Treatt

LN: TET

£236.4m market cap

402p last close

Treatt provides innovative ingredient solutions from its manufacturing bases in Europe, North America and Africa, principally for the flavours and fragrance industries and multinational consumer goods companies, particularly in the beverage sector.

Investment summary

Treatt has delivered another period of strong revenue and profit growth, demonstrating its transformation from a trading house to a provider of value-added, technical flavour and fragrance solutions. Its key categories of citrus, tea and sugar-reduction continue to drive profit growth. After a few years of increasing raw material costs, Treatt is experiencing some falling prices, particularly in citrus. Citrus represents c 50% of company revenues – and Treatt’s historical area of expertise – and falling raw material prices tend to result in selling price deflation. Crucially, they do not necessarily result in a fall in profits, as due to timing of contracts, the fall in raw material costs is not always fully passed onto customers. We trim our FY19 and FY20 sales forecasts in light of raw material deflation, but we leave our profit forecasts broadly unchanged. Our fair value moves to 517p (from 510p) as we roll forward our DCF to commence in 2020.

Y/E Sep
Revenue (£m)
EBITDA (£m)
PBT (£m)
EPS (p)
P/E (x)
P/CF (x)
2017A 101.3 15.0 12.8 18.5 21.7 44.8
2018A 112.2 16.6 13.8 20.3 19.8 63.8
2019E 113.8 15.7 14.0 18.1 22.2 15.8
2020E 116.1 18.4 14.7 19.0 21.2 13.9
Last updated on 23/05/2019
Industry outlook

Treatt is migrating its business from that of a pure supplier to the food and beverage industries to being a valued partner in the development of new ingredients. Citrus and tea flavours and sugar reduction are core areas of focus, with the latter undergoing a structural growth trend.

Last updated on 23/05/2019
Sector
Industrials
Share price graph
Balance sheet
Forecast net debt (£m) 3.1
Forecast gearing ratio (%) 4
Price performance
%
1m
3m
12m
Actual (3.7) (6.9) (16.4)
Relative* 0.2 (7.4) (9.6)
52-week high/low 508.0p/388.0p
*% relative to local index
Key management
Tim Jones Chairman
Daemmon Reeve CEO
Richard Hope CFO

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