Camellia : Interim Report 2021

CAMELLIA PLC

INTERIM2017REPORT 2021

CAMELLIA PLC

INTERIM REPORT 2021

Registered office

Linton Park

Linton

Maidstone

Kent ME17 4AB

Registered number 00029559

www.camellia.plc.uk

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CAMELLIA PLC

CHAIRMAN'S STATEMENT

Due to the normal seasonality in our business, we are reporting a first half loss before tax of £7.8 million (2020 H1: £12.9 million loss) which is significantly lower than that of the corresponding period of 2020 reflecting the high level of legal costs incurred and impairments in H1 2020. The underlying loss before tax for the first half was £7.3 million (2020 H1: £6.0 million loss). However H1 2020 also included an underlying profit before tax of £3.6 million from Horizon Farms and therefore, on a like for like basis, the underlying loss in H1 2021 was significantly smaller.

Our tea volumes in the period were 5% higher and we also saw significant improvements in our average selling prices in India and Bangladesh. However, the benefit of these was in large part offset by the significant increases in wages in Assam. Despite efforts being made by both the industry and governments around the world, the global tea market remains over-supplied and poorly priced and this can be seen most starkly in the prices achieved for our African teas. The reduced avocado crop and the extension of lockdown restrictions have also been unhelpful. Our associates, in particular BF&M, have made a substantial contribution to our performance in H1.

Strategy

As announced in the AGM statement in June, the Board of Camellia is undertaking a series of measures aimed at re-balancing the Group's portfolio of investments in order to take better advantage of its strengths, and thereby to improve profitability and share price performance. These measures include accelerating our agricultural diversification and divesting of certain assets which we consider to be non core.

In line with this and as announced in July, we have completed the acquisition of an 80% stake in Bardsley England, the UK's second largest apple grower, and disposed of our interests in the aerospace sector with the sales of Abbey Metal Finishing and Atfin.

Other strategic developments are included in the Operating review.

Outlook

Our full year outcome is expected to reflect lower underlying profit before tax from Agriculture (after adjusting for Horizon Farms £4.5 million full year underlying profit before tax in 2020) and from Engineering due in large part to a softening of activity in the oil and gas markets and the impact of Covid on the markets previously served by our aerospace business. This is expected to be offset in part by improved performance from Food Service and our associates. As always, our financial results remain largely dependent on Agriculture where the majority of harvesting and sales take place in the second half of the year. It is therefore too early to give a firm indication of the likely results for 2021.

Dividend

The Board is pleased to declare an interim dividend of 44p per share (2020 H1: nil) payable on 8 October 2021 to shareholders registered at the close of business on 10 September 2021 and will consider the overall dividend in respect of 2021 when the year is complete.

Board

It is with great sadness that we announced last month the death of our Deputy Chairman, Senior Independent Director and Chairman of the audit committee, Chris Relleen. Chris joined the Board in 2006 as a non-executive director, and we will remember Chris's contribution to the Board and miss his wise counsel, humility and humour.

The Board has today appointed William Gibson as Senior Independent Director and Gautam Dalal as Chairman of the audit committee. Simon Turner will join the nomination and remuneration committees.

People

Once again, I would like to thank all of our staff around the world for their continuing efforts in extremely difficult circumstances.

Malcolm Perkins

Chairman

1 September 2021

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CAMELLIA PLC

OPERATING REVIEW

COVID-19 AND TRADING UPDATE

People

The first half has been very tough for all of our staff and their communities. The virulent re-emergence of the pandemic in India and Bangladesh combined with further lockdowns in most of our production centres and markets have created a demanding operating environment. Vaccine roll-outs across most of our operating countries have been slow and difficult, and it is against that background that I would once again like to thank all of our staff for their efforts.

Trading

Full details of the trading results for the first half are set out below but in summary all of our businesses are operational, albeit in modified ways to take account of social distancing.

The key features that have impacted the first half of this year relative to H1 2020 have been:

• A 5% increase in our total tea production volumes, higher average tea selling prices in India and Bangladesh, offset in part by the significant wage increase in Assam
• Continuing over-supply of the tea market and the consequential impact on prices for Kenya and Malawi
• Significantly lower avocado volumes coming out of Kenya but at marginally better prices
• Increased macadamia volume expectations coupled with lower average price expectations
• Slow growth in UK demand for Engineering and Food Service as a result of the prolonged lockdown
• No profits from Horizon Farms which was sold in 2020

Additional detail on the first half results is set out below.

Acquisitions and Disposals

Following the end of the first half we completed three important strategic transactions. First, we acquired an 80% share in Bardsley England for £15.7 million and have also made a loan to Bardsley of £9.3 million. Bardsley is a major fruit farming business and the UK's second largest apple grower. The farming operation covers 850 hectares in Kent and grows apples, pears, cherries, plums and strawberries as well as having a large grading, packing and storage facility. Bardsley is an innovator in the use of agritech and regenerative agriculture. Customers include major supermarkets in the UK.

Bardsley's focus on perennial agriculture, its UK base, innovative thinking and prospects for immediate and exciting growth makes this a significant acquisition for the Group.

We also took the decision to dispose of our two interests in the aerospace sector which had been hit very hard by the downturn in air travel resulting from the pandemic. We believe that the capital required to maintain the operations in an uncertain environment could be better deployed in our core business.

Financial Position

The Group has a strong balance sheet with substantial liquidity which amounted to £62.1 million in cash and cash equivalents net of borrowings as at 30 June 2021. In order to part fund the Bardsley acquisition, disposals of easily liquidated assets were made from the investment portfolio amounting to £14.2 million. The Group may sell certain less liquid, non income generating assets in order to fund strategically important acquisitions.

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CAMELLIA PLC

OPERATING REVIEW

FIRST HALF OPERATING RESULTS

Agriculture

The revenue and underlying trading (loss)/profit by crop during the period is set out below. The Appendix at the end of this interim report includes details of the revenues and underlying trading profits for the last 5 financial years.

Note: Please see note 5 for further segmental information and note 6 for details of the adjustments made to trading profit in arriving at underlying trading (loss)/profit for the Agriculture division.

Tea

Overall tea production in the first half was up 5% at 44.1mkg (H1 2020: 42.0mkg), though different regions experienced markedly different conditions. Pricing has been mixed with continued weakening of average prices in Africa but in India and Bangladesh CTC prices have firmed while Orthodox prices declined over the same period last year.

India: The Covid situation in India remains deeply concerning despite the extensive efforts made to keep all our staff safe, including restricting workforce deployment to 50% in West Bengal. Production in the first half of the year was 17% up on the same period last year largely due to less severe lockdowns in the current year offset in part by the impact of very dry weather early in the season.

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