Half-year Report

Camellia Plc

Interim results

Camellia Plc (AIM:CAM) announces its interim results for the six months ended 30 June 2016.

Malcolm Perkins, Chairman of Camellia Plc, stated:

"Profits for the first six months of the year are substantially higher than the same period last year, once again demonstrating the strength in the diversity of the group."

"Underlying progress was made by all of our businesses, however a number have faced truly challenging conditions either due to weather or markets and the outlook for the group continues to be mixed. In addition, unpredictable weather makes crop volumes hard to predict and has a consequential effect on prices. In the short term the depreciation in sterling against most of our operating currencies in the agricultural division is likely to have a positive impact on our full year results. In the UK, the lowering of the interest rate will inevitably have a detrimental impact on our banking operations and the continuing uncertainty following the EU referendum vote has triggered a slowdown in our engineering businesses. It is too early, and there remain too many uncertainties, to make any prediction for the full year."

1 Restated to include bearer crops as property, plant and equipment: to include growing crop of green leaf tea at fair value and to include the green leaf element of made tea inventories at fair value in accordance with IAS 16 and IAS41 (amended). The effect of the inclusion of fair values for green leaf growing crop and for green leaf in inventory as required by IAS41 is to accelerate the recognition of an element of profit which would historically have been recognised in future periods

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

Highlights

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

The Interim Report will be available to download from the investor relations section on the Company's website www.camellia.plc.uk

Enquiries

Chairman's statement

Our results for the first half show a profit before tax of £4.9 million, compared with a loss (restated) of £3.1 million last year. This is the first year in which our permanent plantings have been classified under IAS 16 as property, plant and equipment rather than under IAS 41 as biological assets, which I hope will make the underlying results clearer for shareholders. We are still relatively early in the year for the agricultural business and therefore, as always, the second half will be key to the overall performance for the year.

The divisional results are discussed in more detail in the operating review, but once again demonstrate the strength in the diversity of the group. Weather patterns continue to be erratic with benign conditions in Kenya leading to record crops but no end in sight to the drought in South Africa. There is no question that the uncertainty both before and after the EU referendum vote has had an impact on the UK economy, and on our UK businesses, but with most of our earnings coming from outside the UK the depreciation of sterling following the vote will help our reported result.

Underlying progress was made by all of our businesses in the first half of the year, however a number have faced truly challenging conditions either due to weather or markets. In the 2015 Annual Report we set out the strategy for each of our divisions; strategies which are designed to provide long term value to shareholders in line with the group's ethos. However, markets and economic conditions continue to change rapidly and these strategies will remain under review by the Board and Executive Committees.

Dividend

The Board has declared an interim dividend of 35p (2015: 34p) payable on 7 October 2016 to shareholders registered at the close of business on 8 September 2016.

Outlook

The outlook for the group continues to be mixed. In addition, unpredictable weather makes crop volumes hard to predict and has a consequential effect on prices. However in the short term the depreciation in sterling against most of our operating currencies in the agricultural division is likely to have a positive impact on our full year results. In the UK, the lowering of the interest rate will inevitably have a detrimental impact on our banking operations and the continuing uncertainty following the EU referendum vote has triggered a slowdown in our engineering businesses. It is too early, and there remain too many uncertainties, to make any prediction for the full year.

Malcolm Perkins

Chairman

24 August 2016

Operating Review

The operating profit for the group in the first half was £3.2 million on group revenues that were 3.5% ahead of the same period last year at £106.1 million. As explained in the Chairman's statement, if the depreciation of Sterling is sustained it will have a positive impact on reported profits for the full year.

This is the first time that we have reported our bearer crops as property, plant and equipment. In addition, we have included the growing crop of green leaf tea at fair value and included the green leaf element of made tea inventories at fair value as required by IAS 41, the effect of which is to accelerate the recognition of an element of profit which would historically have been recognised in future periods. All numbers including prior years have therefore been restated.

Agriculture

Tea

India: The tea crop in India in the first 6 months was better than last year (up approximately 21%), which was heavily drought affected, and prices were also higher than in the same period last year. Since 1 July, significant rainfall has caused flooding which has reduced our crop expectations for July and August and prices have reduced.

Bangladesh: Conditions in Bangladesh have been excellent for growing tea in the first half of the year with volumes significantly up (66.7%) on last year. Given the volumes, prices have held up relatively well, partly as a result of an increase in the duty levied on imported teas, although they were marginally below last year. Since 1 July prices have shown some improvement.

Kenya: Kenya has seen a record production of tea in the first half of this year, and our estates have been no exception (up approximately 50%). However, as we warned in the annual report, tea prices in Kenya have dropped significantly since the start of the year and our margins have been materially reduced.

Malawi: The weather in Malawi has been less favourable than in other tea growing areas and as a result our crop is down 6% in the first half of the year. Encouragingly however, given the volumes of tea being produced in Kenya, prices have remained stable in dollar terms. Our Malawi operations are committed to the revitalisation programme outlined in the 2015 Annual Report and this is having a significant impact on overall production costs. We continue to believe that this is the correct strategy to build a sustainable future for the Malawi tea industry.

Macadamia

Prices for macadamia have remained firm in the first half of the year, but the impact of the drought caused by last year's El Nino on production volumes is only now fully emerging. We currently estimate that our macadamia kernel volumes for the year will be down by approximately 50% in South Africa and by 25% to 30% in Malawi.

On a more positive note, the new macadamia cracking facility in Kenya has been completed within budget and has now been fully commissioned and is meeting our expectations.

Avocado

It is early in the season for the main avocado crop but harvesting has begun and currently looks to be in line with our expectations.

Speciality crops

Pricing for rubber has marginally improved from the very low levels of last year, but is unlikely to become commercially attractive until there is a sustained improvement in the oil price.

In California, the Murcott harvest was significantly down on expectations for both volume and price. Although the Navel harvest was significantly higher than last year, prices were lower and the net benefit was insufficient to compensate for the lower Murcott revenues. Harvesting of the almonds and pistachios has yet to begin. There was a higher rainfall this winter than for some time which has increased the availability of surface water at the farm.

The grape harvest in South Africa was poor as a result of the drought which will inevitably impact volumes and revenues this year.

Soya yields in Brazil were above expectations.

The remaining speciality crops are performing broadly in line with expectations.

In total, the Agriculture division made a trading profit of £7.3 million (2015: profit £1.6 million) on turnover of £75.1 million (2015: £65.3 million).

Banking and Financial Services

The first half of the year saw Duncan Lawrie implementing the first stage of its new strategic plan. Sally Tennant has now been appointed as Chairman, certain restrictions on bank lending have been removed and a number of other key appointments have been made. As with all banks, the decision by the Bank of England to lower interest rates and the uncertainties surrounding the property market, make the environment more challenging. The group continues to monitor the risk environment surrounding the bank.

Of our associated companies, BF&M reported core operating earnings in the first three months of 2016 ahead of the corresponding period in 2015. The remaining associates traded in line with expectations.

In total, the Banking and Financial Services division's subsidiaries made a trading loss of £2.8 million (2015: trading loss £1.2 million) on turnover of £6.0 million (2015: £6.7 million). In addition, our share of the profits of associates amounted to £2.6 million (2015: £0.5 million) reflecting the inclusion of BF&M as an associate from 1 July 2015.

Engineering

Engineering North: The oil industry in Aberdeen continues to suffer from the decline in the oil price and uncertainties surrounding investment in the North Sea. Orders at AJT continue to be below where we would like them to be and consequently we have had to take measures including a redundancy programme and the temporary introduction of reduced working hours in order to contain overheads. The situation remains under close review.

Engineering South: Abbey Metal Finishing continues to trade ahead of expectations following its turnaround last year. The remaining businesses in the division are trading broadly in line with expectations.

In total, the Engineering division made a trading loss of £0.9 million (2015: trading loss £3.5 million) on turnover of £10.1 million (2015: £15.1 million).

Food Service

The Food Service division continues to trade in line with expectations reporting trading profit of £0.1 million for the year to date (2015: profit £0.4 million) on turnover of £14.7 million (2015: £15.2 million).

Investments

Our Investment portfolio has increased in value from £30.6 million at 31 December 2015 to £34.2 million, primarily reflecting the depreciation of sterling against the Japanese Yen during the period.

Pensions

With expectations for future investment returns remaining at low levels and in light of the performance of our UK operations, we have started a statutory 60 day consultation with the active members of the Linton Park Pension Scheme (2011) on a proposal to close the defined benefit section to future accrual.

Tom Franks

Chief Executive

Interim management report

The chairman's statement and operating review form part of this report and includes important events that have occurred during the six months ended 30 June 2016 and their impact on the financial statements set out herein.

Principal risks and uncertainties

The directors' report in the statutory financial statements for the year ended 31 December 2015 (the accounts are available on the company's website: www.camellia.plc.uk) highlighted risks and uncertainties that could have an impact on the group's businesses. As these 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 performance. These risks and uncertainties continue to be relevant for the remainder of the year. In addition, the chairman's statement included in this report refers to certain specific risks and uncertainties that the group is presently facing.

Statement of directors' responsibilities

The directors confirm that these condensed financial statements have been prepared in accordance with IAS 34 'Interim Financial Reporting' as adopted by the European Union, and that the interim management report herein includes a fair review of the information required by sections 4.2.7 and 4.2.8 of the Disclosure and Transparency Rules of the United Kingdom's Financial Conduct Authority.

The directors of Camellia Plc are listed in the Camellia Plc statutory financial statements for the year ended 31 December 2015. There have been no subsequent changes of directors and a list of current directors is maintained on the group's website at www.camellia.plc.uk.

By order of the board

Malcolm Perkins

Chairman

24 August 2016

Consolidated income statement

for the six months ended 30 June 2016

Statement of comprehensive income

for the six months ended 30 June 2016

Consolidated balance sheet

at 30 June 2016

Consolidated cash flow statement

for the six months ended 30 June 2016

Statement of changes in equity

for the six months ended 30 June 2016

Notes to the accounts

1 Basis of preparation

These financial statements are the interim condensed consolidated financial statements of Camellia Plc, a company registered in England, and its subsidiaries (the "group") for the six month period ended 30 June 2016 (the "Interim Report"). They should be read in conjunction with the Report and Accounts (the "Annual Report") for the year ended 31 December 2015.

The financial information contained in this interim report has not been audited and does not constitute statutory accounts within the meaning of Section 435 of the Companies Act 2006. A copy of the statutory accounts for the year ended 31 December 2015 has been delivered to the Registrar of Companies. The auditors' opinion on these accounts was unqualified and does not contain an emphasis of matter paragraph or a statement made under Section 498(2) and Section 498(3) of the Companies Act 2006.

The interim condensed financial statements have been prepared in accordance with International Financial Reporting Standards ("IFRS") including IAS 34 "Interim Financial Reporting". For these purposes, IFRS comprise the Standards issued by the International Accounting Standards Board ("IASB") and Interpretations issued by the International Financial Reporting Standards Interpretations Committee ("IFRS IC") that have been adopted by the European Union.

Where necessary, the comparatives have been restated from the previously reported interim results to take into account any presentational changes made in the Annual Report.

These interim condensed financial statements were approved by the board of directors on 24 August 2016. At the time of approving these financial statements, the directors have a reasonable expectation that the company and the group have adequate resources to continue to operate for the foreseeable future. They therefore continue to adopt the going concern basis of accounting in preparing the financial statements.

2 Accounting policies

These interim condensed financial statements have been prepared on the basis of accounting policies consistent with those applied in the financial statements for the year ended 31 December 2015. In addition, the group has implemented the following amended standards:

A summary of the above amendments was provided on page 48 of the 2015 Annual Report.

IAS 16 and IAS 41 (amendments) amends the reporting for bearer plants. The group has applied the amendments retrospectively in accordance with the transition provisions of the standard and the comparative figures have been restated. The impact on the group has been in the following areas:

As bearer plants are now accounted for under IAS 16 rather than IAS 41 in the same way as property, plant and equipment, fair value adjustments are no longer required and instead the assets will now be depreciated. The produce on bearer plants will remain in the scope of IAS 41 and require a fair value adjustment. The effect has been that the loss before tax for the period to 30 June 2015 has reduced by £5.3 million and profit for the year to 31 December 2015 has decreased by £20.1 million.

The effect of these amendments is to increase earnings per share from a loss of (288.1)p per share to a loss of (188.3)p per share for the period 30 June 2015 and decease earnings per share from a profit of 450.7p per share to a profit of 50.7p per share for the year to 31 December 2015, the effect on the cash flow statement is immaterial.

3 Restatement - fair value of green leaf tea

As disclosed in the 2015 Annual Report, made tea was included in inventory at cost as no reliable fair value was available to reflect the uplift in value arising at the point of harvest of green leaf. Following a reassessment, the fair value for green leaf at the point of harvest can now be more reliably calculated. Made tea inventories now include the fair value of green leaf and the impact of this change is a £0.2 million uplift in opening reserves and £0.1 million uplift in non-controlling interest, at 1 January 2015.

4 Cyclical and seasonal factors

Due to climatic conditions the group's tea operations in India and Bangladesh produce most of their crop during the second half of the year. Tea production in Kenya remains at consistent levels throughout the year but in Malawi the majority of tea is produced in the first six months.

Soya and maize in Brazil and citrus in California are generally harvested in the first half of the year. In California the pistachio crop occurs in the second half of the year and has 'on' and 'off' years. The majority of the macadamia crop in Malawi and South Africa is harvested in the second half of the year but in Kenya the majority of macadamia is harvested in the first half. Avocados in Kenya are mostly harvested in the second half of the year.

There are no other cyclical or seasonal factors which have a material impact on the trading results.

5 Segment reporting

6 Cost of sales

Included in cost of sales are the following gains/(losses) arising from changes in fair value of biological assets: