Camellia Regulatory News (CAM)

CAMELLIA PLC

FINAL RESULTS

Camellia Plc (AIM:CAM) Final results for the year ended 31 December 2018.

Malcolm Perkins, Chairman, stated:

"2018 was a very good year for the Group. We made significant financial and strategic progress as our agricultural crops benefited from generally good weather conditions and selling prices. We also continued to develop our business portfolio, with substantial investment continuing in agriculture whilst disposing of a number of peripheral businesses.

After the year end we acquired two tea estates in Assam which we believe now makes us the largest private tea producer in the world.

Looking at 2019, it is too early to predict outcomes as most of our trading takes place in the second half of the year. However, early tea auction prices have been weak, with those in Kenya below the cost of production and there is a risk that other tea markets could be impacted as their seasons begin. We continue to monitor and prepare for Brexit and whilst we expect there to be some impact on our UK businesses, we are confident that the majority of our operations will be largely unaffected."

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

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 131-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:

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

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

The profit after tax from continuing operations in the year to 31 December 2018 was £32.5 million (2017: profit £15.4 million) and the Segment trading profit and loss information set out below is extracted from note 1 on page 57 of the Accounts.

Our business is made up as follows:

AGRICULTURE

2018: Revenue - £245.3 million, Segment trading profit - £51.0 million

ENGINEERING

2018: Revenue - £22.2 million, Segment trading loss - £0.6 million1

FOOD SERVICE

2018: Revenue - £41.5 million, Segment trading profit - £1.6 million1

DIRECTORS AND ADVISERS

Chairman's statement

I am pleased to report the results for 2018, which reflects a profit before tax from continuing operations of £52.5 million and which includes two significant provision releases amounting to £14.4 million (2017: profit before tax from continuing operations £27.6 million).

Trading during 2018 was generally strong and reflected not only good weather and some firm markets but also the progressive investment that we have been making in our businesses. Our tea operations saw exceptional outputs, with record production of 103mkg. Our two other core crops also performed well, and with more benign weather, the macadamia crop improved in volume and we achieved a record avocado harvest. Our UK businesses also returned to a collective profit.

As set out in more detail in the Chief Executive's report, we made a number of acquisitions and disposals in the year as we continue to refine and adapt our business portfolio in line with our strategy. A majority shareholding in Jing Tea was acquired and we also entered into agreements to purchase two farms in Tanzania. In an important development after the year-end, we acquired two tea estates in Assam, which, together with our existing estates, we believe makes us the largest private tea producer in the world. These are long-term projects in line with our strategy to diversify our production footprint and add value to our products.

Whilst the results for the year were encouraging, we remain alert to global economic uncertainties and the potential challenges that we may face. Climate change and political instability continue to be major concerns and the steps that we are undertaking to help mitigate the effects of these are set out in the Chief Executive's report.

Overall, 2018 was a very good year for the Group in terms of both strategic execution and financial performance. With our strong market positions in our core crops and significant net cash resources, we are well placed to take advantage of any opportunities which uncertain markets may present.

Dividend

Your Board is recommending a final dividend of 102p per share which, together with the interim dividend already paid of 40p per share, brings the total distribution for the year to 142p per share compared with 135p per share for 2017.

Outlook

During 2019 we will consolidate the progress made in 2018 as we continue to invest in our business and integrate the new acquisitions. Whilst it remains too early to make meaningful comments about individual crops, tea auction volumes in Kenya have been very high for some months with average sale prices below the cost of production since November which is of some concern. Furthermore, these volumes are impacting the prices in Malawi and there is a risk that our other tea markets could be adversely affected as their seasons begin. We continue to monitor and prepare for Brexit and, whilst we expect there to be some impact on our UK businesses, we are confident that the majority of our operations will be largely unaffected.

Staff

As always, my thanks go out to all our staff for their efforts in 2018.

Malcolm Perkins

Chairman

10 April 2019

Chief Executive's Report

OVERVIEW

2018 saw the continuing development of Camellia whilst staying true to our roots of building a long-term sustainable business. We were fortunate in that we experienced broadly benign weather conditions across most of our agricultural operations, and it is pleasing to be able to demonstrate that our continued investment in agriculture is delivering financial returns. One-off weather events resulting from climate change remain a risk and therefore it continues to be a priority to invest in climate mitigators such as dams and irrigation and to increase the diversification of our production geographies.

Overall, I believe that whilst international trade may become more difficult in the short-term, demand for our agricultural produce from an increasingly affluent, urbanising, health conscious consumer will continue to rise. The potential addition of blueberries to our speciality crop portfolio (as described below) reflects our strategy to benefit from these trends.

Whilst the weather has played a key role in the exceptional tea crop, the investments that we have been making in our estates and our factories have enabled us to capitalise on that crop. Likewise, after consecutive drought years, macadamia volumes were up by 45%, but we have the infrastructure in place to handle these volumes. 2018 also saw a change in the market for tea, whereby almost all the UK major tea brands are now disclosing the names of the estates from which they buy. This is a welcome development and I am pleased to confirm that our estates are on those lists.

During the year we continued to build on our strengths by investing and diversifying our agricultural base both by geography and crop. In the other divisions we are investing in areas where we can add value to our products and divesting where we do not believe that the business is core to our future.

Acquisitions and Investments

§ During the year we signed contracts to purchase two farms in Tanzania for development into avocado and macadamia orchards. This will be the Group's first investment into Tanzania and reflects our desire to expand our core crop production volumes and diversify our geographic footprint. Development of these farms, which are currently green field sites with approximately 1,200Ha of development potential, will take some years.

§ After the year-end, we purchased two tea estates in Assam; Bargang and Harchurah. These are both well-known and respected marks and will help to balance our portfolio of teas from India.

§ We are investing in two important trials. We planted 23Ha of avocado near Kitale in Kenya which, if successful, could lead to a development of 600Ha. We have also planted a trial of 10Ha of blueberries at Kakuzi in Kenya. This is the first time we have trialled blueberries and, if successful, we have the opportunity to expand the trial substantially.

§ Outside of the Agriculture division we made two acquisitions. We purchased a majority stake in Jing Tea and the whole of Black Gold Oil Tools. Jing Tea is a UK based branded speciality tea business which will help us to distribute our high-end teas more profitably and bring us closer to our consumers. Black Gold Oil Tools is an oilfield services company based in Aberdeen which brings an additional line of business to AJT Engineering.

The projects highlighted above, particularly in the Agriculture division where we already have significant development commitments, will require substantial further investment. I am therefore pleased that our balance sheet remains strong and that we have the resources available to complete these projects.

Divestments

During the year we completed the sales of GU Cutting and Grinding, BMT (Great Yarmouth) and XiMo, all of which were referenced in the annual report and accounts for 2017.

We also disposed of our interests in Affish and Wylax, the Dutch fish trading businesses which no longer fitted with our strategy.

Financial Performance

The underlying profit before tax from continuing operations (i.e. before taking account of the two provision releases described below) amounts to £38.1 million, up 38% on the comparable result for 2017. Whilst we will not always be fortunate enough to experience the benign weather that we had in 2018, it clearly demonstrates that as we grow and diversify our agricultural operations and focus our non-agricultural businesses, we are able to enhance our profitability and therefore our dividend.

We also recorded the following significant provision releases:

BUSINESS STRATEGY

The overall Group strategy, which is set out on page 19, remains unchanged with each division expected to perform against an agreed divisional 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.

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 diversifying the Group's political and commodity price risk.

Engineering

AJT Engineering. To take advantage of the recovering oil sector whilst diversifying into adjacent sectors in order to create a sustainably profitable engineering business focused on the 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

Tea Production

2018 saw the Group's highest ever production levels through our own and managed factories. Total made tea produced was 103mkg (2017: 95mkg) which was a record for the Group.

* Estate volumes only, in addition 24.2mkg of Bought Leaf tea was produced (2017: 19.3mkg) and a further 4.5mkg was produced for managed clients (2017: 4.0mkg)

Tea pricing and operations

India

Overall, India produced record volumes of tea in 2018 as a result of higher Bought Leaf volumes purchased by Jogopur factory which was expanded last year. Our own estate production was up 3% on 5 year average volumes and Bought Leaf volumes were at record levels, up 48% on 2017 at 8.4mkg.

Average tea prices were generally up on last year across all regions and our average selling price was 7% up on the prior year. However, this increase was not sufficient to offset multiple mid-year interim wage increases totalling 33% in West Bengal and 22% in Assam.

It is encouraging that the Darjeeling region has recovered well from the extended strike in 2017 with good quality teas and strong prices being achieved throughout the year. As part of our investment in Darjeeling and our commitment to reducing our carbon footprint, two factories have been converted from coal to Liquid Natural Gas as a heat source for drying and a hydro-electric generation system has been commissioned at Castleton.

The packet tea operation saw consolidation of the Tea City acquisition made in 2017, a brand development strategy being rolled out and our sales footprint expanded. Sales volumes grew 14% during 2018 to 10.4mkg.

The replanting programme continued with 227Ha completed and a further 205Ha uprooted for replanting at a later date.

Bangladesh

The Bangladesh tea crop was down on 2017 by 6% at 12.8mkg, as a result of a generally drier year.

The market however was very strong with exceptional prices being attained from August through to November. Our average prices were up 38% on the prior year.

Operationally, good progress has been made on the replanting and infilling programme with two 'super-nurseries' being established, one of which is the largest in Bangladesh. The replanting and extension programme continued with 161Ha being completed in the year and an additional two million plants were used for infilling.

In order to process the anticipated increase in crop, Luskerpore factory was upgraded in the year.

Kenya

Tea production (including smallholders and managed clients) was up on 2017 by 10% and was our second highest production year ever. This trend however was reflected across Kenya resulting in record national production and as a result prices have been under pressure. Auction volumes at Mombasa in the year were at a record high of 458mkg, easily surpassing 2016's record of 408mkg. Our auction prices peaked in February but have declined since then and from November have been below our cost of production. Our average selling price for the year was 6% below that of 2017.

Disappointingly, whilst there has been some progress, the 2014/15, 2016/17 and 2018/19 Collective Bargaining Agreements have still not been agreed although discussions with the union are ongoing. As ever, these delays cause uncertainty for us and frustration for the workforce.

As reported last year, we continue to invest in field and factory technology and our new mechanical harvester is now being field trialled. Successful trials have also been conducted on a continuous withering system leading to plans for further investment in this technology. We also installed a new fluid bed drier in Kepchomo factory which has proved successful in reducing energy requirements whilst improving tea quality.

We replanted a total of 41Ha in 2018 (2017:16Ha) and uprooted a further 49Ha for replanting in 2019. The replanting program has been mechanised significantly to improve productivity.

Malawi

As a result of ideal weather conditions with excellent rainfall and the return of the winter 'chiperoni', Malawi produced a consecutive record crop (including smallholders) for the year of 22mkg, up 13% on 2017. Encouragingly, our average prices were up 3% on 2017 and the market showed strong demand for Malawi teas in 2018 despite the oversupply of tea at the Mombasa auction.

Developments included expanding the withering at Ruo factory and replanting a total of 106Ha in 2018 (2017: 99Ha).

Eastern Produce Malawi now produces about 42% of Malawi's total tea production 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). Wage negotiations and a collective bargaining agreement were successfully concluded during 2018, awarding 22% wage increases during the year. During 2018 we saw continued progress on women's empowerment programs, farmer field schools, and the introduction of improved nutrition provision in the daily meal. These developments are positive for us, the industry in Malawi and the workforce and their communities. The tea industry in Malawi is however critically dependent on the continued support of the international tea buyers at the Malawi auction if it is to continue these developments.

Macadamia Production

Macadamia production in 2018 increased substantially as weather conditions improved. With the trees still recovering from two dry years, yields remain below optimal levels but we are optimistic as to their eventual recovery with favorable weather conditions.

Macadamia Pricing

Despite the increased volumes from Africa, Macadamia prices in the year remained firm and for certain grades increased by as much as 23%. Our average selling price for the year was 18% ahead of 2017.

Macadamia Operations

Malawi

Volumes were 43% up on 2017, a significant improvement although still 19% below our best year in 2014. Early indications for 2019 volumes are that they will be broadly in line with those of 2018.

South Africa

Production volumes were 57% up on 2017. Developments included completion of the third phase of the Zetmac cracking facility renovation and upgrade, and continuing work on the Mambedi dam. In 2018, 80Ha were planted on Mambedi estate.

Regrettably with regard to the Wales estate, which amounts to 191Ha of mature macadamia, we have made no progress towards renewing the lease for the property. Dialogue continues with the claimant community, however it is now likely that the 2019 harvest will be the last from this estate.

Kenya

Production volumes were 29% up on 2017 as a result of improved weather and maturing orchards. Developments included 6Ha of new planting.

* Estate volumes only. In addition, 5mkg of smallholder fruit was received (2017: 0.9mkg)

Avocado Pricing and Operations

2018 was a very good year for avocado production with a record 2.8 million exported cartons. Our own estate Hass avocado production was 2.1 million cartons and there was also a record volume of smallholder Hass exported at over 0.5 million cartons, with other varieties making up the remainder.

However, Kenya was not the only country to see very large volumes of fruit. From May, unprecedented volumes of avocados arrived in Europe from Peru and South Africa, and as a result the prices in the European market came under severe pressure. Over the year our average estate Hass prices were down about 40% on 2017 with a consequential impact on profitability.

During the year we planted an additional 25Ha of Hass avocados and 73Ha of Pinkerton avocados which brings the total planted area to 718Ha. In addition, the planting of a 23Ha trial of avocados near Kitale in Kenya was completed and, so far, the trees are doing well. If this trial proves successful there is a total of 600Ha which may be planted.

* 2017 was an 'off' year for Pistachios

** Pineapple production was phased out during 2018

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

Speciality Crops, Pricing and Operations

Arable

Soya volumes were down about 3% on the record levels of 2017 but Maruque farm in Brazil managed to produce the highest yields in the district. Soya prices were slightly down on last year. Maize was planted on a larger area this year and as a result, volumes were up by 25%. Average prices were up by 26%.

Rubber

Rubber is grown on areas of the tea estates unsuited for growing tea. Production in 2018 was slightly ahead of 2017 but prices remain below the cost of production.

Citrus

Following last year's exceptional crop, volumes of Murcotts were significantly down this year but this was offset in part by an excellent Navel orange crop which also fetched good prices.

Pistachio

2018 was an 'on' year for Pistachios and volumes and prices were in line with expectations.

Wine

2018 started disappointingly as the severe drought in the Cape region of South Africa reduced bulk wine production by 39%. However, a new marketing strategy and the appointment of a new international agent saw sales rise by 25%. During the year 8Ha of vines were replanted bringing the total planted area to 73Ha.

Almonds

The almond crop was a little behind expectations following a heavy frost in the middle of flowering in 2018.

Forestry

Production of eucalyptus in Brazil reduced substantially, as did prices, reflecting muted demand during the year and a one-off large contract delivered during 2017.

Livestock

Livestock sales remained in line with that of the prior year with prices increasing marginally.

Blueberries

In a new crop for us, we have established a 10Ha blueberry trial at Kakuzi in Kenya. These plants are grown in pots in polytunnels and therefore require extensive infrastructure, however this means that they can be grown on otherwise unproductive areas of the farm. Following completion of the infrastructure, planting commenced in January 2019. If successful, there are substantial additional areas of Kakuzi which could be developed.

In total, the Agriculture division made a segment trading profit of £51.0 million (2017: £35.6 million) on revenue of £245.3 million (2017: £239.4 million), as set out in note 1 to the Accounts.

Engineering

AJT Engineering had a slower than anticipated start to 2018 but improved as the year progressed. Revenue for the year rose by 82% to £13.3 million. During the year AJT Engineering acquired a small company, Black Gold Oil Tools, which provides an additional aligned revenue stream as well as an adjacent site which will allow the separation of machining and fabrication activities.

Abbey Metal Finishing had slightly increased revenue in the year but with a reduced margin. Atfin's revenues increased 6% in the year and margins improved reflecting economies of scale.

BMT (Great Yarmouth), GU Cutting and Grinding and XiMo were sold during the year.

In total, the Engineering division made a segment trading loss of £0.6 million (2017: trading loss £2.6 million) on revenue of £22.2 million (2017: £20.5 million), as set out in note 1 to the Accounts.

Food Service

With its estate of cold stores effectively at maximum capacity, additional transport contracts saw ACS&T revenues increase 7% on 2017. However, there was a minor reduction in profitability as a result of changes to the business mix and provisions for dilapidations.

Jing Tea traded in line with expectations and made a small loss for the year as it invested in line with its expansion strategy.

The remaining food service businesses were disposed of during the year.

In total the Food Service division made a segment trading profit of £1.6 million (2017: £1.8 million) on revenue of £41.5 million (2017: £37.8 million), as set out in note 1 to the Accounts.

Investments

Investment Portfolio. The gains on sale for the year were £0.4 million (2017: £0.7 million). Due to the implementation of IFRS 9, £0.3 million of this gain was reflected in the Income Statement and £0.1 million in the Statement of Comprehensive Income. The total value of the portfolio at 31 December 2018 was £39.6 million (2017: £47.0 million). The reduction reflects a number of disposals in the year and the weakening in the equity markets in the second half of 2018.

Investment Property. We continue to work on our estate of investment property in order to maximise the value and the yield. Two properties on the Linton Park Estate were converted to residential, whilst another property was acquired and is now being refurbished ready for rental.

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

Associates

BF&M experienced an improvement in its trading performance mainly as a result of a fall in claims payable in the year, 2017 having been impacted by two category 5 hurricanes in the Caribbean. As a result, BF&M's profit before tax was Bermudian Dollar 18.7 million (2017: Bermudian Dollar 1.9 million).

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

In total, our share of the results of associates amounted to £7.6 million (2017: £2.0 million).

POLITICAL, LEGISLATIVE AND LEGAL ISSUES

The Group is present in many jurisdictions and is subject to local legislation. We previously disclosed that at the start of 2016 the Government of Malawi put forward new legislation which proposed, inter alia, the conversion of all freehold property into 50 year leaseholds. The final legislation has now been published and I am pleased to say carries no such provisions.

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. We continue to keep the situation under review.

Brexit

Brexit and the potential impact across the Group is something for which we have been preparing over the last two years. The significant uncertainty as to the precise structure and timing of any eventual Brexit continues to pose challenges for these preparations.

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.

Apart from our operations in Malawi and Kenya, none of our Agriculture businesses sell directly into the UK. In Malawi and Kenya, we sell a relatively small proportion of our produce into the UK. Current UK Government guidance suggests that no tariffs will be imposed on UK black tea imports, while imports of macadamia are expected to incur tariffs at 2% and avocados at 4%. Undoubtedly these additional costs will be shared by the participants in the supply chain, if they arise. Our Agriculture operations are not reliant on the UK for supplies of materials or equipment.

Our UK based operations are likely to see higher costs from import duties. However, in the short term the issue is likely to be disruption to the supply of raw materials, chemicals and parts. As a contingency, all the UK operations have increased their stock holding to provide a buffer. Export activity is limited, except at Abbey Metal Finishing where a material proportion of sales are to the EU. A no-deal Brexit could result in delays to sales and an increase in working capital requirements if there is disruption at the ports, and margin pressure as a result of import duties incurred by customers. Jing imports tea from Asia and its green tea imports to the UK may be subject to tariffs at 3%, however this is not currently a material element of that business.

Our investment portfolio has minimal direct exposure to UK markets. However its value may be impacted by the effect of volatility in exchange rates and in financial markets more widely.

In addition, there is a potential risk that we could incur additional tax costs e.g. if we are unable to recover VAT on purchases from the EU or if there are changes to withholding tax rates on dividends received from any of our overseas subsidiaries.

CAPITAL INVESTMENT AND DEVELOPMENT

We continued to invest in our assets during the year and £17.4 million was spent on property, plant, equipment and investment property (2017: £15.0 million). Key projects are referred to in the operational reports above. A further £4.3 million (2017: £6.0 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.

This year, for the first time we will also be publishing on our website a separate Environmental, Social and Governance report. This report will allow 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. Further guidance on our approach to Governance, Sustainability and CSR is also set out in the Strategic Report on pages 19 to 24 of this document.

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 or other corporate activity.

One of the largest uses of energy in the Group is the requirement to process and dry our tea crop. The investments that we have been making to increase energy efficiency in our tea factories has enabled us to reduce our energy usage from 1.33kg to 1.25kg of CO2 per kg of made tea, a reduction of 6.4%. Furthermore, we increased our use of renewable energy by 57% over the year resulting in a further drop in total carbon emissions.

Total water usage was similar to 2017 reflecting the better weather conditions offset by the increased crop.

We continue to pursue initiatives to reduce our environmental impact including:

As part of our investment in social sustainability, we continue our long-term plan of upgrading our housing to ensure that it complies with the latest SAN standards and work with the local communities, unions, NGOs and governments to improve the local infrastructure.

One area that I would like to highlight is the increasing number of partner projects with which we are involved. These are projects which we jointly undertake, primarily with our customers but frequently with the involvement of local government and NGOs. This co-operation allows us both to accelerate certain social initiatives on the estates and also to make sure that we have access to the best solutions available globally.

Some of the key initiatives that took place during 2018 included:

§ Partnership for Community Health Advancement, Darjeeling, India. This project, which has been carried out at Margaret's Hope Tea Estate in Darjeeling in conjunction with Twinings and DLR Prerna (a Darjeeling Development organisation), is aimed at improving sanitation and hygiene practices. Running over four years, it involves both educational elements and significant upgrades to the sanitation infrastructure.

§ ETP - UNICEF Programme, Assam, India. This programme, of which we are only a part, is being implemented by UNICEF, co-ordinated by the Ethical Tea Partnership and supported by their members. The programme goals are to realise the rights of children, adolescents and women across the tea estates of Assam. By participating in this programme, we believe that we can demonstrate the ability of properly managed tea estates to be a force for good in a region which has a long history of deprivation.

§ Baby Nursing Unit, Nandi Hills, Kenya. This project which was built with support from Taylors of Harrogate provides facilities for breast-feeding mothers at the Chemomi Estate. The unit is used by over 300 women, thereby allowing them to remain a part of the economic process.

§ Farmer Field Schools, Malawi. In order to promote biodiversity, maintain the local landscape and prevent soil erosion, we have been working with the Ethical Tea Partnership and the local community to establish tree nurseries and plant indigenous species on Mulanje mountain.

SUMMARY

2018 was an important year for the Group in which we made tangible progress on our long-term strategy. In particular, we have now divested those businesses which we felt to be unsuitable for further investment and have invested in a number of strategically aligned projects which will help us to meet our goals and secure the future for all our stakeholders.

Tom Franks

Chief Executive

10 April 2019

Chief Financial Officer's report

Overview of Results

The profit after tax for the year ended 31 December 2018 was £32.3 million which includes two large provision releases (2017: £30.2 million, including £14.8 million of profit from discontinued operations).

Profit before tax from our continuing operations in 2018 was £52.5 million (2017: £27.6 million). This improvement reflects, inter alia, a significant increase in profits as a result of continued strong average selling prices for tea, improved volumes and strong prices for our macadamia crop, improved trading at BF&M, and two significant items:

Excluding these items, the underlying profit before tax from continuing operations was £38.1 million (2017: £27.6 million).

Equity attributable to the owners of Camellia was £395.5 million (2017: £368.4 million) with net cash and cash equivalents of £109.6 million (2017: £106.8 million).

Effect of Disposals

As a consequence of the decision to sell GU Cutting and Grinding and BMT (Great Yarmouth), these businesses were reclassified as held for sale at the end of 2017 and an impairment charge of £1.8 million was recognised in 2017.

During 2018, GU Cutting and Grinding, BMT (Great Yarmouth) and XiMo were sold. The 2018 trading loss for these businesses was £0.2 million (2017: loss £0.8 million) and is reported within Engineering.

Affish and Wylax were sold in December 2018 and the 2018 trading loss for these businesses £0.2 million (2017: loss £0.4 million) is reported within Food Service.

Discontinued Operation

As previously disclosed, during 2017, the Group completed the sale of Duncan Lawrie's UK asset management business as well as the disposals of various businesses operated by Duncan Lawrie's Isle of Man subsidiaries. Duncan Lawrie's banking licences were surrendered in 2017 and the business is now closed.

The loss from the discontinued operation in 2018 was £0.2 million (2017: profit £14.8 million).

Currencies

Over the course of the year, Sterling weakened against all our key operating currencies, except against the Bangladesh Taka and South African Rand where there was a marginal strengthening. This has resulted in a gain on foreign exchange translation of £11.6 million (2017: loss £28.4 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 2018 would have been £0.7 million higher. Our profit before tax from continuing operations includes an exchange gain of £0.2 million on transactions during the year (2017: loss £0.1 million).

Cash

The Group's net cash position increased to £109.6 million for the year (2017: £106.8 million) reflecting, inter alia, strong net cash inflows from continuing operating activities of £24.5 million (2017: inflow £30.9 million) and significant continued investment in our businesses. The Group has loans outstanding amounting to £3.9 million.

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 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.

Dividends

Camellia has a long track record of steady dividend growth. The Board is recommending an increase in the final dividend for 2018 to 102p per share, giving an aggregate increase for the year of 5.2% and a total dividend of 142p per share.

Taxation

The Group's effective tax rate of 38.2% (2017: 28.8%) reflects the increase in the proportion of profits earned in higher rate overseas jurisdictions. 2017's effective tax rate reflects the fact that the gains on disposal of Duncan Lawrie Asset Management are expected to be exempt from tax.

Tax and Other Provisions

Certain of the wage negotiations in Kenya remain unresolved for the Collective Bargaining Agreement years of 2014/15, 2016/17 and 2018/19 which creates significant uncertainty as to the cost base of our businesses in Kenya. We also have ongoing wage negotiations in Bangladesh and India. We consider we have made adequate provision for the likely outcome of these negotiations.

In addition, as previously disclosed:

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 and provision has been made in line with those. Unfortunately, in other situations the law is either unclear or underdeveloped and in these instances, we make provisions on a best estimate basis for the liabilities likely to arise, having taken appropriate advice.

Pensions and Post-Employment Benefits

The Group operates a number of defined benefit pension schemes, the largest of which is in the UK. Our 2017 triennial valuation for the UK scheme, which was closed to future accrual during 2016, showed a funding surplus of £7.1 million. We continue to keep the scheme under close review in light of the volatility in bond and equity markets.

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 £24.7 million (2017: £30.9 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. This year a net actuarial loss of £0.7 million (2017: net actuarial gain of £34.3 million) is reflected in the Statement of Comprehensive Income. The net loss this year reflects:

A £9.0 million non-recurring gain has arisen from the government of Bangladesh deeming the tea industry to be exempt from previously enacted legislation which required companies to make a payment on retirement to all employees, based upon compensation and length of service. The consequence is that this provision for post employment benefits is no longer required. The gain which has been reflected in the Income Statement reflects the accrued liability immediately prior to the date of change in legislation.

Our Income Statement also reflects current and past service costs of £3.1 million, which includes £0.9 million for the expected cost of equalising guaranteed minimum pension benefits for certain members of the UK scheme.

In addition, £1.5 million (2017: £2.7 million) has been charged to our Income Statement in respect of employee benefit expenses.

Shareholders' Funds

Equity attributable to Camellia's shareholders at the 2018 year end was £395.5 million (2017: £368.4 million). A reconciliation is set out in the Group statement of changes in equity on page 41.

Susan Walker

Chief Financial Officer

10 April 2019

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 2018 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 6 to 15. 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 16 to 18. 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 15 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.

Principal Risks and Uncertainties

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

Food Service

Group Principal Policies

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

A summary of each principal policy is set out below and they are set out in full on our website.

Anti-Bribery and Corruption

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

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

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

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

Certification and Traceability

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

Employee Welfare

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

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

All our tea estates have a hospital, clinic or dispensary. In addition, in India and Bangladesh employees have access to central Group operated hospitals to which more serious cases can be referred. We provide medical services, including where appropriate antiretroviral drugs, in those communities where HIV/AIDS is prevalent. We also give medical support to schools that are either run locally or by our operations.

We are committed to providing development opportunities for all. We provide education opportunities in areas where we operate, either by building and running schools or by supporting state educational projects in our communities. We also provide programmes for skills development and adult education.

Environmental

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

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

Health and Safety

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

Modern Slavery

The Group continues to comply with the requirements of the Modern Slavery Act 2015, to ensure that modern slavery and human trafficking are not taking place either within the Group or in the supply chains of our operations. A copy of the statement for the year ended 31 December 2018 is available on the Company's website. In some countries, it is both the cultural norm and permissible for parents to involve their children in the productive process, we do not subscribe to this approach and the use of child labour is prohibited across the Group. Group operations are required to confirm this statement and adopt local policies and procedures to ensure continued compliance. This includes setting out codes of conduct when working alongside customers and suppliers.

Tax

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

Whistleblowing

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

Key Financial Performance Indicators

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

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

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

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

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

Certain of the key financial performance indicators are included in the Chief Executives report on pages 6 to 15.

Non-Financial Performance Indicators

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

These are regularly monitored and used by local management. Where applicable, the Board considers such KPIs by exception.

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 due consideration be given 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 2018.

1 'Company Directors' consists of the company's Board as detailed on page 4

By order of the Board

Amarpal Takk

Company Secretary

10 April 2019

Report of the directors

The Directors present their report together with the audited consolidated accounts for the year ended 31 December 2018.

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 15.

Results and Dividends

The profit after tax for the year amounted to £32.3 million (2017: £30.2 million). The Board has proposed a final dividend for the year of 102p per share payable on 12 July 2019 to holders of the ordinary shares registered at the close of business on 14 June 2019. The total dividend payable for 2018 is 142p per share (2017: 135p per share). Details are shown in note 11 to the Accounts.

Directors

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

Under the Company's articles of association all the Directors are required to retire annually. Accordingly, Malcolm Perkins, Tom Franks, Susan Walker, Graham Mclean, Chris Relleen, Frédéric Vuilleumier, William Gibson and Gautam Dalal will retire and, being eligible, will seek re-election at the AGM on 6 June 2019.

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 independent non-executive Director and Deputy Chairman in January 2006 having previously been a non-executive Director of Linton Park Plc. He is senior independent Director, chairman of the Audit committee and a member of the Nomination and Remuneration committees.

William Gibson was appointed as an independent non-executive Director in September 2014. He was previously chairman and managing director of Westminster Press and an executive director of the Financial Times Group. He is chairman of the Remuneration committee 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 during 2018.

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.

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 10 April 2019 the Company has been advised of the following interests in its share capital:

* Controlled by Nokia Pensioenfonds VZW

Share Capital and Purchase of Own Shares

The Company's share capital comprises one class of ordinary shares of 10p per share which carry no restrictions on the transfer of shares or on voting rights (other than as set out in the Company's articles of association). There are no agreements known to the Company between shareholders in the Company which may result in restrictions on the transfer of shares or on voting rights in relation to the Company. Details of the issued share capital are contained in note 36 to the Accounts.

At the AGM in 2018, 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 on 6 June 2019.

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

§ So far as each Director is aware, there is no relevant audit information of which the Company's auditors are unaware.

§ Each Director has taken all the steps that ought to have been taken as a Director, including making appropriate enquiries of fellow Directors and of the Company's auditors for that purpose, in order to be aware of any information needed by the Company's auditors in connection with preparing their report and to establish that the Company's auditors are aware of that information.

Employees

Details in relation to employees are set out on page 24.

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

Taking account of the Group's cash and cash equivalents balances, after reviewing the Group's budget for 2019 and cash forecasts for the next 15 months, 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 28 to 31.

Political Donations

The Group has no political affiliations and we do not make political donations. We 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.

By order of the Board

Amarpal Takk

Company Secretary

10 April 2019

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 eight Directors, four 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 25 and 26.

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 the Directors to make informed judgements on matters referred to the Board. The Board met nine times in 2018.

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

Board Evaluation

An internal review, led by the Company Secretary, was undertaken this year. This was based upon a series of questions. The review confirmed that the Board is strong and collegiate with all members demonstrating behaviours that support our strategic direction, vision and culture. Each Director has the opportunity to contribute and challenge, which enables a constructive and quality debate during Board meetings.

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 2018, 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:

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 18 to the Accounts.

Pensions

A key area of judgement is in relation to the valuation of the pension scheme 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 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 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.

Tax and other uncertain provisions

The basis of provisions for material uncertain tax situations were considered by the committee as were the provision in respect of the ongoing Collective Bargaining Agreement negotiations for 2014/15, 2016/17 and 2018/19 in Kenya, and for wage increases in India and in Bangladesh. The committee is satisfied that the provisions represent best estimates of the likely liabilities.

Adoption of IFRS 9 and IFRS 15

The committee reviewed the accounting policies of the Group in light of the requirement to adopt IFRS 9 and 15 from 1 January 2018. The adoption of IFRS 9 and IFRS 15 has not had a material impact on the financial statements of the Group. IFRS 9 was adopted without restating comparative information and its adoption has resulted in the reclassification of the Group's financial assets. In relation to IFRS 15, it was concluded that the Group's revenue recognition practices were in line with IFRS 15 in all material respects. For more details see pages 53 and 54 to the Accounts.

Adoption of IFRS 16

The committee reviewed and approved the accounting policy for leasing arrangements. The Group's leasing arrangements have been reviewed in light of the new lease accounting rules in IFRS 16. The standard will affect primarily the accounting for the Group's operating leases and details of the impact on the 2019 financial statements are included on page 54 to the Accounts. The Group will apply the standard from its mandatory adoption date of 1 January 2019.

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, 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 33 to 34.

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 36.

Internal Control and Risk Management Systems

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

De-centralisation 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 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 and review Group 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

10 April 2019

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:

§ The Financial Statements, prepared in accordance with International Financial Reporting Standards as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole.

§ The Strategic Report includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.

§ The Annual Report and financial statements, taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Company's position and performance, business model and strategy.

On behalf of the Board

Malcolm Perkins

Chairman

10 April 2019

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 31.

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. The committee considers any views of the shareholders expressed on Directors' remuneration.

At the AGM on 7 June 2018, the Remuneration Report for the year to 31 December 2017 was approved by shareholders with 99.99% of the votes cast in favour, 0.01% of the votes cast against and 576 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 2018. Tom Franks, Graham Mclean and Susan Walker receive an excess non-pensionable salary supplement equivalent to 10% of base salary. As a result of the change to the taxation rules on pension annual allowances, the Company ceased contributions to the Linton Park Group Personal Pension Scheme on 6 April 2017 for Graham Mclean and Susan Walker. These payments are included in 'Remuneration' in the table above.

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

10 April 2019

Consolidated income statement

for the year ended 31 December 2018

Statement of comprehensive income

for the year ended 31 December 2018

Consolidated balance sheet

at 31 December 2018