Tate & Lyle Regulatory News (TATE)

7 November 2019

TATE & LYLE PLC STATEMENT OF HALF YEAR RESULTS

For the six months to 30 September 2019

Key highlights

·; Encouraging first-half with performance in line with our expectations

‒ Food & Beverage Solutions delivered top-line momentum and double-digit profit2 growth

‒ Sucralose performed solidly with profit2 broadly in-line with the comparative period

‒ Primary Products profit2 lower in challenging market conditions

·; 'Sharpen, Accelerate, Simplify' priorities supporting performance

·; Four-year US$100m productivity programme on track

·; Balance sheet strengthened following UK pension buy-in and debt refinancing

·; Important sustainable agriculture programme launched

·; Full-year guidance unchanged

Financial highlights

·; 11% increase in Food & Beverage Solutions profit2 to £90m

‒ Sales 4% higher3 with good price and mix management in all regions

‒ Volume in line with the comparative period

·; 1% decrease in Sucralose profit2 to £29m

·; 5% decrease in Primary Products profit2 to £86m

‒ Sweeteners and Starches profit2 5% lower; Commodities profit2 in line with the comparative period

·; Group statutory profit before tax 45% higher due to lower net exceptional costs

·; 3% increase3 in adjusted profit before tax

·; 3% increase3 in adjusted diluted earnings per share

·; Adjusted free cash flow £19m higher at £171m (£2m higher on pre-IFRS 16 basis*)

·; Net debt to EBITDA 1.0x (0.6x on pre-IFRS16 basis*)

·; Interim dividend increased by 0.2p to 8.8p per share; up 2.3%

Nick Hampton, Chief Executive, said:

"We made encouraging progress in the first half. In Food & Beverage Solutions, increased focus on pricing and mix management delivered strong growth. Profit from Primary Products was lower despite good performance from our manufacturing and supply chain network as market conditions continued to be challenging. Both divisions benefited from productivity gains and cost discipline. Cash generation was higher and during the half we took further actions to strengthen our balance sheet.

Our priorities to sharpen the focus on our customers, accelerate portfolio development and simplify the business are driving momentum across the organisation and supporting performance. We are also proud to have established an important programme to support sustainable agriculture for US-grown corn.

Overall, the business is in a strong financial position and delivering clear strategic progress.

Despite market challenges, our outlook for the year ending 31 March 2020 is unchanged and we continue to expect earnings per share growth in constant currency to be broadly flat to low-single digit."

1 The adjusted results for the six months to 30 September 2019 have been adjusted to exclude exceptional items, amortisation of acquired intangible assets and the tax on those adjustments. A reconciliation of statutory and adjusted information is included in Note 2 to the Financial Information. Growth percentages are calculated on unrounded numbers.

2 Adjusted operating profit, percentage change in constant currency

3 Change in constant currency

* IFRS 16 Leases adoption increased net debt by £173 million and adjusted free cash flow by £17 million. Comparatives have not been restated.

FINANCIAL HIGHLIGHTS

The adjusted results for the six months to 30 September 2019 have been adjusted to exclude exceptional items, amortisation of acquired intangible assets and the tax on those adjustments. A reconciliation of statutory and adjusted information is included in Note 2 to the Financial Information. Growth percentages are calculated on unrounded numbers.

·; Food & Beverage Solutions adjusted operating profit of £90m:

− Sales 4% higher1 reflecting good price and mix management and the pass through of higher net corn costs.

− New Products sales increased1 12% to £55m, representing 11% of Food & Beverage Solutions sales.

− Profit 11% higher1 reflecting cost discipline.

·; Sucralose adjusted operating profit of £29m, broadly in-line in constant currency:

− Production efficiencies and customer mix largely offset lower volume.

·; Primary Products adjusted operating profit of £86m:

− Sweeteners and Starches profit 5% lower1 with good performance from manufacturing and supply chain and cost discipline partly offsetting weaker volume from challenging market conditions.

o Sweetener volume in line with the comparative period.

o Industrial Starch volume 12% lower reflecting the closure of paper capacity at a customer's facility and weaker paper and packaging demand.

− Commodities profit of £6m, in line with the comparative period in constant currency.

·; Central costs at £22m, 8% lower1.

·; Net finance costs of £15m, 12% higher1 reflecting increased lease interest following IFRS 16 adoption.

·; Net exceptional costs of £11m with net exceptional cash outflow of £12m. Exceptional items relate to actions to simplify the business and the portfolio.

− £5m restructuring charge as part of the simplification programme.

− £6m closure costs of Primary Products' small, non-core savoury ingredients business.

·; Adjusted effective tax rate of 20.9% (2018 - 21.5%), lower than expected due to the pension buy-in transaction. Adjusted effective tax rate for the 2020 financial year expected to be in the 20% to 22% range.

·; Group statutory profit before tax of £164m, £51m higher mainly due to lower exceptional costs.

·; Adjusted free cash flow2 increased to £171m. Cash generation from operations was strong, while capital expenditure in the half was £11m higher at £73m.

·; Net debt2 at £465m, was £128m higher than at 31 March 2019. Following the adoption of IFRS 16 lease liabilities of £173m are now included in net debt.

1 Change in constant currency

2 IFRS 16 Leases was adopted in the year without restating comparatives. Lease payments are now classified as financing rather than operating cash flows increasing adjusted free cash flow by £17 million. IFRS 16 lease liabilities increased net debt by £173 million at 30 September 2019.

Webcast and Conference Call Details

A presentation of the results by Chief Executive, Nick Hampton, and Chief Financial Officer, Imran Nawaz, will be audio webcast live at 10.00 (GMT) on Thursday 7 November 2019. To view and/or listen to a live audio-cast of the presentation, visit https://brrmedia.news/62fmj. Please note that remote listeners will not be able to ask questions during the Q&A session.

A webcast replay of the presentation will be available within two hours of the end of the live broadcast on the link above.

For those unable to view the webcast, there will also be a teleconference facility for the presentation. Details are given below:

Dial in details:

UK dial in number: +44 (0)330 336 9411

US dial in number: +1 323 794 2588

Password: 8690611

There will be no replay facility for the teleconference. Please use the link above to view the webcast replay.

For more information contact Tate & Lyle PLC:

Christopher Marsh, VP Investor Relations

Tel: +44 (0) 20 7257 2110 or Mobile: +44 (0) 7796 192 688

Andrew Lorenz, FTI Consulting (Media)

Tel: +44 (0) 20 3727 1323 or Mobile: +44 (0) 7775 641 807

Overview

We have made an encouraging start to the year with good commercial and operational execution together with strong cost discipline and gains from productivity initiatives delivering solid financial results. The three priorities we announced in May 2018 to sharpen the focus on our customers, accelerate portfolio development and simplify the business are driving momentum across the organisation and supporting performance. Cash generation remains good, our balance sheet is robust, and we continue to invest for long-term growth. Overall, although we continue to face external cost pressures and an evolving and uncertain geopolitical landscape, the business is in a strong financial position and delivering clear strategic progress.

Purpose-driven organisation

Tate & Lyle's purpose is Improving Lives for Generations. Our people believe passionately that, through our purpose, we can successfully grow our business and have a positive impact on society. We live our purpose through three main pillars. Firstly, supporting healthy living by using our ingredients and expertise to help people make healthier and tastier choices when they eat and drink, and lead a more balanced lifestyle. Secondly, to help build thriving communities where we operate. Thirdly, to care for the planet we live on and help protect it for the benefit of future generations.

In September, we announced an important multi-year partnership with Land O' Lakes SUSTAINTM, a US conservation solutions provider, to support sustainable agriculture practices on 1.5 million acres of US-grown corn. This is equivalent to every single acre of corn we buy globally each year. Under the programme, participating farmers in the Midwest receive customised support to help measure and improve greenhouse gas emissions, nitrogen efficiency, water usage, wind erosion and soil quality. We are the first corn wet-milling ingredient supplier to launch a sustainable agriculture programme of this kind.

We are also working to increase energy efficiency and reduce carbon emissions in our business. During the half, the Board approved the construction of a new natural-gas fired combined heat and power system at our Lafayette South corn wet-mill in Indiana. This investment, which is subject to local regulatory approval, is due to be completed in the second half of the 2021 calendar year and will deliver significant improvements in energy and operational efficiency, and substantially reduce greenhouse gas emissions.

Focus on three priorities to 'Sharpen, Accelerate, Simplify' supporting performance

Sharpen the focus on our customers

·; We continue to build stronger relationships at all levels of our customers' organisations. In the first half,in addition to increased 'top-to-top' interactions with customers, the number of calls or face-to-face meetings held each month with customers to discuss growth opportunities increased by 20%. This helped increase the value of our customer project pipeline by 6% in the same period and drive top-line growth.

·; We are increasingly seeking new ways to collaborate with customers. During the half, we held our first two-day Fibre Symposium for around 50 customers at our Innovation Centre in Chicago, as well as a two-day sugar-reduction event in Shanghai with more than 80 customers. We also launched our Healthink workshops across Asia Pacific in Singapore, Malaysia and Vietnam. Healthink brings together customers, academia, trade associations, NGOs and our technical experts to look at ways to drive thinking on healthier food and drink, and how our ingredients and solutions can be used to tackle increasing levels of obesity, diabetes and digestive health concerns.

·; In October, we opened our new offices and expanded labs in Sao Paulo, Brazil, and a further expansion of our existing application labs in Singapore. Both will allow us to collaborate more closely with customers and to help them develop new products, and reformulate existing products, to meet increasing consumer demand for healthier, tastier food and beverages.

Accelerate portfolio development

·; New Product sales were 12% higher than the comparative period. This growth was driven largely by our clean-label starches and fibre products.

·; We continue to improve the balance of our innovation portfolio with an increasing emphasis on developing line extensions (i.e. new variants of existing product lines) as these tend to have faster financial returns. For example, in the first half we launched three new non-GMO starch products from our CLARIA® line of clean label starches which add shelf-stability with a clean taste, white colour, and neutral flavour to frozen soups, sauces, and bakery fillings.

·; We continue to expand our global open innovation network. Through our partnership with TERRA, a leading Food & Agriculture Incubator, we partnered with three more start-ups on early stage developments in areas such as food safety and reclaiming value from waste streams.

Simplify our business

·; We are on track to deliver our four-year US$100 million productivity target. This programme commenced in the 2019 financial year to drive supply chain and selling and administration costs benefits, delivering £25 million in productivity benefits in its first year.

·; We approved capital investments to reduce energy costs and increase efficiency such as a new co-generation system and new boilers.

·; We delivered cost reduction and efficiency improvements in our supply chain including projects to reclaim energy, de-bottleneck production processes and improve yields through waste reduction.

·; Zero-based budgeting continues to reduce discretionary costs, particularly in areas such as travel, contractors and events.

·; We introduced new systems and processes to automate and reduce bureaucracy, including new tools for recipe management and remote working.

Strong balance sheet

Our strong balance sheet provides the means to invest in accelerating growth and during the first half we took actions to strengthen and de-risk it further. In August, we priced US$200 million of long-term debt which will be used to refinance a maturing debt facility at lower cost. In September, we supported the trustees of our main UK pension scheme in completing a £930 million bulk annuity insurance 'buy-in' securing an insurance policy to meet the future pensions obligations for our main UK pension scheme without incremental funding by the Group. This will create an annual cash benefit of £20 million from the 2021 financial year.

Executive management

To simplify our management structure, the four regional general managers in Food & Beverage Solutions now report directly to Nick Hampton, Chief Executive. In addition, on 1 September 2019, Harry Boot, President, Asia Pacific, Food & Beverage Solutions was appointed to the Group's Executive Committee.

Outlook

The outlook for the year ending 31 March 2020 remains unchanged. On 23 May 2019, the Group gave the following outlook statement for the year ending 31 March 2020:

"We expect continuing progress in Food & Beverage Solutions and gains from productivity initiatives to offset both lower Sucralose profits and continued market challenges in Primary Products. As a result, we expect earnings per share growth in constant currency to be broadly flat to low-single digit."

SEGMENTAL OPERATING PERFORMANCE

Food & Beverage Solutions

Strong profit growth

Volume was in line with the comparative period. Sales increased by 4% in constant currency to £478 million driven by good price and mix management and the impact of passing through higher net corn costs. Adjusted operating profit was 11% higher in constant currency driven by good sales growth, cost discipline and operating leverage. The effect of currency translation was to increase sales by £16 million and adjusted operating profit by £4 million.

North America

Top-line momentum continued with volume up 1% and sales 6% higher at £235 million. Sales growth was driven by good progress across a range of categories, notably beverage, bakery and dairy (especially ice cream). While the overall US food and beverage market remains largely flat, we continue to see strong customer demand in our key categories, particularly to deliver sugar and calorie reduction.

Asia Pacific and Latin America

Volume increased by 3%. Sales increased by 8% in constant currency to £115 million with single-digit growth in Asia Pacific and double-digit growth in Latin America. In Asia Pacific, we saw good sales growth in China in dairy and in South East Asia in soups, sauces and dressings. In Latin America, sales growth was strong in Mexico and in dairy in the Southern Cone. In Brazil, macroeconomic conditions improved and new front-of-pack labelling rules led to reformulation opportunities with customers.

Europe, Middle East and Africa

Volume decreased by 3%, while sales at £128 million were in line with the comparative period as we continued to exit lower margin texturant business to improve mix. The expansion of our facility in Slovakia to double capacity of high-grade maltodextrin (used in categories such as baby food) opened in October 2019.

New Products

Sales of New Products (products launched in the last seven years) increased by 12% in constant currency (16% reported currency) to £55 million. New Products represent 11% of Food & Beverage Solutions sales. Sales of PROMITOR® Soluble Fibre increased strongly reflecting its use as a fibre enrichment solution and for sugar and calorie reduction particularly in beverage, dairy, confectionery and bakery. We also saw good growth in Non-GMO texturants and clean label starches from our CLARIA® line of functional starches.

Sucralose

Solid results

Sucralose volume decreased by 6% and sales at £76 million decreased by 5% in constant currency principally due to phasing. Adjusted operating profit at £29 million was 1% lower in constant currency reflecting good customer mix and cost management. The effect of currency translation was to increase sales by £3 million and adjusted operating profit by £2 million.

Primary Products

Profit lower in constant currency in challenging market conditions

Volume was 2% lower with sweeteners in line but weaker demand for industrial starch. Sales at £922 million were up 1% in constant currency reflecting the pass through of higher net corn costs. Adjusted operating profit at£86 million was 5% lower in constant currency.

Adjusted operating profit in Sweeteners and Starches was 5% lower in constant currency with good performance from manufacturing and supply chain and strong cost discipline offsetting cost inflation and weaker volume from challenging market conditions. There was a £4 million insurance recovery in the comparative period. Commodities profit at £6 million was in line in constant currency.

To simplify our business and focus capital investment on key priorities, we have decided to close our small, non-core, savoury ingredients business and not invest the significant capital required to sustain this business, with production due to cease at the end of the 2019 calendar year.

The effect of currency translation was to increase sales by £46 million and adjusted operating profit by £5 million.

Sweeteners

Volume was in line with the comparative period due to strong customer service and operational performance, despite soft demand for bulk sweeteners in the US. Demand for carbonated soft drinks in the US continued to be soft, partly reflecting higher pricing and lower promotional intensity within that category.

Industrial Starches

Volume was 12% lower due to the closure of paper capacity at a customer's facility combined with weaker demand for paper and for packaging as e-commerce operators drove packaging optimisation initiatives. US domestic demand was also impacted by increased imports of paper.

Commodities

Commodities delivered profit of £6 million, in line in constant currency. Co-product recoveries were in line with the comparative period. Ethanol cash margins declined while income from our network of corn elevators increased slightly.

Summary of financial results for the period to 30 September 2019 (unaudited)

1 Adjusted results and a number of other terms and performance measures used in this document are not directly defined within accounting standards. We have provided descriptions of the various metrics and their reconciliation to the most directly comparable measures reported in accordance with IFRS and the calculation (where relevant) of any ratios in Note 2.

2 IFRS 16 Leases was adopted in the year without restating comparatives. Lease payments are now classified as financing rather than operating cashflows increasing adjusted free cash flow by £17 million. IFRS 16 lease liabilities increased net debt by £173 million at 30 September 2019.

Sales from continuing operations of £1,476 million were 7% higher than the prior period (2% higher in constant currency).

Adjusted profit before tax of £181 million was 9% higher than the prior period (3% in constant currency). Adjusted diluted earnings per share increased by 2.6p to 30.5p (3% in constant currency).

On a statutory basis, profit before tax increased by £51 million to £164 million driven by an improved operating performance and lower exceptional charges of £11 million (2018 - £47 million). As a result, statutory diluted earnings per share increased by 10.4p to 27.8p.

Central costs

Central costs, which include head office costs and certain treasury and legal activities, were 7% lower (8% in constant currency) at £22 million, reflecting continued strong cost discipline.

Net finance expense

Net finance expense from continuing operations was £2 million higher than the prior period at £15 million, driven predominantly by the adoption of the new leasing standard, IFRS 16, which increased finance expense by £3 million. This has been partially offset by higher finance income on cash deposits.

On 1 August 2019 the Group priced a US$200 million debt private placement which will be issued on 19 November 2019 at which point US$100 million 3.31% notes due 2029 and US$100 million 3.41% notes due 2031 will be drawn down. The proceeds will be used to refinance a maturing £200 million 6.75% bond.  

Share of profit after tax of joint ventures

The Group's share of profit after tax of joint ventures of £13 million was in line with the prior period (2% lower in constant currency).

Exceptional items

In the six months to 30 September 2019, the Group recorded a net exceptional charge of £11 million, and a net exceptional cash outflow of £12 million. Exceptional items comprised the following:

·; £5 million restructuring charge as part of the previously announced simplification programme, of which£3 million is an exceptional cash item.

·; £6 million charge relating to the decision to exit the Primary Products' small, non-core savoury ingredients business of which £1 million is an exceptional cash item.

·; Total cash flows from exceptional items were £12 million, including £10 million relating to charges recorded in the year to 31 March 2019.

During the six months to 30 September 2018, the Group recorded a net exceptional charge of £47 million which mainly comprised a £40 million non-cash impairment charge.

Taxation

The adjusted effective tax rate on earnings for the six months to 30 September 2019 was 20.9% (2018 - 21.5%), the lower rate primarily reflecting the pension buy-in transaction which enabled the utilisation of some previously unrecognised tax losses in the period. We now expect the adjusted effective tax rate for the year ending31 March 2020 to be in the range of 20% to 22%.

The reported effective tax rate (on statutory earnings) was 20.4% (2018 - 28.2%), the higher comparative period rate reflecting higher non-tax deductible exceptional costs.

Earnings per share

Adjusted basic earnings per share increased by 9% (3% in constant currency) to 30.8p and adjusted diluted earnings per share at 30.5p were also 9% higher (3% in constant currency). Statutory diluted earnings per share increased by 10.4p to 27.8p reflecting lower exceptional charges in the period.

Dividend

An increase in the interim dividend for the six months to 30 September 2019 of 0.2p to 8.8p has been approved by the Board. This will be paid on 3 January 2020 to all shareholders on the Register of Members on 22 November 2019. In addition to the cash dividend option, shareholders will continue to be offered a Dividend Reinvestment Plan alternative.

Cash flow and net debt

1 Adjusted results and a number of other terms and performance measures used in this document are not directly defined within accounting standards. We have provided descriptions of the various metrics and their reconciliation to the most directly comparable measures reported in accordance with IFRS, and the calculation where relevant of any ratios, in Note 2.

2 IFRS 16 Leases was adopted in the year without restating comparatives. Lease payments are now classified as financing rather than operating cash flows increasing adjusted free cash flow by £17 million. IFRS 16 lease liabilities increased net debt by £173 million at 30 September 2019.

Adjusted free cash flow (representing cash generated from continuing operations after net interest paid, income tax paid, and capital expenditure, and excluding the impact of exceptional items) was £171 million, £19 million higher than the prior period mainly due to the adoption of IFRS 16 Leases in the period. Before the impact of IFRS 16, adjusted free cash flow was £2 million higher.

Capital expenditure of £73 million, which included an £11 million investment in intangible assets, was £11 million higher reflecting continued investment in capacity as well as safety, efficiency and maintenance investments. We continue to expect capital expenditure for the 2020 financial year to be around £140 million to £160 million.

Other significant cash flows in arriving at net debt included: £27 million of dividends received from joint ventures, external dividend payment of £97 million, and a £8 million payment for share option commitments.

Overall net debt at 30 September 2019 of £465 million was £128 million higher than at 31 March 2019. The adoption of IFRS 16 increased net debt by £173 million at 30 September 2019. Strong cash generation decreased net debt by £61 million in the period (2018 - decrease of £80 million) before the adverse impact of exchange rates. Foreign currency translation, mainly due to the stronger US dollar, increased net debt by £23 million.

Retirement benefits

The Group maintains pension plans for its employees and former employees in a number of countries. Certain of these arrangements are defined benefit pension schemes. All funded schemes in the UK and US are closed for further accrual. In the US, the Group also provides an unfunded post-retirement medical benefit scheme.

On 18 September, the Group further de-risked its retirement benefit obligations by supporting the trustees of the main UK defined benefit pension scheme in completing a £930 million bulk annuity insurance policy 'buy-in' for that scheme. The 'buy-in' secured an insurance asset that fully matches the remaining pension liabilities of the scheme, with the result that the Company no longer bears any investment, longevity, interest rate or inflation risk.

The scheme assets and liabilities were close to balance on a funding basis, and the opportunity therefore arose for a 'buy-in' transaction requiring no incremental funding by the Group. As the scheme was in surplus on an accounting basis, in accordance with the relevant accounting standards the impact of this transaction was to derecognise £195 million of pension scheme accounting surplus by charging the same amount to other comprehensive income. There was no impact on profit before tax.

The other significant movement in retirement benefit obligations in the period relates to actuarial losses of £155 million, which arose because of a reduction in the discount rates applied to pension liabilities in the US and UK. The corresponding gain on plan assets in the period was £114 million. Neither items impacted profit before tax.

At 30 September 2019, the Group's retirement benefit obligations are now in a net deficit of £207 million (31 March 2019 - surplus of £24 million), with the movement principally reflecting the charges to other comprehensive income set out above. The closing total net deficit substantially comprises the unfunded schemes in the US.

As a result of the 'buy-in' cash contributions into the main UK scheme will cease, saving approximately £20 million of cash annually from the 2021 financial year.

Further information about retirement benefit obligations is included in Note 8 to the condensed consolidated financial statements.

Basis of preparation

The Group's principal accounting policies are unchanged compared with the year ended 31 March 2019.

With effect from 1 April 2019 the Group has adopted IFRS 16 Leases which has had a material impact on Group net debt and adjusted free cash flow and IFRIC 23 Uncertainty over Income Tax Treatments which has not had a material impact. As permitted by IFRS 16 comparatives have not been restated. Further information can be found in Note 11.

Details of the basis of preparation, including information in respect of the Group's adjusted performance metrics, can be found in Note 1 to the attached financial information. Growth percentages are calculated on unrounded numbers.

Going Concern

After making enquiries, the Directors are satisfied that the Group has adequate resources to continue to operate for a period of not less than 12 months from the date of approval of the financial information and that there are no material uncertainties around their assessment. For these reasons, the Directors continue to adopt the going concern basis in preparing the condensed consolidated financial information of the Group.

Risks and uncertainties

The principal risks and uncertainties affecting the business activities of the Group are detailed on pages 61 to 65 of the Tate & Lyle Annual Report 2019, a copy of which is available on the Company's website at www.tateandlyle.com. In our view these principal risks remain unchanged from those disclosed therein and actions continue to be taken to substantially mitigate the impact of such risks, should they materialise.

The Board reviewed the impact of Brexit and the contingency plan we have in place in the event the UK leaves the EU without a deal; and concluded that Brexit is not a material risk for us.

Impact of changes in exchange rates

The Group's reported financial performance at average rates of exchange for the six months to 30 September 2019 was favourably impacted by currency translation. The average and closing US dollar and Euro exchange rates used to translate reported results were as follows:

For the period to 30 September 2019, net foreign exchange translation increased Food & Beverage Solutions adjusted operating profit by £4 million, increased Sucralose adjusted operating profit by £2 million and increased Primary Products adjusted operating profit by £5 million, with adjusted profit before tax for the Group increasing in total by £10 million.

CONDENSED (INTERIM) CONSOLIDATED INCOME STATEMENT (UNAUDITED)

CONDENSED (INTERIM) CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)

 Total comprehensive income all relates to continuing operations and is entirely attributable to owners of the Company.

CONDENSED (INTERIM) CONSOLIDATED STATEMENT OF FINANCIAL POSITION (UNAUDITED)

CONDENSED (INTERIM) CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED)

A reconciliation of the movement in cash and cash equivalents to the movement in net debt is presented in Note 6.

CONDENSED (INTERIM) CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

NOTES TO THE FINANCIAL INFORMATIONFor the six months to 30 September 2019

1. Presentation of half year financial information

The principal activity of Tate & Lyle PLC and its subsidiaries, together with its joint ventures, is the global provision of ingredients and solutions to the food, beverage and other industries.

The Company is a public limited company incorporated and domiciled in the United Kingdom and registered in England. The address of its registered office is 1 Kingsway, London WC2B 6AT. The Company has its primary listing on the London Stock Exchange.

Basis of preparation

This condensed set of consolidated financial information for the six months to 30 September 2019 has been prepared on a going concern basis in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and IAS 34 Interim Financial Reporting as adopted by the European Union (EU). The condensed set of consolidated financial information should be read in conjunction with the Group's Annual Report and Accounts for the year to 31 March 2019, which were prepared in accordance with IFRSs as adopted by the EU.

Having reviewed the Group's latest projected results, cash flows, liquidity position and borrowing facilities, the Directors are satisfied that the Group has adequate resources to continue to operate for a period not less than 12 months from the date of approval of the condensed set of financial information and that there are no material uncertainties around their assessment. Accordingly, the Directors continue to adopt the going concern basis of accounting in preparing the condensed set of consolidated financial information.

The condensed set of consolidated financial information is unaudited, but has been reviewed by the external auditors. The condensed set of consolidated financial information in the Statement of Half Year Results does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. The Group's published Annual Report and Accounts for the year to 31 March 2019 were approved by the Board of Directors on 22 May 2019 and filed with the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain an emphasis of matter paragraph or a statement under Section 498 (2) or (3) of the Companies Act 2006. The condensed set of consolidated financial information for the six months to 30 September 2019 on pages 13 to 28 was approved by the Board of Directors on 6 November 2019.

Changes in accounting policy and disclosures

The accounting policies adopted in the preparation of the condensed set of consolidated financial information are consistent with those of the Group's Annual Report and Accounts for the year to 31 March 2019, but also reflect the adoption, with effect from 1 April 2019, of new or revised accounting standards, as set out below. Further detail is provided in Note 11.

- IFRS 16 Leases (effective for the year beginning 1 April 2019)

The standard eliminates the classification of leases as either operating or finance leases and introduces a single accounting model. On adoption on 1 April 2019 lease commitments have been recognised on the statement of financial position as liabilities of £167 million within borrowings and associated 'right-of-use' (ROU) assets of £151 million within property, plant and equipment.

- IFRIC 23 Uncertainty over Income Tax Treatments (effective for the year beginning 1 April 2019)

The interpretation clarifies the recognition principles when there is uncertainty over income tax treatments under IAS 12. The adoption of this interpretation has not had a material impact on the Group's financial statements.

There are no other new standards, new interpretations or amendments to standards or interpretations that have been published that are exp ected to have a significant impact on the Group's financial statements.

Seasonality

The Group's principal exposure to seasonality is in relation to working capital. The Group's inventories are subject to seasonal fluctuations reflecting the timing of crop harvests in North America and purchases. Inventory levels typically increase from September to November and gradually reduce in the first six months of the calendar year.

Changes in constant currency

Where changes in constant currency are presented in this statement, they are calculated by retranslating current period results at prior period exchange rates. Reconciliations of the movement in constant currency have been included in 'Additional information' within this document.

Use of alternative performance measures

The Group also presents alternative performance measures, including adjusted operating profit, adjusted profit before tax, adjusted earnings per share and adjusted free cash flow, which are used for internal performance analysis and incentive compensation arrangements for employees. They are presented because they provide investors with additional information about the performance of the business which the Directors consider to be valuable. For the periods presented, alternative performance measures exclude, where relevant:

- Exceptional items (excluded as they are material in amount; and are outside the normal course of business or relate to events which do not frequently recur, and therefore merit separate disclosure in order to provide a better understanding of the Group's underlying financial performance);

- Amortisation of acquired intangible assets (costs associated with amounts recognised through acquisition accounting that impact earnings compared to organic investments); and

- Tax on the above items and tax items that themselves meet these definitions. For tax items to be treated as exceptional, amounts must be material and their treatment as exceptional enable a better understanding of the Group's underlying financial performance.

Alternative performance measures reported by the Group are not defined terms under IFRS and may therefore not be comparable with similarly-titled measures reported by other companies. Reconciliations of the alternative performance measures to the most directly comparable IFRS measures are presented in Note 2.

Exceptional items

Exceptional items comprise items of income, expense and cash flow, including tax items that: are material in amount; and are outside the normal course of business or relate to events which do not frequently recur, and therefore merit separate disclosure in order to provide a better understanding of the Group's underlying financial performance. Examples of events that give rise to the disclosure of material items of income, expense and cash flow as exceptional items include, but are not limited to:

·; impairment events;

·; significant business transformation activities;

·; disposals of operations or significant individual assets;

·; litigation claims by or against the Group; and

·; restructuring of components of the Group's operations.

For tax items to be treated as exceptional, amounts must be material and their treatment as exceptional enable a better understanding of the Group's underlying financial performance.

Exceptional items in the Group's financial statements are classified on a consistent basis across accounting periods.

2. Reconciliation of alternative performance measures

Income statement measures

For the reasons set out in Note 1, the Group presents alternative performance measures including adjusted operating profit, adjusted profit before tax and adjusted earnings per share.

The following table shows the reconciliation of the key alternative performance measures to the most directly comparable measures reported in accordance with IFRS:

The following table shows the reconciliation of the adjusting items in the current and comparative periods:

Cash flow measure

The Group also presents an alternative cash flow measure, 'Adjusted free cash flow' which is defined as cash generated from continuing operations after net interest and tax paid, and capital expenditure, and excluding the impact of exceptional items.

The following table shows the reconciliation of adjusted free cash flow:

1 IFRS 16 Leases was adopted in the year without restating comparatives. Lease payments are now classified as financing rather than operating cashflows, increasing adjusted free cash flow by £17 million.

Financial strength measure

At the interim period the Group uses the net debt to EBITDA ratio to assess its financial strength. The Group no longer uses the interest cover ratio and so this has been removed. Performance is based on the previous 12 months' results. The ratio is calculated based on unrounded figures in £ million.

1 IFRS 16 Leases was adopted in the year without restating comparatives. For the ratio calculated at 30 September 2019, IFRS 16 lease liabilities increased net debt by £173 million and EBITDA by £17 million. On a like-for-like basis the net debt to EBITDA ratio was 0.6 times.

2 30 September 2019 results include the impact of IFRS 16 Leases from adoption - i.e. six months only.

3. Segment information

Segment information is presented on a basis consistent with the information presented to the Board (the designated Chief Operating Decision Maker). All sales are from external customers.