Tate & Lyle sweetened by speciality ingredients gain - UPDATE

30th May 2013 07:06

Tate & Lyle dished out a tasty set of full-year results, sweetened by strong growth at its core speciality ingredients arm.Although statutory profits fell, the group grew underlying operating profits 4.0%, marginally ahead of analyst expectations, to £358m in the year to end March.Speciality food ingredients (SFI) grew sales 7.0% on the back of trends to more healthy-lifestyle products and urbanisation in emerging markets driving demand for convenience foods containing its stabilising and preservative products. Chief Executive Javed Ahmed said the underlying business had made progress performed despite facing a number of headwinds.Group sales rose 6.0% to £3.26bn but margins were squeezed 1.6 percentage points at 22.5% by a step-change in fixed costs due to the resumption of its Splenda Sucralose facility in Alabama, business transformation initiatives, lower sucralose volumes and higher corn input costs.Tate & Lyle's transformation programme included the opening of the £33m Commercial and Food Innovation Centre in Chicago, which has led to a "step change in the level of customer engagement" as clients visit state-of-the-art laboratories, a demonstration kitchen, sensory testing, analytical facilities and a pilot plant.Moreover, the group's research and development arm helped launch six "promising" new products, including a stevia-based, natural no-calorie sweetener Tasteva and a salt reduction product, Soda-Lo Salt Microspheres.T&L also launched a new £30m venture capital fund in January 2013 to back start-up and growing companies working in food sciences and enabling technologies in both developed and emerging markets. Free cash flow increased from £79m to £110m, after the company lifted the total dividend 5.2% to 26.2p a share.On the outlook for the current year, Ahmed said: "we will continue to build on the foundations we have laid and expect to deliver another year of profitable growth." He added: "Three years ago we set out to build a high quality business, one capable of generating sustained growth over the long term. "We are on track to deliver this but we are not there yet. While we have more work to do, I believe we now have a solid foundation from which we can build."Broker Jefferies noted the results were broadly in line with consensus estimates but that earnings per shares was, at 57p, 3.0% ahead of consensus due to a one-off settlement and a lower group tax rate. "Positive outlook for growth in all SFI businesses in 2014 (particularly Sucralose) gives us confidence in the medium term growth outlook driven by the company's enhanced SFI platform and improved commercial/innovation capability," wrote analyst Dirk Van Vlaanderen."It's by no means the finished article, but we believe the enhanced platform and improved commercial/innovation capability is beginning to drive a more confident and consistent growth outlook for the group."While Van Vlaanderen approves of the more stately deployment of a new IT platform, fellow analyst Martin Deboo at Investec was surprised by an increase of around 75% in investment in the Global Shared Services Centre, which he added was "both material and a concern for us". Summing up, he saw "little in the statement to inspire either FY14 upgrades or any fundamental change in market perception".Shares in Tate & Lyle were down 0.4% at 845.5p at 10:55 on Thursday.OH