Tate & Lyle PLC (LON:TATE) investors were left with a bitter taste on Thursday after the ingredients firm forecast flat earnings per share (EPS) growth for its current year while reporting a profit slide for the last 12 months.
In its results for the year ended 31 March, the FTSE 250 firm reported a pre-tax profit of £240mln, 16% lower than the prior year, though revenues rose 2% to £2.75bn.
READ: Tate & Lyle reports profits ahead of comparative in final quarter of 2018 but shares turn lower on full year forecasts
Diluted EPS fell 31% to 38.6p, while a 2.5% increase in the final dividend to 20.8p took the total payout to 29.4p, 2.4% higher than last year.
The profit figures had been weighed down during the year by a 11% fall in profit from the firm’s Primary Products division to £148mln, offsetting rises in its Food & Beverage and Sucralose arms of 3% and 11% respectively.
Nick Hampton, the company’s chief executive, also failed to provide much cheer after forecasting that for the current financial year the group expected “broadly flat to low-single digit” EPS growth as progress in Food & Beverages was offset by lower Sucralose profits and “continued market challenges” for Primary Products.
However, the CEO pointed out that the company was starting to see “real momentum” from a new strategy to accelerate performance in the business, particularly improving customer engagement, speeding up product development and streamlining its structure.
The benign earnings outlook left investors in a sour mood and the shares slumped 4.7% to 755.2p in early trading.
In a note to clients, analysts at Liberum were more upbeat on the company despite what they called “conservative” guidance for the current year, reiterating their ‘buy’ rating and 900p target price on the stock.
The analysts expect “solid” EBIT margin growth in the company’s Food & Beverage division over 2019 and 2020, adding that they thought the market was underestimating Tate’s margin potential which could drive “strong upside” to both earnings and its share price.