All cheers and no booze as Treatt fortunes rocket
Global demand for healthier living is driving a revenue surge for natural ingredients manufacturer Treatt plc and has sent its UK share price soaring.
The Bury St Edmunds company will this month start transferring staff to its new headquarters at Suffolk Park and has a sizeable war chest to underpin continued expansion.
Its share price rocketed 97p – more than 10 per cent – to 1,055p on the back of a half-year trading update that showed strong growth in revenue and margins.
Treatt supplies natural extracts and ingredients for the beverage, flavour and fragrance industries and is a former Business of the Year in our annual Awards competition.
Treatt expects first-half revenue to swell by 14 per cent to around £60.8 million and says growth is particularly strong in tea, health & wellness and fruit & vegetables categories – meeting growing global consumer demand for healthier living.
A transition into more sophisticated, solution-driven products in citrus has also played its part in the upsurge, the company says.
The new UK headquarters opens later this month and staff are beginning to transition on a phased basis; along with the recently expanded US facility, the uptick ensures the group is well-positioned for future growth.
Treatt will start commissioning new plant and machinery later this calendar year as planned to enable production to relocate.
Treatt’s products are meeting growing demand from consumers for more natural, clean-label and 'better-for-you' beverages and are driving pipeline growth and, in turn, financial performance.
The Group has won significant new business across a wide range of beverage and flavour applications including the fast-growing alcoholic seltzer market which continues to expand rapidly in the US and begins to gain traction globally.
Revenue growth has been achieved through direct sales to global and local brand owners as well as indirectly through the flavour and fragrance industry, demonstrating the strength of the group's business model.
Citrus revenue has returned to modest growth, following a decline in FY20, and margins improved materially in the period as the group's prior investment in more sophisticated extraction technologies resulted in the launch of more value-add ingredients.
Also, raw material prices for orange oil – which fell significantly in 2019 – have returned to more normalised levels.
Treatt continues to grow its synthetic aroma business. This category, which includes important flavour ingredients for meat alternative protein flavours and snack foods, performed well with revenue up significantly compared with the prior year.
Herbs, spices & florals, which include an extensive range of manufactured and traded essential oils and extracts, saw revenues fall in the period due to reduced demand caused by Covid-19.
With the UK relocation nearing completion, net debt at the end of the period was £5.1m with total bank facilities of £21.2m remaining undrawn.
CEO Daemmon Reeve said: “Performance across the group continues to be very strong despite the ongoing global Covid-19 related restrictions. These measures continue to impact our customers in global hospitality industries and whilst the outlook is promising, we are taking a conservative approach and will assess how our order book progresses in the coming weeks and months.
“The success we have had in diversifying the Group's flavour and fragrance expertise across a wide range of categories has helped our resilience over the period.
“Our strategy is driven by an obsession with offering solutions that are of clear relevance to our customer base, providing differentiated ingredients that align with consumer trends in growing markets.
“Our effectiveness in developing these relationships continues to shine through and the execution is testament to the skill and endeavour of our colleagues together with the culture across the group.”