Flavour and fragrance specialist Treatt’s (TET) sweet half year figures confirm tasty top line momentum continues apace. Today's positive results and optimistic comments on future trading have sent shares in the Bury St Edmunds-based business up 3.9% to 483p.

In a further palate-pleasing piece of news, Treatt announces the sale of non-core unit Earthoil Plantations, a deal that will enable management to invest in the company’s growing product categories of citrus, sugar reduction and tea.

Despite its terrific financial track record and returns, Treatt remains under-the-radar of many investors, although Shares outlined the company’s qualities and competitive advantages in depth here in early 2017.

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Classified within the Specialty Chemicals sector, Treatt provides innovative ingredient solutions to the flavour, fragrance and consumer product industries. The beverages sector is a particularly fertile market thanks to that industry's trends towards natural, clean label and calorie-free products.

Sugar reduction is a focus for drinks customers, who work closely alongside Treatt’s laboratory technicians, helping forge closer relationships.

UPDATE LEAVES SWEET TASTE

Results for the half to the end of March reveal 14% revenue growth to £53.6m, reflecting new business wins and growth with existing customers, as well as a 20.4% leap in adjusted profit before tax to £5.8m and a 10.3% dividend hike to 1.6p.

‘Following the exceptional performance of the group in 2017, it is very encouraging to again be reporting both strong revenue and profit growth for the half year,’ says CEO Daemmon Reeve, adding that the encouraging first half performance has continued into the third quarter.

Treatt - MAY 2018Since taking over in 2012, Reeve has transformed the business from a seller of flavour and fragrance-based commodities to a value added, higher margin ingredients supplier.

He insists: ‘Our strategy continues to deliver with the main business drivers of citrus, tea and sugar reduction performing well in the period. Whilst there is still much to do to complete the year, and movements in exchange rates or raw material prices can impact results, the board is currently confident that the group will meet its expectations for the financial year ending 30 September 2018.'

Besides Treatt’s key growth drivers of citrus, tea and sugar reduction, Reeve also highlights the significant growth in revenues ‘from our range of authentic, natural, fruit and vegetable extracts which are used to characterise the fresh authentic flavour in premium beverages.’

GROWTH INGREDIENTS

Treatt is investing for future long-term growth, having raised £20.8m in the half to help fund US capacity expansion and its UK site relocation, with full planning permission for a new UK site in Bury St Edmunds received earlier this year.

As at 31 March, Treatt boasted a positive cash balance of £6.5m, compared to a £10.2m net debt position at the start of the financial year. The balance sheet will be further strengthened through the £11m sale of Earthoil, which supplies pure, organic, fair trade essential and cold pressed vegetable seed oils for the personal care and cosmetic industries, to chemicals distributor Univar.

Divesting this non-core business will enable Reeve to invest to ‘drive future growth in core areas aligned with our strategy’, namely the key product categories of citrus, sugar reduction and tea.

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Issue Date: 08 May 2018