21 OCTOBER 2021 - TATE & LYLE PLC

RESTATEMENT OF PRIOR YEAR FINANCIAL INFORMATION FOR THE SHAREHOLDER APPROVED SALE OF A CONTROLLING STAKE IN THE PRIMARY PRODUCTS BUSINESS ("NewCo")

Introduction

On 12 July 2021, Tate & Lyle announced that it had entered into an agreement to sell a controlling stake in a new company ("NewCo") and its subsidiaries which will hold Tate & Lyle's Primary Products business in North America and Latin America and its interests in the Almidones Mexicanos S.A de C.V ("Almex") and DuPont Tate & Lyle Bio-Products Company, LLC ("Bi-PDO") joint ventures (together, the "NewCo Business"), to Gemini Holdings, LP (the "Purchaser") an affiliate of funds managed by KPS Capital Partners, LP ( together with the Purchaser and their affiliates, "KPS") (altogether, the "Transaction").  Under the terms of the Transaction, Tate & Lyle will continue to hold a 49.9% interest in NewCo and will benefit from potential value creation in the NewCo Business in the future.

On 30 September 2021 Tate & Lyle ordinary shareholders voted to approve the transaction, with 99.9% of the shares that voted voting in favour of the Transaction.

In advance of the publication on 4 November 2021 of Tate & Lyle's half-year results for the six months ended 30 September 2021, and to assist with understanding the accounting impact of the Transaction, this announcement is being made to provide details of the framework under which the future results of Tate & Lyle will be reported and set out the restated comparative information for the six months to 30 September 2020 and the year ended 31 March 2021.

This document also contains pro-forma financial information for Tate & Lyle for the six months ended 30 September 2020 and the year ended 31 March 2021, which shows the impact of further adjustments reflecting additional factors that will come into effect at or following completion of the Transaction.  The pro-forma adjustments show a reduction in adjusted diluted earnings per share (EPS) for each period.  However, it should be noted that the dilution presented for the year ended 31 March 2021 is not indicative of expected future dilution, which will be lower.  This is because the year ended 31 March 2021 saw a record level of Commodities profits which increases profits from discontinued operations and so increases the associated dilution impact.  The dilution impact is also calculated before the reduction in the diluted number of ordinary shares expected to result from the proposed special dividend and share consolidation (which is expected to take place after completion of the Transaction).

Background

On completion, KPS will have 50.1% of the voting rights in NewCo, majority board voting rights and operational control.  Tate & Lyle will, therefore, no longer unilaterally control the NewCo Business and will cease to consolidate it in its financial statements. Tate & Lyle will equity account for its 49.9% interest in NewCo as a joint venture following completion of the Transaction.

Completion of the Transaction continues to be expected in the first quarter of the 2022 calendar year (i.e. on or before the end of the Tate & Lyle Group's financial year ending 31 March 2022) subject to a number of further conditions being satisfied, including inter alia: (i) obtaining certain Antitrust Clearances; (ii) the completion of a reorganisation of the Tate & Lyle Group to separate the NewCo Business from the Food & Beverage Solutions business and create a standalone group of entities under NewCo which hold the NewCo Business; and (iii) the completion of an information technology separation. Tate & Lyle is working (together with KPS, where applicable) to achieve satisfaction of these conditions within this timeframe.

Outline of the restated financial information

From July 2021, the NewCo Business has been classified as held for sale and met the definition of a discontinued operation in accordance with IFRS 5.

As a result, the NewCo Business is required to be treated as such in the current financial period (being the year ending 31 March 2022), and this classification will be adopted in the Group's half year results announcement on 4 November 2021.   Accordingly, the comparatives for the six months to 30 September 2020 and the year ended 31 March 2021 will be restated on a consistent basis. These restatements have been set out in Section I. They also include a reconciliation from the results originally disclosed for these periods to the classification of operations defined as continuing.  Such continuing operations comprise the following:

·      The Group's existing Food & Beverage Solutions operating segment;

·      The Group's Sucralose operating segment;

·      The Group's European Primary Products business[1], which is not part of the Transaction; and

·      Central costs

[1]  Following the completion of the Transaction, it is expected that the European Primary Products business will be part of the Food & Beverage Solutions operating segment

The composition of continuing operations will be consistent year on year and therefore the results of continuing operations to be published in the half year results announcement for the six months to 30 September 2021 will be comparable with the restated financial information set out below.

Then set out in Section II of this document, are further adjustments to show the pro-forma impact of the Transaction because certain impacts will only come into effect at or following completion.  The basis of preparation of this pro-forma financial information is described below.

Additional Pro-forma adjustments made to restated financial information

In Section II of the financial information the pro-forma effect of the Transaction is provided. In addition to the adjustments described in Section I, these pro-forma adjustments reflect the impact of the following:

·      The impact of long-term agreements that will exist between the Group and NewCo from completion of the Transaction, including, inter alia, for the cost of certain services provided by NewCo for procurement of net raw materials and the manufacture of finished goods products; and

·      The Group's equity accounted share of profits of the NewCo Business from Completion.

The pro-forma financial information in Section II is designed to show the illustrative impact of the Transaction on continuing operations as if it had completed on 1 April 2020, being the start of the earliest period presented in this document.

The pro-forma effect on EPS of the impact on the number of ordinary shares following the planned share consolidation has not been disclosed herein as it will be dependent on the market capitalisation of Tate & Lyle at the time of the consolidation.  Illustratively, at the current share price of £6.75 a £500 million special dividend and associated share consolidation would result in a reduction of approximately 74 million shares, representing approximately 16% of the Group's share capital used for the purpose of calculating EPS.  The pro-forma financial information in Section II does not include the positive impact this will have on reducing EPS dilution.

While IFRS 5 provides the basis on which the restated financial information included in Section I is prepared, pro-forma financial information is a non-IFRS measure.  In addition, because such pro-forma financial information contains estimates with respect to each of the items set out above, it should not be used to replace the restated statutory financial information but is an illustration of how the Group will present its financial results following completion of the Transaction.

Further impact of classification of the NewCo Business as Held for Sale

IFRS 5 requires certain adjustments to assets held for sale, for which the relevant items to the Group from the Transaction are as follows:

·      Cessation of depreciation of assets of the NewCo Business; and

·      Cessation of equity accounting of the share of profits from the Group's existing joint venture interests in Almex and Bio-PDO (after which any dividends received from these two joint ventures are recorded as income within discontinued operations)

Such adjustments apply prospectively from 1 July 2021 and comparatives are not restated[2].  The impact of these adjustments is reflected in discontinued operations only and there is no impact on the continuing operations defined above.  Accordingly, the restated comparative financial information set out below is unimpacted by the held for sale adjustments.

[2]  IFRS 5 requires discontinued operations to be restated to apply in all periods but it requires the held for sale adjustments above only to apply prospectively from 1 July 2021.
 

FINANCIAL INFORMATION

Section I - Restated Financial Information

Summary of restated financial results for the six months to 30 September 2020

1.   Adjusted results and a number of other terms and performance measures used in this document are not directly defined within IFRS. 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 to the Statement of Half Year Results for the six months to 30 September 2020.

2.   Adjustment to revenue comprises overall reclassification to discontinued operations of £797 million, representing external revenue from the Primary Products business in North America and Latin America.  In addition, £45 million of revenue from the European Primary Products business, which is not subject to the NewCo disposal transaction, is reclassified to Food & Beverage Solutions in the summary financial information.

3.   Adjustment relates to the inclusion of the European Primary Products business in Food & Beverage Solutions, which is not subject to the NewCo disposal transaction (£4 million loss), and the inclusion of certain stranded costs (£4 million of costs) which are reallocated from Primary Products to Food & Beverage Solutions because they will remain with the Group post disposal.

4.   Primary Products profit is removed on the basis that it is included in discontinued operations with the exception of its European Primary Products business which is included within Food & Beverage Solutions following the adjustment in item 3 above.

5.   Adjustment relates to the interest charge on certain leases included in the disposal group which has been reclassified to discontinued operations.

6.   Both the Group's joint ventures Almex and Bio-PDO are subject to the NewCo disposal transaction.  Their results are included within discontinued operations.

7.   Adjustment relates to the exceptional costs recorded within the disposal group which has been reclassified to discontinued operations.

8.   Income tax expense represents statutory income tax and therefore includes tax on exceptional items.  Adjusted diluted EPS is calculated using adjusted tax rate, consistent with the Group's usual presentation.   

Segmental results for the six months to 30 September 2020

Following the classification of NewCo as a disposal group held for sale and discontinued operation, in the year ending 31 March 2022 there is no change to the Group's existing reportable IFRS 8 segments as this segment information remains consistent with the information being presented to the Board (Chief Operating Decision Maker) for the purpose of allocating resources and assessing business performance.  Following completion of the Transaction, and for the year ending 31 March 2023 and beyond, the IFRS 8 operating segments are expected to again remain unchanged, except that the Primary Products segment will become the Group's interest in the NewCo joint venture and the Group's existing European Primary Products business will become part of the Food & Beverage Solutions operating segment.

Further information is provided below to reconcile the segmental results to the presentation adopted in the summary financial information. 

IFRS 8 Segmental disclosure (unchanged from previous disclosure)

2. Food & Beverage Solutions adjustment relates to the inclusion of the European Primary Products business which is not subject to the disposal of the NewCo Group (£4 million loss) and the inclusion of certain operating costs (£4 million of costs) which will remain with the Group post disposal. Primary Products adjustment relates to its results (excluding the European Primary Products business results) being classified as a discontinued operation.