Focus on
ingredients
Annual Report 2014
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.
Our
ingredients
at work
SPLENDA® Sucralose
Sweetens without adding calories
KRYSTAR® Crystalline Fructose
Provides sweetness and extends
shelf life
HAMULSION® food system
Thickens, stabilises, provides
consistent mouthfeel and optimises
cost (one all-inclusive solution)
REZISTA® speciality food starch
Provides body, mouthfeel and stability
PROMITOR® Soluble Corn Fiber
Provides added fibre and mouthfeel
to rebalance fat or sugar reduction
PromOat® Beta Glucan
Adds natural fibre and promotes
heart health
Delicious reduced fat, reduced
sugar and reduced calorie
yoghurt with added fibre.
www.tateandlyle.com/
ingredientsandservices
FINANCIAL HIGHLIGHTS
Financial highlights
Adjusted operating profit 1 (£m)
Adjusted diluted earnings
per share 3 (pence)
£349m
55.7p
3562
349
3462
56.02
56.62
55.7
2012
2013
2014
2012
2013
2014
Dividend per share (pence)
Net debt (£m)
27.6p4
24.9
26.2
27.64
£353m
476
479
3533
2012
2013
2014
2012
2013
2014
1 Continuing operations before
exceptional items and amortisation
of acquired intangible assets.
2 Restated for IAS 19 (Revised 2011)
‘Employee Benefits’.
3 Based on earnings from continuing
operations excluding exceptional
items, amortisation of acquired
intangible assets, net retirement
benefit interest and the tax effect
of these items.
4 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)
2014
£325m
£290m
£273m
58.0p
20132
£334m
£301m
£273m
57.4p
Adjusted operating profit, adjusted profit before tax and adjusted
earnings per share
Unless stated otherwise, adjusted operating profit in this Annual Report excludes
discontinued operations and is before exceptional items (see Note 7) and
amortisation of acquired intangible assets. In addition, adjusted profit before tax
and adjusted earnings per share also exclude net retirement benefit interest.
Adjusted earnings per share also excludes the tax effect of the adjusted items.
Trademarks
SPLENDA® and the SPLENDA® logo are trademarks of McNeil Nutritionals, LLC.
Definitions/cautionary statement
Please see the explanatory notes on the inside back cover.
Strategic Report
Financial Highlights
Our Group at a Glance
Chairman’s Statement
Our Operations
Chief Executive’s Review
Our Marketplace
Our Business Model
Our Strategy
Our Strategy in Action
Key Performance Indicators
Speciality Food Ingredients
Bulk Ingredients
Group Financial Results
Additional Financial Information
Risks
Corporate Responsibility
Governance
Board of Directors
Statement from the Chairman
Corporate Governance
Audit Committee Report
Nominations Committee Report
Corporate Responsibility Committee Report
Directors’ Remuneration Report
Directors’ Report
Directors’ Statement of Responsibilities
Financial Statements
Independent Auditors’ Report
to the Members of Tate & Lyle PLC
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Statement of Financial Position
Consolidated Statement of Cash Flows
Consolidated Statement of Changes in Equity
Notes to the Consolidated Financial Statements
Parent Company Financial Statements
Useful Information
Information for Investors
Five-year Summary
Glossary and Explanatory Notes
01
02
04
06
07
10
12
14
16
18
20
22
24
26
29
32
38
40
41
47
50
51
52
72
73
74
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78
79
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134
141
142
144
Tate & Lyle PLC Annual Report 2014 | 01
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Strategic Report
OUR GROUP AT A GLANCE
A global business dedicated to serving our
customers from over 30 locations worldwide
Sales
Adjusted profit before tax
Net debt
Employees worldwide
£3,147m
2013 – £3,256m
£322m
2013 – £327m
£353m
2013 – £479m
4,523
2013 – 4,326
Tate & Lyle operates through two
global divisions: Speciality Food
Ingredients and Bulk Ingredients.
These two divisions are supported by our
Innovation and Commercial Development
(ICD) group, global Shared Service Centre
and other global functions.
We have operations in over 30 locations, including
our manufacturing facilities, such as our two scale
SPLENDA® Sucralose facilities in Singapore and
the US, and our network of corn wet mills in
Europe and the US, which are shared by the two
divisions to make our corn-based products. We
have also built a global network of customer-facing
facilities allowing us to collaborate with customers
wherever they are located, including our global
innovation hub, the Commercial and Food
Innovation Centre in Chicago, USA.
Our operations
Page 6
Performance of our divisions
Pages 20 to 23
02 | Tate & Lyle PLC Annual Report 2014
Principal Locations
Latin America
Buenos Aires, Argentina
Guadalajara, Mexico2
Mexico City, Mexico
Santa Rosa, Brazil
São Paulo, Brazil
USA
Chicago, Illinois
Dayton, Ohio
Decatur, Illinois
Duluth, Minnesota
Houlton, Maine
Lafayette, Indiana
Loudon, Tennessee
McIntosh, Alabama
Princeton, New Jersey
Sycamore, Illinois
Van Buren, Arkansas
Sales by division
Adjusted operating profit 1
Employees by geography
1 31% Speciality Food Ingredients
2 69% Bulk Ingredients
1 55% Speciality Food Ingredients
2 45% Bulk Ingredients
1 46% North America
2 37% Europe, Middle
3 10% Latin America
4 7% Asia Pacific
East & Africa
1
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2
2
1 Adjusted operating profit excluding central costs.
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Key
Manufacturing facilities
Applications/technical services facilities
Principal central/ICD locations
Europe
Adana, Turkey2
Bergamo, Italy
Boleraz, Slovakia2
Kimstad, Sweden
Koog, the Netherlands
Lille, France
Łód ´z, Poland
London, UK
Lübeck, Germany
Mold, UK
Noto, Italy
Ossona, Italy
Middle East & Africa
Casablanca, Morocco
Kya Sand, South Africa
Asia Pacific
Brisbane, Australia
Singapore
Shanghai, China
Suqian, China
Xuzhou, China
Razgrad, Bulgaria2
Szabadegyháza, Hungary2
2 Joint venture.
Tate & Lyle PLC Annual Report 2014 | 03
ChaIRman’S Statement
“The Board is confident
that our strategy of
becoming a leading global
provider of speciality food
ingredients will create
long-term sustainable
value for our shareholders.”
Sir Peter Gershon
04 | Tate & Lyle PLC Annual Report 2014
Corporate Responsibility
Pages 32 to 37
Governance
Pages 40 to 46
Introduction
I could not open my statement on the
performance of Tate & Lyle during the year
without first addressing safety and the
three tragic fatalities that have occurred
over the last 12 months. Two accidents in
Europe – one in Hungary and one in the
Netherlands – and one just after the year
end in Singapore, resulted in three people
who came to work at our facilities not
returning home to their families. At the time
of writing, one other person remains in a
critical condition in hospital in Singapore.
I know I speak for the entire Board and the
Company as a whole when I express my
deep regret and sincere condolences to
those families. We will continue to provide
them with all the support that we can
and our thoughts and prayers remain
with them.
The tragic loss of these colleagues
reminds us that safety is, and must always
be, our first priority. With that in mind, we
are re-doubling our focus on safety, with
Javed Ahmed and his team leading a series
of fresh initiatives to further improve hazard
identification and accident prevention at all
of our sites. These new measures will be
closely overseen by William Camp and
our Corporate Responsibility Committee.
We will consider what other measures are
required when the results of the official
investigations into the causes of the
fatalities are known.
Group performance
We have faced a number of challenges
over the last financial year. Unseasonably
cold weather on both sides of the Atlantic
Strategic Report in the first half of the year reduced demand
for our bulk sweeteners and this, along with
an increasingly competitive environment
for SPLENDA® Sucralose and lower returns
from co-products in volatile corn markets
in the US, offset a good performance
in a number of areas, notably the
emerging markets.
Although we are now facing the headwind
from lower SPLENDA® Sucralose prices,
the Board is confident that our strategy
of becoming a leading global provider
of speciality food ingredients will create
long-term sustainable value for our
shareholders. Accordingly, in the year
ahead, we will continue to put in place
the investment required to ensure the
continued execution of our strategy and to
build on the solid foundations laid over the
last four years under Javed’s leadership.
Strategic progress
Realising our vision of becoming
a leading global provider of speciality
food ingredients and solutions requires
us to explore new horizons and broaden
the geographic reach of the business.
While we continue to develop the business
within what have historically been our core
markets of North America and Europe,
I am pleased to say we have made very
good progress over the last few years
building our speciality food ingredients
business in both Asia and Latin America.
During the year, the Board visited China
and Singapore to see our Asia Pacific
operations and to gain a better
understanding of the opportunities that
exist in the region. Against a backdrop
of rapid urbanisation, rising household
income and changing tastes, the role of
innovation and new product development
is becoming increasingly important in
these regions as food and beverage
manufacturers look to respond to
consumer demand. We were able to
see first-hand how our investment in new
capabilities and customer-facing facilities
is helping our customers meet their
objectives and get their new products
to market faster across the region.
I am in no doubt that, alongside this
investment, the strength of the Tate & Lyle
brand and our reputation for delivering
innovative food ingredients and solutions
with the highest standards of quality,
traceability and reliability have played
an important part in building our presence
in these markets.
The formation of Tate & Lyle Howbetter
earlier in the year which combines
Tate & Lyle’s global blending capabilities
and recipe know-how with Howbetter’s
strong local expertise and infrastructure,
provides us with an excellent platform to
accelerate the growth of our Food Systems
business in China. The acquisition of
Winway Biotechnology, a Chinese
producer of polydextrose, which we expect
to complete later in the year, will further
enhance our presence in Asia and our
offering in the fast-growing fibre category.
Work to lay the foundations for future
long-term growth derived from new
ingredients continues within our Innovation
and Commercial Development group (ICD).
While the contribution from recent launches
is modest, we are encouraged by the
pipeline of customer projects and the
strength of our innovation pipeline which
remains robust. Within ICD we have also
made excellent progress building a world-
class marketing function which has begun
work on a range of initiatives to promote
our business and products globally.
Our investment in our global Commercial
and Food Innovation Centre in Chicago,
USA is not only helping us bring new
products identified by ICD to market faster,
it is also helping to generate stronger,
more collaborative relationships with
our customers. Further information
on this is on page 16.
Governance
As the business expands, my fellow
directors and I are devoting more time
to obtaining a better understanding of the
markets in which we operate and how our
business is evolving to meet customer
needs. As well as individual non-executive
directors’ site visits to our operations, and
the Board visit to the Asia Pacific region,
members of the Audit Committee also
visited our global Shared Service Centre
in Łód´z, Poland to review its work and
future initiatives with the local team.
This year, we agreed that the annual review
of Board effectiveness should be externally
facilitated. We felt that given the importance
of inclusive leadership and the changes
to the Board in the previous financial year
there would be significant benefit in
undertaking this review from a diversity and
inclusion perspective. Further details on our
visits and the effectiveness review are set
out within the Governance section.
Corporate responsibility
and risk management
We have continued to strengthen our
internal control arrangements and external
reporting on environmental, social and
governance matters, including in relation
to safety and business continuity
management. Our approach to safety,
business continuity and risk management
focuses on preventive programmes,
approaches and actions to reduce the
risk of experiencing any incidents; and
on advanced planning and preparedness
Dividend per share (pence)
27.6p1
24.9
26.2
27.61
2012
2013
2014
1 This includes the proposed final dividend.
for responding to actual events that may
occur. Corporate responsibility matters are
integrated into the Group’s enterprise-wide
risk management and reporting process
(see page 29).
During the year, we have engaged with
customers and other key stakeholders to
better understand the environmental, social
and governance matters and potential risks
that they see as particularly important.
We have used this feedback to review how
we report on corporate responsibility in this
Annual Report and through other means
including our corporate website.
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.
The Board is recommending a 5.3%
increase in the final dividend to 19.8p
(2013 – 18.8p) per share making a full-year
dividend of 27.6p (2013 – 26.2p) per share,
a 5.3% increase on the prior year. Subject
to shareholder approval, the proposed final
dividend will be due and payable on
1 August 2014 to all shareholders on the
Register of Members at 27 June 2014.
In addition to the cash dividend option,
shareholders will continue to be offered
a Dividend Reinvestment Plan (DRIP)
alternative.
Finally, I would like to acknowledge the hard
work of all our employees in a challenging
year. We continue to make good strategic
progress in transforming Tate & Lyle and
we have them to thank for that.
Sir Peter Gershon
Chairman
28 May 2014
Tate & Lyle PLC Annual Report 2014 | 05
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Strategic Report
OUR OPERATIONS
Tate & Lyle operates through two global divisions:
Speciality Food Ingredients (SFI)
Bulk Ingredients (BI)
SFI 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 create cost-effective, better tasting
products for consumers.
SFI works closely with our Innovation and Commercial Development
group to develop and commercialise new products.
BI manufactures and markets products including sweeteners,
industrial starches, ethanol, acidulants and animal feed, for food and
beverage, industrial and agricultural customers around the world.
BI also partners with bio-based materials companies seeking expertise
to commercialise 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.
Customers
(cid:116)(cid:1) Large, multi-national food and beverage manufacturers
(cid:116)(cid:1) Small and medium-sized food and beverage manufacturers
(cid:116)(cid:1) Private label food and beverage manufacturers
Products
Sweeteners
Texturants
–
–
Speciality corn-based sweeteners
including KRYSTAR® Crystalline Fructose
High-intensity sweeteners including
SPLENDA® Sucralose, PUREFRUITTM
Monk Fruit Extract and TASTEVA®
Stevia Sweetener
– Speciality starches
– Locust bean gum
Customers
(cid:116)(cid:1) Large, multi-national food and beverage manufacturers
(cid:116)(cid:1) Paper and board producers
(cid:116)(cid:1) Gasoline suppliers
(cid:116)(cid:1) Textile manufacturers
(cid:116)(cid:1) Animal feed compounders
Products
(cid:116)(cid:1) Liquid sweeteners including corn syrup, dextrose and glucose
(cid:116)(cid:1) Industrial starches
(cid:116)(cid:1) Citric acid
(cid:116)(cid:1) Bio-fuels
(cid:116)(cid:1) Animal feed including corn gluten feed and corn gluten meal
Health and wellness – PROMITOR® Soluble Corn Fiber
Food Systems
– STA-LITE® Polydextrose
– SODA-LO® Salt Microspheres
– PromOat® Beta Glucan
– Food stabiliser systems
– Functional ingredient blends
The Innovation and Commercial Development group supports our two divisions:
Innovation and Commercial Development (ICD)
ICD is a key enabler of Tate & Lyle’s growth strategy. It brings together
open innovation, R&D, global marketing and platform management 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 divisions, it concentrates
particularly on growing SFI. As a result, ICD’s resources are predominantly
focused on three broad platforms within the global speciality food
ingredients market – sweeteners, texturants, and health and wellness.
We have identified five core scientific competencies as being key to
delivering innovation in these three platforms: bio-chemistry; formulations
science; separations science; particle design; and organic chemistry.
We have made investments in innovation and technical services facilities
across the world to support these.
Ideas are generated from both internal and external sources. Internally,
these come from work done by our own scientists. Externally, we generate
ideas from engagement with our customers and from our dedicated Open
Innovation team which seeks to develop partnerships with universities,
research institutions and start-ups specialising in food science and novel
ingredients. We also invest in long-term external partnerships through our
venture funds.
All of our ideas and innovations are put forward for commercialisation via a
defined process which is designed to prioritise ideas, time and resources.
Open
innovation
Research and
development
Innovation and
Commercial
Development
Global
marketing
Platform
management
A clear focus on three SFI platforms
Sweeteners
Texturants
Health and wellness
Marketplace for SFI and BI
Pages 10 and 11
06 | Tate & Lyle PLC Annual Report 2014
Our business model
Pages 12 and 13
CHIEF EXECUTIVE’S REVIEW
Highlights
Speciality Food Ingredients sales up 4% (up 4% in constant currency)
at £983 million with adjusted operating profit in line with the prior year
(up 1% in constant currency) at £213 million:
– Continued strong growth in Asia and Latin America
– Acquisition of Biovelop, and in China, the formation of Tate & Lyle Howbetter
and agreement to acquire Winway Biotechnology
Bulk Ingredients adjusted operating profit 5% lower (4% lower in constant
currency) at £172 million due to soft beverage season and unusually cold
and prolonged winter in the US
Adjusted profit before tax 2% lower (flat in constant currency) at £322 million
Balance sheet remains strong with reduction in net debt of £126 million
to £353 million (2013 – £479 million)
Final dividend of 19.8p proposed making a total dividend of 27.6p
(2013 – 26.2p) up 5.3% on prior year
Successful deployment of upgraded IS/IT platform across Europe with US
and Singapore on track for the summer
Board approval of capital investment of £100 million over the next two
years in Speciality Food Ingredients to expand capacity for existing
and pipeline products
Javed Ahmed
Full-year performance
During the year, we continued to make
steady progress in executing our strategy.
The delivery of profit growth in starch-
based speciality ingredients and Food
Systems, along with another year of
strong growth in emerging markets,
was offset by the impact of the cold spring
in the US last year followed by the recent
severe and prolonged winter, and an
increasingly competitive market for
SPLENDA® Sucralose.
Sales for the year were £3,147 million
(2013 – £3,256 million), 3% lower than the
prior year (3% in constant currency) with
sales in Speciality Food Ingredients up 4%
(4% in constant currency) to £983 million
(2013 – £947 million) and 6% lower in Bulk
Ingredients (6% in constant currency) at
£2,164 million. Adjusted operating profit
was 2% lower (1% in constant currency)
at £349 million (2013 – £356 million) with
adjusted operating profit in Speciality Food
Ingredients in line with the prior year at
£213 million (up 1% in constant currency)
and 5% lower (4% in constant currency)
in Bulk Ingredients at £172 million (2013
– £182 million). Adjusted profit before tax
was 2% lower (flat in constant currency),
at £322 million (2013 – £327 million), and
adjusted diluted earnings per share were
2% lower (flat in constant currency) at 55.7p
(2013 – 56.6p).
Financial management
and balance sheet
Our average quarterly cash conversion cycle
improved by three days to 39 days (2013
– 42 days) largely driven by a decrease in
working capital due to lower finished goods
inventories and lower corn prices.
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 thresholds. At 31 March 2014,
the net debt to EBITDA ratio was 0.8
times (2013 – 1.0 times), against our internal
threshold of 2.0 times and interest cover
on total operations was 11.6 times
(2013 – 11.1 times), again comfortably
ahead of our minimum threshold of
5.0 times.
Net debt of £353 million at 31 March
2014 was lower than at the end of last
year (2013 – £479 million), reflecting
the reduction in working capital and a
decrease in the value of dollar denominated
debt as a result of the weakening of the
US dollar against sterling.
We continue to generate a good level of
return on our assets with return on capital
employed of 19.2% (2013 – 19.7%).
Changes in constant currency are calculated by retranslating comparative period results at current
period exchange rates.
Tate & Lyle PLC Annual Report 2014 | 07
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Strategic Report
CHIEF EXECUTIVE’S REVIEW | CONTINUED
Safety
As already set out in the Chairman’s
Statement on page 4, I am saddened
to report that the performance of the
Group this year has been completely
overshadowed by three fatal accidents.
As a result of these tragic events, working
with the Chairman, the Board and the
Corporate Responsibility Committee,
we are taking a fresh look at our overall
safety approach and procedures,
not limited to the specific areas related
to these accidents.
I know I speak for all of my colleagues
across the Group when I say that we
are determined to continue to improve
our safety programme so as to keep all
those that work at or visit our sites safe
at all times.
Strategy and business update
Growth in Speciality Food Ingredients
Since May 2010, we have made steady
progress executing our strategy and
growing Speciality Food Ingredients,
having delivered average annual volume
growth of 5% and compound annual
operating profit growth of 7% during that
period. Excluding SPLENDA® Sucralose,
where an increasingly competitive
environment held back growth of the
division as a whole, we have delivered
a strong performance across the rest
of Speciality Food Ingredients, with
compound annual profit growth of
12% during the same four-year period.
This growth has been achieved by rigorously
following through on the key priorities we set
out in May 2010, when we outlined a path
to grow our Speciality Food Ingredients
division by: diversifying our business
geographically through building our
presence in faster growing, emerging
markets and hence reducing our reliance
on developed markets; broadening our
product portfolio through the development
of a world-class innovation capability;
and forming stronger relationships with
our customers through much greater
collaboration with them.
Over the past year we have made further
progress in each of these areas.
Entering new markets
We delivered another strong performance
in Asia Pacific and Latin America with
double-digit volume growth during the
period, as we continued to leverage the
strength of our brand, our ingredients
portfolio and our applications expertise in
these regions. Our successful expansion
into the emerging markets, which now
represent 19% of Speciality Food
Ingredients sales, is a result of the
investments we have made in building
strong local teams and infrastructure,
08 | Tate & Lyle PLC Annual Report 2014
which have been key enablers in forming
direct and higher quality relationships with
regional food and beverage customers.
During the year, we opened an applications
and technical service laboratory in
Singapore (the new hub of our Asia Pacific
operations), and established a sales office
in Japan.
We have also strengthened our presence
through acquisition. In October 2013, we
acquired a 51% equity interest in Jiangsu
Howbetter Food Co., Ltd, a leading Food
Systems business in China. By combining
Tate & Lyle’s global blending capabilities
and extensive recipe expertise with
Howbetter’s strong local expertise and
infrastructure, Tate & Lyle Howbetter
provides us with an excellent platform
from which to accelerate the growth of
our Food Systems business in China.
In March 2014, we announced the
signing of an agreement to acquire
Winway Biotechnology (Winway), a leading
producer of polydextrose fibre in China.
Winway will provide us with our third global
polydextrose facility complementing our
existing facilities in the Netherlands and
the US. The acquisition, which is subject
to government approval (expected in the
next few months), will allow us to further
accelerate the growth of our speciality
fibres business in Asia Pacific and
to expand our health and wellness
offering globally.
Innovation
Our Innovation and Commercial
Development group (ICD) launched five
new products during the year including
PULPIZ® Pulp Extender, a speciality food
starch that replaces tomato pulp in a range
of applications. ICD also continued to play
a key role in the commercialisation of our
recently launched ingredients, particularly
our salt reduction ingredient SODA-LO®
Salt Microspheres and our stevia-based,
no-calorie, natural sweetener TASTEVA®
Stevia Sweetener. During the year, a
number of customers launched products
incorporating these ingredients and we
continued to work closely with customers
on formulation, product prototyping and
testing to convert the increasing number of
customer projects in the pipeline into sales.
Our innovation pipeline remains strong with
a total of 35 products at various stages of
development including ten in the final
stages, some of which we plan to launch
over the next 12 to 18 months. The pipeline
is well balanced with a number of line
extensions, next generation and
breakthrough projects across our
sweeteners, texturants, health and
wellness and bulk ingredients platforms.
Our global marketing team is an
integral part of the innovation and
commercialisation process. In addition
to developing clear value propositions
and positioning for our ingredients, this
team is also developing consumer-focused
strategies for specific applications in the
beverage, ‘clean label’, convenience
and dairy categories.
At the start of the year, we acquired
Biovelop, an early-stage manufacturer
of oat beta glucan which added a ‘clean
label’, speciality fibre with strong EFSA1
health claims to our existing corn-based
fibre-portfolio. During the year, high levels
of customer interest in PromOat® Beta
Glucan has helped to build a strong
pipeline. Work to expand capacity at
our plant in Kimstad, Sweden has begun
and we expect this will come on line
in the current financial year.
Focus on the customer
As reported at our half-year results,
we have made significant progress
in increasing customer collaboration
by leveraging our global Commercial
and Food Innovation Centre in Chicago
and our enhanced network of applications
laboratories around the world. During the
year, we commissioned an independent
analysis to understand better our
customers’ views of our developing
innovation capabilities. This showed a
marked improvement in the way we are
perceived by those customers who interact
with us at our Innovation Centre in Chicago,
with around two-thirds of those stating that
we were ‘exceeding their expectations’.
This has not only led to us developing
stronger customer relationships but also
to winning new business with both existing
and new customers.
SPLENDA® Sucralose
As announced in February 2014, the
competitive environment for sucralose
intensified during the final quarter, driven
by an increase in capacity in China and
a significant overhang of unsold Chinese
sucralose. Against this backdrop, we
renewed a number of customer contracts
for SPLENDA® Sucralose, including some
on a multi-year basis, and as a result we
experienced an increase in the rate of price
decline in SPLENDA® Sucralose in the final
quarter. As previously announced, with
these contracts in place and based on
current market dynamics, we expect
average prices in the 2015 financial year
to be around 15% lower than the 2014
financial year.
1 EFSA – European Food Safety Authority.
Notwithstanding the competitive market
environment and the headwind of lower
prices, we continue to see good long-term
volume growth opportunities in the global
market for sucralose driven by a number
of factors:
(cid:116)(cid:1)Given rising rates of obesity and diabetes
globally, increased consumer focus on
health and wellness is continuing to drive
food and beverage manufacturers to
reduce or replace sugar content in their
products. The imposition of taxes by
governments on food and beverage
products with high levels of sugar or
calories is also creating opportunities
and increasing demand for sucralose;
(cid:116)(cid:1)Sucralose continues to be the high
intensity sweetener of choice because
the combination of its superior taste
profile and heat stability that enable it to
be incorporated in a wide range of food,
beverage and other applications. This
provides an opportunity for sucralose to
continue to replace other high intensity
sweeteners that have already been
incorporated into low calorie products in
the market as well as replacing sugar. In
calendar year 2013, 6,3732 new products
were launched globally incorporating
sucralose, a 54% increase over the prior
year (2012 – 4,142 launches) compared
with 3,6332 for aspartame (up 4% on
2013) and 2,8602 for stevia (up 56%
on 2013) where we also have a strong
offering through TASTEVA® Stevia
Sweetener. As a result, sucralose’s value
share of the global high intensity
sweetener market continues to grow,
standing at 35% for calendar year 2013;
(cid:116)(cid:1)We also see good growth potential
in the tabletop market where we now
have full freedom to operate worldwide.
While we expect the global market for
sucralose to remain competitive, our
priority remains to increase volumes by
both growing and taking a greater share
of the global market for sucralose, by
leveraging our unparalleled applications
and formulations expertise and providing
our customers with the highest standards
of quality, traceability and reliability in the
industry. Specifically, our focus over the
next year will be to continue to renew
existing customer contracts, aggressively
pursue new business opportunities globally
(including those relating to the substitution
of other artificial high intensity sweeteners
given the increasing price competitiveness
of SPLENDA® Sucralose) and drive further
cost savings and efficiencies through our
two large-scale continuous production
facilities in the US and Singapore.
Investing in a platform for
long-term growth
In order to support continued growth in the
Speciality Food Ingredients division, the
Board has approved, in line with our
disciplined capital process, capital
investment of £100 million over the next
two years. This investment will be used to
expand capacity at our speciality plants in
Europe and the US and our recently
acquired oat beta glucan business, support
the growth in new products expected to be
launched in the next 12 to 18 months and
deliver cost reduction initiatives. As a result,
we expect the ratio of capital expenditure
to depreciation to increase in the next
financial year to approach 2.0 times, with
an average payback on these projects of
3.5 years.
Earlier this month, we successfully
deployed the upgraded global IS/IT system
across our European operations and we
remain on track to implement the system
in the US and Singapore by the end of
summer. While we expect the total
investment in the IS/IT platform and global
Shared Service Centre to be towards the
top of the £120 – 135 million range we
disclosed in May 2013, we are starting to
see the benefits from this investment, in
particular within procurement and shared
services, and continue to target a three-
year cash payback from completion of
the implementation.
During the year, we incurred £46 million of
costs on the rollout of the common IS/IT
platform, taking the total costs to 31 March
2014 on the global Shared Service Centre
and IS/IT platform to £124 million, of which
£77 million was capital expenditure. As a
result of bringing the IS/IT system into
operation across the business, we expect
our depreciation and amortisation charge
to increase by £5 million in financial year
2015 and a further £4 million the year after.
Conclusion
The transformation of Tate & Lyle
remains firmly on track and our strategy
of becoming a leading global provider
of speciality food ingredients will
continue to create long-term value
for our shareholders.
Excluding SPLENDA® Sucralose, Speciality
Food Ingredients has grown strongly over
the last four years and well ahead of the
wider market, underpinned by the good
progress we have made in emerging
markets, innovation and working more
closely with our customers.
While we are operating in an intensely
competitive, dynamic market for sucralose,
we continue to see good volume growth
opportunities and are well placed to secure
this growth.
Following the implementations of our global
IS/IT platform over the summer, we will
have completed virtually all the business
transformation initiatives we set out to
deliver four years ago.
We have strengthened our financial
position, which provides us with the
resources to invest in the business and the
flexibility to make acquisitions where we
see high quality opportunities to accelerate
organic growth.
Since 2010, we have built a more robust,
more global and higher-quality business
that is capable of generating sustained
growth over the long term. I would like
to thank all of our employees across
Tate & Lyle for their continued hard work
and dedication over the last year and look
forward to working alongside them in
continuing to deliver our objectives over
the next financial year and beyond.
Key performance indicators (KPIs)
Our KPIs for the year ended 31 March 2014
are detailed on pages 18 and 19.
Outlook
In Speciality Food Ingredients, we expect
to deliver volume growth across all major
product categories but a lower profit
contribution from SPLENDA® Sucralose
is expected to offset a good performance
elsewhere in the division. Profits in this
division are expected to be more evenly
weighted between the first and second
halves than the previous financial year.
In Bulk Ingredients, we now anticipate
a slower start in the US in our first quarter
associated with the prolonged and severe
winter, combined with lower European
sugar prices in our second half, to
outweigh a better performance across
other product categories.
Overall, and before the impact of
currency movements3, while we expect
the Group’s performance for the full year
to be slightly lower than the comparative
period, we are well placed to deliver growth
in the longer term.
Javed Ahmed
Chief Executive
28 May 2014
2 Source: Innova Market Insights.
3 The estimated annual movement in operating
profit and profit before tax caused by a one
cent movement in the US dollar is £1.7 million
and £1.6 million respectively.
Tate & Lyle PLC Annual Report 2014 | 09
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Strategic Report
OUR MARKETPLACE
Speciality Food Ingredients
The global market for speciality food ingredients is large and growing, underpinned by strong
consumer trends: convenience, health and wellness and ‘clean label’.
Focus and depth
Our strategy is to focus on three core
platforms and to have deep expertise
within each one:
Sweeteners
Texturants
Health and wellness
Global speciality food ingredients market
Approximately US$35 billion*
1 14% Sweeteners
2 20% Texturants
3 14% Functional food
ingredients
4 8% Colours and
preservatives
5 33% Flavour
6 11% Other
1
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5
4
2
3
Tate & Lyle Speciality
Food Ingredients:
1. Sweeteners
(cid:116)(cid:1) SPLENDA® Sucralose
(cid:116)(cid:1) Speciality corn-based sweeteners
(cid:116)(cid:1) PUREFRUITTM Monk Fruit Extract
(cid:116)(cid:1) TASTEVA® Stevia Sweetener
2. Texturants
(cid:116)(cid:1) Speciality food starches
(cid:116)(cid:1) Food stabiliser systems
3. Health and wellness
(cid:116)(cid:1) PROMITOR® Soluble Corn Fiber
(cid:116)(cid:1) STA-LITE® Polydextrose
(cid:116)(cid:1) SODA-LO® Salt Microspheres
(cid:116)(cid:1) PromOat® Beta Glucan
* Sources: Leatherhead; SRI; LMC International; Company analysis.
Convenience
Health and wellness
‘Clean label’
(cid:116)(cid:1) Changes in consumer lifestyles continue
to increase the demand for packaged and
convenience foods, for consumption both
at home and ‘on the go’
(cid:116)(cid:1) Product launches with a ‘convenient’ claim
increased globally by 25% in 2013
(cid:116)(cid:1) Increasing urbanisation has driven growth
in Asia Pacific and Latin America where
launches of convenience products increased
by 23% and 40% respectively in 2013
(cid:116)(cid:1) Consumers are increasingly aware of the link
between diet and health and are seeking
products enhanced or fortified with
ingredients such as fibre
(cid:116)(cid:1) The number of product launches containing
fibres increased by 47% globally in 2013 with
growth across both developed and
developing markets
(cid:116)(cid:1) In 2013, product launches containing fibres
were up by 65% in Asia Pacific and by 51%
in Europe
(cid:116)(cid:1) Food and beverage manufacturers are
launching more ‘clean label’ products in
response to increasing consumer demand
for more natural products across a broad
range of categories
(cid:116)(cid:1) The fastest growing ‘clean label’ categories
are baby food, soups, soft drinks, cereals
and spreads
(cid:116)(cid:1) ‘Clean label’ product launches increased
globally by 27% in 2013
Global convenience product launches1, 2
Global product launches containing fibres1, 3
Global ‘clean label’ product launches1, 4
+25%
151,499
+13%
+47%
9,809
+29%
+27%
50,236
+13%
2011
2012
2013
2011
2012
2013
2011
2012
2013
Source: Innova Market Insights.
1 Data shown is based on calendar years.
2 Definition: product launches that have at least one of these claims – convenient consumption, easy-to-prepare, ready prepared, time saving.
3 Definition: product launches containing fibres in their formulation.
4 Definition: product launches claiming no additives/preservatives, natural, organic and/or without genetically modified organisms (non GMO).
10 | Tate & Lyle PLC Annual Report 2014
Bulk Ingredients
Bulk ingredients operates in a mature, consolidated industry, manufacturing largely commodity
products, where the level of profitability is related to the level of industry capacity utilisation.
Steady sustained
cash generation
Our strategy is to generate sustained
long-term cash flows to help fund
growth in Speciality Food Ingredients:
Optimise margins
Optimise and fill grind capacity
Ensure security of raw material supply
Dampen volatility
US corn wet milling industry output
by major product category in 2013 (75bn lbs)*
1 44% Liquid
Sweeteners
(commercial weight)
2 10% Starch
3 11% Ethanol
4 35% Co-products
1
4
3
2
Tate & Lyle Bulk Ingredients:
1. Liquid Sweeteners
(cid:116)(cid:1) High fructose corn syrup
(cid:116)(cid:1) Glucose
(cid:116)(cid:1) Dextrose
2. Starch
(cid:116)(cid:1) Industrial starch
3. Ethanol
4. Co-products
(cid:116)(cid:1) Corn oil
(cid:116)(cid:1) Corn gluten feed
(cid:116)(cid:1) Corn gluten meal
* Sources: Compiled by the Corn Refiners Association based on 2013 data from the U.S. Department of
Agriculture, Renewable Fuels Association, American Coalition for Ethanol, press reports, and industry
data compiled for CRA by Veris Consulting, Inc. Corn marketing year ended 31 August 2013.
NB Includes approximately 95% of US corn milling industry.
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Bulk corn sweeteners
Industrial markets
(cid:116)(cid:1) Corn is the main raw material in the corn wet
milling industry which, in the US, processes
around 11% of the corn crop annually
(cid:116)(cid:1) A good harvest in the US in 2013, as a result
of favourable growing conditions, helped
ease tight market conditions and saw corn
supplies restored to more normal levels
(cid:116)(cid:1) As a result of a more balanced demand
and supply situation, US corn prices
reduced significantly during the summer
of 2013 with corn prices in Europe following
a similar pattern
(cid:116)(cid:1) Demand for US bulk corn sweeteners,
including high fructose corn syrup (HFCS), is
closely linked to the consumption of beverages
and carbonated soft drinks in particular, both
in the US and Mexico
(cid:116)(cid:1) During 2013, a softer beverage season
caused by the cold spring in the US reduced
consumption of beverages thereby
weakening domestic demand for HFCS
across the industry
(cid:116)(cid:1) Mexican imports of US HFCS were also
held back as a result of lower Mexican sugar
prices (used as a substitute for HFCS)
(cid:116)(cid:1) The paper industry, which provides a major
source of demand for industrial starches in
the US, saw a reduction in operating rates
during the year as a result of a modest
decrease in demand
(cid:116)(cid:1) In Europe, additional starch capacity
reduced industrial starch prices and
margins during the year
(cid:116)(cid:1) US ethanol industry margins recovered
during the year and moved into positive
territory as a result of improved demand
and supply dynamics
US and European spot corn price (c/bushel)5
US carbonated soft drinks sales volume year-on-year change (%)6
)
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900
800
700
600
500
400
300
US corn
EU corn
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250
200
150
100
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13 weeks to end
June
2013
September
2013
December
2013
-3.1%
-2.9%
March
2014
-2.6%
-6.3%
0%
-10%
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5 Source: Bloomberg.
6 Source: IRI Infoscan Reviews, Total U.S. Multi-Outlet and Convenience (FDM, WMT, Dollar, Club, Convenience Stores).
Tate & Lyle PLC Annual Report 2014 | 11
Strategic Report
OUR BUSINESS MODEL
Turning raw materials
into distinctive,
high-quality ingredients
and solutions for our
customers
Through our facilities across the world we:
Collaborate closely with our customers to
help them develop new concepts, adapt
formulations and get products to market faster
Draw on the deep sector knowledge of our
food scientists and ideas sourced from
outside the Company to develop and
commercialise the next generation of
speciality food ingredients
Apply our manufacturing know-how and
supply chain expertise to turn raw materials
into high quality food ingredients for delivery to
our food and beverage customers worldwide.
Our operations
Page 6
Our Strategy in Action
Pages 16 and 17
12 | Tate & Lyle PLC Annual Report 2014
Raw materials
Sourcing raw materials
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
Page 36
Speciality Food
Ingredients
Innovation and
Commercial
Development
Bulk
Ingredients
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Customers
Innovation and Commercial Development (ICD)
Both divisions, but principally Speciality Food
Ingredients 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.
Customers
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Producing high-quality ingredients
We operate through two global divisions – Speciality Food
Ingredients and Bulk Ingredients.
Our production facilities include a network of corn wet mills in
North America and Europe which manufacture both bulk and
speciality products. In addition to the plants shared by the two
divisions to make corn-based products, we produce sucralose
through two, large-scale, continuous processing facilities in the
US and Singapore, and operate a number of smaller-scale
blending facilities where we make food stabiliser systems.
Each division has its own sales force and commercial operations
to provide the necessary focus and expertise for customers in
their respective end markets.
Understanding our markets
Customer insights drive all that we do. We analyse the
markets we operate in globally and we use market research
to gain insights into consumers’ dietary habits, their
perceptions of ingredients, and their nutritional expectations
of food and drinks.
We use these insights to drive our own product development,
to differentiate ourselves from our competitors and to help
our customers meet consumer needs.
Tate & Lyle PLC Annual Report 2014 | 13
Strategic Report
OUR STRATEGY
How we are delivering
on our strategy
Our vision
Our vision is to become a 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
division through:
– deeper customer understanding
– continuous innovation
– stronger positions in high-growth
markets
Driving our Bulk Ingredients division
for sustained cash generation to fuel
this growth.
Our Strategy in Action
Pages 16 and 17
14 | Tate & Lyle PLC Annual Report 2014
Deep customer
engagement
We believe that getting closer
to our customers, developing
a better understanding of their
needs and changing the ways
we interact with them is a key
part of delivering sustainable
long-term growth.
Innovation
Creating a world-class
innovation capability is a key
part of our growth strategy.
The Innovation and Commercial
Development group (ICD)
provides a fully integrated
approach to developing and
commercialising innovation to
meet our customers’ needs.
New markets and
customer channels
Our aim is to build our
presence significantly in
emerging markets and in those
parts of the speciality food
ingredients market where
historically we have been
under-represented, specifically
in SMEs and private label.
Sustained cash
generation
Within Bulk Ingredients our
strategy is to provide stable,
long-term cash flow to help
fund growth in Speciality
Food Ingredients.
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Global network
Our global Commercial and Food Innovation Centre in
Chicago, USA is helping us transform the way we work
with our customers. It has:
(cid:116)(cid:1) Full sensory capabilities
(cid:116)(cid:1) Full culinary capabilities
(cid:116)(cid:1) High-tech food laboratories
(cid:116)(cid:1) A pilot plant
(cid:116)(cid:1) Global communications capabilities.
We have also developed a global network of regional
applications and technical services facilities enabling us to
interact directly with customers across our markets, helping
them develop new concepts and get them to market faster.
Progress
2015 Priorities
Increased level of customer
interaction at our global
Commercial and Food
Innovation Centre and our other
client-facing facilities worldwide
Step change in the way we are
perceived by food and beverage
customers in the speciality food
ingredients industry
Broaden customer interaction
through our global network of
innovation, applications and
technical services facilities
Improve quality and size of
customer project pipeline
Convert more customer
relationships into strategic
partnerships
Ideas within our innovation pipeline are derived from
three sources:
In-house innovation (part of ICD)
(cid:116)(cid:1) New products or technologies generated by
in-house scientists
Open innovation (part of ICD)
(cid:116)(cid:1) Leverages our global network of research institutions,
start-ups and universities
(cid:116)(cid:1) Provides route to market for technologies or products
close to commercial launch
Tate & Lyle venture funds
(cid:116)(cid:1) Invests in early-stage speciality food ingredients concepts
by partnering with research institutions, other venture
funds, universities and entrepreneurs.
Progress
2015 Priorities
Addition of PromOat® Beta
Glucan, PrOatein™ Oat Protein
and PULPIZ® Pulp Extender
to our speciality food
ingredients portfolio
Commercialisation of recent
innovations such as SODA-LO®
Salt Microspheres
Continued to progress projects
through the innovation pipeline
which remains robust
Launch new products from
within our innovation pipeline
Increase sales from recently
launched products
Continue to leverage
open innovation network
and partnerships
Expanding in new markets
(cid:116)(cid:1) Building dedicated speciality food ingredients businesses
in both Asia Pacific and Latin America.
(cid:116)(cid:1) Forming direct selling relationships with local food and
beverage manufacturers as well as multinationals.
(cid:116)(cid:1) Investing in local infrastructure with the opening of satellite
applications and technical services facilities in the
emerging markets.
SMEs and private label
(cid:116)(cid:1) Changing the way we access and work with SMEs
and private label customers by developing more
direct relationships.
Progress
Continued strong organic
growth in Asia Pacific and
Latin America
2015 Priorities
Deliver another year of
strong organic growth
in emerging markets
Expanded presence in Asia
Pacific through Tate & Lyle
Howbetter and agreement to
acquire Winway Biotechnology
Established new applications
and technical services facilities
in Singapore and direct sales
presence in Japan
Complete acquisition of
Winway Biotechnology and
continue to expand our
presence in emerging markets
Leverage dedicated resources
to develop relationships
with both SMEs and food
service customers
We aim to achieve sustained cash generation by:
(cid:116)(cid:1) Dampening earnings volatility by diversifying our income
streams into new areas
(cid:116)(cid:1) Optimising margins by gradually moving the corn
that we grind away from markets that are in
long-term structural decline into higher margin
speciality food ingredients
(cid:116)(cid:1) Ensuring the security of our supply of raw materials
(cid:116)(cid:1) Reducing costs and continuing to improve
operational efficiency.
Progress
2015 Priorities
Bulk Ingredients performance
held back by challenges
posed by a soft beverage
season, severe and prolonged
winter weather and lower
co-product returns
Further investment in corn
storage capacity for security
of supply
Optimise margins by improving
product mix and delivering
further operational efficiencies
Further divert corn grind to
Speciality Food Ingredients
division
Further investment in
strengthening security of raw
material supply
Leverage fermentation assets
and expertise to drive
diversification
Tate & Lyle PLC Annual Report 2014 | 15
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Strategic Report
OUR STRATEGY IN ACTION
Deep customer engagement
Innovation
We continued to see an increase in customer interaction
through our global Commercial and Food Innovation Centre
in Chicago, USA and our global network of applications
and technical services facilities.
Customer visits to the Centre increased by 10% in the
year, while just under one-fifth of all customer visits to our
six main customer-facing laboratories took place in the
emerging markets. We also saw an increase in the number
of visitors from the key areas of marketing, R&D and senior
management leading to growth in the number of customer
projects being generated.
As the level of customer interaction has increased so too has
customers’ perception of our capabilities, with the results from
a survey carried out during the year revealing that 63% of our
customers believe we are ‘exceeding their expectations’.
This level of satisfaction is approaching ‘best in class’
and is a positive lead indicator for future growth.
Our innovation pipeline remains strong, and as at 31 March
2014 comprised a total of 35 projects, including ten in the final
stages. The composition of the pipeline is well balanced across
our three Speciality Food Ingredients platforms, including 36%
in health and wellness, reflecting our focus on increasing our
presence in this area.
During the year, we brought PULPIZ® Pulp Extender to
market, a texturant used to replace tomato paste in a range
of applications. In May 2013, we acquired Biovelop, the
manufacturer of PromOat® Beta Glucan, which has also
brought a new, high value, speciality fibre PrOateinTM
Oat Protein into our portfolio.
We continue to see strong customer interest in our novel
salt-reduction ingredient SODA-LO® Salt Microspheres with our
focus now turning to converting customer projects into sales
and broadening the range of applications in which SODA-LO®
Salt Microspheres can be used.
Impact of visiting Commercial and Food Innovation Centre in Chicago,
USA on customer satisfaction*
Innovation pipeline by stage of development (number of projects)
At 31 March 2014
Exceeds expectations
As expected
Almost as expected
10%
48%
42%
8%
29%
63%
All customers
in survey
Customers in survey collaborating at the global
Commercial and Food Innovation Centre
*
Survey conducted between October and December 2012,
and March and April 2013.
16 | Tate & Lyle PLC Annual Report 2014
Sweeteners
Texturants
Health and wellness
Bulk Ingredients
13
8
7
4
3
Stage 1
Stage 2
Stage 3
Stage 4
Stage 5
New markets and customer channels
Sustained cash generation
Tate & Lyle Howbetter’s Food Systems blending facility
Grain elevator at Fowler, Indiana, USA
We delivered another strong performance in the emerging
markets of Asia Pacific and Latin America with double-digit
volume growth in the period. The investment we have made to
increase sales coverage and in our applications and technical
services facilities in these regions, including the opening of a
new facility in Singapore during the year, is providing an
excellent platform to attract new customers and engage
directly with them in the local market, share ideas and develop
new projects.
The creation of Tate & Lyle Howbetter and the agreement to
acquire Winway Biotechnology, a manufacturer of polydextrose
speciality fibre, strengthens our presence in Asia Pacific as we
continue to invest in growing our speciality food ingredients
business in these faster growing markets.
As envisaged when we started our business transformation
programme four years ago, we are developing a more
geographically diverse company with a reduced reliance
on the developed markets and an improved risk profile.
While a number of challenges held back the performance of
our Bulk Ingredients division during the year, including the
very cold spring and extremely cold and prolonged winter in
the US, overall we have delivered a steady performance from
this part of the business over the last four years.
This has been achieved against a backdrop of very significant
volatility in the corn market through:
(cid:116)(cid:1)a relentless focus on efficiency and cost reduction
(cid:116)(cid:1)trading up to higher margin products
(cid:116)(cid:1)diverting the corn that we grind to new areas like
green chemistry
(cid:116)(cid:1)investing in projects to help dampen risk within the
division, such as expanding our network of corn
elevators to enhance the security of supply.
We will maintain this same disciplined approach as we look to
deliver a steady performance from this division and to ensure
it continues to generate a sustained source of cash to grow
our Speciality Food Ingredients division.
SFI sales by region 2014*
Bulk Ingredients adjusted operating profit (£m)
1 52% North America
2 24% Europe & Middle East
3 19% Emerging markets
4 5% Rest of world
172
182
172
157
3
4
1
2
*
Calculated based on SFI’s Latin America and Asia Pacific sales
of single ingredients (excluding Japan, Australia and New Zealand).
2011
2012
2013
2014
Tate & Lyle PLC Annual Report 2014 | 17
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KEY PERFORMANCE INDICATORS
Measuring our success against our strategy
Performance
We focus on a number of
financial performance measures
to ensure that our strategy
successfully delivers increased
value for our shareholders.
What we measure
Why we measure it
Sales of speciality food
ingredients
To ensure we are successful in growing the division
which is the key area of strategic focus for the business.
Performance metric for the Group Bonus Plan.
Adjusted operating profit2
To track the underlying performance of the business and to
ensure sales growth translates into increased profits.
Performance metric for the Group Bonus Plan.
Return on capital employed2:
adjusted profit before interest,
tax and exceptional items
divided by adjusted average
invested operating capital3 for
continuing operations.
Cash conversion cycle4:
controllable working capital
divided by quarterly sales,
multiplied by the number of days
in the quarter.
Net debt to EBITDA
multiple5: 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 cover5: the number
of times the profit of the Group
exceeds interest payments
made to service its debt.
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.
Performance metric for the Performance Share Plan.
To track how efficient we are in turning increased
sales into cash and to ensure that working capital
is managed effectively.
Performance metric for the Group Bonus Plan.
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.
Chief Executive’s Review
Pages 7 to 9
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
Pages 24 to 28
Corporate responsibility1
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
Pages 32 to 37
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.
Safety performance is a specific consideration that
the Remuneration Committee may factor into decisions
on pay.
1 Measured on a calendar year basis.
2 Prior year numbers restated for IAS 19 (Revised 2011) ‘Employee Benefits’.
3 Defined as shareholders’ equity excluding net debt, net tax assets/liabilities and net retirement benefit obligations.
4 Defined as controllable working capital divided by quarterly sales, multiplied by the number of days in the quarter on a four-quarter rolling basis
(a reduction in the number of days represents an improvement).
18 | Tate & Lyle PLC Annual Report 2014
How we have performed
Comment
£887m £947m £983m
2012
2013
2014
£346m
£356m £349m
2012
2013
2014
21.4%
19.7% 19.2%
2012
2013
2014
36
days
42
days
39
days
2012
2013
2014
1.1x
1.0x
0.8x
2012
2013
2014
11.1x
11.1x
11.6x
2012
2013
2014
0.85
0.85
0.58
2011
2012
2013
0.21
0.26
0.13
2011
2012
2013
Volume growth of 4% in SFI with value sales growth held back by
lower prices for SPLENDA® Sucralose and lower corn prices.
Growth of 1% in Speciality Food Ingredients with a good performance
in Europe, Asia Pacific and Latin America offset by a lower
contribution from the US and SPLENDA® Sucralose. A reduction
in Bulk Ingredients of 4% as a result of weakened demand for bulk
sweeteners and lower co-product returns.
Reduction in adjusted operating profit combined with slight increase
in operating assets.
Lower finished goods inventories in the US, and significantly lower
corn prices in the US.
Ratio remains well inside our internal maximum threshold of 2.0x.
The improvement reflects the reduction in net debt during the year.
Ratio remains well above our internal minimum threshold of 5.0x.
Change
+4%
(constant currency)6
Change
-1%
(constant currency)6
Change
-50bps7
Change
Improved
by 3 days
Change
Improved
0.2x
Change
Improved
0.5x
While our safety KPIs were the lowest levels recorded, we are
saddened to report that our Group safety performance this year was
completely overshadowed by three fatal accidents: two during and
one after the end of the reporting year. Further details are provided
in the Chairman’s Statement on page 4, the Chief Executive’s Review
on page 8 and the Corporate Responsibility section on page 33.
5 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.
6 Changes in constant currency are calculated by retranslating comparative period results at current period exchange rates.
7 Basis points (one hundred basis points equates to one percentage point).
Tate & Lyle PLC Annual Report 2014 | 19
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SPECIALITY FOOD INGREDIENTS
Performance overview
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 group to develop a pipeline
of new products.
Sales
£983m
2013 – £947m
Adjusted operating profit
£213m
2013 – £213m
Sales
Adjusted operating profit
Adjusted operating margin
“We delivered another strong
performance in emerging
markets which are becoming
a more meaningful part of the
division. While we face a
headwind from lower
SPLENDA® Sucralose prices,
we are well placed to capitalise
on strong consumer trends as
we leverage the investment
we have made to diversify the
business both geographically
and through innovation.”
Olivier Rigaud
20 | Tate & Lyle PLC Annual Report 2014
Year ended 31 March
2013
£m
947
213
22.5%
2014
£m
983
213
21.7%
Reported
+4%
0%
-80bps
Change
Constant
currency
+4%
+1%
-70bps
Market conditions and trends
The global market for speciality food
ingredients, and particularly those areas of
the market where we operate, continues to
benefit from a number of strong underlying
consumer trends: health and wellness,
convenience and ‘clean label’.
Consumers are increasingly aware of the
link between diet and health. The rising
incidence of diabetes and obesity in both
developed and developing markets is
driving consumers, manufacturers and
governments to focus on ‘healthier’
products. In addition to products which
address calorie and weight management,
consumers are also increasingly seeking
solutions for heart health, including lower
sodium products, and digestive health,
including fibre-enhanced products. The
number of global product launches
containing fibres or making a low sodium
claim increased by 47%1 and 37%1
respectively in calendar year 2013, with
growth across both developed and
developing markets.
Changes in consumer lifestyles continue to
increase the demand for packaged and
convenience foods, for consumption both
at home and ‘on the go’. Product launches
with a ‘convenient’ claim increased globally
by 25%1 in calendar year 2013 and, whilst
demand continues to grow in developed
markets, increasing levels of urbanisation
are driving demand for convenience
products in developing markets as well.
Demand for convenience is a key driver for
speciality ingredients that provide added
functionality such as stability, texture and
extended shelf-life.
Food and beverage manufacturers are
launching more ‘clean label’ products in
response to increasing consumer demand
for more natural products across a broad
range of categories. Global ‘clean label’
product launches increased by 27%1
in calendar year 2013, responding
to increasing consumer awareness of food
processing, origination of finished and
unfinished goods, and ingredient labelling.
Against the backdrop of continuing tough
macroeconomic conditions in many
countries and tighter household budgets,
coupled with high raw materials prices,
cost-optimisation continues to be a theme
with food and beverage customers looking
at ways to reduce costs and provide more
value-based alternatives for consumers
without compromising on taste.
Financial performance
Within Speciality Food Ingredients, volumes
grew by 4% and sales increased by 4%
(also up 4% in constant currency) to £983
million (2013 – £947 million) with good
volume growth in Asia, Europe and Latin
America, held back by a softer
performance in the US where volumes
were slightly lower than the comparative
period. Adjusted operating profit was in line
with the prior year (up 1% in constant
currency) at £213 million (2013 – £213
million) as a result of lower selling prices
for SPLENDA® Sucralose and a lower
contribution from the US. This result
includes the majority of the £6 million
one-off gain from the purchase, sale
and leaseback of our building in Hoffman
Estates, US, and £7 million representing
1 Source: Innova Market Insights.
the final annual payment received from
McNeil Nutritionals as part of the
realignment of the sucralose business
back in 2004. Operating margins reduced
by 80 basis points to 21.7% (2013 – 22.5%).
The effect of currency translation was to
decrease adjusted operating profit by
£2 million.
This division comprises three broad
product categories: starch-based speciality
ingredients, high intensity sweeteners and
Food Systems.
Starch-based speciality ingredients
Sales increased by 7% (7% in constant
currency) to £595 million (2013 – £559
million) with volume growth of 5%. While
percentage operating margins were slightly
lower, operating profit was ahead of the
prior year. While we expect to deliver
another year of good volume growth in
financial year 2015, the level of sales value
growth is expected to be lower as a result
of the significant reduction in corn prices.
In food starches, we saw volume growth
across all regions with particularly strong
growth in Latin America and Europe.
In Europe, our strong innovation capability
and new products, such as CREAMIZTM
and PULPIZ® Pulp Extender, helped
us maintain a healthy leadership position
in speciality starches in the region,
particularly within the convenience
food and dairy categories.
In speciality corn sweeteners, we saw
growth across all regions outside the
US including very strong growth as in
the previous year in Latin America, where
we continued to expand our business
in the beverage and dairy categories.
Our success in this region over the past
few years is a good example of how we
are steadily broadening the geographic
mix of the business and reducing our
reliance on developed markets.
Our fibres range continues to benefit
from the strong consumer interest in health
and wellness, and we saw volume growth
across all regions during the period, with
particularly strong growth once again in
Asia. The planned acquisition of Winway
Biotechnology will provide us with an
excellent platform from which to accelerate
the growth of our specialty fibres business
not only in China but across Asia as a whole.
High intensity sweeteners
Sales in this category, which comprises
SPLENDA® Sucralose and our no-calorie,
natural sweeteners, were in line with the
comparative period (up 1% in constant
currency) at £198 million (2013 – £198
million), with volumes 5% higher.
Engaging with customers
Launch of TASTEVA® Stevia
Sweetener in Latin America
TASTEVA® Stevia Sweetener is our new,
natural-source, stevia-based sweetener.
Launched in 25 countries in just 18
months, it is making excellent progress in
the market, in particular in Latin America
where it has already exceeded its sales
targets for the first year. TASTEVA® Stevia
Sweetener is tapping into consumer
demand for natural, low-calorie
ingredients, particularly sweeteners –
and is being recognised by customers
for its superior taste compared with other
stevia-based sweeteners. TASTEVA®
Stevia Sweetener allows customers to
replace more sugar than they could with
other competing stevia products (which
retain a bitter taste if used in high
quantities), without using masking or
modifying agents, thus improving the
nutritional profile and consumer appeal
of their brands.
In SPLENDA® Sucralose, the renewal
of a number of large customer contracts
during the final quarter, including some
on a multi-year basis, against the backdrop
of an intensely competitive market
environment, resulted in an increase
in the rate of price decline in SPLENDA®
Sucralose during the final quarter with
the reduction in price for the full year
outweighing volume growth.
Demand for no-calorie natural sweeteners
continues to grow with 2,860 product
launches during calendar year 2013
incorporating stevia, an increase of 56%
on the prior year. Against this backdrop,
we continued to see good volume growth
in our natural no-calorie sweeteners,
particularly our stevia-based, natural-
source sweetener TASTEVA® Stevia
Sweetener, with a number of customer
product launches during the year. While
we continue to see good opportunities
for further growth and a strong pipeline
for our natural no-calorie sweeteners,
the overall contribution to this product
category remains relatively small.
Food Systems
Sales were in line with last year (down
1% in constant currency) at £190 million
(2013 – £190 million), with volumes 6%
lower, reflecting our decision to focus
on higher margin blends, which more than
offset good volume growth in developing
markets. Despite the lower volumes,
Fruit juice containing TASTEVA® Stevia Sweetener
with stevia leaf
we delivered good operating profit
growth driven by improved product mix,
tight cost control and lower prices for
some raw materials.
Our recently opened technical and
commercial facility in Roggenhorst,
Germany is helping us work more closely
with customers and strengthen our
pipeline of new products.
The creation of Tate & Lyle Howbetter
provides us with a solid platform from
which to expand our Food Systems
business in China and more broadly
across the region. As well as bringing new
customers, its high quality local blending
capabilities are helping to strengthen
our offering to existing customers. It also
enables us to leverage additional know-
how and expertise across our network
of Food Systems businesses globally.
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BULK INGREDIENTS
Performance overview
Stable long-term cash flows to fuel our growth
Bulk Ingredients manufactures and markets a range of products
including sweeteners, industrial starches, ethanol, acidulants and
animal feed, for food and beverage, industrial and agricultural
customers around the world.
Bulk Ingredients also partners with a 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.
Sales
£2,164m
2013 – £2,309m
Adjusted operating profit
£172m
2013 – £182m
Sales
Adjusted operating profit
Adjusted operating margin
Year ended 31 March
2013
£m
2 309
182
7.9%
2014
£m
2 164
172
7.9%
Reported
-6%
-5%
0 bps
Change
Constant
currency
-6%
-4%
+10 bps
“We coped well with a number
of challenges during the year as
we continue to provide a steady
source of cash to support growth
in Speciality Food Ingredients.
Looking ahead, our focus
remains on optimising margins,
maintaining efficient assets and
seeking to further dampen the
risk profile of the division.”
Market conditions
A good corn harvest in the US with
production increasing by around 30%
compared with the previous year and
a recovery in the stocks-to-use ratio to
more normal levels, resulted in a significant
reduction in corn prices in the summer.
However, during the last quarter of the
financial year, corn prices increased
steadily, driven by rising demand from
US ethanol and exports. The latest
production estimate from the USDA1
for the 2014/15 harvest is broadly in line
with the prior year at 13.9 billion bushels.
The unusually cold spring in the US in
2013, constrained demand for carbonated
soft drinks, a key end market for bulk liquid
corn sweeteners. In the three-month period
to the end of June 2013, US carbonated
soft drinks sales volume declined by 6.3%2
against the comparative period, with sales
volume over the whole year 3% lower. In
addition to softer domestic demand, lower
Mexican sugar prices resulted in a 24%3
reduction in exports of US HFCS to
Mexico. The protracted severe cold winter
weather in the US also created operational
and supply chain challenges across the
industry, particularly during the quarter
ended 31 March 2014.
World sugar prices, which provide a
reference price for some of our products,
continued to decline steadily during 2013
as supply was increased following
consecutive years of surplus. However,
towards the end of the financial year, prices
stabilised reflecting ongoing weather risks
and the potential impact of these on the
Brazilian crop. In Europe, sugar prices
started to decline in the second half of the
financial year, reflecting an increase in stock
levels following the steps taken by the
European Union in the 2012/13 sugar year
to increase imports, and lower consumer
demand due to the cold spring.
The paper industry, which provides a major
source of demand for industrial starches in
the US, saw a reduction in operating rates
during the 2013 calendar year as a result of
lower demand. In Europe, additional starch
capacity reduced industrial starch prices,
putting pressure on margins.
Conditions in the US ethanol industry
improved steadily during the year, following
a boost from the large corn crop which
drove production costs down and made
US ethanol a more cost competitive fuel.
Increased demand, which tightened
ethanol inventories, combined with
logistical difficulties impacting the
supply side in the second half of the
financial year caused by the severe cold
weather, also helped improve ethanol
pricing fundamentals.
Matt Wineinger
22 | Tate & Lyle PLC Annual Report 2014
1 USDA is the US Department of Agriculture.
2 Source: IRI Infoscan Reviews, Total US
Multi-Outlet and Convenience (FDM, WMT,
Dollar, Club, Convenience Stores).
3 Source: US Census Bureau, HTS Export data.
A combination of tight supplies, reflecting
the limited availability of good quality corn
in the lead up to the new harvest last year
and increased demand, kept prices high
for corn gluten feed particularly during
the second half of the financial year.
Conversely, corn oil prices were lower
as a result of the increased supply of
corn distillers’ oil from the dry mill
ethanol industry.
Financial performance
Bulk Ingredients volumes decreased by
1% and sales were 6% lower (6% lower
in constant currency) at £2,164 million
(2013 – £2,309 million) largely due to the
pass through of lower corn prices. Adjusted
operating profit was 5% lower (4% lower
in constant currency) at £172 million (2013
– £182 million) as a result of the soft US
beverage season, which reduced demand
for liquid corn sweeteners, lower returns
from co-products and, in the final quarter,
the impact of the protracted severe cold
winter in the US. This result includes a
one-off gain of £3.5 million in the first
half from the on-sale of Orsan China
(a monosodium glutamate producer in
which Tate & Lyle previously held a stake
and which was sold in 2009). The effect
of currency translation was to decrease
adjusted operating profit by £2 million.
This division comprises three broad
product categories: sweeteners; industrial
starches, acidulants and ethanol;
and co-products.
Sweeteners
In the Americas, bulk corn sweetener
volumes decreased by 2% largely as
a result of lower HFCS volumes caused
by the cold spring which reduced demand
for carbonated soft drinks during the
second quarter. Sales decreased by 6%
(down 6% in constant currency) to £889
million (2013 – £942 million) as a result of
the lower volumes and the reduction in
corn prices following the large corn crop.
Despite lower volumes, profits were ahead
of the comparative period as a result of the
modest increase in HFCS unit margins
secured in the 2013 calendar year
contracting round.
Operating profits from Almex, our
Mexican joint venture, were lower than
the comparative period reflecting reduced
volumes and lower margins as a result of
greater competition from Mexican sugar.
In Europe, sales of bulk corn sweeteners
increased by 1% (flat in constant currency)
to £148 million (2013 – £146 million), with
volumes 1% higher than the prior year.
We saw the benefit of higher unit margins
throughout the year, driven in the first half
by sugar prices (which provide the
Security of supply
Investment in grain elevators
Our network of 14 grain elevators (silos),
located in the US corn belt, makes an
essential contribution to ensuring we
have a reliable, high-quality source of
corn for our US plants. Corn can
deteriorate if not stored well, so there is
an advantage to keeping the storage in
our own hands; moreover many of our
elevators have forged long-term
relationships with producers who
provide a consistent supply of locally-
produced corn each year. Over the last
few years we have been adding capacity
at existing elevators as well as acquiring
new ones, and with that, increasing the
number of farmers we buy corn from
each year.
reference price for isoglucose (HFCS)
in the EU) staying high for longer than
expected and, in the second half, lower
raw material costs following a good corn
crop. As a result, overall profits for the full
year were ahead of the comparative period.
Industrial starches, acidulants
and ethanol
Sales decreased by 5% (3% in constant
currency) to £635 million (2013 – £667
million).
In industrial starches, volumes were 2%
higher. In the US, where we contract for
longer periods than in Europe, profit was
ahead of the prior year as a result of firmer
pricing and slightly higher volumes. In
Europe, lower prices, reflecting the pass
through of lower corn costs and increased
competition, put pressure on margins and
reduced profits compared with last year.
This part of the business remains
particularly sensitive to changes in
the macroeconomic environment.
In US ethanol, which represents a small
part of our business, the improvement
in market conditions, particularly during
the second half, resulted in a better
performance and a reduction in
operating losses.
Grain elevator at Francesville, Indiana, USA
Profit in our citric acid business was lower
than the prior year, with reduced volumes
more than offsetting lower raw material
costs. Our Bio-PDO® joint venture delivered
an improved performance during the
period as a result of slightly higher volumes
and lower corn costs.
Co-products
Sales of co-products decreased by 11%
(down 11% in constant currency) to £492
million (2013 – £554 million). Overall returns
from co-products were £7 million lower
than our expectations at the start of the
year, driven by corn gluten feed and corn oil
which more than offset higher returns from
corn gluten meal. Since over 80% of our
US corn grind is utilised to produce Bulk
Ingredients, the majority of this impact is
recorded within this product category.
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GROUP FINANCIAL RESULTS
“ Our robust balance
sheet provides us with
a solid platform allowing
us to invest a further
£100 million in Speciality
Food Ingredients growth
over the next two years.”
Tim Lodge
24 | Tate & Lyle PLC Annual Report 2014
Highlights
Strong free cash flow generation
of £227 million
Balance sheet remains strong with
£126 million reduction in net debt
to £353 million
Investment of £100 million over the next
two years in expansion and cost reduction
projects within Speciality Food Ingredients
Additional steps taken to reduce pension
risk including buy-in of liabilities of the
Amylum UK Pension Scheme
Sales from continuing operations of £3,147
million (2013 – £3,256 million) were 3%
lower than the prior year (3% in constant
currency). Sales in Speciality Food
Ingredients increased by 4% (4% in
constant currency) to £983 million (2013
– £947 million), with sales volumes
increasing by 4%. Sales in Bulk Ingredients
decreased by 6% (6% in constant currency)
to £2,164 million (2013 – £2,309 million),
with volumes 1% lower.
Adjusted operating profit decreased by
2% (1% in constant currency) to £349
million (2013 – £356 million). In Speciality
Food Ingredients, adjusted operating
profit was in line (up 1% in constant
currency) with the prior year at £213 million
(2013 – £213 million). Bulk Ingredients
adjusted operating profit decreased by
5% (4% in constant currency) to £172
million (2013 – £182 million).
Adjusted net finance expense (excluding
net retirement benefit interest) decreased
from £29 million to £27 million, largely
driven by the repayment of our £100 million
bond in June 2012 and lower interest rates
on our floating rate debt.
Both adjusted profit before tax and
adjusted diluted earnings per share
decreased by 2% (flat in constant currency)
to £322 million (2013 – £327 million) and
55.7p (2013 – 56.6p) respectively.
On a statutory basis, profit before tax from
continuing operations decreased by 4%
(down 2% in constant currency) to £290
million (2013 – £301 million) and profit for
the year from total operations was in line at
£273 million (2013 – £273 million), with the
current period benefiting from an
exceptional income tax credit of £28 million
following the favourable resolution of
outstanding tax matters in Spain.
Basis of preparation
At the beginning of the year, the Group
adopted IAS 19 (Revised 2011) ‘Employee
Benefits’ which introduced a change to the
way the Group accounts for defined benefit
pension plans. The change modifies the
basis on which the financing charge is
calculated by applying the discount rate
to the net defined benefit obligation and
requires the recognition of scheme
administration costs within operating profit.
Comparative information for 2013 has been
restated on a consistent basis and an
explanation and analysis of the effect of
the changes is presented in Note 43.
For the year ended 31 March 2014, the
new requirements increased statutory net
finance costs by £8 million (31 March 2013
– £6 million) and reduced operating profit
by £2 million (31 March 2013 – £2 million).
With the exception of the changes arising
from the adoption of IAS 19 (Revised 2011)
the Group’s principal accounting policies
are unchanged compared with the year
ended 31 March 2013.
Adjusted performance measures
We report adjusted performance measures
because they provide both management
and investors with valuable additional
information on the performance of the
business. The following items are excluded
from these adjusted measures:
(cid:116)(cid:1)exceptional items (Note 7)
(cid:116)(cid:1)amortisation of intangible assets acquired
through business combinations (Note 15)
(cid:116)(cid:1)net retirement benefit interest (Note 30)
(cid:116)(cid:1)tax on adjusting items
(cid:116)(cid:1)results of discontinued operations
(Note 12).
This adjusted information is used internally
for analysing the performance of the
business. A reconciliation of reported and
adjusted information is included in Note 42.
Impact of changes in exchange rates
In comparison to the prior year, the Group’s
reported financial performance was
adversely affected by currency translation.
A weakening of the average US dollar
exchange rate against sterling was only
partially offset by the strengthening of other
currencies, which has slightly reduced
profits. The movement in period-end
exchange rates, particularly the weaker
US dollar, led to a reduction in net debt
as a result of the translation of dollar-
denominated debt.
Summary of financial results
Year ended 31 March
Continuing operations
Sales
Adjusted operating profit
Adjusted net finance expense
Adjusted profit before tax
Exceptional items
Amortisation of acquired intangible assets
Net 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
Net debt
At 31 March
2013
Restated1
£m
Change
(reported)
%
Change
(constant
currency)
%
3 256
356
(29)
327
(12)
(10)
(4)
301
(46)
255
18
273
54.9p
53.8p
57.7p
56.6p
7.4p
18.8p
26.2p
-3%
-2%
-2%
-4%
-4%
-3%
-1%
0%
-2%
-2%
0%
2%
-3%
-2%
0%
-2%
5.4%
5.3%
5.3%
2014
£m
3 147
349
(27)
322
(14)
(10)
(8)
290
(45)
245
28
273
52.8p
52.1p
56.5p
55.7p
7.8p
19.8p
27.6p
353
479
26.3%
1 Restated for the adoption of IAS 19 (Revised 2011) ‘Employee Benefits’.
The average and closing exchange rates
used to translate reported results were as
follows:
US dollar:sterling
Euro:sterling
Average rates Closing rates
2014
2013
1.59 1.57
1.19 1.24
2014
2013
1.67 1.52
1.21
1.18
Central costs
Central costs, which include head office,
treasury and reinsurance activities,
decreased by £3 million to £36 million,
largely as a result of lower staff-related
costs.
Energy costs
Energy costs were higher than the prior
year at £177 million (2013 – £170 million),
as a result of the increased price of energy
used in many regions, in particular the US,
which more than offset positive variances
relating to efficiency and input mix. We
have covered approximately 66% of our
estimated energy needs for financial year
2015, albeit at higher prices than in financial
year 2014 which we will look to mitigate
through further efficiencies.
Exceptional items from continuing
operations
Year ended 31 March
2014
2013
£m
£m
(14)
(20)
Business transformation costs
Gain on disposal of joint venture
– Sucromiles
Net exceptional charge
–
(14)
8
(12)
During the year ended 31 March 2014, an
exceptional charge of £14 million (see Note
7) was recognised in continuing operations,
relating to business transformation costs,
specifically the implementation of the
common global IS/IT platform. This
compares to a net exceptional charge in
the comparative year of £12 million, with
£20 million of business transformation
costs partially offset by a credit of £8 million
from the disposal of our share in
Sucromiles SA, our former Colombian
citric-acid joint venture.
The tax impact of net exceptional items
within continuing operations was a £9
million credit (2013 – £5 million credit).
Tate & Lyle PLC Annual Report 2014 | 25
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ADDITIONAL FINANCIAL INFORMATION
Net finance expense
After excluding net retirement benefit
interest, net finance expense from
continuing operations decreased to £27
million (2013 – £29 million) with a reduction
in underlying net interest expense driven by
the repayment of our £100 million bond in
June 2012 and lower interest rates on our
floating rate debt.
The effective tax rate on adjusted profit of
18.5% (2013 – 18.0%) includes tax credits
in relation to prior year adjustments in the
US. As a result of these tax benefits in
financial year 2014, and our expectation
of further changes in the geographic mix
of profits, we anticipate the effective tax
rate will be higher in financial year 2015
at a little over 20%.
Taxation
Our tax policy is to manage our obligations
in compliance with all relevant tax laws,
disclosure requirements and regulations.
We seek to ensure that our approach to
tax and the tax payments we make in all
territories in which we have operations
are fully consistent with local requirements,
taking into account available tax incentives
and allowances, and are aligned with the
Group’s wider business strategy.
Discontinued operations
and legacy issues
During the year, the Group recognised
a profit from discontinued operations of
£28 million which wholly comprised a
non-cash exceptional income tax credit
arising from the favourable resolution of
outstanding tax matters associated with
the starch facilities which formed part
of the Group’s former Food & Industrial
Ingredients, Europe segment.
During the prior year, the Group recognised
a profit of £18 million from discontinued
operations which comprised: an exceptional
gain of £26 million on the completion of the
sale of its Vietnam Sugar operations, its
remaining Israel Sugar assets and other
assets, all of which related to the Group’s
former Sugars segment; partially offset by
an operating loss of £8 million that was
incurred by these businesses.
Earnings per share
Adjusted diluted earnings per share from
continuing operations at 55.7p (2013 –
56.6p) were 2% lower (flat in constant
currency). Adjusted basic earnings per
share from continuing operations
decreased by 2% (down 1% in constant
currency) to 56.5p. Total basic earnings
per share were flat at 58.8p (2013 – 58.6p)
with the discontinued operations result
reflecting the one-off benefit from the
aforementioned £28 million exceptional
tax credit.
Dividend
The Board is recommending a 5.3%
increase in the final dividend to 19.8p
(2013 – 18.8p) per share making a full
year dividend of 27.6p (2013 – 26.2p) per
share, up 5.3% on the prior year. Subject
to shareholder approval, the proposed
final dividend will be due and payable
on 1 August 2014 to all shareholders
on the Register of Members on 27 June
2014. In addition to the cash dividend
option, shareholders will continue to be
offered a Dividend Reinvestment Plan
(DRIP) alternative.
We seek to develop good, open working
relationships with tax authorities and to
engage with them proactively, recognising
that tax legislation can be complex and
may be subject to differing interpretations.
In instances where this might arise, we
seek to engage with the relevant tax
authorities in open discussion of any such
differences as early as possible to remove
uncertainty and obtain resolution.
Tate & Lyle’s tax strategy and the
management of tax risk is primarily the
responsibility of the Chief Financial Officer
and the Vice President, Group Tax and
is reviewed by the Board and the Audit
Committee to ensure responsible tax
practices are maintained across the
Group’s businesses.
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
2008 to reflect our investment in innovative
technology) and the UK, and rates that lie
somewhere in between, for example,
in certain East European countries.
Our UK earnings are now relatively small
following the sale of our sugars and
molasses businesses. Less than 1% of total
Group sales (2014 – £22 million) are derived
from our UK operations 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. We do,
however, pay and collect other taxes in
the UK, including payroll taxes, VAT and
business rates. Our total tax contribution
to the UK Exchequer was in excess
of £21 million during the year ended
31 March 2014.
26 | Tate & Lyle PLC Annual Report 2014
Assets
Gross assets of £2,527 million at 31 March
2014 were £260 million lower than the prior
year principally driven by a weakening of
the US dollar which reduced the sterling
value of assets and a reduction in working
capital. Net assets increased by £14 million
to £1,050 million with profits generated in
the year being largely offset by dividend
payments, foreign exchange losses on the
translation of overseas subsidiaries, the
post-tax effect of retirement benefits and
share repurchases.
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 benefits as part of the
retirement package.
During the year, we took further steps to
reduce our pension risk. In September,
the trustees of the Amylum UK Pension
Scheme agreed a buy-in of the liabilities
of the scheme. In addition, the assets and
liabilities of the defined benefit pension plan
in the Netherlands were transferred to a
new collective defined contribution plan
and the defined benefit plan was closed
to future accrual. This transfer was treated
as a settlement on which the Group
recognised a gain of £4 million.
The net deficit on our retirement benefit
plans decreased by £45 million to £220
million (2013 – £265 million). The net deficit
on the Group’s pension plans decreased
by £19 million to £166 million (2013 – £185
million), with an increase in the underlying
deficit more than offset by employer’s
contributions of £43 million and favourable
currency movements. The liabilities
associated with unfunded retirement
medical plans in the US decreased by
£26 million to £54 million (2013 – £80
million), principally due to a favourable
claims experience, an increase in the
applicable discount rate and favourable
currency movements.
Net debt (£m)
(479)
391
17
(29)
35
(124)
(353)
(159)
(5)
2013
PBIT/
Other
operating
Working
capital
including
pensions
Capex
Dividends
Other
Exchange
2014
Share
issue/
purchase
Net interest paid decreased by £4 million
to £31 million principally as a result of the
repayment of our £100 million bond in June
2012 and lower interest rates on our floating
rate debt. Net income tax payments were
£23 million (2013 – £18 million).
Free cash inflow (representing cash
generated from continuing operations
after working capital, interest, taxation and
capital expenditure) at £227 million was
£117 million higher than the prior year
largely as a result of the working capital
inflow of £38 million during the period
(2013 – outflow of £107 million).
During the year we spent £29 million on
the repurchase of ordinary shares to satisfy
share option schemes. Parent company
cash dividends paid were £124 million,
£7 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 £1 million at 31 March 2014 (2013 –
£2 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 for 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 £174
million (2013 – £189 million) and related
primarily to railcar leases in the USA. Rental
charges for the year ended 31 March 2014
in respect of continuing operations were
£17 million (2013 – £19 million).
Net debt
Net debt was lower than the prior year
at £353 million (2013 – £479 million).
Free cash flow from continuing businesses
of £227 million was partially offset by
dividend payments of £124 million and
the repurchase of £29 million of ordinary
shares to satisfy the Group’s share option
schemes. There was a favourable
exchange rate impact on net debt of
£35 million principally as a result of the
weakening of the US dollar against sterling.
The Group’s $500 million 5% bond matures
in November 2014 and has therefore
been reclassified from non-current to
current borrowings.
During the year, net debt peaked at £497
million in April 2013. The average net debt
was £372 million, a reduction of £61 million
from £433 million in the prior year.
Cash flow
Operating cash flow from continuing
operations was £440 million (2013 – £297
million). An inflow within working capital
of £38 million was mainly driven by lower
finished goods inventories and lower corn
prices in the US. The cash flow impact
of the Group’s retirement benefit plans
amounted to £43 million (2013 – £42 million).
Year ended 31 March
2014
2013
£m
£m
Adjusted operating profit from
continuing operations
Depreciation/amortisation
Share based payments
Other non-cash items
Working capital before retirement
benefits and exceptional
cash items
Net retirement benefit obligations
Cash expenditure on
exceptional items
Operating cash flow
Capital expenditure
Operating cash flow less capital
expenditure
Net interest and tax paid
Free cash flow
349
108
8
(6)
356
98
13
–
38
(43)
(107)
(42)
(14)
440
(159)
281
(54)
227
(21)
297
(134)
163
(53)
110
Capital expenditure of £159 million,
including a £45 million investment in
intangible assets, was 1.5 times the
depreciation and amortisation charge
of £108 million and, as in the prior year,
includes 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 financial year 2015 to approach
2.0 times reflecting an additional £100
million of capital investment over the
next two years in our Speciality Food
Ingredients division.
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ADDITIONAL FINANCIAL INFORMATION | CONTINUED
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 £387
million against a book value of £353 million
(2013 – fair value £529 million; book value
£479 million). Derivative financial
instruments used to manage the interest
rate and currency of borrowings had a fair
value of £29 million asset (2013 – £38
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
£1 million asset (2013 – £nil). 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 £20 million asset
(2013 – £21 million asset).
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.
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.
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 Strategic Report. 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.
28 | Tate & Lyle PLC Annual Report 2014
RISKS
Our risk framework
Effectively managing
the risks we face
Tate & Lyle is exposed to a number
of risks which might have a material
adverse effect on our reputation,
operations and financial performance.
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Review
and monitor
risks
1
Identify risks
4
Respond
to risks
Our risk
framework
2
Assess
risks and
interactions
3
Prioritise
risks
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 risks.
Approach
The Group’s enterprise-wide risk
management and reporting process helps
management to identify, assess, prioritise
and mitigate risk. This bottom-up process
involves a rolling programme of workshops,
facilitated by the risk management team,
held around the Group. The current and
forward-looking risks identified are collated
and reported through functional and
divisional levels to the Group Executive
Committee. These risks are also reviewed
by the Board on a top-down basis to
assess the key risks facing Tate & Lyle. This
dual approach 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). This output is
reviewed by the Board. As part of the
annual risk assessment process, the Board
also reviews emerging and ‘black swan’
risks facing the Group.
Responsibility for managing each key risk
and the associated mitigating controls is
allocated to an individual executive within
each division. As part of the process,
senior executive management formally
confirms 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.
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 we are
taking, are set out on pages 30 and 31.
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.
During the year ended 31 March 2014, 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, which
includes a retrospective review of how the
prior year risk appetite has been applied in
practice, 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 mis-statement.
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RISKS | CONTINUED
Risks
Impact and description
Examples of mitigating actions
Safety
Failure to act
safely and to
maintain the safe
and continuous
operation of
our facilities.
Strategy
Failure to grow
in speciality
food ingredients.
Innovation
Failure to innovate
and commercialise
new products.
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.
The Group’s strategy is to become the
leading global provider of speciality food
ingredients and solutions. The ability to
deliver the strategy may be impacted by a
number of factors such as delivering
growth in emerging markets, acquisitions,
customer readiness to adopt new
ingredients and launch products using
them, competitor actions, and growing
key product or product families. Failure to
deliver on this strategy over the longer
term would negatively affect the Group’s
credibility and reputation.
Failure to identify important consumer
trends and provide innovative solutions,
and the inability to successfully
commercialise new products, could
impact the delivery of the Group’s
strategy. This would affect its
performance and reputation.
Quality
Failure to maintain the
quality of our products
and high standards of
customer service.
The safety of consumers of our products
is critical. Poor quality or sub-standard
products or poor customer service could
have a negative impact on our reputation
and relationships with customers.
(cid:116)(cid:1) Health and safety policies and procedures at all facilities with
dedicated staff to ensure they are embedded and measured
(cid:116)(cid:1) Regular review of performance and policies by the Corporate
Responsibility Committee
(cid:116)(cid:1) 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
(cid:116)(cid:1) Maintain suitable insurance programme against customary risks
(cid:116)(cid:1) Programme of global compliance audits; senior executives also
undertake annual executive audits at the majority of our sites
(cid:116)(cid:1) Investments are being made to increase the Group’s sales
and technical resources, including in emerging markets
(cid:116)(cid:1) New staff recruited and existing staff developed to upgrade skill
sets particularly in customer-facing areas and innovation
(cid:116)(cid:1) Internal capabilities have been enhanced to help promote growth
through acquisition
(cid:116)(cid:1) Global programme has been established to enhance customer
account management, planning and execution
(cid:116)(cid:1) Three platforms have been established in Innovation and
Commercial Development – sweeteners, texturants and health
and wellness – to drive new product development and innovation
in speciality food ingredients
(cid:116)(cid:1) Innovation and Commercial Development team works closely with
customers and other external organisations to identify emerging trends
(cid:116)(cid:1) Open innovation team actively scouts for breakthrough
technologies and opportunities across industries and universities
(cid:116)(cid:1) Global marketing organisation established to provide launch support
for new product initiatives as well as base business expansion
(cid:116)(cid:1) Prioritise ‘partnership’ opportunities with customers to accelerate
development cycles and time to market for new ingredients
(cid:116)(cid:1) Multiple steps in process testing in all product lines and strict quality
control procedures to prevent release of product without full quality
control clearance
(cid:116)(cid:1) Policies, procedures and performance reviewed regularly by the
Corporate Responsibility Committee
(cid:116)(cid:1) Third-party audit programme in place, supplemented by internal
global compliance audits
(cid:116)(cid:1) 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.
(cid:116)(cid:1) Remuneration policies designed to attract, retain and reward
employees with ability and experience to execute Group strategy
(cid:116)(cid:1) Talent development strategy to provide opportunities for
employees, as well as training to close skill gaps
(cid:116)(cid:1) Single global performance appraisal and talent planning processes
and system in place
(cid:116)(cid:1) Increased Board-level focus on succession planning for business-
critical roles
Legal and
regulatory
Failure to comply
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.
(cid:116)(cid:1) Regular monitoring and review of changes in law and regulation in
such areas as health and safety, environment, quality, food safety
and corporate governance
(cid:116)(cid:1) Global regulatory team, supported by external consultants,
monitors local regulatory requirements affecting our products
and how these change over time
(cid:116)(cid:1) Legal teams maintain compliance policies in areas such as anti-trust
and anti-corruption law; and provide ongoing training to employees
30 | Tate & Lyle PLC Annual Report 2014
Risks
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
variations in local or regional harvest and
weather conditions, crop disease,
climate change, 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,
margins may be affected by customers
not taking expected volumes.
(cid:116)(cid:1) Strategic relationships with suppliers and trading companies
including multi-year agreements
(cid:116)(cid:1) 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
(cid:116)(cid:1) Raw material and energy purchasing policies to provide security
of supply
(cid:116)(cid:1) Expanding network of corn elevators to enhance security of supply
(cid:116)(cid:1) Putting in place new or back-up supply sources in case primary
suppliers face localised challenges
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
common ways of working supported by
a global IS/IT platform and global shared
services. Issues arising in the
implementation of this project would
have an adverse impact on the Group’s
ability to achieve its strategy.
(cid:116)(cid:1) Ongoing refinements to programme based on lessons learnt
in the process (e.g. phased go-live approach to mitigate the
deployment risk)
(cid:116)(cid:1) Dedicated internal resources allocated to the project, working in
conjunction with business teams
(cid:116)(cid:1) Formal steering committee (executive management) and Board/
Audit Committee review of project progress against agreed
milestones and timelines
(cid:116)(cid:1) Appointment of a highly experienced programme manager
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Failure to counter
negative perceptions of
the Group’s products.
We must be fully prepared to counter
unexpected/unfounded negative
publicity about our products and seek
to ensure the science behind our
ingredients is supported by credible
sources and is clearly communicated.
Failure to do so would have a negative
impact on the Group’s performance
and reputation.
(cid:116)(cid:1) Innovation and Commercial Development and regulatory experts
substantiate relevant product claims prior to launch
(cid:116)(cid:1) Media relations advisors monitor coverage in both print and
electronic media of the Group and its products and develop
action plans to deal with any negative publicity
(cid:116)(cid:1) Participation in trade organisations and industry-wide initiatives
to promote and protect our products
Finance
Failure to manage
the balance sheet,
particularly during
periods of economic
uncertainty.
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.
(cid:116)(cid:1) Capital expenditure procedures to control and monitor allocation
and spend
(cid:116)(cid:1) All new investments are evaluated against clear strategic and
financial criteria; those approved are subject to greater scrutiny
and have clear execution milestones
(cid:116)(cid:1) External resources and expertise used where required
(cid:116)(cid:1) Exposure to liquidity risk is managed by ensuring we maintain
access to a wide range of funding sources, and by effective
management of our cash resources
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.
(cid:116)(cid:1) Policies to ensure that key tasks are segregated to safeguard assets
(cid:116)(cid:1) Finance and capital expenditure manuals set out procedure
(cid:116)(cid:1) Chief Executive and Chief Financial Officer undertake detailed
quarterly business and financial reviews
(cid:116)(cid:1) Additional control processes put in place in recognition of the
elevated risks posed by the implementation of the new global
IS/IT system
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CORPORATE RESPONSIBILITY
Our sustainability journey
We approach corporate responsibility (CR) from a stakeholder perspective; in terms of our workplace,
the environment, our marketplace and the communities of which we are a part. We seek to continually
improve the way that we manage, perform in and report on CR matters.
Corporate responsibility governance
Management and performance
Reporting and communication
Workplace
We deeply regret three fatal accidents
that occurred at our sites during the last
year: these tragic accidents and our
response are reported on pages 4,
8 and 33.
Environment
We were included in the FTSE 350
Climate Disclosure Leadership Index for
the second year running in 2013, having
scored once again in the top 10% of the
FTSE 350 companies responding.
Marketplace
We implement controls to promote and
ensure responsible and ethical conduct
by our employees, business partners
and in our supply chain (see pages
36 and 37).
Community
We have expanded community
involvement in the year providing
support locally and globally in the areas
of well-being, education and
environment (see page 37).
Engagement
This year we have engaged with
customers and other key stakeholders
and used this feedback to review how
we report on and communicate about
CR matters.
Reporting
The scope, principles and
methodologies we use in reporting
CR performance are provided in ‘CR
Reporting Criteria Annual Report 2014’
available at www.tateandlyle.com/
CR2014.
Our internal audit function reviewed the
CR information and data in this Annual
Report to confirm its accuracy.
We gained independent external
assurance over selected environmental
data on pages 35 and 36 in this Annual
Report from Bureau Veritas UK Ltd.
Their assurance statement can be found
at www.tateandlyle.com/CR2014.
Employees by division
as at 31 March 2014
1 49% Bulk Ingredients
2 42% Speciality Food Ingredients
3 9% Central functions
Employees by geography
as at 31 March 2014
1 46% North America
2 37% Europe, Middle
3 10% Latin America
4 7% Asia Pacific
East & Africa
3
1
2
4
1
3
2
Governance of CR matters is overseen
by the Board’s Corporate Responsibility
Committee (see page 51).
The Chief Executive is the director with
specific responsibility for CR matters.
CR matters are part of the Group’s risk
management and reporting processes
(see page 29).
Our policies and control arrangements
addressing human rights include:
(cid:116)(cid:1)our Code of Ethics and the internal
and external communication and
training undertaken around it
(cid:116)(cid:1)the Company’s position and practices
on equal opportunities and diversity
(cid:116)(cid:1)the Company’s Speak Up
(whistleblowing) arrangements
(see page 45)
(cid:116)(cid:1)our controls for managing standards in
the supply chain (see page 37).
Workplace
Our employees are critical in delivering our
strategy. The key CR considerations for us
in terms of our workplace are 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 2014, Tate & Lyle employed
4,523 people (2013 – 4,326). Our employee
base has increased in the last year primarily
due to the formation of Tate & Lyle
Howbetter in China, and the acquisition
of Biovelop, the Swedish oat beta
glucan manufacturer.
32 | Tate & Lyle PLC Annual Report 2014
Safety
We have no higher priority than safety,
for our employees and for everyone who
comes to our sites. Our ultimate goal
is to have no accidents and no injuries.
Our Executive Safety Steering
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
the majority of our sites around the world.
Performance
We deeply regret the deaths during the last
year of an employee at our manufacturing
facility in the Netherlands who fell from
height, an external truck driver working
at our joint-venture site in Hungary who
died in an industrial accident, and a
contractor in Singapore who died from
burns after a hot water escape in April
2014. A further contractor remains in a
critical condition in hospital in Singapore.
These tragic accidents were thoroughly
investigated, both internally and externally.
Actions, based on preliminary findings,
have been taken to prevent this type of
accident reoccurring and so that we may
learn from these tragic events. Further
details are provided in the Chairman’s
Statement on page 4 and the Chief
Executive’s Review on page 8.
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Safety performance²
Recordable incident rate
Number of injuries requiring treatment beyond first aid per 200,000 hours
Number of incidents combined (2013)
44
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Contractors
1.55
1.43
0.55
0.63
0.94
0.43
2011
2012
2013
US industry sector employee averages 20123 and Tate & Lyle employees 2013
6.5
Beverage and tobacco
5.4
Food manufacturing
3.7
Construction
3.4
Private industry
2.3
Chemical manufacturing
1.5
Energy products manufacturing
0.43
Tate & Lyle
Lost-work case rate
Number of injuries that resulted in lost-work days per 200,000 hours
Fatalities
2013
21
2012
0
2011
0
10
Number of cases combined (2013)
Tate & Lyle employees
Contractors
1 One employee and one external truck driver.
One of our contractors also had a fatality in
April 2014.
The safety performance indicators,
recordable incident rate and lost-work case
rate, saw a 32% and 49% reduction
respectively during the year, to reach our
lowest levels ever recorded. However,
safety is about people, not just numbers,
and we can never do too much to keep
ourselves and our colleagues safe.
Recordable
incident rate
Lost-work
case rate
Change
versus
2012
Change
versus
2013
2012
0.43 -32% 0.09 -53%
0.94 -34% 0.22 -49%
0.58 -32% 0.13 -49%
2013
Employees
Contractors
Combined
External benchmarking
To put our safety performance in context
and because many of our employees are
located in the US, we compare our results
with US industry averages, as shown in the
graphs opposite.
0.43
0.31
0.17
0.19
0.22
0.09
2011
2012
2013
US industry sector employee averages 20123 and Tate & Lyle employees 2013
1.9
Beverage and tobacco
1.4
Construction
1.3
Food manufacturing
1.0
Private industry
0.7
Chemical manufacturing
0.5
Energy products manufacturing
0.09
Tate & Lyle
2 We report safety performance by calendar year.
3 Source: US Department of Labor, November 2013.
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CORPORATE RESPONSIBILITY | CONTINUED
Safety milestones
Five of our US plants between them won
15 US Corn Refiners Association (CRA)
Safety Awards during the year.
Twenty-five of our facilities did not
experience a recordable injury in 2013,
compared to 20 in 2012.
Safety initiatives
Safety projects and activities progressed
during the year included:
(cid:116)(cid:1)Contractor safety programme:
we improved contractors’ safety by
increased monitoring, sharing best
practices, and closer relationships
(cid:116)(cid:1)Safety competency: we trained
managers and supervisors on safety
leadership and ownership; training for
safety representatives included courses
on scaffolding and excavation
(cid:116)(cid:1)Hand safety: a third party conducted
glove surveys; we purchased additional
cut-resistant gloves and knives with
retractable blades; and installed
glove-type awareness boards
(cid:116)(cid:1)Safety awareness: we held our
annual Global Safety Week where
many employees and their families,
and contractors, took part in activities
across our sites worldwide.
Occupational health and well-being
We contract with external occupational
health professionals to monitor and
safeguard the health of employees at work,
and to provide information, advice and
support to them on general health and
wellness matters.
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 policies, practices and procedures
for recruitment, training and career
development promote equality of
opportunity. We are committed to treating
people with disabilities fairly in all respects,
including regarding applications, training,
promotion and career development. An
employee who becomes disabled would,
where appropriate, be offered retraining
for a more suitable role.
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. We aim to attract a diverse
workforce that reflects the communities
in which we operate. In 2011 we
34 | Tate & Lyle PLC Annual Report 2014
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ntability P
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Safety
Core
Values
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established a Diversity and Inclusion
Council. It works on creating awareness
of diversity and inclusion issues, tracking
inclusion metrics, and championing our
diversity and inclusion programme across
the Company.
Progress during the year included:
(cid:116)(cid:1)Continued increase in awareness
among senior managers of diversity
and inclusion issues, having included
consideration of these issues in their
annual performance objectives
(cid:116)(cid:1)Embedding a focus on diversity
in our recruitment practices
(cid:116)(cid:1)Enhanced cultural diversity from the
acquisition of Biovelop, the Swedish
oat beta glucan manufacturer, and
the formation of Tate & Lyle Howbetter
in China.
Employee engagement
We believe that employees who are
engaged (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 13
languages, to face-to-face dialogue such
as site-wide meetings, functional meetings
and small group or team meetings.
We continue to invest in helping employees
and managers stay up to date with the
latest requirements of their roles; courses
provided during the year included a
supervisors’ development programme,
people management development
programme, stakeholder management
and influencing, and sales training.
In 2013 we conducted our second
employee survey to obtain employees’
Gender diversity
as at 31 March 2014
Board of Directors
1 7 (70%) Men
2 3 ( 30%) Women
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Senior managers and
statutory directors1
1 117 (81%) Men
2 27 ( 19%) Women
1
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All employees2
1 2,860 (73%) Men
2 1,035 (27%) Women
1
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1 Gender diversity for senior managers, excluding
statutory directors, is 43 (77%) men and 13 (23%)
women.
2 Excludes joint-venture employees.
candid opinions about Tate & Lyle and to
facilitate conversations about how we can
make the Company a better place to work.
Participation increased to 84%, while the
overall survey score was just above 3.6 on
a scale of 1 to 5 (where 5 is the best score),
also an increase compared to the prior
year. The results highlighted areas of
progress and strength as well as areas
where we can improve. These have been
translated into action plans for individual
teams as well as the Company as a whole.
Environment
We aim to operate our business with
a strong regard for environmental
sustainability. By using resources such
as energy and water more efficiently,
and reducing waste, we aim to improve
our environmental sustainability while
also controlling operating costs.
Implementing our business strategy, by
growing our Speciality Food Ingredients
division, is gradually changing the shape
of our manufacturing operations to produce
more speciality products (see page 20)
which typically involve additional
manufacturing steps compared with our
Bulk Ingredients division. This can drive
some increase in resource use and waste,
which we are working to mitigate through
efficiency and waste reduction projects
and programmes.
Environmental performance¹
We work to address environmental
considerations across the life cycle of
our products, from our agricultural supply
chain to how our products are packaged
and transported.
and health and safety management
standards. Additionally, our rolling
programme of external, independent
environmental compliance audits assures
compliance with regulatory requirements.
Our 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 breaches an operating
limit we seek to take steps immediately
to resolve the issue and prevent
reoccurrence.
Our internal global compliance audit
programme confirms compliance with
our environmental and food safety, quality
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 the use of energy (and consequent
air emissions and carbon footprint), 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 product packaging.
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Energy use
GJ per tonne production
Primary carbon footprint3
Tonnes CO2e per tonne production
Water use
Cubic metres per tonne production
Waste to landfill
Tonnes per 1,000 tonnes production
4.562
0.3752
4.302
7.212
4.42
4.49
4.562
0.373
0.368
0.3752
4.27
4.18
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7.92
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1 We report environmental performance by calendar year.
2 Refers to 2013 data that has been externally assured by Bureau Veritas UK Ltd. Their assurance statement is at www.tateandlyle.com/CR2014.
3 Previously we have reported carbon footprint in tonnes of carbon dioxide (CO2); we now report in tonnes of carbon dioxide equivalent (CO2e) across all years.
Environmental sustainability targets and achievements
We have four medium-term environmental sustainability targets.
Target by end of 2016
Reduce CO2e emissions from energy use
by 12.5% per tonne of production
(baseline year 2008)4
Calendar year 2013 status
10% reduction in CO2e emissions per tonne
of production versus 2008
Implement packaging reduction
programmes with customers representing
>50% of sales (£)
Programmes initiated with customers
representing >20% of sales (£)
Implement transport efficiency
programmes with customers representing
>50% of sales (£)
Programmes initiated with customers
representing >25% of sales (£)
Implement sustainable agricultural
sourcing programmes for our top 20
agricultural raw materials and ingredients
by volume
Overall, we are currently working on sustainable
agricultural sourcing across 30 raw materials/
ingredients. During the year we established new
sustainable sourcing criteria for four agricultural
raw materials/ingredients
Example
In calendar year 2014, we will be implementing
an energy project at our Sagamore, Indiana, US
plant that will reduce our greenhouse gas
emissions by up to 56,000 tonnes CO2e per year
In 2013 we changed from a paper-foil-paper
sack to a paper-plastic-paper sack for several
products that improves recyclability (and
thereby reduces resource use)
Four high-efficiency, low emission ‘methane
diesel’ trucks are dedicated to our central
European distribution, utilising liquefied natural/
bio gas
We utilise an externally conducted
sustainability risk assessment of our
agricultural raw materials/ingredients to
help us decide how to focus our work on
sustainable agriculture
4 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 CO2e emissions in the medium term.
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CORPORATE RESPONSIBILITY | CONTINUED
Operational performance
During the year we saw the impact of:
(cid:116)(cid:1)some of our Bulk Ingredients plants
running below capacity – which reduces
their environmental efficiency, due
to lower demand for carbonated soft
drinks caused by unusually cold
and wet weather
(cid:116)(cid:1)changes in our production mix – with the
manufacture of more speciality products
(cid:116)(cid:1)some site-specific factors causing
temporary environmental efficiency
impacts, such as works to implement
a new process sequence at Loudon,
US and from taking equipment off-line at
Decatur, US for scheduled replacement.
In calendar year 2013, compared with 2012
our performance was as follows:
(cid:116)(cid:1)Energy use per tonne of production
increased by 1.6%. Since 2008 we have
reduced energy use per tonne of
production by 8%.
(cid:116)(cid:1)Carbon footprint from energy use
increased by 1.9% per tonne of
production. Since 2008 we have reduced
CO2e emissions per tonne of production
by 10%. In calendar year 2014 we will
be implementing an energy project
at our Sagamore, Indiana, US which
we anticipate will reduce our emissions
by up to 56,000 tonnes CO2e per year.
(cid:116)(cid:1)Water use per tonne of production
increased by 2.8%. Since 2008 we have
reduced water use per tonne of
production by 6%. Water re-use and
recycling projects implemented at
Dayton, Ohio, US during the last two
years are saving more than 500,000
cubic meters of water annually.
(cid:116)(cid:1)Waste to landfill increased by 2.2% per
tonne of production. Since 2008 we have
reduced waste to landfill per tonne of
production by 25%.
We are working to improve our
environmental performance by focusing on:
(cid:116)(cid:1)Capital projects and operational
practices to reduce our impact
(cid:116)(cid:1)Working with our suppliers and others to
promote sustainable agriculture
(cid:116)(cid:1)Working with our customers on reducing
our combined environmental impact
associated with transport and packaging.
Group greenhouse gas (GHG)
emissions for the period 1 January to
31 December 2013 in tonnes of carbon
dioxide equivalent (tCO2e) were:
(cid:116)(cid:1)From combustion of fuel and operation of
facilities (Scope 1) 2,270,489 tCO2e1
(cid:116)(cid:1)From electricity, heat, steam and cooling
purchased (Scope 2) 1,224,731 tCO2e1
(cid:116)(cid:1)In total (Scope 1 and 2) 3,495,220 tCO2e1
which equates to an intensity of 0.375
tCO2e1 per tonne of production.
We have reported on all of the material
emission sources required under The
Companies Act 2006 (Strategic Report
and Directors’ Report) Regulations 2013.
We report GHG emissions in line with the
GHG Protocol Corporate Accounting and
Reporting Standard. The scope, principles
and methodology we use are provided in
‘CR Reporting Criteria Annual Report 2014’
at www.tateandlyle.com/CR2014.
Marketplace
The food and beverage industry is our
largest market sector and comprises over
70% of Group sales. Other industry sectors
we sell into include industrial, animal feed
and personal care.
CR in the marketplace for us is about: the
safety, integrity and functionality of our
products; the origin of our agricultural raw
materials; the conduct of our commercial
relationships; and the standards within our
supply chain.
Product safety and quality
Our products adhere to the highest
standards of food safety, quality and
traceability. Products that are safe and to
the correct specification are of the utmost
importance to us. To ensure this, all of our
manufacturing facilities are externally
certified to the Global Food Safety Initiative
each year and we have well-established
processes and procedures globally to
ensure that we comply with this standard.
Our control arrangements include in-
process testing, an annual global
compliance audit programme, and
independent food safety audits of every
manufacturing site. The ability to trace and
recall product is tested annually both
globally and locally at each facility.
Developing sustainable products
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.
In line with our strategy, we focus
particularly on growing our Speciality Food
Ingredients division, and as such the
majority of our new product development
is in this area. Many of our speciality
sweeteners and fibres improve stability,
thereby helping to extend consumer
product shelf life and assist in avoiding food
waste, which is an important food industry
sustainability issue. Our health and
wellness platform delivers innovative
ingredients with substantiated health
benefits to customers worldwide.
For example, PromOat® Beta Glucan,
a product we acquired in 2013, is a natural
component of wholegrain Swedish oats
that allows foods and beverages to help
lower cholesterol levels and promote
digestive and intestinal health.
Our raw materials and ingredients are
largely derived from renewable agricultural
sources, principally corn, and in addition
we consider sustainability matters
throughout the product lifecycle. To this
end, for our innovation pipeline, we use
a sustainability evaluation tool to:
(cid:116)(cid:1)Undertake a sustainability risk
assessment at an early stage in the
product development process, to identify
any potential concerns
(cid:116)(cid:1)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.
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 Code of Ethics. The Code
is made available in 13 languages and is
communicated internally via our intranet,
through local ‘Ethics Ambassadors’ across
the business, and through training
programmes. Externally, the Code is
integrated into our supplier and business
partner relationships.
We support our employees and business
partners in coming forward with any
information concerning actual or alleged
breaches of the Code of Ethics. As part of
our Speak Up process, we provide access
to an independent, anonymous third-party
reporting service, through free phone
numbers in 47 countries and by email.
Information on accessing this service is
communicated across the Company,
and externally via our corporate website.
Any issues reported are investigated by
members of our Speak Up Committee,
a group of senior Tate & Lyle executives
who are responsible for ensuring that any
concerns are investigated and that
appropriate action is taken.
1 Refers to data that has been externally assured by Bureau Veritas UK Ltd. Their assurance statement can be found at www.tateandlyle.com/CR2014.
36 | Tate & Lyle PLC Annual Report 2014
Standards in our supply chain
We operate a tiered, risk-based approach
to CR matters in our supply chain.
(cid:116)(cid:1)Our Code of Ethics sets out the ethical
standards and behaviours we require
our employees and business partners
to follow in conducting the Company’s
business. It is communicated to our
suppliers through our contracts and
other engagement with them.
(cid:116)(cid:1)Our purchase contract terms and
conditions include: the requirement
for 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, anti-corruption/anti-
bribery, and the prevention of child
or forced labour; that they comply
with the standards, expectations and
commitments in our Code of Ethics;
and that they require comparable
compliance of their own suppliers.
(cid:116)(cid:1)Our Procurement function has in place
a global procedure whereby the
environmental, social and governance
risks associated with supply contracts
are evaluated, based on: firstly, the
source country, where independent
ratings of human rights risk are applied;
and secondly, the items being supplied,
with reference to an external sustainability
risk assessment of our agricultural raw
materials/ingredients. If the source
country is identified as being of high
or medium risk for human rights,
or the contract is for a higher risk item,
enhanced control arrangements are
put in place.
Our sustainable agriculture programme
specifically addresses environmental,
social and governance matters in our
agricultural raw materials/ingredient
supply chain (see page 35).
In addition, having used the ‘Sedex’
social and ethical compliance system
(www.sedexglobal.com) across our own
manufacturing facilities for a number of
years, we are now starting to use it in our
supply chain as one of the tools to promote
and assure good CR practices.
Tate & Lyle is a member of the FTSE4Good
indices of companies meeting global
corporate responsibility standards; the
screening criteria for which include supply
chain risks and control arrangements.
Community
We have a strong history of community
involvement and during the year we
continued to support communities local
to our operations and globally.
Our approach
For Tate & Lyle, community involvement
is about having a positive and lasting
relationship with the community: changing
lives for the better. We focus on three
specific areas:
(cid:116)(cid:1)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
(cid:116)(cid:1)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
(cid:116)(cid:1)Environment: to promote environmental
sustainability and good environmental
management, addressing issues
of climate change, natural resources
and conservation
Overview of the year
In the year ended 31 March 2014,
charitable donations were £501,000
(2013 – £376,000). We aim to increase our
investment in community involvement each
year, in line with the growth of our business.
Local programmes/partnerships
We seek to engage with local communities
where our principal manufacturing, R&D
and office facilities are located. Employees
at each location can make their own
decision as to the specific projects they
support and the partnerships that they
develop. As a result we support a range
of initiatives and organisations in our
local communities.
(cid:116)(cid:1)Well-being: we supported a wide variety
of local health and well-being initiatives
this year, including United Way
community programmes at several
locations in the US. For the second year
running, our e-Christmas card supported
the homeless charity Crisis at Christmas
in London, UK and the Northern Illinois
Food Bank in Chicago, USA: both
organisations provided practical,
immediate assistance to those in need
over the holiday period.
Community spend by area
Year ended 31 March 2014
1 39% Well-being
2 34% Education
3 18% Environment
4 9% Other
4
1
3
2
(cid:116)(cid:1)Education: this year we supported
local schools, colleges and universities.
For example: by assisting with new
equipment purchases, running a road
safety event for children at local schools,
and providing scholarship funds to help
students access higher education.
(cid:116)(cid:1)Environment: this year we supported
a number of environmental initiatives,
including improvement works to local
park and conservation areas, and
tree planting.
Global partnerships
We have made good progress in
developing our global partnership
programmes during the year.
On well-being, we have continued to
be a partner with the Global Alliance
for Improved Nutrition (GAIN –
www.gainhealth.org), and we contributed
$50,000 to disaster relief by the Red Cross
following the Philippines typhoon in
November 2013.
For education, we are implementing an
undergraduate bursary/scholarship
programme across selected universities
internationally, assisting undergraduates
to access courses in STEM disciplines.
For environment, we are a corporate
partner of the environmental research
and engagement charity Earthwatch
(http://eu.earthwatch.org), with which we
have established a project on the ecology,
conservation and sustainable harvesting
of seaweed.
The Strategic Report from page 1 to
page 37 of this Annual Report was
approved by the Board on 28 May 2014.
On behalf of the Board
Lucie Gilbert
Company Secretary
28 May 2014
Tate & Lyle PLC Annual Report 2014 | 37
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Governance
BOARD OF DIRECTORS
Sir Peter Gershon CBE
Chairman and Chairman of
the Nominations Committee
Liz Airey
Non-Executive Director and
Chairman of the Audit Committee
Joined the Board as an independent Non-Executive Director and Chairman
Designate in February 2009. Appointed Chairman in July 2009. Aged 67.
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
(cid:116)(cid:1) Chairman of National Grid plc
(cid:116)(cid:1) Member of HM Government Efficiency and Reform Board
(cid:116)(cid:1) Chairman of the Aircraft Carrier Alliance
(cid:116)(cid:1) Member of the advisory board of The Sutton Trust
Joined the Board in January 2007. Aged 55.
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
(cid:116)(cid:1) Chairman of the Unilever UK Pension Fund
(cid:116)(cid:1) Senior Independent Director of Jupiter Fund Management PLC
(cid:116)(cid:1) Senior Independent Director of Dunedin Enterprise Investment
Trust PLC
Javed Ahmed
Chief Executive
William Camp
Non-Executive Director and Chairman of
the Corporate Responsibility Committee
Joined the Board as Chief Executive in October 2009. Aged 54.
Joined the Board in May 2010. Aged 65.
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
(cid:116)(cid:1) Member of Mosaic Advisory Board
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
(cid:116)(cid:1) Senior Advisor, Naxos Capital
(cid:116)(cid:1) Director of Culligan International
Tim Lodge
Chief Financial Officer
Douglas Hurt
Non-Executive Director
Joined the Board in December 2008 as Group Finance Director.
Aged 49.
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
Joined the Board in March 2010. Aged 57.
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
(cid:116)(cid:1) Finance Director of IMI plc
Our governance structure
Certain responsibilities are
delegated to four Board
Committees, details of which
are provided on pages 47 to
51 and on page 64.
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
Corporate Responsibility (CR)
Committee
William Camp (Chairman)
Liz Airey, Sir Peter Gershon,
Virginia Kamsky, Dr Ajai Puri
38 | Tate & Lyle PLC Annual Report 2014
Virginia Kamsky
Non-Executive Director
Robert Walker
Senior Independent Director and Chairman
of the Remuneration Committee
Joined the Board in December 2012. Aged 60.
Joined the Board in January 2006. Aged 69.
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
(cid:116)(cid:1) Non-executive director of Dana Holding Corporation
(cid:116)(cid:1) Member of the US Secretary of the Navy Advisory Panel
(cid:116)(cid:1) Trustee of the China Institute in America
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
(cid:116)(cid:1) Chairman of Travis Perkins plc
(cid:116)(cid:1) Chairman of Enterprise Inns plc
Anne Minto OBE
Non-Executive Director
Lucie Gilbert
Company Secretary
Joined the Board in December 2012. Aged 60.
Appointed Company Secretary in August 2012. Aged 42.
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
(cid:116)(cid:1) Non-executive director and Chairman of the Remuneration
Committee of Shire PLC
(cid:116)(cid:1) Trustee of the University of Aberdeen Development Trust
(cid:116)(cid:1) Non-executive director of ExlService Holdings, Inc.
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.
Directorships
None
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Dr Ajai Puri
Non-Executive Director
Joined the Board in April 2012. Chairman of the Research Advisory
Group. Aged 60.
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
(cid:116)(cid:1) Member of the supervisory board of Nutreco N.V.
(cid:116)(cid:1) Non-executive director of Barry Callebaut AG
(cid:116)(cid:1) Non-executive director of Britannia Industries Limited
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
Rob Luijten
Executive Vice President,
Human Resources
Gabriella Parisse
President, Innovation and
Commercial Development
Olivier Rigaud
President, Speciality
Food Ingredients
Matt Wineinger
President, Bulk Ingredients
Tate & Lyle PLC Annual Report 2014 | 39
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Governance
STATEMENT FROM THE CHAIRMAN
The governance arrangements we
have in place have proven to be sound,
as evidenced in the external Board
effectiveness review
Introduction
Dear shareholder
Effective governance is a key component
of the way Tate & Lyle manages its
business and risks. The governance
arrangements we have in place have
proven to be sound, as evidenced in the
external Board effectiveness review.
Board composition
Robert Walker, our Senior Independent
Director, joined the Board at the start of
2006 and we anticipate that he will retire
from the Board after serving a full nine
years. In preparation for this, we have
commenced work on planning for his
successor as Senior Independent Director
and as Chairman of the Remuneration
Committee. In addition, the Nominations
Committee has recommended that an
additional non-executive director join the
Board, ideally prior to Robert’s departure.
To this end, a clear specification has been
drawn up and shared with the appointed
search consultants, Spencer Stuart. We
will of course announce any changes to
the Board and specific roles as soon as
the process has concluded and the Board
reaches a decision.
Board effectiveness review
The last external Board effectiveness
review was conducted in 2011 and the
Board agreed that the 2014 review
should be externally facilitated. We felt
that additional benefits could also be
derived from a review which was
undertaken from a diversity and inclusion
perspective and chose Schneider Ross to
facilitate the review. The review concluded
that the Board and its Committees
operate effectively and identified some
areas for further action, details of which
are set out on page 44.
Reporting to shareholders
The UK Government and other regulatory
bodies have introduced a number of new
reporting requirements which now apply
to Tate & Lyle. These include a new edition
of the UK Corporate Governance Code
which provides that the Directors should
state that they consider that the Annual
Report and Accounts, taken as a whole,
is ‘fair, balanced and understandable’.
In preparation for this, we enhanced our
processes for producing the Annual
Report. Each of the directors has
confirmed that he or she considers the
Annual Report 2014 to be fair, balanced
and understandable.
Focus for 2015
We regularly review the Board’s areas
of focus. The key areas to which we will
continue to devote significant time at
Board and Committee level are as follows:
(cid:116)(cid:1)Safety, including the effectiveness
of new initiatives to improve hazard
identification and accident prevention
at all our sites
(cid:116)(cid:1)The performance of the Speciality Food
Ingredients division and its products,
including SPLENDA® Sucralose
(cid:116)(cid:1)Customer engagement
(cid:116)(cid:1)The Group’s innovation pipeline
(cid:116)(cid:1)Strategic initiatives, including
acquisition opportunities
(cid:116)(cid:1)Talent management, senior recruitment
and succession planning activities.
Sir Peter Gershon
Chairman
28 May 2014
40 | Tate & Lyle PLC Annual Report 2014
Sir Peter Gershon
CORPORATE GOVERNANCE
UK Corporate Governance Code
The UK Corporate Governance Code,
dated September 2012 (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 year
from 1 April 2013 to 31 March 2014 the
Company has complied fully with the Code.
This Governance section of the
Annual Report, including the Directors’
Remuneration Report plus the disclosures
contained in the Risks section on pages
29 to 31, provide details of how the
Company applies the principles and
complies with the provisions of the Code.
The Directors’ responsibilities for the
preparation of financial statements are
explained in the Directors’ Statement
of Responsibilities on page 73. Their
statement on going concern is on page 28.
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
ensures that its obligations to shareholders
and others are met.
There is a schedule of matters reserved
to the Board for decision, which includes
approval of:
(cid:116)(cid:1)Group strategy
(cid:116)(cid:1)Annual budget and operating plans
(cid:116)(cid:1)Major capital expenditure, acquisitions
or divestments
(cid:116)(cid:1)Interim dividends
(cid:116)(cid:1)Full-year and half-year results
and interim management statements
(cid:116)(cid:1)Board and Company Secretary
appointments
(cid:116)(cid:1)Senior management structure
and responsibilities
(cid:116)(cid:1)Treasury policies
(cid:116)(cid:1)Directors’ conflicts of interest
(cid:116)(cid:1)Systems of internal control
and risk management.
Board Committees
The Board has delegated certain responsibilities to Committees, details of which can be
found on pages 47 to 51 and on page 64.
Governance structure
Board
Audit
Committee
Corporate
Responsibility
Committee
Nominations
Committee
Remuneration
Committee
Chief
Executive
The Research Advisory Group (RAG)
is chaired by Dr Ajai Puri and comprises
external subject matter experts and senior
Tate & Lyle managers. The RAG’s remit
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.
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
2014, including one held at the global
Commercial and Food Innovation Centre
in Chicago, USA and one at the Group’s
offices in Shanghai, China. Three additional
Board meetings were also held to consider
proposals relating to the Group’s business
transformation programme and to review
operational performance. The Board also
met offsite for one day to focus on strategy.
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.
Research
Advisory
Group
Executive
Committee
Meetings are structured to facilitate open
debate, and all directors participate
in discussing safety, strategy, trading,
financial performance and risk
management. Members of executive
management attend Board meetings
and regularly make presentations.
The Chairman continued to hold a short
discussion with the non-executive directors
collectively both immediately before and
after each scheduled Board meeting.
Directors’ attendance at Board meetings
Directors as at
31 March 2014
Sir Peter Gershon
Javed Ahmed
Tim Lodge
Liz Airey
William Camp
Douglas Hurt
Virginia Kamsky
Anne Minto
Dr Ajai Puri
Robert Walker
Number of
meetings
9
9
9
9
9
9
9
9
9
9
Number of
meetings
attended
9
9
9
9
9
9
9
9
8
9
During the year, Dr Ajai Puri was unable
to attend a meeting that was held outside
the usual schedule due to unavoidable
business commitments and he provided
input on the agenda items to the Chairman
prior to the meeting.
Tate & Lyle PLC Annual Report 2014 | 41
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Governance
CORPORATE GOVERNANCE | CONTINUED
Summary of the Board’s work during
the year
During the year, the Board continued
to oversee the ongoing transformation
of the Group’s culture and business
and considered all matters within its remit,
focusing in particular on the following:
(cid:116)(cid:1)Safety
(cid:116)(cid:1)The performance of the Speciality Food
Ingredients (SFI) and Bulk Ingredients (BI)
divisions and the Innovation and
Commercial Development group (ICD),
including the impact of the global
Commercial and Food Innovation Centre
The Chief Executive
Key responsibilities include:
(cid:116)(cid:1)Proposing strategy to the Board
and delivering it
(cid:116)(cid:1)Running the business
(cid:116)(cid:1)Communicating the Board’s
expectations with regard to culture,
values and behaviours
(cid:116)(cid:1)Ensuring the Board is aware
of the executive directors’ views
on business issues.
The Senior Independent Director
Key responsibilities include:
(cid:116)(cid:1)The Group’s approach to customer
(cid:116)(cid:1)Acting as a sounding board
engagement and collaboration
for the Chairman
(cid:116)(cid:1)The ongoing implementation of the
project to create one global IS/IT platform
(cid:116)(cid:1)Talent management and succession
(cid:116)(cid:1)Conducting an annual review
of the Chairman’s performance
(cid:116)(cid:1)Being available to shareholders
planning activities.
In the 2015 financial year, the Board
will focus in particular on the areas listed
on page 40.
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.
Board allocation of time
1 34% Strategy
2 24% Execution
of strategy
3 18% Risk
4 13% Business results
5 11% Governance
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Division of 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:
(cid:116)(cid:1)The effective operation, leadership and
governance of the Board
(cid:116)(cid:1)Ensuring the effectiveness of the Board,
and each director individually
(cid:116)(cid:1)Setting the style and tone of Board
discussions
(cid:116)(cid:1)Ensuring the directors receive accurate,
timely and clear information.
if they have any concerns that they
have been unable to resolve through
the normal channels.
Board effectiveness
Board diversity
As set out in the Board’s statement on
diversity, published on the Group’s website,
the Directors believe that 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 Annual Report, the
Board comprised 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.
Tenure of non-executive directors
1 0 to 3 years – 3 directors
2 4 to 6 years – 2 directors
3 7 to 9 years – 2 directors
3
1
2
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 (AGM).
As part of the annual Board effectiveness
review, each director goes through a formal
performance review process. All directors
completed this process during the year
and, in line with the Code, Robert Walker
and Liz Airey, who have served for over six
years, have both been subject to a
particularly rigorous review.
Time commitment
All directors have disclosed any significant
external commitments to the Board and
confirmed that they continue to 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 Directors
continue to devote the necessary time
to the Company.
During the year, the Board met without the
Chairman present to consider his request
to chair the Aircraft Carrier Alliance. The
Chairman assured the Board that he would
continue to be able to devote sufficient time
to his duties at Tate & Lyle and the Board
unanimously agreed to his request.
Advice and support
The appointment and removal of the
Company Secretary is a matter for the
Board as a whole. 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.
There is also a formal procedure whereby
directors can obtain independent
professional advice, if necessary,
at the Company’s expense.
42 | Tate & Lyle PLC Annual Report 2014
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 sessions on the speciality
food ingredients market in Asia Pacific.
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, including the
Food Ingredients Europe Exhibition,
were also arranged 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 visits to Chicago, Shanghai
and Singapore, the Chairman and the
non-executive directors visited 13 of the
Group’s sites in Europe and the USA
as part of their independent site visit
programme. 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, the Chairman
and non-executive directors have visited
21 of the Group’s principal locations as
part of this programme.
Asia Pacific is a key growth region for the Group and
in January 2014 the Board visited the SFI facilities in
Shanghai and Singapore. The visit enabled directors
to increase their understanding of the challenges and
opportunities of the local markets and to meet staff
based at these locations.
Directors’ induction programme
On appointment to the Board, directors
receive background reading about the
Group and details of Board procedures
and other matters related to governance.
The Company Secretary then works with
each of the new directors to deliver a
tailored induction programme. No new
directors joined the Board during the
financial year. A detailed summary of
the induction programme undertaken
by directors in the previous financial year
is included in the Annual Report 2013.
Performance evaluation
A review of the Board’s effectiveness is undertaken each year. The process is led either
internally or by an external facilitator. Following an external review in 2011, the Chairman
led the process in 2012 and 2013.
2013 Board effectiveness review
The progress made since the 2013 evaluation is summarised below.
Recommendations
Update on actions
Increase the amount of time spent on
understanding the market and how
customer relationships are managed.
Enhance knowledge of the
innovation pipeline.
Increase the Directors’ focus on talent
management and succession planning.
Identify and implement improvements
to Board reporting in respect of the
performance of SFI.
Two Global Enterprise Account Directors
have presented to the Board and additional
time is allocated to reviewing customer
engagement.
The Board undertook a review of the
innovation pipeline and key ICD processes
during its visit to the global Commercial
and Food Innovation Centre.
The Board delegated this action to the
Nominations Committee which focused on
this at each of its subsequent meetings
during the year.
Board reporting has been enhanced.
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The Board agreed that the 2014 review
should be externally facilitated. Given the
importance of inclusive leadership and
the changes to the Board in the previous
financial year, the Directors felt that it would
be particularly beneficial for the review
to reflect on diversity and inclusion.
After careful consideration of providers,
Schneider Ross, an independent external
consultancy firm specialising in diversity
and inclusion, was retained to undertake
the review.
Schneider Ross held confidential one-to-
one interviews with directors and members
of the leadership team who regularly attend
Board and/or Committee meetings plus
three external advisers. The discussions
focused on the behavioural aspects of
Board effectiveness including how the
Board works together, the quality of inputs,
discussions and decision-making, and
specific themes such as succession
planning. Following the interviews and,
working in conjunction with the Company
Secretary, questionnaires were produced
to solicit further feedback on the overall
effectiveness, performance and processes
of the Board and each of its Committees.
Thirty individuals, including regular
attendees and four external advisors,
were invited to complete these
questionnaires anonymously.
The key results and recommendations
were presented to the Board by
Schneider Ross.
The results were grouped into three
broad areas:
(cid:116)(cid:1)Mechanics: for instance processes,
structure, membership and operation
of the Board and its Committees
(cid:116)(cid:1)Dynamics: including leadership, the
Tate & Lyle Values in practice in the
boardroom, quality of discussions,
debate and decision-making
(cid:116)(cid:1)Specifics: including strategy, customer
engagement, talent management and
succession planning, and risk appetite.
The Board deliberated each of Schneider
Ross’s recommendations and an action
plan was agreed; examples are provided
in the table on page 44.
In addition, each Committee considered
the output from Schneider Ross’s review
of the Committees. Each of the reviews
indicated that the Committees were
operating effectively and made a number
of recommendations for further
consideration. Examples of the agreed
actions are set out in each of the separate
reports of the Audit Committee and the
Corporate Responsibility (CR) Committee.
With regard to the Remuneration
Committee, following consideration of
the report from Schneider Ross, that
Committee agreed a number of actions
including increased communication with
all Remuneration Committee members
prior to Committee meetings and
refinements to the Remuneration
Committee’s programme of activity
for the year ending 31 March 2015.
Tate & Lyle PLC Annual Report 2014 | 43
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Governance
CORPORATE GOVERNANCE | CONTINUED
2014 Board effectiveness review
Area
Agreed actions
Mechanics
(cid:116)(cid:1) Ways to further improve the support for incoming presenters to be
considered and implemented.
(cid:116)(cid:1) A working party to be established to identify ways to enhance site visits.
Dynamics
(cid:116)(cid:1) Chief Executive to meet with executives who attend Board meetings
immediately afterwards to discuss how the Board operated as a whole
and to reflect on any learnings.
(cid:116)(cid:1) Thinking styles of candidates for the Board and Executive Committee to
be taken into consideration once skill set and experience has been
confirmed.
(cid:116)(cid:1) Undertake an externally-facilitated session for the Board focusing on
boardroom dynamics, relationships and how to make even better use of
Board diversity.
Specifics
(cid:116)(cid:1) Building on the progress made in 2013, further proposals to be
developed to drive customer centricity in the boardroom.
(cid:116)(cid:1) Board Committees to oversee the executive focus on building an
inclusive culture.
(cid:116)(cid:1) Revisit the timing and location of the scheduled Board meetings,
in particular the timing of the annual Board strategy day.
Progress will be monitored by the
Chairman and Company Secretary
throughout the 2015 financial year
and regular updates will be provided
to the Board.
With regard to the performance of
individual directors, the review concluded
that all directors continued to make an
effective contribution to the Board’s work,
were well prepared and informed about
issues they needed to consider, and that
their commitment remained strong. The
Chairman also provided individual
feedback to each director and the Senior
Independent Director provided feedback
to the Chairman.
The performance of the Chief Executive and
Chief Financial Officer was also 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 discuss the
Chairman’s performance.
These reviews also concluded that both the
Chairman and Chief Executive continued to
fulfil their responsibilities effectively.
Re-election of directors
The Company’s Articles of Association
require all directors to seek re-election by
shareholders at least once every three
years. In addition, any directors appointed
by the Board must stand for re-election at
the first AGM following his or her
appointment. Any non-executive directors
who have served for more than nine years
are subject to annual re-election.
The Code provides that all directors should
seek re-election on an annual basis and 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 set out on page 71.
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.
44 | Tate & Lyle PLC Annual Report 2014
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.
The Company also maintains directors’
and officers’ liability insurance cover,
the level of which is reviewed annually.
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 Financial Reporting Council, ‘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 mis-statement 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 business
(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 divisions to
help identify, measure, monitor and report
significant risks. The units report regularly
on progress with the implementation of the
Group’s strategy, including its impact on the
risk environment. Key risks are reviewed
regularly by the Board. Further information
on the Group’s risk management process
can be found on page 29.
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 a 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 to supplement internal
processes as appropriate. Given the
ongoing 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.
(cid:116)(cid:1)The schedule of matters reserved to
the Board ensures that the Directors
control, among other matters, all
significant strategic, financial and
organisational issues.
(cid:116)(cid:1)A clear organisational structure
and limits of authority in respect
of items such as capital expenditure,
pricing and contract authorisation.
(cid:116)(cid:1)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.
(cid:116)(cid:1)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.
(cid:116)(cid:1)The Audit and CR Committees oversee
the operation of controls and report
regularly to the Board. If a failure
of control has a material impact, then
a detailed investigation, analysis and
action plan would be provided to and
considered by the Audit Committee,
the CR Committee and the Board
(as appropriate).
Speak Up (whistleblowing)
Speak Up, the Group’s whistleblowing
programme, has been in place for a
number of years in all operations controlled
by the Group. This programme, which is
monitored by the Audit and CR
Committees, is designed to enable
employees, contractors, customers,
suppliers or other stakeholders to raise
concerns confidentially in cases where
conduct is deemed to be contrary to the
Group’s Values. It may include, for
example, actions that may endanger safety;
unethical practices; or criminal offences.
The Speak Up programme provides
a number of alternative ways to raise
concerns including a telephone reporting
line, email, and a web-based reporting
facility. The multilingual communication
facilities are operated by independent
service providers who submit a report to
the Speak Up Committee for investigation.
Reports received during the year were kept
strictly confidential and the concerns
identified were referred to appropriate
managers within the Group for resolution.
Where appropriate, action was taken to
address the issues raised. The reports
were analysed and monitored to ensure
the process continued to be effective.
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:
(cid:116)(cid:1)The maintenance of records that, in
reasonable detail, accurately and fairly
reflect transactions including the
acquisition and disposal of assets
(cid:116)(cid:1)Reasonable assurance that transactions
are recorded as necessary to permit
preparation of financial statements in
accordance with International Financial
Reporting Standards
(cid:116)(cid:1)Reasonable assurance regarding the
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 SFI and BI certify that their reported
information provides a true and fair view
of the state of the financial affairs of their
division and its results for the period. The
results of this financial disclosure process
are reported to the Audit Committee.
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.
Tate & Lyle PLC Annual Report 2014 | 45
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Governance
CORPORATE GOVERNANCE | CONTINUED
2014 review of the effectiveness of internal controls
Values and behaviours
Financial controls
Compliance controls
Operational controls
Risk management
process
Responses to questionnaires reviewed by
Global Ethics Director and internal audit function
Output discussed by Audit Committee
in April and May
Output discussed by Corporate Responsibility
Committee in March and May
Responses reviewed by Global Ethics Director and internal audit function
Annual General Meeting
The 2014 AGM will be held at The Queen
Elizabeth II Conference Centre in London
on Thursday 24 July 2014 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. 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.
Relations with shareholders
Shareholder communications
The Chief Executive, Chief Financial
Officer and Group VP, Investor and Media
Relations maintain a regular programme
of visits and presentations to institutional
shareholders both in the UK and overseas.
The Chairman also undertook separate
visits to institutional shareholders and the
Senior Independent Director met with
a number of institutional shareholders.
Feedback on interaction with institutional
shareholders is provided to all directors.
The Investor Relations team 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. In addition, the Company’s
external advisors give an annual briefing
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.
2014 review of the effectiveness
of the system of internal control
The effectiveness of the Group’s internal
control system is monitored throughout
the year and once a year the Board, with
the assistance of the Audit and CR
Committees, conducts its own review
of the effectiveness of the systems of risk
management and internal control. In 2014,
this review was once again facilitated by
the internal audit function and covered
the period from the start of the financial
year to the date of this Annual Report.
The process included a two-stage review
to facilitate discussion with the Audit and
CR Committees discussing the results
of the two-stage review at their meetings
in March, April and May 2014 and the
Board then discussed the output at its
meeting in May 2014.
The 2014 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. Delivery
of these enhancements 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 Chairman
is a member of the Remuneration Committee
but is not involved in any aspect of his own
remuneration. The Directors’ Remuneration
Report on pages 52 to 71 sets out
the remuneration policy and the way
in which the established policy has
been implemented.
46 | Tate & Lyle PLC Annual Report 2014
AUDIT COMMITTEE REPORT
Introduction
Dear shareholder
I am pleased to report on the activities
of the Audit Committee.
Members of the Committee take an active
role in understanding aspects of the
business and the challenges it faces and,
as part of this, the Committee visited the
global Shared Service Centre in Łód´z,
Poland during the year. This provided us
with an opportunity to meet with the local
leadership team and conduct a detailed
review of operations.
In addition to our usual matters, including
the financial results for the full year and
half year and the interim management
statements, applicable accounting policies
and going concern assumptions, we
continued to undertake in-depth reviews
of key topics. These included risk
management processes, the management
of commodities risk and, together with the
members of the Corporate Responsibility
Committee, IT security.
We also considered the timing of the
tender of the external audit contract. As
explained in the Chief Executive’s Review,
implementation of the global IS/IT platform
is ongoing and the Committee believes
that continuity of the external auditors
plays a very important role in managing
risk effectively during this transition to new
systems, processes and ways of working.
We have therefore agreed to undertake
a tender after the Board considers that
the platform is operating satisfactorily
across all our material operations. In the
meantime, we are undertaking preliminary
work to prepare ourselves and the
business for the tender.
In preparation for this year’s audit,
I attended part of PwC’s initial planning
meeting where I was able to meet with
members of the global audit team. The
Committee collectively met the US audit
partner as part of our annual programme.
I led a review of the Committee’s
effectiveness, supplementing the activities
s
undertaken as part of the external Board
effectiveness review, explained on page
43. Both of these reviews concluded that
the Committee was functioning effectively
y
and identified a number of areas for
further action. These include: increasing
the membership of the Committee;
reviewing detailed scoping documents for
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the in-depth reviews to enhance the value
e
Liz Airey
gained from them; and furthering
interaction with divisional senior
finance management.
I look forward to meeting with
shareholders at the forthcoming AGM
on 24 July 2014.
Liz Airey
Chairman of the Audit Committee
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Composition and constitution
Main responsibilities of the Audit Committee
The Audit Committee, which comprises
three non-executive directors, oversees
the Group’s financial reporting and
internal controls and provides a formal
reporting link with the external auditors.
The Committee’s terms of reference,
which are reviewed annually, are
available on the Company’s website,
www.tateandlyle.com.
These include:
(cid:116)(cid:1)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
(cid:116)(cid:1)Reviewing significant financial reporting
issues and accounting policies
and disclosures in financial reports
(cid:116)(cid:1)Reviewing the effectiveness of the
Group’s internal control procedures
and risk management systems
(cid:116)(cid:1)Reviewing the effectiveness of the
internal audit function
(cid:116)(cid:1)Overseeing the Group’s relationship
with the external auditors including
the level of fees
(cid:116)(cid:1)Reviewing and monitoring the
external auditors’ independence
and objectivity and the effectiveness
of the audit process
(cid:116)(cid:1)Making recommendations to the Board
on the appointment or reappointment
of the Group’s external auditors.
Meetings during the year ended
31 March 2014
The Committee met six times during the
year and the minutes of each meeting are
made available to all directors via the Board
portal. Membership of the Committee and
attendance during the year were as follows:
Directors as at
31 March 2014
Liz Airey1
Douglas Hurt
Anne Minto
Number of
meetings
6
6
6
Number of
meetings
attended
6
6
6
1 Committee Chairman.
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 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 and is a member of the
Institute of Chartered Accountants in
England and Wales.
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 attend meetings of the
Committee by invitation. In addition,
the Committee continues to enhance
its exposure to the business through
its programme of key topics for in-depth
review, which involves operational and
other key senior managers presenting
to the Committee.
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.
Tate & Lyle PLC Annual Report 2014 | 47
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Governance
AUDIT COMMITTEE REPORT | CONTINUED
Independence of the external auditors
The Group’s external auditors are
PricewaterhouseCoopers LLP (PwC)
and the Committee operates a policy to
safeguard its 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;
and partner rotation. During the year,
the Committee reviewed the processes
that the external auditors have in place
to safeguard their independence, and
received a letter from the external auditors
confirming that, in their opinion, they
remained independent.
Work undertaken during the year
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. 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.
The policy also sets out the circumstances
in which the external auditors may be
permitted to undertake non-audit services.
The Chief Financial Officer and Chairman
of the Committee have authority to approve
the provision of certain services up to
£100,000 or £250,000 respectively.
The Committee must approve any
proposed non-audit services that exceed
those thresholds. Such proposals must
be justified and, if appropriate, subject
to tender. In addition, the policy specifies
the services which are not permitted under
any circumstances, such as the provision
of remuneration advice and internal
audit outsourcing.
The Committee reviews the policy on
an annual basis and considers quarterly
reports which set out the ongoing non-
audit services provided by the auditors
and the fees incurred.
In April 2014, the European Parliament
adopted proposals which include certain
restrictions around the provision of
non-audit services by the auditors and
a 70% non-audit services fee cap. These
proposals are likely to come into force at
EU level during 2014 and the Committee
will revise the policy to reflect the new
requirements as they take effect in the UK.
A breakdown of the fees paid to the
external auditors in respect of audit- and
non-audit-related work is included in Note
8. The total amount paid in respect of the
Group audit, audit of subsidiaries and joint
ventures and the half-year review was
£2 million and £0.2 million was paid in
respect of non-audit-related services.
Fees paid in respect of non-audit-related
services therefore comprised 9% of the
total fees paid to PwC.
Financial reporting
At each of its meetings during the year, the
Audit Committee reviewed accounting
papers prepared by management and
determined, with the perspective of the
external auditors, the appropriateness of
key accounting policies, estimates and
judgments. The significant issues that the
Committee considered in relation to the
financial statements for the year ended
31 March 2014 are listed below.
(cid:116)(cid:1)Reported and adjusted earnings: the
Committee considered management’s
review of reported and adjusted earnings,
to ensure that significant one-off items of
income and expense had been correctly
classified, and that external disclosure of
these items was appropriate.
(cid:116)(cid:1)Commodity risk: the Group uses
corn commodity contracts to manage
and hedge its corn book in the US.
The valuation of the corn book, which
is underpinned by a number of
judgments, has a material impact
on the reported results of the Group.
The Committee participated in a detailed
information session led by both executive
and local US management covering the
key commodity risks and the risk
management framework in place
to mitigate these risks. In addition
to this session, the Committee
considered the work performed by the
external auditors before concluding that
the judgments made in determining the
valuation were appropriate.
(cid:116)(cid:1)Retirement obligations: a number of
judgments have to be made when
calculating the fair value of the Group’s
legacy retirement obligations. The
Committee reviewed the assumptions
proposed by management (reflecting
advice from the Group’s external actuary)
which have driven a reduction in the
pension and healthcare net liability (see
Note 30) and considered reports from
the external auditors before agreeing
that the assumptions were reasonable.
In addition, the Committee reviewed
and agreed management’s proposed
accounting treatment for both the
September 2013 full buy-in of the
Amylum UK defined benefit pension
scheme, having adopted the calculations
performed by the external actuary
and the December 2013 transfer of the
defined benefit obligation of Tate & Lyle
Netherlands BV.
(cid:116)(cid:1)Taxation: the Group operates in a
number of tax jurisdictions and
provisioning for potential direct tax
exposures with local tax authorities is
underpinned by a range of judgments.
The Committee reviewed the Group’s
principles and processes for managing
tax risks during the year and reviewed
the key judgments made in estimating
the Group’s tax charge along with the key
disclosures, including a statement of tax
principles, proposed to be included in the
Annual Report (set out on page 26 and
in Notes 11 and 29). The Committee
was satisfied that the judgments made
in estimating the Group’s tax charge
were reasonable, and that the tax
disclosures to be made in the
Annual Report were appropriate.
In addition to the above items, the
Committee reviewed management’s annual
goodwill impairment assessment paper,
considering future performance of the
underlying divisions, 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. Separate
papers on the Group’s existing and
emerging litigation risks were presented
to the Committee and duly considered.
There have been no substantive
developments in any material case
in the current year.
External audit
PwC (or its predecessor firms) has been
the Company’s auditors since 1989. The
lead audit partner is rotated on a five-yearly
basis and, as set out in last year’s report,
the lead audit partner changed with effect
from the beginning of the 2014 financial
year in line with this requirement.
48 | Tate & Lyle PLC Annual Report 2014
Internal audit
Following a competitive tender process,
the Committee retained Independent
Audit Limited to conduct a review of the
effectiveness of the internal audit function,
the last external review having been
undertaken in 2010. The review concluded
that the internal audit function had
continued to strengthen since that time
and make a significant contribution to
the internal governance of the Group.
A number of areas for incremental
improvement were agreed and implemented,
including enhancements to the function’s
charter and planning cycle.
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 those controls.
Throughout the year, the Committee
focused in particular on the impact of the
implementation of the new IS/IT platform
and associated changes to the control
environment, together with any potential
impact on financial reporting processes.
It also reviewed controls to mitigate fraud
risk and the Group assurance map
outlining the key risks and associated
assurance processes. In addition, the
Committee reviewed the output from the
annual review of the effectiveness of
internal financial reporting controls and
then reported to the Board on that review.
As set out on page 48, the Committee
undertook a detailed review of the Group’s
approach to managing corn and the
associated hedging processes during the
year. During this session the Committee
considered the controls in place and how
they are being enhanced with the
implementation of the global IS/IT platform.
The Committee will continue to keep these
activities under review during the year
ending 31 March 2015.
Following the conclusion of the audit
for the year ended 31 March 2013, 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 at Group level
and at divisional level and considered the
most recent public report on the inspection
of PwC which was issued by the FRC in
May 2013. The Committee concluded that
the external audit process was operating
effectively and that PwC continued to
provide effective and independent
challenge to management. The review
identified a number of areas for process
enhancements which were implemented
and incorporated into the criteria set for
the audit in respect of the year ended
31 March 2014.
The Code states that FTSE 350 companies
should tender the provision of audit
services at least every ten years or explain
their approach, if different. The Competition
Commission has published additional
proposals that are expected to come into
effect in October 2014. These require FTSE
350 companies to put their statutory audit
engagement out to tender at least every
ten years. In addition to this, in April 2014
the European Parliament adopted
proposals which include the requirement
that audit firms of all EU companies listed
on a regulated market are subject to
retender after ten years and rotate off after
20 years. These proposals are likely to
come into force at EU level during 2014.
The Committee continues to consider legal
and regulatory developments in this regard.
The Committee discussed the timing of a
tender on a regular basis during the
financial year ended 31 March 2014. In light
of the output of the effectiveness review
and the ongoing implementation of the
global IS/IT platform, the Committee
agreed to undertake a tender after the
Board considers that the platform is
operating satisfactorily across all material
operations. The Committee has
recommended to the Board that PwC
continue to act as auditors to the Group.
PwC has indicated its willingness to
continue in office, and a resolution that
PwC be reappointed will be proposed at
the AGM. As explained in the letter from
the Chairman of the Committee, activities
are underway to prepare the Group
for the tender.
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The global Shared Service Centre (the Centre)
in Łódź, Poland is the principal location for
handling the financial transactional activities
and processes for Tate & Lyle. The Committee
has monitored its development since its
establishment in 2011.
In October 2013, the Committee visited the
Centre and met with senior managers to
understand more about the control environment
in place and the progress the Centre had made
in achieving its other objectives, which include
supporting decision making across the Group
through the prompt delivery of centralised
management information, and providing
high quality, consistent advice, support
and resolution.
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Tate & Lyle PLC Annual Report 2014 | 49
Governance
NOMINATIONS COMMITTEE REPORT
I look forward to meeting with
shareholders at the forthcoming
AGM on 24 July 2014.
Sir Peter Gershon
Chairman of the Nominations
Committee
Introduction
Dear shareholder
One of the key areas of focus for the
Committee is succession planning and
during the year we focused on both Board
succession plans and executive succession
planning and talent management.
As explained in my statement on page
40, Robert Walker, Senior Independent
Director and Chairman of the
Remuneration Committee, is expected to
retire during the current financial year after
serving a full nine years on the Board. In
preparation for this, we commenced work
on planning for his successor as Senior
Independent Director and as Chairman
of the Remuneration Committee. We also
reviewed the needs of the Board in light
of this imminent retirement and have
drawn up a specification for an additional
non-executive director. We have retained
Spencer Stuart to assist with this search.
The Executive Vice President, HR
presented to us at a number of our
meetings to provide us with regular
updates on the progress of the executive
succession planning and talent
management activities. We will continue
to monitor progress for these two core
activities during the financial year ending
31 March 2015.
Schneider Ross, who performed the
external review of Board effectiveness,
undertook a review of the Committee’s
effectiveness. The review concluded that
the Committee was functioning effectively
and recommended that the Committee
continue to maintain its clear focus on
succession planning going forward.
Sir Peter Gershon
Composition and constitution
Main responsibilities of the Nominations Committee
The Nominations Committee comprises
the Chairman of the Company, the Chief
Executive and all of the non-executive
directors. It ensures that the balance
of skills and experience of the Board
remains appropriate for the needs
of the Group.
The Committee’s terms of reference,
which are reviewed annually, are
available on the Company’s website,
www.tateandlyle.com.
These include:
(cid:116)(cid:1)Reviewing the size and composition
of the Board, including succession
planning, and the leadership needs
of the Group generally
(cid:116)(cid:1)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
(cid:116)(cid:1)Making recommendations on the
process for the appointment of the
Chairman of the Board
(cid:116)(cid:1)Reviewing annually the performance of
each member of the Group Executive
Committee and reporting on that review
to the Remuneration Committee.
Work undertaken during the year
During the year and up to the date of
this Annual Report, in addition to the work
set out in the Chairman’s letter above,
the work undertaken by the Nominations
Committee included:
Succession planning
The Committee reviewed succession
plans for Executive Committee roles and
the progress of action plans to address
any gaps. The Committee continues to
review progress on a regular basis.
Performance evaluation
The Committee undertook a performance
evaluation of each member of the Group
Executive Committee and reported its
conclusions to the Remuneration Committee.
Membership of Board Committees
The Committee reviewed the composition
of each of the Board’s Committees in
conjunction with recommendations from
the relevant chairmen. The Committee
agreed with the conclusions of the Audit
Committee effectiveness review that an
additional member should join that
committee. To that end, the specification
for the new non-executive director covers
the experience and skills required by
members of our Audit Committee. In
addition, the Committee recommended
that Virginia Kamsky join the CR
Committee. The Board agreed with the
recommendation and she joined the CR
Committee with effect from 1 April 2014.
Meetings during the year ended
31 March 2014
The Committee met three times during the
year. Membership of the Committee and
attendance during the year were as follows:
Directors as at
31 March 2014
Sir Peter Gershon1
Javed Ahmed
Liz Airey
William Camp
Douglas Hurt
Virginia Kamsky
Anne Minto
Dr Ajai Puri
Robert Walker
1 Committee Chairman.
Number of
meetings
3
3
3
3
3
3
3
3
3
Number of
meetings
attended
3
3
3
3
3
3
3
3
3
The Committee has a formal calendar of
items for consideration at each meeting
and meets at least twice a year.
50 | Tate & Lyle PLC Annual Report 2014
CORPORATE RESPONSIBILITY COMMITTEE REPORT
Introduction
Dear shareholder
As explained in the Corporate
Responsibility section on page 33, the
Group has no higher priority than safety,
so we were all shocked and saddened by
the tragic fatalities at three of our plants
over the last year. In each case, we
investigated the circumstances
surrounding the accidents and the actions
taken by management based on the
preliminary findings of these investigations
immediately after the events, as well as
ensuring all necessary co-operation was
given to the local regulatory investigations.
We also worked with management to
ensure all necessary assistance was
available to support the families and
others affected by these incidents.
We are sponsoring a management
initiative to refocus and refresh our
approach to safety. The oversight of
ongoing safety initiatives will continue to
be a key focus for the Committee this year.
We undertook a detailed review of the
Group’s approach to tackling cyber
security and received a report on progress
in this regard during the year. We will
continue to monitor the ongoing efforts
to mitigate this risk across the Group.
The annual review of Committee
effectiveness, undertaken by Schneider
Ross, indicated that the Committee
continues to operate effectively. It
recommended some areas for process
improvement, such as the timing of
meetings where the discussion topics
overlap with the interests of the Audit
Committee, for example IT security. In
addition, the review highlighted topics
for increased focus, such as initiatives
to drive and embed inclusion across the
organisation, and we have adjusted our
agenda to address these suggestions.
William Camp
Last, but by no means least, we welcome
Virginia Kamsky as an additional Committee
member from 1 April 2014 and we have
put in place an induction programme for
her, reflecting our wide remit.
I look forward to meeting with
shareholders at the forthcoming AGM.
William Camp
Chairman of the CR Committee
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Composition and constitution
Main responsibilities of the Corporate Responsibility Committee
The Committee comprises four
non-executive directors and the
Chairman of the Company. The
Committee oversees the Group’s
processes and measures used to
manage social, environmental and
ethical risks and associated internal
controls.
The Committee’s terms of reference,
which are reviewed annually, can be
found on the Company’s website,
www.tateandlyle.com.
These include:
(cid:116)(cid:1)Monitoring the Group’s approach to
corporate responsibility and ensuring
it aligns with Group strategy
(cid:116)(cid:1)Reviewing the effectiveness of the
Group’s policies and procedures
relating to a safe working environment
(cid:116)(cid:1)Approving, or recommending to the
Board for approval, CR policies
(cid:116)(cid:1)Reviewing the implementation of
appropriate environmental policies
(cid:116)(cid:1)Monitoring the effectiveness of
workplace policies concerning
employee relations, equal opportunities,
travel, entertainment and conflicts
of interest
(cid:116)(cid:1)Reviewing whistleblowing arrangements
(cid:116)(cid:1)Satisfying itself that the Group has
appropriate policies, systems and
controls in place in respect of the risks
falling within the Committee’s remit.
Meetings during the year ended
31 March 2014
The Committee met four times during the
year. Membership of the Committee and
attendance during the year were as follows:
Safety
The Committee discussed the Group’s
initiatives to improve workplace safety
performance and received regular reports
from the VP, Global Safety.
Directors as at
31 March 2014
William Camp1
Liz Airey
Sir Peter Gershon
Dr Ajai Puri
Number of
meetings
4
4
4
4
Number of
meetings
attended
4
4
4
4
1 Committee Chairman.
Virginia Kamsky joined the committee on 1 April
2014. As she did not serve during the year under
review, she is excluded from the above analysis.
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
letter, the work undertaken by the CR
Committee included the following:
Product safety continued to be an area of
focus and the VP, Global Quality and Food
Safety provided regular updates 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 further refinements
to the external reporting of the Group’s
gender diversity.
Business practices
The Committee reviewed the effectiveness
of the independent confidential reporting
(whistleblowing) line. Further information
on this is on page 45.
Charitable donations
The Committee received an update on
implementation of the global community
involvement programme, and also
approved a proposed education
partnership strategy as set out on page 37.
Environment
The VP, Sustainability provided the
Committee with updates on 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.
Tate & Lyle PLC Annual Report 2014 | 51
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Governance
DIRECTORS’ REMUNERATION REPORT
Chairman’s introduction
Dear shareholder
The purpose of this introductory letter to
the Directors’ Remuneration Report for
the year ended 31 March 2014, is to
provide some context for the Committee’s
decision-making during the year, and
to summarise the key points of the
Report. Hopefully, this will make reading
the detailed Report that follows
somewhat easier.
Guiding principles
Our philosophy remains unchanged:
the Company’s remuneration framework
should be simple, and provide for
a close alignment between executive
remuneration and shareholders’ interests.
We aim to achieve this primarily by
making a significant proportion of
pay conditional on the achievement
of stretching performance conditions
and by ensuring that executives maintain
significant personal shareholdings
in the Company.
We were ‘early adopters’ of features such
as claw back provisions (which apply to
both annual bonus and long-term share
awards), and the ‘single-figure’ and ‘pay
scenario’ disclosures that have now been
adopted into standard reporting.
Business performance and
remuneration outcomes for the year
The Committee judges that the Company
made further progress in executing its
strategy despite facing a number of
challenges that held back financial
performance. Profit growth in starch-based
speciality ingredients and Food Systems
and strong growth in emerging markets,
were offset by the impact of cold weather,
including the extremely cold and prolonged
US winter, and an increasingly competitive
market for sucralose. Good momentum in
emerging markets, a robust innovation
pipeline and a strong balance sheet, bodes
well for the longer term.
With regard to the financial metrics used in
our incentive plans:
(cid:116)(cid:1)Annual Bonus Plan. Growth in net sales
(less cost of raw materials) of 2.0% and
like-for-like profit growth of 0.5% (in
constant currency) for the year ended
31 March 2014 demonstrate continued
progress in the context of significant year-
on-year profit growth over prior periods.
The cash conversion cycle improved by
4.8%. As a result, the Committee has
approved annual bonus payments in the
range of up to 3% of base salary for
executive directors.
(cid:116)(cid:1)Performance Share Plan. Adjusted
earnings per share has grown by 7.2%
on a compound annual basis over the
three financial years ended 31 March
2014; and adjusted return on capital
employed in the year to 31 March 2014
is 19.2%, which is significantly above
our cost of capital. As a result, the
awards granted under the Performance
Share Plan will vest at 63.4%.
In confirming these outcomes, the
Committee discussed the Company’s
health and safety performance during
the past year.
Key committee activities
during the year
The last significant changes in the
Company’s remuneration arrangements
were made in 2010, to introduce the
Annual Bonus Plan and the Performance
Share Plan in their current forms,
receiving significant support from
shareholders at the 2010 Annual
General Meeting (AGM). Four years on,
the Committee felt it would now be
appropriate to undertake a detailed
review to test the continued
appropriateness of the performance
metrics used in our current incentive
framework. This review confirmed that
these metrics remain closely aligned with
Net sales less raw materials change vs prior
year – per bonus metric (%)
Adjusted diluted EPS long-term incentive
metric (pence)
Tate & Lyle PLC adjusted closing share
price (pence)
4.6
2.0
16.0
56.0
56.6
55.7
900
800
700
600
500
400
300
2012
2013
2014
2012
2013
2014
03-2009 03-2010 03-2011 03-2012 03-2013 03-2014
Adjusted PBTEA change vs prior year – per
bonus metric (%)
Adjusted ROCE long-term incentive
metric (%)
28.0
3.9
0.5
21.4
19.7
19.2
2012
2013
2014
2012
2013
2014
52 | Tate & Lyle PLC Annual Report 2014
Approval of the remuneration policy
for the year ahead
In view of the discussion above, we have
made no changes to our remuneration
design or framework at this time, and
the report on remuneration policy, which
we ask shareholders to support at the
AGM, is consistent with our approach
to date and the arrangements which
shareholders have previously approved.
I trust we can count on your support.
Robert Walker
Chairman of the Remuneration
Committee
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Chairman’s introduction continued
our strategic objectives and that
remuneration outcomes have been
closely aligned with business
performance. The chart below illustrates
this alignment in respect of the Annual
Bonus Plan through to the end of the
financial year to which this Report relates.
The chart shows relative year-on-year
growth in sales and profits (both key
metrics in the Annual Bonus Plan) against
a trend line in bonus outcomes over the
same period:
Relative annual
sales growth
Relative annual
profit growth
Trend line in bonus
outcomes
2011
2012
2013
2014
Based on this review, the Committee
concluded that the choice of our financial
metrics across the annual bonus and
long-term share plan remain appropriate.
Looking ahead, we will of course continue
to review targets on an annual basis to
ensure that these remain appropriately
stretching and aligned with the business
strategy and outlook.
I can confirm that the Committee has
made no change to the structure of the
remuneration package for the year ahead,
and executive directors’ salaries remain
unchanged since 1 April 2012, the second
year of no increase.
Engagement with shareholders
As part of our annual cycle of activity,
in addition to the normal shareholder
engagement activities which the
Board undertakes, I write to our key
institutional shareholders in my capacity
as Remuneration Committee Chairman
in order to offer a meeting to discuss
any shareholder issues or concerns.
This year, I have already written to our
top 20 shareholders; this is a larger
number than in the past to ensure that
we consult on the widest possible basis.
g
It is a reflection of the significant levels
ort for our current
of shareholder support for our current
remuneration arrangements that
ements that
shareholders had no issues to raise with
issues to raise with
me as part of that process. As a group,
ocess. As a group,
ed their strong support
shareholders indicated their strong support
for our approach, which was reflected in
hich was reflected in
a 96% vote to approve our remuneration
ve our remuneration
report resolution at the AGM in 2013.
he AGM in 2013.
Robert Walker
About these Reports
The information regarding directors’ remuneration is presented in two Reports: the first relates to our remuneration policy (the Directors’
Remuneration Policy Report), and the second relates to the way in which our established policy has been implemented during the year
under review (the Annual Report on Remuneration).
Resolutions to approve each of these Reports will be proposed at the AGM. It is our intention that the policy approved by shareholders
will apply for a period of three years, and will not be put to an annual shareholder vote, although we intend to report on both policy and
implementation each year.
These Reports have 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) (Amendment) Regulations 2013 (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 information on pages 67 to 71 marked as ‘(audited)’). Resolutions to approve each Report will be proposed
at the AGM on 24 July 2014.
Directors’ Remuneration Policy Report
Introduction
This Report sets out the Company’s policy in relation to directors’ remuneration. This approach was originally established in 2010
in connection with the review of the business strategy following Javed Ahmed’s appointment as Chief Executive, and the policy
is fundamentally unchanged from that set out in the 2011, 2012 and 2013 Annual Reports.
Subject to shareholder approval at the AGM on 24 July 2014, the Committee will operate within this policy from that date.
The Committee will retain discretion on specific aspects of policy and implementation, as described in this report along with an overriding
discretion to determine bonus outcomes and judge the level at which share awards vest, in order to ensure that payments are consistent
with the underlying health and performance of the business, within the maximum opportunity stated in the policy tables.
The Committee may make minor changes to the policy without seeking shareholder approval, for example to benefit the administration
of arrangements, or to take account of changes in legislation. Any such changes will be disclosed in the relevant Annual Report.
Tate & Lyle PLC Annual Report 2014 | 53
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Governance
DIRECTORS’ REMUNERATION REPORT | CONTINUED
Remuneration strategy and key principles
The Company’s remuneration strategy, and supporting principles which apply consistently across employee, management and executive
populations, is summarised in the table below.
Remuneration strategy Key principles
The Company’s
remuneration strategy
is to provide packages
that enable the Company
to recruit, retain and
motivate high-calibre
individuals in the
markets in which
we operate to deliver
superior operational
performance and
outstanding
financial results
(cid:116)(cid:1) Base pay and benefits are generally positioned at local market ‘median’ levels
(cid:116)(cid:1) For all employees, our pay for performance framework provides for meaningful differentiation
in salary progression and opportunities for career progression, based on each individual’s contribution
(cid:116)(cid:1) The total package opportunity should provide meaningful reward for superior performance and encourage
the achievement of genuinely stretching short-term and long-term objectives
(cid:116)(cid:1) Below executive level, key individuals who have a specific accountability for driving annual and longer-term
performance may be selected to participate variously in our sales incentive plan, the Annual Bonus Plan,
and/or the Performance Share Plan
(cid:116)(cid:1) Alignment with shareholders’ long-term interests is carefully preserved, for example through: a significant
proportion of pay being based on performance; effective governance around remuneration decisions;
a considered approach to setting performance targets; the adoption of shareholding guidelines at senior
executive levels; and claw back provisions on incentive awards
(cid:116)(cid:1) All aspects of remuneration are designed to encourage a focus on long-term, sustained performance
and risk management
(cid:116)(cid:1) Our approach is intended to be equitable and transparent and operate across the Group, recognising
that we recruit talented individuals and operate in an international market
(cid:116)(cid:1) Outcomes must be achieved in a way that is consistent with the Group’s core Values and Code of Ethics,
and that fosters sustainable, profitable growth
The charts below illustrate the international nature of our business – although we are UK-listed and headquartered in London, a very
significant proportion of our people, our shareholders, and our customers are based outside the UK. Accordingly, it is important that
our remuneration arrangements are appropriately competitive in that international context.
Our sales1
1 2% UK
2 59% US
Our shareholders2
3 17% Other European
countries
4 22% Rest of world
1 50% UK
2 40% US
3 4% Other European
countries
4 6% Rest of world
Our people3
1 4% UK
2 46% US
3 35% Other European
countries
4 15% Rest of world
1 2
4
3
3 4
1
2
1 2
4
3
1 Sales by destination (from continuing operations) as per Note 4 to the Financial Statements.
2 Shareholders are represented by an analysis of the largest 20 institutional shareholdings (covering 48% of the register at 31 March 2014).
3 Includes all joint-venture employees.
A clear link between our strategy and directors’ remuneration
The Company’s remuneration arrangements place a clear emphasis on driving Company performance, through incentives that are
directly linked to the key performance indicators (KPIs) which come from our business strategy. In this way, we maintain a keen focus
on delivering long-term growth, thereby enhancing long-term value for shareholders.
The table opposite summarises the KPIs that we use to measure the Group’s success against our strategy. The right-hand column
describes how these KPIs link directly to remuneration arrangements.
Key Performance Indicators
Pages 18 and 19
54 | Tate & Lyle PLC Annual Report 2014
Key performance indicators
Link to directors’ remuneration
Financial results
Adjusted operating profit
This is a key determinant of awards under the Annual Bonus Plan.
Adjusted diluted EPS growth
Awards under the Performance Share Plan depend on this metric.
Dividend per share
Net debt
The dividend has a direct impact through individual executive share ownership
and dividend equivalents on deferred bonus awards.
Objectives are reflected in incentive plan target setting, but this metric does not directly
impact remuneration.
Performance and financial strength (in addition to the above)
Speciality food ingredients sales growth
Informs the sales target in the Annual Bonus Plan that is set by the Committee each year.
Return on capital employed
Awards under the Performance Share Plan depend on this metric.
Cash conversion cycle
This is a performance metric in the Annual Bonus Plan.
Net debt to EBITDA and interest cover
Objectives are reflected in Annual Bonus Plan targets, but this metric does not directly
impact remuneration.
Corporate responsibility
Safety metrics
Safety and broader corporate responsibility matters are specific factors that the Committee
may factor into decisions on pay and annual incentive plan outcomes.
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Key components of directors’ remuneration
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.
The executive directors’ remuneration consists of base salary, annual bonus, long-term incentives, and retirement and other benefits as
described in the table overleaf. Claw back provisions apply to incentive awards following release (as described in the policy table on
pages 56 to 59), and a strong alignment with shareholders’ interests is maintained through significant personal shareholding
requirements imposed on each director.
The key components of the remuneration framework for executive directors are summarised in the graphic below, and the full policy in
relation to each item is described in the tables that follow.
Fixed
Variable (short-term)
Variable (long-term)
Base salary: providing fixed
remuneration which reflects
the market value of the role
Annual bonus: to deliver
the Company’s annual
financial performance
objectives
Long-term share incentive: to deliver shareholder value
linked to efficient use of capital and profitable long-term growth
Employment / retirement
benefits: consistent with
local market practice
Claw back provisions mean cash and share incentives may be recouped in specific circumstances
Personal share ownership: strengthens alignment between executives and shareholders
Tate & Lyle PLC Annual Report 2014 | 55
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Governance
DIRECTORS’ REMUNERATION REPORT | CONTINUED
Executive directors’ remuneration policy table
Purpose and alignment with strategy
Operation
Opportunity
Base salary (short-term, fixed remuneration)
To provide fixed remuneration that reflects the
market value of the individual, his or her skills
and experience and performance
(cid:116)(cid:1) Base salaries are positioned at around the
median of the relevant market based on
company size and operations (for UK
directors, the Committee currently has
regard to the 50th to 130th largest UK-listed
companies), and taking account of personal
performance, as well as individual
circumstances (e.g. following promotion into
a new role)
(cid:116)(cid:1) Base salary reviews take into account
increases awarded to employees below
executive level, and the impact on pension
and other consequences of increases
(cid:116)(cid:1) Increases arising from the normal annual
review will normally be limited to the local
market increase applicable to employees
at the same location generally. However,
the Committee may use its discretion
to award a higher or lower increase to
ensure that salaries remain appropriately
aligned with the external market,
and to reflect changes in experience,
role or responsibility
Employment and retirement benefits (short-term, fixed remuneration)
To provide employment and retirement benefits
in line with the relevant local market
(cid:116)(cid:1) Retirement benefits are provided by way
of defined contribution arrangements,
or an equivalent cash allowance
(cid:116)(cid:1) Other employment benefits include car
(or car allowance), health insurance, group
income protection and, where appropriate,
life cover
(cid:116)(cid:1) The value of retirement and/or cash
benefits in lieu of pension is set by
reference to external market practice
(using the same market reference point
as for base salary), and is subject to
periodic review
(cid:116)(cid:1) The value of non-cash benefits is
determined by the cost of provision, e.g.
third-party health insurance premiums
Annual bonus (short-term, performance-related remuneration)
To support the Company’s strategy by
rewarding the achievement of the Company’s
annual performance objectives
(cid:116)(cid:1) The discretionary Annual Bonus Plan
(cid:116)(cid:1) No bonus is payable if performance is
rewards the achievement of financial and
other objectives established by the
Committee for the relevant financial year
(cid:116)(cid:1) The bonus award is made, subject to
the Committee’s approval, following the
end of the financial year and the audit
of full-year results
(cid:116)(cid:1) The bonus award may comprise cash and
deferred shares, depending on the level of
award that is made
below ‘threshold’, regardless of
performance against other metrics
(cid:116)(cid:1) The ‘target’ bonus is 75% of base salary
for the Chief Executive, and 50% of base
salary for the Chief Financial Officer
(cid:116)(cid:1) The maximum cash bonus is 100%
of base salary; any annual bonus above
100% of base salary is delivered in
Tate & Lyle PLC shares which are
deferred for two years
(cid:116)(cid:1) The maximum cash and share bonus
is 175% of base salary
(cid:116)(cid:1) Deferred shares carry the right to receive
a cash payment in lieu of the dividend that
would have been paid on those shares
between award and release
56 | Tate & Lyle PLC Annual Report 2014
Performance framework
Commentary
(cid:116)(cid:1) Base salary is a fixed element of the remuneration package, paid monthly
(cid:116)(cid:1) Employees generally participate in a merit-based review, which means that the general market
increase which applies will be sufficient to maintain competitiveness against the local market,
while individual high performers may be rewarded with higher salary increases
(cid:116)(cid:1) Benefits are a fixed part of the remuneration package, and typically accrue monthly
(cid:116)(cid:1) Retirement benefits are defined contribution in nature, limiting the financial risk and potential
costs to the Company
(cid:116)(cid:1) Performance is assessed over the relevant financial year
(cid:116)(cid:1) Performance metrics are selected by the Committee at the start of the relevant year,
and are drawn from key financial metrics. Additionally, the Committee may select
quantifiable metrics that are aligned with our strategic and/or operational objectives
on a personal or collective basis
(cid:116)(cid:1) 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
(cid:116)(cid:1) The greatest weighting will be given to financial performance; specifically, a minimum profit
hurdle applies before any bonus is payable against any of the metrics
(cid:116)(cid:1) The final bonus award is made at the Committee’s discretion. Subject to the overall maximum,
the Committee may make appropriate adjustments to ensure that the bonus outcomes are a fair
reflection of the underlying performance of the Company and may also take into account factors
such as Group safety, operational performance, and personal performance
(cid:116)(cid:1) A consistent framework applies to
employees generally – salaries are
positioned by reference to the local
market median, and salary reviews
take into account local market
increases, external benchmarking,
and personal performance
(cid:116)(cid:1) No changes to the policy for executive
directors have been made in the year
or are proposed for the year ahead
(cid:116)(cid:1) The provision of employment and
retirement benefits to executive directors
is consistent with our policy and approach
for employees generally: appropriate
benefits are provided in line with local
competitive market practice
(cid:116)(cid:1) No changes to the policy for executive
directors have been made in the year
or are proposed for the year ahead
(cid:116)(cid:1) Claw back provisions apply, which
means cash and share elements may
be recouped in specific circumstances
during the two-year period following
the end of the financial year to which
the bonus relates
(cid:116)(cid:1) The discretionary Annual Bonus Plan
applies to a broad population who have
roles which allow them to contribute
materially to the successful delivery
of the Company’s annual performance
objectives. The Annual Bonus Plan
operates within a consistent framework
for all participants, with financial targets
typically set by reference to the business
area that is most relevant to the
employee’s role
(cid:116)(cid:1) No changes to the policy for executive
directors have been made in the year
or are proposed for the year ahead
Tate & Lyle PLC Annual Report 2014 | 57
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Governance
DIRECTORS’ REMUNERATION REPORT | CONTINUED
Executive directors’ remuneration policy table continued
Purpose and alignment with strategy
Operation
Opportunity
Performance Share Plan (long-term, performance-related remuneration)
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
(cid:116)(cid:1) Awards over Tate & Lyle PLC shares may be
made, at the Committee’s discretion, on an
annual basis taking an individual executive’s
contribution and performance into account
(cid:116)(cid:1) Awards will only vest to participants if
demanding financial performance
requirements have been achieved over a
period of at least three financial years
commencing with the financial year in which
the award is made
(cid:116)(cid:1) The Committee has the flexibility to make
awards of up to 300% of base salary (at
the time of award) if appropriate to ensure
market competitiveness and taking
account of the Company’s performance
(cid:116)(cid:1) The award will lapse entirely if threshold
performance targets are not achieved
(cid:116)(cid:1) Only 15% of any award made to
executive directors vests for achieving
threshold performance
Personal share ownership requirements (this information is provided here to explain a key feature of the remuneration
framework, but these requirements do not form part of the binding ‘policy’)
To strengthen long-term alignment
of interests between senior executives
and the Company’s shareholders
(cid:116)(cid:1) Executive directors are subject to individual
minimum share ownership requirements
(cid:116)(cid:1) Specified holdings must be built up over an
initial five-year period following the adoption
of the policy (or appointment, if later) and
retained for the duration of employment
(cid:116)(cid:1) Share ownership requirements for
executive directors are as follows:
– Chief Executive: four times base salary
– Chief Financial Officer: three times base
salary
Other (potential) benefits
Operation
Opportunity
To address specific commercial or
administrative situations, the following benefits
may be provided:
(cid:116)(cid:1) Director relocation and associated benefits,
including international healthcare
(cid:116)(cid:1) Payment in lieu of dividend on specific
share awards
(cid:116)(cid:1) UK savings-related share options
(Sharesave Plan)
(cid:116)(cid:1) If a director is required to relocate at the
Company’s request, e.g. as a result of
changing business requirements, additional
benefits may arise in accordance with the
Group relocation policy. Benefits may
include (without limitation): relocation
assistance; health cover; travel;
accommodation; and tax equalisation
(cid:116)(cid:1) Certain share awards carry the right to
receive a cash payment in lieu of the
dividend that would have been paid on those
shares pending delivery
(cid:116)(cid:1) 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 from net salary
(cid:116)(cid:1) No directors currently receive relocation
benefits
(cid:116)(cid:1) The cost of provision will be determined
by the policy and will depend on the
specific circumstances
(cid:116)(cid:1) Specific benefits and the cost of provision
would be approved by the Remuneration
Committee at the time
(cid:116)(cid:1) The value of any payment in lieu of
dividend will depend on: the value of the
relevant dividends paid over the relevant
period, and the number of shares to which
the participant is entitled
(cid:116)(cid:1) The value of individual grants is capped by
reference to maximum participant savings
(monthly savings/deductions from salary
may not exceed HMRC limits, and a
savings contract may run for a three-
or five-year period)
58 | Tate & Lyle PLC Annual Report 2014
Performance framework
Commentary
(cid:116)(cid:1) Long-term performance is assessed over three financial years, commencing with the year in
(cid:116)(cid:1) Claw back provisions apply to awards
which the award is made
(cid:116)(cid:1) Awards are subject to the achievement of financial performance metrics which are confirmed by
the Committee in advance of each new grant. Two performance metrics have applied to awards
made since 2010, and equal weight has been given to each:
– Growth in adjusted diluted earnings per share from continuing operations (EPS) over the
three-year performance period
– Adjusted return on capital employed (ROCE) achieved at the end of the performance period
(cid:116)(cid:1) These metrics were selected because together they represent key determinants of shareholder
value creation: measuring the effectiveness of strategic investment decisions and the quality of
earnings generated. If material changes to the metrics or weightings are proposed, the
Committee would consult with key shareholders in advance of making a new award
(cid:116)(cid:1) Targets for each new award are carefully considered by the Committee ahead of the grant of
awards in any year, to ensure these remain appropriately stretching over the three-year
performance period, taking into account: the business strategy and long-term financial plan,
market expectations and the prevailing economic climate
made from 2013, which means they may
be recouped in specific circumstances
during the two-year period following the
end of the performance period (as
described on page 69)
(cid:116)(cid:1) Participation in the Performance Share
Plan is extended to a targeted population
of senior executives who are expected to
make material individual contributions to
the successful delivery of the Company’s
strategy and long-term performance.
All awards under the Performance Share
Plan are subject to the same performance
framework, ensuring alignment and focus
on our financial goals
(cid:116)(cid:1) Before any shares are released at the end of the performance period, 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
(cid:116)(cid:1) No changes to the policy for executive
directors have been made in the year
or are proposed for the year ahead
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(cid:116)(cid:1) The value of an individual director’s interests in shares is directly affected by share
price performance
Performance framework
(cid:116)(cid:1) Relocation benefits are fixed in accordance with Group policy
(cid:116)(cid:1) The payment in lieu of dividend is a benefit attached to specific awards, where
applicable conditions have been satisfied at vesting. Accordingly, no additional
performance conditions apply
(cid:116)(cid:1) No performance conditions are attached to Sharesave awards because the Sharesave
Plan is an all-employee scheme
(cid:116)(cid:1) Similar share ownership requirements
extend to Executive Committee members
(at three times base salary), and to a
broader group of executives in senior
leadership roles (at a level equal to their
base salary)
(cid:116)(cid:1) No changes to the policy for executive
directors have been made in the year
or are proposed for the year ahead
Commentary
(cid:116)(cid:1) Any such benefits would be payable in
accordance with policies applicable more
generally to employees within the Group
(cid:116)(cid:1) The value of any payment in lieu
of dividends will be included in the
‘single figure’ table in the year the
payment is made
(cid:116)(cid:1) Executive directors are entitled to
participate in the Sharesave Plan because
the plan must be open to all employees
in the UK
Tate & Lyle PLC Annual Report 2014 | 59
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Service contracts
The Company’s policy regarding
executive directors’ service contracts
and appointment terms is to take account
of market practice, and to ensure that
provisions in relation to notice periods
or termination payments are not excessive,
as well as to ensure that contracts provide
appropriate protection for the Company,
for example in relation to restrictions on
competition, solicitation of customers or
employees, and the protection of
intellectual property.
Executive directors are employed under
service contracts commencing on dates
as follows: Javed Ahmed (Chief Executive)
– 1 October 2009; Tim Lodge (Chief
Financial Officer) – 4 December 2008;
and provide for six months’ notice from
the executive or 12 months’ notice from
the Company.
Service contracts for executive
directors and letters of appointment for
the Chairman and non-executive directors
are available for inspection at the
Company’s registered office.
Beyond the items disclosed in this Report,
there are no further obligations on the
Company which could give rise to a
remuneration or loss of office payment
to a director.
Governance
DIRECTORS’ REMUNERATION REPORT | CONTINUED
Remuneration policy for the
Chairman and non-executive
directors
Terms of appointment
The Chairman and non-executive directors
have letters of appointment and do not have
service contracts or notice periods. Under
the terms of their appointment, they are
usually expected to serve on the Board for
between three and nine years, subject to
their re-election by shareholders. The
Company Chairman and non-executive
directors receive a fee for their services, and
do not participate in the Group’s incentive or
pension schemes, do not receive any other
benefits, and have no right to compensation
if their appointment is terminated.
Chairman and non-executive
directors’ fees
Non-executive directors’ fees (excluding
the Chairman) are reviewed annually by
the Chairman and executive directors of
the Board. The Chairman’s fee is reviewed
annually by the Committee (excluding
the Chairman).
Aggregate fees depend on the
responsibilities assumed by each non-
executive director. A basic fee is paid to
the Chairman, to the Senior Independent
Director and to each non-executive director.
In addition, supplemental fees are payable
to each Committee chairman. Accordingly,
supplemental fees are paid to the chairmen
of the Audit, Corporate Responsibility, and
Remuneration Committees as well as to the
chairman of the Research Advisory Group,
to reflect the extra responsibilities required
by each of these positions.
Increases in fees arising from the normal
annual review will generally be limited to the
market increase applicable to UK employees
generally. However, a higher or lower increase
may be awarded to ensure that fees paid are
commensurate with those paid by other
UK-listed companies over time and are set at
a level to retain individuals with the necessary
experience and ability to make a substantial
contribution to the Group.
Status of previously approved
remuneration policy statements
It is intended that provisions consistent
with previously disclosed directors’
remuneration policies and/or incentive
plans previously approved by shareholders
will continue to apply after the resolution
to adopt the remuneration policy set out
in this Policy Report is approved. Such
provisions will allow, without limitation:
(cid:116)(cid:1)Contractual commitments entered into
before the policy takes effect, or before
an individual was subject to this policy on
directors’ remuneration, to be honoured
(cid:116)(cid:1)The satisfaction of awards and/or
commitments made in relation to
short-term and long-term incentive plan
awards (providing they were consistent
with the policy in effect at the time the
original award/commitment was made).
Such arrangements shall remain in effect
and be included in the current
remuneration policy by reference, even if
they are not specifically provided for within
the policy set out in this Policy Report.
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.
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 incentive plans
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.
60 | Tate & Lyle PLC Annual Report 2014
Policy on the terms of directors’
appointment
In order to ensure the continued growth
and success of the business over time,
the Company must have the flexibility to
appoint new individuals to the Board, either
by way of internal promotion or external
appointment, on terms that are sufficient
to attract and motivate individuals of the
highest calibre.
The following key principles describe our
intended approach in these circumstances
(and are consistent with the principles that
apply to the broader employee population).
(cid:116)(cid:1)The starting point for negotiating any
package on appointment will be the
structure of the annual package in the
‘future policy on remuneration’ that has
been approved by shareholders and is
current at the time of the appointment.
(cid:116)(cid:1)We will review the appropriateness of the
total package (both fixed and variable
elements), to ensure that it is appropriate
in the context of relevant external market
practice, the complexity and scope of
the role, the particular needs and
requirements of the Company at the time,
internal relativities, and the appointee’s
skills, experience and qualifications.
(cid:116)(cid:1)To respond to specific circumstances
and/or to allow for differences in practice
over time and by location, the Committee
accepts that employment benefits may
need to be structured differently from the
specific provisions in place for current
directors. The Committee therefore
retains flexibility to make appropriate
adjustments in provision, as considered
appropriate, to provide market-
referenced benefits which are necessary
or appropriate in the proper performance
of the role, for example in relation to:
healthcare and insurance; transport
and security; and provision for retirement.
(cid:116)(cid:1)Where an appointment requires an
individual to relocate, internationally
or otherwise, the Company may agree
to make payment(s) to offset certain
expenses incurred as a consequence of
relocation or may provide benefits in line
with our global/domestic mobility policy,
on appointment and on an ongoing
basis, depending on the circumstances.
Such benefits may include, without
limitation: travel; relocation and tax-
related assistance; and similar benefits
on repatriation at the end of the term.
(cid:116)(cid:1)The current policy provides for a
maximum level of variable remuneration
that is equivalent to 475% of base salary
in the financial year of appointment. This
is consistent with the aggregate current
maximum award under the Annual Bonus
Plan (including any deferred shares) and
the maximum award value under our
Performance Share Plan, although the
balance between short-term and
long-term elements may be different from
the current policy, and awards may be
made on different terms.
(cid:116)(cid:1)Where an internal candidate is appointed,
contractual commitments that have been
made prior to appointment to the Board,
along with any benefits and/or incentive
awards that have been awarded at that
time, may remain in effect and be
honoured, even if they would not
otherwise be consistent with the
shareholder-approved remuneration
policy in effect at the time.
(cid:116)(cid:1)In order to secure the appointment
of a suitable external candidate, the
Committee retains the flexibility to provide
additional compensation for the value of
incentive awards or other benefits that
are forfeited on leaving a former
employer. In such circumstances, the
Committee may make use of cash and/or
shares, as it considers appropriate in
the circumstances. The Committee will
exercise careful judgment in formulating
the terms on which such a compensatory
award will be made, taking into account
the form of award(s) that are forfeited,
the timeframes over which they may
otherwise have been earned and any
performance conditions that would
have applied.
This policy is intended to enable the
Committee to structure an offer on terms
that it considers to be in the best interests
of the Company and its shareholders.
Depending on the circumstances, and
any restrictions or requirements that may
apply, the Company may consult with key
shareholders as part of this process
and/or disclose terms on which a
new appointment is made through
the Regulatory Information Service,
or in the following Annual Report.
Policy on payments in connection
with loss of office
It is the Company’s policy that executive
directors are normally employed on
contracts that provide for not more than
12 months’ notice from the Company
and at least six months’ notice from the
executive. To protect the Company’s
interests, restrictive covenants (non-
compete/non-solicitation) apply for a period
of 12 months following termination, less
any period of ‘garden leave’. The Chief
Executive and Chief Financial Officer are
each employed on contracts consistent
with this policy.
The Committee’s policy in respect of the
treatment of executive directors leaving the
Company is summarised in this section.
The key principles are that the framework is
designed to support a smooth transition
from the Company, encouraging an orderly
transfer of responsibilities, and taking into
account the interests of shareholders in
securing the sustained performance of the
business beyond the executive’s departure.
Termination for dishonesty or misconduct
are circumstances in which the executive
would retain the minimum contractual
entitlements on departure (as described
in column ‘A’ of the table on page 62),
consistent with the need to avoid providing
any element of reward for failure. An
executive’s departure in compassionate
circumstances such as death or permanent
disability would generally result in the
most beneficial terms being received
(as described in column ‘B’ of the table
on page 62).
The terms that will apply if an executive
departs from the Company in other
circumstances would be considered at the
Committee’s discretion and approved on
a case-by-case basis, in keeping with the
principles above. Such circumstances
would potentially result in treatment that
is more favourable than the minimum but
no more generous than that which applies
in the compassionate circumstances
described above.
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DIRECTORS’ REMUNERATION REPORT | CONTINUED
Summary of policy on payments in connection with loss of office
(A) Termination for dishonesty or misconduct
(B) Death or permanent disability
Fixed elements of
remuneration:
(cid:116)(cid:1) Base salary
(cid:116)(cid:1) Pension
(cid:116)(cid:1) Benefits
Annual bonus
awards
Cash elements, including accrued holiday pay, are
paid pro rata to the termination date. Non-cash
benefits may continue to be provided until the
termination date, or paid as a cash equivalent (based
on the cost of provision) on a pro rata basis.
Cash elements, including accrued holiday pay, are paid
pro rata to the end of the relevant notice period. Non-cash benefits
may continue to be provided until the end of the notice period,
or paid as a cash equivalent (based on the cost of provision)
on a pro rata basis.
No discretionary bonus would be awarded in these
circumstances. More generally, no discretionary
bonus will normally be awarded unless an individual is
in active employment on the payment date (for cash
awards) and/or the award date (for deferred share
awards).
Dishonesty or misconduct may lead to the operation
of claw back provisions within the terms of the plan.
Any discretionary bonus that is payable will be approved on a
case-by-case basis by the Committee.
Any bonus will normally be pro-rated to reflect the portion of the
financial year prior to cessation, and would be paid at the normal
time, reflecting the extent to which the original performance targets
have been met.
However, within a discretionary bonus framework, the Committee
retains the flexibility to approve the timing and amount of the bonus
on some other basis.
Deferred share
awards
Unvested deferred shares will lapse.
Vested awards that have not been transferred/
released/exercised prior to cessation will lapse.
Previously vested but unexercised awards may be released
in the normal way.
In respect of unvested awards:
Dishonesty or misconduct may lead to the operation
of claw back provisions within the terms of the plan.
(cid:116)(cid:1) If a participant dies, a deferred bonus award will vest in full
on that date
Long-term share
incentive
(Performance
Shares Plan)1
Unvested awards will lapse.
Vested awards that have not been transferred,
released or exercised prior to cessation will lapse.
Dishonesty or misconduct may lead to the operation
of claw back provisions within the terms of the plan.
(cid:116)(cid:1) In the event of permanent disability, a deferred bonus award
will continue on its existing terms, unless the Committee
exercises its discretion to approve the release of the award
on an earlier date.
In the event of a change of control, an award may, at the
Committee’s discretion, be released on or prior to the event, or be
exchanged for a replacement award with an acquiring company.
Previously vested but unexercised awards may be released during
a period ending six months following cessation.
In respect of unvested awards:
(cid:116)(cid:1) Awards made in prior years will remain in effect and, unless the
Committee determines that awards should vest on some other
basis, an individual may receive a proportion of the potential
award depending on the extent to which the original
performance conditions have been achieved at the end of the
normal performance period
(cid:116)(cid:1) Other than in the case of death or permanent disability, awards
will generally be reduced to reflect the proportion of the
performance period which has elapsed prior to cessation.
The same provisions apply in the event of a change of control, but
for the fact that the achievement of performance conditions will be
assessed when the change of control is effective.
Provision for
payments in lieu of
notice, and
requirements for
mitigation
The Company has the option to make a payment in lieu of notice in relation to the fixed elements of remuneration only (base
salary, pension, and contractual benefits). Depending on the circumstances, such a payment may be subject to a duty of
mitigation. The Chief Financial Officer’s contract gives the Company the contractual right to phase the payments and to
reduce them if the executive mitigates his loss.
Other elements of remuneration described in the table are not affected by these provisions.
1 Savings-related share options granted under the HMRC-approved Sharesave Plan will vest or lapse in keeping with HMRC regulations applicable to the
circumstances at the relevant date.
In addition to contractual rights to any payment on loss of office, any employee, including executive directors, may have statutory and/or
common law or other rights to certain additional payments, for example in a redundancy situation. Similarly, additional consideration
may be provided, if necessary, to secure specific agreements following separation (for example an enhanced non-compete provision)
that protect the Company’s interests.
Depending on the role and circumstances of departure, a director who has been relocated may be repatriated in accordance
with previously agreed terms. The Company may pay some or all of the costs incurred by the executive in respect of legal, financial,
outplacement or other relevant personal advisory services and/or expenses in connection with relocation. The Committee will approve
such arrangements on a case-by-case basis, with a view to maintaining compliance with regulatory requirements and consistency
with internal Company policies that may apply.
62 | Tate & Lyle PLC Annual Report 2014
Application of remuneration policy
The tables and charts below illustrate the application of the remuneration policy described in this report, by showing the value that may
be delivered from each element of the package under different performance scenarios.
Element/value (£000s)
Base salary
Pension allowance
Other benefits
Annual bonus1
Performance Share Plan2
Total potential value
Chief Executive
Chief Financial Officer
Below
threshold
721
252
20
–
–
993
Threshold
721
252
20
–
324
1 317
Target
721
252
20
541
1 244
2 778
Stretch
721
252
20
1 262
2 163
4 418
Below
threshold
406
102
14
–
–
522
Threshold
406
102
14
–
183
705
Target
406
102
14
203
700
1 425
Stretch
406
102
14
711
1 218
2 451
£5m
£4m
£3m
£2m
£1m
£0
100%
Below
threshold
49%
29%
22%
45%
19%
36%
25%
75%
Threshold
Target
Stretch
Composition of remuneration:
Performance Share Plan
Annual Bonus Plan
Base salary, pension
and other benefits
26%
74%
49%
14%
37%
50%
29%
21%
Threshold
Target
Stretch
100%
Below
threshold
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1 Annual bonus shows cash and deferred shares. No bonus is paid at or below threshold; the target opportunity is 75% of base salary for the Chief Executive and
50% for the Chief Financial Officer, while the maximum is 175%.
2 The maximum award is 300% of base salary. 15% vests at threshold, and the ‘target’ shown is half way between threshold and stretch (i.e. 57.5% of maximum).
Consideration of shareholder views
The remuneration strategy and policy described here were established in 2010 following a review and extensive consultation with major
shareholders. Shareholders overwhelmingly approved the continuing use of the Performance Share Plan as our long-term incentive
at the AGM in 2012.
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.
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.
Statement of consideration of employment conditions elsewhere in the Company
The principles on which we base remuneration decisions for executives (as described on page 54) are broadly consistent with
those on which we base remuneration decisions for all employees. In particular, the Committee takes into account the general pay
and employment conditions of other employees of the Company when making decisions on executive directors’ remuneration.
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. The Committee also reviews
information on bonus payments and share awards made to the broader management of the Group when determining awards and
outcomes at executive director level.
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DIRECTORS’ REMUNERATION REPORT | CONTINUED
Annual Report on Remuneration
Introduction
As explained on page 53, this Report sets out how our established remuneration policy has been implemented during the year.
The Report also covers details relating to the composition and key responsibilities of the Remuneration Committee and provides
more information on how our incentive plans operate.
Implementation of the remuneration policy in the financial year ending 31 March 2015
The Company intends to implement the approved directors’ remuneration policy for the financial year ending 31 March 2015.
Remuneration Committee consideration of matters relating to directors’ remuneration
The Remuneration Committee comprises independent non-executive directors and the Chairman of the Board. The Committee
met four times during the year. Membership and attendance during the year were as follows:
Directors as at 31 March 2014
Robert Walker (Committee Chairman)
Sir Peter Gershon
William Camp
Anne Minto
Dr Ajai Puri
Number of meetings
4
4
4
4
4
Meetings attended
4
4
4
4
4
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.
Main responsibilities of the Remuneration Committee
The main responsibilities of the Committee include:
(cid:116)(cid:1)Assessing the appropriateness of executive remuneration in the context of the Company’s strategy and priorities as well as overall
competitiveness, taking into account data from independent, external sources
(cid:116)(cid:1)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 contract terms
(cid:116)(cid:1)Setting performance targets for awards made to senior executives under the Annual Bonus Plan and the long-term incentive plan
and reviewing performance outcomes
(cid:116)(cid:1)Reviewing the broader operation of the Annual Bonus and Performance Share Plans, including participation and overall award levels.
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.
Committee advisor
The Committee appointed Deloitte LLP as external advisor to the Committee, following a review and competitive tender process during
2012. As part of its annual processes, the Committee considered and confirmed that advice received from Deloitte LLP is objective and
independent. Deloitte LLP is a signatory to the Remuneration Consultants’ Code of Conduct, giving additional confidence to the
Committee that the advice received is objective and independent of conflicts of interest.
Fees charged by Deloitte LLP for the provision of remuneration advice to the Committee amounted to £51,750 for the year ended
31 March 2014 in accordance with standard terms of business and a work plan that primarily reflects the Committee’s planned
activities during the year. During the year, Deloitte LLP also provided services to the rest of the Group on internal audit, corporate
finance, systems, tax compliance and accounting.
Statement of shareholder voting
A resolution to approve the Directors’ Remuneration Report was passed at the AGM on 24 July 2013. The voting outcome, which has
previously been disclosed, was as follows:
Resolution
Directors’ Remuneration Report
Total for
Number of votes
293 142 434
% of vote
95.92
Total against
Number of votes
12 471 975
% of vote
4.08
Votes withheld1
Number of votes
593 308
1 Votes withheld are not counted in the calculation of the proportion of votes for or against a resolution. On 24 July 2013, there were 466,378,765 ordinary shares in
issue (excluding treasury shares).
64 | Tate & Lyle PLC Annual Report 2014
Chart showing total shareholder return and Chief Executive pay
The chart, as required under the Regulations, illustrates the cumulative total shareholder return (TSR) performance of Tate & Lyle
PLC 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 over the five-year period.
The graph shows the value of £100 invested in the FTSE 100 Index and Tate & Lyle in the five years from 31 March 2009.
The table provides the accompanying statistics required by the Regulations: a total compensation figure (determined on the same
basis as for the single figure) for amounts paid to the individual serving as Chief Executive, and the proportion of any annual bonus
and long-term incentive (LTI) that vested in the year (as a percentage of the maximum opportunity).
450
400
350
300
250
200
150
100
50
0
Tate & Lyle PLC
(ordinary shares)
FTSE 100
31 March 2009
31 March 2010
31 March 2011
31 March 2012
31 March 2013
31 March 2014
Chief Executive1 total remuneration
(£000s per single figure)
Annual bonus (% of maximum)
LTI vesting (% of maximum)
Javed Ahmed
Iain Ferguson
977
1 312
86%
0%
3 277
nil
100%
81%
11 198
170
58%
100%
5 367
n/a
18%
100%
2 729
n/a
1.6%
67.7%
1 Javed Ahmed has served as Chief Executive since his appointment on 1 October 2009. Iain Ferguson was Chief Executive in the period until that date. The total
remuneration figure shown for the year ended 31 March 2012 includes the value from a number of one-off compensatory awards made to Javed Ahmed on his
appointment, as disclosed and explained in the 2009 and 2012 Annual Reports.
Comparison of movement in Chief Executive and broader employee remuneration
Change in value: year ended 31 March 2014 vs 31 March 2013
Chief Executive
Broader employee population2
Base salary
0%
+2.7%
Value of benefits
0%
+20%
Annual bonus3
-91%
-56%
2 The broader employee population refers to a global population of salaried employees for salary comparison and the UK employee population for the benefits
comparison, reflecting the context in which executive directors’ salaries and benefits are determined; and refers to the global group of participants in the Annual
Bonus Plan for the bonus comparison, so that the combination of business performance across our divisions that contributes to the Group’s results is appropriately
represented.
3 Includes deferred shares where applicable.
Relative importance of spend on pay
Remuneration paid to or receivable by all employees of the Group
Distributions to shareholders (by way of dividend and purchase of ordinary shares into treasury)
Year ended
31 March 2013
£234m
£140m
Year ended
31 March 2014
£225m
£153m
% change
-3.8%
+9.3%
Tate & Lyle PLC Annual Report 2014 | 65
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DIRECTORS’ REMUNERATION REPORT | CONTINUED
The sections that follow provide more information on remuneration decisions and the operation of incentive plans during the year ended
31 March 2014.
Base salary
Executive directors’ salaries are reviewed annually, with effect from 1 April. At the 2014 review, the Committee agreed that no changes
would be made to executive director salaries for the year ahead, taking current market positioning into account. The average increase
awarded to other UK-based employees was approximately 2.7%.
Executive directors’ base salaries as at 1 April (£)
Javed Ahmed
Tim Lodge
2014
721 000
405 820
2013
721 000
405 820
% change
nil
nil
Chairman’s and non-executive directors’ fees
Fees are reviewed annually, in accordance with our stated policy, by the Committee (excluding the Chairman) in respect of the
Chairman’s fee, and by the Chairman and the executive directors in respect of other non-executive directors’ fees.
Taking into account the competitiveness of current fees against the comparable market position, and the time commitment required of
each role, the adjustments in the table below were approved with effect from 1 April 2014. The aggregate increase is broadly in line with
the rate of increase applicable to UK-based employees (being approximately 2.7%).
Fees (per annum) as at 1 April (£)
Basic fees
Chairman1
Non-executive director
Senior Independent Director
Supplemental fees (per annum)
Chairman of Audit Committee
Chairman of Remuneration Committee
Chairman of Corporate Responsibility Committee
Chairman of Research Advisory Group
2014
2013
% change
324 500
62 850
72 850
16 650
12 500
11 100
23 300
315 950
61 500
68 600
16 300
10 850
10 850
22 800
2.7%
2.1%
6.2%
2.2%
15.2%
2.3%
2.2%
1 The Chairman’s fee includes his role as Chairman of the Nominations Committee.
Annual bonus
The bonus structure described here applied to the year ended 31 March 2014; we propose to retain this structure for the coming year.
The bonus focuses performance on three objectives: profitability; sales performance; and cash conversion. 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. To achieve the maximum
payout, performance against all three metrics must be at or above the stretch level.
Step 1
Step 2
Step 3
Target bonus
(% of base salary)
Chief Executive
(75%)
Chief Financial
Officer (50%)
X
Profitability
multiplier
(once minimum
threshold is
achieved)
X
Sales performance
multiplier
X
Cash conversion
multiplier
=
Bonus achieved
(as % of base salary)
Profit performance is the most important of the three metrics, so multipliers for the profitability factor are more heavily geared than for
the other two metrics, that is, improvements in profitability 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.
66 | Tate & Lyle PLC Annual Report 2014
Annual bonus for the year ended 31 March 2014 (audited)
The table below provides further information on each metric. The Committee considers that bonus targets are commercially sensitive
because they may reveal information about the business plan in the year ahead that may damage our competitive advantage, and
accordingly does not disclose these on a prospective basis. However, we continue our practice of reporting the level of performance
required to achieve maximum bonus for the year just ended relative to the prior year’s performance, and the level of performance
actually achieved against those targets.
Bonus objective
Profitability
Sales performance
Cash conversion
Metric
Definition
Rationale
PBTEA
Net sales less cost of raw materials
Cash conversion cycle
Adjusted profit before tax, exceptional
items, amortisation and net retirement
benefit interest
Gross sales net of associated selling
costs, less the costs of raw materials
used in production
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
The number of days between cash
expenditure and collection, taking
account of inventory, payables and
receivables; based on the average of
the four quarter-end results
Measures whether the business is
managing its working capital and
converting profit into cash effectively
Performance required
for maximum bonus
11.4% improvement vs prior year
8.0% improvement vs prior year
6.7% improvement vs prior year
Actual performance
0.5% improvement vs prior year
2.0% improvement vs prior year
4.8% improvement vs prior year
Bonus outcome
Between threshold and target
Between threshold and target
Between target and stretch
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Comments on actual
performance
Speciality Food Ingredients –
operating profit growth of 1% with
good volume growth in Asia Pacific,
Europe and Latin America offset by
slightly lower US volumes and lower
SPLENDA® Sucralose prices; Bulk
Ingredients – operating profit 4%
lower as a result of soft US beverage
season, lower returns from co-
products and the impact of the
protracted severe cold winter in
North America
Lower sales largely driven by the
impact of pass through of significantly
lower corn prices in Bulk Ingredients
and starch-based speciality
ingredients
This improved by three days as a
result of lower inventory levels in the
US and significantly lower corn prices
Performance is 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 underlying strength and performance of the Company.
On the basis of these performance outcomes, an annual bonus was awarded by the Committee of 2.81% of base salary for the Chief
Executive and 1.88% of base salary for the Chief Financial Officer for the year ended 31 March 2014.
Deferral and claw back provisions
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 payment in lieu of dividend between award and release.
Both the cash and share elements are subject to claw back provisions, which mean 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 Performance Share Plan (PSP) was reviewed in 2010 to provide a long-term incentive that is consistent with the business strategy.
We specifically consulted with shareholders in detail at that time and again when we renewed the PSP on the same key terms in 2012.
The PSP closely aligns executive directors’ and senior executives’ interests with the strategy and with the interests of shareholders over
the long term, and is therefore an important component of the overall package. At the 2012 AGM, 98% of shareholder votes were cast
in support of the resolution to approve the PSP.
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DIRECTORS’ REMUNERATION REPORT | CONTINUED
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 into account Company performance.
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.
Metric
Definition
Weighting
Rationale
Vesting schedule
Adjusted diluted earnings per share (EPS)
Adjusted return on capital employed (ROCE)
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
Performance is measured by the adjusted ROCE
on continuing operations achieved at the end of the
three-year performance period against the pre-determined
targets1
50% of the award depends on this metric
50% of the award depends on this metric
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
EPS performance (CAGR)
Below 6%
6%
Between 6% and 15%
At or above 15%
Vesting outcome
(% of maximum)
Nil
15%
On a straight line between
15%2 and 100%
100%
ROCE performance
Below 13.4%
13.4%
Between 13.4% and 16.4%
At or above 16.4%
Vesting outcome
(% of maximum)
Nil
15%
On a straight line between
15%2 and 100%
100%
1 The ROCE outcome would be adjusted downward in the event of any asset impairment (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.
2 Under the special arrangements that were agreed in 2009 on the Chief Executive’s appointment, 25% of his 2011 award vests at threshold performance.
The Committee reviews the appropriateness of metrics and 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 2011, 2012 and 2013 vest in accordance with the schedule set out in the table 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.
2011 PSP awards vesting by reference to the period ended 31 March 2014 (audited)
PSP awards made in 2011 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
Weighting
Performance
outcome
Vesting outcome
for this element
Combined vesting outcome
50%
50%
7.2% growth
18.9%
26.8%
100%
Based on the combination of EPS and ROCE
performance, the Committee has confirmed
that 63.4% of the PSP awards made in 2011
have vested
Under the arrangements agreed in 2009 on the Chief Executive’s appointment, 25% of the award made to Javed Ahmed in 2011
vests at threshold. Accordingly, the EPS element vests at 35.4%, the ROCE element vests at 100%, and the overall combined
award vests at 67.7%.
In confirming these outcomes, the Committee also considered the broader underlying financial performance of Tate & Lyle over the
performance period, to ensure that vesting results based on these performance outcomes were consistent with a broader view of the
financial health and performance of the business.
68 | Tate & Lyle PLC Annual Report 2014
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.
Single figure table (audited)
Year ended 31 March
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
Former directors
Evert Henkes
Salary/fees
2014
2013
Benefits1
2014
2013
Annual Bonus
2014
2013
PSP Shares2
2014
2013
Pension
2014
2013
316
307
–
–
–
–
–
–
–
–
721
406
721
406
23
15
20
14
20
8
233
87
1 712
903
4 141
1 956
252
101
252
101
78
72
62
62
62
84
79
–
76
67
60
20
20
82
70
47
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Other
remuneration
2014
2013
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
2014
2013
316
307
2 728
1 433
5 367
2 564
78
72
62
62
62
84
79
–
76
67
60
20
20
82
70
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1 Benefits for executive directors include health insurance and car allowance.
2 PSP awards were released to participants based on the achievement of performance conditions over the period ended 31 March 2014 (as described on page 68).
PSP awards vested following the Remuneration Committee meeting in May 2014 and are valued at a share price of 668.50 pence, being the closing share price
on 27 May 2014 which is the vesting date.
Total pension entitlements (audited)
Directors participate in arrangements that are defined contribution in nature. Contributions made to or in lieu of pension in respect
of each director during the year are shown in the single figure table.
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 £193,340 per annum (31 March 2013 – £188,000). 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. His normal retirement date is the end of the month in which he attains age 62. No additional benefits would arise
in the event of his early retirement.
Termination and loss of office payments (audited)
There have been no payments to past directors and no loss of office payments made during the year.
Share awards made during the year (audited)
Award
Javed Ahmed Performance
Share Plan
Performance
Share Plan
Tim Lodge
Type of award
Nil cost
option
Nil cost
option
Date of grant
2 July 2013
Number of
shares
Face value
of award3
267 418 £2 163 010
Face value
as % of salary3
300%
2 July 2013
150 518 £1 217 465
300%
Performance
conditions4
50% adjusted
diluted EPS
growth;
50% adjusted
ROCE
Performance
period
Three
financial
years ending
31 March
2016
% of vesting
at threshold
15%
3 Under the terms of the Plan approved by shareholders, the number of shares comprising an award in any year is calculated based on the average share price over
the last three months of the preceding financial year, being 808.85 pence for the 2013 award.
4 Performance conditions are described on page 68.
Tate & Lyle PLC Annual Report 2014 | 69
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Governance
DIRECTORS’ REMUNERATION REPORT | CONTINUED
Share awards made in prior years (audited)
The table below sets out the current position of share-based awards made to executive directors.
As at
1 April 2013
(number)
Awards
vested
during year
(number)
Awards
lapsed
during year
(number)
Awards
exercised
during year
(number)
As at
31 March
2014
(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 A1
Compensatory Award C2,3
Long-term incentive Award A2,3
Long-term incentive Award B2,4,5
Long-term incentive Award C2,6
Performance Share Plan2,7:
2012
Deferred shares from annual bonus8:
2011 bonus year
Tim Lodge
Performance Share Plan2,7:
2008
2009
20106
2011
2012
Deferred shares from annual bonus8:
2010 bonus year9
2011 bonus year
419 403
257 870
656 640
473 042
378 337
310 567
2 010
26 088
151 999
223 381
212 950
174 805
–
–
–
473 042
–
–
–
–
–
223 381
–
–
51 683
1 131
51 683
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
419 403
257 870
656 640
473 042
444.90
444.90
444.90
440.20
632.50
676.50
676.50
875.50
378 337
590.50
310 567
671.00
2 010
676.50
–
–
–
26 088
151 999
223 381
–
–
–
394.25
294.25
440.20
611.00
676.50
875.50
–
–
212 950
590.50
174 805
671.00
–
–
01/10/11
29/05/12
29/05/12
28/05/13
After
31/03/14
After
31/03/15
29/05/14
24/05/11
29/05/12
28/05/13
After
31/03/14
After
31/03/15
51 683
–
–
1 131
611.00
676.50
816.50
–
31/05/13
29/05/14
1
2
3
4
5
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.
The three-year performance period for these awards begins on the first day of the financial year in which the award is granted.
This award is subject to the same performance conditions as PSP awards made in 2009.
This award is subject to the same performance conditions as PSP awards made in 2010.
2010 PSP awards vested in full, based on the achievement of adjusted diluted EPS growth and adjusted ROCE performance, as described in the Annual
Report 2013.
This award is subject to the same performance conditions as PSP awards made in 2011.
6
7 The performance conditions for PSP awards made in 2011, 2012 and 2013 are 50% adjusted diluted EPS and 50% adjusted ROCE, as described in this Report.
8
Deferred shares granted under the Annual Bonus Plan (as described on page 67). The full value of these awards has 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).
9 The shares awarded in relation to the 2010 bonus vested at the end of their two-year deferral period.
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 savings contract.
As at
1 April 2013
(number)
Options
granted
during year
(number)
Options
exercised
during year
(number)
Options
lapsed
during year
(number)
As at 31
March
2014
(number)
Exercise
price
(pence)
3 720
2 471
–
–
–
–
–
–
3 720
418.00
2 471
607.00
Exercise
period
01/03/15 to
31/08/15
01/03/18 to
31/08/18
Chief Executive (Javed Ahmed)
Savings-related options 2009
Chief Financial Officer (Tim Lodge)
Savings-related options 2012
70 | Tate & Lyle PLC Annual Report 2014
Statement of directors’ shareholding and share interests (audited)
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.
Our executive shareholding requirements are more demanding and extend to a greater number of senior executives in the Group when
compared with similar UK-listed companies.
(cid:116)(cid:1)The Chief Executive has a target share ownership requirement of four times base salary, and his shareholding currently exceeds
this target.
(cid:116)(cid:1)The Chief Financial Officer has a target shareholding of three times base salary, and his shareholding currently exceeds this target.
(cid:116)(cid:1)Other Executive Committee members are subject to the share ownership policy, with target holdings at three times salary.
(cid:116)(cid:1)This policy was extended to a broader group of executives from 2011 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.
Directors’ interests (audited)
The interests held by each person who was a director during 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.
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
Interest in shares1
Shares –
conditional on
performance2
Shares – not
conditional on
performance3
Options – not
conditional on
performance4
Total
82 080
–
–
–
82 080
1 204 457
316 391
956 322
538 273
1 808 965
1 131
3 720
2 471
3 973 464
858 226
16 000
2 200
10 000
5 000
8 600
2 018
22 162
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
16 000
2 200
10 000
5 000
8 600
2 018
22 162
1 Includes shares owned by connected persons.
2 Includes awards under the Performance Share Plan and the special arrangements that were put in place to facilitate Javed Ahmed’s recruitment
which are subject to performance conditions.
3 Includes deferred share awards made under the Annual Bonus Plan, and vested but unexercised awards granted to Javed Ahmed in connection
with his appointment.
4 Includes HMRC-approved Sharesave Plan awards.
There were no changes in directors’ interests in the period from 1 April 2014 to 28 May 2014.
The market price of the Company’s ordinary shares at the close of business on 31 March 2014 was 667.50 pence, and the range during
the year ended 31 March 2014 was 624.0 pence to 883.0 pence.
On behalf of the Board
Robert Walker
Chairman of the Remuneration Committee
28 May 2014
Tate & Lyle PLC Annual Report 2014 | 71
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Governance
DIRECTORS’ REPORT
About the Directors’ Report
The Directors’ Report comprises the
Governance section from pages 38
to 51, the Directors’ Report on pages
72 and 73 and the Useful Information
section from pages 141 to the inside
back cover. Other information that
is relevant to the Directors’ Report,
and which is incorporated by
reference into the Directors’ Report,
is disclosed as follows:
(cid:116)(cid:1)Likely future developments of the
Company (throughout the Strategic
Report)
(cid:116)(cid:1)Human rights (page 32)
(cid:116)(cid:1)Greenhouse gas emissions
(pages 35 and 36)
(cid:116)(cid:1)Relationship with employees (page 34)
(cid:116)(cid:1)Financial instruments (Note 21).
Results and dividend
A review of the results can be found on
pages 1 to 37.
An interim dividend of 7.8p per ordinary
share was paid on 3 January 2014. The
Directors recommend a final dividend of
19.8p per ordinary share to be paid on
1 August 2014 to shareholders on the
register on 27 June 2014, subject to
approval at the 2014 Annual General
Meeting (AGM). The total dividend for
the year is 27.6p per ordinary share
(2013 – 26.2p).
Research and development
The Group spent £33 million
(2013 – £32 million) on research
and development during the year.
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 may delegate day-to-
day management and decision making to
individual executive directors. Details of the
Board Committees can be found on pages
47 to 51 and on page 64.
72 | Tate & Lyle PLC Annual Report 2014
Share capital
As at 31 March 2014, the Company had
nominal issued ordinary and preference
share capital of £119 million comprising
£117 million in ordinary shares, including
£0.6 million in treasury shares and
£2 million in preference shares.
To satisfy obligations under employee
share plans, the Company issued 9,983
ordinary shares during the year and
reissued 2,443,619 ordinary shares from
treasury. The Company issued 2,914
shares during the period from 1 April
2014 to 28 May 2014. Further information
about share capital is in Note 24.
Information about options granted
under the Company’s employee
share plans is in Note 26.
The Company was given authority at
the 2013 AGM to make market purchases
of up to 46,639,912 of its own ordinary
shares. The Company purchased
3,045,000 of its own ordinary shares
during the year ended 31 March 2014;
these shares are held in treasury to satisfy
awards made under performance share
plans. This authority will expire at the
2014 AGM and approval will be sought
from shareholders for a similar authority
to be given for a further year.
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
below on preference shares. The Company
is not aware of any agreements between
shareholders that may restrict the transfer
or exercise of voting rights.
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 or
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.
DTR Rule 5 disclosure
As at 28 May 2014, the Company had been
notified under Rule 5 of the Disclosure and
Transparency Rules of the following
holdings of voting rights in its shares:
Number
of shares2 % held2
9.97
4.98
46 514 801
22 890 148
Black Rock, Inc
AXA S.A.1
Artemis Investment
Management LLP1
Invesco Limited1
Schroders plc
TIAA-CREF Investment
Management, LLC and
18 348 821
Teachers Advisors, INC.
Barclays Global Investors1 17 568 133
23 207 193
23 111 061
21 252 858
4.97
4.95
4.56
3.94
3.59
1 Notification was made over 12 months ago; as
permitted under Rule 5, shareholders may not be
required to notify us of subsequent changes within
certain ranges.
2 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 plans contain
provisions relating to a change of control.
Further information is on page 60.
Political donations
Again this year, in line with the Group’s
policy, no political donations were made in
the European Union (EU). Outside the EU,
the Group’s US business made
contributions during the year totalling
US$22,000 (£14,000) (2013 – US$19,000;
£12,000) to state political party committees
and to the campaign committees of state
candidates affiliated to the major parties. In
all, ten separate donations were made, the
largest being of $5,000 and the smallest
$300. US$14,000 (£9,000) (2013 –
US$8,000; £5,000) was also contributed by
the Tate & Lyle Political Action Committee
(PAC). Nine separate donations were made,
the largest being of $4,000 and the
smallest $1,000. The PAC is funded entirely
by US employees. Employee contributions
are entirely voluntary and no pressure is
placed on US employees to participate.
No funds are provided to the PAC by
Tate & Lyle but under US law, an employee-
funded PAC must bear the name of the
employing company.
DIRECTORS’ STATEMENT OF RESPONSIBILITIES
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:
(cid:116)(cid:1)Select suitable accounting policies
and then apply them consistently
(cid:116)(cid:1)Make judgements and accounting
estimates that are reasonable
and prudent
(cid:116)(cid:1)State whether IFRSs as adopted
by the European Union and, with
regard to the Parent Company Financial
Statements, applicable UK Accounting
Standards have been followed, subject
to any material departures disclosed
and explained in the Group and
Parent Company Financial
Statements respectively
(cid:116)(cid:1)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
and 39, confirm that, to the best of his
or her knowledge:
(cid:116)(cid:1)The Annual Report, taken as a whole, is
fair, balanced and understandable and
provides the information necessary for
shareholders to assess the Company’s
and the Group’s performance, business
model and strategy
(cid:116)(cid:1)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
(cid:116)(cid:1)The Strategic Report and 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.
Disclosure of information to auditors
So far as each director is aware, there is
no relevant audit information of which the
Company’s auditors are unaware; and he
or she has taken all the steps that he or she
ought to have taken as a director in order to
make himself or herself aware of any
relevant audit information and to establish
that the Company’s auditors are aware of
that information.
The Directors’ Report on pages 38 to 51,
pages 72 and 73 and pages 141 to the
inside back cover and the Directors’
Remuneration Report from pages 52 to 71
of this Annual Report were approved by the
Directors on 28 May 2014.
On behalf of the Board
Lucie Gilbert
Company Secretary
28 May 2014
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Tate & Lyle PLC Annual Report 2014 | 73
Financial Statements
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF TATE & LYLE PLC
Report on the Group financial
statements
Our opinion
In our opinion the Group financial statements of
Tate & Lyle PLC and its subsidiaries (collectively
‘the Group’), defined below:
(cid:116)(cid:1) give a true and fair view of the state of the
Group’s affairs as at 31 March 2014 and
of the Group’s profit and cash flows for
the year then ended;
(cid:116)(cid:1) have been properly prepared in accordance
with International Financial Reporting
Standards (IFRSs) as adopted by the
European Union; and
(cid:116)(cid:1) have been prepared in accordance with the
requirements of the Companies Act 2006
and Article 4 of the IAS Regulation.
This opinion is to be read in the context of what
we say in the remainder of this report.
What we have audited
The Group financial statements, which are
prepared by Tate & Lyle PLC, comprise:
(cid:116)(cid:1) the consolidated statement of financial
position as at 31 March 2014;
(cid:116)(cid:1) the consolidated income statement and
consolidated statement of comprehensive
income for the year then ended;
(cid:116)(cid:1) the consolidated statement of changes in
equity and consolidated statement of cash
flows for the year then ended; and
(cid:116)(cid:1) the notes to the consolidated financial
statements, which include a summary of
significant accounting policies and other
explanatory information.
The financial reporting framework that has
been applied in their preparation comprises
applicable law and IFRSs as adopted by the
European Union.
Certain disclosures required by the financial
reporting framework have been presented
elsewhere in the Annual Report 2014 (‘the
Annual Report’), rather than in the notes to
the Group financial statements. These are
cross-referenced from the Group financial
statements and are identified as audited.
What an audit of financial
statements involves
We conducted our audit in accordance with
International Standards on Auditing (UK and
Ireland) (‘ISAs (UK & Ireland)’). 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:
(cid:116)(cid:1) whether the accounting policies are
appropriate to the Group’s circumstances
and have been consistently applied and
adequately disclosed;
(cid:116)(cid:1) the reasonableness of significant accounting
estimates made by the Directors; and
(cid:116)(cid:1) the overall presentation of the financial
statements.
In addition, we read all the financial and
non-financial information in the Annual Report
to identify material inconsistencies with the
audited Group financial statements and to
identify any information that is apparently
materially incorrect based on, or materially
inconsistent with, the knowledge acquired by
us in the course of performing the audit. If we
become aware of any apparent material
misstatements or inconsistencies we consider
the implications for our report.
Overview of our audit approach
Materiality
We set certain thresholds for materiality. These
helped us to determine the nature, timing and
extent of our audit procedures and to evaluate
the effect of misstatements, both individually
and on the financial statements as a whole.
Based on our professional judgement, we
determined materiality for the Group financial
statements as a whole to be £15 million, which
represents approximately 5% profit before tax
from continuing operations.
We agreed with the Audit Committee that we
would report to them misstatements identified
during our audit above £1 million as well as
misstatements below that amount that, in our
view, warranted reporting for qualitative
reasons.
Overview of the scope of our audit
The Group is primarily structured across two
divisions being Speciality Food Ingredients and
Bulk Ingredients with a central support function.
The Group financial statements are a
consolidation of the Group’s reporting units,
spread across the two divisions, which
comprise the Group’s operating businesses
and centralised functions covering 35 countries.
In establishing the overall approach to the
Group audit, we determined the type of work
that needed to be performed at the reporting
units by us, as the Group engagement team,
or component auditors from other PwC network
firms operating under our instructions. Where
the work was performed by component
auditors, we determined the level of involvement
we needed to have in the audit work at those
reporting units to be able to conclude whether
sufficient and appropriate audit evidence had
been obtained as a basis for our opinion on
the Group financial statements as a whole.
Accordingly, we identified six reporting units
which, in our view, required an audit of their
complete financial information, either due to
their size or their risk characteristics. In addition,
specific audit procedures on certain balances
and transactions were performed at a further
nine reporting units. The procedures described
above provided coverage of 78% of the Group’s
sales and 70% of the Group’s profit before tax
from continuing operations.
This, together with additional procedures at
a Group level, including the audit of individual
transactions that were material to the Group
in operating businesses not subject to an audit
of their complete financial information or where
specific audit procedures were not undertaken
by component auditors, gave us the evidence
we needed for our opinion on the Group
financial statements as a whole.
Areas of particular audit focus
In preparing the financial statements, the
Directors made a number of subjective
judgements, for example in respect of
significant accounting estimates that involved
making assumptions and considering future
events that are inherently uncertain. We
primarily focused our work in these areas
by assessing the Directors’ judgements
against available evidence, forming our own
judgements, and evaluating the disclosures
in the financial statements.
In our audit, we tested and examined
information, using sampling and other auditing
techniques, to the extent we considered
necessary to provide a reasonable basis for
us to draw conclusions. We obtained audit
evidence through testing the effectiveness
of controls, substantive procedures or
a combination of both.
We considered the following areas to be those
that required particular focus in the current year.
This is not a complete list of all risks or areas
of focus identified by our audit. We discussed
these areas of focus with the Audit Committee.
Their report on those matters that they
considered to be significant issues in relation to
the financial statements is set out on page 48.
74 | Tate & Lyle PLC Annual Report 2014
Area of focus
Commodity risk
The Group uses corn and other commodity contracts
to manage and economically hedge its corn book within
the US. The US corn book, comprising the commodity
contracts, inventory and purchase and sales contracts
for corn and co-products, are marked to fair value at
the end of each reporting period. The valuation at each
reporting period has a substantial impact on the
reported results of the US business and the Group.
Furthermore, the valuation can require a high
level of judgement.
Refer to Notes 3, 19 and 20 to the Group
financial statements.
Direct tax provisions
The Directors are required to exercise significant
judgement when determining the appropriate amount to
provide in respect of potential direct tax exposures relating
to challenges by the tax authorities on cross border
arrangements and transfer pricing in various countries.
Refer to Notes 3, 11 and 29 to the Group
financial statements.
We focused on this area because of the inherent
judgements required in estimating the amount of provision
required. Changes in assumptions can materially affect the
levels of provisions recorded in the financial statements.
Retirement benefit obligation liabilities
The Group operates material defined benefit pension
plans, giving rise to pension plan liabilities in the UK and
the US. The Group also operates a significant retirement
medical scheme in the US.
We focused on this area because of the magnitude of the
defined benefit pension plan liability and the retirement
medical scheme in the context of the overall statement
of financial position. Levels of judgement and technical
expertise are required in choosing appropriate
assumptions to measure the plans and scheme liabilities.
Changes in key assumptions can have a material impact
on the calculation of the liabilities.
Refer to Notes 3 and 30 to the Group financial statements.
Fraud in revenue recognition
Auditing Standards (ISAs (UK & Ireland)) presume there
is a risk of fraud in revenue recognition because of the
pressure management may feel to achieve the planned
results. The Group’s focus on revenue and profit targets
as a key performance indicator creates incentive for
revenue to be recorded in the incorrect period. Therefore,
we focused on whether transactions have been recorded
in the period in which the Group becomes entitled to
record revenue.
Risk of management override of internal controls
Auditing Standards (ISAs (UK & Ireland)) require that we
consider this.
How the scope of our audit addressed the area of focus
We obtained an understanding of the risks associated with the valuation and pricing
methodology used at the year end and compared it to the underlying accounting policy.
We confirmed the open commodity positions with brokerage houses and re-performed
market price valuations for contracts on a sample basis to test the accuracy
of the valuation.
We tested manual adjustments that were made to the valuations to check the
rationale on which they were based.
In instances where commodities are not readily traded on an open market,
we performed trend analyses against similar market traded commodities.
We obtained a detailed understanding of the Group’s tax strategy and assessed
key technical tax issues and risks related to business and legislative developments.
We recalculated management’s valuations of direct tax provisions and determined
whether the calculations were in line with the Group’s methodology and principles
and whether they had been applied consistently with previous years.
We challenged the key underlying assumptions, having due regard for on-going
correspondence between Group entities and local tax authorities.
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We obtained an understanding of the assumptions used by the Group’s actuaries and
management in calculating the retirement benefit obligations for the defined benefit
pension plans in the UK and the US, and the retirement medical scheme in the US.
Having formed that understanding we challenged the key actuarial assumptions
(including pension increases, salary increases, inflation, discount rates and mortality),
by comparing these to benchmark ranges based on market conditions and
expectations at 31 March 2014 and comparison across the wider pensions industry.
We also confirmed whether the methods used by management to determine key
assumptions had been consistently applied year-on-year and evaluated the rationale
for any changes in approach.
We tested the reconciliation of the opening to closing liability for accuracy taking
into account the movements in key assumptions over the year and any changes
made to benefits provided within the schemes.
We compared membership census data used in the actuarial models to the payroll
data held by the Group to determine that the data used in the actuarial calculations
was complete and represented only genuine members.
We challenged the appropriateness of management’s revenue recognition policies,
particularly regarding the appropriate recording of sales around the year end date.
We performed a combination of testing of the financial controls around revenue
recognition and testing of revenue recorded during the year, and testing of sales
transactions and credit notes around the year-end date to determine whether the
criteria for recording revenue had been met.
We tested revenue recorded through manual adjustments to determine whether those
manual entries corresponded to revenue transactions that had occurred in the period
and met the Group’s revenue recognition policies.
We tested key reconciliations and manual journal entries. We also considered whether
there was evidence of bias by management in the significant accounting estimates
and judgements relevant to the financial statements.
Furthermore, we assessed the overall control environment of the Group, including the
arrangements for staff to ‘whistle-blow’ inappropriate actions, and interviewed senior
management and the Group’s internal audit function.
We incorporated a number of unpredictable audit procedures into our work, including
the audit of certain immaterial balances.
Tate & Lyle PLC Annual Report 2014 | 75
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Financial Statements
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF TATE & LYLE PLC | CONTINUED
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.
Other matter
We have reported separately on the
Parent Company financial statements of
Tate & Lyle PLC for the year ended 31 March
2014 and on the information in the Directors’
Remuneration Report that is described
as having been audited.
John Waters (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
28 May 2014
Notes:
(a) The maintenance and integrity of the Tate & Lyle
website (www.tateandlyle.com) 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.
(b) Legislation in the United Kingdom governing
the preparation and dissemination of financial
statements may differ from legislation in other
jurisdictions.
Going Concern
Under the Listing Rules we are required to
review the Directors’ statement, set out on
page 28, in relation to going concern. We have
nothing to report having performed our review.
As noted in the Directors’ statement, the
Directors have concluded that it is appropriate
to prepare the Group financial statements using
the going concern basis of accounting. The
going concern basis presumes that the Group
has adequate resources to remain in operation,
and that the Directors intend it to do so, for at
least one year from the date the Group financial
statements were signed. As part of our audit we
have concluded that the Directors’ use of the
going concern basis is appropriate.
However, because not all future events or
conditions can be predicted, these statements
are not a guarantee as to the Group’s ability to
continue as a going concern.
Opinions on other matter prescribed
by the Companies Act 2006
In our opinion the information given in the
Strategic Report and the Directors’ Report for
the financial year for which the Group financial
statements are prepared is consistent with the
Group financial statements.
Other matters on which we are
required to report by exception
Adequacy of information and
explanations received
Under the Companies Act 2006 we are required
to report to you if, in our opinion we have not
received all the information and explanations
we require for our audit. We have no exceptions
to report arising from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are
required to report to you if, in our opinion,
certain disclosures of Directors’ remuneration
specified by law have not been made.
We have no exceptions to report arising
from this responsibility.
Corporate Governance Statement
Under the Listing Rules we are required to
review the part of the Corporate Governance
Statement relating to the Parent Company’s
compliance with nine provisions of the UK
Corporate Governance Code (‘the Code’).
We have nothing to report having performed
our review.
On page 73 of the Annual Report, as required
by the Code Provision C.1.1, the Directors state
that they consider the Annual Report taken as
a whole to be fair, balanced and understandable
and provides the information necessary for
members to assess the Group’s performance,
business model and strategy. On page 48,
as required by C.3.8 of the Code, the Audit
Committee has set out the significant issues
that it considered in relation to the Group
financial statements, and how they were
addressed. Under ISAs (UK & Ireland) we
are required to report to you if, in our opinion:
(cid:116)(cid:1) the statement given by the Directors is
materially inconsistent with our knowledge
of the Group acquired in the course of
performing our audit; or
(cid:116)(cid:1) the section of the Annual Report describing
the work of the Audit Committee does not
appropriately address matters communicated
by us to the Audit Committee.
We have no exceptions to report arising from
this responsibility.
Other information in the
Annual Report
Under ISAs (UK & Ireland), we are required to
report to you if, in our opinion, information in
the Annual Report is:
(cid:116)(cid:1) materially inconsistent with the information in
the audited Group financial statements; or
(cid:116)(cid:1) apparently materially incorrect based on, or
materially inconsistent with, our knowledge
of the Group acquired in the course of
performing our audit; or
(cid:116)(cid:1) is otherwise misleading.
We have no exceptions to report arising from
this responsibility.
Responsibilities for the financial
statements and the audit
Our responsibilities and those of
the Directors
As explained more fully in the Directors’
Statement of Responsibilities set out on
page 73, 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 ISAs
(UK & Ireland). Those standards require us
to comply with the Auditing Practices Board’s
Ethical Standards for Auditors.
76 | Tate & Lyle PLC Annual Report 2014
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
Continuing operations:
– basic
– diluted
Continuing and discontinued operations:
– basic
– diluted
Analysis of adjusted profit before tax from continuing operations
Profit before tax
Adjusted for:
– exceptional items
– amortisation of acquired intangible assets
– net retirement benefit interest
Adjusted profit before tax
* Restated for the adoption of IAS 19 (Revised 2011) ‘Employee Benefits’ (see Note 43).
The Notes on pages 82 to 133 form part of these financial statements.
Notes
4, 5
4, 6
10
10
11
12
12
13
13
7
15
10, 30
Year ended 31 March
Restated*
2013
£m
2014
£m
3 147
325
2
(37)
290
(45)
245
28
273
273
–
273
3 256
334
1
(34)
301
(46)
255
18
273
272
1
273
pence
pence
52.8p
52.1p
58.8p
58.0p
£m
290
14
10
8
322
54.9p
53.8p
58.6p
57.4p
£m
301
12
10
4
327
Tate & Lyle PLC Annual Report 2014 | 77
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Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Profit for the year
Other comprehensive (expense)/income
Items that may be reclassified to profit or loss
Fair value loss on cash flow hedges
Fair value loss on cash flow hedges transferred to profit or loss
Fair value loss on available-for-sale financial assets
(Loss)/gain on currency translation of foreign operations
Fair value gain/(loss) on net investment hedges
Currency translation gain transferred to profit or loss on disposal of foreign operations
Tax expense relating to the above items
Items that will not be reclassified to profit or loss
Retirement benefit plans:
– actual return lower than interest on plan assets
– net actuarial gain/(loss)
Tax expense relating to the above items
Total other comprehensive expense
Total comprehensive income
Analysed by:
– continuing operations
– discontinued operations
Total comprehensive income
Attributable to:
– owners of the Company
– non-controlling interests
Total comprehensive income
* See Note 43.
The notes on pages 82 to 133 form part of these financial statements.
Notes
25
25
18
25
25
37
11
30
30
11
Year ended 31 March
Restated*
2013
£m
273
2014
£m
273
(1)
–
–
(130)
50
–
–
(81)
(29)
19
(22)
(32)
(113)
160
132
28
160
160
–
160
(3)
4
(1)
57
(30)
(14)
(6)
7
(13)
(132)
(6)
(151)
(144)
129
117
12
129
127
2
129
78 | Tate & Lyle PLC Annual Report 2014
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
EQUITY
Capital and reserves
Share capital
Share premium
Capital redemption reserve
Other reserves
Retained earnings
Equity attributable to owners of the Company
Non-controlling interests
TOTAL EQUITY
LIABILITIES
Non-current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Deferred tax liabilities
Retirement benefit deficits
Provisions for other liabilities and charges
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings and bank overdrafts
Derivative financial instruments
Provisions for other liabilities and charges
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Notes
15
16
17
18
20
29
23
30
22
23
20
33
18
24
24
25
27
28
20
29
30
31
27
28
20
31
2014
£m
389
865
6
28
23
7
1
–
1 319
418
314
1
79
396
1 208
–
1 208
2 527
117
406
8
58
460
1 049
1
1 050
2
439
2
45
220
10
718
315
40
339
50
15
759
1 477
2 527
At 31 March
2013
£m
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
1 751
2 787
The Notes on pages 82 to 133 form part of these financial statements.
The consolidated financial statements on pages 77 to 133 were approved by the Board of Directors on 28 May 2014 and signed on its behalf by:
Javed Ahmed, Tim Lodge Directors
Tate & Lyle PLC Annual Report 2014 | 79
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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
– other non-cash items
– finance income
– finance expense
Change in working capital
Change in net retirement benefit obligations
Cash generated from continuing operations
Interest paid
Income tax paid
Net cash generated from operating activities in discontinued operations
Net cash generated from operating activities
Cash flows from investing activities
Purchase of intangible assets
Purchase of property, plant and equipment
Proceeds on disposal of property, plant and equipment
Acquisitions of businesses, net of cash acquired
Disposal of businesses, net of cash disposed
Disposal of joint ventures, net of cash disposed
Purchase of available-for-sale financial assets
Disposal of available-for-sale financial assets
Interest received
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Purchase of own shares
Cash inflow from additional borrowings
Cash outflow from repayment of borrowings
Repayment of capital element of finance leases
Dividends paid to owners of the Company
Dividends paid to non-controlling interests
Net cash used in financing activities
Net increase/(decrease) in cash and cash equivalents
Cash and cash equivalents
Balance at beginning of year
Net increase/(decrease) in cash and cash equivalents
Currency translation differences
Balance at end of year
* See Note 43.
Year ended 31 March
Restated*
2013
£m
2014
£m
290
97
–
21
8
(6)
(2)
37
38
(43)
440
(33)
(23)
–
384
(45)
(114)
34
(15)
3
–
(4)
2
2
(137)
–
(29)
4
(46)
(2)
(124)
–
(197)
50
379
50
(33)
396
301
91
(9)
17
13
–
(1)
34
(107)
(42)
297
(36)
(18)
8
251
(42)
(92)
3
–
36
15
(4)
–
1
(83)
1
(23)
24
(117)
(2)
(117)
(2)
(236)
(68)
446
(68)
1
379
Notes
16
15
26
10
10
32
37
37
37
18
18
24
14
34
34
33
A reconciliation of the movement in cash and cash equivalents to the movement in net debt is presented in Note 34.
The Notes on pages 82 to 133 form part of these financial statements.
80 | Tate & Lyle PLC Annual Report 2014
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
At 1 April 2012
Year ended 31 March 2013 – Restated*
Profit for the year
Other comprehensive income/(expense)
Total comprehensive income
Share-based payments (includes tax credit of £2 million)
Purchase of own shares
Proceeds from shares issued
Non-controlling interests in subsidiaries sold
Dividends paid (Note 14)
At 31 March 2013
Year ended 31 March 2014
Profit for the year
Other comprehensive expense
Total comprehensive (expense)/income
Share-based payments
Purchase of own shares
Non-controlling interests in subsidiaries acquired
Initial recognition of put option on non-controlling
interest (Note 37)
Dividends paid (Note 14)
At 31 March 2014
* See Note 43.
Share capital
and share
premium
(Note 24)
£m
523
Capital
redemption
reserve
£m
8
Other
reserves
(Note 25)
£m
128
Attributable to
the owners
of the
Company
£m
1 033
Retained
earnings
£m
374
Non-
controlling
interests
£m
25
–
–
–
–
–
–
–
–
523
–
–
–
–
–
–
–
–
523
–
–
–
–
–
–
–
–
8
–
–
–
–
–
–
–
–
8
–
11
11
–
–
–
–
–
139
–
(81)
(81)
–
–
–
–
–
58
272
(156)
116
15
(23)
1
–
(117)
366
273
(32)
241
8
(29)
–
(2)
(124)
460
272
(145)
127
15
(23)
1
–
(117)
1 036
273
(113)
160
8
(29)
–
(2)
(124)
1 049
1
1
2
–
–
–
(25)
(2)
–
–
–
–
–
–
1
–
–
1
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Total
equity
£m
1 058
273
(144)
129
15
(23)
1
(25)
(119)
1 036
273
(113)
160
8
(29)
1
(2)
(124)
1 050
Other comprehensive income/(expense) recognised in retained earnings relates wholly to retirement benefit plans. An analysis of other
comprehensive income/(expense) recognised in other reserves by component of equity is presented in Note 25.
At 31 March 2014, retained earnings included a deduction of £37 million (2013 – £29 million) for the cumulative cost of own shares held in relation
to share-based incentive plans. Further information on own shares is presented in Note 24.
Dividends on ordinary shares in respect of the financial year
Per ordinary share:
– interim paid
– final proposed
The Notes on pages 82 to 133 form part of these financial statements.
Year ended 31 March
2014
pence
7.8p
19.8p
27.6p
2013
pence
7.4p
18.8p
26.2p
Tate & Lyle PLC Annual Report 2014 | 81
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1 Basis of preparation
Description of business
Tate & Lyle PLC (the Company) is a public
limited company incorporated and domiciled
in the United Kingdom. The Company’s
ordinary shares are listed on the London
Stock Exchange.
The Company, its subsidiaries and
proportionately consolidated joint ventures
(together ‘the Group’) provides ingredients
and solutions to the food, beverage and other
industries. The Group operates from more
than 30 production facilities around the world.
The Group’s continuing operations comprise
two operating segments: Speciality Food
Ingredients and Bulk Ingredients. Segment
information is presented in Note 4.
Accounting period
The Group’s annual financial statements
are drawn up to 31 March. These financial
statements cover the year ended
31 March 2014 with comparative amounts
for the year ended 31 March 2013.
Basis of accounting
The consolidated financial statements on pages
77 to 133 have been prepared on the going
concern basis in accordance with International
Financial Reporting Standards (IFRS) as
adopted for use in the European Union and
those parts of the Companies Act 2006 that are
applicable to companies reporting under IFRS.
The consolidated financial statements have
been prepared under the historical cost
convention, modified in respect of the
revaluation to fair value of available-for-sale
financial assets, derivative financial instruments,
assets classified as held for sale and assets
held by defined benefit pension plans.
The Group’s principal accounting policies are
set out in Note 2.
Company financial statements
The Company has not adopted IFRS and
prepares its separate financial statements in
accordance with applicable law and UK
Accounting Standards (UK GAAP). The
Company’s separate financial statements
are set out on pages 135 to 140.
Going concern
For the reasons set out on page 28, the
Directors have adopted the going concern basis
in preparing the Company’s and the Group’s
financial statements.
Reconciliations of the adjusted performance
measures to the most directly comparable
measures presented in accordance with IFRS
are presented in Note 42.
Accounting standards adopted during
the year
At the beginning of the year, the Group adopted
a number of new or revised accounting
standards that are outlined below. With the
exception of the changes arising from the
adoption of IAS 19 (Revised 2011) ‘Employee
Benefits’, the Group’s principal accounting
policies are unchanged compared with the
year ended 31 March 2013.
IAS 19 (Revised 2011) ‘Employee Benefits’
IAS 19 (Revised 2011) caused the Group to
change the way it accounts for defined benefit
pension and other retirement benefit plans. It
had no impact on the Group’s financial position
but it changed the allocation of movements in
the deficits or surpluses on the plans within and
between profit or loss and other comprehensive
income. Comparative amounts for 2013 have
been restated on a consistent basis.
An explanation and analysis of the effect
of IAS 19 (Revised 2011) on the Group’s
results for the year and the prior year is
presented in Note 43.
IFRS 13 Fair Value Measurement
IFRS 13 established a single source of guidance
for measuring fair value and introduced
consistent disclosures about fair value
measurements. From the Group’s perspective,
IFRS 13 is relevant to the measurement of
available-for-sale financial assets, derivative
financial instruments, assets classified as held
for sale and assets held by defined benefit
pension plans, and in relation to impairment
testing and in accounting for business
combinations. IFRS 13 was adopted
prospectively from 1 April 2013 so there
was no change in any fair values determined
in previous periods.
IAS 1 (Revised 2011) Presentation
of Financial Statements
IAS 1 (Revised 2011) had no overall impact on
the amount of other comprehensive income,
but requires that items of other comprehensive
income that may be reclassified to profit or loss
are presented separately from those that will not
be reclassified to profit or loss.
Other standards
At the beginning of the year, the Group adopted
various minor improvements to accounting
standards arising from the IASB’s 2009 – 2011
review cycle and Amendments to IFRS 7
Disclosures – Offsetting Financial Assets and
Financial Liabilities.
Discontinued operations
In the Group’s financial statements, the results,
assets and liabilities and cash flows of
discontinued operations are presented
separately from those of continuing operations.
An operation is classified as discontinued if it
is a component of the Group that: (i) has been
disposed of, or meets the criteria to be classified
as held for sale; and (ii) represents a separate
major line of business or geographic area
of operations or will be disposed of as part
of a single co-ordinated plan to dispose
of a separate major line of business
or geographic area of operations.
Fair value measurement
Fair value is the price that would be received to
sell an asset or paid to transfer a liability in an
orderly transaction between market participants
at the measurement date, regardless of whether
that price is directly observable or estimated
using another valuation technique. In estimating
the fair value of an asset or a liability, the Group
takes into account the characteristics of the
asset or liability if market participants would take
those characteristics into account when pricing
the asset or liability at the measurement date.
Fair value measurements are categorised into
Level 1, 2 or 3 based on the degree to which
the inputs to the fair value measurements are
observable and the significance of the inputs
to the fair value measurement in its entirety,
as follows:
(cid:116)(cid:1) Level 1 inputs are quoted prices
(unadjusted) in active markets for identical
assets or liabilities that the entity can
assess at the measurement date
(cid:116)(cid:1) Level 2 inputs are inputs, other than
quoted prices included in Level 1, that
are observable for the asset or liability
either directly or indirectly
(cid:116)(cid:1) Level 3 inputs are unobservable inputs
for the asset or liability.
Use of adjusted measures
Tate & Lyle presents adjusted performance
measures including adjusted operating profit,
adjusted profit before tax and adjusted earnings
per share that are used for internal performance
analysis and incentive compensation
arrangements for employees and are presented
because they provide investors with valuable
additional information about the performance
of the business. For the periods presented,
adjusted performance measures exclude,
where relevant, exceptional items, the
amortisation of acquired intangible assets,
net retirement benefit interest and tax on those
adjustments. Adjusted performance measures
reported by the Group are not defined terms
under IFRS and may therefore not be
comparable with similarly-titled measures
reported by other companies. The Directors
do not regard these measures as a substitute
for, or superior to, the equivalent measures
presented in accordance with IFRS.
82 | Tate & Lyle PLC Annual Report 2014
2 Principal accounting policies
Basis of consolidation
(a) Subsidiaries
A subsidiary is an entity controlled, either
directly or indirectly, by the Company, where
control is the power to govern the financial and
operating policies of the entity so as to obtain
benefits from its activities. Control generally
exists where the Group owns a shareholding
that gives it more than one half of the voting
rights in the entity.
A non-controlling interest in a subsidiary
represents the share of the net assets of the
subsidiary that is attributable to the equity
interest in the subsidiary that is not owned
by the Group.
The Group’s income and expenses, assets and
liabilities and cash flows include those of each
of its subsidiaries from the date on which the
Company obtains control until such time as
control is lost. All intra-Group transactions,
balances, income and expenses are eliminated
on consolidation.
(b) Joint ventures
A joint venture is a contractual arrangement
under which the Group and other parties
undertake an activity that is subject to joint
control, whereby strategic financial and
operating policy decisions require unanimous
consent of the Group and the other parties. The
Group’s interests in jointly controlled entities are
accounted for by proportionate consolidation,
whereby the Group’s share of the income and
expenses, assets and liabilities and cash flows
of those entities are combined on a line-by-line
basis in the financial statements with those of
the Company and its subsidiaries.
Intra-Group balances and unrealised profits
or losses on transactions between the Group
and joint ventures are normally eliminated
to the extent of the Group’s interest in the joint
venture. Losses are, however, recognised
in full where they represent a reduction in the
net realisable value of a current asset or an
impairment loss.
(c) Associates
An associate is an entity over which the Group
has significant influence. Significant influence is
the power to participate in financial and operating
policy decisions but not to control or jointly
control them. 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 share of
the profit or loss, other comprehensive income
and net assets are shown on one line of the
relevant primary financial statements.
Losses of an associate in excess of the Group’s
interest in the entity are not recognised, except
to the extent that the Group has incurred
obligations or made payments on behalf of
the associate.
Unrealised profits or losses on transactions
between the Group and its associates are
normally eliminated to the extent of the Group’s
interest in the associate. Losses are, however,
recognised in full where they represent a
reduction in the net realisable value of a current
asset or an impairment loss.
The consolidated financial statements are
presented in pounds sterling which is the
Company’s functional currency.
Business combinations
A business combination is a transaction or other
event in which the Group obtains control over
a business such that it becomes a subsidiary.
Business combinations are accounted for
using the acquisition method.
Goodwill arising in a business combination
represents the excess of the sum of the
consideration transferred, the amount of any
non-controlling interest in the acquired business
and, in a business combination achieved in
stages, the fair value at the acquisition date
of the Group’s previously held equity interest,
over the net total of the identifiable assets
and liabilities of the acquired business at the
acquisition date. Any shortfall is recognised
immediately as a gain in the income statement.
Consideration transferred represents the sum
of the fair values at the acquisition date of the
assets given, liabilities incurred or assumed
and equity instruments issued by the Group
in exchange for control over the acquired
business.
Acquisition-related costs are charged to the
income statement in the period in which they
are incurred.
Identifiable assets and liabilities of the acquired
business are measured at their fair value at the
acquisition date, except for certain items that
are measured in accordance with the relevant
Group accounting policy, including retirement
benefit obligations and deferred tax assets
and liabilities.
Any non-controlling interest in the acquired
business is measured either at fair value or
at the non-controlling interest’s proportionate
share of the identifiable assets and liabilities
of the business.
Put options issued by the Group over non-
controlling interests are initially recognised
as a liability measured at fair value with a
corresponding charge directly to equity.
Subsequently, the liability is measured at
amortised cost using the effective interest
method and changes in its carrying amount
are recognised in the income statement.
Changes in the Group’s ownership interest in a
subsidiary that do not result in a loss of control
are accounted for within equity. Any gain or loss
on loss of control is recognised in the income
statement.
Foreign currency translation
At entity level, transactions in foreign
currencies are translated into the entity’s
functional currency at the exchange rate ruling
at the date of the transaction. Monetary assets
and liabilities denominated in foreign currencies
are translated at the exchange rate ruling at
the period-end date. Currency translation
differences arising at entity level are recognised
in the income statement.
On consolidation, the results of foreign
operations are translated into pounds sterling
at the average rate of exchange for the period
and their assets and liabilities are translated into
pounds sterling at the exchange rate ruling at
the period-end date. Currency translation
differences arising on consolidation are
recognised in other comprehensive income
and taken to the currency translation reserve.
In the event that a foreign operation is sold,
the gain or loss on disposal recognised in the
income statement is determined after taking
into account the cumulative currency translation
differences arising on consolidation of the
operation subsequent to the adoption of IFRS.
In the cash flow statement, the cash flows of
foreign operations are translated into pounds
sterling at the average exchange rate for
the period.
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.
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.
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.
Tate & Lyle PLC Annual Report 2014 | 83
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
2 Principal accounting policies
continued
Goodwill
Goodwill arising in a business combination
is recognised as an intangible asset and is
allocated to the cash-generating unit (‘CGU’)
or group of CGUs that is expected to benefit
from the synergies of the business combination.
Goodwill is not amortised but is tested for
impairment annually and whenever there are
events or changes in circumstances that
indicate that its carrying amount may not
be recoverable.
Goodwill is carried at cost less any recognised
impairment losses.
Other intangible assets
Other intangible assets are stated at cost less
accumulated amortisation and any recognised
impairment losses. All intangible assets
recognised by the Group have finite useful lives.
(a) Acquired in business combinations
An intangible resource acquired in a business
combination is recognised as an intangible
asset if it is separable from the acquired
business or arises from contractual or legal
rights. Acquired intangible assets, for example,
patents and customer relationships, are
amortised on a straight-line basis so as to
charge their cost, which represents their fair
value at the date of acquisition, over the periods
of their expected benefit to the Group, which
are in the range three to 15 years.
(b) Other intangibles
Other intangible assets mainly comprise certain
product development expenditure, marketing-
related intangibles, computer software costs
and assets under construction relating to the
common global IS/IT system.
Costs incurred on the development,
design and testing of new or improved
products are capitalised only when the
technical and commercial feasibility of the
product has been proven and prior to the
product going into full production. Research
and other development expenditures are
charged to the income statement in the
period in which they are incurred.
Other intangibles include marketing-related
intangibles relating to the SPLENDA® Sucralose
alliance with McNeil Nutritionals, LLC.
Other intangible assets are amortised on a
straight-line basis so as to charge their cost
over the periods of their expected benefit to the
Group, which are in the range three to ten years.
Capitalised costs in respect of the global IS/IT
system will be amortised once the system is
deployed into the Group’s businesses.
Property, plant and equipment
Land and buildings mainly comprise
manufacturing sites and administrative facilities.
Plant and machinery mainly comprises
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 period 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
Residual values and useful lives are reviewed
at each period-end 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
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.
Impairment of non-financial assets
Goodwill, other intangible assets and property,
plant and equipment are tested for impairment
whenever events or circumstances indicate that
their carrying amounts may not be recoverable.
Additionally, goodwill is subject to an annual
impairment test.
An asset is impaired to the extent that its
carrying amount exceeds its recoverable
amount. An asset’s recoverable amount
represents the higher of the asset’s value in use
and its fair value less costs to sell. An asset’s
value in use represents the present value of the
future cash flows expected to be derived from
continued use of the asset. Fair value less costs
to sell is the amount obtainable from the sale
of the asset in an arm’s length transaction
between knowledgeable, willing parties, less
the costs of disposal.
Where it is not possible to estimate the
recoverable amount of an individual asset,
the recoverable amount is determined for
the CGU to which the asset belongs. An asset’s
CGU is the smallest group of assets that
includes the asset and generates cash inflows
that are largely independent of the cash inflows
from other assets or groups of assets. Goodwill
does not generate cash inflows independently
of other assets and is, therefore, tested for
impairment at the level of the CGU or group
of CGUs to which it is allocated.
Value in use is based on estimates of pre-tax
cash flows discounted at a pre-tax discount rate
that reflects the risks specific to the CGU to
which the asset belongs.
Where necessary, impairment of non-financial
assets other than goodwill is recognised before
goodwill is tested for impairment. When
goodwill is tested for impairment and the
carrying amount of the CGU or group of CGUs
to which it is allocated exceeds its recoverable
amount, the impairment is allocated first to
reduce the carrying amount of the goodwill and
then pro-rata to the other non-financial assets
belonging to the CGU or group of CGUs on the
basis of their respective carrying amounts.
Impairment losses are recognised in the income
statement. Impairment losses recognised in
previous periods for assets other than goodwill
are reversed if there has been a change in the
estimates used to determine the asset’s
recoverable amount, but only to the extent
that the carrying amount of the asset does
not exceed its carrying amount had no
impairment been recognised in previous
periods. Impairment losses recognised in
respect of goodwill cannot be reversed.
84 | Tate & Lyle PLC Annual Report 2014
2 Principal accounting policies
continued
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.
Financial instruments
(a) 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 expenses. When a trade receivable
is uncollectable, it is written off against the
allowance account for trade receivables.
Subsequent recoveries of amounts previously
written off are credited against operating
expenses in the income statement.
(b) 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.
(c) 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.
(d) 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 in other comprehensive income.
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 a security below its cost is
considered as an indicator that the securities
are impaired. Impairments are recognised
in the income statement.
(e) Borrowings
Borrowings are initially measured at fair value,
net of transaction costs incurred. Borrowings
are subsequently measured at amortised cost
using the effective interest rate method,
whereby any difference between the proceeds
(net of transaction costs) and the initial fair value
is recognised in the income statement over
the period of the borrowings. As explained
under ‘Hedge accounting’ below, the carrying
amount of a borrowing may be subject
to adjustment where it is a hedged liability
in a fair value hedge.
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 period-end date.
Dividends on preference shares are recognised
in the income statement as interest expense.
(f) Derivative financial instruments
The Group uses derivative financial instruments
to reduce its exposure to commodity price,
currency exchange rate and interest rate
movements. The Group does not hold or issue
derivatives for speculative purposes.
All derivative financial instruments held by the
Group are recognised as assets or liabilities
measured at their fair values at the period-end
date. As explained under ‘Hedge accounting’
below, unless and to the extent that a derivative
is in a designated and effective cash flow or net
investment hedging relationship, fair value gains
and losses on derivatives are recognised in the
income statement.
Derivative financial instruments that are not in a
designated hedging relationship are classified
as held for trading.
(g) 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.
(h) Offsetting financial instruments
Financial assets and financial liabilities are offset
and the net amount presented in the statement
of financial position where there is a legally
enforceable right to offset the recognised
amounts and there is an intention to settle
on a net basis or realise the asset and settle
the liability simultaneously.
Hedge accounting
For a hedging relationship to qualify for hedge
accounting, it must be documented at inception
together with the Group’s risk management
objective and strategy for initiating the hedge
and it must both be expected to be highly
effective in offsetting the changes in cash flows
or fair value attributed to the hedged risk and
actually be highly effective in doing so.
(a) Cash flow hedges
Hedging relationships are classified as cash
flow hedges where the hedging instrument
hedges exposure to variability in cash flows
that is attributable either to a particular risk
associated with a recognised asset or liability
(such as interest payments on variable rate
debt), a highly probable forecast transaction
(such as commodity purchases) or the foreign
currency risk in a firm commitment (such as the
purchase of an item of equipment).
Where a hedging relationship is classified as a
cash flow hedge, to the extent that the hedge is
effective, changes in the fair value of the
hedging instrument are recognised in other
comprehensive income rather than in the
income statement. When the hedged item
affects the income statement, the cumulative
fair value gain or loss recognised in other
comprehensive income is transferred to the
income statement. When a hedged firm
commitment results in the recognition of a
non-current asset, the initial carrying amount
of the asset is adjusted for the cumulative fair
value gain or loss.
If the hedging instrument expires or is sold, or
if the hedging relationship no longer meets the
conditions for hedge accounting, the cumulative
fair value gain or loss remains in equity until the
forecast transaction is recognised in the income
statement. If a hedged forecast transaction is
no longer expected to occur, the cumulative fair
value gain or loss is immediately transferred to
the income statement.
(b) Net investment hedges
A net investment hedge is the hedge of the
currency exposure on the retranslation of the
Group’s net investment in a foreign operation.
Net investment hedges are accounted for
similarly to cash flow hedges. Changes in the
fair value of the hedging instrument are, to the
extent that the hedge is effective, recognised
in other comprehensive income.
In the event that the foreign operation is
disposed of, the cumulative fair value gain or
loss recognised in other comprehensive income
is transferred to the income statement where it
is included in the gain or loss on disposal of the
foreign operation.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
value of the policy is deemed to be equivalent
to the present value of the related benefit
obligations. A deficit or surplus is recognised
on each plan which represents the difference
between the present value of the benefit
obligation and the fair value of the plan assets.
Where a plan is in surplus, the surplus
recognised is limited to the present value
of any amounts that the Group expects to
recover by way of refunds or a reduction in
future contributions.
The defined benefit cost recognised in the
income statement comprises the current
service cost, any past service cost and the
net interest on the deficit or surplus. Gains
or losses on curtailments or settlements of
the plans are also recognised in the income
statement in the period in which the
curtailment or settlement occurs.
Remeasurements of the deficit or surplus are
recognised in other comprehensive income.
Current service cost represents the increase in
the present value of the benefit obligation due
to benefits accrued during the period, less
employee contributions. Past service cost
represents the change in the present value of
the benefit obligation that arises from benefit
changes that are applied retrospectively to
benefits accrued in previous years. Any past
service cost is recognised in full in the period
in which the benefit changes are made.
Net interest on the deficit or surplus is
calculated by applying the discount rate that is
used in measuring the present value of the
benefit obligation to the deficit or surplus.
Plan administration costs incurred by the Group
are also recognised in the income statement.
Remeasurements comprise differences
between the actual return on plan assets (less
asset management expenses) and the interest
on the plan assets and actuarial gains and
losses. Actuarial gains and losses represent the
effect of changes in the actuarial assumptions
made in measuring the present value of the
benefit obligation and experience differences
between those assumptions and actual
outcomes. Actuarial gains and losses are
recognised in full in the period in which
they occur.
(b) Defined contribution plans
Contributions made by the Group to defined
contribution pension schemes are recognised
in the income statement in the period in which
they fall due.
2 Principal accounting policies
continued
Hedge accounting
(c) Fair value hedges
Hedging relationships are classified as fair value
hedges where the hedging instrument hedges
the exposure to changes in the fair value of a
recognised asset or liability that is attributable
to a particular risk (such as the fair value of fixed
rate debt).
financial statements and its tax base used
in the computation of taxable profit. Deferred
tax is accounted for using the liability method,
whereby deferred tax liabilities are generally
recognised for all taxable temporary differences
and deferred tax assets are recognised to the
extent that it is probable that taxable profits will
be available in the foreseeable future against
which deductible temporary differences can
be utilised.
Where the hedging relationship is classified
as a fair value hedge, the carrying amount
of the hedged asset or liability is adjusted
by the change in its fair value attributable
to the hedged risk and the resulting gain
or loss is recognised in the income statement
where, to the extent that the hedge is effective,
it offsets the fair value gain or loss on the
hedging instrument.
Provisions
A provision is a liability of uncertain timing or
amount that is recognised when the Group has
a present obligation (legal or constructive) as a
result of a past event, it is more likely than not
that a payment will be required to settle the
obligation and the amount can be
estimated reliably.
Where the effect is material, the expected future
payments are discounted using a pre-tax discount
rate that reflects current market assessments of
the time value of money and, where appropriate,
the risks specific to the liability. The unwinding
of any discount is recognised in the income
statement within finance expense.
Provision is made for restructuring costs
when a detailed formal plan for the restructuring
has been determined and the plan has been
communicated to those affected by it.
Gains from the expected disposal of assets
are not taken into account in measuring
restructuring provisions.
Provisions are not recognised for future
operating losses.
Provisions are recognised for onerous contracts
to the extent that the benefits expected to be
derived from a contract are lower than the
unavoidable cost to the Group of meeting its
obligations under the contract.
Income taxes
Current tax is the amount of tax payable or
recoverable in respect of the taxable profit or
loss for the period. Taxable profit differs from
accounting profit because it excludes income
and expenses that are recognised in the period
for accounting purposes but are either not
taxable or not deductible for tax purposes or
are taxable or deductible in earlier or
subsequent periods. Current tax is calculated
using tax rates that have been enacted or
substantively enacted at the period-end date.
Deferred tax is tax expected to be payable or
recoverable on temporary differences between
the carrying amount of an asset or liability in the
86 | Tate & Lyle PLC Annual Report 2014
Deferred tax assets and liabilities are not
recognised if the temporary differences arise
from the initial recognition of goodwill or from
the initial recognition of other assets and
liabilities in a transaction other than a business
combination that affects neither accounting
profit nor taxable profit.
Deferred tax liabilities are recognised for taxable
temporary differences arising on investments
in foreign 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 it
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 is recovered or the
liability is settled.
Current tax assets and liabilities are offset
when there is a legally enforceable right to set
off the amounts and management intends to
settle on a net basis. 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.
Current and deferred tax is recognised in
the income statement unless it relates to an
item that is recognised in the same or a different
period outside the income statement, in which
case it too is recognised outside the income
statement, either in other comprehensive
income or directly in equity.
Retirement benefits
As described in Note 30, the Group operates
pension plans in most of the countries in which
it operates. Defined benefit pension plans are
principally in the UK and the US and, until
December 2013, in the Netherlands, and the
Group operates a number of defined
contribution pension plans.
The Group also operates defined benefit
retirement medical plans in the US.
(a) Defined benefit plans
A valuation of each of the defined benefit plans
for accounting purposes is carried out annually
at 31 March by independent qualified actuaries.
Benefit obligations are measured using the
projected unit credit method and are
discounted using the market yields on high
quality corporate bonds denominated in the
same currency as, and of similar duration to, the
benefit obligations. Plan assets are measured at
their fair value at the period-end date. Where a
plan holds a qualifying insurance policy, the fair
(b) Financial instruments
IFRS 9 Financial Instruments will eventually
replace IAS 39 Financial Instruments:
Classification and Measurement. IFRS 9 is
being issued in stages. While the sections
dealing with the classification and measurement
of financial instruments have been issued, the
IASB is currently revisiting certain aspects of
them. The section of the standard dealing with
the impairment of financial assets is still under
development. During the year, the IASB issued
the section dealing with hedge accounting that
sets out a new hedge accounting model that is
intended to be more closely aligned with how
entities undertake risk management activities
when hedging financial and non-financial
exposures.
In February 2014, the IASB tentatively decided
to defer the effective date of IFRS 9 and it is not
now expected to become mandatory for the
Group until the year ending 31 March 2019
(though this will be subject to its endorsement
for use in the European Union).
(c) Other pronouncements
With effect from 1 April 2014, the Group
adopted Amendments to IAS 39 Novation of
Derivatives and Continuation of Hedge
Accounting, which clarifies that, provided
certain conditions are met, hedge accounting
need not be discontinued where a hedging
derivative is novated.
Also with effect from 1 April 2014, the Group
adopted Amendments to IAS 32 Offsetting
Financial Assets and Liabilities, which clarifies
the conditions that must be met in order to set
off financial assets and financial liabilities, and
Amendments to IAS 36 Recoverable Amount
Disclosures for Non-Financial Assets.
Subject to its endorsement for use in the
European Union, with effect from 1 April 2015,
the Group will adopt Amendments to IAS 19
Defined Benefit Plans: Employee Contributions,
which clarifies how employee contributions that
are linked to service should be attributed to
periods of service and when such contributions
may be treated as a reduction in the service
cost that is recognised in the income statement.
Also with effect from 1 April 2015, the Group
will adopt various minor improvements to
accounting standards arising from the IASB’s
2010 – 2012 and 2011 – 2013 review cycles.
2 Principal accounting policies
continued
Share-based incentives
As described in Note 26, the Company
operates share-based compensation plans
under which it grants awards over its ordinary
shares to its own employees and to those of its
subsidiaries. All of the awards granted under
the existing plans are classified as equity-settled
awards. The Group recognises a compensation
expense that is based on the fair value of the
awards measured at the grant date using the
Black-Scholes option pricing formula. Fair value
is not subsequently remeasured unless relevant
conditions attaching to the award are modified.
Fair value reflects any market performance
conditions and all non-vesting conditions.
Adjustments are made to the compensation
expense to reflect actual and expected
forfeitures due to failure to satisfy service
conditions or non-market performance
conditions.
Generally, the resulting compensation expense
is recognised in the income statement on
a straight-line basis over the vesting period and
a corresponding credit is recognised in equity.
In the event of the cancellation of an award,
whether by the Group or a participating
employee, the compensation expense
that would have been recognised over the
remainder of the vesting period is recognised
immediately in the income statement.
Dividends
Dividends on the Company’s ordinary
shares are recognised when they have been
appropriately authorised and are no longer at
the Company’s discretion. Accordingly, interim
dividends are recognised when they are paid
and final dividends are recognised when they
are declared following approval by shareholders
at the Company’s AGM. Dividends are
recognised as an appropriation of
shareholders’ equity.
Own shares
Own shares represent the Company’s ordinary
shares that are held by the Company in treasury
or by a sponsored Employee Benefit Trust that
are used to satisfy awards made under the
Company’s share-based incentive plans. When
own shares are acquired, the cost of purchase
in the market is deducted from equity. Gains or
losses on the subsequent transfer or sale of
own shares are also recognised in equity.
Assets held for sale
An asset or group of assets is classified as held
for sale if its carrying amount will be principally
recovered through a sale transaction rather than
through continuing use in the business, it is
available for immediate sale in its present
condition and management has committed to,
and has initiated, a plan to sell the asset which,
when initiated, was expected to result in a
completed sale within 12 months. Assets that
are classified as held for sale are measured at
the lower of their carrying amount when they
were classified as held for sale and their fair
value less costs to sell.
Accounting standards issued but not
yet adopted
A number of new or revised accounting
standards have been issued that are relevant to
the Group but had not been adopted at
31 March 2014. With the exception of IFRS 11
Joint Arrangements, the Directors do not expect
that these standards will have a material impact
on the Group’s reported results, cash flows or
financial position.
(a) Consolidation, joint arrangements
and associates
With effect from 1 April 2014, the Group
adopted five related standards dealing
with consolidation, joint arrangements
and associates.
IFRS 10 Consolidated Financial Statements
IFRS 10 replaces the parts of the existing
IAS 27 Consolidated and Separate Financial
Statements that deal with consolidated financial
statements and SIC-12 Consolidation – Special
Purpose Entities. IFRS 10 establishes a single
control model for consolidation that applies to
all entities, including special purpose entities.
IFRS 11 Joint Arrangements
IFRS 11 will change significantly the accounting
for the Group’s interests in joint ventures in the
consolidated financial statements.
At present, the Group’s interests in joint
ventures are accounted for by proportionate
consolidation. IFRS 11 prohibits the use of
proportionate consolidation and requires that
joint ventures are accounted for using the equity
method of accounting. While these changes will
have no net impact on the Group’s results or
financial position, they will affect many of the
individual line items in the consolidated financial
statements. In the 2015 financial year,
comparative amounts for the 2014 financial year
will be restated on a consistent basis. An
explanation and analysis of the effect of IFRS 11
is presented in Note 44.
IAS 27 (Revised 2011) Separate Financial
Statements
IAS 27 was revised such that it now deals only
with the requirements for separate financial
statements because the requirements for
consolidated financial statements are now
contained in IFRS 10.
IAS 28 (Revised 2011) Investments in Associates
and Joint Ventures
IAS 28 was revised as a consequence of the
issuance of IFRS 11 in order to set out the
requirements for the application of the equity
method when accounting for joint ventures.
IFRS 12 Disclosure of Interests in Other Entities
IFRS 12 is a new and comprehensive standard
that prescribes disclosure requirements for all
forms of interests in other entities, including joint
ventures and associates.
Tate & Lyle PLC Annual Report 2014 | 87
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
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.
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
period-end 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.
Derivatives and hedge accounting
The Group uses derivative financial instruments
to reduce its exposure to commodity price,
currency exchange rate and interest rate
movements.
In particular, the Group uses corn and other
commodity contracts to manage and hedge its
corn book in the US. The US corn book is
comprised of the commodity contracts,
inventory and contracts for the purchase and
sale of corn and co-products, some elements of
which are expected to mature in more than 12
months’ time, and is measured at fair value at
each period-end date. The valuation of the corn
book, which is underpinned by a number of
judgements, has a material impact on the
reported results of the Group.
At 31 March 2014, the Group recognised
derivative assets of £102 million (including
commodity pricing contracts of £65 million) and
derivative liabilities of £52 million (including
commodity pricing contracts of £45 million). The
fair value of derivatives continually changes in
response to changes in prevailing market
conditions affecting future corn and other
commodity prices, currency exchange rates
and interest rates. Where practicable, the Group
uses hedge accounting to mitigate the impact
of changes in the fair value of its hedging
instruments on the income statement, but the
Group’s results may be affected by these fair
value changes where hedge accounting cannot
be applied or due to hedge ineffectiveness.
Retirement benefits
The Group operates defined benefit pension
plans in the UK and the US and unfunded
retirement medical plans in the US. Generally, a
deficit or surplus is recognised on each plan
which represents the difference between the
present value of the benefit obligation and the
fair value of the plan assets (any surplus may be
restricted in certain circumstances).
At 31 March 2014, the present value of the
benefit obligations on the plans was
£1,525 million (2013 – £1,672 million), including
£54 million (2013 – £80 million) in respect of the
unfunded medical plans. The present value of
the benefit obligations is based on actuarial
estimates of the future benefits that will be
payable to the members of the plans. As such,
the benefit obligations are based on a number
of assumptions, changes to which could have a
material impact on the reported amounts.
With regard to the pension plans, the present
value of the benefit obligations is most sensitive
to assumed life expectancies, expected future
price inflation rates and the discount rate
applied to the benefit obligations. At
31 March 2014, an increase of one year in life
expectancy would have increased the
obligations by £68 million, an increase in future
price inflation of 50 basis points would have
increased the obligations by £75 million and a
reduction in the discount rate of 100 basis
points would have increased the obligations
by £255 million.
At 31 March 2014, the assets held by the
pension plans amounted to £1,305 million
(2013 – £1,407 million), of which £346 million
(2013 – £275 million) comprised qualifying
insurance policies. Plan assets are measured at
their fair value at the period-end date. The fair
values of qualifying insurance policies held by
the plans are deemed to be equivalent to the
present value of the related benefit obligations.
Otherwise, the carrying amounts of the plan
assets are affected more by market risks,
including interest rate risk, and other risks than
by assumptions made in estimating the fair
values of unquoted assets.
Whilst changes in the assumptions used in
determining the present value of the benefit
obligations will have an impact on the Group’s
income statement through their effect on the
service cost and the net interest on the deficit or
surplus in the plans, most of the impact of such
changes, together with fluctuations in the actual
return on the plan assets, will be reflected in
other comprehensive income.
Full details of the assumptions made, which are
based on advice from the Group’s actuaries,
are set out in Note 30.
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 period-end 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.
Provisions
The Group recognises a provision where
a legal or constructive obligation exists at
the period-end 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 31 March 2014, 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.
88 | Tate & Lyle PLC Annual Report 2014
4 Segment information
Segment information is presented in the financial statements on a consistent basis with the information presented to the Board for the purposes
of allocating resources within the Group and assessing the performance of the Group’s businesses.
Continuing operations comprise two operating segments: Speciality Food Ingredients and Bulk Ingredients. Central, which comprises central costs
including head office, treasury and reinsurance activities, does not meet the definition of an operating segment under IFRS 8 ‘Operating Segments’
but no sub-total is shown for the Group’s operating segments in the tables below so as to be consistent with the presentation of segment information
to the Board.
The Board uses adjusted operating profit as the measure of the profitability of the Group’s businesses. Adjusted operating profit is, therefore, the
measure of segment profit presented in the Group’s segment disclosures. Adjusted operating profit represents operating profit before specific items
that are considered to hinder comparison of the trading performance of the Group’s businesses either year-on-year or with other businesses. During
the periods presented, the items excluded from operating profit in arriving at adjusted operating profit were the amortisation of acquired intangible
assets and exceptional items.
An analysis of total assets and total liabilities by operating segment is not presented to the Board but it does receive segmental analysis of net
working capital (inventories, trade and other receivables, less trade and other payables). Accordingly, the amounts presented for segment assets
and segment liabilities in the tables below represent those assets and liabilities that comprise elements of net working capital.
Analysis by business segment
Year ended 31 March 2014
Segment sales
External sales (Note a)
Segment results
Adjusted operating profit/(loss)
Adjusting items:
Exceptional items
Amortisation of acquired
intangible assets
Operating profit/(loss)
Finance income
Finance expense
Profit before tax
Other segment information
Capital investments (Note b)
Depreciation
Amortisation of intangible assets
Share-based payments
At 31 March 2014
Segment assets
Working capital items
Other assets
Total assets
Segment liabilities
Working capital items
Other liabilities
Total liabilities
Net working capital
Continuing operations
Speciality
Food
Ingredients
£m
Bulk
Ingredients
£m
Notes
Central
£m
7
15
10
10
16
15
26
983
213
–
(10)
203
93
38
18
2
2 164
172
–
–
172
66
55
2
1
242
447
–
(36)
(14)
–
(50)
34
4
1
5
44
Total
£m
3 147
349
(14)
(10)
325
2
(37)
290
193
97
21
8
733
(94)
(181)
(42)
(317)
148
266
2
416
Discontinued
operations
(Note 12)
£m
Total
operations
£m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
3 147
349
(14)
(10)
325
2
(37)
290
193
97
21
8
733
1 794
2 527
(317)
(1 160)
(1 477)
416
(a) The Group’s internal structure is such that there are no inter-segment sales.
(b) Capital investments comprise the cost of acquisition of businesses and capital expenditure on property, plant and equipment, intangible assets
and investments.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
4 Segment information continued
Continuing operations
Speciality
Food
Ingredients
£m
Bulk
Ingredients
£m
Notes
Central*
£m
Total*
£m
Discontinued
operations
(Note 12)
£m
Total
operations*
£m
Restated* – Year ended 31 March 2013
Segment sales
External sales (Note a)
Segment results
Adjusted operating profit/(loss)
Adjusting items:
Exceptional items
Amortisation of acquired
intangible assets
Operating profit/(loss)
Finance income
Finance expense
Profit before tax
Other segment information
Capital investments (Note b)
Depreciation
Amortisation of intangible assets
Share-based payments
7
15
10
10
16
15
26
At 31 March 2013
Segment assets
Working capital items
Other assets
Total assets
Segment liabilities
Working capital items
Other liabilities
Total liabilities
Net working capital
947
213
(3)
(10)
200
43
36
15
3
2 309
182
8
–
190
66
52
1
3
304
566
–
(39)
(17)
–
(56)
34
3
1
7
23
3 256
356
(12)
(10)
334
1
(34)
301
143
91
17
13
893
(115)
(223)
(46)
(384)
189
343
(23)
509
10
(8)
26
–
18
–
–
18
–
–
–
–
3
(1)
2
3 266
348
14
(10)
352
1
(34)
319
143
91
17
13
896
1 891
2 787
(385)
(1 366)
(1 751)
511
*
Restated for the adoption of IAS 19 (Revised 2011) Employee Benefits, which increased Central costs by £2 million and increased net finance expense by £6 million
(see Note 43).
Geographical information
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:
United Kingdom
United States
Other European countries
Rest of world
Total
Sales by destination
Year ended 31 March
2013
£m
63
1 965
502
726
3 256
2014
£m
64
1 858
520
705
3 147
Sales by origin
Year ended 31 March
2013
£m
23
2 404
528
301
3 256
2014
£m
22
2 282
546
297
3 147
Location of non-current assets
At 31 March
2013
£m
38
829
309
147
1 323
2014
£m
42
763
321
135
1 261
Concentration of revenue
During 2014, one customer contributed 11% of the Group’s external sales from continuing operations (2013 – none over 10%).
90 | Tate & Lyle PLC Annual Report 2014
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
Analysis of operating expenses/(income) by nature:
External sales
Operating expenses/(income)
Cost of inventories (included in cost of sales)
Staff costs (of which £129 million (2013 – £125 million) was included in
cost of sales)
Gain on settlement of defined benefit pension plan
Depreciation of property, plant and equipment:
– owned assets (of which £90 million (2013 – £86 million) was included
in cost of sales)
– leased assets (included in cost of sales)
Exceptional items
Amortisation of intangible assets:
– acquired intangible assets
– other intangible assets
Operating lease rentals:
– plant and machinery
Research and development expenditure
(Decrease)/increase in allowance for doubtful debts
Gain on disposal of property, plant and equipment
Other operating expenses
Total operating expenses
Operating profit
* See Note 43.
Note
17
Year ended 31 March
2013
£m
2 780
476
3 256
2014
£m
2 707
440
3 147
Year ended 31 March 2014
Discontinued
operations
£m
–
Continuing
operations
£m
3 147
Notes
5,12
Restated*
Year ended 31 March 2013
Discontinued
operations
£m
10
Continuing
operations
£m
3 256
9
30
16
16
7
15
15
23
1 961
245
(4)
92
5
14
10
11
17
33
(1)
(3)
442
2 822
325
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2 066
256
–
87
4
12
10
7
19
32
1
(1)
429
2 922
334
6
–
–
–
–
(26)
–
–
–
–
2
(1)
11
(8)
18
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
7 Exceptional items
Exceptional items recognised in arriving at operating profit were as follows:
Continuing operations
Business transformation costs
Gain on disposal of interest in joint venture – Sucromiles
Discontinued operations
Gain on disposal of businesses – Vietnam Sugar
Gain on disposal of assets – Molasses
Total exceptional (expense)/income before tax
Year ended 31 March
2013
£m
2014
£m
(14)
–
(14)
–
–
–
(14)
(20)
8
(12)
21
5
26
14
Continuing operations
During the year, the Group incurred further business transformation costs on the implementation of a common global IS/IT platform and, in the prior
year, also on the implementation of the global Shared Services Centre, of which £14 million (2013 – £18 million) did not meet the criteria to be
capitalised. During the prior year, the Group also incurred costs of £2 million to complete the relocation of employees and restructuring associated
with establishing the Commercial and Food Innovation Centre in Chicago, USA.
During the prior year, the Group completed the disposal of its share in Sucromiles SA, its Colombian citric acid joint venture, on which it recognised
a gain of £8 million (including cumulative currency translation gains transferred from other comprehensive income).
Exceptional items are analysed by operating segment in Note 4.
Profit for the year from continuing operations includes an income tax credit of £9 million (2013 – credit of £5 million) in relation to exceptional items
(see Note 11). Tax credits on exceptional costs are only recognised to the extent that losses incurred will result in tax recoverable in the future.
Discontinued operations
During the year, the Group recognised an exceptional income tax credit of £28 million in discontinued operations (see Note 12).
During the prior year, the Group completed the sale of its Vietnam Sugar operations on which it recognised a gain of £21 million (including cumulative
currency translation gains transferred from other comprehensive income). Also during the prior year, the Group completed the sale of land and
buildings of its former Molasses business on which it recognised a gain of £5 million. Exceptional items recognised during the prior year had no
impact on the income tax expense of discontinued operations.
8 Auditors’ remuneration
Fees payable to the Company’s auditors, PricewaterhouseCoopers LLP, and its associates were as follows:
Fees payable for the audit of the Company and consolidated financial statements
Fees payable for other services:
– the audit of the Company’s subsidiaries and joint ventures
– audit-related services
– tax advisory services
Fees in respect of the audit of the Group’s pension schemes
Total
Year ended 31 March
2013
£m
0.7
2014
£m
0.7
1.3
–
0.1
2.1
0.1
2.2
1.2
0.3
–
2.2
0.1
2.3
Audit-related services in the prior year related to review work performed on the controls configured within the common global IS/IT platform.
92 | Tate & Lyle PLC Annual Report 2014
9 Staff costs
Staff costs were as follows:
Wages and salaries
Social security costs
Other pension costs:
– defined benefit pension schemes
– defined contribution pension schemes
Retirement medical benefits
Share-based payments
Total
Year ended 31 March 2014
Discontinued
operations
£m
–
–
Continuing
operations
£m
209
18
Year ended 31 March 2013
Discontinued
operations
£m
–
–
Continuing
operations
£m
210
22
5
3
2
8
245
–
–
–
–
–
4
4
3
13
256
–
–
–
–
–
Notes
30
30
30
26
The monthly average number of people employed by the Group, excluding associates’ employees and including the Group’s 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
Continuing operations
Speciality Food Ingredients
Bulk Ingredients
Central
Discontinued operations
Total
Year ended 31 March
2014
2013
1 802
2 233
432
4 467
–
4 467
1 731
2 187
404
4 322
60
4 382
At 31 March 2014, the Group employed 4,523 (2013 – 4,326) people (all in continuing 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
Retirement benefits
Share-based payments
Total
Year ended 31 March
2013
£m
5
1
6
12
2014
£m
5
1
4
10
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 52 to 71. Members of the Group Executive Committee are identified on page 39.
The aggregate emoluments of directors in respect of qualifying services to the Company were £2 million (2013 – £2 million).
As determined in accordance with the Companies Act 2006, the aggregate gains made by the directors on the exercise of share options were
£4 million (2013 – £1 million).
Tate & Lyle PLC Annual Report 2014 | 93
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
10 Finance income and finance expense
Finance income
Interest receivable
Total finance income
Finance expense
Interest payable on bank and other borrowings
Fair value hedges:
– fair value loss on interest rate derivatives
– fair value adjustment of hedged borrowings
Fair value loss on derivatives not designated as hedges
Finance lease interest
Net retirement benefit interest
Total finance expense
Net finance expense
* See Note 43.
Notes
20
20
30
Year ended 31 March
Restated*
2013
£m
2014
£m
2
2
(28)
(20)
20
–
(1)
(8)
(37)
(35)
1
1
(28)
–
1
(1)
(2)
(4)
(34)
(33)
Finance expense is shown net of borrowing costs of £2 million (2013 – £2 million) capitalised within intangible assets at a capitalisation rate
of 3.9% (2013 – 3.8%).
Interest payable on other borrowings includes £0.2 million (2013 – £0.2 million) of dividends in respect of the Group’s 6.5% cumulative preference shares.
Finance income and finance expense relate wholly to continuing operations.
11 Income tax expense
Analysis of charge for the year
Continuing operations
Current tax:
– UK
– overseas
Deferred tax:
Charge for the year
Adjustments in respect of previous years
Income tax expense
* See Note 43.
Note
29
Year ended 31 March
Restated*
2013
£m
2014
£m
–
43
43
7
(5)
45
–
23
23
27
(4)
46
Profit for the year from continuing operations reflected an income tax expense of £45 million (2013 – expense of £46 million), including an income
tax credit of £9 million (2013 – credit of £5 million) in respect of exceptional items (see Note 7).
Adjustments to deferred tax in respect of prior years totalled a credit of £5 million (2013 – credit of £4 million). The amount recognised in the current
year reflects non-recurring tax credits in relation to prior years in the US, following a detailed review of underlying tax information. The amount
recognised in the 2013 financial year principally related to the settlement of prior year tax in a number of jurisdictions.
The standard rate of corporation tax in the United Kingdom reduced from 23% to 21% with effect from 1 April 2014 and will reduce further
to 20% from 1 April 2015.
The tax on the Group’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 23% (2013 – 24%)
Adjusted for the effects of:
– items not taxable
– losses not recognised
– adjustments to tax in respect of previous years
– different tax rates applied on overseas earnings
Total
94 | Tate & Lyle PLC Annual Report 2014
Year ended 31 March
Restated*
2013
£m
301
72
2014
£m
290
67
(2)
3
(5)
(18)
45
(5)
9
(4)
(26)
46
11 Income tax expense continued
The Group’s effective tax rate is sensitive to the geographic mix of profits and losses and reflects a combination of higher tax rates in certain
jurisdictions such as the US, nil effective tax rates in the UK (due to brought forward tax losses) and in Singapore (due to having ‘pioneer status’
awarded by the government in 2008) and rates that lie somewhere in between, for example, in certain eastern European countries. Our tax rate
is favourably affected by our internal financing which involves borrowing by our US operations from the UK, the interest on which has the effect
of reducing the amount of tax payable in the US.
The Group’s effective tax rate on continuing operations, calculated on the basis of the income tax expense as a proportion of profit before tax of
£290 million (2013 – £301 million), was 15.6% (2013 – 15.3%). This compares with the standard rate of corporation tax in the UK of 23% (2013 – 24%).
The Group’s adjusted effective tax rate on continuing operations, calculated on the basis of the adjusted income tax expense of £60 million
(2013 – £59 million) as a proportion of adjusted profit before tax of £322 million (2013 – £327 million) was 18.5% (2013 – 18.0%).
Discontinued operations
Profit for the year from discontinued operations reflected an exceptional income tax credit of £28 million (2013 – £nil) as explained in Note 12.
Tax charge relating to components of other comprehensive income
Retirement benefit obligations
Cash flow hedges
Tax losses
Tax charge 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 on share-based payments
Total
* See Note 43.
Note
29
Year ended 31 March
Restated*
2013
£m
(6)
(1)
(5)
(12)
(12)
2014
£m
(22)
–
–
(22)
(22)
Year ended 31 March
2013
£m
(3)
1
(2)
2014
£m
(1)
1
–
12 Discontinued operations
During the year, the Group recognised a non-cash exceptional income tax credit of £28 million following the favourable resolution of outstanding tax
matters associated with the starch facilities which formed part of the Group’s former Food & Industrial Ingredients, Europe segment. During the prior
year, the Group completed the sale of its Vietnam Sugar operations and the disposal of land and buildings of its former Molasses business, which
related to the Group’s former Sugars segment, on which it recognised an exceptional gain before tax of £26 million.
Sales
Adjusted operating profit/(loss)
Exceptional items
Operating profit/(loss)
Profit/(loss) before tax
Income tax credit
Profit/(loss) for the year
Non-controlling interests
Profit/(loss) attributable to owners of the Company
Note
7
7
Year ended 31 March
2014
£m
–
–
–
–
–
28
28
–
28
Vietnam Sugar
£m
9
3
21
24
24
–
24
(1)
23
Other
£m
1
(11)
5
(6)
(6)
–
(6)
–
(6)
2013
Total
£m
10
(8)
26
18
18
–
18
(1)
17
Tate & Lyle PLC Annual Report 2014 | 95
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
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 an average of 3.5 million shares (2013 – 3.5 million shares) held by the Company or the Employee Benefit
Trust to satisfy awards made under the Group’s share-based incentive plans.
Profit attributable to owners of the
Company (£million)
Weighted average number of ordinary shares in
issue (millions)
Basic earnings per share
Year ended 31 March 2014
Restated*
Year ended 31 March 2013
Continuing
operations
Discontinued
operations
245
464.1
52.8p
28
464.1
6.0p
Total
273
464.1
58.8p
Continuing
operations
Discontinued
operations
255
464.2
54.9p
17
464.2
3.7p
Total
272
464.2
58.6p
Diluted
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue to assume conversion of all potentially
dilutive ordinary shares. Potentially dilutive ordinary shares arise from awards made under the Group’s share-based incentive plans. Where the
vesting of these awards is contingent on satisfying a service or performance condition, the number of potentially dilutive ordinary shares is calculated
based on the status of the condition at the end of the period. Potentially dilutive ordinary shares are actually dilutive only when the average market
price of the Company’s ordinary shares during the period exceeds their exercise price (options) or issue price (other awards). The greater any such
excess, the greater the dilutive effect. The average market price of the Company’s ordinary shares during the year was 788p (2013 – 720p). The
dilutive effect of share-based incentives was 6.4 million shares (2013 – 9.3 million shares).
Profit attributable to owners of the
Company (£million)
Weighted average number of diluted
ordinary shares (millions)
Diluted earnings per share
Year ended 31 March 2014
Year ended 31 March 2013
Restated*
Continuing
operations
Discontinued
operations
245
470.5
52.1p
28
470.5
5.9p
Total
273
470.5
58.0p
Continuing
operations
Discontinued
operations
255
473.5
53.8p
17
473.5
3.6p
Total
272
473.5
57.4p
Adjusted earnings per share
Adjusted earnings per share measures are calculated based on profit for the year from continuing operations attributable to owners of the Company
before adjusting items as follows:
Notes
7
15
10
Year ended 31 March
Restated*
2013
£m
255
2014
£m
245
14
10
8
(15)
262
56.5p
55.7p
12
10
4
(13)
268
57.7p
56.6p
Continuing operations
Profit attributable to owners of the Company
Adjusting items:
– exceptional items
– amortisation of acquired intangible assets
– net retirement benefit interest
– tax effect of the above adjustments
Adjusted earnings
Adjusted basic earnings per share
Adjusted diluted earnings per share
* See Note 43.
96 | Tate & Lyle PLC Annual Report 2014
14 Dividends on ordinary shares
Dividends on ordinary shares in respect of the financial year:
Per ordinary share:
– interim dividend paid
– final dividend proposed
Total dividend
Year ended 31 March
2013
pence
2014
pence
7.8
19.8
27.6
7.4
18.8
26.2
The Directors propose a final dividend for the financial year of 19.8p per ordinary share that, subject to approval by shareholders, will be paid on
1 August 2014 to shareholders who are on the Register of Members on 27 June 2014.
Dividends on ordinary shares paid in the year:
Final dividend paid relating to the prior year
Interim dividend paid relating to the year
Total dividend paid
Year ended 31 March
2013
£m
83
34
117
2014
£m
88
36
124
Based on the number of ordinary shares outstanding at 31 March 2014, the final dividend for the financial year is expected to amount to £92 million.
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Tate & Lyle PLC Annual Report 2014 | 97
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
15 Goodwill and other intangible assets
Cost
At 1 April 2013
Subsidiaries acquired
Additions at cost
Currency translation differences
At 31 March 2014
Accumulated amortisation and impairment
At 1 April 2013
Amortisation charge
Currency translation differences
At 31 March 2014
Net book value at 31 March 2014
Cost
At 1 April 2012
Additions at cost
Currency translation differences
At 31 March 2013
Accumulated amortisation and impairment
At 1 April 2012
Amortisation charge
Currency translation differences
At 31 March 2013
Net book value at 31 March 2013
(a) Goodwill
The carrying amount of goodwill is allocated as follows:
Allocated by geographical area
United States
Europe
Allocated by business segment
Speciality Food Ingredients
Bulk Ingredients
Total
Patents and other
intellectual
property
£m
Other acquired
intangible
assets
£m
Total acquired
intangible assets
£m
Goodwill
£m
Other
intangible
assets
£m
217
10
–
(11)
216
–
–
–
–
216
217
–
–
217
–
–
–
–
217
34
5
–
–
39
28
3
–
31
8
33
1
–
34
27
1
–
28
6
119
–
–
(5)
114
68
7
(3)
72
42
116
–
3
119
57
9
2
68
51
370
15
–
(16)
369
96
10
(3)
103
266
366
1
3
370
84
10
2
96
274
116
–
57
(7)
166
34
11
(2)
43
123
70
43
3
116
27
7
–
34
82
2014
£m
55
83
138
77
1
78
216
Total
£m
486
15
57
(23)
535
130
21
(5)
146
389
436
44
6
486
111
17
2
130
356
At 31 March
2013
£m
60
85
145
71
1
72
217
(i) Impairment tests carried out during the year
Goodwill is tested for impairment annually and whenever there is an indication of impairment at the level of the cash-generating unit (CGU) or group
of CGUs to which it is allocated. Tate & Lyle is principally managed as an integrated network in the United States and Europe, with a large amount
of interdependency between plants servicing both the Speciality Food Ingredients and Bulk Ingredients segments. Goodwill is therefore tested
for impairment on a geographical basis, except where it can be allocated to a specific CGU or group of CGUs.
A description of the impairment tests conducted in relation to the most significant goodwill amounts are set out below. In each case, the recoverable
amount was calculated based on value in use. Value in use was calculated based on budgets and plans covering the next five years that have been
approved by the Board. Cash flows were projected during the five-year period based on budgeted gross margin and management’s expectations
of market developments. Beyond the five-year plan, cash flows were assumed to grow at the long-term growth rate for the relevant geographical
markets based on forecasts included in industry reports. Cash flows were discounted using pre-tax rates that are based on the Group’s weighted
average cost of capital adjusted, where appropriate, to reflect differences between the risk profile of the geographical areas or CGUs concerned and
that of the Group as a whole.
United States
Goodwill allocated to the United States relates to the Staley acquisition in 1988. Cash flows beyond the five-year plan were assumed to grow
at 2% per annum in perpetuity based on the long-term growth rate for this geographic market. Cash flows were discounted using a pre-tax rate
of 10.1% (2013 – 10.1%). Significant headroom exists and management concluded that no impairment is required.
98 | Tate & Lyle PLC Annual Report 2014
15 Goodwill and other intangible assets continued
Europe
Goodwill allocated to Europe relates to the acquisition in 2000 of the minority of 34% of shares of the former Amylum business. Cash flows
beyond the five-year plan were assumed to grow at 2% per annum in perpetuity based on the long-term growth rate for this geographic market.
Cash flows were discounted using a pre-tax rate of 10.1% (2013 – 10.1%). Significant headroom exists and management concluded that no
impairment is required.
Speciality Food Ingredients
Goodwill allocated to the Speciality Food Ingredients segment includes £61 million (2013 – £63 million) that relates to the acquisition of G.C. Hahn
and Company in June 2007 and that of Cesalpinia Foods in December 2005. As these businesses are integrated for operating purposes, they
are tested for impairment as one CGU. Cash flows beyond the five-year plan were assumed to grow at 2% per annum in perpetuity based on
the long-term growth rate for the geographic markets in which these businesses operate. Cash flows were discounted using a pre-tax rate
of 10.1% (2013 – 10.1%). Management concluded that no impairment is required.
(ii) Possibility of impairment in the near future
Management considers that there is no reasonably possible change in one or more of the key assumptions used in the impairment tests that would
give rise to an impairment loss during the coming year.
(b) Other intangible assets
Other intangible assets include capitalised development costs with a carrying amount of £77 million (2013 – £47 million) relating to the common
global IS/IT platform, of which £51 million (2013 – £20 million) is under construction and will not be amortised until it is deployed into the business.
In May 2014, the system was successfully deployed across our European operations and we remain on track to implement it in the US and Singapore
by the end of the summer. Management considers that the costs capitalised to date are fully recoverable by way of incremental benefits over the
system’s useful life of seven years.
Additions to other intangible assets during the year included a marketing-related intangible of £10 million relating to the establishment of a renewed
SPLENDA® Sucralose alliance with McNeil Nutritionals, LLC. and capitalised borrowing costs of £2 million (2013 – £2 million).
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Cost
At 1 April 2013
Additions at cost
Subsidiaries acquired
Transfers on completion
Disposals and write-offs
Currency translation differences
At 31 March 2014
Accumulated depreciation and impairment
At 1 April 2013
Depreciation charge
Disposals and write-offs
Currency translation differences
At 31 March 2014
Net book value at 31 March 2014
Cost
At 1 April 2012
Additions at cost
Transfers on completion
Disposals and write-offs
Currency translation differences
At 31 March 2013
Accumulated depreciation and impairment
At 1 April 2012
Depreciation charge
Disposals and write-offs
Currency translation differences
At 31 March 2013
Net book value at 31 March 2013
Land and
buildings
£m
Plant and
machinery
£m
Assets in the
course of
construction
£m
494
18
1
11
(32)
(41)
451
223
11
(2)
(17)
215
236
444
2
33
(5)
20
494
209
11
(5)
8
223
271
2 108
16
2
75
(5)
(182)
2 014
1 453
86
(4)
(124)
1 411
603
1 932
7
103
(19)
85
2 108
1 327
80
(17)
63
1 453
655
32
80
–
(86)
–
–
26
–
–
–
–
–
26
82
86
(136)
–
–
32
–
–
–
–
–
32
Total
£m
2 634
114
3
–
(37)
(223)
2 491
1 676
97
(6)
(141)
1 626
865
2 458
95
–
(24)
105
2 634
1 536
91
(22)
71
1 676
958
In December 2013, the Group completed the back-to-back purchase, sale and leaseback under an operating lease of its building at the global
Commercial and Food Innovation Centre in Chicago, USA. The transaction generated a one-off gain of £6 million, which comprised a gain of
£3 million on the recognition of the remainder of the lease incentive on the original lease and a gain of £3 million on the sale of the property.
The majority of the gain was included in the results of the Speciality Food Ingredients segment.
Tate & Lyle PLC Annual Report 2014 | 99
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
16 Property, plant and equipment continued
Impairment reviews
Management conducted an impairment test on the plant in Dayton, Ohio, on which an impairment was recognised in previous years. The recoverable
amount of the plant was calculated based on value in use, with estimated future cash flows based on internal forecasts of future gross margins for the
next five years and by calculating a terminal value beyond that five-year period based on a growth rate of 2% per annum in perpetuity. Cash flows
were discounted using a pre-tax discount rate of 12.1%, which was adjusted upwards to take into account the risk associated with the regulatory
and competitive environment in which the plant operates. Management concluded that neither further impairment nor reversal of previous impairment
was required.
Management conducted impairment reviews of other property, plant and equipment during the year and concluded that there were no indicators
of impairment.
Leased assets
Property, plant and equipment includes plant and machinery held under finance leases with a net book value of £15 million (2013 – £18 million).
17 Investments in associates and joint ventures
Associates
At 31 March 2013 and 31 March 2014
The Group’s principal associate, which is accounted for under the equity method, is identified in Note 41.
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
6
Year ended 31 March
2013
£m
4
(4)
–
2014
£m
4
(4)
–
2014
£m
13
(7)
6
At 31 March
2013
£m
13
(7)
6
Joint ventures
The Group’s principal joint ventures, which are proportionately consolidated, are listed in Note 41. The amounts proportionately consolidated
in the Group income statement and statement of financial position (after the elimination of the Group’s share of transactions and balances with
the Company’s subsidiaries) are summarised below:
Sales
Expenses
Profit before tax
Income tax expense
Profit for the year
Note
5
Year ended 31 March 2014
Discontinued
operations
£m
–
–
–
–
–
Continuing
operations
£m
440
(366)
74
(13)
61
Year ended 31 March 2013
Discontinued
operations
£m
–
–
–
–
–
Continuing
operations
£m
476
(428)
48
(14)
34
100 | Tate & Lyle PLC Annual Report 2014
17 Investments in associates and joint ventures continued
Statement of financial position
Assets
Non-current assets
Cash and cash equivalents
Other current assets
Total
Liabilities
Non-current borrowings
Other non-current liabilities
Current borrowings
Other current liabilities
Total
Net assets
There are guarantees in respect of banking facilities of a joint venture totalling £9 million (2013 – £9 million).
18 Available-for-sale financial assets
At 1 April 2012
Additions
Fair value loss
Currency translation differences
At 31 March 2013
Additions
Disposals
Currency translation differences
At 31 March 2014
Presented in the statement of financial position as follows:
Non-current assets
Assets held for sale
Total
2014
£m
139
50
109
298
2
4
18
48
72
226
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At 31 March
2013
£m
173
73
158
404
7
19
31
56
113
291
£m
24
4
(1)
1
28
4
(2)
(2)
28
Note
38
2014
£m
28
–
28
At 31 March
2013
£m
27
1
28
Available-for-sale financial assets primarily comprise £28 million (2013 – £28 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 carrying value of the available-for-sale financial
assets are denominated in the following currencies:
US dollar
Sterling
Euro
Total
US dollar-denominated assets include £nil (2013 – £1 million) classified as assets held for sale.
2014
£m
23
5
–
28
At 31 March
2013
£m
18
8
2
28
Tate & Lyle PLC Annual Report 2014 | 101
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
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 2014 and 31 March 2013.
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
–
302
396
–
(778)
–
(315)
(395)
Derivatives
in a hedging
relationship
£m
–
–
–
35
–
(5)
–
30
Amortised
cost
£m
–
372
379
–
(896)
–
(382)
(527)
Derivatives
in a hedging
relationship
£m
–
–
–
56
–
(17)
–
39
Notes
18
23
33
20
28
20
27
Notes
18
23
33
20
28
20
27
Held for
trading
£m
–
–
–
67
–
(47)
–
20
Held for
trading
£m
–
–
–
84
–
(64)
–
20
Available-
for-sale
£m
28
–
–
–
–
–
–
28
Available-
for-sale
£m
27
–
–
–
–
–
–
27
At 31 March 2014
Total
carrying
value
£m
28
302
396
102
(778)
(52)
(315)
(317)
Total
carrying
value
£m
27
372
379
140
(896)
(81)
(382)
(441)
Fair value
£m
28
302
396
102
(812)
(52)
(315)
(351)
At 31 March 2013
Fair value
£m
27
372
379
140
(946)
(81)
(382)
(491)
Trade and other receivables presented above excludes £13 million (2013 – £14 million) relating to prepayments.
Trade and other payables presented above excludes £2 million (2013 – £3 million) relating to social security.
Included in borrowings are items in a hedging relationship which are held at amortised cost, with a fair value adjustment applied,
as they are in a fair value hedge.
Fair value hierarchy
Set out on page 103 is how the Group’s financial instruments measured at fair value, fit within the following fair value hierarchy:
(cid:116)(cid:1) Quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1)
(cid:116)(cid:1) Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly or indirectly (level 2)
(cid:116)(cid:1) Inputs for the asset or liability that are not based on observable market data (level 3).
102 | Tate & Lyle PLC Annual Report 2014
19 Financial instruments by category continued
The following tables illustrate the Group’s financial assets and liabilities measured at fair value at 31 March 2014 and 31 March 2013:
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
At 31 March 2014
Total
£m
Level 3
£m
18
20
20
20
20
20
20
20
20
–
–
–
–
10
10
–
–
–
(14)
(14)
–
3
33
1
13
50
(2)
(5)
–
(10)
(17)
28
–
–
–
42
70
–
–
–
(21)
(21)
28
3
33
1
65
130
(2)
(5)
–
(45)
(52)
Notes
Level 1
£m
Level 2
£m
At 31 March 2013
Total
£m
Level 3
£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)
Level 1 financial instruments
The fair value of financial instruments traded in active markets (commodity futures) is based on quoted market prices at the period-end 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. An explanation of the key inputs used in calculating the fair value of these
contracts is set out in Note 3 under the heading ‘Derivatives and hedge accounting’.
Tate & Lyle PLC Annual Report 2014 | 103
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
19 Financial instruments by category continued
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:
Commodity
pricing
contracts
– assets
£m
22
Commodity
pricing
contracts
– liabilities
£m
(22)
Available-
for-sale
assets
£m
23
53
–
–
(22)
53
42
–
–
(53)
42
(21)
–
–
22
(21)
(21)
–
–
21
(21)
–
(1)
4
1
27
–
(2)
4
(1)
28
Total
£m
23
32
(1)
4
1
59
21
(2)
4
(33)
49
At 31 March 2014
Liabilities
£m
Assets
£m
At 31 March 2013
Liabilities
£m
Assets
£m
3
20
–
23
6
4
3
13
36
1
1
64
66
66
102
23
79
102
(2)
–
–
(2)
(2)
–
(3)
(5)
(7)
–
(1)
(44)
(45)
(45)
(52)
(2)
(50)
(52)
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)
At 1 April 2012
Total gains or losses:
– in operating profit
– in other comprehensive income
Purchases
Settlements
At 31 March 2013
Total gains or losses:
– in operating profit
– in other comprehensive income
Purchases
Settlements
At 31 March 2014
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
Interest rate swaps:
– accrued interest
– fair value hedges
– held for trading
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
104 | Tate & Lyle PLC Annual Report 2014
20 Derivative financial instruments continued
The ineffective portion recognised in operating profit that arises from cash flow hedges amounts to £nil (2013 – £1 million gain).
The ineffective portion recognised in operating profit that arises from net investment hedges amounts to £nil (2013 – £nil).
The ineffective portion recognised in net finance expense that arises from fair value hedges amounts to £nil (2013 – £1 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:
US dollar
Singapore dollar
Brazilian real
Mexican peso
Euro
Other
2014
£m
(55)
49
25
(16)
2
(3)
At 31 March
2013
£m
(36)
32
34
(29)
1
(3)
Gains and losses recognised in the hedging reserve in equity (Note 25) on forward foreign exchange and commodity pricing contracts at
31 March 2014 are expected to be reclassified to the income statement at various dates until December 2016.
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 2014 were £345 million (2013 – £364 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 United States and Europe. The notional principal amounts of the outstanding currency swap contracts applied in net investment hedging
relationships as of 31 March 2014 were £147 million (31 March 2013 – £158 million). Within net investment hedging gains/losses, a fair value gain
of £12 million (2013 – £5 million loss) on translation of the currency swap contracts to pounds sterling at the period-end date was recognised
in the translation reserve in shareholders’ equity (Note 25).
In addition, at 31 March 2014, of the Group’s borrowings, a total of £456 million (2013 – £495 million) are designated as hedges of the net investments
in overseas subsidiaries.
Debt-related derivatives held for trading
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 2014 were £210 million
(2013 – £231 million).
Trading contracts
Commodity pricing contracts held for trading relate to the Group’s commodity trading activities which are undertaken for the purposes of supporting
underlying operations.
Tate & Lyle PLC Annual Report 2014 | 105
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
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, 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 United States 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 United States and Europe, by
maintaining a percentage of net debt in US dollars and euro to mitigate the effect of these risks. This is achieved by borrowing principally in US 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 £353 million (2013 – £479 million) was held
in the following currencies: net borrowings of US dollars 114% (2013 – 108%) and of euro nil% (2013 – 3%); and net deposits of pounds sterling
10% (2013 – 10%) and other currencies 4% (2013 – 1%). The Group’s interest cost through the income statement is impacted by changes in the
relevant exchange rates.
The following table illustrates only the Group’s sensitivity to the fluctuation of the major currencies on its financial assets and liabilities, as defined and
set out in Note 19:
Sterling/US dollar 10% change
Sterling/euro 10% change
At 31 March 2014
At 31 March 2013
Income
statement
–/+£m
–
3
Equity
–/+£m
37
6
Income
statement
–/+£m
–
–
Equity
–/+£m
48
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 2014, the longest term of any fixed rate debt held by the Group was until November 2019
(2013 – November 2019). The proportion of net debt at 31 March 2014 (excluding the Group’s share of joint-venture net debt) that was fixed or
capped for more than one year was 40% (2013 – 64%).
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 2014 assuming that other variables
remain unchanged.
As at 31 March 2014, if interest rates increase by 100 basis points, there would be no impact on the Group’s profit before tax (2013 – decrease by
£1 million). If interest rates decrease by 100 basis points, or less where applicable, Group profit before tax will increase by £1 million (2013 – increase
by £1 million).
106 | Tate & Lyle PLC Annual Report 2014
21 Financial risk factors continued
Price risk management
Tate & Lyle participates mainly in three markets: food and beverage; industrial ingredients; 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 pricing contracts (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
At 31 March 2014
At 31 March 2013
Income
statement
–/+£m
1
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.
Analysis of amounts set off
The following tables set out the financial assets and financial liabilities which are subject to offsetting, enforceable master netting arrangements and
similar agreements. Amounts which are set off against financial assets and liabilities in the Group’s statement of financial position are set out below.
Amounts not offset but which could be offset under certain circumstances are also shown.
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At 31 March 2014
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
Total
Trade and other payables
Derivative financial liabilities
Bank loans and overdrafts
Total
At 31 March 2013
Trade and other receivables
Derivative financial assets
Cash and cash equivalents
Total
Trade and other payables
Derivative financial liabilities
Bank loans and overdrafts
Total
Gross financial
assets/
(liabilities)
£m
302
102
396
800
Gross financial
(liabilities)/
assets set off
£m
–
–
–
–
Net financial
assets/
(liabilities)
£m
302
102
396
800
Related
amounts not
set off
£m
–
(5)
–
(5)
(315)
(52)
(778)
(1 145)
–
–
–
–
(315)
(52)
(778)
(1 145)
–
5
–
5
Gross financial
assets/(liabilities)
£m
372
140
379
891
Gross financial
(liabilities)/assets
set off
£m
–
–
–
–
Net financial
assets/(liabilities)
£m
372
140
379
891
Related amounts
not set off
£m
–
(21)
–
(21)
(382)
(81)
(896)
(1 359)
–
–
–
–
(382)
(81)
(896)
(1 359)
–
21
–
21
Net
£m
302
97
396
795
(315)
(47)
(778)
(1 140)
Net
£m
372
119
379
870
(382)
(60)
(896)
(1 338)
Amounts which do not meet the criteria for offsetting on the statement of financial position but could be settled net in certain circumstances
principally relate to derivative transactions under ISDA (International Swaps and Derivatives Association) agreements where each party has
the option to settle amounts on a net basis in the event of default of the other party.
Tate & Lyle PLC Annual Report 2014 | 107
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
21 Financial risk factors continued
Analysis of maximum credit exposure
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 year end 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
2014
£m
396
302
102
28
–
At 31 March
2013
£m
379
372
140
27
1
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 2014 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 July 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 intends to refinance the core committed bank facility no later than 12 months prior to the facility’s maturity in July 2016. 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 2014, after subtracting total undrawn committed facilities, there was
no gross debt maturing within 12 months (2013 – none) and 29% of gross debt maturing within 2.5 years (2013 – none). The average maturity of the
Group’s gross debt was 3.9 years (2013 – 4.6 years). At the year end, the Group held cash and cash equivalents of £396 million (2013 – £379 million)
and had committed facilities of £480 million (2013 – £527 million) of which £480 million (2013 – £527 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
108 | Tate & Lyle PLC Annual Report 2014
<1 year
£m
(337)
(38)
(315)
99
(86)
(16)
<1 year
£m
(77)
(41)
(382)
93
(80)
(44)
1–5 years
£m
(166)
(69)
(2)
At 31 March 2014
> 5 years
£m
(255)
(14)
–
244
(226)
(4)
–
–
–
1–5 years
£m
(518)
(99)
(3)
At 31 March 2013
> 5 years
£m
(262)
(30)
–
271
(251)
(3)
–
–
–
21 Financial risk factors continued
Included in borrowings are £2,394,000 of 6.5% cumulative preference shares. Only one year’s worth of interest payable on these shares is included
in the less than one year category.
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.
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; and to retain as a minimum an investment grade credit rating which enables
consistent access to debt capital markets. 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 & 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 2014, 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.
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The Group regards its total capital as follows:
Net debt
Equity attributable to owners of the Company
Total capital
Note
34
2014
£m
353
1 049
1 402
At 31 March
2013
£m
479
1 036
1 515
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 2014 and
31 March 2013 are:
Net debt/EBITDA
Interest cover
22 Inventories
Raw materials and consumables
Work in progress
Finished goods
Total
Year ended 31 March
2013
times
1.0
11.1
2014
times
0.8
11.6
2014
£m
241
21
156
418
At 31 March
2013
£m
267
21
222
510
Finished goods inventories of £4 million (2013 – £5 million) are carried at realisable value, this being lower than cost. Inventories of £150 million
(2013 – £164 million) are carried at market value. During the year, no net impairment charge was recognised against inventories (2013 – £nil).
Tate & Lyle PLC Annual Report 2014 | 109
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
23 Trade and other receivables
Non-current trade and other receivables
Other receivables
Total
Current trade and other receivables
Trade receivables
Less: allowance for doubtful debts
Trade receivables – net
Prepayments and accrued income
Margin deposits
Other receivables
Total
The carrying amounts of trade and other receivables were denominated in the following currencies:
US dollar
Euro
Sterling
Other
Total
2014
£m
1
1
2014
£m
276
(8)
268
13
13
20
314
2014
£m
172
103
11
29
315
At 31 March
2013
£m
3
3
At 31 March
2013
£m
340
(10)
330
14
18
21
383
At 31 March
2013
£m
222
95
11
58
386
Allowance for doubtful debts
Trade receivables are subject to limited credit risk because the Group has a number of key customers of good credit quality and a large
number of internationally dispersed customers. Trade receivables are regularly reviewed for collectability and an allowance has been established
for doubtful debts against which trade receivables are written-off when they are no longer considered to be collectible. Movements on the
allowance for doubtful debts were as follows:
At 1 April
Net credit/(expense) for the year (Note 6)
Currency translation differences
At 31 March
Year ended 31 March
2013
£m
(7)
(3)
–
(10)
2014
£m
(10)
1
1
(8)
As at 31 March 2014, trade receivables of £22 million (2013 – £31 million) were past due but not impaired because they were considered to be
collectible. The ageing analysis of these trade receivables was as follows:
Up to 30 days past due
1–3 months past due
Total
Trade receivables are not generally interest-bearing but interest may be charged to customers on overdue amounts.
2014
£m
22
–
22
At 31 March
2013
£m
28
3
31
110 | Tate & Lyle PLC Annual Report 2014
24 Share capital and share premium
At 31 March 2013 and 31 March 2014
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 ended 31 March 2014
Year ended 31 March 2013
Shares
468 192 900
9 983
468 202 883
£m
117
–
117
Shares
468 160 519
32 381
468 192 900
£m
117
–
117
Own shares
Own shares represent the Company’s ordinary shares that are acquired to meet the Group’s expected obligations under share-based incentive
arrangements (see Note 26). Own shares are held either by the Company in treasury or by an Employee Benefit Trust that was established by the
Company.
Movements in own shares held were as follows:
At 1 April
Purchased in the market
Transferred to employees
At 31 March
Year ended 31 March 2014
Cost
£m
29
29
(21)
37
Number
4 413 175
3 545 000
(3 251 746)
4 706 429
Year ended 31 March 2013
Cost
£m
23
23
(17)
29
Number
3 795 558
3 500 000
(2 882 383)
4 413 175
During the year, 3,045,000 (2013 – 2,000,000) shares were purchased into treasury at a cost of £25 million (2013 – £13 million) and 500,000
(2013 – 1,500,000) shares were purchased into the Employee Benefit Trust at a cost of £4 million (2013 – £10 million).
During the year, 2,443,619 (2013 – 2,703,843) shares held in treasury and 808,127 (2013 – 178,540) shares held in the Employee Benefit Trust
were transferred to employees to satisfy vested share awards.
At 31 March 2014, 2,442,914 (2013 – 1,841,533) shares were held in treasury with a market value of £16 million (2013 – £16 million) and 2,263,515
(2013 – 2,571,642) shares were held in the Employee Benefit Trust with a market value of £15 million (2013 – £22 million).
At 31 March 2014, own shares held represented 1.0% (2013 – 0.9%) of the Company’s called up share capital.
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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
4 815
3 873
1 955
1 242
2 024
538
616
121
146
15 330
At 31 March 2014
%
Total
%
31.4
25.3
12.8
8.1
13.2
3.5
4.0
0.8
0.9
100.0
1 270 548
3 026 174
2 441 124
2 237 815
6 261 691
3 772 112
30 537 962
38 693 792
379 961 665
468 202 883
0.3
0.6
0.5
0.5
1.3
0.8
6.5
8.3
81.2
100.0
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Tate & Lyle PLC Annual Report 2014 | 111
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
25 Other reserves
At 1 April 2012
Other comprehensive income
Loss on cash flow hedges
Loss on cash flow hedges transferred to profit or loss
Loss on revaluation of available-for-sale financial assets
Gain on currency translation of foreign operations
Loss on net investment hedges
Gain transferred to profit or loss on disposal of foreign operations
Tax relating to the above items
At 31 March 2013
Other comprehensive income
Loss on cash flow hedges
Loss on currency translation of foreign operations
Gain on net investment hedges
Tax relating to the above items
At 31 March 2014
Hedging
reserve
£m
2
Currency
translation
reserve
£m
28
Other
reserves
£m
98
(3)
4
–
–
–
–
(1)
2
(1)
–
–
–
1
–
–
–
56
(30)
(14)
–
40
–
(130)
50
–
(40)
–
–
(1)
–
–
–
–
97
–
–
–
–
97
Total
£m
128
(3)
4
(1)
56
(30)
(14)
(1)
139
(1)
(130)
50
–
58
26 Share-based incentives
The Company operates share-based incentive arrangements for the executive directors, senior executives and other eligible employees under which
awards and options are granted over the Company’s ordinary shares. All of the arrangements under which awards and options were outstanding
during the 2014 and 2013 financial years are classified as equity-settled. During the year, the compensation expense recognised in profit or loss in
respect of share-based incentives was £8 million (2013 – £13 million).
Background
Performance Share Plan
The Group’s principal ongoing share-based incentive arrangement is the Performance Share Plan (PSP). Participation in the PSP is restricted
to the executive directors and other senior executives. Awards made under the PSP normally vest provided the participant remains in the Group’s
employment during the performance period and the Group achieves earnings per share (EPS) and return on capital employed (ROCE) targets.
Up to 50% of each award vests dependent on the compound annual growth rate of the Group’s adjusted diluted EPS from continuing operations
reaching specified levels over the performance period. Up to 50% of each award vests dependent on the Group’s adjusted ROCE from continuing
operations reaching specified levels at the end of the performance period. The performance period is the period of three financial years beginning
with the financial year in which the award is granted. During the 2014 and 2013 financial years, the Group recognised an expense in relation to
share-based incentives that were awarded to the Chief Executive Officer in 2009, 2010 and 2011 that were subject to the same performance
conditions that applied to awards made under the PSP in those years. From 2012, the Chief Executive Officer has participated in the PSP.
Further information on the PSP is set out in the Directors’ Remuneration Report on pages 52 to 71.
Group Bonus Plan – Deferred Element
Bonuses earned under the Group Bonus Plan are normally paid in cash up to 100% of the base salary of the participating executive. Any excess
above 100% of base salary is paid in the form of deferred shares that are released after two years subject to the executive remaining in the Group’s
employment. During the vesting period, payments in lieu of dividends are made in relation to the deferred shares.
Further information on the Group Bonus Plan is set out in the Directors’ Remuneration Report.
Sharesave Plan
Options are granted from time-to-to time under the Company’s Sharesave Plan, which is open to all employees in the UK. It offers eligible employees
the option to buy shares in the Company after a period of three or five years funded from the proceeds of a savings contract to which they contribute
on a monthly basis.
Executive Share Option Scheme
Options are outstanding under the Company’s legacy executive share option scheme. The last grant of options was made under this scheme in 2004
and those options vested in 2007.
112 | Tate & Lyle PLC Annual Report 2014
26 Share-based incentives continued
Movements in the year
Movements in the awards outstanding during the year were as follows:
Outstanding at 1 April
Granted
Exercised
Lapsed
Outstanding at 31 March
Exercisable at 31 March
Year ended 31 March 2014
Weighted
average
exercise
price
pence
10p
11p
14p
20p
10p
16p
Awards
Number
10 838 115
2 591 210
(3 261 729)
(309 212)
9 858 384
1 981 524
Year ended 31 March 2013
Weighted
average
exercise
price
pence
16p
8p
29p
7p
10p
29p
Awards
Number
11 270 273
2 718 602
(2 914 764)
(235 996)
10 838 115
1 875 237
The weighted average market price of the Company’s ordinary shares on the dates on which awards were exercised during the year was 817p
(2013 – 654p).
Awards granted in the year
During the year, PSP awards were granted over 2,548,235 shares (2013 – 2,673,024 shares) and Sharesave options were granted over 42,975 shares
(2013 – 37,210 shares). The compensation expense recognised in relation to these awards is based on the fair value of the awards at their respective
grant dates. The weighted average fair values of the awards granted during the year and the principal assumptions made in measuring those fair
values were as follows:
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Fair value at grant date
Principal assumptions
Share price on grant date
Expected life of the awards
Risk-free interest rate
Dividend yield on the Company’s shares
Volatility of the Company’s shares
Year ended 31 March 2014
Year ended 31 March 2013
PSP
752p
Sharesave
198p
PSP
619p
Sharesave
209p
817p
782p
3 years 3.3/5.3 years
0.45%/0.9%
3.5%
30%
–
3.5%
n/a
679p
3 years
–
4.0%
n/a
759p
3.3/5.3 years
0.65%/1.2%
4.0%
35%
The fair value of the awards was measured using the Black-Scholes option pricing formula, taking into account factors such as non-transferability,
exercise restrictions and behavioural considerations.
Expected volatility was based on the historical volatility of the market price of the Company’s shares over the expected life of the awards.
No deferred shares were granted under the Group Bonus Plan during the year. During the prior year, 8,368 deferred shares were granted in relation
to annual bonuses earned during the year ended 31 March 2012.
Awards outstanding at the end of the year
The range of exercise prices and the weighted average remaining contractual life of awards outstanding at the end of the year were as follows:
Exercise price
Nil
200p to 399p
400p to 799p
Total
At 31 March 2014
Weighted
average
contractual
life
months
48.2
14.2
34.5
47.7
Awards
Number
9 638 499
98 694
121 191
9 858 384
At 31 March 2013
Weighted
average
contractual
life
months
49.1
14.6
37.6
48.4
Awards
Number
10 573 265
167 358
97 492
10 838 115
Tate & Lyle PLC Annual Report 2014 | 113
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
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
Industrial Revenue Bonds 2016–2036 (US$77,655,000)
5.0% Guaranteed Notes 2014 (US$500,000,000)
6.625% Guaranteed Notes 2016 (US$250,000,000)
6.75% Guaranteed Notes 2019 (£200,000,000)
Total
Bank loans
Variable unsecured loans (US$)
Total
Other borrowings
Obligations under finance leases
Total
Total non-current borrowings
2014
£m
2
2
2014
£m
216
2
63
34
315
2014
£m
2
47
–
157
214
420
2
2
17
17
439
At 31 March
2013
£m
3
3
At 31 March
2013
£m
264
3
79
36
382
At 31 March
2013
£m
2
51
341
177
224
795
5
5
21
21
821
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.
Current borrowing
Unsecured borrowings
5.0% Guaranteed Notes 2014 (US$500,000,000)
Industrial Revenue Bonds 2013 (US$14,345,000)
Bank overdrafts
Short-term loans
Total
Other borrowings
Obligations under finance leases
Total current borrowings
2014
£m
304
–
6
27
337
2
339
At 31 March
2013
£m
–
9
8
56
73
2
75
Included within borrowings are £345 million (2013 – £363 million) of borrowings subject to fair value hedges, of which amortised cost has been
increased by £24 million (2013 – £46 million) in the table above.
Secured borrowings
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default.
114 | Tate & Lyle PLC Annual Report 2014
28 Borrowings continued
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
420
2
17
339
778
At 31 March 2014
Fair value
£m
451
2
17
342
812
Book value
£m
795
5
21
75
896
At 31 March 2013
Fair value
£m
845
5
21
75
946
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
2014
£m
9
164
266
439
At 31 March
2013
£m
344
191
286
821
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 2014 rise by an average of 1% over the year ending 31 March 2015, there would be no impact on the Group’s profit
before tax (2013 – decrease by £1 million).
Taking into account the Group’s interest rate and cross currency swap contracts, the effective interest rates of its borrowings are as follows:
2,394,000 6.5% cumulative preference shares of £1 each
Industrial Revenue Bonds 2013–2036 (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)
2014
£m
6.5%
0.1%
2.8%
4.1%
4.3%
At 31 March
2013
£m
6.5%
0.2%
2.9%
4.2%
4.8%
Short-term loans and overdrafts
Current short-term loans mature within the next 12 months and overdrafts are repayable on demand. Both short-term loans and bank overdrafts are
arranged at floating rates of interest and expose the Group to cash flow interest rate risk.
Credit facilities and arrangements
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 2014, this committed facility remains undrawn. The facility has a value of £480 million (2013 – £527 million) and matures in July 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.
Finance lease commitments
Amounts payable under finance lease commitments are as follows:
Within one year
Between one and five years
After five years
Total
Less future finance charges
Present value of minimum lease payments
At 31 March 2014
Present value
of minimum
lease
payments
£m
2
9
8
19
Minimum
lease
payments
£m
4
10
11
25
(6)
19
At 31 March 2013
Present value
of minimum
lease
payments
£m
2
11
10
23
Minimum
lease
payments
£m
4
14
13
31
(8)
23
Tate & Lyle PLC Annual Report 2014 | 115
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
29 Deferred tax
Deferred tax is calculated on temporary differences arising between the carrying amount of assets and liabilities for accounting purposes and their
respective tax values. Deferred tax liabilities arise where the carrying amount is higher than the tax value (more tax deduction has been taken). This
can happen where we invest in capital assets, as governments often encourage investment by allowing tax depreciation to be recognised faster than
accounting depreciation. This reduces the tax value of the asset relative to its carrying amount. Deferred tax liabilities are generally provided on all
taxable temporary differences. Deferred tax assets arise where the carrying amount is lower than the tax value (less tax benefit has been taken). This
can happen where we have trading losses, which cannot be offset in the current period but can be carried forward and we consider it probable that
we will be able to offset the losses against future taxable profits.
Movements in deferred income tax net assets/(liabilities) in the year are as follows:
Deferred tax
At 1 April 2012
Charged to the income statement – restated*
Charged to other comprehensive income – restated*
Charged directly to equity
Currency translation differences
At 31 March 2013
Charged to the income statement
Charged to other comprehensive income
Charged directly to equity
Currency translation differences
At 31 March 2014
£m
12
(23)
(12)
(1)
8
(16)
(2)
(22)
(1)
3
(38)
Of the amounts of deferred tax charged to the income statement and other comprehensive income, a charge of £1 million (2013 – £1 million) 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 £614 million (2013 – £571 million) have not been recognised to the extent that they exceed
taxable profits against which these assets may be recovered. No unrelieved tax losses expired under current tax legislation in the year ended
31 March 2014.
The total deferred tax on unremitted earnings is £3 million (2013 – £4 million) of which £nil (2013 – £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 period-end date was approximately
£3 million (2013 – £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:
Capital
allowances
in excess of
depreciation
£m
(115)
–
(12)
(10)
(137)
–
4
12
(121)
Other
£m
(33)
3
(8)
8
(30)
3
23
2
(2)
Total
£m
(148)
3
(20)
(2)
(167)
3
27
14
(123)
Deferred tax liabilities
At 1 April 2012
Transfers between categories
Charged to the income statement
Currency translation differences
At 31 March 2013
Transfers between categories
Credited to the income statement
Currency translation differences
At 31 March 2014
116 | Tate & Lyle PLC Annual Report 2014
29 Deferred tax continued
Deferred tax assets
At 1 April 2012
Transfers between categories
Credited/(charged) to the income statement – restated*
Charged to other comprehensive income – restated*
Charged directly to equity
Currency translation differences
At 31 March 2013
Transfers between categories
(Charged)/credited to the income statement
Charged to other comprehensive income
Charged directly to equity
Currency translation differences
At 31 March 2014
Retirement
benefit
obligations
£m
74
–
25
(6)
–
7
100
–
(6)
(22)
–
(8)
64
Share-based
payments
£m
7
–
2
–
(1)
(1)
7
–
(1)
–
(1)
–
5
Tax losses
£m
78
–
(33)
(5)
–
2
42
–
(23)
–
–
(3)
16
Other
£m
1
(3)
3
(1)
–
2
2
(3)
1
–
–
–
–
Total
£m
160
(3)
(3)
(12)
(1)
10
151
(3)
(29)
(22)
(1)
(11)
85
Deferred tax assets and liabilities are offset where there is a legally enforceable right of offset and there is an intention to settle the balances net.
As a result of these offsets, the deferred tax balances are presented in the statement of financial position as follows:
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Deferred tax liabilities
Deferred tax assets
Net deferred tax liability
* See Note 43.
2014
£m
(45)
7
(38)
At 31 March
2013
£m
(24)
8
(16)
30 Retirement benefit obligations
(a) Plan information
(i) Pensions
The Group operates a number of defined benefit pension plans, principally in the UK and the US and, until December 2013, in the Netherlands.
Generally, the pension benefits provided under these plans are determined based on the pensionable salary and period of pensionable service
of the individual members. Most of the plans are funded and the plan assets held separately from those of the Group in funds that are under the
control of trustees. The extent of the powers of the trustees, in particular in respect of funding and investment strategy, varies and is dependent
on local regulations and the rules of each plan. Payments made by the Group to the plans principally comprise funding contributions agreed with
the trustees that are determined in accordance with local regulations to ensure that appropriate funding levels are maintained and funding deficits
are eliminated over a reasonable period of time. All of the significant defined benefit pension plans operated by the Group are closed to new entrants
and most are closed to future accrual.
The Group operates defined contribution pension plans in a number of countries. Contributions payable by the Group to these plans during the year
amounted to £3 million (2013 – £4 million).
(ii) Other benefits
The Group’s subsidiaries in the US provide unfunded retirement medical plans to the majority of their employees. Such plans provide financial
assistance in meeting various costs including medical, dental and prescription drugs. Employees are required to contribute to the cost of benefits
received under the plans. The Group meets the remaining costs of providing these benefits in the period in which they are incurred.
(b) Summary of financial effect
At the beginning of the year, the Group adopted IAS 19 (Revised 2011) ‘Employee Benefits’, which changed the way in which it accounts for defined
benefit pension and other retirement benefit plans and certain of the related disclosure requirements. An explanation and analysis of the financial
effect of these changes on the periods presented is set out in Note 43. Where necessary, comparative information for the prior year presented below
has been restated to reflect these changes.
Tate & Lyle PLC Annual Report 2014 | 117
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
30 Retirement benefit obligations continued
(i) Analysis of amounts presented in the income statement
Charged/(credited) to operating profit
Defined benefit plans:
– Current service cost
Pension plans
Medical plans
– Gain on settlement
– Plan administration expenses
Defined contribution plans
Net charge to operating profit
Charged/(credited) to finance expense
Interest on benefit obligations
Interest on plan assets
Net charge to finance expense
Year ended 31 March
2013
£m
2014
£m
5
2
(4)
2
5
3
8
64
(56)
8
4
3
–
2
9
4
13
69
(65)
4
During the year, the assets and liabilities of the defined benefit pension plan in the Netherlands were transferred to a new collective defined
contribution plan and the defined benefit plan was closed. For accounting purposes, this transfer was treated as a settlement on which the Group
recognised a gain of £4 million (of which £2 million was attributed to the Bulk Ingredients segment and £2 million was attributed to the Speciality
Food Ingredients segment).
(ii) Analysis of amounts presented in other comprehensive income
Return on plan assets
Actual return on plan assets (net of asset management expenses)
Interest on plan assets
Actual return lower than interest on plan assets
Actuarial gains/ (losses)
Gain/(loss) from changes in financial assumptions
Loss from changes in demographic assumptions
(Loss)/gain from experience against assumptions
Net actuarial gain/(loss)
Year ended 31 March
2013
£m
2014
£m
27
(56)
(29)
60
(40)
(1)
19
52
(65)
(13)
(134)
(2)
4
(132)
During the year, the trustees of the Amylum UK Pension Scheme agreed a full buy-in of its benefit obligations at a cost of £82 million (which was
partially funded by an additional contribution from the Group of £6 million). For accounting purposes, the related benefit obligation was valued at £69
million such that there was a loss on plan assets of £13 million. During the prior year, the trustees of the Tate & Lyle Group Pension Scheme in the UK
agreed a partial buy-in in relation to current pensioners at a cost of £347 million. For accounting purposes, the related benefit obligation was valued at
£266 million such that there was a loss on plan assets of £81 million.
(iii) Analysis of defined benefit liability
At 31 March 2014
At 31 March 2013
Pensions
£m
Medical
benefits
£m
Total
£m
Pensions
£m
Medical
benefits
£m
(1 425)
(46)
(1 471)
1 305
(166)
–
(166)
(166)
–
(54)
(54)
–
(54)
–
(54)
(54)
(1 425)
(100)
(1 525)
1 305
(220)
–
(220)
(220)
(1 539)
(53)
(1 592)
1 407
(185)
12
(197)
(185)
–
(80)
(80)
–
(80)
–
(80)
(80)
Total
£m
(1 539)
(133)
(1 672)
1 407
(265)
12
(277)
(265)
Benefit obligations:
Funded plans
Unfunded plans
Fair value of plan assets
Net deficit
Presented in the statement of financial position:
Retirement benefit surplus
Retirement benefit deficit
118 | Tate & Lyle PLC Annual Report 2014
30 Retirement benefit obligations continued
(iv) Analysis of movements in the net deficit
At 1 April 2012
Year ended 31 March 2013
– (Increase)/decrease in the benefit obligation
– Increase in the fair value of plan assets
At 31 March 2013
Year ended 31 March 2014
– Decrease in the benefit obligation
– Decrease in the fair value of plan assets
At 31 March 2014
Pensions
£m
(36)
Medical benefits
£m
(104)
(194)
45
(185)
121
(102)
(166)
24
–
(80)
26
–
(54)
Total
£m
(140)
(170)
45
(265)
147
(102)
(220)
(c) Defined benefit obligations
(i) Principal assumptions
Pensions
For accounting purposes, the benefit obligation of each plan has been calculated in accordance with IAS 19 based on data gathered for the most
recent actuarial valuation and by applying assumptions made by the Group on the advice of independent actuaries.
As required by local regulations, actuarial valuations of the US pension plans are carried out each year and those of the UK pension plans are carried
out at least every three years. An actuarial valuation at 31 March 2013 of the Tate & Lyle Group Pension Scheme in the UK has commenced. Whilst
the valuation has not yet been finalised, the Group has used the data gathered in relation to the valuation as the basis for measuring the related
benefit obligation. An actuarial valuation of the Amylum UK Pension Scheme was last carried out at 30 June 2011.
Principal assumptions used in calculating the benefit obligation were as follows:
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Inflation rate
Expected rate of salary increases
Expected rate of pension increases:
– Deferred pensions
– Pensions in payment
Discount rate
Inflation rate
Expected rate of salary increases
Expected rate of pension increases:
– Deferred pensions
– Pensions in payment
Discount rate
UK
CPI 2.4%/
RPI 3.4%
n/a
2.4%
3.2%
4.2%
UK
CPI 2.5%/
RPI 3.5%
n/a
2.5%
3.4%
4.2%
At 31 March 2014
US Other countries
2.5%
3.5%
n/a
n/a
4.3%
2.0%
2.0%
1.6%
1.6%
3.5%
At 31 March 2013
US
Other countries
2.5%
3.5%
n/a
n/a
3.9%
2.0%
2.0%
0.9%
0.9%
3.1%
Assumptions regarding future mortality rates of members of the Group’s pension plans are based on published statistics and taking into account the
profile of the plan members. On this basis, the average life expectancies assumed for members of the plans are as follows:
Male aged 65 now
Male aged 65 in 20 years’ time
Female aged 65 now
Female aged 65 in 20 years’ time
At 31 March 2014
At 31 March 2013
UK
23 years
26 years
24 years
27 years
US
19 years
20 years
21 years
22 years
UK
22 years
25 years
23 years
25 years
US
19 years
21 years
21 years
22 years
Shorter longevity assumptions are used for members who retire on grounds of ill health.
Medical benefits
Principal assumptions used in calculating the benefit obligation are medical cost inflation and the discount rate applied to the expected benefit
payments. Management assumed medical cost inflation at 6.0% per annum (2013 – 7.0%), grading down to 5% by 2016, and used a discount rate
of 4.1% (2013 – 3.7%).
Tate & Lyle PLC Annual Report 2014 | 119
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
30 Retirement benefit obligations continued
(ii) Analysis of movements in the benefit obligation
At 1 April 2012
Year ended 31 March 2013
Service cost
Plan administration costs
Interest on benefit obligation
Actuarial gains/(losses):
– Changes in financial assumptions
– Changes in demographic assumptions
– Experience against assumptions
Net actuarial (loss)/gain
Employees' contributions
Benefits paid
Currency translation differences
(Increase)/decrease in the benefit obligation
At 31 March 2013
Year ended 31 March 2014
Service cost
Plan administration costs
Interest on benefit obligation
Actuarial gains/(losses):
– Changes in financial assumptions
– Changes in demographic assumptions
– Experience against assumptions
Net actuarial (loss)/gain
Employees’ contributions
Benefits paid
Transfer on settlement
Currency translation differences
(Increase)/decrease in the benefit obligation
At 31 March 2014
UK
£m
(867)
–
(2)
(43)
(132)
–
–
(132)
–
47
(1)
(131)
(998)
–
(2)
(41)
23
(39)
(7)
(23)
–
49
–
2
(15)
(1 013)
US
£m
(468)
Other countries
£m
(63)
Pension benefits
Total
£m
(1,398)
Medical benefits
£m
(104)
(1)
–
(20)
(26)
(1)
2
(25)
–
25
(30)
(51)
(519)
(1)
–
(19)
21
(1)
3
23
–
26
–
45
74
(445)
(3)
–
(2)
(7)
(1)
–
(8)
(1)
2
–
(12)
(75)
(4)
–
(1)
(2)
–
1
(1)
(1)
2
67
–
62
(13)
(4)
(2)
(65)
(165)
(2)
2
(165)
(1)
74
(31)
(194)
(1 592)
(5)
(2)
(61)
42
(40)
(3)
(1)
(1)
77
67
47
121
(1 471)
(3)
–
(4)
31
–
2
33
–
3
(5)
24
(80)
(2)
–
(3)
18
–
2
20
–
4
–
7
26
(54)
(iii) Maturity of obligations
At 31 March 2014, the weighted average duration of the significant defined benefit obligations was as follows:
Pension plans:
– UK
– US
Medical benefits
At 31 March 2014, the benefits expected to be paid by the plans over the next ten years were as follows:
Benefit payments:
– Within 12 months
– Between 1 to 2 years
– Between 2 to 5 years
– Between 5 to 10 years
UK
£m
49
49
150
263
US
£m
Other countries
£m
Pension benefits
Total
£m
Medical benefits
£m
24
25
78
140
–
–
–
–
73
74
228
403
4
4
12
19
Total
£m
(1,502)
(7)
(2)
(69)
(134)
(2)
4
(132)
(1)
77
(36)
(170)
(1 672)
(7)
(2)
(64)
60
(40)
(1)
19
(1)
81
67
54
147
(1 525)
Duration
18 years
12 years
9 years
Total
£m
77
78
240
422
120 | Tate & Lyle PLC Annual Report 2014
30 Retirement benefit obligations continued
(d) Plan assets
(i) Investment strategy
Principal risks
The defined benefit pension plans expose the Group to actuarial risks such as interest rate, longevity, inflation and investment risk.
Interest rate risk
Inflation risk
Volatility in the financial markets can have a significant effect on the
benefit obligation as the calculation of the obligation involves
discounting based on yields on AA-rated corporate bonds. A
decrease in the bond yield will increase the benefit obligation.
Inflation risk arises where pensionable salaries, deferred pensions or
pensions in payment are subject to inflation increases. A higher rate
of inflation will lead to a higher benefit obligation.
Longevity risk
Investment risk
Longevity (or life expectancy) represents a risk because the longer
members of the plans live the higher benefit payments to them will
be. An increase in life expectancy beyond that assumed will increase
the benefit obligation.
If the return on the plan assets is lower than the discount rate applied
to the benefit obligation, there will be an increase in the deficit (or
reduction in the surplus) on the plan.
Mitigation of risk
The Group encourages the trustees of the plans to adopt an investment policy that seeks to mitigate these risks, which involves investing a significant
proportion of the plan assets in liability-driven investment portfolios that mitigate interest rate, inflation and investment risks. The Group seeks to
ensure that, as far as is practicable, the investment portfolios of the funded plans are invested in long-term fixed interest securities with maturities and
in currencies that match the expected future benefit payments as they fall due. In the UK, interest rate derivatives are used to achieve close matching
where matching fixed-interest securities are not available in the market. Most of the inflation risk for the Group arises in the UK since deferred
pensions and pensions in payment in the US do not attract inflation increases. Inflation risk is mitigated by holding index-linked government bonds
and corporate bonds and, in the UK, inflation derivatives. At 31 March 2014, £346 million (2013 – £275 million) of the benefit obligation was matched
by qualifying insurance policies that also mitigate longevity risk. The plans also maintain a portfolio of return-seeking investments, principally in the
form of equities and property.
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(ii) Plan assets by category
Equities – quoted
Corporate bonds – quoted
Government bonds – quoted
Property – unquoted
Insurance policies – unquoted
Other assets – unquoted
Equities – quoted
Corporate bonds – quoted
Government bonds – quoted
Property – unquoted
Insurance policies – unquoted
Other assets – unquoted
UK
£m
237
148
105
45
343
96
974
UK
£m
204
180
166
57
272
120
999
Other countries
£m
At 31 March 2014
Total
£m
–
–
–
–
–
–
–
332
321
148
62
346
96
1 305
US
£m
95
173
43
17
3
–
331
US
£m
Other countries
£m
At 31 March 2013
Total
£m
144
117
52
29
3
1
346
21
9
20
–
–
12
62
369
306
238
86
275
133
1 407
Plan assets do not include any direct investments in securities issued by the Group or any property occupied by or other assets used by the Group.
Assets are classified as quoted only if they have a quoted market price in an active market as defined by IFRS 13 ‘Fair Value Measurement’. All other
assets are classified as unquoted.
Tate & Lyle PLC Annual Report 2014 | 121
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
30 Retirement benefit obligations continued
(iii) Analysis of movements in the plan assets
At 1 April 2012
Year ended 31 March 2013
Interest on plan assets
Actual return (lower)/higher than interest on plan assets
Employer’s contributions
Employees’ contributions
Benefits paid
Currency translation differences
(Decrease)/increase in fair value of plan assets
At 31 March 2013
Year ended 31 March 2014
Interest on plan assets
Actual return (lower)/higher than interest on plan assets
Employer’s contributions
Employees’ contributions
Benefits paid
Transfer on settlement
Currency translation differences
Decrease in fair value of plan assets
At 31 March 2014
UK
£m
1 005
US
£m
302
Other countries
£m
55
50
(35)
26
–
(47)
–
(6)
999
42
(41)
24
–
(49)
–
(1)
(25)
974
13
18
20
–
(25)
18
44
346
13
12
18
–
(26)
–
(32)
(15)
331
2
4
2
1
(2)
–
7
62
1
–
1
1
(2)
(63)
–
(62)
–
Total
£m
1 362
65
(13)
48
1
(74)
18
45
1 407
56
(29)
43
1
(77)
(63)
(33)
(102)
1 305
(e) Funding of the plans
A full valuation is performed by actuaries for the trustees of each plan to determine the level of funding required. Employer contributions are agreed
between the trustees of each plan and the Group on the basis of these valuations. The assumptions used by the trustees for funding purposes may
differ from the assumptions made by the Group for accounting purposes. As a result, the funding deficits or surpluses on the plans may be very
different from the accounting deficits or surpluses.
During the year ending 31 March 2015, the Group expects to contribute approximately £33 million to its defined benefit pension plans and to pay
approximately £4 million in relation to retirement medical benefits.
(f) Sensitivity analysis
At 31 March 2014, the sensitivity of the net deficit on the plans to changes in the principal assumptions was as follows (assuming in each case that the
other assumptions are unchanged):
Change
in assumption
+/-
Increase/(decrease) in obligation
Decrease
in assumption
£m
Increase
in assumption
£m
50 bp
1 year
100 bp
50 bp
100 bp
75
68
(206)
2
(5)
(59)
(68)
255
(2)
6
Pension plans
Inflation rate
Life expectancy
Discount rate
Medical benefits
Medical cost inflation
Discount rate
122 | Tate & Lyle PLC Annual Report 2014
31 Provisions for other liabilities and charges
At 1 April 2012
Provided in the year
Released in the year
Utilised in the year
Exchange and other movements
At 31 March 2013
Provided in the year
Released in the year
Utilised in the year
Exchange and other movements
At 31 March 2014
Provisions are expected to be utilised as follows:
– within one year
– after more than one year
Total
Insurance
funds
£m
11
3
(2)
(2)
–
10
2
(1)
(4)
(1)
6
Restructuring
and closure
provisions
£m
4
2
–
–
–
6
–
–
(2)
–
4
Other
provisions
£m
13
9
(5)
(2)
4
19
–
(1)
(2)
(1)
15
Total
£m
28
14
(7)
(4)
4
35
2
(2)
(8)
(2)
25
2014
£m
15
10
25
At 31 March
2013
£m
20
15
35
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Insurance funds represent amounts provided by the Group’s captive insurance subsidiary in respect of the expected level of insurance claims.
These provisions are expected to be utilised within five years.
Restructuring and closure provisions relate to 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 and are expected to be utilised within
five years.
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Tate & Lyle PLC Annual Report 2014 | 123
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
Year ended 31 March
2013
£m
(47)
(38)
(20)
(6)
4
(107)
2014
£m
65
37
(57)
(4)
(3)
38
2014
£m
238
158
396
2014
£m
396
396
At 31 March
2013
£m
223
156
379
At 31 March
2013
£m
379
379
At 31 March
2013
£m
64
214
80
21
379
32 Change in working capital
Continuing operations
Decrease/(increase) in inventories
Decrease/(increase) in receivables
Decrease in payables
Increase in derivative financial instruments (excluding debt-related derivatives)
(Decrease)/increase in provisions for other liabilities and charges
Decrease/(increase) in working capital
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
Total
The effective interest rate on short-term deposits was 0.3% (2013 – 0.3%), with an average maturity of two days (2013 – two days).
The carrying amount of cash and cash equivalents are denominated in the following currencies:
Euro
US dollar
Sterling
Other
Total
34 Net debt
Reconciliation of the increase/(decrease) in cash and cash equivalents to the movement in net debt:
2014
£m
70
248
52
26
396
Year ended 31 March
2013
£m
(68)
95
27
13
–
(43)
(3)
(476)
(479)
2014
£m
50
44
94
–
(3)
35
126
(479)
(353)
Net increase/(decrease) in cash and cash equivalents
Net decrease in borrowings
Decrease in net debt resulting from cash flows
Fair value and other movements
Debt acquired on acquisition of subsidiaries
Currency translation differences
Decrease/(increase) in net debt in the year
Net debt at beginning of year
Net debt at end of year
124 | Tate & Lyle PLC Annual Report 2014
34 Net debt continued
Movements in the Group’s net debt are as follows:
At 1 April 2012
(Increase)/decrease resulting from cash flows
Fair value movements/other
Reclassification
Currency translation differences
At 31 March 2013
Decrease resulting from cash flows
Fair value movements/other
Reclassification
Debt acquired on acquisition of subsidiaries
Currency translation differences
At 31 March 2014
Balances at 31 March 2014 comprise:
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Net debt is denominated in the following currencies:
Cash and cash
equivalents
£m
424
(46)
–
–
1
379
50
–
–
–
(33)
396
–
396
–
–
Borrowings and finance leases
Current
£m
(141)
77
7
(12)
(6)
(75)
39
–
(304)
(3)
4
(339)
–
–
–
(339)
Non-current
£m
(805)
2
1
12
(31)
(821)
5
21
304
–
52
(439)
Derivatives
£m
24
16
5
–
(7)
38
–
(21)
–
–
12
29
–
–
(439)
–
23
13
(2)
(5)
Euro
US dollar
Sterling
Other
Total
35 Contingent liabilities
Trade guarantees
Trade guarantees
Assets held
for sale
£m
22
(22)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2014
£m
1
(401)
33
14
(353)
Total
£m
(476)
27
13
–
(43)
(479)
94
–
–
(3)
35
(353)
23
409
(441)
(344)
At 31 March
2013
£m
(12)
(521)
49
5
(479)
2014
£m
1
At 31 March
2013
£m
2
Trade guarantees have been given in the normal course of business by the Group at both 31 March 2014 and 31 March 2013. These are in respect
of Revenue and Customs, ECGD recourse agreements, letters of credit and tender and performance bonds.
Sale of EU Sugars
As previously announced, American Sugar Holdings (ASR) 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 in September 2010. 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 defend vigorously.
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 31 March 2014
will have a material adverse effect on the Group’s financial position.
Tate & Lyle PLC Annual Report 2014 | 125
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
36 Commitments
Capital commitments
Commitments for the purchase of intangible assets
Commitments for the purchase of property, plant and equipment
Total
2014
£m
1
39
40
At 31 March
2013
£m
6
21
27
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 period-end date, the Group has outstanding commitments under non-cancellable operating leases which fall due as follows:
Within one year
Between one year and five years
After five years
Total
2014
£m
21
68
85
174
At 31 March
2013
£m
24
77
88
189
37 Acquisitions and disposals
Year ended 31 March 2014
Acquisitions
On 17 May 2013, the Group acquired a 100% equity interest in Biovelop, an early-stage Swedish manufacturer of oat beta glucan. The acquisition
broadened the Group’s health and wellness offering and added a clean-label, speciality fibre with strong health claims to its existing corn-based
portfolio.
On 8 October 2013, the Group acquired a 51% equity interest in Jiangsu Howbetter Food Co., Ltd, a leading Food Systems business in China.
The new venture, Tate & Lyle Howbetter, provides the Group with local infrastructure and capabilities to accelerate the growth of its Food Systems
business in China. At the acquisition date, the Group entered into put and call option arrangements whereby at a future date it could be required to
purchase, or could itself opt to purchase, the 49% non-controlling interest in Tate & Lyle Howbetter for an amount in cash based on the future results
of that business. The Group initially recognised a liability of £2 million in relation to the put option and a corresponding debit to equity attributable
to owners of the Company.
Goodwill of £10 million was recognised on business combinations during the year, which was determined as follows:
Cash consideration
Non-controlling interests (share of net assets acquired)
Less: Net assets acquired
Goodwill
Cash flows:
Cash consideration paid
Cash outflow on acquisitions
2014
£m
15
1
(6)
10
15
15
Goodwill recognised during the year was attributable to the broadening of the Group’s product offering and other synergies expected to be achieved
with the Group’s existing businesses. None of the goodwill recognised during the year is expected to be deductible for tax purposes.
Businesses acquired during the year contributed revenue of £2 million and a loss before tax of £2 million to the Group’s results. Had they been
acquired at the beginning of the year, their contribution to the Group’s results would not have been materially different.
Acquisition-related costs were less than £1 million.
Disposal
On 31 May 2013, the on-sale by the acquirer of Orsan China (a monosodium glutamate producer in which Tate & Lyle held a stake that was sold in
2009) resulted in a one-off operating gain of £3 million.
126 | Tate & Lyle PLC Annual Report 2014
37 Acquisitions and disposals continued
Year ended 31 March 2013
Disposals
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 transferring a cumulative currency translation gain to the income
statement, there was a gain on disposal of £8 million that was recognised as an exceptional item 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 transferring
a cumulative currency translation gain to the income statement, there was a gain on disposal of £21 million that was recognised as an exceptional
item within discontinued operations.
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 a gain on disposal of £5 million that was recognised as an exceptional
item within discontinued operations.
EU Sugars
During the prior year, the Group received £2 million in respect of a working capital settlement from its disposal of the EU Sugars business
to American Sugar Refining in September 2010. No change to the loss on disposal was recorded.
Other
During the prior year, the Group disposed of the remaining assets of its Israel Sugar business, resulting in a gain of £2 million, which was offset
by losses on the disposal of other assets relating to the Group’s discontinued Sugar operations.
A net gain of £34 million was recognised on disposals of businesses during the prior year, which may be analysed as follows:
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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
– Currency translation differences transferred to profit or loss
Net gain on disposal
Reported as:
– Exceptional items (Note 7)
– Non-exceptional items:
– Gain on disposal
– Loss on disposal
Total
Cash flows:
– Cash consideration
– Cash disposed
Net cash inflow on disposals
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
26
2
(2)
26
58
(22)
36
2013
Total
£m
2
23
4
19
22
(9)
(4)
27
(1)
83
(25)
58
81
(3)
14
34
34
2
(2)
34
78
(27)
51
Tate & Lyle PLC Annual Report 2014 | 127
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
38 Assets classified as held for sale
At 31 March 2013, the Group’s investment in Mitr Lao Sugar Company was classified as held for sale. It was sold during the year for £1 million which
resulted in no gain or loss.
39 Related party disclosures
Identity of related parties
The Group has related party relationships with its subsidiaries, joint ventures and associates, the Group’s pension schemes and with key
management being its directors and executive officers. No related party relationships with close family members of the Group’s key management
existed in the current or comparative year.
Subsidiaries, joint ventures and associates
Transactions entered into by the Company with subsidiaries and between subsidiaries as well as the resultant balances of receivables and payables
are eliminated on consolidation and are not required to be disclosed. 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 and between 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 (2013 – £9 million).
Key management compensation
Key management compensation is disclosed in Note 9.
Year ended 31 March
2013
£m
2014
£m
154
304
2014
£m
10
21
8
12
174
279
At 31 March
2013
£m
15
21
20
53
128 | Tate & Lyle PLC Annual Report 2014
40 Currency exchange rates
The principal exchange rates used to translate the results, assets and liabilities and cash flows of the Group’s foreign operations into pounds sterling
were as follows:
Average rate
US dollar
Euro
Year-end rate
US dollar
Euro
41 Principal subsidiaries, joint ventures and associates
Subsidiaries based in the United Kingdom1
G.C. Hahn and Company Limited
Tate & Lyle Industries Limited
Tate & Lyle International Finance PLC2
Tate & Lyle Investments Limited2
Tate & Lyle LLC
1 Registered in England and Wales, except Tate & Lyle LLC which is registered in Delaware, USA.
2 Direct subsidiaries of Tate & Lyle PLC.
Type of business
Blending
Holding company
In-house treasury company
Holding company
Holding company
Year ended 31 March
2013
£1 =
2014
£1 =
1.59
1.19
2014
£1 =
1.67
1.21
1.57
1.24
At 31 March
2013
£1 =
1.52
1.18
Percentage of
equity attributable
to Tate & Lyle PLC
100
100
100
100
100
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Tate & Lyle PLC Annual Report 2014 | 129
Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
41 Principal subsidiaries, joint ventures and associates continued
Subsidiaries operating overseas
Country of incorporation
or registration
Argentina
Company
Tate & Lyle Argentina SA
Australia
Belgium
Bermuda
Brazil
Chile
China
France
Germany
Gibraltar
Italy
Mexico
Morocco
Netherlands
Tate & Lyle ANZ Pty Limited
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.
Tate & Lyle Chile Commercial Ltda
Tate & Lyle Howbetter Co. Ltd1
Tate & Lyle Trading (Shanghai) Co. Ltd1
G.C. Hahn & Co. Food Stabiliser Business (Shanghai) Ltd.1
G.C. Hahn & Cie. S.A.R.L.
Tate & Lyle Ingredients France S.A.S.
G.C. Hahn & Co. Stabilisierungstechnik GmbH
G.C. Hahn & Co. Cooperationsgeschaft mbH
Tate & Lyle Insurance (Gibraltar) Limited
Tate & Lyle Italia S.P.A.
Tate & Lyle Mexico, S. de R.L.de C.V.
Tate & Lyle Morocco SA
Nederlandse Glucose Industrie B.V.
Tate & Lyle Netherlands B.V.
Poland
Singapore
South Africa
G.C. Hahn & Co. Technika stabilizowania Sp.z.o.o.
Tate & Lyle Global Shared Services Sp.z.o.o
Tate & Lyle Singapore Pte Ltd
Tate and Lyle South Africa Proprietary Limited
Spain
Sweden
USA
G.C. Hahn Estabilizantes y Tecnologia para Alimentos
Tate & Lyle Sweden AB
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
1 Non-coterminous year end.
Joint ventures
Country of incorporation
or registration
Bulgaria
Hungary
Mexico
Netherlands
Romania
Slovakia
Turkey
USA
Company
Amylum Bulgaria EAD1,2
Hungrana Kft1,2
Almidones Mexicanos SA2
Eaststarch C.V.
Amylum Romania S.R.L.1
Amylum Slovakia, spol s.r.o.1
Amylum Nisasta Sanayi Ve Ticaret Anonim Sireketi1
DuPont Tate & Lyle Bio Products Company, LLC
Type of business
Cereal sweeteners and starches,
sucralose distribution
Sucralose distribution and blending
Holding company
Management and finance
Citric acid, sucralose distribution,
cereal sweeteners and starches
Blending
Cereal sweeteners and starches,
sucralose distribution
Blending
Sucralose distribution,
cereal sweeteners and starches
Blending
Blending
Research and development centre
Blending
Holding company
Reinsurance
Blending
Sucralose distribution
Cereal sweeteners and starches
Holding company
Cereal sweeteners and starches,
sucralose distribution
Blending
Holding company
High-intensity sweeteners
Blending, cereal sweeteners and
starches
Blending
Oat beta glucan
Holding company
Blending
In-house banking
Holding company
Cereal sweeteners and starches
High-intensity sweeteners
In-house banking
Type of business
Cereal sweeteners and starches
Cereal sweeteners and starches
Cereal sweeteners and starches
Holding company
Cereal sweeteners and starches
Cereal sweeteners and starches
Cereal sweeteners and starches
Industrial ingredients
Percentage of
equity attributable
to Tate & Lyle PLC
100
100
100
100
100
100
100
51
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)
(50)
Percentage of
equity attributable
to Tate & Lyle PLC3
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.
130 | Tate & Lyle PLC Annual Report 2014
41 Principal subsidiaries, joint ventures and associates continued
Associate
Country of incorporation or registration
Thailand
Company
Tapioca Development Corporation1
Type of business
Starch production
1 Indirect associate of Tate & Lyle PLC.
Percentage of
equity attributable
to Tate & Lyle PLC
33.3
The results, assets and liabilities and cash flows of those entities whose financial years are not coterminous with that of the Group are consolidated
or proportionately consolidated in the Group’s financial statements on the basis of management accounts for the year ended 31 March.
A full listing of the Company’s subsidiaries, joint ventures and associates is available from the Company Secretary at the Company’s registered office
at 1 Kingsway, London WC2B 6AT.
42 Reconciliation of adjusted performance measures
For the reasons set out in Note 1, Tate & Lyle presents adjusted performance measures including adjusted operating profit, adjusted profit before tax
and adjusted earnings per share. For periods presented, these adjusted performance measures exclude, where relevant, exceptional items, the
amortisation of acquired intangible assets, net retirement benefit interest, tax on those adjustments and an exceptional tax item in discontinued
operations.
The following table shows the reconciliation of the adjusted performance measures to the most directly comparable measures presented in
accordance with IFRS.
£m (unless otherwise stated)
Continuing operations
Sales
Operating profit
Net finance expense
Profit before tax
Income tax expense
Profit for the year
Basic earnings per share
Diluted earnings per share
Effective tax rate
Discontinued operations
Sales
Operating profit/(loss)
Net finance expense
Profit/(loss) before tax
Income tax credit
Profit/(loss) for the year
Non-controlling interests
Profit/(loss) attributable to shareholders
Basic earnings/(loss) per share
Diluted earnings/(loss) per share
Total operations
Sales
Operating profit
Net finance expense
Profit before tax
Income tax expense
Profit for the year
Non-controlling interests
Profit attributable to shareholders
Basic earnings per share
Diluted earnings per share
Effective tax rate
* See Note 43.
Reported
Year ended 31 March 2014
Adjusting
items
Adjusted
3 147
325
(35)
290
(45)
245
52.8p
52.1p
15.6%
–
–
–
–
28
28
–
28
–
24
8
32
(15)
17
3.7p
3.6p
–
–
–
–
(28)
(28)
–
(28)
6.0p
5.9p
(6.0)p
(5.9)p
3 147
325
(35)
290
(17)
273
–
273
58.8p
58.0p
5.9%
–
24
8
32
(43)
(11)
–
(11)
(2.3)p
(2.3)p
3 147
349
(27)
322
(60)
262
56.5p
55.7p
18.5%
–
–
–
–
–
–
–
–
–
–
3 147
349
(27)
322
(60)
262
–
262
56.5p
55.7p
18.5%
Reported
3 256
334
(33)
301
(46)
255
54.9p
53.8p
15.3%
10
18
–
18
–
18
(1)
17
3.7p
3.6p
3 266
352
(33)
319
(46)
273
(1)
272
58.6p
57.4p
14.4%
Restated*
Year ended 31 March 2013
Adjusting
items
Adjusted
–
22
4
26
(13)
13
2.8p
2.8p
–
(26)
–
(26)
–
(26)
–
(26)
(5.6)p
(5.5)p
–
(4)
4
–
(13)
(13)
–
(13)
(2.8)p
(2.7)p
3 256
356
(29)
327
(59)
268
57.7p
56.6p
18.0%
10
(8)
–
(8)
–
(8)
(1)
(9)
(1.9)p
(1.9)p
3 266
348
(29)
319
(59)
260
(1)
259
55.8p
54.7p
18.5%
Tate & Lyle PLC Annual Report 2014 | 131
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Financial Statements
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS | CONTINUED
43 Adoption of IAS 19 (Revised 2011) ‘Employee Benefits’
At the beginning of the year, the Group adopted IAS 19 (Revised 2011) Employee Benefits, which changed the way it accounts for defined benefit
pension and other retirement benefit plans. IAS 19 (Revised 2011) had no effect on the Group’s financial position but it changed the allocation
of movements in the net deficits or surpluses on the plans within and between the income statement and other comprehensive income.
In previous years, the Group’s income statement reflected an expected return on the plan assets and an interest cost on the benefit obligation.
Differences between those assumptions and the actual outcomes were included in the net actuarial gain or loss that was recognised in other
comprehensive income. Under the revised standard, the Group’s income statement reflects a net interest cost or credit calculated by applying the
discount rate used in measuring the present value of the benefit obligation to the deficit or surplus on the plan. Essentially, therefore, in the Group’s
income statement the expected return on the plan assets has been replaced by an interest credit. Differences between the actual return on the plan
assets and the interest credit are recognised on a separate line in other comprehensive income.
Asset management costs continue to be deducted in arriving at the actual return on plan assets. Plan administration costs that were previously
deducted in arriving at the actual return on the plan assets are now charged to operating profit.
Comparative amounts for 2013 have been restated on a consistent basis. An analysis of the effect of IAS 19 (Revised 2011) on the Group’s results
for 2014 and 2013 is presented below.
£m unless otherwise stated
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
Other comprehensive expense
Total comprehensive income
Continuing operations
Basic earnings per share
Diluted earnings per share
Total operations
Basic earnings per share
Diluted earnings per share
Year ended 31 March 2014
Year ended 31 March 2013
Under
previous
policy
Effect of
IAS 19R
As
reported
As
previously
reported
Effect of
IAS 19R
As
restated
3 147
327
2
(29)
300
(49)
251
28
279
(119)
160
54.1p
53.4p
60.1p
59.3p
–
(2)
–
(8)
(10)
4
(6)
–
(6)
6
–
(1.3)p
(1.3)p
(1.3)p
(1.3)p
3 147
325
2
(37)
290
(45)
245
28
273
(113)
160
52.8p
52.1p
58.8p
58.0p
3 256
336
3
(30)
309
(49)
260
18
278
(149)
129
56.0p
54.9p
59.7p
58.5p
–
(2)
(2)
(4)
(8)
3
(5)
–
(5)
5
–
(1.1)p
(1.1)p
(1.1)p
(1.1)p
3 256
334
1
(34)
301
(46)
255
18
273
(144)
129
54.9p
53.8p
58.6p
57.4p
132 | Tate & Lyle PLC Annual Report 2014
44 Future adoption of IFRS 11 ‘Joint Arrangements’
With effect from 1 April 2014, the Group adopted IFRS 11 Joint Arrangements which will change significantly the accounting for its interests
in joint ventures.
In these financial statements, the Group’s interests in joint ventures are accounted for by proportionate consolidation, whereby the Group’s share
of the income and expenses, assets and liabilities and cash flows of joint ventures are combined on a line-by-line basis with those of Tate & Lyle PLC
and its subsidiaries. IFRS 11 prohibits the use of proportionate consolidation and requires that joint ventures are accounted for using the equity
method of accounting. Under the equity method of accounting, the Group’s share of the after tax profits and losses of the joint ventures will be shown
on one line of the consolidated income statement, its share of their net assets will be shown on one line of the consolidated statement of financial
position and the consolidated statement of cash flows will reflect cash flows between the Group and the joint ventures (investments in and dividends
from joint ventures) within cash flows from investing activities. While these changes will not affect the Group’s earnings or its net assets, they will affect
many of the individual line items presented in the Group’s financial statements.
Comparative amounts for 2014 will be restated on a consistent basis in the Group’s financial statements for future periods. We present below
an analysis of the effect of IFRS 11 on selected line items.
As currently
reported
£m
Elimination of
proportionate
consolidation
£m
Adoption of
equity
accounting
£m
As will be
restated
£m
Consolidated profit or loss and comprehensive income
Year ended 31 March 2014
Continuing operations
Sales
Operating profit
Finance income
Finance expense
Share of profit after tax of joint ventures
Profit before tax
Income tax expense
Profit from continuing operations
Profit from discontinued operations
Profit for the year
Other comprehensive expense
Total comprehensive income
Consolidated cash flows
Year ended 31 March 2014
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Net cash inflow
Consolidated assets and liabilities
At 31 March 2014
Non-current assets
Current assets
Total assets
Total equity
Non-current liabilities
Current liabilities
Total equity and liabilities
3 147
325
2
(37)
–
290
(45)
245
28
273
(113)
160
384
(137)
(197)
50
1 319
1 208
2 527
1 050
718
759
2 527
(393)
(74)
–
–
–
(74)
13
(61)
–
(61)
22
(39)
(98)
116
–
18
(137)
(146)
(283)
(224)
(6)
(53)
(283)
–
–
–
–
61
61
–
61
–
61
(22)
39
–
–
–
–
224
–
224
224
–
–
224
2 754
251
2
(37)
61
277
(32)
245
28
273
(113)
160
286
(21)
(197)
68
1 406
1 062
2 468
1 050
712
706
2 468
Going forward, the Group will present segment and adjusted financial information on a proportionate consolidation basis since this reflects
the management of our joint ventures on an integrated basis with the Group’s subsidiaries.
Tate & Lyle PLC Annual Report 2014 | 133
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Financial Statements
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS
OF TATE & LYLE PLC
Responsibilities for the financial
statements and the audit
Our responsibilities and those
of the Directors
As explained more fully in the Directors’
Statement of Responsibilities set out on
page 73, 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 ISAs (UK & 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.
Other Matter
We have reported separately on the Group
financial statements of Tate & Lyle PLC for
the year ended 31 March 2014.
John Waters (Senior Statutory Auditor)
for and on behalf of
PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
28 May 2014
(a) The maintenance and integrity of the Tate & Lyle
website (www.tateandlyle.com) 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.
(b) Legislation in the United Kingdom governing
the preparation and dissemination of financial
statements may differ from legislation
in other jurisdictions.
Report on the Parent Company
financial statements
Our opinion
In our opinion the Parent Company financial
statements, defined below:
(cid:116)(cid:1) give a true and fair view of the state of the
Parent Company’s affairs as at 31 March 2014;
(cid:116)(cid:1) have been properly prepared in accordance
with United Kingdom Generally Accepted
Accounting Practice; and
(cid:116)(cid:1) have been prepared in accordance with the
requirements of the Companies Act 2006.
This opinion is to be read in the context of what
we say in the remainder of this report.
What we have audited
The Parent Company financial statements,
which are prepared by Tate & Lyle PLC,
comprise:
(cid:116)(cid:1) the Parent Company balance sheet as at
31 March 2014;
(cid:116)(cid:1) the notes to the Parent Company financial
statements, which include a summary of
significant accounting policies and other
explanatory information.
The financial reporting framework that has been
applied in their preparation comprises
applicable law and United Kingdom Accounting
Standards (United Kingdom Generally Accepted
Accounting Practice).
In applying the financial reporting framework,
the Directors have made a number of subjective
judgements, for example in respect of
significant accounting estimates. In making
such estimates, they have made assumptions
and considered future events.
Certain disclosures required by the financial
reporting framework have been presented
elsewhere in the Annual Report 2014 (“the
Annual Report”) rather than in the notes
to the Parent Company financial statements.
These are cross-referenced from the Parent
Company financial statements and are
identified as audited.
What an audit of financial
statements involves
We conducted our audit in accordance with
International Standards on Auditing (UK &
Ireland) (“ISAs (UK & Ireland)”). 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:
(cid:116)(cid:1) whether the accounting policies are
appropriate to the Parent Company’s
circumstances and have been consistently
applied and adequately disclosed;
(cid:116)(cid:1) the reasonableness of significant accounting
estimates made by the Directors; and
(cid:116)(cid:1) the overall presentation of the financial
statements.
In addition, we read all the financial and
non-financial information in the Annual Report
to identify material inconsistencies with the
audited Parent Company financial statements
and to identify any information that is apparently
materially incorrect based on, or materially
inconsistent with, the knowledge acquired by us
in the course of performing the audit. If we
become aware of any apparent material
misstatements or inconsistencies we consider
the implications for our report.
Opinions on other matters prescribed
by the Companies Act 2006
In our opinion:
(cid:116)(cid:1) The information given in the Strategic Report
and the Directors’ Report for the financial year
for which the Parent Company financial
statements are prepared is consistent with
the Parent Company financial statements.
(cid:116)(cid:1) The part of the Directors’ Remuneration
Report to be audited has been properly
prepared in accordance with the Companies
Act 2006.
Other matters on which we are
required to report by exception
Adequacy of accounting records and
information and explanations received
Under the Companies Act 2006 we are required
to report to you if, in our opinion:
(cid:116)(cid:1) we have not received all the information and
explanations we require for our audit; or
(cid:116)(cid:1) 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
(cid:116)(cid:1) 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.
We have no exceptions to report arising
from this responsibility.
Directors’ remuneration
Under the Companies Act 2006 we are
required to report to you if, in our opinion,
certain disclosures of Directors’ remuneration
specified by law have not been made.
We have no exceptions to report arising
from this responsibility.
Other information in the Annual
Report
Under ISAs (UK & Ireland), we are required to
report to you if, in our opinion, information in the
Annual Report is:
(cid:116)(cid:1) materially inconsistent with the information in
the audited Parent Company financial
statements; or
(cid:116)(cid:1) apparently materially incorrect based on, or
materially inconsistent with, our knowledge of
the Parent Company acquired in the course of
performing our audit; or
(cid:116)(cid:1) is otherwise misleading.
We have no exceptions to report arising from
this responsibility.
134 | Tate & Lyle PLC Annual Report 2014
PARENT COMPANY BALANCE SHEET
Fixed assets
Tangible assets
Investments in subsidiary undertakings
Investment in associate
Total
Current assets
Debtors
Cash at bank
Creditors – amounts falling due within one year
Net current (liabilities)/assets
Total assets less current liabilities
Creditors – amounts falling due after more than one year
Net assets
Capital and reserves
Called up share capital
Share premium account
Capital redemption reserve
Profit and loss account
Total shareholders’ funds
Notes
2
3
4
5
6
7
10
11
11
11
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£m
13
999
1
1 013
1 501
1
1 502
(1 533)
(31)
982
(2)
980
117
406
8
449
980
At 31 March
2013
£m
9
1 006
1
1 016
1 535
–
1 535
(1 407)
128
1 144
(2)
1 142
117
406
8
611
1 142
The Parent Company’s financial statements on pages 135 to 140 were approved by the Board of Directors on 28 May 2014 and signed on its behalf
by:
Javed Ahmed, Tim Lodge Directors
The Notes on pages 136 to 140 form part of these financial statements.
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Registered number: 76535
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Tate & Lyle PLC Annual Report 2014 | 135
Financial Statements
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS
1 Principal accounting policies
Accounting basis
Tate & Lyle PLC (the Company) is a public
limited company incorporated and domiciled
in the United Kingdom. The Company’s
ordinary shares are listed on the London
Stock Exchange.
The Company’s financial statements are
prepared under the historical cost convention
in accordance with the Companies Act 2006
and applicable UK accounting standards.
The Company’s principal accounting policies
are unchanged compared with the year ended
31 March 2013.
For the reasons set out on page 28, the
Company’s financial statements are prepared
on a going concern basis.
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. Profit and loss account
disclosures are presented in Note 14.
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. 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
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.
Investments in subsidiary undertakings and in
associates represent interests that are directly
owned by the Company and are stated at cost
less amounts written-off for any permanent
diminution in value.
Amounts owed by or to subsidiary
undertakings
Amounts owed by or to subsidiary undertakings
are stated at amortised cost using the effective
interest method. Amounts owed by subsidiary
undertakings are written off where deemed
unrecoverable.
Research and development
All expenditure on research and development
is charged to the profit and loss account
when incurred.
136 | Tate & Lyle PLC Annual Report 2014
Leases
Operating lease payments are charged to the
profit and loss account on a straight-line basis
over the lease term.
Retirement benefits
The Company participates in a defined benefit
pension scheme in which certain of its
subsidiaries also participate. The Company,
which is not the principal employer, cannot
identify its share of the underlying assets and
liabilities of the scheme. Accordingly, as
permitted by FRS 17 Retirement Benefits,
the Company accounts for the scheme as
a defined contribution scheme and charges
its contributions to the scheme to the profit
and loss account in the periods in which
they fall due.
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 currency translation
Transactions denominated in foreign
currencies are translated into pounds sterling
at the exchange rate ruling on the date of the
transaction. Monetary assets and liabilities
denominated in foreign currencies are
retranslated into pounds sterling at the
exchange rate ruling on the balance sheet date.
Currency translation differences are credited
or charged to the profit and loss account.
Non-monetary assets denominated in foreign
currencies are not usually retranslated. An
investment in an overseas subsidiary
undertaking or associate is, however,
retranslated if it is financed by foreign currency
borrowings and the borrowings are designated
as a hedging instrument in relation to the
investment. If this is the case, the resulting
translation gain or loss on the investment is
recognised in the profit and loss account where,
to the extent that the hedge is effective, it will be
offset by the translation gain or loss on the
related borrowings.
Share-based incentives
As described in Note 26 to the Group financial
statements, the Company operates share-
based incentive plans under which it grants
awards over its ordinary shares to its own
employees and to those of its subsidiary
undertakings. All of the awards granted
under the existing plans are classified
as equity-settled awards.
For awards granted to its own employees,
the Company recognises an expense that is
based on the fair value of the awards measured
at the grant date using the Black-Scholes option
pricing formula. Fair value reflects any market
performance conditions and all non-vesting
conditions. Adjustments are made to the
compensation expense to reflect actual
and expected forfeitures due to failure
to satisfy service conditions or non-market
performance conditions.
Generally, the expense is recognised in the
profit and loss account on a straight-line basis
over the vesting period and a corresponding
credit is recognised in the profit and loss
account reserve.
For awards granted to employees of
its subsidiary undertakings, the Company
recognises a capital contribution to the
subsidiary and a corresponding credit
to equity calculated on the same basis as
the expense that it recognises for awards
to its own employees.
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.
Guarantees
From time to time, the Company provides
guarantees to third parties in respect of the
indebtedness of its subsidiary undertakings and
joint ventures. The Directors consider these
guarantees to be insurance arrangements and,
therefore, the Company recognises a liability in
respect of such guarantees only in the event
that it becomes probable that the guarantee will
be called upon and the Company will be
required to make a payment to the third party.
Own shares
Own shares represent the Company’s ordinary
shares that are held by the Company in treasury
or by a sponsored Employee Benefit Trust that
are used to satisfy awards made under the
Company’s share-based incentive plans.
When own shares are acquired, the cost
of purchase in the market is deducted from
the profit and loss account reserve. Gains
or losses on the subsequent transfer or sale
of own shares are also recognised in the profit
and loss account reserve.
Dividends
Dividends on the Company’s ordinary
shares are recognised when they have been
appropriately authorised and are no longer at
the Company’s discretion. Accordingly, interim
dividends are recognised when they are paid
and final dividends are recognised when they
are declared following approval by shareholders
at the Company’s AGM. Dividends are
recognised as an appropriation of shareholders’
funds. Details of dividends paid and proposed
are set out in Note 12.
2 Tangible fixed assets
Cost
At 1 April 2013
Additions
Transfer to a subsidiary
At 31 March 2014
Accumulated depreciation
At 1 April 2013
Charge for the year
At 31 March 2014
Net book value at 31 March 2013
Net book value at 31 March 2014
3 Investments in subsidiary undertakings
Cost
At 1 April 2013
Currency translation differences
At 31 March 2014
Impairment
At 1 April 2013
Provision for impairment
Currency translation differences
At 31 March 2014
Net book value at 31 March 2013
Net book value at 31 March 2014
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12
9
(4)
17
3
1
4
9
13
£m
1 565
(2)
1 563
559
7
(2)
564
1 006
999
A list of the Company’s principal subsidiaries is presented in Note 41 of the Group financial statements.
The provision for impairment during the year reflects an adjustment to the recoverable amount of the Company’s investment in Tate & Lyle Ventures
Ltd and Tate & Lyle Services Belgium NV. The directors believe that the carrying value of the investments is supported by the value of their underlying
net assets.
During the year, the Company made capital contributions to subsidiary undertakings in respect of share-based incentive awards granted to their
employees of £nil (2013 – £7 million).
4 Investment in associate
The Company holds a 16.6% interest of ordinary shares in Tapioca Development Corporation, a company incorporated in Thailand.
5 Debtors
Due within one year
Amounts owed by subsidiary undertakings
Other debtors
Total
2014
£m
1 495
6
1 501
At 31 March
2013
£m
1 531
4
1 535
The effective interest rate applicable to amounts owed by subsidiary undertakings at 31 March 2014 is 2.1% (2013 – 2.3%). Amounts owed by
subsidiary undertakings are receivable on demand. There is no security for non-trading amounts.
Tate & Lyle PLC Annual Report 2014 | 137
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Financial Statements
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS | CONTINUED
6 Creditors – amounts falling due within one year
Amounts owed to subsidiary undertakings
Other creditors
Accruals and deferred income
Total
2014
£m
1 518
6
9
1 533
At 31 March
2013
£m
1 392
5
10
1 407
The effective interest rate applicable to amounts owed to subsidiary undertakings at 31 March 2014 was 2.2% (2013 – 2.3%). 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
Total
2014
£m
2
2
At 31 March
2013
£m
2
2
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 Contingent liabilities
At 31 March 2014, the Company had given guarantees in respect of loans and overdraft facilities of certain of its subsidiaries and joint ventures
totalling £1,535 million (2013 – £1,645 million), against which amounts drawn totalled £859 million (2013 – £938 million). Other trade guarantees have
been given in the normal course of business by Tate & Lyle PLC in respect of Revenue and Customs, ECGD recourse agreements, letters of credit,
and tender and performance bonds.
9 Financial commitments
Operating lease rentals payable during the year were £1 million (2013 – £1 million).
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
At 31 March 2014, the Company had outstanding capital commitments of £nil (2013 – £5 million).
2014
£m
1
6
11
18
At 31 March
2013
£m
1
6
12
19
138 | Tate & Lyle PLC Annual Report 2014
10 Called up share capital
Allotted, called up and fully paid equity share capital
At 1 April
Allotted under share option schemes
At 31 March
11 Reconciliation of movements in shareholders’ funds
At 1 April 2012
Year ended 31 March 2013
Profit for the year
Proceeds from shares issued
Purchase of own shares
Share-based payments
Ordinary dividends paid (Note 12)
At 31 March 2013
Year ended 31 March 2014
Loss for the year
Purchase of own shares
Share-based payments
Ordinary dividends paid (Note 12)
At 31 March 2014
Year ended 31 March 2014
Year ended 31 March 2013
Shares
468 192 900
9 983
468 202 883
£m
117
–
117
Shares
468 160 519
32 381
468 192 900
Called up
share capital
£m
117
Share
premium
account
£m
406
Capital
redemption
reserve
£m
8
Profit
and loss
account
£m
525
–
–
–
–
–
117
–
–
–
–
117
–
–
–
–
–
406
–
–
–
–
406
–
–
–
–
–
8
–
–
–
–
8
212
1
(23)
13
(117)
611
(11)
(29)
2
(124)
449
£m
117
–
117
Total
£m
1 056
212
1
(23)
13
(117)
1 142
(11)
(29)
2
(124)
980
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At 31 March 2014, the profit and loss account reserve was stated after a deduction of £37 million (2013 – £29 million) for the cumulative cost of own
shares held indirectly in an Employee Benefit Trust or directly as treasury shares in relation to share-based compensation plans. Further information
on own shares is presented in Note 24 to the Group financial statements.
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 the Employee Benefit Trust or as treasury shares. The amount available for the payment of dividends
by the Company at 31 March 2014 was £449 million (2013 – £611 million).
12 Dividends
Dividends on ordinary shares in respect of the financial year:
Per ordinary share:
– interim dividend paid
– final dividend proposed
Total dividend
Year ended 31 March
2013
pence
2014
pence
7.8p
19.8p
27.6p
7.4p
18.8p
26.2p
The Directors propose a final dividend for the financial year of 19.8p per ordinary share that, subject to approval by shareholders, will be paid on
1 August 2014 to shareholders who are on the Register of Members on 27 June 2014.
Final dividend paid relating to the prior year
Interim dividend paid relating to the year
Total dividend paid
Year ended 31 March
2013
£m
83
34
117
2014
£m
88
36
124
Based on the number of ordinary shares outstanding at 31 March 2014, the final dividend for the financial year is expected to amount to £92 million.
13 Related parties
As permitted by FRS 8 Related Party Disclosures, related party transactions with the Company’s wholly-owned subsidiaries 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 (2013 – £9 million).
Tate & Lyle PLC Annual Report 2014 | 139
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Financial Statements
NOTES TO THE PARENT COMPANY FINANCIAL STATEMENTS | CONTINUED
14 Profit and loss account disclosures
The Company recognised a loss for the year of £11 million (2013 – profit of £212 million).
Fees payable to the Company’s auditors, PricewaterhouseCoopers LLP, for the audit of the Company’s financial statements amounted
to £0.1 million (2013 – £0.1 million).
The Company employed an average of 136 people (including directors) during the year (2013 – 121). Staff costs are shown below:
Wages and salaries
Social security costs
Other pension costs
Share-based incentives
Total
Year ended 31 March
2013
£m
11
3
1
6
21
2014
£m
11
1
1
3
16
Directors’ emoluments disclosures are provided in the Directors’ Remuneration Report on pages 52 to 71 and in Note 9 of the Group financial
statements.
At 31 March 2014, 5,862,890 (2013 – 6,073,157) outstanding share options were attributable to employees and directors of the Company as follows:
Year issued
2010
2011
2012
2013
2008
2009
2010
2011
2012
2013
2008
2009
2010
2011
2012
2013
2003
2009
2009
2009
2010
2011
2011
2012
Number of
shares
5 532
13 398
14 819
12 170
2 672
4 464
4 989
7 063
13 442
6 762
7 506
16 559
49 986
1 047 850
1 222 200
1 142 877
96 022
419 403
257 870
656 640
473 042
378 337
4 496
4 791
Subscription
prices (pence)
488.00
552.00
607.00
652.00
376.00
418.00
488.00
552.00
607.00
652.00
–
–
–
–
–
–
325.00
–
–
–
–
–
–
–
Dates normally
exercisable
2014
2015
2016
2017
2014
2015
2016
2017
2018
2019
2011–2018
2012–2018
2013–2019
2014–2020
2015–2021
2016–2022
2007–2014
2011–2017
2012–2018
2012–2018
2013–2019
2014–2020
2013–2019
2014–2020
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
140 | Tate & Lyle PLC Annual Report 2014
INFORMATION FOR INVESTORS
Shareholding enquiries
General enquiries
Information on how to manage your
shareholdings can be found at
www.shareview.co.uk. The website also
provides answers to commonly asked
shareholder questions and has 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 number, 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, 8.30 am to 5.30 pm
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 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.
www.tateandlyle.com
Financial calendar
2014 Annual General Meeting
Announcement of half-year results for the six months to 30 September 2014
Announcement of full-year results for the year ending 31 March 2015
2015 Annual General Meeting
24 July 2014
6 Nov 20141
28 May 20151
29 July 20151
1 Provisional date.
Dividends paid on ordinary shares during the year ended 31 March 2014
Payment date
2 Aug 2013
3 Jan 2014
Final 2013
Interim 2014
Dividend description
Dividend per share
18.8p
7.8p
Dividend calendar for dividends on ordinary shares
Announced
Payment date
1 Provisional date.
2 Subject to approval of shareholders.
2014 final
29 May 2014
1 Aug 20142
2015 interim
6 Nov 20141
2 Jan 20151
2015 final
28 May 20151
31 July 20151,2
Dividends paid on 6½% cumulative preference shares
Paid each 31 March and 30 September.
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 share of £1 each
Equivalent value per ordinary share of 25p
6½% cumulative preference share
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 (OTCQX) market in the form
of ADSs and these are evidenced by American Depositary Receipts (ADRs). The shares are
traded under the ticker symbol TATYY. Each ADS is equivalent to four ordinary shares.
For more information, contact The Bank of New York Mellon at:
BNY Mellon Shareowner Services
PO Box 30170
College Station
TX 77842-3170
Tel: +1 888 269 2377 (for US calls)
+1 201 680 6825 (for calls from outside the US)
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 disclosures on
www.otcqx.com and www.pinksheets.com.
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
shareholder reference number that is either on their share certificate or other correspondence.
Beware of share fraud
Shareholders should be very wary of any unsolicited calls or correspondence offering to buy
or sell shares at a discounted price. These calls are typically from fraudsters operating ‘boiler
rooms’. Boiler rooms use increasingly sophisticated means to approach investors and often leave
their victims out of pocket. If you are concerned that you may have been targeted by fraudsters
please contact the FCA Consumer Helpline on 0800 111 6768.
Tate & Lyle PLC Annual Report 2014 | 141
Tate & Lyle PLC Annual Report 2014 | 141
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Useful Information
FIVE-YEAR SUMMARY
Per share information
Earnings per share:
– basic2
– adjusted basic2
Earnings per share:
– diluted2
– adjusted diluted2
Dividends per ordinary share
Closing share price at 31 March
Closing market capitalisation at 31 March (£million)
Business ratios
Interest cover (times)3
Adjusted profit before tax divided by net finance expense
Gearing
Net debt as a percentage of total net assets2
Adjusted operating margin
Adjusted operating profit as a percentage of sales2
Return on net operating assets
Adjusted operating profit as a percentage of average
net operating assets2
Dividend cover (times)
Basic earnings per share divided by dividends per share2
Adjusted basic earnings per share divided by dividends per share2
Year ended
31 March
2014
58.8p
56.5p
58.0p
55.7p
27.6p
667.5p
3 125
11.6x
34%
Restated1
2010
Restated1
2011
Restated 1
2012
Restated 1
2013
4.6p
40.0p
4.6p
40.0p
22.9p
454.2p
2 092
5.8x
84%
8.1%
33.7p
48.1p
33.2p
47.3p
23.7p
577.5p
2 703
6.9x
48%
9.6%
63.8p
57.4p
62.7p
56.4p
24.9p
705.0p
3 301
11.1x
45%
58.6p
55.8p
57.4p
54.7p
26.2p
850.0p
3 980
11.1x
46%
11.1%
10.7%
11.1%
14.0%
20.0%
22.8%
21.5%
22.2%
0.2x
1.7x
1.4x
2.0x
2.6x
2.3x
2.2x
2.1x
2.1x
2.0x
1 Restated for the adoption of IAS 19 (Revised 2011) Employee Benefits.
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.
142 | Tate & Lyle PLC Annual Report 2014
Employment of capital
Goodwill and intangible assets
Property, plant and equipment
Other non-current assets
Working capital
Net pension deficit
Net assets held for sale (excluding cash included in net debt)
Net operating assets
Net debt
Net tax asset/(liability)
Total net assets
Capital employed
Called up share capital
Reserves
Non-controlling interests
Results summary
Continuing operations
Sales
Adjusted operating profit
Amortisation of acquired intangible assets
Exceptional items
Operating (loss)/profit
Adjusted net finance expense
Net retirement benefit interest expense
Net finance expense
(Loss)/profit before tax
Income tax credit/(expense)
(Loss)/profit for the year from continuing operations
Profit/(loss) for the year from discontinued operations
Non-controlling interests
Profit for the year attributable to owners of the Company
Continuing operations
Adjusted profit before tax3
(Loss)/earnings per share:
– basic
– diluted
2010
£m
340
1 208
21
302
(257)
18
1 632
(814)
36
854
115
712
827
27
854
2011
£m
320
855
24
279
(139)
62
1 401
(464)
36
973
117
833
950
23
973
2012
£m
325
922
28
370
(140)
63
1 568
(476)
(34)
1 058
117
916
1 033
25
1 058
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2013
£m
356
958
33
497
(265)
1
1 580
(479)
(65)
1 036
117
919
1 036
–
1 036
At 31 March
2014
£m
389
865
34
412
(220)
–
1 480
(353)
(77)
1 050
117
932
1 049
1
1 050
Year ended 31 March
Restated1,2
2010
£m
Restated1
2011
£m
Restated1
2012
£m
Restated1
2013
£m
2 533
266
(14)
(298)
(46)
(53)
(14)
(67)
(113)
98
(15)
40
(4)
21
213
(3.3)p
(3.3)p
2 720
319
(13)
(5)
301
(54)
(13)
(67)
234
(45)
189
(29)
(4)
156
265
40.9p
40.3p
3 088
346
(12)
68
402
(30)
(4)
(34)
368
(69)
299
2
(4)
297
316
64.2p
63.0p
3 256
356
(10)
(12)
334
(29)
(4)
(33)
301
(46)
255
18
(1)
272
327
54.9p
53.8p
2014
£m
3 147
349
(10)
(14)
325
(27)
(8)
(35)
290
(45)
245
28
–
273
322
52.8p
52.1p
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1 Restated for the adoption of IAS 19 (Revised 2011) Employee Benefits.
2 Restated to reflect the former Sugars businesses which have been classed as discontinued operations.
3 Adjusted profit before tax excludes exceptional items, the amortisation of acquired intangible assets and net retirement benefit interest.
Tate & Lyle PLC Annual Report 2014 | 143
Useful Information
GLOSSARY
A
Acidulants Ingredients such as citric acid that
are used to add a ‘sour’ taste to foods and soft
drinks and to act as a preservative.
Adjusted operating profit (PBITEA)
Operating profit (as defined separately),
adjusted for amortisation of acquired intangible
assets and net exceptional items.
Adjusted profit before tax (PBTEA) Profit
before taxation (as defined separately), adjusted
for amortisation of acquired intangible assets,
net exceptional items and net retirement benefit
interest.
Aflatoxin A by-product of a grain fungus,
present in the 2012 US corn harvest.
B
BI Bulk Ingredients division.
Bio-PDO® Multi-purpose monomer
propanediol made from corn sugar (as
opposed to being made from a petrochemical
source). Used in cosmetics, detergents,
carpets and textiles.
C
Carbon dioxide equivalent (CO2e)
One metric tonne of carbon dioxide or an
amount of any other greenhouse gas with
an equivalent global warming potential,
calculated consistently with international
carbon reporting practice.
CCC Cash conversion cycle, defined for the
purposes of the Annual Bonus Plan as the
number of days between cash expenditure and
collection, taking account of inventory, payables
and receivables; based on the average of the
four quarter-end results.
‘Clean label’ A term used in the food and
beverage industry generally to refer to simpler
ingredient lists for consumer appeal. Detailed
interpretations may vary.
Constant currency Changes in constant
currency are calculated by retranslating
comparative period results at current period
exchange rates.
Continuing operations Operations of the
Group excluding any discontinued operations
(as defined separately).
Continuous process facility A facility
designed to manufacture a finished product
via continuous process (rather than a batch
process).
Co-products Corn gluten feed, corn gluten
meal and corn oil.
Corn gluten feed The largest Tate & Lyle
co-product, used by dairy and beef
cattle markets.
CR Corporate responsibility.
D
Discontinued operations An operation is
classified as discontinued if it is a component
of the Group that: (i) has been disposed of,
or meets the criteria to be classified as held
for sale; and (ii) represents a separate major line
of business or geographic area of operations
or will be disposed of as part of a single
co-ordinated plan to dispose of a separate
major line of business or geographic area
of operations.
E
EFSA European Food Safety Authority.
F
Food Systems The Tate & Lyle blending
business which is part of SFI and which sources
ingredients and uses them to develop bespoke
combinations of ingredients for customers.
Formulations science This is the study
of how ingredients interact in complex mixtures
to deliver specific attributes. In food, multiple
food components are blended to create
desired texture, flavour, appearance, and
taste. Formulation science is used to develop
predictions of how combinations of ingredients
will impact these important performance
attributes. This is an interdisciplinary science
that includes chemistry, materials science and
elements of measurement science, statistics
and mathematical modelling.
Functional food ingredients Ingredients
that offer benefits that go beyond the basic
nutritional role of the ingredient. For example,
some carbohydrates are reported to have
other benefits such as improved
gastrointestinal function.
G
Greenhouse gas (GHG) Any of the following:
carbon dioxide (CO2), methane (CH4), nitrous
oxide (N2O), hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs), sulphur hexafluoride
(SF6).
H
HAMULSION® food system A thickening
agent comprising a blend of different
ingredients.
HFCS High fructose corn syrup, also called
isoglucose in Europe.
I
ICD Innovation and Commercial Development
group, supporting our two business divisions,
SFI and BI.
K
KPI Key performance indicator.
N
Natural A ‘natural’ description usually refers to
a food ingredient that is present in nature and
has been minimally processed. However,
interpretations vary as does the legal and
regulatory landscape in different countries.
O
Operating profit (also referred to as profit
before interest and tax (PBIT)) Sales less net
operating expense.
P
Profit before tax (PBT) Sales, less net
operating expense, less net finance expense.
PROMITOR® Soluble Corn Fiber A prebiotic
soluble fibre.
PromOat® Beta Glucan A soluble fibre
made from wholegrain oats used to bring
the health benefits of oat beta glucan to
food and beverages.
PULPIZ® Pulp Extender A starch that mimics
tomato pulp texture and taste.
PUREFRUIT™ Monk Fruit Extract
A zero-calorie sweetener made from monk fruit.
R
REZISTA® speciality food starch A modified
starch made from waxy corn which builds
and protects texture in foods.
S
Separations science Technology and
techniques used to isolate individual
compounds from complex mixtures. It includes
distillation, filtration, and a variety of other
techniques.
SFI Speciality Food Ingredients division.
SME Small- and medium-sized enterprises.
For Tate & Lyle, this means regional or global
customers with turnover below the level of
approximately £500 million.
SODA-LO® Salt Microspheres
A salt-reducing ingredient made from salt.
SPLENDA® Sucralose A zero-calorie
sweetener made from sugar.
STA-LITE® Polydextrose A soluble fibre with
prebiotic properties made from corn and used
to provide body and texture in reduced calorie,
no-added sugar and high-fibre foods.
T
TASTEVA® Stevia Sweetener
A zero-calorie sweetener made from stevia.
Trading cash flows The Group’s adjusted
operating profit stated before the non-cash
charges for depreciation and amortisation.
U
USDA US Department of Agriculture.
144 | Tate & Lyle PLC Annual Report 2014
DEFINITIONS/EXPLANATORY NOTES
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.
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 is
registered in England and Wales. 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.
Amortisation
Unless stated otherwise, the use of the
word ‘amortisation’ on pages 1 to 73 in this
Annual Report relates to the amortisation
of intangible assets acquired through
business combinations.
Continuing operations
Unless stated otherwise, all comments
in this Annual Report refer to the continuing
operations adjusted to exclude exceptional
items, amortisation of intangible assets
acquired through business combinations and
net retirement benefit interest. A reconciliation
of reported and adjusted information is included
in Note 42.
Definitions
In this Annual Report, ‘Company’ means
Tate & Lyle PLC; ‘Tate & Lyle’ or ‘Group’
means Tate & Lyle PLC and its subsidiary
and joint-venture companies.
Environmental statement
This Annual Report has been printed on
UPM Fine offset, a paper produced using
wood fibre from fully sustainable forests with
Forest Stewardship Council® (FSC®)
certification. All pulps used are elemental
chlorine free and the manufacturing mill holds
the ISO 14001 and the EMAS accreditations
for environmental management.
Printed in the UK by Pureprint using vegetable
inks and their Alcofree and Pureprint
environmental printing technology. Pureprint
is a CarbonNeutral® company, is registered
to the Environmental Management System ISO
14001 and is 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.
The CO2 emissions from the production
and distribution of this 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
Rob White
Designed and produced by
C O N R A N D E S I G N G R O U P
www.tateandlyle.com