Tate&Lyle Annual Report 2008 It all starts here Annual Report 2008 Tate & Lyle is a world-leading manufacturer of renewable food and industrial ingredients. We use innovative technology to transform corn and sugar into quality ingredients used by millions of people every day. Cautionary statement Tate & Lyle PLC Please read the full cautionary and non-reliance Tate & Lyle PLC is a public limited company listed on statements, which can be found on page 164. the London Stock Exchange and registered in England. This is the report and accounts for the year ended Environmental statement 31 March 2008. More information about Tate & Lyle This report is printed on ‘Look!’ and Revive 50/50 can be found on our website at www.tateandlyle.com paper and has been independently certified on behalf of the Forest Stewardship Council (FSC). Definitions In this report, ‘Company’ means Tate & Lyle PLC. Printed at St Ives Westerham Press Ltd, ISO14001, ‘Tate & Lyle’ or ‘Group’ means Tate & Lyle PLC and FSC certified and CarbonNeutral® its subsidiary and joint venture companies. Trademarks SPLENDA® and the SPLENDA® logo are trademarks of McNeil Nutritionals, LLC. The DuPont Oval logo, Dupont™ and Sorona® are trademarks or registered trademarks of E.I. du Pont de Nemours and Company. Overview of the year Sir David Lees and Iain Ferguson summarise Dividends per share Tate & Lyle’s performance in the past year. 2 Performance highlights 4 Chairman’s statement 6 Chief Executive’s review % 10 Vision, strategy and + business objectives 5 OVERVIEW OF THE YEAR What we do Find out how we make our ingredients, which markets we operate in, how we serve our customers, and what we are doing to grow our business. 12 Overview 28 Going to market 14 Sustainable sourcing 32 People 18 Creating volume 34 External environment and 22 Preserving value risk factors 24 Adding value WE DO WHAT How we performed How we measure our performance, and the results for the Group and each business division for the financial year. 38 Our operations 40 Key performance indicators 41 Operating and financial review 41 Group results 44 Divisional performance 52 Other financial information HOW WE PERFORMED How we run the business Find out who Tate & Lyle’s directors are and how we apply our values to the way we run our business. 58 Board of directors 60 Executive management 61 Corporate governance 68 Corporate social responsibility HOW WE RUN THE BUSINESS Statutory information Our detailed financial statements and other statutory information such as directors’ pay. 79 Directors’ report 82 Directors’ remuneration report 94 Group financial statements 154 Parent company financial statements 160 Ten-year review (non-statutory) 162 Information for investors (non-statutory) STATUTORY INFORMATION STATUTORY Tate & Lyle Annual Report 2008 1 Overview of the year Performance highlights Primary and value added products Value added products Sales are those that utilise technology or Year to 31 March intellectual property enabling our £m customers to produce distinctive 3 424 products and Tate & Lyle to obtain 3 225 a price premium and/or sustainable 2 535 2 622 higher margins. Other products from our commodity corn milling and sugars businesses are classified as primary. 802 690 2007 2008 2007 2008 2007 2008 Primary Value added Total1 Adjusted operating profit Year to 31 March £m 311 286 187 157 159 160 2007 2008 2007 2008 2007 2008 Primary Value added Total1 1 Total includes central costs of £31 million in 2008 and £35 million in 2007 2 Tate & Lyle Annual Report 2008 OVERVIEW OF THE YEAR Basis of preparation Unless stated Adjusted diluted earnings per share Dividends per share otherwise, the Group’s financial statements Year to 31 March Year to 31 March are prepared in accordance with International pence pence Financial Reporting Standards (IFRS). Information prior to 2005 is shown under Generally Accepted Accounting Practice in the United Kingdom (UK GAAP). WE DO WHAT 37.5 Adjusted operating profit and adjusted 32.7 earnings per share Unless stated 22.6 otherwise, adjusted operating profit and 21.5 adjusted earnings per share in this annual report and accounts excludes discontinued operations and are before exceptional items and amortisation. 2007 2008 2007 2008 Amortisation Unless stated otherwise, the use of the word ‘amortisation’ on pages 1 to 92 in this annual report relates to the amortisation of acquired intangible assets. Continuing operations Unless stated otherwise, all comments in this annual report and accounts refer to the continuing operations HOW WE PERFORMED adjusted to exclude exceptional items and amortisation of acquired intangible assets. Tate & Lyle’s five-year cumulative total shareholder return Total shareholder return performance Value of £100 invested on 31 March 2003 The graph shows the cumulative total shareholder return performance (share £ price growth plus reinvested dividends) 250 of Tate & Lyle over the past five years Tate & Lyle compared with the FTSE 100 Index. 200 FTSE 100 Index 150 100 HOW WE RUN THE BUSINESS 50 31 March 2003 31 March 2004 31 March 2005 31 March 2006 31 March 2007 31 March 2008 Source: Kepler Associates STATUTORY INFORMATION STATUTORY Tate & Lyle Annual Report 2008 3 Overview of the year Chairman’s statement 2008 was a year of significant change and progress for Tate & Lyle. We successfully achieved a number of steps to reshape our business in line with our strategy to build a stronger value added business on a low-cost commodity base. This reshaping process is largely complete and, taken together with some important changes in the management structure, the Group is now well positioned to benefit from the growth opportunities in our chosen markets. Results of continuing operations Sales for the year ended 31 March 2008 were £3,424 million, 6% higher (10% in constant currency) than the prior year. Profit before tax, adjusted to exclude exceptional items and amortisation of acquired intangible assets, at £244 million was 11% lower (7% in constant currency) than the prior year, and diluted earnings per share at 32.7p were 13% lower (8% in constant currency). Net debt at £1,041 million increased by £141 million. The Group’s results of continuing operations were adversely affected by a very disappointing performance in international sugar trading and by the weak US dollar. These two factors more than account for the lower profit before tax referred to above. In international sugar trading, we have taken the necessary actions to restructure its activities and re-focus management priorities to ensure that this year’s loss of £9 million is not repeated. The results of the rest of the Group’s operations were encouraging, demonstrating considerable resilience in the face of both the unprecedented increase in global commodity prices and the impact of the EU sugar regime reform. Food & Industrial Ingredients, Americas once again performed strongly, achieving a fourth consecutive year of record profits. The 13% increase in profits from core value added food ingredients and the 6% increase in SPLENDA® Sucralose sales, both in constant currency, were also pleasing and demonstrate the good progress we are making to grow our business in those areas of strategic focus and investment. Dividend The Board proposes an increase of 1.1p (5%) in the total dividend for the year to 22.6p. This is covered 1.5 times by adjusted basic earnings before exceptional items and amortisation of acquired intangible assets from continuing operations, and 1.8 times from total operations. The proposed final dividend of 16.1p (2007 – 15.3p) will be due and payable on 31 July 2008 to all shareholders on the Register of Members at 4 July 2008. 4 Tate & Lyle Annual Report 2008 Return of capital During the year the Board carried out its annual evaluation We returned £159 million to shareholders through the of the effectiveness of the Board. This year the Board repurchase of 33.6 million shares representing 69% of engaged Dr Tracy Long of Boardroom Review to act the approval given by shareholders at the Annual General as an independent facilitator for the review. Dr Long’s Meeting (AGM) in July 2007. Given current worldwide report was presented to and discussed by the Board OVERVIEW OF THE YEAR economic conditions, we have decided to suspend the and the recommendations made are being implemented. remainder of the repurchase programme. We will be asking shareholders to renew the Company’s authority Outlook to buy back shares at the AGM on 23 July 2008. Looking forward to the year to 31 March 2009: The Board ■ We anticipate the Food & Industrial Ingredients On 2 May 2008, we announced that Stanley Musesengwa, businesses in the Americas and Europe, which together Chief Executive, International, and Stuart Strathdee, accounted for 72% of the Group’s continuing operating Corporate Development Director, will retire from Tate & Lyle’s profit before central costs in the 2008 financial year, Board of Directors at the AGM on 23 July 2008. will make further progress benefiting in the Americas both from improved high fructose corn syrup pricing WHAT WE DO WHAT Stanley Musesengwa has worked for Tate & Lyle for achieved for the 2008 calendar year and from additional over 28 years and has been a Director since April 2003. value added capacity now on stream. In Europe, the He has served Tate & Lyle with great distinction over the results will be significantly influenced by European years and we wish him every success for the future. cereal prices following the 2008 harvest. Stuart Strathdee has worked for Tate & Lyle for over ■ The EU sugar regime reforms have proved successful 31 years and has been a Director since November 1994. in eliminating all but 6% of the quota production The Board is deeply appreciative of his loyal service and capacity targeted for reduction.