Treatt buoyed by strong annual results
Plans for the relocation of Treatt Plc’s UK site continue to progress well. Contracts were exchanged in December 2016 (subject to outline planning consent) on a 10-acre plot of land on the new Suffolk Business Park in Bury St Edmunds.
CEO Daemmon Reeve says that with the continuing momentum being delivered by the company’s 2020 Strategic Plan, strong revenue growth, and the beneficial impact from higher product margins, the board believes that profit before tax for the financial year ending September 30, 2017 will substantially exceed its previous expectations.
The company manufactures and supplies innovative ingredient solutions for the flavour, fragrance, beverage and consumer product industries. It issued an upbeat trading statement to the markets in January and further upgraded its forecasts in a further announcement last week.
Treatt said momentum has gathered pace, with the results for the six months ending March 31, 2017 now expected to show substantial progress compared to the prior year.
Reeve said that this had resulted from a combination of strong growth to revenues – currently estimated to be up in excess of 20 per cent over the comparable period last year – driven by both new business wins and growth with existing customers, combined with improved product margins as Treatt continues to move up the value chain.
Treatt said that all of its key product categories had delivered strong revenue growth since the start of the financial year, with citrus and sugar reduction solutions producing particularly strong performances. Earthoil, the group’s personal care ingredients division, also continues to perform well as recent investments begin to deliver returns.
As Treatt enters the seasonally busiest time of the financial year, it is encouraged to see order books for the remainder of the current financial year, and into next year, across the group materially up on a year ago.
The strategy to manage foreign exchange risk is designed to prevent currency from having a material impact on the net results. During the period, the GB Pound/US Dollar exchange rate had been relatively stable and, therefore, the expected reversal of last year’s FX loss of £0.5 million should positively impact on the results for the half year, the company believes. This includes the retranslation benefits from the group’s US subsidiary Treatt USA.
The strength of the group’s order book and the impact of higher raw material prices, has resulted in an expected increase to net debt which is expected to be approximately £10m-£12m at the half year compared to £8.4m at the same time last year.
But Treatt adds: “Nonetheless, with confidence for the usual pattern of strong cash inflow in the second half of the year, it is expected that overall net debt will fall significantly by our financial year end.”