Tate & Lyle PLC Annual Financial Report (6878B)

TIDMTATE

RNS Number : 6878B

Tate & Lyle PLC

10 June 2019

Tate & Lyle PLC

Annual Financial Report

Tate & Lyle PLC (the "Company") confirms that copies of the following documents have been submitted to the National Storage Mechanism and will shortly be available for inspection at: http://www.morningstar.co.uk/uk/NSM.

   1.   Annual Report 2019; 
   2.   Notice of Annual General Meeting 2019; 
   3.   Notice of Availability; and 
   4.   Proxy Form. 

The Annual Report 2019, Notice of Annual General Meeting 2019 and Notice of Availability are also available on Tate & Lyle's website at www.tateandlyle.com/investors/annual-reports. A hard copy of the Annual Report 2019 and Notice of Annual General Meeting 2019 will be posted to shareholders, who have requested for them, on or around 18 June 2019.

For the purposes of complying with Disclosure Guidance and Transparency Rule (DTR) 6.3.5R and the requirements it imposes on issuers as to how to make public annual financial reports, we set out below:

   -     in Appendix A, the principal risks and uncertainties facing the Company; 
   -     in Appendix B, the Directors' responsibility statement; and 
   -     in Appendix C, the disclosure regarding related party transactions. 

The appendices have been extracted from the Annual Report 2019 in unedited full text and the page numbers in the text refer to the page numbers in that document. This information should be read in conjunction with the Company's 2019 full-year results announcement, released on 23 May 2019, which contained a condensed set of financial statements and which can be found at www.tateandlyle.com/investors/results-and-presentations. Together, these constitute the material required by DTR 6.3.5R to be communicated to the media in unedited full text through a Regulatory Information Service.

Claire-Marie O'Grady

Company Secretary

10 June 2019

APPIX A

RISK FACTORS

Principal risks

It is ultimately the Board's responsibility to decide what is considered a principal risk to the business - namely one that could threaten our business model, performance, solvency or liquidity. Our risk profile does, of course, evolve and the Board updates its view of principal risks accordingly. This year, the Board decided that no changes to the principal risks were needed. See pages 61 to 65 for our list of principal risks and examples of mitigating actions.

The Board confirms that a robust assessment of our principal risks was carried out this year.

Strategic Risks

   1.   Lack of growth in Food & Beverage Solutions 

Failing to grow Food & Beverage Solutions could prevent us from delivering our performance against targets. This could reduce our profitability over both the shorter and the longer term and damage investors' view of us as an innovative solutions provider to our customers.

Policies and procedures in place

   --    An organic and acquisitive growth plan which supports our strategy. 
   --    Global and regional five-year plans focused on key categories. 

-- An M&A team which works closely with Innovation and Commercial Development (ICD) and our divisions to identify and deliver acquisitions and partnerships focused on growth.

-- Incentive schemes and bonus programmes for customer-facing teams tied to strategic as well as operational targets.

Key developments this year

-- We refreshed our product development 'StageGate' process to ensure we focus on those opportunities most likely to deliver growth.

   --    We strengthened our customer-facing and innovation teams in Food & Beverage Solutions. 

-- We rolled out a global programme to increase customer focus in key areas such as customer account management and planning.

   2.   Failure to innovate and commercialise new products 

New products are essential to the long-term growth of our business, and our ability to lead the industry in our chosen categories. Without them, we might be unable to meet our customers' future requirements, which could damage our performance and reputation and result in customers moving to work with competitors.

Policies and procedures in place

-- A robust innovation process that delivers a strong pipeline of products through internal development and open innovation.

-- An ICD team that tracks emerging consumer trends and works closely with commercial partners to deliver innovation, with all strategies aligned to deliver targeted growth.

   --    Targets for new product sales tied to incentive and bonus schemes for customer-facing teams 
   --    An open innovation team scouting for breakthrough technologies. 

-- A marketing team that gives insights into consumer and key category trends, and supports new product launches.

-- Partnership opportunities with customers prioritised to accelerate development cycles and bring new ingredients to market more quickly.

Key developments this year

-- We restructured the ICD team to focus on category strategy and growth and to ensure clear accountability.

   --    We improved our model for testing new ideas before commercial roll-out. 
   3.   Inability to attract, develop, engage and retain key people 

To be successful, we must have great people in the right roles. Without them, we may be unable to deliver our strategy.

Policies and procedures in place

   --    Remuneration policies designed to attract, retain and reward the best people. 

-- Talent development that provides opportunities for employees and training to close skill gaps.

   --    Initiatives to make sure we keep diversity front of mind everywhere. 
   --    A single global performance management system, as well as talent planning processes. 

-- Progress measured against cultural objectives and global employee surveys that help to reveal what employees really think about working at Tate & Lyle.

   --    Executive Committee and Board focus on succession planning for business-critical roles. 

Key developments this year

   --    We revamped our internal and external communications plans. 

-- We engaged closely with our global leadership team to support engagement and ensure alignment around key priorities.

-- We reviewed our incentive programmes to ensure they are aligned with strategy and continue to provide an attractive employee proposition, to drive engagement and individual performance.

   --    We launched a programme to put our purpose at the heart of who we are and how we operate. 

Operational risks

   4.   Failure to act safely and operate our facilities safely and responsibly 

Safety is not just a priority - it's foundational at Tate & Lyle. Failure to comply with laws and regulations relating to health, safety and the environment could result in us being unable to protect our employees, stakeholders and the wider communities in which we operate. It could also lead to fines and have a negative impact on our reputation.

Policies and procedures in place

-- Continuous improvement plan for environment, health and safety (EHS) in place at all our sites (Journey to EHS Excellence, or J2EE), visibly sponsored by the Chief Executive and Executive Committee.

-- Quarterly EHS Advisory Board receives EHS updates and reviews performance; attended by the Chief Executive, and includes an external EHS expert.

-- Regular reviews by Executive Committee and Board of EHS performance and progress against J2EE.

   --    SafeStart(R) behavioural safety training programme at all sites. 

Key developments this year

-- We increased investment in our EHS team including the recruitment of safety engineers at our major plants.

-- We completed deep-dive EHS reviews at all plants to identify areas that require improvement or greater focus. These areas are built into a continuous improvement plan.

   --    We continued to invest in J2EE including: 

o Introducing a new EHS digital management system, Gensuite

o Implementing two new initiatives, Life Saving Principles and STOP Work Authority.

5. Failure to operate our plants continuously, manage our supply chain, and meet high standards of customer service

There are many risks in operating plants which could cause breaks in production, leading to disruption and a deterioration in customer service. This, in turn, could damage our ability to grow and perform as a business.

Policies and procedures in place

   --    A preventative maintenance programme across our plant network. 
   --    An ongoing programme to improve our global supply chain processes. 

-- Business continuity capabilities to enable us to supply products to customers from alternative sources quickly if there's a natural disaster or major equipment or plant failure.

-- Customer service capabilities managed by Global Operations as part of an integrated end-to-end supply chain process.

   --    Plans for the continued operation of our US plants in extreme winter weather. 

Key developments this year

   --    We strengthened our maintenance programmes across our major plants. 
   --    We refreshed our business continuity plans to support long-term strategic growth. 

-- We aligned our sales and operational planning process with product line management teams to strengthen our ability to balance supply and demand.

   --    We invested in digital technology to improve customer service. 

-- We enhanced the way we manage inventory to improve customer service and our ability to supply.

   6.   Failure to maintain the quality and safety of our products 

Poor quality products could affect safety and also damage our reputation and relationships with customers. This could have a negative effect on our performance and corporate reputation.

Policies and procedures in place

   --    Strict quality control and product testing procedures. 
   --    Recall process running and tested. 
   --    Third-party audit programme, supplemented by internal compliance audits. 

-- Suppliers assessed for food safety/quality risks, including raw material suppliers, tollers and warehouses.

   --    Allergen management programme. 

Key developments this year

-- We implemented a recipe management system to centralise the management of our products and ingredients.

-- We updated our hazard analysis and critical control points plans at all plants to ensure compliance with the new US Food Safety Modernization Act.

-- We established a Quality Incident Review Board to investigate incidents and share resulting best practice across all sites.

-- We continued to focus on minimising the risk of cross-contamination at our plants by upgrading our food defence programmes using the US Food and Drug Administration (FDA) food defence plan builder.

7. Inability to manage fluctuations in the price and availability of raw materials, energy, freight and other operating inputs

Fluctuations in crop prices could affect our margins. These changes could stem from things like alternative crops, coproduct values and varying local or regional harvests because of, for example, weather conditions, crop disease, climate change or crop yields. In some cases, due to the basis for pricing in sales contracts or due to competitive markets, we may not be able to pass the full increase in raw material prices, or higher energy, freight or other operating costs, on to our customers. Our margins might also be affected by customers not taking expected volumes.

Policies and procedures in place

   --    Strategic relationships and multi-year agreements with suppliers and trading companies. 

-- A balanced portfolio of supply and tolling contracts with customers that helps to balance raw material prices and product sales prices and volume risks.

   --    Raw material and energy purchasing policies that increase the security of our supply. 
   --    A network of corn elevators which enhances the security of our supply. 

-- New or back-up supply sources (for chemicals, for example) in case primary suppliers face localised challenges.

-- The use of derivatives and forward contracts, where practical, to hedge and manage our exposure to raw material and co-product prices.

Key developments this year

   --    We added procurement resources regionally to better manage local market variances. 

-- We combined our transportation procurement and logistics teams to improve how we manage suppliers and better serve customers.

-- We reorganised our global engineering teams to allow our engineers to spend more time on improvement and problem solving.

   8.   Failure to maintain the security of our information systems and data 

A cyber-security breach, whether stemming from human error, deliberate action or a technology failure, could lead to unauthorised access to or misuse of our information systems, technology or data. This, in turn, could result in harm to our assets, data loss and business disruption - and could bring legal risks and reputational damage.

Policies and procedures in place

-- A cyber-security enhancement programme focused on strengthening our people, process and technology defences.

   --    Compulsory cyber-security training and cyber-security breach scenario exercises. 
   --    Advanced perimeter defences, as well as continuous vulnerability detection and defences. 
   --    Separate systems across our plant network to provide resilience. 
   --    A 24/7, third-party security operations centre. 

Key developments this year

   --    We revised our privacy guidelines to align with the EU General Data Protection Regulation. 
   --    We introduced a security operations centre and computer emergency response team. 
   --    We added specific cyber-security terms and conditions to new contracts. 

-- We ran a number of cyber-security communications campaigns to raise awareness with our employees.

-- We invested in a range of technology defences, from next-generation firewalls to enhanced email security.

Legal, Regulatory and Governance Risks

   9.   Breach of legal or regulatory requirements including our Code of Ethics 

If we don't meet our legal and/or regulatory obligations, our relationships with customers could be damaged, and there could be contractual claims, threats to our licences and, in extreme cases, risks to our directors and officers. It could also affect our performance and corporate reputation.

Policies and procedures in place

-- Legal and regulatory teams working in partnership with commercial teams to identify legal and regulatory risk and to provide advice and solutions.

-- Regular monitoring of legal and regulatory developments to identify those that could affect Tate & Lyle.

   --    Key legal policies. 
   --    Ethics and compliance training programme. 

-- Third-party-hosted whistleblowing process giving employees a way to raise concerns anonymously if they're not comfortable raising them internally.

   --    A full-time Global Head of Ethics and Compliance. 

Key developments this year

-- We restructured our Legal and Compliance teams to strengthen legal resources in the regional businesses.

-- We reviewed our legal and ethics and compliance programmes to make sure they focus on priority areas to drive efficiency and support growth.

   --    We updated and relaunched our Code of Ethics. 
   --    We introduced ethics and compliance monitoring of high-risk countries. 

-- We rolled out an ethics training programme and trained around 1,000 employees on data protection.

10. Failure to maintain an effective system of internal financial controls

Without effective internal financial controls, we could be exposed to financial irregularities and losses from events that may affect our performance and ability to operate.

Policies and procedures in place

-- Financial policies and standards supported by procedures for key financial processes, for example, capital expenditure.

-- A number of forums to monitor and manage our financial risks, for example, our monthly working capital review and our regional Control Environment Councils.

-- Detailed quarterly business and financial reviews by our Chief Executive and Chief Financial Officer.

   --    Confirmation of minimum control standards at the half year and the end of the financial year. 
   --    Automated controls built into our systems wherever possible. 

-- A well-resourced Group Audit and Assurance team which provides independent assurance to management and the Board.

Key developments this year

-- We continued to strengthen our framework for enterprise controls, and to focus on the segregation of duties and quality of our balance sheet reconciliations.

-- We evolved our risk and control matrix and rolled this out in Europe, Middle East and Africa and North America.

-- We implemented a new finance operating model in Asia Pacific and Latin America to make better use of our shared service centre.

11. Changes in consumer, customer or government attitudes to our products

The regulatory status or perception of our products could be affected by things like changes in customers' or consumers' attitudes, changes in food laws and regulations, and/or campaigns targeted at specific ingredients or technologies. These could affect our ability or freedom to operate.

Policies and procedures in place

-- Science behind our ingredients (for example, health claims or nutritional impact) supported by credible sources, clearly communicated and understood by the relevant regulatory authorities.

-- A global regulatory team, supported by external consultants, that monitors local regulatory requirements affecting our products.

   --    A global nutrition team which initiates and monitors research and publications on the use and functionality of our ingredients, and maintains a global network of health and nutrition clinicians, academics and experts. 

-- Membership of trade organisations giving us access to broader sources of information and provide, where appropriate, a single voice for the industry on the issues (both regulatory and public interest) affecting our ingredients.

   --    Strong relationships with regulatory authorities. 
   --    Clear information on our ingredients' provenance and traceability. 

-- A Research Advisory Group, chaired by a non-executive director and comprising leading scientific experts, which reviews critical aspects of our innovation activities and provides guidance.

Key developments this year

-- We expanded non-GM alternatives for a number of key product areas (such as texturants) and developed constructive relationships with certification companies.

-- We integrated our global regulatory team into ICD to ensure that the development of new ingredients goes hand-in-hand with regulatory approvals.

12. Failure to manage effectively changes in government regulations and/or trade policies

Government actions or policies could cause changes in tariffs or customs duties or impose import/export limitations and other barriers. These could lead to additional costs for our business, restrict our growth and limit our ability to operate in certain markets.

Policies and procedures in place

-- Strategic engagement with political parties, influencers and regulatory authorities in the main countries in which we operate.

-- Active member of relevant industry trade associations, such as the Corn Refiners Association in the US.

-- A network optimisation model that enables us to adapt and optimise production across our plant network if there are market restrictions in certain countries, for example, by switching production to other plants.

-- A global plant network that allows customers to be served from different countries if products from certain markets are restricted or become less economically attractive.

-- Continued investment in resources and infrastructure across different markets and geographies that diversifies our business mix.

Key developments this year

-- We carried out scenario-planning exercises to assess the impact of the change from the North American Free Trade Agreement to the new United States-Mexico-Canada Agreement.

   --    We put in place a contingency plan in the event the UK leaves the EU without a deal. 

APPENDIX B

DIRECTORS' RESPONSIBILITY STATEMENT

The Directors are responsible for the maintenance and integrity of the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions. Each of the Directors, whose names and functions are listed on pages 68 to 71, confirms that, to the best of his or her knowledge:

-- The Annual Report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's and the Group's position and performance, business model and strategy.

-- The Group financial statements, which have been prepared in accordance with IFRSs as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group.

-- The Company financial statements, which have been prepared in accordance with UK GAAP (United Kingdom Accounting Standards, comprising FRS 101 'Reduced Disclosure Framework' and applicable law) give a true and fair view of the assets, liabilities, financial position and profit of the Company.

-- The Strategic Report and the Directors' report include a fair review of the development and performance of the business and the position of the Group and the Company, together with a description of the principal risks and uncertainties that it faces.

APPENDIX C

RELATED PARTY DISCLOSURES

Identity of related parties

The Group has related party relationships with its joint ventures, the Group's pension schemes and with key management, being its Directors and executive officers. Key management compensation is disclosed in Note 9. There were no other related party transactions with key management. There were no material changes in related parties or in the nature of related party transactions during the year and no material related party transactions containing unusual commercial terms in the current or prior year.

Subsidiaries and joint ventures

 
                                           Year ended 31 March 
--------------------------------------  ---------------------- 
                                              2019        2018 
                                              GBPm        GBPm 
--------------------------------------  ----------  ---------- 
 Sales of goods and service to joint 
  ventures                                     164         147 
 Purchases of goods and services from            -           - 
  joint ventures 
 Receivables due from joint ventures            28          20 
 Payables due to joint ventures                  -           - 
--------------------------------------  ----------  ---------- 
 
 

Transactions entered into by the Company, Tate & Lyle PLC, with subsidiaries and between subsidiaries as well as the resultant balances of receivables and payables are eliminated on consolidation and are not required to be disclosed.

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact [e-mail] or visit www.rns.com.

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June 10, 2019 06:30 ET (10:30 GMT)