Building
for growth
Annual Report 2013
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Overview
Financial Highlights
A year of further progress
Adjusted operating profit1
Adjusted diluted earnings
per share2
£m
321
348
358
pence
45.8
54.7
57.0
2011
2012
2013
2011
2012
2013
Dividend per share
pence
Net debt
£m
23.7
24.9
26.2 3
464
476
479
2011
2012
2013
2011
2012
2013
1 Continuing operations; before exceptional items and amortisation of intangible assets
acquired through business combinations.
2 Continuing operations; before exceptional items and amortisation of intangible assets
acquired through business combinations and post-retirement benefit interest.
3 This includes the proposed final dividend.
Statutory results
Operating profit
Profit before tax
Profit for the year (on total operations)
Diluted earnings per share (on total operations)
2013
£336m
£309m
£278m
58.5p
2012
£404m
£379m
£309m
64.3p
Contents
Directors’ Report
Overview*
IFC Financial Highlights
01 Introduction to the Business
02 Our Group at a Glance
04 Our Business Model
06 Our Strategy
08 Key Performance Indicators
10 Chairman’s Statement
Operational Review*
12 Chief Executive’s Review
15 Speciality Food Ingredients
18 Bulk Ingredients
20 Innovation and Commercial
Development
21 Group Financial Results
22 Additional Financial Information
26 Risks
29 Corporate Responsibility
Governance*
37 Statement from the Chairman
38 Board of Directors
40 Corporate Governance
50 Directors’ Remuneration Report
63 Other Statutory and Governance
Information
65 Directors’ Statement of Responsibilities
Financial Statements
and Shareholder Information
Financial Statements
66 Independent Auditors’ Report
to the Members of Tate & Lyle PLC
67 Consolidated Income Statement
68 Consolidated Statement
of Comprehensive Income
69 Consolidated Statement
of Financial Position
70 Consolidated Statement of Cash Flows
71 Consolidated Statement of Changes
in Shareholders’ Equity
72 Notes to the Consolidated Financial
Statements
119 Parent Company Financial Statements
Shareholder Information
126 Five-year Review Financial Years to
31 March
128 Information for Investors
* 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.
Details of the sections that form the Business Review
can be found on page 64.
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 exclude discontinued operations and are before
exceptional items and amortisation of intangible assets acquired through business combinations.
In addition, adjusted profit before tax and adjusted earnings per share exclude post-retirement
benefit interest.
Trademarks
SPLENDA® and the SPLENDA® logo are trademarks of McNeil Nutritionals, LLC.
Definitions/cautionary statement
Please read the statements on the inside back cover.
Tate & Lyle PLC Annual Report 2013
Overview
Introduction to the Business
A leading global provider
of ingredients and solutions
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About us: Tate & Lyle is a leading global provider of
ingredients and solutions to the food, beverage and other
industries. Through our production facilities across 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.
Building a platform for future growth: Our vision is
to become the leading global provider of speciality food
ingredients and solutions. Over the last three years we have
been taking a number of steps to realise this vision through
our business transformation programme.
The first part of the transformation, which is now complete,
was about realigning and focusing our resources on growing
our Speciality Food Ingredients business unit.
The second part is about getting the right enabling platform
in place. We have made good progress including the move
to a new operating model comprising two global business
units, implementing a global Shared Service Centre and the
initial roll-out of our global IS/IT system.
Attention is now turning towards growth and we have started
to see signs of this coming through, including a significant
increase in customer engagement following the opening of our
global Commercial and Food Innovation Centre, solid progress
in growing the innovation pipeline and launching new products
and, increasing our presence in emerging markets.
Our Strategy: pg 6
This Annual Report is available on our
Annual Report 2013 microsite,
www.tateandlyle.com/annualreport2013.
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Tate & Lyle PLC Annual Report 2013
01
Overview
Our Group at a Glance
A global business dedicated
to serving our customers from
over 30 locations worldwide
Sales
£3,256m
2012 – £3,088m
Adjusted profit before tax
£329m
2012 – £318m
Net debt
£479m
2012 – £476m
Employees worldwide
4,326
Tate & Lyle operates through two global business units:
Speciality Food Ingredients and Bulk Ingredients.
These two business units are supported by our Innovation
and Commercial Development group, our global Shared
Service Centre and our other global functions.
We have operations in over 30 countries, including our
manufacturing facilities, and our global network of satellite
applications laboratories allowing us to collaborate with
customers wherever they are located and to leverage our
new global innovation hub, the Commercial and Food
Innovation Centre in Chicago, USA.
Speciality Food Ingredients
USA
Chicago, Illinois
Houlton, Maine
Lafayette, Indiana
McIntosh, Alabama
Princeton, New Jersey
Sycamore, Illinois
Van Buren, Arkansas
Bulk Ingredients
USA
Dayton, Ohio
Decatur, Illinois
Duluth, Minnesota
Lafayette, Indiana
Loudon, Tennessee
Latin America
Buenos Aires, Argentina
Mexico City, Mexico
São Paulo, Brazil
Latin America
Guadalajara, Mexico1
Santa Rosa, Brazil
Europe
Bergamo, Italy
Kimstad, Sweden
Koog, Netherlands
Lille, France
Lübeck, Germany
Mold, UK
Noto, Italy
Ossona, Italy
Europe
Adana, Turkey1
Boleraz, Slovakia1
Razgrad, Bulgaria1
Szabadegyhaza, Hungary1
Middle East & Africa
Kya Sand, South Africa
Asia Pacific
Brisbane, Australia
Jurong Island, Singapore
Shanghai, China
Middle East & Africa
Casablanca, Morocco
Key Central/ICD Locations
Chicago, USA
Lille, France
Łód ´z, Poland
London, UK
02
Tate & Lyle PLC Annual Report 2013
Overview
Employees by geography
Adjusted operating profit1
4
1
3
2
1 47% North America
2 37% Europe, Middle
East & Africa
3 11% Latin America
4 5% Asia Pacific
1
1 54% Speciality Food
Ingredients
2 46% Bulk Ingredients
2
1 Adjusted operating profit
excluding central costs.
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Speciality Food Ingredients
USA
Chicago, Illinois
Houlton, Maine
Lafayette, Indiana
McIntosh, Alabama
Princeton, New Jersey
Sycamore, Illinois
Van Buren, Arkansas
Bulk Ingredients
USA
Dayton, Ohio
Decatur, Illinois
Duluth, Minnesota
Lafayette, Indiana
Loudon, Tennessee
Latin America
Buenos Aires, Argentina
Mexico City, Mexico
São Paulo, Brazil
Latin America
Guadalajara, Mexico1
Santa Rosa, Brazil
Europe
Bergamo, Italy
Kimstad, Sweden
Koog, Netherlands
Lille, France
Lübeck, Germany
Mold, UK
Noto, Italy
Ossona, Italy
Europe
Adana, Turkey1
Boleraz, Slovakia1
Razgrad, Bulgaria1
Szabadegyhaza, Hungary1
Key
Manufacturing Facilities
Applications/Technical
Services Facilities
Key Central/ICD Locations
Middle East & Africa
Kya Sand, South Africa
Asia Pacific
Brisbane, Australia
Jurong Island, Singapore
Shanghai, China
Middle East & Africa
Casablanca, Morocco
Key Central/ICD Locations
Chicago, USA
Lille, France
Łód ´z, Poland
London, UK
1 Joint venture.
Tate & Lyle PLC Annual Report 2013
03
Overview
Our Business Model
Turning raw
materials into
distinctive,
high-quality
ingredients and
solutions for
our customers
Through our facilities across the
world we:
• Use our innovation capabilities
to develop and enhance new
and existing products
• Leverage our technical and
applications expertise to provide
a full end-to-end service for
our customers
Sources
Most of 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 clear standards, both
operational and ethical, to our 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, quality and ethical
standards throughout the supply chain.
Developing sustainable products: pg 34
Raw materials
04
Tate & Lyle PLC Annual Report 2013
Speciality Food
Ingredients
Innovation and
Commercial
Development
Bulk
Ingredients
Customers
Customers
Overview
Operations
We operate through two global business units – Speciality
Food Ingredients and Bulk Ingredients. Each business
unit has its own manufacturing and commercial
operations to provide the necessary focus and expertise
for customers in their two respective end markets.
Speciality Food Ingredients (SFI)
SFI produces distinctive, high-value ingredients which are sold
in markets where customers look for technical and innovation
capability, insight and flexibility. 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.
Speciality Food Ingredients: pg 15
Customers
Food and beverage is our most significant market
comprising over 70% 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, we provide technical and
applications support. For smaller customers, we are
often their ‘outsourced’ R&D team.
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Speciality Food
Ingredients
Innovation and
Commercial
Development
Bulk
Ingredients
Innovation and Commercial Development
(ICD)
Both business units, but principally SFI, are
supported by the ICD group. ICD brings together
research and development, platform management,
global marketing and open innovation into one
global team, to provide an integrated approach
to developing and commercialising innovative new
products and technologies.
Innovation and Commercial Development: pg 20
Customers
Customers
Bulk Ingredients (BI)
BI produces ingredients which are relatively undifferentiated
and are sold in markets where customers principally look for
supplier reliability, quality and value.
Bulk Ingredients: pg 18
Tate & Lyle PLC Annual Report 2013
05
Raw materials
Overview
Our Strategy
How we are delivering
on our strategy
A strategy for long-term growth
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 unit through:
– deeper customer understanding
– continuous innovation
– stronger positions in high-growth markets
• Driving our Bulk Ingredients business unit for
sustained cash generation to fuel this growth
Deeper customer
engagement
We believe that getting closer to
our customers, developing a better
understanding of their needs and
changing the way we interact with them
is a key part of delivering sustainable
long-term growth.
Our new global Commercial and Food
Innovation Centre in Chicago, which we
opened to customers in June 2012, helps
us transform the way we work with our
customers. It has:
• Full sensory capabilities
• Full culinary capabilities
• High-tech food processing laboratories
• A pilot plant sample preparation area
• Global access, communications
and capabilities
• The ability to expand into new
applications
Speciality Food Ingredients: pg 15
Bulk Ingredients: pg 18
Innovation and Commercial Development: pg 20
06
Tate & Lyle PLC Annual Report 2013
Overview
Speciality Food Ingredients
Bulk Ingredients
Innovation
New markets and
customer channels
Sustained cash
generation
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Within Bulk Ingredients our strategy is
to provide stable, long-term cash flow
to help fund growth in Speciality Food
Ingredients. We aim to achieve this by:
• Reducing earnings volatility by
diversifying our income streams into
new areas
• Optimising margins by gradually
moving a proportion of the corn that
we grind away from markets that are in
long-term structural decline into higher
margin speciality food ingredients
• Ensuring the security of our raw
material supply
• Reducing costs and continuing to
improve operational efficiency
Our aim is to build our presence
significantly in emerging markets
and those parts of the speciality food
ingredients market where historically
we have been under-represented,
specifically in SMEs and private label.
Emerging markets
• Building dedicated go-to-market
teams in both Asia Pacific and
Latin America
• Strengthening our sales and technical
resources
• Investing in local infrastructure with the
opening of new satellite applications
and technical services facilities in
Mexico City, São Paulo and Shanghai
SMEs and private label
• Changing the way we access and
work with SME and private label
customers by developing more direct
relationships
Creating a world-class innovation
capability is a key part of our growth
strategy. The Innovation and Commercial
Development (ICD) group provides a fully
integrated approach to developing and
commercialising innovation to meet our
customers’ needs. Ideas within our
innovation pipeline are derived from
three sources:
In-house innovation (part of ICD)
• New products or technologies
generated by in-house scientists
Open innovation (part of ICD)
• Leverages our global network of
research institutions, start-ups and
universities
• Provides route-to-market for
technologies or products close
to commercial launch
Tate & Lyle ventures
• Leverages our global network of
research institutions, venture funds,
universities and entrepreneurs
• Invests in early-stage companies
and manages them to exit in three
to five years
Mexico City
Applications/Technical
Services Facilities
São Paulo
Applications/Technical
Services Facilities
Recent investments
in our innovation network.
Tate & Lyle PLC Annual Report 2013
07
Overview
Key Performance Indicators
Measuring our success
against our strategy
2013
2012
Change
(constant
currency)4
(constant
currency)4
the business unit which is the key area
of strategic focus for the business.
To track the underlying performance
of the business and to ensure sales
growth translates into increased profits.
a strong rate of return on the assets
that we employ and have a disciplined
approach to capital investment.
Performance
We focus on a number of financial performance
measures to ensure that our strategy successfully
delivers increased value for our shareholders.
Chief Executive’s Review: pg 12
What we measure
Why we measure it
How we performed
Comment
Sales of speciality food ingredients
To ensure we are successful in growing
£947m
£887m
+8%
Adjusted operating profit
£358m
£348m
+4%
Return on capital employed: adjusted profit before interest,
tax and exceptional items divided by adjusted average net
operating assets1 for continuing operations.
To ensure that we continue to generate
19.8%
21.6%
-180bps5
Growth in operating assets outstripped
Financial strength
We look at measures of financial strength to ensure that
we maintain the financial flexibility to grow the business
whilst maintaining investment-grade credit ratings.
Group Financial Results: pg 21
Corporate responsibility
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.
Corporate Responsibility: pg 29
Cash conversion cycle2: controllable working capital divided
by quarterly sales, multiplied by the number of days in the quarter.
To track how efficient we are in
turning increased sales into cash
and to ensure that working capital
is managed effectively.
42 days
36 days
Lengthened
by 6 days
What we measure
Why we measure it
How we performed
Comment
Net debt to EBITDA multiple3: 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 cover3: the number of times the profit of the Group
exceeds interest payments made to service its debt.
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.
2013
1.0x
2012
1.1x
11.1x
11.1x
What we measure
Why we measure it
How we performed7
Comment
Recordable incident rate: the number of injuries per 200,000
hours that require more than first aid, for employees and
contractors.
Lost-work case rate: the number of injuries that resulted in
lost-work days per 200,000 hours, for employees and contractors.
2012
2011
Change
The safety of our employees and
0.85
0.85
No change
contractors is of paramount importance.
Ensuring safe and healthy conditions
at all our locations is essential to our
operation as a successful business.
0.26
0.21
Three more
19 lost-work cases globally in 2012,
lost-work cases
compared to 16 in 2011.
1 Defined as shareholders’ equity excluding net debt, net tax assets/liabilities, net retirement benefit obligations and net operating assets of discontinued operations.
2 Defined as controllable working capital divided by quarterly sales, multiplied by number of days in quarter on a four-quarter rolling basis (a reduction in the number
of days represents an improvement).
3 Net debt, EBITDA, profit and interest are defined under the Group’s bank covenant conditions and are based on unrounded numbers. Net debt is calculated using
average rates of exchange.
4 Changes in constant currency are calculated by translating comparative period results at current period exchange rates.
5 Basis points (one hundred basis points equates to one percentage point).
6 A fungus impacting corn quality caused by prolonged hot and dry conditions.
7 Unlike our other KPIs, we report safety performance by calendar year because we are required to do so for other regulatory reporting purposes.
08
Tate & Lyle PLC Annual Report 2013
Delivered solid sales growth in SFI,
underpinned by 4% volume growth.
7% growth in Bulk Ingredients with
Speciality Food Ingredients flat as a
result of a step change in fixed costs
due to restart of the US Sucralose facility
and business transformation initiatives.
growth in adjusted operating profit
reflecting restart of the US Sucralose
facility, investment in business
transformation initiatives and higher
working capital.
Higher inventory levels in the US due
to higher corn prices, aflatoxin6 and
additional sucralose inventory following
the restart of the US sucralose facility.
Ratio remains well inside our internal
maximum limit of 2.0x. Improvement
reflects modest growth in EBITDA and
small reduction in net borrowings.
Ratio remains well above internal
minimum limit of 5.0x.
Overview
The Board has chosen a number of key performance indicators
to measure the Group’s progress. The table sets out these
indicators, explaining how they relate to our strategic priorities,
and how we performed against them this year.
Performance
We focus on a number of financial performance
measures to ensure that our strategy successfully
delivers increased value for our shareholders.
Chief Executive’s Review: pg 12
Sales of speciality food ingredients
Adjusted operating profit
What we measure
Why we measure it
How we performed
Comment
2013
2012
Change
To ensure we are successful in growing
the business unit which is the key area
of strategic focus for the business.
To track the underlying performance
of the business and to ensure sales
growth translates into increased profits.
£947m
£887m
£358m
£348m
+8%
(constant
currency)4
+4%
(constant
currency)4
Return on capital employed: adjusted profit before interest,
tax and exceptional items divided by adjusted average net
operating assets1 for continuing operations.
To ensure that we continue to generate
a strong rate of return on the assets
that we employ and have a disciplined
approach to capital investment.
19.8%
21.6%
-180bps5
Cash conversion cycle2: controllable working capital divided
by quarterly sales, multiplied by the number of days in the quarter.
To track how efficient we are in
turning increased sales into cash
and to ensure that working capital
is managed effectively.
42 days
36 days
Lengthened
by 6 days
Delivered solid sales growth in SFI,
underpinned by 4% volume growth.
7% growth in Bulk Ingredients with
Speciality Food Ingredients flat as a
result of a step change in fixed costs
due to restart of the US Sucralose facility
and business transformation initiatives.
Growth in operating assets outstripped
growth in adjusted operating profit
reflecting restart of the US Sucralose
facility, investment in business
transformation initiatives and higher
working capital.
Higher inventory levels in the US due
to higher corn prices, aflatoxin6 and
additional sucralose inventory following
the restart of the US sucralose facility.
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Financial strength
We look at measures of financial strength to ensure that
we maintain the financial flexibility to grow the business
whilst maintaining investment-grade credit ratings.
Group Financial Results: pg 21
Corporate responsibility
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.
Corporate Responsibility: pg 29
What we measure
Why we measure it
How we performed
Comment
Net debt to EBITDA multiple3: 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 cover3: the number of times the profit of the Group
exceeds interest payments made to service its debt.
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.
2013
1.0x
2012
1.1x
11.1x
11.1x
Ratio remains well inside our internal
maximum limit of 2.0x. Improvement
reflects modest growth in EBITDA and
small reduction in net borrowings.
Ratio remains well above internal
minimum limit of 5.0x.
What we measure
Why we measure it
How we performed7
Comment
Recordable incident rate: the number of injuries per 200,000
hours that require more than first aid, for employees and
contractors.
Lost-work case rate: the number of injuries that resulted in
lost-work days per 200,000 hours, for employees and contractors.
The safety of our employees and
contractors is of paramount importance.
Ensuring safe and healthy conditions
at all our locations is essential to our
operation as a successful business.
2012
2011
Change
0.85
0.85
No change
0.26
0.21
Three more
lost-work cases
19 lost-work cases globally in 2012,
compared to 16 in 2011.
1 Defined as shareholders’ equity excluding net debt, net tax assets/liabilities, net retirement benefit obligations and net operating assets of discontinued operations.
2 Defined as controllable working capital divided by quarterly sales, multiplied by number of days in quarter on a four-quarter rolling basis (a reduction in the number
3 Net debt, EBITDA, profit and interest are defined under the Group’s bank covenant conditions and are based on unrounded numbers. Net debt is calculated using
of days represents an improvement).
average rates of exchange.
4 Changes in constant currency are calculated by translating comparative period results at current period exchange rates.
5 Basis points (one hundred basis points equates to one percentage point).
6 A fungus impacting corn quality caused by prolonged hot and dry conditions.
7 Unlike our other KPIs, we report safety performance by calendar year because we are required to do so for other regulatory reporting purposes.
Tate & Lyle PLC Annual Report 2013
09
Overview
Chairman’s Statement
We remain on track with our
objective of delivering a platform
for sustainable long-term growth
A key strength of long-standing companies such as
Tate & Lyle is their ability to reinvent themselves. As one of
only two companies currently listed in the FTSE 100 index
that have also been members of the FT30 since its inception
in 1935, Tate & Lyle has successfully managed change
for nearly 100 years – including our current transformation
journey which began in 2010 – and this is one of the reasons
why we are still going strong today.
Introduction
As a company, Tate & Lyle has embraced
change and responded to it effectively over
many decades, but it is also important to
recognise those aspects of the business
that have remained constant and been
critical in ensuring our success throughout
our long history.
First, our core values of safety, respect and
integrity remain enshrined within the culture
of the business and guide how we operate
both internally and externally. Second is our
core competence of manufacturing and
delivering food ingredients and solutions to
our customers with the highest standards
of quality, traceability and reliability.
These attributes have helped us get to
where we are today and will remain at the
very core of the business in the future as
we build upon the work we have done over
the last three years.
Safety
We have no higher priority than safety
and are committed to providing safe and
healthy working conditions for all our
employees and contractors, and our safety
performance continues to compare well
with companies both within and outside
our industry.
While we delivered an improvement in our
contractor recordable incident rate during
calendar year 2012, there are still areas
where we can do better. The overall
recordable incident rate in 2012 was the
same as in 2011 and the number of
lost-work cases increased by three.
During the year, we undertook a wide
range of safety improvement projects and
we continue to work to assure the safety
of all those who work at our sites. Our
employees can be rightly proud that we
are a leader in safety performance in our
sector, but we are not complacent and
we continually strive for improvement.
Strategy
In May 2010, we announced a number of
important steps to help your Company build
a platform capable of delivering sustainable
long-term growth and to achieve our vision
of becoming the leading global provider of
speciality food ingredients and solutions
underpinned in part by the cash generated
10
Tate & Lyle PLC Annual Report 2013
Overview
“Our core values of
safety, respect and
integrity remain
enshrined within
the culture of the
business and guide
how we operate
both internally and
externally.”
by our Bulk Ingredients business unit.
Since then, significant progress has been
made under the leadership of Javed
Ahmed and his team and we have started
to see the initial signs of the investment we
have made coming through, but there is still
more work to do.
Central to our ability to deliver sustainable
growth is improving the way we innovate,
something that began with the creation
of the Innovation and Commercial
Development group (ICD) in June 2010.
Since its formation, ICD has made good
progress developing the innovation pipeline
and in partnership with the Speciality Food
Ingredients business unit has driven the
launch of new products during the year.
Recordable incident rate1
0.95
0.85
0.85
2010
2011
2012
Lost-work case rate1
0.47
0.26
0.21
2010
2011
2012
1 Unlike our other KPIs, we report
safety performance by calendar year.
Our new global Commercial and Food
Innovation Centre in Chicago, USA
which opened to customers in June 2012,
reinforces not only our commitment to
establish a world-class innovation
capability but also significantly improves
how we interact and collaborate with
customers. I am delighted to say that
since it opened we have seen a significant
increase in the level of activity and
interaction with customers and their
feedback has been extremely encouraging.
Board composition and diversity
On 1 December 2012, we welcomed
Virginia (Ginny) Kamsky and Anne Minto
to the Board as non-executive directors.
Ginny’s detailed knowledge and experience
of China and Anne’s broad corporate
experience will be of considerable benefit
to the Board. On behalf of the Board,
I would also like to thank Evert Henkes,
who retired from the Board after nine
years of highly-valued service.
We have taken advantage of the
opportunities provided by our new global
Shared Service Centre in Poland and the
global Commercial and Food Innovation
Centre in Chicago, USA to broaden the
make up of our employees in terms of
gender and ethnicity.
Corporate responsibility and
risk management
We continue to strengthen our internal
control arrangements and associated
reporting of environmental, social and
governance matters.
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Reflecting the importance the Board
places on ethical leadership we rolled out
our new Code of Ethics to replace our
Code of Business Conduct and reviewed
and updated our supply chain standards.
We built additional corporate responsibility
requirements into our standard purchase
contract terms and conditions and
implemented a new sustainability risk
assessment and evaluation tool for our
product development pipeline.
Financial performance
Entering the year, we faced a number
of headwinds, including the step change
in fixed costs associated with the restart
of production at our SPLENDA® Sucralose
facility in McIntosh, Alabama and our
business transformation initiatives. I am
therefore pleased to report that despite
these we have delivered growth in adjusted
profit before tax of 4% to £329 million
(2012 – £318 million) and adjusted diluted
earnings per share of 5% at constant
currency to 57.0p per share (2012 – 54.7p
per share).
Dividend
The Board recognises the importance of
the dividend to shareholders and follows a
progressive dividend policy with the aim of
growing the dividend over time taking into
account the long-term earnings prospects
of the business.
In line with our progressive dividend
policy, the Board is recommending a
5.6% increase in the final dividend to 18.8p
(2012 – 17.8p) making a full year dividend
of 26.2p (2012 – 24.9p) per share, up 5.2%
on the prior year. Subject to shareholder
approval, the proposed final dividend will
be due and payable on 2 August 2013
to all shareholders on the Register of
Members on 28 June 2013. In addition
to the cash dividend option, shareholders
will continue to be offered a Dividend
Reinvestment Plan (DRIP) alternative.
Finally, I would like to thank all our
employees who have again worked
immensely hard to deliver this year’s results
while continuing to make good progress in
transforming Tate & Lyle.
Sir Peter Gershon
Chairman
29 May 2013
Tate & Lyle PLC Annual Report 2013
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Operational Review
Chief Executive’s Review
The underlying business performed
well as we build on the foundations
we have put in place
Highlights
• Speciality Food Ingredients sales up 7% to £947 million (8% in constant
currency) with adjusted operating profit broadly in line (0% in constant
currency) with prior year at £213 million (2012 – £214 million)
• Bulk Ingredients adjusted operating profit up by 6% to £182 million (7% in
constant currency)
• Adjusted diluted earnings per share up 4% to 57.0p (5% in constant currency)
• 5.6% increase proposed for the final dividend to 18.8p, making a total
dividend increase of 5.2% to 26.2p
• Promising new product launches including our stevia-based, natural, no-
calorie sweetener, TASTEVA® Stevia Sweetener and salt reduction product,
SODA-LO® Salt Microspheres
12
Tate & Lyle PLC Annual Report 2013
Overview of Group’s financial
performance
I am pleased to report that the underlying
business continues to perform well and
that, despite having entered the year facing
a number of headwinds, including the step
change in fixed costs associated with
the restart of our SPLENDA® Sucralose
facility in McIntosh, Alabama and our
business transformation initiatives, we
have made progress.
Sales for the year were £3,256 million
(2012 – £3,088 million), an increase of
5% (6% in constant currency) on the prior
year with sales in our Speciality Food
Ingredients business unit growing by 7%
(8% in constant currency) to £947 million
(2012 – £887 million). Adjusted operating
profit increased by 3% (4% in constant
currency) to £358 million (2012 – £348
million) with adjusted operating profit in
Speciality Food Ingredients broadly in line
with the prior year at £213 million and up
6% (7% in constant currency) in Bulk
Ingredients at £182 million (2012 – £172
million). Adjusted profit before tax increased
by 4% (4% in constant currency) to £329
million (2012 – £318 million) with adjusted
diluted earnings per share also up 4% (5%
in constant currency) to 57.0p (2012 – 54.7p).
Financial management and
balance sheet
Our average quarterly cash conversion
cycle increased from 36 days to 42 days.
This was driven by an increase in working
capital including higher inventory levels
in the US due to higher corn prices and
aflatoxin, and the requirement for
additional sucralose inventory following
the restart of production at our McIntosh,
Alabama facility.
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 2013, the
net debt to EBITDA ratio was 1.0 times
(2012 – 1.1 times), against our upper limit
of 2.0 times. Interest cover on total
operations at 31 March 2013 was 11.1
times (2012 – 11.1 times), again comfortably
ahead of our minimum limit of 5.0 times.
Operational Review
Adjusted operating profit1
£m
321
348
358
2011
2012
2013
Adjusted diluted earnings
per share2
pence
45.8
54.7
57.0
2011
2012
2013
1 Continuing operations: before
exceptional items and amortisation
of intangible assets acquired
through business combinations.
2 Continuing operations; before
exceptional items, amortisation
of intangible assets acquired
through business combinations
and post-retirement benefit interest.
Net debt of £479 million at 31 March 2013
was slightly higher than at the end of last
year (2012 – £476 million), reflecting an
increase in working capital, capital
expenditure payments including our
business transformation projects and an
increase in the value of dollar denominated
debt as a result of the strengthening of the
US dollar against sterling.
Return on capital employed at 19.8%
(2012 – 21.6%) was lower than the prior
year driven by an increase in operating
assets reflecting the restart of our
SPLENDA® Sucralose facility in McIntosh,
Alabama, investment in our business
transformation initiatives and higher levels
of working capital within the business.
Key Performance Indicators: pg 8
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Building a platform for
long-term growth
During the year, we reached a number
of important milestones in our business
transformation programme.
In June 2012, we formally opened our global
Commercial and Food Innovation Centre
in Chicago, USA to customers, featuring
state-of-the-art laboratories, a
demonstration kitchen, sensory testing,
analytical facilities and a pilot plant. Since
then we have seen a step change in the
level of customer engagement with a
significant increase in the number of visits
to the new facility as well as an improvement
in the quality of customer interaction.
In April 2013, the global Commercial and
Food Innovation Centre was awarded
the prestigious Gold certification by LEED1
(Leadership in Energy and Environmental
Design). The total investment made to
develop the new Centre was £33 million,
including £7 million of costs incurred
during the year.
Our Innovation and Commercial
Development group (ICD), continues to
develop the new product development
pipeline across our core platforms of
Sweeteners, Texturants and Health &
Wellness. During the year, ICD supported
the launch of six new products including
our stevia-based, natural, no-calorie
sweetener TASTEVA® Stevia Sweetener,
and our salt reduction product, SODA-LO®
Salt Microspheres for which the formal
grant of the US patent was confirmed in
March 2013. To drive the successful
commercialisation of our new products,
we have reorganised and strengthened
our marketing organisation including the
recruitment of a new Senior Vice President,
Global Marketing.
Our Open Innovation team continues to
search for opportunities globally to form
partnerships with universities, research
institutes and start-ups specialising in food
science. In December 2012, we signed
an agreement with Nandi Proteins Limited,
a spin-out from Heriot-Watt University
in Edinburgh, to continue developing an
early-stage protein ingredient technology
for use in the food texturants space.
In January 2013, we launched a new,
dedicated open innovation web portal
(www.tateandlyleopeninnovation.com)
to encourage potential partners to submit
proposals aligned with our innovation
priorities. In May 2013, following our
earlier agreement on SODA-LO® Salt
Microspheres, we broadened our
relationship with Eminate, a subsidiary of
Nottingham University, with an agreement
to develop its hollow microsphere
technology to reduce sodium bicarbonate
in baked goods.
We launched a new £30 million eight-year
venture capital fund on 1 January 2013,
building on our existing venture fund
activities. The new fund will invest in
start-ups and expansion-stage companies
in both developed and emerging markets
in food sciences and enabling technologies.
The combination of the new fund and our
internal Open Innovation team will give us
access to the full spectrum of new ideas,
technologies and opportunities in the global
food science sector enabling us to deliver
more innovative solutions to our customers.
On 17 May 2013, we acquired Biovelop,
an early-stage manufacturer of oat beta
glucan. The acquisition broadens our
health and wellness offering and adds
a clean-label, speciality fibre with strong
health claims to our existing corn-based
fibre portfolio.
We continued to grow our presence in
emerging markets. In December 2012,
we opened our newly upgraded offices
and applications centre in Shanghai, which,
together with the opening of applications
and technical services facilities in Mexico
City and São Paulo last year, has
strengthened our ability to service
customers in these regions and expanded
our global innovation network. These new
facilities include pilot plant equipment for
the production of food and beverage
prototypes which are helping us leverage
our applications know-how and technical
expertise to help meet local taste
preferences and respond rapidly to our
customers. We have also continued to
1 LEED certification is official recognition that the
design, fit-out and operation of a building complies
with the requirements prescribed within the LEED
rating systems of the US Green Building Council®.
Tate & Lyle PLC Annual Report 2013
13
Operational Review
Chief Executive’s Review continued
expand our go-to-market and technical
teams in both Asia and Latin America
allowing us to broaden our coverage in
these regions in terms of both product
categories and geography.
Global Shared Service Centre and
IS/IT system
Our global Shared Service Centre in Łód ´z,
Poland is operating well having successfully
completed its first full year of operations
processing financial transactions for our
European and US businesses.
In July 2012, we deployed our new global
IS/IT system across the majority of our
European operations alongside a new set
of business processes. Since then, we
have gained invaluable practical experience
operating the new system and processes
in a live environment. This has shown us
that while the new system meets the
day-to-day needs of the business, we need
to adapt the design to meet the high-quality
operational capabilities we require, and to
realise further benefits, some of which have
been identified as a result of operating the
new system. Accordingly, to allow time to
develop, build and test the design changes,
we have decided to extend the next phase
of the system’s deployment into the first
half of calendar year 2014.
Given that the new system is a key enabler
of our global operating model, it warrants
taking the additional time. As a result,
the total investment in the global Shared
Service Centre and IS/IT system is
expected to increase by £45–60 million,
dependent on the final date of
implementation, bringing the total expected
investment in these projects to around
£120–135 million. Based on our current
estimates, including the benefits that have
already been delivered from these projects,
we continue to target a three-year cash
payback on the total investment following
implementation of the IS/IT system across
the business.
Our global Commercial and Food
Innovation Centre is driving
customer engagement and new
product development
The opening of our new state-of-the-art
global Commercial and Food Innovation
Centre is helping us step up the level of
customer interaction and get new
products to market faster. During the
year, we made solid progress increasing
the number of projects in the new
product development pipeline and
launching new products including our
stevia-based natural, no-calorie
sweetener, TASTEVA® Stevia Sweetener
and our salt reduction product
SODA-LO® Salt Microspheres.
During the year, we incurred £43 million
of costs on the roll-out of the global Shared
Service Centre and the common IS/IT
platform, taking the total costs to date
on these projects to £78 million.
Conclusion
Three years ago we set out to build a
high-quality business, one capable of
generating sustained growth over the long
term. We are on track to deliver this but
we are not there yet. While we have more
work to do, I believe we now have a solid
foundation from which we can build.
Our new Innovation Centre in Chicago, USA
and global network of satellite laboratories
are working well, providing the ideal
environment for us to get closer to our
customers. We have started to get new
products into the market and expanded
our health and wellness offering through
the acquisition of new technologies. Our
emerging markets presence and business
continues to grow as we leverage the
investment we have made in both people
and infrastructure.
A key competitive advantage for any
company is its people and its culture. We
have very talented and dedicated people
at Tate & Lyle working hard to create a
real entrepreneurial and high performance
culture and without them none of what we
have achieved during the year would have
been possible. I am very grateful for their
support and commitment.
Key performance indicators (KPIs)
Our KPIs for the year ended 31 March 2013
are detailed on pages 8 and 9.
Group outlook for the year ending
31 March 2014
In Speciality Food Ingredients, we expect
to deliver good sales and profit growth with
volume growth across all major product
categories.
In Bulk Ingredients, against a backdrop
of continued corn price volatility, improved
bulk sweetener unit margins in the US are
expected to offset a softer start in US bulk
sweetener volumes and lower isoglucose
margins in Europe. Profits within Bulk
Ingredients are expected to be more evenly
distributed between the first and second
half than in the prior year.
Overall, we expect to deliver another year
of profitable growth.
Javed Ahmed
Chief Executive
29 May 2013
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Tate & Lyle PLC Annual Report 2013
Operational Review
Speciality Food Ingredients
Growth in Speciality Food
Ingredients through focus
and depth
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 to
develop a pipeline of
new products.
Market conditions and trends
While the food and beverage industry
remains relatively resilient, it is not
immune to fluctuations in the wider
economy. Nonetheless, the global
market for speciality food ingredients
continued to benefit from a number
of underlying global consumer trends.
Customers
• Large, multi-national food and
beverage manufacturers
• Small- and medium-sized food
and beverage manufacturers
• Private label food and beverage
manufacturers
Products
• Sweeteners:
– Speciality corn-based sweeteners
including crystalline fructose
– High intensity sweeteners including
SPLENDA® Sucralose,
PUREFRUIT™ Monk Fruit Extract
and TASTEVA® Stevia Sweetener
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The rising incidence of diabetes and
obesity in both developed and developing
countries is driving consumers and
governments to focus more on healthier
lifestyles and in turn, increasing demand
for ingredients from food and beverage
manufacturers in the health and wellness
space. Consumer demand for more
natural, ‘cleaner label’ products is
increasing with close to a third of all
product launches in 2012 in Western
Europe1 making some form of natural claim.
Rapid urbanisation in emerging markets and
rising levels of disposable income continue
to increase the penetration of packaged
and convenience foods which in turn is
supporting demand for speciality ingredients
that provide added functionality such as
extending shelf-life, stability and texture.
Against the backdrop of continuing tough
macroeconomic conditions and a weaker
consumer environment, particularly in
Europe, coupled with high and volatile prices
for certain raw materials, cost optimisation
continues to be an important driver for food
and beverage customers, looking at ways
to reduce costs and provide more value-
based alternatives for consumers.
We believe that the combination of our
leading market positions, strong product
portfolio and technical and applications
expertise along with the investments we
have made to build a platform capable of
delivering long-term sustainable growth,
makes us well placed to benefit from these
global trends in the future.
• Texturants:
– Speciality starches
– Locust bean gum
• Health & Wellness:
– PROMITOR® Soluble Corn Fiber
– STA-LITE® Polydextrose
– SODA-LO® Salt Microspheres
– Oat beta glucan
• Food systems:
– Food stabiliser systems
– Functional ingredient blends
1 GNPD Mintel; Food and drink products claiming to be ‘natural’ or ‘all natural’ as a proportion of all food
and drink product launches.
Tate & Lyle PLC Annual Report 2013
15
Olivier Rigaud President
“ The market for speciality
food ingredients is
supported by three
strong consumer trends:
convenience, health and
wellness and ‘natural’.
Our strong product
portfolio, technical and
applications expertise
and the investment we
have made over the last
three years makes us
well placed to benefit
from these trends
longer term.”
Sales
£947m
2012 – £887m
Adjusted operating profit
£213m
2012 – £214m
Operational Review
Speciality Food Ingredients continued
The global speciality food ingredients market is large and growing…
Our approach to delivering
a winning strategy in this
market is to focus on three
core platforms: Texturants,
Sweeteners and Health &
Wellness, and to have deep
expertise within each one.
Global speciality food
ingredients market
approximately US$35 billion*
Where Tate & Lyle plays
6
5
1
4
2
3
1 14% Sweeteners
2 20% Texturants
3 14% Functional food ingredients
4 8% Colours and preservatives
5 33% Flavour
6 11% Other
Sweeteners
• SPLENDA® Sucralose
• Speciality corn-based sweeteners
• PUREFRUITTM Monk Fruit Extract
• TASTEVA® Stevia Sweetener
Texturants
• Speciality food starches
• Dairy stabilisers
Health & Wellness
• PROMITOR® Soluble corn fibre
• STA-LITE® Polydextrose
• SODA-LO® Salt Microspheres
• Oat beta glucan
… with growth underpinned by three strong consumer trends:
*Source: Leatherhead; SRI; LMC International; Company analysis; Data as at 2010.
Convenience
24/7 lifestyles increasing
the demand for processed
foods
Health and wellness
Greater understanding
of the link between diet
and health
Natural
Trend towards natural,
‘cleaner label’ foods
Convenience product
launches1
In North America per year
2,970
Global population who are obese2
Product launches
labelled as ‘natural’3
%
Men
Women
In Western Europe 4 %
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28
902
10
8
5
13
14
2002
2012
1980
2008
1980
2008
2002
2006
2012
Sources: World Health Organisation, Tate & Lyle analysis of Mintel GNPD data
1 Includes microwaveable, on-the-go and time-saving/speedy products.
2 Obesity measured as BMI > 30.
3 Food and drink products claiming to be ‘natural’ or ‘all natural’ as a proportion
of all food and drink product launches.
4 ‘Western Europe’ includes Austria, Belgium, Denmark, Finland, France, Germany, Ireland, Italy, the
Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the UK.
16
Tate & Lyle PLC Annual Report 2013
Operational Review
Sales
Adjusted operating profit
Margin
Year to 31 March
2012
£m
887
214
24.1%
2013
£m
947
213
22.5%
Change
Reported
+7%
0%
-160 bps
Constant
currency
+ 8%
0%
-170 bps
Financial performance
Within Speciality Food Ingredients, volumes
grew by 4% and sales increased by 7%
(8% in constant currency) to £947 million
(2012 – £887 million). Adjusted operating
profit was broadly in line with the prior year
at £213 million (2012 – £214 million) with
operating margins down 1.6 percentage
points at 22.5% (2012 – 24.1%). The
reduction in margin reflects the step
change in fixed costs associated with the
restart of our SPLENDA® Sucralose facility
in McIntosh, Alabama, our business
transformation initiatives, lower sucralose
volumes and higher corn input costs.
The effect of exchange translation was
to decrease adjusted operating profit
by £1 million.
This segment comprises three broad
product categories namely: starch-based
speciality ingredients, high-intensity
sweeteners and food systems.
Starch-based speciality ingredients
In starch-based speciality ingredients,
sales increased by 13% (14% in constant
currency) to £559 million (2012 – £494
million) with volume growth of 5%. While
we increased unit margins, percentage
operating margins were lower due to the
increase in fixed costs and higher corn
prices. While we expect to deliver an
increase in unit margins within this category
for the 2014 financial year, the impact of
passing through a further increase in corn
prices during the 2013 calendar year
contracting round is expected to result in
a slight reduction in percentage operating
margins in this category.
In food starches, volumes grew across
all regions, with particularly strong growth
in Asia driven by rising demand for
convenience foods where our value-added
starches are used to add functionality such
as mouth-feel and extending shelf life.
We have also seen good demand for our
speciality starches in Europe and the US,
particularly within the snacks sector.
We saw strong volume growth in our
speciality corn sweeteners in emerging
markets where demand is driven not only
by the functional benefits they provide,
including the delivery of a consistent texture
and sweetness profile, but also the role
that they play as a substitute for sugar in
cost-optimisation projects. The strike at
our plant in Turkey during the first quarter
resulted in volumes in Europe being lower
than the comparative period.
Our fibres range continues to benefit from
consumers’ increased focus on health
and wellness, and we saw strong volume
growth in Europe and Asia during the
period. The acquisition in May 2013 of
Biovelop, an early-stage manufacturer
of oat beta glucan, adds a clean-label
speciality fibre with strong health claims
to our existing corn-based fibres portfolio.
High-intensity sweeteners
Within high-intensity sweeteners, which
comprises SPLENDA® Sucralose and
our no-calorie, natural sweeteners
PUREFRUITTM Monk Fruit Extract and
TASTEVA® Stevia Sweetener, sales were
in line with the comparative period at
£198 million (2012 – £197 million) with
volumes 1% lower.
After a very strong prior year, where
volumes grew by 12%, SPLENDA®
Sucralose volumes were 1% lower than
the prior year as a result of two main
factors. First, we had a slow start to the
year with a soft first quarter driven by
weakness in Europe. Second, we
experienced lower volumes within the
table top segment where competition
from natural alternatives has increased.
While we saw a return towards more
normal growth patterns overall in the
second quarter and throughout the
remainder of the year, supported by the
delivery of a number of growth initiatives,
this was not sufficient to match the strong
prior year result.
We expect long-term demand for
SPLENDA® Sucralose to continue to be
underpinned by the health and wellness
trend as well as its superior taste profile
and heat stability. With our two unique
large-scale continuous production facilities
now operational following the restart of our
facility in McIntosh, Alabama we continue
to provide our customers with the highest
quality, fully traceable sucralose, produced
according to the highest standards of
sustainability and reliability in the industry.
The launch of products by our customers
within the table top segment incorporating
our no-calorie, fruit-based sweetener,
PUREFRUITTM Monk Fruit Extract has
stimulated a number of other customer
product launches and driven incremental
sales within the high-intensity sweetener
category. We have also been encouraged
by the initial customer response to our
stevia-based, natural, no-calorie sweetener,
TASTEVA® Stevia Sweetener which
launched in September 2012.
Food systems
In Food Systems, our blending business,
sales were 3% lower (flat in constant
currency) at £190 million (2012 – £197
million) with volumes also down 3% on the
prior year. Despite the price of certain raw
materials remaining high during the period,
the performance of this product category
was ahead of the prior year reflecting the
improvements we have made in managing
these higher input costs and our decision
to focus on higher margin blends.
Our new technical and commercial facility
in Lübeck, Germany which opened in June
2012, has helped us to increase the level of
customer interaction and has provided a
focal point for the creation and sharing of
new ideas between our food systems
facilities around the world.
Group outlook for the year ending
31 March 2014: pg 14
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Tate & Lyle PLC Annual Report 2013
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Operational Review
Bulk Ingredients
Stable long-term cash
flows to fuel our growth
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.
Market conditions
In the US, the worst drought in the
mid-west for 56 years affected both the
size and quality of the 2012/13 harvest
with supply falling from the original US
Department of Agriculture’s (USDA)
projections of 15.6 million1 to 11.9 million2
bushels (-24%), resulting in a sharp rise
in corn prices during the summer. While
corn prices remained high and volatile
throughout the remainder of the financial
year, they eased slightly during the second
half based on higher projections for ending
stocks and on the latest planting intentions
for the new harvest which if realised, would
represent the highest acreage since 1936.
Corn prices in Europe, where the harvest
was also affected by a hot and dry summer,
followed a similar pattern to the US.
The extremely dry and hot conditions in the
US also affected corn quality with aflatoxin,
a by-product of a grain fungus which tends
to concentrate in certain co-products,
present in the harvest particularly in those
areas hardest hit by the drought.
Sugar is the key competitor of many of
our corn bulk sweeteners. World sugar
prices fell during the year reflecting better
supplies, underpinned by a better harvest
in Brazil, which helped stock levels to
recover and created a global surplus. In the
US, prices also fell as a result of a record
beet harvest, a large crop in Mexico (where
sugar prices also fell) and the USDA’s
decision to allow additional imports before
the size of the domestic crop was known.
Conversely, EU prices remained high and
increased slightly during the year reflecting
Customers
• Large, multi-national food and
beverage manufacturers
• Paper and board producers
• Fuel and gasoline suppliers
• Textile manufacturers
• Animal feed compounders
Products
• Liquid sweeteners including corn
syrup, dextrose and glucose
• Industrial starches
• Citric acid
• Bio-fuels
• Animal feed including corn gluten feed
and corn gluten meal
1 10 May 2012.
2 10 August 2012.
Matt Wineinger President
“ Our aim is to provide
a sustainable source
of cash to drive growth
in Speciality Food
Ingredients. Over the
last three years, we
have taken a number
of steps to diversify
our income streams
into new areas and
to reduce volatility
and costs.”
Sales
£2,309m
2012 – £2,201m
Adjusted operating profit
£182m
2012 – £172m
18
Tate & Lyle PLC Annual Report 2013
Operational Review
Sales
Adjusted operating profit
Margin
Year to 31 March
2012
£m
2 201
172
7.8%
2013
£m
2 309
182
7.9%
Change
Reported
+5%
+6%
+10 bps
Constant
currency
+6%
+7%
+10 bps
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the undersupply of imports from preferential
cane sugar suppliers over the last few
years, something that has led the EU
Commission to intervene to boost supply.
While US domestic demand for nutritive
sweeteners continued its long-term
downward trend, once again strong
seasonal demand and an increase in
exports helped offset this decline with
Mexico continuing to represent the major
export destination. In Europe, higher corn
prices during the second half reduced
isoglucose (HFCS) margins.
In the US and Europe, overall consumption
of paper and board, the main sources of
demand for our industrial starches, was
slightly lower than the prior year.
The market for US ethanol continued to be
challenging with negative industry margins
and inventory overhang for much of the
period as a result of oversupply, following
the removal of the blender’s tax credit in
December 2011, and high corn prices.
In response, some industry capacity has
come off-line in order to get a better
balance between supply and demand,
leading to lower levels of industry utilisation
and inventory.
Against a backdrop of high corn prices
and the severe drought in the US, prices
for animal feed increased in the summer
peaking in September and remaining high
for the remainder of the financial year.
However, as anticipated, the increased
concentration of aflatoxin above certain
thresholds, particularly in corn gluten meal,
restricted the end markets into which these
co-products could be sold, reducing
average prices in the second half.
conditions in US ethanol and a £8 million
adverse impact from aflatoxin. The full
year result includes the release of accrued
royalties and other expenses totalling
£4.5 million following the settlement of
the commercial dispute with Whitefox
after the year end. The effect of exchange
translation was to decrease operating
profit by £2 million.
This business unit comprises three broad
product categories namely: sweeteners;
industrial starches, acidulants and ethanol;
and co-products.
Sweeteners
In the Americas, bulk corn sweeteners
volumes decreased by 1% and sales
increased by 8% (7% in constant currency)
to £942 million (2012 – £876 million) due
to higher corn prices. Having achieved
a modest increase in HFCS unit margins
in the 2012 contracting round, profits
were higher within this segment than
the comparative period despite the
lower volumes.
In Europe, sales of bulk corn sweeteners
increased by 4% (10% in constant
currency) to £146 million (2012 – £141
million) with volumes in line with the prior
year. While unit margins during the first
half were higher as a result of higher sugar
prices (which provide the reference price
for isoglucose (HFCS) in the EU), they were
squeezed during the second half on the
back of higher corn prices, with the overall
performance for the full year ahead of the
comparative period.
Operating profits from Almex, our
Mexican joint venture, were up on the
comparative period.
Financial performance
Bulk Ingredients volumes decreased by
2% as we continued our strategy of
diverting grind to produce speciality food
ingredients, with sales up 5% (6% in
constant currency) to £2,309 million
(2012 – £2,201 million) as a result of higher
corn prices. Adjusted operating profit
increased by 6% (7% in constant currency)
to £182 million (2012 – £172 million) driven
by a strong performance from bulk
sweeteners in both the US and Europe,
partially offset by challenging market
Industrial starches, acidulants and
ethanol
Sales of industrial starches, acidulants and
ethanol decreased by 2% (flat at constant
currency) to £667 million (2012 – £677
million) with volumes down by 5%.
In industrial starches, volumes were 5%
lower as we continued to switch a
proportion of corn grind to speciality food
ingredients. In the US where we are able to
contract for longer periods than in Europe,
while volumes were lower than the
comparative period, we delivered a better
performance for the year overall driven
by firmer pricing. In Europe, while volumes
were broadly in line with the prior year, unit
margins were somewhat lower reflecting
higher corn costs. This part of the business
remains particularly sensitive to changes
in the macro-economic environment.
In US ethanol, which represents a small
part of our business, the challenging
market conditions resulted in negative
margins for much of the period and an
increase in operating losses for the full
year compared to the prior year.
The performance of our citric acid business
was slightly better than the prior year with
higher volumes more than offsetting the
impact of higher raw material costs. Having
made a loss last year, our Bio-PDO® joint
venture delivered a better performance
generating a small operating profit during
the period.
As part of our strategy to diversify and
reduce volatility within our Bulk Ingredients
business unit, our Bio-Ventures team
continued to work on a number of projects
to leverage our fermentation facilities with
our green-chemistry partners. In December
2012, we completed the first successful
commercial scale production of
1,4-Butanediol (Bio-BDO) with our partner
Genomatica using a bio-based
manufacturing process at our joint-venture
facility in Loudon, Tennessee.
Co-products
Sales of co-products increased by 9%
(9% in constant currency) to £554 million
(2012 – £507 million). For the full year,
overall we generated a small amount of net
additional income from co-products with
gains made in corn gluten feed partially
offset by lower returns on corn gluten
meal where quality and prices have been
affected by aflatoxin. We will continue
to manage the risk posed by aflatoxin
throughout the current crop until the new
harvest in the autumn of 2013.
Since over 80% of our US corn grind is
utilised to produce bulk ingredients, the
majority of the impact from co-products
is recorded within this segment.
Group outlook for the year ending
31 March 2014: pg 14
Tate & Lyle PLC Annual Report 2013
19
Operational Review
Innovation and Commercial Development
Sustainable long-term
growth through successfully
commercialising innovation
ICD brings together R&D and the commercial functions
into one team to drive innovation and bring new products
to market
Innovation and
Commercial Development
Research &
Development
Platform
Management
Global Marketing
Open Innovation
Karl Kramer President
“ We have made good
progress developing
the innovation pipeline.”
A clear focus on three SFI platforms
Sweeteners
Texturants
Health & Wellness
Remit
The Innovation and Commercial
Development (ICD) group was established
on 1 June 2010 as a key enabler of
Tate & Lyle’s growth strategy. ICD brings
together the following: R&D, platform
management, global marketing, and open
innovation – into one global team, to
provide an integrated approach towards
developing and commercialising innovative
new products and technologies.
While ICD supports both of Tate & Lyle’s
global business units, it concentrates
particularly on growing the Speciality
Food Ingredients business unit. As a
result, ICD’s resources are predominantly
focused on three broad platforms within
the global speciality food ingredients
market – Sweeteners, Texturants, and
Health & Wellness.
We generate ideas across our three
product platforms from both internal and
external sources. Internally, we generate
ideas based on the work done by our own
scientists leveraging our deep platform
expertise and the investment we have
made in innovation and technical services
facilities across the world. Externally, we
generate ideas from engagement with our
customers and also from dedicated Open
Innovation team – which seeks to develop
partnerships with universities, research
institutions and start-ups specialising in
food science and novel ingredients, in
addition to our ventures fund. All of our
ideas and innovations are commercialised
via our stage-gate process.
provide an important link between our
R&D scientists, platform managers and
customers and also to drive the successful
commercialisation of new product launches.
Our achievements during the year
Our first priority, following the transfer of
our ICD operations into our new global
Commercial and Food Innovation Centre in
Chicago, USA at the end of the last financial
year, was to integrate our people, including
those who were new to Tate & Lyle, fully
into the facility and to embed the Centre
into day-to-day operations.
In June 2012, we opened the new Centre
to customers and since then we have seen
a step change in the number of customer
visits, including customers based outside
the US.
In addition, the new facility is helping us
to collaborate with customers on new
projects at an earlier stage and has
increased the depth and overall quality
of customer engagement with the
involvement of representatives on both
sides from a broader range of areas
including R&D, applications and marketing.
During the year, we realigned and refreshed
our global marketing capabilities, including
the recruitment of a new Senior Vice
President, Global Marketing. The integration
of global marketing within ICD is helping to
Working alongside the Speciality Food
Ingredients business unit, ICD has
supported the launch of a number of new
products. In September 2012, we launched
our second natural, no-calorie sweetener,
TASTEVA® Stevia Sweetener, which further
enhances our sweeteners offering alongside
PUREFRUIT™ Monk Fruit Extract and
SPLENDA® Sucralose. In November 2012,
we announced the global launch of our new
salt-reduction technology, SODA-LO® Salt
Microspheres, helping to expand our offering
within our Health & Wellness platform.
The ICD group has continued to lay the
foundations for future growth through
the expansion and development of the
innovation pipeline. During the year, we
have made good progress developing
ideas and moving projects through the
pipeline including preparing the ground
for the launch of new products in the final
stages of development.
Looking ahead, we will remain focused
on building the innovation pipeline, opening
up new projects with customers and
supporting the launch of new products,
a number of which we aim to roll out in
the coming financial year.
20
Tate & Lyle PLC Annual Report 2013
Operational Review
Group Financial Results
A strong balance sheet providing
a robust financial platform
Sales from continuing operations of £3,256
million (2012 – £3,088 million) were 5%
higher than the prior year (6% in constant
currency). Sales in Speciality Food
Ingredients increased by 7% (8% in
constant currency) to £947 million (2012
– £887 million), with sales volumes
increasing by 4%. Sales in Bulk Ingredients
grew by 5% (6% in constant currency) to
£2,309 million (2012 – £2,201 million) with
volumes 2% lower.
Adjusted operating profit increased by 3%
(4% in constant currency) to £358 million
(2012 – £348 million). In Speciality Food
Ingredients, adjusted operating profit was
broadly in line with the prior year at £213
million (2012 – £214 million) and in Bulk
Ingredients adjusted operating profit
increased by 6% (7% in constant currency)
to £182 million (2012 – £172 million).
Adjusted net finance expense (excluding
post-retirement benefit interest) decreased
from £30 million to £29 million largely driven
by the repayment of our £100 million bond
at its maturity in June 2012 which was
funded from cash reserves.
Adjusted profit before tax increased by 4%
(4% in constant currency) to £329 million
(2012 – £318 million) with adjusted diluted
earnings per share increasing by 4% (5% in
constant currency) to 57.0p (2012 – 54.7p).
On a statutory basis, profit before tax from
continuing operations decreased by 18% to
£309 million (2012 – £379 million) and profit
for the year from total operations was down
10% at £278 million (2012 – £309 million)
with the comparative period benefiting
from a net exceptional credit of £68 million
largely related to our decision to restart
production at our SPLENDA® Sucralose
facility in McIntosh, Alabama.
O
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Summary of financial results
Year to 31 March
Continuing operations
Sales
Adjusted operating profit
Adjusted net finance expense
Adjusted profit before tax
Exceptional items
Amortisation of intangible assets acquired
through business combinations
Post-retirement benefit interest
Profit before tax
Income tax expense
Profit for the year from continuing operations
Profit for the year from discontinued
operations
Profit for the year
Earnings per share – continuing
operations
Basic
Diluted
Adjusted earnings per share –
continuing operations
Basic
Diluted
Dividends per share
Interim paid
Final proposed
2013
£m
3 256
358
(29)
329
(12)
(10)
2
309
(49)
260
18
278
56.0p
54.9p
58.2p
57.0p
7.4p
18.8p
26.2p
2012
£m
3 088
348
(30)
318
68
(12)
5
379
(72)
307
2
309
65.9p
64.6p
55.8p
54.7p
7.1p
17.8p
24.9p
Change
(reported)
%
Change
(constant
currency)
%
+5%
+3%
+4%
+6%
+4%
+4%
+4%
+5%
+4.2%
+5.6%
+5.2%
Net debt
At 31 March
479
476
Tate & Lyle PLC Annual Report 2013
21
Tim Lodge Chief Financial Officer
“ Our balance sheet
remains strong with
both net debt to
EBITDA and interest
cover ratios well
within our internal
limits, providing us
with the flexibility to
invest for growth.”
Sales
£3,256m
2012 – £3,088m
Adjusted profit before tax
£329m
2012 – £318m
Adjusted diluted earnings per share
57.0p
2012 – 54.7p
Operational Review
Additional Financial Information
As announced in May 2012 we now
exclude post-retirement benefit interest
from the presentation of our adjusted
earnings. All comparatives have been
restated accordingly.
Basis of preparation
Adjusted performance
We report adjusted profit because 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
(Notes 12 and 37)
• exceptional items from continuing
operations (Note 7)
• amortisation of intangible assets
acquired through business combinations
(Note 15)
• post-retirement benefit interest (as
announced in May 2012) (Note 10).
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
In comparison to the prior year, the Group’s
reported financial performance this year
has been adversely affected by exchange
rate translation. A strengthening of the
average US dollar exchange rate against
sterling has been more than offset by the
weakening of other currencies which has
reduced profits. The movement in period-
end exchange rates, particularly the
stronger US dollar, led to an increase in
net debt as a result of the translation of
dollar-denominated debt. The average and
closing exchange rates used to translate
reported results were as follows:
US
dollar:sterling
Euro:sterling
Average rates Closing rates
2013
2012
2013
2012
1.57 1.60
1.15
1.24
1.52 1.60
1.18 1.20
Central costs
Central costs, which include head office,
treasury and reinsurance activities,
decreased by £1 million to £37 million
mainly as a result of the settlement of
claims by our captive insurer.
Energy costs
Energy costs were slightly lower than
the prior year at £170 million (2012 – £171
million) as a result of lower consumption,
following the sale of our share in
Sucromiles SA, the former citric acid joint
venture in Colombia, partially offset by
increased costs due to changes in energy
mix. We have covered approximately 70%
of our estimated energy needs for year
ending 31 March 2014, albeit at higher
prices than in the year ended 31 March
2013 which we will look to mitigate
through further efficiencies.
Exceptional items from continuing
operations
Year to 31 March
2012
£m
2013
£m
Gain on disposal of joint venture
– Sucromiles
Business transformation costs
Reversal of fixed asset
impairments – McIntosh and
Decatur assets
Reversal of provision – McIntosh
Exceptional (loss)/gain
8
(20)
–
(15)
–
–
(12)
60
23
68
Exceptional items within continuing
operations generated a net loss of £12
million on a pre-tax basis. On 1 August
2012, the Group completed the disposal
of our share in Sucromiles SA, the former
citric acid joint venture in Colombia, to our
former joint venture partner, Organizacion
Ardila Lulle, resulting in a gain on disposal
of £8 million.
An exceptional charge of £20 million
was recognised in relation to business
transformation costs with £18 million in
relation to the implementation of a common
global IS/IT platform and global Shared
Service Centre and £2 million in relation to
the new Commercial and Food Innovation
Centre in Chicago.
The tax impact on continuing operations’
net exceptional items is a credit of £5 million.
Exceptional items from continuing
operations in the prior year comprised a
net exceptional credit of £68 million related
to our decision to restart production at our
SPLENDA® Sucralose facility in McIntosh,
Alabama (£76 million credit) and the
reversal of previously impaired assets in
Decatur, Illinois (£7 million credit), partially
offset by business transformation costs
(£15 million). The tax impact of net
exceptional items from continuing
operations was a £31 million charge and
the Group also recognised an exceptional
tax credit of £10 million for the recognition
of a deferred tax asset in respect of US
foreign tax credits associated with the
disposal of the partially constructed and
mothballed corn wet mill facility in Fort
Dodge, Iowa.
Net finance expense
As announced in May 2012, when
calculating adjusted earnings we now
exclude the impact of post-retirement
benefit plans from net finance expense
to provide a more stable measure of the
underlying performance of the business.
After excluding this impact, net finance
expense from continuing operations
decreased to £29 million (2012 – £30
million) with a reduction in underlying
net interest expense largely driven by
the repayment of our £100 million bond
in June 2012.
22
Tate & Lyle PLC Annual Report 2013
Operational Review
Final proposed dividend
18.8p
+5.6%
Net debt
£479m
2012 – £476m
Free cash flow
£110m
2012 – £79m
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For the year ending 31 March 2014,
the Group will adopt the revised IAS19
accounting standard on employee benefits.
We will continue to exclude the impact
of post-retirement benefit plans from net
interest expense in calculating adjusted
earnings. The standard also requires
administration costs for post-retirement
schemes to be expensed through the profit
and loss account. These are approximately
£2 million and adoption of the revised
standard will reduce both reported and
adjusted operating profit by this amount.
Taxation
Our tax rate is sensitive to the geographic
mix of profits and reflects a combination of
higher rates in certain jurisdictions such as
the US, nil effective rates in Singapore (due
to pioneer status which we were granted in
2003 to reflect our investment in innovative
technology) and the UK, and rates that lie
somewhere in between for example, in
certain Eastern European countries.
Our UK earnings are now relatively small
following the sale of our sugars and
molasses businesses with less than 1% of
total Group sales (£23 million) being derived
from our UK operations and which are
offset by our corporate costs, primarily the
interest we pay on our borrowings. As a
result, we pay no corporation tax in the UK.
The effective tax rate on adjusted profit
reduced to 17.9% (2012 – 18.2%) with an
increase in the underlying tax rate of
around 150 basis points – driven by
changes in the geographic mix of profits –
being more than offset by the settlement
of outstanding tax issues in certain
jurisdictions outside the UK. As a result of
these non-recurring tax benefits in financial
year 2013, and our expectation of further
changes in the geographic mix of profits,
we anticipate the effective tax rate will be
somewhat higher in financial year 2014
than this underlying tax rate.
Discontinued operations and
legacy issues
Discontinued operations comprise our
former Sugars division, principally the
EU Sugars business which we sold in
September 2010, Molasses which we sold
in December 2010, our Vietnamese sugar
interests which we sold in June 2012 and
legacy contracts and investments of our
former International Sugar Trading business.
Sales from discontinued operations for
the year decreased to £10 million from
£72 million as a result of the disposal of
the Vietnamese sugar interests and the
continued run-off of activities in the
former International Sugar Trading
business. The operating profit from
our discontinued operations totalled
£18 million, after exceptional gains of
£26 million (2012 – £11 million).
The exceptional gains for the year relate
to the disposal of our Vietnamese sugar
operations (£21 million) and the disposal
of land and buildings relating to the former
Molasses business (£5 million). The impact
of taxation on our discontinued operations
was £nil which compares to a £15 million
exceptional tax charge in the prior year
in respect of outstanding tax matters
associated with our former starch facilities
in Europe. The profit from discontinued
operations after taxation for the year was
£18 million (2012 – £2 million).
American Sugar Refining (ASR) has issued
proceedings setting out a number of claims
it believes it has under the Agreement
dated 30 September 2010 relating to the
sale and purchase of Tate & Lyle’s EU
Sugar refining business, totalling around
£40 million. The subject matter of these
claims is closely related to the issues
considered by the independent accounting
expert in his decision notified to the parties
in May 2012 which strongly supported
Tate & Lyle’s position, as reported in our
full year results last year.
After the period end, we settled the
commercial dispute with Whitefox
Technologies Limited which was the
subject of proceedings in New York last
year. The terms of the settlement are
confidential, but the companies are
pleased that this matter has now been
resolved in a positive way for all involved.
Tate & Lyle PLC Annual Report 2013
23
Operational Review
Additional Financial Information continued
Earnings per share
Adjusted diluted earnings per share from
continuing operations were 57.0p (2012
– 54.7p), an increase of 4% (5% in constant
currency) as a result of higher operating
profits, marginally lower net finance
expense and the reduction in the effective
tax rate. On the same basis, adjusted basic
earnings per share increased by 4% (5% in
constant currency) to 58.2p (2012 – 55.8p).
Total basic earnings per share decreased
by 9% to 59.7p (2012 – 65.5p) with the prior
year benefiting from net exceptional gains
driven by the restart of our SPLENDA®
Sucralose facility in McIntosh, Alabama.
Dividend
The Board is recommending a 5.6%
increase in the final dividend to 18.8p
(2012 – 17.8p) making a full year dividend
of 26.2p (2012 – 24.9p) per share, up 5.2%
on the prior year. Subject to shareholder
approval, the proposed final dividend will
be due and payable on 2 August 2013 to all
shareholders on the Register of Members
on 28 June 2013. In addition to the cash
dividend option, shareholders will continue
to be offered a Dividend Reinvestment Plan
(DRIP) alternative.
Assets
Gross assets of £2,787 million at 31 March
2013 were £119 million lower than the
prior year principally as a result of the
disposal of assets that were held for sale,
including our former Vietnamese sugar
and Colombian citric acid businesses.
Net assets decreased by £22 million to
£1,036 million with profits generated in
the year and foreign exchange gains on
the translation of overseas subsidiaries
being more than offset by actuarial losses
on our post-retirement schemes and
dividend payments.
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
now closed the main UK scheme and US
salaried scheme to future accrual, certain
obligations remain. In the US, we also
provide medical and life assurance benefits
as part of the retirement package.
In December 2012, the Trustee of the main
UK pension scheme agreed a £347 million
partial pensioner buy-in of approximately
43% of total pensioner liabilities with
Legal & General plc which effectively
hedges these liabilities in full.
The net deficit of our post-retirement
obligations at 31 March 2013 of £265
million increased by £125 million from the
prior year (2012 – £140 million). The
increase in obligations was a result of lower
discount rates used to value our obligations
and the accounting impact on plan assets
of the pensioner buy-in, partly offset by
cash contributions made to the schemes.
Net debt
Net debt was marginally higher than the
prior year at £479 million (2012 – £476
million). Free cash flow from continuing
businesses of £110 million together with
disposal proceeds from the sale of
businesses (£51 million) were partially offset
by dividend payments of £117 million and
the repurchase of £23 million of ordinary
shares to satisfy the Group’s share option
schemes (Note 24). There was an adverse
exchange rate impact on net debt of £43
million principally as a result of the
strengthening of the US dollar exchange
rate against sterling.
In June 2012, at maturity, we repaid our
6.5% £100 million Guaranteed Notes from
cash resources. During the year, net debt
peaked at £526 million in February 2013.
The average net debt was £433 million,
a reduction of £21 million from £454 million
in the prior year.
Cash flow
Operating cash flow from continuing
operations was £297 million (2012 – £233
million). An outflow within working capital
of £107 million included higher inventory
levels in the US due to higher corn prices
and aflatoxin, and the requirement for
additional sucralose inventory following
the restart of production at our McIntosh,
Alabama facility.
The cash flow impact of payments made
into the Group’s main pension schemes
amounted to £44 million (2012 – £80
million) with the prior year including a
one-off contribution of £45 million into the
main UK pension scheme following the
conclusion in June 2011 of the triennial
valuation as at 31 March 2010.
Year to 31 March
2012
£m
2013
£m
Adjusted operating profit from
continuing operations
Depreciation/amortisation
Working capital before retirement
benefits and exceptional
cash items
Net retirement benefit obligations
Cash expenditure on
exceptional items
Share-based payments
Operating cash flow
Capital expenditure
Operating cash flow less capital
expenditure
Net interest and tax paid
Free cash flow
358
98
348
91
(107)
(44)
(121)
(80)
(21)
13
297
(134)
163
(53)
110
(16)
11
233
(130)
103
(24)
79
Capital expenditure of £134 million,
including a £42 million investment in
intangible assets, was 1.4 times the
depreciation and amortisation charge
of £98 million and, as in the prior year,
reflects expenditure on our business
transformation initiatives and in particular,
the implementation of the global IS/IT
system. We expect the ratio of capital
expenditure to depreciation/amortisation
in the year ending 31 March 2014 to be
higher than that of 2013.
Net interest paid decreased by £5 million
to £35 million principally as a result of the
repayment of the £100 million bond in
June 2012.
Net income tax payments were £18 million
(2012 – £16 million inflow), with the prior
year including a one-off US tax receipt of
£24 million in relation to the recovery of tax
as a result of the sale of the mothballed
facility at Fort Dodge, Iowa.
Free cash inflow (representing cash
generated from continuing operations after
working capital, interest, taxation and
24
Tate & Lyle PLC Annual Report 2013
Operational Review
capital expenditure) at £110 million was
£31 million higher than the prior year
principally as a result of lower contributions
to the main UK pension scheme and lower
working capital outflows partially offset by
higher tax payments.
During the year we spent £23 million on
the repurchase of ordinary shares to satisfy
share option schemes. Parent company
cash dividends paid were £117 million,
£5 million higher than the prior year.
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
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 £2 million
at 31 March 2013 (2012 – £1 million).
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 £189 million (2012 – £205
million) and related primarily to railcar
leases in the USA. Rental charges for the
year ended 31 March 2013 in respect of
continuing operations were £19 million
(2012 – £22 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 £529
million against a book value of £479 million
(2012 – fair value £518 million; book value
£476 million). Derivative financial
instruments used to manage the interest
rate and currency of borrowings had a fair
value of £38 million asset (2012 – £24
million asset).
The main types of instrument used are
interest rate swaps, interest rate options
(caps or floors) and cross-currency interest
rate swaps. The fair value of other derivative
financial instruments hedging future
currency and commodity transactions
was £nil (2012 – £1 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 a £21 million asset
(2012 – £1 million asset).
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
was 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 values of certain
items of merchandisable agricultural
commodities that are included in
inventories are based on market prices.
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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 70% 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.
Tate & Lyle PLC Annual Report 2013
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Operational Review
Risks
Managing the risks
we face effectively
Tate & Lyle is exposed to a number of risks which might have a material
adverse effect on our reputation, operations and financial performance.
The Board 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 a
rolling 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 business unit. As part of the process,
senior executive management formally
confirms once a year 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, and
where appropriate, reported to the Board.
During the year ended 31 March 2013, the
Board and the Group Executive Committee
undertook an exercise to consider the
nature and extent of the Group’s risk
appetite. The results of this exercise are
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
Safety
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, which could cause
a temporary or permanent stoppage
in production and could have a material
adverse effect on the Group.
• Central global function, Group Operational Efficiency and Sustainability,
outside business unit control, sets and monitors safety and environmental
standards
• Health and safety policies and procedures at all facilities with dedicated staff
to ensure they are embedded and measured
• Regular review of performance and policies by the Corporate Responsibility
Committee
• Safety and environmental targets are included in employees’ performance
objectives
• Internal global compliance audits on safety and environment performed
• Business continuity capabilities 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.
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Tate & Lyle PLC Annual Report 2013
Operational Review
Risk
Impact and description
Examples of mitigating actions
Strategy
Failure to
grow in
speciality food
ingredients
The Group’s strategy is to become the
leading global provider of speciality food
ingredients and solutions. Failure to
deliver on this strategy over the longer
term would negatively affect the Group’s
credibility and reputation.
• Three platforms have been established in Innovation and Commercial
Development – Sweeteners, Texturants and Health & Wellness – to drive
new product development and innovation in Speciality Food Ingredients
• New global Commercial and Food Innovation Centre opened in Chicago,
USA in 2012 to promote closer collaboration with speciality food ingredient
customers and to link with the global network of applications and technical
services facilities
• Investments are being made to increase the Group’s sales and technical
resources in emerging markets
• Internal capabilities have been enhanced to help promote growth
through acquisition
• Open Innovation team actively scout for breakthrough technologies and
opportunities across industries and universities
• A second corporate venture fund launched to invest in start-ups and
expansion-stage companies in the global food science and investment
community
• Programmes in place to recruit new staff and develop existing staff to
upgrade skill sets particularly in customer-facing areas and innovation.
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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.
Quality
Failure to
maintain the
quality of our
products and
high standards
of customer
service
• Central global function, Group Operational Efficiency and Sustainability,
manages Group-wide quality process and procedures with dedicated staff
at all facilities to ensure they are embedded and measured
• Product safety and quality policies and procedures in place to prevent
contamination
• Policies procedures and performance reviewed regularly by the Corporate
Responsibility Committee
• Third-party audit programme in place, supplemented by internal global
compliance audits
• Recall simulation exercises undertaken.
People
Failure to
attract, develop
and retain key
personnel
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 process and system in place
• Increased Board-level focus on succession planning for key roles.
Legal and
regulatory
Non-compliance
with legislation
and regulation
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.
• Regular monitoring and review of changes in law and regulation in such areas
as health and safety, environment, quality, food and corporate governance are
regularly monitored and reviewed
• Global regulatory team supported by external consultants, monitors local
regulatory requirements affecting our products and how these change
over time
• Legal teams maintain compliance policies in areas such as anti-trust
and anti-corruption laws; and provide ongoing training to employees.
Tate & Lyle PLC Annual Report 2013
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Operational Review
Risks continued
Risk
Impact and description
Examples of mitigating actions
Raw
materials
Fluctuations
in prices 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
increase in raw material prices or higher
energy, freight or other operating costs.
Additionally, margin may be affected by
customers not taking volumes to which
they previously committed.
• New purchasing and storage practices developed to minimise the impact of
aflatoxin (a fungus impacting corn quality caused by prolonged hot and dry
conditions, such as those experienced in certain parts of the US during
the year)
• 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
• Network of grain elevators in place in the US to hold corn supplies
• Derivatives used where possible to hedge exposure to movements in future
prices of commodities.
Key projects
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
shared 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 internal resources allocated to the project
• Programme 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
• Retained services of experienced external global implementation partners
• Ongoing refinements to programme based on lessons learnt in the process.
Reputation
Failure to
counter
negative
perceptions of
the Group’s
products
Finance
Failure to
manage the
balance sheet,
particularly
during periods
of economic
uncertainty
We must be fully prepared to counter
unexpected/unfounded negative publicity
about our products.
• Innovation and Commercial Development and regulatory experts substantiate
relevant product claims prior to launch
• Media relations advisors monitor Group press coverage and action plans
to deal with any negative publicity
• Participation in trade organisations and industry-wide initiatives to promote
and protect our products
• When dealing with regulatory bodies, industry and consumer groups, and
the media, our regulatory and nutrition teams focus on credible, high quality
science to inform debates on the benefits, risks or efficacy of our ingredients.
• Capital expenditure procedures to control and monitor allocation and spend
• All new investments are evaluated against clear strategic and financial criteria
with greater scrutinity and clear execution milestones for approved investments
• External resources and expertise used where required
• Exposure to liquidity risk is managed by ensuring access is maintained
to a wide range of funding sources, and by effective management of our
cash resources.
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 capital expenditure projects
which, if not delivered successfully, could
negatively affect the Group’s performance
and reputation.
Finance
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.
• Policies ensure that key tasks are segregated to safeguard assets
• Finance and capital expenditure manuals set out procedure
• Chief Executive and Chief Financial Officer undertake detailed quarterly
business and financial reviews
• Additional control processes, including external reviews by a third party, put in
place during the year in light of the initial implementation of the new global IS/
IT system in the Single Ingredients business in Europe
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Tate & Lyle PLC Annual Report 2013
Operational Review
Corporate Responsibility
Our sustainability journey
We think about corporate responsibility (CR) from a
stakeholder perspective, and so we define our reporting in
terms of our workplace, the environment, our marketplace,
and the communities of which we are a part.
We want to continuously improve the way that we perform
in, manage and report on CR matters across all aspects
of our business.
Performance
This year we:
• continued to be above average for
safety performance compared with
our own and other industry sectors.
We take safety very seriously and
seek to continuously improve our
programmes and performance,
which is outlined on page 30
• reduced CO2 emissions, water
use and waste to landfill at our
manufacturing facilities, per tonne
of production
• were included in the FTSE 350 Carbon
Disclosure Leadership Index, having
scored in the top 10% of FTSE 350
companies responding to the Carbon
Disclosure Project (CDP) 2012
information request
• developed new global community
involvement programmes and
partnerships.
Overview of the year
Management of corporate
responsibility
This year we:
• reviewed and strengthened our
contractor safety programme
• rolled out our new Code of Ethics
to replace our Code of Business
Conduct
• reviewed and updated the CR
requirements in our standard purchase
contract terms and conditions
• implemented a new sustainability risk
assessment and evaluation tool for our
product development pipeline.
Reporting and communication
This year we:
• raised the profile of CR matters with
employees, suppliers, customers and
investors, including having discussions
with customers on CR issues to
explain our approach, to understand
each other’s programmes, and to
explore ways of working together to
improve our collective performance
• completed the transition to
stakeholder-orientated reporting
in this Annual Report
• gained external assurance
over selected environmental
data in this Annual Report from
PricewaterhouseCoopers LLP
(see page 36).
More online
Read more about our approach
to corporate responsibility at
www.tateandlyle.com.
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Workplace
The key CR considerations for us in terms
of our workplace are health and safety,
and how we manage our relationship with
employees. In line with our values, we
believe that everyone should be safe at
work and be treated fairly and with respect.
Employee profile
At 31 March 2013, Tate & Lyle employed
4,326 people. We have further developed
our employee base in the last year through
the opening of our new global Commercial
and Food Innovation Centre in Chicago, USA
and by expanding our commercial teams.
Employees by business unit
as at 31 March 2013
1 51% Bulk
Ingredients
2 40% Speciality
Food
Ingredients
3 9% Central
functions
3
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2
Employees by geography
as at 31 March 2013
1 47% North
America
2 37% Europe,
Middle East
and Africa
3 11% Latin America
4 5% Asia Pacific
4
1
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Tate & Lyle PLC Annual Report 2013
29
Operational Review
Corporate Responsibility continued
Safety
We have no higher priority than safety, not
only for our employees but for everyone
who comes to our sites. Our ultimate goal
is no accidents or injuries.
Our Executive Safety Committee, chaired
by our Chief Executive, met throughout the
year to review our safety performance and
improvement programmes. Our senior
executives are personally involved in safety
management and undertake annual
executive audits at our major sites around
the world.
Performance
We measure and report safety against two
key performance indicators:
• Recordable incident rate
Employees and contractors combined:
no change at 0.85.
• Lost-work case rate
Employees and contractors combined:
0.26 compared with 0.21 last year,
due to 19 lost-work cases globally in
calendar year 2012 compared to 16
in 2011.
Despite a low number of accidents in the
spring and early summer, and very good
results at many facilities, we ended the year
with the overall recordable incident rate
being the same as 2011 and the overall
lost-work case rate increasing due to three
more lost-work cases than last year.
Many of our locations achieved excellent
safety performance: a number of sites had
zero recordable incidents; several reached
milestones of four million hours worked
without a lost-work case; and one site had
an accident in December after 20 years
without a lost-work case.
Two of our US plants, both of which are in
Lafayette, Indiana, won US Corn Refiners
Association awards during the year.
Lafayette South won three – Incident Rate
Excellence, One Million Hours and Zero
Lost Work Days and Sagamore won one –
Zero Lost Work Days.
Safety performance
Recordable incident rate
Number of injuries requiring treatment beyond first aid per 200,000 hours
Employees
Number of
incidents
33
0.69
0.63
0.55
Contractors
Number of
incidents
30
1.62
1.55
1.43
2010
2011
2012
2010
2011
2012
US industry sector averages 20111 and Tate & Lyle overall 2012
6.90
Beverage and tobacco
5.60
Food manufacturing
3.90
Construction
3.50
Private industry
2.40
Chemical manufacturing
2.00
Energy industry
0.85
Tate & Lyle
Lost-work case rate
Number of injuries that resulted in lost-work days per 200,000 hours
Employees
Number of
cases
10
Contractors
Number of
cases
0.83
0.34
0.17
0.19
9
0.43
0.31
2010
2011
2012
2010
2011
2012
US industry sector averages 20111 and Tate & Lyle overall 2012
1.50
Food manufacturing
1.50
Construction
1.10
Private industry
0.70
Chemical manufacturing
0.50
Energy industry
0.26
Tate & Lyle
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Tate & Lyle PLC Annual Report 2013
1 Source: US Department of Labor, October 2012.
External benchmarking
To put our safety performance in
perspective and because many of our
employees are located in the US we
monitor US industry averages. In 2012 our
safety performance was better than the
average achieved by companies across our
own and other industry sectors, as shown
in the graphs on page 30.
Safety projects and activities
During the year we made progress with a
number of safety initiatives, these included:
• Contractor safety programme: we
have worked hard in the past year to
improve contractors’ safety practices,
including: reviewing their safety
programmes; setting up a contractor
safety improvement task force; asking
contractors to share best practices;
revising our global contractor safety
expectations document; and addressing
specific issues by meeting the executive
managers of the relevant companies to
discuss performance and their safety
improvement plans.
• Safety management systems:
we implemented new procedures for
hazardous activities; we developed a
Code of Safety Leadership to ensure
colleagues are clear on what their
safety leadership responsibilities are;
and renewed Road Safety Guidelines to
promote safe driving and travel. We also
further improved machine guarding at
our facilities and enhanced training for
employees working at height, for example
on ladders or elevated platforms.
• Safety awareness: we held our
first global office and laboratory safety
conference, as well as our annual
Global Safety Week with many
employees and their families taking
part across the Group.
Occupational health and well-being
We contract with occupational health
professionals to monitor and safeguard
the health of employees at work, and to
provide information, advice and support
to them on health matters.
Looking ahead
Having seen employee hand and arm
safety incidents increase in 2012, we have
made this area a priority for 2013, along
with our ongoing work on contractor safety.
Gender diversity
as at 31 March 2013
Board of Directors
Relationship with employees
Our values define what we stand for and
how we behave with our customers,
suppliers, investors, the communities we
operate in and with each other. We believe
in equal opportunities for all, regardless
of gender, sexual orientation, age, marital
status, disability, race, religion or other
beliefs and ethnic or national origin.
Our Values
1
1 70% Men
2 30% Women
2
Managers
2
1
1 78% Men
2 22% Women
Our policies, practices and procedures
for recruitment, training and career
development promote equality of
opportunity. An employee who becomes
disabled would, where appropriate, be
offered retraining for a more suitable role.
We are committed to treating people with
disabilities fairly in all respects, including
regarding applications, training, promotion
and career development.
Diversity and inclusion
We believe in a culture where all employees
contribute to the performance of the
Company and have the opportunity to
develop fully according to their individual
abilities. As part of that, we aim to attract
a diverse workforce that reflects the
communities in which we operate. In 2011
we established a Diversity and Inclusion
Council. The Council works on creating
awareness of diversity and inclusion issues,
establishing and tracking inclusion metrics,
and championing our diversity and
inclusion programme across the Company.
All employees
1
1 76% Men
2 24% Women
2
Progress during the financial year included:
• continued increase in awareness
among senior managers of diversity
and inclusion issues, having included
consideration of these issues in their
annual performance objectives
• taking the opportunity provided by
our new global Commercial and Food
Innovation Centre in Chicago and at
our new global Shared Service Centre
in Poland to recruit diverse workforces
at those two locations
• piloting of a diversity and inclusion
coaching programme for key staff.
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Operational Review
Corporate Responsibility continued
Employee engagement
We believe that employees who are
engaged in the business, by which we
mean committed to the Group, its goals,
values and strategy, and to each other, are
happier and ultimately deliver better results.
Good internal communication is essential
to this. We communicate with our
employees in a number of ways, from
Company-wide media including our
intranet and our quarterly employee
magazine which is published in eleven
languages, to face-to-face dialogue such
as site-wide meetings, functional meetings
and small group or team meetings.
In 2012, we conducted our first global
employee survey which was designed to
enable employees to give candid opinions
about Tate & Lyle and to facilitate
conversations about how we can make
the Company a better place to work.
Participation in the survey was encouraging
at 81%, and the overall survey score was
just above 3.5 on a scale of 1 to 5 (where
5 is the best score). The results highlighted
clear strengths as well as areas where we
can do better, and have been translated
into action plans for individual teams as
well as the Company as a whole.
Looking ahead
We are working to continue raising
awareness of diversity and inclusion;
provide more support to our leaders across
the Company to help them engage with
their teams; to implement a new set of
global training courses for middle and
senior managers; and to strengthen further
our recruitment and induction processes.
Environment
We seek to operate our business in a way
that is as environmentally sustainable as
practical. By using resources such as
energy and water more efficiently, and
reducing waste, we aim to improve our
environmental sustainability further while
controlling operating costs.
Our approach
Tate & Lyle’s environmental policy and
standards apply to all our activities globally,
and we aim to integrate environmental
considerations into all major decisions.
Our facilities operate under local
environmental authorisations and permits
and we require strict compliance with these
at all times. If a site inadvertently breaches
an operating limit we seek to take steps
immediately to resolve the issue and
prevent reoccurrence.
We have procedures and programmes
in place to manage and minimise the
environmental impact of our operations,
our packaging and our supply chain.
We have internal and external auditing
processes. Our annual internal global
compliance audit programme confirms
compliance with our environmental and
food safety, quality and health and safety
management standards. Additionally, our
rolling programme of external, independent
environmental compliance audits assures
compliance with regulatory requirements.
We include annual environmental
sustainability targets in the performance
objectives of employees from Executive
Committee to plant level. These include
energy use, water use and waste reduction,
amongst others.
Overall, we are working to address
environmental considerations across the
life cycle of our products, from our
agricultural supply chain to how our
products are packaged and transported.
Within our own operations and joint
ventures we focus on those aspects of our
activities that have the greatest potential
impact on the environment, namely our use
of energy (and consequent air emissions
and carbon footprint), our water use, and
waste management.
Beyond our own operations we focus our
attention on our agricultural raw material
and ingredient supply chain, the
transportation of our products to our
customers, and our products’ packaging.
Operational performance
In calendar year 2012, compared with 2011:
• Energy use per tonne of production
increased by 1.6% due to changes in
our production mix – with the
manufacture of more speciality products,
and site-specific factors such as the
installation of new air emissions
control equipment.
Since 2008 we have reduced energy use
per tonne of production by 10%. Energy
efficiency projects implemented this year
included optimisation of the steam system
at our joint-venture plant in Boleraz,
Slovakia; and the installation of energy
efficient lighting at Sycamore, Illinois.
• Carbon footprint from energy use
decreased by 1.1% per tonne of
production due to changes in our fuel
mix, alongside energy efficiency projects
at many locations.
Since 2008 we have reduced CO2
emissions per tonne of production
by 11%.
• Water use per tonne of production
decreased by 2.1% due to various water
efficiency projects including: at Dayton,
Ohio, where water re-use and recycling
implemented in 2012 will save up to 45%
of the plant’s annual water use; and at
Decatur, Illinois, which received General
Electric’s ‘Return on Environment’ and
‘Proof not Promises’ awards for water
saving initiatives in 2012.
Since 2008 we have reduced water use
per tonne of production by 9%.
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Tate & Lyle PLC Annual Report 2013
Operational Review
• Waste to landfill decreased by 11%
per tonne of production, due to good
progress with waste reduction, re-use
and recycling programmes at many
facilities. For example, at Lafayette
South, Indiana, external waste recovery
facilities, which use anaerobic digestion
to produce energy from waste, were
used to reduce our waste to landfill
following on from similar work at our
Sagamore plant in Lafayette, Indiana,
the previous year.
Since 2008 we have reduced waste to
landfill per tonne of production by 26%.
Looking ahead
We aim to improve environmental
performance in the coming year by
focusing on the following areas:
• capital projects and operational practices
to reduce our energy use, CO2 emissions,
water use and waste to landfill per tonne
of production
• working with our customers on reducing
our combined environmental impact
• working with our suppliers and others
to promote sustainable agriculture.
Environmental performance
Energy use
Primary carbon footprint
GJ per tonne production
Tonnes CO2 per tonne production
4.44
4.42
4.492
0.375
0.374
0.3702
20101
20111
2012
20101
20111
2012
Water use
Waste to landfill
Cubic meters per tonne production
Tonnes per ’000 tonnes production
4.35
4.27
4.182
7.23
7.92
7.052
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20101
20111
2012
20101
20111
2012
1 Previously reported numbers for 2010 and 2011 have been adjusted to remove the energy use, carbon
footprint, water use and waste arising from the Sucromiles joint venture, our share in which was sold
during calendar year 2012.
2 Refers to 2012 data that has been assured by PricewaterhouseCoopers LLP (see page 36).
Environmental sustainability targets
We have four medium-term environmental sustainability targets
Target by end of 2016
Reduce CO2 emissions from energy use
by 12.5% per tonne of production
(baseline year 2008)1
Implement packaging reduction
programmes with customers representing
>50% of sales (£)
Implement transport efficiency
programmes with customers representing
>50% of sales (£)
Implement sustainable agricultural
sourcing programmes for our top 20
agricultural raw materials and ingredients
by volume
Calendar year 2012 status
11% reduction in CO2 emissions per tonne
of production versus 2008
Comment
In 2012 our joint-venture facility in Hungary
started up a new biomass boiler
Programmes initiated with customers
representing >9% of sales (£)
Programmes initiated with customers
representing >9% of sales (£)
In 2012 we evaluated our principal 25 agricultural
raw materials and ingredients and progressed
sustainable agriculture initiatives
In 2012 we changed from a three-ply to a two-ply
paper sack for several products, reducing paper
use by approximately 1,500 tonnes per year
In 2012 we piloted a new liquefied petroleum gas
(LPG) truck design with a transport contractor in
Europe which can reduce CO2 emissions by up
to 70% per trip
A number of updated sustainable sourcing
criteria and new initiatives are currently in
development or implementation
1 We recognise that installing new air emissions control equipment at several locations over the next few years and the manufacture of more speciality products will
make it more challenging to reduce our energy use and CO2 emissions in the medium term.
Tate & Lyle PLC Annual Report 2013
33
Operational Review
Corporate Responsibility continued
Marketplace
The food and beverage sector is our most
significant market comprising over 70%
of Group sales. Other markets we sell
into include industrial, animal feed, and
pharmaceutical and personal care. Our
customers include many of the world’s
largest food and beverage manufacturers.
Sustainability in the marketplace for us is
about: the safety and functionality of our
products; the origin of our agricultural raw
materials; the conduct of our commercial
relationships; and standards within our
supply chain.
Product safety and quality
Our products adhere to the highest
standards of food safety, quality and
traceability. This is particularly relevant
when producing ingredients for
specialist customers such as baby food
manufacturers. All our manufacturing
facilities are certified to the Global Food
Safety Initiative, and we have well-
established processes and procedures
across our manufacturing and R&D
facilities to ensure we comply with this
standard. These include an annual internal
global compliance audit programme and
annual external, independent food safety
audits of every manufacturing site.
Developing sustainable products
We want our products to be sustainable;
as well as the fact that our raw materials
and ingredients are largely derived from
renewable agriculture sources (principally
corn), we aim to consider sustainability
matters throughout the product lifecycle.
To this end, for our innovation pipeline, in
2012 we developed a new sustainability
risk assessment and evaluation tool.
We use this tool to:
• undertake a sustainability risk
assessment at an early stage in the
product development process, in order
to identify any potential concerns in the
supply chain, manufacture or use stages
of the product life cycle
• evaluate sustainability issues as we
proceed with product development, to
avoid or reduce any potential adverse
impacts such as the use of energy
and non-renewable resources, and
to leverage positive impacts such as
product health and wellness benefits.
In line with our strategy, we are focusing
particularly on growing our Speciality Food
Ingredients business unit, and as such the
majority of our new product development
is in this area. For example, our Health &
Wellness platform delivers innovative
ingredients with substantiated health
benefits to customers worldwide.
Additionally, many of our speciality
sweeteners and fibres have health and
wellness benefits. Our aim is to help our
customers provide consumers with healthy,
nutritious foods and beverages as part of a
normal balanced diet. We aim to ensure that
our ingredients, and any claims we make
regarding their benefits or efficacy, are
supported by clear, demonstrated science.
Our portfolio of speciality food ingredients
ranges from low-calorie sweeteners to
soluble fibres. For example, SPLENDA®
Sucralose is exceptionally stable, so that it
helps to extend consumer product shelf life
and thereby assists in avoiding food waste,
and SODA-LO® Salt Microspheres allow
food manufacturers to reduce salt levels
by 25-50% in various applications.
Conduct of commercial
relationships
We are committed to ensuring a safe, open
and responsible culture in all our business
dealings wherever we operate, in line
with our newly-launched Code of Ethics.
The Code of Ethics, to be available in
14 languages, is communicated internally
through several means including our
intranet, and by local ‘Ethics Ambassadors’
being appointed across the business.
Externally, the Code of Ethics is being
integrated into our supplier and business
partner relationships, in particular through
the terms and conditions of our standard
purchase contracts.
We support our employees and business
partners in coming forward with any
information concerning actual or alleged
breaches of the Code of Ethics. We provide
access to Safecall, an independent,
anonymous third-party reporting service,
through free phone numbers in 46
countries and by email. Information on
accessing this service is communicated
across the Company and externally via
our intranet and our corporate website.
Any issues reported through Safecall are
investigated by members of our Speak Up
Committee, a group of senior Tate & Lyle
executives who are responsible for
ensuring that any concerns flagged to
them through our normal internal reporting
processes or via Safecall are investigated
and that appropriate action is taken.
Standards in our supply chain
We require our suppliers to uphold
international business standards and to be
fully compliant with all applicable laws and
regulations, including but not limited to:
those regarding freedom of association
and collective bargaining; non-
discrimination; working hours and wages;
health and safety; protection of the
environment; anti-corruption/anti-bribery;
and the prevention of child or forced labour.
This year we reviewed and updated the
specific corporate responsibility
requirements built into our standard
purchase contract terms and conditions.
Looking ahead
We are currently focusing particularly
on sustainable agriculture, a growing area
of importance for the food and beverage
industry and its stakeholders.
34
Tate & Lyle PLC Annual Report 2013
Operational Review
Global partnerships
During the year, we also started to develop
global partnership programmes in our three
community involvement areas. For
well-being, we have become a business
alliance partner with the Global Alliance
for Improved Nutrition (GAIN), and for
environment we have become a corporate
partner of the environmental research and
action charity Earthwatch International. We
are working with both charities to set up our
own specific programme. For education,
we expect to announce educational
partnerships during calendar year 2013.
Looking ahead
We recognise that being a responsible
corporate citizen includes having a strong
and forward-looking community
involvement programme.
We plan to develop our community
involvement programme by:
• expanding the geographical reach
• further developing our global and local
partnership programmes
• making a larger financial commitment.
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Community
We have a strong history of community
involvement and during the year we
continued to support communities local to
our operations. Additionally, we have made
good progress in implementing our new
community involvement strategy as defined
last year, including the establishment of
new global programmes and partnerships.
Our approach
For Tate & Lyle, community involvement
is about having a positive and lasting
relationship with the community: specifically
changing things for the better in the areas of
education, well-being and the environment.
• Education: to develop young people’s
knowledge and understanding of
science, technology, engineering and
mathematics (STEM subjects), and their
preparedness for a career in a STEM-
based discipline, either academically
or vocationally.
Community spend by area
Year to 31 March 2013
4
1
3
1 44% Education
2 39% Well-being
3 11% Environment
4 6% Other
2
Local programmes/partnerships
We aim to engage with local communities
where our manufacturing, R&D and office
facilities are located. Different locations can
make their own decisions as to the specific
projects they support and the partnerships
that they develop, thereby catering to
relevant local needs.
We support a wide range of initiatives and
organisations in our local communities.
• Well-being: to provide practical
assistance in the area of well-being
from health issues including nutrition
to general welfare, such as supporting
food banks.
• Education: we support local schools,
for example by assisting with new
equipment or facilities, and provide
scholarship funds to assist students
to go to colleges and universities.
• Environment: to promote environmental
sustainability and good environmental
management, addressing issues of
climate change, water resources and
conservation.
We aim to increase our investment in these
three areas each year, in line with the
growth of our business.
Overview of the year
In the year ended 31 March 2013,
chartiable donations were £376,000
(2012: £308,000). We expect to increase
contributions further in the year to
31 March 2014.
• Well-being: we support a wide variety
of local health and well-being initiatives.
This year, our e-Christmas card
supported the homeless charity Crisis
at Christmas in London, UK and the
Northern Illinois Food Bank in Chicago,
USA. Both of these organisations
provided practical, immediate assistance
to those in need over the holiday period.
• Environment: we support a number
of local environmental initiatives.
Tate & Lyle PLC Annual Report 2013
35
Independent assurance
This year we gained external assurance over selected
environmental data in this Annual Report from
PricewaterhouseCoopers LLP.
Full details of the principles and methodologies we have used
in reporting CR performance in this Annual Report can be found
in the ‘CR Reporting Criteria Annual Report 2013’ available
on the Company’s website, www.tateandlyle.com/CR2013.
The selected environmental data as referenced on page 33
has been subject to independent assurance by
PricewaterhouseCoopers LLP. Their assurance report
can be found on the Company’s website,
www.tateandlyle.com/CR2013.
Operational Review
Corporate Responsibility continued
Corporate responsibility governance
Governance of CR matters is overseen by the Corporate
Responsibility Committee (see page 49), the responsibilities
of which include monitoring the Group’s approach to CR and
ensuring that it aligns with Group strategy. The Chief Executive
is the director with specific responsibility for CR matters.
CR matters are integrated into the Group’s enterprise-wide
risk management and reporting process (see page 26).
Corporate responsibility reporting notes
Here we outline the scope and definitions of the CR data
presented in this Report.
• Safety and environmental data
– We report safety and environmental performance by
calendar year (1 January to 31 December) because we
are required to do so for regulatory reporting purposes.
– We report safety data from Tate & Lyle-owned and joint-
venture manufacturing facilities, and from our offices and
other facilities worldwide, for example, R&D centres.
– We report environmental data from Tate & Lyle-owned
and joint-venture manufacturing facilities worldwide.
– For our SPLENDA® Sucralose facility in McIntosh, Alabama
where we restarted production in March 2012, we include
safety performance data for calendar year 2012 in this
Annual Report. We will start reporting environmental
performance data once we have two full calendar years
of data to better assure reporting accuracy.
• Employee and community involvement data
– We report employee and community involvement
performance by financial year (1 April to 31 March) in line
with the financial reporting systems providing that data.
– Employee data comprises Tate & Lyle employees and a
percentage share of joint-venture employees in line with
the percentage of those businesses that we own, except
for gender diversity where a full share of all joint-venture
employees are included (Note 9).
– Community involvement data comprises Tate & Lyle-owned
and joint-venture operations and a percentage share of
joint-venture operations in line with the percentage of those
businesses that we own.
• Internal assurance
– Our internal audit function carried out a review of the CR
information and data presented in this Report and confirmed
its accuracy.
36
Tate & Lyle PLC Annual Report 2013
Governance
Statement from the Chairman
We are committed to strong
governance which we believe is the
key to maintaining the trust that our
investors and customers place in us
Sir Peter Gershon Chairman
Dear Shareholder
As Chairman, I am responsible for
ensuring the Board operates effectively.
Throughout the year, we have continued
to develop our practices and change our
focus, reflecting the evolution of the
Group’s business transformation.
To maximise the potential of this talent, we
put in place tailored induction programmes
to help the new non-executive directors
contribute effectively as soon as possible
after joining the Board. More information on
the recruitment process and the induction
programmes can be found on pages 48
and 42 respectively.
Having undertaken an externally-facilitated
review of Board effectiveness in 2011, I led
the review process again this year. As part
of the process, we agreed key areas of
focus for the Board during the year ending
31 March 2014, being:
In my statement last year, I explained
that we had undertaken a review of the
composition needs of the Board in light
of the Group’s strategy and the length of
tenure of our directors. Dr Ajai Puri joined
the Board on 1 April 2012 and during the
year, we undertook further refreshment
of the Board, a process which culminated
with the appointment of two new
non-executive directors, Virginia Kamsky
and Anne Minto, on 1 December 2012.
I am very pleased that we have been able
to attract strong and diverse talent to the
Board over the past 14 months.
• The Group’s innovation pipeline; and
• Talent management and succession
planning.
Further information on the Board
effectiveness review is on page 43.
In addition, I continued to hold a short
discussion with the non-executive
directors collectively both immediately
before and after each scheduled Board
meeting. These sessions help to continue
to ensure that the Board operates
effectively and to provide timely feedback
where appropriate.
G
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• Safety;
• The performance of the Speciality Food
Ingredients business unit;
• Strategic initiatives, including acquisition
Sir Peter Gershon
Chairman
29 May 2013
opportunities;
• Customer engagement;
Tate & Lyle PLC Annual Report 2013
37
Governance
Board of Directors
Strong governance,
effective leadership
2
4
6
8
10
1
3
5
7
9
11
More online
Read full biographies of the
directors and members of the
Group Executive Committee
online at www.tateandlyle.com.
1 Sir Peter Gershon CBE
Chairman and Chairman of the
Nominations Committee
Joined the Board as an independent
Non-Executive Director and Chairman
Designate in February 2009. Appointed
Chairman in July 2009. Aged 66.
Skills and experience
Sir Peter has broad business experience
gained in large and complex international
organisations and has held various
leadership roles in the UK private and
public sector. He was formerly Chairman
of Premier Farnell plc; Chief Executive of
the Office of Government Commerce;
Managing Director of Marconi Electronic
Systems; and a member of the UK Defence
Academy Advisory Board.
Other directorships
• Chairman of National Grid plc
• Member of HM Government Efficiency
and Reform Board
• Member of the advisory board of
The Sutton Trust
2 Javed Ahmed
Chief Executive
Joined the Board as Chief Executive in
October 2009. Aged 53.
Skills and experience
Javed has extensive international
experience from a wide variety of senior
management roles. He started his career
with Procter & Gamble and then spent
five years with Bain & Co. before joining
Benckiser (later Reckitt Benckiser plc)
in 1992 where he gained significant
experience of international consumer goods
markets and held positions including Senior
Vice President, Northern Europe; President,
North America; Executive Vice President,
North America, Australia and New Zealand;
and Executive Vice President, Europe.
Other directorships
None
Our governance
structure
Certain responsibilities are
delegated to four Board
Committees, details of which
are given on pages 46 to 51.
Audit Committee
Liz Airey, Chairman
Douglas Hurt
Anne Minto
Remuneration Committee
Robert Walker, Chairman
William Camp
Sir Peter Gershon
Anne Minto
Dr Ajai Puri
Nominations Committee
Sir Peter Gershon, Chairman
Javed Ahmed
Liz Airey
William Camp
Douglas Hurt
Virginia Kamsky
Anne Minto
Dr Ajai Puri
Robert Walker
38
Tate & Lyle PLC Annual Report 2013
Governance
3 Tim Lodge
Chief Financial Officer
Joined the Board in December 2008
as Group Finance Director. Aged 48.
Skills and experience
Tim joined the Group in 1988 and 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.
Other directorships
None
4 Liz Airey
Non-Executive Director and
Chairman of the Audit Committee
Joined the Board in January 2007.
Aged 54.
Skills and experience
Liz was an investment banker and has
extensive financial experience in the UK
and internationally. She was formerly
Finance Director of Monument Oil and
Gas plc.
Other directorships
• Chairman of the Unilever UK Pension
Fund
• Senior Independent Director of Jupiter
Fund Management PLC
• Senior Independent Director of Dunedin
Enterprise Investment Trust PLC
5 William Camp
Non-Executive Director and Chairman
of the Corporate Responsibility
Committee
Joined the Board in May 2010. Aged 64.
Skills and experience
Bill 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.
Other directorships
• Non-executive director of BioAmber Inc
• Senior Advisor, Naxos Capital
6 Douglas Hurt
Non-Executive Director
Joined the Board in March 2010. Aged 56.
Skills and experience
Douglas is a Chartered Accountant. He
held a number of financial and operational
roles, including US and European senior
management positions, at GlaxoSmithKline
before joining IMI plc as Finance Director
in 2006.
Other directorships
• Finance Director of IMI plc
7 Virginia Kamsky
Non-Executive Director
Joined the Board in December 2012.
Aged 59.
Skills and experience
Ginny is Chairman and Chief Executive
Officer of Kamsky Associates, Inc. She also
served as an Executive Vice President of
Foamex International, Inc. and held a
variety of leadership roles at Chase
Manhattan Bank.
Other directorships
• Non-executive director of Dana Holding
Corporation
• Member of the US Secretary of the Navy
Advisory Panel
• Chairman of the Board of Trustees of the
China Institute in America
8 Anne Minto OBE
Non-Executive Director
Joined the Board in December 2012.
Aged 60.
Skills and experience
Anne was Group Director of Human
Resources at Centrica plc from 2002 until
her retirement in 2011. She previously held
senior management roles at Shell UK and
Smiths Group plc and was Deputy
Director-General of the Engineering
Employers’ Federation.
Other directorships
• Non-executive director and Chairman
of the Remuneration Committee of
Shire PLC
• Trustee of the University of Aberdeen
Development Trust
• Non-executive director of ExlService
Holdings, Inc.
9 Dr Ajai Puri
Non-Executive Director
Joined the Board in April 2012. Chairman
of the Research Advisory Group. Aged 59.
Skills and experience
Ajai has a PhD in Food Science from
the University of Maryland, USA. He was
President – Research, Development and
Product Integrity and a member of the
Executive Board of Koninklijke Numico N.V.
from 2003 to 2007. Prior to this, Ajai
held various management positions with
The Coca-Cola Company, culminating
in Senior Vice President Technical,
The Minute Maid Company.
Other directorships
• Member of the supervisory board
of Nutreco N.V.
• Non-executive director of Barry
Callebaut AG
• Non-executive director of Britannia
Industries Limited
10 Robert Walker
Senior Independent Director and
Chairman of the Remuneration
Committee
Joined the Board in January 2006.
Aged 68.
Skills and experience
Robert 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.
Other directorships
• Chairman of Travis Perkins plc
• Chairman of Enterprise Inns plc
• Chairman of Americana International
Holdings Limited
11 Lucie Gilbert
Company Secretary
Appointed Company Secretary in August
2012. Aged 41.
Skills and experience
Lucie was appointed Deputy Company
Secretary in 2008 and previously held senior
company secretarial roles in several listed
companies, including Experian PLC and Brit
Insurance Holdings PLC. Lucie is a Fellow of
the Institute of Chartered Secretaries and
Administrators and an Associate of the
Chartered Insurance Institute.
Other directorships
None
Corporate Responsibility
(CR) Committee
William Camp, Chairman
Liz Airey
Sir Peter Gershon
Dr Ajai Puri
Our Group Executive
Committee
The Group Executive
Committee oversees the
development and execution of
the Group’s strategy, and has
overall responsibility for
achieving business results.
The members of the Committee
are listed opposite.
Javed Ahmed
Chief Executive
Tim Lodge
Chief Financial Officer
Robert Gibber
Executive Vice President,
General Counsel
Karl Kramer
President, Innovation and
Commercial Development
Rob Luijten
Executive Vice President,
Human Resources
Olivier Rigaud
President, Speciality Food
Ingredients
Matt Wineinger
President, Bulk Ingredients
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Tate & Lyle PLC Annual Report 2013
Tate & Lyle PLC Annual Report 2013
39
Governance
Corporate Governance continued
UK Corporate Governance Code
The UK Corporate Governance Code dated
June 2010 (the Code) and issued by the
Financial Reporting Council is applicable
to companies with a premium listing on the
London Stock Exchange. As such, we are
required to state how we have applied the
principles contained in the Code and to
disclose whether we have complied with
the provisions of the Code during the year.
Throughout the period from 1 April 2012
to 31 March 2013 the Company has been
in full compliance with the Code.
This Report, together with the Directors’
Remuneration Report and the disclosures
contained in the Risks section on pages 26
to 28, provide details of how the Company
applies the principles and complies with
the provisions of the Code. Further
information on the Code can be found on
the Financial Reporting Council’s website,
www.frc.org.uk.
The Board
The role of the Board
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’s performance. The Board
also sets the Company’s values and
standards and ensures that its obligations
to shareholders and others are met.
There is a schedule of matters reserved
to the Board for decision, which include
approval of:
• Group strategy
• Annual budget and operating plans
• Major capital expenditure, acquisitions
or divestments
• Interim 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
• Systems of internal control and risk
management.
Other responsibilities are delegated to
Board Committees, details of which can
be found on pages 46 to 51.
In addition to the standing Board
Committees, the Group established in
2006 the Research Advisory Group (RAG)
which is now chaired by Dr Ajai Puri and
comprises external subject matter experts
and senior Tate & Lyle managers. The
focus and composition of the RAG evolved
during the year and the RAG’s remit now
covers reviewing the innovation pipeline
and providing insight into how leading-
edge science and technology can be
applied to enhance the Group’s speciality
food ingredients portfolio. The RAG meets
regularly, principally at the global
Commercial and Food Innovation Centre
in Chicago, USA and Dr Puri provides
regular updates to the Board on the work
of the RAG.
The directors’ responsibilities for the
preparation of financial statements are
explained in the Directors’ Statement of
Responsibilities on page 65. Their statement
on going concern is on page 25.
Operation of the Board
Board meetings
The Board and its Committees meet
regularly according to a schedule linked
to key events in the Company’s corporate
calendar. Ad hoc meetings are also
arranged to consider matters requiring
review and decision outside the scheduled
meetings. Six scheduled Board meetings
were held during the year ended 31 March
2013, including one Board meeting held at
the global Commercial and Food Innovation
Centre in Chicago, USA. Three ad hoc
Board meetings were also held at short
notice to consider proposals relating to
the Group’s strategy and business
transformation programme. The Board also
met offsite for one day to focus on strategy
and, as agreed as part of the 2012 Board
effectiveness review, held a conference
call to review operational performance
when the period between Board meetings
exceeded two months.
Key Board roles and responsibilities
The roles of the Chairman, Chief Executive and Senior Independent Director are
separated and their responsibilities are set out in writing and agreed by the Board.
The Chairman
Key responsibilities include:
The Senior Independent Director
Key responsibilities include:
• The effective operation, leadership and
• Acting as a sounding board for
governance of the Board;
the Chairman;
• Ensuring the effectiveness of the
Board, and each director individually;
• Setting the style and tone of the Board
discussions; and
• Ensuring the directors receive accurate,
timely and clear information.
• Conducting an annual review of
the Chairman’s performance; and
• Being available to shareholders if they
have any concerns that they have
been unable to resolve through the
normal channels.
The Chief Executive
Key responsibilities include:
• Proposing strategy to the Board and
delivering it;
• Running the business;
• Communicating the Board’s
expectations with regard to culture,
values and behaviours; and
• Ensuring the Board is aware of
the executive directors’ views on
business issues.
40
Tate & Lyle PLC Annual Report 2013
Governance
Directors’ attendance at
Board meetings
Directors as at
31 March 2013
Sir Peter Gershon
Javed Ahmed
Tim Lodge
Liz Airey
William Camp
Douglas Hurt
Virginia Kamsky1
Anne Minto1
Dr Ajai Puri
Robert Walker
Former directors
Evert Henkes2
• the ongoing implementation of the
project to create one global IS/IT
platform; and
• talent management and succession
planning activities.
In the 2014 financial year, the Board will
focus in particular on the areas listed on
page 37.
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.
Number of
meetings
attended
9
9
9
8
8
7
3
3
9
8
Evert Henkes ceased to be a director on
30 November 2012, having completed
three terms of three years each. As
disclosed in the Annual Report 2012,
Dr Ajai Puri joined the Board with effect
from 1 April 2012. Virginia Kamsky and
Anne Minto were appointed as additional
non-executive directors with effect from
1 December 2012. Further information on
the selection process is contained within
the Nominations Committee Report on
page 48 and the tailored induction
programme is explained on page 42.
Tenure of non-executive directors
Number of
meetings
9
9
9
9
9
9
3
3
9
9
6
5
1 Joined the Board on 1 December 2012.
2 Ceased to be a director on 30 November 2012.
The rolling programme of items for
discussion by the Board is reviewed at
each Board meeting and updated to reflect
topical matters. All substantive agenda
items have comprehensive briefing papers
which are distributed via the electronic
Board portal, generally five working days
before the meeting. In the few instances
where a director is unable to attend a
meeting, his or her comments on the
briefing papers are given in advance to
the Chairman.
Meetings are structured to facilitate open
discussion, and all directors participate
in discussing strategy, trading, safety,
financial performance and risk
management. Members of executive
management attend Board meetings
and make presentations regularly.
Summary of the Board’s work during
the year
During the year, the Board oversaw the
ongoing transformation of the Group’s
culture and business and considered
all matters within its remit, focusing in
particular on the following:
• safety;
• the performance of the Speciality Food
Ingredients and Bulk Ingredients
business units and the Innovation and
Commercial Development group,
including the impact of the global
Commercial and Food Innovation Centre;
1
5
4
3
1 32% Strategy
2 20% Execution
of strategy
3 14% Business results
4 20% Risk
5 14% Governance
2
3
1
2
1 0 to 3 years 3 directors
2 4 to 6 years 2 directors
3 7 to 9 years 2 directors
In 2013, the Directors agreed to refine the
categorisation of their time to that set out
above to reflect better the nature of the
issues they consider.
Board effectiveness
Board diversity
As set out in the Board’s statement on
diversity, published on the Group’s website,
the Directors believe Board composition is
a key element of Board effectiveness and
each member, and potential member, of
the Board must be able to demonstrate the
skills, experience and knowledge required
to contribute to the effectiveness of the
Board. Subject to that overriding principle,
the Directors believe that the Board’s
perspective and approach can be greatly
enhanced through gender, age and cultural
diversity. It is the Board’s policy to consider
overall Board balance and diversity when
appointing new directors.
Board composition
At the date of this document, the Board
comprises ten directors with deep
knowledge and experience in diverse
business sectors within global markets:
the Chairman, who has no executive
responsibilities; two executive directors;
and seven non-executive directors. The
names and biographies of the directors are
on pages 38 and 39.
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Independence
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 which they
have not resolved through the usual
channels, 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.
As part of the annual Board effectiveness
review, each director goes through a formal
performance review process. All directors
completed this process and, in line with the
Code, Robert Walker and Liz Airey, who
have served for over six years, have been
subject to a particularly rigorous review.
Tate & Lyle PLC Annual Report 2013
Tate & Lyle PLC Annual Report 2013
41
Governance
Corporate Governance continued
Time commitment
All directors have disclosed any significant
external commitments to the Board and
confirmed they have sufficient time to
discharge their duties to Tate & Lyle.
The other significant commitments of the
Directors are set out on pages 38 and 39.
The time commitment of all non-executive
directors and the Chairman is reviewed
annually and the Board is comfortable that
all continue to devote the necessary time
to the Company.
Advice and support
All directors have access to the advice and
services of the Company Secretary, Lucie
Gilbert, who is responsible for ensuring
that Board processes are followed and
that applicable rules and regulations are
complied with. The appointment and
removal of the Company Secretary is a
matter for the Board as a whole. There is
also a formal procedure whereby, in the
furtherance of their duties, directors can
obtain independent professional advice,
if necessary, at the Company’s expense.
Information 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.
Directors receive ongoing training and
updates on relevant issues as appropriate,
taking into account their individual
qualifications and experience. Bespoke
training sessions were held during the
year, including a session on speciality
food ingredients.
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. During the year, in addition to
the Board’s USA visit, as part of their solo
site visit programme, the Chairman and
the non-executive directors visited nine
of the Group’s sites in Europe, the USA
and Asia Pacific between them. These
visits provide directors with the opportunity
to interact with local management and gain
in-depth knowledge about the challenges
being faced by the Group’s operations
across the world. Over the past three
years, directors have visited 22 of the
Group’s key locations.
Directors’ induction programme
Three new non-executive directors joined
the Board during the financial year. On
appointment to the Board, each of the
directors received background reading
about the Group and details of Board
procedures and other matters related to
governance. The Company Secretary then
worked with each of the new directors to
deliver a tailored induction programme,
as shown in the table below.
Director
Dr Ajai Puri
Non-executive director and
Chairman of the Research
Advisory Group
Virginia Kamsky
Non-executive director
Aim of induction programme
To increase Ajai’s knowledge of the
Group’s processes and its people
(in particular the Innovation and
Commercial Development group),
the operation of the Research
Advisory Group and the UK-listed
company environment.
To increase Virginia’s knowledge
of the Group’s business, processes
and its people (in particular the
Group’s operations in China)
and the UK-listed company
environment.
Anne Minto
Non-executive director
To increase Anne’s knowledge
of the Group’s business, processes
and its people.
Details of programme
Ajai attended a formal education session led by an external expert, Jon
Edis-Bates, and the Company Secretary on the role and responsibilities
of a UK-listed company director. He also visited the global Commercial
and Food Innovation Centre in Chicago, USA, the Innovation Centre in
Lille, France and the London head office. During his visits, he met with
senior operational and functional management and members of the
Research Advisory Group, which has since been restructured under
his chairmanship.
Virginia attended a formal education session led by an external expert,
Jon Edis-Bates, and the Company Secretary on the role and
responsibilities of a UK-listed company director. She also visited the
global Commercial and Food Innovation Centre in Chicago, USA, the
Bulk Ingredients business unit’s plant in Decatur, Illinois, the Speciality
Food Ingredients business unit’s applications laboratory in Shanghai,
China and the London head office where she met with senior operational
management and key functional heads.
Anne visited the global Commercial and Food Innovation Centre in
Chicago, the Bulk Ingredients business unit’s plant in Decatur, Illinois,
the Speciality Food Ingredients business unit’s plant in Koog, the
Netherlands and the London head office where she met with senior
operational management and key functional heads. Anne also held
additional meetings with the Executive VP Human Resources and
members of his team to gain a detailed understanding of the operation
of the Group’s HR and remuneration policies and processes.
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Tate & Lyle PLC Annual Report 2013
Governance
Performance evaluation
A review of the Board’s effectiveness is undertaken each year. The process is led either internally or by an external facilitator. The last
external review took place in 2011. In 2012 and again in 2013, the Board decided that the Chairman should facilitate the review.
2012 Board effectiveness review
The progress made since the 2012 evaluation is summarised in the table below:
Recommendations
Strengthen understanding and knowledge of
the speciality food ingredients market.
Update on actions
The Directors attended a training session on speciality food ingredients and additional time is
now allocated to the consideration of the speciality food ingredients markets in Board meetings.
Nominations Committee to increase its focus
on succession planning.
The Nominations Committee undertook a detailed review of succession planning for Executive
Committee members.
Identify and implement opportunities for senior
line managers’ involvement in the Corporate
Responsibility Committee.
The Committee met with additional senior managers as it reviewed items such as business
continuity management and product safety; opportunities for additional involvement for senior
managers will continue to be identified.
Enhance arrangements for updating the Board
where there is an interval of more than two
months between Board meetings.
There was only one occasion where the Board was not due to meet for over two months; briefing
papers from the Chief Executive and Chief Financial Officer were circulated to all directors and a
conference call was held to update non-executive directors on operational activities.
Overhaul the rolling Board agenda to reflect better
the Group’s agreed strategy and focus.
The rolling agenda was overhauled with increased emphasis on strategic issues; it continues to
evolve.
2013 Board effectiveness review:
As part of the 2013 Board review, the Chairman held one-to-one meetings with each director, the Executive VP General Counsel and
the Company Secretary. The main themes and observations were then summarised in a report that was discussed by the whole Board.
It concluded that the Board continued to operate effectively but made a number of recommendations for improvements, as summarised
below. The Company Secretary is monitoring progress which will be reported in the Annual Report 2014.
Recommendations
Increase the amount of time spent on
understanding the market and how customer
relationships are managed.
Agreed actions
The Board will meet regularly with global enterprise account managers.
Enhance knowledge of the innovation pipeline.
Additional time will be allocated to reviewing the development of the innovation pipeline.
Increase the Directors’ focus on talent
management and succession planning.
Having focused on the Executive Committee in the year ended 31 March 2013, the Nominations
Committee will regularly review progress for key roles which are below the Executive Committee.
Identify and implement improvements to Board
reporting in respect of the performance of the
Speciality Food Ingredients business unit.
Both reporting of performance and time allocated for Board discussions will be enhanced during
the year ending 31 March 2014.
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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,
were well prepared and informed about
issues they need to consider, and that their
commitment remained strong. The
Chairman also provided individual
feedback to each director.
The performance of the Chief Executive
and Chief Financial Officer was considered
by the Nominations Committee, in line with
its terms of reference.
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. In addition, the Chairman
held a private meeting with the non-
executive directors to appraise the Chief
Executive’s performance. These reviews
also concluded that both the Chairman
and Chief Executive continued to fulfil their
responsibilities effectively.
The Board agreed that the chairmen of the
Committees should lead the review of their
own committees’ effectiveness. The results
of the reviews were discussed by the
Committees and then by the Board which
concluded that each Committee operated
effectively throughout the year.
Tate & Lyle PLC Annual Report 2013
Tate & Lyle PLC Annual Report 2013
43
Governance
Corporate Governance continued
Re-election
The Board has agreed that all Directors
shall seek re-election on an annual basis.
Details of the recommendations and
actions arising from the Board
effectiveness reviews carried out in 2012
and 2013 are on page 43.
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.
Accountability
Internal control
The Board has overall responsibility for
the Group’s system of internal control
and risk management and for reviewing
its effectiveness.
The objective of internal control within
Tate & Lyle is to support efficient
implementation of the Group’s strategy
and effective operations whilst enabling
it to respond appropriately to significant
business, operational, financial, compliance
and other risks to achieving the Company’s
objectives. The system of internal controls
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
guidance published by the FRC, ‘Internal
Control: Revised Guidance for Directors’
(formerly the Turnbull Guidance). The Board
recognises that internal control systems are
designed to identify and manage, rather
than eliminate, the risk of failure to achieve
business objectives, and can only provide
reasonable and not absolute assurance
against material misstatement or losses
and the breach of laws and regulations.
Internal control system
The Board determines the level of risk that
it is prepared to accept in the organisation
(risk appetite) and oversees the strategies
for significant risks that have been identified.
Executive management works within the risk
appetite and develops the mechanisms and
processes to direct the organisation,
through setting the tone and expectations
from the top, delegating authority and
monitoring compliance.
Line management has primary responsibility
for compliance with Group policies,
principles and compliance requirements.
In certain functions, notably safety and
product quality, executive management has
also established separate assurance teams
to oversee the effective execution of controls.
The risk management function works with
executive management and the business
units to help identify, measure, monitor
and report significant risks. The units
report regularly on progress with the
implementation of the Group’s strategy,
including the impact on the risk
environment, and the key risks are reviewed
regularly by the Board. Further information
on the Group’s risk management process
can be found on page 26.
The internal audit function provides
independent and objective assessment of
the appropriateness and effectiveness of the
Group’s internal control systems to the Audit
and CR Committees, and to the Board.
It has the authority to review any relevant
aspect of the business and a duty to report
on any material weaknesses. The Group
has an annual risk-based internal audit plan
which is approved by the Audit and CR
Committees. It is updated regularly to reflect
changes to the control environment.
The findings from audits are discussed with
executive management and action plans
put in place where appropriate. Progress
against these plans is monitored regularly
by the internal audit function. Summaries of
both audits and progress on any actions are
discussed regularly at meetings of the Audit
and CR Committees.
The Board also commissions external
specialists as appropriate. Given the
significant business transformation activity,
in addition to regular reports from the
internal audit function, the Board continued
to receive reports from external specialists
retained to review key elements of the
transformation programme.
Key features of the internal control system
The Group’s internal control system has a
number of key features which ensure that
risk is monitored and managed throughout
the year, including those listed below.
• The schedule of matters reserved to the
Board ensures that the Directors control,
among other matters, all significant
strategic, financial and organisational
issues.
• A clear organisational structure and limits
of authority in respect of items such as
capital expenditure, pricing and contract
authorisation.
• A comprehensive planning and budgeting
system for all items of expenditure with
an annual budget approved by the
Board. Performance is reported monthly
against budget and prior year results;
significant variances are investigated;
and revised forecasts for the current
financial year and financial projections
for future years are prepared regularly.
• The Group has comprehensive safety,
product quality assurance and
environmental management systems.
Where appropriate, these are
independently certified to internationally
recognised standards; they are also
subject to a regular independent
audit process.
• Regular meetings of the Audit and CR
Committees to oversee the operation of
effective controls. The Committees report
regularly to the Board. In the event that
any significant losses are incurred during
any year as a result of a failure of controls,
a detailed analysis would be provided to
the Audit Committee, CR Committee (if
appropriate), and the Board.
44
Tate & Lyle PLC Annual Report 2013
Governance
to the date of this Annual Report. In view
of the Group’s recent evolution, including
the embedding of the CR Committee within
the governance framework, the activity
following the relaunch of core values and
the first global employee engagement
survey, the annual review was redesigned
to provide insight into all these areas. The
new process also included a two-stage
review to facilitate discussion. The Audit
Committee, CR Committee and the Board
discussed the results of the two-stage
review at their meetings in March and
May 2013.
The 2013 review covered financial,
operational and compliance controls,
values and behaviours and the risk
management process and included
questionnaires and representation letters
completed by management. The internal
audit function monitored and selectively
checked the results of this review, ensuring
that the responses from management were
consistent with the results of its work
during the year. As part of this process,
areas for enhancements to internal
controls, and associated action plans to
deliver them, were identified and delivery
of these is being monitored by the Audit
Committee or CR Committee as
appropriate. The Board considers that
none of the areas identified for
enhancement in relation to the review
constituted a significant weakness.
Remuneration
The Board has delegated to the
Remuneration Committee responsibility
for agreeing the remuneration policy for the
Chairman, Chief Executive, Chief Financial
Officer and senior executives. The
Directors’ Remuneration Report on pages
50 to 62 sets out the principles for
remuneration at Tate & Lyle and includes
details of the role and activities of the
Remuneration Committee.
Controls over financial reporting
The financial reporting control system
covers the financial reporting process
and the Group’s process for preparing
consolidated accounts and includes
policies and procedures which provide
for: the maintenance of records that, in
reasonable detail, accurately and fairly
reflect transactions including the acquisition
and disposal of assets; reasonable
assurance that transactions are recorded
as necessary to permit preparation of
financial statements in accordance with
International Financial Reporting
Standards; and reasonable assurance
regarding prevention or timely detection
of unauthorised use of the Group’s assets.
In addition, specific disclosure controls
and procedures are in place to support
the approval of the Group’s financial
statements. Twice a year representatives
from the business units certify that their
reported information provides a true and
fair view of the state of the financial affairs
of the business unit and its results for the
period. The results of this financial
disclosure process are reported to the
Audit Committee.
During the year, the Group rolled out the
new global IS/IT system across the majority
of our European business. As part of this
process, additional control processes were
put in place to mitigate risks arising on
implementation of the system.
Joint ventures
All material joint ventures follow either the
Group’s formal systems of internal control,
or their own internal control procedures.
These separate procedures are subject
to review by the Group’s internal audit
function and the Group works with its
partners to ensure that action plans are
in place to address any issues identified
during those reviews.
2013 review of the effectiveness of the
system of internal control
Each year, the Board, with the assistance
of the Audit and CR Committees, conducts
a review of the effectiveness of the systems
of risk management and internal control.
In 2013, this review was facilitated by the
internal audit function and covered the
period from the start of the financial year
Relations with Shareholders
Shareholder communications
The Chief Executive, Chief Financial Officer
and Group VP Investor & Media Relations
maintain a regular programme of visits and
presentations to institutional shareholders
both in the UK and overseas. During the
year, the Chairman undertook separate
visits to institutional shareholders and the
Senior Independent Director also met with
a number of institutional shareholders.
Feedback on interaction with institutional
shareholders is provided to all directors.
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 receives an annual briefing from the
Company’s external 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 communications with shareholders.
Key announcements, financial reports
and other information about the Group
can be found on the Company’s website,
www.tateandlyle.com.
Annual General Meeting (AGM)
The 2013 AGM will be held at The Queen
Elizabeth II Conference Centre in London
on Wednesday 24 July 2013 at 11.00 am.
Full details are set out in the Notice
of Meeting.
Shareholders have the opportunity to
put questions to the Board at the AGM 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.
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Governance
Corporate Governance continued
Audit Committee Report
Dear Shareholder
During the year, in addition to our usual
matters, including the financial results
for the full year, half year and the interim
management statements, applicable
accounting policies and going concern
assumptions, we continued with our
practice of conducting in-depth reviews
of key topics. The key topics we
reviewed included risk management,
controls in the Speciality Food
Ingredients business unit and Group
financial control standards.
Our policy on auditor independence
states that the lead engagement partner
is required to rotate after a term of five
years. The current lead engagement
partner, Paul Cragg, will reach the end
of his five-year term at the forthcoming
AGM. In the year, the Committee
oversaw a process during which a
number of potential successors were
considered and then endorsed the
appointment of a new lead engagement
partner, John Waters. A robust transition
programme has been agreed and as part
of this, John has attended Committee
meetings since autumn 2012.
I also led a review of the Committee’s
effectiveness which concluded that the
Committee was operating effectively
and identified some areas for increased
focus. As part of this process, we
agreed the topics for our programme
of detailed reviews including a review
of the operation of the global Shared
Service Centre in Łód ´z, Poland and IT
security. We also updated the terms of
reference to reflect changes in practice
at Tate & Lyle and the UK corporate
governance landscape.
Liz Airey
Chairman of the Audit Committee
The Audit Committee 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,
are available on the Company’s website,
www.tateandlyle.com.
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 Group’s relationship
with the external auditors including
the level of fees;
• 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 reappointment
of the Group’s external auditors.
The Committee met five times during the
year. Membership of the Committee and
attendance during the year were as follows:
Directors as at
31 March 2013
Liz Airey
(Committee Chairman)
Douglas Hurt
Anne Minto1
Former directors
Evert Henkes2
Number of
meetings
Number of
meetings
attended
5
5
2
3
5
5
2
3
1 Joined the Board and the Audit Committee on
1 December 2012.
2 Ceased to be a director and a member of the Audit
Committee on 30 November 2012.
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.
Two of our members meet this requirement:
Liz Airey was an investment banker and
former finance director of Monument Oil
and Gas plc and Douglas Hurt is Finance
Director at IMI plc.
The Chief Financial Officer, VP Group Audit
and Assurance, Group VP Finance and
Control, Executive VP General Counsel
and representatives of the external auditors
are normally invited to attend each meeting.
The Chairman of the Board and Chief
Executive also attend meetings of the
Committee by invitation. In addition, the
Committee seeks to further enhance its
exposure to the business through its
programme of key topics for review, which
involves operational and other key senior
managers presenting to the Committee.
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.
Independence of the external
auditors
The Group’s external auditors are
PricewaterhouseCoopers LLP (PwC)
and the Committee operates a policy
to safeguard their objectivity and
independence. 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 also 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
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Tate & Lyle PLC Annual Report 2013
Governance
supply non-audit-related services sets out
these arrangements.
The policy on auditor independence was
reviewed and updated during the year.
The Committee also reviewed and
approved a number of proposals falling
under the remit of this policy including the
engagement of PwC in respect of the
review of certain disclosures contained in
the statement on Corporate Responsibility
on page 33 and the appointment of a
former PwC employee.
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. The total amount
paid in respect of the Group audit, audit of
subsidiaries and the half-year review was
£1.9 million and £0.3 million was paid in
respect of non-audit-related services.
Work undertaken during the year
In addition to the activities outlined in the
statement from the Committee Chairman,
during the year and up to the date of this
Annual Report, the work undertaken by
the Committee fell under four main areas:
financial reporting, oversight of the external
auditors, oversight of the internal audit
function and internal control and risk
management. The Committee’s work in
each of these areas is described below.
Financial reporting
At each of its meetings during the year
the Audit Committee reviewed accounting
papers prepared by management and
determined, with the support of the
external auditor, the appropriateness
of accounting policies, estimates, and
judgements. The main areas of focus
are listed below:
• Management’s judgement of the level of
provisions required in respect of ongoing
litigation, in particular claims by American
Sugar Holdings (ASR) relating to the
sale of the EU Sugars business, and by
Whitefox Technologies Limited in respect
of the ongoing commercial dispute.
In the case of EU Sugars, based on
legal counsel’s assessment of formal
proceedings served by ASR, the
Committee was satisfied that
management’s provision is reasonable
and appropriate at this stage of the
process. In the case of Whitefox, the
Group has received an offer to settle in
its favour and consequently the brought-
forward provisions have been released.
• The Committee reviewed the
assumptions advised by the Group’s
external actuary which have driven an
increase in the pension and healthcare
net liability and accepted these to be
reasonable. The Committee also
reviewed and agreed management’s
proposed method of accounting for the
November 2012 partial buy-in of the UK
Group defined benefit scheme, relying
on calculations performed by the
external actuary.
• The value of intangible assets, goodwill,
and tangible assets were reviewed
against management’s expectation of
future performance of the underlying
business units, including discussion of
the discount rates used, and forecast
assumptions and sensitivities.
The Committee was satisfied that
no impairment charges, or reversal
of impairments, were required.
• The key judgements made in estimating
the Group’s tax charge including
provisions relating to certain territories
where the Committee reviewed the
status of ongoing discussions with the
tax authorities and supported
management’s position as reasonable.
External audit
PwC (or its predecessor firms) has been
the Company’s auditors since 1989.
Following the conclusion of the audit for the
year ended 31 March 2012, the Committee
conducted an internal review of the
effectiveness of the auditors (the last
external review having been undertaken
in 2010). As part of the process, the
Committee reviewed the auditors’
performance against criteria set at the
start of the audit, together with feedback
from management and the Public Report
on the 2011/12 Inspection of
PriceWaterhouseCoopers LLP issued by
the FRC in June 2012, and concluded that
the external audit process was operating
effectively and PwC continued to provide a
good service to Tate & Lyle; the Committee
subsequently agreed that there was no
need to undertake a tender at present.
Accordingly the Committee has
recommended 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 reappointed will be proposed at
the AGM. The Committee has discussed
the provisions of the September 2012
iteration of the Code which applies to the
Company’s next reporting period and
includes a provision to tender the external
audit at least once every ten years, and
intends to comply with this provision.
The Committee is mindful of the FRC’s
commentary regarding the timing of
tender processes and has already had
initial discussions on the likely timing
of the tender.
Internal audit
The Committee reviewed the remit,
organisation, annual plan and resources
of the internal audit function and undertook
a review of its effectiveness. The review
concluded that the function continued to
strengthen and make a significant
contribution to the internal governance
of the Group. A number of areas for
improvement in processes were identified
and following the review, the internal audit
charter was revised to reflect the function’s
responsibilities to the Corporate
Responsibility Committee.
Internal control and risk management
The Committee continued to receive and
consider regular reports from management
and the VP Group Audit and Assurance
on the effectiveness of the Group’s risk
management system. The reports from
the latter included the findings from reviews
of internal financial controls and actions
to address any weaknesses in controls.
Throughout the year, the Committee
focused in particular on the impact of the
implementation of a new IS/IT platform
in Europe and associated changes to the
control environment together with any
potential impact on financial reporting
processes. It also reviewed the Group
assurance map outlining the key risks and
associated assurance processes. The
Committee also reviewed the output from
the annual review of the effectiveness of
internal financial reporting controls and
then reported to the Board on this review.
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Tate & Lyle PLC Annual Report 2013
47
Governance
Corporate Governance continued
Nominations Committee
Report
Dear Shareholder
Along with the usual matters we review,
such as diversity and the performance
of members of the Executive Committee,
we focused on two key areas during the
year: Board composition and executive
succession planning.
During the year, we recommended
the appointment of two new directors.
Details of our process are set out below.
We also addressed a key action arising
from the 2012 Board effectiveness review,
namely executive succession planning
and we also enhanced our processes
relating to succession planning for
key non-executive Board roles, in
particular the timelines for agreeing
successors for the chairmanship
of the Board’s Committees.
During the year, I led a review of the
effectiveness of the Committee which
indicated that the Committee was
functioning effectively, and the rolling
programme of items for consideration
was modified in light of a number of
recommendations made during the
review process.
Sir Peter Gershon
Chairman of the Nominations
Committee
The Nominations Committee comprises
the Chairman of the Company, the Chief
Executive and all of the non-executive
directors. Its terms of reference, which are
reviewed annually, 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:
Directors as at
31 March 2013
Sir Peter Gershon
(Committee Chairman)
Javed Ahmed
Liz Airey
William Camp
Douglas Hurt
Virginia Kamsky1
Anne Minto1
Dr Ajai Puri
Robert Walker
Former directors
Evert Henkes2
Number of
meetings
Number of
meetings
attended
6
6
6
6
6
2
2
6
6
4
6
6
6
4
4
2
2
6
6
4
1 Joined the Board on 1 December 2012.
2 Ceased to be a director on 30 November 2012.
The Committee has a formal calendar of
items for consideration at each meeting
and meets at least twice a year.
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
process 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
agreed specifications for two new non-
executive directors, one who could
strengthen the Board’s understanding
of the Chinese market and one who
would also serve on the Remuneration
Committee. The Committee agreed to
retain two external search consultants to
focus on one role apiece, given the nature
of the two specifications. Egon Zehnder
and KornFerry Whitehead Mann were
subsequently appointed. Both
organisations have a good understanding
of the Group’s business: Egon Zehnder
assists in the indentification of individuals
to fill other senior executive roles and
KornFerry Whitehead Mann assists the
Group with talent management activities.
In line with the Board’s stated policy, both
are signatories to the Executive Search
Firms Voluntary Code of Conduct. Both
consultancies then prepared a ‘long list’
comprising a diverse range of potential
candidates meeting the specification.
The search consultants and the Chairman
then identified a subset of this long list to
meet with the Chairman. Following these
initial interviews, the Chairman
recommended a short list of candidates
to be interviewed by the Chief Executive
and two other members of the Committee.
The Committee subsequently discussed
the results of these interviews and also
reviewed the candidates’ anticipated ability
to provide the necessary time commitment
to Tate & Lyle. The Committee
recommended that Virginia Kamsky and
Anne Minto be appointed as additional
non-executive directors. This
recommendation, together with the
Committee memberships proposed for
both directors, was approved by the Board
and Virginia Kamsky and Anne Minto joined
the Board on 1 December 2012.
Succession planning
The Committee reviewed succession plans
for Executive Committee roles and the
progress of action plans to address any
gaps. The Committee will continue to
review progress regularly.
During the year and up to the date of this
Annual Report, the work undertaken by the
Nominations Committee included:
Board composition
Following the review of the Board’s
composition, the Committee drew up and
Performance evaluation
The Committee undertook a performance
evaluation of each of the members of the
Group Executive Committee and reported
its conclusions to the Remuneration
Committee.
48
Tate & Lyle PLC Annual Report 2013
Governance
Corporate Responsibility
Committee Report
Dear Shareholder
As explained in the Corporate
Responsibility statement on page 30,
the Group has no higher priority than
safety and we continued to review the
Group’s safety performance at each
meeting. While our recordable incident
rate remained the same, we had three
more lost-work cases in the year. The
oversight of ongoing safety initiatives
to address this is a key focus for the
Committee this year.
We also undertook a detailed review
of the business continuity management
controls and processes. Senior
managers with specific responsibilities
for these processes presented to the
Committee as part of this review
process, in line with one of the key
actions arising from the 2012 Board
effectiveness review (see page 43).
The Committee’s role within the Group’s
governance framework continued to
evolve during the year and we updated
the terms of reference to clarify the
Committee’s role in the Group’s overall
system of internal control.
The annual review of Committee
effectiveness indicated that the
Committee continued to operate
effectively, and also identified some
process improvements. We
subsequently restructured our annual
programme of items for review and
instigated a revised approach to
management presentations at
Committee meetings.
William Camp
Chairman of the CR Committee
The Committee comprises three non-
executive directors and the Chairman of the
Company. Its terms of reference, which are
reviewed annually, can be found on the
Company’s website, www.tateandlyle.com.
The Committee met four times during the
year. Membership of the Committee and
attendance during the year were as follows:
Directors as at
31 March 2013
William Camp
(Committee Chairman)1
Liz Airey
Sir Peter Gershon1
Dr Ajai Puri
Number of
meetings
Number of
meetings
attended
4
4
4
4
4
4
4
4
1 William Camp succeeded Sir Peter Gershon as
Chairman of the Committee on 1 August 2012.
Main responsibilities of the
CR Committee
The main responsibilities of the
Committee include:
• Monitoring the Group’s approach to
corporate responsibility and ensuring
it aligns with Group strategy;
• Reviewing the effectiveness of the
Group’s policies and procedures
relating to a safe working environment;
• Approving, or recommending to the
Board for approval, CR policies;
• 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 whistleblowing
arrangements; 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.
Work undertaken during the year
During the year and up to the date of this
Annual Report, in addition to the work
outlined in the Committee Chairman’s
statement, the work undertaken by the
CR Committee included the following:
Safety
The Committee reviewed the Group’s
initiatives to improve workplace safety
performance in general and contractor
performance in particular.
Product safety continued to be an area of
focus and the Global VP Quality and Food
Safety provided an update on the operation
of the Group’s quality assurance processes.
Diversity and inclusion
The Committee received an update on the
implementation of diversity and inclusion
initiatives and agreed the parameters for
external reporting on the Group’s
gender diversity.
Business practices
The Committee reviewed the
implementation of the Group’s new Code
of Ethics and agreed an ethics and
compliance strategy for the Group which
will continue to be subject to regular review
by the Committee.
In addition, the Committee discussed the
increased use of the independent
confidential reporting (whistleblowing) line
which had been achieved through the
implementation of actions in 2012 to
improve awareness of that line.
Having approved the scope of a new global
Community Involvement Programme in
2012, the Committee received an update
on implementation and also approved two
new global partnerships, details of which
can be found on page 35.
Environment
The Committee remained focused on the
impact of the Group’s operations on the
environment and reviewed the Group’s
environmental performance and initiatives
on a regular basis.
Internal control
The Committee received regular reports
from management and the VP Group Audit
and Assurance in respect of the policies,
systems and controls in place in respect
of the risks falling within the Committee’s
remit. The Committee reviewed the output
from the annual review of the effectiveness
of controls falling within its terms of
reference and then reported to the Board
on this review.
Corporate responsibility: pg 29
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Tate & Lyle PLC Annual Report 2013
49
Governance
Directors’ Remuneration Report
Directors’
Remuneration Report
Dear Shareholder
As a Committee, we believe that our
approach to remuneration provides a
relatively simple but effective overall
framework that is aligned with long-term
success and returns to shareholders, and
requires individual executives to invest
in material long-term shareholdings.
In that context, we have not made any
material changes to the remuneration
framework during the year. However,
I would like to draw attention to some
headlines from the Report, to illustrate the
Committee’s approach and the principles
that govern our decision making.
Our approach to remuneration remains
a key part of the Company’s business
strategy, with the following key themes:
• cultural change – incentive
arrangements to keep executives
focused on long-term growth to deliver
enhanced value for shareholders
• clarity and simplicity are important
– our incentive arrangements are
clearly linked to balanced financial
metrics over both the short and
long term
• personal investment is a prominent
feature – in comparison with other
FTSE 100 companies, the executive
shareholding requirements we have
established are more demanding and
extend to a greater number of senior
executives in the organisation.
The Committee’s key activities during
the year included:
• consultation with shareholders ahead
of the renewal of our Performance
Share Plan, with the inclusion of
claw-back provisions which will apply
from 2013; the PSP was approved
at the 2012 AGM, with 98% of
shareholders who voted in support
of the resolution
• reflecting our commitment to
good corporate governance, we
reviewed the independent advisor
to the Committee as part of a
planned process.
I led the annual review of the
Committee’s effectiveness. The 2013
review concluded that the Committee
appropriately fulfilled its role and carried
out its duties against the responsibilities
described in its terms of reference.
Robert Walker
Chairman of the Remuneration
Committee
About this 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 UK Corporate
Governance Code. PricewaterhouseCoopers
LLP has audited such content as required
by the Act (the tabular information on pages
60 to 62). A resolution to approve this
Report will be proposed at the AGM on
24 July 2013.
Remuneration Committee
The Remuneration Committee comprises
independent non-executive directors and
the Chairman of the Board. Evert Henkes
served as Chairman of the Committee until
30 November 2012, and was succeeded
from 1 December 2012 by Robert Walker.
The Committee met four times during the
year. Membership and attendance during
the year were as follows:
Directors as
at 31 March 2013:
Robert Walker
(Committee Chairman)1
Sir Peter Gershon
William Camp
Anne Minto2
Dr Ajai Puri
Former directors
Evert Henkes3
Number
of meetings
Meetings
attended
4
4
4
2
4
2
4
4
3
2
4
2
1 Robert Walker succeeded Evert Henkes as
Chairman of the Committee on 1 December 2012.
2 Joined the Board and the Remuneration
Committee on 1 December 2012.
3 Ceased to be a director and Chairman of the
Remuneration Committee on 30 November 2012.
The Company Secretary serves as
secretary to the Committee. The Chief
Executive, the Executive Vice President,
Human Resources, the Vice President,
Global Compensation and Benefits and the
Executive Vice President, General Counsel
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
has appointed independent external
advisors, as described below.
The Committee has a formal calendar of
items for consideration. The Committee’s
terms of reference, which are reviewed
annually, are available on the Company’s
website, www.tateandlyle.com.
Main responsibilities of the
Remuneration Committee
The main responsibilities of the
Committee include:
• Assessing the appropriateness of
executive remuneration in the context
of the Company’s strategy, priorities
and competitiveness, taking into
account data from independent,
external sources;
• Setting the detailed remuneration of
the executive directors, designated
members of senior management,
and the Company Chairman (in
consultation with the Chief Executive),
including: base salary or fees, annual
bonus, long-term incentives, benefits
and terms of employment including
those relating to the termination of
services;
• Setting performance targets for
awards made to senior executives
under the annual bonus plan and
the long-term incentive plan and
reviewing performance outcomes; and
• Reviewing the broader operation of
the annual bonus and Performance
Share Plans, including participation
and overall award levels.
50
Tate & Lyle PLC Annual Report 2013
Governance
Committee activities during the year
As part of the review of the Committee’s
effectiveness referred to above, the
Committee considers the proportion of
its time that has been allocated to various
matters under its terms of reference. For
the calendar year 2012, this is illustrated
in the chart below:
Time analysis – year to
31 December 2012
6
5
1
1
2
4
3
1 14% Senior executive
remuneration
2 21% Annual bonus plan
3 21% Share plans
4 13% Communications1
5 8% Market practice/
regulatory
consultations2
6 23% Other – including
review of advisors3
1 ‘Communications’ includes consulting with
shareholders on the renewal of the
Performance Share Plan and the preparation of
the Directors’ Remuneration Report, as well as
shareholder engagement ahead of the AGM.
2 ‘Market practice/regulatory consultations’
includes time spent contributing to the
government consultations on executive
remuneration proposals, and the Committee’s
update on market practice (led by the
external advisor).
3 ‘Other’ includes matters of routine business
as well as the review of external advisors that
was conducted during 2012.
Committee advisors
Hewitt New Bridge Street (HNBS) was
appointed by the Committee in the role
of independent advisor and served in that
capacity from 2005 until November 2012.
During the year, the Committee conducted
a review of its external advisor as part
of a planned process, in keeping with
Tate & Lyle’s commitment to good
corporate governance. The review resulted
in Deloitte LLP being appointed by the
Committee to replace HNBS with effect
from November 2012. Both HNBS and
Deloitte are signatories to the Remuneration
Consultants’ Code of Conduct, giving
additional confidence to the Committee
that their advice is objective and that they
are independent of conflicts of interest.
In addition to market remuneration data
provided by HNBS and Deloitte, the
Committee received total shareholder
return data from Kepler Associates, and
Linklaters provided general legal advice
on remuneration and share plan matters.
During the year ended 31 March 2013,
HNBS and Kepler Associates provided no
other services to the Group, Deloitte LLP
provided advice on internal audit, corporate
finance, systems and tax compliance and
Linklaters provided legal advice on a range
of matters.
Remuneration strategy and policy
The remuneration strategy and policy
described here were established in 2010
following a review which included extensive
consultation with major shareholders. Both
strategy and policy are carefully aligned
with the Company’s business strategy,
by placing a clear emphasis on driving
Company performance, through incentives
that are aligned with the key performance
indicators which in turn link directly to our
business strategy. In this way, we maintain
a keen focus on delivering long-term
growth, thereby enhancing long-term
value for shareholders.
Strategy
The Company’s remuneration strategy
is to provide packages that attract, retain
and motivate high-calibre individuals to
deliver superior operational performance
and outstanding financial results. These
outcomes must be achieved in a way
that aligns with the Group’s core values
and Code of Ethics, and that fosters
sustainable, profitable growth. To achieve
these aims, packages must be:
• aligned to shareholders’ interests
• sufficiently competitive
• designed to encourage a focus on
long-term, sustained performance and
risk management
• fair and transparent
• consistent across the Group.
Policy
To achieve the strategy, the policy for the
remuneration of executive directors and
senior executives includes:
• setting base salaries around the market
median
• rewarding genuinely stretching, superior
performance with upper quartile levels
of remuneration
• providing an appropriate balance
between reward in the short and
long term, and between reward that
is fixed and variable
• providing a competitive, balanced
package of benefits.
We intend to retain this policy in the
coming year.
Employee and investor
perspectives
Broader employment conditions
within the Company
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, and ensuring that the same
principles apply in setting performance
targets for executives’ incentives as for
other employees of the Group.
Investors’ views and corporate
governance
As noted above, the remuneration strategy
and policy described here were established
in 2010 following a review and extensive
consultation with major shareholders.
The Committee (led by the Committee
Chairman) engages with our major
institutional shareholders each year
specifically on remuneration topics,
alongside the Board’s wider-ranging
shareholder engagement programme.
Following consultation, shareholders
overwhelmingly approved both our
remuneration policy and the continuing
use of the Performance Share Plan as our
long-term incentive at the AGM in 2012. The
Committee also receives regular updates on
investors’ views and corporate governance
matters. These lines of communication
ensure that emerging best practice
principles are factored into the Committee’s
decision making during the year.
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Tate & Lyle PLC Annual Report 2013
51
Governance
Directors’ Remuneration Report continued
Overview of remuneration arrangements
The current remuneration package for executive directors consists of base salary, annual bonus, long-term incentives, and retirement
and other benefits as described in the table below.
Time frame
Short term
(paid monthly)
Purpose
To provide fixed
remuneration that
reflects the market
value of the individual,
their skills and experience
and performance
Fixed/variable
Fixed
Description
• Base salaries are positioned at around the median of
the relevant market (the 50th to 130th largest UK-listed
companies), and taking account of personal performance
• Base salary reviews take into account increases awarded to
employees below executive level, and the impact on pension
and other consequences of increases
Fixed
• Retirement benefits are defined contribution in nature: the
Short term
(paid/accrued
monthly)
Short term
(annually)
Performance-
related (variable)
Chief Executive has a cash allowance of 35% of base salary;
the Chief Financial Officer has a cash allowance of 25% of
base salary
• Other employment benefits include car (or car allowance),
health insurance, group income protection and, where
appropriate, life cover
• Three performance metrics apply: profit growth is given
the greatest weighting, followed by sales growth and cash
conversion
• 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
• A minimum profit hurdle applies before any bonus is payable
against any of the metrics; for the maximum bonus to be
payable, performance in all three metrics is required to be
outstanding
• The maximum cash bonus is 100% of salary; any annual
bonus above 100% of base salary is delivered in
Tate & Lyle PLC shares which are deferred for two years;
maximum cash and share bonus is 175% of salary
• ‘Claw back’ provisions apply, which means cash and share
elements may be recouped in specific circumstances
Component
Base salary
Employment
and retirement
benefits
Short-term
incentive:
annual bonus
To provide benefits in
line with the market,
and, in the case of
pensions, with low
financial risk to the
Company
To support the
Company’s strategy
by rewarding the
achievement of the
Company’s annual
performance objectives
relating to profit growth,
sales growth and cash
conversion
Long-term
incentive:
Performance
Share Plan
To support the Company’s
strategy by incentivising
sustained profit growth
and capital efficiency over
successive three-year
performance periods,
and to help retain senior
executive talent
Long term
(three years)
Performance-
related (variable)
• Performance shares that vest after three years, subject to
demanding performance requirements
• Two performance metrics apply: growth in earnings per share
and return on capital employed
• The Committee has flexibility to make awards of up to 300%
of base salary if appropriate to ensure market
competitiveness and taking account of the Company’s
performance
• Only 15% of the award vests at threshold performance;
outstanding performance is required for 100% vesting
• ‘Claw-back’ provisions apply to awards made from 2013,
which means they may be recouped in specific
circumstances
Personal share
ownership
requirements
To strengthen
long-term alignment
of interests between
senior executives
and the Company’s
shareholders
Long term
(minimum
holdings
retained for
the duration
of employment)
Variable
(directly affected
by share price
performance)
• The Chief Executive and the Chief Financial Officer have
target share ownership requirements of four and three times
base salary respectively
• Similar share ownership requirements extend to Executive
Committee members (at three times salary), and to a broader
group of executives in senior leadership roles (at a level equal
to their salary)
52
Tate & Lyle PLC Annual Report 2013
Governance
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 potential value from long-term
incentive awards under the Company’s
Performance Share Plan.
The following sections provide more detail about each component of remuneration.
Base salary
Executive directors’ salaries are reviewed annually, with effect from 1 April. At the 2013
review, the Committee agreed that no changes would be made to executive directors’
salaries for the year ahead, taking current market positioning into account. The average
increase awarded to other UK-based employees was approximately 3%.
Executive directors’ base salaries are shown in the table below.
2013
£
721 000
405 820
As at 1 April
2012
£
721 000
405 820
Target performance
Chief Executive
Javed Ahmed
Tim Lodge
1
1 53% Fixed pay
2 47% Variable pay
Annual bonus
Three performance factors determine annual bonus awards, as shown in the table below.
2
Chief Financial Officer
1
1 58% Fixed pay
2 42% Variable pay
2
Stretch performance
Chief Executive
Performance
metric
PBTEA
Net sales less
cost of raw
materials
Cash
conversion
cycle
Definition
Adjusted profit before tax,
exceptional items, amortisation
and post-retirement benefit
interest.
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; it is based on
the average of the four
quarter-end numbers
Rationale
Measures the underlying profit generated by
the business and whether management is
converting growth into profit effectively
Measures whether management is growing the
business: by assessing growth after deducting
the cost of raw materials, this metric better
reflects the value added by the business
Measures whether the business is managing its
working capital and converting profit into cash
effectively
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1 22% Fixed pay
2 78% Variable pay
2
These metrics are measured on the basis of constant exchange rates for the Group’s
continuing operations. The Committee reviews and approves the performance
outcomes, considers the Group’s safety performance and then may make adjustments
on an exceptional basis to ensure that the results are a true reflection of the actual
performance of the Company.
Chief Financial Officer
1
1 21% Fixed pay
2 79% Variable pay
2
The bonus structure described here applied to the year ended 31 March 2013; we
propose to retain this structure for the coming year.
How the bonus is determined
Before any bonus is payable, a minimum level of profit has to be achieved by the
Company, regardless of performance against other metrics.
For each performance metric, there is a corresponding multiplier, which varies between
threshold, target and stretch levels of performance. Once the minimum profit threshold is
achieved, bonuses are calculated by applying the ‘multipliers’ which have the effect of
increasing or decreasing the value of the bonus depending on performance against each
metric in turn.
Tate & Lyle PLC Annual Report 2013
53
Governance
Directors’ Remuneration Report continued
To achieve the maximum payout, performance against all three factors must be at or above the stretch level.
Target bonus
(% of base salary)
Chief Executive (75%)
Chief Financial
Officer (50%)
PBTEA
performance
multiplier
(once profit exceeds the
minimum threshold)
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
Relative weighting of bonus metrics
PBTEA is the most important of the three metrics, so multipliers for the PBTEA factor are more heavily ‘geared’ than for the other two
metrics, that is, improvements in PBTEA have the greatest impact on bonus payments. All multipliers and their weightings are agreed
by the Committee when targets are set at the start of the year, reflecting the importance of each of the metrics in the context of the
progress made against the Company’s long-term business strategy.
The following charts illustrate the relative weighting associated with each metric at threshold, target and stretch levels of performance.
Threshold
Target
Stretch
1
3
1
2
1
3
2
1 Profit
2 Net sales growth
3 Cash conversion
Bonus outcomes for the year ended 31 March 2013
The table below shows, for each metric, the performance required to achieve maximum bonus and the actual 2013 result relative to
the prior year’s performance. It also shows the corresponding bonus outcome. All numbers are shown at constant exchange rates.
Performance
requirement
to achieve
maximum
bonus
+8.3%
Performance
factor
PBTEA
Actual
performance Performance
3.9%
Between
threshold
and target
Net sales less
cost of raw
materials
Cash
conversion
cycle
+7.3%
4.6%
Between
threshold
and target
Improve by
7.6%
‘Worsen’
13.5%
Below
threshold
Operating profit growth in Bulk Ingredients of 7% (strong US and EU liquid
sweeteners offset by weaker US ethanol and aflatoxin); Speciality Food Ingredients
profit in line with the prior year with 8% sales growth offset by step change in fixed
costs associated with the restart of our SPLENDA® Sucralose facility in McIntosh,
Alabama and business transformation initiatives; net interest broadly in line.
Pass through of higher corn costs in most product lines including liquid
sweeteners and industrial starches in the US, starch-based speciality ingredients
in SFI, offset by challenging market conditions in US ethanol and higher corn
prices in the EU during the second half (which we are unable to hedge).
This lengthened due to an increase in working capital arising from: higher
inventory in the US impacted by higher corn prices and aflatoxin; and higher
sucralose inventory following the restart of production at our SPLENDA®
Sucralose facility in McIntosh, Alabama.
On the basis of these performance outcomes, an annual bonus was awarded by the Committee of 32% of base salary for the
Chief Executive and 22% of base salary for the Chief Financial Officer.
Any bonus amount up to 100% of base salary is paid in cash. Any excess above 100% of base salary is paid in the form of deferred
shares. The shares are released after two years subject to the executive remaining in service with the Company, and carry the right
to receive a dividend equivalent between award and release.
54
Tate & Lyle PLC Annual Report 2013
Governance
Claw-back provisions
Both the cash and share elements are subject to ‘claw-back’ provisions, which means that 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
an act of gross misconduct.
Long-term incentive – Performance Share Plan
The structure of the current Performance Share Plan (PSP) was developed in 2010 to reflect the business strategy following detailed
consultation with major shareholders. The PSP closely aligns executive directors’ and senior executives’ interests with the strategy and
the interests of shareholders over the long term, and is therefore an important component of the overall package.
Ahead of the AGM in 2012, we consulted with shareholders representing approximately 45% of our issued share capital on a specific
resolution to approve a renewal of the PSP, as shareholder approval for the 2003 PSP would expire at the end of its ten-year life. No
changes to key terms of the PSP were proposed as part of this process, including the maximum award levels that had been permitted
since 2010 and the choice of performance conditions that apply (as described below). Shareholders voted overwhelmingly to approve
the renewal of the PSP at the 2012 AGM, with 98% of shareholder votes cast in support of the resolution.
Maximum award level
Since the 2010 AGM, awards to the executive directors and other senior executives have been granted at the discretion of the
Committee, with flexibility for the Committee to make awards of up to 300% of base salary where necessary to ensure market
competitiveness, while taking Company performance into account.
Performance conditions
The release of awards depends on the Group’s performance during the three-year performance period beginning on 1 April in the year
of the award. For awards made since 2010, the performance conditions comprised two elements, explained in the table below,
consistent with the principles established following the review and consultation with shareholders at that time.
Performance
measure
Adjusted diluted
earnings per share
(EPS)
Weighting
50%
Definition
• 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 pre-determined targets
Adjusted return on
capital employed
(ROCE)
50%
• Performance is measured by the adjusted ROCE on continuing operations
achieved at the end of the three-year performance period against the
pre-determined targets
• Importantly the ROCE outcome would be adjusted downward in the
event of any asset impairment, by adding this back into capital employed;
this is to encourage a prudent investment strategy
• For this reason, in the event of there being an impairment of assets
during the performance period, the ROCE figure for PSP purposes
can be significantly lower than the unadjusted ROCE number reported
in the Company’s accounts
Rationale
The Committee
selected this metric as
it is a key determinant
of shareholder value
creation
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
The Committee reviews the appropriateness of targets ahead of the grant of awards in any year to ensure these remain sufficiently
stretching. In practice, no changes to the performance targets have been made since they were established in 2010, and accordingly
shares awarded under the PSP in 2010, 2011 and 2012 vest in accordance with the schedule set out in the table below.
G
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Percentage of award vesting
0%
15%
On a straight line between 15% and 100%
100%
CAGR of adjusted diluted EPS
during the performance period
(50% of award)
Below 6%
6%
Between 6% and 15%
15% or more
Adjusted ROCE at end
of performance period
(50% of award)
Below 13.4%
13.4%
Between 13.4% and 16.4%
At 16.4% or above
Before any shares are released, the Committee must also be satisfied that the level of vesting determined by performance against these
targets is justified by the broader underlying financial performance of the Company.
Tate & Lyle PLC Annual Report 2013
55
Governance
Directors’ Remuneration Report continued
Awards vesting by reference to performance to 31 March 2013: 2010 PSP award
PSP awards made in 2010 were dependent on EPS growth and ROCE targets as described above, with each condition applicable
to half of the award. Performance against these conditions and the vesting outcome is indicated in the table below.
Performance
condition
EPS growth
ROCE
Proportion of
total award
50%
50%
Level of vesting
for this element
of the award
Performance
outcome
16.0% growth 100%
100%
17.0% growth
Combined vesting outcome
Based on the combination of EPS growth over the period and the
level of ROCE achieved in the year ended 31 March 2013, 100%
of the PSP awards made in 2010 have vested
The Committee also considered the broader underlying financial performance of Tate & Lyle over the performance period, to ensure
that vesting results based on the performance outcomes were consistent with a broader view of the financial health and performance
of the business.
Awards granted in the year to 31 March 2013
During the year ended 31 March 2013, the Company made awards under the 2003 PSP, and the Committee approved awards to
executive directors of up to 300% of base salary, taking into account competitive need and Company performance to date.
Claw-back provisions
Awards made under the PSP from 1 April 2013 are subject to ‘claw-back’ provisions for a period following the vesting date and
extending to the fifth anniversary following the date of grant. During this period, the Committee may determine that an award will
lapse wholly or in part (or may require that a participant shall repay up to 100% of the value of any award that has vested by virtue of
performance), in the event of circumstances including the following: material misstatement of financial results; misconduct which
justifies, or could justify, summary dismissal of the participant; or if information has emerged which would have affected the value of the
original award that was granted to a participant, or the level at which the performance conditions were judged to have been satisfied.
Additional share plan disclosures
Potential impact of mergers and acquisitions or other corporate activity
In the context of a merger or acquisition, or other relevant corporate activity, any potential impact on the schemes would be specifically
considered by the Committee. In such circumstances, the Committee retains the authority to vary the performance target or the vesting
outcome to ensure that outcomes are equitable for both the participant and shareholders.
Change of control and voting
All of the Company’s share plans contain provisions relating to a change of control. Outstanding awards 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.
Sharesave Plan
The Company operates a Sharesave Plan which is open to all employees in the UK, and provides a mechanism for employees to
purchase shares at a discounted price through savings that accumulate from monthly deductions in salary. Executive directors are
entitled to participate because the plan must be open to all employees in the UK. The value of individual grants is capped (monthly
savings/deductions from salary may not exceed £250), and no performance conditions are attached to awards because it is an
all-employee scheme.
Dilution
Shareholder approvals to operate our share incentive plans carry limits on the number of new shares that may be issued to satisfy
awards over time. These restrictions are referred to as limits on shareholder ‘dilution’, and the remaining capacity to use newly issued
shares within the limits approved by shareholders is referred to as ‘headroom’. In the ten-year period to 31 March 2013, awards made
under the executive schemes represented 1.73% of the Company’s issued ordinary share capital, leaving available dilution headroom
of 3.27%. Awards made under all share schemes represented 1.96% of the Company’s issued ordinary share capital leaving available
dilution headroom of 8.04%. The Company will use shares that have been purchased by the Employee Benefit Trust to satisfy awards
made to the Chief Executive prior to 2012 and deferred share awards made under the Annual Bonus Plan (as described on page 54).
56
Tate & Lyle PLC Annual Report 2013
Governance
Personal share ownership requirements (policy on executive share ownership)
The Committee and executive management believe that personal investment in Company shares is an important part of our overall
remuneration framework. Material personal investment in Company shares serves to strengthen the long-term alignment of interests
between senior executives and the Company’s shareholders.
Compared with similar companies in the FTSE 100, our executive shareholding requirements are more demanding and extend to
a greater number of senior executives in the organisation.
The Chief Executive has a target share ownership requirement of four times base salary, and his shareholding currently exceeds
this target. The Chief Financial Officer has a target shareholding of three times base salary, which has been met.
Other Executive Committee members are subject to the share ownership policy, with target holdings at three times salary. From 2011,
this policy was extended to a broader group of executives who have senior leadership roles within the Company. The shareholding
target for this group is equal to their base salary.
The Committee monitors progress against the share ownership requirements annually.
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 notice
periods or termination payments are not excessive. The following table summarises the key provisions of the executive directors’
service contracts.
Provision
Notice period
• By the director
• By the Company
Termination payment
Holiday
Restrictive covenants (non-
compete/non-solicitation)
Contract commencement date
Chief Executive – Javed Ahmed
Chief Financial Officer – Tim Lodge
• 6 months
• 12 months
• The Company has the option to pay in lieu of notice
the base salary and pension allowance that would
have been payable during the notice period
• 30 days
• For the period of 12 months (less any garden
• 6 months
• 12 months
• The Company has the option 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
• 30 days
• For the period of 12 months (less any garden leave
G
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leave period) following termination of employment
period) following termination of employment
• 1 October 2009
• 4 December 2008
Executive directors’ external appointments
The Board believes that the Company can benefit from executive directors holding external non-executive directorships. Such
appointments are subject to approval by the Board and are normally restricted to one position for each executive director. Fees may be
retained by the executive director concerned. Neither of the executive directors currently holds an external non-executive directorship.
Chairman and non-executive director arrangements
Terms of appointment
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. The non-executive directors do not participate in the Group’s incentive or pension schemes, do not
receive other benefits, and have no right to compensation on the early termination of their appointment.
Tate & Lyle PLC Annual Report 2013
57
Governance
Directors’ Remuneration Report continued
Chairman’s fees
The Committee (excluding the Chairman) reviews the Chairman’s fees each year, taking into account the current market position,
the individual’s experience and contribution to the Group.
Following the most recent review of fees, the Committee approved an increase in the Chairman’s fees of 3% to £315,950 effective
from 1 April 2013, in line with the rate of increase applicable to the UK employee population.
Non-executive directors’ fees
Non-executive directors’ fees, reviewed annually by the Chairman and executive directors of 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, Corporate Responsibility and Remuneration Committees to reflect the extra
responsibilities required by these positions. A supplement is also paid to the Chairman of the Research Advisory Group.
Taking into account the competitiveness of current fees against the comparable market position, and the time commitment required
of the non-executive directors, the executive directors and the Chairman agreed that an adjustment to increase non-executive
directors’ fees by 3% would be made with effect from 1 April 2013, in line with the UK employee population. The fees are shown in
the following table.
Non-executive director
Senior Independent Director
Chairman of Audit Committee
Chairman of Remuneration Committee
Chairman of the Corporate Responsibility Committee
Chairman of Research Advisory Group
At 1 April 2013
£
61 550
68 600
Basic fees (per annum)
At 1 April 2012
£
59 750
66 600
Supplemental fees (per annum)
At 1 April 2012
£
15 850
10 550
10 550
22 150
At 1 April 2013
£
16 300
10 850
10 850
22 800
Executive directors’ total remuneration for the year ended 31 March 2013
The following tables show the remuneration packages of the executive directors for the year ended 31 March 2013, and illustrate the
potential value in different performance scenarios.
Actual remuneration for the year (shown in the right-hand column) includes the value of incentive awards vesting by reference to
performance in the year ended 31 March 2013. Given the Group’s EPS and ROCE performance in the period to 31 March 2013,
awards will vest at maximum. The value of share awards vested in the year as shown in the right-hand column of the table (‘actual
earned/vested’) also reflects approximately 84% share price appreciation over the performance period.
Chief Executive (Javed Ahmed)
Element/value (£000s)
Base salary
Annual bonus (cash and deferred shares) 2
LTI – face value of 2012 PSP grant
(vesting based on performance to March 2015)
LTI vesting for performance to 31 March 2013
(Long-term incentive award B)
Pension allowance
Other benefits
Total value
Projections: remuneration in the year to
31 March 2013 at different performance scenarios
Below threshold
721
0
0
–
252
20
993
At threshold
721
0
(0% of
base salary)
324
(15% vesting)
At target
721
541
(75% of
base salary)
1 244
(57.5% vesting)
At stretch
721
1 262
(175% of
base salary)
2 163
(100% vesting)
–
252
20
1 317
–
252
20
2 778
–
252
20
4 418
Actual earned/
vested1
721
233
–
4 021
252
20
5 247
58
Tate & Lyle PLC Annual Report 2013
Governance
Chief Financial Officer (Tim Lodge)
Projections: remuneration in the year to
31 March 2013 at different performance scenarios
Element/value (£000s)
Base salary
Annual bonus (cash and deferred shares) 2
Below threshold
406
0
LTI – face value of 2012 PSP grant
(vesting based on performance to March 2015)
LTI vesting for performance to 31 March 2013 (2010 PSP grant)
Pension allowance
Other benefits
Total value
0
–
101
14
521
At threshold
406
0
(0% of
base salary)
183
(15% vesting)
At target
406
203
(50% of base
salary)
700
(57.5% vesting)
At stretch
406
710
(175% of base
salary)
1 217
(100% vesting)
–
101
14
704
–
101
14
1 424
–
101
14
2 448
Actual earned/
vested1
406
87
–
1,899
101
14
2 507
1 Actual earned/vested includes annual bonus earned in respect of 2013 financial year (as described on page 60) and LTI/share awards which vest subject to
performance up to and including the financial year ended 31 March 2013, which are valued using the closing share price of 850.00p on the last working day of the year.
For Javed Ahmed: the LTI award that vests based on performance to 31 March 2013 relates to a long-term incentive award of shares (‘long-term incentive award B’),
in accordance with the incentive arrangements agreed at the time of his appointment (as described in the Annual Report 2009) with a face value of £2,082,000
at the time of award (referenced to three times salary at the time the 2010 PSP awards were made), and subject to the same performance conditions as applicable
to those awards.
For Tim Lodge: the LTI award shown here is the 2010 PSP grant, which was made over shares with a face value of £983,000 at the date of grant.
These LTI awards are subject to the same performance conditions and will vest at maximum, based on the EPS and ROCE performance recorded in the period to
31 March 2013 (as discussed on page 55). The value of these awards at 31 March 2013 as shown in the table reflects significant share price appreciation over the
performance period.
2 Any portion of the annual bonus that exceeds 100% of base salary is deferred into Tate & Lyle PLC shares for two years.
Tate & Lyle share price (pence)
The value attributed to share awards shown as actual
earned/vested during the year to executive directors
in the table on page 61 reflects considerable share price
growth to 31 March 2013. Over the three-year
performance measurement period which applies to
2010 PSP grants, Tate & Lyle’s share price increased by
84%, generating £1.8bn in value for shareholders.
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
since it is a broad equity market index with constituents
comparable in size to Tate & Lyle. The graph shows the value
of £100 invested in the FTSE 100 Index and Tate & Lyle in the
five years from 31 March 2008.
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900900
800800
700700
600600
500500
400400
£200
£150
£100
£50
Tate & Lyle
Tate & Lyle
TSE 100
FFTSE 100
31/03/2010
31/03/2010
31/03
31/03
31/03
31/03/2011
31/03
/2011
31/03/2011
31/03
31/03
31/03
31/03/2012
31/03
/2012
31/03/2012
31/03
31/03
31/03
31/03/2013
31/03
/2013
31/03/2013
31/03/08
31/03/08
31/03
31/03
31/03
31/03/09
31/03
31/03/09/09
31/03
31/03
31/03
31/03/10
31/03
31/03/10/10
31/03
31/03
31/03
31/03/11
31/03
31/03/11/11
31/03
31/03
31/03
31/03/12
31/03
31/03/12/12
31/03
31/03
31/03
31/03/13
31/03
31/03/13/13
Source: Factset
Source: Factset
Source: Factset
Source: Factset
Tate & Lyle PLC Annual Report 2013
59
Governance
Directors’ Remuneration Report continued
Information subject to audit
Directors’ emoluments (audited)
The following table shows the directors’ emoluments for the year ended 31 March 2013.
Chairman
Sir Peter Gershon
Executive directors
Javed Ahmed
Tim Lodge
Non–executive directors
Liz Airey
William Camp
Douglas Hurt
Virginia Kamsky4
Anne Minto4
Dr Ajai Puri5
Robert Walker
Former directors
Evert Henkes6
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
2013
£000
Total year
to 31 March
2012
£000
307
721
406
76
67
60
20
20
82
70
–
373
114
–
–
–
–
–
–
–
47
1 876
–
487
–
5
1
–
–
–
–
–
–
–
–
6
–
233
87
–
–
–
–
–
–
–
–
320
–
–
–
–
–
–
–
–
–
–
–
–
307
298
1 332
608
1 780
909
76
67
60
20
20
82
70
73
58
58
–
–
–
65
47
2 689
68
3 309
1 Other allowances include car allowance which in the case of Javed Ahmed is £15,000, with a further £105,690 representing payments in lieu of dividends on an award
of shares as disclosed in the share awards table on page 61.
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 Joined the Board on 1 December 2012.
5 Joined the Board on 1 April 2012.
6 Ceased to be a director on 30 November 2012.
Directors’ pension provision (audited)
As a deferred member of the Group Scheme, Tim Lodge’s total accrued pension from the Group Scheme at the end of the year
amounted to £188,000 per annum (£181,000 – 31 March 2012). The Scheme was closed to future accrual from April 2011; the
year-on-year change relates only to the inflation-linked contractual uplift in deferred pension values that applies under the Scheme
rules. The transfer value of the accrued pension at the end the year amounted to £3,265,000 compared to £3,345,000 at the start
of the year, representing a decrease of £80,000. All amounts are calculated in accordance with actuarial assumptions applicable
at each reporting date.
60
Tate & Lyle PLC Annual Report 2013
Governance
Share awards (audited)
The table below sets out the current position of share-based awards made to executive directors.
Awards
granted
during
year1
(number)
Awards
vested
during
year2
Awards
lapsed
during
year3
(number)
(number)
Awards
exercised
during
the year
(number)
As at
31 March
2013
(number)
As at
1 April 2012
(number)
Market
price
on date
awards
granted
(pence)
Market
price
on date
awards
vested
(pence)
Vesting date
Javed Ahmed
Share-incentive arrangements
on recruitment:
Compensatory Award A4
Compensatory Award C5, 6, 7
Long-term incentive Award A5, 6
Long-term incentive Award B6, 8
Long-term incentive Award C 6, 9
Performance Share Plan6:
20121
Deferrred shares from annual
bonus10:
2011 bonus year
Tim Lodge
Performance Share Plan6:
2008
2009
2010
20111
20121
Deferred shares from annual
bonus10:
2010 bonus year
2011 bonus year
419 403
359 488
659 609
473 042
378 337
–
–
–
–
–
–
357 870
656 640
–
–
–
1 618
2 969
–
–
–
100 000
–
–
–
419 403
257 870
656 640
473 042
378 337
444.90
444.90
444.90
440.20
590.50
632.50
676.50
676.50
01/10/11
29/05/12
29/05/12
– After 31/03/13
– After 31/03/14
–
–
310 567
2 010
–
–
26 088
152 687
223 381
212 950
–
–
–
–
–
174 805
–
151 999
–
–
–
51 683
–
–
–
–
–
–
–
–
688
–
–
–
–
–
–
–
–
–
–
–
–
–
–
310 567
671.00
– After 31/03/15
2 010
676.50
–
29/05/14
26 088
151 999
223 381
212 950
174 805
394.25
294.25
440.20
590.50
671.00
611.00
676.50
24/05/11
29/05/12
– After 31/03/13
– After 31/03/14
– After 31/03/15
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51 683
1 131
611.00
676.50
–
–
24/05/13
29/05/14
1
2
3
4
The performance conditions for PSP awards made in 2011 and 2012 are adjusted diluted EPS, against which 50% of the award will be measured, and adjusted
ROCE, for the remaining 50% of the award.
The vesting of 2009 PSP awards was based on a combination of relative TSR performance against a specific comparator group and EPS growth over the period
1 April 2009 to 31 March 2012, as described in the Annual Report 2012.
On 29 May 2012, a proportion of the awards lapsed because the performance conditions applicable to PSP awards made in 2009 were not met in full2.
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 were available to exercise from 1 October 2011, being the second anniversary of Javed Ahmed joining the Company and will
remain exercisable until 30 September 2017. Pending delivery, he receives a payment in lieu of dividend on these shares which is subject to the deduction of tax.
In the event of a change in control, the shares will be delivered immediately.
5 This award was subject to the same performance conditions as those which applied to awards made under the PSP in 2009.
6 The three-year performance period for all these awards begins on the first day of the financial year in which the award is granted.
7 The share price at the date these shares were exercised was 641.00p (21 June 2012).
8 This award is subject to the same performance conditions as those which apply to awards made under the PSP in 2010.
9 This award is subject to the same performance conditions as those which apply to awards made under the PSP in 2011.
10 Deferred shares granted under the annual bonus scheme (as described on page 54). The full value of these awards have been disclosed previously in the
emoluments table(s) in the relevant bonus year(s). (For example, the values of deferred shares relating to performance in the year ended 31 March 2012 are included
in the emoluments table for the year ended 31 March 2012 (contained within the Annual Report 2012)).
Tate & Lyle PLC Annual Report 2013
61
Governance
Directors’ Remuneration Report continued
All-employee schemes (audited)
Details of the directors who were in office for any part of the financial year, and who hold or held options to subscribe for ordinary
shares of the Company, are set out in the table below.
Savings-related share options are options granted under the HMRC-approved Sharesave Plan. 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 2012
(number)
Options
granted
during year
(number)
Options
exercised
during year
(number)
Options
lapsed
during year
(number)
As at
31 March
2013
(number)
Exercise
price
(pence)
Exercise
period
Chief Executive (Javed Ahmed)
Savings-related options 2009
Chief Financial Officer (Tim Lodge)
Savings-related options 2007 1
3 720
4 253
–
–
Savings-related options 2012
–
2 471
–
1 This award was exercised during the year (on 1 March 2013), when the market share price was 825.00p.
–
–
3 720
4 253
–
–
–
–
418.00 01/03/15 to
31/08/15
01/03/13 to
31/08/13
01/03/18 to
31/08/18
607.00
395.00
The market price of the Company’s ordinary shares at the close of business on the last day of the financial year was 850.00p, and the
range during the year to 31 March 2013 was 633.50p to 850.00p.
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 25p 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.
Number of ordinary shares of 25p each
Chairman
Sir Peter Gershon
Executive directors
Javed Ahmed
Tim Lodge
Non-executive directors
Liz Airey
William Camp
Douglas Hurt
Virginia Kamsky
Anne Minto
Dr Ajai Puri
Robert Walker
Ordinary shares
1 April
2012
31 March
2013
LTI 1
Options 2, 3
1 April
2012
31 March
2013
1 April
2012 1
31 March
2013
67 736
70 138
–
–
–
–
914 860
51 723
1 050 915
57 814
2 289 8793 2 497 8693
842 037
666 789
3 720
4 253
3 720
2 471
16 000
800
10 000
–
–
–
11 382
16 000
1 600
10 000
5 000
5 000
2 018
11 786
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1 Includes shares awarded under the Annual Bonus Plan, PSP and the special arrangements that were put in place to facilitate Javed Ahmed’s recruitment which are
subject to performance conditions.
2 Granted under the Sharesave Plan.
3 Includes shares which are not subject to performance conditions (see page 54 for details).
There were no changes in directors’ interests in the period from 1 April 2012 to 29 May 2013.
On behalf of the Board
Robert Walker
Chairman of the Remuneration Committee
29 May 2013
62
Tate & Lyle PLC Annual Report 2013
Governance
Other Statutory and Governance Information
Principal activities of the Group
The principal activity of Tate & Lyle PLC and
its subsidiary and associated undertakings
together with its joint ventures is the global
provision of ingredients and solutions to
the food, beverage and other industries.
Results and dividend
A review of the results can be found from
the inside front cover through to page 36.
An interim dividend of 7.4p per ordinary
share was paid on 4 January 2013.
The Directors recommend a final dividend
of 18.8p per ordinary share to be paid
on 2 August 2013 to shareholders on the
register on 28 June 2013, subject to approval
at the 2013 Annual General Meeting (AGM).
The total dividend for the year is 26.2p per
ordinary share (2012 – 24.9p).
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, 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 46 to 51.
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 which are available on the
Company’s website, 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.
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 62.
Directors’ indemnities and
insurance cover
As at the date of this Annual 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 UK public holidays.
Equivalent indemnities remain in force for
Evert Henkes, who ceased to be a director
on 30 November 2012.
The Company also maintains directors’
and officers’ liability insurance cover, the
level of which is reviewed annually.
Share capital
As at 31 March 2013, the Company had
nominal issued ordinary and preference
share capital of £119 million comprising
£117 million in ordinary shares, including
£0.5 million in treasury shares and
£2 million in preference shares.
To satisfy obligations under employee share
plans, the Company issued 32,381 ordinary
shares during the year and reissued
2,703,843 ordinary shares from treasury.
The Company issued 520 shares during the
period from 1 April 2013 to 29 May 2013.
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
2012 AGM to make market purchases of up
to 46,592,720 of its own ordinary shares.
The Company purchased 2,000,000 of its
own ordinary shares during the year ended
31 March 2013. This authority will expire at
the 2013 AGM and approval will be sought
from shareholders for a similar authority to
be given for a further year.
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Tate & Lyle PLC Annual Report 2013
63
Governance
Other Statutory and Governance Information continued
Substantial shareholdings
As at 29 May 2013, the Company had been notified under Rule 5 of the Disclosure and
Transparency Rules of the following holdings of voting rights in its shares:
Black Rock, Inc
Schroders plc
AXA S.A.
Artemis
INVESCO Limited
Lloyds Banking Group plc
TIAA-CREF Investment Management, LLC and
Teachers Advisors, INC.
Barclays Global Investors
Legal & General Group Plc
1 As at the date in the notification to the Company.
Change of control
The Company has a committed bank
facility of US$800 million, which matures
in 2016. 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 56.
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 £32 million (2012 – £29
million) on research and development
during the year.
Number
of shares1
51 202 984
23 284 299
22 890 148
23 207 193
23 111 061
22 854 608
19 070 922
17 568 133
14 120 697
% held1
10.98
4.99
4.98
4.97
4.95
4.89
4.09
3.59
3.02
Donations
Worldwide charitable donations during the
year totalled £376,000 (2012 – £308,000),
of which £55,000 (2012 – £6,000) was
donated in the UK. More details of the
Group’s community involvement can be
found on page 35.
Again this year, in line with the Group’s
policy, no political donations were made
in the European Union (EU). In 2013, the
Group’s US business made contributions
of US$19,000; £12,000 (2012 – US$8,300;
£5,000) to political organisations in the US.
In accordance with the Federal Election
Campaign Act in the USA, Tate & Lyle
continues to support an employee-
operated Political Action Committee (PAC)
funded entirely by US employees. The PAC
is not controlled by Tate & Lyle; employee
contributions are entirely voluntary and no
pressure is placed on 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. This year, a total
of US$8,000; £5,000 (2012 – US$11,000;
£7,000) was donated to political
organisations by the Tate & Lyle PAC.
Payment to suppliers
Tate & Lyle PLC is a holding company and
had no amounts owing to trade creditors at
31 March 2013. The Group’s creditor days
outstanding at 31 March 2013 were 48
days (2012 – 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.
Post balance sheet event
On 17 May 2013, the Company acquired
Biovelop, a Swedish manufacturer of oat
beta glucan.
Business Review
The Companies Act 2006 requires the
Directors’ Report to include a Business
Review which must contain a fair review
of the Company’s business during the
financial year ended 31 March 2013,
including an analysis of the position of
the Group at the end of the financial year,
and a description of the principal risks
and uncertainties facing the Company.
The information that fulfils the Business
Review requirements can be found in
the following sections:
• Our Business Model on pages 4 to 5
• Our Strategy on pages 6 to 7
• Key Performance Indicators on pages
8 to 9
• Chief Executive’s Review on pages
12 to 14
• Speciality Food Ingredients on pages
15 to 17
• Bulk Ingredients on pages 18 to 19
• Innovation and Commercial
Development on page 20
• Group Financial Results on page 21
• Additional Financial Information on
pages 22 to 25
• Risks on pages 26 to 28
• Corporate Responsibility on pages 29
to 36
64
Tate & Lyle PLC Annual Report 2013
Governance
Directors’ Statement of Responsibilities
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 from the inside front
cover to page 65 of this Annual Report was
approved by the Directors on 29 May 2013.
On behalf of the Board
Lucie Gilbert
Company Secretary
29 May 2013
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The directors are responsible for preparing
the Annual Report, the Directors’
Remuneration Report and the Financial
Statements in accordance with applicable
law and regulations.
Company law requires the directors to
prepare financial statements for each
financial year. Under that law the directors
have prepared the Group Financial
Statements in accordance with International
Financial Reporting Standards (IFRSs) as
adopted by the European Union, and the
Parent Company Financial Statements in
accordance with United Kingdom Generally
Accepted Accounting Practice (United
Kingdom Accounting Standards and
applicable law). 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
European Union and with regard to
the Parent company financial statements
and applicable UK Accounting
Standards have been followed, subject
to any material departures disclosed
and explained in the Group and Parent
company financial statements
respectively; and
• prepare the financial statements on
the going concern basis unless it is
inappropriate to presume that the
Company will continue in business.
The directors are responsible for keeping
adequate accounting records that are
sufficient to show and explain the
Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Company and the
Group and enable them to ensure that
the financial statements and the Directors’
Remuneration Report comply with the
Companies Act 2006 and, as regards
the Group financial statements, Article 4
of the IAS Regulation. They are also
responsible for safeguarding the assets
of the Company and the Group and hence
for taking reasonable steps for the
prevention and detection of fraud and
other irregularities.
The directors are responsible for the
maintenance and integrity of the
Company’s website. Legislation in the
UK governing the preparation and
dissemination of financial statements may
differ from legislation in other jurisdictions.
Each of the directors, whose names and
functions are listed on pages 38 to 39,
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, and the
Parent Company Financial Statements
in accordance with UK Accounting
Standards, give a true and fair view of
the assets, liabilities, financial position
and profit of the Group and Parent
Company; and
• the overview and operational review
sections contained in the Directors’
Report include 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.
Tate & Lyle PLC Annual Report 2013
65
Financial Statements
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
2013 which comprise the Consolidated Income
Statement, the Consolidated Statement of
Comprehensive Income, the Consolidated
Statement of Financial Position, the
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.
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
2013 to identify material inconsistencies with
the audited financial statements. If we become
aware of any apparent material misstatement
or inconsistencies we consider the implications
for our report.
Under the Listing Rules we are required
to review:
– 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 UK
Corporate Governance Code specified for
our review; and
– certain elements of the report to shareholders
by the Board on Directors’ remuneration.
Respective responsibilities of
directors and auditors
As explained more fully in the Directors’
Statement of Responsibilities set out on
page 65, 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
Opinion on financial statements
In our opinion the Group financial statements:
– give a true and fair view of the state of the
Group’s affairs as at 31 March 2013 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 matter
prescribed by the Companies Act
2006
In our opinion the information given in the
Directors’ Report for the financial year for which
the Group financial statements are prepared is
consistent with the Group financial statements.
Matters on which we are required
to report by exception
We have nothing to report in respect of the
following:
Under the Companies Act 2006 we are required
to report to you if, in our opinion:
– 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 page 119 on
the Parent company financial statements of
Tate & Lyle PLC for the year ended 31 March
2013 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
29 May 2013
Notes:
(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.
66
Tate & Lyle PLC Annual Report 2013
Financial Statements
Consolidated Income Statement
Continuing operations
Sales
Operating profit
Finance income
Finance expense
Profit before tax
Income tax expense
Profit for the year from continuing operations
Profit for the year from discontinued operations
Profit for the year
Profit for the year attributable to:
– owners of the Company
– non-controlling interests
Profit for the year
Earnings per share attributable to the owners of the Company
from continuing and discontinued operations:
– basic
– diluted
Earnings per share attributable to the owners of the Company
from continuing operations:
– basic
– diluted
Analysis of adjusted profit before tax from continuing operations
Profit before tax
Adjust for:
– exceptional items
– amortisation of intangible assets acquired through business combinations
– post-retirement benefit interest
Adjusted profit before tax, exceptional items, amortisation of intangible assets
acquired through business combinations and post-retirement benefit interest
The notes on pages 72 to 118 form part of these Group financial statements.
Notes
4, 5
4, 6
10
10
11
12
12
13
13
7
15
10
Year to 31 March
2012
£m
2013
£m
3 256
336
3
(30)
309
(49)
260
18
278
277
1
278
3 088
404
8
(33)
379
(72)
307
2
309
305
4
309
pence
pence
59.7
58.5
56.0
54.9
£m
309
12
10
(2)
329
65.5
64.3
65.9
64.6
£m
379
(68)
12
(5)
318
l
S
t
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t
s
Tate & Lyle PLC Annual Report 2013
Tate & Lyle PLC Annual Report 2013
67
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Financial Statements
Consolidated Statement of Comprehensive Income
Profit for the year
Actuarial losses in post-employment benefit plans
Deferred tax relating to actuarial losses in post-employment benefit plans
Net fair value losses on cash flow hedges
Cash flow hedges reclassified and reported in the income statement during the year
Valuation losses on available-for-sale financial assets
Net exchange differences
Items recycled to the income statement on disposal
Deferred tax relating to the other above components
Other comprehensive expense for the year, net of tax
Total comprehensive income for the year
Total continuing operations
Total discontinued operations
Attributable to:
– owners of the Company
– non-controlling interests
Dividends per share:
– interim paid
– final proposed
The notes on pages 72 to 118 form part of these Group financial statements.
Notes
30
11
25
25
18
37
11
Year to 31 March
2012
£m
309
(87)
33
(2)
(3)
(1)
(30)
(11)
(6)
(107)
202
211
(9)
202
198
4
202
2013
£m
278
(153)
(3)
(3)
4
(1)
27
(14)
(6)
(149)
129
117
12
129
127
2
129
14
pence
pence
7.4
18.8
26.2
7.1
17.8
24.9
68
Tate & Lyle PLC Annual Report 2013
Financial Statements
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 owners of the Company
Share capital
Share premium
Capital redemption reserve
Other reserves
Retained earnings
Total shareholders’ funds
Non-controlling interests
TOTAL 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
TOTAL EQUITY AND LIABILITIES
Notes
Year to 31 March
2012
£m
2013
£m
15
16
17
18
20
29
23
30
22
23
20
33
18, 38
24
24
25
27
28
20
29
30
31
27
28
20
31
38
356
958
6
27
54
8
3
12
1 424
510
383
4
86
379
1 362
1
1 363
2 787
117
406
8
139
366
1 036
–
1 036
3
821
21
24
277
15
1 161
382
53
75
60
20
590
–
590
1 751
2 787
325
922
5
23
57
37
2
146
1 517
450
332
3
80
424
1 289
100
1 389
2 906
117
406
8
128
374
1 033
25
1 058
4
805
19
25
286
18
1 157
382
49
141
94
10
676
15
691
1 848
2 906
The Group financial statements on pages 67 to 118 were approved by the Board of Directors on 29 May 2013 and signed on its behalf by:
Javed Ahmed, Tim Lodge Directors
The notes on pages 72 to 118 form part of these Group financial statements.
Tate & Lyle PLC Annual Report 2013
Tate & Lyle PLC Annual Report 2013
69
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Financial Statements
Consolidated Statement of Cash Flows
Cash flows from operating activities
Profit before tax from continuing operations
Adjustments for:
– depreciation of property, plant and equipment
– exceptional items, net of cash flow impact
– amortisation of intangible assets
– share-based payments charge
– finance income
– finance expense
Change in working capital
Change in net retirement benefit obligations
Cash generated from continuing operations
Interest paid
Income tax (paid)/received
Cash 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
Disposal of available-for-sale financial assets
Acquisitions of businesses, net of cash acquired
Disposal of joint ventures, net of cash disposed
Disposal of businesses, net of cash disposed
Purchase of property, plant and equipment
Purchase of intangible assets and other non-current assets
Net cash generated from investing activities in discontinued operations
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issuance of ordinary and treasury shares
Repurchase of ordinary shares
Cash outflow from repayment of borrowings
Cash inflow from additional borrowings
Cash outflow from repayment of capital element of finance leases
Dividends paid to the Company’s owners
Dividends paid to non-controlling interests
Net cash used in financing activities in discontinued operations
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents
Balance at beginning of year
Effect of changes in foreign exchange rates
Net decrease in cash and cash equivalents
Balance at end of year
As presented in the consolidated statement of financial position
Cash and cash equivalents
Assets held for sale
Balance at end of year
The notes on pages 72 to 118 form part of these Group financial statements.
Notes
6, 16
6, 15
9, 26
10
10
32
12
18
18
37
37
37
12
24
14
12
34
33
38
33
Year to 31 March
2012
£m
379
85
(84)
18
11
(8)
33
(121)
(80)
233
(43)
16
25
231
2
3
(6)
18
(7)
–
1
(102)
(28)
2
(117)
3
(19)
(188)
8
(5)
(112)
–
(2)
(315)
(201)
654
(7)
(201)
446
424
22
446
2013
£m
309
91
(9)
17
13
(3)
30
(107)
(44)
297
(36)
(18)
8
251
3
1
(4)
–
–
15
36
(92)
(42)
–
(83)
1
(23)
(117)
24
(2)
(117)
(2)
–
(236)
(68)
446
1
(68)
379
379
–
379
70
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Financial Statements
Consolidated Statement of Changes in Shareholders’ Equity
Balance at 1 April 2011
Other comprehensive expense for the year
Profit for the year
Total comprehensive (expense)/income for the year
Share-based payments charge, including tax
Share repurchase
Proceeds from shares issued
Dividends paid
Balance at 31 March 2012
Other comprehensive income/(expense) for the year
Profit for the year
Total comprehensive income for the year
Share-based payments charge, including tax
Share repurchase
Proceeds from shares issued
Non-controlling interests disposed
Dividends paid
Balance at 31 March 2013
Share capital
and share
premium
(Note 24)
£m
523
–
–
–
–
–
–
–
523
–
–
–
–
–
–
–
–
523
Capital
redemption
reserve
£m
8
–
–
–
–
–
–
–
8
–
–
–
–
–
–
–
–
8
Other
reserves
(Note 25)
£m
175
(47)
–
(47)
–
–
–
–
128
11
–
11
–
–
–
–
–
139
Attributable to
the owners
of the
Company
£m
950
(107)
305
198
13
(19)
3
(112)
1 033
(150)
277
127
15
(23)
1
–
(117)
1 036
Retained
earnings
£m
244
(60)
305
245
13
(19)
3
(112)
374
(161)
277
116
15
(23)
1
–
(117)
366
Non-
controlling
interests
£m
23
–
4
4
–
–
–
(2)
25
1
1
2
–
–
–
(25)
(2)
–
Total equity
£m
973
(107)
309
202
13
(19)
3
(114)
1 058
(149)
278
129
15
(23)
1
(25)
(119)
1 036
Retained earnings at 31 March 2013 include a deduction for own shares held by the ESOP trust of £15 million (2012 – £5 million).
The notes on pages 72 to 118 form part of these Group financial statements.
l
S
t
a
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Tate & Lyle PLC Annual Report 2013
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Notes to the Consolidated Financial Statements
1 Presentation of financial
statements
General information
As set out on page 63, 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 premium 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. The
Directors have a reasonable expectation that
the Group has adequate resources to continue
to operate for the foreseeable future. The Group
therefore continues to adopt the going concern
basis in preparing its consolidated financial
statements which has been applied consistently
throughout the year.
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 (including
derivatives) at fair value through profit and loss.
These consolidated financial statements are
presented in pounds sterling, which is the
functional currency of the Parent and the
presentational currency of the Group.
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 Group operates two business units
within continuing operations: Speciality Food
Ingredients and Bulk Ingredients. These
business units meet the definition of an
operating segment under IFRS 8. 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
Note 4 to be consistent with internal
management reporting.
Discontinued operations include activities
relating to businesses that formed part of the
former Sugars segment.
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, statutory measurements of profit.
The term ‘adjusted’ refers to the relevant
measure being reported, excluding exceptional
items, the amortisation of intangible assets
acquired through business combinations and
post-retirement benefit interest. Exceptional
items are explained in Note 7. A reconciliation
of statutory to adjusted information is provided
in Note 43.
New IFRS standards and
interpretations adopted
From 1 April 2012 the Group has adopted the
following new and amended IFRSs and IFRIC
interpretations:
– Amendment to IFRS 7 Financial instruments:
Transfer of financial assets
– Amendment to IFRS 1 First time adoption
on hyperinflation and fixed dates
– Amendment to IAS 12 Income taxes on
deferred tax.
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:
– Amendments to IAS 1 Presentation of
financial statements – other comprehensive
income (effective 1 July 2012)
– Amendments to IAS 19 Employee benefits
(effective 1 January 2013)
– Amendments to IAS 32 Financial instruments
presentation (effective 1 January 2014)
– Amendment to IFRS 7 Financial instruments:
Disclosures on offsetting (effective
1 January 2013)
– Annual improvements 2011 (effective
1 January 2013)
– IFRS 9 Financial instruments (effective
1 January 2013)
– IFRS 10 Consolidated financial statements
(endorsed 1 January 2014)
– IFRS 11 Joint arrangements (endorsed
1 January 2014)
– IFRS 12 Disclosure of interest in other entities
(endorsed 1 January 2014)
– IFRS 13 Fair value measurement (effective
1 January 2013).
The adoption of these standards, amendments
and interpretations is not expected to have a
material impact on the Group’s result for the
year or equity other than the amendment to
IAS 19 and IFRS 11. The amendment to IAS 19
changes the basis on which the financing
charge is calculated by applying the discount
rate to the net defined benefit obligation and
the presentation of costs within the income
statement. For the year ended 31 March 2013,
the new requirements would have reduced
operating profit by £2 million (2012 – £2 million)
and increased net finance costs recognised
outside adjusted earnings by £6 million
(2012 – £9 million). Under its current accounting
policies the Group recognises actuarial gains
and losses directly in other comprehensive
income, as required by the new standard.
In May 2011, the IASB issued IFRS 11
Joint Arrangements which, is effective for
accounting periods beginning on or after
1 January 2014. While the net result and net
assets will remain unchanged, the presentation
of the Consolidated Income Statement,
Consolidated Statement of Financial Position
and Consolidated Statement of Cash Flow will
change significantly as IFRS 11 prohibits
proportionate consolidation of joint ventures
which is the Group’s current accounting policy,
as allowed under IAS 31. Under IFRS 11, joint
ventures will be equity accounted. Operating
segment results will remain unchanged and
continue to proportionately consolidate joint
ventures reflecting internal reporting to the
Group’s Chief Operating Decision Maker with
a reconciliation to the IFRS presented figures.
The adoptions of the other standards may affect
disclosures in the Group’s financial statements.
The Parent Company, Tate & Lyle PLC, has not
adopted IFRS as its statutory reporting basis.
Audited financial statements for the parent
company, prepared in accordance with UK
GAAP, are set out on pages 120 to 125.
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.
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2 Group accounting policies
continued
(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. The Group’s share
of post-acquisition movements in other
comprehensive income is recognised in other
comprehensive income.
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 functional currency of
the Parent and the presentational currency
of the Group.
(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 recognised in other comprehensive
income (OCI) as qualifying cash flow hedges,
qualifying quasi-equity balances or 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
presentation currency are translated into
the presentation currency as follows:
(i)
(ii)
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;
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 within OCI.
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.
Plant and machinery mainly comprise
equipment used in the manufacturing and
operating process. Assets under the course
of construction comprise property, plant and
equipment which is in the process of being
completed and not ready for use.
Property, plant and equipment is stated at
historical cost less accumulated 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
year in which they are incurred.
Depreciation is calculated using the straight-line
method to allocate the cost 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.
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
Tate & Lyle PLC Annual Report 2013
73
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Notes to the Consolidated Financial Statements continued
2 Group accounting policies
continued
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 with incentives recognised over the
period of the lease at a constant periodic rate.
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 if
positive. 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. Goodwill is tested for
impairment annually and whenever there is
an indication of impairment, and is carried at
cost less accumulated impairment losses.
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
three 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.
They are measured at historical cost less
accumulated amortisation and impairment
losses. Amortisation of the assets is recognised
on a straight-line basis over the period of
their expected benefit which ranges from
three to 15 years.
(d) Other intangible assets
Other intangible assets are shown at historical
cost less accumulated amortisation and
impairment losses. Other intangible assets
mainly include certain development
expenditure, software costs and assets under
construction relating to the common global IS/IT
system. Costs incurred on development
projects (relating to the development design
and testing of new or improved products) are
recognised as intangible assets when all 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.
Capitalised costs in respect of the common
global IS/IT system are amortised once it is
deployed into the businesses. Amortisation of
the assets is recognised on a straight-line basis
over the period of their expected benefit which
ranges from three to seven years.
Impairment
Assets that have an indefinite useful life are not
subject to amortisation and are tested at least
annually for impairment. No intangible assets
other than goodwill have an indefinite life. In
addition, assets in the course of construction
are not depreciated and are subject to annual
impairment review where there is an indication
of impairment. 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.
For the purposes of assessing impairment,
assets other than goodwill are grouped at the
lowest levels for which there are separately
identifiable cash inflows (cash-generating units).
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 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 statement of financial
position date. The dividends on preference
shares are recognised in the income statement
as interest expense.
(d) Derivatives held for trading
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)
(ii)
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.
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 offset
against the hedged transaction.
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Financial Statements
2 Group accounting policies
continued
(iii)
Hedges of net investments
Hedges of a net investment in a foreign
operation are designated as net investment
hedges. To the extent that movements
in the fair values of these instruments
effectively offset the underlying risk being
hedged, they are recognised in the
translation reserve until the period during
which a foreign operation is disposed of
or partially disposed of, at which point the
cumulative gain or loss is recognised in
profit or loss, offsetting the cumulative
difference recognised on the translation
of the net investment.
Hedge accounting is discontinued at the
point when the hedging relationship no longer
qualifies for hedge accounting. In the case of
cash flow hedging relationships, the cumulative
movement in the fair value of the hedging
instrument previously recognised in equity up
to that point is retained there until the forecast
transaction affects profit or loss, unless the
hedged transaction is no longer expected to
occur, in which case the cumulative movement
in fair value is transferred to profit or loss
immediately. Movements in the fair value of
hedging instruments where the relationship 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.
Provisions are made for any slow moving,
obsolete or defective inventories.
Trade receivables
Trade receivables are recognised initially at fair
value and subsequently measured at amortised
cost using the effective interest method, less
provision for impairment. A provision for
impairment of trade receivables is established
when there is objective evidence that the
group will not be able to collect all amounts
due according to the original terms of the
receivables. Significant financial difficulties
of the debtor, probability that the debtor will
enter bankruptcy or financial reorganisation,
and default or delinquency in payments are
considered indicators that the trade receivable
is impaired. The amount of the provision is the
difference between the asset’s carrying amount
and the present value of estimated future cash
flows, discounted at the original effective
interest rate. The carrying amount of the asset
is reduced through the use of an allowance
account, and the amount of the loss is
recognised in the income statement within
‘operating costs’. When a trade receivable
is uncollectible, it is written off against the
allowance account for trade receivables.
Subsequent recoveries of amounts previously
written off are credited against ‘operating costs’
in the income statement.
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 where the legal right of offset exists.
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 owners 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 owners.
These shares are used to satisfy share options
and long-term share incentive 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.
Provisions
Provisions for other 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.
The main provisions held by the Group include
insurance provisions, restructuring and closure
provisions, and other provisions which relate
primarily to legal matters and previously
disposed businesses.
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 statement
of financial position date.
The tax for amounts presented in other
comprehensive income or the statement of
changes in shareholders’ equity are recognised
in the respective statement.
Deferred tax is accounted for using the
statement of financial position 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.
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Notes to the Consolidated Financial Statements continued
2 Group accounting policies
continued
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. It comprises the fair value of the
consideration received or receivable for the sale
of goods and services. 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.
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 once these contributions have
been paid.
The amounts recognised in the statement of
financial position in respect of defined benefit
pension plans are the net deficit or the net
surplus being the present value of the defined
benefit obligation at the statement of financial
position 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 the income
statement, 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 are 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
immediately through the consolidated
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 immediately to the consolidated
statement of comprehensive income. These
obligations are valued annually by independent
qualified actuaries.
76
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(c) Share-based compensation
The Group operates a number of equity-settled,
share-based compensation plans. The fair value
of employee services received in exchange for
the grant of the options is recognised as an
expense. The total amount to be expensed over
the vesting period is determined by reference to
the fair value of the options granted, excluding
the impact of any non-market vesting conditions
(for example, earnings targets). Non-market
vesting conditions are included in assumptions
about the number of options that are expected
to become exercisable. At each statement of
financial position 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. During the year £2 million of borrowing
costs have been capitalised (2012 – £1 million)
at a rate of 3.8% (2012 – 3.7%).
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, significant business transformation
activities, disposals of operations or significant
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.
Dividend distribution
Final dividend distributions to the Company’s
owners 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.
Financial Statements
2 Group accounting policies
continued
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, which is determined to be the
Board, receives information on the segmental
net working capital in order to assess the
performance of the segments.
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 statement of financial position 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 asset impairment being
increased or reversed, in part or in full, at a future
date. Goodwill impairment is never reversed.
Sensitivities are performed around the discount
rate and operating profit growth which are
considered the critical assumptions in the review.
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 statement of financial position 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. The
annuity purchased for the partial pensioner
buy-in is measured in accordance with the
defined benefit obligation of the affected
pension membership. 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 £70 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 decreased by 1%, the gross
plan liabilities would increase by approximately
£255 million.
The income statement generally comprises
a regular charge to operating profit for open
defined benefit plans, which represents the
service cost of providing the benefit for the
year, and a finance result, 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 1% increase in the
assumption of the discount rate would increase
the net finance expense by approximately
£1.1 million.
Full details of these assumptions, which are
based on advice from the Group’s actuaries,
are set out in Note 30.
Provisions
The Group recognises a provision where
a legal or constructive obligation exists at
the statement of financial position 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 statement of financial position 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
statement of financial position 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.
Tate & Lyle PLC Annual Report 2013
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Notes to the Consolidated Financial Statements continued
4 Segment information
The Group operates two business units within continuing operations: Speciality Food Ingredients and Bulk Ingredients. These business units meet
the definition of operating segment under IFRS 8. 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.
In the current year, there has been a change to internal management reporting which eliminates inter-segment sales.
Discontinued operations comprise businesses that formed part of the former Sugars segment (Note 12).
The segment results for the year to 31 March 2013 are as follows:
Continuing operations
Speciality
Food
Ingredients
£m
Notes
Bulk
Ingredients
£m
Central
costs
£m
947
–
947
213
(3)
(10)
200
2 309
–
2 309
182
8
–
190
–
–
–
(37)
(17)
–
(54)
304
566
23
7
15
10
10
10
Discontinued
operations
(Note 12)
£m
10
–
10
(8)
26
–
18
–
–
–
18
3
Total
£m
3 256
–
3 256
358
(12)
(10)
336
1
(30)
2
309
893
Total from
continuing
and
discontinued
operations
£m
3 266
–
3 266
350
14
(10)
354
1
(30)
2
327
896
1 421
470
2 787
(115)
(223)
(46)
(384)
(1)
(385)
Sales
Total sales
Inter-segment sales
External sales (Note a)
Operating profit/(loss)
Before exceptional items and
amortisation of intangible assets
acquired through business
combinations
Exceptional items
Amortisation of intangible assets
acquired through business
combinations
Operating profit/(loss)
Finance income before post
retirement benefit interest
Finance expense
Post-retirement benefit interest
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
(1 158)
(208)
(1 751)
511
143
91
17
13
Other segment information
Net working capital
Capital investments (Note c)
Depreciation
Amortisation of intangible assets
Share-based payments
16
15
9, 26
189
43
36
15
3
343
66
52
1
3
(23)
34
3
1
7
509
143
91
17
13
2
–
–
–
–
(a)
(b)
There were no customers that contributed more than 10% of the Group’s external sales from continuing operations for the year ended
31 March 2013.
Segment assets and liabilities comprise 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 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.
78
Tate & Lyle PLC Annual Report 2013
Financial Statements
4 Segment information continued
The segment results for the year to 31 March 2012 are as follows:
Continuing operations
Speciality
Food
Ingredients
£m
Notes
Bulk
Ingredients
£m
Central
costs
£m
992
(105)
887
214
70
(12)
272
2 277
(76)
2 201
172
7
–
179
–
–
–
(38)
(9)
–
(47)
258
513
13
Discontinued
operations
(Note 12)
£m
72
–
72
5
11
–
16
2
(1)
–
17
40
Total
£m
3 269
(181)
3 088
348
68
(12)
404
3
(33)
5
379
784
Total from
continuing
and
discontinued
operations
£m
3 341
(181)
3 160
353
79
(12)
420
5
(34)
5
396
824
1 515
567
2 906
Sales
Total sales
Inter-segment sales
External sales (Note a)
Operating profit/(loss)
Before exceptional items and
amortisation of intangible assets
acquired through business
combinations
Exceptional items
Amortisation of intangible assets
acquired through business
combinations
Operating profit/(loss)
Finance income before post-retirement
benefit interest
Finance expense
Post-retirement benefit interest
Profit before tax
7
15
10
10
10
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
(117)
(222)
(47)
(386)
(9)
(395)
(1 153)
(300)
(1 848)
429
153
87
18
11
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Other segment information
Net working capital
Capital investments (Note c)
Depreciation
Amortisation of intangible assets
Share-based payments
16
15
9, 26
141
70
30
18
3
291
52
53
–
2
(34)
30
2
–
6
398
152
85
18
11
31
1
2
–
–
(a)
(b)
There were no customers that contributed more than 10% of the Group’s external sales from continuing operations for the year ended 31 March
2012. Sales between segments were carried out at arm’s length.
Segment assets and liabilities comprises 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 were reported within segment information as unallocated, as
these were not reported to the Chief Operating Decision Maker at 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 Company. 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:
l
S
t
a
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m
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t
s
United Kingdom
United States
Other European countries
Rest of world
Total
External sales by destination
Year to 31 March
2012
£m
64
1 849
526
649
3 088
2013
£m
63
1 965
502
726
3 256
External sales by origin
Year to 31 March
2012
£m
18
2 216
512
342
3 088
2013
£m
23
2 404
528
301
3 256
Location of non-current assets
Year to 31 March
2012
£m
39
767
302
146
1 254
2013
£m
38
829
309
147
1 323
Tate & Lyle PLC Annual Report 2013
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Financial Statements
Notes to the Consolidated Financial Statements continued
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
Continuing operations
Analysis by nature:
External sales
Staff costs
– of which relate to cost of sales
Inventories:
– cost of inventories recognised as an expense (included in cost of sales)
Depreciation of property, plant and equipment:
– owned assets
– of which relate to cost of sales
– leased assets (included in cost of sales)
Exceptional items
Amortisation of intangible assets:
– intangible assets arising through business combinations
– other intangible assets
Operating lease rentals:
– plant and machinery
Research and development expenditure
Impairment of trade receivables
Impairment of inventories
(Profit)/loss on disposal of property, plant and equipment
Other operating and selling expenses
Total
Operating profit from continuing operations
Discontinued operations
Analysis by nature:
External sales
Staff costs
– of which relate to cost of sales
Inventories:
– cost of inventories recognised as an expense (included in cost of sales)
Depreciation of property, plant and equipment:
– owned assets
– of which relate to cost of sales
Exceptional items
Impairment of trade receivables
Profit on disposal of property, plant and equipment
Other operating and selling expenses
Total
Operating profit from discontinued operations
Notes
5
9
16
16
7
15
15
23
22
Notes
12
9
16
7
23
Note
17
2013
£m
3 256
256
2 066
87
4
12
10
7
19
32
1
–
(1)
427
2 920
336
2013
£m
10
–
6
–
(26)
2
(1)
11
(8)
18
Year to 31 March
2012
£m
2 617
471
3 088
2013
£m
2 780
476
3 256
£m
121
81
£m
1
2
2012
£m
3 088
250
1 952
84
1
(68)
12
6
22
29
1
1
1
393
2 684
404
2012
£m
72
2
60
2
(11)
–
–
3
56
16
£m
125
86
£m
–
–
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Financial Statements
7 Exceptional items
Exceptional items are as follows:
Continuing operations
Gain on disposal – Sucromiles (Note a)
Business transformation costs (Note b)
Reversal of fixed asset impairment (Note c)
Reversal of provision – McIntosh (Note c)
Total
Discontinued operations
Gain on disposal – Vietnam (Note d)
Gain on disposal – Molasses (Note e)
Gain on disposal of minority holdings – International Sugar Trading (Note f)
Total
Year to 31 March
2012
£m
2013
£m
8
(20)
–
–
(12)
21
5
–
26
–
(15)
60
23
68
–
–
11
11
Continuing operations
(a)
On 1 August 2012, the Group completed the disposal of its share in Sucromiles SA (Sucromiles), its Colombian citric acid joint venture, to its
former joint-venture partner, Organizacion Ardila Lulle. After recycling foreign exchange revaluation gains previously held in reserves to the
income statement, a gain on disposal of £8 million was recorded and is reported in the Bulk Ingredients segment. Further details are set out
in Note 37.
(b)
The Group has recognised an exceptional charge of £20 million (2012 – £15 million) in relation to business transformation costs. The Group
incurred £18 million (2012 – £9 million) of costs that did not meet the capitalisation criteria associated with the implementation of a common
global IS/IT platform and global Shared Services Centre, and £2 million (2012 – £5 million) in relation to the relocation of employees and
restructuring associated with the new Commercial and Food Innovation Centre in Chicago, USA. In the prior year, a further £1 million of closure
and other restructuring costs were incurred in relation to the Food Systems business. These costs are reported in the Speciality Food
Ingredients segment (£3 million; 2012 – £6 million) and within Central costs (£17 million; 2012 – £9 million).
(c)
In the prior year, the Group took the decision to re-open the mothballed facility in McIntosh, Alabama and restart the production of sucralose,
which resulted in the reversal of £53 million of the impairment charge previously recognised against property, plant and equipment. In addition,
£23 million of the provision in respect of obligations relating to the mothballed facility was no longer required and was also reversed. These
exceptional items were reported within the Speciality Food Ingredients segment.
In addition, in November 2010 the Group signed an agreement with Amyris, Inc. to manufacture trans-beta-farnesene using assets located
at the Decatur, Illinois plant that were previously redundant. In the prior year, commercial viability of the new production process was proven
resulting in a £7 million reversal of the write down previously recognised against property, plant and equipment. This exceptional item was
reported within the Bulk Ingredients segment.
The tax impact on continuing net exceptional items is a £5 million credit (2012 – £31 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 the prior year, the Group recognised an exceptional tax credit of £10 million which represented the recognition of a deferred tax asset in respect
of foreign tax credits recognised in association with the disposal of the ethanol facility in Fort Dodge, Iowa.
Discontinued operations
(d)
On 29 June 2012, the Group completed the sale of Vietnam Sugar to TH Milk Food Stock Company. After recycling foreign exchange revaluation
gains previously held in reserves to the income statement, a gain on disposal of £21 million was recorded. Further details are set out in Note 37.
(e) On 20 March 2013, the Group completed the sale of the land and buildings relating to the former Molasses business, resulting in a gain on
disposal of £5 million being recognised. Further details are set out in Note 37.
(f)
In the prior year, the Group completed the sale of its minority holdings in the former International Sugar Trading business in Egypt and
Saudi Arabia. After recycling revaluation gains previously held in reserves to the income statement, the Group recorded an exceptional gain
of £11 million.
The tax impact on discontinued net exceptional items for the period is £nil (2012 – £nil). Tax credits on exceptional costs are only recognised to the
extent that losses incurred will result in tax recoverable in the future.
In the prior year, the Group recognised an exceptional tax charge of £15 million in respect of outstanding tax matters associated with the starch
facilities that formed part of the former Food & Industrial Ingredients, Europe segment, which are in the process of litigation. These facilities were
disposed of by the Group in the year ended 31 March 2008.
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Financial Statements
Notes to the Consolidated Financial Statements continued
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 and its associates 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
– audit-related services
– other services
Total audit fees
Fees in respect of the audit of the Group pension schemes
Total
9 Staff costs
Staff costs for the Group during the year were as follows:
Year to 31 March
2012
£m
2013
£m
0.7
1.2
0.3
–
2.2
0.1
2.3
0.6
1.2
0.5
0.1
2.4
0.1
2.5
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 2013
Discontinued
operations
£m
–
–
Continuing
operations
£m
210
22
Year to 31 March 2012
Discontinued
operations
£m
2
–
Continuing
operations
£m
204
24
4
4
3
13
256
–
–
–
–
–
4
4
3
11
250
–
–
–
–
2
Notes
30
30
26
The average monthly 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
2012
1 693
2 247
346
4 286
2013
1 731
2 187
404
4 322
In addition, the average number of people employed relating to discontinued operations was 60 (2012 – 276).
The number of people employed by the Group at 31 March 2013 was 4,326 (2012 – 4,636). Included in these numbers are nil (2012 – 253) employees
relating to discontinued operations.
Central includes shared service employees who perform activities for the whole Group, including the Speciality Food Ingredients and Bulk Ingredients
segments.
Key management compensation
Salaries and short-term employee benefits
Post-employment benefits
Share-based payments
Total
Year to 31 March
2012
£m
7
1
6
14
2013
£m
5
1
6
12
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 50 to 62. Members of the Group Executive Committee are given on page 39.
The aggregate emoluments of directors in respect of qualifying services to the Company were £2 million (2012 – £3 million).
As required by the Companies Act 2006, the aggregate gains made by the directors on the exercise of share options were £1 million
(2012 – £1 million).
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Financial Statements
10 Finance income and finance expense
Continuing operations
Finance income
Interest receivable
Net finance income arising on defined benefit retirement schemes:
– expected return on plan assets
– interest cost
Total finance income
Finance expense
Interest payable on bank and other borrowings
Finance lease charges
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
Total finance expense
Net finance expense
Notes
30
30
Year to 31 March
2012
£m
2013
£m
1
71
(69)
3
(28)
(2)
–
(1)
1
(30)
(27)
3
78
(73)
8
(31)
(1)
20
(3)
(18)
(33)
(25)
Finance expense is shown net of borrowing costs capitalised within intangible assets (Note 15) of £2 million (2012 – £1 million capitalised within
property, plant and equipment) at a capitalisation rate of 3.8% (2012 – 3.7%).
Interest payable on other borrowings includes £0.2 million (2012 – £0.2 million) of dividends in respect of the Group’s 6.5% cumulative preference shares.
Discontinued operations
Included within the profit for the year in relation to discontinued operations (Note 12) is net finance income of £nil (2012 – £1 million).
11 Income tax expense
Analysis of charge for the year
Continuing operations
Current tax:
In respect of the current year
– UK
– overseas
Adjustments in respect of previous years
Deferred tax:
Deferred tax charge
Adjustments in respect of previous years
Exceptional tax credit
Income tax expense
Note
29
Year to 31 March
2012
£m
2013
£m
–
23
–
23
30
(4)
–
49
–
7
–
7
73
2
(10)
72
The income tax charge relating to continuing operations for the year to 31 March 2013 is £49 million (2012 – £72 million) and includes a credit of
£5 million in respect of pre-tax exceptional items (2012 – £31 million charge).
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 15.8% (2012 – 19.0%). This compares with the standard rate of corporation tax in the UK of 24% (2012 – 26%). The effective tax rate
relating to continuing operations on profit before exceptional items, amortisation of intangible assets acquired through business combinations,
post-retirement benefit interest and exceptional tax items is 17.9% (2012 – 18.2%).
Included within deferred tax is a credit of £4 million (2012 – £2 million charge) principally relating to the settlement of prior year tax obligations in a
number of jurisdictions.
In the prior year the exceptional tax credit of £10 million represents the recognition of a deferred tax asset in respect of foreign tax credits recognised
in association with the disposal of Fort Dodge, Iowa.
The standard rate of corporation tax in the United Kingdom has reduced from 24% to 23% from 1 April 2013.
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Financial Statements
Notes to the Consolidated Financial Statements continued
11 Income tax expense continued
The tax on the company’s profit before tax differs from the standard rate of corporation tax in the United Kingdom as follows:
Profit before tax
Corporation tax charge thereon at 24% (2012 – 26%)
Adjusted for the effects of:
– exceptional tax credit
– items not (taxable)/deductible for tax purposes
– losses not recognised
– adjustments to tax in respect of previous years
– different tax rates applied on overseas earnings
Total
Year to 31 March
2012
£m
379
99
2013
£m
309
74
–
(5)
9
(4)
(25)
49
(10)
3
4
2
(26)
72
Discontinued operations
The income tax charge in respect of discontinued operations (Note 12) in the year to 31 March 2013 is £nil (2012 – £15 million charge). The
comparative period comprised a £15 million exceptional charge increasing the provisions relating to outstanding tax matters associated with starch
facilities that formed part of the former Food & Industrial Ingredients, Europe segment, which are in the process of litigation. These facilities were
disposed of by the Group in the year ended 31 March 2008.
Tax charge relating to components of other comprehensive income
Retirement benefit obligations
Cash flow hedges
Tax losses
Tax (charge)/credit relating to components of other comprehensive income
Deferred tax
Tax on items recognised directly in equity
Current tax credit on share-based payments
Deferred tax charge/(credit) on share-based payments
Total
Notes
29
Year to 31 March
2012
£m
33
–
(6)
27
27
2013
£m
(3)
(1)
(5)
(9)
(9)
Year to 31 March
2012
£m
–
(2)
(2)
2013
£m
(3)
1
(2)
12 Discontinued operations
The results of the former Sugars segment are presented as discontinued operations in both the current and comparative year. In the current year,
the Group completed the sale of its Vietnam Sugar operations, its remaining Israel Sugar assets and other assets relating to Sugar operations which
are discontinued. Further details can be found in Note 37. In the prior year, Other also includes £15 million of income tax expense in respect of
outstanding tax matters associated with the starch facilities that formed part of the former Food & Industrial Ingredients, Europe segment, which
are in the process of litigation.
Sales
Operating profit/(loss) before exceptional items
Exceptional items
Operating profit/(loss)
Profit/(loss) before tax
Income tax expense
Profit/(loss) for the year
Non-controlling interests
Profit/(loss) attributable to owners of the Company
Notes
Vietnam Sugar
£m
9
Year to 31 March 2013
Total
Other
£m
£m
10
1
7
11
3
21
24
24
–
24
(1)
23
(11)
5
(6)
(6)
–
(6)
–
(6)
(8)
26
18
18
–
18
(1)
17
84
Tate & Lyle PLC Annual Report 2013
Financial Statements
12 Discontinued operations continued
Sales
Operating profit/(loss) before exceptional items
Exceptional items
Operating profit
Finance income
Finance expense
Profit before tax
Income tax expense
Profit/(loss) for the year
Non-controlling interests
Profit/(loss) attributable to owners of the Company
Net cash flows from discontinued operations are as follows:
Net cash generated from operating activities
Net cash generated from operating activities
Net cash generated from investing activities
Net cash used in financing activities
Notes
Vietnam Sugar
£m
31
Year to 31 March 2012
Total
£m
72
Other
£m
41
7
10
10
11
7
–
7
2
–
9
–
9
(4)
5
(2)
11
9
–
(1)
8
(15)
(7)
–
(7)
5
11
16
2
(1)
17
(15)
2
(4)
(2)
Vietnam Sugar
£m
4
Vietnam Sugar
£m
10
2
(2)
Year to 31 March 2013
Total
Other
£m
£m
8
4
Year to 31 March 2012
Total
£m
25
2
(2)
Other
£m
15
–
–
13 Earnings per share
Basic
Basic earnings per share is calculated by dividing the profit attributable to owners 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 owners of the
Company (£million)
Weighted average number of ordinary shares in
issue (millions)
Basic earnings/(loss) per share
Year to 31 March 2013
Year to 31 March 2012
Continuing
operations
Discontinued
operations
260
464.2
56.0p
17
464.2
3.7p
Total
277
464.2
59.7p
Continuing
operations
Discontinued
operations
307
465.7
65.9p
(2)
465.7
(0.4)p
Total
305
465.7
65.5p
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 performance conditions
at the end of the financial year, and the number of shares which would be issued based on the status at the end of the financial year.
Profit/(loss) attributable to owners of the
Company (£million)
Weighted average number of ordinary shares
(millions)
Diluted earnings/(loss) per share
Year to 31 March 2013
Year to 31 March 2012
Continuing
operations
Discontinued
operations
260
473.5
54.9p
17
473.5
3.6p
Total
277
473.5
58.5p
Continuing
operations
Discontinued
operations
307
474.9
64.6p
(2)
474.9
(0.3)p
Total
305
474.9
64.3p
The adjustment for the dilutive effect of share options at 31 March 2013 was 9.3 million shares (2012 – 9.2 million).
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Notes to the Consolidated Financial Statements continued
13 Earnings per share continued
Adjusted earnings per share
Adjusted earnings per share is stated excluding exceptional items, amortisation of intangible assets acquired through business combinations and
post-retirement benefit interest as follows:
Continuing operations
Profit attributable to owners of the Company
Adjustments:
– exceptional items
– amortisation of intangible assets acquired through business combinations
– post-retirement benefit interest
– tax effect of the above adjustments
– exceptional tax credit
Adjusted profit
Adjusted basic earnings per share from continuing operations
Adjusted diluted earnings per share from continuing operations
14 Dividends
Dividends paid on ordinary equity shares:
– final paid relating to prior year
– interim paid relating to current year
Total dividend paid
Satisfied by:
– cash
Total
The total ordinary dividend is 26.2p (2012 – 24.9p) made up as follows:
– interim dividend paid
– final dividend proposed (Note a)
Total
Notes
7
15
10
11
Year to 31 March
2012
£m
307
2013
£m
260
12
10
(2)
(10)
–
270
(68)
12
(5)
24
(10)
260
58.2p
57.0p
55.8p
54.7p
Year to 31 March
2012
£m
2013
£m
83
34
117
117
117
7.4p
18.8p
26.2p
79
33
112
112
112
7.1p
17.8p
24.9p
(a)
The final dividend proposed for the year of £87 million (2012 – £83 million), based on the number of shares outstanding as at 31 March 2013 has
not been recognised as a liability and will be settled on 2 August 2013, to shareholders who are on the Register of Members on 28 June 2013,
subject to approval by shareholders at the Company’s Annual General Meeting on 24 July 2013.
86
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Financial Statements
15 Goodwill and other intangible assets
Patents and other
intellectual
property
£m
Other acquired
intangible
assets
£m
Goodwill
£m
Total acquired
intangibles
£m
Other
intangible
assets
£m
Cost
At 1 April 2012
Additions at cost
Exchange
At 31 March 2013
Accumulated amortisation and impairments
At 1 April 2012
Amortisation charge
Exchange
At 31 March 2013
Net book value at 31 March 2013
Cost
At 1 April 2011
Additions at cost
Exchange
At 31 March 2012
Accumulated amortisation and impairments
At 1 April 2011
Amortisation charge
Exchange
At 31 March 2012
Net book value at 31 March 2012
Goodwill
The carrying amounts of goodwill by segment are as follows:
217
–
–
217
–
–
–
–
217
222
–
(5)
217
–
–
–
–
217
33
1
–
34
27
1
–
28
6
33
–
–
33
25
2
–
27
6
116
–
3
119
57
9
2
68
51
121
–
(5)
116
49
10
(2)
57
59
366
1
3
370
84
10
2
96
274
376
–
(10)
366
74
12
(2)
84
282
Speciality Food Ingredients (Note a)
Bulk Ingredients
Allocated by geography:
– United States (Note b)
– Europe (Note c)
Total
70
43
3
116
27
7
–
34
82
40
30
–
70
22
6
(1)
27
43
2013
£m
71
1
60
85
217
Total
£m
436
44
6
486
111
17
2
130
356
416
30
(10)
436
96
18
(3)
111
325
Year to 31 March
2012
£m
76
1
57
83
217
Goodwill is tested for impairment annually and whenever there is an indication of impairment. The carrying value was compared to the recoverable
amount which was determined by value in use. Although cash flows have been identified for certain individual plants for the purposes of assessing
the recoverable amounts, the business is principally 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 cash-generating
unit (CGU). Unless otherwise stated, impairment reviews are carried out in accordance with the methodology set out in Notes 2 and 3 using cash flows
based on the latest Board approved management projections with management determined budgeted gross margin based on past performance and
its expectations of market development. The discount rates used are pre-tax and are based on the Group’s WACC adjusted to reflect specific risks
relating to the relevant operating segments. The weighted average growth rates used are consistent with the forecasts included in industry reports.
The terminal value is based on the long-term growth rate for the relevant geographical markets and is approximately 2% or lower per year.
(a)
Goodwill within the Speciality Food Ingredients segment includes amounts relating to the acquisition of G.C. Hahn & Company in June 2007 and
the acquisition of the Cesalpinia Foods group in December 2005 which are all within the Food Systems division, which totals £63 million (2012
– £62 million). These businesses have been tested for impairment as one CGU following sufficient integration between the businesses. A pre-tax
discount rate of 10.1% (2012 – 10.4%) has been used with cash flow projections based on the five-year business plan. A 2% growth was
assumed in perpetuity based on the long-term national average growth rates for the geographic markets in which these businesses operate.
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 10.1% (2012 – 10.4%) and 2% growth assumed in perpetuity based on long-term national average growth
rate for these markets. Significant headroom exists and management has concluded that no impairment is required.
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Financial Statements
Notes to the Consolidated Financial Statements continued
15 Goodwill and other intangible assets continued
(b)
Goodwill relating to the United States includes £60 million (2012 – £57 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 10.1% (2012 – 10.4%). A 2% growth was assumed in perpetuity based on the long-term national average growth rate for this geographic
market. Significant headroom exists and management has concluded that no impairment is required.
(c)
Goodwill relating to Europe includes £85 million (2012 – £83 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 goodwill impairment testing
purposes. The goodwill in the former Amylum business has been tested for impairment using a pre-tax discount rate of 10.1% (2012 – 10.4%).
Cash flow projections for five years were used. A 2% growth was assumed in perpetuity based on the long-term national average growth rates
for these markets. Significant headroom exists and 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
Other intangible assets is made up of capitalised development costs and software. Included in capitalised development costs is £47 million
(2012 – £18 million) relating to a common global IS/IT platform of which £20 million (2012 – £18 million) is held as assets under construction and will
be amortised over a period of seven years once it is deployed into the businesses. Additions to Other intangible assets include capitalised borrowing
costs of £2 million (2012 – £nil).
16 Property, plant and equipment
Cost
At 1 April 2012
Additions at cost
Transfers on completion
Disposals and write-offs
Exchange
At 31 March 2013
Accumulated depreciation and impairments
At 1 April 2012
Depreciation charge
Disposals and write-offs
Exchange
At 31 March 2013
Net book value at 31 March 2013
Cost
At 1 April 2011
Additions at cost
Transfers on completion
Transfer to assets held for sale
Disposals and write-offs
Exchange
At 31 March 2012
Accumulated depreciation and impairments
At 1 April 2011
Depreciation charge
Transfer to assets held for sale
Reversal of impairment losses
Disposals and write-offs
Exchange
At 31 March 2012
Net book value at 31 March 2012
Land and
buildings
£m
Plant and
machinery
£m
Assets in the
course of
construction
£m
444
2
33
(5)
20
494
209
11
(5)
8
223
271
433
2
21
(2)
(3)
(7)
444
221
10
(1)
(18)
(1)
(2)
209
235
1 932
7
103
(19)
85
2 108
1 327
80
(17)
63
1 453
655
1 893
24
64
(15)
(10)
(24)
1 932
1 328
77
(13)
(42)
(9)
(14)
1 327
605
82
86
(136)
–
–
32
–
–
–
–
–
32
78
90
(85)
(1)
–
–
82
–
–
–
–
–
–
–
82
Total
£m
2 458
95
–
(24)
105
2 634
1 536
91
(22)
71
1 676
958
2 404
116
–
(18)
(13)
(31)
2 458
1 549
87
(14)
(60)
(10)
(16)
1 536
922
Additions to property, plant and equipment includes capitalised borrowing costs of £nil million (2012 – £1 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, or that an impairment loss recognised in a previous period no longer exists or has decreased.
88
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Financial Statements
16 Property, plant and equipment continued
Impairment reviews
2013 and 2012
The Group carried out an impairment review at 31 March 2013. 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 between
10.1% and 12.1% (2012 – between 10.4% and 12.4%) and a 2% growth rate assumed in perpetuity, where appropriate. Taking all factors into account
management concluded that no impairments were required. During 2012, the Group reversed previously recognised impairments on its sucralose
manufacturing facility in McIntosh, Alabama (£53 million) and £7 million relating to the previously redundant plant at its Decatur, Illinois facility. See
Note 7 for further details.
In respect of the plant in Dayton, Ohio which had been previously impaired, 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. A pre-tax
discount rate of 12.1% was used to take into account the risk associated with the regulatory and competitive environment in which it operates. Taking
all factors into account management concluded that no further impairment or reversal of previous impairments was required.
Leased assets
Included in property, plant and equipment is plant and machinery held under finance leases with a net book value of £18 million (2012 – £20 million).
17 Investments in associates and joint ventures
Associates
At 1 April 2011 and 2012
Exchange
At 31 March 2013
The Group’s associates, which are accounted for under the equity method, are listed in Note 42.
The amounts equity accounted in the Group income statement and statement of financial position are summarised below:
Income statement
Sales
Expenses
Profit before and after tax
Statement of financial position
Assets
Liabilities
Net assets
£m
5
1
6
Year to 31 March
2012
£m
5
(5)
–
31 March
2012
£m
10
(5)
5
2013
£m
4
(4)
–
2013
£m
13
(7)
6
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:
Sales
Other expense
Profit/(loss) before tax
Income tax expense
Profit/(loss) for the year
Note
5
Year to 31 March 2013
Discontinued
operations
£m
–
–
–
–
–
Continuing
operations
£m
476
(428)
48
(14)
34
Year to 31 March 2012
Discontinued
operations
£m
–
(1)
(1)
–
(1)
Continuing
operations
£m
471
(401)
70
(13)
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Notes to the Consolidated Financial Statements continued
17 Investments in associates and joint ventures continued
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
There are guarantees in respect of banking facilities of a joint venture totalling £9 million (2012 – £10 million).
18 Available-for-sale financial assets
At 1 April 2011
Additions
Disposal
Fair value loss
Exchange
At 31 March 2012
Additions
Fair value loss
Exchange
At 31 March 2013
2013
£m
173
73
158
404
7
19
31
56
113
291
31 March
2012
£m
170
102
159
431
7
17
7
74
105
326
£m
36
6
(18)
(1)
1
24
4
(1)
1
28
Presented in the statement of financial position as follows:
Non-current available-for-sale financial assets
Assets held for sale
Total
Note
38
2013
£m
27
1
28
31 March
2012
£m
23
1
24
Available-for-sale financial assets primarily comprise £28 million (2012 – £24 million) of unlisted securities. The fair values of non-current available-for-
sale financial assets are approximated at cost where fair value cannot 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:
US dollar (Note a)
Sterling
Euro
Total
(a) US dollar includes £1 million (2012 – £1 million) of assets classified as held for sale in current assets.
2013
£m
18
8
2
28
31 March
2012
£m
14
8
2
24
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Financial Statements
19 Financial instruments by category
Set out below is a comparison by category of carrying values and fair values of all of the Group’s financial assets and financial liabilities as at
31 March 2013 and 31 March 2012.
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
–
372
379
–
(896)
–
(382)
(527)
Derivatives
in a hedging
relationship
£m
–
–
–
56
–
(17)
–
39
Amortised
cost
£m
–
323
424
–
(946)
–
(378)
(577)
Derivatives
in a hedging
relationship
£m
–
–
–
60
–
(17)
–
43
Notes
18
23
33
20
28
20
27
Notes
18
23
33
20
28
20
27
Held for
trading
£m
–
–
–
84
–
(64)
–
20
Held for
trading
£m
–
–
–
77
–
(96)
–
(19)
Available-
for-sale
£m
27
–
–
–
–
–
–
27
Available-
for-sale
£m
23
–
–
–
–
–
–
23
Total
carrying
value
£m
27
372
379
140
(896)
(81)
(382)
(441)
Total
carrying
value
£m
23
323
424
137
(946)
(113)
(378)
(530)
31 March 2013
Fair value
£m
27
372
379
140
(946)
(81)
(382)
(491)
31 March 2012
Fair value
£m
23
323
424
137
(988)
(113)
(378)
(572)
Trade and other receivables presented above excludes £14 million (2012 – £11 million) relating to prepayments.
Trade and other payables presented above excludes £3 million (2012 – £8 million) relating to social security.
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.
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Financial Statements
Notes to the Consolidated Financial Statements continued
19 Financial instruments by category continued
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 2013 and 31 March 2012:
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
Liabilities at fair value
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
Liabilities at fair value
Notes
Level 1
£m
Level 2
£m
Level 3
£m
31 March 2013
Total
£m
18
20
20
20
20
20
20
20
20
–
–
–
–
11
11
–
–
–
(21)
(21)
–
2
59
1
14
76
(13)
(10)
(2)
(14)
(39)
27
–
–
–
53
80
–
–
–
(21)
(21)
27
2
59
1
78
167
(13)
(10)
(2)
(56)
(81)
Notes
Level 1
£m
Level 2
£m
Level 3
£m
31 March 2012
Total
£m
18
20
20
20
20
20
20
20
20
–
–
–
–
23
23
–
–
–
(34)
(34)
–
16
61
2
13
92
(40)
(13)
(1)
(3)
(57)
23
–
–
–
22
45
–
–
–
(22)
(22)
23
16
61
2
58
160
(40)
(13)
(1)
(59)
(113)
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Financial Statements
19 Financial instruments by category continued
Level 1 financial instruments
The fair value of financial instruments traded in active markets (commodity futures) is based on quoted market prices at the statement of financial
position 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.
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 statement of financial
position 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 principally approximated at cost. Values are adjusted for permanent impairments and fair value movements as disclosed in Note 18.
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:
At 1 April 2011
Total gains or losses:
– in operating profit
– in other comprehensive income
Purchases
Settlements
At 31 March 2012
Total gains or losses:
– in operating profit
– in other comprehensive income
Purchases
Settlements
At 31 March 2013
Commodity
pricing
contracts
– assets
£m
14
Commodity
pricing
contract
– liabilities
£m
(14)
Available-
for-sale
assets
£m
19
22
–
–
(14)
22
53
–
–
(22)
53
(22)
–
–
14
(22)
(21)
–
–
22
(21)
–
(1)
6
(1)
23
–
(1)
4
1
27
Total
£m
19
–
(1)
6
(1)
23
32
(1)
4
1
59
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Financial Statements
Notes to the Consolidated Financial Statements continued
20 Derivative financial instruments
Non-current derivative financial instruments used
to manage the Group’s net debt profile
Currency swaps:
– net investment hedges
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
– held for trading
Interest rate swaps
– accrued interest
Total derivative financial instruments used
to manage the Group’s net debt profile
Other current derivative financial instruments
Forward foreign exchange contracts:
– cash flow hedges
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
Assets
£m
31 March 2013
Liabilities
£m
Assets
£m
31 March 2012
Liabilities
£m
2
45
7
54
–
–
7
7
61
1
1
77
79
79
140
54
86
140
(13)
–
(8)
(21)
–
–
(2)
(2)
(23)
(2)
–
(56)
(58)
(58)
(81)
(21)
(60)
(81)
2
44
11
57
4
10
6
20
77
2
2
56
60
60
137
57
80
137
(8)
–
(11)
(19)
(2)
(30)
(2)
(34)
(53)
(1)
(4)
(55)
(60)
(60)
(113)
(19)
(94)
(113)
The ineffective portion recognised in operating profit that arises from cash flow hedges amounts to a £1 million gain (2012 – £nil).
The ineffective portion recognised in operating profit that arises from net investment hedges amounts to £nil (2012 – £nil).
The ineffective portion recognised in net finance expense that arises from fair value hedges amounts to a £1 million gain (2012 – £2 million gain).
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
2013
£m
1
(36)
–
32
2
31 March
2012
£m
5
(36)
1
32
(2)
Gains and losses recognised in the hedging reserve in equity (Note 25) on forward foreign exchange and commodity pricing contracts as of
31 March 2013 will be released to the income statement at various dates up to 12 months from the statement of financial position date.
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Financial Statements
20 Derivative financial instruments continued
Fair value hedges
The Group employs interest rate swap contracts to hedge interest rate risks associated with its borrowings. The notional principal amounts of the
outstanding interest rate swap contracts applied in fair value hedging relationships as of 31 March 2013 were £364 million (2012 – £353 million).
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 2013 were £158 million (31 March 2012 – £152 million). Within net investment hedging losses, a fair value loss of £5 million (2012 – £4 million
gain) on translation of the currency swap contracts to pounds sterling at the statement of financial position date was recognised in the translation
reserve in shareholders’ equity (Note 25).
In addition, at 31 March 2013, of the Group’s borrowings, a total of £495 million (2012 – £369 million) is designated as hedges of the net investments
in overseas subsidiaries.
Debt-related derivatives held for trading
The notional amounts of the outstanding currency swap contracts not designated within hedge relationships as at 31 March 2013 were £nil million
(2012 – £321 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 2013 were £231 million
(2012 – £219 million).
Trading contracts
Commodity pricing contracts held for trading relate to the Group’s commodity trading activities which are undertaken for the purposes of supporting
underlying operations.
21 Financial risk factors
Management of financial risk
The 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 of Tate & Lyle PLC regularly reviews these risks and approves written policies covering the use of financial
instruments to manage these risks and sets overall risk limits. The derivative financial instruments approved by the Board to manage financial risks
include swaps, both interest rate and currency, swaptions, caps, forward rate agreements, foreign exchange and commodity forward contracts and
options, and commodity futures.
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. 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. Tate & Lyle International Finance PLC arranges funding and manages interest rate, foreign
exchange and bank counterparty risks within limits approved by the Board of Tate & Lyle PLC.
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 corn pricing.
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 recognised 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 £479 million (2012 – £476 million) was held
in the following currencies: net borrowings of US dollars 108% (2012 – 113%), euro 3% (2012 – nil%), net deposits of pounds sterling 10% (2012 – 8%
and other currencies 1% (2012 – 5%). The Group’s interest cost through the income statement is impacted by changes in the relevant exchange rates.
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Notes to the Consolidated Financial Statements continued
21 Financial risk factors continued
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 10% change
Sterling/euro 10% change
31 March 2013
31 March 2012
Income
statement
–/+£m
–
–
Equity
–/+£m
48
6
Income
statement
–/+£m
1
–
Equity
–/+£m
54
6
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 2013, the longest term of any fixed rate debt held by the Group was until November 2019
(2012 – November 2019). The proportion of net debt at 31 March 2013 (excluding the Group’s share of joint-venture net debt) that was fixed or
capped for more than one year was 64% (2012 – 56%).
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 2013 assuming that other variables remain
unchanged.
As at 31 March 2013 if interest rates increase by 100 basis points, the Group’s profit before tax will decrease by £1 million (2012 – no impact). If
interest rates decrease by 100 basis points, or less where applicable, Group profit before tax will increase by £1 million (2012 – £1 million increase).
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 at 31 March to the price movement of commodities:
Corn 50% change
31 March 2013
31 March 2012
Income
statement
–/+£m
3
Equity
–/+£m
–
Income
statement
–/+£m
3
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 customers’ 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 at the balance sheet date is as follows:
Cash and cash equivalents
Trade and other receivables
Derivative financial instruments – assets
Available-for-sale financial assets
Held for sale assets
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2013
£m
379
372
140
27
1
31 March
2012
£m
424
323
137
23
51
Financial Statements
21 Financial risk factors continued
The Group’s trade receivables are short term in nature and largely comprise amounts receivable from business customers. 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 2013 include 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$800 million which matures in June 2016. 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 3.5 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.
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 at least 35% has a maturity of more than 2.5 years. At 31 March 2013, after subtracting total undrawn committed facilities, there was no
debt maturing within two and a half years (2012 – none). The average maturity of the Group’s gross debt was 4.6 years (2012 – 4.9 years). At the year
end the Group held cash and cash equivalents of £379 million (2012 – £424 million) and had committed facilities of £527 million (2012 – £500 million)
of which £527 million (2012 – £500 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
statement of financial position 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
Liquidity analysis
Borrowings including finance leases
Interest on borrowings
Trade and other payables
Derivative contracts:
– receipts
– payments
Commodity contracts
<1 year
£m
(77)
(41)
(382)
93
(80)
(44)
<1 year
£m
(142)
(46)
(382)
693
(699)
(21)
1–5 years
£m
(518)
(99)
(3)
31 March 2013
> 5 years
£m
(262)
(30)
–
271
(251)
(3)
–
–
–
1–5 years
£m
(491)
(122)
(4)
313
(282)
–
31 March 2012
> 5 years
£m
(273)
(44)
–
–
–
–
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 assets and liabilities denominated in currencies other than pounds sterling are converted to pounds sterling using year end exchange rates.
Tate & Lyle PLC Annual Report 2013
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Notes to the Consolidated Financial Statements continued
21 Financial risk factors continued
Capital risk management
The Group’s primary objectives in managing its capital are to safeguard the business as a going concern; to maintain a progressive dividend policy;
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 2013, the long-term credit rating from Moody’s was Baa2 (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:
Net debt
Total shareholders’ equity
Total capital
Note
34
2013
£m
479
1 036
1 515
31 March
2012
£m
476
1 058
1 534
The Board 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 two times and interest cover should exceed five 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 2013 and 31 March 2012 are:
Net debt/EBITDA
Interest cover
22 Inventories
Raw materials and consumables
Work in progress
Finished goods
Total
2013
times
1.0
11.1
2013
£m
267
21
222
510
31 March
2012
times
1.1
11.1
31 March
2012
£m
256
23
171
450
Finished goods inventories of £5 million (2012 – £4 million) are carried at realisable value, this being lower than cost. Inventories of £164 million
(2012 – £175 million) are carried at market value. During the year ended 31 March 2013, the Group did not recognise a net impairment charge against
inventories (2012 – £1 million).
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Financial Statements
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
Other receivables
Total
2013
£m
3
3
2013
£m
340
(10)
330
14
18
21
383
31 March
2012
£m
2
2
31 March
2012
£m
271
(7)
264
11
36
21
332
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, except prepayments, represents the Group’s maximum credit exposure.
The carrying amount of trade and other receivables are denominated in the following currencies:
US dollar
Euro
Sterling
Other
Total
Provision for impairment of receivables
At 1 April
Charge for the year
Transfer to held for sale
Exchange
At 31 March
2013
£m
222
95
11
58
386
2013
£m
(7)
(3)
–
–
(10)
31 March
2012
£m
205
77
13
39
334
31 March
2012
£m
(19)
(1)
14
(1)
(7)
The creation of provisions for impaired receivables has been included in the income statement.
The Group recognised a loss of £3 million (2012 – £1 million) for impairment of its trade receivables during the year. The loss is from both continuing
(£1 million, 2012 – £1 million) and discontinued operations (£2 million, 2012 – £nil) and has been included in operating profit in the income statement
(Note 6).
As at 31 March 2013, trade receivables of £31 million (2012 – £35 million) were past due but not impaired. The trade receivables not past due nor
impaired are considered recoverable and of good credit quality. During the year, £nil (2012 – £14 million) of trade receivables have been reclassified
to held for sale (Note 38).
The ageing analysis of these trade receivables is as follows:
Up to 30 days past due
1–3 months past due
Total
2013
£m
28
3
31
31 March
2012
£m
31
4
35
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Financial Statements
Notes to the Consolidated Financial Statements continued
24 Share capital and share premium
At 31 March 2012 and 31 March 2013
Ordinary
share capital
£m
117
Share
premium
£m
406
Total
£m
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
At 31 March
Year to 31 March 2013
Year to 31 March 2012
Shares
468 160 519
32 381
468 192 900
£m
117
–
117
Shares
468 111 340
49 179
468 160 519
£m
117
–
117
Treasury shares and shares held in ESOP trust
As at 31 March 2013, the Group held 1,841,533 shares (2012 – 2,545,376 shares) in Treasury.
During the year, 2,703,843 shares (2012 – 379,952 shares) were released from Treasury to satisfy share options exercised.
During the year, the Company repurchased 2,000,000 shares (2012 – 2,750,000 shares) to be held in Treasury for £13 million (2012 – £19 million)
to satisfy share options granted to employees under the Group’s share option schemes. The shares repurchased represent 0.4% of the Company’s
called up share capital at 31 March 2013 (2012 – 0.6%) and had a nominal value of £0.5 million (2012 – £0.7 million).
The shares held in Treasury at 31 March 2013 represented 0.4% (2012 – 0.5%) of the Company’s share capital at the year end, and have a nominal
value of less than £0.5 million (2012 – £0.6 million).
As at 31 March 2013, the Group held 2,571,642 shares (2012 – 1,250,182 shares) in an ESOP trust.
During the year, 178,540 shares (2012 – 1,463,512 shares) were released from the ESOP trust to satisfy share options exercised.
During the year, the Company repurchased 1,500,000 shares to be held in the ESOP trust (2012 – nil) for £10 million to satisfy share options granted
to employees under the Group’s share option schemes. The shares repurchased represent 0.3% of the Company’s called up share capital at
31 March 2013 (2012 – nil) and had a nominal value of £0.4 million.
The shares held in the ESOP trust at 31 March 2013 represent 0.5% (2012 – 0.3%) of the Company’s share capital at year end, have a nominal value
of £0.6m (2012 – £0.3m) and a market value of 850.0p per share (2012 – 705.0p per share).
Analysis of ordinary shareholders
Number of shares of 25p each
Up to 500
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
Number of
holdings
4 720
3 847
1 979
1 308
2 070
512
634
121
151
15 342
%
30.8
25.1
12.9
8.5
13.5
3.3
4.1
0.8
1.0
100.0
Total
1 243 080
3 018 077
2 468 707
2 361 474
6 371 475
3 618 675
32 163 696
39 772 005
377 175 711
468 192 900
31 March 2013
%
0.3
0.6
0.5
0.5
1.3
0.8
6.9
8.5
80.6
100.0
100
Tate & Lyle PLC Annual Report 2013
Financial Statements
25 Other reserves
At 1 April 2011
Cash flow hedges:
– fair value losses in the year
– reclassified and reported in the income statement during the year
Loss 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 2012
Cash flow hedges:
– fair value losses in the year
– reclassified and reported in the income statement during the year
– tax effect of the above movements
Loss on revaluation of available-for-sale financial assets
Currency translation differences:
– net investment hedging losses in the year
Net exchange differences on consolidation
Items transferred to the income statement on disposal
At 31 March 2013
Hedging
reserve
£m
7
Translation
reserve
£m
58
All other
reserves
(Note a)
£m
110
(2)
(3)
–
–
–
–
2
(3)
4
(1)
–
–
–
–
2
–
–
–
3
(33)
–
28
–
–
–
–
(30)
56
(14)
40
–
–
(1)
–
–
(11)
98
–
–
–
(1)
–
–
–
97
Total
£m
175
(2)
(3)
(1)
3
(33)
(11)
128
(3)
4
(1)
(1)
(30)
56
(14)
139
(a)
All other reserves include the merger reserve and the available-for-sale fair value reserve, both of which are non-distributable.
26 Share-based payments
During the year to 31 March 2013, 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 2013
Number of options/shares granted
in year to 31 March 2012
Fair value per share for 2013 grant (pence)
Fair value per share for 2012 grant (pence)
Valuation basis
Contractual life
Vesting conditions
Performance
share plan
Bi-annually
Executive
share option
scheme
(Note a)
Deferred
bonus share
plan
2 673 024
2 937 428
619
542
–
–
–
–
–
–
–
–
Group bonus
plan – deferred
benefit award
Annually as
applicable
in May
8 368
296 710
697
555
Duration
in years
Sharesave Plan
Annually
in June
Annually in
December
3
5
3
5
3
5
3
5
–
–
–
–
–
–
–
23 768
13 442
26 273
7 823
198
208
126
141
Monte Carlo
10 years
(Note b)
Binomial
Lattice
10 years
(Note c)
Monte Carlo
Contractual
3 years
(Note d)
2 years
(Note f)
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 2013, exercise of 2,673,024 shares is dependent 50% on adjusted diluted earnings per share and 50% on return
on capital employed.
For the year ended 31 March 2012, exercise of 2,937,428 shares is dependent 50% on adjusted diluted earnings per share and 50% on return
on capital employed.
(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.
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101
Financial Statements
Notes to the Consolidated Financial Statements continued
26 Share-based payments continued
(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 2012 and 31 March 2013 were by invitation at a 20% discount to the market price. Options are
exercisable at the end of a three-year or five-year savings contract.
(f) The deferred benefit award will be exercisable at the end of a two-year period dependent on contractual obligations.
The Group recognised total expenses before tax of £13 million (2012 – £11 million) related to equity-settled share-based payment transactions
during the year.
Details of the movements for equity-settled share option schemes during the year to 31 March were as follows:
Outstanding at 1 April
Granted
Exercised
Lapsed
Outstanding at 31 March
31 March 2013
Weighted
average
exercise
price
pence
16
8
29
7
10
Shares
number
11 270 273
2 718 602
(2 914 764)
(235 996)
10 838 115
31 March 2012
Weighted
average
exercise
price
pence
32
6
99
13
16
Shares
number
11 211 368
3 268 234
(1 892 643)
(1 316 686)
11 270 273
The weighted average Tate & Lyle PLC share price at the date of exercise for share options exercised during the year was 654p (2012 – 647p).
At 31 March 2013 1,875,237 (2012 – 862,865) of the outstanding options were exercisable at a weighted average exercise price of 29p (2012 – 154p).
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 2013
Weighted
average
exercise
price
pence
–
–
326
547
10
Weighted
average
remaining
contractual
life in months
49.1
–
14.6
37.6
48.4
Number
outstanding
at end of year
10 573 265
–
167 358
97 492
10 838 115
Number
outstanding
at end of year
10 788 721
–
403 619
77 933
11 270 273
Year to 31 March 2012
Weighted
average
exercise
price
pence
–
–
333
494
16
Weighted
average
remaining
contractual
life in months
47.3
–
22.1
37.4
46.3
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:
Performance
share plan
n/a
Sharesave
Plan
December
35%
3 years 3.3/5.3 years
0.65/1.20%
4.0%
10%
n/a
n/a
n/a
759
–
4.0%
0%
n/a
n/a
80%1
679
At 31 March 2013
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)
1 Relating to grants made during the year.
102
Tate & Lyle PLC Annual Report 2013
Financial Statements
26 Share-based payments continued
At 31 March 2012
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)
1 Relating to grants made during the year.
Performance
share plan
n/a
3 years
–
4.0%
0%
n/a
n/a
80%1
593
Sharesave
Plan
December
35%
3.2/5.2 years
1.85/2.65%
4.3%
10%
n/a
n/a
n/a
552
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
Total
Current payables
Trade payables
Social security
Accruals and deferred income
Other payables
Total
28 Borrowings
Non-current borrowings
Unsecured borrowings
2,394,000 6.5% cumulative preference shares of £1 each (Note a)
Industrial Revenue Bonds 2016–2036 (US$77,655,000, 2012 – US$92,000,000 )
5.0% Guaranteed Notes 2014 (US$500,000,000)
6.625% Guaranteed Notes 2016 (US$250,000,000)
6.75% Guaranteed Notes 2019 (£200,000,000)
Bank loans
Variable unsecured loans (US$)
Other borrowings
Obligations under finance leases
Total non-current borrowings
2013
£m
3
3
2013
£m
264
3
79
36
382
2013
£m
2
51
341
177
224
795
5
5
21
21
821
31 March
2012
£m
4
4
31 March
2012
£m
256
8
81
37
382
31 March
2012
£m
2
57
329
170
218
776
7
7
22
22
805
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s
(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.
Included within borrowings are £363 million (2012 – £351 million) of borrowings subject to fair value hedges, of which amortised cost has been
increased by £46 million (2012 – £46 million) in the table above.
Tate & Lyle PLC Annual Report 2013
103
Financial Statements
Notes to the Consolidated Financial Statements continued
28 Borrowings continued
Current borrowings
6.5% Guaranteed Notes 2012 (£100,000,000)
Industrial Revenue Bonds 2013 (US$14,345,000)
Unsecured bank overdrafts
Short-term unsecured loans
Obligations under finance leases
Total current borrowings
2013
£m
–
9
8
56
2
75
31 March
2012
£m
101
–
6
32
2
141
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
Current borrowings
Total
Book value
£m
795
5
21
75
896
31 March 2013
Fair value
£m
845
5
21
75
946
Book value
£m
776
7
22
141
946
31 March 2012
Fair value
£m
818
7
22
141
988
The fair value of borrowings has been determined using either quoted market prices, broker dealer quotations or discounted cash flow analysis.
Interest rate risks and maturity of borrowings
The maturity profile of the Group’s non-current borrowings is as follows:
One to two years
Two to five years
After five years
Total non-current borrowings
2013
£m
344
191
286
821
31 March
2012
£m
9
508
288
805
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 2013 rise by an average of 1% over the year to 31 March 2014, this would decrease Group profit before tax by
approximately £1 million (2012 – £nil).
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 2013–2036 (US$92,000,000)
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)
2013
£m
6.5%
0.2%
–
2.9%
4.2%
4.8%
31 March
2012
£m
6.5%
0.4%
3.3%
3.0%
4.3%
4.9%
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
Tate & Lyle International Finance PLC holds a US$800 million five year committed multi-currency club facility with a core of highly-rated banks that
was arranged in July 2011.
As at 31 March 2013, this committed facility remains undrawn. The facility has a value of £527 million (2012 – £500 million) and matures in June 2016.
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.
104
Tate & Lyle PLC Annual Report 2013
Financial Statements
28 Borrowings continued
Finance lease commitments
Amounts payable under finance lease commitments are as follows:
Within one year
Between one and five years
After five years
Less future finance charges
Present value of minimum lease payments
31 March 2013
Present value
of minimum
lease
payments
£m
2
11
10
23
Minimum
lease
payments
£m
4
14
13
31
(8)
23
31 March 2012
Present value
of minimum
lease
payments
£m
2
12
10
24
Minimum
lease
payments
£m
4
16
13
33
(9)
24
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 (assets)/liabilities in the year are as follows:
Deferred tax
At 1 April 2011
Charge to the income statement
Credit to the statement of comprehensive income
Credited directly to equity
Exchange
At 31 March 2012
Charge to the income statement
Charge to the statement of comprehensive income
Charged directly to equity
Exchange
At 31 March 2013
£m
(44)
65
(27)
(2)
(4)
(12)
26
9
1
(8)
16
Of the amounts of deferred tax charged to the income statement and other comprehensive income, a charge of £1 million (2012 – £1 million credit)
arose 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 £571 million (2012 – £349 million) have not been recognised to the extent that they exceed
taxable profits against which these assets may be recovered. The increase in losses is the result of losses no longer being recognised in relation to
UK deferred tax pension liabilities that have reversed and the adjustment to submitted tax returns. No unrelieved tax losses expired under current tax
legislation in the year ended 31 March 2013.
The total deferred tax on unremitted earnings is £4 million (2012 – £4 million) of which £nil (2012 – £nil) has been recognised. The Group has not
recognised the 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 statement of financial position date was approximately
£4 million (2012 – £4 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 2011
Transfers between categories
Charged to the income statement
Exchange
At 31 March 2012
Transfers between categories
Charged to the income statement
Exchange
At 31 March 2013
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F
n
a
n
c
a
i
Capital
allowances
in excess of
depreciation
£m
85
–
32
(2)
115
–
12
10
137
Other
£m
29
(3)
8
(1)
33
(3)
8
(8)
30
l
S
t
a
t
e
m
e
n
t
s
Total
£m
114
(3)
40
(3)
148
(3)
20
2
167
Tate & Lyle PLC Annual Report 2013
105
Financial Statements
Notes to the Consolidated Financial Statements continued
29 Deferred tax continued
Deferred tax assets
At 1 April 2011
Transfers between categories
(Charged)/credited to the income statement
Credited/(charged) to the statement of comprehensive income
Credited to equity
Exchange
At 31 March 2012
Transfers between categories
Credited/(charged) to the income statement
Charged to the statement of comprehensive income
Charged to equity
Exchange
At 31 March 2013
Retirement
benefit
obligations
£m
69
–
(27)
33
–
(1)
74
–
22
(3)
–
7
100
Share-based
payments
£m
3
–
1
–
2
1
7
–
2
–
(1)
(1)
7
Tax losses
£m
64
–
20
(6)
–
–
78
–
(33)
(5)
–
2
42
Other
£m
22
(3)
(19)
–
–
1
1
(3)
3
(1)
–
2
2
Total
£m
158
(3)
(25)
27
2
1
160
(3)
(6)
(9)
(1)
10
151
Deferred tax assets and liabilities are offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.
As a result of these offsets, the deferred tax balances are presented in the statement of financial position as follows:
Deferred tax liabilities
Deferred tax assets
Total
2013
£m
24
(8)
16
31 March
2012
£m
25
(37)
(12)
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 Group also maintains defined contribution pension schemes and some fully insured pension schemes.
The principal schemes are funded and their assets held in separate trustee-administered funds. The schemes are funded in line with local practice
and contributions are assessed in accordance with local independent actuarial advice. The schemes operated by the Group are subject to
independent actuarial valuation at regular intervals using consistent assumptions appropriate to conditions prevailing in the relevant country. The most
recent finalised actuarial valuations of plan assets and the present value of the defined benefit obligations in the main United Kingdom scheme were
carried out as at 31 March 2010 by independent actuaries. As required under statutory regulations, a new valuation commenced as at 31 March 2013.
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. From 6 April 2011, the main United Kingdom Pension Scheme closed to future accruals.
During the year, the trustees of the main UK scheme agreed a £347 million partial pensioner buy-in with Legal and General plc.
The Group’s subsidiaries in the United States provide unfunded retirement medical and life assurance benefits to their employees.
The Group expects to contribute approximately £36 million to its defined benefit plans in the year to 31 March 2014.
(b) Principal assumptions
The principal assumptions used for the purpose of the actuarial valuations were as follows:
Year to 31 March 2013
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
Pension benefits
UK
2.5/3.5%
n/a
3.4%
4.2%
5.2%
7.7%
US
2.5%
3.5%
n/a
3.9%
6.2%
8.0%
Other
2.0%
2.0%
0.9%
3.1%
4.5%
7.1%
Medical
benefits
2.5%
n/a
n/a
3.8%
n/a
n/a
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Tate & Lyle PLC Annual Report 2013
Financial Statements
30 Retirement benefit obligations continued
Year to 31 March 2012
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
2.3/3.3%
n/a
3.3%
5.1%
6.3%
8.4%
US
2.5%
3.5%
n/a
4.4%
7.1%
8.0%
Pension benefits
Other
2.0%
2.0%
0.9%
3.9%
5.4%
6.5%
Medical
benefits
2.5%
n/a
n/a
4.1%
n/a
n/a
In accordance with the Scheme rules, both the Consumer Price Index (CPI) and Retail Price Index (RPI) inflation measures are used to value the
Group’s UK retirement benefit obligation.
Mortality assumptions – Year to 31 March 2013
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 2012
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
UK
22 years
25 years
23 years
25 years
US
19 years
21 years
21 years
22 years
Expected longevity post age 65
UK
22 years
25 years
23 years
25 years
US
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 3.8% (2012 – 8.9%), and amounted to a gain of £52 million
(2012 – £112 million gain).
Medical cost trend rates are estimated at 7.0% per annum (2012 – 9.0%), grading down to 5% by 2017. If medical cost trend rates were to increase
or decrease by 1%, the effects are estimated as follows:
Increase/(decrease) in medical benefits current service and interest cost
Increase/(decrease) in medical benefits obligation
(c) Amounts recognised in the income statement
Year to 31 March 2013
Current service cost charged to operating profit
Interest cost
Expected return on plan assets
(Credited)/charged to finance expense
Total
Year to 31 March 2012
Current service cost charged to operating profit
Interest cost
Expected return on plan assets
(Credited)/charged to finance expense
Total
UK
£m
–
43
(50)
(7)
(7)
UK
£m
–
44
(55)
(11)
(11)
Increase
£m
1
6
31 March 2013
Decrease
£m
(1)
(6)
Increase
£m
1
10
31 March 2012
Decrease
£m
(1)
(8)
Pension benefits
Other
£m
3
2
(2)
–
3
Other
£m
3
3
(3)
–
3
Total
£m
4
65
(71)
(6)
(2)
Pension benefits
Total
£m
4
68
(78)
(10)
(6)
Medical
benefits
£m
3
4
–
4
7
Medical
benefits
£m
3
5
–
5
8
US
£m
1
20
(19)
1
2
US
£m
1
21
(20)
1
2
Total
£m
7
69
(71)
(2)
5
Total
£m
7
73
(78)
(5)
2
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).
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Financial Statements
Notes to the Consolidated Financial Statements continued
30 Retirement benefit obligations continued
(d) Amounts recognised in the statement of financial position
At 31 March 2013
Fair value of plan assets:
– equities
– bonds
– property and other
Present value of funded obligations
Present value of unfunded obligation
Net asset/(liability) recognised in the statement
of financial position
Disclosed in the statement of financial position as:
– retirement benefit surplus
– retirement benefit deficit
% of
plan
assets
20%
35%
45%
% of
plan
assets
42%
48%
10%
UK
£m
204
346
449
999
(998)
–
1
12
(11)
% of
plan
assets
34%
47%
19%
US
£m
144
169
33
346
(466)
(53)
(173)
–
(173)
Pension benefits
Others
Total
% of
plan
assets
Medical
benefits
£m
£m
26%
39%
35%
369
544
494
1 407
(1 539)
(53)
–
–
–
–
–
(80)
Total
369
544
494
1 407
(1 539)
(133)
(185)
(80)
(265)
12
(197)
–
(80)
12
(277)
£m
21
29
12
62
(75)
–
(13)
–
(13)
Property and other includes the annuity purchased following the partial pension buy-in which effectively covers the affected pension membership’s
liabilities in full.
At 31 March 2012
Fair value of plan assets:
– equities
– bonds
– property and other
Present value of funded obligations
Present value of unfunded obligation
Net asset/(liability) recognised in the statement
of financial position
Disclosed in the statement of financial position as:
– retirement benefit surplus
– retirement benefit deficit
% of
plan
assets
36%
48%
16%
% of
plan
assets
33%
47%
20%
% of
plan
assets
40%
48%
12%
UK
£m
359
488
158
1 005
(867)
–
138
146
(8)
US
£m
122
144
36
302
(422)
(46)
(166)
–
(166)
Others
£m
18
26
11
55
(63)
–
(8)
–
(8)
Pension benefits
% of
plan
assets
37%
48%
15%
Total
£m
499
658
205
1 362
(1 352)
(46)
Medical
benefits
£m
–
–
–
–
–
(104)
Total
499
658
205
1 362
(1 352)
(150)
(36)
(104)
(140)
146
(182)
–
(104)
146
(286)
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
Liabilities
At 1 April 2011
Total service cost
Interest cost
Actuarial loss
Benefits paid
Plan participants’ contributions
Exchange
At 31 March 2012
Total service cost
Interest cost
Actuarial loss/(gain)
Benefits paid
Plan participants’ contributions
Exchange
At 31 March 2013
Pension benefits
Other
£m
55
3
3
6
(2)
1
(3)
63
3
2
8
(2)
1
–
75
Total
£m
1 286
4
68
117
(75)
1
(3)
1 398
4
65
167
(74)
1
31
1 592
Medical
benefits
£m
97
3
5
4
(5)
–
–
104
3
4
(33)
(3)
–
5
80
Total
£m
1 383
7
73
121
(80)
1
(3)
1 502
7
69
134
(77)
1
36
1 672
US
£m
408
1
21
61
(23)
–
–
468
1
20
25
(25)
–
30
519
UK
£m
823
–
44
50
(50)
–
–
867
–
43
134
(47)
–
1
998
108
Tate & Lyle PLC Annual Report 2013
Financial Statements
30 Retirement benefit obligations continued
Pension benefits
Assets
At 1 April 2011
Expected return on assets
Actuarial gain
Contributions paid by employer
Plan participants’ contributions
Benefits paid
Exchange
At 31 March 2012
Expected return on assets
Actuarial (loss)/gain
Contributions paid by employer
Plan participants’ contributions
Benefits paid
Exchange
At 31 March 2013
UK
£m
919
55
33
48
–
(50)
–
1 005
50
(35)
26
–
(47)
–
999
US
£m
274
20
(2)
32
–
(23)
1
302
19
12
20
–
(25)
18
346
Other
£m
51
3
3
2
1
(2)
(3)
55
2
4
2
1
(2)
–
62
Total
£m
1 244
78
34
82
1
(75)
(2)
1 362
71
(19)
48
1
(74)
18
1 407
(f) Analysis of actuarial losses recognised in the consolidated statement of comprehensive income
Difference between the actual return and the expected return on plan assets
Changes in assumptions underlying the present value of scheme liabilities
Actuarial losses recognised in the consolidated statement of comprehensive income
Cumulative actuarial loss recognised in the consolidated statement of comprehensive income
Medical
benefits
£m
–
–
–
5
–
(5)
–
–
–
–
3
–
(3)
–
–
2013
£m
19
134
153
341
Deferred tax taken directly to equity on retirement benefit obligations was £3 million charge to equity (2012 – £33 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)
Experience adjustments on plan assets
– loss/(gain)
2013
£m
1 672
(1 407)
265
–
19
2012
£m
1 502
(1 362)
140
–
(34)
2011
£m
1 383
(1 244)
139
(12)
(37)
2010
£m
1 429
(1 172)
257
–
(201)
All experience adjustments are recognised directly in equity, net of related tax (see the consolidated statement of comprehensive income).
Total
£m
1 244
78
34
87
1
(80)
(2)
1 362
71
(19)
51
1
(77)
18
1 407
31 March
2012
£m
(34)
121
87
188
2009
£m
1 186
(975)
211
(18)
247
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109
Financial Statements
Notes to the Consolidated Financial Statements continued
31 Provisions for other liabilities and charges
At 1 April 2011
Charged to the income statement
Credited to the income statement
Utilised in the year
Exchange and other movements
At 31 March 2012
Charged to the income statement
Credited to the income statement
Utilised in the year
Exchange and other movements
At 31 March 2013
Provisions are expected to be utilised as follows:
– within one year
– after more than one year
Total
Insurance
funds
£m
13
2
–
(4)
–
11
3
(2)
(2)
–
10
Restructuring
and closure
provisions
£m
35
–
(23)
(7)
(1)
4
2
–
–
–
6
Other
provisions
£m
17
4
(4)
(4)
–
13
9
(5)
(2)
4
19
2013
£m
20
15
35
Total
£m
65
6
(27)
(15)
(1)
28
14
(7)
(4)
4
35
31 March
2012
£m
10
18
28
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 credit during the prior year primarily relates to the decision made to re-open the mothballed facility in
McIntosh, Alabama and restart the production of sucralose. This resulted in a reversal of £23 million of obligations no longer required and was
recorded as an exceptional credit. The remaining provisions relate to other restructuring within the Group and are expected to be utilised within
five years.
Other provisions primarily relate to Group legal matters and previously disposed businesses. These provisions are expected to be utilised within
five years. The majority of the credit to the provision relates to the litigation with Whitefox Technologies which has been settled.
The charge to the income statement in relation to the unwinding of discounts was £nil (2012 – £nil).
32 Change in working capital
Increase in inventories
Increase in receivables
(Decrease)/increase in payables
Increase in derivative financial instruments (excluding debt-related derivatives)
Increase/(decrease) in provisions for other liabilities and charges
Increase in working capital (continuing operations)
33 Cash and cash equivalents
Cash at bank and in hand
Short-term bank deposits
Total
Presented in the financial statements as follows:
Cash and cash equivalents
Assets held for sale
Total
2013
£m
(47)
(38)
(20)
(6)
4
(107)
2013
£m
223
156
379
2013
£m
379
–
379
31 March
2012
£m
(49)
(62)
18
(16)
(12)
(121)
31 March
2012
£m
327
119
446
31 March
2012
£m
424
22
446
The effective interest rate on short-term deposits was 0.3% (2012 – 1.5%), with an average maturity of two days (2012 – 13 days).
110
Tate & Lyle PLC Annual Report 2013
Financial Statements
33 Cash and cash equivalents continued
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 bank overdrafts
Debt-related derivative instruments
Cash and cash equivalents
Assets held for sale – cash and cash equivalents
Net debt
2013
£m
64
214
80
21
379
2013
£m
(821)
(75)
38
379
–
(479)
31 March
2012
£m
215
127
63
41
446
31 March
2012
£m
(805)
(141)
24
424
22
(476)
Notes
28
28
20
33
38
Derivative financial instruments presented within assets and liabilities in the statement of financial position of £59 million (2012 – £24 million) net asset
comprise net debt-related instruments of £38 million (2012 – £24 million) asset and net non-debt-related instruments of £21 million (2012 – £nil) asset.
In the prior year, additional net non-debt related instruments of £8 million asset were included in assets and liabilities held for sale (Note 38).
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
Decrease in cash and cash equivalents in the year
Cash outflow from net decrease in borrowings
Inception of finance lease
Fair value and other movements
Exchange
Increase in net debt in the year
At 31 March
2013
£m
(12)
(521)
49
5
(479)
2013
£m
(476)
(68)
95
–
13
(43)
(3)
(479)
31 March
2012
£m
(1)
(535)
37
23
(476)
31 March
2012
£m
(464)
(201)
185
(7)
7
4
(12)
(476)
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111
Financial Statements
Notes to the Consolidated Financial Statements continued
35 Contingent liabilities
Trade guarantees
Trade guarantees
2013
£m
2
31 March
2012
£m
1
Trade guarantees have been given in the normal course of business by the Group at both 31 March 2013 and 31 March 2012. These 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.
Sale of EU Sugars
As previously announced, American Sugar Holdings (ASR) has raised a number of claims totalling in the region of £40 million that it believes it has
under the Share and Business Sale Agreement relating to its acquisition of the Group’s EU Sugars business. These claims in large part relate to the
turbulence in the supply of raw sugar to the EU during the period prior to closing and the increase in certain rolling re-export commitments of the
business. Some, but not all, of these issues were considered in the expert adjudication on the closing accounts in which, as noted in the Annual
Report 2012, the expert strongly supported Tate & Lyle’s position. ASR (through its subsidiary T&L Sugars Limited) has now commenced formal
proceedings in respect of these claims which the Group intends to vigorously defend.
Whitefox Technologies
The commercial dispute with Whitefox Technologies, which was the subject of proceedings in the Supreme Court of the State of New York in
June 2012 has been settled, bringing this matter to a conclusion.
Other claims
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 statement
of financial position date will have a material adverse effect on the Group’s financial position.
36 Commitments
Capital commitments
Commitments for the acquisition of intangible assets
Commitments for the acquisition of property, plant and equipment
Total
2013
£m
6
21
27
31 March
2012
£m
10
21
31
Operating lease arrangements
Operating lease payments represent rentals payable by the Group for certain of its land, buildings, plant and equipment. Certain operating lease
agreements allow for renewal at the end of the original term at the option of the Group.
At the statement of financial position 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
2013
£m
24
77
88
189
31 March
2012
£m
31
79
95
205
37 Acquisitions and disposals
2013
Continuing operations
Sucromiles
On 1 August 2012, the Group completed the disposal of its share in Sucromiles SA (Sucromiles), its Colombian citric acid joint venture, to its former
joint-venture partner, Organizacion Ardila Lulle, for consideration of £20 million. After recycling foreign exchange revaluation gains previously held
in reserves to the income statement, an exceptional gain on disposal of £8 million (Note 7) was recorded within continuing operations.
Discontinued operations
Vietnam Sugars
On 29 June 2012, the Group completed the sale of Vietnam Sugar to TH Milk Food Stock Company for consideration of £45 million. After recycling
foreign exchange revaluation gains previously held in reserves to the income statement, an exceptional gain on disposal of £21 million was recorded
within discontinued operations (Note 7).
Molasses
On 20 March 2013, the Group completed the sale of land and buildings with book value of £2 million relating to the former Molasses business to W&R
Barnett Ltd. Cash consideration totalled £7 million resulting in an exceptional gain on disposal of £5 million recorded within discontinued operations
(Note 7).
112
Tate & Lyle PLC Annual Report 2013
Financial Statements
37 Acquisitions and disposals continued
EU Sugars
During the financial year, the Group also received £2 million in respect of a working capital settlement from its disposal of the EU Sugars business
to American Sugar Refining in the year ended 31 March 2011. No change to the loss on disposal was recorded.
Other
During the financial year, the Group disposed of the remaining assets in the Israeli Sugar business, resulting in a profit of £2 million. This has been
offset by losses from the disposal of other assets within the Group relating to Sugar operations which are discontinued (Note 12).
The calculation of the result on disposals in the financial year, split between continuing and discontinued operations, are shown below:
Goodwill and intangible assets
Property, plant and equipment
Derivative financial instruments – assets
Inventories
Trade and other receivables
Trade and other payables
Derivative financial instruments – liabilities
Cash and cash equivalents
Taxation
Total assets disposed
Non-controlling interests disposed
Net assets disposed
Total consideration
Other items:
Disposal costs
Exchange differences transferred from equity
Gain on disposal
Reported as:
Exceptional gain within continuing operations (Note 7)
Operating loss within discontinued operations
Exceptional gain within discontinued operations (Note 7)
Operating gain within discontinued operations
Cash flows:
Cash consideration
Cash disposed
Cash inflow during the year to 31 March 2013
Continuing
operations
£m
–
3
–
9
9
(6)
–
5
–
20
–
20
Discontinued
operations
£m
2
20
4
10
13
(3)
(4)
22
(1)
63
(25)
38
20
–
8
8
8
–
–
–
8
20
(5)
15
61
(3)
6
26
–
(2)
26
2
26
58
(22)
36
Total
£m
2
23
4
19
22
(9)
(4)
27
(1)
83
(25)
58
81
(3)
14
34
8
(2)
26
2
34
78
(27)
51
2012
Continuing operations
G.C. Hahn & Company
During the prior year, following the exercise of a put option by Georg Hahn Familien GmbH, the Group acquired the final 5% of the issued share
capital of the business for a total consideration of £7 million. The Group has now acquired 100% of the issued share capital.
Discontinued operations
International Sugar Trading
During the prior year, the Group completed the sale of its minority holdings in the former International Sugar Trading business in Egypt and Saudi
Arabia and received £18 million in cash consideration. After recycling revaluation gains previously held in reserves to the income statement, the Group
recorded an exceptional gain of £11 million (Note 7).
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113
Financial Statements
Notes to the Consolidated Financial Statements continued
38 Assets and liabilities classified as held for sale
Assets held for sale as at 31 March 2013 and 2012 are shown in the table below. The asset held for sale at 31 March 2013 relates to the Group’s
investment in Mitr Lao Sugar Company.
Assets and liabilities reported as held for sale as at 31 March 2012 comprised of the Group’s majority share in Vietnam Sugar, its 50% share in
Sucromiles SA (Sucromiles), its Colombian citric acid joint venture, land and buildings relating to the former Molasses business, the investment
in Mitr Lao Sugar Company and other assets relating to the Group’s former sugar operations. All of these assets and liabilities with the exception
of the investment in Mitr Lao Sugar Company were disposed during the year. Further detail relating to these disposals can be found in Note 37.
Assets
Intangible assets
Property, plant and equipment
Available-for-sale financial assets
Inventories
Trade and other receivables
Derivative financial instruments
Cash and cash equivalents
Total assets held for sale
Liabilities
Trade and other payables
Current tax liabilities
Derivative financial instruments
Total liabilities held for sale
2013
£m
31 March
2012
£m
–
–
1
–
–
–
–
1
–
–
–
–
2
22
1
25
15
13
22
100
(9)
(1)
(5)
(15)
39 Post balance sheet events
On 17 May 2013, the Group acquired Biovelop, an early-stage Swedish manufacturer of oat beta glucan.
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. 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.
For transactions and balances with joint ventures, there is an element which is not eliminated on consolidation relating to the external joint-venture partner
which is required to be disclosed. Transactions and balances with joint ventures are as shown below. There are no such transactions with associates.
Continuing operations
Sales of goods and services
– to joint ventures
Purchases of goods and services
– from joint ventures
Receivables
– due from joint ventures
Payables
– due to joint ventures
Financing
– loans to joint ventures
– deposits from joint ventures
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 £9 million (2012 – £10 million).
Key management
Key management compensation is disclosed in Note 9.
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Tate & Lyle PLC Annual Report 2013
2013
£m
174
279
15
21
20
53
31 March
2012
£m
164
289
23
21
13
36
Financial Statements
41 Foreign exchange rates
The following exchange rates have been applied in the translation of the financial statements of foreign subsidiaries, joint ventures and associates:
Average foreign exchange rates
£1 = US$
£1 = €
Year end foreign exchange rates
£1 = US$
£1 = €
42 Main subsidiaries and investments
Subsidiaries based in the United Kingdom1
G.C. Hahn and Company Limited2
Tate & Lyle Holdings Limited3
Tate & Lyle Industries Limited
Tate & Lyle International Finance PLC3
Tate & Lyle Group Services Limited
Tate & Lyle Investments Limited3
Tate & Lyle LLC
Year to 31 March
2012
1.60
1.15
31 March
2012
1.60
1.20
2013
1.57
1.24
2013
1.52
1.18
Percentage of
equity attributable
to Tate & Lyle PLC
100
100
100
100
100
100
100
Type of business
Blending
Holding company
Holding company
In-house treasury company
Holding company
Holding company
Holding company
1 Registered in England and Wales, except Tate & Lyle LLC which is registered in Delaware, USA.
2 In the prior year, the Group acquired the final 5% issued share capital of the Hahn business. However, due to the structure of the acquisition agreement, the Group
has borne risks and rewards of 100% of the business. Accordingly, a non-controlling interest has never been recognised since the original acquisition in the 2008
financial year.
3 Direct subsidiaries of Tate & Lyle PLC.
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Financial Statements
Notes to the Consolidated Financial Statements continued
42 Main subsidiaries and investments continued
Subsidiaries operating overseas
Country of incorporation or registration
Argentina
Company
Tate & Lyle Argentina SA
Australia
Belgium
Bermuda
Brazil
Chile
China
Croatia
Czech Republic
France
Germany
Gibraltar
Italy
Lithuania
Mexico
Morocco
Netherlands
Poland
Russia
Singapore
South Africa
Spain
Ukraine
USA
Tate & Lyle ANZ Pty Limited2
Tate & Lyle Services (Belgium) N.V.
Tate & Lyle Management & Finance Limited
Tate & Lyle Brasil S.A.1
G.C. Hahn & Co. do Estabilizantes e Tecnologia para
Alimentos Ltda.2
Tate & Lyle Chile Commercial Ltda
Tate & Lyle Trading (Shanghai) Co. Ltd
G.C. Hahn & Co. Food Stabilizer Business
(Shanghai) Ltd.2
G.C. Hahn & Co. d.o.o. Za distribuciju stabilizacionih
sistema2
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
Tate & Lyle Insurance (Gibraltar) Limited
Tate & Lyle Italia S.P.A.
UAB G.C. Hahn & Co.2
Tate & Lyle Mexico, S. de R.L.de C.V.
Tate & Lyle Morocco SA
Nederlandse Glucose Industrie B.V.
Tate & Lyle Netherlands B.V.
G.C. Hahn & Co. Technika stabilizowania Sp.z.o.o.2
Tate & Lyle Global Shared Services Sp.z.o.o
OOO Hahntech Service.1
Tate & Lyle Singapore Pte Ltd
Tate & Lyle South Africa Proprietary Limited
G.C. Hahn Estabilizantes y Tecnologia para Alimentos2
PII G.C. Hahn & Co. Kiew1,2
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
Type of business
Cereal sweeteners and starches,
Sucralose distribution
Sucralose distribution and blending
Holding company
Management and finance
Citric acid, Sucralose distribution
Blending
Cereal sweeteners and starches,
Sucralose distribution
Sucralose distribution
Blending
Blending
Blending
Blending
Blending
Holding company
Reinsurance
Blending
Blending
Holding company
Cereal sweeteners and starches
Holding company
Cereal sweeteners and starches,
Sucralose distribution
Blending
Holding company
Blending
High-intensity sweeteners
Blending
Blending
Blending
Holding company
Blending
In-house banking
Holding company
Cereal sweeteners and starches
High-intensity sweeteners
In-house banking
Percentage of
equity attributable
to Tate & Lyle PLC
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
1 Non-coterminous year-end.
2 In the prior year, the Group acquired the final 5% issued share capital of the Hahn business. However, due to the structure of the acquisition agreement, the
Group has borne risks and rewards of 100% of the business. Accordingly, a non-controlling interest has never been recognised since the original acquisition
in the 2008 financial year.
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42 Main subsidiaries and investments continued
Joint ventures
Country of incorporation or registration
Bulgaria
Hungary
Mexico
Netherlands
Romania
Slovakia
Turkey
USA
Type of business
Company
Amylum Bulgaria EAD1,2
Cereal sweeteners and starches
Hungrana Kft1,2
Cereal sweeteners and starches
Almidones Mexicanos SA2
Cereal sweeteners and starches
Holding company
Eaststarch C.V.
Amylum Romania S.R.L..1
Cereal sweeteners and starches
Amylum Slovakia spol s.r.o.1
Cereal sweeteners and starches
Amylum Nisasta Sanayi Ve Ticaret Anonim Sireketi1 Cereal sweeteners and starches
DuPont Tate & Lyle Bio Products Company, LLC
Industrial ingredients
(100)
(50)
Percentage of
equity attributable
to Tate & Lyle PLC 3
50
25
50
50
50
50
50
50
(100)
(100)
(100)
1 Share capital held by Eaststarch C.V.
2 Non-coterminous year-end.
3 The proportion of shares held by Tate & Lyle PLC, its subsidiaries, joint ventures and associates is shown in brackets where it is different from the percentage of equity
attributable to Tate & Lyle PLC.
Associates
Country of incorporation or registration
Thailand
Company
Tapioca Development Corporation1
Type of business
Starch production
1 Indirect associates of Tate & Lyle PLC.
Percentage of
equity attributable
to Tate & Lyle PLC
33.3
Those entities which have non-coterminous year-ends are consolidated in the Group financial statements using management accounts for the
period to 31 March.
A full listing of all the subsidiaries and investments is available from the Company Secretary at 1 Kingsway, London WC2B 6AT.
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Financial Statements
Notes to the Consolidated Financial Statements continued
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, closure and significant business transformation activities;
– amortisation of intangible assets acquired through business combinations; and
– post-retirement benefit interest.
The following table shows the reconciliation of the statutory information presented in the income statement to the adjusted information:
£m (unless otherwise stated)
Continuing operations
Sales
Operating profit
Net finance expense
Profit before tax
Income tax expense
Profit attributable to owners
of the Company
Basic earnings per share (pence)
Diluted earnings per share (pence)
Tax rate
Discontinued operations
Sales
Operating profit/(loss)
Net finance income
Profit/(loss) before tax
Income tax expense
Profit/(loss) after tax
Non-controlling interests
Profit/(loss) attributable to owners
of the Company
Basic earnings/(loss) per share (pence)
Diluted earnings/(loss) per share (pence)
Total operations
Sales
Operating profit
Net finance expense
Profit before tax
Income tax expense
Profit after tax
Non-controlling interests
Profit attributable to owners
of the Company
Basic earnings per share (pence)
Diluted earnings per share (pence)
Tax rate
Year to 31 March 2013
Reported
Exceptional/
adjusting items
Adjusted
Reported
Year to 31 March 2012
Exceptional/
adjusting items
Adjusted
3 256
336
(27)
309
(49)
260
56.0
54.9
15.8%
10
18
–
18
–
18
(1)
17
3.7
3.6
3 266
354
(27)
327
(49)
278
(1)
277
59.7
58.5
14.9%
–
22
(2)
20
(10)
10
2.2
2.1
–
(26)
–
(26)
–
(26)
–
(26)
(5.6)
(5.5)
–
(4)
(2)
(6)
(10)
(16)
–
(16)
(3.4)
(3.4)
3 256
358
(29)
329
(59)
270
58.2
57.0
17.9%
10
(8)
–
(8)
–
(8)
(1)
(9)
(1.9)
(1.9)
3 266
350
(29)
321
(59)
262
(1)
261
56.3
55.1
18.3%
3 088
404
(25)
379
(72)
307
65.9
64.6
19.0%
72
16
1
17
(15)
2
(4)
(2)
(0.4)
(0.3)
3 160
420
(24)
396
(87)
309
(4)
305
65.5
64.3
21.9%
–
(56)
(5)
(61)
14
(47)
(10.1)
(9.9)
–
(11)
–
(11)
15
4
–
4
0.9
0.8
–
(67)
(5)
(72)
29
(43)
–
(43)
(9.2)
(9.1)
3 088
348
(30)
318
(58)
260
55.8
54.7
18.2%
72
5
1
6
–
6
(4)
2
0.5
0.5
3 160
353
(29)
324
(58)
266
(4)
262
56.3
55.2
17.8%
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Financial Statements
Independent Auditors’ Report to the Members of Tate & Lyle PLC
– 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 2013.
Paul Cragg (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
29 May 2013
Notes:
(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.
We have audited the Parent company financial
statements of Tate & Lyle PLC for the year
ended 31 March 2013 which comprise the
Parent Company Balance Sheet and the related
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).
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 2013 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.
Respective responsibilities of
directors and auditors
As explained more fully in the Directors’
Statement of Responsibilities set out on page
65, 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
Opinion on financial statements
In our opinion the Parent company financial
statements:
– give a true and fair view of the state
of the Parent company’s affairs as at
31 March 2013;
– 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:
– the part of the Directors’ Remuneration
Report to be audited has been properly
prepared in accordance with the Companies
Act 2006; and
– the information given in the Directors’ Report
for the financial year for which the Parent
company financial statements are prepared is
consistent with the Parent company financial
statements.
Matters on which we are required
to report by exception
We have nothing to report in respect of the
following matters where the Companies Act
2006 requires us to report to you if, in our
opinion:
– 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
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119
Financial Statements
Parent Company Balance Sheet
Fixed assets
Tangible assets
Investments in subsidiary undertakings
Investment in associate
Current assets
Debtors
Creditors – amounts falling due within one year
Net current assets
Total assets less current liabilities
Creditors – amounts falling due after more than one year
Provisions for liabilities
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Profit and loss account
Total shareholders’ funds
Notes
Year to 31 March
2012
£m
2013
£m
2
3
4
5
6
7
9
12
13
13
13
9
1 006
1
1 016
1 535
1 535
(1 407)
128
1 144
(2)
–
1 142
117
406
8
611
1 142
7
1 002
1
1 010
1 490
1 490
(1 441)
49
1 059
(2)
(1)
1 056
117
406
8
525
1 056
The Parent company financial statements on pages 120 to 125 were approved by the Board of Directors on 29 May 2013 and signed on its behalf by:
Javed Ahmed, Tim Lodge Directors
Registered number 76535
The notes on pages 121 to 125 form part of these Parent company financial statements.
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Notes to the Parent Company Financial Statements
1 Parent Company accounting
policies
Accounting basis
The Parent company financial statements are
prepared under the historical cost convention
in accordance with the Companies Act 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 loss for the year
before dividends dealt with in the financial
statements of the Company amounted to
£89 million (2012 – loss of £79 million).
This includes audit fees in relation to the
audit of the Parent company of £0.1 million
(2012 – £0.1 million). Accounting policies have
been applied consistently, other than where
new policies have been adopted. The financial
statements are prepared on a going concern
basis as disclosed in the Tate & Lyle PLC
consolidated financial statements for the year
ended 31 March 2013.
Tangible fixed assets
Tangible fixed assets are stated at historical
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 furniture,
fixtures, fittings and computer software which
are depreciated over a period of five to ten
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.
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 on a straight-line basis.
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 Company,
which is not the principal 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 profit
and loss account as they are incurred.
Deferred tax
Deferred tax is recognised on a discounted 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 year (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. The grant
by the Company of options over its equity
instruments to the employees of subsidiary
undertakings in the Group is treated as a capital
contribution. The fair value of employee services
received, measured by reference to the grant
date fair value, is recognised over the vesting
period as an increase to investment in
subsidiary undertakings, with a corresponding
credit to equity.
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.
Provisions
Provisions are recognised when the Company
has a present obligation as a result of a past
event, it is probable that a transfer of economic
benefits will be required to settle the obligation,
and a reliable estimate can be made of the
amount of the obligation.
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.
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121
Financial Statements
Notes to the Parent Company Financial Statements continued
2 Tangible assets
Cost
At 1 April 2012
Additions
At 31 March 2013
Accumulated depreciation
At 1 April 2012
Charge for the year
At 31 March 2013
Net book value at 31 March 2012
Net book value at 31 March 2013
3 Investments in subsidiary undertakings
Cost
At 1 April 2012
Increase – share based payments
Exchange
At 31 March 2013
Impairment
At 1 April 2012
Provision for impairment
Exchange
At 31 March 2013
Net book value at 31 March 2012
Net book value at 31 March 2013
Total
£m
9
3
12
2
1
3
7
9
Shares in
subsidiary
undertakings
£m
1 557
7
1
1 565
555
3
1
559
1 002
1 006
A list of the main subsidiaries is disclosed within Note 42 of the Group consolidated financial statements. The provision for impairment reflects an
adjustment to the recoverable amount to the Company’s investment in Tate & Lyle Ventures Ltd and Tate & Lyle Services Belgium NV upon payment
of a dividend to the Company. The directors believe that the carrying value of the investments is supported by the value of their underlying net assets.
4 Investment in associate
The Company holds a 16.6% interest of ordinary shares in Tapioca Development Corporation, a company incorporated in Thailand, for book value
of £1 million (2012 – £1 million) and has net assets of £3 million.
5 Debtors
Due within one year
Amounts owed by subsidiary undertakings
Other debtors
Total
2013
£m
1 531
4
1 535
31 March
2012
£m
1 486
4
1 490
The effective interest rate applicable to amounts owed by subsidiary undertakings at 31 March 2013 is 2.3% (2012 – 2.6%). Amounts owed by
subsidiary undertakings are receivable on demand. There is no security for non-trading amounts.
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Financial Statements
6 Creditors – amounts falling due within one year
Amounts owed to subsidiary undertakings
Other creditors
Accruals and deferred income
Total
2013
£m
1 392
5
10
1 407
31 March
2012
£m
1 426
6
9
1 441
The effective interest rate applicable to amounts owed to subsidiary undertakings at 31 March 2013 is 2.3% (2012 – 2.9%). Amounts owed to
subsidiary undertakings are repayable on demand. There is no security for non-trading amounts.
7 Creditors – amounts falling due after more than one year
Preference shares (Note a)
Total
2013
£m
2
2
31 March
2012
£m
2
2
(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.
8 Deferred tax
Deferred tax charged to profit in the year was £nil (2012 – £nil).
9 Provisions for liabilities
At 1 April 2012
Credited to the profit and loss account
At 31 March 2013
10 Contingent liabilities
Loans and overdrafts of subsidiaries and joint ventures
Restructuring
£m
1
(1)
–
2013
£m
938
31 March
2012
£m
863
Guarantees given in respect of drawn and undrawn loans and overdrafts by Tate & Lyle PLC were £1,645 million at 31 March 2013
(2012 – £2,108 million).
Other trade guarantees have been given in the normal course of business by Tate & Lyle PLC at both 31 March 2013 and 31 March 2012. 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 2013 in respect of operating leases were £1 million (2012 – £4 million).
At the balance sheet date, the Company has outstanding capital commitments of £5 million due within the year. Operating lease commitments for
land and buildings fall due as follows:
Within one year
Later than one year and no later than five years
After five years
Total
2013
£m
1
6
12
19
31 March
2012
£m
1
6
13
20
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Financial Statements
Notes to the Parent Company Financial Statements continued
12 Called up share capital
Allotted, called up and fully paid equity share capital
At 1 April
Allotted under share option schemes
At 31 March
31 March 2013
31 March 2012
Shares
468 160 519
32 381
468 192 900
£m
117
–
117
Shares
468 111 340
49 179
468 160 519
£m
117
–
117
Treasury shares and shares held in ESOP trust
As at 31 March 2013, the Company held 1,841,533 shares (2012 – 2,545,376 shares) in Treasury.
During the year, 2,703,843 shares (2012 – 379,952 shares) were released from Treasury to satisfy share options exercised.
During the year, the Company repurchased 2,000,000 shares (2012 – 2,750,000 shares) to be held in Treasury for £13 million (2012 – £19 million) to
satisfy share options granted to employees under the Group’s share option schemes. The shares repurchased represent 0.4% of the Company’s
called up share capital at 31 March 2013 (2012 – 0.6%) and had a nominal value of £0.5 million (2012 – £0.7 million).
The shares held in Treasury at 31 March 2013 represented 0.4% (2012 – 0.5%) of the Company’s share capital at the year end, and have a nominal
value of less than £0.5 million (2012 – £0.6 million).
As at 31 March 2013, the Company held 2,571,642 shares (2012 – 1,250,182 shares) in an ESOP trust.
During the year, 178,540 shares (2012 – 1,463,512 shares) were released from the ESOP trust to satisfy share options exercised.
During the year, the Company repurchased 1,500,000 shares (2012 – nil) to be held in the ESOP trust for £10 million to satisfy share options granted
to employees under the Group’s share option schemes. The shares repurchased represent 0.3% of the Company’s called up share capital at
31 March 2013 (2012 – nil) and had a nominal value of £0.4 million.
The shares held in the ESOP trust at 31 March 2013 represent 0.5% (2012 – 0.3%) of the Company’s share capital at year end, have a nominal value
of £0.6m (2012 – £0.3m) and a market value of 850.0p per share (2012 – 705.0p per share).
13 Reconciliation of movements in shareholders’ funds
At 1 April 2012
Profit for the financial year
Proceeds from shares issued
Share-based payments
Ordinary dividends paid
Share purchase
At 31 March 2013
At 1 April 2011
Loss for the financial year
Proceeds from shares issued
Share-based payments
Ordinary dividends paid
Share purchase
At 31 March 2012
Ordinary
shares
£m
117
–
–
–
–
–
117
Ordinary
shares
£m
117
–
–
–
–
–
117
Share premium
account
£m
406
–
–
–
–
–
406
Share premium
account
£m
406
–
–
–
–
–
406
Capital
redemption
reserve
£m
8
–
–
–
–
–
8
Capital
redemption
reserve
£m
8
–
–
–
–
–
8
Profit and loss
account
£m
525
212
1
13
(117)
(23)
611
Profit and loss
account
£m
721
(79)
3
11
(112)
(19)
525
Total
£m
1 056
212
1
13
(117)
(23)
1 142
Total
£m
1 252
(79)
3
11
(112)
(19)
1 056
Ordinary shares carry the right to participate in dividends and each share entitles the holder to one vote on matters requiring shareholder
approval except for ordinary shares held in an ESOP trust or Treasury shares. The amount available for the payment of dividends by the Company
at 31 March 2013 was £616 million (2012 – £525 million).
14 Related parties
As permitted by FRS 8 Related Party Disclosures, related party transactions with wholly owned subsidiaries of Tate & Lyle PLC are not disclosed.
There were no transactions with other related parties except for the provision of guarantees in respect of banking facilities of a joint venture totalling
£9 million (2012 – £10 million).
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Tate & Lyle PLC Annual Report 2013
Financial Statements
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 121 staff including directors (2012 – 107) and the total staff costs are shown below:
Wages and salaries
Social security
Retirement benefits
Share-based payments
Total
2013
£m
11
3
1
6
21
31 March
2012
£m
14
4
1
6
25
Directors’ emoluments disclosures are provided in the Directors’ Remuneration Report on pages 50 to 62 of this Annual Report and in Note 9 of the
Group financial statements.
In addition, 6,073,157 (2012 – 5,527,046) outstanding share options attributable to employees and directors of the Company as at 31 March 2013 are
shown below:
Sharesave Scheme – 3 year options
Sharesave Scheme – 5 year options
Performance Share Plan
Executive share option scheme
Javed Ahmed – compensatory awards
Javed Ahmed – long-term incentive awards
Group Bonus Plan
Year issued
2010
2011
2012
2008
2009
2010
2011
2012
2008
2009
2010
2011
2012
2003
2009
2009
2009
2010
2011
2011
2011
2012
Number of
shares
13 055
17 962
17 486
3 562
4 464
4 989
7 063
10 971
65 683
291 759
1 037 033
961 478
1 182 758
118 011
419 403
257 870
656 640
473 042
378 337
4 281
142 519
4 791
Subscription
prices (pence)
488.00
552.00
607.00
376.00
418.00
488.00
552.00
607.00
–
–
–
–
–
325.00
–
–
–
–
–
–
–
–
Dates normally
exercisable
2014
2015
2016
2014
2015
2016
2017
2018
2011–2018
2012–2018
2013–2019
2014–2020
2015–2021
2007–2014
2011–2017
2012–2018
2012–2018
2013–2019
2014–2020
2013
2013–2018
2014–2020
16 Dividends
Details of the Company’s dividends are set out in Note 14 of the Group financial statements.
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Shareholder Information
Five-year Review Financial Years to 31 March
Share information
Pence (unless otherwise stated)
Closing share price at 31 March
Earnings per share (pence):
– basic2
– basic, before amortisation, exceptional items and post-
retirement benefit interest2
Earnings per share (pence):
– diluted2
– diluted, before amortisation, exceptional items and post-
retirement benefit interest2
Dividend
Closing market capitalisation (£ million)
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, amortisation
and post-retirement benefit interest divided by dividends
per share (pence)2
Basic earnings per share before exceptional items, amortisation
and post-retirement benefit interest divided by dividends
per share (pence)2
20091
260.5
14.2
39.1
14.1
38.8
22.9
1 198
2010 1
454.2
3.3
41.1
3.3
40.9
22.9
2 092
2011 1
577.5
35.3
44.6
34.7
43.9
23.7
2 665
2012 1
705.0
65.5
56.3
64.3
55.2
24.9
3 283
2013 1
850.0
59.7
56.3
58.5
55.1
26.2
3 946
6.1
5.8
6.9
11.1
11.1
122%
6.8%
95%
8.2%
48%
9.6%
45%
46%
11.2%
10.7%
12.7%
14.1%
20.2%
22.9%
21.6%
0.6
1.7
0.1
1.8
1.5
1.9
2.6
2.3
2.3
2.1
1 ‘Amortisation’ relates to the amortisation of intangible assets acquired through business combinations.
2 These metrics have been calculated using the results of both continuing and discontinued operations.
3 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.
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Tate & Lyle PLC Annual Report 2013
Shareholder Information
Employment of capital
Goodwill, intangible assets and property, plant and equipment
Other non-current assets
Working capital
Pension deficit
Net assets held for sale (excluding cash included in net borrowings)
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 intangible assets acquired
through business combinations
Exceptional items
Group operating profit/(loss)
Net finance expense excluding post-retirement benefit interest
Post-retirement benefit interest
Profit/(loss) before tax
Income tax (expense)/credit
Profit/(loss) after tax
Discontinued operations
Non-controlling interests
Profit for the year attributable to owners of the Company
Profit before tax, exceptional items, amortisation and
post-retirement benefit interest2
Earnings/(loss) per share attributable to the owners of the
Company from continuing operations:
– basic
– diluted
2009 1
£m
1 922
19
605
(211)
28
2 363
(1 231)
(119)
1 013
115
872
987
26
1 013
2010 1
£m
1 548
21
302
(257)
18
1 632
(814)
36
854
115
712
827
27
854
2011
£m
1 175
24
279
(139)
62
1 401
(464)
36
973
117
833
950
23
973
2012
£m
1 247
28
370
(140)
63
1 568
(476)
(34)
1 058
117
916
1 033
25
1 058
2013
£m
1 314
33
497
(265)
1
1 580
(479)
(65)
1 036
117
919
1 036
–
1 036
2 505
2 533
2 720
3 088
3 256
286
(15)
(110)
161
(49)
(4)
108
(11)
97
(31)
(1)
65
268
(14)
(298)
(44)
(53)
(19)
(116)
95
(21)
40
(4)
15
321
(13)
(5)
303
(54)
(4)
245
(49)
196
(29)
(4)
163
348
(12)
68
404
(30)
5
379
(72)
307
2
(4)
305
358
(10)
(12)
336
(29)
2
309
(49)
260
18
(1)
277
237
215
267
318
329
21.0
20.9
(4.7)
(4.7)
42.6
41.9
65.9
64.6
56.0
54.9
1 The profit summaries for the years ended 31 March 2009 and 31 March 2010 have been restated to reflect the former Sugars businesses which have been classed
as discontinued operations and are excluded from all years presented.
2 ‘Amortisation’ relates to the amortisation of intangible assets acquired through business combinations.
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Tate & Lyle PLC Annual Report 2013
Shareholder Information
Information for Investors
Dividends on ordinary shares
Two payments were made during the tax year 2012/2013 as follows:
Payment date
3 Aug 2012
4 Jan 2013
Dividend description
Final 2012
Interim 2013
Dividend
per share
17.8p
7.4p
Shareholding enquiries
General enquiries
Information on how to manage your shareholdings can be found at https://help.shareview.co.uk. The website also provides answers to commonly asked
questions regarding shareholder registration and links to downloadable forms, guidance notes and company history fact sheets.
Email enquiries (Equiniti Shareview Enquiry Service)
If your question is not answered by the information provided online you can send your enquiry via secure email from the above website. You will be
asked to complete a structured form and to provide your Shareholder Reference, name and address. You will also need to provide your email address
if this is how you would like to receive your response.
Telephone enquiries
0871 384 2063 (for UK calls)1
+44 (0)121 415 0235 (for calls from outside the UK)
1 Calls to this number are charged at 8p per minute plus network extras. Lines are open from Monday to Friday, 8:30am to 5:30pm UK time (excluding UK public holidays).
Written enquiries
Equiniti Limited, Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA
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 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 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 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.
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Tate & Lyle PLC Annual Report and Accounts 2013
Shareholder Information
Financial calendar
2013 Annual General Meeting
Announcement of half-year results for six months to 30 September 2013
Announcement of full-year results for the year ending 31 March 2014
2014 Annual General Meeting
1 Provisional date.
Dividend on ordinary shares
Announced
Payment date
1 Provisional date.
2 Subject to the approval of shareholders.
Dividends on 6½% cumulative preference shares
Paid each 31 March and 30 September.
24 July 2013
7 Nov 2013 1
29 May 2014 1
24 July 2014 1
2013 final
30 May 2013
2 Aug 2013 2
2014 interim
2014 final
7 Nov 2013 1 29 May 2014 1
3 Jan 2014 1
1 Aug 2014 1,2
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.
Non-reliance statement
This Annual Report 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.
Amortisation
Unless stated otherwise, the use of the
word ‘amortisation’ on pages 1 to 65 in
this Annual Report relates to the amortisation
of intangible assets acquired through
business combinations.
Cautionary statement
This Annual Report 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
should be construed as a profit forecast.
Tate & Lyle PLC
Tate & Lyle PLC is a public limited company
listed on the London Stock Exchange and
registered in England. This is the Annual Report
for the year ended 31 March 2013. More
information about Tate & Lyle can be found on
the Company’s website, www.tateandlyle.com.
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.
Continuing operations
Unless stated otherwise, all comments in
this Annual Report refer to the continuing
operations adjusted to exclude exceptional
items, amortisation of intangible assets
acquired through business combinations and
post-retirement benefit interest. A reconciliation
of reported and adjusted information is included
in Note 43.
Definitions
In this Report, ‘Company’ means Tate & Lyle
PLC; ‘Tate & Lyle’ or ‘Group’ means Tate & Lyle
PLC and its subsidiary and joint-venture
companies.
Environmental statement
This report is printed on Heaven 42 and all
of the pulp is bleached using an elemental
chlorine free process (ECF). Printed in the UK
by Pureprint using its alcofree® and pureprint®
environmental printing technology, and
vegetable inks were used throughout.
Pureprint is a CarbonNeutral® company and
both the manufacturing mill and Pureprint are
registered to the Environmental Management
System ISO 14001 and are Forest Stewardship
Council® (FSC) chain-of-custody certified.
If you have finished with this Annual Report
and no longer wish to retain it, please pass
it on to other interested readers or dispose
of it in your recycled paper waste.
Tate & Lyle PLC Annual Report 2013
The CO2 emissions from the production and
distribution of this Annual Report have been
offset through the purchase of carbon credits in
the Pureprint Gold programme. The offsets are
always in Gold Standard accredited projects and
currently come from the Basa Magogo project
in South Africa. The first Gold Standard project
of its kind in the world, this innovative behaviour-
change programme teaches local communities
in South Africa to burn coal more efficiently
thereby reducing carbon emissions and
reducing health risks by producing less smoke.
Registered office
Tate & Lyle PLC
1 Kingsway
London WC2B 6AT
Tel: +44 (0)20 7257 2100
Fax: +44 (0)20 7257 2200
Company number: 76535
www.tateandlyle.com
Credits
Photography
Peter Wynn Thompson
Detlev Klockow
Designed and produced by
C O N R A N D E S I G N G R O U P
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