Treatt PLC (LON:TET) has transformed itself from a commodity-based ingredients company into a supplier of value-added ingredients and ingredient solutions. The previous strategy was delivered three years ahead of target, following a stellar FY17, and the new strategy introduced last September builds on the strong momentum in the business, which has seen five consecutive years of earnings above company expectations. Our DCF analysis points to a value of 540p/share, supported by peer group analysis that places the stock at a c 10% discount to its competitors.
Strategy 1.2
Treatt’s new strategy is an evolution of the previous one. The focus remains on the company’s core areas of citrus, tea and sugar reduction, and indeed the announcement of the sale of Earthoil underscores management’s commitment to increase the company’s focus. Treatt continues to invest in its people and its culture. This has served the company well, and has driven enhanced customer relationships. The management is also focused on increasing the company’s technical abilities to drive the business forward through product innovation and operational efficiencies, which in turn should drive margin expansion. The UK relocation and US expansion will help achieve these objectives.
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