Group Financial Results
Tim Lodge “Our robust balance sheet provides us with a solid platform allowing us to invest a further £100 million in Speciality Food Ingredients growth over the next two years.”
Sales from continuing operations of £3,147 million (2013 – £3,256 million) were 3% lower than the prior year (3% in constant currency). Sales in Speciality Food Ingredients increased by 4% (4% in constant currency) to £983 million (2013 – £947 million), with sales volumes increasing by 4%. Sales in Bulk Ingredients decreased by 6% (6% in constant currency) to £2,164 million (2013 – £2,309 million), with volumes 1% lower.
Adjusted operating profit decreased by 2% (1% in constant currency) to £349 million (2013 – £356 million). In Speciality Food Ingredients, adjusted operating profit was in line (up 1% in constant currency) with the prior year at £213 million (2013 – £213 million). Bulk Ingredients adjusted operating profit decreased by 5% (4% in constant currency) to £172 million (2013 – £182 million).
Adjusted net finance expense (excluding net retirement benefit interest) decreased from £29 million to £27 million, largely driven by the repayment of our £100 million bond in June 2012 and lower interest rates on our floating rate debt.
Both adjusted profit before tax and adjusted diluted earnings per share decreased by 2% (flat in constant currency) to £322 million (2013 – £327 million) and 55.7p (2013 – 56.6p) respectively.
On a statutory basis, profit before tax from continuing operations decreased by 4% (down 2% in constant currency) to £290 million (2013 – £301 million) and profit for the year from total operations was in line at £273 million (2013 – £273 million), with the current period benefiting from an exceptional income tax credit of £28 million following the favourable resolution of outstanding tax matters in Spain.
- Strong free cash flow generation of £227 million
- Balance sheet remains strong with £126 million reduction in net debt to £353 million
- Investment of £100 million over the next two years in expansion and cost reduction projects within Speciality Food Ingredients
- Additional steps taken to reduce pension risk including buy-in of liabilities of the Amylum UK Pension Scheme
Summary of financial results
Year ended 31 March
|Sales||3 147||3 256||-3%||-3%|
|Adjusted operating profit||349||356||-2%||-1%|
|Adjusted net finance expense||(27)||(29)|
|Adjusted profit before tax||322||327||-2%||0%|
|Amortisation of acquired intangible assets||(10)||(10)|
|Net retirement benefit interest||(8)||(4)|
|Profit before tax||290||301||-4%||-2%|
|Income tax expense||(45)||(46)|
|Profit for the year from continuing operations||245||255||-4%||-2%|
|Profit for the year from discontinued operations||28||18|
|Profit for the year||273||273||0%||2%|
|Earnings per share – continuing operations|
|Adjusted earnings per share – continuing operations|
|Dividends per share|
|At 31 March||353||479||26.3%|
- Restated for the adoption of IAS 19 (Revised 2011) ‘Employee Benefits’.
Basis of preparation
At the beginning of the year, the Group adopted IAS 19 (Revised 2011) ‘Employee Benefits’ which introduced a change to the way the Group accounts for defined benefit pension plans. The change modifies the basis on which the financing charge is calculated by applying the discount rate to the net defined benefit obligation and requires the recognition of scheme administration costs within operating profit. Comparative information for 2013 has been restated on a consistent basis and an explanation and analysis of the effect of the changes is presented in Note 43 of the Notes to the Financial Statements.
For the year ended 31 March 2014, the new requirements increased statutory net finance costs by £8 million (31 March 2013 – £6 million) and reduced operating profit by £2 million (31 March 2013 – £2 million).
With the exception of the changes arising from the adoption of IAS 19 (Revised 2011) the Group’s principal accounting policies are unchanged compared with the year ended 31 March 2013.
Adjusted performance measures
We report adjusted performance measures because they provide both management and investors with valuable additional information on the performance of the business. The following items are excluded from these adjusted measures:
- exceptional items (Note 7 of the Notes to the Financial Statements).
- amortisation of intangible assets acquired through business combinations (Note 15 of the Notes to the Financial Statements).
- net retirement benefit interest (Note 30 of the Notes to the Financial Statements).
- tax on adjusting items
- results of discontinued operations (Note 12 of the Notes to the Financial Statements).
This adjusted information is used internally for analysing the performance of the business. A reconciliation of reported and adjusted information is included in Note 42 of the Notes to the Financial Statements.
Impact of changes in exchange rates
In comparison to the prior year, the Group’s reported financial performance was adversely affected by currency translation. A weakening of the average US dollar exchange rate against sterling was only partially offset by the strengthening of other currencies, which has slightly reduced profits. The movement in period-end exchange rates, particularly the weaker US dollar, led to a reduction in net debt as a result of the translation of dollar-denominated debt.
The average and closing exchange rates used to translate reported results were as follows:
|Average rates||Closing rates|
Central costs, which include head office, treasury and reinsurance activities, decreased by £3 million to £36 million, largely as a result of lower staff-related costs.
Energy costs were higher than the prior year at £177 million (2013 – £170 million), as a result of the increased price of energy used in many regions, in particular the US, which more than offset positive variances relating to efficiency and input mix. We have covered approximately 66% of our estimated energy needs for financial year 2015, albeit at higher prices than in financial year 2014 which we will look to mitigate through further efficiencies.
Exceptional items from continuing operations
|Year ended 31 March|
|Business transformation costs||(14)||(20)|
|Gain on disposal of joint venture – Sucromiles||–||8|
|Net exceptional charge||(14)||(12)|
During the year ended 31 March 2014, an exceptional charge of £14 million (see Note 7 of the Notes to the Financial Statements) was recognised in continuing operations, relating to business transformation costs, specifically the implementation of the common global IS/IT platform. This compares to a net exceptional charge in the comparative year of £12 million, with £20 million of business transformation costs partially offset by a credit of £8 million from the disposal of our share in Sucromiles SA, our former Colombian citric-acid joint venture.
The tax impact of net exceptional items within continuing operations was a £9 million credit (2013 – £5 million credit).