Tate & Lyle Regulatory News (TATE)

29 May 2014 07:01

TATE & LYLE PLCEFFECT OF ADOPTION OF IFRS 11 ‘JOINT ARRANGEMENTS’

29 May 2014

ACCOUNTING FOR JOINT VENTURES

With effect from 1 April 2014, Tate & Lyle adopted IFRS 11 ‘Joint Arrangements’ which will change significantly the basis of accounting for its interests in joint ventures.

Previously, the Group’s interests in joint ventures were accounted for by proportionate consolidation, whereby the Group’s share of the income and expenses, assets and liabilities and cash flows of joint ventures was combined on a line-by-line basis with those of Tate & Lyle PLC and its subsidiaries. IFRS 11 prohibits the use of proportionate consolidation and requires that joint ventures are accounted for using the equity method of accounting. Under the equity method of accounting, the Group’s share of the after tax profits and losses of the joint ventures are shown on one line of the consolidated income statement, its share of their net assets are shown on one line of the consolidated statement of financial position and the consolidated statement of cash flows reflects cash flows between the Group and the joint ventures (investments in and dividends received from joint ventures) within cash flows from investing activities.

The Group’s results announcements in respect of the year ending 31 March 2015 will include comparative amounts for the year ended 31 March 2014 restated in accordance with IFRS 11. In order to assist users in understanding the effect of this change, we publish today reconciliations showing the effect of IFRS 11 on the Group’s statutory results, financial position and cash flows for the year ended 31 March 2014 (‘FY14’) and for the six months ended 30 September 2013 (‘HY14’).

SUMMARY OF EFFECT

Whilst these changes do not affect the Group’s earnings or its net assets, they affect many of the individual line items presented in the Group’s financial statements. Going forward, however, the Group will present segment and adjusted financial information on a proportionate consolidation basis since this reflects the management of our joint ventures on an integrated basis with the Group’s subsidiaries. Accordingly, performance measures such as adjusted operating profit, adjusted profit before tax and adjusted diluted earnings per share will be unaffected by these changes. We summarise below the effect of the changes using the usual format for our presentation of the Group’s headline results.

		Year ended						Six months ended
		31 March 2014						30 September 2013
Continuing operations				Previously						Previously
£m unless stated otherwise		Restated		reported				Restated		reported
Adjusted results1
Adjusted sales		3 147		3 147				1 737		1 737
Adjusted operating profit2		349		349				187		187
Adjusted profit before tax3		322		322				173		173
Adjusted diluted earnings per share4		55.7p		55.7p				29.9p		29.9p
Adjusted free cash flow5		227		227				239		239
Adjusted net debt		353		353				336		336
Statutory results
Sales		2 754		3 147				1 516		1 737
Operating profit		251		325				139		176
Profit before tax		277		290				150		158
Profit for the year (on total operations)		273		273				130		130
Diluted earnings per share (on total operations)		58.0p		58.0p				27.6p		27.6p
Free cash flow5		141		227				193		239
Net debt		385		353				374		336
Dividend per share		27.6p		27.6p				7.8p		7.8p

1			Adjusted results include the Group’s share of the results of joint ventures on a proportionate consolidation basis.
2			Adjusted operating profit for FY14 is before the amortisation of acquired intangible assets of £10 million (HY14 – £5 million) and a net exceptional charge of £14 million (HY14 – £6 million).
3			Adjusted profit before tax for FY14 is further adjusted for the Group’s share of the income tax expense of joint ventures of £13 million (HY14 – £8 million) and the net retirement benefit interest expense of £8 million (HY14 – £4 million).
4			Adjusted earnings per share for FY14 is based on earnings after the adjustments made in arriving at adjusted profit before tax and is further adjusted to deduct the tax credit on those adjustments of £15 million (HY14 – £4 million).
5			Free cash flow represents cash generated from operating activities, less net interest paid, less tax paid, less capital expenditure.

RESTATED FINANCIAL INFORMATION

Reconciliations showing the effect of IFRS 11 on the Group’s primary financial statements are presented on the following pages:

Six months

Year ended

At

ended

At

At

31 March

31 March

30 September

30 September

31 March

2014

2014

2013

2013

2013

Consolidated income statement

Page 3

Page 8

Consolidated statement of comprehensive income

Page 4

Page 9

Consolidated statement of financial position

Page 5

Page 10

Page 13

Consolidated statement of cash flows

Page 6

Page 11

Consolidated statement of changes in equity

Page 7

Page 12

ELIMINATION OF PROPORTIONATE CONSOLIDATION

In the attached reconciliations, the amounts described as the elimination of proportionate consolidation comprise the elimination of the Group’s share of the income and expenses, assets and liabilities, and cash flows of joint ventures and the reversal of the elimination of the Group’s share of transactions, balances and cash flows with joint ventures recognised by the Group’s subsidiaries.

SEGMENT INFORMATION

For the purposes of allocating resources and assessing the performance of the Group’s businesses the Board will continue to receive financial information that reflects the Group’s interests in joint ventures accounted for by proportionate consolidation. Accordingly, the measures of segment revenue (sales) and segment profit or loss (adjusted operating profit) that are presented in the consolidated financial statements will continue to be prepared on the proportionate consolidation basis. Similarly, segment net working capital information will continue to be presented to the Board on a proportionate consolidation basis. Segment information is presented on pages 14 and 15.

FREE CASH FLOW AND NET DEBT

We will present adjusted free cash flow and adjusted net debt on a proportionate consolidation basis. On pages 16 and 17, we present the Group's free cash flow, net debt and the reconciliation of reported cash flow to the movement in net debt for the above periods.

ADDITIONAL INFORMATION

We focus on a number of key financial performance indicators to measure the value generated by the Group's operations and to assess its financial strength. Our measures of financial strength, net debt to EBITDA and interest cover, are defined under the Group's banking covenants and are unchanged as a result of the adoption of IFRS 11. We also continue to calculate the other key performance indicators on a proportionate consolidation basis. On page 18, we present each of the Group's key financial performance measures for the above periods.

INVESTOR AND MEDIA CONTACTS

A copy of this announcement can be found on our website at www.tateandlyle.com. A hard copy of this announcement is also available from the Company Secretary, Tate & Lyle PLC, 1 Kingsway, London WC2B 6AT.

For more information contact Tate & Lyle PLC:

Mathew Wootton, Group VP, Investor and Media RelationsTel: +44 (0) 20 7257 2110 or Mobile: +44 (0) 7500 100320

Andrew Lorenz, FTI ConsultingTel: +44 (0) 20 7269 7113 or Mobile: +44 (0) 7775 641807

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)YEAR ENDED 31 MARCH 2014

Adoption of IFRS 11

Elimination of

Adoption of

Previously

proportionate

equity

reported

consolidation

accounting

Restated

£m

£m

£m

£m

Continuing operations Sales

3 147

(393)

–

2 754

Operating profit

325

(74)

–

251

Finance income

2

–

–

2

Finance expense

(37)

–

–

(37)

Share of profit after tax of joint ventures

–

–

61

61

Profit before tax

290

(74)

61

277

Income tax expense

(45)

13

–

(32)

Profit for the year from continuing operations

245

(61)

61

245

Profit for the year from discontinued operations

28

–

–

28

Profit for the year

273

(61)

61

273

Profit for the year attributable to:

– Owners of the Company

273

(61)

61

273

– Non-controlling interests

–

–

–

–

Profit for the year

273

(61)

61

273

Earnings per share

Pence

Pence

Pence

Pence

Continuing operations:

– Basic

52.8p

(13.1)p

13.1p

52.8p

– Diluted

52.1p

(13.0)p

13.0p

52.1p

Continuing and discontinued operations:

– Basic

58.8p

(13.1)p

13.1p

58.8p

– Diluted

58.0p

(13.0)p

13.0p

58.0p

Analysis of adjusted profit before tax from continuing operations

£m

£m

£m

£m

Profit before tax

290

(74)

61

277

Adjusted for:

Exceptional items

14

–

–

14

Amortisation of acquired intangible assets

10

–

–

10

Net retirement benefit interest

8

–

–

8

Share of tax of joint ventures

–

–

13

13

Adjusted profit before tax

322

(74)

74

322

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)YEAR ENDED 31 MARCH 2014

								Adoption of IFRS 11
								Elimination of				Adoption of
				Previously				proportionate				equity
				reported				consolidation				accounting				Restated
				£m				£m				£m				£m
Profit for the year				273				(61)				61				273
Other comprehensive (expense)/income
Items that may be reclassified to profit or loss
Fair value loss on cash flow hedges				(1)				(1)				–				(2)
Loss on currency translation of foreign operations				(130)				23				–				(107)
Fair value gain on net investment hedges				50				–				–				50
Share of other comprehensive expense of joint ventures				–				–				(22)				(22)
				(81)				22				(22)				(81)
Items that will not be reclassified to profit or loss
Retirement benefit plans:
– Actual return lower than interest on plan assets				(29)				–				–				(29)
– Net actuarial gain				19				–				–				19
Tax expense relating to the above items				(22)				–				–				(22)
				(32)				–				–				(32)
Total other comprehensive expense				(113)				22				(22)				(113)
Total comprehensive income				160				(39)				39				160
Analysed by:
– Continuing operations				132				(39)				39				132
– Discontinued operations				28				–				–				28
Total comprehensive income				160				(39)				39				160
Attributable to:
– Owners of the Company				160				(39)				39				160

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)AT 31 MARCH 2014

								Adoption of IFRS 11
								Elimination of				Adoption of
				Previously				proportionate				equity
				reported				consolidation				accounting				Restated
				£m				£m				£m				£m
ASSETS
Non-current assets
Goodwill and other intangible assets				389				–				(82)				307
Property, plant and equipment				865				(133)				–				732
Investments in joint ventures				–				–				308				308
Investments in associates				6				–				(2)				4
Available-for-sale financial assets				28				–				–				28
Derivative financial instruments				23				–				–				23
Deferred tax assets				7				(3)				–				4
Trade and other receivables				1				(1)				–				–
				1 319				(137)				224				1 406
Current assets
Inventories				418				(46)				–				372
Trade and other receivables				314				(49)				–				265
Current tax assets				1				–				–				1
Derivative financial instruments				79				(1)				–				78
Cash and cash equivalents				396				(50)				–				346
				1 208				(146)				–				1 062
TOTAL ASSETS				2 527				(283)				224				2 468
EQUITY
Capital and reserves
Share capital				117				–				–				117
Share premium				406				–				–				406
Capital redemption reserve				8				–				–				8
Other reserves				58				1				(1)				58
Retained earnings				460				(225)				225				460
Equity attributable to owners of the Company				1 049				(224)				224				1 049
Non-controlling interests				1				–				–				1
TOTAL EQUITY				1 050				(224)				224				1 050
LIABILITIES
Non-current liabilities
Trade and other payables				2				–				–				2
Borrowings				439				(2)				–				437
Derivative financial instruments				2				–				–				2
Deferred tax liabilities				45				(3)				–				42
Retirement benefit deficits				220				–				–				220
Provisions for other liabilities and charges				10				(1)				–				9
				718				(6)				–				712
Current liabilities
Trade and other payables				315				(32)				–				283
Current tax liabilities				40				(2)				–				38
Borrowings and bank overdrafts				339				(16)				–				323
Derivative financial instruments				50				(1)				–				49
Provisions for other liabilities and charges				15				(2)				–				13
				759				(53)				–				706
TOTAL LIABILITIES				1 477				(59)				–				1 418
TOTAL EQUITY AND LIABILITIES				2 527				(283)				224				2 468

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)YEAR ENDED 31 MARCH 2014

								Adoption of IFRS 11
								Elimination of				Adoption of
				Previously				proportionate				equity
				reported				consolidation				accounting				Restated
				£m				£m				£m				£m
Cash flows from operating activities
Profit before tax from continuing operations				290				(74)				61				277
Adjustments for:
– Depreciation of property, plant and equipment				97				(14)				–				83
– Amortisation of intangible assets				21				(1)				–				20
– Share-based payments				8				–				–				8
– Other non-cash items				(6)				–				–				(6)
– Finance income				(2)				–				–				(2)
– Finance expense				37				–				–				37
– Share of profit after tax of joint ventures				–				–				(61)				(61)
Change in working capital				38				(23)				–				15
Change in net retirement benefit obligations				(43)				–				–				(43)
Cash generated from continuing operations				440				(112)				–				328
Interest paid				(33)				–				–				(33)
Income tax paid				(23)				14				–				(9)
Net cash generated from operating activities				384				(98)				–				286
Cash flows from investing activities
Purchase of intangible assets				(45)				–				–				(45)
Purchase of property, plant and equipment				(114)				12				–				(102)
Proceeds on disposal of property, plant and equipment				34				(1)				–				33
Acquisitions of businesses, net of cash acquired				(15)				–				–				(15)
Disposal of businesses, net of cash disposed				3				–				–				3
Purchase of available-for-sale financial assets				(4)				–				–				(4)
Disposal of available-for-sale financial assets				2				–				–				2
Interest received				2				–				–				2
Dividends received from joint ventures				–				105				–				105
Net cash used in investing activities				(137)				116				–				(21)
Cash flows from financing activities
Purchase of own shares				(29)				–				–				(29)
Cash inflow from additional borrowings				4				4				–				8
Cash outflow from repayment of borrowings				(46)				(4)				–				(50)
Repayment of capital element of finance leases				(2)				–				–				(2)
Dividends paid to the owners of the Company				(124)				–				–				(124)
Net cash used in financing activities				(197)				–				–				(197)
Net increase in cash and cash equivalents				50				18				–				68
Cash and cash equivalents
Balance at beginning of year				379				(74)				–				305
Net increase in cash and cash equivalents				50				18				–				68
Currency translation differences				(33)				6				–				(27)
Balance at end of year				396				(50)				–				346

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)YEAR ENDED 31 MARCH 2014

				Share capitaland sharepremium				Capitalredemptionreserve				Otherreserves				Retainedearnings				Attributable tothe ownersof the Company				Non-controllinginterests(NCI)				Totalequity
				£m				£m				£m				£m				£m				£m				£m
At 31 March 2013				523				8				139				366				1 036				–				1 036
Year ended 31 March 2014
Profit for the year				–				–				–				273				273				–				273
Other comprehensive expense				–				–				(81)				(32)				(113)				–				(113)
Total comprehensive (expense)/income				–				–				(81)				241				160				–				160
Share-based payments				–				–				–				8				8				–				8
Purchase of own shares				–				–				–				(29)				(29)				–				(29)
NCI in subsidiaries acquired				–				–				–				–				–				1				1
Initial recognition of put option on NCI				–				–				–				(2)				(2)				–				(2)
Dividends paid				–				–				–				(124)				(124)				–				(124)
At 31 March 2014				523				8				58				460				1 049				1				1 050

CONDENSED CONSOLIDATED INCOME STATEMENT (UNAUDITED)SIX MONTHS ENDED 30 SEPTEMBER 2013

Adoption of IFRS 11

Elimination of

Adoption of

Previously

proportionate

equity

reported

consolidation

accounting

Restated

£m

£m

£m

£m

Continuing operations Sales

1 737

(221)

–

1 516

Operating profit

176

(37)

–

139

Finance income

1

–

–

1

Finance expense

(19)

–

–

(19)

Share of profit after tax of joint ventures

–

–

29

29

Profit before tax

158

(37)

29

150

Income tax expense

(28)

8

–

(20)

Profit for the period from continuing operations

130

(29)

29

130

Profit for the period from discontinued operations

–

–

–

–

Profit for the period

130

(29)

29

130

Profit for the period attributable to:

– Owners of the Company

130

(29)

29

130

– Non-controlling interests

–

–

–

–

Profit for the period

130

(29)

29

130

Earnings per share

Pence

Pence

Pence

Pence

Continuing operations:

– Basic

28.0p

(6.3)p

6.3p

28.0p

– Diluted

27.6p

(6.2)p

6.2p

27.6p

Continuing and discontinued operations:

– Basic

28.0p

(6.3)p

6.3p

28.0p

– Diluted

27.6p

(6.2)p

6.2p

27.6p

Analysis of adjusted profit before tax from continuing operations

£m

£m

£m

£m

Profit before tax

158

(37)

29

150

Adjusted for:

Exceptional items

6

–

–

6

Amortisation of acquired intangible assets

5

–

–

5

Net retirement benefit interest

4

–

–

4

Share of tax of joint ventures

–

–

8

8

Adjusted profit before tax

173

(37)

37

173

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)SIX MONTHS ENDED 30 SEPTEMBER 2013

								Adoption of IFRS 11
								Elimination of				Adoption of
				Previously				proportionate				equity
				reported				consolidation				accounting				Restated
				£m				£m				£m				£m
Profit for the period				130				(29)				29				130
Other comprehensive (expense)/income
Items that may be reclassified to profit or loss
Fair value gain on cash flow hedges				1				(1)				–				–
Fair value gain on cash flow hedges transferred to the income statement				(1)				–				–				(1)
Net currency translation differences				(59)				14				–				(45)
Share of other comprehensive expense of joint ventures				–				–				(13)				(13)
				(59)				13				(13)				(59)
Items that will not be reclassified to profit or loss
Re-measurement of retirement benefit plans				(2)				–				–				(2)
Tax expense relating to the above item				(16)				–				–				(16)
				(18)				–				–				(18)
Total other comprehensive expense				(77)				13				(13)				(77)
Total comprehensive income				53				(16)				16				53
Analysed by:
– Continuing operations				53				(16)				16				53
– Discontinued operations				–				–				–				–
Total comprehensive income				53				(16)				16				53
Attributable to:
– Owners of the Company				53				(16)				16				53

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)AT 30 SEPTEMBER 2013

								Adoption of IFRS 11
								Elimination of				Adoption of
				Previously				proportionate				equity
				reported				consolidation				accounting				Restated
				£m				£m				£m				£m
ASSETS
Non-current assets
Goodwill and other intangible assets				370				–				(83)				287
Property, plant and equipment				897				(138)				–				759
Investments in joint ventures				–				–				331				331
Investments in associates				6				–				(2)				4
Available-for-sale financial assets				28				–				–				28
Derivative financial instruments				39				(1)				–				38
Deferred tax assets				1				–				–				1
Trade and other receivables				2				(1)				–				1
				1 343				(140)				246				1 449
Current assets
Inventories				320				(51)				–				269
Trade and other receivables				339				(58)				–				281
Current tax assets				3				–				–				3
Derivative financial instruments				108				(8)				–				100
Cash and cash equivalents				449				(56)				–				393
				1 219				(173)				–				1 046
TOTAL ASSETS				2 562				(313)				246				2 495
EQUITY
Attributable to owners of the Company
Share capital				117				–				–				117
Share premium				406				–				–				406
Capital redemption reserve				8				–				–				8
Other reserves				80				(8)				8				80
Retained earnings				376				(238)				238				376
TOTAL EQUITY				987				(246)				246				987
LIABILITIES
Non-current liabilities
Borrowings				769				(3)				–				766
Derivative financial instruments				11				–				–				11
Deferred tax liabilities				48				(3)				–				45
Retirement benefit deficits				232				–				–				232
Provisions for other liabilities and charges				10				(1)				–				9
				1 070				(7)				–				1 063
Current liabilities
Trade and other payables				319				(36)				–				283
Current tax liabilities				55				(1)				–				54
Borrowings and bank overdrafts				52				(15)				–				37
Derivative financial instruments				57				(6)				–				51
Provisions for other liabilities and charges				22				(2)				–				20
				505				(60)				–				445
TOTAL LIABILITIES				1 575				(67)				–				1 508
TOTAL EQUITY AND LIABILITIES				2 562				(313)				246				2 495

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)SIX MONTHS ENDED 30 SEPTEMBER 2013

								Adoption of IFRS 11
								Elimination of				Adoption of
				Previously				proportionate				equity
				reported				consolidation				accounting				Restated
				£m				£m				£m				£m
Cash flows from operating activities
Profit before tax from continuing operations				158				(37)				29				150
Adjustments for:
– Depreciation of property, plant and equipment				49				(7)				–				42
– Amortisation of intangible assets				8				–				–				8
– Share-based payments				5				–				–				5
– Finance income				(1)				–				–				(1)
– Finance expense				19				–				–				19
– Share of profit after tax of joint ventures				–				–				(29)				(29)
Change in working capital				114				(14)				–				100
Change in net retirement benefit obligations				(23)				–				–				(23)
Cash generated from continuing operations				329				(58)				–				271
Interest paid				(15)				–				–				(15)
Income tax paid				(12)				7				–				(5)
Cash used in discontinued operations				(1)				–				–				(1)
Net cash generated from operating activities				301				(51)				–				250
Cash flows from investing activities
Purchase of intangible assets				(23)				–				–				(23)
Purchase of property, plant and equipment				(41)				5				–				(36)
Acquisitions of businesses, net of cash acquired				(12)				–				–				(12)
Disposal of businesses, net of cash disposed				3				–				–				3
Purchase of available-for-sale financial assets				(2)				–				–				(2)
Disposal of available-for-sale financial assets				1				–				–				1
Interest received				1				–				–				1
Dividends received from joint ventures				–				60				–				60
Net cash used in investing activities				(73)				65				–				(8)
Cash flows from financing activities
Purchase of own shares				(16)				–				–				(16)
Cash outflow from repayment of borrowings				(32)				(1)				–				(33)
Repayment of capital element of finance leases				(1)				–				–				(1)
Dividends paid to the owners of the Company				(88)				–				–				(88)
Net cash used in financing activities				(137)				(1)				–				(138)
Net increase in cash and cash equivalents				91				13				–				104
Cash and cash equivalents
Balance at beginning of period				379				(74)				–				305
Net increase in cash and cash equivalents				91				13				–				104
Currency translation differences				(21)				5				–				(16)
Balance at end of period				449				(56)				–				393

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)SIX MONTHS ENDED 30 SEPTEMBER 2013

				Share capitaland sharepremium				Capitalredemptionreserve				Otherreserves				Retainedearnings				Attributable tothe ownersof theCompany
				£m				£m				£m				£m				£m
At 31 March 2013				523				8				139				366				1 036
Six months ended 30 September 2013
Profit for the period				–				–				–				130				130
Other comprehensive expense				–				–				(59)				(18)				(77)
Total comprehensive income				–				–				(59)				112				53
Share-based payments				–				–				–				2				2
Purchase of own shares				–				–				–				(16)				(16)
Dividends paid				–				–				–				(88)				(88)
At 30 September 2013				523				8				80				376				987

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)AT 31 MARCH 2013

								Adoption of IFRS 11
								Elimination of				Adoption of
				Previously				proportionate				equity
				reported				consolidation				accounting				Restated
				£m				£m				£m				£m
ASSETS
Non-current assets
Goodwill and other intangible assets				356				(1)				(85)				270
Property, plant and equipment				958				(146)				–				812
Investments in joint ventures				–				–				377				377
Investments in associates				6				–				(2)				4
Available-for-sale financial assets				27				–				–				27
Derivative financial instruments				54				–				–				54
Deferred tax assets				8				–				–				8
Trade and other receivables				3				(3)				–				–
Retirement benefit surplus				12				–				–				12
				1 424				(150)				290				1 564
Current assets
Inventories				510				(72)				–				438
Trade and other receivables				383				(62)				–				321
Current tax assets				4				(1)				–				3
Derivative financial instruments				86				(2)				–				84
Cash and cash equivalents				379				(74)				–				305
				1 362				(211)				–				1 151
Assets held for sale				1				–				–				1
				1 363				(211)				–				1 152
TOTAL ASSETS				2 787				(361)				290				2 716
EQUITY
Attributable to owners of the Company
Share capital				117				–				–				117
Share premium				406				–				–				406
Capital redemption reserve				8				–				–				8
Other reserves				139				(21)				21				139
Retained earnings				366				(269)				269				366
TOTAL EQUITY				1 036				(290)				290				1 036
LIABILITIES
Non-current liabilities
Trade and other payables				3				–				–				3
Borrowings				821				(5)				–				816
Derivative financial instruments				21				–				–				21
Deferred tax liabilities				24				(3)				–				21
Retirement benefit deficits				277				–				–				277
Provisions for other liabilities and charges				15				–				–				15
				1 161				(8)				–				1 153
Current liabilities
Trade and other payables				382				(38)				–				344
Current tax liabilities				53				(1)				–				52
Borrowings and bank overdrafts				75				(17)				–				58
Derivative financial instruments				60				(5)				–				55
Provisions for other liabilities and charges				20				(2)				–				18
				590				(63)				–				527
TOTAL LIABILITIES				1 751				(71)				–				1 680
TOTAL EQUITY AND LIABILITIES				2 787				(361)				290				2 716

SEGMENT INFORMATION (UNAUDITED)

(a) Segment sales

							Year ended31 March2014£m				Six monthsended30 September2013£m
External sales
Speciality Food Ingredients							983				519
Bulk Ingredients							2 164				1 218
Total sales							3 147				1 737
Elimination of proportionate consolidation							(393)				(221)
Group sales							2 754				1 516
(b) Segment results
							Year ended31 March2014£m				Six monthsended30 September2013£m
Adjusted operating profit
Speciality Food Ingredients							213				112
Bulk Ingredients							172				92
Central							(36)				(17)
Total adjusted operating profit							349				187
Elimination of proportionate consolidation							(74)				(37)
Group adjusted operating profit							275				150
Adjusting items:
– Exceptional items							(14)				(6)
– Amortisation of acquired intangibles							(10)				(5)
Group operating profit							251				139
Finance income							2				1
Finance expense							(37)				(19)
Share of profit after tax of joint ventures							61				29
Group profit before tax							277				150
Adjusted operating margin
Speciality Food Ingredients							21.7%				21.5%
Bulk Ingredients							7.9%				7.5%
Central							n/a				n/a
Total							11.1%				10.8%

(c) Segment assets/(liabilities)

							At 31 March 2014
							Assets				Liabilities				Net
							£m				£m				£m
Net working capital
Speciality Food Ingredients							242				(94)				148
Bulk Ingredients							447				(181)				266
Central							44				(42)				2
Total working capital							733				(317)				416
Elimination of proportionate consolidation							(96)				32				(64)
Group working capital							637				(285)				352
Other assets/(liabilities)							1 831				(1 133)				698
Group assets/(liabilities)							2 468				(1 418)				1 050
							At 31 March 2013
							Assets				Liabilities				Net
							£m				£m				£m
Net working capital
Continuing operations:
Speciality Food Ingredients							304				(115)				189
Bulk Ingredients							566				(223)				343
Central							23				(46)				(23)
							893				(384)				509
Discontinued operations							3				(1)				2
Total working capital							896				(385)				511
Elimination of proportionate consolidation							(137)				38				(99)
Group working capital							759				(347)				412
Other assets/(liabilities)							1 957				(1 333)				624
Group assets/(liabilities)							2 716				(1 680)				1 036

ANALYSIS OF FREE CASH FLOW (UNAUDITED)

							Group				Effect of				Total
							(Equity				proportionate				(Proportionate
							accounted)				consolidation				consolidation)
							£m				£m				£m
Year ended 31 March 2014
Cash generated from continuing operations							328				112				440
Purchase of property, plant and equipment							(102)				(12)				(114)
Purchase of intangible assets							(45)				–				(45)
Operating cash flow less capital expenditure							181				100				281
Interest paid							(33)				–				(33)
Interest received							2				–				2
Income tax paid							(9)				(14)				(23)
Free cash flow							141				86				227
Six months ended 30 September 2013
Cash generated from continuing operations							271				58				329
Purchase of property, plant and equipment							(36)				(5)				(41)
Purchase of intangible assets							(23)				–				(23)
Operating cash flow less capital expenditure							212				53				265
Interest paid							(15)				–				(15)
Interest received							1				–				1
Income tax paid							(5)				(7)				(12)
Free cash flow							193				46				239

ANALYSIS OF NET DEBT (UNAUDITED)

							Group				Effect of				Total
							(Equity				proportionate				(Proportionate
							accounted)				consolidation				consolidation)
							£m				£m				£m
At 31 March 2014
Non-current borrowings							(437)				(2)				(439)
Current borrowings and bank overdrafts							(323)				(16)				(339)
Debt-related derivatives							29				–				29
Cash and cash equivalents							346				50				396
Net debt							(385)				32				(353)
At 30 September 2013
Non-current borrowings							(766)				(3)				(769)
Current borrowings and bank overdrafts							(37)				(15)				(52)
Debt-related derivatives							36				–				36
Cash and cash equivalents							393				56				449
Net debt							(374)				38				(336)
At 31 March 2013
Non-current borrowings							(816)				(5)				(821)
Current borrowings and bank overdrafts							(58)				(17)				(75)
Debt-related derivatives							38				–				38
Cash and cash equivalents							305				74				379
Net debt							(531)				52				(479)

MOVEMENT IN NET DEBT (UNAUDITED)

							Group				Effect of				Total
							(Equity				proportionate				(Proportionate
							accounted)				consolidation				consolidation)
							£m				£m				£m
Year ended 31 March 2014
Increase/(decrease) in cash and cash equivalents							68				(18)				50
Net decrease in borrowings							44				–				44
Decrease/(increase) in net debt resulting from cash flows							112				(18)				94
Debt in subsidiary acquired							(3)				–				(3)
Currency translation differences							37				(2)				35
Decrease in net debt/(funds) in the year							146				(20)				126
Net (debt)/funds at beginning of year							(531)				52				(479)
Net (debt)/funds at end of year							(385)				32				(353)
Six months ended 30 September 2013
Increase/(decrease) in cash and cash equivalents							104				(13)				91
Net decrease in borrowings							34				(1)				33
Decrease/(increase) in net debt resulting from cash flows							138				(14)				124
Debt in subsidiary acquired							(3)				–				(3)
Fair value and other movements							(4)				1				(3)
Currency translation differences							26				(1)				25
Decrease in net debt/(funds) in the period							157				(14)				143
Net (debt)/funds at beginning of period							(531)				52				(479)
Net (debt)/funds at end of period							(374)				38				(336)

RATIO ANALYSIS (UNAUDITED) (a)

								Six months
				Year ended				ended
				31 March				30 September
				2014				2013
Net debt to EBITDA(b)
= Net debt				373				351
Pre-exceptional EBITDA				467				463
				= 0.8 times				= 0.8 times
Interest cover (b)
= Operating profit before exceptional items and amortisation of intangible assets				359				351
Net finance expense				31				32
				= 11.6 times				= 10.9 times
Earnings dividend cover
= Adjusted basic earnings per share from continuing operations				56.5				n/a
Dividend per share				27.6
				= 2.0 times
Cash dividend cover (c)
= Free cash flow from continuing operations				227				239
Cash dividends				128				37
				= 1.8 times				= 6.5 times
Return on capital employed
= Profit before interest, tax and exceptional items from continuing operations				339				n/a
Average invested operating capital of continuing operations (d)				1 770
				= 19.2%
Average quarterly cash conversion cycle (e)				39 days				43 days
				At				At
				31 March				30 September
				2014				2013
Gearing
= Net debt				353				336
Total equity				1 050				987
				= 34%				= 34%

Each of the ratios shown above is calculated based on the proportionate consolidation of the results, assets and liabilities and cash flows of the Group’s interests in joint ventures.

Notes:

(a)			All ratios are calculated based on unrounded figures.
(b)			Net debt to EBITDA and interest cover are defined under the Group’s banking covenants. For the purpose of these ratios, the effect of new or revised accounting standards adopted by the Group subsequent to 1 April 2012 are ignored and net debt is calculated using average currency exchange rates.
(c)			Free cash flow represents cash generated from continuing operations, less net interest paid, less income tax paid, less capital expenditure. Cash dividends represent dividends on ordinary shares paid or proposed in respect of the reporting period, excluding dividends reinvested in shares through the DRIP scheme.
(d)			Average invested operating capital represents the average at the beginning and end of the period of shareholders’ equity excluding net debt, net tax assets/liabilities and net retirement benefit obligations.
(e)			Average quarterly cash conversion represents controllable net working capital at the end of the quarter divided by sales in the quarter, multiplied by the number of days in the quarter and is calculated on a four-quarter rolling basis (a reduction in the number of days represents an improvement).

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