Breaking News
0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

Treatt: Positive Momentum Continues

By Edison GroupStock MarketsOct 12, 2021 10:50
uk.investing.com/analysis/treatt-positive-momentum-continues-200499227
Treatt: Positive Momentum Continues
By Edison Group   |  Oct 12, 2021 10:50
Saved. See Saved Items.
This article has already been saved in your Saved Items
 

Treatt (LON:TET) has had yet another strong year, with momentum in the business continuing. Revenue growth was 14% during the year, or 18% at constant currency, and was driven by continued strength in the healthier living segments, although slightly below our forecasts. Margins also continued to benefit from the positive mix as Treatt’s products increasingly move towards more value-added solutions. FY21 PBT is still expected to be in line with prior guidance.

EPS Estimates
EPS Estimates

Share price performance

Share price performance
Share price performance

Flavours and fragrances continue to be attractive

The flavours and fragrances market continues to be attractive and Treatt successfully embraces the sweet spot. Its portfolio is well suited for the consumer trends of clean labels and more natural, better-for-you products. For example, the consumer shift away from categories such as beer towards products such as craft beers, alcoholic seltzers and cocktails – which all contain natural flavourings – serves as a material driver of growth for the whole flavour industry and for Treatt in particular. The return of the on-trade following the lifting of COVID-19 restrictions, coupled with an increase in new launches that were postponed from the height of the pandemic, has resulted in further growth, particularly in the tea category, which was up 113% in revenue terms.

Positive mix still driving margin improvement

Treatt’s continued focus on value-added products continues to be a driver of margin expansion as the group moves away from commodity products. Faster growth in the higher-margin categories was also of help during FY21 and hence management upgraded its PBT outlook with the H121 results. In terms of costs, increases in freight and logistics costs have not materially affected the group as it tends to transport concentrated product, hence logistics costs are less significant. The company reported ending FY21 with net debt of c £6m on a pre-IFRS 16 basis.

Valuation: Dividend uplift expected

We note the current share price is discounting medium-term sales growth of 4.5%, falling to 2.0% in perpetuity, with a WACC of 5.7% and a terminal EBIT margin of 20.0%. We expect a significant uplift in the dividend in FY21 as the company has a very modest net debt position. Our earnings estimates remain broadly unchanged following the announcement. On a calendarised basis, Treatt trades at 32.8x FY22e P/E and 20.9x FY22e EV/EBITDA. On both P/E and EV/EBITDA multiples, it trades at a c 10% premium to its peer group.

Click on the PDF below to read the full report:

Treatt: Positive Momentum Continues
 

Related Articles

Treatt: Positive Momentum Continues

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Disclaimer: Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.
Continue with Google
or
Sign up with Email