Camellia Regulatory News (CAM)

CAMELLIA PLC

FINAL RESULTS

Camellia Plc (AIM:CAM) Final results for the year ended 31 December 2020.

Malcolm Perkins, Chairman, stated:

"2020 was a tough year for all of our operations, people and communities globally. The consequences of the pandemic were unpredictable and have at times tested our resilience. However, it is testament to the quality of our management teams, our employees and our financial prudence that we ended 2020 with an underlying operating profit.

"While the UK is returning to normality to the benefit of some of our UK based businesses, we have concerns about further waves of the pandemic across India, Bangladesh and East Africa. We do not believe that normal trading conditions will emerge until 2022, and some businesses will continue to feel the effect of the pandemic for some time thereafter."

* Profit before tax excluding separately disclosed significant items

** Including the special dividend of 102p declared in September 2020

Strategic highlights

This announcement contains inside information for the purpose of Article 7 of the Market Abuse Regulation (EU) No. 596/2014.

ENQUIRIES

CAMELLIA AT A GLANCE

Camellia Plc is an international Group - a global family of diverse companies with a 133-year history employing approximately 76,000 people worldwide. Our operations are in Agriculture, Engineering, Food Service and Investments. From the start, Camellia's ethos has been based on the highest moral and professional integrity, and a commitment to doing the right thing - ethically and commercially, globally and locally.

Our business is built on two fundamental principles:

§ Long-termism. We are custodians, holding our business in trust for future generations. We have a responsibility to promote the stability, security and continuity of all our businesses, so they can be passed on to the next generation as enduring operations. We recognise that people and businesses take time to establish and grow to their full potential. We are committed to improving the long-term stability and well-being of our businesses, the communities and the environments in which we operate.

§ Sustainability. We are committed not only to the welfare of our employees but also to the communities in which they live. Our businesses can and should grow with respect and care for the environment rather than at a cost to it. We proactively invest in ensuring that the places where we operate are protected and improved, and seek to minimise the impact of our business on the environment.

The Segment trading profit and loss information set out below, including details of underlying profit is extracted from note 1 on page 64 of the Accounts.

Our business is made up as follows:

AGRICULTURE

2020: Revenue - £247.2 million, Segment underlying trading profit - £18.3 million, Segment trading profit - £2.2 million

ENGINEERING

2020: Revenue - £19.3 million, Segment trading loss - £1.5 million

FOOD SERVICE

2020: Revenue - £23.6 million, Segment trading loss - £1.7 million

INVESTMENTS

ASSOCIATES

2020: Share of results after taxation - £6.1 million

DIRECTORS AND ADVISERS

CHAIRMANS STATEMENT

2020 was a deeply challenging year for all of our operations, people and communities globally. The consequences of the pandemic have been unpredictable and have at times tested our resilience. However, it is testament to the quality of our management teams, our employees and our financial prudence that we came through 2020 with an underlying operating profit before tax of £13.2 million. The vast majority of our income arises from growing basic commodities and foodstuffs for which there will always be a demand.

2020 was marked by the very serious human rights abuse allegations made against our operations at Kakuzi in Kenya and in Malawi. We settled these claims and more importantly, have taken the opportunity to review the policies and procedures across the Group to ensure that they reflect international best practice. The relationship with the local communities across all our agricultural operations is critical to both our ethos and success; we continue to nurture them and have taken extensive steps to improve work practices and safeguarding measures (further discussed later in this report). The Board's deep commitment to ensuring we live up to our aspirations in this area for the benefit of all our employees and communities will be greatly assisted by our decision to establish a new Safeguarding and Stewardship Committee (involving independent experts) and a network of new grievance mechanisms on the ground.

Climate change remains a major concern to the Group and continues to influence our long-term strategy. Reflecting this, we disposed of our interest in Horizon Farms in California. Concerns over water availability and long-term climate projections made this a good time to sell and we were pleased with the price achieved. Other strategic developments are covered in the Operational report.

The results for 2020 reflect a profit before tax of £7.8 million after significant one off net costs amounting to £8.2 million (2019: profit before tax from continuing operations £22.3 million, including provision releases and one-off items of £4.9 million).

Dividend

The Group is set up in a way that reflects our long-term approach, with financial stability and sustainability at the heart of our philosophy. I was pleased that, having deferred the 2019 final dividend until we could assess more clearly the impact of the pandemic, we were able to pay it in full. Your Board is recommending a final dividend in respect of the year ended 31 December 2020 of 144p per share.

Outlook

At this stage, whilst there are signs of the world returning closer to normality with the roll out of vaccines, we do not believe that normal trading conditions will emerge until 2022, and certain businesses will continue to feel the effect of the pandemic for some time thereafter.

We remain financially strong, with significant net cash, and have the resources to withstand a further period of disruption. The demand for our agricultural produce will remain and we are managing the business in a manner which we believe will ensure our future prosperity, whilst taking the necessary steps to manage our costs in the short term.

Directors

Jonathon Bond, who joined the Board on 6 March 2020, is taking up a new executive role which necessitates him retiring from the Board at the AGM. I should like to thank him for his contribution and wish him well for the future.

Staff

My gratitude and sincere thanks go out to all our staff for their efforts in 2020. It is thanks to their resilience, hard work and loyalty in this unprecedented and challenging year that the Group remains in such a strong position.

Malcolm Perkins

Chairman

3 May 2021

OPERATIONAL REPORT

OVERVIEW

2020 was a difficult year as a combination of the pandemic, litigation against the Group arising from allegations against our East African operations, poor tea prices and a possible no deal Brexit all had the potential to impact trading. Despite this, sales in our agriculture division grew and underlying profits saw only a marginal decline. We also continued to implement our strategy of investing for long term growth and refining our portfolio of businesses.

COVID

Whilst all our businesses were able to keep trading throughout the pandemic, they were all hit to some extent, whether through lockdowns preventing operations, or markets closing. However, I am proud of the efforts that have been made by all of our employees to ensure continuity of operations no matter how tough the challenges. Whilst there is optimism that the impact of the vaccine will start to return things to normal, there remains no doubt that 2021 will also be challenging for some operations.

Litigation concerning our East African operations

In January 2020, the Company announced that it and certain UK subsidiary companies faced legal claims in the UK based on allegations against two businesses in its African operations, namely Kakuzi in Kenya and EPM in Malawi. These claims have now been resolved (without any admission of liability) through settlements of up to £4.6 million in relation to the Kenyan claims and £2.3 million in relation to the Malawian claims. These are in addition to £9.2 million of legal and other costs associated with the defence of these allegations which are also reflected in the 2020 results. We have also put in place significant progressive measures around employee and community welfare, details of which are set out in the Environmental and Social report below. Such measures include, for example, building social centres, establishing a specialist female leadership programme and appointing female safety marshalls. Up to date information on progress on these measures can be found on the Camellia Group website.

The serious human rights claims the Group faced relating to its operations in Kenya led to a number of European supermarket chains suspending Kakuzi as a supplier of avocados. We are proactively working to address these customer concerns, including with the assistance of leading human rights advisers and are pleased that a number of our customers intend to resume trade in the new season. Eastern Produce Malawi has established and Kakuzi is establishing an Operational-level Grievance Mechanism (OGM), as defined by the UN Guiding Principles and by Human Rights specialists. Consequently, the claimants' UK law firm has agreed it will not bring or support any other claims relating to or in connection with the Camellia Group's operations in Kenya or Malawi for a substantial period of time. This reflects their confidence in the development of the Group's OGMs.

Tea prices

The pandemic has interrupted both the supply and demand for tea in different ways in different countries. However, the world remains over-supplied with tea which, combined with a desire across the industry to raise wages and living standards could lead to a long-term decline in the profitability of tea growing. We are pleased to see the major producing countries begin to take steps to help address this imbalance for the good of the industry and the hundreds of thousands of people who work in it and whose livelihoods depend on it.

Brexit

Our UK businesses in particular made extensive preparations for the impact of Brexit. Things have now settled down and we do not anticipate any material effect on our trading operations.

INVESTMENTS AND DIVESTMENTS

Despite the difficulties in doing business in 2020, we continued our strategy of diversifying our agricultural products and production base.

During the year we replanted a total of 316Ha of tea, and established a further 98Ha of avocado and 36Ha of macadamia. Since the start of 2021 we have planted an additional 37Ha of avocado in Tanzania and 174Ha of tea in our India and Bangladesh operations.

We continued to invest in our assets during the year and £10.7 million was spent on property, plant, equipment and investment property (2019: £14.5 million). Key projects are referred to in the operational reports below. A further £3.7 million (2019: £4.6 million) was invested in bearer crop and forestry plantings.

We also announced the sale of our Horizon Farms property in California for a total cash consideration of $31 million. This was brought about by concerns over the long-term future of the farm given the scarcity of reliable sources of water.

PERFORMANCE

Agriculture

In total, the Agriculture division made a segment trading profit of £2.2 million (2019: £23.9 million) on revenue of £247.2 million (2019: £238.7 million), as set out in note 1 to the Accounts. This includes costs of £16.1 million (2019: £1.3 million) in respect of legal and other costs associated with the allegations arising from our East African operations. Agriculture's underlying trading profit was £18.3 million (2019: £19.0 million).

Tea Production

2020 saw the Group produce slightly lower volumes of tea, due in part to the lockdown of the tea estates in India at the start of the pandemic although this was partially offset by record production in Kenya.

Tea pricing and operations

India

Our own production in India was down by 19% against a national reduction of 22%. This was a result of a complete lockdown of all tea gardens in the early weeks of the pandemic followed by cyclone Amphan and an unusually severe monsoon season. The smallholder sector was particularly impacted and our Bought Leaf production was down by 40%.

Prices for CTC teas however improved significantly as domestic demand rose and supply fell. In the Dooars, prices were up 32% and in Assam 13%. In Darjeeling however, the loss of the lucrative first flush due to the lockdown resulted in average prices 12% down on the prior year.

Exports were well down on normal years as a result of strong local demand and the very high volumes emerging from Kenya.

Due to the many disruptions to the estate operations as a result of COVID, it was agreed by all parties that wage increases would be suspended for 2020. Interim wage increases for West Bengal has been agreed at 14.8% for 2021 and in Assam the wage increase is subject to a court process.

Packet tea sales volumes in India grew by 16% to 13.1mkg, reflecting our continued marketing efforts. The high price of purchased tea however impacted margins.

The replanting programme continued with 164Ha completed (2019: 239Ha) and a further 62Ha uprooted for replanting at a later date. In 2021 a total of 117Ha of replanting has been completed in the first quarter.

Bangladesh

Our crop in Bangladesh was down by 12% as a result of a very slow start to the season caused by dry hot weather, followed by torrential downpours from cyclone Amphan.

Average prices were down by 17% as tea consumption in Bangladesh relies heavily on the hot tea stalls, many of which were closed for a significant part of the year.

A wage award was agreed in the fourth quarter of 2020 with a 17.6% increase in the daily rate effective from 1 January 2019 with the possible introduction of improved productivity measures later in 2021.

The replanting and extension programme was scaled back in favour of infilling young tea areas which had lost a high number of plants as a result of a very dry start to the year. A total of 105Ha of tea was planted in the year (2019: 161Ha) of which 95Ha was replanting and 10Ha of new planting. A total of 3.8 million bushes were planted to infill existing fields. In the first quarter of 2021 a total of 57Ha of replanting has been completed.

Kenya

Production (including smallholder and managed client volumes) was up by 36% which broke all records and was 11% above our previous best year in 2016. 2021 production volumes in the first quarter are lower than last year, particularly in the West of Rift region. Pricing remains under pressure with average prices in quarter one of 2021 3% below the same period last year.

The greatest gains were seen in the smallholder sector where our 2020 production was up 51% whilst our own estate volumes were up 34%. This picture was reflected across Kenya where smallholder volumes were up 25% overall against 23% from the commercial plantation sector.

Such a huge supply of tea put significant pressure on prices and our average price was down 12% on last year. However, our factories performed well in relative terms, with prices 17% above the average commercial plantation sector auction pricing.

To help control the levels of production and prices, new tea regulations were proposed in early 2020 and resulted in the signing of the Tea Act 2020 in December. The new Act makes a number of significant changes to the way in which the tea auction system and export markets work in Kenya and we await to see how they will impact the industry.

There were no wage increases agreed with the unions during the year and discussions are ongoing.

We replanted a total of 47Ha in 2020 (2019: 51Ha) and uprooted a further 50Ha for replanting in 2021.

Malawi

Production (including smallholder volumes) was down on 2019 by 5% due to the drier conditions experienced, particularly in the second quarter. Our production levels for the first quarter of 2021 are 7% higher than last year.

With the very large volumes of tea available in Kenya, pricing has been under pressure, and sales through the auction were suspended in April 2020. On resumption of the auction, prices improved significantly in July and overall average prices for the year were in line with 2019 levels. Pricing in 2021 is slightly higher than the same period in 2020.

The newly elected Government of Malawi announced the implementation of a new minimum wage from the start of 2021. A wage increase reflecting this was subsequently agreed with the unions at 19% for 2021 alongside certain productivity improvements.

As a result of cash conservation measures, no replanting nor any new irrigation schemes were carried out during the year.

Macadamia Production

Macadamia kernel volumes produced in 2020 decreased to 1.1mkg (2019: 1.3mkg). This 17% drop on 2019 was due to a period of very hot weather in Malawi and South Africa at the end of 2019 which affected flowering and nut set. Kenya's volumes reflected an increase of 45% as the orchards continued to mature and benefited from benign weather conditions throughout the year.

1 Excludes 191Ha relating to Wales Estate which was vacated post completion of the 2020 harvest

Macadamia Pricing

The pandemic has resulted in reduced demand from tourism and the food service sector. Imports into two of our main markets (USA and Japan) were down significantly. Despite this being partially offset by increased demand from retail, macadamia kernel prices fell and averaged 4% below those of 2019.

Due to the reduced demand in 2020, we believe that inventories of kernel from the 2020 season are higher than normal. Production in 2021 is also anticipated to be increasing which could bring prices under pressure for the new season depending on the speed of recovery in the hospitality sector.

Macadamia Operations

In total we planted another 36Ha of macadamia in South Africa, to which an additional 6Ha has been added in the first quarter of 2021. We harvested our 2020 crop from Wales estate before vacating the property as planned and previously reported.

Early indications from the 2021 season in Malawi show that kernel quality has been adversely impacted by pest and disease damage which could result in lower production volumes and reduced average prices. There are currently no indications of similar damage to the crop in Kenya and South Africa. Initial assessments of our overall production volumes from our orchards for the 2021 season indicate a higher crop than 2020.

Avocado Production

Avocado volumes from our own estates in 2020 increased to 10.9mkg (2019: 7.1mkg). This increase reflects the increase in mature hectarage and 2020 being an 'on' year for avocado.

Avocado Pricing and Operations

Average prices for Hass avocados (which made up 95% of our volumes) were down 41% on the record levels that we saw in 2019, partly due to the closure of the hotel and restaurant sector, but also due to record volumes of fruit from Peru overwhelming the European market during the summer. Prices recovered rapidly in the autumn once the excess fruit was sold.

A total of 98Ha (2019: 79Ha) of avocado orchards were planted during the year of which 34Ha was the Carmen variety.

We continue to monitor the 23Ha trial of avocados near Kitale in Kenya which we initiated in 2017. The first export crop was completed in the year with satisfactory results. The timing of the production and harvest indicates a later market window than the Kakuzi fruit which will be beneficial for prices. We expect to take a decision next year on whether to move forward with the full development.

In Tanzania, the purchase of the Mgagao farm is complete. The first 13Ha of avocado were planted in 2020 with an additional 37Ha planted in early 2021.

In South Africa the land clearance on the new farm reported last year is under way and the first 80Ha of avocado will be planted in 2022.

Speciality Crops Production

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

1 Sold in 2020

Speciality Crops, Pricing and Operations

Arable

We grow a variety of annual crops in Brazil including soya, sorghum, wheat, maize and barley. In 2020 all crops grew well and achieved good prices, assisted in part by the devaluation of the Brazilian Real.

Rubber

Rubber is grown on areas of the Bangladesh tea estates unsuited for growing tea. Volumes produced in 2020 were in line with 2019, as were average prices which remain below cost.

Wine

Although grape production was up 51% and wine sales up 63% compared with 2019, the continuing losses of the operation have necessitated implementing a restructuring process. In 2021 all grape production will be sold to third party wineries and branded sales will continue under an agency agreement.Blueberries

The blueberry trial continues - the first commercial crop was harvested this year but, as previously indicated, volumes achieved were below expectations due to cool, wet weather and the crop was sold locally.

Citrus, pistachios and almonds

2020 was an excellent citrus season for both the Murcott and Navel Orange crops. Following the sale of Horizon Farms during 2020, this will be the final crop of citrus and there will be no further production of pistachios and almonds.

Forestry

Production of Eucalyptus in Brazil increased 53% in the year due to continued strong demand from the paper industry. Kakuzi saw a 17% decline in production of forestry products for the market in Kenya due to a reduction in demand resulting from COVID restrictions.

Livestock

Births were up this year due to benign weather conditions leading to excellent volumes of good quality grazing which ensured the cattle were in peak condition.

Engineering

In total, the Engineering division recorded a segment trading loss of £1.5 million (2019: £Nil million) on revenue of £19.3 million (2019: £22.1 million), as set out in note 1 to the Accounts.

AJT Engineering had a successful year in the oilfield services division. However, the site services division was largely closed from the middle of March 2020 until the end of the year, with much of the work postponed and with the engineers being unable to get on site. Despite this, total revenues were up by 1% to £15.2 million. Abbey Metal Finishing and its subsidiary Atfin both had a difficult year as COVID related disruption to the aerospace market significantly impacted demand and sales volumes. Combined revenues were down 33% with a consequent impact on profitability.

Food Service

In total the Food Service division made a segment trading loss of £1.7 million (2019: £0.8 million profit) on revenue of £23.6 million (2019: £29.8 million), as set out in note 1 to the Accounts.

ACS&T saw reduced profitability from 26% lower transport revenues as demand for frozen products from the restaurant sector fell.

Jing Tea saw total revenues fall by 42% following closure of the hotel, restaurant and tourism sectors. However, sales through its online platform have increased by 33%.

Investments

Investment Portfolio. The loss on sales for the year was £0.1 million (2019: £1.1 million). Of this a gain of £0.2 million was reflected in the Income Statement and a loss of £0.3 million in the Statement of Comprehensive Income. The total value of the portfolio at 31 December 2020 was £50.6 million (2019: £47.0 million). The increase reflects the strength of global equity markets, particularly in the second half of 2020.

Investment Property. Work continues on the development of the Linton Park Estate with an additional three properties redeveloped and let in 2020.

Collections. The collections are held at cost. A number of minor additions and disposals were made during the year.

Associates

In total, our share of the results of associates amounted to £6.1 million (2019: £4.6 million).

BF&M benefited from a significantly reduced claims experience in its property, casualty, life and health businesses due to the impact of COVID and the lack of any major hurricane damage in the year. Gross premiums written decreased by 7% to Bermudian Dollar 308.1 million, driven by an expected shift of health premiums between the company and the amounts allocated to the Bermuda Government as part of Bermuda's health financing reforms, along with lower property and casualty premiums and life premiums. BF&M's profit for the year was Bermudian Dollar 21.6 million (2019: Bermudian Dollar 13.1 million). Looking ahead, BF&M expects to see an increase in claims activity as vaccination programmes are rolled out.

Our two associate companies in Bangladesh, United Insurance and United Finance, produced lower results reflecting more challenging economic conditions in Bangladesh due to COVID.

ON-GOING LITIGATION

We previously disclosed that in 2018, the Kenyan National Land Commission was asked by a small number of claimant groups to investigate historical land injustice claims concerning lands registered in the name of Kakuzi and Eastern Produce Kenya. The land claims have been refuted through the Kenyan legal system. A constitutional petition has been filed by us and also a request to stay the proceedings of the National Land Commission until the legal position has been determined. This matter is on-going and we continue to keep the situation under review.

SUMMARY

2020 was a difficult year for the Group for all the reasons set out above and 2021 to date continues to show some market disruption. We remain in hope that the impact of the vaccines will result in a return to normality but anticipate that this will not be possible in many countries before the end of next year.

However, I am very pleased that we have been able to stay true to our strategy and to continue to invest for the future. I am also enormously grateful for the way that our people have tackled the pandemic and the significant challenges that it has brought with it.

We continue to invest in sustainability; our ESG report in 2020 showed the strength and depth of our commitment in this area and the steps that have been taken following the claims in Kenya and Malawi has helped strengthen our Human Rights processes and governance. Our balance sheet remains strong with £76.0 million of net cash in the Group and money market deposits amounting to £5.1 million at 31 March 2021. Whilst some of this cash is committed to long-term projects it gives us the scope and financial resilience to continue to develop Camellia for the benefit of all our stakeholders.

Tom Franks

Chief Executive

3 May 2021

FINANCIAL REPORT

Overview of Results

Revenue in Agriculture increased 3.5% to £247.2 million (2019: £238.7 million) in 2020 reflecting higher prices in India, increases in packet tea sales volumes and prices in India, and increased sales volumes of avocado, citrus and cereals. However, revenue from Food Service and Engineering were both adversely affected by the pandemic which offset the gains in Agriculture leaving total revenue at £291.2 million (2019: £291.5 million).

Underlying profit before tax was £16.0 million (2019: £17.4 million). Underlying profit before tax is before a £8.2 million loss relating to a number of large separately disclosed items (2019: separately disclosed profit of £4.9 million).

Profit before tax in 2020 was £7.8 million (2019: £22.3 million). This reduction in profit before tax reflects, inter alia, generally lower average selling prices for tea, lower volumes and lower prices for our macadamia crop, higher volumes and lower prices for our avocado crop, improved profits at BF&M, and a number of separately disclosed items:

The loss after tax for the year ended 31 December 2020 was £0.8 million (2019: Profit after tax £15.1 million).

Equity attributable to the owners of Camellia was £376.6 million (2019: £395.7 million) with net cash and cash equivalents of £94.9 million (2019: £89.4 million) and financial assets at fair value through profit or loss (ie money market funds) of £5.3 million (2019: £6.2 million).

Impairments

The impairments to the Jing Tea brand, investment properties plant and equipment at Abbey Metal Finishing and elsewhere in the UK have arisen following revisions to our estimates of the future profits and cashflows arising from those assets predominantly as a consequence of the impact of COVID. Key assumptions made in quantifying the scale of the impairments at Jing Tea and Abbey Metal Finishing relate to the speed of recovery of the travel and leisure and food service markets.

COVID Impact

As set out in the Operational report on page 6, our businesses are currently operating broadly as normal with the exception of our Food Service and Aerospace businesses. Our experience over the last year has given us valuable insight into how the pandemic impacts our markets and businesses. Despite this, it remains difficult to predict with any certainty the impact of COVID on the Group during the remainder of this year. Accordingly, we continue to take actions to conserve cash by focusing on efficiencies, minimising our operating costs and focusing capital expenditure across the Group.

However, with our substantial cash resources, our investment portfolio and limited gearing, we are well placed to withstand a further period of disruption to our operations and sales.

Currencies

Over the course of the year, Sterling strengthened against the majority of our operating currencies. This has resulted in a loss on foreign exchange translation of £22.6 million (2019: loss £16.7 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 2020 would have been £1.3 million higher. Our profit before tax includes an exchange gain of £2.2 million on transactions during the year (2019: loss £0.3 million).

Cash

The Group's net cash position increased to £94.9 million at 31 December 2020 (2019: £89.4 million) reflecting, inter alia, net cash inflows from continuing operating activities of £12.9 million (2019: inflow £12.6 million) and the receipt of the proceeds of £21.6 million from the sale of Horizon Farms property. We spent £14.7 million on investment in our existing operations. We also increased our holding in BF&M at a cost of £0.3 million. The Group has loans outstanding of £4.8 million (2019: £6.9 million).

We expect capital expenditure in 2021 to be closer to historical levels as we continue to invest in our key strategic growth priorities.

As previously highlighted, a number of the Group's key trading subsidiaries have minority shareholders such that when cash is repatriated to the UK by way of dividends, those minorities are entitled to their share of the relevant dividend. In a number of cases, withholding taxes are also payable from our share of those dividends.

Funds are reserved within our subsidiary companies to ensure wherever possible a level of headroom exists against the risk of crop losses and adverse price movements, such as are possible as a result of COVID. In addition, funds are held for:

These will reduce the net cash available to the Group in future years as they are spent or, in the case of the disputed tax assessments and contingent liabilities, if settlement is made.

Taxation

The Group's effective tax rate of 110.3% (2019: 32.3%) reflects the significant losses which were incurred in the UK due to the pandemic, the cost of group legal claims in the UK for which no immediate tax relief is available and not being able to recognise the associated deferred tax asset on our balance sheet until it is sufficiently clear when these UK tax losses will be utilised.

Tax and Other Provisions

As is normal at this time of the year, we have ongoing wage negotiations in Kenya, Bangladesh (some of which have since concluded) and India. We consider we have made adequate provision for the likely outcome of these.

Provisions also include the estimates for the agreed settlements in respect of the litigation in East Africa and other costs related to the litigation which are expected to be paid in 2021 but which arise from events occuring prior to the year end.

We continue to have a number of significant uncertain tax situations, which have been disclosed previously:

In Malawi the Revenue Authority (MRA) recently indicated that it intended to collect VAT on sales made at auction and under private treaty for export, in the period since 2017. Tea sales intended for the export market were subject to an industry wide agreement with the MRA and the Reserve Bank of Malawi reached at the time the auction was established, resulting in these deemed exports being zero rated for VAT. The MRA has raised an assessment for VAT against Eastern Produce Malawi in connection with this which has been appealed in light of the historic agreement and long-established custom and practice of the industry. Following discussions between the Malawi government, the MRA and the entire tea industry, the MRA has undertaken to investigate the sales process for export teas and to consider the implications of this on the VAT treatment of these deemed export sales. Pending conclusion of the review, the MRA has given permission for the auction to continue with teas deemed as export zero rated for VAT and the assessment raised against Eastern Produce Malawi has been suspended. Eastern Produce Malawi's estimated contingent liability for VAT on these deemed export sales, excluding any penalties and interest, is approximately £7.8 million.

Pensions and Other Employment Benefits

The Group operates a number of defined benefit pension schemes, the largest of which is in the UK.

The 2020 triennial valuation for the UK scheme, which was closed to future accrual during 2016, has now been concluded and shows a funding surplus and no contributions are currently required to be made to the scheme for the next 3 years.

The overseas defined benefit schemes are located in Bangladesh and India. Our businesses in Kenya, India and Bangladesh also have obligations to pay terminal gratuities based on years of service and, in some cases, based on salaries.

In aggregate, our employee benefit schemes currently show deficits on an IAS 19 basis of £16.6 million(2019: £22.0 million deficit).

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 gain of £4.3 million (2019: gain £3.5 million) is reflected in the Statement of Comprehensive Income. The net gain this year arises primarily from the UK scheme where strong asset performance was only offset in part by the effect of lower discount rates and lower inflation assumptions.

Our Income Statement also reflects current and past service costs of £2.2 million (2019: net cost £1.6 million) and £0.7 million (2019: £1.1 million) in respect of employee benefit interest cost.

Susan WalkerChief Financial Officer

3 May 2021

ENVIRONMENTAL AND SOCIAL REPORT

At Camellia, ESG is integral to our business. We believe that the success of all our operations is fundamentally connected to the communities and environments, including the wider supply chains, in which we operate. Our Group report (Custodianship) illustrates not only the ESG initiatives undertaken across the Group but also explains the Group's approach to each of these principles. We have aligned ourselves to seven of the United Nations Sustainable Development Goals (SDGs):

§ SDG 3: Good health and well being

§ SDG 4: Quality education

§ SDG 5: Gender equality

§ SDG 6: Clean water and sanitation

§ SDG 8: Decent work and economic growth

§ SDG 13: Climate action

§ SDG 15: Life on land

The Group's ESG initiatives are based on our fundamental belief that we are custodians of our operations, ensuring they undergo a process of continuous improvement. This enables them to be passed on to the next generation whilst caring for the environments in which they are based and for those communities who depend on them.

The Group's approach to ESG is the responsibility of the Strategy Group (as described on page 36) which is supported in certain key areas by the Safeguarding and Stewardship Committee which is described in more detail below. The boards of the Group's operating companies closely consider their respective governance protocols and the environmental impact of their ongoing operations and investment decisions, with regard to both Group requirements and local regulations and legislation.

Environmental

Climate change is a significant risk to the Group's agricultural operations which it affects in different ways and to differing extents. We seek to mitigate this impact by diversifying our agricultural production by both origin and crop. We are also planting more drought resistant crop varieties and using other initiatives, such as restorative farming methods and sustainable irrigation, to manage the impact of climate change.

We are committed to our goal of protecting the environment and minimising our environmental footprint. This is achieved through a range of resource efficiency initiatives with the ultimate intention of setting carbon reduction targets across our operations. In addition to minimising our environmental impact, we protect and enhance natural habitats such as forests and water bodies for local flora and fauna.

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 from which to irrigate sustainably.

The Group also oversees c.11,100Ha of indigenous forests and conservation areas plus a further 7,500Ha of commercial forestry. These areas, in combination with the large areas of perennial crops, have the potential to sequester significant amounts of carbon and act as an important offset against the Group's carbon emissions. We have estimated the impact of sequestration on our core crops and our managed eucalyptus estates. We provide more detail on this below.

We use appropriate partners to support the Group in achieving our environmental protection and environmental footprint initiatives. As an example, in 2020 an initiative between our Kenya tea operations and Cambridge University was established to investigate possible savings in thermal and electrical energy usage and thus a reduction in carbon emissions, in the manufacture of tea. The seed funding to launch this project was provided by our Chairman's Fund which has allowed the initiative to proceed. Excellent progress has been made to identify possible significant savings in both thermal and electrical energy usage in the two factories being trialled in the exercise.

Environmental reporting

During the financial year we reported to the Environment Agency under ESOS (Energy Savings Opportunity Scheme), which included energy audits of our UK operations and the identification of potential energy saving initiatives and investments. The Group's UK operations are considering such initiatives and have included a selection in their future investment plans as set out below.

2020 is also the first year for which the Group is required to report under SECR (Streamlined Energy & Carbon Reporting) Regulations, which is set out in the rest of this section. The Group has not been subject to any environmental fines during the reporting period.

Global GHG emissions and energy use data for period 1 January 2020 to 31 December 2020

† 2019 was restated as a result of improvements in data quality and completeness

* Note: 2020 is the first reporting period for which we reported our scope 2 market-based emissions

Methodology

The scope of the reporting for SECR purposes was determined by including the businesses in which the Group owns majority holdings. It includes GHG (Greenhouse Gas) emissions and energy use of businesses that were divested during the reporting period up to the date of transfer of risk and reward pertaining to those businesses. The reporting period aligns with the Group's financial reporting period. The reported figures are an aggregation of emissions and energy consumption of the Group's reporting units. A reporting unit is defined as a geographically located operating entity or group of entities. For example, the Goodricke group of companies is defined as one reporting unit. Within a reporting unit distinction is made between different sites, field operations and factory operations.

The emission factors used in calculating the Group's emissions are as per those published by the UK Department for Business, Energy & Industrial Strategy and the UK Department for Environment, Food and Rural Affairs, which are in line with the GHG Protocol guidance. The non-UK electricity emission factors are sourced from the International Energy Agency for Scope 2 location-based reporting. For Scope 2 market-based reporting they are sourced directly from the electricity suppliers, where available.

A standardised reporting tool is used to capture the Group's environmental and energy data. Year on year trends in the data are analysed and understood. Where estimates are used these are disclosed and assessed in terms of magnitude as part of the overall data quality.

Every effort is made to ensure the environmental data that we report is accurate. However should more accurate or complete data be available for prior years, we will restate if it results in a movement of at least 5% in the reported data. We may restate carbon emissions even when there is no change in consumption data, due to corrections to the emissions factors provided by Defra. In relation to the 2019 data some improvements were made in terms of quality and completeness, which resulted in a 6% increase.

Changes in Scope 1 and Scope 2 emissions

The Group's Scope 1 and 2 emissions reduced during the reporting period primarily due to lower production in India and Bangladesh. Total made tea production in India was down by 22% in 2020 and since these tea factories are primarily fueled by coal, this reduction in production represents 59% of the drop in the Group's total carbon footprint. The Group's Bangladesh operations saw made tea production reduce by 12%. These tea factories are primarily fueled by natural gas and this reduction in production represents a further 14% of the drop in the Group's carbon footprint.

One of the largest uses of energy in the Group is the requirement to process and dry our tea crop. We include the made tea intensity ratio (kg CO2e per kg of made tea) and we continue to invest to increase the carbon efficiency of our tea factories. We are happy to report that in 2020 there has been a 7% improvement in the Group's made tea intensity ratio, mainly as a result of efficiency measures implemented at our Kenya and Malawi tea operations supported by a significant increase in production by our Kenyan operations and lower production in India. This was partially offset by the increased use of coal in India per kilo of Made Tea.

As mentioned above, the Group's perennial crops, sequester significant amounts of carbon. Recently, we conducted a study using Ricardo Plc to estimate the amount the Group's core crops and managed forestry sequester through the soil. On average, for our tea crop sequestration by the soil is estimated to offset c.43% of the carbon emissions from field production and land use change. Similarly, for our avocado and macadamia crops we estimate that soil sequestration offsets c.64% and 28% of the 2020 carbon emissions from field production respectively. There is also a large carbon stock that sits in the soil and that has built up over many years, which, as a Group, we have a duty to protect through the use of sustainable practices such as restorative agriculture techniques. We will continue to review our operations' practices regarding the protection and enhancement of our soils and assess where we can make improvements.

Environmental certifications

All of the Group's engineering businesses and ACS&T are ISO 140001 certified and many of our international operations are subject to stringent certifications that include environmental impact requirements.

Energy efficiency action taken

As noted above, an initiative between our Kenya tea operations and Cambridge University was established to investigate possible savings in thermal and electrical energy, and thus a reduction in energy use, in the manufacture of tea.

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

In aggregate, we expect the above energy saving initiatives and a number of smaller initiatives to result in873 MWh saving in energy per annum.

In addition, the Group is continuing with its programme of replacing existing energy sources with renewable energy sources, which amounted to a further 490 MWh in 2020. The main initiatives taken to date include the installation of solar generation at a number of Duncan Brother's tea estates, EPK in Kenya and at the Group's farm in Brazil as well as the installation of hydro turbines at a number of Goodricke's tea estates. All our UK operations have green tariff electricity contracts.

The Group's operations have also made an assessment of potential energy efficiency initiatives that can be implemented over the next five years. The implementation of these initiatives is subject to approval by the respective operations' boards and the Group's annual budgeting process. We set out some of the key initiatives below:

We expect the above initiatives to provide significant savings in energy over the next five years. The Group will continue to replace existing energy sources with renewable energy sources where possible. Our ultimate intention is to set energy reduction targets across our operations.

SOCIAL

The Group's businesses are fundamentally connected to the welfare of the communities and environments in which we operate. We 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. We support and integrate the SDGs into our sustainability strategy, which forms a key pillar in our overall strategy.

The majority of our operations are based in developing countries. We make progress every year, not only in trying to increase wages, but also in improving housing, education and healthcare, all of which are important to improving livelihoods. To this end we are working with our supply chain, customers, national governments, trade unions and NGOs to improve living conditions of employees.

The Group's response to COVID

The pandemic continues to be a global crisis and the situation remains uncertain but the increasing rate of vaccinations is encouraging. The Group's operations reacted to the outbreak of the pandemic swiftly to protect its employees and communities. We have worked closely with local governments, communities and the Group's clients.

Measures and initiatives put in place have focused on training and education on sanitation, social distancing measures and the provision of medical and other equipment. Providing a safe place to work and supporting the Group's local communities have been particularly important over the past year. Further information is available from the Group's various social media platforms.

Healthcare

The majority of our tea estates in India and Bangladesh have a hospital and a qualified doctor, and our operations in these countries also have central hospitals. Our African operations run dispensaries established on their estates, offering 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. The Group provides medical services including, where appropriate, antiretroviral drugs in those communities where HIV and AIDS are a concern. Medical support is also provided to schools that are either run locally or by our operations.

Across the Group we own and/or operate 50 hospitals and 85 dispensaries. In 2020, the Group performed 878,744 patient treatments, of which 499,734 treatments were for Group employees, at its hospitals. The Group also owns and/or operates 176 nurseries and creches, 147 primary schools and 14 secondary schools. In total we educated more than 30,000 children. The Group owns c.48,000 houses and houses c.294,000 people, of which c.68,000 are employees.

Human Rights

We are determined to safeguard Human Rights across our own operations and supply chains. Many of the operations are subject to audit and certification, where Human Rights are one aspect of such process.

Following the allegations made against our East African operations, the Board decided to enhance the Group's governance and safeguarding oversight functions to comply with the UN Guiding Principles on Business and Human Rights. The Board has established a Safeguarding and Stewardship committee which is further described on page 38. The committee shall promote the highest standards in protecting and promoting Human Rights across the Group and has appointed an internationally respected firm of specialists to review the Human Rights position of our larger operations and to make recommendations for improvements where necessary.

In addition, we have started the process of putting in place Operational-level Grievance Mechanisms in many of our major countries of operation, which will be compliant with UN Guiding Principles and overseen by independent third-parties. We continue to review our Group Principal Policies to identify what, if any, changes should be made. We expect our investee companies similarly to review their own policies and procedures, including policies designed to ensure that support is provided to complainants where allegations of Human Rights violations arise.

Progressive measures

As described below, the Group has also implemented a significant number of progressive measures in both Kenya and Malawi to help protect the rights of its employees and their communities. Up to date information on these measures and other initiatives implemented across the Group are set out on the Camellia Group website.

Eastern Produce Malawi has established a Women's Empowerment Initiative which will fund projects to improve the skills, employment opportunities, and educational attainment of women and girls in and around its operations. These include:

In Kenya, Kakuzi has confirmed that it will be putting in place certain measures, for the benefit of the communities on and around its estate. These include:

Kakuzi has also engaged an additional independent Human Rights consultancy to conduct a Human Rights impact assessment of its operations, so that local communities and commercial partners can have confidence in Kakuzi's commitment to the highest standards of business and Human Rights.

Approved by the Board

Amarpal TakkCompany Secretary

3 May 2021

STRATEGIC REPORT

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 2020 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 the Operational report on pages 6 to 12. The Chairman's Statement and the Operational report, together with information contained within the report of the Directors, highlight the key factors affecting the Group's development and performance. Further details of the financial performance and position of the Group are set out in the Financial report on pages 13 to 15. 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 Operational report, the Environment and Social report, and within the Report of the Directors.

Business Model

The Group consists of operations engaged in Agriculture, Engineering and Food Service. The Group also holds a range of Investments. Operations are managed on a divisional basis with regular reports made to the Board on performance against the annual budget. Each division is expected to perform against an agreed strategy with goals and targets for the short, medium and long-term. These are summarised below.

Agriculture

Core crops. To focus on our core crops of tea, macadamia and avocado where we have scale and geographic diversity. Where appropriate opportunities arise, to add to our production capability in these three crops, as well as to make aligned acquisitions and investments to enable us to capture more of the value chain. To investigate the possibility of a fourth core crop if suitable opportunities present themselves.

Speciality crops. To maintain our portfolio of speciality crops 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.

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

Engineering

AJT Engineering. To maintain our presence in the oil services sector whilst diversifying into adjacent energy related sectors in order to create a sustainably profitable engineering business focused on the wider energy sector.

Abbey Metal Finishing and Atfin. To continue to grow both businesses as quality suppliers to the aerospace industry. The impact of the pandemic on the aerospace industry may render this strategy unachievable and wider strategic options are being assessed.

Food Service

ACS&T. To continue to operate as a niche high quality business in the storage and distribution of frozen foods, aiming to achieve critical mass by profitable growth and if appropriate, acquisition.

Jing Tea. To grow the existing respected small brand into a larger, more profitable distributor and retailer of speciality teas internationally.

Investments

Investment Portfolio. The Group has 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. The strategy is to continue to invest in quality assets where an appropriate yield may be realised. The process of developing some of our existing properties to enhance yield will continue.

Collections. The Group has collections of art, philately and manuscripts which are regularly reviewed and are added to or sold as appropriate.

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.

S172 Statement

This section serves as the Company's section 172 statement and should be read in conjunction with the whole of the Environmental and Social report, the Strategic report, the Corporate Governance report and the Statement of Directors' Responsibilities. Section 172 of the Companies Act 2006 requires Directors to take into consideration the interests of stakeholders in their decision making.

The Directors continue to have regard to the interests of the Company's employees and other stakeholders, including the impact of its activities on the environment and the Company's reputation, when making decisions. Acting in good faith and fairly between members, the Directors consider what is most likely to promote the success of the Company for its members in the long-term.

The Board regularly considers the views of its principal stakeholders and how we engage with them. The stakeholder voice is brought into the boardroom throughout the annual cycle through information provided by management presentations, meetings and operational visits. There is on-going dialogue between members of the Board and significant shareholders whose views are also reported to the Board.

The Board continues to enhance its methods of engagement with the workforce. During 2019 it was concluded that the most effective method to measure engagement across the Group's UK staff was to undertake an employee survey. This survey was conducted in 2020. We invited all UK employees to participate in an anonymous employee engagement survey called "Your Voice". It asked a series of questions relating to recognition, development, leadership, wellbeing and opinions on how the companies are responding to the COVID pandemic. The results generated a number of follow up initiatives which have been raised with the boards of the respective operations. These include more opportunity for middle management development and enhanced Group-communications. The survey will be repeated in 2021 to track progress, monitor engagement levels, implement new initiatives, and promote a culture of ongoing feedback.

Principal Risks and Uncertainties

There are a number of possible risks and uncertainties that could impact the Group's operations. The Group regularly monitors the risks at operational and Group level. Information on the Group's financial risks is disclosed in note 42 of the Accounts. The following material risks relating to the Group's principal operations have been identified.

Agriculture

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 Group Principal Policies which are cascaded across the Group. Each operation is required to prescribe its own local policies based upon the Group Principal Policies. On an annual basis, each significant operation confirms to Group its adherence with the Group Principal Policies. 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 effective. 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, and the Employee Welfare 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 RFA certified and all our macadamia, avocado and winery processing facilities are FSSC 22000 certified. Across the Group, operations have also obtained ISO14001, ISO9001 and ISO45001 and many other appropriate accreditations.

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.

As part of our wider drive towards greater sustainability, we are developing a range of mid to long-term targets to reduce the environmental impact of our operations. As an example, strategic improvements in our usage and sourcing of energy supports our ambition to align with Science-Based Targets. Targets adopted by the operations to reduce greenhouse gas emissions are considered 'Science-Based' if they are in line with the level of de-carbonisation required to keep the global temperature increase below 2ºC compared to pre-industrial temperatures.

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.

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, officers and executives, and all those acting for or on the Group's behalf are strictly prohibited from offering, 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 officer 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 Officer. Group employees have access to the whistleblowing officer for the individual operation, as well as the Group Whistleblowing Officer or the chairman 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 trafficking 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 2020 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 in 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 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 and Food Service divisions, the Board receives monthly profit and operating performance information.

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

Certain of the key financial performance indicators are included in the Operational report on pages 6 to 12.

Non-Financial Performance Indicators

Each operation has developed non-financial KPIs that are relevant to it, these include:

These are regularly monitored and used by local management. The Board considers such KPIs by exception where local operations notify that significant material issues have emerged.

Employees

The Group keeps employees informed through internal publications, the website and social media on the performance of the Group and on matters affecting them as employees and arrangements to that end are made by the local management.

As set out in the Group's Employee Welfare Policy, it is the Group's policy that operating companies give due consideration to employment applications received from disabled persons and to 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 at 31 December 2020.

Approved by the Board

Amarpal Takk

Company Secretary

3 May 2021

REPORT OF THE DIRECTORS

The Directors present their report together with the audited consolidated accounts for the year ended31 December 2020.

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 activities of its subsidiary undertakings comprise:

Agriculture

Engineering

Food Service

Investments

Further details of the Group's activities are included in the Operational report on pages 6 to 12.

Results and Dividends

The loss after tax for the year amounted to £0.8 million (2019: profit after tax £15.1 million). The Board is proposing a final dividend for the year 2020 of 144p per share. Therefore, the total dividend payable for 2020 is 144p per share (2019: 42p per share). Details are shown in note 11 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, Tom Franks, Susan Walker, Graham Mclean, Chris Relleen, Frédéric Vuilleumier, William Gibson, Gautam Dalal and Simon Turner will retire and, being eligible, will seek re-election at the AGM.

Jonathon Bond is not seeking re-election as he will be taking up a new executive post which necessitates him stepping down from the Board. 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.

Tom Franks was appointed as Chief Executive with effect from 1 September 2015. He joined Camellia as Deputy Chief Executive in October 2014. He is a chartered accountant and a Fellow of the Chartered Institute of Securities and Investment.

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 Officer 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 United Finance Limited.

Non-Executive Directors

Chris Relleen was formerly a partner at PricewaterhouseCoopers. He was appointed as an independent non-executive Director and Deputy Chairman in January 2006 having previously been a non-executive Director of Linton Park Plc. He is senior independent Director, chairman of the Audit committee and a member of the Nomination and Remuneration committees.

William Gibson was appointed as an independent non-executive Director in September 2014. He was previously chairman and managing director of Westminster Press and an executive director of the Financial Times Group. He is chairman of the Remuneration committee, chairman of the Safeguarding and Stewardship committee (appointed in December 2020), and a member of the Audit 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 office based in Geneva, Switzerland. He was a member of the Audit committee until April 2019.

Gautam Dalal was appointed as an independent non-executive Director in March 2018. He was previously a partner at KPMG and a founder-director of the UK India Business Council, a member of the Asian Business Association and a director of AMREF Health Africa's International Board. He is a member of the Audit committee.

Jonathon Bond was appointed as an independent non-executive Director in March 2020. Jonathon has spent 25 years in the private equity industry with a particular focus on raising standards of governance and performance. He is also a senior independent director of Jupiter Fund Management plc, a non-executive director of Standard Life Private Equity Trust plc and Scottish Widows/Lloyds Bank Insurance. He was appointed a member of the Safeguarding and Stewardship committee in December 2020.

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.

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. He was appointed a member of the Safeguarding and Stewardship committee in December 2020.

Substantial Shareholdings

As at 6 April 2021 the Company has been advised of the following interests in its share capital:

* Controlled by Nokia Pensioenfonds VZW

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 36 to the Accounts.

At the AGM in 2020, 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 21.

Employees

Details in relation to employees are set out on page 30.

R&D

The Group undertakes some R&D projects within its operations in order to improve efficiency and grow revenues.

Future Development

Details of future developments are set out in the Operational 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 affect the Group, the most recent business performance of the Group, including the impacts of the pandemic, as described in the Operational report on pages 6 to 12.

The Directors considered the impact of the current COVID environment on the business for the next 15 months.

We 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 over the last year, we expect our agriculture businesses will continue to operate broadly as currently. In the UK we have assumed that the food service market begins to recover gradually over the course of the next two years and that the aerospace market recovery to pre-COVID levels is delayed until 2026.

At 31 December 2020, the Group had cash and cash equivalents of £94.9 million with loans outstanding of £4.8 million. In addition, the Group had undrawn short-term loan and overdraft facilities of £23.7 million and a portfolio of liquid investments with a fair market value of £50.6 million.

We have modelled various severe but plausible scenarios using assumptions including the combined effect of reduced sales volumes for tea, reduced avocado exports and reduced sales volumes for macadamia during 2021. 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 2021 for our tea, macadamia and avocado crops.

Historically in the tea sector, restrictions on, or reductions in the supply of tea either regionally or globally have led to higher selling prices and this was borne out in India during 2020. However, for prudence for the purposes of our downside scenario planning we have not reflected increased selling prices for tea nor any significant reduction to our operating cost base.

Under both the base case and the downside scenario, the Group is expected to continue to have sufficient 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 42 of the accounts.

Corporate Governance

The Company's statement on corporate governance can be found in the Corporate Governance report on pages 35 to 39.

Political Donations

The Company has no political affiliations 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, and stakeholders, communities and to the interests of the business.

Approved by the Board

Amarpal Takk

Company Secretary

3 May 2021

CORPORATE GOVERNANCE

Statement of Compliance

The Company fully complies with the Quoted Companies Alliance's 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. There are ten principles of the QCA Code which the Company complies with in full. The table on our website sets out how we comply.

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 ten Directors, six of whom are non-executive Directors. The remaining Directors are executive Directors, including the Chairman. Chris Relleen, the Deputy Chairman, has been designated as the senior independent Director. The names and brief biographical details of each Director appear on pages 31 and 32.

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 has also established the Safeguarding and Stewardship committee.

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 sufficient information in advance of Board meetings to enable informed judgements to be made on matters referred to the Board. The Board met 10 times in 2020.

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

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 2018. Details of the next review will be disclosed when the next review is completed at the end of 2021.

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 two Executive Committees. The Agriculture Executive Committee is chaired by the Director of Agriculture and includes the Chief Executive, Chief Financial Officer, the Group General Counsel and heads of all the key agricultural operations. The Engineering and Food Service Executive Committee is chaired by the Chief Executive and includes the Chief Financial Officer, the Managing Directors of UK businesses, the Group General Counsel, the UK Investment Manager and the UK Head of HR.

Investments and Associates report directly to the Chief Executive.

Nomination Committee

The committee is chaired by Malcolm Perkins. Its other members are William Gibson and Chris Relleen.

The principal responsibilities of the committee are set out below:

The committee met once during the year to consider the composition of the Audit committee.

Audit Committee

The committee is chaired by Chris Relleen. The other members of the committee during the year were Gautam Dalal and William Gibson. During 2020, the committee met on three occasions.

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

Significant issues considered by the Audit Committee

The Audit committee assesses whether suitable accounting policies have been adopted and whether management has made appropriate estimates and judgements. In the year under review, the Audit committee considered the following matters in relation to the financial statements:

Going concern

The committee considered the appropriateness of the going concern principle of accounting used in preparing the financial statements in the context, in particular, of the ongoing impact of the pandemic on the Group's cash requirements.

Biological assets

One of the key areas of judgement that the committee considered in reviewing the financial statements was the valuation of biological assets in accordance with IAS 41. Valuations are based on discounted cash flows or are carried out by external professional valuers. These were considered for consistency of approach and assumptions agreed as reasonable. For more details see note 19 to the Accounts.

Pensions

A key area of judgement is in relation to the valuation of the pension schemes obligations. Whilst this is conducted by independent actuaries, the size of the obligation means that a relatively minor difference in the assumptions 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 sufficient to support the valuation.

Carrying value of intangible assets

The Group's carrying value of the Jing 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 and the uncertainties regarding timing of recovery from the impact of COVID and future revenue growth rates for Jing. 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 a £3.5 million provision for impairment of the Jing brand, no impairment provision was required.

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 other fixtures and fittings in the UK in the context of COVID and third party valuations and agreed that an impairment of £3.0 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 2020. 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 increase in the share price post year end and the control premium associated with our holding concluded that no impairment is required.

Costs relating to the litigation relating to East Africa

The committee considered the recognition criteria, quantification and accounting treatment of the expected legal and other costs of the litigation relating to Kakuzi and Eastern Produce Malawi, with reference to costs incurred to 31 December 2020, the agreed settlements in each case and the legal costs expected to be incurred during 2021 in finalising and withdrawing the court action. This included consideration of the appropriate classification of the expected liabilities between trade creditors, accruals and provisions.

Provisions

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

External auditor

To assess the effectiveness 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.

The committee confirms that the Annual Report and Accounts, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy.

Remuneration Committee

The committee is chaired by William Gibson and the other member is Chris Relleen.

The responsibilities of the committee include:

The Remuneration report appears on pages 41 to 42.

Safeguarding & Stewardship Committee

In 2020, the Company established a Safeguarding and Stewardship Committee to promote its mission to meeting the highest standards in protecting and promoting Human Rights across the Group. The committee meets regularly throughout the year and is chaired by William Gibson. Other members of the committee are Jonathon Bond, Amarpal Takk and Louise Nicholls (the former head of Human Rights and food sustainability at a leading UK supermarket). Malcolm Perkins will join the committee in June, following the resignation of Jonathon Bond.

The principal objectives of the committee are set out below:

Insurance

The Company purchases insurance to cover its Directors and officers, 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 36.

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 effectiveness 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 efficient day to day operations remains with the local management. Accountability and delegation of authority are clearly defined with regular communication between Group head office 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 2021

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 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 IASB. 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 affairs 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 sufficient 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 differ from legislation in other jurisdictions.

Responsibility Statement

We confirm that to the best of our knowledge:

Approved by the Board

Malcolm Perkins

Chairman

3 May 2021

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 page 38.

Policy on Directors' Remuneration

The policy agreed by the committee is as follows:

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 2017 AGM and applied for a period of three years until 2020. The committee considers any views of the shareholders expressed on Directors' remuneration.

At the AGM on 10 June 2020, the Remuneration Report for the year to 31 December 2019 was approved by shareholders with 99.97% of the votes cast in favour, 0.03% of the votes cast against and 585 votes withheld.

Service Contracts

Malcolm Perkins, Tom Franks, 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 officers' 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

Directors' Pensions

Malcolm Perkins received no payment for pensionable service during 2020. Tom Franks, Graham Mclean and Susan Walker receive an excess non-pensionable salary supplement equivalent to 10% of base salary.

In addition to the above, an unfunded pension of US$200,000 per annum is paid to Gordon Fox, a former Director of the Company.

Approved by the Board

Amarpal Takk

Company Secretary

3 May 2021

CONSOLIDATED INCOME STATEMENT

for the year ended 31 December 2020

STATEMENT OF COMPREHENSIVE INCOME

for the year ended 31 December 2020