TATE & LYLE IS A WORLD LEADERIN SUGAR, CEREAL SWEETENERSAND STARCHES.
TO BUILD ON THIS POSITION ANDPROVIDE OUR SHAREHOLDERSWITH VALUE, OUR ORGANISATIONWILL BE DRIVEN BY EFFICIENCYAND INNOVATION.
IN THIS REPORT, WE SHOW WHATWE ARE DOING TO ACHIEVE THAT.
ANNUAL REPORT 1998
ContentsKey Objectives 1
Chairman’s Statement 2
Our Current Capability 5
Creating Value 7
Breaking New Ground 9
Our Products 10
Chief Executive’s Review 12
Operating and Financial Review 17
Tate & Lyle in the Community 25
Environment Report 26
Key Management 27
Board of Directors 28
Directors’ Report 30
Report of the Remuneration and Appointments Committee 32
Directors’ Responsibilities, Corporate Governance and Auditors’ Report 38
Financial Statements 39
Main Subsidiaries and Investments 65
Information for Investors 68
Ten Year Review 70
Index 72
Our BusinessThe Tate & Lyle Group, with headquarters in theUK, operates in over 50 countries with a turnoverof over £4 billion. It produces and processessugar from cane and beet, and processes cereals(predominantly maize and wheat) into sweetenersand starches and other products. The Group alsostores, distributes and processes by-products,particularly into animal feed.
TAT E & L Y L E 1
OUR KEY OBJECTIVES FOR SHAREHOLDER VALUE
WE WILL:
M A I N TAIN OUR FOCUS ON SWEETENERS, STARCHES AND
OTHER PRODUCTS DERIVED FROM CARBOHYDRATES.
DRIVE COSTS OUT OF OUR BUSINESSES BY PERSISTENT
AT1TENTION TO MANUFACTURING AND CAPITAL EFFICIENCY.
USE OUR VOLUME PROCESSING SKILLS TO GROW
S E L E C T I V E LY IN MARKETS WHERE THE DEMOGRAPHICS
ARE FAVOURABLE.
DELIVER ADDITIONAL GROWTH WITH NEW PRODUCTS AND
NEW PROCESSING APPLICATIONS, DEVELOPED THROUGH
E S TABLISHED RESEARCH CAPABILITIES AND INDUSTRY
ALLIANCES.
MAKE THE NECESSARY CHANGES THROUGHOUT OUR
O R G A N I S ATION TO EXPLOIT THE MANY OPPORTUNITIES IN
OUR INDUSTRY.
2 TAT E & LY L E
CHAIRMAN’S STATEMENT
From the Chairman Sir David Lees
Sir Neil Shaw It is appropriate that I should start my first statement as Chairman of
Tate & Lyle with thanks to Neil Shaw for his services to the Company during 23 years on
the Board, from which he retired in June of this year. He became a director in 1975, was
appointed Group Managing Director in 1980 and Chairman in 1986. I am pleased to
have the opportunity to acknowledge his very considerable contribution to Tate & Lyle
over what has been a distinguished career in a number of different roles.
Results Profit before tax was £165 million. Profit before tax and exceptional items
(comprising £13 million profit on fixed asset sales and £15 million exceptional costs)
was £167 million. This was disappointing by comparison with last year’s £241 million.
Currency effects accounted for £11 million of the reduction in profits which were also
affected adversely by a number of other factors. These included start-up difficulties at
Amylum’s new plant in France, a disease that affected Western Sugar’s beet crop and
low sugar prices in North America following a record crop elsewhere. These factors and
the results are described in greater detail in the Chief Executive’s Review on page 12.
Diluted earnings per share before exceptional items of 27.2p reflected the lower
pre-tax profits and compare with 35.1p last year.
Operating cash flow was £395 million. Net borrowings increased by £46 million
to £955 million after capital expenditure, acquisitions and other investments of
£354 million.
Dividend The total dividend for 1997/98 of 17.0p remains unchanged from the
underlying figure for the previous year, which excludes the special enhancement in
connection with the Foreign Income Dividend paid at the interim in 1997. The final
dividend of 11.7p will be due and payable on 6 April 1999 as a second interim dividend
to shareholders on the register on 11 December 1998. The payment is two months later
than usual but by postponing it to this date the Company saves Advance Corporation
Tax which would not be recoverable.
Initial Targets Having been Chairman for less than two months and with a steep
learning curve ahead in relation to Tate & Lyle’s various businesses, it would be
premature for me to do more in this statement than identify a few initial targets.
These are set out below:
• Last year was self-evidently disappointing for Tate & Lyle. Our aim is to ensure
that 1997/98 represents the trough.
• The dividend has effectively remained the same for three years. Going forward,
as an absolute minimum, we will seek to maintain it in real terms.
• Capital and other investment expenditure in recent years has been heavy, not
least within the Amylum Group. We will target the rapid achievement of the
projected returns on which those investments were based.
• Balance Sheet gearing has increased, and interest cover is low by our historic
standards. As a target and without damaging future prospects we will aim to
restore interest cover to at least four times as soon as possible.
Financial Results 1998 1997
Turnover £4 467m £4 651m
Profit before interest* £248m £305m
Profit before taxation* £167m £241m
Dividend per share– underlying 17.0p 17.0p– FID enhancement – 1.325p
Diluted earnings per share* 27.2p 35.1p
*before exceptional charge
Dividends pence*FID Enhancement of 1.325p
20
15
10
5
18.325*17.0
16.014.4
94 95 96 97 98
17.0
TAT E & LY L E 3
• We will ensure that our strategy is clearly focused, with the overriding aim of
delivering value for shareholders.
The Board Between the beginning of 1998 and the end of 1999 the Board will have
seen a large number of changes among its non-executive members. Paul Lewis,
formerly Deputy Chairman, and Sir Brian Hayes retired from the Board last February and
Sir Neil Shaw retired last June. Sir Saxon Tate, Lady Prior and Jonathan Taylor, who have
served as directors for 41 years, 13 years and 10 years respectively, will be retiring from
the Board at the AGM.
Red Wilson has been a director for 14 years and was appointed Deputy Chairman
earlier this year. He has expressed a wish to retire from the Board in September 1999.
I look forward to his help and advice during my first year as Chairman.
All these directors have contributed to the development of Tate & Lyle over many
years and their individual and collective effort is gratefully acknowledged. It is anticipated
that two new non-executive directors will be appointed to the Board during 1999.
Change of Financial Year A number of commercial negotiations take place at the end
of the calendar year which can have a material effect on the results of the year following.
In order both to improve the accuracy of our internal budgets and forecasts and to make
our public statements more informative, we have decided to change the financial year
end from September to March.
The current accounting period will therefore be for 78 weeks ending on 25 March
2000. Interim statements will be sent to shareholders covering the two 26-week periods
to 27 March 1999 and 25 September 1999. We would anticipate making interim
dividend payments on 13 July 1999 and 11 January 2000 and a final dividend payment
in the summer of 2000. The Annual General Meeting previously announced for
2 February 1999 will be postponed to the end of April 1999 in order to meet Companies
Act requirements arising from the change of year end. A letter to shareholders giving
further information will be despatched in February.
Outlook Like almost every other company Tate & Lyle faces a number of challenges
and these will not be made any easier by general economic conditions that are likely to
become more difficult for a time. Our overriding objective must be to restore the trading
performance of the Group whilst pursuing a strategy that will be to the advantage of
shareholders, customers and employees. My tenure to date has been a short one;
nevertheless I am confident that such an objective is attainable.
Sir David Lees Chairman
24 November 1998
Our overriding objective must be to
restore the trading performance of
the Group whilst pursuing a strategy
that will be to the advantage
of shareholders, customers
and employees. My tenure to date
has been a short one; nevertheless
I am confident that such an
objective is attainable.
In the Nesle plant
TAT E & L Y L E 5
SINCE ITS FOUNDATION IN THE LAST
CENTURY TATE & LYLE HAS BUILT A
S U B S TANTIAL GLOBAL PRESENCE IN ITS
CORE BUSINESSES. WE ARE NOW A
WORLD LEADER IN SUGAR, CEREAL
SWEETENERS AND STARCHES.
WHAT HAS MADE THAT POSSIBLE?
The Group has consistently generated around
£400 million cash from operating activities in
each of the last five years from businesses with
significant positions in established markets.
A core competence of the Group is its ability to process
high volumes of carbohydrates efficiently to provide a
low-cost platform for higher value products. We have
developed know-how in biochemical processing to
combine with existing skills in advanced separation
technologies. This allows us to use fermentation
techniques to manufacture at low cost and in high volume. The successful recent
acquisition of the citric acid businesses of Haarmann & Reimer builds on this
capability. The location of the plants enhances our existing presence in the UK,
US and Mexico, and provides a foothold in South America, in Colombia and
Brazil, to extend the Group’s strong presence in the Americas.
The Tate & Lyle name is
respected everywhere in the
world of sweeteners. The
Group has a strong collection
of local brands which benefit
from good recognition in their
markets – Tate & Lyle Sugars in the UK, Domino
and Redpath in North America and many others
in Europe, Africa and Australia.
Staley is redirecting
capacity at its Decatur
plant from high fructose
corn syrup to higher
margin starch products
by installing new
equipment. An additional flash dryer has
expanded starch drying capacity, part of the
ongoing reconfiguration of Staley’s plants for
increased capability in speciality products.
Tate & Lyle has a substantial global presence in its core
businesses. The strength of this geographic diversification is
underpinned by advanced processing capabilities across a
range of agricultural raw materials. We have first class
brands, a wide and increasing product range and strong
cash generation to fund future growth.
Led by the advanced wheat starch plant at Nesle in
northern France, the Amylum Group has completed
the repositioning of its European production facilities
over a five year period at a cost of over £300 million.
This was made possible by the Group’s skills at
processing a range of agricultural raw materials and driven by the determination to
choose the lowest cost carbohydrate source for the production of starch based
products in each European country. Wheat will be the lowest cost source of starch in
northern Europe. Maize still remains the material of choice for many products.
CapabilityOur Current Capability Our Current Capability Our Current Capability Our Current Capability Our Current Capability Our Current Capability Our Current Capability O
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EVA analysis in progress
TAT E & L Y L E 7
IN VOLUME PROCESSING BUSINESSES
EVERY SMALL IMPROVEMENT MAT T E R S ,
EVERY MARGIN PERCENTAGE POINT
COUNTS AND EVERY POUND OF CAPITA L
INVESTMENT MUST PAY OFF.
W H AT ARE WE DOING TO MAKE THAT
HAPPEN?
Creating valuEconomic Value Added (EVA) is being used to focus
on shareholder value at all levels in the Group. Improvement in
EVA has a strong correlation with growth in shareholder value
and pay systems are being changed to reward EVA growth.
The efficient use of capital, whether investing or realising cash,
is thereby incentivised. The EVA culture is felt at all levels,
whether at the Board (where EVA analysis supports all
investment decisions) or in the businesses (where there has
been extensive education and training and every employee has
the Group’s EVA training brochure).
Bundaberg designed and built a new
mill in Queensland, Australia – the first in
that state since 1925. The innovative
design is smaller, lighter and cheaper
(both in capital and running costs) than
a traditional mill and is Bundaberg’s
response to the economic demands of
the industry.
Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our
Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Valu
e fo
r ou
r S
hare
hold
ers
Valu
e fo
r ou
r S
hare
hold
ers
ueWe are taking action to create value from our
portfolio of existing and future investments. To enhance
returns to our shareholders we are introducing
value measurement techniques at all levels of the
business and are building a focused culture intent on
cost reduction, manufacturing efficiency and growth.
Total manufacturing costs
across the Group are in
excess of £800 million. Small
percentage improvements
therefore quickly impact the
bottom line. A new position – Group President,
Operations – has been created to ensure that
existing skills are leveraged across all our
businesses. Electricity co-generation plants,
already providing low cost power at Staley, have
been completed at the Thames refinery in the
UK and at Amylum in northern France.
£72 million of proceeds were generated by the
disposal of assets that are either non-core or not
creating shareholder value. PM Ag Products
withdrew from one sector of its animal feeds
business. A minority shareholding in Azucarera
Ebro Agricolas, a Spanish sugar company, was
sold. Domino disposed of its packaging material
subsidiary. The sale of UM Group’s animal feed
equipment business was announced. Surplus
land, buildings and plant were sold by Group
businesses around the world.
SAP systems have been chosen for
integrating the Group’s operations.
They have been fully implemented at
Tate & Lyle Sugars in the UK, and at
Staley, PM Ag Products, Western
Sugar and Tate & Lyle Citric Acid in North America. Further roll-
outs at Domino Sugar and Redpath Sugars in North America and
at Amylum Group and Alcântara in Europe will be completed in
1999. Costs will reduce as the benefits of standardisation and
scale economies are realised.
The North American
Business Improvement
Project is ahead of its
target to pay back
within two years. The
support functions of four separate
businesses were integrated into a
single centre to service businesses in
North America. Administrative
headcount reductions of over 150
people were identified and
procurement costs were cut using
national pricing agreements and by
leveraging purchasing power.
Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Sharehold
ers Value for our Sharehold
ers Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders Value for our Shareholders
8 TAT E & LY L E
Glucose molecule
TAT E & L Y L E 9
TO BUILD FOR THE FUTURE W E
M U S T DEVELOP NEW PRODUCTS FOR
TOMORROW’S CUSTOMERS AS WELL AS
TODAY’S.
HOW ARE WE DOING THIS?
Zambia Sugar has become the first
company in sub-Saharan Africa to fortify
its sugar with Vitamin A to help in the
battle against vitamin deficiency. This
project began as a joint initiative with the
Zambian Food and Nutritional Commission and involved the co-
operation of the United States Agency for International
Development and a number of other international agencies.
The acquisition of Haarmann & Reimer’s citric
acid businesses, renamed Tate & Lyle Citric Acid,
has given the Group significant volume in this
product. It is a widely-used food and beverage
ingredient, complementary to our existing
products and sold to many of our existing customers.
Improvements in process, capacity balance, overheads and
logistics – identified before the acquisition and available only
through integration with Tate & Lyle’s existing businesses –
provide immediate opportunities for value-adding growth.
BreakingBuilding the Future Building the Future Building the Future Building the Future Building the Future Build
Future Building the Future Building the Future Building the Future Building the Future Building the Future Buildingthe
Futu
re
Bui
ldin
g
the
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re
Over 20 new
products have been
brought to market in
the last two years.
We have worldwide
alliances with major universities and
institutions for research into new
products and processes. Our North
American research team supports the
widest product range in the US corn wet
milling industry.
W
D E S I G N
Domino Sugar have
announced Qwik-Flo
Plus, an extension
to their Qwik-Flo
Granules line of
speciality products. It is targeted for
nutraceutical applications, making it easy
to add fortifying nutrients and minerals
during manufacture, and can be tailored to
suit each customer’s requirements.
Staley’s corn processing
skills and a long-established
business relationship with
our partner in Argentina
led to a US$52 million
investment in IMASA, a
corn sweetener and starch
business, the first major investment in South America
for Tate & Lyle. The plant was built by Staley engineers
in the 1970s and the further application of process
skills learnt in the larger plants in the US will lead
to reduced unit costs.
Construction of the Company’s new 6,000 tonnes
cane/day sugar mill in Nghe An Province in Vietnam is
nearly complete. Tate & Lyle Bundaberg, in Australia,
provided management and engineering support and supplied key equipment
from its foundry subsidiary after a competitive open tender.
g new groundFrom an established platform we are expanding our value-
added product range, using the opportunities of new
production processes, particularly in fermentation, as well as
more conventional product development to meet customer
needs. We continue to strengthen our commitment to R&D,
with our own networked teams and through established
industry alliances. Changing world demographics are opening
up new markets for our global sucrose business.
ding the Future Building the Future Building the Future Building the Future Building the Future Building the Future Building the Future Building the Future Building the FutureBuilding
the Future
Building
the Future
Building
the Future
Building
the Future
Building
the Future Building the Future Building the Future Building the Future Building the Future Building the Future Building the Future Building the Future Building the Future Buildingth
e Fu
ture
Bui
ldin
g th
e Fu
ture
Bui
ldin
g th
e Fu
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Bui
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Building the F
10 T AT E & L Y L E
OUR PRODUCTS
Raw Sugar The Group owns or has interests in plants around the tropics in which sugar cane is milled
to produce raw sugar, including a major cane milling business in Australia, and cane milling interests
in Thailand.
White Sugar Raw cane sugar is refined into white sugar at Group plants in five continents. Tate & Lyle
Sugars in the UK and Alcântara in Portugal are cane sugar refiners with retail brands, supplying major
shares of their national markets.
Domino Sugar in the US and Redpath in Canada are major cane sugar refiners with significant brands
in the retail market. Western Sugar is a sugar beet processor with six plants in the High Plains states.
Occidente is a joint venture in Mexico which has three cane mills producing white sugar.
Group interests include Zambia Sugar, an estate and a large cane mill producing white sugar, and ZSR
Corporation, a Zimbabwe corporation which includes two cane sugar refineries. The Group also has
interests in packing stations and other cane mills in southern Africa, and a refinery in Australia.
A wide range of sugar products for table top and industrial use in foodstuffs and beverages is produced
mainly for local consumption. We also trade in sugar and supply equipment to the sugar industry.
SugarWhite sugar, packaged in various ways, is the Group’s main sugar product. Whitesugar may be produced directly from beet or cane in factories close to the crop,or those factories may produce raw sugar, which is transported to refineries nearto major markets.
TAT E & L Y L E 11
Cereal Sweeteners and StarchesSweeteners and starches can be made from cereals, including maize – called corn in the US– and wheat. In the wheat process, the dry wheat is ground into flour and bran, which isseparated for use as an animal feed. A wet separation process extracts gluten, starch andeffluent from the flour. In the corn wet milling process, the shelled corn is first cleaned andsteeped in water. The swollen corn is coarsely ground to loosen the germ. The usedsteepwater yields nutrients used in animal feeds. Corn oil is extracted from the germ, whilethe germ residue is used for animal feeds. A second grinding process releases the starchand gluten for separation. The gluten and fibre separated during the grinding process areused in animal feeds. The separated starch, now 99.5% pure, produces three familiesof products.
Cereal Sweeteners The syrup conversion process converts starch slurry into cereal sweeteners
such as high fructose corn syrup, glucose, fructose, dextrose and maltodextrin. These products are
used in the brewing and soft drinks industry, and in baking and confectionery, fermentation and
pharmaceuticals.
Starch and Starch Derivatives As well as basic starch, speciality starches are processed from starch
slurry. Food starches are widely used in foodstuffs. Non-food starches have a wide range of uses in the
paper, packaging and building industries.
Fermentation Products Through a further step the Group produces ethanol, citric acid, monosodium
glutamate, potable alcohol, amino acids and polyols.
Staley is one of the largest corn wet millers in the US. 40% of the world’s corn is grown in the US.
The Amylum Group operates throughout Europe. Both businesses produce cereal sweeteners and
starches, Amylum produces glutamate in France and China. Tate & Lyle has citric acid plants in the
US, the UK, Brazil and Mexico, and citric acid interests in Colombia and India.
Animal Feeds and Bulk StorageThe Group produces over five million tonnes of by-products each year, used mainly inanimal feed. Molasses is produced wherever sugar cane is milled or sugar beet sliced toproduce sugar. The UM Group’s network of joint ventures and subsidiaries sourcesmolasses through purchase contracts, and collects it in strategically-placed storage tanksready for shipment to market.
Animal Feeds Molasses, a by-product of the sugar industry, is a staple for the animal feed industry.
For healthy growth, animals need a balanced diet of protein, fats and carbohydrates with vitamins
and trace elements. Animals may eat grass supplemented by feed on farms, or may, in the US, be
concentrated in “feed lots” and eat solely feed. UM and PM Ag sell ingredients, supplements and
complete feeds.
Bulk Storage The expertise gained in storing molasses has been applied to storing different
commodities for third parties. Moving first into liquid storage in the UK, Africa and Canada, the
Group now also has a significant dry bulk storage business in the UK.
12 TAT E & LY L E
Profits This has been an unsatisfactory year, with profits before exceptionals at
£167 million compared to last year’s £241 million. It is for this reason that my review,
while explaining the financial results, concentrates more than usual on the broader
issues of strategy. In the long run businesses survive and prosper fundamentally
because they adopt and execute the right strategies. This review explains what we
are doing and why.
Exceptional Profits and Charges We had an exceptional profit from the sales of
fixed assets of £13 million and two items of exceptional cost totalling £15 million.
These related to a £5 million fine imposed by the European Commission relating to
sugar marketing practices in the UK between 1986 and 1990 and a £10 million grain
purchasing irregularity at Amylum’s Greek subsidiary. All these have been treated as
exceptional items with a net total charge of £2 million. Legal actions and recovery
procedures have been launched in Greece and a complete review undertaken of
controls throughout the Amylum Group.
Performance of Main Businesses This year our main businesses have suffered
extremely difficult markets particularly in US sugar and European starch. There have also
been a number of one-off costs, mainly in the first half, that have impeded progress.
The sugar market in the UK was particularly competitive in the retail sector and the
strong pound attracted imports and reduced export margins. Lower UK sales were
replaced by additional exports to several new markets to maintain Tate & Lyle Sugars’
output from its fixed raw sugar supply quota. Its resilient performance benefited from the
successful implementation of cost reduction strategies, particularly those arising from
the closure of the Greenock refinery in August 1997 and the transfer of that volume to
the Thames refinery.
At Amylum, a potato starch surplus and excess glucose capacity in Europe caused
weak starch and glucose pricing. Results were further impacted by delays and extra
commissioning costs of £20 million at the new plant at Nesle in France.
The plant at Nesle has now been commissioned. The efforts of a specialist team
from across the Group were used to overcome the problems of commissioning a
new plant using advanced technologies. Some mechanical difficulties have been
experienced in producing monosodium glutamate but this unit is now operating at
75% of planned capacity. Other units producing liquid polyols and alcohols are
working well. When the monosodium glutamate plant is running at full capacity a major
restructuring of Amylum’s production capacity will have been completed at a cost of over
£300 million. The raw material balance of the Amylum Group has now been switched
decisively to use more wheat. New products have been added and new process
technologies have been introduced, thus allowing Amylum to reduce its cost base
substantially and to adapt its product mix and capacity to anticipated market growth.
The maize processing section of Amylum’s plant in Aalst, Belgium, was taken out of
production during the year.
At Staley in the US, pricing in the company’s main cereal sweetener products,
particularly high fructose corn syrup (HFCS), improved, but not to acceptable levels.
CHIEF EXECUTIVE’S REVIEW
From the Chief Executive Larry Pillard
In the long run businesses survive
and prosper fundamentally because
they adopt and execute the right
strategies. This report explains what
we are doing and why.
Profit Before Interest £ million
400
300
200
100
223
339371
318
94 95 96 97 98
247
Turnover £ million
6,000
5,000
4,000
3,000
2,000
1,000
4,0174,452
5,1604,651
x,
94 95 96 97 98
4,467
TAT E & LY L E 13
The capacity added by the industry in 1994/95 continued to overhang the market although
utilisation levels have improved. Market dynamics and economic pressures will resolve this
in due course. At current margins no new capacity is likely to be built, and the sweetener
market continues to grow at 4% per year. The anticipated market for HFCS in Mexico was
curtailed by tariffs imposed by the Mexican government, contrary to the North American
Free Trade Agreement.
Staley’s efforts over the past few years to shift its product mix towards value-added
food ingredients resulted in strong performance from speciality sweeteners and modified
food starches. Industrial starches also delivered good results. The contribution from these
products, together with continuing attention to costs, is partly cushioning the company
from the consequences of low bulk sweetener prices – an advantage of Staley’s broad
product range.
In North American Sugar a large US beet crop led to oversupply, low prices and a
volume squeeze on the cane sector. The results of the Group’s cane refiner, Domino
Sugar, were down substantially despite lower unit refining costs and a significant
contribution from its branded and speciality businesses. Western Sugar, the Group’s beet
business, also suffered from low prices and was unable to benefit from higher beet
volumes due to the late-season break-out of cercospera leafspot disease which reduced
profits by £15 million. In Canada, 1998 was the first full year where the benefits of
Redpath’s growth strategy, implemented in 1996, bore fruit. Operating profits were up
substantially from last year.
Performance of Other Businesses Tate & Lyle International traded sugar profitably after
the losses sustained in Russia the previous year.
Bundaberg in Australia increased profits, with production up 10%. In Africa, our businesses
in both Zambia and Zimbabwe increased profits in their local currencies.
In a difficult year for agriculture worldwide, animal feed and bulk storage profits were down.
Strategy Our strategy must have the effect of optimising returns from our core businesses
and reducing the cyclicality of our earnings. To do this we will:
• Continue to concentrate on sweeteners, starches and other products derived
from carbohydrates.
• Maintain competitiveness by an absolute focus on technical excellence, driving out
costs and enhancing the value of by-products.
• Use R&D to develop value-added products with good margins to build on the profits
of our volume businesses.
• Develop our product base selectively, taking account of favourable demographics
in new markets.
Creating Value Economic Value Added (EVA®) principles are being driven down
through the business to increase emphasis on the efficient use of capital as well as the
maximisation of profit. The aim is to create an organisation focused at all levels on the
enhancement of shareholder value. New bonus schemes being introduced will use EVA
as one of the financial measures for performance awards.
Our strategy must have the effect
of optimising returns from our
core businesses and reducing
the cyclicality of our earnings.
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14 TAT E & LY L E
Costs Although the biggest influence in the short term on the results of an
agri-processing company is the state of its markets, the most vital aspect for the long
term is the level of its costs. There is absolutely no substitute for being cost-competitive.
A number of cost improvement programmes are producing significant results.
The closure of Greenock refinery in the UK saved £6 million and the North American
Business Improvement Project generated savings in 1998 well in excess of the
£11 million spent on the project to date. Across the whole Group we are eliminating
unnecessary overheads with improved systems and an insistence on standardisation.
But individual programmes, however effective, are no substitute for a low-cost
culture. I expect to see it in all our businesses and I expect it to show through in a
decline in unit product costs every year. We are working to make this happen through
improving process technologies, benchmarking and a concentration on continuous
improvement, while fulfilling our responsibilities for the environment and for the safety
of our employees. In the latter area I will let one achievement speak for the whole
Group – the recognition by the US National Safety Council of Staley’s Lafayette South
plant as the safest in the industry for working nearly three million man-hours without a
lost-time incident.
Disposals We have increased the emphasis on eliminating non-core activities.
The proceeds of disposals totalled £72 million during the year and included significant
US animal feed businesses – Vigortone and Webel Feeds, a US packaging material
business, a shareholding in Azucarera Ebro Agricolas, a Spanish sugar company, and
the sale of surplus land, buildings and plant in the US, Australia and the UK. We will
continue to review our portfolio of businesses in the light of their potential contribution
to the future of the Group.
Positioning for Growth We are positioned to push much harder into the growth
opportunities that are available to us. We have processing skills across many
agricultural raw materials including cane and beet sugar, maize and wheat. These
core competences provide a low cost platform to make a range of products using
fermentation and other techniques.
Fermentation is a good example of adding value to basic carbohydrate feedstocks,
such as molasses, glucose and sucrose, which are already produced by the Group.
The process uses specialised micro-organisms to convert carbohydrate feedstock
to higher value products. The ability to harness biotechnology to efficiently produce
existing and new food ingredients, nutraceutical and other bio-products will provide
significant opportunities for the Group in the future and is one of the key areas for our
R&D efforts.
We have been working hard to expand our product base organically and in the last
two years alone have added more than 20 new products across the Group. We have
a strong range of brand names. The fact that we are known primarily for our bulk
processing of commodity agri-products conceals the extent to which we have already
developed away from this base. Over 30% of our profits in 1998 came from speciality
and branded products. We will continue this emphasis.Micro-biological research
Tate & Lyle Sugars Productivity Tonnes/Employee
1,200
1,000
800
600
400
200
769
94 95 96 97 98
815 807 828
1,027
Disposal of Assets £ million
80
60
40
2019.0
94 95 96 97 98
60.8
22.3
44.0
72.4
CHIEF EXECUTIVE’S REVIEW
TAT E & LY L E 15
Citric Acid In July 1998 we bought the citric acid businesses of Haarmann & Reimer
from Bayer AG for US$210 million. With US$300 million in annual sales, this acquisition
immediately gives us a leading share of the global market, with plants in the US, UK,
Brazil, Colombia and Mexico.
This is a significant investment in a number of other ways. Citric acid is the most
widely used food acidulant (a group of food ingredients which add flavour to food
and beverages). It is used to a great extent by Tate & Lyle’s existing customer base.
Importantly for the future, the addition of this new fermentation product line will further
enhance the Group’s growing core competence in the fermentation process.
The business has been renamed ‘Tate & Lyle Citric Acid’ and by virtue of careful
pre-planning is being rapidly integrated with the existing organisation. All US support
services for the business were quickly assimilated into the Group’s systems and many
other operational savings have been identified.
Other Major Investments In January, the Group bought a 61% stake (with 50% of
the voting rights) in Industrias de Maiz SA (‘IMASA’), a leading Argentine-based corn
sweetener and starch processing business, for US$52 million. This is an investment in
a well-established business in partnership with the previous owner with whom Staley,
particularly, has enjoyed a long relationship. It was the Group’s first major investment
in South America, soon followed by the Tate & Lyle Citric Acid plants in Brazil and
Colombia. In its first few months it has performed well, and there are significant
opportunities to use the Group’s expertise to enhance future performance.
In Vietnam, construction of the sugar mill in Nghe An Province made excellent progress,
on time and within budget with a planned commissioning in the 1998/99 season. Cane
agriculture is being developed in a wide area around the factory in partnership with the
government which has also been responsible for improving the supporting infrastructure.
Full capacity is expected to be reached within three years.
In Australia, Tate & Lyle Bundaberg has completed a £25 million investment in a new
mill in the Atherton Tableland area of Queensland, again on time and within budget.
The mill uses new innovative technology developed by Bundaberg’s engineers to
lower cane milling costs substantially. This factory exceeded our expectations in its
first season.
Sucralose The long-awaited US regulatory approval of sucralose, our high intensity
sweetener, was announced in April, and is the broadest initial approval to a low-calorie
sweetener. Sucralose is approved for use in thirty countries worldwide and the European
regulatory petition is now under active review.
Management We are developing a management system that will enable the strengths
of individual businesses to be leveraged across the whole Group without reducing
the accountability of managers. I have appointed Loren Luppes, formerly President
of Staley, to head a function charged with delivering best practice in manufacturing
and processing techniques, including the highest possible environmental and safety
standards. The seniority of this appointment reflects the importance I place on it and theProducts containing sucralose
In July 1998 we bought the citric
acid businesses of Haarmann &
Reimer from Bayer AG for
US$210 million. With US$300 million
in annual sales, this acquisition
immediately gives us a leading share
of the global market, with plants in
the US, UK, Brazil, Colombia
and Mexico.
Cane fields inNghe An Province, Vietnam
TAT E & LY L E 15
value that can be delivered. Our manufacturing costs, excluding raw material inputs,
total some £800 million and the difference in cost between best and average practice
can be startling.
There were other important senior management changes during the year, notably in
North America where radical measures to re-engineer the operations both in terms of
direct cost and of commercial strategy were implemented. Andrew Ferrier, who had
previously been President of Redpath Sugars in Canada, stepped up to run the
combined sugar operations of North America, rapidly being integrated. John Doxsie
was promoted from within Staley to fill the vacancy at President left by the move of
Loren Luppes. The new group responsible for the supply of all support services to
North American companies is headed up by Pat Mohan. In Europe, Frank Karsbergen,
an executive with extensive experience in the food industry, was recruited as Chief
Executive Officer of the Amylum Group. In the UK, Anthony Williams joined us as
Director of Corporate Finance and Investor Relations.
Employees and the Community The most important contribution of the Group to
the community is the provision of work, training and infrastructure. This is one of the
unmeasured by-products of any successful economic enterprise, particularly in less-
developed countries. All the Group’s businesses also work hard to support their local
communities by direct donations of both time and money.
In many cases, it is the difficult years that require the most from employees. For all our
employees in all countries this has been a hard year, but as always their skill and energy
have been unwavering. My sincere thanks go to them.
Looking Forward The low margins in our key markets are temporary. They are not due
to irreversible structural change and the recovery will lead to considerable improvement
in the Group’s results. We have taken action to improve our competitive position.
Although 1998 was not an acceptable year, we look forward in 1999 to achieving
improved returns, with the benefits of lower raw material costs, recent investments and
acquisitions and completed capital projects.
Larry Pillard Chief Executive24 November 1998
We are developing a management
system that will encourage the
strengths of individual business-
units to be leveraged across
the whole Group.
We have taken action to improve our
competitive position. Although 1998
was not an acceptable year, we
look forward in 1999 to achieving
improved returns, with the benefits
of lower raw material costs, recent
investments and acquisitions and
completed capital projects.
TAT E & L Y L E 17
OPERATING AND FINANCIAL REVIEW
Summary of Financial ResultsGroup profit before interest fell by £56.8 million, from £305.1 million (before exceptional items of £82.0 million), to
£248.3 million (before exceptional items of £1.4 million). Exchange rate movements accounted for £12.6 million of
the profit reduction. Group turnover fell by £184.5 million, due to exchange rate movements.
Profit before interest from the Americas sweetener businesses fell by
£38.8 million. A large beet crop reduced US sugar margins. Western
Sugar was not able to benefit from the crop due to a local beet
disease. In Europe, Amylum suffered from a competitive market,
commissioning costs and a grain purchasing irregularity in Greece.
Tate & Lyle Sugars cost reduction programme more than offset the
adverse effects of the strong pound. Profit before interest from
European sweetener businesses fell by £12.4 million.
The impact of the grain purchasing irregularity and the fine
imposed by the European Commission on Tate & Lyle Sugars were
treated as exceptional costs totalling £14.6 million. Exceptional profit
on asset disposals totalled £13.2 million, including the sale of a 2%
holding of Azucarera Ebro Agricolas shares, leading to a net
exceptional charge of £1.4 million.
Increased borrowings offset by exchange rate movements
caused the net interest charge to rise by £17.7 million. The profit
before tax was £165.4 million, an increase of 3.8%. Diluted earnings
per share rose by 21.5% to 27.1p.
Sweeteners and Starches – AmericasSegment profits before exceptional items and interest fell by 25% from £153.0 million to £114.2
million, of which £2.5 million was due to exchange rate movements.
Staley’s continuing cost cutting measures allowed it to put in a
resilient performance in difficult market conditions. Modest HFCS
pricing improvements were achieved but returns are still below normal
expectations. HFCS capacity utilisation has increased. Anticipated
growth of a market for HFCS in Mexico was curtailed by tariffs
imposed by the Mexican government. Sales have been strong with
substantial growth in starch products for use in foods. KRYSTAR®
crystalline fructose sales were good, with growing demand worldwide.
Industrial starches performed well throughout the year, and an
additional flash dryer was installed at the Decatur plant to meet
increased demand. The company’s potato starch business is being
refocused towards new markets, such as food grade starches, and
towards less reliance on reclaimed starch as a raw material. In
September, the Murtaugh, Idaho plant was closed and its operations
combined with other potato starch plants.
A new plant to produce polydextrose using a phosphoric
acid catalysed reaction went on-stream in Decatur early in the year,
and further markets are being developed for this low-fat bulking
agent, used in a wide variety of foods and beverages. Patent
litigation filed by a competitor has affected sales, but this action has
now been dismissed.
Although corn prices were high early in the year, they dropped
to more normal levels later which reduced pressures on raw material
costs. A record corn crop in autumn 1998, combined with high
stocks, has put corn prices at their lowest levels in 10 years. Profits at
Almex, the Mexican corn wet milling joint venture, increased following
the completion of plant improvements, despite limitations on HFCS
production from tariffs on US corn imports to Mexico.
In January, the US$52 million purchase of a 61.2% share of
Industrias de Maiz, SA (‘IMASA’), Argentina’s leading corn sweetener
and starch business, was completed. IMASA’s major product is HFCS
for the soft drink industry.
Tate & Lyle Citric Acid In July, the citric acid businesses of
Haarmann & Reimer were acquired by Tate & Lyle and renamed.
Headquarters for this division have been established in Decatur,
Illinois. Initial results are above expectations.
Domino Sugar, Western Sugar, Redpath Sugars were
combined into a single business managed by an integrated
management team.
Competitive pressures from the large national beet crop
reduced Domino’s cane sugar sales in the US and depressed
margins. Although unit refining costs decreased, results overall were
down substantially. Domino’s speciality business continued to be a
significant profit contributor.
Results for beet sugar were down due to a local beet disease
which resulted in a significant drop in sugar production. This was
exacerbated by a decline in selling prices, but mitigated by a
reduction in unit costs.
In Canada, 1998 was the first full year where the benefits
of Redpath’s growth strategy, implemented in 1996, were
demonstrated. Underlying operating profits were up substantially. Part
of this improvement was due to a significant reduction in operating
costs. Strong sugar trading profits in 1998 benefited from producer
raw sugar sourcing and innovative freight arrangements. The dry
blend operations acquired in 1996 also increased their contribution.
Tate & Lyle North American Support Service has been
established as a consequence of the Business Improvement Project
to provide finance, human resources, information systems, risk
management, legal services, government relations, and procurement
for all five North American businesses, now centralised in Decatur.
18 T AT E & L Y L E
OPERATING AND FINANCIAL REVIEW
Single systems for support operations are improving efficiency and
producing significant savings. Purchasing power has been
improved by the consolidation, leading to significant savings in raw
materials and supplies. Distribution costs were reduced by the
outsourcing of selected activities.
The overall number of staff has been reduced and
communications and services have improved due to
standardisation and centralisation. Employee benefits are being
standardised to be consistent across all businesses, which will
lead to simplification of processing, a reduction in administrative
costs, and increased employee mobility among North American
business units.
O c c i d e n t e operates in Mexico, where excellent gro w i n g
a n d harvesting conditions led to a re c o rd national production of
5 . 1 million tonnes, up 13.3%. Occidente’s three mills with
attached refineries produced 342,500 tonnes of refined sugar,
u p 31%. Occidente’s two Gulf coast mills showed a re m a r k a b l e
recovery fro m the impact of the previous year’s dro u g h t .
Investments in improved efficiency and lower production costs
bore fruit throughout the year. Tamazula mill yield was among the best
in the country. Further advances are planned as the modernisation
programme continues.
The Mexican sugar market was depressed in the early part
of the year as a result of the large surplus, recovering after the summer
as a result of the successful export of the entire surplus of 1.2 million
tonnes. Occidente used this export opportunity to develop commercial
links with Tate & Lyle customers importing sugar in South America.
The Domino brand of grocery sugar was successfully launched
in Mexico taking a significant share at various national grocery chains.
A strong presence for the Domino brand in Mexico would prove
valuable in a future opening up of the North American sugar market
under NAFTA.
Sweeteners and Starches – EuropeSegment profits before exceptional items and interest fell by 13% from £96.7 million to £84.3 million
due to a strong pound (£3.1 million), further start-up costs at Amylum’s Nesle plant in northern France
and competitive European starch markets.
Tate & Lyle Sugars performed well despite the adverse effects of
a strong pound. The UK market was affected by competitor action,
particularly in the drink manufacturing and retail sectors. Lower UK
sales were replaced by additional exports to several new markets.
The business benefited from the successful implementation of
cost reduction plans, particularly the closure of the Greenock refinery
in August 1997, and the smooth transfer of production to the
Thames refinery.
The European Commission announced its decision in relation
to UK marketing practices between June 1986 and July 1990. Tate &
Lyle Sugars was fined ECU 7 million (£5 million) out of total fines of
over ECU 50 million imposed on the four companies involved.
The Combined Heat and Power facility at the Thames refinery
was extended with the installation of a new gas turbine and waste
heat boiler, and is now generating power for sale to the national grid
as well as for internal needs.
There was a further improvement in safety performance with
time lost due to accidents reduced by more than one third.
Alcântara remained the biggest white sugar supplier in
Portugal despite increased beet sugar production in Portugal. Capital
expenditure, aimed at reducing costs and increasing product quality,
safety and efficiency, was continued. The company is the lowest cost
producer in its market and the only sugar operator in Portugal
approved to the Quality System Standard ISO 9002.
Eastern Sugar, a joint venture, develops and manages
investments in Hungary, Slovakia and the Czech Republic.
In Hungary, Kaba was able to self-finance its expansion.
The consolidation of the sugar industry is developing and Kaba is
p rocessing the additional beet from two recently purc h a s e d
factories nearby which have been closed. Sales volumes were
up 31%. The capital investment programme, which will conclude
in 2000, will ensure that Kaba is among the most competitive
factories in Central Europe. Discussions to establish a Sugar
Regime are still ongoing.
In Slovakia, Juhocukor had a difficult year. For the second
year an oversupply of sugar reduced prices and generated losses.
The Slovak Government imposed a minimum price but this was
undermined by insufficient protection against imports and a dwindling
world sugar price. Consolidation of the industry is anticipated in the
near future.
In the Czech Republic, Hana Sugars together with its
associated units has 14% of the market. Cukrspol, in which Eastern
Sugar increased its stake, has 18% of the market and closed down
the Velvary factory. Hana and Cukrspol are participating in the
restructuring of the industry. The oversupply of sugar in the Czech
Republic was alleviated significantly by a strong export policy and
domestic prices returned to levels which could enable the industry
to return to profitability.
Amylum has made significant progress with its ‘Masterplan’,
covering the major reorganisation of manufacturing facilities. The
commissioning of the state of the art wheat starch plant in Nesle,
France, was completed. The maize plant in Aalst, Belgium has been
closed, consistent with the original objective to replace and not
substantially increase market capacity. Commissioning of the Nesle
TAT E & L Y L E 19
plant took longer than envisaged, which increased costs by
£20 million and delayed the revenue contribution of this major asset.
Mechanical problems have been experienced particularly in the
development of a new production process for monosodium
glutamate. Modular extensions of the wheat starch plant to produce
ethanol, potable and absolute alcohols and liquid polyols, using new
technologies, were commissioned successfully.
Wheat is now Amylum’s primary raw material in northern
Europe, and ideally suited to Amylum’s product portfolio.
Elsewhere in western Europe, the investment and
reorganisation plans affecting production facilities in Belgium,
Netherlands, Spain and the UK were completed and good progress
was made towards long-term cost reduction targets.
Together, the total capital expenditure incurred for
Masterplan investments exceeds £300 million. They provide
considerable competitive advantages for Amylum through cost
savings and new product development.
In eastern Europe, good pro g ress is being made in
developing isoglucose sales to the soft drink industry. Despite the
general weak performance of these economies, these operations
a re now making a positive contribution to Amylum’s re s u l t s .
Apart from the extra costs associated with commissioning the
Nesle plant, profits continue to be affected by difficult market
conditions in Europe for starches and cereal sweeteners. These arise
in part from a potato starch surplus and a competitive glucose market
in the EU. Market growth will in time alleviate some of these pre s s u re s .
The market for the co-product vital wheat gluten has been b u o y a n t .
In Greece, a raw material purchasing irregularity gave rise to a
£10 million charge. Legal actions and recovery procedures have been
launched and appropriate changes introduced to policies and
procedures to avoid any recurrence.
Tate & Lyle International benefited from its operations in
Russia and recovered some of the previous year’s losses. Trading
activity in this region has not been materially affected by the downturn
in the Russian economy. Elsewhere TLI recorded a satisfactory
performance in a year when volatilities in economic conditions in the
Far East and some emerging markets have made trading conditions
very difficult.
Sweeteners and Starches – Rest of the WorldSegment profits before exceptional items and interest rose by 14% from £17.5 million to £20.0
million despite £4.7 million adverse exchange rate movements.
Australia – Tate & Lyle Bundaberg’s cane milling operations
achieved better raw and white sugar prices and higher tonnages,
despite processing delays due to heavy rains affecting processing at
the end of the year. Part of this production will be made up in the
current year. Hedging of raw sugar by the Queensland Sugar
Corporation, a statutory marketing authority, and lower Australian
dollar exchange rates offset the impact of lower world prices.
Strong sales were achieved in the Australian domestic white
sugar market along with a progressive improvement in margins.
The rationalisation of the Australian refined sugar industry has
assisted with a more favourable marketing outlook.
The innovative Atherton Tableland Mill west of Cairns
commenced cane crushing during the year on time and
within budget.
China – Tate & Lyle Swire Both factories in Guangxi – Luwu
and Napeng – crushed record cane crops in record times this year
and were judged ‘model’ factories by the provincial government.
Sugar prices in China remain depressed due to overproduction and
the businesses remain unprofitable. New government policies
currently being implemented are expected to improve the balance
of supply and demand.
Crop prospects for 1998/99 at Luwu and Napeng are
encouraging. The factories, which were treated as subsidiaries, were
reclassified as trade investments from April 1998, reflecting difficulties
experienced in influencing these businesses.
Zambia – Zambia Sugar achieved record production and
sales, although regional markets were depressed. Capital investment
was targeted at improving efficiency at the mill and factory. New
continuous ‘C pan’ and vertical crystallisers were installed on time
and within budget and immediately yielded improved efficiencies.
The company relocated its head office from Lusaka to
Nakambala and closed the non-core jams, juice and sauce business.
In May, Zambia Sugar became the first producer in the
African sub-region to fortify its sugar with Vitamin A. This move,
made in conjunction with the Zambian Government and with
Non-Governmental Organisations, was welcomed in Zambia
where Vitamin A deficiency is a major problem. Combined
with new packaging and a new brand, ‘Whitespoon’, the move
has enhanced the value of the core sugar products and
improved sales.
An extensive retraining programme for management and
supervisory staff was implemented with efficiency and cost reduction
as a major focus.
Zimbabwe – ZSR Corporation Production and sales of
refined sugar in regional markets increased by 5% to 251,000 tonnes.
Profit increased substantially in local currency. This growth was
achieved in spite of the difficult economic conditions, particularly in
Zimbabwe. Capital expenditure aimed at improving efficiency, product
quality and improved environmental standards was carried out at the
two refineries.
20 T AT E & L Y L E
OPERATING AND FINANCIAL REVIEW
Vietnam – Nghe An Tate & Lyle’s new sugar factory in Nghe
An Province, Vietnam, made excellent progress. This will process 6,000
tonnes cane per day. The factory construction is on time and budget
with a planned commissioning in the 1998/99 season. Cane agriculture
developed in a wide area around the factory and local Government
has been responsible for improving the supporting infrastructure.
Full capacity is expected to be reached within three years.
Thailand – UFIC Group Despite the Asian economic turmoil
and the knock-on currency effects in Thailand, the sugar industry in
Thailand has been fairly resilient. UFIC did experience a small reduction
in volumes partly due to weather conditions. With over 60% of
production exported, US$ revenues were preserved. With a stabilising
exchange rate and recent Government measures through the banking
system, the Thai sugar industry continues to be a dominant player in
the region.
India – Chilwaria’s new factory achieved successful operations
during its first full crop in 1997/98 and a large area of cane was planted
by local farmers in spring 1998. However, the crop prospects for
1998/99 have been reduced by the recent severe flooding in north-
east India.
Saudi Arabia – United Sugar Company’s new refinery
began commercial operations in June 1997 and in its first full year
it produced 350,000 tonnes of fully refined sugar, mainly for the
booming local market. It is now producing at its rated capacity
output of 550,000 tonnes per year supplying over 85% of the
country’s demand and meeting the highest quality standards of
major international customers. The main suppliers of raw sugar are
Australia and Brazil.
Tate & Lyle provides management for the raw sugar purchasing
and refinery operations. Significant training programmes for the Saudi
staff are aimed at reducing expatriate involvement.
The plant is expected to expand by up to 20% over the next
three years to meet increased demand and to allow exports to
neighbouring countries.
Animal Feed and Bulk StorageSegment profits before exceptional items and interest fell by 18% from £36.6 million to
£30.0 million, of which £0.3 million was due to exchange rate movements.
UM Group performed well in an adverse trading environment.
The impact of both a sharp decline in prices for molasses and
the Asian crisis was mitigated by the global spread of the molasses
trading business. The focus on value-added products in Europe
combated the depressed market conditions in many areas.
This was a very difficult year for UK agriculture and results of
the speciality feeds division and many of its competitors were
depressed. The acquisition of the RS Feed Blocks business and the
mineral and supplement business of Chapman and Frearson increase
Rumenco’s throughput. Rumenco also consolidated its activities in
Ireland by merging its Preference Products subsidiary with
Masterfarm, part of Co-operative Animal Health, to form Nutribio,
Ireland’s largest supplier of on-farm supplements.
United Storage enjoyed high utilisation and strong profit growth.
PM Ag Products sold its Vigortone business, consolidated
administrative and financial services with its sister companies and
implemented new information systems. The sale of Vigortone and its
subsidiary, Webel Feeds reflected a focus on employing group by-
products and sharing group strengths in PM Ag’s business activities.
The OH Kruse business performed satisfactorily and successfully
initiated operations at Wendell, Idaho, a rapidly growing centre of dairy
production. Kruse also consolidated production of packaged feed and
speciality products at Pixley, California, allowing the older and less
efficient El Monte, California location to stop production. Ferndale
Grain Co, acquired in 1994, also performed well, consolidating
production facilities in Washington and announcing the construction
of a new plant in Granger, Washington to serve the growing dairy
market in that region.
The feed supplement block business increased sales volumes
and outsourced some processes. The feed liquids business
completed construction of a new terminal in the Port of Seattle,
Washington, replacing one of the company’s oldest facilities.
In addition, new liquid feed plants were added to the Montgomery,
Alabama block production facility and the feed plants in Ontario
and Pixley, California. Liquid feed operations were also expanded
through joint ventures in new markets with potential for growth.
An initiative to add value to by-products from Western Sugar
operations was launched.
TAT E & L Y L E 21
Other Businesses and ActivitiesLower profits from reinsurance were offset by lower central costs. The net losses in the segment,
which includes head office costs, were £0.2 million, compared with profits of £1.3 million last year.
Demand for Tate & Lyle Process Technology’s process
technologies for sugar producers and refiners increased substantially.
The Technical Service Department provided support to Group sugar
manufacturing operations, and assisted in the development of new
process technologies for other Tate & Lyle divisions.
It has been a difficult year in Booker Tate’s business
environment. Abnormal weather conditions arising from the El Niño
phenomenon affected several client businesses and low world sugar
prices and imports reduced prices in some markets. Despite this the
results of most of Booker Tate’s client base held up well.
In all areas there is an emphasis on reducing costs. In Kenya,
Guyana and Swaziland this is being achieved through significant
expansion to achieve economies of scale, and through technologies
such as diffusers in Kenya, drip irrigation in Swaziland and plans for
co-generation of electricity from bagasse in Belize, Barbados, Guyana
and Kenya and projects to produce high-grade alcohol or bakers’
yeast at many locations.
Expansion of the client base was hampered by market
uncertainties aggravated more recently by the financial turmoil in the
Far East and Russia. Progress was nevertheless maintained and
Booker Tate took over the management of three privately owned mills
in Indonesia. Discussions are also at an advanced stage with new
clients in Latin America and the Caribbean.
Speciality Sweeteners Sucralose was approved for use in the
US by the Food & Drug Administration (FDA) in April 1998. Approval for
use in 15 food and beverage categories constituted the broadest initial
approval ever given by the FDA to a low-calorie sweetener.
Access to the US market, the largest sweetener market in the
world, provides the foundation for the expansion of sucralose as a
global business. Under an exclusive licence agreement,
sucralose will be marketed in the US by Johnson & Johnson’s
McNeil Specialty Products Company, who have announced the
construction of a new US plant. Customer interest has been
positive, especially in the soft drinks segment, and several new
products sweetened with sucralose have already been launched.
Sucralose, also known as Splenda®, is now approved for
use in 28 countries. The European Union petition for approval
remains under active review.
Bundaberg Foundry designed and manufactured the
new Tableland Mill’s major processing plant and innovative
technology and also managed the construction project.
Bundaberg Rum sales increased again this year. Greater
consumer demand, a new marketing campaign which promotes
product appeal, and a broader range of products, contributed to
the higher performance.
A new type of refreshment, Bundaberg Premium, which
was launched during the year and is a brewed premium
beverage with an infusion of Bundaberg Rum, has exceeded
sales forecasts.
Tate & Lyle Reinsurance, the Group’s Bermuda
captive reinsurance company, enjoyed a good underwriting year.
Cash flow remains strong and investment income was good.
The down-turn in equity markets at the year end adversely
affected reported profits, partly in reaction to last year’s strong
equity performance, which led to record profitability in 1997.
The company continues to write Group and profitable
third party insurance contracts within strictly controlled
exposure limits.
FinancingThe Group’s net borrowing rose from £908.8 million to £954.7 million following continued investment.
Currency movements reduced net debt by £31.7 million. The Group paid a Foreign Income Dividend in
February and July, and will defer its 1999 final dividend to April, so that irrecoverable Advance Corporation
Tax does not arise. The Group’s disclosures follow the new Accounting Standards Board standard on
‘Derivatives and other Financial Instruments: Disclosures’ (FRS 13).
Cash Flow Operating cash flow totalled £394.5 million in the year
(1997 – £408.6 million). £136.8 million (1997 – £140.0 million) was
paid to providers of finance as dividends and interest. Taxation paid
was £56.0 million (1997 – £65.2 million).
Plant replacement, improvement and expansion expenditure
totalled £199.0 million compared to depreciation of £134.6 million.
Further investment expenditure amounted to £155.1 million.
Disposals of fixed assets and investments generated cash of
£ 7 2 . 4 million. The funding re q u i rement totalled £80.0 million (1997 –
£120.1 million).
22 TAT E & LY L E
OPERATING AND FINANCIAL REVIEW
Capital and Investment Expenditure Major capital projects
undertaken included the completion of the Nesle wheat starch plant,
and related alterations to the Orsan glutamate factory at the same
location, the continuing construction of a new cane mill in Vietnam’s
Nghe An Province, the completion of a new cane mill in Queensland,
Australia, improvements to Staley’s starch production facilities and
further expansion at the cane mill in Zambia.
The major investments were the purchase of the citric acid
business of Haarmann & Reimer in July, for £126.1 million, located in
the US, the UK and South America, and the purchase for £30.4
million of a 61.2% stake in IMASA, a starch and cereal sweetener
business in Argentina.
Debt The Group’s investment programme was financed by an
increase in Group net debt to £954.7 million (1997 – £908.8 million)
which caused a rise in the debt to equity ratio to 88% at the year end
(1997 – 78%). The average debt for the year was £998.8 million (1997
– £932.0 million). Interest cover (the ratio of operating profit plus share
of profit before tax of joint ventures and associates to the net of
interest payable less receivable by Tate & Lyle PLC and its subsidiaries)
fell slightly over the year to 3.5 times (1997 – 3.6).
Management of Financial Risk The major financial risks faced by
the Group are funding risk, interest rate risk, currency risk and certain
commodity price risks.
The Board of Tate & Lyle PLC regularly reviews these risks and
approves written policies covering the use of financial instruments to
manage risk, and overall risk limits. The last review was in September
1998. All the Group’s material financial instruments are categorised as
being held either for trading or risk management. Trading of financial
instruments within the Group is severely limited, confined only to
tightly controlled areas within the sugar and maize pricing operations
and Group treasury.
Control and Direction of Treasury Group financing, including
debt, interest costs and foreign exchange matters, is substantially
directed (with the exception of certain matters controlled by and
relating to the Amylum Group) by the Group treasury company, Tate & Lyle
International Finance PLC, whose operations are controlled by its Board.
The treasury company is chaired by the Group Finance Director.
Group interest rate and currency exposures are concentrated
either in the treasury company or in appropriate holding companies
through market-related transactions with Group subsidiaries. These
acquired positions are managed by the treasury company within its
authorised limits.
Funding At the year end the Group held cash and current asset
investments of £243.3 million (1997 – £260.3 million) and had undrawn
committed multicurrency facilities of £273.7 million (1997 –
£115.2 million). These resources are maintained to meet the projected
maximum cash outflow from debt repayment and seasonal working
capital needs foreseen until the end of the next calendar year. Although
peak seasonal net debt rose to £1,059.7 million in February 1998,
(May 1997 – £1,005.1 million) the standby facilities were not used.
Group policy is to ensure that, after subtracting the total of undrawn
committed facilities, no more than 30% of gross debt matures within
twelve months and at least 50% has a maturity of more than two and a
half years. The maturity profile of the Group’s debt has lengthened so that
at the year end the results of these calculations were 11% and 68%
respectively (1997 – 15% and 60%).1
Part of the US dollar cash flow from operations was converted,
together with the proceeds of the sale of shares in Azucarera Ebro
Agricolas to meet the sterling outflow in taxation and dividends. The
proportion of Group net debt denominated in US dollars, Canadian
dollars and Australian dollars rose from 56% at the start of the year
to 63% at the year-end. Debt in EU currencies other than sterling fell
from 27% to 22%.2
Going Concern After making enquiries, the directors have a reasonable
expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future. For this reason they
continue to adopt the going concern basis in preparing the accounts.
Borrowing Covenants With the exception of funds raised by the
Amylum Group and some small overseas units, all Group company
borrowings are guaranteed by Tate & Lyle PLC. These guarantees contain
common financial covenants of an interest cover ratio of not less than two
and a half to one and a balance sheet gearing of not more than 200%.
Group treasury monitors compliance against all financial obligations and it
is Group policy to manage the consolidated balance sheet so as to
operate at all times well within covenanted restrictions.
Interest Rates Interest rate risks are managed by fixing or capping
portions of debt for varying periods by the use of interest rate derivatives
or cash instruments. The Group’s policy is that no interest rate fixings are
undertaken for more than twelve years and between 30% and 75% of
Group net debt is fixed.
At the year end the longest term of any significant fixed rate debt
held by the Group was until May 2002. The fixed proportion of net debt
Cash from Operating Activities£ million
500
400
300
200
100
445
94
438
95
367
96
409
97 98
395
TAT E & L Y L E 23
was 59% (1997 – 52%) and the average maturity of fixed rate gross
borrowings was 2.8 years. Out-of-the-money caps covered another
20% of net debt (1997 – 31%).
A 1% and 5% rise in average interest rates for the year ending
September 1999 from market levels seen in September 1998 would re d u c e
G roup profit before tax by £5.7 million and £20.1 million re s p e c t i v e l y.
Net interest costs increased to a rate of 6.7% for the year when
measured against average net debt (1997 – 6.5%).
Foreign Currency The Group’s foreign currency exposure
management policy requires subsidiaries to hedge transactional
currency exposures against the currency in which their results are
measured. Foreign exchange contracts are used to hedge selected
future sales and purchases, which may be either contracted or
uncontracted. Gains and losses on these contracts are deferred until
recognition of the sale or purchase, which is normally within one year.
The Group’s accounting policy is to translate profits of overseas
companies using average exchange rates. It is the Group’s policy not
to hedge exposures arising from profit translation.
Net assets are held in a number of currencies and translated at
year-end rates. The resulting exposures are managed by the mix of
currencies in which the Group borrows and by currency swaps which
change both the interest cost of debt and the translational exposure.
The objectives are to maintain a low cost of debt coupled with a
balanced portfolio of net assets by currency which retains some
potential for currency-related appreciation while partially hedging
against currency depreciation.3
The Group’s present policy is that net assets in sterling should
not fall below 10%, net assets in US dollars, Canadian dollars and
Australian dollars combined should not exceed 60%, net assets
in EU currencies excluding sterling should not exceed 30% and
those in other currencies should not exceed 30%. Against this limit
year-end net assets by currency group were: sterling 13%, dollars
50%, EU currencies 16% and other currencies 21%.
The weighted average exchange rate used to translate US dollar
profits was US$1.65 (1997 – $1.63), compared with the year-end rate
of US$1.70 (1997 – $1.61). Average exchange rates for EU currencies
were generally higher than last year reflecting sterling’s strength.
Compared with last year’s average rates there was a £10.6 million
translation loss (1997 – £21.1 million loss) in profits before tax. At
the previous year-end rates the Group net debt would have been
£44.9 million higher. A £109.2 million translation loss was recorded in
the Group’s foreign currency net assets (1997 – £74.9 million loss).
The only material risks from economic foreign currency exposures
are to UK sugar refining from sterling appreciation against the ECU, and
to Australian cane milling activities. Group strategy has been not to
hedge these risks. Over the long term this has served us well.
Use and Fair Value4 of Financial Instruments In the normal course
of business the Group uses derivative financial instruments with
off-balance sheet risk, and non-derivative financial instruments included
on the balance sheet.
The fair value of Group net borrowings at year end was
£975.5 million against a book value of £954.7 million (1997 – fair value
£918.3 million, book value £908.8 million). Financial instruments used
to manage the interest rate and currency of borrowings had a fair
value of £4.2 million liability against a book value of £0.3 million asset
(1997 – fair value £1.7 million liability, book value £0.3 million asset).
The main types of instrument used are banker’s acceptances, loans
and deposits, interest rate swaps, interest rate options (caps or
floors), forward rate agreements, cross currency interest rate swaps
and currency loans and deposits. There is also a limited use of
futures contracts.
The fair value of other financial instruments hedging future
currency and commodity transactions was £10.9 million liability
against a book value of £4.4 million liability (1997 – fair value
£5.3 million liability, book value £5.8 million asset). In currency
exposure management the instruments used are spot and forward
purchases and sales, and options.
The fair value of financial instruments held for trading was
£1.8 million asset (1997 – £0.3 million asset). The net gains included
in operating profit from trading financial instruments were £0.2 million
(1997 – £1.7 million).
Commodities Derivatives are used to hedge movements in the future
prices of commodities in those domestic and international markets
where the Group buys and sells sugar and maize. Commodity futures
and options are used to hedge inventories and the costs of raw
materials for un-priced and prospective contracts not covered by
forward product sales. The options and futures hedging contracts
generally mature within one year and all are with organised exchanges.
Credit Risk The Group controls credit risk by entering into financial
instruments only with highly credit-rated authorised counterparties.
Counterparty positions are monitored on a regular basis.
Year 2000 Programme The Year 2000 problem is concerned with
dates being correctly handled by computer systems before, during
and after the Millennium period. Tate & Lyle classified the issues as:
Software Applications, Manufacturing Embedded Chips, Supply
Chains, Telecommunications, and Desktops. The Tate & Lyle Year 2000
programme was launched in May 1996 to address software issues
and plans were put in place to install replacement package software
in many locations – chiefly from SAP. As the issues were further
understood, manufacturing embedded chip programmes developed in
1997 and in early 1998 supply chain programmes commenced which
apply to our customers, suppliers and other parties. We continue to
upgrade our server, telecommunications and desktop computer
systems with latest standard operating environments. We have Year
2000 projects in over 70 locations throughout the world using local
teams and taking account of the business impact of different
Year 2000 issues. The Year 2000 programme is co-ordinated and
managed centrally and we continue to be members of the IMPACT
Year 2000 Programme.
24 TAT E & LY L E
OPERATING AND FINANCIAL REVIEW
At the end of December 1998 the Group expects to have
completed a global inventory of Year 2000 problems, to have solved
75% of them and tested 50% of the solutions. The remaining solutions
and testing are scheduled for 1999, and in the main will be completed
by June. Year 2000 problems are complex and it is not possible to
guarantee all problems will be resolved. However, the Board believes
it has appropriate procedures in place and will deal promptly with any
failures or issues as they arise.
The Group expects to spend £12 million on Year 2000 issues.
This estimate is based on information from the Group’s subsidiaries,
and includes costs of products and services, apportioned as necessary
between Year 2000 and other projects, and an estimate of the cost of
employees’ time.
Shareholder Value Economic Value Added (‘EVA®’) is after-tax
operating profit less the cost of capital employed in generating that
profit. EVA concepts are increasingly used to assist the Group’s
operational and strategic decision-making, in conjunction with other
measures. They provide a total measure which allows, for example,
reductions in capital employed to be evaluated against profit increases.
The Group plans to use EVA techniques increasingly to enhance
shareholder value by more focused decision-making.
European Monetary Union The formation of a Euro-currency
bloc from 1999 has implications for many areas of the Group. All
operating units, particularly those in potentially-participating states,
are making preparations. The Group is also discussing treasury
issues with its bankers.
Taxation The Group taxation charge of £44.0 million was 26.6% of
pre-tax profits (1997 – 31.6%). The decrease in the overall rate of tax
compared with 1997 was primarily due to the non-deductibility of
certain of that year’s £82.0 million exceptional items against tax
liabilities. Without the exceptional items, the underlying rate of taxation
was 27.0% in 1997.
Change of Financial Year For the reasons described in the
Chairman’s Statement on page 3 the financial year end will change
from September to March. The current accounting period will
therefore be for 78 weeks ending on 25 March 2000.
Dividend A second interim dividend of 11.7p will be paid as an
ordinary dividend on 6 April 1999 and no further final dividend is
recommended. An interim dividend of 5.3p was paid as a Foreign
Income Dividend (FID). The 1997 interim included a special
enhancement of 1.325p to compensate certain shareholders for a
loss of net yield arising from this form of dividend. Changes in the
regulations make such an enhancement unnecessary for subsequent
FIDs.
A summary of dividends paid and recommended is:
Dividend cover is 1.6 times.
Simon Gifford Group Finance Director
24 November 1998
1998 19970000555550511111§
Interim Dividend – Underlying 5.3p 5.3p
– FID enhancement – 1.325p
Second Interim / Final 11.7p 11.7p
Total for the year– Underlying 17.0p 17.0p
– FID enhancement – 1.325p
Note1Note 16 on page 53 gives the maturity profile of the Group’s debt and standby
facilities.2The currency and net interest rate exposure of financial assets and liabilities are given
in note 30 on pages 62 and 63.3Net asset currency exposures are shown in note 31 on page 64.4Current value is defined as the amount at which a financial instrument could be
exchanged in an arm’s length transaction between informed and willing parties.
All debt and debt hedging instruments with an original maturity of less than three
months are assumed to be valued at book.
Diluted Earnings per Share pence
50
40
30
20
10
38.1
94
43.7
95
38.3
96
22.3
97 98
27.1
TAT E & LY L E 25
TATE & LYLE IN THE COMMUNITY
Tate & Lyle fully acknowledges the contribution it should make to
the well-being of the communities in which it operates throughout
the world.
We have continued to support a wide range of community
projects both at home and overseas, allocating around 0.7% of profit
before tax worldwide and 1% of UK pre-tax profits based on the
previous year’s results (excluding exceptional items). This year our
target percentage for education and youth was increased from 35%
to 50% of total donations, with other categories each being reduced
by approximately 5% to 25% civic and environment, 15% health and
welfare and 10% arts. Our total charitable donations and support
amounted to £1.6 million worldwide of which £0.9 million was
donated in the UK.
Below are a few examples of the range of activities:
In the UK, the major emphasis has been on education with
continuing support for Reading Is Fundamental® and The Newham
Reading Project. As one of the main employers in the London
Borough of Newham, Tate & Lyle Sugars (‘TLS’) works in partnership
with many local bodies to benefit urban regeneration and improve
educational and training opportunities for local youngsters. As well as
the East London Partnership, Newham Education Business
Partnership and Community Links, TLS is a partner in the Newham
Consortium for ‘New Deal’ for the unemployed and the Newham
‘Education Action Zone’, a Government initiative to raise standards in
local schools. We have also worked with the Royal Botanic Gardens,
Kew, by sponsoring an educational pack for primary schools linked to
a major environmental project to create the world’s largest seed bank.
Companies from the UM Group are actively involved in two
major National Forest projects: the National Arboretum memorial to
those who lost their lives in World War II and the Burton Urban Forest
initiative. Elsewhere in Europe local sports teams, educational projects
and arts-related activities are supported, including Alcântara’s
scholarships for promising young musicians from low-income families
in Portugal.
In Australia, Tate & Lyle Bundaberg supports a number of
social, environmental and cultural programmes in the rural
communities where it has a presence. The Company is a major donor
to a new library complex for the Central Queensland University and is
continuing its support for the Queensland Youth Orchestra.
Our North American subsidiaries concentrate their support in
the city areas where they have plants. Together with employee
volunteers Domino is involved in a number of local programmes linked
to schools and training. Staley works in partnership with local groups
who have demonstrated a sustained ability to meet important
community needs, sponsoring youth recreational projects through the
Decatur Park Foundation. At Western’s Nebraska locations there is
an ‘Adopt-a-School’ Programme which brings the realities of business
to the classroom by using employee volunteers to tell children of their
work experiences. Our animal feed company, PM Ag Products,
concentrates its support on agricultural education, including
organisations which give youngsters first-hand experience in
raising livestock.
Redpath in Canada funnels its major community drive through
United Way, the administrative/co-ordinating body for more than 200
organisations and charities. Like many Group companies, Redpath
encourages employee participation both through the Company’s
payroll giving scheme and through sponsored events.
Health and welfare feature strongly in the community activities
of Group companies in the developing world. At Zambia Sugar, the
company runs comprehensive hygiene, health and education
programmes for employees, their families and the local community.
This includes mother and baby clinics, immunisation, Aids awareness
and skills training programmes. Such activities also form an integral
part of Booker Tate’s management of large-scale sugar-related
agribusinesses in remote areas with little or no community
infrastructure. UM Group companies based in developing countries
also support health and education issues such as the Tom Mboya
Unit for cerebral palsy in Kenya and a children’s education scheme
in Guyana.
More important than any single initiative, the Group has
a business culture that recognises the need to support the
local community if business development is to be sustained in
the long term.
Children from ‘Reading Is Fundamental’ programmes on theThames river as guests of Tate & Lyle.
26 T AT E & L Y L E
ENVIRONMENT
The Group’s policy on the environment is that ‘Operating Units should
conduct their operations in recognition of the Group’s responsibilities
towards the natural environment within which we live and work
and comply with relevant laws, regulations and consents’. This is
supported by written operational and reporting procedures.
The Group is committed to a continuing programme of
monitoring the environmental impact of its operations. Investment
programmes are in place at a number of manufacturing sites to
improve the quality of atmospheric emissions, liquid effluent
discharges and solid waste and resource utilisation and all sites aim
continuously to improve their environmental performance.
Some examples of environmental improvements from around
the Group:
• At Kaba in Hungary, process control integration at the boilers
has led to further air purity protection improvements.
Developments on the beet line have reduced water
consumption and waste water output.
• At the Thames refinery in London a 10% production
enhancement was achieved with no increase in emission levels.
• PM Ag Products’ continuous emphasis on the re-use of
resources has lead to improvements in energy use, recycling of
process water and paper and ingredient reclamation.
• At Staley a new system of monitoring effluent levels and flow
rates in the sewer lines in the Decatur plant allows upsets to be
immediately identified and corrected.
• Alcântara in Portugal is installing a plant for pre-treatment
of liquid effluents to meet the needs of both present and
future regulations.
• At Zambia Sugar the discharge of each type of liquid effluent –
suspended solids, nitrates and phosphates – has shown
improvement on the previous year.
• At Amylum’s plant in the Netherlands, a second anaerobic
wastewater treatment reactor has reduced the Chemical
Oxygen Demand (COD).
The environmental report to the Board did not show a
significant change from the previous year’s level of compliance
orders and minor violations and the Board does not consider any
to be material.
TAT E & L Y L E 27
KEY MANAGEMENT
Americas
Staley J R Doxsie
North American Sugar A A Ferrier
Occidente A Saenz
PM Ag Products M A Reed
Business Support Services J P Mohan
European Division J H W Walker
Tate & Lyle Sugars C Rutherford
Alcântara M Vidal
UM Group T Holderness-Roddam
Tate & Lyle International S J Mitchell / R Harlow
European Beet Sugar C Laur
International Division S Strathdee
Bundaberg Sugar G E Mitchell
African Sugar S H Musesengwa
Booker Tate B Newton
Speciality Sweeteners A J Maguire
Group Executives
Group Finance Director S Gifford
Director, Human Resources C F Baxter
General Counsel R A Gibber
Company Secretary J R Hunter
Group President, Operations L E Luppes
Group Financial Controller J H Metcalf
Strategic Planner S J H Tedbury
Director, Corporate Finance & Investor Relations A C W Williams
28 T AT E & L Y L E
BOARD OF DIRECTORS
Non-Executive Chairman
Sir David Lees (age 62)*† was appointed on 1 October 1998. He is
also non-executive Chairman of GKN plc, which he joined in 1970
and where he was appointed Finance Director in 1982, Group
Managing Director in 1987 and Chairman and Chief Executive from
1988 until 1996. He was non-executive Chairman of Courtaulds plc
from July 1996 until September 1998. He is a non-executive director
of the Bank of England and the Royal Opera House.
Executive Directors
L G Pillard (age 51) Chief Executive joined the Group in 1992 as
Chief Executive Officer of A E Staley. He has extensive technical and
managerial experience in the corn wet milling industry in both the US
and Europe. He was appointed to the Tate & Lyle Board in February
1994, became Chief Operating Officer and Group Managing Director
in January 1996 and was appointed to his current position in
November 1996.
S Gifford (age 52)‡ Group Finance Director qualified as a chartered
accountant in 1969. He joined Tate & Lyle in that year and has gained
wide experience in financial and general management roles. He was
Managing Director of the Foreign Investment Division from 1987 and
in 1993 was appointed Company Secretary with responsibility for
investor relations. He was appointed to the Tate & Lyle Board in
January 1996.
S Strathdee (age 47) Managing Director, International Division
joined the Group in 1977. He has served in a variety of management
positions including Group Treasurer, Managing Director of Tate & Lyle
International and Managing Director of United Molasses. He was
appointed to the Tate & Lyle Board in November 1994.
J H W Walker (age 54)# Managing Director, European Division
joined the Group in 1966. He has held a range of executive positions
including Managing Director of United Molasses and Managing
Director of Tate & Lyle Sugars. He was appointed to the Tate & Lyle
Board in March 1993.
Sir Neil Shaw retired as Chairman on 30 June 1998.
P S Lewis retired as Deputy Chairman on 3 February 1998.
Sir Brian Hayes retired as a non-executive director on
3 February 1998.
Non-Executive Directors
L R Wilson (age 58)*† is Chairman of BCE Inc, Canada’s largest
telecommunications company. He joined the Board of Tate & Lyle in
1984 and until 1989 had responsibility for the Group’s North American
operations. He was appointed Deputy Chairman on 5 May 1998 and
was Acting Chairman from 1 July 1998 to 30 September 1998.
He is a director of Bell Canada and Northern Telecom Ltd, and a
member of the Supervisory Board of DaimlerChrysler AG.
K G G Hopkins (age 53)*† joined the Board in November 1994.
A PhD in Chemistry, he worked for Unilever before joining Croda
International Plc, the speciality chemical company, in 1976. He was
appointed Group Chief Executive of Croda in 1987, and will become
Chairman of Croda on 1 January 1999.
C Piwnica (age 40) qualified as a lawyer and practised law at the
New York and Paris bars. She has held various management
positions in the Amylum Group. Appointed to the Amylum Board in
1991, she became Vice Chairman in 1994 and Chairman in October
1996, when she joined the Board of Tate & Lyle. She is a director of
several other international companies.
Lady Prior (age 68)‡# joined the Board in 1985. She is Chairman
of the Church Schools Company and has a number of other public
interests in the field of education and in charitable organisations.
Sir Saxon Tate (age 66)*† served in executive positions throughout
the Group from 1952 to 1981 when he became Chief Executive of the
Northern Ireland Development Board. From 1985 to 1991 he was
Chairman of the London Commodity Exchange. He was appointed
to the Board of Tate & Lyle in 1957.
J F Taylor (age 63)†‡ retired as Chairman of Booker plc in 1998.
He brings many years’ experience in international food businesses to
the Board of Tate & Lyle which he joined in 1988. He is a director of
The Equitable Life Assurance Society and MEPC PLC and Chairman
of Ellis & Everard plc.
Lord Walker (age 66)*# has considerable business experience and
a wide knowledge of international agriculture and food businesses.
He served as a UK Cabinet Minister as head of five departments
between 1970 and 1990 when he joined the Tate & Lyle Board. He is
Vice Chairman of Dresdner Kleinwort Benson, Chairman of Cornhill
Insurance PLC and a director of LIFFE.
A M Yurko (age 47)*†‡ is Managing Director & Chief Executive Officer
of Siebe plc. He obtained wide management experience in the US
before joining Siebe in 1989, being appointed a director of Siebe in
1991. He joined the Tate & Lyle Board in April 1996.
* Remuneration and Appointments Committee† Audit Committee‡ Pension Fund Committee
# Corporate Affairs Committee
TAT E & LY L E 29
Sir David LeesLarry Pillard Simon Gifford
John WalkerStuart Strathdee
30 TAT E & L Y L E
DIRECTORS’ REPORT
Principal activities of the Group The activities of Tate & Lyle PLC and
its subsidiary and associated undertakings (the ‘Group’) are principally
processing carbohydrates to provide a range of sweetener and starch
products, and animal feed and bulk storage.
Business Review The Chairman’s Statement on pages 2 to 3, the
Chief Executive’s Review and the Operating and Financial Review on
pages 12 to 24 inclusive report on the activities during the year
and likely future developments.
Acquisitions, Disposals and Changes in Investments Acquisitions,
disposals and changes in investments are referred to in the Operating
and Financial Review on pages 17 to 24.
The Group spent £16.3 million on research and development in
the year.
Share Capital The Company issued 10,126,561 ordinary shares
during the year of which 8,387,137 were issued on conversion of
preference shares and 1,739,424 on the exercise of employee share
options. The total value of ordinary shares issued at the issue price for
cash was £6.0 million.
Details of substantial interests in Tate & Lyle are given on page
60. Apart from these holdings, the directors have not been notified of
any material interest of 3% or more or any non-material interest
exceeding 10% of the issued voting capital of the Company.
The Company has not acquired any of its shares during the year.
Dividends The final dividend for the 1998 financial year will be 11.7p.
It will be due and payable on 6 April 1999 to shareholders on the
register on 11 December 1998. Given the new date for the AGM, this
final dividend will be paid as an interim dividend and does not require
shareholder approval. This dividend amounts to £53.4 million and
makes a total for the year of 17.0p per share (1997 – 17.0p plus a
Foreign Income Dividend (‘FID’) enhancement of 1.325p).
Both dividends for the year to 27 September 1997 together with
the interim dividend paid on 14 July 1998 were paid as FIDs.
Directors Members of the Board of Directors at any time during the
year are listed on page 28.
At the Annual General Meeting Mr S Gifford, Lady Prior,
Mr J H W Walker and Mr L R Wilson are retiring by rotation. Of these,
Mr S Gifford, Mr J H W Walker and Mr L R Wilson, being eligible,
offer themselves for re-election under Article 84. Sir David Lees,
who became a director on 1 October 1998, will retire under Article 90
and, being eligible, offers himself for re-election.
Mr S Gifford and Mr J H W Walker are employed under
contracts detailed in the Remuneration and Appointments Committee
report on pages 32 to 36. The other directors retiring do not have
service contracts.
Directors’ Interests At no time during the year has any director had
any material interest in a contract with the Company, being a contract
of significance in relation to the Company’s business. A statement of
directors’ interests in shares of the Company is set out on page 59.
Corporate Governance Throughout the period the Company has
complied with the Cadbury Committee’s Code of Best Practice, the
provisions of the London Stock Exchange Listing Rules concerning
Directors’ Remuneration and Going Concern, and Section A of the
‘Best Practice Provisions: Directors’ Remuneration’ annexed to the
Listing Rules.
The Committee on Corporate Governance published a new
Combined Code in June 1998 and different governance reporting
requirements under the Listing Rules will apply to the Company’s next
annual report. The Company’s governance has been substantially
consistent with the principles of the Code since its publication.
The Board of Directors meets regularly and comprises a majority of
non-executive directors. The executive directors have service contracts,
details of which are included in the Remuneration & Appointments
Committee Report. The Board has delegated authority to certain
Board committees:
The Remuneration and Appointments Committee report is on
pages 32 to 36.
The Audit Committee comprises non-executive directors, with
executive directors attending by invitation. It receives reports from the
external auditors, reviews the interim and annual financial statements
and receives regular reports from the internal audit department.
Additionally the committee reviews the operation and effectiveness of
the Company’s internal financial procedures.
The Pension Fund Committee supervises the pension and
retirement plans for Group employees worldwide to ensure that
these are properly established, maintained, controlled, managed and
audited. It reviews all retirement benefit schemes prior to obtaining
Board approval and reports to the Board periodically on their status,
funding and control.
Other Board Committees include the Banking Committee and the
Corporate Affairs Committee.
The Executive Management Committee oversees the activities of
the Group and includes as members the executive directors and other
senior executives.
Internal Control The Board of Directors is responsible for
internal financial control, supported by the Group Finance Director
and the finance directors of the operating units. The Board has
reviewed the effectiveness of the Group’s system of financial
control during the year. The system of controls can provide only
reasonable and not absolute assurance against material misstatement
or loss.
TAT E & L Y L E 31
The Group has a clearly defined organisation structure under
which individual responsibilities are written down and monitore d .
Businesses operate under mandatory written pro c e d u res to pro v i d e
an appropriate control environment. The Group Operating Policies
s e t out the Gro u p ’s commitment to competence, integrity and
e t h i c a l v a l u e s .
The Board has the primary responsibility for identifying
business risks, through committees where appropriate and assisted
by senior executives. Risks are controlled by quantifying and
reporting exposures and by focusing internal audit effort on the
most sensitive areas.
The Company operates a comprehensive annual planning and
financial reporting system comparing results with plan and the previous
year on a monthly basis. Revised forecasts for the year are produced
quarterly. Reports include a monthly cash flow statement projected
for 15 months.
The Company has defined pro c e d u res for the authorisation
o f capital expenditure and investment, granting of guarantees,
t r a d i n g and hedging of currencies and commodities and use of
t reasury pro d u c t s .
The Group Finance Director undertakes quarterly reviews of
the major operating units. The internal audit department supports the
Board in maintaining procedures through a programme of regular
reviews which focus on key aspects of the business. The Board
has delegated authority to the Banking Committee and the Board of
Tate & Lyle International Finance PLC, the treasury company (which
includes employees from other units), to assist in the execution of the
prescribed procedures.
Employment The Group employs 22,220 people. 7,928 are
employed in Africa, 5,560 in North America and 2,370 in the UK.
Group companies operate within a framework of personnel
policies appropriate to their own market sector and country of
operation. Policies and procedures for recruitment, training and career
development promote equality of opportunity regardless of age, sex,
marital status, religion, colour, race, ethnic or national origin, or
disability. The aim is to encourage a culture in which all employees
have the opportunity to develop as fully as possible in accordance
with their individual abilities and the needs of the Group.
The Company is committed to effective communication with
employees, including information on its performance and business
environment. It follows appropriate consultation procedures and has
an established European Forum.
Training Training has concentrated on multi-skilling to encourage
flexibility in working practices. Training programmes have been
developed and extensively delivered across the Group to promote the
adoption of EVA techniques by employees at all levels. The Group runs
a series of international management programmes to develop
management skills and create valuable opportunities for the
cross-fertilisation of management ideas across the Group.
Employee Share Option Schemes Offers made under the executive
share option schemes and the UK savings related share option scheme
together resulted in the grant of 1,211 options to buy 1,546,209 share s .
70% of eligible UK employees hold share options. More information
about options granted under the schemes is given on page 59.
Community An account of the Group’s community activities appears
on page 25. Charitable donations made in the UK during the year
totalled £854,000.
Environment The Group’s environmental policies, procedures and
actions are described on page 26.
Year 2000 The Group’s actions in relation to the Year 2000 problem
are described in the Operating and Financial Review on pages 23 and 24.
Policy on Payment of Creditors It is the Company’s policy that the
Group’s UK operating companies should follow the CBI Prompt Payers’
Code. Copies of this Code are available from the Confederation of
British Industry, Centre Point, New Oxford Street, London. The Policy
requires the Company to agree the terms of payment with its suppliers,
to ensure those suppliers are aware of those terms and to abide by
those terms.
Tate & Lyle PLC is a holding company and, as distinct from the
Tate & Lyle Group, has no revenue and no trade creditors. It is therefore
not possible to provide statistics for the Company as required by the
Companies Act.
Annual General Meeting (‘AGM’) The 1999 AGM, which had
previously been set for 2 February 1999, has been deferred until late
April 1999 as outlined in the Chairman’s Statement on page 3. The
Notice convening the AGM, together with full details of all ordinary and
special business, will be sent to shareholders in due course.
Auditors Our auditors, Coopers & Lybrand (‘C&L’), merged with Price
Waterhouse on 1 July, following which C&L resigned and the directors
appointed the new firm, PricewaterhouseCoopers (‘PwC’), as auditors.
A resolution to reappoint PwC as auditors to the Company will be
proposed at the Annual General Meeting.
By order of the Board
John R Hunter Secretary
24 November 1998
TAT E & L Y L E 31
The Group has a clearly defined organisation structure under
which individual responsibilities are written down and monitore d .
Businesses operate under mandatory written pro c e d u res to pro v i d e
an appropriate control environment. The Group Operating Policies
s e t out the Gro u p ’s commitment to competence, integrity and
e t h i c a l v a l u e s .
The Board has the primary responsibility for identifying
business risks, through committees where appropriate and assisted
by senior executives. Risks are controlled by quantifying and
reporting exposures and by focusing internal audit effort on the
most sensitive areas.
The Company operates a comprehensive annual planning and
financial reporting system comparing results with plan and the previous
year on a monthly basis. Revised forecasts for the year are produced
quarterly. Reports include a monthly cash flow statement projected
for 15 months.
The Company has defined pro c e d u res for the authorisation
o f capital expenditure and investment, granting of guarantees,
t r a d i n g and hedging of currencies and commodities and use of
t reasury pro d u c t s .
The Group Finance Director undertakes quarterly reviews of
the major operating units. The internal audit department supports the
Board in maintaining procedures through a programme of regular
reviews which focus on key aspects of the business. The Board
has delegated authority to the Banking Committee and the Board of
Tate & Lyle International Finance PLC, the treasury company (which
includes employees from other units), to assist in the execution of the
prescribed procedures.
Employment The Group employs 22,220 people. 7,928 are
employed in Africa, 5,560 in North America and 2,370 in the UK.
Group companies operate within a framework of personnel
policies appropriate to their own market sector and country of
operation. Policies and procedures for recruitment, training and career
development promote equality of opportunity regardless of age, sex,
marital status, religion, colour, race, ethnic or national origin, or
disability. The aim is to encourage a culture in which all employees
have the opportunity to develop as fully as possible in accordance
with their individual abilities and the needs of the Group.
The Company is committed to effective communication with
employees, including information on its performance and business
environment. It follows appropriate consultation procedures and has
an established European Forum.
Training Training has concentrated on multi-skilling to encourage
flexibility in working practices. Training programmes have been
developed and extensively delivered across the Group to promote the
adoption of EVA techniques by employees at all levels. The Group runs
a series of international management programmes to develop
management skills and create valuable opportunities for the
cross-fertilisation of management ideas across the Group.
Employee Share Option Schemes Offers made under the executive
share option schemes and the UK savings related share option scheme
together resulted in the grant of 1,211 options to buy 1,546,209 share s .
70% of eligible UK employees hold share options. More information
about options granted under the schemes is given on page 59.
Community An account of the Group’s community activities appears
on page 25. Charitable donations made in the UK during the year
totalled £854,000.
Environment The Group’s environmental policies, procedures and
actions are described on page 26.
Year 2000 The Group’s actions in relation to the Year 2000 problem
are described in the Operating and Financial Review on pages 23 and 24.
Policy on Payment of Creditors It is the Company’s policy that the
Group’s UK operating companies should follow the CBI Prompt Payers’
Code. Copies of this Code are available from the Confederation of
British Industry, Centre Point, New Oxford Street, London. The Policy
requires the Company to agree the terms of payment with its suppliers,
to ensure those suppliers are aware of those terms and to abide by
those terms.
Tate & Lyle PLC is a holding company and, as distinct from the
Tate & Lyle Group, has no revenue and no trade creditors. It is therefore
not possible to provide statistics for the Company as required by the
Companies Act.
Annual General Meeting (‘AGM’) The 1999 AGM, which had
previously been set for 2 February 1999, has been deferred until late
April 1999 as outlined in the Chairman’s Statement on page 3. The
Notice convening the AGM, together with full details of all ordinary and
special business, will be sent to shareholders in due course.
Auditors Our auditors, Coopers & Lybrand (‘C&L’), merged with Price
Waterhouse on 1 July, following which C&L resigned and the directors
appointed the new firm, PricewaterhouseCoopers (‘PwC’), as auditors.
A resolution to reappoint PwC as auditors to the Company will be
proposed at the Annual General Meeting.
By order of the Board
John R Hunter Secretary
24 November 1998
32 TAT E & L Y L E
REPORT OF THE REMUNERATION AND APPOINTMENTS COMMITTEE
The Remuneration and Appointments Committee, chaired by
L R Wilson, consists exclusively of non-executive directors. The
Committee determines the pay and benefits of Tate & Lyle’s executive
directors and senior executives. The Committee also makes
recommendations to the Board on Board appointments and approves
senior executive appointments and corporate governance issues.
Remuneration Policy for Executive Directors and Senior
Executives The Group’s remuneration policy is to provide
remuneration packages which:
• are competitive and commensurate with other international
businesses of similar size, particularly those in the food
processing industry;
• are designed to attract, retain and motivate high-calibre
executives;
• reward above average performance;
• are based on local country practice; and
• give full consideration to Section B of the best practice
provisions annexed to the London Stock Exchange
Listing Rules.
The remuneration package consists of short-term rewards (base
salary and annual bonus), long-term rewards (share options) and
benefits (retirement benefits, life assurance, medical insurance etc)
appropriate to local country practice. In determining levels of each
part of the package, the Committee uses external market surveys
from independent consultants.
Base salary reflects job responsibilities, market rate and the
sustained level of individual performance. The Company sets base
salaries taking account of the median relative to similar companies.
Annual bonus is a short-term reward which reflects the
performance of the Group, or appropriate division or subsidiary,
against financial objectives.
Share option schemes are long-term rewards aligned with
shareholder interests.
Benefits reflect local market practice at median levels. Retirement
benefits, in the form of pension and/or lump sums, are provided
through tax-approved schemes, covering executives and senior
managers in the country and business sector in which they perform
their principal duties. In certain circumstances where individuals are
transferred from their home country to other Group locations but are
likely to retire in the home country, pension benefits may continue to
be provided on a home country basis. Where the promised level of
benefits cannot be provided through appropriate tax-approved
schemes, the excess pension liabilities are accrued in the accounts
and are paid by the Group.
Remuneration Practice
Base salary: Executive director and senior executive salaries are
reviewed on 1 October each year.
Annual bonus: The Group operates an Executive Bonus Scheme
for executive directors and senior executives internationally. For
Tate & Lyle PLC executives, objectives determined by the Committee
are set annually in terms of earnings per share and profit before tax.
Maximum bonuses payable are capped. The Chief Executive
can earn a bonus of up to 80% of salary and other executive directors
of the Company up to 65%. A maximum bonus payment would only
be made if exceptional financial performance were achieved.
No bonuses were earned by executive directors in 1998.
Share option schemes: The Company has UK and International
Executive Share Option Schemes. The first such schemes were
introduced in 1982 and new schemes were approved by shareholders
in 1992. Option grants are based on individual performance and are
phased over a number of years. The exercise of executive share
options granted since November 1995 is subject to the Group
achieving an increase in fully-diluted earnings per share of 6% more
than the increase in the UK Retail Price Index during any period of
three consecutive financial years over the life of the option.
The Company has a Savings Related Share Option Scheme
that is open to all eligible employees in the UK.
Pension Provision and Benefit Levels
Past Chairman As explained in last year’s Report and Accounts,
Sir Neil Shaw is in receipt of a pension established by the Group’s
Canadian subsidiary, Redpath Industries. On his death there is a
provision for the payment of a pension to his widow. The pension
payable to Sir Neil, and the widow’s pension, are increased
annually at the rate of 5%. Contributions of £219,140 were made
prior to his retirement, in June 1998 (1997 – £320,000) to fund
the deficit identified when his pension commenced in 1992. As at
31 May 1998, the scheme benefits were fully funded, based on
current actuarial assumptions.
Chief Executive Larry Pillard is a member of the A E Staley pension
plans. The aim is to provide him with a pension from age 60 equal to
approximately 52% of a three year average of total compensation,
including bonus. There is no provision for this pension to be increased
in payment. Mr Pillard is also provided with a lump sum death in
service benefit. There are limitations under US tax regulations on
retirement provision from tax-approved plans. Compensation for the
effect of these limitations, except for those which apply to the tax-
approved retirement savings plans, is provided for through unfunded
arrangements. As an expatriate, Mr Pillard is also paid a disturbance
allowance and other benefits.
TAT E & L Y L E 33
Executive Directors in the UK For executive directors who are
members of the Company’s UK pension arrangements the aim is to
provide a pension at age 60 equal to two-thirds of base salary,
reduced where service to age 60 is less than 20 years. Bonuses are
not pensionable. The benefit also includes a widow’s pension payable
on a director’s death and a lump sum on death in service. Once in
payment to a director or his widow, the pension is increased each
year in line with the Retail Price Index up to a maximum of 5%, with a
minimum of 3%.
Summaries of the individual executive directors’ pension
arrangements are available for inspection at the registered office of
the Company during normal business hours and at the Annual
General Meeting.
Service Contracts All UK executive directors have service contracts
terminable by the Company on not more than two years’ notice and
by the individual directors on up to six months’ notice. These notice
periods take into account the international nature of Tate & Lyle’s
business and the need to remain competitive. The Chief Executive
has two service contracts with the Group, the unexpired terms of the
service contracts are 24 months. The Committee will consider the
appropriateness of a 12 month period of notice for new executive
directors appointed to the Board.
The non-executive directors (with the exception of C Piwnica –
see Directors’ Emoluments note 2, on page 35) do not have service
contracts.
Non-Executive Directorships The Committee believes that the
Company can benefit from its executive directors holding a non-
executive appointment and also believes that this represents a
valuable opportunity in terms of personal and professional
development. Such appointments are subject to the approval of the
Board and it is the Company’s practice that fees derived from such
appointments may be retained by the executive director concerned.
Non-Executive Directors’ Remuneration Fees for non-executive
directors’ duties are determined by the Board with regard to market
norms within the restrictions contained in the Articles of Association.
The Chairman’s letter of appointment includes a termination clause
which defines payments of up to a maximum of 12 months’ fees
should his term of office be terminated prior to September 2001
without requisite notice. No retirement benefit rights accrue from the
Company to non-executive directors nor are they eligible to receive
incentive payments, grants of shares or share options in respect of
their services to the Company.
L R Wilson Chairman of Remuneration and Appointments Committee
24 November 1998
34 T AT E & L Y L E
NOTES TO REMUNERATION AND APPOINTMENTS COMMITTEE REPORT
1. Directors’ Options The market price of the ordinary shares at close of business on 25 September 1998 was 320p and the range during the
1998 financial year was 314p to 577.5p. The Register of Directors’ Interests, which is open to inspection, contains full details of directors’
shareholdings and share options.
Options exercisable – 1998Weighted Weighted
average Options exercisable averageoption option
Executive Option Holdings at 26 September 1998 Number price – p Earliest date Latest date Number price – p1111000000000000000005
S Gifford 144 912 456.0 03/02/95 28/11/07 34 500 410.8
L G Pillard 399 760 448.8 30/11/95 28/11/07 145 000 411.8
S Strathdee 144 500 422.5 03/02/95 28/11/07 90 000 404.3
J H W Walker 167 410 394.2 08/05/93 28/11/07 135 000 383.905 05 05 05 05 05
Executive Market Executiveshare price at shareMovement in
options Options Options Exercise date of Gain per Gross optionsExecutive Option Holdings 1997 granted exercised price – p exercise – p share – p gain – £ 19981111000000000000000005
S Gifford 143 000 46 912 20 000 208.25 324.5 116.25 23 250 144 912
15 000 273.0 324.5 51.5 7 725
10 000 270.0 324.5 54.5 5 450
L G Pillard 275 000 124 760 – – – – – 399 760
S Strathdee 140 000 4 500 – – – – – 144 500
J H W Walker 156 500 10 910 – – – – – 167 41005 05 05 05 05 05 05 05
The directors’ holdings include options issued at 15% discount in 1992 and 1993. These will be exercisable at discounted prices from 1999
subject to the satisfaction of performance criteria. All unexercised executive share options were granted at prices above 320p, the price at
25 September 1998, except for an option over 20,000 shares held by Mr Walker.
WeightedExercisable optionsaverage
optionSavings Related Option Holdings at 26 September 1998 Number price – p Earliest date Latest date1111000000000000000005
S Gifford 4 863 354.5 01/08/99 31/01/03
L G Pillard 4 551 379.0 01/08/01 31/01/02
S Strathdee 4 765 361.9 01/08/00 31/01/04
J H W Walker 4 716 365.6 01/08/00 31/01/0305 05 05 05
Savings Market Savingsrelated share price at related shareMovement in
options Options Options Exercise date of Gain per Gross optionsSavings Related Option Holdings 1997 granted exercised price – p exercise – p share – p gain – £ 19981111000000000000000005
S Gifford 4 863 – – – – – – 4 863
L G Pillard 4 551 – – – – – – 4 551
S Strathdee 5 465 3 780 4 480 308 494 186 8 333 4 765
J H W Walker 4 716 – – – – – – 4 71605 05 05 05 05 05 05 05
The aggregate gain made by directors on the exercise of options during the year was £44,758.
TAT E & L Y L E 35
2. Directors’ Emoluments Emoluments of Tate & Lyle PLC directors, contained within staff costs were:
Salary Annual 1998 1997(inc fees) Benefits bonus Total Total
£000 £000 £000 £000 £0001111000000000000000005
Chairman
Sir Neil Shaw1 210 91 – 301 330
Executive Directors
S Gifford 250 16 – 266 212
P S Lewis1 8 5 – 13 136
L G Pillard (highest paid director) 453 121 – 574 475
S Strathdee 171 6 – 177 167
J H W Walker 197 11 – 208 195
Non-Executive Directors
Sir Brian Hayes1 7 – – 7 20
K G G Hopkins 20 – – 20 20
C Piwnica 1772 – – 177 188
Lady Prior 20 – – 20 20
Sir Saxon Tate 20 1 – 21 21
J F Taylor 20 – – 20 20
Lord Walker 20 – – 20 20
L R Wilson 20 – – 20 20
A M Yurko 20 – – 20 2005 05 05 05 05
Totals 1 613 251 – 1 864 1 86405 05 05 05 051Part year.2£157,000 as Chairman, Amylum Group, and £20,000 as a non-executive director of Tate & Lyle.
Former directors’ fees and benefits in respect of services provided during 1998: Lord Jellicoe, £5,000 (1997 – £25,694); Sir Neil Shaw, £6,750.
Under a two year contract dated 1 July 1998, Sir Neil is engaged as a consultant to the Company at £27,000 per annum. Benefits of £11,562 were
provided to a former director, Mr Mirsky.
In 1997 five executive directors waived their fees of £14,000 each.
36 TAT E & L Y L E
NOTES TO REMUNERATION AND APPOINTMENTS COMMITTEE REPORT
3. Pension provision Defined benefit schemes Definedcontribution
schemesIncrease in Transfer value Accumulated
accrued of increase total accrued Contributionspension in accrued pension at paid in the
for the year1 pension2 year end3 year4
£000 £000 £000 £0001111000000000000000005
S Gifford 24 308 145 –
L G Pillard 16 73 179 3
S Strathdee 7 68 77 –
J H W Walker 2 31 127 –05 05 05 05
1For each director, the figure represents the difference between the total accrued pension at 26 September 1998 and the corresponding pension one year earlier. The figures quoted
include an adjustment for inflation as provided under paragraph 12.43 (x) (x) (a) of the Listing Rules of the London Stock Exchange.2For Mr Gifford, Mr Strathdee and Mr Walker, the figures shown represent the transfer value, calculated in accordance with Guidance Note 11 issued by the Faculty and Institute of
Actuaries, of the inflation-adjusted increase in the total accrued pension for the year. For Mr Pillard, the figure shown represents the Accrued Benefit Obligation, that is the present
value of the inflation-adjusted increase in the total accrued pension for the year.3The figure shown represents the amount of pension benefits, based on service, pensionable earnings and, where appropriate, transferred pension rights, which would have been
preserved for each director had he left service on 26 September 1998.4The figure shown represents the amount of matching contributions paid during the year by the Company to the 401(K) plans of the director who is a member of the A E Staley pension
plans.
The table above excludes any reference to Sir Neil Shaw and Mr Lewis as no additional pension benefits have accrued to them during the year.
Sir Neil Shaw is in receipt of a pension established by the Group’s Canadian subsidiary, Redpath Industries, and Mr Lewis is in receipt of a pension
from the Tate & Lyle Group Pension Scheme.
The limitation under UK tax law on the level of final remuneration used in the calculation of pension benefits (known as the earnings cap) does not
apply to the current executive directors because of their length of service with the Group.
Directors’ Responsibilities, Corporate Governance
and Auditors’ Report 38
Group Profit and Loss Account 39
Balance Sheets 40
Statement of Cash Flows 41
Segmental Analysis 42
Other Statements 43
Notes to the Financial Statements 44
Accounting Policies 44
Operating Profit, Exceptional Items, Staff Costs 46
Interest Payable and Similar Charges, Taxation,
Dividends Paid and Proposed 47
Earnings per Share, Tangible Fixed Assets 48
Fixed Asset Investments 50
Stocks, Debtors, Current Asset Investments 51
Creditors 52
Borrowings due after more than one year 53
Provisions for Liabilities and Charges 54
Post-retirement Benefits 55
Contingent Liabilities, Related Party Transaction 56
Financial Commitments 57
Share Capital 58
Reserves, Shareholders’ Funds 60
Net Cash Inflow from Operating Activities,
Change in Working Capital,
Cash Flow/Net Debt Reconciliation 61
Non-cash Movements in Net Debt, Fair Value
of Financial Instruments used for Risk Management,
Currency and Interest Rate Exposure of
Financial Assets and Liabilities 62
Currency Analysis of Net Assets, Changes in
Group Interests, Post Balance Sheet Events 64
Main Subsidiaries and Investments 65
Information for Investors 68
T AT E & L Y L E 37
FINANCIAL CONTENTS
38 T AT E & L Y L E
DIRECTORS’ RESPONSIBILITIES, CORPORATE GOVERNANCE AND AUDITORS’ REPORT
Directors’ ResponsibilitiesThe directors have a specific responsibility for reporting to shareholders and for the assets of the Group. The directors
are required to present for each period financial statements which comply with the provisions of the Companies Act
1985 in respect of the state of affairs of the Group as at the end of the accounting period and of the profit and loss for
that period. In preparing the financial statements, suitable accounting policies, framed by reference to reasonable and
prudent judgements and estimates, have to be used and applied consistently. Applicable accounting standards have
been followed and the accounts have been prepared on a going concern basis. The directors are responsible for the
Group’s system of internal financial control, for ensuring that arrangements are made for the maintenance of adequate
accounting records, for safeguarding the assets of the Group, and for ensuring that steps are taken with a view to
preventing and detecting fraud and other irregularities.
Corporate GovernanceOur auditors have confirmed that, in their opinion, with respect to the directors’ statements on internal financial control
and on going concern on pages 22, 30 and 31, the directors have provided the disclosures required by the Listing
Rules of the London Stock Exchange and such statements are not inconsistent with information of which they
are aware from their audit work on the financial statements, and that the directors’ other statements on page 30
appropriately reflect the Company’s compliance with the other aspects of the Cadbury Code specified for their review
by Listing Rule 12.43(j). They were not required to perform the additional work necessary to, and do not, express any
opinion on the effectiveness of either the Group’s system of internal financial control or its corporate governance
procedures, nor the ability of the Group to continue in operational existence.
Auditors’ Reportto the members of Tate & Lyle Public Limited Company
We have audited the financial statements on pages 39 to 67 which have been prepared under the historical cost
convention as modified by the revaluation of certain tangible fixed assets and the accounting policies set out on
pages 44 and 45.
Respective responsibilities of directors and auditors As described above, the Company’s directors are
responsible for the preparation of financial statements. It is our responsibility to form an independent opinion,
based on our audit, on those statements and to report our opinion to you.
Basis of opinion We conducted our audit in accordance with Auditing Standards issued by the Auditing Practices
Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the
financial statements. It also includes an assessment of the significant estimates and judgements made by the directors
in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Company’s
circumstances, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and explanations which we considered
necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are
free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also
evaluated the overall adequacy of the presentation of information in the financial statements.
Opinion In our opinion the financial statements give a true and fair view of the state of affairs of the Company and the
Group at 26 September 1998 and of the profit and cash flows of the Group for the 52 weeks then ended and have
been properly prepared in accordance with the Companies Act 1985.
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
1 Embankment Place, London WC2N 6NN
24 November 1998
TAT E & L Y L E 39
GROUP PROFIT AND LOSS ACCOUNT
For the 52 weeks to 26 September 1998
1998 1997Notes Profit and Loss Account £ million £ million
0000000000000051
Turnover 4 466.6 4 651.1
Less share of turnover of – joint ventures (310.1) (249.1)
– associates (39.2) (49.4)05 05
Group turnover 4 117.3 4 352.605 05
2 Operating profit before exceptional items 217.4 276.5
3 Exceptional items (14.6) (82.0)
of which – reorganisation costs – (29.9)
– provisions for impairment in goodwill and
fixed assets – (59.9)
– European Union fine (4.5) –
– other (10.1) 7.805 05
2 Operating profit 202.8 194.5
3 Exceptional profit on sale of fixed assets 13.2 –
Share of profits of joint ventures 26.8 22.51
Share of profits of associates 4.1 6.11
05 05
Profit before interest 246.9 223.11
Interest receivable and similar income 32.0 27.7
5 Interest payable and similar charges (99.3) (88.6)
Share of joint ventures’ interest (11.1) (1.6)1
Share of associates’ interest (3.1) (1.3)105 05
Profit before taxation 165.4 159.3
6 Taxation (44.0) (50.3)05 05
Profit after taxation 121.4 109.0
Minority interests – equity 2.6 (7.3)05 05
Profit for the period 124.0 101.7
7 Dividends paid and proposed (77.9) (83.4)
of which – on equity shares (77.6) (81.8)
– on non-equity shares (0.3) (1.6)05 05
Retained profit 46.1 18.305 05
Earnings per Share0000000000000051
8 Basic 27.4p 22.6p
8 Diluted 27.1p 22.3p2
05 05The results of acquisitions and discontinued operations are not material to the results of the Group. Historical cost
profits and losses are not materially different from those shown above.
1Restated in accordance with FRS9 “Associates and Joint Ventures”.2Restated in accordance with FRS14 “Earnings per Share”.
40 TA T E & L Y L E
BALANCE SHEETS
At 26 September 1998
1998 1997 1998 1997Tate & Tate &
Group Group Lyle PLC Lyle PLCNotes Employment of Capital £ million £ million £ million £ million
0000000000000051
Fixed assets9 Tangible assets 1 706.8 1 685.9 1.1 3.7
10 Investments in joint ventures:– share of gross assets 310.3 246.4 – –
– share of gross liabilities (177.4) (119.1) – –
– share of net assets 132.9 127.3 – –10 Investments in associates 14.0 13.7 – –
10 Other investments 38.1 47.0 2 347.4 2 178.905 05 05 05
1 891.8 1 873.9 2 348.5 2 182.605 05 05 05
Current assets
11 Stocks 387.6 408.9 – –
Debtors – due within one year subject to financing arrangementsDebtors 44.4 – – –
Less: non–returnable amounts received (40.3) – – –
4.1 – – –
12 Debtors – other debtors due within one year 509.1 550.0 242.8 240.2
12 Debtors – due after more than one year 76.8 103.1 1.3 14.113 Investments 185.3 165.1 – –
Cash at banks and in hand 58.0 95.2 – –05 05 05 05
1 220.9 1 322.3 244.1 254.305 05 05 05
Creditors – due within one year
14 Borrowings (410.6) (278.8) (1 749.8) (1 586.0)
15 Other (567.4) (598.9) (68.9) (78.2)05 05 05 05
Net current assets/(liabilities) 242.9 444.6 (1 574.6) (1 409.9)05 05 05 05
Total assets less current liabilities 2 134.7 2 318.5 773.9 772.7
Creditors – due after more than one year16 Borrowings, including convertible debt (787.4) (890.3) (1.7) (1.7)
15 Other (10.5) (11.8) – –
17 Provisions for liabilities and charges (250.1) (252.1) (1.9) (1.9)05 05 05 05
Total net assets 1 086.7 1 164.3 770.3 769.105 05 05 05
Capital Employed0000000000000051
Capital and reserves22 Called up share capital 116.5 116.3 116.5 116.3
23 Share premium account 376.5 370.7 376.5 370.7
23 Revaluation reserve 35.4 37.4 – –23 Other reserves 31.5 30.7 – –
23 Profit and loss account 370.9 437.8 277.3 282.105 05 05 05
24 Shareholders’ funds 930.8 992.9 770.3 769.105 05 05 05
of which – equity shareholders’ funds 928.4 971.9 767.9 748.1
of which – non-equity shareholders’ funds 2.4 21.0 2.4 21.0
Minority interests – equity 155.9 171.4 – –05 05 05 05
1 086.7 1 164.3 770.3 769.105 05 05 05The financial statements were approved by the Board at a meeting on 24 November 1998.
Sir David Lees
L G PillardS Gifford
} Directors
Registered No. 76535
TAT E & L Y L E 41
STATEMENT OF CASH FLOWS
For the 52 weeks to 26 September 1998
1998 1998 1997 1997Notes £ million £ million £ million £ million
0000000000000051
25 Net cash inflow from operating activities 394.5 408.6
Dividends from joint ventures 12.9 12.4
Dividends from associates 0.3 0.6
Returns on investments and servicing of finance
Interest paid (98.4) (89.9)
Interest received 29.7 27.7
Interest element of finance leases (0.3) (0.3)
Preference dividends paid (0.7) (1.9)
Dividends paid to minority interests in subsidiary undertakings (3.8) (11.6)05 05
(73.5) (76.0)
Taxation paid (56.0) (65.2)
Capital expenditure and financial investment
Purchase of tangible fixed assets (199.0) (321.9)
Sale of tangible fixed assets 19.2 14.0
Purchase of fixed asset investments (1.6) (10.9)
Sale of fixed asset investments 24.4 4.005 05
(157.0) (314.8)
Acquisitions and disposals
Purchase of businesses and subsidiaries (net of cash acquired)1 (108.1) (6.0)
Sale of businesses 28.4 3.6
Purchases of interests in joint ventures and associates (45.4) (28.7)
Sale of interests in joint ventures and associates 0.4 22.405 05
(124.7) (8.7)
Equity dividends paid (76.5) (77.0)05 05
(80.0) (120.1)
Management of liquid resources
(Increase)/reduction in short-term investments (30.4) 131.4
Financing
Issue of shares 6.0 4.7
Contributed by minority interest 1.4 7.2
Repayment of borrowings due after one year (35.9) (117.9)
New borrowings due after one year 17.4 81.3
Increase/(reduction) in short-term borrowings 118.9 (8.1)
Capital element of finance lease payments (1.2) (1.1)05 05
Net cash inflow/(outflow) from financing 106.6 (33.9)05 05
27 Movement in cash (3.8) (22.6)05 051In addition, £3.3 million of borrowings and £0.7 million of deposits were assumed as part of the acquisition of subsidiaries in 1998.
42 TA T E & L Y L E
SEGMENTAL ANALYSIS
For the 52 weeks to 26 September 1998
1998 1998 1998 1997 1997 1997Before Profit Before Profit
exceptional Exceptional before exceptional Exceptional beforeitems items interest items items interest
Profit Before Interest £ million £ million £ million £ million £ million £ million0000000000000051
Sweeteners and starches
– Americas 114.2 0.7 114.9 153.0 (18.1) 134.9
– Europe 84.3 (3.3)1 81.0 96.7 (20.5) 76.2
– Rest of the world 20.0 0.6 20.6 17.5 (18.3) (0.8)05 05 05 05 05 05
218.5 (2.0) 216.5 267.2 (56.9) 210.3
Animal feed and bulk storage 30.0 (0.1) 29.9 36.6 (25.1) 11.5
Other businesses and activities (0.2) 0.7 0.5 1.3 – 1.305 05 05 05 05 05
248.3 (1.4) 246.9 305.1 (82.0) 223.105 05 05 05 05 051Includes all exceptional items charged in arriving at operating profit.
1998 1997 1998 1997Turnover Turnover Turnover Turnoverincluding including of of
joint ventures joint ventures joint ventures joint venturesand associates and associates and associates and associates
Turnover £ million £ million £ million £ million0000000000000051
Sweeteners and starches
– Americas 1 754.3 1 849.6 140.9 94.9
– Europe 1 308.1 1 368.1 103.7 106.0
– Rest of the world 615.3 580.9 32.1 30.505 05 05 05
3 677.7 3 798.6 276.7 231.4
Animal feed and bulk storage 675.2 740.8 34.9 37.5
Other businesses and activities 113.7 111.7 37.7 29.605 05 05 05
4 466.6 4 651.1 349.3 298.505 05 05 05The above table shows only third party turnover. Inter segment turnover totalled £61.5 million (1997 – £68.8 million).
Average exchange rates of £1=$1.65 and £1=BFr60.8 (1997 – $1.63 and BFr56.4) have been used to translate
the profits of US and Belgian subsidiary companies respectively.
1998 1997Turnover by Geographical Market £ million £ million0000000000000051
United Kingdom 685.8 771.7
Other European countries 874.5 930.7
USA 1 762.2 1 863.1
Rest of the world 1 144.1 1 085.605 05
4 466.6 4 651.105 05
Profit Before Interest by Geographical Base0000000000000051
United Kingdom 69.0 35.3
Other European countries 18.4 22.8
USA 104.5 126.8
Rest of the world 55.0 38.205 05
246.9 223.105 05
TAT E & L Y L E 43
OTHER STATEMENTS
1998 1997 1998 1997Net Operating Assets and Employees £ million £ million Employees Employees0000000000000051
Sweeteners and starches
– Americas 977.0 913.9 4 719 4 684
– Europe 747.2 803.2 3 477 4 079
– Rest of the world 251.3 235.0 9 862 12 67205 05 05 05
1 975.5 1 952.1 18 058 21 435
Animal feed and bulk storage 127.4 143.9 1 744 2 413
Other businesses and activities (47.3) 5.2 1 692 1 55305 05 05 05
2 055.6 2 101.2 21 494 25 40105 05Unallocated liabilities (dividends and tax) (14.2) (28.1)
Net borrowings (954.7) (908.8)05 05
Total net assets 1 086.7 1 164.305 05Employee numbers are based on average monthly figures and exclude employees within joint ventures and associates.
Period end exchange rates of £1=$1.70 and £1=BFr58.7 (1997 – $1.61 and BFr58.5) have been used to translate
the balance sheets of US and Belgian subsidiary companies respectively.
1998 1997Statement of Recognised Gains and Losses £ million £ million0000000000000051
Profit for the period 124.0 101.7
Currency difference on foreign currency net investments (94.6) (56.6)05 05
Total recognised gains for the period 29.4 45.105 05The movement on Group reserves is shown in note 23.
Reconciliation of Movements in Shareholders’ Funds0000000000000051
Total recognised gains and losses for the year 29.4 45.1
Dividends (77.9) (83.4)
Issue of shares 6.0 8.6
Goodwill written off on acquisition (29.9) (4.6)
Goodwill transferred to profit and loss account 10.3 29.405 05
Net decrease in shareholders’ funds (62.1) (4.9)
At 27 September 1997 992.9 997.805 05
At 26 September 1998 930.8 992.905 05
NOTES TO THE FINANCIAL STATEMENTS
44 T AT E & L Y L E
1 Accounting Policies0000000000000051
Basis of accounting
These accounts cover the 52-week financial period from 28 September 1997 to 26 September 1998, with comparative
figures for the 52 weeks ended 27 September 1997.
These financial statements are prepared under the historical cost convention, as modified by the revaluation of
certain tangible fixed assets, and in accordance with the Companies Act 1985 and applicable accounting standards.
New accounting standards
The following accounting standards have been adopted in these financial statements for the first time:
– FRS9 ‘Associates and Joint Ventures’
– FRS13 ‘Derivatives and other Financial Instruments: Disclosures‘
– FRS14 ‘Earnings per Share’.
The following accounting standards, which are not mandatory until the Group’s next financial period, will be adopted in
the next financial statements:
– FRS10 ‘Goodwill and Intangible Assets’
– FRS11 ‘Impairment of Fixed Assets and Goodwill’
– FRS12 ‘Provisions, Contingent Liabilities and Contingent Assets’.
Basis of consolidation
The accounts of all subsidiary undertakings are consolidated from the date of their acquisition up to the date of sale.
At acquisition, fair values are attributed to the assets and liabilities of the company acquired. Any excess of
consideration given over these fair values is transferred to the profit and loss reserve.
As permitted by Section 230 of the Companies Act 1985, a profit and loss account is not presented for
Tate & Lyle PLC.
Joint ventures and associates are accounted for by the equity method from the date of their acquisition up to the
date of sale. A fair value is attributed to the investment acquired and any excess of consideration given over this fair
value is transferred to the profit and loss reserve.
Foreign currencies
Assets and liabilities in foreign currencies are translated into sterling at the rates of exchange ruling on the last day of
the financial period (the closing rate) except when they are hedged by an open foreign exchange contract, in which
case the rate of exchange specified in the contract is used.
The profits of overseas companies are translated at the annual average of daily exchange rates and the difference
when compared with that arising from the use of closing rates, together with differences on exchange arising from the
translation of the opening balance sheets of overseas companies at year-end rates are taken directly to distributable
reserves. Other profits and losses on exchange are credited or charged to operating profit.
Turnover
Turnover comprises the amount receivable in the ordinary course of business, net of value added and sales taxes, for
goods and services provided. By-product revenues are credited to the cost of raw materials.
Stock
Stock is valued at the lower of direct cost together with attributable overheads and net realisable value and is
transferred to the profit and loss account on a ‘first in, first out’ basis.
Depreciation
The depreciation charge is calculated so as to allocate the cost or revalued amount of tangible fixed assets
systematically over their remaining useful economic lives. These asset lives are reviewed regularly. The following asset
lives are used:
Freehold land : No depreciation
Freehold buildings : 20 to 50 years
Leasehold property : Period of the lease
Plant and machinery : 3 to 28 years
TA T E & L Y L E 45
1 Accounting Policies (continued)0000000000000051
Leased assets
Tangible fixed assets held under finance leases are capitalised and depreciated in accordance with the Group’s
depreciation policy. Operating lease charges are charged to profit as incurred.
Research and development
All expenditure on research and development is charged to profit as incurred.
Advertising
Advertising costs are charged to profit when the advertising first takes place.
Post-retirement benefits
The Group operates a number of defined benefit pension schemes and, in North America, some post-retirement
healthcare and life assurance schemes. The expected cost of post-retirement benefits is charged to the profit and loss
account, on the advice of actuaries, so as to accrue the cost over the service lives of employees on the basis of a
constant percentage of earnings. Variations from the regular cost are spread over the expected remaining service lives
of current employees in the scheme.
Deferred taxation
Deferred taxation is recognised at the anticipated tax rate using the liability method on differences arising from the
inclusion of income and expenditure in taxation computations in periods different from those in which they are included
in the financial statements, to the extent that it is probable that a liability or asset will crystallise. Deferred tax on
post-retirement benefits is recognised in full.
Financial instruments and their derivatives
Financial instruments and their derivatives are categorised as held for trading or held as hedges.
Financial instruments held for trading
The fair value of all instruments held for trading is recognised in the balance sheet and all unrealised profits and losses
are taken to operating profit.
Financial instruments held as hedges
All hedging instruments are matched with their underlying hedged item. Each instrument’s gain or loss is brought into
the profit and loss account and its fair value into the balance sheet, at the same time and in the same place as is the
matched underlying asset, liability, income or cost. For foreign exchange and commodity instruments this will be in
operating profit matched against the relevant purchase or sale, and for interest rate instruments within interest payable
or receivable over the life of the instrument or relevant interest period. The profit or loss on an instrument may be
deferred if the hedged transaction is expected to take place or would normally be accounted for in a future period.
The finance costs of debt instruments are charged to the profit and loss account over the term of the debt at a
constant rate on the carrying amount. Such costs include the costs of issue and any discount to face value arising
on issue, or any premium payable on maturity.
Differences arising from the movement in exchange rates during the year from the translation to sterling of the
foreign currency borrowings and similar instruments used to finance long-term foreign equity investments are taken
direct to distributable reserves and reported in the statement of total recognised gains and losses.
Changes in the fair value of most financial instruments or the underlying hedged item are not usually recognised
in the profit and loss account. However, if unrealised changes in the fair value of the hedged item are included in the
profit and loss account changes in the fair value of the instrument are also included.
Initial margin deposits and variation margin deposits and receipts for futures contracts are included in current
assets or current liabilities while the position is open. Unamortised premiums are also held in similar accounts.
All premiums or fees, paid or received, in respect of a financial instrument are accounted for over the life of the
matched underlying asset, liability, income or cost, even if the instrument has been sold. If the matched underlying
asset, liability, income or cost ceases to exist, or is no longer considered likely to exist in the future, the hedging
instrument is sold. Any profit or loss on the sale is recognised in the profit and loss account as part of operating profit.
NOTES TO THE FINANCIAL STATEMENTS
46 TA T E & L Y L E
1997Before 1997
exceptional Exceptional1998 items items 1997
2 Operating Profit £ million £ million £ million £ million0000000000000051
The following have been charged or credited in arriving at operating profit:
Raw materials and consumables 2 734.5 2 894.1 – 2 894.1Other external charges 222.3 255.4 – 255.4Staff costs (Note 4) 372.3 401.2 – 401.2Depreciation of tangible fixed assets 134.6 123.0 21.7 144.7Operating lease rentals and other hire charges – Plant and machinery 30.8 27.5 – 27.5Operating lease rentals and other hire charges – Other 6.5 8.0 – 8.0Auditors’ fees and expenses – Audit1 1.6 1.6 – 1.6Auditors’ fees and expenses – Non-audit (UK only) 0.1 0.2 – 0.2Exchange gains – (0.9) – (0.9)Profit on sale of tangible fixed assets – (2.0) – (2.0)Income from fixed asset investments (2.0) (2.8) – (2.8)Profit on sale of fixed asset investments – (2.9) (3.9) (6.8)Provisions against fixed asset investments 0.1 0.3 13.6 13.9Loss on sale of business – – 2.7 2.7Advertising 9.1 9.9 – 9.9Other operating charges 424.82 391.2 59.7 450.9Other operating income (20.2) (27.7) (11.8) (39.5)
05 05 05 05
3 914.5 4 076.1 82.0 4 158.105 05 05 051Including £0.3 million (1997 – £0.3 million) relating to the audit of the Company.2Including the exceptional costs of the £4.5 million European Union fine and the £10.1 million Greek grain purchasing irregularity.
The Group spent £16.3 million (1997 – £22.4 million) on research and development during the year.
Exceptionalitems Minority
before tax Tax interests3 Exceptional Items £ million £ million £ million £ million
0000000000000051
1997North American Business Improvement Project 29.9 (10.4) (0.4) 19.1Write-off of goodwill and write-down of assets associated
with under-performing businesses 59.9 (1.2) (9.8) 48.9Termination payment on long-term power contract 7.9 (3.2) (1.7) 3.0Profit on sale of Eurolysine investment (3.9) – 2.6 (1.3)Credit relating to insurance claim arising from 1996
explosion at Scottsbluff facility (11.8) – – (11.8)05 05 05 05
82.0 (14.8) (9.3) 57.905 05 05 051998European Union fine (4.5) – – (4.5)Greek grain purchasing irregularity (10.1) – 3.7 (6.4)Profit on sale of fixed assets 13.2 (2.2) (0.6) 10.4
05 05 05 05
(1.4) (2.2) 3.1 (0.5)05 05 05 05
In the statement of cash flows, the European Union fine has no cash impact in 1998. The Greek grain purchasing irregularity is included in cash flow from operating activities. The proceeds from the sale of fixed assets are included in the amounts shown for sale of tangible fixed assets, fixed asset investments, businesses or joint ventures and associates as appro p r i a t e .
1998 19974 Staff Costs £ million £ million
0000000000000051
Wages and salaries 312.5 336.3Social security costs 34.2 37.6Pension costs 17.0 17.1Other post-retirement benefits 8.6 10.2
05 05
372.3 401.205 05Details of directors’ remuneration are given in the Remuneration and Appointments Committee’s report onpages 34, 35 and 36.
TA T E & L Y L E 47
1998 19975 Interest Payable and Similar Charges £ million £ million
0000000000000051
On bank loans and overdrafts 55.8 54.9On all other loans 48.1 38.5
05 05
103.9 93.4Interest capitalised as part of tangible fixed asset additions (4.6) (4.8)
05 05
99.3 88.605 05Interest costs include aggregate finance charges in respect of leases amounting to £0.3 million (1997 – £0.4 million).
6 Taxation0000000000000051
Profit before taxes and minority interests:United Kingdom 28.8 (3.6)Overseas 136.6 162.9
05 05
165.4 159.305 05UK taxationOn profit of the Company and subsidiaries for the period:UK corporation tax at 31% (1997 – 32%) 25.1 18.9Double taxation relief (16.1) (18.9)
05 05
9.0 –Deferred taxation 0.2 0.4On Group share of profits of joint ventures 0.1 0.6On Group share of profits of associates 0.2 –Adjustments to previous years – corporate taxation (3.8) 2.6Adjustments to previous years – deferred taxation (0.4) (0.2)
05 05
5.3 3.405 05
Overseas taxationCorporate taxation 22.8 37.0Deferred taxation 14.0 2.0On Group share of profits of joint ventures 4.6 4.9On Group share of profits of associates 0.1 0.7Adjustments to previous years – corporate taxation (0.8) 1.2Adjustments to previous years – deferred taxation (2.0) 1.1
05 05
38.7 46.905 05
Group taxation charge 44.0 50.305 05
7 Dividends Paid and Proposed0000000000000051
Dividends on non-equity shares – 6.5% cumulative preference shares 0.1 0.1Dividends on non-equity shares – 7.25p convertible cumulative redeemable Dividends on non-equity shares – preference shares of 12.5p each 0.2 1.5
05 05
0.3 1.6Dividends on equity shares – ordinary shares 77.6 81.8
05 05
77.9 83.405 05The total ordinary dividend is 17.0p made up as follows:Interim dividend – underlying 5.3p 5.3pInterim dividend – FID enhancement – 1.325pSecond interim / final dividend 11.7p 11.7p
05 05
17.0p 18.325p05 05The interim dividend was paid as a Foreign Income Dividend (‘FID’). A second interim dividend will be paid as anordinary dividend on 6 April 1999 and no further final dividend is recommended. The 1997 dividends were paid as FIDs.
NOTES TO THE FINANCIAL STATEMENTS
48 TA T E & L Y L E
8 Earnings per Share0000000000000051
The basic earnings per share are calculated by dividing profit after taxation and minority interests of £124.0 million
(1997 – £101.7 million) less preference dividend of £0.3 million (1997 – £1.6 million), by the weighted average number
of ordinary shares in issue during the period, 450,968,664 (1997 – 442,730,671).
The diluted earnings per share are calculated on the assumptions that:
(a) the outstanding options over 7,727,107 shares had been exercised and that the funds so generated would be
used to purchase 6,249,087 ordinary shares at the average price during the period of 487p. Options over 156,240
shares have been excluded from the calculation as they are anti-dilutive;
(b) that the issued share capital had been increased by 4,461,425 ordinary shares on conversion of the convertible
cumulative redeemable preference shares.
Assets inLand and Plant and course of
Total buildings machinery construction9 Tangible Fixed Assets £ million £ million £ million £ million
0000000000000051
Gross book value
At 27 September 1997 2 621.1 578.9 1 815.3 226.9
Differences on exchange (153.0) (41.9) (97.4) (13.7)
Businesses acquired 95.4 21.0 73.2 1.2
Businesses sold (39.5) (15.8) (23.6) (0.1)
Additions 199.7 11.1 52.0 136.6
Transfers on completion – 37.8 163.0 (200.8)
Disposals (46.9) (12.1) (30.6) (4.2)05 05 05 05
At 26 September 1998 2 676.8 579.0 1 951.9 145.905 05 05 05
Depreciation0000000000000051
At 27 September 1997 935.2 130.6 804.6 –
Differences on exchange (42.2) (6.7) (35.5) –
Businesses sold (26.5) (9.2) (17.3) –
Charge for period 134.6 19.2 115.4 –
Disposals (31.1) (5.6) (25.5) –05 05 05 05
At 26 September 1998 970.0 128.3 841.7 –05 05 05 05
Net book valueAt 26 September 1998 1 706.8 450.7 1 110.2 145.905 05 05 05At 27 September 1997 1 685.9 448.3 1 010.7 226.905 05 05 05
Analysis of gross book value0000000000000051
Cost 2 561.6 478.4 1 937.3 145.91977 valuation 11.0 0.4 10.6 –1985 valuation 8.4 4.4 4.0 –1988 valuation 0.7 0.7 – –1989 valuation 58.3 58.3 – –1993 valuation 36.8 36.8 – –
05 05 05 05
At 26 September 1998 2 676.8 579.0 1 951.9 145.905 05 05 05
TA T E & L Y L E 49
Land and Plant andbuildings machinery
9 Tangible Fixed Assets (continued) £ million £ million0000000000000051
Original cost of fixed assetsCost (or earliest ascribed value) 531.8 1 948.5Related depreciation (125.8) (832.8)
05 05
At 26 September 1998 406.0 1 115.705 05Assets in course of construction are held at cost.
Freehold Leasehold Bulk liquidTotal Land Buildings Long Short storage
£ million £ million £ million £ million £ million £ million0000000000000051
Analysis of land and buildingsGross book value 579.0 82.3 417.9 26.0 14.2 38.6Depreciation (128.3) – (99.5) (6.4) (0.9) (21.5)
05 05 05 05 05 05
Net book valueat 26 September 1998 450.7 82.3 318.4 19.6 13.3 17.105 05 05 05 05 05At 27 September 1997 448.3 86.5 302.5 19.0 16.8 23.505 05 05 05 05 05
Leased assetsIncluded in the tangible fixed assets are the following capitalised values and related accumulated depreciation for assetsbeing acquired under finance leases:
Land and Plant andbuildings machinery£ million £ million
0000000000000051
Capitalised value 1.4 23.4Depreciation (0.9) (12.9)
05 05
Net book value at 26 September 1998 0.5 10.505 05
Land and Plant andTotal buildings machinery
Tate & Lyle PLC £ million £ million £ million0000000000000051
Cost 3.5 0.1 3.4Depreciation (2.4) – (2.4)
05 05 05
Net book value at 26 September 1998 1.1 0.1 1.005 05 05At 27 September 1997 3.7 2.1 1.605 05 05Expenditure in the period amounted to £0.5 million and depreciation charged was £0.4 million. The net book value ofdisposals was £2.7 million.
NOTES TO THE FINANCIAL STATEMENTS
50 T AT E & L Y L E
1998 199710 Fixed Asset Investments £ million £ million
0000000000000051
Group
Joint ventures – unlisted 132.9 127.3
Associates – unlisted 14.0 13.7
Other fixed asset investments:
Listed – at cost 1 8.2 18.1
Unlisted – at cost less amounts provided of £1.2 million (1997 – £3.4 million)2 11.0 14.0
Loans 18.9 14.905 05
Total 185.0 188.005 051Market value £9.5 million (1997 – £39.5 million).2Directors’ valuation £11.2 million (1997 – £14.3 million).
Tate & Lyle PLC0000000000000051
Shares in Group undertakings at cost or earliest ascribed value 1 372.3 1 372.3
Revaluation additions 7.2 7.205 05
1 379.5 1 379.5
Loans to Group undertakings less amounts provided of £9.3 million (1997 – £9.3 million) 963.3 794.8
Shares in joint ventures at cost less acquisition goodwill of £4.8 million written off (1997 – £4.8 million) 4.5 4.5
Other 0.1 0.105 05
2 347.4 2 178.905 05
1998 1998Joint Other equity Tate &
ventures Associates investments Loans Group Lyle PLCMovement in book value £ million £ million £ million £ million £ million £ million0000000000000051
At 27 September 1997 127.3 13.7 32.1 14.9 188.0 2 178.9
Differences on exchange (18.9) (2.4) (1.7) (0.7) (23.7) (0.1)
Additions 38.7 3.4 1.5 0.1 43.7 –
Goodwill (14.3) – – – (14.3) –
Reclassification 0.9 (0.9) (2.7) 4.6 1.9 –
Disposals – (0.1) (10.0) – (10.1) –
Increase in loans to
Group undertakings – – – – – 168.6
Retained profits of
joint ventures and associates 0.6 0.3 – – 0.9 –
Movement in provisions (1.4) – – – (1.4) –05 05 05 05 05 05
At 26 September 1998 132.9 14.0 19.2 18.9 185.0 2 347.405 05 05 05 05 05
TA T E & L Y L E 51
1998 1997Group Group
11 Stocks £ million £ million0000000000000051
Raw materials, consumables and in-process stocks 207.9 238.7
Contract work in progress 0.5 3.7
Finished goods and goods held for resale 160.9 146.0
New crop expenditure 18.3 20.505 05
387.6 408.905 05Contract work in progress stated after deduction of progress payments received and receivable of £nil million
(1997 – £0.2 million).
1998 1997 1998 1997Tate & Tate &
Group Group Lyle PLC Lyle PLC12 Debtors £ million £ million £ million £ million
0000000000000051
Due within one year
UK taxation 35.4 7.4 70.9 29.3
Overseas taxation 2.9 – – –
Trade debtors 345.6 430.9 – –
Owed by subsidiary undertakings – – 1.6 1.8
Owed by joint ventures and associates 12.9 9.6 – –
Other debtors 78.3 63.5 0.7 1.0
Prepayments and accrued income 34.0 38.6 169.6 208.105 05 05 05
509.1 550.0 242.8 240.205 05 05 05Due after one year
Deferred taxation 42.6 55.9 – 13.3
Owed by joint ventures and associates – 0.2 – 0.2
Other debtors 26.5 34.7 1.3 0.6
Prepayments and accrued income 7.7 12.3 – –05 05 05 05
76.8 103.1 1.3 14.105 05 05 05
13 Current Asset Investments0000000000000051
Listed on overseas exchanges 73.1 82.3 – –
Unlisted investments 1.3 5.3 – –
Loans, short-term deposits and unlisted fixed interest securities 110.9 77.5 – –05 05 05 05
185.3 165.1 – –05 05 05 05Included in the above are deposits of £15.0 million (1997 – £14.5 million) pledged as security for loans to joint ventures
and associates. In addition deposits of £19.9 million (1997 – £24.4 million) are pledged as security for loans to other
subsidiaries.
NOTES TO THE FINANCIAL STATEMENTS
52 T AT E & L Y L E
1998 1997 1998 1997Tate & Tate &
Group Group Lyle PLC Lyle PLC14 Creditors – borrowings £ million £ million £ million £ million
0000000000000051
Due within one year
Current portion of long-term creditors 90.3 33.7 – –
Bank overdrafts – secured 3.3 5.1 – –
Bank overdrafts – unsecured 32.4 65.5 0.2 0.6
Other bank loans – secured 18.3 21.3 – –
Other bank loans – unsecured 224.9 136.6 – –
Short-term loans – secured 2.7 4.1 – –
Short-term loans – unsecured 38.7 12.5 – –
Owed to subsidiary undertakings – – 1 749.6 1 585.405 05 05 05
410.6 278.8 1 749.8 1 586.005 05 05 05Lenders of secured loans have a charge over certain tangible fixed assets.
15 Creditors – other0000000000000051
Due within one year
Trade creditors 285.6 293.1 – –
Accruals and deferred income 138.4 154.1 2.5 2.9
Owed to subsidiary undertakings – – 10.5 13.3
Payments received on account 0.4 4.6 – –
Other creditors 53.5 53.3 1.2 1.0
Social security 13.7 12.1 0.8 0.8
Owed to joint ventures and associates 3.5 4.7 0.3 0.105 05 05 05
495.1 521.9 15.3 18.105 05 05 05
Overseas taxation 11.1 15.0 – –
UK taxation 6.0 8.2 0.2 7.4
Proposed dividends
– holders of Tate & Lyle PLC shares 53.4 52.7 53.4 52.7
– minority interests in subsidiary undertakings 1.8 1.1 – –05 05 05 05
72.3 77.0 53.6 60.105 05 05 05
567.4 598.9 68.9 78.205 05 05 05Due after more than one year
Accruals and deferred income 2.7 4.1 – –
Other 7.8 7.7 – –05 05 05 05
10.5 11.8 – –05 05 05 05
Creditors due after more than one year fall due as follows:
0000000000000051
Over one year and up to two years 0.8 1.6
Over two years and up to five years 1.6 1.8
Over five years 8.1 8.405 05
10.5 11.805 05
TA T E & L Y L E 53
1998 1997 1998 1997Tate & Tate &
Group Group Lyle PLC Lyle PLC16 Borrowings – due after more than one year £ million £ million £ million £ million
0000000000000051
Debentures, loans and overdrafts
Industrial revenue bonds 1998/2005 (US$29,560,000)1 17.4 19.2 – –
8% Guaranteed Bonds 1999 (£100,000,000) 99.9 99.8 – –
6.545% Partially Guaranteed Secured Bonds 2000(US$500,000,000) 41.0 58.3 – –
Variable convertible bonds 2000 (FFr350,000,000) 41.2 40.0 – –
67⁄8% Guaranteed Bonds 2001 (US$150,000,000) 87.8 93.0 – –
Other variable unsecured loans 24.9 31.1 – –
Other fixed unsecured loans 26.5 27.7 1.7 1.7
Other fixed secured loans 1.0 – – –
Obligations under finance leases 4.2 4.6 – –05 05 05 05
343.9 373.7 1.7 1.705 05 05 05
Bank loans and overdrafts
Variable unsecured 1999 (US$50,000,000) 29.4 31.1 – –
Variable unsecured 1999 (US$51,500,000) 30.2 32.1 – –
Variable unsecured 2002 (US$75,000,000) 44.1 46.7 – –
Variable unsecured 2002 (US$50,000,000) 29.4 31.1 – –
Variable unsecured other 234.1 241.7 – –
7.863% unsecured 2001 (£163,756,230) 163.8 163.8 – –
Fixed unsecured other 2.8 3.8 – –05 05 05 05
533.8 550.3 – –05 05 05 05
Less portion of borrowings due within one year (90.3) (33.7) – –05 05 05 05
787.4 890.3 1.7 1.705 05 05 051$23.7 million held at variable interest rates, the balance is held at fixed interest rates from 5.0% to 6.25%.
Maturity of borrowings
Over one year and up to two years 212.0 111.7 – –
Over two years and up to three years 329.7 201.7 – –
Over three years and up to four years 179.3 335.2 – –
Over four years and up to five years 58.7 190.1 – –
Over five years 7.7 51.6 1.7 1.705 05 05 05
787.4 890.3 1.7 1.705 05 05 05£71.6 million of borrowings falling due after more than one year are repayable by instalments. £7.7 million of borrowings
maturing after five years are repayable other than by instalments.
The Group has further undrawn committed multicurrency facilities of £273.7 million, which expire as follows:
1998£ million
0000000000000051
Within one year –
Over one year and up to two years 14.7
Over two years and up to five years 29.4
Over five years 229.605
273.705These facilities incur commitment fees at market rates. The facilities may only be withdrawn in the event of specified
events of default. In addition the Group has substantial uncommitted facilities.
NOTES TO THE FINANCIAL STATEMENTS
54 TA T E & L Y L E
16 Borrowings – due after more than one year (continued)0000000000000051
Tate & Lyle PLC has guaranteed all payments to be made in respect of the 8% Bonds and of the 67⁄8% Bonds
unconditionally. The rights of the bondholders against Tate & Lyle PLC on a winding up would be equivalent to those
of all other unsecured and unsubordinated creditors.
The US$500 million 6.545% bonds, which were issued by a US subsidiary undertaking, are secured by a bank
letter of credit which will satisfy the principal amount of the bonds at maturity (or, on acceleration, its present value).
The annual coupons on the bonds (or, on acceleration, their present value) are guaranteed by Tate & Lyle PLC which
has also purchased the bondholders’ rights to recover from the subsidiary the amount secured by the letter of credit.
Therefore at the level of the US subsidiary undertaking the bonds are fully recourse, however, by virtue of the foregoing
arrangements, the liability of the Group is limited to £41.0 million (1997 – £58.3 million) (representing the net present
value of the coupons payable over the life of the bonds). The rights of the bondholders against Tate & Lyle PLC on a
winding up would be equivalent to those of all other unsecured and unsubordinated creditors.
The FFr350 million variable convertible bonds were issued by Orsan SA, a subsidiary in which Amylum Belgium NV
has an 80.4% interest. Unless the options referred to below are exercised, the bonds will be redeemed in April 2000 for
FFr381.5 million. At the option of the bondholders, each bond is convertible into 4 shares of Orsan in April 2000.
Arrangements are in place to ensure that there will be no dilution of the Group’s interest in Orsan.
On 10 June 1996, £190.5 million 53⁄4% Guaranteed Bonds were redeemed for £163.8 million and replaced by
borrowings with substantially the same terms. The premium on redemption of £23.3 million is being amortised over the
life of the replacement debt and is treated as a payment of interest in the statement of cash flows. The £163.8 million
7.863% unsecured borrowings due 2001, which replaced the Guaranteed Bonds, were fully drawn by a UK subsidiary
undertaking and are guaranteed on a subordinated basis by Tate & Lyle PLC. The effective rate of interest (including
both coupon and accrued issue discount) on the 53⁄4% Guaranteed Bonds, was 13.3%.
On 31 March 1998, in order to repay an intra-Group loan of US$650 million, a US subsidiary made a bank
borrowing of US$650 million. Another Group company guaranteed the principal amount of this borrowing through
letters of credit issued by banks backed by financial assets of that company in an amount equal to the principal. These
arrangements make this borrowing in substance non-recourse to the Group as to principal in the event of default and
accordingly the borrowing and the financial assets have been offset in these accounts.
Debentures, loans and overdrafts of £2.3 million at 26 September 1998 are secured against certain tangible fixed
assets. Finance lease obligations are secured against the assets concerned.
Other Post17 Provisions for Liabilities Deferred Insurance Retirement
Total taxation funds Pensions Benefits Otherand Charges £ million £ million £ million £ million £ million £ million0000000000000051
Group
At 27 September 1997 252.1 14.4 39.3 42.0 114.9 41.5
Differences on exchange (14.5) (0.2) (2.3) (2.5) (7.1) (2.4)
Businesses acquired 1.6 (0.9) – 1.1 1.4 –
Utilised in period (17.8) (2.3) (0.2) (2.4) (6.2) (6.7)
Profit and loss account 28.0 11.1 0.8 3.6 8.6 3.9
Advance Corporation Tax 0.7 0.7 – – – –05 05 05 05 05 05
At 26 September 1998 250.1 22.8 37.6 41.8 111.6 36.305 05 05 05 05 05Of the provisions set up on the acquisitions of subsidiary companies, £0.6 million has been utilised in the year.
£2.4 million has been released to the profit and loss account. Depending on their nature, acquisition provisions are
classified as creditors (note 15) or as provisions for liabilities and charges.
An additional £0.9 million was charged to the profit and loss account of Tate & Lyle PLC during the year and
£0.9 million was utilised. Therefore the pension provision has been maintained at £1.9 million.
TA T E & L Y L E 55
1998 1997 1998 1997Tate & Tate &
Group Group Lyle PLC Lyle PLC17 Provisions for Liabilities and Charges (continued) £ million £ million £ million £ million
0000000000000051
Analysis of deferred taxation
Assets recognised
UK – other timing differences (10.5) (8.4) (0.8) (0.6)
UK – Advance Corporation Tax recoverable – (13.3) – (12.7)
Overseas – post-retirement benefits (42.6) (43.3) – –
Overseas – other timing differences (10.3) (11.7) – –05 05 05 05
(63.4) (76.7) (0.8) (13.3)
Assets included as debtors in note 12 42.6 55.9 – 13.305 05 05 05
(20.8) (20.8) (0.8) –
Liabilities provided
UK – capital allowances 9.4 7.6 – –
Overseas – on fixed assets 28.6 19.1 – –
Overseas – other timing differences 5.6 8.5 – –05 05 05 05
Deferred taxation liabilities provided 22.8 14.4 (0.8) –05 05 05 05Potential assets
UK – other timing differences (10.8) (12.9) (0.8) (0.6)
UK – Advance Corporation Tax recoverable – (13.3) – (12.7)
Overseas – post-retirement benefits (42.6) (43.3) – –
Overseas – other timing differences (89.5) (76.9) – –
Potential liabilities
UK – capital allowances 46.3 41.2 – –
Overseas – on fixed assets 194.0 187.8 – –
Overseas – other timing differences 5.6 8.1 – –05 05 05 05
Potential full deferred taxation provision 103.0 90.7 (0.8) (13.3)05 05 05 05Deferred tax on earnings to be retained overseas is not provided except to the extent that there is an intention to remit
them in the foreseeable future.
18 Post-retirement Benefits0000000000000051
The Group maintains pension plans for its operations throughout the world. Most of these programs are defined benefit
pensions schemes with retirement, disability, death and termination income benefits. The retirement income benefits are
generally a function of years of employment and final salary.
The assets of the schemes are held in separate trustee-administered funds. The schemes are funded in line
with local practice and contributions are assessed in accordance with the advice of the local actuary in each case.
The schemes operated by the Group are subject to independent actuarial valuation at regular intervals using consistent
assumptions appropriate to conditions prevailing in the relevant country.
The main scheme is the Tate & Lyle Group Pension Scheme with benefits related to service and final salary.
A valuation was made as at 31 March 1997 by a qualified actuary using the projected unit method. The principal
actuarial assumptions made were that, over the long term, the total return on future investments will be 7.64% per
annum; remuneration will increase at between 4.54% and 5.31% per annum, the rate of retail price future inflation will be
3.50% per annum and dividend growth will be 5.00% per annum in the short term reducing to 4.02% in the long term.
Provision was made for the pension increases provided under the rules of the Scheme. The valuation disclosed a surplus
which the actuary advised is sufficient to support the continued suspension of contributions until the result of the next
actuarial valuation, due to be made as at 31 March 1999, is available.
NOTES TO THE FINANCIAL STATEMENTS
56 TA T E & L Y L E
18 Post-retirement Benefits (continued)0000000000000051
In aggregate at the date of the most recent actuarial valuation, the market value of assets of the schemes in surplus was
£858.6 million and of those schemes in deficit was £33.4 million. The actuarial value of the assets was sufficient to cover
108% and 76% respectively of the benefits accrued to members, after allowing for future salary increases.
The Group also maintains some fully insured schemes, multi-employer pension arrangements and defined
contribution pension arrangements.
The Group’s subsidiaries in the United States provide healthcare and life assurance benefits to their employees.
The arrangements are unfunded. Valuations are conducted annually by a qualified actuary using the projected unit
method. The principal actuarial assumptions were that medical inflation will increase by 7% in 1998 reducing ultimately
to 6%; a discount rate of 7% was used.
1998 1997 1998 1997Tate & Tate &
Group Group Lyle PLC Lyle PLC19 Contingent Liabilities £ million £ million £ million £ million
0000000000000051
Guarantees of loans and overdrafts of subsidiaries,joint ventures, associates and former subsidiaries1 0.2 3.5 817.4 753.2
Trade guarantees 10.0 11.1 – –05 05 05 051£0.2 million has been advanced (1997 – £3.5 million); Tate & Lyle PLC £817.4 million (1997 – £753.2 million).
Other trade guarantees have been given in the normal course of business by the Group and by Tate & Lyle PLC at both
26 September 1998 and 27 September 1997. These are excluded from the figures given above and are in respect of
Customs and Excise and Intervention Board for Agricultural Produce bonds, ECGD recourse agreements, letters of
credit and tender and performance bonds.
A subsidiary company of the Group has received a £9.3 million claim for the past discharge of cooling water
without authorisation. During the year the courts ruled against the Company for a proportion of the claim relating to
earlier years. The Company has appealed against the ruling and continues to vigorously contest the entire assessment
on the grounds that proper applications were filed at the time in question and that subsequent authorisation was
granted. In addition there are a number of other legal claims or potential claims arising in the ordinary course of
business against the Group, the outcome of which cannot at present be foreseen. The Company is vigorously
contesting these claims and, in the opinion of the directors, after taking legal advice, no significant liability will arise.
20 Related Party Transaction0000000000000051
In August 1997 the Trustees of the Tate & Lyle Group Pension Scheme for UK employees decided to sell £200.0 million
of equities and buy an equivalent amount of index-linked gilts. To facilitate the transaction the Group’s treasury
subsidiary provided a loan facility. £170.0 million was drawn down by the pension fund on 4 September 1997.
The loan balance on 27 September 1997 was £2.5 million plus accrued interest of £178,000. Final repayment was
made on 30 September 1997. Interest at 7 1⁄2% totalling £179,000 was charged on the loan, based on the Lloyds Bank
base rate +1⁄2%.
TA T E & L Y L E 57
21 Financial Commitments0000000000000051
The Group leases railway wagons, vehicles, plant and equipment and office buildings through non-cancellable operating
leases. Certain of these leases contain escalation clauses, renewal options and purchase options.
1998 1997 1998 1997Tate & Tate &
Group Group Lyle PLC Lyle PLC£ million £ million £ million £ million
0000000000000051
(a) Commitments under operating leases to payrentals for the next year
Annual commitments in respect of plant andmachinery operating leases which expire:
– within one year 2.7 1.6 – –
– between second and fifth years 12.4 10.6 0.1 –
– over five years 9.9 9.6 – –05 05 05 05
25.0 21.8 0.1 –05 05 05 05Annual commitments in respect of land andbuilding operating leases which expire:
– within one year 0.4 0.3 – –
– between second and fifth years 0.5 0.4 – –
– over five years 3.8 4.4 1.3 1.605 05 05 05
4.7 5.1 1.3 1.605 05 05 05(b) Commitments under operating leases to payrentals in future years
within one year 29.7 24.0
in second year 23.9 23.8
in third year 19.2 19.6
in fourth year 16.5 15.6
in fifth year 14.5 14.6
more than five years 81.0 91.605 05
184.8 189.205 05(c) Contracts for capital expenditure
Expenditure contracted for but not provided for in
the financial statements is estimated at 21.3 38.1 – –05 05 05 05
NOTES TO THE FINANCIAL STATEMENTS
58 TA T E & L Y L E
1998 199722 Share Capital £ million £ million
0000000000000051
Authorised share capital of Tate & Lyle PLC
2,394,000 61⁄2% cumulative preference shares of £1 each (1997 – 2,394,000) 2.4 2.4
790,424,000 ordinary shares of 25p each (1997 – 683,057,915) 197.6 170.8
Nil 7.25p (net) dividend convertible cumulative redeemablepreference shares of 12.5p each (1997 – 214,732,170) – 26.8
05 05
200.0 200.005 05Allotted and fully paid
2,394,000 61⁄2% cumulative preference shares of £1 each (1997 – 2,394,000) 2.4 2.4
456,336,316 ordinary shares of 25p each (1997 – 446,209,755) 114.1 111.6
Nil 7.25p (net) dividend convertible cumulative redeemablepreference shares of 12.5p each (1997 – 18,557,257) – 2.3
05 05
116.5 116.305 05Details of shares allotted during the year are given in the Directors’ Report.
The rate of dividend of the 61⁄2% cumulative preference shares is 4.55% plus the associated tax credit. On a
return of capital on a winding-up, the holders of 61⁄2% cumulative preference shares shall be entitled to £1 per share,
in preference to all other classes of shareholders. Holders of these shares are entitled to vote at meetings, except on
the following matters: any question as to the disposal of the surplus profits after the dividend on these shares has been
provided for, the election of directors, their remuneration, any agreement between the directors and the Company, or
the alteration of the Articles of Association dealing with any of such matters.
The remaining outstanding convertible preference shares were converted to ordinary shares during the year.
Rights associated with options granted under the executive share option scheme vest 3 years after the date of grant
and are exercisable within 10 years after date of grant, generally at a price equal to market price on grant date. The
exercise of executive share options granted after November 1995 is subject to the Group achieving an increase in diluted
earnings per share of 6% more than the increase in the UK Retail Price Index during any period of three consecutive
financial years over the life of the grant. Rights associated with options granted under the SAYE share option scheme vest
3, 5 or 7 years after the date of grant, the period being specified at the grant date. SAYE options are exercisable within six
months after the date on which rights are vested, generally at a price 20% below market price on grant date.
No. of Total sharesAnalysis of Ordinary Shareholders holdings % thousands %0000000000000051
At 26 September 1998 by size of holdingUp to 500 shares of 25p each 5 191 24.3 1 327 0.3
501 – 1 000 4 800 22.4 3 650 0.8
1 001 – 1 500 3 361 15.7 4 187 0.9
1 501 – 2 000 2 076 9.7 3 675 0.8
2 001 – 5 000 4 077 19.1 12 435 2.7
5 001 – 10 000 902 4.2 6 218 1.3
10 001 – 200 000 784 3.7 36 798 8.1
200 001 – 500 000 86 0.4 26 824 5.9
Above 500 000 108 0.5 361 222 79.205 05 05 05
21 385 100.0 456 336 100.005 05 05 05
TA T E & L Y L E 59
22 Share Capital (continued)0000000000000051
At 26 September 1998, options had been granted and were still outstanding under the Company’s share option
schemes. The number of shares issuable and the subscription prices have been adjusted in accordance with the rules
of each scheme to take account of the rights issue made in May 1988 and the share split in January 1989.
Savings related Executiveschemes schemes Total
0000000000000051
Range of option exercise prices (pence) 300–387 208.25–498 208.25–498
Weighted average exercise price (pence) 358 423 396
Weighted average remaining life (months) 39 70 55
Options granted, exercised and lapsed under the Company’sshare option schemes were as follows:
Outstanding at 27 September 1997 3 726 070 4 785 415 8 511 485
Granted 763 021 783 188 1 546 209
Exercised (805 453) (933 971) (1 739 424)
Lapsed (413 423) (21 500) (434 923)05 05 05
Outstanding at 26 September 1998 3 270 215 4 613 132 7 883 34705 05 05Options exercisable at 27 September 1997 30 702 2 639 965 2 670 667
Options exercisable at 26 September 1998 10 688 2 528 000 2 538 688
At 26 September 1998 9,527,689 shares were available to be granted as options (1997 – 14,810,399).
Ordinary Shares1998 1997
0000000000000051
Directors’ interests
S Gifford 77 461 31 339
K G G Hopkins 1 610 1 610
L G Pillard 6 874 5 374
C Piwnica 2 612 2 612
Lady Prior 6 739 6 739
S Strathdee 11 637 7 090
Sir Saxon Tate 114 954 114 954
J F Taylor 6 042 6 042
Lord Walker 10 000 10 000
J H W Walker 12 597 12 523
L R Wilson 142 036 142 036
A M Yurko 2 000 2 000
Included in the interests of Sir Saxon Tate are holdings totalling 14,407 ordinary shares which are classed as trustee
interests. All other directors’ interests are beneficially held. There were no changes in directors’ interests in the
period from 26 September 1998 to 24 November 1998 other than 8 additional shares acquired for a Corporate PEP
owned by Mr S Gifford. No director had interests in any class of shares other than ordinary shares. The Register of
D i rectors’ Interests, which is open to inspection, contains full details of d i rectors’ shareholdings and options to
s u b s c r i b e for share s .
NOTES TO THE FINANCIAL STATEMENTS
60 T AT E & L Y L E
22 Share Capital (continued)0000000000000051
Substantial Interests in Share Capital
The following notification of significant shareholders’ interest had been received by 24 November 1998 under the
provisions of the Companies Act 1985.% of ordinary
Number of issued shareshares capital notified
0000000000000051
Material interest
Archer-Daniels-Midland Company 27 517 173 6.03
Non-material interest
Franklin Resources, Inc (formerly Templeton Global Investors Inc) 77 600 060 17.00
Share Revaluation Profit and Otherpremium reserve loss reserves Total
23 Reserves £ million £ million £ million £ million £ million0000000000000051
Group
At 27 September 1997 370.7 37.4 437.8 30.7 876.6
Differences on exchange1 – (1.0) (92.1) (1.5) (94.6)
Issue of shares 5.8 – – – 5.8
Retained profit – – 46.1 – 46.1
Goodwill arising on acquisitions – – (29.9) – (29.9)
Goodwill transferred to profit and loss account – – 10.3 – 10.3
Other transfers – (1.0) (1.3) 2.3 –05 05 05 05 05
At 26 September 1998 376.5 35.4 370.9 31.5 814.305 05 05 05 05Company
At 27 September 1997 370.7 – 282.1 – 652.8
Issue of shares 5.8 – – – 5.8
Retained loss – – (4.8) – (4.8)05 05 05 05 05
At 26 September 1998 376.5 – 277.3 – 653.805 05 05 05 051Differences on exchange include £20.4 million increase in shareholders’ funds in respect of differences arising on the retranslation of foreign currency
borrowings used to hedge equity investments in foreign enterprises.
The profit dealt with in Tate & Lyle PLC was £73.1 million.
The amount of depreciation provided in the period on the book value of tangible fixed assets which represents
revaluation surpluses has been transferred from revaluation reserve to profit and loss account.
The revaluation reserve arises as a consequence of carrying certain tangible fixed assets of subsidiaries in the
balance sheet at valuations determined in years up to 1993.
Other reserves are non-distributable and include statutory reserves of overseas subsidiaries amounting to
£29.6 million (1997 – £28.3 million). Cumulative post-acquisition retained losses of joint ventures and associates
amounted to £10.1 million (1997 – profits of £0.5 million). Cumulative goodwill written off to the profit and loss reserve
amounted to £567.5 million (1997 – £547.9 million).
The amount available for the payment of dividends by the parent company at 26 September 1998 was
£277.3 million, being the balance of the profit and loss account.
1998 199724 Shareholders’ Funds £ million £ million
0000000000000051
Non-equity interests
– 61⁄2% cumulative preference shares 2.4 2.4
– 7.25p convertible cumulative redeemable preference shares of 12.5p each – 18.605 05
2.4 21.0
Equity interests 928.4 971.905 05
Shareholders’ funds 930.8 992.905 05
TA T E & L Y L E 61
1998 199725 Net Cash Inflow from Operating Activities £ million £ million
0000000000000051
Operating profit 202.8 194.5
Depreciation of tangible fixed assets 134.6 144.7
Change in working capital (Note 26) 55.7 42.9
Profit on sale of tangible fixed assets, fixed asset investments and business (Note 2) – (6.1)
Goodwill transferred from reserves – 18.7
Provisions against fixed asset investments 1.4 13.905 05
394.5 408.605 05
26 Change in Working Capital0000000000000051
(Reduction) in stocks (Note 11) (21.3) (47.8)
(Reduction)/increase in debtors (Note 12) (67.7) 3.9
(Reduction) in debtors due after more than one year (Note 12) (13.0) (5.3)
Reduction in creditors (Note 15) 28.1 20.0
Reduction/(increase) in provisions for liabilities and charges (Note 17) 10.4 (9.8)05 05
Movement over period (63.5) (39.0)
Differences on exchange 7.6 6.4
Acquisitions and disposals during period 19.8 0.7
Other (19.6) (11.0)05 05
(55.7) (42.9)05 05Working capital includes provisions and excludes taxation, dividends and items affecting total Group borrowings. Other
movements represent the elimination of balances within debtors and creditors attributable to interest, tangible fixed
assets and fixed asset investments.
28 September Cash Non-cash1 Exchange 27 September1996 flow movements movements 1997
27 Cash Flow/Net Debt Reconciliation £ million £ million £ million £ million £ million0000000000000051
Current asset investments 329.0 (131.4) – (32.5) 165.1
Cash at banks and in hand 115.9 (9.7) – (11.0) 95.2
Overdrafts (66.5) (12.9) – 8.8 (70.6)05
Cash flow (22.6)05
Other borrowings due within one year (196.8) 8.1 – 14.2 (174.5)
Borrowings due after one year (1 015.7) 37.7 (3.4) 57.4 (924.0)05
45.805 05 05 05 05
(834.1) (108.2) (3.4) 36.9 (908.8)05 05 05 05 0527 September Cash Non-cash1 Exchange 26 September
1997 flow movements movements 1998£ million £ million £ million £ million £ million
0000000000000051
Current asset investments 165.1 30.4 0.7 (10.9) 185.3
Cash at banks and in hand 95.2 (34.9) – (2.3) 58.0
Overdrafts (70.6) 31.1 – 3.8 (35.7)05
Cash flow (3.8)05
Other borrowings due within one year (174.5) (118.9) (3.3) 12.1 (284.6)
Borrowings due after one year (924.0) 19.7 (2.4) 29.0 (877.7)05
(99.2)05 05 05 05 05
(908.8) (72.6) (5.0) 31.7 (954.7)05 05 05 05 051See note 28 on page 62.
Current asset investments are considered to be liquid resources.
NOTES TO THE FINANCIAL STATEMENTS
62 T AT E & L Y L E
1998 199728 Non-cash Movements in Net Debt £ million £ million
0000000000000051
Assumed on acquisition of subsidiaries (2.6) –
Amortisation of bond discount (1.5) (1.5)
New finance leases (0.9) (1.9)05 05
(5.0) (3.4)05 05
29 Fair Value of Financial Instruments used for Risk Management0000000000000051
The fair value is defined as the amount at which a financial instrument could be exchanged in an arm’s length
transaction between informed and willing parties, excluding accrued interest, and is calculated by reference to market
rates discounted to current value. Where market values are not available, fair values have been calculated by
discounting cash flows at prevailing interest and exchange rates. All debt and financial instruments used to manage the
interest rate and currency of borrowings with a maturity of less than three months after the balance sheet date are
assumed to have a fair value equal to the book value. The book values are the amounts recorded in the balance sheet
and include premium payments or receipts which are recognised over the period to which the relevant instrument
relates. Initial margin deposits held by brokers as collateral in respect of open futures positions are excluded from the
book value. The major financial risks facing the Group and the objectives and policies for holding financial instruments
are discussed in the Operating and Financial Review on pages 22 and 23.
The fair value of the Gro u p ’s financial instruments at 26 September 1998 was:
1998 1998 1997 1997Book Fair Book Fairvalue value value value
£ million £ million £ million £ million0000000000000051
Cash at banks and in hand 58.0 58.0 95.2 95.2
Current asset investments 185.3 185.3 165.1 167.0
Borrowings (1 198.0) (1 218.8) (1 169.1) (1 180.5)05 05 05 05
Net borrowings (954.7) (975.5) (908.8) (918.3)
Financial instruments used to manage interestrate and currency of borrowings 0.3 (4.2) 0.3 (1.7)
Other financial instruments (4.4) (10.9) 5.8 (5.3)
Non-equity shares (2.4) (2.3) (21.0) (38.0)
30 Currency and Interest Rate Exposure of Financial Assets and Liabilities0000000000000051
After taking into account the various interest rate and cross currency interest rate swaps entered into by the Group, the
currency and interest rate exposure of the financial liabilities of the Group as at 26 September 1998 was:
Non-interestTotal Fixed rate Floating rate bearing
£ million £ million £ million £ million0000000000000051
Sterling 171.2 165.5 3.3 2.4
United States Dollars 718.4 332.6 381.4 4.4
Canadian Dollars 49.5 – 49.5 –
Australian Dollars 17.0 – 17.0 –
EU currencies (excluding Sterling) 240.1 62.6 175.9 1.6
Others 8.6 0.7 7.9 –05 05 05 05
Total 1 204.8 561.4 635.0 8.405 05 05 05of which
– gross borrowings 1 198.0 561.4 635.0 1.6
– working capital 4.4 – – 4.4
– non-equity shares 2.4 – – 2.405 05 05 05
1 204.8 561.4 635.0 8.405 05 05 05
TA T E & L Y L E 63
Average yearsAverage Average years to maturity of
30 Currency and Interest Rate Exposure interest rate to maturity non-interest(%) of fixed of fixed bearing
of Financial Assets and Liabilities (continued) rate liabilities rate liabilities liabilities10000000000000051
Sterling 10.8 2.6 –
United States Dollars 6.6 3.2 0.5
Canadian Dollars – – –
Australian Dollars – – –
EU currencies (excluding Sterling) 5.3 0.9 4.5
Others 7.6 3.2 –05 05 05
Average 6.6 2.8 1.605 05 051The non-equity shares are not redeemable and so are excluded from this analysis.
The average sterling interest rate of 10.8% reduces to 7.9% if the amortisation of the premium on redemption of the
5.75% Guaranteed Bonds is excluded. The floating rate borrowings, cash and current asset investments bear interest
based on relevant national LIBOR equivalents or government bond rates.
The currency and interest rate exposure of the financial assets of the Group as at 26 September 1998 was:
Non-interestTotal Fixed rate Floating rate bearing
£ million £ million £ million £ million0000000000000051
Sterling 24.0 – 24.0 –
United States Dollars 152.3 – 152.0 0.3
Canadian Dollars 19.5 – 19.5 –
Australian Dollars 3.7 – 3.7 –
EU currencies (excluding Sterling) 28.9 – 28.9 –
Others 15.2 – 15.2 –05 05 05 05
Total/average 243.6 – 243.3 0.305 05 05 05of which
– current asset investments 185.3 – 185.3 –
– cash 58.0 – 58.0 –
– working capital 0.3 – – 0.305 05 05 05
243.6 – 243.3 0.305 05 05 05
Total netGains Losses gains/(losses)
£ million £ million £ million0000000000000051
Unrecognised gains and losses on hedges at 27 September 1997 11.8 (16.8) (5.0)
Deduct: gains and losses arising in previous years that were recognised in 1998 (5.2) 11.4 6.205 05 05
Gains and losses arising before 27 September 1997 that were not recognised in 1998 6.6 (5.4) 1.2
Gains and losses arising in 1998 that were not recognised in 1998 12.6 (22.8) (10.2)05 05 05
Unrecognised gains and losses on hedges at 26 September 1998 19.2 (28.2) (9.0)05 05 05
of which
– gains and losses expected to be recognised in 1999 10.5 (16.2) (5.7)
– gains and losses expected to be recognised in 2000 or later 8.7 (12.0) (3.3)
The instruments used for hedging Group exposure to movements in interest rates, exchange rates and commodity
prices are detailed in the Operating and Financial Review on page 23. Changes in the fair value of instruments used as
hedges are not recognised in the financial statements until the hedged position matures.
NOTES TO THE FINANCIAL STATEMENTS
64 T AT E & L Y L E
31 Currency Analysis of Net Assets0000000000000051
The Group’s borrowings and net assets by currency at 26 September 1998 were:
Net operating 1998 1997assets, dividends Net Total Totaland tax balances borrowings net assets net assets
£ million £ million £ million £ million0000000000000051
Pounds Sterling 284.3 (144.8) 139.5 145.1
United States Dollars 950.9 (562.0) 388.9 444.7
Canadian Dollars 70.5 (30.1) 40.4 39.7
Australian Dollars 122.7 (13.3) 109.4 129.9
EU currencies (excluding Sterling) 386.5 (211.2) 175.3 201.2
Others 226.5 6.7 233.2 203.705 05 05 05
Total net assets 2 041.4 (954.7) 1 086.7 1 164.305 05 05 05The amounts shown above for net borrowings and total net assets are after taking into account various cross currency
interest rate swaps and forward foreign exchange contracts entered into by the Group.
There are no material transactional currency exposures in the Group.
32 Changes in Group Interests0000000000000051
The principal changes in Group interests during the 1998 financial year, all of which were accounted for as
acquisitions, were:
– on 15 January 1998 Staley Holdings Inc acquired a 61.2% interest in the shares, and 50% of the voting rights
of, IMASA for $52 million;
– on 1 July 1998 the citric acid business of Haarmann & Reimer was purchased for $210 million.
The tangible fixed assets of the UK citric acid business were reduced on acquisition by £28.7 million to fair value
of £11.1 million. There were no other material adjustments to book values recorded. The effect of these and other 1998
acquisitions was as follows:
Investment inPurchase of Purchase of other joint
citric acid other ventures and 1998businesses subsidiaries associates Total
£ million £ million £ million £ million0000000000000051
Net assets acquired
Tangible fixed assets 92.0 3.4 – 95.4
Fixed asset investments 7.1 0.1 19.5 26.7
Working capital 24.4 0.9 – 25.3
Minority interests (7.7) – 1.2 (6.5)05 05 05 05
115.8 4.4 20.7 140.905 05 05 05Consideration
Cash paid 112.3 2.4 35.9 150.6
Net borrowings of subsidiaries acquired (1.1) 3.7 – 2.6
Deferred consideration 14.9 – – 14.9
Other – 2.7 – 2.705 05 05 05
126.1 8.8 35.9 170.805 05 05 05
Goodwill arising on consolidation 10.3 4.4 15.2 29.905 05 05 05
33 Post Balance Sheet Events0000000000000051
There are no material post balance sheet events.
TA T E & L Y L E 65
MAIN SUBSIDIARIES AND INVESTMENTS
At 26 September 1998
Proportion of shareSubsidiaries based in the UK 1 Type of business capital held %0000000000000051
Amylum UK Limited3 Cereal sweeteners & starches (63.3) 66.7
Greenwich Distillers Limited Alcohol distillation (63.3) 100
The Molasses Trading Company Limited Holding company 100
Tate & Lyle Holdings Limited2, 3 Holding company 100
Tate & Lyle Industrial Holdings Limited 2 Holding company 100
Tate & Lyle Industries Limited See below 100
Tate & Lyle International Finance PLC2 In-house banking 100
Tate & Lyle Investments Limited2 Holding company 100
Tate & Lyle Investments (USA) Limited Holding company 100
Tate & Lyle Ventures Limited2 Holding company 100
United Molasses (Ireland) Ltd Molasses 50
1Registered in England, except United Molasses (Ireland) Ltd, which is registered in Northern Ireland.2Direct subsidiaries of Tate & Lyle PLC.3Tate & Lyle PLC holds directly 78.5% of Tate & Lyle Holdings Limited and 331/3% of Amylum UK Limited.
Main Operating Units of Tate & Lyle Industries Limited Type of business0000000000000051
Kentships Shipping agents
Speciality Sweeteners High intensity sweeteners
Tate & Lyle Citric Acid Citric acid
Tate & Lyle International Sugar trading
Tate & Lyle Process Technology Sugar technology
Tate & Lyle Sugars Sugar refining
UM Group, comprising:
F S L Bells Animal feeds
Rumenco Animal feeds
United Molasses Molasses
United Storage Bulk liquid storage
UMT Feed mill engineering
Proportion of ordinary share
Subsidiaries operating overseas Type of business capital held %0000000000000051
Australia Bundaberg Distilling Investments Pty Ltd Holding company 100
Bundaberg Foundry Engineers Ltd Sugar mill engineering 100
Bundaberg Sugar Ltd Raw sugar manufacture, sugar refining and molasses 100
Tate & Lyle Bundaberg Ltd Holding company 100
Tate & Lyle Investments (Australia) Pty Limited Holding company 100
Barbados Caribbean Antilles Molasses Company Limited Molasses 100
Belgium Amylum Belgium NV Cereal sweeteners & starches (63.3) 66.7
Tameco NV Molasses 100
Bermuda Tate & Lyle Management & Finance Limited Management & finance 100
Tate & Lyle Reinsurance Limited Reinsurance 100British VirginIslands Anglo Vietnam Sugar Investments Limited Holding company 60
Brazil Mercocitrico Fermentaçoes SA Citric acid 100
Tate & Lyle do Brasil Serviços e Participações Ltda Sugar trading 100
Canada Tate & Lyle North American Sugars Limited Sugar refining 100
China Orsan Guangzhou Gourmet Powder Company Limited Glutamate producer (26.0) 51
Denmark Nordisk Melasse A/S Molasses 100
MAIN SUBSIDIARIES AND INVESTMENTS
At 26 September 1998
66 TA T E & L Y L E
Proportion of ordinary share
Subsidiaries operating overseas (continued) Type of business capital held %0000000000000051
France Amylum Aquitaine Cereal sweeteners & starches (63.3) 100
Amylum France SAS Cereal sweeteners & starches (63.3) 100
Orsan SA Glutamate producer (50.9) 80.4
Société Européenne des Mélasses SA Molasses 66
UMT SA Feed mill engineering 100
Germany Hansa Melasse – Handelsgesellschaft mbH Molasses 100
Universal Milling Technology GmbH Feed mill engineering 100
Greece Amylum Hellas SA Cereal sweeteners & starches (62.4) 98.6
Guyana Caribbean Molasses Company Inc Molasses 100
Hong Kong Tate & Lyle Swire Limited Holding company 67
India Tate & Lyle Investments (India) Pvt Ltd Holding company 100
Italy Melassa Italiana SpA Molasses 100
Kenya East African Storage Company Limited Storage & distribution 100
Mauritius The Mauritius Molasses Company Limited Molasses 66.7
Mexico Mexama, SA de CV Citric acid 65.4
Tate & Lyle Mexico SA de CV Holding company 100
Morocco Amylum Maghreb SA Cereal sweeteners & starches (63.3) 100
Mozambique Companhia Exportadora de Melaços Molasses 100
Netherlands Amylum Nederland BV Cereal sweeteners & starches (63.3) 100
Nederlandsche Melasse Handel Maatschappij BV Molasses 100
Tate & Lyle Holland BV Holding company 100
UMT Boxtel BV Feed mill engineering 100
UMT Deurne BV Feed mill engineering 100
Norway Tate & Lyle Norge A/S Sugar distribution 100
Poland Cukrownia Garbòw SA Sugar beet processing 80
Portugal Alcântara Empreendimentos SGPS, SA Holding company 100
Alcântara Refinarias – Açucares, SA Sugar refining 100
Tate & Lyle (Portugal) Importaçao e Exportaçao Ltda Molasses 100
South Africa The Pure Cane Molasses Company (Durban) (Pty) Ltd Molasses 100
Spain Amylum Ibérica SA Cereal sweeteners & starches (61.4) 97
United Molasses (España) SA Molasses 100
Trinidad Caribbean Bulk Storage and Trading Company Ltd Molasses 100
USA A E Staley Manufacturing Company Cereal sweeteners & starches (90.0) 100
PM Ag Products Inc Animal feeds & molasses 100
Staley Grain Inc Cereal sweeteners & starches (90.0) 100
Staley Holdings Inc Holding company (90.0) 92.7
Tate & Lyle Citric Acid Inc Citric acid 100
Tate & Lyle Finance, Inc In-house banking 100
Tate & Lyle Inc Holding company 100
Tate & Lyle North American Finance Company, LLC Holding company 100
Tate & Lyle North American Sugars, Inc Sugar refining 100
Technostaal Schouten Inc Feed mill engineering 100
TLI Holding Inc In-house banking 100
United Molasses Inc Molasses 100
The Western Sugar Company Sugar beet processing 100
Vietnam Nghe An Tate & Lyle Sugar Company Limited Cane sugar manufacture (42.0) 70
Zambia Zambia Sugar Plc Cane sugar manufacture 50.9
Zimbabwe ZSR Corporation Ltd Sugar refining 50.1
TA T E & L Y L E 67
Particulars of other subsidiaries, joint ventures and associates which are either not material or are dormant will be
included in the forthcoming Annual Return.
The percentage of equity attributable to Tate & Lyle PLC is shown in brackets where it is different from the
proportion of shares held by Tate & Lyle PLC, its subsidiaries, joint ventures and associates.
There are shareholders’ agreements made in September 1988 involving Amylum Belgium NV, CIP (the other
shareholder in Amylum Belgium NV and Amylum UK Limited) and Tate & Lyle. These agreements provide for CIP and
Amylum Belgium NV to sell, at their options, their minority stakes in Staley, Amylum UK and Amylum Belgium NV to
Tate & Lyle. They also provide for them to buy, again at their options, a further 16.67% of Amylum Belgium NV and
Amylum UK in which case Tate & Lyle has the option to buy the minority stake in Staley. In all cases the exercise price
is fair market value. All of the options will expire together on or after 7 September 2003.
Proportion of ordinary share
Joint ventures Type of business capital held %0000000000000051
Argentina Industrias de Maiz SA Cereal sweeteners & starches (55.1) 71.4
Australia Bundaberg Distilling Company Pty Limited Alcohol distillation 50
Bundaberg Rum Company Alcohol marketing 50
Botswana Sugarmark (Pty) Limited Sugar distribution (16.7) 33.3
Bulgaria Amylum Bulgaria AD1 Cereal sweeteners & starches (30.7) 96.9
Colombia Sucromiles SA Citric acid 50
Czech Republic Cukrovar Brodek u Prerova, as2 Sugar beet processing (22.0) 44.1
Cukrovar Kojetin as2 Sugar beet processing (39.6) 90.3
Hanácké Cukrovary as2 Sugar beet processing (43.9) 87.7
Hungary Hungrana kft1 Cereal sweeteners & starches (15.8) 50
Kabai Cukorgyar Rt2 Sugar beet processing (37.3) 74.6
India Chilwaria Sugars Limited Cane sugar manufacture 50
Ireland Premier Molasses Company Ltd Molasses 50
Italy Sedamyl SpA Cereal sweeteners & starches (31.6) 50
Mexico Almidones Mexicanos SA Cereal sweeteners & starches (45.0) 50
Grupo Industrial Azucarero de Occidente SA de CV Cane sugar manufacture 49
Namibia Sugarmark (Namibia) (Pty) Limited Sugar distribution 33.3
Netherlands Eastern Sugar BV Holding company 50
Eaststarch CV Holding company (31.6) 50
Romania Amylum Romania SA1 Cereal sweeteners & starches (25.6) 81
Slovakia Amylum Slovakia spol sro1 Cereal sweeteners & starches (31.6) 100
Juhocukor as2 Sugar beet processing (40.5) 81
Spain Compania de Melazas SA Molasses 50
Turkey Amylum Nisasta1 Cereal sweeteners & starches (31.6) 100
United Kingdom Agricultural Bulk Services (Bristol) Limited Bulk storage 50
Booker Tate Limited Agribusiness 50
USA Midwest PMS Speciality feeds 50
Mountain Lake Manufacturing Cereal sweeteners & starches (45.0) 50
The share capital held is of ordinary shares, except for Bundaberg Rum Company, Mountain Lake Manufacturing and
Midwest PMS, which are unincorporated partnerships.
1Share capital held by Eaststarch CV.2Share capital held by Eastern Sugar BV.
Proportion of ordinary share
Associates Type of business capital held %0000000000000051
India Bharat Starch Industries Limited Cereal sweeteners & starches (36.3) 40.4
Ireland Nutribio Limited Animal feeds 45
Thailand Tapioca Development Corporation Starch production (25.0) 33.3
United Farmer & Industry Company Limited Cane sugar manufacture 20.4
United Kingdom Fletcher Smith Limited Agribusiness 35
INFORMATION FOR INVESTORS
68 TA T E & L Y L E
Addresses and Telephone Numbers0000000000000051
Relevant addresses and telephone numbers are given on the back cover.
Dividends on Ordinary Shares0000000000000051
The 1998 interim dividend was paid as a Foreign Income Dividend on 14 July 1998, details of which were given in theInterim Report.
The 1998 final dividend will be due and payable on 6 April 1999. Payment is being deferred by two months fromthe normal payment date of early February. This will save irrecoverable Advance Corporation Tax.
Services0000000000000051
Personal Equity Plans (PEPs)The Company will continue to offer both a General and a Single Company PEP in Tate & Lyle PLC ordinary shares butnew applications must have been fully processed by 5 April 1999. After that date new PEPs will no longer be available,as announced in the Budget on 17 March 1998. PEPs already in existence on 5 April 1999 may continue to be held.For further details, please contact Bradford & Bingley (PEPs) Nominees Limited, the PEP Manager.
Share Dealing ServiceThe Company’s stockbrokers offer a simple and economic way of buying and selling Tate & Lyle PLC ordinary shares.Basic commission is 1% with a minimum charge of £10. For further details please contact the share dealing service ofHoare Govett Corporate Finance Limited.
Share RegistrationIf you wish your dividends to be paid directly into a bank or building society account, please request a dividendmandate form from Lloyds TSB Registrars (‘LR’). The dividend counterfoil will continue to be posted to the address onthe register.
If you wish to consolidate four or more individual share certificates into a single one, simply send the certificateswith a covering letter to LR.
If you have more than one account, arising from inconsistencies in name or address details, you may avoidduplicate sets of mailings by asking LR to merge the holdings.
Share Price InformationThe latest share price information is available on Teletext and also the Cityline service operated by the Financial Times.Calls are charged at 50p per minute at all times.
Annual ReportFurther copies of this Report can be obtained from the Company Secretary or from Taylor Rafferty Associates inNorth America.
The Company also keeps a mailing list. Investors who hold their shares through a nominee/custodian and whowish to receive all shareholder communications may ask to be added to that list.
Web Site – http://www.tate-lyle.co.ukThe Company web site provides direct links to other Group company sites and to sites providing financial and otherinformation relevant to the Company.
General EnquiriesFor information about the Group’s businesses and for all other investor enquiries please contact the CompanySecretary at the Company’s Registered Office.
T AT E & L Y L E 69
UK Tax0000000000000051
Income Tax If your total income is less than your personal tax allowances you may be able to obtain repayment of some or all ofthe tax credit attached to dividends you have received up to 5 April 1999. If you think you can make a claim, ask yourlocal Tax Office for leaflet IR110. The address is in the telephone book under ‘Inland Revenue’.
Capital Gains TaxThe market values on 31 March 1982 for the purposes of indexation in relation to capital gains tax of Tate & Lyle PLC
shares then in issue were:Ordinary shares of £1 each 201.00pEquivalent value per ordinary share of 25p 50.25p61⁄2% cumulative preference shares (Now 4.55% plus tax credit) 43.50p
ADS Investors 0000000000000051
Tate & Lyle American Depositary Shares (‘ADSs’)The Company’s shares trade in the United States on the NASDAQ over the counter (‘OTC’) market in the form of ADSsand these are evidenced by American Depositary Receipts (ADRs). The shares are traded under the symbol TATYY.Each ADS is equivalent to four ordinary shares. The ADRs are issued by The Bank of New York.
Dividend Payments to ADS HoldersDividend payments to ADS holders are made in US dollars by the depositary, The Bank of New York. Payment will bemade approximately ten days after the UK payment date. The current double taxation convention between the UnitedKingdom and the United States includes provisions which entitle qualifying US resident ADS holders to a refund of anyUK tax credit attaching to the dividend, less a 15% withholding tax charged on the sum of the dividend and the taxcredit. If in doubt you should consult your personal advisor.
Voting at the Annual General MeetingThe next Annual Meeting of shareholders will take place in London in April. ADR holders may instruct The Bank of NewYork how to vote the ordinary shares represented by their ADRs by completing and returning a voting card that will bemailed to them by The Bank of New York.
Financial Calendar0000000000000051
The precise dates of meetings, announcements and dividend payments on ordinary shares have still to be determinedfollowing the change in the year end date. A guide to the calendar is given in the Chairman’s Statement on pages2 and 3.
Dividends on 61⁄2% Cumulative Preference Shares (‘61⁄2%CPS’)(Now 4.55% plus tax credit) Paid 31 March and 30 SeptemberAdvance Corporation Tax is to be abolished on 6 April 1999. The shares will then revert to being 61⁄2% CPS withdividends payable at the rate of 3.25p per share on each payment date.
Interest on Unsecured Loan Stocks8% Unsecured Loan Stock 2003/2008 and101⁄2% Unsecured Loan Stock 2003/2008 Paid 31 March and 30 September
70 TA T E & L Y L E
TEN YEAR REVIEW
Share Information 1989 1990 1991 1992 1993 1994 1995 1996 1997 19980000000000000051111000
Pence per 25p ordinary share
Closing share price 266.0 237.0 396.0 342.0 380.0 434.0 449.0 470.5 438.5 320.0
Earnings – basic 30.9 46.8 38.9 29.3 38.0 43.9 49.7 40.5 22.6 27.4
basic, excludingexceptional items 30.9 34.4 38.9 29.3 38.0 43.9 54.1 40.5 35.7 27.5
Earnings – diluted1 26.8 39.5 32.4 26.1 33.1 38.1 43.7 38.3 22.3 27.1
diluted, excludingexceptional items1 26.8 30.2 32.4 26.1 33.1 38.1 47.2 38.3 35.1 27.2
Dividend payments 9.0 10.0 11.2 12.0 13.0 14.4 16.0 17.0 18.325 17.00000000000000051111000
% Growth in share price
– average annual compoundrate since 1988 32.5% 8.7% 25.4% 14.2% 13.6% 13.7% 12.2% 11.2% 9.1% 4.8%
Closing market capitalisation £million 1 138 1 011 1 697 1 507 1 687 1 933 2 021 2 127 1 993 1 460
Including convertible redeemablepreference shares £million 288 247 377 293 327 372 238 65 36 –
Business Ratios0000000000000051111000
Interest cover – times 3.8 5.3 5.6 5.0 5.7 7.8 6.8 5.8 3.6 3.5Profit before interest less share of joint ventures’ and associates’interest divided by net interest
– excluding exceptional items 3.8 4.4 5.6 5.0 5.7 7.8 7.2 5.8 4.8 3.5
Gearing 176% 74% 81% 89% 78% 64% 59% 70% 78% 88%
Net borrowing as a percentageof net assets
Net margin 8.4% 8.7% 9.2% 7.6% 7.7% 7.9% 8.9% 6.6% 6.6% 5.6%
Profit before interest and exceptionalitems as a percentage of turnover
Return on net operating assets 22.9% 23.6% 24.0% 17.4% 18.7% 20.8% 23.7% 17.6% 14.6% 11.9%
Profit before interest and exceptionalitems as a percentage of average netoperating assets
Dividend cover – times 3.4 4.7 3.5 2.4 2.9 3.0 3.1 2.4 1.2 1.6
Earnings per share divided bydividends per share
– excluding exceptional items 3.4 3.4 3.5 2.4 2.9 3.0 3.4 2.4 1.9 1.6
1Restated in accordance with FRS14 ‘Earnings per Share’.
TA T E & L Y L E 71
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998Employment of Capital £ million £ million £ million £ million £ million £ million £ million £ million £ million £ million0000000000000051111000
Fixed assets 1 061.3 936.5 1 159.7 1 250.1 1 351.3 1 420.7 1 591.7 1 805.1 1 873.9 1 891.8
Working capital 218.3 94.7 144.0 168.9 142.6 143.5 187.4 266.3 227.3 163.8))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110
Net operating assets 1 279.6 1 031.2 1 303.7 1 419.0 1 493.9 1 564.2 1 779.1 2 071.4 2 101.2 2 055.6
Net borrowings (770.5) (403.2) (552.7) (641.9) (626.6) (581.0) (630.4) (834.1) (908.8) (954.7)
Net liabilities for dividends and tax (71.7) (86.4) (65.1) (56.5) (59.7) (73.3) (74.6) (49.8) (28.1) (14.2)))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110
Total net assets 437.4 541.6 685.9 720.6 807.6 909.9 1 074.1 1 187.5 1 164.3 1 086.7))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110Capital Employed
Called up share capital 109.1 109.8 112.4 114.9 115.4 115.8 116.5 115.8 116.3 116.5
Reserves 273.8 361.7 492.0 515.0 594.7 670.5 792.9 882.0 876.6 812.7))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110
382.9 471.5 604.4 629.9 710.1 786.3 909.4 997.8 992.9 929.2
Minority interests 54.5 70.1 81.5 90.7 97.5 123.6 164.7 189.7 171.4 157.5))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110
437.4 541.6 685.9 720.6 807.6 909.9 1 074.1 1 187.5 1 164.3 1 086.7))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110
Profit Summary0000000000000051111000
Turnover 3 176.2 3 117.0 3 054.0 3 135.3 3 538.6 4 016.9 4 451.6 5 160.2 4 651.1 4 466.6))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110Operating profit beforeexceptional items 257.4 268.5 276.8 233.1 259.3 303.0 373.6 309.1 276.5 217.4
Exceptional items – – – – – – (25.5) – (82.0) (14.6)))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110
Operating profit 257.4 268.5 276.8 233.1 259.3 303.0 348.1 309.1 194.5 202.8
Exceptional profit on sale of fixed assets – 51.0 – – – – – – – 13.2
Share of profits of jointventures and associates 9.9 4.2 3.7 4.4 12.8 14.5 23.3 29.9 28.6 30.9))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110
Profit before interest1 267.3 323.7 280.5 237.5 272.1 317.5 371.4 339.0 223.1 246.9
Net interest (70.2) (61.3) (49.7) (47.9) (47.1) (40.0) (53.9) (57.3) (60.9) (67.3)
Share of joint ventures’
and associates’ net interest (0.5) (0.3) – (0.1) (2.5) (3.7) (6.4) (5.4) (2.9) (14.2)))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110
Profit before taxation 196.6 262.1 230.8 189.5 222.5 273.8 311.1 276.3 159.3 165.4
Taxation (63.7) (72.8) (64.8) (49.8) (55.0) (73.7) (84.5) (70.1) (50.3) (44.0)))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110
Profit after taxation 132.9 189.3 166.0 139.7 167.5 200.1 226.6 206.2 109.0 121.4
Minority interests (21.9) (23.5) (22.3) (23.6) (18.3) (29.0) (28.3) (32.2) (7.3) 2.6))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110
Profit for the period 111.0 165.8 143.7 116.1 149.2 171.1 198.3 174.0 101.7 124.0
Dividends (44.0) (48.3) (53.9) (56.8) (60.3) (65.5) (72.9) (77.9) (83.4) (77.9)))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110
Retained profit 67.0 117.5 89.8 59.3 88.9 105.6 125.4 96.1 18.3 46.1))))!110!!110!!110!!110!!110!!110!!110!!110!!110!!110
1Restated in accordance with FRS9 ‘Associates and Joint Ventures’.
72 T AT E & L Y L E
Accounting Policies 44
ADS Investors 69
Alcântara 18
Amylum 18
Animal Feed and Bulk Storage, Review of 20
Annual General Meeting 31
Associates 50, 67
Audit Committee 30
Auditors’ Report 38
Balance Sheets 40, 71
Booker Tate 21
Borrowing Covenants 22
Borrowings due after more than one year 53
Bundaberg Foundry 21
Bundaberg Rum 21
Cash Flow and Debt Management 21
Cash Flow/Net Debt Reconciliation 61
Chairman’s Statement 2
Change in Working Capital 61
Change of Financial Year 3
Changes in Group Interests 64
Chief Executive’s Review 12
Chilwaria 20
Citric Acid Acquisition 15
Commitments 57
Commodities 23
Community 25
Contingent Liabilities 56
Control and Direction of Treasury 22
Corporate Governance 30, 38
Costs 46
Credit Risk 23
Creditors – borrowings 52
Creditors – other 52
Currency Analysis of Net Assets 64
Currency and Interest Rate Exposure of
Financial Assets and Liabilities 62
Current Asset Investments 51
Debtors 51
Description of Business Inside Front Cover
Directors’ Biographies 28
Directors’ Emoluments 35
Directors’ Interests 31
Directors’ Options 34
Directors’ Pension Provision 36
Directors’ Report 30
Directors’ Responsibilities 38
Disposals 14
Dividends 24, 47
Domino Sugar 17
Earnings per Share 39, 48
Eastern Sugar 18
Economic and Monetary Union 24
Economic Value Added (EVA®) 13, 24
Employee Share Option Schemes 31
Employment 31
Environment 26
Exceptional Items 46
Executive Directors’ and Senior Executives’ Remuneration 32
Executive Management Committee 30
Fair Value of Financial Instruments used for Risk Management 23, 62
Financial Calendar 69
Financing 21
Fixed Asset Investments 50
Fixed Assets, Tangible 48
Foreign Currency 23
Funding 22
Gearing 70
Going Concern 22
Interest Payable and Similar Charges 47
Interest Cover 70
Interest Rates 22
Internal Control 30
Investments 15
Joint Ventures 50, 67
Key Management 27
Key Objectives 1
Management of Financial Risk 22
Margin, Net 70
Net Cash Inflow from Operating Activities 61
Net Operating Assets – Segmental Analysis 43
Nghe An Tate & Lyle 20
Non-cash Movements 62
Non-Executive Directors’ Remuneration 33
Non-Executive Directorships 33
North American Support Services 17
Occidente 18
Operating and Financial Review 17
Other Businesses and Activities, Review of 21
Payment of Creditors 31
Pension Fund Committee 30
Personal Equity Plans (PEPs) 68
PM Ag Products 20
Post Balance Sheet Events 64
Post-retirement Benefits 55
Products 10
Profit and Loss Account 39
Profit Before Interest – Segmental Analysis 42
Profit Summary 71
Provisions for Liabilities and Charges 54
INDEX
Subject Page Number Subject Page Number
TAT E & L Y L E 73
Reconciliation of Movements in Shareholders’ Funds 43
Redpath Sugars 17
Related Party Transactions 56
Remuneration and Appointments Committee, Report of the 32
Reserves 60
Share Capital 30, 58
Share Dealing Service 68
Share Information 70
Share Price Information 68
Share Registration 68
Shareholders’ Funds 60
Speciality Sweeteners 21
Staff Costs 46
Staley, A E 17
Statement of Cash Flows 41
Statement of Recognised Gains and Losses 43
Stocks 50
Subsidiaries based in the UK 65
Subsidiaries operating overseas 65
Sucralose 14
Sweeteners & Starches – Americas, Review of 17
Sweeteners & Starches – Europe, Review of 18
Sweeteners & Starches – Rest of the World, Review of 19
Tate & Lyle Bundaberg 19
Tate & Lyle International 19
Tate & Lyle Process Technology 21
Tate & Lyle Reinsurance 21
Tate & Lyle Sugars 18
Tate & Lyle Swire 19
Taxation 24
Ten Year Review 70, 71
Turnover by Geographical Market 42
Turnover – Segmental Analysis 42
UFIC Group 20
UM Group 20
United Sugar Company 20
Web Site 68 & Back Cover
Western Sugar 17
Year 2000 Programme 24
Zambia Sugar 19
ZSR Corporation 19
Subject Page Number Subject Page Number
Registered Office
Sugar Quay, Lower Thames Street
London EC3R 6DQ
Tel: 0171 626 6525
Fax: 0171 623 5213
Web Site
http://www.tate-lyle.co.uk
Share Registrar
Lloyds TSB Registrars (Team 54)
The Causeway, Worthing
West Sussex BN99 6DA
Tel: 01903 833072
Fax: 01903 833371
ADR Depositary
The Bank of New York,
Investor Relations Department
101 Barclay Street – 11th Floor
New York, NY 10286
Tel: 1 800 524 4458
North American Contact for Annual Reports
Taylor Rafferty Associates, Inc.
205 Lexington Avenue
New York, NY 10016-6022
Tel:(212) 889 4350
Fax: (212) 683 2614
Stockbrokers
Hoare Govett Limited
4 Broadgate, London EC2M 7LE
Tel: 0171 601 0101
Fax: 0171 374 7645
PEP Manager
Bradford & Bingley (PEPs) Nominees Limited
PO Box 198, Main Street
Bingley, West Yorkshire BD16 2YD
Tel: 01274 555700
