Camellia Regulatory News (CAM)

CAMELLIA PLC

FINAL RESULTS

Camellia Plc (AIM:CAM) Final results for the year ended 31 December 2019.

Malcolm Perkins, Chairman, stated:

"The Group is set up in a way that reflects our long-term approach, with financial stability and sustainability being at the heart of our philosophy. The current situation with regard to COVID-19 is unprecedented not only in its severity but because we cannot tell at this stage for how long it will last nor what the implications will be. However for now our agricultural operations, with the exception of India, are producing as expected and our non-agricultural businesses continue to trade, albeit some at a significantly reduced rate. The overall impact on prices for our crops will not be known until later in the year.

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

Against this background I should like to thank all our staff across the world for their invaluable contributions both to the business and their local communities."

* Underlying profit before tax is profit before tax from continuing operations excluding separately disclosed significant items

Financial highlights

Strategic highlights

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

The Annual Report will be available on the investor relations section of the Company's website www.camellia.plc.uk

ENQUIRIES

Camellia at a glance

Camellia Plc is an international Group - a global family of diverse companies with a 132-year history employing approximately 78,000 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. Profits are our lifeblood but not our soul.

Our business is built on two fundamental principles:

The profit after tax from continuing operations in the year to 31 December 2019 was £15.1 million (2018: profit £32.5 million) and the Segment trading profit and loss information set out below is extracted from note 1 on page 62 of the Accounts.

Our business is made up as follows:

AGRICULTURE

2019: Revenue - £238.7 million, Segment trading profit - £25.2 million

ENGINEERING

2019: Revenue - £22.1 million, Segment trading profit - £Nil

FOOD SERVICE

2019: Revenue - £29.8 million, Segment trading profit - £0.8 million

Directors and advisers

Chairman's statement

The results for 2019 reflect a profit before tax from continuing operations of £22.3 million and include significant provision releases and one off items amounting to £6.2 million (2018: profit before tax from continuing operations £52.5 million, including provision releases of £14.4 million).

In previous years we have talked extensively about the need to diversify our portfolio of businesses, particularly in Agriculture, and to ensure that we are as efficient in our production methods as we can be. The need for this diversification has never been more evident than in 2019, which saw the year open with an over-supply of tea in the market causing prices to fall and from which they never recovered.

Our own tea production fell slightly short of last year's record but at 101.4mkg was our second highest year, reflecting the investment that we have made in replanting and irrigation and the purchase of two additional estates in Assam. Our other core crops also performed well, and with good prices in the market, both macadamia and avocado made a significant contribution to Group profit.

More generally, we saw an increasing number of extreme weather events across our operations, with hurricanes, droughts, floods and excessive temperatures seemingly more frequent and more widespread than they have ever been. In 2019 we published our first ever comprehensive ESG report to demonstrate what we are doing to reduce our own environmental footprint, and to mitigate the impacts of climate change. Whilst we are pleased with our progress in many areas, we are also conscious that we need to do more and therefore we have also introduced an internal fund, to use some of our centrally held resources to enable a step change in our sustainability programmes around the world.

Dividend

The Group is set up in a way that reflects our long-term approach, with financial stability and sustainability being at the heart of our philosophy. The current situation with regard to COVID-19 is unprecedented not only in its severity but because we cannot tell at this stage for how long it will last nor what the implications will be. Your Board has therefore decided not to recommend any additional dividends until we get clarity on the situation. Once we have this clarity and if circumstances so justify, we will declare a special dividend alongside the interim dividend.

Outlook

Never in my years as Chairman has it been so hard to predict the outcome of the coming year. Whilst only a small proportion of our operations are direct to the consumer, the ramifications of the COVID-19 outbreak and the economic fallout arising from it are affecting all our businesses to some extent, and the ultimate impact will not be clear for some months yet. This matter is discussed in more detail in the Chief Executive's report. It is of course a situation that changes day by day.

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

Directors

I am delighted to welcome two new Non-Executive Directors onto the Board. Simon Turner, who is president of The Camellia Foundation, our majority shareholder, and Jonathon Bond who holds a number of directorships and has a particular focus on raising standards of governance and performance.

Staff

As always, my thanks go out to all our staff for their efforts in 2019 but in addition I should like to thank them for their continuing support during this very difficult period.

Malcolm Perkins

Chairman

7 May 2020

Chief Executive's Report

COVID-19 AND TRADING UPDATE

People

First, I would like to reiterate our gratitude to all of our staff around the world for their continuing support both within the business but also within the communities in which they operate.

Trading

Agriculture

All our agricultural operations continue to work as close to normal as is possible with the exception of India. Following the shut down in India announced on 24 March there has been a gradual easing of restrictions and currently all tea estates are open but utilising only 25% of their workforce in West Bengal and 50% of the workforce in Assam in order to maintain social distancing. As a consequence, we expect to lose the majority of our lucrative first flush and, if the current restrictions continue, a significant proportion of our second flush crops in India.

Elsewhere the restrictions that we are seeing globally continue to increase with all our countries of operation experiencing some form of lock down. It remains unclear the extent of the impact these restrictions will have on our production levels, our distribution channels, demand for our produce and access to market for our perishable crops such as avocado and citrus. A number of tea auctions have been cancelled in recent weeks although some have since resumed or are scheduled to resume in May. Overall tea prices during the first quarter was exceptionally poor as a result of the very high production levels of 2019, but as a consequence of the current crisis we have seen some signs of increased demand and prices for our teas.

As a result of very dry hot weather in Malawi and South Africa during the fourth quarter of 2019 we are also anticipating a decline in our macadamia production for 2020 and reduced global demand is also likely to adversely impact prices.

Engineering

Our engineering businesses are operating at close to normal. Both AJT Engineering (due to its role in the energy sector) and Abbey Metal Finishing (due to its role for aerospace and military) are deemed to be essential businesses. We are concerned however that issues in the wider economy could mean that demand in the oil, energy and aerospace sectors will be very weak in the second half of the year.

Food Service

ACS&T continues to operate but the reduced demand for its transport services which we mentioned on 1 April, means that profitability in H1 2020 is expected to be significantly lower than that for the same period in 2019. Jing Tea continues to trade at a substantially reduced level. Both businesses' trading results for the remainder of the year are dependent on the timing of any resumption of operations in the hospitality and food service sectors.

Financial Position

The Group has a strong balance sheet with substantial cash liquidity which amounted to £77.1 million in cash and cash equivalents net of borrowings as at 31 March 2020. In addition, our investment portfolio had a market value of £43.8 million at 31 March 2020. We continue to conserve cash wherever possible against a fast changing and unpredictable backdrop.

Community Action

As a Group we are uniquely placed to be able to assist in this crisis. We currently manage over 100 hospitals and clinics in some of the world's poorest countries where there is little access to public healthcare. Wherever appropriate our operations are working with the local authorities to ensure that these facilities are used for the benefit of the whole community. In addition, we are taking a wide range of steps across different businesses to help wherever possible. These steps include work on face masks by our engineering businesses in the UK; bulk purchasing of food in Kenya to ensure that our staff and their families are not forced to pay extortionate prices; purchasing hospital supplies in Malawi; payment of wages and distribution of food to our staff in India, whether in lock down or working and the provision of hygiene and social distancing education.

OVERVIEW

After an exceptional 2018, 2019 was a more challenging year for the Group, if not perhaps as challenging as 2020 is turning out to be.

Our long-term strategy of diversifying our agricultural products continues to impact positively on our results and we have made good progress in furthering this strategy during the year. On the investment side:

Overall in 2019, our macadamia volumes continued to grow as the trees matured and prices held up well despite the increased volumes. Our investment in macadamia processing facilities has improved margins and widened our customer base and we are optimistic that whilst macadamia remains a relatively niche product amongst edible nuts, the market continues to grow.

Our avocado harvest was, as anticipated, significantly down after last year's bumper crop but this was more than compensated for by the excellent prices received from the European market. We continue to examine ways to even out the natural tendency of the avocado tree to produce significantly larger crops in alternate years.

The results for our speciality crops were more mixed, edible nuts performed well but we were hit by a number of weather-related issues in our arable operations in Brazil.

However, whilst our diversification strategy has made good progress, we remain the world's largest private grower of black tea which is therefore core to our performance. 2018 saw a record global production of tea at 5.9 million tonnes and we believe this was exceeded in 2019. This growth was driven partially by favorable weather conditions in Asia but more significantly by the relentless growth of the smallholder market. As a result, we witnessed record volumes of tea at the auctions, with consequent weaknesses in the market prices for black tea, from the start of 2019 and which continued throughout the year.

The drivers of this growth in production vary by geography, but good prices in former years, the ability of smallholders to produce tea with fewer of the social and certification costs, and a decrease in regulation have all played their part. There are a number of reasons why this situation will eventually reverse; global consumption will continue to increase, politicians are becoming increasingly concerned over the damage to the industry and to rural livelihoods, and producers themselves will abandon growing tea if there is no money to be made. However, such fundamental changes in the market will take time.

As a result of the above, 2019 turned out to be a difficult year for the Group's tea operations. Whilst our own production volumes were excellent at 101.4mkg, reflecting our investment over the past few years, prices were poor. Although our Indian tea prices were relatively steady, others including Kenya (13% down), Bangladesh (25% down) and Malawi (14% down) suffered steep falls. The start of 2020 saw average prices continue to fall in all markets, although there are signs this is reversing on account of the current crisis.

Despite steep increases in labour costs across all of our tea operations, the significant strides made to improve both efficiency and productivity through technology and structural reform, have enabled us to mitigate these increases to a significant extent.

Outside Agriculture, the performance was mixed. Our UK engineering and food service operations were all constrained by Brexit and other market related issues and our largest associate, BF&M, whilst having strong underlying growth was hit by two hurricanes in the year which held back profits.

Acquisitions and Investments

As reported in last year's Annual Report, at the beginning of 2019 we completed the acquisition of two tea estates in Assam. As stated above we have also completed the purchase of an additional farm close to our estates in the Levubu district of South Africa which will, in due course, help to compensate for the loss of Wales estate, the lease for which expires in 2020.

Financial Performance

The underlying profit before tax from continuing operations (i.e. before taking account of the provision releases and one off items described below) amounts to £16.1 million, down 58% on the comparable result for 2018.

We also recorded the following significant items:

BUSINESS STRATEGY

The overall Group strategy, which is set out on page 21, remains unchanged with each division 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.

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.

PERFORMANCE

Agriculture

In total, the Agriculture division made a segment trading profit of £25.2 million (2018: £51.0 million) on revenue of £238.7 million (2018: £245.3 million), as set out in note 1 to the Accounts.

Tea Production

2019 saw the Group produce high volumes of tea through our own and managed factories just falling short of 2018's record volumes. Total made tea produced was 101.4mkg (2018: 103.1mkg).

Tea pricing and operations

India

Overall, India produced a record volume of tea in 2019 for the second consecutive year. This was principally as a result of improved volumes from our own estates, and the impact of the two estates that we bought in Assam at the start of the year. In total our own estate production was up 14% and bought leaf volumes were relatively stable at 8.2mkg.

Across all our Indian operations the average selling price for the year was 2% down on 2018 primarily due to a drop in the market value for 'old season' teas in the first quarter of 2019.

This and the very significant wage increases that took place during 2018 which totaled 33% in West Bengal and 22% in Assam has led to a significant pressure on margins which could only be partially mitigated by productivity and efficiency improvements.

Having recovered well in 2018 from the general strike in 2017, it is disappointing that for 2019 season teas prices in Darjeeling have slipped back significantly. Darjeeling produces very high quality teas but due to the altitude and topography, volumes are small and production costs are high. We continue to invest in marketing and tourism in the region for this unique product.

Packet tea sales volumes in India grew by 8.5% to 11.3 mkg in a highly competitive market due to continued marketing efforts.

We also opened three new tea lounges in Mumbai, Kolkata and at Mirik Lake in Darjeeling, taking the total to seven. These café/restaurants help to showcase our finest teas to a wider audience and promote tourism in Darjeeling.

The replanting programme continued with 239Ha completed and a further 205Ha uprooted for replanting at a later date.

Politically, the election saw the BJP gain significant ground in both Assam and West Bengal. The National Citizenship Register is causing tension in the border areas which has the potential to impact operations in both India and Bangladesh.

Bangladesh

Our Bangladesh tea crop was up on 2018 by 11% at 14.2mkg, as a result of good weather and the significant progress that we have made on replanting and infilling.

Unfortunately, the increased production resulting from the good weather, together with teas being available from India caused our average prices to drop.

The replanting and extension programme continued with 161Ha of new tea being established in the year and an additional three million bushes planted to infill existing fields.

Kenya

Tea production (including smallholders and managed clients) was down on 2018 by 15% and was our lowest production year since 2012. This was as result of a very dry start to the year from which volumes never recovered. However, frustratingly, these countrywide lower volumes failed to result in the expected increase in prices due to the large carry forward stocks of 2018 teas sent to the auction. As a result, average auction prices fell by 13% during the year.

The collective bargaining agreements covering the period 2014-2019 have now been agreed which has allowed us to make all outstanding payments to our employees and to release certain provisions which we were carrying. These agreements not only set pay levels but also productivity which will enable us to improve efficiency in the future.

The over-production in Kenya is having a severe effect on the livelihood's of smallholder farmers. This has resulted in the Kenyan government announcing a range of proposed measures to regulate and control the tea market. These measures which are currently out for consultation include the banning of private sales of tea, regulating agency agreements, provisions for the payment of smallholder farmers and ensuring that more value-added activities take place within Kenya. The final form of these proposals and when they might be enacted remains unclear.

We replanted a total of 51Ha in 2019 (2018: 41Ha) and uprooted a further 49Ha for replanting in 2020.

Malawi

Although not at 2018 record levels, Eastern Produce Malawi produced its second highest crop (including smallholders) in the year of 20mkg, down 10% on 2018. However, the Malawi market is linked to the Mombasa tea-auction and the weakness there left our average price for the year down 14%.

Eastern Produce Malawi continues to produce a little over 40% of Malawi's total tea and is therefore a key stakeholder in the MOU 2020 process (a coalition of producers, buyers and NGOs seeking to revitalise the industry and working towards a sustainable wage rate for employees). As I stated last year, the wage negotiations and a collective bargaining agreement were successfully concluded during 2018, awarding 22% wage increases but that such increases were only sustainable with the support of international buyers. The combination of increased costs and reduced prices has resulted in a tea sector in Malawi which is in danger of becoming unsustainable.

Developments included replanting a total of 77Ha in 2019 (2018: 106Ha) and installing additional irrigation at Ruo estate.

Macadamia Production

In line with the overall plan to increase our macadamia production, volumes produced in 2019 increased to 1.3mkg (2018: 1.1mkg).

Macadamia Pricing

Macadamia prices remained firm during the year and averaged 4% ahead of 2018 which was encouraging given the increase in global supply.

Macadamia Operations

Malawi

Volumes were 6% up on 2018 as a result of benign weather.

South Africa

Volumes were 7% up on 2018 despite the Wales estate being hit by a major hailstorm during flowering which impacted the nut set and reduced volumes by 50% from that estate. Developments included:

As regards the Wales estate, which amounts to 191Ha of mature macadamia, we have made no significant progress towards renewing the lease for the property, although we will now be able to harvest the 2020 crop before vacating the estate.

Kenya

Production volumes were 36% up on 2018 as the orchards continue to mature. Developments included the installation of optical sorting technology at the processing plant.

Avocado Pricing and Operations

Following the bumper crops in 2018, production of Hass from our own orchards was down 35% in 2019 due to the trees going in to an "off" year. This "off" year cycle was experienced in many other producing countries such as Peru, South Africa and Chile. As a result, global supply volumes were down whilst demand continued to increase leading to an undersupplied market and very firm pricing with our estate Hass average prices 152% higher than in 2018.

Smallholder Hass volumes in 2019 were down by 86%, but our outgrowers up by 2%. This was partially due to generally lower production volumes but also due to smallholders supplying other exporters.

A total of 79Ha of new Hass orchards were planted during the year including 9Ha of the Carmen variety of Hass.

Pinkerton volumes were up on the previous year by 77% and prices rose by 24%.

We continue to monitor the 23Ha trial of avocados near Kitale in Kenya which we initiated in 2017.

* 2019 was an 'off' year for Pistachios

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

Speciality Crops, Pricing and Operations

Arable

Our arable operation in Brazil had a difficult year due to a combination of weather and pest and disease related issues. Soya harvest volumes were slightly down (1%) on last year, however prices were up 8%. Both the maize and oat crops suffered from pest and disease attacks and the wheat from unexpected frosts in July. Despite these adversities, the farm continues to generate good profits.

Rubber

Rubber is grown on areas of the Bangladesh tea estates unsuited for growing tea. Volumes produced in 2019 were in line with 2018 and although average prices increased by 4% they remain below cost.

Citrus

Citrus volumes were 77% up on last year but prices were 40% lower due to market over supply.

Pistachios

2019 was an off year for our pistachios so a very small volume was produced.

Wine

The harvest this year was much improved on 2018's drought affected crop with volumes up 24% but sales continue to disappoint. During the year 11Ha of vines were replanted bringing the total planted area to 84Ha.

Almonds

Almond volumes were 18% ahead of 2018 as the orchards continue to mature; prices remained firm in line with previous years.

Forestry

Production of Eucalyptus in Brazil doubled in the year due to increased demand from the paper industry. Kakuzi also saw a 30% increase in production of forestry products for the market in Kenya.

Livestock

Births were down this year due to the drought conditions experienced during the first quarter of the year which affected the availability and quality of grazing.

Blueberries

As previously reported, a 10Ha trial of blueberries was established at Kakuzi early in 2019. The first crop was harvested in September 2019 totalling 4 tonnes most of which was sold in the local market. The fruit showed excellent flavour and sizing which is most encouraging at this point. The first main crop is expected in the autumn of 2020. If successful, there are substantial additional areas of Kakuzi which could be developed.

Engineering

In total, the Engineering division reached break even (2018: trading loss £0.6 million) on revenue of £22.1 million (2018: £22.2 million), as set out in note 1 to the Accounts. The division continued to be cash generative.

AJT Engineering had a much better year with sales rising by 15% to £16.0 million as the strategy to increase utilisation and diversify into other parts of the energy sector continue to pay off. However increased overheads meant that the business made a small operating loss in the year.

Abbey Metal Finishing and its subsidiary Atfin both had a difficult year as issues in the aerospace supply chain and concerns from European customers over Brexit-impacted sales volumes. Combined revenues were down 9% with a consequent impact on profitability.

Food Service

In total the Food Service division made a segment trading profit of £0.8 million (2018: £1.6 million) on revenue of £29.8 million (2018: £41.5 million), as set out in note 1 to the Accounts.

ACS&T saw reduced profitability from lower revenue as production issues at its major customer saw storage volumes fall significantly over the summer.

Jing Tea saw revenues rise by 27%. Shortly before the year end Jing opened its first retail store in St Christopher's Place, London which began trading well but is currently closed.

Investments

Investment Portfolio. The gains on sale for the year were £1.1 million (2018: £0.4 million). Of this gain £0.2 million was reflected in the Income Statement and £0.9 million in the Statement of Comprehensive Income. The total value of the portfolio at 31 December 2019 was £47.0 million (2018: £39.6 million). The increase reflects the strength of global equity markets, particularly in the second half of 2019, in part offset by a number of disposals during the year.

Clearly the market value of the portfolio has fallen significantly in the last few weeks though not as severely as global markets due to the strength of the yen and we estimate the value at 31 March 2020 to be £43.8 million.

Investment Property. Work continues on the development of the Linton Park Estate with an additional two properties expected to be completed and available for rental in 2020. In addition, a property in central London was refurbished and has now been let.

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 £4.6 million (2018: £7.6 million).

Although BF&M was adversely impacted by two major hurricanes in 2019, Dorian which hit the Bahamas and Humberto which hit Bermuda, gross premiums written increased by 12% driven by growth in property premiums in the Caribbean and higher annuity premiums. BF&M's profit for the year was Bermudian Dollar 13.1 million (2018: Bermudian Dollar 18.5 million).

Our two associate companies in Bangladesh, United Insurance and United Finance, produced satisfactory results broadly in line with expectations.

POLITICAL, LEGISLATIVE AND LEGAL ISSUES

The Group is present in many jurisdictions and is subject to local legislation. 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 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.

Group claims against African operations

As we stated in our trading update of January 2020, Camellia and a number of its subsidiary companies have received notification of claims to be made in the UK relating to allegations made by multiple individuals concerning two of those companies' African operations. The allegations are of serious assault, harassment and sexual misconduct allegedly committed by certain individuals employed by those two foreign operating companies. The Company and its wider group takes any complaint of criminality, misconduct, illegality, or unethical behaviour extremely seriously. At this stage the financial impact of these claims is impossible to quantify, but the related legal and other costs will be significant. Costs incurred since notification of these claims in 2019 to the end of March 2020 amount to £3.5 million.

Brexit

Brexit and the potential impact across the Group is something for which we have been preparing over the last three years. Whilst there is now clarity as to the dates, the significant uncertainty as to the precise structure of any post-Brexit trading arrangements continues to pose challenges for these preparations.

As we have said previously, whilst we expect there to be some impact on our UK operations, we are confident that the majority of our operations will be largely unaffected.

The direct impact of a no-deal Brexit on our Group primarily arises from potential import and export tariffs, changes to the way trade flows between the UK and rest of the world and, from a financial perspective, the volatility of exchange rates and the potential risk we could incur additional tax costs.

CAPITAL INVESTMENT AND DEVELOPMENT

We continued to invest in our assets during the year and £14.5 million was spent on property, plant, equipment and investment property (2018: £17.4 million). Key projects are referred to in the operational reports above. A further £4.6 million (2018: £4.3 million) was invested in bearer crop and forestry plantings.

ENVIRONMENTAL, SOCIAL AND GOVERNANCE

Sustainability, whether it is environmental or social is fundamental to the ethos of Camellia. Many of our operations have histories going back over 100 years and we continue to invest in them for the long-term. Ensuring, therefore, that the environments and communities on which we depend are maintained and enhanced is key to our future.

In 2019, for the first time we also published a separate Environmental, Social and Governance report. This ESG report allowed us to add more detail as to the breadth and scale of activities that we undertake in this area and highlight our commitment to it. We intend to publish an updated version during the course of 2020. Further guidance on our approach to Governance, Sustainability and CSR is also set out in the Strategic Report on pages 21 to 27 of this document.

As part of our long-term commitment to the environment we are running a large number of programmes across our operations to mitigate our environmental impact and to reduce our carbon footprint. Clearly the ability of our operations to continue to invest in these initiatives depends on their results which can lead to a stop/start approach to this investment. Furthermore, a number of the potential solutions are untested in the country or on the crop concerned. We have therefore introduced a Chairman's Fund, the aim of which is to utilise some of our centrally held resources to maintain these critical initiatives and to make a step change in the speed and effectiveness of the programmes. More detail will be available in our 2020 ESG report to be published later this year.

Performance

As part of our environmental impact assessment we measure total energy consumption, carbon emissions, and water usage as set out below.

These numbers set out actual usage, prior years have not been adjusted to reflect acquisitions, disposals nor other corporate activity.

Overall our energy usage dropped during the year but our total carbon emissions were up by 5.6%. This largely reflects the acquisitions of tea estates in India in 2019 which rely on coal as a fuel source. One of the largest uses of energy in the Group is the requirement to process and dry our tea crop and I am pleased to report that the continuing investment we have been making to increase energy efficiency in our tea factories has resulted in a drop in our carbon emissions from 1.48kg to 1.39kg of CO2 per kg of made tea, a reduction of 6%.

SUMMARY

Although 2019 was a less good year financially for the Group compared with the exceptional results in 2018, we continued to make good progress with our core strategy. Our tea operations continued to produce excellent volumes and quality of tea and we made significant improvements in efficiency and productivity. Our two other core crops, macadamia and avocado, once again demonstrated the importance of this diversification, and whilst not yet large enough, are already showing their ability to mitigate the cyclicality of the tea market. The investments that we are making in these areas will improve this situation in the future.

Like all commodities, tea has cycles; cycles which can be long or short depending on a range of factors. However, tea remains the world's most widely consumed drink after water, global consumption continues to increase and inevitably prices will improve albeit it remains unclear as to when.

We continue to invest in sustainability; our first ESG report in 2019 showed off some of the strength and depth of our commitment in this area and was very positively received by our many stakeholders. Our new Chairman's Fund will ensure that we maintain our impetus in this area.

We are fortunate that our balance sheet remains strong with £89.4 million of net cash in the Group and money market deposits amounting to £6.2 million. However some of this cash is committed for long-term projects and much of it overseas. At this stage there are a number of short-term calls on this cash and therefore until we get some certainty as to the future, we believe that it is prudent to conserve cash wherever we can. We have already put a number of capital projects on hold and have decided not to pay a final dividend for 2019. If circumstances justify, we will declare a special dividend alongside the interim dividend.

2020 is likely to be one of the most challenging years that the Group has yet faced and is already testing our operations across the world. I am delighted by the response of our staff and proud of the efforts that they have made not just in their own business, but in the wider communities where they operate. This has been particularly true in the agricultural operations where the Group's hospitals have been made available to assist local services.

Tom Franks

Chief Executive

7 May 2020

Chief Financial Officer's report

Overview of Results

The profit after tax for the year ended 31 December 2019 was £15.1 million (2018: £32.3 million).

Profit before tax from our continuing operations in 2019 was £22.3 million which includes £6.2 million relating to a number of large separately disclosed items (2018: £52.5 million, including provision releases of £14.4 million). This reduction in profit before tax reflects, inter alia, lower average selling prices for tea, improved volumes and strong prices for our macadamia crop, lower volumes and higher prices for our avocado crop, lower profits at BF&M, and a number of significant items:

Excluding these items, the underlying profit before tax from continuing operations was £16.1 million (2018: £38.1 million).

Equity attributable to the owners of Camellia was £395.7 million (2018: £395.5 million) with net cash and cash equivalents of £89.4 million (2018: £109.6 million) and financial assets at fair value through profit or loss (ie money market funds) having increased to £6.2 million (2018: £3.7 million).

COVID-19 impact

As set out in the CEO's Report on page 6, our businesses are currently operating broadly as normal with the exception of our Indian estates. However, the impact of COVID-19 on the Group during the remainder of this year is difficult to predict with any certainty. Accordingly, we have taken actions to conserve our cash during this period of uncertainty by reducing our operating and capital expenditure across the Group and by deciding not to recommend any additional dividends until we have clarity on the situation.

We have undertaken a scenario planning exercise, further details of which are set out in the Report of the Directors on page 30, to assess a range of potential impacts on our profits and cashflows. This has included considering the impact of very substantial sales volume reductions across our major operations and pricing risks for our macadamia and avocado crops as well as the mitigating actions we could take in those circumstances. The impact of these on our revenue, were they to occur would have a substantially negative impact on Group profitability. Further, the scenario modelling indicates that in this event, the Group would, in the absence of material price increases, or significant levels of overseas government support, make a substantial loss during 2020.

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

Currencies

Over the course of the year, Sterling strengthened against all our key operating currencies. This has resulted in a loss on foreign exchange translation of £16.7 million (2018: gain £11.6 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 2019 would have been £0.8 million lower. Our profit before tax from continuing operations includes an exchange loss of £0.3 million on transactions during the year (2018: gain £0.2 million).

There has been significant currency volatility during 2020 to date, the impact of which will only become clear as the year progresses. We are fortunate that much of our revenue is denominated in hard currencies which provides some hedging against our emerging markets currency risk.

Cash

The Group's net cash position decreased to £89.4 million at 31 December 2019 (2018: £109.6 million) reflecting, inter alia, lower net cash inflows from continuing operating activities of £12.6 million (2018: inflow £24.5 million) as a result of the reduced trading results. We spent £9.4 million on acquiring businesses and in addition maintained a significant level of investment in our existing operations and in purchasing land (£19.0 million). We also increased our holding in BF&M at a cost of £1.3 million. The Group has loans outstanding amounting to £6.9 million (2018: £3.9 million).

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-19. In addition funds are held for:

These will reduce the net cash available to the Group in future years as they are spent, resolved, or (in the case of the disputed taxation assessments) if they are not settled in the way we expect.

In light of the impact of COVID-19 on equity markets and on interest rates, it is likely that deficit reduction contributions will be required to our UK defined benefit pension scheme following the completion of our triennial valuation later this year.

Our businesses are conserving cash pending further clarity on the full impact of the COVID-19 situation and we expect capital expenditure to be lower in 2020 than historically.

Taxation

The Group's effective tax rate of 32.3% (2018: 38.2%) is higher than we would want. The key reason for this is that it reflects the losses which are incurred in the UK for which no tax relief is available and the fact that we are not able to recognise the associated deferred tax asset on our balance sheet until it is sufficiently clear when those UK tax losses will be utilised.

Tax and Other Provisions

During the year, the wage negotiations in Kenya were resolved for the Collective Bargaining Agreement years of 2014 to 2019 and payment made to employees. The balance of the provisions which we were carrying have now been released, as have certain provisions for wage increases in India, amounting in aggregate to £9.8 million. As is normal at this time of the year, we have ongoing wage negotiations in Bangladesh and India. We consider we have made adequate provision for the likely outcome of these.

We quantify our provisions for tax in accordance with IFRIC 23 (Uncertainty over tax treatments) which we have implemented for the first time this year. The impact of this has not been material to our tax charge for the year. However, there are a number of significant movements in tax provisions due to changes in circumstances.

We have a number of significant uncertain tax situations, the majority of which have been disclosed previously:

In some of our jurisdictions, the tax authorities have levied assessments in respect of prior years. In a number of situations, the liability position under statute and case law is clear but unfortunately, in other situations the law is either unclear or underdeveloped and in these instances we make provisions where we consider it is more likely than not that a liability will arise and the quantum of provision is determined in accordance with IFRIC 23.

Pensions and Other Employment Benefits

The Group operates a number of defined benefit pension schemes, the largest of which is in the UK. The triennial valuation of the UK scheme is due to be carried out in 2020. The 2017 triennial valuation for the UK scheme, which was closed to future accrual during 2016, showed a funding surplus of £7.1 million. The recent UK interest rate reductions and the major movements in equity market valuations due to COVID-19 will have significantly impacted both the scheme's asset values and its obligations such that were the valuation to be performed today, the scheme would be in a deficit position.

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 £22.0 million (2018: £24.7 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 inflation and gilt yields in the relevant jurisdictions and to asset performance. This year a net actuarial gain of £3.5 million (2018: loss £0.7 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 £1.6 million (2018: net gain £5.9 million, including a £9.0 million gain re post-employment benefits curtailment gain) and £1.1 million (2018: £1.5 million) in respect of employee benefit interest.

In addition, £3.6 million has been charged to our Income Statement in 2019 in respect of possible workers profit participation obligations for prior years in Bangladesh which has been recognised as a consequence of regulatory changes during the year. As announced previously, legislation has been enacted in Bangladesh requiring certain companies to make workers profit participation payments. The applicability of this legislation to our tea operations in Bangladesh is not wholly clear, and the government fund to which payments are to be made has not yet been established. We consider sufficient provision to have been made for these costs.

Susan Walker

Chief Financial Officer

7 May 2020

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 2019 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 Chief Executive's report on pages 5 to 16. 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. Further details of the financial performance and position of the Group are set out in the Chief Financial Officer's report on pages 17 to 20. 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 16 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. 

S172 Statement

This section serves as the Company's section 172 statement and should be read in conjunction with the whole of 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.

The Board continues to enhance its methods of engagement with the workforce. For example, 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, and overseas operations are encouraged to undertake similar steps.

During the year, the Board reviewed our Group Principal Policies, which includes additional steps to prevent modern slavery across the operations. For more information, refer to pages 25 to 26.

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 41 of the Accounts. The following material risks relating to the Group's principal operations have been identified.

Agriculture

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.

It is also 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 2019.

By order of the Board

Amarpal Takk

Company Secretary

7 May 2020

Report of the directors

The Directors present their report together with the audited consolidated accounts for the year ended 31 December 2019.

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 undertakings comprise:

Agriculture

Engineering

Food Service

Investments

Further details of the Group's activities are included in the Chief Executive's report on pages 6 to 16.

Results and Dividends

The profit after tax for the year amounted to £15.1 million (2018: £32.3 million). The Board is not proposing a final dividend for the year 2019. Therefore, the total dividend payable for 2019 is 42p per share (2018: 142p per share). Details are shown in note 9 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 and Gautam Dalal will retire and, being eligible, will seek re-election at the AGM. Jonathon Bond and Simon Turner were each appointed as a Non-Executive Director effective from 6 March 2020 and will seek election to the Board at the AGM.

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

Executive Directors

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

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 Chairman and 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 independentnon-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 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 was appointed a member of the Audit committee in 2019.

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.

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.

Substantial Shareholdings

As at 7 May 2020 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 35 to the Accounts.

At the AGM in 2019, 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:

Employees

Details in relation to employees are set out on page 27.

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 Chief Executive's report.

Going Concern

As set out in the CEO's Report on page 6, our businesses are currently operating broadly as normal with the exception of our Indian estates.

The Directors, at the time of approving the financial statements and, after assessing the principal risks have considered the impact of a severe but plausible downside scenario for COVID-19, with the major variables being the depth and duration of COVID-19 and the extent of action taken by governments in the jurisdictions in which we operate. The Directors considered the impact of the current COVID-19 environment on the business for the next 15 months.

Whilst the situation evolves daily making scenario planning difficult, we have considered several variables which may impact on revenue, profits and cash flows. In light of the nature of our business and our current approvals/status in our various jurisdictions, we have assumed our operations to be important, essential businesses which will continue to operate wherever possible with appropriate safety protocol in place and on the basis that we will also be able to continue to sell our produce to customers.

Whilst the virus will have an impact on many aspects of the Group's operations, disruption to the production, distribution, demand for and hence sales of our core crops; tea, macadamia and avocado, will have the biggest impact on our cashflows. Within that, as tea is still our major revenue generator (67% of Revenue in 2019) and involves the employment of a large labour force, any disruption to tea production and/or sales activities will have a disproportionately adverse impact on our cashflows.

All our businesses have put in place contingency plans, aimed at making operational cost reductions and wherever possible delaying or cancelling non-critical expenditure.

At 31 December 2019, the Group had cash and cash equivalents of £89.4 million with borrowings of £6.9 million. In addition, the Group had undrawn short-term loan and overdraft facilities of £24.1 million and a portfolio of liquid investments with a fair market value of £47.0 million.

We have modelled various scenarios using assumptions including significantly reduced combined sales volumes of up to 30% for tea, up to 40% for avocado exports and up to 25% for macadamia during 2020. 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 2020 for our macadamia and avocado crops. The scenario modelling indicates that the Group would, in the absence of material price increases, or significant levels of government support, make a substantial loss during 2020. We would however anticipate a recovery in subsequent years as the impact of the virus recedes.

Historically in the tea sector, restrictions on, or reductions in the supply of tea either regionally or globally have led to higher selling prices. It is too soon, and the COVID-19 situation too novel, to determine the extent to which this may occur in 2020. Accordingly, for the purposes of our downside scenario planning we have not reflected increased selling prices.

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.

Corporate Governance

The Company's statement on corporate governance can be found in the Corporate Governance report on pages 32 to 35.

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.

Stewart Holl (India) Limited and Amgoorie India Limited, made an aggregate donation in April 2019 ofIndian Rupees INR 400k (equivalent to approximately £4,400) to Assam Pradesh Congress Committee.

By order of the Board

Amarpal Takk

Company Secretary

7 May 2020

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 28 and 29.

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

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

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

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

A report summarising the Group's financial and operational performance is provided to Directors each month. Each Director has sufficient information in advance of Board meetings to enable informed judgements to be made on matters referred to the Board. The Board met nine times in 2019.

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 and the executive Directors of the Board, and also 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 divisional heads of Engineering North, Engineering South and Food Service, the Managing Director of Jing Tea, the Group General Counsel 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 Frédéric Vuilleumier and William Gibson. Gautam Dalal replaced Frédéric Vuilleumier as a member of the committee from April 2019. During 2019, 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 impact of COVID-19 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 17 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 were discussed in light of the trading of those businesses. 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 £0.3m provision impairment of the goodwill relating to the Assam gardens, no impairment was required.

Carrying value of BF&M

The Group's carrying value of BF&M is higher than the share price for BF&M. 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 control premium associated with our holding concluded that no impairment is required.

Adoption of IFRIC 23, tax and other provisions

The basis of provisions for material uncertain tax situations were considered by the committee as were the provisions for wage increases in India and in Bangladesh. The committee is satisfied that the provisions represent best estimates of the likely liabilities.

The committee reviewed the implementation of IFRIC 23's guidance for quantifying uncertain tax provisions which was implemented from 1 January 2019.

Adoption of IFRS 16

The Group's leasing arrangements were reviewed in light of the new lease accounting rules in IFRS 16 which was adopted for the first time from 1 January 2019. The standard has affected primarily the accounting for the Group's operating leases and details of the impact on the 2019 financial statements are included on page 58 to the Accounts.

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 37 to 38.

Insurance

The Company purchases insurance to cover its Directors 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 35.

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.

By order of the Board

Amarpal Takk

Company Secretary

7 May 2020

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 Financial Reporting Standards (IFRSs) as adopted by the EU and Article 4 of the IAS Regulation and have also chosen to prepare the parent company financial statements under IFRSs as adopted by the EU. 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:

On behalf of the Board

Malcolm Perkins

Chairman

7 May 2020

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 35.

Policy on Directors' Remuneration

The policy agreed by the committee is as follows:

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

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

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

The remuneration policy was approved by shareholders at the 2017 AGM and applied for a period ofthree years until 2020. The committee considers any views of the shareholders expressed on Directors' remuneration.

At the AGM on 6 June 2019, the Remuneration Report for the year to 31 December 2018 was approved by shareholders with 99.99% of the votes cast in favour, 0.01% of the votes cast against and 508 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 following sections on Directors' remuneration and pensions have been audited.

Directors' Remuneration

Notes

Directors' Pensions

Malcolm Perkins received no payment for pensionable service during 2019. 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.

By order of the Board

Amarpal Takk

Company Secretary

7 May 2020

Consolidated income statement

for the year ended 31 December 2019

Statement of comprehensive income

for the year ended 31 December 2019