single manufacturing location. Central
costs increased by £13 million to £31 million,
due principally to one-off costs of £5 million
during the year associated with the review
and reorganisation of the Group’s activities,
and certain one-off credits totalling £6 million
recognised in the prior year.
In addition to the effects of exchange rate
changes, operating profit has been affected
by a small number of one-off items during the
2010 financial year: we recognised income of
£3 million following surrender of isoglucose
quota in Romania; and incurred costs of £5
million relating to the review and reorganisation
of the business performed during the year.
Amortisation of acquired intangibles totalling
£14 million (2009 – £15 million) was marginally
below the prior year.
Exceptional items totalling a charge of
£276 million (2009 – £119 million) have been
addressed in the Chief Executive’s review
and are detailed in Note 7.
The net finance expense from continuing
operations increased from £51 million to
£69 million. The exchange impact within
interest accounted for an increase of £4 million
compared to the prior year. We recognised a
charge within interest expense in the current
Tate & Lyle Annual Report 2010 19
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Business review Performance
year relating to post-retirement benefit plans
of £19 million (2009 – £3 million). Interest
capitalised in the year reduced to £2 million
from £11 million in the comparative period,
reflecting lower levels of capital expenditure
and the decision to suspend completion and
commissioning of the Fort Dodge, Iowa plant.
Underlying net finance expense was below the
level of the prior year, reflecting significantly
lower levels of average net debt.
The loss before tax from continuing operations
on a statutory basis was £61 million compared
to a profit of £113 million in the prior year.
The effective rate of tax on adjusted profit
from continuing operations was 20.4%
(2009 – 27.3%). The decrease was due mainly
to changes in the geographical origin of profits,
especially lower levels of profits in the USA, and
the impact of our internal financing plan.
Discontinued operations comprise our former
international Sugar Trading business and the
residual activities in Eastern Sugar. The operating
loss from discontinued operations totalled
£2 million (2009 – £21 million, after exceptional
losses of £22 million).
The exceptional losses for the year to
31 March 2009 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 was not included in the sale and is
being addressed separately in accordance
with the related shareholders’ agreements.
The process of sale of these minority interests
has continued through the 2010 financial year,
and is expected to be completed in the 2011
financial year. Fair value losses relating to these
activities of £10 million have been recognised in
the 2010 financial year through the consolidated
statement of comprehensive income.
The loss from discontinued operations after
taxation for the year was £4 million (2009 –
£24 million).
Total basic earnings per share were 3.3p
(2009 – 14.2p), 77% lower than the prior year.
Total diluted earnings per share were 3.3p
(2009 – 14.1p), down 77% from the prior year.
Adjusted diluted earnings per share from
continuing operations were 38.9p (2009 – 38.0p),
an increase of 2% (decrease of 2% in constant
currency). On the same basis, basic earnings per
share were higher by 2% (2% lower in constant
currency) at 39.1p (2009 – 38.2p).
Overview of divisional financial performance
During the year ended 31 March 2010, the performance of our divisions was as follows:
2010
£m
2009
£m
Movement1
%
2010
£m
Sales
Adjusted operating profit
2009
£m
Movement1
%
1 855
1 797
(2)
178
181
Food & Industrial
Ingredients, Americas
Food & Industrial
Ingredients, Europe
Sugars
Sucralose
Central
491
973
187
–
539
1 048
169
–
Continuing operations
3 506
3 553
Primary
Value added
Central
2010
£m
2 476
1 030
–
2009
£m
2 584
969
–
Continuing operations
3 506
3 553
(15)
(10)
4
n/a
(6)
Sales
Movement1
%
(8)
–
n/a
(6)
54
30
67
(31)
298
2010
£m
125
204
(31)
298
(10)
4
100
(9)
(72)
(7)
51
12
72
(18)
298
Adjusted operating profit
2009
£m
132
184
(18)
298
Movement1
%
(13)
5
(72)
(7)
1 On a constant currency basis (adjusting 2009 reported figures using 2010 exchange rates).
20 Tate & Lyle Annual Report 2010
Food & Industrial Ingredients, Americas
Sales
Food
Industrial
Adjusted operating
profit/(loss)
Food
Industrial
Margin
Food
Industrial
Total
Year to 31 March 2010
Year to 31 March 2009
Primary
£m
982
327
1 309
85
(8)
77
Value
added
£m
382
164
546
98
3
101
Total
£m
Primary
£m
1 364
491
1 855
878
393
1 271
183
(5)
178
95
3
98
Value
added
£m
369
157
526
83
–
83
Total
£m
1 247
550
1 797
178
3
181
8.7%
(2.4)%
5.9%
25.7%
1.8%
18.5%
13.4%
(1.0)%
9.6%
10.8%
0.8%
7.7%
22.5%
–
15.8%
14.3%
0.5%
10.1%
Market conditions
Primary
US domestic demand for nutritive sweeteners
in the 2010 financial year continued its gradual
long-term downward trend although, during the
second half of the 2010 financial year, exports of
corn sweeteners to Mexico increased, offsetting
this impact. Higher Mexican demand was driven
by high sugar prices in the Mexican market, and
a relative strengthening of the Mexican peso,
which increased the competitiveness of US
corn sweeteners.
US ethanol production increased to around
10.8 billion gallons in the 2009 calendar year
from 9.3 billion gallons in the prior year. The
industry continued to commission capacity in
order to meet the increased demand for corn-
based ethanol mandated under the Renewable
Fuel Standard. Oil prices rose steadily
throughout the 2010 financial year, to close at
around US$80 per barrel at 31 March 2010,
and US gasoline prices remained at a premium
to ethanol selling prices from the middle of the
2009 calendar year. However, with ample supply
of corn-based ethanol in US markets, there was,
at most, a modest cash margin in spot ethanol
markets during the 2010 financial year. Lower
levels of profitability in ethanol have also placed
pressure on pricing and unit margins of native
starch products, since the industry has some
ability to swing capacity between product lines in
response to changes in relative returns.
Demand for industrial starches, primarily used
in paper and packaging production, recovered
modestly from the levels experienced during
the second half of the 2009 financial year, and
showed sequential quarterly growth in the final
quarter of the 2010 financial year, although
still significantly below the levels experienced
before the economic downturn. The markets for
industrial starches remain challenging due both
to lower levels of demand and margin pressure
from US wet mill ethanol capacity.
Record corn yields and a large corn crop in the
2009 calendar year produced a more stable
corn price environment in the 2010 financial
year compared with the prior year. Lower corn
quality, from the late 2009 harvest following wet
conditions during autumn 2009 in much of the
US corn belt, caused some production issues
for all corn processors. US corn acreage is
expected to increase in 2010, and corn prices
are expected to remain at levels experienced in
recent months.
The market for corn gluten feed continued to
be challenging, due both to pressure on US
livestock numbers which affected demand, and
the competitive impact of higher dry mill ethanol
production, which drove the continuing increase
in supply of distillers’ dry grains, a substitute
ingredient in animal feed applications. Access to
EU markets for corn co-products manufactured
from EU-approved GM varieties has reopened,
although export activity remained limited due to
a lack of US competitiveness.
Value added
Overall, the market for value added food
ingredients remained steady throughout the 2010
financial year, although consumer focus on the
trends of health and wellness and convenience
has continued to drive growth in these areas.
Demand patterns for value added industrial
starches remained at levels below those
experienced before the economic downturn,
consistent with the trend experienced in the
primary industrial starch markets.
Financial performance
Sales of £1,855 million were 3% above the
prior year (2% lower in constant currency).
The decrease in constant currency was driven
principally by the impact of lower co-product
values. Adjusted operating profit of £178 million
was 2% below the prior year (10% in constant
currency). The effect of exchange translation was
to increase operating profit by £17 million.
Primary
Sales increased by 3% to £1,309 million
(decreased by 2% in constant currency).
Operating profits decreased by £21 million to
£77 million, a reduction of 21% (29% in constant
currency). Co-product income was significantly
below the comparative period, which benefited
from strong prices during the commodity price
peak of summer 2008. Corn prices in the
USA saw an unprecedented spike in the 2008
calendar year, reaching almost US$8 per bushel
Tate & Lyle Annual Report 2010 21
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in July 2008. Corn co-product prices also 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, corn gluten meal, and corn
oil. Crude oil prices peaked at almost US$150 per
barrel in July 2008, but fell rapidly to below
US$40 per barrel during the second half of the
2008 calendar year. Corn gluten feed selling prices
were weak during the 2010 financial year due both
to lower demand, following reductions in US beef
and dairy herds, and an increased supply of the
co-product from dry mill ethanol production.
Primary food sales of £982 million were 12%
higher than the prior year (7% in constant
currency). Operating profits of £85 million were
11% below the prior year (18% in constant
currency). The reduction in operating profit was
due to lower co-product income from the sale of
corn oil. Excluding the impact of co-products,
operating profits in primary food were marginally
above the prior year. Total sales volumes within
primary food were marginally above the prior
year, as increased sweetener demand from
Mexico in the second half of the 2010 financial
year contrasted with a modest destocking effect
experienced across all major product lines in the
second half of the prior year.
Operating profits from primary sweeteners in the
second half of the 2010 financial year were below
the comparative period, reflecting margins in the
final quarter somewhat below the prior year.
Profits at Almex, our Mexican cereal sweeteners
and starches joint venture, were marginally below
the prior year due to a modest reduction in unit
margins. Our citric acid business performed well,
with solid improvement in operating profit over the
prior year reflecting strong global demand.
Primary industrial sales (comprising ethanol, native
industrial starches and animal feed co-products)
of £327 million were 17% below the prior year
(21% in constant currency). Operating losses of
£8 million in the 2010 financial year compared with
operating profits of £3 million in the prior year. The
reduction in operating profits was due principally
to lower industrial starch profits and lower animal
feed co-product income.
Industrial starch profits in the 2010 financial year
were lower than the prior year due to lower levels
of underlying demand (which reduced markedly
from the third quarter of the 2009 financial year)
and to additional demand in the comparative
period following the floods in Iowa during 2008
which affected production at competitor plants.
Demand remains relatively weak in the US
domestic paper and packaging markets, and the
relative strength of the US dollar has adversely
impacted the overseas competitiveness of our
major customers. Industrial starch prices and
margins have also come under pressure from
lower ethanol returns, as the industry has
some ability to swing capacity between these
product lines.
Ethanol losses were broadly in line with the
comparative period. Although US ethanol markets
improved slightly in the second half of the 2010
financial year, with a modest cash margin returning
to spot markets, ethanol activities in the second
half of the 2010 financial year still generated an
operating loss.
Following a detailed analysis of end markets, in
light of costs of around £70 million to complete
and commission our plant in Fort Dodge, and
factoring in the risks associated with future
returns from completing and operating the
plant, we have concluded that the plant is highly
unlikely to be completed or commissioned in the
foreseeable future. As a result, the facility has
been mothballed and written down to £17 million,
leading to an impairment of £217 million which has
been recognised as an exceptional charge in the
2010 financial year. A further exceptional charge
of approximately £25 million will be recognised
during the 2011 financial year in respect of long-
term contracts relating to the facility.
Value added
Value added ingredients sales increased by 4%
to £546 million (decreased by 3% in constant
currency). Operating profits increased by 22%
(12% in constant currency) to £101 million.
Operating profits from value added food increased
by 18% (9% in constant currency) to £98 million
reflecting firmer pricing and steady demand
patterns. We have continued to experience
good growth in sales volumes of our wellness
ingredients. PROMITOR™ Soluble Corn Fiber
performed strongly, with several major customers
launching new products containing this ingredient
during the year in order to meet increased
consumer demand.
Operating profits from value added industrial
ingredients were £3 million, compared with break
even in the prior year. Operating profits from
value added industrial starches were broadly in
line with the prior year: while demand patterns
have stabilised at levels somewhat below those
experienced immediately following the economic
downturn, unit margins continue to be under
pressure. The Bio-PDO™ joint venture broke even
in the 2010 financial year, having made a small
loss in the prior year.
Looking forward
Demand for value added food ingredients has
proved steady, and we expect this trend to
continue. Within our primary food markets, we
expect domestic demand for corn sweeteners to
continue its long-term trend of gradual decline,
although Mexico currently represents an attractive
market for US sweeteners.
Whilst we have seen a degree of improvement
in demand for industrial starches from the levels
experienced during the second half of the 2009
financial year, with lower capacity utilisation
levels in key US end markets and reduced export
markets, we remain cautious about the timing and
extent of further improvement in demand.
Visibility over the timing of any improvement in
ethanol markets remains limited.
Corn costs have weakened since the start of
the calendar year with the expectation of a large
US corn crop in calendar year 2010. The level
of net corn costs will, as usual, be a key factor
in determining performance in the coming
financial year.
22 Tate & Lyle Annual Report 2010
Food & Industrial Ingredients, Europe
Sales
Food
Industrial
Adjusted operating
profit/(loss)
Food
Industrial
Margin
Food
Industrial
Total
Year to 31 March 2010
Year to 31 March 2009
Primary
£m
Value
added
£m
133
133
266
24
(3)
21
225
–
225
33
–
33
Total
£m
358
133
491
57
(3)
54
Primary
£m
170
163
333
27
–
27
Value
added
£m
206
–
206
24
–
24
Total
£m
376
163
539
51
–
51
18.0%
(2.3)%
7.9%
14.7%
–
14.7%
15.9%
(2.3)%
11.0%
15.9%
–
8.1%
11.7%
–
11.7%
13.6%
–
9.5%
Market conditions
Primary
Volumes of isoglucose 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 but, unlike sugar, the raw
material input price is not regulated. During
the four-year process of reform, isoglucose
producers paid a restructuring levy, but also had
their quotas increased by 60%. The payment
of these levies ceased on 30 September 2009.
Through our Eaststarch joint-venture, and its 50%
share in the Hungrana joint-venture facility, the
Group has an economic interest in approximately
55% of the EU’s isoglucose quotas.
European demand for corn-based sweeteners
for use in fermentation (which is not subject
to quota control) continued to be adversely
impacted by competition from out-of-quota
sugar stocks, which act as a substitute for this
purpose. Market demand for other primary
food ingredients in the 2010 financial year was
relatively steady at levels marginally below those
experienced before the economic downturn.
Industrial starch markets in Europe have
remained challenging. With demand still
materially below the levels experienced before
the economic downturn and greater competition
from other carbohydrate sources, notably wheat
and potato starches, pricing in this market has
been under considerable pressure.
The good European corn crop of 2008 was
followed by another in 2009, and net corn costs
have remained at similar, lower levels throughout
the 2010 financial year.
Value added
Demand for value added food ingredients has
remained steady. Consumer focus on health
and wellness continues to drive market growth
in this area.
Financial performance
Sales decreased by 9% to £491 million (15%
in constant currency). Adjusted operating profit
increased by 6% to £54 million (4% in constant
currency). EU restructuring aid totalling £3 million
(2009 – £11 million) was recognised during
the year, following the surrender of isoglucose
quota in Romania. Excluding restructuring aid in
both years, operating profit increased by 24%
in constant currency. The effect of exchange
translation was to increase profit by £1 million.
The Single Ingredients business achieved a result
marginally below the prior year. Lower levels
of capacity utilisation impacted unit margins,
particularly in the second half of the year.
The Food Systems business reported a result
slightly ahead of the prior year, reflecting robust
demand patterns and continuing benefit from the
integration of this business.
Primary
Sales of primary products decreased by 20%
to £266 million (25% in constant currency).
Operating profit reduced from £27 million to
£21 million, a decrease of 22% (22% in
constant currency).
Within primary food ingredients, liquid sweetener
volumes were broadly in line with the prior year.
Sweetener volumes reduced following closure of
the Greek plant, but the business continued to
benefit from its increased EU isoglucose quota
and, during the year, completed the expansion
of isoglucose capacity at our joint-venture plant
in Slovakia. However, against the backdrop of
lower levels of demand we have seen following
the economic downturn, unit margins in non-
quota primary food were below the level of
the prior year, reflecting a more competitive
marketplace, particularly during the second half
of the 2010 financial year.
During the first half of the 2010 financial year,
the division recognised a charge of £4 million
representing the final levies payable into the
EU restructuring fund. During the second half
of the 2010 financial year, restructuring aid
of £3 million was recognised following our
decision to surrender our Romanian isoglucose
quota. During the second half of the prior year,
restructuring aid of £11 million was recognised
following the surrender of the small isoglucose
quotas in the Netherlands and Greece.
Primary industrial ingredients generated an
operating loss of £3 million in the year, compared
to a result of breakeven in the prior year. Sales
volumes were below the prior year, and unit
margins came under pressure in an increasingly
competitive marketplace.
Tate & Lyle Annual Report 2010 23
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Value added
Value added sales increased from £206 million to
£225 million, an increase of 9% (2% in constant
currency). Operating profits increased by 38%
(32% in constant currency) to £33 million.
We achieved value added operating profit
growth in both Single Ingredients and Food
Systems. Single Ingredients’ sales volumes
increased slightly, and unit margins increased
with improved pricing. Volumes benefited
from the successful commissioning of the new
polydextrose line at our plant in the Netherlands,
the first polydextrose production facility in
Europe. Food Systems performed above the prior
year, as demand in key markets proved relatively
robust in the face of the economic downturn.
Looking forward
Performance in the coming financial year will, as
usual, be influenced by European cereal prices
following this year’s harvest. Isoglucose prices
will continue to be linked to EU sugar prices,
which appear to have stabilised following the
completion of regime reform. While we expect
continuing stability in demand from food and
beverage customers, we remain cautious over
the extent and timing of recovery in industrial
starch markets.
Sugars
Sales
Products
Molasses
Adjusted operating
profit/(loss)
Products
Molasses
Margin
Products
Molasses
Total
Year to 31 March 2010
Year to 31 March 2009
Primary
£m
Value
added
£m
673
228
901
14
13
27
72
–
72
3
–
3
Total
£m
745
228
973
17
13
30
Primary
£m
Value
added
£m
711
269
980
(11)
18
7
68
–
68
5
–
5
Total
£m
779
269
1 048
(6)
18
12
2.1%
5.7%
3.0%
4.2%
–
4.2%
2.3%
5.7%
3.1%
(1.5)%
6.7%
0.7%
7.4%
–
7.4%
(0.8)%
6.7%
1.1%
Market conditions
EU sugar
The sugar and isoglucose markets within
the EU are regulated by EU Sugar Regime
legislation, part of the EU Common Agricultural
Policy. A four-year period of reform, which saw
the surrender of almost six million tonnes of
beet sugar quotas and a reduction in the EU
institutional price structures of 36%, ended on
1 October 2009 with the implementation of the
final quota and price cuts.
During the reform period, the market was
characterised by oversupply, because the timing
of the beet quota surrender was later than initially
forecast by the EU Commission. However, as
expected, from 1 October 2009, the market has
become better balanced, leading to improved
unit refining margins for EU sugar processors.
Under the new regime, preferential access
rights for cane sugar imports are granted to
an expanded, but still limited, set of supplier
countries. The supply of raw cane sugar in the
EU market has come under increasing pressure
in recent months both because supply from
preferential sources has not grown as quickly
as foreseen in the reform process and because
increased world sugar prices, which recently
hit 30-year highs, have reduced the economic
incentive to export all preferential
raw sugar to the EU market.
24 Tate & Lyle Annual Report 2010
Vietnam
Sugar prices in the Vietnamese market have
remained strong due to the spike in world prices,
and the impact of grassy green shoot disease,
which has reduced sugar cane output in
the region.
Molasses
In the molasses market, traded volumes have
reduced from the prior year, although prices and
margins have remained relatively strong.
Financial performance
Sales reduced by 7% to £973 million (10% in
constant currency). This reduction principally
reflected lower average selling prices following
the final EU institutional price cut on 1 October
2009 and lower traded molasses volumes.
Adjusted operating profit increased by 150% to
£30 million (100% in constant currency) reflecting
improved margins in the EU during the second
half of the 2010 financial year, following the 1
October 2009 price change. Performance also
benefited from lower energy and distribution
costs. We recognised £17 million of transitional
aid in the year (2009 – £17 million). We will
recognise the final £8.5 million of transitional aid
in the six months to 30 September 2010. The
effect of exchange translation was to increase
profit by £3 million.
Our Vietnamese cane sugar business, Nghe An
Tate & Lyle, performed marginally ahead of the
prior year, with improved selling prices more than
offsetting lower sales volumes.
Following a further decline in the commercial
prospects of our sugar refining business in Israel,
we have recognised an exceptional charge of
£15 million (2009 – £9 million) representing a
full write-down of the fixed assets and an
inventory impairment.
Primary
Adjusted operating profit increased by £20 million
to £27 million. Unit margins increased in all of our
major EU industrial markets from 1 October 2009,
although total sales volumes in the 2010 financial
year were marginally below the prior year. Lower
natural gas prices led to lower energy costs in
the year while improvements in supply chain
management led to a reduction in distribution
costs.
Our molasses and storage business performed
well in the year, with operating profit of
£13 million. This was below the exceptionally
strong profits of £18 million achieved in the
comparative period when the sharp spike in
cereal prices during the summer of 2008 led to
very high demand and prices for molasses.
Value added
Operating profit of £3 million was 40% below
the prior year (50% in constant currency) as the
UK retail sugar marketplace remained extremely
competitive during the year.
Securing raw sugar supplies
The business has worked hard to address
the challenge of raw sugar supply. In July 2009,
Mitr Lao, our joint venture in Laos, delivered
its first sugar to our UK refinery. This was the
first sugar delivered to Europe from Asia under
the Everything But Arms (EBA) initiative. We
anticipate growth from this project, and others
in Laos and Cambodia, in future years. In April
2010, we announced that we have entered into
an agreement with the Jamaican government for
the supply of 100,000 tonnes of sugar in the
2011 calendar year.
During the year, we also formed a technical
support group to work with our preferential
cane sugar supplier partners to grow their
sugar industries sustainably and profitably.
Led by a Tate & Lyle employee with over 30
years’ experience in the cane sugar supply chain,
this group will help our partners improve their
performance in field, factory and logistics.
Looking forward
In the 2011 financial year, we expect unit refining
margins in EU sugar to remain at levels similar to
those achieved during the second half of the 2010
financial year. Before the impact of transitional
aid, with lower levels of capacity utilisation, we
expect operating profits from EU sugar to be
marginally above the level achieved in the
2010 financial year.
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Tate & Lyle Annual Report 2010 25
Business review Performance
Sucralose
Sales
Adjusted operating profit
Margin
Year to 31 March 2010
Year to 31 March 2009
Primary
£m
–
–
–
Value
added
£m
187
67
35.8%
Total
£m
187
67
35.8%
Primary
£m
–
–
–
Value
added
£m
169
72
42.6%
Total
£m
169
72
42.6%
Market conditions
We estimate that the value of the global market
for high-intensity sweeteners (HIS) remained flat
at around US$1.2 billion in the 2009 calendar
year. SPLENDA® Sucralose again increased its
share of the HIS market, increasing from 25% to
26% during the year, gaining share within every
major geographic region.
During the year, SPLENDA® Sucralose also
continued to capture an increasing share of
new product launches containing HIS. Total
product launches containing HIS increased
by 11% year on year, while those containing
SPLENDA® Sucralose increased by 15%.
Geographically, the majority of new products
launched with SPLENDA® Sucralose were in
Japan, Latin America and Europe.
Customer product launches
During the year, there were a number of
notable customer product launches, product
line extensions and reformulations using
SPLENDA® Sucralose. New product launches
included Pepsi Max in China; Fanta flavoured
beverages in Belgium; Orange Crush in
Mexico; Cadbury Beldent Chewing Gum in
Argentina; and Colgate Wisp in the USA. After
experiencing success in the market, products
such as Gatorade G2 and Pillsbury Reduced
Sugar Bakery Mixes and Frostings extended
their product lines. Hansen’s Monster Energy
expanded into the European market, and is
now available in Australia, the Netherlands,
UK, France, Belgium, Spain and South Africa.
SPLENDA® Sucralose has continued to lead the
energy drink market as the preferred sweetener.
Private label manufacturers continue to
reformulate using SPLENDA® Sucralose, offering
products for key retailers such as Kroger, Target,
Schwan’s, Aldi, Sainsbury’s and Wal-Mart.
Financial performance
Total sales volumes increased by 14%, with
growth principally in Europe, Latin America and
Asia Pacific. Sales revenue increased by 11%
to £187 million (4% in constant currency) with
volume growth partly offset by lower average
selling prices. Average selling prices reduced
due to volume-incentive arrangements in long-
term customer contracts and a more competitive
HIS market. The effect of exchange translation
was to increase operating profit by £2 million.
Following the significant yield improvements
achieved during the 2009 financial year, and the
consequent decision to produce all sucralose
at our fourth-generation facility in Singapore,
the process of mothballing our sucralose plant
in McIntosh, Alabama was completed ahead of
expectations, accelerating the benefit of lower-
cost production.
Adjusted operating profit reduced by 7% (9% in
constant currency) to £67 million. This decrease
was driven by one off credits of around £4 million
in the prior year and lower unit margins, reflecting
the non-exceptional costs arising from the
reorganisation of the sucralose manufacturing
footprint, together with the relatively high costs in
opening inventory which impacted cost of sales
in the 2010 financial year. These impacts were
partly mitigated by reduced operating costs from
running a single plant during the latter part of
the financial year.
Operating margins of 35.8% were below the
underlying margins in the high 30% range
achieved in the 2009 financial year, but ahead
of management’s expectations due to a
degree of customer re-stocking boosting sales
volumes during the early part of the year and
the accelerated capture of cost benefits from
running a single plant during the latter part of
the year. Reported operating margin in the 2009
financial year was 42.6%. After adjusting for
one-off credits, including those arising from
the final settlement of deferred consideration
payable to McNeil, underlying operating margins
for the 2009 year were in the high 30% range.
Following the decision to mothball McIntosh,
we recognised an exceptional charge in the
first half of the 2010 financial year of £55 million
representing the anticipated cash costs
associated with this decision. Cash costs
of £19 million were paid during the 2010
financial year.
Looking forward
We expect our strategy of putting in place long-
term customer contracts with volume incentive
arrangements to continue to drive sales volume
growth at lower average selling prices. We have
contracted the vast majority of sales for
calendar year 2010, and a majority of sales
for calendar year 2011, much of it through
multi-year agreements.
Having now consumed substantially all of
the higher-priced inventory produced within
the two plant manufacturing footprint, in the
2011 financial year we will achieve a full year’s
benefit from concentrating all production at
the Singapore plant. As previously stated, we
therefore expect operating margins in the
2011 financial year to move back to the high
30% range.
26 Tate & Lyle Annual Report 2010
Other financial information
Central costs
Central costs, which include head office, treasury
and reinsurance activities, increased by £13 million to
£31 million. Costs totalling £5 million arose from the review
and reorganisation of the Group’s activities performed
during the year. The prior year included one-off credits
totalling £6 million.
Central costs in the 2011 financial year, excluding any
amounts related to the reorganisation of the Group’s activities,
are expected to be broadly in line with the reported charge for
the 2010 financial year.
Energy costs
Energy costs for the year were £193 million (2009 –
£208 million), a decrease of 7% (11% in constant currency).
The improvement of £25 million in constant currency
was due principally to lower prices (£14 million) and
efficiency improvements (£11 million). We have covered
approximately 65% of our estimated energy needs for
the 2011 financial year at prices broadly in line with levels
in the 2010 financial year.
Exceptional items from continuing operations
£m
UK Group Pension Scheme changes
Closure and restructuring costs
Write-off of assets
Impairment charges
Settlement with Mexican government
Exceptional items
2010
42
(58)
(28)
(232)
–
(276)
2009
–
–
(24)
(106)
11
(119)
Exceptional items within our continuing operations during
the year totalled a net charge of £276 million.
With regard to our plant in Fort Dodge, Iowa, in the last
few months we have conducted detailed analyses of the
end markets which the plant would supply under our new
capital management processes. The continuing depressed
and volatile outlook for ethanol, and uncertain conditions in
industrial starch and corn gluten feed markets, do not provide
any basis to complete and commission the plant.
Changes in feed and energy markets, together with the
reconfiguration of technology required following our
experience of installing new equipment at our Loudon plant,
along with remobilisation costs, would mean that, if we were
to complete Fort Dodge, total additional costs would now
be in the region of £70 million.
Factoring in the risks associated with future returns from the
plant, including the length of time to complete, regulatory
uncertainty and a continuation of the current market
conditions, we have concluded that the plant is highly unlikely
to be completed or commissioned in the foreseeable future.
As a result, the facility has been mothballed and written down
to £17 million, leading to an impairment of £217 million which
has been recognised as an exceptional charge in the 2010
financial year. A further exceptional charge of approximately
£25 million will be recognised during the 2011 financial year
in respect of long-term contracts relating to the facility. We will
continue to seek ways to maximise shareholder value from
the Fort Dodge plant in these circumstances.
An exceptional gain of £42 million has been recognised in
relation to changes announced to the Group Pension Scheme
in the UK. Of the total gain, £32 million relates to a negative
past service cost following the removal of the early retirement
discretion from November 2009 and £10 million relates to
a curtailment gain as a result of the decision to close the
scheme to future benefit accrual for employee members
from April 2011.
Within our Sucralose division, we have recognised an
exceptional charge of £55 million in relation to the decision
to mothball the Sucralose manufacturing facilities in
McIntosh, Alabama. The charge covers costs connected with
redundancy, clean-up activities and ongoing fixed costs, and
includes provision for costs to final closure. The cash outflows
in the year totalled £19 million and the remaining balance is
expected to be spent in the years ending 31 March 2011 and
31 March 2012.
The reorganisation of our food systems business in Europe
will lead to exceptional cash costs totalling £7 million, of
which £3 million has been recognised in the 2010 financial
year, with the balance expected to be recognised in the
2011 financial year.
Within the Food & Industrial Ingredients, Americas segment,
following a review of research and development projects in
the context of our new strategic focus, we have recognised
an exceptional charge of £28 million in relation to a pilot plant
and related assets since we no longer intend to pursue these
products to full-scale production.
The Group has recognised a further impairment charge of
£15 million at its sugar refining business in Israel comprising
a full write-down of the fixed assets and an inventory
impairment following a further decline in the business’s
commercial prospects.
The tax impact on continuing net exceptional items in the
2010 financial year totalled a £112 million credit (2009 –
£44 million credit). Tax credits on exceptional costs are only
recognised to the extent that losses incurred will result in tax
recoverable in the future. In addition, an exceptional tax credit
of £15 million has been recognised in the 2010 financial year
in respect of the release of certain tax provisions.
Exceptional items from continuing operations in the 2009
financial year comprised an impairment charge of £97 million
in connection with the mothballing of our McIntosh, Alabama
sucralose facility; a charge of £24 million in relation to a
dispute with a supplier over the performance and suitability
of ethanol dehydration equipment; 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); and an impairment of
£9 million following a review of the carrying value of our
sugar refinery in Israel.
Costs associated with the reorganisation
of the Group’s activities
Exceptional costs of £8 million associated with the
reorganisation and restructuring of the Group’s activities are
expected to be recognised in the 2011 financial year, with
further exceptional costs expected to be in the region of
£13 million the following year. These cash costs are expected
subsequently to pay back within two years. Additionally,
we are developing a detailed implementation plan for a
common, global IS/IT platform, which we anticipate will
be implemented over the next 24 months.
Tate & Lyle Annual Report 2010 27
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Business review Performance
Net finance expense
The net finance expense from continuing operations increased
from £51 million to £69 million. The exchange impact within
interest accounted for an increase of £4 million compared to
the prior year. We recognised a charge within interest expense
in the current year relating to post-retirement benefit plans
of £19 million (2009 – £3 million). Interest capitalised in the
year reduced to £2 million from £11 million in the comparative
period, reflecting lower levels of capital expenditure and the
decision to suspend completion and commissioning of the Fort
Dodge, Iowa plant. Underlying net finance expense was below
the level of the prior year, reflecting significantly lower levels of
average net debt.
Lower levels of average net debt will benefit interest expense
in the 2011 financial year, although the mix of debt will cause
the average cost of debt to increase over the previous year. We
expect net interest charges related to post-retirement benefit
plans to be around £6 million in the 2011 financial year.
The effective interest rate in the year on total operations,
calculated as net finance expense excluding net financing
charges relating to retirement benefits and including capitalised
interest, divided by average net debt, was 5.3% (2009 – 5.0%).
Interest cover for total operations, calculated on a bank
covenant basis, was 5.8 times (2009 – 6.1 times).
Taxation
The taxation charge from continuing operations before
exceptional items and amortisation of acquired intangible
assets was £47 million (2009 – £68 million). The effective
rate of tax on adjusted profit was 20.4% (2008 – 27.3%). The
decrease was due mainly to changes in the geographical origin
of profits, especially lower levels of profits in the USA, and the
impact of our internal financing plan.
If the mix in the geographical origin of profits in the year to
31 March 2011 is similar to those in the year to 31 March 2010,
the tax rate is expected to remain in the low 20% range.
Discontinued operations
Discontinued operations comprise our former international
Sugar Trading business and the residual activities in Eastern
Sugar. Sales from discontinued operations for the year
amounted to £101 million (2009 – £852 million).
The operating loss from discontinued operations totalled
£2 million (2009 – £21 million, after exceptional losses of
£22 million).
The exceptional losses for the year to 31 March 2009 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 was not included
in the sale and is being addressed separately in accordance
with the related shareholders’ agreements. The process of
sale of these minority interests has continued through the
2010 financial year, and is expected to be completed in the
2011 financial year; fair value losses of £10 million have been
recognised in the financial year through the consolidated
statement of comprehensive income.
The loss from discontinued operations after taxation for the
year was £4 million (2009 – £24 million).
Earnings per share
Adjusted diluted earnings per share from continuing operations
were 38.9p (2009 – 38.0p), an increase of 2% (decrease of 2%
in constant currency). On the same basis, basic earnings per
share were higher by 2% (2% lower in constant currency) at
39.1p (2009 – 38.2p).
Total basic earnings per share were 3.3p (2009 – 14.2p), 77%
lower than the prior year. Total diluted earnings per share were
3.3p (2009 – 14.1p), down 77% from the prior year.
28 Tate & Lyle Annual Report 2010
Dividend
The Board is recommending a maintained final dividend of
16.1p, making a full-year dividend of 22.9p per share, in line
with the prior year. The proposed final dividend of 16.1p
(2009 – 16.1p) will be due and payable on 30 July 2010 to all
shareholders on the Register of Members at 25 June 2010.
A scrip dividend alternative is being offered.
An interim dividend of 6.8p (2009 – 6.8p) was paid on
8 January 2010. Adjusted earnings dividend cover, based
on total operations, was 1.7 times (2009 – 1.7 times) and for
continuing operations was 1.7 times (2009 – 1.7 times).
The dividend was covered 5.2 times by free cash flow
(2009 – 1.5 times).
Cash flow
Adjusted operating profit
Depreciation/amortisation1
Change in working capital
Share-based payments
Operating cash flow
Capital expenditure
2010
£m
298
122
291
5
716
(79)
Operating cash flow less capital expenditure 637
Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Europe
Sugars
Sucralose
Central
Operating cash flow
Food & Industrial Ingredients, Americas
capital expenditure
Other capital expenditure
2010
£m
381
109
143
109
(26)
716
(30)
(49)
Operating cash flow less capital expenditure 637
1 Amortisation other than acquired intangibles
2009
£m
298
117
31
5
451
(224)
227
2009
£m
293
102
10
70
(24)
451
(158)
(66)
227
Operating cash flow from continuing operations increased by
59% to £716 million (2009 – £451 million), driven principally by
strong working capital inflows during the 2010 financial year.
Working capital inflows totalled £291 million (2009 –
£31 million). The continued reduction in inventory levels
generated cash inflows of £113 million (2009 – £113 million),
while improvements from receivables and payables generated
inflows of £175 million (2009 – £33 million). Margin calls
reduced, resulting in an inflow of £35 million (2009 – outflow
of £70 million). Net interest paid totalled £59 million (2009 –
£56 million). Income tax paid from continuing operations was
£38 million (2009 – £17 million), with the lower prior year tax
outflow being driven by one-off refunds in both the UK and the
USA. Capital expenditure of £79 million (2009 – £224 million),
at around two-thirds of the depreciation charge, reduced
significantly from the prior year following the completion of the
four-year capital expenditure programme. In the year ending
31 March 2011, we would expect capital expenditure to be
broadly in line with depreciation.
Free cash inflow (representing cash generated from continuing
operations less interest, taxation and capital expenditure)
totalled £540 million (2009 – inflow of £154 million).
Within discontinued operations, net cash outflows totalled
£54 million, including a £26 million repayment of proceeds
to Bunge following completion of the sale of international
Sugar Trading. The remaining outflows primarily relate to
retained counterparty positions that were not included in
the sale to Bunge.
During the year, the Group paid around £21 million to acquire a
further 15% in G.C. Hahn & Co. (Hahn), following the exercise
of an option by Hahn Familien GmbH, the former owner of
Hahn, set out in the original acquisition agreement, requiring
Tate & Lyle to acquire this shareholding. Tate & Lyle acquired
80% of the issued share capital of Hahn on 15 June 2007. The
option consideration paid for the 15% was fixed under the
terms of the original acquisition agreement, and is equivalent
pro rata to the value paid for the 80% stake. The acquisition
agreement allows for Tate & Lyle to acquire the remaining 5%
of the issued share capital of Hahn prior to 1 January 2020
through put and call options.
Post-retirement benefits
We maintain pension plans for our employees in a number
of countries. 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.
At 31 March 2010, there was a net deficit in respect of these
arrangements of £257 million (2009 – £211 million). The
increase in the deficit was driven by an increase in benefit
obligations of £243 million, offset by an increase in assets
of £197 million.
Equity dividends paid in cash were £103 million (2009 –
£104 million). In total, we paid a net of £162 million (2009 –
£160 million) to providers of finance in the form of dividends
and interest. We recognised a net inflow of £2 million relating
to employee share option exercises during the year (2009 –
£3 million), and a net outflow of £6 million from repurchase of
our own shares by the Employee Share Ownership Trust
(2009 – £nil).
Net cash generated (defined as cash from operating activities,
investing activities and share issues, less shares repurchased
and dividends) amounted to £347 million (2009 – £245 million).
Net debt
Net debt reduced from £1,231 million at 31 March 2009 to
£814 million at 31 March 2010, primarily due to significant
working capital inflows and lower levels of capital expenditure.
The effects of exchange provided a benefit of £79 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
strengthened against the US dollar and the euro during the
year, net debt reported in sterling has reduced.
During the year, net debt peaked at £1,247 million in April 2009
(2009 – peak of £1,530 million in December 2008). The average
net debt was £1,020 million, a reduction of £210 million from
£1,230 million in the prior year.
Net assets
As at 31 March
Return on net
operating assets
2010
£m
2009
£m
2010
%
2009
%
Net operating assets/
liabilities
Food & Industrial
Ingredients, Americas
700
1 186
Food & Industrial
Ingredients, Europe
Sugars
Sucralose
Central
Total net operating
assets
Other
Net debt
Net assets
471
296
124
(6)
530
385
243
15
1 585
83
1 668
(814)
2 359
(115)
2 244
(1 231)
854
1 013
19
9
9
35
–
14
18
8
4
26
–
13
Net assets at 31 March 2010 were £854 million (2009 –
£1,013 million). This decrease was driven by retained profits
of £19 million, cash flow hedge gains of £24 million
and deferred tax on components of other comprehensive
income of £25 million, offset by post-retirement benefit
actuarial losses of £104 million, exchange effects (net of
hedging effects) of £10 million, losses on available for sale
investments of £10 million and dividends (including minority
interest dividends) of £107 million. Net current assets were
£119 million higher at £631 million.
The service charge in the forthcoming 2011 financial year is
forecast to remain broadly in line with the charge of £11 million
recognised in the 2010 financial year, whilst the net finance
expense is expected to decrease from £19 million to
around £6 million.
Shareholders’ equity
During the year, 0.5 million scrip dividend shares were issued
and 0.8 million shares were released from treasury for a total
consideration of £2 million. At 31 March 2010, there were
460.6 million shares in issue of which 0.5 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. In November 2009, we issued
a £200 million bond which matures in November 2019, and
undertook a tender offer to repurchase the 2012 sterling bonds.
The new issue, in conjunction with the tender offer for the 2012
sterling bonds, was designed to extend our maturity profile
and further diversify our sources of funding. We repurchased
£100 million of the 2012 sterling bonds on the completion
of the tender offer. Capital market issues outstanding at
31 March 2010 include the US$300 million 6.125% 144A bond
maturing in 2011; the £100 million 6.50% bond maturing in
2012; the US$500 million 5.00% 144A bond maturing in 2014;
the US$250 million 6.625% 144A bond maturing in 2016; and
the £200 million 6.75% bond maturing in 2019.
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 a core
committed bank facility of US$1 billion which matures in
October 2012. This facility is unsecured and contains our
standard 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 5.8 times (2009 – 6.1 times).
Under our covenant definition, net debt and EBITDA are both
calculated using average exchange rates; the ratio for
financial year 2010 was 1.8 times (2009 – 2.4 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 31 March 2010, after
subtracting total undrawn committed facilities, there was no
debt maturing within 12 months or within two-and-a-half years
(2009 – none and none). The average maturity of our gross
debt was approximately 5.4 years (2009 – approximately
4.8 years). At 31 March 2010, we held cash and cash
equivalents of £504 million (2009 – £434 million) and committed
facilities of £659 million (2009 – £788 million) of which
Tate & Lyle Annual Report 2010 29
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Business review Performance
£515 million (2009 – £524 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; to
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 & Poor’s (S&P) for the provision of credit ratings,
and it is our policy to keep them informed of all major
developments. At 31 March 2010, the long-term credit rating
from Moody’s was Baa3 (stable outlook) and from S&P was
BBB- (negative outlook). We are committed to maintaining
investment-grade credit ratings.
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
maximum ratio of net debt to EBITDA should not exceed
2.5 times, and that interest cover should exceed 5 times.
The net debt to EBITDA KPI target has been reduced from
2.5 times to 2.0 times for the financial year 2011 and beyond.
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 £13 million
at 31 March 2010 (2009 – £97 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
£195 million (2009 – £237 million) and related primarily to
railcar leases in the USA. Rental charges for the year ending
31 March 2010 in respect of continuing operations were
£24 million (2009 – £27 million).
Financial risk controls
Management of financial risk
Our main financial risks are credit, liquidity, and market
risks. The latter include interest rate risk, currency risk and
certain commodity price risks. We also have certain non-
financial or non-quantifiable risks; these are set out in the
Risk management section on pages 16 and 17. 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
30 Tate & Lyle Annual Report 2010
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.
These functions are controlled by divisional management,
who are responsible for ratifying general strategy and oversee
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.
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. This 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. A derogation of the maximum percentage of
fixed-rate debt was approved by the Tate & Lyle PLC Board
until 30 June 2010. At 31 March 2010 the longest term of any
fixed-rate debt held by the Group was until November 2019.
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 82% (2009 – 55%).
If the interest rates applicable to our floating-rate debt rise
from the levels of 31 March 2010 by an average of
100 basis points over the year to 31 March 2011, with all
other variables held constant, this would reduce Group
operating profit before tax by approximately £1 million
(2009 – £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 provides 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 31 March 2010, net debt was held in the following
currencies: net borrowings of US dollars 76% (2009 – 77%);
euros 20% (2009 – 20%); sterling 7% (2009 – 3%); and other
currency deposits of 3% (2009 – deposits of 0%).
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 2010, denominated in non-functional currencies for
all operating units within the Group.
31 March 2010
31 March 2009
Income
statement
-/+ £m
Equity
-/+ £m
Income
statement
-/+ £m
Equity
-/+ £m
–
–
28
15
1
1
40
13
Sterling/US$
5% change
Sterling/euro
5% change
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.
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 31 March 2010 was
£813 million against a book value of £814 million (2009 – fair
value £1,308 million; book value £1,231 million).
Derivative financial instruments used to manage the interest
rate and currency of borrowings had a fair value of £9 million
liability (2009 – £13 million liability). 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 £6 million
liability (2009 – £36 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 £22 million asset (2009 – £44 million liability).
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 ‘Business review: What we do’ and ‘Business
review: Performance’ sections. The financial position of
the Group, its cash flows, liquidity position and borrowing
facilities are described in the same sections. 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 annual report
and accounts.
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Tate & Lyle Annual Report 2010 31
Business review Performance
Corporate social responsibility
Employee safety results for the
2009 calendar year
Overview
This year, we have changed how we report corporate social
responsibility (CSR). We have incorporated those areas
in which we measure performance – safety, environment,
community – into this ‘Business review: Performance’
section, emphasising their importance to the long-term
success of the business. The other two parts of our traditional
CSR report, namely how we manage our relationships with
commercial partners and suppliers, and our approach to
employee health and wellbeing, are covered in the ‘Business
review: What we do’ section, since they are an integral part of
how we do business.
We believe that changing the way we report CSR more
accurately reflects the central role it plays in the way we
do business – which, for Tate & Lyle, means operating to
high social, ethical and environmental standards in
all circumstances.
Managing corporate social responsibility
Our approach to CSR is enshrined in our Business Code of
Conduct (the Code). The Code applies unconditionally to all
wholly-owned parts of the Group, and we also aim to apply
the Code in those operations in which we have a 50% stake
or more. Where we have a minority stake, we encourage
our partners to adopt the Code. Applying the Code requires
proactive management at every level within the Company.
The Board reviews Tate & Lyle’s CSR policies and
performance annually, and the Chief Executive is the Board
member accountable for all aspects of CSR. A copy of the
Code can be found on our website, www.tateandlyle.com.
Our internal audit function reviews the processes used
to collect and collate the information contained within this
CSR section. In the 2011 financial year, we will be establishing
a new Corporate Responsibility Board Committee. This
Committee will be reviewing our current data and processes
and, as a result, we expect that there will be a number of
changes to our methodology and presentational format and
this will be reflected in the Annual Report 2011.
Safety
Tate & Lyle has no higher priority than safety, which we believe
is fundamental to running a successful business. This means
ensuring safe and healthy conditions for everyone at our sites:
employees; contractors; and visitors. By reporting, recognising
and rewarding safety performance, we aim to ensure that all
our operations focus on continuous improvement.
Overview
The Group continued to make progress in safety performance
in the 2009 calendar year, with improvements in all areas
with the exception of the severity rate (lost workdays) which
worsened by 18%. Following significant improvements in
2008, our contractor safety index worsened by 28% in 2009.
This will be a major area of focus in 2010.
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Group safety index (weighted average of injuries sustained
in the workplace across Tate & Lyle, with more severe
incidents having greater impact) improved by 3%;
Recordable injury rate (injury requiring treatment beyond
first aid) improved by 33%;
Lost-time accident rate (recordable injury sufficiently severe
to result in lost workdays or to restrict the employee’s
ability to perform his/her job) improved by 17%; and
Severity rate (number of workdays lost due to injuries
per 200,000 employee hours) worsened by 18%.
Most Group locations equalled or improved on their 2008
safety performance, including 19 locations that reported
no recordable injuries and 24 that reported no lost-time
accidents for the year. Overall, we were pleased that our
results showed good progress compared to 2008, with the
exception of the severity rate which worsened. Actions are
being taken to reduce the severity rate in 2010 primarily
through a focus on training, behavioural auditing, and
continuous reviews of physical conditions and
programmes at each site.
Benchmarking results
In comparing the performance of each of our divisions with
results from the US Bureau of Labor Statistics (2008 being
the most recent data available), 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 the 2009
calendar year
Following significant improvements in 2008, we were
disappointed that our contractor safety index worsened by
28% in 2009, impacted in particular by a 50% worsening of
the severity rate (lost workdays).
In the 2009 calendar year, compared with the 2008 results:
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Contractor safety index worsened by 28%;
Recordable injury rate improved by 26%;
Lost-time accident rate improved by 2%; and
Severity rate worsened by 50%.
Contractor safety is a major focus in 2010. At our larger
sites we are introducing a new contractor review system to
evaluate contractor safety performance on a monthly basis.
We will also hold regular safety meetings with contractors
to explain safety expectations, and accountability for safety
performance will be a factor in contractor selection and
site maintenance.
Benchmarking results
While we were disappointed with our contractor safety
performance in 2009, our results nonetheless compare
well with the US Bureau of Labor Statistics for 2008 (the
most recent data available). The Bureau reports the overall
recordable injury rate per 200,000 employee hours for US
contractors to be 4.7 against 1.42 at Tate & Lyle, and the
overall lost-time accident rate to be 2.5 against our
rate of 0.75.
32 Tate & Lyle Annual Report 2010
Safety – key performance indicators
Group safety index
Contractor safety index
2.08
1.16
1.12
3.74
3.43
2.67
07
08
09
07
08
09
The smaller the index, the better the performance.
Our target is zero for every Tate & Lyle operation.
The smaller the index, the better the performance.
Our target is zero for every Tate & Lyle operation.
Benchmarking safety:
recordable injury rate1
6.20
5.90
4.50
US industry
3.90
1.69
0.82
0.43
1.00
0.99
A
B
C
D
E
F
G
H
Benchmarking safety:
lost-time accident rate2
4.00
3.20
2.50
US industry
2.00
Benchmarking contractor safety:
recordable injury rate1
4.70
1.42
US
industry
Tate
& Lyle
Benchmarking contractor safety:
lost-time accident rate2
2.50
0.363
0.28
0.31
0.77
0.33
0.33
A
B
C
D
E
F
G
H
0.75
US
industry
Tate
& Lyle
A US food manufacturing E Food & Industrial Ingredients, Americas
B US grain milling
C US corn refiners
D US sugar industry
F Food & Industrial Ingredients, Europe
G Sugars
H Sucralose
1
2
Number of injuries per 200,000 employee hours requiring more
than first aid.
Rate of recordable injuries sufficiently serious to result in lost
workdays or restricted work activities.
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Number of injuries per 200,000 employee hours
requiring more than first aid.
Rate of recordable injuries sufficiently serious to result in
lost workdays or restricted work activities.
Cases with days away from work only, not including
restricted work activities.
Sources:
Tate & Lyle data from Group safety records
US industry statistics as reported by the US Bureau of Labor Statistics
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Tate & Lyle Annual Report 2010 33
Business review Performance
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:
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an increased focus on the human and behavioural aspects
of safety;
utilization of the networking concept to make effective use
of available resources;
improved communications on issues of safety throughout
the Group;
sharing of best practice, including the use of leading
indicators;
auditing of safety and loss control programmes; and
active involvement of Company executives to promote and
audit safety programmes.
Projects and activities
Our network safety committees and their task forces
undertook a wide range of safety projects in 2009. Some
examples include:
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Group-wide behavioural auditing and training. During 2009,
our operations in the Americas introduced a new five-step
employee training programme called SafeStart;
use of a third-party and insurance audit teams to review
Occupational Safety and Health Administration and
regulatory compliance, and fire protection programme;
sustained efforts to keep the families of employees
involved in the overall safety process through promotional
items, contests, and safety days;
ongoing use of recognition and award programmes to
identify and reward outstanding safety performance and
mark safety milestones; and
continued work in managing and monitoring contractors,
along with on-site contractor training.
Awards
Tate & Lyle runs a number of annual, Group-wide safety
awards. To qualify for entry into our ‘Global Safety’ awards
programme, plants must operate the entire year without lost
time, and meet other ‘world-class safety’ criteria. Winners in
2009 were:
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Large plant (over 250,000 employee hours per year):
Amylum Nisasta (Turkey)
Small plant (fewer than 250,000 employee hours per year):
Plaistow (UK).
Our ‘Flagship’ awards are made by the US and European
Safety Committees on a divisional level. Winners in
2009 were:
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US/Asia large plant: Singapore
Europe large plant: Amylum Nisasta (Turkey)
Small plant: Dayton, Ohio (USA).
Outlook
We were saddened to learn that shortly before this report
was published, a fatality occured at our joint-venture plant in
Turkey. The Board has been informed and a full investigation
is under way.
While our employee safety record is good, we want every site
to be world class. In order to maintain consistency across
Tate & Lyle’s plants and operations, safety leaders from across
the Group have developed a new strategic global safety plan
for the Group. Going forward, we will measure ourselves
annually against world-class safety performance indicators,
improving the co-ordination, scope and presentation of
safety reporting data to help us identify issues and events in
advance. Contractor safety and physical/behavioural auditing
and safety training will continue to be areas of focus in 2010.
By implementing the global indicators and promoting the
active involvement of management, employees and
contractors in our safety efforts, we aim to improve safety
performance further and come closer to world-class safety
across the Group.
Environment
Tate & Lyle believes that companies must take steps to
manage their impact on the 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. This aim will
be achieved by upholding defined, key environmental
standards in all of our operations, and we actively
encourage our business partners to demonstrate similar
levels of commitment.
Overview
Managing our impacts to produce a more positive result is
good for the environment and also brings economic benefits
to Tate & Lyle. When reviewing our environmental footprint,
we focus 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. Energy use is by far our most
significant impact, and therefore has highest priority. In
recent years, we have also reported our carbon footprint,
an increasingly important global measure of overall
environmental performance.
Tate & Lyle’s environmental policy applies to all our locations,
and fully integrates environmental management into their
operational systems and procedures. The Board reviews the
policy and environmental performance annually. The policy
can be found on our website, www.tateandlyle.com.
2009 calendar year results
We focus our measurement and improvement efforts on the
areas with the greatest environmental and financial impact.
Compared to 2008 figures, and using normalised indices for
consumption per unit of finished product output, our results
for the 2009 calendar year were:
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energy consumption remained the same;
water consumption decreased by 4%; and
non-hazardous solid waste production decreased by 24%.
Although we did not meet our target of a per-unit 3%
reduction in energy consumption in 2009, we are pleased
to report that we have reduced both water consumption
and waste production per unit of output, following
increases in 2008.
34 Tate & Lyle Annual Report 2010
Carbon footprint
This is a measure of the impact that a person, organization
or product has on the environment in terms of the amount of
carbon dioxide produced during a given period or product
cycle. Calculating our total carbon footprint helps us to
manage our overall environmental impact and benchmark
our performance year on year.
Primary carbon footprint
Primary carbon footprints measure the carbon associated with
production from the point of arrival of raw materials at specific
sites to the point of departure of products from those sites,
and covers emissions generated through the combustion of
fossil fuels and from transportation within our sites.
Tate & Lyle’s primary carbon footprint in the 2009 calendar
year across all its large sites was 0.39 tonnes of CO2 per
tonne of production. This represents a 2.5% reduction from
0.40 tonnes in the 2008 calendar year. Our primary carbon
footprint figures for 2007 (0.39) and 2008 (0.33), as disclosed
in last year’s annual report, have been restated on a like-for-
like basis with 2009.
Secondary footprint
Secondary carbon footprints include indirect as well as
direct carbon dioxide emissions from the entire lifecycle of a
product or service, including those associated with product
manufacture and eventual breakdown.
Retail sugar
Raw cane sugar milling is almost carbon neutral. Cane grows
in the field, waste fibre powers the factory and the cane
re-grows each year, often up to five times without the need
for replanting. It is then transported by ship to Tate & Lyle’s
refineries in London and Lisbon, a mode of transport that
produces very small levels of CO2 emissions per tonne.
In 2008 our Sugars business began a 12-month project
to measure the secondary carbon footprint of its refining
business, from cane field to supermarket and on to consumer
use and disposal. The business received official accreditation
of the results of this study from the UK’s Carbon Trust in July
2009. The carbon footprint of our retail cane sugar is 380g of
CO2 per 1kg bag – significantly less than that of beet sugar.
Tate & Lyle granulated sugar packs started carrying the
Carbon Reduction Label from September 2009. We believe
that we are the first to receive independent accreditation and
display our carbon footprint on retail sugar packs.
Other sugar products
We have also calculated and gained accreditation for the
business-to-business carbon footprint for some of our
UK-based bulk sugar products to enable our customers
to estimate the footprint of their own products when using
Tate & Lyle ingredients. Since the majority of our products are
shipped in bulk, business-to-business footprints are the same
as the secondary footprint, less the carbon dioxide associated
with packing materials and packing materials waste.
Violation, abatement and compliance orders
The vast majority of our operations completed 2009
without significant incident. Where Tate & Lyle inadvertently
contravened regulations, we reacted immediately with an
action plan to correct the problem.
Environment – key performance indicators
Group energy index
0.79
0.79
0.79
07
08
09
Group water index
0.81
0.84
0.81
07
08
09
Group non-hazardous solid waste index
1.65
1.26
1.02
07
08
09
Primary carbon footprint1
Tonnes of CO2 per tonne of production
0.40
0.40
0.39
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The smaller the index, the better the performance.
1 The primary carbon footprint of Tate & Lyle’s large sites.
Tate & Lyle Annual Report 2010 35
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Business review Performance
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. Further information on the risk
management process is on page 45.
Measuring data
We collect detailed data and report results from each
operating unit quarterly, using a comprehensive system.
The data is then aggregated to create a single set of
environmental performance indices for the Group, adjusted
to take account of acquisitions and disposals.
Management systems
Environmental management is integrated into operational
systems, training and monitoring activities, and enforced
through a robust reporting system. We have a documented
Group Crisis Management System, which enables an
effective and professional response to incidents of a serious
and/or urgent nature. The system also covers Tate & Lyle’s
response to third-party crises that could have a significant
impact on our business.
Training
Employees receive regular training on managing
environmental impacts and changes in legislation, so that
they are always aware of important and relevant issues.
Operating units have environmental management committees
that meet regularly to monitor progress against agreed
improvement targets.
Customers and suppliers
We work closely with our customers to ensure our systems
meet their requirements.
We also brief all on-site contractors about key environmental
issues to ensure that we are managing our environmental
impact effectively.
Investing in renewable energy sources
Energy use is very important to us. 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 improve our environmental performance,
we are developing technology to use renewable energy
sources. For example, our biomass boiler at our London
sugar refinery is designed to supply up to 70% of the site’s
energy requirements.
Outlook
We have formulated an action plan for 2010 designed
to manage our impact on the environment. Specific
actions include:
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reducing energy and water usage per unit of production
and minimising all waste produced by our processes
through continued focus on efficient operation at all times,
supported where beneficial by capital investment;
actively working to eliminate any incidence of non-
compliance with environmental permits; and
continued evaluation of our primary carbon footprint
across the Group and the achievement of associated
reductions through the use of benchmarking and
best practice.
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.
This 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
Many of our employees participate in our community
partnership programmes. Our community involvement
benefits our employees by enhancing the 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 200 organisations, ranging
from long-established charities to fledgling community
organisations. Community support takes many forms,
depending on the needs of the organisation. It 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. It selects projects that target
local needs and deliver the most positive impact, and ensures
that our community work reflects our broader responsibilities
as a company. Our guidelines for funding and support are:
n
n
n
n
education – 50%;
environment – 25%;
health – 15%; and
arts – 10%.
In the financial year to 31 March 2010, Tate & Lyle’s total
worldwide charitable donations were £714,000 (2009 –
£699,000) and total global pro bono contribution in goods
and services was estimated at £235,000 (2009 – £221,000).
Actual community spend by allocation
Year ended 31 March 2010
Arts
8%
Health
15%
Environment
21%
Education
56%
36 Tate & Lyle Annual Report 2010
We support many initiatives and organisations involved
in community regeneration all round the world. Here is a
selection from each of the UK and the USA.
UK
n
n
n
n
n
Community Links: a local charity working to regenerate the
area of Newham in east London
Community Food Enterprise: a social enterprise improving
community access to affordable fresh fruit and vegetables
in east London
Richard House Children’s Hospice: London’s first hospice
for terminally-ill children, which we have supported since it
was founded in 1996
Tate Britain: supporting art projects for children at this
London gallery
East London Business Alliance (ELBA): we are a founder
member of this regeneration agency for east London,
which connects business to local people, public and
community partners to enable social and economic
change. We support ELBA’s initiative to capture long-term
benefits from London hosting the 2012 Olympic Games.
USA
n
n
n
Educational institutions: including Millikin University,
Purdue University, the University of Illinois, and Richland
Community College
Decatur Park District: we fund a number of youth activities
as well as annual park district events that provide
recreational opportunities for the entire community
Decatur Community Foundation: we are a founder
member of this organisation created in 2000 to provide an
endowment to support a broad range of programmes that
benefit the Decatur, Illinois community.
Employee volunteering
Tate & Lyle employees around the world make great efforts
to support their local communities. Their involvement is vital
to maintain good, long-term relationships. Our employees
join local committees, advocate their causes and provide
mentoring and business skills.
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. Further information on some of our employees’
volunteering activities around the world can be found on our
website, www.tateandlyle.com.
Outlook
We continue to encourage our employees around the world
to get involved in supporting their communities. In 2010, we
will be focusing our spend more closely to ensure it is used
in areas where it can be most beneficial.
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Find out more about Tate & Lyle
at www.tateandlyle.com
Tate & Lyle Annual Report 2010 37
Governance
Board of directors
Sir Peter Gershon
Chairman
Became Chairman on 23 July 2009
after joining the Board in February
2009. Formerly Chief Executive of
the Office of Government Commerce,
Managing Director of Marconi
Electronic Systems and a member
of the GEC plc board. Currently
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 63.
Javed Ahmed
Chief Executive
Joined the Group as Chief Executive
on 1 October 2009 from Reckitt
Benckiser plc. Started his career
with Procter & Gamble and then spent
five years with Bain & Co. Joined
Benckiser (later Reckitt Benckiser plc) in
1992. Subsequently held a number
of senior positions, both in the UK
and internationally, including Senior
Vice President, Northern Europe;
President, North America; Executive
Vice President, North America,
Australia and New Zealand; and
Executive Vice President, Europe.
Aged 50.
Tim Lodge
Group Finance Director
Joined the Group in 1988 and
joined the Board in December 2008
as Group Finance Director. Has held
a number of senior operational and
financial roles, 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 45.
Liz Airey
Non-executive director
Joined the Board in January 2007.
Formerly Finance Director of Monument
Oil and Gas plc (1990-1999). Currently
Chairman of the JP Morgan European
Fledgeling Investment Trust PLC
and the Unilever UK Pension Fund,
Senior Independent Director of
Jupiter Fund Management plc, and
a non-executive director of Dunedin
Enterprise Investment Trust PLC.
Aged 51.
William Camp
Non-executive director
Joined the Board on 1 May 2010.
Worked for 22 years for Archer
Daniels Midland Company, before
retiring in 2007, and held a variety
of management positions including
Executive Vice President, Asia Strategy;
Executive Vice President, Processing;
and Senior Vice President, Global
Oil Seeds, Cocoa and Wheat Milling.
Based in the USA and currently serves
on the boards of Chiquita Brands
International Inc, Grain Storage Inc
and Oasis Foods Company.
Aged 61.
Richard Delbridge
Senior Independent Director
Joined the Board in September 2000.
A Chartered Accountant, he has held
a number of senior operational and
financial positions including partner
of Arthur Andersen & Co; Managing
Director of JP Morgan’s London offices;
Director, Group Finance, Midland
Bank plc; Group Finance Director,
HSBC Holdings plc; and Director and
Group Chief Financial Officer, National
Westminster Bank Plc. Currently a
non-executive director of Standard
Chartered PLC.
Aged 68.
38 Tate & Lyle Annual Report 2010
Evert Henkes
Non-executive director
Joined the Board in December 2003.
Worked for Shell for 30 years before
retiring in 2003 and held a number of
senior management positions in Europe
and Asia Pacific culminating in Chief
Executive of Shell Chemicals in 1998.
Currently a non-executive director
of Outokumpu OYJ, Air Products
and Chemicals Inc, and SembCorp
Industries Ltd.
Aged 66.
Douglas Hurt
Non-executive director
Joined the Board on 10 March 2010.
A Chartered Accountant, he is
currently Finance Director of IMI plc.
Before joining IMI plc in 2006, he
held a number of financial and
operational roles, including US
and European senior management
positions at GlaxoSmithKline.
Aged 53.
Robert Walker
Non-executive director
Joined the Board in January 2006.
He spent over 30 years with Procter
& Gamble, McKinsey and finally,
PepsiCo, where he was responsible
for the company’s beverage operations
in Europe, the Middle East and Africa.
He is currently Chairman of Travis
Perkins PLC, WH Smith PLC and
Americana International Holdings
Limited; he has also served on a
number of FTSE 100/250 boards,
including Wolseley, Severn Trent,
BAA, Signet, and Thomson Travel.
Aged 65.
Dr Barry Zoumas
Non-executive director
Joined the Board in May 2005.
Worked for Hershey Foods Corporation
for 27 years before retiring in 1997 and
held a number of positions, culminating
as Corporate Vice President of Science
and Technology. Based in the USA
and currently the Alan R. Warehime
Professor of Agribusiness and Professor
of Food Science and Nutrition at Penn
State University, USA and also Global
Chairman of the International Life
Sciences Institute.
Aged 67.
Robert Gibber
Company Secretary
and General Counsel
A solicitor, Robert joined Tate & Lyle
in 1990 as a commercial lawyer.
Previously worked for City law firms
Wilde Sapte and Herbert Oppenheimer.
Graduated from Wadham College,
Oxford in Oriental Studies (Chinese) in
1984. Appointed General Counsel in
1997 and Company Secretary in 2001.
Aged 47.
Committee membership
as at 26 May 2010
Audit Committee
Liz Airey, Chairman
Richard Delbridge
Evert Henkes
Douglas Hurt
Robert Walker
Dr Barry Zoumas
Remuneration Committee
Evert Henkes, Chairman
Liz Airey
William Camp
Richard Delbridge
Sir Peter Gershon
Douglas Hurt
Robert Walker
Dr Barry Zoumas
Nominations Committee
Sir Peter Gershon, Chairman
Javed Ahmed
Liz Airey
William Camp
Richard Delbridge
Evert Henkes
Douglas Hurt
Robert Walker
Dr Barry Zoumas
Tate & Lyle Annual Report 2010 39
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Solutions platform. Subsequently joined
Swift and Co, where he was President
of its Australian Meat Holdings division
until 2007.
Executive
management
The members of the Group
Executive Committee as at
26 May 2010 are as follows:
Javed Ahmed
Chief Executive
(Chairman of the Committee)
Tim Lodge
Group Finance Director
Robert Gibber
Company Secretary and
General Counsel
Ian Bacon
Chief Executive, Sugars
Karl Kramer
President, Sucralose
Rob Luijten
Group Human
Resources Director
Olivier Rigaud
President, Food & Industrial
Ingredients, Europe
Matt Wineinger
President, Food & Industrial
Ingredients, Americas
Governance Executive management
Executive
management
The Group Executive Committee
oversees the development and
execution of the Group’s strategy, and
has overall responsibility for achieving
business results.
The biographies for Javed Ahmed,
Tim Lodge and Robert Gibber are on
pages 38 and 39.
Ian Bacon
Chief Executive, Sugars
Joined Tate & Lyle in November
2005 and became Chief Executive,
Sugars in January 2006. A graduate of
Birmingham University, Ian began his
26-year career with Unilever in 1979,
holding a number of senior positions
including Vice President, Global
Customer Development; Vice President,
Operations North Africa, Middle East
and Turkey; and General Manager,
Birds Eye Wall’s.
Karl Kramer
President, Sucralose
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 also holds
an MBA from the New York University
Stern School of Business. Began his
career in R&D at General Foods and
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 international general
management roles in the flavour
division of Givaudan.
Rob Luijten
Group Human Resources Director
Joined Tate & Lyle in February 2010.
Holds a Masters degree in Human
Resource Studies from Tilburg University
and began his career with Inamed
Corporation before spending ten years
with GE Plastics where he held a number
of senior human resources roles in both
Europe and Asia, including five years
based in Shanghai as Human Resources
Director, Asia Pacific. Subsequently
joined BG Group PLC where he was
Human Resources Director, Africa,
Middle East and Asia until 2009.
Olivier Rigaud
President, Food & Industrial
Ingredients, Europe
Joined Tate & Lyle (Amylum business)
in 1988 as a sales manager in France.
A chemistry graduate, he has held
various management positions within
Tate & Lyle, including in industrial
products, liquid sweeteners and alcohol
sales. In 2000, Olivier became Vice
President Food Ingredients, Europe
and was appointed President, Food &
Industrial Ingredients, Europe in 2008.
Matt Wineinger
President, Food & Industrial
Ingredients, Americas
Joined Tate & Lyle in March 2008
and became President, Food &
Industrial Ingredients, Americas in
July 2008. 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 and later
Cargill, where he became President
of Sales, Marketing and Research
& Development in 2002 for its Meat
Executive management structure
from 1 June 2010
As explained in the Chief Executive’s
review on page 6, from 1 June 2010 we
will reorganise and operate through three
global business units: Speciality Food
Ingredients, Bulk Ingredients and Sugars.
A new unit, the Innovation and Commercial
Development group, will be established.
The composition of the Group Executive
Committee is shown in the diagram below.
Javed Ahmed
Chief Executive
Matt Wineinger
President,
Bulk Ingredients
Olivier Rigaud
President,
Speciality Food
Ingredients
Ian Bacon
President, Sugars
Karl Kramer
President,
Innovation and
Commercial
Development
Tim Lodge
Chief Financial
Officer
Rob Luijten
Executive Vice
President,
Human Resources
Robert Gibber
Executive Vice
President,
Company
Secretary and
General Counsel
40 Tate & Lyle Annual Report 2010
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
As a UK-listed company, Tate & Lyle is required to state
whether it has complied with the provisions in Section 1 of
the Financial Reporting Council’s (FRC) Combined Code on
Corporate Governance (as updated in 2008) (the Code) during
the financial year under review. The Code is available from the
FRC’s website (www.frc.org.uk). The Board confirms that the
Company has complied with all these provisions during the
financial year ended 31 March 2010.
This report, together with the directors’ remuneration report,
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 it has the
necessary financial resources and people to meet them,
and reviews management performance. The Board also sets
the Company’s values and standards and ensures that its
obligations to shareholders and others are met.
The Board has a schedule of matters reserved to it for its
decision. This schedule is reviewed annually and includes
approval of:
n Group strategy;
n annual budget and operating plans;
n
n
major capital expenditure, acquisitions or divestments;
full-year and half-year results and interim
management statements;
n safety and environmental policies;
n Board and Company Secretary appointments;
n
senior management structure, responsibilities and
succession plans;
treasury policies;
n
n directors’ conflicts of interest;
n system of internal control and risk management; and
n dividend policy.
Other responsibilities are delegated to Board Committees,
which operate within defined terms of reference. Details of
these are given in the Board Committees section.
The directors’ responsibilities for the preparation of financial
statements are explained on page 57 and their statement
on going concern is on page 31.
Board balance and independence
At the date of this report, the Board comprises the
Chairman, who has no executive responsibilities, two
executive directors and seven non-executive directors.
The names and biographies of the directors are in the
Board of directors section.
Sir David Lees ceased to be a director on 23 July 2009
and Sir Peter Gershon succeeded him as Chairman of the
Company on the same day. Iain Ferguson ceased to be a
director on 1 October 2009 and Javed Ahmed succeeded him
as Chief Executive and as a director of the Company on the
same day. Douglas Hurt and William Camp were appointed
non-executive directors with effect from 10 March 2010 and
1 May 2010 respectively.
With the exception of the Chairman, who is presumed under
the Code not to be independent, the Board considers all the
non-executive directors to be independent.
The Board has appointed a Senior Independent Director,
Richard Delbridge, who is available to shareholders if they
have any issues or concerns, and leads the annual review of
the Chairman’s performance. The Board has appointed Robert
Walker to succeed Richard Delbridge as Senior Independent
Director with effect from the close of the 2010 Annual General
Meeting (AGM), when Richard will cease to be a director.
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 AGM.
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
running the business and implementing strategy and policy.
The other significant commitments of the Chairman,
Sir Peter Gershon, are set out on page 38. The Board is
satisfied that they do not restrict him from carrying out his
duties as Chairman effectively.
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 his or her
appointment. Any non-executive directors who have served
for more than nine years are subject to annual re-election.
The FRC’s review of the Code recognised the importance of
the Chairman in setting the tone for the rest of the Board. In
light of public statements ahead of the publication of the new
UK Corporate Governance Code, it has been decided that the
Chairman will seek re-election at the forthcoming AGM.
The directors standing for re-election this year are Liz Airey
and Evert Henkes, who were last re-elected in 2007, and
Javed Ahmed, Douglas Hurt and William Camp, who were
appointed since the last AGM. The Chairman, Sir Peter
Gershon, will also stand for re-election. The directors standing
for re-election, with the exception of Javed Ahmed, 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 56.
Tate & Lyle Annual Report 2010 41
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Governance Corporate governance
Board and committee meetings
There were eight scheduled Board meetings during the
year ended 31 March 2010, one of which was held at the
Group’s offices in Decatur, USA. One additional meeting was
held to consider changes to the composition of the Board.
All directors also met off-site for two days to consider the
Group’s strategy and review key business issues.
Directors’ attendance at the Board and Committee meetings
that they were eligible to attend is shown in the table below.
Board Committee
Audit Nominations Remuneration
Committee
Committee
Directors as at 31 March 2010
Javed Ahmed
Liz Airey
Richard Delbridge
Sir Peter Gershon
Evert Henkes
Douglas Hurt
Tim Lodge
Robert Walker
Dr Barry Zoumas
Former directors
Iain Ferguson
Sir David Lees
5/5
9/9
9/9
9/9
9/9
1/1
8/9
9/9
9/9
3/3
3/3
–
5/5
5/5
2/2
5/5
–
–
5/5
4/5
–
–
2/2
6/6
6/6
6/6
6/6
1/1
–
6/6
5/6
2/2
3/3
–
8/8
8/8
8/8
8/8
1/1
–
8/8
7/8
–
3/3
William Camp joined the Board on 1 May 2010 and is therefore excluded from
the above analysis.
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 reviewed at each Board meeting and 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.
All substantive agenda items have comprehensive briefing
papers circulated five working days before the meeting.
Members of executive management attend Board meetings
and make presentations regularly. During the year, the Board
adopted the custom of holding a short discussion between
the non-executive directors and the Chairman prior to the
start and immediately upon conclusion of each scheduled
Board meeting.
Board allocation of time
The chart below shows the approximate time the Board has
spent discussing agenda items during the year, separated
into broad categories.
Governance
9%
Operations
14%
Strategy
36%
Finance/risk
39%
Capital expenditure
and investment
2%
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
42 Tate & Lyle Annual Report 2010
42 Tate & Lyle Annual Report 2010
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.
Directors’ conflicts of interest
As permitted under the Companies Act 2006, the Company’s
Articles of Association permit directors to authorise conflicts
of interest and the Board has 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 their appointment.
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, including 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.
Directors receive ongoing training and updates on relevant
issues as appropriate, taking into account their individual
qualifications and experience. A number of training sessions
were held 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.
In November 2009, a number of directors attended the
Food Ingredients Europe exhibition in Frankfurt, Germany.
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 and frequency of
Board and Committee meetings, further enhancements to
the format and content of Board papers and the inclusion
in Board meeting agendas of more specialist presentations
and training sessions, in particular business-relevant topic
areas, notably science and technology and geographically-
specific subjects. It was also felt that directors would
benefit from more opportunities to interact, both in Board
meetings and on more informal occasions, with a broader
range of Group employees, particularly those considered to
be of high potential. The Board also agreed to establish a
Corporate Responsibility Committee that will be responsible
for reviewing and monitoring the processes and measures
used to manage social, environmental and ethical risks and
will assist the Board to enhance its strategy and policies in
this area. The Committee will report to the Board and will be
chaired by the Chairman of the Board. Other actions arising
from the performance evaluation are being or will be taken to
address the matters raised, with progress monitored by the
Company Secretary.
With regard 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 operated effectively throughout the year.
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. Both
Sir Peter Gershon and Javed Ahmed undertook separate visits
to major institutional shareholders following their respective
appointments during the year.
The Investor Relations department provides the Board with
a detailed report on any meetings with major institutional
shareholders at each scheduled Board meeting. 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 the
full-year and half-year 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.
Annual General Meeting (AGM)
The 2010 AGM will be held at the Queen Elizabeth II
Conference Centre in London, on Thursday 22 July 2010 at
11.00 am. Full details are set out in the Notice of Meeting.
Shareholders who attend the AGM have the opportunity
to put questions to the Board on matters relating to the
Group’s operations and performance. Approximately
200 shareholders attended the 2009 AGM. 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.
Share capital
At 31 March 2010, the Company had nominal issued ordinary
and preference share capital of £117 million comprising
£115 million in ordinary shares, including £0.1 million in
treasury shares, and £2 million in preference shares.
To satisfy obligations under employee share plans, the
Company issued 48,287 ordinary shares during the year and
reissued 816,012 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 2010 to
26 May 2010.
Further information about share capital is on page 91.
Information about options granted under the Company’s
employee share schemes is on pages 93 and 94.
The Company was given authority at the 2009 AGM to make
market purchases of up to 45,868,000 of its own ordinary
shares. The Company made no such purchases during the
year ended 31 March 2010. This authority will expire at the
2010 AGM and approval will be sought from shareholders for
a similar authority to be given for a further year.
Substantial shareholdings
At 26 May 2010, the Company had been notified under Rule 5
of the Disclosure and Transparency Rules of the Financial
Services Authority of the following holdings of voting rights
in its shares:
INVESCO plc
Harbinger Capital Partners LLC
AXA S.A.
Lehman Brothers International
(Europe)
Legal & General Group plc
Barclays Global Investors
No. of shares
73,462,349
42,313,670
22,890,148
18,122,510
18,062,288
17,568,133
% held
15.97
9.21
4.98
3.95
3.93
3.59
Articles of Association
The Articles of Association set out the internal regulation
of the Company and cover such matters as the rights of
shareholders, the appointment or removal of directors and
the conduct of the Board and general meetings. Copies are
available on request and are displayed on the Company’s
website at www.tateandlyle.com.
In accordance with the Articles of Association, directors can
be appointed or removed by the Board or by shareholders in
general meeting. Amendments to the Articles of Association
have to be approved by at least 75% of those voting in
person or by proxy at a general meeting of the Company.
Subject to UK company law and the Articles of Association,
the directors may exercise all the powers of the Company,
and may delegate authorities to committees, and day-to-day
management and decision making to individual executive
directors. Details of the main Board Committees can be found
on pages 44 to 45.
A special resolution will be put to the 2010 AGM to adopt
new Articles of Association reflecting changes arising from
the implementation of the final sections of the Companies Act
2006 and the Shareholders’ Rights Directive.
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.
Tate & Lyle Annual Report 2010 43
Tate & Lyle Annual Report 2010 43
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Governance Corporate governance
The Committees are supported by the services of the
Company Secretariat and, if 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 at the date of this report are shown
on page 39.
The Committee meets as required, usually before each Board
meeting, and has a formal calendar of items for consideration.
The Committee determines the remuneration packages of
each executive director and the other members of the Group
Executive Committee. These include 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
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.
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 at the date of this report
are shown on page 39. Sir Peter Gershon succeeded
Sir David Lees as Chairman of the Committee on
23 July 2009. Iain Ferguson ceased to be a member of the
Committee on 1 October 2009 and Javed Ahmed joined
the Committee on the same day. Douglas Hurt and
William Camp joined the Committee on 10 March and
1 May 2010 respectively.
The main responsibilities of the Committee are to:
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review the size and composition of the Board,
including succession planning, and the leadership
needs of the Group generally;
recommend 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.
In May 2009, and as disclosed in the Annual Report 2009,
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 and Javed Ahmed joined the Board on 1 October 2009.
The Nominations Committee is responsible for succession
planning for non-executive directors to ensure that
directors are recruited to fill actual or forthcoming vacancies.
44 Tate & Lyle Annual Report 2010
When recruiting non-executive directors the Committee
considers the particular skills, knowledge and experience
that would most benefit the Board and engages external
recruitment consultants. During the year, external recruitment
consultants were engaged to assist in the search for two
additional non-executive directors. Following a detailed
selection process the Committee recommended that Douglas
Hurt and William Camp join the Board. The recommendations
were approved by the Board and they joined the Board on
10 March and 1 May 2010 respectively.
Audit Committee
The Committee comprises solely independent non-executive
directors.
The members of the Committee at the date of this report
are shown on page 39. Sir Peter Gershon ceased to be a
member of the Committee on 23 July 2009. Douglas Hurt
joined the Committee on 10 March 2010.
All the Committee members have extensive management
experience in large international organisations. The Chairman,
Liz Airey, is an investment banker and former finance director
of Monument Oil and Gas plc, and Douglas Hurt is Finance
Director at IMI plc.
The Committee meets at least five 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:
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oversee the Group’s financial reporting process and
monitor the integrity of the full-year 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 as 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-related
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:
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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;
reviewing the policy on auditor independence and the
basis of the provision of non-audit-related 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, with the assistance of Independent Audit
Limited. The review concluded that the internal audit
function had greatly strengthened over the last few years
and was making a significant contribution to the internal
governance of the Group. Further development will
be necessary to ensure that the internal audit function
continues to meet the Group’s needs which will evolve with
the implementation of the Group’s strategy. In addition,
some opportunities to improve processes and practices
were identified and are being implemented;
again with the assistance of Independent Audit Limited,
undertaking a review of the effectiveness of the external
auditors, the outcome of which is reported below;
reviewing the Committee’s terms of reference and its
effectiveness. The review in 2010 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 statements;
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-related services provided by the
external auditors. During the year, the Committee reviewed the
processes that the external auditors 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. It 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.
The Committee receives a regular report setting out the non-
audit-related 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 8 on page 74. 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.
In light of the long-standing nature of Pricewaterhouse-
Coopers LLP’s tenure as the external auditors of the Group’s
accounts, the Audit Committee appointed Independent
Audit Limited to undertake a review of the external auditors
during the year. The review concluded that Pricewaterhouse-
Coopers LLP provided a good service to Tate & Lyle and
advised that there was no need to undertake a tender for the
audit. The Committee concurred with these conclusions. The
Committee also reviewed the fees paid to other audit firms for
services during the year ended 31 March 2010 and noted that
there were no contractual obligations that would restrict the
Committee’s choice of external auditors should it decide that
any change was appropriate. The Committee recommended to
the Board that PricewaterhouseCoopers LLP continue to act
as auditors to the Group. PricewaterhouseCoopers LLP have
indicated their willingness to continue in office, and a resolution
that they be re-appointed will be proposed at the AGM.
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, prioritise
and mitigate risk. The process involves an ongoing programme
of workshops, facilitated by the risk management function, held
around the Group. The risks identified are collated and reported
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 are 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.
Tate & Lyle Annual Report 2010 45
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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 to and
opportunities for 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 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, and 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 the 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, 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 a 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.
Governance Corporate governance
During the year ended 31 March 2010, the risk assessment
process was reviewed and changes were made to improve the
process across the Group. The enhanced process continues
to follow 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 mis-statement. A series of risk
assessments was carried out, culminating 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 then
reviewed by the Board.
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.
Executive management is also responsible for establishing
and maintaining adequate internal control and risk
management systems relating to the financial reporting
process. The systems and controls in place include policies
and procedures that relate to the maintenance of records
that, in reasonable detail, accurately and fairly reflect
transactions and dispositions of assets; provide reasonable
assurance that transactions are recorded as necessary to
permit the preparation of financial statements in accordance
with International Financial Reporting Standards; require
representatives of the businesses to certify that their reported
information gives a true and fair view of the state of affairs
of the business and its results for the period; and review and
reconcile reported data.
All the material joint ventures to which the Group is party
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 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:
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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 ethics.
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;
46 Tate & Lyle Annual Report 2010
Directors’ remuneration report
This report has been prepared in accordance with the
requirements of the Companies Act 2006 (the Act) and
Schedule 8 of the Large and Medium Sized Companies
and Groups (Accounts and Reports) Regulations 2008 (the
Regulations), the Listing Rules of the UK Listing Authority
and the Combined Code. PricewaterhouseCoopers LLP
have audited such content as required by the Act (the tabular
information on pages 53 to 56). A resolution to approve this
report will be proposed at the AGM on 22 July 2010.
Remuneration Committee
The Remuneration 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
Liz Airey
William Camp (from 1 May 2010)
Richard Delbridge
Sir Peter Gershon
Douglas Hurt (from 10 March 2010)
Sir David Lees (until 23 July 2009)
Robert Walker
Dr Barry Zoumas
The Chief Executive, Group Human Resources Director, Group
Compensation Manager and Company Secretary, who acts
as Secretary to the Committee, are normally invited to attend
meetings, although none are present or involved when his or
her own remuneration is discussed.
The Committee met eight times during the year. Individual
members’ attendance records at meetings during the year are
given in the table on page 42.
Responsibilities
The Committee’s terms of reference, which can be found on
the Company’s website at www.tateandlyle.com, are reviewed
annually to ensure they reflect best practice. The Committee’s
responsibilities include:
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setting the remuneration of the executive directors, the
Company Chairman and other senior management in
accordance with a policy determined by the Committee
and agreed with the Board;
reviewing the competitiveness of executive remuneration
using data from independent consultants;
reviewing the operation of the long-term incentive plans
and annual bonus plan, and determining the participants
and overall grant levels; and
agreeing performance targets for the annual bonus plan
and long-term incentive plan and reviewing performance
against these targets.
The Committee reviews its work and effectiveness each year
and reports any recommendations to the Board. The 2010
review concluded that the Committee had fulfilled its role
and responsibilities appropriately.
Consultants
The Committee receives advice from independent
remuneration consultants. During the year, Hewitt New
Bridge Street (Hewitt) (part of Hewitt Associates Ltd) acted
as principal adviser to the Committee.
In addition to market remuneration data provided by
Hewitt and by Towers Watson, the Committee receives total
shareholder return performance data and ranking information
for the Performance Share Plan and Deferred Bonus Share
Plan and general market data from Kepler Associates.
Linklaters provides general legal advice on remuneration
matters. Towers Watson assists with pension accounting
for the Company and acts as actuaries to the UK-based
Tate & Lyle Group Pension Scheme. Hewitt, Towers Watson
and Kepler Associates provided no other services to the
Group. Linklaters gave legal advice to the Group on a
range of matters.
Review of executive remuneration
In light of the Company’s evolving strategic objectives,
explained in the Chief Executive’s review, the Committee
undertook a comprehensive review of executive remuneration
arrangements, with input from its external advisers. The
results of this review, and proposed changes to remuneration
for the forthcoming year are explained in the summary of
executive remuneration review on page 52.
Remuneration strategy and policy
Strategy
The Company’s remuneration strategy is to provide
remuneration packages that attract, retain and motivate
high-calibre individuals such that they will deliver superior
operational performance and outstanding financial results,
in a manner that aligns with the Group’s core values and
Business Code of Conduct to foster sustainable, profitable
growth. To do so, packages must:
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be aligned to shareholders’ interests;
be competitive;
encourage a focus on long-term, sustained performance;
be fair and transparent; and
be consistent across the Group.
Policy
To achieve the strategy, the policy for the remuneration of
executive directors and senior executives includes:
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setting base salary around the market median;
rewarding stretching, superior performance with upper
quartile levels of reward;
providing an appropriate balance between reward in the
short and the long term, and between reward that is fixed
and variable; and
providing a competitive, balanced package of benefits.
The Committee also takes into account the general pay and
employment conditions of other employees of the Company
when determining executive directors’ remuneration for the
relevant financial year. This includes taking account of the
levels of base salary increase for employees below executive
level when reviewing executive base salaries, and ensuring
that the same principles apply in setting performance
targets for executive’s incentives as for other employees
of the Group.
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Tate & Lyle Annual Report 2010 47
Governance Directors’ remuneration report
Remuneration arrangements during the year
ended 31 March 2010 for executive directors
Balance between fixed and variable components
The relative proportions of the Chief Executive’s and the
Group Finance Director’s remuneration, when valued at both
target and stretch performance levels, including base salary,
annual bonus and the award value of the long-term incentives,
are shown in the charts below.
Target performance
Target performance
Chief Executive
Chief Executive
Group Finance Director
Group Finance Director
Stretch performance
Stretch performance
Chief Executive
Chief Executive
Group Finance Director
Group Finance Director
Non-performance-
related pay 40%
Non-performance-
related pay 40%
Non-performance-
related pay 57%
Non-performance-
related pay 57%
Non-performance-
related pay 18%
Non-performance-
related pay 18%
Non-performance-
related pay 31%
Non-performance-
related pay 31%
Performance-related pay 60%
Performance-related pay 60%
Performance-related pay 43%
Performance-related pay 43%
Performance-related pay 82%
Performance-related pay 82%
Performance-related pay 69%
Performance-related pay 69%
Remuneration components
The current remuneration package for executive directors consists of base salary, annual bonus, other benefits, long-term
incentives, and retirement benefits as follows:
Component
Objective
Principles
Base salary
Reflects market value of the individual,
his or her skills and experience
and performance.
n Reviewed annually with changes usually taking effect on 1 April.
n Benchmarked against relevant comparators, primarily the 50th
to 130th ranked companies of the FTSE.
n Base salary reviews take into account pay increase levels for
employees below the executive level.
n Positioned around the median of the relevant market, taking
account of personal performance.
Annual bonus
Incentivises year-on-year delivery
of short-term performance objectives.
n Targets set at the start of each financial year by reference to
the annual operating plan, performance in previous years, market
Other benefits
Provide a competitive, cost-effective
benefits package.
Long-term
incentives
Incentivise long-term value creation.
Assists retention of key individuals.
Aligns executives’ and shareholders’
interests.
Pension
Provides competitive post-retirement
benefits.
expectations and the prevailing economic climate.
n Level of payout is determined by reference to the performance
of the Group, primarily against financial objectives.
n Designed to reflect local market practice.
n Discretionary annual award of shares, subject to performance
conditions and remaining in service.
n Delivered through a company pension plan and/or cash
allowances, reflecting local market practice.
n For executive directors, only base salary is pensionable.
48 Tate & Lyle Annual Report 2010
Base salary, benefits and other allowances
Since the Chief Executive joined the Group on
1 October 2009, the Committee agreed that an increase at
the normal review date of 1 April would not be appropriate in
2010. The Group Finance Director’s base salary was increased
by 2%, effective 1 April 2010 (2009 – 0%). This was in line
with levels of base salary increase for other employees.
Executive directors’ base salaries are shown in the
table below.
Javed Ahmed
Tim Lodge
As at 1 April 2010
£
As at 1 April 2009 or
date of appointment
if later
£
675 000
382 500
675 000
375 000
Executive directors also receive other benefits comprising
principally a company car or a cash allowance in lieu; health
insurance; and premiums paid on life assurance policies.
Annual bonus scheme
Bonus for the year ended 31 March 2010
Two performance criteria were applied to the bonus for the
year ended 31 March 2010 as follows:
Performance criteria
Proportion of annual incentive
Group profit before tax, exceptional
items and amortisation (PBTEA)
Operating cash flow metric (cash flow)
75%
25%
The performance target criteria consisted of threshold and
target awards payable on the achievement of predetermined
performance levels, and a maximum award payable for
the achievement of a performance level in excess of target
performance. There was a minimum requirement that before
any bonus could be payable under the cash flow metric,
threshold PBTEA had to be achieved. For bonus purposes,
PBTEA and cash flow were based on the performance of the
Group’s continuing businesses.
The executive directors’ award potential, as a percentage
of base salary, for the achievement of different levels of
performance was as follows:
Javed Ahmed
Tim Lodge
Threshold
10%
10%
% of base salary
Target
75%
50%
Maximum
150%
100%
The financial results for the year ended 31 March 2010 are
explained in detail in the business review. The Group delivered
an outstanding performance in operating cash flow, with
a £417 million (34%) reduction in net debt, and a net debt
to EBITDA ratio of 1.8 times (2009 – 2.4 times). Free cash
flow of £540 million (2009 – £154 million) was generated.
Performance substantially exceeded the ‘stretch’ level
under this component of bonus. Group PBTEA, measured
on a constant exchange rate basis, was 97% of the
‘stretch’ performance level after adjustments. The
Remuneration Committee awarded Tim Lodge a total
bonus of £352,621 (94% of base salary) taking account
of performance on the two metrics, and his outstanding
personal contribution to the results for the year ending
31 March 2010 and to the development of the new Group
strategy for the forthcoming year.
As reported in the Annual Report 2009, under the terms
of his recruitment package, Javed Ahmed was, subject to
certain conditions, entitled to a compensatory cash payment
of 75% of base salary, to recognise the potential annual
bonus payment foregone from his former employer. The
Remuneration Committee, with input from the Nominations
Committee, deemed that the conditions had been met and
accordingly a payment of £506,250 (75% of base salary)
was awarded to him. In accordance with the terms of his
appointment, Javed Ahmed’s entitlement to a bonus under
the Tate & Lyle annual bonus scheme for the year ended
31 March 2010 was reduced by the amount of this
compensatory cash payment and was such that he did
not receive any bonus payment.
Long-term incentive arrangements
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 2010, the Company operated
one LTIP, the Tate & Lyle 2003 Performance Share Plan (PSP).
In addition, there are some outstanding awards that were
made under earlier plans that are no longer in operation or
have been suspended.
Performance Share Plan (PSP)
Maximum award level
Under the PSP, executive directors and other senior
executives are awarded, at the discretion of the Committee,
a conditional right to receive a number of Tate & Lyle
ordinary shares in value up to a maximum of 175% of
base salary per annum.
Javed Ahmed received special long-term incentive awards
to facilitate his recruitment, detailed in the Annual Report
2009, and also on page 54. Although these were not granted
under the PSP, they have similar terms to PSP awards.
Javed Ahmed did not receive a grant in 2009 under the
PSP itself.
Performance conditions – 2009 awards
The number of shares 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. For the 2009 awards, the performance conditions
comprised two elements:
a) Total shareholder return (TSR) – 50% of total award
Performance is measured by comparing the TSR (share
price growth plus reinvested dividends) of Tate & Lyle
relative to a comparator group comprising the companies
occupying positions 50 to 130 of the FTSE rankings at
the beginning of the relevant performance period of three
years. The Committee considered the comparator group to
be appropriate given the Company’s position in the FTSE
Index. The Committee chose the relative TSR metric as an
objective measure of the value created for shareholders. The
Committee reviews the performance measurement metrics
and the continued validity of the comparator group annually.
All share prices for the purpose of the TSR calculation are
based on a three-month average.
b) Adjusted diluted earnings per share (EPS) metric –
50% of total award
Performance is measured by comparing the compound
annual growth rate (CAGR) of the Company’s adjusted diluted
EPS from total operations over the three-year performance
period against predetermined targets. The Committee
considered that the use of adjusted diluted EPS alongside
relative TSR created a balance between two commonly used
internal and external metrics, both being relevant measures
aligned to shareholder value.
Tate & Lyle Annual Report 2010 49
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Governance Directors’ remuneration report
Shares awarded under the PSP in 2009 vest in accordance
with the following schedule:
Percentage of
award vesting
0%
25%
CAGR of adjusted
diluted EPS during the
performance period
(50% of award)
Relative TSR ranking
percentile
(50% of award)
Below 5%
Below median
5%
At median
On a straight-line Between 5%
basis between
25% and 100%
and 15%
100%
15% or more
Between median
and upper quartile
At upper quartile
or above
There is no retesting of the performance conditions.
Before any shares become eligible for release, the Committee
must also be satisfied that this is justified by the underlying
financial performance of the Group over the measurement
period. Subject to the Committee’s approval, the conditional
award is then converted into an option to acquire the
appropriate number of shares.
Suspended schemes
Deferred Bonus Share Plan (DBSP)
Awards were made under the DBSP from 2005 to 2008,
and it was suspended in 2009. 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 received 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). The performance condition attached to past awards
is the same as that attached to PSP awards made in the
same year.
Awards made in 2007 under the PSP and DBSP
The awards made under the PSP and DBSP in 2007 were
subject to a performance condition based on the Company’s
TSR over the three-year performance period from 1 April 2007
to 31 March 2010, relative to a comparator group of
companies (being those occupying positions 50 to 130
in the FTSE rankings at the start of the measurement period).
The Company’s TSR ranked Tate & Lyle 49th in the comparator
group of companies. This was below the minimum requirement
of median performance, and accordingly, awards made
under the PSP did not vest and lapsed. DBSP participants
will receive one matching share for every three lodged shares
subject to the service requirements in the plan rules.
Change of control and voting
Some of the Company’s employee share plans include
restrictions on transferring 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 of 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.
Sharesave Scheme
The 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
50 Tate & Lyle Annual Report 2010
all-employee scheme, and the value of individual grants is
capped. 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.
Dilution
To satisfy options granted under the 1992 Executive Share
Option Scheme (closed in July 2000) and the Sharesave
Scheme, the Company issues new shares. To satisfy
outstanding awards under the PSP and DBSP matching
shares, the Company uses either treasury shares or shares
that have been purchased by the Trustees of the Tate & Lyle
Employee Benefit Trust. The Company will use shares that
have been purchased by the Employee Benefit Trust to
satisfy awards made to Javed Ahmed.
In the ten-year period to 31 March 2010, awards made under
the executive schemes represented 1.6% of the Company’s
issued ordinary share capital (2009 – 1.8%), leaving available
dilution headroom of 3.4% (2009 – 3.2%). Awards made
under all share schemes represented 3.0% of the Company’s
issued ordinary share capital (2009 – 3.1%) leaving available
dilution headroom of 7.0% (2009 – 6.9%).
Executive shareholding policy
The shareholding requirement for Javed Ahmed is four
times base salary. Under the policy applying during the year
ended 31 March 2010 the shareholding requirement for other
executive directors was one times base salary. Executive
directors who have not met their target shareholding are
expected to retain a significant proportion of shares acquired
through LTIPs towards meeting their target.
Pensions
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. The Group Scheme will close to
future final salary pension accrual on 5 April 2011 and be
replaced by a defined contribution pension plan.
Current executive directors
Javed Ahmed 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. He is paid a cash allowance calculated
as 35% of base salary, from which he can make his own
retirement savings arrangements.
Tim Lodge is a member of the Group Scheme and currently
accrues pension at a rate of approximately 1/38th of
pensionable earnings (basic salary only) for each year of
service, subject to an employee contribution of 3% of
pensionable salary. 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%.
Former executive directors
Iain Ferguson, the former Chief Executive, left the Company
on 31 December 2009. 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. He was provided
with life assurance cover and also participated in the Group
Income Protection Scheme.
Details of the accrued pension benefits for those executive
directors who participate in the Group Scheme are given
on page 55. Details of amounts paid in lieu of pensions are
included in the table on page 53, under pension allowance.
Executive directors’ service contracts
Policy
Contracts for executive directors are normally terminable by
the Company on a maximum of one year’s notice, 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.
Current executive directors
Both 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. Where the Company
seeks termination of the contract (other than where summary
dismissal is appropriate), 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. In the case of Tim Lodge, the
Company may, as a consequence, make a reduced payment,
or require phased payment, so as to ensure that he fulfils his
obligation to mitigate his losses.
The details of the executive directors’ service contracts as at
31 March 2010 are given in the table below.
Effective date
of contract
Unexpired
term
Notice
period
Javed Ahmed,
Chief Executive
Tim Lodge,
Group Finance
Director
1 October
2009
4 December
2008
52 weeks
52 weeks
52 weeks
52 weeks
Former executive directors
Iain Ferguson retired as an executive director and stepped
down from the Board on 1 October 2009, but remained an
employee until 31 December 2009 to facilitate an orderly
transition to the new Chief Executive. Whilst he remained an
employee, his salary continued to be paid and he continued
to receive his cash allowance in lieu of pension and benefits.
He was also eligible to participate in the annual bonus
scheme in respect of this service up to 31 December 2009,
subject to performance conditions. For the period between
1 January 2010 and the end of his notice period 31 May 2010
Iain Ferguson received five months’ pay in lieu of notice
including base salary, cash allowance in lieu of pension,
and benefits. Iain Ferguson’s existing PSP and DBSP share
awards were reduced pro rata, to the end of his notice period,
and continue to be subject to performance conditions.
Chairman’s fees
Sir Peter Gershon became Chairman on 23 July 2009 and
received fees of £275,000 per annum (pro rata) for the year
ended 31 March 2010. The Committee reviews the Chairman’s
fees each year and the Chairman does not participate in
discussions or decisions relating to his own remuneration.
Following the most recent review of fees, the Remuneration
Committee agreed that an increase would not be required
on 1 April 2010 and the Chairman’s annual fees have been
maintained at £275,000 for the year ending 31 March 2011.
Non-executive directors’ fees
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. 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
occurred on 1 April 2010. The fees are shown in the
table below.
Basic fees (per annum)
As at 1 April 2010 As at 1 April 2009
£
£
Non-executive director
Senior Independent Director
49 200
55 850
48 000
54 500
Supplements (per annum)
As at 1 April 2010 As at 1 April 2009
£
£
Chairman of Audit Committee
Chairman of Remuneration
Committee
Chairman of Research
Advisory Group
15 375
15 000
10 250
10 000
21 525
21 000
Executive directors’ external appointments
The Board believes that the Company benefits from executive
directors holding external non-executive directorships. Such
appointments are subject to approval by the Board and are
normally restricted to one position for each executive director.
Fees may be retained by the executive director concerned.
Neither of the executive directors holds a non-executive
directorship currently.
Total shareholder return performance
The graph below, as required under the Regulations, illustrates
the cumulative TSR performance 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 broad equity market index with constituents
comparable in size to Tate & Lyle. The graph shows the TSR
for the FTSE 100 Index and Tate & Lyle in the five years from
31 March 2005.
Tate & Lyle’s five-year cumulative total shareholder return
Value of £100 invested on 31 March 2005
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Tate & Lyle
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120
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80
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March 05 March 06 March 07 March 08 March 09 March 10
Tate & Lyle Annual Report 2010 51
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Governance Directors’ remuneration report
Summary of executive remuneration review
The Committee undertook a comprehensive review of
executive remuneration during the year ended 31 March 2010,
and is planning to implement a number of changes to
remuneration policy for the year ending 31 March 2011,
intended to provide more emphasis on driving Company
performance and delivering value for shareholders.
The remuneration arrangements for Javed Ahmed (details
of which were disclosed in the Annual Report 2009 and in
this report) were excluded from this review having been
agreed on his appointment in 2009. His arrangements will
remain unchanged.
Following consultation with major shareholders and
shareholder bodies, a number of changes to the existing
arrangements for Tim Lodge and other members of the
Group Executive Committee are proposed.
These changes are designed to support the Company’s
strategy, with a greater emphasis on performance-related
pay, alignment to shareholder value growth, sustained
performance and management of risk. The changes also
reflect Tate & Lyle’s increasingly international business profile
and management team, with more than three-quarters of
revenues generated outside the UK.
Annual bonus for the year ending 31 March 2011
1. Performance metrics
There will be a new approach to performance metrics for
annual bonus, designed to reflect the key value drivers
for the business. There will be three performance metrics:
sales growth, profitability and cash conversion cycle, to
reflect management’s ability to grow the business, generate
underlying profit and convert profit into cash. Sales growth
will be measured by a contribution metric (net sales less raw
material cost), profit will be based on the current PBTEA
metric, and cash conversion cycle will be based on net
working capital. The greatest emphasis will be on profit;
before any bonus becomes payable under any of the criteria,
a minimum level of profit will need to be achieved. To achieve
the maximum bonus payout, performance against all three
metrics will need to be outstanding. Consistent with prior
years, all numbers will be restated on the basis of exchange
rates used for the Group’s annual operating plan.
As the financial targets are commercially sensitive they
will not be disclosed in advance. However, following
shareholder consultation, the Committee has determined
that the directors’ remuneration report for the year ending
31 March 2011 will include the financial targets for each
metric, the extent to which they were achieved and the impact
of this on the bonus paid.
2. Target and maximum bonus payable
The target level of annual bonus will remain unchanged
at 50% of base salary. However, the maximum bonus will
be set at 175% of base salary, for achieving outstanding
performance across all three metrics.
3. Delivery in shares
The portion of any annual bonus above 100% of base
salary will be delivered in Tate & Lyle PLC shares, which will
be deferred for a further two years. These shares will not
benefit from any matching. This will contribute to executives’
increased shareholding requirements (see below) and provide
a focus on sustained shareholder value growth and risk
management.
The balance of the annual bonus will be delivered in
non-deferred cash.
4. Claw-back
The Committee will have the authority to claw back up to
100% of annual bonus, in certain situations such as employee
misconduct or mis-statement of financial results.
52 Tate & Lyle Annual Report 2010
Long-term incentive
1. Award size and shareholding requirement
The PSP rules currently permit a maximum individual award of
1.75 times base salary. Following the executive remuneration
review, the Committee concluded it should seek shareholder
approval for an increase in the award limit, which is detailed
in the Notice of AGM. The proposed larger award size will
also be subject to a new approach to performance conditions
(see below). It is also accompanied by a significant increase
in the executive shareholding requirement, also detailed in
the Notice. The percentage of the total award that vests at
threshold performance will also reduce, as a further incentive
to drive higher levels of performance.
The USA is the largest operating base and source of sales
and profits for the company. A higher LTI award limit will
enable the Committee to make awards that take better
account of market practice amongst companies operating
in the North American market.
Accordingly, shareholder approval of this amendment to the
rules of the PSP is being sought at the forthcoming AGM.
2. Performance conditions
The Committee’s view is that performance conditions for the
PSP should give management a clear line of sight between
their performance and reward, as this will maximize the
motivational impact of the Plan. As Tate & Lyle has few,
if any, directly comparable peers, relative TSR does not
provide this line of sight. The broad peer group that has
been used for previous PSP awards includes companies
across many different sectors, and therefore does not give
a like-for-like comparison.
It is therefore proposed to apply financial performance
conditions to the award. These will be metrics that are
important drivers of shareholder value. The Committee is
aware that financial performance conditions are sometimes
criticised for being susceptible to manipulation. The
Committee will therefore make any necessary adjustments
to the performance outcomes to ensure that the results are a
true reflection of the actual performance achieved.
For the awards in 2010 the proposed metrics are:
(a) Adjusted diluted earnings per share (EPS) metric:
50% of total award.
Performance is measured by comparing the compound
annual growth rate (CAGR) of the Company’s adjusted
diluted EPS from continuing operations over the three-year
performance period against the predetermined targets.
(b) Adjusted return on capital employed (ROCE):
50% of total award.
Tate & Lyle has extensive capital investment in its plant and
equipment, and from previous acquisitions. Ensuring this
generates a healthy level of return is an important objective
and accordingly the ROCE metric has been introduced.
Performance is measured by the adjusted ROCE percentage
over the three-year performance period against the
predetermined targets.
Details of the performance targets and vesting scale for the
2010 awards to be made under the PSP are provided in
the Notice of AGM, accompanying the resolution seeking
shareholder approval for a change to the award limit.
Directors’ emoluments
The following table shows the directors’ emoluments for the year ended 31 March 2010.
Chairman
Sir Peter Gershon2
Executive directors
Javed Ahmed3
Tim Lodge
Non–executive directors
Liz Airey
Richard Delbridge
Evert Henkes
Douglas Hurt4
Robert Walker
Dr Barry Zoumas
Former directors
Sir David Lees5
Iain Ferguson6
Directors who retired before
31 March 20097
Total
Salary
and fees
£000
Pension
allowances
£000
Benefits
and other
allowances1
£000
Compensation
for loss
of office
£000
Annual
bonus
£000
Total
year to
31 March
2010
£000
Total
year to
31 March
2009
£000
221
338
375
63
55
58
3
48
69
106
363
–
1 699
–
118
–
–
–
–
–
–
–
–
145
–
263
10
15
14
–
–
–
–
–
–
7
9
–
–
506
353
–
–
–
–
–
–
–
312
–
–
–
–
–
–
–
–
–
–
231
977
742
63
55
58
3
48
69
–
437
–
113
1 266
–
55
1 171
437
3 625
17
–
124
58
59
58
–
48
69
357
1 044
2 321
4 155
1
2
3
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).
Sir Peter Gershon was appointed Chairman on 23 July 2009. The fees he received during the year include the fees he received in his capacity of non-executive director
and Chairman Elect during the period 1 April to 22 July 2009.
Javed Ahmed was appointed a director with effect from 1 October 2009. The amount shown under annual bonus represents a compensatory cash payment to recognise
the value of bonus payments foregone with his former employer, equal to 75% of his base salary, as disclosed in the Annual Report 2009. Javed Ahmed did not receive
any additional bonus under the Tate & Lyle annual bonus scheme as his bonus award was more than offset by this compensatory cash payment.
4 Douglas Hurt was appointed to the Board on 10 March 2010.
5 Sir David Lees ceased to be a director on 23 July 2009.
6
Iain Ferguson ceased to be a director on 1 October 2009 but remained an employee until 31 December 2009 to assist with the orderly transition to the new
Chief Executive. For the period between 1 October and 31 December 2009 in which Iain Ferguson did not serve as a director but remained an employee he was paid
base salary of £181,500, bonus of £156,149, a pension allowance of £72,600 and a car allowance of £3,750. These amounts are not included in the table above.
Compensation for loss of office represents payments in lieu of notice in accordance with his service contract, for the period between 1 January and 31 May 2010 which
was the remainder of his notice period. This included payments in lieu of base salary of £302,500, pension allowance of £121,000, car allowance of £6,250 and an
estimate for DBSP shares foregone of £7,000.
Stuart Strathdee, formerly a director until he stepped down from the Board at the AGM on 23 July 2008, remained an employee of the Company, working on strategic
development, until 31 July 2009. For the four months served to 31 July 2009, he was paid a base salary of £114,333, a bonus of £98,364 and received non-cash benefits
of £3,850. These amounts are not included in the table above.
7
Performance Share Plan (PSP) – directors’ interests
Conditional rights to receive Tate & Lyle PLC ordinary shares under the PSP held by directors at 1 April 2009 (or date of
appointment if later) and 31 March 2010 (or date of cessation if earlier), together with awards made during the year,
were as follows:
Conditional awards
held at 1 April 2009
(or date of
appointment if later)1
Conditional
Deferred
Conditional
awards
made
during
the year 2
Conditional
awards
released/ Conditional
awards
exercised
during
lapsed
in the year 4
the year 3
Conditional
awards
deferred
during
Conditional awards held at
31 March 2010
(or date of cessation if earlier)
the year Conditional
Deferred
Eligible
for release
Director
Tim Lodge
Former director
Iain Ferguson5
57 858
–
152 687
–
12 813
–
197 732
762 147
–
–
192 401
183 833
–
385 913
–
–
–
–
1
2
3
For awards made in 2007 and 2008, performance is measured by comparing the Company’s TSR with a comparator group of companies being companies occupying
positions 50 to 130 of the FTSE rankings at the beginning of the relevant performance period. If, at the end of the performance period, Tate & Lyle ranks at the upper
quartile or above in 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. Vested shares from the 2007 and 2008 awards are deferred for a further
12 months, after which they are eligible to be exercised.
The performance period for the awards made during the year is from 1 April 2009 to 31 March 2012. The closing mid-market share price on 8 July 2009 (the date
of the 2009 award) was 294.25p.
The closing mid-market price of a share on 18 June 2004, the date of award was 323.50p and on 29 May 2009, the date of exercise, it was 297.75p while the shares
were released on that day at a share price of 286.00p. The notional aggregate gain made by the director on this exercise of options during the year was £572,874
(2009 – £nil).
4 On 1 April 2009, 100% of the conditional awards made in 2006 lapsed because performance conditions were not met.
5
Iain Ferguson ceased to be a director on 1 October 2009.
Awards made under the PSP are structured as nil-cost options and the performance conditions attaching to the awards made under the PSP in 2009 are described on page 49.
Tate & Lyle Annual Report 2010 53
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Governance Directors’ remuneration report
Deferred Bonus Share Plan (DBSP) – directors’ interests
Conditional rights to receive matching shares over Tate & Lyle PLC ordinary shares under the DBSP held by directors at
1 April 2009 (or date of appointment if later) and 31 March 2010 (or date of cessation if earlier), together with awards made
during the year, were as follows:
Shares
acquired
with net
bonus at
Shares
acquired
with
net bonus
1 April 2009 during the year
Shares
acquired
with net
bonus at
31 March
20101
Maximum
matching
shares
on gross
bonus at
1 April 2009
Maximum
matching
shares
awarded
during
the year
Matching
shares
released
during
the year 2,3,4
Matching
shares
lapsed
during
the year
Maximum
matching
shares
on gross
bonus at
31 March
2010
1,3,5
Director
Tim Lodge
Former director
Iain Ferguson6
2 003
58 038
–
–
2 003
6 790
32 302
196 739
–
–
–
–
6 790
14 540
72 701
109 498
1 Or date of cessation if earlier.
2
The matching shares, representing the minimum one-for-three share match based on continued employment, were released on 11 June 2009 and the closing
mid-market share price on that day was 314.25p and on 28 June 2006, the date of award, it was 589.50p.
3 For awards made in 2006 and 2007, vesting is determined as follows:
n
n
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 increasing to two matching shares for upper quartile performance or above.
4
5
6
The notional aggregate gain made by directors on the exercise of options during the year was £45,692 (2009 – £83,783).
For awards made in 2008, 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 two
matching shares are awarded for upper quartile performance.
Iain Ferguson ceased to be a director on 1 October 2009.
Share awards made to Javed Ahmed
To facilitate the recruitment of Javed Ahmed as Chief Executive in 2009, the Remuneration Committee established special
share incentive arrangements, applying only to him, comprising awards to compensate him for certain long-term incentives
given up by him as a consequence of leaving his former employer, and to provide an appropriate level of performance-based
incentives taking account of the ongoing level of long-term incentive awards that would have applied had he remained with
his previous employer.
Full details of the awards, which are on terms similar to those set out in the PSP, are as follows:
Awards held
on appointment
Conditional
Deferred
Awards
made
during
the year1
Awards
released
during
the year
Awards
lapsed
in the year
Awards
deferred
during
the year Conditional
Deferred
Awards held at
31 March 2010
Eligible
for release
Award name
Compensatory award – A2
Compensatory award – B3
Compensatory award – C4
Long-term incentive
award – A4
Total
–
–
–
–
–
–
–
–
–
419 403
269 616
359 488
659 609
– 1 708 116
–
–
–
–
–
–
–
–
–
–
419 403
–
–
–
269 616
359 488
419 403
–
–
–
659 609
–
419 403 1 288 713
419 403
–
–
–
–
–
1 The closing mid-market share price on 28 October 2009 (the date of the awards) was 444.90p.
2
This award is not subject to performance conditions to compensate him for certain long-term incentives given up by him as a consequence of leaving his former employer
and shares will be delivered on 1 October 2011, being the second anniversary of Javed Ahmed joining the Company. Pending delivery, Javed Ahmed receives a payment
in lieu of dividend on these shares which will be subject to the deduction of tax. In the event of a change of control, the shares will be delivered immediately.
This awards is subject to the same performance condition as that which 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.
This awards is subject to the same performance condition as that which applies to awards made under the PSP in 2009 as disclosed on page 49. Performance will be
measured and the relevant number of shares released after the performance period ends on 31 March 2012.
3
4
The provisions relating to Javed Ahmed, to whom benefits are provided under the special share incentive arrangements
(the Scheme), the maximum number of shares available for release, and the basis for determining the participant’s entitlement
cannot be altered to the advantage of the participant without prior shareholder approval (except for minor amendments to
benefit the administration of the Scheme, to take account of a change in legislation or to obtain or maintain favourable tax,
exchange control, or regulatory treatment for the participant or the Company). The benefits under the special share incentive
arrangements detailed above are non-pensionable. The terms of the Scheme will be available for inspection at the registered
office of the Company from the date that the Notice of AGM is sent until the close of the AGM, and at the place of the AGM for
at least 15 minutes before and during the meeting.
54 Tate & Lyle Annual Report 2010
Share option schemes – directors’ interests
Options over Tate & Lyle PLC ordinary shares each granted under the 2000 Executive Share Option Schemes (ESOS) and
Sharesave Scheme and held by directors as at 1 April 2009 (or date of appointment if later) and 31 March 2010 (or date of
cessation if earlier), and during the year, were as follows:
Directors
Javed Ahmed3
Tim Lodge
Former director
Iain Ferguson4
At 1 April
20091
Exercised
during
the year
Granted
during
the year
At 31 March
2010 2
Exercise
price
(pence)
Earliest
exercise
date
Latest
exercise
date
Notes
–
4 253
245 718
272 307
3 988
522 013
–
–
–
–
–
–
3 720
–
3 720
4 253
418.00
395.00
01.03.15
01.03.11
31.08.15
31.08.11
–
–
–
–
245 718
272 307
3 988
522 013
335.75
325.00
408.00
18.06.06
18.06.07
01.08.13
17.06.13
17.06.14
31.01.14
5
5
6
6
5
1 Or date of appointment if later.
2 Or date of cessation if earlier.
3 Javed Ahmed was appointed a director with effect from 1 October 2009.
4
5 Granted under the Sharesave Scheme. Since it is an all-employee share scheme, no performance conditions are attached.
6
Iain Ferguson ceased to be a director on 1 October 2009.
Granted in 2003 and 2004 under the ESOS. The options were subject to a performance condition 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 ESOS have met their performance condition and are exercisable.
No other options lapsed or were exercised during the year under the ESOS or the Sharesave Scheme, save those disclosed
above. No amount was payable for the grant of any option.
The market price of the Company’s ordinary shares at the close of business on 31 March 2010 was 454.20p, and the range
during the year to 31 March 2010 was 255.25p to 478.10p.
Directors’ pension provision
Tim Lodge is a member of the Group Scheme. The information below sets out the disclosures required for him under both the
Listing Rules of the UK Listing Authority and the Regulations.
Accumulated
total
accrued
pension at
year-end1
£000
Age at
31 March
2010
Directors’
contribu-
tions
during
the year2
£000
Increase
in accrued
pension
during
the year3
£000
Defined benefit schemes
Transfer
value of
increase
in accrued
Increase pension (net
of inflation)
less
directors’
contribu-
tions5
£000
in accrued
pension
during the
year (net of
inflation)4
£000
Transfer
value of
accrued
pension
at start
of the year6
£000
Transfer
value of
accrued
pension at
year-end7
£000
Increase
in transfer
value for
the year
less
directors’
contribu-
tions8
£000
Director
Tim Lodge
45
168
11
63
63
834
1 395
2 268
862
1
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 Tim Lodge had he left service on 31 March 2010.
2 The figure represents the contributions paid over the year.
3
The figure represents the difference between the total accrued pension at 31 March 2010 and the corresponding accrued pension at the beginning of the year.
No allowance is made for inflation.
4 As note 3, except that the figure quoted includes an adjustment for inflation in accordance with the Listing Rules of the Financial Services Authority.
5 The figure shown represents the transfer value of the inflation-adjusted increase in the total accrued pension for the year, net of the director’s own contributions.
6 The figure shown represents the transfer value of the accumulated total accrued pension as at the beginning of the year.
7
The figure shown represents the transfer value of the accumulated total accrued pension at 31 March 2010. During the course of the year the actuarial basis used
by the Group Scheme was amended by the Trustees, generally resulting in an increase in the transfer value amount. The transfer value quoted has been calculated using
the actuarial bases which applied at 31 March 2010. Part of the increase in the transfer value over the year is attributable to the change in actuarial basis. During the year,
discretionary early retirement terms which allowed executives to retire at age 60 on an unreduced pension were removed. The transfer value quoted reflects Tim Lodge’s
normal retirement age of 62. This change had the effect of reducing the transfer value relative to that quoted at 31 March 2009.
The figure shown represents the increase in the transfer value from the beginning of the year to 31 March 2010. The transfer value quoted has been calculated using
the actuarial bases which applied at each reporting date, net of the director’s own contributions.
8
Stuart Strathdee, a member of the Group pension scheme and a former director who stepped down from the Board on 23 July 2008, continued as an employee until he
left the company on 31 July 2009. During the year Stuart Strathdee opted out of the Group pension scheme and his full accrued pension entitlement was paid as a cash
equivalent transfer value to a private pension arrangement.
Tate & Lyle Annual Report 2010 55
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Governance Directors’ remuneration report / Other statutory and governance information
Directors’ interests in Tate & Lyle shares
The table sets out the interests of directors and their
connected persons in Tate & Lyle shares.
All of the interests set out in the table are beneficially held
and no director had interests in any class of shares other than
ordinary shares.
Sir Peter Gershon
Javed Ahmed2
Liz Airey
Richard Delbridge
Evert Henkes
Douglas Hurt3
Tim Lodge
Robert Walker
Dr Barry Zoumas
Ordinary shares
At 31 March
2010
At 1 April
20091
35 255
100 000
16 000
50 000
1 016
–
27 246
10 429
27 000
34 700
–
16 000
50 000
1 000
–
26 818
10 265
27 000
William Camp joined the Board on 1 May 2010. He does not
hold any shares.
There were no changes in directors’ interests in the period
from 1 April 2010 to 26 May 2010.
On behalf of the Board
Evert Henkes
Chairman, Remuneration Committee
26 May 2010
1 Or date of appointment if later.
2 Javed Ahmed was appointed a director with effect from 1 October 2009.
3 Douglas Hurt was appointed a director with effect from 10 March 2010.
Other statutory and governance
information
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.
Results and dividend
A review of the results is on pages 18 to 37. An interim
dividend of 6.8p per ordinary share was paid on 8 January
2010. The directors recommend a final dividend of 16.1p per
ordinary share to be paid on 30 July 2010 to shareholders on
the register on 25 June 2010, subject to approval at the 2010
Annual General Meeting (AGM). A scrip dividend alternative
will also be available. The total dividend for the year is 22.9p
per ordinary share (2009 – 22.9p).
Shareholders’ rights
Holders of ordinary shares have the rights accorded to them
under UK company law, including the rights 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.
Restrictions on holding shares
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.
Change of control
The Company has a committed bank facility of US$1 billion,
which matures in 2012. Under the terms of this facility, the
banks can give notice to Tate & Lyle to prepay outstanding
amounts and cancel the commitments where there is a
56 Tate & Lyle Annual Report 2010
change of control of the Company. The Company is the
guarantor of a £200 million bond issue by its subsidiary,
Tate & Lyle International Finance PLC dated 25 November
2009, which is repayable in 2019. Under the terms of the
bond issue, noteholders have the option to request an early
repayment where there is a change of control of the Company.
All of the Company’s share schemes contain provisions relating
to a change of control. Further information is on page 50.
Essential contracts and other arrangements
In light of the scope and diversity of the Group’s activities, there
are no contracts or arrangements considered to be essential to
the operation of the business or the Group as a whole.
Research and development
The Group spent £26 million (2009 – £28 million) on research
and development during the year.
Donations
Worldwide charitable donations during the year totalled
£714,000 (2009 – £699,000), of which £379,000 (2009 –
£379,000) was donated in the UK. More details of the Group’s
community involvement can be found on pages 36 and 37.
Again this year, in line with the Group’s policy, no political
donations were made in the European Union (EU). Outside
the EU, the Group’s US business made contributions during
the year totalling US$47,000 (£29,000) (2009 – US$48,000;
£27,000) to state and national political party committees and
to the campaign committees of state candidates affiliated to
the major parties. The total includes US$13,000 (£8,000) (2009
– US$23,000; £13,000) contributed by the Tate & Lyle Political
Action Committee (PAC). The PAC is funded entirely by US
employees. Employee contributions are entirely voluntary
and no pressure is placed on US employees to participate.
No funds are provided to the PAC by Tate & Lyle but under
US law, an employee-funded PAC must bear the name of the
employing company.
Payment to suppliers
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 2010. The Group’s creditor
days outstanding at 31 March 2010 were 53 days (2009 – 38
days), based on the ratio of Group trade creditors at the end
of the year to the amounts invoiced during the year by trade
creditors.
Governance Directors’ statement of responsibilities
Directors’ statement of
responsibilities
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). Under company law, the directors must
not approve the financial statements unless they are satisfied
that they 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 these financial statements, the directors are
required to:
n
n
n
n
select suitable accounting policies and then apply
them consistently;
make judgements and accounting estimates that are
reasonable and prudent;
state whether IFRSs as adopted by the EU, and with
regard to the Parent company financial statements
applicable UK Accounting Standards, have been
followed, subject to any material departures disclosed
and explained in the Group and Parent company
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.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain the
transactions of the Company and the Group and disclose with
reasonable accuracy at any time the financial position of the
Company and the Group, and enable them to ensure that the
financial statements and the directors’ remuneration report
comply with the Companies Act 2006 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 38 and 39, confirms that, to the best of his or her
knowledge:
n
n
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 business review contained in the directors’ report
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 or she has taken all the steps that he or she ought to
have taken as a director in order to make himself or herself
aware of any relevant audit information and to establish that
the Company’s auditors are aware of that information.
The directors’ report on pages 1 to 57 of this annual report
was approved by the directors on 26 May 2010.
On behalf of the Board
Robert Gibber
Company Secretary
26 May 2010
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Find out more about Tate & Lyle
at www.tateandlyle.com
Tate & Lyle Annual Report 2010 57
Independent Auditors’ Report to the Members of Tate & Lyle PLC
We have audited the Group financial statements of Tate & Lyle PLC
for the year ended 31 March 2010 which comprise the Consolidated
income statement, the Consolidated statement of comprehensive
income, the Consolidated statement of financial position, Consolidated
statement of cash flows, the Consolidated statement of changes
in shareholders’ equity and the related Notes to the consolidated
financial statements. The financial reporting framework that has been
applied in their preparation is applicable law and International Financial
Reporting Standards (IFRSs) as adopted by the European Union.
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ statement of responsibilities
set out on page 57, the directors are responsible for the preparation of
the Group financial statements and for being satisfied that they
give a true and fair view. Our responsibility is to audit the Group
financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions, has been prepared for and only for
the Company’s members as a body in accordance with Chapter 3 of
Part 16 of the Companies Act 2006 and for no other purpose. We do
not, in giving these opinions, 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.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to
the Group’s circumstances and have been consistently applied and
adequately disclosed; the reasonableness of significant accounting
estimates made by the directors; and the overall presentation of the
financial statements.
Opinion on financial statements
In our opinion the Group financial statements:
n
n
n
give a true and fair view of the state of the Group’s affairs as at
31 March 2010 and of its profit and cash flows for the year
then ended;
have been properly prepared in accordance with IFRSs as
adopted by the European Union; and
have been prepared in accordance with the requirements of the
Companies Act 2006 and Article 4 of the lAS Regulation.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion the information given in the Directors’ report for the
financial year for which the Group financial statements are prepared is
consistent with the Group financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following:
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
n
n
certain disclosures of directors’ remuneration specified by law
are not made; or
we have not received all the information and explanations
we require for our audit.
Under the Listing Rules we are required to review:
n
n
the directors’ statement, set out on page 31, in relation
to going concern; and
the part of the Corporate Governance statement relating to the
Company’s compliance with the nine provisions of the June 2008
Combined Code specified for our review.
Other matter
We have reported separately on the Parent company financial
statements of Tate & Lyle PLC for the year ended 31 March 2010
and on the information in the Directors’ remuneration report that
is described as having been audited.
Paul Cragg (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
26 May 2010
Note: the maintenance and integrity of the Tate & Lyle PLC website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
58 Tate & Lyle Annual Report 2010
Consolidated income statement
Continuing operations
Sales
Operating profit
Finance income
Finance expense
(Loss)/profit before tax
Income tax credit/(expense)
Profit for the year from continuing operations
Loss for the year from discontinued operations
Profit for the year
Profit 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
(Loss)/profit before tax
Add back:
Exceptional items
Amortisation of acquired intangible assets
Adjusted profit before tax, exceptional items and amortisation of acquired intangible assets
The notes on pages 64 to 109 form part of these Group financial statements.
Notes
4, 5
4, 6
10
10
11
12
13
13
14
7
15
Year to 31 March
2010
£m
2009
£m
3 506
3 553
8
5
(74)
(61)
84
23
(4)
19
15
4
19
164
10
(61)
113
(19)
94
(24)
70
65
5
70
pence
pence
3.3
3.3
4.2
4.2
6.8
16.1
22.9
£m
(61)
276
14
229
14.2
14.1
19.5
19.4
6.8
16.1
22.9
£m
113
119
15
247
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Tate & Lyle Annual Report 2010 59
Consolidated statement of comprehensive income
Profit for the year
Other comprehensive income (‘OCI’):
Actuarial losses relating to retirement benefit plans
Net gains/(losses) on cash flow hedges
Valuation (losses)/gains on available-for-sale financial assets
Exchange differences
Deferred tax relating to the above components of OCI
Other comprehensive (expense)/income for the year
Total comprehensive (expense)/income for the year
Attributable to:
Equity holders of the Company
Minority interests
The notes on pages 64 to 109 form part of these Group financial statements.
Notes
30
18
11
Year to 31 March
2010
£m
19
(104)
24
(10)
(10)
25
(75)
(56)
(59)
3
(56)
2009
£m
70
(71)
(34)
24
139
40
98
168
157
11
168
60 Tate & Lyle Annual Report 2010
Consolidated statement of financial position
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
Notes
15
16
17
18
20
29
23
30
22
23
20
33
18
24
24
25
27
28
20
29
30
31
27
28
20
31
TOTAL LIABILITIES
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
The Group financial statements were approved by the Board of Directors on 26 May 2010 and signed on its behalf by:
Javed Ahmed, Tim Lodge
Directors
The notes on pages 64 to 109 form part of these Group financial statements.
2010
£m
340
1 208
7
14
49
143
2
16
1 779
409
424
4
150
504
18
1 509
3 288
115
405
8
220
79
827
27
854
1
1 119
67
59
273
37
1 556
485
52
190
125
26
878
2 434
3 288
31 March
2009
£m
374
1 548
8
11
47
30
5
47
2 070
538
723
6
200
434
28
1 929
3 999
115
404
8
219
241
987
26
1 013
11
1 129
72
78
258
21
1 569
538
77
523
268
11
1 417
2 986
3 999
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Tate & Lyle Annual Report 2010 61
Consolidated statement of cash flows
Cash flows from operating activities
(Loss)/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
Change in working capital
Cash generated from continuing operations
Interest paid
Income tax paid
Cash (used in)/generated from 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 businesses
Purchase of property, plant and equipment
Purchase of other intangible assets
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Purchase 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
Notes
6
7
6
9
10
10
32
12
18
37
37
37
14
2010
£m
(61)
116
276
20
5
(5)
74
291
716
(62)
(38)
(29)
587
–
(3)
–
3
(21)
–
(26)
(79)
(5)
(131)
2
(6)
198
(462)
(3)
(103)
(2)
(376)
Year to 31 March
2009
£m
113
112
119
20
5
(10)
61
31
451
(73)
(17)
140
501
5
(6)
9
17
(1)
(4)
57
(224)
(7)
(154)
3
-
1
(14)
(3)
(104)
(1)
(118)
229
165
40
229
434
Net increase in cash and cash equivalents
34
80
Cash and cash equivalents
Balance at beginning of year
Effect of changes in foreign exchange rates
Net increase in cash and cash equivalents
Balance at end of year
The notes on pages 64 to 109 form part of these Group financial statements.
434
(10)
80
504
33
62 Tate & Lyle Annual Report 2010
Consolidated statement of changes in shareholders’ equity
Balance at 31 March 2008
Other comprehensive income/(expense)
for the year
Profit for the year
Share-based payments charge,
including tax
Proceeds from shares issued
Items transferred to income
on disposal
Dividends paid
Balance at 31 March 2009
Other comprehensive income/(expense)
for the year
Profit for the year
Share-based payments charge,
including tax
Share purchase
Proceeds from shares issued
Dividends paid
Issue of shares for scrip dividend
Balance at 31 March 2010
Share capital
and share
premium
(Note 24)
£m
518
–
–
–
1
–
–
519
–
–
–
–
1
–
–
520
Capital
redemption
reserve
£m
Other
reserves
(Note 25)
£m
Attributable
to the equity
Retained holders of the
Company
earnings
£m
£m
Minority
interests
£m
Total equity
£m
8
–
–
–
–
–
–
8
–
–
–
–
–
–
–
8
91
132
–
–
–
(4)
–
219
1
–
–
–
–
–
–
220
317
(40)
65
1
2
–
(104)
241
(75)
15
6
(6)
1
(105)
2
79
934
16
950
92
65
1
3
(4)
(104)
987
(74)
15
6
(6)
2
(105)
2
827
6
5
–
–
–
(1)
26
(1)
4
–
–
–
(2)
–
27
98
70
1
3
(4)
(105)
1 013
(75)
19
6
(6)
2
(107)
2
854
Retained earnings at 31 March 2010 include a deduction for own shares held by the ESOP trust of £12 million (2009 – £7 million).
All but 0.01 pence per share of the dividends arising on these shares have been waived by the trust.
The notes on pages 64 to 109 form part of these Group financial statements.
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Tate & Lyle Annual Report 2010 63
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 2006, 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 2009 is
derived from the statutory financial statements for that year, except
certain comparative information has been re-presented to conform
with the current year presentation.
In addition in accordance with IAS 1 (revised), the Group has re-
presented the following comparative information to conform with
current year presentation. Finance income and finance expense in
the income statement for the year ended 31 March 2009 have been
re-presented to disclose £17 million of the receipts and payments
under interest rate swaps net, as opposed to gross, so as to reflect
the economic substance of the underlying derivatives. The associated
cash flows have also been re-presented.
The Group has also re-presented certain derivatives held for trading
in the statement of financial position from current assets or liabilities
to non-current assets or liabilities based upon contractual maturity
date. £13 million of assets and £15 million of liabilities have been
re-presented. There is no overall effect on the Group’s profit for the
year, equity or net increase in cash and cash equivalents from these
re-presentations.
There is no overall effect on the Group’s income statement, net
assets or overall cash flows from continuing operations from these
re-presentations.
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 42.
64 Tate & Lyle Annual Report 2010
New IFRS standards and interpretations adopted
From 1 April 2009 the Group has adopted the following new and
amended IFRSs and IFRIC interpretations:
IFRS 8 Operating Segments replaces IAS 14 Segment Reporting.
IFRS 8 takes the management view to determine the operating and
reportable segments, rather than the risks and reward model and the
primary and secondary segments required by IAS 14. The impact of
adopting IFRS 8 is stated in Note 4.
IAS 1 (revised) Presentation of Financial Statements introduces some
terminology changes and changes in presentation and disclosure, in
particular, the introduction of the consolidated statement of changes
in shareholders’ equity as a primary statement. Under IAS 1
(revised), the Group has elected to present two income statements,
a consolidated income statement and a consolidated statement of
comprehensive income.
Amendment to IFRS 7 Financial Instruments: Disclosures introduces
disclosures about financial instruments. The impact of adopting these
amendments is included in Note 19.
The following amendments and interpretations have not had a material
impact on the results or financial position of the Group:
−
−
−
−
IFRIC 13 Customer Loyalty Programmes
IFRIC 15 Agreements for the Construction of Real Estate
IFRIC 16 Hedges of a Net Investment in a Foreign Operation
Amendment to IFRS 2 Share-based Payment – Vesting
conditions and cancellations
− Revised IAS 23 Borrowing Costs
−
Amendment to IAS 27 Consolidated and Separate Financial
Statements – Cost of an investment in a subsidiary, jointly
controlled entity or associate
Amendment to IAS 32 Financial Instruments: Presentation and
IAS 1 Presentation of Financial Statements on Puttable financial
instruments and obligations arising on liquidation
IASB’s 2009 annual improvements project
−
−
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:
−
−
−
−
−
−
−
−
−
IFRIC 17 Distributions of Non-cash Assets to Owners
IFRIC 18 Transfers of Assets from Customers
Amendment to IAS 27 Consolidated and Separate
Financial Statements
Amendment to IAS 39 Financial Instruments: Recognition and
Measurement – Eligible hedged items
Amendment to IAS 32 Financial Instruments: Disclosure and
Presentation – Presentation on classification of rights issues
IFRS 2 Share-based Payment – Group cash-settled share-based
payment transactions
IFRIC 19 Extinguishing financial liabilities with equity instruments
Amendment to IAS 24 Related Party Disclosures
IAS 19 Employee Benefits – Prepayments of a minimum
funding requirement
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 revised IFRS 3 Business Combinations includes the immediate
expensing of acquisition-related costs rather than inclusion in goodwill,
and the recognition and measurement at fair value of contingent
consideration at acquisition date with subsequent changes to income.
The adoption of this revised standard may impact the Group’s profit
for the year and equity.
In November 2009, the IASB issued IFRS 9 Financial Instruments
Classification and Measurement which altered the classification
and measurement of financial instruments. Under the new standard
only two possible classifications arise, rather than the four existing
classifications currently available under IAS 39, and will result in all
financial assets being valued at amortised cost or fair value through
profit and loss. Financial liabilities are excluded from the scope of the
standard. The standard is not mandatory before 2013 year-ends and
is yet to be endorsed by the European Union. The adoption of this
standard may impact the Group’s profit, equity and 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 110 to 117.
(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:
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 statement of financial position 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.
(i) assets and liabilities, including goodwill and fair value adjustments
for each statement of financial position presented, are translated at
the closing rate at the date of that statement of financial position;
(ii) 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
(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
statement of financial position 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.
In the prior year the useful lives of certain assets were adjusted
which resulted in a reduction in the depreciation charge by
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.
Tate & Lyle Annual Report 2010 65
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Notes to the consolidated financial statements
2 Group accounting policies (continued)
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 IAS 38
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.
66 Tate & Lyle Annual Report 2010
(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.
(e) Commodity and treasury hedging instruments
Under IAS 39, 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.
2 Group accounting policies (continued)
(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.
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.
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 statement of financial position 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.
Any gains or losses from settlement or curtailment is recognised in
the income statement when the curtailment or settlement occurs.
Tate & Lyle Annual Report 2010 67
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Notes to the consolidated financial statements
2 Group accounting policies (continued)
Actuarial gains and losses arising from experience adjustments and
changes in actuarial assumptions are charged or credited to equity
immediately through the statement of comprehensive income.
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.
(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, including
tax items, 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. See Note 7 for further details.
68 Tate & Lyle Annual Report 2010
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
Final dividend distributions to the Company’s equity holders are
recognised as a liability in the Group’s financial statements in the
period in which the dividends are approved by the Company’s
shareholders, while interim dividend distributions are recognised in the
period in which the dividends are declared and paid. Where a scrip
alternative is offered and taken, the distribution is effected through an
issue of bonus shares from the share premium account.
Segment reporting
As disclosed in Note 1 and Note 4, the Group has adopted IFRS
8 Operating Segments. IFRS 8 requires that entities adopt the
management approach to identifying reportable operating segments
and reporting the financial performance of those segments. Segment
information is reported for those components for which separate
financial information is available and which management uses
internally for allocating resources and assessing performance.
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.
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.
3 Critical accounting estimates and judgements (continued)
If the cash flow or discount rate assumptions were to change because
of market conditions, the level of impairment could be different and
could result in the impairment of property, plant and equipment being
increased or reversed, in part or in full, at a future date.
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 US. 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 statement of financial
position. 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 65 would increase the liability by £65 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 £19 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 £0.1 million.
Full details of these assumptions, which are based on advice from the
Group’s actuaries, are set out in Note 30.
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 31.
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 asset impairments and
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 29.
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Tate & Lyle Annual Report 2010 69
Notes to the consolidated financial statements
4 Segment information
From 1 April 2009, the Group has adopted IFRS 8 Operating Segments. The Group has identified the Chief Operating Decision Maker ‘CODM’ as
the Board of Directors, as key decisions on assessing performance and allocation of resources are reviewed by the Board or its sub-committees.
Under IFRS 8, there has been no change to the Group’s reportable segments. Central costs, which include head office, treasury and reinsurance
activities, do not meet the operating segment definition under IFRS 8 but has been disclosed as a reportable segment in the results below to be
consistent with internal management reporting.
Discontinued operations comprise international Sugar Trading and Eastern Sugar (see Note 12).
The segment results for the year to 31 March 2010 are as follows:
Continuing operations
Food &
Industrial
Ingredients,
Americas
£m
Food &
Industrial
Ingredients,
Europe
£m
Sugars
£m
Sucralose
£m
Central
costs
£m
1 866
(11)
1 855
178
(245)
(3)
(70)
493
(2)
491
54
(3)
(8)
43
973
–
973
30
22
–
52
187
–
187
67
(55)
(3)
9
–
–
–
(31)
5
–
(26)
Discontinued
Total from
continuing &
operations discontinued
operations
£m
(Note 12)
£m
135
(34)
101
3 654
(47)
3 607
(2)
–
–
(2)
(2)
(4)
296
(276)
(14)
6
(71)
(65)
Total
£m
3 519
(13)
3 506
298
(276)
(14)
8
(69)
(61)
1 183
563
478
178
98
2 500
71
2 571
483
92
182
54
104
915
24
700
32
61
5
217
1
471
31
15
11
2
–
296
22
17
–
16
1
124
2
21
4
–
–
(6)
5
2
–
–
3
1 585
92
116
20
235
5
47
–
–
–
–
–
504
66
4
143
3 288
939
1 309
75
52
59
2 434
1 632
92
116
20
235
5
Sales
Total sales
Inter-segment sales
External sales (note a)
Operating profit/(loss)
Before exceptional items and
amortisation of acquired
intangible assets
Exceptional items (Note 7)
Amortisation of acquired
intangible assets (Note 15)
Operating (loss)/profit
Net finance expense
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/(liabilities)
Capital investments (note b)
Depreciation (Note 16)
Amortisation of intangible
assets (Note 15)
Impairment charges
Share-based payments (Note 9)
(a) One external customer (2009 – none) contributed more than 10% of the Group’s continuing external sales for the year ended 31 March 2010.
The external sales for this customer are £354 million which has been recorded across all the reportable segments, excluding central costs.
(b) Capital investments comprise capital expenditure on property, plant and equipment, intangible assets and investments.
These items include amounts arising on acquisition of businesses.
70 Tate & Lyle Annual Report 2010
4 Segment information (continued)
The segment results for the year to 31 March 2009 are as follows:
Continuing operations
Sales
Total sales
Inter-segment sales
External sales
Operating profit/(loss)
Before exceptional items and
amortisation of acquired
intangible assets
Exceptional items (Note 7)
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)
Food &
Industrial
Ingredients,
Americas
£m
Food &
Industrial
Ingredients,
Europe
£m
Sugars
£m
Sucralose
£m
Central
costs
£m
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)
–
–
–
(18)
–
–
(18)
Discontinued
operations
(Note 12)
£m
Total
£m
Total from
continuing &
discontinued
operations
£m
3 573
(20)
3 553
874
(22)
852
4 447
(42)
4 405
298
(119)
(15)
164
(51)
113
1
(22)
–
(21)
(2)
(23)
299
(141)
(15)
143
(53)
90
1 723
606
562
272
131
3 294
175
3 469
537
76
177
29
116
935
171
1 186
164
55
6
3
1
530
33
14
9
1
–
385
31
16
–
10
1
243
5
25
5
97
–
15
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
(a) Capital investments comprise capital expenditure on property, plant and equipment, intangible assets and investments.
These items include amounts arising on acquisition of businesses.
The United Kingdom is the home country of the parent. Sales (from continuing operations) and non-current assets, other than financial instruments,
deferred tax assets and retirement benefit assets in the principal territories are as follows:
External sales by destination
Year to 31 March
External sales by origin
Year to 31 March
Location of non-current assets
Year to 31 March
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United Kingdom
United States
Other European countries
Rest of world
Total
2010
£m
473
1 656
768
609
3 506
2009
£m
461
1 598
954
540
3 553
2010
£m
630
1 846
613
417
3 506
2009
£m
710
1 786
686
371
3 553
Sales (from continuing operations) are split between the following types of products:
Primary
Value added
Total
2010
£m
248
735
372
202
1 557
2009
£m
248
1 066
382
239
1 935
Year to 31 March
2010
£m
2 476
1 030
3 506
2009
£m
2 584
969
3 553
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Tate & Lyle Annual Report 2010 71
Notes to the consolidated financial statements
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
6 Operating profit/(loss)
Continuing operations
Analysis by nature:
External sales
Staff costs
Inventories:
– cost of inventories recognised as an expense (included in cost of sales)
– fair value loss on derivatives held for trading (included in cost of sales)
– impairment of inventories 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
Government grant income, including Transitional Aid
Ineffectiveness on derivative financial instruments:
– ineffectiveness loss/(gain) on derivatives designated as cash flow hedges
– ineffectiveness (gain)/loss on derivatives designated as net investment hedges
Other operating expenses
Total
Operating profit from continuing operations
Discontinued operations
Analysis by nature:
External sales
Staff costs
Inventories:
– cost of inventories recognised as an expense (included in cost of sales)
Exceptional items
Impairment of trade receivables
Other operating expenses
Total
Operating loss from discontinued operations
72 Tate & Lyle Annual Report 2010
Notes
17
Notes
9
16
16
7
15
15
23
23
20
20
Notes
12
9
7
23
12
Year to 31 March
2010
£m
3 177
329
3 506
2009
£m
3 277
276
3 553
Year to 31 March
2010
£m
3 506
262
1 971
5
–
114
2
276
14
6
24
26
3
(1)
(20)
3
(1)
814
2009
£m
3 553
257
2 019
8
3
109
3
119
15
5
27
28
2
(3)
(28)
(4)
1
828
3 498
8
3 389
164
Year to 31 March
2010
£m
101
–
103
–
–
–
103
(2)
2009
£m
852
4
811
22
3
33
873
(21)
7 Exceptional items
Exceptional items are as follows:
Continuing operations
UK Group Pension Scheme changes (a)
Closure and restructuring costs (b)
Write-down of assets (c)
Impairment charges (d)
Settlement with Mexican government (e)
Total
Discontinued operations
Loss on disposal – international Sugar Trading (f)
Total
Year to 31 March
2010
£m
42
(58)
(28)
(232)
–
(276)
–
–
2009
£m
–
–
(24)
(106)
11
(119)
(22)
(22)
(a) The Group has recognised an exceptional gain of £42 million in relation to changes announced to the Group Pension Scheme in the United
Kingdom. Of the total gain, £32 million relates to negative past service costs following the removal of the discretionary early retirement benefit
from November 2009 and £10 million relates to a curtailment gain as a result of the closure of the scheme to future benefit accrual for employee
members from 6 April 2011. This exceptional item relates to the Sugars and central costs segments.
(b) The Group has recognised an exceptional charge in relation to the decision to mothball the Sucralose manufacturing facilities in McIntosh,
Alabama. In the year to 31 March 2010 the charge totalled £55 million and covers costs connected with redundancy, clean-up activities and
ongoing fixed costs, and includes provision for costs to final closure. The cash outflows in the year totalled £19 million and the remaining
balance is forecast to be spent in the years ending 31 March 2011 and 31 March 2012. This exceptional item relates to the Sucralose segment.
Additionally, the Group has recognised £3 million of closure and other restructuring costs relating to the Food Systems business within the
Food & Industrial Ingredients, Europe segment.
(c) Following a review of its portfolio of research and development projects, the Group has written off £28 million in relation to assets from which
it does not expect to receive a commercial benefit. Of the £28 million, £20 million had previously been reported within property, plant and
equipment, £6 million within intangible assets and £2 million within prepayments. These assets relate to operations reported in the Food &
Industrial Ingredients, Americas segment.
In the year ended 31 March 2009, 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. This exceptional loss related to operations reported in the Food & Industrial Ingredients, Americas segment.
(d) Following a detailed analysis of end markets, in light of costs of around £70 million to complete and commission the plant in Fort Dodge, Iowa,
and factoring in the risks associated with future returns from operating the plant, the Group has concluded that the plant is highly unlikely to be
completed or commissioned in the foreseeable future. As a result, the facility has been mothballed and an impairment charge of £217 million
has been reflected in the year. Of the £217 million charge, £209 million relates to assets previously held in assets under construction and
£8 million relates to prepayments. This exceptional item relates to the Food & Industrial Ingredients, Americas segment.
The Group has also recognised an impairment charge of £15 million at its sugar refining business in Israel comprising a full write-down of the
fixed assets (£11 million) and an inventory impairment (£4 million). This impairment charge reflects future decline in the commercial prospects in
Israel and is in addition to the impairment charge of £9 million recognised in the year ended 31 March 2009. The sugar refining business in
Israel is reported in the Sugars reporting segment.
In the year ended 31 March 2009, the decision to mothball the McIntosh, Alabama plant resulted in an impairment charge of £97 million being
recognised. This impairment charge is recognised in the Sucralose segment.
(e) In the year ended 31 March 2009, as a result of a settlement of a dispute with the Mexican government over tax on soft drinks containing
high fructose corn syrup, 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 the lost revenue. The business is reported in the Food & Industrial Ingredients, Americas segment.
(f)
In the year ended 31 March 2009 the Group recorded a loss of £22 million in relation to its international Sugar Trading business. 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. The business was
previously reported in the Sugars segment.
The tax impact on continuing net exceptional items is a £112 million credit (2009 – £44 million credit). There was no tax effect on the exceptional
item from discontinued operations in the year to 31 March 2009. Tax credits on exceptional costs are only recognised to the extent that losses
incurred will result in tax recoverable in the future. In addition, there are exceptional tax items of £15 million (Note 11) in respect of the release
of various tax provisions following settlement of outstanding issues around the Group.
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Tate & Lyle Annual Report 2010 73
Notes to the consolidated financial statements
8 Auditors’ remuneration
During the year the Group (including its overseas subsidiaries) obtained the following services from the Company’s auditors
as detailed below:
Fees payable to the Company’s auditors for the audit of the Company’s annual financial statements
Fees payable to the Company’s auditors and its associates for other services:
– the audit of the Company’s subsidiaries, pursuant to legislation
Total audit fees
Other services pursuant to legislation
All other services
Total
Year to 31 March
2010
£m
0.6
1.5
2.1
0.1
0.2
2.4
2009
£m
0.7
1.5
2.2
0.1
0.1
2.4
In addition to the above, fees totalling £0.1 million (2009 – £0.1 million) were paid to the Company’s auditors in respect of the audit of Group
pension schemes.
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 2010
Year to 31 March 2009
Continuing
operations
£m
Discontinued
operations
£m
Continuing
operations
£m
Discontinued
operations
£m
Notes
30
30
26
221
23
9
2
2
5
262
–
–
–
–
–
–
–
215
22
12
1
2
5
257
4
–
–
–
–
–
4
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 2006, this includes part-time employees:
By business segment
Food & Industrial Ingredients, Americas
Food & Industrial Ingredients, Europe
Sugars
Sucralose
Central
Total
Year to 31 March
2010
2 376
1 340
1 391
229
280
5 616
2009
2 512
1 998
1 359
262
278
6 409
Included in the above numbers are 3 (2009 – 52) employees relating to discontinued operations, where all employees were employed by Sugars
in both years.
The number of people employed by the Group at 31 March 2010 was 5,666 (2009 – 5,718).
Key management compensation
Salaries and short-term employee benefits
Retirement benefits
Share-based payments
Share option gains
Termination benefits
Total
Year to 31 March
2010
£m
2009
£m
5
1
2
1
–
9
3
1
1
–
2
7
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 at 31 March 2010 consisted of the Company’s executive directors, details of whose remuneration
are given in the directors’ remuneration report on pages 47 to 56, the Company Secretary and General Counsel, the Presidents of the four business
divisions, the President, Global R&D and the Group Human Resources Director.
The aggregate emoluments of directors in respect of qualifying services to the Company were £4 million (2009 – £4 million).
74 Tate & Lyle Annual Report 2010
10 Finance income and finance expense
Continuing
Finance income
Interest receivable
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
Finance lease charges
Unwinding of discounts in provisions
Fair value (losses)/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
30
30
31
Year to 31 March
2010
£m
5
5
(4)
(49)
(76)
57
(2)
–
(2)
(1)
3
(74)
(69)
2009
£m
10
10
(15)
(38)
(79)
76
(3)
(1)
30
1
(32)
(61)
(51)
Finance expense is shown net of borrowing costs capitalised into the cost of assets (Note 16) of £2 million (2009 – £11 million) at a capitalisation
rate of 5.0% (2009 – 5.0%).
Interest payable on other borrowings includes £0.2 million (2009 – £0.2 million) of dividends in respect of the Group’s 6.5% cumulative
preference shares.
The comparative information has been re-presented as set out in Note 1.
Discontinued
Included within the loss for the year in relation to discontinued operations (Note 12) is net finance expense of £2 million (2009 – £2 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
Exceptional tax credit
Deferred tax credit
Income tax (credit)/expense
Year to 31 March
2010
£m
1
40
(2)
(15)
24
(108)
(84)
2009
£m
–
70
(14)
–
56
(37)
19
The income tax credit relating to continuing operations in the year to 31 March 2010 of £84 million (2009 – expense of £19 million) includes a credit
of £112 million in respect of exceptional items (2009 – £44 million).
The exceptional tax credit of £15 million represents releases of various tax provisions following settlement of outstanding issues around the Group.
The effective tax rate for the year, calculated on the basis of the total income tax credit relating to continuing operations as a proportion of loss
before tax, is 137.7% (2009 – income tax expense on profit before tax of 16.8%). This compares with the standard rate of corporation tax in the
UK of 28% (2009 – 28%).
Discontinued
The income tax expense in respect of discontinued operations (Note 12) in the year to 31 March 2010 is £nil million (2009 – £1 million).
Tate & Lyle Annual Report 2010 75
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Notes to the consolidated financial statements
11 Income tax expense (continued)
Continuing
(Loss)/profit before tax
Corporation tax (credit)/charge thereon at 28% (2009 – 28%)
Adjusted for the effects of:
– exceptional tax credit
– (income not taxable)/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
2010
£m
(61)
(17)
(15)
(2)
19
(2)
(67)
(84)
2009
£m
113
32
–
2
29
(7)
(37)
19
The effective tax rate relating to continuing operations on profit before exceptional items, amortisation and exceptional tax items is 20.4%
(2009 – 27.3%).
Tax credit/(charge) relating to components of other comprehensive income
Retirement benefit obligations
Cash flow hedges
Available for sale financial assets
Tax credit relating to components of other comprehensive income
Current tax
Deferred tax (Note 29)
Tax on items recognised directly in equity
Deferred tax (credit)/charge on share-based payments
Total
12 Discontinued operations
Year to 31 March
2010
£m
29
(4)
–
25
–
25
2009
£m
31
9
–
40
–
40
Year to 31 March
2010
£m
(1)
(1)
2009
£m
4
4
As previously reported, during the year ended 31 March 2009 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 to 31 March 2010 and 31 March 2009. Under the terms of the sale agreement, the Group managed the working capital of the business until
31 March 2009, when the balances were assumed by Bunge.
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 2010 and 31 March 2009.
The results of international Sugar Trading and Eastern Sugar were both reported in the Sugars segment.
76 Tate & Lyle Annual Report 2010
12 Discontinued operations (continued)
Sales
Operating (loss)/profit
Finance income
Finance expense
(Loss)/profit before and after tax
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
Net cash flows from discontinued operations are as follows:
Net cash used in operating activities
Net cash used in investing activities
Net cash generated from operating activities
Net cash generated from investing activities
Year to 31 March 2010
International
Sugar
Trading
£m
101
(3)
1
(3)
(5)
Eastern
Sugar
£m
–
1
–
–
1
Total
£m
101
(2)
1
(3)
(4)
Year to 31 March 2009
International
Sugar
Trading
£m
Notes
Eastern
Sugar
£m
7
852
(1)
(22)
(23)
4
(8)
(27)
–
(27)
–
2
–
2
2
–
4
(1)
3
Total
£m
852
1
(22)
(21)
6
(8)
(23)
(1)
(24)
International
Sugar
Trading
£m
(25)
(25)
International
Sugar
Trading
£m
87
62
Year to 31 March 2010
Eastern
Sugar
£m
(4)
–
Total
£m
(29)
(25)
Year to 31 March 2009
Eastern
Sugar
£m
53
4
Total
£m
140
66
There were no cash flows used in or generated from financing activities in the years to 31 March 2010 or 31 March 2009.
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Tate & Lyle Annual Report 2010 77
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.
Profit/(loss) attributable to equity holders
of the Company (£million)
Weighted average number of ordinary
shares in issue (millions)
Basic earnings/(loss) per share
Year to 31 March 2010
Year to 31 March 2009
Continuing
operations
Discontinued
operations
19
457.0
4.2p
(4)
457.0
(0.9)p
Total
15
457.0
3.3p
Continuing
operations
Discontinued
operations
89
456.5
19.5p
(24)
456.5
(5.3)p
Total
65
456.5
14.2p
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.
Profit/(loss) attributable to equity holders
of the Company (£million)
Weighted average number of diluted
shares in issue (millions)
Diluted earnings/(loss) per share
Year to 31 March 2010
Year to 31 March 2009
Continuing
operations
Discontinued
operations
19
459.3
4.2p
(4)
459.3
(0.9)p
Total
15
459.3
3.3p
Continuing
operations
Discontinued
operations
89
459.8
19.4p
(24)
459.8
(5.3)p
Total
65
459.8
14.1p
The adjustment for the dilutive effect of share options at 31 March 2010 was 2.3 million shares (2009 – 3.3 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 (£million):
– exceptional items
– amortisation of acquired intangible assets
– tax effect of the above adjustments
– exceptional tax credit
Adjusted profit (£million)
Adjusted basic earnings per share from continuing operations
Adjusted diluted earnings per share from continuing operations
14 Dividends
Dividends paid on ordinary equity shares (£million):
– final paid relating to prior year
– interim paid relating to current year
Total dividend paid
Satisfied by:
– cash (£million)
– scrip dividend (£million) (note a)
Total
The total ordinary dividend is 22.9p (2009 – 22.9p) made up as follows:
– interim dividend paid
– final dividend proposed (note b)
Total
Notes
7
15
11
Year to 31 March
2010
19
276
14
(116)
(15)
178
2009
89
119
15
(49)
–
174
39.1p
38.9p
38.2p
38.0p
Year to 31 March
2010
2009
74
31
105
103
2
105
6.8p
16.1p
22.9p
73
31
104
104
–
104
6.8p
16.1p
22.9p
(a) The interim dividend paid during the year ended 31 March 2010 was the first to be paid to shareholders with the option to receive dividends as
a scrip issue. Further detail is disclosed in Note 24.
(b) 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 30 July 2010 to shareholders who are on the Register of Members on 25 June 2010.
78 Tate & Lyle Annual Report 2010
15 Goodwill and intangible assets
Cost
At 1 April 2009
Additions at cost
Disposals and write-offs
Exchange and other movements
At 31 March 2010
Accumulated amortisation
and impairments
At 1 April 2009
Amortisation charge
Disposals and write-offs
Exchange and other movements
At 31 March 2010
Net book value at
31 March 2010
Cost
At 1 April 2008
Businesses acquired
Additions at cost
Businesses sold
Exchange and other movements
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
Goodwill
£m
Patents
£m
Other
acquired
intangible
assets
£m
Total
acquired
intangibles
£m
Other
intangible
assets
£m
240
–
–
(10)
230
–
–
–
–
–
230
202
1
–
–
37
240
8
–
–
(8)
–
240
33
–
–
–
33
20
3
–
–
23
10
33
–
–
–
–
33
16
–
4
–
20
13
132
1
–
(6)
127
31
11
–
(2)
40
87
108
–
–
–
24
132
15
–
11
5
31
405
1
–
(16)
390
51
14
–
(2)
63
327
343
1
–
–
61
405
39
–
15
(3)
51
101
354
34
6
(7)
(1)
32
14
6
(1)
–
19
13
22
–
7
(1)
6
34
6
(1)
5
4
14
20
Total
£m
439
7
(7)
(17)
422
65
20
(1)
(2)
82
340
365
1
7
(1)
67
439
45
(1)
20
1
65
374
Goodwill
The carrying amounts of goodwill by reportable segment are as follows:
Food & Industrial Ingredients, Americas (note a)
Food & Industrial Ingredients, Europe (note b)
Sugars
Total
2010
£m
74
155
1
230
31 March
2009
£m
77
161
2
240
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 £74 million includes £60 million (2009 – £63 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% (2009 – 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% (2009 – 11%).
In both cases zero growth was assumed in perpetuity. Management has concluded that no impairment is required for either business.
Tate & Lyle Annual Report 2010 79
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Notes to the consolidated financial statements
15 Goodwill and intangible assets (continued)
(b) Goodwill in the Food & Industrial Ingredients, Europe segment of £155 million includes £89 million (2009 – £91 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% (2009 –
11%). Zero growth was assumed in perpetuity. Management has concluded that no impairment is required.
In addition, goodwill includes £41 million (2009 – £42 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% (2009 – 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% (2009 – 11%), and zero growth assumed in perpetuity. Management has concluded
that no impairment is required.
16 Property, plant and equipment
Cost
At 1 April 2009
Additions at cost
Transfers on completion
Disposals and write-offs
Exchange and other movements
At 31 March 2010
Accumulated depreciation and impairments
At 1 April 2009
Depreciation charge
Impairment losses and write-downs
Disposals and write-offs
Exchange and other movements
At 31 March 2010
Net book value at 31 March 2010
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
591
2
6
(1)
(20)
578
288
15
–
(1)
(10)
292
286
466
6
27
(6)
(18)
116
591
219
18
18
(4)
(15)
52
288
303
2 394
12
44
(13)
(88)
2 349
1 493
101
31
(13)
(48)
1 564
785
1 815
15
134
(32)
(37)
499
2 394
1 088
94
87
(32)
(34)
290
1 493
901
345
68
(50)
(1)
(17)
345
1
–
209
–
(2)
208
137
222
208
(161)
–
(6)
82
345
–
–
1
–
–
–
1
344
Total
£m
3 330
82
–
(15)
(125)
3 272
1 782
116
240
(14)
(60)
2 064
1 208
2 503
229
–
(38)
(61)
697
3 330
1 307
112
106
(36)
(49)
342
1 782
1 548
Additions to fixed assets includes capitalised borrowing costs of £2 million (2009 – £11 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% (2009 – 11%) and a zero
growth rate assumed in perpetuity. This did not result in an impairment in either the year ended 31 March 2010 or 31 March 2009.
80 Tate & Lyle Annual Report 2010
16 Property, plant and equipment (continued)
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 2010. 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% (2009 – 11%) 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 a detailed analysis of end markets, in light of costs of around £70 million to complete and commission the plant in Fort Dodge, Iowa,
and factoring in the risks associated with future returns from operating the plant, the Group has concluded that the plant is highly unlikely to be
completed or commissioned in the foreseeable future. As a result, the facility has been mothballed. An impairment review has been carried out
and as a result an impairment charge of £209 million against assets under construction (as part of the impairment charge of £217 million) has
been recognised as an exceptional item. This exceptional item relates to the Food & Industrial Ingredients, Americas segment. The recoverable
amount has been based on value in use, calculated using the expected cash flow approach, weighted for the potential timings of completion
and commissioning the plant, and using management’s internal forecasts of future cash flows for five years, a pre-tax discount rate of 11% and
a zero growth rate assumed in perpetuity.
Following a review of its portfolio of research and development projects, the Group decided to write down assets relating to operations in the
Food & Industrial Ingredients, Americas segment resulting in an impairment write-down of £20 million being recognised in exceptional items.
The Group has carried out a further review of its sugar refining operation in Israel as a result of the deterioration of the margins driven by record
high sugar prices and a surplus of EU beet sugar being exported into the Israel domestic market. 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% (2009 – 13%). An impairment of £11 million (2009 – £9 million) was recognised in exceptional items in the year.
In the year ended 31 March 2009, the decision to mothball the McIntosh, Alabama, plant resulted in an impairment charge of £97 million
being recognised.
Leased assets
Included in property, plant and equipment is plant and machinery held under finance leases with a net book value of £13 million (2009 – £16 million).
During the year ended 31 March 2010, there were no additions recognised on the inception of finance leases (2009 – £1 million) and no
impairment losses (2009 – £10 million) relating to leased assets of the Sucralose facility in McIntosh, Alabama.
17 Investments in associates and joint ventures
Associates
At 1 April 2008
Exchange and other movements
At 31 March 2009
Exchange and other movements
At 31 March 2010
£m
7
1
8
(1)
7
The Group’s associates, which are accounted for under the equity method, are listed in Note 41.
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 statement of financial position are summarised below:
Income statement
Sales
Expenses
Profit before and after tax
Statement of financial position
Assets
Liabilities
Net assets
Year to 31 March
2010
£m
5
(5)
–
2010
£m
12
(5)
7
2009
£m
2
(2)
–
31 March
2009
£m
14
(6)
8
Tate & Lyle Annual Report 2010 81
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Notes to the consolidated financial statements
17 Investments in associates and joint ventures (continued)
Joint ventures
The Group’s joint ventures are proportionately consolidated and the continuing businesses are listed in Note 41. The amounts proportionately
consolidated in the Group income statement and statement of financial position are summarised below:
Income statement
Sales
Other (expense)/income
Profit before tax
Income tax expense
Profit for the year
Statement of financial position
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
18 Available-for-sale financial assets
At 31 March 2008
Additions
Disposals
Fair value gains
At 31 March 2009
Additions
Fair value loss
At 31 March 2010
Presented in the statement of financial position as follows:
Non-current available-for-sale financial assets
Current assets held for sale
Total
Year to 31 March 2010
Year to 31 March 2009
Continuing
operations
£m
Discontinued
operations
£m
Continuing
operations
£m
Discontinued
operations
£m
329
(277)
52
(9)
43
–
1
1
–
1
276
(236)
40
(11)
29
2010
£m
174
61
118
353
5
18
10
57
90
263
–
4
4
(1)
3
31 March
2009
£m
215
43
170
428
5
11
30
49
95
333
£m
15
6
(6)
24
39
3
(10)
32
2010
£m
14
18
32
31 March
2009
£m
11
28
39
Available-for-sale financial assets primarily comprise £32 million (2009 – £39 million) of unlisted securities. The fair values of non-current available-
for-sale financial assets are approximated at cost. Hence, value is adjusted only for permanent impairment and for no other movement. The fair
values of current assets held for sale are based on management’s valuation of expected proceeds.
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 £15 million (2009 – £23 million) of assets classified as held for sale in current assets.
(b) US dollar comprises £3 million (2009 – £5 million) of assets classified as held for sale in current assets.
82 Tate & Lyle Annual Report 2010
2010
£m
15
9
6
2
32
31 March
2009
£m
23
9
5
2
39
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 2010 and 31 March 2009.
Available-for-sale financial assets
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments – assets
Borrowings
Derivative financial instruments – liabilities
Trade and other payables
Total
Available-for-sale financial assets
Trade and other receivables
Cash and cash equivalents
Derivative financial instruments – assets
Borrowings
Derivative financial instruments – liabilities
Trade and other payables
Total
Amortised
cost
£m
Notes
Derivatives
and other
items at
fair value
£m
Held for
trading
£m
Available-
for-sale
£m
18
23
33
20
28
20
27
Notes
18
23
33
20
28
20
27
–
398
504
–
(819)
–
(477)
(394)
–
–
–
48
(490)
(75)
–
(517)
–
–
–
151
–
(117)
–
34
14
–
–
–
–
–
–
14
Amortised
cost
£m
–
687
434
–
(1 187)
–
(522)
(588)
Derivatives
and other
items at
fair value
£m
–
–
–
69
(465)
(116)
–
(512)
Held for
trading
£m
Available-
for-sale
£m
–
–
–
178
–
(224)
–
(46)
11
–
–
–
–
–
–
11
31 March 2010
Total
carrying
value
£m
14
398
504
199
(1 309)
(192)
(477)
(863)
Fair
value
£m
14
398
504
199
(1 308)
(192)
(477)
(862)
31 March 2009
Total
carrying
value
£m
11
687
434
247
(1 652)
(340)
(522)
(1 135)
Fair
value
£m
11
687
434
247
(1 729)
(340)
(522)
(1 212)
Trade and other receivables presented above excludes £28 million (2009 – £41 million) relating to prepayments.
Trade and other payables presented above excludes £9 million (2009 – £27 million) of deferred income relating to Transitional Aid.
Fair value hierarchy
As of 1 April 2009, the Group has adopted the amendments to IFRS 7 Financial Instruments: Disclosures. IFRS 7 requires disclosure of how the
Group’s financial instruments measured at fair value, fit within the following fair value hierarchy:
− quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
−
−
inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2);
inputs for the asset or liability that are not based on observable market data (level 3).
The following table illustrates the Group’s financial assets and liabilities measured at fair value at 31 March 2010:
Assets at fair value
Available-for-sale financial assets
Derivative financial instruments:
– currency swaps
– interest rate swaps
– forward foreign exchange contracts
– commodity pricing contracts
Assets at fair value
Liabilities at fair value
Derivative financial instruments:
– currency swaps
– interest rate swaps
– forward foreign exchange contracts
– commodity pricing contracts
Borrowings
Liabilities at fair value
31 March 2010
Notes
Level 1
£m
Level 2
£m
Level 3
£m
18
20
20
20
20
20
20
20
20
–
–
–
–
61
61
–
–
–
(86)
–
(86)
–
28
38
4
58
128
(58)
(17)
(10)
(18)
(490)
(593)
14
–
–
–
10
24
–
–
–
(3)
–
(3)
Total
£m
14
28
38
4
129
213
(58)
(17)
(10)
(107)
(490)
(682)
Tate & Lyle Annual Report 2010 83
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Notes to the consolidated financial statements
19 Financial instruments by category (continued)
Level 1 financial instruments
The fair value of financial instruments traded in active markets (commodity futures) is based on quoted market prices at the balance sheet date.
A market is regarded as active if quoted prices are readily and regularly available from an exchange, dealer, broker, industry group, pricing service,
or regulatory agency, and those prices represent actual and regularly occurring market transactions on an arm’s length basis.
Level 2 financial instruments
The fair values of financial instruments that are not traded in an active market (interest rate swaps, cross currency swaps, commodity pricing
contracts and forward foreign exchange contracts) are determined by using valuation techniques. These valuation techniques maximise the use of
observable market data where it is available and rely as little as possible on entity specific estimates.
The fair value of interest rate swaps, currency swaps and forward foreign exchange contracts is calculated as the present value of the future cash
flows based on observable inputs drawn from interest yield curves sourced from a reputable third party source.
The amount shown within level 2 for borrowings only includes those borrowings which are designated as hedged items in fair value hedges with
respect to interest rate risk and whose carrying amount is adjusted for the gain or loss on the hedged item attributable to the hedged risk.
Level 3 financial instruments
The fair value of financial instruments is based on unobservable inputs that are supported by little or no market activity at the balance sheet date.
These inputs generally reflect the entity’s own assumptions about how a market participant would reasonably be expected to determine the price
of a financial instrument.
For commodity pricing contracts, in evaluating the significance of fair value inputs, the Group generally classifies assets or liabilities as level 3 when
their fair value is determined using unobservable inputs that individually, or when aggregated with other unobservable inputs represent more than
10% of the fair value of the observable inputs of the assets or liabilities.
Available-for-sale financial assets which are analysed at level 3 primarily represent investments in unlisted securities. The fair values of the unlisted
securities are approximated at cost. Hence, value is adjusted only for permanent impairment and for no other movement.
For financial instruments in level 3, the Group does not consider that changes to inputs to reasonable alternatives would have a material impact on
the income statement or equity.
The following table reconciles the movement in the Group’s financial instruments classified in level 3 of the fair value hierarchy between 1 April 2009
and 31 March 2010:
At 1 April 2009
Total gains or losses in operating profit
Purchases
Settlements
At 31 March 2010
Commodity
pricing
contracts
– assets
£m
Commodity
pricing
contracts
– liabilites
£m
Available-
for-sale
assets
£m
21
10
–
(21)
10
–
(3)
–
–
(3)
11
–
3
–
14
Total
£m
32
7
3
(21)
21
84 Tate & Lyle Annual Report 2010
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
Currency swaps – held for trading
Interest rate swaps – fair value hedges
Interest rate swaps – held for trading
Current derivative financial instruments used
to manage the Group’s net debt profile
Currency swaps – accrued interest
Interest rate swaps – accrued interest
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
Forward foreign exchange contracts – held for trading
Commodity pricing contracts – cash flow hedges
Commodity pricing contracts – held for trading
Total other derivative financial instruments
Total derivative financial instruments
Presented in the statement of financial position as follows:
Non-current derivative financial instruments
Current derivative financial instruments
31 March 2010
Assets
£m
Liabilities
£m
Assets
£m
31 March 2009
Liabilities
£m
–
16
22
9
47
12
7
19
66
1
1
2
3
–
2
126
131
133
199
49
150
199
(51)
(2)
(3)
(11)
(67)
(5)
(3)
(8)
(75)
–
–
–
(6)
(4)
(7)
(100)
(117)
(117)
(192)
(67)
(125)
(192)
5
–
29
13
47
10
3
13
60
–
–
–
12
–
10
165
187
187
247
47
200
247
(45)
–
(7)
(15)
(67)
(3)
(3)
(6)
(73)
(2)
(3)
(5)
(23)
–
(30)
(209)
(262)
(267)
(340)
(72)
(268)
(340)
The comparative information has been re-presented as set out in Note 1.
The ineffective portion recognised in operating profit that arises from cash flow hedges amounts to a loss of £3 million (2009 – £4 million gain).
The ineffective portion recognised in operating profit that arises from net investment hedges amounts to a gain of £1 million (2009 – £1 million loss).
The ineffective portion recognised in net finance expense that arises from fair value hedges amounts to a gain of £1 million (2009 – £2 million loss).
In accordance with IAS 1 (revised) the Group has re-presented certain held for trading derivatives from current to non-current as set out in Note 1.
As at 1 April 2008, £4 million of assets and £5 million of liabilities have been re-presented. There was no overall effect on the Group’s equity.
The re-presented comparatives as at 1 April 2008 are as follows:
Non-current
Current
Total
Assets
re-presented
£m
40
271
311
1 April 2008
Liabilites
re-presented
£m
(35)
(262)
(297)
Tate & Lyle Annual Report 2010 85
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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
2010
£m
(68)
(30)
75
25
(4)
31 March
2009
£m
(50)
2
69
22
(13)
Gains and losses recognised in the hedging reserve in equity (Note 25) on forward foreign exchange and commodity pricing contracts as of
31 March 2010 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 2010 will be released to the income statement at various dates until the
maturity of the underlying borrowings in June 2012. The notional principal amount of the outstanding interest rate swaps is £136 million
(2009 – £142 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 2010 were £364 million and £100 million respectively (2009 – £227 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 2010 were £298 million (31 March 2009 – £250 million). The fair value gain of £6 million (2009 – £48 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 25).
In addition, at 31 March 2010, of the Group’s borrowings, a total of £564 million (2009 – £860 million) is designated as hedges of the net
investments in overseas subsidiaries.
Debt-related derivatives held for trading
Currency swap contracts associated with the partial repurchase of the 6.5% Guaranteed Notes 2012 were closed out in November 2009 by
entering into offsetting currency swap contracts. These swaps do not qualify for hedge accounting. The notional amounts of the outstanding
currency swap contracts not designated within hedge relationships as at 31 March 2010 were £203 million (2009 – £nil million).
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 swap contracts not designated within hedge relationships as of 31 March 2010 were £231 million
(2009 – £244 million).
In addition, at 31 March 2009, there were interest rate cap contracts outstanding with notional amounts of £109 million. These caps matured during
the year ended 31 March 2010.
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. Foreign exchange contracts held for trading are undertaken to hedge anticipated future contractual cash flows within the
Group’s cereal sweetners and starches business.
86 Tate & Lyle Annual Report 2010
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.
Commodity price risks are managed through divisional commodity trading functions in the USA and Europe. These functions are controlled by
divisional management who are 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.
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 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 amounting to £814 million (2009 – £1,231 million) was held in the following currencies: net borrowings of US
dollars 76% (2009 – 77%), euro 20% (2009 – 20%), pounds sterling 7% (2009 – 3%) and net deposits of other currencies 3% (2009 – net deposits
of 0%). The Group’s interest cost through the income statement is impacted by changes in the relevant exchange rates.
The following table 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 2010
31 March 2009
Income
statement
–/+£m
–
–
Equity
–/+£m
28
15
Income
statement
–/+£m
1
1
Equity
–/+£m
40
13
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. A derogation of the maximum percentage of fixed rate debt was approved by the Tate & Lyle PLC
Board until 30 June 2010. At 31 March 2010, the longest term of any fixed rate debt held by the Group was until November 2019 (2009 – 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
82% (2009 – 55%).
If the interest rates applicable to the Group’s floating rate debt rise/fall from the levels at the end of March 2010 by an average of 100 basis points
over the year to 31 March 2011, Group profit before tax will reduce/increase by approximately £1 million (2009 – £4 million). The floating rate
interest payments on £136 million (2009 – £142 million) of the Group’s borrowings are hedged and designated under cash flow hedge relationships.
Tate & Lyle Annual Report 2010 87
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Notes to the consolidated financial statements
21 Financial risk factors (continued)
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.
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 2010
31 March 2009
Income
statement
–/+£m
2
3
Equity
–/+£m
–
–
Income
statement
–/+£m
2
1
Equity
–/+£m
1
–
The majority of the Group’s 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
2010
£m
504
398
199
14
31 March
2009
£m
434
687
247
11
The Group’s trade receivables are short term in nature and largely comprise amounts receivable from consumers and business customers. There
are no amounts included in trade receivables in respect of securitised receivables (2009 – £98 million). 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. In November 2009, the Group issued a £200 million 6.75%
bond which matures in November 2019, and undertook a tender offer to repurchase the 2012 sterling bonds. The objective of the new issue in
conjunction with the tender offer for the 2012 sterling bonds was to extend the Group’s maturity profile and further diversify sources of funding.
The Group repurchased £100 million of the 2012 sterling bonds on the completion of the tender offer. Capital market issues outstanding
at 31 March 2010 include the US$300 million 6.125% 144A bond maturing in 2011, the £100 million 6.50% bond maturing in 2012, the
US$500 million 5.00% 144A bond maturing in 2014, the US$250 million 6.625% 144A bond maturing in 2016, and the £200 million 6.75% bond
maturing in 2019.
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 a core committed bank facility of US$1 billion of which US$1 billion matures in 2012. This facility is unsecured
and contains 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. In the year ended 31 March 2009, the Group 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 statement of financial position
so as to operate well within these covenanted restrictions. In both the current and comparative reporting period, the Group complied with its
financial covenants at all measurement points. The majority of the Group’s borrowings are raised through the Group treasury company, Tate & Lyle
International Finance PLC, and are then on-lent to the business units on an arm’s length basis.
88 Tate & Lyle Annual Report 2010
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 2010, after subtracting total undrawn committed
facilities, there was no debt maturing within two and a half years (2009 – none). The average maturity of the Group’s gross debt was 5.4 years
(2009 – 4.8 years). At the year end the Group held cash and cash equivalents of £504 million (2009 – £434 million) and had committed facilities of
£659 million (2009 – £788 million) of which £515 million (2009 – £524 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 non-derivative 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
> 5 years
£m
31 March 2010
(191)
(62)
(474)
407
(394)
(123)
(653)
(190)
–
778
(802)
(3)
(435)
(115)
–
–
–
–
Of the £191 million borrowings with maturities of less than one year £138 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 2009
> 5 years
£m
(525)
(61)
(516)
521
(505)
(232)
(483)
(183)
–
306
(351)
(9)
(598)
(81)
–
–
–
–
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 cash flows 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, 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. At 31 March 2010, the long-term credit rating from Moody’s was Baa3 (stable outlook) and from
S&P was BBB– (negative outlook). The Group is committed to maintaining investment grade credit ratings.
The Group regards its total capital as follows:
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Net debt
Total shareholders’ equity
Total capital
2010
£m
814
854
1 668
31 March
2009
£m
1 231
1 013
2 244
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Tate & Lyle Annual Report 2010 89
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 maximum net debt to EBITDA KPI target has been reduced
from 2.5 times to 2.0 times for the year ending 31 March 2011 and beyond. The ratios for these KPIs for the financial years ended 31 March 2010
and 31 March 2009 are:
Net debt/EBITDA
Interest cover
22 Inventories
Raw materials and consumables
Work in progress
Finished goods
Total
2010
1.8
5.8
2010
£m
202
19
188
409
31 March
2009
2.4
6.1
31 March
2009
£m
227
24
287
538
Finished goods inventories of £2 million (2009 – £1 million) are carried at realisable value, this being lower than cost. Inventories of £60 million
(2009 – £99 million) are carried at market value.
The Group has recognised an impairment charge of £4 million against finished goods inventories at its sugar refining business in Israel, which has
been included in exceptional items. The sugar refining business in Israel is reported in the Sugars segment.
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
Margin deposits
Government grants receivable
Other receivables
Total
2010
£m
–
–
2
2
2010
£m
329
(24)
305
28
45
3
43
424
31 March
2009
£m
1
1
3
5
31 March
2009
£m
475
(21)
454
40
151
12
66
723
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.
There are no amounts within trade receivables in respect of securitised receivables (2009 – £98 million). The receivables securitisation was fully
repaid during the year (Note 28). 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 were
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
Other
Total
2010
£m
231
98
31
66
426
31 March
2009
£m
455
183
38
52
728
(a) Includes £3 million of government grants receivable under the Transitional Aid and Restructuring Aid provisions of the EU Sugar Regime
(2009 – £12 million).
90 Tate & Lyle Annual Report 2010
23 Trade and other receivables (continued)
Provision for impairment of receivables
At 1 April
Charge for the year
Reversal of impairment
Disposal of businesses
Exchange
At 31 March
2010
£m
(21)
(3)
1
–
(1)
(24)
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 £3 million (2009 – £14 million) for impairment of its trade receivables during the year. Of this loss £3 million
(2009 – £2 million) from continuing operations and £nil million (2009 – £3 million) from discontinued operations has been included in operating
profit in the income statement (Note 6) and £nil million (2009 – £9 million) has been included in exceptional items.
As at 31 March 2010, trade receivables of £63 million (2009 – £66 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
24 Share capital and share premium
At 1 April 2008
Proceeds from issuance of ordinary shares
At 31 March 2009
Proceeds from issuance of ordinary shares
At 31 March 2010
2010
£m
42
4
17
63
Ordinary
share capital
£m
Share
premium
£m
114
1
115
–
115
404
–
404
1
405
31 March
2009
£m
37
16
13
66
Total
£m
518
1
519
1
520
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 (2009 – 790,424,000)
Allotted, called up and fully paid equity share capital
At 1 April
Allotted under share option schemes
Scrip dividend shares issued
At 31 March
2010
£m
198
31 March
2009
£m
198
31 March 2010
31 March 2009
Shares
460 012 801
48 287
514 612
460 575 700
£m
115
–
–
115
Shares
459 910 466
102 335
–
460 012 801
£m
114
1
–
115
Treasury shares and shares held in ESOP trust
As at 31 March 2010, the Group held 512,490 shares (2009 – 1,328,502 shares) in Treasury.
During the year 816,012 shares (2009 – 1,426,571 shares) were released from Treasury to satisfy share options exercised.
The shares held in Treasury at 31 March 2010 represent 0.1% (2009 – 0.3%) of the Parent company’s share capital at the year end,
and have a nominal value of £0.1 million (2009 – £0.3 million).
As at 31 March 2010, the Group held 3,141,100 shares (2009 – 1,840,801 shares) in an ESOP trust at a nominal value of 25p and a market
value of 454.2p (2009 – 260.5p).
During the year ended 31 March 2010, shareholders were given the option to receive the interim dividends in the form of a scrip issue.
On 8 January 2010, the Group issued 514,612 shares for scrip at a nominal value per share of 25p and a cash equivalent value of £4.25.
Tate & Lyle Annual Report 2010 91
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Notes to the consolidated financial statements
24 Share capital and share premium (continued)
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
25 Other reserves
At 31 March 2008
Cash flow hedges:
– fair value losses in the year
– reclassified and reported in the income statement during the year
– tax effect of the above movements
Gain on revaluation of available-for-sale financial assets
Currency translation differences:
– net investment hedging losses in the year
Net exchange differences on consolidation
Items transferred to income on disposal
At 31 March 2009
Cash flow hedges:
– fair value gains in the year
– reclassified and reported in the income statement during the year
– tax effect of the above movements
Loss on revaluation of available-for-sale financial assets
Currency translation differences:
– net investment hedging gains in the year
Net exchange differences on consolidation
At 31 March 2010
Number of
holdings
5 219
4 338
2 253
1 505
2 434
554
575
98
101
%
Total
1 399 953
30.6
3 404 394
25.4
2 802 771
13.2
2 722 938
8.8
7 614 523
14.2
3 901 072
3.2
28 234 008
3.4
29 523 797
0.6
0.6 380 972 244
31 March 2010
%
0.3
0.7
0.6
0.6
1.7
0.9
6.1
6.4
82.7
17 077
100.0
460 575 700
100.0
Hedging
reserve
£m
Translation
reserve
£m
Other
reserves
(note a)
£m
2
(21)
(13)
9
–
–
–
–
(23)
13
11
(4)
–
–
–
(3)
(9)
–
–
–
–
(321)
454
(1)
123
–
–
–
–
58
(67)
114
98
–
–
–
24
–
–
(3)
119
–
–
–
(10)
–
–
109
Total
£m
91
(21)
(13)
9
24
(321)
454
(4)
219
13
11
(4)
(10)
58
(67)
220
(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.
92 Tate & Lyle Annual Report 2010
26 Share-based payments
During the year to 31 March 2010, 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 2010
Number of options/shares granted
in year to 31 March 2009
Fair value per share for 2010 grant (pence)
Fair value per share for 2009 grant (pence)
Performance
share plan
Executive share
option scheme
Bi-annually Annually in June
(note a)
in June and
November
Deferred
bonus
share plan
Duration
in years
Sharesave scheme
Annually in July
Annually in June
Annually in
December
5 001 896
2 478 568
234
170
–
–
–
–
–
19 026
–
215
3
5
3
5
3
5
3
5
–
–
85 632
45 453
66 029
31 340
148 132
61 893
–
–
66
75
90
97
67
76
Valuation basis
Contractual life
Vesting conditions
Monte Carlo Binomial Lattice
10 years
(note c)
10 years
(note b)
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) For the year ended 31 March 2010, exercise of 419,403 shares is not subject to any performance conditions, exercise of 269,616 shares
is dependent on total shareholder return and the exercise of 4,312,877 shares is dependent 50% on total shareholder return and 50% on
earnings per share.
For the year ended 31 March 2009, exercise was dependent on total shareholder return by reference to a competitor group over a
three-year period following grant.
(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 previously 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 and a performance target over the performance period as described in (b) above, participants received 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 were paid on the deferred shares but not on matching shares. This plan was suspended during the
year ended 31 March 2009.
(e) Options granted in the years to 31 March 2009 and 31 March 2010 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 (2009 – £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
31 March 2010
31 March 2009
Weighted
average
exercise
price
pence
111
11
174
38
76
Shares
number
11 664 517
2 804 988
(1 732 598)
(2 953 381)
9 783 526
Weighted
average
exercise
price
pence
117
42
149
48
111
Shares
number
9 783 526
5 132 981
(1 064 000)
(2 552 549)
11 299 958
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Tate & Lyle Annual Report 2010 93
Notes to the consolidated financial statements
26 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 377 pence (2009 –
467 pence). At 31 March 2010, 1,891,485 (2009 – 3,017,439) of the outstanding options were exercisable at a weighted average exercise price
of 329 pence (2009 – 280 pence). A detailed breakdown of the range of exercise prices for options outstanding at 31 March is shown in the
table below:
At nil cost
£0.01 to £1.99
£2.00 to £3.99
£4.00 to £7.99
Total
Year to 31 March 2010
Year to 31 March 2009
Number
outstanding
at end of year
8 846 512
–
2 207 816
245 630
11 299 958
Weighted
average
remaining
contractual
life in months
55.6
–
41.6
36.5
52.5
Weighted
average
exercise
price
pence
–
–
340
443
76
Number
outstanding
at end of year
6 649 565
–
2 910 196
223 765
9 783 526
Weighted
average
remaining
contractual
life in months
52.9
–
53.5
23.2
52.3
Weighted
average
exercise
price
pence
–
–
338
466
93
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 2010
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 (pence)
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 (pence)
Performance
share plan
Sharesave
scheme
December
40%
35%
n/a 3.3/5.3 years
3%/3.4%
5.7%
10%
n/a
n/a
n/a
418
–
5.15%-7.8%
0%
35%
26%-144%
100%
346
Deferred
bonus plan
Performance
share plan
Sharesave
scheme
June
Sharesave
scheme
December
30%
n/a
–
5.6%
0%
30%
17-56%
100%
401
30%
30%
30%
n/a 3.5/5.5 years 3.5/5.5 years
4.5%/4.6%
5.3%
4.9%
5.7%
10%
10%
n/a
n/a
n/a
n/a
n/a
n/a
400
398
–
5.7%
0%
30%
17-53%
100%
392
The expected volatility is based on the Company’s historical volatility over the three-year period prior to each award date.
94 Tate & Lyle Annual Report 2010
27 Trade and other payables
Non-current payables
Accruals and deferred income (note a)
Other payables
Total
Current payables
Trade payables
Social security
Deferred consideration (note b)
Accruals and deferred income (note c)
Other payables
Total
2010
£m
–
1
1
2010
£m
302
12
7
126
38
485
31 March
2009
£m
10
1
11
31 March
2009
£m
295
9
28
178
28
538
(a) Includes government grant deferred income of £nil million (2009 – £9 million) under the Transitional Aid provisions of the EU Sugar Regime.
(b) Deferred consideration relates to the acquisition of G. C. Hahn & Co. (Note 37).
(c) Includes government grant deferred income of £9 million (2009 – £18 million) under the Transitional Aid provisions of the EU Sugar Regime.
28 Borrowings
Non-current borrowings
Unsecured borrowings
2,394,000 6.5% cumulative preference shares of £1 each (2009 – £2,394,000) (note a)
Industrial Revenue Bonds 2016-2036 (US$92,000,000)
6.125% Guaranteed Notes 2011 (US$300,000,000)
6.5% Guaranteed Notes 2012 (£100,000,000) (note b)
5.0% Guaranteed Notes 2014 (US$500,000,000)
6.625% Guaranteed Notes 2016 (US$250,000,000)
6.75% Guaranteed Notes 2019 (£200,000,000)
Bank loans
Variable unsecured loans (US$)
Variable unsecured loans (euro)
Other borrowings
Obligations under finance leases
Total non-current borrowings
2010
£m
2
61
200
106
346
176
200
31 March
2009
£m
2
64
214
215
366
189
–
1 091
1 050
6
–
6
22
22
7
47
54
25
25
1 119
1 129
(a) 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.
(b) During the year ended 31 March 2010, the Group redeemed £100 million of the 6.5% Guaranteed Notes maturing in June 2012.
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Tate & Lyle Annual Report 2010 95
Notes to the consolidated financial statements
28 Borrowings (continued)
Current borrowings
Unsecured bank overdrafts
Drawdown of committed facilities
Receivables securitisation
Short-term unsecured loans
Current portion of non-current borrowings
Obligations under finance leases
Total current borrowings
2010
£m
23
139
–
25
–
3
190
31 March
2009
£m
23
257
98
141
1
3
523
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 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
31 March 2010
Book value
£m
Fair value
£m
Book value
£m
31 March 2009
Fair value
£m
1 091
6
22
190
1 309
1 090
6
22
190
1 308
1 050
54
25
523
1 652
1 127
54
25
523
1 729
The fair value of borrowings has been determined using either quoted market prices, broker dealer quotations or discounted cash flow analysis.
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
2010
£m
203
470
446
31 March
2009
£m
49
446
634
1 119
1 129
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 2010 by an average of 1% over the year to 31 March 2011, this would reduce Group profit before tax by
approximately £1 million (2009 – £4 million).
Previously, as part of its interest rate management strategy, the Group had entered into interest rate caps. At 31 March 2009, the notional principal
amount of these caps was £109 million, capping interest rates at 4%. These caps matured during the year ended 31 March 2010.
96 Tate & Lyle Annual Report 2010
28 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 (£100,000,000)
5.0% Guaranteed Notes 2014 (US$500,000,000)
6.625% Guaranteed Notes 2016 (US$250,000,000)
6.75% Guaranteed Notes 2019 (£200,000,000)
2010
6.5%
0.8%
5.4%
4.9%
5.0%
5.9%
4.5%
31 March
2009
6.5%
0.8%
5.0%
4.2%
4.9%
6.0%
n/a
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 an undrawn committed multi-currency facility of £515 million (2009 – £524 million), which matures in October 2012. This facility
incurs commitment fees at market rates prevailing when the facility was arranged. The facility 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:
31 March 2010
31 March 2009
Present value of
Minimum lease minimum lease Minimum lease
payments
£m
payments
£m
payments
£m
Present value of
minimum lease
payments
£m
Within one year
Between one and five years
After five years
Less future finance charges
Present value of minimum lease payments
3
17
5
25
5
20
7
32
(7)
25
5
21
12
38
(10)
28
3
17
8
28
Finance lease agreements allow for renewal at the end of the original ten-year lease term at the option of the Group.
29 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/(assets) in the year are as follows:
Deferred tax
At 1 April 2008
Credited to income
Credited to statement of comprehensive income
Charged directly to equity
Exchange differences
At 31 March 2009
Credited to income
Credited to statement of comprehensive income
Credited directly to equity
Exchange differences
At 31 March 2010
£m
106
(39)
(40)
4
17
48
(108)
(25)
(1)
2
(84)
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Of the amounts of deferred tax credited to income and equity, £0.3 million (2009 – £1 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 £371 million (2009 – £293 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 2010.
The total deferred tax on unremitted earnings is £3.3 million of which £0.6 million has been recognised. The Group has not recognised the
remaining amount as it is able to control the timing of the reversal of these temporary differences and it is probable that they will not reverse in
the foreseeable future.
The aggregate amount of temporary differences arising from unremitted profits at the balance sheet date was approximately £2.7 million
(2009 – £1.1 billion). The reduction in temporary differences was due to the introduction of the UK dividend exemption regime on 1 July 2009.
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Tate & Lyle Annual Report 2010 97
Notes to the consolidated financial statements
29 Deferred tax (continued)
The movements in deferred tax assets and liabilities during the period are as follows:
Deferred tax liabilities
At 1 April 2008
Transfers between categories
(Credited)/charged to income
Exchange differences
At 31 March 2009
Transfers between categories
Credited to income
Exchange differences
At 31 March 2010
Deferred tax assets
At 1 April 2008
Transfers between categories
(Charged)/credited to income
Credited to statement of comprehensive income
Charged to equity
Exchange differences
At 31 March 2009
Transfers between categories
(Charged)/credited to income
Credited to statement of comprehensive income
Credited to equity
Exchange differences
At 31 March 2010
Capital
allowances in
excess of
depreciation
£m
126
(21)
(32)
29
102
–
(94)
(1)
7
Retirement
benefit
obligations
£m
Share-based
payments
£m
Tax
losses
£m
35
(2)
(4)
31
–
21
81
–
(10)
29
–
(6)
94
4
–
2
–
(4)
–
2
–
(1)
–
1
–
2
2
(2)
–
–
–
–
–
–
4
–
–
–
4
Other
£m
47
(3)
1
9
54
(2)
(25)
(4)
23
Other
£m
26
(20)
10
9
–
–
25
(2)
(4)
(4)
–
(1)
14
Total
£m
173
(24)
(31)
38
156
(2)
(119)
(5)
30
Total
£m
67
(24)
8
40
(4)
21
108
(2)
(11)
25
1
(7)
114
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 statement of financial position as follows:
Deferred tax liabilities
Deferred tax assets
Total
2010
£m
59
(143)
(84)
31 March
2009
£m
78
(30)
48
98 Tate & Lyle Annual Report 2010
30 Retirement benefit obligations
(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.
During the year, the Group initiated a consultation process on the proposal that the main United Kingdom pension scheme be closed to future
accrual from 6 April 2011. At the same time, the decision that the Group would no longer fund early retirements was communicated to members.
The proposal to close to future accrual was confirmed by the Group on 31 March 2010. These changes give rise to exceptional items in the
income statement for the year ended 31 March 2010 (Note 7).
The Group’s subsidiaries in the USA provide unfunded retirement medical and life assurance benefits to their employees.
The Group expects to contribute approximately £38 million to its defined benefit plans in the year to 31 March 2011.
(b) Principal assumptions
The principal assumptions used for the purpose of the actuarial valuations were as follows:
Year to 31 March 2010
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 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
Mortality assumptions – Year to 31 March 2010
Male aged 65 now
Male aged 65 in 20 years’ time
Female aged 65 now
Female aged 65 in 20 years’ time
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
3.7%
4.5%
3.5%
5.5%
5.9%
8.1%
UK
2.7%
3.5%
2.7%
6.9%
6.6%
8.5%
Pension benefits
US
2.5%
3.5%
n/a
5.7%
7.5%
8.4%
Others
2.0%
2.0%
1.3%
4.8%
6.3%
7.5%
Pension benefits
US
2.5%
3.5%
n/a
7.3%
7.9%
8.8%
Others
2.0%
2.0%
1.0%
6.3%
5.9%
7.0%
Medical
benefits
2.5%
n/a
n/a
5.6%
n/a
n/a
Medical
benefits
2.5%
n/a
n/a
7.1%
n/a
n/a
Expected longevity post age 65
UK
US
21 years
24 years
22 years
24 years
19 years
19 years
21 years
21 years
Expected longevity post age 60
UK
US
26 years
28 years
27 years
29 years
23 years
23 years
25 years
25 years
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The expected retirement age assumption has been changed to 65 due to the removal of the discretionary early retirement terms as described
in (a) above.
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 positive 26.5% (2009 – negative 15.4%), and amounted to
a gain of £258 million (2009 – £171 million loss).
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Tate & Lyle Annual Report 2010 99
Notes to the consolidated financial statements
30 Retirement benefit obligations (continued)
Medical cost trend rates are estimated at 10% per annum (2009 – between 8.5%-10.5%), grading down to 5% by 2020. 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 2010
Current service cost
charged to operating profit
Exceptional items (Note 7):
– negative past service cost
– curtailment benefit
Total (credited)/charged to operating profit
Interest cost
Expected return on plan assets
Charged to finance expense
Total
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
UK
£m
3
(32)
(10)
(39)
46
(42)
4
(35)
UK
£m
5
52
(55)
(3)
2
31 March 2010
Increase
£m
Decrease
£m
Increase
£m
31 March 2009
Decrease
£m
1
8
(1)
(7)
1
7
(1)
(6)
US
£m
5
–
–
5
22
(13)
9
14
US
£m
6
20
(19)
1
7
Pension benefits
Others
£m
Total
£m
Medical
benefits
£m
1
–
–
1
2
(2)
–
1
9
(32)
(10)
(33)
70
(57)
13
(20)
Pension benefits
Others
£m
1
2
(2)
–
1
Total
£m
12
74
(76)
(2)
10
2
–
–
2
6
–
6
8
Medical
benefits
£m
2
5
–
5
7
Total
£m
11
(32)
(10)
(31)
76
(57)
19
(12)
Total
£m
14
79
(76)
3
17
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).
(d) Amounts recognised in the statement of financial position
At 31 March 2010
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
statement of financial position
Disclosed in the statement
of financial position as:
Retirement benefit surplus
Retirement benefit obligations
% of
plan
assets
29%
34%
37%
% of
plan
assets
54%
29%
17%
UK
£m
249
301
327
877
(872)
–
5
15
(10)
% of
plan
assets
32%
44%
24%
US
£m
131
72
42
245
(357)
(42)
(154)
–
(154)
Pension benefits
Others
Total
% of
plan
assets
34%
34%
32%
Medical
benefits
£m
£m
396
395
381
–
–
–
Total
£m
396
395
381
1 172
(1 286)
(42)
–
–
(101)
1 172
(1286)
(143)
(156)
(101)
(257)
16
(172)
–
(101)
16
(273)
£m
16
22
12
50
(57)
–
(7)
1
(8)
100 Tate & Lyle Annual Report 2010
30 Retirement benefit obligations (continued)
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
statement of financial position
Disclosed in the statement of financial
position as:
Retirement benefit surplus
Retirement benefit obligations
% of
plan
assets
25%
36%
39%
% of
plan
assets
49%
34%
17%
UK
£m
185
267
280
732
(687)
–
45
45
–
% of
plan
assets
27%
42%
31%
US
£m
96
68
34
198
(318)
(37)
(157)
–
(157)
Pension benefits
Others
Total
% of
plan
assets
30%
36%
34%
£m
12
19
14
45
(50)
–
(5)
2
(7)
Medical
benefits
£m
£m
Total
£m
293
354
328
–
–
–
–
–
(94)
975
(1 055)
(131)
293
354
328
975
(1 055)
(37)
(117)
(94)
(211)
47
(164)
–
(94)
47
(258)
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.
e) Reconciliation of movement in plan assets and liabilities
Pension benefits
Liabilities
At 1 April 2008
Total service cost
Interest cost
Actuarial gain
Benefits paid
Exchange differences
At 31 March 2009
Total service cost
Negative past service cost
Curtailment benefits
Interest cost
Actuarial loss
Benefits paid
Exchange differences
At 31 March 2010
Assets
At 1 April 2008
Expected return on assets
Actuarial loss
Contributions paid by employer
Benefits paid
Exchange differences
At 31 March 2009
Expected return on assets
Actuarial gain
Contributions paid by employer
Benefits paid
Exchange differences
At 31 March 2010
UK
£m
810
5
52
(136)
(47)
3
687
3
(32)
(10)
46
229
(51)
–
872
UK
£m
859
55
(148)
12
(47)
1
732
42
141
13
(51)
–
877
US
£m
273
6
20
(27)
(19)
102
355
5
–
–
22
55
(22)
(16)
399
US
£m
209
19
(89)
11
(19)
67
198
13
55
12
(22)
(11)
245
Total
£m
1 128
12
74
(167)
(67)
112
1 092
9
(32)
(10)
70
292
(75)
(18)
Medical
benefits
£m
75
2
5
(9)
(5)
26
94
2
–
–
6
13
(5)
(9)
Total
£m
1 203
14
79
(176)
(72)
138
1 186
11
(32)
(10)
76
305
(80)
(27)
Others
£m
45
1
2
(4)
(1)
7
50
1
–
–
2
8
(2)
(2)
57
1 328
101
1 429
Pension benefits
Others
£m
44
2
(10)
3
(1)
7
45
2
5
2
(2)
(2)
50
Total
£m
1 112
76
(247)
26
(67)
75
975
57
201
27
(75)
(13)
1 172
Medical
benefits
£m
–
–
–
5
(5)
–
–
–
–
5
(5)
–
–
Total
£m
1 112
76
(247)
31
(72)
75
975
57
201
32
(80)
(13)
1 172
Tate & Lyle Annual Report 2010 101
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Notes to the consolidated financial statements
30 Retirement benefit obligations (continued)
(f) Analysis of actuarial losses/(gains) recognised in the consolidated statement of comprehensive income
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 losses recognised in the consolidated statement of comprehensive income
Cumulative actuarial loss recognised in the consolidated statement of comprehensive income
2010
£m
(201)
–
305
104
159
Deferred tax taken directly to equity on retirement benefit obligations was £29 million credit to equity (2009 – £31 million credit 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
– (gain)/loss
2010
£m
1 429
(1 172)
257
–
(201)
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
All experience adjustments are recognised directly in equity, net of related tax (see the consolidated statement of comprehensive income).
31 Provisions for other liabilities and charges
Insurance
funds
£m
Deferred
consideration
£m
Restructuring
and closure
provisions
£m
Other
provisions
£m
At 1 April 2008
Charged/(credited) to the income statement
Utilised in the year
Exchange and other movements
At 31 March 2009
Charged to the income statement
Utilised in the year
Exchange and other movements
At 31 March 2010
Provisions are expected to be utilised as follows:
Within one year
After more than one year
Total
10
4
(4)
2
12
3
(2)
(1)
12
10
(2)
(8)
–
–
–
–
–
–
32
–
(27)
2
7
56
(21)
–
42
16
(1)
(5)
3
13
–
(1)
(3)
9
2010
£m
26
37
63
31 March
2009
£m
247
(18)
(158)
71
55
2006
£m
1 351
(1 179)
172
7
(108)
Total
£m
68
1
(44)
7
32
59
(24)
(4)
63
31 March
2009
£m
11
21
32
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 related 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. There were no receipts recognised in the income statement
during the year (2009 – £9 million).
102 Tate & Lyle Annual Report 2010
31 Provisions for other liabilities and charges (continued)
Restructuring and closure provisions primarily relate to businesses and plants 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. The amount charged to
the income statement includes £55 million in relation to the decision to mothball the sucralose manufacturing facility in McIntosh, Alabama.
There was no charge to the income statement in relation to the unwinding of discounts (2009 – £1 million).
32 Change in working capital
Decrease in inventories
Decrease in receivables
Increase/(decrease) in payables
Decrease in derivative financial instruments (excluding debt-related derivatives)
Decrease in provisions for other liabilities and charges
Decrease in retirement benefit obligations
Decrease in working capital (continuing operations)
Excluded from the movement in retirement benefit obligations is an actuarial loss of £104 million (2009 – £71 million).
33 Cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
Total
2010
£m
113
126
84
8
(19)
(21)
291
2010
£m
142
362
504
The effective interest rate on short-term deposits was 0.4% (2009 – 3.0%), with an average maturity of 6 days (2009 – 24 days).
The carrying amount of cash and cash equivalents are denominated in the following currencies:
Euro
US dollar
Sterling
Other
Total
34 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
2010
£m
136
322
2
44
504
2010
£m
(1 119)
(190)
(9)
504
(814)
Notes
28
28
20
33
31 March
2009
£m
113
47
(84)
6
(34)
(17)
31
31 March
2009
£m
102
332
434
31 March
2009
£m
161
235
4
34
434
31 March
2009
£m
(1 129)
(523)
(13)
434
(1 231)
(a) Current borrowings and overdrafts at 31 March 2010 does not include any amounts (2009 – £98 million) in respect of securitised receivables.
(b) Derivative financial instruments presented within assets and liabilities in the statement of financial position of £7 million net asset comprise
net debt-related instruments of £9 million liability and net non-debt-related instruments of £16 million asset (2009 – £93 million net liability
comprising net debt-related instruments of £13 million liability and net non-debt-related instruments of £80 million liability).
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Tate & Lyle Annual Report 2010 103
Notes to the consolidated financial statements
34 Net debt (continued)
Net debt is denominated in the following currencies:
Euro
US dollar
Sterling
Other
Total
Movements in the Group’s net debt are as follows:
At 1 April
Increase in cash and cash equivalents in the year
Cash outflow from net decrease in borrowings
Debt transferred on disposal of subsidiaries
Inception of finance leases
Trade finance recognised as debt
Fair value and other movements
Exchange differences
Decrease/(increase) in net debt in the year
At 31 March
35 Contingent liabilities
Guarantees of loans and overdrafts of joint ventures and associates
Trade guarantees
2010
£m
(161)
(620)
(60)
27
(814)
31 March
2009
£m
(250)
(947)
(38)
4
(1 231)
2010
£m
2009
£m
(1 231)
(1 041)
80
267
–
–
(16)
7
79
417
229
16
8
(1)
(55)
(9)
(378)
(190)
(814)
(1 231)
2010
£m
–
13
31 March
2009
£m
9
22
In addition to the above we have guaranteed the obligations of certain subsidiaries and joint ventures to Payment Agencies in connection with
Restructuring Aid. The Group’s share of these guarantees is £6 million (2009 – £66 million).
Other trade guarantees have been given in the normal course of business by the Group at both 31 March 2010 and 31 March 2009. 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.
36 Commitments
Capital commitments
Commitments for the acquisition of property, plant and equipment
2010
£m
8
31 March
2009
£m
29
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
Total
104 Tate & Lyle Annual Report 2010
2010
£m
31
84
80
195
31 March
2009
£m
34
105
98
237
37 Acquisitions and disposals
Acquisitions
During the year ended 31 March 2008, the Group acquired 80% of the issued share capital of G.C. Hahn & Co. (Hahn) from Georg Hahn Familien
GmbH (the Hahn Family). As the Group effectively bears all the risks and rewards for 100% of this business, no minority interest is recognised in
the Group’s financial statements.
The acquisition agreement allowed 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. During the year to 31 March 2010 a put option was exercised for 75% of the remaining 20% for a total consideration
of £21 million which was paid by the Group on 31 March 2010. The Group can acquire the remaining 5% of the issued share capital of Hahn
prior to 1 January 2020 through put and call options. At 31 March 2010 deferred consideration of £7 million is recognised in trade and other
payables (Note 27).
In the year ended 31 March 2009, 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 represented an adjustment to the purchase price and was recognised as an addition to goodwill
in the year.
Disposals
International Sugar Trading
In the year to 31 March 2009, the Group disposed of its international Sugar Trading business to Bunge Limited (Bunge) for total consideration,
net of disposal costs of £57 million. Following agreement of completion adjustments, the Group repaid £26 million to Bunge during the year to
31 March 2010. A summary of the disposal is provided below:
Year to 31 March
Total consideration, net of costs
Net assets disposed
Trade and other payables repaid/(assumed)
Other items, including risk transfer payments and fair value adjustments
Loss on disposal
Cash flows:
Cash consideration, net of costs
Cash (used in)/generated from disposals
2010
£m
(26)
–
26
–
–
(26)
(26)
2009
£m
57
(14)
(43)
(22)
(22)
57
57
A number of minority interests 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 Group anticipates completion of disposal of these minority interests,
in the year to 31 March 2011. These minority interests are classified as current assets held for sale in the statement of financial position and are
stated at £18 million as at 31 March 2010 (2009 – £28 million).
Other Disposals
In the year ended 31 March 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.
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Tate & Lyle Annual Report 2010 105
Notes to the consolidated financial statements
38 Post balance sheet events
As a result of the decision being made to mothball the Fort Dodge plant, a further exceptional charge of approximately £25 million will be
recognised during the 2011 financial year in respect of onerous contracts relating to the facility.
39 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 comparative 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
Payables
– due to joint ventures
Financing
– loans to joint ventures
– deposits from joint ventures
Discontinued
Financing
– deposits from joint ventures
2010
£m
86
174
18
8
10
3
2010
£m
–
31 March
2009
£m
61
209
14
26
10
42
31 March
2009
£m
53
The Group had no material related party transactions containing unusual commercial terms.
Key management
Key management compensation is disclosed in Note 9.
40 Foreign exchange rates
The following exchange rates have been applied in the translation of the financial statements of foreign subsidiaries, joint ventures and associates:
Year to 31 March
2009
1.80
1.19
31 March
2009
1.43
1.08
2010
1.61
1.13
2010
1.52
1.12
Average foreign exchange rates
£1 = US$
£1 = €
Year end foreign exchange rates
£1 = US$
£1 = €
106 Tate & Lyle Annual Report 2010
41 Main subsidiaries and investments
Subsidiaries based in the United Kingdom1
G.C. Hahn & Co. Limited2
Molasses Trading Company Limited
Tate & Lyle Holdings Limited3
Tate & Lyle Industries Limited
Tate & Lyle International Finance PLC3
Tate & Lyle Investments Limited3
Tate & Lyle Investments (Gulf States) Limited
Tate & Lyle LLC
United Molasses (Ireland) Limited4
Type of business
Blending
Holding company
Holding company
See below
In-house treasury company
Holding company
Holding company
Holding company
Molasses
Percentage
of equity
attributable to
Tate & Lyle PLC
100
100
100
100
100
100
100
100
50
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
The Group holds 95% of the issued capital of Hahn and has the right to acquire the remaining 5% through put and call options. 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.
3 Direct subsidiaries of Tate & Lyle PLC.
4 Non-coterminous year end.
Main operating units of Tate & Lyle Industries Limited
Tate & Lyle Sugars , Europe
Tate & Lyle Molasses and Storage
Type of business
Sugar refining
Molasses and bulk liquid storage
Subsidiaries operating overseas
Country of incorporation or registration
Company
Type of business
Percentage
of equity
attributable to
Tate & Lyle PLC
Argentina
Australia
Belgium
Bermuda
Brazil
British Virgin Islands
Chile
China
France
Germany
Gibraltar
Hong Kong
Italy
Israel
Mauritius
Mexico
Morocco
Mozambique
Netherlands
Norway
Portugal
Singapore
South Africa
Spain
Trinidad
Tate & Lyle Argentina SA
G.C. Hahn & Co. (Australia) Pty. Ltd.2
Tate & Lyle ANZ Pty
Tate & Lyle Molasses Belgium NV
Tate & Lyle Services Belgium NV
Tate & Lyle Management & Finance Limited
Tate & Lyle Brasil do SA¹
Anglo Vietnam Sugar Investments Limited
Tate & Lyle Chile Commercial Ltda
Tate & Lyle Trading (Shanghai) Limited
France Melasse SA1
Société Européenne des Mélasses SA1
Tate & Lyle Molasses Germany GmbH
G.C. Hahn & Co. Stabilisierungstechnik GmbH2
Cesalpinia Germany GmbH
Tate & Lyle Insurance (Gilbraltar) Limited
Tate & Lyle Asia Limited
Tate & Lyle Molasses Italy SrL
Tate & Lyle Italia Spa
Tate & Lyle Gadot Manufacturing
Tate & Lyle Israel Limited
The Mauritius Molasses Company Limited
Continental Colloids Mexicana SA
Mexama SA de CV
Tate & Lyle Mexico SA de CV
Tate & Lyle Morocco SA
Companhia Exportadora de Melaços
Tate & Lyle Biomaterials BV
Tate & Lyle Molasses Holland BV
Tate & Lyle Holland BV
Tate & Lyle Netherlands BV
Nederlandse Glucose Industrie 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 (Pty) Limited
Tate & Lyle Molasses Spain SA
Caribbean Bulk Storage and
Trading Company Limited¹
Cereal sweeteners & starches,
Sucralose distribution
Blending
Sucralose distribution
Molasses
Holding company
Management & finance
Citric acid, Sucralose distribution
Holding company
Cereal sweeteners & starches,
Sucralose distribution
Sucralose distribution
Molasses
Holding company
Molasses
Blending
Blending
Reinsurance
Sucralose distribution
Molasses
Blending
Sugar refining
Sugar trading
Molasses
Blending
Citric acid
Holding company
Cereal sweeteners & starches
Molasses
Bio-development
Molasses
Holding company
Cereal sweetners & starches,
Sucralose distribution
Holding company
Sugar distribution
Holding company
Sugar refining
Molasses
High Intensity sweeteners
Blending
Molasses
Molasses
100
100
100
100
100
100
100
75
100
100
66.6
66.6
100
100
100
100
100
-
100
65
100
66.7
100
65
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Tate & Lyle Annual Report 2010 107
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Notes to the consolidated financial statements
41 Main subsidiaries and investments (continued)
Subsidiaries operating overseas (continued)
Country of incorporation or registration
Company
Type of business
Percentage
of equity
attributable to
Tate & Lyle PLC
USA
Vietnam
Staley Holdings Inc
Tate & Lyle Custom Ingredients LLC
Tate & Lyle Finance Inc
TLHUS, Inc
Tate & Lyle Ingredients Americas, Inc
Tate & Lyle Sucralose Inc
TLI Holding Inc
Nghe An Tate & Lyle Sugar Company Limited
Holding company
Blending
In-house banking
Holding company
Cereal sweeteners & starches
High intensity sweeteners
In-house banking
Cane sugar manufacture
100
100
100
100
100
100
100
(80.9) 60.7
1 Non-coterminous year-end.
2
The Group holds 95% of the issued capital of Hahn and has the right to acquire the remaining 5% through put and call options. 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.
Joint ventures
Country of incorporation or registration
Company
Amylum Bulgaria EAD1,2
Sucromiles SA2
Hungrana Kft1,2
Premier Molasses Company Limited2
Almidones Mexicanos SA2
Eaststarch CV
Amylum Slovakia spol sro1
Compania de Melazes SA2
Amylum Nisasta AS1
DuPont Tate & Lyle Bio Products Company LLC
Bulgaria
Columbia
Hungary
Ireland
Mexico
Netherlands
Slovakia
Spain
Turkey
USA
1 Share capital held by Eaststarch CV
2 Non-coterminous year-end.
Associates
Type of business
Cereal sweeteners & starches
Citric acid
Cereal sweeteners & starches
Molasses
Cereal sweeteners & starches
Holding company
Cereal sweeteners & starches
Molasses
Cereal sweeteners & starches
Industrial ingredients
Country of incorporation or registration
Company
Italy
Philippines
Thailand
1 Non-coterminous year-end.
Eridania Tate & Lyle Spa
Tate & Lyle Philippine Inc
Tapioca Development Corporation
Type of business
Sugars
Molasses
Starch production
Percentage
of equity
attributable to
Tate & Lyle PLC
(100)
(50)
(100)
(100)
50
50
25
50
50
50
50
50
50
50
Percentage
of equity
attributable to
Tate & Lyle PLC
35
40
33.3
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.
108 Tate & Lyle Annual Report 2010
42 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, impairments, and closure and restructuring provisions; 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 2010
Year to 31 March 2009
Exceptional/
amortisation
£m
Adjusted
£m
Reported
£m
Exceptional/
amortisation
£m
Continuing operations
Sales
Operating profit
Net finance expense
(Loss)/profit before tax
Income tax credit/(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
Loss before tax
Income tax expense
Minority interests
Loss attributable to equity
holders of the Company
Basic EPS (p)
Diluted EPS (p)
Tax rate
Total operations
Sales
Operating profit
Net finance expense
(Loss)/profit before tax
Income tax credit/(expense)
Minority interests
Profit attributable to equity
holders of the Company
Basic EPS (p)
Diluted EPS (p)
Tax rate
Reported
£m
3 506
8
(69)
(61)
84
(4)
19
4.2
4.2
–
290
–
290
(131)
–
159
34.9
34.7
3 506
3 553
298
(69)
229
(47)
(4)
178
39.1
38.9
164
(51)
113
(19)
(5)
89
19.5
19.4
137.7%
20.4%
16.8%
101
(2)
(2)
(4)
–
–
(4)
(0.9)
(0.9)
–
3 607
6
(71)
(65)
84
(4)
15
3.3
3.3
–
–
–
–
–
–
–
–
–
–
290
–
290
(131)
–
159
34.9
34.7
101
(2)
(2)
(4)
–
–
(4)
(0.9)
(0.9)
–
852
(21)
(2)
(23)
(1)
–
(24)
(5.3)
(5.3)
(3.8)%
3 607
4 405
296
(71)
225
(47)
(4)
174
38.2
38.0
143
(53)
90
(20)
(5)
65
14.2
14.1
129.2%
20.9%
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
Adjusted
£m
3 553
298
(51)
247
(68)
(5)
174
38.2
38.0
27.3%
852
1
(2)
(1)
(1)
–
(2)
(0.4)
(0.5)
(75.0)%
4 405
299
(53)
246
(69)
(5)
172
37.8
37.5
27.8%
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Tate & Lyle Annual Report 2010 109
Independent Auditors’ Report to the Members of Tate & Lyle PLC:
Parent company financial statements
We have audited the Parent company financial statements of
Tate & Lyle PLC for the year ended 31 March 2010 which comprise
the Parent company balance sheet and the Notes to the Parent
company financial statements. The financial reporting framework
that has been applied in their preparation is applicable law and
United Kingdom Accounting Standards (United Kingdom Generally
Accepted Accounting Practice).
Respective responsibilities of directors and auditors
As explained more fully in the Directors’ statement of responsibilities
set out on page 57, the directors are responsible for the preparation of
the Parent company financial statements and for being satisfied that
they give a true and fair view. Our responsibility is to audit the Parent
company financial statements in accordance with applicable law and
International Standards on Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions, has been prepared for and only
for the company’s members as a body in accordance with Chapter
3 of Part 16 of the Companies Act 2006 and for no other purpose.
We do not, in giving these opinions, 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.
Scope of the audit of the financial statements
An audit involves obtaining evidence about the amounts and
disclosures in the financial statements sufficient to give reasonable
assurance that the financial statements are free from material
misstatement, whether caused by fraud or error. This includes an
assessment of: whether the accounting policies are appropriate to
the Parent company’s circumstances and have been consistently
applied and adequately disclosed; the reasonableness of significant
accounting estimates made by the directors; and the overall
presentation of the financial statements.
Opinion on financial statements
In our opinion the Parent company financial statements:
n
n
n
give a true and fair view of the state of the company’s affairs
as at 31 March 2010;
have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements
of the Companies Act 2006.
Opinion on other matters prescribed by the
Companies Act 2006
In our opinion:
n
n
the part of the directors’ remuneration report to be audited
has been properly prepared in accordance with the Companies
Act 2006; and
the information given in the directors’ report for the financial year
for which the Parent company financial statements are prepared
is consistent with the Parent company financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following matters where
the Companies Act 2006 requires us to report to you if, in our opinion:
n
n
n
n
adequate accounting records have not been kept by the Parent
company, or returns adequate for our audit have not been
received from branches not visited by us; or
the Parent company financial statements and the part of the
directors’ remuneration report to be audited are not in agreement
with the accounting records and returns; or
certain disclosures of directors’ remuneration specified by law are
not made; or
we have not received all the information and explanations we
require for our audit.
Other matter
We have reported separately on the Group financial statements of
Tate & Lyle PLC for the year ended 31 March 2010.
Paul Cragg (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
1 Embankment Place
London WC2N 6RH
26 May 2010
Note: the maintenance and integrity of the Tate & Lyle PLC website is the
responsibility of the directors; the work carried out by the auditors does not
involve consideration of these matters and, accordingly, the auditors accept
no responsibility for any changes that may have occurred to the financial
statements since they were initially presented on the website.
110 Tate & Lyle Annual Report 2010
Parent company balance sheet
Fixed assets
Tangible assets
Investments in subsidiary undertakings
Investment in associates
Current assets
Debtors – due within one year
Debtors – due after more than one year
Creditors – due within one year
Net current assets/(liabilities)
Total assets less current liabilities
Creditors – due after more than one year
Provisions for liabilities and charges
Total net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Profit and loss account
Shareholders’ funds
Notes
2
3
4
5
5
6
7
9
12
13
13
13
Year to 31 March
2010
£m
2
1 416
1
1 419
399
1
400
(61)
339
1 758
(490)
(1)
1 267
115
405
8
739
2009
£m
2
1 879
1
1 882
53
3
56
(135)
(79)
1 803
(514)
(3)
1 286
115
404
8
759
1 267
1 286
The Parent company financial statements were approved by the Board of directors on 26 May 2010 and signed on its behalf by:
Javed Ahmed, Tim Lodge
Directors
Registered no. 76535
The notes on pages 112 to 117 form part of these Parent company financial statements.
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Tate & Lyle Annual Report 2010 111
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 and computer software 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
2006 and applicable UK accounting standards. As permitted by
Section 408(2) of the Companies Act 2006, 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
2010 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 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
–
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 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
Amendments to FRS29 Financial Instruments: Disclosures
Amendment to FRS20 Share-based payment – Group cash-
settled share-based payment transactions
The 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.
112 Tate & Lyle Annual Report 2010
Dividend distribution
Final dividend distributions to the Company’s equity holders are
recognised as a liability in the Group’s financial statements in the
period in which the dividends are approved by the Company’s
shareholders, while interim dividend distributions are recognised in the
period in which the dividends are declared and paid. Where a scrip
alternative is offered and taken, the distribution is effected through an
issue of bonus shares from the share premium account.
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 30 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 26
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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Tate & Lyle Annual Report 2010 113
Notes to the Parent company financial statements
2 Tangible fixed assets
The net book value of tangible fixed assets of £2 million (2009 – £2 million) comprises plant and machinery and computer software. Net book value
comprises cost of £4 million (2009 – £4 million) less accumulated depreciation of £2 million (2009 – £2 million).
3
Investments in subsidiary undertakings
At 1 April 2009
Increase – share-based payments
Impairment
Write-offs
Exchange differences
At 31 March 2010
Shares in
subsidiary
undertakings
£m
Loans to
subsidiary
undertakings
£m
1 635
2
(3)
(196)
(22)
1 416
244
–
–
(240)
(4)
–
Total
£m
1 879
2
(3)
(436)
(26)
1 416
Shares in subsidiary undertakings are stated at cost or earliest ascribed value less amounts provided of £149 million (2009 – £149 million).
The impairment reflects the write-down to recoverable amount of the Company’s investment in Tate & Lyle Ventures Ltd. The write-offs have
arisen as a result of a rationalisation of the Group subsidiary structure in the United Kingdom and involved share reductions, loan forgiveness
and liquidation, and striking off of certain companies no longer required. The gain arising on this exercise of £25 million has been treated
as non-distributable.
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
(2009 – £1 million).
5 Debtors
Due within one year
UK taxation
Amounts due from subsidiary undertakings
Other debtors
Prepayments and accrued income
Total
Due after more than one year
Deferred tax
Total
2010
£m
16
377
5
1
399
2010
£m
1
1
31 March
2009
£m
7
38
7
1
53
31 March
2009
£m
3
3
Note
8
114 Tate & Lyle Annual Report 2010
6 Creditors – due within one year
Amounts owed to subsidiary undertakings
Other creditors
Accruals and deferred income
Total
2010
£m
49
4
8
61
31 March
2009
£m
126
5
4
135
The effective interest rate applicable to amounts owed to subsidiary undertakings at 31 March 2010 is 1.5% (2009 – 1.6%). 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
2010
£m
488
2
490
31 March
2009
£m
512
2
514
The effective interest rate applicable to amounts owed to subsidiary undertakings at 31 March 2010 is 6.5% (2009 – 6.5%). Amounts owed to
subsidiary undertakings at year end mature after more than two years (2009 – mature after more than three years).
8 Deferred tax
Deferred tax charged to profit in the year was £2 million (2009 – £2 million).
9 Provisions for liabilities and charges
At 31 March 2009
Utilised in the year
At 31 March 2010
Restructuring
£m
2
(1)
1
Other
£m
1
(1)
–
Total
£m
3
(2)
1
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
2010
£m
31 March
2009
£m
1 251
1 407
Guarantees given in respect of drawn and undrawn loans and overdrafts by Tate & Lyle PLC were £2,661 million at 31 March 2010
(2009 – £2,807 million).
Other trade guarantees have been given in the normal course of business by Tate & Lyle PLC at both 31 March 2010 and 31 March 2009.
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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Tate & Lyle Annual Report 2010 115
Notes to the Parent company financial statements
11 Financial commitments
Annual payments made by the Company in the year ended 31 March 2010 in respect of operating leases that expire later than one year and
no later than five years were £3 million (2009 – £3 million expiring after more than five years).
12 Called up share capital
Authorised equity share capital
790,424,000 ordinary shares of 25p each (2009 – 790,424,000)
Allotted, called up and fully paid equity share capital
At 1 April
Allotted under share option schemes
Scrip dividend shares issued
At 31 March
2010
£m
198
31 March
2009
£m
198
31 March 2010
31 March 2009
Shares
460 012 801
48 287
514 612
460 575 700
£m
115
–
–
115
Shares
459 910 466
102 335
–
460 012 801
£m
114
1
–
115
Treasury shares and shares held in ESOP trust
As at 31 March 2010, the Group held 512,490 shares (2009 – 1,328,502 shares) in Treasury.
During the year 816,012 shares (2009 – 1,426,571 shares) were released from Treasury to satisfy share options exercised.
The shares held in Treasury at 31 March 2010 represented 0.1% (2009 – 0.3%) of the share capital at the year end, and have a nominal value of
£0.1 million (2009 – £0.3 million).
As at 31 March 2010, the Group held 3,141,100 shares (2009 – 1,840,801 shares) in an ESOP trust at a nominal value of 25p and a market value
of 454.2p (2009 – 260.5p).
13 Reconciliation of movements in shareholders’ funds
At 1 April 2009
Profit for the year
Proceeds from shares issued
Share purchase
Share-based payments
Ordinary dividends paid
Issue of shares for scrip dividend
At 31 March 2010
Ordinary
shares
£m
115
–
–
–
–
–
–
115
Share
premium
account
£m
Capital
redemption
reserve
£m
Profit and
loss account
£m
404
–
1
–
–
–
–
405
8
–
–
–
–
–
–
8
759
83
1
(6)
5
(105)
2
739
Total
£m
1 286
83
2
(6)
5
(105)
2
1 267
The profit for the year before dividends dealt with in the financial statements of the Company amounted to £83 million (2009 – £518 million).
The amount available for the payment of dividends by the Company at 31 March 2010 was £714 million (2009 – £759 million). As at 31 March
2010, there was £25 million (2009 – £nil) of non-distributable reserves in the profit and loss account (see Note 3).
During the year ended 31 March 2010, shareholders were given the option to receive the interim dividends in the form of a scrip issue.
On 8 January 2010, the Group issued 514,612 shares for scrip at a nominal value per share of 25p and a cash equivalent value of £4.25.
116 Tate & Lyle Annual Report 2010
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 408(2) of the Companies Act 2006, the Company has not presented its own profit and loss account.
The Company employed 94 staff including directors (2009 – 90) and the total staff costs are shown below:
Wages and salaries
Social security
Retirement benefits
Total
2010
£m
11
1
1
13
31 March
2009
£m
11
1
1
13
Directors’ emoluments disclosures are provided in the directors’ remuneration report on pages 47 to 56 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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Find out more about Tate & Lyle
at www.tateandlyle.com
Tate & Lyle Annual Report 2010 117
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
2001
2002
2003
20041
20053,4,7
20064,7
20074
20084
20094
20104
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
454.2
3.3
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
38.2
3.3
38.0
22.9
Closing market capitalisation (£ million)
1 102
1 683
1 441
1 435
2 586
2 791
2 816
2 484
1 198
2 092
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
2.3
3.3
7.6
9.3
11.6
9.9
8.4
7.8
6.1
5.8
91%
59%
45%
40%
48%
92%
90%
110%
122%
95%
4.3%
5.3%
7.8%
7.7%
8.3%
8.8%
9.2%
8.7%
6.8%
8.2%
8.5% 10.5% 14.2% 15.4% 18.8% 18.9% 18.9% 15.5% 12.7% 14.1%
(2.8)
1.4
1.5
1.7
1.6
(0.3)
2.1
1.8
0.6
0.1
0.8
1.2
1.8
1.8
1.9
2.1
2.3
1.8
1.7
1.7
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
‘Amortisation’ relates to the amortisation of acquired intangible assets.
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.
6 These ratios have been calculated using the results of both continuing and discontinued operations.
7 Comparative figures for 2005 and 2006 have been restated to reflect the adoption of IFRIC4.
Results presented above are for years to 31 March and have been calculated using the Group’s published interim and full-year financial statements.
118 Tate & Lyle Annual Report 2010
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
(Loss)/profit before net finance expense
Net finance expense
Net finance (expense)/income of
joint ventures and associates
(Loss)/profit before tax
Income tax (expense)/credit
(Loss)/profit after tax
Minority interests
Discontinued operations
(Loss)/profit for the year
Profit before tax, exceptional items
and amortisation
UK GAAP2
IFRS
2001
£m
2002
£m
2003
£m
20041
£m
20053,4,6
£m
20064,6
£m
20074
£m
20084
£m
20094
£m
20104
£m
1 860
–
307
1 699
–
114
1 565
–
94
1 414
–
107
1 461
3
37
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)
1 548
21
45
18
1 632
(814)
(142)
(93)
(144)
(155)
1 062
1 081
1 044
978
(44)
983
(51)
940
(85)
(123)
(119)
995
950
1 013
123
885
123
920
123
889
1 008
54
1 043
38
1 012
32
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
36
854
115
712
827
27
854
4 146
3 944
3 167
3 167
3 339
3 465
3 225
2 867
3 553
3 506
156
(5)
–
151
29
180
180
(8)
–
172
36
208
219
(8)
(39)
172
35
207
(307)
–
(12)
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
295
(12)
(59)
224
298
(15)
(119)
164
–
–
–
289
224
164
–
–
–
289
(36)
–
253
(88)
165
(3)
52
214
–
–
–
224
(42)
–
182
(76)
106
7
81
194
–
–
–
164
(51)
–
113
(19)
94
(5)
(24)
65
298
(14)
(276)
8
–
8
–
–
–
8
(69)
–
(61)
84
23
(4)
(4)
15
113
159
228
227
254
267
275
253
247
229
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
‘Amortisation’ relates to the amortisation of acquired intangible assets.
Profit summary information for the years ended 31 March 2009 and 31 March 2010 is presented in accordance with the presentation adopted in the 2010 Group financial
statements and unless otherwise stated represents continuing operations only. Profit summary information for the years ended 31 March 2008, 31 March 2007 and
31 March 2006 is presented in accordance with the presentation adopted in the Group Financial Statements for 2009, 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 2010 119
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Information for investors
Dividends on ordinary shares
Two payments were made during the tax year 2009/2010 as follows:
Financial calendar (dates are provisional except those
marked with an asterisk)
2010 Annual General Meeting
Announcement of half-year results for
six months to 30 September 2010
Announcement of full-year results for
the year ending 31 March 2011
2011 Annual General Meeting
22 July 2010*
4 Nov 2010
26 May 2011
28 July 2011
Dividend on ordinary shares
2010 final
2011 interim
2011 final
Announced
Payment date
27 May 2010*
30 July 20101
4 Nov 2010 26 May 2011
5 Aug 20111
7 Jan 2011
1 Subject to the approval of shareholders
Dividends on 6½% cumulative preference shares
Paid 31 March and 30 September.
Electronic communications
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.
Payment date
31 July 2009
8 Jan 2010
Dividend
description
Final 2009
Interim 2010
Dividend
per share
16.1p
6.8p
Services
Shareholding enquiries
Queries on shareholdings should be addressed to Tate & Lyle’s
Registrar, Equiniti.
Equiniti Limited
Aspect House
Spencer Road
Lancing
West Sussex
BN99 6DA
Tel: 0871 384 2063† (for UK calls)
+44 (0)121 415 0235 (for calls from outside the UK)
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. Lines are open from
8:30am to 5:30pm UK time, Monday to Friday.
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.
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
6½% 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 on the OTCQX exchange under the ticker symbol TATYY.
Each ADS is equivalent to four ordinary shares. For more information,
contact the Bank of New York Mellon at:
The Bank of New York Mellon
Shareowner Services
PO Box 358516
Pittsburgh
PA 15252-8516
Tel: +1 888 269 2377 (for US calls)
+1 201 680 6825 (for calls from outside the USA)
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.
120 Tate & Lyle Annual Report 2010
Find out more about Tate & Lyle
at www.tateandlyle.com
Contents
Directors’ report
Overview
1 Performance highlights
2 Chairman’s statement
3 Chief Executive’s review
Business review
8 What we do
18 Performance
18 Group financial results
21 Food & Industrial Ingredients, Americas
23 Food & Industrial Ingredients, Europe
24 Sugars
26 Sucralose
27 Other financial information
32 Corporate social responsibility
Governance
38 Board of directors
40 Executive management
41 Corporate governance
47 Directors’ remuneration report
56 Other statutory and governance information
57 Directors’ statement of responsibilities
Financial statements and
other information
Financial statements
58 Independent Auditors’ Report to the
Members of Tate & Lyle PLC
59 Consolidated income statement
60 Consolidated statement of
comprehensive income
61 Consolidated statement of financial position
62 Consolidated statement of cash flows
63 Consolidated statement of changes in
shareholders’ equity
64 Notes to the consolidated financial statements
110 Parent company financial statements
Shareholder information
118 Ten-year review
120 Information for investors
www.tateandlyle.com
Tate & Lyle is a global provider of
ingredients and solutions to the food,
beverage and other industries. We
transform raw materials into distinctive,
high-quality ingredients for our customers
which are consumed or used by millions
of people every day.
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.
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 57 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.
A reconciliation of reported and adjusted information
is included in Note 42 on page 109.
A new way of reporting
You will notice that we have changed
the way we report this year. The focus of
this annual report is to fulfil our statutory
obligations to report on the performance
and prospects of the Company to our
shareholders. For everything else you
would like to know about Tate & Lyle,
please go to our new website,
www.tateandlyle.com.
Cautionary statement
Please read the full cautionary and non-reliance statements
which can be found on page 121.
Definitions
In this report, ‘Company’ means Tate & Lyle PLC; ‘Tate & Lyle’
or ‘Group’ means Tate & Lyle PLC and its subsidiary and
joint-venture companies.
Trademarks
SPLENDA® and the SPLENDA® logo are trademarks of
McNeil Nutritionals, LLC.
The DuPont Oval logo, DuPont™ and Sorona® are trademarks or
registered trademarks of E. I. du Pont de Nemours and Company.
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 2010.
More information about Tate & Lyle can be
found on our website at www.tateandlyle.com.
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®
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
Credits
Designed, typeset and produced by
www.berghindjoseph.com
Photography by David Rees
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.
Tate & Lyle Annual Report 2010 121
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www.tateandlyle.com
Annual Report 2010