For the year ended 30 September 2002

2002 was a year of significant change and modernisation for Treatt. Group turnover increased by 11 percent during the year to £30.7 million (2001: £27.6 million). Profit before tax and exceptional items is slightly lower at £2.77million (2001: £2.83 million). Earnings per share before exceptional items was 19.7 pence (2001: 19.4 pence).

The Board is recommending a final dividend of 5.7 pence (2001: 5.5 pence), giving a 4 percent increase in the total dividend for the year to 8.4 pence (2001: 8.1 pence) per share.

Exceptional items this year included £591,000 for the full write-off of R. C. Treatt’s Customer Relationship Management (“CRM”) system, which will be superseded by our Enterprise Resource Planning (“ERP”) Group-wide IT system. A further £148,000 is in respect of reorganisational costs, spread across various departments, where measures have been taken to ensure staffing levels are more closely aligned to our business needs.

After a dull first quarter’s sales, the following nine months were strong, assisted by the Group’s position in orange oil products, which resulted in some significant stock profits.

Florida Treatt, now renamed Treatt USA, had a very good year winning new business across its product range with sales growing by 27 percent. This supports the Board’s decision to invest in new facilities in the USA. In the UK, sales from the main operating Company, R. C. Treatt, grew largely due to increased orange oil prices and also due to increased sales to existing customers across the product range. Distribution of aroma chemicals out of the UK continue to grow, but at reduced margins due to competitive conditions.

The move to a new site by our American subsidiary, Treatt USA, was completed on schedule at the end of September. The purpose-designed 65,000 sq foot facility in Lakeland was also finished within budget (US$6.3 million). As previously announced, the Group has begun implementation of our new JD Edwards ERP computer system. This began successfully at Treatt USA in October 2002. We intend to implement the system throughout the Group over the next two years, the next phase being the installation in the UK during 2003/4. This ERP system will be integrated across all the functions of our business and will allow the Group to satisfy all of the current business requirements which are expected to arise in the future. The Group will continue to invest in information technology in order to facilitate its future profitable growth.

Prospects
The Group’s order books at year-end, both in the UK and the USA, were higher than last year. The results for 2003 will reflect our increased level of capital investment, both in the UK and the USA, resulting in higher write-off charges. Similarly, the additional borrowing at fixed interest rates will also increase the amount of interest payable. We are optimistic for growth in the US but higher write-off and interest charges will, in the short term, moderate any improvement in results.

Additionally, orange oil, an orange juice by-product which is an important raw material for Treatt, is at a high price level. Orange products accounted for 19 percent (2001: 12 percent) of the Group’s turnover in 2002, mainly due to higher prices of orange oil. For R. C. Treatt in the UK, the majority of orange oil is sourced from Brazil and the balance from Florida, USA. Orange oil is unusually firm for this time of year, when it normally weakens as Florida’s new crop approaches.

Due to the strengthening position of Treatt USA in beverage ingredients for the American domestic market the Group’s business is becoming more seasonal in that the first quarter of the financial year will normally be a quieter quarter.

It has already become apparent that the ability to manufacture similar products both sides of the Atlantic is of considerable interest to some potentially very large customers who wish to be assured of continuity of supply when sourcing raw materials. There are very few flavour and fragrance ingredient companies as well placed in this respect as Treatt PLC.

People
Each year we quite rightly acknowledge the support and dedication of our employees, and the Board would like to thank them on behalf of the shareholders. I am pleased to be able to report that as a demonstration of the strength of our commitment to the development of our personnel Anita Haines was appointed Human Resources Director of the Group on 1 October 2002. Anita Haines joined the Group in January 1988 as Company Secretary of R C Treatt and became Human Resources Manager in September 2000.

In September 2002, Mark Bottjer tendered his resignation from his position as Finance Director of the Group effective from 31 December 2002. We wish him well in his next appointment. We are currently undertaking a selection process and we expect to make an appointment in the next few months.

EDWARD DAWNAY
Chairman