Currency in GBP
Last close As at 17/03/2023
GBP5.67
▲ 35.00 (6.58%)
Market capitalisation
GBP327m
Research: Consumer
Treatt’s AGM trading update suggests a more normal and steady pattern of trading has resumed, following the setbacks that caused the profit warning last August. Management has clearly taken rapid steps to address the issues that were identified, and indeed this was already evident in October’s FY22 pre-close trading update. Performance remains in line with management expectations and our forecasts are unchanged.
Treatt |
Back to steady growth |
AGM statement |
Food and beverages |
30 January 2023 |
Share price performance
Business description
Next events
Analysts
Treatt is a research client of Edison Investment Research Limited |
Treatt’s AGM trading update suggests a more normal and steady pattern of trading has resumed, following the setbacks that caused the profit warning last August. Management has clearly taken rapid steps to address the issues that were identified, and indeed this was already evident in October’s FY22 pre-close trading update. Performance remains in line with management expectations and our forecasts are unchanged.
Year end |
Revenue |
PBT* |
EPS* |
DPS |
P/E |
Yield |
09/21 |
124.3 |
22.7 |
30.1 |
7.5 |
20.8 |
1.2 |
09/22 |
140.2 |
16.5 |
21.9 |
7.9 |
28.7 |
1.3 |
09/23e |
148.6 |
17.9 |
23.4 |
8.5 |
26.8 |
1.4 |
09/24e |
157.5 |
20.3 |
26.2 |
9.5 |
23.9 |
1.5 |
Note: *PBT and EPS are normalised, excluding amortisation of acquired intangibles, exceptional items and share-based payments.
Steady revenue growth, led by Citrus
Q123 sales were up 3% versus the prior year at constant currency and up 9% at actual currency. Citrus witnessed strong growth, with margin improvement across several key value-added products that have benefited from the execution of Treatt’s procurement and pricing strategies. Management continues to implement strong cost discipline, and the revised hedging and FX strategy has successfully managed the FX impact.
UK relocation almost complete
UK production has almost fully transferred to the new facility, with the process expected to complete in the autumn. Treatt’s UK production capacity will at least double once this occurs. The company is well-invested to capture its growth ambitions in the medium term, and hence the board looks forward to the remainder of the year with confidence.
Valuation: Trades at a small premium to peers
The current share price is discounting medium-term sales growth of 4.3%, falling to 2.0% in perpetuity, with a WACC of 7.7% and a terminal EBIT margin of 21.5% (vs 11.3% in FY22). Our estimates remain unchanged following the announcement: we note Q1 is a relatively light quarter for Treatt, as it is a more summer-weighted business owing to its exposure to beverages in the northern hemisphere. H1 results will be published on 9 May. Treatt trades at 26.8x FY23e P/E and 16.7x FY23e EV/EBITDA. On both P/E and EV/EBITDA multiples, it trades at a c 5–15% premium to its peer group, although it trades at a c 5–10% discount to peers if we exclude those that are more exposed to lower-margin commoditised products.
Exhibit 1: Financial summary
£000's |
2020 |
2021 |
2022 |
2023e |
2024e |
2025e |
||
Year end September |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
IFRS |
||
PROFIT & LOSS |
||||||||
Revenue |
|
|
109,016 |
124,326 |
140,185 |
148,596 |
157,512 |
165,387 |
Cost of Sales |
(77,140) |
(82,103) |
(101,101) |
(106,127) |
(111,392) |
(115,804) |
||
Gross Profit |
31,876 |
42,223 |
39,084 |
42,469 |
46,120 |
49,584 |
||
EBITDA |
|
|
17,862 |
24,877 |
19,503 |
23,985 |
25,810 |
27,419 |
Operating profit (before amort. and excepts.) |
|
|
16,053 |
23,172 |
17,027 |
18,954 |
20,745 |
22,118 |
Intangible Amortisation |
(75) |
(93) |
(215) |
(183) |
(155) |
(132) |
||
Share based payments |
(886) |
(1,733) |
(1,039) |
(1,011) |
(1,135) |
(1,227) |
||
Other |
0 |
0 |
0 |
0 |
0 |
0 |
||
Operating Profit |
15,092 |
21,346 |
15,773 |
17,760 |
19,455 |
20,759 |
||
Net Interest |
(291) |
(427) |
(517) |
(1,038) |
(446) |
(199) |
||
Exceptionals |
(1,060) |
(1,302) |
923 |
0 |
0 |
0 |
||
Profit Before Tax (norm) |
|
|
15,762 |
22,745 |
16,510 |
17,916 |
20,299 |
21,919 |
Profit Before Tax (FRS 3) |
|
|
13,741 |
19,617 |
16,179 |
16,722 |
19,009 |
20,560 |
Profit Before Tax (company) |
|
|
14,801 |
20,919 |
15,256 |
16,722 |
19,009 |
20,560 |
Tax |
(2,896) |
(4,469) |
(2,864) |
(3,762) |
(4,467) |
(4,832) |
||
Profit After Tax (norm) |
12,762 |
18,090 |
13,215 |
14,153 |
15,832 |
17,088 |
||
Profit After Tax (FRS 3) |
10,845 |
15,148 |
13,315 |
12,959 |
14,542 |
15,728 |
||
Discontinued operations |
0 |
0 |
0 |
0 |
0 |
0 |
||
Average Number of Shares Outstanding (m) |
59.8 |
60.1 |
60.4 |
60.4 |
60.4 |
60.4 |
||
EPS - normalised (p) |
|
|
21.3 |
30.1 |
21.9 |
23.4 |
26.2 |
28.3 |
EPS - adjusted (p) |
|
|
19.7 |
27.1 |
25.3 |
21.5 |
24.1 |
26.0 |
EPS - (IFRS) (p) |
|
|
18.1 |
25.2 |
22.0 |
21.5 |
24.1 |
26.0 |
Dividend per share (p) |
6.0 |
7.5 |
7.9 |
8.5 |
9.5 |
10.3 |
||
Gross Margin (%) |
29.2 |
34.0 |
27.9 |
28.6 |
29.3 |
30.0 |
||
EBITDA Margin (%) |
16.4 |
20.0 |
13.9 |
16.1 |
16.4 |
16.6 |
||
Operating Margin (before GW and except.) (%) |
14.7 |
18.6 |
12.1 |
12.8 |
13.2 |
13.4 |
||
Operating Margin (%) |
13.8 |
17.2 |
11.3 |
12.0 |
12.4 |
12.6 |
||
BALANCE SHEET |
||||||||
Fixed Assets |
|
|
54,048 |
65,811 |
79,644 |
80,502 |
81,645 |
83,020 |
Intangible Assets |
1,358 |
2,424 |
3,206 |
3,023 |
2,868 |
2,736 |
||
Tangible Assets |
50,159 |
61,039 |
74,281 |
77,479 |
78,777 |
80,284 |
||
Investments |
2,531 |
2,348 |
2,157 |
0 |
0 |
0 |
||
Current Assets |
|
|
69,472 |
83,606 |
108,537 |
97,456 |
102,689 |
107,210 |
Stocks |
36,050 |
47,263 |
68,351 |
62,410 |
65,840 |
68,801 |
||
Debtors |
24,167 |
26,371 |
37,113 |
32,691 |
34,495 |
36,054 |
||
Cash |
7,739 |
7,260 |
2,354 |
2,354 |
2,354 |
2,354 |
||
Other |
1,516 |
2,712 |
719 |
0 |
0 |
0 |
||
Current Liabilities |
|
|
(15,989) |
(30,460) |
(46,224) |
(28,211) |
(25,544) |
(22,053) |
Creditors |
(12,640) |
(17,620) |
(23,792) |
(19,464) |
(19,790) |
(19,909) |
||
Short term borrowings |
(3,203) |
(12,697) |
(22,035) |
(8,350) |
(5,357) |
(1,748) |
||
Provisions |
(146) |
(143) |
(397) |
(397) |
(397) |
(397) |
||
Long Term Liabilities |
|
|
(16,411) |
(11,605) |
(7,711) |
(10,544) |
(9,047) |
(7,243) |
Long term borrowings |
(3,450) |
(2,624) |
(2,342) |
(4,175) |
(2,678) |
(874) |
||
Other long term liabilities |
(12,961) |
(8,981) |
(5,369) |
(6,369) |
(6,369) |
(6,369) |
||
Net Assets |
|
|
91,120 |
107,352 |
134,246 |
139,203 |
149,742 |
160,934 |
CASH FLOW |
||||||||
Operating Cash Flow |
|
|
15,677 |
13,442 |
(1,830) |
30,019 |
20,903 |
23,016 |
Net Interest |
(191) |
(270) |
(382) |
(1,038) |
(446) |
(199) |
||
Tax |
(2,191) |
(4,874) |
443 |
(3,762) |
(4,467) |
(4,832) |
||
Capex |
(23,909) |
(13,195) |
(11,849) |
(8,229) |
(6,363) |
(6,808) |
||
Acquisitions/disposals |
(1,041) |
(1,178) |
4,672 |
0 |
0 |
0 |
||
Financing |
(69) |
238 |
475 |
0 |
0 |
0 |
||
Dividends |
(3,378) |
(3,704) |
(4,834) |
(4,741) |
(5,137) |
(5,764) |
||
Net Cash Flow |
(15,102) |
(9,541) |
(13,305) |
12,248 |
4,490 |
5,414 |
||
Opening net debt/(cash) |
|
|
(15,958) |
(427) |
9,114 |
22,419 |
10,171 |
5,681 |
HP finance leases initiated |
0 |
0 |
0 |
0 |
0 |
0 |
||
Other |
(429) |
(0) |
0 |
0 |
0 |
0 |
||
Closing net debt/(cash) |
|
|
(427) |
9,114 |
22,419 |
10,171 |
5,681 |
267 |
Source: Edison Investment Research, company data
|
|
Research: TMT
YouGov’s trading update covering the six months to end January confirms that the group is on track to meet the full year market revenue consensus of £264m, 19% ahead of the prior year. This is a little ahead of our modelling (£255m), so we have adjusted accordingly. Our operating profit forecast is unchanged, reflecting a slight shift in mix towards Custom Research, which runs with structurally lower operating margins than Data Products. The search for a new CEO is ongoing, with current CEO Stephan Shakespeare set to step across to be non-executive chair in August. YouGov’s strategic plan for FY24–26 remains in the preparation phase.
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