Improving lives
for generations
T
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8
Annual Report 2018
Group statutory results
Sales1 (£m)
Profit before tax1 (£m)
Diluted earnings
per share1 (pence)
Net debt (£m)
£2 710m
£286m
56.1p
£392m
2
7
5
3
2
7
1
0
2
3
5
5
2
8
6
2
3
3
5
4
.
2
5
6
.
1
4
5
2
4
3
4
3
9
2
1
2
6
2
5
.
9
16
17
18
16
17
18
16
17
18
16
17
18
Alternative performance measures
Return on capital
employed2 (%)
Adjusted profit
before tax1,2 (£m)
Adjusted diluted
earnings per share1,2
(pence)
16.2%
£301m
50.1p
1
6
.
2
1
4
.
3
1
1
.
3
3
0
1
2
7
1
1
9
3
5
0
.
1
4
7
.
1
3
4
.
5
Adjusted free
cash flow2 (£m)
£196m
1
9
6
1
7
4
5
3
16
17
18
16
17
18
16
17
18
16
17
18
1 Continuing operations only.
2 Adjusted results and a number of other terms and performance measures used in this Annual Report are not directly defined within accounting standards.
For clarity, we have provided descriptions of the various metrics and their reconciliations to the most directly comparable measures reported in IFRS, and the
calculations, where relevant, of any ratios, in Notes 1 and 4.
Tate & Lyle is a global provider of
solutions and ingredients for food,
beverage and industrial markets.
Inspired by our purpose of
improving lives for generations,
we work with our customers to
make food and drink healthier
and tastier. Through our expertise
in key categories, we deliver
sweetness, texture and fibre
enrichment to products enjoyed
by millions of people every day.
This Annual Report is also available on the Company’s website, www.tateandlyle.com.
Strategic Report
02 Our purpose
08 At a glance
09 Our business
10 Chairman’s Statement
12 Chief Executive’s Review
16 Executive Committee
18 Business Model
20 Marketplace
22 Key Performance Indicators
24 Food & Beverage Solutions
27 Primary Products
30
Innovation and Commercial Development
31 Global Operations
32 Group Financial Results
38 Risks
42 Our People
45 Business Conduct
46 Environment, Health and Safety
50 Community Involvement
Governance
52 Board of Directors
56
Chairman’s introduction to
Corporate Governance
57 Corporate Governance
66 Audit Committee Report
70 Nominations Committee Report
72 Directors’ Remuneration Report
90 Directors’ Report
91 Directors’ Statement of Responsibilities
Financial Statements
92
Independent Auditors’ Report to the
Members of Tate & Lyle PLC
100 Consolidated Income Statement
101 Consolidated Statement of
Comprehensive Income
102 Consolidated Statement of
Financial Position
103 Consolidated Statement of Cash Flows
104 Consolidated Statement of Changes
in Equity
105 Notes to the Consolidated
Financial Statements
169 Parent Company Financial Statements
Useful Information
177 Group Five-year Summary
179 Additional Information
180 Information for Investors
181 Glossary
183 Definitions/explanatory notes
Trademarks
SPLENDA® and the SPLENDA®
logo are trademarks of Heartland
Consumer Products LLC.
Definitions/cautionary statement
Please see the explanatory notes on page 183.
www.tateandlyle.com 1
Strategic ReportGovernanceFinancial StatementsUseful Information Our purpose...
2 Tate & Lyle PLC Annual Report 2018
Through our purpose, we
believe we can successfully
grow our business and have
a positive impact on society.
Our purpose is to improve lives for generations. Our purpose inspires us
and informs what we do. It motivates us and makes us strive to do our
best. Our purpose is our passion – it’s in our DNA.
Reducing calorie intake
Enhancing taste
From soft drinks and smoothies to biscuits and
bars, from soups and sauces to gravies and
seasonings, our solutions are used to enhance the
taste, texture and flavour of food and drink enjoyed
by people all over the world.
SPLENDA® Sucralose
has removed more than
85
trillion
calories
from people’s diets globally
over the last 26 years. That is
the equivalent of over 21 million
tonnes of sugar.
Stabilising food
Education on nutrition
Our stabiliser business has
been helping to improve food
for over a century. Founded in
Germany in the 19th century,
it started its business by sterilising
food at high temperatures so it
could be canned or bottled to
make it safer for long sea voyages.
Our child health improvement programme in three
schools in Shanghai, China, is helping children,
parents and teachers learn about the importance
of diet, nutrition, and maintaining an active lifestyle.
See more on page 50
www.tateandlyle.com 3
Strategic ReportGovernanceFinancial StatementsUseful Information For a changing world...
4 Tate & Lyle PLC Annual Report 2018
Modern life is changing the
way we work, eat and play.
Our purpose drives us to find
innovative solutions to meet
changing consumer demands.
The rise of technology, together
with changes in diets and lifestyles,
has caused many people to lead a
more sedentary, less active way of
life. People are generally eating too
much and moving too little, and
progressively unbalanced lifestyles
are affecting their health. The
incidence of diseases like obesity
and diabetes, and digestive health
concerns, are increasing rapidly.
However, while over two billion people
are either overweight or obese, one in
nine people in the world do not have
enough food to eat. No matter where
you look, societies are facing significant
food and health-related challenges.
By delivering our purpose, we believe
Tate & Lyle can help make a difference.
Digestive health
Diabetes
Daily fibre intake is below recommended levels
40
30
20
10
0
Recommended range 25-38 grammes
21
16
12
23
18
17
UK
US
China
Japan
Mexico
Brazil
Sources: see page 183.
422m
adults globally are estimated to
suffer from diabetes
Source: World Health Organization
2014 data; adult is 18 years or older.
www.tateandlyle.com 5
Strategic ReportGovernanceFinancial StatementsUseful Information To improve lives
for generations
6 Tate & Lyle PLC Annual Report 2018
Working in partnership with
our customers and other
stakeholders, we bring our
purpose to life every day.
Our purpose is to improve lives for
generations by helping people make
healthier and tastier choices when
they eat and drink, and lead a more
balanced lifestyle. By doing this, we
believe we can deliver meaningful
benefits for consumers, our
customers, employees and the
communities we live in.
Through our ingredients, people and
expertise, we are passionate about
making a positive difference to
people’s lives. By delivering nutrition
while maintaining great taste to
products consumed by millions of
people every day, we don’t just feed
people, we feed them well.
Living our purpose
Helping people make
healthier choices
by reducing sugar,
calories and fat from
their food and drink,
or adding more fibre
and protein.
Helping people
understand the need to
balance the calories they
consume with the
calories they burn
through physical activity.
g
Educatio
n o
ealthier e a ti n
H
We deliver our
purpose by focusing
on four areas
B
a
l
a
n
c
e
d
life
style
s
r
P e
g
o n al wellbein
n
n
u
t
r
i
t
i
o
n
Helping people gain a
better understanding of
the link between food
and health.
Helping to promote
physical, emotional and
mental health in the
workplace and local
communities.
www.tateandlyle.com 7
Strategic ReportGovernanceFinancial StatementsUseful Information
At a glance
Origins
Founded in the UK by
Henry Tate in 1859
Henry Tate & Sons and
Abram Lyle & Sons
merged their
businesses
to form
Tate & Lyle
in 1921
People
55
different nationalities
work at Tate & Lyle
Values
Safety
Integrity
Respect
Categories
Strong technical expertise in
beverages, dairy, and soups,
sauces and dressings
Financials
Listed as Tate.L on the
London Stock Exchange
within the FTSE 250
Laboratories
18application and technical service
centres across the world
supporting customers in
their local markets
Sales1
Adjusted profit before tax1
£2.7bn
£301m
1 See footnotes on inside front cover.
People
More than
4,100
employees worldwide
Global
Plants, labs and offices in over
30 locations worldwide
Markets
Leading positions in sweeteners,
texturants, fibres, stabilisation,
and industrial starches
Raw materials
1.4macres of corn processed at our
manufacturing facilities in the US
each year
8 Tate & Lyle PLC Annual Report 2018
Our business
We employ more than 4,100 people across the world and our ingredients and
solutions are sold or distributed in over 120 countries.
Business divisions1
Food & Beverage Solutions
Provides solutions for customers globally that
meet consumer demand for healthier and tastier
food and drink.
Primary Products
Provides high volume food and industrial
products primarily for customers in the
North American market.
Read more on pages 24 to 26
Read more on pages 27 to 29
Supported by two global teams
Innovation and Commercial Development
Manages the innovation pipeline and uses leading-edge
science to develop solutions for our customers which
help reduce sugar, calories and fat, and add fibre.
Global Operations
Manages the safe, efficient and cost-effective
operation of our manufacturing assets, and ensures
our ingredients reach customers on time and to the
right specification.
Read more on page 30
Read more on page 31
1 Our two business divisions have been renamed and reportable segments have been amended. Read more on page 12.
www.tateandlyle.com 9
Strategic ReportGovernanceFinancial StatementsUseful Information Chairman’s Statement
Year of strong
delivery
Results
I am pleased to report that Tate & Lyle delivered a strong
performance in the year ended 31 March 2018 with profits
and earnings per share both well ahead of the prior year.
Cash generation remained strong and the balance sheet
is robust, providing flexibility to support future growth.
Progressive dividend
The Board is recommending a final dividend of 20.3p
per share bringing the total dividend for the year ending
31 March 2018 to 28.7p per share, an increase of 2.5%.
This reflects the Board’s confidence in the business, while
at the same time continuing to rebuild dividend sustainability.
Looking ahead, the Board remains committed to a
progressive policy of growing our dividend over time, taking
into account the earnings prospects and investment needs
of the business.
A bright future
I am delighted that, on 1 April 2018, Nick Hampton
became our new Chief Executive. Nick succeeded
Javed Ahmed who, after eight years of outstanding
service, decided to step down from this role and retire
from the Company. Javed retires with the Board’s deep
gratitude and very best wishes for the future.
Nick had previously been our Chief Financial Officer for
three years, during which time he demonstrated a strong
track record of delivering results, inspiring colleagues
and preparing the business for the exciting mission
which he articulates in the following pages. The Board is
very confident that Nick has the experience, energy and
vision to lead Tate & Lyle through the next phase of its
growth and development as a world-class technology-
based and service-driven ingredients business.
As you will read in his report, Nick has already made a strong
start in his new role, with programmes already underway to
sharpen focus on our customers, accelerate our portfolio’s
development, and simplify and drive productivity. At the same
time, Nick and his management team are injecting new clarity
of purpose and dynamism into the organisation to align our
teams more effectively, increase their agility and improve
their execution.
10 Tate & Lyle PLC Annual Report 2018
“Since joining the Board over a
year ago, I have visited many
of the Group’s facilities
across the world and I am
always impressed and
energised by the passion,
commitment and enthusiasm
of our teams wherever I go.”
Summary
Tate & Lyle is a strong company in a good financial position.
While we continue to face an evolving and sometimes challenging
geopolitical landscape, we do so with confidence given the solid
foundations upon which the Company has been built. Under
Nick’s leadership, I am excited about the future of Tate & Lyle,
and our ability to unlock the growth potential of the business.
I look forward to working with him to realise that potential, and
drive growth and value for our shareholders in the years ahead.
Gerry Murphy
Chairman
23 May 2018
Delivering responsibly
Protecting our people, and the environment, are foundational
to our business. At the start of the 2017 calendar year, we
undertook an extensive Group-wide review of all our safety
processes and procedures, supported by an independent external
expert consultancy. The review provided important insights into
how we think about and manage safety, and how we can improve
our safety culture. The outcome is our comprehensive new
Group-wide ‘Journey to Environmental, Health and Safety (EHS)
Excellence’, launched in January 2018, more details of which can
be found on pages 46 and 47. Our ultimate goal is to have no
accidents and no injuries, and the Board remains focused on
creating a safer Tate & Lyle for all our employees, contractors
and visitors.
Our environmental performance showed a pleasing improvement
in the 2017 calendar year, with positive progress in our primary
carbon footprint, waste sent to landfill and water usage. Our energy
use remained largely unchanged.
Board changes
There were a number of changes to the Board during the year.
As presaged in last year’s Annual Report, Liz Airey retired from
the Board at the 2017 Annual General Meeting. Then, on
31 October 2017, having served on the Board for a year, Jeanne
Johns stepped down as a non-executive director and chairman
of the Corporate Responsibility Committee due to new
commitments. On behalf of the Board, I would like to thank
Liz and Jeanne for their contributions to Tate & Lyle.
As mentioned earlier, Javed Ahmed retired as Chief Executive
and from the Board on 1 April 2018, succeeded by Nick Hampton.
In April, we announced that Imran Nawaz will be joining the
Company, and the Board, on 1 August 2018, as our new Chief
Financial Officer.
Governance
To give the Board greater and more direct oversight of certain
critical areas of corporate responsibility, in particular safety, the
Board has decided to dissolve the Corporate Responsibility
Committee and allocate its duties between the main Board and
the Audit Committee. Further details of this change can be found
in my Corporate Governance report on page 56.
People
The strong financial performance of the Company in the year
ended 31 March 2018 is a reflection of the hard work and skill of
all our colleagues at Tate & Lyle. On behalf of the Board, I would
like to thank our management team and all our employees for
their contribution in delivering another successful year. Since
joining the Board over a year ago, I have visited many of the
Group’s facilities across the world and I am always impressed
and energised by the passion, commitment and enthusiasm of
our teams wherever I go.
www.tateandlyle.com 11
Strategic ReportGovernanceFinancial StatementsUseful Information Chief Executive’s Review
Accelerating business
performance
I am delighted and honoured to be appointed as Tate & Lyle’s
Chief Executive. Tate & Lyle has both a proud and long heritage,
and an exciting future. As global demand for healthier, tastier
food with a better nutritional balance continues to grow, we have
the potential and opportunity to deliver benefits not only for our
shareholders but also for society at large, including our
customers, consumers, the communities in which we operate,
and our employees. I look forward to working with Gerry, the
Board, the management team, and all our employees to drive
Tate & Lyle’s business forward in the years ahead.
Overview of Group performance
Tate & Lyle delivered a year of strong profit and cash
performance. At the same time, we made good progress
strengthening the commercial business, improving operational
disciplines, and investing for future growth.
Adjusted profit before tax increased by 11% (13% in constant
currency) to £301 million with adjusted operating profit growth
in all businesses.
We have decided to rename our business divisions and change
how we report. The Group will continue to operate in two
divisions, Food & Beverage Solutions (which includes Sucralose
and was previously named Speciality Food Ingredients) and
Primary Products (previously named Bulk Ingredients). The
Food & Beverage Solutions division will be reported across
two reportable segments (Food & Beverage Solutions and
Sucralose) reflecting their different economic characteristics
and how we manage them.
Key highlights
• Group delivers strong financial results
• Food & Beverage Solutions performs well with good
volume momentum. Sucralose also performed well
• Another year of excellent performance in Primary Products
• Strong balance sheet with cash generation supporting
progressive dividend
• Programmes underway to sharpen customer focus,
accelerate portfolio development and simplify and
drive productivity
• New leadership team in place.
12 Tate & Lyle PLC Annual Report 2018
Our business
Our two divisions have been renamed
and reporting amended.
Two business divisions
Food & Beverage Solutions (including Sucralose)
previously Speciality Food Ingredients
Primary Products
previously Bulk Ingredients
Three reportable segments
Food & Beverage Solutions
Sucralose
Primary Products
The Food & Beverage Solutions segment had an encouraging
year, with volume 3% higher. It was especially pleasing to see a
return to volume growth in the important North American
market, where we saw success from our focus on higher growth
sub-segments and key categories. In the other regions of the
world, volume growth continued to be good. Adjusted operating
profit increased by 5% (8% in constant currency) to £137 million
reflecting both higher volume and the recovery of our stabiliser
business (previously named Food Systems). Investments in the
longer-term development of the business in the first half
moderated profit growth.
Sales of New Products, which represent products in the first
seven years after launch, grew by 15% to US$121 million.
Our innovation capability is well established with each of our
sweeteners, texturants and health and wellness platforms
contributing to growth.
Sucralose adjusted operating profit increased by 6% (5% in
constant currency) to £55 million, with lower operating costs
driving higher margins.
Primary Products delivered particularly good results. Adjusted
operating profit increased by 28% (30% in constant currency) to
£166 million. The performance in the core business was driven by
a combination of strong commercial and operational execution,
and firm margins. Profits from Commodities increased by
£24 million to £32 million mainly reflecting market opportunities
across co-products and gains from corn sourcing.
Profits from our joint venture businesses were 14% lower at
£28 million.
Adjusted diluted earnings per share from continuing operations
increased by 6% (7% in constant currency) to 50.1p.
Cash generation continued to be excellent. Adjusted free cash
flow increased by £22 million to £196 million reflecting stronger
operating results and lower capital expenditure. Net debt at
£392 million, was £60 million lower. Return on capital employed
increased by 190 bps to 16.2%.
Our balance sheet remains robust and the Group is well
positioned for the future.
Progress in the year
During the year, we continued to invest to underpin future growth
in Food & Beverage Solutions and to support cash delivery from
Primary Products.
Our business and presence in the emerging markets continues to
grow. The challenges of both over- and under-nutrition in these
regions means that our customers are increasingly seeking
solutions which reduce sugar, calories and fat, and enrich
products with fibre. While demand for more natural and healthier
food is increasing, consumers will not compromise on taste.
Making healthy food tastier, and tasty food healthier in categories
like dairy and beverages is a challenge that our food scientists
are especially well equipped to meet. During the year we
expanded our food application laboratories in Shanghai,
Singapore and Mexico City. At each site, we added new customer-
facing facilities as well as pilot scale equipment to enable
customers to work with us to design, trial and benchmark
different recipe formulations. These new laboratories are already
making a material difference to the way we serve our customers
in these regions.
We continue to bring new products to market both through our
in-house innovation capabilities and by establishing strategic
partnerships. For example, in April 2017, we entered into an
exclusive partnership with Sweet Green Fields, one of the largest
fully integrated global stevia players, to bring their leading
stevia-based sweetening solutions to our customers worldwide.
Our purpose
I passionately believe in our purpose of improving lives
for generations; that we can successfully grow our
business and make a positive impact on society. Part of
my role as Chief Executive is to make sure our purpose
is central to everything we do, and to give our people
the support and opportunity they need to live it. As I
travel around the Group, I am deeply aware of the
passion and pride our people have to make a difference
to the world we live in, both today and for the future –
to improve lives for generations.
www.tateandlyle.com 13
Strategic ReportGovernanceFinancial StatementsUseful Information Strategy
Our strategy is to grow our business by:
• Growing Food & Beverage Solutions by building leading
positions in three categories globally – beverages, dairy,
and soups, sauces and dressings – and in two or three
additional categories in each region where we have local
expertise. Managing Sucralose to generate cash
• Driving value from Primary Products by optimising its
portfolio to deliver steady earnings and generate cash.
Primary Products is predominantly anchored in the more stable
North American market, with strong market positions in
high-volume sweeteners and industrial starches, and supported
by scale, cost competitive assets.
Underpinning our business is a reputation built over many years
as a trusted supplier, with highly skilled people motivated by a
strong sense of purpose to improve people’s lives by enabling
healthier food choices.
Actions to accelerate business performance
Leveraging these strengths and our strong balance sheet, we are
implementing three programmes to accelerate business
performance:
1. Sharpen focus on customers and key categories
• Focus our growth strategy on three categories globally –
beverages, dairy, and soups, sauces and dressings – and two
or three additional categories in each region where we have
local expertise
• Reorganise our commercial teams to reflect how our
customers are organised in these categories
• Integrated Food Systems into Food & Beverage Solutions to
provide one approach for customers.
2. Accelerate portfolio development
• Accelerate development and commercialisation of
new products
• Develop more external partnerships and alliances to
catalyse innovation
• Increase emphasis on acquisitions and joint ventures.
3. Simplify and drive productivity
• Target US$100 million of productivity savings over the next
four years
• Simplify the business, reduce costs, and increase efficiencies
across the supply chain
• Productivity benefits expected to be paced evenly across the
four years, and will be invested to grow the business, improve
customer service, and support margin progression.
Chief Executive’s Review continued
Reflecting the encouraging progress demonstrated over the
first year of this partnership, in May 2018, we extended our
relationship by acquiring a 15% shareholding in Sweet
Green Fields.
We are also working in partnership with Codexis, a leading
protein engineering company and expert in enzymes, to create
novel enzymatic routes to new product development from starch
and other source materials.
We continued to invest in our manufacturing footprint to drive
long-term growth. In October, we announced our intention to
more than double capacity of maltodextrin at our facility in
Boleraz, Slovakia. This expansion is expected to be completed in
2019, and will enable us to meet growing customer demand for
maltodextrins, particularly in the infant food sector in Europe,
Middle East and Africa, and Asia Pacific. Then, in December,
we completed the expansion of our polydextrose fibre plant in
Nantong, China. This expansion, which increases capacity by
more than three times from when the facility was acquired by
Tate & Lyle in 2014, will help support local and global demand for
our fibres. Finally, in March, our joint venture DuPont Tate & Lyle
Bio Products announced an expansion to its manufacturing
facility in Loudon, Tennessee, to increase annual production of its
bio-based 1,3-propanediol by 35 million pounds. This expansion,
which is expected to be completed in 2019, will help meet
growing customer demand for higher-performing ingredients
from a petroleum-free, more sustainable and renewable source.
Executive management team
During the year, we further strengthened the executive
management team with the appointment in September of Andrew
Taylor as President, Innovation and Commercial Development
and Melissa Law as President, Global Operations. Andrew
previously worked at The Boston Consulting Group, where he was
a Senior Partner and Managing Director, leading the global
Innovation Practice. Before joining Tate & Lyle, Melissa worked at
Baker Hughes, where she led the Global Specialties Chemicals
Division, a major part of its Oilfield Service portfolio. Together
with Imran Nawaz, formerly of Mondele-z International, who will
join us as Chief Financial Officer in August 2018, the executive
team has a good blend of company experience, industry
knowledge, and a fresh perspective, and is well set to lead the
business into the next phase of its development.
An integrated business with a strong value
proposition
Tate & Lyle operates as one integrated business going to market
as two trading divisions. Food & Beverage Solutions and Primary
Products each has a distinct role to play, and both are important to
the Group’s future. They share common assets and we manage
them together to optimise overall returns for shareholders.
Food & Beverage Solutions, which operates in the large and
growing global food ingredients market, combines a deep
understanding of sweetness, texture and fibre enrichment with
expertise in key categories of beverages, dairy, and soups,
sauces, and dressings, to tailor solutions for our customers.
These solutions help meet growing global consumer demand for
food and drink with less sugar, calories and fat and more fibre.
While food is global, taste is local, so our customers also value
our ability to deliver solutions in their local markets.
14 Tate & Lyle PLC Annual Report 2018
Investment case
Our businesses have a clear focus...
Primary
Products
Food & Beverage
Solutions
Sucralose
Manage for stable earnings;
cash generation
Growth driver;
top and bottom line growth
Manage for cash;
high return on assets
to deliver returns...
Earnings per share1 – accelerate growth
Organic return on capital employed2 – improve returns
Dividend – maintain progressive dividend policy
Investment case
In Food & Beverage Solutions, we expect to accelerate revenue
growth and deliver margin accretion, while managing Sucralose
for cash; and in Primary Products optimise product mix to
underpin stable earnings and cash flow delivery. As the three
programmes we are implementing gather momentum, we expect
growth in earnings per share in constant currency to accelerate,
organic return on capital employed in constant currency to
improve, and strong cash generation to support our progressive
dividend policy.
Tate & Lyle is in a strong financial position. We generate a good
return on our assets and have a strong balance sheet with
modest leverage. We believe the appropriate leverage over the
longer term for our business lies in the range of 1x to 2x net
debt:EBITDA, giving us flexibility to invest and grow the business.
To maintain our financial position and investment grade credit
rating, we will apply clear capital allocation priorities:
• Invest in sustainable organic growth
• Fund acquisitions, partnerships or joint ventures to accelerate
growth
• Maintain our progressive dividend policy
• Return surplus capital to shareholders.
Overall, we are in a strong financial position with clear priorities
to accelerate growth.
Environment, health and safety
Following a Group-wide safety review completed during the year,
we concluded that our safety and environmental performance are
closely linked and should be co-ordinated and managed holistically.
As a result of this, during the year a new environmental, health
and safety (EHS) strategy was developed to deliver and sustain
EHS excellence across all our locations for all our employees and
contractors. More information about this programme can be
found on pages 46 and 47.
People
Our employees across Tate & Lyle bring a huge amount of energy
and passion to work every day, and I would like to thank them for
their hard work and dedication. Our strong performance this year
is a testament to their talent and commitment and, in my first
year as Chief Executive, I look forward to working with them.
Outlook
For the year ending 31 March 2019, we expect growth in earnings
per share1 in constant currency to be in a mid-single digit range,
albeit towards the lower end due to energy and transport cost
inflation in North America and a strong year of Commodities
performance in fiscal 2018.
Summary
Tate & Lyle enters the 2019 financial year in a good position.
We have a strong value proposition aligned to growing global
trends of sugar, calorie and fat reduction, fibre enrichment and
demand for cleaner labels. We have set out three clear priorities
for the business – to sharpen our focus on our customers,
accelerate portfolio development, and simplify the business and
drive productivity – and actions to deliver these priorities are
already underway.
With our clear strategy, talented people, and strong sense of
purpose, I am confident we have a strong business capable of
delivering sustained returns.
Nick Hampton
Chief Executive
23 May 2018
1 Adjusted diluted earnings per share from continuing operations in constant currency.
2 In constant currency.
www.tateandlyle.com 15
Strategic ReportGovernanceFinancial StatementsUseful Information
Executive Committee
Our executive team
Responsible for delivering our strategy and achieving business results.
From left to right
Rowan Adams, Rob Luijten, Nick Hampton, Joan Braca, Robert Gibber, Melissa Law, Andrew Taylor and Jim Stutelberg.
16 Tate & Lyle PLC Annual Report 2018
Nick Hampton
Melissa Law
Chief Executive
Nick became the Chief Executive on 1 April 2018. He joined
Tate & Lyle as Chief Financial Officer in September 2014. Prior
to joining Tate & Lyle, he held a number of senior roles over a
20-year career at PepsiCo, including as PepsiCo’s CFO Europe;
President, West Europe Region; and Senior Vice President
Commercial, Europe.
President, Global Operations
Melissa joined Tate & Lyle in September 2017. Prior to joining
Tate & Lyle, Melissa worked for Baker Hughes, a GE company,
where she led the Global Specialties Chemicals Division, with
prior executive roles for the company’s Australian and Gulf of
Mexico operations. Melissa’s 20 years of experience ranges
across R&D, operations, marketing, commercial and sales.
Joan Braca
Rowan Adams
President, Food & Beverage Solutions
Joan joined Tate & Lyle in 2013 as Senior Vice President and
General Manager, Asia Pacific. She was then appointed
President, Food & Beverage Solutions from November 2014.
Prior to joining Tate & Lyle, Joan spent nearly 20 years with
Rohm and Haas Company in a variety of operational and general
management roles in the US, Europe and Asia Pacific.
Jim Stutelberg
President, Primary Products
Jim joined Tate & Lyle in 2014 from Pennsylvania-based
PPG Industries Inc. where he led its Americas Automotive
Coatings business. Prior to that, he spent 16 years with Dow
Corning Corporation in a variety of senior marketing, sales and
general management roles, including five years working in
Shanghai, China.
Andrew Taylor
President, Innovation and Commercial Development
Andrew joined Tate & Lyle in September 2017. Prior to joining
Tate & Lyle, Andrew worked for the global management
consultancy firm The Boston Consulting Group (BCG), where he
was a Senior Partner and Managing Director. From 2008, he also
led BCG’s global Innovation Practice.
Executive Vice President, Corporate Affairs
Rowan joined Tate & Lyle in 2001 from National Westminster
Bank. During his career at Tate & Lyle he has held a number
of senior roles and was appointed Executive Vice President,
Corporate Affairs in November 2014 with global responsibility
for public affairs, communications and risk.
Robert Gibber
Executive Vice President, General Counsel
Rob joined Tate & Lyle in 1990 as a commercial lawyer having
started his career in private practice. He was appointed General
Counsel in 1997 and was Company Secretary between 2001 and
2012. Rob has global responsibility for Legal and Quality.
Rob Luijten
Executive Vice President, Human Resources
Rob joined Tate & Lyle as Executive Vice President, Human
Resources in 2010. Prior to joining Tate & Lyle, he was Human
Resources Director for Africa, Middle East and Asia for BG Group
PLC. He also spent ten years with GE Plastics in a number of
senior human resources roles in both Europe and Asia.
Imran Nawaz
Chief Financial Officer (from 1 August 2018)
As announced on 17 April 2018, Imran will join Tate & Lyle
and become the Chief Financial Officer with effect from
1 August 2018. Imran joins Tate & Lyle from Mondele-z
International where he has held the position of Senior Vice
President Finance Europe since 2014.
www.tateandlyle.com 17
Strategic ReportGovernanceFinancial StatementsUseful Information Business Model
How we create value
Our ingredients and solutions are valuable to our customers because they are highly
functional and help meet growing consumer and societal needs. They add taste,
texture, nutrition and functionality to products consumed and used by millions of
people every day.
The revenue from the sale of our ingredients and solutions generates income which, after meeting
our costs, helps fund business investments, and provide returns to shareholders through dividends.
How our business works
Consumer insight
We use our expertise in areas
such as sensory, culinary and
marketing to obtain a deep
understanding of what the
consumer wants. This insight
drives our new product
development programme, and
how we collaborate with
our customers.
Customers
Deliver
We aim to deliver our
ingredients to customers on
time, in full and to the right
specification. For Food &
Beverage Solutions, this is a
complex process with multiple
ingredients travelling around
the world. For Primary
Products, volumes are larger
but products generally travel
relatively shorter distances
to customers.
Innovation
Our teams of scientists
and nutritionists continuously
research and test ingredients
to create solutions for our
customers. We work closely
with our customers to
understand their needs.
Engaging with them earlier
and throughout the innovation
process helps drive quicker
adoption cycles.
Manufacture
Most of our ingredients are
made from agricultural crops, mostly
corn. They are mainly produced at
large-volume corn wet mills (shared
by both divisions) and smaller
blending facilities. Safety, quality,
traceability and environmental
impact are high priorities in our
raw material sourcing and
production processes.
Local solutions
Consumer taste and texture
preferences are different across
the world, which is why we have a
global network of application labs.
Customers come to our labs to
work with our food scientists to
reformulate their products using
our ingredients for their
local markets.
18 Tate & Lyle PLC Annual Report 2018
What drives us
Our purpose is to improve lives for generations. This is what drives us. Inspired by our purpose, we work with our customers to make
food and drink healthier and tastier. We do this by delivering sweetness, texture, fibre enrichment and stabilisation to products
consumed by millions of people every day. We focus on three categories globally: beverages, dairy, and soups, sauces and dressings;
and on a regional basis categories such as bakery and bars and biscuits. Our solutions are valuable to our customers because they
help meet growing consumer and societal needs for food which is lower in sugar, calories and fat, and with more fibre, in the face of
growing global levels of obesity and diabetes, and digestive health issues. Our industrial products, including our large portfolio of
industrial starches, are also valuable to our customers as they enhance product performance across a wide range of markets – from
paper production to adhesives, to applications in building supplies, oil drilling and more.
What makes us different
We have key strengths which, in combination, differentiate us in the market.
Leading functional expertise
We have strong technical expertise in the intersection of
sweetness, texture, stabilisation and fibre enrichment, through
our leading portfolio of sweeteners, highly functional speciality
starches, and fibres with specific nutritional and health benefits.
Deep category understanding
Through our teams of food scientists, nutritionists and other
experts, we have an increasingly deep understanding, globally
and locally, of the categories we focus on such as beverages,
dairy, and soups, sauces and dressings.
Delivering tailored solutions
The combination of functional expertise and deep category
understanding, together with our strong innovation pipeline,
enables us to deliver tailored solutions for our customers which
meet growing consumer demand for healthier and tastier food
and drink.
Customer focus
Both divisions look to develop strong customer relationships
built on a partnership approach. We are a trusted service
provider and provide local, regional and global services to fit
our customers’ needs.
Large scale manufacturing base
Our scale manufacturing base and know-how enable us to
drive operational efficiencies and a high level of product quality.
They also provide a cost effective supply of ingredients and
solutions for distribution through our global supply chain.
Talented people
Our people are passionate, dedicated and highly skilled.
We invest in training and developing our employees and also
recruit high-calibre talent to ensure we have the right people,
teams and skills to grow our business.
What underpins our business
Safety
Protecting our people is foundational to
our business. Our ultimate goal is to have
no accidents and no injuries, and this year
we implemented a new approach to
enhance our safety programme.
Values
Our Values of safety, integrity and respect
define what we stand for and how we
behave with our customers, suppliers,
investors, partners, the communities in
which we operate, and each other.
Board oversight
The Board of Directors oversees the
activities of the Group through regular
meetings, its committees, and visits
to our operations around the world.
Read more on pages 46 and 47
Read more on page 42
Read more on page 57
www.tateandlyle.com 19
Strategic ReportGovernanceFinancial StatementsUseful Information Marketplace
Markets in which we operate
Food & Beverage Solutions
Ingredients and solutions which add
specific functionality and value to
customers’ products
It serves customers globally, with an
increasing presence in higher
growth markets such as Asia Pacific
and Latin America.
Size1
c.US$55 billion
Annual growth2
c.4-5%
The market
Food & Beverage Solutions (which
includes Sucralose) provides ingredients
and solutions which help customers
meet increasing consumer demand for
healthier and tastier food and drink.
Where we operate
We focus on four areas of the market:
• Sweeteners – Products include high
intensity sweeteners (e.g. SPLENDA®
Sucralose) and speciality sweeteners
(e.g. DOLCIA PRIMA® Allulose)
• Texturants – Products include
REZISTA® Corn-based Starches and
CLARIA® Clean-Label Starches
Key market drivers
Healthier
With obesity and diabetes on the rise
worldwide, consumers are looking to
reduce sugar, calories and fat in their
food and drink while also adding
beneficial ingredients such as fibre
and protein.
• Health and wellness – Products
include fibres (e.g. PROMITOR®
Soluble Fibre), and oat protein
• Stabilisers – Customised ingredient
blends providing high functionality
such as viscosity and stability
(e.g. HAMULSION®).
Clean label
Consumers want to understand the
ingredients on food and drink labels.
Increasingly, they are choosing products
with labels with ingredients they feel are
less processed, or they perceive to be
simpler or ‘natural’.
How we deliver solutions
We work in partnership with our
customers to reformulate their existing
products, or create new products,
to make food and drink healthier
and tastier.
Enrichment
Our diverse portfolio of fibres offers a
range of nutritional and functional
benefits, while delivering exceptional
digestive tolerance.
Sugar and calorie reduction
Through our portfolio of sweeteners and
fibres, we create solutions that help
reduce sugar and calories without giving
up the sweetness and texture
consumers want.
Texture
Our range of starches provide key
functionality for foods such as
thickening, shelf-stability and fat
reduction, while still providing the
texture consumers want.
We take these products and, using our
technical expertise, we provide solutions
for our customers in categories such
as beverages, dairy, and soups, sauces
and dressings.
Free from
Intolerance to certain ingredients is
leading to increased demand for
allergen-free foods such as dairy-free.
Convenience
Convenience often comes at the cost of
nutrition. Consumers want food and
drink that offer fast, ‘grab-and-go’
nutrition, and provide healthier choices.
Stabilisation
Through our in-depth knowledge of
ingredients and complex food systems,
we create customised stabiliser systems
(highly functional ingredient blends) that
ensure products maintain stability, and
appetising texture, throughout their
shelf life.
1 IHS 2014; Speciality Chemicals update Program: Food Additives; Leatherhead 2014: The Global Food Additives Market; and other sources.
2 Leatherhead; LMC International; Company analysis; data as at 2013, five year CAGR 2009-2013.
20 Tate & Lyle PLC Annual Report 2018
Primary Products
High volume ingredients which
are largely undifferentiated and
compete primarily on quality,
service and price
The market
Primary Products provides high volume
food and industrial products to
customers who operate on a large scale.
It primarily serves the North American
market. Its products, derived mainly
from corn, meet customer needs in the
Where we operate
Sweeteners
Sweeteners provide sweetness
and mouthfeel to regular carbonated
soft drinks and other foods and drinks.
Key market drivers
Industry capacity utilisation
Our ingredients are produced
mainly at four large corn wet mills in
the US and two smaller mills in Europe.
Supply/demand balance is a key driver
of profitability in the US corn wet milling
industry. Supply/demand in the industry
was well balanced during the year.
How we drive value
As it operates in mature markets,
Primary Products aims to create value
by focusing on:
• optimising product mix and margins
• maintaining a mix of tolling and
non-tolling contracts
• continuously driving productivity
and efficiency
food and beverage, paper and packaging
industries. It also sells co-products as
animal feed to customers globally. The
end-markets it serves are mostly
mature and consolidated.
% of Primary Products profit from
North America
>90%
Industrial starches
Industrial starches strengthen and
improve the surface conditions of paper
and cardboard, and are also used in
adhesives for building products.
Acidulants
Acidulants are used mainly to enhance
flavour and preserve foods, beverages
and pharmaceuticals.
Commodities
Commodities include co-products such
as corn gluten meal and corn gluten feed
(sold mainly as animal feed) and corn oil.
We also produce some ethanol at our
Loudon, Tennessee facility.
Corn market
The US corn wet milling industry
processes around 9% of the US corn
crop. Recent harvests have been strong
with corn inventory high and prices
relatively low and stable. Corn is largely
a pass-through cost.
Sweetener demand
Demand in the US for regular carbonated
soft drinks, the main end-market for our
sweeteners, has declined modestly over the
last three years, broadly offset by growth in
other markets including exports to Mexico.
We seek to steadily re-deploy primary
capacity in our corn wet mills to support
growth in Food & Beverage Solutions to
maintain good utilisation of our assets.
• reducing exposure to commodity
markets where we can, by dampening
volatility by using conservative
hedging strategies; actively managing
co-product sales; and investing in our
corn elevator storage network to
secure raw material supply
• maintaining capital expenditure
discipline.
www.tateandlyle.com 21
Strategic ReportGovernanceFinancial StatementsUseful Information Key Performance Indicators
Measuring progress
Delivering our strategy
We focus on a number of financial performance measures to ensure our
strategy successfully delivers increased value for our shareholders.
Read more on pages 12 to 15
Sales of Food &
Beverage Solutions
Adjusted profit
before tax1
Return on capital
employed1
Adjusted operating
cash flow1
£
8
3
4
m
£
8
5
0
m
£
7
4
1
m
£
3
0
1
m
£
2
7
1
m
£
1
9
3
m
1
6
.
2
%
1
4
.
3
%
1
1
.
3
%
£
2
9
9
m
£
2
7
3
m
£
1
2
4
m
16
17
18
16
17
18
16
17
18
162
17
18
+2%
+13%
+190 bps
+10%
in constant currency
in constant currency
How we calculate it
As reported, continuing
operations only, excludes
Sucralose.
As reported, continuing
operations only.
The percentage return of the
Group’s earnings from continuing
operations on its invested capital.
Adjusted operating cash flow is
defined as adjusted free cash flow
from continuing operations, adding
back net interest and tax paid,
retirement cash contributions,
and excluding derivative and
margin call movements within
working capital.
Why we measure it
To ensure we are successful
in growing the business.
Comments
To track the underlying
performance of the business and
to ensure sales growth translates
into increased profits.
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.
To track how efficient we are in
turning increased profit into cash
and to ensure that working
capital is managed effectively.
Sales were 2% higher in constant
currency, mainly driven by higher
volume in all regions, including a
return to volume growth in North
America. Sales in Asia Pacific
and Latin America were 5%
higher in constant currency.
Adjusted operating profit was 13%
higher in constant currency, and
11% higher in reported currency,
with profit higher in all our
businesses. Primary Products
performed especially strongly, with
profits 30% higher.
The return generated on capital
employed increased during the
year driven by higher earnings.
The return on capital employed
remains well ahead of our
weighted average cost of capital.
Adjusted operating cash flow
increased to £299 million,
benefiting from stronger
operating performance and lower
capital expenditure, with cash
cover of the dividend increasing.
1 Adjusted results and a number of other terms and performance measures used in this Annual Report are not defined within accounting standards. For clarity,
we have provided descriptions of the various metrics and their reconciliations to the most directly comparable measures reported in IFRS, and the calculations,
where relevant, of any ratios, in Notes 1 and 4.
2 Restated to reflect exclusion of operating post-retirement benefit costs.
22 Tate & Lyle PLC Annual Report 2018
Maintaining financial flexibility
Acting safely4
We look at measures of financial
strength to ensure we have the flexibility
to grow the business.
Protecting our people is foundational
to our business, which is why we have
key performance indicators for safety.
Read more on pages 32 to 37
Read more on pages 46 and 47
Net debt to EBITDA
multiple1, 3
Interest cover1, 3
Recordable
incident rate
Lost-work
case rate
1
.
2
0
.
9 0
.
8
1
3
.
9
1
4
.
6
1
0
.
7
0
.
7
6
0
.
7
6
0
.
7
6
0
.
1
9
0
.
1
6
0
.
1
1
16
17
18
16
17
18
15
16
17
15
16
17
0.1x
decrease
0.7x
increase
Flat
0.08
increase
How we calculate it
The number of times the
Group’s net borrowing exceeds
its earnings.
The number of times the
Group’s earnings exceed
interest payments made to
service its debt.
How we calculate it
The number of injuries per
200,000 hours that required
more than first aid, for
employees and contractors.
The number of injuries that
resulted in lost-work days per
200,000 hours, for employees
and contractors.
Why we measure it
Why we measure it
To ensure that we have the appropriate level of financial gearing
and that we generate sufficient profits to service our debt. These
measures are a key focus for banks and providers of both debt and
equity capital.
Ensuring safe and healthy conditions at all our locations is
essential to our operation as a successful business.
Comments
Comments
The net debt to EBITDA ratio strengthened to 0.8 times. Cash flow
generation was strong and net debt decreased by £60 million.
EBITDA increased by 6%. Our net debt to EBITDA ratio remains
comfortably ahead of our internal threshold of 2.0 times. Interest
cover increased to 14.6 times, again comfortably ahead of our
internal minimum threshold of 5.0 times.
For employees and contractors, the 2017 calendar year saw an
unchanged recordable incident rate for the third year running.
However, the number of lost-work cases increased by 50% (or four
incidents). Total hours worked decreased by 8% following the
closure of the Singapore Sucralose facility and the completion of
major capital expenditure projects in 2016. There were no fatalities
in 2017. The two fatalities which occurred in calendar year 2016,
are recorded separately and are not included in the rates above.
3 Ratios calculated under the Group’s bank covenants definitions and reported on a proportionate consolidation basis.
4 Measured on a calendar year basis.
www.tateandlyle.com 23
Strategic ReportGovernanceFinancial StatementsUseful Information Food & Beverage Solutions
Commentary for Sucralose is provided separately on page 26.
Food & Beverage Solutions
Volume growth and encouraging performance while we continue to invest for
longer-term growth.
Year ended 31 March
Continuing operations
Volume
North America
Asia Pacific and Latin America
Europe, Middle East and Africa
Total
Sales
North America
Asia Pacific and Latin America
Europe, Middle East and Africa
Total
Adjusted operating profit
2018
Volume
change
1%
7%
6%
3%
2018
£m
416
184
250
850
137
2017
£m
420
176
238
834
129
Change
%
(1%)
4%
5%
2%
5%
Constant
currency
change
%
-%
5%
1%
2%
8%
The Group has made changes to its reportable segments which are explained on page 12.
Key highlights
Food & Beverage Solutions
• Good performance with profit 8% higher in constant
currency
• Volume growth improved to 3%, with volume growth in
North America
• Re-focused growth strategy on key categories to align
with customer
• New Products progress with sales 15% higher
• Expanded application labs in Asia Pacific and
Latin America.
Sucralose
• Adjusted operating profit 5% higher in constant
currency with margin growth.
“ With our clear category focus
and strong solutions portfolio,
we are well-placed to benefit
from growing global demand for
healthier food and drink.”
Joan Braca
President, Food & Beverage Solutions
24 Tate & Lyle PLC Annual Report 2018
Improving lives,
making food healthier
How do you make a delicious tasting yoghurt with reduced sugar, fat
and calories, enriched with fibre, and with the texture consumers love?
Our ability to combine our understanding of sweetness, texture and fibre
enrichment, with our expertise in the dairy category, makes this possible
by tailoring the right solution for our customers in their local markets.
SPLENDA® Sucralose
Sweetens without adding calories
CLARIA® Functional
Clean-Label Starch
Provides clean-label texture
and mouthfeel, and replaces fat
PROMITOR® Soluble Fibre
Contributes added fibre, provides
mouthfeel, and allows calorie
and sugar reduction
HAMULSION®
Stabiliser Systems
Thickens, stabilises,
optimises cost,
and provides
consistent mouthfeel
Our solutions help our customers meet growing global consumer trends:
Addressing global consumer trends
1 in 4
84%
81%
products launched globally
contains a clean-label claim1
of US consumers report limiting
the amount of sugar in their diets2
of US consumers say taste is
the primary driver of purchase3
Sources
1 Innova Market Insights analysis for Tate & Lyle, May 2016.
2 Mintel, ‘Insights on Health, Sugar & Sweeteners and Beverages’ May 2017.
3 Food International Council Foundation – 2018 Food and Health Survey.
www.tateandlyle.com 25
Strategic ReportGovernanceFinancial StatementsUseful Information Food & Beverage Solutions continued
Volume grew by 3%, with growth in all regions, including a return
to growth in North America. Sales were 2% higher in constant
currency at £850 million. Adjusted operating profit was 8% higher
in constant currency reflecting both higher volume and the
recovery of our stabiliser business (formerly Food Systems)
following the successful consolidation of our blending facilities
in Europe and the lapping of the £5 million write down of an
unrecoverable debt.
During the year, we invested in the expansion of customer-facing
applications laboratories in the emerging markets and invested
in our offer to customers by selectively balancing competitive
price positioning and growing margins. These decisions, together
with increasing North American transport costs, moderated
profit growth in the second half of the year.
The effect of currency translation was to increase sales by
£1 million, but reduce adjusted operating profit by £2 million.
North America
In North America, market conditions continued to be challenging
as the overall US food and beverage market remained flat with
consumers increasingly seeking alternatives to traditional
brands, and many of our largest customers experiencing end
market softness. Despite this, volume grew 1% as we:
(1) continued to win new business in targeted higher-growth
sub-categories across dairy, bakery and health and nutrition,
where our technical depth and expertise are providing increasing
value to our customers; (2) developed our business in customer
channels growing faster than the market, such as food service
and own label; and (3) gained share in our larger food and
beverage customers.
Sales in constant currency were flat at £416 million, reflecting
product mix and pass through of lower corn costs.
Asia Pacific and Latin America
In Asia Pacific and Latin America, volume was 7% higher, with
especially strong growth in China and Mexico. Sales increased by
5% in constant currency to £184 million.
In Latin America, Mexico saw double digit volume growth, with
particularly strong demand for sweeteners helped by favourable
market dynamics. In Brazil, we delivered double digit volume
growth, mainly driven by texturant and sweetener sales in the
dairy category. Weakness in the Venezuelan market led to double
digit decline in volume in the Andean region.
In Asia Pacific, we delivered strong double digit volume growth
in China with good growth in dairy and beverages, while in
South Eastern Asia volume was lower due to a competitive
sweetener market.
During the year, we expanded our customer-facing applications
facilities in Shanghai, Singapore and Mexico City, and completed
the expansion of manufacturing capacity at our polydextrose fibre
facility in Nantong, China.
Europe, Middle East and Africa
In Europe, Middle East and Africa, volume increased by 6% driven
by double digit volume growth both in Southern Europe, where
sweetener demand in beverages was strong, and in Central
Europe, reflecting good demand for our texturant solutions in
soups, sauces and dressings. In Russia, stabiliser volume was
significantly lower following a customer credit issue in the prior
year. Sales at £250 million increased by 1% in constant currency,
impacted by lower mix of stabiliser sales.
26 Tate & Lyle PLC Annual Report 2018
To meet increasing customer demand, during the year we
announced an expansion of maltodextrin capacity at our facility
in Slovakia, which is expected to come on line in the 2019
calendar year.
New Products
Volume of New Products grew by 24%. Sales increased by 15% to
US$121 million or £91 million (2017 – US$105 million or
£81 million).
Higher sales in texturants were led by growth in clean label
starches and in our range of Non-GMO products. Our CLARIA®
line of functional clean label starches continues to perform well,
with a new line of instant starches released in the year and a
promising customer pipeline. We continue to broaden our offering
of Non-GMO solutions in line with this growing consumer trend.
The replacement of sugar in beverages led to higher sales of
our stevia portfolio of products, with PUREFRUITTM, our monk
fruit extract high intensity sweetener, also performing well.
In April 2017, we entered into an exclusive partnership with
Sweet Green Fields, one of the largest fully integrated stevia
players. Reflecting the encouraging progress demonstrated
over the first year of this partnership, in May 2018, we extended
our relationship by acquiring a 15% shareholding in Sweet
Green Fields.
Sucralose
Value-based strategy delivering returns.
Volume
Sales
Adjusted operating profit
2018
£m
2017
£m
Change
%
146
55
162
52
(12%)
(10%)
6%
Constant
currency
change
%
(9%)
5%
The Group has made changes to its reportable segments which are explained
on page 12.
As expected, Sucralose volume reduced by 12% reflecting the
sale of excess inventory in the first half of the comparative year
following the completion of the transition to our facility in
McIntosh, Alabama in March 2016. Pricing was firm with sales
9% lower in constant currency at £146 million. While volume was
lower, our McIntosh facility continued to operate well and at close
to capacity, delivering lower operating costs, and adjusted
operating profit was 5% higher in constant currency at
£55 million.
While overall market demand for sucralose continues to grow
over the longer term, market prices are expected to moderate
reflecting increases in industry supply from Chinese manufacturers.
The effect of currency translation was to reduce sales by
£1 million, with no impact on adjusted operating profit.
Primary Products
Strong performance, firm margins and consistent execution.
Primary Products
2018
Volume
change
3%
0%
1%
2018
£m
2017
£m
Change
%
Constant
currency
change
%
1 714
1 757
(2%)
(1%)
134
32
166
121
8
129
10%
311%
28%
11%
333%
30%
Year ended 31 March
Continuing operations
Volume
North American Sweeteners
North American Industrial Starches
Total Primary Products
Sales
Total Primary Products
Adjusted operating profit
Sweeteners and Starches
Commodities
Total Primary Products
The Group has made changes to its reportable segments which are explained on page 12.
Key highlights
• Strong performance with profit 30% higher
• Robust margins in balanced supply/demand industry
• North American Sweeteners volume 3% higher
• £13 million increase in Sweeteners and Industrial
Starches profit
• Good mix management and customer service
• Commodities profit £24 million higher in constant currency.
“ We remain focused on delivering
steady earnings and cash, and
optimising our portfolio to
deliver incremental value.”
Jim Stutelberg
President, Primary Products
www.tateandlyle.com 27
Strategic ReportGovernanceFinancial StatementsUseful Information
Primary Products continued
Improving lives,
for everyday needs
From adding great taste to beverages, to making paper smoother, to helping
cardboard boxes stay sealed, our sweeteners, starches and acidulants are used
to help make the lives of millions of people easier and more enjoyable every day.
Packaging tape
Our range of STA-TAPETM starches are
used in the manufacture of brown
paper tape for sealing cardboard boxes.
STA-TAPETM starches adhere very well
and help to protect package contents
during transit. They also provide a
‘security seal’ for products, as the tape
can’t be lifted and re-stuck.
Soft drinks
High fructose corn syrup is
used as a sweetener in soft
drinks and beverages. Citric
acid can also be used to
improve taste or add a distinct
sour flavour impact.
Paper
Our starches, such as ETHYLEX® and
STA-LOK®, are used in the production
of paper to increase strength and
stability, and provide a smoother
surface. Our starches help improve
everyday items such as magazines,
writing paper, cardboard and tissues.
28 Tate & Lyle PLC Annual Report 2018
North American Free Trade Agreement (NAFTA)
The United States, Canada, and Mexico commenced discussions
in August 2017 to modernise NAFTA. NAFTA is very important to
the US food and agriculture sector, and Mexico in particular is a
key export market for the corn wet milling industry, notably for
high fructose corn syrup. As at the date of this Annual Report,
talks between the three parties are ongoing, and we continue to
monitor the situation closely.
Prior to the commencement of the talks on NAFTA, in June 2017
the US Department of Commerce and the Mexican Secretariat of
Economy agreed revised Sugar Suspension Agreements. These
Agreements, originally put in place in 2014, suspend the
anti-dumping and countervailing duty investigations on imports of
Mexican sugar into the US. They also limit the amount of sugar
that Mexican companies can export to the US, and set price floors
for that sugar. The revised Agreements maintain a productive US
trading relationship with Mexico, and preserve cross-border
trade of sweeteners between the two countries.
Using the whole corn kernel
Tate & Lyle uses every part of the corn kernel; nothing is
wasted. Corn is broken down into 58% corn starch (used to
make food and industrial ingredients); 22% corn gluten
feed (made from the hull and fibre and used in cattle feed);
4% corn gluten meal (extracted from the endosperm and
used in aquaculture feed and pet food); 3% corn oil (made
from the germ and used by the food industry); and the
remaining 13% is water.
Endosperm
Starch
Starch
and
gluten
Source: Tate & Lyle analysis.
Hull and
fibre
Germ
Volume increased by 1% with North American sweetener growth
and robust demand.
Adjusted operating profit of £166 million increased by 30% in
constant currency. Sweeteners and Starches adjusted operating
profit increased by 11% in constant currency, benefiting from
strong commercial and supply chain execution, solid demand,
and moderate margin gains secured in the 2017 calendar year
contracting round. In the second half, increasing energy and
transport costs held back profit growth. Commodities contributed
profits of £32 million, an increase of £24 million.
The effect of currency translation was to decrease sales by
£20 million and adjusted operating profit by £2 million.
The US corn wet milling industry remains relatively well
balanced, reflecting firm overall demand with modestly declining
US domestic demand for high fructose corn syrup offset by
growing sweetener demand in some end-use categories,
including the brewing industry, other fermentation uses and
sweetener exports to Mexico.
Corn prices
For the fourth consecutive year, the US corn crop was good with
strong yields resulting in high closing US inventories. Corn prices
varied through the year, trading mostly in the $3.30 to $3.90 per
bushel range, in advance of the 2017 crop. US corn prices moved
modestly higher in the first quarter of the 2018 calendar year
reflecting concerns of a smaller crop in Argentina and increased
exports by the US.
North American Sweeteners
Volume increased 3%, led by stable demand in the US and growth
in export volume to Mexico. Unit margins for contracts renewed
for the 2017 calendar year increased, reflecting successful
contracting and continued good industry supply demand balance.
Unit margins further benefited from product mix management
and efficiency initiatives.
The 2018 calendar year contracting round delivered unit margins
broadly in line with the previous year.
North American Industrial Starches
North American Industrial Starches volume was flat compared
with the prior year. Overall demand for paper remains steady
with growing demand for packaging and tissue, offsetting
declines in printing and writing paper. Demand for starches
in construction materials also remained steady in a relatively
stable US housing market.
Commodities
Commodities had a strong year delivering profits of £32 million,
£24 million higher than the prior year. The stronger performance
mainly reflected gains from the sourcing of corn and stronger
co-products profits. Profits from corn gluten feed, a co-product
used for animal nutrition, strengthened reflecting improved
market conditions and better realised prices during the year.
Profits from our network of corn elevators also increased.
US ethanol cash margins remained towards the low-end of the
historical range with industry inventories high.
www.tateandlyle.com 29
Strategic ReportGovernanceFinancial StatementsUseful Information Innovation and Commercial Development
Using science to
make food better
Innovation and Commercial Development (ICD) is an important
part of our growth strategy. ICD brings together scientific and
commercial functions into one team to provide an integrated
approach to developing and commercialising new products and
technologies. The team uses its deep understanding of consumer
trends and food and beverage categories, along with leading-
edge science, to create solutions for customers which address
growing demand for healthier and tastier food and drink.
ICD is based at our global Commercial and Food Innovation Centre
in Chicago, USA. At the Centre, we offer our customers a full range
of facilities and services including sensory evaluation, culinary
development, human nutrition and regulatory expertise, state-of-
the-art research and application laboratories, and a pilot plant.
Through the Centre, and our global network of applications and
technical services laboratories, we work closely with our customers
to develop new products and bring them to market quickly.
ICD supports both business divisions and focuses mostly on four
food and beverage platforms where we have strong expertise.
Each platform has a clear strategic focus aligned to large market
opportunities.
• Sweeteners: we promote sugar substitution through a range
of low-calorie and no-calorie alternatives to sugar. Reducing
calories is an increasingly important priority for both
consumers and governments
• Texturants: we deliver highly functional and ‘clean-label’
starches. In the food industry, starches are used to provide
texture and shelf stability
• Health and wellness: we offer soluble fibres and a range of
oat-based ingredients which support healthy digestion and
have other functional benefits such as replacing fat, sugar
and calories
• Stabilisation and functional systems: these help food
preserve its structure, for example, by preventing oil and
water emulsions from separating, ice crystals from forming,
and fruit from settling in products such as jams and yoghurts.
ICD consists of five areas working together as one team.
• Research and development: we use leading-edge science to
deliver innovative new products which target large market
opportunities
• Platform management: we use research to develop strategies
for our four platforms aligned to large market opportunities
• Strategic marketing: our market research programme keeps
us up to date with consumer and category trends. Our own
primary research is supplemented by insights from syndicated
research services such as Euromonitor
• Regulatory and nutrition: we support our business and our
customers by undertaking pre-clinical and clinical research to
provide key scientific knowledge about our ingredients, and to
navigate regulatory processes in markets across the world
• Open innovation: we complement our in-house science by
developing relationships with universities and research
institutions specialising in food science and technologies.
We also seek to identify and develop opportunities across our
platforms. Tate & Lyle Ventures also invests in early-stage
companies in the food ingredient and technology space.
We manage our innovation pipeline through a rigorous,
multi-step stage gate process with clear milestones.
Through this process, we assess the size and viability of an
idea from conception through to final launch into the market.
Protecting our science
We protect our intellectual property by patenting our
innovations and processes. During the year we had 88 new
patents granted. In total, at 31 March 2018, we had 384
patents in issue and more than 370 patents pending.
Focus on five scientific competencies
Organic chemistry
Biochemistry
Separations science
Formulations science
Particle design
30 Tate & Lyle PLC Annual Report 2018
Global Operations
Delivering operational
excellence
Our Global Operations team is responsible for the delivery of
high-quality products to our customers across the world. It’s
their job to run our plants safely, efficiently and cost-effectively,
making sure that our ingredients reach customers on time, in
full, and to the right specification. The team works closely with
Food & Beverage Solutions and Primary Products to serve
customers through a flexible and efficient supply chain.
Raw material sourcing and procurement
Like all large companies, we have a global procurement team
to manage sourcing efficiently. Most of our ingredients and
solutions are produced from agricultural crops, principally corn,
and so we have a separate sourcing team for raw materials.
They work closely with farmers and other commercial partners
to ensure we have a reliable and secure supply. In the US, where
most of our plants are located, we have a network of storage
elevators to manage the cost effectiveness, security and
sustainability of our corn supply. At harvest time, due to high
volumes, corn is delivered either to our elevators or is delivered
direct from farmers. We receive deliveries at our plants by rail
car, truck or barge.
Manufacturing
In the US, we have four major corn wet mills, three in the
mid-west and one in Tennessee, which serve US domestic
customers and those in Latin America and Asia Pacific.
In Europe, principally serving European customers, we have
a corn wet mill in the Netherlands and one in Slovakia.
All our corn wet mills make ingredients for both business
divisions. Other key sites include our Sucralose facility in the
US, and our citric acid plants in the US and Brazil. Smaller
manufacturing sites include an oat-based fibres facility in
Sweden and a polydextrose fibre facility in China.
Logistics
Global Operations manages the storage, transportation and
delivery of products from our plants to our customers. We have
a global planning process supported by regional planning
resources for Food & Beverage Solutions, and a global network
of warehouses and transfer stations where we keep products
close to our customers. This process means we have the
flexibility to respond to our customers’ needs.
Customer service
Our customer service teams for Food & Beverage Solutions and
Primary Products sit within Global Operations. The teams are
regional so that they can offer the best customer experience from
order receipt to delivery.
Continuous improvement
A dedicated Continuous Improvement team leads productivity,
efficiency and reliability projects across Tate & Lyle. By using
innovative approaches and established continuous improvement
methodologies, such as Lean and Six Sigma, the team identifies
and delivers projects to streamline processes, reduce process
waste, and improve product quality.
Environment, health and safety
Protecting our people and the world around us is foundational to
our business. Global Operations is responsible for environmental,
health and safety (EHS) performance across the Group. In 2017,
we developed a new, global approach to EHS for everyone who
works at Tate & Lyle. More details can be found on pages 46 to 49
of this Annual Report.
Examples of two achievements during the year
Triple the fibre at Nantong, China
In December 2017, we completed a
project to expand capacity and upgrade
processes at our STA-LITE® Polydextrose
(fibre) facility in Nantong, China. This
project has tripled capacity. As part of the
expansion, manufacturing and quality
processing were significantly enhanced,
and an advanced environmental
management infrastructure and
system was implemented.
US energy efficiency certifications
Our corn wet mills in Lafayette South,
Indiana and Loudon, Tennessee were
awarded Energy Star Certification by the
US Environmental Protection Agency
(EPA) for outstanding energy efficiency
performance in 2017, with Lafayette
South achieving the best performance of
all corn wet mills in the US. The award
recognises industrial plants that are
performing in the top 25% of similar
facilities across the US for energy
efficiency, and which meet strict energy
performance levels set by the EPA.
www.tateandlyle.com 31
Strategic ReportGovernanceFinancial StatementsUseful Information Group Financial Results
Strong financial performance
+13%
+8%
Group adjusted profit before tax
with profit growth in all businesses at
constant currency
Food & Beverage Solutions profit1
to £137 million with good volume momentum
and New Products progress
+30%
Primary Products profit1
to £166 million, 11% profit1 growth in Sweeteners and Starches;
Commodities £24 million higher
+5%
Sucralose profit1
to £55 million
+15%
Sales from New Products2
to US$121 million
£53m
higher Group reported profit before tax
with improved trading and lower exceptional costs
+7%
Earnings per share3
at constant currency
£60m
Net debt £60 million lower,
with adjusted free cash flow £22 million
higher at £196 million
1 Adjusted operating profit, percentage change in constant currency.
2 New Products represent products in the first seven years after launch.
3 Adjusted diluted earnings per share from continuing operations.
32 Tate & Lyle PLC Annual Report 2018
Summary of financial results for the year ended 31 March 2018 (audited)
Year ended 31 March1
Continuing operations unless otherwise stated
Sales
Adjusted operating profit
– Food & Beverage Solutions
– Sucralose
– Primary Products
– Central
Adjusted operating profit
Adjusted net finance expense
Share of profit after tax of joint ventures and associates
Adjusted profit before tax
Exceptional gain/(loss)
Amortisation of acquired intangible assets
Net retirement benefit interest
Profit before tax
Income tax (expense)/credit
Profit for the year – continuing operations
Profit for the year – discontinued operations
Profit for the year – total operations
Earnings per share – continuing operations (pence)
Basic
Diluted
Adjusted earnings per share – continuing operations (pence)
Basic
Diluted
Cash flow and net debt
Adjusted free cash flow
Net debt – At 31 March
2018
£m
2017
£m
2 710
2 753
Change
%
(2%)
Constant
currency
change %
(1%)
5%
6%
28%
8%
5%
30%
14%
15%
(14%)
11%
(14%)
13%
137
55
166
(58)
300
(27)
28
301
2
(12)
(5)
286
(23)
263
2
265
129
52
129
(46)
264
(25)
32
271
(19)
(12)
(7)
233
22
255
1
256
4%
4%
6%
6%
8%
7%
57.0p
56.1p
50.9p
50.1p
55.0p
54.2p
47.8p
47.1p
196
392
174
452
Sales from continuing operations of £2,710 million were 2% lower
(1% lower at constant currency) reflecting the impact of lower
corn costs.
Adjusted profit before tax
Year ended 31 March 2018
On a statutory basis, profit before tax from continuing operations
increased by £53 million to £286 million. Statutory diluted
earnings per share from continuing operations increased by 1.9p
to 56.1p as improved operating performance was largely offset by
the effect of an increased statutory effective tax rate of 8.1% (2017
– 9.6% credit reflecting the recognition of exceptional deferred
tax credits). As a result of the increased current year tax charge,
profit for the year from total operations increased only modestly
to £265 million (2017 – £256 million).
Adjusted profit before tax from continuing operations was 11%
higher than last year (13% in constant currency), at £301 million.
Adjusted diluted earnings per share from continuing operations
increased by 3.0p to 50.1p as increased profits were partially offset
by a higher adjusted effective tax rate of 21.9% (2017 – 18.2%).
1 Adjusted results and a number of other terms and performance measures
used in this Annual Report are not directly defined within accounting
standards. For clarity, we have provided descriptions of the various metrics
and their reconciliations to the most directly comparable measures reported
in IFRS, and the calculations, where relevant, of any ratios, in Notes 1 and 4.
+£37m
+£8m
+£3m
£(4)m
£(14)m
£301m
£271m
Food &
Beverage
Solutions
2017
Adjusted
profit
before
tax
Sucralose
Primary
Products
Joint
ventures
Interest/
central
2018
Adjusted
profit
before
tax
www.tateandlyle.com 33
Strategic ReportGovernanceFinancial StatementsUseful Information Group Financial Results continued
Central costs
Central costs, which include head office costs, treasury and
reinsurance activities, were £12 million higher at £58 million
reflecting higher captive insurance costs, following an increase
in self-insured claims from the Group’s operations.
Net finance expense
Adjusted net finance expense from continuing operations,
which excludes net retirement benefit interest, was £2 million
higher at £27 million, mainly driven by lower capitalised interest
(principally related to the construction of the Loudon co-generation
facility, commissioned in the second half of the 2017 financial
year) and the impact of increased US interest rates on floating
rate debt.
Share of profit after tax of joint ventures
and associates
The Group’s share of profit after tax of joint ventures and
associates of £28 million was £4 million lower than the prior year
reflecting lower profits in the Group’s Almex joint venture in
Mexico due to the lapping of prior year non-trading gains,
principally transactional currency gains.
Exceptional items from continuing operations
Operating exceptional credits from continuing operations of
£2 million were recognised in respect of the disposal of an
investment held as part of the Group’s venture fund portfolio
(2017 – total net operating exceptional costs of £19 million).
In the year ended 31 March 2018, the Group recognised
exceptional tax gains totalling £38 million, comprising two items:
firstly, a credit of £36 million, reflecting mainly the revaluation
downwards of net US deferred tax liabilities following the
reduction in the US federal tax rate; and secondly, a net credit of
£2 million following an increase in UK deferred tax assets
resulting from changes in both UK and US tax legislation and
anticipated changes to the Group’s internal financing
arrangements. In the comparative year, the Group recognised
exceptional deferred tax credits totalling £65 million.
More details on the tax exceptional items can be found in Notes 7
and 12.
Taxation
The adjusted effective tax rate on earnings for continuing
operations for the year ended 31 March 2018 increased to 21.9%
(2017 – 18.2%).
Two factors drove the increase in the adjusted effective tax rate in
the year: firstly, changes to UK legislation arising from the
OECD’s Base Erosion and Profit Shifting (BEPS) project and
consequent changes to the internal financing arrangements we
use to fund our international businesses; and secondly, an
increase in profits generated in the US, a jurisdiction with a
higher rate of corporation tax during the year to 31 March 2018.
The Group adjusted effective tax rate was at the lower end of the
21% to 24% range anticipated coming into the year.
On 22 December 2017, the United States enacted the Tax Cuts
and Jobs Act (‘US Tax Reforms’). This legislation reduced the
headline rate of federal income tax in the United States to 21%
(from 35%) from 1 January 2018, as well as introducing a number
of incentives for companies to invest in the US and other changes
to broaden the tax base in the US. Due to the efficiency of its
internal financing arrangements the Group will generate modest
benefit from the US Tax Reforms, with future upward pressure on
the adjusted effective tax rate also removed.
The reported effective tax rate on statutory earnings for the year
was a charge of 8.1% (2017 – credit of 9.6%). The statutory tax
charge was impacted by exceptional tax charges and credits in
the year including the write down of deferred tax assets and
liabilities related to legislation changes in the UK and US and
anticipated changes to the Group’s internal financing
arrangements. Legislation limiting the utilisation of carry forward
losses in the UK was enacted in the year, resulting in a write off
of part of a deferred tax asset created in the prior year, with a
consequent charge to the statutory tax rate. Overall, exceptional
tax gains in the 2018 financial year were £38 million compared to
£65 million in the comparative year.
The recognition and measurement of deferred tax assets and
liabilities is dependent on a number of key judgements, estimates
and assumptions. Judgements relate principally to: the size and
duration of future internal financing arrangements; the interest
coupon payable on these arrangements; the future level of
deductible expenses incurred in the UK; and foreign currency
exchange rates. Changes in assumptions, along with future
changes in legislation, could have a material impact on the
amount of tax recognised in future accounting periods.
We estimate that the adjusted effective tax rate for the 2019
financial year will be in the range of 20% to 22%.
A list of key uncertainties affecting the Group’s adjusted and
reported effective tax rates, as well as the factors that are
expected to influence the sustainability of the Group’s effective
tax rates in the future, are set out on pages 129 and 130.
Discontinued operations
The Group recognised a gain of £2 million from discontinued
operations in respect of its former Moroccan operation (2017
– profit of £1 million).
Earnings per share
Adjusted basic earnings per share from continuing operations
increased by 6% (8% in constant currency) to 50.9p and adjusted
diluted earnings per share from continuing operations at 50.1p
were 6% higher (7% in constant currency).
Dividend
The Board is recommending a 0.5p or 2.5% increase in the final
dividend to 20.3p (2017 – 19.8p) per share. This increased final
dividend makes a full year dividend of 28.7p (2017 – 28.0p) per
share, up 2.5% on the prior year. Subject to shareholder approval,
the proposed final dividend will be due and payable on 1 August 2018
to all shareholders on the Register of Members on 22 June 2018.
In addition to the cash dividend option, shareholders will continue
to be offered a Dividend Reinvestment Plan (DRIP) alternative.
34 Tate & Lyle PLC Annual Report 2018
Assets
Gross assets of £2,571 million at 31 March 2018 were £200 million lower than at 31 March 2017, mainly reflecting the adverse impact
of the weakening US dollar.
Net assets increased by £35 million to £1,367 million as the profit for the year was partially offset by net exchange losses of £83 million
and the dividend payment of £131 million.
Retirement benefits
The Group maintains pension plans for its employees in a number of countries. Some of these arrangements are defined benefit
pension schemes and, although we have closed the main UK scheme and the US salaried and hourly paid schemes to future accrual,
certain obligations remain. In the US, we also provide medical benefits as part of retirement packages.
The net surplus on the Group’s retirement benefits plans was £18 million, an improvement of £157 million from a net deficit at
31 March 2017 of £139 million. The improvement was led by a reduction in the deficit of the US schemes largely as a result of foreign
exchange movements from the weakening of the US dollar and by cash contributions. In addition to total regular cash contributions of
£44 million in the year, the Group made an accelerated gross cash contribution to the US schemes of £56 million, in light of an
opportunity to fund the schemes while taking advantage of a higher US tax deduction.
Under funding arrangements in connection with the 2016 triennial actuarial valuation, the Group has committed to make core
funding contributions for the main UK scheme of £12 million per year and supplementary contributions of £6 million per year until
31 March 2023 into a secured funding account, payable to the Trustee on certain triggering events.
During the year ending 31 March 2019, the Group expects to contribute approximately £30 million to retirement benefit schemes,
comprising £26 million to its defined benefit plans and £4 million in relation to retirement medical plans.
Cash flow and net debt
Adjusted operating profit from continuing operations
Adjusted for:
Non-cash items in adjusted operating profit and working capital
Net retirement benefit obligations
Less: accelerated US defined benefit schemes contribution (exceptional cash flows)
Net retirement benefit obligations: underlying funding
Net interest and tax paid
Less: cash tax benefit on accelerated contribution (exceptional cash flows)
Net interest and tax paid: underlying
Capital expenditure
Adjusted free cash flow1
Year ended 31 March1
2018
£m
300
121
(94)
56
(38)
(36)
(20)
(56)
(131)
196
2017
£m
264
162
(36)
–
(36)
(63)
–
(63)
(153)
174
Adjusted free cash flow (representing cash generated from continuing operations after net interest paid, income tax paid, and capital
expenditure, and excluding the impact of exceptional items) was £196 million, £22 million higher than the prior year principally
reflecting higher earnings and lower capital expenditure.
Capital expenditure of £131 million, which included a £20 million investment in intangible assets, was 0.9 times the depreciation and
adjusted amortisation charge of £142 million and reflects continued investment in capacity as well as efficiency and sustaining
investments. We expect capital expenditure for the 2019 financial year to be between £130 million and £150 million.
Other significant cash flows in arriving at net debt included: £26 million of dividends received from joint ventures; external dividend
payments of £131 million; £27 million payments for the purchase of shares to satisfy share option commitments and a net £36 million
accelerated funding payment to the US pension schemes (a gross payment of £56 million, less £20 million tax deduction).
Overall net debt at 31 March 2018 of £392 million was £60 million lower than at 31 March 2017. Net debt decreased by £25 million in
the year (2017 – decrease of £39 million) before the favourable impact of exchange rates. Foreign currency translation, mainly from
the impact of the weakening US dollar, reduced net debt by £35 million.
Year ended 31 March
Cash dividend cover2
Net debt (£m)
Leverage (net debt:EBITDA)1
Return on capital employed1
2018
1.5x
392
0.8x
16.2%
2017
1.3x
452
0.9x
14.3%
1 Adjusted results and a number of other terms and performance measures used in this Annual Report are not directly defined within accounting standards. For
clarity, we have provided descriptions of the various metrics and their reconciliations to the most directly comparable measures reported in IFRS, and the
calculations, where relevant, of any ratios, in Notes 1 and 4.
2 Cash dividend cover is calculated as adjusted free cash flow from continuing operations divided by cash dividends.
www.tateandlyle.com 35
Strategic ReportGovernanceFinancial StatementsUseful Information Group Financial Results continued
Financial risk factors
Our key financial risk factors are market risks, such as foreign
exchange, transaction and translation exposures, and credit and
liquidity risks, as explained in Note 29.
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. 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 lessee does not assume 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 £274 million (2017 – £318 million) and
related primarily to railcar leases in the US and our commitment
for a gas pipeline to supply our Loudon facility. Rental charges for
the year ended 31 March 2018 in respect of continuing operations
were £35 million (2017 – £32 million).
Use and fair value of financial instruments
In the normal course of business we use both derivative and
non-derivative financial instruments. The fair value of Group net
debt at the year end was £398 million against a book value of
£392 million (2017 – fair value £472 million, book value
£452 million). Derivative financial instruments used to manage
the interest rate and currency of borrowings had a fair value of
£12 million liability (2017 – £21 million liability). The main types
of instrument used are interest rate swaps and cross-currency
interest rate swaps. The fair value of other derivative financial
instruments hedging future currency and commodity
transactions was £2 million liability (2017 – £2 million asset).
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 £13 million asset (2017 – £11 million asset).
Fair value estimation
The fair value of derivative financial instruments is based on the
market price of comparable instruments at the balance sheet
date if they are publicly traded. The fair value of the forward
currency contracts was determined based on market forward
exchange rates at the balance sheet date. The fair values of
short-term deposits, receivables, payables, loans and overdrafts
with a maturity of less than one year are assumed to approximate
their book values. The fair values of bonds, bank and other loans,
including finance lease liabilities due in more than one year,
are estimated by discounting the future contractual cash flows
at the current market interest rate available to the Group for
similar financial instruments, adjusted for the fair valuation
effects of currency and interest rate risk exposures, where
those instruments form part of related hedging relationship
agreements. The fair value of borrowings relating to the US
Private Placement Notes is based on broker dealer quotations.
The fair value of commodity forward contracts and options,
and commodity futures is based on market prices and, where
relevant, management’s estimate of basis and the price at which
co-products will be bought or sold in the future. The values of
certain items of merchandisable agricultural commodities that
are included in inventories are based on market prices.
Going concern
The Directors are satisfied that the Group has adequate
resources to continue to operate for a period not less than
12 months from the date of approval of the financial statements
and that there are no material uncertainties around their
assessment. Accordingly, the Directors continue to adopt the
going concern basis of accounting.
Basis of preparation
The Group’s principal accounting policies are unchanged from
the year ended 31 March 2017. A number of minor changes to
accounting policies have been adopted during the year, although
they have had no material effect on the Group’s financial statements.
Details of the basis of preparation, including information in respect
of the methodology used to calculate the Group’s alternative
performance measures, can be found in Notes 1 and 4.
Impact of changes in exchange rates
The Group’s reported financial performance at average rates
of exchange for the year ended 31 March 2018 was adversely
impacted by currency translation compared to the prior year.
The average and closing US dollar and euro exchange rates used
to translate reported results were as follows:
Year ended 31 March
US dollar:sterling
Euro:sterling
Average rates
Closing rates
2018
1.33
1.13
2017
1.30
1.19
2018
1.40
1.14
2017
1.25
1.17
For the year ended 31 March 2018, foreign exchange translation
decreased Group adjusted profit before tax by £4 million (Food &
Beverage Solutions by £2 million, Primary Products by £2 million
with no change in Sucralose).
36 Tate & Lyle PLC Annual Report 2018
Changes to reporting segments
The Group will continue to operate in two divisions, Food & Beverage Solutions (which includes Sucralose, and was previously named
Speciality Food Ingredients) and Primary Products (previously named Bulk Ingredients). The Food & Beverage Solutions division will
be reported across two reportable segments (Food & Beverage Solutions and Sucralose) reflecting their different economic
characteristics and how we manage them. The segmental disclosure prepared in this Annual Report reflects this change from two
reportable segments to three, and has been further amended to report Food Systems operations (the Group’s stabiliser solutions
business) within the regional results of Food & Beverage Solutions, mirroring a change to the management of that business.
Disclosure of the performance of the divisions is provided below in the form previously used at the 2017 financial year end for
comparability purposes, together with restated comparatives for the six month period to 30 September 2017, which will serve as
comparatives for the Group’s forthcoming half year results.
Food & Beverage Solutions and Sucralose results for the year ended 31 March 2018 in previous disclosure format
Year ended 31 March
Continuing operations
North America
Asia Pacific and Latin America
Europe, Middle East and Africa
Total: excluding SPLENDA® Sucralose
and Food Systems
Volume
change
1%
8%
8%
2018
£m
355
147
163
2017
£m
357
148
145
Change
%
(1%)
0%
13%
Sales
Constant
currency
change
%
1%
1%
9%
Adjusted operating profit
2018
£m
2017
£m
Change
%
Constant
currency
change
%
4%
665
650
2%
2%
118
125
(6%)
(4%)
Food Systems
SPLENDA® Sucralose
(5%)
(12%)
185
146
184
162
0%
(10%)
(1%)
(9%)
19
55
4
52
353%
6%
357%
5%
3%
996
996
0%
0%
192
181
6%
7%
Food & Beverage Solutions results for the six months to
30 September 2017 on the revised disclosure format
Six months to 30 September
Continuing operations
Volume
North America
Asia Pacific and Latin America
Europe, Middle East and Africa
Total
Sales
North America
Asia Pacific and Latin America
Europe, Middle East and Africa
Total
Adjusted operating profit
2017
Volume
change
0%
6%
6%
3%
2017
£m
211
98
124
433
75
www.tateandlyle.com 37
Strategic ReportGovernanceFinancial StatementsUseful Information
Risks
Managing our
risks effectively
How we manage risk
ERM Programme
1
Identify
risks
5
Review and
monitor risks
2
Assess
risks and
interactions
4
Respond to and
mitigate risks
3
Prioritise
risks
Three lines of defence
O v ersight
3rd
2nd
1st
R
isk own e r
and con t
r
s
hip
o l
M
o
nitoring and c o m p lia nce
Independent a s s u r
a
n
e
c
ERM Programme
Tate & Lyle’s enterprise risk management
(ERM) programme facilitates a common,
Group-wide approach to the identification,
analysis and assessment of risks and
the way risks are managed, controlled
and monitored.
Three lines of defence
We manage significant risks through three
levels of defence.
1. Risk ownership and control
Business and operational management
is responsible for identifying risks and
maintaining effective controls on a
day-to-day basis, and for implementing
policies and procedures that are consistent
with that objective. Front line controls are
updated regularly in response to the
Group’s changing risk profile.
2. Monitoring and compliance
Group functions support management in
monitoring key risk areas, and ensuring the
first line of defence is designed and
operating as intended. These functions,
including risk management, quality, ethics
and compliance, and environment, health
and safety, also identify current and
emerging risks, and monitor the timely
remediation of deficiencies.
3. Independent assurance
The Group Audit and Assurance team
(internal audit) and external assurance
providers give independent assurance over
the Group’s risk management, control, and
governance processes and systems.
Oversight
The Board, Audit Committee and Executive
Committee provide oversight and direction
in accordance with their respective
responsibilities. More information is in the
governance section of this Annual Report.
38 Tate & Lyle PLC Annual Report 2018
Risk framework
The Board has overall responsibility for the Group’s system
of risk management and internal control, and for setting the
Group’s risk appetite. The schedule of matters reserved to the
Board ensures that the Board makes a robust assessment of the
principal risks facing the Group, and determines the nature and
extent of risk it is willing for the Group to take to achieve its
strategic objectives.
Approach
Process to identify risks
The Group-wide risk management and reporting process helps
to identify, assess, prioritise and mitigate risk. Principal risks are
considered over a time period of three years. This annual process
is both bottom-up and top-down.
The top-down aspect involves the Board assessing what it
believes to be the principal risks facing Tate & Lyle. The bottom-
up aspect involves a rolling programme of workshops, facilitated
by the risk management team, held around the Group. These
workshops identify current and potential risks which are then
collated and reported through functional and divisional levels to
the Executive Committee. Areas and behaviours which could
potentially trigger risk combinations are also considered.
Through these processes, we identify the Group’s key business,
strategic, financial, operational and compliance risks, and then
develop action plans and controls to mitigate them as far as
possible, to the extent deemed appropriate taking account of the
Group’s risk appetite. The Board reviews these risks again, as
well as emerging and black swan risks.
Risk appetite
As part of the annual risk assessment process, the Board and
Executive Committee consider the nature and extent of the
Group’s risk appetite. The results of this exercise are used as
part of strategic planning activities, and in setting ongoing
mitigating actions.
Managing risks
Individual executives are assigned responsibility for managing
risks and their associated mitigating controls. As part of the
process, senior executive management formally confirms once
a year that 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, where appropriate, reported to the Board.
The Executive Committee reviews the principal risks regularly
and formally at least three times a year, and reports any changes
in the level or velocity of the risks, and associated mitigating
actions, to the Board. The Board reviews the principal risks at
least every six months.
Principal risks
The Board has carefully considered the type and extent of the
principal risks to the Group achieving its objectives. While the
Group seeks to manage risk carefully, at the same time the
Board recognises that some risk needs to be taken for the
Group to achieve its strategic goals.
Over time, the Group’s risk profile evolves and the Board’s view
of the principal risks is updated accordingly. Following a number
of changes to the principal risks over the last few years, the
Board decided this year that no changes to the principal risks
were required.
The Board confirms that a robust assessment of the principal
risks facing the Company, including those that would threaten its
business model, performance, solvency and liquidity, has been
carried out. The principal risks identified as part of the process
undertaken during the year, together with examples of the
mitigating actions being taken, are set out on pages 40 and 41. It
is not possible to identify or anticipate every risk that may affect
the Group.
Viability statement
In accordance with the provisions of the UK Corporate
Governance Code, the Directors have assessed the viability of the
Group, taking into account our current position and the potential
impact of the principal risks we face.
Although the Group’s strategic plan, which the Board reviews
annually, forecasts beyond three years, the current planning
process provides for the preparation of a detailed financial
plan over a three-year period, built bottom-up on a divisional
basis, including anticipated capital and funding requirements.
For this reason, the Directors have determined that a three-year
period to 31 March 2021 is an appropriate period over which to
assess viability.
To assess viability, we stress-tested the strategic plan under four
downside scenarios which would stress the potential viability of
the Group if one or more of the principal risks set out in this
Annual Report were to occur. The potential impact of these
scenarios was assessed individually, and in combinations, on
both a gross (before mitigation) and a net (after mitigation) basis.
The four downside scenarios modelled were: a major operational
failure causing the shutdown of a large manufacturing facility for
an extended period of time; a sharp decline in sales in one or
more of our major product lines; the loss of one or more of our
key global customers; and government actions or policies
restricting or preventing our ability to operate in key markets.
In each case, we assumed we would still be able to secure
financing or re-financing in the capital markets in all plausible
market conditions.
We measured the impact of these risks occurring by quantifying
their financial impact on the strategic plan, and on the Group’s
viability when set against measures including liquidity, credit
rating and financial covenant requirements. We also considered
operational and commercial impacts. The results of this stress
testing showed that the Group would, over the three-year period,
be able to withstand the impact of the most severe combination
of the risks modelled if we made adjustments to our strategic
plan and capital allocation priorities, and carried out other
available mitigating actions.
Based on this assessment, the Directors confirm that they have a
reasonable expectation that the Group will be able to continue in
operation and meet its liabilities as they fall due over the period
to 31 March 2021.
www.tateandlyle.com 39
Strategic ReportGovernanceFinancial StatementsUseful Information Risks continued
Principal risks
Examples of how we manage the risk
Safety
Act safely and maintain the safe operation of our facilities
The safety of our employees, contractors, suppliers, and the
communities in which we operate is paramount. We must operate
within local laws, regulations, rules and ordinances relating to
health, safety and the environment, including emissions. Failure to
act safely, which could lead to loss of life or serious injury, may give
rise to fines or penalties for breach of safety laws, interruptions in
operations or loss of our licence to operate, liability payments and
costs arising from injuries or damage, and damage to our reputation.
Strategy
Grow in food and beverage solutions
Our ability to deliver our strategy to grow our Food & Beverage Solutions
business may be affected by a number of factors such as delivering
growth in emerging markets, customers’ readiness to adopt new
ingredients and incorporate them in new product launches, competitor
actions, and growing key product or product families. Furthermore,
failure to make acquisitions and create value by integrating them into
the Group effectively, may also affect our ability to deliver growth.
Failure to deliver our strategy over the longer term would negatively
affect our credibility, reputation and profitability.
Innovation
Innovate and commercialise new products
Failure to identify important consumer trends and provide innovative
solutions, and the inability to successfully commercialise new
products, could impact the delivery of our strategy. This would affect
our performance and reputation.
• Health and safety policies and procedures are in place at all facilities with
dedicated staff to ensure they are embedded and measured
• Regular review of performance and policies by the Board
• Maintenance of suitable insurance programme
• Programme of global compliance audits
• SafeStart® behavioural safety training programme rolled out across
plants, offices and labs
• During the year, a comprehensive review of Group-wide safety protocols,
procedures and culture was undertaken with the support of an
independent external expert consultancy. As a result, a new strategy and
approach to safety was implemented called ‘Journey to EHS Excellence’
• A new global environment, health and safety (EHS) organisation was put
in place to support our Journey to EHS Excellence (see pages 46 and 47
for more information).
• Investments to increase sales and technical resources, and
infrastructure, particularly in emerging markets (laboratories expanded
in Shanghai, Singapore and Mexico City during the year)
• New staff recruited and existing staff developed to upgrade skillsets in
customer-facing areas and innovation
• Global programme to increase customer focus in key areas such as
customer account management, planning and execution
• Programme put in place to sharpen focus on our customers
• Commercial organisation re-aligned to focus on key categories.
• Innovation and Commercial Development team conducts research and
works closely with customers and other external organisations to identify
emerging consumer trends
• Open innovation team actively scouts for breakthrough technologies and
opportunities across industries and universities
• Strategic marketing organisation provides support for new product
launches and consumer and category insight
• Prioritisation of ‘partnership’ opportunities with customers to accelerate
development cycles and bring new ingredients to market more quickly
• Tate & Lyle Ventures invests in early-stage companies in food science
and technology by partnering with research institutions, entrepreneurs
and other venture funds.
People
Attract, develop, engage and retain key personnel
The performance, knowledge and skills of employees are central to
our success. We must attract, integrate, engage and retain the talent
we need to deliver our strategy, and have the appropriate processes
and culture in place. Being unable to retain key people and
adequately plan for succession could have a negative impact on
our performance.
• Remuneration policies designed to attract, retain and reward employees
with ability and experience to execute Group strategy
• Talent development strategy to provide opportunities for employees, as
well as training to close skills gaps
• Single global performance management system and talent planning
processes in place
• Focus by the Board on succession planning for business-critical roles
• Measurement of progress against cultural objectives, for example, global
employee surveys.
Legal and compliance
Comply with legal and regulatory requirements,
and our Code of Ethics
We operate in a variety of markets and are therefore 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.
Cyber security
Maintain the security of our information systems and data
A cyber security breach, whether as a result of human error,
deliberate action or the failure of technology systems, could result in
unauthorised access to or misuse of information systems, technology
or data. This could cause harm to our assets, loss of data, business
disruption, legal liabilities and damage to our reputation.
• Regular monitoring and review of changes in law and regulation in areas
such as health and safety, environment, quality, food safety, corporate
governance and data protection
• Legal teams maintain compliance policies in areas such as anti-trust and
anti-corruption law; and provide ongoing training to employees
• Ethics training provided to employees
• Full-time global Head of Ethics and Compliance appointed during the year
• Whistleblowing process in place (Speak Up programme)
• Compliance with the EU General Data Protection Regulation.
• Cyber security enhancement programme in place focused on
strengthening people, process and technology defences
• Compulsory cyber security training
• Cyber security breach scenario exercises
• Advanced perimeter defences in place
• Continuous vulnerability detection and defences
• Separation of systems within plant network
• Third-party Security Operations Centre providing 24/7 security
monitoring, security event correlation and threat counter-measures.
40 Tate & Lyle PLC Annual Report 2018
Principal risks
Examples of how we manage the risk
Operations and supply chain
Maintain the continuous operation of our plant network and
supply chain, including high standards of customer service
Operating plants involves many risks which could cause temporary
or permanent breaks in production. We must have a robust sales
and operations planning process to avoid disruption to the supply
chain and maintain high standards of customer service. Failure to do
any of these things could have a material adverse effect on our
performance and reputation.
• Preventive maintenance programme across the plant network
• Ongoing programme to improve global supply chain processes
• 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
• Dedicated internal resources allocated to key projects in conjunction with
business teams to ensure business continuity is not compromised
• Customer service managed by Global Operations as part of integrated
end-to-end supply chain process.
Raw materials
Fluctuations in prices and availability of raw materials,
energy, freight and other operating inputs
Our margins may be affected by fluctuations in crop prices due to
factors such as alternative crops, co-product values and the
variability of local or regional harvests caused by, for example,
weather conditions, crop disease, climate change or crop yields.
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.
Quality
Maintain the quality and safety of our products
The safety of the consumers of our products is critical. Poor quality
or sub-standard products could have a negative impact on consumer
safety and on our reputation and relationships with customers.
Consumer concerns and food regulation
Changes in consumer, customer or government
attitudes to our products
Our freedom or ability to operate may be affected by changes in
consumer or customer attitudes, food law and regulatory changes,
campaigns targeted at specific ingredients or technologies or other
factors that may impact the regulatory status or perception of our
products or of their functionality, efficacy or use. We must ensure
that the science behind our ingredients (for example, health claims,
nutritional impact) is supported by credible sources, clearly
communicated and understood by relevant regulatory authorities.
Failure to do so may restrict the markets for our products.
Government regulations and trade policies
Changes in government regulations and/or trade
policies
Government actions or policies causing changes in tariffs, customs
duties, or imposing import/export limitations, or other barriers, may
lead to our business incurring additional costs, or may restrict
opportunities for growth or prevent or limit our ability to operate in
certain markets.
Financial controls
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 the accuracy and reliability of
our records and financial reporting.
• Strategic relationships with suppliers and trading companies including
multi-year agreements
• Balanced portfolio of supply and tolling contracts in operation with
customers to manage balance of raw material prices and product sales
prices and volume risks
• Raw material and energy purchasing policies to provide security of supply
• Network of corn elevators to enhance security of supply
• New or back-up supply sources in place in case primary suppliers face
localised challenges
• Use of derivatives and forward contracts where practical, to hedge and
manage our exposure to raw material and co-product prices.
• Strict quality control and product testing procedures to ensure products
are released only with full quality control clearance
• Quality policies, procedures and performance reviewed by the Board
• Hazard Analysis and Critical Control Points plans updated at all plants to
be fully compliant with new US Food Safety Modernization Act
• Immediate response Recall Committee meets promptly if a recall
event occurs
• Third-party audit programme supplemented by internal global
compliance audits
• Regular recall simulation exercises.
• Global regulatory team, supported by external consultants, monitors
local regulatory requirements affecting our products
• Global nutrition team initiates and monitors research and publications
concerning the use and functionality of our ingredients and maintains
global network of health and nutrition clinicians, academics and experts
• Membership of trade organisations provides access to broader sources
of information and ensures, where appropriate, a single voice for the
industry on regulatory and public interest issues affecting our ingredients
• Maintenance of relations with regulatory authorities
• Provision of clear information on ingredients’ provenance and traceability
• Research Advisory Group, chaired by a non-executive director and
comprising leading scientific experts, reviews critical aspects of the
Group’s innovation activities and provides guidance.
• Programme in place to ensure that we actively engage in discussions
with political parties, influencers and regulatory authorities in the main
countries we operate in
• Active member of relevant industry trade associations
• Model in place enabling production across the plant network to be adapted
or optimised in the event of market restrictions in certain countries
• Operation of a global plant network means customers can be served
from different countries if products from certain markets are restricted
or become economically less attractive
• Continue to invest in resources and infrastructure across different
markets and geographies to diversify business mix.
• Financial policies and standards are in place supported by procedures for
key financial processes, for example, capital expenditure
• Financial risks are monitored and managed through a number of forums,
for example, the regional Control Environment Councils
• Chief Executive and Chief Financial Officer undertake detailed quarterly
business and financial reviews
• Minimum control standards are confirmed at the half-year and at the end
of the financial year
• Automated controls are built into systems where possible.
www.tateandlyle.com 41
Strategic ReportGovernanceFinancial StatementsUseful Information Our People
Working the Tate & Lyle way
Every company talks about hiring the right people. For us, that
means hiring people who believe in our purpose, who live our
Values, and who give of their best to make our business a
success. In return, Tate & Lyle constantly invests in our people’s
skills and expertise through training and development, and by
providing a workplace that is inspiring and welcoming to all.
Policies
Our global human resources policies set out our position on
topics such as equal opportunities, diversity and inclusion,
employee training and reward. We have made these available on
the Company’s intranet as well as communicating them across
the Group.
Our policies covering ethical conduct and human rights include:
• Our Code of Ethics and related internal and external
communication and training (see page 45)
• Our ‘Speak Up’ programme (system that supports
whistleblowing) (see page 63)
• Our global human resources policies as described above
• Our standards in the supply chain and our anti-slavery and
human trafficking statement (see page 45).
Values
Our Values of safety, integrity and respect are at the heart of how
we work. They demonstrate what we stand for and how we
behave with our customers, suppliers, investors, the
communities we operate in, and with each other. In line with our
Values, we believe that everyone should be safe at work and be
treated fairly and with respect.
Our team of Values Ambassadors together with our Employee
Engagement Champions are responsible for promoting our
Values and the right way of doing business to colleagues across
the Group.
Leadership behaviours
During the year, we reviewed our performance values and
leadership framework in the context of the cultural and
leadership behaviours we need to deliver our strategy. We
decided to focus and simplify our approach by merging our
previous leadership framework and performance values
(achievement, accountability, creativity, speed and teamwork) into
three leadership behaviours of partnership, agility and execution.
We have started a programme to embed these behaviours across
the Group and this will be a key priority in the year ahead.
Employee profile (as at 31 March 2018)
At 31 March 2018, Tate & Lyle employed 4,192 people (2017 – 4,146). During the year, we continued to expand our commercial
and technical teams in Asia Pacific and Latin America, and to add staff at our global Shared Service Centre in Poland.
Employees by division
As at 31 March 2018
Employees by geography
As at 31 March 2018
Primary
Products
41%
Food & Beverage Solutions
Central
Functions
13%
Asia
Pacific
5%
North America
51%
46%
Europe, Middle East
and Africa
34%
Latin
America
10%
42 Tate & Lyle PLC Annual Report 2018
Diversity and inclusion
All employees must feel able to contribute to the Group’s
performance and have the opportunity to develop their abilities to
the fullest. We are committed to creating a culture and workplace
that encourages and values diversity and inclusion. Our policy is
to employ the best candidates available in every position
regardless of gender, sexual orientation, age, marital status,
nationality, colour, disability, race, religion or philosophical
beliefs, marriage or civil partnership, pregnancy, maternity,
gender reassignment or ethnic or national origin.
A diverse workforce helps us reflect our customers and the
communities we operate in, enabling us to understand and
respond to their changing needs. During 2017, our diversity and
inclusion work included:
• Diversity and inclusion awareness training for senior managers
– to date, more than 70 have been trained
• Trialling unconscious bias training for hiring managers
• Establishing a Diversity and Inclusion Council in our Global
Operations unit to help work towards ensuring our employee
mix at plant locations reflects the society and communities we
work within
Using the UK Government’s methodology, Tate & Lyle has a
median gender pay gap of 11% across all UK employees. This is
the result of having fewer women in senior roles. Analysis of our
employee population up to and including manager level –
representing three-quarters of our UK employees shows no
difference in median pay by gender. Across the Group, while
female representation in our senior management population has
risen by 47% since 2013, doubling the number of female senior
managers, we recognise we have more work to do.
Employee wellbeing
A key part of our purpose is to focus on how we can deliver an
improvement in our employees’ personal wellbeing. During the
year, we launched a taskforce to identify how we can enhance
and support the wellbeing of our employees in the areas of
physical, emotional and mental health. This builds on various
initiatives already in place, including:
• Continuing our participation in the Global Corporate Challenge
for the fifth consecutive year – this saw 1,071 employees
across the Group take more than one billion steps over
100 days to help improve their fitness and encourage a more
balanced lifestyle
• Continued support for our Women’s Network, one of our
• Encouraging US employees to take part in a healthy eating and
Employee Resource Groups, which ran career management and
mentoring workshops at multiple locations
• Improving female representation in our workforce from
27% to 28%.
UK gender pay gap
UK gender pay reporting legislation requires employers with 250
or more employees in each employing business in the UK to
publish calculations every year showing the pay gap between
male and female employees. The number of employees we have
in each of our two employing businesses in the UK is below the
required threshold. Despite this, we have published details of our
gender pay on the Company’s website, www.tateandlyle.com.
lifestyle programme called ‘Naturally Slim’
• Providing subsidised healthier food options in plant canteens
• Sponsoring team-based sports activities in different locations
• Organising visits from external occupational health
professionals at various locations.
Gender diversity (as at 31 March 2018)
Board of directors
Senior managers1
All employees
Men – 78% (7)
Women – 22% (2)
Men – 74% (50)
Women – 26% (18)
Men – 72% (3,004)
Women – 28% (1,188)
1 Gender diversity for senior managers,
including statutory directors, is 80%
(115) men and 20% (29) women.
www.tateandlyle.com 43
Strategic ReportGovernanceFinancial StatementsUseful Information Our People continued
Employee engagement
We believe that engaged and motivated employees will be happier
and deliver better results for the Group. In 2017, we conducted
our fourth global employee survey to learn about our employees’
opinions of Tate & Lyle, and to start conversations about how we
can improve our workplace and ways of working. 86% of
employees took part, with the overall survey score just above 3.7
on a scale of 1 to 5 (where 5 is the best score). This shows a
meaningful increase in positive attitudes from the previous
survey in 2015, highlighting important progress as well as areas
where we can improve. For example, employees told us they
wanted more communications at a local team level; as a result
we are making sure our management and leadership
development programmes actively reinforce how managers and
employees communicate through team meetings and face-to-
face dialogue. We also distributed engagement toolkits to
managers and team leaders across the Group to help translate
these results into action.
Good internal communications are critical to creating and
sustaining employee engagement. We communicate with our
employees around the world through a number of channels
including email, videos, our intranet, our Yammer internal social
network, team meetings, employee town halls, and our global
employee magazine. We publish the magazine every four months
in English, with summaries in nine other languages.
Employee reward and recognition
Reward and recognition is a central part of our employee
engagement strategy. We reward people based on their
performance and contribution to our success, and ensure
competitive and fair remuneration through regular benchmarking
of roles. All arrangements are subject to Group and individual
performance measures.
We have a strong focus on non-financial recognition. This takes
many forms, from localised recognition moments in team
meetings, through to large events.
Employee development
We have a formal annual appraisal process. As part of this, we
empower employees to take ownership of their careers with a
personal development plan. Nurturing talent and supporting
development is an important part of our culture. During 2017,
this included:
• Investing in helping our employees and managers improve
both their technical skills and their management and
leadership capabilities
• Implementing customer-focused development programmes
across our frontline sales teams
• Providing a suite of online eLearning courses that enable
employees around the world to access training via their smart
phones and tablets
• Updating our management development curriculum and
launching both our flagship Global Leadership Programme and
Future Leaders Pool to further strengthen our leaders.
Priorities for the year ahead
In the year ahead, priorities to continue developing our people
include:
• Further embed our new leadership behaviours of partnership,
agility and execution
• Increase awareness of diversity and inclusion throughout the
Group, including rolling out unconscious bias training
• Roll out a Group-wide employee wellbeing programme
• Introduce a quarterly Pulse Survey to measure employee
engagement, alongside our annual employee surveys
• Enhance our internal communications programme to further
strengthen the link between our ingredients and our purpose
• Continue to deliver our employee recognition programme.
Extraordinary People Awards 2017
In 2017, we launched our first global Extraordinary People
Awards. These awards celebrated individual employees
nominated by their peers for their outstanding contribution
to Tate & Lyle, our customers, and the communities in which
we operate.
The awards ceremony was held in San Francisco, California,
in October 2017 and was attended by the nominees, their
guests and the senior management team.
Award categories included: Customer First; Safe Keeper;
Star Performer; and Unsung Hero. There was also a special
Chief Executive’s Award which was won by our VP, R&D
Texturants for her outstanding work in delivering and
promoting our texturant portfolio.
44 Tate & Lyle PLC Annual Report 2018
Winners of our Extraordinary People Awards, held in San Francisco,
California, in October 2017
Business Conduct
Doing business with integrity
At Tate & Lyle we believe in doing what is right, no matter what.
Integrity is one of our three Values along with safety and respect,
and we expect everyone at Tate & Lyle, and all who work with us,
to act in accordance with our Values and live up to our standards.
We set out what this means in our Code of Ethics (Code), which is
publicised widely throughout the Group. It is supported by
detailed policies and procedures. We encourage people to report
any breaches through our Speak Up programme, which we
publicise widely in our plants and offices, on our intranet and in
other internal communications. As we say in the introduction to
our Code, compromising our standards is never worth it.
Code of Ethics and conduct of commerical
relationships
Our Code, available in 13 languages, defines the standards of
behaviour we expect from everyone at Tate & Lyle, and those who
work with us such as our business partners and suppliers.
During 2017, our newly appointed Head of Ethics and Compliance
led a review of the Code. As a result, an updated Code will be
published in 2018.
We are subject to anti-corruption and anti-bribery laws in all
countries in which we operate, including the UK Bribery Act,
which has extraterritorial reach. Our operations in emerging
markets bring additional risk of bribery and corruption.
Tate & Lyle has a zero-tolerance approach to bribery. Any breach
of our Code in this area could result in reputational damage,
criminal prosecution, significant fines and loss of future revenue.
We also aim to ensure that the business practices of our
suppliers, distributors and agents are in line with our ethics.
In order to protect against bribery by both employees and third
parties, a number of controls are in place. We support the Code
with a set of standards including the Group Competition (Anti-
trust) Standard, Group Gifts and Hospitality Standard, Anti-Money
Laundering and Anti-Corruption/Bribery Standard and Agents
and Commissions Standard. In 2017, our legal team provided
targeted training on our Code, helping colleagues uphold the
Code and our standards.
We conduct due diligence on our agents, and include relevant
contractual terms in their agreements with us. Through our
internal regional Control Environment Councils, we monitor risks
to the business in relation to ethics and compliance and take
necessary steps to address any shortcomings.
Standards in our supply chain
Our Code is part of our terms and conditions, contracts and other
supplier engagements. We expect suppliers to comply with the
standards set out in the Code.
Our anti-slavery and human trafficking statement is available on the
Company’s website, at www.tateandlyle.com/anti-slavery-statement.
Reporting concerns
We encourage our employees and business partners to come
forward with any information concerning actual or alleged
breaches of our Code. We provide an independent, anonymous
third-party reporting service in 47 countries via a free phone
number and by email.
We promote our Speak Up programme internally through our
employee communications and externally through the Company’s
website. Members of our Speak Up Committee investigate any
issues reported.
Product safety and quality
Our Product Safety and Quality Policy sets out the standards
required for our products. We have well-established processes in
place to make sure we both comply with applicable laws in the
country of production and sale, and satisfy all relevant food safety
standards. These processes include in-process and finished
product testing; a global compliance audit programme; annual
product traceability and recall testing (both globally and locally at
each facility); raw material, processing aids, packaging material
and supplier risk assessments; environmental pathogen
monitoring; robust food safety training and ongoing reviews of
global food safety recalls/root causes to pressure test our controls.
We use continuous improvement tools such as a first-pass quality
and complaint index to improve our quality performance.
Our global compliance audit programme includes local and
global traceability and recall exercises, annual quality
management site reviews and activities to track compliance with
our Product Food Safety and Quality policies. Our aim is to ensure
we follow up all results from our audit programme, and share the
results across facilities to leverage best practice. We also
monitor global regulatory food safety changes to make sure our
programmes address emerging issues and reflect changing
regulations. Every year our manufacturing facilities are externally
certified in line with the Global Food Safety Initiative. We are
pleased to report that all sites obtained an A/AA rating or
equivalent indicating no major or critical food safety concerns.
Priorities in the year ahead
• Launch our updated Code of Ethics and training programme
• Review and enhance policies and controls to protect against
bribery by employees and third parties
• Continue to promote our Speak Up programme, encouraging
open and honest communication across Tate & Lyle.
www.tateandlyle.com 45
Strategic ReportGovernanceFinancial StatementsUseful Information Environment, Health and Safety
On a journey to excellence
Protecting our people and the world around us is foundational to
the way we do business. Our ultimate goal is to provide a safe
working environment for everyone and to reduce our impact on
the environment to the minimum.
Comprehensive review leads to a new
EHS programme
In 2017, we undertook a comprehensive Group-wide safety
review. The review was conducted by an independent external
expert consultancy experienced in heavy processing industries.
Our objective was to assess Tate & Lyle’s safety performance in
terms of processes, organisation and culture, and to identify any
opportunities for improvement. The review also looked at our
global safety management systems, and included an all-employee
safety culture survey.
The review team reported their findings to the Board and the
Executive Committee, highlighting areas where we performed
well, such as occupational safety, and areas in need of
improvements, such as process safety. A new strategy and
approach to safety was developed and agreed with the Board to
deliver excellence, over time, at all Tate & Lyle locations.
The review also found that environmental performance is closely
linked to safety performance. We therefore decided that our
environmental, health and safety (EHS) programme and
performance should be coordinated and managed holistically,
led by a senior executive responsible for EHS within the Global
Operations team.
Journey to EHS Excellence
In January 2018, we launched our ‘Journey to EHS Excellence’
for everyone working at Tate & Lyle, employees and contractors.
This multi-year programme aims to deliver and sustain world-class
EHS performance throughout the Group, with a key element being
the commitment of and participation by all our Group’s leaders.
As part of the launch, we developed a new global EHS management
system aligned with the requirements and terminology of
international standards for environmental, occupational health
and safety, and risk management (ISO 14001 and OHSAS 18001).
The system includes a revised global EHS policy (available at
www.tateandlyle.com) which include a number of principles
designed to keep our people safe. These include areas such as
working at height, combustible dust, railcar safety, and hot
liquids, chemicals and steam. Each element sets out globally
applicable requirements and expected results.
Under the new system, we have also implemented a new ‘Stop
Work Authority’ across the Group. Under this, all employees,
contractors, and people who are conducting work or work-related
activities under the control of Tate & Lyle, have the authority and
responsibility to stop any activity they believe is not being done
safely or poses an environmental risk. It does not matter how
critical the activity is for our operations, we will always support a
decision to stop work that is not being done safely or poses an
environmental risk.
Going on a ‘tiger hunt’
A key part of our Journey to EHS Excellence is implementing a
new hazard management process that helps identify and
evaluate high-risk processes. As part of this, we classify all
risks as either ‘lions’ or ‘tigers’. Both animals are predators
but have very different hunting techniques. Lions hunt
together in the open and are relatively easy to spot and avoid
(like easy-to-identify occupational safety issues), while tigers
are solitary hunters that hide and use surprise to catch their
prey (like hard-to-identify process safety issues).
Our review found that we were better at occupational safety
than process safety, and so we decided to go ‘tiger hunting’.
During 2017, we started to hold ‘tiger hunts’ at all our sites,
and will complete this process in 2018. When we find a risk
during a ‘tiger hunt’, we identify the safety barriers currently in
place to mitigate it and, using a scenario-based audit, ensure
they are working as intended. If not, we change them to make
sure they do.
‘Tiger hunt’ team in Kimstad, Sweden, January 2018
46 Tate & Lyle PLC Annual Report 2018
The overall aim of the new programme is to strengthen our
workplace EHS culture:
• To prevent serious injury and loss of life
• To provide clarity about the behaviour we expect from those
who work for us and with us
• To reduce our environmental impact by minimising water
consumption, CO2 generation and waste to landfill, considering
the entire life-cycle of our products, from sourcing raw
materials to processing, packaging and transport of
finished goods.
Tracking the Journey
We will assess the performance of our new EHS management
system, including compliance with the revised EHS policy,
through periodic compliance audits, performance assessments,
key performance indicator monitoring and cultural surveys.
We will hold annual management reviews to drive compliance,
improve performance and ensure the system continues to meet
our global policy requirements.
We provide updates on EHS performance and improvement
programmes to the Executive Committee every month. In
addition, we encourage senior executives to visit sites around the
world to meet employees and contractors to discuss safety and
identify key issues. The knowledge they gain from the front line is
invaluable in helping us review and improve our EHS practices
and address specific employee concerns.
Looking ahead to 2018, our priority is to roll out and embed the
Journey to EHS Excellence across all Tate & Lyle sites.
Safety performance
The 2017 calendar year saw an 8% reduction in incidents and an
unchanged recordable incident rate for the third year running.
However, the number of lost-work cases increased by 50% (or four
incidents) compared to 2016, driven largely by an increase in
ergonomic-related accidents. Total hours worked decreased by 8%
following the closure of the Singapore Sucralose facility and the
completion of major capital expenditure projects in 2016. Hands
and fingers remained the most injured body parts at Tate & Lyle,
with bruises, sprains and strains the most common injuries.
We suffered no fatalities in 2017.
Safety performance by calendar year
Employee
Contractor
Combined
Recordable incident rate
Lost-work case rate
2017
0.64
1.14
0.76
Change versus 2016
-14%
43%
0%
2017
0.10
0.44
0.19
Change versus 2016
-17%
340%
73%
Recordable incident rate
Lost-work case rate
Nature of accidents
Safety performance charts1
1
.
4
7
0
.
4
6
0
.
7
6
0
.
8
0
0
.
7
6
0
.
7
4
1
.
1
4
0
.
7
6
0
.
6
4
0
.
4
4
0
.
1
9
0
.
2
6
0
.
1
6
0
.
1
2
0
.
1
2
0
.
1
0
0
.
1
1
0
.
1
0
2015
2016
2017
2015
2016
2017
Number of injuries requiring treatment
beyond first aid per 200,000 hours
Number of injuries that resulted in
lost-work days per 200,000 hours
Tate & Lyle employees
Tate & Lyle employees
Slip, trip or fall – 26%
Contractors
Combined
Number of incidents
combined2 (2017)
49
(2016: 53)
Contractors
Combined
Number of lost-work cases
combined2 (2017)
12
(2016: 8)
Struck by or against an object – 31%
Burns – 2%
Ergonomics or manual handling – 27%
Other – 14%
1 We report safety performance by calendar year and all employees at Tate & Lyle owned operations and joint ventures.
2 Tate & Lyle employees and contractors combined.
www.tateandlyle.com 47
Strategic ReportGovernanceFinancial StatementsUseful Information
Environment, Health and Safety continued
Environmental performance
Our main environmental impacts are energy and carbon, water and waste. We consider our impacts principally within our own
operations, but are increasingly focusing on the sustainability of our agricultural supply chain, particularly our principal raw material,
corn. Our environmental performance in 2017 showed positive progress in our primary carbon footprint, waste to landfill and water
usage. Our energy use remained largely unchanged.
Environmental performance1 (by calendar year)
Primary carbon
footprint
Tonnes CO2e per tonne
of production
0
.
4
4
1
0
.
4
0
1
0
.
3
9
5
X
X
X
0
.
3
4
5
Energy use
Gigajoules (GJ) per tonne
of production
Waste to landfill
Tonnes per 1,000 tonnes
of production
Water use
Cubic metres per tonne
of production
5
.
1
0
4
.
8
7
4
.
8
2
4
.
8
4
1
0
.
1
0
1
0
.
2
2
8
.
6
1
8
.
3
5
4
.
6
0
4
.
6
5
4
.
5
3
4
.
3
6
08
152
162
172
08
152
162
172
08
152
162
172
08
152
162
172
1 We report environmental performance by calendar year and for all qualifying sites – both Tate & Lyle owned and joint ventures.
2 Refers to 2015, 2016 and 2017 data that has been externally assured by Bureau Veritas UK Ltd. Their assurance statement is at
www.tateandlyle.com/about-us/corporate-responsibility.
Energy use and carbon emissions
Environmental considerations play a key part in our approach to
business, with climate change risks and opportunities automatically
considered as part of our strategic decision-making process. This
approach has helped us reduce our CO2e emissions per tonne of
production by 22%, and energy use per tonne of product by 5%
since 2008. Since 2016, we have reduced our CO2e emissions by
13%, although our energy use per tonne of production increased
by 0.4% during that period. Emissions from electricity, heat,
steam and cooling purchased (Scope 2) decreased by 31% mainly
as a result of the co-generation project at our Loudon facility,
which installed more efficient natural gas powered turbines.
Our Group greenhouse gas emissions for the period 1 January
to 31 December 2017 in tonnes of carbon dioxide equivalents
(tCO2e) were:
Highlights of good practice
• For the third year running, our Lafayette South corn wet mill in
Indiana was awarded Energy Star status by the US Environmental
Protection Agency (EPA). This award recognises industrial
plants that are in the top 25% of similar facilities across
the US for energy efficiency, and which meet strict energy
performance levels. For the last three years, Lafayette South
has achieved a perfect score, and in 2015 and 2016 was the
only corn wet mill in the US with Energy Star certification
• Our corn wet mill in Loudon, Tennessee also received its first
Energy Star award from the EPA. This award follows the recent
completion of a new gas-fired combined heat and power facility
at Loudon, helping improve energy and operational efficiency
and reduce greenhouse gas emissions.
From combustion of fuel and
operation of facilities (Scope 1)
From electricity, heat, steam
and cooling purchased (Scope 2)
In total (Scope 1 and 2)
Intensity
2017
2016
1,949,248
tCO2e
694,926
tCO2e
2,644,174
tCO2e
0.345 tCO2e2
per metric
tonne of
production
1,975,058
tCO2e
1,001,033
tCO2e
2,976,091
tCO2e
0.395 tCO2e2
per metric
tonne of
production
48 Tate & Lyle PLC Annual Report 2018
Waste to landfill
We have reduced the amount of waste we send to landfill by 3%
per tonne of production since 2016, and by 17% since 2008.
Water use
We assess water risks through a well-established enterprise-wide
process designed to identify, assess, prioritise and mitigate risks
associated with water use during manufacturing and throughout
our supply chain. This approach has helped us to reduce water use
per tonne of production by 4% in 2017, and by 5% since 2008.
Highlights of good practice
• Working with local Maliseet Indians, our plant in Houlton,
Maine planted 400 trees to help protect water quality in a
shared river
• By making simple improvements to its air compressor cooling
system, our plant in Van Buren, Arkansas reduced its water
consumption by 25% for each unit of production in 2017.
Managing environmental risk
Through our new EHS system, we have introduced a process
to continually measure and evaluate our environmental
performance and take corrective actions as necessary. Through
this system, we:
• Use effective planning and documented information and action
tracking to achieve our short-, medium- and long-term
environmental goals
• Employ a systematic approach to risk management that helps
us protect the environment
• Invest in improving our workers’ environmental knowledge,
skills and capabilities throughout their career, helping them
deliver environmental excellence
• Comply with all relevant environmental requirements to
demonstrate our duty of care to the environment
• Systematically consider environmental impact during projects
so we can simultaneously achieve the best possible outcomes
and minimise ecological risks.
We are in the process of reviewing the publication by the Task
Force on Climate-related Financial Disclosures and will take into
consideration its recommendations during the coming year.
Environmental targets
Last year, we set ourselves three medium-term targets with a 2008 baseline to be met by 2020, for CO2e emissions, waste to landfill
and sustainable sourcing. The table below summarises our progress against these targets.
Target by end of 2020
Reduce CO2e emissions
from energy use by 19% per
tonne of production (baseline
year 2008)
Reduce waste to landfill by
30% (baseline year 2008)
Implement sustainable
agricultural sourcing
programmes for our top 35
agricultural raw materials
and ingredients based on
risk and spend (£)
Progress against target
Achieved 22% reduction in CO2e emissions per
tonne of production since 2008.
Achieved 17% reduction in tonnes of waste per
1,000 tonnes of production since 2008.
This year, we took the opportunity to review
our sustainable sourcing programme. We have
built a cross-functional team to add rigour to
our risk assessment and ensure programmatic
improvements are embedded in our business
processes.
We will be finalising and implementing a new
programme in 2018 and will describe it and our
performance in next year’s Annual Report.
Commentary
Annual reduction driven by natural gas-fired
co-generation facility commissioned at our
Loudon, Tennessee facility at the end of 2016
that replaces two coal-fired boilers.
Action plan in place to procure cost-effective
landfill alternatives for major waste streams.
As corn is one of our largest raw materials, we
strengthened our engagement with the Corn
Refiners Associations’ through committees and
projects aimed at improving sustainable
agricultural practices.
In 2017, Tate & Lyle committed to sponsoring
the Conservation Technology Information Center
(CTIC) Big Pine Creek Watershed Fieldprint
Project aimed at improving sustainable agriculture
through farm-specific conservation plans.
Sustainable sourcing
We focus our efforts on ways to improve sustainable agriculture practices within our corn supply chain, and work closely with key
customers to help them meet their targets and realise their ambitions for sustainable agriculture. For example, we are members of
Field to Market (www.fieldtomarket.org), the US alliance for sustainable agriculture, which helps define, measure and promote
sustainability in US agriculture, particularly for corn production.
www.tateandlyle.com 49
Strategic ReportGovernanceFinancial StatementsUseful Information Community Involvement
More than a local business
Tate & Lyle has a proud history of community involvement, starting
over 150 years ago with the founding of our original businesses by
Henry Tate and Abram Lyle. Today, community involvement remains
a strong part of our culture, with employees and teams across the
world generously sharing their time, talent and resources to make a
positive and lasting difference to the communities in which we work.
Approach
Supporting our purpose of improving lives for generations, the
aim of our community involvement programme is to build
stronger, healthier local communities. During the year, we
reviewed and refreshed our community involvement programme
to focus even more closely on this goal. As a result, we decided to
concentrate on three main areas, with a particular emphasis on
supporting children and young adults.
• Health: we support projects which improve the health and
wellbeing of people of all ages, helping them understand the
role nutrition and physical activity play in a well-balanced life
• Hunger: having enough nutritious food to eat is a basic human
need and the foundation of a community’s health. We work
with global and local experts to give people in need in our
communities, and beyond, access to nutritious meals
• Education: habits form at a young age. That is why we work with
local schools, education foundations and other community partners
to help prepare students for healthier, brighter futures.
During 2017, in addition to supporting partnerships and
programmes in the areas of health, hunger and education, we
continued to work with the environmental charity Earthwatch
(www.earthwatch.org) on a project to research sustainable stevia
farming. We also made corporate donations to The American Red
Cross to support relief efforts in areas of Texas ravaged by
Hurricane Harvey in August 2017, and the devastating earthquake
that hit Mexico City in September 2017.
Programmes and partnerships
We aim to work with local communities in the vicinity of our
facilities. Within our broader global framework, we empower
employees at each location to make their own decisions about
which projects they wish to support and what partnerships they
want to develop.
We regularly review our programme, and the partners and
projects we support.
• Our partners include registered charities, educational
institutions and non-governmental agencies that meet our
own high standards for delivering services and results
• Our plan and budget for community involvement are developed
and approved as part of our annual operating plan process
• Ongoing evaluation of our partners and projects examines their
reach, results and impact.
Healthy Eating, Happy Learning,
Shanghai, China
With one in four children in China over the age of seven
forecast to become overweight or obese by 20301, the
government and nutrition organisations are looking for
ways to address this challenge. In 2017, we partnered with
the Shanghai Nutrition
Society to launch the
‘Healthy Eating, Happy
Learning’ programme.
The programme in
summary
• Two-year programme
involving 1,000 students
aged between six and
nine in three schools
• Two schools benefit from healthier lunches, nutrition and
health education, and more physical activity, with the third
school acting as a ‘control’
• Parents and teachers learn about the importance of diet,
nutrition and maintaining an active lifestyle. To support
them, we hold family cooking lessons at our test kitchens
in Shanghai
• The health of all children involved is monitored regularly,
with progress compared to the ‘control’ school
• At the end of the two years, the programme’s
methodology and results will be assessed to see if it
could become a model to improve the lives of more
children, schools and families within China.
1 Peking University School of Public Health 2017.
Overview of the year
In the year ended 31 March 2018, cash community spend and
charitable donations were £479,000 (2017 – £660,000).
Cash community spend by area
Year end 31 March 2018
Education – 33%
Health – 32%
Hunger – 12%
Environment – 10%
Other – 13%
50 Tate & Lyle PLC Annual Report 2018
Community involvement highlights during the year
Health
We supported a number of programmes that helped
people of all ages understand the role that healthy eating,
nutrition, physical activity and mental wellness play in a
well-balanced lifestyle.
• We supported local community running clubs such as the
Staley Striders in Decatur, Illinois
• Employees at our Santa Rosa, Brazil site took part in a
project to restore and update the local Physiotherapy
Centre, AIDESA
• Through our sponsorship of the United Way in the US, we
helped to support local agencies like the Boys and Girls
Club whose ‘Triple Play’ programme teaches children the
importance of daily physical activity and good nutrition.
Employees from Santa Rosa, Brazil working to restore the municipal
Physiotherapy Centre for the local disabled community
Hunger
Making sure families across our communities have enough to
eat remains a key area of support. Over the last year:
• We supported students at Enders-Salk Elementary School
near our Commercial and Food Innovation Centre,
Chicago through the local district’s ‘Food 4 Thought’
programme. This provided a healthy breakfast to students
every morning so they could start the school day with the
energy to learn
• We supported Crisis for Christmas providing food and
shelter to homeless people in London, UK
• We sponsored the North Illinois Food Bank’s festive
holiday meal programme, with our employees helping
pack 30,000 food boxes for families in need over the
Christmas period.
A joint team from our Commercial and Food Innovation Centre, Chicago
and Sycamore, Illinois sites supporting a mobile food pantry organised by
the Northern Illinois Food Bank
Education
Helping communities towards healthier, more positive
futures calls for educational programmes that help
community members of all ages and levels of education.
• In the US, we provided STEM-based teaching grants to
classrooms in Decatur, Duluth, Lafayette, Loudon and
McIntosh. These grants gave students from elementary to
high school the chance to create, explore and connect with
science, technology and maths
• We funded a number of scholarships for college-bound
students in the US, Vietnam and South Africa. These
bursary programmes offered students the chance to
undertake college or university-level coursework that
counted towards a four-year degree.
Mathematics concepts come to life in Loudon County schools through our
annual STEM grants
Non-financial information regulation
Under sections 414CA and 414CB of the Companies Act 2006,
as amended by The Companies, Partnerships and Groups (Accounts
and Non-Financial Reporting) Regulations 2016, Tate & Lyle is
required to include in its Strategic Report, a non-financial
information statement. Information required by these Regulations is
included in Business Model (pages 18 and 19), Risks, Our People,
Business Conduct, Environment, Health and Safety and Community
Involvement reports from pages 38 to 51.
The Board approved the Strategic Report on pages 1 to 51
of this Annual Report on 23 May 2018.
By order of the Board
Claire-Marie O’Grady
Company Secretary
www.tateandlyle.com 51
Strategic ReportGovernanceFinancial StatementsUseful Information Board of Directors
Our Board
Dr Gerry Murphy
Chairman
Nick Hampton
Chief Executive
Paul Forman
Independent non-executive director
Lars Frederiksen
Douglas Hurt
Anne Minto OBE
Independent non-executive director
Senior Independent Director
Independent non-executive director
Imran Nawaz
Imran Nawaz
Chief Financial Officer
Chief Financial Officer
(from 1 August 2018)
(from 1 August 2018)
As announced on 17 April 2018, Imran
As announced on 17 April 2018, Imran
will join the Board and become the
will join the Board and become the
Chief Financial Officer with effect
Chief Financial Officer with effect
from 1 August 2018. Imran Nawaz
from 1 August 2018. Imran Nawaz
joins Tate & Lyle from Mondele-z
joins Tate & Lyle from Mondelēz
International where he has held the
International where he has held the
position of Senior Vice President
position of Senior Vice President
Finance Europe since 2014.
Finance Europe since 2014.
Dr Ajai Puri
Independent
non-executive director
Sybella Stanley
Independent
non-executive director
52
Tate & Lyle PLC Annual Report 2018
52 Tate & Lyle PLC Annual Report 2018
Nick Hampton
Chief Executive
Date appointed to Board: September 2014
Paul Forman
Non-executive director
Date appointed to Board: January 2015
Independent: No
Aged: 51
Nationality: British
Skills and expertise:
Nick brings a wealth of food industry
insights to the Board. His general
management, financial and operational
experience in senior management roles in
a major multinational food and beverage
business combined with his experience in
leading transformational projects provides
him with the skillset required to inspire and
lead the Group.
Current external commitments:
Non-executive director and Chairman of
the Audit Committee of Great Portland
Estates plc.
Previous roles:
Held a number of senior roles over a
20-year career at PepsiCo, including Senior
Vice President and Chief Financial Officer,
Europe and President, West Europe
Region and Senior Vice President
Commercial, Europe.
Independent: Yes
Aged: 53
Nationality: British
Board Committees
A
R
N
Skills and expertise:
Paul has wide experience in global
manufacturing, commercial, as well as
strategy consultancy and M&A advisory
services. He brings insight to the
commercialisation of innovation pipelines
and the implementation of business-to-
business customer and market-led
strategies in a large multinational
business-to-business context. His
experience as a CEO of a number of
global companies enables him to provide
valuable insights to the Board.
Current external commitments:
Chief Executive of Essentra plc.
Previous roles:
Group Chief Executive of Coats plc and Low
& Bonar PLC. Served as a non-executive
director at Brammer PLC.
Dr Gerry Murphy
Chairman and Chair of
Nominations Committee
Date appointed to Board: January 2017
Independent: Yes on appointment
Aged: 62
Nationality: Irish
Board Committees
N
Skills and expertise:
Gerry started his career in the food and
drinks sector and received his PhD in food
technology. He has held a number of chief
executive roles and has also been an
investor and independent director in a
number of international listed companies.
His significant business and board level
experience and a detailed understanding of
UK corporate governance requirements
enable him to provide the Board with
valuable leadership.
Current external commitments:
Chairman of The Blackstone Group’s
principal European entity
Chairman designate of Burberry Group plc.
Previous roles:
Senior Managing Director in Blackstone’s
Private Equity group (2008 to 2017). CEO of
Greencore Group plc, Exel plc, Carlton
Communications plc and most recently
Kingfisher plc (2003 to 2008). Held non-
executive directorships in Intertrust NV,
British American Tobacco plc, Invest
Europe, Merlin Entertainments plc, Reckitt
Benckiser plc, Abbey National plc and
Novar plc.
Board Committees
Certain responsibilities are delegated to
three Board Committees, details of
which are provided on pages 66 to 89.
A
R
N
Audit Committee
Remuneration Committee
Nominations Committee
www.tateandlyle.com 53
www.tateandlyle.com 53
Strategic ReportGovernanceFinancial StatementsUseful Information
Board of Directors continued
Lars Frederiksen
Non-executive director
Date appointed to Board: April 2016
Independent: Yes
Aged: 59
Nationality: Danish
Board Committees
R
N
Skills and expertise:
As the former CEO of a global speciality
food ingredients business, Lars led a
successful business transformation and his
insights will be invaluable to the Board as
Tate & Lyle continues to evolve. He brings
operational expertise and insights and an
understanding of how to attract and retain
talent in a global business.
Current external commitments:
Chairman of Matas A/S
Non-executive director of Falck A/S
Chairman of the Danish Committee for
Good Corporate Governance
Chairman of the Hedorf Foundation.
Previous roles:
CEO of Chr. Hansen Holding A/S from 2005
until retirement in March 2013, leading a
transformation of the business and a
successful listing on the Copenhagen stock
exchange during that period. Prior to
becoming CEO, held various management
positions at Chr. Hansen.
Douglas Hurt
Senior Independent Director and Chair
of the Audit Committee
Date appointed to Board: March 2010
Anne Minto OBE
Non-executive director and Chair of the
Remuneration Committee
Date appointed to Board: December 2012
Independent: Yes
Aged: 61
Nationality: British
Independent: Yes
Aged: 64
Nationality: British
Board Committees
Board Committees
A
N
A
R
N
Skills and expertise:
Douglas is a chartered accountant and has
extensive experience as a former finance
director of a global manufacturing and
business-to-business engineering group,
and also in senior management roles in the
US and Europe, which provides the Board
with valuable perspectives and insights into
financial and operational issues. In addition,
his understanding of the London investment
community and pension matters supports
the Board in its oversight and decision-
making roles.
Current external commitments:
Senior Independent Director and
chairman of the Audit Committee of
Vesuvius plc
Non-executive director of BSI Group
Senior Independent Director and
Chairman of the Audit Committee of
Countryside Properties PLC.
Previous roles:
Finance Director of IMI plc and held
a number of financial and operational
roles, including US and European
senior management positions,
at GlaxoSmithKline plc.
Skills and expertise:
Anne’s extensive career in general
management and human resources is
particularly useful to the Board when
considering succession planning, talent
management, executive remuneration and
other employee-related activities. She has a
detailed understanding of how to attract
and retain global talent and her roles on the
boards of companies listed in both London
and New York provide her with a detailed
understanding of global executive
remuneration practices and UK and US
remuneration governance requirements.
Current external commitments:
Non-executive director of ExlService
Holdings, Inc.
Chairman of the University of Aberdeen
Development Trust
Non-executive director of the Court of the
University of Aberdeen.
Previous roles:
Non-executive director and chairman of the
Remuneration Committee of Shire PLC
(until April 2018). Group Director of Human
Resources at Centrica plc from 2002 until
retirement in 2011. Prior to that, held senior
management roles at Shell UK and Smiths
Group plc and was Deputy Director-General
of the Engineering Employers’ Federation.
Board Committees
Certain responsibilities are delegated to
three Board Committees, details of
which are provided on pages 66 to 89.
A
R
N
Audit Committee
Remuneration Committee
Nominations Committee
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Dr Ajai Puri
Non-executive director and Chair of the
Research Advisory Group
Date appointed to Board: April 2012
Independent: Yes
Aged: 64
Nationality: Indian/American
Board Committees
R
N
Skills and expertise:
Ajai’s food science background and career
in research and development in global food
and beverage companies provides the
Board with detailed technical knowledge
and insights into market perceptions,
nutrition and food and regulatory trends
relevant to the speciality food ingredients
business. His experience in the Asia Pacific
region is of particular benefit as we
continue to focus on growth in emerging
markets. His work with regulatory bodies
and knowledge of nutrition, science and
food regulation provides him with the
skillset required to chair the Research
Advisory Group and to support the Board
and Tate & Lyle with valuable insights
into how leading-edge science and
technology can be successfully deployed
as part of the Group’s Food & Beverage
Solutions portfolio.
Current external commitments:
Non-executive director of Britannia
Industries Limited
Non-executive director of Firmenich SA
Non-executive director of Global Alliance
for Improved Nutrition (GAIN).
Previous roles:
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, held
various management positions with
The Coca-Cola Company, culminating
in Senior Vice President Technical,
The Minute Maid Company.
Sybella Stanley
Non-executive director
Date appointed to Board: April 2016
Gender diversity of Directors
At 23 May 2018
Independent: Yes
Aged: 56
Nationality: British
Board Committees
A
N
Skills and expertise:
Sybella has extensive commercial and
financial experience and brings a wealth of
knowledge about the London investment
community and substantial experience of
communicating with this and other
investment communities outside the UK.
Her long career in corporate finance and
M&A will be invaluable to the Board’s
consideration of strategic opportunities.
Current external commitments:
Director of Corporate Finance at RELX
Group plc
Non-executive director of The Merchants
Trust PLC
Member of the Department of Business,
Energy and Industrial Strategy’s
Industrial Development Advisory Board
Member of the Somerville College Oxford
Development Board.
Previous roles:
Originally qualified as a barrister and,
before joining RELX Group in 1997, was a
member of the M&A advisory team at
Citigroup and later Barings.
Male – 6
Female – 2
Directors’ nationalities
At 23 May 2018
British – 5 directors
American – 1 director
Irish – 1 director
Danish – 1 director
Tenure of non-executive
directors
At 23 May 2018
Less than 3 years – 2 directors
3 to 6 years – 2 directors
Over 6 years – 2 directors
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Chairman’s introduction to Corporate Governance
“A year in which we enhanced
the effectiveness of Board and
Committee oversight.”
Dr Gerry Murphy, Chairman
Building on our strong
governance culture
Dear shareholder
During the course of this year, we addressed the three key
development areas identified in our 2017 board effectiveness
review. Firstly, we reviewed the remits of the Audit and Corporate
Responsibility Committees to address any areas of potential
overlap. The outcome of this review is discussed in more detail
below. Secondly, we undertook a project to align management and
board reporting to minimise multiple reporting formats and to
improve the quality of information to the Board. Lastly, we allocated
more time in the Board calendar to focus on strategy. We reviewed
how our two business divisions and our Innovation and Commercial
Development (ICD) team are developing their organisational
capabilities to support our strategy and product development.
Review of the Corporate Responsibility (CR)
Committee
Our review of the remits of the Audit and CR Committees, and
the outcome of our Group-wide safety review, prompted us to
re-consider the role of the CR Committee.
The Board recognises the importance of the role that companies
play in society. We also note that developments in corporate
governance are placing greater emphasis on the way in which
companies and boards consider and report on how they discharge
that role. Against that backdrop, the Directors considered that it
would be appropriate for the Board, as a whole, to have greater
visibility of the Group’s corporate responsibility activities.
To that end, oversight of the main areas of the CR Committee’s
remit: including safety, product quality, and sustainability have
moved to the Board. Other topics will move to the Audit Committee.
The Board proposes to keep this revised Board remit under review
and does not rule out reinstating a corporate responsibility (or
similar) committee in the future.
review was positive. The main area identified for review in the
2019 financial year was succession planning for non-executive
directors. After a year in which the Board focused on the Chief
Executive transition and the appointment of a new Chief Financial
Officer, it is right that we should now turn our attention to succession
planning for these other director roles. This will be a major focus for
the Nominations Committee in the 2019 financial year.
More details of the Board’s effectiveness review and the areas
identified for further development can be found on page 61.
Priorities for the 2019 financial year
Our new Chief Executive has set out three key priorities to
accelerate business performance as described on page 14. The
Board’s focus in the 2019 financial year will be to support him as
he implements these programmes with particular emphasis on:
Performance of the Food & Beverage Solutions division
Strategic initiatives, including acquisition opportunities and
effective integration of any acquisitions made
Innovation pipeline
Reviewing talent management and our succession pipeline
The execution of ongoing programmes to strengthen our
customer engagement and business execution.
Shareholder engagement
Following the publication of our Annual Report 2017, I met with a
number of our larger shareholders and welcomed the opportunity
to hear and discuss their views on business performance and
governance matters. The Board values an open dialogue with
investors and I, and my fellow Directors, look forward to meeting
shareholders who are able to attend our Annual General Meeting
on 26 July 2018.
Board effectiveness
This year, our Board effectiveness review was externally facilitated
by Independent Audit. While there are areas in which the Board
can seek to enhance its effectiveness, overall the outcome of the
Gerry Murphy
Chairman
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Corporate Governance
Leadership
Our governance structure
The Group’s primary decision-making body is the Board. It is accountable to shareholders for the Group’s financial and operational
performance, and is responsible for setting the strategy and ensuring that risk is managed effectively. The Board maintains a
schedule of items which it is required to consider and approve. We review this schedule regularly and update it to reflect
developments in corporate governance and emerging practice.
As shown in the diagram below, the Board has delegated certain responsibilities to a number of Committees. The Board retains
overall accountability and the Committee Chairs are responsible for reporting back to the Board on the Committees’ activities.
Minutes of the Committees’ meetings are made available to all Directors on the web-based Board portal.
Accountable to shareholders for the Group’s
financial and operational performance
Sets the Group’s strategy
Oversees management’s implementation of
the strategy
The Board
Chaired by Dr Gerry Murphy
Monitors the operational and financial
performance of the Group
Sets the Group’s risk appetite
Ensures that appropriate risk management
systems and internal controls are in place
Sets the Group’s ethics, culture and agrees
the Group’s Values
Ensures good corporate governance
practices are in place.
Chief
Executive
Audit
Committee
Nominations
Committee
Remuneration
Committee
Chaired by Douglas Hurt
Oversees financial reporting, internal
Chaired by Dr Gerry Murphy
Makes recommendations to the
Chaired by Anne Minto
Recommends the Group’s
financial controls and risk
management systems, the risk
management process, the internal
audit function and the Group’s
relationship with the external
auditors.
Board regarding the structure, size,
composition and succession needs of
the Board and its Committees
Reviews the performance of the
executive directors. Oversees
succession planning for Directors
and senior management.
Remuneration Policy for executive
directors. Sets and monitors the
level and structure of remuneration
for the executive directors and other
senior executives
Sets the Chairman’s fee.
More on page 66
More on page 70
More on page 72
Executive Committee
Research Advisory Group
Nick Hampton appointed Chief Executive on 1 April 2018
Chaired by Javed Ahmed up until 1 April 2018
Recommends strategic and
operating plans to the Board
Assists the Chief Executive in
implementing the strategy
agreed by the Board
Monitors the performance of the
two business divisions and
global support functions
Identifies, evaluates, manages
and monitors risks facing
the Group.
Chaired by Dr Ajai Puri
Comprises external experts and
senior Tate & Lyle managers
Reviews the innovation pipeline
Provides insights into how
leading-edge science and
technology could enhance
the portfolio of the Group’s
Food & Beverage Solutions
business division.
The Executive Committee is supported by a number of operational committees, including the Environment, Health and Safety (EHS) Advisory Board,
Operations Committee, Capital Expenditure Committee, Cyber Security Committee, Business Continuity Committee, IS/IT Portfolio Review Committee and
the Group Intellectual Property Committee. Committees may also be established for a finite period to oversee key strategic or operational priorities.
57
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Corporate Governance continued
Key responsibilities of the Board
At the date of this Annual Report, the Board comprises the Chairman, one executive director and six non-executive directors.
Their responsibilities are summarised below. There is a clear division of responsibilities: the Chairman leads the Board and the
Chief Executive leads the business.
Chairman
Responsible for the effective operation,
leadership and governance of the Board
Chairs Board meetings, Nominations Committee meetings
and the Annual General Meeting
Sets the Board agenda with the Chief Executive and
Company Secretary
Facilitates active engagement by all Directors
Sets the style and tone of Board discussions
Ensures the Directors receive accurate, timely and
clear information.
Chief Executive
Responsible for proposing strategy to the Board
and delivering it
Runs the business
Communicates within the organisation the Board’s
expectations with regard to culture, Values and behaviours
Ensures the Board is aware of current business issues.
Chief Financial Officer1
Responsible for the Group’s financial affairs
Contributes to the management of the Group’s business
Supports the Chief Executive with the development and
implementation of the strategy.
Non-executive directors
Responsible for overseeing the delivery of the
strategy within the risk appetite set by the Board
Advise and constructively challenge the executive directors.
Senior Independent Director
Responsible for ensuring that the Chairman’s
performance is evaluated
Acts as a sounding board for the Chairman and supports him
in the delivery of his objectives
Serves as an intermediary with the Chairman for other
Directors if necessary
Maintains a comprehensive understanding of the major issues
of shareholders and is available if shareholders have any
concerns that they have been unable to resolve through the
normal channels.
Company Secretary
Responsible for maintaining the governance and
listing rules compliance framework
Supports the Chairman, Chief Executive and Committee Chairs
in setting agenda items for Board and Committee meetings
Advises the Board on developments in corporate governance,
legislation and regulation
Assists the Chairman and the Chief Executive in ensuring
that the Directors are provided with relevant information in
a timely manner
Organises inductions for new Directors and ongoing training
for all directors.
1 Upon the appointment of Nick Hampton as Chief Executive effective 1 April 2018, the position of Chief Financial Officer has been vacant. Imran Nawaz will take up the
role of Chief Financial Officer with effect from 1 August 2018. The responsibilities of the Chief Financial Officer during this interregnum have mainly remained with
Nick Hampton with some delegated to the Group VP, Finance and Control.
Compliance with the Code
The UK Corporate Governance Code (the Code) issued by the Financial Reporting Council in April 2016 is the standard against which
we are required to measure ourselves for the year ended 31 March 2018. Throughout the year, the Company has applied the principles
and fully complied with the Code.
The Code can be found at www.frc.org.uk.
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Board activity during the year ended 31 March 2018
The Board holds six scheduled meetings each year at Group locations and an off-site meeting to discuss strategy. In the few instances
where a Director is unable to attend a meeting, he or she generally provides comments in advance to the Chairman. This year’s
scheduled meetings were held in London at the Group’s headquarters, at our plant in Koog, the Netherlands and at our Commercial
and Food Innovation Centre in Chicago, USA.
Strategy
• Undertook deep dives into each of our
Primary Products and Food & Beverage
Solutions divisions, considered the key
growth drivers, markets and customers
in each
• Reviewed the priorities identified for ICD
in the 2019 financial year
• Considered a presentation on how
consumer behaviour is changing and
impacting the purchasing decisions of
Tate & Lyle’s customers
• Reviewed the Group’s strategic plan.
Financial
• Approved the payment of the interim dividend and recommended payment
of the final dividend
• Considered and agreed treasury and tax matters
• Approved the tax strategy
• Approved the Annual Operating Plan for the year ending 31 March 2019
• Approved the Annual Report 2017, the half- and full-year results and
associated announcements
• Regular review of financial performance and forecasts.
Operational/commercial
• Reviewed the conclusions of the external review of safety
Internal control and risk management
• Considered and agreed the Group’s risk appetite and
across the Group
principal risks
• Reviewed the content of, and implementation road map
for, the Group’s new EHS strategy and received and
considered regular progress updates
• Approved capital expenditure projects
• Reviewed the development of the innovation pipeline
and considered the technical competencies required for
our ICD unit.
• Assessed the effectiveness of our internal controls and
risk management systems
• Agreed the Modern Slavery Act statement available on
the Company’s website
• Agreed the Viability statement as disclosed in the Annual
Report 2017
• Approved the adoption of a going concern basis of
accounting in preparing the half- and full-year results.
Governance and stakeholders
• Considered the output and recommendations from the Board
effectiveness review
• Considered and approved the disbandment of the Corporate
Responsibility Committee and the reallocation of its remit to the
Board and the Audit Committee
• Discussed feedback from institutional shareholders and analysts
• Considered the implications of the FRC’s draft revised Corporate
Governance Code and responded to the FRC’s consultation
• Reviewed and approved Directors’ conflicts of interest (if any).
Leadership and employees
• Approved the appointment of Nick Hampton as
Chief Executive and Imran Nawaz as Chief
Financial Officer
• Endorsed the Chief Executive’s appointment of
Melissa Law and Andrew Taylor to the Group
Executive Committee
• Held Chairman-led Town Halls at our global
Shared Services Centre in Poland and at our
plant in Koog, the Netherlands
• Reviewed diversity, talent management and
bench strength within the organisation.
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Corporate Governance continued
Directors’ attendance at Board
and Committee Meetings during the year
Directors as at 31 March 2018
Dr Gerry Murphy
Javed Ahmed2
Nick Hampton
Liz Airey3
Paul Forman
Lars Frederiksen4
Douglas Hurt
Jeanne Johns5
Anne Minto
Dr Ajai Puri
Sybella Stanley
Number of meetings attended
Audit
Nominations
Corporate
Responsibility
Board
7/7
7/7
7/7
1/2
7/7
6/7
7/7
3/4
7/7
7/7
7/7
Committee
5/51
n/a
n/a
2/2
5/5
n/a
5/5
n/a
5/5
n/a
5/5
Committee
3/3
0/0
n/a
0/1
3/3
2/3
3/3
1/1
3/3
3/3
3/3
Committee
3/3
n/a
n/a
n/a
n/a
3/3
3/3
2/2
n/a
3/3
n/a
Remuneration
Committee
7/71
n/a
n/a
n/a
7/7
6/7
n/a
2/3
7/7
5/7
n/a
1 Although not a Committee member, attended the Committee meetings by invitation.
2 Resigned as a Director with effect from 1 April 2018.
3 Resigned as a Director with effect from 27 July 2017 and unable to attend one meeting due to a pre-existing commitment.
4 Unable to attend one meeting due to a pre-existing commitment.
5 Resigned as a Director with effect from 31 October 2017.
Effectiveness
The Board regularly reviews the balance of experience, skills,
gender and diversity of thinking styles around the boardroom table
to ensure that the composition of the Board and its Committees is
appropriate for the Group as it continues to evolve and implement
the strategy. The Board and its Committees carry out a formal
effectiveness review process once a year which provides new
insights into the operation of the Board and areas for development
or particular focus.
Board composition
At the date of this Annual Report, the Board comprised eight
Directors with deep knowledge and experience in diverse business
sectors within global markets: the Chairman, who has no executive
responsibilities; one executive director; and six non-executive
directors. The names, skills and experience of the Directors are set
out on pages 53 to 55.
Appointment to the Board
The Nominations Committee has responsibility for the appointment
of non-executive and executive directors and recommends new
appointments to the Board. During the year, the Nominations
Committee carried out succession planning in respect of the roles
of Chief Executive and Chief Financial Officer. The Board approved
the Nominations Committee’s recommendation that Nick Hampton
be appointed Chief Executive with effect from 1 April 2018 and that
Imran Nawaz be appointed as Chief Financial Officer with effect
from 1 August 2018. Further details about these appointment
processes are set out in the Nominations Committee report on
pages 70 and 71.
Re-election of Directors
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 Nick Hampton, do not have service contracts.
Each Director goes through a formal performance review process
as part of the annual Board effectiveness review. All Directors
completed this process during the year and, in line with the Code,
Douglas Hurt and Dr Ajai Puri, who have both served for over
six years, have been subject to a particularly rigorous review.
Independence
The Code provides that the Board should state its reasons if it
determines that a Director is independent notwithstanding the
existence of relationships or circumstances which may appear
relevant to its determination, including if the Director has served
on the Board for more than nine years from the date of his or her
first election.
With the exception of Dr Gerry Murphy, who, as Chairman, is
presumed under the Code not to be independent, the Board
considers all the non-executive directors to be independent.
Directors’ interests
During the year, no Directors had a material interest in any
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 89.
Directors’ induction programme
In those years in which new Directors join the Board, the
Company Secretary works with each Director to tailor an induction
programme which covers strategy, operations (including safety
and environmental performance), risk management and
internal control.
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2018 Board effectiveness review
The Board’s review of its effectiveness was facilitated by Independent Audit Limited, using their online assessment service Thinking
Board®. Their facilitation helped ensure that our review was rigorous and covered the important influences on the Board’s effectiveness.
As independent advisors, they discussed with us the focus and coverage of our Board and Committee questionnaires, administered the
questionnaires on a confidential basis, analysed the results independently from the Board and management, and presented the findings
and their suggestions in a paper which was discussed with the Chairman and provided to all Directors. Independent Audit also met with
the Board to share its views on the issues raised through our self-assessment.
The main recommendations identified by the review and the actions agreed by the Board include:
Issue/recommendation
Action
Review Board and Committee
composition
This will be a focus for the Nominations Committee in the 2019 financial year.
Introduce non-executive
directors-only sessions
Following Board meetings, short sessions for non-executive directors-only have been
introduced. Non-executive directors also held two non-executive-only dinners during
the year.
Review the culture of the
organisation
As we transition to our new Chief Executive and to a more purpose-led organisation,
the Board has scheduled a review of the corporate culture in the 2019 financial year.
Review the Group’s approach to
reward in order to ensure it
continues to align with the
Group’s strategy
Continue Board overseas visits
Review Board information
This item will be considered by the Remuneration Committee in the 2019 financial year.
We propose to continue the individual non-executive director site visit programme
whereby each non-executive director visits one Group site each year, as non-executive
directors find this to be a valuable and informative experience. The Board will continue
to host one meeting a year at the Group’s main US site, the global Commercial and
Food Innovation Centre in Chicago, with visits to other locations in alternate years.
During the year, we engaged a third-party provider to assist in creating a corporate
dashboard, which provides the Board with an ‘at a glance’ summary of the Group’s
financial and non-financial performance. In addition, we reviewed and revised the
content and presentation of Board materials, in particular to align management and
Board information. We have found that these improvements in our Board materials
facilitate a better Board discussion.
Review of the Committees
In addition to the Board effectiveness review, the chairs of the Audit
and Remuneration Committees led the review of their Committee’s
effectiveness with Independent Audit as facilitator. These reviews
confirmed that all Committees continue to provide effective
support to the Board. Areas for further focus are noted in the
individual Committee reports.
Review of individual Directors
Dr Gerry Murphy led performance reviews of the non-executive
directors, while the Nominations Committee reviewed the
performance of the Chief Executive, Chief Financial Officer and the
other members of the Executive Committee, in line with its terms
of reference. These reviews confirmed that each Director
continues to make an effective contribution to the Board’s work
and is well-prepared and informed about issues they needed to
consider. In each case, their commitment remains strong.
Professional development and independent site
visit programme
Directors receive ongoing training and updates on relevant issues
as appropriate, taking into account their individual qualifications
and experience. The Company Secretary helps Directors undertake
any other professional development they consider necessary to
assist them in carrying out their duties.
During the year, in addition to the Board’s visit to the Commercial
and Food Innovation Centre in Chicago, USA, and to our plant in
Koog, the Netherlands, the Chairman and/or various of the non-
executive directors visited six of the Group’s sites in Europe, three
of the Group’s sites in the US, three of the Group’s sites in Asia
and two of the Group’s sites in Latin America as part of their
independent site visit programme. These visits provide Directors
with the opportunity to interact with local management and to gain
in-depth knowledge about the opportunities and challenges for the
Group’s operations across the world.
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Accountability
The Board is responsible for determining the nature and extent of
the principal risks it is willing to take in achieving the Group’s
strategic objectives and for maintaining sound risk management
and internal control systems.
Risk management and internal control
A formal process is in place which aims to identify and evaluate
risks and how they are managed, further details of which are set
out on pages 38 and 39.
The objective of the internal control system is to protect the
Group’s assets and reputation and to ensure the reliability of
financial information for both internal use and external publication.
The systems of internal control and risk management cannot
eliminate the risk of failure to achieve business objectives and can
only provide reasonable, not absolute, assurance against material
misstatement or loss.
An overview of the Group’s internal control system is set out on
page 63 with details of those people or functions responsible for
managing or monitoring risks set out on page 64.
2018 review of the effectiveness of the system of
internal control
The Board monitors the effectiveness of the Group’s systems of
internal control and risk management throughout the year. Once a
year, the Board, supported by the Audit Committee, conducts its
own review of the effectiveness of the systems of risk management
and internal control. As last year, the 2018 review was facilitated by
Group Audit and Assurance 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
Committee discussing the results of the review at their meetings in
March and May 2018. The Board then discussed the output at its
meeting in May 2018.
The 2018 review covered financial, operational and compliance
controls, Values and behaviours, and the risk management
process, and included questionnaires and representation letters
completed by management. Group Audit and Assurance monitored
and selectively checked the results of the 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 the Board
as appropriate.
The Board considers that none of the areas identified for
improvement constituted a significant failing or weakness.
Corporate Governance continued
Advice and support
All Directors have access to the advice and services of the
Company Secretary, who is responsible for ensuring that the
Board follows due process, and that the Company complies with
applicable rules and regulations.
There is also a formal procedure whereby Directors can
obtain independent professional advice, if necessary, at the
Company’s expense.
Directors’ conflicts of interest
Directors have a statutory duty to avoid situations in which they
may have interests that conflict with those of the Company, unless
that conflict is first authorised by the Board. As permitted under
the Companies Act 2006, the Company’s Articles of Association
allow Directors to authorise conflicts of interest and the Board has
an established policy and set of procedures for managing and,
where appropriate, authorising, actual or potential conflicts
of interest.
The key elements of those procedures are as follows:
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, for instance through the agreement and
implementation of guidelines and protective measures regarding
the ongoing management of any situational conflict
Directors are required to declare other situations which could
result in a potential conflict of interest
Any potential conflicts of interest in relation to proposed
Directors are considered by the Board prior to their appointment
The Board reviews Directors’ actual or potential conflicts of
interest at least annually.
During the year, the Board assessed and approved potential
conflicts, together with guidelines and protective measures
as appropriate.
Directors’ indemnities and insurance cover
As at the date of this Annual Report, 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
and 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 our registered office during
business hours on any weekday except UK public holidays.
Equivalent indemnities remain in force for Liz Airey, Jeanne Johns
and Javed Ahmed who ceased to be Directors on 27 July 2017,
31 October 2017 and 1 April 2018 respectively.
The Company also maintains Directors’ and officers’ liability
insurance cover, and reviews the level of cover each year.
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Key features of
the internal
control system
The system has four broad areas
Risk assessment
• Risk assessments are undertaken as part of
‘business as usual’ as well as through a more
formalised Enterprise Risk Management process.
Tone from the top and business
environment controls
• The Values framework (see page 42)
• The Group policies framework
• Business performance management processes,
covering planning, budgeting and performance
• Schedule of matters reserved to the Board and
terms of reference for Board Committees
• A clear organisational structure with responsibility,
accountability and limits of authority clearly defined
for employees
• Segregation of duties of employees.
Information and communication
controls
• Board and Executive Committee reporting
framework
• Communication protocols for external
communications
• Whistleblowing process.
Monitoring controls
• Controls monitoring by dedicated teams covering,
for instance, finance, safety, product quality,
intellectual property and cyber security
• Framework of reviews by appropriately qualified
people.
Financial reporting internal control system
This system covers the financial reporting process and the Group’s
process for preparing consolidated accounts. It includes policies
and procedures which require:
The maintenance of records that, in reasonable detail,
accurately and fairly reflect transactions including the
acquisition and disposal of assets
Reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in
accordance with International Financial Reporting Standards
Reasonable assurance regarding the prevention or timely
detection of unauthorised use of the Group’s assets.
We also have specific disclosure controls and procedures around
the approval of the Group’s financial statements. Twice a year,
representatives from the business units certify that they have
complied with the minimum control standards and 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.
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
Committee, is designed to enable employees, contractors,
customers, suppliers and other stakeholders to raise concerns
confidentially about conduct they consider contrary to the Group’s
Values. It may include, for example, unsafe or unethical practices,
or criminal offences.
The Speak Up programme provides a number of ways to raise
concerns including a telephone reporting line, email, and a web-
based reporting facility. These multilingual communication
channels are operated by independent service providers who
submit reports to the Speak Up Committee for investigation
as necessary.
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. The
Audit Committee received analysis of all reports submitted via the
Speak Up programme during the year.
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Corporate Governance continued
Internal control system
Body
Responsibilities
The Board
Determines the level of risk that it is prepared to accept in the business (risk appetite)
Agrees the Group’s principal risks for disclosure in the Annual Report
Oversees the strategies for managing principal risks.
Audit and Corporate
Responsibility
Committees*
Review aspects of the risk management and internal control systems for risks within its remit and
report to the Board
Discuss regular reports from the VP, Group Audit and Assurance (internal audit)
Carry out a formal review of the effectiveness of the internal control and risk management systems
and report to the Board on the output of that review at least once a year (Audit Committee).
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
Manages risk and ensures that mitigation is operated across the business which is appropriate and in
accordance with the accountability framework
Has primary responsibility for compliance with Group policies, our Values and legal requirements
Within certain functions, notably safety and product quality, separate assurance teams oversee the
effective operation of controls.
Employees
Manage risks within their predefined accountabilities
Are trained on, for example, safety, cyber security, competition law and anti-bribery and corruption to
increase their awareness of risks (training may be tailored and/or mandatory).
Group risk manager
Risk management
committees
Works with executive and line management to help identify, measure, mitigate, monitor and report
principal risks.
Review certain risks and controls and monitor initiatives to strengthen controls
Comprise senior management and functional specialists
Examples include the Cyber Security Steering Committee which considers cyber security risks, and
the regional Control Environment Councils which consider regional financial risks and controls.
Global Audit
and Assurance
(internal audit)
Provides objective assessment of the appropriateness and effectiveness of the Group’s internal
control systems to the Audit Committee (to the Corporate Responsibility Committee when in place)
and to the Board
Has the authority to review any relevant aspect of the business and a duty to report on any
material weaknesses
Develops and works to a risk-based internal audit plan which is approved by the Audit Committee and
which is regularly updated.
External specialists
Commissioned by the Board from time to time to supplement internal processes as appropriate.
* The Corporate Responsibility Committee was dissolved during the year. For more information see page 56.
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Annual General Meeting
The AGM provides all shareholders with the opportunity to
question the Board on matters put to the meeting, including this
Annual Report. Shareholders who attended last year’s AGM
received a presentation from the Chief Executive on the Group’s
activities and performance.
The 2018 AGM will be held at Glaziers Hall in London on Thursday
26 July 2018 at 10.00 am. Full details are set out in the Notice of
AGM. Resolutions are decided by means of a poll and the votes
received in respect of each resolution, together with the number
of abstentions, are announced through a regulatory information
service and published on the Company’s website. Shareholders
can choose to receive shareholder documentation, including the
Annual Report, electronically or in paper format, and may submit
proxy votes and any questions either electronically or by post.
Investor calendar
Set out below is a summary of our major investor activity
during the year.
April 2017
• Remuneration
Committee Chairman
consultation programme.
May 2017
• Full-year results issued
• Investor roadshow
meetings in the UK.
June 2017
• Investor roadshow
meetings in the UK
and US
July 2017
• Trading statement issued
• Annual General Meeting
in UK.
• Investor conference in
France
• Annual Report published.
September 2017
• Investor conference
in UK.
November 2017
• Half-year results issued
• Investor roadshow
meetings in the UK
and US
• Investor conferences in
UK, France and US
• Chairman meeting with
investors.
December 2017
• North American investor
group meeting in UK
• Investor conference
in UK.
February 2018
• Trading statement issued
• Investor meetings in UK.
Engagement with shareholders
and others
We are committed to maintaining an open dialogue with
shareholders, debt investors and potential investors and recognise
the importance of that relationship in the governance process.
We have a focused investor relations programme that aims to help
existing and potential investors understand the Group. We provide
feedback from the investment community to all Directors regularly
to ensure they understand the views expressed by major investors.
Institutional investors
The Chief Executive, Chief Financial Officer and VP, Investor
and Media Relations maintain a programme of meetings with
institutional shareholders from the UK, Europe, North America
and Asia.
During the year, Dr Gerry Murphy held meetings with a number
of the Company’s larger institutional shareholders. In addition,
following the announcement of the appointment of Nick Hampton
as Chief Executive in January 2018, a number of larger institutional
shareholders were offered meetings with Dr Gerry Murphy,
although no investors required meetings. Anne Minto, Chair of the
Remuneration Committee, offered meetings to the Company’s
principal investors in relation to the Remuneration Policy renewal
(see page 73 for more information). All Directors received periodic
updates on investor communication activities.
Analysts
As well as the full-year and half-year results presentations to
investors and analysts, we host conference calls after each trading
update. We publish any presentations, together with the associated
announcements, on the Company’s website and we also make any
audio recordings available for a short period after each event. The
Chief Financial Officer and VP, Investor and Media Relations also
meet regularly with analysts.
Independent feedback on our investor relations
programme
Each year, an external investor relations advisor undertakes a
comprehensive review of investor perceptions of the Group,
management, strategy and communications. The output from
this review was presented to the Board in November 2017 and
actions taken forward by management. Recommendations
included broadening discussion of the drivers of North American
performance in the Food & Beverage Solutions division, and a
re-focusing of the Group’s investor targeting programme to
focus on large UK active underweight investors, using
management selectively.
Other capital providers
The Chief Financial Officer, Group Treasurer and VP, Investor
and Media Relations regularly meet with our committed lending
banks and bond holders and ratings agencies (Standard & Poor’s
and Moody’s).
Private (retail) shareholders
We encourage private shareholders to provide feedback to the
Board via the Company Secretary. We also include a questions
card with the AGM documentation sent to shareholders so that
those who cannot attend the meeting have the opportunity to
ask questions.
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Audit Committee Report
“This year, we oversaw the tender process
to appoint new external auditors and an
external review of the effectiveness of the
Group Audit and Assurance function.”
Douglas Hurt, Chair of the
Audit Committee
Dear shareholder
As Audit Committee Chair, I am pleased to present the
Committee’s report for the year.
Committee governance
In addition to our usual matters, including the financial results for
the full year and half year, applicable accounting policies and going
concern assumptions, we continued with our practice of looking
in depth at certain aspects of the control environment. These
included an impact assessment of new accounting standards, in
particular IFRS 16, a review of the impact of recent US tax reform
on the Group and a review of our Group Treasury function. Some
members of the Committee also visited the Global Shared Services
Centre in Łódz, Poland. Finance and operational leaders attended
the Committee meetings at which these detailed reviews
were held.
As disclosed previously, the competitive external audit tender
process took place during the year resulting in a recommendation by
the Committee to the Board to appoint Ernst & Young LLP (EY) as
external auditors. This recommendation was approved, and we
announced our proposal to appoint EY as external auditors to the
market on 3 August 2017. A resolution to appoint EY for the financial
year commencing 1 April 2018 will be put to shareholders at the
AGM on 26 July 2018. Details of the tender process can be found
on page 69.
On behalf of the Board, the Audit Committee would like to thank
PwC for their significant contribution and support to Tate & Lyle
over the years. We would also like to thank each firm that
participated in the tender process.
During the year, the effectiveness of the Group Audit and Assurance
(internal audit) function was assessed by Grant Thornton. The review
concluded that the function continues to operate effectively. Further
details of this assessment are set out on page 69.
As explained in the Chairman’s corporate governance statement
on page 56, the Corporate Responsibility Committee was dissolved
during the year. As a result, the remit of the Audit Committee will
now include ethics and compliance, privacy law compliance, cyber
and IS/IT controls. In addition, we will maintain our programme of
in-depth review of the control environment.
I look forward to meeting you at our forthcoming AGM.
Douglas Hurt
Chair of the Audit Committee
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Responsibilities
The Committee assists the Board by overseeing financial reporting,
internal controls, the risk management process, the internal audit
function (Group Audit and Assurance) and our relationship with the
external auditors. Further details of its responsibilities are in the
Committee’s terms of reference, on the Company’s website,
www.tateandlyle.com.
Composition
The Committee currently comprises of four independent Directors.
Liz Airey was also a member of the Committee up until her
resignation from the Board on 27 July 2017.
The Code stipulates that:
(i)
the Committee as a whole shall have competence relevant to the
sector in which the Company operates. The Committee considered
that it does, as a whole, have extensive experience of global
manufacturing and supply organisations, and of business-to-
business groups, some experience of commercialisation of
innovation pipelines and a wealth of knowledge and understanding
of the London investment community and governance matters. It
continues to strengthen the competencies of its members through
ongoing development programmes and updates.
(ii) at least one Committee member should have recent and relevant
financial experience. Douglas Hurt met this requirement as he was
Finance Director at IMI plc and is a Fellow of the Institute of
Chartered Accountants in England and Wales.
The Company Secretary is the secretary to the Committee.
Meetings during the year
Meetings are generally scheduled in line with key times in the
Group’s financial reporting calendar. The Committee held five
scheduled meetings during the year. Attendance during the
year is set out on page 60.
The Committee has also met once since the end of the financial
year and prior to the signing of this Annual Report.
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 and
attend each meeting. The Chairman of the Board and Chief Executive
are also invited to and attend Committee meetings. In addition, senior
finance and operational leaders attend and present to the Committee
on an ad hoc basis, depending on the issues being discussed.
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Effectiveness
The review of the Committee’s effectiveness was facilitated
externally by Independent Audit. The output was discussed by the
Committee. This concluded that the Committee continued to
operate effectively and identified a number of areas to focus on
next year which includes the risk management process, how the
Group has implemented a three lines of defence model and
effectiveness of the external auditors.
Work undertaken during the year
The Committee maintains a calendar of items for consideration at
each meeting and reviews and updates it regularly. As well as the
work referred to above, the Committee focused on four main
areas: financial reporting; oversight of the external auditors;
oversight of the internal audit function; and internal control and
risk management.
Financial reporting
At each of its meetings, the Audit Committee reviewed and
constructively challenged the accounting judgements and
disclosures set out in the papers prepared by management
and determined, with the help of the external auditors, the
appropriateness of these. The significant issues considered by
the Committee in relation to this year’s financial statements
are listed on page 68.
The Committee also considered management’s review of reported
and adjusted earnings, reviewed and challenged the impairment
assessments performed during the year, and satisfied itself that
significant one-off items of income and expense had been correctly
classified and appropriately disclosed. Papers on the Group’s
existing and emerging litigation risks were also considered.
External auditors
PwC (or its predecessor firms) have been the Group’s auditors
since 1989 (formally appointed at the Company’s annual general
meeting on 24 January 1990). As disclosed previously, the financial
year 2018 will be the last year in which PwC will perform the
Group’s audit.
In accordance with the Competition and Markets Authority
Order and the Committee’s terms of reference, the Committee
agreed the scope and the Chairman, on behalf of the Committee,
negotiated and agreed the fee and scope of the statutory audit for
the year ended 31 March 2018.
Safeguarding the auditors’ independence
The Committee operates a policy to safeguard the objectivity and
independence of the external auditors. This policy sets out certain
disclosure requirements by the external auditors to the
Committee; restrictions on the employment of the external
auditors’ former employees; 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.
Provision of non-audit services
The policy also sets out the circumstances in which the external
auditors may be permitted to undertake non-audit services and
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 each year and considers
quarterly reports which set out the ongoing non-audit services
provided by the auditors and the fees incurred. Under our policy
on non-audit services, which is in accordance with the Revised
Ethical Standard 2016 published by the Financial Reporting
Council, the Chief Financial Officer has authority to approve
the permitted services up to £10,000 and the Chair of the
Committee has authority to approve up to £100,000. In all other
cases, the Committee must approve any proposed, permitted,
non-audit services.
A breakdown of the fees paid to the external auditors in respect of
audit- and non-audit related work is included in Note 9.
The total amount paid in respect of the Group audit and audit of
subsidiaries was £2.3 million, and £131,000 was paid in respect of
non-audit services. Fees paid in respect of non-audit services
therefore comprised 6% of the total fees paid to PwC.
Effectiveness of the external auditors
Following the conclusion of the audit for the year ended 31 March
2017, the Committee conducted an internal review of the
effectiveness of the external auditors. 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 and divisional levels. It also considered:
The most recent report by the Financial Reporting Council
(FRC) in May 2017 on the audit quality inspection of PwC
The FRC’s guidance on evaluating audit quality which
suggested reviewing the external auditors’ competence in the
following areas:
– making appropriate judgements about materiality
– identifying and focusing on the areas of greatest risk
– designing and carrying out effective audit procedures
– understanding and interpreting the evidence they obtain
– making reliable evaluations of that evidence
– reporting clearly and honestly.
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 recommendations where we could improve
processes including:
Planning and communication for the US component of the audit
Clearer transparency and better communication regarding the
financial impact of any changes of scope
Smooth transition to the new auditor.
These were implemented and incorporated into the criteria set for
the audit for the current year. The Committee discussed progress
against these criteria regularly.
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Audit Committee Report continued
Significant accounting matters considered by the Committee
Area
Background
Committee’s activities and conclusion
Commodity risk We use commodity contracts to manage and
hedge our corn positions in the US.
The valuations of the corn book and the
co-products produced as part of the corn wet
milling process, which are both underpinned
by a number of judgements, have a material
impact on the reported results of the Group.
The Committee received regular updates on the key commodity risks
and the risk management framework in place to mitigate these risks.
The Committee also considered the work performed by the external
auditors before concluding that the judgements made in determining
the valuations of the corn and co-products positions were appropriate.
This will continue to be a key area of focus for the Committee.
Mr Hurt and Ms Stanley each visited our plant in Decatur as part of
their individual site visits and held meetings with senior managers
to gain a deeper understanding of the operations and management
of Commodities.
Taxation
We operate and pay taxes in a number
of jurisdictions, which requires the
interpretation of complex tax law.
As such, we make provision for potential
direct tax exposures with local tax authorities
and reassess this as necessary at the half-
year and year-end. Our assessment is
underpinned by a range of judgements from
tax professionals and external advisors.
The Committee reviewed the key judgements made in estimating the
Group’s tax charge along with the key disclosures, including a statement
of tax principles, set out on page 34 and in Note 12. The Committee was
satisfied that the judgements made in estimating the Group’s tax charge
were reasonable, and that the disclosures were appropriate.
The key factors likely to affect the future tax charge including recent
US Tax reforms, as well as the key risks and uncertainties, were
considered and the Committee agreed the disclosure of these factors
in this Annual Report.
The Committee reviewed the tax strategy statement during the year and
recommended it for approval by the Board.
The Committee considered the appropriateness of tax provisions at the
balance sheet date, including amounts provided in respect of Group
financing structures, US tax risks and global transfer pricing risks.
The Committee concluded that the measurement and disclosure of
these provisions were appropriate.
Retirement
obligations
We have significant retirement benefit
obligations in the UK and the US, including
unfunded retirement medical plans in the US.
A number of judgements have to be made
when calculating the fair value of the Group’s
legacy retirement obligations.
The Committee discussed and constructively challenged the
assumptions proposed and methodologies used by management and
considered reports from the external auditors before agreeing that the
assumptions were reasonable. The Committee also considered the
appropriateness of the treatment and disclosure of the additional
contribution to the US pension schemes.
Impairments
We test all goodwill for impairment annually,
and, additionally, test all assets where there
has been a previous impairment or where an
indicator of potential impairment is
considered to exist.
Capitalisation of
development
cost
Our R&D team develops and delivers
innovative new products. The innovation
pipeline is managed through a disciplined
process and the development costs are
capitalised at the appropriate stage in
accordance with the Group’s policy.
The Committee reviewed the annual goodwill impairment assessment.
The future performance of the underlying businesses, including the
discount rates used and forecast assumptions and sensitivities, were
discussed and constructively challenged. The Committee concluded
that the assumptions were acceptable, and the conclusion that no
impairments existed alongside the appropriate disclosure of sensitivities,
were appropriate.
The Committee challenged the appropriateness of the Group’s
capitalisation policy for development costs and reviewed management’s
conclusion on the policy which included (1) determining the appropriate
point to commence capitalisation which included technical, commercial
and financial criteria, (2) the governance and process to ensure that
the policy was appropriately and consistently applied and (3) the
methodology adopted to capture and allocate development costs.
The Committee concluded that the Group policy remained appropriate.
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External audit tender
As anticipated last year, we completed a tender process to appoint
a new external auditor for the financial year ending 31 March 2019.
This coincides with the end of the current PwC audit engagement
partner’s (John Waters) five-year term at the conclusion of the
audit for the year ended 31 March 2018.
The Audit Committee led the tender process, including agreeing the
timetable, the tender shortlist, the objectives and the key selection
criteria it would use in determining its recommendation to the Board.
The key selection criteria included quality of the proposed team
and firm, technical experience within the industry in which we
operate and geographical coverage. The audit tender process
was coordinated by a sub-committee comprising the Chair of the
Audit Committee; the Chief Financial Officer; the VP, Group Audit
and Assurance; Group VP, Finance and Control; and was supported
by Group Procurement.
An initial invitation to participate in the tender process was provided
to a number of auditing firms, including both ‘Big 4’ and medium-
sized firms. Subsequent to this invitation, one firm outside the Big 4
held a series of meetings with management and delivered a
capability assessment against the Group’s audit tender criteria.
However, it was determined that this firm did not possess the depth
of appropriately skilled US resources to deliver an effective audit.
A notification of audit tender was sent out subsequently setting out
high-level key dates and key facts, and a timeline for lead partner
selection early in the process, to ensure that the right person was
leading the process for each firm, considered crucial to ensure
that each firm submitted their most competitive bid. The lead
partner for each audit firm that passed the initial assessment was
subsequently selected by the Chair of the Audit Committee and the
Chief Financial Officer. The Chief Executive was also invited to meet
the preferred audit partner from each firm.
The tender process included provision of a data room, meetings
with management and finance team members. Each participant
was also asked to consider and present responses on a number
of key accounting matters presented during the tender process.
All the steps culminated in each of the participants making a final
presentation to the Audit Committee members, based on a prior
written submission. The process captured and considered the
views of other stakeholders, for example the Head of Group Tax
and other senior finance leaders.
At the conclusion of the process, the Audit Committee recommended
to the Board that Ernst & Young LLP (EY) be appointed as external
auditors with effect from the financial year ending on 31 March 2019.
The Audit Committee believed that both EY and one other firm,
KPMG LLP, were capable of performing a high-quality global
audit, but had a reasoned preference for EY, based on the agreed
selection criteria.
The Board accepted the Audit Committee’s recommendation
to appoint EY as external auditors and a resolution for the
appointment of EY will be put to shareholders at the 2018 AGM.
The Audit Committee confirms this recommendation is free from
influence by third parties and that no restrictive contractual clause
has been imposed on the Company. PwC will cease to hold office
with effect from the conclusion of the 2018 AGM, having completed
the audit of the Group’s financial statements for the year.
The Audit Committee considers that the Company has complied
with the Competition and Markets Authority’s Statutory Audit
Services for Large Companies Market Investigation (Mandatory
Use of Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014 for the financial year under review.
Internal audit – Group Audit and Assurance
Group Audit and Assurance (GAA) is an internal function that
services the Board and all levels of management. It provides
objective assurance to add value and improve the organisation’s
operations. Its responsibilities include assessing the principal risks
of the organisation and examining, evaluating and reporting on the
adequacy and effectiveness of the systems of risk management
and internal control as operated by management. Management
remains responsible for identifying risks and for the design and
operation of controls to manage risk. During the year, the
Committee reviewed the remit, organisation, annual plan,
resources and effectiveness of GAA and concluded that the
function continues to operate effectively.
The effectiveness review of the GAA function was facilitated
by Grant Thornton during the year. The appointment of Grant
Thornton followed a competitive tender process. The effectiveness
review comprised interviews with various stakeholders including
the Chair of the Audit Committee, the Chief Executive, the Chief
Financial Officer, senior management and finance leaders, the
external auditors and GAA team members; and involved reviewing
documents including the GAA charter, audit plan, audit universe
and associated risk assessments and audit papers and reports.
The review concluded that GAA continues to operate effectively
with some suggestions on areas for enhancement, for example
audit report style and presentation.
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 during
the year.
The reports from the latter included the findings from reviews of
internal financial controls and actions to address any weaknesses
in those controls. The Committee also reviewed the operation of
the Group’s whistleblowing programme (Speak Up) and the
analysis of reports submitted via the Speak Up programme, and
approved the proposed plan of work presented by the new Head
of Ethics and Compliance. See page 63 for further information
on Speak Up.
Throughout the year, the Committee focused in particular on
strengthening the financial control environment and the impact of
this on the financial reporting processes. The Committee reviewed
controls to mitigate fraud risk and the Group assurance map, a tool
which sets out the assurance processes and the three lines of
defence model. It also considered the results of the annual review
of the effectiveness of internal financial reporting controls, which
took into account the Group Risk Manager’s support to the risk
management process, and then reported to the Board. Further
details about this review are on page 62.
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Nominations Committee Report
“This year, the Committee focused on
the Chief Executive transition and the
appointment of a new Chief Financial Officer.”
Dr Gerry Murphy, Chair of the
Nominations Committee
Dear shareholder
This year, the Committee focused on Chief Executive succession
with the appointment of Nick Hampton as Chief Executive
designate in January 2018.
Following Nick’s appointment, the Committee turned its attention
to the appointment of a new Chief Financial Officer and, as
announced on 17 April 2018, Imran Nawaz will join the Company
and the Board on 1 August 2018.
On behalf of the Board, I would like to thank Javed Ahmed, Nick
Hampton, and my fellow non-executive directors for executing a
smooth and effective succession process.
With our senior leadership positions now established, the
Nominations Committee and the Board will focus this year on
succession planning for the non-executive director roles in order to
ensure that the Board has the skills and experience necessary to
support the new management team as it executes the Group’s
strategy over the coming years.
Gerry Murphy
Chairman
Committee governance
Responsibilities
The Committee assists the Board by reviewing the size and
composition of the Board, including succession planning, and
the leadership needs of the Group generally, recommending
candidates for appointment as Directors and as Company
Secretary and, in this financial year, the performance of each
member of the Executive Committee. Further details of its
responsibilities are in the Committee’s terms of reference,
on the Company’s website, www.tateandlyle.com.
Composition
During the financial year under review, the Committee comprised
the Chairman of the Company, the Chief Executive and all
independent Directors. The Company Secretary is the secretary
to the Committee.
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70 Tate & Lyle PLC Annual Report 2018
Meetings during the year
Meetings are generally held around the time of scheduled Board
meetings. The Committee held two scheduled meetings during
the year and also met on one other occasion to discuss the
appointment of the new Chief Executive.
Attendance during the year is set out on page 60.
The Executive VP, Human Resources and the VP, Global Talent are
invited to attend and present to the Committee on an ad hoc basis,
depending on the issues being discussed.
Effectiveness
Independent Audit led an externally facilitated review of the
Committee’s effectiveness and the output was discussed by the
Committee. This concluded that the Committee continued to
operate effectively and confirmed that the focus for the coming
year would be on Board succession planning. As a result of the
effectiveness review, the Committee made a number of changes
to its terms of reference. Those changes included removing the
Chief Executive as a member of the Committee, moving annual
oversight of performance of Executive Committee members to
the Remuneration Committee for consideration in the context of
variable pay outcomes and awards and adding oversight of senior
management development, particularly in the context of potential
Board succession, to the Committee’s remit.
Work undertaken during the year
The Committee maintains a calendar of items for consideration at
each meeting and reviews and updates it regularly.
Board succession planning
Appointment of Nick Hampton as Chief Executive
After eight years as the Chief Executive of the Company, Javed
Ahmed indicated his desire to retire from the Company, at a time to
be mutually agreed with the Committee, and to work with the
Chairman and the Committee to effect an orderly succession
process. The Committee retained Korn Ferry and Spencer Stuart
to assist with the search for a new Chief Executive. Both advisors
are signatories to the Voluntary Code of Conduct for Executive
Search Firms and have a good understanding of the Group’s
business, having been previously engaged in the identification of
individuals to fill non-executive director roles and other senior
executive roles.
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The Committee identified the skills and experience necessary and
desirable for the role and the search advisors prepared lists of
potential candidates meeting the specification. The Committee
considered the list of candidates provided in the context of its
knowledge and experience of Nick Hampton. Each of the non-
executive directors, and the Committee as a whole, met with
Nick Hampton to understand his future strategy and plans for the
Group, should he succeed to the role of Chief Executive. Having
assessed his suitability for the role, and taking into account his
performance as Chief Financial Officer since 2014, his significant
contribution to the Group in that time and the positive views held of
him by investors, the Board decided to appoint Nick Hampton as
Chief Executive, with effect from 1 April 2018.
Appointment of Imran Nawaz as Chief Financial Officer
Following the decision to appoint Nick Hampton as Chief Executive,
the Nominations Committee turned its attention to the recruitment
of a Chief Financial Officer. The Committee appointed a
sub-Committee comprising the Chairman, the Chair of the Audit
Committee and the Chief Executive designate. The sub-committee
drew up a detailed job specification and appointed Korn Ferry to
assist with an external search, having determined that there were
no ‘ready now’ internal candidates. Members of the sub-committee
interviewed a number of candidates and before recommending
his appointment to the Nominations Committee, the Chair of the
Remuneration Committee also had the opportunity to meet
with him.
Following the recommendation of the Nominations Committee,
Imran Nawaz will be appointed Chief Financial Officer and a
director of the Board with effect from 1 August 2018.
Board diversity
The Board believes that a diverse and inclusive culture is a driver of
superior business performance, growth and innovation. The Board
has a clear policy on diversity that acknowledges that the Board’s
perspective and approach can be greatly enhanced through
gender, age and cultural diversity, notwithstanding the overriding
principle that each member, and potential member, of the Board
must be able to demonstrate the skills, experience and knowledge
required to contribute to the overall effectiveness of the Board.
Wherever feasible, the Committee uses search firms who are
signatories to the Voluntary Code of Conduct for Executive Search
Firms which seeks to address gender diversity on boards and best
practice for the related search processes.
As set out elsewhere in this report, when considering candidate
directors, the Committee looked at a number of different criteria,
including gender, age, culture and personal attributes such as
thinking style. This was reflected in the long lists and shortlists of
possible candidates.
As at the date of this report, the Board comprises the Chairman,
one executive director and six non-executive directors. Female
representation (two Directors) equates to 25% of the Board.
Diversity below the Board
We recognise that to be a successful company, we must be both
diverse and inclusive. We expect everyone, everywhere, to play a
role in ensuring we become a truly diverse and inclusive
organisation where differences are respected and everyone’s
contributions are valued.
Our Group human resources policy records our commitment to
providing opportunities for all colleagues irrespective of (among
other things) sex, race, ethnicity, colour, religion, background, age
and sexual orientation.
As described on page 43, among the measures we have in place to
improve female representation in our senior management
population, we now ensure that women are included on shortlists
for all senior roles.
Succession planning
The Committee also considered succession plans for senior
executive roles. During the year, members of the Committee
participated in two new appointments to the Executive Committee:
Melissa Law, President, Global Operations and Andrew Taylor,
President, Innovation and Commercial Development.
Performance evaluation
The Committee evaluated the performance of each member of
the Executive Committee and reported its conclusions to the
Remuneration Committee.
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Directors’ Remuneration Report
“Executive director succession
has been a key focus for the
Committee this year.”
Anne Minto, Chair of the
Remuneration Committee
Dear shareholder
As Chair of the Remuneration Committee, I am pleased to present
our Remuneration Report (Report) for the financial year ended
31 March 2018.
This introduction provides context for the Committee’s decisions
which were taken during the year, and summarises key points
from the Report, including performance and incentive plan
outcomes, and Committee activities.
Business performance context
As you will have read in the introductory statements in this Annual
Report, we are pleased to report another year of progress, with
good profit and cash delivery:
13% increase in adjusted profit before tax at constant currency
with profit growth in all businesses
8% increase in Food & Beverage Solutions profit1 to £137 million,
with good volume and New Products momentum
5% increase in Sucralose profit1 to £55 million
30% increase in Primary Products profit1 to £166 million, 11%
profit1 growth in main business, Commodities £24 million higher
7% increase in earnings per share2 at constant currency
£53 million higher Group statutory profit before tax with
improved trading and lower exceptional costs
Net debt £60 million lower, with adjusted free cash flow
£22 million higher at £196 million
Proposed final dividend increased by 0.5p to 20.3p per share;
making a total dividend of 28.7p, up 2.5%.
1 Adjusted operating profit, percentage change in constant currency.
2 Adjusted diluted earnings per share from continuing operations.
Note: Food & Beverage Solutions metrics relate to the reportable segment.
72 Tate & Lyle PLC Annual Report 2018
72 Tate & Lyle PLC Annual Report 2018
Incentive outcomes for the year
The headline incentive outcomes for the year were as follows:
Annual bonus plan: awards for the year reflect good profit and
cash performance relative to stretching targets set at the start of
the year. Food & Beverage Solutions (F&B Solutions) sales volume
is ahead of prior year, but below the stretching target we set at the
start of the year. As a result, bonus awards for the year are
between target and maximum levels.
Performance Share Plan (PSP): awards made in 2015 reached the
end of their three-year performance period. Adjusted return on
capital employed in the year to 31 March 2018 of 17.5% exceeded
the maximum vesting requirement (and is well in excess of our
cost of capital). Earnings per share compound annual growth of
16.1% over the three-year period exceeds the maximum vesting
requirement. Accordingly, the PSP awards made in 2015 will vest
in full.
Total remuneration outcomes are above ’target’ but below
‘maximum’ policy levels, which the Committee considers to
be consistent with the performance and financial health of
the business.
Key Committee activities during the year
In addition to the responsibilities of the Committee (which are
described in summary on page 79), the Committee spent significant
time on matters relating to the following key items during the year:
Executive director appointments: the Committee carefully
considered and approved remuneration terms in respect of the
executive director appointments we have announced, operating
within the Remuneration Policy (Policy) that shareholders
approved in July 2017. Nick Hampton, who has served as Chief
Financial Officer (CFO) since September 2014, was appointed
Chief Executive (CEO) with effect from 1 April 2018. Javed Ahmed
retired as CEO on 1 April 2018. Imran Nawaz will join as CFO
with effect from 1 August 2018. Further details are provided in
this Report and key terms are summarised on page 85.
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Taking account of institutional shareholders’ views on the levels
of executive director pension provision, the Committee has taken
the decision to reduce the level of pension contribution the
Company will make for each role going forward: the CEO will
receive 25% of salary (reflecting Nick Hampton’s contractual
commitment made on appointment in 2014), and the CFO will
receive 20% of salary (contribution rates were previously 35% and
25%, respectively). As a result of securing internal succession to
the CEO the Committee believes it has successfully lowered
overall executive director remuneration going forward.
Senior executive appointments: during the year, key
appointments at Executive Committee level were made to
ensure we continue to have a strong balance of skills and
experience across the broader executive team. The Committee
has carefully considered appropriate remuneration terms for
each of these appointments and transitions in turn.
Engaged with shareholders ahead of Policy renewal at last
year’s AGM: we renewed our Policy at the 2017 AGM, and
although we were not making any material changes, we
maintained open lines of communication with our largest
shareholders to ensure that the Committee’s decisions were
fully informed by shareholder views.
Regulatory and governance developments: the Committee
receives regular updates on regulatory, institutional shareholder and
governance developments to ensure that the Committee’s decisions
take Group strategy and the needs of the business into account,
while reflecting investor and governance expectations around good
practice. In the spirit of engagement, and in support of good
governance principles, the Committee input into the Company’s
response to the BEIS Corporate Governance consultation, and the
subsequent FRC consultation recommendations on the Corporate
Governance Code.
Engagement with workforce
Pending the outcome from the FRC Corporate Governance
consultation, the Board and Remuneration Committee have been
considering how our approach to engagement with the workforce
may be further developed and broadened over time.
Gender pay
Although we employ a relatively small proportion of our people in
the UK (our two employing businesses in the UK are each below
the 250 employee threshold for reporting), the Committee has also
spent time reviewing the UK regulatory requirements relating to
gender pay, as well as the actions taken in the business to drive
gender balance. As discussed in Our People report (see page 43),
we aim to attract a diverse workforce that reflects the communities
in which we operate. We firmly believe that all employees
contribute to the performance of the Group and should have equal
opportunity to develop according to their individual abilities.
Accelerating business performance
The CEO’s statement sets out a number of actions that have
been initiated to accelerate business performance, in particular
to sharpen our focus on our customers and key categories,
accelerate portfolio development, and to simplify and drive
productivity. During the year ahead, the Committee expects to
review our current remuneration arrangements to ensure they
support these business goals. At this stage, we expect any changes
to be within the scope of our existing Policy, and we will consult
with shareholders, as appropriate, later in the year with a view to
implementing any changes for the year ending 31 March 2020.
Remuneration Policy and shareholder approval
Our Policy was approved by shareholders at the 2017 AGM with
97% of votes in favour.
The Committee is satisfied that this Policy continues to provide
for a strong alignment between Group performance and the
remuneration of executive directors and, as stated in this
Report, we intend to continue to operate within this approved
Policy during the financial year ending 31 March 2019.
A resolution to approve the Report, which contains key information
on the way in which our Policy has been implemented during the
year ended 31 March 2018, will be proposed at the AGM on
26 July 2018.
In closing, I would like to thank my fellow members of the
Remuneration Committee for their diligence and engagement
through the year, particularly with regard to the additional matters
we have considered in relation to our executive director
appointments. Additionally, I would like to personally thank our
advisors Deloitte and the members of the internal team for the
excellent support they have provided to the Committee.
Anne Minto OBE
Chair of the Remuneration Committee
About this Report
This Report has been prepared in accordance with the requirements of the Companies Act 2006 (the Act) and Schedule 8 to the Large
and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, the Listing Rules of the UK Listing Authority and
the UK Corporate Governance Code. PricewaterhouseCoopers LLP have audited such content as required by the Act (the information
on pages 86 to 89 marked as ‘(audited)’.
Key sections of this Report are as follows:
At a glance
74 Remuneration strategy and key
principles
Directors’ Remuneration Policy
76 Directors’ Remuneration Policy
statements
74 Overview of remuneration
77 Key components of Directors’
framework
remuneration
75 Performance highlights and
incentive outcomes for the year
75 Remuneration Policy scenarios for
the year to which this Report relates
Annual Report on Remuneration
79 The Remuneration Committee
81 Directors’ salaries and fees
81 Annual bonus
83 Long-term incentive – Performance Share Plan
85 Executive director changes during the year
86 Single figure table and other audited disclosures
89 Directors’ shareholdings and share interests
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Directors’ Remuneration Report continued
At a glance
We received strong shareholder support for our Directors’ Remuneration Policy (Policy) at the 2017 AGM, and no changes are proposed for
the year ahead.
Incentive pay outcomes reflect strong financial performance during the year leading to total executive director remuneration outcomes for
the year at between ‘target’ and ‘stretch’ levels.
Remuneration strategy and key principles
The Group’s remuneration strategy and supporting principles, which apply consistently to employees, managers and executives, are
summarised below:
The Group’s remuneration strategy is to provide competitive packages that enable the Group to recruit, retain and
motivate high-calibre individuals in the markets in which we operate so that we may deliver superior operational
performance and outstanding financial results
Base pay and benefits are referenced to the comparative local
market, taking account of company size and operations
For all employees, our pay for performance framework
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
provides for meaningful differentiation in salary progression
and opportunities for career progression, based on each
individual’s contribution
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 the Performance Share Plan
Incentive opportunities for eligible roles provide meaningful
rewards for superior performance and encourage the
achievement of genuinely stretching short-term and
long-term objectives
All aspects of remuneration are designed to encourage a focus on
long-term, sustained performance and risk management. Outcomes
must be achieved in a way that is consistent with the Group’s Values
and Code of Ethics, and that foster sustainable, profitable growth
Alignment with shareholders’ long-term interests is carefully
preserved, for example, through: a significant proportion of senior
executive 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 malus and claw back provisions on
incentive awards.
Overview of our executive director remuneration framework: no changes proposed for the year
Base salary and employment benefits
Market competitive elements to attract the right calibre of executives (including
health cover, car and defined contribution retirement benefits). Retirement benefit
levels are reduced: 25% for CEO (previously 35%) and 20% for CFO (previously 25%)
Annual bonus1
Rewards achievement against annual performance objectives:
2017-2018 metrics:
Profit
F&B Solutions volume
Cash flow
Max cash bonus is 100% of salary
Max opportunity is 175% of salary
Any award over 100% is paid in shares, deferred for two years
Chief Executive target: 75% of salary
Chief Financial Officer target: 50% of salary.
Performance Share Plan1:
Supports the Group’s strategy to create shareholder value from profitable Food &
Group profit growth (25%)
F&B Solutions profit growth (25%)
Group ROCE (50%)
Pre 2016: EPS (50%), ROCE (50%)
Beverage Solutions-led growth and to motivate and retain senior talent:
Max award is 300% of salary
15% vesting at ‘threshold’
Awards since 2016 subject to a three-year performance period plus a two-year
post vesting holding period – five years in total.
Shareholding requirements
Chief Executive – 4 times salary
Chief Financial Officer – 3 times salary
Claw back and malus provisions
Apply for two years after a bonus award or vesting of PSP awards
Key: Number of years: Performance period Deferral/holding period Ongoing requirements
1 Food & Beverage Solutions metrics relate to the reportable segment.
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Key Performance Indicators for financial year 2018
Our remuneration arrangements have a clear link to key performance indicators (KPIs) which are aligned with our
business strategy.
Sales of Food &
Beverage Solutions
+2%
in constant currency
Adjusted profit
before tax1
+13%
in constant currency
Return on capital
employed1
+190bps
Adjusted operating
cash flow1
+10%
1 Adjusted results and a number of other terms and performance measures used in this Annual Report are not defined within accounting standards.
For clarity, we have provided descriptions of the various metrics and their reconciliations to the most directly comparable measures reported in IFRS,
and the calculations where relevant of any ratios, in Notes 1 and 4.
Performance highlights and incentive outcomes for the year
Annual bonus
Metric
Group adjusted profit before tax
Food & Beverage Solutions volume
Adjusted operating cash flow
Target1
£297m
+4% vs prior year
£281m
Actual1
£319m
+3% vs prior year
£321m
vs target
+7.4% (+£22m)
-1%
+14.2% (+£40m)
Bonus award to Chief Executive and Chief Financial Officer: 72% of maximum
1 Bonus targets and actual performance are assessed at constant (budget) exchange rates.
See page 82 for more detail
Performance Share Plan (2015 Award)
Adjusted diluted EPS from continuing operations (50%)
Targets
(threshold-stretch)
Actual
(2015-2018)
6% – 15% compound annual
16.1% (above stretch)
growth over three years
Adjusted ROCE on continuing operations (50%)
12.6% – 15.6% at the end of the
17.5%2 (above stretch)
performance period
100% of the award made in 2015 will vest, based on the combination of EPS and ROCE performance.
2 ROCE performance is shown under proportionate accounting, consistent with the basis on which the targets for the 2015 award were established.
See page 83 for more detail
Remuneration Policy scenarios and actual outcome for the year
Chief Executive (£000s) – Javed Ahmed
Chief Financial Officer (£000s) – Nick Hampton
£1 014
£1 339
£2 637
£4 439
£3 672
49%
28%
23%
41%
21%
38%
48%
24%
28%
100%
25%
75%
Total
£5m
£4m
£3m
£2m
£1m
£0m
Below
threshold
Threshold
Target
Stretch
Actual
Base and benefits Annual bonus Performance Share Plan
Total
£5m
£4m
£3m
£2m
£1m
£0m
£670
£906
£1 721
£3 166
£2 776
50%
29%
21%
52%
24%
24%
46%
15%
39%
26%
74%
Threshold
Target
Stretch
Actual
100%
Below
threshold
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Directors’ Remuneration Report continued
Directors’ Remuneration Policy
The Directors’ Remuneration Policy (Policy) was formally approved by shareholders at the AGM on 27 July 2017 (with 97% of votes cast to
support the resolution) and it remains our intention that the Policy will apply for a period of three years from the date of that AGM.
We operate in an international context
The charts below illustrate the international nature of our business. Although we are UK-listed and headquartered in London, UK, a
very significant proportion of our sales, employees and shareholders are based outside the UK. Accordingly, it is important that our
remuneration arrangements are competitive in that international context.
Our sales1
Our people
Our shareholders2
United Kingdom – 1%
United States – 70%
Other European countries – 12%
Rest of world – 17%
UK – 6%
Europe (excluding UK),
Middle East and Africa – 28%
North America – 51%
Latin America – 10%
Asia Pacific – 5%
1 Sales by destination (from continuing operations) as per Note 5.
2 Analysis of shareholder register as at 3 April 2018.
UK – 48%
North America – 26%
Other European countries – 24%
Rest of world – 2%
Consideration of shareholder views
The remuneration strategy described here was largely established in 2010 following a review and extensive consultation with major
shareholders. Shareholders endorsed the continuing use of the Performance Share Plan as our long-term incentive at the AGM in 2016,
and formally approved the Policy most recently at the AGM in 2017.
The Chair of the Remuneration Committee engages with our major institutional shareholders each year specifically on remuneration
topics, alongside the Board’s 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 in the Group
The principles on which we base remuneration decisions for executives (as described on page 74) 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 Group 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 relevant 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.
As noted in the opening statement, pending the outcome from the FRC Corporate Governance Code review, the Board and Remuneration
Committee have been considering how our approach to engagement with the workforce may be further developed and broadened
over time.
Gender pay
Although we employ a relatively small proportion of our people in the UK (our two employing businesses in the UK are each below the 250
employee threshold for reporting), the Committee has also spent time reviewing the UK reporting requirements relating to gender pay, as
well as the actions taken in the business to drive gender balance. As discussed in Our People report (see page 43), we aim to attract a
diverse workforce that reflects the communities in which we operate. We firmly believe that all employees contribute to the performance
of the Group and should have equal opportunity to develop fully according to their individual abilities.
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Key components of Directors’ remuneration
As a Committee, we believe that our approach to remuneration provides an effective overall framework that is aligned with long-term
success and returns to shareholders.
Executive directors’ remuneration consists of base salary, annual bonus, long-term incentives, and retirement and other benefits as
described in the table below. Malus and claw back provisions apply to incentive awards following release, and a strong alignment with
shareholders’ interests is maintained through significant personal shareholding requirements imposed on each Director.
Remuneration framework (summary)
Each component has a clear purpose, and the variable elements are driven by KPIs which have a clear link to strategy.
Providing market competitive fixed remuneration to attract the right calibre of executive
Base salary and
employment
benefits
See page 81
Base salary decisions are referenced to the comparative local market taking account of company size and
operations and personal performance. Increases are typically limited to the general increase for Group
employees in the same local market
Retirement benefits are provided by way of defined contribution, or equivalent cash arrangements. Contribution
levels are reduced from 1 April 2018: 25% for CEO (previously 35%) and 20% for CFO (previously 25%)
Other benefits may include car (or allowance), health insurance and life cover.
Supporting near-term growth goals by rewarding strong annual financial performance
Annual bonus1
Key drivers:
Profit
F&B Solutions
volume
Cash flow.
See page 81
Target bonus is 50% of salary for the CFO and 75% of salary for the CEO
Maximum cash bonus is 100% of salary. Maximum total bonus opportunity is 175% of salary, with any award
over 100% paid in shares, which are deferred for two years
Metrics relate to profitability, Food & Beverage Solutions volume growth and cash flow. Profit performance
is the most important of these metrics: no bonus is payable if performance is below a minimum level,
regardless of performance against other metrics; and profit performance has the greatest impact on
overall bonus outcomes.
Supporting the Group’s strategy by incentivising sustained profit growth and capital efficiency over successive
three-year performance periods, and retaining senior executive talent
Performance
Share Plan1
Key drivers
(awards from 2016):
F&B Solutions
adjusted operating
profit (25%)
Group adjusted
profit before tax
(25%)
Group adjusted
ROCE (50%).
The maximum award that may be made to executive directors is 300% of salary
If the threshold level of performance is achieved across all metrics, 15% of the award will vest.
Awards made in 2015 and vesting in 2018
50% relates to the ROCE performance achieved in the final year of the performance period: the threshold
requirement for ROCE performance is 12.6% and full vesting requires ROCE performance of 15.6%, both being
in excess of our weighted average cost of capital
50% relates to EPS growth over the three-year performance period: the threshold requirement is 6% compound
growth p.a. and full vesting of that element requires 15% compound growth p.a.
Awards made from 2016
25% relates to Food & Beverage Solutions adjusted operating profit, consistent with the desire to grow our Food
& Beverage Solutions segment and investment case. Threshold is 8% and full vesting requires 13% compound
growth p.a.
See page 83
25% relates to Group adjusted operating profit, a key performance metric to drive sustainable long-term
profitable growth. Threshold is 5% and full vesting requires 10% compound growth p.a.
50% relates to Group adjusted ROCE, driving efficient investment for value-added returns from the total
business. Threshold is 12% and full vesting requires 16% in the final year of the performance period
Executive directors will be required to hold shares for a two-year period after the end of the three-year
performance period (i.e. the combination of performance and holding period will be five years in total),
demonstrating a strong long-term alignment with shareholder interests.
To focus on sustainable value creation over time and to strengthen long-term alignment of interests between
senior executives and the Group’s shareholders
Shareholding
requirements
Claw back/malus
Overriding factors.
Executive directors are subject to individual minimum share ownership requirements which must be retained
for the duration of employment: Chief Executive (4x salary); Chief Financial Officer (3x salary)
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)
Claw back and malus provisions apply for two years following bonus awards or the vesting of PSP awards
Safety and broader corporate responsibility matters are specific factors that the Committee may factor into
decisions on pay and annual incentive plan outcomes.
1 Food & Beverage Solutions metrics relate to the reportable segment.
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Directors’ Remuneration Report continued
Directors’ Remuneration Policy
The Directors’ Remuneration Policy (Policy) was formally approved by shareholders at the AGM on 27 July 2017 (with 97% of votes cast to
support the resolution) and it remains our intention that the Policy will apply for a period of three years from the date of that AGM.
No changes have been made to the Policy, and we intend to operate within this Policy during the financial year ending 31 March 2019.
The Policy is published on pages 78 to 85 of our Annual Report 2017, and is available on the Company’s website
(www.tateandlyle.com/annualreport2017).
The Committee retains discretion on specific aspects of Policy and implementation, as described in the Policy, along with an overriding
discretion to determine bonus outcomes and judge the level at which share awards vest, to ensure that payments are consistent with the
underlying financial 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
arrangements, or to take account of changes in legislation. Any such changes would be disclosed in the relevant Annual Report.
Service contracts
The Group’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 Group, 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 that provide for six months’ notice from
the executive and 12 months’ notice from the Group.
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 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.
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.
Executive directors’ external appointments
The Board believes that the Group 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.
78 Tate & Lyle PLC Annual Report 2018
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Tate & Lyle PLC Annual Report 2018
Annual Report on Remuneration
Statement of shareholder voting
The Remuneration Policy was approved by shareholders at the AGM on 27 July 2017. The last Annual Report on Remuneration was
approved by shareholders at the AGM on 27 July 2017. The following voting outcomes were disclosed after the AGM:
Resolution
Directors’ Remuneration Policy
Annual Report on Remuneration
Total for
(number of
votes)
295 458 658
291 846 638
Total against
(number of
votes)
8 622 530
12 218 602
% of vote
97.16
95.98
Votes
withheld1
(number of
votes)
79 6622
6102
% of vote
2.84
4.02
1 Votes withheld are not counted in the calculation of the proportion of votes for or against a resolution.
2 On 27 July 2017, there were 465,684,612 ordinary shares in issue, excluding treasury shares.
Implementation of the Remuneration Policy in the financial year ending 31 March 2019
The Committee intends that the Policy approved by the shareholders at the AGM on 27 July 2017, will apply for a period of three years from
that date.
Resolution to approve the Annual Report on Remuneration at the 2018 AGM
A resolution to approve this Annual Report on Remuneration will be proposed at the AGM on 26 July 2018.
The Remuneration Committee
Meetings during the year
The Remuneration Committee comprised the following independent non-executive directors during the year: Anne Minto (Chair),
Paul Forman, Lars Frederiksen, Jeanne Johns (until 31 October 2017), and Dr Ajai Puri. The Committee met seven times during the year.
Membership and attendance during the year are set out on page 60.
The Committee met twice after the end of the financial year, and before the signing of this Annual Report. The Company Secretary serves
as secretary to the Committee. The Chairman of the Board; the Chief Executive; the Executive VP, Human Resources; the VP, Global
Compensation and Benefits; and the Executive VP, General Counsel are normally invited to attend meetings to assist the Committee,
although none is present or involved when his or her own remuneration is discussed. The Committee’s external advisor (Deloitte LLP)
attends each meeting to provide independent advice, and also provides regular updates to the Committee on relevant corporate
governance and market-related developments.
Main responsibilities of the Remuneration Committee
The Committee has a formal calendar of items for consideration. The main responsibilities of the Committee include:
Assessing the appropriateness of executive remuneration in
the context of the Group’s strategy and priorities as well as
overall competitiveness, taking into account data from
independent, external sources
Setting the detailed remuneration of the executive directors,
designated members of senior management, and the Company
Chairman (in consultation with the Chief Executive), including:
base salary or fees; annual bonus; long-term incentives;
benefits; and contractual terms
Setting performance targets for awards made to senior
executives under the annual bonus plan and the long-term
incentive plan, and reviewing performance outcomes
Reviewing the broader operation of the annual bonus and
Performance Share Plans, including participation and overall
award levels
Reviewing its own effectiveness each year.
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 to act as our external advisor following a review and competitive tender process during 2012.
As part of its annual processes, the Committee considered and confirmed that advice received during the year from Deloitte LLP was
objective and independent. Deloitte LLP is a signatory to the Remuneration Consultants’ Code of Conduct; this gives the Committee
additional confidence 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 £51,700 for the year ended 31 March 2018, with fees being charged
on a time incurred basis. During the year ended 31 March 2018, Deloitte LLP also provided services to the rest of the Group on corporate
finance, consulting, systems, tax compliance and accounting.
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Directors’ Remuneration Report continued
Chart showing total shareholder return and Chief Executive’s pay
The chart illustrates the cumulative total shareholder return (TSR) performance of the Company against the FTSE 100 and FTSE 250
Indices over the past nine years. These Indices are considered to provide an appropriate comparison as they represent a broad equity
market with constituents comparable in size and complexity to the Company over the period to which the chart relates. The graph shows
the value of £100 invested in each Index and the Company in the nine years from 31 March 2009.
Tate & Lyle PLC (ordinary shares)
450
FTSE 100
FTSE 250
)
£
(
d
e
t
s
e
v
n
i
0
0
1
£
f
o
e
u
l
a
v
d
e
x
e
d
n
I
400
350
300
250
200
150
100
50
0
31 March
31 March
2009
2009
31 March
31 March
2010
2010
31 March
31 March
2011
2011
31 March
31 March
2012
2012
31 March
31 March
2013
2013
31 March
31 March
2014
2014
31 March
31 March
2015
2015
31 March
31 March
2016
2016
31 March
31 March
2017
2017
31 March
31 March
2018
2018
Chief Executive’s1 total remuneration (£000s per single figure table)
Javed Ahmed
977
3 277
11 1982
5 367
2 728
1 312
nil
170
n/a
n/a
996
n/a
2 139
3 239
n/a
n/a
Iain Ferguson
Annual bonus
(% of
maximum)
LTI vesting (%
of maximum)
86%
100%
58%
18%
1.6%
0%
77%
80%
0%
81%
100%
100%
67.7%
0%
10.9%
50%
1 Javed Ahmed served as Chief Executive since his appointment on 1 October 2009 until 1 April 2018. Iain Ferguson was Chief Executive prior to 1 October 2009.
2 The total remuneration figure shown for the year ended 31 March 2012 includes one-off compensatory appointment awards.
Comparison of movement in Chief Executive and broader employee remuneration
Change in value: year ended 31 March 2018 vs 31 March 2017
Chief Executive
Broader employee population2
Base salary
0%
3%
Value of
benefits1 Annual bonus3
-10%
-8%
-2%
8%
1 No changes to benefit policies were made in respect of the Chief Executive or employees during the year. The percentage change in the employee benefits figure is the
result of differences in employee participation levels and changes in the cost of insured benefits, including healthcare.
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. For the bonus comparisons, it refers to the global group of
participants in the annual bonus plan 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 employees of the Group (continuing operations)
Distributions to shareholders (by way of dividend and purchase of ordinary shares)
Year ended
31 March 2018
£336m
£158m
Year ended
31 March 2017
£328m
£148m
% change
2.4%
6.8%
The year-on-year variance in employee remuneration is attributable to factors including foreign exchange rate movements (reflecting our
significant US employee base) as well as variable pay arrangements driven by Group financial performance.
See Notes 10, 14 and 22 for further information.
80 Tate & Lyle PLC Annual Report 2018
80
Tate & Lyle PLC Annual Report 2018
3 672
n/a
72%
100%
Directors’ salaries and fees
Base salary
Nick Hampton was appointed Chief Executive with effect from 1 April 2018 (previously Chief Financial Officer). As Chief Executive,
Nick Hampton receives an annual salary of £665,000 from 1 April 2018.
Imran Nawaz has been appointed Chief Financial Officer with effect from 1 August 2018 and will receive an annual salary of £470,000.
Executive directors’ external appointments
Nick Hampton was appointed as a non-executive director of Great Portland Estates plc on 17 October 2016, and received fees of £69,350 in
the year to 31 March 2018 which he is entitled to retain.
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.
At the 2018 review, taking into account the competitiveness of current fees against the comparable market position, and the time
commitment required of each role and the level of increase applicable to UK employees, it was agreed that fees would be increased as
summarised in the table below.
Fees (per annum) as at 1 April (£)
Basic fees
Non-executive director
Senior Independent Director
Supplemental fees (per annum)
Chair of Audit Committee
Chair of Remuneration Committee
Chair of Research Advisory Group
2018
2017
% change
68 000
78 800
18 050
13 550
25 200
66 350
76 900
17 600
13 200
24 600
2.5%
2.5%
2.5%
2.5%
2.5%
Dr Gerry Murphy (appointed Chairman on 1 April 2017) receives a total annual fee of £350,000 which will not be reviewed until 2019.
Annual bonus
Overview
The bonus is based on performance against three objectives: Group profitability; Food & Beverage Solutions volume growth; and Group
operating cash flow. Before any bonus is payable, a minimum level of Group profit must be achieved, regardless of performance
against the 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 level 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.
Target bonus
(% of base salary)
Chief Executive
(75%)
Chief Financial
Officer (50%)
Step 1
Profitability
multiplier (once
minimum level is
achieved)
X
Step 2
F&B Solutions
volume growth
multiplier
X
Step 3
Operating cash
flow multiplier
X
=
Bonus achieved
(as % of base
salary)
At target level of performance, the multiplier is one for each metric, so if performance is ‘at target’ against each metric, the result is a
‘target’ bonus outcome. To achieve the maximum payout, performance against all three metrics must be at or above the stretch level.
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 a significantly greater 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 Group’s long-term business strategy.
The maximum bonus opportunity is 175%. Above a certain level of performance, the bonus calculation for the Chief Executive is made on
the basis that the bonus ‘target’ is 50% (rather than 75%) of salary.
Malus and claw back provisions
Both the cash and share elements are subject to malus and claw back provisions for a period of 24 months following the award. This
means that they may be recouped in whole or in part, at the discretion of the Committee, in the exceptional event that results were found
to have been misstated or if an executive director commits an act of gross misconduct.
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Directors’ Remuneration Report continued
Deferral into shares
The bonus amount up to 100% of base salary is paid in cash. The 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 director remaining in service with the Group, 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 malus and claw back
provisions, as set out above.
Overview for the year ended 31 March 2018
Awards are linked to stretching
financial targets set at the start of
the year against key metrics:
Group profit – measures the underlying
profit generated by the total business and
whether management is converting growth
into profit effectively
Food & Beverage Solutions volume –
measures whether management is growing
the Food & Beverage Solutions segment
Group operating cash flow – provides a
focus on managing working capital and
converting profit into cash effectively.
Bonus awards reflect strong underlying financial performance
13% increase in adjusted profit before tax at constant currency with profit growth
in all businesses
8% increase in Food & Beverage Solutions profit1 to £137 million, with good
volume and New Products momentum
5% increase in Sucralose profit1 to £55 million
30% increase in Primary Products profit1 to £166 million, 11% profit1 growth in
main business, Commodities £24 million higher
7% increase in earnings per share2 at constant currency
£53 million higher Group statutory profit before tax with improved trading and
lower exceptional costs
Net debt £60 million lower, with adjusted free cash flow £22 million higher at
£196 million.
1 Adjusted operating profit, percentage change in constant currency.
2 Adjusted diluted earnings per share from continuing operations.
Annual bonus for the year ended 31 March 2018 (audited)
The table below provides further information on each metric, the targets set at the start of the year and actual performance for the year.
Bonus objective
Profitability
Growth
Cash management
Adjusted profit before tax
Food & Beverage Solutions volume Adjusted operating cash flow
Adjusted profit before tax,
exceptional items, amortisation and
net retirement benefit interest
Measures the underlying profit
performance of the total business
Volume targets are set relative to
prior year performance
Adjusted group operating cash flow,
based on the average of half-year and
full-year figures
Measures whether management is
growing the Food & Beverage
Solutions business
Measures effective management of
working capital and effective
conversion of profit into cash
Metric
Definition
Rationale
Threshold
Target
Stretch
£282m
£297m
£310m
Actual performance1
£319m
Equal to prior year
+4% vs prior year
+5% vs prior year
+3% vs prior year
£261m
£281m
£301m
£321m
1 Bonus targets are set and actual performance is assessed at constant (budget) exchange rates, reflecting consistent practice with prior years.
The Committee also considers the Group’s safety and overall financial performance to ensure that the results are a true reflection of
the underlying strength and performance of the Group. On the basis of these performance outcomes, annual bonus awards of 72% of
maximum, equivalent to 126% of base salary, were awarded by the Committee to the Chief Executive (Javed Ahmed) and the Chief
Financial Officer (Nick Hampton) for the year ended 31 March 2018. No discretion has been exercised by the Committee in relation to
these awards.
The bonus amount up to 100% of base salary is paid in cash and the balance is paid in the form of deferred shares as described above.
Bonus arrangements for the coming year
This overall framework will be retained for the year ahead (the profit metric will be aligned with our corporate reporting, no longer adjusted for
retirement benefit interest); the overall bonus framework gives the greatest weighting to the Group profit metric, and retains the requirement
that a minimum level of profit must be achieved before any bonus is payable regardless of performance against other metrics.
The Board considers that bonus targets for the year ahead are commercially sensitive because they may reveal information about the
business plan that may damage our competitive advantage, and accordingly does not disclose these on a prospective basis. However,
we continue our practice of reporting targets in full, and the level of performance actually achieved, for the year just ended.
As noted in my introductory statement, the Committee expects to review our current remuneration arrangements during the year ahead to
ensure these support the business priorities established by Nick Hampton, Chief Executive. At this stage, we expect any changes to be
within the scope of our existing Policy, but we will consult with shareholders in respect of any material changes that are proposed for the
subsequent financial year, as appropriate, later in the year.
82 Tate & Lyle PLC Annual Report 2018
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Tate & Lyle PLC Annual Report 2018
Long-term incentive – Performance Share Plan (PSP)
Overview
The PSP provides a share-based incentive to closely align executive directors’ and senior executives’ interests with the strategy and with
the interests of shareholders over the long term. It is therefore an important component of the overall package.
Maximum award level
Since the 2010 AGM, awards to 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 Group performance. Individual awards made in any year are considered by the Committee on a case-by-case basis.
Performance conditions for awards made in 2015
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 in the years 2010 to 2015 (inclusive), the performance conditions comprised two elements, explained in the
table below. These metrics were selected following the review and consultation with shareholders at that time, as they represented key
drivers of shareholder value creation for the Group as a whole.
Metric
Definition
Earnings per share (EPS)
Return on capital employed (ROCE)
Compound annual growth rate (CAGR) of the Group’s
adjusted diluted EPS from continuing operations over the
performance period
Adjusted ROCE on continuing operations achieved at the
end of the three-year performance period1, 2
Weighting
50% of the award depends on this metric
50% of the award depends on this metric
Vesting schedule EPS performance (CAGR)
Vesting outcome
(% of maximum)
ROCE performance
Vesting outcome
(% of maximum)
Below 6%
6%
Nil
15%
Below 12.6%
12.6%
Nil
15%
Between 6% and 15%
On a straight line between
15% and 100%
Between 12.6% and 15.6%
On a straight line between
15% and 100%
At or above 15%
100%
At or above 15.6%
100%
1 The ROCE outcome may be adjusted downward in the event of an asset impairment (adding this back into capital employed); this is to encourage a prudent investment
strategy. In these circumstances, the ROCE figure for PSP purposes can be significantly lower than would otherwise be reported.
2 ROCE performance for awards made in 2015 is assessed on the basis of proportionate consolidation of joint ventures, consistent with the basis on which targets were
set for these awards prior to their grant.
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 Group.
2015 PSP awards vesting by reference to the period ended 31 March 2018 (audited)
PSP awards made in 2015 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
Threshold
Stretch
Performance
outcome
Combined vesting outcome
Adjusted Group ROCE1 on continuing
operations (50%)
Adjusted Group EPS CAGR from
continuing operations (50%)
12.6%
15.6%1
17.5%
6.0%
15.0%
16.1%
As EPS and ROCE performance outcomes are
each above the corresponding ‘stretch’ levels,
the PSP awards made in 2015 will vest in full
ROCE performance is shown under proportionate accounting consistent with the basis on which the targets for the 2015 award were established.
The performance period applicable to 2015 awards is 1 April 2015 to 31 March 2018. Over this period, the business has maintained clear
principles in relation to the disciplined use of capital, and ROCE performance of 17.5% (under proportionate accounting) will result in this
element being paid at stretch. Over the same period, the earnings per share performance of 16.1% will result in 100% of the total award
being permitted to vest. No discretion has been exercised by the Committee in relation to this outcome.
In confirming the vesting outcome, the Committee also considered the broader underlying financial performance of the Group over the
performance period, including the impact of impairments, to ensure that vesting results based on these performance outcomes are
consistent with a broader view of the financial health and performance of the business.
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Directors’ Remuneration Report continued
Performance conditions for awards made in 2016 and 2017
The Performance framework was reviewed in 2016 to ensure continued alignment with the Group strategy and long-term growth plans following
the structural changes in the business in 2015. The metrics adopted aligned the PSP with our strategic priorities to deliver long-term value by:
Incentivising overall growth in the value of the Group and above-market growth in our higher value Food & Beverage Solutions business
(half the award relates to Group and Food & Beverage Solutions profit growth metrics)
Incentivising the maintenance of a strong balance sheet and the efficient deployment of Group capital (a ROCE metric applies to half the award).
Appropriate threshold and stretch targets for each of these metrics were considered carefully by the Committee taking into account a
number of reference points, described in summary below. Overall, performance at these levels requires our Food & Beverage Solutions
(and Sucralose) and Primary Products (PP) businesses to perform strongly in their respective markets.
We consulted with a broad group of our largest shareholders on these proposals, which were met with high levels of support during that
consultation, and were strongly endorsed by shareholders at the 2016 AGM.
See pages 74 and 75 of our 2016 Annual Report for more details.
Metrics for Awards
since 2016 (weighting)
Rationale for metric
Target range
(threshold-stretch)
Rationale for target ranges
F&B Solutions adjusted
operating profit (25%)
Consistent with the
F&B Solutions growth-
led business strategy
and investment case
Group adjusted profit
before tax (25%)
Key performance
metric to drive
sustainable long-term
profitable growth
8% – 13% p.a. three-
year compound growth
Targets above-market F&B Solutions growth and significant
New Product sales
Value generative in the context of global market growth of
4-5% and our historic operating profit growth trend of c. 7%.
5% – 10% p.a.
three-year compound
growth
Targets are consistent with execution of Group strategy:
steady earnings from PP as described in 2016, with
profitable F&B Solutions growth ahead of the market
Targets aligned with our long-term plan and the realities of
our operating model (without growth investment in PP, and
recognising US sweetener market is in structural decline).
Group adjusted ROCE
(50%)
Drives efficient
investment for value-
added returns from the
total business
12% – 16% in the final
year of the three-year
performance period
Reflects geographic footprint (post exit from European
PP business)
Incentivises ROCE performance in excess of our cost of
capital and progression over time.
Financial underpin
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 Group.
Recognising the importance of the dividend to our investors, the Committee retains a specific discretion to reduce PSP
vesting if dividends paid by the Group over the performance period do not conform with our stated dividend policy.
Note: Food & Beverage Solutions metrics relate to the reportable segment.
Targets are set and performance is assessed at reported exchange rates.
The level of vesting at threshold is limited to 15% of the maximum for executive directors.
The Committee reviews the appropriateness of metrics and targets ahead of the grant of awards in any year to ensure they remain
sufficiently stretching.
As noted in my introductory statement, we do not propose any changes to our arrangements for the year ahead. During the coming year,
the Committee expects to review our remuneration arrangements to ensure they support the business priorities established with Nick
Hampton’s succession as Chief Executive. At this stage, we expect any changes to be within the scope of our existing Policy, and we will
consult with shareholders, as appropriate, later in the year in respect of any changes that are proposed for the subsequent financial year
(ending 31 March 2020).
Post-vesting holding period
For awards made in 2016 and subsequently, executive directors are required to hold shares for a two-year period after the end of the
three-year performance period (i.e. the combination of performance and holding period is five years in total). This holding period sits
alongside the existing personal shareholding requirements and claw back/malus provisions, and demonstrates a strong long-term
alignment with shareholder interests.
Malus and claw back provisions
Awards made under the PSP from 1 April 2013 are subject to malus and 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 emerges 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.
84 Tate & Lyle PLC Annual Report 2018
84
Tate & Lyle PLC Annual Report 2018
Executive director changes during the year
Nick Hampton – appointed Chief Executive
As announced on 16 January 2018, Nick will receive an annual salary of £665,000 from 1 April 2018, subject to annual review. His pension
allowance remains at 25% of salary, reflecting the contractual commitment made on appointment in 2014 (and representing a reduction
against the established policy for the CEO role of 35% of salary). His maximum level of award under the annual bonus and PSP as a
percentage of salary are not changing from those applicable to his role as CFO. Target bonus opportunity is 75% of salary (consistent with
our Policy for the CEO role). These arrangements provide fixed compensation that is circa 15% lower than the previous CEO.
Imran Nawaz – appointed Chief Financial Officer
Imran Nawaz was appointed Chief Financial Officer with effect from 1 August 2018 and his remuneration details were provided on the
announcement of his appointment on 17 April 2018. He will receive an annual salary of £470,000. He will receive a company contribution
to his pension plan of 20% of base salary (being a reduction against the established policy level of 25% for the Chief Financial Officer role).
He will also be eligible for a bonus under Tate & Lyle’s discretionary bonus scheme (50% of salary at target and a maximum opportunity of
175% of salary), with bonus participation in the financial year ending 31 March 2019 being on a time pro-rated basis. Imran will be eligible
to participate in the PSP with annual awards at up to 300% of base salary, subject to performance conditions over a three-year period.
Consistent with our shareholder-approved Policy on the terms of directors’ appointment, we have made provision to compensate Imran
for specific short-term and long-term incentives given up by him as a consequence of him leaving his former employer. As announced,
these compensatory awards comprised a one-off Restricted Stock Award (RSA) of £800,000 worth of shares in Tate & Lyle PLC (subject to
employment and subject to achievement of individual business performance conditions); and we have agreed that in 2018, he will receive a
PSP award at 300% of his full annual salary subject to normal PSP performance conditions.
The RSA and 2018 PSP awards will be subject to forfeiture/repayment if he ceases to be employed in the first 36 months of employment
due to his resignation or dismissal for cause.
Imran will receive practical relocation assistance including a taxable allowance of £200,000 (gross; being £106,000 estimated net) within
a 12-month period following appointment in line with the Company’s relocation policy – to mitigate the many expenses expected to be
incurred on relocation from Zurich, including stamp duty and equivalent home sale and purchase fees, and taxes and estate agency fees.
Remuneration Policy scenarios for the year ahead
The overall impact of these executive director appointments, and the reduction in pension provision against policy levels and the operation
for our incentive plans for the year ahead, is that the total compensation opportunity for each of these roles has reduced year-on-year. The
charts below illustrate the value that may be delivered from each element of the package under different performance scenarios for the
year ending 31 March 2019.
Chief Executive (£000s) – Nick Hampton
Chief Financial Officer (£000s) – Imran Nawaz1
£848
£1 210
£2 345
£4 007
XX%
50%
29%
21%
XX%
43%
21%
36%
5%
25%
70%
100%
Total
£4m
£3m
£2m
£1m
£0m
Total
£4m
£3m
£2m
£1m
£0m
£577
£818
£1 517
£2 810
50%
29%
21%
XX%
XX%
4%
26%
70%
100%
47%
15%
38%
Below
threshold
Threshold
Target
Stretch
Below
threshold
Threshold
Target
Stretch
Base and benefits Annual bonus Performance Share Plan
1 Imran Nawaz will join the Company on 1 August 2018; the illustration shows the full annualised value of the core remuneration package for comparison.
Javed Ahmed – retires as Chief Executive
As announced on 16 January 2018, Javed Ahmed retired as Chief Executive and ceased employment with the Company on 1 April 2018.
Arrangements relating to his departure were disclosed at the time and are set out on page 87.
www.tateandlyle.com 85
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Strategic ReportGovernanceFinancial StatementsUseful Information
Directors’ Remuneration Report continued
Other audited disclosures
Single figure table (audited)
£000s
Year ended 31 March
Salary/fees
2018
2017
Chairman
Benefits1
2018
Annual bonus
Share awards
Pension
Total
2017
20182
2017
2018
2017
2018
2017
2018
2017
Dr Gerry Murphy
350
88
–
–
–
–
–
–
–
–
350
88
Executive directors
Javed Ahmed3
Nick Hampton4
Non-executive
directors6
Paul Forman
Lars Frederiksen
Douglas Hurt
Anne Minto
Dr Ajai Puri
Sybella Stanley
Former directors7
Sir Peter Gershon
William Camp
Liz Airey
Jeanne Johns
721
526
721
513
41
13
42
13
908
1 009 1 7505
1 215
662
808 1 4445
1 676
252
131
252
3 672
3 239
128
2 776
3 138
66
66
95
80
91
66
–
–
22
46
65
65
84
78
89
65
334
76
72
28
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
66
66
95
80
91
66
–
–
22
46
65
65
84
78
89
65
334
76
72
28
Totals
2 129
2 278
54
55
1 570
1 817
3 194
2 891
383
380
7 330
7 421
1 Benefits for executive directors include health insurance and car allowance.
2 Bonus includes the value of deferred shares (based on the average share price over the period 1 January – 31 March 2018). The cash bonus award to Javed Ahmed was
£721,000 and the cash bonus award to Nick Hampton was £526,000.
3 Javed Ahmed retired as Chief Executive following the end of the financial year on 1 April 2018 (see page 87).
4 Nick Hampton served as Chief Financial Officer during the year, and was appointed Chief Executive following the end of the financial year on 1 April 2018 (see page 85).
5 This is the PSP Award made in 2015. PSP awards outcomes are discussed on page 83, and the value is included in the table above based on a share price of £5.98,
being the closing share price on 21 May 2018 when the Remuneration Committee determined performance conditions were met. For Nick Hampton, this also includes
the value from SAYE awards on release from the 2014 SAYE scheme.
6 In accordance with the Group’s expenses policies, non-executive directors receive reimbursement for their reasonable expenses for attending Board meetings.
In instances where those costs are treated by HMRC as taxable benefits, the Group also meets the associated tax cost to the non-executive director through a PAYE
settlement agreement with HMRC. Amounts are minimal and do not show in the table after rounding.
7 William Camp stepped down as Director on 31 March 2017 and Sir Peter Gershon stepped down as Chairman on 31 March 2017. Liz Airey stepped down as a Director
on 27 July 2017. Jeanne Johns stepped down as a Director on 31 October 2017.
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, and are equivalent to 35% of salary for Javed Ahmed as Chief Executive
and 25% for Nick Hampton as Chief Financial Officer, reflecting contracts on appointment. Nick Hampton was appointed Chief Executive
effective 1 April 2018 and his pension contribution will remain at 25% of salary.
86 Tate & Lyle PLC Annual Report 2018
86
Tate & Lyle PLC Annual Report 2018
Payments to past directors (audited)
As announced on 16 January 2018, Javed Ahmed retired as Chief Executive and ceased employment with the Group on 1 April 2018. His
salary and other benefits all ceased with effect from this date.
As previously announced, and in keeping with our shareholder approved policy, the Committee determined that Javed would retain:
An entitlement to bonus in relation to the year ending 31 March 2018, which was determined and will be paid in due course in line with
full year performance (as described on page 82)
Deferred bonus awards, which were earned based on performance in the relevant year, may be released at the end of the relevant
deferral period, in accordance with the applicable Scheme rules
Rights to previously granted awards under the PSP, which remain subject to the relevant performance criteria, and may vest on the
normal vesting dates, on a time pro-rated basis reflecting the proportion of the three-year vesting period during which he was
employed, in accordance with the applicable Scheme rules.
The Committee has not exercised any discretion in relation to the assessment of any performance conditions or the timing of vesting,
or the basis on which relevant awards will be pro-rated.
Payments for loss of office
There have been no other payments to past directors other than as disclosed in this Report. No loss of office payments have been made
during the year.
Share awards made during the year ended 31 March 2018 (audited)
Javed
Ahmed
Award
Group Bonus
Plan (31 March
2017)
Type of
award
Nil cost
option
Date of grant
23 May 2017
Number of
shares
39 850
Face value of
award
£288 4021
Performance
conditions
None2
Performance
period
Two-year
deferral
% of
vesting at
threshold
n/a
Performance
Share Plan3
Nil cost
option
16 August
2017
298 875
£2 163 018
Nick
Hampton
Group Bonus
Plan (31 March
2017)
Nil cost
option
23 May 2017
40 739
£294 8361
Performance
Share Plan3
Nil cost
option
16 August
2017
217 855
£1 576 660
Sharesave
Scheme5
Savings-
related
options
4 December
2017
3 243
£17 998
25% F&B Solutions
adjusted operating
profit; 25% Group
adjusted profit;
50% adjusted
ROCE4
None2
25% F&B Solutions
adjusted operating
profit; 25% Group
adjusted profit;
50% adjusted
ROCE4
Continued
employment
(SAYE)
15%
Three financial
years ending
31 March 2020
plus two-year
holding period
n/a
15%
Two-year
deferral
Three financial
years ending
31 March 2020
plus two-year
holding period
Three years
ending
1 March 2021
n/a
1 Deferred shares are granted under the annual bonus plan (as described on page 82). The full value of these awards has been previously disclosed for each Director in
the single figure’ table in last year’s Annual Report for the year ended 31 March 2017 and is similarly included in the 2017 figure in the single figure table on page 86 of
this Report. The share allocation was made during the year ending 31 March 2018, and shown in the table above, based on the average share price over the last three
months of the preceding financial year, being 723.72 pence per share for the 2017 award.
2 Deferred bonus awards were subject to performance conditions in the year ending 31 March 2017, and remain subject to continued employment in accordance with the
Scheme rules.
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 723.72 pence per share for the 2017 award. In 2017, the Committee approved awards of 300% of salary for the
Chief Executive and 300% of salary for the Chief Financial Officer, which is within our approved Remuneration Policy.
4 Performance conditions applicable to PSP awards made in 2017 are described on page 83.
5 Savings-related share options are options granted under the HMRC-approved Sharesave Plan. Options are granted on the same terms to all participating employees,
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. The exercise price per share for these shares under option is 555.00 pence, reflecting a 20% discount to market value as permitted under HMRC rules, and is
applicable to all participants.
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Strategic ReportGovernanceFinancial StatementsUseful Information
Directors’ Remuneration Report continued
Historic awards under all-employee schemes (audited)
The table below sets out the current position of options to subscribe for ordinary shares of the Company that were granted to executive
directors in the years prior to the current reporting year.
Savings-related share options are options granted under the HMRC-approved Sharesave Plan. Options are granted on the same terms to
all participating employees, 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. The exercise price reflects a 20% discount to market value as permitted under
HMRC rules, and is applicable to all participants.
Javed Ahmed
Savings-related options 2014
Nick Hampton
Savings-related options 2014
As at
1 April 2017
(number)
5 941
Options
vested
during year
Options
exercised
during year
Options
lapsed
during year
(number)
–
(number)
–
(number)
–
As at
31 March
2018
(number)
5 941
3 529
3 529
3 529
–
–
Exercise
price
Exercise
(pence)
period
510.00 01/03/20 to
31/08/20
510.00 01/03/18 to
31/08/18
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
31 March
2017
(number)
Awards
vested
during year
Awards
lapsed
during year
Awards
exercised
during year
(number)
(number)
(number)
As at
31 March
2018
(number)
Market
price on
date
awards
granted
(pence)
Market
price on
date
awards
exercised
(pence)6
Vesting date
Javed Ahmed
Share-incentive
arrangements on
recruitment:
Compensatory Award A1
Performance Share Plan2, 3:
2013
2014
20154
2016
Group Bonus Plan
2016
Nick Hampton
Share incentive
arrangements on
recruitment:
2015 Restricted Share
Award5
Performance Share Plan2, 3:
20154
2016
Group Bonus Plan:
2016
419 403
–
–
419 403
–
444.90
661.60
01/10/11
29 148
305 584
292 595
374 124
–
152 792
–
–
–
152 792
–
–
29 148
152 792
–
–
–
–
292 595
374 124
817.50
707.83
616.04
578.15
726.97
726.97
15/06/16
15/06/17
– After 31/03/18
– After 31/03/19
42 742
–
–
–
42 742
578.15
–
25/05/2018
121 781
121 781
–
121 781
–
574.80
726.97
15/06/17
241 251
266 064
29 368
–
–
–
–
–
–
–
–
241 251
266 064
616.04
578.15
– After 31/03/18
– After 31/03/19
–
29 368
578.15
–
25/05/2018
1 This award, to compensate Javed Ahmed for certain long-term incentives given up by him as a consequence of leaving his former employer, was not subject to
performance conditions. The shares were available to exercise from 1 October 2011, being the second anniversary of Javed Ahmed joining the Group.
2 The three-year performance period for these awards began on the first day of the financial year in which the award was granted.
3 The performance conditions for PSP awards made in 2013, 2014 and 2015 are 50% adjusted diluted EPS and 50% adjusted ROCE, as described in this Report.
The performance conditions for the PSP awards made in 2016 are 25% Food & Beverage Solutions adjusted operating profit; 25% Group adjusted profit; 50% adjusted
ROCE (as described on page 84).
4 The PSP award made in 2015 will vest at 100%, following the Committee’s assessment of performance conditions (as described on page 83).
5 This award, as described on page 71 of the 2015 Annual Report, was made to compensate Mr Hampton for incentives forfeited with his previous employer.
6 These awards are structured as nil cost options; awards were exercised with a nil exercise price.
88 Tate & Lyle PLC Annual Report 2018
88
Tate & Lyle PLC Annual Report 2018
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 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.
The Chief Executive has a target share ownership requirement of four times base salary. At 31 March 2018, Javed Ahmed held shares
in accordance with this policy with a value just under 30 times base salary
The Chief Financial Officer has a target shareholding of three times base salary, to be achieved within five years of appointment.
Nick Hampton joined the Group in September 2014, and at 31 March 2018, he held shares in accordance with the policy with a value
of just under three times base salary as Chief Financial Officer
Other Executive Committee members are subject to the share ownership policy, with target holdings at three times salary
This policy extends to a broader group of executives who have senior leadership roles within the Group. The shareholding target for this
group is equal to their base salary.
Under the shareholding policy, the value of shareholdings is assessed net of tax, at the prevailing share price, and executives are expected
to reach the required level of shareholding within five years of appointment. 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 25 pence each in the Company
are shown below. All these interests are beneficially held and no Director had interests in any other class of shares. The table also
summarises the interests in shares held through the Company’s various share plans.
Chairman
Dr Gerry Murphy
Executive directors
Javed Ahmed
Nick Hampton
Non-executive directors
Paul Forman
Lars Frederiksen
Douglas Hurt
Anne Minto
Dr Ajai Puri
Sybella Stanley
Former directors
Liz Airey5
Jeanne Johns5
Interest in
Nil cost options
– conditional on
shares1
performance2
Shares – not
conditional on
performance3
Options – not
conditional on
performance4
Total as at
31 March 2018
Total as at
31 March 2017
20 000
–
–
–
20 000
10 000
3 431 568
190 032
965 594
725 170
82 592
70 107
5 941
3 243
4 485 695
988 552
4 568 387
784 154
10 000
15 000
10 000
8 600
10 018
4 983
26 000
4 000
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
10 000
15 000
10 000
8 600
10 018
4 983
26 000
4 000
10 000
15 000
10 000
8 600
10 018
3 983
26 000
–
1 Includes shares owned by connected persons.
2 Awards under the PSP. These awards were made as options with a nil exercise price.
3 Deferred share awards made under the Group Bonus Plan.
4 These are HMRC-approved Sharesave Plan awards.
5 As at the date they ceased to be a Director.
There were no changes in Directors’ interests in the period from 1 April 2018 to 23 May 2018.
On behalf of the Board
Anne Minto OBE
Chair of the Remuneration Committee
23 May 2018
www.tateandlyle.com 89
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Strategic ReportGovernanceFinancial StatementsUseful Information
Directors’ Report
About the Directors’ Report
The Directors’ Report comprises the
Governance section from pages 52 to 71,
the Directors’ Report on pages 90 and 91
and the Useful Information section from
pages 177 to 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:
Likely future developments of
the Company (throughout the
Strategic Report)
Human rights (page 42)
Greenhouse gas emissions (pages 48
and 49)
Relationship with employees (pages
42 to 44)
Financial instruments (Note 29)
Post balance sheet events (Note 35).
Results and dividend
A review of the consolidated Group’s results
can be found on the inside front cover to
page 51.
An interim dividend of 8.4 pence per ordinary
share was paid on 5 January 2018. The
Directors recommend a final dividend of
20.3 pence per ordinary share to be paid
on 1 August 2018 to shareholders on the
register on 22 June 2018, subject to approval
at the 2018 Annual General Meeting (AGM).
The total dividend for the year is 28.7 pence
per ordinary share (2017 – 28.0 pence).
The Trustees of the Tate & Lyle PLC
Employee Benefit Trust (the EBT) have
waived their right to receive dividends over
their total holding of 4,788,306 ordinary
shares as at 31 March 2018.
Research and development
The Group spent £35 million
(2017 – £37 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
90
Tate & Lyle PLC Annual Report 2018
90 Tate & Lyle PLC Annual Report 2018
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 66
to 71 and on page 79.
Share capital
As at 31 March 2018, 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 52,068 ordinary
shares during the year and reissued 1,010,461
ordinary shares from treasury. The Company
issued 2,646 shares during the period from 1
April 2018 to 23 May 2018. Further information
about share capital is in Note 22. Information
about options granted under the Company’s
employee share plans is in Note 31.
The Company was given authority at the 2017
AGM to make market purchases of up to
46,468,572 of its own ordinary shares. The
Company made no purchases of its own
ordinary shares during the year ended
31 March 2018, however the EBT purchased
3.9 million ordinary shares in the year. This
authority will expire at the 2018 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
ordinary and preference shares in the
capital of the Company.
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 in ‘Shareholders’ rights’
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.
Change of control
At 31 March 2018, the Group had a
committed bank facility of US$800 million
with a number of relationship banks which
contains change of control clauses. The
Group also had £200 million of Guaranteed
Notes and US$400 million of Private
Placement Notes which contain change of
control provisions. In aggregate, this
financing is considered significant to the
Group and in the event of a takeover (change
of control) of the Company, these contracts
may be cancelled, become immediately
payable or be subject to acceleration.
All the Company’s share plans contain
provisions relating to a change of control.
Further information is set out in the
Directors’ Remuneration Policy.
Disclosure table pursuant to Listing Rule LR 9.8.4C
In accordance with LR 9.8.4C, the table below sets out the location of the information
required to be disclosed, where applicable.
Applicable sub-paragraph within LR 9.8.4
(1)
(2)
(4)
(5)
(6)
(7)
(8)
(9)
(10)
(11)
(12)
(13)
(14)
Interest capitalised by the Group
Unaudited financial information
Long-term incentive scheme only involving a Director
Directors’ waivers of emoluments
Directors’ waivers of future emoluments
Non pro-rata allotments for cash (issuer)
Non pro-rata allotments for cash (major subsidiaries)
Listed company is a subsidiary of another company
Contracts of significance involving a Director
Contracts of significance involving a controlling shareholder
Waivers of dividends
Waivers of future dividends
Agreement with a controlling shareholder
Page(s)
127
None
85 and 88
None
Not applicable
90
None
Not applicable
None
Not applicable
90
90
Not applicable
DTR Rule 5 disclosure
As at 31 March 2018, the Company had
been notified under Rule 5 of the Disclosure
and Transparency Rules of the following
holdings of voting rights in its shares:
Black Rock, Inc.1
Ameriprise
Financial, Inc.
Standard Life
Aberdeen plc
The Capital Group
Companies, Inc.
Artemis Investment
Management LLP1
AXA S.A.1
Invesco Limited1
Schroders plc1
Barclays Global
Investors1
Number
of shares2
%
held2
46 514 801 9.97
23 767 456 5.10
23 463 001 5.04
23 129 245 4.96
23 045 106 4.94
22 890 148 4.98
23 111 061 4.95
23 098 654 4.95
17 568 133 3.59
1 Notification was made over 12 months ago; as
permitted under Rule 5, shareholders are not
required to notify us of subsequent changes
within certain ranges.
2 As at the date in the notification to the Company.
In the period from 1 April 2018 to 23 May
2018, there have been no changes,
notified to the Company, to the holdings
as disclosed above.
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$26,200 (£18,700) (2017 – US$22,000;
£17,000) to state political party committees
or political action committees, and to the
campaign committees of state or local
candidates affiliated to the major parties.
In all, nine separate donations were made,
the largest being US$10,000 and the
smallest US$500.
US$12,700 (£9,000) (2017 – US$17,450;
£13,000) was also contributed by the Tate &
Lyle Political Action Committee (PAC). Eight
separate donations were made, the largest
being of US$3,000 and the smallest US$500.
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.
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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 regulation.
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.
Company law requires the Directors to
prepare financial statements for each
financial year. Under that law, the Directors
have prepared the Group Financial
Statements in accordance with
International Financial Reporting Standards
(IFRSs) as adopted by the EU, and Company
Financial Statements in accordance with
UK GAAP (United Kingdom Accounting
Standards, comprising FRS 101 ‘Reduced
Disclosure Framework’ 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 year.
In preparing these financial statements,
the Directors are required to:
Select suitable accounting policies and
then apply them consistently
Make judgements and accounting
estimates that are reasonable
and prudent
State whether applicable IFRSs as
adopted by the EU have been followed for
the Group Financial Statements and
United Kingdom Accounting Standards,
comprising FRS 101, have been followed
for the Company Financial Statements,
subject to any material departures
disclosed and explained in the
Financial Statements
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 Group
and Company’s transactions and disclose
with reasonable accuracy at any time the
financial position of the Company and the
Group. These records should 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. The
Directors 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.
Each of the Directors, whose names and
functions are listed on page 52, confirms that,
to the best of his or her knowledge:
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
position and performance, business model
and strategy
The Group Financial Statements, which
have been prepared in accordance with
IFRSs as adopted by the EU, give a true
and fair view of the assets, liabilities,
financial position and profit of the Group
The Company Financial Statements,
which have been prepared in accordance
with UK GAAP (United Kingdom
Accounting Standards, comprising FRS
101 ‘Reduced Disclosure Framework’
and applicable law) give a true and fair
view of the assets, liabilities, financial
position and profit of the Company
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
and the Company, 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 Group and Company’s auditors are
aware of that information.
The Directors’ Report on pages 52 to 71,
pages 90 and 91and pages 177 to the
inside back cover and the Directors’
Remuneration Report from pages 72 to 89
of this Annual Report were approved by
the Directors on 23 May 2018.
On behalf of the Board
Claire-Marie O’Grady
Company Secretary
23 May 2018
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Report on the audit of the financial statements
Opinion
In our opinion:
• Tate & Lyle PLC’s Group financial statements and Parent Company financial statements (the ‘financial statements’) give a true and fair
view of the state of the Group’s and of the Parent Company’s affairs as at 31 March 2018 and of the Group’s profit and cash flows for the
year then ended;
• the Group financial statements have been properly prepared in accordance with IFRSs as adopted by the European Union;
• the Parent Company financial statements have been properly prepared in accordance with United Kingdom Generally Accepted
Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 ‘Reduced Disclosure Framework’, and applicable
law); and
• the financial statements have been prepared in accordance with the requirements of the Companies Act 2006 and, as regards the Group
financial statements, Article 4 of the IAS Regulation.
We have audited the financial statements, included within the Annual Report, which comprise: the Consolidated Statements of Financial
Position as at 31 March 2018; the Parent Company Balance Sheet as at 31 March 2018, the Consolidated Income Statement and
Consolidated Statement of Comprehensive Income, the Consolidated Statement of Cash Flows, and the Consolidated and Parent Company
Statements of Changes in Equity for the year then ended; and the notes to the Consolidated and Parent Company financial statements,
which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs (UK)’) and applicable law. Our responsibilities
under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial statements section of our report. We
believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial
statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided to
the Group or the Parent Company.
Other than those disclosed in Note 9 to the financial statements, we have provided no non-audit services to the Group or the Parent
Company in the period from 1 April 2017 to 31 March 2018.
Our audit approach
Context
The context of our audit was set by the Group’s major activities in the year ended 31 March 2018 (‘FY18’). FY18 involved few significant
business changes, although as a result of the Food Systems business being fully integrated into Food & Beverage Solutions, the business
revised its allocation of goodwill to the CGUs. The goodwill associated with Biovelop, the Group’s oat business in Sweden, continues to be
sensitive to reasonably possible changes in assumptions. As such we have retained goodwill and intangible asset impairment as a key
audit matter.
Our other key audit matters have been further refined to reflect certain developments in the Group during FY18.
.
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Overview
Materiality
• Overall Group materiality: £14.7 million (2017 – £12 million), based on 5% of profit before tax
from continuing operations adding back the Group’s share of tax of joint ventures and
associates and exceptional items, which is our defined profit measure.
• Overall Parent Company materiality: £3.4 million (2017 – £1.6 million), based on 5% of profit
before tax from continuing operations excluding dividends received.
Audit scope
• Our audit included full-scope audits of six reporting components (Tate & Lyle PLC, Tate & Lyle
International Finance, the Primary Products business in the US, the Food & Beverage Solutions
business in the US, the US Sucralose business, and G.C. Hahn Limited, a Company in Wales)
with specified audit procedures performed at a further five reporting components
(Tate & Lyle Services Slovakia, Tate & Lyle Insurance Gibraltar, the Brazil Primary Products
business, the Brazil Food & Beverage Solutions business and the US Tax Group). We also
performed testing at the Global Shared Services Centre (GSS) in Poland in support of these
component audits.
Materiality
Audit scope
• Taken together, the components at which audit work was performed accounted for 84% of
consolidated sales and 63% of our profit measure (as defined above). This percentage is calculated
on an absolute basis, which aggregates component profits and losses, ignoring sign convention.
Adjusting further to remove group recharges our work accounted for 81% of our profit measure.
• Our audit covered all components that individually contributed more than 10% of consolidated
sales and our profit measure (as defined above).
• The Group engagement team performed the audit of the standalone Parent Company financial
statements, for which work was performed by the Group engagement team as well as at the
GSS in Poland.
Areas of
focus
Areas of focus
• Commodity risk (Group).
• Complex tax accounting and uncertain tax positions (Group).
• Retirement benefit obligations and assets (Group).
• Goodwill and intangible asset impairment (Group).
• Investments in subsidiaries (Parent).
Consolidated sales
Profit1
Profit2
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1 Reporting
components: 84%
2 Other
components: 16%
1 Reporting
components: 63%
2 Other
components: 37%
1 Reporting
components: 81%
2 Other
components: 19%
1 As defined above.
2 Profit, as defined above, further adjusted for recharges.
The scope of our audit
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the financial statements.
In particular, we looked at where the Directors made subjective judgements, for example in respect of significant accounting estimates
that involved making assumptions and considering future events that are inherently uncertain.
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it operates, and
considered the risk of acts by the Group which were contrary to applicable laws and regulations, including fraud. We designed audit
procedures at Group and significant component level to respond to the risk, recognising that the risk of not detecting a material
misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment
by, for example, forgery or intentional misrepresentations, or through collusion. We focused on laws and regulations that could give rise to
a material misstatement in the Group and Parent Company financial statements, including, but not limited to, the Companies Act 2006, the
Listing Rules, Pensions legislation, UK tax legislation and equivalent local laws and regulations applicable to significant component teams.
Our tests included, but were not limited to, discussions with in-house legal counsel and inspection of underlying support and calculations
where applicable. There are inherent limitations in the audit procedures described above and the further removed non-compliance with
laws and regulations is from the events and transactions reflected in the financial statements, the less likely we would become aware of it.
We did not identify any key audit matters relating to irregularities, including fraud. As in all of our audits we also addressed the risk of
management override of internal controls, including testing journals and evaluating whether there was evidence of bias by the Directors
that represented a risk of material misstatement due to fraud.
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continued
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the financial
statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by the auditors, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in the
audit; and directing the efforts of the engagement team. These matters, and any comments we make on the results of our procedures
thereon, were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do
not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
Key audit matter
How our audit addressed the key audit matter
Commodity risk (Group)
Refer to Notes 2, 28 and 29 in the Group financial statements.
The Group’s accounting policy is to mark-to-market at each balance
sheet date its commodity positions, including its forward sales and
purchase contracts with customers and grain suppliers. In addition,
certain commodity raw material inventories are measured at net
realisable value. The Group manages the commodity price risk on
sales and purchase contracts by taking long and short positions and
through the use of derivative financial instruments, primarily futures
and options contracts.
This was a key audit matter due to the complexity of the calculations
and the judgement involved in the valuation of certain commodities
positions, most notably co-products that do not have an actively
traded futures market. These co-products include corn gluten feed,
corn gluten meal and corn oil. Additionally, basis adjustments are
made to certain commodity valuations to reflect market conditions,
which necessitate further management judgement.
The fair values of commodities pricing contracts as at 31 March
2018 were assets of £22 million and liabilities of £11 million.
We understood and evaluated management’s process for
managing the commodity price risk inherent within its commodity
positions and compared it with management’s underlying risk
management and accounting policies. No matters were identified
that would indicate that the risk management and accounting
policies were not being followed.
We obtained management’s forward pricing sheet for commodities
used in its mark-to-market calculations. For those commodities
with an actively traded market, we assessed the consistency of the
forward prices with those published by the Chicago Mercantile
Exchange. For those commodities where an active futures market
does not exist (principally co-products) and for the basis
adjustments made, we understood and challenged management’s
methodology for determining the valuations, including the inputs
and assumptions used. To further assess the reasonableness of
the forward prices estimated by management, we performed trend
analyses against similar market or exchange traded commodities
and compared certain ratios of co-product prices against
historical ratios.
In addition to testing the forward price estimates, we audited the
calculations of the fair value and associated unrealised gains
and losses on the commodity based positions. We found that
management’s forward price estimates and the calculations of
fair value of positions were reasonable and supported by market
observable data, where appropriate.
Where management had calculated values by reference to non-
market observable data, we found that these were within
acceptable ranges.
For derivative financial instruments, which were used to manage
the commodity price risk, we independently confirmed these
positions with the counterparty and recalculated the fair value
of the positions held. We found that the fair values of these
derivative financial instruments were supported by the
confirmations and recalculations.
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Key audit matter
How our audit addressed the key audit matter
Complex tax accounting and uncertain tax positions (Group)
Refer to Notes 2 and 12 in the Group financial statements.
The nature of the Group’s multinational and cross-border
operations exposes it to complicated tax regulations. This requires
management to exercise judgement in determining the appropriate
amount of tax to provide in respect of tax obligations in a number of
jurisdictions. In addition, certain financing arrangements that the
Group has entered into, while not uncommon or unduly aggressive,
have been previously subject to enquiry by tax authorities. Changes
in management’s estimates of the likely result of enquiries by tax
authorities could materially affect the quantum of tax provisions
recognised in the Group financial statements. At 31 March 2018 the
Group had centrally held provisions for uncertain tax positions of
£30 million (2017 – £34 million). There have also been changes in
tax law in the US that have impacted the Group’s current and
deferred tax balances at 31 March 2018. The most significant
impact has been in respect of the US Tax Cuts and Jobs Act (‘US
Tax Reform’) which was substantively enacted before the year-end.
Some of the changes are complex and there are a number of areas
of uncertainty relating both to the manner in which the law will
apply and to the accounting in certain areas.
Retirement benefit obligations and assets (Group)
Refer to Notes 2 and 30 in the Group financial statements.
The Group has significant retirement benefit obligations in the UK
and the US, including unfunded retirement medical plans in the US.
At 31 March 2018 the present value of these obligations was
£1,612 million (2017 – £1,769 million) offset by plan assets at
fair value of £1,630 million (2017 – £1,630 million) in respect of
funded schemes.
These retirement benefit obligations were determined based on a
number of actuarial assumptions and calculations, which were subject
to significant judgement and estimate. Changes in these assumptions
can have a material impact on the quantum of obligations recorded in
the consolidated statement of financial position.
During FY18 an additional lump sum payment of £56 million was
made to reduce the deficit in the US pension scheme.
In conjunction with our UK, US, and international tax and transfer
pricing specialists, we evaluated and challenged management’s
judgements in respect of estimates of tax exposures and
contingencies, in order to assess the adequacy of the Group’s tax
provisions. This included obtaining a detailed understanding of the
Group’s key technical tax matters and the related risks, including
business and legislative developments.
We recalculated management’s valuation of its tax provisions and
determined whether the calculations were in line with the Group’s
methodology and principles, and whether they had been applied on
a basis consistent with previous years. We also examined
management’s analysis of its financing arrangements and
considered recent correspondence with the tax authorities and
third party tax advisors. From the evidence obtained, we concluded
that the level of provisioning was acceptable.
Additionally, we assessed the appropriateness of judgements and
estimates, as they pertain to taxation matters and concluded they
were appropriate.
We have assessed management’s treatment of changes arising
from US Tax Reform with help from our UK and US tax specialists
and consider the judgements made, including the classification of
the impact of the changes as exceptional, to be appropriate.
We understood and evaluated 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 unfunded retirement medical scheme in the US.
In conjunction with our pension specialists, we challenged the
actuarial assumptions by comparing these against benchmark
ranges based on the market conditions and expectations at
31 March 2018. Based on our review of the assumptions, in each
case we found that the actuarial assumptions used were reasonable
and sat within our acceptable range and, where appropriate, were
applied on a basis consistent with previous years.
In addition, we independently confirmed the pension assets held by
the UK and US schemes with the third-party custodians and fund
managers. We also performed an independent assessment of the
asset valuations and concluded that they were appropriate.
We considered it appropriate to classify the additional lump sum
payment as exceptional as it is non-recurring and material.
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Key audit matter
How our audit addressed the key audit matter
Goodwill and intangible asset impairment (Group)
Refer to Notes 2 and 19 in the Group financial statements.
At 31 March 2018 the Group had a net balance of £204 million of
goodwill (2017 – £212 million) spread across multiple geographies
and relating to multiple cash generating units (‘CGUs’). In addition,
the Group had £156 million of intangible assets (2017 –£189 million)
comprising patents and other intellectual property, capitalised
development expenses and other acquired intangible assets.
The carrying values of goodwill and intangible assets are contingent
on future cash flows and there is a risk that the assets will be
impaired if these cash flows do not meet the Group’s expectations.
The impairment reviews performed by the Group contained a
number of judgements and estimates including revenue growth,
the success of market and capacity expansion, profit margin, cash
conversion, terminal values and discount rates. Changes in these
assumptions could lead to an impairment to the carrying value of
intangible assets and goodwill. During the year, the Group had re-
evaluated the allocation of Goodwill to the CGUs and reduced the
number of CGUs triggered by the Group reorganisation whereby
the Food Systems business has been fully integrated into the
Food & Beverage Solutions segment.
We obtained the Group’s annual impairment analyses and tested
the reasonableness of key assumptions, including profit and cash
flow growth or decline, terminal values and the selection of
discount rates.
We performed our own independent sensitivity calculations to
quantify downside changes to management’s models required to
result in impairment.
With the exception of Biovelop, there is no reasonably possible
change in one or more of the key assumptions used in the
impairment tests for goodwill and other intangible assets that
would give rise to an impairment loss during the coming year.
Our work surrounding the assessment of Biovelop involved
analysing the validity of the key assumption for the valorisation
of its co-products. Incorporating this into the model, it remains
highly sensitive to a reasonably possible change in assumptions,
and as such, a disclosure has been made within the Group’s
financial statements (Note 19), together with a sensitivity
analysis performed.
Investments in subsidiaries (Parent)
Refer to Notes 1 and 4 in the Parent Company financial statements.
The Parent Company holds direct investments in Group
subsidiaries. This is the entity's principal activity and therefore
a key audit matter. At 31 March 2018, the Parent Company had
investments in subsidiary undertakings of £1,037 million
(2017 – £1,028 million).
We obtained the details of the Parent Company’s investments in
subsidiaries on the balance sheet and compared them to the
Parent Company’s share of the subsidiaries’ net assets. As a result
of our work, which leveraged the procedures performed over the
goodwill and intangible asset impairment models described above,
we determined that the impairment charges and reversals recognised
during the year were appropriate and that the carrying values of the
assets recognised on the balance sheet were supportable.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the financial statements as a
whole, taking into account the structure of the Group and the Parent Company, the accounting processes and controls, and the industry in
which they operate.
The Group is structured across three reportable segments; Food & Beverage Solutions, Sucralose and Primary Products, with a central
support function. The Group financial statements are a consolidation of the Group’s reporting units, spread across the three reportable
segments, which comprise the Group’s operating businesses and centralised functions covering more than 250 individual components.
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
components, in order to be able to conclude whether sufficient appropriate audit evidence had been obtained, as a basis for our opinion on
the Group financial statements as a whole. This involvement included oversight visits and review of working papers at the GSS in Poland,
and the Group’s two financially significant components in the US (the US Primary Products business and the US Food & Beverage
Solutions business). We also attended the clearance meetings for these components. In addition, we met with management in Brazil,
Sweden and the UK, and the non-PwC firm audit team for the Group’s joint venture in Mexico, and reviewed the audit work they performed.
The Parent Company operates as a single entity. Work on the audit was performed by both the Group audit team and our component team
at the GSS in Poland. All work was overseen by the Group audit team. Members of the Group audit team conducted a site visit to the GSS in
Poland to discuss the work performed by those auditors.
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Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds for materiality. These,
together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit
procedures on the individual financial statement line items and disclosures and in evaluating the effect of misstatements, both individually
and in aggregate on the financial statements as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Group financial statements
Parent Company financial statements
Overall materiality
£14.7 million (2017 – £12.0 million).
£3·4 million (2017 – £1.6 million).
How we determined it
Rationale for
benchmark applied
5% of profit before tax from continuing operations
(£286 million) adding back the Group’s share of tax of
joint ventures and associates (£12 million) and
exceptional items (£2 million).
The Group’s principal measure of earnings is adjusted
profit before tax from continuing operations, which
excludes exceptional items, amortisation of acquired
intangible assets and net retirement benefit interest
from profit before tax. The Group adjusts for
exceptional items as it believes that doing so is
necessary to provide an understanding of financial
performance. We have not used adjusted profit before
tax, as defined above, as our benchmark since the
amortisation of acquired intangible assets and net
retirement benefit interest are recurring items.
5% of result before tax adding back the receipt of
intercompany dividends.
The Company’s principal measure of earnings is
profit before tax.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality. The range of
materiality allocated across components was between £1 million and £11 million. Certain components were audited to a local statutory
audit materiality that was also less than our overall Group materiality.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above £750,000 (Group audit)
(2017 – £500,000) and £340,000 (Parent Company audit) (2017 – £160,000) as well as misstatements below those amounts that, in our view,
warranted reporting for qualitative reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
Reporting obligation
Outcome
We are required to report if we have anything material to add or draw
attention to in respect of the directors’ statement in the financial
statements about whether the Directors considered it appropriate to
adopt the going concern basis of accounting in preparing the
financial statements and the Directors’ identification of any material
uncertainties to the Group’s and the Parent Company’s ability to
continue as a going concern over a period of at least 12 months from
the date of approval of the financial statements.
We have nothing material to add or to draw attention to. However,
because not all future events or conditions can be predicted, this
statement is not a guarantee as to the Group’s and Parent
Company’s ability to continue as a going concern.
We are required to report if the directors’ statement relating to
Going Concern in accordance with Listing Rule 9.8.6R(3) is
materially inconsistent with our knowledge obtained in the audit.
We have nothing to report.
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Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our auditors’ report
thereon. The Directors are responsible for the other information. Our opinion on the financial statements does not cover the other
information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form
of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so, consider
whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise
appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform
procedures to conclude whether there is a material misstatement of the financial statements or a material misstatement of the other
information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are
required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act
2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006 (CA06),
ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions and matters as
described below (required by ISAs (UK) unless otherwise stated).
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report
for the year ended 31 March 2018 is consistent with the financial statements and has been prepared in accordance with applicable legal
requirements. (CA06)
In light of the knowledge and understanding of the Group and Parent Company and their environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
The Directors’ assessment of the prospects of the Group and of the principal risks that would threaten the solvency or liquidity of
the Group
We have nothing material to add or draw attention to regarding:
• The Directors’ confirmation on page 39 of the Annual Report that they have carried out a robust assessment of the principal risks facing
the Group, including those that would threaten its business model, future performance, solvency or liquidity.
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or mitigated.
• The Directors’ explanation on page 39 of the Annual Report as to how they have assessed the prospects of the Group, over what period
they have done so and why they consider that period to be appropriate, and their statement as to whether they have a reasonable
expectation that the Group will be able to continue in operation and meet its liabilities as they fall due over the period of their
assessment, including any related disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the directors’ statement that they have carried out a robust assessment of the
principal risks facing the Group and statement in relation to the longer-term viability of the Group. Our review was substantially less in
scope than an audit and only consisted of making inquiries and considering the Directors’ process supporting their statements; checking
that the statements are in alignment with the relevant provisions of the UK Corporate Governance Code (the ’Code’); and considering
whether the statements are consistent with the knowledge and understanding of the Group and Parent Company and their environment
obtained in the course of the audit. (Listing Rules)
Other Code Provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the Directors, on page 91, that they consider the Annual Report taken as a whole to be fair, balanced and
understandable, and provides the information necessary for the members to assess the Group’s and Parent Company’s position and
performance, business model and strategy is materially inconsistent with our knowledge of the Group and Parent Company obtained in
the course of performing our audit.
• The section of the Annual Report on page 68 describing the work of the Audit Committee does not appropriately address matters
communicated by us to the Audit Committee.
• The directors’ statement relating to the Parent Company’s compliance with the Code does not properly disclose a departure from a
relevant provision of the Code specified, under the Listing Rules, for review by the auditors.
Directors’ Remuneration
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance with the Companies
Act 2006. (CA06)
98 Tate & Lyle PLC Annual Report 2018
98
Tate & Lyle PLC Annual Report 2018
Responsibilities for the financial statements and the audit
Responsibilities of the Directors for the financial statements
As explained more fully in the Directors’ Statement of Responsibilities, the Directors are responsible for the preparation of the financial
statements in accordance with the applicable framework and for being satisfied that they give a true and fair view. The Directors are also
responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the Directors are responsible for assessing the Group’s and the Parent Company’s ability to
continue as a going concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting
unless the Directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but
to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high
level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement
when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could
reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the Parent 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 required reporting
Companies Act 2006 reporting
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; or
• 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
• certain disclosures of directors’ remuneration specified by law are not made; or
• the Parent Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in agreement with
the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit Committee, we were appointed by the members on 24 January 1990 to audit the financial
statements for the year ended 29 September 1990 and subsequent financial periods. The period of total uninterrupted engagement is
28 years, covering the years ended 29 September 1990 to 31 March 2018.
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John Waters (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
23 May 2018
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Strategic ReportGovernanceFinancial StatementsUseful Information
Consolidated Income Statement
Continuing operations
Sales
Operating profit
Finance income
Finance expense
Share of profit after tax of joint ventures and associates
Profit before tax
Income tax (expense)/credit
Profit for the year – continuing operations
Profit for the year – discontinued operations
Profit for the year – total operations
Notes
5
6
11
11
21
12
8
Profit for the years presented from total operations is entirely attributable to owners of the Company.
Earnings per share
Continuing operations:
– basic
– diluted
Total operations:
– basic
– diluted
Analysis of adjusted profit for the year – continuing operations
Profit before tax – continuing operations
Adjusted for:
Net (gain)/loss on exceptional items
Amortisation of acquired intangible assets
Net retirement benefit interest
Adjusted profit before tax – continuing operations
Adjusted income tax expense – continuing operations
Adjusted profit for the year – continuing operations
13
13
7
19
11, 30
4
4, 12
4
Year ended 31 March
2018
£m
2017
£m
2 710
2 753
290
2
(34)
28
286
(23)
263
2
265
233
2
(34)
32
233
22
255
1
256
Pence
Pence
57.0p
56.1p
57.4p
56.5p
£m
286
(2)
12
5
301
(66)
235
55.0p
54.2p
55.2p
54.4p
£m
233
19
12
7
271
(49)
222
100 Tate & Lyle PLC Annual Report 2018
100 Tate & Lyle PLC Annual Report 2018
Consolidated Statement of Comprehensive Income
Profit for the year
Other comprehensive income/(expense)
Items that have been/may be reclassified to profit or loss:
Fair value gain on cash flow hedges
Fair value (gain)/loss on cash flow hedges transferred to the income statement
Reclassified and reported in the income statement in respect of
available-for-sale financial assets
Fair value gain on available-for-sale financial assets
(Loss)/gain on currency translation of foreign operations
Fair value gain/(loss) on net investment hedges
Share of other comprehensive (expense)/income of joint ventures and
associates
Amounts transferred to the income statement upon disposal of subsidiary
Amounts transferred to the income statement upon disposal of associate
Tax effect of the above items
Items that will not be reclassified to profit or loss:
Re-measurement of retirement benefit plans:
– actual return higher than interest on plan assets
– net actuarial gain/(loss) on retirement benefit obligations
Tax effect of the above items
Total other comprehensive (expense)/income
Total comprehensive income
Analysed by:
– continuing operations
– discontinued operations
Total comprehensive income
Total comprehensive income is entirely attributable to owners of the Company.
Notes
23
23
23
23
23
23
21, 23
23, 34
21, 23
12, 23
30
30
12
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Year ended 31 March
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£m
265
2017
£m
256
–
(4)
–
3
(122)
39
(9)
–
(1)
–
(94)
2
41
(33)
10
(84)
181
179
2
181
1
4
(1)
–
185
(69)
7
(1)
–
–
126
179
(106)
(30)
43
169
425
425
–
425
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Consolidated Statement of Financial Position
ASSETS
Non-current assets
Goodwill and other intangible assets
Property, plant and equipment
Investments in joint ventures
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
TOTAL ASSETS
EQUITY
Capital and reserves
Share capital
Share premium
Capital redemption reserve
Other reserves
Retained earnings
Equity attributable to owners of the Company
TOTAL EQUITY
LIABILITIES
Non-current liabilities
Trade and other payables
Borrowings
Derivative financial instruments
Deferred tax liabilities
Retirement benefit deficit
Provisions for other liabilities and charges
Current liabilities
Trade and other payables
Current tax liabilities
Borrowings and bank overdrafts
Derivative financial instruments
Provisions for other liabilities and charges
TOTAL LIABILITIES
TOTAL EQUITY AND LIABILITIES
Notes
2018
£m
At 31 March
2017
£m
19
20
21
21
18
28
12
17
30
15
17
12
28
16
22
22
23
24
25
28
12
30
32
24
12
25
28
32
360
965
85
–
37
8
7
3
178
1 643
419
294
1
24
190
928
2 571
117
406
8
159
677
1 367
1 367
10
554
21
42
160
15
802
312
57
16
12
5
402
1 204
2 571
401
1 061
92
4
30
15
22
1
120
1 746
441
291
1
31
261
1 025
2 771
117
406
8
253
548
1 332
1 332
10
604
37
25
259
17
952
315
57
88
17
10
487
1 439
2 771
The notes on pages 105 to 168 form part of these financial statements. The consolidated financial statements on pages 100 to 168 were
approved by the Board of Directors on 23 May 2018 and signed on its behalf by:
Nick Hampton
Director
102 Tate & Lyle PLC Annual Report 2018
102 Tate & Lyle PLC Annual Report 2018
Consolidated Statement of Cash Flows
Cash flows from operating activities
Profit before tax from continuing operations
Adjustments for:
– depreciation of property, plant and equipment
– amortisation of intangible assets
– share-based payments
– exceptional income statement items
– net finance expense
– share of profit after tax of joint ventures and associates
Net retirement benefit obligations, comprising:
– Accelerated US defined benefit schemes contribution (exceptional cash flows)
– Underlying funding
Changes in working capital and other non-cash movements
Cash generated from continuing operations
Net income tax paid, comprising:
– Cash tax benefit on accelerated contribution (exceptional cash flows)
– Net underlying income tax paid
Interest paid
Cash used in discontinued operations
Net cash generated from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Purchase of intangible assets
Disposal of property, plant and equipment
Cash adjustment in respect of previous acquisitions
Disposal of businesses, net of cash disposed
Disposal of associates
Purchase of available-for-sale financial assets
Disposal of available-for-sale financial assets
Interest received
Dividends received from joint ventures and associates
Net cash used in investing activities
Cash flows from financing activities
Purchase of own shares to trust or treasury
Cash inflow from additional borrowings
Cash outflow from repayment of borrowings
Repayment of capital element of finance leases
Dividends paid to the owners of the Company
Net cash used in financing activities
Notes
20
19
31
7
11
21
7
26
7
8
34
34
18
21
22
14
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Year ended 31 March
2018
£m
286
114
40
15
(4)
32
(28)
(94)
(56)
(38)
(36)
325
(11)
20
(31)
(27)
(1)
286
(111)
(20)
–
–
–
5
(8)
4
2
26
2017
£m
233
109
40
21
(5)
32
(32)
(36)
–
(36)
4
366
(35)
–
(35)
(30)
(3)
298
(127)
(26)
2
3
3
–
(4)
4
2
29
(102)
(114)
(27)
4
(77)
(1)
(131)
(232)
(18)
66
(189)
(1)
(130)
(272)
Net decrease in cash and cash equivalents
27
(48)
(88)
Cash and cash equivalents
Balance at beginning of year
Net decrease in cash and cash equivalents
Currency translation differences
Balance at end of year
27
27
16
261
(48)
(23)
190
317
(88)
32
261
A reconciliation of the movement in cash and cash equivalents to the movement in net debt is presented in Note 27.
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Consolidated Statement of Changes in Equity
Other
reserves
Retained
earnings
Attributable
to the
owners
of the
Company
Non-
controlling
interests
(NCI)
£m
370
£m
1 028
£m
1
£m
127
–
126
126
–
–
–
–
–
253
–
(94)
(94)
–
–
–
159
256
43
299
24
(18)
3
–
(130)
548
265
10
275
12
(27)
(131)
677
256
169
425
24
(18)
3
–
(130)
1 332
265
(84)
181
12
(27)
(131)
1 367
Notes
14
14
Total
equity
£m
1 029
256
169
425
24
(18)
3
(1)
(130)
1 332
265
(84)
181
12
(27)
(131)
1 367
–
–
–
–
–
–
(1)
–
–
–
–
–
–
–
–
–
Year ended 31 March
2018
Pence
2017
Pence
8.4
20.3
28.7
8.4
19.8
28.2
8.2
19.8
28.0
8.2
19.8
28.0
Share capital
and share
premium
Capital
redemption
reserve
£m
523
£m
8
–
–
–
–
–
–
–
–
523
–
–
–
–
–
–
523
–
–
–
–
–
–
–
–
8
–
–
–
–
–
–
8
At 1 April 2016
Year ended 31 March 2017:
Profit for the year – total operations
Other comprehensive income
Total comprehensive income
Share-based payments, net of tax
Purchase of own shares to trust or treasury
Derecognition of put option on NCI
Movement on NCI
Dividends paid (Note 14)
At 31 March 2017
Year ended 31 March 2018:
Profit for the year – total operations
Other comprehensive (expense)/income
Total comprehensive (expense)/income
Share-based payments, net of tax
Purchase of own shares to trust or treasury
Dividends paid (Note 14)
At 31 March 2018
Dividends on ordinary shares (pence per share)
In respect of the financial year:
– interim
– final
Paid in the financial year:
– interim – in respect of the financial year
– final – in respect of the previous financial year
104 Tate & Lyle PLC Annual Report 2018
104 Tate & Lyle PLC Annual Report 2018
Notes to the Consolidated Financial Statements
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1. Basis of preparation
Description of business
Tate & Lyle PLC (the Company) is a public limited company
incorporated in the United Kingdom and registered in England.
The Company’s ordinary shares are listed on the London
Stock Exchange.
The Company and its subsidiaries (together ‘the Group’) provide
ingredients and solutions to the food, beverage and other
industries. The Group operates from numerous production
facilities around the world.
The Group’s continuing operations comprise three reportable
segments: Food & Beverage Solutions, Sucralose and Primary
Products. Segment information is presented in Note 5.
Accounting period
The Group’s annual financial statements are drawn up to 31 March.
These financial statements cover the year ended 31 March 2018
with comparative financials for the year ended 31 March 2017.
Basis of accounting
The consolidated financial statements on pages 100 to 168 have
been prepared in accordance with International Financial Reporting
Standards (IFRS) and related interpretations 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 Directors are satisfied that the Group has adequate resources
to continue to operate for a period not less than 12 months
from the date of approval of the financial statements and that
there are no material uncertainties around their assessment.
Accordingly, the Directors continue to adopt the going concern
basis of accounting.
The Group’s principal accounting policies have been consistently
applied throughout the year and are set out in Note 2 and Note 3.
Functional and presentation currency
The consolidated financial statements are presented in pounds sterling,
which is also the Company’s functional currency. All amounts are
rounded to the nearest million, unless otherwise indicated.
Accounting standards adopted during the year
In the current year, the Group has adopted, with effect from
1 April 2017, new or revised accounting standards as set out below:
• IAS 7 Disclosure Initiative
• IAS 12 Recognition of Deferred Tax Assets for Unrealised Losses
• Annual Improvements to IFRSs 2014-2016 cycle.
The adoption of these amendments has had no material effect on
the Group’s financial statements.
Use of alternative performance measures
The Group also presents alternative performance measures,
including adjusted operating profit, adjusted profit before tax,
adjusted earnings per share, adjusted operating cash flow
and adjusted free cash flow, which are used for internal
performance analysis and incentive compensation arrangements
for employees.
These measures are presented because they provide investors with
additional information about the performance of the business which
the Directors consider to be valuable. For the years presented,
alternative performance measures exclude, where relevant:
• Exceptional items (excluded as they relate to events which are
unlikely to recur, are outside the normal course of business and
therefore merit separate disclosure in order to provide a better
understanding of the Group's underlying financial performance)
• Amortisation of acquired intangible assets (costs associated with
amounts recognised through acquisition accounting that impact
earnings compared to organic investments)
• Net retirement benefit interest (accounting charges or credits
which are not linked to the underlying performance of the
business. The amounts excluded reflect the net interest cost of
post-retirement benefit plans substantially closed to future
accrual); and
• Tax on the above items and tax items that themselves meet these
definitions. For tax items to be treated as exceptional, amounts
must be material and their treatment as exceptional enable a better
understanding of the Group’s underlying financial performance.
Alternative 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.
Reconciliations of the alternative performance measures to the
most directly comparable IFRS measures are presented in Note 4.
Following the improved funding status of the Group’s pension
schemes, the Group no longer intends to exclude net retirement
benefit interest from its alternative performance measures from
the beginning of the 2019 financial year as the size of this
adjustment is no longer expected to be material.
Changes in constant currency
Where changes in constant currency are presented, they are
calculated by retranslating current year results at prior year
exchange rates. Reconciliations of the movement in constant
currency have been included in the additional information within
this document.
2. Principal accounting policies requiring
significant judgements and estimates
In preparing these consolidated financial statements, management
has made judgements and used estimates and assumptions in
establishing the reported amounts of assets, liabilities, income and
expense under the Group’s accounting policies. Judgements are
based on the best evidence available to management. Estimates
are based on factors including historical experience and
expectations of future events, corroborated with external
information where possible. Judgements and estimates and their
underlying assumptions are reviewed and updated on an ongoing
basis, with any revisions being recognised prospectively. However,
given the inherent uncertainty of such estimates, the actual results
might differ significantly from the anticipated ones.
The accounting policies and information about the accounting
estimates and judgements made in applying these accounting policies
that have the most significant effect on the amounts recognised in the
consolidated financial statements are set out below.
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Notes to the Consolidated Financial Statements continued
2. Principal accounting policies requiring
significant judgements and estimates continued
Fair value measurement
(This accounting policy applies principally to Available-for-sale
financial assets; Derivatives and hedge accounting; Financial
instruments – fair value and risk management; and Retirement
benefit obligations – see Notes 18, 28, 29, and 30)
A number of the Group’s accounting policies and disclosures
require the measurement of fair value for either financial or non-
financial assets and liabilities. Examples of the former include
loans, interest rate swaps and commodity contracts; examples of
the latter include intangible assets and property, plant and
equipment acquired in a business combination.
Fair value is the amount of money, or other consideration, expected
to be exchanged for an asset or a liability in an arm’s length
transaction. When measuring fair value, the Group takes into
account the characteristics of the asset or liability and uses
observable market data, such as prices quoted on a recognised
exchange, to the greatest extent possible. Where such data is not
available, the Group has an established framework in place that
deals with setting, monitoring and evaluating non-observable
inputs, including the respective classification of the fair value
measurements. Such unobservable inputs are based on
management’s own assessment of market and other conditions
currently prevailing or expected to prevail.
Fair value measurements are categorised into three different levels
based on the degree to which the inputs used to arrive at the fair
value of the assets and liabilities are observable and the significance
of the inputs to the fair value measurement in its entirety, as follows:
• Level 1 inputs are quoted prices (unadjusted) in active markets
for identical assets or liabilities that the entity can assess at the
measurement date. The prices of equity shares or bonds quoted
on the London Stock Exchange are examples of Level 1 inputs
• Level 2 inputs are those, other than quoted prices included in
Level 1, that are observable either directly or indirectly. Most
interest rate swaps fall in this category as their prices are
referenced to a published rate curve, but it is not price specific
to the swap itself
• Level 3 inputs are unobservable 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. This would include expected future cash flows from
budgets and forecasts the entity has made. Certain elements of the
Group’s commodity contract portfolio also fall into this category, as
their values include significant management-derived assumptions.
For assets and liabilities that are recognised in the financial
statements at fair value on a recurring basis, the Group determines
whether transfers have occurred between levels in the hierarchy by
re-assessing categorisation (based on the lowest level of input that
is significant to the fair value measurement as a whole) at the end
of the reporting period.
Key sources of estimation uncertainty
Corn and co-product inventories held in the US business are
measured at net realisable value since they are considered to be
agricultural produce after harvest. The Group uses financial
instruments (mainly forward contracts) to manage price risk within
its US business, by hedging the contracted amount of corn when
any business division enters into a finished good sales contract.
106 Tate & Lyle PLC Annual Report 2018
106 Tate & Lyle PLC Annual Report 2018
The elements of the Group’s US net corn position are accounted for
as follows:
• Contracts for the physical purchase of corn in respect of
corresponding committed sales of finished goods are marked to
market in accordance with IAS 39 with any gains or losses
recognised in the income statement
• Contracts for the sale of corn and corn based products are
marked to market in accordance with IAS 39 with any gains or
losses recognised in the income statement
• Corn inventories are measured at net realisable value in
accordance with IAS 2.3, with any gains or losses recognised in
the income statement
• Financial instruments (futures and options) are carried at fair
value with any gains or losses recognised immediately in the
income statement.
Although the Group manages corn price risk by entering into
offsetting ‘back-to-back’ corn positions, there is still underlying
price risk on the basis cost that must be paid for delivery of the corn
to its plants. This basis is the difference in price between that at
which a farmer will sell and the price on the Chicago Mercantile
Exchange (CME), and is typically driven by local supply, demand and
logistics factors, requiring estimation for valuation purposes.
The production of finished goods from corn also results in the
production of three co-products (corn gluten feed, corn gluten
meal and corn oil). The price risk associated with these co-
products cannot readily be hedged as there are no actively traded
markets for these commodities. Whilst the Group actively manages
its overall co-product positions in the US, the Group can hold either
a net long or short position for each co-product based on the
volume of co-products made, bought (or short sold) and forward
sold at any point in time. These positions are measured at fair value
at each reporting date, with gains and losses recognised in the
income statement.
Management exercises significant judgement in deriving these fair
values, which involves estimating the basis and the price at which
the Group will purchase or sell these co-product positions in the
future. These inputs are classified as unobservable, and are derived
by in-house experts, with reference to sources such as: the
expected supply and demand for corn and substitute products,
expectations of weather conditions, and historical published
co-product pricing levels over a period of up to three months from
the balance sheet date.
Whilst it is possible to model the sensitivity of profit to changes in
any one of the key assumptions, it is important to note that, due to
the complexity and interdependence of related assumptions, the
overall (net) impact in reality is likely to be different.
The accounting for corn and co-product positions can
create significant volatility in the Group’s income statement,
although the use of such contracts is critical to the business as it
effectively limits the Group’s exposure to fluctuating market prices.
Whilst it is not practical to quantify all elements included in fair
value measurements, the Group discloses sensitivity analysis on
the key areas of judgement (price of co-products and basis) and the
carrying amounts impacted by estimation uncertainty in Note 29.
Full details of the valuation technique are also included in Note 29.
Corn and co-product positions in Europe are measured and carried
at the lower of cost and net realisable value, since the European
business does not currently have the potential to hedge corn price
risk on a similar basis to the US.
Taxation
(This accounting policy principally applies to Income taxes – see
Note 12)
Taxable profit differs from accounting profit because it excludes
certain items of income and expense that are recognised in the
financial statements but are treated differently for tax purposes.
Current tax is the amount of tax expected to be payable or receivable
on the taxable profit or loss for the current period. This amount is
then amended for any adjustments in respect of prior periods.
Current tax is calculated using tax rates that have been written into
law (‘enacted’) or irrevocably announced/committed by the respective
government (‘substantively enacted’) at the period-end date.
Current tax receivable (assets) and payable (liabilities) are offset
only when there is a legal right to settle them net and the entity
intends to do so. This is generally true when the taxes are levied by
the same tax authority.
Because of the differences between accounting and taxable profits
and losses reported in each period, temporary differences arise on
the amount certain assets and liabilities are carried at for accounting
purposes and their respective tax values. Deferred tax is the amount
of tax payable or recoverable on these temporary differences.
Deferred tax liabilities arise where the carrying amount of an asset
is higher than its tax value (more tax deduction has been taken).
This can happen where the Group invests 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 accounting
carrying amount. Deferred tax liabilities are generally provided on
all taxable temporary differences. The periods over which such
temporary differences reverse will vary depending on the life of the
related asset or liability.
Deferred tax assets arise where the carrying amount of an asset is
lower than the tax value (less tax benefit has been taken). This can
happen where the Group has trading losses, which cannot be offset
in the current period but can be carried forward. Deferred tax assets
are recognised only where the Group considers it probable that it
will be able to obtain the benefit of them in the future (for example,
use such losses by offsetting them against future taxable profits).
Taxable temporary differences can also arise on investments in
foreign subsidiaries and associates, and interests in joint ventures.
Where the Group is able to control the reversal of these differences
and it is probable that these will not reverse in the foreseeable
future, then no deferred tax is provided.
Deferred tax is calculated using the enacted or substantively
enacted rates that are expected to apply when the asset is realised
or the liability is settled.
Similar to current taxes, deferred tax assets and liabilities are
offset only when there is a legal right to settle them net and the
entity intends to do so. This normally requires both assets and
liabilities to have arisen in the same country.
Income tax expense reported in the financial statements comprises
current tax as well as the effects of changes in deferred tax assets
and liabilities. Tax expenses/credits are generally recognised in the
same place as the items to which they relate. For example, the tax
associated with a gain on disposal is recognised in the income
statement, in line with the gain on disposal. Equally, the tax
associated with pension obligation actuarial gains and losses is
recognised in other comprehensive income, in line with the
actuarial gains and losses.
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Key sources of estimation uncertainty
The Group operates in a large number of countries around the
world. Uncertainties exist in relation to the interpretation of
complex tax legislation, changes in tax laws, and the amount and
timing of future taxable income. In some jurisdictions, agreeing tax
liabilities with local tax authorities can take several years. This
could necessitate future adjustments to taxable income and
expense already recorded.
At the period-end date, tax liabilities and assets are based on
management’s best judgements around the application of the tax
regulations and management’s estimate of the future amounts that
will be settled. Management considers tax exposures individually,
and arrives at judgements with support from experienced tax
professionals and external advisors. There is, however, a risk that
the Group’s judgements are challenged by the tax authorities,
resulting in a different tax payable or recoverable from the amounts
that have been provided.
Deferred tax assets are recognised for unused tax losses only to
the extent that it is probable that taxable profit will be available
against which the losses can be utilised. Management judgement
is required to determine the amount of deferred tax that should be
recognised, dependent on the anticipated timing and quantum of
future taxable profit. This amount includes UK deferred tax assets
based on the level of brought-forward losses it expects to utilise in
the future. This amount is dependent on key judgements relating
to the size, duration and interest rate of the Group’s internal
financing arrangements.
The main uncertainties impacting taxation arise from potential
changes to legislation. Firstly, the OECD’s Base Erosion and Profit
Shifting (BEPS) project has been one of the most significant
multilateral initiatives in recent years for modifying international tax
rules. As these recommendations continue to evolve and are
adopted into local tax legislation over the coming years, this may
continue to impact the Group’s effective tax rate. Secondly, on
22 December 2017 the United States enacted the Tax Cuts and Jobs
Act (‘US Tax Reforms’). As well as reducing the headline rate of
corporation tax in the US, it introduced a number of incentives for
companies to invest in the US and other changes to broaden the tax
base in the US. Whilst guidance will continue to emerge,
management has exercised judgement in the application of the US
Tax Reforms which has had a material impact on the Group’s
statutory effective tax rate.
The Group’s operating model involves cross-border supply of
significant volumes of goods into numerous end markets, and the
provision of services from one jurisdiction to another. There is a
risk that different tax authorities could seek to assess higher profits
(or lower costs) to activities being undertaken in their jurisdiction,
potentially leading to higher total tax payable by the Group.
Retirement benefit plans
(This accounting policy principally applies to Retirement benefit
obligations – see Note 30)
The Group operates both defined contribution and defined benefit
pension plans principally in the UK and the US and unfunded
retirement medical plans in the US.
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Notes to the Consolidated Financial Statements continued
2. Principal accounting policies requiring
significant judgements and estimates continued
Retirement benefit plans continued
a) Defined benefit plans
For accounting purposes a valuation of each of the defined benefit
plans is carried out annually at 31 March using 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 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, representing 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 costs of the defined benefit plan that are recognised in the
income statement include the current service cost, any past service
cost and the interest on the net deficit or surplus. Gains or losses
on curtailments or settlements of the plans are recognised in the
income statement in the period in which the curtailment or
settlement occurs. Plan administration costs incurred by the Group
are also recognised in the income statement.
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.
Interest on the net 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.
Re-measurements of the deficit or surplus are recognised in other
comprehensive income. Re-measurements 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.
Key sources of estimation uncertainty
At 31 March 2018, the present value of the benefit obligations of the
plans was £1,612 million (2017 – £1,769 million), including
£63 million (2017 – £76 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.
108 Tate & Lyle PLC Annual Report 2018
108 Tate & Lyle PLC Annual Report 2018
The present value of the benefit obligations is most sensitive to the
discount rate applied to the benefit obligations, assumed life
expectancies, and expected future price inflation rates. Whilst the
Group establishes the assumptions on a consistent basis reflecting
advice from qualified actuaries, based on published indices and other
actuarial data, management must apply judgement in selecting the
most appropriate value from within an acceptable range.
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 interest
on the net deficit or surplus in the plans. However, 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.
Impairment of non-financial assets
(This accounting policy principally applies to Goodwill and other
intangible assets; and Property, plant and equipment – see Notes
19 and 20)
Property, plant and equipment and intangible assets are reviewed
for impairment whenever any events or changes in circumstances
indicate that their carrying amounts may not be recoverable.
If such an indication exists, then the recoverable amount of the asset
is estimated. In addition, goodwill is tested for impairment annually.
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 benefit which the entity expects to derive from the
asset over its life, discounted to present value (value in use) and the
net price for which the entity can sell the asset in the open market
(fair value less costs of disposal). The discount rate used for the
value in use calculation is a pre-tax rate that reflects the risks
specific to the asset or groups of assets tested.
For the purpose of impairment testing, assets are grouped together
into the smallest group of assets which has cash inflows that are
largely independent of the cash inflows from other assets or groups
of assets. This could also be a single asset. Goodwill does not
generate cash inflows independently and is, therefore, tested for
impairment at the level of the Cash Generating Unit (‘CGU’) or
group of CGUs to which it is allocated. Note 19 shows the allocation
of material elements of goodwill to CGUs for impairment testing
purposes. 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. Such
reversals are limited to the carrying amount of the asset had no
impairment been recognised in previous periods. Impairment
losses recognised in respect of goodwill cannot be reversed.
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 present value (‘value in use’). The ‘fair value less
costs of disposal’ of an asset may be used where this results in an
amount in excess of ‘value in use’.
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Key sources of estimation uncertainty
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 exclude benefits from
major expansion projects requiring future capital expenditure
where that expenditure has not been approved and committed on
the dates the assets are tested except where a fair value less costs
of disposal model is used. These estimates are particularly
significant for Tate & Lyle Sweden AB where the amount of
headroom is relatively small.
Future cash flows are discounted using a discount rate appropriate
for the CGU being tested. The discount rate is impacted by
estimates of interest rates, equity returns and market and country-
related risks. The Group’s weighted average cost of capital, which is
used as the initial reference point for the discount rate before any
asset-specific adjustments are made, is reviewed on a regular
basis. If the cash flow or discount rate assumptions were to change
because of market conditions, the recoverable amount could be
different and could result in an asset impairment being increased
or, excepting goodwill, reversed, in part or in full, at a future date.
Critical accounting judgement
In respect of Tate & Lyle Sweden AB (formerly ’Biovelop’), the
Group’s Oat Beta Glucan plant, the impairment test resulted in a
low level of headroom compared to the carrying value. The
recoverable amount is dependent on the ability to commercialise
certain co-product streams which remain under development.
Management has been required to exercise significant judgement
in determining the value of future cash flows associated with these
co-product sales.
3. Other principal accounting policies
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, certain inventories, assets classified as held
for sale, assets held by defined benefit pension plans and intangible
and tangible assets acquired in a business combination.
Basis of consolidation
a) Business combinations
A business combination is a transaction or other event in which the
Group obtains control over a business. Business combinations are
accounted for using the acquisition method, the key elements of
which are set out below.
Identifiable assets and liabilities of the acquired business are
generally measured at their fair value at the acquisition date.
Retirement benefit obligations and deferred tax assets and
liabilities are measured in accordance with the Group’s
accounting policies.
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.
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 written by the Group over non-controlling interests are
initially recognised as a liability measured at the present value of
the exercise price with a corresponding charge directly to equity.
Subsequently, the liability is measured at the present value of the
expected redemption amount and re-measured in accordance
with IAS 39 (at amortised cost), with changes recognised in the
income statement.
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, where a business
combination is 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 re-measurement gain or loss on the
previously held equity interest is recognised in the income
statement. Any shortfall, or negative goodwill, is recognised
immediately as a gain 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 upon loss of control is recognised in the
income statement.
b) Subsidiaries
Subsidiaries are all entities (including structured entities) over
which the Group has control. The Group controls an entity when the
Group is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those
returns through its power over the entity. Subsidiaries are
consolidated from the date on which the Group obtains control.
They are deconsolidated from the date that control ceases.
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. Inter-company transactions, balances and unrealised gains or
losses on transactions between Group companies are eliminated.
c) Equity accounted investments
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.
A joint venture is an entity or a contractual arrangement under
which the Group and other parties undertake activities that are
subject to joint control, whereby the Group has rights to the net
assets of the arrangement rather than to the arrangement’s assets
or obligations for its liabilities.
Interests in associates and joint ventures (together ‘Equity
accounted investments’) are accounted for under the equity
method. They are initially recognised at cost, which includes
transaction costs. Subsequently, 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, until the date
on which significant influence or joint control ceases.
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Notes to the Consolidated Financial Statements continued
3. Other principal accounting policies continued
Basis of consolidation continued
c) Equity accounted investments continued
Losses of an equity accounted investment 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 investment.
Unrealised profits or losses on transactions between the Group and
its equity accounted investments are eliminated to the extent of the
Group’s interest. Losses are, however, recognised in full where
they represent a reduction in the net realisable value of a current
asset or an impairment loss.
Discontinued operations
(see Note 8)
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.
The results, assets and liabilities and cash flows of discontinued
operations are presented separately from those of continuing
operations.
Discontinued operations comprised the following:
Eaststarch / Morocco
During the year ended 31 March 2018, the Group reached a
settlement with the Moroccan tax authorities over historical tax
matters relating to the Group’s former corn wet mill in Casablanca,
Morocco. This resulted in a net credit of £2 million.
Discontinued operations in the comparative year also related to the
Group’s Moroccan subsidiary.
Foreign currency translation
(This accounting policy applies to all transactions and net assets in
foreign currencies)
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.
The consolidated financial statements are presented in pounds
sterling. 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.
Goodwill and fair value adjustments arising on the acquisition of a
foreign operation are treated as assets and liabilities of the foreign
operation and translated accordingly.
When a foreign operation is sold, the gain or loss on disposal
recognised in the income statement is determined after taking into
account the recycling of 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
(This accounting policy relates to Notes 5 and 6)
a) Sales of goods and services
Revenue comprises the fair value of consideration receivable in the
ordinary course of business, net of value added and sales taxes,
rebates and discounts and after eliminating sales within the Group.
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 at which time, in exchange it obtains the right to
consideration. Discounts mainly comprise volume-driven rebates.
The Group accrues for discounts against agreed customer terms
reflecting latest expectations of amounts likely to fall due under
the terms of the customer contract, subsequently adjusted for
actual performance.
Where amounts are paid to customers in advance in order to obtain
commercial rights, the resultant asset is amortised against
revenue in accordance with performance under the agreement.
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
(This accounting policy principally relates to Note 7)
Exceptional items comprise items of income, expense and cash
flow, including tax items, that are: material in amount, relate to
events which are unlikely to recur, are outside the normal course of
business and therefore merit separate disclosure in order to
provide a better understanding of the Group's underlying financial
performance. Examples of events that give rise to the disclosure of
material items of income, expense and cash flow 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 restructuring of components of the Group’s operations.
For tax items to be treated as exceptional, amounts must be
material and their treatment as exceptional enable a better
understanding of the Group’s underlying financial performance.
All material amounts relating to exceptional items in the Group’s
financial statements are classified on a consistent basis across
accounting periods.
Goodwill and other intangible assets
(see Note 19)
a) Goodwill
Goodwill arising in a business combination is recognised as an
intangible asset and is allocated to the 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.
Goodwill is carried at cost less any recognised impairment losses.
b) Intangible assets other than goodwill
Intangible assets other than goodwill are stated at cost less
accumulated amortisation and any recognised impairment losses.
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110 Tate & Lyle PLC Annual Report 2018
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c) Intangible assets acquired in business combinations
An intangible resource acquired in a business combination is
recognised as an intangible asset at its fair value at the date
of acquisition, 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 over the periods of their expected benefit to the
Group, which range from three to 15 years.
d) Other intangible assets
Other intangible assets mainly comprise certain capitalised costs
relating to product development, marketing, computer software
and the 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 established and
prior to the product going into full production. Research and other
related expenditures are charged to the income statement in the
period in which they are incurred.
Other intangible assets are amortised on a straight-line basis over
the periods of their expected benefit to the Group, which are in the
range of three to ten years. Capitalised costs in respect of the core
global IS/IT system are being amortised over a period of five to
seven years.
Residual values and useful lives are reviewed at each period-end
date and adjusted as appropriate, with any resulting changes
recognised in the income statement prospectively.
Property, plant and equipment
(see Note 20)
Land and buildings mainly comprise manufacturing sites,
application laboratories and administrative facilities. Plant and
machinery mainly comprise equipment used in the manufacturing
and operating process. Assets in 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
Plant and machinery
No depreciation
20 to 50 years
Period of the lease
3 to 28 years
Residual values and useful lives are reviewed at each period-end
date and adjusted as appropriate, with any resulting changes
recognised in the income statement prospectively.
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
(see Notes 20, 25, 29 and 33)
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 lease
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 rate of interest.
Depreciation on assets held under finance leases is charged to the
income statement, on a straight-line basis over the shorter of the
lease term and their useful life.
All other leases are treated as operating leases. The total amount
payable under the operating lease, including lease incentives and
guaranteed lease increases, is spread over the lease period on a
straight-line basis. Where termination or extension options are
available to the Group, management considers whether it is
reasonably certain of exercising these options in determining the
lease period.
Inventories
(see Note 15)
Corn and co-product inventories held in the US business are
measured at net realisable value since they are considered to be
agricultural produce after harvest, in accordance with IAS 2.3.
Gains and losses are recognised in the income statement.
All other inventories are carried at the lower of cost and net
realisable value. 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 and is calculated using the ‘first in/first out’ or ‘weighted
average’ 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
(see Notes 16, 17, 18, 24, 25, 28 and 29)
a) Trade receivables
Trade receivables are initially recognised at fair value, which is
generally the same as the invoiced amount, and subsequently
measured at amortised cost, or their recoverable amount. Trade
receivables are predominantly short-term and so the effects of
time-value of money are not considered material.
Where there is objective evidence that the Group will not be
able to collect all amounts due according to the original terms
of the receivable, the receivable is considered to be impaired.
Significant financial difficulties of the debtor, probability that
the debtor will enter bankruptcy or financial reorganisation, and
default or delinquency in payments are considered to be objective
evidence of impairment. The amount of the impairment, and
related provision, is the difference between the receivable’s
original value and the present value of the estimated future
cash flows, discounted at the original effective interest rate.
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Notes to the Consolidated Financial Statements continued
3. Other principal accounting policies continued
Financial instruments continued
a) Trade receivables continued
The impairment is recognised in the income statement
immediately, and the provision is netted against the value of the
receivable. When a trade receivable is deemed uncollectable, it is
written off against the related provision.
Subsequent recoveries of amounts previously written off are
credited against operating expenses in the income statement in the
period in which they are recovered.
b) Trade payables
Trade payables are predominantly short-term and are initially
recognised at fair value, which is generally the invoice amount. The
effects of time-value of money are not considered material.
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 are generally available-for-
sale and are carried at fair value, with movements in fair value
recognised in other comprehensive income. The Group does not
trade equity instruments and does not manage them on a fair value
basis. Where fair value cannot be reliably measured, the assets are
carried 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. Impairment losses recognised in profit or loss for an
investment in an available-for-sale equity instrument are not
reversed through profit or loss. However, if the fair value of an
impaired available-for-sale debt security subsequently increases
and the increase can be related objectively to an event occurring
after the impairment loss was recognised, then the impairment is
reversed through profit or loss.
e) Borrowings
Borrowings are initially measured at fair value, net of transaction
costs incurred, which is generally the amount of proceeds received.
Borrowings are subsequently measured at amortised cost using
the effective interest rate method, whereby the net proceeds are
gradually increased to the amount that will be ultimately settled
using a constant rate of interest. This constant rate of return is
used to calculate the amount recognised as interest expense in the
income statement.
As explained under ‘Hedge accounting’ (see below), the carrying
amount of a borrowing may be adjusted 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 the period-end date.
Dividends on preference shares that are classified as a liability 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
Some contracts may include features that are similar to and expose
the Group to the same risks as standalone derivatives. Where such
an embedded derivative is not closely related to the host contract
and where the host contract itself is not already recognised at fair
value, the embedded derivative is separated from the host contract
and accounted as a standalone derivative. The hedge accounting
principles described below equally apply to embedded derivatives.
h) Offsetting financial instruments
Financial assets and financial liabilities are offset and the net
amount presented in the statement of financial position only where
there is a legally enforceable right to offset them and the Group
intends to either settle them on a net basis or realise the asset and
settle the liability simultaneously.
Hedge accounting
(see Notes 28 and 29)
As described in Note 29, the Group uses derivatives to mitigate risk.
In many cases, the changes in the fair value of the derivatives are
recognised before the hedged risk affects the Group income
statement. For example, when the Group takes out a forward
foreign currency contract to fix the exchange rate on committed or
highly probable future sales in a foreign currency, changes in the
fair value of the forward foreign exchange contract will be
recognised in the income statement immediately, whereas the
future sale will not affect the income statement until it is made.
This creates a mismatch in the timing of recognition for
compensating gains and losses. Hedge accounting seeks to
mitigate this mismatch by applying specific accounting rules, if
strict criteria are met, to the items that create the exposure to risk
and the items used to manage that risk.
A hedging relationship principally consists of two items: the hedged
item and the hedging instrument. The hedged item is the
transaction or balance that exposes the Group to a risk that can be
identified and the hedging instrument is the transaction or balance
that is used to manage the risk. In the above example, the contract
to sell goods at a future date in a foreign currency gives rise to
foreign currency transaction exposure for the Group. As exchange
rates change, the eventual proceeds from the future sale when
expressed in the entity’s functional currency will also change,
creating risk. This is the hedged item. In this example, the foreign
currency exchange contract the Group takes out locks in a known
functional currency value for its foreign currency cash receipt and
therefore eliminates the volatility in cash flows on the sale. The
forward currency exchange contract is the hedging instrument.
112 Tate & Lyle PLC Annual Report 2018
112 Tate & Lyle PLC Annual Report 2018
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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. The hedge 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. This relationship is demonstrated by matching the terms of
hedging instruments very closely to the hedged items, or where the
Group uses more complex arrangements, by the use of statistical
methods that show the relationship between the hedging pairs.
There are three hedging models that apply to different types
of transactions.
a) Cash flow hedges
Hedging relationships are classified as cash flow hedges where the
hedging instrument hedges exposure to variability in cash flows
that are 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.
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).
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 only 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.
Share-based payments
(see Note 31)
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 based on
the fair value of the awards measured at the grant date using the
Black-Scholes option pricing model. Fair value is not subsequently
re-measured 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.
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.
Provisions and contingent liabilities
(see Note 32)
A provision is a liability of uncertain timing or amount that is
recognised when: 1) the Group has a present obligation (legal or
constructive) as a result of a past event; 2) it is more likely than not
that a payment will be required to settle the obligation; and 3) the
amount can be reliably estimated.
Where a payment is not probable, or the amount of the obligation
cannot be measured with sufficient certainty, a contingent liability
is disclosed.
Contingent liabilities are also disclosed if a possible obligation
arises from past events, but its existence will be confirmed only by
the occurrence or non-occurrence of uncertain future events.
Provisions are determined by discounting the expected future
payments 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. The impact of discounting is not material
to the Group.
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. Future operating losses
are not provided for.
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. Before establishing the amount of the provision,
any impairment losses on assets associated with the contract
are recognised.
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
3. Other principal accounting policies continued
Assets held for sale
(see Note 8)
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 and
the following conditions are met:
• it is available for immediate sale in its present condition
• management has committed to, and has initiated, a plan to sell
the asset; and
• the sale is expected to complete within 12 months of the balance
sheet date, and must be highly probable.
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. Any impairment loss
on a disposal group is allocated first to goodwill and then, on a
pro-rata basis, to the remaining assets and liabilities other than
inventories, financial instruments, investment property, employee
benefits and deferred tax assets, which continue to be measured in
accordance with the relevant Group accounting policies.
Impairment on the initial recognition of held for sale assets, and
gains or losses on subsequent re-measurement, are recognised in
the income statement.
Once classified as held for sale, property, plant and equipment and
intangible assets are no longer depreciated or amortised. Equity
accounted investments are no longer equity accounted when
classified as held for sale.
Accounting standards issued but not yet adopted
The following new standards have been issued and are relevant to
the Group, but were not effective for the financial year beginning
1 April 2017, and have not been adopted early:
a) IFRS 15 Revenue from Contracts with Customers (effective
for the year ending 31 March 2019)
The Group has undertaken a review of its commercial
arrangements across all significant revenue streams and
geographies including assessing the timing of revenue recognition
as well as focusing on the accounting for principal and agency
relationships, consignment stocks and discounts provided. As a
result of the review, the Group has concluded that the adoption of
IFRS 15 is not expected to have a material impact on reported
revenue or revenue growth rates.
b) IFRS 9 Financial Instruments (effective for the year ending
31 March 2019)
The Group has reviewed the key areas of IFRS 9 and its activities in
these areas to ensure full compliance upon adoption. The Group
has concluded that the adoption of IFRS 9 will not have a material
impact on its consolidated results or financial position.
The review focused on all three aspects of IFRS 9:
Classification and measurement
The Group expects to continue measuring at fair value all financial
assets currently held at fair value. The Group intends to apply the
option to present fair value changes in Other Comprehensive
Income (OCI) for those equity shares currently held as available-
for-sale (AFS) and which are intended to be held for the foreseeable
future. All other assets held as AFS are expected to be measured at
fair value through profit or loss. Any amounts held in OCI related to
those other assets will be reclassified to retained earnings, the
quantum of which is expected to be immaterial. Trade receivables
and other receivables are held to collect the principal amount in
line with the contractual arrangements. As such, the Group has
concluded that they meet the criteria for amortised cost
measurement under IFRS 9. This is consistent with the current
basis of accounting.
Impairment
The Group will apply the simplified approach and record lifetime
expected losses on all trade receivables. The loss allowance to be
recognised is not expected to be material.
Hedge accounting
The Group determined that all existing hedge relationships that are
currently designated in effective hedging relationships will continue
to qualify for hedge accounting under IFRS 9. As IFRS 9 does not
change the general principles of how an entity accounts for
effective hedges, applying the hedging requirements of IFRS 9 is
not expected to have a significant impact on the Group’s financial
statements.
c) IFRS 16 Leases (effective for the year ending 31 March 2020)
The standard eliminates the classification of leases as
either operating or finance leases and introduces a single
accounting model, requiring the recognition of substantially
all current operating lease commitments on the statement of
financial position.
The Group is in the process of performing an impact assessment by
assessing all existing leases against the guidance contained in
IFRS 16. Material judgements and estimates are required in
identifying and accounting for leases and determining the discount
rate, as well as choosing the transition methodology. The Group is
continuing to assess the impact of these judgements and
estimates, and based on current information, expects a material
increase in both property, plant and equipment and associated
lease obligations. A quantification of the impact upon adoption will
be included in the 31 March 2019 financial statements.
d) IFRIC 23 Uncertainty over Income Tax Treatments (effective
for the year ending 31 March 2020, subject to EU endorsement)
The interpretation is to be applied to the determination of taxable
profit (tax loss), tax bases, unused tax losses, unused tax credits
and tax rates, when there is uncertainty over income tax treatments
under IAS 12. The financial impact of this, together with any other
implications of this interpretation, will be assessed during the 2019
financial year.
No other new standards, new interpretations or amendments
to standards or interpretations have been published which
are expected to have a significant impact on the Group’s
financial statements.
114 Tate & Lyle PLC Annual Report 2018
114 Tate & Lyle PLC Annual Report 2018
4. Reconciliation of alternative performance measures
Income statement measures
For the reasons set out in Note 1, the Group presents alternative performance measures including adjusted operating profit, adjusted
profit before tax and adjusted earnings per share.
For the years presented, these alternative performance measures exclude, where relevant:
• exceptional items
• the amortisation of acquired intangible assets
• net retirement benefit interest
• tax on the above items and tax items that themselves meet these definitions.
Following the improved funding status of the Group’s pension schemes, the Group no longer intends to exclude net retirement benefit
interest from its alternative performance measures from the beginning of the 2019 financial year as the size of this adjustment is no longer
expected to be material.
The following table shows the reconciliation of the key income statement alternative performance measures to the most directly
comparable measures reported in accordance with IFRS:
£m unless otherwise stated
Continuing operations
Sales
Operating profit
Net finance expense
Share of profit after tax of joint ventures and
associates
Profit before tax
Income tax (expense)/credit
Profit for the year
Basic earnings per share (pence)
Diluted earnings per share (pence)
Effective tax rate expense/(credit) %
Year ended 31 March 2018
Year ended 31 March 2017
IFRS
reported
Adjusting
items
Adjusted
reported
IFRS
reported
Adjusting
items
Adjusted
reported
2 710
290
(32)
28
286
(23)
263
57.0p
56.1p
8.1%
–
10
5
–
15
(43)
(28)
(6.1p)
(6.0p)
2 710
2 753
300
(27)
28
301
(66)
235
50.9p
50.1p
21.9%
233
(32)
32
233
22
255
55.0p
54.2p
(9.6%)
–
31
7
–
38
(71)
(33)
(7.2p)
(7.1p)
2 753
264
(25)
32
271
(49)
222
47.8p
47.1p
18.2%
The following table shows the reconciliation of the adjusting items impacting adjusted profit for the year in the current and comparative year:
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Continuing operations
Exceptional (gain)/loss in operating profit
Amortisation of acquired intangible assets
Total excluded from adjusted operating profit
Net retirement benefit interest
Total excluded from adjusted profit before tax
Tax credit on adjusting items
Exceptional tax credits
Total excluded from adjusted profit for the year
Notes
7
19
11
12
7, 12
Year ended 31 March
2018
£m
2017
£m
(2)
12
10
5
15
(5)
(38)
(28)
19
12
31
7
38
(6)
(65)
(33)
Cash flow alternative performance measures
The Group also presents two alternative cash flow measures which are defined as follows:
a) Adjusted free cash flow represents cash generated from continuing operations, after net interest and tax paid, and capital
expenditure and excluding the impact of exceptional items.
b) Adjusted operating cash flow is defined as adjusted free cash flow from continuing operations, adding back net interest and tax
paid, retirement cash contributions, and excluding derivative and margin call movements within working capital.
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
4. Reconciliation of alternative performance measures continued
Cash flow alternative performance measures continued
The following table shows the reconciliation of these cash flow alternative performance measures:
Adjusted operating profit from continuing operations
Adjusted for:
Depreciation and adjusted amortisation
Share-based payments charge
Changes in working capital and other non-cash movements
Net retirement benefit obligations
Less: accelerated US defined benefit schemes contribution (exceptional cash flows)
Net retirement benefit obligations: underlying funding
Capital expenditure
Net interest and tax paid
Less: cash tax benefit on accelerated contribution (exceptional cash flows)
Net interest and tax paid: underlying
Adjusted free cash flow
Add back: net interest and tax paid (excluding exceptional cash flows)
Add back: net retirement underlying cash contributions
Less: derivatives and margin call movements within changes in working capital
Adjusted operating cash flow
Year ended 31 March
2018
£m
300
142
15
(36)
(94)
56
(38)
(131)
(36)
(20)
(56)
196
56
44
3
299
2017
£m
264
137
21
4
(36)
–
(36)
(153)
(63)
–
(63)
174
63
42
(6)
273
Other performance measures
The Group presents certain financial measures as defined in its external financial covenants as well as return on capital employed (ROCE)
as Key Performance Indicators. Net debt to EBITDA and interest cover are defined under the Group’s financial covenants and are required
to be reported on a proportionate consolidation basis. For financial covenant purposes these ratios are calculated based on the accounting
standards that applied for the 2014 financial year, with new accounting standards adopted by the Group subsequent to 1 April 2014
disregarded. Net debt is calculated using average currency exchange rates. Average invested operating capital represents the average
at the beginning and end of the year of goodwill and other intangible assets, property, plant and equipment, working capital, provisions,
non-debt derivatives and other assets. All ratios are calculated based on unrounded figures in £ million. The following tables present the
calculation of these alternative measures:
Calculation of net debt to EBITDA ratio – on a financial covenant basis
Net debt
Further adjustments set out in financial covenants:
to reflect use of average exchange rates in translating net debt and proportionate
consolidation
Net debt – on a financial covenant basis
Adjusted operating profit
Further adjustments set out in financial covenants:
to reflect proportionate consolidation
to exclude charges for share-based payments
to add back depreciation and adjusted amortisation
deduction for other finance costs
Pre-exceptional EBITDA – on a financial covenant basis
Net debt to EBITDA ratio (times)
116 Tate & Lyle PLC Annual Report 2018
116 Tate & Lyle PLC Annual Report 2018
Note
2018
£m
31 March
2017
£m
27
392
452
25
417
300
44
15
142
(2)
499
0.8
(13)
439
264
48
21
137
–
470
0.9
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n
4. Reconciliation of alternative performance measures continued
Other performance measures continued
Calculation of interest cover ratio – on a financial covenant basis
Adjusted operating profit
Further adjustments set out in financial covenants:
to reflect proportionate consolidation
to exclude charges for share-based payments
deduction for other finance costs
2018
£m
300
39
15
(2)
31 March
2017
£m
264
43
21
–
Operating profit before exceptional items and amortisation of intangible assets
– on a financial covenant basis
352
328
Adjusted net finance expense
Less: Other finance costs
Further adjustments set out in financial covenants:
to reflect proportionate consolidation and other adjustments
Net finance expense – on a financial covenant basis
Interest cover ratio (times)
Calculation of return on capital employed
Adjusted operating profit
Add back amortisation on acquired intangible assets
Profit before interest, tax and exceptional items from continuing operations for ROCE
Goodwill and other intangible assets
Property, plant and equipment
Working capital, provisions and non-debt derivatives
Other
Invested operating capital of continuing operations
Average invested operating capital
Return on capital employed (ROCE) %
25
–
(1)
24
13.9
31 March
2016
£m
390
926
323
29
1 668
27
(2)
(1)
24
14.6
2017
£m
264
(12)
252
401
1 061
394
–
1 856
1 762
14.3
2018
£m
300
(12)
288
360
965
385
–
1 710
1 783
16.2
5. Segment information
Segment information is presented on a basis consistent with the information presented to the Board (the designated Chief Operating
Decision Maker) for the purposes of allocating resources within the Group and assessing the performance of the Group’s businesses.
As described on page 37, continuing operations now comprise three reportable segments: Food & Beverage Solutions, Sucralose (which
together made up the Speciality Food Ingredients segment in the prior year) and Primary Products (Bulk Ingredients segment in the prior
year). This change was made to reflect the different economic characteristics of these products, and reflects the way in which information
on the Group’s performance is presented to the Board. Central, which comprises central costs including head office, treasury and re-
insurance activities, does not meet the definition of an operating segment under IFRS 8 ‘Operating Segments’ but is included in order to be
consistent with the presentation of segment information presented to the Board. The segments are served by a single manufacturing
network, and receive services from a number of global support functions. The segmental allocation of costs is performed using standard
product costs to allocate all direct costs (including manufacturing facility-based depreciation) and allocation keys for all indirect costs
(including share-based payments and amortisation) consistently applied over time.
www.tateandlyle.com 117
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
5. Segment information continued
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 year on year.
During the years presented, the items excluded from operating profit in arriving at adjusted operating profit were the amortisation of
acquired intangible assets and exceptional items. The segmental classification of exceptional items is detailed in Note 7.
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. The segmental split of working capital allocates raw material and co-product inventories, and associated payables, based on the
segmental split of primary capacity. Other payables, work in progress and finished goods inventories and receivables are allocated based
on the products to which they relate. The segment results were as follows:
a) Segment sales
Food & Beverage Solutions
Sucralose
Primary Products
Sales – continuing operations
Sales – discontinued operations
Sales – total operations
Note
8
Year ended 31 March
2018
£m
850
146
1 714
2 710
–
2 710
2017*
£m
834*
162*
1 757
2 753
3
2 756
* Restated to reflect the change in reportable segments made in the 2018 financial year.
If the above segmental information were presented on a basis consistent with the prior year, Food & Beverage Solutions and Sucralose
would be combined as Speciality Food Ingredients to show sales for the year ended 31 March 2018 of £996 million (2017 – £996 million).
Primary Products was renamed from Bulk Ingredients in the year.
b) Segment results
Adjusted operating profit, as defined in Notes 1 and 4, is the measure of profitability of the Group’s businesses used by the Board as it is
considered to be the best measure to compare the results over time.
Year ended 31 March
Notes
7
19
11
11
21
2018
£m
137
55
166
(58)
300
2
(12)
290
2
(34)
28
286
–
286
2017*
£m
129*
52*
129
(46)
264
(19)
(12)
233
2
(34)
32
233
1
234
Food & Beverage Solutions
Sucralose
Primary Products
Central
Adjusted operating profit – continuing operations
Adjusting items:
– exceptional items
– amortisation of acquired intangible assets
Operating profit – continuing operations
Finance income
Finance expense
Share of profit after tax of joint ventures and associates
Profit before tax – continuing operations
Profit before tax – discontinued operations
Profit before tax – total operations
* Restated to reflect the change in reportable segments made in the 2018 financial year.
118 Tate & Lyle PLC Annual Report 2018
118 Tate & Lyle PLC Annual Report 2018
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5. Segment information continued
Adjusted operating margin
Food & Beverage Solutions
Sucralose
Primary Products
Central
Total – continuing operations
Year ended 31 March
2018
%
2017*
£m
16.1%
37.7%
9.7%
n/a
11.1%
15.5%*
32.1%*
7.3%
n/a
9.6%
* Restated to reflect the change in reportable segments made in the 2018 financial year.
If the above segmental information were presented on a basis consistent with the prior year, Food & Beverage Solutions and Sucralose
would be combined as Speciality Food Ingredients to show adjusted operating profit for the year ended 31 March 2018 of £192 million
(2017 – £181 million) and an adjusted operating margin of 19.3% (2017 – 18.2%). Primary Products was renamed from Bulk Ingredients in
the year.
c) Segment assets/(liabilities)
Segment assets and segment liabilities include net working capital (inventories, trade and other receivables, less trade and other
payables). An analysis of total assets and total liabilities by operating segment is not presented to the Board.
Net working capital
Food & Beverage Solutions
Sucralose
Primary Products
Central
Group working capital – continuing and total operations
Other assets/(liabilities)
Group assets/(liabilities)
Net working capital
Food & Beverage Solutions
Sucralose
Primary Products
Central
Group working capital – continuing and total operations
Other assets/(liabilities)
Group assets/(liabilities)
Assets
£m
Liabilities
£m
287
62
357
10
716
1 855
2 571
At 31 March 2018
Net
£m
154
53
212
(25)
394
973
(133)
(9)
(145)
(35)
(322)
(882)
(1 204)
1 367
At 31 March 2017*
Assets
£m
Liabilities
£m
307*
64*
349
13
733
2 038
2 771
(122)*
(7)*
(146)
(50)
(325)
(1 114)
(1 439)
Net
£m
185*
57*
203
(37)
408
924
1 332
* Restated to reflect the change in reportable segments made in the 2018 financial year.
If the above segmental information were presented on a basis consistent with the prior year, Food & Beverage Solutions and Sucralose
would be combined as Speciality Food Ingredients to show net working capital assets of £349 million (2017 – £371 million) and net working
capital liabilities of £142 million (2017 – £129 million). Primary Products was renamed from Bulk Ingredients in the year.
www.tateandlyle.com 119
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
5. Segment information continued
d) Other information – depreciation
Food & Beverage Solutions
Sucralose
Primary Products
Central
Depreciation – continuing operations
Depreciation – total operations
Year ended 31 March
2018
£m
38
9
66
1
114
114
2017*
£m
36*
9*
63
1
109
109
* Restated to reflect the change in reportable segments made in the 2018 financial year.
If the above segmental information were presented on a basis consistent with the prior year, Food & Beverage Solutions and Sucralose
would be combined as Speciality Food Ingredients to show depreciation of £47 million (2017 – £45 million). Primary Products was renamed
from Bulk Ingredients in the year.
e) Other information – amortisation
Food & Beverage Solutions
Sucralose
Primary Products
Central
Amortisation – continuing operations
Amortisation – total operations
Year ended 31 March
2018
£m
30
–
9
1
40
40
2017*
£m
30*
–*
9
1
40
40
* Restated to reflect the change in reportable segments made in the 2018 financial year.
If the above segmental information were presented on a basis consistent with the prior year, Food & Beverage Solutions and Sucralose
would be combined as Speciality Food Ingredients to show amortisation of £30 million (2017 – £30 million). Primary Products was renamed
from Bulk Ingredients in the year.
f) Other information – share-based payments
Food & Beverage Solutions
Sucralose
Primary Products
Central
Share-based payments – continuing operations
Share-based payments – total operations
Year ended 31 March
2018
£m
3
1
4
7
15
15
2017*
£m
6*
1*
6
8
21
21
* Restated to reflect the change in reportable segments made in the 2018 financial year.
If the above segmental information were presented on a basis consistent with the prior year, Food & Beverage Solutions and Sucralose
would be combined as Speciality Food Ingredients to show share-based payments of £4 million (2017 – £7 million). Primary Products was
renamed from Bulk Ingredients in the year.
120 Tate & Lyle PLC Annual Report 2018
120 Tate & Lyle PLC Annual Report 2018
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5. Segment information continued
g) Other information – capital investment
Capital investment comprises the cost of acquisition of businesses and capital expenditure on property, plant and equipment, intangible
assets (including amounts accrued) and investments. Capital investment is allocated based on the product(s) to which the investment
relates. Where capital expenditure relates to plant sustaining or cost reduction projects, the cost is allocated based on the segmental split
of the product mix by plant.
Food & Beverage Solutions
Sucralose
Primary Products
Central
Capital investment – continuing operations
Capital investment – total operations
Year ended 31 March
2018
£m
51
4
67
19
141
141
2017*
£m
60*
6*
73
19
158
158
* Restated to reflect the change in reportable segments made in the 2018 financial year.
If the above segmental information were presented on a basis consistent with the prior year, Food & Beverage Solutions and Sucralose
would be combined as Speciality Food Ingredients to show capital investment of £55 million (2017 – £66 million). Primary Products was
renamed from Bulk Ingredients in the year.
h) Geographical information – sales by destination
United Kingdom
United States
Other European countries
Rest of the world
Sales – continuing operations
Sales – discontinued operations
Sales – total operations
i) Geographical information – sales by origin
United Kingdom
United States
Other European countries
Rest of the world
Sales – continuing operations
Sales – discontinued operations
Sales – total operations
Note
8
Note
8
Year ended 31 March
2018
£m
39
1 902
312
457
2 710
–
2 710
2017
£m
34
2 057
306
356
2 753
3
2 756
Year ended 31 March
2018
£m
45
2 128
342
195
2 710
–
2 710
2017
£m
37
2 173
335
208
2 753
3
2 756
j) Concentration of revenue
During the year ended 31 March 2018, no customer contributed more than 10% of the Group’s external sales from continuing operations
(2017 – no customer contributed more than 10%).
www.tateandlyle.com 121
www.tateandlyle.com 121
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
5. Segment information continued
k) Geographical information – location of non-current assets
The Parent Company is based in the United Kingdom. The location of non-current assets, other than financial instruments, deferred tax
assets and retirement benefits are as follows:
United Kingdom
United States
Other European countries
Rest of the world
Non-current assets
6. Operating profit
Analysis of operating expenses by nature:
Continuing operations
External sales
Operating expenses
Cost of inventories (included in cost of sales)
Staff costs (of which £151 million (2017 – £153 million) was included in cost
of sales)
Depreciation of property, plant and equipment:
– owned assets (of which £104 million (2017 – £99 million) was included in cost
of sales)
– leased assets (included in cost of sales)
Exceptional (gain)/loss
Amortisation of intangible assets:
– acquired intangible assets
– other intangible assets
Operating lease rentals
Impairment of trade receivables
Impairment of intangible assets (non-exceptional items)
Other operating expenses
Total operating expenses
Operating profit
2018
£m
17
965
331
100
1 413
At 31 March
2017
£m
20
1 088
343
108
1 559
Year ended 31 March
2018
£m
2 710
2017
£m
2 753
1 362
1 449
Notes
10
336
328
20
20
7
19
19
17
19
113
1
(2)
12
28
35
1
1
533
2 420
290
106
3
19
12
28
32
5
5
533
2 520
233
Research and development expenditure totalling £35 million (2017 – £37 million) was included within amounts above.
122 Tate & Lyle PLC Annual Report 2018
122 Tate & Lyle PLC Annual Report 2018
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7. Exceptional items
Exceptional items recognised in arriving at operating profit were as follows:
Continuing operations
Tate & Lyle Ventures gain on disposals
Business re-alignment – impairment, restructuring and other net costs
Asset impairments and related costs
US retirement benefit obligation settlement gain
Exceptional items – continuing operations
Discontinued operations
Business re-alignment – Eaststarch / Morocco disposals
Exceptional items – discontinued operations
Exceptional items – total operations
Footnotes
Year ended 31 March
2018
£m
2017
£m
(a)
(b)
(c)
(d)
(e)
2
–
–
–
2
–
–
2
3
(5)
(26)
9
(19)
1
1
(18)
In addition, the following exceptional tax items were recognised in the current and comparative year:
Continuing operations
US tax adjustments
UK tax adjustments
Exceptional tax credit – continuing operations
Discontinued operations
Moroccan tax matters
Exceptional tax credit – discontinued operations
Exceptional tax credit – total operations
Footnotes
Year ended 31 March
2018
£m
2017
£m
(f)
(g)
(h)
36
2
38
2
2
40
31
34
65
–
–
65
Continuing operations – within operating profit
a)
In the year ended 31 March 2018, the Group recognised a £2 million cash gain, in respect of the disposal of an investment held
as part of its venture fund portfolio, previously classified as an available-for-sale financial asset. This gain was classified within
central costs.
In the year ended 31 March 2017, the Group recognised a £3 million cash gain, primarily in respect of deferred consideration
received following disposal of part of its venture fund portfolio. This profit was classified within central costs.
b)
In the year ended 31 March 2018, the Group paid cash of £2 million to utilise remaining provisions in respect of the business
re-alignment of Sucralose and its European operations, but recognised no charges in this respect during the year.
In the year ended 31 March 2017, the Group recognised a net £5 million charge (£6 million of cash costs offset by a £1 million
non-cash credit) in respect of the business re-alignment of Sucralose and its European operations. Cash payments in respect
of this re-alignment were £21 million. The net £5 million charge was recognised within the Sucralose segment.
c)
In the year ended 31 March 2017, the Group recognised a net £13 million exceptional charge in respect of its Brazilian Food
Systems business, Gemacom Tech Indústria E Comércio S.A. reflecting a partial impairment of goodwill offset by lower contingent
consideration now expected to fall due. The net charge was recognised within the Food & Beverage Solutions segment.
In the year ended 31 March 2017, the Group recognised a £7 million charge for the disposal of its equity interest in
Jiangsu Tate & Lyle Howbetter Food Co., Ltd, its Food Systems subsidiary in China. Cash payments for costs totalled
£3 million. This charge was recognised within the Food & Beverage Solutions segment.
Also recognised in the year ended 31 March 2017 was a non-cash charge of £6 million in respect of the impairment of certain
redundant assets at our Decatur facility in the US. The charge was recognised within the Primary Products segment.
d)
In the year ended 31 March 2017, the Group recognised a £9 million non-cash gain in respect of the settlement of certain
elements of its US retirement benefit plan obligations. The exceptional gain was recognised within the Primary Products
segment (£6 million) and the Food & Beverage Solutions segment (£3 million).
There was no net tax on continuing exceptional items in either the current or comparative year. Tax credits/charges on exceptional items
are only recognised to the extent that gains/losses incurred are expected to result in tax recoverable/payable in the future.
www.tateandlyle.com 123
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
7. Exceptional items continued
Discontinued operations – within operating profit
e) On 1 June 2016, the Group completed the sale of its corn wet mill in Casablanca, Morocco to ADM, receiving gross cash
proceeds of £4 million. In the year ended 31 March 2017, following completion of this disposal, the Group recognised a
£1 million exceptional gain resulting from the recycling of cumulative foreign exchange translation gains from reserves to the
income statement. This non-cash gain was recognised within the Primary Products segment.
There was no tax on discontinued exceptional items in either the current or comparative year.
Continuing operations – exceptional taxation items
f)
In the year ended 31 March 2018, the Group recognised an exceptional tax credit of £36 million, principally reflecting the
revaluation downwards of net US deferred tax liabilities following the reduction in the US federal corporation tax rate from
1 January 2018. US deferred tax liabilities primarily comprise amounts arising from accelerated tax depreciation on assets.
In the year ended 31 March 2017, following the transfer at fair value of its sucralose intellectual property assets from the UK to
the US, the Group recognised an exceptional deferred tax credit of £31 million, reflecting the anticipated future tax benefits.
g)
In the year ended 31 March 2018, two significant changes drove an exceptional net credit of £2 million resulting from the
increase in UK deferred tax assets:
i. UK legislation to limit to 50% the utilisation of brought-forward losses was enacted during the second half of the 2018
financial year, resulting in a £16 million write down of the previous deferred tax asset recognised in relation to the Group’s
internal financing arrangements.
ii. Anticipated changes to the Group’s internal financing arrangements, enabled by amendments to US tax legislation, led to
the recognition of an increase in the deferred tax asset of £18 million.
In the year ended 31 March 2017, following changes in UK tax legislation arising from the OECD’s Base Erosion and Profit
Shifting project and changes to the internal financing arrangements we use to fund our international businesses, the Group
recognised an exceptional deferred tax credit of £34 million, reflecting previously unrecognised tax losses in the UK, which,
based on enacted legislation at the time, were expected to be utilised against future UK taxable profits.
Discontinued operations – exceptional taxation items
h)
In the year ended 31 March 2018, the Group recognised an exceptional tax gain of £2 million following settlement with the
Moroccan tax authorities of historical matters relating to the Group’s former Moroccan subsidiary. The Group made a payment
of £1 million in respect of this matter during the 2018 financial year. This subsidiary was sold, as part of a broader transaction,
to ADM on 1 June 2016.
Exceptional cash flows
Net cash outflows on exceptional items were as follows:
Continuing operations
Business re-alignment – impairment, restructuring and other net costs
Asset impairment and related costs
Net cash outflows – exceptional items
Income statement (gain)/loss – included in profit before tax
Adjustment for exceptional income statement items – per statement of cash flows
Footnotes
(b)
(c)
Accelerated US defined benefit schemes contribution (exceptional cash flows)
Cash tax benefit on accelerated contribution (exceptional cash flows)
Adjustment for exceptional cash flows
(i)
Year ended 31 March
2018
£m
(2)
–
(2)
(2)
(4)
(56)
20
(36)
2017
£m
(21)
(3)
(24)
19
(5)
–
–
–
i)
In the year ended 31 March 2018, the Group made an accelerated cash contribution of £56 million into the US defined benefit
pension schemes against which the Group received a cash tax benefit of £20 million leading to an overall cash outflow of
£36 million. This cash contribution was incremental to the ongoing annual scheme payments.
In addition, in the year ended 31 March 2018, there were exceptional cash flows relating to the sale of assets from the Group’s venture fund
portfolio totalling £2 million (2017 – £2 million) recognised within cash from investing activities.
124 Tate & Lyle PLC Annual Report 2018
124 Tate & Lyle PLC Annual Report 2018
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8. Discontinued operations
The discontinued operations of the Group are disclosed and discussed further in Note 3.
The results of the discontinued operations which have been included in the Consolidated income statement were as follows:
Discontinued operations – Eaststarch / Morocco
Sales
Operating profit including exceptional items
Profit for the year – discontinued operations
Notes
5
Year ended 31 March
2018
£m
–
–
2
2017
£m
3
1
1
Basic and diluted earnings per share (pence) – discontinued operations
13
0.4p
0.2p
During the year ended 31 March 2018, the Group recognised an exceptional tax gain of £2 million following settlement with the Moroccan
tax authorities of historical matters relating to the Group’s former Moroccan subsidiary. The Group made a payment of £1 million in
respect of this matter during the 2018 financial year. This subsidiary was sold, as part of a broader transaction, to ADM on 1 June 2016.
In the year ended 31 March 2017, the Group received gross cash proceeds of £4 million in relation to this sale to ADM and recognised a
£1 million exceptional gain (see Note 7).
The results of the discontinued operations which have been included in the consolidated statement of cash flows were as follows:
Discontinued operations – Eaststarch / Morocco
Profit before tax from discontinued operations
Adjustment for:
Exceptional items and changes in working capital
Cash used in discontinued operations
9. Auditors’ remuneration
Fees payable to the Company’s external 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
– audit-related assurance services
– other non-audit services
Fees in respect of the audit of the Group’s pension schemes
Total
Year ended 31 March
2018
£m
–
(1)
(1)
2017
£m
1
(4)
(3)
Year ended 31 March
2018
£m
0.7
1.6
0.1
–
2.4
0.1
2.5
2017
£m
0.7
1.7
0.1
0.1
2.6
0.1
2.7
The audit and non-audit fees related to joint ventures payable to PricewaterhouseCoopers LLP and its associates, excluded from the table
above, were £0.1 million (2017 – £0.1 million) and £nil (2017 – £nil) respectively.
www.tateandlyle.com 125
www.tateandlyle.com 125
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
10. 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
2018
£m
282
25
3
10
1
15
336
2017
£m
275
22
2
7
1
21
328
The average number of people employed by the Company and its subsidiaries, including part-time employees, is set out below:
By reportable segment
Continuing operations
Food & Beverage Solutions
Sucralose**
Primary Products
Central
Total
Year ended 31 March
2018
2017*
1 811
90
1 754
534
4 189
1 843*
88*
1 731
489
4 151
* Restated to reflect the change in reportable segments made in the 2018 financial year.
** The Food & Beverage Solutions division operates with a single commercial team. It is not practicable to split this team between the two segments comprising this
division, and therefore the entire headcount of this team has been included within the Food & Beverage Solutions segment.
In the year ended 31 March 2018, there were no employees (2017 – average number of employees – 15) within discontinued operations.
At 31 March 2018, the Group employed 4,192 (2017 – 4,146) people all within continuing operations. The Group’s three reportable segments
are supported by Global Operations, which is responsible for running the Group’s manufacturing facilities. The Group allocates the
headcount of the Global Operations team to segments based on the split of primary capacity at each location. Central includes shared-
service employees who perform activities for the whole Group, including the Food & Beverage Solutions, Sucralose and Primary Products
segments.
Key management compensation
Salaries and short-term employee benefits
Retirement benefits
Share-based payments
Total
Year ended 31 March
2018
£m
10
1
6
17
2017
£m
11
1
9
21
Key management is represented by the Executive Committee and the Company’s Directors. Remuneration details of the Company’s
Directors are given in the Directors’ Remuneration Report on pages 72 to 89. Members of the Executive Committee are identified on
pages 16 and 17. The aggregate gains made by the Directors on the exercise of share options were £7 million (2017 – £4 million).
126 Tate & Lyle PLC Annual Report 2018
126 Tate & Lyle PLC Annual Report 2018
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11. Finance income and expense
Continuing operations
Net 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
Finance lease interest
Net retirement benefit interest
Unwinding of discount on liabilities
Finance expense
Finance income
Net finance expense
Reconciliation to adjusted net finance expense
Net finance expense
Net retirement benefit interest
Adjusted net finance expense – continuing operations
Note
Year ended 31 March
2018
£m
2017
£m
(27)
(6)
6
(1)
(5)
(1)
(34)
2
(32)
£m
(32)
5
(27)
(25)
(4)
4
(1)
(7)
(1)
(34)
2
(32)
£m
(32)
7
(25)
30
Notes
30
4
Finance expense is shown net of borrowing costs capitalised within property, plant and equipment of £nil (2017 – £2 million) at a
capitalisation rate of 3.9% (2017 – 3.8%).
Interest payable on other borrowings includes £0.2 million (2017 – £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.
12. Income taxes
Analysis of charge for the year – continuing operations
Continuing operations
Current tax:
– United Kingdom
– Overseas
Deferred tax:
Credit for the year
Income tax (expense)/credit – continuing operations
Year ended 31 March
2018
£m
2017
£m
(9)
(45)
(54)
31
(23)
–
(23)
(23)
45
22
For the years ended 31 March 2018 and 31 March 2017, there were no adjustments in respect of previous years for current or deferred tax.
Reconciliation to adjusted income tax expense
Income tax (expense)/credit
Taxation on exceptional items, amortisation of acquired intangibles and
net retirement benefit interest
Exceptional US tax credit
Exceptional UK tax credit
Adjusted income tax expense – continuing operations
Notes
7
7
4
£m
(23)
(5)
(36)
(2)
(66)
£m
22
(6)
(31)
(34)
(49)
The Group’s adjusted effective tax rate on continuing operations, calculated on the basis of the adjusted income tax expense of £66 million
(2017 – £49 million) as a proportion of adjusted profit before tax of £301 million (2017 – £271 million) was 21.9% (2017 – 18.2%).
The Group’s statutory effective tax rate on continuing operations, calculated on the basis of the reported income tax expense of £23 million
(2017 – credit of £22 million) as a proportion of profit before tax of £286 million (2017 – £233 million) was 8.1% (2017 – credit of 9.6%).
www.tateandlyle.com 127
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
12. Income taxes continued
In the year to 31 March 2018, the Group recognised exceptional tax gains totalling £38 million, comprising two items: firstly, a credit of
£36 million predominantly reflecting the revaluation downwards of net US deferred tax liabilities following the reduction in the US federal
tax rate; and secondly a net credit of £2 million following an increase in UK deferred tax assets. This resulted from: changes to UK
legislation limiting to 50% the utilisation of brought-forward losses, resulting in a £16 million write down of the previous deferred tax asset;
and anticipated changes to the Group’s internal financing arrangements, enabled by amendments to US tax legislation, resulting in an
increase of £18 million in the deferred tax asset. In the comparative year, the Group recognised tax credits totalling £65 million. Further
details can be found in Note 7.
The Group’s adjusted income tax charge of £66 million (2017 – £49 million) is stated before the exceptional tax credits above, and the tax
impact of the adjustments made between reported and adjusted profit before tax (being adjustments for amortisation of acquired
intangibles, exceptional items in operating profit and net retirement benefit interest). The adjusted effective tax rate increased as a result
of changes to the UK tax legislation and consequent changes to our internal financing arrangements and an increase in profits from the
US, a jurisdiction with higher rates of corporation tax during the year.
The standard rate of corporation tax in the UK reduced from 20% to 19% with effect from 1 April 2017 and is expected to reduce from
19% to 17% with effect from 1 April 2020. The Group tax charge in future years is expected to benefit modestly from US Tax Reforms,
which came into effect from 1 January 2018. Further changes in tax legislation in the jurisdictions in which the Group operates could have
a material impact on the Group’s tax charge and/or the amount of deferred tax recognised in future accounting periods.
The Group recognised a tax charge in the UK in the year of £9 million (2017 – £nil), as current year taxable income exceeded costs,
together with brought-forward losses. The remaining UK losses have been treated as partially recoverable in future periods, as reflected in
the deferred tax asset booked for the year (see page 130).
At 31 March 2018, the carrying value of current tax assets totalled £1 million (2017 – £1 million) and the carrying value of the current tax
liabilities totalled £57 million (2017 – £57 million).
An analysis of tax charged or credited on adjusting items and exceptional tax items within continuing operations is set out below:
Year ended 31 March 2018
Year ended 31 March 2017
Notes
Pre-tax
£m
Tax (charge)/
credit
£m
Pre-tax
£m
Tax (charge)/
credit
£m
Exceptional items
Tate & Lyle Ventures disposal gain
Business re-alignment – impairment,
restructuring and other net costs
Asset reversals/(impairments) and related costs
US retirement benefit obligation settlement gain
Exceptional items
Amortisation of acquired intangibles
Net retirement benefit interest
Adjusting items
Exceptional deferred tax items
Exceptional US tax credit
Exceptional UK tax credit
4
Exceptional deferred tax items
4, 7
2
–
–
–
2
(12)
(5)
(15)
–
–
–
Total – continuing operations
4
(15)
–
–
–
–
–
3
2
5
36
2
38
43
3
(5)
(26)
9
(19)
(12)
(7)
(38)
–
–
–
(38)
–
1
2
(3)
–
3
3
6
31
34
65
71
128 Tate & Lyle PLC Annual Report 2018
128 Tate & Lyle PLC Annual Report 2018
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
U
s
e
f
u
l
I
n
f
o
r
m
a
t
i
o
n
12. Income taxes continued
Reconciliation of the effective tax rate
As the Group’s head office and parent company are domiciled in the UK, the Group uses the UK corporation tax rate to reference its
effective tax rate, notwithstanding that only a small proportion of the Group’s business is in the UK. The tax on the Group’s profit before tax
differs from the standard rate of corporation tax in the UK as follows:
Year ended 31 March
Profit before tax
Less share of profit after tax of joint ventures and associates
Parent Company and subsidiaries’ profit before tax
Corporation tax charge thereon at 19% (2017 – 20%)
Adjusted for the effects of:
– non-deductible expenses and other permanent items
– impairment of assets not deductible
– sale of investments not taxable
– manufacturing credits1
– losses not currently treated as being recoverable in future periods2
– losses previously considered irrecoverable, now expected to be recoverable
– exceptional tax credits3
– tax rates above the UK rate applied on overseas earnings4
Total tax (charge)/credit – continuing operations
1 The Group benefits from certain tax incentives available to manufacturing companies.
2018
£m
286
(28)
258
(49)
(2)
–
–
1
(2)
–
38
(9)
(23)
2017
£m
233
(32)
201
(40)
–
(5)
1
6
(4)
3
65
(4)
22
2 The Group incurs expenses in jurisdictions where it does not currently expect to be able to recover these amounts against future taxable profits. This has the effect of
increasing the Group’s overall effective tax rate.
3 Changes in UK and US tax legislation led to exceptional tax credits totalling £38 million which included a £3 million current tax charge (See Note 7).
4 The Group is subject to tax rates in the jurisdictions in which it operates which are above the UK corporation tax rate (the Group’s reference rate) leading to an increase
in total tax charge. The Group’s tax rate is favourably impacted by its internal financing arrangements which involve borrowing by its operations from the UK, the
interest on which has the effect of reducing the amount of tax payable. This financing benefit was materially reduced following UK legislation changes.
Key factors impacting the sustainability of the effective tax rate:
1. Tax Reforms
US Tax Reforms, effective 1 January 2018, have reduced the US federal tax rate from 35% to 21%. Further changes to tax legislation, in the
US or in other jurisdictions in which the Group operates, could materially impact the effective tax rate in the future.
The Group operates internal financing arrangements which involve borrowing by our operations from the UK, the interest on which has the
effect of reducing the amount of tax payable. These arrangements could be affected by further tax reforms in future periods impacting the
Group’s effective tax rate.
2. The timing of recognising tax benefits from brought-forward losses in the UK
Legislative changes in the UK have been enacted which restrict the utilisation of brought-forward losses by 50% which has led to a
significant taxation charge in the Group’s income statement. The extent of UK taxable profits utilised in subsequent years may be subject
to variability, impacting the Group's tax charge.
3. Material changes in the geographic mix of profits
The Group’s effective tax rate is sensitive to the geographic mix of profits and reflects a combination of higher rates in certain jurisdictions
such as the US, lower effective rates in the UK due to the availability of losses and rates that lie somewhere in between. If the geographic
mix of profits were to change materially, through changes in the composition of the Group’s business or changes in performance, our tax
rate could change materially.
www.tateandlyle.com 129
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
12. Income taxes continued
Key factors impacting the sustainability of the effective tax rate continued:
4. Resolution of tax judgements arising from current or future tax issues
At any one time, the Group can be subject to a number of challenges by tax authorities in the jurisdictions in which it operates. The
outcome of these challenges is inherently uncertain, potentially resulting in a different tax charge from the amounts initially provided.
At 31 March 2018, the Group carried a central provision in current tax payables in respect of uncertain tax positions within its continuing
operations totalling £29 million (2017 – £34 million). Based on all substantively enacted legislation, the Group believes that no reasonably
possible change in assumptions would lead to a material change in this number.
Exceptional tax credits
In the year ended 31 March 2018, the Group recognised exceptional tax credits totalling £38 million (2017 – £65 million) in respect of recent
changes to UK and US tax legislation and the Group’s internal financing arrangements. Further details can be found in Note 7.
Deferred tax
Deferred tax is calculated on differences between the accounting value of assets and liabilities and their respective tax values.
The movements in deferred tax assets and liabilities during the year were as follows:
At 1 April 2016
(Charged)/credited to the income statement
underlying
exceptional
Charged to other comprehensive income
Credited directly to equity
Currency translation differences
At 31 March 2017
(Charged)/credited to the income statement
underlying
exceptional
Charged to other comprehensive income
Charged directly to equity
Currency translation differences
At 31 March 2018
Capital
allowances in
excess of
depreciation
Retirement
benefit
obligations
£m
(134)
(11)
–
–
–
(24)
(169)
(2)
52
–
–
18
(101)
£m
83
(6)
–
(30)
–
17
64
4
1
(60)
–
(9)
–
Share-
based
payments
£m
2
2
–
–
3
–
7
–
–
–
(3)
–
4
Tax losses
£m
6
–
34
–
–
–
40
(5)
(4)
–
–
(1)
30
Other1
£m
25
(5)
31
–
–
4
55
(7)
(8)
–
–
(8)
32
Total
£m
(18)
(20)
65
(30)
3
(3)
(3)
(10)
41
(60)
(3)
–
(35)
1 During the prior year the Group rationalised ownership of its Sucralose IP to align it with the underlying US manufacturing base. This resulted in the recognition of a
deferred tax asset of £31 million. Other deferred tax items include temporary differences arising from accounting provisions, where the timing of the tax deduction is
different from the timing of accounting recognition, and business combinations.
Deferred tax assets and liabilities are offset where there is a legally enforceable right of offset and there is an intention to net settle the
balances. After taking these offsets into account, the net position of £35 million liability (2017 – £3 million liability) is presented as a
£7 million deferred tax asset (2017 – £22 million asset) and a £42 million deferred tax liability (2017 – £25 million liability) in the Group’s
statement of financial position.
Other than changes as a result of US Tax Reforms (see previous page), changes in enacted tax rates had no effect on the amount of
deferred tax charged to the income statement and other comprehensive income or equity. There was no impact from the imposition of new
taxes. No deferred tax assets have been recognised in respect of tax losses of £556 million (2017 – £508 million) as there is uncertainty as
to whether taxable profits against which these assets may be recovered, will be available. No unrelieved tax losses expired under current
tax legislation in the year ended 31 March 2018.
The total deferred tax on unremitted earnings is £1 million (2017 – £3 million) of which £nil (2017 – £2 million) has been recognised. The
Group has not recognised the full amount as it is able to control the timing of the reversal of certain of these temporary differences and it
is not probable that they will reverse in the foreseeable future.
130 Tate & Lyle PLC Annual Report 2018
130 Tate & Lyle PLC Annual Report 2018
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a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
U
s
e
f
u
l
I
n
f
o
r
m
a
t
i
o
n
12. Income taxes continued
Discontinued operations
An exceptional income tax credit of £2 million was recognised in the year ended 31 March 2018 (2017 – £nil) in respect of discontinued
operations (see Note 8). This credit related to historical tax matters at the Moroccan facility, which the Group sold to ADM during the
2017 financial year.
Tax on other comprehensive income
The following table sets out the tax arising on components of other comprehensive income:
Retirement benefit obligations
Deferred tax credit relating to components of other comprehensive income
Retirement benefit obligations
Current tax charge relating to components of other comprehensive income
Total tax on other comprehensive income
Year ended 31 March
2018
£m
(60)
(60)
27
27
(33)
2017
£m
(30)
(30)
–
–
(30)
Tax on items recognised directly in equity
A deferred tax charge of £3 million, in relation to share-based payments, was recognised directly in equity (2017 – £3 million credit).
13. Earnings per share
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 6 million shares (2017 – 4 million shares) held by the Company and the
Employee Benefit Trust to satisfy awards made under the Group’s share-based incentive plans.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue assuming conversion of
potentially dilutive ordinary shares, reflecting vesting assumptions on employee share plans, as well as the profit attributable to owners of
the Company for any proceeds on such conversions. 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 dilutive only when the average market price of the Company’s ordinary shares during the year exceeds their exercise price
(options) or issue price (other awards). Otherwise, the effect of exercising such options or awards would be to increase the earnings per
share rather than to dilute. The greater any such excess, the greater the dilutive effect. The average market price of the Company’s
ordinary shares during the year was 676p (2017 – 695p). The dilutive effect of share-based incentives was 7.7 million shares
(2017 – 7.1 million shares).
Profit attributable to owners of the
Company (£ million)
Weighted average number of ordinary shares
(million) – basic
Basic earnings per share (pence)
Weighted average number of ordinary shares
(million) – diluted
Diluted earnings per share (pence)
Year ended 31 March 2018
Year ended 31 March 2017
Continuing
operations
Discontinued
Total
operations
operations
Continuing
operations
Discontinued
operations
Total
operations
263
2
265
255
1
256
462.3
57.0p
462.3
0.4p
462.3
57.4p
464.1
55.0p
464.1
0.2p
464.1
55.2p
470.0
56.1p
470.0
0.4p
470.0
56.5p
471.2
54.2p
471.2
0.2p
471.2
54.4p
www.tateandlyle.com 131
www.tateandlyle.com 131
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
13. Earnings per share continued
Adjusted earnings per share
A reconciliation between profit attributable to owners of the Company from continuing operations and the equivalent adjusted metric,
together with the resulting adjusted earnings per share metrics can be found below:
Continuing operations
Profit attributable to owners of the Company
Adjusting items:
– exceptional (gain)/loss
– amortisation of acquired intangible assets
– net retirement benefit interest
– tax effect of the above adjustments
– exceptional tax credits
Adjusted profit attributable to owners of the Company
Notes
7
19
11, 30
12
7, 12
4
Year ended 31 March
2018
£m
263
(2)
12
5
(5)
(38)
235
2017
£m
255
19
12
7
(6)
(65)
222
Adjusted basic earnings per share (pence) – continuing operations
Adjusted diluted earnings per share (pence) – continuing operations
50.9p
50.1p
47.8p
47.1p
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
2018
Pence
8.4
20.3
28.7
2017
Pence
8.2
19.8
28.0
The Directors propose a final dividend for the financial year of 20.3p per ordinary share that, subject to approval by shareholders, will be
paid on 1 August 2018 to shareholders who are on the Register of Members on 22 June 2018.
Dividends on ordinary shares paid in the financial year:
Final dividend paid relating to the prior financial year
Interim dividend paid relating to the financial year
Total dividend paid
Year ended 31 March
2018
£m
92
39
131
2017
£m
92
38
130
Based on the number of ordinary shares outstanding at 31 March 2018 and the proposed amount, the final dividend for the financial year is
expected to amount to £94 million.
15. Inventories
Raw materials and consumables
Work in progress
Finished goods
Total
2018
£m
201
17
201
419
At 31 March
2017
£m
206
19
216
441
Finished goods inventories of £1 million (2017 – £4 million) are carried at net realisable value, this being lower than cost. Agricultural
produce after harvest of £103 million (2017 – £103 million) is carried at net realisable value. During the year ended 31 March 2018, the
Group recognised a write down of inventories totalling £3 million (2017 – £6 million), which relates to the normal course of business and is
included in the cost of inventories.
132 Tate & Lyle PLC Annual Report 2018
132 Tate & Lyle PLC Annual Report 2018
16. Cash and cash equivalents
Cash and cash equivalents
Total
The carrying amount of cash and cash equivalents was denominated in the following currencies:
US dollar
Euro
Sterling
Other
Total
17. Trade and other receivables
Trade receivables
Less provision for doubtful debts
Trade receivables – net
Prepayments and accrued income
Margin deposits
Other receivables
Total
The amounts above do not include non-current other receivables of £3 million (2017 – £1 million).
The carrying amount of trade and other receivables was denominated in the following currencies:
US dollar
Euro
Sterling
Other
Total
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
U
s
e
f
u
l
I
n
f
o
r
m
a
t
i
o
n
2018
£m
190
190
2018
£m
161
16
4
9
190
2018
£m
280
(14)
266
16
1
11
294
2018
£m
201
40
14
42
297
At 31 March
2017
£m
261
261
At 31 March
2017
£m
226
12
2
21
261
At 31 March
2017
£m
264
(14)
250
15
3
23
291
At 31 March
2017
£m
184
46
12
50
292
During the year, the Group recognised impairments or write offs of receivables totalling £1 million (2017 – £5 million). At 31 March 2018,
trade receivables of £18 million (2017 – £7 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
Over 3 months past due
Total
2018
£m
14
3
1
18
At 31 March
2017
£m
6
1
–
7
Trade receivables are not generally interest-bearing but interest may be charged to customers on overdue amounts.
www.tateandlyle.com 133
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
18. Available-for-sale financial assets
Available-for-sale financial assets comprise £37 million (2017 – £30 million) of unlisted securities. These available-for-sale financial assets
are carried at cost where fair value cannot be reliably measured.
At 1 April 2016
Year ended 31 March 2017:
Additions
Disposals
Re-measurement of non-qualified deferred compensation arrangements
Currency translation differences
At 31 March 2017
Year ended 31 March 2018:
Additions
Revaluations
Disposals
Impairment
Re-measurement of non-qualified deferred compensation arrangements
Currency translation differences
At 31 March 2018
The carrying value of available-for-sale financial assets was denominated in the following currencies:
US dollar
Sterling
Euro
Total
Presented in the statement of financial position as follows:
Non-current assets
Current assets
Total
Note
30
30
2018
£m
31
2
4
37
2018
£m
37
–
37
£m
23
4
(2)
2
3
30
8
3
(2)
(1)
2
(3)
37
At 31 March
2017
£m
25
2
3
30
At 31 March
2017
£m
30
–
30
134 Tate & Lyle PLC Annual Report 2018
134 Tate & Lyle PLC Annual Report 2018
19. Goodwill and other intangible assets
Cost
At 1 April 2017
Additions at cost
Currency translation differences
At 31 March 2018
Accumulated amortisation and impairment
At 1 April 2017
Impairment charge
Amortisation charge
Currency translation differences
At 31 March 2018
Net book value at 31 March 2018
Cost
At 1 April 2016
Re-measurement of acquisition
Additions at cost
Disposals and write offs
Currency translation differences
At 31 March 2017
Accumulated amortisation and impairment
At 1 April 2016
Impairment charge
Disposals and write offs
Amortisation charge
Currency translation differences
At 31 March 2017
Net book value at 31 March 2017
Goodwill
The carrying amount of goodwill is allocated as follows:
Allocated by geographical area
United States
Europe
Allocated by reportable segment
Food & Beverage Solutions
Primary Products
Total
i
S
t
r
a
t
e
g
c
R
e
p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
n
c
i
a
l
S
t
a
t
e
m
e
n
t
s
U
s
e
f
u
l
I
n
f
o
r
m
a
t
i
o
n
Goodwill
£m
Patents and
other IP
Other acquired
intangibles
Total acquired
intangibles
£m
£m
£m
Other
intangible
assets
£m
229
–
(11)
218
17
–
–
(3)
14
204
41
–
(1)
40
37
–
1
–
38
2
166
–
(1)
165
112
–
11
(3)
120
45
436
–
(13)
423
166
–
12
(6)
172
251
254
20
(20)
254
123
1
28
(7)
145
109
Total
£m
690
20
(33)
677
289
1
40
(13)
317
360
204
40
150
394
204
598
1
–
(2)
26
229
–
18
(2)
–
1
17
212
–
–
–
1
41
35
–
–
2
–
37
4
–
–
–
16
166
91
–
–
10
11
112
54
1
–
(2)
43
436
126
18
(2)
12
12
166
270
–
26
(1)
25
1
26
(3)
68
254
690
82
5
–
28
8
123
131
208
23
(2)
40
20
289
401
2018
£m
72
109
181
21
2
23
204
At 31 March
2017
£m
74
–
74
136
2
138
212
www.tateandlyle.com 135
www.tateandlyle.com 135
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
19. Goodwill and other intangible assets continued
(i) Impairment tests carried out during the year
The Group operates principally as an integrated manufacturing network in the United States and Europe, with a large amount of
interdependency between plants servicing both the Food & Beverage Solutions and Primary Products segments. Goodwill is therefore
tested for impairment on a geographical basis, except where it can be allocated to a specific CGU. During the year, the Group has
integrated its Food Systems business into the core Speciality Food Ingredients business (now together Food & Beverage Solutions) to drive
synergies in commercial strategy, commercial organisation and enabling infrastructure and organisation. As a result of this
re-organisation, management considers that goodwill in relation to Food Systems businesses should no longer be tested separately but
should be tested at a geographical level.
A description of the impairment tests conducted in relation to the most significant goodwill amounts are set out as follows. In each case,
the recoverable amount was calculated based on value in use, with the exception of the European business, the Latin American Food &
Beverage Solutions operations and Tate & Lyle Sweden AB. Value in use was calculated based on budgets and plans covering the next five
years that have been reviewed by the Board. Cash flows were projected during the five-year period based on budgeted operating profit and
management’s expectations of market developments. Beyond the five-year plan, cash flows were generally 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.
Goodwill allocated by geographical area
United States
Goodwill allocated to the US operations of £72 million (2017 – £74 million which related to single ingredient operations only) relates
predominantly to the Staley acquisition in 1988. The key assumptions in the model are derived from the Group’s Annual Operating Plan for
2019 and Board-reviewed five-year plan, which includes mid-single digit volume growth in Food & Beverage Solutions and flat volumes in
Primary Products. Operating profit is assumed to increase by low-single digits for both Food & Beverage Solutions and Primary Products,
based on management’s long-term expectations. Based on the risk profile of the assets tested, cash flows were discounted using a pre-
tax rate of 8.9% (2017 – 8.8%). Significant headroom exists and management concluded that no impairment is required.
Europe
Goodwill of £109 million is allocated to the European operations. At 31 March 2017, goodwill totalled £106 million being £63 million relating
to the European Food Systems CGU incorporating G.C. Hahn and Company and Cesalpinia Foods and £43 million relating to the
Tate & Lyle Boleraz s.r.o. CGU. Both CGUs were tested separately in 2017. The key assumptions in the model are derived from the Group’s
Annual Operating Plan for 2019 and Board-reviewed five-year plan which assumes expansion beyond normal maintenance capital
expenditure. Accordingly, the recoverable amount was determined based on fair value less costs of disposal. The fair value was
determined based on a discounted cash flow model using a post-tax discount rate and cash inflows and outflows from future expansion.
Cash flows from 2019 onwards are expected to grow at a double-digit compound annual rate over the subsequent four years reflecting the
growth derived from the expansion. Cash flows were discounted using a post-tax rate of 7.1%. Management concluded that no impairment
is required.
Goodwill allocated by reportable segment
Food & Beverage Solutions
Goodwill of £6 million is allocated to the Latin American Food & Beverage Solutions operations (2017 – £7 million) relating to Tate & Lyle
Gemacom Tech Indústria E Comércio S.A. which was tested separately in 2017. The impairment model assumes expansion beyond normal
maintenance capital expenditure and the recoverable amount therefore was calculated based on fair value less costs of disposal. The fair
value was determined based on a discounted cash flow model using a post-tax discount rate and cash inflows and outflows from future
expansion. The model assumes a return to profitability over the first two years with volume and contribution margin growth in low-double
digits over the five years. The long-term growth rate is assumed to be 5% thereafter, reflecting the growth expectations for this market.
Cash flows were discounted using a post-tax rate of 11.7% (2017 – 12% post-tax). Management concluded that no impairment is required.
In 2017, management recognised an impairment charge of £16 million within other expenses as an exceptional item in relation to the
Gemacom CGU. Refer to Note 7 for further details.
Goodwill of £9 million (2017 – £10 million) allocated to the Food & Beverage Solutions segment relates to the acquisition of Tate & Lyle
Sweden AB (formerly ’Biovelop’), the Oat Beta Glucan plant, in the 2014 financial year. The key assumptions in the model are derived from
the Group’s Annual Operating Plan for 2019, and the model projects material operating profit growth as commercialisation of a key
co-product stream is achieved. Management concluded, based on the fair value less cost of disposal model used, that no impairment is
required. Cash flows were discounted using a post-tax rate of 7.0% (2017 – 7.1%). Long-term growth rate is assumed to be 1% (2017 – 0%)
thereafter, reflecting the future growth potential of the market. However, this calculation resulted in a low level of headroom compared
with the carrying value. The amount of headroom was particularly sensitive to the discount rate, the pricing of the PrOateinTM main product
and sales volumes and prices of co-products. Reasonably possible changes in each of these assumptions individually, being changes in
excess of an increase in the discount rate of 6bps, a reduction in pricing of PrOateinTM sold of 100bps, a reduction in volumes of
co-products sold in years two to five of 90bps or a reduction in pricing of co-products sold of 100bps would lead to an impairment.
Management considers the value of co-product revenues within the model to be an area of significant judgement. Refer to Note 2 for
further details.
There are no other individually material elements of goodwill allocated to the Food & Beverage Solutions, Sucralose or Primary Products
reportable segments.
136 Tate & Lyle PLC Annual Report 2018
136 Tate & Lyle PLC Annual Report 2018
i
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e
g
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n
a
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F
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a
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t
s
U
s
e
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f
o
r
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a
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i
o
n
19. Goodwill and other intangible assets continued
(ii) Possibility of impairment in the near future
Management considers that, with the exception of Tate & Lyle Sweden AB, there is no reasonably possible change in one or more of the
key assumptions used in the impairment tests for goodwill and other intangible assets that would give rise to an impairment loss during
the coming year.
20. Property, plant and equipment
Cost
At 1 April 2017
Additions at cost
Transfers on completion
Disposals and write offs
Currency translation differences
At 31 March 2018
Accumulated depreciation and impairment
At 1 April 2017
Depreciation charge
Disposals and write offs
Currency translation differences
At 31 March 2018
Net book value at 31 March 2018
Including assets held under finance leases
Cost
At 1 April 2016
Additions at cost
Transfers on completion
Disposals and write offs1
Currency translation differences
At 31 March 2017
Accumulated depreciation and impairment
At 1 April 2016
Depreciation charge
Impairment charge
Disposals and write offs1
Currency translation differences
At 31 March 2017
Net book value at 31 March 2017
Including assets held under finance leases
Land
and buildings
£m
Plant and
machinery
£m
Assets in the
course of
construction
£m
569
5
43
(4)
(57)
556
289
14
(3)
(30)
270
286
–
485
1
43
(30)
70
569
265
14
3
(30)
37
289
280
–
2 433
4
111
(18)
(252)
2 278
1 729
100
(17)
(187)
1 625
653
8
2 142
5
199
(249)
336
2 433
1 633
95
4
(247)
244
1 729
704
10
77
104
(154)
(1)
–
26
–
–
–
–
–
26
–
222
122
(242)
(25)
–
77
25
–
–
(25)
–
–
77
–
Total
£m
3 079
113
–
(23)
(309)
2 860
2 018
114
(20)
(217)
1 895
965
8
2 849
128
–
(304)
406
3 079
1 923
109
7
(302)
281
2 018
1 061
10
1 In the year ended 31 March 2017, the formerly impaired assets at the Singapore plant were decommissioned and removed from the fixed asset register.
Impairment reviews
Management conducted impairment reviews of property, plant and equipment during the year and concluded that there were no
impairments. During the prior year, the Group recognised an impairment charge of £6 million in respect of the impairment of certain
redundant assets at the Decatur facility in the US (see Note 7). As part of the impairment and deconsolidation of the Group's equity interest
in Jiangsu Tate & Lyle Howbetter Food Co., Ltd, the Group recognised a £1 million charge (see Note 7).
www.tateandlyle.com 137
www.tateandlyle.com 137
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
21. Equity accounted investments
The amounts recognised in the Consolidated income statement are as follows:
Joint ventures – continuing operations
Total operations
The amounts recognised in the Consolidated statement of financial position are as follows:
Associates
Joint ventures
Year ended 31 March
2018
£m
28
28
2018
£m
–
85
2017
£m
32
32
At 31 March
2017
£m
4
92
Associates
On 2 November 2017, the Group completed the sale of its 33.3% share in an associated undertaking, the Tapioca Development
Corporation. This was the Group’s only associate and was accounted for under the equity method. The associate had share capital
consisting solely of ordinary shares, which were held directly by the Group, and the country of incorporation or registration is also its
principal place of business. Tapioca Development Corporation is a private company, based in Thailand, and there is no quoted market price
available for its shares.
This sale resulted in cash proceeds of £5 million and resulted in a profit on disposal of £2 million, after recycling of cumulative foreign
exchange translation gains of £1 million from reserves to the income statement upon disposal.
In the opinion of the Directors, this former associate was not considered to be material to the Group and there are no contingent liabilities
relating to the Group’s previously held interest in the associate.
The investment in the associate as at 31 March 2018 was £nil (2017 – £4 million). During the years ended 31 March 2018 and 31 March
2017, other than the gain on disposal, the Group recognised no net profit in its consolidated income statement and received no dividends
from its associate.
Joint ventures
In the opinion of the Directors, the Group’s material joint ventures, which are accounted for under the equity method, are Almidones
Mexicanos SA (Almex) and DuPont Tate & Lyle Bio Products Company, LLC (Bio-PDO) (see Note 38). The joint ventures have share capital
consisting solely of ordinary shares, which are held directly by the Group (and its joint venture partners) and are private companies. No
quoted market price is available for their shares. There are no contingent liabilities relating to the Group’s interest in the joint ventures.
The movements in the carrying value of the Group’s investment in joint ventures are summarised as follows:
Investments in joint ventures
At 1 April 2017
Share of profit after tax of joint ventures – total operations
Other comprehensive expense (including exchange)
Dividends paid
At 31 March 2018
At 1 April 2016
Share of profit after tax of joint ventures – total operations
Other comprehensive income (including exchange)
Dividends
At 31 March 2017
Note
23
Note
23
£m
92
28
(9)
(26)
85
£m
82
32
7
(29)
92
Set out below is the summarised financial information for each material joint venture accounted for using the equity method.
The information reflects the amounts presented in the financial statements of the joint ventures (and not the Group’s share of those
amounts) adjusted for differences in accounting policies between the Group and the joint ventures to make it consistent with the Group’s
accounting policies.
138 Tate & Lyle PLC Annual Report 2018
138 Tate & Lyle PLC Annual Report 2018
21. Equity accounted investments continued
Income Statement
Year ended 31 March 2018
Bio-PDO
£m
Other
£m
Sales
Depreciation and amortisation
Other expense
Profit before tax
Income tax expense
Profit for the year from total operations
Other comprehensive expense
Total comprehensive income
Dividends
Sales
Depreciation and amortisation
Other expense
Profit before tax
Income tax expense
Profit for the year from total operations
Other comprehensive income
Total comprehensive income
Dividends
Statement of Financial Position
Assets
Non-current assets
Cash and cash equivalents
Other current assets
Liabilities
Other non-current liabilities
Current borrowings
Other current liabilities
Net assets
Almex
£m
627
(2)
(564)
61
(17)
44
(12)
32
(53)
Almex
£m
618
(2)
(546)
70
(20)
50
5
55
(33)
97
(7)
(71)
19
(7)
12
(4)
8
–
Bio-PDO
£m
90
(7)
(65)
18
(4)
14
10
24
(24)
i
S
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t
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R
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G
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F
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a
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m
e
n
t
s
U
s
e
f
u
l
I
n
f
o
r
m
a
t
i
o
n
Total
£m
724
(9)
(635)
80
(24)
56
(17)
39
(53)
–
–
–
–
–
–
(1)
(1)
–
Year ended 31 March 2017
Other
£m
–
–
–
–
–
–
(1)
(1)
–
Total
£m
708
(9)
(611)
88
(24)
64
14
78
(57)
At 31 March 2018
Almex
£m
Bio-PDO
£m
Other
£m
43
2
161
206
4
47
57
108
98
46
27
20
93
–
–
21
21
72
–
–
–
–
–
–
–
–
–
Total
£m
89
29
181
299
4
47
78
129
170
www.tateandlyle.com 139
www.tateandlyle.com 139
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
21. Equity accounted investments continued
Statement of Financial Position
At 31 March 2017
Total
£m
99
17
169
285
4
22
75
101
184
Total
£m
184
56
(17)
(53)
170
85
85
Total
£m
163
64
14
(57)
184
92
92
Assets
Non-current assets
Cash and cash equivalents
Other current assets
Liabilities
Other non-current liabilities
Current borrowings
Other current liabilities
Net assets
Almex
£m
Bio-PDO
£m
Other
£m
45
7
155
207
4
22
62
88
119
53
10
14
77
–
–
13
13
64
1
–
–
1
–
–
–
–
1
Reconciliation of the summarised financial information presented to the carrying amount of the Group’s interest in joint ventures:
Reconciliation of summarised financial information
Almex
£m
119
44
(12)
(53)
98
50%
49
49
Almex
£m
97
50
5
(33)
119
50%
59
59
Bio-PDO
£m
Other
£m
64
12
(4)
–
72
50%
36
36
Bio-PDO
£m
64
14
10
(24)
64
50%
32
32
1
–
(1)
–
–
50%
–
–
Other
£m
2
–
(1)
–
1
50%
1
1
Opening net assets at 1 April 2017
Profit for the year from total operations
Other comprehensive expense
Dividends
Closing net assets at 31 March 2018
Interest in joint venture (%)
Interest in joint venture at share
Carrying value at 31 March 2018
Opening net assets at 1 April 2016
Profit for the year from total operations
Other comprehensive income/(expense)
Dividends
Closing net assets at 31 March 2017
Interest in joint venture (%)
Interest in joint venture at share
Carrying value at 31 March 2017
140 Tate & Lyle PLC Annual Report 2018
140 Tate & Lyle PLC Annual Report 2018
22. Share capital and share premium
At 31 March 2018 and 31 March 2017
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 2018
Year ended 31 March 2017
Number of
shares*
Cost
£m
Number
of shares*
468 256 866
117
468 235 944
52 068
–
20 922
468 308 934
117
468 256 866
Cost
£m
117
–
117
* The nominal value of each share is 25 pence.
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 31). Own shares are held either by the Company in treasury or by an Employee Benefit Trust (EBT) that
was established by the Company.
Movements in own shares held were as follows:
Year ended 31 March 2018
Year ended 31 March 2017
At 1 April
Purchased in the market:
– into treasury
– into the EBT
Transferred to EBT*
Transferred to employees:
– from treasury
– from the EBT
At 31 March
Number
of shares
5 529 597
–
3 900 000
–
(1 010 461)
(1 068 438)
7 350 698
Cost
£m
37
Number
of shares
4 161 942
–
27
–
(6)
(6)
52
2 000 000
541 110
15 572
(230 619)
(958 408)
5 529 597
Cost
£m
28
14
4
–
(2)
(7)
37
* Shares held for the benefit of untraceable shareholders and bearer warrant holders transferred to the trust at nil cost.
Treasury shares
Shares held in the EBT
Total
Number
of shares
2 562 392
4 788 306
7 350 698
At 31 March 2018
Market
value
£m
% of outstanding
share capital
14
26
40
0.6
1.0
1.6
Number
of shares
3 572 853
1 956 744
5 529 597
At 31 March 2017
Market
value
£m
% of outstanding
share capital
27
15
42
0.8
0.4
1.2
www.tateandlyle.com 141
www.tateandlyle.com 141
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
23. Other reserves
At 1 April 2016
Other comprehensive income/(expense):
Cash flow hedges:
– fair value gain in the year
– reclassified and reported in the income statement
in the year
Available-for-sale financial assets:
– reclassified and reported in the income statement
in the year
Currency translation differences:
– gain on currency translation of foreign operations
– fair value loss on net investment hedges
Share of other comprehensive income of joint ventures
Items transferred to income statement on disposal of subsidiary
At 31 March 2017
Other comprehensive (expense)/income:
Cash flow hedges:
– reclassified and reported in the income statement
in the year
Available-for-sale financial assets:
– fair value gain in the year
Currency translation differences:
– loss on currency translation of foreign operations
– fair value gain on net investment hedges
Share of other comprehensive expense of joint ventures
Items transferred to income statement on disposal of associate
At 31 March 2018
Hedging reserve
Currency
translation reserve
Other reserves
£m
(2)
1
4
–
–
–
–
–
3
(4)
–
–
–
–
–
(1)
£m
30
–
–
–
185
(69)
7
(1)
152
–
–
(122)
39
(9)
(1)
59
£m
99
–
–
(1)
–
–
–
–
98
–
3
–
–
–
–
101
Total
£m
127
1
4
(1)
185
(69)
7
(1)
253
(4)
3
(122)
39
(9)
(1)
159
For the years ended 31 March 2018 and 31 March 2017, there was no tax effect on the above movements in reserves.
24. Trade and other payables
Current payables
Trade payables
Social security
Accruals and deferred income
Other payables
Total
The above amounts do not include non-current other payables of £10 million (2017 – £10 million).
2018
£m
192
7
91
22
312
At 31 March
2017
£m
185
6
107
17
315
142 Tate & Lyle PLC Annual Report 2018
142 Tate & Lyle PLC Annual Report 2018
24. Trade and other payables continued
The carrying amount of trade and other payables was denominated in the following currencies:
US Dollar
Euro
Sterling
Other
Total
25. Borrowings
Non-current borrowings
2,394,000 6.5% cumulative preference shares of £1 each
Industrial Revenue Bonds 2023–2036 (US$70,100,000)
US Private Placement 2023-2027 (US$400,000,000)
6.75% Guaranteed Notes 2019 (£200,000,000)
Total loan notes
Other bank loans
Total other bank loans
Other borrowings
Obligations under finance leases
Total obligations under lease obligations
Total non-current borrowings
Current borrowings
US commercial paper
Short-term loans
Unsecured bank overdrafts
Total loan notes and overdrafts
Other borrowings
Obligations under finance leases
Total current borrowings
i
S
t
r
a
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e
g
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R
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G
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n
a
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a
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e
n
t
s
U
s
e
f
u
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I
n
f
o
r
m
a
t
i
o
n
2018
£m
220
43
29
30
322
2018
£m
2
50
285
207
544
–
–
10
10
554
2018
£m
–
13
1
14
2
16
At 31 March
2017
£m
242
22
32
29
325
At 31 March
2017
£m
2
56
319
212
589
1
1
14
14
604
At 31 March
2017
£m
70
16
1
87
1
88
Included within borrowings are £150 million (2017 – £150 million) of borrowings subject to fair value hedges, the amortised cost of which
has been increased by £7 million (2017 – £13 million) in the tables above.
Lease liabilities are effectively secured as the rights to the leased asset revert to the lessor in the event of default. There are no other
securities on borrowings.
www.tateandlyle.com 143
www.tateandlyle.com 143
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
25. Borrowings continued
Current borrowings continued
Taking into account the Group’s interest rate and cross currency swap contracts, the effective interest rates of its borrowings are as follows:
$25m 3.83% US Private Placement Notes 2023
$180m 4.06% US Private Placement Notes 2025
$100m 4.16% US Private Placement Notes 2027
$95m US Private Placement FRN1 2023
2,394,000 6.5% cumulative preference shares of £1 each
Industrial Revenue Bonds 2023–2036 (US$70,100,000)
6.75% Guaranteed Notes 2019 (£200,000,000)
Year ended 31 March
2018
3.8%
4.1%
4.2%
3.1%
6.5%
1.1%
5.4%
2017
3.8%
4.1%
4.2%
2.4%
6.5%
0.7%
5.2%
1 Floating rate note based on US six-month LIBOR + 1.47%.
Short-term loans and overdrafts
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 revolving credit facility with a core of highly rated banks
which matures between July 2020 and July 2021. At 31 March 2018, the facility had a value of £570 million (2017 – £638 million) and was
undrawn. The facility incurs commitment fees at market rates prevailing when the facility was arranged. The lenders have the right, but
not the obligation, to cancel their commitments 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
2018
Present value
of minimum
lease payments
£m
2
9
1
12
Minimum lease
payments
£m
3
10
1
14
(2)
12
Minimum lease
payments
£m
1
12
5
18
(3)
15
At 31 March
2017
Present value
of minimum
lease payments
£m
1
10
4
15
26. Change in working capital and other non-cash movements
Continuing operations
(Increase)/decrease in inventories
(Increase)/decrease in receivables
Increase/(decrease) in payables
Increase in derivative financial instruments (excluding debt-related derivatives)
Decrease in provisions for other liabilities and charges
Change in working capital
Other non-cash movements
Change in working capital and other non-cash movements
Year ended 31 March
2018
£m
(8)
(41)
19
(6)
(2)
(38)
2
(36)
2017
£m
13
35
(47)
(4)
(2)
(5)
9
4
144 Tate & Lyle PLC Annual Report 2018
144 Tate & Lyle PLC Annual Report 2018
27. Net debt
Reconciliation of the decrease in cash and cash equivalents to the movement in net debt:
Year ended 31 March
Net decrease in cash and cash equivalents
Net decrease in borrowings*
Decrease in net debt resulting from cash flows
Fair value and other movements
Currency translation differences
Decrease/(increase) in net debt in the year
Net debt at beginning of the year
Net debt at end of year
2018
£m
(48)
74
26
(1)
35
60
(452)
(392)
* Net change in borrowings includes repayments of capital elements of finance leases of £1 million (2017 - £1 million).
Movements in the Group’s net debt were as follows:
At 1 April 2016
(Increase)/decrease resulting from cash flows
Fair value and other movements
Reclassification
Currency translation differences
At 31 March 2017
(Increase)/decrease resulting from cash flows
Fair value and other movements
Reclassification
Currency translation differences
At 31 March 2018
Cash and cash
equivalents
£m
317
(88)
–
–
32
261
(48)
–
–
(23)
190
Borrowings and finance leases
Current
£m
(200)
124
4
(2)
(14)
(88)
74
(2)
(3)
3
(16)
Non-current
£m
(556)
–
2
2
(52)
(604)
–
6
3
41
(554)
Debt-related
derivatives
£m
5
–
(3)
–
(23)
(21)
–
(5)
–
14
(12)
2017
£m
(88)
124
36
3
(57)
(18)
(434)
(452)
Total
£m
(434)
36
3
–
(57)
(452)
26
(1)
–
35
(392)
At 31 March 2018, total liabilities arising from financing activities were £582 million (2017 – £713 million).
Debt-related derivative financial instruments represent the net fair value of currency and interest rate swaps that are used to manage the
currency and interest rate profile of the Group’s net debt. At 31 March 2018, the net fair value of these derivatives comprised assets of
£10 million (2017 – £17 million) and liabilities of £22 million (2017 – £38 million).
Net debt is denominated in the following currencies:
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a
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g
c
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p
o
r
t
G
o
v
e
r
n
a
n
c
e
i
F
n
a
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c
i
a
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a
t
e
m
e
n
t
s
U
s
e
f
u
l
I
n
f
o
r
m
a
t
i
o
n
US dollar
Euro
Sterling
Other
Total
2018
£m
(276)
(36)
(56)
(24)
(392)
At 31 March
2017
£m
(347)
(41)
(46)
(18)
(452)
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
28. Derivatives and hedge accounting
Non-current derivative financial instruments used to manage the
Group’s net debt profile
Currency swaps
Interest rate swaps
Current derivative financial instruments used to manage the
Group’s net debt profile
Currency swaps
Interest rate swaps
Total derivative financial instruments used to manage
the Group’s net debt profile
Other current derivative financial instruments
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
At 31 March 2018
At 31 March 2017
Assets
£m
Liabilities
£m
Assets
£m
Liabilities
£m
1
7
8
–
2
2
(21)
–
(21)
(1)
–
(1)
2
13
15
–
2
2
(37)
–
(37)
(1)
–
(1)
10
(22)
17
(38)
–
22
22
32
8
24
32
(2)
(9)
(11)
(33)
(21)
(12)
(33)
3
26
29
46
15
31
46
(1)
(15)
(16)
(54)
(37)
(17)
(54)
The ineffectiveness recognised in profit or loss in the current period arising from net investment hedges was £1 million gain (2017 – £nil).
The ineffectiveness recognised in profit or loss in the current and prior periods arising from fair value and cash flow hedges was not material.
Cash flow hedges
The Group employs commodity pricing contracts to hedge cash flow risk associated with forecast transactions. Gains and losses
recognised in the hedging reserve in equity (see Note 23) on commodity pricing contracts at 31 March 2018 are expected to be reclassified
to the income statement at various future dates.
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 2018 were
£150 million (2017 – £150 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 US and Europe. The notional principal amounts of the outstanding currency swap contracts applied in net investment
hedging relationships as of 31 March 2018 were £169 million (2017 – £182 million). Within net investment hedging gains/losses, a fair value
gain of £14 million (2017 – £21 million loss) on translation of the currency swap contracts to pounds sterling at the period-end date was
recognised in the currency translation reserve in shareholders’ equity (see Note 23).
In addition, at 31 March 2018, of the Group’s liabilities, a total of £163 million (2017 – £188 million) are designated as hedges of the net
investments in foreign operations.
146 Tate & Lyle PLC Annual Report 2018
146 Tate & Lyle PLC Annual Report 2018
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29. Financial instruments – fair value and risk management
Financial instruments by category
Set out below is a comparison by category of carrying values and fair values of all the Group’s financial assets and financial liabilities as at
31 March 2018 and 31 March 2017.
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/cash
£m
Derivatives in
a hedging
relationship
£m
Derivatives
held for
trading
£m
Available-for-
sale financial
assets
£m
Total carrying
value
£m
Notes
Fair value
£m
At 31 March 2018
18
17
16
28
25
28
24
Notes
18
17
16
28
25
28
24
–
281
190
–
(570)
–
(315)
(414)
–
–
–
10
–
(24)
–
(14)
–
–
–
22
–
(9)
–
13
37
–
–
–
–
–
–
37
37
281
190
32
(570)
(33)
(315)
(378)
37
281
190
32
(576)
(33)
(315)
(384)
At 31 March 2017
Amortised
cost/cash
Derivatives in a
hedging
relationship
Derivatives
held for
trading
Available-for-
sale financial
assets
Total carrying
value
£m
–
277
261
–
(692)
–
(319)
(473)
£m
£m
–
–
–
20
–
(39)
–
(19)
–
–
–
26
–
(15)
–
11
£m
30
–
–
–
–
–
–
30
£m
30
277
261
46
(692)
(54)
(319)
(451)
Fair value
£m
30
277
261
46
(712)
(54)
(319)
(471)
Trade and other receivables presented above excludes £16 million (2017 – £15 million) relating to prepayments. Trade and other payables
presented above excludes £7 million (2017 – £6 million) relating to social security.
Borrowings with a carrying value of £207 million (2017 – £212 million) relate to listed bonds with a fair value of £217 million
(2017 –£229 million) according to quoted market prices and are categorised as Level 1 for fair value measurement. Borrowings with a
carrying value of £285 million (2017 – £319 million) relate to US Private Placement Notes with a fair value of £281 million
(2017 – £322 million) according to broker dealer quotations and are categorised as Level 3 for fair value measurement. The remaining
borrowings have a fair value measured by discounted estimated cash flows with an applicable market quoted yield and are categorised
as Level 2 for fair value measurement.
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Notes to the Consolidated Financial Statements continued
29. Financial instruments – fair value and risk management continued
Fair value hierarchy
The following tables illustrate the Group’s financial assets and liabilities measured at fair value at 31 March 2018 and 31 March 2017 (refer
to Note 2 for a description of the three levels of fair value measurement):
Notes
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
At 31 March 2018
18
28
28
28
28
28
–
–
–
5
5
–
(5)
(5)
–
1
9
6
16
(22)
(1)
(23)
37
–
–
11
48
–
(5)
(5)
37
1
9
22
69
(22)
(11)
(33)
Notes
Level 1
£m
Level 2
£m
Level 3
£m
Total
£m
At 31 March 2017
18
28
28
28
28
28
–
–
–
7
7
–
(6)
(6)
–
2
15
1
18
(38)
(7)
(45)
30
–
–
21
51
–
(3)
(3)
30
2
15
29
76
(38)
(16)
(54)
Assets at fair value
Available-for-sale financial assets
Derivative financial instruments:
– currency swaps
– interest rate swaps
– commodity pricing contracts
Assets at fair value
Liabilities at fair value
Derivative financial instruments:
– currency swaps
– commodity pricing contracts
Liabilities at fair value
Assets at fair value
Available-for-sale financial assets
Derivative financial instruments:
– currency swaps
– interest rate swaps
– commodity pricing contracts
Assets at fair value
Liabilities at fair value
Derivative financial instruments:
– currency swaps
– commodity pricing contracts
Liabilities at fair value
148 Tate & Lyle PLC Annual Report 2018
148 Tate & Lyle PLC Annual Report 2018
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29. Financial instruments – fair value and risk management continued
Financial instruments measured at fair value
The following table shows the methodology used to measure Level 3 fair values. The table isolates the unobservable inputs; however, the
full impact on the Group’s income statement is described within the price risk management section.
Type
Valuation technique
Significant unobservable inputs
Written commodity contract
Based on the Group’s own
assessment of the
commodity, supply and
demand, as well as
expected pricing.
1. Price of co-product
positions (refer to fair
value measurement
section in Note 2).
2. Basis (refer to fair value
measurement section in
Note 2).
Sensitivity of the fair value measurement in
reasonable changes to inputs
1. 10% increase/(decrease) in the price of
the co-products would result in a net
increase/(decrease) in fair value of
£3 million (2017 – £nil) in respect of
Level 3 financial instruments.
2. 10% increase/(decrease) in the cost of
basis would result in a net increase/
(decrease) in fair value of £2 million
(2017 – £2 million) in respect of Level 3
financial instruments.
In addition to the above, the Group’s available-for-sale financial assets are sensitive to a number of market and non-market factors.
The following table reconciles the movement in the Group’s net financial instruments classified in Level 3 of the fair value hierarchy:
Commodity pricing
contracts –
assets
Commodity pricing
contracts –
liabilities
Available-for-
sale financial
assets
Other financial
liability
At 1 April 2016
Total gains/(losses):
– in operating profit
– in other comprehensive income
Re-measurement of non-qualified deferred
compensation arrangements
Purchases
Settlements
At 31 March 2017
Total gains/(losses):
– in operating profit
Re-measurement of non-qualified deferred
compensation arrangements
Purchases
Settlements
At 31 March 2018
£m
38
21
–
–
–
(38)
21
11
–
–
(21)
11
£m
(4)
(3)
–
–
–
4
(3)
(5)
–
–
3
(5)
£m
23
–
3
2
4
(2)
30
(1)
2
8
(2)
37
£m
(2)
3
(1)
–
–
–
–
–
–
–
–
–
Total
£m
55
21
2
2
4
(36)
48
5
2
8
(20)
43
Management of financial risk
The key financial risks faced by the Group are credit risk, liquidity risk and market risks, which include interest rate risk, foreign exchange
risk and certain commodity price risks. The Board regularly reviews these risks and approves written policies covering the use of financial
instruments to manage these risks and sets overall risk limits. The derivative financial instruments approved by the Board of
Tate & Lyle PLC to manage financial risks include swaps, both interest rate and currency, swaptions, caps, forward rate agreements,
foreign exchange and commodity forward contracts and options, and commodity futures.
The Chief Financial Officer retains 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 directed by its board. 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 US and Europe. These functions are
controlled by divisional management who are responsible for ratifying general strategy and overseeing performance on a monthly
basis. The performance of the commodity trading function is monitored against its ability to match the Group’s needs for raw materials
with purchase contracts, as well as the Group’s output of co-products with sales contracts. Commodity price contracts are categorised as
being held either for trading or for hedging price exposures. The Group applies a limited level of hedge accounting to its economic price
exposure hedges.
www.tateandlyle.com 149
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Notes to the Consolidated Financial Statements continued
29. Financial instruments – fair value and risk management continued
Market risks
Foreign exchange management
The Group operates internationally and is exposed to foreign exchange risks arising from commercial transactions (transaction exposure),
and from recognised assets, liabilities and investments in foreign 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, although exceptions can be approved by
the Chief Financial Officer. The amounts deferred in equity from derivative financial instruments designated as cash flow hedges are
released to the income statement or statement of financial position and offset against the movement in underlying transactions only when
the forecast transactions affect the income statement or statement of financial position respectively.
Translation exposure
The Group manages the foreign exchange exposure to net investments in overseas operations, particularly in the US and Europe,
by borrowing principally in US dollars, which provide a partial match for the Group’s major foreign currency assets. The Group also
manages some of its foreign exchange exposure to net investments in foreign operations through the use of currency swap contracts and
other liabilities. The amount deferred in equity from the hedging instruments designated as net investment hedges is offset against the
foreign currency translation effect of the net investment in foreign operations, and is released to the income statement upon disposal of
those investments.
The following table illustrates only the Group’s sensitivity to the fluctuation of the Group’s major currencies against sterling on its income
statement and other components of equity, assuming that each exchange rate moves in isolation. The income statement impact is due to
changes in the fair value of monetary assets and liabilities including non-designated foreign currency derivatives. The equity impact for
foreign exchange sensitivity relates to derivative and non-derivative financial instruments hedging the Group’s net investments in its
European and US operations.
Sterling/US dollar 10% change
Sterling/euro 10% change
At 31 March 2018
At 31 March 2017
Income
statement -/+
£m
1
1
Equity -/+
Income
statement -/+
£m
27
5
£m
–
1
Equity -/+
£m
31
5
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 is fixed for more than one year and that no interest rates are fixed for more than 12 years. At 31 March 2018, the longest term of
any fixed rate debt held by the Group was until October 2027 (2017 – October 2027). The proportion of net debt managed by the Group’s
treasury function at 31 March 2018 that was fixed or capped for more than one year was 68% (2017 – 65%).
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 2018 assuming
that other variables remain unchanged.
As at 31 March 2018, if interest rates increased by 100 basis points, Group profit before tax would decrease by £2 million (2017 – £2 million).
If interest rates decreased by 100 basis points, or less where applicable, Group profit before tax would increase by £1 million
(2017 – £1 million increase).
Price risk management
The Group participates mainly in four markets: food and beverage; industrial ingredients; pharmaceutical and personal care; and animal
feed. Food and beverage and industrial ingredients markets are the most significant. All ingredients are produced from renewable crops,
predominantly corn.
The Group is exposed to movements in the future prices of commodities in those domestic and international markets where the Group
buys and sells corn (and related co-products) and energy for production. Commodity futures, forwards and options are used where
available to hedge inventories and the costs of raw materials for unpriced and prospective contracts not covered by forward product sales.
Some of the contracts are used to hedge co-product pricing, for which there is no active market. The pricing is established by the Group,
based on a number of inputs, as discussed on page 106. Due to the seasonality of corn production, at certain points in time throughout the
year, the exposure to commodity pricing contracts may be higher.
As at 31 March 2018, a 50% increase/decrease in the price of corn will result in a decrease/increase to the income statement of
£3 million (2017 – £3 million) and related decrease/increase in other components of equity of £1 million (2017 – £nil).
150 Tate & Lyle PLC Annual Report 2018
150 Tate & Lyle PLC Annual Report 2018
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29. Financial instruments – fair value and risk management continued
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 substantially with investment grade counterparties
approved by the Board.
The Board has 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. 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’ financial information such as liquidity and turnover ratio, are required to evaluate
customers’ credit worthiness.
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’s trade receivables are short term in nature and are largely comprised of amounts receivable from business customers.
Concentrations of credit risk with respect to trade receivables are limited, with our customer base including large, unrelated and
internationally dispersed customers.
The Group considers its maximum exposure to credit risk at the year-end date is the carrying value of each class of financial assets as
disclosed under financial instruments by category on page 147.
Analysis of amounts set-off
The Group does not offset financial assets and liabilities in its statement of financial position as the Group has no intention to net settle,
except as described below.
Derivative assets and liabilities of £9 million (2017 – £17 million) could be offset under an enforceable master netting agreement. Amounts
which do not meet the criteria for offsetting in the statement of financial position but could be settled net in certain circumstances
principally relate to derivative transactions under International Swaps and Derivatives Association (ISDA) agreements where each party
has the option to settle amounts on a net basis in the event of default of the other party.
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 2018 are listed in Note 25.
At the year end, the Group held cash and cash equivalents of £190 million (2017 – £261 million) and had committed undrawn facilities of
£570 million (2017 – £638 million). 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 Group has a core committed bank facility of US$800 million, of which US$80 million matures in 2020 and US$720 million in 2021. This
facility is unsecured and contains financial covenants for the Group that the 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. Refer to Note 4 for the
calculation of these measures for financial covenant purposes. 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 periods, 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 taking into account the total of undrawn committed facilities, no more than 10% of gross debt
matures within 12 months and at least 35% matures beyond 2.5 years. At 31 March 2018, after taking account of undrawn committed
facilities, the Group was compliant with the policy. The average maturity of the Group’s gross debt was 5.4 years (2017 – 6.2 years), taking
account of undrawn committed facilities.
www.tateandlyle.com 151
www.tateandlyle.com 151
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
29. Financial instruments – fair value and risk management continued
The table below analyses the undiscounted cash flows related to the Group’s non-derivative financial liabilities and derivative assets and
liabilities.
Liquidity analysis
Borrowings including finance leases
Interest on borrowings
Trade and other payables
Derivative contracts:
– receipts
– payments
Commodity pricing contracts
Liquidity analysis
Borrowings including finance leases
Interest on borrowings
Trade and other payables
Derivative contracts:
– receipts
– payments
Commodity pricing contracts
< 1 year
£m
1 – 5 years
£m
(8)
(25)
(305)
113
(110)
1
< 1 year
£m
(79)
(26)
(315)
107
(105)
3
(210)
(63)
(10)
166
(183)
–
1 – 5 years
£m
(212)
(79)
(10)
179
(206)
(1)
At 31 March 2018
> 5 years
£m
(339)
(38)
–
–
–
–
At 31 March 2017
> 5 years
£m
(383)
(54)
–
–
–
–
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.
Derivative contracts include currency swaps, forward exchange contracts and interest rate swaps. Commodity pricing contracts included
above represent options and futures. Commodity pricing contracts classified within Level 2 and Level 3 of fair value measurement are not
included in the liquidity analysis above as they are not settled for cash.
Financial assets and liabilities denominated in currencies other than pounds sterling are translated 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 the dividend policy; to
maintain sufficient financial flexibility to undertake its investment plans; and to retain an investment-grade credit rating which enables
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 PLC has contractual relationships with Moody’s and Standard & Poor’s (S&P) for the provision of credit ratings.
At 31 March 2018, the long-term credit rating from Moody’s was Baa2 (stable outlook) (2017 – Baa2) and from S&P was BBB
(stable outlook) (2017 – BBB).
The Group regards its total capital as follows:
Net debt
Equity attributable to owners of the Company
Total capital
Note
27
2018
£m
392
1 367
1 759
At 31 March
2017
£m
452
1 332
1 784
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 were:
Net debt/EBITDA
Interest cover
152 Tate & Lyle PLC Annual Report 2018
152 Tate & Lyle PLC Annual Report 2018
Note
4
4
year ended 31 March
2018
Times
0.8
14.6
2017
Times
0.9
13.9
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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. 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 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 £10 million (2017 – £7 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) Movement in net defined benefit asset/(liability)
(i) Analysis of net defined benefit asset/(liability)
At 31 March 2018
At 31 March 2017
Benefit obligations:
Funded plans
Unfunded plans
Fair value of plan assets
Net surplus/(deficit)
Presented in the statement of financial position as:
Retirement benefit surplus
Retirement benefit deficit
Net defined benefit asset/(liability) reconciliation:
At 1 April 2016
Year ended 31 March 2017
– net increase in the benefit obligation
– net increase in the fair value of plan assets
At 31 March 2017
Year ended 31 March 2018
– net decrease in the benefit obligation
– net change in the fair value of plan assets
At 31 March 2018
Pensions
£m
Medical
benefits
£m
Total
£m
Pensions
£m
Medical
benefits
£m
(1 493)
(56)
(1 549)
1 630
81
178
(97)
81
–
(63)
(63)
–
(63)
–
(63)
(63)
(1 493)
(1 630)
(119)
(1 612)
1 630
18
(63)
(1 693)
1 630
(63)
178
(160)
18
120
(183)
(63)
–
(76)
(76)
–
(76)
–
(76)
(76)
Pensions
£m
(142)
Medical
benefits
£m
(66)
(125)
204
(63)
144
–
81
(10)
–
(76)
13
–
(63)
Total
£m
(1 630)
(139)
(1 769)
1 630
(139)
120
(259)
(139)
Total
£m
(208)
(135)
204
(139)
157
–
18
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
30. Retirement benefit obligations continued
(ii) Analysis of movements in the benefit obligation
Pension benefits
UK
£m
US
£m
Other
£m
Total
£m
(985)
(568)
(15)
(1 568)
Medical
benefits
£m
(66)
Total
£m
(1 634)
–
(3)
(33)
(177)
53
12
(112)
51
–
–
(2)
(99)
–
–
(23)
16
10
(19)
7
69
9
–
(83)
(21)
(2)
–
–
–
–
–
–
–
–
(2)
(1)
(5)
(2)
(3)
(56)
(161)
63
(7)
(105)
120
9
(2)
(86)
(125)
(1 084)
(589)
(20)
(1 693)
–
(26)
25
23
(8)
40
60
–
2
76
–
(21)
–
4
(6)
(2)
31
–
63
71
(3)
–
–
–
–
–
–
(2)
2
(3)
(3)
(47)
25
27
(14)
38
91
(2)
67
144
(1)
–
(2)
(2)
1
–
(1)
4
–
–
(10)
(10)
(76)
(1)
(2)
–
–
3
3
5
–
8
13
(63)
(3)
(3)
(58)
(163)
64
(7)
(106)
124
9
(2)
(96)
(135)
(1 769)
(4)
(49)
25
27
(11)
41
96
(2)
75
157
(1 612)
Total
£m
76
77
236
399
At 31 March 2018
(1 008)
(518)
(23)
(1 549)
At 31 March 2018, the benefits payment expected by the plans over the next ten years were as follows:
UK
£m
41
41
125
216
31
32
97
162
Pension benefits
US
£m
Other
£m
Total
£m
Medical
benefits
£m
72
73
222
378
4
4
14
21
–
–
–
–
–
423
322
745
43
788
At 1 April 2016
Year ended 31 March 2017
Service cost – current
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
Benefits paid
Settlement gain (see Note 7)
Re-measurement of non-qualified deferred
compensation arrangements (see Note 18)
Currency translation differences
Increase in the benefit obligation
At 31 March 2017
Year ended 31 March 2018
Service cost – current
Interest on benefit obligation
Actuarial gains/(losses):
– changes in financial assumptions
– changes in demographic assumptions
– experience against assumptions
Net actuarial gain/(loss)
Benefits paid
Re-measurement of non-qualified deferred
compensation arrangements (see Note 18)
Currency translation differences
Decrease/(increase) in the benefit obligation
Benefit payments:
– within 12 months
– between 1 to 2 years
– between 3 to 5 years
– between 6 to 10 years
Total expected benefit payments
over the next ten years
154 Tate & Lyle PLC Annual Report 2018
154 Tate & Lyle PLC Annual Report 2018
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30. Retirement benefit obligations continued
In the UK, scheme members can elect to forego a portion of their future pension benefits, in return for a lump sum payment, or a transfer
out to other arrangements. These amounts are excluded from future benefit projections.
The £157 million improvement was driven by a reduction in the deficit of the US schemes largely as a result of foreign exchange
movements from the weakening of the US dollar and by cash contributions. In addition to regular cash contributions of £44 million in the
year, the Group made an accelerated gross cash contribution to the US schemes of £56 million, in light of an opportunity to fund the
schemes while taking advantage of a higher US tax deduction.
The pension benefits paid in respect of US plans were higher in the financial year ended 31 March 2017 compared to the current financial
year due to the settlement made by some deferred members during the prior year which resulted in the recognition of a £9 million
exceptional gain (see Note 7d).
At 31 March 2018, the weighted average duration of the significant defined benefit obligations was as follows:
Pension plans:
– UK
– US
Medical benefits
Duration
16 years
11 years
10 years
Assumptions
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. Note that for the
UK defined benefit pension plan these ’best estimate’ IAS 19 assumptions are different to the more prudent assumptions used for funding
valuation purposes. For the US defined benefit pension plan, the funding valuation assumptions are identical to the IAS 19 assumptions.
The principal assumptions used in calculating the benefit obligation were as follows:
Inflation rate
Expected rate of salary increases
Expected rate of pension increases:
– deferred pensions
– pensions in payment
Discount rate
At 31 March 2018
At 31 March 2017
UK
2.2%/3.2%
n/a
2.2%
3.1%
2.6%
US
2.5%
3.5%
n/a
n/a
4.0%
UK
2.3%/3.3%
n/a
2.3%
3.1%
2.4%
US
2.5%
3.5%
n/a
n/a
4.0%
Assumptions regarding future mortality rates of members of the Group’s pension plans are based on published statistics and take 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 2018
At 31 March 2017
UK
US
UK
US
21.4 years
20.8 years
21.6 years
20.9 years
23.2 years
22.4 years
23.7 years
22.5 years
23.5 years
22.7 years
23.8 years
22.9 years
25.3 years
24.3 years
26.1 years
24.5 years
Shorter longevity assumptions are used for members who retire on grounds of ill health.
www.tateandlyle.com 155
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
30. Retirement benefit obligations continued
Medical benefits
Principal assumptions used in calculating the benefit obligation are medical cost inflation and the discount rate applied to the expected
benefit payments. The Group has assumed medical cost inflation at 7.5% per annum (2017 – 8.0%), grading down to 5% by 2023, and used
a discount rate of 3.9% (2017 – 3.9%).
At 31 March 2018, the sensitivity of the net surplus/(deficit) on the plans to changes in the principal assumptions was as follows (assuming
in each case that the other assumptions are unchanged):
Pension plans
Inflation rate*
Life expectancy
Discount rate
Medical benefits
Medical cost inflation
Discount rate
Increase/(decrease) in obligation
Change in
Increase in
assumptions +/-
surplus/(deficit)
Decrease in
surplus/(deficit)
50 bp
1 year
50 bp
50 bp
50 bp
58
68
(102)
2
(3)
(55)
(70)
115
(2)
3
* Inflation rate sensitivity covers the inflation assumption, expected rate of salary increases assumption and expected rate of pensions in payment increases assumption.
UK
£m
1 018
34
164
22
(51)
–
169
1 187
28
(9)
22
(1)
(60)
–
(20)
1 167
US
£m
408
17
15
16
(69)
56
35
443
16
11
69
(1)
(27)
(48)
20
463
Total
£m
1 426
51
179
38
(120)
56
204
1 630
44
2
91
(2)
(87)
(48)
–
1 630
(iii) Analysis of movements in the plan assets
At 1 April 2016
Year ended 31 March 2017
Interest on plan assets
Actual return higher than interest on plan assets
Employer’s contributions
Benefits paid
Currency translation differences
Increase in fair value of plan assets
At 31 March 2017
Year ended 31 March 2018
Interest on plan assets
Actual return (lower)/higher than interest on plan assets
Employer’s contributions
Plan administration costs
Benefits paid
Currency translation differences
(Decrease)/increase in fair value of plan assets
At 31 March 2018
156 Tate & Lyle PLC Annual Report 2018
156 Tate & Lyle PLC Annual Report 2018
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30. Retirement benefit obligations continued
Analysis of plan assets
Equities – quoted
Corporate bonds – quoted
Government bonds – quoted
Investment funds – quoted
Derivatives – quoted
Cash
Property – unquoted
Investment funds – unquoted
Derivatives – unquoted
Insurance policies – unquoted
Year ended 31 March 2018
Year ended 31 March 2017
UK
£m
79
162
811
205
(383)
15
–
1
15
262
1 167
US
£m
–
331
128
–
–
–
–
–
–
4
463
Total
£m
79
493
939
205
(383)
15
–
1
15
266
1 630
UK
£m
150
138
795
182
(395)
20
–
1
18
278
1 187
US
£m
110
254
53
–
–
–
22
–
–
4
443
Total
£m
260
392
848
182
(395)
20
22
1
18
282
1 630
The fair value of the insurance policies is deemed to be equivalent to the present value of the related benefit obligation.
The Group also paid an additional £5 million (2017 – £4 million) into the US unfunded retirement medical plans and £4 million
(2017 – £4 million) into the US unfunded pension plans to meet the cost of providing benefits in the financial year.
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.
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 Group considers that it has an unconditional right to the surplus
relating to the UK plan as the scheme rules state that any surplus should be returned to the Group in the event that there are
no members left in the pension scheme.
c) Mitigation of risk
The defined benefit pension plans expose the Group to actuarial risks such as interest rate, longevity, inflation and investment 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 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.
At 31 March 2018, £266 million (2017 – £282 million) of the benefit obligation was fully matched by qualifying insurance policies that also
mitigate longevity and investment risks. The UK plans also maintain a portfolio of return-seeking investments, principally in the form of
equities and investment funds, whilst the US funded plans are principally comprised of fixed interest securities since all equity and real
estate assets were sold following the accelerated contribution payment.
In the UK, interest rate derivatives are used to achieve close matching where matching fixed-interest securities are not available in the
market. At 31 March 2018 the ratio of non-insured liabilities under the main UK plan which had been hedged for both interest rate and
inflation rate risks was 87%. For interest rate purposes it is the economic liability risk which is hedged rather than the IAS 19 accounting
liability risk, i.e. the hedging is linked to movements in government bond yields rather than high quality AA corporate bond yields. The
economic liability risk is hedged in this way as it impacts the funding position which, in turn, drives the Company’s cash contribution
requirements. 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.
d) Funding of the plans
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. The main UK scheme triennial valuation as at 31 March 2016 was concluded during the prior
year, with agreed core funding contributions maintained at £12 million per year, and the Group also committing to extend the
supplementary contributions payable into the secured funding account of £6 million per year until 31 March 2023. This funding is payable
to the trustees on certain triggering events such as underperformance of the Scheme’s investments or a deterioration in the strength of
the Group’s financial covenant. The Group will continue to fund the UK plan administration costs.
During the year ending 31 March 2019, the Group expects to contribute approximately £26 million to its defined benefit pension plans and
to pay approximately £4 million in relation to retirement medical benefits.
www.tateandlyle.com 157
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
31. Share-based payments
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 2018 and 2017 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 £15 million (2017 – £21 million). Other than the Sharesave
Plan, all option awards have a nil exercise price. The following arrangements existed during the period:
a) 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 until the end of the performance period, and are subject to the satisfaction of performance conditions.
The conditions applicable to PSP awards made from 1 April 2016 relate to the achievement of the Group adjusted return on capital
employed (ROCE) and adjusted profit targets. 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. Up to 25% of each award vests dependent on the compound
annual growth in the Group’s adjusted profit before tax with the remaining 25% from compound annual growth of the Food & Beverage
Solutions adjusted operating profit.
The conditions applicable to PSP awards made prior to 31 March 2016 relate to the achievement of earnings per share (EPS) and 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.
b) Group Bonus Plan – deferred element
Bonuses earned under the Group Bonus Plan (GBP) 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.
c) Sharesave Plan
Options are granted from time 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. The exercise price reflects a discount to market value of up to 20%.
d) Restricted Share Awards
The Company has made a Restricted Share Award (RSA) to a number of eligible employees. Awards made normally vest provided the
participant remains in the Group’s employment during the performance period and other conditions, specific to the individual awards,
are met.
e) Conditional Share Award
During the prior year, the Company made a Conditional Share Award (CSA) to eligible employees. Up to 50% of each award vested
dependent on adjusted Group profit after tax on continuing operations for the year ended 31 March 2017. Up to 50% of each award vested
dependent on the Group’s adjusted ROCE from continuing operations as at 31 March 2017. The award vested as soon as practicable after
31 March 2017, although, some employees were subject to an additional retention period ending 31 March 2018. The vesting level of the
awards may be reduced in other circumstances specified at award.
Further information for these awards made in relation to executive directors (a, b and c only) are set out in the Directors’ Remuneration
Report on pages 72 to 89.
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
2018
2017
Awards
(number)
Weighted average
exercise price
(pence)
Awards
(number)
Weighted average
exercise price
(pence)
12 435 492
4 262 759
(2 130 967)
(3 453 377)
11 113 907
485 268
10p
15p
13p
5p
13p
17p
10 607 961
5 875 352
(1 209 949)
(2 837 872)
12 435 492
603 939
10p
6p
10p
5p
10p
3p
The weighted average market price of the Company’s ordinary shares on the dates on which awards were exercised during the year was
704p (2017 – 684p).
158 Tate & Lyle PLC Annual Report 2018
158 Tate & Lyle PLC Annual Report 2018
31. Share-based payments continued
Awards granted in the year
During the year, PSP awards were granted over 3,807,789 shares (2017 – 4,177,420 shares), RSAs were granted over 124,011 shares
(2017 – nil), no CSAs were granted (2017 – 1,474,000 shares), the deferred element of GBP awards were granted over 216,727 shares
(2017 – 161,503 shares) and Sharesave options were granted over 114,232 shares (2017 – 62,429 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:
Fair value at grant date
Exercise price
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 2018
Year ended 31 March 2017
PSP
Sharesave
627p
–
133p
555p
687p
684p
3 years 3.3/5.3 years
– 0.62%/0.86%
4.08%
n/a
4.12%
25%
CSA
n/a
–
n/a
n/a
–
n/a
n/a
PSP
Sharesave
662p
–
102p
597p
CSA
582p
–
722p
667p
621p
3 years
3.3/5.3 years
0.9/1.9 years
–
0.37%/0.76%
3.87%
n/a
4.20%
25%
–
4.51%
n/a
In addition, 216,727 deferred shares issued under the Group Bonus Plan during the year have an expected life of 2.0 years with a fair value
at the grant date of 795p (2017 – 614p). RSAs of 124,011 (2017 – nil) were granted, with employment related conditions and expected life of
the award, specific to each individual grant.
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.
Awards outstanding at the end of the year
The range of exercise prices and the weighted average remaining contractual life of the awards outstanding at the end of the year were
as follows:
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a
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s
U
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f
o
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a
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i
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Exercise price
Nil
400p to 799p
Total
At 31 March 2018
Weighted average
contractual life
(months)
46.7
33.8
46.4
Awards
(number)
10 853 697
260 210
11 113 907
At 31 March 2017
Weighted average
contractual life
(months)
44.9
32.1
44.7
Awards
(number)
12 207 008
228 484
12 435 492
www.tateandlyle.com 159
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
32. Provisions and contingent liabilities
Provisions
Insurance
provisions
Restructuring and
closure provisions
Other provisions
At 1 April 2016
Year ended 31 March 2017
Provided in the year
Released in the year
Utilised in the year
Exchange and other movements
At 31 March 2017
Year ended 31 March 2018
Provided in the year
Released in the year
Utilised in the year
Exchange and other movements
At 31 March 2018
Provisions are expected to be utilised as follows:
– within one year
– after more than one year
Total
£m
12
1
(1)
(5)
2
9
2
–
(3)
(1)
7
£m
14
3
(1)
(14)
1
3
–
–
(2)
(1)
–
£m
10
3
–
–
2
15
1
(1)
(1)
(1)
13
2018
£m
5
15
20
Total
£m
36
7
(2)
(19)
5
27
3
(1)
(6)
(3)
20
At 31 March
2017
£m
10
17
27
Provisions primarily relate to Group legal matters, previously disposed businesses and insurance provisions representing amounts
provided by the Group’s captive insurance subsidiary in respect of the expected level of insurance claims. All provisions are expected to be
utilised within five years.
The difference between the carrying value and the discounted present value was not material in either year.
Contingent liabilities
Passaic River
The Group remains subject to a legal case arising from the notification in 2007 by the U.S. Environmental Protection Agency (USEPA) that
it, along with approximately 70+ others, is a potentially responsible party (PRP) for a 17 mile section of the northern New Jersey Passaic
River, a major ‘Superfund’ site. In March 2016, the USEPA issued its Record of Decision (ROD) on the likely cost for the remediation of the
lower eight-mile section of the river (the most contaminated). Whilst the Group will continue to vigorously defend itself in this matter, in
light of the publication of the ROD, the Group has maintained a provision of £6 million in respect of this. The Group continues to be unable
to estimate a reasonably possible range of loss in respect of the remaining nine-mile section of the river and therefore has not recognised
a provision for this section.
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. While there is always uncertainty as to the outcome of any claim or litigation, it is not expected that
the claims and litigation existing at 31 March 2018 will have a material adverse effect on the Group’s financial position.
160 Tate & Lyle PLC Annual Report 2018
160 Tate & Lyle PLC Annual Report 2018
33. Commitments
Capital commitments
Total commitments for the purchase of property, plant and equipment
In addition, commitments in respect of retirement benefit obligations are detailed in Note 30.
2018
£m
26
At 31 March
2017
£m
25
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 year-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
2018
£m
35
106
133
274
At 31 March
2017
£m
34
116
168
318
34. Acquisitions and disposals
Completion of Tapioca Development Corporation disposal in the 2018 financial year
On 2 November 2017, the Group completed the sale of its 33.3% share in an associated undertaking, the Tapioca Development
Corporation. This sale resulted in cash proceeds of £5 million and resulted in a profit on disposal of £2 million, after recycling of
cumulative foreign exchange translation gains of £1 million from reserves to the income statement upon disposal.
Completion of Moroccan disposal in the 2017 financial year
On 1 June 2016, the Group completed the sale of its corn wet mill in Casablanca, Morocco to ADM, receiving gross cash proceeds of
£4 million, a net £3 million after cash disposed. In the year ended 31 March 2017, the Group recognised a £1 million exceptional gain
resulting from the recycling of cumulative foreign exchange translation gains from reserves to the income statement upon disposal of the
investment. Refer to Note 7 for details on the settlement reached with the Moroccan tax authorities in respect of historical tax matters
relating to this entity.
Completion of Howbetter disposal in the 2017 financial year
On 23 December 2016, the Group completed the disposal of Jiangsu Tate & Lyle Howbetter Food Co., Ltd, its Food Systems subsidiary in
China, recognising a £7 million operating exceptional charge (within other expenses) in respect of impairing and deconsolidating the entity
prior to disposal, and the associated costs of exiting (see Note 7).
35. Events after the balance sheet date
On 23 May 2018, the Group entered into an agreement to acquire a 15% equity holding in Sweet Green Fields, one of the largest privately
held, fully integrated global stevia ingredient companies. Under the terms of the agreement, the Group has an option to acquire the
remaining 85% share in due course.
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www.tateandlyle.com 161
www.tateandlyle.com 161
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
36. Related party disclosure
Identity of related parties
The Group has related party relationships with its joint ventures and associates, the Group’s pension schemes and with key management,
being its Directors and executive officers. No related party transaction with close family members of the Group’s key management
occurred in the current or comparative year.
Subsidiaries, joint ventures and associates
Transactions entered into by the Company, Tate & Lyle PLC, 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. Transactions and balances with and
between joint ventures are as shown below. There are no such transactions with associates.
In the year ended 31 March 2018, the Group disposed of its 33.3% interest in Tapioca Development Corporation, a company based in
Thailand, its only associate. See Notes 21 and 34.
In the year ended 31 March 2017, the Group disposed of, and therefore ceased to have related party transactions with two of its
subsidiaries. The Group disposed of its equity interest in Jiangsu Tate & Lyle Howbetter Food Co., Ltd, its Food Systems business in China.
The Group also completed the disposal of its interest in its corn wet mill in Casablanca, Morocco.
There were no other material changes in related parties or in the nature of related party transactions during the year.
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
Year ended 31 March
2018
£m
147
–
2018
£m
20
–
2017
£m
133
–
At 31 March
2017
£m
24
–
The Group had no material related party transactions containing unusual commercial terms in the current or prior year.
Key management compensation is disclosed in Note 10. There were no other related party transactions with key management.
37. 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:
Year ended 31 March
2018
£1 =
1.33
1.13
2018
£1 =
1.40
1.14
2017
£1 =
1.30
1.19
At 31 March
2017
£1 =
1.25
1.17
Average rate
US dollar
Euro
Year-end rate
US dollar
Euro
162 Tate & Lyle PLC Annual Report 2018
162 Tate & Lyle PLC Annual Report 2018
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38. Full listing of subsidiaries, joint ventures and associates
Subsidiaries based in the United Kingdom1
Astaxanthin Manufacturing Limited
Cesalpinia (UK) Limited
G.C. Hahn and Company Limited
Hahntech International Limited
Harvey Steel Sugars Limited2
Histonpark Limited
Type of business
Dormant
Dormant
Food & Beverage
Solutions
production
Dormant
Dormant
Dormant
Robinson Milling Systems (Tewkesbury) Limited
Dormant
T.L.S.S. Pension Nominees Limited
Dormant
Tate & Lyle Export Holdings Limited2
Holding company
Tate & Lyle Group Services Limited
Holding company
Tate & Lyle Holdings Americas Limited
Holding company
Tate & Lyle Holdings Limited
Holding company
Tate & Lyle Industrial Holdings Limited2
Dormant
Tate & Lyle Industries Limited
Tate & Lyle International Finance PLC2
Holding company
In-house treasury
company
Tate & Lyle Investments (Gulf States) Limited
Dormant
Tate & Lyle Investments America Limited
Holding company
Tate & Lyle Investments Brazil Limited
Holding company
Tate & Lyle Investments Limited2
Holding company
Tate & Lyle L.P.
Tate & Lyle Overseas Limited
Investment
partnership
Dormant
Tate & Lyle Pension Trust Limited2
Pension company
Tate & Lyle Share Shop Limited2
Non-trading
Tate & Lyle Technology Limited2
Holding company
Tate & Lyle UK Limited2
Tate & Lyle Ventures II LP
Non-trading
Investment
partnership
Tate & Lyle Ventures Limited2
Holding company
Tate & Lyle Ventures LP
Investment
partnership
Percentage of
ordinary shares
attributable to
Tate & Lyle PLC
Percentage of
preference
shares
attributable to
Tate & Lyle PLC Registered address
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
– 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
–
1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
100 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
100 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
–
1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
100 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
100 1 Kingsway, London WC2B 6AT, United Kingdom
–
1209 North Orange Street, Wilmington, Delaware
19801, United States
– 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
–
1 Kingsway, London WC2B 6AT, United Kingdom
– 1 Kingsway, London WC2B 6AT, United Kingdom
–
1 Kingsway, London WC2B 6AT, United Kingdom
1 Registered in England and Wales, except Tate & Lyle L.P. which is registered in Delaware, USA.
2 Direct subsidiaries of Tate & Lyle PLC.
www.tateandlyle.com 163
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
38. Full listing of subsidiaries, joint ventures and associates continued
Subsidiaries operating overseas
Percentage of
ordinary shares
attributable to
Tate & Lyle PLC
Percentage of
preference
shares
attributable to
Tate & Lyle PLC
Registered address
Country of incorporation
or registration
Company
Type of business
Argentina
Tate & Lyle Argentina SA1
Food & Beverage Solutions
Australia
Tate & Lyle ANZ Pty Limited
distribution and sales support
Food & Beverage Solutions
production and distribution
Belgium
Tate & Lyle Services
Internal service provider and
(Belgium) N.V.2
sales support
Bermuda
Tate & Lyle Management &
Reinsurance
Finance Limited
Brazil
Tate & Lyle Brasil S.A.1
Citric acid production and
Food & Beverage Solutions
distribution
G.C. Hahn & Co. do Brasil
Dormant
Estabilizantes e Tecnologia
para Alimentos Ltda.1
Tate & Lyle Gemacom Tech
Indústria e Comércio S.A.1
Food & Beverage Solutions
production and support
100
100
100
100
100
100
93
Canada
Tate & Lyle Ingredients
Food & Beverage Solutions
100
Canada Limited
sales support
Chile
China
Tate & Lyle Chile
Commercial Ltda
Tate & Lyle Trading
(Shanghai) Co. Ltd1
Food & Beverage Solutions
distribution and sales support
Food & Beverage Solutions
distribution and sales support
100
100
Food & Beverage Solutions
100
sales
G.C. Hahn & Co. Food
Stabiliser Business
(Shanghai) Ltd1
Tate & Lyle Food Ingredients
(Nantong) Company Limited1
Polydextrose production
100
– New & Hi-Tech Industrial
– San Martín 140, 14th Floor, City
of Buenos Aires, Argentina
– Building 2, 1425 Boundary Road,
Wacol QLD 4076, Australia
– Industrielaan 4 box 10/1, 9320
Aalst, Belgium
– Canon's Court, 22 Victoria
Street, Hamilton, Bermuda
– Santa Rosa do Viterbo, State of
São Paulo, Fazenda Amália, São
Paulo, 14270-000, Brazil
– Rua Sapetuba Nº 211, CEP:-
005510-001- Vila Pirajussara,
Estado de São Paulo, Brazil
– No. 380, Distrito Industrial, City
of Juiz de Fora, State of Minas
Gerais at Rua B, 36092-050,
Brazil
– Suite 400, Phoenix Square, 371
Queen Street, Fredericton NB
E3B 4Y9, Canada
– Isidora Goyenechea 2800, Piso
43, Las Condes, Santiago, Chile
– 16F, Building C, Headquarters
Park Phase 2, 1582 Gumei
Road, Shanghai, 200233, China
– 16F, Building C, Headquarters
Park Phase 2, 1582 Gumei
Road, Shanghai, 200233, China
Development District, Rudong
county, Nantong city, China
226400
– Calle 11 #100-121 Of 309, Cali,
Colombia
– Donji Banovec 15, Koprivnica,
48000, Croatia
– Ostravská 169, 339 01 Klatovy IV,
Czech Republic
– 87 Street 9, Maadi , Cairo, Egypt
– 76, rue du Maréchal Lyautey,
78100 Saint Germain En Laye,
France
– 2 Avenue de L'Horizon, 59650
Villeneuve-D'Ascq, France
Colombia
Tate & Lyle Colombia S.A.S.1 Food & Beverage Solutions
Croatia
G.C. Hahn & Co. d.o.o. Za
distribuciju stabilizacionih
sistema
distribution and sales support
Food & Beverage Solutions
sales
Czech Republic
G.C. Hahn & Co. stabilizacni
Food & Beverage Solutions
Egypt
France
technika, s.r.o.
sales
Tate & Lyle Egypt LLC
Dormant
G.C. Hahn & Cie. SARL
Food & Beverage Solutions
sales
100
100
100
100
100
Tate & Lyle Ingredients
Research and development
100
France S.A.S.
centre and Food & Beverage
Solutions sales support
164 Tate & Lyle PLC Annual Report 2018
164 Tate & Lyle PLC Annual Report 2018
38. Full listing of subsidiaries, joint ventures and associates continued
Subsidiaries operating overseas continued
Country of incorporation
or registration
Company
Germany
G.C. Hahn & Co.
Stabilisierungstechnik
GmbH
Type of business
Food & Beverage Solutions
research and development
and sales support
G.C. Hahn & Co.
Holding company
Cooperationsgesellschaft
mbH
Tate & Lyle Germany GmbH
Food & Beverage Solutions
Gibraltar
Tate & Lyle Insurance
(Gibraltar) Limited
sales support
Reinsurance
Greece
Tate & Lyle Greece A.E.
Food & Beverage Solutions
sales support
India
Tate & Lyle Investments
Dormant
(India) Private Ltd
Israel
Tate & Lyle Israel Limited
Dormant
Gamtal Foods Ltd
Dormant
Italy
Tate & Lyle Italia S.P.A.
Food & Beverage Solutions
production and
sales support
Percentage of
ordinary shares
attributable to
Tate & Lyle PLC
Percentage of
preference
shares
attributable to
Tate & Lyle PLC
Registered address
100
100
100
100
95
100
100
65
100
– Roggenhorster Strasse 31,
23556, Lübeck, Germany
– Roggenhorster Strasse 31,
23556, Lübeck, Germany
– Roggenhorster Strasse 31,
23556, Lübeck, Germany
– Suite 913, Europort, Gibraltar
– 54248 Thessaloniki, K.
Papadaki 69, Greece
– C-367, Defense Colony, New
Delhi, 110 024, India
– 16 Hatidhar st Ra'annana,
Raanana, 4088, Israel
– 7 Anatot, Tel Aviv Jaffa,
6908007, Israel
– Via Verdi, 1-Ossona, Milano,
Italy
Japan
Tate & Lyle Japan KK
Food & Beverage Solutions
100
– 2F Oak Minami-Azabu Building,
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distribution
Lithuania
UAB G.C. Hahn & Co.
Food & Beverage Solutions
sales
Mexico
Tate & Lyle México, S. de
Food & Beverage Solutions
R.L. de C.V.1
distribution and sales support
Mexama, S.A. de C.V.1
Non-trading
100
100
65
Talo Services de Mexico,
Internal service provider
100
S.C.1
Morocco
T&L Casablanca S.A.R.L.
Food & Beverage Solutions
100
sales support
Netherlands
Nederlandse Glucose
Holding company
Industrie B.V.
Tate & Lyle Netherlands
Primary Products and Food &
B.V.
Beverage Solutions
production
Poland
G.C. Hahn & Co. Technika
stabilizowania Sp.z o.o.
Food & Beverage Solutions
sales
Tate & Lyle Global Shared
Internal service provider
Services Sp.z o.o.
Tate & Lyle Poland
Dormant
Sp.z o.o.
100
100
100
100
100
3-19-23 Minami-Azabu,
Minato-ku, Tokyo, Japan
– E. Simkunaites Str. 10, Vilnius,
LT04130, Lithuania
– piso 2, Av. Universidad 749,
Col del Valle Sur, Ciudad de
Mexico , 03100, México
– Calle lago de tequesquitengo ,
No 111 Col. Cuahutemoc C.P.
62430 , Morelos, México
– piso 2, Av. Universidad 749,
Col del Valle Sur, Ciudad de
Mexico , 03100, México
– 22, Rue du Parc, Casa Théâtre
Centre, Anfa, Casablanca,
Morocco
100 1541 KA, Koog aan de Zaan,
Lagedijk 5, The Netherlands
– 1541 KA, Koog aan de Zaan,
Lagedijk 5, The Netherlands
– Sterlinga 8A, 91425, Łódź,
Poland
– Sterlinga 8A, 91425, Łódź,
Poland
– Sterlinga 8A, 91425, Łódź,
Poland
www.tateandlyle.com 165
www.tateandlyle.com 165
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
38. Full listing of subsidiaries, joint ventures and associates continued
Subsidiaries operating overseas continued
Country of incorporation
or registration
Company
Russian Federation Tate & Lyle CIS LLC1
Type of business
Food & Beverage
Solutions sales
Percentage of
ordinary shares
attributable to
Tate & Lyle PLC
Percentage of
preference
shares
attributable to
Tate & Lyle PLC
Registered address
100
– Leninskaya Sloboda,26, Area 2, Room
100, 115280, Moscow, Russian
Federation
Singapore
Tate & Lyle Asia Pacific
Food & Beverage
100
– 3 Biopolis Drive, #05-11 Synapse,
Pte. Ltd.
Solutions sales and
ASPAC regional head
office
Tate & Lyle Singapore
Sucralose production (now
Pte Ltd
decommissioned)
Tate & Lyle Singapore
Holding company
Holdings Pte Ltd
Slovakia
Tate & Lyle Boleraz s.r.o. Primary Products and
Food & Beverage
Solutions production
Tate & Lyle Slovakia,
Internal service provider
s.r.o.
Tate and Lyle South
Africa Proprietary
Limited
Food & Beverage
Solutions production and
distribution
South Africa
Singapore 138623
– One Marina Boulevard #28-00
Singapore 018989
– One Marina Boulevard #28-00
Singapore 018989
– Boleraz 114, 91908 Boleraz, Slovakia
– Boleraz 114, 91908 Boleraz, Slovakia
– 1 Gravel Drive, Kya Sands Business
Park, Kya Sands, 2163, South Africa
100
100
100
100
100
Spain
G.C. Hahn Estabilizantes
y Tecnologia para
Alimentos
Food & Beverage
Solutions sales
100
– Av. Valencia, 15, 46171, Casinos
Valencia, Spain
Ebromyl S.L.
Dormant
Talan Iberica SA
Dormant
Sweden
Tate & Lyle Sweden AB
Oat protein and Beta
Glucan production
Turkey
Tate and Lyle Turkey
Food & Beverage
Gıda Hizmetleri Anonim
Şirketi
Solutions sales support
Ukraine
PII G.C. Hahn & Co. Kiev1 Food & Beverage
Solutions sales
United Arab
Emirates
Tate & Lyle DMCC
Food & Beverage
Solutions sales support
USA
Staley Holdings LLC
Holding company
Tate & Lyle Custom
Ingredients LLC
Food & Beverage
Solutions production
Tate & Lyle Finance LLC
In-house finance
TLHUS, Inc.
Holding company
Tate & Lyle Ingredients
Primary Products and
Americas LLC
Food & Beverage
Solutions production
Tate & Lyle Sucralose
Sucralose production
LLC
TLI Holding LLC
In-house finance
166 Tate & Lyle PLC Annual Report 2018
166 Tate & Lyle PLC Annual Report 2018
100
100
100
100
100
100
100
100
100
100
100
100
100
– Paseo Independencia, 6- PLT 3, 50004,
Zaragoza, Zaragoza, Spain
– 28 Raimundo Fernández Villaverde,
28003, Madrid, Spain
– Älvåsvägen 1, 610 20, Kimstad, Sweden
– Esentepe Mah., Büyükdere Cad. , 193
Plaza Kat: 2 193 / 235A14 Şişli, İstanbul,
Turkey
– Mala Olexandriwka, Zentralna-Str. 2-B,
Borispol, 08320KIEW, UKRAINE
– Cluster X, Tower X3, Office n. 3805.,
Jumeira Lake Towers, Dubai, United
Arab Emirates
– 1209 North Orange Street, Wilmington,
Delaware 19801, United States
– 1209 North Orange Street, Wilmington,
Delaware 19801, United States
– 1209 North Orange Street, Wilmington,
Delaware 19801, United States
– 1209 North Orange Street, Wilmington,
Delaware 19801, United States
– 1209 North Orange Street, Wilmington,
Delaware 19801, United States
– 1209 North Orange Street, Wilmington,
Delaware 19801, United States
– 1209 North Orange Street, Wilmington,
Delaware 19801, United States
38. Full listing of subsidiaries, joint ventures and associates continued
Subsidiaries operating overseas continued
Country of incorporation
or registration
Company
Type of business
Percentage of
ordinary shares
attributable to
Tate & Lyle PLC
Percentage of
preference
shares
attributable to
Tate & Lyle PLC
Registered address
Tate & Lyle Domestic
Internal service provider
100
– 1209 North Orange Street,
International
Sales Corporation
Wilmington, Delaware 19801,
United States
Tate & Lyle Grain, Inc.
Grain products
100
– 1209 North Orange Street,
Wilmington, Delaware 19801,
United States
Tate & Lyle Malic Acid
Dormant
100
– 1209 North Orange Street,
LLC
Wilmington, Delaware 19801,
United States
Tate & Lyle Sugar
Holding company
100
– 1209 North Orange Street,
Holdings, Inc.
Wilmington, Delaware 19801,
United States
Tate & Lyle Americas
Internal service provider
100
– 1209 North Orange Street,
LLC
Wilmington, Delaware 19801,
United States
Tate & Lyle Citric Acid
Citric acid production
100
– 1209 North Orange Street,
LLC
Staley International Inc.
Cereal sweeteners and
G. C. Hahn USA LLC
Dormant
starches
100
100
Wilmington, Delaware 19801,
United States
– 208 So. LaSalle Street, Suite 814,
Chicago, IL 560604, United States
– 1209 North Orange Street,
Wilmington, Delaware 19801,
United States
1 Non-coterminous year-end.
2 Direct subsidiaries of Tate & Lyle PLC.
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Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Consolidated Financial Statements continued
38. Full listing of subsidiaries, joint ventures and associates continued
Joint ventures
Percentage of
ordinary shares
attributable to
Tate & Lyle PLC
Percentage of
preference
shares
attributable to
Tate & Lyle PLC
Registered address
50
50
50
– Calle 26 No. 2756, Zona Industrial,
Guadalajara, Jal., 44940, Mexico
– Calle 26 No. 2756, Zona Industrial,
Guadalajara, Jal., 44940, Mexico
- Calle 26 No. 2756, Zona Industrial,
Guadalajara, Jal., 44940, Mexico
Country of incorporation
or registration
Company
Type of business
Mexico
Almidones Mexicanos
Primary Products and Food &
S.A. de C.V.1
Beverage Solutions
production
Promotora de Productos
y Mercados Mexicanos,
S.A. de C.V.1
Primary Products and Food &
Beverage Solutions
production
Estacion de
Primary Products and Food &
Beverage Solutions
production
Transferencia
Coatzacoalcos, S.A. de
C.V.1
DuPont Tate & Lyle Bio
Products Company, LLC
USA
1 Non-coterminous year-end.
Industrial ingredients
50
– 1209 North Orange Street,
Wilmington, Delaware 19801, United
States
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 equity accounted in the Group’s financial statements on the basis of management accounts for the year to 31 March.
168 Tate & Lyle PLC Annual Report 2018
168 Tate & Lyle PLC Annual Report 2018
Parent Company Balance Sheet
ASSETS
Fixed assets
Tangible fixed assets
Intangible assets
Investments in subsidiary undertakings
Investments in associates
Total
Current assets
Debtors
Cash at bank
Creditors – amounts falling due within one year
Net current 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
Retained earnings
Total shareholders’ funds
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n
Notes
2018
£m
At 31 March
2017
£m
2
3
4
5
6
7
8
11
3
2
1 037
–
1 042
1 480
–
1 480
(1 208)
272
1 314
(2)
1 312
117
406
8
781
2
3
1 028
4
1 037
1 554
–
1 554
(1 314)
240
1 277
(2)
1 275
117
406
8
744
1 312
1 275
The Company recognised profit for the year of £180 million (2017 – £298 million).
The Parent Company’s financial statements on pages 169 to 176 were approved by the Board of Directors on 23 May 2018 and signed on its
behalf by:
Nick Hampton
Director
The notes on pages 171 to 176 form part of these financial statements.
Tate & Lyle PLC
Registered number: 76535
www.tateandlyle.com 169
www.tateandlyle.com 169
Strategic ReportGovernanceFinancial StatementsUseful Information
Parent Company Statement of Changes in Equity
At 1 April 2016
Year ended 31 March 2017:
Profit for the year
Purchase of own shares
Share-based payments
Dividends paid
At 31 March 2017
Year ended 31 March 2018:
Profit for the year
Purchase of own shares
Share-based payments
Dividends paid
At 31 March 2018
Called up
share
capital
£m
117
Share
premium
account
£m
406
Capital
redemption
reserves
£m
8
Retained
earnings
£m
579
–
–
–
–
–
–
–
–
117
406
–
–
–
–
–
–
–
–
117
406
–
–
–
–
8
–
–
–
–
8
298
(18)
15
(130)
744
180
(27)
15
(131)
781
Total
equity
£m
1 110
298
(18)
15
(130)
1 275
180
(27)
15
(131)
1 312
At 31 March 2018, the Company had realised profits available for distribution in excess of £650 million (2017 - in excess of £625 million).
170 Tate & Lyle PLC Annual Report 2018
170 Tate & Lyle PLC Annual Report 2018
Notes to the Parent Company Financial Statements
1. Principal accounting policies
Basis of preparation
Tate & Lyle PLC (the Company) is a public limited company
incorporated in the United Kingdom and registered in England. 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 Financial Reporting
Standard 101 Reduced Disclosure Framework (FRS 101) and with
UK accounting presentation as at 31 March 2018, with comparative
figures as at 31 March 2017.
For the reasons set out on page 105, the Company’s financial
statements are prepared on a going concern basis.
As permitted by Section 408 of the Companies Act 2006, the
Company’s profit and loss account is not presented in these
financial statements. Profit and loss account disclosures are
presented in Note 13.
The results of the Company are included in the preceding Group
financial statements.
The following disclosure exemptions from the requirements of
IFRS have been applied in the preparation of these financial
statements, in accordance with FRS 101:
• the requirements of IAS 7 Statement of Cash Flows
• the requirements of paragraph 17 and 18(a) of IAS 24 Related
Party Disclosures
• the requirements in IAS 24 Related Party Disclosures to disclose
related party transactions entered into between two or more
members of a group, provided that any subsidiary which is a
party to the transaction is wholly owned by such a member
• the requirement in paragraph 38 of IAS 1 Presentation of
Financial Statements to present comparative information in
respect of paragraph 79(a)(iv) of IAS 1
• the requirements of IFRS 7 Financial Instruments: Disclosures
• the requirements of paragraphs 30 and 31 of IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors
• the requirements of IFRS 2 Share-Based Payments
• the requirements of paragraphs 91 to 99 of IFRS 13 Fair Value
Measurement
• the requirements of paragraphs 10(d) (statement of cash flows),
10(f) (statement of financial position as at the beginning of the
preceding period when an entity applies an accounting policy
retrospectively), 38(A to D) (comparative information), 40(A to D)
(presentation of third balance sheet), 111 (statement of cash
flows) and 134 to 136 (capital management) of IAS 1 Presentation
of Financial Statements.
The Company intends to maintain these disclosure exemptions in
future years.
Judgements and key sources of uncertainty
Estimating fair value for share-based transactions requires
determination of the most appropriate valuation model
which depends on the terms and conditions of each individual
grant. This estimation also requires determination of the most
appropriate inputs to the valuation model.
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Investments
Subsidiaries are all entities over which the Company has control.
The Company controls an entity when it is exposed to, or has rights
to, variable returns from its involvement with the entity and has the
ability to affect those returns through its power over the entity.
An associate is an entity over which the Company has significant
influence. Significant influence is the power to participate in
financial and operating policy decisions but not to control or jointly
control them.
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.
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 IAS 19 Employee 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 in respect of all temporary differences
that have originated but which have not reversed at the balance
sheet date where transactions or events have occurred at that date
that will result in an obligation to pay more, or a right to pay less, or
to receive more tax. Deferred tax assets are recognised to the
extent that they are regarded as recoverable. Assets are regarded
as recoverable when it is regarded as more likely than not there
will be suitable taxable profits from which the future reversal of the
underlying timing differences can be deducted.
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 and
carried at historical cost are translated using the exchange rate
ruling on the date of transaction.
www.tateandlyle.com 171
www.tateandlyle.com 171
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Parent Company Financial Statements continued
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.
Dividend income received from subsidiary companies is recognised
when the right to receive the payment is established.
1. Principal accounting policies continued
Share-based payments
As described in Note 31 to the consolidated 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.
Commitments in respect of retirement benefit obligations are
detailed in Note 14.
172 Tate & Lyle PLC Annual Report 2018
172 Tate & Lyle PLC Annual Report 2018
2. Tangible fixed assets
Cost
At 1 April 2017
Additions
Disposals
At 31 March 2018
Accumulated depreciation
At 1 April 2017
Depreciation charge
Disposals
At 31 March 2018
Net book value at 31 March 2017
Net book value at 31 March 2018
3. Intangible assets
Cost
At 1 April 2017
Additions
At 31 March 2018
Accumulated amortisation
At 1 April 2017
Amortisation charge
At 31 March 2018
Net book value at 31 March 2017
Net book value at 31 March 2018
4. Investments in subsidiary undertakings
Cost
At 1 April 2017
Additions
At 31 March 2018
Impairment
At 1 April 2017
Reversal of impairment
At 31 March 2018
Net book value at 31 March 2017
Net book value at 31 March 2018
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Plant and
machinery
£m
5
1
–
6
3
–
–
3
2
3
Other
intangible
assets
£m
5
–
5
2
1
3
3
2
£m
1 587
8
1 595
559
(1)
558
1 028
1 037
5. Investments in associates
On 2 November 2017, the Company disposed of its 33.3% interest in the ordinary shares in Tapioca Development Corporation, a company
incorporated in Thailand.
www.tateandlyle.com 173
www.tateandlyle.com 173
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Parent Company Financial Statements continued
6. Debtors
Due within one year
Current tax
Amounts owed by subsidiary undertakings
Other debtors
Total
2018
£m
8
1 469
3
1 480
At 31 March
2017
£m
–
1 551
3
1 554
The effective interest rate applicable to amounts owed by subsidiary undertakings at 31 March 2018 is 2.1% (2017 – 1.8%). Amounts owed
by subsidiary undertakings are receivable on demand. There is no security for non-trading amounts.
7. Creditors – amounts falling due within one year
Amounts owed to subsidiary undertakings
Other creditors
Accruals and deferred income
Total
2018
£m
1 187
5
16
At 31 March
2017
£m
1 292
6
16
1 208
1 314
The effective interest rate applicable to amounts owed to subsidiary undertakings at 31 March 2018 was 2.5% (2017 – 2.3%). Amounts owed
to subsidiary undertakings are repayable on demand. There is no security for non-trading amounts.
8. Creditors – amounts falling due after more than one year
Total
2018
£m
2
At 31 March
2017
£m
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.
9. Contingent liabilities
At 31 March 2018, the Company had given guarantees in respect of committed financing of certain of its subsidiaries and joint ventures
totalling £1,196 million (2017 – £2,117 million), against which amounts drawn totalled £571 million (2017 – £700 million). The Company had
given guarantees in respect of operating lease commitments of certain of its subsidiaries and joint ventures totalling £234 million
(2017 – £288 million). The Company provides other guarantees in the normal course of business. The Company has assessed the
probability of material loss under these guarantees as remote.
In addition, commitments in respect of retirement benefit obligations are detailed in Note 14.
10. Financial commitments
Operating lease rentals payable during the year were £1 million (2017 – £1 million), all in respect of land and buildings. At 31 March 2018,
the Company 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
At 31 March 2018 and 31 March 2017, the Company had no outstanding capital commitments.
2018
£m
2
7
5
14
At 31 March
2017
£m
1
6
6
13
174 Tate & Lyle PLC Annual Report 2018
174 Tate & Lyle PLC Annual Report 2018
11. Share capital and share premium
Allotted, called up and fully paid equity share capital
At 1 April
Allotted under share option schemes
At 31 March
Number
of shares
2018
Cost
£m
Number
of shares
468 256 866
117
468 235 944
52 068
–
20 922
468 308 934
117
468 256 866
2017
Cost
£m
117
–
117
See Note 22 in the consolidated financial statements for details of treasury shares and shares held in the Employee Benefit Trust.
12. 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
2018
pence
8.4
20.3
28.7
2017
pence
8.2
19.8
28.0
The Directors propose a final dividend for the financial year of 20.3p per ordinary share that, subject to approval by shareholders, will be
paid on 1 August 2018 to shareholders who are on the Register of Members on 22 June 2018.
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
2018
£m
92
39
131
2017
£m
92
38
130
Based on the number of ordinary shares outstanding at 31 March 2018 and the proposed amount, the final dividend for the financial year is
expected to amount to £94 million.
13. Profit and loss account disclosures
The Company recognised a profit for the year of £180 million (2017 – £298 million).
Fees payable to the Company’s external auditors, PricewaterhouseCoopers LLP, for the audit of the Company’s financial statements
amounted to £0.1 million (2017 – £0.1 million).
The Company employed an average of 168 people (including Directors) during the year (2017 – 149). Staff costs are shown below:
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Wages and salaries
Social security costs
Other pension costs
Share-based incentives
Total
Year ended 31 March
2018
£m
27
5
2
7
41
2017
£m
26
5
2
8
41
Directors’ emoluments disclosures are provided in the Directors’ Remuneration Report on pages 72 to 89 and in Note 10 of the
consolidated financial statements.
No deferred tax assets have been recognised in respect of tax losses of £341 million as there is uncertainty as to whether taxable profits
against which these assets may be recovered will be available.
www.tateandlyle.com 175
www.tateandlyle.com 175
Strategic ReportGovernanceFinancial StatementsUseful Information
Notes to the Parent Company Financial Statements continued
14. Retirement benefit obligations
Plan information
The Company participates in a defined benefit plan together with another subsidiary company, Tate & Lyle Industries Ltd. Payments made
by contributing companies principally comprise funding contributions agreed with the trustees that are determined to ensure that
appropriate funding levels are maintained and funding deficits are eliminated over a reasonable period of time. The plan is closed to new
entrants and future accruals. The Company has 332 pensioners and deferred pensioners out of a total membership of circa 5,600
(excluding dependent beneficiaries).
The Company also operates a defined contribution pension plan. Contributions payable by the Company to the plan during the year
amounted to £2 million (2017 – £2 million).
The Company has provided a full liability guarantee in respect of the pension obligations of Tate & Lyle Industries Ltd, the other
participating employer. Whilst there is no agreed allocation of deficit or surplus, the trustees have discretion to distribute any surplus on
winding up as they consider appropriate, after increase of benefits consistent with Inland Revenue Limits which applied up to 5 April 2006.
Funding commitments of the plan
As required by UK regulations, actuarial valuations are carried out at least every three years. The main UK scheme triennial valuation as at
31 March 2016 was concluded during the prior year, with agreed core funding contributions maintained at £12 million per year, and
supplementary contributions payable into the secured funding account of £6 million per year until 31 March 2023. The deficit or surplus in
the plan impacts the future contributions which are determined with reference to the triennial actuarial valuations.
For further details on the defined benefit plan see Note 30 in the consolidated financial statements.
176 Tate & Lyle PLC Annual Report 2018
176 Tate & Lyle PLC Annual Report 2018
Group Five-year Summary
Employment of capital
Goodwill and intangible assets
Property, plant and equipment
Other assets
Working capital (including provisions and non-debt
derivatives)
Net pension (deficit)/surplus
Net assets held for sale (excluding cash included in net debt)
Net operating assets
Investment in joint ventures and associates
Net debt
Net tax 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 profit
Adjusted net finance expense
Net retirement benefit interest expense
Net finance expense
Share of profit after tax of joint ventures and associates
Profit before tax
Income tax (expense)/credit
Profit for the year from continuing operations
Profit for the year from discontinued operations
Non-controlling interests
Profit for the year attributable to owners of the Company
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a
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2014
£m
307
732
28
351
(220)
–
2015
£m
340
750
33
339
(227)
–
2016
£m
390
926
23
323
(208)
5
2017
£m
401
1 061
30
394
(139)
–
At 31 March
2018
£m
360
965
37
385
18
–
1 198
1 235
1 459
1 747
1 765
312
(385)
(75)
1 050
117
932
1 049
1
1 050
327
(555)
(71)
936
117
818
935
1
936
85
(434)
(81)
96
(452)
(59)
85
(392)
(91)
1 029
1 332
1 367
117
911
1 028
1
117
1 215
1 332
–
117
1 250
1 367
–
1 029
1 332
1 367
2014
£m
2015
£m
2016
£m
Year ended 31 March
2017
£m
2018
£m
2 737
2 341
2 355
2 753
2 710
274
(10)
(14)
250
(27)
(8)
(35)
22
237
(32)
205
68
–
273
184
(9)
(142)
33
(23)
(8)
(31)
23
25
(21)
4
26
–
30
188
(11)
(50)
127
(23)
(6)
(29)
28
126
(5)
121
42
–
163
264
(12)
(19)
233
(25)
(7)
(32)
32
233
22
255
1
–
300
(12)
2
290
(27)
(5)
(32)
28
286
(23)
263
2
–
256
265
Adjusted profit before tax
269
184
193
271
301
www.tateandlyle.com 177
www.tateandlyle.com 177
Strategic ReportGovernanceFinancial StatementsUseful Information
Group Five-year Summary continued
Per share information
Earnings per share continuing operations:
– basic (pence)
– diluted (pence)
Earnings per share total operations:
– basic (pence)
– adjusted basic (pence)
Earnings per share total operations:
– diluted (pence)
– adjusted diluted (pence)
Dividends per ordinary share (pence)
Closing share price at 31 March (pence)
Closing market capitalisation at 31 March (£million)
Business ratios
Interest cover (times)1
Operating profit before exceptional items and amortisation
of intangible assets divided by net finance expense
Net debt to EBITDA (times)1
Net debt divided by pre-exceptional EBITDA
Gearing
Net debt as a percentage of total net assets2
Adjusted operating margin
Adjusted operating profit as a percentage of sales2
2014
2015
2016
2017
2018
Year ended 31 March
44.2p
43.6p
58.8p
56.5p
58.0p
55.7p
27.6p
667.5p
3 125
0.9p
0.8p
6.6p
38.0p
6.5p
37.7p
28.0p
26.1p
25.9p
35.1p
34.9p
34.8p
34.7p
28.0p
55.0p
54.2p
55.2p
47.9p
54.4p
47.1p
28.0p
57.0p
56.1p
57.4p
50.9p
56.5p
50.1p
28.7p
597.5p
578.0p
764.5p
544.6p
2 798
2 706
3 580
2 550
11.6x
10.7x
10.7x
13.9x
14.6x
0.8x
1.3x
1.2x
0.9x
0.8x
37%
59%
42%
34%
29%
10.0%
7.8%
7.9%
9.6%
11.1%
Return on net operating assets
21.7%
14.4%
13.1%
15.7%
16.4%
Profit before interest, tax and exceptional items as a
percentage of average net operating assets2
Dividend cover (times)
Basic earnings per share divided by dividends per share2
2.1x
0.2x
1.3x
2.0x
2.0x
Adjusted basic earnings per share divided by dividends
per share2
2.0x
1.4x
1.2x
1.7x
1.8x
1 Interest cover and net debt to EBITDA have been calculated using the same basis as set out in the Group’s external financial covenants. (see Note 4 of the attached
consolidated financial statements).
2 These metrics have been calculated using the results of both continuing and discontinued operations.
178 Tate & Lyle PLC Annual Report 2018
178 Tate & Lyle PLC Annual Report 2018
Additional Information
Calculation of changes in constant currency
Where changes in constant currency are presented in this statement, they are calculated by retranslating current year results at prior year
exchange rates. The following table provides a reconciliation between the 2018 performance at actual exchange rates and at constant
currency exchange rates. Absolute numbers presented in the tables are rounded for presentational purposes, whereas the growth
percentages are calculated on unrounded numbers.
Adjusted performance
Continuing operations
Sales
Food & Beverage Solutions
Sucralose
Primary Products
Central
Adjusted operating profit
Adjusted net finance expense
Share of profit after tax of joint
ventures and associates
Adjusted profit before tax
Adjusted income tax expense
Adjusted profit after tax
2018
£m
2 710
137
55
166
(58)
300
(27)
28
301
(66)
235
2018 at
constant
currency
£m
2 730
139
55
168
(58)
304
(27)
28
305
(68)
237
Underlying
growth
£m
(23)
10
3
39
(12)
40
(2)
(4)
34
(19)
15
FX
£m
20
2
–
2
–
4
–
–
4
(2)
2
2017*
£m
2 753
129*
52*
129
(46)
264
(25)
32
271
(49)
222
Adjusted diluted EPS (pence)
50.1p
0.4p
50.5p
3.4p
47.1p
Change
%
(2%)
5%
6%
28%
(22%)
14%
(8%)
(14%)
11%
(34%)
6%
6%
Change in
constant
currency
%
(1%)
8%
5%
30%
15%
(14%)
13%
(37%)
7%
7%
* Restated to reflect the change in reportable segments made in the 2018 financial year.
If the above segmental information were presented on a basis consistent with the prior year, Food & Beverage Solutions and Sucralose
would be combined as Speciality Food Ingredients to show adjusted operating profit for the year ended 31 March 2018 of £192 million
(2017 – £181 million). Primary Products was renamed from Bulk Ingredients in the year.
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www.tateandlyle.com 179
www.tateandlyle.com 179
Strategic ReportGovernanceFinancial StatementsUseful Information
Information for Investors
Shareholder enquiries
Ordinary shares
Equiniti Limited
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. You can
also send your enquiry via secure email
from the Shareview website.
Telephone enquiries
0371 384 2063 (for UK calls)1
+44 (0)121 415 0235 (for calls from outside
the UK)
1 Lines open 8.30am to 5.30pm (UK time), Monday
to Friday (excluding public holidays in England
and Wales).
Written enquiries
Equiniti Limited, Aspect House, Spencer
Road, Lancing, West Sussex BN99 6DA.
American Depositary Shares
(ADSs)
The Bank of New York Mellon
The Company’s shares trade in the US
on the over-the-counter (OTC) market in
the form of ADSs and these are evidenced
by American Depositary Receipts (ADRs).
The shares are traded under the ticker
symbol TATYY.
Telephone and email enquiries
+1 888 269 2377 (for US calls)
+1 201 680 6825 (for calls from outside the US)
shrrelations@cpushareownerservices.com
Written enquiries
BNY Mellon Shareowner Services
PO Box 505000
Louisville, KY 40233-5000
USA
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.
180 Tate & Lyle PLC Annual Report 2018
180 Tate & Lyle PLC Annual Report 2018
Financial calendar
2018 Annual General Meeting
Announcement of half-year results for the six months to 30 September 2018
Announcement of full-year results for the year ending 31 March 2019
2019 Annual General Meeting
26 July 2018
8 Nov 20181
23 May 20191
25 July 20191
Dividends paid on ordinary shares during the year ended
31 March 2018
Payment date
1 August 2017
5 Jan 2018
Dividend
description
Final 2017
Interim 2018
Dividend per
share
19.8p
8.4p
Dividend calendar for dividends on ordinary shares
Announced
Payment date
1 Provisional date.
2 Subject to approval of shareholders.
2018 final
2019 interim
24 May 2018 8 November 20181
4 January 20191
1 August 20182
2019 final
23 May 20191
31 July 20191, 2
Dividends paid on 6.5% 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
6.5% cumulative preference share
201.00p
50.25p
43.50p
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 the impact of the documents on the environment.
Shareholders who wish to receive email notification should register online at
www.shareview.co.uk, using their shareholder reference number that is on either their
share certificate or other correspondence.
Dividend payments
Dividend reinvestment plan
The Company operates a Dividend Reinvestment Plan (DRIP) which enables shareholders
to use their cash dividend to buy additional shares in Tate & Lyle PLC. Further information
can be obtained from Equiniti.
Direct into your bank account
We encourage shareholders to have their dividends paid directly into their bank or building
society account; dividend confirmations are then mailed to shareholders separately.
This method avoids the risk of dividend cheques being delayed or lost in the post. If you live
outside the UK, Equiniti also offers an overseas payment service whereby your dividend
is converted into your local currency. Further information on mandating your dividend
payments and the overseas payment service can be obtained from Equiniti.
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 Financial Conduct Authority (FCA) Consumer
Helpline on 0800 111 6768.
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Glossary
A
C
D
Acidulants
Ingredients such as citric acid that are used
to add a ‘sour’ taste to food and soft drinks
and to act as a preservative.
Adjusted free cash flow
Adjusted free cash flow represents cash
generated from continuing operations
excluding the impact of exceptional items,
less net interest paid, less income tax paid,
less capital expenditure.
Adjusted operating cash flow
Adjusted operating cash flow is defined as
adjusted free cash flow from continuing
operations, adding back net interest and tax
paid, retirement cash contributions, and
excluding derivative and margin call
movements within working capital.
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 tax (as defined separately),
adjusted for amortisation of acquired
intangible assets, net exceptional items
and net retirement benefit interest.
B
Bio-PDOTM
Multi-purpose monomer propanediol
made from corn (as opposed to being
made from a petrochemical source).
Used in cosmetics, detergents, carpets
and textiles.
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 practices.
CLARIA® Functional Clean-Label
Starches
A line of clean-label starches with neutral
taste and colour comparable to normal
modified starches that is versatile across a
broad range of applications and
sophisticated processes.
‘Clean label’
A term used in the food and beverage
industry generally to refer to shorter or
simpler ingredient lists or less processed
ingredients that appeal more to some
consumers than those containing complex
ingredients. Interpretations may vary.
Commodities
Commodities include US ethanol and
co-products.
Constant currency
Where changes in constant currency
are presented, they are calculated by
retranslating current year results at prior
year exchange rates. Reconciliation
between the 2018 performance at actual
exchange rates and at constant currency
exchange rates have been included in the
additional information on page 179.
Continuing operations
Operations of the Group excluding any
discontinued operations (as defined
separately).
Co-products
Corn gluten feed, corn gluten meal and
corn oil.
Corn gluten feed
The largest Tate & Lyle co-product, used in
animal feed for dairy and beef cattle.
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.
DOLCIA PRIMA® Allulose
Low-calorie sugar that offers a superior,
new taste experience.
E
ETHYLEX® Surface Treatment Starch
An industrial starch used in paper.
F
Food & Beverage Solutions (F & B
Solutions)
Including Sucralose, previously named
Speciality Food Ingredients (SFI) division.
Food Systems
The previous name of our stabiliser
business which is part of the Food &
Beverage Solutions division. It sources
ingredients and uses them to develop
bespoke combinations of ingredients for
customers, principally for stabilisation.
G
Greenhouse gas (GHG)
Any of the following: carbon dioxide (CO2),
methane (CH4), nitrous oxide (N2O),
hydrofluorocarbons (HFCs),
perfluorocarbons (PFCs), sulphur
hexafluoride (SF6).
H
HFCS
High fructose corn syrup widely used as
a substitute for sugar in North America.
Also called isoglucose in Europe.
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Strategic ReportGovernanceFinancial StatementsUseful Information
Glossary continued
I
P
ICD
Innovation and Commercial Development
group, supporting our two business
divisions, Food & Beverage Solutions and
Primary Products.
L
Label friendly
Denotes ingredients that, when listed on
product ingredient labels, may appeal more
to some consumers who show a preference
for ingredients in food products which they
feel are more transparent, authentic,
simpler or easier to understand than
alternatives which may be perceived by
some consumers as being artificial,
chemical or in some way less authentic.
N
Natural
A ‘natural’ description usually refers to a
food ingredient that is present in nature and
has been minimally processed. However,
interpretations vary according to the
different legal and regulatory landscape in
different countries.
New Products
New Products are products in the first
seven years after launch.
O
Operating profit (also referred to as
profit before interest and tax (PBIT))
Sales less net operating expense.
Primary capacity
Processing capacity for the first stage of
production, at which the agricultural raw
material enters the production process.
Primary Products (PP)
Previously named Bulk Ingredients (BI)
division.
Profit before tax (PBT)
Sales, less net operating expense, less net
finance expense and including the Group’s
share of profit after tax of joint ventures.
PROMITOR® Soluble Fibre
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.
R
REZISTA® Speciality Food Starch
A modified starch made from waxy corn
which builds and protects texture in foods.
S
SPLENDA® Sucralose
A zero-calorie sweetener, the
manufacturing process for which starts
with sugar.
Stabiliser Systems
Systems customising ingredient blends to
improve product mouthfeel, texture and
stability profile.
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.
STA-LOK® Cationic Corn Starch
An industrial starch used in paper.
STA-TAPETM Starches
An industrial starch used for adhesives.
Sucralose
A reportable segment and part of the Food
& Beverage Solutions division.
182 Tate & Lyle PLC Annual Report 2018
182 Tate & Lyle PLC Annual Report 2018
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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.
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.
Sources for Digestive health
chart on page 5
1. Institute of Medicine, Food and Nutrition
Board. Dietary Reference Intakes: Energy,
Carbohydrates, Fiber, Fat, Fatty Acids,
Cholesterol, Protein and Amino Acids.
Washington, DC: National Academies
Press; 2002/2005.
2. Stephen AM, Champ MM-J, Cloran, SJ,
et al. Dietary fibre in Europe: current state
of knowledge on definitions, sources,
recommendations, intakes and
relationships to health. Nutrition Research
Reviews. July 2017.
3. World Health Organization Diet, Nutrition
and the Prevention of Chronic Diseases.
Geneva: WHO. 2003.
4. Auestad N, Hurley J, Fulgoni VL, et al.
Contribution of Food Groups to Energy
and Nutrient Intakes in Five Developed
Countries. Nutrients. 2015 Jun 8;7(6):
4593-618.
5. Murphy N, Norat T, Ferrari P, et al.
Dietary fibre intake and risks of cancers of
the colon and rectum in the European
prospective investigation into cancer and
nutrition (EPIC). PLoS One. 2012;7:e39361.
6. Wang HJ et al. Trends in dietary fiber
intake in Chinese aged 45 years and above,
1991-2011. Eur J Clin Nutr. 2014 May;
68(5):619-22.
7. CODEX-aligned dietary fiber definitions
help to bridge the ‘fiber gap’. Jones JM.
Nutr J. 2014;13:34.
8. Flores M, Macias N, Rivera M, et al.
Dietary patterns in Mexican adults are
associated with risk of being overweight or
obese J Nutr. 2010 Oct;140(10).
9. Sardinha AN, Canella DS, Martins AP, et
al. Dietary sources of fiber intake in Brazil.
Appetite. 2014 Aug;79:134-8.
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 91 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,
net retirement benefit interest and tax on
the above items and tax items that
themselves meet these definitions. A
reconciliation of reported and adjusted
information is included in Note 4 of the
consolidated financial statements.
Definitions
In this Annual Report:
‘Company’ means Tate & Lyle PLC
‘Tate & Lyle’, ‘Group’, ‘we’, ‘us’ or
‘our’ means Tate & Lyle PLC and
its subsidiaries
‘Gemacom’ means Tate & Lyle
Gemacom Tech Indústria e Comércio
S.A.
‘Almex’ means Almidones Mexicanos SA
‘Bio-PDO’ means DuPont Tate & Lyle
Bio Products Company, LLC
‘during the year’ means during the
financial year ended 31 March 2018.
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 their environmental
management systems.
Printed in the UK by Pureprint using
vegetable inks and its Alcofree and
Pureprint environmental printing
technology. Pureprint is a CarbonNeutral®
company, is registered to the
Environmental Management System
Standard 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 Annual Report have been
offset through the purchase of carbon
credits in the Pureprint Gold programme.
The offsets are always in Gold Standard
accredited projects and currently come
from the Basa Magogo project in South
Africa. The first Gold Standard project of its
kind in the world, this innovative behaviour-
change programme teaches local
communities in South Africa to burn coal
more efficiently, thereby reducing carbon
emissions and reducing health risks by
producing less smoke.
Registered office
Tate & Lyle PLC
1 Kingsway
London WC2B 6AT
Tel: +44 (0)20 7257 2100
Fax: +44 (0)20 7257 2200
Company number: 76535
Designed and produced by
Black Sun Plc
www.tateandlyle.com 183
www.tateandlyle.com 183
Strategic ReportGovernanceFinancial StatementsUseful Information
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
184 Tate & Lyle PLC Annual Report 2018
Designed and produced by
Black Sun Plc
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