Camellia Regulatory News (CAM)

Camellia Plc

Final results

Camellia Plc (AIM:CAM) announces its final results for the year ended 31 December 2015.

Malcolm Perkins, Chairman of Camellia Plc, stated:

"2015 saw substantial improvements in the underlying trading of our businesses led by the performance of our Kenyan tea business and by the steps which we have taken to address the issues in Engineering."

"The strength and diversity of our operations, the investments we continue to make in Agriculture, the success we have had in bringing in new management, and the ongoing turnaround, sale or closure of our loss making companies, all point to a more successful future. However conditions in many of our markets remain challenging. In particular, the start of 2016 has seen record tea production in Kenya which has resulted in a significant fall in the market price and the continuing low oil price provides a challenge to certain of our engineering businesses."

* Headline profit is a measure of the underlying performance of the group which is not impacted by exceptional items or items considered non-operational in nature

Highlights

Enquiries

Camellia Plc 01622 746655

Tom Franks, CEO

Susan Walker, CFO

Panmure Gordon 0207 8862500

Nominated Advisor and Broker

Andrew Godber

Erik Anderson

Camellia at a glance

Camellia Plc is an international Group - a global family of diverse companies with a 128-year heritage employing approximately 76,000 people worldwide. Our operating divisions include Agriculture, Banking and Financial Services, 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. Profits are our lifeblood but not our soul.

Our business is built on two fundamental principles:

Our business is made up of five divisions:

AGRICULTURE

2015: Turnover - £186.5 million, Trading profit - £26.3 million, Return on capital - 9.9%

BANKING AND FINANCIAL SERVICES

2015: Subsidiaries Turnover - £13.1 million, Trading loss - £3.6 million

2015: Associates Share of results after taxation - £4.2 million (including 6 months results for BF&M)

ENGINEERING

2015: Turnover - £18.6 million, Trading loss - £1.2 million*

FOOD SERVICE

2015: Turnover - £31.9 million, Trading profit - £0.7 million, Return on capital - 4.0%

Chairman's statement

Our results for the year reflect once again the diversity of our operations and the unpredictability of global markets. Excluding the adjustment for the revaluation of biological assets, which I am pleased to report will have a much reduced impact on our accounts going forward, and the significant provision for post-employment benefits that we have been required to make in Bangladesh, headline profits were £23.9 million compared to £17.2 million in 2014. This result reflects the difficulties that our subsidiaries in the oil services sector have been facing; but also reflects the improved tea prices in Kenya and the improved profitability of our agricultural operations more generally.

2015 was a transitional year for your Group, with the appointment of Tom Franks as the Chief Executive, Graham Mclean as Managing Director of Agriculture and Susan Walker as the Chief Financial Officer and the retirement of a number of longstanding executive directors. As a result there have been consequential changes to both roles and responsibilities and also the organisation of the Group which are set out in the Chief Executive's and corporate governance reports. A detailed statement which shareholders will hopefully find interesting and informative is included as the Chief Executive's report and we have also included substantially more information in the annual accounts to assist shareholders with getting a better understanding of our Group.

Notwithstanding these changes, I am pleased to report that the overriding principles of the Group remain constant. We are committed to the development of the business over the long term and to the sustainability of our businesses, the environments and communities in which we operate.

As announced previously we took the step during the year of closing one of our subsidiaries, AKD Engineering, following many years of substantial losses. This was not a decision that your Board took lightly, being well aware of the social and other implications of this move, but was unfortunately unavoidable given the trading conditions. We sold the Loddon Engineering business towards the end of the year to the De Swart Group, an owner in a better position to ensure the long term future of that business. Despite these changes, the Group has continued its policy of organic growth and development, further details of which are contained in the Chief Executive's report.

Dividend

Your Board is recommending a final dividend of 95p per share which, together with the interim dividend already paid of 34p per share, brings the total distribution for the year to 129p per share compared with 126p per share in 2014.

Directors

During the year Anil Mathur, Chris Ames and Peter Field resigned as directors of the company. I would like to thank them all again for their contribution to the Group, and I am pleased that Peter Field will continue to contribute as Chairman of our operations in India and Bangladesh.

Outlook

The outlook for 2016 is challenging. Climate change, and in particular erratic rainfall patterns, makes predicting crop volumes difficult. The start of 2016 has seen record tea production in Kenya which has resulted in a significant fall in the market price. The continuing low oil price provides a challenge to our engineering businesses and low interest rates restrict returns in banking. However, the strength and diversity of our operations, the success we have had in bringing in new management where appropriate, and the ongoing turnaround, sale or closure of our loss making companies, all point to a more successful future.

Staff

As always, my thanks go out to all our staff for their efforts in 2015.

Malcolm Perkins

Chairman

27 April 2016

Chief Executive's Report

I am delighted to present to you my first report as Chief Executive. This year we are making significant additional disclosures which I hope will enhance shareholders understanding of the Group and its strategy. As is inevitable in a Group of this size and diversity, there have been many performance highlights this year but also some areas of the business which have found markets more challenging.

Of particular note was the success of our operations in Kenya where a combination of good yields and improved prices delivered significant additional profit. However, the introduction of new post-employment benefits legislation in Bangladesh has meant that we have made a significant provision of £6.4 million this year against this liability and the fall in the oil price hit our subsidiaries (AKD Engineering and AJT Engineering) in that sector very hard. Unfortunately, the continuing weakness in the oil price and the resulting lack of orders for major capital equipment from AKD Engineering meant that we had to close the company in July 2015. We also sold our interest in Loddon Engineering, a Norfolk based stable manufacturer, to a subsidiary of the De Swart Group.

MANAGEMENT

During the year we reviewed the management of the business. Camellia is diverse and complex in both its markets and geographies and therefore having the right management in place is fundamental to driving performance. We have made a number of changes to management and to reporting lines in order to increase skills, create clarity and ensure proper accountability in the trading businesses. As a result the Group is now managed on a divisional rather than geographic basis. A summary of the new structure together with the revised remit and membership of the executive committees is set out in the corporate governance report.

BUSINESS STRATEGY

Whilst the overall Group strategy, which is set out on page 15, remains unchanged, each division is now expected to perform against an agreed divisional strategy which sets out the goals and targets for the short and medium term.

The divisional strategies may be summarised as follows:

Agriculture. The Agriculture division has an exceptional collection of high quality assets spread across a variety of geographies and crops. There are however certain crops where we have scale and geographic spread and therefore the opportunity to build a significant market presence. These are tea, macadamia and avocados. Here we will continue to expand the planted area, enlarge our geographic spread and where appropriate move up the value chain to protect future margins. For the remaining crops, where developing a significant market presence is not practicable but where there are opportunities for profitable investment, we will continue to acquire assets in line with the broader Group strategy.

Banking and Financial Services. During the year, the Group performed a strategic review of Duncan Lawrie to establish the best future path for the business. As a result of that review, the Group has approved a new growth strategy to invest in, and expand, Duncan Lawrie. Key components of the new strategy include building the banking operations by increasing both lending and deposits; growing the wealth management business by substantially increasing the assets under management and investing in people and infrastructure to ensure a market leading suite of products and services for our clients. This strategy will require, inter alia, further investment in the business and we have relaxed certain lending restrictions previously imposed by the Group.

I anticipate that the strategy will take a number of years to execute and I am pleased to report the appointment of Sally Tennant as the new Chair of Duncan Lawrie, subject to the appropriate regulatory approval, to assist the management team in implementing that strategy.

The Group also has three associated companies in the financial services sector, one of which, BF&M, is included as an associate from 1 July 2015 following a purchase of additional shares by the Group and a reassessment of our relationship with BF&M. The Group will continue to monitor its investments in these companies and may increase or decrease its holdings as appropriate.

Engineering

Engineering North. AJT Engineering has been a strongly profitable business for the Group in the past but is currently impacted by the low oil price and its effect on investment in the North Sea oil industry. As a result, AJT Engineering has had to amend its strategy so as to react to the new environment. This has included taking steps to reduce costs and diversify its customer base. AJT Engineering remains committed to providing a full service to its customers and anticipates emerging from the current hiatus strongly positioned for the future.

Engineering South. The principal driver of growth in Engineering South will be Abbey Metal Finishing (Amfin) and its joint venture in Germany, Atfin. Under its new management team, Amfin has taken significant steps in the last 12 months to focus its customer base, improve its delivery performance and return to profitability. The plan is to complete these steps during 2016 and for Amfin to provide the Group with a return on the significant investments made since the fire in 2010. Atfin is taking steps to diversify its customer base and is now moving towards profitability.

The remaining businesses in Engineering South are expected to grow organically over the coming years.

Food Service

UK. ACS&T will continue to operate as a niche high quality operator in the storage and distribution of frozen foods together with some ambient food service provision as demand and space allows. The business will expand and invest where appropriate to continue to serve the needs of its customers.

Netherlands. Affish and Wylax, our fish trading and distribution businesses in the Netherlands, have struggled to grow in tough economic conditions. However, following the recent appointment of a new managing director and sales director, these businesses are now looking to expand both their product offering and customer base.

Investments

Investment Portfolio. The Group has a portfolio, principally of listed investments, under the management of a full time investment manager. The strategy remains to invest for the long term in high quality companies where we believe that there is hidden value.

Investment Property. The Group is disclosing for the first time this year the current market value of the investment property portfolio (page 59). The strategy is to continue to invest in quality assets where an appropriate yield may be realised.

Collections. The Group has collections of art, philately and manuscripts under the management of a curating team. These assets are regularly reviewed and are added to or sold as appropriate in order to enhance the collections.

*Estate volumes only, in addition 14.7 million kg of tea was produced for smallholders (2014 - 15.5 million kg)

Tea pricing and operations

India

Average tea prices in 2015 were up 3.8% in Rupees against 2014 levels, reflecting particularly good performances from our Assam teas, but costs of production were also up, reflecting labour rate increases which impacted margins. A new blending and packing facility for export teas was commissioned in Kolkata during the year with an annual capacity of approximately 4 million kgs per annum.

Packet tea sale volumes were up 13.6% on 2014 in this competitive but growing sector of the Indian local tea market. Instant Tea production was down 25% on 2014 with prices also slightly down. During the year, a solar water heating unit was installed at the plant in order to reduce energy costs.

Rainforest Alliance Certification was achieved on all Assam and Darjeeling estates along with FSSC 22000 certification in the factories; ISO 22000 certification was achieved for the Dooars' factories.

Bangladesh

Pricing was up 11% on the previous year due to improved demand at auction and a resumption of high duty tariffs on imported tea.

A project to create capacity for irrigation on two gardens commenced during the second quarter having been delayed as a result of political disturbances. Total replanting achieved in the year was 115 Ha leaving a total of 385 Ha under rehabilitation at the end of the year in preparation for future replanting.

Kenya

As a result of lower production volumes across Kenya as a whole, tea prices were up 35.7% from the previous year's levels. The market for Kenya teas is largely an export one and prices are subject to significant volatility linked to production volumes. Fluctuations in the tea price have a major impact on Group profitability.

We continue to produce good quality hand plucked tea, and mechanical harvesting continues on a trial basis. During 2015, we established our first large-scale solar project. Significant reductions in carbon emissions have been achieved as well as a reduction in power costs.

All the estates and smallholders remain Rainforest Alliance certified and all factories are ISO 22000 compliant.

Malawi

In Malawi we experienced highly erratic weather conditions which had a significant adverse effect on crop volumes. The operations experienced serious flooding following drought conditions at the start of the year and then drought conditions re-emerged for most of the year thereafter.

Pricing in 2015 was up 3% on 2014 levels but costs per kg increased significantly due to the lower crop, inflationary pressure through substantial currency devaluation and significant wage increases. These circumstances contributed to a substantial decline in the profitability of the tea operations in 2015.

The Tea Association of Malawi, of which we are a leading member, in conjunction with the Ethical Tea Partnership, signed up to an extensive five-year revitalisation programme for the industry aimed at addressing workers' wages, smallholder sustainability, product quality and replanting.

All estates and smallholders are Rainforest Alliance certified. All factories are Fairtrade certified and two factories continued with UTZ certification.

Macadamia Pricing

Pricing for macadamia in 2015 was up 15.3% on 2014 levels and set a record level for the global macadamia kernel market due to continuing demand from China.

Macadamia Operations

Malawi

Production of macadamia nuts was down 9.0% on the previous year due to the impact of dry weather conditions. The processing facility once again achieved ISO 22000 certification.

South Africa

Volumes in 2015 were significantly ahead of last year. The development of Mambedi Estate to macadamia orchards continues with 98 Ha planted in 2015. A further 80 Ha has been prepared for planting. The processing factory successfully completed the first phase of upgrading to a modern state-of-the-art cracking facility. The plant was also recertified under ISO 22000 for the 2015 season.

Kenya

New plantings continued with 158 Ha being planted in the year. Construction of a new cracking facility began in April and good progress has been made to date. The facility is expected to open in June 2016.

* Estate volumes only. In addition 2.3 million kg of smallholder fruit was packed (2014 - 2.7 million kg)

Avocado Pricing and Operations

A record volume of 1.9 million cartons were exported: 17% up on 2014. The smallholder fruit volumes were slightly lower than last year as a result of tight quality controls and lower availability of acceptably sized fruit. Despite this, excellent returns were generated for growers from the fruit exported. The smallholder initiative continues to gain momentum with the number of registered growers increasing each year. Pricing in 2015 was at record levels (up 64% on 2014) as a result of demand from the European market.

* 2015 was an 'off year' for Pistachios

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

Speciality Crops Pricing and Operations

Pricing for rubber in 2015 was 24.4% below 2014 due to the drop in oil prices making synthetic rubber more price competitive than natural latex. There are also significant inventories of natural rubber building in South East Asia which are contributing to the downward pressure on price.

Prices for California citrus were slightly up in the year. Reduced volumes in the year reflect the effect of the decision to replace an area of mandarins with a different variety of citrus.

Both the maize and soya crops in Brazil sold at higher levels than anticipated.

Prices for fresh pineapple production in Kenya were marginally up.

Wine grape production in the Western Cape, South Africa was down 13% on last year but bottled wine production and sale volumes were up. Results were in line with expectation although slightly down on the previous year.

Pricing for pistachios in 2015 was 28% up on 2014 levels due to demand in the global market.

Almond prices were also high but no contribution was attributed to Group profit in 2015 given the immature nature of the trees. Revenues from almonds will be attributed to Group profit for 2016.

Forestry operations continued to produce satisfactory volumes for fuel wood and value addition products.

We continue to raise cattle on those areas of the Kakuzi Estate in Kenya unsuitable for crop development.

In total, the Agriculture division made a trading profit of £26.3 million (2014: £27.2 million) on turnover of £186.5 million (2014: £164.2 million).

Banking and Financial Services

The low interest rate environment together with restrictions on lending imposed by the Group and costs associated with adjusting to new regulatory requirements, have led to several years of losses at Duncan Lawrie. As a result, the Group undertook a strategic review of the bank during the year, the result of which is the implementation of the growth strategy described above. In 2015 the bank made losses which were significantly above those incurred in 2014, reinforcing the need to execute the new strategy. These losses are likely to continue into 2016 as the bank invests in clients, staff and systems.

Our two associated companies in Bangladesh, United Insurance and United Finance, both had a reasonable year with profits marginally ahead of 2014.

From 1 July 2015 we are accounting for BF&M, a Bermuda based insurance company, as an associate. BF&M had a strong year in 2015 reporting a profit before tax of Bermudian Dollar 30.1 million (2014: Bermudian Dollar 26.7 million).

In total, the Banking and Financial Services division's subsidiaries made a trading loss of £3.6m (2014: trading loss £2.5m) on turnover of £13.1 million (2014: £12.4 million). In addition, our share of the results of associates amounted to £4.2 million (2014: £1.1 million).

Engineering

Engineering North

Engineering North had a difficult year with the fall in the oil price resulting in AJT Engineering in Aberdeen struggling to fill its order book. Turnover at AJT Engineering fell from £12.0 million in 2014 to £9.6 million in 2015. In the current climate it is hard to predict the oil price and the impact that it may have on the industry in Aberdeen and therefore the company is braced for another difficult year.

Engineering South

Engineering South had a transitional year with the sale and closure of Loddon Engineering and AKD Engineering respectively, and new management teams appointed at Abbey Metal Finishing, Atfin and GU Cutting and Grinding. The continuing turnaround at Abbey Metal Finishing and the disposal of the other loss making businesses means that we anticipate a significantly improved performance in the coming year.

In total, the Engineering division made a trading loss of £5.5 million (2014: trading loss £8.4 million) on turnover of £24.1 million (£28.9 million). £4.3 million of the trading loss in 2015 related to AKD Engineering and Loddon Engineering.

In addition, during the year we sold three properties and certain assets which were surplus to the requirements of the Engineering division generating a net profit on sale of £3.7million (2014: nil).

Food Service

ACS&T had a better year than 2014 with turnover increasing by 7.5%, although the market remains competitive in both the storage and distribution areas and as a result profits were marginally down. During the year we also took possession of a new office building in Wolverhampton and implemented a new IT system at all our facilities to manage logistics. In the Netherlands, both Affish and Wylax experienced challenging trading conditions.

In total the Food Service division made a trading profit of £0.7 million (2014: £0.9 million) on turnover of £31.9 million (2014: £30.9 million).

Investments

Investment Portfolio. Despite the significant fluctuations in both global equity and currency markets there was little change in the value of the portfolio. The total value of the portfolio is £30.6 million (2014: £63.5 million) reflecting the reclassification of our holding in BF&M as an associate.

Investment Property. The Group is disclosing for the first time this year the current market value of the investment property portfolio (page 59). The Group took the opportunity during the year to acquire further land and buildings at Linton Park.

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

LEGISLATIVE CHANGES

The Group is present in many jurisdictions, and is subject to local legislation. The following two issues either have had, or are likely to have, a material impact on the Group.

DEVELOPMENT

During 2015 we continued to invest in the development of our assets and £19.4 million was spent on property, plant and equipment and investment property (2014: £19.0 million) including the following key projects:

In addition to our continuous programme of replanting our tea areas, a programme to extend our planted areas has been underway for a number of years and in 2015:

SUSTAINABILITY AND CSR

The Group has always had a strong focus on social and environmental responsibility and this is something we intend to maintain and grow. The key aspects of that policy are set out on page 17.

The Group strives to develop the workforce through training and to improve housing, healthcare, and education across the Group and in the communities that we work in.

This year we have been involved in the tea revitalisation project in Malawi, solar projects in India and Kenya, and have embarked on major housing renewal projects in Malawi, Kenya and India. In addition, I am pleased to report that every operating company in the UK has now been accredited by the Living Wage Foundation as a Living Wage Employer.

Tom Franks

Chief Executive

27 April 2016

Chief Financial Officer's Report

Overview of results

After taking account of the provision for past service costs relating to changes in Bangladesh to post-employment benefit entitlements of £6.1 million, gains arising from changes in the fair value of biological assets of £20.6 million (2014: £8.8 million), exceptional and other one off items, the profit before tax for the year to 31 December 2015 amounted to £40.5 million compared with £22.0 million in the previous year.

The Group has net assets of £372.8 million (2014: £364.4 million) and net cash and cash equivalents of £65.6 million (2014: £54.1 million), excluding balances relating to our banking operations.

Headline profit

The headline profit before tax for the year to 31 December 2015 was 39.0% higher than previous year at £23.9 million (2014: £17.2 million). Headline profit is a measure of underlying performance which is not impacted by exceptional and other items considered non-operational in nature and is designed to make clear the underlying trading performance of the Group.

Accounting policies and practices

We increased our holding in BF&M to 36.1% during the year and, having reassessed our relationship, consider that it is now appropriate to account for it as an associate company rather than as an available for sale financial asset. This has resulted in our proportionate share of BF&M's profit after tax for the period from 1 July 2015 of £2.9 million being included in our results for the year instead of the dividends we received.

Following further acquisition of property in the UK during 2015, our investment property holdings are now shown as a separate asset class which continues to be carried at cost. In the interests of providing further clarity for shareholders, the estimated market value is disclosed in note 18 to the financial statements.

Impact of changes to the accounting treatment of biological assets (IAS 41 amendments)

This is the last year in which IAS 41 will be relevant to the majority of our agricultural operations and from 1 January 2016 our permanent plantings will be classified under IAS 16 as property, plant and equipment to be depreciated over their expected useful life. If the new standard had applied to our 2015 results it would have had the following estimated effect on our reported profits:

Currencies

The Group's operations in Africa and Brazil have seen significant devaluation of their functional currencies during the year. This together with the high rates of inflation in these countries places substantial pressure on our cost base, particularly in Malawi. However, our operations in Africa benefit from the fact that the majority of their sales are in hard currencies, typically US dollars or Euros, which provides some protection. Over the course of the year to 31 December 2015, the Malawi Kwacha weakened by 35.7%, the Kenya Shilling by 6.5%, the South African Rand by 26.5% and the Brazilian Real by 41.3% against Sterling.

Cashflow

The Group's net cash position increased to £65.6 million at 31 December 2015 (2014: £54.1 million) (excluding net cash balances held within our banking subsidiaries) reflecting strong net cash inflows from operations of £33.7 million (2014: inflow £7.9 million).

Taxation

The Group's effective tax rate of 45.9% (2014: 62.2%) reflects the continuing losses incurred in the UK which we are currently unable to relieve against profits elsewhere in the Group. It also reflects a provision for taxation in Malawi arising from assessments raised by the Malawi Revenue Authority for unpaid taxes from prior years. We continue to be of the view that the claim is without technical merit.

Pensions and post-employment benefits

The Group operates a number of defined benefit pension schemes, the largest of which is in the UK. The overseas schemes are located in Bangladesh, India and the Netherlands. The UK scheme has been closed to new entrants for a number of years and of our UK based work force, approximately 15% are members of this scheme. 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.

Our employee benefit schemes currently show net deficits of £38.6 million (2014: £41.6 million net deficit). Accounting for defined benefit schemes is prescribed by IAS 19 and the quantum of the deficit continues to be volatile and sensitive to small changes in assumptions as regards inflation and gilt yields in the relevant jurisdictions. This year a net actuarial gain of £9.1 million (net actuarial loss in 2014 of £20.3 million) is reflected in the Statement of comprehensive income.

In addition, £8.4 million (2014: £1.0 million) has been charged to our income statement in respect of employee benefit obligations. £6.4 million of the increase in cost relates to obligations for post-employment benefits arising from recently enacted legislation in Bangladesh, of which £6.1 million relates to relevant employees service with the Group in years prior to the current financial year. The cash flow impact of this legislation will arise over a number of years as staff retire or otherwise leave the business.

Contributions to the externally funded defined benefit schemes are determined after consultation with the respective trustees and actuaries. In the UK, additional annual contributions of £0.9 million are being made to reduce the scheme's funding deficit.

Shareholders' funds

Equity attributable to Camellia's shareholders at the 2015 year end was £330.4 million (2014: £321.7 million). A reconciliation is set out in the Group statement of changes in equity.

Susan Walker

Chief Financial Officer

27 April 2016

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 2015 and a description of 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 Chief Executive's report on pages 5 to 12. The Chairman's statement and the Chief Executive's report, together with information contained within the report of the directors, highlight the key factors affecting the Group's development and performance. 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 Chief Executive's report shown on pages 6 to 12 and within the report of the directors.

Business model

The Group consists of businesses engaged in Agriculture, Banking and Financial Services, Engineering, Food Service and Investment. Businesses are managed on a divisional basis with regular reports made to the Board on performance against the annual budget.

Principal risks and uncertainties

There are a number of possible risks and uncertainties that could impact the Group's businesses. As the Group's businesses are widely spread both in terms of activity and location, it is unlikely that any one single factor could have a material impact on the Group's long-term performance. The following risks relating to the Group's principal operations have been identified:

Agriculture

The Group's agricultural based businesses are located in Kenya, Malawi, South Africa, Bangladesh, India, Brazil and the USA. The success of these activities is greatly dependent on climatic conditions, controlling plant disease, the cost of labour and the market price. We export a considerable amount of produce through the port of Mombasa in Kenya. Such exports can be seriously delayed by inefficiencies in the operation of the port. In addition, exports from these businesses are subject to foreign exchange fluctuations as products, particularly those from Africa, are normally priced in US dollars or Euros.

In Kenya, Malawi and South Africa there are long-term political issues concerning land ownership over which the Group has little control or influence. The Board continues to work with local management and with the assistance of lawyers to monitor land ownership issues that may impact the Group's operations. In Kenya, the length of the leases owned by non-Kenyan citizens and corporations has been reduced from 999 years to 99 years in accordance with the new constitution. In South Africa, on land where ownership claims have been made, any substantiated claim is required to be resolved on a willing buyer willing seller basis and crops are generally only planted following notification to the Land Claims Commission. In Malawi, a bill is currently being debated in the parliament on the foreign ownership of land which could see the freehold land interest being converted to 50 year leasehold.

In India, violence from separatist Groups which has been a problem for some years has reduced in Assam, Darjeeling and the Dooars. In Bangladesh, there have been instances of civil unrest and political instability. The situation continues to be monitored and the Group's operations in these regions have generally been able to trade normally.

A fourth consecutive year of drought in California brought about a state imposed 25% reduction in water usage by urban consumers. Ground and surface water resources remain scarce and continue to decline, imposing a challenge to management to ensure sufficient water resources are made available for the crops. This was achieved in 2015 because of our investment in irrigation infrastructure over several years, but remains a concern for the future.

Engineering

A number of the engineering companies are dependent for a significant part of their revenue on the aerospace and the oil and gas industries. As we saw in 2015, a downturn in either of these sectors would have and has had an impact on the level of activity in these businesses.

Some of the processes used by the companies involved in metal treatment require high standards of health and safety and environmental management. Failure to maintain these standards could give rise to accidents or environmental damage.

Food Service

Food Service is a highly competitive industry with low operating margins and is largely dependent on the food industry for the utilisation of cold stores.

Cold stores are heavy users of electricity and any significant movement in energy costs can affect the operation's profitability.

ACS&T is dependent upon a sophisticated computer system. The failure of this system could have significant consequences for the business although a disaster recovery plan is in place.

Banking and Financial Services

Duncan Lawrie Limited is regulated by the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) and has a well-developed compliance process. The following risks have been identified:

Bank failures in the jurisdictions within which Duncan Lawrie operates can also impact its results as a consequence of industry wide compensation schemes to which it is required to contribute.

Further information on the Group's financial risks are disclosed in note 39 of the accounts.

Investments

The Group owns a number of investments including listed investments. The value of these investments is therefore likely to fluctuate in line with global stock market movements.

Pension schemes

There is one final salary scheme in the UK which is closed to new entrants and permits an element of future accrual for existing members in the defined benefit section. A material proportion of the assets of the scheme are invested in equities and the value of these assets will fluctuate in line with global equity markets. Continuing improvements in mortality rates may also increase the liabilities of the scheme.

The Group's overseas subsidiaries make pension provision for certain employees in accordance with relevant local legislation. Some risk remains if there are changes to the governing legislation, requiring the companies to make larger contributions to these schemes. Some of these pension plans are final salary based and not fully funded.

Credit Risk

Credit control procedures are in place throughout the Group but the risk remains that some customers may have difficulty making payments.

Social and environmental responsibility

Background

The Group has a wide range of businesses operating around the world in diverse commercial, cultural and regulatory environments. These businesses encompass a correspondingly wide spectrum of employment and environmental issues and our main challenge is to ensure that these are appropriately managed across the Group.

The Group's businesses have a duty to meet local regulatory requirements and will always strive to do so. In this respect, there is a distinction between our UK businesses and our agricultural businesses based mostly in developing countries. Whilst the UK businesses are subject to well-developed regulatory regimes in the areas of employment and environmental protection, this is not necessarily the case elsewhere. Our agricultural businesses meet the standards expected by the Group, local legislation and by our customers.

Particular challenges and opportunities for the Group lie in the following areas:

Child labour: the use of child labour is prohibited by all of our businesses. The minimum legal working age varies around the world and in some countries it is both the cultural norm and permissible for parents to involve their children in the productive process. We do not subscribe to this approach and therefore translating our policy into unambiguous local rules and enforcing these rules requires vigilance.

Health and safety: Our European and North-American businesses operate in a strong regulatory climate, and have a good health and safety culture and record. Achieving equivalent standards of health and safety management in our operations in some developing countries is a continuing challenge however improvements have been achieved during the year.

Medical care and education: In some countries, our workers and their children do not have access to good state provision of medical or educational services. However, the majority of our tea estates in India and Bangladesh have a hospital and a qualified doctor and our operations in both these countries have central Group hospitals to which more serious illnesses are referred. A number of our African businesses report a high incidence of HIV/AIDS related illnesses. We provide, as a minimum, basic medical services including where appropriate antiretroviral drugs. We also give support to schools that are either run locally or by our companies.

Casual labour: Some of our agricultural businesses rely on seasonal labour, notably at harvest time. Our agricultural companies give casual and contract workers employment rights in accordance with the requirements of local legislation.

Environmental management: Our UK-based engineering businesses have the greatest potential to create pollution and hazardous waste and need to meet tight legislative standards. Where appropriate, our UK businesses have formal environmental management systems in place and most are independently certified to the international standard ISO 14001. The enforcement of environmental legislation in many countries where we operate is poor and our businesses in these locations have to act on their own initiative to meet international standards of environmental protection. Our agricultural businesses carry out activities that could impact the environment. These businesses have adopted rigorous procedures to reduce the environmental impact of the operations.

Greenhouse Gas (GHG) Emissions

Our emissions have been calculated based on the GHG Protocol Corporate Standard. Emissions reported correspond with our financial year.

Our approach

We believe that good management of employment and environmental issues is essential in ensuring the long-term success of our businesses. We are therefore committed to devoting the necessary resources to improve continually our performance in these areas.

The Group has a corporate social responsibility policy which is available on the company's website.

The Board has adopted an anti-bribery policy which complies with the requirements of the Bribery Act 2010. The policy has been introduced across the Group and its implementation is being monitored. The Board does not permit bribery as part of its business practices.

The Board is currently devising a policy to comply with the requirements of the Modern Slavery Act 2015 which will be in place by the end of 2016.

Performance

There are no current employment or environmental issues that prejudice the continuing development of the Group. None of the Group's businesses were prosecuted for any significant breach of employment legislation during the year. The Board has established a process for ensuring that the corporate social responsibility policy is enforced across the Group.

Key financial performance indicators

Return on segmental assets

The nature of the Group's principal activities is such that the Board takes a long-term view on its operations, particularly in Agriculture. It is also concerned to improve the quality of the Group's assets over the long-term and monitors that by reference to return on net assets achieved in the main segments of the business which are then compared against budget. The returns achieved in the current and prior year were as follows:

Group borrowings ratio

The Board's objective is to ensure that gross borrowings as a percentage of tangible net assets do not exceed 50 per cent. The ratio at 31 December 2015 was 3.3% (2014: 0.9%).

Gross borrowings and tangible net assets (share capital and reserves less goodwill and intangible assets) are derived from the consolidated accounts.

Key non-financial performance indicators

The following information has been compiled based on data provided by the Group's subsidiary undertakings. The Board considers that this information demonstrates the level of compliance with important elements of the Group's principles. The Board will regularly review which key non-financial performance indicators are most appropriate.

Employees

The Group keeps employees informed, through internal publications and other communications, on the performance of the Group and on matters affecting them as employees and arrangements to that end are made by the management of individual subsidiary undertakings.

It is also Group policy that proper consideration is given to applications for employment 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 2015:

By order of the Board

Julia Morton

Secretary

27 April 2016

Report of the directors

The directors present their report together with the audited accounts for the year ended 31 December 2015.

Principal activities

The company is a public limited company, 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 and associated undertakings comprise:-

Agriculture

Banking and Financial Services

Engineering

Food Service

Investments

Further details of the Group's activities are included in the Chairman's statement and the Chief Executive's report on pages 5 to 12.

Results and dividends

The profit after taxation for the year amounted to £21.9 million (2014: £8.3 million). The Board has proposed a final dividend for the year of 95p per share payable on 1 July 2016 to holders of the ordinary shares registered at the close of business on 10 June 2016. The total dividend for 2016 is therefore 129p per share (126p per share). Details are shown in note 12.

Directors and Secretary

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 and William Gibson will retire and, being eligible will seek re-election at the AGM on 2 June 2016.

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 chairman and a non-executive director of Duncan Lawrie Limited and Duncan Lawrie Asset Management Limited.

Graham Mclean, a qualified agriculturalist, was appointed as Managing 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 22 years. He is a non-executive director of Kakuzi Limited.

Susan Walker was appointed Chief Financial Officer for the Group on 4 June 2015 having joined Camellia in 2014 as Finance Director Designate and was appointed as an executive director on 2 April 2015. She is a chartered certified accountant and a non-executive director of Goodricke Group Limited, United Finance Limited and Duncan Lawrie Limited.

Non-Executive directors

Chris Relleen was formerly a partner in PricewaterhouseCoopers. He was appointed as independent non-executive director and deputy chairman in January 2006 having previously been a non-executive director of Linton Park Plc. He is a non-executive director and chairman of the Audit Committee of Duncan Lawrie Limited. 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 and a member of the Audit and Nomination committees.

Frédéric Vuilleumier was appointed as an independent non-executive director in March 2013. He is partner of Oberson Abels SA, a law office based in Geneva, Switzerland. He is a member of the Audit Committee.

Secretary

Julia Morton has been company secretary since September 2011.

Substantial shareholdings

As at 27 April 2016 the company has been advised of the following interests in the share capital of the company:

Share capital and purchase of own shares

The company's share capital comprises one class of ordinary shares of 10 pence each 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 34 to the accounts.

At the annual general meeting in 2015, 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 annual general meeting. A resolution proposing renewal of the authority will be submitted to shareholders at the next annual general meeting.

Disclosure of information to auditors

PricewaterhouseCoopers LLP has expressed its willingness to continue as auditors of the company and a resolution proposing PricewaterhouseCoopers LLP re-appointment will be put to the annual general meeting.

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

Future development

Details of future development are set out in the Chief Executive's report.

Going concern

After reviewing the Group's budget for 2016 and other forecasts, the directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. Therefore they continue to adopt the going concern basis in preparing the accounts.

Corporate governance

The company's statement on corporate governance can be found in the corporate governance report on pages 25 to 28.

By order of the Board

Julia Morton

Secretary

27 April 2016

Corporate governance

Statement of compliance

This statement describes how the company applies the main principles of UK Corporate Governance Code 2014 ("the Code"). In implementing the Code, the directors have taken account of the company's size and structure and the fact that there is a controlling shareholder. At the time of the company's delisting from the Main Market of the London Stock Exchange and admission to trading on AIM in September 2014, it was stated that the Board did not envisage that there would be any significant alteration to the standards of reporting and governance which the company maintained at that time. AIM companies are not required to comply with the requirements of the Code. However, the Board has chosen to follow the Code for the year to 31 December 2015.

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, three of whom are independent non-executive directors. The remaining directors are executive directors, including the executive 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 22 and 23.

There is on-going dialogue between the Chairman and the majority shareholder whose views are reported to the Board. The company is also in contact with other significant shareholders.

The Board has established a remuneration committee, audit committee and nomination committee. Terms of reference of each of the committees can be viewed on the company's website.

The Board undertook a performance evaluation during the year by way of an internal review.

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 annually 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 including detailed information on each of its businesses is sent to directors each month. Each director is provided with sufficient information in advance of Board meetings to enable the directors to make informed judgments on matters referred to the Board. The Board met eleven times in 2015.

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

Executive committees

The Board has established the Strategy Group, consisting of the Chairman and the executive directors of the Board, and two Executive Committees. The Agriculture Executive Committee is chaired by the Managing Director of Agriculture and includes the Chief Executive, Chief Financial Officer 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 divisional heads of Engineering North, Engineering South and Food Service, the Company Secretary and the Group Head of HR.

Banking and Financial Services (being primarily Duncan Lawrie) and Investments report direct to the Chief Executive.

Nomination committee

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

The principal responsibilities of the nomination committee are set out below:

The committee did not meet during the year.

Audit committee

The audit committee is chaired by Chris Relleen. The other members of the committee are Frédéric Vuilleumier and William Gibson. During 2015, the committee met on three occasions.

Principal responsibilities

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

Significant issues in relation to financial statements

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 significant matters in relation to the financial statements:

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

Pensions - A key area of judgment is in relation to the value of the pension scheme obligation. Whilst this is conducted by independent expert actuaries, the size of the obligation means that a relatively minor difference in the assumptions could result in a material change in the obligation. The committee considered the competence of the actuaries and the assumptions adopted and concluded that the work performed is sufficient to support the value.

Goodwill and intangibles - The value of goodwill and intangibles is inherently complex and relies on judgment and estimation. The committee consider the performance of the underlying assets and their ability to continue to support the carrying value. As a result, the committee is satisfied that the carrying value is supported.

External auditors

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 auditor objectivity, PricewaterhouseCoopers operates a five year rotation policy for audit partners for a listed entity.

The company's external audit was last tendered in 2009, which resulted in a change to PricewaterhouseCoopers at that point. The audit committee is currently undertaking a review of the Group's external audit requirements following a change in the rules on audit rotation in India. The outcome of the review will be announced in due course.

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 remuneration 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 30 to 32.

Insurance

The company purchases insurance to cover its directors in respect of legal actions against them in their capacity as directors of the company. The level of cover is currently £20 million. All directors have access to independent professional advice at the company's expense.

Share capital structure

The share capital of the Group is set out in note 34.

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.

Decentralisation is a key management philosophy with responsibility for efficient day to day operations delegated to local management. Accountability and delegation of authority are clearly defined with regular communication between Group head office and local management. The performance of each company is continually monitored centrally including a critical review of annual budgets, forecasts and monthly sales, profits and cash reports. Financial results and key business statistics and variances from approved plans are carefully monitored. Senior management regularly visit and review the Group's operating units. However, any system of internal control can provide only reasonable, and not absolute, assurance against material mis-statement or loss.

By order of the Board

Julia Morton

Secretary

27 April 2016

Statement of directors' responsibilities

The directors are responsible for preparing the annual report, the directors' remuneration report and the financial statements in accordance with applicable law and regulations.

Company law requires the directors to prepare Group and parent company financial statements for each financial year. Under that law the directors have prepared the Group and parent company financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union.

Under company law the directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of both the Group and the parent company and of the profit or loss of the Group and company for that period.

In preparing these financial statements, the directors are required to:

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 the Group and enable them to ensure that the financial statements and the directors' remuneration report comply with the Companies Act 2006 and, as regards the Group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the company and the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

In addition, each of the directors considers that the annual report, 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.

The directors are responsible for the maintenance and integrity of the corporate and financial information included on the company's website.

On behalf of the Board

Malcolm Perkins

Chairman

27 April 2016

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 ("the committee") are set out on page 28.

Policy on directors' remuneration

In determining remuneration policy and the remuneration of directors, full consideration has been given to the relevant provisions of the UK Corporate Governance Code 2014. The committee seeks to provide remuneration packages that will attract, retain and motivate the best possible person for each position. The committee also wishes to align the interests of executives with shareholders. The Group's activities are based largely on agriculture, which is highly dependent on factors outside management control (e.g. weather and market prices for our produce), and this is a significant consideration as to why the company does not operate profit related bonus, share option or share incentive schemes for directors.

The remuneration policy for executives reflects the overriding remuneration philosophy and principles of the wider Group. When determining the remuneration policy and arrangements for directors, the committee considers pay and employment conditions elsewhere in the Group to ensure that pay structures are appropriately aligned and that levels of remuneration remain appropriate in this context. The remuneration policy, approved by shareholders at the AGM held on 5 June 2014, took effect from the date of that AGM and will be applied for a period of three years until the AGM in 2017. This policy takes into account any views of the shareholders expressed to the committee on directors' remuneration.

At the AGM on 4 June 2015, the remuneration report for the year to 31 December 2014 was approved by shareholders with 99.97% of the votes cast in favour, 0.02% of the votes cast against and 0.01% of the 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. There are no specific contractual provisions for compensation upon early termination of a non-executive director's employment. The remuneration committee reviews salaries annually and will seek independent professional advice when appropriate.

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

Directors' remuneration

Notes

Directors' pensions

UK employees, including executive directors, are eligible to join pension schemes operated within the Group. Malcolm Perkins was a member of The Linton Park Group Pension Scheme up until 28 February 2010. Peter Field and Anil Mathur were members of the Linton Park Pension Scheme 2011 until 5 April 2012.

There was no pensionable service for Malcolm Perkins, Peter Field and Anil Mathur during 2015.

Tom Franks receives an excess non-pensionable salary supplement equivalent to 10% of base salary. Chris Ames received an excess non-pensionable salary supplement equivalent to 25% of base salary. Graham Mclean and Susan Walker are members of the Linton Park Group Personal Pension Scheme which is a defined contribution based scheme.

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.

By order of the Board

Julia Morton

Secretary

27 April 2016

Consolidated income statement

for the year ended 31 December 2015

Statement of comprehensive income

for the year ended 31 December 2015

Consolidated balance sheet

at 31 December 2015