Camellia Regulatory News (CAM)

Notes for editors

AKD Engineering is a wholly owned subsidiary of Camellia Plc and employs 113 staff at Horn Hill, Lowestoft. It has been in operation for 60 years, originally manufacturing diesel engines for the local ship building industry, before becoming an engineering services provider to the Oil and Gas industry.

Camellia Plc (CAM.L) is a global agriculture and horticulture group, whose activities also extend to engineering, food storage and distribution, banking and financial services. The Company employs approximately 75,000 people globally.

The agriculture and horticulture division is engaged in the production of tea, edible nuts (macadamias, pistachios and almonds), citrus fruits, avocado, rubber, forestry, viticulture, cattle, other horticultural produce and general farming (maize and soya). The Company is one of the largest private tea producers world-wide with a total of 65 tea estates and 60 tea factories. The Company's main operations are in India, Bangladesh, Malawi and Kenya, where the tea is grown and produced. It also has notable agricultural operations, other than tea, in Brazil, California, Kenya, South Africa and Malawi.

The engineering division is engaged in precision engineering, cutting and grinding, fabrication, heat treatment, galvanising, powder coating and manufacture of stables, etch inspection and catalysts. These businesses are predominately UK based and serve customers in a number of sectors including the offshore oil and gas and aerospace sectors.

The food storage and distribution division is involved in frozen, chilled and ambient temperature food supply chain management providing cold storage, refrigerated transport and production support to several leading UK food manufacturers. It also specialises in frozen imports and distributes seafood products in Europe and supplies food service customers in the Netherlands with fish products.

The banking and financial services division comprises Duncan Lawrie, which provides an integrated suite of banking services, financial planning, investment management and trust and estate advice.

23 April 2015

Chairman's Statement

The headline profit before tax for the year to 31 December 2014 amounted to £17.23 million compared with £38.15 million in the previous year. Headline profit is a measure of underlying performance which is not impacted by exceptional and other items considered non-operational in nature.

Profit before taxation included an amount of £8.82 million (2013: £21.09 million) arising from changes in the fair value of biological assets. It is hoped that the year 2014 will be the last year in which IAS 41 will be relevant to the majority of our agricultural operations. It is expected that from 2015 our permanent plantings will be classified under IAS 16 as property, plant and equipment to be depreciated over their expected lifespan.

After taking account of exceptional and other one off items the profits before tax for the year to 31 December 2014 amounted to £21.98 million compared with £59.65 million in the previous year. This is a particularly disappointing result, reasons for which may be briefly summarised as very poor tea sales prices in Kenya, substantial losses associated with two onerous contracts at AKD, the ever increasing costs of regulation and compliance at Duncan Lawrie and an exceptional provision against an investment in Bermuda. These items are explained in more detail below.

Dividend

The board is recommending a final dividend of 92p per share which, together with the interim dividend already paid of 34p per share, brings the total distribution for the year to 126p per share compared with 125p per share in 2013.

Agriculture and horticulture

In my Chairman's Statement last year I warned of the potential impact of climatic conditions and the imbalance of supply & demand, particularly for tea, on our profitability. Such circumstances prevailed in 2014, leading to the profits of our agricultural operations being 35 per cent. below those of the previous year.

Tea

India

Adverse climatic conditions prevailed in India, particularly at the beginning of the year, resulting in a decline in production which would have been considerably worse if it had not been for our extensive irrigation facilities. Sale prices increased marginally over the previous year but the resultant profitability was 36 per cent. lower than that of the previous year.

Bangladesh

Bangladesh also suffered from very dry conditions at the beginning of the year and production was significantly reduced. Tea prices throughout the year were also substantially lower due to the reduction in import tax, allowing the import of cheap tea from other origins. The partial reversal of this tax reduction came too late in the year to have any meaningful impact. As a result profitability was 64 per cent. below that of the previous year. The ongoing political unrest in the country is being monitored.

Kenya

Tea production again increased due to benign climatic conditions but the resulting oversupply resulted in tea prices continuing at a very low level throughout the year, at times below the cost of production. We have therefore witnessed a major reduction in the profits of our Kenya operation over the last two years. The profitability in 2014 was 48 per cent. lower than prior year.

Malawi

Production was reasonable in Malawi but again prices fell, being some 16 per cent. below that of the previous year. Profitability was approximately 40 per cent. lower than last year.

Edible nuts

Production of our pistachio nuts at Horizon Farms in California were roughly in line with expectations, 2014 being an 'on' year. The newly planted areas of almonds should produce a meaningful crop in 2015. California is presently experiencing a major and prolonged drought and water restrictions have recently been imposed by the State Governor. The consequences will be severe if the drought, now in its fourth year, persists much longer.

The macadamia production in Malawi and South Africa was in accordance with our expectations and prices in dollar terms showed a reasonable increase. We are seeing pleasing increases in production from our investment over recent years in macadamia plantings in Kenya and exported our first kernel with the cracking of the nuts having been sub-contracted. We intend to continue our expansion of the planted area and expect to commence construction of our own cracking facility during 2015.

Other horticulture

Our Avocado production, at Kakuzi, while ahead of the previous year was below expectations. Sale prices were marginally reduced from last year.

Adverse climatic conditions impacted on our rubber production in Bangladesh and prices were significantly lower than the previous year. This may be a continuing phenomenon whilst low oil prices increase the competitiveness of synthetic rubber.

Our Brazilian operations harvested mainly soya during the year and production was good. Prices were also ahead of the previous year.

Our citrus production at Horizon Farms was better than expected following the climatic damage suffered in the early part of the year. Prices were 15 per cent. down on the prior year.

The wine grape harvest on our farm in South Africa improved during the year and we have been slightly more successful in marketing our higher value products.

Food storage and distribution

The results from our food storage and distribution businesses were marginally lower during the year.

In the UK, Associated Cold Stores and Transport had a more difficult year, with competition in the market place being fierce. In the Netherlands however trading conditions improved slowly, partially due to the reduction in the cost of imported product, which resulted in those operations making a small profit.

Engineering

AKD Engineering at Lowestoft experienced yet another disastrous year mainly as a result of two large contracts experiencing substantial losses. These contracts are now largely complete. The legal proceedings to which I have referred previously were settled prior to going to court on the basis that the legal costs, both past and potentially in the future, were totally disproportionate to the amount of claims that we may have been successful in establishing.

AKD's business is totally dependent on the North Sea oil and gas market and due to the low price of crude oil, the orders from the sector in which AKD operates have completely dried up. The unfortunate but inevitable decision taken to close this business was announced on 7 April 2015. The likely losses that we would have experienced over the forthcoming months, or indeed years, were deemed to be unsustainable. We expect to incur further losses in 2015 as we target to complete an orderly closure of this business by the end of the first half of the year.

Abbey Metal Finishing also experienced a difficult year in 2014. Part of the reason for this is the cost associated with the new joint venture in Germany, where we are still awaiting final accreditation from our projected major customer to utilise our facilities. The facilities at Hinckley are gradually clawing back previous lost business and the efficiency ratios have increased during the last few months.

Results of AJT Engineering, although slightly lower than the previous year were also satisfactory but, again, the effect of low oil prices on these operations is presently difficult to anticipate, but likely to be negative. 

BMT in Great Yarmouth, GU Cutting and Grinding and Loddon Engineering all produced results better than the previous year.

As stated above, the impact of low crude oil prices is already having a major effect on the placement of orders by our customers in the oil and gas sector. The on-going effect of this on a number of our engineering subsidiaries cannot yet be quantified but is certain to be detrimental.

Banking and financial Services

Duncan Lawrie Private Bank has had a difficult year coping with the twin challenges of very low interest rates and the conservative risk profile required by the group. This conservative approach to risk has long been a cornerstone of the group's policy at Duncan Lawrie, but with the low interest rate environment potentially extending into the medium term, the group is now reviewing its options with regard to the ongoing development of Duncan Lawrie.

Associates and investments

Operations in Bangladesh remain difficult due to the continuing political unrest but our associated companies United Finance (previously United Leasing) and United Insurance both produced reasonable results for the year.

Our listed investments generally performed well during the year with the exception of an investment in Bermuda, which has now fallen below our cost and therefore an impairment of £2.33 million has had to be provided through the profit and loss account.

Development

2014 was a difficult year. However, the difficulties have not prevented us from continuing with the organic development of our operations and we must continue to invest in areas that will go towards mitigating the ever increasing costs of production, particularly in our tea gardens. This is an ongoing commitment and a substantial part of our profitability is reinvested in our operations in order to secure their long term future. We continue to examine possible acquisitions in the sectors in which we operate, but the influence on the market of venture capital funds who highly gear their investments and look for a short term exit make such acquisitions either too expensive or very difficult to locate. We will continue to invest in good freehold or long leasehold properties where circumstances are deemed appropriate.

Directors

Martin Dunki resigned as a director of your company in November 2014. Anil Mathur will retire at the conclusion of the annual general meeting in June after having completed 35 years of loyal and valuable service to the group. I would like to express my thanks to both gentlemen for their tireless contribution to the group.

William Gibson joined the board as a non-executive director in September 2014. Tom Franks and Graham Mclean joined the board as Deputy Chief Executive Officer and Joint Managing Director for agriculture respectively in October 2014. Susan Walker was appointed a director on 2 April 2015 and will assume the position of Finance Director in June following Anil's retirement

Staff

My thanks are due to all our staff throughout the world for their contribution in 2014.

M C Perkins

Chairman

23 April 2015

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 2014 and a description of principal risks and uncertainties facing the group. A fair review of the business of the group is incorporated within the chairman's statement on pages 3 to 5. The chairman's statement together with information contained within the report of the directors highlight the key factors affecting the group's development and performance. Other matters are dealt with below:

Group strategy

The board has adopted the following strategy for the group:

The progress against this strategy during the year is set out in further detail in the chairman's statement shown on pages 3 to 5 and within the report of the directors.

Business model

The group consists of a portfolio of businesses mainly in agriculture and horticulture, private banking and financial services, food storage and distribution and engineering. Each business is managed at local level with independent management who report to the board regularly on performance against an annual budget.

Principal risks and uncertainties

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

Agriculture and horticulture

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

In Kenya, Malawi and South Africa there are long-term issues concerning land ownership over which the group has little control but monitors the situation closely.

The board continues to work with local management to monitor land ownership issues that may impact the group's operations. In Kenya, the length of the leases owned by non-Kenyan citizens and corporations has been reduced from 999 years to 99 years in accordance with the new constitution. In South Africa, on land where competing ownership claims have been made, any substantiated claim is required to be resolved on a willing buyer willing seller basis and crops are generally only planted following notification to the Land Claims Commission.

In India, violence from separatist groups which has been a problem for some years has recently been greatly reduced in Assam, Darjeeling and the Dooars. In Bangladesh, there were during 2014 and continue to be instances of civil unrest, general strikes and blockades. The situation continues to be monitored and the group's operations in these regions have largely been able to trade normally.

UK engineering

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

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

Cold storage and transport

Cold storage and transport in the UK is a highly competitive industry and is largely dependent on the food industry for the utilisation of cold stores.

Cold stores are heavy users of electricity and any significant movement in energy costs can affect the operation's profitability. Similarly, the transport division is affected by sharp movements in the cost of fuel and the cost of the implementation of new regulations for drivers.

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

Banking and financial services

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

Duncan Lawrie Limited has no exposure to the sub-prime mortgage market but in periods of low interest rates or low stock market values its income stream will inevitably be affected. Bank failures in the jurisdiction within which Duncan Lawrie operates can also impact its results as a consequence of industry wide compensation schemes to which it is required to contribute.

Further information on the group's financial risks are disclosed in note 38 of the accounts.

Investments

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

Pension schemes

There is one final salary scheme in the UK, following the merger of three schemes in 2011. It is closed to new entrants and permits an element of future accrual for existing members in the defined benefit section. A material proportion of the assets of the scheme are invested in equities and the value of these assets will fluctuate in line with global equity markets. Continuing improvements in mortality rates and the impact of the real rate of return may also increase the liabilities of the scheme.

Credit Risk

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

Social and environmental responsibility

Background

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

The group's businesses have a duty to meet local regulatory requirements and will always strive to do so. In this respect, there is a distinction between our UK businesses and our agricultural and horticultural businesses based mostly in developing countries. Whilst the UK businesses are subject to well-developed regulatory regimes in the areas of employment and environmental protection, this is not necessarily the case elsewhere. Our agricultural and horticultural businesses have responded to the increasing amount of relevant local legislation and to the demands of the marketplace, as many of our major customers for agricultural products now expect us to meet their own social and environmental standards, or to achieve certification against recognised international standards such as 'Fairtrade' labelling.

Particular challenges for the group lie in the following areas:

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

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

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

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

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

Greenhouse Gas (GHG) Emissions

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

Our approach

We believe that good management of employment, social and environmental issues is essential in ensuring the long-term success of our businesses. We are therefore committed to devoting the resources necessary to improve continually our performance with the same vigour that we apply to other aspects of managing our business.

The board has a corporate social responsibility policy which is available on the company's website and which has been adopted across the group.

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

Performance

There are no current employment or environmental issues that prejudice the continuing development of the group. No group businesses were prosecuted for any significant breach of employment legislation during the year. The executive committee has established a process for ensuring that the corporate social responsibility policy is enforced across the group.

Key financial performance indicators

Return on segmental assets

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

Segment net assets (segment assets less segment liabilities) and segment profit are as reported in the consolidated accounts.

Group borrowings ratio

The board's objective is to ensure that gross borrowings as a percentage of tangible net assets do not exceed 50 per cent. The ratio achieved at 31 December 2014 was 0.92% (2013: 0.96%).

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

Key non-financial performance indicators

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

Employees

It is group policy to keep employees informed, through internal publications and other communications, on the performance of the group and on matters affecting them as employees and arrangements to that end are made by the management of individual subsidiary undertakings.

It is also group policy that proper consideration is given to applications for employment received from disabled persons and to give employees who become disabled every opportunity to continue their employment.

The table below provides a breakdown of the gender of the directors and employees at 31 December:

By order of the board

J A Morton

Secretary

23 April 2015

Report of the directors

The directors present their report together with the audited accounts for the year ended 31 December 2014.

Principal activities

The company is a holding company and its country of incorporation is England. The principal activities of its subsidiary and associated undertakings comprise:

Agriculture and horticulture - the production of tea, edible nuts, avocados, citrus, rubber, fruits, other horticultural produce and general farming

Engineering - metal finishing, precision engineering and heat treatment

Food storage and distribution

Private banking and financial services

The holding of property and investments

Further details of the group's activities are included in the chairman's statement on pages 3 to 5.

Results and dividends

The profit for the year amounted to £8,310,000 (2013: £37,543,000). The board has proposed a final dividend for the year of 92p per share payable on 3 July 2015 to holders of ordinary shares registered at the close of business on 12 June 2015. The total dividend for 2014 is therefore 126p per share (2013: 125p per share). Details are shown in note 12.

Directors

The directors of the company are listed on page 2. The following directors had beneficial interests in the share capital of the company:

Under the company's articles of association all the directors are required to retire annually. Accordingly, Mr M C Perkins, Mr C J Ames, Mr P J Field, Mr C J Relleen, Mr F Vuilleumier will retire and, being eligible, seek re-election at the AGM on 4 June 2015.

Mr T K Franks, Mr G H Mclean, Mrs S A Walker and Mr W K Gibson, having been appointed to the board since the last annual general meeting, will seek election to the board.

Mr A K Mathur will not seek re-election at the next AGM and will retire as a director at the conclusion of the meeting.

None of the directors or their families had a material interest in any contract of significance with the company or any subsidiary during and at the end of the financial year.

Executive directors

Mr M C 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. Mr Perkins is chairman of the nomination committee.

Mr C J Ames, a chartered accountant, is a joint managing director of Camellia Plc, a non-executive director of Kakuzi Limited and a non-executive director of Duncan Lawrie Limited. He was previously managing director of Douglas Deakin Young Limited which was acquired by the Camellia group in 2005. Prior to that he was a partner of PricewaterhouseCoopers.

Mr P J Field is a joint managing director of Camellia Plc, is chairman of Goodricke Group Limited and a non-executive director of Duncan Lawrie Limited. Before joining the group in 1987, Mr Field was with Grindlays Bank engaged primarily with their business in the Indian subcontinent.

Mr A K Mathur, is a chartered accountant and joined the group in 1981. He was appointed finance director in 1999 and is also a director of Goodricke Group Limited. He will retire as a director at end of the AGM on 4 June 2015.

Mr T K Franks, was appointed Deputy Chief Executive in October 2014. He is a non-executive director of Duncan Lawrie Limited. He was previously Global Chairman of KPMG Corporate Finance and a Partner of KPMG LLP having joined KPMG in 1988.

Mr G H Mclean, a qualified agriculturalist, was appointed Managing Director of Agriculture in October 2014. He was previously regional director of the Group's operations in Africa and has worked for the Group for 22 years.

Mrs S A Walker, joined Camellia on 1 July 2014 as Finance Director Designate. She was appointed executive director in April 2015. She will formally take over as Finance Director on 4 June 2015, when Anil Mathur retires from the Board. Prior to joining Camellia, she held various positions at KPMG over a 21 year period, latterly as Director Corporate Finance and more recently was Director, Plc Advisory at BDO Corporate Finance.

Non-executive directors

Mr C J Relleen was formerly a partner in PricewaterhouseCoopers. He was appointed an independent non-executive director and deputy chairman in January 2006 having previously been a non-executive director of Linton Park Plc. Mr Relleen is also a non-executive director of Duncan Lawrie Limited. He is the senior independent director, chairman of the Audit Committee and a member of the Nomination and Remuneration committees.

Mr W Gibson was appointed as an independent non-executive director from 1 September 2014. Mr Gibson 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 Committee.

Mr F Vuilleumier was appointed as a non-executive independent director on 7 March 2013. Mr Vuilleumier is a partner of Oberson Avocats, a law office based in Geneva, Switzerland. He is also a Swiss Certified tax expert and a lecturer in tax law at the University of Lausanne. He is a member of the Audit Committee.

Secretary

Mrs J A Morton was appointed as company secretary on 8 September 2011.

Substantial shareholdings

As at 23 April 2015 the company had been advised of the following interests in the share capital of the company:

Camellia Private Trust Company Limited held through its subsidiary, Camellia Holding AG 1,427,000 ordinary shares (51.67 per cent. of total voting rights).

Alcatel Bell Pensioenfonds VZW held through HSBC Global Custody Nominees (UK) Limited 297,398 ordinary shares (10.76 per cent. of total voting rights).

Taube Hodson Stonex & Partners held through State Street Nominees Limited 91,296 ordinary shares (3.31 per cent. of total voting rights).

Share capital and purchase of own shares

The company's share capital comprises one class of ordinary shares of 10 pence each which carry no restrictions on the transfer of shares or on voting rights (other than as set out in the company's articles of association). There are no agreements known to the company between shareholders in the company which may result in restrictions on the transfer of shares or on voting rights in relation to the company. Details of the issued share capital are contained in note 33 to the accounts.

At the annual general meeting in 2014, shareholders gave authority for the company to purchase up to 276,200 of its own shares. The company has purchased 5,200 of its own shares for cancellation since 1 January 2014. This authority expires at the conclusion of this year's annual general meeting on 4 June 2015. A resolution to renew the authority is being put to shareholders at the forthcoming AGM.

Disclosure of information to auditors

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

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

Going concern

After reviewing the group's budget for 2015 and other forecasts, the directors have a reasonable expectation that the group has adequate resources to continue in operational existence for the foreseeable future. Therefore they continue to adopt the going concern basis in preparing the accounts.

Corporate governance

The company's statement on corporate governance can be found in the corporate governance report on pages 15 to 18.

By order of the board

J A Morton

Secretary

23 April 2015

Corporate governance

Statement of compliance

This statement describes how the company applies the main principles of UK Corporate Governance Code 2014 ("the Code"). In implementing the Code, the directors have taken account of the company's size and structure and the fact that there is a controlling shareholder. At the time of the company's delisting from the main market of the London Stock Exchange and listing on AIM in September 2014, it was stated that the board did not envisage that there would be any significant alteration to the standards of reporting and governance which the company maintains currently. AIM companies are not required to comply with the requirements of the Code. However, the board is committed where practical to developing and applying high standards of corporate governance as detailed below.

The company has complied with the relevant provisions set out in the Code throughout the year with the exception of the following area of the Code that has not been implemented:

The roles of chairman and chief executive have continued to be fulfilled during the year by Mr Perkins and not separated as required by the Code. Mr Franks was appointed as Deputy Chief Executive on 1 October 2014. In addition, Mr Ames, Mr Field and Mr Mclean are joint managing directors and have responsibility for aspects of the day to day management of the group.

The board

The board currently comprises ten directors. Three are non-executive directors, of which all are considered independent. The remaining directors are executive directors, including the executive chairman. Mr Relleen, the deputy chairman, has been designated as the senior independent director. The names and brief biographical details of each director appear on pages 12 and 13.

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

The board has established a nomination committee chaired by Mr Perkins, the other members being Mr Relleen and Mr Gibson.

The board has established a remuneration committee, audit committee and executive committee. Terms of reference of each of these 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 annually and covers, inter alia, the following areas:

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

A report summarising the group's financial and operational performance including detailed information on each of its businesses is sent to directors each month. Each director is provided with sufficient information in advance of board meetings to enable the directors to make informed judgments on matters referred to the board. The board met eleven times in 2014.

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

Executive committee

The board has delegated the day to day management of the group's operations to the executive committee which is also responsible for implementing board policy. The members of the committee are:

Nomination committee

The nomination committee is chaired by Mr Perkins. Its other members are Mr Gibson and Mr Relleen.

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

Audit committee

The audit committee is chaired by Mr Relleen. The other members of the committee are Mr Vuilleumier and Mr Gibson. Mr Vaughan-Johnson was a member of the committee until he retired from the board on 5 June 2014. During 2014, the committee met on three occasions.

Principal responsibilities

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

Significant issues in relation to financial statements

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

Biological assets - One of the key areas of judgment that the committee considered in reviewing the financial statements was the valuation of biological assets in accordance with IAS 41. Valuations are carried out by external professional valuers or are based on discounted cash flows. These were agreed for consistency of approach and the assumptions were determined to be reasonable. For more details see note 18 to the accounts.

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

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

External auditors

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

The company's external audit was last tendered in 2009, which resulted in a change to PwC at that point. We are aware of the regulatory developments and transitional arrangements in relation to audit tendering provisions and will continue to monitor guidance.

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 comprises the board's two independent non-executive directors, being Mr Gibson who is chairman of the committee and Mr Relleen.

The committee's full terms of reference are available on the company's website. The responsibilities of the committee include:

The committee met once during 2014. The remuneration report appears on pages 20 to 22.

Insurance

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

Share capital structure

The share capital of the group is set out in note 33.

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 controls, the principal features of which are described below.

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

By order of the board

J A Morton

Secretary

23 April 2015

Statement of directors' responsibilities

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

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

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

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

The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the company's transactions and disclose with reasonable accuracy at any time the financial position of the company and the group and enable them to ensure that the financial statements and the directors' remuneration report comply with the Companies Act 2006 and, as regards the group financial statements, Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the company and the group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Each of the directors, whose names and functions are listed on page 2 confirm that, to the best of their knowledge:

In addition, each of the directors considers that the annual report, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the company's performance, business model and strategy.

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

On behalf of the board

M C Perkins

Chairman

23 April 2015

Remuneration report

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

Remuneration committee

A report of the proceedings during 2014 of the remuneration committee ("the committee") is set out on page 18 and includes details of the membership of the committee.

Policy on directors' remuneration

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

The remuneration policy for executives reflects the overriding remuneration philosophy and principles of the wider group. When determining the remuneration policy and arrangements for directors, the committee considers pay and employment conditions elsewhere in the group to ensure that pay structures are appropriately aligned and that levels of remuneration remain appropriate in this context. The remuneration policy was approved by shareholders at the AGM held on 5 June 2014, and took effect from the date of that AGM, will be applied for a period of 3 years until the AGM in 2017. This policy takes into account any views of the shareholders expressed to the committee on directors' remuneration.

At the AGM on 5 June 2014, the remuneration report for the year to 31 December 2013 was approved by shareholders with 99.80 per cent. of the votes cast in favour, 0.15 per cent. of the votes cast against and 0.05 per cent. of the votes withheld.

Service contracts

Messrs Perkins, Ames, Field, Mathur, Franks, Mclean and Mrs Walker are each employed on rolling service contracts. Mr Perkins's service contract is dated 25 April 2002, Mr Ames's service contract is dated 24 April 2009, Mr Field's service contract is dated 19 December 2011, Mr Mathur's service contract is dated 1 December 2003, Mr Franks' service contract is dated 8 April 2015, Mr Mclean's service contract is dated 10 April 2015 and Mrs Walker's service contract is dated 14 April 2015. The service contracts are terminable at any time by a one year period of notice from the company or the director. Following their initial appointment non-executive directors may seek re-election by shareholders at each subsequent annual general meeting. Non-executive directors do not have service agreements. There are no specific contractual provisions for compensation upon early termination of a non-executive director's employment. The remuneration committee reviews salaries annually and will seek independent professional advice when appropriate.

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

Directors' remuneration

Notes:

Directors' pensions

Most UK employees, including executive directors, are eligible to join pension schemes operated within the group. Mr Perkins was a member of The Linton Park Group Pension Scheme up until 28 February 2010. Mr Field and Mr Mathur were members of the Linton Park Pension Scheme 2011 until 5 April 2012. This Pension Scheme was formerly the Unochrome Group Pension Scheme and was merged with the Linton Park Pension Scheme and the Lawrie Group Pension Scheme on 1 July 2011. Under The Linton Park Group Pension Scheme the normal retirement age was 63 up until 31 December 2003 in respect of service up until that date. With effect from 1 January 2004 the normal retirement age was increased to 65.

From 1 May 2007 the normal retirement age of members of The Lawrie Group Pension Scheme was increased to 65. Pension benefits accrued prior to that date can be paid at age 63 without actuarial reduction. In a few cases pensions can be paid from age 60 without actuarial reduction. The Linton Park Pension Scheme (2011) provides for a lump sum death in service benefit of four times basic salary and a spouse's pension of half of the member's pension, based on prospective service.

All benefits are subject to HM Revenue and Customs limits. Up until 6 April 2005, under The Linton Park Group Pension Scheme, post retirement pension increases were based on the annual increase in the retail price index, subject to a maximum of 5 per cent. From 6 April 2005, the maximum increase reduced to 2.5 per cent. per annum in respect of pension accrued on or after that date. Also, under The Linton Park Group Pension Scheme there is a minimum increase of 3 per cent. per annum in respect of service before 1 January 2002. Under The Lawrie Group Pension Scheme for entrants prior to 1 January 1996, pension earned prior to April 2003 is subject to a 5 per cent. increase per annum. From 1 May 2007, the maximum increase reduced to 2.5 per cent. in respect of pension accrual on or after that date.

Accrual for pension for Messrs Perkins, Field and Mathur has ceased and there was no pensionable service for these directors during 2014.

Mr Franks receives an excess non-pensionable salary supplement equivalent to 10 per cent. of base salary. Mr Mclean and Mrs Walker are members of the Linton Park Group Personal Pension Scheme. An excess non-pensionable salary supplement equivalent to 25 per cent. of base salary is also paid to Mr Ames.

In addition to the above, an unfunded pension of US$200,000 per annum is paid to Mr G Fox, a former director of the company.

By order of the board

J A Morton

Secretary

23 April 2015

Consolidated income statementfor the year ended 31 December 2014

Statement of comprehensive incomefor the year ended 31 December 2014

Consolidated balance sheetat 31 December 2014

Company balance sheetat 31 December 2014

The notes on pages 30 to 83 form part of the financial statements.

The financial statements were approved on 23 April 2015 by the board of directors and signed on their behalf by:

M C Perkins

Chairman

Consolidated cash flow statementfor the year ended 31 December 2014