Stock of the week: Tate & Lyle
Once famous for its sugar business, it is now in the business of supplying ingredients and solutions to the food, drinks and other industries. The Speciality Food division produces sweeteners, texturants and food ingredients. The Bulk Ingredients manufactures and markets a range of products including liquid sweeteners, starch and ethanol.
As the global food processing market continues to grow, an investment in this company would likely keep investors sweet for a long time. Especially as an increasing amount of sales are set to come from emerging markets and new products. In addition to this, consumer demand for healthier diets is ever increasing and so alternatives to sugar content will too simultaneously.
The new CEO announced a strategy plan in May where he declared his plans to oversee three programmes with the intent to sharpen focus on customers, accelerate portfolio development, simplify the business and deliver productivity improvements.
This was followed by a positive set of results that month; the company reported a 13% increase in adjusted profit to £301m and the dividend was up by 2.5% to 28.7pence.
In September the group confirmed the outlook for the year is unchanged, but the CEO has forecasted earnings per share growth at the lower end of the mid-single digit range.
Nonetheless, there is hope for an improvement in the quality of earnings, as a result of some major structural change initiatives, so we do suggest a ‘buy’ recommendation for a medium to high risk portfolio, with the added attraction of a 4.4% prospective yield.
Despite rising by 20% since March, investors are advised to build a holding over time, as the stock has been rather volatile.
Helal Miah is investment research analyst at The Share Centre