Tate & Lyle Regulatory News (TATE)

21 Jun 2011 16:54

Tate & Lyle PLC Annual Financial Report Tate & Lyle PLC (the "Company") confirms that copies of the following documents havebeen submitted to the National Storage Mechanism and will shortly be available forinspection at: www.Hemscott.com/nsm.do. 1. Annual Report and Accounts 2011; 2. Notice of Annual General Meeting 2011; and 3. Proxy Form. The Annual Report and Accounts 2011 and Notice of Annual General Meeting 2011 arealso available on Tate & Lyle's website at www.tateandlyle.com/annual_report. The Company announced its full year results on 27 May 2011. Attached to this announcementis additional information for the purposes of compliance with the Disclosure andTransparency Rules which has been extracted from the Annual Report and Accounts 2011and the page numbers in the text refer to the page numbers in that document. Lucie Gilbert Deputy Company Secretary 21 June 2011 APPENDIX A RISK FACTORS The following information is set out on pages 19 to 21 of the Annual Report 2011. Risk management Tate & Lyle could be affected by a number of risks, which might have a material adverseeffect on our reputation, operations and financial performance. The Board of directors has overall responsibility for the Group's system of riskmanagement and internal control. The schedule of matters reserved to the Board ensuresthat the directors control, among other matters, all significant strategic, financialand organisational issues. Approach The Group's enterprise-wide risk management and reporting process helps managementto identify, assess, prioritise and mitigate risk. The process involves an ongoingprogramme of workshops, facilitated by the risk management function, held aroundthe Group. The risks identified are collated and reported through functional anddivisional levels to the Group Executive Committee. This culminates in the identificationof the Group's key business, financial, operational and compliance risks with associatedaction plans and controls to mitigate them where possible (and to the extent deemedappropriate taking account of costs and benefits). The output is then reviewed bythe Board. Responsibility for managing each key risk and the associated mitigatingcontrols is allocated to an individual executive within each division. As part ofthe process, senior executive management formally confirms that these key risks arebeing managed appropriately within their operations and that controls have been examinedand are effective. The confirmations and any exceptions are discussed at the AuditCommittee and Corporate Responsibility Committee once a year. During the year ended 31 March 2011, the risk management process was enhanced furtherthrough an exercise undertaken by the Board of directors and the Group ExecutiveCommittee to consider the nature and extent of the Group's risk appetite. The resultsof this exercise are being used as part of the Group's strategic planning activities,and in considering ongoing mitigating actions. The Group's risk management process continues to follow the Committee of SponsoringOrganizations of the Treadway Commission (COSO) Enterprise Risk framework. The COSOframework provides a process to manage the risk of failure to achieve business objectivesand assurance against material loss or misstatement. KEY RISKS Key risks and uncertainties identified as part of the risk management process undertakenduring the year, together with some of the mitigating actions that we are taking,are set out below. It is not possible to identify or anticipate every risk that mayaffect the Group. Our overall success as a global business depends, in part, uponour ability to succeed in different economic, social and political environments andto manage and to mitigate these risks. Failure to act safely and to maintain the safe and continuous operation of our facilities The safety of our employees, contractors, suppliers, and the communities in whichwe operate is paramount. We must operate within local laws, regulations, rules andordinances relating to health, safety and the environment, including emissions. Theoperation of plants involves many risks, including failure or sub-standard performanceof critical equipment; improper installation or operation of equipment; failure ofcritical supplier; and natural disasters. If these risks cause a temporary or permanentstoppage in production, this could have a material adverse effect on the Group. Examples of mitigating actions * Corporate Responsibility Committee in place * Board annual review of Group safety/environmental performance/policies * Separate central global function established, Group Operational Efficiencyand Sustainability, outside business unit control, to set and monitor standards * Health and safety policies and procedures at all facilities with dedicatedstaff to ensure policies are embedded and measured * Environmental management systems at production facilities * Business continuity plans in place to enable supply, as quickly as practicable,of product to customers from alternative sources in the event of a natural disasteror major equipment or plant failure backed by appropriate insurance coverage againstbusiness interruption * Periodic review of critical supply or supplier dependencies in principal manufacturingoperations. Failure to maintain the quality of our products and high standards of customer service The safety of consumers of our products is critical. Poor quality or sub-standardproducts or poor customer service could have a negative impact on our reputationand relationships with customers. Examples of mitigating actions * Central global function, Group Operational Efficiency and Sustainability, managesGroup-wide quality process and procedures * Product safety and quality policies and procedures in place to prevent contamination * Dedicated staff at all locations to ensure policies are embedded and measured * Third-party audits completed * Recall simulation exercises undertaken. Failure to attract, develop and retain key personnel Performance, knowledge and skills of employees are central to success. We must attract,integrate and retain the talent required to fulfil our ambitions and deliver theGroup's strategy. Inability to retain key knowledge and adequately plan for successioncould have a negative impact on Company performance. Examples of mitigating actions * Remuneration policies designed to attract, retain and reward employees withability and experience to execute Group strategy * Talent strategy to provide opportunities for employees to develop careers * Single global performance appraisal system in place * New Commercial and Food Innovation Centre in Chicago, USA to help attract andretain new talent to the Group. Non-compliance with legislation and regulation The Group operates in diverse markets and therefore is exposed to a wide range oflegal and regulatory frameworks. We must understand and comply with all applicablelegislation. Any breach could have a financial impact and damage our reputation. Examples of mitigating actions * Regulatory managers monitor changes in legislation and develop action plans * Legal teams maintain compliance policies in areas such as antitrust, moneylaundering and anti-corruption laws; and provide ongoing training to employees * External consultants provide quarterly reports on regulatory change. Fluctuations in prices, offtake and availability of raw materials, energy, freightand other operating inputs Margins may be affected by fluctuations in crop prices due to factors such as harvestand weather conditions, crop disease, crop yields, alternative crops and co-productvalues. In some cases, due to the basis for pricing in sales contracts, or due tocompetitive markets, we may not be able to pass on to customers the full amount ofraw material price increases or higher energy, freight or other operating costs. Examples of mitigating actions * Strategic relationships with suppliers and trading companies * Multiple-source supply agreements for key ingredient supplies * Balanced portfolio of supply and tolling contracts in operation with customersto manage balance of raw material prices and product sales prices and volume risks * Raw material and energy purchasing policies to provide security of supply * Derivatives used where possible to hedge exposure to movements in future pricesof commodities Failure to protect intellectual property Our commercial success depends, in part, on obtaining and maintaining patent protectionon certain products and technology. We must successfully defend patents against third-partychallenges or infringements. Examples of mitigating actions * Group legal department, supported by expert patent lawyers, monitors all patents * Group Intellectual Property (IP) committee in place, chaired by the Presidentof Innovation and Commercial Development, to oversee the Group's IP management * Organised and secure process for identifying and recording innovations, tradesecrets and potential patentable ideas. Competitors may achieve significant advantage through technological step change orhigher service levels Competitors could introduce a major technological step change, such as significantlyimproving the efficiency of a production process and lowering costs (and therebycommoditising products); or introduce a new product with better functionality whichin turn could lead to a decline in our sales and/or profitability. We must ensurewe exceed or at least match competitors' service and quality performance. Examples of mitigating actions * Innovation and Commercial Development team to produce innovations in productdevelopment, applications, manufacturing technology and customer services * Global key account managers in place for major customers * Improved customer relationship management capabilities as part of the programmeto implement a common global IS/IT platform and global support services. Failure to implement the Group's programme to transform its operational capabilities The Group has committed to a programme to transform its operational capabilities,primarily by implementing a common global IS/IT platform and global support services.If this programme is not implemented as planned, this would have an adverse impacton the Group's ability to achieve its strategy. Examples of mitigating actions * Dedicated resources allocated to the project * Project scope set out in detailed legal contracts with external system integratorand other providers, with appropriate governance and remedy mechanisms * Detailed project implementation plan subject to both internal and externalaudit and review * Formal steering committee (executive management) and Board/Audit Committeereview of project progress against agreed milestones and timelines. Failure to counter negative perceptions of the Group's products We must be fully prepared to counter unexpected/ unfounded negative publicity aboutour products. Examples of mitigating actions * Innovation and Commercial Development and regulatory teams substantiate relevantproduct claims * Media relations department monitors Group press coverage and has action plansto deal with any negative publicity. Failure to identify important consumer trends and innovate could impact the business'sability to grow Falling behind the curve on emerging dietary trends and/or an inability to innovatecould impact the delivery of the Group's strategy. This would impact its performanceand reputation. Examples of mitigating actions * Innovation and Commercial Development team works closely with customers andadvisors to identify emerging trends * Consumer-facing research to ensure we are aware of consumers' needs and expectations * Global key account managers in place for major customers * New Commercial and Food Innovation Centre in Chicago, USA will enable scientists,marketing, sales and technical experts to collaborate more closely with customers * Recruitment and training policies in place to strengthen and upgrade staffskill sets. Failure to manage capital expenditure and working capital, and deliver key projects We must manage our finances within strictly controlled parameters, particularly whenexternal financial conditions are uncertain and highly changeable. The change programmecurrently being undertaken by the Group consists of a number of projects which, ifnot delivered successfully, could impact the Group's performance and reputation. Examples of mitigating actions * Significant projects approved and monitored by the Board * Debt and working capital levels monitored constantly and reported monthly tothe Board * Capital expenditure procedures to control and monitor allocation and spend * Major or key projects have dedicated teams * External resources and expertise used where required or as appropriate. Failure to maintain an effective system of internal financial controls Without effective internal financial controls, we could be exposed to financial irregularitiesand losses from acts which could have a significant impact on the ability of thebusiness to operate. We must safeguard business assets and ensure accuracy and reliabilityof records and financial reporting. Examples of mitigating actions * Authorisation policies ensure that key tasks are segregated to safeguard assets * Detailed internal finance and capital expenditure manuals set out procedure * Group financial performance monitored with monthly Board reports and regularforecasting * Chief Executive and Chief Financial Officer undertake detailed quarterly businessand financial reviews * Internal audit function provides assurance. APPENDIX B DIRECTORS' RESPONSIBILITY STATEMENT The following statement is extracted from page 59 of the Annual Report 2011: Each of the directors, whose names and functions are listed on pages 32 and 33, confirmsthat, to the best of his or her knowledge: * the Group financial statements, which have been prepared in accordance withIFRSs as adopted by the EU, give a true and fair view of the assets, liabilities,financial position and profit of the Group; and * the business review contained in the directors' report includes a fair reviewof the development and performance of the business and the position of the Group,together with a description of the principal risks and uncertainties that it faces. APPENDIX C RELATED PARTY DISCLOSURES The following is extracted from Note 40 on page 108 of the Annual Report 2011: Identity of related parties The Group has related party relationships with its subsidiaries, joint ventures andassociates, the Group's pension schemes and with key management being its directorsand executive officers. No related party relationships with close family membersof the Group's key management existed in the current or comparative year. Subsidiaries, joint ventures and associates Transactions entered into by the Company with subsidiaries and between subsidiariesas well as the resultant balances of receivables and payables are eliminated on consolidationand are not required to be disclosed. Similarly, the Group's share of transactionsentered into by the Company and its subsidiaries with joint ventures and betweenjoint ventures as well as the Group's share of the resultant balances of receivablesand payables are eliminated on consolidation. Transactions and balances with jointventures (before consolidation eliminations) and with associates are as follows: 31 March Continuing 2011 £m 2010 £m Sales of goods and services - to joint ventures and associates 150 111 Purchases of goods and services - from joint ventures and associates 221 174 Receivables - due from joint ventures and associates 15 18 Payables - due to joint ventures and associates 17 8 Financing - loans to joint ventures and associates 18 10 - deposits from joint ventures and associates 25 3 The Group had no material related party transactions containing unusual commercialterms. The Group provides guarantees in respect of banking facilities of a joint venturetotalling £10 million (2010 - £21 million). Key management Key management compensation is disclosed in Note 9. END