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www.tateandlyle.com
Annual Report 2011
Focus, Fix, Grow.
Contents
Directors’ report
Business review*
1 Performance highlights
2 Our business
4 Chairman’s statement
5 Chief Executive’s review
8 Strategy and key performance indicators
10 Group financial results
12 Speciality Food Ingredients
15 Bulk Ingredients
18
19
22 Additional financial information
26 Corporate responsibility
Innovation and Commercial Development
Risk management
Governance*
32 Board of directors
34 Executive management
35 Corporate governance
44 Directors’ remuneration report
57 Other statutory and governance information
59 Directors’ statement of responsibilities
Financial statements and
shareholder information
Financial statements
60
61
62
63
64
65
66
112
Independent Auditors’ Report to the
Members of Tate & Lyle PLC
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in
shareholders’ equity
Notes to the consolidated financial
statements
Parent company financial statements
Shareholder information
118 Five-year review
120
Information for investors
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.
Adjusted operating profit, adjusted profit
before tax and adjusted earnings per share
Unless stated otherwise, adjusted operating
profit, adjusted profit before tax 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
‘amortisation’ or ‘amortisation of acquired
intangibles’ on pages 1 to 59 in this annual report
relates to the amortisation of intangible assets
acquired through business combinations.
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 43 on page 111.
Cautionary statement
Please read the full cautionary and non-reliance
statements which can be found on the inside
back cover.
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.
* These sections make up the Directors’ report. This part
of the annual report sets out the information on the
Group’s principal activities, together with a review of the
development and performance of the Group, including
financial performance, in accordance with Section
417 of the Companies Act 2006.
This report is available online at
www.tateandlyle.com/annualreport2011
We are always reviewing the way that we
communicate with our shareholders and this
year we have also produced this report as
an iPad app which you can download for
free from the AppStore.
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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 2011.
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.
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Tate & Lyle Annual Report 2011 121
Business review Performance highlights
Adjusted operating profit1
£m
Adjusted diluted earnings per share1
pence
321
268
45.7
33.7
20102
2011
20102
2011
Dividend per share
pence
Net debt3
£m
22.9
22.9
23.7
1 231
814
464
2009
2010
2011
2009
2010
2011
Notes
1
2
3
Before exceptional items and amortisation of acquired intangible assets.
The results for the year ended 31 March 2010 have been restated to reflect the reclassification
of the Sugars segment as discontinued operations.
Exchange rate movements reduced net debt by £27 million in the year ended 31 March 2011.
Excluding movements in exchange rates, net debt reduced by £323 million.
Statutory results
Operating profit/(loss)
Profit/(loss) before tax (continuing operations)
Profit for the year (total operations)
Diluted earnings per share (total operations)
Year to 31 March
2010
£(44)m
£(116)m
£19m
3.3p
2011
£303m
£245m
£167m
34.7p
Tate & Lyle Annual Report 2011 1
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Speciality Food Ingredients
Innovation
and Commercial
Development
Bulk Ingredients
Customers
Customers
Business review Our business
Tate & Lyle is a global provider of ingredients and
solutions to the food, beverage and other industries.
Through our production facilities around the world,
we turn raw materials into distinctive, high quality
ingredients for our customers. Our ingredients
and solutions add taste, texture, nutrition and
functionality to products used or consumed by
millions of people every day.
Here we explain how our business works.
Raw materials
Sources
Operations
All our ingredients are produced from crops,
predominantly corn. Ensuring we have a reliable
source of corn for our plants is essential.
This involves developing long-term, mutually
beneficial relationships with growers, farmers
and other commercial partners to secure supply;
understanding commodity markets; and hedging
costs where feasible. Supply chain ethics are
important to us. We apply rigorous standards,
both practical and ethical, to all suppliers, and
work with them to help them meet our compliance
needs. This is essential if we are to meet our
customers’ requirements for traceability and
quality throughout the supply chain.
We operate through two global business
divisions – Bulk Ingredients (BI) and Speciality
Food Ingredients (SFI). Each division has its own
dedicated manufacturing base as well as separate
commercial organisations to provide the necessary
focus and expertise for customers in their two
different end markets. BI produces ingredients
which are relatively undifferentiated and are sold
in markets where customers principally look
for supplier reliability, quality and value. SFI on
the other hand produces distinctive, high-value
ingredients which are sold in markets where
customers look for technical and innovation
capability, insight and flexibility.
2 Tate & Lyle Annual Report 2011
Raw materials
Speciality Food Ingredients
Innovation
and Commercial
Development
Bulk Ingredients
Customers
Customers
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SFI also has a food systems or blending
business which sources ingredients and uses
them along with our own to develop bespoke
combinations of ingredients primarily for
small- to medium-sized customers.
Both divisions – but principally SFI – are
supported by the Innovation and Commercial
Development (ICD) group. ICD brings together
product development, marketing and platform
management into one global team, enabling
a fully integrated approach to developing
and commercialising innovation.
Customers
Food and beverage is our most significant market
comprising over 75% of Group sales. Other markets
we sell into include industrial, animal feed, and
pharmaceutical and personal care.
Customer understanding drives all that we do.
We use market research to understand the consumer
(our customer’s customer), the markets we operate
in and our customers’ needs. 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 us.
For large customers, our ICD group provides technical
and applications support. For smaller customers, our
ICD group is often their R&D team.
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Tate & Lyle Annual Report 2011 3
Business review Chairman’s statement
Tate & Lyle has made progress
during the year, delivering a good
financial performance and having
taken a number of important steps
in line with our strategy to ‘focus,
fix and grow’ the business.
We have no higher priority than safety. In light of the
above, during the year we asked DuPont, recognised
as an industry leader in safety, to undertake a review
of safety across the Group. The results of this audit
have catalysed an action plan which will help us
achieve our long-term goal of world-class safety
performance. My colleagues on the Board and I
will continue to pay close attention to this.
Corporate responsibility and risk management
Following its 2010 effectiveness review, the Board
established a Corporate Responsibility Committee
to strengthen its oversight of safety, social,
environmental and ethical matters.
Profit before tax, exceptional
items and amortisation of acquired
intangible assets of £263 million
represents growth of 34%
(32% in constant currency).
Providing strong, effective leadership within a sound
framework of control is the Board’s primary duty
and requires directors to have a deep understanding
of the business. We began a programme of
individual site visits by directors which has helped
us enormously in our work this year to enhance risk
management and determine an appropriate risk
appetite for Tate & Lyle. It has also made the directors
more visible to employees. This will be very important
in the coming year as we continue to implement our
strategy and intensify our focus on safety.
Finally, I would like to thank all our employees who
have worked immensely hard during a period of
great change to deliver this year’s results.
Sir Peter Gershon
Chairman
26 May 2011
Sir Peter Gershon
Chairman
Overview
We have refocused the business through the sale
of our EU Sugar Refining Operations, Molasses
business and ethanol facility in Fort Dodge, Iowa,
USA, and the reorganisation of the Group into
two global operating divisions, Speciality Food
Ingredients and Bulk Ingredients, supported by
the creation of the Innovation and Commercial
Development group, a unit dedicated to driving
long-term growth.
During the year, the Board approved two major
strategic initiatives to support the transformation of
the business. The first, the Commercial and Food
Innovation Centre in Chicago, USA will transform
our product development capability and the way
we work with our customers; the second, the
development of a single set of business processes
supported by one global IT infrastructure and a
global Shared Services Centre in Łód ´z, Poland, will
make the business more efficient and responsive.
Financial performance
Profit before tax, exceptional items and
amortisation of acquired intangible assets of
£263 million represents growth of 34% (32%
in constant currency) on the previous year, with
Speciality Food Ingredients and Bulk Ingredients
delivering an increase of 26% and 15% in adjusted
operating profit respectively.
Through a combination of continued tight financial
discipline, strong cash generation and proceeds
from disposals, net debt at the year end stood at
£464 million, a 43% reduction on the previous
year (2010 – £814 million).
I am also pleased to report that we have made
progress reducing the amount of adverse
exceptional items reported within these results.
Dividend
The Board is recommending a 5% increase in the
final dividend to 16.9p, making a full-year dividend
of 23.7p per share, up 3.5% on the prior year.
The proposed increase in the dividend reflects
the Board’s confidence in the business.
Safety
The Board deeply regrets the fatality that
occurred at our joint-venture plant in Turkey in
May 2010 as reported last year. Whilst our overall
safety performance has continued to compare well
against the industry we are very disappointed that
our performance has deteriorated from last year.
4 Tate & Lyle Annual Report 2011
Business review Chief Executive’s review
Our objective remains to build a
platform on which we can deliver
steady and sustainable long term
growth and value for shareholders.
We remain on track to deliver on
this objective.
Javed Ahmed
Chief Executive
Results for the continuing operations are adjusted
to exclude exceptional items and amortisation
of acquired intangible assets. Except where
specifically stated to the contrary, this commentary
relates only to the adjusted results for the
continuing operations. A reconciliation of statutory
and adjusted information is included at Note 43.
The net finance expense from continuing
operations decreased from £72 million to
£58 million principally as a result of lower pension
interest expense. Adjusted profit before tax was
up 34% (32% in constant currency) to £263 million
(2010 – £196 million) reflecting the strong operating
performance and reduction in net interest charge.
Overview of Group’s financial performance
Tate & Lyle performed well in the year achieving
steady volume growth across a number of our
markets, very strong returns from co-products
and lower sucralose manufacturing costs.
Sales for the year were £2,720 million
(2010 – £2,533 million), an increase of 7%
(5% in constant currency) on the prior year.
In Speciality Food Ingredients, sales increased
by 2% (2% in constant currency) to £805 million
(2010 – £788 million) with sales volumes up by
7%. The rate of sales growth was impacted by
reduced selling prices for SPLENDA® Sucralose
reflecting our strategy of securing long-term
volume incentive contracts with our customers.
Within Bulk Ingredients, sales increased by
10% (7% in constant currency) to £1,915 million
(2010 – £1,745 million).
Adjusted operating profit increased by 20%
(17% in constant currency) to £321 million
(2010 – £268 million). In Speciality Food
Ingredients, adjusted operating profit increased
by 26% (25% in constant currency) to £206 million
(2010 – £163 million), driven by increased sales
volumes, operational leverage, improved product
mix and lower SPLENDA® Sucralose manufacturing
costs. The effect of exchange translation was to
increase adjusted operating profit by £2 million.
In Bulk Ingredients, adjusted operating profit
increased by 15% (11% in constant currency) to
£157 million (2010 – £136 million), driven by volume
growth, very strong returns from co-products and
an improved performance from ethanol offset
by lower margins in sweeteners and industrial
starches. Higher corn prices, particularly in the
second half of the year, resulted in an additional
£16 million of co-product returns compared to the
prior year. The effect of exchange translation was
to increase adjusted operating profit by £5 million.
Central costs, which include head office, treasury
and reinsurance activities, increased by £11 million
to £42 million reflecting the costs associated with
strengthening the Group’s senior management
team, costs associated with our financing portfolio
and one-off costs of £6 million in the first half
relating to the review of the Group’s activities.
Adjusted diluted earnings per share increased by
36% (34% in constant currency) to 45.7p benefiting
from improved operating performance and a lower
effective tax rate of 18.5% (2010 – 20.8%).
In Speciality Food Ingredients,
adjusted operating profit
increased by 26% (25% in
constant currency).
Exceptional items on continuing and
discontinued operations totalled a charge of
£48 million (2010 – £276 million). Within continuing
operations there was a net £10 million gain on the
sale of the Fort Dodge facility and £15 million of
costs associated with the business transformation
programme. Within discontinued operations a
loss of £55 million was booked on the disposal
of the EU Sugar Refining Operations (EU Sugars),
which remains subject to closing adjustments
and adjudication as discussed in Note 35, and
a gain of £12 million on the disposal of Molasses.
Balance sheet
We continue to focus on managing our working
capital closely resulting in our average quarterly
cash conversion cycle falling from 45 days
to 34 days.
The key performance indicators (KPIs) of our
financial strength, the ratio of net debt to earnings
before interest, tax, depreciation and amortisation
(EBITDA) and interest cover, remain well within our
internal targets. At 31 March 2011, the net debt
to EBITDA ratio was 1.1 times (2010 – 1.8 times),
against our target of 2.0 times. Interest cover on
total operations at 31 March 2011 was 6.9 times
(2010 – 5.8 times), again ahead of our minimum
target of 5.0 times.
Tate & Lyle Annual Report 2011 5
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Business review Chief Executive’s review
The Group’s balance sheet was strengthened
significantly during the year. Net debt reduced
by 43% to £464 million at 31 March 2011
(31 March 2010 – £814 million). This improvement
in net debt, which builds upon the considerable
reduction achieved in the prior year, was driven
by the disposals of EU Sugars, Molasses and
Fort Dodge, resulting in a net cash inflow of
£316 million, and the underlying cash generated
by the business.
Return on capital employed increased from
13.6% to 20.6% as a result of increased profits,
a reduction in operating assets reflecting the
writedown of Fort Dodge, the reduced average
levels of working capital within the business
and exchange rate effects.
Dividend
The Board is recommending a 5% increase in
the final dividend to 16.9p (2010 – 16.1p) making
a full year dividend of 23.7p (2010 – 22.9p) per
share, up 3.5% on the prior year. Subject to
shareholder approval, the proposed final dividend
will be due and payable on 5 August 2011 to
all shareholders on the Register of Members
at 1 July 2011. In addition to the cash dividend
option, shareholders will also be offered a Dividend
Reinvestment Plan (DRIP) alternative. The DRIP
replaces the scrip alternative that was previously
available to shareholders.
Our new operating model is
simple and transparent and
provides an efficient platform
for future growth.
Safety
We have no higher priority than safety and are
committed to providing safe and healthy working
conditions for all our employees, contractors and
visitors. Whilst we are pleased that the safety
performance at most of our locations improved
in the 2010 calendar year, and that our safety
performance continues to compare favourably
against the industry, the Group’s overall safety
performance (as detailed in the KPI table on pages
8 and 9) deteriorated in 2010. Having set ourselves
very high standards, we take any reduction in
performance very seriously. A detailed plan has
been put in place to drive an improvement in
safety performance which our global safety
teams, employees and contractors are working
hard to embed across the Group.
Focus, fix, grow: update
As we set out in May 2010, Tate & Lyle’s
strategy is to grow our Speciality Food Ingredients
business supported by cash generated from Bulk
Ingredients. To deliver on this strategy, and to
reinvigorate Tate & Lyle, we have taken a number
of steps during the year to ‘focus, fix and grow’
the business.
Focus
We have disposed of a number of businesses
and assets to ensure that our resources are
focused on delivering our strategy and maximising
returns to shareholders. During the year we sold
EU Sugars, Molasses, Fort Dodge and, after the
year-end, we announced the conditional sale of
our Vietnam sugar interests. As a result of these
disposals, Tate & Lyle is a more focused, less
complex business with a reduced exposure
to commodity markets.
Fix
The new operating model implemented on
1 June 2010 based on two global business units,
Speciality Food Ingredients and Bulk Ingredients,
supported by a global unit dedicated to driving
growth, Innovation and Commercial Development,
and shared support services is being embedded.
This new operating model is simple and transparent
and provides an efficient platform for future growth,
both organically and through bolt-on acquisition.
We have also taken steps to strengthen the
customer-facing areas of our business – for
example, the commercial organisations of the
speciality and bulk businesses have been
separated and are now fully focused on
serving their different end markets.
In May 2010, we announced two major two-year
initiatives to transform our operational capabilities –
firstly, to implement a common global IS/IT platform
and secondly, to provide global support services
through the use of shared service centres. After
a detailed and thorough planning process, both
initiatives were launched on 1 January 2011 and
are making good progress. Following an evaluation
of a number of different locations, the decision was
made to locate our global Shared Service Centre
in Łód ´z, Poland. The new centre is expected to be
operational by the end of 2011 with the various
services to be provided migrated to the new centre
in a phased process over a 12- to 15-month period.
The new IS/IT platform will also be implemented via
a phased process starting in the first half of 2012.
Building a high-performance culture is a key part
of the ‘fix’ phase. To help achieve this, during the
year we put in place a new global performance
management system, a new global sales incentive
system and established common global metrics in
areas such as working capital, customer service
and quality. Ensuring we have the right skills and
talent in the business is also very important. We
are developing our high potential employees by
providing them with more training and opportunities
to learn, particularly with international assignments,
and are also recruiting new staff both to fill skills
gaps and to refresh our talent base.
The new process for capital investment planning
and implementation has now been fully embedded
within the organisation. All new investments are
now evaluated against clear strategic and financial
criteria with greater scrutiny and clear execution
milestones for approved investments.
6 Tate & Lyle Annual Report 2011
Grow
The Innovation and Commercial Development
(ICD) group, which was formed on 1 June 2010,
has made good progress during the year working
closely with customers on product development
and innovation initiatives. ICD is responsible for
the innovation pipeline and, during the year, the
processes used by ICD to manage and review the
pipeline, and the way it launches new products,
were completely overhauled. During the year we
launched RESISTAMYL™ 140, a bakery cream
starch in Europe, and PROMITOR™ Soluble
Corn Fiber 85 in the USA and Latin America.
We also recently announced a five-year strategic
partnership agreement with BioVittoria Ltd for the
exclusive global marketing and distribution rights
for BioVittoria’s monk fruit extract, marketed under
the PUREFRUIT™ brand name. PUREFRUIT™ is the
only fruit-based calorie-free sweetening ingredient
available today and is a good addition to our
sweetener and wellness portfolios.
To enhance how we engage with our customers,
and improve our access to them, in October 2010
we announced that we would be establishing a
new Commercial and Food Innovation Centre
in Chicago, USA. The centre, which is due to
be operational in early 2012, will be the global
headquarters of ICD and will feature laboratories,
a demonstration kitchen, sensory testing, and
analytical and pilot plant facilities.
The underlying global consumer trends of
health and wellness and convenience continue
to underpin long-term growth in the speciality
food ingredients market. Customer demand
for both new and existing products that meet
consumers’ needs in these key areas remains
strong, particularly for products that can help
address rising levels of diabetes and obesity in
the developed and, increasingly, the developing
world. Cost optimisation in the face of high and
volatile commodity (e.g. sugar) prices is also
driving demand. In light of the strong pipeline
of demand for SPLENDA® Sucralose both from
existing and new customers, and having carried
out a comprehensive review of the available
options, we have decided to restart sucralose
production at our mothballed facility in McIntosh,
Alabama, USA. The restart of production, which
we expect to take place during the first half of
financial year 2013, reinforces our commitment
to the sucralose business, provides further
resilience in our supply chain and further
strengthens our position as the leading global
manufacturer and supplier of sucralose.
We are also looking to build our business and
capabilities in two areas where we see long-term
growth – new customer segments and emerging
markets. Dedicated resources have now been
put in place in Europe and the USA to serve small
and medium enterprise (SMEs) and private label
customers. In emerging markets, we have changed
our senior management team in Asia Pacific to
provide fresh impetus to our efforts in that region.
We are also building new application laboratories
in Mexico and Brazil to add to our global network,
and have strengthened our sales teams in both
Latin America and China.
In our Bulk Ingredients division, we are looking
at ways to diversify our business by leveraging our
fermentation expertise and facilities to partner with
businesses in the bio-based materials industry.
In November 2010, we signed an agreement
with Amyris under which Tate & Lyle will produce
farnesene at its facilities in Decatur, Illinois, USA
with the end product being distributed by Amyris.
Then in March 2011, we signed an agreement
with Genomatica under which we will dedicate a
demonstration-scale production facility in Decatur
for exclusive use by Genomatica for the scale-up
of the Bio-BDO process.
The grow phase is beginning
to yield some small but
tangible benefits.
Costs
The total costs associated with the delivery of
the new Commercial and Food Innovation Centre
are expected to be £37 million and the common
IS/IT platform and global support services to be
£57 million. Of the total amount of £94 million,
£40 million is expected to be treated as exceptional
costs within the income statement and £54 million
as capital expenditure. During the financial year
2011, £6 million of capital and £10 million of
exceptional costs were incurred and we anticipate
around £65 million of expenditure in relation to
these projects during the year ending 31 March
2012. The remaining expenditure relating to
IS/IT and global shared services will be incurred
in the year ending 31 March 2013. We expect the
investment made in the common IS/IT platform
and global support services to pay back over
a period of three years.
Risk management
We have embedded a framework of risk
management into the various programmes
undertaking the initiatives to focus, fix and grow the
business, to address the execution risk associated
with them. This framework has been supplemented
by internal and external risk and assurance
activities over the life of the programmes.
Conclusion
We have taken a number of important steps during
the year to deliver on our commitment to focus,
fix and grow the business. The focus phase is now
largely complete and the fix phase is progressing
well, although there is still more work to do.
Whilst the grow phase is beginning to yield some
small but tangible benefits it is still early days.
Our objective remains to build a platform on which
we can deliver steady and sustainable long-term
growth and value for shareholders. We remain
on track to deliver on this objective.
Javed Ahmed
Chief Executive
26 May 2011
Tate & Lyle Annual Report 2011 7
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Business review Strategy and key performance indicators
Our vision is to become the leading global provider of speciality food
ingredients and solutions. Our strategy is to deliver this vision through:
• A disciplined focus on growing our
speciality food ingredients business
– Deeper customer understanding,
continuous innovation and agility
– Stronger positions in high
growth markets
• Driving our bulk ingredients
business for sustained cash
generation to fuel this growth
PERFORmANCE
What we measure
We focus on a number of financial performance
measures to ensure that our strategy successfully
delivers increased value for our shareholders.
• Sales of speciality food ingredients.
• Adjusted operating profit.
• Return on capital employed: adjusted profit before
interest, tax and exceptional items divided by adjusted
average net operating assets for continuing operations.
• Cash conversion cycle: controllable working
capital divided by quarterly sales, multiplied by
the number of days in quarter.
FINANCIAL STRENGTH
What we measure
We look at measures of financial strength to
ensure that we maintain the financial flexibility to
grow the business whilst maintaining investment
credit ratings.
• Net debt to EBITDA multiple1: 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.
• Interest cover1: the number of times the profit of
the Group exceeds interest payments made to
service its debt.
CORPORATE RESPONSIBILITY
What we measure
It is important that we act responsibly and consider
carefully the impact our activities have on all
stakeholders including employees, customers and
the communities in which we operate.
• Recordable incident rate2: the number of
injuries per 200,000 employee hours that require
more than first aid.
• Lost-time accident rate2: the number of recordable
injuries sufficiently serious to result in lost work days
or restricted work activities per 200,000 hours.
Update on environmental sustainability
We are establishing an index for environmental
sustainability which we will report on as a key
performance indicator from calendar year 2011.
Like safety, we report environmental figures by
calendar year because we are required to do
so for other regulatory reporting.
1 Net debt, EBITDA and interest as defined in our banking covenants.
2
In previous years we measured the safety index, a weighted average
of injuries sustained in the workplace. This year we have begun
instead to report our recordable incident and lost-time accident rates,
because they are recognised industry standards for benchmarking.
The rates reported above are combined rates covering both employees
and contractors. Further detail on employee and contractor rates is
provided in the Corporate responsibility report on page 27.
8 Tate & Lyle Annual Report 2011
The Board has chosen a number of key performance indicators
to measure the Group’s progress. The table below sets out these
indicators, explaining how they relate to our strategic priorities,
and how we performed against them this year.
Why we measure it
How we performed
2011
2010 (restated)
Change
(constant currency)
• To ensure we are successful in growing the
division which is the key area of strategic focus
for the business.
£805m £788m +2%
• To track the underlying performance of the
business and to ensure sales growth translates
into increased profits.
£321m £268m +17%
• To ensure that we continue to generate a strong rate
of return on the assets that we employ and that we
have a disciplined approach to capital investment.
20.6% 13.6% +700bps3
• To track how efficient we are in turning increased
sales into cash and to ensure that working capital
is managed effectively.
34 days 45 days +11 days
Why we measure it
• To ensure that we have the appropriate level of
financial gearing and that we generate sufficient
profits to service our debt. These measures are
a key focus for banks and providers of both
debt and equity capital.
Why we measure it
• The safety of our employees and contractors
is of paramount importance. Ensuring safe and
healthy conditions for employees at all our
locations is essential to our operation as a
successful business.
How we performed
2011
2010
1.1x
6.9x
1.8x
5.8x
How we performed
2010 4
2009 4
0.93
0.58
0.89
Change
-5%
0.39
-49%
3
4
Basis points (one hundred basis points equates to one
percentage point).
Unlike our other KPIs, we report safety figures by calendar year
because we are required to do so for other regulatory reporting.
Tate & Lyle Annual Report 2011 9
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Business review Group financial results
Sales were up 5%1 at £2.7 billion, while adjusted
operating profit was up 17%1, with a 25%1 increase in
profits from our Speciality Food Ingredients division, our
focus for growth. With lower interest and tax, earnings
per share increased by 34%1, and net debt reduced by
43% to £464m, just over a third of the level at the end
of financial year 2009.
Tim Lodge
Chief Financial Officer
Summary of Group financial results
£m (unless stated otherwise)
Continuing operations
Sales
Adjusted operating profit
Net finance expense
Adjusted profit before tax
Exceptional items
Amortisation of acquired intangibles
Profit/(loss) before tax
Income tax (expense)/credit
Profit/(loss) for the year from continuing operations
(Loss)/profit for the year from discontinued operations
Profit for the year
Earnings/(loss) per share from continuing operations
Basic
Diluted
Adjusted earnings per share from continuing operations
Basic
Diluted
Dividends per share
Interim paid
Final proposed
Net debt at 31 March
1 Constant currency change.
Constant
currency
change
%
+5
+17
+32
+36
+34
Year to
31 March
2011
Year to
31 March
2010
Change
reported
%
2 720
2 533
321
(58)
263
(5)
(13)
245
(49)
196
(29)
167
42.6p
41.9p
46.5p
45.7p
6.8p
16.9p
23.7p
464
268
(72)
196
(298)
(14)
(116)
95
(21)
40
19
(4.7)p
(4.7)p
33.9p
33.7p
6.8p
16.1p
22.9p
814
+7
+20
+34
+37
+36
–
+5
+3.5
+43
10 Tate & Lyle Annual Report 2011
Sales of £2,720 million (2010 – £2,533 million)
from continuing operations were 7% higher than
the prior year (5% in constant currency). Sales
in Speciality Food Ingredients increased by
2% (2% in constant currency) from £788 million
to £805 million with sales volume increasing
7% year on year. The rate of sales growth was
impacted by reduced selling prices for sucralose
reflecting our strategy of securing long-term
volume incentive contracts with our customers.
Sales in Bulk Ingredients grew by 10%
(7% in constant currency) to £1,915 million
(2010 – £1,745 million).
Adjusted operating profit increased by 20%
over the prior year (17% in constant currency)
to £321 million (2010 – £268 million). Adjusted
operating profits in Speciality Food Ingredients
increased by 26% (25% in constant currency)
to £206 million (2010 – £163 million) driven by
increased volumes, operational leverage, improved
product mix and lower manufacturing costs for
sucralose. In Bulk Ingredients, adjusted operating
profit grew by 15% (11% in constant currency)
to £157 million (2010 – £136 million) driven by
increased volumes, very strong returns from
co-products on the back of the high corn price
and an improved performance from ethanol,
despite lower margins in sweeteners and
industrial starches.
Central costs, which include head office, treasury
and reinsurance activities, increased by £11 million
to £42 million reflecting the costs associated with
strengthening the Group’s senior management
team, costs associated with our financing portfolio
and one-off costs of £6 million in the first half
relating to the review of the Group’s activities.
Amortisation of intangibles acquired through
business combinations was £13 million
(2010 – £14 million).
Exceptional items from continuing and
discontinued operations totalled a charge of
£48 million (2010 – £276 million). Within continuing
operations there was a net £10 million gain on the
sale of the Fort Dodge facility and £15 million of
costs associated with the business transformation
programme. Within discontinued operations a
loss of £55 million was booked on the disposal
of EU Sugars, which remains subject to closing
adjustments and adjudication as discussed in
Note 35, partially offset by a gain of £12 million
on the disposal of Molasses.
Speciality Food Ingredients
accounts for 64% of operating
profit, with margins around
three times those of Bulk
Ingredients.
The net finance expense from continuing
operations decreased from £72 million to
£58 million principally as a result of lower pension
interest expense. We were not able to benefit
fully in the year from the decrease in average net
debt due to the predominantly fixed nature of our
gross borrowings. However the net interest charge
is expected to be lower in the 2012 financial year
as a result of lower levels of average net debt,
the repayment of our US$300 million 6.125%
bond in June 2011 and a positive impact from
pension interest.
Net debt reduced by 43%
to £464 million.
Adjusted profit before tax increased by 34%
(32% in constant currency) to £263 million
(2010 – £196 million). On a statutory basis, profit
before tax was £245 million compared to a loss of
£116 million in the prior year. The effective rate of
tax on adjusted profit from continuing operations
was 18.5% (2010 – 20.8%). The decrease was
due mainly to changes in the geographical origin
of profits and also the resolution of some
historical tax issues.
Discontinued operations comprise the EU Sugars,
Molasses, International Sugar Trading, and the
sugar operations in Vietnam and Israel. The
operating loss from discontinued operations was
£45 million after exceptional losses of £43 million
(2010 – profit of £50 million, after exceptional gains
of £22 million). On 20 April 2011, we announced
the conditional sale of our Vietnam sugar interests.
Any profit on disposal will be recognised as
and when the sale completes. The loss from
discontinued operations after taxation for the year
was £29 million (2010 – profit of £40 million).
Total basic earnings per share was 35.3p
(2010 – 3.3p) and total diluted earnings per share
was 34.7p (2010 – 3.3p). Adjusted diluted earnings
per share from continuing operations was 45.7p
(2010 – 33.7p) and on the same basis basic
earnings per share was 46.5p (2010 – 33.9p).
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Tate & Lyle Annual Report 2011 11
Business review Speciality Food Ingredients
Speciality Food Ingredients develops, produces and
markets distinctive, high-quality ingredients for food
and beverage customers across the world. By leveraging
our manufacturing facilities, innovative technology
and formulation expertise, we help them create more
cost-effective, better tasting products for consumers.
Speciality Food Ingredients works closely with our
Innovation and Commercial Development team
(see page 18) to develop a pipeline of new products.
Olivier Rigaud
President
Sales
Operating profit
Operating cashflow
+25%1
£805m £206m
Customers
• Large, multi-national food and
beverage manufacturers
• Small and medium-sized food
and beverage manufacturers
• Private label food and beverage
manufacturers
St Petersburg,
Russia
Kya Sand,
South Africa
Mold, UK
Asia Pacific
Brisbane, Australia
Jurong Island,
Singapore
main locations
Americas
Houlton, Maine
Lafayette, Indiana
McIntosh, Alabama
Sycamore, Illinois
Van Buren, Arkansas
EMEA
Lübeck, Germany
Bergamo, Italy
Noto, Italy
Ossona, Italy
Koog, The
Netherlands
£263m
Products
• Starch-based speciality ingredients:
– Speciality starches including
fat-replacers and stabilisers
– Speciality sweeteners including
crystalline fructose
– Soluble corn fibres including
polydextrose and PROMITOR™
Soluble Corn Fiber
• High-intensity sweeteners:
– SPLENDA® Sucralose
– PUREFRUIT™
• Food systems:
– Stabilisers systems
– Flavoured systems
Summary of financial results
£m (unless stated otherwise)
Sales
Adjusted operating profit
Margin
1 Constant currency change.
2 Basis points (one hundred basis points equates to one percentage point).
Year to 31 March
2011
805
206
25.6%
2010
788
163
20.7%
Reported
+2%
+26%
+490bps2
Change
Constant
currency
+2%
+25%
+480bps2
12 Tate & Lyle Annual Report 2011
Market conditions
In food starches, increased demand for starch
derivatives and the poor availability in Europe of
potato-based starches due to the poor harvest,
has tightened European industry capacity resulting
in increased demand for corn-based starches and
a firming of starch margins overall. A short supply
of tapioca-based starches in Asia resulted in an
increase in corn-based modified food starch sales
in the region. In the USA and Europe the continuing,
albeit gradual, recovery from the recession has
seen a strengthening demand for modified food
starch in the convenience food industry with
innovation in snacks leading the recovery.
Continuing high and volatile sugar prices have
had a positive impact on demand for starch-based
speciality and high-intensity sweeteners. Increased
regulation in some markets, notably Latin America,
where some countries are now mandating stricter
labelling of sugar levels in foods or restricting the
use of competing sweeteners, further contribute
to this trend.
Rising levels of obesity and diabetes in both the
developed and emerging markets as well as the
high and volatile price of sugar continue to support
the market for high-intensity sweeteners. Sucralose
again increased its value share of the high-intensity
sweeteners market, increasing from 27% to 28%.
SPLENDA® Sucralose’s share of the global market
for sucralose remains approximately 90%.
The increased focus on healthier lifestyles is
also driving demand in the health and wellness
space and we have seen robust growth in this
area driven by new product launches during the
year. In addition, the favourable opinions granted
by the European Food Safety Authority (EFSA)
for polydextrose and sucralose in April 2011
are expected to increase the focus on these
ingredients as key contributors to healthy diets.
Within Food Systems, a key driver of growth
continues to be the need for customers to develop
and formulate more cost effective solutions against
a backdrop of high commodities prices.
Financial performance
Sales volumes increased by 7% with volume
growth across all value-added product categories.
Sales increased by 2% (2% in constant
currency) to £805 million (2010 – £788 million).
Adjusted operating profit increased by 26%
(25% in constant currency) to £206 million
(2010 – £163 million). The increase in operating
profit and margin was driven by higher volumes,
operational leverage, improved product mix and
lower sucralose manufacturing costs. The effect
of exchange translation was to increase adjusted
operating profit by £2 million.
This division comprises three broad product
platforms namely: starch-based speciality
ingredients, high-intensity sweeteners and
food systems.
Starch-based speciality ingredients
In starch-based speciality ingredients sales
increased by 4% (2% in constant currency)
to £434 million (2010 – £418 million). Margins
increased by five percentage points and our aim
is to hold on to most of these margin gains during
financial year 2012. The benefits of operational
leverage derived from selling additional volumes of
higher margin products with only a relatively small
uplift in our fixed cost base was the key driver of
the profitability growth of this product segment.
In modified food starches, sales volume
increases were driven by increased demand
across all regions. Steady growth in developing
markets, especially the Asia Pacific region, was
driven by the demand for more convenience and
manufactured foods. During the year we launched
RESISTAMYL™ 140, a bakery cream starch,
in Europe and the initial sales response has
been encouraging.
Adjusted operating profit
increased by 26% (25% in
constant currency).
Speciality corn sweeteners benefited from higher
sales volumes in Europe, the USA and developing
markets, particularly Latin America on the back
of high and volatile sugar prices.
The successful launch of our high-fibre, low-sugar
and low-calorie prebiotic fibre – PROMITOR™
Soluble Corn Fiber 85 – in the USA and Latin
America has driven growth in our health and
wellness platform which we expect will continue to
benefit from the consumer trend towards healthier
lifestyles. During the year we also commissioned
the first polydextrose fibre manufacturing operation
in Europe, providing our European customers
with a shorter supply chain and a broader product
range. We are very pleased with the customer
reaction to our fibre product range. As high-value
products, their growth has improved product mix
leading to an improvement in margin.
Whilst sales to developing markets increased
strongly across this product category during the
year, they are building from a low base and thus the
contribution to operating profit remains modest.
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Tate & Lyle Annual Report 2011 13
Business review Speciality Food Ingredients
High-intensity sweeteners
Within high-intensity sweeteners, we saw
good sales volume growth during the year. As
expected, average selling prices were lower than
the comparative period, reflecting our strategy
of securing long-term sucralose contracts with
volume incentive arrangements. As a result,
sales by value decreased by 1% (3% in constant
currency) to £185 million (2010 – £187 million).
Looking forward, we expect the decline we have
seen in selling prices for SPLENDA® Sucralose to
moderate towards the end of this financial year
as contracts renew. A reduction in SPLENDA®
Sucralose manufacturing costs was an important
driver of increased profitability in this product
segment and Speciality Food Ingredients overall.
We anticipate the current
steady demand patterns to
continue and a year of good
sales growth.
We have seen continuing strong growth in demand
for SPLENDA® Sucralose. This growth has come
not only from more mature markets such as
Europe and the USA but also emerging markets,
particularly Asia and Latin America where, as
in developed markets, obesity and diabetes is
becoming more prevalent. These markets provide
an excellent opportunity to expand our footprint
where the taste preferences of consumers for
beverages and other products are less well
established and where the heat stability of
SPLENDA® Sucralose make it well suited to less
well developed supply chains. In addition, we
have also seen increased demand for SPLENDA®
Sucralose from customers looking to use more
cost-efficient alternatives in an environment of
volatile and high-priced sugar.
We expect these long-term structural drivers
to sustain the growth levels achieved over the
last few years, supported by a strong pipeline
of demand for SPLENDA® Sucralose both from
existing and new customers. This means that
we will need further capacity to meet future
demand and as a result we are going to restart
production of SPLENDA® Sucralose at McIntosh,
Alabama, USA during the first half of the year
ending 31 March 2013. The decision to restart
production at McIntosh, which was taken following
a comprehensive review of alternative options,
reinforces our commitment to the sucralose
business, provides further resilience in our supply
chain and further strengthens our position as
the leading global manufacturer and supplier
of sucralose.
In restarting McIntosh, we will incur approximately
£3 million of additional costs which will reduce
profit in the year to 31 March 2012 and the loss
for the plant will be around twice that amount the
following year as fixed costs increase. The increase
in fixed costs includes the impact of additional
depreciation as the plant is brought back into
operation. We plan to operate the two plants in
such a way as to minimise the additional fixed
costs incurred and expect to achieve good levels
of operational leverage as volumes increase.
In May 2009, following the significant increase
in manufacturing yields achieved during the 2009
financial year, we announced the mothballing of
the McIntosh facility and that production of all
SPLENDA® Sucralose would take place at our
Singapore facility. At that time, we recognised an
impairment of £97 million and took a provision of
£55 million to cover the cash costs associated
with mothballing McIntosh, in anticipation of cash
payback over three years. In restarting McIntosh
we expect to reverse approximately £50 million of
this impairment this financial year, adjusting the
original amount by the notional depreciation over
the last two years and for some equipment which
needs to be replaced. We expect to incur a further
£13 million of capital expenditure this financial
year to bring the plant back into operation and
will employ more working capital once we restart
production. We have achieved the annual savings
from the mothballing as anticipated but expect
to be able to release approximately £20 million of
the original £55 million provision this financial year
once we re-commission the facility. This saving
more than covers the cash costs of the restart.
Food Systems
During the year, sales from Food Systems
increased by 2% (3% in constant currency) to
£186 million (2010 – £183 million) impacted by
weaker second half volume on the back of tougher
trading conditions in some markets, notably
Russia. Volume growth of 4% was driven by
increases in Asia Pacific, the USA and South Africa.
We continue to leverage our product formulation
expertise to provide cost-effective solutions for our
customers against a backdrop of high and rising
prices in raw materials.
Outlook
In Speciality Food Ingredients, we anticipate the
current steady demand patterns to continue and
a year of good sales growth. The lower sucralose
manufacturing costs are now reflected in the
performance of this division and, accordingly, the
level of profit growth in the coming financial year
is expected to be more modest than the strong
result achieved in financial year 2011.
14 Tate & Lyle Annual Report 2011
Business review Bulk Ingredients
Bulk Ingredients manufactures and markets a range of
products including nutritive sweeteners, industrial starches,
ethanol, acidulants and animal feed, for food and beverage,
industrial and agricultural customers around the world.
Bulk Ingredients also partners with an increasing number
of bio-based materials companies seeking expertise in
the commercialisation of green chemistry fermentation.
One such partnership is our joint venture with DuPont
which manufactures Bio-PDO™ a bio-based ingredient
used in the textile and plastics industries.
Matt Wineinger
President
Sales
Operating profit
Operating cashflow
£1,915m
+11%1
£157m
£99m
main locations
Customers
Products
• Large, multi-national food
and beverage manufacturers
• Paper and board producers
• Fuel and gasoline suppliers
• Textile manufacturers
• Animal feed compounders
• Liquid sweeteners including corn
sugar, dextrose and glucose
• Industrial starches
• Citric acid
• Bio-fuels
• Animal feed including corn gluten
feed and corn gluten meal
Americas
Dayton, Ohio
Decatur, Illinois
Duluth, Minnesota
Lafayette, Indiana
Loudon, Tennessee
Santa Rosa, Brazil
Cali, Colombia 2
Guadalajara,
Mexico 2
EMEA
Razgrad, Bulgaria 2
Szabadegyháza
(Hungrana plant),
Hungary 2
Casablanca,
Morocco
Boleraz, Slovakia 2
Adana, Turkey 2
Summary of financial results
£m (unless stated otherwise)
Sales
Adjusted operating profit
Margin
1 Constant currency change.
2 Joint venture.
3 Basis points (one hundred basis points equates to one percentage point).
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Year to 31 March
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1 915
157
8.2%
2010
1 745
136
7.8%
Reported
+10%
+15%
+40bps3
Change
Constant
currency
+7%
+11%
+30bps3
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Tate & Lyle Annual Report 2011 15
Business review Bulk Ingredients
Market conditions
Whilst US domestic demand for nutritive
sweeteners in the 2011 financial year continued
its gradual long-term downward trend, strong
seasonal demand and increased exports of corn
sweeteners to Mexico offset this impact. Higher
Mexican demand was driven by high domestic
sugar prices in the Mexican market, and a relative
recovery of the Mexican peso against the US dollar
which accelerated the substitution of cane sugar
with corn sugar.
Adjusted operating profit
increased by 15% (11% in
constant currency).
US corn yields for the 2010 harvest were low
compared with recent experience. The fall in
production is expected to reduce stocks to their
lowest level since 1996 and the forecast stocks-
to-use ratio for the end of the current crop year is
the lowest on record. The latest planting intentions,
reported by the United States Department of
Agriculture (USDA), indicate that planted corn
would increase to the second highest level on
record, driven by high corn prices. The European
corn price has followed similar trends to the
US market.
In the European sweetener market world
sugar prices rose above the EU preferential rate
thereby discouraging traditional suppliers of cane
sugar, some of whom also experienced harvest
difficulties, from supplying to Europe. This supply
restriction was compounded by lower beet sugar
yields from the harsh winter resulting in higher
sugar prices. The selling price of isoglucose (corn
sugar), which is closely correlated to the sugar
price, rose towards the end of the financial year
but not at the same rate as corn prices, resulting
in a squeeze on margins.
Although demand for industrial starches in the USA
recovered modestly, it still remains significantly
below the levels experienced before the economic
downturn. The demand for industrial starches
in Europe also improved with demand for corn
starches receiving an additional boost on the back
of the poor potato harvest. In US ethanol, whilst
cash margins have increased, levels of profitability
within the industry remain low overall.
Co-product prices were supported by fundamental
demand and improved through the year on the
back of higher corn and competing commodity
prices. The market for US corn gluten feed was
boosted by the reopening of European markets
to EU-approved genetically modified varieties and
by China’s increased imports of competing feed
products. Demand for corn gluten meal, primarily
for pet food, remained firm and exports to Latin
America were stronger as aquaculture companies
continued to increase production. In addition,
demand for corn oil remained strong.
Financial performance
Sales increased by 10% (7% in constant currency)
to £1,915 million (2010 – £1,745 million). Adjusted
operating profit increased by 15% to £157 million
(11% in constant currency) driven by strong
levels of co-product income and an improved
performance from our ethanol business, despite
lower margins in sweeteners and industrial
starches. The effect of exchange translation
was to increase operating profit by £5 million.
This division comprises three broad product
platforms namely: sweeteners; industrial starches,
acidulants and ethanol; and co-products.
Sweeteners
In the Americas, bulk corn sweetener volumes
increased by 14% and sales by 3% (decreased
by 1% in constant currency) to £734 million
(2010 – £715 million). As anticipated at the time
of the announcement of our contracting round in
January 2010, corn sugar (HFCS) unit margins
were somewhat below the comparative period
after taking into account lower input costs.
Whilst we experienced firm demand patterns for
Corn Sugar 55 and 42 in Mexico and strong US
domestic demand as good weather provided an
uplift in seasonal demand, the higher volumes did
not offset the lower margins which had resulted
from the 2010 calendar year pricing round and
profits for the full year were below the
comparative period.
Co-product prices were
supported by fundamental
demand and improved
through the year on the back
of higher corn and competing
commodity prices.
16 Tate & Lyle Annual Report 2011
In Europe, sales of bulk corn sweeteners increased
by 10% (14% in constant currency) to £123 million
(2010 – £112 million). Volumes increased by 11%
year on year reflecting the increased capacity
from our Slovakian expansion and increased
quotas. Unit margins were lower, particularly in
the second half, on the back of higher corn costs
which increased at a faster rate than the price of
sugar, which effectively determines the price for
isoglucose (corn sugar) in the EU.
Whilst citric acid sales increased within our
acidulants business, profits were lower than
the prior year as a result of higher input costs.
As in the prior year, the Bio-PDO™ joint venture
broke even in the 2011 financial year.
Co-products
Sales of co-products increased by 21%
(19% in constant currency) to £349 million
(2010 – £289 million).
The impact of rising US corn prices throughout
the year resulted in additional profits of
£16 million from co-products compared with the
prior year. Since over 80% of our corn grind is
utilised to produce Bulk Ingredients, the majority
of this impact is recorded within this segment.
In anticipation of potential supply tightness in
the run up to the new harvest, we plan to hold
our silos full to the beginning of the harvest year.
With the larger volumes in inventory combined
with the higher price of corn, we increased the
amount of working capital tied up in US corn
inventories by approximately £126 million at
31 March 2011. European corn prices also rose
increasing co-product sales. However, hedging
options are more limited than in the USA so
that higher corn prices had a modest negative
impact on profitability in the second half.
Outlook
In Bulk Ingredients, we expect sweetener
margins to remain flat calendar year on year
with volumes slightly down as we diversify
some grind to Speciality Food Ingredients.
Elsewhere, industrial starches are expected
to perform better, particularly in Europe,
but not sufficiently to offset more normal
co-product returns.
Operating profits from Almex, our Mexican
joint venture, were up significantly on the
comparative period, reflecting higher volumes
and improved pricing.
Industrial starches, acidulants and ethanol
Sales of industrial starches, acidulants and ethanol
increased by 13% (10% in constant currency) to
£709 million (2010 – £629 million).
Industrial starch volumes grew by 8%. Whilst we
have seen a modest recovery in market conditions,
margins continued to be under pressure in the USA
where the market remains very competitive. The
performance for the year was below the prior year
as the increased volumes were more than offset by
lower unit margins. In Europe, tighter supply-side
conditions as a result of the poor starch potato
harvest resulted in improved margins towards
the end of the year.
In Europe, sales of bulk
corn sweeteners increased
by 10% (14% in constant
currency).
Whilst we experienced improved positive cash
margins in US ethanol, this product continued to
generate a loss at the operating level. At the end
of the period, we completed the sale of our Fort
Dodge facility for cash consideration of £36 million
resulting in an exceptional credit for the full year of
£10 million (2010 – impairment of £217 million). The
disposal reduces our exposure to what remains a
volatile and highly commoditised industry.
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Tate & Lyle Annual Report 2011 17
Business review Innovation and Commercial Development
The role of the Innovation and Commercial Development team is
to identify and develop new business opportunities and to create and
commercialise new ingredients, thereby providing long-term growth
for Tate & Lyle.
Karl Kramer
President
Remit
The Innovation and Commercial Development
(ICD) group is a key enabler of Tate & Lyle’s
strategy. Established on 1 June 2010, its remit
is to drive long-term growth across Tate & Lyle.
ICD brings together three areas – product
development, marketing, and platform
management – into one global team, providing
an integrated approach to developing and
commercialising innovation.
While ICD supports both of Tate & Lyle’s global
business units, it concentrates mainly on growing
our Speciality Food Ingredients division. As a
result, ICD’s resources are predominantly focused
on three broad areas within the global speciality
food ingredients market – sweeteners, texturants
and health and wellness.
Within ICD, we have a dedicated Open Innovation
team which looks to develop partnerships with
universities, customers and start-ups specialising
in food science, with a goal of bringing their new
technologies or products to market.
ICD is responsible for developing and
managing the Group’s innovation pipeline, and
also for launching commercially successful
new products.
Innovation centres and laboratories
ICD is currently headquartered in Decatur,
Illinois, USA but, by early 2012, its global
headquarters will be the new Commercial
and Food Innovation Centre in Chicago, USA.
This new centre, which will feature state-of-the-
art laboratories, a demonstration kitchen, and
sensory testing, analytical and pilot plant facilities,
will give us the ideal facilities for working more
closely with customers. In this centre we will
be able to develop solutions to meet their
functional, formulation and nutritional needs.
As well as the new centre in Chicago, ICD has
a research centre in Lille, France. These two
centres are supported by a global network of
smaller regional applications laboratories (in
countries such as China, Germany, Argentina,
Australia, and South Africa) where our local
applications specialists take our customers’
products from a written brief to prototype at high
speed, while ensuring the final product reflects
local tastes. We are currently building two more
applications laboratories, one in Brazil and
one in Mexico.
Pilot plants
ICD also operates the Group’s pilot plant
facilities, both laboratory scale and within our
manufacturing facilities. Scaling up and testing
formulations and ideas at our pilot plants allows
us to assess the feasibility of new processes,
new products and new technology, ensuring
we get them right before investing in
commercial-scale processes.
Market research
Customer understanding drives all that we
do. We use market research to help us better
understand the consumer (our customers’
customer). Through our research programme,
ICD measures consumers’ views on particular
ingredients; gets their opinions on the latest
trends; analyses their dietary habits; and
understands their attitudes towards ‘healthy’
food. Our research covers all the regions of
the world we operate in, giving us the insights
necessary to offer tailor-made solutions for
our customers that we know will work in
local markets.
18 Tate & Lyle Annual Report 2011
Business review 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 Board of directors has overall responsibility
for the Group’s system of risk management and
internal control. The schedule of matters reserved
to the Board ensures that the directors control,
among other matters, all significant strategic,
financial and organisational issues.
Approach
The Group’s enterprise-wide risk management
and reporting process helps 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). The output is then reviewed by the Board.
Responsibility for managing each key risk and the
associated mitigating controls is allocated to an
individual executive within each division. As part
of the process, senior executive management
formally confirms that these key risks are being
managed appropriately within their operations
and that controls have been examined and are
effective. The confirmations and any exceptions are
discussed at the Audit Committee and Corporate
Responsibility Committee once a year.
During the year ended 31 March 2011, the risk
management process was enhanced further
through an exercise undertaken by the Board of
directors and the Group Executive Committee to
consider the nature and extent of the Group’s risk
appetite. The results of this exercise are being used
as part of the Group’s strategic planning activities,
and in considering ongoing mitigating actions.
The Group’s risk management 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 misstatement.
Key risks
Key risks and uncertainties identified as part of
the risk management process undertaken during
the year, together with some of the mitigating
actions that we are taking, are set out below. 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.
Risk
Impact and description
Examples of mitigating actions
Failure to act safely
and to maintain the
safe and continuous
operation of our
facilities
The safety of our employees,
contractors, suppliers, and the
communities in which we operate is
paramount. We must operate within
local laws, regulations, rules and
ordinances relating to health, safety and
the environment, including emissions.
The operation of plants involves many
risks, including failure or sub-standard
performance of critical equipment;
improper installation or operation of
equipment; failure of critical supplier;
and natural disasters. If these risks
cause a temporary or permanent
stoppage in production, this could
have a material adverse effect
on the Group.
• Corporate Responsibility Committee in place
• Board annual review of Group safety/environmental
performance/policies
• Separate central global function established, Group
Operational Efficiency and Sustainability, outside business
unit control, to set and monitor standards
• Health and safety policies and procedures at all facilities with
dedicated staff to ensure policies are embedded and measured
• Environmental management systems at production facilities
• Business continuity plans in place to enable supply,
as quickly as practicable, of product to customers from
alternative sources in the event of a natural disaster or
major equipment or plant failure backed by appropriate
insurance coverage against business interruption
• Periodic review of critical supply or supplier dependencies
in principal manufacturing operations.
Failure to maintain the
quality of our products
and high standards of
customer service
The safety of consumers of our
products is critical. Poor quality
or sub-standard products or poor
customer service could have a
negative impact on our reputation
and relationships with customers.
• Central global function, Group Operational Efficiency
and Sustainability, manages Group-wide quality process
and procedures
• Product safety and quality policies and procedures in
place to prevent contamination
• Dedicated staff at all locations to ensure policies are
embedded and measured
• Third-party audits completed
• Recall simulation exercises undertaken.
Tate & Lyle Annual Report 2011 19
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Business review Risk management
Risk
Impact and description
Examples of mitigating actions
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
and deliver the Group’s strategy. Inability
to retain key knowledge and adequately
plan for succession could have a
negative impact on Company
performance.
• 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
• Single global performance appraisal system in place
• New Commercial and Food Innovation Centre in
Chicago, USA to help attract and retain new
talent to the Group.
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.
• Regulatory managers monitor changes in
legislation and develop action plans
• Legal teams maintain compliance policies in
areas such as antitrust, money laundering and
anti-corruption laws; and provide ongoing training
to employees
• External consultants provide quarterly reports
on regulatory change.
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
co-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.
• Strategic relationships with suppliers and
trading companies
• 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.
• Group legal department, supported by expert
patent lawyers, monitors all patents
• Group Intellectual Property (IP) committee in
place, chaired by the President of Innovation
and Commercial Development, to oversee the
Group’s IP management
• Organised and secure process for identifying
and recording innovations, trade secrets and
potential patentable ideas.
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.
• Innovation and Commercial Development
team to produce innovations in product
development, applications, manufacturing
technology and customer services
• Global key account managers in place for
major customers
• Improved customer relationship management
capabilities as part of the programme to
implement a common global IS/IT platform
and global support services.
20 Tate & Lyle Annual Report 2011
Risk
Impact and description
Examples of mitigating actions
Failure to implement the
Group’s programme to
transform its operational
capabilities
The Group has committed to a
programme to transform its operational
capabilities, primarily by implementing a
common global IS/IT platform and global
support services. If this programme is not
implemented as planned, this would have
an adverse impact on the Group’s ability
to achieve its strategy.
• Dedicated resources allocated to the project
• Project scope set out in detailed legal contracts
with external system integrator and other
providers, with appropriate governance and
remedy mechanisms
• Detailed project implementation plan subject to
both internal and external audit and review
• Formal steering committee (executive
management) and Board/Audit Committee
review of project progress against agreed
milestones and timelines.
Failure to counter
negative perceptions
of the Group’s
products
We must be fully prepared to counter
unexpected/unfounded negative publicity
about our products.
• 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.
Failure to identify
important consumer
trends and innovate
could impact the
business’s ability
to grow
Falling behind the curve on emerging
dietary trends and/or an inability to
innovate could impact the delivery of the
Group’s strategy. This would impact its
performance and reputation.
• Innovation and Commercial Development team
works closely with customers and advisors to
identify emerging trends
• Consumer-facing research to ensure we are
aware of consumers’ needs and expectations
• Global key account managers in place for
major customers
• New Commercial and Food Innovation Centre
in Chicago, USA will enable scientists, marketing,
sales and technical experts to collaborate more
closely with customers
• Recruitment and training policies in place to
strengthen and upgrade staff skill sets.
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Failure to manage
capital expenditure and
working capital, and
deliver key projects
We must manage our finances within
strictly controlled parameters, particularly
when external financial conditions are
uncertain and highly changeable. The
change programme currently being
undertaken by the Group consists of a
number of projects which, if not delivered
successfully, could impact the Group’s
performance and reputation.
• Significant projects approved and monitored
by the Board
• Debt and working capital levels monitored
constantly and reported monthly to the Board
• Capital expenditure procedures to control and
monitor allocation and spend
• Major or key projects have dedicated teams
• External resources and expertise used where
required or as appropriate.
Failure to maintain an
effective system of
internal financial
controls
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.
• 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 Chief Financial Officer
undertake detailed quarterly business and
financial reviews
• Internal audit function provides assurance.
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Tate & Lyle Annual Report 2011 21
Business review Additional financial information
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:
•
•
•
results of discontinued operations, including
gains and losses on disposal (Note 12 and
Note 37);
exceptional items from continuing operations
(Note 7); and
amortisation of intangibles acquired through
business combinations.
This adjusted information is used internally
for analysing the performance of the business.
A reconciliation of reported and adjusted
information is included in Note 43.
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 exchange rate against
sterling. The movement in exchange rates had led
to increased profits and a reduction in net debt
as a result of the translation of accounts recorded
in foreign exchange. The average and closing
exchange rates used to translate reported
results were as follows:
US dollar:sterling
Euro:sterling
Average rates
Closing rates
2011
2010
2011
2010
1.55
1.19
1.61
1.13
1.60
1.13
1.52
1.12
Segmental analysis
Following the change of the organisational
structure announced in May 2010, the Group
restructured its internal organisation into four
distinct segments: Speciality Food Ingredients,
Bulk Ingredients, Sugars and central costs. Sugars
was subsequently classified as discontinued
following the announcement on 1 July 2010 of the
disposal of EU Sugars and the launch of processes
to sell the remaining businesses within the Sugars
division. Comparative information has been
reclassified accordingly.
Central costs
Central costs, which include head office, treasury
and reinsurance activities, increased by £11 million
to £42 million reflecting the costs associated with
strengthening the Group’s senior management
team, costs associated with our financing portfolio
and one-off costs of £6 million in the first half
relating to the review of the Group’s activities.
The effect of exchange translation was to
increase central costs by £1 million.
Energy costs
Energy costs for the year were £170 million
(2010 – £178 million), a decrease of 4% (7% in
constant currency). The improvement of £12 million in
constant currency was due principally to lower prices
(£22 million) and efficiency improvements (£9 million),
partly offset by higher volumes (£14 million) and an
unfavourable input mix (£5 million). We have covered
the cost of almost 70% of our estimated energy
needs for the 2012 financial year, and while contracts
have been secured at higher prices than in the 2011
financial year we will look to mitigate some of the
upward pressure through efficiencies.
Exceptional items from continuing operations
Year to
31 March
2011
£m
Year to
31 March
2010
£m
Business transformation costs
Gain on disposal of assets net of
pre-disposal costs – Fort Dodge
Impairment charges – Fort Dodge
UK Group Pension Scheme
changes
Closure costs
Write-down of assets
Exceptional items
(15)
10
–
–
–
–
(5)
(3)
–
(217)
5
(55)
(28)
(298)
Exceptional items within our continuing operations
during the year totalled a net charge of £5 million
on a pre-tax basis. We recognised an exceptional
gain of £10 million relating to the Fort Dodge facility
which was sold on 30 March 2011. The facility was
impaired in the previous financial year. We have
incurred an exceptional charge of £15 million in
relation to business transformation costs, principally
restructuring associated with the new Commercial
and Food Innovation Centre in Chicago, USA and
the implementation of a common global IS/IT
platform and global support services.
The tax impact on continuing net exceptional items
is a charge of £10 million. In addition, an exceptional
tax credit of £8 million has been recognised in
respect of unrealised profit on inventory following
the restructuring of our business. This credit has no
impact on cash paid or received.
Exceptional items from continuing operations
in the 2010 financial year comprised a £3 million
charge relating to business transformation costs
in Speciality Food Ingredients, an impairment
charge of £217 million relating to the decision to
mothball our Fort Dodge facility, a £55 million charge
relating to our decision to mothball the sucralose
manufacturing facility in McIntosh, Alabama, USA,
and the write-off of £28 million of research and
development assets from which we no longer expect
to receive a commercial benefit. We also recognised
a £5 million exceptional gain in relation to changes
to the UK Group Pension Scheme. The exceptional
tax credit on continuing operations was £117 million,
primarily due to the deferred tax asset related to the
impairment of the Fort Dodge facility. An exceptional
tax credit of £15 million was also recognised in
respect of the release of various tax provisions.
22 Tate & Lyle Annual Report 2011
These items relate to the impact of major
turbulence in the supply of raw sugar to the
EU during the period prior to closing which
resulted in an increase in certain rolling re-export
commitments of the business arising under the EU
Sugar Regime. The Group believes that its position
is fully supported and as such will be robustly
defended. No provision in respect of outstanding
items has been recorded.
Earnings per share
Adjusted diluted earnings per share from
continuing operations was 45.7p (2010 – 33.7p),
an increase of 36% (34% in constant currency) as
a result of higher operating profits, lower finance
costs and the reduction in the effective tax rate.
On the same basis, basic earnings per share was
higher by 37% (36% in constant currency) at
46.5p (2010 – 33.9p).
Total basic earnings per share at 35.3p was higher
than the prior year as the 2010 basic earnings
per share of 3.3p was impacted by significant
exceptional costs.
Dividend
The Board is recommending a 5% increase in the
final dividend to 16.9p (2010 – 16.1p) making a full
year dividend of 23.7p (2010 – 22.9p) per share,
up 3.5% on the prior year. Subject to shareholder
approval, the proposed final dividend will be due
and payable on 5 August 2011 to all shareholders
on the Register of Members at 1 July 2011. In
addition to the cash dividend option, shareholders
will also be offered a Dividend Reinvestment Plan
(DRIP) alternative. The DRIP replaces the scrip
alternative that was previously available
to shareholders.
Assets
Gross assets at 31 March 2011 were £3,051 million,
£237 million lower than the previous year principally
as a result of the disposal of EU Sugars and
Molasses. Net assets increased by £119 million
to £973 million driven by the profits generated
in the year and actuarial gains relating to our
post retirement plans partially offset by dividend
payments and foreign exchange losses on the
translation of overseas subsidiaries.
Post-retirement benefits
We maintain pension plans for our employees in a
number of countries. Some of these arrangements
are defined benefit pension schemes and, although
we have closed the main UK scheme to future
accrual and commenced the process for closing
the US schemes to future accrual during the year,
legacy obligations remain. In the USA, we also
provide medical and life assurance benefits as
part of the retirement package.
Net finance expense
The net finance expense from continuing
operations decreased from £72 million to
£58 million, principally as a result of lower pension
interest expense. We were not able to benefit fully
from the decrease in average net debt due to the
fixed nature of our gross borrowings.
However, the net interest charge is expected to
be significantly lower in the 2012 financial year
as a result of lower levels of average net debt,
a reduction of our average effective interest rate
principally as a result of the repayment of our
US$300 million bond in June 2011, and a change
from a £4 million pension interest expense in
the year ended 31 March 2011 to an anticipated
pension interest credit of £5 million in the year
ending 31 March 2012.
Taxation
The taxation charge from continuing operations
before exceptional items and amortisation of
acquired intangible assets was £49 million
(2010 – £41 million) as a result of higher pre-tax
adjusted profit. The effective rate of tax on adjusted
profit decreased to 18.5% (2010 – 20.8%) as a
result of the geographic mix of profits and also
the resolution of some historical tax issues.
The effective tax rate for the 2012 financial year
is expected to remain broadly in line with this year’s
effective tax rate assuming the geographic mix of
profits is in line with our expectations.
Discontinued operations
Discontinued operations comprise our former
Sugars Division, principally our former EU Sugars
business which we sold in September 2010,
our former Molasses business which we sold in
December 2010, our former International Sugar
Trading business, and our Vietnam and Israeli
sugar interests which are reported as assets held
for sale. On 20 April 2011 we announced we had
entered into a conditional agreement to sell our
Vietnam business.
Sales from discontinued operations for the year
decreased to £590 million from £1,074 million as a
result of the sale of EU Sugars and Molasses part
way through the year. The operating loss from our
discontinued operations totalled £45 million, after
exceptional losses of £43 million (2010 – profit of
£50 million, after exceptional profits of £22 million).
The exceptional pre-tax loss for the year of
£43 million comprises the £55 million loss
on disposal of EU Sugars booked during the
year partially offset by the £12 million profit
on the disposal of Molasses. Taxation on our
discontinued operations was a £16 million
credit (2010 – £11 million charge) after reflecting
an exceptional tax credit of £19 million
(2010 – £5 million charge). The loss from
discontinued operations after taxation for the
year was £29 million (2010 – profit of £40 million).
The final loss on disposal of EU Sugars is subject
to closing adjustments arising from the agreement
of post completion statements. The process to
reach such agreement is ongoing, and items
totalling £54 million remain outstanding and are
expected to be submitted for adjudication to
an independent expert.
Tate & Lyle Annual Report 2011 23
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Business review Additional financial information
The net deficit on our post retirement
obligations reduced by £118 million to £139 million
at 31 March 2011 from £257 million in the prior
year principally as a result of increasing asset
valuations and cash contributions during the year.
The UK pension obligations relating to EU Sugars
and Molasses remained with the Group.
Net debt
Net debt fell by £350 million to £464 million
(2010 – £814 million) driven by free cash flow of
£190 million from the continuing businesses and
£316 million relating to the sale of EU Sugars,
Molasses and Fort Dodge. These inflows were
partially offset by cash utilised by the discontinued
businesses amounting to £105 million, principally
the repayment of letters of credit ahead of
disposal, and dividend payments of £70 million.
In addition, 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, net debt reported in sterling has reduced
by £27 million.
During the year, net debt peaked at £836 million in
May 2010. The average net debt was £661 million,
a reduction of £359 million from £1,020 million in
the prior year.
Cash flow
Adjusted operating profit from
continuing businesses
Depreciation/amortisation
Working capital
Share-based payments
Operating cash flow
Capital expenditure
Operating cash flow less
capital expenditure
Net interest and tax paid
Free cashflow
Year to
31 March
2011
£m
Year to
31 March
2010
£m
321
96
(101)
9
325
(58)
267
(77)
190
268
105
186
4
563
(60)
503
(89)
414
Operating cash flow from continuing operations
was £325 million, a decrease of £238 million
compared with the prior year primarily due to
increases in working capital of £101 million
(2010 – reduction of £186 million) as we took the
decision to increase US inventories (£126 million)
in the second half of the year. This action was taken
in response to the anticipated tight supply situation
running up to the next corn harvest. We also made
further progress to reduce working capital tied
up in payables and receivables.
Net interest paid decreased by £13 million to
£46 million principally as a result of a decrease in
interest paid on our bank and other borrowings.
Income tax paid was £31 million.
Capital expenditure of £58 million was 64% of the
depreciation charge, reflecting the transition to our
new Group capital allocation process. Including
the investments we will be making in growth and
business transformation and the additional capital
investment required to restart production at the
McIntosh facility, we expect capital expenditure
to be up to 1.4 times depreciation in the 2012
financial year.
Free cash inflow (representing cash generated
from continuing operations after working capital,
interest, taxation and capital expenditure) was
£190 million, £224 million lower than the prior year
principally as a result of the increases in working
capital discussed earlier.
Cash outflow related to discontinued operations
was £105 million compared with an inflow of
£97 million in the prior year due to the timing of
working capital flows ahead of the disposal of
EU Sugars and Molasses. Net disposal proceeds
from the sale of EU Sugars and Molasses were
£280 million.
Equity dividends paid were £70 million, £33 million
lower than the previous year due to the high take
up of the scrip dividend.
Financial risk factors
Our key financial risk factors are market risks,
such as foreign exchange, transaction and
translation exposures, and credit and liquidity risks.
Please refer to Note 21 of the financial statements
on page 89 for a discussion of these risk factors.
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 £1 million at 31 March 2011
(2010 – £13 million).
24 Tate & Lyle Annual Report 2011
We aim to optimise financing costs in respect of
all financing transactions. Where it is economically
beneficial, we choose to lease 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 £173 million (2010 – £195 million)
and related primarily to railcar leases in the USA.
Rental charges for the year ended 31 March 2011
in respect of continuing operations were
£23 million (2010 – £24 million).
Use and fair value of financial instruments
In the normal course of business we use both
derivative and non-derivative financial instruments.
The fair value of Group net borrowings at the year
end was £504 million against a book value of
£464 million (2010 – fair value £823 million; book
value £814 million).
Derivative financial instruments used to manage
the interest rate and currency of borrowings had
a fair value of £4 million liability (2010 – £9 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 £3 million asset
(2010 – £6 million liability). When managing
currency exposure, we use spot and forward
purchases and sales, and options.
The fair value of other derivative financial
instruments accounted for as held for trading
was £2 million asset (2010 – £22 million).
Fair value estimation
The fair value of derivative financial instruments
is based on the market price of comparable
instruments at the balance sheet date if they
are publicly traded. The fair value of the forward
currency contracts has been determined based
on market forward exchange rates at the balance
sheet date. The fair values of short-term deposits,
receivables, payables, loans and overdrafts with
a maturity of less than one year are assumed to
approximate their book values. The fair values of
bonds, bank and other loans, including finance
lease liabilities due in more than one year, are
estimated by discounting the future contractual
cash flows at the current market interest rate
available to the Group for similar financial
instruments, adjusted for the fair valuation effects
of currency and interest rate risk exposures,
where those instruments form part of related
hedging relationship agreements, financial and
commodity forward contracts and options,
and commodity futures. The value of certain
items of merchandisable agricultural commodities
that are included in inventories are based on
market prices.
Going concern
The Group’s business activities, together with
the factors likely to affect its future development,
performance and position are set out in this
Business review. 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 affected,
and are likely to continue to be affected, by
large movements in input prices. However,
with some 75% of revenues from food and
beverage ingredients, the Group has a measure
of resilience (although not immunity) to economic
challenges. 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.
After making enquiries, the directors have a
reasonable expectation that the Company and
the Group have adequate resources to continue
in operational existence for the foreseeable future.
Accordingly, they continue to adopt the going
concern basis in preparing the annual report
and accounts.
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Tate & Lyle Annual Report 2011 25
Business review Corporate responsibility
At Tate & Lyle we see the Company’s performance in financial,
operational, social and environmental terms. They are interdependent
and all contribute to creating value, which is why corporate responsibility
measures are included in our Group key performance indicators.
Javed Ahmed, Chief Executive
Our approach to corporate responsibility (CR)
is enshrined in our Business Code of Conduct
(the Code), a copy of which can be found on our
website, www.tateandlyle.com. The Code applies
unconditionally to all wholly-owned parts of
the Group, and we also seek 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 CR policies
and performance annually, and the Chief
Executive is the Board member accountable
for all aspects of CR.
Improving our management of CR
Following both the Group strategic review and
Board effectiveness review we carried out in 2010
(details of which are in the annual report 2010),
we enhanced how we oversee, manage and report
on our CR risks and performance, including:
•
•
•
we established a new Board Committee,
the CR Committee, to review and monitor
the processes and measures used to manage
social, environmental and ethical risks. Details
of the Committee’s membership, attendance
and key activities are on page 42. The
Committee’s terms of reference are available
on our website, www.tateandlyle.com;
we reorganised CR activities under a new
global unit, Group Operational Efficiency
and Sustainability (GOES). The Group VP,
GOES reports directly to the Chief Executive,
who retains overall responsibility for CR.
As part of this reorganisation, we also
created a new position, VP Sustainability,
with specific responsibility for driving forward
our sustainability work and communicating
with stakeholders; and
with the help of our internal audit function
and external consultants URS Scott Wilson,
we carried out a review of CR performance
data presented in the annual report. It resulted
in improvements to the way CR data is
captured across the Group, and changes
to how we measure and report performance.
We now report key performance indicators
on a normalised absolute basis, in line with
industry practice.
Reporting parameters
We report safety and environmental performance
by calendar year, because we are required to do so
for other regulatory reporting. Assertions made in
this CR section have been verified by our internal
audit function and the processes for measuring our
carbon footprint have been externally reviewed
by URS Scott Wilson.
This year we have reorganised our reporting of CR
issues for ease of reference, bringing together into
one section our reports on safety, our people, the
environment and communities. Next year we plan
to report using a stakeholder model – consisting
of workplace, marketplace, the environment and
communities – to reflect the integral importance
of our stakeholders to our decision-making.
Safety
We have no higher priority than safety. Ensuring
safe and healthy conditions for employees,
contractors and visitors at all our locations is
essential to our operation as a successful business.
Overview of the year
Whilst our safety performance at most of
our locations improved in 2010 and our safety
performance continues to compare favourably
against the industry, the Group’s overall safety
performance deteriorated in 2010. We were deeply
saddened by the death of one employee at our
joint-venture plant in Adana, Turkey (as mentioned
in the annual report 2010). Three other employees
also suffered serious injuries. Whilst all three
have now returned to their old positions, these
incidents contributed to the overall deterioration
in safety performance. This is not acceptable, and
we are taking action to enhance our safety culture
throughout Tate & Lyle.
Managing safety
Maintaining a consistently safe and healthy
workplace for our people requires effective,
proactive management. During the year, we
undertook a comprehensive review of our
approach to managing safety. As a first step,
in August 2010 we introduced a ‘Call to Action’
to standardise best practice and help embed
a safety culture Group-wide – an effort greatly
helped by our restructuring as an integrated
global company and the subsequent global
management of safety initiatives, policies
and programmes.
26 Tate & Lyle Annual Report 2011
Projects and activities
We implemented a number of initiatives as part
of the Call to Action:
•
•
•
the Chief Executive and all his direct reports are
closely involved in our safety auditing system;
we commissioned external safety consultants,
DuPont, to conduct a Group-wide perception
survey and field assessments, leading to a
safety improvement plan that includes action
plans for all plants;
we have standardised accident investigation
procedures, health and safety policies and
procedures, reporting of performance including
near-misses, and communications across
the Group; and
•
we have established global forums to share
best practice worldwide.
Results for the 2010 calendar year
Following feedback on last year’s report, this
year we rationalised the way we present data
into two key measures, recordable incident rate
and lost-time accident rate, in accordance with
Occupational Safety & Health Administration
(OSHA), the recognised global industry standard.
In line with best practice and transparency we
report here in normalised absolute numbers;
and use our Group Safety Index, which we
reported publicly in previous years, as an
internal management tool.
Employee safety results
•
•
Recordable incident rate improved by 1%
Lost-time accident rate worsened by 59%
The US Corn Refiners Association (CRA) safety
statistics are an important measure for us. Our
Sagamore plant won three CRA awards relating
to employee safety this year.
Contractor safety results
•
•
Recordable incident rate worsened by 13%
Lost-time accident rate worsened by 39%
Benchmarking results
We benchmark our safety performance against a
recognised global leader in safety, DuPont. Whilst the
recordable incident rate for employees was slightly
above benchmark, the recordable incident rate for
contractors was higher than benchmark. The lost-time
accident rates for both employees and contractors
were also higher than benchmark. The lost-time
accident rate and contractor performance continue
to be a key area of focus for improvement.
Outlook
We are committed to implementing a world-class
safety culture that delivers world-class safety
performance. While we are disappointed with
our performance in 2010, we have an agreed safety
strategy and objectives plan for 2011 which was
prepared following the results of the work undertaken
by DuPont. Our global safety teams, employees and
contractors are working together to implement
actions to deliver this plan in 2011.
Safety performance
While in practice we make no distinction between employee and contractor safety
and we report combined rates in our Group key performance indicators on pages
8 and 9, for regulatory reporting purposes we report on these groups separately.
Recordable incident rate
Number of injuries requiring treatment beyond
first aid per 200,000 hours
Lost-time accident rate
Number of recordable injuries sufficiently serious
to result in lost work days or restricted work
activities per 200,000 hours
1.82
1.09
1.38
1.56
0.89
0.64
0.64
0.46
0.7
0.69
0.36
0.29
2008
2009
2010
2008
2009
2010
Employees
Contractors
Employees
Contractors
The smaller the number, the better the performance.
Our target is zero for every Tate & Lyle operation.
The smaller the number, the better the performance.
Our target is zero for every Tate & Lyle operation.
Tate & Lyle Annual Report 2011 27
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•
Reward: we have new structures for
incentivising and rewarding employees,
including a new performance-related Group
bonus plan and a sales incentive scheme
consistent across all our locations. Our
remuneration policy for directors is explained
on page 45.
•
Appraisal: we have harmonised our
employee appraisal system across the Group,
and are seeking to assess performance in a
consistent way.
Diversity and inclusion
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.
An important part of our cultural transformation
is to become more globally diverse and inclusive,
both in our internal talent pool and our range of
potential recruits. We have established a diversity
and inclusion council to embed this approach
in our operations.
Health and wellbeing
We share best practice across the Company
and work with healthcare partners to provide
information, advice and support on health issues.
Our programmes are developed in line with local
needs and cultures.
Outlook
Our evolution into a global organisation
demands a truly diverse workforce and this will
be a key focus in our recruitment and retention
policies. We will also be working to further embed
our new performance management systems
and processes across the Group.
Business review Corporate responsibility
Our people
We aim to have good, ethical employment
practices and standards across all our operations,
in line with our Business Code of Conduct. Our
policy is to reward our employees in order to
attract, retain and motivate the right people.
Financial remuneration is an important but by
no means exclusive part of this.
Employee profile
At 31 March 2011, Tate & Lyle employed 4,111
people across the Group. The decrease from 5,666
employees is mostly due to the sale of our Sugars
businesses. These figures exclude any remaining
Sugars employees, including those in Vietnam,
although they were still employed by us on
31 March 2011.
Employees by business unit
Speciality Food
Ingredients
41%
Bulk Ingredients
59%
Employees by geography
North America
46%
Asia Pacific
5%
Latin America
15%
Europe, Middle East
and Africa
34%
2011: the journey to a
performance-related culture
We have seen significant changes in our
Company as we implement our new strategy.
We support and engage with our employees
on this journey in a number of ways.
•
Communication: in changing times,
regular communication is more important
than ever. With the emphasis on open,
two-way discussion, we explore the issues
involved in transforming the business through
a wide range of channels and media, such as
roadshows, workshops, conference calls and
our refreshed staff magazine. These activities
include our communication and support
programme for employees directly affected by
strategic change, namely the establishment of
our new innovation centre in Chicago, USA
and the establishment of a global Shared
Services Centre in Łód ´z, Poland.
28 Tate & Lyle Annual Report 2011
Environment
We seek to operate in a way that is as
environmentally sustainable as practical, while
working continually to reduce our environmental
impact further. By using resources such as energy
and water more efficiently, and reducing waste, we
can also achieve reductions in operational costs
per unit of production. Improving the Company’s
environmental sustainability, therefore, is not only
good for the environment but can also be beneficial
financially. In recognition of this, we are working on
including an environmental sustainability measure
in the Group key performance indicators in next
year’s report, while continuing to report on our
existing environmental metrics in this CR section.
Overview of the year
Tate & Lyle’s environmental policy and standards
apply to all our activities globally, and we aim to
integrate environmental considerations into all
major decisions. We focus on those aspects of our
direct operations that have the greatest potential
impact on the environment, these comprise: our
energy use and consequent carbon footprint;
our water use; and waste.
2010 was an exceptional year for us in terms
of environmental performance. Energy efficiency
improved significantly, as projects to improve
ethanol distillation and dehydration at Loudon,
Tennessee, USA, and energy management at
the Decatur, Illinois, USA and Loudon refineries,
delivered their full benefits. As a result our
carbon footprint decreased. Meanwhile our
water efficiency increased and waste volume
was reduced through targeted efficiencies.
Managing our environmental performance
During 2010 we took several measures to improve
the management, oversight and reporting of
environmental performance, including:
•
•
•
implementing one standard environmental audit
programme across the Group;
issuing updated, detailed environmental
reporting guidance, to ensure reporting on
a standard and consistent basis; and
commissioning external consultants URS Scott
Wilson to review our processes for measuring
our carbon footprint. This led to enhancements
to our reporting methodology and tools for
measuring our carbon footprint, in line with the
relevant international reporting standards.
Results for the 2010 calendar year
The data presented here outline the environmental
performance of our global manufacturing facilities,
including joint ventures where we have operational
management control or influence.
The graphs on page 30 show our progress.
In calendar year 2010, versus 2009:
•
•
•
•
Energy use per tonne of production reduced
by 9%, due to energy efficiency projects and
improvements in plant utilisation
Primary carbon footprint from manufacturing
energy use reduced by 10% per tonne of
production, resulting largely from these energy
efficiency improvements
Water use reduced by 5% per tonne of
production, due to water efficiency projects
and improvements in plant utilisation
Waste reduced by 4% per tonne of
production, and has reduced by 24%
since 2008, following a combination of
waste reduction projects, production process
changes at Loudon, USA, and improvements
in plant utilisation.
Most of our operations globally complied with
their environmental operating permit limits during
2010. On the rare occasions that a site temporarily
exceeded its limits, we took immediate action
to correct the issue and prevent a recurrence.
We expect all our operations to meet operating
permit limits at all times and treat any
contraventions seriously.
Outlook
Our newly-appointed VP Sustainability will
provide strategic leadership of our work to further
improve environmental performance, driving action
plans that will build on our progress to date.
These plans include:
•
•
•
•
reducing energy and water usage per unit of
production, and minimising process waste,
through a constant focus on efficient operation,
supported where appropriate by capital
investment;
working to eliminate any incidence of
non-compliance with environmental permits;
continuing to evaluate our carbon footprint; and
improving engagement with colleagues and
external stakeholders on our environmental
performance and other sustainability matters.
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Tate & Lyle Annual Report 2011 29
Business review Corporate responsibility
Environmental performance
Energy use
GJ per tonne production
Primary carbon footprint
Tonnes CO2 per tonne production
4.99
4.94
4.48
0.41
0.41
0.37
2008
2009
2010
2008
2009
2010
Water use
Cubic meters per tonne production
Waste
Tonnes per ‘000 tonnes production
4.68
4.65
4.43
9.57
7.57
7.23
2008
2009
2010
2008
2009
2010
The environmental data for the calendar years 2008, 2009 and 2010 presented in this Annual Report 2011 is not directly comparable to
that provided in the Company’s annual report 2010 and previous reports due to changes to the Company’s structure and developments
in the Company’s environmental reporting arrangements. Specifically, these differences are as follows:
1.
Discontinued operations have been removed for 2008, 2009 and 2010.
2.
Inclusion of data from some additional joint ventures.
3.
Movement to normalised absolute reporting (i.e. performance per tonne of production volume).
30 Tate & Lyle Annual Report 2011
Community
We want to play a positive role in the
communities in which we operate. Our policy
is to build long-term relationships with local
partners who directly address local needs, and
who share our aims in establishing strong, safe and
healthy communities. We chiefly do this through
charitable donations and by supporting our
employees’ participation in community activities.
Overview of the year
In the past, our Sugars division played a key role
in our overall community programme. The disposal
of the Group’s EU Sugar Refining operations on
30 September 2010 had no immediate impact
on the recipients of the division’s community
activities, as these activities were transferred
with the business. However, there was an
impact on the structure and focus of the Group’s
overall community programme. We are therefore
undertaking a comprehensive review of the Group’s
community programme, and will report on the
results of this review in the annual report 2012.
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:
•
•
•
•
education – 50%
environment – 25%
health – 15%
arts – 10%
In the financial year to 31 March 2011,
Tate & Lyle’s total worldwide charitable donations
were £346,000 (2010 – £714,000); this decrease
is largely due to the sale of the Group’s EU Sugar
Refining operations.
Actual community spend by allocation
We support many initiatives and organisations
involved in community regeneration all round the
world, including:
Europe
•
Hungrana, Hungary: our joint venture
business supported a local primary school by
donating equipment and holding safety and
environmental events.
•
•
Amylum Bulgaria: our joint venture business
supports local schools and runs other
small-scale initiatives.
Tate & Lyle, The Netherlands: we sponsor
a windmill, an institute for visually impaired
people and a holiday programme for disabled
children. We also hold careers, historical and
technical open days for the local community.
•
Amylum Nisasta, Turkey: every year our joint
venture business supports the TEMA Soil/Tree
Foundation with a local tree-planting day.
USA
•
Lafayette: our two plants support the United
Way of Lafayette regeneration organisation.
•
Decatur: we support agricultural shows, local
organisations responsible for arts grants,
and a range of education, community and
regeneration projects. We also support the
Associated Colleges of Illinois.
•
Loudon: our plant supports the United Way
of Loudon regeneration organisation.
Asia
•
We made a one-off donation for the victims
of the Japanese earthquake and tsunami.
Outlook
Following the sale of the Group’s EU Sugar
Refining operations, we will undertake a
comprehensive review of the nature, purpose and
scope of our community programme everywhere
we operate. We will assess policies, the nature of
pro bono and cash contributions, and the selection
of charities we support. Results will be included
in our annual report 2012.
Arts
10%
Health
24%
Environment
26%
Education
40%
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Tate & Lyle Annual Report 2011 31
Governance Board of directors
Sir Peter Gershon
Chairman
Javed Ahmed
Chief Executive
Became Chairman in 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 UK Government’s
Efficiency Board, and the Advisory
Board of the UK Defence Academy.
Aged 64.
Joined the Group as Chief Executive
in 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 51.
Tim Lodge
Chief Financial Officer
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 a
Fellow of the Chartered Institute of
Management Accountants. In June
2010 his title was changed to
Chief Financial Officer.
Aged 46.
Liz Airey
Non-executive director
William Camp
Non-executive director
Evert Henkes
Non-executive director
Joined the Board in January 2007.
Formerly Finance Director of
Monument Oil and Gas plc. Currently
Chairman of the JP Morgan European
Smaller Companies 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 52.
Joined the Board in 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 62.
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 67.
32 Tate & Lyle Annual Report 2011
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Douglas Hurt
Non-executive director
Robert Walker
Senior Independent Director
Dr Barry Zoumas
Non-executive director
Joined the Board in 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 54.
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 and Americana
International Holdings Limited; he
has also served on a number of FTSE
100/250 boards, including WH Smith
(Chairman), Wolseley, Severn Trent,
BAA, Signet, and Thomson Travel.
Aged 66.
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 68.
Committee membership
as at 26 May 2011
Audit Committee
Liz Airey, Chairman
Evert Henkes
Douglas Hurt
Remuneration Committee
Evert Henkes, Chairman
William Camp
Sir Peter Gershon
Robert Walker
Nominations
Committee
Sir Peter Gershon, Chairman
Javed Ahmed
Liz Airey
William Camp
Evert Henkes
Douglas Hurt
Robert Walker
Dr Barry Zoumas
Corporate Responsibility
Committee
Sir Peter Gershon, Chairman
Liz Airey
William Camp
Dr Barry Zoumas
Robert Gibber
Executive Vice President,
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 48.
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Tate & Lyle Annual Report 2011 33
Governance 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 32 and 33.
Olivier Rigaud
President, Speciality Food Ingredients
Karl Kramer
President, Innovation and
Commercial Development
Joined Tate & Lyle in April 2008, became
President, Sucralose in June 2008 and was
appointed President, Innovation and Commercial
Development in June 2010. 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
Executive Vice President, Human Resources
Joined Tate & Lyle in February 2010 and was
appointed Executive Vice President, Human
Resources in June 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.
Joined Tate & Lyle (Amylum business) in
1988 as a sales manager in France. A chemistry
graduate from Aix-Marseille University, 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. He was appointed
President, Speciality Food Ingredients in
June 2010.
Matt Wineinger
President, Bulk Ingredients
Joined Tate & Lyle in March 2008, became
President, Food & Industrial Ingredients,
Americas in July 2008 and was appointed
President, Bulk Ingredients in June 2010. 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
Solutions platform. Subsequently joined Swift
and Co, where he was President of its Australian
Meat Holdings division until 2007.
Javed Ahmed
Chief Executive
Matt Wineinger
President,
Bulk Ingredients
Olivier Rigaud
President,
Speciality Food
Ingredients
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
34 Tate & Lyle Annual Report 2011
Governance Corporate governance
With the ongoing evolution of best practice in UK corporate
governance, the Board continues to work hard to ensure it keeps up to
date with these changes. We value our reputation as a well-run company
and will continue to commit significant effort to maintaining it.
Board effectiveness review
In light of the significant changes to the Board
and Group over the previous 18 months, and
the length of time that had elapsed since the last
external Board effectiveness review (conducted
in 2008) the Board agreed that the 2011 review
should be externally facilitated. Details of this
review are on page 38.
Developments in corporate governance
We continued to monitor the changes to the
corporate governance landscape. Following the
publication of the new UK Corporate Governance
Code, which applies to Tate & Lyle from 1 April
2011, all directors will be standing for re-election
at the forthcoming AGM. We also reviewed and
updated the schedule outlining the role and
responsibilities of the Chairman, Chief Executive
and Senior Independent Director during the year
to bring it into line with evolving best practice.
Looking ahead, we will continue to develop
our processes, procedures and systems as
both Tate & Lyle and our wider governance
environment evolve.
Sir Peter Gershon
Chairman
26 May 2011
Statement from the Chairman
As Chairman I am responsible for ensuring
that the Board operates effectively. During
the year, we undertook a number of actions to
enhance further the governance structure and
thereby improve the Board’s effectiveness.
These included:
Establishment of a Corporate
Responsibility Committee
In light of the output from the 2010 Board
Effectiveness review, the Board established a
Corporate Responsibility (CR) Committee with
effect from 1 July 2010. The CR Committee is
responsible for reviewing and monitoring the
processes and measures used to manage social,
environmental and ethical risks. During the year,
this new Committee reviewed a number of issues
including the Group’s safety performance, product
quality processes, environmental performance
and diversity and inclusion initiatives. Further
detail is provided on page 42.
Use of non-executive directors’ time
We also undertook a comprehensive review of
the Board and Committees’ programmes and use
of non-executive directors’ time. In the past, all
non-executive directors generally served on
each Board Committee. Following the review, the
directors agreed that all non-executive directors
would serve on the Nominations Committee
and at least one other Committee. Details of the
current Committee memberships are on page 33.
In addition, we restructured the Board agenda
to facilitate greater discussion and reduced the
number of scheduled Board meetings from eight
to six per annum, although we recognised that, as
a result, the scheduled meetings would have to
be longer and that we would need to meet on an
ad hoc basis more frequently than in the past.
We also established an annual programme of
independent site visits whereby each non-executive
director undertakes at least one ‘solo’ site visit a
year, in addition to the Group Board visit. This will
increase both Board visibility across the Group and
also the non-executive directors’ understanding
of our operations. Between us, the non-executive
directors and I have visited a total of 12 sites
during the year.
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Tate & Lyle Annual Report 2011 35
Governance Corporate governance
Compliance with the Combined Code
Throughout the period 1 April 2010 to 31 March
2011 the Company has been in full compliance
with the June 2008 issue of the Combined Code
on Corporate Governance (the Code), published
by the Financial Reporting Council and available
on its website www.frc.org.uk.
Other responsibilities are delegated to Board
Committees, details of which are given on pages
40 to 44. The directors’ responsibilities for the
preparation of financial statements are explained
in the Directors’ statement of responsibilities on
page 59 and their statement on going concern
on page 25.
This report, together with the Directors’
remuneration report and the disclosures contained
in the risk management section on pages 19 to 21,
provide 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, ensures that the Company 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.
Matters reserved to the Board
The schedule of matters reserved to the
Board for decision includes approval of:
•
•
•
•
•
•
•
•
•
•
Group strategy;
annual budget and operating plans;
major capital expenditure, acquisitions
or divestments;
dividends;
full-year and half-year results and interim
management statements;
Board and Company Secretary
appointments;
senior management structure and
responsibilities;
treasury policies;
directors’ conflicts of interest; and
systems of internal control and risk
management.
Board balance and independence
At the date of this report, the Board comprises
nine directors: the Chairman, who has no
executive responsibilities; two executive
directors; and six non-executive directors.
The names and biographies of the directors
are on pages 32 to 33.
Richard Delbridge ceased to be a director on
22 July 2010 and Robert Walker succeeded
him as Senior Independent Director on the
same day. William Camp was appointed
a non-executive director with effect from
1 May 2010.
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
Senior Independent Director, Robert Walker,
is available to shareholders if they have any
issues or concerns, and leads the annual
review of the Chairman’s performance.
The non-executive directors have a wide
range of skills and knowledge and combine
broad business and commercial experience
with independent and objective judgement.
The terms and conditions of appointment of
the non-executive directors can be inspected
at the Company’s registered office and will
be available for inspection at the Annual
General Meeting (AGM).
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
32. The Board is satisfied that they do not restrict
him from effectively carrying out his duties
as Chairman.
Board meetings
A total of 13 Board meetings were held during
the year ended 31 March 2011; one of the six
scheduled Board meetings was held at the
Group’s offices in Lafayette, Indiana, USA. The
seven ad hoc meetings were required to consider
the development and implementation of the
Group’s strategy and business disposals.
36 Tate & Lyle Annual Report 2011
Directors’ attendance at Board meetings
Directors as at 31 March 2011
Sir Peter Gershon
Javed Ahmed
Tim Lodge
Liz Airey
William Camp1
Evert Henkes
Douglas Hurt2
Robert Walker
Dr Barry Zoumas
Former directors
Richard Delbridge3
Number of
meetings
Number of
meetings
attended
13
13
13
13
11
13
13
13
13
7
13
13
12
13
11
10
9
13
13
6
1 Appointed 1 May 2010.
2
Douglas Hurt is Finance Director at IMI plc. Prior to his
appointment to the Tate & Lyle Board on 10 March 2010, he
indicated that he would be unable to attend a total of four
scheduled meetings due to pre-existing commitments.
Douglas Hurt submitted detailed comments and questions
to the Chairman prior to each meeting that he was unable
to attend to ensure his views and comments could be
communicated in his absence.
3
Retired 22 July 2010.
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.
The rolling programme of items for discussion by
the Board was fully reviewed and revised during
the year in light of changes to the Board schedule
and Committee structure. Meetings have been
restructured to facilitate further open discussion,
and all directors participate in discussing strategy,
trading, safety, 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 Chairman continued to hold a
short discussion with the non-executive directors
collectively both immediately before and after 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
18%
Operations
12%
Finance/risk
33%
Strategy
34%
Capital expenditure
and investment
3%
Board support
All directors have access to the advice and services
of the Company Secretary, Robert Gibber, who is
also the General Counsel and a member of the Group
Executive Committee. The Company Secretary and
the Deputy Company Secretary are responsible for
ensuring that Board processes are followed and
that applicable rules and regulations are complied
with. The appointment and removal of the Company
Secretary is a matter for the Board as a whole.
There is also a formal procedure whereby, in the
furtherance of their duties, directors can obtain
independent professional advice, if necessary,
at the Company’s expense.
Directors’ conflicts of interest
As permitted under the Companies Act 2006, the
Company’s Articles of Association allow 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, new directors receive
background reading about the Group and details
of Board procedures and other governance related
matters. In addition, the directors participate in a
comprehensive induction programme, including
site visits to the Group’s operations in Europe and
the USA and meetings with senior management
across the Group.
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. These included a session on the UK Bribery
Act, provided jointly by the Group’s internal and
external lawyers, and one on food technology which
was provided by members of the faculty at Purdue
University, Lafayette, Indiana, USA.
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.
Tate & Lyle Annual Report 2011 37
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Governance Corporate governance
Performance evaluation
A review of the Board’s effectiveness is
undertaken each year. The main outcomes of the
2010 evaluation, which was led by the Chairman,
are summarised below:
Recommendation
Action
More specialist
presentations and
training sessions to be
included in the Board
agenda.
More opportunity to
interact with a broader
range of employees.
A Corporate
Responsibility
Committee should be
established.
The directors received
detailed presentations during
the year and also training
on areas including food
technology and the UK
Bribery Act.
A programme of independent
site visits was implemented
during the year which enables
the directors to meet more
employees around the Group.
The CR Committee was
established on 1 July 2010
and met for the first time in
September 2010. Details on
the Committee are on page 42.
The Board agreed that the 2011 Board
effectiveness review be externally facilitated.
As part of the process, Sheena Crane, a Board
specialist consultant, held one-to-one meetings
with each director, the Company Secretary and
Deputy Company Secretary. The main themes of
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 including
those recommendations summarised below.
Progress on agreed actions is being monitored
by the Company Secretary and will be reported
in the annual report 2012.
Recommendation
Action
In light of the changes to
the Company’s strategic
focus, future Board
composition should be
subject to a detailed
review during 2011.
The review is underway and
the output from that review
will be reported in the annual
report 2012.
A Board diversity
strategy should be
developed.
The Chairman is leading the
project to develop the Board
diversity strategy during 2011.
Personal development
plans should be
developed for each of the
non-executive directors
and the Chairman.
Personal development plans
are being established.
It would be useful for the
Board to have a series
of ‘deep dive’ sessions
every year.
Deep dive topics are
being identified and will
be included in the
Board agenda.
With regard to the performance of individual
directors, the review 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. Individual feedback
was also provided to each director.
The Board effectiveness review also included a
review of the Audit, Nominations and Remuneration
Committees and each Committee undertook an
evaluation of its own work and effectiveness during
the year. The results of the reviews were discussed
by the Board which concluded that each Committee
operated effectively throughout the year. The CR
Committee will be subject to an effectiveness review
in the 2012 financial year, after its first full year
of operation.
During the year, the non-executive directors met
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.
Shareholder communications
The Chief Executive, Chief Financial Officer and
VP – Investor and Media Relations maintain a
regular programme of visits and presentations
to major institutional shareholders both in the
UK and overseas. The Chairman and Senior
Independent Director participate in this programme
as appropriate and the Chairman provides feedback
to the Board on any matters raised with him by
major shareholders. The Chairman also undertook
separate visits to major institutional shareholders
during the year.
The Investor Relations department provides the
Board with a 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 the full-year and half-year
results presentations.
The Company aims to present a balanced and clear
assessment in all its public reports as well as in
those 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 2011 AGM will be held at the Queen Elizabeth II
Conference Centre in London, on Thursday 28 July
2011 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. All resolutions are decided by means
of a poll and the votes received in respect of each
resolution, together with the level of abstentions,
are notified to the London Stock Exchange and
published on the Company’s website. Shareholders
are offered the choice of receiving shareholder
documentation, including the annual report,
electronically or in paper format as well as the
choice of submitting proxy votes either
electronically or by post.
38 Tate & Lyle Annual Report 2011
Internal control
The Board has overall responsibility for the
Group’s system of internal control, which is
designed to safeguard the assets of the Group
and to ensure the reliability of financial information
for both internal use and external publication and
to comply with the Turnbull Committee guidance.
The schedule of matters reserved to the Board
ensures that the directors control, among other
matters, all significant strategic, financial and
organisational issues.
Responsibilities
The Board delegates to executive management
the responsibility for designing, operating and
monitoring both the system and the maintenance
of effective internal control. Procedures are in
place for identifying, evaluating and managing
any significant risks that face the Group. These
procedures 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.
Mandatory written policies and procedural
manuals exist for all businesses, compliance with
which is reviewed by the Board annually. These
internal control procedures provide that all major
projects require technical, financial and Board
approval, while all capital expenditure within each
project requires senior management approval at
appropriate stages. Adherence to internal control
procedures is ensured by a regular reporting
system that details both technical progress of
projects and the Group’s financial affairs. All
material joint ventures follow the Group’s formal
systems of internal control, and their internal
control procedures are regularly reviewed by
the Group’s internal audit function.
Risk assessment and evaluation form an integral
part of the annual planning process. Each business
division documents its strategic objectives and the
significant risks in achieving them. The divisions
report regularly on progress towards fulfilment,
whilst the key risks are reviewed regularly by
the Board. There is a comprehensive budgeting
and planning system for all items of expenditure
with an annual budget approved by the Board.
Results are reported against budget on a monthly
basis, with significant variances investigated and
the Chief Executive and Chief Financial Officer
undertake regular financial and operational reviews
of the business divisions. Revised forecasts for the
financial year and financial projections for future
years are prepared on a regular basis.
Financial reporting
The Company has in place internal control
and risk management systems in relation to the
Company’s financial reporting process and the
Group’s process for preparation of consolidated
accounts. They include policies and procedures
which provide:
•
that transactions and disposals of assets
are accurately and fairly reflected;
•
•
reasonable assurance that transactions are
recorded as necessary to permit the preparation
of financial statements in accordance with
International Financial Reporting Standards;
assurance that representatives of the
businesses have certified that their reported
information provides a true and fair view of the
state of the financial affairs of the business and
its results for the period; and
•
that reported data has been reviewed and
reconciled.
Monitoring effectiveness
The Board receives reports from the Chief
Executive, Chief Financial Officer, business
division presidents and other senior executives
to enable it to assess on an ongoing basis the
effectiveness of the systems of internal control
and risk management. The Audit Committee
periodically reviews the effectiveness of the system
of internal control through reports from 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 and a duty to report on any
material weaknesses.
2011 review of effectiveness
The Board, with the assistance of the Audit
Committee and Corporate Responsibility
Committee, conducted an 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,
included a Group-wide certification that
appropriate internal controls were in place to
facilitate the Board’s review of effectiveness.
The internal audit function monitored and
selectively checked the results of this exercise,
ensuring that the representations made were
consistent with the results of its work during the
year. Where weaknesses have been identified,
remedial action plans were also reported. The
results of this exercise were summarised for
the Audit Committee, Corporate Responsibility
Committee and the Board.
This assessment is carried out every year. In
the event that any significant losses were to be
incurred during any particular year as a result of
a failure of controls, a detailed analysis would
be provided to the Audit Committee, Corporate
Responsibility Committee (if appropriate),
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.
Further information on risk is on pages 19 to 21.
Tate & Lyle Annual Report 2011 39
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Governance Corporate governance
Audit Committee
The Audit Committee currently comprises three
non-executive directors, and oversees the Group’s
financial reporting and internal controls and
provides a formal reporting link with the external
auditors. Its terms of reference, which are reviewed
annually by the Board, are available on the
Company’s website, www.tateandlyle.com.
The Committee met six times during the year.
Membership of the Committee and attendance
during the year were as follows:
Number of
meetings
Number of
meetings
attended
6
6
6
3
2
2
6
5
5
3
2
2
Directors as at 31 March 2011
Liz Airey (Chairman of
the Committee)
Evert Henkes
Douglas Hurt
Former members
Richard Delbridge1
Robert Walker2
Dr Barry Zoumas2
1 Retired 22 July 2010.
2 Until 30 June 2010.
All the Committee members have extensive
management experience in large international
organisations. It is a requirement of the Code
that at least one Committee member has recent
and relevant financial experience; Liz Airey, an
investment banker and former finance director
of Monument Oil and Gas plc, and Douglas
Hurt, Finance Director at IMI plc, both meet
this requirement.
The Chief Financial Officer, VP – Group Audit
and Assurance, VP – Group Financial Controller
and representatives of the external auditors are
normally invited to attend each meeting of the
Committee. The Chairman of the Board and Chief
Executive also attend meetings of the Committee
by invitation.
The minutes of each meeting are circulated to
the Board. The VP – Group Audit 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.
Main responsibilities of the
Audit Committee
The main responsibilities of the
Committee include:
•
•
•
•
•
•
•
overseeing the Group’s financial reporting
process and monitoring the integrity
of the financial statements and formal
announcements relating to the Group’s
financial performance;
reviewing significant financial reporting
issues and accounting policies and
disclosures in financial reports;
reviewing the effectiveness of the Group’s
internal control procedures and risk
management systems;
reviewing the effectiveness of the internal
audit function;
overseeing the Board’s relationship with the
external auditors;
reviewing and monitoring the external
auditors’ independence and objectivity and
the effectiveness of the audit process; and
making recommendations to the Board on
the appointment or re-appointment of the
Group’s external auditors.
Independence of the external auditors
The Group’s external auditors are
PricewaterhouseCoopers LLP (PwC) and 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 Committee closely monitors the level of audit
and non-audit related services they provide to the
Group. Non-audit related services are normally
limited to assignments that are closely related to
the annual audit or where the work is of such a
nature that a detailed understanding of the Group
is necessary. A policy for the engagement of the
external auditors to supply non-audit related
services has been implemented to formalise these
arrangements which requires Audit Committee
approval for certain categories of work and
fee levels. A breakdown of the fees paid to the
external auditors in respect of audit and non-audit
related work is included in Note 8 of the financial
statements. Having undertaken a review of the
non-audit related services provided during the
year, the Committee is satisfied that these
services did not prejudice the external
auditors’ independence.
40 Tate & Lyle Annual Report 2011
Work undertaken during the year
During the year and up to the date of this
annual report, the work undertaken by the Audit
Committee included:
Consideration and review of full-year and
half-year results and interim management
statements
•
meeting prior to the Board meetings at which
the annual report and financial statements,
the half-year report and interim management
statements were approved to review significant
accounting policies, financial reporting issues
and judgements and reports from the
external auditors.
External audit
•
reviewing the effectiveness of the external audit
process, the external auditors’ strategy and
plan for the half-year review and full-year audit,
and the qualifications, expertise, resources and
independence of the external auditors;
•
•
•
•
agreeing the terms of engagement and fees
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); and
undertaking a review of the effectiveness of
the external auditors.
Risk management framework and
internal audit
•
receiving and considering regular reports from
the VP – Group Audit 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;
•
•
reviewing the strength of the internal controls
framework and considering the annual review
of internal controls on behalf of the Board; and
undertaking a detailed review of the governance
and controls in place within the business
processes transformation programme.
Terms of reference and Audit
Committee effectiveness
•
updating its terms of reference to reflect
evolving best practice and the implications
of the new Committee structure, whereby
responsibility for certain items, including the
whistleblowing process, are passed to the
CR Committee. The Board approved the
updated terms of reference; and
•
undertaking an effectiveness review which
concluded that the Committee was considered
to be operating effectively.
Review of the effectiveness of the
external auditors
•
conducting an internal review of the external
auditors in the year which concluded that the
external audit process was operating effectively
and PwC continued to provide a good service
to Tate & Lyle. The Committee agreed that
there was no need to undertake a tender
for the audit;
•
•
reviewing the fees paid to other audit firms
for services during the year ended 31 March
2011 and noting that there were no contractual
obligations that would restrict the Committee’s
choice of external auditors should it decide that
any change was appropriate; and
recommending to the Board that PwC continue
to act as auditors to the Group. PwC have
indicated their willingness to continue in office,
and a resolution that they be re-appointed will
be proposed at the AGM.
Review of the effectiveness of the internal
audit function
•
undertaking a review of the effectiveness of the
internal audit function. The review concluded
that the internal audit function continued
to strengthen 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.
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Tate & Lyle Annual Report 2011 41
Governance Corporate governance
Corporate Responsibility
Committee
The Corporate Responsibility (CR) Committee
was established with effect from 1 July 2010,
in light of the conclusions of the 2010 Board
effectiveness review (a summary of which is on
page 38) to provide greater oversight on key areas
of corporate responsibility. The CR Committee
currently comprises the Chairman of the Company
and three non-executive directors. Its terms of
reference are available on the Company’s
website, www.tateandlyle.com.
The Committee met three times during the
year. Membership of the Committee and their
attendance during the year were as follows:
Work undertaken during the year
During the year and up to the date of this annual
report, the work undertaken by the CR Committee
included:
Safety
•
reviewing the output of the external review
of the Group’s safety performance and the
resultant action plan, and monitoring its
implementation.
Product safety
•
undertaking a review of the quality assurance
processes within the Group.
Diversity and inclusion
•
reviewing the Group’s approach to diversity and
inclusion, along with initiatives put in place by
management.
Directors as at 31 March 2011
Sir Peter Gershon (Chairman
of the Committee)
Liz Airey
William Camp
Dr Barry Zoumas
Number of
meetings
Number of
meetings
attended
Environment
•
reviewing the actions being undertaken to
improve the Group’s performance further.
3
3
3
3
The Committee also undertook the annual
review of internal controls in relation to the above
areas. Further information on the work of the
Committee and the Group’s approach to corporate
responsibility reporting is contained in the
Corporate responsibility report on pages 26 to 31.
3
3
2
3
The Committee has established a formal calendar
of items for consideration at each meeting and
will meet at least four times each full year. The
minutes of each meeting are circulated to the
Board. The Chief Executive, Executive VP – Human
Resources, VP – Group Audit and Assurance and
other members of the senior management team (as
invited by the Committee) usually attend meetings.
Main responsibilities of the
Corporate Responsibility Committee
The main responsibilities of the
Committee include:
•
•
•
•
•
•
•
monitoring the Group’s overall approach to
corporate responsibility and ensuring it is
in alignment with the Group strategy;
approving, or where appropriate
recommending to the Board for approval,
CR policies;
reviewing the effectiveness of the
Group’s policies and procedures relating
to the provision of a safe environment;
reviewing the implementation of appropriate
environmental policies;
monitoring the effectiveness of workplace
policies concerning employee relations,
equal opportunities, travel, entertainment
and conflicts of interest;
reviewing the arrangements by which
employees may, in confidence, raise
concerns about possible improprieties
in matters of financial reporting,
financial control or other matters
(whistleblowing); and
satisfying itself that the Group has
appropriate policies, systems and controls
in place in respect of the risks falling within
the Committee’s remit.
Nominations Committee
The Nominations Committee currently comprises
the Chairman of the Company, the Chief Executive
and all of the non-executive directors. Its terms
of reference, which are reviewed annually by the
Board, are available on the Company’s website,
www.tateandlyle.com.
The Committee met four times during the
year. Membership of the Committee and their
attendance during the year were as follows:
Number of
meetings
Number of
meetings
attended
Directors as at 31 March 2011
Sir Peter Gershon (Chairman of
the Committee1)
Javed Ahmed
Liz Airey
William Camp2
Evert Henkes
Douglas Hurt
Robert Walker
Dr Barry Zoumas
Former directors
Richard Delbridge3
4
4
4
4
4
4
4
4
1
4
4
4
4
4
2
4
4
1
1
Except when the Committee is dealing with the appointment
of a successor to the Chairman, when the Senior Independent
Director chairs the Committee.
2 Appointed 1 May 2010.
3 Retired 22 July 2010.
The Committee has a formal calendar of items for
consideration at each meeting and meets at least
twice a year.
42 Tate & Lyle Annual Report 2011
Main responsibilities of the
Nominations Committee
The main responsibilities of the
Committee include:
•
reviewing the size and composition of the
Board, including succession planning, and
the leadership needs of the Group generally;
•
•
•
recommending 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,
bearing in mind the need for diversity;
making recommendations on the processes
for the appointment of the Chairman of the
Board; and
reviewing annually the performance of each
member of the Group Executive Committee
and reporting on that review to the
Remuneration Committee.
Work undertaken during the year
During the year and up to the date of this annual
report, the work undertaken by the Nominations
Committee included:
Board composition
•
reviewing the successional needs of the
Board on a regular basis during the year.
No additional non-executive directors were
recruited during the year. William Camp,
who joined the Board on 1 May 2010, was
recruited during the financial year ended
31 March 2010 and details of the recruitment
process were disclosed in the annual
report 2010.
Committee membership
•
reviewing the membership of all Board
Committees following the Board’s decision
to establish a Corporate Responsibility
Committee. Its recommendations regarding
Committee composition were approved by
the Board.
Performance evaluation
•
undertaking a performance evaluation of
each of the members of the Group Executive
Committee and reporting its conclusions to
the Remuneration Committee.
Terms of reference and Nominations
Committee effectiveness
•
updating its terms of reference to reflect
evolving best practice. The Board approved
the revised terms of reference; and
•
undertaking a review of effectiveness
which concluded that the Committee was
considered to be operating effectively while
identifying a number of areas for focus,
including the development of a strategy on
Board diversity for approval by the Board in
the first half of the 2012 financial year.
Remuneration Committee
The Remuneration Committee comprises
independent non-executive directors and the
Chairman of the Board. Its terms of reference,
which are reviewed annually by the Board,
are available on the Company’s website,
www.tateandlyle.com.
The Committee met six times during the
year. Membership of the Committee and their
attendance during the year were as follows:
Number of
meetings
Number of
meetings
attended
6
6
6
6
1
1
1
1
6
6
6
6
1
1
1
1
Directors as at 31 March 2011
Evert Henkes (Chairman of the
Committee)
William Camp1
Sir Peter Gershon
Robert Walker
Former members2
Liz Airey
Richard Delbridge
Douglas Hurt
Dr Barry Zoumas
1 Appointed 1 May 2010.
2 Until 30 June 2010.
The Committee meets as required, usually before
each Board meeting, and has a formal calendar
of items for consideration. The minutes of each
meeting are circulated to those non-executive
directors who are not members of the Committee.
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 (excluding
the Chairman, Sir Peter Gershon) 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.
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Tate & Lyle Annual Report 2011 43
Governance 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 has audited such content as required by the
Act (the tabular information on pages 54 to 56).
A resolution to approve this report will be
proposed at the AGM on 28 July 2011.
Remuneration Committee
The Remuneration Committee (the Committee)
comprises 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 (until 1 July 2010)
William Camp (from 1 May 2010)
Richard Delbridge (until 1 July 2010)
Sir Peter Gershon
Douglas Hurt (from 10 March 2010 to 1 July 2010)
Robert Walker
Dr Barry Zoumas (until 1 July 2010)
The Chief Executive, Executive Vice President
Human Resources, Group Compensation Manager
and Executive Vice President Company Secretary
and General Counsel, who acts as Secretary to the
Committee, are normally invited to attend meetings
to assist the Committee, although none is present
or involved when his or her own remuneration
is discussed.
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 met six times during the year.
Individual members’ attendance records at meetings
during the year are given in the table on page 43.
Main responsibilities of the
Remuneration Committee
•
The Committee’s main responsibilities include:
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 plan and annual bonus plan, and
determining the participants and overall
grant levels; and
setting 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 2011 review concluded that the
Committee had fulfilled its role and responsibilities
appropriately.
Consultants
The Committee receives advice from independent
remuneration consultants. During the year the
Committee carried out a comprehensive triennial
review of potential external advisors and as a result
reappointed Hewitt New Bridge Street (HNBS)
(part of Hewitt Associates Ltd) to act as principal
adviser to the Committee. HNBS is a signatory to
the Remuneration Consultant’s Voluntary Code
of Conduct.
In addition to market remuneration data provided
by HNBS and by Towers Watson, the Committee
receives total shareholder return performance
data and ranking information for the Performance
Share Plan and the legacy 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. During the year ended
31 March 2011, HNBS, 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
During the year ended 31 March 2010, the
Committee undertook a comprehensive review of
executive remuneration, and consulted extensively
with major shareholders on the proposals developed
during this review. The revised remuneration policy
was detailed in the Directors’ remuneration report
for the year ended 31 March 2010. Both that
Directors’ remuneration report, and a resolution to
change the award limits under the Performance
Share Plan, were approved by shareholders at the
2010 AGM. The changes to remuneration policy are
aligned to the Company’s business strategy placing
more emphasis on driving Company performance
and growth, and delivering value for shareholders.
The changes were implemented for the year ended
31 March 2011; the remuneration detailed in this
report therefore reflects the new policy. As the Chief
Executive’s remuneration had only recently been
agreed, on his recruitment in October 2009, some
aspects of the new policy were not applied to him
during the year ended 31 March 2011, details of
which are explained in this report.
Following further review, the Committee decided
that for the year ending 31 March 2012, the revised
policy should be fully extended to the Chief
Executive, with some adjustment to reflect the
terms of his remuneration agreed on recruitment
as discussed opposite.
44 Tate & Lyle Annual Report 2011
Changes to incentive arrangements are an
important component in delivering the business
strategy; they help to provide focus on the drivers
of sustained, long-term growth, including product
innovation and strengthening our position in high
growth markets. The agreed annual bonus plan
incorporates metrics based on sales, profitability
and conversion of profits to cash, which are all
key indicators of whether the strategy is being
delivered. The Performance Share Plan (PSP)
measures how successfully we grow the absolute
level of profits and deliver a strong return on the
capital we employ, over the three-year performance
period. Executives have a substantial stake in
Tate & Lyle shares and dividends through deferral
of part of annual bonus into shares, large executive
shareholding requirements and the shares held
in the PSP.
Remuneration strategy and policy
Remuneration arrangements during the year
ended 31 March 2011 for executive directors
Balance between fixed and performance-
related components
The relative proportions of fixed and performance-
related remuneration for the Chief Executive and
the Chief Financial Officer are shown below. These
are valued at both target and stretch performance
levels, including base salary, annual bonus and the
award value of the long-term incentives.
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Target performance
Chief Executive
Chief Financial Officer
Stretch performance
Chief Executive
Chief Financial Officer
Non-performance-
related pay 40%
Non-performance-
related pay 53%
Non-performance-
related pay 18%
Non-performance-
related pay 19%
Strategy
The Company’s remuneration strategy is to provide
remuneration packages that attract, retain and
motivate high-calibre individuals to deliver superior
operational performance and outstanding financial
results, in a manner that aligns with the Group’s
Chief Financial Officer
core values and Business Code of Conduct and
Non-performance-
fosters sustainable, profitable growth. To do so,
related pay 40%
packages must:
Non-performance-
related pay 53%
Target performance
Chief Executive
• be aligned to shareholders’ interests;
• be competitive;
Performance-related pay 60%
Performance-related pay 47%
Stretch performance
Chief Executive
Chief Financial Officer
Non-performance-
related pay 18%
Non-performance-
related pay 19%
Performance-related pay 81%
Performance-related pay 82%
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encourage a focus on long-term, sustained
performance and risk management;
Performance-related pay 60%
Performance-related pay 47%
• 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:
•
•
•
•
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 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 considering 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 executives’ incentives as
for other employees of the Group.
It is the intention to retain the policy referred to
above in the forthcoming year.
Performance-related pay 82%
Performance-related pay 81%
Chief Executive’s remuneration package
The Committee has agreed the following changes
to the Chief Executive’s remuneration package,
to align these components with the new executive
remuneration policy agreed in 2010, which is already
applicable to the Chief Financial Officer:
Annual bonus (changes effective for year
ending 31 March 2012)
•
Annual bonus payable for performance at
threshold will reduce from 10% of base salary
to 0% of base salary;
•
•
Maximum annual bonus, payable for outstanding
performance, will increase from 150% to 175%
of base salary; and
The portion of any annual bonus payment that
exceeds 100% of base salary will be delivered
in the form of Tate & Lyle PLC shares, which
are deferred for two years and subject to
service conditions.
The Chief Executive will continue to be entitled to
a 75% target bonus to respect the arrangements
agreed upon his recruitment.
Long-term incentive – Performance Share Plan
(changes effective for grant in 2012)
•
The level of vesting at threshold performance will
reduce from 25% of the award to 15%. The award
level remains at 300% of base salary, the level
agreed when Javed Ahmed was recruited in 2009.
The Chief Executive’s shareholding target will remain
at 4x base salary; he has already met this target.
Tate & Lyle Annual Report 2011 45
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Governance Directors’ remuneration report
Summary of remuneration components
The current remuneration package for executive directors consists of base salary, annual bonus,
long-term incentives, and retirement and other benefits as follows:
Component
Objective
Summary
Base salary
Reflects market value
of the individual, their
skills and experience
and performance.
Annual bonus
Rewards the
achievement of the
annual performance
objectives of the
Company.
• Reviewed annually with changes usually taking effect on 1 April.
• Benchmarked against relevant comparators, primarily the
50th to 130th ranked companies of the FTSE index.
• Base salary reviews take into account pay increase levels for
employees below the executive level, and the impact on pension
and other consequences of increases.
• Positioned around the median of the relevant market, taking
account of personal performance.
• Three performance metrics apply: sales, profit and cash conversion.
• Greatest weighting is on profit, and a minimum profit hurdle also
applies before any bonus is payable against any of the metrics.
• Targets for each metric are set at the start of each financial year,
taking account of the business strategy, performance in previous
years, market expectations and the prevailing economic climate.
• The Chief Financial Officer’s threshold, target and maximum annual
bonuses are 0%, 50% and 175% of base salary, respectively.
The equivalent figures for the Chief Executive, in accordance with
the special arrangements that were put in place to facilitate his
recruitment, are 10%, 75% and 150% of base salary.1
• For the maximum bonus to be payable, performance in all three
metrics is required to be outstanding.
• The portion of any annual bonus above 100% of base salary is
delivered in Tate & Lyle PLC shares1 which are deferred for two
years; these do not benefit from any matching.
• The Committee can ‘claw back’ bonus in the exceptional event
of misstatement of results or gross misconduct.
Long-term
incentives
Rewards sustained
performance, and helps
retain talent.
• Awards in the form of performance shares that vest after
three years, subject to demanding performance requirements.
• Two performance metrics apply: earnings per share growth
and percentage return on capital employed.
• Maximum annual award size is currently 250% of base salary2,
although the Committee may make awards up to 300% of base
salary if necessary to ensure market competitiveness and taking
account of Group performance. However, only 15% of the award
vests at threshold performance2. Outstanding performance is
required for 100% vesting.
Shareholding
requirement
Ensures alignment
with shareholders.
• The Chief Executive and the Chief Financial Officer have target
holdings of four and three times base salary respectively.
Pension
Provides competitive
pension, with low risk
to the Company.
• Only base salary is pensionable for executive directors.
• The Chief Executive has a defined contribution cash allowance of
35% of base salary.
• The Chief Financial Officer had a defined benefit of 1/38th of final
salary (3% employee contribution) until 5 April 2011, which from
6 April 2011 changes to a cash allowance of 25% of base salary.
Other benefits
Provide competitive
benefits.
• These include car (or car allowance) benefit, health insurance,
group income protection and, where appropriate, life cover.
1
2
In accordance with the special arrangements that were put in place to facilitate his recruitment, the Chief Executive can earn a bonus of
up to 150% of base salary which is not subject to deferral. With effect for the year ending 31 March 2012, the Chief Executive’s threshold,
target and maximum annual bonus will be 0%, 75% and 175% of base salary respectively, with the portion of bonus above 100% of base
salary deferred into shares for two years. The change in the maximum and threshold bonus potential and deferral of bonus will align these
elements with the new policy.
In accordance with the special arrangements that were put in place to facilitate his recruitment, the Chief Executive’s award level is set at
300% of base salary, with 25% vesting at threshold performance. With effect from the long-term incentive grant scheduled for 2012, the
level of vesting at threshold performance for the Chief Executive will reduce to 15% of the award, to align it with the new policy.
Base salary
The Chief Executive’s base salary, having remained unchanged in 2010, was increased by 3.7% with
effect from 1 April 2011. The Chief Financial Officer’s base salary was increased by 3.0% with effect from
1 April 2011. This compared with average levels for other UK based employees, who were awarded a
base salary increase generally of between 3% and 4%.
Executive directors’ base salaries are shown in the table below.
Javed Ahmed
Tim Lodge
46 Tate & Lyle Annual Report 2011
2011
£
700 000
394 000
As at 1 April
2010
£
675 000
382 500
Annual bonus scheme
Bonus for the year ended 31 March 2011
The annual bonus opportunity for each executive director is shown in the table below.
Javed Ahmed
Tim Lodge1
Threshold
10%
0%
% of base salary
Target
75%
50%
Maximum
150%
175%
1
The portion of bonus that exceeds 100% of base salary is delivered in deferred shares.
Three performance factors were applied to the annual bonus. These are shown in the table below:
Performance
factor1
Definition
PBTEA
Profit before tax, exceptional Items
and amortisation.
Net sales
less cost
of raw
materials
Cash
conversion
cycle (CCC)
Gross sales net of associated
selling costs, less the costs of raw
materials used in production.
The number of days between
disbursement of cash and collection
of cash, taking account of inventory,
payables and receivables.
Reasons for selecting
Measures the underlying profits
generated by the business and
whether management is converting
growth into profits effectively.
Measures whether management is
growing the business. Growth is taken
after cost of raw materials to better
reflect value added.
Measures whether the business is
managing its working capital and
converting profit into cash effectively.
Effective weighting2
(at max bonus)
Chief
Executive
Chief
Financial
Officer
87.0%
70.8%
6.5%
14.6%
6.5%
14.6%
1
2
For bonus purposes all three metrics are measured on the basis of constant exchange rates and subject to adjustments reviewed and
approved by the Committee to ensure that the results are a true reflection of the actual performance. Performance is assessed on the
Group’s continuing operations.
The effective factor weighting at maximum bonus is calculated by reference to the difference in the multipliers that apply to achieve
maximum bonus versus those at threshold, calculating the relative weight of these increments.
The CCC metric is based on a straight average of the four quarter ending numbers (i.e. at 30 June 2010,
30 September 2010, 31 December 2010 and 31 March 2011) to avoid a focus purely on the year-end
numbers which may be distorted and not reflect underlying working capital and cash management
performance throughout the year.
For each performance factor there is a corresponding multiplier at the threshold, target and stretch level
of performance, and sliding scales between them.
How the multiplier works
Target bonus
(% of base salary)
Chief Executive
(75%)
Chief Financial
Officer (50%)
PBTEA
performance
multiplier
Net sales
less cost of
raw materials
performance
multiplier
Cash
conversion
cycle
performance
multiplier
Bonus
achieved
as % of
base salary
Step 1
Step 2
Step 3
The multipliers for the PBTEA factor are more heavily geared than for the other two factors, reflecting
the fact that PBTEA is the most important of the three metrics. Before any bonus is payable, a minimum
level of profit has to be achieved, regardless of the level of performance in the net sales less cost of raw
materials and cash conversion cycle metrics. To achieve the maximum payout, performance against all
three factors must be at the stretch level. The multipliers are predetermined by the Committee and the
relative weightings reflect the importance of each of the metrics for the coming year in the context of the
progress made against the overall long-term strategy.
Once the performance outcome is known for each metric, the relevant multiplier is calculated for each.
The target bonus is then adjusted by each of the multipliers to arrive at the final bonus outcome.
Tate & Lyle Annual Report 2011 47
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The following charts show for the Chief Executive and Chief Financial Officer the weighting of each metric
relative to threshold for given levels of actual bonus. All numbers are at constant exchange rates.
Weighting of bonus metrics for Chief Executive
at different levels of bonus %
Weighting of bonus metrics for Chief Financial
Officer at different levels of bonus %
150%
175%
100%
Represents 100% of base
salary, above which any
bonus is deferred into
shares for 2 years
Bonus
20%
75% 150%
Bonus
20%
50% 175%
CCC
PBTEA
Net sales less raw
Target = 75%
Maximum = 150%
The weighting of the bonus metrics at
a level of 20% has been included in the
above for illustrative purposes only.
CCC
PBTEA
Net sales less raw
Target = 50%
Maximum = 175%
The weighting of the bonus metrics at
a level of 20% has been included in the
above for illustrative purposes only.
The table below shows, relative to 2010 actual performance: (i) the performance required to achieve
maximum bonus; and (ii) the 2011 actual performance. All numbers are shown at constant exchange rates.
Performance factor
PBTEA
Net sales less cost of raw materials
Cash conversion cycle
Performance
requirement
to achieve
maximum bonus
+22.6%
+0.4%
+11.9%
As at 1 April 2011
Actual
performance
+29.6%
+2.8%
+24.8%
The table below shows the actual performance outcome for 2011 relative to the bonus range.
Performance
factor
PBTEA
Net sales less
cost of raw
materials
Actual
performance
outcome1
Above stretch
performance level
Above stretch
performance level
Commentary
The strong growth in PBTEA was driven by higher sales volumes,
operational leverage, improved product mix, very strong returns from
co-products and lower manufacturing costs for SPLENDA® Sucralose.
There was good growth in sales volumes across both main businesses.
In Speciality Food Ingredients volume growth was 7% although sales
value was impacted by reduced selling prices for SPLENDA® Sucralose
reflecting the strategy of securing long-term volume incentive contracts
with customers. Bulk Ingredients benefited from higher co-product
income and an improved performance from the ethanol business offset
by lower margins in sweeteners and industrial starches.
Cash
conversion
cycle
Above stretch
performance level
Good progress was made on all working capital items but was offset by
rising corn inventories in the USA towards the year end, as the Group
sought to manage the supply risk in the coming year following market
predictions of low corn inventories prior to the 2011 harvest.
1
In view of the performance outcomes for the year ended 31 March 2011 in the table above, the maximum annual bonus of 175% of base
salary for the Chief Financial Officer and 150% of base salary for the Chief Executive were awarded by the Committee.
48 Tate & Lyle Annual Report 2011
Any bonus amount up to 100% of base salary
is paid in cash. Any excess above 100% of base
salary is delivered in the form of a conditional
award of Tate & Lyle PLC shares, which carry
the right to receive an amount equivalent to the
ordinary dividend, to be paid in cash or shares
as determined by the Committee. The shares
are released and the dividend equivalent paid or
released after two years subject to the executive
remaining in service with the Company. In
accordance with the special arrangements that
were put in place to facilitate his recruitment,
the Chief Executive was entitled to a bonus of
up to 150% of base salary for the year ended
31 March 2011, none of which is deferred.
Both the cash award and the share component
are subject to ‘claw-back’, which means they may
be recouped in whole or in part, at the discretion
of the Committee in the exceptional event that
results were found to have been misstated or if
an executive commits gross misconduct.
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 2011, the
Company operated an LTIP, the Tate & Lyle 2003
Performance Share Plan (PSP). There are some
remaining awards that were made under earlier
plans that are no longer in operation or have
been suspended.
Performance Share Plan (PSP)
2008 PSP award
As shown in the graph on the right, for the
performance period from 1 April 2008 to 31 March
2011 in relation to the PSP awards made in 2008,
Tate & Lyle’s share price growth and dividend
yields resulted in a total shareholder return (TSR)
that ranked Tate & Lyle at 26th position (69th
percentile) in the comparator group of companies
(being the occupying positions 50 to 130 of the
FTSE rankings at the beginning of the performance
period). This is second quartile performance at
which level the performance condition specifies
that 81% of the conditional award made in
2008 is eligible for release with effect from the
determination of the performance conditions.
The performance condition also specifies that,
before any shares can be released, the Committee
must be satisfied that the underlying financial
performance of Tate & Lyle over the performance
period justifies the participants receiving their
shares. For the award made in 2008 under the
PSP, the Committee considers that the underlying
financial performance of Tate & Lyle over the
performance period does justify the participants
receiving their shares.
2008 PSP award Total Shareholder Return
Tate & Lyle and comparator group from
1 April 2008 to 31 March 2011
)
%
(
R
S
T
r
a
e
y
-
3
250
200
150
100
50
0
-50
-100
Tate & Lyle
39.1%
Bottom
quartile
Third
quartile
Second
quartile
Top
quartile
Each bar in the chart represents a company
in the comparitor group.
Source: Kepler Associates
Historical performance criteria and vesting
Relative TSR performance was used as the sole
performance criterion until 2009, when an earnings
per share (EPS) performance condition was
introduced alongside relative TSR for 50% of the
award. The following table shows the vesting levels
of awards granted from 2003 up to 2008. Awards
made under the PSP in 2005, 2006 and 2007
did not vest because the threshold performance
conditions were not met.
Year of award
Year of vesting
Level of vesting
2003
2004
2005
2006
2007
2008
2006
2007
2008
2009
2010
2011
84%
100%
0%
0%
0%
81%
Maximum award level
Following shareholder approval of the changes
to the PSP at the 2010 AGM, 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 250% of base salary per annum,
with flexibility for the Committee to make awards
of up to 300% of base salary where necessary to
ensure market competitiveness, taking account of
Company performance.
Javed Ahmed received special long-term incentive
(LTI) awards to facilitate his recruitment, detailed
in the annual report 2009, and also on page 55.
Although these were not granted under the PSP,
they have similar terms, including the same
performance conditions, to PSP awards.
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Tate & Lyle Annual Report 2011 49
Governance Directors’ remuneration report
Performance conditions – 2010 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 2010 awards, the
performance conditions comprised two elements:
a) Adjusted diluted Earnings Per Share (EPS) (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
predetermined targets. The Committee selected this metric as it is a key determinant of shareholder
value creation.
b) Adjusted Return On Capital Employed (ROCE) (50% of the total award)
Performance is measured by the adjusted ROCE on continuing operations achieved at the end of
the three-year performance period against the predetermined targets. The original targets of 13.0% at
threshold and 16.0% at maximum vesting, as disclosed in the Notice of Meeting for the 2010 annual
general meeting, were revised following the sale of EU Sugars on 30 September 2010 to 13.4% and 16.4%
respectively, in each case representing an increase of 100 basis points and 400 basis points, respectively,
relative to the adjusted ROCE (which was also revised on a like for like basis), achieved in the year ended
31 March 2010. The Committee selected this metric as it is a good indicator of the effectiveness of strategic
investment decisions and of the quality of earnings generated. Importantly the ROCE outcome is adjusted
downward by adding back any asset impairments into capital employed; this is to encourage a prudent
investment strategy. For this reason, in the event of there being an impairment of assets, the ROCE figure
for PSP purposes can be significantly lower than the unadjusted ROCE number reported in the
Company’s accounts.
The two metrics referred to above provide better line of sight for participants than relative TSR,
as Tate & Lyle has few, if any, directly comparable peers that can be used to create a peer group.
Shares awarded under the PSP in 2010 vest in accordance with the following schedule:
Percentage of award vesting
0%
15%1
On a straight line between 15% and 100%
100%
CAGR of adjusted diluted EPS
during the performance period
(50% of award)
Adjusted ROCE at end of
performance period
(50% of award)
Below 6%
6%
Below 13.4%
13.4%
Between 6% and 15% Between 13.4% and 16.4%
At 16.4% or above
15% or more
1
In accordance with the special arrangements that were put in place to facilitate the Chief Executive’s recruitment, 25% of his award
vests at threshold performance.
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 a nil-cost option to acquire the
appropriate number of shares.
Deferred Bonus Share Plan (DBSP) (suspended scheme)
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 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 conditions attached
to past awards is the same as that attached to PSP awards made in the same year. The performance
conditions attached to the PSP awards made in 2008 are described on page 49. Accordingly, 88% of the
maximum matching shares available under the DBSP conditional award in 2008 is eligible for release.
Change of control and voting
All of the Company’s share plans contain provisions relating to a change of control. 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, and in proportion to the time served during the
performance period.
50 Tate & Lyle Annual Report 2011
Executive shareholding policy
The Committee monitors the policy annually. The Chief Executive has met his shareholding target of four
times base salary, to be acquired by 1 October 2014. The Chief Financial Officer has a target shareholding
of three times base salary by 22 July 2015.
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 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 2000
Executive Share Option Scheme, 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 and any awards to be made under the Group Bonus Plan.
In the ten-year period to 31 March 2011, awards made under the executive schemes represented 0.71%
of the Company’s issued ordinary share capital (2010 – 1.6%), leaving available dilution headroom of 4.29%
(2010 – 3.4%). Awards made under all share schemes represented 1.1% of the Company’s issued ordinary
share capital (2010 – 3.0%) leaving available dilution headroom of 8.9% (2010 – 7.0%).
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 closed to future final salary
pension accrual from 6 April 2011 and the employee members have been offered membership of the
existing Stakeholder plan.
Javed Ahmed is not a member of the Group Scheme for pension purposes and accordingly has accrued
no pension benefits under it. He is paid a cash allowance calculated as 35% of base salary, from which he
can make his own retirement savings arrangements although this may include the Company Stakeholder
Plan. 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.
Tim Lodge was a member of the Group Scheme until its closure and accrued 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 accrued includes a widow’s pension
payable on his death and a lump sum on death in service. Once in payment, this part of his pension (and
any subsequent widow’s pension) will be subject to increases in line with price inflation up to a maximum
of 5%, with a minimum of 3%. From 6 April 2011, Tim Lodge is paid a cash allowance calculated as 25%
of base salary, from which he can make his own retirement savings arrangements although this may
include the Company Stakeholder Plan.
Details of the accrued pension benefits for Tim Lodge under the Group Scheme are given on page 56.
Details of amounts paid in lieu of pensions to Javed Ahmed are included in the table on page 54, under
pension allowance.
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Tate & Lyle Annual Report 2011 51
Governance Directors’ remuneration report
Service contracts of executive directors
The policy in determining service contracts is to take account of market practice, and to ensure that
provisions in relation to termination notice periods or payments are not excessive. The following table
summarises the key provisions of the executive directors’ service contracts not referred to elsewhere
in this report.
Provision
Javed Ahmed – Chief Executive
Tim Lodge – Chief Financial Officer
Notice period
• By the director
• By the Company
Termination payment
6 months
12 months
6 months
12 months
The Company has the right, but not the
obligation, to pay in lieu of notice the
base salary and pension allowance that
would have been payable during the
notice period.
The Company has the right, but not the
obligation, to pay in lieu of notice the salary,
pension and other contractual benefits
arising during the notice period. The
Company has the contractual right to phase
the payments and to reduce them if the
executive mitigates his loss.
Expenses
Reimbursement of expenses reasonably
incurred in accordance with his duties.
Reimbursement of expenses reasonably
incurred in accordance with his duties.
Holiday entitlement
30 days
30 days
Sick pay
Full basic salary for the first 26
consecutive weeks and thereafter at
a rate reduced by up to half at the
Committee’s discretion subject to
termination by the Company.
Full basic salary for the first 26 consecutive
weeks and thereafter at a rate reduced by
up to a half at the Committee’s discretion
subject to termination by the Company.
Restrictive covenants
For the period of 12 months (less any
garden leave period) following termination
of employment.
For the period of 12 months (less any
garden leave period) following termination
of employment.
Contract
commencement date
1 October 2009
4 December 2008
Executive directors’ external appointments
The Board believes that the Company benefits from executive directors holding external non-executive
directorships at the appropriate time. 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.
Chairman’s fees
Sir Peter Gershon became Chairman on 23 July 2009 receiving fees of £275,000 per annum which
remained unchanged for the year ended 31 March 2011. 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 approved an increase in the
Chairman’s fees to £283,250 effective 1 April 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 of their terms of appointment 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.
52 Tate & Lyle Annual Report 2011
The Chairman and the Deputy Company Secretary undertook a detailed review of the actual and
anticipated time commitments of each of the non-executive directors (excluding the Chairman).
The analysis indicated that the time commitments for non-executive directors were well in excess of
the time commitment indicated in their appointment letters. A review of market data provided by HNBS
indicated that the current basic fee level was significantly below the market median for companies
of similar size and complexity to Tate & Lyle. Taking account of the current market position, and the
increased time commitment required of the non-executive directors, the executive directors and the
Chairman agreed that an adjustment to non-executive directors’ fees be made with effect
from 1 April 2011. The fees are shown in the following table.
Non-executive director
Senior Independent Director
Chairman of Audit Committee
Chairman of Remuneration Committee
Chairman of Research Advisory Group
Basic fees (per annum)
At 1 April 2011
£
At 1 April 2010
£
58 000
64 650
49 200
55 850
Supplemental fees (per annum)
At 1 April 2011
£
At 1 April 2010
£
15 375
10 250
21 525
15 375
10 250
21 525
Executive directors’ total remuneration package for the year ended 31 March 2011
The following tables show the remuneration package of the executive directors for the year ended
31 March 2011.
Javed Ahmed (Chief Executive)
Element
Base salary
Annual bonus
LTI – face value of 2010 grant
(vesting deferred until 2013)
LTI vesting for performance to
31 March 20113
Pension allowance
Other benefits
Total value
Tim Lodge (Chief Financial Officer)
Element
Base salary
Annual bonus4
LTI (PSP) – face value of 2010 grant
(vesting deferred until 2013)
LTI (PSP and DBSP) vesting for
performance to 31 March 2011
Cash value of pension accrual5,6
Other benefits
Total value
Below threshold
performance
£000
675
None
None
–
236
19
930
Below threshold
performance
£000
383
None
None
–
216
14
613
At threshold
performance
£000
675
68
(10% of
base salary)
506
(25% vesting)
At target
performance1
£000
675
506
(75% of
base salary)
1 266
(62.5% vesting)
–
236
19
1 504
–
236
19
2 702
At threshold
performance
£000
383
0
(0% of
base salary)
143
(15% vesting)
At target
performance1
£000
383
191
(50% of
base salary)
550
(57.5% vesting)
–
216
14
756
–
216
14
1 354
At stretch
performance
£000
Actual earned/
vested2
£000
675
1 013
(150% of
base salary)
2 025
(100% vesting)
–
236
19
3 968
675
1 013
–
1 267
236
19
3 210
At stretch
performance
£000
Actual earned/
vested2
£000
383
669
(175% of
base salary)
956
(100% vesting)
–
216
14
2 238
383
669
–
185
216
14
1 467
1
2
In the case of the LTI, ‘target’ is taken to be midway between threshold and stretch.
Actual annual bonus earned in respect of 2011 and LTI vesting of 81% following year-end 31 March 2011, which are valued using the
closing share price on 31 March 2011. In the case of Tim Lodge, his PSP award, which will convert into a deferred right to acquire the
appropriate number of Tate & Lyle PLC shares at the end of a one year retention period subject to service conditions, represents £150,658
and the DBSP £34,350, representing the matching component of shares awarded in 2008.
3
Relates to special incentive arrangements upon recruitment to compensate for LTI awards foregone as a result of leaving his former employer.
4
5
6
The portion of bonus that exceeds 100% of base salary is deferred into Tate & Lyle PLC shares for two years.
Estimated value of defined benefit pension accrual has been calculated taking account of the accrual rate, salary increase effective
1 April 2010, pensionable service and the HMRC valuation factor.
As of 6 April 2011, the Group Pension Scheme closed to future accrual. Tim Lodge, who was a member of the Scheme, now receives
25% of base salary as a cash allowance and no longer accrues a defined benefit pension.
Tate & Lyle Annual Report 2011 53
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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 2006.
Tate & Lyle’s five-year cumulative
total shareholder return
Value of £100 invested on 31 March 2006
£
150
120
90
60
30
Tate & Lyle
FTSE
100
Index
March 06
March 07
March 08
March 09
March 10
March 11
Source: Kepler Associates
Directors’ emoluments (audited)
The following table shows the directors’ emoluments for the year ended 31 March 2011.
Chairman
Sir Peter Gershon
Executive directors
Javed Ahmed
Tim Lodge
Non-executive directors
Liz Airey
William Camp4
Evert Henkes
Douglas Hurt
Robert Walker
Dr Barry Zoumas
Former directors
Richard Delbridge5
Directors who retired
before 31 March 20106
Total
Salary
and fees
£000
Pension
and other
allowances1
£000
Benefits2
£000
Annual
bonus
– cash
£000
Annual
bonus
– deferred3
£000
Total year to
31 March
2011
£000
Total year to
31 March
2010
£000
275
675
383
65
45
59
49
54
71
17
–
15
347
13
–
–
–
–
–
–
–
–
1 693
375
–
4
1
–
–
–
–
–
–
–
–
5
–
–
290
1 013
383
–
286
2 039
1 066
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
65
45
59
49
54
71
17
–
1 396
286
3 755
231
977
742
63
–
58
3
48
69
55
1 379
3 625
1
Other allowances include car allowance which in the case of Javed Ahmed is £15,000, with a further £96,043 representing payments
in lieu of dividends on an award of shares as disclosed in the share awards table on page 55.
2
Benefits for the executive directors include health insurance.
3 Deferred into Tate & Lyle PLC shares for two years and subject to service conditions.
4 William Camp was appointed to the Board with effect from 1 May 2010.
5 Richard Delbridge ceased to be a director on 22 July 2010.
6
Under the agreements signed at the time that Iain Ferguson stood down as Chief Executive and a director (referred to in the annual
report 2010), he will be entitled to receive an amount during the year ending 31 March 2012 relating to PSP shares foregone for the
period 1 January 2010 to 31 May 2010, part of which will relate to the year ended 31 March 2011. The final amount will be set out in
the annual report 2012. The final amount will depend on the share price on the date of release, likely in June 2011. On the basis of
the current share price, the amount would be in the region of £150,000–£160,000.
54 Tate & Lyle Annual Report 2011
Share awards (audited)
The following table sets out the current position of share-based awards made to executive directors:
As at
1 April 2010
(number)
Awards
granted
during
year 1
(number)
Awards
vested
during
year
(number)
Awards
lapsed
during
year
(number)
As at
31 March
2011
(number)
Market
price on
date
awards
granted
(pence)
Market
price on
date
awards
vested
(pence)
Vesting
date
Javed Ahmed
Special share-incentive
arrangements relating
to recruitment:
compensatory awards
Award A2
Award B3
Award C4
Special share-incentive
arrangements relating
to recruitment: long-
term incentive awards:
Award A4
Award B5
Tim Lodge
Tate & Lyle
Performance
Share Plan 20036
20077
2008
2009
2010
Tate & Lyle Deferred
Bonus Share Plan 20056
20088
419 403
269 616
359 488
–
–
–
659 609
–
– 473 042
12 995
32 050
152 687
–
–
–
– 223 381
6 790
–
–
–
–
–
–
–
–
–
–
–
– 419 403
– 269 616
– 359 488
444.90
444.90
444.90
– 659 609
– 473 042
444.90
440.20
–
12 995
–
32 050
– 152 687
– 223 381
577.50
394.25
294.25
440.20
–
6 790
401.00
–
–
–
–
–
–
–
–
–
–
01/10/11
After 31/03/11
After 31/03/12
After 31/03/12
After 31/03/13
–
After 31/03/11
After 31/03/12
After 31/03/13
After 31/03/11
1
2
The performance conditions for awards are adjusted diluted EPS, against which 50% of the award will be measured, and adjusted ROCE,
for the remaining 50% of the award.
This award to compensate Javed Ahmed for certain long-term incentives given up by him as a consequence of leaving his former employer
is not subject to performance conditions. The shares will be delivered on 1 October 2011, being the second anniversary of Javed Ahmed
joining the Company. Pending delivery, he 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.
3 This award is subject to the same performance condition as that which applies to awards made under the PSP in 2008.
4 This award is subject to the same performance condition as that which applies to awards made under the PSP in 2009.
5 This award is subject to the same performance condition as that which applies to awards made under the PSP in 2010.
6 The three-year performance period for all awards begins on the first day of the financial year in which the award is granted.
7 On 1 April 2011, 100% of the conditional awards made in 2007 lapsed because performance conditions were not met.
8
This was the last year in which awards were made under the DBSP prior to suspension of the arrangement with the performance
conditions the same as those applying to the 2008 PSP. The vesting will be determined based on TSR during the three-year performance
period against companies positioned 50 to 130 of the FTSE index at the start of the performance period such that one matching share is
awarded for each lodged share for median performance increasing on a pro-rata basis to two match shares for upper quartile performance.
As indicated on page 50, the TSR performance resulted in 88% of the maximum matching shares available under the award vesting.
All-employee schemes (audited)
Details of the directors who were in office for any part of the financial year, and hold or held options to
subscribe for ordinary shares of the Company are set out below.
Savings-related share options are options granted under the HMRC-approved Sharesave Scheme.
Options are not subject to performance conditions and are normally exercisable during the six-month
period following the end of the relevant (three- or five-year) contract.
As at
1 April 2010
(number)
Options
granted
during year
(number)
Options
exercised
during year
(number)
Options
lapsed
during year
(number)
As at
31 March
2011
(number)
Exercise
price
(pence)
Javed Ahmed
Savings-related options 2009
Tim Lodge
Savings-related options 2007
3 720
4 253
–
–
–
–
–
–
3 720
418.00
4 253
395.00
Exercise period
01/03/15 to
31/08/15
01/03/13 to
31/08/13
The market price of the Company’s ordinary shares at the close of business on 31 March 2011 was
577.50p, and the range during the year to 31 March 2011 was 409.10p to 599.50p.
Tate & Lyle Annual Report 2011 55
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Directors’ pension provision (audited)
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.
Accumu-
lated total
accrued
pension at
year-end1
£000
Director’s
contribu-
tions
during
the year2
£000
Increase
in accrued
pension
during
the year3
£000
Increase
in accrued
pension
during the
year (net of
inflation)4
£000
Age at 31
March 2011
Transfer
value of
increase
in accrued
pension
(net of
inflation)
less
director’s
contribu-
tions5
£000
Transfer
value of
accrued
pension at
start
of period6
£000
Transfer
value of
accrued
pension at
year-end7
£000
Increase
in transfer
value for
the period,
less
director’s
contribu-
tions8
£000
Director
Tim Lodge
46
181
11
13
6
70
2 268
2 759
480
1
2
3
4
5
6
7
8
The figure 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 2011.
The figure represents the contributions paid over the year.
The figure represents the difference between the total accrued pension at 31 March 2011 and the corresponding accrued pension at the
beginning of the year. No allowance is made for inflation.
The figure represents the difference between the accrued pension at 31 March 2011 and the corresponding accrued pension at the
beginning of the year. The figures quoted include an adjustment for inflation in accordance with the Listing Rules of the UK Listing Authority.
The figure represents the transfer value of the inflation-adjusted increase in the total accrued pension for the year, net of the director’s
own contributions. We have used September 2010 RPI price inflation as our measure of inflation.
The figure represents the transfer value of the accumulated total accrued pension as at the beginning of the year.
The figure represents the transfer value of the accumulated total accrued pension at 31 March 2011.
The figure represents the increase in the transfer value from the beginning of the year to 31 March 2011. The transfer values quoted
have been calculated using the actuarial bases which applied at each reporting date, net of the director’s own contributions.
Directors’ interests (audited)
The interests held by each person who was a director at the end of the financial year in the ordinary shares
of 25 pence each in the Company are shown below. 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. The table also
summarises the interests in shares held through the Company’s various share plans.
Chairman
Sir Peter Gershon
Executive directors
Javed Ahmed
Tim Lodge
Non-executive
directors
Liz Airey
William Camp
Evert Henkes
Douglas Hurt
Robert Walker
Barry Zoumas
Ordinary shares
LTI2
Options3
As at
1 April 20101
(number)
As at
31 March 2011
(number)
As at
1 April 20101
(number)
As at
31 March 2011
(number)
As at
1 April 20101
(number)
As at
31 March 2011
(number)
35 255
58 975
–
–
100 000
27 246
611 252
43 763
1 708 1164
204 522
2 181 1584
414 908
16 000
–
1 016
–
10 429
27 000
16 000
–
1 065
5 000
10 935
27 000
–
–
–
–
–
–
–
–
–
–
–
–
–
3 720
4 253
–
–
–
–
–
–
–
3 720
4 253
–
–
–
–
–
–
1 Or date of appointment if later.
2
Includes shares awarded under the PSP, DBSP and the special arrangements that were put in place to facilitate Javed Ahmed’s recruitment
which are subject to performance conditions.
3 Granted under the Sharesave Scheme.
4
Includes 419,403 shares which are not subject to performance conditions (see page 55 for details).
There were no changes in directors’ interests in the period from 1 April 2011 to 26 May 2011.
On behalf of the Board
Evert Henkes
Chairman of the Remuneration Committee
26 May 2011
56 Tate & Lyle Annual Report 2011
Governance Other statutory and governance information
Principal activities of the Group
The principal activities of Tate & Lyle PLC and
its subsidiary and associated undertakings
together with its joint ventures are developing,
manufacturing and marketing food and industrial
ingredients made from renewable resources.
Results and dividend
A review of the results is on pages 1 to 31. An
interim dividend of 6.8p per ordinary share was
paid on 7 January 2011. The directors recommend
a final dividend of 16.9p per ordinary share to be
paid on 5 August 2011 to shareholders on the
register on 1 July 2011, subject to approval at the
2011 Annual General Meeting (AGM). The scrip
dividend scheme has been closed and a dividend
reinvestment plan is being offered. The total
dividend for the year is 23.7p per ordinary
share (2010 – 22.9p).
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 Board
Committees can be found on pages 40 to 44.
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.
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.
As explained on page 35, the UK Corporate
Governance Code provides that all directors
should seek re-election on an annual basis and
accordingly, all directors will seek re-election at the
forthcoming AGM. The directors standing for re-
election, with the exception of Javed Ahmed and
Tim Lodge, 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.
Directors’ indemnities and insurance cover
As at the date of this report, indemnities are in
force under which the Company has agreed to
indemnify the directors, to the extent permitted
by the Companies Act 2006, against claims from
third parties in respect of certain liabilities arising
out of, or in connection with, the execution of their
powers, duties and responsibilities as directors
of the Company or any of its subsidiaries. The
directors are also indemnified against the cost of
defending a criminal prosecution or a claim by the
Company, its subsidiaries or a regulator provided
that where the defence is unsuccessful the director
must repay those defence costs. These indemnities
are qualifying indemnity provisions for the purposes
of Sections 232 to 234 of the Companies Act
2006 and copies are available for inspection at the
registered office of the Company during business
hours on any weekday except public holidays.
Equivalent indemnities remain in force for Richard
Delbridge, who ceased to be a director on
22 July 2010.
The Company also maintains directors’ and
officers’ liability insurance cover, the level of
which is reviewed annually.
Tate & Lyle Annual Report 2011 57
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Governance Other statutory and governance information
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 £25 million (2010 – £26 million)
on research and development during the year.
Donations
Worldwide charitable donations during the year
totalled £346,000 (2010 – £714,000), of which
£19,000 (2010 – £379,000) was donated in the
UK. More details of the Group’s community
involvement can be found on page 31.
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$27,000 (£17,000) (2010 – US$47,000;
£29,000) to state and national political party
committees and to the campaign committees
of state candidates affiliated to the major
parties. The total includes US$17,000 (£11,000)
(2010 – US$13,000; £8,000) 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, wherever possible, all
wholly-owned companies around the world follow
the CBI Prompt Payers’ Code (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
2011. The Group’s creditor days outstanding at
31 March 2011 were 48 days (2010 – 53 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.
Share capital
At 31 March 2011, the Company had nominal
issued ordinary and preference share capital of
£119 million comprising £117 million in ordinary
shares, including £0.04 million in treasury shares,
and £2 million in preference shares.
To satisfy obligations under the scrip dividend
scheme and employee share plans, the Company
issued 7,535,640 ordinary shares during the
year and reissued 337,162 ordinary shares from
treasury. The Company issued 5,883 ordinary
shares during the period from 1 April 2011 to
26 May 2011. Further information about share
capital is in Note 24. Information about options
granted under the Company’s employee share
schemes is in Note 26.
The Company was given authority at the
2010 AGM to make market purchases of up
to 46,006,320 of its own ordinary shares. The
Company made no such purchases during the year
ended 31 March 2011. This authority will expire at
the 2011 AGM and approval will be sought from
shareholders for a similar authority to be given
for a further year.
Substantial shareholdings
As at 26 May 2011, 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 Limited
Lloyds Banking Group plc
Schroders plc
Blackrock, Inc
AXA S.A.
Global AEGON Asset
Management Group
Lehman Brothers
International (Europe)
Legal & General Group plc
Barclays Global Investors
Number
of shares
65 321 630
32 340 632
24 024 911
23 330 220
22 890 148
18 718 460
18 122 510
18 062 288
17 568 133
% held
13.96
6.91
5.16
4.99
4.98
4.00
3.95
3.93
3.59
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 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.
58 Tate & Lyle Annual Report 2011
Governance 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.
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 32 and 33, confirms that, to
the best of his or her knowledge:
•
•
the Group financial statements, which have
been prepared in accordance with IFRSs as
adopted by the EU, give a true and fair view
of the assets, liabilities, financial position and
profit of the Group; and
the 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 59 of this
annual report was approved by the directors on
26 May 2011.
On behalf of the Board
Robert Gibber
Company Secretary
26 May 2011
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:
•
•
•
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.
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Tate & Lyle Annual Report 2011 59
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 2011 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
on page 59, 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 and express an opinion on
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. In addition, we read all the financial and non-
financial information in the Annual Report 2011 to identify material
inconsistencies with the audited financial statements. If we become
aware of any apparent material misstatements or inconsistencies
we consider the implications for our report.
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 2011 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:
n
the information given in the Annual Report 2011 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
n
the Directors’ statement, set out on page 25, in relation to going
concern;
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; and
certain elements of the report to shareholders by the Board on
Directors’ remuneration.
Other matter
We have reported separately on the Parent company financial
statements of Tate & Lyle PLC for the year ended 31 March 2011
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 2011
Note:
(a) the maintenance and integrity of the Tate & Lyle PLC website, and any
other electronic media used to present the financial statements, 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
or any other electronic media.
(b) legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
60 Tate & Lyle Annual Report 2011
Consolidated income statement
Continuing operations
Sales
Operating profit/(loss)
Finance income
Finance expense
Profit/(loss) before tax
Income tax (expense)/credit
Profit/(loss) for the year from continuing operations
(Loss)/profit for the year from discontinued operations
Profit for the year
Profit for the year attributable to:
– equity holders of the Company
– non-controlling interests
Earnings per share attributable to the equity holders of the Company
from continuing and discontinued operations:
– basic
– diluted
Earnings/(loss) 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
Profit/(loss) 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 66 to 111 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
2011
£m
2 720
2 533
303
3
(61)
245
(49)
196
(29)
167
163
4
167
(44)
2
(74)
(116)
95
(21)
40
19
15
4
19
pence
pence
35.3
34.7
42.6
41.9
6.8
16.9
23.7
£m
245
5
13
263
3.3
3.3
(4.7)
(4.7)
6.8
16.1
22.9
£m
(116)
298
14
196
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Tate & Lyle Annual Report 2011 61
Consolidated statement of comprehensive income
Profit for the year
Actuarial gains/(losses) in post-employment benefit plans
Net fair value gains on cash flow hedges
Cash flow hedges reclassified and reported in the income statement during the year
Valuation gain/(losses) on available-for-sale financial assets
Net exchange differences
Items recycled to the income statement on disposal
Deferred tax relating to the above components
Other comprehensive income/(expense) for the year, net of tax
Total comprehensive income/(expense) for the year
Attributable to:
– equity holders of the Company
– non-controlling interests
The notes on pages 66 to 111 form part of these Group financial statements.
Notes
30
18
11
Year to 31 March
2010
£m
19
(104)
13
11
(10)
(10)
–
25
(75)
(56)
(59)
3
(56)
2011
£m
167
58
9
9
1
(37)
(23)
–
17
184
181
3
184
62 Tate & Lyle Annual Report 2011
Consolidated statement of financial position
ASSETS
Non-current assets
Goodwill and other 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 equity holders of the Company
Share capital
Share premium
Capital redemption reserve
Other reserves
Retained earnings
Non-controlling interests
TOTAL SHAREHOLDERS’ EQUITY
LIABILITIES
Non-current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Deferred tax liabilities
Retirement benefit deficit
Provisions for other liabilities and charges
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings and bank overdrafts
Derivative financial instruments
Provisions for other liabilities and charges
Liabilities held for sale
TOTAL LIABILITIES
Notes
15
16
17
18
20
29
23
30
22
23
20
33
38
24
24
25
27
28
20
29
30
31
27
28
20
31
38
TOTAL SHAREHOLDERS’ EQUITY AND LIABILITIES
The Group financial statements were approved by the Board of Directors on 26 May 2011 and signed on its behalf by:
Javed Ahmed, Tim Lodge
Directors
The notes on pages 66 to 111 form part of these Group financial statements.
2011
£m
320
855
5
19
48
74
1
103
1 425
454
291
25
135
654
1 559
67
1 626
3 051
117
406
8
175
244
950
23
973
1
887
56
30
242
21
1 237
406
33
227
126
44
836
5
841
2 078
3 051
31 March
2010
£m
340
1 208
7
14
49
143
2
16
1 779
409
424
4
150
504
1 491
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
–
878
2 434
3 288
Tate & Lyle Annual Report 2011 63
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Consolidated statement of cash flows
Cash flows from operating activities
Profit/(loss) before tax from continuing operations
Adjustments for:
– depreciation of property, plant and equipment
– exceptional items
– amortisation of intangible assets
– share-based payments charge
– finance income
– finance expense
Changes 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
Interest received
Purchase of available-for-sale financial assets
Acquisitions of subsidiaries, net of cash acquired
Disposal of businesses, net of cash disposed
Purchase of property, plant and equipment
Purchase of intangible assets and other non-current assets
Net cash used in investing activities in discontinued operations
Net cash generated from/(used in) investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary shares
Repurchase of ordinary shares
Cash inflow from additional borrowings
Cash outflow from repayment of borrowings
Cash outflow from repayment of capital element of finance leases
Dividends paid to the Company’s equity holders
Net cash used in financing activities in discontinued operations
Net cash used in financing activities
Net increase in cash and cash equivalents
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 66 to 111 form part of these Group financial statements.
Notes
6
7
6
9
10
10
32
12
18
37
37
12
14
12
34
33
Year to 31 March
2010
£m
(116)
99
298
20
4
(2)
74
186
563
(61)
(30)
115
587
–
2
(3)
(21)
(26)
(60)
(5)
(18)
(131)
2
(6)
198
(417)
(3)
(103)
(47)
(376)
80
434
(10)
80
504
2011
£m
245
91
5
18
9
(3)
61
(101)
325
(49)
(31)
(100)
145
37
3
(5)
–
280
(58)
(12)
(5)
240
2
–
–
(129)
(2)
(70)
(18)
(217)
168
504
(18)
168
654
64 Tate & Lyle Annual Report 2011
Consolidated statement of changes in shareholders’ equity
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
Scrip issue of shares for dividend
Balance at 31 March 2010
Other comprehensive (expense)/income
for the year
Profit for the year
Share-based payments charge,
including tax
Proceeds from shares issued
Dividends paid
Scrip issue of shares for dividend
Non-controlling interests disposed
Share capital
and share
premium
(Note 24)
£m
519
–
–
–
–
1
–
–
520
–
–
–
1
–
2
–
Balance at 31 March 2011
523
Capital
redemption
reserve
£m
8
–
–
–
–
–
–
–
8
–
–
–
–
–
–
–
8
Other
reserves
(Note 25)
£m
219
1
–
–
–
–
–
–
220
(45)
–
–
–
–
–
–
175
Attributable
to the equity
holders of the
Company
£m
Retained
earnings
£m
Non-
controlling
interests
£m
Total equity
£m
241
(75)
15
6
(6)
1
(105)
2
79
63
163
10
1
(105)
33
–
244
987
(74)
15
6
(6)
2
(105)
2
827
18
163
10
2
(105)
35
–
950
26
1 013
(1)
4
–
–
–
(2)
–
27
(1)
4
–
–
(2)
–
(5)
23
(75)
19
6
(6)
2
(107)
2
854
17
167
10
2
(107)
35
(5)
973
Retained earnings at 31 March 2011 include a deduction for own shares held by the ESOP trust of £11 million (2010 – £12 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 66 to 111 form part of these Group financial statements.
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Tate & Lyle Annual Report 2011 65
Notes to the consolidated financial statements
1 Presentation of financial statements
General information
The principal activity of Tate & Lyle PLC is the global provision of
ingredients and solutions to the food, beverage and other industries.
It operates from more than 30 production facilities around the world.
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 modified to include revaluation of certain
financial instruments and commodities, share options and pension
assets and liabilities.
These consolidated financial statements are presented in pounds
sterling, which is the Group’s functional and 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 2010 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.
Following a change in the organisational structure, the segments
disclosed under the provisions of IFRS 8 Operating Segments have
been changed to Speciality Food Ingredients, Bulk Ingredients, Sugars
and Central costs. The comparative segmental information for the
year ended 31 March 2010 has been reclassified.
Following the disposal of the EU Sugar Refining operations
(‘EU Sugars’) to American Sugar Refining, Inc, the sale of Molasses
to W&R Barnett Ltd and the announcement of the proposed sale
of Vietnam Sugar and commitment to sell the Israel operations, the
Sugars segment has been reclassified as discontinued operations in
the current and comparative periods. In the current year, the assets
and liabilities of Vietnam Sugar and the sugar operations in Israel have
been included within assets and liabilities held for sale.
There is no overall effect on the Group’s comparative 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 the
amortisation of intangible assets arising on acquisition of businesses.
A reconciliation of statutory to adjusted information is provided
in Note 43.
66 Tate & Lyle Annual Report 2011
New IFRS standards and interpretations adopted
From 1 April 2010 the Group has adopted the following new and
amended IFRSs and IFRIC interpretations:
–
−
−
−
−
−
−
−
−
IFRS 1 (revised) First time adoption
IFRIC 17 Distribution of Non-cash Assets to Owners
Amendment to IAS 27 (revised) Consolidated and Separate
Financial Statements
IFRS 3 (revised) Business Combinations
IFRS 2 Share-based Payment – group cash-settled share-based
payment transactions
Amendment to IAS 32 Financial Instruments: Presentation
on classification of rights issues
Amendment to IAS 39 Financial Instruments: Recognition and
Measurement – eligible hedged items
IFRIC 18 Transfer of Assets from Customers
IFRIC 16 Hedges of a net investment in a foreign operation.
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 these revised standards has not had a material
impact on the Group’s profit for the year and equity.
New IFRS standards and interpretations not adopted
The following standards, amendments and interpretations are not
yet effective and have not been adopted early by the Group:
IFRS 9 Financial Instruments: Classification and Measurement
−
− Amendment to IAS 24 Related Party Disclosures
−
Amendments to IFRIC 14, IAS 19, Prepayments of a Minimum
Funding Requirement
IFRIC 19 Extinguishing Financial Liabilities with Equity Instruments
IFRS Annual Improvements 2010
Amendment to IFRS 7 Financial Instruments: Disclosures
on derecognition
Amendments to IFRS 1 First time adoption – financial
instrument disclosures
−
–
−
−
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.
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. In October 2010, the IASB issued additions to IFRS
9 relating to financial liabilities. The main change in the additions is
that in cases where the fair value option is taken for financial liabilities,
the part of a fair value change due to an entity’s own credit risk is
recorded in other comprehensive income rather than the income
statement, unless this creates an accounting mismatch. 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.
On 12 May, 2011, the IASB issued IFRS 10 Consolidated Financial
Statements, IFRS 11 Joint Arrangements and IFRS 12 Disclosure of
Interests in Other Entities which are all effective for accounting periods
beginning on or after 1 January 2013. The Group is still continuing
to assess the impact of these standards but initial assessments
suggest that while net profit and net assets will remain unchanged, the
presentation of the Consolidated Income Statement and Consolidated
Statement of Financial Position will change significantly as IFRS 11
prohibits the proportional consolidation of Joint Arrangements.
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 112 to 117.
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 non-controlling interest’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) Transactions and non-controlling interests
The group treats transactions with non-controlling interests as
transactions with equity owners of the group. For purchases from
non-controlling interests, the difference between any consideration
paid and the relevant share acquired of the carrying value of net
assets of the subsidiary is recorded in equity. Gains or losses on
disposals to non-controlling interests are also recorded in equity.
(c) 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. However, if a loss on the transaction provides
evidence of a reduction in the net realisable value of current assets,
or an impairment loss, the loss is recognised immediately.
(d) 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. Unrealised gains on transactions
between the group and its associates are eliminated to the extent
of the Group’s interest in the associate. Unrealised losses are also
eliminated on the same basis unless the transaction provides
evidence of an impairment of the asset transferred.
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.
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(b) Transactions and balances
Foreign currency transactions are translated into the functional
currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the
settlement of such transactions and from the translation at period
end exchange rates of monetary assets and liabilities denominated
in foreign currencies are recognised in the income statement, except
when deferred in equity as qualifying cash flow hedges and
qualifying net investment hedges.
(c) Group entities
From 1 April 2004, the results and financial position of all the Group’s
entities that have a functional currency different from the presentational
currency are translated into the presentation currency as follows:
(i) assets and liabilities, including goodwill and fair value adjustments
for each 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 (including
components of comprehensive income) 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. These exchange
differences comprise the exchange differences on all amounts
deemed to be part of the net investment in the foreign operation,
which are recycled to the income statement when a disposal occurs.
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.
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.
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Tate & Lyle Annual Report 2011 67
Notes to the consolidated financial statements
2 Group accounting policies (continued)
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, and depreciated over the shorter of the lease term
and its useful life.
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, excluding 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.
Goodwill is allocated to cash-generating units for the purpose of
impairment testing. The allocation is made to those cash-generating
units or groups of cash-generating units that are expected to benefit
from the business combination in which the goodwill arose.
(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 which ranges from 5 to 15 years.
(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 which ranges from 5 to 15 years.
(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 at least 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. Non-financial assets other than goodwill that suffered an
impairment in previous periods are reviewed for possible reversal of
the impairment at each reporting date. The recoverable amount is the
higher of an asset’s fair value less costs to sell and value in use.
68 Tate & Lyle Annual Report 2011
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 expected to
benefit from the synergies of the business combinations. 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. Where fair value cannot be reliably measured, the
assets are approximated at cost. Cumulative fair value gains or losses
on an asset are recycled through the income statement when the
asset is disposed or impaired. A significant or prolonged decline in the
fair value of the security below its cost is considered as an indicator
that the securities are impaired. Impairments are recognised in the
income statement.
(b) Loans and receivables
Non-current and current receivables and loans granted are recognised
initially at fair value and thereafter carried at amortised cost less
provisions for impairment. Movements in carrying value are recognised
in the income statement.
(c) Borrowings
Borrowings are recognised initially at fair value, net of transaction
costs incurred. Where borrowings are designated as hedged items
under fair value hedges, they are subsequently remeasured for fair
value changes in respect of the hedged risk with such changes
recognised in the income statement. Otherwise, borrowings are
subsequently stated at amortised cost; any difference between the
proceeds (net of transaction costs) and the redemption value is
recognised in the income statement over the period of the borrowings
using the effective interest rate 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. Preference shares, which are mandatorily redeemable
on a specific date, are classified as liabilities. The dividends on
these preference shares are recognised in the income statement
as interest expense
(d) Commodity trading instruments
Commodity instruments acquired for trading purposes are
initially recognised at fair value on the date a derivative contract is
entered into and are subsequently re-measured at their 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 other comprehensive income
until the period during which the hedged forecast transaction
affects profit or loss, at which point the cumulative gain or loss
is recognised in operating profit, 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 net
finance expense 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.
2 Group accounting policies (continued)
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 fails to meet the IAS 39 hedge
accounting criteria or where the movement represents the ineffective
portion of a qualifying hedging relationship are recognised in the
income statement immediately as other income and expense or net
finance expense, as appropriate.
(f) Embedded derivatives
Where an embedded derivative is not closely related to the host
contract and where the host contract itself is not already recognised
at fair value, movements in the fair value of the embedded derivative
are separated from the associated transaction and, except where the
embedded derivative is designated as a cash flow hedging instrument,
recognised in the income statement.
(g) Fair values
Fair values are based on market values where they are available.
For unlisted securities the Group establishes fair value using
valuation techniques. These include the use of recent arm’s length
transactions, reference to other similar instruments and discounted
cash flow analysis.
Where no market prices are available, the fair value of financial
liabilities is calculated with reference to discounted expected
future cash flows.
Inventories
Inventories are stated at the lower of cost and net realisable value
with the exception of certain items of merchandisable agricultural
commodities which are stated at market value, in line with regional
industry accounting practices.
Cost comprises direct materials and, where applicable, direct labour
costs and those overheads that have been incurred in bringing the
inventories to their present location and condition. Cost is calculated
using the ‘first in – first out’ or weighted average cost methods,
appropriate to the materials and production processes involved.
Net realisable value represents the estimated selling price less all
estimated costs to completion and costs to be incurred in
marketing, selling and distribution.
Trade receivables
Non-current and current trade receivables are recognised initially at
fair value and subsequently measured at amortised cost using the
effective interest method, less provision for impairment.
Cash and cash equivalents
Cash and cash equivalents include cash in hand, deposits held at call
with banks and other short-term highly liquid investments with original
maturities of three months or less and, for the purposes of the cash
flow statement only, bank overdrafts are 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 and long term share incentive
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plans 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.
Trade payables
Non-current and current trade payables are recognised initially at
fair value and subsequently measured at amortised cost using the
effective interest rate method, less provision for impairment
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 taxable 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 primarily at the point of delivering to the
customer, and in exchange obtains the right to consideration.
(b) Interest income
Interest income is recognised on a time-proportion basis using
the effective interest rate method.
(c) Dividend income
Dividend income is recognised when the right to receive payment
is established.
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Tate & Lyle Annual Report 2011 69
Notes to the consolidated financial statements
2 Group accounting policies (continued)
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 through 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 net deficit and the
net surplus of 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 qualified 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.
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
70 Tate & Lyle Annual Report 2011
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.
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.
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
IFRS 8 Operating Segments requires that entities identify and report
the financial performance of these operating 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. In
addition to receiving information relating to the operating performance
of the business, principally sales and adjusted operating performance,
the Chief Operating Decision Maker receives information on the
segmental net working capital in order to assess the performance
of the segments.
Following the change in the organisational structure announced in May
2010, the Group restructured its internal organisation into four distinct
segments: Speciality Food Ingredients, Bulk Ingredients, Sugars and
Central costs. Sugars was subsequently classified as discontinued.
Management reporting has been realigned with this reorganisation
and, as a result, the segment information set out below reflects this
change. Comparative information for the year ended 31 March 2010
has been reclassified.
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, or meet the criteria to be
classified as held for sale under IFRS 5.
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 operating
profit. 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.
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. The group only recognises
a surplus to the extent it has an unconditional right to a refund or a
reduction in future contributions. 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 £61 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 £18 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 net finance expense by approximately £0.2 million.
Full details of these assumptions, which are based on advice from
the Group’s actuaries, are set out in Note 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 arise from 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 2011 71
Notes to the consolidated financial statements
4 Segment information
Following the change in the organisational structure announced in May 2010, the Group restructured its internal organisation into four distinct
segments: Speciality Food Ingredients, Bulk Ingredients, Sugars and Central costs. Sugars was subsequently classified as discontinued.
Management reporting has been realigned with this reorganisation and, as a result, the segment information set out below reflects this change.
Comparative information for the year ended 31 March 2010 has been reclassified.
Central costs, which include head office, treasury and reinsurance activities, do not meet the operating segment definition under IFRS 8 but have
been disclosed as a reportable segment in the tables below to be consistent with internal management reporting.
Discontinued operations comprise previously disclosed International Sugar Trading and Eastern Sugar together with the Sugars division (Note 12).
The segment results for the year to 31 March 2011 are as follows:
Continuing operations
Speciality
Food
Ingredients
£m
Notes
Bulk
Ingredients
£m
Central
costs
£m
Discontinued
operations
(Note 12)
£m
Total from
continuing and
discontinued
operations
£m
Sales
Total sales
Inter-segment sales
External sales (note a)
Operating profit/(loss)
Before exceptional items and
amortisation of acquired
intangible assets
Exceptional items
Amortisation of acquired
intangible assets
Operating profit/(loss)
Net finance expense
Profit/(loss) before tax
Segment assets (note b)
Unallocated assets:
– non-current assets
– current assets
Total assets
Segment liabilities (note b)
Unallocated liabilities:
– non-current liabilities
– current liabilities
Total liabilities
Other segment information
Net working capital
Capital investments (note c)
Depreciation
Amortisation of intangible assets
Impairment charges
Share-based payments
7
15
15
9
916
(111)
805
206
(7)
(13)
186
1 987
(72)
1 915
157
9
–
166
–
–
–
(42)
(7)
–
(49)
207
511
13
Total
£m
2 903
(183)
2 720
321
(5)
(13)
303
(58)
245
731
590
–
590
(2)
(43)
–
(45)
–
(45)
40
(106)
(237)
(61)
(404)
(8)
101
26
34
18
2
–
274
34
55
–
–
1
(48)
16
2
–
–
8
327
76
91
18
2
9
32
8
9
–
4
–
3 493
(183)
3 310
319
(48)
(13)
258
(58)
200
771
1 424
856
3 051
(412)
(1 236)
(430)
(2 078)
359
84
100
18
6
9
(a) There were no customers that contributed more than 10% of the Group’s external sales from continuing operations for the year ended
31 March 2011.
(b) Segment assets and liabilities relates to controllable working capital (trade and other receivables, inventories and trade and other payables), as
reported to the Chief Operating Decision Maker. All other assets and liabilities are reported within segment information as unallocated as these
are not reported to the Chief Operating Decision Maker at operations segment level.
(c) Capital investments comprise capital expenditure on property, plant and equipment, intangible assets and investments. These items include
amounts arising on acquisition of businesses.
72 Tate & Lyle Annual Report 2011
4 Segment information (continued)
The segment results for the year to 31 March 2010 are as follows:
Continuing operations
Speciality
Food
Ingredients
£m
Notes
Bulk
Ingredients
£m
Central
costs
£m
Discontinued
operations
(Note 12)
£m
Total from
continuing and
discontinued
operations
£m
Sales
Total sales
Inter-segment sales
External sales (note a)
Operating profit/(loss)
Before exceptional items and
amortisation of acquired
intangible assets
Exceptional items
Amortisation of acquired
intangible assets
Operating profit/(loss)
Net finance (expense)/income
(Loss)/profit before tax
Segment assets (note b)
Unallocated assets:
– non-current assets
– current assets
Total assets
Segment liabilities (note b)
Unallocated liabilities:
– non-current liabilities
– current liabilities
Total liabilities
Other segment information
Net working capital
Capital investments (note c)
Depreciation
Amortisation of intangible assets
Impairment charges
Share-based payments
7
15
15
9
869
(81)
788
163
(66)
(14)
83
1 772
(27)
1 745
136
(237)
–
(101)
–
–
–
(31)
5
–
(26)
216
386
11
Total
£m
2 641
(108)
2 533
268
(298)
(14)
(44)
(72)
(116)
613
1 074
–
1 074
28
22
–
50
1
51
222
(90)
(198)
(37)
(325)
(161)
126
25
39
18
2
–
188
40
58
2
217
–
(26)
5
2
–
–
4
288
70
99
20
219
4
61
22
17
–
16
1
3 715
(108)
3 607
296
(276)
(14)
6
(71)
(65)
835
1 777
676
3 288
(486)
(1 555)
(393)
(2 434)
349
92
116
20
235
5
(a) Two external customers contributed more than 10% of the Group’s external sales from continuing operations for the year ended 31 March
2010. The combined external sales for these customers were £553 million which have been recorded across all the reportable segments,
excluding central costs.
(b) Segment assets and liabilities relates to controllable working capital (trade and other receivables, inventories and trade and other payables) as
reported to the Chief Operating Decision Maker. All other assets and liabilities are reported within segment information as unallocated as these
are not reported to the Chief Operating Decision Maker at operations segment level.
(c) 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:
United Kingdom
United States
Other European countries
Rest of world
Total
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
2011
£m
65
1 746
432
477
2 720
2010
£m
43
1 652
426
412
2 533
2011
£m
16
1 948
451
305
2 720
2010
£m
19
1 841
425
248
2 533
2011
£m
38
660
327
156
2010
£m
248
735
372
202
1 181
1 557
Tate & Lyle Annual Report 2011 73
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Notes to the consolidated financial statements
5 Sales from continuing operations
Analysis of sales by category:
Sales of goods (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)
Depreciation of property, plant and equipment:
– owned assets
– leased assets
Exceptional items
Amortisation of intangible assets:
– intangible assets arising on acquisition of businesses
– other intangible assets
Operating lease rentals:
– plant and machinery
Research and development expenditure
Impairment of trade receivables
Reversal of impairment of trade receivables
Impairment of property, plant and equipment
Loss on disposal of property, plant and equipment
Government grant income
Ineffectiveness on derivative financial instruments:
– ineffectiveness loss on derivatives designated as cash flow hedges
– ineffectiveness gain on derivatives designated as net investment hedges
Other operating expenses
Total
Operating profit/(loss) 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)
Depreciation of property, plant and equipment:
– owned assets
Government grant income, including Transitional Aid
Exceptional items
Impairment of property, plant and equipment
Other operating expenses
Total
Operating (loss)/profit from discontinued operations
74 Tate & Lyle Annual Report 2011
Notes
17
Notes
9
16
16
7
15
15
23
23
20
20
Notes
9
16
7
12
Year to 31 March
2010
£m
2 210
323
2 533
2011
£m
2 317
403
2 720
Year to 31 March
2010
£m
2 533
213
1 241
5
97
2
298
14
6
24
26
3
(1)
–
–
(3)
3
(1)
650
2 577
(44)
Year to 31 March
2010
£m
1 074
49
841
17
(17)
(22)
–
156
1 024
50
2011
£m
2 720
247
1 400
8
90
1
5
13
5
23
25
1
–
2
1
–
–
–
596
2 417
303
2011
£m
590
28
464
9
–
43
4
87
635
(45)
7 Exceptional items
Exceptional items are as follows:
Continuing operations
Gain on disposal, net of pre-disposal costs – Fort Dodge (note a)
Impairment charges – Fort Dodge (note b)
Business transformation costs (note c)
Closure and restructuring costs (note d)
UK Group Pension Scheme changes (note e)
Write-down of assets (note f)
Total
Discontinued operations
Loss on disposal – EU Sugars (note g)
Gain on disposal – Molasses (note h)
UK Group Pension Scheme changes (note e)
Impairment charges (note b)
Total
Year to 31 March
2010
£m
2011
£m
10
–
(15)
–
–
–
(5)
(55)
12
–
–
(43)
–
(217)
(3)
(55)
5
(28)
(298)
–
–
37
(15)
22
The comparative figures for 2010 have been restated to reflect the disposal of EU Sugars and Molasses, which are presented as discontinued
operations in both years.
(a) The Group has recorded a net exceptional gain of £10 million in respect of the mothballed ethanol facility at Fort Dodge, Iowa. On 30 March
2011 the facility was sold for cash consideration of £36 million resulting in a gain on disposal of £15 million. An exceptional charge of
£25 million had previously been booked early in the year in respect of onerous contracts relating to future obligations of the plant. As a result
of the disposal, £20 million of the resultant provision was no longer required and was reversed. This exceptional gain is reported in the Bulk
Ingredients segment.
(b) In the year ended 31 March 2010, 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
concluded that the plant was highly unlikely to be completed or commissioned in the foreseeable future. As a result, the facility was mothballed
and an impairment charge of £217 million recognised. Of the £217 million charge, £209 million related to assets previously held in assets under
construction and £8 million related to prepayments. This exceptional item was reported in the Bulk Ingredients segment.
In the year ended 31 March 2010, the Group recognised an impairment charge of £15 million at its sugar refining business in Israel comprising
a full write-down of the property, plant and equipment (£11 million) and an inventory impairment (£4 million). This impairment charge reflected
anticipated future decline in the commercial prospects of Israel which is now reported within discontinued operations.
(c) The Group has recognised an exceptional charge of £15 million in relation to business transformation costs. The Group incurred £6 million
of charges in relation to the implementation of a common global IS/IT platform, £4 million in relation to the relocation of employees and
restructuring associated with the new Commercial and Food Innovation Centre in Chicago, Illinois, and £5 million (2010 – £3 million) of closure
and other restructuring costs relating to the Food Systems business. These costs are reported in the Bulk Ingredients (£1 million), Speciality
Food Ingredients (£7 million) and the Central costs (£7 million) segments.
(d) In the year ended 31 March 2010, the Group recognised an exceptional charge in relation to the decision to mothball the sucralose
manufacturing facility in McIntosh, Alabama. The charge totalled £55 million and covered costs connected with redundancy, clean-up
activities and ongoing fixed costs, and included provision for costs to final closure. The exceptional item was reported in the Speciality Food
Ingredients segment.
(e) In the year ended 31 March 2010, the Group 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 related to negative past service costs following the removal of the
discretionary early retirement benefit from November 2009 and £10 million related 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 related to the Central costs (£5 million) and Sugars
(£37 million) segments.
(f)
In the year ended 31 March 2010, following a review of its portfolio of research and development projects, the Group wrote 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 related to operations
reported in both the Bulk Ingredients (£20 million) and Speciality Food Ingredients (£8 million) segments.
(g) The Group recorded a loss of £55 million in relation to the disposal of EU Sugars. Further details are set out in Note 37.
(h) The Group recorded a gain of £12 million in relation to the disposal of Molasses. Further details are set out in Note 37.
The tax impact on continuing net exceptional items is £10 million charge (2010 – £117 million credit). The tax impact on the discontinued net
exceptional items is a £19 million credit (2010 – £5 million charge). 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 has been an exceptional tax credit of £8 million in respect of the recognition
of a deferred tax asset on unrealised profit in inventory following the restructuring of the business organisation.
There was an exceptional tax credit of £15 million in the year ended 31 March 2010 in respect of the release of various tax provisions following
settlement of outstanding issues around the Group.
Tate & Lyle Annual Report 2011 75
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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 parent company and consolidated
financial statements
Fees payable to the Company’s auditors and its associates for other services:
– the audit of the Company’s subsidiaries, pursuant to legislation
Total audit fees
Other services pursuant to legislation
Other services relating to taxation
All other services
Total
Year to 31 March
2010
£m
2011
£m
0.6
1.1
1.7
0.1
0.1
0.8
2.7
0.6
1.5
2.1
0.1
–
0.2
2.4
In addition to the above, fees totalling £0.1 million (2010 – £0.1 million) were paid to the Company’s auditors in respect of the audit of Group
pension schemes.
Included within fees payable to the Company’s auditors and its associates is £0.1 million (2010 – £0.3 million) and within all other services
£0.6 million (2010 – £nil) relating to discontinued operations including the costs of vendor due diligence in respect of the disposal of Molasses.
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 2011
Year to 31 March 2010
Continuing
operations
£m
Discontinued
operations
£m
Continuing
operations
£m
Discontinued
operations
£m
Notes
30
30
26
206
19
8
2
3
9
247
26
1
1
–
–
–
28
178
21
7
1
2
4
213
43
2
2
1
–
1
49
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
Speciality Food Ingredients
Bulk Ingredients
Central
Total
Year to 31 March
2010
1 730
2 215
280
4 225
2011
1 631
2 382
293
4 306
In addition, the average number of people employed relating to discontinued operations was 854 (2010 – 1,394)
The number of people employed by the Group at 31 March 2011 was 4,416 (2010 – 5,666). Included in these numbers are 305 (2010 – 1,505)
employees relating to discontinued operations.
Key management compensation
Salaries and short-term employee benefits
Post-employment benefits
Share-based payments
Share option gains
Total
Year to 31 March
2010
£m
2011
£m
7
1
5
–
13
5
1
2
1
9
Key management is represented by the Group Executive Committee and the Company’s directors. Remuneration details of the Company’s
directors are given in the directors’ remuneration report on pages 44 to 56. Members of the Group Executive Committee are given on page 34.
The aggregate emoluments of directors in respect of qualifying services to the Company were £4 million (2010 – £4 million).
76 Tate & Lyle Annual Report 2011
10 Finance income and finance expense
Continuing
Finance income
Interest receivable
Total finance income
Finance expense
Interest payable on bank and 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 gains/(losses) 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
Recycle of cash flow hedge reserve in respect of borrowings repaid
Total finance expense
Net finance expense
Notes
Year to 31 March
2010
£m
2011
£m
30
30
31
3
3
(45)
(76)
72
(1)
(2)
7
(3)
(7)
(6)
(61)
(58)
2
2
(54)
(76)
57
(1)
–
(2)
(1)
3
–
(74)
(72)
Finance expense is shown net of borrowing costs capitalised into the cost of assets (Note 16) of £nil (2010 – £2 million at a capitalisation
rate of 5.0%).
Interest payable on other borrowings includes £0.2 million (2010 – £0.2 million) of dividends in respect of the Group’s 6.5% cumulative
preference shares.
Discontinued
Included within the loss for the year in relation to discontinued operations (Note 12) is net finance income of £nil (2010 – £1 million).
11 Income tax expense
Analysis of charge for the year
Continuing
Current tax:
In respect of the current year
– UK
– overseas
Adjustments in respect of previous years
Exceptional tax credit
Deferred tax:
– deferred tax charge/(credit)
– exceptional tax credit
Income tax expense/(credit)
Year to 31 March
2010
£m
2011
£m
–
3
(10)
–
(7)
64
(8)
49
1
33
(2)
(15)
17
(112)
–
(95)
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The income tax charge relating to continuing operations in the year to 31 March 2011 of £49 million (2010 – credit of £95 million) includes a charge
of £10 million in respect of pre-tax exceptional items (2010 – £117 million credit).
Included within current tax is a £10 million credit (2010 – £2 million) principally relating to the settlement of prior year tax obligations in a number
of jurisdictions.
The exceptional tax credit of £8 million represents the recognition of a deferred tax asset on unrealised profit in inventory following the restructuring
of the Group. £15 million in 2010 represented 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 charge relating to continuing operations as a proportion of profit
before tax, is 19.7% (2010 – income tax credit on loss before tax of 81.9%). This compares with the standard rate of corporation tax in the
UK of 28% (2010 – 28%).
The standard rate of corporation tax in the United Kingdom will reduce from 28% to 26% from 1 April 2011.
Discontinued
The income tax credit in respect of discontinued operations (Note 12) in the year to 31 March 2011 is £16 million (2010 – £11 million expense).
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Tate & Lyle Annual Report 2011 77
Notes to the consolidated financial statements
11 Income tax expense (continued)
Continuing
Profit/(loss) before tax
Corporation tax charge/(credit) thereon at 28% (2010 – 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
(116)
(32)
(15)
(2)
16
–
(62)
(95)
2011
£m
245
69
(8)
7
15
(10)
(24)
49
The effective tax rate relating to continuing operations on profit before exceptional items, amortisation and exceptional tax items is 18.5%
(2010 – 20.8%).
Tax (charge)/credit relating to components of other comprehensive income
Retirement benefit obligations
Cash flow hedges
Tax losses
Other
Tax credit relating to components of other comprehensive income
Current tax
Deferred tax
Tax on items recognised directly in equity
Deferred tax credit on share-based payments
Total
12 Discontinued operations
Notes
29
Year to 31 March
2010
£m
29
(4)
–
–
25
–
25
2011
£m
(19)
(5)
22
2
–
–
–
Year to 31 March
2010
£m
2011
£m
(1)
(1)
(1)
(1)
On 1 July 2010, the Group announced its intention to sell all the businesses within the Sugars segment. Accordingly, the results of these Sugars
businesses are presented as discontinued operations for the year ended 31 March 2011 and 31 March 2010. On 30 September 2010, the
Group completed the disposal of EU Sugars to American Sugar Refining, Inc. On 3 December 2010, the Group completed the disposal of
Molasses to W&R Barnett Ltd. On 20 April 2011, the Group announced that it had entered into a conditional contract to dispose of Vietnam
Sugar to TH Milk Food Joint Stock Company for cash consideration of approximately £33 million together with the Group’s proportionate share
of cash and working capital. The results of the Israel and Vietnam Sugar are presented within the Other category for both periods.
Sales
Operating (loss)/profit before exceptional items
Exceptional items
Notes
7
Operating (loss)/profit
Finance income
Finance expense
(Loss)/profit before tax
Income tax credit/(expense)
(Loss)/profit for the year
Non-controlling interests
(Loss)/profit attributable to equity holders of the
Company
EU
Sugars
£m
330
Molasses
£m
141
(2)
(55)
(57)
–
–
(57)
22
(35)
–
(35)
7
12
19
–
–
19
(1)
18
(1)
17
International
Sugar
Trading
£m
18
(11)
–
(11)
–
(1)
(12)
–
(12)
–
(12)
Year to 31 March 2011
Other
£m
101
4
–
4
1
–
5
(5)
–
(3)
(3)
Total
£m
590
(2)
(43)
(45)
1
(1)
(45)
16
(29)
(4)
(33)
78 Tate & Lyle Annual Report 2011
12 Discontinued operations (continued)
Sales
Operating profit/(loss) before exceptional items
Exceptional items
Operating profit/(loss)
Finance income
Finance expense
Profit/(loss) before tax
Income tax (expense)/credit
Profit/(loss) for the year
Non-controlling interests
Profit/(loss) attributable to equity holders of the Company
Net cash flows from discontinued operations are as follows:
Net cash (used in)/generated from operating activities
Net cash (used in)/generated from investing activities
Net cash used in financing activities
Net cash generated from/(used in) operating activities
Net cash (used in)/generated from investing activities
Net cash used in financing activities
13 Earnings per share
EU
Sugars
£m
689
Molasses
£m
228
International
Sugar
Trading
£m
101
14
37
51
2
–
53
(12)
41
–
41
EU
Sugars
£m
(85)
(5)
(16)
EU
Sugars
£m
110
(17)
(45)
14
–
14
1
–
15
(2)
13
(1)
12
(3)
–
(3)
–
(2)
(5)
–
(5)
–
(5)
Molasses
£m
(11)
(1)
(1)
Molasses
£m
28
(2)
(1)
International
Sugar
Trading
£m
(17)
–
–
International
Sugar
Trading
£m
(25)
–
–
Year to 31 March 2010
Other
£m
56
3
(15)
(12)
–
–
(12)
3
(9)
(3)
(12)
Total
£m
1 074
28
22
50
3
(2)
51
(11)
40
(4)
36
Year to 31 March 2011
Other
£m
13
1
(1)
Total
£m
(100)
(5)
(18)
Year to 31 March 2010
Other
£m
2
1
(1)
Total
£m
115
(18)
(47)
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 2011
Year to 31 March 2010
Continuing
operations
Discontinued
operations
196
461.5
42.6p
(33)
461.5
(7.3)p
Total
163
461.5
35.3p
Continuing
operations
Discontinued
operations
(21)
457.0
(4.7)p
36
457.0
8.0p
Total
15
457.0
3.3p
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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, and the Group’s long term share incentive plans. For non-
performance related share plans, 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. For performance related share plans, a calculation is performed to determine the satisfaction or otherwise, of the forecast performance
conditions at the end of the reporting period, and the number of shares which would be issued based on the forecast status at the end of the
reporting period.
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 2011
Year to 31 March 2010
Continuing
operations
Discontinued
operations
196
468.8
41.9p
(33)
468.8
(7.2)p
Total
163
468.8
34.7p
Continuing
operations
Discontinued
operations
(21)
457.0
(4.7)p
36
457.0
8.0p
Total
15
457.0
3.3p
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The adjustment for the dilutive effect of share options at 31 March 2011 was 7.3 million shares (2010 – nil).
Tate & Lyle Annual Report 2011 79
Notes to the consolidated financial statements
13 Earnings per share (continued)
Adjusted earnings per share
Adjusted earnings per share is stated excluding exceptional items and amortisation of acquired intangible assets as follows:
Continuing operations
Profit/(loss) 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
Notes
7
15
11
Year to 31 March
2010
(21)
298
14
(121)
(15)
155
2011
196
5
13
8
(8)
214
46.5p
45.7p
33.9p
33.7p
For the purposes of the adjusted diluted earnings per share from continuing operations for the year ended 31 March 2010, the adjustment for the
dilutive effect of share options was 2.3 million.
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 23.7p (2010 – 22.9p) made up as follows:
– interim dividend paid
– final dividend proposed (note b)
Total
Year to 31 March
2010
2011
74
31
105
70
35
105
6.8p
16.9p
23.7p
74
31
105
103
2
105
6.8p
16.1p
22.9p
(a) During the year, shareholders were given the option to receive the final dividend relating to the prior year and the interim dividend relating to
the current year in the form of a scrip issue. On 30 July 2010 and 7 January 2011, the Group issued 5,716,625 shares and 1,601,272 shares
respectively for scrip at a nominal value per share of 25p and a cash equivalent value of £35 million. Further detail is disclosed in Note 24.
(b) The final dividend proposed for the year of £79 million (2010 – £74 million), based on the number of shares outstanding as at 31 March 2011
has not been recognised as a liability and will be paid, subject to approval by shareholders at the Company’s Annual General Meeting, on
5 August 2011 to shareholders who are on the Register of Members on 1 July 2011.
80 Tate & Lyle Annual Report 2011
15 Goodwill and other intangible assets
Goodwill
£m
Patents
£m
Other
acquired
intangible
assets
£m
Total
acquired
intangibles
£m
Other
intangible
assets
£m
Cost
At 1 April 2010
Additions at cost
Transfer to assets held for sale
Disposals and write-offs
Exchange
At 31 March 2011
Accumulated amortisation
and impairments
At 1 April 2010
Amortisation charge
Disposals and write-offs
Exchange
At 31 March 2011
Net book value at 31 March 2011
Cost
At 1 April 2009
Additions at cost
Disposals and write-offs
Exchange
At 31 March 2010
Accumulated amortisation
and impairments
At 1 April 2009
Amortisation charge
Disposals and write-offs
Exchange
At 31 March 2010
Net book value at 31 March 2010
230
–
–
(2)
(6)
222
–
–
–
–
–
222
240
–
–
(10)
230
–
–
–
–
–
230
33
–
–
–
–
33
23
2
–
–
25
8
33
–
–
–
33
20
3
–
–
23
10
127
–
(2)
–
(4)
121
40
11
–
(2)
49
72
132
1
–
(6)
127
31
11
–
(2)
40
87
390
–
(2)
(2)
(10)
376
63
13
–
(2)
74
302
405
1
–
(16)
390
51
14
–
(2)
63
327
Goodwill
The carrying amounts of goodwill by segment are as follows:
Speciality Food Ingredients (note a)
Bulk Ingredients
Allocated by geography:
– United States (note b)
– Europe (note c)
Total
32
12
–
(3)
(1)
40
19
5
(2)
–
22
18
34
6
(7)
(1)
32
14
6
(1)
–
19
13
2011
£m
80
1
57
84
222
Total
£m
422
12
(2)
(5)
(11)
416
82
18
(2)
(2)
96
320
439
7
(7)
(17)
422
65
20
(1)
(2)
82
340
31 March
2010
£m
81
1
60
88
230
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Goodwill is tested for impairment annually and whenever there is an indication of impairment. Although cash flows have been identified for certain
individual plants for the purposes of assessing the recoverable amounts, the business is managed as a network in the United States and Europe,
with a large amount of interdependency between plants with plants servicing both the Speciality Food Ingredients and Bulk Ingredients segments.
As a result, except as noted, it is not possible to allocate goodwill to either the Bulk Ingredients or the Speciality Food Ingredients segments.
Therefore, goodwill is tested for impairment on a geographical basis except where goodwill can be allocated to an identifiable separate CGU.
Unless otherwise stated, impairment reviews are carried out in accordance with the methodology set out in Notes 2 and 3 using cashflows based
on the latest Board approved management projections.
(a) Goodwill within the Speciality Food Ingredients segment includes £48 million (2010 – £48 million) relating to the acquisition of G.C. Hahn & Co.
in June 2007, £18 million (2010 – £18 million) relating to the acquisition of the Cesalpinia Foods group in December 2005 and £12 million
(2010 – £13 million) relating to the acquisition of Continental Custom Ingredients in January 2006. These businesses have been tested for
impairment and a pre-tax discount rate of 11% (2010 – 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% (2010 – 11%), and zero growth assumed in perpetuity. Management has concluded
that no impairment is required.
(b) Goodwill relating to the United States includes £57 million (2010 – £60 million) relating to the Staley acquisition in 1988, which is treated as one
CGU for impairment testing purposes. Cash flows used were based on the latest approved plans for five years discounted using a pre-tax rate
of 11% (2010 – 11%). Zero growth was assumed in perpetuity. Management has concluded that no impairment is required.
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Tate & Lyle Annual Report 2011 81
Notes to the consolidated financial statements
15 Goodwill and other intangible assets (continued)
(c) Goodwill relating to Europe includes £84 million (2010 – £86 million) relating to the acquisition in 2000 of the minority of 34% of shares of the
former Amylum business. Although cash flows have been identified for certain individual plants for the purposes of assessing the recoverable
amounts of property, plant and equipment (as described in Note 16) the business is treated as one CGU for impairment testing purposes.
The goodwill in the former Amylum business has been tested for impairment using a pre-tax discount rate of 11% (2010 – 11%). Zero growth
was assumed in perpetuity. Management has concluded that no impairment is required.
Management considers that no reasonably possible change in any of the assumptions would cause the recoverable amount of goodwill
attached to the above CGUs to fall below their carrying value.
Other intangible assets
Included in other intangible assets are £2 million (2010 – £nil) of assets under construction in relation to the implementation of a common global
IS/IT platform.
16 Property, plant and equipment
Cost
At 1 April 2010
Additions at cost
Transfers on completion
Transfer to assets held for sale
Disposals and write-offs
Businesses sold
Exchange and other movements
At 31 March 2011
Accumulated depreciation and impairments
At 1 April 2010
Depreciation charge
Transfer to assets held for sale
Impairment losses and write-downs
Disposals and write-offs
Businesses sold
Exchange and other movements
At 31 March 2011
Net book value at 31 March 2011
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
Land and
buildings
£m
Plant and
machinery
£m
Assets in the
course of
construction
£m
578
3
3
(11)
(3)
(114)
(23)
433
292
14
(4)
3
–
(72)
(12)
221
212
591
2
6
(1)
(20)
578
288
15
–
(1)
(10)
292
286
2 349
11
50
(57)
(12)
(346)
(102)
1 893
1 564
86
(42)
1
(12)
(206)
(63)
1 328
565
2 394
12
44
(13)
(88)
2 349
1 493
101
31
(13)
(48)
1 564
785
345
53
(53)
–
(211)
(39)
(17)
78
208
–
–
4
(195)
(4)
(13)
–
78
345
68
(50)
(1)
(17)
345
1
–
209
–
(2)
208
137
Total
£m
3 272
67
–
(68)
(226)
(499)
(142)
2 404
2 064
100
(46)
8
(207)
(282)
(88)
1 549
855
3 330
82
–
(15)
(125)
3 272
1 782
116
240
(14)
(60)
2 064
1 208
Additions to property, plant and equipment includes capitalised borrowing costs of £nil (2010 – £2 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.
82 Tate & Lyle Annual Report 2011
16 Property, plant and equipment (continued)
Impairment reviews
2011
The Group’s European businesses are a major supplier of sweeteners which operates in competition to sugar throughout the Continent. Following
the disposal of five European starch plants in October 2007, the Group carried out an impairment review in respect of the remaining CGUs at 31
March 2011. 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% (2010 – 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.
During the year, the Group carried out an impairment review in respect of its Dayton plant which manufactures citric acid in light of changes to the
regulatory and competitive environment in which it operates. 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 and applying a terminal value. The pre-tax discount
rate used was 11%. Taking all factors into account management concluded that no further impairment or reversal of previous impairments
was required.
2010
In the year ended 31 March 2010, 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 concluded
that the plant was highly unlikely to be completed or commissioned in the foreseeable future. As a result, the facility was mothballed. An impairment
review was 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) was recognised as an exceptional item. This exceptional item related to the Bulk Ingredients segment. The recoverable amount was
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.
In the year ended 31 March 2010, following a review of its portfolio of research and development projects, the Group decided to write down assets
relating to operations in the Bulk Ingredients segment resulting in an impairment write-down of £20 million relating to Plant and Machinery being
recognised in exceptional items.
In the year ended 31 March 2010, the Group 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% (2010 – 13%). An impairment of £11 million was recognised in exceptional items that year.
Leased assets
Included in property, plant and equipment is plant and machinery held under finance leases with a net book value of £11 million (2010 – £13 million).
17 Investments in associates and joint ventures
Associates
At 1 April 2009
Exchange and other movements
At 31 March 2010
Disposals of businesses
At 31 March 2011
Notes
37
£m
8
(1)
7
(2)
5
The Group’s associates, which are accounted for under the equity method, are listed in Note 42.
During the year, the Group disposed of its investment in Eridania Tate & Lyle SpA for £3 million proceeds. The carrying value was £2 million at the date
of disposal (Note 37).
The amounts equity accounted in the Group income statement and statement of financial position are summarised below:
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Income statement
Sales
Expenses
Profit before and after tax
Statement of financial position
Assets
Liabilities
Net assets
Year to 31 March
2010
£m
2011
£m
4
(4)
–
2011
£m
10
(5)
5
5
(5)
–
31 March
2010
£m
12
(5)
7
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Tate & Lyle Annual Report 2011 83
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 42. The amounts proportionately
consolidated in the Group income statement and statement of financial position are summarised below:
Income statement
Sales
Other expense
Profit/(loss) before tax
Income tax expense
Profit/(loss) 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 2009
Additions
Fair value loss
At 31 March 2010
Additions
Disposal of businesses
Fair value gain
Exchange
At 31 March 2011
Notes
5
Year to 31 March 2011
Year to 31 March 2010
Continuing
operations
£m
Discontinued
operations
£m
Continuing
operations
£m
Discontinued
operations
£m
403
(344)
59
(14)
45
3
(7)
(4)
–
(4)
323
(273)
50
(9)
41
2011
£m
175
74
158
407
7
23
11
69
110
297
6
(3)
3
–
3
31 March
2010
£m
174
61
118
353
5
18
10
57
90
263
£m
39
3
(10)
32
5
(1)
1
(1)
36
Presented in the statement of financial position as follows:
Non-current available-for-sale financial assets
Current assets held for sale
Total
Notes
38
2011
£m
19
17
36
31 March
2010
£m
14
18
32
Available-for-sale financial assets primarily comprise £36 million (2010 – £32 million) of unlisted securities. The fair values of non-current available-
for-sale financial assets are approximated at cost where fair value can not be reliably measured. The fair values of current assets held for sale are
based on management’s valuation of expected proceeds based on a signed share sale agreement.
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 £14 million (2010 – £15 million) of assets classified as held for sale in current assets.
(b) US dollar includes £3 million (2010 – £3 million) of assets classified as held for sale in current assets.
84 Tate & Lyle Annual Report 2011
2011
£m
14
12
8
2
36
31 March
2010
£m
15
9
6
2
32
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 2011 and 31 March 2010.
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
18
23
33
20
28
20
27
Notes
18
23
33
20
28
20
27
–
274
654
–
(736)
–
(400)
(208)
Amortised
cost
£m
–
398
504
–
(819)
–
(465)
(382)
Derivatives
and other
items in a
hedging
relationship
£m
–
–
–
42
(378)
(55)
–
(391)
Derivatives
and other
items in a
hedging
relationship
£m
–
–
–
48
(490)
(75)
–
(517)
Held for
trading
£m
Available-
for-sale
£m
–
–
–
141
–
(127)
–
14
19
–
–
–
–
–
–
19
Held for
trading
£m
Available-
for-sale
£m
–
–
–
151
–
(117)
–
34
14
–
–
–
–
–
–
14
31 March 2011
Fair
value
£m
19
274
654
183
(1 154)
(182)
(400)
(606)
31 March 2010
Fair
value
£m
14
398
504
199
(1 318)
(192)
(465)
(860)
Total
carrying
value
£m
19
274
654
183
(1 114)
(182)
(400)
(566)
Total
carrying
value
£m
14
398
504
199
(1 309)
(192)
(465)
(851)
Trade and other receivables presented above excludes £18 million (2010 – £28 million) relating to prepayments.
Trade and other payables presented above excludes £7 million (2010 – £12 million) relating to social security. At 31 March 2010, £9 million in
respect of deferred income relating to Transitional Aid was excluded.
Included in borrowings are other items in a hedging relationship which are held at amortised cost with a fair value adjustment applied, as they
are in a fair value hedge.
Fair value hierarchy
Set out below is 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 tables illustrate the Group’s financial assets and liabilities measured at fair value at 31 March 2011 and 31 March 2010:
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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
Notes
Level 1
£m
Level 2
£m
Level 3
£m
18
20
20
20
20
20
20
20
20
–
–
–
–
53
53
–
–
–
(21)
–
(21)
–
16
40
10
50
116
(46)
(14)
(10)
(77)
(378)
(525)
19
–
–
–
14
33
–
–
–
(14)
–
(14)
31 March 2011
Total
£m
19
16
40
10
117
202
(46)
(14)
(10)
(112)
(378)
(560)
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Tate & Lyle Annual Report 2011 85
Notes to the consolidated financial statements
19 Financial instruments by category (continued)
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
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)
31 March 2010
Total
£m
14
28
38
4
129
213
(58)
(17)
(10)
(107)
(490)
(682)
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:
Commodity
pricing
contracts
– assets
£m
Commodity
pricing
contracts
– liabilities
£m
Available-
for-sale
assets
£m
21
10
–
(21)
10
14
–
–
(10)
14
–
(3)
–
–
(3)
(14)
–
–
3
(14)
11
–
3
–
14
–
1
5
(1)
19
Total
£m
32
7
3
(21)
21
–
1
5
(8)
19
At 1 April 2009
Total gains or losses in operating profit
Purchases
Settlements
At 31 March 2010
Total gains or losses:
– in operating profit
– in other comprehensive income
Purchases
Settlements
At 31 March 2011
86 Tate & Lyle Annual Report 2011
20 Derivative financial instruments
Non-current derivative financial instruments used
to manage the Group’s net debt profile
Currency swaps:
– net investment hedges
– fair value, net investment and cash flow hedges
– held for trading
Interest rate swaps:
– fair value hedges
– 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
– held for trading
Commodity pricing contracts:
– cash flow hedges
– 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 2011
31 March 2010
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
–
–
12
24
10
46
4
6
10
56
1
1
2
9
–
3
113
125
127
183
48
135
183
(43)
–
(1)
–
(11)
(55)
(2)
(3)
(5)
(60)
(1)
–
(1)
(9)
–
(1)
(111)
(121)
(122)
(182)
(56)
(126)
(182)
–
–
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)
The ineffective portion recognised in operating profit that arises from cash flow hedges amounts to £nil (2010 – £3 million loss).
The ineffective portion recognised in operating profit that arises from net investment hedges amounts to £nil (2010 – £1 million gain).
The ineffective portion recognised in net finance expense that arises from fair value hedges amounts to £nil (2010 – £1 million gain).
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Tate & Lyle Annual Report 2011 87
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
2011
£m
6
(33)
1
30
(3)
31 March
2010
£m
(68)
(30)
75
25
(4)
Gains and losses recognised in the hedging reserve in equity (Note 25) on forward foreign exchange and commodity pricing contracts as of
31 March 2011 will be released to the income statement at various dates up to 17 months from the balance sheet date.
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 2011 were £353 million and £nil respectively (2010 – £364 million and £100 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 2011 were £290 million (31 March 2010 – £298 million). Within net investment hedging gains, a fair value gain of £7 million (2010 –
£6 million gain) 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 2011, of the Group’s borrowings, a total of £351 million (2010 – £564 million) is designated as hedges of the net
investments in overseas subsidiaries.
Debt-related derivatives held for trading
Certain currency swap contracts associated with the partial repurchase of the 6.5% Guaranteed Notes 2012 were closed out during the year ended
31 March 2010 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 2011 were £192 million (2010 – £203 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 2011 were
£218 million (2010 – £231 million).
Trading contracts
Commodity pricing contracts held for trading relate to the Group’s commodity trading activities which are undertaken for the purposes of supporting
underlying operations. Foreign exchange contracts held for trading are undertaken to hedge anticipated future contractual cash flows within the
Group’s cereal sweetners and starches business.
88 Tate & Lyle Annual Report 2011
21 Financial risk factors
Management of financial risk
The key 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 sets overall risk limits.
The Chief Financial Officer retains the overall responsibility for 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 Chief Financial Officer 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 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 euro to mitigate the effect of these risks. This is achieved by borrowing principally in US dollars and
euro, which provide a partial match for the Group’s major foreign currency assets. 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.
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 £464 million (2010 – £814 million)
was held in the following currencies: net borrowings of US dollars 98% (2010 – 76%), euro 35% (2010 – 20%), net deposits of pounds sterling
28% (2010 – net borrowings of 7%) and other currencies 5% (2010 – 3%). 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 2011
31 March 2010
Income
statement
–/+£m
1
–
Equity
–/+£m
23
11
Income
statement
–/+£m
–
–
Equity
–/+£m
28
15
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Interest rate management
The Group has an exposure to interest rate risk, arising principally from changes in US dollar, sterling and euro interest rates. This risk is
managed by fixing or capping portions of debt using interest rate derivatives to achieve a target level of fixed/floating rate net debt, which aims
to optimise net finance expense and reduce volatility in reported earnings. The Group’s policy is that between 30% and 75% of Group net debt
(excluding the Group’s share of joint-venture net debt) is fixed or capped (excluding out-of-the-money caps) for more than one year and that no
interest rates are fixed for more than 12 years. At 31 March 2011, the longest term of any fixed rate debt held by the Group was until November
2019 (2010 – November 2019). The proportion of net debt at 31 March 2011 (excluding the Group’s share of joint-venture net debt) that was
fixed or capped for more than one year was 85% (2010 – 82%). A derogation of the maximum percentage of fixed rate debt was approved by
the Tate & Lyle PLC Board until 30 June 2011.
The Group considers a 100 basis point change in interest rates a reasonably possible change except where rates are less than 100 basis points.
In these instances it is assumed that the interest rates increase by 100 basis points and decrease to zero for the purpose of performing the
sensitivity analysis. The impact is calculated with reference to the gross debt and cash held as at 31 March 2011 assuming that other variables
remain unchanged.
If interest rates increase by 100 basis points, Group profit before tax will increase by approximately £2 million (2010 – £1 million). If interest rates
decrease by 100 basis points, or less where applicable, Group profit before tax will decrease by approximately £1 million (2010 – £1 million).
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Tate & Lyle Annual Report 2011 89
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).
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 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
31 March 2011
31 March 2010
Income
statement
–/+£m
2
Equity
–/+£m
–
Income
statement
–/+£m
2
Equity
–/+£m
–
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
2011
£m
654
274
183
19
31 March
2010
£m
504
398
199
14
The Group’s trade receivables are short term in nature and largely comprise amounts receivable from business customers. There are no amounts
included in trade receivables in respect of securitised receivables (2010 – £nil). Concentrations of credit risk with respect to trade receivables are
limited due to the Group’s having a number of key quality customers and a customer base which is large, unrelated and internationally dispersed.
Liquidity risk management
The Group manages its exposure to liquidity risk and ensures maximum flexibility in meeting changing business needs, by maintaining access to
a wide range of funding sources, including capital markets and bank borrowings. Capital market issues outstanding at 31 March 2011 include the
US$300 million 6.125% 144A bond maturing in June 2011, the £100 million 6.50% bond maturing in June 2012, the US$500 million 5.00% 144A
bond maturing in November 2014, the US$250 million 6.625% 144A bond maturing in June 2016, and the £200 million 6.75% bond maturing in
November 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 which matures in October 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.
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.
90 Tate & Lyle Annual Report 2011
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 2011, after subtracting total undrawn committed
facilities, there was no debt maturing within two and a half years (2010 – none). The average maturity of the Group’s gross debt was 4.8 years
(2010 – 5.4 years). At the year end the Group held cash and cash equivalents of £654 million (2010 – £504 million) and had committed facilities
of £623 million (2010 – £659 million) of which £623 million (2010 – £515 million) was 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
– payments
Commodity contracts
Borrowings including finance leases
Interest on borrowings
Trade and other payables
Derivative contracts:
– receipts
– payments
Commodity contracts
<1 year
£m
1-5 years
£m
31 March 2011
>5 years
£m
(229)
(52)
(406)
361
(346)
(5)
(436)
(151)
(1)
970
(990)
–
(418)
(68)
–
–
–
–
<1 year
£m
1-5 years
£m
31 March 2010
>5 years
£m
(191)
(61)
(474)
407
(394)
(123)
(653)
(185)
(1)
778
(802)
(3)
(435)
(96)
–
–
–
–
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 and interest rate swaps. 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 2011, the long-term credit rating from Moody’s was Baa3 (stable outlook) and from
S&P was BBB– (stable 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
Notes
34
2011
£m
464
973
1 437
31 March
2010
£m
814
854
1 668
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Tate & Lyle Annual Report 2011 91
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 2.0 times and interest cover should exceed 5 times. These ratios
are calculated on the same basis as the external financial covenants noted above. The ratios for these KPIs for the financial years ended
31 March 2011 and 31 March 2010 are:
Net debt/EBITDA
Interest cover
22 Inventories
Raw materials and consumables
Work in progress
Finished goods
Total
2011
1.1
6.9
2011
£m
288
16
150
454
31 March
2010
1.8
5.8
31 March
2010
£m
202
19
188
409
Finished goods inventories of £4 million (2010 – £2 million) are carried at realisable value, this being lower than cost. Inventories of £197 million
(2010 – £60 million) are carried at market value.
In 2010, the Group recognised an impairment charge of £4 million against finished goods inventories at its sugar refining business in Israel, which
was included in exceptional items. The sugar refining business in Israel has been classed as an asset held for sale at 31 March 2011 and is reported
in discontinued operations.
23 Trade and other receivables
Non-current trade and other receivables
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
2011
£m
1
1
2011
£m
263
(19)
244
18
5
–
24
291
31 March
2010
£m
2
2
31 March
2010
£m
329
(24)
305
28
45
3
43
424
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 is limited credit risk with respect to trade receivables, as the Group has a number of key quality customers and a large number of
internationally dispersed customers. The carrying value of trade and other receivables represents the maximum credit exposure.
Government grants receivable relate to 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
2011
£m
142
75
19
56
292
31 March
2010
£m
231
98
31
66
426
(a) Includes £nil of government grants receivable under the Transitional Aid and Restructuring Aid provisions of the EU Sugar Regime
(2010 – £3 million).
92 Tate & Lyle Annual Report 2011
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
2011
£m
(24)
(1)
–
5
1
(19)
31 March
2010
£m
(21)
(3)
1
–
(1)
(24)
The creation and release of provision for impaired receivables have been included in the income statement.
The Group recognised a loss of £1 million (2010 – £3 million) for impairment of its trade receivables during the year. The loss is solely from
continuing operations and has been included in operating profit in the income statement (Note 6).
As at 31 March 2011, trade receivables of £37 million (2010 – £63 million) were past due but not impaired. The ageing analysis of these trade
receivables is as follows:
Up to 30 days past due
1–3 months past due
Over 3 months past due
Total
24 Share capital and share premium
At 1 April 2009
Proceeds from issuance of ordinary shares
Issue of shares for scrip dividends
Capitalised on scrip dividends
At 31 March 2010
Proceeds from issuance of ordinary shares
Issue of shares for scrip dividends
Capitalised on scrip dividends
At 31 March 2011
2011
£m
26
1
10
37
31 March
2010
£m
42
4
17
63
Ordinary
share capital
£m
Share
premium
£m
115
–
–
–
115
–
2
–
117
404
1
2
(2)
405
1
33
(33)
406
Total
£m
519
1
2
(2)
520
1
35
(33)
523
Ordinary shares carry the right to participate in dividends and each share entitles the holder to one vote on matters requiring shareholder approval.
Allotted, called up and fully paid equity share capital
At 1 April
Allotted under share option schemes
Scrip dividend shares issued
At 31 March
Year to 31 March 2011
Year to 31 March 2010
Shares
460 575 700
217 743
7 317 897
468 111 340
£m
115
–
2
Shares
460 012 801
48 287
514 612
117
460 575 700
£m
115
–
–
115
Treasury shares and shares held in ESOP trust
As at 31 March 2011, the Group held 175,328 shares (2010 – 512,490 shares) in Treasury.
During the year 337,162 shares (2010 – 816,012 shares) were released from Treasury to satisfy share options exercised.
The shares held in Treasury at 31 March 2011 represented less than 0.1% (2010 – 0.1%) of the Parent company’s share capital at the year end,
and have a nominal value of less than £0.1 million (2010 – £0.1 million).
As at 31 March 2011, the Group held 2,713,694 shares (2010 – 3,141,100 shares) in an ESOP trust at a nominal value of 25p and a market
value of 577.5p (2010 – 454.2p).
During the year ended 31 March 2011, shareholders were given the option to receive the final dividend relating to the prior year and the interim
dividend relating to the current year in the form of a scrip issue. On 30 July 2010 and 7 January 2011, the Group issued 5,716,625 shares and
1,601,272 shares respectively for scrip at a nominal value per share of 25p and a cash equivalent value of £35 million.
Tate & Lyle Annual Report 2011 93
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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 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
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
Gain on revaluation of available-for-sale financial assets
Currency translation differences:
– net investment hedging gains in the year
Net exchange differences on consolidation
Items transferred to the income statement on disposal
At 31 March 2011
Number of
holdings
5 133
4 340
2 262
1 555
2 449
560
586
102
130
%
30.0
25.3
13.2
9.1
14.3
3.3
3.4
0.6
0.8
Total
1 362 081
3 408 994
2 818 630
2 814 748
7 603 898
3 943 911
29 665 839
33 304 495
383 188 744
31 March 2011
%
0.3
0.8
0.6
0.6
1.6
0.8
6.3
7.1
81.9
17 117
100.0
468 111 340
100.0
Hedging
reserve
£m
(23)
13
11
(4)
–
–
–
(3)
9
9
(5)
–
–
–
(3)
7
Translation
reserve
£m
123
Other
reserves
(note a)
£m
119
–
–
–
–
58
(67)
114
–
–
–
–
29
(65)
(20)
58
–
–
–
(10)
–
–
109
–
–
–
1
–
–
–
110
Total
£m
219
13
11
(4)
(10)
58
(67)
220
9
9
(5)
1
29
(65)
(23)
175
(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.
94 Tate & Lyle Annual Report 2011
26 Share-based payments
During the year to 31 March 2011, various equity-settled share-based payment arrangements existed, as set out below. The grants made during
the year and the prior year were as follows:
Type of arrangement
Timing of grant
Number of options/shares granted
in year to 31 March 2011
Number of options/shares granted
in year to 31 March 2010
Fair value per share for 2011 grant (pence)
Fair value per share for 2010 grant (pence)
Performance
share plan
Bi-annually
3 305 524
5 001 896
381
234
Executive
share option
scheme
Annually
in June
(note a)
Deferred
bonus
share plan
Annually
in July
Duration
in years
Sharesave scheme
Annually
in June
Annually in
December
–
–
–
–
–
–
–
–
3
5
3
5
3
5
3
5
–
–
–
–
–
–
–
–
14 218
7 482
85 632
45 453
84
94
90
97
Valuation basis
Contractual life
Vesting conditions
Monte Carlo
10 years
(note b)
Binomial Lattice
10 years
(note c)
Monte Carlo
3 years
(note d)
Black-Scholes
3/5 years
(note e)
Black-Scholes
3/5 years
(note e)
(a) The last grant under this scheme was made in June 2004.
(b) For the year ended 31 March 2011, exercise of 3,305,524 shares is dependent 50% on adjusted diluted earnings per share and 50% on return
on capital employed.
For the year ended 31 March 2010, exercise of 419,403 shares was not subject to any performance conditions, exercise of 269,616 shares
was dependent on total shareholder return and the exercise of 4,312,877 shares was dependent 50% on total shareholder return and 50% on
adjusted diluted earnings per share.
(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 2010 and 31 March 2011 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 £9 million (2010 – £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:
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F
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Outstanding at 1 April
Granted
Exercised
Lapsed
Outstanding at 31 March
31 March 2011
31 March 2010
Weighted
average
exercise
price
pence
72
3
331
54
33
Shares
number
9 780 720
5 132 981
(1 064 000)
(2 694 760)
11 154 941
Weighted
average
exercise
price
pence
111
11
174
55
72
Shares
number
11 154 941
3 327 224
(982 311)
(2 240 878)
11 258 976
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Tate & Lyle Annual Report 2011 95
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 514 pence (2010 –
377 pence). At 31 March 2011, 1,008,988 (2010 – 1,728,068) of the outstanding options were exercisable at a weighted average exercise price
of 332 pence (2010 – 330 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 2011
Year to 31 March 2010
Number
outstanding
at end of year
10 183 236
–
1 002 184
73 556
11 258 976
Weighted
average
remaining
contractual
life in months
Weighted
average
exercise
price
pence
51.1
–
31.4
38.1
49.2
–
–
338
449
33
Number
outstanding
at end of year
8 864 912
–
2 044 399
245 630
11 154 941
Weighted
average
remaining
contractual
life in months
55.5
–
40.9
36.5
52.4
Weighted
average
exercise
price
pence
–
–
341
443
72
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 2011
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 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)
Performance
share plan
Sharesave
scheme
December
n/a
35%
n/a 3.3/5.3 years
2.1%/3.0%
5.5%
10%
n/a
n/a
n/a
538
–
5.2%
0%
n/a
n/a
100%
443
Performance
share plan
40%
n/a
–
5.15%-7.8%
0%
35%
26%-144%
100%
346
Sharesave
scheme
December
35%
3.3/5.3 years
3%/3.4%
5.7%
10%
n/a
n/a
n/a
418
The expected volatility is based on the Company’s historical volatility over the three-year period prior to each award date.
27 Trade and other payables
Non-current payables
Accruals and deferred income
Other payables
Total
Current payables
Trade payables
Social security
Deferred consideration (note a)
Accruals and deferred income (note b)
Margin payables
Other payables
Total
2011
£m
1
–
1
2011
£m
245
7
7
76
6
65
406
31 March
2010
£m
–
1
1
31 March
2010
£m
302
12
7
126
–
38
485
(a) Deferred consideration relates to the acquisition of G. C. Hahn & Co. (Note 37).
(b) Includes government grant deferred income of £nil (2010 – £9 million) under the Transitional Aid provisions of the EU Sugar Regime.
96 Tate & Lyle Annual Report 2011
28 Borrowings
Non-current borrowings
Unsecured borrowings
2,394,000 6.5% cumulative preference shares of £1 each (2010 – £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$250,000,000)
6.75% Guaranteed Notes 2019 (£200,000,000)
Bank loans
Variable unsecured loans (US$)
Other borrowings
Obligations under finance leases
Total non-current borrowings
2011
£m
2
57
–
104
328
170
201
862
7
7
18
18
887
31 March
2010
£m
2
61
200
106
346
176
200
1 091
6
6
22
22
1 119
(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.
Current borrowings
6.125% Guaranteed Note 2011 (US$ 300,000,000)
Unsecured bank overdrafts
Drawdown of committed facilities
Short-term unsecured loans
Obligations under finance leases
Total current borrowings
2011
£m
187
10
–
25
5
227
31 March
2010
£m
–
23
139
25
3
190
Secured borrowings
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
Fair values
The fair values of the Group’s borrowings compared with their book values are as follows:
Non-current unsecured borrowings
Non-current bank loans
Other non-current borrowings
Other current borrowings
Total
31 March 2011
Book value
£m
Fair value
£m
Book value
£m
31 March 2010
Fair value
£m
862
7
18
227
900
7
18
229
1 114
1 154
1 091
6
22
190
1 309
1 100
6
22
190
1 318
The fair value of borrowings has been determined using either quoted market prices, broker dealer quotations or discounted cash flow analysis.
Tate & Lyle Annual Report 2011 97
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Notes to the consolidated financial statements
28 Borrowings (continued)
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
2011
£m
115
338
434
887
31 March
2010
£m
203
470
446
1 119
Floating rate borrowings bear interest based on relevant national LIBOR equivalents. If the interest rates applicable to the Group’s floating rate
debt and cash held as at 31 March 2011 rise by an average of 1% over the year to 31 March 2012, this would increase Group profit before tax by
approximately £2 million (2010 – £1 million).
Taking into account the Group’s interest rate and cross currency swap 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)
2011
6.5%
0.3%
5.1%
3.7%
3.1%
5.9%
4.7%
31 March
2010
6.5%
0.3%
5.0%
7.2%
4.9%
5.9%
4.8%
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 £623 million (2010 – £515 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:
Within one year
Between one and five years
After five years
Less future finance charges
Present value of minimum lease payments
Minimum lease
payments
£m
31 March 2011
Present value of
minimum lease
payments
£m
Minimum lease
payments
£m
31 March 2010
Present value of
minimum lease
payments
£m
5
16
2
23
7
18
3
28
(5)
23
3
17
5
25
5
20
7
32
(7)
25
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 2009
Credited to the income statement
Credited to the statement of comprehensive income
Credited directly to equity
Exchange
At 31 March 2010
Charge to the income statement
Charge to the statement of comprehensive income
Credited directly to equity
Exchange
At 31 March 2011
98 Tate & Lyle Annual Report 2011
£m
48
(108)
(25)
(1)
2
(84)
38
–
(1)
3
(44)
29 Deferred tax (continued)
Of the amounts of deferred tax charged to the income statement and other comprehensive income, a credit of £1.8 million (2010 – £0.3 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 £451 million (2010 – £371 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 2011.
Deferred tax assets in respect of tax losses of £39 million have been recognised in the current year in relation to the disposal of Fort Dodge.
In addition tax losses of £25 million have been recognised in the current year to offset the deferred tax liability arising from the UK pensions surplus.
The total deferred tax on unremitted earnings is £5.5 million (2010 – £3.3 million) of which £0.6 million (2010 – £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 £4.9 million
(2010 – £2.7 million).
Other deferred tax liabilities principally relate to deferred tax on acquired intangible assets.
Other deferred tax assets principally relate to deferred tax on provisions.
The movements in deferred tax assets and liabilities during the year are as follows:
Deferred tax liabilities
At 1 April 2009
Transfers between categories
Credited to the income statement
Exchange
At 31 March 2010
Transfers between categories
Charged to the income statement
Charged to the statement of comprehensive income
Exchange
At 31 March 2011
Capital
allowances
in excess of
depreciation
£m
102
–
(94)
(1)
7
–
84
–
(6)
85
Deferred tax assets
At 1 April 2009
Transfers between categories
(Charged)/credited to the income statement
Credited/(charged) to the statement of comprehensive income
Credited to equity
Exchange
At 31 March 2010
Transfers between categories
(Charged)/credited to the income statement
(Charged)/credited to the statement of comprehensive income
Credited to equity
Exchange
At 31 March 2011
Retirement
benefit
obligations
£m
Share-based
payments
£m
Tax
losses
£m
81
–
(10)
29
–
(6)
94
–
(1)
(19)
–
(5)
69
2
–
(1)
–
1
–
2
–
–
–
1
–
3
–
–
4
–
–
–
4
–
42
22
–
(4)
64
Other
£m
54
(2)
(25)
(4)
23
(3)
7
2
–
29
Other
£m
25
(2)
(4)
(4)
–
(1)
14
(3)
12
(1)
–
–
22
Total
£m
156
(2)
(119)
(5)
30
(3)
91
2
(6)
114
Total
£m
108
(2)
(11)
25
1
(7)
114
(3)
53
2
1
(9)
158
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:
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Deferred tax liabilities
Deferred tax assets
Total
2011
£m
30
(74)
(44)
31 March
2010
£m
59
(143)
(84)
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Tate & Lyle Annual Report 2011 99
Notes to the consolidated financial statements
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.
In the United Kingdom, the most recent actuarial valuations of plan assets and the present value of the defined benefit obligations were carried
out as at 31 March 2010 by independent actuaries, and the results of these valuations are being finalised.
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.
In the year ended 31 March 2010, the Group decided to close the main United Kingdom pension scheme 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. These changes gave 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.
During the year, the Group announced its intention to close its main US pension schemes, which closed to future accrual from 1 January 2011.
The Group expects to contribute approximately £40 million to its defined benefit plans in the year to 31 March 2012, subject to the finalisation of
the 2010 actuarial valuations of the UK schemes.
(b) Principal assumptions
The principal assumptions used for the purpose of the actuarial valuations were as follows:
Year to 31 March 2011
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 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
UK
2.6/3.6%
4.4%
3.4%
5.5%
6.2%
8.4%
UK
3.7%
4.5%
3.5%
5.5%
5.9%
8.1%
Pension benefits
Others
2.0%
2.0%
1.3%
5.2%
5.3%
6.5%
Pension benefits
Others
2.0%
2.0%
1.3%
4.8%
6.3%
7.5%
US
2.5%
3.5%
n/a
5.4%
7.2%
8.0%
US
2.5%
3.5%
n/a
5.7%
7.5%
8.4%
Medical
benefits
2.5%
n/a
n/a
5.3%
n/a
n/a
Medical
benefits
2.5%
n/a
n/a
5.6%
n/a
n/a
During the year the UK government announced that the Consumer Price Index (CPI) rather than the Retail Price Index (RPI) should be used as the
basis of the calculation of inflation for the statutory index linked features of retirement benefits. Accordingly, the obligations of the UK schemes have
been calculated with reference to the CPI where permitted by the scheme rules. For the year ended 31 March 2011, the inflation rate applied for
CPI and RPI are 2.6% and 3.6% respectively.
Mortality assumptions – Year to 31 March 2011
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 2010
Male aged 65 now
Male aged 65 in 20 years’ time
Female aged 65 now
Female aged 65 in 20 years’ time
Expected longevity post age 65
US
UK
21 years
24 years
22 years
24 years
19 years
19 years
21 years
21 years
Expected longevity post age 65
US
UK
21 years
24 years
22 years
24 years
19 years
19 years
21 years
21 years
Shorter longevity assumptions are used for members who retire on grounds of ill-health.
The expected rates of return on individual categories of plan assets are estimated by reference to indices published by the relevant exchanges.
The overall expected rate of return is calculated by weighting the individual rates in accordance with the anticipated balance in the plan’s
investment portfolio. The actual rate of return on the plan assets for the year was positive 9.3% (2010 – positive 26.5%), and amounted to
a gain of £109 million (2010 – £258 million gain).
100 Tate & Lyle Annual Report 2011
30 Retirement benefit obligations (continued)
Medical cost trend rates are estimated at 9.5% per annum (2010 – 10%), grading down to 5% by 2020. If medical cost trend rates were to increase
or decrease by 1%, the effects are estimated as follows:
31 March 2011
31 March 2010
Increase
£m
Decrease
£m
Increase
£m
Decrease
£m
Increase/(decrease) in medical benefits current service and interest cost
Increase/(decrease) in medical benefits obligation
1
9
(1)
(7)
1
8
(c) Amounts recognised in the income statement
Year to 31 March 2011
Current service cost
charged to operating profit
Past service cost
Curtailment benefit
Total charged to operating profit
Interest cost
Expected return on plan assets
(Credited)/charged to finance expense
Total
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
UK
£m
2
–
(1)
1
47
(52)
(5)
(4)
UK
£m
3
(32)
(10)
(39)
46
(42)
4
(35)
US
£m
5
1
–
6
22
(18)
4
10
US
£m
5
–
–
5
22
(13)
9
14
Pension benefits
Others
£m
Total
£m
Medical
benefits
£m
1
–
–
1
2
(2)
–
1
Others
£m
1
–
–
1
2
(2)
–
1
8
1
(1)
8
71
(72)
(1)
7
Pension benefits
Total
£m
9
(32)
(10)
(33)
70
(57)
13
(20)
3
–
–
3
5
–
5
8
Medical
benefits
£m
2
–
–
2
6
–
6
8
(1)
(7)
Total
£m
11
1
(1)
11
76
(72)
4
15
Total
£m
11
(32)
(10)
(31)
76
(57)
19
(12)
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 2011
Fair value of plan assets:
– equities
– bonds
– property and other
Present value of funded obligations
Present value of unfunded obligations
Unrecognised asset due to surplus restriction
Net asset/(liability) recognised in the
statement of financial position
Disclosed in the statement
of financial position as:
– retirement benefit surplus
– retirement benefit deficits
% of
plan
assets
38%
47%
15%
% of
plan
assets
53%
30%
17%
UK
£m
349
430
140
919
(823)
–
–
96
102
(6)
% of
plan
assets
35%
44%
21%
US
£m
145
81
48
274
(366)
(42)
–
(134)
–
(134)
Others
Pension benefits
Total
% of
plan
assets
41%
43%
16%
Medical
benefits
£m
–
–
–
–
–
(97)
–
£m
512
534
199
1 245
(1 244)
(42)
(1)
Total
£m
512
534
199
1 245
(1 244)
(139)
(1)
(42)
(97)
(139)
103
(145)
–
(97)
103
(242)
£m
18
23
11
52
(55)
–
(1)
(4)
1
(5)
Tate & Lyle Annual Report 2011 101
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Notes to the consolidated financial statements
30 Retirement benefit obligations (continued)
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)
Others
Pension benefits
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
(1 286)
(143)
(156)
(101)
(257)
16
(172)
–
(101)
16
(273)
£m
16
22
12
50
(57)
–
(7)
1
(8)
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
UK
£m
687
3
(32)
(10)
46
229
(51)
–
872
2
–
(1)
47
(48)
(49)
–
–
823
UK
£m
732
42
141
13
(51)
–
877
52
21
18
(49)
–
–
919
US
£m
355
5
–
–
22
55
(22)
(16)
399
5
1
–
22
27
(23)
–
(23)
408
US
£m
198
13
55
12
(22)
(11)
245
18
16
32
(23)
(14)
–
274
Others
£m
50
1
–
–
2
8
(2)
(2)
57
1
–
–
2
–
(2)
(2)
(1)
55
Others
£m
45
2
5
2
(2)
(2)
50
2
–
2
(2)
–
(1)
51
Total
£m
1 092
9
(32)
(10)
70
292
(75)
(18)
1 328
8
1
(1)
71
(21)
(74)
(2)
(24)
1 286
Pension benefits
Total
£m
975
57
201
27
(75)
(13)
1 172
72
37
52
(74)
(14)
(1)
1 244
Liabilities
At 1 April 2009
Total service cost
Negative past service cost
Curtailment benefits
Interest cost
Actuarial loss
Benefits paid
Exchange
At 31 March 2010
Total service cost
Past service cost
Curtailment benefits
Interest cost
Actuarial (gain)/loss
Benefits paid
Businesses sold
Exchange
At 31 March 2011
Assets
At 1 April 2009
Expected return on assets
Actuarial gain
Contributions paid by employer
Benefits paid
Exchange
At 31 March 2010
Expected return on assets
Actuarial gain
Contributions paid by employer
Benefits paid
Exchange
Unrecognised asset due to surplus restriction
At 31 March 2011
102 Tate & Lyle Annual Report 2011
Medical
benefits
£m
94
2
–
–
6
13
(5)
(9)
101
3
–
–
5
(1)
(5)
–
(6)
97
Medical
benefits
£m
–
–
–
5
(5)
–
–
–
–
5
(5)
–
–
–
Total
£m
1 186
11
(32)
(10)
76
305
(80)
(27)
1 429
11
1
(1)
76
(22)
(79)
(2)
(30)
1 383
Total
£m
975
57
201
32
(80)
(13)
1 172
72
37
57
(79)
(14)
(1)
1 244
30 Retirement benefit obligations (continued)
(f) Analysis of actuarial (gains)/losses 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
Unrecognised asset due to surplus restriction
Actuarial (gains)/losses recognised in the consolidated statement of comprehensive income
Cumulative actuarial loss recognised in the consolidated statement of comprehensive income
2011
£m
(37)
(12)
(10)
1
(58)
101
Deferred tax taken directly to equity on retirement benefit obligations was £19 million charge to equity (2010 – £29 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
2011
£m
1 383
(1 244)
139
(12)
(37)
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
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
Restructuring
and closure
provisions
£m
Other
provisons
£m
At 1 April 2009
Charged to the income statement
Utilised in the year
Exchange and other movements
At 31 March 2010
Charged to the income statement
Credited to the income statement
Utilised in the year
Exchange and other movements
At 31 March 2011
Provisions are expected to be utilised as follows:
– within one year
– after more than one year
Total
12
3
(2)
(1)
12
5
(2)
(2)
–
13
7
56
(21)
–
42
28
(20)
(13)
(2)
35
13
–
(1)
(3)
9
16
(1)
(7)
–
17
2011
£m
44
21
65
31 March
2010
£m
(201)
–
305
–
104
159
2007
£m
1 317
(1 188)
129
25
3
Total
£m
32
59
(24)
(4)
63
49
(23)
(22)
(2)
65
31 March
2010
£m
26
37
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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 restructuring and closure provisions charged during the year primarily relate to the implementation of a common global IS/IT platform and
additional closure and other restructuring costs relating to the Food Systems business, within the Speciality Food Ingredients segment. The amount
utilised during the year primarily relates to the decision to mothball the sucralose manufacturing facility in McIntosh, Alabama. In addition, during
the year the Group charged to the income statement an exceptional provision of £25 million in respect of onerous contracts relating to the future
obligations of the plant at Fort Dodge, Iowa. As a result of the disposal in March 2011, £20 million of the resultant provision was no longer required
and was reversed. These provisions are expected to be utilised within two years.
Other provisions primarily relate to Group legal matters and costs associated with the disposal of the Sugars segment. These provisions are
expected to be utilised within 5 years.
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The charge to the income statement in relation to the unwinding of discounts was £2 million (2010 – £nil).
Tate & Lyle Annual Report 2011 103
Notes to the consolidated financial statements
32 Change in working capital
(Increase)/decrease in inventories
Decrease in receivables
Increase in payables
(Increase)/decrease in derivative financial instruments (excluding debt-related derivatives)
Decrease in provisions for other liabilities and charges
Decrease in retirement benefit obligations
(Increase)/decrease in working capital (continuing operations)
2011
£m
(121)
1
88
(7)
(16)
(46)
(101)
Excluded from the movement in retirement benefit obligations is an actuarial gain of £58 million (2010 – actuarial loss £104 million).
33 Cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
Total
2011
£m
153
501
654
The effective interest rate on short-term deposits was 0.4% (2010 – 0.4%), with an average maturity of 12 days (2010 – 6 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
Debt-related derivative instruments
Cash and cash equivalents
Net debt
2011
£m
55
415
132
52
654
2011
£m
(887)
(227)
(4)
654
(464)
Notes
28
28
20
33
31 March
2010
£m
99
78
39
10
(19)
(21)
186
31 March
2010
£m
142
362
504
31 March
2010
£m
136
322
2
44
504
31 March
2010
£m
(1 119)
(190)
(9)
504
(814)
Derivative financial instruments presented within assets and liabilities in the statement of financial position of £1 million net asset comprise net
debt-related instruments of £4 million liability and net non-debt-related instruments of £5 million asset (2010 – £7 million net asset comprising net
debt-related instruments of £9 million liability and net non-debt-related instruments of £16 million asset).
104 Tate & Lyle Annual Report 2011
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 businesses
Trade finance recognised as debt
Fair value and other movements
Exchange
Decrease in net debt in the year
At 31 March
2011
£m
(162)
(458)
131
25
(464)
2011
£m
(814)
168
147
8
–
–
27
350
(464)
31 March
2010
£m
(161)
(620)
(60)
27
(814)
2010
£m
(1 231)
80
267
–
(16)
7
79
417
(814)
Included in the cash outflow from net decrease in borrowings is an amount of £16 million (2010 – £45 million) that is included in net cash used in
financing activities from discontinued operations.
35 Contingent liabilities
Trade guarantees
2011
£m
1
31 March
2010
£m
13
As at 31 March 2010, trade guarantees included £13 million in relation to discontinued operations.
In addition to the above, in 2010 we had guaranteed the obligations of certain subsidiaries and joint ventures to Payment Agencies in connection
with Restructuring Aid. The Group’s share of these guarantees were £6 million.
Other trade guarantees have been given in the normal course of business by the Group at both 31 March 2011 and 31 March 2010. 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.
Sale of EU Sugars
The sale of EU Sugars to American Sugar Refining, Inc. completed on 30 September 2010. The consideration after working capital adjustments was
£227 million, subject to closing adjustments arising from the agreement of post completion statements. The process to reach such agreement is
ongoing and items totalling £54 million remain outstanding and are expected to be submitted for adjudication to an independent expert. These items
relate to the impact of major turbulence in the supply of raw sugar to the EU during the period prior to closing which resulted in an increase in certain
rolling re-export commitments of the business arising under the EU Sugar Regime. The Group believes that its position is fully supported and as such
will be robustly defended. No provision in respect of outstanding items has been recorded.
36 Commitments
Capital commitments
Commitments for the acquisition of property, plant and equipment
2011
£m
24
31 March
2010
£m
8
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.
Tate & Lyle Annual Report 2011 105
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Notes to the consolidated financial statements
36 Commitments (continued)
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
37 Acquisitions and disposals
2011
£m
24
68
81
173
31 March
2010
£m
31
84
80
195
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 non-controlling 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 through put and call options.
During the year to 31 March 2010 a put option was exercised for 15% of the issued share capital for a total consideration of £21 million which
was paid by the Group on 31 March 2010. At 31 March 2011 deferred consideration of £7 million relating to the remaining 5% of the issued share
capital is recognised in trade and other payables (Note 27).
Disposals
EU Sugars and Molasses disposal
During the year the Group completed the disposal of EU Sugars to American Sugar Refining, Inc. The disposal comprised an asset sale of the
Thames Sugar Refinery and its associated businesses in London and a share sale of Alcantara Empreendimentos SGPS, SA, Tate & Lyle Norge AS
and Eridania Tate & Lyle SpA. Total consideration of £227 million remains subject to finalisation of post completion statements (Note 35).
During the year the Group also completed the disposal of Molasses to W&R Barnett Ltd. Total consideration was £66 million, subject to finalisation
of post completion statements. The Group incurred £4 million of costs associated with the disposal.
The calculation of the result on disposal is shown below:
EU Sugars
£m
Molasses
£m
31 March 2011
Total
£m
Goodwill and intangible assets
Property, plant and equipment
Investment in associates
Available-for-sale financial assets
Derivative financial instruments – assets
Inventories
Trade and other receivables
Trade and other payables
Derivative financial instruments – liabilities
Retirement benefit obligation
Cash and cash equivalents
Borrowings
Taxation
Total assets disposed
Non controlling interests disposed
Net assets disposed
Cash received during the year
Receivable at 31 March 2011
Total consideration
Other items:
Disposal costs
Recycling of cash flow hedge reserve
Exchange differences transferred from equity
(Loss)/gain on disposal
Cash flows:
Cash consideration
Cash disposed
Cash inflow in the year
106 Tate & Lyle Annual Report 2011
1
203
2
1
18
72
66
(53)
(15)
(2)
5
(5)
(1)
292
–
292
225
2
227
(4)
3
11
(55)
225
(5)
220
2
14
–
–
7
35
42
(33)
(3)
–
5
(3)
(2)
64
(5)
59
65
1
66
(4)
–
9
12
65
(5)
60
3
217
2
1
25
107
108
(86)
(18)
(2)
10
(8)
(3)
356
(5)
351
290
3
293
(8)
3
20
(43)
290
(10)
280
37 Acquisitions and disposals (continued)
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.
38 Assets and liabilities classified as held for sale
On 20 April 2011, the Group has entered into a conditional contract to dispose of Vietnam Sugar to TH Milk Food Joint Stock Company. The Group
is committed to the disposal of its other remaining businesses within the legacy Sugars division, principally Tate & Lyle Gadot Manufacturing and
Tate & Lyle Israel Limited. These businesses have been disclosed as discontinued operations (Note 12) and the assets and liabilities as at 31 March
2011 are shown in the table below.
Assets and liabilities as at 31 March 2011 are shown as held for sale as follows:
Assets
Intangible assets
Property, plant and equipment
Inventories
Trade and other receivables
Available-for-sale financial assets
Total assets held for sale
Liabilities
Trade and other payables
Total liabilities held for sale
39 Post balance sheet events
2011
£m
2
22
17
9
17
67
(5)
(5)
31 March
2010
£m
–
–
–
–
18
18
–
–
On 20 April 2011, the Group announced the sale on a conditional basis of Vietnam Sugar to TH Milk Food Joint Stock Company for cash
consideration of £33 million in addition to the Group’s share of the value of working capital and net cash to be retained in the business.
The disposal is expected to be completed during the first half of the 2012 financial year.
On 26 May 2011, the Group took the decision to re-open the mothballed facility in McIntosh, Alabama and restart production of sucralose there.
The Group estimates that the re-opening process will take about 12 months and that production will commence in the first half of the financial year
ending 31 March 2013. Capital expenditure of around £13 million is anticipated before the plant can restart. The decision will result in the reversal
of impairment of around £50 million and the release of around £20 million of the McIntosh mothball provision at current exchange rates. Both the
reversal of the impairment and the release of the provision will be recognised as exceptional items in the 2012 financial year.
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Tate & Lyle Annual Report 2011 107
Notes to the consolidated financial statements
40 Related party disclosures
Identity of related parties
The Group has related party relationships with its subsidiaries, joint ventures and associates, the Group’s pension schemes and with key
management being its directors and executive officers. No related party relationships with close family members of the Group’s key management
existed in the current or 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 and associates
Purchases of goods and services
– from joint ventures and associates
Receivables
– due from joint ventures and associates
Payables
– due to joint ventures and associates
Financing
– loans to joint ventures and associates
– deposits from joint ventures and associates
2011
£m
150
221
15
17
18
25
31 March
2010
£m
111
174
18
8
10
3
The Group had no material related party transactions containing unusual commercial terms.
The Group provides guarantees in respect of banking facilities of a joint venture totalling £10 million (2010 – £21 million).
Key management
Key management compensation is disclosed in Note 9.
41 Foreign exchange rates
The following exchange rates have been applied in the translation of the financial statements of foreign subsidiaries, joint ventures and associates:
Average foreign exchange rates
£1 = US$
£1 = €
Year end foreign exchange rates
£1 = US$
£1 = €
42 Main subsidiaries and investments
Subsidiaries based in the United Kingdom1
G.C. Hahn & Co. Limited2
Tate & Lyle Holdings Limited3
Tate & Lyle Industries Limited
Tate & Lyle International Finance PLC3
Tate & Lyle Investments Limited3
Tate & Lyle LLC
Year to 31 March
2010
2011
1.55
1.19
2011
1.60
1.13
1.61
1.13
31 March
2010
1.52
1.12
Type of business
Blending
Holding company
Holding company
In-house treasury company
Holding company
Holding company
Percentage
of equity
attributable to
Tate & Lyle PLC
100
100
100
100
100
100
1 Registered in England and Wales, except 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.
108 Tate & Lyle Annual Report 2011
42 Main subsidiaries and investments (continued)
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
Chile
China
Croatia
Czech Republic
France
Germany
Gibraltar
Hong Kong
Hungary
Italy
Israel
Lithuania
Mexico
Morocco
Netherlands
Poland
Singapore
South Africa
Spain
Ukraine
USA
Tate & Lyle Argentina SA
Tate & Lyle ANZ Pty Limited2
Tate & Lyle Services Belgium NV
Tate & Lyle Management & Finance Limited
Tate & Lyle Brasil do SA1
G.C. Hahn & Co. Estabilizantes e Tecnologia
para Alimentos Ltda.2
Tate & Lyle Chile Commercial Ltda
Tate & Lyle Trading (Shanghai) Limited
G.C. Hahn & Co. Food Stabilizer Business
(Shanghai) Ltd.2
G.C. Hahn & Co. d.o.o.2
G.C. Hahn & Co. Stabilizacni technika s.r.o.2
G.C. Hahn & Cie. S.A.R.L.2
G.C. Hahn & Co. Stabilisierungstechnik GmbH2
G.C. Hahn & Co. Cooperationsgeschaft mbH2
Cesalpinia Germany GmbH
Tate & Lyle Insurance (Gilbraltar) Limited
Tate & Lyle Asia Limited
G.C. Hahn & Co. Stabilizalastechnikai Kft2
Tate & Lyle Italia Spa
Tate & Lyle Gadot Manufacturing
Tate & Lyle Israel Limited
UAB Litauen G.C. Hahn & Co.2
Tate & Lyle Mexico S. de R.L.de C.V.
Tate & Lyle Morocco SA
Tate & Lyle Holland BV
Tate & Lyle Netherlands BV
Cereal sweeteners & starches,
Sucralose distribution
Sucralose distribution and blending
Holding company
Management & finance
Citric acid, Sucralose distribution
Blending
Cereal sweeteners & starches,
Sucralose distribution
Sucralose distribution
Blending
Blending
Blending
Blending
Blending
Holding company
Blending
Reinsurance
Sucralose distribution
Blending
Blending
Sugar refining
Sugar trading
Blending
Holding company
Cereal sweeteners & starches
Holding company
Cereal sweeteners & starches,
Sucralose distribution
Holding company
High-intensity sweeteners
Blending
Nederlandse Glucose Industrie BV
G.C. Hahn & Co. Technika stabilizowania sp.z.o.o.2 Blending
Tate & Lyle Singapore Pte Ltd
Tate & Lyle South Africa (Pty) Limited
G.C. Hahn Estabilizantes y Tecnologia
para Alimentos2
G.C. Hahn2
Staley Holdings LLC
Tate & Lyle Custom Ingredients LLC
Tate & Lyle Finance LLC
TLHUS, Inc
Tate & Lyle Ingredients Americas, LLC
Tate & Lyle Sucralose LLC
TLI Holding LLC
Blending
Blending
Holding company
Blending
In-house banking
Holding company
Cereal sweeteners & starches
High-intensity sweeteners
In-house banking
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
65
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
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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 a call option. However due to the structure of the acquisition
agreement, the Group effectively bears all the risks and rewards for 100% of the business and therefore no minority interest is recognised.
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Tate & Lyle Annual Report 2011 109
Notes to the consolidated financial statements
42 Main subsidiaries and investments (continued)
Joint ventures
Country of incorporation or registration
Company
Amylum Bulgaria EAD1,2
Sucromiles SA2
Hungrana Kft1,2
Almidones Mexicanos SA2
Eaststarch CV
Amylum Slovakia spol sro1
Amylum Nisasta AS1
DuPont Tate & Lyle Bio Products Company LLC
Bulgaria
Columbia
Hungary
Mexico
Netherlands
Slovakia
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
Cereal sweeteners & starches
Holding company
Cereal sweeteners & starches
Cereal sweeteners & starches
Industrial ingredients
Country of incorporation or registration
Company
Thailand
Tapioca Development Corporation1
Type of business
Starch production
Percentage
of equity
attributable to
Tate & Lyle PLC
(100)
(50)
(100)
(100)
50
50
25
50
50
50
50
50
Percentage
of equity
attributable to
Tate & Lyle PLC
33.3
1
Indirect associates of Tate & Lyle PLC.
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 financial statements using management accounts for the
period to 31 March.
110 Tate & Lyle Annual Report 2011
43 Reconciliation to adjusted information
As explained in Note 1, adjusted information is presented as it provides both management and investors with valuable additional information
on the performance of the business. The following items are excluded from adjusted information:
– exceptional items including profits and losses on disposals of businesses, impairments, and closure and restructuring provisions; and
– amortisation of intangibles acquired through business combinations.
The following table shows the reconciliation of the statutory information presented in the income statement to the adjusted information:
Year to 31 March 2011
Year to 31 March 2010
£m (unless otherwise stated)
Continuing operations
Sales
Operating profit/(loss)
Net finance expense
Profit/(loss) before tax
Income tax (expense)/credit
Non-controlling interests
Profit/(loss) attributable to equity
holders of the Company
Basic EPS (pence)
Diluted EPS (pence)
Tax rate
Discontinued operations
Sales
Operating (loss)/profit
Net finance income
(Loss)/profit before tax
Income tax credit/(expense)
Non-controlling interests
(Loss)/profit attributable to equity
holders of the Company
Basic EPS (pence)
Diluted EPS (pence)
Total operations
Sales
Operating profit
Net finance expense
Profit/(loss) before tax
Income tax (expense)/credit
Non-controlling interests
Profit attributable to equity
holders of the Company
Basic EPS (pence)
Diluted EPS (pence)
Tax rate
Reported
Exceptional/
amortisation
Adjusted
Reported
Exceptional/
amortisation
2 720
303
(58)
245
(49)
–
196
42.6
41.9
19.7%
590
(45)
–
(45)
16
(4)
(33)
(7.3)
(7.2)
3 310
258
(58)
200
(33)
(4)
163
35.3
34.7
16.4%
–
18
–
18
–
–
18
3.9
3.8
–
43
–
43
(19)
–
24
5.4
5.3
–
61
–
61
(19)
–
42
9.3
9.1
2 720
2 533
321
(58)
263
(49)
–
214
46.5
45.7
18.5%
(44)
(72)
(116)
95
–
(21)
(4.7)
(4.7)
81.9%
590
1 074
(2)
–
(2)
(3)
(4)
(9)
(1.9)
(1.9)
50
1
51
(11)
(4)
36
8.0
8.0
3 310
3 607
319
(58)
261
(52)
(4)
205
44.6
43.8
6
(71)
(65)
84
(4)
15
3.3
3.3
19.7%
129.2%
–
312
–
312
(136)
–
176
38.6
38.4
–
(22)
–
(22)
5
–
(17)
(3.7)
(3.7)
–
290
–
290
(131)
–
159
34.9
34.7
Adjusted
2 533
268
(72)
196
(41)
–
155
33.9
33.7
20.8%
1 074
28
1
29
(6)
(4)
19
4.3
4.3
3 607
296
(71)
225
(47)
(4)
174
38.2
38.0
20.9%
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Tate & Lyle Annual Report 2011 111
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 2011 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 59, 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 and express
an opinion on 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. In addition, we read all the
financial and non-financial information in the Annual Report 2011 to
identify material inconsistencies with the audited financial statements.
If we become aware of any apparent material misstatements or
inconsistencies we consider the implications for our report.
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 Parent company’s
affairs as at 31 March 2011;
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 Annual Report 2011 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 2011.
Paul Cragg (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
26 May 2011
Note:
(a) the maintenance and integrity of the Tate & Lyle PLC website, and any
other electronic media used to present the financial statements, 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,
or any other electronic media.
(b) legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation in
other jurisdictions.
112 Tate & Lyle Annual Report 2011
Parent company balance sheet
Fixed assets
Tangible assets
Investments in subsidiary undertakings
Investment in associate
Current assets
Debtors:
– amounts falling due within one year
– amounts falling due after more than one year
Creditors – due within one year
Net current assets
Total assets less current liabilities
Creditors – amounts falling due after more than one year
Provisions for liabilities and other charges
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Profit and loss account
Shareholders’ funds
Notes
Year to 31 March
2010
£m
2011
£m
2
3
4
5
5
6
7
9
12
13
13
13
3
1 184
1
1 188
326
–
326
(71)
255
1 443
(188)
(3)
1 252
117
406
8
721
2
1 416
1
1 419
399
1
400
(61)
339
1 758
(490)
(1)
1 267
115
405
8
739
1 252
1 267
The Parent company financial statements were approved by the Board of directors on 26 May 2011 and signed on its behalf by:
Javed Ahmed, Tim Lodge
Directors
Registered no. 76535
The notes on pages 114 to 117 form part of these Parent company financial statements.
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Tate & Lyle Annual Report 2011 113
Notes to the Parent company financial statements
1 Parent company accounting policies
Accounting basis
The Parent company financial statements are prepared under the
historical cost convention in accordance with the Companies Act
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 profit for the year
before dividends dealt with in the financial statements of the Company
amounted to £44 million (2010 – £83 million). The Tate & Lyle PLC
consolidated financial statements for the year ended 31 March
2011 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 FRS 25 Financial Instruments: Presentation –
Puttable financial instruments and obligations arising on liquidation
Amendment to FRS 26 Financial Instruments: Recognition and
Measurement – Eligible hedged items
Improvements to Financial Reporting Standards
Amendments to FRS 29 Financial Instruments: Disclosures
Amendment to FRS 20 Share-based payment – Group cash-
settled share-based payment transactions
Amendment to FRS 25 (IAS 32) Financial instruments:
Presentation on the classification of rights issues
UITF Abstract 48 on accounting implications of the
replacement of RPI with CPI
New UK standards and interpretations not adopted
The following amendments to Financial Reporting Standards have
been issued but have not yet been adopted by the Company:
FRS 30 Heritage Assets
Improvements to Financial Reporting Standards
–
–
– SSAP 25 Segmental Reporting
– FRS 8 Related Party Disclosures
– FRS 29 Financial Instruments: Disclosures
–
UITF Abstract 47 (IFRIC 19), Extinguishing financial liabilities
with equity instruments
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.
Tangible fixed assets
Tangible fixed assets are stated at historic purchase cost less
accumulated depreciation. Cost includes the original purchase price
of the asset and the costs attributable to bringing the asset to its
working condition for its intended use. 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 FRS 23 The Effects
of Changes in Foreign Exchange Rates.
114 Tate & Lyle Annual Report 2011
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.
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
financial statements 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
Monetary 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.
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.
1 Parent company accounting policies (continued)
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.
2 Tangible fixed assets
The net book value of tangible fixed assets of £3 million (2010 – £2 million) comprises plant and machinery and computer software. Net book
value comprises cost of £5 million (2010 – £4 million) less accumulated depreciation of £2 million (2010 – £2 million).
3
Investments in subsidiary undertakings
At 1 April 2010
Increase – share-based payments
Impairment
Reversal of impairment
Exchange
At 31 March 2011
Shares in
subsidiary
undertakings
£m
1 416
3
(232)
13
(16)
1 184
Shares in subsidiary undertakings are stated at cost or earliest ascribed value less amounts provided of £368 million (2010 – £149 million).
The impairment relates to the reassessment of the carrying value of a subsidiary after the payment of a dividend in favour of the Company.
The reversal of impairment reflects an uplift to the recoverable amount of the Company’s investment in Tate & Lyle Ventures Ltd and Tate & Lyle
Services Belgium NV.
4
Investment in associate
The Company holds a 16.6% interest in Tapioca Development Corporation, a company incorporated in Thailand, for book value of £1 million
(2010 – £1 million).
5 Debtors
Due within one year
Current tax
Amounts due from subsidiary undertakings
Other debtors
Prepayments and accrued income
Total
2011
£m
3
318
4
1
326
31 March
2010
£m
16
377
5
1
399
The effective interest rate applicable to amounts due from subsidiary undertakings at 31 March 2011 is 2.0% (2010 – 1.5%). Amounts due from
subsidiary undertakings are receivable on demand.
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Due after more than one year
Deferred tax
Total
6 Creditors – due within one year
Amounts due to subsidiary undertakings
Other creditors
Accruals and deferred income
Total
Amounts due to subsidiary undertakings are repayable on demand.
Note
8
2011
£m
–
–
2011
£m
55
8
8
71
31 March
2010
£m
1
1
31 March
2010
£m
49
4
8
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Tate & Lyle Annual Report 2011 115
Notes to the Parent company financial statements
7 Creditors – due after more than one year
Amounts due to subsidiary undertakings (note a)
Preference shares (note b)
Total
2011
£m
186
2
188
31 March
2010
£m
488
2
490
(a) The effective interest rate applicable to amounts owed to subsidiary undertakings at 31 March 2011 is 6.5% (2010 – 6.5%). Amounts due to
subsidiary undertakings at year end mature after more than one year (2010 – mature after more than two years).
(b) 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.
8 Deferred tax
Deferred tax charged to profit in the year was £1 million (2010 – £2 million).
9 Provisions for liabilities
At 31 March 2010
Charged to the income statement
Utilised in the year
At 31 March 2011
Restructuring
£m
1
8
(6)
3
Provisions primarily relate to restructuring as a result of the disposal of Group businesses and are expected to be utilised within the next 12 months.
10 Contingent liabilities
Loans and overdrafts of subsidiaries and joint ventures
2011
£m
1 035
31 March
2010
£m
1 251
Guarantees given in respect of drawn and undrawn loans and overdrafts by Tate & Lyle PLC were £2,479 million at 31 March 2011
(2010 – £2,661 million).
Other trade guarantees have been given in the normal course of business by Tate & Lyle PLC at both 31 March 2011 and 31 March 2010.
These are excluded from the figures given above and are in respect of Revenue and Customs and the Rural Payments Agency for Agricultural
Produce bonds, ECGD recourse agreements, letters of credit, and tender and performance bonds.
11 Financial commitments
Annual payments made by the Company in the year ended 31 March 2011 in respect of operating leases that expire within one year were
£3 million (2010 – £3 million that expire later than one year and no later than five years).
12 Called up share capital
Allotted, called up and fully paid equity share capital
At 1 April
Allotted under share option schemes
Scrip dividend shares issued
At 31 March
31 March 2011
31 March 2010
Shares
460 575 700
217 743
7 317 897
468 111 340
£m
115
–
2
Shares
460 012 801
48 287
514 612
117
460 575 700
£m
115
–
–
115
Treasury shares and shares held in ESOP trust
As at 31 March 2011, the Group held 175,328 shares (2010 – 512,490 shares) in Treasury.
During the year 337,162 shares (2010 – 816,012 shares) were released from Treasury to satisfy share options exercised.
The shares held in Treasury at 31 March 2011 represented less than 0.1% (2010 – 0.1%) of the share capital at the year end, and have a nominal
value of less than £0.1 million (2010 – £0.1 million).
As at 31 March 2011, the Group held 2,713,694 shares (2010 – 3,141,100 shares) in an ESOP trust at a nominal value of 25p and a market value
of 577.5p (2010 – 454.2p).
116 Tate & Lyle Annual Report 2011
13 Reconciliation of movements in shareholders’ funds
At 1 April 2010
Profit for the year
Proceeds from shares issued
Share-based payments
Ordinary dividends paid
Issue of shares for scrip dividend
At 31 March 2011
Ordinary
shares
£m
115
–
–
–
–
2
117
Share
premium
account
£m
Capital
redemption
reserve
£m
Profit and
loss account
£m
405
–
1
–
–
–
406
8
–
–
–
–
–
8
739
44
1
9
(105)
33
721
Total
£m
1 267
44
2
9
(105)
35
1 252
Ordinary shares carry the right to participate in dividends and each share entitles the holder to one vote on matters requiring shareholder approval.
The amount available for the payment of dividends by the Company at 31 March 2011 was £721 million (2010 – £714 million).
During the year ended 31 March 2011, shareholders were given the option to receive the final dividend relating to the prior year and the interim
dividend relating to the current year in the form of a scrip issue. On 30 July 2010 and 7 January 2011, the Group issued 5,716,625 shares and
1,601,272 shares respectively for scrip at a nominal value per share of 25p and a total cash equivalent value of £35 million.
14 Related parties
As permitted by FRS 8 Related Party Disclosures, disclosure of related party transactions with other companies controlled by Tate & Lyle PLC is not
provided. There were no reportable transactions with other related parties other than providing guarantees in respect of banking facilities of a joint
venture totalling £10 million (2010 – £21 million).
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 98 staff including directors (2010 – 94) and the total staff costs are shown below:
Wages and salaries
Social security
Retirement benefits
Share based payments
Total
2011
£m
14
2
1
6
23
31 March
2010
£m
11
1
1
3
16
Directors’ emoluments disclosures are provided in the directors’ remuneration report on pages 44 to 56 of this annual report and in Note 9 of the
Group financial statements.
In addition, 5,108,263 outstanding share options attributable to employees and Directors of the Company as at 31 March 2011 are shown below:
Sharesave Scheme – 3/5 year options
Performance Share Plan
Executive share option scheme
Javed Ahmed – compensatory awards
Javed Ahmed – long term incentive awards
Deferred bonus share plan
16 Dividends
Year issued
Number of
shares
Subscription
prices
pence
Dates normally
exercisable
2006
2006
2007
2007
2008
2008
2009
2011
2008
2008
2009
2010
2003
2004
2009
2009
2009
2010
2008
4 847
456
1 911
26 073
5 029
52 131
39 613
21 700
222 115
326 216
677 307
1 066 797
136 216
339 904
689 019
359 488
659 609
473 042
6 790
518.00
716.00
531.00
395.00
408.00
376.00
418.00
488.00
–
–
–
–
335.75
325.00
–
–
–
–
–
2011-2012
2012
2012-2013
2011-2013
2011-2014
2012-2014
2013-2015
2014-2016
2011-2017
2012-2018
2012-2018
2013-2019
2006-2013
2007-2014
2011-2017
2012-2018
2012-2018
2013-2019
2011-2017
Details of the Company’s dividends are set out in Note 14 of the Group financial statements.
Tate & Lyle Annual Report 2011 117
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Five-year review financial years to 31 March
IFRS
Share information
Pence per 25p ordinary share
Closing share price
Earnings per share:
– basic2
– basic, before amortisation and exceptional items2
Earnings per share:
– diluted2
– diluted, before amortisation and exceptional items2
Dividend
20071
575.0
44.3
48.7
43.6
47.9
21.5
20081
540.0
40.9
41.1
40.4
40.6
22.6
20091
260.5
14.2
37.8
14.1
37.5
22.9
20101
454.2
3.3
38.2
3.3
38.0
22.9
20111
577.5
35.3
44.6
34.7
43.8
23.7
Closing market capitalisation (£ million)
2 816
2 484
1 198
2 092
2 665
Business ratios
Interest cover – times
Profit before interest, exceptional items and amortisation
divided by net finance expense2,3
Gearing
Net borrowings as a percentage of total net assets2
Net margin
Profit before interest, exceptional items and amortisation
as a percentage of sales2
Return on net operating assets
Profit before interest and exceptional items as a percentage
of average net operating assets2
Dividend cover – times
Basic earnings per share after exceptional items and
amortisation divided by dividends per share2
Basic earnings per share before exceptional items and
amortisation divided by dividends per share2
8.4
7.8
6.1
5.8
6.9
90%
9.2%
110%
8.7%
122%
6.8%
95%
8.2%
48%
9.6%
18.9%
15.5%
12.7%
14.1%
20.2%
2.1
2.3
1.8
1.8
0.6
1.7
0.1
1.7
1.5
1.9
1
2
3
‘Amortisation’ relates to the amortisation of acquired intangible assets.
These ratios have been calculated using the results of both continuing and discontinued operations.
Interest cover has been calculated using the same basis as set out in the Group’s external bank covenants.
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 2011
IFRS
Employment of capital
Goodwill, intangible assets and property, plant and equipment
Other non-current assets
Working capital
Net assets held for sale
Net operating assets
Net borrowings
Net (liabilities)/assets for dividends and tax
Total net assets
Capital employed
Called up share capital
Reserves
Non-controlling interests
Profit summary1
Sales
Group operating profit:
Before exceptional items and amortisation2
Amortisation of acquired intangible assets
Exceptional items
Group operating profit/(loss)
Net finance expense
Profit/(loss) before tax
Income tax (expense)/credit
Profit/(loss) after tax
Non-controlling interests
Discontinued operations
Profit for the year attributable to equity holders
of the Company
20071
£m
1 449
25
445
61
1 980
(900)
(85)
995
122
838
960
35
995
20081
£m
1 516
22
576
–
2 114
(1 041)
(123)
950
114
820
934
16
950
20091
£m
1 922
19
394
28
2 363
(1 231)
(119)
1 013
115
872
987
26
1 013
20101
£m
1 548
21
45
18
1 632
(814)
36
854
115
712
827
27
854
20111
£m
1 175
24
140
62
1 401
(464)
36
973
117
833
950
23
973
1 707
1 995
2 505
2 533
2 720
250
(9)
(13)
228
(39)
189
(66)
123
(3)
94
214
260
(12)
(59)
189
(45)
144
(72)
72
10
112
194
286
(15)
(110)
161
(53)
108
(11)
97
(1)
(31)
65
268
(14)
(298)
(44)
(72)
(116)
95
(21)
(4)
40
15
321
(13)
(5)
303
(58)
245
(49)
196
(4)
(29)
163
Profit before tax, exceptional items
and amortisation2
Earnings/(loss) per share attributable to the equity holders of
the Company from continuing operations:
– basic
– diluted
210
215
233
196
263
24.9
24.4
17.3
17.1
21.0
20.9
(4.7)
(4.7)
42.6
41.9
1
2
Profit summary for the years ended 31 March 2007 to 31 March 2010 has been restated to reflect the disposal of EU Sugars, the sale of the Molasses businesses and the
intention to sell the remaining businesses in the legacy Sugars segment. These businesses, classed as discontinued operations are excluded from all years.
‘Amortisation’ relates to the amortisation of acquired intangible assets.
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Tate & Lyle Annual Report 2011 119
Information for investors
Dividends on ordinary shares
Two payments were made during the tax year 2010/2011 as follows:
Payment date
30 July 2010
7 Jan 2011
Dividend
description
Final 2010
Interim 2011
Dividend
per share
16.1p
6.8p
Services
Shareholding enquiries
Queries on shareholdings should be addressed to Tate & Lyle’s
Registrar, Equiniti.
Financial calendar
2011 Annual General Meeting
Announcement of half-year results for
six months to 30 September 2011
Announcement of full-year results for
the year ending 31 March 2012
2012 Annual General Meeting
1 Provisional date
Dividend on ordinary shares
28 July 2011
3 Nov 20111
31 May 20121
26 July 20121
2011 final
2012 interim
2012 final
Announced
Payment date
27 May 2011
5 Aug 20112
3 Nov 20111
6 Jan 20121
31 May 20121
3 Aug 20122
1 Provisional date
2 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.
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 USA 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 2011
Find out more about Tate & Lyle
at www.tateandlyle.com
Contents
Directors’ report
Business review*
1 Performance highlights
2 Our business
4 Chairman’s statement
5 Chief Executive’s review
8 Strategy and key performance indicators
10 Group financial results
12 Speciality Food Ingredients
15 Bulk Ingredients
18
19
22 Additional financial information
26 Corporate responsibility
Innovation and Commercial Development
Risk management
Governance*
32 Board of directors
34 Executive management
35 Corporate governance
44 Directors’ remuneration report
57 Other statutory and governance information
59 Directors’ statement of responsibilities
Financial statements and
shareholder information
Financial statements
60
61
62
63
64
65
66
112
Independent Auditors’ Report to the
Members of Tate & Lyle PLC
Consolidated income statement
Consolidated statement of
comprehensive income
Consolidated statement of financial position
Consolidated statement of cash flows
Consolidated statement of changes in
shareholders’ equity
Notes to the consolidated financial
statements
Parent company financial statements
Shareholder information
118 Five-year review
120
Information for investors
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.
Adjusted operating profit, adjusted profit
before tax and adjusted earnings per share
Unless stated otherwise, adjusted operating
profit, adjusted profit before tax 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
‘amortisation’ or ‘amortisation of acquired
intangibles’ on pages 1 to 59 in this annual report
relates to the amortisation of intangible assets
acquired through business combinations.
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 43 on page 111.
Cautionary statement
Please read the full cautionary and non-reliance
statements which can be found on the inside
back cover.
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.
* These sections make up the Directors’ report. This part
of the annual report sets out the information on the
Group’s principal activities, together with a review of the
development and performance of the Group, including
financial performance, in accordance with Section
417 of the Companies Act 2006.
This report is available online at
www.tateandlyle.com/annualreport2011
We are always reviewing the way that we
communicate with our shareholders and this
year we have also produced this report as
an iPad app which you can download for
free from the AppStore.
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i
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 2011.
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.
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Tate & Lyle Annual Report 2011 121
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www.tateandlyle.com
Annual Report 2011
Focus, Fix, Grow.