Treatt Regulatory News (TET)

CHAIRMAN'S STATEMENT

Results

The Group has enjoyed a good year in 2010 with strong growth in both sales and profits, with operating profit up by 26% to £4.9m. Group revenue continued to grow for the twelfth year in succession with an increase for the year of 12.4% to £63.3m (2009: £56.3m). Over the last three years Group revenue has risen by 66%. Group adjusted* earnings before interest, tax, depreciation and amortisation increased by 20% to £6.0m (2009: £5.0m) with adjusted* profit before tax for the year being up by 29% to a new all-time high of £4.5m (2009: £3.5m). Basic adjusted* earnings per share has increased by 24% to 30.3 pence (2009: 24.5 pence) per share.

The Board is proposing a final dividend of 8.9 pence (2009: 8.3 pence), increasing the total dividend for the year by 8.3% to 13.0 pence (2009: 12.0 pence) per share. The final dividend will be payable on 4 March 2011 to all shareholders on the register at close of business on 28 January 2011.

Towards the end of the 2009 financial year there was a weakening of demand and this trend continued into the first quarter of the 2010 financial year. However, in January 2010 demand began to recover and sales of the Group's products rose sharply across the broad range of new and existing customers, reaching record levels in terms of both volumes and value in the third quarter. The final quarter of the year was significantly stronger than the corresponding period last year. The value of sales of orange oil products, which represent 17% of Group revenue (2009: 17%), increased by 12% during the year although volumes were unchanged. Contribution from orange oil co-products increased even more sharply as prices rose steadily throughout the period. By the end of the financial year orange oil prices had begun to reach all-time highs although this did not impact on the results for the year ended 30 September 2010. Over the course of the year, the US Dollar to Pound Sterling exchange rate had a broadly neutral effect on the business as it ended the year little different to where it had opened twelve months earlier, although there were some periods of significant fluctuation in between.

Following strong positive cash inflow of almost £7m in 2009, the Group's inventory holdings increased in 2010 as expected, both in terms of volumes, as inventory levels were replenished, and values, as prices rose, resulting in an overall cash outflow (movement in net debt) for the year of £2m. As confirmed in the Half Year Results Announcement, the Group's bank facilities were renewed without difficulty, with £6 million of US Dollar denominated debt being converted from a one year to a three year committed facility.

Group operating profit after foreign exchange translation differences increased by 26% to £4.9m (2009: £3.9m). The Group's main UK operating business, R.C. Treatt, had another strong performance and the year also saw a significantly improved performance by Treatt USA. The Group's organic and fair trade business, Earthoil, continued to make progress although this was hampered by its loss-making South African subsidiary, which was disposed of during the year.

The Board has reviewed the £4.3m carrying value of goodwill relating to the Group's organic and fair trade cosmetic ingredient business, Earthoil (as required by International Financial Reporting Standards). The Group acquired 50% of Earthoil in 2007 and obtained full ownership in 2008. The Board is confident of the potential of Earthoil, however it is now apparent that the development of Earthoil has taken longer than originally anticipated. Accordingly, a goodwill impairment charge of £2.4m has been made in the year, reducing profit before tax from £4.5m to £2.1m. The impairment charge is a non-cash item.

R.C. Treatt has performed consistently strongly over the last few years and 2010 was no exception with total revenues increasing by 12% to £43.6m (2009: £38.9m). Although the financial year began slowly, in part due to the timing of major customer deliveries, as prices began to firm the levels of activity both in terms of value and the number of transactions increased rapidly and reached record levels in the third quarter. With its widely spread global customer base, the Company continued to enjoy strong sales growth particularly in the Far East (where sales increased by 25%) and in aroma chemicals (where sales grew by 16%).

Treatt USA had a very good year seeing a significant recovery in demand from existing customers as well as winning an encouraging level of new business. Year on year US Dollar sales grew by 16%, with an improved product mix also providing a boost to margins. Having reduced inventory levels by £3m in 2009, levels in 2010 grew by less than £1m, notwithstanding the 16% increase in sales. The growth in specialty sales continued with another year of double digit growth, increasing in US Dollars by 15% (2009: 14%) across a wide range of products.

Earthoil results showed some progress in 2010, with sales growth of 9%. Underlying Earthoil's performance, there have been definite signs of improvement in regular order intake and deliveries, coupled with strong growth in sales to its major customers. However, Earthoil's South African subsidiary continued to underperform and was therefore the subject of a management buy-out during the year. The Company continues to win new business, enabling the Group to make inroads into the cosmetics sector, which remains a long term strategic goal.

Prospects

To fully set out the prospects for the current year is not easy. The most significant raw material purchased by the Group is orange oil, which is then processed by the Group with the resultant products being sold at prices which reflect raw material costs. Over the last 30 years the price of orange oil has fallen to as low as US$0.40/kg (in 1983) and peaked at US$5/kg (in 1995).

In recent times, with higher petroleum prices underpinning the price, orange oil has been relatively stable at around $2/kg. In 2009, there was an oversupply of orange oil and the price fell for a short period to under $1/kg. During 2010, as a result of unprecedented climatic conditions, including a drought in Brazil and a freeze in Florida, coupled with high demand for orange oil co-products, orange oil prices have reached historic highs of well over $6/kg. This volatility can lead to significant stock profits but also to high levels of risk in terms of managing the Group's supply pipeline when prices fall back.

The new financial year has started very well with both sales and margins significantly up on the same period last year for all three group businesses, R.C. Treatt, Treatt USA and Earthoil. Indeed Treatt USA achieved a record level of profit in October. The next twelve months could be somewhat tumultuous for the Group as raw material and product prices reach their peak with a significant risk that prices, in particular orange oil, could then fall sharply resulting in potentially large stock losses. The Group has many years experience of dealing with such situations and steps are in place to mitigate these losses where possible.

The Group also expects to continue to see significant sales growth in the Far East and many other parts of the world where it sees opportunities to increase market share. Following strong sales growth in 2010, as businesses were re-stocking following a period of heavy de-stocking in 2009, demand for other products is expected to subside and we have seen some signs of a decline in orders.

Summary

In summary, the Group has performed well over its entire product range over the last three years through difficult times, as the world continues to eat, drink and buy cosmetics, regardless of economic conditions. Flavour, fragrance and cosmetics companies look to Treatt to provide quality products in an efficient manner. As a truly independent and global business, Treatt remains well placed to take advantage of competitive opportunities, and through its commitment to continuous improvement, Treatt has become a supplier of choice.

People

Importantly, the Board would again like to place on record its thanks to all Group employees for their tremendous dedication and effort which has resulted in another good year of excellent progress. This could not have been achieved without a stable and committed workforce.

As reported last year, Ned Dawnay and David Appleby retired from the Board during the year and we were very pleased to welcome Ian Neil to the Board with extensive flavour and fragrance experience, having worked within the industry for over 25 years.

JAMES GRACE

Chairman

3 December 2010

* Excluding goodwill impairment

TREATT PLC

PRELIMINARY STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2010

GROUP INCOME STATEMENT

All amounts relate to continuing operations

TREATT PLC

PRELIMINARY STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2010

GROUP STATEMENT OF COMPREHENSIVE INCOME

TREATT PLC

PRELIMINARY STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2010

GROUP STATEMENT OF CHANGES IN EQUITY

TREATT PLC

PRELIMINARY STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2010

GROUP BALANCE SHEET

TREATT PLC

PRELIMINARY STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2010

GROUP STATEMENT OF CASH FLOWS

TREATT PLC

PRELIMINARY STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2010

GROUP RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET DEBT

TREATT PLC

PRELIMINARY STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2010

NOTES TO THE PRELIMINARY STATEMENT

1. Basis of preparation

In accordance with Section 435 of the Companies Act 2006, the Group confirms that the financial information for the years ended 30 September 2010 and 2009 are derived from the Group's audited financial statements and that these are not statutory accounts and, as such, do not contain all information required to be disclosed in the financial statements prepared in accordance with International Financial Reporting Standards ("IFRS"). The statutory accounts for the year ended 30 September 2009 have been delivered to the Registrar of Companies. The statutory accounts for the year ended 30 September 2010 have been audited and approved, but have not yet been filed.

The Group's audited financial statements received an unqualified audit opinion and the auditor's report contained no statement under section 498(2) or 498(3) of the Companies Act 2006.

The financial information contained within this preliminary statement was approved and authorised for issue by the Board on 3 December 2010.

2. Accounting policies

These financial statements have been prepared in accordance with the accounting policies set out in the full financial statements for the period ending 30 September 2009, other than the following new standards and amendments to standardswhich are mandatory and relevant to the Group for the first time for financial years beginning on or after 1 January 2009:

·; IAS 1 (revised), "Presentation of financial statements". The most significant change within IAS 1 (revised) is the requirement to produce a statement of comprehensive income setting out all items of income and expense relating to non owner changes in equity. There is a choice betweenpresenting comprehensive income in one statement or in two statements comprising an income statement and aseparate statement of comprehensive income.  The Group has elected to present comprehensive income in two statements.  In addition, IAS 1 (revised) requires the statement of changes in equity to be presented as aprimary statement.

·; IFRS 2 "Share based payments" hasbeen adopted buthasnot had a material impact on the financial statements of the Group.

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3. Geographical segmental information

The following table provides an analysis of the Group's revenue by geographical market, irrespective of the origin of the goods or services:

TREATT PLC

PRELIMINARY STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2010

NOTES TO THE PRELIMINARY STATEMENT

4. Taxation

5. Dividends

The declared interim dividend for the year ended 30 September 2010 of 4.1 pence was approved by the Board on 21 May 2010 and was paid on 15 October 2010. Accordingly it has not been included as a deduction from equity at 30 September 2010. The proposed final dividend for the year ended 30 September 2010 of 8.9 pence will be voted on at the Annual General Meeting on 25 February 2011. Both dividends will therefore be accounted for in the results for the year ended 30 September 2011.

TREATT PLC

PRELIMINARY STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2010

NOTES TO THE PRELIMINARY STATEMENT

6. Earnings per Ordinary Share

(1) Basic earnings per share

 Basic earnings per share is based on the weighted average number of ordinary shares in issue and ranking for dividend during the year of 10,199,504 (2009: 10,167,177).

Basic earnings per share has been shown both before and after goodwill impairment of £2.4m. The earnings used to calculate basic earnings per share before and after goodwill are earnings of £3,086,000 and £654,000 respectively (2009: £2,488,000).

The weighted average number of shares excludes shares held by the "Treatt Employee Benefit Trust".

(2) Diluted earnings per share

Diluted earnings per share is based on the weighted average number of ordinary shares in issue and ranking for dividend during the year, adjusted for the effect of all dilutive potential ordinary shares, of 10,237,603 (2009: 10,177,825), and earnings (after goodwill impairment) of £654,000.

The number of shares used to calculate earnings per share (EPS) have been derived as follows: