Camellia Regulatory News (CAM)

CAMELLIA PLC

Final results for the year ended 31 December 2022

2022 Highlights

Strategic developments

Outlook

Malcolm Perkins, Chairman, stated:

"Camellia withstood a range of challenges in 2022, including the impact of inflation on input and distribution costs as a result of the Ukraine war, volatility in financial markets, the cost of living crisis in the UK as well as adverse weather in India and prolonged strikes in Bangladesh. The combination of these meant that the Group's profitability was significantly impacted. That said, the resilience and commitment of our people has enabled us to continue to focus on our strategy of expansion in areas of expertise while divesting non-core businesses.

Trading in 2023 to date has been mixed, with higher production volumes in Kenya offsetting the lower prices being achieved in that market. There has been a positive opening for new season teas in Bangladesh but prices in India are significantly lower than last year, albeit for both countries it is very early in the season. The remaining crops are developing in line with our expectations for the stage of the growing cycle with volumes of macadamia expected to be ahead of those of 2023. However, higher global inventories are continuing to put downward pressure on macadamia kernel prices with the result that orders and pricing for 2023 are well below prior year. The impact of substantial rises in wages and energy prices continue to be felt across all our agriculture operations and are expected to impact margins. Overall, however, with financial markets less volatile than in the recent past, we expect adjusted profit before tax to be ahead of that of 2022."

* Profit before tax excluding separately disclosed significant items, details of which can be found in note 1 and note 4 to the Accounts later in this announcement

This announcement contains inside information for the purpose of Article 7 of the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.

ENQUIRIES

Camellia at a glance

We are an international Group headquartered in the UK, a global family of companies focused on agriculture, and are passionate about our produce and our communities.

We are committed to doing the right thing: ethically and commercially, globally and locally. We are custodians, operating sustainable businesses in trust for future generations. We seek to improve the long-term stability and wellbeing of these businesses and the communities and environments in which they operate.

We seek to use sustainable agricultural practices to ensure that the environments and communities in which we operate are protected and enhanced. This allows us to continually improve operational eciency and sustainability which is not only a driving force for enhancing profitability but also a powerful tool to reduce our environmental impact, benefit our communities and support our ultimate ambition to reach net zero.

Purpose and strategy

We aim to generate long-term value for our shareholders and our stakeholders which include our employees, customers, suppliers and local communities in which we operate.

The Group's strategy is to focus on the sustainable production of its core crops (tea, nuts and fruit) whilst continuously assessing opportunities to diversify by both crop and origin.

Execution of this strategy will involve divesting non-agriculture assets as appropriate opportunities arise.

Our business is made up as follows:

Agriculture

2022: Revenue - £283.0 million, trading profit £15.5 million

Other investments

Engineering

2022: Revenue - £13.2 million, trading loss £0.8 million

Investments

Associates

2022: Share of results after taxation - £3.1 million loss

Directors and advisers

Chairman's statement and operational report

Overview of financial results

Revenue from continuing operations for the Group increased to £297.2 million from £255.3 million in 2021. This included an 18% increase in revenue in Agriculture to £283.0 million (2021: £238.9 million) reflecting a full year of trading from Bardsley England, higher tea prices in almost all jurisdictions, albeit on lower crops, higher avocado volumes at reduced selling prices, increased macadamia sales volumes at reduced prices and improved arable prices. This was oset in part by reduced packet tea revenues in India. Revenue from Engineering was lower in 2022 reflecting the sale of Abbey Metal and Amfin during 2021.

Revenue from the discontinued operation (ACS&T) improved in the period up to the date of sale reflecting increased activity in the UK food service sector as COVID restrictions eased.

The results for 2022 show a loss before tax for continuing operations of £3.7 million (2021: £7.1 million profit) reflecting significantly lower results from BF&M and a large impairment charge in respect of Bardsley England. However, taking account of non recurring separately disclosed items the adjusted profit before tax for continuing operations is £4.6 million (2021: £8.8 million). Adjusted profit before tax for continuing operations is before separately disclosed items, primarily impairments, further details of which are set out in note 4 to the Accounts.

The Agriculture division showed improved trading profits in 2022 due to a strong focus on consistent quality to maximise prices, cost control and eciency initiatives as well as through volume growth in macadamia and avocado and from improved pricing for our arable crops. The improved profitability for the division was achieved despite poor weather in India, a prolonged labour strike in Bangladesh, significantly higher distribution costs for our products, especially from Africa, significant inflation in energy and input costs as a result of the Ukraine war, the UK cost of living crisis and the after eects of the COVID pandemic continuing to indirectly impact certain aspects of our trading.

Due to the very high inflation experienced in the UK fruit sector, coupled with severe customer price sensitivity, the combination of which has impacted our view of the future for Bardsley England, an impairment of £10.0 million has been recognised in the 2022 results (see page 73).

Our Engineering division's results also improved in 2022 through a strong focus on cost control and eciency initiatives and reflecting the benefits of the sale of loss making businesses in 2021.

Our results were however also adversely impacted by the poor performance of our associate, BF&M, which was severely aected by the volatility in financial markets and recorded a significant loss, our share of which was £3.6 million, primarily as a result of marking investments to market values. In contrast in 2021 BF&M made a significant contribution to profits of £6.4 million.

In addition to the loss from our continuing operations, we recorded a significant profit from discontinued operations (i.e. our Food Service segment) of £7.6 million (2021: £nil), inclusive of the gain on sale of ACS&T of £3.8 million.

Dividend

Reflecting continued confidence in the Group's long-term future, the Board is recommending a final dividend in respect of the year ended 31 December 2022 of 102p per share bringing the total dividend for the year to 146p per share (2021: 146p per share).

Strategic matters

The Group comprises businesses that produce nutritious and healthy food. Increasing global demand for sustainable and healthy diets drives our continued strategy of evolving to meet the changing needs of our customers, smallholder growers and others. Alongside generating returns for our shareholders we have a role to ensure we use resources responsibly, build strong rural economies and ensure thriving healthy communities by drawing upon everything we have learnt over many decades as a tea, macadamia, and avocado producer.

We noted in our 2022 Interim Report that the Board was undertaking a series of measures aimed at re‑balancing the Group's portfolio of investments to take better advantage of its strengths, and thereby improve profitability and share price performance. This exercise continues.

The Group continues to focus on its key strengths in agriculture and the further diversification of crop and origin, facilitated through disposing of non-core assets.

During 2022, the diversification strategy for the Group's core crops has continued with the ongoing expansion of its macadamia and avocado footprints. We have progressed new avocado developments in three of our origins in Africa looking to build on our experience in Kenya and our market knowledge and scale. The developments in Tanzania and South Africa also diversify origin to take advantage of the dierent climatic and water benefits that these locations present, and which ultimately will lead to a longer market window for fruit deliveries into the various key markets we supply.

Macadamia developments continued in Kenya with both commercial and trial plantings to maximise existing site potential and test alternative sites for future viability with an objective of creating further options for diversification of crop and origin for the future.

Blueberry expansion and development into a possible significant potential core crop for the Group, continues to be a strong ambition given the availability and diversity of location and water supply. As explained later, the experience being gained from the current commercial blueberry trial in Kenya will be invaluable in converting a possibility into reality.

Sustainability and safeguarding

The work initiated by the Stewardship and Safeguarding committee (SSC) has progressed across the Group with the assistance of international specialist consultants. Group subsidiaries have continued to review their social and grievance procedures, and where appropriate, to establish operational-level grievance mechanisms in accordance with the UN Guiding Principles on Business and Human Rights. Group subsidiaries have also enhanced local reporting and training by raising awareness across their management, employees and local communities.

The Board remains committed to further enhancing the Group's environmental and sustainability practices, and has expanded the remit of the SSC. Consequently, that committee has been reconstituted as the Sustainability and Safeguarding committee and reports to the Board. More details of this committee are set out in the corporate governance section on page 40.

The Group strives to use water sustainably, reduce waste, protect the ecosystems within which it operates, and works to ensure estates and smallholders are resilient to climate change. Ahead of the 2023 annual report, the Group is preparing to implement the recommendations of the Task Force on Climate-Related Financial Disclosures (TCFD) which is an important step in that process. As part of this eort, the Group has embarked on measuring its Scope 3 emissions. In conjunction with Scope 1 and 2 emission data, this will put us in a position to consider Science Based Targets for emission reduction.

Investment activities

Capital expenditure in 2022 for continuing operations amounted to £16.9 million. Within this, substantial investment was made in Kenya, Tanzania and South Africa, expanding our macadamia and avocado orchards with a total of 251Ha of new avocado and 97Ha of new macadamia planted. 293Ha of tea was replanted across the Group in the year.

The development of three residential properties on the Linton Park estate was completed and these have been let.

We expect capital expenditure in 2023 to be in line with recent historical levels as we continue to invest in our key strategic growth priorities.

Progress on refocusing investments

ACS&T

Consistent with our strategy, we sold ACS&T at the end of December for £16.6 million with the funds received at the start of January 2023. This also released £3.8 million of cash by way of a pre-sale dividend from that operation. This was the last component of our Food Services division which is now shown as a discontinued operation in our results for 2022. ACS&T contributed £1.7 million of profit before tax in the year and its disposal generated a gain on sale of £3.8 million.

Properties

A residential property in central London was sold in February 2022. We continue to consider opportunities to realise our investment in properties and are currently marketing properties in London and Bristol, others may be sold in due course.

As a consequence of changes in work practices and oce requirements, we relocated our head oce to a Group owned property at Wrotham in Kent in March 2023. Planning consent has been achieved to convert Linton Park to residential use and the property is being marketed for sale.

Collections

Part of the Camellia Collection was sold at auction during 2022 generating net cash proceeds of £3.6 million and a gain on sale of £1.4 million. Further items are due to be auctioned during 2023.

Performance

Agriculture

In total, Agriculture made a trading profit of £15.5 million (2021: £13.1 million) on revenue of £283.0 million (2021: £238.9 million), as set out in note 1 to the Accounts.

Tea

* See note 1 to the Accounts

Estate production and manufacturing

Group tea production in 2022 was 92.9mkg, down 6% on 2021 levels (2021: 99.1mkg) due to lower production in most jurisdictions resulting mainly from adverse weather, and in Bangladesh, a prolonged strike.

Pricing and operations

Tea pricing for all regions, except Darjeeling in India and Malawi, was above that of last year, with our estates being rewarded for concentrating their eorts on the consistent production of high quality teas. As with total production, our sales volumes were also lower.

Shipping logistics have continued to be a challenge throughout the year though this has improved in more recent months. We continue to experience inflation in key input costs, particularly wages, fertiliser, energy and logistics. Distribution costs, particularly from Africa, increased substantially in the year and this in combination with reduced volumes has impacted margins.

India

Our estate crop for 2022 was up 3% on last year. The impact of continued poor weather meant that our production volumes did not recover to pre-pandemic levels.

Our net selling prices firmed for both Dooars and Assam CTC teas due to demand in the internal packet tea market and improved quality, up on prior year by 8% for Dooars and 3% for Assam CTC teas. Darjeeling prices were down 8% over the same period, due to reduced demand. Our Assam Orthodox (rolled leaf tea) prices were up 27% on prior year as the market continued to benefit from severely reduced production entering world markets from Sri Lanka.

North India market pricing overall remained strong in 2022 for quality teas due to limited supply and supported by 100% import taris. North India export volumes were up c.26%, with prices in this market on a par with last year.

2023 has seen the last of the limited 2022 tea stocks sold at significantly lower prices than in the corresponding period last year and the first auctions of the new season also opened substantially lower. Going forward pricing will be determined by regional production volumes and demand.

As previously announced, wages in West Bengal increased 15% for 2022 and Assam wages increased 13% eective from August 2022. A further esclation in wages of 7.7% has recently been announced in West Bengal, on which we await clarification.

Investment in replanting continued with 122Ha of planting completed (2021: 167Ha) and a further 182Ha uprooted in preparation for future planting.

Bangladesh

Due to a very dry start to the season, then very wet weather and flooding coupled with a national strike over wages during the peak season, the Bangladesh operations reported a 21% lower crop than prior year.

Our average net selling price was up 3% on prior year, due to an increased concentration on quality and improved grade mix, though this was insucient to compensate for the reduced volume and significant wage inflation discussed below.

National production was 3% down on prior year but was the third highest crop on record, principally as a result of a 22% increase in bought leaf volumes, the production of which was not aected by the strike. The bought leaf sector has grown 140% in 5 years and its continued rapid escalation, if left unchecked, presents challenges to the market with a risk that potential oversupply results in downward pressure on pricing.

2023 has seen reasonable prices for prior season teas in the initial sale. Forthcoming pricing will be driven by the level of production over the summer months.

Following strike action and intervention by the government, a wage increase of 41.7% was mandated and agreed by the unions eective from August 2022. In addition, a lump sum payment of Tk11,000 per permanent worker was agreed, payable in 2023. The significant wage increase has substantially impacted the ongoing cost of production and requires a meaningful increase in productivity and selling prices if tea production in Bangladesh is to be sustainable long-term.

The total area planted in 2022 was 145Ha (2021: 143Ha) of which 118Ha was replanting and 27Ha was newly planted areas.

Kenya

Following a cool, dry first and last quarter, our Kenyan estates' crop production was down 12% on the previous year. Total factory volumes were down 9%. The national crop was only down c.1%, which is indicative of increasing production levels from smallholders.

Our average selling price in 2022 was up on prior year by 17%. We have continued to outperform our commercial grower competitors in the district by concentrating on quality with a price dierential of 7% above the average and our average prices were the highest of the commercial growers.

The "all average price" at Mombasa auction was 18% up on 2021, driven principally by the sale of improved quality teas. There were large volumes of medium quality teas which did not sell, building a large stock of inventory. Export levels were c.27% down on 2021 with demand from Pakistan and Egypt lower due to the lack of availability of hard currency with which to purchase tea. Demand from the UK was also down due to lower consumption. Increased competition from other beverages and low retail pricing in western markets continues to be a challenge for the industry as is the oversupply of low to medium quality CTC teas for which there is a limited market.

In 2023 our prices to date have been significantly below that of the same period of 2022 reflecting a continuing reduced demand from Kenya's largest two buyers, Pakistan and Egypt. Pricing levels looking forward will depend on production volumes and quality as well as the continued shortage of hard currency in these regions. However, our crop for Q1 2023 was significantly ahead of the same period last year.

Following the conclusion of the CBA negotiations wages are expected to increase by 7% in 2023.

We replanted a total of 53Ha (2021: 50Ha) whilst uprooting 52Ha for replanting in 2023.

Malawi

Our Malawi crop in 2022 was 3% down on that of 2021 following a slow start to the season due to the late arrival of the rains.

Sales in the first half of 2022 experienced some delays due to the logistics challenges arising from a scarcity of containers and flooding disruption at Durban port in South Africa. However, the situation has significantly improved in recent months.

Malawi prices remained under pressure for much of the year with the plainer teas from West of Rift Kenya still proving an attractive value substitution to buyers. Malawi, being land locked, is at a considerable disadvantage to most of its neighbours due to the additional costs of transport to markets. Our average selling price was 2% below that of 2021.

As previously announced, a wage increase of 13% was agreed eective from August 2022. A further increase of 5% applied from January 2023.

On 26 May 2022, the Reserve Bank of Malawi announced that it would stop supporting the currency and allowed the exchange rate to reflect market fundamentals. This resulted in a devaluation of the Kwacha of c.25%. Despite this, the availability of foreign exchange is very limited posing challenges to importers.

There was no replanting in Malawi for a third successive year, a decision taken to conserve resources considering trading conditions.

Selling prices in 2023 in Malawi are marginally above those of the same period of 2022. The market is expected to be volatile for a period due to uncertainty influenced by the general direction of the Kenya market. A lack of foreign exchange in a few key markets also adds to the expected volatility. Our production volumes in Malawi for Q1 2023 are below those of last year.

In mid-March 2023 cyclone Freddy hit southern Malawi with torrential rain and strong winds causing loss of life and extensive damage to property and infrastructure. Sadly, we had one fatality that occurred in our eastern Mulanje operations where the worst of the weather was experienced and where a landslide destroyed approximately 12Ha of tea, irrigation equipment and other water supply systems. Electricity supply has since been reinstated to all factories and roads and bridges have been repaired so access to all estates has been restored. Production has continued throughout, although at lower than expected levels.

The impact on the surrounding communities has been more significant with loss of life, housing and the destruction of many hectares of food crops. We are supporting the community and providing assistance where possible. Nationally there is a great deal of damage to infrastructure in and around the urban centre of Blantyre which will take time to rebuild.

Instant tea, branded tea and tea lounges

India

Sales volumes of our packet tea in India fell by 9%, and net prices also reduced by 5%. Despite increasing demand for tea, packet tea sales continue to suer from competitive pressure in the branded market as well as reduced demand for private label teas. However, the operation has continued to innovate with new product development and the release of new product lines in Single Estate premium teas and five varieties of Ready to Drink bottled iced teas.

Instant tea production in 2022 was up 17% on the previous year. Sales volumes increased 36% with average prices also up by 5% reflecting increased demand and product mix changes, leading to a significantly improved contribution from the operation.

UK

Revenue recovered close to pre-pandemic levels and trading improved for Jing Tea as COVID restrictions were further eased in all markets except China. Although margins have been adversely aected by inflation, particularly on packaging and logistics costs, overall losses are lower than those experienced in 2021. Additional warehousing has been established in Dubai to serve the Middle East markets more eciently and new customers have been successfully secured for 2023.

Nuts and fruits

* See note 1 to the Accounts

Macadamia

The Group's kernel production volumes increased by 29% in 2022 due to improved growing conditions in Southern Africa generally, enhanced pest control in Malawi and our Kenya crop has increased over 30% on the previous year. The Kenya crop is increasing as further areas of maturing orchard come into bearing alongside the increasing maturity of existing orchards.

However, our average net selling price was down 10% on 2021 reflecting high inventories and continuing subdued market demand for kernel post COVID, particularly from China, but also the USA and Japan and exacerbated by increased worldwide production. Sales volumes were however up 18% on 2021 and profits benefitted from the additional volumes, related eciencies and a favourable sales grade mix despite higher distribution costs.

Harvesting of the 2023 crop is underway and volume indications at this stage are encouraging. The macadamia harvest in Malawi was virtually complete before cyclone Freddy arrived in country, so there has been no significant impact on production volumes and processing continues.

Global production volumes in 2022 were above prior year with the two major producers, Australia and South Africa up 7% and 28% respectively. China's production volumes also increased by an estimated 44% reducing their demand for imports. Higher global inventory going into 2023 is continuing to put downward pressure on prices, particularly on kernel grades for the ingredients market.

This situation is expected to persist for some time. Orders and pricing in 2023 so far are well below prior year as buyers assess the current market conditions.

Avocado

Our estate avocado production was up 70% on last year, due in large part to the bi-annual nature of the production which also resulted in higher volumes packed for smallholders The avocado tree has a natural tendency towards alternate or bi-annual bearing, widely known as 'on' and 'o' years and 2022 was an 'on' year. Our estate Hass pricing was up 2% on prior year, due to a firm market for the majority of our fruit arrivals.

There was an excellent Pinkerton season with export volumes up 143% and pricing up 6% on the previous year leading to a significant contribution from that crop to profits despite higher distribution costs.

The 2023 Pinkerton harvest is well advanced with volumes ahead of 2022 and we expect prices to be higher. The Hass season has now started with volumes expected to be significantly behind those of 2022 reflecting the fact that it is an 'o year' for Hass.

We continue our avocado expansion strategy by diversifying our origin portfolio, with further plantings in Tanzania, Kenya and South Africa. We planted 102Ha (2021: 37Ha) at our farm in Tanzania, a further 69Ha (2021: 44Ha) in Kenya and 78Ha (2021: nil) in South Africa. In 2023 to date a further 98Ha have been planted in Tanzania.

During the year Kakuzi in Kenya achieved GLOBALG.A.P. "SPRING" Certificate of Conformity for the sustainable management of water resources.

Other fruits

Apples and pears

Bardsley England is the Group's only agricultural investment in the UK and to date it has failed to perform to expectation incurring a pre-tax loss of £5.7 million in 2022. A combination of factors has contributed to this unacceptable outcome. These include higher than anticipated labour costs, due to government policy on pay for seasonal workers which had a consequent impact on wage rates for permanent workers, as well as very high inflation in electricity, fertiliser, chemicals and fuel costs as a result of the Ukraine war which also had an indirect inflationary impact on other costs. The UK apple season in 2022 saw very high volumes of production with the market oversupplied thus applying significant downward pressure on prices in a rising cost environment. Although consumers have experienced significant food inflation, key retail customers have resisted any meaningful selling price increases. Studies have estimated inflation for apple growers in the UK at 23% in contrast to average industry selling price increases of 0.8% (Source: British Grower Association Survey). Attempts to mitigate cost increases through the restructuring undertaken in December 2021 and other eciency and cost reduction initiatives have had limited impact.

The record breaking heat in the summer coupled with harvesting delays due to heavy rain led to a 49% increase in production volumes but a combination of smaller fruit and significant quality issues further compounded the impacts of high cost inflation and low pricing.

Many producers in the UK top fruit sector are also experiencing diculties and some producers have ceased farming with replanting significantly scaled back. However, consumers continue to demand locally sourced produce and UK fruit remains competitively priced. Despite the challenges in the short term, it is our view that the UK top fruit sector is likely to present opportunities in the coming years for growth and margin recovery for producers.

Considering the trading environment, a decision has been made to further restructure and significantly reduce the scale of Bardsley England's operations. As a result, the uneconomical West Kent orchards were closed in January 2023 and discussions to exit the related leases remain ongoing.

In March 2023, Bardsley England agreed with its key customer that the existing supply contract will be terminated at the end of the current season. Bardsley England intends is participating in the re-tendering of this contract.

The potential closure of the West Kent packhouse operation was announced on 30 March 2023 and the employee consultation is ongoing with packing from that site expected to continue until early August 2023 to fulfil current contracts. The business is expected to be consolidated on a single site in East Kent which has large fruit storage facilities and is well located for access to key transport routes. This will allow for transport and other operational eciencies to be achieved and for future overhead cost savings.

An impairment charge of £10.0 million has been recognised in respect of Bardsley England's assets and goodwill in 2022 as a result of the reduced expectations for the business in the current economic and sectoral environment. Restructuring costs in the range of approximately £1 million to £1.25 million are expected to be incurred and recognised in the 2023 results. Due to the ongoing contractual commitments for 2023, in conjunction with restructuring costs, we expect Bardsley England to also record a significant loss in 2023.

Grapes

Grape production at our South African operation ended with a record harvest 17% up on that of 2021. The grapes were high quality and were sold to local commercial-scale winemakers. The 2023 harvest in South Africa has resulted in a further record production, well ahead of expectation. Pricing is in line with 2022.

Blueberries

2022 was the third year of full production of our 10Ha trial in Kenya.

As previously stated, the indications from the trial are that the variety planted initially does not perform optimally in Kenyan conditions. Other varieties have been trialed in small areas during 2022 and at least two of these are showing much greater potential than the current dominant variety planted. The reason for establishing this commercial scale trial was to test plant establishment, agronomy practices and varieties and this is being achieved very successfully. During 2023 the most promising varieties from the trial will be planted in the 10Ha area.

Production in 2022 fell by 33% reflecting the transition of the trial out of one variety pending the establishment of the others as explained above. The majority of the crop produced was sold locally.

Other agriculture

2022: Revenue - £15.8 million (2021: £11.4 million), trading profit £6.3 million (2021: £4.8 million)

* Volumes quoted are for conversion to value addition products rather than fuel wood for own use.

Arable

Our soya and maize crop production was higher than that of prior year with excellent quality being achieved. Prices for the soya crop were 37% higher than the prior year and maize prices increased by 4%, reflecting the impact of the Ukraine war on global food grain markets. Wheat stocks carried over from 2021 also achieved good prices. This led to substantially increased profits for our operation in Brazil.

Rubber

Production was down 5%, with pricing down 1% on last year and prices remain lower than the cost of production. A number of initiatives are being pursued with the aim of reducing the losses from this crop.

Forestry

Kakuzi's forestry volumes were slightly ahead of last year with the main focus on fence post sales. The production of quality timber products is also being investigated as a potential diversified and value-added product line.

Our Brazil operation restarted its eucalyptus timber sales during the year but no significant pine timber sales were made. Pine resin sales continued throughout the year, providing a useful contribution to profits.

Livestock

Births were down significantly on last year, leading to lower revenues.

There are now some 600Ha under grass production for baling and sale into the local market which will also provide a diversified source of revenue for the livestock operation.

Other investments

Engineering - A JT Engineering

A trading loss of £0.8 million (2021: £2.3 million loss) on revenue of £13.2 million (2021: £15.3 million) was recorded, as set out in note 1 to the Accounts. The loss in 2022 was lower than prior year due to tight cost control and a focus on eciency and improving terms with customers.

Market conditions in both the oil and gas and hydro sectors were flat during 2022. The surge in orders during the autumn of 2022 subsequently abated due to government policies aecting the confidence of the oil majors to increase production from the North Sea and the energy crisis causing the key customer for Site Services to postpone planned projects. Order intake and enquires in 2023 to date for both divisions are encouraging.

Associates

2022 Share of results: Loss of £3.1 million (2021: Profit of £7.2 million)

BF&M

BF&M recorded a shareholders' net loss of Bermudian $8.8 million as compared to shareholders' net income of Bermudian $25.2 million for 2021. Significant increases in interest rates resulted in short-term fluctuations in the values of BF&M's fixed income portfolio. Both bond and equity asset prices declined, resulting in unrealised losses of Bermudian $19 million (loss of 7.4%). A non-recurring, goodwill impairment charge of Bermudian $5 million was also recorded.

Net income from operations, excluding fair value movements in investments and the goodwill impairment, was Bermudian $11.5 million versus Bermudian $22.0 million in 2021. Gross premiums written for the period increased by 3% from the prior year, driven by increased property premiums oset by the non-renewal of a large account which was fully reinsured. Short term P&C claims and adjustment expenses increased by 6.8% to Bermudian $15.8 million. Excluding the fair value impact, life and health policy benefits increased by 9% to Bermudian $96.8 million. Group health claims remained elevated just above pre-pandemic levels with a return to normalised levels expected in 2023. Volatility in financial markets impacted overall assets under management, however the pension and annuity businesses remain well-positioned as these markets recover.

United Finance and United Insurance

Our two associate companies in Bangladesh, United Finance and United Insurance, produced lower results reflecting continued challenging economic conditions in Bangladesh.

While United Finance's net operating income was 13% higher than that of the prior year due to an increase in the number of new loans sanctioned, margins were impacted by the eect of inflation on the overhead base and an increase in the costs of non-performing loans.

The underwriting profit for United Insurance decreased due to a decrease in gross premiums, higher claims and increased cost of reinsurance.

Investment portfolio

The total value of the portfolio at 31 December 2022 was £35.6 million (2021: £40.2 million). During the year a net £5.6 million was realised from the investment portfolio.

Currencies

Over the course of the year, Sterling weakened against the majority of our operating currencies. This has resulted in a gain on foreign exchange translation of £9.3 million (2021: loss £4.0 million) which is reflected in the Statement of Comprehensive Income. Had we translated our profit before tax for the year using the same average rates as last year, our results for 2022 would have been £0.2 million lower. Our profit before tax includes an exchange gain of £1.5 million on transactions during the year (2021: gain £0.4 million).

Tax and other provisions

The Group's tax charge reflects the losses in the UK and impairment charges which are not deductible for tax. The tax charge also reflects the reversal of a significant deferred tax liability as a result of movements in the surplus on the UK Pension Scheme.

As is normal at this time of the year, we have ongoing wage negotiations relating to prior periods in India. We consider we have made adequate provision for their likely outcome.

Despite progress being made during 2022, we continue to have a number of significant uncertain tax situations totaling £12.5 million, which have been disclosed previously and which are detailed in note 42 to the Accounts.

Pensions and other employment benefits

The Group operates a number of defined benefit pension schemes, the largest of which is in the UK. On an IAS 19 basis, at the end of 2022 the UK scheme had a deficit of £1.1 million. No contributions are currently being made to the scheme. The next triennial valuation is due in 2023.

Accounting for defined benefit schemes is prescribed by IAS 19 and the quantum of the deficit continues to be highly sensitive to small changes in assumptions as regards wage inflation and gilt yields in the relevant jurisdictions and to asset performance. This year a net actuarial loss after tax of £9.3 million (2021: post tax net gain £16.5 million) is reflected in the Statement of Comprehensive Income. The net loss this year arises primarily from the UK scheme where asset performance was lower than expected.

Outlook

Trading in 2023 year to date has been mixed with higher production volumes in Kenya offsetting the lower prices being achieved in that market. There has been a positive opening for new season teas in Bangladesh but prices in India are significantly lower than last year, albeit for both countries it is very early in the season. Macadamia volumes are also significantly ahead of those of 2022 but pricing continues to be under significant pressure and sales volumes are below prior year. The remaining crops are developing in line with what we would expect at this stage in the growing cycle.

There remains residual uncertainty about how the war in Ukraine might impact the tea market and input costs more broadly going forward. High energy prices will continue to aect our margins. Fertiliser prices also remain relatively high with the impact continuing to be felt in the cost of production across all our agricultural operations. Furthermore, rising inflation is leading to continuing increases in wage demands.

Overall, however, with financial markets less volatile than in the recent past, we expect adjusted profit before tax for 2023 to be ahead of that of 2022 and with our substantial cash resources, our investment portfolio and limited gearing, we continue to be well placed to withstand a further period of disruption to our operations and sales.

We thank all of our sta for the way in which they responded to the many challenges of the year in what has been a fast-changing business environment. The passion for our products, our skills and the professionalism of our people are key to our success.

Environmental and social report

At Camellia, ESG (Environmental, Social and Governance) is integral to our business. This is based on our fundamental belief that we are custodians of our operations and must ensure a process of continuous improvement across all that we do. This enables our assets to be passed on to future generations whilst caring for the environments in which they are based and for those communities who depend on them. We believe that the success of all our operations is intrinsically connected to the communities, the environments and wider supply chains in which they operate.

During the year we developed a Group sustainability strategy consisting of five guiding pillars which are set out below, with the United Nations 10 Sustainable Development Goals (SDGs) to which they align:

* SDG 3 (Good health and wellbeing); SDG 4 (Quality education); SDG 5 (Gender equality); SDG 6 (Clean water and sanitation); SDG 7 (Aordable and clean energy); SDG 8 (Decent work and economic growth); SDG 12 (Responsible consumption and production); SDG 13 (Climate action); SDG 15 (Life on land) and SDG 16 (Peace, justice, and strong institutions).

Within these five guiding pillars we have identified five key focus areas for which the Group's operations will create timebound action plans and initiatives to actively create strategies and seek solutions which address the various challenges facing the Group:

We realise that these are highly complex areas and it will take time to devise, as well as implement, plans to achieve our desired outcomes. In some areas solutions may not yet exist but we intend to actively seek and trial possibilities where practically and economically feasible.

The Group undertakes a variety of ESG projects and initiatives, examples of which are set out in this report and on our website (www.camellia.plc.uk).

The Group's approach to ESG is described in detail in this section and is the responsibility of the Board which is supported by the Sustainability and Safeguarding committee. The boards of the Group's operating companies closely consider their respective governance protocols and the environmental and social impact of their ongoing operations and investment decisions, with regard to both Group requirements and local regulations and legislation. The Group's approach to Governance is set out in the Corporate Governance report.

Environmental

Climate change is the most significant long-term risk to the Group's agricultural operations. We seek to mitigate the impact of this risk by diversifying our agricultural production by both origin and crop. We also continue to plant more drought resistant crop varieties and use other initiatives, such as regenerative farming methods and sustainable irrigation.

In addition to our eorts to minimise our environmental impact, we work to protect and enhance forests and water bodies to promote biodiversity. The material environmental impacts that arise from the Group's operations fall broadly into three categories: (i) greenhouse gas emissions from on-site combustion of fuels to power the tea factory driers; (ii) use of fertilisers; and (iii) extraction of water for irrigation of crops. Water is extracted from a variety of sources, but we seek to maximise rainwater capture by creating large reservoirs wherever possible from which to irrigate sustainably.

The Group oversees c.9,000Ha of indigenous forests and conservation areas and a further 7,200Ha of commercial forestry (eucalyptus, pine and cypress). These areas, in combination with fields of perennial crops sequester significant amounts of carbon and act as an important carbon sink, which once quantified will oset some of the Group's emissions. We have estimated sequestration of our core crops and our managed eucalyptus estates, which we comment on further below.

We use specialist partners to support the Group in achieving environmental protection and emission footprint reduction initiatives and are continuously exploring technologies that can reduce our environmental footprint.

Environmental reporting

The Group continues to report under the Streamlined Energy & Carbon Reporting Regulations (SECR), which is set out in the rest of this section. The Group's 2023 annual report will include the Group's reporting in line with the Taskforce on Climate-Related Financial Disclosures (TCFD) reporting framework.

Based on prior year Scope 1 and Scope 2 carbon footprint investigation and analysis, the Group has determined that our priority for the reduction in emissions should be the thermal and electrical energy requirements of tea manufacture. Thermal energy demand reflects the highest levels of emissions and accordingly initiatives have been targeted towards reducing the quantity of fuel (coal, gas, wood) consumed.

Global GHG* emissions (excluding UK) and energy use data for the year to 31 December

* Greenhouse gas

** tCO2e - tonnes of carbon dioxide equivalent

Refer to Appendix 1 for more detailed data and Appendix 3 for the methodology.

There is no market-based data available for global (excluding UK).

Changes in Scope 1 and Scope 2 emissions

The Group's Scope 1 and Scope 2 location-based emissions (excluding UK) reduced by 1.9% during the reporting period. This was primarily due to a reduction in volumes of made tea produced in Bangladesh and a lower national grid emission factor for Kenya. This was partially oset by higher electricity usage in South Africa due to an increase in the area under irrigation. In the tea drying process the Indian operations rely on coal whilst Bangladesh uses natural gas. Where possible, and with infrastructure permitting, cleaner fuel sources and eciency improvements are being implemented, although progress is at an early stage.

We report the made tea intensity ratio (2022:1.36 kg CO2e per kg of made tea; 2021:1.29kg CO2e per kg of made tea) and we continue to invest to improve the carbon eciency of our tea factories. There has been a 5.9% increase in the Group's location-based made tea carbon intensity, mainly due to less carbon ecient production in Bangladesh. Green leaf volumes received into factories reduced during the period leading up to the industrial action so factory capacity was not optimised. Following the strike, leaf was longer, resulting in leaf volumes taking longer to process. We are also pleased to observe that our Kenyan and Malawian tea operations have continued to improve their thermal energy eciency in their tea factories.

As mentioned above, the Group's perennial crops sequester significant amounts of carbon. We previously reported that we conducted an external study to estimate the volume of carbon sequestered by the Group's key crops and managed forestry. Sequestration forms an integral part of the Group's ambitions to become net zero and we continue to assess how to reflect this as part of the Group's sustainability strategy. We await further direction from the GHG Protocol, under its land sector removals guidance, in relation to the accounting for carbon stocks.

UK GHG emissions and energy use data for the year to 31 December

Refer to Appendix 2 for more detailed data including market-based data and Appendix 3 for the methodology.

Environmental certifications

AJT Engineering is ISO 14001 certified, the framework of which helps the entities improve building energy eciency, reduce waste streams, and increases awareness of potential environmental risk factors. Many of our global operations are Rainforest Alliance certified and some are GlobalG.A.P. certified.

Energy eciency action taken

In the period covered by the report, the Group's operations have implemented a range of energy eciency initiatives. We set out some of the key examples below:

2021 Key examples were:

In aggregate, we expect the above energy saving initiatives and several smaller initiatives to result in 4.1 GWh (2021: 2.3 GWh) saving in energy per annum.

In addition, the Group is continuing with its programme of replacing existing energy sources with renewables and in 2022 installed additional capacity expected to produce 430 MWh. The main initiatives to date include the installation of solar generation at several operations in India, Bangladesh, Kenya and Brazil, as well as the installation of hydro turbines in India. In the UK a number of our sites are on green tari electricity contracts. The Group's operations have also assessed potential energy eciency initiatives that can be implemented over the next five years to provide significant savings. We set out examples of the key initiatives below:

The Group will continue with its program of replacing existing energy sources with renewables where possible with a focus on increasing installed solar capacity. Our ultimate intention is to set energy use and emission reduction targets across our operations.

Social

The Group's businesses are fundamentally connected to the welfare of the communities and environments in which they operate. They proactively invest to ensure these environments are protected and improved. Our focus is on the long-term stability, security and continuity of our businesses and those communities. To this end our subsidiaries are working with supply chains, customers, national governments, trade unions and NGOs to help improve the livelihoods of their employees and their communities.

Healthcare, education and housing

Healthcare, education and housing continue to be integral parts of the Group's operations. For example, the majority of tea estates in India and Bangladesh have a hospital and a qualified doctor, in addition to central referral hospitals owned and managed by the operations. Our African operations run dispensaries established on their estates, oering medical services and care to employees, their dependents, and people from surrounding communities. These are manned by qualified medical personnel from our operations and services are free to employees and their dependents. Across the Group we continue to operate 50 hospitals and 85 dispensaries that we own and/or operate. In 2022, the Group performed 1million patient treatments, of which 564,000 were for employees.

Many of our Group's operations provide childcare and education to their employees' families from nursery up to secondary school. During the year we continued to run 175 nurseries and creches, 72 primary schools and six secondary schools. In total we educated more than 23,000 children. In certain circumstances, our Group's operations will provide land or other resources to contribute to the running of local schools which are not owned and/or operated by them.

We also provide housing to a large number of employees and their families. The housing is owned and managed by our Group's operations and is provided and maintained in line with widely recognised international certifications. The Group's operations own c.48,000 houses accommodating c.293,000 people, of whom c.66,000 are employed.

2022 continued to be a year impacted by the eects of the COVID pandemic. Our Group's operations have made significant eorts to provide safe working and living environments for our employees as well as the wider communities in which they operate.

Approved by the Board

Amarpal Takk

Company Secretary

3 May 2023

Strategic report

The Strategic report contains certain forward-looking statements. These statements are made by the Directors in good faith based on the information available to them up to the time of their approval of this report and such statements should be treated with caution due to the inherent uncertainties, including both economic and business risk factors, underlying any such forward-looking information.

Business review

The Company is required to set out in this report a fair review of the business of the Group during the year ended 31 December 2022 and a description of the principal risks and uncertainties facing the Group. A fair review of the business of the Group is incorporated within the Chairman's statement and operational report on pages 5 to 15. The Chairman's statement and operational report, together with information contained within the Report of the Directors, highlights the key factors aecting the Group's development, performance and the financial performance of the Group (see pages 5 to 15 of the Chairman's statement and operational report). Other matters are dealt with below.

Group strategy

The Board has adopted the following strategy for the Group:

The progress against this strategy during the year is set out in further detail in the Chairman's statement and operational report, the Environmental and social report, and within the Report of the Directors.

Business model

The Group is engaged in Agriculture, Other investments and Associates.

Camellia operates a decentralised business model which empowers the management teams in its subsidiaries to run their businesses with the scope and accountability to identify and implement initiatives that create value for the Group. Our devolved approach enables decisions to be made by those closest to the issues and the stakeholders that may be aected, thereby fostering resilience and flexibility in planning and enabling timely responses to impacts and opportunities.

Regular reports are made to the Board on performance against the annual budget and each operation is expected to perform against an agreed strategy with goals and targets for the short, medium and long-term.

Agriculture

To focus on our tea, macadamia and avocado crops, where we have scale and geographic diversity. To maintain and selectively expand our portfolio of crops and products in order to retain the diversity of location and crop which has historically proven so valuable in spreading the Group's political and commodity price risk. Where appropriate opportunities arise, to add to our production capability in bearer plant agriculture, as well as to make aligned acquisitions and investments to enable us to capture more of the value chain.

All our agriculture operations have regard to the potential threats arising from politics and the impact of climate change, particularly in water stressed areas, and will adapt their portfolio of operations accordingly.

Other investments and Associates

AJT Engineering. To keep our presence in the energy sector under review, in line with our strategy of expansion in areas of expertise, while divesting in non-core businesses.

Investment portfolio. To have a portfolio, principally of listed investments, the strategy for which remains to invest in high quality companies where we believe that there is long-term value. This portfolio also enables us to balance our geographic risk exposure.

Investment property. Parts of the portfolio may be sold to accelerate the Group's investment in agriculture.

Collections. Parts of the art, philately and manuscripts collections may be realised to facilitate the increased focus on our core agricultural business.

Associates. The Group has three associate companies in the financial services sector of which BF&M, the listed Bermudian insurance business is the most significant. With all our Associates, we continually monitor our investment and may increase or decrease our holding in the future.

Principal risks and uncertainties

The Group is exposed to a variety of possible risks and uncertainties that could impact the Group's operations and future performance. The Group regularly monitors these risks at operational and Group level.

Our decentralised operating model enables Group company management teams to identify, evaluate and manage risks that are relevant to their geographic location and markets. The Strategy group considers risks identified to it by the Group companies, and where appropriate raises them to the Board and/or the Audit committee. Information on the Group's financial risks is disclosed in note 43 of the Accounts.

The Board has carried out an assessment of the material risks and uncertainties relating to the Group's principal operations, with key mitigations and assessment of change in risk year-on-year. These are set out in the table below.

Agriculture

Engineering

Investments and Associates

Group

Group principal policies (GPPs)

There are a range of issues that are important to the Group and to all of our operations, whatever sector they operate in. These are set out in the GPPs which are periodically cascaded across the Group. Each operation is required to prescribe its own local policies based upon the GPPs. On an annual basis, each significant operation confirms to Group its adherence with the GPPs. Ultimately, our individual operations have experts who are best placed to identify how each policy can be implemented and applied which in turn enables them to operate responsibly and ethically over the long-term.

Notwithstanding the fact that overall responsibility for the implementation and enforcement of the GPPs rests with the management of each operating company, certain GPPs (such as the Anti-Bribery and Corruption GPP, the Modern Slavery GPP and the Tax GPP) include provisions which are directly eective. This is the case where observance of these provisions is required in order for Camellia Plc to comply with its own legal and regulatory obligations.

The GPPs can therefore be grouped into the following four categories:

The High-level GPPs comprise the Certification and Traceability GPP, the Health and Safety GPP, the Environment GPP, Employee Welfare GPP and Human Rights GPP. The Compliance GPPs comprise the Anti-Bribery and Corruption GPP and the Whistleblowing GPP. A summary of each principal policy is set out below and they are set out in full on our website.

High-level GPPs

Certification and traceability

As part of our end to end supply chain, our operations are required to meet the requirements of our customers and suppliers in terms of certifications and traceability. The vast majority of our tea gardens are Rainforest Alliance certified and all our macadamia, avocado and winery processing facilities are FSSC 22000 certified. Across the Group, many operations have also obtained ISO14001, ISO9001 and ISO45001 and many other appropriate accreditations, such as Red Tractor for our Bardsley England operation.

Health and safety

We take responsibility for our people by promoting good health and providing a safe and healthy workplace to protect all employees, contractors, visitors and the public from foreseeable work hazards. All operations are required to comply with local health and safety legislation, regulations and to obtain certifications from external authorities.

Environmental

We are mindful of the environment in which we operate, recognising that our operations require natural resources and that our operations generate emissions and waste. We understand and comply with current applicable legislation in the jurisdictions in which we operate. Our operations are each required to commit to policies which reduce their environmental footprint and which include (where appropriate), carbon, recycling, waste and water.

Employee welfare

Our employees are at the heart of what we do, and their safety and welfare is paramount, as described in Environmental and social report. Operations are required to have policies and procedures in place which cover equality, health, personal development, training, diversity, and (where appropriate) education, housing and sanitation.

We consciously and continuously work towards encouraging equality in management positions across our operations. The Group complies with local regulations to encourage employees with disabilities to work in our operations and where necessary, makes appropriate adjustments to working practices.

Human rights

Camellia Plc and its operating companies believe that businesses flourish where human rights are protected and respected, with remedy available. The Group is committed to protecting and respecting the dignity, well being and human rights of the Group's employees, the communities in which the Group operates and those with whom we have relationships or who may be impacted by the Group's operations.

The Group is committed to upholding internationally recognised human rights in line with the principles and guidance contained in the UN Guiding Principles on Business and Human Rights, including those set out in the International Bill of Human Rights and the International Labour Organisation's Declaration on Fundamental Principles and Rights at Work. Where national law and international human rights standards dier, we follow the higher standard; where they are in conflict, we adhere to national law, while seeking ways to respect international human rights to the greatest extent possible.

Compliance GPPs

Anti-Bribery and corruption

The Company has adopted an anti-bribery policy which complies primarily with the requirements of the UK Bribery Act 2010 although the Board also requires compliance with the laws of all countries in which the Group operates.

All Group employees, ocers and executives, and all those acting for or on the Group's behalf are strictly prohibited from oering, paying, soliciting or accepting bribes or kickbacks, including facilitation payments.

Compliance with the anti-bribery policy is monitored by the individual operations and incidents are reported to the anti-bribery ocer for such operation.

In addition, the Board has adopted an anti-facilitation of tax evasion policy which complies with the requirements of the UK Criminal Finances Act 2017. The policy has been introduced across the Group and its compliance is monitored at Group and by individual operations.

Whistleblowing

Our whistleblowing policy provides guidelines for people who feel they need to raise certain issues in confidence. It is designed to protect those raising a genuine concern, in line with the Public Interest Disclosure Act 1998 or other jurisdictional legislation. Each operation is required to have a designated local whistleblowing ocer. Employees have access to the whistleblowing ocer for the individual operation, as well as the Group whistleblowing ocer or the chair of the Audit committee.

Modern slavery GPP

The Group continues to comply with the requirements of the Modern Slavery Act 2015, to ensure that modern slavery and human tracking are not taking place either within the Group or in the supply chains of our operations. A copy of the statement for the year ended 31 December 2022 is available on the Company's website. In some countries, it is both the cultural norm and permissible for parents to involve their children in the production process. We do not subscribe to this approach and the use of child labour is prohibited across the Group. All Group operations are required to confirm this statement and adopt local policies and procedures to ensure continued compliance. This includes setting out codes of conduct when working alongside customers and suppliers.

Tax principles

The Group's tax principles include: compliance with applicable tax laws; payment of the correct tax amounts; interpretation of tax law; undertaking tax planning based on commercial rationale; and transparency with tax authorities.

Key financial performance indicators

The nature of the Group's principal activities is such that the Board takes a long-term view of its operations, particularly Agriculture.

The Board reviews monthly reports with a range of financial and other indicators to monitor the performance of each division depending on the nature of its operations.

For the Agriculture division, the Board receives monthly profit and operating performance information, data on sales prices and volumes, costs of production and crop volumes against budget and on a per unit basis. Rainfall and other climate data are also considered.

For the Engineering division, the Board receives monthly profit and operating performance information.

For Investments, the value and performance of the share portfolio is reviewed quarterly.

For Associates, the Board receives revenue and profitability information when those companies release information to their respective shareholders.

Certain of the key financial performance indicators are included in the Chairman's statement and operational report on pages 5 to 15.

Non-financial performance indicators

Operations have developed non-financial KPIs that are relevant to it, these are regularly monitored and include:

The Board, or the Strategy group (as appropriate), considers such KPIs by exception where local operations notify that significant material issues have emerged.

Section 172 statement

This section 172 statement should be read in conjunction with the Environmental and social report, this Strategic report, the Corporate Governance report and the Statement of Directors' Responsibilities.

In performing their duty under section 172(1) (a) to (f) of the Companies Act 2006, Directors have acted in a way that they have considered, in good faith, to promote the success of the Group as a whole, whilst carefully considering the interests of shareholders and other stakeholders which have an impact on the long-term success and sustainability of the Group, including suppliers, customers, employees, the communities in which the Group operates, and the impact on the environment.

Long-term

The Board is undertaking a series of measures aimed at re-balancing the Group's portfolio of investments in order to take better advantage of its strengths, and thereby to improve profitability. This includes investment in social and environmental initiatives, in particular, to mitigate the impact of climate change. This also includes accelerating agricultural diversification and divesting of certain assets which we consider to be non-core, details of which are covered elsewhere in this report. Key risks, potential impact and mitigations are included in the "Principal Risks and Uncertainties" section below.

Stakeholders

The Board recognises the value of stakeholder relationships and the key role that these play in the Group's sustainability and success over the longer term. Good progress continues to be made across the Group in initiatives to protect and promote human rights and a peaceful, long-term and mutually beneficial relationship between the activities of businesses within the Group and the communities aected by them. Many environmental and social projects are initiated by sta in our subsidiaries each year, which we highlight on our website and various social media platforms. Further information can be found in the Environmental and social report.

Views of stakeholders are provided to the Board through the information from management reporting, committees and meetings and operational visits. The Board conducts regular reviews of how to continue to engage eectively with stakeholders and there is ongoing dialogue between members of the Board and stakeholders.

Employees

In order to track progress made, and in line with our culture of seeking ongoing feedback, another annual employee engagement survey, Your Voice, was undertaken during 2022. The survey gathered anonymous and open feedback from employees to inform local management decisions as well as to provide Board insights. All employees in the UK were invited to respond and the results of the survey are continuing to be used to plan key initiatives and track progress.

Employees are kept informed on matters aecting them and the performance of the Group by their local management as well as through internal publications, the Camellia Plc website, social media and operational visits. Kenyan and Indian operations have social media platforms which support employee engagement and Kakuzi uses YouTube videos to communicate news and information about sta and their roles within the business.

As set out in the Group's Employee Welfare Policy, operating companies are expected to give due consideration to employment applications received from disabled persons and give employees who become disabled every opportunity to continue their employment.

The table below provides a breakdown of the gender of the Directors and employees on 31 December 2022.

Approved by the Board

Amarpal Takk

Company Secretary

3 May 2023

Report of the directors

The Directors present their report together with the audited consolidated accounts for the year ended 31 December 2022.

Principal activities

The Company is a public company limited by shares, which is quoted on the AIM Market of the London Stock Exchange and incorporated and domiciled in England and Wales. The principal activity of Camellia Plc is a holding company and the principal activities of its subsidiary undertakings comprise:

Fostering business relationships is of paramount importance to the Directors, as set out in the s172 Statement in the Strategic report. Further details of the Group's activities are included in the Strategic report and the Chairman's statement and operational report.

Results and dividends

The loss after tax for the year amounted to £8.3 million (2021: Profit after tax £4.5 million). The Board is proposing a final dividend for the year 2022 of 102p per share payable on 26 July 2023 to holders of the ordinary shares registered at the close of business on 16 June 2023. Therefore, the total dividend payable for 2022 is 146p per share (2021: 146p per share). Details are shown in note 12 to the Accounts.

Directors

The Directors are listed on page 4. The following Directors had beneficial interests in the shares of the Company.

Under the Company's articles of association all the Directors are required to retire annually. Accordingly, Malcolm Perkins, Susan Walker, Graham Mclean, Frédéric Vuilleumier, Simon Turner, Rachel English and Stephen Buckland will retire and, being eligible, will seek re-election at the forthcoming Annual General Meeting (AGM).

None of the Directors or their families had a material interest in any contract of significance with the Company or any subsidiary during, or at the end of, the financial year.

Executive directors

Malcolm Perkins was appointed a Director in 1999 and Chairman in 2001, having joined Eastern Produce (Holdings) Limited, now Linton Park Plc, in 1972. He is a chartered accountant and chairman of the Nomination committee.

Graham Mclean, a qualified agriculturalist, was appointed as Director of Agriculture in October 2014. He was previously regional director of the Group's operations in Africa and has worked for the Group for more than 25 years. He is a non-executive director of Kakuzi Plc.

Susan Walker was appointed Chief Financial Ocer for the Group on 4 June 2015. She joined Camellia as Finance Director Designate on 1 July 2014. She is a chartered certified accountant and a non-executive director of Goodricke Group Limited and of United Finance Limited.

Non-executive directors

Stephen Buckland was appointed as a non-executive Director in November 2021. He previously held positions within the Camellia Group's agricultural and banking businesses. He holds an executive position within The Camellia Foundation, a UK charity whose primary donor of the same name is the ultimate majority shareholder of Camellia Plc. He is a member of the Audit committee.

Rachel English was appointed as an independent non-executive Director in May 2022. She is a chartered accountant and has extensive international and general management experience, having founded and served on the board of several significant businesses, including as chair of Acacia, a FTSE 250 company, and previously served on the audit committee of the UK Department for International Development. She has substantial experience and interest in ESG matters. She became the chair of the Audit and Remuneration committees and joined the Nomination committee on 8 June 2022.

Simon Turner was appointed as a non-executive Director in March 2020. After an earlier career in the legal profession, he is now president of the board of the trustee of The Camellia Foundation. He is a member of the Remuneration and Nomination committees.

Frédéric Vuilleumier was appointed as an independent non-executive Director in March 2013. He is a partner of Oberson Abels SA, a law oce based in Geneva, Switzerland. He became a member the Audit, Remuneration and Nomination committees on 8 June 2022.

Company Secretary

Amarpal Takk was appointed as Group General Counsel and Company Secretary in April 2018. He is a qualified solicitor of England and Wales.

Substantial shareholdings

As at 6 April 2023 the Company has been advised of the following interests in its share capital:

Share capital and purchase of own shares

The Company's share capital comprises one class of ordinary shares of 10p per share which carry no restrictions on the transfer of shares or on voting rights (other than as set out in the Company's articles of association). There are no agreements known to the Company between shareholders in the Company which may result in restrictions on the transfer of shares or on voting rights in relation to the Company. Details of the issued share capital are contained in note 37 to the Accounts.

At the AGM in 2022, shareholders gave authority for the Company to purchase up to 276,200 of its own shares. This authority expires at the conclusion of this year's AGM at which a resolution proposing renewal of the authority will be submitted to shareholders.

Auditors

A resolution proposing the reappointment of Deloitte LLP will be put to the AGM.

Each of the persons who were Directors at the time when this Directors' report was approved has confirmed that:

Energy and carbon disclosure

In compliance with the SECR requirements, our greenhouse gas emissions, energy consumption and energy reduction initiatives are reported within the Environment and Social report on pages 16 to 20.

Employees and stakeholders

The Directors have had regard to the need to foster the Company's business relationships with employees, suppliers, customers and others, and the eect of that regard, including on the principal decisions taken by the Company during the financial year. Details in relation to employees and stakeholders are set out in the section 172 Statement on pages 30 to 31.

Research and development

The Group invests in research and development projects within its operations in order to improve eciency and grow revenues. In Kenya, Malawi and India technical departments in conjunction with specialised departmental teams are focused on numerous projects to improve operational eciencies (both field and factory), pest and disease identification and control, improving energy eciency and utilisation and the implementation of new technologies to enhance automation.

We continue to collaborate with various organisations, for example, the Cambridge Environmental Sustainability Strategy committee, the Carbon Trust, and the Gatsby Foundation on various areas of future business strategy. In Kenya we are running a commercial blueberry trial to evaluate the viability of dierent varieties. In Brazil, research and development is ongoing into water saving irrigation systems, and satellite imaging for soil, nutrient and crop profiling help to identify climate impact and plant nutrient requirements. These initiatives will help to inform decisions on the implementation of precision farming technologies.

Future development

Details of future developments are set out in the Chairman's statement and operational report and in the Strategic report.

Going concern

The Directors, at the time of approving the financial statements, considered the Group's business activities together with the main trends and factors likely to aect the Group, and the most recent business performance of the Group as described in the Chairman's statement and operational report on pages 5 to 15.

They also considered the potential impact of the current operating environment and the Ukraine conflict on the business for the next 15 months.

The Directors have considered several variables which may impact on revenue, profits and cash flows. In light of the nature of our business and our experience of trading through the pandemic and the Ukraine conflict, we expect our Agriculture businesses will continue to operate broadly as set out in the Chairman's statement and operational report. We have assumed that the leisure and food services markets continue to recover gradually over the course of the next year.

At 31 December 2022, the Group had cash and cash equivalents net of borrowings of £45.6 million. In addition, the Group had undrawn short-term loan and overdraft facilities of £22.4 million and a portfolio of liquid investments with a fair market value of £35.6 million. In early January 2023, £16.6 million in cash was received from the sale of ACS&T.

The Directors have modelled various severe but plausible scenarios using assumptions including the combined eect of reduced sales volumes for tea, and reduced sales volumes for macadamia during 2023. The revenue and operational impact of such volume reductions across our operations would have a substantially negative impact on Group profitability. We have also considered the risk of price reductions during 2023 for our tea, macadamia and avocado crops.

Historically in the Tea operations, restrictions on, or reductions in, the supply of tea either regionally or globally have led to higher selling prices. However, for prudence for the purposes of our downside scenario planning we have not reflected increased selling prices for tea nor any significant mitigating reductions to our operating cost base in our tea operations. We have assumed that in certain scenarios aspects of our investment programme would be curtailed.

Under both the base case and the downside scenario, the Group is expected to continue to have sucient headroom relative to the funding available to it.

The Directors believe that the Company and the Group are well placed to manage their financing and other business risks satisfactorily and, have a reasonable expectation that the Company and the Group will have adequate resources to continue in operational existence for the foreseeable future. The Directors therefore continue to adopt the going concern basis in preparing the financial statements.

Financial risk management

Information on the Group's financial risk management objectives and policies and on the exposure of the Group to relevant risks in respect of financial instruments is set out in note 43 of the Accounts.

Corporate governance

The Company's statement on corporate governance can be found in the Corporate Governance report on pages 36 to 40.

Political donations

The Company has no political aliations and does not make political donations. Its operations work with governments and other parties around the world on issues that are important to our customers, stakeholders, communities and to the interests of the business.

Approved by the Board

Amarpal Takk

Company Secretary

3 May 2023

Corporate governance

Statement of compliance

The Company is committed to complying with the Quoted Companies Alliance's (QCA) Corporate Governance Code for Small and Mid-size Quoted Companies (QCA Code). The Chairman considers the application of standards of corporate governance that are appropriate for the Group's nature, status, profile, size and circumstances to be important in ensuring the Group is managed for the long-term benefit of all stakeholders. The table on our website sets out how we comply with the ten principles of the QCA Code.

The Group consists of a portfolio of businesses which are grouped into independently managed divisions. These divisions report into the Board by function against a variety of metrics including budgets and business plans.

The Board

The Board currently comprises seven Directors, four of whom are non-executive Directors as set out on page 4. The remaining Directors are executive Directors, including the Chairman. The names and brief biographical details of each Director appear on pages 32 and 33.

The Board has established Remuneration, Audit and Nomination committees. Terms of reference of each of the committees can be viewed on the Company's website.

The Board is responsible for managing the Group's business and has adopted a schedule of matters reserved for its approval. The schedule is reviewed periodically and covers, inter alia, the following areas:

A full copy of the schedule is available on the Company's website.

A report summarising the Group's financial and operational performance is provided to Directors each month. Each Director has sucient information in advance of Board meetings to enable informed judgements to be made on matters referred to the Board.

Board diversity

The Group has an Employee Welfare GPP which Group companies are expected to subscribe to (see page 28). In addition, the Company has a Dignity at Work and Equal Opportunities policy. The Board of Directors has overall responsibility for the effective operation of this policy and for ensuring compliance with discrimination law. Day-to-day operational responsibility for this policy, including regular review of this policy, has been delegated to the UK HR Manager.

The key principle of the Dignity at Work and Equal Opportunities policy is that there should be equal opportunities for employees to reach their potential and this is achieved by empowering people to excel in their careers regardless of race, gender, ethnicity, cognitive or personal strengths, sexual orientation or socio-economic background. Our objective is that all staff should feel respected, valued and included.

The above objectives apply to the Group as a whole but equally to the Board and to its Nomination, Audit and Remuneration committees. Such diversity and inclusion objectives for senior appointments are achieved through the engagement of specialist external executive recruitment firms. The most recent example was the appointment of Rachel English, as a non-executive Director.

Attendance by Directors at Board and committee meetings held during the year was as follows:

* Tom Franks, William Gibson and Gautam Dalal's attendance reflects the period up to 30 June 2022 and Rachel English's attendance reflects the period from 6 May 2022.

** Frédéric Vuilleumier's attendance reflects the period from 8 June 2022.

*** Where a meeting was not quorate, decisions were raised to and approved by the Board.

Board evaluation

The Board has agreed to undertake a performance evaluation by way of internal review every three years. The last evaluation was conducted in 2021. Details of the next review will be disclosed when the next review is completed at the end of 2024.

Executive committees

The Board has established the Strategy group, consisting of the Chairman, the executive Directors of the Board and the Group General Counsel. The Board has also established an Agriculture Executive Committee which is chaired by the Director of Agriculture and includes the Chairman (as interim Chief Executive), Chief Financial Ocer, the Group General Counsel and heads of all the key agricultural operations.

Investments and Associates report directly to the Chairman.

Nomination committee

The committee is chaired by Malcolm Perkins. Its other members are Rachel English, Frederic Vuilleumier and Simon Turner.

The principal responsibilities of the committee are set out below:

Audit committee

The committee is chaired by Rachel English (Gautam Dalal chaired the committee up to 8 June 2022). The other members of the committee during the year were Stephen Buckland and Frederic Vuilleumier.

The principal responsibilities of the committee are set out below and were undertaken during the year:

The Audit committee assesses whether suitable accounting policies have been adopted and whether management has made appropriate estimates and judgements.

Ensuring the integrity of the financial statements and associated announcements is a fundamental responsibility of the Audit Committee. During the year it formally reviewed the Group's interim and annual reports. These reviews considered:

A key responsibility of the Audit committee is to consider the significant areas of complexity, management judgement and estimation that have been applied in the preparation of the financial statements. The Committee has, with support from Deloitte LLP (Deloitte) as external auditor, reviewed the suitability of the accounting policies which have been adopted and whether management has made appropriate estimates and judgements. Set out below are the significant areas of accounting judgement or management estimation and a description of how the Committee concluded that such judgements and estimates were appropriate.

Pensions

The valuation of the pension schemes obligations is conducted by independent actuaries and due to the size of the obligation a relatively minor change to the assumptions made could result in a material change in the quantum of the obligation. The committee considered the competence of the actuaries and the key assumptions adopted and concluded that the work performed is sucient to support the valuation.

Carrying value of intangible assets

The Group's carrying values of the Jing Tea and Tea City brands and of the goodwill relating to the two Assam estates purchased in 2019 were discussed in light of the trading of those businesses. In particular consideration was given to likely future yield profile of the Assam estates and the range of future revenue growth rates for Jing.

The carrying value of the goodwill relating to Bardsley England which arose on the acquisition of that group of companies was discussed in context of the current inflationary environment's impact on margins and the expected continuing challenging market conditions as well as the expected reduction in scale of the business. In light of the significantly lower expectations for the profitability of the business in the foreseeable future, the committee agreed that an impairment of £3.6 million had occurred.

The committee considered the fair value of the Group's holdings and whether any impairment in the carrying value had occurred and agreed that apart from the impairment of assets related to Bardsley England, no other impairment provisions were required in respect of intangible assets.

Carrying value of tangible assets

The committee considered the fair value of the Group's investment property portfolio, the carrying value of plant and equipment at the engineering subsidiaries, and the carrying value of certain of the Indian and Bangladeshi estates in the context of recent trading and third party valuations and agreed that no impairment had occurred during the year. The carrying value of the underlying property, plant and equipment assets used in Bardsley England business was also considered in light of the expectation of a period of continuing losses for that business in the current trading environment and the committee agreed that an impairment of £6.4 million had occurred.

Carrying value of BF&M

The Group's carrying value of BF&M was higher than the share price for BF&M at 31 December 2022. The committee considered the fair value of the Group's holding and whether any impairment in the carrying value had occurred and in view of the expected control premium associated with our holding concluded that no impairment is required.

Provisions

The bases of provisions for material uncertain tax situations were considered by the committee as were the provisions for wage increases in Bangladesh, Kenya and India. The committee is satisfied that the provisions represent best estimates of the likely liabilities. Consideration was given to the accounting implications of the VAT assessment received in Malawi in 2021 and management's judgement that it should continue to be disclosed as a contingent liability.

The committee considered the implications of the VAT assessment received in the UK which indicated a liability of £1.2 million. In light of external advice it is being appealed and the committee concluded that the provision held was reasonable.

External auditor

To assess the eectiveness of the external audit process, the external auditor is required to report to the Audit committee and confirm their independence in accordance with ethical standards and that they had maintained appropriate internal safeguards to ensure their independence and objectivity. In addition to the steps taken by the Board to safeguard the auditor's objectivity, Deloitte operates a five-year rotation policy for audit partners for a listed entity.

The committee reviewed those non-audit services provided by the external auditor and satisfied itself that the scale and nature of those services were such that the external auditors objectivity and independence were safeguarded.

Remuneration committee

The committee is chaired by Rachel English (William Gibson was chair up to 8 June 2022) and the other members are Simon Turner and Frederic Vuilleumier.

The responsibilities of the committee include:

The Remuneration report appears on pages 41 to 42.

Sustainability and Safeguarding committee

The Board has expanded the remit of the previously established Safeguarding and Stewardship committee to include not only the promotion of human rights across the Group, but to further enhance the Group's environmental and sustainability practices. Consequently, the committee has been reconstituted to the Sustainability and Safeguarding committee and reports to the Board. The committee is chaired by Rachel English. Other members are the Chairman (in his capacity as Interim CEO), the Director of Agriculture, the Group General Counsel and the Head of Strategy. The committee advises the Board on strategy in these areas and monitors and reports on progress against the agreed strategy.

Insurance

The Company purchases insurance to cover its Directors and ocers, and those of its subsidiaries in respect of legal actions against them in their capacity as Directors of the Company. All Directors have access to independent professional advice at the Company's expense.

Share capital structure

The share capital of the Company is set out in note 37.

Internal control and risk management systems

The Directors acknowledge that they are responsible for maintaining a sound system of internal control. During the year, the Audit committee, on behalf of the Board, reviewed the eectiveness of the framework of the Group's system of internal control, the principal features of which are described below.

The key management philosophy of the Company is that the responsibility for ecient day to day operations remains with the local management at the operational level. Accountability and delegation of authority are clearly defined with regular communication between Group head oce and the management of the individual operations. Our key operations have internal audit functions reporting to local audit committees. The performance of each operation is continually monitored centrally including a critical review of annual budgets, forecasts and monthly sales, profits and cash reports. Financial results and key operational statistics and variances from approved plans are carefully monitored. Group senior management regularly visit operations. However, any system of internal control can provide only reasonable, and not absolute, assurance against material mis-statement or loss.

Approved by the Board

Amarpal Takk

Company Secretary

3 May 2023

Remuneration report

This report is drawn up in accordance with the Companies Act 2006 and the AIM Rules for Companies.

Remuneration committee

Details of the Remuneration committee are set out on pages 39 and 40.

Policy on Directors' remuneration

The policy agreed by the committee is as follows:

In implementing the second point, the Company does not operate profit related bonus, share option or share incentive schemes for Directors as the Group's activities are based largely on agriculture, which is highly dependent on factors outside management control such as the weather and market prices.

The policy is designed to ensure that the Directors manage the Group's businesses for the long-term in line with the strategy of the Group.

In determining this remuneration policy and the remuneration of Directors, consideration has been given to the relevant provisions of the QCA Guidelines.

The remuneration policy was approved by shareholders at the 2020 AGM and applies for a period of three years. The remuneration policy shall be reconsidered for shareholder approval at the AGM in 2023. The committee considers any views expressed by shareholders on Directors' remuneration.

At the AGM on 30 June 2022, the Remuneration Report for the year to 31 December 2021 was approved by shareholders with 99.81% of the votes cast in favour, 0.19% of the votes cast against and 641 votes withheld.

Service contracts

Malcolm Perkins, Graham Mclean and Susan Walker are each employed on rolling service contracts.

The service contracts are terminable at any time by a one year period of notice from the Company or the Director. Following their initial appointment non-executive Directors may seek re-election by shareholders at each subsequent Annual General Meeting. Non-executive Directors do not have service agreements. The Company has in place appropriate director's and ocers' liability insurance cover in respect of legal action against its executive and non-executive Directors, amongst others.

There are no specific contractual provisions for compensation upon early termination of a non-executive Director's employment.

The following sections on Directors' remuneration and pensions have been audited.

Directors' remuneration

Notes

(i) The executive Directors' benefits in kind include the value attributed to medical insurance, permanent health insurance, spouse/partner travel and cash alternatives to company cars

(ii) Rachel English received an additional fee for her role as chair of the Audit committee, the Remuneration committee and the Sustainability and Safeguarding committee (from 6 May)

(iii) William Gibson received an additional fee for his chairmanship of the Remuneration committee and the Sustainability and Safeguarding committee (up to 30 June 2022)

(iv) Tom Franks resigned from the board on 30 June 2022 and received a payment of £661,443 for loss of oce. This included a payment in lieu of notice equivalent to 12 months of base salary and benefits in kind

Directors' pensions

Malcolm Perkins received no payment for pensionable service during 2022. Tom Franks, Graham Mclean and Susan Walker received an excess non-pensionable salary supplement equivalent to 10% of base salary.

Approved by the Board.

Amarpal Takk

Company Secretary

3 May 2023

Statement of directors' responsibilities

The Directors are responsible for preparing the Annual Report and Accounts in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors are required to prepare the Group financial statements in accordance with United Kingdom adopted international accounting standards in conformity with the requirements of the Companies Act 2006. The financial statements also comply with International Financial Reporting Standards (IFRSs) as issued by the International Accounting Standards Board. The Directors have also chosen to prepare the parent company financial statements under United Kingdom adopted international accounting standards. Under Company law the Directors must not approve the accounts unless they are satisfied that they give a true and fair view of the state of aairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements, International Accounting Standard 1 requires that Directors:

The Directors are responsible for keeping adequate accounting records that are sucient to show and explain the Company's transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the Company's website. Legislation in the UK governing the preparation and dissemination of financial statements may dier from legislation in other jurisdictions.

Responsibility statement

We confirm that to the best of our knowledge:

This responsibility statement was approved by the Board of Directors on 3 May 2023.

Malcolm Perkins

Chairman

3 May 2023

Consolidated income statement

for the year ended 31 December 2022