Resilient sales performance
Treatt, the manufacturer and supplier of a diverse and sustainable portfolio of natural extracts and ingredients for the beverage, flavour and fragrance industries, announces today its audited results for the financial year ended 30 September 2023.
FINANCIAL HIGHLIGHTS1:
| Financial year ended 30 September 2023 | Financial year ended 30 September 2022 | Change | |
| Revenue | £147.4m | £140.2m | +5.1% |
| Gross profit | £44.8m | £39.1m | +14.7% |
| Gross profit margin | 30.4% | 27.9% | +250 bps |
| Profit before tax and exceptional items | £17.3m | £15.3m | +13.7% |
| Profit before tax | £13.5m | £16.2m | -16.3% |
| Adjusted basic earnings per share2 | 22.94p | 19.80p | +15.9% |
| Basic earnings per share | 18.01p | 22.04p | -18.3% |
| Final dividend per share | 5.46p | 5.35p | +2.0% |
| Total dividend per share | 8.01p | 7.85p | +2.0% |
| Net debt | £10.4m | £22.4m | -53.7% |
| Net debt to adjusted EBITDA3 ratio | 0.45x | 1.21x | -62.8% |
| Net debt to EBITDA ratio | 0.54x | 1.16x | -53.2% |
| Adjusted return on average capital employed4 | 12.2% | 11.6% | +60bps |
| Return on average capital employed | 9.0% | 11.9% | -290bps |
1 All measures based on continuing operations.
2 Adjusted earnings per share measures exclude exceptional items and the related tax effect.
3 EBITDA is calculated as operating profit plus depreciation and amortisation. The adjusted measure excludes exceptional items.
4 Return on average capital employed is calculated by dividing operating profit before exceptional items (as shown in the Group income statement) by the average capital employed in the business, which is calculated as total equity (as shown in the Group balance sheet) plus net debt or minus net cash (as shown in the Group reconciliation of net cash flow to movement in net debt), averaged over the opening, interim and closing amounts. The adjusted measure excludes exceptional items.
5 Operating margin is calculated by dividing operating profit by revenue from continuing operations. The adjusted measure excludes exceptional items.
6 TreattZest is a citrus product that offers an authentic, fresh, zesty profile, this is an existing product of Treatt’s with high growth potential.
FINANCIAL HIGHLIGHTS1:
· Resilient revenue growth of 5% (3% in constant currency) at £147.4m (FY22: £140.2m)
· Gross margin improvement driven by minimal impact of FX, operational efficiencies, as well as pricing adjustments
· FY23 profit before tax and exceptional items growth of 14% year on year to £17.3m (FY22 £15.3m) in line with Board expectations
· Year-end net debt of £10.4m (FY22 £22.4m), reflecting record cash generation in the year
OPERATIONAL HIGHLIGHTS1:
· Successful pricing actions, particularly in Citrus, to recover raw material inflation
· Continued strong growth in China and Coffee, key strategic growth drivers
· With UK site transition now complete, capex has returned to normalised levels, and the group has a strong platform to drive growth and efficiencies in the year ahead and beyond
· Cost discipline embedded in the business, mitigating macro headwinds, including customer destocking
Commenting on the results, CEO Daemmon Reeve said:
“We have delivered good progress this year, with growth in both sales and profit, and sustained demand in our end markets, despite a challenging backdrop. We saw encouraging growth in new markets, including coffee, China and Treattzest 6, as we worked to capitalise on the opportunities here, and a strong performance from our citrus lines. While destocking trends were evident as customers reduced inventory in the face of elevated interest rates, we dealt with this proactively, mitigating impact through good cost discipline and considered pricing action.”
“We achieved a significant milestone in the Group’s history, as we completed our transition to the new Skyliner way facility, with work ongoing to maximise efficiencies as we continue to grow.
“As we enter the new financial year, while we are seeing some signs of recovery in a few customers, we are hoping to see further signs that destocking trends are reversing. In addition, long-term trends towards health and wellness, sugar reduction and use of natural extracts, areas in which Treatt excels, continue to support our core beverage market, and our largest geographical markets are returning to growth. These factors, together with the commitment and hard-work of all our colleagues in the past year and into the new, means that Treatt is well-positioned for further growth in the year ahead.
“After 32 years working at Treatt, this is my final set of results before I retire in December. The business has changed immeasurably for the better in that time. I am lucky to have worked with talented and energetic colleagues and I leave with Treatt in good shape and in good hands.”
Analyst and investor conference call
A conference call for analysts and investors will be held at 8.15 a.m. today, 28 November 2023. For dial-in details, please contact MHP at treatt@mhpc.com.
Enquiries:
Treatt plc +44 (0)1284 702500
Daemmon Reeve Chief Executive Officer
Ryan Govender Chief Financial Officer
Joint Broker
Investec Bank plc +44 (0)20 7597 5970
Patrick Robb
David Anderson
Joint Broker
Peel Hunt Plc +44 (0)20 7418 8900
George Sellar
Andrew Clark
Financial PR
MHP +44 (0)20 3128 8339
Tim Rowntree
Eleni Menikou
Catherine Chapman
About the Group
Treatt is a global, independent manufacturer and supplier of a diverse and sustainable portfolio of natural extracts and ingredients for the flavour, fragrance and multinational consumer product industries, particularly in the beverage sector. Renowned for its technical expertise and knowledge of ingredients, their origins and market conditions, Treatt is recognised as a leader in its field.
The Group employs in the region of 400 staff in Europe, North America and Asia and has manufacturing facilities in the UK and US. Its international footprint enables the Group to deliver powerful and integrated solutions for the food, beverage and fragrance industries across the globe.
Chairman’s statement
I am delighted to present my first Chair’s Statement, having taken up the role earlier this year. I am grateful to my predecessor, Tim Jones, for his guidance as I took over the reins from him.
Daemmon Reeve, who has been with Treatt for almost 33 years, 11 of these as CEO, retires on 31 December 2023. Ryan Govender, our CFO, will become Interim CEO while we conduct a search for Daemmon’s replacement. On behalf of all stakeholders, I’d like to thank both Tim and Daemmon for the important contribution they have made to Treatt over many years. The business is set for exciting growth, and I look forward to working with its talented people as the business forges ahead.
Well invested for future growth
As Treatt enters the next chapter in its almost 140-year history, it feels an appropriate time to reflect on some of its many strengths: deep expertise in the global sourcing and manufacturing of ingredients; long-standing trusted customer relationships; renowned technical expertise to deliver authentic tastes sustainably; and commitment to delivering excellence in its products. Capital investments in the UK and US, together with the dedication and expertise of our people, have positioned Treatt for significant growth in the years ahead. We are excited by growth potential in China and have continued to invest in our local team, product range and operations, establishing a facility focused on product testing and development tailored to the Chinese market and the wider region.
Since joining the Board, I have been struck by the talent of my colleagues and their commitment to the business, to each other and to our customers, across all our functions and geographies. Their expertise, passion and teamwork position Treatt strongly to deliver the Group’s strategic priorities, and to capitalise on the many opportunities ahead in the dynamic beverage sector.
Treatt is proud to be trusted by a broad, international customer base, with many relationships in place for decades. These include household brands and some of the biggest flavour houses in the world, as they navigate and influence evolving consumer trends.
Performance
Treatt has delivered a resilient performance in the year despite difficult macroeconomic conditions. This is thanks to the drive and expertise of colleagues, and the business’ agility in aligning with changing demand in the beverage market for healthier and authentic options.
With interest rates at their highest level for many years, volumes softened as customers in the beverage sector, and beyond, destocked as they tightened control of working capital. However, through considered pricing adjustments to offset materials price increases, and by focusing on cost control, we have been able to deliver a profit before tax and exceptional items increase of 13.7% in the period. Also, through our team’s discipline and focus, we have been able to reduce our net debt position by some £12.0m, driven by record cash generation over the course of the year. On behalf of the Board, I would like to thank all of our people for their hard work and dedication in delivering these resilient results.