Camellia : Half Year Report

Camellia Plc

Interim Results

Camellia Plc (AIM:CAM) announces its interim results for the six months ended 30 June 2017.

Malcolm Perkins, Chairman of Camellia, stated:

"Profits for the first half of the year are distorted by the profit on disposal of Duncan Lawrie Asset Management which, net of related trading losses, contributed £15.8 million of profit in the first half. Reported revenue has benefitted from favourable exchange rates and the sale of last season's tea stock but this has had little impact on overall profitability which has been held back by substantially lower prices for tea in India and Bangladesh."

Financial highlights

Six months ended 30 June 2017	Six months ended 30 June 2016(1)	Year ended 31 December 2016
£'m	£'m	£'m
Revenue - continuing operations	123.6	100.1	257.9
Profit before tax from continuing operations	1.9	6.8	26.5
Profit/(loss) from discontinued operation	15.8	(1.9)	(20.0)
Profit/(loss) for the period	16.3	2.4	(5.9)
Earnings/(loss) per share	532.2p	29.0p	(387.4)p
Dividend per share	37p	35p	130p

1 - Restated to include Duncan Lawrie as a discontinued operation

Highlights

• Total profit for the period includes the disposal of Duncan Lawrie Asset Management;

• Poorer prices for tea in India and Bangladesh;

• High volumes and prices for soya and citrus;

• Substantially improved profits in Food Service, Associates and Speciality Crops;

• Dividend increased by 5.7%;

• Cash and cash equivalents at 30 June 2017 were £98.7 million (30 June 2016: £53.0 million).

This announcement contains inside information for the purposes 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

Camellia Plc

01622 746655

Tom Franks, CEO Susan Walker, CFO

Panmure Gordon

0207 886 2500

Nominated Advisor and Broker

Andrew Godber Erik Anderson

Chairman's statement

Our results for the first half show a profit before tax from continuing operations of £1.9 million which compares to an unusually strong profit of £6.8 million (restated) for the first half of 2016.

In addition, a net profit of £15.8 million is attributable to Duncan Lawrie, our discontinued operation, comprising £19.2 million of a gain on sale of Duncan Lawrie Asset Management, which completed on 11 May 2017, less the £3.4 million of ongoing net operating costs of the bank during the wind down period. The full impact of this transaction, which has been accounted for over 2 years, is described in the 2016 annual report.

The Group continues to operate steadily against a backdrop of increased political uncertainty, not least in the UK. The most serious development has been the continuing civil unrest in Darjeeling which has brought all tea production in the district to a halt.

There have been no significant investments or divestitures made in the period; the winding down of Duncan Lawrie Private Bank continues in line with the expectations set out in the annual report.

Dividend

The Board has declared an interim dividend of 37p (2016: 35p) payable on 6 October 2017 to shareholders registered at the close of business on 8 September 2017.

Outlook

Given that the majority of harvesting takes place in the second half, it is hard to make predictions for the full year. This is particularly true this year given the tea price dynamics in India and Bangladesh and difficulties in predicting crop volumes.

However, tea prices in Africa, strong avocado prices and the performance of some of our non agricultural businesses are encouraging.

Malcolm Perkins

Chairman

24 August 2017

Operating review

The profit before tax from continuing operations in the first half was £1.9 million (H1 2016 restated: £6.8 million) on revenues of

£123.6 million (H1 2016 restated: £100.1 million). Overall we are pleased with the results which, against a very strong 2016 comparator demonstrate that whilst agricultural prices and growing conditions are outside our control, the actions taken over the last two years have resulted in an improved contribution from some of our businesses and enhanced potential in others. As a result we have decided to raise the interim dividend by 5.7% to 37 pence per share.

Our revenue has benefited from the translation effect of weaker average sterling exchange rates in the six months to 30 June 2017 compared to the same period last year which contributed £11.6 million of the £23.5 million increase in revenue. In contrast sterling has strengthened against a number of the currencies in which we operate since 31 December 2016 resulting in a loss on foreign exchange translation of £14.6 million in the six month period (2016: gain of £52.0 million) which is reflected in the Statement of comprehensive income.

We continue to watch the Brexit situation closely but as over 90% of our revenue is generated by businesses operating outside continental EU we are unlikely to see a major effect on our businesses other than the implications from exchange rate movements.

The results for the period to June 2016 have been restated to show Duncan Lawrie as a discontinued operation.

Agriculture

Tea

India: The key development in India has been the fall in tea prices arising from oversupply in the market. The non Darjeeling estates have produced similar volumes to last year but average prices have been significantly lower due to high volumes of last season's stock in the market. This, combined with the increasing cost base particularly with respect to labour, has impacted margins. In Darjeeling, the general strike which started on 12 June has brought the province to a standstill as a result of which we have lost the entire second flush. There appears to be no prospect of an early resolution to the situation which has resulted from a political dispute outside the Group's control and it is now considered unlikely that there will be any more significant production in Darjeeling this year. Whilst Darjeeling volumes are relatively small, the loss of this particularly high value component of the crop is disappointing.

Bangladesh: Conditions in Bangladesh have once again been favourable resulting in yields broadly in line with last year, however despite efforts made by the Bangladesh Government to support the domestic market by increasing the duty on imported teas, average prices are down 27% compared with last year due to high volumes of carry forward stock in the market.

Kenya: Conditions at the start of the year were very dry, leading to reduced production volumes (down 27% on last year) and average prices up 19% on last year. With the commencement of the long rains in May, volumes have increased and prices at the Mombasa auction have held reasonably firm.

Malawi: Production in Malawi is 8% ahead of last year at prices that are 11% better than last year.

Macadamia

Very challenging weather conditions during last year's flowering have resulted in macadamia production in our three producing countries being significantly below expectations and only marginally better than the same period in 2016. Prices have remained strong.

Avocado

The avocado crop in Kenya has been impacted by the dry conditions earlier in the season, which is expected to result in smaller fruit size than last year. However, the demand for quality fruit continues to grow and prices remain very strong.

Speciality crops

Pricing for rubber has improved and whilst production was hampered by wet weather in the first half we expect this to be recovered.

The murcott and navel orange harvests in California were significantly ahead of expectations on both volumes and price. Harvesting of the almonds has just begun and this is an 'off' year for pistachios.

The South African grape harvest was once again poor due to the severe drought in the Western Cape. However, the quality of the wine being produced is high.

Soya yields in Brazil were at record levels and prices were marginally ahead of last year.

In total, the Agriculture division made a trading profit of £1.5 million (H1 2016: £7.3 million) on revenue of £96.1 million (H1 2016: £75.1 million).

Engineering

Engineering North: The situation with the oil services industry in Aberdeen would appear to have stabilised and whilst it is too early to forecast a return to growth, the industry is more optimistic about the future. In addition, AJT Engineering has made an investment into the hydroelectric sector in order to diversify its income stream going forward. The early success of this latter venture, together with stability in the oil sector, is encouraging.

Engineering South: All businesses are continuing to trade in line with expectations. Particularly pleasing has been the growth in our aerospace focused metal finishing businesses at Abbey Metal Finishing and Atfin.

XiMo: The specialist metathesis catalyst research business continues to make losses in line with expectations as it develops products for market.

In total, the Engineering division made a trading loss of £1.6 million (H1 2016: trading loss £0.9 million) on revenue of

£9.5 million (H1 2016: £10.1 million).

Food Service

The Food Service division is trading significantly ahead of last year with strong client demand in the UK.

In total, the Food Service division made a trading profit of £1.2 million (H1 2016: £0.1 million) on revenue of £17.8 million (H1 2016: £14.7 million).

Investments and Associates

Our investment portfolio, which consists mostly of listed securities has increased in value to £41.3 million (31 December 2016:

£37.2 million), reflecting a mixture of disposals, market and currency movements.

Our share of the profits of associates amounted to £3.7 million (H1 2016: £2.6 million). This primarily arises from our holding in BF&M which has had a good start to the year.

Discontinued operation

As previously announced the sale of Duncan Lawrie Asset Management completed on 11 May, and the closure of the remaining banking operations in the UK and the Isle of Man are largely complete. The anticipated net cash proceeds from the discontinuation of this business have not changed and are expected to be available to the Group later in the year.

Pensions

In the UK, the IAS19 pension deficit has significantly reduced from £44.6 million to £29.8 million in the period due principally to strong investment returns on the scheme's assets and the adoption of the most recent longevity tables in the calculations. The triennial valuation of the scheme is underway.

Strategy

We continue to look carefully at opportunities to enhance our production and value added operations in agriculture using our cash resources. I am determined that we utilise these resources for the long term benefit of the Group and our shareholders only when the right opportunities arise.

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 2017 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 2016 (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 2016. 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 2017
Consolidated income statement
for the six months ended 30 June 2017
Continuing operations	Notes	Six months ended 30 June 2017 £'m	Six months ended 30 June 2016 £'m Restated	Year ended 31 December 2016 £'m
Revenue	4	123.6	100.1	257.9
Cost of sales	(102.1)	(76.5)	(188.5)
Gross profit	21.5	23.6	69.4
Other operating income	1.0	1.1	2.3
Distribution costs	(4.9)	(3.9)	(14.7)
Administrative expenses	(20.4)	(18.5)	(38.0)
Trading (loss)/profit	4	(2.8)	2.3	19.0
Share of associates' results	5	3.7	2.6	5.1
Profit on disposal of available-for-sale investments	6	0.5	0.2	1.5
1.4	5.1	25.6
Investment income	0.4	0.3	0.6
Finance income	1.4	1.6	2.7
Finance costs	(0.2)	(0.2)	(0.6)
Net exchange gain	0.1	0.5	0.4
Employee benefit expense	(1.2)	(0.5)	(2.2)
Net finance income	7	0.1	1.4	0.3
Profit before tax from continuing operations	1.9	6.8	26.5
Taxation	8	(1.4)	(2.5)	(12.4)
Profit from continuing operations	0.5	4.3	14.1
Profit/(loss) from discontinued operation	9	15.8	(1.9)	(20.0)
Profit/(loss) for the period	16.3	2.4	(5.9)
Profit/(loss) attributable to:
Owners of the parent	14.7	0.8	(10.7)
Non-controlling interests	1.6	1.6	4.8
16.3	2.4	(5.9)
Earnings/(loss) per share - basic and diluted	11	532.2p	29.0p	(387.4p)

Consolidated statement of comprehensive income for the six months ended 30 June 2017

Profit/(loss) for the period	Six months ended 30 June 2017 £'m 16.3	Six months ended 30 June 2016 £'m Restated 2.4	Year ended 31 December 2016 £'m (5.9)
Other comprehensive income/(expense): Items that will not be reclassified subsequently to profit or loss: Remeasurements of post employment benefit obligations (note 15)	15.2	(15.9)	(24.3)
Deferred tax movement in relation to post employment benefit

obligations - - 1.2

15.2 (15.9) (23.1)

Items that may be reclassified subsequently to profit or loss:
Foreign exchange translation differences	(14.6)	29.3	52.0
Available-for-sale investments:
Valuation gains/(losses) taken to equity	6.6	(0.2)	3.5
Transferred to income statement on sale	(0.2)	-	(1.2)
Share of other comprehensive income of associates	-	-	0.2
(8.2)	29.1	54.5
Other comprehensive income for the period, net of tax	7.0	13.2	31.4
Total comprehensive income for the period	23.3	15.6	25.5
Total comprehensive income/(expense) attributable to: